19919510 COMMON SHARES EDP – Energias do Brasil SA

CONFIDENTIAL OFFERING MEMORANDUM 

19,919,510 COMMON SHARES 

EDP – Energias do Brasil S.A. 

Common Shares 

R$37.00 per share 

EDP – Energias de Portugal S.A., a sociedade aberta organized as a corporation (sociedade anónima) under the laws of Portugal, 

the selling shareholder, is offering to the public in Brazil and to qualified institutional investors in the United States and to institutional 

and other investors elsewhere a total of 19,919,510 common shares of EDP – Energias do Brasil S.A., a sociedade por ações organized 

under the laws of Brazil controlled by the selling shareholder. 

The selling shareholder has registered this offering, or the Offering, with the Brazilian Securities Commission (Comissão de Valores 

Mobiliários), or the CVM. Our common shares are currently listed on the Novo Mercado segment, or the Novo Mercado, of the São Paulo 

Stock Exchange (BM&FBOVESPA S.A. — Bolsa de Valores, Mercadorias e Futuros), or the BM&FBOVESPA, under the symbol 

“ENBR3.” The ISIN number of our common shares is “BRENBRACNOR2.” 

The selling shareholder has granted to Banco Morgan Stanley S.A., an option for a period of up to 30 days from, and including, the 

date of execution of the Brazilian Underwriting Agreement, to purchase up to 1,991,950 additional common shares (representing up to 

10% of the total number of common shares initially offered in this offering) to cover over-allotments, if any, provided that the decision to 

allocate the additional common shares is made jointly by the underwriters at the time the price per share is determined. 

Investing in the common shares involves risks. See “Risk Factors” beginning on page 15. 

This offering of the common shares by the selling shareholder has not been and will not be registered under U.S. Securities Act of 

1933, as amended, or the Securities Act, or under any U.S. state securities laws. The common shares may not be offered or sold within 

the United States or to U.S. persons (as defined in Regulation S under the Securities Act), except to qualified institutional buyers, or 

QIBs (in accordance with Rule 144A under the Securities Act), pursuant to exemptions from registration provided under the Securities 

Act, and to certain non-U.S. persons outside the United States in reliance on Regulation S under the Securities Act. By purchasing the 

common shares in the United States, you will be deemed to have represented to us that you are a QIB. See “Transfer Restrictions” on 

page 177 for a description of restrictions on transfers of the common shares offered by this offering memorandum. 

None of the U.S. Securities and Exchange Commission, or the SEC, any state securities commission, the CVM, the BM&FBOVESPA, 

the Brazilian Association of Financial and Capital Markets (Associação Brasileira das Entidas dos Mercados Financeiras e de Capitais – 

ANBIMA), the Portuguese Securities Market Commission (Comissão do Mercado de Valores Mobiliários) and any other regulatory authority 

has approved or disapproved these securities nor have any of the foregoing authorities passed upon or endorsed the merits of this offering or 

the accuracy or adequacy of this offering memorandum (or the prospectus in Portuguese used in connection with the offering of the common 

shares in Brazil, or the Brazilian prospectus). Any representation to the contrary is a criminal offense. 

Investors residing outside Brazil, including QIBs in the United States and institutional and other investors outside the United 

States and Brazil that are not U.S. persons, may purchase our common shares if they comply with the registration requirements 

of CVM Instruction No. 325, dated January 27, 2000, Resolution No. 2,689, dated January 26, 2000, of the Brazilian National 

Monetary Council (Conselho Monetário Nacional), or the CMN, or Law No. 4,131, dated September 3, 1962. For a description on 

how to comply with these registration requirements, see “Market Information” on page 28. 

Payment for our common shares will be required to be made in reais, through the facilities of the Central Depository 

BM&FBOVESPA (Central Depositária BM&FBOVESPA), formerly the Brazilian Settlement and Custodial Company (Companhia 

Brasileira de Liquidação e Custódia), and we expect to deliver our common shares through the Central Depository BM&FBOVESPA on 

or about July 13, 2011. 

Espírito Santo 

Investment Bank 

Global Coordinators and Joint Bookrunners 

Banco Itaú BBA Morgan Stanley Santander 

Co-manager 

Caixa – Banco de Investimento 

The date of this offering memorandum is July 7, 2011.

(This page intentionally left blank)

FORWARD-LOOKING STATEMENTS ......... iv 

PRESENTATION OF FINANCIAL AND 

OTHER INFORMATION ............................... vi 

SUMMARY ........................................................... 1 

THE OFFERING ................................................ 10 

SUMMARY FINANCIAL AND OTHER 

INFORMATION ............................................. 12 

RISK FACTORS ................................................ 15 

EXCHANGE RATES ......................................... 27 

MARKET INFORMATION .............................. 28 

USE OF PROCEEDS ......................................... 32 

CAPITALIZATION ........................................... 33 

DILUTION .......................................................... 34 

SELECTED FINANCIAL INFORMATION ... 35 

MANAGEMENT’S DISCUSSION AND 

ANALYSIS OF FINANCIAL CONDITION 

AND RESULTS OF OPERATIONS .............. 40 

CONTENTS 

Page Page 

i 

OVERVIEW OF THE BRAZILIAN ENERGY 

INDUSTRY ...................................................... 73 

BUSINESS ........................................................... 96 

MANAGEMENT .............................................. 134 

PRINCIPAL SHAREHOLDERS .................... 142 

RELATED PARTY TRANSACTIONS .......... 146 

DESCRIPTION OF CAPITAL STOCK ......... 149 

DIVIDENDS AND DIVIDEND POLICY ....... 162 

TAXATION ....................................................... 165 

PLAN OF DISTRIBUTION ............................. 173 

TRANSFER RESTRICTIONS ........................ 177 

LEGAL MATTERS .......................................... 184 

INDEPENDENT ACCOUNTANTS ................ 185 

ENFORCEMENT OF JUDGMENTS AGAINST 

FOREIGN PERSONS ................................... 186 

INDEX TO FINANCIAL STATEMENTS ..... F-1 

You should rely only on the information contained in this offering memorandum. None of us, any 

of the underwriters listed under “Plan of Distribution,” or underwriters, and the international 

placement agents appointed by the underwriters to facilitate the placement of common shares outside 

of Brazil have authorized anyone to provide you with different or additional information from that 

contained in this offering memorandum. If anyone provides you with different or additional 

information, you should not rely on it. You should assume that the information in this offering 

memorandum is accurate only as of the date on the front cover of this offering memorandum, 

regardless of the time of delivery of this offering memorandum or any sale of our common shares. 

Our business, financial condition, results of operations and prospects may change after the date on 

the front cover of this offering memorandum. None of us, the underwriters and the international 

placement agents are making an offer to sell the common shares in any jurisdiction where the offer 

or sale is not permitted. 

In this offering memorandum, references to “EDP,” “Company,” “we,” “us” and “our” refer to EDP – 

Energias do Brasil S.A. and its consolidated subsidiaries, except where the context requires otherwise. 

References to “common shares” refer to the common shares of EDP – Energias do Brasil S.A., except where 

the context requires otherwise. References to the “selling shareholder”, “controlling shareholder” of EDP and 

“Energias de Portugal” are to EDP – Energias de Portugal, S.A., a sociedade aberta as a corporation 

(sociedade anónima organized under the laws of Portugal, and references to “EDP Group” are to Energias de 

Portugal, together with its subsidiaries and affiliates. 

The term “Brazil” refers to the Federative Republic of Brazil and the term “Brazilian government” refers 

to the federal government of the Federative Republic of Brazil. 

All references in this offering memorandum to “real,” “reais” or “R$” are to the legal currency of 

Brazil, and all references to “U.S. dollar,” “U.S. dollars,” “USD” or “US$” are to the legal currency of the 

United States. 

This offering memorandum is highly confidential, and we have prepared it for use solely in connection 

with the proposed offering of our common shares outside Brazil. This offering memorandum is personal to 

the offeree to whom it has been delivered by the international placement agents and does not constitute an 

offer to any other person or to the public in general to subscribe for or otherwise to acquire our common 

shares. Distribution of this offering memorandum to any person other than the offeree is unauthorized, and 

any disclosure of any of its contents without our prior written consent is prohibited. Each offeree, by

accepting delivery of this offering memorandum, agrees to the foregoing and agrees not to make any 

photocopies of this offering memorandum, in whole or in part. 

The selling shareholder is relying on an exemption from registration under the Securities Act for offers 

and sales of securities that do not involve a public offering. The common shares offered through this offering 

memorandum are subject to restrictions on transferability and resale and may not be transferred or resold in 

the United States, except as permitted under the Securities Act and applicable U.S. state securities laws 

pursuant to registration or an exemption from registration. By purchasing these securities, you will be deemed 

to have made the acknowledgements, representations and warranties and agreements described under the 

heading “Transfer Restrictions” in this offering memorandum. You should be aware that you may be required 

to bear the financial risks of this investment for an indefinite period of time. In making an investment decision, 

you must rely on your own examination of our business and the terms of this offering, including the merits 

and risks involved. 

You must comply with all applicable laws and regulations in force in any jurisdiction in which you 

purchase, offer or sell our common shares or possess or distribute this offering memorandum and must obtain 

any consent, approval or permission required for your purchase, offer or sale of our common shares under the 

laws and regulations in force in any jurisdiction to which you are subject or in which you make these 

purchases, offers or sales, and none of us or any of the international placement agents will have any 

responsibility therefor. 

We, the underwriters and the international placement agents reserve the right to reject any offer to 

purchase, in whole or in part, and for any reason, our common shares offered hereby. We and the international 

placement agents also reserve the right to sell or place less than all of our common shares offered hereby. 

Unless otherwise indicated, all information contained in this offering memorandum assumes no exercise 

by Banco Morgan Stanley S.A. of its option to purchase up to an additional 1,991,950 common shares 

(representing up to 10% of the total number of common shares initially offered in this offering) to cover 

over-allotments, if any. 

The offering of the common shares by the selling shareholder is simultaneously being made in Brazil by 

a prospectus in Portuguese that has been filed with the CVM and that has the same date as this offering 

memorandum. The Brazilian prospectus, however, has a different format and contains certain information 

generally not included in documents such as this offering memorandum. This offering is made in the United 

States and elsewhere outside Brazil solely on the basis of the information contained in this offering 

memorandum. Investors should take this into account when making investment decisions. 

This document is being distributed to, and is only directed at, persons who (i) are outside the United 

Kingdom, or (ii) have professional experience in matters relating to investments falling within Article 19(5) 

of the Financial Services and Markets Act of 2000 (Financial Promotion) Order 2005, or FSMA, or (iii) in 

circumstances in which Section 21(1) of FSMA does not apply to us. The common shares are only available 

to, and any invitation, offer or agreement to subscribe, purchase or acquire such common shares will only be 

engaged in with relevant persons. Any person who is not a relevant person should not act or rely on this 

document or any of its contents. 

In any European Economic Area, or EEA, Member State that has implemented Directive 2003/71/EC 

(together with any applicable implementing measures in any Member State, the “Prospective Directive”), this 

communication is only addressed to and is only directed at qualified investors in that Member State within the 

meaning of the Prospective Directive. 

This document has not been and will not be approved by the Portuguese Securities Market Commission 

(Comissão do Mercado dos Valores Mobiliários) and therefore the offer of the common shares by the Selling 

Shareholder is not addressed to non-qualified investors resident and/or located in Portugal and cannot be 

made to the public in Portugal or under circumstances which are deemed to be a public offer under the 

Portuguese Securities Code (Código dos Valores Mobiliários) and other securities legislation and regulations 

applicable in Portugal. 

ii

This document may not be publicly distributed or be accessible in Portugal, nor may any publicity or 

marketing activities related to the offer of the common shares by the Selling Shareholder be conducted in 

Portugal. 

We are not, and the underwriters and the international placement agents are not, making any 

representation to any purchaser of our common shares regarding the legality of an investment in our common 

shares by the purchaser under any legal investment or similar laws or regulations. You should not consider 

any information in this offering memorandum to be legal, business or tax advice. You should consult your 

own attorney, business advisor and tax advisor for legal, business and tax advice regarding an investment in 

our common shares. 

NOTICE TO NEW HAMPSHIRE RESIDENTS 

NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR 

A LICENSE HAS BEEN FILED UNDER RSA 421-B OF THE NEW HAMPSHIRE REVISED 

STATUTES WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS 

EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW 

HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY 

DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. 

NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS 

AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF 

STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATION OF, OR 

RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. 

IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, 

CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS 

OF THIS PARAGRAPH. 

iii

FORWARD-LOOKING STATEMENTS 

This offering memorandum includes forward-looking statements that are subject to risks and 

uncertainties, in particular in the “Summary,” “Risk Factors,” “Management’s Discussion and Analysis of 

Financial Condition and Results of Operations” and “Business” sections. These statements are based on 

current expectations and projections about future events and financial trends that affect or may affect our 

business. Words such as “believe,” “may,” “can,” “seek,” “estimate,” “continue,” “anticipate,” “intend,” 

“expect,” “plan,” “will,” “could,” “predict,” “project” and other similar words are used in this offering 

memorandum to identify forward-looking statements. 

While we believe these forward-looking statements are based on reasonable assumptions, they are subject 

to risks and uncertainties and rely on information currently available to us and therefore do not constitute 

guarantees of future results, which could substantially differ from those results anticipated in our forwardlooking 

statements due to several factors, including, but not limited to, the following: 

• the impact of the global financial and economic crisis in Brazil; 

• economic, political, demographic, hydrological and business conditions generally in Brazil and 

particularly in our concession areas; 

• increase in interest rates or inflation or changes in the valuation of the real; 

• early termination of our concessions by the Brazilian government; 

• increase in competition in the Brazilian electricity industry; 

• our ability to implement our investment plan, including our ability to acquire new concessions in 

auctions carried out by the Brazilian government, to build new generation projects, and to obtain 

financing on reasonable terms; 

• changes in consumer demand for electricity and an increase in customers’ payment defaults; 

• interruption in the supply of electricity; 

• our inability to generate sufficient electricity due to water shortages, transmission outages, operating 

or technical problems or physical damage to our facilities; 

• changes in electricity tariffs and taxes; 

• potential interruption or disturbance in our services; 

• our ability to control technical and commercial losses of electricity; 

• changes in existing and future governmental regulation of the Brazilian electricity sector; 

• changes in existing safety, health and environmental regulations; 

• our obligations related to pension funds; 

• changes in existing and future tax laws; 

• unfavorable decisions in connection with administrative and judicial proceedings; 

• changes in laws with respect to the acquisition of rural properties by foreigners; and 

• other risk factors discussed under “Risk Factors.” 

iv

Forward-looking statements involve risks and uncertainties and are not a guarantee of future performance. 

In light of the risks and uncertainties described above, the forward-looking events and circumstances 

discussed in this offering memorandum may not occur or be accurate, and our future results of operations and 

performance may differ materially from those set out for a number of reasons. Given such limitations, 

investors should not make any decision to invest in our common shares on the basis of the forward-looking 

statements included herein. The forward-looking statements included herein are made only as of the date of 

this offering memorandum, and we do not undertake any obligation to release publicly any revisions to those 

forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence 

of unanticipated events. 

v

PRESENTATION OF FINANCIAL AND OTHER INFORMATION 

Consolidated Financial Statements 

We maintain our books and records in reais. The financial information contained in this offering 

memorandum should be read in conjunction with our consolidated financial statements as of and for the years 

ended December 31, 2010 and 2009 and our consolidated interim financial statements as of and for the threemonth 

periods ended March 31, 2011 and 2010 and the notes thereto, included elsewhere in this offering 

memorandum, each prepared in accordance with International Financial Reporting Standards, or IFRS, issued 

by the International Accounting Standards Board, or IASB, and also in accordance with accounting practices 

adopted in Brazil in conformity with the pronouncements issued by the Accounting Pronouncement 

Committee (CPC). 

Our consolidated financial statements include our financial information and that of our subsidiaries. 

For a complete list of our subsidiaries, see Note 1 to our financial statements included elsewhere in this 

offering memorandum. 

Changes in Accounting Practices 

Law No. 11,638/2007 and Law No. 11,941/2009 substantially modified Brazilian accounting provisions. 

These new accounting rules became effective on January 1, 2008 for all year-end financial statements relating 

to any fiscal year and are mandatory for all Brazilian publicly-held companies. 

The purpose of these amendments was to facilitate the transition from Brazilian GAAP to IFRS and to 

allow regulatory entities and the CVM to issue new accounting rules and procedures in accordance with IFRS. 

In addition, as a result of the enactment of those laws, the CPC issued a number of compulsory accounting 

pronouncements applicable to financial statements as of and for the year ended December 31, 2008. 

In furtherance of the transition to IFRS, the CPC has issued several additional pronouncements, which 

were applied in the preparation of our financial statements as of and for the year ended December 31, 2010, 

with retroactive application for comparison purposes to the financial statements as of and for the year ended 

December 31, 2009. 

The consolidated financial statements of the Company for the years ended December 31, 2010 and 

2009 were prepared in accordance with International Financial Reporting Standards (IFRS) issued by the 

International Accounting Standards Board (IASB) and also in accordance with accounting practices 

adopted in Brazil in conformity with the pronouncements issued by the Accounting Pronouncement 

Committee (CPC). 

The Company adopts all IFRS for the first time in its consolidated financial statements at January 1, 2009. 

The Note 3 "Transition of accounting practices to IFRS" of the Financial statements as of December 31, 

2010 and 2009, details the main effects of the transition to IFRS in view of the Brazilian accounting practices 

for the Company's consolidated financial statements for the year ended December 31, 2009 and the balance 

sheet on transition date of January 1, 2009. 

Rounding 

Certain amounts and percentages included in this offering memorandum have been rounded to facilitate 

their presentation. Therefore, the totals presented in certain tables may not be an arithmetic aggregation of the 

figures that precede them. 

Market Information 

The statements included in this offering memorandum regarding the Brazilian electricity industry are 

based on information obtained from internal sources, publicly available information and industry 

publications. Other information included in this offering memorandum was obtained from reports 

vi

published by official government sources, including, the Brazilian Ministry of Mines and Energy 

(Ministério de Minas e Energia), or MME, ANEEL, the Brazilian Electricity Trading Board (Câmara de 

Comercialização de Energia Elétrica), or CCEE, the Brazilian National Electricity System Operator 

(Operador Nacional do Sistema Elétrico), or ONS, the Brazilian Institute of Geography and Statistics 

(Instituto Brasileiro de Geografia e Estatística), or IBGE, and the Central Bank of Brazil (Banco Central 

do Brasil), or the Central Bank, among others. Although we believe the information derived from these 

sources is reliable, it has not been independently verified by us and therefore we cannot guarantee such 

information is accurate and complete. Accordingly, we do not make any representations as to the accuracy 

or completeness of any of this information. 

vii


SUMMARY 

This summary highlights information about our business and our financial and operating information 

contained elsewhere in this offering memorandum. This summary may not contain all the information that 

may be important to you, and we urge you to read this entire offering memorandum carefully, including the 

sections “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of 

Operations” and our consolidated financial statements and notes to those statements, included in this offering 

memorandum, before deciding to invest in our common shares. 

Overview 

We are a holding company that, through our diversified portfolio, engages in the generation, distribution, 

transmission and trading of electric power in the Brazilian market. Our holdings consist of electric power 

generation projects, such as the Lajeado hydroelectric power plant and the Peixe Angical hydroelectric power 

plant that, together with other hydroelectric and wind power generation projects, gave us a total installed 

capacity of 1,741 MW as of March 31, 2011. Our total potential installed capacity is expected to reach 2,151 

MW by 2012, through our participation in the Pecém project (a joint venture with MPX to develop a coalpowered 

thermal power plant now under construction) and other ongoing electric power generation projects 

such as the development of a Tramandaí wind farm (located in the State of Rio Grande do Sul) along with 

EDP Renováveis. Our electricity distribution companies, EDP Bandeirante and EDP Escelsa, supply 

approximately 2.7 million customers, the majority of which are in residential and industrial areas across 98 

municipalities, 28 of which are located in the State of São Paulo and 70 located in the State of Espírito Santo 

(with a total population of approximately 8 million inhabitants). Our distribution concession areas cover a 

total of 50,885 square kilometers. Our electricity trading company, Enertrade, traded a total of 8,263 GWh of 

electricity in 2010 and 2,330 GWh of electricity in the three-month period ended March 31, 2011. 

Our leading positions in the Brazilian electricity market include being (i) the fourth largest private-sector 

distribution group in Brazil based on electricity sold in 2010 according to EPE – Empresa de Pesquisa 

Energética; (ii) the fifth largest private-sector generation group in Brazil based on installed capacity as of 

December 31, 2010 according to ANEEL; and (iii) the third largest private-sector trading group in Brazil 

based on energy traded in 2010 according to CCEE. 

1

The following table sets forth our principal financial and operating indicators for the periods indicated: 

As of and for the Three- 

Month Period Ended 

March 31, 

2 

Variation 1 st 

Quarter 

2011/2010 

As of and for the Year Ended Variation 

December 31, 

2010/2009 

2011 2010 (%) 2010 2009 (%) 

(in R$ million, except as otherwise indicated) 

Net operating revenues ................... 1,384.8 1,200.4 15.4 5,034.3 4,621.7 8.9 

Distribution .................................. 1,030.1 922.8 11.6 3,762.7 3,446.2 9.2 

Generation .................................... 265.1 227.1 16.7 1,004.1 979.1 2.6 

Trading ......................................... 230.9 148.6 55.4 741.4 763.2 (2.9) 

Transmission ................................ 1.5 1.7 (11.8) 6.2 4.2 47.6 

Others (1) ........................................ (142.8) (99.8) 43.1 (480.2) (571.1) (15.9) 

Net income ...................................... 187.7 173.0 8.5 582.6 695.7 (16.3) 

Distribution .................................. 142.9 137.6 3.8 456.8 435.1 5.0 

Generation (2) ................................. 44.0 39.6 11.1 199.0 257.8 (22.8) 

Trading ......................................... 10.9 9.6 13.3 16.7 25.0 (33.2) 

Transmission ................................ 1.3 1.1 18.2 4.5 3.7 21.6 

Others (1) ........................................ (11.2) (14.9) (24.8) (94.5) (25.9) 265.0 

Adjusted EBITDA (3) ....................... 460.4 412.2 11.7 1,522.5 1,523.6 (0.1) 

Distribution .................................. 271.4 251.0 8.1 840.5 811.1 3.6 

Generation .................................... 181.7 159.8 13.7 731.9 709.4 3.2 

Trading ......................................... 15.6 14.4 8.5 22.5 35.5 (36.6) 

Transmission ................................ 1.2 1.1 9.1 4.7 3.9 20.5 

Others (1) ........................................ (9.6) (14.0) (32.0) (77.1) (36.3) 112.4 

Adjusted EBITDA margin (4) ........... 33.2% 34.3% (3.2) 30.2% 33.0% (8.3) 

Installed capacity (MW) ................. 1,741.0 1,741.0 0.0 1,741.0 1,738.0 0.2 

Distributed energy (GWh) ............... 6,185.0 5,959.0 3.8 23,749.0 21,313.0 11.4 

Sold energy (GWh) (5) ...................... 

Indebtedness: 

2,330.0 2,086.0 11.7 8,263.0 8,715.0 (5.2) 

(6) 

Loans and financings ...................... 3,245.9 3,083.7 5.3 3,385.9 3,193.3 6.0 

(–) Cash equivalents .................... (1,015.5) (1,136.6) (10.7) (1,126.4) (1,102.0) 2.2 

Net indebtedness (7) .......................... 2,230.4 1,947.1 14.5 2,259.5 2,091.3 8.0 

(1) Others correspond to intra-segment eliminations, holding company activities and our controlled subsidiary Escelsapar. 

(2) Excluding the interest of non-controlling shareholders. 

(3) Adjusted EBITDA is a non-GAAP measure calculated by the Company and reconciled to our financial statements taking into 

account the provisions of CVM Circular No. 01/2007, consisting of net income for the period before income and social contribution 

taxes, income from non-controlling shareholders, founders' shares, financial income (expense), net, reversal of interest on equity 

and depreciation and amortization. Adjusted EBITDA is not a Brazilian GAAP measure and has no standardized meaning and our 

definition may not be comparable to that used by other companies. We present Adjusted EBITDA because we believe it is a 

meaningful measure of performance. Adjusted EBITDA should not be considered alone or as a substitute for net income, as an 

indicator of operational performance, or as an alternative to cash flow as an indicator of liquidity. 

(4) Adjusted EBITDA Margin is Adjusted EBITDA divided by net operational revenue. 

(5) Volume of energy traded by Enertrade (includes related party transactions). 

(6) Includes debt with third parties, interest and principal, in Brazilian and foreign currency, with different maturity dates and allocated 

in specific projects or for cash management. Also includes registered derivatives. For further information, see“ Loans and 

financings” included in the notes to the Financial Statements included elsewhere in this offering memorandum. 

(7) Net loans and financing corresponds to total loans and financing minus cash equivalents.

The table below presents the reconciliation of our Adjusted EBITDA for the periods indicated: 

For the Three-Month Period Ended 

For the Year 

March 31, 

Ended December 31, 

2011 2010 2010 2009 

(in R$ million, except otherwise indicated) 

Net income .......................................................................... 187.7 173.0 582.6 695.7 

(+) Income and social contribution .................................... 103.1 97.2 249.1 248.8 

(+) Non-controlling shareholders ....................................... 22.2 25.0 136.9 146.9 

(+) Founders’ shares (1) ........................................................ 2.1 2.4 17.2 15.8 

(+) Financial result .............................................................. 44.3 26.9 177.0 82.0 

(+) Income from equity interest .......................................... 2.4 0.6 1.8 0.4 

(+) Depreciation and amortization ..................................... 98.6 87.1 358.0 334.1 

Adjusted EBITDA (2) ......................................................... 460.4 412.2 1,522.5 1,523.6 

Adjusted EBITDA margin (3) ............................................ 33.2% 34.3% 30.2% 33.0% 

Net margin (4) ...................................................................... 13.6% 14.4% 11.6% 15.1% 

(1) Pursuant to Article 46 of Chapter IV of Brazilian Corporation Law, founders’ shares are negotiable instruments, without par value, 

not recognized within capital stock, which may be created at any time by companies (sociedade por ações). The only right granted 

to holders of these shares is participation in the annual income of the Company. Our subsidiary that has founders’ shares is Lajeado 

Energia S.A. 


account the provisions of CVM Circular No. 01/2007, consisting of net income of the period before income and social contribution 

taxes, income from non-controlling shareholders, founder’s shares, financial income (expense), net, reversal of interest on equity 



meaningful measure of performance. Adjusted EBITDA should not be considered alone or as a substitute to net income, as an 

indicator of operational performance, or as an alternative to cash flow as an indicator of liquidity. For a reconciliation of Adjusted 

EBITDA by business segment, see “Selected Financial and Other Information”. 


(4) Net Margin is net income divided by net operating revenues for the periods presented. 

During the three-month period ended on March 31, 2011, our electricity generation business, the 

principal component of our growth strategy, recorded net operating revenues of R$265.1 million and net 

income of R$44.0 million (excluding non-controlling interests). For the same period, our electricity 

distribution business, which is responsible for the bulk of our net income and, through operational efficiency 

and directed investments that facilitate organic growth, reduces losses and provides quality services, recorded 

net operating revenues of R$1,030.1 million and net income of R$142.9 million. Our electricity power trading 

business, Enertrade, recorded net operating revenues of R$230.9 million and net income of R$10.9 million 

during the three-month period ended March 31, 2011. 

Our consolidated net operating revenues were R$5,034.5 million for the year ended on December 31, 

2010, and R$1,384.8 million for the three-month period ended on March 31, 2011. 

Since our initial public offering in 2005, we have developed important projects and consummated 

transactions that we believe demonstrate our management’s capacity to help our business grow, including, 

among others, (i) the completion of construction and commencement of operations of the Peixe Angical 

hydroelectric power plant, which added 452 MW to our installed capacity; (ii) an exchange of equity interests 

in certain companies owned by us and by Grupo Rede, whereby we transferred our equity interest in Enersul 

to Grupo Rede, in exchange for direct and indirect equity interests in the Lajeado hydroelectric power plant, 

increasing our equity participation in this hydroelectric power plant from 27.7% to 73% of the voting share 

capital; and (iii) we entered into a the joint venture with MPX for the development of the Pecém coalpowered 

thermal power plant project. Since 2005, our installed generation capacity grew from 530 MW to 

1,741 MW. 

3

Business Segments 

Generation 

For the year ended December 31, 2010, our generation business recorded net operating revenues of 

R$1,004.1 million, representing approximately 19.9% of our consolidated net revenues, adjusted EBITDA of 

R$731.9 million, representing approximately 48.1% of our consolidated adjusted EBITDA, and net income of 

R$199.0 million (excluding non-controlling shareholders), representing 34.2% of our consolidated net income. 

During the three-month period ended March 31, 2011, our generation business recorded net operating 

revenues of R$265.1 million, representing approximately 19.1% of our consolidated net revenues, adjusted 

EBITDA of R$181.7 million, representing approximately 39.5% of our consolidated adjusted EBITDA, and 

net income of R$44.0 million, representing 23.4% of our consolidated net income. We briefly describe our 

power generation companies below. 

Investco 

We hold a 56% equity interest in Lajeado, which holds a 73.0% equity interest in Investco. The 

remaining 27.0% equity interest is directly and indirectly held by CPFL Lajeado and CEB Lajeado. Investco 

owns the Lajeado hydroelectric power plant, in operation since May 1995 and located on the Tocantins River, 

in the municipalities of Lajeado and Miracema do Tocantins, in the State of Tocantins. This hydroelectric 

power plant has an installed capacity of 902.5 MW and an average assured energy of 527 MW, divided into 

five generation units, with an installed capacity of 180.5 MW each. 

Enerpeixe 

We directly hold a 60% equity interest in Enerpeixe. The remaining 40% equity is held by Furnas. 

Incorporated in May 2001, this hydroelectric power plant is located on the Tocantins River in the municipality 

of Peixe, with an installed capacity of 452 MW and an average assured energy of 271 MW. 

Pecém 

We directly hold a 50% equity interest in Pecém. The remaining 50% equity is held by MPX. Located in 

the municipality of Pecém, in the State of Ceará, this coal-powered thermal power plant, when completed in 

2012, will have an installed capacity of 720 MW and an assured energy output of 615 MW. 

Energest 

Our wholly owned subsidiary Energest holds part of our remaining power generation assets, including 15 

operational power plants, with a total installed capacity of 371,8 MW. These power plants are located in the 

States of Espírito Santo (with an installed capacity of 302.2 MW) and Mato Grosso do Sul (with an installed 

capacity of 68.7 MW). 

Cenaeel 

We indirectly hold a 45% equity interest in Cenaeel. EDP Renováveis holds the remaining 55%. Cenaeel 

holds equity interests in two wind farms located in the municipality of Água Doce, in the State of Santa 

Catarina, with a total installed capacity of 13.8 MW and a total average assured energy of 3 MW. 

Distribution 

For the year ended on December 31, 2010, our distribution business recorded net operating revenues of 



R$456.8 million, representing 78.4% of our consolidated net income. During the three-month period ended 

March 31, 2011, our distribution business recorded net operating revenues of R$1,030.1 million, representing 

approximately 74.4% of our consolidated net revenues, adjusted EBITDA of R$271.4 million, representing 

approximately 58.9% of our consolidated adjusted EBITDA, and net income of R$142.9 million, representing 

76.1% of our consolidated net income. We briefly describe our power distribution companies below. 

4

EDP Bandeirante 

One of the main power distribution companies in the State of São Paulo and our largest wholly-owned 

power distribution subsidiary, EDP Bandeirante operates in the areas of Alto Tietê, Vale do Paraíba and the 

northern coastal region of the State, with approximately 1.5 million customers, providing services to 

approximately 4.6 million people in a total area of approximately 9.6 square kilometers. The State of São 

Paulo represents 33.3% of Brazil’s gross domestic product, or GDP, according to an IPEADATA 2008 report, 

from ABRADEE. As of the three-month period ended on March 31, 2011, EDP Bandeirante’s net revenues 

represented 59.7% of the total power distribution net revenues. 

The GDP of the State of São Paulo, the main industrial center of Brazil and EDP Bandeirante’s 

concession grew by 6.9% in 2010, a growth rate of 8.5%, similar to Brazil’s GDP growth rate of 7.5% for the 

same period. Many large and diversified industrial companies are located in this region, including companies 

in the metals, paper, chemical products, rubber and plastic, technology, automobile and aviation industries. 

EDP Escelsa 

The main power distribution company in the State of Espírito Santo, according to ABRADEE, EDP 

Escelsa, has approximately 1.2 million customers, providing services to approximately 3.2 million people, in 

a total area of approximately 41.2 square kilometers, representing approximately 90% of the total area of the 

state. As of the three-month period ended on March 31, 2011, EDP Escelsa’s net revenues represented 40.3% 

of our total power distribution net revenues. 

The GDP of the State of Espírito Santo grew by 13.3% during the first quarter of 2011, above the average 

national GDP growth rate of 7.5%, according to IBGE. The development of the State of Espírito Santo has 

benefited from increasing activities, including those of Vale S.A., Companhia Siderúrgica de Tubarão and 

Fibria Celulose S.A. The State is the major national producer of iron ore pellets and the second-largest steel 

producer in Brazil, according to Grupo Vale. 

Trading 

Enertrade 

Our power trading activities are conducted through our wholly-owned subsidiary, Enertrade, and are 

focused on free consumers in Brazil, both in our power distribution companies’ concession areas and in other 

concession areas. We have a market share of 9.2% according to CCEE, which ranks us third among the 

country’s main energy traders (the leading trader has a market share of 17.9% while the second-ranked trader 

has a share of 12.1%), according to CCEE. 

For the year ended on December 31, 2010, we traded a total of 8,263 GWh of electricity, recorded net 

operating revenues of R$741.4 million, representing approximately 14.7% of our consolidated net revenues, 

adjusted EBITDA of R$22.5 million, representing approximately 1.5% of our consolidated adjusted EBITDA, 

and net income of R$16.7 million, representing 2.9% of our consolidated net income. During the three-month 

period ended March 31, 2011, our trading business recorded net operating revenues of R$230.9 million, 

representing approximately 16.7% of our consolidated net revenues, and net income of R$10.9 million, 

representing 5.8% of our consolidated net income. 

Others 

In addition to generation, distribution and trading businesses, we conduct: (i) operations between 

subsidiaries, which are eliminated at the consolidated level; (ii) activities at the holding company level; 

(iii) IT and internet services exclusively for the companies of the EDP group through Escelsapar; and 

(iv) transmission operations through Evrecy S.A., with amounts not significant at the consolidated level. 

5

Our Strengths 

We believe that our competitive strengths include the following: 

Integrated Generation, Distribution and Trading Operations. Our business consists of integrated power 

generation, distribution and trading operations in Brazil. Our power distribution companies and our power 

trading company, Enertrade, provide services in areas with concentrated industrial and residential customers. 

EDP Bandeirante and EDP Escelsa operate in highly developed and commercial areas within the State of São 

Paulo. The State of São Paulo is the largest market in Brazil, representing approximately 33.0% of Brazil’s 

GDP, according to an IPEADATA 2008 report. EDP Escelsa’s concession area is the State of Espírito Santo, 

where the main sectors of the economy are related to metals, minerals, chemicals, rubber and plastics, which 

are mainly produced for export. According to the CCEE, Enertrade ranks third among the private-sector 

power trading companies in Brazil in terms of volume of electricity traded in the wholesale market in 2010, 

trading a total of 8,263 GWh in 2010, and as of the three-month period ended on March 31, 2011, trading a 

total of 2,330 GWh. 

In the generation business, we also participate in electricity generation projects, such as the Lajeado 

hydroelectric power plant and the Peixe Angical hydroelectric power plant, that, together with other 

electricity generation projects, provided us with a total installed electricity generating capacity of 1,731 MW 

as of March 31, 2011. In 2008, we started our operations in the Brazilian wind power market through a 

partnership with EDP Renováveis. Upon completion of the Pecém project (a joint venture with MPX for the 

development of a coal-powered thermal power plant that is now under construction), and other ongoing 

electric power generation projects that include the development of a Tramandaí wind farm (located in the 

State of Rio Grande do Sul), we expect that our total potential installed capacity will reach 2,151 MW by 

2012. 

Concession assets and long term contracts linked to inflation. A significant part of our revenues is 

backed by distribution and generation of electricity through concessions, which are regulated assets with long 

useful lives rendering essential services for economic and social development. We have no concessions due to 

expire over the next 14 years. Accordingly, revenue variations that may occur will arise only from the rules 

and risks inherent to our business. In the case of distribution, revenues are restated annually according to 

inflation indexes discounted from the productivity of each concession and tariffs reviewed every three years 

(for EDP Escelsa) or four years (for EDP Bandeirante), which take into account the development of efficient 

costs and capital returns. Generation carries the right to sell electricity corresponding to the physical 

guarantee of its facility for the period determined by the granting authority for long term contracts that 

establish annual adjustments to prices for inflation. 

Experience in the Development and Operation of Generation Projects. The worldwide experience of 

the EDP Group, and the experience we acquired in Brazil in the development and operation of large power 

generation projects, including the Lajeado hydroelectric power plant (902.5 MW) and the Peixe Angical 

hydroelectric power plant (452 MW), provide us with an important strategic position that will assist us in 

benefitting from potential opportunities in this segment. We believe we have the capabilities to enter into 

strategic partnerships with large and experienced companies in the Brazilian electricity market, as we did with 

the Peixe Angical hydroelectric power plant with Furnas, and with the Pecém project, through our partnership 

with MPX. Our investment strategy in the power generation business is focused on investing in projects in 

which we exercise shareholding and management control or, alternatively, joint control of projects with 

power purchase agreements. We believe this strategy mitigates risks related to licensing, financing, 

implementation and maintenance of projects before engineers as well as overall management of the operation. 

We are also developing studies for a potential participation in government sponsored auctions for a gaspowered 

thermal power plant, or A-3 auctions. 

Operating Efficiency and Consistent History of Costs Reduction. Our focus on controllable costs has 

helped to maintain a trend of cost savings over the three years ended December 31, 2010, which has 

contributed to growth in our gross margin. This trend reflects our resolve and ability to optimize the capacity 

of our resources, seek simplification of corporate structures, and gain efficiency in our processes. Our ratio of 

controllable expenditures to gross margin has been decreasing over the last few years from 37.8% in 2008, to 

33.3% in 2009, 32.4% in 2010 and 30.3% in March 2011. 

6

Solid Capital Structure, Historic Dividend Payments and Solid Financial Position. We have a solid 

capital structure, low indebtedness ratios and significant growth in cash flow from operations, reflecting our 

steady increase in operating revenues, adjusted EBITDA and dividend payments. Between 2006 and 2010, 

our net operating revenues, adjusted EBITDA and dividend payments had average compounded annual 

growth rates of 6.0%, 9.1% and 21.2%, respectively. As of March 31, 2011, our total net debt was R$2,230.4 

million, or 1.4 times our adjusted EBITDA recorded during the past four quarters, of R$1,598.1 million. We 

also believe we are perceived by credit rating agencies and the Brazilian and international capital markets and 

bank loan markets as a creditworthy company. According to reports by Moody’s dated as of May 27, 2010 

(for EDP Bandeirante) and as of May 5, 2011 (for EDP Escelsa), rating agencies gave investment grade 

ratings with respect to the debt of our power distribution companies, on both a local and an international basis. 

We believe these ratings reflect a gradual and consistent improvement in our business and financial condition. 

According to a report published on May 3, 2011, Standard & Poor’s, or S&P. raised the ratings of our power 

distribution companies. S&P increased EDP Escelsa’s local rating from AA to AA+, with a stable outlook, 

and the international rating from BB to BB+, while S&P mentioned EDP Bandeirante’s local rating at AA+ 

with an outlook modified from stable to positive. In 2009, BNDES granted us a R$900 million long-term 

revolving credit line, available for a five-year period, in order to finance investments in fixed assets for our 

distribution and generation businesses, which was unprecedented for the sector at the time. We believe that 

our solid capital structure and solid financial position set us apart from our competitors, allowing us to 

execute our growth strategy, which mainly focuses on relatively low risk generation assets. 

Controlling Group with Vast Experience in the Electricity Sector and Experienced Management Team. 

We are controlled by the EDP Group, an established international group of companies with vast experience in 

the generation, distribution and trading of electricity, that is the fourth-largest group in the Iberian Peninsula 

electricity sector and one of the largest private-sector groups in Portugal (by market value). The EDP Group 

represents value and credibility, as it has been making long-term investments in Brazil for almost 15 years. 

The EDP Group differentiates itself by its experience with renewable energy projects, social policies and 

environmental issues, and was named Best Utility 2010 by the Dow Jones Sustainability Index. In addition, 

our management has significant experience in the electricity sector. Our management is highly focused on the 

efficient management of our assets, reduction of costs, and the creation of value for our shareholders, and is 

guided by the highest standards of corporate governance. 

Our Strategies 

Our principal objective is the creation of value for our shareholders primarily through sustained growth in 

electricity generation, distribution and trading markets in Brazil. In order to achieve this objective, our 

principal strategies include the following: 

Expand our Generation Activities. We believe that our generation business represents a significant 

growth potential in the Brazilian market and that our experience in the development and management of large 

power generation projects (as of the date of this Offering Memorandum we have 19 generation power plants 

under operation), as well as our ability to enter into partnerships with other important players in the power 

generation segment, places us in a privileged strategic position to benefit from growth opportunities that 

include the renewable energy segment, in which we own 13 small hydroelectric power plants (PCHs) as well 

as two wind farms, with a total generation capacity of 165.3 MW. We believe Brazil’s installed capacity will 

increase over the next few years, primarily through the use of hydroelectric power plants, thermal power 

plants and renewable energy. According to EPE, Brazilian market demand should reach a total of 63,480 MW 

of installed capacity by 2019. We believe that the principal growth opportunities in Brazil will be in: 

• Hydroelectric power plants, through (i) participation in new hydroelectric generation auctions; 

(ii) focus on the feasibility and, as applicable, development of mid-sized hydroelectric power plants 

and small hydroelectric power plants; and (iii) the acquisition of existing hydroelectric power assets. 

In order to strengthen our position in the market, we executed an agreement for the acquisition of the 

total capital stock of ECE Participações S.A., or ECE, which owns 90% of the Amapá Energia 

Consortium. This consortium owns the right to operate the Santo Antônio do Jari hydroelectric 

power plant, located in the States of Pará and Amapá. The remaining 10% participation is owned by 

Jari Energética S.A., or JESA, original owner of the concession, and which has a tag along right to 

sell us its participation under the same conditions. The term to exercise this tag along right expires on 

7

July 15, 2011. The Santo Antônio do Jari hydroelectric power plant will have an installed capacity of 

300 MW and an average assured energy of 196.1 MW corresponding to a load factor of 65% already 

approved by ANEEL, of which 190 MW has already been sold under the A-5 auction held in 

December 2010 for the period of 30 years through December 31, 2044, when the concession term 

expires. The project also assumes an increase of installed capacity of 73.40 MW, which is subject to 

ANEEL's approval. Total estimated investment amount may vary from R$1,270 million and R$1,410 

million, including the construction of the maximum capacity of 373.4 MW, project payment to the 

sellers and any amounts arising from the tag along right by JESA. The closing of the acquisition is 

subject to the completion of certain conditions precedents, including the regulatory authorizations 

such as ANEEL's approval; 

• Thermal power plants, through our investment in 2008 in coal-powered thermal plant Pecém, in the 

State of Ceará, will increase our installed capacity by 360 MW. The investment was made taking into 

consideration the demand to increase Brazil’s installed generation capacity to secure a sufficient 

supply of electricity to allow for stable economic growth. Recently, we entered into a gas supply 

agreement with Petrobras – Petróleo Brasileiro S.A., or Petrobras, which involves a potential 

participation in A-3 auctions; and 

• Renewable energy, in consideration of the increasing demands on clean energy, through our 

partnership with EDP Renováveis, in order to (i) complete the construction of Tramandaí wind farm 

with installed capacity of 70MW; and (ii) analyze new wind power projects. 

Maintain Our Investments and Focus on Operational Efficiency and Organic Growth in the 

Electricity Distribution Segment. We intend to focus on our current investments in the electricity distribution 

segment, increasing our activities in this segment through organic growth, improving our operational 

efficiency, and preparing for the next periodic revision cycle for tariff adjustments to be proposed by ANEEL 

in order to ensure the quality of services provided to our consumers. 

Maintain a Strong Presence in the Electricity Trading Segment. We are actively focused on our 

electricity trading activities, as a strategic response to the development of a free consumer market in Brazil. 

We intend to focus on the loyalty of clients located both in and out of our distribution areas and that choose to 

be free customers. We intend to supply electricity to these free customers through our trading company, 

Enertrade, providing solutions to their electricity needs, thus adding value to the services we provide. The sale 

of electricity has low fixed costs and the sales margins offer profit opportunities. Additionally, our electricity 

trading segment may present partnership opportunities with power generation segment, enabling long-term 

agreements. Through Enertrade, we guarantee our participation in the development of the free consumer 

market in Brazil. 

Incentivize Sustainability and Innovation. We are committed to conducting our business and using our 

resources in a sustainable way in accordance with global sustainability principles. We try not to waste the 

natural resources we use in our production processes by efficiently using energy, using renewable sources of 

energy and reducing greenhouse gases throughout our production chain. We focus on promoting safe work 

conditions and maintaining the health of our employees, in addition to being actively involved in several 

social benefit programs. We strive to be recognized as market leaders in sustainability and innovation in the 

business segments in which we operate. 

Consolidate our Position as a Relevant Player in the Electricity Energy Sector. We intend to have a 

primary role in the development of the Brazilian electricity sector by identifying the best investment 

opportunities in our business segments in accordance with our business strategy and our strict return on 

investment criteria. Since our initial public offering in 2005, we have developed and completed important 

projects and transactions, including, among others, (i) the construction of the Peixe Angical hydroelectric 

power plant; (ii) the Lajeado/Enersul Exchange Agreement; and (iii) the joint venture with MPX. 

8

Our Corporate Structure 

The following chart represents our corporate structure as of the date of this offering memorandum: 

For further information regarding our principal shareholders, see “Principal Shareholders.” 

Our principal executive offices are located at Rua Bandeira Paulista, 530, 14 th floor, São Paulo, SP, 

Brazil. Our Investor Relations Department’s telephone number is (55 11) 2185-5900 and the facsimile 

number is (55 11) 2185-5975. We maintain a website at www.edpbr.com.br and a link for investors at 

www.edpbr.com.br/ri. Information on our website is not incorporated into this offering memorandum and 

should not be relied upon in determining whether to make an investment in our common shares. 

Recent Developments 

In addition to the acquisition of the right to operate the Santo Antônio do Jari hydroelectric power plant 

described in "Our Strategies – Expand our Generation Activies", on June 15, 2011, EDP Bandeirante made a 

provision in the amount of R$77.4 million for a lawsuit filed by White Martins S.A., discussing the legality of 

a tariff increase to industrial customers practiced by EDP Bandeirante. The provisioned amount was already 

deposited as guaranty in the lawsuit. According to the practice adopted in previous years, when considering 

the accounts of the year ended December 31, 2011, we will propose to mitigate the potential impact of this 

provision to our net income. See "Business – Legal Proceedings". 

9

THE OFFERING 

Selling shareholder ........................ EDP – Energias de Portugal, S.A. 

Company ....................................... EDP – Energias do Brasil S.A. 

Underwriters .................................. Banco Santander (Brasil) S.A., Banco Morgan Stanley S.A., Banco Itaú 

BBA S.A. and BES Investimento do Brasil S.A. – Banco de Investimento. 

Lead Coordinator ........................... Banco Santander (Brasil) S.A. 

Co-manager ................................... Caixa – Banco de Investimento, S.A. 

International Placement Agents ..... Santander Investment Securities, Inc., Morgan Stanley & Co. LLC, Itau 

BBA USA Securities, Inc., Banco Espírito Santo de Investimento S.A., 

Espírito Santo Financial Services, Inc. and Caixa – Banco de 

Investimento, S.A. 

Offering ......................................... The selling shareholder is offering a total of up to 19,919,510 common 

shares to: 

Offering Price ................................ R$37.00 per common share. 

• the public, our employees and institutional investors in Brazil 

pursuant to an offering registered in Brazil; 

• QIBs in the United States in reliance on Rule 144A under the 

Securities Act; and 

• other investors outside the United States and Brazil that are 

not U.S. persons, in reliance on Regulation S under the 

Securities Act. 

Investors other than investors in Brazil will have to observe the 

investment mechanisms regulated by the CMN, the Central Bank and 

the CVM. 

Over-allotment Option ................... The selling shareholder has granted to Banco Morgan Stanley, S.A., an 

option for a period of up to 30 days from, and including, the date of the 

execution of the Brazilian Underwriting Agreement, to purchase up to 

1,991,950 additional common shares (representing up to 10% of the total 

number of common shares initially offered in this offering) to cover 

over-allotments, if any. 

Share Capital ................................. Our share capital consists of 158,805,204 common shares, with no par value. 

Tag-along Rights ........................... The sale of a controlling stake in us, whether in a single transaction or in 

successive related transactions, must contain a provision requiring the 

buyer of common shares representing control to conduct a public tender 

offer for our remaining common shares, subject to Brazilian law then in 

effect and the regulations of the Novo Mercado, in order to assure the 

holders of our remaining common shares treatment equal to that given to 

the controlling shareholder selling its stake. 

10

Voting Rights ................................ Each of our common shares entitles its holder to one vote at our annual 

or special shareholders’ meetings. See “Description of Capital Stock – 

Rights of Our Shares.” 

Lock-up Restrictions ..................... We, our directors and officers, the selling shareholder and our controlling 

shareholders will agree that we and they will not issue, offer, sell or 

otherwise dispose of any common shares or securities convertible into or 

exercisable for any common shares during the 90-day period following 

the date of the final Brazilian prospectus, except for certain limited 

exceptions. See “Plan of Distribution.” 

Use of Proceeds ............................. The Company will not receive any proceeds from the Offering. The 

selling shareholder will receive all net proceeds resulting from the selling 

of the common shares object of this Offering, including the net proceeds 

resulting from the exercise of the Over-allotment Option. 

Dividends ...................................... Our bylaws require us to pay to our shareholders a minimum mandatory 

dividend of 25% of our annual net income, calculated in accordance with 

the Brazilian Corporation Law, as further described in “Dividends and 

Dividend Policy.” 

Listing ............................................ Our common shares are currently listed on the Novo Mercado of the 

BM&FBOVESPA under the symbol “ENBR3.” 

Trading, Settlement and 

Clearance ....................................... 

Payment for the common shares will be required to be made in reais. We 

expect the common shares to be delivered via book entry on 

July 13, 2011, the third business day after the date of the final offering 

memorandum. Trades in the common shares on the BM&FBOVESPA 

will be settled through the facilities of the Central Depository 

BM&FBOVESPA (Central Depositária BM&FBOVESPA), formerly the 

Brazilian Settlement and Custodial Company (Companhia Brasileira de 

Liquidação e Custódia). 

Transfer Restrictions ..................... Our common shares have not been registered under the Securities Act 

and are subject to restrictions on transfer. In addition, for so long as the 

common shares are “restricted securities” within the meaning of Rule 

144(a)(3) under the Securities Act, such common shares may not be 

deposited into any unrestricted depositary receipt facility in respect of 

our common shares established or maintained by a depositary bank other 

than a Rule 144A restricted depositary receipt facility. For information 

on restrictions on transfer of our common shares, see “Transfer 

Restrictions.” Transfer of our common shares, including by and between 

nonresidents of Brazil, may only be effected in Brazil. 

Risk Factors ................................... An investment in our common shares involves risks. See “Risk Factors” 

for information on certain factors that should be carefully analyzed 

before investing in our common shares. 

11

SUMMARY FINANCIAL AND OTHER INFORMATION 

We present below a summary of our consolidated balance sheet and statements of income for each of the 

periods indicated. Our consolidated financial statements are prepared in accordance with IFRS. The 

financial information presented below should be read in conjunction with “Presentation of Financial and 

Other Information,” “Management’s Discussion and Analysis of Financial Condition and Results of 

Operations” and the financial statements, including the notes thereto, included in this offering memorandum. 

The following summary financial information has been derived from our consolidated financial 

statements as of and for the years ended December 31, 2010 and 2009 and our interim consolidated financial 

statements as of and for the three-month periods ended March 31, 2011 and 2010, included elsewhere in this 

offering memorandum, and include, in the opinion of our management, all adjustments necessary to 

adequately present our financial condition for the periods indicated. Net income for the three-month period 

ended March 31, 2011 is not necessarily indicative of the results that may be expected for the year ended 


This offering memorandum includes translations of various real amounts into U.S. dollars at specified 

rates solely for your convenience. You should not construe these translations as representations by us that the 

real amount actually represents these U.S. dollar amounts or could be converted into U.S. dollars at the rates 

indicated. Unless otherwise indicated, we have translated the real amounts for the year ended December 31, 

2010 and for the three-month period ended March 31, 2011, using a rate of R$1.6287 to U.S.$1.00, the rate of 

exchange as of March 31, 2011. See “Exchange Rates”. 

Three-Month Period 

Ended March 31, Year Ended December 31, 

2011 2011 2010 2010 2009 

(in US$ 

millions) (in R$ millions) 

12 

(in US$ 

millions) (in R$ millions) 

Net operating revenues .................................................... 850.2 1,384.8 1,200.4 3,091.0 5,034.3 4,621.7 

Electricity services costs 

Electricity cost ................................................................ (435.6) (709.5) (587.7) (1,656.7) (2,698.2) (2,340.3) 

Electricity purchased for resale ................................... (339.6) (553.1) (433.4) (1,287.4) (2,096.8) (1,866.7) 

Electricity network use charges ................................... (96.0) (156.4) (154.4) (369.3) (601.4) (473.7) 

Operating costs ............................................................... (103.0) (167.8) (164.6) (406.0) (661.3) (598.5) 

Personnel ...................................................................... (23.8) (38.8) (38.3) (93.3) (151.9) (146.5) 

Materials and third-party services ............................... (31.0) (50.5) (47.1) (124.7) (203.1) (166.6) 

Depreciation and amortization .................................... (41.0) (66.8) (66.3) (169.6) (276.2) (257.2) 

Other operating costs ................................................... (7.2) (11.7) (12.9) (18.5) (30.1) (28.1) 

Service cost rendered to third parties ............................. (0.3) (0.5) (0.9) (3.7) (6.1) (2.9) 

Gross operating profit ..................................................... 311.3 507.0 447.2 1,024.6 1,668.8 1,680.0 

Operational expenses ...................................................... (89.2) (145.2) (122.0) (309.6) (504.2) (490.5) 

Selling .......................................................................... (8.0) (13.1) (17.4) (49.3) (80.3) (42.0) 

General and administrative .......................................... (48.9) (79.6) (65.2) (160.9) (262.0) (321.6) 

Depreciation and amortization .................................... (19.5) (31.7) (20.7) (50.2) (81.8) (76.9) 

Other operating expenses ............................................ (12.8) (20.8) (18.7) (49.2) (80.1) (50.0) 

Service result .................................................................. 222.1 361.8 325.2 715.0 1,164.6 1,189.5 

Income from equity interest ............................................ (1.5) (2.4) (0.6) (1.1) (1.8) (0.4) 

Financial revenues ....................................................... 31.7 51.6 73.6 207.5 338.0 296.6 

Financial expenses ....................................................... (58.9) (95.9) (100.5) (316.2) (515.0) (378.6) 

Financial result ................................................................ (27.2) (44.3) (26.9) (108.7) (177.0) (82.0) 

Income before income tax and social contribution ..... 193.5 315.1 297.7 605.2 985.7 1,107.1 

Current income and social contribution taxes ................ (58.9) (96.0) (93.2) (140.8) (229.3) (196.8) 

Deferred income and social contribution taxes .............. (4.4) (7.1) (4.0) (12.2) (19.8) (52.0) 

Net income before non-controlling shareholders .............. 130.2 212.0 200.5 452.3 736.6 858.3 

Non-controlling shareholders ......................................... (13.6) (22.2) (25.0) (84.1) (136.9) (146.9) 

Founders’ shares ............................................................. (1.3) (2.1) (2.4) (10.6) (17.2) (15.8) 

Net income for the period ............................................... 115.2 187.7 173.0 357.7 582.6 695.7 

Profit per share (in Reais) ............................................... 0.7 1.2 1.1 2.3 3.7 4.4

As of March 31, As of December 31, 

2011 2011 2010 2010 2009 

Assets (in US$ millions) (in R$ millions) (in US$ millions) (in R$ millions) 

Current assets ........................................................ 1,625.7 2,647.7 1,765.0 2,874.7 2,713.6 

Cash and cash equivalents .................................. 623.5 1,015.5 691.6 1,126.4 1,102.0 

Accounts receivable ............................................ 5.4 8.8 5.3 8.7 6.0 

Indemnifiable financial assets ............................. 0.5 0.8 0.5 0.8 0.8 

Consumers and concessionaires .......................... 574.3 935.4 545.7 888.8 901.8 

Taxes and social contribution ............................. 244.4 398.1 331.7 540.3 419.3 

Inventories ........................................................... 17.9 29.1 17.3 28.1 13.2 

Pledges and restricted deposits ........................... 31.7 51.6 38.6 62.9 69.6 

Prepaid expenses ................................................. 2.4 3.9 3.3 5.3 2.6 

Assets available for sale ...................................... 18.5 30.1 25.1 40.8 39.1 

Other asstes ......................................................... 107.1 174.4 106.0 172.6 159.1 

Noncurrent assets.................................................. 6,119.4 9,966.7 6,100.2 9,935.4 9,202.9 

Long-term receivables .......................................... 974.4 1,587.0 962.7 1,567.9 1,373.2 

Accounts receivable ............................................ 11.4 18.5 11.5 18.8 21.9 

Indemnifiable financial assets ............................. 255.7 416.5 243.9 397.3 325.3 

Consumers and concessionaires .......................... 40.5 65.9 39.1 63.7 64.9 


Deferred income and social contribution taxes .. 476.5 776.0 478.1 778.7 748.3 

Advances for future capital increases ................. 0.3 0.5 0.3 0.5 – 

Pledges and restricted deposits ........................... 147.2 239.8 147.2 239.7 130.8 

Prepaid expenses ................................................. 0.5 0.8 0.6 0.9 1.1 

Other assets ......................................................... 19.8 32.2 19.9 32.4 49.9 

Investments ......................................................... 21.4 34.9 22.9 37.3 30.9 

Property, plant and equipment ............................ 3,277.0 5,337.2 3,256.3 5,303.6 4,803.8 

Intangible assets .................................................. 1,846.6 3,007.6 1,858.4 3,026.7 2,995.0 

Total ....................................................................... 7,745.1 12,614.4 7,865.2 12,810.1 11,916.5 


2011 2011 2010 2010 2009 

Liabilities (in US$ millions) (in R$ millions) (in US$ millions) (in R$ millions) 

Current liabilities .................................................. 1,334.3 2,173.1 1,550.6 2,525.4 2,325.3 

Suppliers .............................................................. 359.7 585.8 384.6 626.4 508.1 


Dividends ............................................................ 118.7 193.3 117.3 191.1 144.6 

Debentures ........................................................... 88.8 144.6 142.3 231.7 210.0 

Loans, financing and debt charges ...................... 229.0 373.0 230.7 375.7 572.7 

Post-employment benefits ................................... 16.9 27.6 16.9 27.6 27.2 

Estimated employee benefits and social charges .. 37.1 60.4 31.0 50.5 48.8 

Regulatory and sector charges ............................ 141.0 229.6 138.4 225.4 156.6 

Use of public property......................................... 11.8 19.3 11.9 19.4 17.3 

Provisions ............................................................ 18.5 30.1 18.6 30.3 19.6 

Other accounts payable ....................................... 54.3 88.5 84.4 137.4 166.0 

Noncurrent liabilities ............................................ 2,322.1 3,782.0 2,351.3 3,829.6 3,369.4 

Suppliers .............................................................. 0.3 0.5 0.6 0.9 – 


Deferred income and social contribution taxes .. 178.9 291.4 177.4 289.0 261.0 

Debentures ........................................................... 391.6 637.8 391.5 637.6 453.2 

Loans, financing and debt charges ...................... 1,283.5 2,090.5 1,314.5 2,140.9 1,957.4 

Post-employment benefits ................................... 115.4 188.0 116.2 189.2 130.8 

Regulatory and sector charges ............................ 7.6 12.3 7.9 12.9 14.9 

Use of public property......................................... 139.2 226.7 132.5 215.8 205.6 

Provisions ............................................................ 95.2 155.1 94.3 153.6 141.1 

Provisions for unsecured liabilities ..................... 1.4 2.3 7.9 12.8 – 

Reserve for reversal and amortizations ............... 10.6 17.2 10.6 17.2 17.2 

Other accounts payable ....................................... 13.3 21.6 13.4 21.8 45.9 

Shareholders’ equity ....................................... 2,907.6 4,735.6 2,796.4 4,554.5 4,362.9 

Capital ................................................................. 1,954.1 3,182.7 1,954.1 3,182.7 3,182.7 

Capital reserves ................................................... 58.7 95.6 58.7 95.6 96.7 

Profit reserves...................................................... 851.4 1,386.6 851.4 1,386.6 1,243.0 

Other comprehensive income ............................. (67.8) (110.4) (63.7) (103.8) (50.1) 

Treasury shares.................................................... (4.1) (6.6) (4.1) (6.6) (6.6) 

Accumulated earnings (losses) ........................... 115.2 187.7 – – (102.8) 

Non-controlling shareholders.............................. 1,181.1 1,923.7 1,166.9 1,900.6 1,858.9 

Total shareholders’ equity and non-controlling 

shareholders ..................................................... 4,088.7 6,659.3 3,963.3 6,455.1 6,221.8 

Total liabilities and shareholders’ equity ........... 7,745.1 12,614.4 7,865.2 12,810.1 11,916.5 

13


Month Period ended 

March 31, 

14 

Variation 1 st 

Quarter 

2011/2010 

As of and for the Year Variation 

Ended December 31, 2010/2009 

2011 2010 (%) 2010 2009 (%) 


Adjusted EBITDA (3) ........................................... 460.4 412.2 11.7 1,522.5 1,523.6 (0.1) 

Distribution ..................................................... 271.4 251.0 8.1 840.5 811.1 3.6 

Generation (2) .................................................... 181.7 159.8 13.7 731.9 709.4 3.2 

Trading ............................................................ 15.6 14.4 8.5 22.5 35.5 (36.6) 

Transmission ................................................... 1.2 1.1 4.3 4.7 3.9 20.5 

Others (1) ........................................................... (9.6) (14.0) (32.0) (77.1) (36.3) 112.4 

Adjusted EBITDA margin (4) ............................... 33.2% 34.3% (3.2) 30.2% 33.0% (8.3) 

Installed capacity (MW) ..................................... 1,741.0 1,741.0 0.0 1,741.0 1,738.0 0.2 

Distributed energy (GWh) .................................. 6,185.0 5,959.0 3.8 23,749.0 21,313.0 11.4 

Sold energy (GWh) (5) .......................................... 2,330.0 2,086.0 11.7 8,263.0 8,715.0 (5.2) 

(1) Others correspond to intra-segment eliminations, Holding activities and the controlled company Escelsapar. 












Three-Month Period Ended March 31, Year Ended December 31, 

2011 2010 2010 2009 


Net income ........................................................ 187.7 173.0 582.6 695.7 

(+) Income and social contribution ................... 103.1 97.2 249.1 248.8 

(+) Non-controlling shareholders ...................... 22.2 25.0 136.9 146.9 

(+) Founders’ shares (1) ...................................... 2.1 2.4 17.2 15.8 

(+) Financial income ......................................... 44.3 26.9 177.0 82.0 

(+) Income from equity interest ........................ 2.4 0.6 1.8 0.4 

(+) Depreciation and amortization .................... 98.6 87.1 358.0 334.1 

Adjusted EBITDA (2) ........................................ 460.4 412.2 1,522.5 1,523.6 

Adjusted EBITDA margin (3) .......................... 33.2% 34.3% 30.2% 33.0% 

Net margin (4) .................................................... 13.6% 14.4% 11.6% 15.1% 




Energia S.A. 










(4) Net Margin is net profits divided by net income for the periods presented.

RISK FACTORS 

An investment in our common shares involves exposure to certain risks. Before making an investment 

decision, potential investors should carefully consider all of the information set forth in this offering 

memorandum, including the risk factors set forth below as well as our financial statements, including the 

notes thereto, included elsewhere in this offering memorandum. Our business, financial condition, results of operations, 

cash flow, liquidity and/or future business may be adversely affected by any of the risk factors described below. As a 

result of these and/or any other risk factors, the price of our common shares could decrease and potential investors could 

lose all or part of their investment in our common shares. Additional risks and uncertainties not currently known to us, or 

those that we currently deem to be immaterial, may also materially and adversely affect us and/or the price of our 

common shares. 

For purposes of this section, except when expressly mentioned otherwise or if the context otherwise requires, when a 

risk, as mentioned above, “causes a material adverse effect on us” or “may adversely affect us,” such adverse 

effect may or will affect our business, financial condition, results of operations, cash flow, liquidity and 

prospects and/or the trading price of our common shares. 

Risks Relating to the Brazilian Electricity Industry 

Any change in Brazilian electricity industry regulations may have an adverse effect on the business and 

results of operations of companies in the Brazilian electricity industry, including us. 

Our operations are regulated and supervised by ANEEL and the MME. ANEEL, the MME and other 

regulatory agencies have historically had a substantial degree of influence on our business, including the type, 

as well as the terms and conditions, of the electricity purchase agreements that we are authorized to enter into. 

In recent years, the Brazilian government has implemented new laws and regulations affecting the Brazilian 

electricity industry, such as the Provisional Measure (Medida Provisória) 144/2003, converted into Law n. 

10,848, dated as of March 15, 2004, the New Electricity Law (Lei de Novo Modelo do Setor Elétrico), which 

substantially changed the guidelines then in force and the rules applicable to sale of electric energy in Brazil. 

Certain actions were brought before the Brazilian Supreme Court (Supremo Tribunal Federal) to 

challenge the constitutionality of those changes. In 2006, the Brazilian Supreme Court dismissed those actions, 

stating that, in principle, it shall not consider the New Electricity Law as a the basis for the invalidity of the 

provisional measure, as well as the conversion into a law, relating to hydropower use for electricity 

production. The Brazilian Supreme Court has not yet issued a final ruling regarding the constitutional 

challenge. The impact of the Brazilian Supreme Court considering the possible unconstitutionality of the New 

Electricity Law is unknown at this time. 

We are unable to predict the terms of any alternative framework for the regulation of electricity in Brazil. 

We would likely face costs in re-aligning our business to meet the requirements of any such framework, 

which would adversely affect our financial condition and results of operations. 

Our operations and the implementation of our growth strategy may be adversely affected by 

governmental actions, including: (a) changes to laws and regulations applicable to our business; (b) 

discontinuation and/or changes to the federal and state concession programs; (c) imposition of stricter criteria 

to qualify for future public bids; and (d) delay in the implementation of our annual tariffs adjustment. 

We cannot predict the actions that will be taken or the policies that will be adopted by the Brazilian 

government in the future and to what extent such policies may affect our operating results. In the event we are 

forced to act in a way substantially different to that established in our business plan, our financial and 

operating results may be adversely affected. 

We are subject to numerous safety, health and environmental laws and regulations that may become more 

rigorous in the future and result in more responsibilities and capital expenditures. 

Our generation, transmission and distribution activities are subject to rigorous safety, health and 

environmental laws at Federal, State and City levels, as well as to the inspection of governmental agencies 

responsible for the implementation of such laws and related policies. These laws require us to obtain 

15

environmental licenses, among others, for the development of new projects and for the installation and 

operation of new equipment necessary for our operations. These rules are complex and may change with 

time, hindering or even precluding our ability to comply with the applicable requirements, which could 

prohibit our current or future operations. Nongovernmental organizations and the public in general have the 

right to comment on and otherwise follow the licensing procedures, including the proposal of legal 

measures in order to suspend or cancel them, or request public authorities to do so. Moreover, 

governmental agencies may impose sanctions against us in the event we fail to comply with the safety, 

health and environmental laws. These sanctions may include, among others, the imposition of fines, permit 

cancellation and the stoppage of work and activities. Furthermore, failure to comply with these laws may 

also result in criminal charges against us and our managers, in addition to the obligation to repair or 

indemnify possible damages. Compliance with safety, health and environmental laws may force us to incur 

capital expenditures and, as a result, divert resources from planned investments, which may adversely 

affect our financial condition and results of operations. 

Changes to environmental laws and regulations may have an adverse effect on the business of electricity 

power companies in Brazil, including us. 

Electricity companies in Brazil are subject to comprehensive federal, state and local environmental 

legislation, including laws related to atmospheric emissions and interference with environmentally 

protected areas. We are required to obtain environmental licenses and permits from governmental agencies 

in order to conduct our activities. Brazilian government agencies could bring enforcement actions against 

us for any failure to comply with applicable laws. Such enforcement actions could include, among other 

things, the imposition of fines, revocation of licenses and suspension of operations. Such failures may also 

result in criminal liability (including criminal liability of our officers and directors). The Attorney’s Office 

(Ministério Público) may conduct a civil investigation and/or file a civil class action suit claiming 

indemnifiable damages caused to the environment and to third parties and seek injunctive relief. 

Governmental agencies or other governmental bodies may also create new and more stringent rules or seek 

to interpret existing laws and regulations in a more restrictive way, including requiring new environmental 

licenses for facilities and equipment, thereby causing electric power companies, including us, to spend 

additional funds on environmental compliance. Governmental agencies may also significantly delay the 

issuance of licenses and permits needed for the development of the businesses of electricity companies, 

including us, causing delays in project implementation schedules. Any action in this regard taken by 

governmental agencies may have a negative impact on the Brazilian electricity industry and an adverse 

effect on our business and results of operations. 

Our customers may no longer use our distribution system. 

A significant portion of our net operating revenues from the use of our distribution system are derived 

from the Distribution Network Use Tariff (Tarifa de Uso do Sistema de Distribuição), or TUSD, charged to 

free and special customers in our concession areas. If these customers directly connect themselves to the 

Basic Network (Rede Básica), our operating revenues may be adversely affected. We cannot guarantee that 

the our main customers are not currently intending to directly connect to the Basic Network, or to implement 

self-generation projects. If so, our results of operations could be adversely affected. In addition, TUSD tariffs 

are established by ANEEL based on inflation rates and the amount of investments and costs budgeted for the 

expansion, maintenance and operation of the distribution system in the previous year. Therefore, our results of 

operations may be adversely affected if TUSD tariffs are not adequately adjusted by ANEEL. 

Environmental damages resulting from our operations may subject us to incur costs, which may negatively 

impact our business and the market price of our securities. 

The operations of electric power companies may cause significant environmental damage. Brazilian 

federal laws provide for strict liability to perform environmental remediation and to indemnify third parties 

for environmental damage, notwithstanding culpability. In addition, for environmental recovery costs, federal 

laws may consider piercing the corporate veil of companies that cause environmental damage as well as 

company officers and directors who may be held personally liable. The payment of substantial recovery costs 

for environmental damages may adversely affect our results of operations and financial condition as well as 

16

the market price of our securities. Despite the fact that there are no specific legal provisions, many Brazilian 

legal scholars believe that there is no statute of limitation for environmental liability. 

The concentration of the energy matrix of the Brazilian electricity industry, the impact of potential 

electricity shortages and the consequent implementation of electricity conservation programs may have an 

adverse effect on our business and results of operations. 

The Brazilian electricity industry, whose energy matrix is heavily concentrated in hydroelectric power 

generation (which accounted for 71.2% of the installed generation capacity of the National Interconnected 

Electric System as of December 31, 2010), faces natural limitations on its generation capacity. Hydroelectric 

power plants cannot generate electricity beyond the capacity enabled by the country’s hydrological resources. 

The ONS controls reservoir levels seeking to optimize the level of water available for hydroelectric 

generation in each of the plants associated to the corresponding reservoirs, in addition to maintaining a certain 

reserve of water for emergency situations. 

The Brazilian electricity industry is, therefore, vulnerable to natural events, such as floods and rainfall 

shortages, which affect electricity generation capacity, as well as to regulatory restrictions imposed on the 

National Interconnected Electric System that may limit total usage of the electricity generated in Brazil. 

Below average rainfall in the years prior to 2001 and insufficient growth in the installed capacity of the 

National Interconnected Electric System, coupled with an increase in demand, resulted in low reservoir levels 

and low hydroelectric operating capacity in the Southeast, Midwest and Northeast regions of Brazil during 

that period. In response to the energy shortage, on May 15, 2001, the Brazilian government established a 

rationing program to reduce energy consumption, or the Rationing Program. 

The Rationing Program established limits for electricity consumption for free customers, both 

commercial and residential, which ranged from a 15.0% to 25.0% reduction in permitted electricity 

consumption, from June 2001 until February 2002. After that period, Brazil experienced a period of low 

rainfall that affected the price of electricity sold. 

We cannot assure you that periods of low or extremely low average rainfall will not occur and have an 

adverse effect on our results of operations in the future. 

In the event Brazil experiences another period of potential or actual electricity shortage, the Brazilian 

government may implement policies and measures which may have an adverse effect on our financial 

condition and results of operations, as well as on the market price of our securities. 

The assured energy of our HPPs may be reduced. 

The revenue of hydroelectric generation companies in Brazil is tied to the amount of electricity that they 

contract to sell under regulated long-term contracts, which we refer to as “assured energy.” According to 

Decree 2,655 of July 2, 1998, each HPP that is part of the National Interconnected Electric System will be 

given an amount of assured energy. The assured energy of each HPP that is part of the electricity reallocation 

mechanism (Mecanismo de Realocação de Energia), or the MRE, is equal to the amount of electricity that 

such plant has contracted to sell under long-term contracts and such amounts are reviewed every five years, or 

upon occurrence of certain significant events. The amount of assured energy can be reduced by up to 5% of 

the amount established in the last review, and overall reductions can be up to 10% of the base amount set 

forth in the corresponding concession agreement. On November 18, 2004, the MME published Ordinance 

(Portaria) 303, which mandates that the amount of assured energy of hydroelectric power generators, except 

for Itaipu Binational, will remain at those levels until December 31, 2014. We cannot assure you that the 

assured energy of our HPPs will not be reduced as of 2015, and that our results of operations and financial 

condition would not be adversely affected as a consequence. 

Electric energy shortage risk. 

The Brazilian energy matrix is predominantly hydropower based and an extended period of lack of rain 

would reduce the volume of water in the hydroelectric power plants’ reservoirs, resulting in the increase of 

the energy acquisition cost in the short-term market and an increase in the amounts charged in the electrical 

17

system as a result of the increase in the delivery of thermoelectric power plants. In an extreme event, as 

occurred in Brazil in 2001, a rationing program could be adopted, which may result in a reduction in our 

revenues. 

Risks Relating to Our Business 

The loss of any of our concessions may result in losses. 

In accordance with Law n. 8,987 dated February 13, 1995, as amended, or the Concession Law, a 

concession is subject to early termination under certain circumstances, including if the concessionaire does 

not perform its obligations established in the concession agreement, expropriation, forfeiture, voluntary 

termination or termination by judicial order, and bankruptcy or liquidation of the concessionaire, in addition 

to any situations permitting intervention and penalty under the relevant concession agreement. In any of the 

circumstances described above, concession assets will be transferred to the granting authority. Although the 

concession agreement establishes that the concessionaire is entitled to indemnification for any of its 

investments that are expropriated, we cannot assure you that indemnification would sufficiently compensate 

us for the loss of future profits related to the concession assets that have not been fully amortized or 

depreciated. 

Likewise, according to applicable law, in the event we fail to comply with the terms of the permits that 

allow for the operation of our TPPs, the corresponding operating permit may be cancelled, which would have 

a material adverse effect on our business, results of operation and financial condition, as well as on the trading 

price of our common shares. 

The early termination of any of our concession agreements, as well as the imposition of any fines or other 

penalties on us relating to such termination, may have a significant impact on our operating results and affect 

our ability to repay and comply with our financial obligations as well as the market price of our securities. 

Pursuant to Brazilian law, our concessions may be renewed only once and upon approval of the Ministry 

of Mines and Energy or the National Electric Energy Agency, or ANEEL and the compliance with certain 

parameters related to the rendering of the service are accomplished. We intend to request the renewal of each 

of our concessions upon their respective expirations. Given the degree of discretionary power given to the 

granting authority with respect to the renewal of existing concession terms, our subsidiaries may face 

substantial competition from third parties for renewals or for obtaining new concessions. For this reason, 

granting of concessions to our competitors may have an adverse effect on our financial condition and results 

of operations. 

Our operating revenue may be adversely affected if ANEEL takes action relating to our tariffs that are not 

favorable to us. 

The tariffs that we charge for sales of electricity to customers are determined by ANEEL, pursuant to 

concession agreements and to Brazilian law, which establish a price-cap mechanism that permits tariff 

adjustments only if: (i) an annual adjustment (reajuste anual), intended to reestablish necessary revenues, 

with adjustments over the costs that are beyond our control, or Parcel A, and costs that are within our control, 

or Parcel B, that are adjusted in accordance with IGP-M and deducting any efficiency gains; (ii) a periodic 

revision (revisão periódica), aiming to preserve, after a determined period of time under the concession 

agreement, the economic-financial balance of the concessions and also to determine the X factor; and (iii) an 

extraordinary revision (revisão extraordinária), which can be requested at any time if material and 

unforeseeable changes in our economic-financial balance are evidenced. 

Aiming to strike an adequate balance between the interests of consumers to receive qualified electricity 

services at a reasonable price, and the interests of electricity companies to make a reasonable profit, granting 

authority may make unfavorable tariff adjustments that could have an adverse impact on our profitability. 

ANEEL’s discretion in adjusting our tariffs creates significant uncertainty in the operation of our 

distribution business and may result in lower tariffs, which may adversely affect our financial condition and 

results of operations. 

18

Our growth by means of public bids may be adversely affected by future governmental actions or policies 

related to energy generation concessions in Brazil. 

According to Law n. 8,666/93, the Concession Law, public bid invitations issued by the granting 

authorities impose certain requirements for those interested in public bids for new concessions, including 

conditions related to their and their controlling shareholders’ financial stability. We cannot assure you that we 

will be able to meet all of the conditions required to acquire new concessions or to take part in public bids. 

Public bidding rules for electricity generation concessions are subject to change, both at the Federal and state 

levels. We cannot assure you that public bids relating to new electricity generation plants will actually take 

place. In the event public bids fail to occur, are immaterial or are offered on terms that are not economically 

feasible or attractive to us or our controlling shareholder, the expansion and diversification of our current 

electricity generation assets may be adversely affected. 

We cannot assure you that our concession agreements will be renewed. We may be penalized by ANEEL 

for any failure to comply with the terms of our concession agreements and we may not recover our total 

investment in the event any of our concessions is terminated. 

We carry out our generation and distribution activities pursuant to concession agreements entered into 

with ANEEL. Our concessions range from 20 to 35 years and may be renewable only once and at the 

discretion of ANEEL and Ministry of Mines and Energy, upon our request, if certain conditions are met, 

without the need to participate in a new bidding process. 

Considering the discretion level granted to ANEEL by the Concession Law and by the concession 

agreements in respect of the renewal of concessions, and due to the lack of examples of the exercise of 

discretion in these circumstances by ANEEL and the application of the Concession Law, we cannot ensure 

that we will obtain new concessions or that our current concessions will be renewed on favorable terms. 

Additionally, ANEEL may impose fines that may be substantial (in some cases up to two per cent of our 

gross revenues in the fiscal year immediately preceding the imposition of the fine), and restrictions on 

operations, as well as early termination of the concession agreements in the event that we fail to comply with 

their provisions. The early termination or failure to renew any of our concessions or the imposition of 

significant fines or penalties by ANEEL could have an adverse affect on our financial condition and results of 

operations. 

Incorrect estimates of the demand for energy in our distribution concession areas may adversely affect our 

operating results. 

According to the New Electricity Law, electricity distribution companies may not be able to pass on the 

full costs of power purchases to customers in the case of incorrect estimates of the demand for energy. Under 

the New Electricity Law, an electricity distributor must contract in advance, through public auctions, not less 

than 100% of its forecasted power needs for the following five years. If the energy demand forecast is 

inaccurate and we purchase an insufficient amount of electricity or more electricity than needed to meet such 

demand, and the adjustments permitted by law are insufficient to offset these forecasting errors, energy 

distribution companies may be prevented from fully passing on the costs of purchases to customers in the 

short term market, or spot market, and may be subject to the imposition of penalties for not having 100% of 

its power needs. Our financial condition and results of operations may be adversely affected if we are not able 

to pass through these costs to our customers. 

Our ability to collect amounts due from our customers may be adversely affected in the event their 

creditworthiness deteriorates. 

Our accounts receivable for generation, distribution and trading companies depends on the continuous 

creditworthiness of those customers, our risk control and also our ability to collect amounts due. 

As of December 31, 2010, our overdue accounts receivable from customers of electricity distribution 

(consisting of EDP Bandeirante and EDP Escelsa) totaled R$298 million, representing 7.9% of our 2010 gross 

operating revenues. R$131 million was past due by more than 90 days and R$110 million represented the sum 

19

of amounts for doubtful accounts. As of March 31, 2011, our overdue accounts receivable totaled R$332 

million, R$136 million being past due by more than 90 days. If the creditworthiness of our customers 

deteriorates, our business, financial condition and results of operations may be adversely affected. 

We may not be able to fully implement our business strategies. 

Our ability to implement our business strategies depends on various factors. Our strategy to increase our 

presence in generation depends on our ability to: (i) obtain the right to build new generation projects through 

public bids conducted according to the New Electricity Law; (ii) conclude the construction of new generation 

projects, avoiding extraordinary costs resulting from delays in construction, which exceed our budget, 

engineering and environmental issues, issues relating to the underlying property, labor unrest and other 

factors, particularly with respect to the Pecém project, scheduled to become operational by January 2012; and 

(iii) acquire hydroelectric power generation assets on greenfields or ongoing projects as well as increase our 

equity interest in our existing projects. 

Our strategy to develop our energy trading activities depends on our ability to (i) to operate in a highly 

competitive market and (ii) manage market risks inherent in energy trading. We may not be able to identify 

and minimize significant risks, which may affect the results of operation of our energy trading business. 

Our strategy with respect to our success in our distribution business depends on our ability to maintain 

our investments in operational efficiency. The prices at which we purchase and sell energy vary considerably, 

depending, among other things, on demand fluctuations due to economic or other factors, hydrological 

conditions and their effect on energy supply; and the availability of energy from new power generation plants. 

The acquisition of the Santo Antônio do Jari hydroelectric power plant involves risks, if the conditions 

precedent for closing are not met, and if unforeseen events affect the construction, implementation or 

operation of the plant. 

On June 15, 2011, we executed a Share Purchase Agreement for the acquisition of the total capital stock 

of ECE Participações S.A., which owns 90% of the Amapá Energia Consortium. This consortium owns the 

right to operate the Santo Antônio do Jari hydroelectric power plant. The Share Purchase Agreement 

establishes all terms and conditions, especially the conditions precedent for closing, including ANEEL's 

approval of the transaction. 

The construction, implementation and operation of the Santo Antônio do Jari hydroelectric power plant is 

subject to certain unforeseen events, which may cause delays in the timetable for the operation of the plant 

and increase development costs, affecting our cash flow, such as: 

• limited number of outsourcing companies for the construction of the plant; 

• lack or poor performance of equipment; 

• weather interferences; 

• work stoppage, strikes and labor disputes; 

• social disturbances; 

• technical capacity and labor problems; 

• unexpected engineering problems; and 

• regulatory, tax and environmental issues. 

We cannot assure that the above mentioned events may not occur. 

Additionally, the closing of the acquisition is subject to the completion of certain conditions precedents, 

including the regulatory authorizations such as ANEEL's approval. The compliance with such conditions 

20

precedent is beyond our control and, therefore, we cannot assure that they will occur. If the conditions 

precedent are not met or waived our business and results of operations may be materially adversely affected. 

We may need to raise funds in the future by means of the issuance of securities, which may affect the price 

of the shares issued by us and result in a dilution in your interest in our shares. 

We may need to raise funds in the future by means of public or private issue of shares or securities that 

are convertible or exchangeable into shares. Any fund raising by means of the distribution of shares or 

securities convertible or exchangeable into shares may result in a change in the price of shares and the 

dilution of your interest in our shares. 

In addition, we cannot ensure the availability of additional capital or, if available, that it will be available 

under satisfactory conditions. The lack of access to additional capital in satisfactory conditions, including an 

increase in the interest rates, may restrict our growth and the development of our activities, which may 

adversely affect our activities, financial condition and results of operations, and, consequently, the price of 

our securities. 

Our financing agreements may be subject to early termination. 

We are parties to several financing agreements, many of which require us to maintain specified financial 

ratios or to comply with other specific covenants, limiting our ability to enter into new financings or maintain 

credit facilities. Our financing agreements establish specific obligations and any event of default under our 

financing agreements that is not remedied or waived by the creditors could cause all amounts outstanding to 

become due and payable immediately and could also trigger cross-defaults under other financing agreements. 

Our assets and cash flows may not be sufficient to fully repay loans under our outstanding financing 

agreements, both on the regular maturity date as well as in case of prepayment due to default, which may 

adversely affect our financial condition and operating results. 

Unfavorable decisions in our lawsuits could adversely affect our results of operations. 

We are parties to various civil and administrative lawsuits, labor and tax claims, arbitration proceedings 

and real estate and regulatory assessments that are filed and/or initiated in the regular course of our business. 

As of March 31, 2011, our contingencies related to these proceedings totaled R$864.4 million. Of this amount, 

approximately 46.1% is related to tax claims, 13.7% is related to labor claims and the remaining 40.2% is 

related to other civil and commercial disputes. As of March 31, 2011, we had established provisions in the 

total aggregate amount of R$153.4 million. 

In the event that we receive an adverse judgment in connection with claims for which we have not 

established any provisions, our results of operations will be adversely affected. 

Because a significant part of our assets is linked to the rendering of public services, our assets cannot be 

liquidated if we file for bankruptcy or are subject of seizure to ensure the enforcement of court decisions. 

A significant part of our assets, including our electricity distribution network and part of our generation 

assets, is related to the rendering of public services. Pursuant to existing laws and the concession agreements, 

these assets will not be available for settlement in the event of bankruptcy or to enforce court decisions, once 

they are reverted to the granting authority at the end of the concession agreement term or in the event of early 

termination. Except in certain circumstances and if duly authorized by ANEEL, our assets may be pledged in 

order to comply with our obligations, provided that the lien does not consist of the operation and provision of 

services related to electricity distribution and generation. We have the right to be compensated for damages 

by the granting authority in case of early termination of the concession agreements. However, we cannot 

ensure that this compensation will correspond to the market value of the reverted assets. This limitation may 

significantly decrease the amount available to be returned to our shareholders in case of liquidation as well as 

negatively affect our ability to obtain financings, which could adversely affect our financial condition and 

operation results. 

21

If we are unable to successfully control electricity losses, our results of operations and our financial 

condition could be adversely affected. 

We experience two types of electricity losses in our activities: technical losses and commercial losses. 

Technical losses are inherent to the transmission and distribution of electricity, as a portion of the electricity 

we distribute inevitably dissipates in the course of transmission. Commercial losses result from illegal 

connections, theft, fraud, faulty metering and billing errors. In 2010, 2009 and 2008, our total electricity loss 

(technical and commercial combined) as a percentage of total required electricity at EDP Bandeirante was 

11.1%, 11.2% and 10.7%, respectively, and at EDP Escelsa was 14%, 15.5% and 13.9% respectively. In 

addition, future governmental actions in response to any energy shortage, such as the imposition of limits to 

energy consumption implemented through the rationing program in 2001, may result in increased energy 

losses, because more consumers try to evade restrictions through illegal connections, theft and fraud, as 

occurred during the rationing program in 2001. A portion of our electricity losses may not be passed on to 

consumers through tariff increases, and we cannot assure you that increases in electricity losses will not 

adversely affect our financial condition and results of operation. 

We are strictly liable for any damages resulting from inadequate supply of electricity to distribution 

companies, and our contracted insurance policies may not fully cover these damages. 

Under Brazilian law, as a condition of rendering public services, we are strictly liable for direct and 

indirect damages resulting from the inadequate rendering of electricity distribution services, such as (i) losses 

and damages caused to third parties regarding the operation failure, which may cause forced unavailability, 

interruptions or disturbances arising from distribution or transmission systems or (ii) interruptions or 

disturbances that may not arise from a specific agent. 

Accordingly, we may also be held liable for such damages in case of gross negligence or willful 

misconduct. Liabilities resulting from such interruptions or disturbances which are not covered by our 

insurance policies or which exceed coverage limits may result in significant additional costs and have an 

adverse effect on our financial condition and our operating results. 

The need for indemnification in the case of the damages set out in (ii) above and the identification of the 

cause of the damage is made by the National Electricity System Operator and ratified by ANEEL. The final 

appraisal of the National Electricity System Operator could adversely affect the performance of our 

businesses, our results of operations and our financial condition. 

Our insurance coverage may be insufficient to cover potential losses. 

For our active companies, we maintain insurance policies for losses resulting from fire, water damage, 

machinery breakdown and power outage and interruption in our various substations, buildings and facilities 

and for material damage incurred as a result of transportation accidents. We also have liability insurance 

covering material damages, bodily injury and pain and suffering incurred by third parties. For our projects 

under construction, the construction companies purchase engineering risk insurance. Our insurance policies 

may not be sufficient to fully cover all liabilities that may arise in the course of our business. Moreover, we 

may not be able to obtain insurance on comparable terms in the future. Our results of operations may be 

adversely affected if we become liable for damages resulting from accidents that are not fully covered by our 

insurance policies. 

We may incur more obligations related to pension funds than we currently estimate and, as a result, we 

may be forced to make additional contributions to the pension plans of our employees. 

As of March 31, 2011, the present value of our actuarial obligations, as updated from the base date of 

December 31, 2010, net of negative asset fair value, of our defined pension plans were at EDP Bandeirante a 

deficit of R$109.5 million and at EDP Escelsa a positive result of R$95.8 million. 

However, if the actuarial assumptions we adopted are incorrect, or in the event of a reduction in interest 

rates for a long period of time, a reduction in the market value of securities held by the plans or other 

adversities, the actuarial deficit of our plans may increase, affecting, therefore, provisions and increasing the 

22

level of contributions we need to make to the plans for our employees, which may result in an adverse effect 

on our financial condition and results of operations. 

Governmental measures designed to control the acquisition of rural properties by foreigners may restrict 

the development of our business and operations. 

In August 2010, the President approved a report from the Federal Attorney General (Advocacia Geral da 

União) that limits the purchase of lands in Brazil by foreigners and by Brazilian companies that are controlled 

by foreigners. Contrary to the understanding in effect until then, the new report defends the validity of Law n. 

5,709/71 in view of the Brazilian Federal Constitution, imposing limits on the acquisition and lease of rural 

properties in Brazil by foreigners. 

This law provides, for instance, that companies whose capital stock is controlled by foreigners may only 

purchase rural properties for an agricultural, industrial or colonization project with the approval of the 

relevant authorities, until the maximum individual limit of 100 undefined modules (which measure varies for 

each region, from 5ha (five hectares) to 100ha (one hundred hectares)). 

This law also provides that the sum of the rural areas belonging to foreign companies or companies 

controlled by foreigners cannot exceed 25% of a city land, it being understood that, within that 25%, the total 

area held by foreigners or companies controlled by foreigners of the same nationality cannot exceed the limit 

of 40%. The application of the limitations and restrictions provided in law n. 5,709/71 requires that we 

comply with new prior procedures and approvals for the operations of acquisition of lands that result in the 

increase of the period previously provided in such procedures. 

We have more than 100 undefined exploration projects, all new acquisitions, that may require a prior 

consent of the Brazilian Congress. We may also be forced to implement alternate corporate structures (such as 

corporate structures in which for we do not hold the corporate control of the vehicle acquiring the land) in 

order to be able to acquire new properties. We may face restrictions on our ability to acquire certain properties 

due to these new limitations, which may extend the projected investment periods or even cause the 

unfeasibility of new acquisitions. These new limitations may adversely affect our business, operations and 

future results. 

Risks Relating to Brazil 

The Brazilian government has exercised, and continues to exercise, significant influence over the Brazilian 

economy. Brazilian political and economic conditions could adversely affect our business. 

The Brazilian government frequently intervenes in the Brazilian economy and occasionally makes 

significant changes in monetary, credit, tax and other policies and regulations that may influence Brazil’s 

economy. The Brazilian government’s actions to control inflation and other policies and regulations have 

often involved, among other measures, increases in interest rates, changes to fiscal policy, price controls, 

currency devaluations, capital controls and limits on imports. We have no control over, and cannot predict, 

what measures or policies the Brazilian government may take in the future. Changes in Federal, State or 

Municipal policies regulations involving or affecting tariffs or exchange controls, as well as factors such as: 

• inflation and inflation control measures; 

• interest rates; 

• exchange rate control policies and controls over remittances of funds abroad; 

• variations in exchange rates; 

• liquidity of domestic capital and lending markets; 

• fiscal and tax policies, including amendments to tax and labor laws; and 

• other political, social and economic policies or developments in or affecting Brazil; 

23

• could materially adversely affect our business, financial condition or results of operation. 

An example of a recent modification in Federal regulation was the increase of the IOF/Exchange Tax 

over the foreign finance agreements with a term of less than 720 days. Since April 2011, these agreements are 

subject to a tax of 6.00%. Uncertainties related to changes in policies or rules of the Brazilian government that 

may affect these factors, or other factors, may in the future contribute to economic uncertainty in Brazil, 

which may materially adversely affect our business, financial condition or results of operations. 

Inflation, and efforts by the Brazilian government to curb inflation, may contribute to slower economic 

growth in Brazil and adversely impact our business. 

Brazil has historically experienced high rates of inflation and has adopted monetary policies that have 

resulted in one of the world’s highest real interest rates. Between 2004 and March 2011, the SELIC rate, an 

official overnight government rate applied to funds traded through the purchase and sale of public debt 

securities established by the special system for custody and settlement, varied between 19.77% and 8.64% per 

annum. Inflation, and certain government actions taken to combat inflation, especially through the Central 

Bank of Brazil, have had and may again have considerable effects on the Brazilian economy and our business. 

Stringent monetary policies combined with high interest rates may restrict the economic growth of Brazil and 

the availability of credit. Inversely, less stringent governmental and monetary policies and decreases in 

interest rates may trigger rising inflation rates and, consequently, growth volatility and the need for sudden 

and significant rises in interest rates. Moreover, we may not be able to adjust the prices we charge our 

customers to offset the effects of inflation on our cost structure. Any of these factors could have an adverse 

impact on our business. 

Exchange rate instability may adversely affect the Brazilian economy, as well as our business. 

The Brazilian currency has experienced high degrees of volatility in the past. Between 2000 and 2002, 

the real depreciated significantly against the dollar, to a rate of R$3.53 per U.S.$1.00 at the end of 2002. 

Between 2003 and the third quarter of 2008, the real appreciated significantly against the dollar, boosted by 

macroeconomic stability and by a strong increase of foreign investments in Brazil, to an exchange rate of 

R$1.56 per U.S.$1.00 in August 2008. As a result of the global economic and financial crisis, the real 

depreciated by 31.9% against the U.S. dollar during 2008, to a rate of R$2.337 per U.S.$1.00 at the end of 

2008. As of March 31, 2011, the exchange rate was R$1.6287 per U.S.$1.00. 

Depreciation of the real relative to the dollar may create inflationary pressures in Brazil that may lead to 

interest rate increases, which may negatively affect overall Brazilian economic growth and adversely affect 

our financial condition and results of operation. Depreciation generally curtails access to international capital 

markets and prompts government intervention, including recessionary governmental policies. Moreover, 

given the current economic slowdown, a depreciation of the real against the dollar could lead to a reduction in 

consumption, deflationary pressures and lower economic growth in Brazil generally. On the other hand, the 

appreciation of the real against the dollar and other foreign currencies may lead to the deterioration of 

Brazil’s balance of payments, as well as to lower growth in exports. 

Depreciation or appreciation of real against U.S. Dollar may cause an adverse effect on economic growth 

in Brazil, which may indirectly adverse effect our business. 

Risk of issuance of new accounting pronouncements and interpretations, as well as change and/or 

updating to existing accounting pronouncements by IASB (International Accounting Standard Board) and 

CPC (Accounting Standards Committee) may adversely affect our results of operations. 

Considering our adoption of IFRS, the effective adoption of new accounting pronouncements and 

interpretations, as well as changes and/or updating to existing accounting pronouncements, by IASB and CPC, 

may adversely affect our financial statements and our accounting results, including on our basis for dividend 

payments, and may also adversely affect our compliance with financial ratios related to financing agreements. 

24

Events and changes in risk perception in Brazil and in other countries, especially emerging economies, may 

adversely affect the market prices of global securities, including the market price of our common shares. 

The market value of securities issued by Brazilian companies is influenced by the global economy and 

market conditions, including developed and emerging markets. Investors’ reaction to developments in other 

countries may have an adverse effect on the securities of Brazilian companies. Crisis in other emerging 

countries or economic policies of other countries, may decrease investors’ demand for securities issued by 

Brazilian companies, including our securities, which could have a negative effect on the trading price of our 

common shares. 

Moreover, the global economic and financial crisis stemming from the subprime market crisis in the 

United States and Europe has affected the world economy, with various repercussions which directly or 

indirectly affect the capital markets and economy of Brazil, such as fluctuations in trading prices of securities 

issued by publicly-held companies, shortage of credit, a general slowdown of the global economy, foreign 

exchange instability and inflationary pressure, to name a few, and which could directly or indirectly have a 

negative impact on our business. 

Risks Relating to the Common Shares and the Offering 

Our shareholders may not receive dividends. 

In accordance with our bylaws, an amount equivalent to 25% of our annual net income, less amounts 

retained for statutory reserves and contingency reserves (if any), plus the reversal of amounts under prior 

contingency reserves (if any), shall be made available for payment of dividends or interest on shareholders’ 

equity, in any fiscal year. In addition, mandatory dividends may be limited to the realized portion of net 

income. Despite mandatory distribution of dividends, we may choose to not pay dividends to our shareholders 

in any fiscal year if our board of directors considers that any such distribution would be incompatible with our 

financial condition. In addition, our dividend distribution policy may be changed during a general meeting of 

our shareholders at any time. 

The volatility and lack of liquidity of the Brazilian securities market may substantially limit investors’ 

ability to sell our common shares at the price and time of their choice. 

Investments in securities trading in emerging markets, such as Brazil, frequently involve higher risks as 

compared to other international markets, since these investments are more speculative. The Brazilian 

securities market is significantly smaller, less liquid and more concentrated, and can be more volatile than 

major international securities markets, such as the United States market. On December 31, 2010, the total 

capitalization of companies listed on the BM&FBOVESPA represented approximately R$2,569.4 billion 

(U.S.$1,542.1 billion), at an average daily trading volume of R$6,505 billion (U.S.$3,704.8 billion). For 

comparison purposes, the total capitalization of companies listed on The New York Stock Exchange (NYSE) 

was U.S.$13.39 trillion on December 31, 2010. The Brazilian capital market is highly concentrated. The ten 

most actively traded stocks accounted for approximately 42.2% of all stocks traded on the BM&FBOVESPA 

in the fiscal year ended on December 31, 2010. These characteristics of the Brazilian capital market may 

substantially limit investors’ ability to sell our common shares at the price and time of their choice, which 

may have a considerable adverse effect on the price of our common shares. 

The sale of a significant number of our common shares after this offering may adversely affect the trading 

price of our common shares. 

In the case that our controlling or other major shareholders sell, or upon the perception in the market of a 

possible sale of, our common shares or a significant part of our common shares, the trading price of our 

common shares may be adversely effected. 

The interests of our controlling shareholder may conflict with the interests of investors. 

Our controlling shareholder has the power to, among other things, elect the majority of members of our 

board of directors and determine the result of any resolution which requires shareholders’ approval, 

including in related-party transactions, corporate reorganizations, disposals, joint ventures and the time and 

25

amount of payment of any future dividends, observing the requirement of payment of mandatory dividends 

imposed by the Brazilian Corporation Law. Our controlling shareholder may be interested in making 

acquisitions, disposals, entering into joint ventures, loans or similar operations that may conflict with the 

interests of investors. 

Our controlling shareholder may opt for the de-listing of our shares from the Novo Mercado, which may 

result in the modification of the liquidity and price of our shares and also modify the rights of our noncontrolling 

shareholders. In addition, it is possible that the de-listing of our shares from the Novo Mercado 

occurs by reasons beyond our control. 

We may, at any time, de-list our shares from the Novo Mercado, provided that the action is approved by 

shareholders representing the majority of our voting capital at an annual shareholders’ meeting and that we 

provide written notice to the BM&FBOVESPA at least 30 days in advance. The de-listing of our shares from 

the Novo Mercado will not result in the disqualification of our company as a publicly-held company 

registered with BM&FBOVESPA but it can present the other risks discussed below. 

The price to the public offering for the acquisition of common shares will correspond to at least the 

appraised book value, which will be based on an appraisal report prepared by an independent specialized 

company with established experience. The independent appraiser will be selected from a list prepared by our 

board of directors with the name of three companies, by the majority of the holders of outstanding shares at an 

ordinary shareholder meeting. Such meetings, held after the first notice, must have present shareholders 

holding at least 20% of the total outstanding shares or, if held after second notice, shareholders holding any 

number of shareholders representing the outstanding shares. The costs for the preparation of the appraisal 

report will be fully assumed by the offering party. 

Pursuant to the regulation of the Novo Mercado, in the event of a change of control in the 12 months after 

the de-listing of our shares from the Novo Mercado, the purchaser and the selling controlling shareholder, 

severally and jointly, shall offer their shares to the other shareholders for the price and the conditions in which 

they were acquired by the selling controlling shareholders, as appropriately adjusted. 

If our shares are de-listed from the Novo Mercado, we will not be permitted to have shares listed on the 

Novo Mercado for a period of two years after the delisting date, unless there is a change of control in the 

Company after this de-listing from the Novo Mercado. 

Some of our subsidiaries have financial covenants that may affect our ability to distribute dividends. 

We are a holding company, so that our revenues consist, almost exclusively, of distributions from our 

subsidiaries as dividends and interest on share capital. Some of our subsidiaries are subject to certain 

financing agreements that restrict their ability to make dividend distributions and pay interest on share capital. 

In addition, ANEEL may limit the ability of our subsidiaries to make dividends distributions to us. These 

restrictions may decrease the dividends value which would be otherwise available for distribution to the 

holders of our shares. 

The participation of institutional investors considered restricted persons in the bookbuilding process may 

affect the determination of prices or reduce the liquidity of our common shares. 

The price per common share will be determined based on the bookbuilding process, whereby, if under the 

terms of the regulations in force, the demand for the offering is less than one-third of the common shares 

initially offered, in accordance with article 55 of CVM Instruction No. 400, investment intentions will be 

collected from the institutional investors qualified as restricted persons for up to a limit of 15% of the value of 

the offering. The participation of institutional investors qualified as restricted persons in the bookbuilding 

procedure may affect the determination of prices or reduce the liquidity of our common shares in the 

secondary market. 

26

EXCHANGE RATES 

The Brazilian foreign exchange system allows the purchase and sale of foreign currency and the 

international transfer of reais by any person or legal entity, regardless of the amount, subject to certain 

regulatory procedures. 

Since 1999, the Central Bank has allowed the real/U.S. dollar real exchange rate to float freely, and, 

since that time, the real/U.S. dollar exchange rate has fluctuated considerably. Since the beginning of 2001, 

the Brazilian exchange market has been increasingly volatile, and, until early 2003, the value of the real 

declined relative to the U.S. dollar, primarily due to financial and political instability in Brazil and Argentina. 

According to the Central Bank, in 2006 and 2007 however, the real appreciated in relation to the U.S. dollar 

8.5% and 17.0%, respectively. In 2008, the real depreciated 31.9% and, in 2009 and 2010, the real 

appreciated against the U.S. dollar by 25.3% and 3.4%, respectively. On March 31, 2011, the real/U.S. dollar 

exchange rate was R$1.6287 per U.S.$1.00. 

In the past, the Brazilian government has implemented various economic plans and utilized a number of 

exchange rate policies, including sudden devaluation, periodic mini-devaluation during which the frequency 

of adjustments ranged from a daily to a monthly basis, floating exchange rate systems, exchange controls and 

dual exchange rate markets. We cannot predict whether the Central Bank or the Brazilian government will 

continue to let the real float freely or intervene in the exchange rate market by returning to a currency band 

system or otherwise. The real may depreciate or appreciate substantially against the U.S. dollar. 

The following tables set forth the selling rate, expressed in reais per U.S. dollar (R$/U.S.$) for the 

periods indicated, as reported by the Central Bank: 

Year Year-end Average (1) Low High 

(reais per U.S. dollar) 

2006................................................................................................................. 2.138 2.177 2.059 2.371 

2007................................................................................................................. 1.771 1.948 1.733 2.156 

2008................................................................................................................. 2.337 1.837 1.559 2.500 

2009................................................................................................................. 1.741 1.994 1.702 2.422 

2010................................................................................................................. 1.666 1.759 1.655 1.881 

Month Period-end Average (2) Low High 

(reais per U.S. dollar) 

January 2011 .................................................................................................. 1.668 1.675 1.651 1.691 

February 2011 ................................................................................................ 1.661 1.668 1.673 1.676 

March 2011 .................................................................................................... 1.629 1.659 1.629 1.676 

April 2011 ...................................................................................................... 1.573 1.586 1.565 1.619 

May 2011 ....................................................................................................... 1.581 1.614 1.575 1.634 

June 2011 ....................................................................................................... 1.561 1.587 1.561 1.611 

July 2011 (through July 6) ............................................................................. 1.558 1.561 1.558 1.566 

Source: Central Bank. 

(1) Represents the average of the exchange rates of each trading date. 

(2) Represents the average of the lowest and highest rates in the month. 

27

Overview 

MARKET INFORMATION 

Our shares are traded on the Novo Mercado listing segment of the BM&FBOVESPA, under the symbol 

“ENBR3”, according to the listing agreement dated June 13, 2005. 

Securities Issued by the Company 

On July 13, 2005, we conducted an initial public offering of 62,192,668 of our common shares. The initial 

offering price established after the bookbuilding process was R$18.00 per common share. We offered our 

common shares to the public in Brazil in the organized over-the-counter market and outside Brazil, to certain 

qualified institutional buyers (as defined in Rule 144A under the Securities Act) in the United States in reliance 

on exemptions from registration provided under the Securities Act, and outside Brazil and the United Sates to 

institutional and other investors which are not U.S. persons in accordance with Regulation S, and pursuant to 

applicable law in the country of domicile of each foreign investor investing in the common shares, pursuant to 

investment mechanisms provided by CMN Resolution No. 2,689 or Law No. 4,131 and CVM Instruction No. 

325. Our initial public offering was filed with the CVM under Nos. CVM/SRE/REM/2005/007 and 

CVM/SRE/SEC/2005/010. 

The common shares being offered in connection with this offering have the same characteristics as the 

common shares sold in connection with our initial public offering referred to above. 

Except for our common shares, we have no other outstanding shares. Prior to this offering, we have not 

issued or distributed to the public any other securities other than our common shares, and we have not 

conducted a public tender offer for the purchase of any securities of any other company. 

Market Price of Our Common Shares 

The principal trading market for our common shares is the BM&FBOVESPA. Our common shares began 

trading on the Novo Mercado listing segment of the BM&FBOVESPA on July 13, 2005. The table below sets 

forth, for the periods indicated, the reported high, low and average sale prices in nominal reais for our 

common shares on the BM&FBOVESPA. 

Price per Share 

Low Average High 

(in reais) 

2006................................................................................................................................................... 18.65 22.46 25.92 

2007................................................................................................................................................... 19.20 25.27 32.73 

2008................................................................................................................................................... 15.84 22.46 29.56 

2009................................................................................................................................................... 18.37 23.96 32.08 

2010................................................................................................................................................... 29.31 32.85 37.58 

2011................................................................................................................................................... 34.03 37.28 41.10 

2008 

First Quarter of 2008 ........................................................................................................................ 17.81 20.53 23.50 

Second Quarter of 2008 .................................................................................................................... 21.65 24.87 27.60 

Third Quarter of 2008 ....................................................................................................................... 17.91 24.57 29.56 

Fourth Quarter of 2008 ..................................................................................................................... 15.84 19.69 22.23 

2009 

First Quarter of 2009 ........................................................................................................................ 18.37 19.67 21.27 

Second Quarter of 2009 .................................................................................................................... 20.64 23.53 25.70 

Third Quarter of 2009 ....................................................................................................................... 23.31 24.59 26.29 

Fourth Quarter of 2009 ..................................................................................................................... 24.90 28.11 32.08 

28

Low 

Price per Share 

Average 

(in reais) 

High 

2010 

First Quarter of 2010 ....................................................................................................................... 29.81 31.39 33.49 

Second Quarter of 2010 ................................................................................................................... 29.31 31.12 34.65 

Third Quarter of 2010 ...................................................................................................................... 32.49 34.31 36.54 

Fourth Quarter of 2010 .................................................................................................................... 

2011 

33.20 34.53 37.58 

First Quarter of 2011 ....................................................................................................................... 34.03 36.29 39.17 

January 2011 .................................................................................................................................... 35.02 36.84 38.34 

February 2011 .................................................................................................................................. 34.03 35.08 36.38 

March 2011 ...................................................................................................................................... 35.49 36.93 39.17 

April 2011 ........................................................................................................................................ 37.71 38.72 39.64 

May 2011 ......................................................................................................................................... 36.69 38.79 41.10 

June 2011 ......................................................................................................................................... 37.35 38.15 38.91 

Market Making Agreement 

On June 11, 2007, we entered into an agreement, as amended, the Market Making Agreement, with 

Credit Suisse (Brasil) S.A. Corretora de Títulos e Valores Mobiliários, pursuant to which Credit Suisse (Brasil) 

S.A. Corretora de Títulos e Valores Mobiliários will provide market making services for our common shares 

on the BM&FBOVESPA, for automatically renewable one-year periods, unless terminated by the parties, for 

the purpose of creating liquidity for our common shares. 

Regulation of the Brazilian Securities Market 

The Brazilian securities market is regulated by the CVM, which has regulatory authority over the stock 

exchanges and securities markets, as well as the CMN and the Central Bank, which have, among other powers, 

regulatory authority over brokerage firms and regulatory authority over foreign investment and foreign 

exchange transactions. The Brazilian securities markets are generally governed by Law No. 6,385 of 

December 7, 1976, or the Securities Market Law, and the Brazilian Corporation Law, as amended, as well as 

by rules and regulations issued by the CVM, the CMN and the Central Bank. These laws and regulations, 

among others, provide for disclosure requirements applicable to issuers of publicly traded securities, criminal 

sanctions for insider trading and price manipulation, and protection of non-controlling shareholders. These 

laws also provide for the regulation and supervision of brokerage firms and the governance of Brazilian stock 

exchanges. 

Under the Brazilian Corporation Law, a company is either publicly-held (companhia aberta), like us, or 

privately held (companhia fechada). A company is publicly-held when it has securities traded on the stock 

exchange or on over-the-counter markets. All publicly-held companies must be listed with the CVM and are 

subject to reporting and regulatory requirements. A company registered with the CVM may trade its securities 

either on the BM&FBOVESPA or on the Brazilian over-the-counter market. The shares of a listed company 

may also be traded privately, subject to several limitations. 

The over-the-counter market is divided into two categories: (i) organized over-the-counter market, in 

which the transactions are supervised by self-regulating entities authorized by the CVM; and (ii) nonorganized 

over-the-counter market, in which the transactions are not supervised by self-regulating entities 

authorized by the CVM. In either case, transactions are directly traded among persons, outside of the stock 

exchange market, through a financial institution authorized by the CVM. The institution shall be registered 

with the CVM (and in the relevant over-the-counter market), but there is no need for a special license to trade 

securities of a publicly-held company on the over-the-counter market. 

The trading of securities on the BM&FBOVESPA may be suspended at the request of a company in 

anticipation of an announcement of a material event. Trading may also be suspended by the 

BM&FBOVESPA or the CVM, among other reasons, based on or due to a belief that a company has provided 

inadequate information regarding a material event or has provided inadequate responses to inquiries by the 

CVM or the BM&FBOVESPA. 

29

Trading on Brazilian stock exchanges by non-residents of Brazil is subject to certain restrictions under 

the Brazilian foreign investment legislation. See “—Investment in Our Common Shares by Non-residents of 

Brazil.” 

Trading on the BM&FBOVESPA 

Trading on the BM&FBOVESPA may only be performed by authorized institutions. Trading sessions on 

the BM&BOVESPA are conducted each day from 10:00 a.m. to 5:00 p.m., or between 11:00 a.m. to 6:00 p.m. 

during daylight savings time in Brazil. The BM&BOVESPA also permits trading on an "after market" from 

5:45 p.m. to 7:00 p.m., or from 6:45 p.m. to 7:30 p.m. during daylight savings time in Brazil, on an overnight 

electronic trading system connected to traditional brokerage firms and brokerage firms operating on the 

Internet. Trading on the after-market is subject to regulatory limits on price volatility and on the volume of 

shares transacted through Internet brokers. 

When shareholders trade shares on the BM&FBOVESPA, the trade is settled in three business days after 

the trade date, and no adjustments for inflation are made. The seller is ordinarily required to deliver the shares 

to the exchange on the second business day following the trade date. Delivery of, and payment for, shares are 

made through facilities in the BM&FBOVESPA. 

In order to better control volatility, the BM&FBOVESPA adopted a "circuit breaker" system pursuant to 

which trading sessions may be suspended for a period of 30 minutes or one hour whenever the indices of the 

BM&FBOVESPA fall below the limits of 10% or 15%, respectively, in relation to the index registered in the 

previous trading session. 

Investment in Our Common Shares by Non-residents of Brazil 

Foreign investors must register their investment in common shares under Law No. 4,131 or CMN 

Resolution No. 2,689 and CVM Instruction No. 325. CMN Resolution No. 2,689 affords favorable tax treatment 

to foreign investors who are not residents in a tax haven jurisdiction (i.e., countries that do not impose income 

tax or where the maximum income tax rate is lower than 20%), as defined by Brazilian tax laws. 

Under CMN Resolution No. 2,689, foreign investors may invest in almost all financial assets and engage 

in almost all transactions available in the Brazilian financial and capital markets, provided that certain 

requirements are met. In accordance with CMN Resolution No. 2,689, the definition of foreign investor 

includes individuals, companies, mutual funds and other collective investment entities domiciled or 

headquartered abroad. Under CMN Resolution No. 2,689, a foreign investor must: (i) appoint at least one 

representative in Brazil, with powers to perform actions relating to its investment; (ii) appoint an authorized 

custodian in Brazil for its investment, which must be a financial institution duly authorized by the Central 

Bank or the CVM; (iii) through its representative, register as a foreign investor with the CVM; and (iv) 

register its foreign investment with the Central Bank. 

In addition, an investor operating under the provisions of CMN Resolution No. 2,689 must be registered 

with the Brazilian internal revenue service pursuant to its Regulatory Instruction No. 200 of September 13, 

2002, as amended. This registration process is undertaken by the investor’s legal representative in Brazil. 

Securities and other financial assets held by non-Brazilian investors pursuant to CMN Resolution No. 2,689 

must be registered or maintained in deposit accounts or under the custody of an entity duly licensed by the 

Central Bank or the CVM. In addition, securities trading is restricted to transactions carried out in the stock 

exchanges or through organized over-the-counter markets licensed by the CVM, except for transfers resulting 

from a corporate reorganization, or occurring upon the death of an investor by operation of law or will. 

On October 2010, the Brazilian government increased the Tax on Foreign Exchange Transactions, or 

IOF/Exchange Tax. The IOF/Exchange Tax is levied on foreign exchange transactions related to investments 

in the Brazilian securities market made by foreign investors, including acquisitions of common shares by 

foreign investors in] this offering. See “Taxation—Material Brazilian Tax Considerations.” 

30

The Novo Mercado 

The Novo Mercado is a special stock market listing segment of the BM&FBOVESPA exclusively 

intended for companies meeting minimum requirements and agreeing to adhere to differentiated corporate 

governance rules. The items below summarize the key points of the Novo Mercado that are applicable to us: 

• we may not issue or maintain preferred or founder’s shares; 

• at least 25.0% of our capital stock must be outstanding shares; 

• in the event of a transfer of control, either through successive transactions, the same price conditions 

and terms offered to the controlling shareholders must be extended to non-controlling shareholders in 

a tender offer (tag-along rights); 

• the board of directors should be composed of at least five members, of which at least 20.0% should 

be independent directors elected during the shareholders’ meeting for a term of up to two years, with 

re-election permitted; 

• before taking office, new members of our board of directors and our executive officers are required 

to execute an instrument of consent through which they agree to comply with the listing rules of the 

Novo Mercado, Market Arbitration Chamber, the Novo Mercado listing agreement and the 

Arbitration Regulations; 

• include cash flow statements (publicly-held company and consolidated) in our annual and 

quarterly reports; 

• prepare, in English, the full financial statements, management reports and explanatory notes, 

accompanied by an additional explanatory note regarding the reconciliation of year-end results and 

shareholders’ equity, which must include the independent auditors’ report. Under the listing rules of 

the Novo Mercado, we are required to adopt these criteria no later than the release of our financial 

statements in the second year following the execution of the Novo Mercado listing agreement; 

• disclose a schedule of corporate events every year, until the end of January, and any further 

changes in connection with the scheduled events shall be sent to the BM&FBOVESPA and 

immediately disclosed; 

• if we delist from the Novo Mercado or become a privately-held company, the controlling 

shareholders must make a tender offer for the purchase of our common shares held by other 

shareholders at a price per share at least equal to its economic value, according to a valuation report 

prepared by a specialized and independent company of recognized experience (we also must comply 

with requirements of the Brazilian Corporation Law. See “Description of Capital Stock—Delisting 

from the Novo Mercado”); and 

• we, our shareholders, our officers, our directors and members of our fiscal council must commit to 

resolve, by means of arbitration, any and all dispute or controversy which may arise relating to or 

resulting from the application, validity, effectiveness, interpretation, violation and respective effects 

of provisions of the Brazilian Corporation Law, in our bylaws, rules and regulations of the CMN, the 

Central Bank, and the CVM, as well as other rules and regulations applicable to the Brazilian capital 

markets, in addition to those set forth under listing rules of the Novo Mercado, the Novo Mercado 

listing agreement and the Arbitration Regulations. 

31

USE OF PROCEEDS 

This offering will be a secondary public offering by the selling shareholder only and we will not receive 

any proceeds from it. The selling shareholder will receive all net proceeds resulting from the sale of our 

common shares pursuant to this offering, including the net proceeds resulting from any exercise of the 

over-allotment option. 

32

CAPITALIZATION 

The following table sets forth our current and non-current indebtedness, shareholders’ equity and total 

capitalization as of March 31, 2011. As the offering will be a secondary offering only, it will not affect 

our capitalization. 

This table should be read in conjunction with “Selected Financial Information,” “Management’s 

Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial 

statements included elsewhere in this offering memorandum. 

There has been no material change to our capitalization since March 31, 2011. 

Short-term loans and financings ..................................................................................................................... 

As of March 31, 2011 

(R$ in thousands) 

517,630 

Long-term loans and financings ...................................................................................................................... 2,728,259 

Consolidated net equity ................................................................................................................................... 6,659,321 

Capital stock .................................................................................................................................................... 3,182,716 

Profit reserve ................................................................................................................................................... 1,386,620 

Capital reserve ................................................................................................................................................. 88,984 

Retained profits ............................................................................................................................................... 187,742 

Equity Evaluation Adjustments ...................................................................................................................... (110,443) 

Non-controlling shareholders’ interests .......................................................................................................... 1,923,702 

Total capitalization (1) ..................................................................................................................................... 

9,905,210 

(1) Corresponds to total short- and long-term loans and financing and total shareholders’ equity. 

33

DILUTION 

As the offering will be a secondary offering only, it will not result in the dilution of the equity interest of 

any investors in this offering. Dilution for the purposes of the offering, represents the difference between the 

price per share paid by investors in the offering and the value of each share of our common stock immediately 

after the termination of the offering. 

34

SELECTED FINANCIAL INFORMATION 

We present below a summary of our consolidated financial information for each of the periods indicated. 

Our consolidated financial statements are prepared in accordance with IFRS. The financial information 

presented below should be read in conjunction with “Presentation of Financial and Other Information,” 

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial 

statements, including the notes thereto, included in this offering memorandum. 

The following selected financial information related to our consolidated balance sheets and statements of 

income has been derived from our consolidated financial statements as of and for the years ended December 

31, 2010 and 2009 and our interim consolidated financial statements as of and for the three-month periods 

ended March 31, 2011 and 2010, included elsewhere in this offering memorandum, and include, in the 

opinion of our management, all adjustments necessary to adequately present our financial condition for the 

periods indicated. Net income for the three-month period ended March 31, 2011 is not necessarily indicative 

of the results that may be expected for the year ended December 31, 2011. 

This offering memorandum includes translations of various real amounts into U.S. dollars at specified 

rates solely for your convenience. You should not construe these translations as representations by us that the 

real amount actually represents these U.S. dollar amounts or could be converted into U.S. dollars at the rates 

indicated. Unless otherwise indicated, we have translated the real amounts for the year ended December 31, 

2010 and for the three-month period ended March 31, 2011, using a rate of R$1.6287 to U.S.$1.00, the rate of 

exchange as of March 31, 2011. See “Exchange Rates.” 

Three-Month Period Ended March 31, Year Ended December 31, 

2011 2011 2010 2010 2009 

(in US$ 

(in US$ 

millions) (in R$ millions) millions) (in R$ millions) 

Net operating revenues ........................................... 


850.2 1,384.8 1,200.4 3,091.0 5,034.3 4,621.7 

Electricity cost ....................................................... (435.6) (709.5) (587.7) (1,656.7) (2,698.2) (2,340.3) 

Electricity purchased for resale ......................... (339.6) (553.1) (433.4) (1,287.4) (2,096.8) (1,866.7) 

Electricity network use charges......................... (96.0) (156.4) (154.4) (369.3) (601.4) (473.7) 

Operating costs ...................................................... (103.0) (167.8) (164.6) (406.0) (661.3) (598.5) 

Personnel ........................................................... (23.8) (38.8) (38.3) (93.3) (151.9) (146.5) 

Materials and third-party services ..................... (31.0) (50.5) (47.1) (124.7) (203.1) (166.6) 

Depreciation and amortization .......................... (41.0) (66.8) (66.3) (169.6) (276.2) (257.2) 

Other operating costs ......................................... (7.2) (11.7) (12.9) (18.5) (30.1) (28.1) 

Service cost rendered to third parties .................... (0.3) (0.5) (0.9) (3.7) (6.1) (2.9) 

Gross operating profit ............................................ 311.3 507.0 447.2 1,024.6 1,668.8 1,680.0 

Operational expenses ............................................ (89.2) (145.2) (122.0) (309.6) (504.2) (490.5) 

Selling ................................................................ (8.0) (13.1) (17.4) (49.3) (80.3) (42.0) 

General and administrative ................................ (48.9) (79.6) (65.2) (160.9) (262.0) (321.6) 

Depreciation and amortization .......................... (19.5) (31.7) (20.7) (50.2) (81.8) (76.9) 

Other operating expenses .................................. (12.8) (20.8) (18.7) (49.2) (80.1) (50.0) 

Service result ......................................................... 222.1 361.8 325.2 715.0 1,164.6 1,189.5 

Income from equity interest .................................. (1.5) (2.4) (0.6) (1.1) (1.8) (0.4) 

Financial revenues ............................................. 31.7 51.6 73.6 207.5 338.0 296.6 

Financial expenses ............................................. (58.9) (95.9) (100.5) (316.2) (515.0) (378.6) 

Financial result ...................................................... (27.2) (44.3) (26.9) (108.7) (177.0) (82.0) 

Income before income tax and social 

contribution ........................................................ 193.5 315.1 297.7 605.2 985.7 1,107.1 

Current income and social contribution taxes ...... (58.9) (96.0) (93.2) (140.8) (229.3) (196.8) 

Deferred income and social contribution taxes .... (4.4) (7.1) (4.0) (12.2) (19.8) (52.0) 

Net income before non-controlling 

shareholders ......................................................... 130.2 212.0 200.5 452.3 736.6 858.3 

Non-controlling shareholders................................ (13.6) (22.2) (25.0) (84.1) (136.9) (146.9) 

Founders’ shares ................................................... (1.3) (2.1) (2.4) (10.6) (17.2) (15.8) 

Net income for the period ...................................... 115.2 187.7 173.0 357.7 582.6 695.7 

Profit per share (in Reais) ...................................... 0.7 1.2 1.1 2.3 3.7 4.4 

35

Assets 


2011 2011 2010 2010 2009 

(in US$ (in R$ (in US$ 

millions) millions) millions) (in R$ millions) 

Current assets .............................................................................. 1,625.7 2,647.7 1,765.0 2,874.7 2,713.6 

Cash and cash equivalents ........................................................ 623.5 1,015.5 691.6 1,126.4 1,102.0 

Accounts receivable .................................................................. 5.4 8.8 5.3 8.7 6.0 

Indemnifiable financial assets ................................................... 0.5 0.8 0.5 0.8 0.8 

Consumers and concessionaires ................................................ 574.3 935.4 545.7 888.8 901.8 

Taxes and social contribution ................................................... 244.4 398.1 331.7 540.3 419.3 

Inventories ................................................................................. 17.9 29.1 17.3 28.1 13.2 

Pledges and restricted deposits ................................................. 31.7 51.6 38.6 62.9 69.6 

Prepaid expenses ....................................................................... 2.4 3.9 3.3 5.3 2.6 

Assets available for sale ............................................................ 18.5 30.1 25.1 40.8 39.1 

Other asstes ............................................................................... 107.1 174.4 106.0 172.6 159.1 

Noncurrent assets........................................................................ 6,119.4 9,966.7 6,100.2 9,935.4 9,202.9 

Long-term receivables ................................................................ 974.4 1,587.0 962.7 1,567.9 1,373.2 

Accounts receivable .................................................................. 11.4 18.5 11.5 18.8 21.9 

Indemnifiable financial assets ................................................... 255.7 416.5 243.9 397.3 325.3 

Consumers and concessionaires ................................................ 40.5 65.9 39.1 63.7 64.9 

Taxes and social contribution ................................................... 22.7 36.9 22.0 35.9 31.1 

Deferred income and social contribution taxes ........................ 476.5 776.0 478.1 778.7 748.3 

Advances for future capital increases ....................................... 0.3 0.5 0.3 0.5 – 

Pledges and restricted deposits ................................................. 147.2 239.8 147.2 239.7 130.8 

Prepaid expenses ....................................................................... 0.5 0.8 0.6 0.9 1.1 

Other assets ............................................................................... 19.8 32.2 19.9 32.4 49.9 

Investments ............................................................................... 21.4 34.9 22.9 37.3 30.9 

Property, plant and equipment .................................................. 3,277.0 5,337.2 3,256.3 5,303.6 4,803.8 

Intangible assets ........................................................................ 1,846.6 3,007.6 1,858.4 3,026.7 2,995.0 

Total ............................................................................................. 7,745.1 12,614.4 7,865.2 12,810.1 11,916.5 

36

Liabilities 


2011 2011 2010 2010 2009 

(in US$ (in R$ (in US$ 

millions) millions) millions) (in R$ millions) 

Current liabilities .............................................................. 1,334.3 2,173.1 1,550.6 2,525.4 2,325.3 

Suppliers .......................................................................... 359.7 585.8 384.6 626.4 508.1 

Taxes and social contribution ......................................... 258.4 420.8 374.5 609.9 454.5 

Dividends ........................................................................ 118.7 193.3 117.3 191.1 144.6 

Debentures ....................................................................... 88.8 144.6 142.3 231.7 210.0 

Loans, financing and debt charges .................................. 229.0 373.0 230.7 375.7 572.7 

Post-employment benefits ............................................... 16.9 27.6 16.9 27.6 27.2 

Estimated employee benefits and social charges ............ 37.1 60.4 31.0 50.5 48.8 

Regulatory and sector charges ........................................ 141.0 229.6 138.4 225.4 156.6 

Use of public property..................................................... 11.8 19.3 11.9 19.4 17.3 

Provisions ........................................................................ 18.5 30.1 18.6 30.3 19.6 

Other accounts payable ................................................... 54.3 88.5 84.4 137.4 166.0 

Noncurrent liabilities ........................................................ 2,322.1 3,782.0 2,351.3 3,829.6 3,369.4 

Suppliers .......................................................................... 0.3 0.5 0.6 0.9 – 

Taxes and social contribution ......................................... 85.0 138.5 84.7 137.9 142.2 

Deferred income and social contribution taxes .............. 178.9 291.4 177.4 289.0 261.0 

Debentures ....................................................................... 391.6 637.8 391.5 637.6 453.2 

Loans, financing and debt charges .................................. 1,283.5 2,090.5 1,314.5 2,140.9 1,957.4 

Post-employment benefits ............................................... 115.4 188.0 116.2 189.2 130.8 

Regulatory and sector charges ........................................ 7.6 12.3 7.9 12.9 14.9 

Use of public property..................................................... 139.2 226.7 132.5 215.8 205.6 

Provisions ........................................................................ 95.2 155.1 94.3 153.6 141.1 

Provisions for unsecured liabilities ................................. 1.4 2.3 7.9 12.8 – 

Reserve for reversal and amortizations ........................... 10.6 17.2 10.6 17.2 17.2 

Other accounts payable ................................................... 13.3 21.6 13.4 21.8 45.9 

Shareholders’ equity ..................................................... 2,907.6 4,735.6 2,796.4 4,554.5 4,362.9 

Capital ............................................................................. 1,954.1 3,182.7 1,954.1 3,182.7 3,182.7 

Capital reserves ............................................................... 58.7 95.6 58.7 95.6 96.7 

Profit reserves.................................................................. 851.4 1,386.6 851.4 1,386.6 1,243.0 

Other comprehensive income ......................................... (67.8) (110.4) (63.7) (103.8) (50.1) 

Treasury shares................................................................ (4.1) (6.6) (4.1) (6.6) (6.6) 

Accumulated earnings (losses) ....................................... 115.2 187.7 – – (102.8) 

Non-controlling shareholders.......................................... 1,181.1 1,923.7 1,166.9 1,900.6 1,858.9 

Total shareholders’ equity and non-controlling 

shareholders ................................................................. 4,088.7 6,659.3 3,963.3 6,455.1 6,221.8 

Total liabilities and shareholders’ equity ....................... 7,745.1 12,614.4 7,865.2 12,810.1 11,916.5 

37

As of and for the three-Month 

Variation 1 

Period Ended March 31, 

st 

Quarter As of and for the Year Variation 

2011/2010 Ended December 31, 2010/2009 

2011 2010 (%) 2010 2009 (%) 


Adjusted EBITDA (3) ....................... 460.4 412.2 11.7 1,522.5 1,523.6 (0.1) 

Distribution .................................. 271.4 251.0 8.1 840.5 811.1 3.6 

Generation (2) ................................. 181.7 159.8 13.7 731.9 709.4 3.2 

Trading ......................................... 15.6 14.4 8.5 22.5 35.5 (36.6) 

Transmission ................................ 1.2 1.1 4.3 4.7 3.9 20.5 

Others (1) ........................................ (9.6) (14.0) (32.0) (77.1) (36.3) 112.4 

Adjusted EBITDA margin (4) ............ 33.2% 34.3% (3.2) 30.2% 33.0% (8.3) 

Installed capacity (MW) ................. 1,741.0 1,741.0 0.0 1,741.0 1,738.0 0.2 

Distributed energy (GWh) .............. 6,185.0 5,959.0 3.8 23,749.0 21,313.0 11.4 

Sold energy (GWh) (5) ...................... 2,330.0 2,086.0 11.7 8,263.0 8,715.0 (5.2) 

(1) Others correspond to intra-segment eliminations, Holding activities and the controlled company Escelsapar. 













Ended March 31, Year Ended December 31, 

2011 2010 2010 2009 


Net income ......................................................................... 187.7 173.0 582.6 695.7 

(+) Income and social contribution ................................... 103.1 97.2 249.1 248.8 

(+) Non-controlling shareholders ests ............................... 22.2 25.0 136.9 146.9 

(+) Founders’ shares (1) ....................................................... 2.1 2.4 17.2 15.8 

(+) Financial income .......................................................... 44.3 26.9 177.0 82.0 

(+) Income from equity interest ......................................... 2.4 0.6 1.8 0.4 

(+) Depreciation and amortization .................................... 98.6 87.1 358.0 334.1 

Adjusted EBITDA (2) ........................................................ 460.4 412.2 1,522.5 1,523.6 

Adjusted EBITDA margin (3) ........................................... 33.2% 34.3% 30.2% 33.0% 

Net margin (4) ..................................................................... 13.6% 14.4% 11.6% 15.1% 




Energia S.A. 







indicator of operational performance, or as an alternative to cash flow as an indicator of liquidity. For a reconciliation of adjusted 

EBITDA by business segment, see the tables below. 


(4) Net Margin is net profits divided by net income for the periods presented. 

38

The tables below present a reconciliation of our Adjusted EBITDA for the periods indicated by business 

segments: 


Ended March 31, 2011 Distribution Generation Transmission Trading Others Elimination Total 


Net income .................................................. 142.9 44.0 1.3 10.9 187.5 (198.7) 187.7 

(+) Income and social contribution ............ 74.0 23.3 0.1 5.6 0.0 0.0 103.1 

(+) Non-controlling shareholders ............... 0.0 22.2 0.0 0.0 0.0 0.0 22.2 

(+) Founders’ shares (1) ................................ 0.0 2.1 0.0 0.0 0.0 0.0 2.1 

(+) Financial income ................................... 12.8 40.9 (0.2) (0.9) (8.2) 0.0 44.3 

(+) Income from equity interest .................. 0.0 (3.0) 0.0 0.0 (193.4) 198.7 2.4 

(+) Depreciation and amortization ............. 41.7 52.2 0.0 0.0 4.6 0.0 98.6 

Adjusted EBITDA (2) ................................. 271.4 181.7 1.2 15.6 (9.6) 0.0 460.4 

Net revenues .............................................. 1,030.1 265.1 1.5 230.9 0.0 (142.8) 1,384.8 

Adjusted EBITDA margin (3) .................... 26.3% 68.6% 77.6% 6.8% n/a 0.0% 33.2% 

Net margin (4) .............................................. 13.9% 16.6% 81.4% 4.7% n/a 139.2% 13.6% 


Ended March 31, 2010 Distribution Generation Transmission Trading Others Elimination Total 


Net income .................................................. 137.6 39.6 1.1 9.6 172.9 (187.8) 173.0 

(+) Income and social contribution ............ 79.0 22.8 0.1 5.0 (9.5) 0.0 97.2 


(+) Founders’ shares (1) ................................ 0.0 2.4 0.0 0.0 0.0 0.0 2.4 

(+) Financial income ................................... (11.1) 44.5 0.0 (0.2) (6.3) 0.0 26.9 



Adjusted EBITDA (2) ................................. 251.0 159.8 1.1 14.4 (14.0) 0.0 412.2 

Net revenues .............................................. 922.8 227.1 1.7 148.6 0.0 (99.8) 1,200.4 

Adjusted EBITDA margin (3) .................... 27.2% 70.3% 69.0% 9.7% n/a 0.0% 34.3% 

Net margin (4) .............................................. 14.9% 17.4% 64.7% 6.5% n/a 188.2% 14.4% 

Year Ended December 31, 2010 Distribution Generation Transmission Trading Others Elimination Total 


Net income ................................................. 456.8 199.0 4.5 16.7 589.4 (683.9) 582.6 

(+) Income and social contribution ........... 195.4 52.3 0.3 7.8 (6.7) 0.0 249.1 

(+) Non-controlling shareholders .............. 0.0 136.9 0.0 0.0 0.0 0.0 136.9 

(+) Founders’ shares .................................. 0.0 17.2 0.0 0.0 0.0 0.0 17.2 

(+) Financial income .................................. 0.9 177.7 (0.2) (2.2) 0.8 0.0 177.0 

(+) Income from equity interest ................. 0.0 (3.5) 0.0 0.0 (673.3) 678.6 1.8 

(+) Depreciation and amortization ............ 187.4 152.4 0.0 0.2 18.0 0.0 358.0 

Adjusted EBITDA ................................... 840.5 731.9 4.7 22.5 (71.7) (5.3) 1,522.5 

Net revenues ............................................. 3,762.7 1,004.1 6.2 741.4 0.0 (480.2) 5,034.3 

Adjusted EBITDA margin ...................... 22.3% 72.9% 74.9% 3.0% n/a 1.1 30.2% 

Net margin ................................................ 12.1% 19.8% 73.1% 2.3% n/a 142.4% 11.6% 

Year Ended December 31, 2009 Distribution Generation Transmission Trading Others Elimination Total 


Net profit ..................................................... 435.1 257.8 3.7 25.0 693.9 (719.8) 695.7 

(+) Income and social contribution ............ 155.2 78.3 0.2 12.2 2.9 0.0 248.8 


(+) Founders’ shares ................................... 0.0 15.8 0.0 0.0 0.0 0.0 15.8 

(+) Financial income ................................... 46.8 83.3 0.0 (2.0) (46.1) 0.0 82.0 



Adjusted EBITDA .................................... 811.1 709.4 3.9 35.5 (37.6) 1.3 1,523.6 

Net income ................................................. 3,446.2 979.1 4.2 763.2 0.0 (571.1) 4,621.7 

Adjusted EBITDA margin ....................... 23.5% 72.5% 91.2% 4.6% n/a (0.2)% 33.0% 

Net margin (4) .............................................. 12.6% 26.3% 87.0% 3.3% n/a 126.0% 15.1% 

39

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS 

OF OPERATIONS 

The following discussion of our financial condition and results of operations should be read in 

conjunction with our consolidated interim financial statements as of and for the three-month periods ended 

March 31, 2011 and 2010 and our consolidated financial statements as of and for the years ended December 

31, 2010 and 2009 and the notes thereto included in this offering memorandum, as well as with the 

information presented under “Presentation of Financial and Other Information” and “Selected Financial 

Information.” Our financial information is not fully comparable among these periods due to the factors 

described in “Comparability of Financial Information.” 

The following discussion contains forward-looking statements that involve risks and uncertainties. Our 

actual results may differ materially from those discussed in the forward-looking statements as a result of 

various factors, including those set forth in “Forward-Looking Statements” and “Risk Factors.” 

Overview 




















40



Month Period Ended 

March 31, 

41 

Variation 

1 st Quarter 

2011/2010 

As of and for the Year Variation 

Ended December 31, 2010/2009 

2011 2010 (%) 2010 2009 (%) 


Net operating revenues ...................................... 1,384.8 1,200.4 15.4 5,034.3 4,621.7 8.9 

Distribution .................................................... 1,030.1 922.8 11.6 3,762.7 3,446.2 9.2 

Generation ...................................................... 265.1 227.1 16.7 1,004.1 979.1 2.6 

Trading ........................................................... 230.9 148.6 55.4 741.4 763.2 (2.9) 

Transmission .................................................. 1.5 1.7 (11.8) 6.2 4.2 47.6 

Others (1) .......................................................... (142.8) (99.8) 43.1 (480.2) (571.1) (15.9) 

Net income ......................................................... 187.7 173.0 8.5 582.6 695.7 (16.3) 

Distribution .................................................... 142.9 137.6 3.8 456.8 435.1 5.0 

Generation (2) ................................................... 44.0 39.6 11.1 199.0 257.8 (22.8) 

Trading ........................................................... 10.9 9.6 13.3 16.7 25.0 (33.2) 

Transmission .................................................. 1.3 1.1 18.2 4.5 3.7 21.6 

Others (1) .......................................................... (11.2) (14.9) (24.8) (94.5) (25.9) 265.0 

Adjusted EBITDA (3) .......................................... 460.4 412.2 11.7 1,522.5 1,523.6 (0.1) 

Distribution .................................................... 271.4 251.0 8.1 840.5 811.1 3.6 

Generation ...................................................... 181.7 159.8 13.7 731.9 709.4 3.2 

Trading ........................................................... 15.6 14.4 8.5 22.5 35.5 (36.6) 

Transmission .................................................. 1.2 1.1 9.1 4.7 3.9 20.5 

Others (1) .......................................................... (9.6) (14.0) (32.0) (77.1) (36.3) 112.4 

Adjusted EBITDA margin (4) .............................. 33.2% 34.3% (3.2) 30.2% 33.0% (8.3) 

Installed capacity (MW) .................................... 1,741.0 1,741.0 0.0 1,741.0 1,738.0 0.2 

Distributed energy (GWh) ................................. 6,185.0 5,959.0 3.8 23,749.0 21,313.0 11.4 

Sold energy (GWh) (5) ......................................... 2,330.0 2,086.0 11.7 8,263.0 8,715.0 (5.2) 

Indebtedness: (6) 

Loans and financings ......................................... 3,245.9 3,083.7 5.3 3,385.9 3,193.3 6.0 

(-) Cash equivalents ....................................... (1,015.5) (1,136.6) (10.7) (1,126.4) (1,102.0) 2.2 

Net indebtedness (7) ............................................. 2,230.4 1,947.1 14.5 2,259.5 2,091.3 8.0 













in specific projects or for cash management. Also includes registered derivatives. For further information, see “Loans and 




For the Three-Month For the Year Ended 

Period Ended March 31, December 31, 

2011 2010 2010 2009 


Net income ........................................................................................................... 187.7 173.0 582.6 695.7 

(+) Income and social contribution ..................................................................... 103.1 97.2 249.1 248.8 

(+) Non-controlling shareholders ........................................................................ 22.2 25.0 136.9 146.9 

(+) Founders’ shares (1) ......................................................................................... 2.1 2.4 17.2 15.8 

(+) Financial result ............................................................................................... 44.3 26.9 177.0 82.0 

(+) Income from equity interest ........................................................................... 2.4 0.6 1.8 0.4 

(+) Depreciation and amortization ...................................................................... 98.6 87.1 358.0 334.1 

Adjusted EBITDA (2) .......................................................................................... 460.4 412.2 1,522.5 1,523.6 

Adjusted EBITDA margin (3) ............................................................................. 33.2% 34.3% 30.2% 33.0% 

Net margin (4) ....................................................................................................... 13.6% 14.4% 11.6% 15.1% 




Energia S.A. 






























1,741 MW. 

42

Principal Factors Affecting Our Results of Operations 

Tariff Adjustments and Revisions 

We believe our results of operations are directly and significantly affected by changes in tariffs regulated 

by ANEEL, given that our operating revenues and margins (particularly in the cases of our distributors) 

depend on the tariff adjustment process. We seek to maintain a good relationship with regulators and with 

other participants in the market, so that the tariff adjustment process adequately reflects transparency and 

consumer and shareholder interests. 

Distribution tariffs consist of electricity purchase, distribution and transmission costs, in addition to the 

related taxes and industry and social charges. The distributor company is the agent that collects and passes 

these costs on to all sectors. 

Electricity tariffs for both the use of the network and the supply of electricity can be adjusted annually by 

ANEEL (annual tariff adjustments), every three or four years as set forth in the relevant concession agreement 

(periodic tariff revisions), or in extraordinary circumstances (extraordinary tariff revisions). 

ANEEL divides the revenue of distribution companies into two parcels, corresponding to compensation 

for the following costs: (i) costs that are outside the control of the distributor, called Parcel A costs; and (ii) 

costs that are within the control of the distributor, called Parcel B costs. 

Parcel A costs include: 

(1) costs of purchasing electricity in public auctions carried out by ANEEL; 

(2) costs of purchasing electricity from Itaipu Binacional; 

(3) costs of purchasing electricity through bilateral agreements; 

(4) costs incurred with connection charges and the use of transmission and distribution systems; and 

(5) industry charges: Fuel Consumption Account (Conta de Consumo de Combustíveis), or CCC, Energy 

Development Account (Conta de Desenvolvimento Energético), or CDE, Global Reversion Reserve 

(Reserva Global de Reversão), or RGR, Electric Services Supervisory Fee (Taxa de Fiscalização de 

Serviços de Energia Elétrica), or TFSEE, Incentive Program to Foster the Development of 

Alternative Sources of Electricity (Programa de Incentivo às Fontes Alternativas de Energia 

Elétrica), or PROINFA, System Service Charges (Encargos de Serviços do Sistema), or ESS, ONS, 

Research and Development, or R&D, and Compensation for Use of Hydro Resources (Compensação 

Financeira pela Utilização de Recursos Hídricos), or CFURH. 

The transfer of electricity purchase costs under supply agreements negotiated before the enactment of the 

New Electricity Law is subject to a ceiling set by ANEEL for each different source of energy (such as 

hydroelectric, thermal and alternative sources of energy). The ceiling is readjusted annually to reflect 

increases in the costs incurred by the power generation companies. This readjustment takes into account: (i) 

inflation; (ii) foreign currency costs incurred; and (iii) fuel costs (such as natural gas). Foreign currency costs 

incurred may not exceed 25% of the power generation companies’ costs. 

Parcel B costs consist of costs that are within the control of the distribution concessionaires, including the 

cost of capital and operating and maintenance costs, of which operating costs are the most relevant. At each 

adjustment, Parcel B costs are obtained by subtracting Parcel A costs from total revenues for the reference 

period (i.e., the period between the most recent adjustment and the current adjustment). 

Annual tariff adjustments are based on a parametric formula defined in the concession agreement. Parcel 

A costs are generally fully reflected in the adjusted tariffs. Parcel B costs are adjusted according to the 

General Market Price Index (Índice Geral de Preços - Mercado), or IGP-M, and reduced by a factor referred 

to as the “Factor X,” which is an index related to productivity gains applied to distribution tariffs to 

43

incentivize operational efficiency. Annual tariff adjustments are based on the tariff adjustment rate, which we 

refer to as the Tariff Adjustment Index (Índice de Reajuste Tarifário), or IRT. 

Periodic tariff adjustments occur every three, four or five years (each according to the particular 

underlying agreement). Adjustments are carried out by ANEEL considering the following factors: (i) 

modifications in the concession holder’s cost structure and market structure, (ii) tariff levels observed at 

similar companies in the Brazilian or international market and (iii) incentives for efficient and reasonableness 

of the tariffs. 

For periodic tariff adjustments, all Parcel B costs are recalculated in order to make sure that Parcel B is 

sufficient to: (i) cover efficient operating costs; (ii) cover returns on prudent investments (on those that are 

essential for the services of each distribution company’s concession); and (iii) determine the X-factor. The Xfactor 

adjusts the IGP-M that is applied to subsequent annual adjustments and is defined based on two 

components: (a) foreseen productivity gains; and (b) the IPC-A applicable to the labor force’s percentage of 

operating costs. When each tariff adjustment is concluded, the application of the X-factor effectively causes 

the power distribution companies to share their productivity gains with costumers. 

On September 10, 2010, at public hearing 040/2010, ANEEL put forward a proposal to improve the tariff 

adjustment methodology to be used for the third periodic tariff adjustment cycle for power distribution 

concession holders. 

The proposal introduces significant changes, with an adverse effect on the results of operations of power 

distribution companies. The items covered by the proposal are operational costs, the X-factor, non-technical 

losses, Regulatory Payment Basis, irrecoverable revenues, capital return and other revenues. These proposals 

are still under discussion, but they are now at the second stage of the process, during which adjustments and 

improvements have been made to the initial proposal as a result of the comments submitted during the first 

phase by interested parties. 

In addition, distributors can be entitled to extraordinary tariff revisions, in certain cases, in order to ensure 

the economic financial equilibrium of the concession and to compensate them for the effects of unforeseen 

costs that significantly affect their cost structure. 

Brazilian Macroeconomic Conditions 

We are directly affected by Brazilian macroeconomic conditions, since all of our business is conducted in 

Brazil. Brazilian macroeconomic conditions have been characterized by significant variations in economic 

growth, inflation and exchange rates. Performance of the Brazilian economy affects the demand for electric 

energy and inflation affects our revenues, costs and margins. 

Until the onset of the global financial crisis in mid-2008, the Brazilian economy’s main indicators had 

improved significantly. In 2007, President Luís Inácio Lula da Silva began his second four-year term of office. 

He continued to implement the macroeconomic policies set forth during his first term, including a focus on 

fiscal responsibility, floating exchange rate and inflation targeting. In his second term, Brazil launched the 

Economic Acceleration Program (Programa de Aceleração do Crescimento), or PAC, which contemplates, 

among other initiatives, important infrastructure investments. 

The beginning of 2007 brought positive indicators for the Brazilian economy. The Brazilian government 

conducted a review of the calculation methodology of GDP, which caused a substantial improvement in its 

related multiples and resulted in increased optimism that Brazil would be rated as “investment grade” earlier 

than previously anticipated. The real/U.S. Dollar exchange rate appreciated by 17.0% in 2007, to R$1.77 per 

U.S.$1.00 as of December 31, 2007. Inflation, as measured by the IPCA and the IGP-M, was 4.5% and 7.7%, 

respectively, for the year ended December 31, 2007, which enabled the Central Bank to maintain lower 

interest rates. As of December 31, 2007, the SELIC rate was 11.18%. As a result of this favorable economic 

scenario, Brazil’s GDP grew 6.1% in 2007. 

On April 30, 2008, Standard & Poor’s raised the sovereign long-term credit rating of Brazil’s foreign 

currency debt from BB+ to BBB-, giving Brazil’s debt investment grade status. On May 29, 2008, Fitch 

44

Ratings upgraded Brazil to investment grade, raising its rating from BB+ to BBB, and on September 22, 2009, 

Moody’s upgraded long-term Brazilian debt to investment grade, raising its rating to Baa3. These upgrades 

led to the increased inflow of foreign investment into Brazil, which contributed to the appreciation of the real 

and significant improvement in foreign debt indicators, mainly through the accumulation of international 

reserves. Nevertheless, the rating agencies have highlighted weaknesses in fiscal policy, including the higher 

Brazilian gross debt/GDP ratio as compared to countries with the same credit rating, along with structural 

impediments to growth and investment. 

The effects of the global financial crisis in Brazil in 2008 and 2009 were moderate in comparison with 

the effects of previous crises. While liquidity in the Brazilian banking industry was affected by the global 

financial crisis, the Central Bank provided liquidity to the Brazilian market during this period. Brazil’s GDP 

grew 5.2% in 2008, decreased 0.6% in 2009 and grew 7.5% in 2010. 

The real depreciated against the U.S. Dollar by 31.90% in 2008. During 2009, the real appreciated 

against the U.S. Dollar and as of December 31, 2009 the real/U.S. Dollar exchange rate was R$1.74 per 

U.S.$1.00, which reflected an increase of 25.30% compared to December 2008. The real continued to 

appreciate in 2010, to R$1.67 per U.S.$1.00 at year end, which reflected an increase of 4.3% compared to 

December 2009. Inflation, as measured by the IPCA was 4.3% and 5.9%, and as measured by the IGP-M was 

-1.7% and 11.3%, respectively, for the years ended December 31, 2009 and 2010. The trend of periodic 

reductions of interest rates was temporarily reversed during 2008 when the Brazilian Committee for Monetary 

Policy (Comitê de Política Monetária), or COPOM, increased the target SELIC rate by 250 basis points. As a 

result, the SELIC rate was 13.66% as of December 31, 2008. However, in response to the effects of the 

financial crisis in the Brazilian economy, in 2009 the Central Bank began reducing the target SELIC rate 

again, to a level of 8.75% as of December 31, 2009. During 2010, due to inflationary pressure, the Central 

Bank began gradually increasing the target SELIC rate, which reached 10.75% in July 2010, where it 

remained as of December 31, 2010. In January 2011, the Central Bank further increased the rate to 11.67%, 

where it remained as of March 31, 2011, and then again to 11.9% in May 2011, where it remained as of the 

date of this Offering Memorandum. 

The following table sets out certain macroeconomic data for the periods indicated. 

45 

Three months ended 

March 31, Year ended December 31, 

2011 2010 2010 2009 2008 

Real GDP growth in % ........................................................................................ – 2.2 7.5 (0.6) 5.2 

Inflation (IGP-M) (1) in % ..................................................................................... 2.4 2.8 11.3 (1.7) 9.8 

Inflation (IPCA) (2) in % ....................................................................................... 2.4 2.1 5.9 4.3 5.9 

SELIC rate (3) in % ................................................................................................ 11.62 8.65 10.67 8.65 13.67 

Real (appreciation)/depreciation vs. U.S. Dollar over the period in % (4) ........... (2.3) 2.3 (4.3) (25.5) 32 

Exchange rate at end of period – U.S.$1.00 (5) ..................................................... R$1.63 R$1.78 R$1.67 R$1.74 R$2.34 

Average exchange rate at end of period – U.S.$1.00 (5) ....................................... R$1.67 R$1.80 R$1.76 R$1.99 R$1.84 

(1) Inflation measured by the IGP-M is the general market price index measured by FGV. 

(2) Inflation (IPCA) is a general consumer price index measured by the IBGE. 

(3) Annualized SELIC interest rate accumulated in the month. 

(4) Calculated using the exchange rate at the beginning and end of the applicable period. 

(5) Source: Central Bank. 

Inflation affects our business mainly by increasing our operating costs and financial expenses. The 

depreciation of the real increases the purchase price for hydroelectric power at Itaipu, as well as reduces in 

U.S. dollars (or Euros) the amount of dividends to be distributed to our shareholders and the U.S. dollar (or 

Euro) equivalent price of our common shares. We believe that we have implemented a policy that sufficiently 

protects us against foreign exchange fluctuations, as discussed below.

Acquisition of Cenaeel 

On February 16, 2009, EDP Renováveis, in which our subsidiary Enernova holds a 45% interest, 

concluded the acquisition for R$3.3 million of Cenaeel, the holder of the Água Doce and Horizonte wind 

farms and located in the State of Santa Catarina, with an installed capacity of 13.8 MW and the potential to 

expand this capacity by an additional 70 MW. This project is the first private investment in the wind sector in 

Brazil and began in 2004 with the installation of the Horizonte wind farm (4.8 MW), through a power 

purchase agreement with Centrais Elétricas de Santa Catarina S.A., or CELESC, and, in 2006, the Água Doce 

wind farm (9 MW), under the PROINFA program. 

Sale of ESC 90 Telecomunicações Ltda. 

On June 30, 2009, we sold 48.51% of the quotas of ESC 90 that we owned to Net Communication 

Services S.A. The total value of the transaction, as of April 30, 2008, was R$94.6 million. 

As the transaction included the recovery of the credits held by us against ESC 90, it allowed the reversal 

of provisions previously recorded, resulting in an income of R$121 million, of which R$46.2 million was 

recorded in our income statements under Other Operating Revenues, and R$74.8 million was recorded under 

Financial Result. The agreement sets forth the inflation adjustments and adjustments to the value of the 

transaction in the amount of R$3.9 million to be settled in 2011. The transaction is consistent with our 

strategy to focus our operations on the power generation, distribution and trading, with the disposal of assets 

not related to these principal businesses. 

Partial spin-off of Castelo Energética S.A., or Cesa, with transfer of the transmission assets and 

commencement of operations of Evrecy Participações Ltda., or Evrecy. 

On June 1, 2009, at an extraordinary general meeting, the shareholders of our indirect subsidiary, CESA, 

approved its partial spin-off from EDP, upon the transfer of the power transmission concession governed by 

Concession Agreement n. 020/2008, from CESA to our indirect subsidiary, Evrecy, in accordance with 

ANEEL Authorization 1823, of March 3, 2009. The purpose of the spin-off was to improve the operational, 

financial, management and economic efficiencies of the companies. CESA and Evrecy are companies 

controlled directly by our subsidiary, Energest S.A. The spun-off assets of CESA, as merged into Evrecy, 

totaled, as of the April 30, 2009 base date, R$21.5 million, as detailed in the relevant appraisal report. 

In view of the partial spin-off of CESA and the subsequent transfer of the spun-off portion to Evrecy, 

CESA’s capital stock decreased from R$44.9 million to R$23.5 million, without cancellation of the shares. 

Acquisition of Elebrás 

On March 17, 2009, EDP Renováveis Brasil S.A. acquired Elebrás Projetos Ltda., for R$22.3 million, 

including four portfolio projects, with an installed capacity of over 500 MW. The main project making up 

Elebrás’ portfolio is a Tramandaí wind farm, with an installed capacity of 70 MW that is under construction, 

and as executed a power purchase agreement under PROINFA. 

Corporate Reorganization – Merger of Tocantins Energia S.A. and EDP Lajeado Energia S.A. into 

Lajeado Energia S.A. 

On November 30, 2009, at an extraordinary general shareholders meeting of our subsidiaries Tocantins 

Energia S.A., or Tocantins, EDP Lajeado Energia S.A., or EDP Lajeado, and Lajeado Energia S.A., or 

Lajeado, companies making up Grupo EDP – Energias do Brasil, approved a corporate reorganization through 

the merger of subsidiary Tocantins and subsidiary EDP Lajeado into subsidiary Lajeado, in order to: 

• define and simplify the corporate structure of the companies involved and benefit from the synergies 

from the sale of power and management of assets of the investee, Investco S.A. 

• optimize the allocation of funds in order to assure the best return to shareholders. 

46

This corporate reorganization consisted of: 

(i) the merger of our subsidiary Tocantins into our subsidiary Lajeado; 

(ii) the increase of capital stock in our subsidiary EDP Lajeado through our transfer of all of our shares 

in Lajeado Energia; and 

(iii) the merger of our subsidiary EDP Lajeado into our subsidiary Lajeado. 

The merger increased the capital stock of Lajeado, from R$513.8 million to R$756.9 million, an increase 

of R$243.1 million, upon the issuance of 142,029,324 new shares to the shareholders of the government of the 

state of Tocantins, Eletrobrás and us, of which 113,690,041 are common shares attributed to us and 

28,339,283 are preferred class A shares attributed to Eletrobrás. The net assets merged into Lajeado, in the 

amount of R$127.8 million, were fully allocated to a special merger goodwill reserve under shareholders' 

equity. As a result of this corporate reorganization, EDP Lajeado and Tocantins were dissolved for all legal 

purposes and Lajeado assumed the responsibility for their assets and liabilities as the surviving entity. 

In order to continue with the global strategy of simplifying the corporate structure of Grupo EDP that 

began in 2009, Sociedade Enernova S.A., or Enernova, transferred its ownership interest in EDP Renováveis 

Brasil S.A., or EDP Renováveis, to us, through a capital decrease, and we became the direct holder of 

EDPRBR’s shares. Additionally, Enernova was merged into Ipueiras Energia S.A., the surviving entity. 

Other Factors Affecting our Results of Operations 

Our business includes the following segments: power distribution, generation and trading. 

The distribution of electricity is a very capital intensive business, tariffs are strictly regulated by ANEEL 

and operating costs are significant compared to revenues. We believe that the most important factors affecting 

the financial performance of our distribution activities are: 

• the tariffs set forth by ANEEL; 

• the terms on which we are able to purchase electricity; 

• the rate of consumption growth in the concession areas of our companies; 

• our ability to control operating costs and expenses, including electricity losses and customer non-payment; 

• our capital structure and financing costs; and 

• our ability to achieve an adequate return on our investments, maximized compared to the 

resources employed. 

See “Business – Distribution Activities – Customers” for tables showing the consolidated number of 

clients, volume of electricity sold and distributed and gross revenue by consumption class of end customer for 

our distribution businesses for the years ended December 31, 2010 and 2009 and the three-month periods 

ended March 31, 2011 and 2010. 

Generation companies require high levels of capital investment during the initial stages of construction, 

operate with high levels of financial leverage, incur low operating and maintenance costs compared to 

revenues and face intervention from ANEEL with respect to the terms on which electricity is sold. 

We believe that the most important factors affecting the financial performance of our generation activities are: 

• our capability to successfully construct and operate our generation projects; 

• the terms on which we are able to sell electricity; and 

47

• our capital structure and financing costs. 

See “Business – Generation Activities” for a description of our power generation assets. 

The electricity trading segment in Brazil is not capital intensive like the distribution and generation 

segments. Operating expenses, other than the purchase of electricity, are not significant compared to revenues. 

We believe that the most important factors affecting the financial performance of our sales activities are: 

• the rate of growth of electricity consumption in the free market; and 

• the terms on which we are able to purchase and sell electricity. 

See “Business — Energy Trading Activities” for information regarding the volume of electricity traded in 

the three-month periods ended March 31, 2011 and 2010. 

Critical Accounting Practices 

Financial Presentation and Law No. 11,638/07 and Law No. 11,941/09 

We prepare our financial statements in accordance with Brazilian GAAP, which is based on Brazilian 

Corporation Law. 

On December 28, 2007, the Brazilian Congress enacted Law No. 11,638/07, amending the Brazilian 

Corporation Law to introduce new accounting rules with respect to the preparation of financial statements, in 

order to facilitate the convergence process of Brazilian GAAP with IFRS, published by the IASB, and to 

permit the CPC and the CVM to introduce and approve new accounting standards. Further, on December 3, 

2008, the Brazilian government also issued Provisional Measure No. 449, later converted into Law No. 

11,941/09, which established a Transitional Tax Regime meant to neutralize the tax effects from the 

implementation of these changes in accounting practices. 

We assessed, measured and implemented these changes in accounting practices in our financial 

statements as of and for the year ended December 31, 2008. We prepared our financial statements in 

accordance with Brazilian GAAP, which is based on Brazilian Corporation Law (including new standards 

introduced by Laws Nos. 11,638/07 and 11,941/09 as of January 1, 2008), standards issued by the CPC and 

approved by the CVM, as well as regulations of IBRACON and ANEEL. 

In 2009, the Company’s financial statements were presented in accordance with the accounting practices 

adopted in Brazil, which included the changes introduced by Laws 11638/07 and 11941/09, as supplemented 

by the pronouncements issued by the Accounting Standards Committee (CPC), approved by the resolutions 

issued by the Federal Accounting Council (CFC) and the Brazilian Securities and Exchange Commission 

(CVM), issued up to December 31, 2008, and specific legislation issued by the National Agency of Electric 

Energy (ANEEL). Therefore, the financial statements for the year ended 2009 were restated to reflect the 

accounting standards issued in 2009 and 2010 by the CPC in order to allow comparison with the 2010 

financial statements. 

Accounting estimates 

In preparing our consolidated financial statements, we have made certain estimates and assumptions 

about inherently uncertain matters, which estimates and assumptions we consider reasonable based on our 

experience. Our financial presentation may be materially affected if we were to use different estimates or if 

we were to change our estimates in response to future events. A complete discussion of our accounting 

practices and practices is included in the notes to our financial statements, included in this offering 

memorandum. To provide an understanding of how our management forms judgments about future events, 

including the factors and assumptions underlying those estimates, we identified the following critical 

accounting practices: 

48

Revenue Recognition 

Although we bill our customers on various dates throughout each month, revenue from electricity 

tariffs to final customers — including residential, industrial, commercial, rural and public sector customers 

— is recorded in the month in which the electricity is actually delivered to the customer. Revenue for 

electricity delivered to final customers between the date on which the customer’s meter is read and the end 

of a given month is estimated and recorded as revenue during the month in which the electricity is 

delivered to the customer. 

We record a provision called “electricity supplied to be billed” based on the historical consumption of our 

customers. The difference between the estimated consumption amount and the actual amount of electricity 

used by the customer between the date the meter is read and end of the month is recorded in the following 

month, regardless of the date of payment. As a result, final results may differ from these estimates and affect 

our financial condition and our results of operations. 

Property, plant and equipment and Intangible Assets 

We recognize expenses related to the depreciation and amortization of our tangible fixed assets and 

intangible fixed assets. The rates of depreciation and amortization are based on our estimates of the useful 

lives of the assets over the periods during which these assets can be expected to provide benefits to us. In 

addition, we monitor the use of our tangible fixed assets and intangible fixed assets to determine whether any 

impairment of those assets is necessary. The determination of impairment involves judgments and estimates 

as to whether the asset is providing an adequate return in relation to its book value. While we believe that we 

make reliable estimates for these matters, our actual depreciation, amortization and impairment expenses may 

be higher than our estimates, which could negatively affect our results of operations. 

Our intangible fixed assets consist of assets acquired from third parties, including by means of business 

combination, and those generated internally by us and our subsidiaries, substantially represented by 

expenditures in the implementation of software. The following criteria are applied: 

• when intangible assets are acquired from third parties by means of business combinations, goodwill 

to determined in acquisitions involving business combinations; and 

• when intangible assets acquired from third parties: these are measured by the total cost of purchase, 

less amortization expenses. 

Acquired goodwill refers to the amount of goodwill resulting from the purchase of shares of Bandeirante 

and Escelsa, which was recorded in accordance with CVM Instruction No. 319/99 and No. 349/99 and has 

been amortized by the future results expected over the term of the concession of the companies, pursuant to 

the requirements of ANEEL. 

Other rights of use are recorded at amortized cost. 

Deferred Taxes 

We record deferred tax assets and liabilities based on the temporary differences between the book value 

and the tax basis of our assets and liabilities, taking into consideration CVM Instruction No. 371/02. We 

regularly review the recoverability of our deferred tax assets. Under Brazilian GAAP, a deferred tax asset is 

recognized only if it is probable to be realized. Our management believes that the realization of our net 

deferred tax assets is probable. However, their amounts are subject to uncertainties related to the expected 

taxable income and the expected timing of the reversals of existing temporary differences. The amount of 

deferred tax assets deemed realizable, however, may be reduced if estimates of future taxable income are 

reduced for the period in which the deferred tax assets were to be realized. 

Provision for Contingencies 

We record provisions for contingencies when it is probable that we will be required to pay for a potential 

liability. In estimating contingent liabilities with respect to legal proceedings, we consult with our external 

49

and internal legal counsel and analyze possible results, taking into account applicable litigation and settlement 

strategies. We annually request a report that identifies the proceedings in which we are represented by outside 

legal counsel and we have probable potential liability. Our management has established a provision for 

contingencies derived from its analysis of proceedings that represent probable losses. 

Provision for Doubtful Accounts 

In accordance with ANEEL’s regulations, we record a provision for doubtful accounts based on our 

estimate of the amount of our accounts receivable that we will not likely realize, consisting of: (i) amounts 

receivable from residential customers that are late by more than 90 days; (ii) amounts receivable from 

commercial customers that are late by more than 180 days; and (iii) amounts receivable from other customers 

that are late by more than 360 days. We believe that our current allowance for doubtful accounts is sufficient 

to cover any losses that we may incur in collecting accounts receivable from our customers and other 

concessionaires. However, final results may differ from these estimates and affect our financial condition and 

our results of operations. 

Post-employment benefits 

Actuarial liabilities related to our retirement and pension benefits plans are recorded in accordance 

with the provisions of CVM Rule No. 371/00 and Accounting Practices and Procedures (Normas e 

Procedimentos de Contabilidade (NPC)) No. 26 of IBRACON. 

Actuarial costs, contributions and liabilities, as the case may be, are determined each year based on 

actuarial studies developed by independent actuaries. The most recent assessment was prepared as of and for 

the year ended December 31, 2008. 

Actuarial gains and losses are recognized to the extent they exceed 10% of the total assets or liabilities of 

the plan, whichever is higher (corridor criteria). 

We use statistical data and other factors in order to estimate future expenses and liabilities related to 

our pension and employee benefit plans. These factors include assumptions about the discount rate, 

expected return on plan assets and rate of future increases in compensation estimated by us, within certain 

guidelines. In addition, our actuarial consultants also use subjective factors, such as withdrawal, turnover 

and mortality rates. The actuarial assumptions we use may differ materially from our actual results, due to 

changing market and economic conditions, regulatory events, higher or lower withdrawal rates or longer or 

shorter life spans of participants. 

Transactions with derivative financial instruments 

In order to mitigate the exposure of our foreign-currency denominated indebtedness to exchange and 

interest rate fluctuations, we have entered into derivative transactions with various financial institutions. The 

book value, corresponding to the fair value of these derivative transactions related to debts in foreign currency 

as of March 31, 2011, was R$128.6 million. The gains and losses resulting from these derivative transactions 

are recognized in our financial statements as “Financial Results.” 

We calculate the fair value of the derivative instruments based on cash flow models discounted at 

current value, compared to similar transactions entered into dates close to the settlement of relevant 

financial periods, as well as based on comparisons with average market parameters for the transactions 

through the interest rate curves of BM&FBOVESPA, using the Futures DI rate of the BM&FBOVESPA. 

As of March 31, 2011, certain derivative instruments related to foreign-currency denominated 

indebtednesses were recorded for accounting purposes as cash flow hedges for the terms of the instruments. 

The amounts recorded reflect the 50% proportional consolidation of Pecém and the full consolidation of EDP 

Bandeirante of the corresponding underlying indebtedness. 

Changes to the fair values of cash flow hedges are recorded on our balance sheet as equity reserve as 

long as they are effective. Furthermore, derivative transactions that fail to meet hedge accounting are 

recognized as financial result. 

50

We and our subsidiaries do not enter into speculative derivative transactions, but rather only to mitigate 

risks from financial exposures. 

Principal Sources of Revenue and Costs 

Our principal source of revenues is the supply of electricity to final consumers and agents who resell our 

electricity to third parties. Our distribution activities accounted for 74.4% and 74.7% of our consolidated net 

operating revenues in the three-month period ended March 31, 2011 and in the year ended December 31, 2010, 

respectively. Our generation and trading activities accounted for 19.1% and 19.9% of our consolidated net 

operating revenues in the three-month period ended March 31, 2011, and in the year ended December 31, 

2010, respectively. 

Our operating costs and expenses primarily consist of: (i) electricity purchased for resale (54.1% of total 

operating costs and expenses in the three-month period ended March 31, 2011 and 54.3% for the year ended 

December 31, 2010); (ii) electricity network use charges (15.3% of total operating costs and expenses in the 

three-month period ended March 31, 2011 and 15.6% for the year ended December 31, 2010); (iii) 

depreciation and amortization (6.5% of total operating costs and expenses in the three-month period ended 

March 31, 2011 and 7.1% for the year ended December 31, 2010); (iv) personnel costs (3.8% of total 

operating costs and expenses in the three-month period ended March 31, 2011 and 3.9% for the year ended 

December 31, 2010); (v) materials and third party services costs (4.9% of total operating costs and expenses 

in the three-month period ended March 31, 2011 and 5.3% for the year ended December 31, 2010); and (vi) 

other operating expenses and general and administrative expenses (9.8% of total operating costs and expenses 

in the three-month period ended March 31, 2011 and 8.9% for the year ended December 31, 2010). 

Description of Principal Line Items 

Net Operating Revenues 

Operating revenues consist of: (i) revenues from the supply of electricity to final consumers; (ii) revenues 

from the supply of electricity to agents who resell our electricity to third parties; (iii) revenues from the usage 

of our transmission and distribution system; and (iv) other operating revenues, including revenues from the 

usage of our distribution network by free consumers and other concessionaires, and revenues from the lease of 

electricity poles and services provided to third parties. 

Approximately 15% and 13% of our net operating revenues (not considering the elimination between the 

companies) corresponded to electricity traded in the three-month period ended March 31, 2011 and in the year 

ended December 31, 2010, respectively; 67% and 68% of our net operating revenues (not considering the 

elimination between the companies) corresponded to availability of the transmission and distribution system 

in the three-month period ended March 31, 2011 and in the year ended December 31, 2010, respectively; and 

17% and 18% of our net operating revenues (not considering the elimination between the companies) 

corresponded to generation revenues in the three-month period ended March 31, 2011 and in the year ended 

December 31, 2010, respectively. 

Deductions from operating revenues are comprised of: (i) taxes levied on operating revenues, such as 

ICMS (a state value-added tax on sales and services), PIS (a federal value-added tax) and COFINS (a federal 

value-added tax); (ii) regulatory charges, such as RGR and the emergency capacity charge (encargo de 

capacidade emergencial), or ECE; (iii) CCC and CDE quotas; (iv) global reversal reserve; and (v) research 

and development costs. 

For the purpose of tariff adjustments, deductions from operating revenues are classified as line items 

that are not within management’s control. As such, any changes in these amounts can be automatically 

reflected in the next annual tariff adjustment or included in the next periodic tariff revision and thus passed 

on to customers. 

Electricity Service Cost 

Electricity service cost consists of the costs directly related to the purchase of electricity by our 

companies, including electricity purchased for resale (78.0% of total electricity service cost in the three- 

51

month period ended March 31, 2011 and 77.7% for the year ended December 31, 2010), electricity network 

usage charges (22.0% of total electricity service cost in the three-month period ended March 31, 2011 and 

22.3% for the year ended December 31, 2010). 

Operating Costs 

Our operating costs consist of: (i) personnel costs (23.1% of total operating costs in the three-month 

period ended March 31, 2011 and 23.0% for the year ended December 31, 2010); (ii) materials and third party 

services costs (30.1% of total operating costs in the three-month period ended March 31, 2011 and 30.7% for 

the year ended December 31, 2010); (iii) depreciation and amortization (39.8% of total operating costs in the 

three-month period ended March 31, 2010 and 41.8% for the year ended December 31, 2010); (iv) and other 

operating costs (7.0% of total operating costs in the three-month period ended March 31, 2011 and 4.6% for 

the year ended December 31, 2010). 

Operating Expenses 

Operating expenses consist of: (i) selling expenses (9.0% of total operating expenses in the three-month 

period ended March 31, 2011 and 16.8% for the year ended December 31, 2010); (ii) general and 

administrative expenses (54.8% of total operating expenses in the three-month period ended March 31, 2011 

and 55.0% for the year ended December 31, 2010); (iii) depreciation and amortization (21.8% of total 

operating expenses in the three-month period ended March 31, 2011 and 17.2% for the year ended December 

31, 2010); and (iv) other operating expenses (14.3% of total operating expenses in the three-month period 

ended March 31, 2011 and 11.0% for the year ended December 31, 2010). 

Results of Operations 

As a result of the changes in financial presentation introduced by Law 11,638/07, the standards issued by 

the CPC, the financial information as of and for the years ended December 31, 2010 and 2009 and as of and 

for the periods ended March 31, 2011 and 2009 is not fully comparable between periods. See “Presentation of 

Financial and Other Information.” 

52

The table below sets forth selected income statement information for the indicated periods. 

Three-Month Period Year Ended 

Ended March 31, 

December 31, 

2011 2010 2010 2009 


Net operating revenues ......................................................................................... 


1,384.8 1,200.4 5,034.3 4,621.7 

Electricity cost ..................................................................................................... (709.5) (587.7) (2,698.2) (2,340.3) 

Electricity purchased for resale ....................................................................... (553.1) (433.4) (2,096.8) (1,866.7) 

Electricity network use charges....................................................................... (156.4) (154.4) (601.4) (473.7) 

Operating costs .................................................................................................... (167.8) (164.6) (661.3) (598.5) 

Personnel ......................................................................................................... (38.8) (38.3) (151.9) (146.5) 

Materials and third-party services ................................................................... (50.5) (47.1) (203.1) (166.6) 

Depreciation and amortization ........................................................................ (66.8) (66.3) (276.2) (257.2) 

Other operating costs ....................................................................................... (11.7) (12.9) (30.1) (28.1) 

Service cost rendered to third parties .................................................................. (0.5) (0.9) (6.1) (2.9) 

Gross operating profit .......................................................................................... 507.0 447.2 1,668.8 1,680.0 

Operational expenses .......................................................................................... (145.2) (122.0) (504.2) (490.5) 

Selling .............................................................................................................. (13.1) (17.4) (80.3) (42.0) 

General and administrative .............................................................................. (79.6) (65.2) (262.0) (321.6) 

Depreciation and amortization ........................................................................ (31.7) (20.7) (81.8) (76.9) 

Other operating expenses ................................................................................ (20.8) (18.7) (80.1) (50.0) 

Service result ....................................................................................................... 361.8 325.2 1,164.6 1,189.5 

Income from equity interest ................................................................................ (2.4) (0.6) (1.8) (0.4) 

Financial revenues ........................................................................................... 51.6 73.6 338.0 296.6 

Financial expenses ........................................................................................... (95.9) (100.5) (515.0) (378.6) 

Financial result .................................................................................................... (44.3) (26.9) (177.0) (82.0) 

Income before income tax and social contribution .......................................... 315.1 297.7 985.7 1,107.1 

Current income and social contribution taxes .................................................... (96.0) (93.2) (229.3) (196.8) 

Deferred income and social contribution taxes .................................................. (7.1) (4.0) (19.8) (52.0) 

Net income before non-controlling shareholders .............................................. 212.0 200.5 736.6 858.3 

Non-controlling shareholders.............................................................................. (22.2) (25.0) (136.9) (146.9) 

Founders’ shares ................................................................................................. (2.1) (2.4) (17.2) (15.8) 

Net income for the period .................................................................................... 187.7 173.0 582.6 695.7 

Profit per share (in Reais) .................................................................................... 1.2 1.1 3.7 4.4 

In the following discussion, references to increases or decreases in any year or period are made by 

comparison with the corresponding prior year or period, except as the context otherwise indicates. 

Three-Month Period Ended March 31, 2011 Compared to the Three-Month Period Ended March 31, 2010 

Net operating revenues 

Net operating revenues increased by 15.4% to R$1,384.8 million for the three-month period ended March 

31, 2011, from R$1,200.4 million for the corresponding period in 2010, primarily as a result of the following 

factors: 

Generation 

• the volume of energy sold in the group for the three-month period ended March 31, 2011 reached 

1,981.6 GWh, an increase of 11.2% in relation to 1,781.5 GWh sold in the corresponding period in 

the previous year as a result of the seasonal nature of electricity purchase and sale agreements, with a 

greater volume of energy sold in the first quarter of 2011 than 2010; and 

• the average price for the three-month period ended March 31, 2011 was 5.7% higher than the 

average for the corresponding period during the same previous year, as a result of inflation 

adjustments to contracts. 

Distribution 

• growth of 3.1% in the volume of electricity sold to final customers for the three-month period ended 

March 31, 2011 (an increase of 3.8% for EDP Bandeirante and an increase of 2.1% for EDP Escelsa); 

53

Trading 

• growth of 5.6% in the volume of electricity transmitted (free customers and concessionaries) for the 

three-month period ended March 31, 2011 (a 0.6% increase for EDP Bandeirante and a 13.1% 

increase for EDP Escelsa); and 

• an average increase of 9.3% in the tariff for EDP Bandeirante and an increase of 1.7% for EDP 

Escelsa due to a tariff adjustment. 

• the volume of sold energy totaled 2,230 GW for the three-month period ended March 31, 2011 as 

compared to 2,086 GW for the corresponding period in the previous year, an increase of 11.7%, as a 

result of an increase of the medium and short terms sales; and 

• the average price of new contracts for 2011 was higher than for 2010 due to a higher PLD (an average 

of R$18.2 for 2010, as compared to R$34.1 for 2011, as a result of hydrological conditions of the 

country). Further, long term contracts were adjusted for inflation by an average 11.3% for the period). 


Electricity services costs increased by 20.7% to R$709.5 million for the three-month period ended 

March 31, 2011 from R$587.7 million for the corresponding period in 2010, mainly due to a 3.1% increase in 

electricity consumed by captive consumers, as well as in the average power purchase price, as adjusted by 

variations in IPCA and IGP-M. 

Electricity purchased for resale: Costs from electricity purchased for resale increased 27.6% to 

R$553.1 million for the three-month period ended March 31, 2011 as compared to R$433.4 million, mainly 

due to: (i) an increase of energy purchased in auctions primarily due to the need to supply electricity 

previously contracted; (ii) the increase in the average price of power, as adjusted by the IPCA; (iii) an 

increase of 11.2% in the volume of electricity used, as a result of the seasonal nature of electricity purchase 

and sale agreements, with a higher allocation in the first half of the year. This was partially offset by a 

reduction in the amount of energy purchased from Itaipu, as a result of a reduction in quotas allocated to 

our distributors, in addition to the devaluation of the average U.S. dollar of 9.2%, despite the increase of 

1.02% of the annual tariff in U.S. dollars. 

Electricity network use charges: Costs from electricity network use charges increased 1.3% to R$156.4 

million for the three-month period ended March 31, 2011 as compared to R$154.4 million for the 

corresponding period in the previous year, mainly due to the change in the manner of contracting demand for 

the use of transmission lines, mainly at EDP Escelsa, arising from Resolution 399/2010. The prior rule stated 

that the quantity of contracted demand could be reduced by the capacity of power generation of the generators 

close to the concession area of EDP Escelsa, namely: HPP Mascarenhas, HPP Rosal, TPP Sol and TPP 

Linhares. As a result of Resolution 399/2010, the demand contracted for the use of transmission is the total 

required by the distributors, not considering generation capacity. 

Operating costs 

Operating costs increased by 1.9% to R$167.8 million for the three-month period ended March 31, 2011 

from R$164.6 million for the corresponding period in 2010. 

Personnel: Personnel costs increased 1.1% to R$38.8 million for the three-month period ended March 31, 

2011, as compared to R$38.3 million for the corresponding period in the prior year, mainly due to: (i) a 

change in the criteria for recording overtime, arising from a collective bargaining agreement; (ii) an increase 

in expenditures for health plans at EDP Escelsa, due to a court decision and; (iii) an increase in compensation 

and profit sharing due to an adjustment in a collective bargaining agreement. 

Materials and third-party services: materials and third-party services costs increased 7.3% to R$50.5 

million for the three-month period ended March 31, 2011 as compared to R$47.1 million for the 

corresponding period in the previous year. The increase was due to: (i) expenditures for preventive and 

54

corrective maintenance of the network and tree cutting due to a higher number of teams needed for summer 

periods; (ii) our program for recovery of revenues which increased the number of inspections and field, 

commercial and technical teams (although which also resulted in a decrease in commercial losses); (iii) an 

increase in costs from reading and billing due to the growth in our customers base and; (iv) previously agreed 

adjustments to contracts with our service providers. 

Depreciation and amortization: Depreciation and amortization totaled R$66.8 million for the three-month 

period ended March 31, 2011 as compared to R$66.3 million for the corresponding period in the previous 

year, mainly due to growth in new constructions by our distributors. 

Other operating costs: Other operating costs decreased 9.3% to R$11.7 million for the three-month 

period ended March 31, 2011 as compared to R$12.9 million for the corresponding period in the previous 

year, mainly due to lower costs for the deactivation/disposals of machinery and equipment of our distributors 

in 2011 as compared to 2010. 

Gross operating profit 

Gross operating profit increased 13.4% for the period to R$507.0 million for the three month period 

ended March 31, 2011, as compared to R$447.2 million for the corresponding period in the previous year, 

primarily due to the above-mentioned factors. 

Operational expenses 

Operational expenses increased by 19.0% to R$145.2 million for the three-month period ended 

March 31, 2011 from R$122.0 million in the corresponding period for 2010, primarily as a result of: 

Selling: selling expenses decreased 24.9% to R$13.1 million, for the three-month period ended 

March 31, 2011 as compared to R$17.4 million for the corresponding period in the previous year, mainly 

due to a lower allowance for doubtful accounts at our distributors, mainly EDP Bandeirante, due to 

improvements implemented in the billing cycle and in collection processes; 

General and administrative: General and administrative expenses increased 22.1% to R$79.6 million 

for the three-month period ended March 31, 2011 as compared to R$65.2 million for the corresponding 

period in the previous year, mainly due to: (i) lower capitalization of labor, due to the suspension of 

transfers of indirect administrative labor among our companies, in compliance with ANEEL’s Order 4097 

of December 30, 2010; (ii) an increase in legal services arising from contractual adjustments and an 

increase in audit services, due to the need for a reversal of excessive provisions in 2010; and 

Other operating expenses: Other operating costs increased 11.3% to R$20.8 million for the threemonth 

period ended March 31, 2011 as compared to R$18.7 million for the corresponding period in the 

previous year, mainly due to amounts distributed by EDP – Energias do Brasil to Enersul related to losses 

arising from contingencies. 

Service result 

As a result of the foregoing, service income increased by 11.3% to R$361.8 million for the three-month 

period ended March 31, 2011, from R$352.2 million for the corresponding period in the previous year, 

primarily due to the above-mentioned factors. 

Financial results 

Financial results decreased by 64.9% to a loss of R$44.3 million for the three-month period ended March 

31, 2011 as compared to a loss of R$26.9 million the corresponding period in 2010, primarily as a result of: 

Financial revenues: financial revenues decreased by 30.0% to R$51.6 million in 2011 as compared to 

R$73.6 million. The decrease corresponds mainly to restatements of court deposits (with respect to 

installment payments for federal taxes, pursuant to Law 11,941/09); and 

55

Financial expenses: financial expenses decreased by 4.6% to R$95.9 million for the three-month period 

ended March 31, 2011 as compared to R$100.5 million for the same period in 2010. The decrease 

corresponds mainly to the monetary adjustments for the use of public assets, which were higher in the first 

quarter of 2011 than in the corresponding quarter in 2010. 

Income before income and social contribution taxes 

Income before income tax and social contribution increased by 5.8% to R$315.1 million for the threemonth 

period ended March 31, 2011 as compared to R$297.7 million for the corresponding period in the 

previous year, mainly due to the variation in the results from services shown above. 

Income and social contribution taxes 

Income and social contribution taxes increased by 6.1% to R$103.1 million for the three-month period 

ended March 31, 2011 from R$97.2 million for the corresponding period in 2010, primarily as a result of: 

Current income and social contribution taxes: which increased by 3.0% to R$96.0 million in 2011 as 

compared to R$93.2 million for the same period in 2010, due to the higher taxable income for the period; and 

Deferred income and social contribution taxes: which increased by 77.2% to R$7.1 million in 2011 as 

compared to R$4.0 million for the same period in 2010, primarily due to the recognition in 2010 of deferred 

taxes at EDP – Energias do Brasil with respect to installment payments for federal taxes pursuant to 

Law 11,941/09. 

Net income before non-controlling shareholders 

Net income before non-controlling shareholders increased by 5.7% to R$212.0 million for the threemonth 

period ended March 31, 2011, as compared to R$200.5 million for the same period in 2010, primarily 

as a result of service income, financial results and income and social contribution taxes. 

Non-controlling shareholders 

Non-controlling shareholders decreased by 11.4% to R$22.2 million for the three-month period ended 

March 31, 2011 from R$25.0 million for the corresponding period in 2010. This variation was due to a lower 

level of profit at Lajeado Energia S.A. from the adjustment of goodwill amortization curves of the EDP 

Lajeado (upon Lajeado Energia S.A. incorporating Tocantins Energia S.A. and EDP Lajeado S.A.) as from 

November, 2010. 

Net income 

As a result of the foregoing, net income increased by 8.5% to R$187.7 million for the three-month period 

ended March 31, 2011, as compared to R$173.0 million for the same period in 2010. 

56

Year ended December 31, 2010 Compared to Year Ended December 31, 2009 

Net operating revenues 

Net operating revenues increased by 8.9% to R$5,034.3 million in the year ended December 31, 2010 

from R$4,621.7 million in the year ended December 31, 2009, primarily due to: 

Generation 

• increase of 4.0% in electricity sold in 2010 compared to 2009 mainly due to Lajeado having sold a 

greater volume of electricity in the first quarter of 2010; 

• in 2010, the average electricity generation price was at 0.8% lower than in 2009 due to the reduction 

of 7.1% in the average price of power sold at Lajeado. This reduction resulted from the Lajeado 

transactions discussed above, whereby the sales prices were greater than the purchase prices, 

resulting in a margin to us. However, the purchase and sale prices in these transactions were lower 

than the average of the other agreements entered into by our generation companies, and thus reduced 

the average sales price of the overall portfolio. Excluding these Lajeado transactions, the increase in 

the average sales price at Lajeado in 2010 compared to 2009 would have been 3.4% and for the 

overall portfolio would have been 3.9%; and 

• an offsetting decrease in revenues in the amount of R$24.0 million, in 2010 compared to 2009, due 

to a short-term operational ruling filed by ONS that provided for better estimates about and 

compliance with rules issued by the Electric System Monitoring Committee, which reduced the 

allocation of electricity available for sale by hydroelectric plants. 

Distribution 

Trading 

• an increase of 5.8% in the volume of energy sold to final customers in 2010 compared to 2009, 

mainly due to consumption by industrial customers in light of the recovery of the Brazilian economy 

after the global financial crisis. Another factor that increased the captive market for the period was 

the increase in the consumption by residential and commercial customers, due to an increase in 

income and household consumption; and 

• an increase of 21.7% in the energy distributed to free customers in 2010 compared to 2009, due to a 

reduction in energy distributed in 2009 due to the international economic crisis. Net revenues from 

the available distribution system (TUSD) increased by 6.1% in 2010 as compared to 2009, totaling 

R$2,720.3 million, as most of the revenues from free customers relate to network usage contracting, 

in addition to tariff adjustments. 

• net revenues from trading decreased by 2.9% in 2010 compared to the prior year, arising mainly 

from a decrease of 6% in volume sold. Sales in 2010 were 8,263 GW as compared to 8,715 GW in 

2009. Average prices decreased by 5.5%, from approximately R$102/MWh in 2009 to 

approximately R$96.4/MWh in 2010. 

Electricity service cost 

Electricity service cost increased by 15.3% to R$2,698.2 million for the year ended December 31, 2010 

from R$2,340.3 million for the year ended December 31, 2008, primarily due to the reasons described below. 

Electricity purchased for resale: costs from electricity purchased for resale increased by 12.3%, totaling 

R$2,096.8 million for the year ended December 31, 2010 as compared to R$1,866.7 million in 2009 mainly 

due to: (i) an increase in electricity purchased in auctions, providing increased supply of electricity in light of 

the market expansion; and (ii) an increase in the average purchase price of electricity, as adjusted by the IPCA. 

This increase was partially offset by a reduction in the energy purchased from Itaipu due to a reduction in the 

57

quotas allocated to our distributors, in addition to the depreciation of the U.S. dollar in 2010 compared to 

2009, in addition to the reduction of 1.6% in the corresponding tariff amount in U.S. dollars; 

Electricity network use charges: costs from electricity network use charges increased by 27.0%, totaling 

R$601.4 million for the year ended December 31, 2010 as compared to R$473.7 million for the prior year, 

mainly due to a lower volume of rainfall for the period, with a subsequent increase in thermoelectric 

generation, which is more expensive and must be apportioned amongst all participants of the energy sector, 

including the distributors. The Reserve Electric Energy Tariff (EER) was also introduced in 2009, and in 2010 

new plants designed to improve the security in the supply of electricity to the SIN were added, increasing our 

costs. 

Operating costs 

Operating costs increased by 10.5% to R$661.3 million for the year ended December 31, 2010 from 

R$598.5 million for the year ended December 31, 2009, primarily due to following: 

Personnel: Personnel costs increased 3.7% to R$151.9 million for the year ended December 31, 2010 as 

compared to R$146.5 million for the prior year, mainly due to (i) additional overtime paid as required by 

collective bargaining agreement (acordo coletivo) for 2010; (ii) an increase in compensation for employees 

due to the implementation of the career, salary and merit based compensation plan; collective bargaining 

agreement (dissídio coletivo) resulting in more payroll charges; adequacy of benefits to employees; (iii) profit 

sharing as a result of “Projeto Vencer”; offset by lower costs from medical and dental insurance and a 52% 

reduction in private social security payments. 

Materials and third-party services: materials and outsourced services costs increased 21.9% to R$203.1 

million for the year ended December 31, 2010 as compared to R$166.6 million for the corresponding period 

in the previous year. For the materials account, the increase in costs was mainly due to greater use of lighting 

materials, tools and interventions in the network arising from costs for maintenance and repairing electrical 

system, which were higher due to adverse climatic conditions in 2010. Outsourced services increased partially 

due to contractual adjustments by our service providers, as well as to: (i) the suspension of the transfer to 

investments account of the labor of administrative service providers; (ii) compliance with ANEEL Resolution 

363/09, which led to an increase in contracted employees, in order to comply with the average time permitted 

to service customers at our service centers and on telephone calls; (iii) an approximate increase of 13% in the 

costs for reading and billing due to the growth in our customer base and replacement of a service provider; (iv) 

implementation of a revenue recovery program that resulted in a decrease in non-technical losses at EDP 

Bandeirante and EDP Escelsa; and (v) an increase in expenditures for maintenance/repair of the electrical 

system in order to avoid defaults. 

Depreciation and amortization: Depreciation and amortization increased 7.4% to R$276.2 million for the 

year ended December 31, 2010 as compared to R$257.2 million for the previous year, mainly due to the 

commencement of operations by PCH Francisco Gros (formerly called Santa Fé), the incorporation of the 

transmission line and substation Cacimba-Linhares and the operational start-up of the internal billing system, 

both in the concession area of EDP Escelsa, in addition to increased constructions at our distributors. 

Other operating costs: Other operation costs increased 7.0% to R$30.1 million for the year ended 

December 31, 2010 as compared to R$28.1 million for the corresponding period in the previous year, 

primarily due to inflation for the period. 

Gross operating profit 

Gross operating profit decreased by 0.7% for the period to R$1,668.8 million on December 31, 2010, as 

compared to R$1,680.0 million for 2009, mainly due to the factors discussed above. 

58

Operational expenses 

Operational expenses increased by 2.8% to R$504.2 million for the year ended December 31, 2010 from 

R$490.5 million for the year ended December 31, 2009, primarily as a result of: 

Selling: selling expenses increased 91.1% to R$80.3 million for the year ended December 31, 2010 as 

compared to R$42.0 million for the previous year, mainly due to (i) a reversal in December 2009, at our 

trading business, of provisions with respect to Ampla Energia e Serviços S.A., or Ampla, due to an arbitration 

award, which represented 96% of the increase in selling expenses. 

General and administrative: General and administrative expenses decreased 18.5% to R$262.0 million 

for the year ended December 31, 2010 as compared to R$321.6 million in the previous year mainly due to (i) 

a Brazilian Federal Revenue Service (RFB) – COSIT Opinion 27/2008 that granted us the right to obtain noncumulative 

PIS/COFINS tax credits for the years from 2006 to 2010; and (ii) recognition of losses arising 

from court deposits at our distributors for 2009, which did not occur in 2010. 

Depreciation and amortization: The decrease of 6.3% in the period is mainly due to the adjusted 

alignment as from November 2010 of the goodwill amortization of EDP Lajeado (upon its merger and 

corporate reorganization, in which Lajeado Energia S.A. was created from the merger of the companies 

Tocantins Energia S.A. and EDP Lajeado S.A.). 

Other operating expenses: Other operating expenses increased 60.3% to R$80.1 million for the year 

ended December 31, 2010 as compared to R$50.0 million for the prior year, mainly due to (i) recognition of 

provisions for potential losses at Enersul; (ii) the non-recurring sale of ESC 90 in 2009; and (iii) recognition 

of a provision for loss on investments. 

Service result 

As a result of the foregoing, service income decreased by 2.1% to R$1,164.6 million for the year ended 

December 31, 2010 from R$1,189.5 million for the year ended December 31, 2010. 

Financial results 

Financial results: financial result was a loss of R$177.0 million in the year ended December 31, 2010 as 

compared to a loss of R$82.0 million in the year ended December 31, 2009, primarily due to: 

Financial revenues: financial revenues increased 14.0% to R$338 million in 2010 as compared to 

R$296.6 million in 2009. The R$41.4 million increase corresponds mainly to (i) income from financial 

investment, a result from increases in the SELIC average rate, the key rate for most of our financial 

investments; (ii) adjustments to the present value of financial instruments, mainly for Pecém; and (iii) reversal 

of the provision for impairment for our investments in ESC 90, which we sold in 2009. 

Financial expenses: financial expenses increased 36.0% to R$515.0 million in 2010 as compared to 

R$378.6 million in 2009. The R$136.4 million increase corresponds mainly to the mark-to-market and 

adjustments to present value of the financial instruments for Pecém. 


Income before income tax and social contribution decreased by 11.0% to R$985.7 million in 2010 as 

compared to R$1,107.1 million in 2009, mainly due to the sale of ESC 90. The impact from this sale was 

R$120.9 million, of which R$74.7 million was recorded as financial income, for the reversal of the provision 

for non-realization of loan receivables and R$46.2 million in other operating expenses, for the reversal of the 

provision for net capital deficiency for the negative results of ESC 90. 

Income and social contribution taxes 

Income and social contribution taxes increased to R$249.1 million for the year ended December 31, 2010 

as compared to R$248.8 million for the year ended December 31, 2009, primarily due to current income and 

59

social contribution taxes which increased by 16.5% to R$229.3 million for 2010 as compared to R$196.8 

million for 2009, mainly due to increased taxable income at our distribution subsidiaries, offset by deferred 

income and social contribution taxes which decreased by 61.9% to R$19.8 million in 2010 as compared to 

R$52.0 million in 2009, primarily due to (a) tax losses forwarded by EDP Energias do Brasil, under the 

program for payment of federal taxes in installments (Law 11,941/09); and (b) deferred tax with respect to 

hedges at Pecém. 

Net income before non-controlling shareholders 

Net income before non-controlling shareholders decreased by 14.2% to R$736.6 million for the year 

ended December 31, 2010, primarily as a result of the sale of ESC 90 in the amount of R$120.9 million in 

June 2009. 


Non-controlling shareholders decreased by 6.8% to R$136.9 million for the year ended December 31, 

2010 from R$146.9 million for the year ended December 31, 2009, primarily due to less income from 

Investco S.A., due to a reduction in leasing revenue. 

Net income 

As a result of the foregoing, net income decreased by 16.3% to R$582.6 million for the year ended 

December 31, 2010 compared to 2009. The reduction was mainly due to the impact of the sale of ESC 90 in 

2009, which yielded a positive result of R$120.9 million. Excluding the impact of the sale of ESC 90, net 

income would have increased by 1.4% for the year. 

Liquidity and Capital Resources 

Our principal sources of liquidity arise from the cash we generate in our operations and from loans 

entered into with third parties to finance our operating activities and capital expenditures. We principally use 

these resources in our electricity distribution companies to maintain our quality of service and to support the 

natural increase in the network load that is inherent in the concessions. We also utilize our capital resources to 

expand their installed capacity of our electricity generation companies and to increase the interest we hold in 

our electricity generation subsidiaries. We believe that our operating revenues provide sufficient liquidity to 

service our financial commitments. 

Cash Flows 

The table below sets forth our cash flows from operating activities, investing activities and financing 

activities for the periods indicated. 

Three-month Period Year Ended 

Ended March 31, December 31, 

2011 2010 2010 2009 

(in millions of reais) 

Cash flow from operating activities ........................................................................... 233.9 376.4 1,595.5 1,338.7 

Cash flow from investing activities ............................................................................ (115.8) (150.0) (992.5) (284.6) 

Cash flow from financing activities ........................................................................... (229.0) (191.9) (578.6) (452.0) 

Cash and cash equivalents at the beginning of the period ......................................... 1,126.4 1,102.0 1,102.0 499.9 

Cash and cash equivalents at the end of the period .................................................... 1,015.5 1,136.6 1,126.4 1,102.0 

Increase (decrease) in cash and cash equivalents ....................................................... (111.0) 34.6 24.4 602.1 

Increase (decrease) in cash and cash equivalents (%) ................................................ (9.9%) 3.1% 2.2% 120.5% 

Three-Month Period Ended March 31, 2011 Compared to the Three-Month Period Ended March 31, 2011 

Cash flow from operating activities decreased by 37.9%, or R$142.5 million, in the three-month period 

ended March 31, 2011 compared to the corresponding period in 2010 primarily as a result of the receipt of 

outstanding amounts from trading customers, mainly Ampla and free customers. 

60

Cash used in investing activities decreased by 22.8%, or R$34.1 million, for the three-month period 

ended March 31, 2011 compared to the corresponding period in 2010 primarily as a result of the R$24 million 

payment related to the capital reduction of Tocantins Energia through its corporate reorganization in 

November 2009, in addition to the ordinary acquisition of assets. 

In addition, our cash flow from financing activities, increased by R$37.1 million, or 19.0%, for the threemonth 

period ended March 31, 2011 compared to the same period in 2010 primarily as a result of higher 

payments made during the period by EDP Bandeirante, Energest and Investco. 

Year ended December 31, 2010 Compared to Year Ended December 31, 2009 

Cash flow from operating activities decreased by 19.2%, or R$256.7 million, for the year ended 

December 31, 2010 compared to the year ended December 31, 2009, primarily due to a decrease in revenues, 

approximately R$195.5 million as a consequence of decreases in the average revenue of distribution 

customers. 

Cash used in investing activities increased by 248.7%, or R$707.9 million, in the year ended December 

31, 2010 compared to the year ended December 31, 2009, primarily due to the fact that we have not made 

investments in 2009, in respect of the ESC 90 sale and the sale of treasury shares. 

Cash flow from financing activities decreased by R$126.6 million, or 28.0%, in the year ended December 

31, 2010 compared to the year ended December 31, 2009, primarily due the amortization of debt, in addition 

to dividend payment for non-controlling shareholders and a R$24 million payment related to the capital 

reduction at Tocantins Energia through its corporate reorganization in November 2009, which liquidation of 

cash was settled in the first quarter of 2010. 

Capital Expenditures 

Our operating activities demand regular capital expenditures, particularly for the maintenance and 

expansion of our distribution network, and the increase of our generation capacity. The following table sets 

forth our capital expenditures during the periods indicated. 

Three-Month Period Year Ended 

Ended March 31, December 31, 

2010 2011 2009 2010 


Distribution................................................................................................................ 50.2 72.4 369.0 419.0 

EDP Bandeirante ........................................................................................................ 22.7 49.5 147.6 204.4 

EDP Escelsa ................................................................................................................ 27.5 22.9 221.4 214.6 

Generation ................................................................................................................. 61.6 71.2 409.3 622.6 

Enerpeixe .................................................................................................................... 6.4 0.7 21.1 13.6 

Energest ...................................................................................................................... 1.9 4.6 67.5 60.8 

Lajeado/Investco ......................................................................................................... 16.3 – 12.4 30.8 

Francisco Grós ............................................................................................................ 1.1 0.1 41.8 12.6 

Pecém .......................................................................................................................... 35.8 65.7 266.8 504.8 

Others ......................................................................................................................... 7.4 0.3 7.5 13.0 

Total ........................................................................................................................... 119.2 143.9 785.8 1,054.7 

In June 2011, we executed an agreement for the acquisition of ECE Participações S.A., which, if 

approved by the regulator, will require significant capital expenditure during the next four years. 

61

Indebtedness 

The following table sets forth selected information with respect to our loans and financing agreements for 

the periods indicated: 

Three-Month 

Period Ended 

March 31, Year Ended December 31, 

2011 2009 


2010 

Foreign Currency ............................................................................................................ 269.1 265.7 238.5 

Domestic Currency ......................................................................................................... 2,407.8 2,236.0 2,331.5 

Derivatives ...................................................................................................................... 128.6 76.3 119.6 

Total ............................................................................................................................... 2,805.4 2,550.9 2,716.8 

The following table sets forth selected information with respect to the principal outstanding amount of 

our long-term indebtedness at March 31, 2011. 

62 

Amount 

Total term debt obligations due by: (in thousands of reais) 

2011.......................................................................................................................................................................... 397,921 

2012.......................................................................................................................................................................... 492,471 

2013 and after .......................................................................................................................................................... 2,355,497 

The following table sets forth our consolidated leverage ratio for the indicated periods. 


Ended March 31, 

Year Ended December 31, 

2011 2008 2009 2010 

Net Debt / EBITDA .................................................................................... 1.4x 1.8x 1.4x 1.5x 

Loans and Financing Agreements 

Loans and financing agreements are a source of funding used primarily for working capital 

requirements and investing activities. Our loans and financing agreements include standard covenants and 

events of default, including certain financial covenants that require us and/or our subsidiaries to maintain 

certain financial ratios. 

Below are summaries of certain of our main loans and financing agreements. 


Agreement entered into with IDB. On March 5, 2004, EDP Bandeirante entered into a credit agreement 

with the IDB to disburse loans in two tranches in an aggregate principal amount of U.S.$100 million. Each 

tranche disbursed under this credit agreement consists of a loan that was disbursed in 2004 and in respect of 

which principal repayments commenced on May 15, 2006, payable every quarter until maturity. Tranche A, in 

the amount of U.S.$38.9 million, will mature on February 15, 2012 and bears interest at the London Interbank 

Offered Rate, or Libor, plus 4.375% per annum, payable every quarter as of May 15, 2004. Tranche B, in the 

amount of U.S.$61.1 million, matured on February 15, 2009 and bore interest at Libor plus 4% per annum, 

payable every quarter as of May 15, 2004. Tranche B was fully repaid on February 15, 2009. The proceeds 

from this credit agreement were used for capital expenditures. This credit agreement is secured by a pledge of 

our receivables resulting from the supply of electricity and contains certain covenants including a total debt to 

total debt plus equity ratio, a total debt to EBITDA ratio and a debt service coverage ratio, among others.

This financing is related to investment projects, with the guarantee of our receivables made by the supply 

of electric power. For this loan exchange, swap operations were conducted with hedge characteristics, with 

J.P. Morgan S.A. Bank, on March 15, 2004 and Banco Citibank S.A., on November 13, 2003, to exchange of 

original financing charges with IDB, for compensation based on 98% to 109.7% of CDI and 97.94% to 

118.94% of CDI, respectively, falling due at the same dates of the financing agreement. 

Promissory notes 

In 2009, the Board of Directors of EDP Bandeirante approved the issuance of promissory notes. The 

interest expense corresponds to the accumulated variation of the daily average rates of the interbank deposits, 

or DI, calculated and published daily by CETIP, capitalized at a corresponding spread of 1.30% per annum. 

EDP Bandeirante issued 230 notes with a total principal amount of R$230 million. EDP Bandeirante repaid 

the promissory notes on May 31, 2010. 

Banking credit certificates 

We entered into two loan agreements in 2006, in the aggregate amount of R$102 million, including 

R$51 million with Banco do Brasil S.A., or Banco do Brasil, and R$51 million with Banco Santander S.A., 

or Banco Santander. The loan amount bears interest of 105% of the CDI variation, capitalized daily. The 

principal is due in five annual installments, with the first payment due on December 5, 2009 and the last 

one due on December 5, 2013 and semi-annual interest falling due starting from June 5, 2007 up to 


Banco do Brasil/BNDES Credit Facility Agreement 

In January 2009, EDP Bandeirante, EDP Escelsa and Energest entered into a revolving credit 

agreement with BNDES (Contrato de Financiamento Mediante Abertura de Limite de Crédito Rotativo), in 

the amount of R$900 million, to invest in energy generation, transmission and distribution. We are the 

guarantor and are jointly responsible for the obligations set forth in this agreement. The terms of 

disbursement, including as to the guarantees and the amortization schedule, will be set forth in an 

agreement to be entered into by each party at the time of each disbursement. Each loan will bear interest 

with reference to the source of funds of BNDES and may be indexed to: (i) the reference rate published by 

BNDES, indexed to the IPCA; or (ii) the TJLP, as published by the Central Bank. Each loan must mature 

within 120 months of disbursement, and the recipients of each loan must use the total amount of the loan 

within five years from the date of the execution of the loan agreement. This agreement contains typical 

event of default provisions. In addition, the beneficiaries must maintain their respective gross financial debt 

to Adjusted EBITDA ratio equal to or below 3.5 during the term of their respective loan agreements. 

EDP Bandeirante drew down R$86.4 million from the BNDES loan in December, 2009, to be amortized 

over 72 months and with a grace period until May 15, 2011, with the first installment being due on June 15, 

2011 and the last on May 15, 2017, with interest varying from 2.32% p.a. above TJLP and fixed interest of 

4.50% p.a., due starting from February 17, 2010 quarterly during the grace period and monthly thereafter. The 

debt is guaranteed by part of EDP Bandeirante’s revenue arising from energy delivery and related services, in 

the amount equivalent to, at least, 130% of the highest financing installment, including principal, interest and 

other charges defined in the agreement. The outstanding balance of this agreement on March 31, 2011, was 

R$87.1 million. 

The maturity of each sub-credit to be released to the beneficiaries is over 120 months at most, and the 

beneficiaries undertake, pursuant to the agreement, to use the total credit over five years beginning from the 

date of its signature. 

The beneficiaries undertake, throughout the term of effectiveness of the related financing, to keep the 

indicator Gross Financial Debt over EBITDA equal to or lower than 3.5. 


Banco do Brasil/BNDES Credit Facility Agreement 

See “—EDP Bandeirante—Banco do Brasil/BNDES Credit Facility Agreement”. 

63

Banco do Brasil commercial note 

This agreement was executed on June 24, 2010, in the amount of R$135 million as an agroindustrial 

credit, fully disbursed on June 28, 2010. The loan amount bears interest at the rate of 100% of CDI. Principal 

and interest mature in 10 semi-annual installments, with the first payment on November 29, 2010 and the last 

payment on May 29, 2015. 

Program Light for All 

Agreement ECFS 031/04 – A credit line in the amount of R$31 million, as financing (RGR) R$4.8 

million, as an economic subsidy granted by Eletrobrás and R$4.8 million economic subvention granted by the 

Government of the State of Espírito Santo – Program instituted by Decree 4,873, of November 11, 2003, 

coordinated by the Ministry of Mines and Energy and held by Eletrobrás. This agreement was entered into on 

May 21, 2004, and in 2004 resources released in the amount of R$11.6 million, R$10.6 million in 2005, 

R$4.8 million in 2006 and R$3.3 million in 2008, totaling R$30.2 million. Principal bears interest of 5% p.a. 

with a management fee of 1% p.a., paid monthly starting from October 30, 2004. The principal installments 

are monthly starting from August 30, 2006 through July 30, 2016 with a guarantee of revenue binding and 

promissory notes. The undisbursed balance bears a standby fee of 1% p.a., falling due on the 30 th of each 

month, up to the credit termination. 

Agreement ECFS 106/05 – A credit line in the amount of R$50.3 million, as financing (RGR), R$7.7 

million, as an economic subsidy granted by Eletrobrás and R$7.4 million economic subvention granted by the 

Government of the State of Espírito Santo – Program instituted by Decree 4,873, of November 11, 2003, 

coordinated by the Ministry of Mines and Energy and held by Eletrobrás. 

This agreement was entered into on November 20, 2005, with resources released in 2006 in the amount of 

R$20.6 million, R$26.2 million in 2007, R$415,000 in 2008 and R$1.9 million in 2010. The principal amount 

bears interest of 5% p.a. and a management fee of 1% p.a., paid monthly starting from April 30 2006. 

Principal installments will be paid monthly starting from May 30, 2008 through April 30, 2018 with a 

guarantee of revenue binding and promissory notes. The undisbursed balance bears a standby fee of 1% p.a., 

falling due on the 30 th of each month, up to the credit termination. 

Agreement ECFS 181/07 – A credit line in the amount of R$75.8 million, as financing and R$10.1 

million, as an economic subsidy granted by Eletrobrás - Program instituted by Decree 4,873, of November 11, 

2003, coordinated by the Ministry of Mines and Energy and held by Eletrobrás. This agreement was executed 

on June 25, 2007, and in 2008 resources in the amount of R$43.0 million were released. The principal amount 

bears interest of 5% p.a. and management fee of 1% p.a., paid on a monthly basis starting from April 30, 2008. 

Principal installments will be paid monthly starting from April 30, 2010 through March 31, 2020 with a 

guarantee of revenue binding and promissory notes. The disbursed balance bears a standby fee of 1% p.a. 


Agreement ECFS 258/09 – A credit line in the amount of R$56.7 million, as financing and R$7,565,000 

as economic subsidy granted by Eletrobrás - Program instituted by Decree 4,873, of November 11, 2003, 

coordinated by the Ministry of Mines and Energy and held by Eletrobrás. This agreement was executed on 

August 28, 2009, and in 2009 resources in the amount of R$19.3 million were released. The principal amount 

bears interest of 5% p.a. and a management fee of 1% p.a., paid on a monthly basis, starting January 30, 2010. 

The principal installments will be paid monthly starting January 30, 2012 through December 30, 2021 with a 

guarantee of revenue binding and promissory notes. The undisbursed balance bears a standby fee of 1% p.a., 


Enerpeixe 

BNDES Financing 

We entered into a loan and financing agreement in the total amount of R$670 million, approved by 

BNDES, on November 10, 2003, and executed on May 21, 2004, with R$335,000,000 being provided directly 

by BNDES and R$335 million being provided through financial agents. 

64

Investco 

BNDES 

The main terms of the financing are as follows: 

• for the “A” and “C” loans, 12 equal and successive monthly installments, with the first due on March 

15, 2007 and the last on February 15, 2008; and for the “B” and “D” loans, 95 equal and successive 

monthly installments, with the first due on March 15, 2008 and the last on January 15, 2016; 

• for the “A” and “C” loans, variable interest readjusted each quarter based on the weighted average 

cost of all the fees and expenses incurred by BNDES to raise funds in foreign currency, plus a charge 

of 4.5% p.a., for the period in which the guarantee from the indirect controlling company Energias de 

Portugal is in force; and for the “B” and “D” loans, Long Term Interest Rate – TJLP index, plus a 

charge of 4.5% p.a., for the period in which the guarantee from the indirect controlling company 

Energias de Portugal is in force; which spreads may rise to 6% p.a. with effect from the date on 

which the guarantee from the direct controlling company EDP – Energias do Brasil S.A., replaces 

that from the indirect controlling company Energias de Portugal, which will only be able to happen 

from January 2008 onwards, and only at the request of both Enerpeixe and EDP – Energias do Brasil 

S.A.. These rates may be reduced to 5% p.a. if EDP – Energias do Brasil S.A. exhibits a 

capitalization ratio of at least 38% and if Enerpeixe presents a debt servicing coverage ratio of 1.3. 

The debt servicing coverage ratio is calculated based on the difference between cash generated by 

the activity from the cost of servicing the debt, based on information contained in the financial 

statements, with measurements being taken every six months, in June and December; 

• pledges: 

• of shares equal to 60% of the beneficiary’s capital stock, held by EDP – Energias do Brasil S.A. 

• of rights arising from the concession, including, among others: (a) the beneficiary’s receivables 

from the sale of the energy produced by the Peixe Angical hydroelectric power plant power 

plant to the following companies: EDP Bandeirante, EDP Escelsa, Enersul and CEMAT; (b) the 

guarantees contained in the power purchase agreements; 

• to keep in a financial reserve account an amount equal to at least three months’ worth of 

amortization installments, interest and charges, as well as, three months’ worth of payments of 

the operating and maintenance agreement, during the amortization phase; and 

• consisting of a letter of surety from Energias de Portugal, governed by Portuguese laws. 

As of March 31, 2011, we were in full compliance with this agreement. 

A financing agreement executed on September 21, 2000, for loans and financings up to an aggregate of 

R$180 million, at an interest rate of the TJLP plus 4% per year, payable on a quarterly basis from October 15, 

2000 to October 15, 2002 and, on a monthly basis from November 15, 2002 onwards. The loan principal is 

being amortized in 120 successive monthly installments, calculated in accordance with the a growing 

amortization system, starting on November 15, 2002 and with the last installment being due on October 15, 

2012. By way of guarantee, part of the common shares issued by Investco, a promissory note and assignment 

of rights arising out of contracts were given as security. 

A credit facility agreement executed with Banco Itaú, Bradesco, BBA Creditanstalt and Banco ABC in 

return for a pass-through of the loan contracted with the BNDES, with a guarantee from Investco's 

shareholders, on September 21, 2000, for the sum of R$120 million, at an interest rate of the TJLP plus 4% 

per year, payable on a quarterly basis during the initial 24-month grace period and, together with the loan 

principal, in 120 successive monthly installments, starting on November 15, 2002 and with the last 

installment being due on October 15, 2012. By way of guarantee, part of the common shares issued by 

Investco S.A., a promissory note and an assignment of rights resulting from contracts were given as security. 

65

Cumulative receivable shares 

Pursuant to article 8º of Investco’s bylaws, among other things, the “A”, “B” and “C” classes of preferred 

shares are entitled to receive a cumulative, fixed annual dividend, of 3% on the value of their respective share 

of the company’s capital stock. Due to this characteristic, the shares were classified as a debt instrument 

because they meet the definition of a financial liability, due to the fact that Investco does not have the right to 

send the cash or other financial asset to another entity, which is stated in paragraph 19 of CPC 39. The 

estimate of fair value was calculated taking into account the dividend payment conditions described above. 

The annual payment of dividends was taken into account up until 2033 (the end of the concession) and 

brought to present value using a discount rate of 8.70% p.a. 

CESA and Pantanal 

BNDES 

An agreement executed in February 2002, for the amount of R$55.4 million, allocated to the installation 

of three Small Hydroelectric Power Plants – PCHs, the Viçosa and São João plants located in the State of 

Espírito Santo and the Paraíso plant located in the State of Mato Grosso do Sul. Interest accrues at a rate of 

the UMBNDES plus 4.5% per year, with payments being due on a monthly basis, with final maturity of July 

16, 2012. The covenants agreed to are as follows: (i) assignment of the receivables arising from authorizations 

granted by ANEEL; and (ii) a pledge over the common shares of Pantanal. The balances of the financing in 

relation to the Paraíso PCH, together with the respective conditions established under the agreement, were 

transferred to Pantanal. 

An agreement executed in February 2002, for the amount of R$55.4 million, allocated to the installation 

of three Small Hydroelectric Power Plants – PCHs, the Viçosa and São João plants located in the State of 

Espírito Santo and the Paraíso plant located in the State of Mato Grosso do Sul. Interest accrues at a rate of 

the UMBNDES plus 4.5% per year, with payments being due on a monthly basis until June 15, 2012. The 

covenants agreed to are as follows: (i) assignment of the receivables arising from authorizations granted by 

ANEEL; and (ii) a pledge over the common shares, representing Energest's total stake in the Company. The 

balances of the financing in relation to the Paraíso PCH, together with the respective conditions established 

under the agreement, were transferred to Pantanal. 

An agreement executed on November 13, 2009, for a total amount of R$25.4 million. The first tranche 

was disbursed to Pantanal in the amount of R$4.9 million on April 22, 2010, while the second tranche was 

R$15.1 million on May 13, 2010. These amounts will be amortized over periods of 97 and 96 months, 

respectively, with the first installment of both tranches being due on June 15, 2010 and the last installment 

on May 15, 2018, with interest rates that vary from TJLP plus 1.92% to a fixed interest of 4.50%. 

Collateral under the agreement was given as cash deposits in amounts equal to 1.8 times the outstanding 

monthly installments. 

Porto do Pecém 

BNDES 

An agreement executed on July 2009 with the first tranche in the amount of R$700 million being 

disbursed on October 14, 2009. The second tranche in the amount of R$260 million was disbursed in July 

2010, and the third tranche of R$120 million in December 2010. The sums released made it possible to settle 

bridge loans in reais and to cover expenses for the project. The loan agreement contemplates loans and 

financings in the total amount of R$1.4 billion (excluding interest during construction), with a total term of 17 

years, and a grace period for payment of interest and loan principal until July 2012, followed by 14 years of 

amortization. The contracted cost is equal to 2.77% per year plus TJLP. During the construction stage, the 

interest will be capitalized. 

Interamerican Development Bank 

An agreement executed on July 2009 with the first tranche of the long term financing in the amount of 

US$260 million being released on October 30, 2009. The second tranche for the sum of US$50 million was 

66

eleased in August 2010. The total sum disbursed consists of US$117 million worth of the direct loan, the A 

Loan, and US$143 million worth of the indirect loan, the B Loan. The financing agreement with the IDB 

foresee a total sum of US$147 million in terms of the A Loan, and a total of US$180 million in terms of the B 

Loan, with a total term of 17 years in the case of A Loan and 13 years in the case of the B Loan, with a grace 

period for payment of interest and loan principal up to November 2012. The initial interest rate for the A Loan 

is one of Libor + 350 bps, while for the B Loan the comparable figure is Libor + 300 bps, with step-ups over 

the course of the loan period. The aforementioned long-term loan in US dollars was already hedged by means 

of foreign exchange as well as by interest rate swap (from Libor to fixed rate). The consortium responsible for 

the B Loan is made up of the Millenium BCP, Caixa Geral de Depósitos and Calyon banks. 

As of December 31, 2010, we were in breach of our covenant in the IDB loan agreement with respect to 

the execution of an agreement for wastewater treatment services of coal transport and coal handling. We 

obtained an extension of the requirement until May 31, 2011 and an agreement to close the contracts by the 

end of June. As of the date of this offering memorandum, we were in compliance with all other covenants 

with respect to this agreement. 

Derivative Transactions 

A hedge operation with Banco Citibank S.A. of NDFs (Non Deliverable Forwards), executed on October 

17, 2007, for the sum of US$406,736,000, with maturities from January 2009 to October 2012, with an initial 

contracted parity of R$/US$1.8138. Hedge operations together with Banco Citibank and BTG Pactual S.A., or 

BTG Pactual of NDF (Non Deliverable Forwards), were executed on June 30, 2009, for the amount of 

EUR26,059,929.27, with maturities from July 2009 to January 2012, with an initial contracted parity of 

EUR/US$1.4040. Taking into account settlements that have matured up through December 31, 2010, the 

notional amount outstanding at this base date is one of US$ 3,667,242. 

A hedge operation with HSBC and BTG Pactual of NDFs (Non Deliverable Forwards), executed on July 

1, 2009, for the sum of EUR10,134,416.94, with maturities from July 2009 to January 2012, with an initial 

contracted parity of EUR/R$2.7300. Taking into account settlements that have matured up through December 

31, 2010, the notional amount outstanding at this base date is one of US$1,014,692. 

A hedge operation with Citibank and BTG Pactual S.A. of NDFs (Non Deliverable Forwards), executed 

on June 30, 2009, for the sum of US$106,592,330.70, with maturities from July 2009 to January 2012, with 

an initial contracted parity of US$/R$1.9678. 

A hedge operation with Banco Citibank of NDFs (Non Deliverable Forwards), executed on June 30, 2009, 

for the sum of USD 56,162,599.70, with maturities from July 2009 to November 2011, with an initial 

contracted parity of USD/R$1.9678. Taking into account settlements that have matured up to December 31, 

2010, the notional amount outstanding at this base date is one of USD 28,650,392. 

A swap operation with Banco Citibank, contracted on October 16, 2007, for the sum of US$140,521,000, 

starting on April 2, 2012 with final maturity on October 1, 2024, where the Company pays the variation in 

U.S. Dollars plus 5.82% p.a. on the passive index edge and the Bank pays 100% of LIBOR on the active 

index edge. 

A swap operation with Banco Citibank, contracted on October 16, 2007, for the sum of US$186,479,000, 

starting on April 2, 2012 with final maturity on October 1, 2021, where the Company pays the variation in 

U.S. Dollars plus 5.79% p.a. on the passive index edge and the Bank pays 100% of LIBOR on the active 

index edge. 

A swap operation with Banco Citibank, to cover interest capitalized during the construction of the Pecém 

power plant in relation to the financing with the IDB, which was contracted on July 2, 2009, for the sum of 

US$1,249,288,739 (the sum regarding the cumulative balance foreseen for the 4 tranches of the IDB’s 

financing, with an exposure of roughly US$36,000,000), starting on November 16, 2009 with final maturity 

on November 16, 2011, where the Company pays the variation in the U.S. Dollars plus 2.085% p.a. on the 

passive edge and the Bank pays 100% of LIBOR on the active edge. 

67

Santo Antônio do Jari 

Banco do Brasil 

On May 13, 2011, we obtained a credit line with Banco do Brasil in the amount up to R$360 million, 

with a term of 30 months. This credit line is intended to finance our acquisition of ECE Participações S.A. 

and is also for the investment on the construction of the Santo Antônio do Jari hydroelectric power plant. No 

disbursements have been made yet. Financing is subject to the approval of the acquisition by ANEEL. 

Sensitivity Analysis 

For the following charts we considered interest rate scenarios and foreign currency scenarios and their 

respective impact on our results and the results of our subsidiaries, applicable exposure to exchange rate 

fluctuation, interest rates and other indexes, up to maturity of the transactions. The probable scenario was 

determined pursuant to our business plan and the business plans of our subsidiaries as approved by our 

management. The adopted premises take into consideration the macroeconomic information obtained from the 

Focus report issued by the Central Bank, as well as the outstanding balances as of March 31, 2011. Scenarios 

II and III represent amounts based on a 25% and 50% of deterioration, respectively and scenarios IV and V 

represent 25% and 50% appreciation, respectively. The sensitivity analysis presented below refers to balances 

of derivative transactions as of the date of the balance sheet. 

68 

Three-Month Period Ended March 31, 2011 

Scenario Scenario Scenario 

Financial Instruments Risk Probable II III IV Scenario V 

(in thousands of reais – consolidated) 

Financial assets 

Financial investments .............................................. CDI 38,759 48,449 58,139 29,069 19,380 

Related securities ..................................................... CDI 3,942 4,928 5,913 2,957 1,971 

Financial liabilities 

IDB ........................................................................... USD 432 540 648 324 216 

BNDES and CALC .................................................. TJLP 145,721 182,151 218,582 109,291 72,861 

Debentures ............................................................... CDI 206,989 258,736 310,484 155,242 103,495 

Debentures ............................................................... IGP-M 3,454 4,318 5,181 2,591 1,727 

Bank credit certificates ............................................ CDI 31,688 39,610 47,532 23,766 15,844 

Derivatives 

Swap – Active Leg – IDB........................................ USD 432 540 648 324 216 

Swap – Liabilities Leg – IDB .................................. CDI (256) (320) (384) (192) (128) 

Swap – Liabilities Leg – NDF ................................. USD 81,539 101,924 122,309 61,154 40,770 

Swap – Liabilities Leg – NDF ................................. EUR 197 246 296 148 99 

Swap – Liabilities Leg – (i) ..................................... Libor 31,669 39,586 47,504 23,752 15,835 

Swap – Liabilities Leg – (ii) .................................... Libor 4,203 5,254 6,305 3,152 2,102 

References 

CDI % ...................................................................... 10.0% 

TJLP % .................................................................... 6.0% 

IGP-M ...................................................................... 11.0% 

USD.......................................................................... R$1.6287 

EUR.......................................................................... R$2.3129 

Libor 3M .................................................................. 0.303% 

Libor 6M .................................................................. 0.460% 

These sensitivity analyses have been prepared in accordance with CVM Instruction No. 475/2008 and 

measure the impact of changes in market variables on each of our financial instruments and of the financial 

instruments of our subsidiaries. However, settlement of the operations to which these estimates relate can result 

in amounts different from estimated amounts due to inherent subjectivity in the preparation of such analyses.

Contractual Commitments 

The following table summarizes the maturity of relevant contractual commitments that have an impact on 

our liquidity as of March 31, 2011, including both loans and financings obligations and other relevant 

contractual commitments. 

69 

Less than 1 

year 

Payments Due by Period 

1 to 3 

years 3 to 5 years 

More than 

5 years 

Total 


Contractual commitments 

Real property guarantees ................................................................. 3,672.1 1,772.3 356.0 490.1 1,053.7 

Floating charges ............................................................................... 1,853.9 278.9 591.5 348.4 635.1 

Unsecured obligations ..................................................................... 429.1 122.0 237.1 50.5 19.5 

Total ................................................................................................ 5,955.1 2,173.1 1,184.6 889.0 1,708.4 

Quantitative and Qualitative Disclosure About Market Risk 

We are exposed to market risks arising from our normal business activities. These market risks 

principally involve the risk of possible changes in interest rates, exchange rates and credit risks. The main 

threats to the performance of our businesses are mapped, identified and measured based on methodologies 

and tools developed for each type of risk. This process is globally coordinated and supported by an intranet 

based tool called Risk Portal. The risks are mitigated or eliminated, through protection systems or 

contingency plans, descriptions of which can be found in the portal. All significant materials and reports 

associated with monitoring the risks are recorded in the portal and updated periodically as information 

becomes available. 

We have adopted a decentralized management model in which the Audit and Corporate Risk area oversees 

corporate risks, reporting directly to the CEO, while daily risks are monitored by their respective managers. 

In 2010, all corporate risks were reviewed and adjusted both in terms of definition (risk dictionary) and 

extent and probability, providing a consolidated and comparative view of each risk (risk map). In 2011, a new 

risk control project is being implemented to detail the risks identified in 2010 in order to gather sufficient 

information to determine risk indicators in the foreseeable future. This process is based on sustainability 

factors, in order to improve the instruments and maintain adherence to the main principles directing our 

operations. This process is also in compliance with our preventative principle, whereby the lack of full 

scientific knowledge must not be used as a reason to delay the implementation of efficient and economically 

feasible measures to avoid environmental damage or harm to human health. 

Credit Risk 

We are subject to our subsidiaries' credit risk, mainly at EDP Bandeirante and EDP Escelsa, which make 

up the bulk of our net revenues, resulting from billing receivables from consumers. In addition, we fully 

guarantee a BNDES financing for EDP Renováveis in the amount of R$227.7 million. Moreover, part of 

amounts receivable from electricity purchases, sales and trading that are made pursuant to Electric Energy 

Trade Chamber – CCCE rules, are subject to changes depending on the decisions of legal proceedings in 

progress. As of March 31, 2011, the amount related to such legal proceedings totaled R$168 million, R$14 

million of which corresponds to provisions related to transactions under CCEE, being R$10 million related to 

rationing programs from June 2001 to February 2002. 

Risk of Early Termination 

Some of our subsidiaries have debentures and loan and financial agreements with restrictive covenants, 

which usually require the maintenance of economic and financial indexes at certain levels (financial 

covenants) and other provisions. Non-compliance with these covenants may result in acceleration of our debt, 

adversely affecting our results of operations.

Risk of electricity shortage 

The Brazilian energy matrix is predominately hydro-based. Any long-lasting drought would decrease the 

volume of water in the reservoirs of HPPs, and result in a decrease in revenue due to a shortage of electricity, 

an increase in the purchase cost of electricity in the short-term market and an increase in network charges due 

to the dispatch of TPPs. In case of extreme crisis, as occurred in 2001 in Brazil, an electricity rationing 

program could be implemented, which would decrease our revenues. 

Interest Rate Risk 

Our consolidated indebtedness is subject to interest rate fluctuations that may increase our financing costs. 

As of March 31, 2011, our total consolidated indebtedness was of R$3,245.9 million. 48% of the total 

consolidated indebtedness is indexed to TJLP, 33% to CDI, 18% to pre-fixed rates and 1% to IGP-M. 

Therefore, the increase of TJLP, CDI or IGP-M may increase the financial charges of our indebtedness. 

Exchange Rate Risk 

As of March 31, 2011, 91.7% of our total indebtedness was real denominated, or R$2,976.8 million, and 

8.3% or R$269.1 million was denominated in foreign currency. Given that exchange rate fluctuations may 

increase our total indebtednesses. In addition, as of March 31, 2011, 99.7% of our dollar denominated 

indebtedness (R$268.4 million) was protected against exchange rate fluctuations, subject to SELIC rate. 

Therefore, the increase of such rates may increase the financial charges of our indebtedness. 

Electricity risk 

The supply of and demand for electric energy in the different regions of Brazil is measured by our 

Electric Energy Planning and Electric Energy Risk Management Boards, based on a five-year period. The 

Boards also analyze macro and microeconomic variables, and specific characteristics of each operational 

market. In regard to those cases in which the risks exceed the limits defined by our policy, we prepare a report 

on the potential effects of those risks and possible preventative measures to be analyzed by our executive 

board. This process is supported by software and a statistical model we have developed. The model includes 

the identification of risk, definition of parameters, evaluation and risk control in order to anticipate possible 

effects on distribution, generation and selling areas, assuring the supply of electric energy and minimizing 

possible losses. 

Regulatory risk 

Since distribution, transmission and generation activities are regulated and monitored by ANEEL, the 

main regulatory risks include tariff reviews and investments requested by the proper regulatory body. We are 

supported by the Regulatory Strategy area, which centralizes the relationship with ANEEL and monitors 

compliance with the obligations set forth in the concession agreements and in applicable legislation. 

Operational risk 

We are implementing the Crisis Management Plan which addresses a number of events, such as 

discontinued supply of electricity, labor accidents, strikes, natural disasters, information technology and 

telecommunications break down and pandemic scenarios. This is in addition to the communication plan and 

governance model for crisis management. The plan was prepared by our Security and Crisis Management 

Committee, created in 2008, in order to create an integrated approach to management of matters related to our 

global security. The Committee’s responsibilities comprise, among others, disclosure of the strategic security 

outlook, evaluation of the extent of security requirements, awareness of personnel and analysis of incidents. 

In regard to distribution, the System Operational Centers (COS) can be operated remotely from any unit, in 

order to minimize operational risk. Both EDP Bandeirante and EDP Escelsa implemented the Emergency Plan 

(PAE), including preventative fire measures, personal safety precautions and testing of machinery and 

equipment, as well as environmental protection. In the context of PAE, Enerpeixe S.A. simulated preventative 

fire measures in a transformer, for one of 20 scenarios classified as relevant. Energest S.A. has contracted 

services for the preparation of Contingency and Emergency Plans of the Hydroelectric Plants Suíça and 

Mascarenhas and Small Hydroelectric Plants (“PCHs”) São João and Rio Bonito. 

70

Financial risk 

Decisions on financial assets and liabilities are supported by the Financial Risk Management Policy, 

which establishes the conditions of and exposure limits to, market, liquidity and credit risk. The policy 

determines the concentration levels of investments in financial institutions in accordance with the bank 

rating and total value of investments held by EDP Group in Brazil, in order to maintain balance and 

minimize exposure to losses. Our Financial Risk Management Policy does not allow the trading of 

derivative agreements in addition to those amounts allocated to hedge foreign currency-denominated debts 

in order to prevent exchange exposure. As of March 31, 2011, the foreign currency-denominated 

commitments refer basically to two operations (financing for the construction of the thermoelectric plant 

Pecém in 2009 and the loan to BID contracted by EDP Bandeirante in 2004), representing 8.3% of our 

consolidated indebtedness, being 99.7% protected by an exchange hedge. This policy also dictates maturity 

dates and settlement of commitments, avoiding the concentration of commitments in the same period. On a 

weekly basis, the Executive Board receives the report on cash and financial position, including a 

description of operations in accordance with the risk policy and counterparties. In regard to the 

management of these risks, we use tools such as the Risk Control to register and monitor all positions, and 

VaR (Value at Risk) to quantify risk exposure. 

Market risk 

This risk considers delinquent customers, Settlement Price of Differences (PLD), non-technical losses 

and electric energy price variation. The mitigation of this risk includes preventative measures against losses, 

regularization of irregular supplies and performance of the distributors in regions with specific economic 

activities and characteristics. 

Environmental risk 

This includes non-compliance with environmental licenses and natural disasters. All undertakings and 

activities related to the generation and distribution of electric energy are performed in accordance with the 

Sustainability Policy of the EDP complex and the Integrated Environmental, Health and Security Policy 

which fulfills our commitment/obligation to environmental preservation. 

Parameters adopted to manage these risks 

• Define the Company’s functional currency (Real – BRL). 

• Determine the period to be monitored. This is extremely important because there is a direct relation 

between risk and availability of hedge instruments. In the event of long-term debts (over two years), 

there may be some difficulties in the structuring of the hedge operations at acceptable costs. On the 

other hand, the limitation to the evaluation period may represent the assumption of significant risks 

to long-term cash flows. Currently, our analyses consider the entire debt period. 

• Define the marked-to-market procedures. 

• Establish the procedures and parameters to calculate the risk (VaR, TH=10 business days, IC=95%); 

• Define the VaR limits. Currently, our analyses consider the maximum limit of 8.5%, with warning 

at 5.0%); 

• Establish the stress scenarios. Currently, our analyses consider the stress scenario adopted by 

BM&FBOVESPA, adjusted monthly; 

• Define the risk evaluation frequency (weekly); and 

• Perform annual evaluation of assets for insurance coverage. 

71

Financial instruments operated by the Company for sundry hedge purposes and related applications 

As of March 31, 2011, long-term loans and financing totaled R$2,090.5 million and short-term loans and 

financing totaled R$ 373 million. For the same period, debentures amounted to R$ 144.6 million in the shortterm 

and R$ 637.8 million in the long-term. 

Bandeirante Energia S.A. and Porto do Pécem Geração de Energia S.A., companies comprising our 

complex, carried out swap operations to mitigate the exchange risk. The consolidated hedged debt amounted 

to R$268.4 million or 99.7% of the Company’s foreign exchange-denominated debt, representing a net 

exposure of 0.3%. The subsidiary Porto do Pecém Geração de Energia S.A. contracted US$327 million with 

IDB, of which US$159.5 million (50% of the amount contracted, in accordance with the Company’s interest 

in Pecém) was disbursed. 

In the event of any change in the exchange rate, the liabilities would be changed; however, the cash flow 

is hedged against exchange variation. 

We do not have any operations, agreements, obligations or other types of commitments in nonconsolidated 

companies or other operations which could have a material effect, in the present or future, on our 

financial condition, revenues or expenses, operational income (loss), liquidity, capital expenses or capital 

resources, not recorded in the balance sheet. 

Organizational structure of risk management control 

We adopted and implemented the Risk Management Policy and our Audit and Corporate Risk area acts 

as a facilitator in the Risk Management process, supporting the identification and management of business 

risk origins, as well as the continuous monitoring of the compliance of business practices with current policies, 

laws and regulations and risk exposure level. 

This organization structure must provide, on an integrated basis, the monitoring of risk management in 

corporate areas and business units, assuring adherence of the processes and internal controls to national and 

international rules, adding value to businesses through the consolidation of policies and strategies aligned 

with the planning of our businesses. 

The Audit and Corporate Risk area reports directly to the CEO. 

We also adopted and implemented the Financial Risk Management Policy, which establishes guidelines 

for transactions and requires the diversification of transactions and counterparties. Under this policy, the 

nature and general position of financial risks are regularly monitored and managed by the CFO in order to 

evaluate financial results and effects on cash flow. The credit limits and hedge quality of counterparties are 

also reviewed periodically. 

In accordance with this policy, market risks are hedged when necessary to support corporate strategy or 

to maintain the financial flexibility level. 

Hedging strategy 

Once we have identified the risks to be mitigated, we will seek an instrument in the market which will 

better meet our hedging needs. Because all revenues are expressed in Brazilian reais, we have adopted the 

Financial Risk Management Policy of hedging to minimize any exposure to exchange rate variations. As of 

March 31, 2011, only 0.3% of our foreign exchange-denominated debt was not hedged. To decide which 

instrument to use, we consider (i) our liquidity condition; (ii) our credit condition in the financial market; and 

(iii) the market scenario. The hedge quotation, regardless of the instrument, is always determined based on the 

following: (i) credit analysis of the counterparty; (ii) existing covenants from financial agreements entered 

into by our Company and our subsidiaries; and (iii) financial institution spread. 

We use the following instruments: Swaps, Futures Dollar, NDFs (Non Deliverable Forwards), Calls, Puts, 

Collars and insurance policies. 

Off-Balance Sheet Arrangements 

We do not currently have any transactions involving off-balance sheet arrangements. 

72

General 

OVERVIEW OF THE BRAZILIAN ENERGY INDUSTRY 

Brazil’s electricity generation matrix is predominantly hydroelectric, in spite of the increased 

generation of thermal and biomass plants. According to ANEEL, on December 31, 2010, Brazil had a total 

of 2,337 projects in operation, and excluding energy imported from Argentina, Venezuela and Uruguay, but 

energy produced by Itaipu Binacional, Brazil’s total installed electricity generation capacity connected to 

the National Interconnected Electric System was approximately 113 GW. Of the total energy produced by 

the 2,337 projects in operation, approximately 88.8% is produced by HPPs, and 7.9% by TPPs. In addition, 

Brazil has 2 nuclear plants and 50 wind plants, accounting for 2.0% and 0.8% of its installed potential, 

respectively. 

By 2020, through the PDE 2011/2020 – Plano Decenal de Expansão de Energia, an increase of 

approximately 32,184 MW is expected in Brazil's hydroelectric energy generation potential. Auctions were 

held in 2007 and 2008 in respect of large structural projects in the Amazon Region (the HPPs Santo Antonio 

— 3,150 MW and Jirau — 3,300 MW, both located on the Madeira River), whose operations are expected to 

commence in 2013, while preparations are under way for auctions of a Belo Monte installation on the Xingu 

River that is expected to have a hydroelectric energy generation capacity of 11,233 MW. 

In accordance with PDE 2011/2020, the installed electricity generation capacity to be installed in 2020 

for PCHs with installed capacity between 1 and 30 MW is approximately 6,447 MW. By May 11, 2011, the 

current installed capacity of these plants is 3,537 MW, with another 683 MW under construction. 

Additionally, it is estimated that Brazil’s wind energy generation potential in 2020 will be 11,532 MW, 

of which only 929 MW are currently installed (at May 11, 2011). Over half of this potential is located in the 

Northeastern Region, complementing HPPs in the region, given the seasonal nature of the river discharge and 

wind systems. 

According to a ten-year expansion plan approved by the MME in 2008, installed electricity generation 

capacity is projected to increase to 144.8 GW by 2016, of which 115 GW (79.4%) is projected to be 

hydroelectric, 29.8 GW (20.6%) thermoelectric and 8.6 GW (6.6%) is projected to be imported through the 

National Interconnected Electric System. 

Until November, 2010, Eletrobrás owned 35% of the installed electricity generation capacity in Brazil. 

Through its subsidiaries, Eletrobrás is also responsible for 56% of the installed transmission capacity above 

230kV. In addition, it owns stakes in several companies controlled by Brazilian states involved in the 

generation, transmission and distribution of electricity, including among others, Companhia Hidrelétrica do 

São Francisco, or CHESF, Furnas and Eletronorte – Centrais Elétricas do Norte do Brasil S/A. 

The Brazilian Distribution System comprises 63 distributors, of which 23 are state-owned and 21 are 

private. The 10 largest distribution companies supply 63% of the electricity. 

Total electricity consumption in Brazil reached 419,016 GWh in 2010, of which 53.7% was consumed in 

the Southeastern Region. Industrial consumption totaled 183,743 GWh, representing 43.9% of total energy 

consumption. One characteristic of the Brazilian energy market is the presence of large electricity-intensive 

customers, mainly in the steel, metallurgy and paper and pulp sectors. Consumption by Brazilian households 

totaled 107,160 GWh, 25.6% of the total, representing per capita consumption of 153.9 kWh/month. 

73

The Electricity Business in Brazil 

The chart below sets forth Brazil’s installed capacity by state as of June 9, 2011: 

Source: ANEEL, June 9, 2011 

Brazil is a leading hydroelectric energy producer. Moreover, according to the 2010 Brazilian Energy 

Balance, or BEN 2010, year 2009, Brazil has developed only 33% of domestic hydroelectric potential, with a 

large portion of this energy potential found in the Amazon. Because of its lack of interconnection to the 

National Interconnected Electric System, the Northern Region has been called the Isolated System, covering 

45% of Brazil’s territory, but accounting for a mere 1.7% of the Brazil’s total demand. 

The Isolated System is mainly supplied by fuel oil and diesel oil thermal generation sources. In order to 

replace these thermal sources in the Isolated System through the installation of HPPs, ANEEL expects to 

receive incentives from the fund created through the CCC to finance these projects. 

MME data predict a slight alteration in Brazil’s energy matrix in the years ahead. The generation of 

domestic hydroelectricity energy and imported energy is expected to decrease, principally as a result of the 

increased generation of renewable energy. 

According to ONS data for 2010, the generation of hydraulic energy decreased by more than one percentage 

point. On an accumulated basis, the generation of hydraulic energy only increased to 2% in 2010, against an 

increase of 4.5% in 2009, principally as a result of the increased generation of thermoelectric energy. 

Brazilian Electricity Industry Segments 

Generation 

Brazil’s geographical characteristics, in particular, its immense territory and abundant water resources, 

have been determining factors for implementation of a predominantly hydroelectric power generation matrix. 

Current Brazilian Energy Projects 

Energy Source Status 

Associated Capacity 

(kW) 

122 Wind source projects .......................................................................................................... license granted 3,938,507 

18 Wind source projects ............................................................................................................ under construction 505,990 

49 Wind source projects ............................................................................................................ in operation 928,536 

1 Photovoltaic source project .................................................................................................... license granted 5,000 

5 Photovoltaic source project .................................................................................................... in operation 87 

235 Hydroelectric source projects ............................................................................................. license granted 17,166,380 

62 Hydroelectric source projects ............................................................................................... under construction 8,336,096 

908 Hydroelectric source projects ............................................................................................. in operation 81,152,147 

1 Tidal source project ................................................................................................................ license granted 50 

162 Thermoelectric source projects .......................................................................................... license granted 12,330,344 

36 Thermoelectric source projects ............................................................................................. under construction 4,830,383 

1,443 Thermoelectric source projects ....................................................................................... in operation 32,213,075 

Source: ANEEL, May 2011. 

Brazilian States 

74

Energy production plants operate pursuant to a concession, authorization or registration, based upon the 

type of plant, the install capacity of the project and the end-users of the energy produced. Based upon the type 

of end-user, production plants may be categorized under the following description: 

• Producers whose grant of concession specifies that the energy produced is intended for the public 

electricity service; 

• Independent producers, which bear the risk of selling the electricity to distribution companies or 

directly to free customers; and 

• Self-producers, which produce energy for their own consumption, with any surplus energy sold 

subject to authorization. 

Remuneration of the Generation Companies 

Unlike electricity distribution concessionaires, generation concessionaires generally lack provisions in 

their concession agreements for fixed tariffs or mechanisms for the adjustment of these tariffs. Prior to the 

New Electricity Law, generators would sell their energy through initial agreements, pursuant to which tariffs 

were set by ANEEL in accordance with the former Electricity Law, or through bilateral agreements where 

prices were freely negotiable between the parties. 

Following the enactment of the New Electricity Law, generation companies may only sell their electricity 

to distribution companies through public auctions conducted by ANEEL and the CCEE. Through a market 

specifically intended for free customers and trading agents (ambiente de contratação livre), or the ACL, 

energy generators may sell their energy to market placers, distribution companies whose market is less than 

500 GWh/year and Free Customers at freely negotiated prices. 

With respect to bilateral agreements executed and certified by ANEEL, prior to enactment of the New 

Electricity Law, prices negotiated between generators and distributors were usually influenced by the 

limitation on the passing on energy acquisition costs to the tariffs charged by distributors to end customers. 

Transfer of the energy acquired under these agreements is limited by an amount stipulated by ANEEL, or the 

normative amount. 

Limitations on transfer of energy acquisition costs by distributors influence the price of the energy 

offered by generators, as prices have to be less than the Annual Reference Amount in order to be competitive 

and obtain ANEEL approval. The generators also rely on the MRE, which assures them hydrologic variations 

and stable financing results. 

Incentive Program to Foster the Development of Alternative Sources of Electricity (PROINFA) 

In 2002, PROINFA was established by the Brazilian government to create incentives for the development 

of alternative electricity energy sources, including wind energy projects, PCHs and biomass projects. In 

accordance with PROINFA, Eletrobrás purchases the electricity generated by such alternative sources for a 

period of 20 years and transfers this energy to free customers and electricity distribution companies, which are 

responsible for including the costs of the program in their tariffs for all of their respective customers, with the 

exception of low-income customers. Projects intending to qualify for the benefits under PROINFA must be 

fully operational by December 31, 2010. BNDES has approved the opening of a specific credit facility for 

PROINFA-eligible projects, with financing available for up to 80% of the construction costs of plants 

included in the program. 

PROINFA aims to include renewable energy in the national energy matrix: 

• in three years, beginning in 2004, during which time 3,300 MW of renewable energy (1,100 MW of 

wind energy, 1,100 MW from biomass and 1,100 MW from PCHs) will become part of the national 

energy matrix; and 

• By 2020, generated power under the PROINFA is likely to represent at least 15% of the annual growth. 

75

In accordance with MRE’s presentation named “PROINFA: Renewable Energy Public Policies”. 

ANEEL Normative Resolution n. 127, dated December 6, 2004, establishes the procedures for pro-rating 

the cost of PROINFA, in addition to defining the respective energy quotas to be acquired by Free Customers 

and distributors, under the terms of Decree n. 5,025, dated March 30, 2004. 

Energy Reallocation Mechanism (MRE) 

The MRE operates through a 5-stage process which examines, firstly, the capacity of plants in the same 

region to meet the levels of assured energy and, thereafter, the sharing of any surplus energy generated among 

the different regions. These stages are detailed below: 

(i) verifying whether the total net energy produced within the MRE reaches the total Assured Energy 

levels of the members of the MRE as a whole; 

(ii) verifying whether any generator produced higher or lower volumes than their respective assured 

energy volume, as determined by the ONS; 

(iii) in the event any generators participating in the MRE have produced above their respective assured 

energy volume, the additional energy generated is allocated to other generators of the MRE who 

have not achieved their respective assured energy volume. This allocation of the additional energy 

generated, designated “optimized energy” takes place, firstly, between generators within the same 

region and thereafter, among different regions, so as to ensure that all MRE members achieve their 

respective assured energy volume; 

(iv) if all MRE members achieve their respective assured energy volume (or their contracted energy, in 

the case of those MRE members who have not contracted 100% of their assured energy), and if there 

is a balance of energy produced, the additional net regional generation, designated “secondary 

energy,” must be allocated among the generators in different regions. The energy will be traded at 

the CCEE price prevailing in the region where it has been generated; and 

(v) if all MRE members have not achieved their respective assured energy volume, MRE members must 

provide monetary compensation for the resulting energy shortage based on the liquidation price 

differential (preço de liquidação de diferenças), or PLD. 

Optimized Energy 

MRE member generators who produce energy in excess of their respective assured energy volume are 

compensated for the variable costs of operation and maintenance, or O&M costs, and the costs of royalty 

payments for water use. MRE generators who have not generated their respective assured energy volume 

must pay O&M costs and the royalties for water use to the generators who produced in excess of their 

respective assured energy volume during the same period. Currently, Energy Optimization Tariff (Tarifa de 

Energia de Otimização), paid by generators receiving allocations of energy from the MRE is R$8.99/MWh 

for all generators who supplied any excess energy they generated to the MRE (as stipulated in ANEEL 

Normative Resolution No. 1098/2010). 

Secondary Energy 

The total amount of MRE energy remaining following allocations to cover any generator shortfalls is 

referred to as secondary energy. Secondary energy is allocated according to the respective assured energy 

volume of all MRE members. 

Transmission 

The Brazilian transmission system, with a nominal voltage of 230 kV, is referred to as the Basic 

Transmission Network (Rede Básica de Transmissão). The role of the Basic Transmission Network is to 

ensure integration between remote energy sources and load centers represented by terminal sub-stations, so as 

to serve the distributors, or large clients directly. In addition, the Basic Transmission Network is fundamental 

76

for operating the energy system, as it establishes the electrical integration between different water basins or 

between different regions of Brazil, enabling constant interchanges of energy with the aim of optimizing the 

operating costs of the generation matrix (operating as a complement to thermal energy), by replacing highcost 

thermal generation with hydraulic generation. 

The Basic Transmission Network permits free access on the part of interested user agents, while its tariff, 

known as the TUST (Tarifa de Uso do Sistema de Transmissão), is fixed at differentiated values, depending 

on the point of the system accessed by the interested party. 

The tariff calculation is published annually by the regulator and the amounts are comprised of two 

components. The first component takes into account the characteristics of the location and serves, in certain 

respects, as an advice to users, from an economic standpoint, to access the system at points with a lower 

impact on transmissions costs. The second component, which is added to the first, serves, in certain respects, 

as a stamp and is a portion of the tariff adjustment intended to ensure that the Transmission Agents recover 

the permitted annual revenue (receita anual permitida) defined by ANEEL. 

Energy Distribution and Transmission Tariffs 

The tariffs relating to the distribution and transmission systems are (i) the tariff charged for using the 

exclusive local distribution network of each distributor, or the TUSD, and (ii) the TUST, which is defined as 

the tariff charged for using the Basic Network and other transmission installations: 

(i) the TUSD is paid by generators, Free Customers and special customers for use of the distribution 

system of the concessionaire to which they are connected. The amount payable is calculated by 

multiplying the quantity of electricity contracted, by the tariff established by ANEEL; and 

(ii) the TUST is paid by distributors, generators, Free Customers and special customers for use of the 

Basic Network, and adjusted annually for inflation and for annual revenues of the transmission 

concessionaires determined by ANEEL. 

In order to use the transmission and/or distribution installations and to pay the TUST and/or TUSD, the 

user must connect to these transmission and/or distribution systems, for which they must execute an 

Agreement for Connecting to the Transmission System (Contrato de Conexão ao Sistema de Transmissão), 

with the transmission concessionaires who own these installations and/or an Agreement for Connecting to the 

Distribution System (Contrato de Conexão ao Sistema de Distribuição), with the local distributors, as the case 

may be. Connection fees are freely negotiable between the parties, and should cover the costs incurred with 

the project, the construction, equipment, measuring, operation and maintenance of the user’s connection point. 

The Electricity Distribution Segment in Brazil 

Until the middle of the 1990s, the electricity distribution sector in Brazil was virtually entirely carried 

out by state-owned companies. Currently, after several bidding processes, the sector is substantially 

fragmented, operating with 63 distributors throughout the country, ten of which accounted for 63% of the 

energy sold in 2008. 

Currently, distributors can only offer services to their captive clients within their respective concession 

areas, subject to conditions and tariffs regulated by ANEEL. Therefore, should a distributor decide to apply a 

discount to the amount of the regulated tariff, the principle of isonomy must be taken into account. 

In 2010, the electricity distribution segment in Brazil required 419,016 GWh, of which 25.6% was 

distributed to residential clients, 43.9% to industrial clients, 16.5% to commercial clients and 14.1% to other 

clients. The total number of residential clients at December 31, 2010 was approximately 58.0 million. 

In the first quarter of 2011, the electricity distribution segment in Brazil required 107,231 GWh, of which 

26.8% was distributed to residential clients, 41.4% to industrial clients, 17.7% to commercial clients and 

14.1% to other clients. 

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Distribution is undertaken by 63 concessionaires, 23 of whom are public companies (37%), 21 privatized 

companies (33%), 4 municipal companies (6%), 8 state companies (12%) and 7 federal companies (11%), as 

per the map and chart below: 

Electricity Distribution Tariffs 

The average supply tariff in Brazil tends to be of a much lower value when compared to other countries, 

given that Brazil has a predominantly hydroelectric energy generation matrix. 

Tariff control mechanisms have historically been a means of encouraging the substitution of other energy 

sources with hydroelectricity. However, high interest rates and the use of tariffs as a mechanism for 

controlling inflation, which began in the 1980s, reduced the incentive to invest in generation, thereby 

increasing the possibility of rationing. 

Following the creation of ANEEL in 1997, the agency began to regulate the tariffs established by the 

distributors, through the use of concession agreements which, among other things, established the tariffs to be 

applied and the adjustment/review criteria. Within this regulatory environment, tariffs are differentiated in 

accordance with the type of customer (consumption class) and the supply voltage (group/sub-group). 

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The distribution tariff comprises the costs of purchasing the energy, distribution, transmission, taxes and 

industry and social surtaxes. Moreover, the distributor acts an agent, collecting and transferring these costs to 

all sectors. 

Tariff Adjustments and Revisions 

Electricity tariffs for the use of the distribution network and the supply of electricity are subject to an 

annual tariff adjustment, a periodic tariff revision every three to four years, depending on the concession 

agreement and, a special tariff review, each conducted by ANEEL. 

ANEEL divides a distributor’s revenue into two portions corresponding to the following costs: (i) costs 

not manageable by the distributor, known as Parcel A costs; and (ii) costs manageable by the distributor, 

known as Parcel B costs. 

Parcel A costs include the following items: 

(i) acquisition cost of electricity obtained in ANEEL-sponsored public auctions; 

(ii) cost of acquiring electricity from Itaipu Binacional; 

(iii) cost of acquiring electricity under bilateral agreements; 

(iv) costs in respect of charges for connection to and use of the transmission and distribution systems; 

and 

(v) industry surtaxes: CCC, CDE, RGR, TFSEE, PROINFA, ESS, ONS, R&D, CFURH, FEE and EER. 

The Passing on through tariffs of electricity acquisition costs under supply agreements entered into prior 

to the New Electricity Law is subject to a maximum limit based on the normative amount established by 

ANEEL for each energy source, such as hydroelectric energy, thermoelectric energy or alternative energy 

sources. The normative amount is adjusted annually to reflect cost increases incurred by the generators. This 

adjustment takes into account: (i) inflation; (ii) foreign currency costs incurred; and (iii) fuel costs (such as 

natural gas). Foreign currency costs incurred cannot exceed 25% of the generator’s costs. 

Parcel B costs are those costs that may be controlled by concessionaires, such as capital costs and 

operating and maintenance costs, of which operating costs are the most relevant. At each adjustment, Parcel B 

costs are calculated by subtracting from Parcel A costs the total revenue received during the reference period, 

which is defined as the period elapsed between the last adjustment and that being processed; that is, Parcel B 

costs are calculated indirectly. 

The annual tariff adjustment is based on a parametric formula defined in the concession agreement, 

according to which Parcel A costs are typically passed on in full through tariffs. Parcel B costs, in turn, are 

readjusted based upon the IGP-M inflation index, further adjusted for an element called the Factor X (a 

component of the calculation that induces distributors to strive for operational efficiency). The result is the 

IRT. 

ANEEL conducts periodic tariff revisions every three or four years, depending on the agreement with the 

concessionaire. ANEEL conducts reviews taking into account: (i) modifications to the concessionaire’s cost 

structure and market, (ii) tariff levels observed at similar companies at the national and international level and 

(iii) efficiency and tariff moderation. Therefore, in the periodic tariff revision processes implemented by 

ANEEL, all Portion B costs are recalculated so as to ensure that Portion B is sufficient for: (1) covering 

efficient operating costs; (2) adequately remunerating prudent investments considered essential for the subject 

services of the each distributor’s agreement; and (iii) determining the Factor X. The Factor X adjusts the 

IGP-M used in subsequent annual tariff adjustments and is based upon two components: (i) expected 

productivity gains; and (ii) the IPCA on the labor portion of the operating costs. As a result, on concluding 

each tariff adjustment, the application of the Factor X means that distributors share their productivity gains 

with the end customers. 

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In 2006, ANEEL began perfecting the methodologies employed during the first periodic review cycle 

of electricity distribution concessionaires through public hearing 008/2006. This hearing culminated in 

Resolution No. 234/2006, which established the general concepts, the applicable methodologies and the 

initial procedures for undertaking the second periodic tariff revision of public service electricity 

distribution concessionaires. 

On December 20, 2007, ANEEL initiated public hearing 052/2007, in order to obtain additional inputs 

and information for enhancing ANEEL Normative Resolution No. 234/2006. The topics covered included the 

reference company, the Factor X, technical losses, non technical losses, irrecoverable revenues and the BRR. 

The public audience ended on November 25, 2008, approving ANEEL Normative Resolution No. 338/2008, 

which altered the general concepts, applicable methodologies and initial procedures for undertaking the 

second periodic tariff revision of the public service electricity distribution concessionaires. 

In addition, distributors are entitled to a special tariff review, on a case-by-case basis, so as to ensure the 

financial equilibrium of their concession agreements and compensation for unforeseen costs that significantly 

modify their cost structure. 

Electricity trading 

Trading agents that do not have electrical systems are authorized to act exclusively on the free market to 

purchase and sell electricity. 

Trading agents may act: (i) as a trader — selling and purchasing electricity on their own behalf, in free 

and organized markets, and assuming any market risks; (ii) as a broker — intermediating contracts between 

purchasers and sellers, utilizing their market knowledge to generate new business; and (iii) as a consultant — 

prospecting and conducting feasibility studies, as well as providing services in the CCEE free market. 

Electricity may only be traded with a distribution company through participation in an adjustment auction 

(leilão de ajuste), by bidding for contracts with a duration of at most two years and under which electricity 

delivery begins within no more than two years. Except for the sale of electricity through adjustment auctions, 

electricity prices are freely established. 

Free Customer 

According to the Electricity Law, a potentially free customer has a contracted demand of at least 3 MW, 

at a voltage level equal to or higher than 69 kV, or at any other voltage level, provided that supply has begun 

after July 7, 1995, and may choose among: (i) continuing to be served by the local distribution company; (ii) 

purchasing electricity from an independent producer or from self-producers with surplus (upon authorization 

of ANEEL); or (iii) purchasing electricity through a trader. 

Brazilian legislation further provides for the existence of “special” customers, which are those with a 

contracted demand between 500 kW and 3 MW, at any voltage, and which may opt to purchase electricity 

from alternative sources (wind, biomass, PCHs). Special customers receive an incentive for consumption of 

electricity through a discount in the TUSD that may vary from 50% to 100%. 

Brazilian legislation established certain conditions and minimum consumption and voltage limits to 

define which customers would be categorized as free customers. These limits have been reduced to its current 

minimum of 3 MW, thereby increasing the number of free customers. 

The Electricity Law has provided suppliers and their respective free customers no-cost access to the 

distribution and transmission systems of public utility concessionaires and permit holders, upon 

reimbursement of the fees for use of the electricity network and connection costs. 

Regulatory Environment 

In 1998, the Brazilian government enacted the Electricity Law, which, among other provisions, 

established the: (i) creation of a self-regulating entity responsible for operating the wholesale energy market 

and for determining the prices of electricity in the spot market, which was replaced by CCEE in 2004; (ii) 

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equirement that distribution and generation companies enter into initial contracts, usually take-or-pay 

commitments, with prices and quantities approved by ANEEL (the primary purpose of the Initial Contracts 

was to make sure that distribution companies had access to a stable supply of electricity at prices ensuring a 

fixed rate of return to the generation companies during the period of transition to the new model (2002-2005)); 

(iii) creation of ONS, the entity in charge of coordinating and controlling the generation and transmission of 

electricity in the National Interconnected Electric System; and (iv) segregation of the generation, transmission, 

distribution and trading activities (deverticalization). 

In 2000, Decree No. 3,371, of February 24, instituted the Thermoelectricity Priority Program (Programa 

Prioritário de Termeletricidade), or PPT, in order to diversify the Brazilian energy matrix and reduce 

dependence on HPPs. The benefits offered to the TPPs pursuant to the PPT included (i) guaranteed supply of 

gas during 20 years, (ii) guaranteed passing on of respective acquisition costs by distribution companies, until 

the limit of the normative value, as per ANEEL regulations, and (iii) guaranteed access to BNDES special 

funding program for the Brazilian electricity industry. Still in 2000, Law No. 9.991, of July 24, 2000, set forth 

obligations to be complied with by generation, transmission and distribution utility concessionaires, as a result 

of which they had to annually apply a certain percentage of their respective net operating revenues in R&D 

and the Energy Efficiency Program (Programa de Eficiência Energética), or PEE. 

In 2001, as a result of an energy crisis that lasted until February 2002, the Brazilian government 

implemented the following measures: (i) institution of an electricity rationing program in the Southeastern, 

Mid-Western and Northeastern regions of Brazil, which were most affected by the shortage of energy; and (ii) 

creation of the Energy Crisis Management Chamber (Câmara de Gestão da Crise de Energia Elétrica), or 

GCE, which approved a series of emergency measures and established targets for the reduction of electricity 

consumption for residential, commercial and industrial customers located in the regions affected by the 

rationing program, by introducing special tariff systems that stimulated such reduction. A reduction target of 

20% was established for electricity consumption by residential and industrial consumers. These measures 

were suspended in March 2002, following an increase in supply (due to a significant increase in reservoir 

levels) and a moderate decrease in demand. 

In April 2002, the Brazilian government enacted new measures, such as the establishment of the 

Extraordinary Tariff Adjustment (Recomposição Tarifária Extraordinária), or RTE, with a view to 

reimbursing distribution companies for losses incurred during the electricity rationing program, as well as the 

creation of PROINFA, with a view to fostering development of alternative generation sources. 

The Brazilian government further established rules for universal access to electricity distribution services 

that required compliance with (1) all supply orders, including load increase, without undue hardship to the 

requesting customer and (2) applicable regulations. ANEEL established the general conditions for preparation 

of the universal access plans, providing for targets to be met by 2014 and fines in the event of noncompliance 

by distribution companies. The funds from these fines have been prioritized for development of universal 

access to electricity in accordance with ANEEL regulations. 

Finally, in March 2004, the Brazilian government enacted the New Electric Power Sector Law, in an 

attempt to restructure the Brazilian electricity industry, its primary goal being to provide customers with a 

safe supply of electricity at affordable tariffs. 

New Electricity Law 

Beginning in 1995, the Brazilian government has adopted several measures to reformulate the Brazilian 

electricity industry. On March 15, 2004, the New Electric Power Sector Law was enacted for the purpose of 

ensuring customers a safe supply of electricity at a fair tariff, by encouraging the construction and 

maintenance of the country’s generation capacity by public and private companies. The New Electric Power 

Sector Law was implemented by Decree No. 5,163, enacted on July 30, 2004. 

In general terms, the Brazilian electricity industry model was conceived to address concerns regarding the 

establishment of a stable regulatory framework so as to attract investments in the expansion of the generation 

system, ensure reliable supply levels and provide affordable tariffs resulting from competitive biddings. 

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The New Electricity Law requires agents of regulated consumption (distribution companies) to 

estimate their needs over a relatively long horizon of five years. These estimates would indicate the need 

for construction of plants in advance, thus allowing time for the bidding processes to be carried out and for 

the projects to be developed, with the winning bid awarded to the agent offering the lowest tariff. The 

generation agents are granted, in addition to the right to commercially operate the project to be developed, 

long-term contracts (of at least fifteen years), known as Contracts for the Trading of Electricity in the 

Regulated Market (Contratos de Comercialização de Energia Elétrica no Ambiente Regulado), or CCEARs, 

entered into with the distribution agents, and which may be used as a guarantee in order to obtain funds to 

finance the development. 

In the free market, where generation agents, traders and large customers trade electricity, the terms of 

the contracts, contracted volumes, initial date for delivery of electricity and mainly the price are freely 

negotiated between the applicable parties. 

A spot market also exists, in which differences between quantities actually generated/consumed and 

quantities contracted are accounted for and settled. The settlement price is known as the PLD, and is the result 

of a chain of simulation models, with stochastic representation of the natural rainfall in the reservoirs of the 

HPPs and taking into consideration the thermoelectric dispatch per economic merit as a function of its 

variable operating cost. 

The New Electricity Law regulates and establishes: (i) auction procedures; (ii) the form of the power 

purchase agreements; and (iii) the method for passing on of costs to final customers. 

The principal provisions of the New Electricity Law establish: 

(i) the creation of two markets for the trading of electricity: the ACR, where participants include captive 

customers represented by electricity distribution companies, and the ACL; 

(ii) restrictions on certain activities of distribution companies, thereby requiring that they focus on 

their core electricity distribution business and promoting more efficient and reliable service to 

captive customers; 

(iii) the elimination of self-dealing, thereby encouraging distribution companies to purchase electricity at 

the lowest prices available, rather than from related parties; and 

(iv) compliance with contracts entered into before the enactment of the New Electricity Law, thereby 

providing additional security to such contracts. 

The New Electricity Law also excluded Eletrobrás and its subsidiaries from the National Privatization 

Program (Programa Nacional de Desestatização), a program originally created by the Brazilian government 

in 1990 in order to foster the process of privatization of government-owned companies. 

In addition, according to the model guidelines, all agents purchasing electricity are to contract their full 

electricity demand. Agents selling electricity, in turn, are to present the corresponding verification of the 

energy they intend to trade through contracts. Agents failing to comply with this requirement are subject to 

the penalties imposed by ANEEL. 

Beginning in 2005, all electricity generation, distribution and trading agents, independent producers or 

free and special customers are required to notify MME by August 1 of each year of their market or load 

estimates, as the case may be, for each of the next five years. Additionally, each distribution agent should 

notify MME up to sixty days before each electricity auction, of the volume of electricity to be contracted at 

the auctions. Based on this information, MME must establish the total volume of electricity to be contracted 

on the ACR and the generation projects that may participate in the auctions. Distribution companies must also 

specify the contracts through which they intend to meet the demands of potentially free customers. 

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Electricity Trading Markets 

Pursuant to the New Electricity Law, electricity purchase and sale transactions are carried out in two 

distinct trading markets, the ACR and the ACL. 

Electricity distribution companies comply with their obligations to serve their aggregate market primarily 

through public auctions. In addition to the regulated auctions, distribution companies may purchase electricity 

from distributed generation, which may be contracted through public calls (chamadas públicas) held buy the 

distribution company itself, in which the maximum volume of electricity that may be purchased is limited to 

10% of the captive market served. 

With respect to existing electricity contracts, electricity generated by Itaipu is still sold by Eletrobrás to 

distribution concessionaires operating in the South/Southeast/Midwest Interconnected Electric System, 

although no specific contract has been entered into by these concessionaires. The price at which Itaipu 

electricity is traded is denominated in U.S. dollars and established pursuant to an agreement entered into 

between Brazil and Paraguay. As such, the price of Itaipu electricity increases or decreases in accordance with 

the variation of the exchange rate between the Brazilian real and the U.S. dollar. Changes in the sales price of 

Itaipu electricity are subject, however, to the Parcel A cost recovery mechanism. 

Regulated Market (ACR) 

The ACR is intended for the trading of electricity from generation agents, importers or traders to 

distribution companies, which purchase electricity to meet captive customers load. Pursuant to Law No. 

10,848/04, electricity may be acquired in the ACR through: 

(i) CCEARs; 

(ii) Distributed generation, through public calls, limited to 10% of the distribution company load; 

(iii) Contracts under PROINFA; 

(iv) Itaipu contracts; and 

(v) Contracts entered into before enactment of Law No. 10,848/04. 

It is incumbent on the distribution companies to estimate the volume of electricity to be contracted within 

an auction, where they are required to contract 100% of their needs. Any additional volume is to be met by 

energy from new developments, contracted 3 or 5 years in advance in A-3 or A-5 auctions, respectively. 

Noncompliance with the total supply in their distribution markets may lead to severe penalties. 

The public auction program began in the end of 2004 and does not directly replace contracts already 

entered into between production and distribution companies. 

The purchase of electricity through New Electricity Auctions gives rise to two distinct types of bilateral 

contracts: (i) energy contracts; and (ii) capacity contracts. 

Under energy contracts, the generation unit agrees to supply a certain volume of electricity and assumes 

the risk that hydrological conditions and low reservoir levels, among others, may reduce the electricity 

allocated, in which events the generation company is required to purchase electricity in the short-term market 

to meet the volume contracted. Under capacity contracts, the generation unit agrees to make a specific 

capacity available to the regulated market. The generation unit’s revenue is thus guaranteed, any hydrological 

risk being borne by the distribution companies. Together, these contracts constitute the CCEARs. Pursuant to 

the New Electricity Law, electricity distribution companies must pass on to their respective customers costs 

relating to electricity purchased at public auctions, as well as any applicable taxes and charges. 

With respect to new concessions, recently enacted regulations require that competitive biddings for 

new HPPs include, among others provisions, the minimum percentage of electricity to be supplied to the 

regulated market. 

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Free Market (ACL) 

In the free market, electricity is traded between production concessionaires, independent producers, selfproducers, 

trading agents and free customers. In this market, contractual conditions such as price, term and 

amount traded are freely negotiated between the parties pursuant to Decree No. 5,163/04). The regulated 

market also comprises all bilateral contracts existing between generation and distribution companies until 

their termination date, after which they are to be governed by the New Electricity Law. 

Potentially free customers, with contracted capacity exceeding 3 MW, may opt to change their electricity 

suppliers, though contracts with distribution companies may only be terminated following notice by a 

distribution company at least 15 days before it is required to disclose its electricity needs for the next auction. 

Any customer opting for the free system may only return to the regulated system upon five years prior notice 

to its distribution company, though the distribution company may reduce this term at its own discretion. 

Customers with contracted demand between 500 kW and 3 MW are also eligible to participate in the free 

market, but may only purchase electricity from (i) PCHs with capacity ranging between 1,000 kW and 30,000 

kW, (ii) generation companies with capacity limited to 1,000 kW, or (iii) alternative electricity generation 

companies with capacity below 30,000 kW inserted in the system, the so-called special customers. 

Special customers may cancel their contract with a local distribution company upon 180-days’ prior notice 

for indefinite term contracts. For definite term contracts, customers must comply with the contract or, in the 

event of long-term contracts, may cancel these contracts upon 36-months’ prior notice. Special customers may 

return to the regulated market upon 180-days’ prior notice to their regional distribution company. 

Unlike private generation companies, government-owned generation companies may sell electricity to 

Free Customers through auctions. 

Auctions in the Regulated Market (ACR) 

Auctions for the purchase of electricity for new generation projects underway are held: (i) five years 

before the date of initial delivery of electricity (referred to as “A-5” auctions); and (ii) three years before the 

date of starting delivery (referred to as “A-3” auctions). Auctions of energy from existing generation plants 

take place (a) in the year prior to starting of delivery of energy (referred to as “A-1” auctions ) and (b) 

approximately four months prior to the delivery date (referred to as “market adjustments”). Official 

announcements of auctions are drafted by ANEEL, in compliance with guidelines set by the MME, including 

the use of the lowest tariff criterion to determine the winner of the auction. 

Each generation company bidding in an auction executes an electricity purchase and sale agreement with 

each distribution company, in proportion to their estimated needs. The only exception to this rule is the 

market adjustment auction in which contracts are specifically between seller and distribution agents. CCEARs 

arising from “A-5” and “A-3” auctions are valid for 15 to 30 years, whereas those from “A-1” auctions are for 

5 to 15 years. Contracts derived from market adjustment auctions are for two years at most. The total amount 

of energy contracted in these market adjustment auctions may not exceed 1.0% of the total contracted by any 

one distribution company, except for auctions held in 2008 and 2009, for which the total amount of contracted 

energy may not exceed 5.0%. 

In relation to CCEARs derived from the auction of energy from existing generation plants, a permanent 

reduction of the quantity of electricity purchased may be permanently reduced through: (i) compensation for 

the exit of potentially free customers from the ACR; (ii) at the discretion of the distribution company, 

reduction of up to 4.0% per annum of the annual amount contracted in order to adapt to market deviations 

from demand projections, as of the second year subsequent to the declaration that gave rise to the 

corresponding purchase; and (iii) adaptation to the amounts specified in the electricity purchase contracts 

signed prior to March 17, 2004. 

As a general rule, contract durations under auctions are as follows: (i) from 15 to 30 years commencing 

from the initial supply date for new generation projects; (ii) from 5 to 15 years commencing from the year 

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subsequent to the auction for existing generating plants; and (iii) from 10 to 30 years commencing from the 

initial supply date for alternative energy generation projects. 

Upon concluding an auction, generation and distribution companies execute a CCEAR, in which the 

parties agree to the price and quantity of energy contracted in the auction. The CCEAR states that the price 

will be adjusted annually based on the IPCA price indicator. Distribution companies offer financial guarantees 

for generation companies (mainly distribution service receivables) to guarantee their payment obligations 

under the CCEAR. 

Passing on of electricity acquisition costs 

Brazilian regulation also introduced a mechanism, known as the Annual Reference Value, to limit the 

amount of costs that may be passed on to customers. The Annual Reference Value is the weighted average 

electricity price for “A-5” and “A-3” auctions calculated for all distribution companies. 

The Annual Reference Value provides an incentive for distribution companies to contract their expected 

electricity requirements at the lowest price in “A-5” and “A-3” auctions. Distribution companies that pay less 

than the Annual Reference Value for electricity at these auctions may pass on the full Annual Reference 

Value to customers for three years. The Annual Reference Value also limits the passing on of electricity 

acquisition costs under energy purchase contracts for new generation projects. After four years, the electricity 

acquisition costs of these projects may be passed on in full. 

The regulations set the following limits on distribution companies passing on costs to customers: 

(i) costs in excess of 103.0% of actual demand may not be passed on; 

(ii) costs of electricity purchases made at an “A-3” auction may, on a limited basis, be passed on if the volume 

of electricity purchased exceeds 2.0% of the demand for electricity purchased at “A-5” auctions; 

(iii) costs of acquisition of new electricity generation projects may, on a limited basis, be passed on 

if the volume contracted under new contracts related to existing generation plants is less than 

96.0% of the volume of electricity stipulated in the expiring contract; and 

(iv) costs related to purchases of electricity from existing plants in the “A-1” auction may be fully 

passed on, though limited to 1.0% of load recorded in the year prior to notice by the distribution 

company to the MME of estimated electricity demand. If electricity acquired in an “A-1” auction 

exceeds the load of 1.0%, the pass-through of costs will be limited to 70.0% of the average cost of 

acquisition of existing generation. 

Electric power tariffs 

The tariffs used by EDP’s distributors in charging for their electric power distribution services are 

strictly in line with those published in the resolutions of ANEEL, whose responsibility it is to establish 

such tariffs in accordance with Law 9427, dated December 26, 1996. Adjustment and tariff revision 

processes are as provided for in the concession agreements signed by concessionaires with the Brazilian 

government, in accordance with the country’s legal dictates. 

The current tariff regime for electric power distribution services is that of the “price of the service” 

(substituting the “cost of the service” regime, which was previously in force), as established by Law 8987, 

dated February 13, 1995: “Article 9. The tariff for the public service provided will be fixed by the price of the 

winning proposal in the public tender and preserved by the revision rules provided for in this Law, in the 

invitation to bid and in the agreement”. 

The adjustment and tariff revision processes of all electric power distribution concessionaires are carried 

out in accordance with the methodology prepared and published by ANEEL and subject to prior public 

scrutiny. 

85

Tariff Revision and Adjustments 

While the role of the tariff adjustment is to replace any inflationary losses and to share with the consumer 

the Company’s previous year’s efficiency gains, the periodic tariff revision is a mechanism that ultimately 

aims to maintain the economic and financial balance of the agreement, in accordance with what is established 

in the Law of Concessions. The periodic tariff revision process involves calculating the tariff repositioning 

and defining the X Factor. 

The main objective of tariff repositioning is to analyze what are known as Parcels A and B. Parcel A 

comprises non-manageable costs (energy purchase, energy transportation and sector charges) and Parcel 

B comprises the efficient operating costs and capital costs (return on investment and regulatory 

reintegration quota). 

Therefore, the composition of the values of Parcels A and B, as well as other revenues (not exclusively 

arising from tariffs, but that bear a relationship with the service provided or with goods used in providing 

this service) compared with the amount of the revenue received in the previous year, gives the tariff 

repositioning index. 

The treatment of Parcel A is similar to that adopted in the annual adjustments. Based on market 

projections, the volume of energy required by the concessionaire to meet the demands of its captive market is 

checked. The cost of buying the energy required is determined by the purchase agreements entered into by the 

concessionaire, up to the limit of the amount that may be passed on, as permitted by the Regulator. Sector 

charges, such as CCC, CDE, RGR, the Supervision Fee and ONS, as well as costs associated with 

connectivity, transportation and the basic grid are added to the cost of the electric power. 

Treatment of Parcel B in the periodic tariff review is very different from the annual adjustments. In 

annual adjustments the amount of Parcel B, obtained from the parametric formula found in the concession 

agreement, is adjusted by the application of the IGPM for the previous 12 months, less the X Factor fixed on 

the date of the tariff revision. In the periodic tariff review the Regulator checks the volume of resources 

necessary for the concessionaire to cover its operating costs and defines the remuneration level and capital 

recovery permitted. 

In order to define the operating costs, in the 1st and 2nd tariff review cycles ANEEL used the concept of 

the Reference Company (“RC”). The Reference Company concept is associated with three basic assumptions: 

(i) average management efficiency level; (ii) consistency between the regulatory treatment given to operating 

costs and to the evaluation and remuneration of the assets; and (iii) specific conditions of each area of the 

concession. 

The tariff review methodology, including the way of defining efficient operating costs, is being improved 

upon by Aneel, within the scope of Public Hearing 40/2010. The results of the public hearing are still not 

known, but the philosophy for defining operating costs will continue the same: it is possible to earn superior 

returns if the actual administration is more efficient than that determined by Aneel. However, if the real costs 

of the concessionaire are higher than those fixed by Aneel, this will be an incentive for the concessionaire to 

adjust his costs to the regulatory level. 

Remuneration and capital recovery levels are defined in line with the “Regulatory Remuneration Basis” 

concept. The “Regulatory Remuneration Basis” is understood to be the prudent investments the 

concessionaire needs to make to provide the public distribution service in accordance with the conditions 

established in the concession agreement, while meeting the quality levels demanded, assessed at new 

replacement prices (market value) and limited by loading and utilization indices. 

In this sense, remuneration of capital is the result of the Regulatory Remuneration Basis, net of 

depreciation and special obligations, multiplied by the average weighted cost of capital as defined by the 

Regulator. Capital recovery is the result of the Gross Regulatory Remuneration Basis (before accumulated 

depreciation and special obligations) multiplied by the concessionaire’s average depreciation. 

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X Factor 

The X Factor is used in annual adjustments following the periodic tariff review, reducing the IGP-M 

index applicable to the value of Parcel B. The Regulator’s objective is to pass on to consumers the estimated 

efficiency gains for the period between tariff revisions. 

The X Factor is governed by Normative Resolution ANEEL 338/08 and calculated by multiplying Xe by 

the value arising from the IGP-M less the Xa, and adding the value so obtained to Xa at the end. The Xa 

component reflects the application of the IPCA to the labor portion of the concessionaire’s operating costs. 

The Xe component reflects the expectation of a gain in efficiency because of the scale of the business, 

brought about by an increase in electricity consumption in the area served, both because of greater 

consumption by existing consumers as well as by the incorporation of new consumers in the period between 

tariff revisions. 

In the 1st and 2nd tariff revision cycles, calculation of the Xe component was carried out using the 

discounted cash-flow method (DCF), the objective of which is to assess the amount of the concessionaire’s 

future revenues and expenses, given a certain market growth and investment forecast. According to this 

method the Xe component is the one that equals the internal rate of return of the concessionaire’s regulatory 

cash flow in the tariff period with the cost of capital (WACC). 

In the 3rd periodic distributors’ tariff revision period for defining the amounts necessary for calculating 

both tariff repositioning as well as the X Factor, the concepts, criteria and procedures to be used will be those 

that are to be published by ANEEL with regard to its decision on the result of Public Hearing 40/2010. 

The model suggested by ANEEL in Public Hearing 40/2010, which proposes major changes with regard 

to the 2nd tariff revision cycle, as well as contributions sent in by society, can be found at: 

http://www.aneel.gov.br/aplicacoes/audiencia/dspListaDetalhe.cfm?attAnoAud=2010&attIdeFasAud=432& 

id_area=13&attAnoFasAud=2011. 

Concentration rules 

In March 1998, in its effort to encourage an increase in competition, ANEEL established limits regarding 

the concentration of certain services and activities of the electric power sector. These limits were updated on 

July 19, 2000, by means of Normative Resolution ANEEL 278/00. The aforementioned resolution established 

limits with regard to the participation of sector generators, distributors and suppliers. However, this was 

altered by Normative Resolutions ANEEL 252/07 and 299/08 and the current limit is called the selfcontracting 

limit. According to this limit, within the scope of the national grid system, a concessionaire or 

distributor can only acquire electricity from companies linked to it. Furthermore, it can only earmark the 

energy it produces for serving the needs of its captive consumers up to a limit of 30% of the electric power 

sold to such consumers. Distributors may, however, buy electric power from related parties when they are 

taking part in public bidding processes to purchase electric power in the ACR and the winning generator in 

the auction is a party related to the distributor. 

Unbundling 

Article 4 of Law 9074, dated July 7, 1995, amended by Article 8 of Law 10848, dated March 15, 2004, 

establishes the obligation to segregate the electric power distribution and generation activities of 

concessionaire, permittee and authorized companies. 

The obligation to separate distribution activities from those of generation and transmission had to be 

complied with by September 16, 2005, which deadline was extended to March 16, 2007. Those distributors 

that had distributed generation were obliged to enter into purchase and sale agreements of the electric power 

from their respective generating units, by the end of the concession period. 

According to the unbundling rules, within the scope of the SIN, no distributing concessionaires may own 

shares in other companies, either directly or indirectly, or engage in activities that were not compatible with 

the object of their electric power distribution concession. 

87

Competition 

EDP’s distributors own the concession to distribute electricity in 28 municipalities in the State of São 

Paulo and 70 municipalities in the State of Espírito Santo. Within its concession area it faces no competition 

in the distribution of electric power to residential, commercial, industrial and other low voltage consumers, or 

to those with high voltage supply. 

Suppliers and generators of electric power can compete to supply electricity to free consumers or special 

consumers. If they choose to purchase electricity from other suppliers of electric power the free consumers 

and special consumers remain end customers of EDP’s distributors with regard to the electric power 

distribution service. For this service the concessionaires will still be remunerated for use of their distribution 

system so that such competition between suppliers for the supply of electricity to free consumers does not 

affect the operating results of the distributors. 

Regulation of the electric power distribution sector also provides that, if free consumers or special 

consumers move to the free market, the distribution concessionaire has the prerogative to return the volumes 

of energy acquired in the energy purchase auctions relative to those clients that have left its captive base. If 

free clients choose to return to the captive base of the distributors the latter must be notified at least five years 

beforehand, or a lesser period on the initiative of the distributor, in order to allow for the appropriate 

management of their energy supply position. 

Concessions 

Brazil’s constitution provides that facilities for producing, transmitting and trading electricity may be 

developed directly by the Brazilian government, or indirectly by granting concessions, licenses or 

authorizations. Companies or consortiums planning to build or operate electricity generating, transmitting or 

distributing facilities in Brazil must apply for a concession, license or authorization, as applicable, from the 

MME or ANEEL as representatives of the Brazilian government. 

Concessions confer rights to generate, transmit or distribute electricity for a specified period, as opposed 

to licenses or authorizations, which may be revoked at any time at the MME’s discretion after consultation 

with ANEEL. Concessions are generally for durations of 35 years for new generation concessions or 30 years 

for new transmission or distribution concessions. 

Brazil’s regulation of electric energy concessions, or the Electric Energy Concession Law, among other 

provisions, determines (i) conditions with which a concessionaire must comply in order to provide electricity 

services, (ii) electricity customer rights, and (iii) concessionaire and granting authority obligations. In addition, 

concessionaires must comply with current electric sector regulations. The main provisions of the Electric 

Energy Concession Law are as follows: 

• Adequate service. Concessionaires shall provide adequate service in compliance with parameters for 

regularity, continuity, efficiency, safety, timeliness, generality, courteous service, reasonable tariffs 

and access. 

• Easements. The granting authority may condemn property under public necessity or public utility if 

the property is required for electric energy services or construction work and may designate the 

result of any such work as an administrative easement or right-of-way for the benefit of a 

concessionaire, who is responsible for any compensation owed the owner of condemned property 

• Strict liability. The concessionaire is directly responsible for all damages arising from its provision 

of services, irrespective of fault. 

• Corporate ownership and control alterations. The granting authority must approve any direct or 

indirect alteration of corporate ownership or control of the concessionaire. 

88

• Granting-authority intervention. Should the concessionaire fail to fulfill its obligations, the granting 

authority may intervene in the concession in order to ensure adequate provision of services, and due 

compliance with contractual, regulatory and legal processes. 

• Accelerated termination of contract. A concession agreement may be terminated by expropriation, 

revocation, cancellation, annulment of the bidding process that awarded it, bankruptcy or dissolution 

of the concessionaire. Concessionaires are assured full rights to legal defenses should administrative 

proceedings mandate the forfeiture of a concession, as well as the right to appeal any such forfeiture. 

The concessionaire has the right to be compensated for investments made in reversible assets that 

have not been fully amortized or depreciated. In of the event of a forfeiture, the amounts of any 

contractual penalties or damages caused shall be deducted from compensation due the concessionaire. 

• Term. On expiration of the concession, any assets, rights and privileges transferred to the 

concessionaire that are materially related to the provision of electricity services will revert to the 

granting authority. On expiration of the contract, the concessionaire has the right to be compensated 

for investments made on returned assets that have not been fully amortized or depreciated. 

A principal concern of the Brazilian government is that many of the concessions it granted are due to 

expire in 2015. Available data indicates that 21,791.8 MW of installed capacity are subject to non-renewable 

expired concessions. Of this amount, CHESF is responsible for 9,214.5 MW, followed by Cia. Energética de 

São Paulo - CESP (4,995.2 MW), Furnas (3,248 MW) and Companhia Energética de Minas Gerais - Cemig 

(2,598.7 MW). By 2015, several concession agreements will expire, in accordance with the table below: 

Business Concessions Amount Over Total 

Generation 58 generation power plants 

89 

21.5 GW equivalent to average 

12.9 GW (20% of Brazil's 

generation) 

Transmission 73,000 km of transmission lines 83% of Brazil's Basic Grid 

Trading 41 concessionaires 

30% of the Brazilian distribution 

market 

The Brazilian government is currently contemplating extending the expiring concessions for an 

additional period that is yet to be defined, while also attempting to determine the amount and form of 

payments due by concessionaires in respect of concession extensions. 

The prevailing expectation among agents in the market is that payments will be required in respect of 

concession extensions in order to avoid fortuitous gains for concessionaires who would be selling energy from 

fully amortized plants at market prices. 

On the other hand, the current perception among distribution companies is that no payments would be 

required of concessionaires in respect of concession extensions given that there is a tariff review procedure to 

capture efficiency gains and return on capital is fixed. Moreover the very high level of investment required to 

provide the electricity service results in high reversion costs. Many transmission concessionaires believe that 

the Brazilian government will ultimately extend expired concessions as a resolution of the problem. 

None of our concessions are due to expire before 2015. 

Penalties 

Existing legislation prescribes penalties for participants in the electricity sector based on the nature and 

severity of the violation (including warnings, fines and forfeiture). For each violation, fines may be up to 

two percent of the concessionaire’s revenue (net of value added tax and services tax) recorded in the 12 

months prior to a tax assessment notice. Certain infractions that may give rise to fines relate to the 

operator’s failing to apply for ANEEL approval in respect of the following: (i) entering into contracts with 

related parties; (ii) selling or transferring assets required to provide public service or imposing any charge 

on the latter (including any real guarantee, trust deed, attachment or mortgage) or on other assets related to

the concession or revenue from electric services; and (iii) changes in control of the holder of the 

authorization or concession. With respect to contracts between related parties that are subject to approval 

by ANEEL, ANEEL may impose restrictions on the terms and conditions of such contracts and in extreme 

circumstances may order their termination. 

Fee for use of hydroelectric resources 

The New Electricity Law requires holders of concessions and authorizations for use of hydroelectric 

resources to pay a fee in the amount of 6.7% of the value of the electricity they generate. This fee must be 

paid to the authorities of the federal district, state or municipality in which a plant or reservoir is located. 

Principal Entities within the Electricity Sector’s Institutional Structure 

National Energy Policy Council (CNPE) 

The National Energy Policy Council (Conselho Nacional de Política Energética), or the CNPE, is an 

advisory body for the president of Brazil, whose principal responsibility is to formulate policies and 

guidelines to promote the rational use of Brazil’s energy resources; ensure the supply of energy resources to 

the most remote areas or those of difficult access; periodically review energy matrices used in the different 

regions of Brazil, appraise conventional and alternative sources and technologies available; determine 

guidelines for specific programs, such as the use of natural gas, alcohol, and other biomass sources, coal and 

thermonuclear energy; and set import and export guidelines in order to satisfy domestic consumption of oil 

and its derivatives, natural gas and condensate, and ensure the proper functioning of the National Fuel Stocks 

System and the fulfillment of the Annual Plan for Strategic Fuel Stocks (Plano Anual de Estoques 

Estratégicos de combustíveis). 

90

Ministry of Mines and Energy (MME) 

The MME is an executive branch agency in charge of geology, mineral and energy resources; use of 

hydropower; mining and metallurgy; and oil, fuels and electricity, including nuclear energy. Its main function 

is (i) to formulate energy policies and submit them to the CNPE for validation, and (ii) to implement energy 

sector policies approved by the CNPE. 

Electric Sector Monitoring Committee (CMSE) 

The Electric Sector Monitoring Committee (Comitê de Monitoramento do Setor Elétrico), or CMSE, was 

introduced by the New Electricity Law and acts under the guidance of the MME. The CMSE is responsible 

for (i) monitoring electricity sector activities; (ii) appraising the continuity and security of electricity supplies 

throughout Brazil on an ongoing basis; and (iii) suggesting measures to correct problems detected or prevent 

further problems. 

Energy Research Corporation (EPE) 

The EPE acts in tandem with the Ministry of Mines and Energy as a federal public company, conducting 

research to help formulate, plan and implement the Ministry of Mines and Energy’s measures in respect of 

Brazil’s energy policy. The EPE’s research underpins the MME’s energy policy formulations. 

Brazilian Electricity Regulatory Agency (ANEEL) 

As a semi-autonomous governmental organization under special regime that acts together with the MME, 

ANEEL is responsible for: regulating and supervising electricity generation, transmission, distribution and 

marketing, responding to complaints from agents and customers in order to promote a balanced relationship 

between the parties for the benefit of Brazilian society; mediating conflicts of interests between agents of the 

electricity sector and between them and customers; granting licenses and authorizing electric sector facilities 

and services; ensuring fair tariffs; overseeing quality of services; establishing an investment regime; 

stimulating competition between operators and ensuring the universalization of electric energy. 

Electricity Trading Board (CCEE) 

The CCEE is a non-profit legal entity under private law, regulated and supervised by ANEEL for the 

purpose of ensuring the viability of sales of electricity in the National Interconnected Electric System. The 

purpose of CCEE is to enable trading of electricity in the National Interconnected Electric System, both in 

the free and regulated markets, and to keep account of and settle transactions carried out in the short-term 

market, which are externally audited pursuant to the Electric Energy Trading Convention (Convenção de 

Comercialização de Energia Elétrica). Trading rules and procedures regulating CCEE activities are 

approved by ANEEL. 

National Electricity System Operator (ONS) 

The ONS was created for the purpose of operating the National Interconnected Electric System and 

managing Brazil’s basic transmission grid. Its mission is to ensure the continuity, quality and economic 

pricing of the supply of electricity to National Interconnected Electric System users. ONS functions include 

proposing (i) extensions of the basic grid facilities to the granting authority, and (ii) reinforcements to existing 

systems to be considered when planning expansion of transmission systems; and proposing rules for the 

operation of the transmission facilities of the National Interconnected Electric System basic grid to be 

approved by ANEEL. 

Sector charges 

Fuel Consumption Account (CCC) 

The CCC was created by Decree No. 73,102 of November 7, 1973, to allocate costs related to the use of 

fuels (fuel oil, diesel and coal) for thermoelectric generation. 

91

CCC funds are managed by Eletrobrás. ANEEL establishes annual CCC charges to be withheld from 

electricity bills by distribution companies. Annual contributions are calculated in proportion to the market of 

each distribution company, based on estimated costs of fuel needed for TPPs for the following year. 

The National Interconnected Electric System’s CCC subsidies were gradually eliminated over a 3-year 

period starting in 2003 for TPPs built before February 1998 and currently belonging to the National 

Interconnected Electric System. TPPs built after that date will not be entitled to CCC subsidies. In April 2002, 

the Brazilian government mandated that CCC subsidies continue to be paid to TPPs located in isolated 

systems for a period of 20 years in order to foster electricity generation in those regions. 

Through 2005, CCC charges were introduced for the following electric systems: (i) South / Southeast / 

Midwest Interconnected Electric System; (ii) North / Northeast Interconnected Electric System; and (iii) 

Isolated Systems. Pursuant Law No. 9,648/98 and ANEEL Resolution No. 261 of August 13, 1998, the CCC 

benefit for electric generated in the National Interconnected Electric System was eliminated as of January 1, 

2006. 

Energy Development Account (CDE) 

In April 2002, the Brazilian government’s Law No. 10,438 of April 26, 2002, introduced the CDE, to 

foster: (i) energy development by states; (ii) competitiveness of energy produced using wind, PCHs, biomass, 

Brazilian natural gas and coal in the areas covered by the National Interconnected Electric System; and (iii) 

universalization of electric services throughout Brazil. The CDE will last for 25 years and its funds will be 

managed by Eletrobrás. 

CDE funds come from (i) annual payments for the use of public assets, (ii) fines levied on 

concessionaires, licensees and authorized agents by ANEEL; and (iii) payment of annual charges by all agents 

selling energy to final customers. 

CDE funds may also be used as subsidies in order to lower tariffs for electricity supplied to low-income 

residential customers if additional dividends payable to the federal authorities by Eletrobrás plus additional 

revenue earned by generation companies from sales of electricity in public auctions are not sufficient. Low 

income customers are those served by single-phase circuit whose monthly consumption is 80 to 220 kWh per 

month who show proof of registration with the Brazilian government or of being beneficiaries of the Brazilian 

government’s Family Assistance Fund (Bolsa Família) by February 27, 2006. 

Global Reversion Reserve (RGR) 

The RGR was introduced by Decree 41,019 of February 26, 1957. The RGR is an annual amount set 

aside by ANEEL to fund reversion, expropriation, expansion and improvements in public electricity services, 

alternative sources of energy, hydroelectric potential inventory and feasibility studies, and implementation of 

programs and projects designed to combat waste and make more efficient use of electricity. Concessionaires 

make monthly RGR contributions to Eletrobrás, as manager of the funds collected, charged at an annual rate 

of 2.5% of investments they have made in assets related to providing the service, within a maximum of 3% of 

annual net operating revenue. Law 10,438 of April 26, 2002, determined the expiration of RGR in 2010. 

Electric Services Supervisory Fee (TFSEE) 

ANEEL also levies a supervisory fee on agents and concessionaires providing electricity services. This 

fee is referred to as the TFSEE. The TFSEE was introduced by Law No. 9,427 of December 26, 1996, and 

Decree No. 2,410 of November 28, 1997, and amounts to 0.5% of the annual economic benefit obtained by 

a concessionaire. The determination of “economic benefit” is based on the installed capacity of authorized 

generation companies and transmission concessionaires or annual revenues in the case of distribution 

companies. 

Incentive Program to Foster the Development of Alternative Sources of Electricity (PROINFA) 

In 2002, the Brazilian government created PROINFA in order to foster the development of alternative 

sources of electricity, such as wind projects, PCHs and biomass projects. Under PROINFA, Eletrobrás 

92

purchases the electricity generated by these alternative sources for a period of 20 years and transfers it to free 

customers and distribution companies, which undertake to include the program costs in the tariffs charged to 

all end-use customers in a concession area, other than low income customers. Any projects seeking to qualify 

for the benefits offered by PROINFA should be fully operational by December 31, 2010. BNDES has 

approved a specific credit facility for projects included in PROINFA, and may fund up to 80% of the 

construction costs of plants under the program. 

The purpose of this program is to include renewable energy sources in the Brazilian energy matrix as set 

forth below: 

• in three years, as from 2004, a total of 3,300 MW of renewable energy (1,100 MW from wind energy, 

1,100 MW from biomass, and 1,100 MW from PCHs) should be included in the Brazilian energy 

matrix; and 

• By 2020, power generated under the PROINFA is likely to represent at least 15% of annual growth. 

ANEEL Normative Resolution No. 127 of December 6, 2004 set forth procedures for the apportionment 

of PROINFA costs, in addition to defining the electricity shares to be acquired by Free Customers and 

distribution companies, pursuant to Decree No. 5,025, of March 30, 2004. 

System Service Charges (ESS) 

These represent the cost incurred in maintaining the reliability and stability of the National 

Interconnected Electric System for purposes of meeting the Brazilian electricity consumption demand. This 

cost is determined by CCEE on a monthly basis and paid by the distribution companies to the generation 

agents. A major portion of this charge is related to payments to generation companies that received a dispatch 

order from ONS, so as to comply with transmission restrictions. 

National Electricity System Operator (ONS) 

Distributors pay monthly amounts to support the activities of the ONS. The ONS submits both its annual 

budget and the amounts of monthly contributions of its members for approval by ANEEL. 

Research and Development (R&D) 

Law No. 9,991 of July 24, 2000, requires concessionaires of public electricity generation and 

transmission services to invest at least 1% of their annual net operating revenue in R&D with the exception of 

companies generating electricity from wind or solar power, or using biomass sources or PCHs. 

By December 31, 2010, concessionaires and licensees of the public distribution system allocated 0.50% 

of their net operating revenue to R&D and 0.50% to PEE. As of January 1, 2011, these percentages increased 

to 0.75% and 0.25%, respectively. 

Compensation for Use of Hydro Resources (CFURH) 

The CFURH was established by Law No. 7,990 of December 28, 1989. Pursuant Law No. 9,648 of May 

27, 1998, the Brazilian states, the Federal District, the municipalities, and the agencies of direct 

administration of the federal authority shall receive compensation from generation companies for their use of 

hydro resources to generate electricity. This charge is based upon a calculation of the energy produced, on 

which 6.75% is levied and 6% is paid to states and municipalities in which the plant or reservoir is located, to 

the Ministry of the Environment, the MME and the National Fund for Scientific and Technological 

Development (Fundo Nacional de Desenvolvimento Científico e Tecnológico), or FNDCT, established by 

Decree Law No. 716 of July 31, 1969, and again by Law No. 8,172 of January 18, 1991). The remaining 

0.75% of the charge is allocated to the Brazilian National Water Agency. This charge does not apply to PCHs 

under an exemption introduced by the Electricity Law. 

93

Use of Public Assets 

The Brazilian government also levies a charge on independent electricity producers (except PCHs) that 

utilize water resources through the Use of Public Assets Fund (Fundo de Uso de Bem Público), similar to the 

RGR, that is calculated annually by ANEEL (though paid monthly) based on the use of public assets by each 

independent producer. Independent electricity producers are required to make contributions to the Use of 

Public Assets Fund as of a specified date through the end of the concession. Eletrobrás collected these 

payments until December 31, 2002, as of which date payments are collected by the MME. All subsequent 

payments were made directly to the Brazilian government. 

Deverticalization 

The Concession Law, as amended by the New Electricity Law, established the compulsory segregation of 

electricity distribution and generation activities of concessionaires, licensees and holders of authorizations. 

Distributors that had distributed generation were previously required to execute purchase and sale 

contracts for their respective generation units until the end of the concession period. As a result of 

deverticalization, distribution companies, through the National Interconnected Electric System, may not hold, 

either directly or indirectly, interests in companies, or maintain activities not compatible with, the purpose of 

their electricity distribution concession. 

Elimination of self-dealing 

Because the purchase of electricity for distribution to captive customers takes place only in the ACR, 

distributors may no longer purchase up to 30% of electricity needs from related parties (self-dealing), except 

with respect to contracts duly approved by ANEEL prior to the enactment of the New Electricity Law. 

Distributors, however, may buy electricity from related parties when participating in bidding processes for the 

purchase of electricity in the ACR and the winning generation company is a related party of the distributor. 

Environment 

We are subject to extensive environmental legislation in Brazil at the federal, state and municipal levels. 

Compliance with this legislation is supervised by governmental bodies and agencies, which may impose 

administrative penalties for any breach. 

Violations of environmental law may give rise to an environmental crime that may be charged against a 

legal entity’s officers, who are subject to arrest, and the legal entity itself. Violations of environmental law 

may also give rise to administrative penalties such as fines of up to R$50 million (which may be doubled or 

tripled for repeat offenses) and temporary or permanent suspension of business. These penalties are applied 

irrespective of the obligation to repair any damage to the environment and/or to third parties. 

Under civil law, the occasioning of damage to the environment, either directly or indirectly, is a strict and 

joint liability offense. As such, the obligation to repair environmental damage is borne by all those directly or 

indirectly involved, irrespective of any determination of fault. Therefore, the contracting of third parties for 

operations such as waste disposal does not absolve the responsibility any contractor may bear for 

environmental damage occasioned by a third party. 

As of the enactment of Law 6,938/81, which established Brazil’s national environmental policy, activities 

that may or actually pollute the environment, or that may in any way cause environmental damage, are subject 

to environmental licensing. Environmental licensing is required (i) for both the initial installation and 

operation of a plant, and (ii) for any expansions, in each case with licenses subject to periodic renewal. 

Environmental licensing for activities having environmental impacts deemed significant is subject to a 

preliminary environmental impact report (estudo de impacto ambiental), or EIA, and its associated 

environmental impact assessment (relatório de impacto ambiental), or RIMA, and to the implementation of 

measures mitigating and offsetting or compensating environmental impacts caused by the development. 

Moreover, environmental legislation requires that for projects having significant environmental impacts 

agents must allocate a proportion of the investment for offsetting and compensatory measures, which 

allocation ranges from 0 to 0.5% of the investment and is determined by the competent environmental agency. 

94

The licensing process comprises three licenses, each with a specified period of validity: the preliminary 

license, the installation license and the operating license. The type of license issued is dependent upon the 

stage of the project’s development, while the validity of a license is dependent upon compliance with its 

conditions as may be determined by the environmental licensing agency. The failure to obtain an adequate 

license, irrespective of whether the activity has occasioned actual environmental damage, is an environmental 

offense, subjecting the infracting party to administrative penalties such as fines, which may reach R$10 

million at the federal level (and may be doubled or tripled for repeat offenses) and suspension of the 

underlying activity. 

An environmental agency’s delay or rejection of a license, or an agent’s failure to fulfill licensing 

requirements, may delay or halt the project. 

In the event that a licensing agency does not make a timely decision with respect to a license renewal, 

Brazilian legislation permits the licensee to continue the underlying activity subject to licensing, so long as 

the renewal application is submitted 120 days in advance of the license’s final expiration date. 

95

BUSINESS 

This section highlights information about our business and our financial and operating information 

contained elsewhere in this offering memorandum. This section may not contain all the information about 

our business that may be important to you, and we urge you to read this entire offering memorandum 

carefully, including the sections “Risk Factors” and “Management’s Discussion and Analysis of Financial 

Condition and Results of Operations” and our consolidated financial statements and notes to those 

statements, included in this offering memorandum, before deciding to invest in our common shares. 

Overview 




















96


97 

Variation 

1st Quarter 

2011/2010 

As of and for the Three-Month 

As of and for the Year Ended 

Period Ended March 31, 

December 31, 

2011 2010 (%) 2010 2009 (%) 


Variation 

2010/2009 

Net operating revenues .................. 1,384.8 1,200.4 15.4 5,034.3 4,621.7 8.9 

Distribution .................................... 1,030.1 922.8 11.6 3,762.7 3,446.2 9.2 

Generation ...................................... 265.1 227.1 16.7 1,004.1 979.1 2.6 

Trading ........................................... 230.9 148.6 55.4 741.4 763.2 (2.9) 

Transmission .................................. 1.5 1.7 (11.8) 6.2 4.2 47.6 

Others (1) .......................................... (142.8) (99.8) 43.1 (480.2) (571.1) (15.9) 

Net income ..................................... 187.7 173.0 8.5 582.6 695.7 (16.3) 

Distribution .................................... 142.9 137.6 3.8 456.8 435.1 5.0 

Generation (2) ................................... 44.0 39.6 11.1 199.0 257.8 (22.8) 

Trading ........................................... 10.9 9.6 13.3 16.7 25.0 (33.2) 

Transmission .................................. 1.3 1.1 18.2 4.5 3.7 21.6 

Others (1) .......................................... (11.2) (14.9) (24.8) (94.5) (25.9) 265.0 

Adjusted EBITDA (3) ...................... 460.4 412.2 11.7 1,522.5 1,523.6 (0.1) 

Distribution .................................... 271.4 251.0 8.1 840.5 811.1 3.6 

Generation ...................................... 181.7 159.8 13.7 731.9 709.4 3.2 

Trading ........................................... 15.6 14.4 8.5 22.5 35.5 (36.6) 

Transmission .................................. 1.2 1.1 9.1 4.7 3.9 20.5 

Others (1) .......................................... (9.6) (14.0) (32.0) (77.1) (36.3) 112.4 

Adjusted EBITDA margin (4) .......... 33.2% 34.3% (3.2) 30.2% 33.0% (8.3) 

Installed capacity (MW) ................ 1,741.0 1,741.0 0.0 1,741.0 1,738.0 0.2 

Distributed energy (GWh) ............. 6,185.0 5,959.0 3.8 23,749.0 21,313.0 11.4 

Sold energy (GWh) (5) ..................... 2,330.0 2,086.0 11.7 8,263.0 8,715.0 (5.2) 

Indebtedness: (6) 

Loans and financings ..................... 3,245.9 3,083.7 5.3 3,385.9 3,193.3 6.0 

(-) Cash equivalents ....................... (1,015.5) (1,136.6) (10.7) (1,126.4) (1,102.0) 2.2 

Net indebtedness (7) ......................... 2,230.4 1,947.1 14.5 2,259.5 2,091.3 8.0 













in specific projects or for cash management. Also includes registered derivatives. For further information, see“ Loans and 




For the Three-Month Period Ended 

March 31, For the Year Ended December 31, 

2011 2010 2010 2009 


Net income ........................................................................ 187.7 173.0 582.6 695.7 

(+) Income and social contribution .................................. 103.1 97.2 249.1 248.8 

(+) Non-controlling shareholders ..................................... 22.2 25.0 136.9 146.9 

(+) Founders’ shares (1) ...................................................... 2.1 2.4 17.2 15.8 

(+) Financial result ............................................................ 44.3 26.9 177.0 82.0 

(+) Income from equity interest ........................................ 2.4 0.6 1.8 0.4 

(+) Depreciation and amortization ................................... 98.6 87.1 358.0 334.1 

Adjusted EBITDA (2) ....................................................... 460.4 412.2 1,522.5 1,523.6 

Adjusted EBITDA margin (3) .......................................... 33.2% 34.3% 30.2% 33.0% 

Net margin (4) .................................................................... 13.6% 14.4% 11.6% 15.1% 




Energia S.A. 






























1,741 MW. 

98

Business Segments 

Generation 

For the year ended December 31, 2010, our generation business recorded net operating revenues of 



R$199.0 million (excluding non-controlling shareholders), representing 34.2% of our consolidated net income. 

During the three-month period ended March 31, 2011, our generation business recorded net operating 

revenues of R$265.1 million, representing approximately 19.1% of our consolidated net revenues, adjusted 

EBITDA of R$181.7 million, representing approximately 39.5% of our consolidated adjusted EBITDA, and 

net income of R$44.0 million, representing 23.4% of our consolidated net income. We briefly describe our 

power generation companies below. 

Investco 

We hold a 56% equity interest in Lajeado, which holds a 73.0% equity interest in Investco. The 

remaining 27.0% equity interest is directly and indirectly held by CPFL Lajeado and CEB Lajeado. Investco 

owns the Lajeado hydroelectric power plant, in operation since May 1995 and located on the Tocantins River, 

in the municipalities of Lajeado and Miracema do Tocantins, in the State of Tocantins. This hydroelectric 

power plant has an installed capacity of 902.5 MW and an average assured energy of 527 MW, divided into 

five generation units, with an installed capacity of 180.5 MW each. 

Enerpeixe 

We directly hold a 60% equity interest in Enerpeixe. The remaining 40% equity is held by Furnas. 

Incorporated in May 2001, this hydroelectric power plant is located on the Tocantins River in the municipality 

of Peixe, with an installed capacity of 452 MW and an average assured energy of 271 MW. 

Pecém 

We directly hold a 50% equity interest in Pecém. The remaining 50% equity is held by MPX. Located in 

the municipality of Pecém, in the State of Ceará, this coal-powered thermal power plant, when completed in 

2012, will have an installed capacity of 720 MW and an assured energy output of 615 MW. 

Energest 

Our wholly owned subsidiary Energest holds part of our remaining power generation assets, including 15 

operational power plants, with a total installed capacity of 371,8 MW. These power plants are located in the 

States of Espírito Santo (with an installed capacity of 302.2 MW) and Mato Grosso do Sul (with an installed 

capacity of 68.7 MW). 

Cenaeel 

We indirectly hold a 45% equity interest in Cenaeel. EDP Renováveis holds the remaining 55%. Cenaeel 

holds equity interests in two wind farms located in the municipality of Água Doce, in the State of Santa 

Catarina, with a total installed capacity of 13.8 MW and a total average assured energy of 3 MW. 

Distribution 

For the year ended on December 31, 2010, our distribution business recorded net operating revenues of 



R$456.8 million, representing 78.4% of our consolidated net income. During the three-month period ended 

March 31, 2011, our distribution business recorded net operating revenues of R$1,030.1 million, representing 

approximately 74.4% of our consolidated net revenues, adjusted EBITDA of R$271.4 million, representing 

approximately 58.9% of our consolidated adjusted EBITDA, and net income of R$142.9 million, representing 

76.1% of our consolidated net income. We briefly describe our power distribution companies below. 

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One of the main power distribution companies in the State of São Paulo and our largest wholly-owned 

power distribution subsidiary, EDP Bandeirante operates in the areas of Alto Tietê, Vale do Paraíba and the 

northern coastal region of the State, with approximately 1.5 million customers, providing services to 

approximately 4.6 million people in a total area of approximately 9.6 square kilometers. The State of São 

Paulo represents 33.3% of Brazil’s gross domestic product, or GDP, according to an IPEADATA 2008 report, 

from ABRADEE. As of the three-month period ended on March 31, 2011, EDP Bandeirante’s net revenues 

represented 59.7% of the total power distribution net revenues. 

The GDP of the State of São Paulo, the main industrial center of Brazil and EDP Bandeirante’s 

concession grew by 6.9% in 2010, a growth rate of 8.5%, similar to Brazil’s GDP growth rate of 7.5% for the 

same period. Many large and diversified industrial companies are located in this region, including companies 

in the metals, paper, chemical products, rubber and plastic, technology, automobile and aviation industries. 


The main power distribution company in the State of Espírito Santo, according to ABRADEE, EDP 

Escelsa, has approximately 1.2 million customers, providing services to approximately 3.2 million people, in 

a total area of approximately 41.2 square kilometers, representing approximately 90% of the total area of the 

state. As of the three-month period ended on March 31, 2011, EDP Escelsa’s net revenues represented 40.3% 

of our total power distribution net revenues. 

The GDP of the State of Espírito Santo grew by 13.3% during the first quarter of 2011, above the average 

national GDP growth rate of 7.5%, according to IBGE. The development of the State of Espírito Santo has 

benefited from increasing activities, including those of Vale S.A., Companhia Siderúrgica de Tubarão and 

Fibria Celulose S.A. The State is the major national producer of iron ore pellets and the second-largest steel 

producer in Brazil, according to Grupo Vale. 

Trading 

Enertrade 

Our power trading activities are conducted through our wholly-owned subsidiary, Enertrade, and are 

focused on free consumers in Brazil, both in our power distribution companies’ concession areas and in other 

concession areas. We have a market share of 9.2% according to CCEE, which ranks us third among the 

country’s main energy traders (the leading trader has a market share of 17.9% while the second-ranked trader 

has a share of 12.1%), according to CCEE. 

For the year ended on December 31, 2010, we traded a total of 8,263 GWh of electricity, recorded net 

operating revenues of R$741.4 million, representing approximately 14.7% of our consolidated net revenues, 

adjusted EBITDA of R$22.5 million, representing approximately 1.5% of our consolidated adjusted EBITDA, 

and net income of R$16.7 million, representing 2.9% of our consolidated net income. During the three-month 

period ended March 31, 2011, our trading business recorded net operating revenues of R$230.9 million, 

representing approximately 16.7% of our consolidated net revenues, and net income of R$10.9 million, 

representing 5.8% of our consolidated net income. 

Others 

In addition to generation, distribution and trading businesses, we conduct: (i) operations between 

subsidiaries, which are eliminated at the consolidated level; (ii) activities at the holding company level; (iii) 

IT and internet services exclusively for the companies of the EDP group through Escelsapar; and (iv) 

transmission operations through Evrecy S.A., with amounts not significant at the consolidated level. 

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Our Strengths 

We believe that our competitive strengths include the following: 

Integrated Generation, Distribution and Trading Operations. Our business consists of integrated power 

generation, distribution and trading operations in Brazil. Our power distribution companies and our power 

trading company, Enertrade, provide services in areas with concentrated industrial and residential customers. 

EDP Bandeirante and EDP Escelsa operate in highly developed and commercial areas within the State of São 

Paulo. The State of São Paulo is the largest market in Brazil, representing approximately 33.0% of Brazil’s 

GDP, according to an IPEADATA 2008 report. EDP Escelsa’s concession area is the State of Espírito Santo, 

where the main sectors of the economy are related to metals, minerals, chemicals, rubber and plastics, which 

are mainly produced for export. According to the CCEE, Enertrade ranks third among the private-sector 

power trading companies in Brazil in terms of volume of electricity traded in the wholesale market in 2010, 

trading a total of 8,263 GWh in 2010, and as of the three-month period ended on March 31, 2011, trading a 

total of 2,330 GWh. 

In the generation business, we also participate in electricity generation projects, such as the Lajeado 

hydroelectric power plant and the Peixe Angical hydroelectric power plant, that, together with other 

electricity generation projects, provided us with a total installed electricity generating capacity of 1,731 MW 

as of March 31, 2011. In 2008, we started our operations in the Brazilian wind power market through a 

partnership with EDP Renováveis. Upon completion of the Pecém project (a joint venture with MPX for the 

development of a coal-powered thermal power plant that is now under construction), and other ongoing 

electric power generation projects that include the development of a Tramandaí wind farm (located in the 

State of Rio Grande do Sul), we expect that our total potential installed capacity will reach 2,151 MW by 

2012. 

Concession assets and long term contracts linked to inflation. A significant part of our revenues is 

backed by distribution and generation of electricity through concessions, which are regulated assets with long 

useful lives rendering essential services for economic and social development. We have no concessions due to 

expire over the next 14 years. Accordingly, revenue variations that may occur will arise only from the rules 

and risks inherent to our business. In the case of distribution, revenues are restated annually according to 

inflation indexes discounted from the productivity of each concession and tariffs reviewed every three years 

(for EDP Escelsa) or four years (for EDP Bandeirante), which take into account the development of efficient 

costs and capital returns. Generation carries the right to sell electricity corresponding to the physical 

guarantee of its facility for the period determined by the granting authority for long term contracts that 

establish annual adjustments to prices for inflation. 

Experience in the Development and Operation of Generation Projects. The worldwide experience of 

the EDP Group, and the experience we acquired in Brazil in the development and operation of large power 

generation projects, including the Lajeado hydroelectric power plant (902.5 MW) and the Peixe Angical 

hydroelectric power plant (452 MW), provide us with an important strategic position that will assist us in 

benefitting from potential opportunities in this segment. We believe we have the capabilities to enter into 

strategic partnerships with large and experienced companies in the Brazilian electricity market, as we did with 

the Peixe Angical hydroelectric power plant with Furnas, and with the Pecém project, through our partnership 

with MPX. Our investment strategy in the power generation business is focused on investing in projects in 

which we exercise shareholding and management control or, alternatively, joint control of projects with 

power purchase agreements. We believe this strategy mitigates risks related to licensing, financing, 

implementation and maintenance of projects before engineers as well as overall management of the operation. 

We are also developing studies for a potential participation in government sponsored auctions for a gaspowered 

thermal power plant, or A-3 auctions. 

Operating Efficiency and Consistent History of Costs Reduction. Our focus on controllable costs has 

helped to maintain a trend of cost savings over the three years ended December 31, 2010, which has 

contributed to growth in our gross margin. This trend reflects our resolve and ability to optimize the capacity 

of our resources, seek simplification of corporate structures, and gain efficiency in our processes. Our ratio of 

controllable expenditures to gross margin has been decreasing over the last few years from 37.8% in 2008, to 

33.3% in 2009, 32.4% in 2010 and 30.3% in March 2011. 

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Solid Capital Structure, Historic Dividend Payments and Solid Financial Position. We have a solid 

capital structure, low indebtedness ratios and significant growth in cash flow from operations, reflecting our 

steady increase in operating revenues, adjusted EBITDA and dividend payments. Between 2006 and 2010, 

our net operating revenues, adjusted EBITDA and dividend payments had average compounded annual 

growth rates of 6.0%, 9.1% and 21.2%, respectively. As of March 31, 2011, our total net debt was R$2,230.4 

million, or 1.4 times our adjusted EBITDA recorded during the past four quarters, of R$1,598.1 million. We 

also believe we are perceived by credit rating agencies and the Brazilian and international capital markets and 

bank loan markets as a creditworthy company. According to reports by Moody’s dated as of May 27, 2010 

(for EDP Bandeirante) and as of May 5, 2011 (for EDP Escelsa), rating agencies gave investment grade 

ratings with respect to the debt of our power distribution companies, on both a local and an international basis. 

We believe these ratings reflect a gradual and consistent improvement in our business and financial condition. 

According to a report published on May 3, 2011, Standard & Poor’s, or S&P. raised the ratings of our power 

distribution companies. S&P increased EDP Escelsa’s local rating from AA to AA+, with a stable outlook, 

and the international rating from BB to BB+, while S&P mentioned EDP Bandeirante’s local rating at AA+ 

with an outlook modified from stable to positive. In 2009, BNDES granted us a R$900 million long-term 

revolving credit line, available for a five-year period, in order to finance investments in fixed assets for our 

distribution and generation businesses, which was unprecedented for the sector at the time. We believe that 

our solid capital structure and solid financial position set us apart from our competitors, allowing us to 

execute our growth strategy, which mainly focuses on relatively low risk generation assets. 

Controlling Group with Vast Experience in the Electricity Sector and Experienced Management Team. 

We are controlled by the EDP Group, an established international group of companies with vast experience in 

the generation, distribution and trading of electricity, that is the fourth-largest group in the Iberian Peninsula 

electricity sector and one of the largest private-sector groups in Portugal (by market value). The EDP Group 

represents value and credibility, as it has been making long-term investments in Brazil for almost 15 years. 

The EDP Group differentiates itself by its experience with renewable energy projects, social policies and 

environmental issues, and was named Best Utility 2010 by the Dow Jones Sustainability Index. In addition, 

our management has significant experience in the electricity sector. Our management is highly focused on the 

efficient management of our assets, reduction of costs, and the creation of value for our shareholders, and is 

guided by the highest standards of corporate governance. 

Our Strategies 

Our principal objective is the creation of value for our shareholders primarily through sustained growth in 

electricity generation, distribution and trading markets in Brazil. In order to achieve this objective, our 

principal strategies include the following: 

Expand our Generation Activities. We believe that our generation business represents a significant 

growth potential in the Brazilian market and that our experience in the development and management of large 

power generation projects (as of the date of this Offering Memorandum we have 19 generation power plants 

under operation), as well as our ability to enter into partnerships with other important players in the power 

generation segment, places us in a privileged strategic position to benefit from growth opportunities that 

include the renewable energy segment, in which we own 13 small hydroelectric power plants (PCHs) as well 

as two wind farms, with a total generation capacity of 165.3 MW. We believe Brazil’s installed capacity will 

increase over the next few years, primarily through the use of hydroelectric power plants, thermal power 

plants and renewable energy. According to EPE, Brazilian market demand should reach a total of 63,480 

MW of installed capacity by 2019. We believe that the principal growth opportunities in Brazil will be in: 

• Hydroelectric power plants, through (i) participation in new hydroelectric generation auctions; 

(ii) focus on the feasibility and, as applicable, development of mid-sized hydroelectric power plants 

and small hydroelectric power plants; and (iii) the acquisition of existing hydroelectric power assets. 

In order to strengthen our position in the market, we executed an agreement for the acquisition of the 

total capital stock of ECE Participações S.A., or ECE, which owns 90% of the Amapá Energia 

Consortium. This consortium owns the right to operate the Santo Antônio do Jari hydroelectric 

power plant, located in the States of Pará and Amapá. The remaining 10% participation is owned by 

Jari Energética S.A., or JESA, original owner of the concession, and which has a tag along right to 

sell us its participation under the same conditions. The term to exercise this tag along right expires on 

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July 15, 2011. The Santo Antônio do Jari hydroelectric power plant will have an installed capacity 

of 300 MW and an average assured energy of 196.1 MW corresponding to a use factor of 65% 

already approved by ANEEL, of which 190 MW has already been sold under the A-5 auction held in 

December 2010 for the period of 30 years on December 31, 2044, when the concession term expires. 

The project also assumes an increase of installed capacity of 73.40 MW, which is subject to 

ANEEL's approval. Total estimated investment amount may vary from R$1,270 million and R$1,410 

million, including the construction of the maximum capacity of 373.4 MW, project payment to the 

sellers and any amounts arising from the tag along right by JESA. The closing of the acquisition is 

subject to the completion of certain conditions precedents, including the regulatory authorizations 

such as ANEEL's approval; 

• Thermal power plants, through our investment in 2008 in coal-powered thermal plant Pecém, in the 

State of Ceará, will increase our installed capacity by 360 MW. The investment was made taking into 

consideration the demand to increase Brazil’s installed generation capacity to secure a sufficient 

supply of electricity to allow for stable economic growth. Recently, we entered into a gas supply 

agreement with Petrobras – Petróleo Brasileiro S.A., or Petrobras, which involves a potential 

participation in A-3 auctions; and 

• Renewable energy, in consideration of the increasing demands on clean energy, through our 

partnership with EDP Renováveis, in order to (i) complete the construction of Tramandaí wind farm 

with installed capacity of 70MW; and (ii) analyze new wind power projects. 

Maintain Our Investments and Focus On Operational Efficiency and Organic Growth in the 

Electricity Distribution Segment. We intend to focus on our current investments in the electricity distribution 

segment, increasing our activities in this segment through organic growth, improving our operational 

efficiency, and preparing for the next periodic revision cycle for tariff adjustments to be proposed by ANEEL 

in order to ensure the quality of services provided to our consumers. 

Maintain a Strong Presence in the Electricity Trading Segment. We are actively focused on our 

electricity trading activities, as a strategic response to the development of a free consumer market in Brazil. 

We intend to focus on the loyalty of clients located both in and out of our distribution areas and that choose to 

be free customers. We intend to supply electricity to these free customers through our trading company, 

Enertrade, providing solutions to their electricity needs, thus adding value to the services we provide. The 

sale of electricity has low fixed costs and the sales margins offer profit opportunities. Additionally, our 

electricity trading segment may present partnership opportunities with power generation segment, enabling 

long-term agreements. Through Enertrade, we guarantee our participation in the development of the free 

consumer market in Brazil. 

Incentivize Sustainability and Innovation. We are committed to conducting our business and using our 

resources in a sustainable way in accordance with global sustainability principles. We try not to waste the 

natural resources we use in our production processes by efficiently using energy, using renewable sources of 

energy and reducing greenhouse gases throughout our production chain. We focus on promoting safe work 

conditions and maintaining the health of our employees, in addition to being actively involved in several 

social benefit programs. We strive to be recognized as market leaders in sustainability and innovation in the 

business segments in which we operate. 

Consolidate our Position as a Relevant Player in the Electricity Energy Sector. We intend to have a 

primary role in the development of the Brazilian electricity sector by identifying the best investment 

opportunities in our business segments in accordance with our business strategy and our strict return on 

investment criteria. Since our initial public offering in 2005, we have developed and completed important 

projects and transactions, including, among others, (i) the construction of the Peixe Angical hydroelectric 

power plant; (ii) the Lajeado/Enersul Exchange Agreement; and (iii) the joint venture with MPX. 

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Our Corporate Structure 

The following chart represents our corporate structure as of the date of this offering memorandum: 

For further information regarding our principal shareholders, see “Principal Shareholders.” 

Our principal executive offices are located at Rua Bandeira Paulista, 530, 14 th floor, São Paulo, SP, 

Brazil. Our Investor Relations Department’s telephone number is (55 11) 2185-5900 and the facsimile 

number is (55 11) 2185-5975. We maintain a website at www.edpbr.com.br and a link for investors at 

www.edpbr.com.br/ri. Information on our website is not incorporated into this offering memorandum and 

should not be relied upon in determining whether to make an investment in our common shares. 

Our History 

The EDP Group began investing in Brazil in 1996 through the acquisition of a non-controlling interest in 

Companhia de Eletricidade do Rio de Janeiro – CERJ (currently named Ampla Energia e Serviços S.A., or 

Ampla). In 1997, the EDP Group acquired a 25% equity interest in the Luis Eduardo Magalhães 

hydroelectric power plant, or Lajeado hydroelectric power plant, and in 1998, together with CPFL Energia 

S.A., or CPFL, it acquired share control of Bandeirante Energia S.A., or EDP Bandeirante (formerly EBE – 

Empresa Bandeirante de Energia S.A.), which had been incorporated as part of the State Privatization 

Program (Programa Estadual de Desestatização), after its spin-off from Eletropaulo. 

In 1999, the EDP Group acquired an additional interest in Lajeado hydroelectric power plant. As a result 

of this acquisition, it held 27.7% of the voting capital of Investco S.A., or Investco, and rights to the 

receivables from the sale of energy generated by Lajeado hydroelectric power plant in a proportion equal to 

its voting capital stock. 

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Also in 1999, the EDP Group acquired 73.12% of the total share capital of Iven S.A., or Iven, which in 

turn held 52.3% of the share capital of Espírito Santo Centrais Elétricas S.A., or EDP Escelsa. At that time, 

EDP Escelsa had control of Empresa Energética de Mato Grosso do Sul S.A. – Enersul, or Enersul, which it 

obtained pursuant to a privatization auction held in November 1997. 

We were incorporated in July 2000 under the corporate name EDP Brasil S.A. After our incorporation, 

the EDP Group gradually transferred its investments in Brazil to us, and we became the holding company for 

all of the EDP Group’s assets in Brazil, other than its interest in Ampla, which are still directly held by 

Energias de Portugal. 

In 2000, EDP Group and CPFL, as the controlling companies of EDP Bandeirante at that time, conducted 

a public tender offer to acquire shares of EDP Bandeirante. The shares purchased through this public tender 

offer, together with subsequent acquisitions, increased our interest in EDP Bandeirante to 54.0% of its total 

share capital. 

Approximately one year later, we participated in hydroelectric power generation auctions and were 

granted concessions to build two new hydroelectric power plants: the Peixe Angical, located on the Tocantins 

River in the State of Tocantins, with a total installed capacity of 452 MW; and the Couto Magalhães, located 

on the Araguaia River on the border of the States of Goiás and Mato Grosso do Sul, with a total installed 

capacity of 150 MW. 

The concession for the Peixe Angical hydroelectric power plant was granted to our wholly owned 

subsidiary Enerpeixe S.A., or the Enerpeixe. The concession for Couto Magalhães hydroelectric power plant 

was granted to Consórcio Ener-Rede Couto Magalhães, in which we hold a 49.0% interest. The remaining 

51.0% interest in Consórcio Ener-Trade Couto Magalhães is held jointly by Rede Energia S.A. and Rede 

Power do Brasil S.A., collectively Grupo Rede. 

In October 2001, EDP Group and CPFL concluded a spin-off of assets of EDP Bandeirante spin-off, in 

order to segregate corporate control of the company. As a result of this process, a new company, Companhia 

Piratininga de Força e Luz, was created and controlled by CPFL, and EDP Group became into EDP 

Bandeirante’s controlling shareholder. After the spin-off, EDP Bandeirante held the distribution assets in the 

Alto Tietê, Vale do Paraíba and the northern coastal region of the State of São Paulo, an area 51.4% the size 

of its original concession area. Upon acquiring exclusive control of EDP Bandeirante (and 96.5% of the total 

capital of the company), EDP Group was able to fully implement its management policies in EDP 

Bandeirante. 

In October 2002, following a corporate restructuring, we directly controlled the following companies: 

Energest S.A., or Energest, Enertrade – Comercialização e Serviços de Energia S.A., or Enertrade, EDP 

Bandeirante, EDP Lajeado Energia S.A., or EDP Lajeado, Fafen Energia S.A., or Fafen, and Enerpeixe. 

In October 2003, we executed an agreement with Furnas Centrais Elétricas S.A., or Furnas, which, in 

addition to the financing in the amount of R$670.0 million obtained from BNDES, permitted the construction 

development of Peixe Angical hydroelectric power plant. Through this agreement, Furnas acquired 40% of 

Enerpeixe, owner of Peixe Angical hydroelectric power plant. In 2004, a total of R$700.0 million was 

invested in the construction of Peixe Angical hydroelectric power plant, of which R$458.2 million was 

provided through Banco Nacional de Desenvolvimento Econômico e Social – BNDES financing. 

In December 2003, we acquired direct control of Iven, the company that had controlled EDP Escelsa and 

Enersul. 

On December 17, 2004, we sold our 80% equity interest in Fafen to Petróleo Brasileiro S.A. – Petrobras 

for a total amount of R$96.0 million. 

At the general shareholders’ meeting held on March 16, 2005, we changed our corporate name from 

EDP Brasil S.A. to EDP – Energias do Brasil S.A. 

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At the extraordinary shareholders’ meeting held on April 29, 2005, approved (i) the incorporation of Iven 

by the Company; (ii) the Company partial spin-off and the incorporation into EDP Escelsa of goodwill and 

provisions; and (iii) the incorporation of EDP Escelsa’s and EDP Bandeirante’s shares by the Company. At 

that time, we also joined the BM&FBOVESPA’s Novo Mercado segment. 

In 2008, we created Enernova S.A., or Enernova, to invest in renewable energy. In May 2008, Enernova, 

together with EDP Renováveis, established EDP Renováveis Brasil S.A., or EDP Renováveis Brasil, 

dedicated exclusively to the development of wind power. In February 2009, EDP Renováveis Brasil 

purchased all of the shares of Central Nacional de Energia Eólica S.A., or Cenaeel. Further, we also 

established Terra Verde Bionergia Participações S.A., to hold interests in special purpose companies that 

produce ethanol, electricity and biomass and which is currently under liquidation. 

On July 18, 2008, we entered into an exchange agreement with Grupo Rede, (the Lajeado/Enersul 

Exchange Agreement), pursuant to which we and Grupo Rede exchanged equity interests in certain 

companies owned by us and Grupo Rede. Pursuant to this Lajeado/Enersul Exchange Agreement, we 

received equity interest from Grupo Rede in Rede Lajeado Energia S.A. (formerly Lajeado Energia S.A.), 

Tocantins Energia S.A., Denerge – Desenvolvimento Energético S.A. and Investco, and in exchange, we 

transferred our equity interest in Enersul to Grupo Rede. 

Also in 2008, we entered into an exchange agreement with MPX Energia S.A., or MPX, (the “MPX 

Exchange Agreement”), pursuant to which we received from MPX 50% of the outstanding shares of Pecém 

Geração de Energia S.A., owner of the Pecém project, in exchange for our equity interest in Diferencial 

Energia Empreendimentos e Participações Ltda., the owner of the TPP Maranhão project. 

On May 29, 2009, approval was given for the partial spin-off of our indirect subsidiary Castelo 

Energética S.A., or CESA, with one of this company’s concessions being transferred to our indirect subsidiary 

Evrecy Participações Ltda., or Evrecy. Both CESA and Evrecy are directly controlled by our subsidiary 

Energest. This transaction was aimed at increasing the operational, financial, administrative and economic 

efficiency of Evrecy and Energest. 

On June 30, 2009, we sold our 48.51% interest in ESC 90 Telecomunicações Ltda. to NET Serviços de 

Comunicação S.A. for approximately R$94.6 million. 

In July 2009, we concluded the acquisition of Elebrás Projetos Ltda., a company that has various wind 

power projects in the State of Rio Grande do Sul, including the Tramandaí wind farm for approximately 

R$22.3 million. 

On November 25, 2009, we made a public offering of 14,091,000 treasury shares, sold through an 

offering that was carried inside Brazil on the non-organized over-the-counter market, including efforts to 

place the shares abroad. The price per share was R$28.50, at a total capitalization of R$401.6 million. After 

deducting the commissions for the offering, 65% or R$255.1 million of the funds resulting from the public 

offering were used to pay outstanding debt and 35%, or R$137.2 million, was used to boost the Company’s 

financial flexibility. 

On November 30, 2009, we completed the corporate reorganization of Lajeado Energia, EDP 

Lajeado, and Tocantins, which resulted in both Tocantins and EDP Lajeado being wound up, and only 

Lajeado Energia remaining. 

On February 09, 2010, Investco received an operating license, from the Instituto Natureza do Tocantins – 

NATURATINS, renewing the operating license of the Luís Eduardo Magalhães hydroelectric power plant – 

Lajeado, with an installed capacity of 902.5 MW. This license is valid until February 8, 2015. 

At a meeting that was held on February 22, 2010, the Board of Directors approved the execution by EDP 

Bandeirante of the fourth amendment to the Concession Agreement n. 202/1998 and by EDP Escelsa of the 

third amendment to the Concession Agreement n. 001/1995, in order to modify the calculation procedures for 

annual tariff adjustments, aiming to mitigate the impact of sector fees with respect to Parcel A over annual 

revenues of EDP Bandeirante and EDP Escelsa. 

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On March 22, 2010, the Brazilian Institute of the Environment and of Renewable Natural Resources – 

IBAMA executed the first renewal of the operating license of the Peixe Angical hydroelectric power plant, 

with an installed capacity of 452 MW, for a period of six years. 

We are planning the merger of Castelo Energética S.A. – Cesa, or Cesa, into its direct parent company, 

Energest and its subsequent dissolution. The approval of the National Electric Energy Agency – ANEEL, as 

well as consents of the National Bank of Economic and Social Development –BNDES and Banco Santander 

(Brasil) S.A. are required for the consummation of this transaction. On February 10, 2011, Banco Santander 

(Brasil) S.A., approved the transaction. On April 19, 2011, ANEEL approved the transfer of all CESA’s 

generation assets to Energest, by means of Official Resolution n. 2.861. As of the date of this offering 

memorandum, BNDES has not approved the transaction. 

On November 3, 2010, we started the acquisition process for two projects in the State of Mato Grosso, 

from Grupo Bertin, with a total installed capacity of 49.5 MW and an average assured energy of 27.5 MW. 

The Cabeça de Boi is a small hydroelectric power plant with an installed capacity of 30 MW and the Fazenda 

is a small hydroelectric power plant with an installed capacity of 19.5 MW. Both projects have been 

authorized by ANEEL to carry out exploration work, with installation licenses already having been issued by 

the State of Mato Grosso’s Environmental Department and concessions granted for the period up to August 5, 

2038. The consummation of the acquisition of these projects is subject to the satisfaction of various conditions, 

which have not yet been satisfied. 

On June 15, 2011, through our subsidiary Ipueiras Energia S.A., we executed a Share Purchase 

Agreement for the acquisition of the total capital stock of ECE Participações S.A., or ECE, which owns 90% 

of the Amapá Energia Consortium. This consortium owns the right to operate the Santo Antônio do Jari 

hydroelectric power plant, located in the States of Pará and Amapá. The remaining 10% participation is 

owned by Jari Energética S.A., or JESA, original owner of the concession, and which has a tag along right to 

sell us its participation under the same conditions. The term to exercise this tag along right expires on July 15, 

2011. The Santo Antônio do Jari hydroelectric power plant will have an installed capacity of 300 MW and an 

average assured energy of 196.1 MW corresponding to a use factor of 65% already approved by ANEEL, of 

which 190 MW has already been sold under the A-5 auction held in December 2010 for the period of 30 years 

on December 31, 2044, when the concession term expires. The project also assumes an increase of installed 

capacity of 73.40 MW, which is subject to ANEEL's approval. Total estimated investment amount may vary 

from R$1,270 million and R$1,410 million, including the construction of the maximum capacity of 373.4 

MW, project payment to the sellers and any amounts arising from the tag along right by JESA. The closing of 

the acquisition is subject to the completion of certain conditions precedents, including the regulatory 

authorizations such as ANEEL's approval. 

Power Distribution Activities 

Our power distribution business is the main operating activity of the EDP Group, representing 

74.6% of our total net revenues for the year ended December 31, 2009, recording R$3,446 million, and 

representing 74.7% of our total net revenues for the year ended December 31, 2010, recording R$3,763 

million. Comparing the three-month period ended as of March 31, 2010 with the period ended as of 

March 31, 2011, distribution revenues were 76.9% and 74.4% of total net revenues, as R$923 million 

and R$1,030 million, respectively. We have a strong presence in the State of São Paulo through our 

distribution company, EDP Bandeirante and a dominant presence in the State of Espírito Santo through 

our distribution company, EDP Escelsa. 


EDP Bandeirante currently has approximately 1.5 million clients and provides services to approximately 

4.6 million customers in a total area of 9,600 square kilometers encompassing 28 municipalities located in the 

Alto Tietê, Vale do Paraíba and northern coast regions of the State of São Paulo, with approximately 

1.5 million customers, providing services to approximately 4.6 million people in a total area of approximately 

9.6 square kilometers. 

107

EDP Bandeirante’s concession area spans a region with a highly developed infrastructure, export 

production and a dynamic business environment, including companies in the metals, car, paper, chemical 

products, rubber and plastic, and technology industries, with approximately 10,700 industrial plants and over 

94,600 commercial establishments as of December 31, 2010, and with approximately 10,900 industrial plants 

and over 95,200 commercial establishments as of March 31, 2011. 


EDP Escelsa is the main electricity distribution company in the State of Espírito Santo. It has 

approximately 1.2 million clients and provides services to approximately 3.2 million people in a total area of 

41,200 square kilometers, encompassing 70 municipalities located throughout the State of Espírito Santo, 

representing approximately 90% of the total area of the entire state. Its concession area is located in a region 

with high development potential, in particular in the oil and gas, iron ore, chemical products and ornamental 

stone industries, with approximately 11,200 industrial plants and over 99,100 commercial establishments as 

of December 31, 2010, and with approximately 11,300 industrial plants and over 100,200 commercial 

establishments as of March 31, 2011. 

Power Balance 

The electricity distributed by our distribution system of our concessionaires totaled 27,072 GWh in 2010, 

of which 59.5% related to EDP Bandeirante and 40.5% are related to EDP Escelsa. 

For the year ended December 31, 2010, the total electricity distributed by our distribution concessionaries 

was 23,740 GWh, of which EDP Bandeirante distributed 60.3% and EDP Escelsa distributed 39.7%. 

The electricity required by our distribution concessionaires totaled 7,026 GWh for the three-month period 

ended March 31, 2011, of which 58% are related to EDP Bandeirante and 42% are related to EDP Escelsa. 

The following chart sets forth the consolidated power balance of our distributors for the year ended as of 

December 31, 2010, in MWh, setting forth the volume of power input and output, as well as losses resulting 

from the distribution process. 

Itaipu + Proinfa 

4,803,643 

Auction 

10,997,507 

Others 

3,521,684 

Power in transit 

9,034,009 

Power Balance for the Year Ended December 31, 

Losses in transmission 

332,306 

Losses in Itaipu 

219,624 

(-) = 

Short-term Sales 

730,428 

Short-term adjustments 

2,272 

108 

Required 

Energy 

27,072,213 

Provision 

489,671 

Supply 

14,225,221 

Losses and differences 

3,323,312 

Power in transit 

9,034,009

In the above chart, with respect to our energy requirements (inputs): 

• “Itaipu” means electricity purchased from the Itaipu hydroelectric power plant, which is equally 

owned by Brazil and Paraguay. The volume of energy purchased from Itaipu refers to energy 

purchased from the power plant itself, and the item “Itaipu Losses,” refers to losses resulting from 

the transportation of power, from SE Foz do Iguaçu to the center of financial equilibrium, and 

consists of electricity losses in the Itaipu branch (continuous current) and losses over the group of 

transmission lines, barrels, power transformers and voltage equipments equal or greater than 230 kV 

and ANEEL’s defined installations, the Basic Grid. The center of equilibrium is the virtual point 

where all producers and consumers break even, and is the reference point for all power sales and 

purchases; 

• “Bilaterals” are the power purchase agreements, which were freely negotiated between the parties, 

and executed before the New Electricity Law; 

• “Auction” means power bought in the ACR, established by Law n. 10,848/04, which created the 

New Electricity Law; 

• “Short Term Purchases” and “Short Term Sales” provide deficit or surplus positions in the Short 

Term Market – in the CCEE segment where the differences between the amounts of energy 

contracted and the amounts of generation or consumption actually confirmed are traded; and 

• “Power in Transit” means the energy purchased by free customers and other concessionaires from 

other suppliers that use the distribution network of our power distribution companies. The item 

power in transit is repeated in inputs and outputs because it relates only to the use of the distribution 

network and is not part of the purchases or sales of our power distribution companies. 

• “Supply” means the distribution to market; 

• “Provision” means small amounts of energy exchanges, provided by our distributors to others 

distributors; 

• “Losses and Differences” means electricity losses that occur on the distribution system. 

Distribution System 

Our power distribution companies have a wide distribution network that consists primarily of overhead 

transmission lines and substations of varying voltage ranges. The customers we serve through our 

distribution network are classified by voltage level, based on the installed capacity and/or contracted demand. 

We distribute electricity at higher voltage levels (up to 138 kV) to large industrial and commercial customers, 

and we distribute electricity to residential and certain smaller industrial and commercial customers at lower 

voltage levels (at or below 69 kV). The following table sets forth information regarding our distribution 

system for the periods indicated: 

109 

As of December 31, 

2010 2009 

Km of distribution/transmission lines (at or above 69 kV) ............................................. 3,134 3,601 

Km of medium voltage lines (between 1 kV and 69 kV) ............................................... 60,555 59,160 

Km of low voltage lines (at or below 1 kV) .................................................................... 20,812 19,403 

Number of poles in the distribution network .................................................................. 1,105,739 1,021,626 

Number of distribution transformers ............................................................................... 141,600 133,634 

Number of distribution transformers (City) .................................................................... 62,448 61,113 

Number of distribution transformers (Rural) .................................................................. 79,152 72,521 

Our transmission lines are located on property that we have purchased or appropriated and on properties 

on which we have purchased a right of way. Certain transmission lines are shared with other power

transmission companies. The choice of transmission line location is based on technical criteria and is 

followed by negotiations with landowners. 

In general, we possess a right of way on public streets without the need to pay for this right. However, 

we must pay for a right of way on private streets. Due to the public interest in the development of energy 

services, we do not encounter any significant difficulties in installing new low and medium voltage lines. 

Quality Indicators 

The quality and efficiency of a power distribution concessionaire’s distribution system is measured by 

duration of interruption, or DEC (the average time of a power outage per customer per year, in hours), 

frequency of interruption, or FEC (the average number of interruptions experienced by each customer per 

year), and the average response time to a customer’s service request in the power distribution network, in 

minutes, or TMA. The DEC and FEC targets that must be met by concessionaires are set by ANEEL and 

published in customer invoices. 

The table below sets forth the duration and frequency of power outages in the distribution network of our 

distributors for the periods indicated: 

For the three-month period ended March 31, 

2011 2010 2009 

DEC FEC TMA REF.ANEEL DEC FEC TMA REF.ANEEL DEC FEC TMA REF.ANEEL 

(hours) (times) (min.) (DEC/FEC) (hours) (times) (min.) (DEC/FEC) (hours) (times) (min.) (DEC/FEC) 

EDP Bandeirante .... 11.0 6.8 177.8 9.7/8.4 12.2 7.1 189 10.2/8.8 12.8 6.4 186 11.2/9.4 

EDP Escelsa ............ 8.9 6.3 202.0 11.2/9.0 9 6.3 182 11.5/9.1 11.44 6.9 190 11.7/9.7 

Energy Losses 

The results of our power distribution companies are affected by energy losses because lost energy could 

have otherwise been distributed to customers or other concessionaires, reducing the need to purchase 

electricity for resale. There are two types of energy losses: technical losses and non-technical losses. 

Technical losses are those that occur in the ordinary course of our distribution of electricity. Non-technical 

losses are those that result from illegal connections, fraud or billing errors. 

Technical losses are an inherent part of the transportation process and occur both in the transmission and 

the distribution of electricity. Technical losses are associated with the dissipation of electricity in the network. 

Thus, such quantity of electricity is not consumed by customers. 

Non-technical losses consist of electricity actually used by customers that does not provide sales revenue 

as a result of illegal connections, fraud or billing errors, among other factors. 

Energy losses, expressed as a percentage of the total electricity distributed in the period, remained stable 

in 2010 compared with 2009. We highlight the reduction in our non-technical losses, which decreased by 

0.6% to 5.7%. For the three-month period ended March 31, 2011, our non-technical losses totaled 5.32%. 

In 2010, and for the three-month period ended March 31, 2011, we recorded total energy losses of 12.3% 

and 11.9%, respectively. In 2010 and for the three-month period ended March 31, 2011, EDP Escelsa 

recorded total energy losses of 14.0% and 13.4%, respectively. In 2010 and for the three-month period ended 

March 31, 2011, EDP Bandeirante recorded total energy losses of 11.1% and 10.9%, respectively. 

We have budgeted R$37.1 million to prevent losses in 2009. Of the total amount of resources allocated 

to these programs, R$22.3 million relates to operating investments (replacement of meters, special network 

installation and remote metering) and R$14.8 million relates to managerial expenses (inspections and 

disconnecting illegal connections). 

110

Of the total amount of resources allocated to these programs, R$22.3 million relates to operating 

investments (replacement of meters, special network installation and remote metering) and R$14.8 million 

relates to managerial expenses (inspections and disconnecting illegal connections). In such year, our power 

distribution companies carried out approximately 174,000 inspections, which resulted in the removal of 

115,000 illegal connections and the recovery of approximately R$25.1 million. 

In 2010, our power distribution companies spent a total of R$60.4 million in programs aimed to reduce 

losses. In such year, our power distribution companies carried out approximately 266,000 inspections, which 

resulted in the removal of 16,000 illegal connections and the recovery of approximately R$24.8 million. Of 

the total amount of resources allocated to these programs, R$38.7 million relates to operating investments 

(replacement of meters, special network installation and remote metering) and R$21.7 million relates to 

managerial expenses (inspections and disconnecting illegal connections). 

Loss Prevention Program 

For the Year Ended December 31, 

2010 2009 

(R$ million) 

Operational investments ............................................................................................................... 38.7 22.3 

Costs .............................................................................................................................................. 21.7 14.8 

Total ............................................................................................................................................. 60.4 37.1 

Non-technical loss Technical loss 

10.7% 11.2% 11.1% 10.9% 

5.5% 

5.2% 

BAND 

2008 

6.0% 

5.2% 

BAND 

2009 

5.6% 

5.5% 

BAND 

2010 

5.4% 

5.5% 

BAND 

2011 

(1 st Q) 

111 

13.9% 

5.2% 

8.7% 

ESCE 

2008 

15.5% 

6.8% 

8.8% 

ESCE 

2009 

14.0% 

5.7% 

8.3% 

ESCE 

2010 

13.4% 

5.2% 

8.2% 

ESCE 

2011 

(1 st Q)

The table below sets forth the technical and non-technical losses of our power distribution companies as 

well as the average losses in the Brazilian power distribution market for the periods indicated: 

For the Three- 

Month Period 

Ended March 31, For the Year Ended December 31, 

2011 2010 

(%) 

2009 


Technical ......................................................................................... 5.5 5.5 5.2 

Non-technical .................................................................................. 5.4 5.6 6.0 

Total ................................................................................................ 


10.9 11.1 11.2 

Technical ......................................................................................... 8.2 8.3 8.8 

Non-technical .................................................................................. 5.2 5.7 6.8 

Total ................................................................................................ 

Average losses in sector 

13.4 14.0 15.5 

Technical ......................................................................................... 6.6 6.6 6.6 

Non-technical .................................................................................. 5.3 5.7 6.3 

Total average losses ....................................................................... 11.9 12.3 12.9 

Distribution Tariffs 

Tariff mechanisms 

Historically, the tariff control mechanism was a way of encouraging the replacement of other energy 

sources with hydroelectric energy. However, high interest rates and the use of tariffs as an instrument to 

control inflation, which began in the 1980s, reduced incentives for investment in power generation, resulting 

in increased risks for rationing. 

In 1997, ANEEL was created and began to regulate the tariffs charged by power distribution companies, 

based on the concession agreements which, among others, established the tariffs to be charged and the 

respective criteria for readjustment/revision. The tariff is differentiated according to the type of consumer 

(consumption class) and the supply tension (group/sub-group). 

The distribution tariff structure is made up of costs of energy purchases, distribution, transmission, taxes, 

sector-related and social charges. Distribution companies acts as the agents that pass these costs on to all the 

sectors. 

Adjustments and Revisions Applied to Our Distributors 

Electricity tariffs for both the use of the network and the supply of electricity are adjusted annually by 

ANEEL, as well as revised periodically, typically as set forth in the concession agreement. In addition, 

ANEEL may revise tariffs at any time in extraordinary circumstances. For more information regarding how 

tariffs are adjusted, see “Management’s Discussion and Analysis of Financial Condition and Results of 

Operations— Principal Factors Affecting Our Results of Operations— Tariff Adjustments and Revisions”. 

Periodic tariff revisions occur in cycles set forth in the respective concession agreements. EDP 

Bandeirante has had two periodic revisions to its tariffs, in 2003 and 2007, and subsequent revisions will 

occur every four years, in October. EDP Escelsa has had five revisions to its tariffs, in 1998, 2001, 2004, 

2007 and 2010, and subsequent revisions will occur every three years, in August. 

Below is a brief summary of the revisions and adjustments applicable to our power distribution 

companies: 

112


In October 2009, ANEEL permanently ratified the second periodic tariff revision of EDP Bandeirante’s 

tariffs, the period from October 2007 to October 2011. Below are the main changes introduced by ANEEL 

during the second period tariff revision in comparison to what had been provisionally established in 2007 and 

2008: 

(i) the reference company value decreased from R$262.9 million to R$247 million. As the result of 

Public Inquiry No. 047/2009, ANEEL had previously disclosed a Reference Company value of 

R$235 million on July 13, 2009; 

(ii) component Xe of Factor X, used to calculate tariff readjustments, increased from 0.74% to 1.01%; 

and 

(iii) the Percentage of Unrecoverable Income Losses (Percentual de Perdas de Receita Irrecuperáveis) 

increased from 0.50% to 0.60% of gross sales (with taxes). 

These changes became retroactively effective as of October 23, 2007 and the gross and net BRR 

remained unchanged. 


EDP Escelsa was the only one of our power distribution companies that had two periodic tariff revisions 

during the Second Round of Period Adjustments by ANEEL. In August 2009, ANEEL permanently ratified 

the fifth periodic tariff revision for the period from August 2010 to August 2013. For the 2010 revision, it 

applied the same methodology used for the 2007 revision. The tariff revision index, approved by ANEEL to 

be applied from 2010, is 4.41%. 

TUSD 

(i) Reference company (Empresa de Referência): R$269 million duly recognized. 

(ii) Component Xe of Factor X, used to calculate tariff readjustments, increased from 0.00%, by 2007, to 

0.95%. 

The table below sets forth the gross revenue received by our power distribution companies for the use of 

their network by free consumers and concessionaires (power in transit through our network). 

As of and for the Three-Month As of and for the Year Ended 

Period Ended 

December 31, 

2011 2010 2010 2009 

(in R$ thousands) 

EDP Bandeirante ................................................................... 550.7 507.2 2,032.5 1,876.6 

EDP Escelsa ........................................................................... 394.1 417.7 1,525.0 1,415.7 

Total ...................................................................................... 944.8 925.1 3,557.5 3,292.3 

Revenues from the use of our networks increased by 8.1% for the year ended December 31, 2010, as 

compared to the year ended December 31, 2009. This increase is primarily attributed to a 21.7% increase 

volume purchased by free customers as a result of growth in the economy. Revenues from the use of our 

networks increased by 2.1% during the three-month period ended March 31, 2011 as compared to the 

corresponding period in 2010, mainly because of the 5.6% growth of power transit volume (free customers 

and concessionaires). The bulk of our revenues arising from free customers comes from the network use 

(capacity, in MW). For such customers, EDP Escelsa also collects sector-related charges (CCC, CDE, Proinfa, 

etc.), which are transferred to other entities and are calculated in accordance with the electricity consumption 

in MW. 

113

Power Generation Activities 

In 2010, the volume of energy generated by the EDP Group’s power plants, discounting energy losses, 

was 7,293 GWh, which is 5.6% greater than the volume recorded in 2009. The volume of energy sold in 2010 

totaled 8,309 GWh, which represents a 4.1% increase when compared to the 7,985 GWh of energy volume 

sold in 2009. In 2010, net revenue for the power generation business, disregarding intercompany eliminations, 

totaled R$1,004.1 million, a growth of 2.6% when compared to 2009. In 2010, net profit totaled R$199 

million, representing a decrease of 22.8% when compared to 2009. Net revenue for our power generation 

business, disregarding intercompany eliminations, totaled R$265.1 million for the first quarter of 2011, which 

represented a 16.7% increase when compared to the same period in 2010. Net profit totaled R$44.0 million, 

excluding non-controlling interests, as of March 31, 2010, representing a 11.1% increase when compared to 

the same period in 2009. 

The volume of energy sold in the group in the first quarter of 2011 totaled 1,981.6 GWh, an 11.2% 

increase from the 1,781.5 GWh sold during the first quarter of 2010, due to the seasonal nature of agreements 

for the sale of energy, with a greater volume sold during the first half of this year by comparison with the year 

before. 

The average price charged by the EDP Group was 5.7% higher in the first quarter of 2011 than of 2010, 

due to the adjustments of the contracts to reflect cumulative inflation. 

The power we generate is essentially produced through hydroelectric power plants. The power generated 

is transmitted through our own network or the network of third parties to power distribution companies, who 

then transmit the energy to consumers. Our power generation companies sell their guaranteed output, as 

defined by ANEEL, to power trading companies or power distribution companies. 

In 2009, our power generation business, the principal component of our growth strategy, had an installed 

capacity of 1,739 MW. As of each of December 31, 2010 and March 31, 2011, our power generation 

business had an installed capacity of 1,741 MW. The increase installed capacity in 2010 when compared to 

2009 was primarily due to the completion of power upgrades of the small hydroelectric power plants Rio 

Bonito, Suiça and Generating unit No. 3 of Mascarenhas and the correction of the installed capacity of small 

hydroelectric power plant Paraíso. 

114

The table below sets forth a brief description of our power generation assets. 

Plants Installed Capacity Physical Guarantee 

(MW) (Average MW) 

Enerpeixe (1) ........................................................................................................... 452.0 271.0 

HPP Peixe Angical ................................................................................................ 452.0 271.0 

Lajeado and Investco ........................................................................................... 902.5 526.0 

HPP Lajeado (2) ....................................................................................................... 902.5 526.0 

Energest ................................................................................................................ 218.4 145.9 

HPP Mascarenhas .................................................................................................. 184.5 127.0 

HPP Suíça .............................................................................................................. 33.9 18.9 

Energest/Cesa ....................................................................................................... 67.6 36.4 

SHP São João ......................................................................................................... 25.0 14.4 

SHP Rio Bonito ..................................................................................................... 22.5 9.4 

SHP Fruteiras ......................................................................................................... 8.7 5.6 

SHP Jucu ................................................................................................................ 4.8 2.9 

SHP Viçosa ............................................................................................................ 4.5 2.8 

SHP Alegre ............................................................................................................ 2.1 1.3 

Energest/Pantanal ................................................................................................ 52.8 35.6 

SHP Mimoso .......................................................................................................... 29.5 20.9 

SHP Paraíso ........................................................................................................... 21.6 13.3 

SHP São João I ...................................................................................................... 0.7 0.6 

SHP São João II ..................................................................................................... 0.6 0.5 

SHP Coxim ............................................................................................................ 0.4 0.3 

Energest/Costa Rica ............................................................................................ 16.0 12.3 

SHP Costa Rica ..................................................................................................... 16.0 12.3 

Energest/Santa Fé ................................................................................................ 29.0 16.4 

SHP Francisco Gros (ex SHP Santa Fé) ................................................................ 29.0 16.4 

Cenaeel (3) ............................................................................................................... 6.2 1.6 

Água Doce ............................................................................................................. 4.1 1.1 

Horizonte ............................................................................................................... 2.2 0.5 

Total ...................................................................................................................... 1,741.0 1,045.8 

(1) We hold a 60% equity interest. 

(2) We hold a 72.27% equity interest. 

(3) As per our 45% equity interest in EDP Renováveis S.A. 

Installed capacity (MW) 2010 2009 

Water source 

Lajeado and Investco (1) .......................................................................................... 902.5 902.5 

Energest ................................................................................................................. 218.5 215.0 

Cesa ........................................................................................................................ 67.6 65.7 

Costa Rica .............................................................................................................. 16.0 16.0 

Pantanal .................................................................................................................. 52.8 52.2 

Enerpeixe (2) ............................................................................................................ 452.0 452.0 

Santa Fé .................................................................................................................. 29.0 29.0 

Wind source 

Cenaeel (3) ................................................................................................................ 6.2 6.2 

Total ...................................................................................................................... 1,741.0 1,738.6 

(1) We hold a 72.27% equity interest. 

(2) We hold a 60% equity interest. 

(3) As per our 45% equity interest in EDP Renováveis S.A. 

Physical guarantee (Average MW) 2010 2009 

Lajeado and Investco (1) .......................................................................................... 526.6 526.6 

Energest ................................................................................................................. 145.9 145.9 

Cesa ........................................................................................................................ 36.4 34.9 

Costa Rica .............................................................................................................. 12.3 12.3 

Pantanal (2) ............................................................................................................... 35.6 35.6 

Enerpeixe (3) ............................................................................................................ 271.0 271.0 

Santa Fé .................................................................................................................. 16.4 16.4 

Cenaeel (4) ................................................................................................................ 1.6 1.3 

Total ...................................................................................................................... 1,045.8 1,044.0 

(1) Corresponding to the voting capital in EDP Energias do Brasil. 

(2) Not included physical guarantees from Coxim and Corumbá thermal plants (3.85 MW). 

(3) Corresponding to the 60% of the physical guarantee of EDP Energias do Brasil. 

(4) No physical guarantee: remuneration provided by effective generation. 

115

Enerpeixe 

Enerpeixe holds a 60% interest in the capital of the Peixe Angical hydroelectric power plant, located on 

the Tocantins River, built in partnership with Furnas Centrais Elétricas S.A., or Furnas. 

The Peixe Angical hydroelectric power plant 

Located on the Tocantins River, in the municipalities of Peixe and São Salvador, in the State of Tocantins, 

the Peixe Angical hydroelectric power plant has an installed capacity of 452 MW. The Peixe Angical 

hydroelectric power plant initiated its operations on June 27, 2006, when its generating unit n. 1 became 

operational. Generating units No. 2 and 3 entered into operation on July 29, 2006 and September 16, 2006, 

respectively. 

The concession for the Peixe Angical hydroelectric power plant is valid for the period of 35 years and 

was granted by the Brazilian government on June 28, 2001 to Enerpeixe, as the company that won the bidding 

process. Currently, we hold a 60% interest in Enerpeixe and state-owned Furnas holds the remaining 40%. 

Enerpeixe sells the electricity it generates from the Peixe Angical hydroelectric power plant as an 

“Independent Producer,” pursuant to the terms of the concession agreement. 

Energest 

Energest directly and indirectly controls power generation assets owned by us, holding 15 operating 

power plants, with a total capacity of 380.4 MW. The plants are located in the States of Espírito Santo (311.6 

MW of installed capacity) and Mato Grosso do Sul (68.7 MW of installed capacity). Energest is responsible 

for the management of the Mascarenhas and the Suíça hydroelectric power plants, and of the small 

hydroelectric power plants owned by Castelo Energético S.A., or Cesa, Costa Rica e Energética Ltda., or 

Costa Rica, Pantanal Energética Ltda., or Pantanal Energética, and the Francisco Gros small hydroelectric 

power plant (formerly Santa Fé). 

Investco 

Investco operates the Lajeado hydroelectric power plant, located on the Tocantins River in the 

municipalities of Lajeado and Miracema do Tocantins, in the State of Tocantins. The plant has an installed 

capacity of 902.5 MW, divided among five generation units of 180.5 MW each. 

The Lajeado hydroelectric power plant 

The Lajeado hydroelectric power plant, located on the Tocantins River in the State of Tocantins, initiated 

its commercial operations in December 2001, with the commencement of operations of its first turbine. In 

2002, the power plant was in full operation, with five engines, each with a generation capacity of 180.5 MW, 

and a total installed capacity of 902.5 MW. 

The concession for the Lajeado hydroelectric power plant is valid for 35 years and was granted by the 

Brazilian government on December 16, 1997 to the consortium that won the bidding process. 

We hold 49.45% of the total capital of Rede Lajeado and 73% of the voting capital (control) of Investco, 

through Rede Lajeado and EDP Lajeado. The division of the energy sold is in proportion to the interest held 

in the voting capital, in accordance with the concession agreement. 

Investco acts as the leader of the Lajeado consortium, and is responsible for contracting and acquiring all 

services and equipment in connection with the construction and operation of Lajeado hydroelectric power 

plant, in addition to contracting all financing agreements necessary in connection therewith. 

EDP Lajeado sells energy generated from the Lajeado hydroelectric power plant to two of our 

subsidiaries, Enertrade and EDP Bandeirante. See “Related Party Transactions.” 

116

In order to allow the Investco shareholders to operate the Lajeado hydroelectric power plant, on July 

2001, Investco, as owner of the energy generation assets of the Lajeado hydroelectric power plant, and each of 

the shareholders of Investco, collectively holders of 99% of the concession, entered into lease agreements, as 

amended on July 23, 2009, or the Lajeado Lease Agreements, for the same fraction of the assets of the 

Lajeado hydroelectric power plant corresponding to the interest of each Investco shareholder in the 

concession. 

Pursuant to the Lajeado Lease Agreements, each Investco Shareholder pays Investco a pre-determined 

monthly amount, beginning on the date the first generation unit began operations, which is subject to 

discounts calculated monthly as a result of Investco’s obligations under the financing agreements described 

below and its operating expenses. 

The obligations of the Investco shareholders set forth in the Lajeado Lease Agreements are guaranteed by 

the pledge of: (i) their rights arising from their interests in the concession; and (ii) receivables from the sale 

of the energy generated by the Lajeado hydroelectric power plant, other than with respect to the portion of 

those rights relating to 30% of the monthly invoiced receivables for the sale of energy and 50% of the 

receivables from the sale of energy exceeding the amount of energy, which are pledged to Eletrobrás pursuant 

to the Investment Agreement described in “Principal Shareholders—Shareholders’ Agreements.” 

Cenaeel 

We entered into a purchase agreement for the acquisition of 45% of Cenaeel in June 2008, with the 

remaining 55% equity interest held by EDP Renováveis. Cenaeel is a company with two operating wind farms 

in the State of Santa Catarina (Água Doce with 9.0 MW and Horizonte with 4.8 MW), with a total installed 

capacity of 13.8 MW. The acquisition was completed on February 16, 2009. 

Tramandaí 

On March 15, 2010, EDP Renováveis Brasil S.A., a company in which EDP Energias do Brasil has a 

45% stake, began the construction of the Elebrás Cidreira I wind farm in the municipality of Tramandaí, in 

the State of Rio Grande do Sul, with a capacity of 70 MW. This wind farm started its commercial operation 

on May 21, 2011. 

Increased Power Generation Capacity 

Our growth strategy in the generation segment is based on the comprehensive selection of projects to 

obtain profitable growth and create value. The following is a description of our projects. 

Pecém 

Our strategy to expand our installed capacity includes the construction of Pecém thermal power 

plant, in the State of Ceará, a project in partnership with MPX in which we hold 50% of the capital stock. 

Pecém thermal power plant will use imported coal and will have an installed capacity of 720 MW, 615 

of which were sold by TPP Pecém in the A-5 Auction conducted by CCEE in October 2007. The total 

investment in the project will be U.S.$2.8 billion. The price set at the auction was R$125.95/MWh, for a 

contractual term of 15 years. 

The project structure, including the engineering, procurement and construction agreement and the project 

financing, enabled the sale of electricity at an attractive level of return. The implementation schedule projects 

the commencement of commercial operations by January 2012, the date on which the commitment to deliver 

energy in the ACR begins. 

117

Francisco Gros small hydroelectric power plant (formerly Santa Fé) 

ANEEL published a decision on June 15, 2009 disclosing the authorization of the second generation unit 

of a Santa Fé small hydroelectric power plant to begin operations on June 11, 2009. 

Located in the city of Alegre, State of Espírito Santo, this project has an installed capacity of 29 MW and 

physical assured energy of 16.4 average MW. Of that amount, 16 MW was sold to 30 distributors in the A-3 

Auction conducted in June 2006, with the delivery of energy beginning in 2009. 

Investments in this project amounted to R$161.9 million, of which 47%, or R$75.6 million, of the 

funding was provided through a financing granted by BNDES and the remaining 53%, or R$86.3 million 

from our own resources. 

ANEEL, through ruling n. 2,913, dated as of October 4, 2010, consented with the change of name from 

Santa Fé to Francisco Gros. 

Santo Antônio do Jari hydroelectric power plant 

On June 15, 2011, through our subsidiary Ipueiras Energia S.A., we executed a Share Purchase 

Agreement for the acquisition of the total capital stock of ECE Participações S.A., or ECE, which owns 90% 

of the Amapá Energia Consortium. This consortium owns the right to operate the Santo Antônio do Jari 

hydroelectric power plant, located in the States of Pará and Amapá. The remaining 10% participation is 

owned by Jari Energética S.A., or JESA, original owner of the concession, and which has a tag along right to 

sell us its participation under the same conditions. The term to exercise this tag along right expires on July 15, 

2011. The Santo Antônio do Jari hydroelectric power plant will have an installed capacity of 300 MW and an 

average assured energy of 196.1 MW corresponding to a use factor of 65% already approved by ANEEL, of 

which 190 MW has already been sold under the A-5 auction held in December 2010 for the period of 30 years 

on December 31, 2044, when the concession term expires. The project also assumes an increase of installed 

capacity of 73.40 MW, which is subject to ANEEL's approval. Total estimated investment amount may vary 

from R$1,270 million and R$1,410 million, including the construction of the maximum capacity of 373.4 

MW, project payment to the sellers and any amounts arising from the tag along right by JESA. The closing of 

the acquisition is subject to the completion of certain conditions precedents, including the regulatory 

authorizations such as ANEEL's approval. 

Power Upgrades 

In 2010, we finished power upgrades on Rio Bonito small hydroelectric power plant (1.9 MW), which 

added 5.7 MW to the initial installed capacity. We expect to perform power upgrades (17.5 MW) on 

Mascarenhas hydroelectric power plant in 2012. 

The following chart shows the growth of our power generation capacity in the coming years, considering 

only projects whose construction has begun. In 2012, when the Pecém thermal power plant commences 

operations, our total installed capacity will be 2,117 MW. 

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530 

2005 

Energy Trading Activities 

Installed Capacity (MW) 

1,702 29 7 1,738 2 1,741 

32 

2008 

PCH 

Power upgrades 

2009 

Our energy trading activities are conducted through Enertrade. Enertrade enters into transactions in the 

free customer energy market, providing services for free customers in EDP Bandeirante’s and EDP Escelsa’s 

concession areas, as well as free customers generally. 

In addition to contracts with free consumers, Enertrade also has commercial relations with other power 

trading companies and independent producers. In terms of the annual volume of energy sold, Enertrade is the 

third-largest private energy trader in the Brazilian electricity sector, according to the CCEE’s records. In 2010, 

the volume of energy traded totaled 7,884 GWh, compared to 8,308 GWh in 2009. Energy trading’s objective 

is to obtain margins, and as a consequence it is subject to market conditions, which can result on a decrease or 

an increase in the volume sold, for the purpose of increasing return to the overall contract portfolio. 

In 2010, Enertrade began selling infrastructure and energy efficiency services, as a differentiation 

strategy. 


The following table sets forth the volume of electricity traded by Enertrade in the period ended December 

31, 2010 and 2009 and for the three-month period ended March 31, 2011. 

Physical guarantee (Average MW) 

For the threemonth 

period ended 

March 31, For the fiscal year ended 

2011 2010 

(in GWh) 

2009 

Energy sale 

Third parties ......................................................................................................... 1,981 7,412 7,491 

EDP Group companies ........................................................................................ 306 472 817 

Total .................................................................................................................... 

Energy purchase 

2,287 7,884 8,308 

Third parties ......................................................................................................... 1,970 6,612 7,378 

EDP Lajeado ........................................................................................................ 289 1,451 1,310 

Total .................................................................................................................... 2,259 8,063 8,688 

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2010 

Tramandaí 

360 18 2,151 

Pecém 


2012

Power Transmission Activities 

Our transmission activity is residual in the scope of the delivery of energy to the final customer. 

We provide power transmission activities under the concession granted for Castelo Energética S.A. that is 

now held by Evrecy, Concession Agreement n. 020/2008, consisting of: (i) Governador Valadares – 

Conselherio Pena (230kV); (ii) Conselheiro Pena – Aimorés (230kV); and (iii) Aimorés – Mascarenhas 

(Circuit 1) (230kV) and Mascarenhas Substation (230/138kV), located in the States of Minas Gerais and 

Espírito Santo; which was transferred through the partial spin-off of CESA – Castelo Energética S.A. 

This contract establishes the date of July 1, 2009 for the first periodical tariff revision of the transmission 

company and a review cycle of 4 years. In the first periodical tariff revision, all assets were revalued, pursuant 

to ANEEL Regulatory Resolution 338/2008. 

At the Ordinary Public Meeting of ANEEL officers on June 8, 2010, the final results from the first 

periodical tariff revision of Evrecy was approved, retroactive to July 1, 2009, included in the Technical Note 

n. 181/2010-SRE/ANEEL. The tariff repositioning ratio was negative 10.32%, reducing the Annual Revenue 

Permitted - RAP from R$7,848 thousand to R$7,039 thousand for the tariff year from July 1, 2009 to June 30, 

2010. 

The final adjustment installment of Evrecy for the cycle July, 2010, to June, 2011, considering the 

adjustments of the external financial components to the review, as cited in item 57 of the Technical Note 

181/2010SRE/ANEEL, was R$294 thousand recorded in current liabilities which is being amortized in 12 

installments as from July 2010. 

The recalculation of the average rate of the investment compensation that was reduced by ANEEL from 

9.18% p.a. to 7.24% p.a. in large part contributed to the reduction of the annual revenue permitted of Evrecy. 

This reduction of the average rate of the investment compensation was applied to all the transmission 

companies that went through the process of tariff revision in 2010. 

Other Activities 

Although our principal activities are the distribution, generation and trading of energy, we also provide 

technical consulting and advisory services regarding the energy sector to several Brazilian and foreign electric 

power companies as well as power transmission services. 

The following is a description of our subsidiaries that pursue other activities: 

Energest: a company that manages our existing and future generation assets. 

Escelsa Participações S.A., or Escelsapar: a company providing Internet and IT services exclusively to 

the companies of our group. 

Evrecy: a company that was established for the development of project studies, construction, installation, 

operation and exploration of energy transmission lines. 

Market Share 

Distribution 

The electric energy distribution is carried out according to exclusive concession contracts and ANEEL 

regulations, with network services paid for by TUSD and tariffs charged for supplying energy to free and 

special customers in concession areas. TUSD and tariffs charged for supply of energy are calculated and 

established by ANEEL within the parameters established in concession contracts, legislation and regulation of 

the electric sector. 

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The revenue for the use of the distribution system is obtained by the application of TUSD to consumer 

demand and is used in part to partially recover the cost of services and assets related to the distribution 

services. 

The supply tariffs applied to the captive consumers considers distribution costs, compensation of assets 

and costs for the purchase of energy. 

Generation 

For generation, revenue is established by the sale of existing electric energy at prices established in 

auctions and in bilateral contracts. Once such contracts are executed and the conditions precedent are satisfied, 

the energy released may be sold in regulated auctions to meet the distributor’s demands for existing energy 

and/or sold pursuant to contracts with free consumers, other generators or even commercializing companies. 

Trading 

The commercialization of electric energy occurs pursuant to bilateral negotiations of prices and 

conditions among generators and free customers. The free customers who participate in this market are the 

eligible consumers who opted for leaving the captive market. These consumers have legal restrictions to 

return to the captive market. 

Transmission 

Electric energy transmission is regulated by ANEEL pursuant to concessions obtained through bid or the 

segregation of verticalized concessions of transmission facilities, as is the case of the transmission company 

of our group. 

The transmission lines compose the Basic Network and are operated by the National Operator of the 

System – ONS, which contracts the owners of lines through the Contract for Rendering Transmission 

Services – CPST. The operators of the Transmission Lines are responsible for keeping them available to the 

ONS. 

The legislation establishes the right of generators and distributors to access to the free consumers’ 

network through payment of transmission tariffs. The costs of the entire Basic Network are apportioned 

among the generators, distributors and free consumers directly connected to the Network and pay tariff 

regulated by ANEEL. 

Competition 

The energy distribution network operates as a legal and natural monopoly, and use of the network is 

compensated through the TUSD. As a result, customers located in the concession areas of our power 

distribution companies, whether captive customers or free customers, must use our distribution network to 

access energy, compensating our power distribution companies through the TUSD. 

A consumer who opts for the free market continues to pay TUSD to the local power distribution company. 

Therefore, the drop in turnover as a result of the consumer switching over to the free market will not result in 

any decrease in the power distribution company’s margin. 

If a free consumer or other concession holders are able to meet the technical and regulatory conditions to 

transfer the connection point of their energy installations, from the distribution network to the Basic Grid, a 

decrease in the power distribution concession holder’s turnover results in a market loss. 

As for our power generation companies, after the expiration of each of their power sales agreements, the 

energy they produce must be sold as existing power, in the ACR and/or the ACL. 

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Competition in the ACR for our power generation companies occurs through auctions for the power 

purchase to supply and power distribution companies of the National Interconnected Electric System. In 

addition, investors of power generation companies face competition in bids for new concessions. The 

winning proposal secures a concession agreement and a contract for the power sale for a term of 15 to 30 

years. 

In the ACL, trading of energy occurs through free negotiations and prices and conditions are freely 

agreed upon by the parties. In the ACL, competition exists between power generation concessionaires and 

permit holders, trading companies and energy importers. 

In the power trading segment, power trading companies compete for the power purchased from several 

sources. The purchase of power from related party power generation companies is not prohibited. Energy 

trading companies also compete in the trading and intermediation of power sales to free consumers. Our 

principal competitors in the energy trading business are Companhia Paulista de Força e Luz, BTG Pactual, 

Tractebel Energia S.A. and ECOM Ltda. 

In power trading, market risk management is fundamental to be competitive in this segment. Efficiency 

in the control of risk and the ability to take advantage of price differences in the ACL are fundamental for 

Enertrade in terms of competition. 

The competition in the transmission occurs at the time bids for concessions by ANEEL are submitted by 

bidders who compete for the right to implement the transmission line. The bidder with the construction 

proposal with the lowest cost, wins the concession. The service rendering is regulated and there is no 

competition. 

Employees 

Profile of Our Employees 

We operate in different regions of Brazil and we recruit, select and hire our employees in the areas in 

which we operate. For technical and operational positions, we, for the most part, hire from the local labor 

market in the areas we serve. As for senior management, we prefer to hire officers from the region of the 

business unit; however, if we are unable to find an appropriate candidate, we recruit from other areas. 

On March 31, 2011, EDP Energias do Brasil’s had 120 employees, which represented a 45% increase 

when compared to the number of employees in December 31, 2010. This change in the employee headcount 

was caused by: (a) the contracting of 9 employees; (b) the dismissal of 7 employees and (c) 37 internal 

transfers between group companies in order to comply with ANEEL’s regulations. As a result, the turnover 

registered was one of 22.27%, but it should be stressed that if we exclude the transfers between companies of 

our group from the calculation basis, the real turnover was one of 9.76%. Of the 120 employees, 55% are 

men and 45% are women. 

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The following table shows the number of the Company’s employees by category and by geographical 

location, for the dates indicated: 

For the three-month period 

ended March 31, For the year ended December 31, 

Employees 2011 2010 2009 2008 

Total employees ........................................................ 

By category: 

120 83 61 52 

Officer ..................................................................... 4 4 4 3 

High management ................................................... 15 5 7 5 

Managers ................................................................. 16 2 7 6 

Consulting/Experts ................................................. 27 8 1 1 

Professionals ........................................................... 43 47 37 30 

Technicians ............................................................. 

By location: 

15 17 3 7 

Espírito Santo .......................................................... 2 0 0 0 

Mato Grosso do Sul ................................................ 0 0 0 0 

São Paulo ................................................................ 118 83 61 53 

Tocantins ................................................................. 0 0 0 0 

For the three-month period 

ended March 31, For the year ended December 31, 

Outsourced employees 2011 2010 2009 2008 

Total outsourced employees .................................... 

By category: 

40 40 37 39 

Cleaning .................................................................. 14 14 14 14 

Maintenance ............................................................ 3 3 3 3 

Mailroom ................................................................ 5 5 5 5 

Reception ................................................................ 4 4 3 3 

Phone operator ........................................................ 2 2 2 2 

Monitoring .............................................................. 3 3 3 3 

Security ................................................................... 8 8 7 9 

Receptionist ............................................................ 

By location: 

1 1 0 0 

São Paulo ................................................................ 40 40 37 39 

Compensation 

Promotion 

Promotion is awarded to the employees who assume titles carrying more responsibility. All changes in 

positions are considered as from junior to full or from level I to level II. To be eligible an employee must have 

at least 1 (one) year in the current position, in addition to a minimum classification of 91% of performance. 

Promotions offer the initial salary of the position to which the employee is being promoted for remaining 

promotions, the Executive Board decides on a case by case basis. There will be no installments for the 

concession of the proposed salary. 

Merit 

In certain circumstances, we recognize our employees for their performance with a salary increase to a 

higher salary category. All levels of employees who hold the same position for at least one year are eligible 

for this recognition. The amounts to be granted and the eligibility varies in accordance with the performance 

of the employee. In certain cases, managers are able to grant the compensation under their available budgets, 

in September of each year. 

Variable Compensation 

Our compensation policy is based on market-rate salaries in order to maintain an appropriate level of 

competitiveness, which is reviewed annually, or when new positions are created. Research in connection with 

compensation is conducted through the Hay Group consultancy method, which classifies job positions by 

points, taking into account three elements: know-how, mental processing and responsibility for results. 

123

Analysis of these factors results in the weighting attributed to the job position. This method enables the 

assessment of the relative importance and complexity of results expected for the job position. 

Our compensation policy takes into account our respect for differences and offers equal development 

opportunities to our employees. 

Social Security and Benefits 

We manage our benefit policy offered to our employees to provide them wellness and safety, inside and 

outside the work environment. As a result, we remain competitive in hiring and retaining our human 

resources and motivating our employees. 

We believe in social responsibility towards our employees, and we offer a plan of benefits considered one 

of the best in the market, including: health insurance; dental plan; pension fund; meal and food vouchers; day 

care assistance; and life insurance. 

Profit-Sharing Program 

We offer profit-sharing programs for our employees pursuant to Brazilian labor laws. Employee profit 

sharing depends on the fulfillment of five criteria: EDP group’s goals, the Company’s goals, area’s goals, 

individual goals and performance valuation. The bonus is determined in number of monthly salaries 

(represented by the sum of the base salary and additional payment), and may range from zero up to six on 

each employee category. 

Unions 

In 2010, we entered into collective bargaining agreements with all unions representing our employees. 

The agreements included profit-sharing programs for employees. We have a policy that assures free 

association with labor unions and collective bargaining in all the companies of our group. 

The following table sets forth the associations of our employees with unions for the periods indicated. 


Union participation 2011 2010 2009 2008 

Number of associates ................................................................................... 8 3 0 0 

% of associates ............................................................................................. 6% 4% 0 0 

Number of union categories ........................................................................ 1 1 1 1 

Environment 

Legal Aspects 

The power distribution, transmission and generation in Brazil are subject to local, state and federal 

governmental laws, with many of these laws relating to the preservation of the environment. The Brazilian 

constitution gives the federal and state governments the power to enact laws to protect the environment and to 

issue regulations thereunder. Municipalities also have the power to enact such laws and regulations in 

relation to matters of local interest. Any failure to comply with environmental laws and regulations may 

result in significant fines or restrictions on activities. 

Violations of environmental laws may be considered crimes, in which case we and our managers could be 

liable. Violations may also result in administrative penalties, such as fines of up to R$50 million (in case of 

repeated violations, this fine may be doubled or tripled) and temporary or permanent suspensions of activities. 

In addition, such penalties may be imposed, independent of the obligation to repair the damage caused to the 

environment. 

Environmental damage also may result in direct and indirect joint civil liability. The obligation to restore 

the environment may affect all those indirectly or directly involved in the damage, irrespective of proof of 

fault. As a result, when we enter into agreements with third parties to provide any services in our business, 

124

such as for waste disposal, we are subject to liability for possible environmental damage caused by such third 

parties. 

The principal environmental protection agencies overseeing our activities are the Brazilian 

Environmental Institute and Renewable Natural Resources (Instituto Brasileiro do Meio Ambiente e Recursos 

Naturais Renováveis), state environmental protection agencies integrated in the National Environmental 

System (Sistema Nacional do Meio Ambiente), as well as state and federal water resources agencies. State 

and federal justice departments inspect compliance with applicable environment laws and may file a public 

proceeding in connection with any non-compliance with such laws. 

Environmental Issues (Power Distribution) 

In 2010, our power distribution companies invested a total amount of approximately R$12.7 million 

relating to the environment, of which R$3.8 million was invested in EDP Bandeirante and R$8.9 million was 

invested in EDP Escelsa. 

EDP Bandeirante's expenses related to environmental issues result from the implementation of the 

environmental integrated management system, licensing projects and implementation of isolated and compact 

networks. 

The installation of 281 kilometers of protected electricity distribution network in the concession area 

during 2010 provided a better performance of the system and a harmonious environment with the urbanized 

areas, reducing the need for deforestation and helping to improve the landscape. 

During 2010 we executed agreements with municipalities for the improvement of cutting techniques and 

its regularization before the municipal authorities in order to avoid interruptions on the electricity supply. 

EDP Bandeirante executed a biodiversity agreement with the municipalities of Guaratinguetá, Caçapava and 

Guararema, making available tools and equipments for the municipalities greenhouses as well as seeds in 

order to improve the local biodiversity. 

Finally, in order to prevent environmental liabilities, EDP Bandeirante is still developing a soil and 

waters monitoring program, and periodical campaigns of noise measurement in its the substations. 

EDP Escelsa has been operating systematically to preserve natural resources. It promotes and has 

implemented several projects to protect local plant and animal species, restore habitats and manage waste. It 

acts to protect and decrease noise and supports governmental and non-governmental organizations that protect 

the environment. To introduce these activities in its management process, EDP Escelsa is implementing the 

SIGA system, aligned with the international norms ISO 14001. 

Power distribution lines and substations that entered into operation before the need of environmental 

licensing, or after this date, are currently being normalized with the applicable environmental agencies. 

Environmental Issues (Power Generation) 

Like our power distribution companies, our power generation companies are using their best efforts to 

sensibly use natural resources and make their employees, suppliers and the communities in which they 

operate aware of the need to protect the environment. 

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In the period ended December 31, 2010, our power generation companies, those in operation and under 

development, invested a total amount of R$14.1 million. As for our power generation assets in operation, we 

have preservation programs to protect natural habitats and animal species and we monitor the quality of water 

in reservoirs. We also implemented the rural development plan to support communities affected by the 

formation of reservoirs from our power plants. 

In particular, we highlight the Peixe Angical hydroelectric power plant, which was concluded in 2008, 

and has implemented 30 environmental programs to minimize and offset the environmental impact caused by 

the construction of the project. 

The activities of hydroelectric power plants are subject to the granting of water usage rights and payment 

for the use of the water. For rivers under the dominion of the Brazilian government, the grant is issued by the 

Brazilian Water Agency (Agência Nacional de Águas). State water resource agencies issue grants in 

connection with other water resources. Our projects that use water resources have already been granted usage 

rights. 

In addition, we implemented an integrated management system for environment, occupational health and 

labor security, designed by SGIS (Integrated System for Sustainability Management). SGIS is to be 

implemented at the generation companies, with the certification for the Peixe Angical and Lajeado plants 

(ISO 14.000 and OHSAS 18.000) and Paraíso and São João small hydroelectric power plants (ISO 14.000) 

having been obtained. 

Environmental Licensing 

Under Brazilian environmental laws, developers are required to submit construction, installation, 

expansion, alteration and operation plans of any project or business that use natural resources and that have 

damaged or have the potential to damage or pollute the environment within the Brazilian territory for prior 

environmental licensing. 

The granting of the environmental license constitutes an administrative act in which the relevant 

environmental agency establishes conditions, restrictions and measures for environmental control to be 

complied with by the developer. 

The process of environmental licensing has three distinct phases, depending on the stage of development, 

and is conducted with local, state or federal environmental agencies, according to jurisdiction, which is based 

on overriding interest of the affected environmental resources. For each phase, the following licenses are 

issued, all of which have an established expiration term according to the type of license, activity or project: 

• Prior licensing: The prior licensing is the proof of environmental viability of a project and 

determines basic requirements and environmental conditions to be complied with in the phases 

following implementation. If the activity is considered to have a high potential to damage or pollute 

the environment, it is necessary to prepare an environmental impact study (EIA/RIMA), which is 

submitted to the environmental licensing agency for analysis and presented at a public hearing to the 

affected communities. 

• Installation license: The installation license is an authorization for the construction of the project, 

setting forth all control measures and other environmental requirements to be complied with before 

the operation phase. The proof of the implementation of prior licensing requirements and the 

development of a basic environmental project, or BEP, and relevant environmental programs are 

necessary for the issuance of the installation license. 

• Operation License: The operation license is the authorization granted to the developer in order to 

conduct its operations at its facilities for the term established in the license, which is renewable. This 

license must be requested by the developer from the environmental agency, before the completion of 

construction, together with proof that the actions included in the BEP were implemented and the 

environmental requirements of the installation license were fulfilled. 

126

All of our operating licenses are subject to renewal, which must be requested at least 120 days before the 

scheduled expiration date. We actively manage this licensing process, given that all of our projects require 

operation licenses. 

The following table sets forth the status of the environmental licensing of our power generation projects: 

Power 

Environmental licenses – EDP Plants 

Status 

Plant 

Water – Espírito Santo: 

Company (MW) (Plant) License 

PCH Rio Bonito* Cesa 22.00 Operation LO-GCA/SAIA/No. 249/ 

2006/Classe IV 

127 

Validity 

From To 

09/20/2006 09/19/2010 

PCH Fruteiras* Cesa 8.74 Operation LO No. 133/99 08/10/1999 08/09/2003 

PCH Jucu Cesa 4.84 Operation LO-GCA/SAIA/No. 197/ 

2010/Classe II 

05/24/2010 05/23/2014 

PCH Alegre Cesa 2.06 Operation LO-GCA/SAIA/No. 160/ 

1999/Classe II (Renewing) 

06/19/2009 06/18/2013 

PCH Viçosa* Cesa 4.50 Operation LO No. 118/99 06/29/2001 06/28/2005 

PCH São João* Cesa 25.00 Operation LO-GCA/SAIA/No. 040/ 

2007/Classe II 

02/14/2007 02/13/2011 

PCH Santa Fé Santa Fé 29.00 Operation LO-GCA/SAIA/No. 090/ 

2009/Classe III 

04/02/2009 04/01/2013 

UHE Mascarenhas Energest 189.00 Operation LO-GCA/SAIA/No. 130/ 

2011/Classe III 

05/20/2011 05/19/2015 

UHE Suíça* 

Water – Mato Grosso do Sul: 

Energest 34.00 Operation LO-GCA/SAIA/No. 109/ 

2006/Classe IV 

05/08/2006 04/04/2010 

PCH Coxim* Pantanal 0.40 Operation No. 264/2005 09/08/2005 09/07/2009 

UHE Minoso* Pantanal 29.50 Operation No. 062/2006 02/24/2006 02/23/2011 

PCH São João I* Pantanal 0.66 Operation No. 263/2005 09/08/2005 09/07/2009 

PCH São João II* Pantanal 0.60 Operation No. 262/2005 09/08/2005 09/07/2009 

PCH Costa Rica Costa Rica 16.00 Operation No. 160/2007 07/27/2007 07/26/2012 

PCH Paraíso* 

Water – Tocantins: 

Pantanal 21.00 Operation No. 264/2003 12/23/2003 12/22/2007 

UHE Luis Eduardo 

Magalhães 

Investco 902.50 Operation LO SICAM No. 221/2010 02/05/2010 02/08/2015 

AHE Peixe Angical 

Air 

Enerpeixe 498.75 Operation LO No. 518/2006 

1st Renewing 

03/22/2010 03/20/2016 

UEE Horizonte Cenaeel 4.80 Operation LAO No. 1026/2007 12/21/2007 12/21/2011 

UEE Água Doce Cenaeel 9.00 Operation LAO No. 684/2007 07/06/2007 07/06/2011 

UEE Elebrás Cidreria I 

(Tramandaí) 

Elebrás 70.00 Operation LAO No. 140/2011 – DL 01/19/2011 01/18/2015 

* Assets with environmental licenses or regulatory renewal deadline expired, however, the instruction of the 

regularization process was provided prior to the expiration deadline. We are awaiting for the environmental 

authorities to reply.

Concessions, Authorizations and Permits 

The following table sets forth a brief description of our concession agreements and resolutions that grant 

concessions, authorizations and permits to our subsidiaries for the construction or operation of generation, 

distribution or trading of electricity activities in Brazil: 

Concessionaire Site State Type of Grant Began Ends 

Energest HPP Mascarenhas Espírito Santo Concession Agreement 

003/2007 

July 13, 1995 July 16, 2025 

Energest HPP Suíça Espírito Santo Concession Agreement 

003/2007 

Pantanal Energética CGH Coxim 

(Vitor A. De Brito) 

128 

July 14, 1995 July 16, 2025 

Mato Grosso do Sul Order 973/2006 December 4, 1997 indefinite 

Pantanal Energética CGH São João I Mato Grosso do Sul Order 973/2006 December 4, 1997 indefinite 

Pantanal Energética CGH São João II Mato Grosso do Sul Order 973/2006 December 4, 1997 indefinite 

Pantanal Energética PCH Mimoso 

(Assis Chat) 

Mato Grosso do Sul Concession Agreement 

002/1997 

December 4, 1997 December 4, 2027 

Pantanal Energética HPP Paraíso I Mato Grosso do Sul Resolution 358/1999 December 23, 1999 December 23, 2029 

CESA PCH Viçosa Espírito Santo Resolution 111/1999 May 19, 1999 May 19, 2029 

CESA HPP São João Espírito Santo Resolution 110/1999 May 19, 1999 May 19, 2029 

CESA HPP Alegre Espírito Santo Concession Agreement 

002/2007 

CESA HPP Fruteiras Espírito Santo Concession Agreement 

002/2007 

CESA HPP Jucu Espírito Santo Concession Agreement 

002/2007 

CESA HPP Rio Bonito Espírito Santo Concession Agreement 

002/2007 

CESA HPP Iúna Espírito Santo Concession Agreement 

002/2007 

CESA HPP Aparecida Espírito Santo Concession Agreement 

002/2007 

CESA HPP Furmaça Espírito Santo Concession Agreement 

002/2007 

CESA HPP Rio Preto Espírito Santo Concession Agreement 

002/2007 

Costa Rica 

Energética Ltda. 

EDP Lajeado 

Energia S.A. 

July 13, 1995 July 16, 2025 

July 13, 1995 July 16, 2025 

July 13, 1995 July 16, 2025 

July 13, 1995 July 16, 2025 

July 13, 1995 July 16, 2025 

July 13, 1995 July 16, 2025 

July 13, 1995 July 16, 2025 

July 13, 1995 July 16, 2025 

HPP Costa Rica Mato Grosso do Sul Resolution 468/2001 November 5, 2001 November 5, 2031 

HPP Lajeado Tocantins Concession Agreement 

005/1997 

Investco HPP Lajeado Tocantins Concession Agreement 

005/1997 

Enerpeixe HPP Peixe Angical Tocantins Concession Agreement 

130/2001 

January 15, 1998 January 15, 2033 

January 15, 1998 January 15, 2033 

November 7, 2001 November 7, 2036

Concessionaire Site State Type of Grant Began Ends 

Enercouto S.A. HPP Couto 

Magalhães 

Santa Fé Energia S.A. PCH Francisco 

Gros 

Pecém TPP Porto do 

Pecém 

Mato Grosso Concession Agreement 

021/2002 

129 

April 23, 2002 April 23, 2037 

Espírito Santo Resolution 482/2001 November 13, 2001 November 13, 2031 

Ceará Ordinance MME No. 

226/2008 

July 1, 2008 July 1, 2043 

Terra Verde TPP Terra Verde I Matto Grosso do Sul Resolution 1,979/2009 June 25, 2009 June 25, 2039 

Cenaeel Wind Farm 

Horizonte 

Cenaeel Wind Farm Água 

Doce 

Elebrás Wind Farm 

Elebrás Cidreira I 

Elebrás Wind Farm 

Elebrás Santa 

Vitoria do Palmar I 

Santa Catarina Order 472/2002 August 12, 2002 Indefinite 

Santa Catarina Resolution 675/2002 December 11, 2002 December 11, 2032 

Rio grande do Sul Resolution 495/2002 September 5, 2002 September 5, 2032 

Rio grande do Sul Resolution 461/2002 August 28, 2002 August 28, 2032 

Escelsa Distributor Espírito Santo Concession Agreement 

001/1995 

Bandeirante Distributor São Paulo Concession Agreement 

002/1998 

(1) Independent Producers of Electric Energy (Produtores Independentes de Energia Elétrica). 

December 7, 1997 July 17, 2025 

October 23, 1998 October 23, 2028 

On June 15, 2011, we executed a Share Purchase Agreement for the acquisition of the total capital stock 

of ECE Participações S.A., or ECE, which owns 90% of the Amapá Energia Consortium. This consortium 

owns the right to operate the Santo Antônio do Jari hydroelectric power plant, located in the States of Pará 

and Amapá. The closing of the acquisition is subject to the completion of certain conditions precedents, 

including regulatory authorizations such as ANEEL's approval, which is why it is not included in the table 

above. 

For more information about our concessions see “Overview of the Brazilian Electricity Industry— 

Regulatory Environment — Concessions.” 

Seasonality 

Our power distribution companies do not experience any relevant seasonality, since the economic 

characteristics of the markets in which they operate, including the manufacturing, residential and commercial 

markets to captive and free customers, are generally offsetting, resulting in a relatively constant revenue flow 

throughout the year. Furthermore, energy transmission and distribution infrastructure does not have structural 

or operating features subject to seasonal adjustments. In 2010, for example, maximum and minimum monthly 

gross revenue equaled 106% and 96% of the average monthly gross revenue for that year. The revenue and 

results of our power distribution companies are most significantly influenced by the local economy of their 

concession areas. 

Our hydroelectric power plants are connected to the National Interconnected Electric System and have 

been constructed with reservoirs engineered to normalize production outflow. Through the MRE, the energy 

generated by power plants that exceed their assured energy is transferred to plants that generate power below 

their assured energy. In this way, the operation of the energy system as a whole is normalized through the 

mutual and joint support of participating power plants. Thus, although the production of hydroelectric power 

depends on hydrologic and climatic factors, under normal conditions, the system has mechanisms to mitigate 

the effects of such factors.

Property, Plant and Equipment 

Our main properties are HPPs, TPPs, substations and distribution networks in the states of São Paulo, 

Espírito Santo, Mato Grosso do Sul and Tocantins. On March 31, 2011, the net book value of our fixed assets 

totaled R$5,3 million. Our generation facilities represented 99.9% of this net book value, since transmission 

and distribution assets are now classified as other accounts and receivables, in compliance with IFRIC 12. 

Some of our subsidiaries possess easements for distribution lines, which are Company assets that do not revert 

to the land owners upon expiration of our concessions. In general, our facilities are adequate for our present 

needs and are appropriate for their intended purposes. 

Under Brazilian law, certain real property and facilities that we use to perform our obligations under our 

concessions may not be transferred, assigned, pledged, mortgaged, encumbered or sold to any of our creditors, 

or be subject to attachment, without prior approval by ANEEL, and as long as it does not jeopardize the 

operation and continuity of the electric energy generation and distribution services. 

Despite granting concessions for the construction of HPPs, the Brazilian government does not 

concurrently issue decrees for the expropriation of properties affected by the construction of power plants or 

floods in areas neighboring a power plant's dams. These decrees are only issued when the concessionaire 

shows proof that it negotiated with at least 50% of owners of affected properties. Following such negotiations, 

the concessionaire may request the issuance of an expropriation decree to ANEEL. The regulating agency 

studies the request and confirms all available negotiation options were conducted. In this case, the agency 

issues an expropriation decree for the affected property. If the concessionaire and the property owners are 

unable to agree upon the price for the property or easement, the concessionaire may use the decree of 

expropriation to obtain, in court, a provisional issuance of possession of the property, which enables the 

construction to continue while a judicial expert appraises the fair market price of the property. 

Other than the construction of TPP Pecém and our power capacity upgrades, we do not have any 

expansion plans approved for our fixed assets. 

Insurance 

We purchase insurance policies with coverage amounts determined based on the advice of insurance 

specialists, taking into account the nature and level of the risk, in amounts that are deemed sufficient to cover 

any significant losses to our assets and liabilities, according to standards in the insurance market. The 

principal amounts of insurance coverage we carry are as follows: 

Substations ........................................................................................................................................................ 

As of March 31, 2011 


(consolidated) 

922.8 

Power plants ...................................................................................................................................................... 991.4 

Supplies ............................................................................................................................................................. 32.0 

Furniture and fixtures (own) ............................................................................................................................. 35.5 

Furniture and fixtures (third parties) ................................................................................................................ 65.5 

Civil liability ..................................................................................................................................................... 70.0 

Transportation (property) ................................................................................................................................. 7.5 

Transportation (vehicles) .................................................................................................................................. 12.8 

Personal accidents ............................................................................................................................................. 684.2 

Our distributors have insurance policies from reputable insurance companies to protect their assets 

against fire, lightning, explosions, electrical damage and minor engineering work in our various substations, 

buildings and facilities. We also have insurance policies for general civil liability protection against property 

damage and personal injury caused to third parties. 

Our electricity distributors have no insurance coverage for the risk of interruption of commercial 

operations because we believe that the relative risk of major interruption does not justify the cost of the 

applicable insurance premiums. Risks involving flood, earthquake, landslide, theft and terrorist acts are not 

covered by our insurance policies. 

130

Our generation plants maintain insurance coverage on their generators and turbines against fire, lightning, 

explosions, short circuits, electricity interruptions and equipment malfunctions. 

Intellectual Property 

Trademarks 

In Brazil, ownership of a trademark is granted only after it is registered with the National Institute of 

Industrial Property (Instituto Nacional de Propriedade Industrial), or INPI, the agency responsible for 

granting trademarks and patents. After registration is approved by INPI, its holder has exclusive rights to the 

trademark in Brazil for a ten-year period, which may be successively renewed. Until registration of a 

trademark is granted, the applicant may only expect trademark rights for the identification of its products or 

services. 

We have a policy to protect our trademarks and have filed requests for the registration of approximately 

60 trademarks with the INPI in several classes related to our activities. Our principal trademarks include the 

names of our company and our subsidiaries, among them: “EDP”, “Energias do Brasil”, EDP Bandeirante”, 

“EDP Escelsa”, “Enertrade” and “Energest”. 

Currently, all our material trademarks are duly registered or in ongoing registration with the INPI. We do 

not believe that the denial of registration of any of our trademarks would negatively impact our business and 

results of operations. There are no facts that may cause us to lose our trademark rights. 

All our trademarks and patents are developed in order to improve our performance, with no intention to 

sell or otherwise dispose our intellectual property. 

Legal Proceedings 

Overview 

We and our companies are currently involved in various administrative, judicial and arbitration 

proceedings relating to tax, labor, and civil matters, in addition to various administrative proceedings relating 

to environmental and regulatory obligations. 

As of March 31, 2011, our consolidated contingencies, relating to proceedings relating to tax, labor, and 

civil matters, in addition to various administrative proceedings relating to real estate and regulatory 

obligations in which we believe the probability of loss is probable or possible, amounted to approximately 

R$864.4 million, for which we have recorded provisions in the amount of R$153.4 million. 

The classification of the probability of loss related to processes that involve us or our companies take into 

account the prognosis of “probable”, “possible” or “remote” loss, based on the analysis of the alleged facts in 

the initial legal brief, of the arguments that will be deduced in the defense against the lawsuit taking into 

consideration the factual and legal situation, of the dominant jurisprudential position in other such cases, the 

opinion of the internal and external lawyers responsible for handling each lawsuit and for the legal 

development observed in each lawsuit. 

The amounts to be provisioned for such cases are determined based on the values actually involved and in 

the opinion of the external and internal lawyers responsible for handling the lawsuits, with provisions only 

being set up for amounts in relation to those lawsuits where it is considered that the loss is likely. Bearing in 

mind the above-described method of setting up provisions, the amount provided for by us and by our 

companies in relation to each lawsuit tends to coincide with the amount of expenses or losses that we and our 

companies effectively have to incur, but this may not necessarily happen on account of the interpretative 

freedom that each judge has in analyzing the lawsuit. 

EDP Bandeirante is party to several civil, tax and labor proceedings for which we believe the likelihood 

of loss is remote. These amounts are not reflected in the total amount of contingencies in the table below 

because of the subjective nature of the underlying claims, which we and EDP Bandeirante believe do not 

represent relevant contingencies. 

131

The table below sets forth our contingencies (relating to proceedings in which we believe that loss is 

probable or possible), provisions and judicial deposits for the periods indicated: 

Contingencies Provision Judicial Deposits 

As of 

As of 

As of 

As of March December As of March December As of March December 

31, 2011 31, 2010 31, 2011 31, 2010 31, 2011 31, 2010 


Labor ................................................... 118.3 115.6 45.7 45.0 21.0 18.1 

Civil..................................................... 253.0 246.3 66.8 66.2 24.4 24.2 

Tax ...................................................... 398.3 392.5 11.6 10.6 2.9 4.0 

Other ................................................... 94.9 87.5 29.3 28.2 – – 

Total ................................................... 864.5 842.9 153.4 150.0 48.3 46.3 

Labor Proceedings 

As of March 31, 2011, we and our companies are currently involved in various administrative and 

judicial labor proceedings, with a total contingent amount of approximately R$118.3 million (relating to 

proceedings in which we believe the probability of loss is probable or possible), R$45.7 million of which has 

been provisioned. 

In general, labor proceedings involve claims regarding overtime, holidays, the Brazilian Unemployment 

Compensation Fund (Fundo de Garantia do Tempo de Serviço), the 13 th salary, risk premium compensation, 

salary parity, secondary liability involving service providers, voluntary dismissal plans and retirement plans, 

among others. 

Civil, Arbitration and Regulatory Proceedings 

As of March 31, 2011, we were party to various judicial and regulatory proceedings relating to arbitral, 

tax and civil matters, with a total contingent amount of approximately R$253 million (relating to proceedings 

in which we believe the probability of loss is probable or possible), R$66.8 million of which has been 

provisioned. In general, civil proceedings involve claims relating to compensation for accidents with third 

parties, suspension of the power supply, measures involving the rationing of energy, theft of energy, 

compensation for damaged equipment, collection disputes, and economic plans, among others. 

In addition, we are party to proceedings related to: (i) expropriations and administrative easements; (ii) 

the amounts charged for public utilities and the return of amounts unduly charged; (iii) charges for supposed 

frauds or energy meter defects; (iv) payment for the cost of power transmission lines; (v) damages from 

retroactive charges and bills within the same month; (vi) billing amounts of a separate nature on the energy 

bill; (vii) the tariff revisions, including those that created the minimum tariff (tarifa mínima) or social tariff 

(tarifa social)); (viii) contractual contentions; (ix) damages from the development of Lajeado hydroelectric 

power plant; (x) return of emergency energy cost charge amounts; (xi) pleas requiring the universalization of 

power supply services; and (xii) damages from energy fluctuations. 


EDP Bandeirante is the defendant in a judicial claim proposed by White Martins S.A. and White Martins 

Gases Industriais S.A. disputing the legality in the increase of tariffs charged by EDP Bandeirante to 

industrial customers between March 1986 and November 1986. The amount of R$77.4 million was judicially 

deposited as guaranty of the lawsuit in April 2011, but it was later removed. Based on the opinion of EDP 

Bandeirante's external counsel, the chances of loss in this proceeding is probable, and as a result on June 15, 

2011, EDP Bandeirante made a provision in the amount of R$77.4 million. 

Tax Proceedings 

As of March 31, 2011, we were party to various administrative and judicial tax proceedings, with a total 

contingent amount of approximately R$969.9 million, R$11.6 million of which relates to proceedings in 

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which we believe the probability of loss is likely and the remainder of which we believe the probability of 

loss is remote or possible. 

For detailing the cases, the following criteria in terms of materiality were adopted: (a) possible and 

probable expectation of loss, notably those with a risk value in excess of R$20 million; (b) remote expectation 

of loss, notably those with a risk value in excess of R$20 million, which individually represent a sum that 

exceeds 5% (five per cent) of the fiscal contingency and which when discussed as a matter of jurisprudence is 

widely unacceptable from the perspective of the taxpayer. Other factors that could influence the investment 

decision were also taken into account. 


Together with Eletropaulo Metropolitana Eletricidade de São Paulo S.A., EDP Bandeirante is party to a 

claim regarding the plaintiffs' right of amnesty set forth in Provisional Laws Nos. 1858-6 and 1858-8 to pay 

federal taxes. A favorable judgment was issued by the trial court. The Brazilian government presented an 

appeal that is currently being adjudicated. The total contingency as of March 31, 2011, for both plaintiffs was 

approximately R$378 million, and it is not possible to estimate the separate responsibility of EDP Bandeirante. 

Based on the opinion of EDP Bandeirante's external counsel, the probability of loss in this proceeding is 

remote, and EDP Bandeirante has not established a provision in connection with this proceeding. 


EDP Escelsa is disputing the set off of COFINS with FINSOCIAL credits. The total contingency as of 

March 31, 2011 was R$40 million. Based on the opinion of EDP Escelsa's external counsel, the probability of 

loss in this proceeding is possible, and EDP Escelsa has not established a provision in connection with this 

proceeding. 

EDP Energias do Brasil 

EDP Energias do Brasil is administratively disputing the set offs for IRPJ credits from 1999 to 2001. The 

total contingency as of March 31, 2011 was R$39 million. Based on the opinion of EDP Energias do Brasil's 

external counsel, the probability of loss in this proceeding is possible, and EDP Energias do Brasil has not 

established a provision in connection with this proceeding. 

Environmental Proceedings 

As of March 31, 2011, we were party to various administrative and judicial environmental proceedings. 

No provisions have been made for these contingencies because the uncertainty of amounts involved. In 

general, environmental proceedings are filed in connection with events that the environmental authorities 

and/or the Attorney’s Office (Ministério Público) consider an infraction of environmental law. 

Enersul Contingencies 

In connection with the Lajeado/Enersul Exchange Agreement, we have agreed to indemnify Grupo Rede 

with respect to legal contingencies related to Empresa Energética do Mato Grosso do Sul S.A. – Enersul 

assumed by Grupo Rede and arising from events occurring prior to September 11, 2008. Our agreement to 

indemnify Grupo Rede is limited to an aggregate amount of R$100 million and valid for a period of ten years 

from the date of the exchange of equity interests. 

11 specific claims, scheduled in the Lajeado/Enersul Exchange Agreement, are not subject to the 

indemnification limits. As of March 31, 2011, we estimate the total possible liability involved in these claims 

to be R$441.5 million, R$29.3 million of which has been provisioned. 

133

MANAGEMENT 

We are managed by a board of directors and by our executive officers. 

Board of Directors 

Our board of directors is our decision-making body and is responsible for determining our general 

policies, including our long-term strategies. Our board of directors is also responsible for, among other 

matters, electing and supervising the activities of our executive officers. 

Pursuant to our bylaws, our board of directors must have a minimum of five and a maximum of eleven 

members, including one chairman and one vice-chairman, with a one-year unified mandate. All members 

must be shareholders elected at a general shareholders’ meeting and may be replaced at any time. Pursuant to 

the listing rules of the Novo Mercado, at least 20% of the members of our board of directors must be 

independent. A shareholder cannot be a member of the board of directors, unless otherwise approved by a 

general shareholders’ meeting, if such shareholder: (i) is an employee of or holds management positions in 

companies that may be considered our competitors; or (ii) has or represents conflicts of interest with the 

Company. 

Pursuant to Brazilian Corporation Law and CVM Instruction No. 282, of June 26, 1998, shareholders 

representing at least 5% of the voting capital stock of the Company have the right to request cumulative 

voting. If cumulative voting is not requested, members of the board of directors are elected by a majority vote 

of our shareholders, who may vote in person or by proxy. On November 8, 2005, the CVM decided by 

majority vote that shareholders holding common shares that jointly represent at least 10% of our capital stock 

have the right to jointly elect and remove from office one member of our board of directors and his or her 

respective alternate. 

All new members of our board of directors must sign a consent agreement (Termo de Anuência) before 

taking office. Pursuant to this consent agreement members of our board of directors are personally liable for 

complying with the listing agreement of the Novo Mercado, with the rules of the Market Arbitration Chamber 

(Câmara de Arbitragem do Mercado) and with the listing rules of the Novo Mercado. 

Currently, our board of directors is composed of seven members, three of whom are independent 

members. The following table sets forth the name, age, date and position of the current members of our board 

of directors. 

Name Age Position 

134 

Year of First 

Election 

Year of Last 

Election 

Antonio Luis Guerra Nunes Mexia ......................................... 53 Chairman 2006 2011 

Antonio Manuel Barreto Pita de Abreu ................................... 61 Vice-Chairman 2008 2010 

Nuno Maria Pestana de Almeida Alves .................................. 52 Member 2006 2011 

Ana Maria Machado Fernandes ............................................... 48 Member 2006 2011 

Pedro Sampaio Malan .............................................................. 68 Independent Member 2006 2011 

Francisco Carlos Coutinho Pitella ........................................... 58 Independent Member 2007 2011 

Modesto Souza Barros Carvalhosa .......................................... 78 Independent Member 2005 2011 

Pursuant to Brazilian Corporation Law, each member must hold at least one share of our Company. 

In the event the abovementioned ratio of 20% independent members does not result in a whole number, 

the resulting fraction shall be rounded to a whole number as follows: (i) when the fraction is equal to or more 

than 0.5, to the next whole number; or (ii) when the fraction is less than 0.5, to the previous whole number. 

Our board of directors is currently composed of seven members, therefore at least one member must be 

independent and identified as such in the general shareholders’ meeting that elects such independent member. 

Currently, Francisco Carlos Coutinho Pitella, Modesto Souza Barros Carvalhosa and Pedro Sampaio Malan, 

are independent members of our board of directors. 

Our independent directors are elected pursuant to the standards established by BM&FBOVESPA and by 

the Brazilian Corporate Governance Institute (Instituto Brasileiro de Governança Corporativa), or IBGC. As 

such, our independent members: (i) do not have any relationship with the Company other than their interest

in our share capital; (ii) are not controlling shareholders, nor spouses or relatives of second degree of 

controlling shareholders, and cannot presently nor in the previous three years be linked to a company or entity 

related to a controlling shareholder (people associated with public education institutions and/or research are 

excluded from this restriction); (iii) have not been, during the previous three years, employees or directors of 

the Company, of the controlling shareholder, or of a company controlled by the Company; (iv) are not 

suppliers or purchasers, either directly or indirectly, of company services and/or products, to such a scale as 

would imply loss of independence; (v) are not employees or administrators of a corporation or entity seeking 

to offer to or obtain from the Company any services and/or products; (vi) are not the spouses or relatives of 

second degree of any member of the board; and (vii) are not receiving any compensation from our company 

other than compensation due to members of the board of directors (other than income derived from capital 

stock holdings). 

Decisions of the board of directors require a majority vote of the members, and in case of a tie, the 

chairman of the board has the casting vote. Pursuant to Brazilian Corporation Law, members of the board of 

directors are forbidden to vote in any meeting or act in any operation or business in which they have conflict 

of interests with the Company. 

For information on the agreements or other relevant duties between members of the board of directors 

and the Company, see “Related Party Transactions.” 

The following is a summary of the business experience of the current members of our board of directors. 

António Luís Guerra Nunes Mexia. Mr. Mexia is the chairman of our board of directors. He has also 

been chief executive officer of Energias de Portugal, since March 2006. Mr. Mexia has significant experience 

in the Portuguese power sector. He was president of the Portuguese Power Association (Associação 

Portuguesa de Energia) from 1992 to 2002, as well as an officer in large corporations such as Galp Energia 

and Transgás. Mr. Mexia also served as the Minister of Public Works, Transportation and Communications 

of Portugal from July 2004 to March 2005. He was also a professor of European studies at Universidade 

Católica from 1985 to 1989, and an assistant professor of economics at the University of Geneva from 1979 

to 1991. Mr. Mexia obtained a degree in economics from Universidade Genéve in 1980. Mr. Mexia’s 

commercial address is Praça Marquês de Pombal, 12 1250-162 Lisbon, Portugal. 

Nuno Maria Pestana de Almeida Alves. Mr. Alves is a member of our board of directors. He began his 

professional career at Banco Comercial Português and in 1999 became chairman of the board of directors of 

CISF Dealer (the investment branch of Banco Comercial Português). In 2000, he became an officer of 

Pelouros de Tesouraria e Mercado, currently called Millenniumbcp Investimento (former Banco CISF). He 

has a degree in Naval Architecture and Marine Engineering and an MBA from the University of Michigan. 

Mr. Alves’ commercial address is Praça Marquês de Pombal, 12 1250-162 Lisbon, Portugal. 

Ana Maria Machado Fernandes. Ms. Fernandes is a member of our board of directors. She was 

president and CEO of Galp Power, SGPS, SA, director of strategic planning and M&A of Gás de Portugal and 

a manager of Transgás S.A. and of Galp Energia, SGPS, SA. Ms. Fernandes has a degree in economics from 

Faculdade de Economia do Porto, an MBA from Universidade do Porto and a post-graduation in finance 

from Faculdade de Economia do Porto, where she was assistant professor of Accountancy and Financial 

Analysis from 1989 to 1991. Ms. Fernandes’ commercial address is Rua Bandeira Paulista, No. 530, 14 th 

Floor, São Paulo, State of São Paulo, Brazil. 

Francisco Carlos Coutinho Pitella. Mr. Pitella is an independent member of our board of directors. He 

is also investors’ relations officer of GTD Participações S.A., a company that invests in EDP — Energias do 

Brasil S.A., president of the investment committee of Energia PCH Fundo de Investimento em Participações 

and chairman of the board and general officer of Juruena Participações e Investimentos S.A., a company that 

invests in PCHs in the State of Mato Grosso. Mr. Pitella represents Marc Rich Investment AG, Stratton 

Metals LTD and Trafigura AG in ore and metal imports and exports. He was a member of the board of 

directors and of the fiscal council of Escelsa and Enersul, an officer at Vale do Rio Doce Alumínio S.A., 

member of the board of Valesul Alumínio S.A. and Mineração Rio do Norte S.A., as well as a member of the 

advisory council of Albras — Alumínio Brasileiro S.A. and Alunorte — Alumina do Norte do Brasil S.A. He 

was general officer for South America of Atoc Corporation and Marc Rich Investment AG. Mr. Pitella has a 

135

degree in civil engineering from Escola Nacional de Engenharia da UFRJ. His commercial address is Praia 

do Flamengo, No. 66, Block B, Room 1509, Rio de Janeiro, State of Rio de Janeiro, Brazil. 

Modesto Souza Barros Carvalhosa. Mr. Carvalhosa has served as an independent member of our board 

of directors since September 14, 2005. He is also a member of the board of directors of Companhia 

Melhoramentos de São Paulo and of the Arbitration Chamber of the BM&FBOVESPA and a member of the 

Curator’s Council of Universidade Federal de São Carlos and of Fundação Padre Anchieta. He was a 

professor of commercial law at Universidade de São Paulo, legal counselor of the BM&FBOVESPA, 

president of the ethics court of the São Paulo section of the Brazilian Bar Association (Ordem dos Advogados 

do Brasil), or OAB, and a member of Constitutional Commission (Comissão Constitucional) of OAB. Mr. 

Carvalhosa holds a bachelor of law and a PhD in commercial and economic law from Faculdade de Direito 

da Universidade de São Paulo. His commercial address is Rua José Maria Lisboa, No. 1139, São Paulo, State 

of São Paulo, Brazil. 

Pedro Sampaio Malan. Mr. Malan is an independent member of our board of directors. He is also 

president of the board of directors of Unibanco and of Globex-Ponto Frio and a member of the advisory 

council of Alcoa Alumínio S.A. He was the Brazilian Minister of Finance from 1995 to 2002, during the 

Fernando Henrique Cardoso administration and president of the Brazilian Central Bank from 1993 to 

1995. Mr. Malan is a professor of economics at Universidade Católica do Rio de Janeiro and has 

written several papers on the Brazilian and the global economy. Mr. Malan has a degree in Electrical 

Engineering from Escola Politécnica da PUC and a PhD in economics from the University of California, 

Berkeley. Mr. Malan’s commercial address is Rua Eusébio Matoso, No. 891 – 4 th Floor, São Paulo, 

State of São Paulo, Brazil. 

Antonio Manuel Barreto Pita de Abreu. Mr. Abreu has a degree in Electronic Engineering from the 

Instituto Superior Técnico. Most recent positions held: Energias de Portugal, Member of the Executive Board, 

since 2006 Corporate Secretary from 2003 to 2006, Company Secretary from 2003 to 2006. EDP Powerline – 

Infraestruturas de Comunicação, S.A., Chairman of the Board of Directors, from 2003 to 2006. NQF Gás – 

Chairman of the Board of Directors, from 2003 to 2006. ENAGÁS Chairman of the Board of Directors, from 

2003 to 2006. TURBOGÁS Vice-Chairman of the Board of Directors of TURBOGÁS, S. A., from 2003 to 

2006. EDP Soluções Comerciais, S.A. Administrator, from de 2003 a 2006 EDA – Electricidade dos Açores, 

S.A., Administrator, from 2003 to 2006 EDP Participações, S.A, Administrator of EDP Participações, S.A, 

from 2003 to 2006 EDP – Energias do Brasil S.A. CEO, since January 2008; and Vice-Chairman of the Board 

of Directors, since January 2008. Bandeirante Energia S.A. Chairman of the Board of Directors, since May 

2008. Espírito Santo Centrais Elétricas S.A. – Escelsa Chairman of the Board of Directors, since June 2008. 

Investco S.A. Chairman of the Board of Directors, since July 2008. Energest S.A. Chairman of the Board of 

Directors, since May 2008. Enertrade – Comercialização e Serviços de Energia S.A. Chairman of the Board 

of Directors, since May 2008. Enernova S.A. Chairman of the Board of Directors, since June 2008. EDP 

Renováveis Brasil S.A. Vice-Chairman of the Board of Directors, since February 2009. Instituto EDP 

Energias do Brasil Vice-Chairman of the Advisory Board, since May 2008; and CEO, since January 2009. 

Committees of Our Board of Directors 

Our governance structure has three support committees: an Audit Committee, a Compensation 

Committee and a Sustainability and Corporate Governance Committee. These committees are composed of 

three members each, who are also members of the board of directors and whose duty is to advise the board of 

directors on the decisions submitted to its appraisal. The members of these committees may request 

information and solicit suggestions from any member of our executive officers or of any member of our 

management. 

136

Audit Committee 

The audit committee is a permanent committee, which is responsible for monitoring and assessing both 

external as well as internal audit activities, for monitoring the Company’s business risks, accounting practices 

and the transparency of information, as well as for advising the board of directors on its deliberations in 

relation to relevant topics. The audit committee consists of three members, with its chairman being 

independent under the terms of the Novo Mercado listing requirements (Francisco Carlos Coutinho Pitella), 

one member being appointed by the controlling shareholder (Nuno Maria Pestana de Almeida Alves) and 

another member who is also considered as independent (Pedro Sampaio Malan). 

Sustainability and Corporate Governance Committee 

Our sustainability and corporate governance committee is a permanent body responsible for ensuring the 

longevity of our organization. The committee acts to establish a long-term sustainable vision of our 

corporation, which includes defining our businesses and operations while taking into consideration social and 

environmental factors. It also ensures that the best governance practices and the highest ethical principles are 

adopted to increase the value of our company, facilitate access to capital at low costs, and contribute to the 

survival of our corporation. The duties of our sustainability and corporate governance committee include 

proposing a system to evaluate the performance of our board of directors and its members and analyzing 

businesses with related parties. Our sustainability and corporate governance committee consists of three 

members: one independent member of our board of directors (currently Pedro Sampaio Malan, who is also 

president of the committee), one member appointed by our controlling shareholder (currently Ana Maria 

Machado Fernandes) and one independent member pursuant to the listing requirements of the Novo Mercado 

(currently Modesto Souza Barros Carvalhosa). 

Compensation Committee 

Our compensation committee is a non-permanent consulting committee, with the duty of advising the 

board of directors on decisions connected to our compensation policies and the compensation policies of our 

subsidiaries. Our compensation committee consists of three members chosen from the board of directors: 

two members appointed by our controlling shareholder (currently Antônio Luis Guerra Nunes Mexia, who is 

president of the committee, and Nuno Maria Pestana de Almeida Alves) and one independent member 

(currently Pedro Sampaio Malan), pursuant to the listing requirements of the Novo Mercado. 

Fiscal Council 

According to the Brazilian Corporation Law, our fiscal council is a separate independent part of our 

management and our independent auditors. The fiscal council’s main responsibility is to oversee our 

management and to analyze our financial statements, reporting its findings to shareholders. 

According to our bylaws, when established, our fiscal council is comprised by three members, with an 

equal number of alternates. According to the listing rules of the Novo Mercado, members of the fiscal council 

must sign a consent agreement (Termo de Anuência) before taking office. Under Brazilian Corporation Law, 

when the fiscal council is not a permanent body of the company, it may be established by a general 

shareholders’ meeting upon request of shareholders representing at least 10% of the company’s shares or 2% 

of the voting share capital, depending on our share capital structure, pursuant to CVM Instruction No. 324, of 

January 19, 2000. In this case, members of the fiscal council remain in office until the next general 

shareholders’ meeting. In addition, if we have a controlling shareholder or group of controlling shareholders, 

non-controlling shareholders holding 10% of common shares have the right to separately elect a member of 

the fiscal council and his or her alternate, whereas the other shareholders may appoint one member more than 

the total number of members elected by the non-controlling shareholders. 

Pursuant to the CVM, if a shareholder holding less than 50% of our share capital, or shareholders that are 

not members of a group of shareholders that control the company, the controlling shareholder or group of 

controlling shareholders, that alone or together, hold 10% or more of our share capital shall have the right to 

separately elect a member of the fiscal council and his or her alternate. The other shareholder or group of 

shareholders shall have the same right granted to those that elected a member in the abovementioned election, 

137

pursuant to the same rules and conditions. The remaining shareholders that did not take part in the 

abovementioned election are entitled to elect the additional members to the fiscal council and their alternates. 

The fiscal council cannot include members of our board of directors or executive officers, or employees, 

spouses or relatives of our management. In addition, pursuant to Brazilian Corporation Law each member of 

the fiscal council is entitled to receive as compensation an amount equal to at least 10% of the average 

amount paid to each executive officer, minus benefits, representation fees and profit share. 

We do not have a permanent fiscal council. However a fiscal council may be established at any time if 

our shareholders decide to do so. We currently do not have a fiscal council in operation. 

Executive Officers 

Pursuant to our bylaws, our executive officers consists of up to six members, whether shareholders or not, 

all residents of Brazil and elected by our board of directors. Officers may hold more than one of the 

following positions: (i) Chief Executive Officer; (ii) Finance and Investor Relations Officer; (iii) 

Distributions Officer; (iv) Generation Officer; (v) Supplies Officer; and (vi) Management Control Officer. 

The executive officers roles are to manage the Company’s business, undertaking all necessary acts, except 

for those which are reserved, either by law or by the Company’s bylaws, for the shareholders in general meetings 

or for the board of directors. In the performance of their duties, the executive officers are allowed to carry out all 

and any operations and administrative acts that are necessary to achieve the executive board’s objectives, in 

accordance with the general business guidelines established by the board of directors, including making 

decisions regarding the use of proceeds, undertaking obligations, renouncing, assigning rights, assuming debts, 

entering into deals, executing agreements, contracting obligations, acquiring, selling and charging goods and 

property, providing guarantees, aval and surety bonds, issuing, endorsing, pledging, discounting, withdrawing 

and guaranteeing securities in general, in addition to setting up, operating and closing accounts in credit 

establishments, observing all legal restrictions as well as those contained in the Company’s bylaws. 

The board of executive officers meets whenever it is requested by the CEO or by any two Vice-Presidents, 

as well as whenever it is required by the Company’s business activities, with a minimum prior notice of 2 

(two) days, and the meeting will only be held if the majority of the executive officers are present. 

Decisions at the meetings of the board of executive officers will be taken by the majority of the members 

who are present at each meeting or who have manifested their vote in writing, as per the Company’s bylaws, 

with the CEO having the casting vote, in the case of a tie. 

All new members of our board of executive officers must execute a Consent Agreement (Termo de 

Anuência) before taking office. Pursuant to this Consent Agreement members of our board of executive officers 

become personally liable for complying with the listing agreement of the Novo Mercado, with the rules of the 

Market Arbitration Chamber (Câmara de Arbitragem do Mercado) and with the Novo Mercado rules. 

Currently, our board of executive officers consists of four members. The following table sets forth the 

name, age, position, election date and expiration of term of the current members of our executive officers. 

Name 

Antonio Manuel Barreto 

Age Position Election Date Term of Office 

Pita de Abreu ....................................... 61 Chief Executive Officer 

December 14, December 31, 

2010 

2013 

Miguel Dias Amaro ................................ 44 Financial and Investor Relations Officer and December 14, December 31, 

Miguel Nuno Simões Nunes Ferreira 

Management Supervision Officer 

2010 

2013 

Setas .................................................... 40 Distribution Officer 

December 14, December 31, 

2010 

2013 

Luiz Otavio Assis Henriques .................. 53 Generation and Commercialization Officer December 14, December 31, 

2010 

2013 

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The commercial address of our Investor Relations Department is Rua Bandeira Paulista, 530, 14 th Floor, 

São Paulo, State of São Paulo, Brazil. Mr. Miguel Dias Amaro is responsible for this department. He was 

elected as our investor relations officer at the meeting of our board of directors held on December 14, 2010. 

In addition, he has also served as our financial officer since April 7, 2008. The telephone number of our 

Investor Relations Department is +(55 11) 2185-5900, the fax number is +(55 11) 2185-5975, and the email 

address is miguel.amaro@edpbr.com.br. Our website is www.edpbr.com.br. 

The following is a summary of the business experience of our current executive officers. 

Antonio Manuel Barreto Pita de Abreu. See “—Board of Directors” above. 

Miguel Dias Amaro. Has a degree in Mechanical Engineering from the Instituto Superior de Engenharia 

de Lisboa, in Portugal. Most recent positions held: Portugal Telecom SGPS, S.A. Internal Audit Director, 

from October 2003 to December 2007. Energias do Brasil S.A. Executive Vice-President of Management 

Control, since January 2008; and Executive Vice-President of Finance and Investor Relations, since January 

2009. Bandeirante Energia S.A. Member of the Board of Directors, since May 2008. Espírito Santo Centrais 

Elétricas S.A. – Escelsa Member of the Board of Directors, since June 2008. Investco S.A. Substitute Board 

Member since April 2009. Energest S.A. Member of the Board of Directors, since August 2008. Enertrade – 

Comercialização e Serviços de Energia S.A. Member of the Board of Directors, since June 2008. Enernova 

S.A. Member of the Board of Directors, since June 2008. Lajeado Energia S.A., Member of the Board of 

Directors, since September 2008. Porto do Pecém Geração de Energia S.A. Member of the Board of Directors, 

Terra Verde Bioenergia Participações S.A. Member of the Board of Directors, Enerpeixe S.A. Substitute 

Board Member since June 2008. Couto Magalhães Geração de Energia S.A. Vice-Chairman of the Board of 

Directors, since April 2009. 

Miguel Nuno Simões Nunes Ferreira Setas. Has a degree in Technological Physical Engineering from 

IST and had a master’s degree in Electro-Technical and Computer Engineering from IST – the Instituto 

Superior Técnico. Most recent positions held: Energias do Brasil S.A. Executive Vice-President of 

Distribution, since January 2010; and Executive Vice-President of Marketing, from April 2008 to December 

2009. Bandeirante Energia S.A. Member of the Board of Directors, from May 2008 to December 2009; Vice- 

Chairman of the Board of Directors, since January 2010; and CEO and Executive Director of Investor 

Relations, since April 2010. Espírito Santo Centrais Elétricas S.A. – Escelsa Vice-Chairman of the Board of 

Directors since January 2010; and CEO and Executive Director of Investor Relations, since January 2010. 

Investco S.A. Substitute Board Member since September 2008. Energest S.A. Member of the Board of 

Directors, since June 2008. Enertrade – Comercialização e Serviços de Energia S.A. Member of the Board of 

Directors, since January 2010; and Vice-Chairman of the Board of Directors, from June 2008 to December 

2009. Enernova S.A. Member of the Board of Directors, since June 2008; and CEO since June 2008. EDP 

Renováveis Brasil S.A. Member of the Board of Directors, since February 2009; and CEO since February 

2009. Elebrás Projetos S.A. (previously known as Elebrás Projetos Ltda.) CEO since April 2010. Cenaeel – 

Central Nacional de Energia Eólica S.A. CEO since July 2009. Lajeado Energia S.A. Substitute Board 

Member since September 2008. Enerpeixe S.A. Substitute Board Member since June 2008. Instituto EDP 

Energias do Brasil Member of the Advisory Board, since January 2009. Executive Vice-President, since 

January 2009. 

Luiz Otavio Assis Henriques. In 1980 he got a degree in Electrical Engineering from UNICAMP – the 

State University of Campinas, and did a post-graduate course in Energy Planning and the British Privatization 

Model at the Monfort University of Leicester in the UK. Most recent positions held: Energias do Brasil S.A. 

Executive Vice-President of Generation, since May 2008; and Executive Vice-President of Marketing, since 

January 2010. Bandeirante Energia S.A. Member of the Board of Directors, since May 2008; and CEO and 

Interim Executive Director of Investor Relations for the month of January 2010. Espírito Santo Centrais 

Elétricas S.A. – Escelsa Member of the Board of Directors, since May 2008. Investco S.A. CEO and 

Executive Director of Investor Relations, since September 2008 Effective member of the Board of Directors, 

since April 2009. Energest S.A. CEO, since May 2008. Vice-Chairman of the Board of Directors since May 

2008. Enertrade – Comercialização e Serviços de Energia S.A. Vice-Chairman of the Board of Directors since 

January 2010. CEO, since January 2010. Lajeado Energia S.A., Chairman of the Board of Directors since 

September 2008. CEO and Executive Vice-President, since September 2008. Porto do Pecém Geração de 

Energia S.A. Chairman of the Board of Directors since October 2008. Terra Verde Bioenergia Participações 

139

S.A. Member of the Board of Directors since April 2009. Enerpeixe S.A. Chairman of the Board of Directors 

since April 2009. Couto Magalhães Geração de Energia S.A. Vice-Chairman of the Board of Directors since 

April 2008. EnerPrev – Previdência Complementar do Grupo EDP Energias do Brasil Chairman of the Board 

of Directors since March 2009. 

Share Ownership 

None of our members of our board of directors and executive officers hold more than ten shares of our 

common stock as of the date of this offering memorandum. 

Management Compensation 

Compensation Basis 

Pursuant to Brazilian Corporation Law, the global or individual compensation of our board of directors 

and executive officers must be determined at our annual shareholders’ meeting. In accordance with our 

by-laws, the general shareholders’ meeting determines the global compensation, with our board of directors 

being responsible for distributing the amount among the members of the board and our executive officers. 

Furthermore, pursuant to our bylaws, we have no official compensation policy for the members of our board 

of directors and board of executive officers. Our criteria for determining compensation is based on our 

internal policies pursuant to which our compensation committee proposes the compensation to be paid to our 

officers and directors and the officers and directors of our subsidiaries, as well as market practices based on 

an analysis of economic, financial, environmental and social performance. 

The general shareholders’ meeting held on April 7, 2011, approved a total of R$4,01 million as 

compensation to be paid to our management (board of directors, committees and executive officers) from 

April 2010 to March 2011. 

In the three-month period ended March 31, 2011, the aggregate compensation of key personnel in our 

management, pursuant to CVM Instruction No. 560 of December 11, 2008, was R$615,000, considering only 

short-term benefits and not costs with dismissals. 

The tables below set forth the fixed and variable components of direct compensation we paid to our 

management for the periods indicated. 

Year Ended December 31, 2010 

Compensation 

Fixed Variable 


Total 

Board of directors ............................................................................................................. 660.000 – 660.000 

Executive officers ............................................................................................................. 2,076.817 706,800 2,783.617 

Other officers .................................................................................................................... – – – 

Total ................................................................................................................................. 2,077.477 706,800 3,443.617 

Year Ended December 31, 2009 

Compensation 

Fixed Variable 


Total 

Board of directors ............................................................................................................. 792,000 – 792,000 

Executive officers ............................................................................................................. 2,184.076 1,078.334 3,262.410 

Other officers .................................................................................................................... – – – 

Total ................................................................................................................................. 2,976.076 1,078.334 4,054.410 

Stock Option Plan 

As of the date of this offering memorandum we did not have any stock option plans. 

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Family Relationships 

As of the date of this offering memorandum there were no family relationships among the members of 

our board of directors and executive officers, or among them and our controlling shareholders, other than Mr. 

Miguel Dias Amaro, our financial and investor relations officer, who is the brother-in-law of Mr. Antônio 

Luis Guerra Nunes Mexia, the chairman of our board of directors. 

Agreements with our Directors and Officers 

As of the date of this offering memorandum there were no relevant agreements or obligations between us 

and the members of our board of directors and executive officers. 

Legal and Administrative Proceedings Involving Our Directors and Officers 

As of the date of this offering memorandum, there were no relevant or potential proceedings to which the 

members of our board of directors and executive officers are a party, which resulted from our operations. 

141

PRINCIPAL SHAREHOLDERS 

Our capital stock is exclusively composed of common shares. 

The majority vote at our general shareholders’ meetings of our controlling shareholder is exercised 

pursuant to the directions of Energias de Portugal. 

The table below sets forth information about our shares held by each of our shareholders who own 5% or more 

shares of our capital stock, as well as by our management, on the date of this offering memorandum and after the 

offering, assuming placement of all common shares, and assuming no exercise of the over-allotment option. 

Before the Offering After the Offering (1) 

Shareholders Shares (%) Shares (%) 

EDP – Energias de Portugal, S.A. ................................................................ 39,739,013 25.0 19,819,503 12.5 

EDP – Investment & Services Limited ........................................................ 38,234,188 24.1 38,234,188 24.1 

Balwerk Consultadoria Econômica e Participações Sociedade Limitada ... 24,928,914 15.7 24,928,914 15.7 

Luis Antonio Guerra Nunes Mexia .............................................................. 01 – 01 – 

Antonio Manuel Barreto Pita de Abreu ........................................................ 01 – 01 – 

Nuno Maria Pestana de Almeida Alves ....................................................... 01 – 01 – 

Ana Maria Machado Fernandes .................................................................... 01 – 01 – 

Pedro Sampaio Malan ................................................................................... 01 – 01 – 

Francisco Carlos Coutinho Pitella ................................................................ 10 – 10 – 

Modesto Souza Barros Carvalhosa ............................................................... 01 – 01 – 

Treasury Shares ............................................................................................ 280,225 0.2 280,225 0.2 

Others ............................................................................................................ 55,622,864 35.0 75,542,317 47.6 

Total ............................................................................................................. 158,805,204 100.00 158,805,204 100.00 

(1) Assuming no exercise of the over-allotment option. 

Description of Our Main Shareholders 

EDP – Energias de Portugal, S.A. 

Energias de Portugal, our controlling shareholder, is a listed company (sociedade aberta) established as a 

corporation (sociedade por ações) under the laws of Portugal, with headquarters in Lisbon, at Praça Marqués 

de Pombal, 12. There is no shareholder or group of shareholders in Energias de Portugal that might be 

considered a controlling shareholder. The largest individual shareholder of Energias de Portugal is 

PARPÚBLICA – Participações Públicas, SGPS, S.A, a company owned by the Portuguese government. 

The table below presents the main shareholders of Energias de Portugal. 

Shareholders Total Capital (%) 

Parpública – Participações Públicas, SGPS, S.A. (Government of Portugal) .............................................. 915,977,598 25.05 

Iberdola – Participações SGPS, S.A. ............................................................................................................. 248,437,516 6.79 

Caja de Ahorros de Astúrias (CajAstur) ........................................................................................................ 183,257,513 5.01 

José de Mello – Soc. Gestora de Participações Sociais S.A. ........................................................................ 176,340,958 4.82 

Senfora SARL ................................................................................................................................................ 148,431,999 4.06 

Grupo BCP e Fundo de Pensões do Grupo BCP ........................................................................................... 123,241,223 3.37 

Norges Bank .................................................................................................................................................. 97,247,888 2.66 

JP Morgan Chase & Co ................................................................................................................................. 74,151,369 2.03 

Sonatrach ....................................................................................................................................................... 81,713,076 2.23 

Banco Espírito Santo S.A. ............................................................................................................................. 77,003,375 2.11 

EDP (own) shares .......................................................................................................................................... 32,040,235 0.88 

Caixa Geral de Depósitos S.A. ...................................................................................................................... 23,365,116 0.64 

Others ............................................................................................................................................................. 1,453,159,253 39.74 

Total .............................................................................................................................................................. 3,656,537,715 100.00 

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Energias de Portugal Investments and Services, Sociedade Limitada 

Energias de Portugal Investments and Services, Sociedade Limitada, or EDP ISSL, is a company 

established under the laws of the Cayman Islands, with headquarters in George Town, Grand Cayman, at 

Genesis Trust & Corporate Services Ltd., second floor, Compass Centre, P.O. Box 448GT, Cayman Islands, a 

wholly-owned subsidiary of Energias de Portugal, Eletricidade de Portugal Finance Company (Ireland) Ltd., 

owns 100% of the outstanding capital stock of EDP ISSL. 

Balwerk Consultoria Econômica e Participações Soc. Unipessoal Limitada 

Balwerk Consultoria Econômica e Participações Soc. Unipessoal Limitada, or Balwerk Consultoria, a 

wholly-owned subsidiary of Energias de Portugal, is a company established under the laws of Portugal, 

headquartered in Lisbon, at Avenida José Malhoa, lote A – 13. Energias de Portugal owns 100% of the 

outstanding capital stock of Balwerk Consultoria. 

Decision-making Power 

As of the date of this offering memorandum, our controlling shareholder is Energias de Portugal, a 

company established under the laws of Portugal, which holds 25.02% of our voting capital stock. The 

principal shareholder of Energias de Portugal is the Portuguese government, which holds 25.05% of its voting 

capital stock. 

Energias de Portugal has no controlling shareholder or controlling group. The decision-making power of 

the shareholders of Energias de Portugal is not subject to any shareholders’ agreement or proxy agreements 

entered into prior to meetings of the board of directors. As a result, shareholder resolutions are passed by a 

majority vote of the shareholders in general shareholders’ meetings. 

Shareholders’ Agreements 

Investco 

No shareholders’ agreements exist among our shareholders. 

On November 17, 1997, Investco’s shareholders entered into a shareholders’ agreement, or the Investco 

Shareholders’ Agreement, in order to: (i) regulate the exercise of voting rights at those Investco general 

meetings where members of the board of directors are elected; (ii) regulate preemptive rights in the event of 

the disposal of company shares; (iii) set forth rules for participating in the bidding to operate Lajeado 

hydroelectric power plant; (iv) establish criteria for contributing capital to Investco; and (v) regulate the 

allocation of energy produced by Lajeado hydroelectric power plant to shareholders, among others. 

The Investco Shareholders’ Agreement entitles each of the three main shareholders, including EDP 

Lajeado and Lajeado Energia, to elect a member and respective alternate to its board of directors. The 

Investco Shareholders’ Agreement also establishes the preemptive right of current shareholders in the event of 

the disposal of company shares. With regard to allocation of the energy produced by Lajeado hydroelectric 

power plant, the agreement sets forth that each shareholder will be entitled to the amount of energy 

corresponding to its respective interest in Investco’s voting capital. 

Investment Agreement 

On September 12, 2000, the controlling shareholders of Investco’s Shareholders, Investco’s Shareholders, 

Investco and Energias de Portugal executed an investment agreement, or the Investment Agreement, that 

regulates the following matters, among others: (i) the amount of capital needed for the installation of Lajeado 

hydroelectric power plant; (ii) the guarantees granted in certain financings contracted by Investco for 

installing Lajeado hydroelectric power plant; and (iii) the provision of funds to Investco by its shareholders 

for redemption of Eletrobrás Shares. 

Pursuant to the terms of the Investment Agreement, Investco’s Shareholders, including EDP Lajeado and 

Lajeado Energia, undertook to each provide Investco with all the funds necessary for the installation of 

143

Lajeado hydroelectric power plant in the form of capital proportional to their interest in Investco’s voting 

capital. Accordingly, despite the guarantees severally granted by some of Investco’s Shareholders, their 

controlling shareholders or companies belonging to the same controlling group, each Investco Shareholder 

recognized its liability for the contracted financings, proportionally to its respective interest in Investco’s 

voting capital. Non-compliance with these liabilities by any of Investco’s Shareholders will proportionally 

reduce its voting share participation in Investco and, as a result, its part in the energy generated by Lajeado 

hydroelectric power plant. 

The Investment Agreement is applicable to liabilities related to (i) the amount of capital needed for the 

installation of Lajeado hydroelectric power plant, such as maintenance of the 30% minimum capitalization 

required by the agreements entered into with BNDES; (ii) the guarantees provided in agreements entered into 

with BNDES and the agreement entered into with Banco da Amazônia S.A. – BASA I; (iii) the Lajeado Lease 

Agreements; (iv) the redemption of Eletrobrás shares; and (v) the receivables collateral granted in the 

agreement entered into with Banco da Amazônia S.A. – BASA I. 

Therefore, if Energias de Portugal, in the case of the BNDES Agreements, or Energest, in the case of the 

BASA I Agreement, is required to pay the debt on account of the guarantee granted, it may request the other 

Investco Shareholders to pay their respective share of the debt, proportionally to their interest in Investco’s 

voting capital. Non-payment by any of Investco’s shareholders will increase the number of EDP Lajeado’s 

shares in Investco and, consequently, its share of energy in Lajeado hydroelectric power plant. 

Enerpeixe 

On February 4, 2004, we and Furnas, Enerpeixe’s sole shareholders entered into a shareholder’s 

agreement, or Enerpeixe Shareholders’ Agreement, by which we established the terms and conditions that 

govern our relations with Furnas. The Enerpeixe Shareholders’ Agreement regulates (i) the exercise of voting 

rights; (ii) the exercise of controlling power; (iii) the purchase and sale of shares and the exercise of the 

preemptive rights to acquire them; and (iv) how capitalization is made at Enerpeixe for installing, operating 

and maintaining the Peixe Angical hydroelectric power plant. 

With the Enerpeixe Shareholders’ Agreement we and Furnas undertook to provide advances for future 

capital increases of Enerpeixe, taking into account each party’s respective stake in Enerpeixe’s voting capital. 

Certain items within the scope of the general shareholders’ meeting may only be approved by the votes 

representing three quarters of the total voting capital of Enerpeixe. 

While the Enerpeixe Shareholders’ Agreement is effective, the board of directors of Enerpeixe will 

comprise five members, of whom we will elect three members and their alternates and Furnas will elect two 

members and their alternates. The executive officers of Enerpeixe will comprise three officers, of whom we 

will appoint the chief executive officer and the administrative and financial officer and Furnas will appoint a 

technical officer. If a shareholder wants to dispose of its shares and/or subscription rights, the other 

shareholder has the preemptive right to acquire them. The preemptive right will not be applied in the event of 

transfer of shares to related parties, provided that certain requirements are met. The Enerpeixe Shareholders’ 

Agreement also grants both our Company and Furnas the tag-along right, whereby, if one of the shareholders 

wants to sell its shares to a third party or to another shareholder not bound by Enerpeixe Shareholders’ 

Agreement, the selling shareholder must notify the other shareholder so that the latter may express its intent to 

sell its shares together with the selling shareholder. 

The Enerpeixe Shareholders’ Agreement will be in force until the end of the concession agreement, and, 

in the event of renewal of the concession agreement, the Enerpeixe shareholders’ agreement will be 

automatically renewed for the new period. 

Pecém Geração de Energia 

On July 19, 2007, we entered into a shareholders’ agreement with MPX Energia, as amended on October 

14, 2008 and September 17, 2009, or the Porto do Pecém Shareholders’ Agreement, in order to regulate: (i) 

the exercise of the voting rights in Pecém Geração de Energia’s general meetings; (ii) the exercise of control 

144

y the shareholders; (iii) the conditions applicable to the disposal and transfer of the shareholders’ shares; 

(iv) the capitalization of Pecém Geração de Energia, in view of the TPP Pecém installation, operation and 

maintenance; (v) the possibility of dilution or removal of one of the shareholders in the event of default 

relating to Pecém Geração de Energia or concerning any of the conditions provided for in Pecém Geração de 

Energia’s financing agreements; and (vi) the consequences of early maturity of debts of certain loan 

agreements obtained by Pecém Geração de Energia’s, especially regarding its capital structure. 

In accordance with the shareholders’ agreement, all matters for approval at general meetings will only be 

approved after the prior and favorable instruction in writing of each shareholder. Furthermore, some matters 

provided for in the Porto do Pecém Shareholders’ Agreement can only be approved by the votes of 

shareholders representing at least three quarters of Pecém Geração de Energia’s voting capital stock. 

As set forth in the Porto do Pecém Shareholders’ Agreement, Pecém Geração de Energia’s board of 

directors will be comprised of six board members, three of whom will be appointed by each one of the 

shareholders. The chairman of the board of directors will have a one-year term of office and will be 

appointed by each shareholder on a rotating basis. 

Pursuant to the conditions described in the Porto do Pecém Shareholders’ Agreement, the shareholders 

undertake to provide advances for Pecém Geração de Energia’s future capital increases, as well as funds 

needed for the (i) fulfillment of financial commitments; (ii) deposit of guarantees to take part in energy 

auctions; (iii) installation of TPP Pecém; and (iv) proper operation and maintenance of TPP Pecém after its 

start-up. In the event of default of said obligations, the defaulting shareholder’s voting rights will be 

suspended and it will be subject to the monetary penalties set forth in the Porto do Pecém Shareholders’ 

Agreement, for the benefit of Pecém Geração de Energia. Also, in the event of default of such obligations by 

any shareholder, the performing shareholder will be able to provide the missing funds, and the defaulting 

shareholder will be subject to dilution of its interest in Pecém Geração de Energia proportional to the amount 

not paid, or Dilution Option. If a shareholder refuses to grant the guarantees established in the Porto do 

Pecém Shareholders’ Agreement, the performing shareholder may exercise an option for total or partial 

acquisition of the defaulting shareholder’s interest, in accordance with the conditions of the Porto do Pecém 

Shareholders’ Agreement, or Purchase Option. Additionally, if (i) the interest of one of the shareholders falls 

below 25% of Pecém Geração de Energia’s capital stock or (ii) one of the shareholders causes the Dilution 

Option and/or the Purchase Option to be exercised three times, the performing shareholder will have the 

option of purchasing the whole of the defaulting shareholder’s ownership interest in Pecém Geração de 

Energia, in compliance with the conditions of the Porto do Pecém Shareholders’ Agreement. 

In accordance with the terms of the Porto do Pecém Shareholders’ Agreement, the shareholders agree not 

to sell their shares to third parties without the prior written consent of the other shareholder until the 

beginning of operations of the HPP Pecém plant. At the end of said period, shareholders are allowed to 

dispose of their shares, as long as the conditions in the Porto do Pecém Shareholders’ Agreement are met, 

particularly with regard to (i) the preemptive right of the non-selling shareholder; or, in the alternative and at 

the discretion of the non-selling party, (ii) the exercise of the tag-along right, in compliance with the 

conditions set forth in the Porto do Pecém Shareholders’ Agreement. 

145

Overview 

RELATED PARTY TRANSACTIONS 

In the ordinary course of our business, we enter into transactions with related parties that we believe to be 

on terms and conditions no more favorable than the terms and conditions prevailing in the market. These 

transactions relate to, among other things, loans, assumptions of debt, guarantees, power purchase and sale, 

provision of IT services and service agreements for the operation and maintenance of hydroelectric power 

plants and small hydroelectric power plants. 

It is the responsibility of the Company’s Board of Directors, under the terms of sub-paragraph g of article 

22 of its bylaws, to deliberate on any business undertaken by the Company or by any of its shareholders, 

whether direct or indirect. It is also the duty of the Board of Directors to set up technical and advisory 

committees, with a view to achieving a greater degree of control in relation to the acts carried out by the 

Company. Among these committees we highlight the Sustainability and Corporate Governance Committee, 

which is chaired by the independent board member Pedro Malan, who is responsible, along with other things, 

for analyzing and monitoring operations with related parties undertaken by the Company. 

Among other things, the Company’s controlling shareholders are entitled to elect the majority of the 

members of the Board of Directors and to determine the outcome of any decision that has to be approved by 

the shareholders, including operations with related parties. However, Brazil’s Joint Stock Company Law 

imposes certain restrictions on operations with related parties, prohibiting board members and executive 

directors from (i) carrying out any free act utilizing the Company’s assets, at the Company’s expense; (ii) 

receiving, as a result of their position, any type of direct or indirect personal benefit from third parties, unless 

authorization is given by the respective bylaws or granted by the shareholders in general meeting; and (iii) 

intervening in any corporate operation where their interest conflicts with that of the Company, or in decisions 

of which the other directors may be aware of. 

In addition, related parties transactions are regulated and verified by ANEEL. The EDP Group, which is 

the parent company of regulated companies, has related parties transactions. Some of these transactions are 

under analysis by the regulatory authorities who, if it is concluded there has been any failure to comply with 

the regulations that are in force, may apply fines the maximum value of which can reach 2% of the net 

operating revenue of the concession holders involved. The Company observes these rules in the course of its 

business dealings with related parties. 

In this offering memorandum we describe our related-party transactions that are material in the opinion of 

our management. In the course of our operations, we may enter into new agreements, which we do not 

anticipate would have a material impact on our results of operations. Below is a brief summary of the 

material agreements we, our parent company and our subsidiaries have entered into. 

See the explanatory notes to our consolidated financial statements as of and for the three-month period 

ended March 31, 2011 and as of and for the year ended December 31, 2010, respectively, included elsewhere 

in this offering memorandum for more information regarding our related party transactions. 

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Descriptions of Related Party Transactions 

Loan Agreements 

The Group’s companies are parties to the following loan and asset sale agreements with related parties, 

and the material terms of such agreements are summarized below. 

Related Party Relationship 

Transaction 

Date 

Existing 

Balance 

(thousand R$) 

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Amount involved 

(thousand R$) Duration Type of Contract 

Castelo Energético Ltda ........... Subsidiary 12/29/2006 92,356 60,100 12/29/2011 Loan at 100% of CDI 

Escelsa Participações S.A. ........... Subsidiary 05/30/2003 3,854 2,200 11/30/2012 Loan at 100% of CDI 

Investco .................................... Subsidiary 12/10/2009 5,076 5,000 11/08/2012 Loan at 100% of CDI 

Terra Verde Bioenergia ........... Subsidiary 01/01/2010 6,677 6,600 12/25/2012 Loan at 100% of CDI 

Terra Verde Bioenergia ........... Subsidiary 01/15/2001 6,647 0 01/15/2014 Asset Sale 

Power Purchase and Sale Agreements 

We are party to the following power purchase and sale agreements, which involve related parties. Such 

agreements are executed only by our subsidiaries and more information can be found in our subsidiaries' 

financial information. 

Buyer Seller 

Start date of 

supply End date of supply 

Amount 

(R$ thousand) (1) R$/MWh (2) 

Bandeirante Enerpeixe 02/01/2006 01/31/2016 19.340 161,23 

Bandeirante Enerpeixe 02/01/2006 01/31/2016 6.826 152,59 

Bandeirante Energest 01/01/2005 12/31/2012 63 74,28 




Bandeirante Investco 08/01/2002 12/15/2032 148 118,04 

Bandeirante Investco 08/01/2005 12/15/2032 4 118,04 

Bandeirante Lajeado Energia 12/12/2001 11/31/2013 9.785 118,04 

Bandeirante Lajeado Energia 01/01/2008 12/31/2037 2 141,78 



Bandeirante Santa Fé 01/01/2009 12/31/2038 46 151,79 

Escelsa CESA 08/01/2001 07/17/2025 458 174,05 

Escelsa CESA 11/01/2002 07/17/2025 1.776 161,11 

Escelsa CESA 11/01/2007 07/17/2025 3.042 158,81 

Escelsa Enerpeixe 12/23/2002 01/31/2016 9.131 158,17 

Escelsa Energest 01/01/2005 12/31/2012 169 73,85 




Escelsa Lajeado Energia 01/01/2008 12/31/2037 4 141,09 



Escelsa Santa Fé 01/01/2009 12/31/2038 39 151,05 

Energest Enertrade 02/01/2008 12/31/2012 893 148,01 

Enertrade CESA 12/01/2010 12/31/2022 149 142,86 

Enertrade Energest 01/01/2007 12/31/2014 353 121,32 

Enertrade Lajeado Energia 01/01/2003 12/31/2022 14.145 100,76 

Enertrade Lajeado Energia 07/01/2010 12/31/2010 2.045 32,50 

Enertrade Pantanal 01/01/2009 12/31/2023 1.778 119,52 

(1) Amount in liquidation as of December 31, 2010. 

(2) Average prices as of December 31, 2010.

Banco Espirito Santo 

As of May 25, 2011, Banco Espírito Santo, S.A. held, directly and indirectly, through companies in a 

control or group relationship with Banco Espírito Santo, S.A., a qualified stake of 2.11% in the share capital 

of our controlling shareholder Energia de Portugal. Banco Espírito Santo, S.A. is the only shareholder of 

Banco Espírito Santo de Investimento S.A. which controls BES Investimento do Brasil, S.A.—Banco de 

Investimento through an 80% stake. 

Caixa Geral de Depósitos S.A. 

As of May 25, 2011, Caixa Geral de Depósitos S.A. held, directly and indirectly, through companies 

under its control or group relationship with Caixa Geral de Depósitos S.A., a qualified stake of 0.64% in the 

share capital of our controlling shareholder Energia de Portugal. 

Conflicts of Interest 

We adopt corporate governance practices together with those recommended and/or demanded by the 

legislation, including those foreseen under the Novo Mercado listing requirements. As required by the our 

bylaws, certain related parties transactions have to be decided by the our board of directors. Therefore, all our 

transactions, particularly those involving related parties, were duly submitted to our decision-making bodies, 

under the terms of its bylaws, in addition to the fact that ANEEL is informed of and gives prior authorization 

for all agreements with concession holders and licensees of public services. 

Moreover, in accordance with Brazilian Corporation Law, all members of the Company’s Board of 

Directors are prohibited from voting at any board meeting, or from acting in any operation or business in 

which they have interests that conflict with those of the Company. 

The Company’s operations and business dealings with related parties are in line with market norms and 

are supported by the required prior evaluations of their conditions and of the Company’s strict interest in their 

undertaking. 

However, there is no way for the Company to prove the commutativity of the operations other than to 

disclose the figures regarding these operations for the due examination of the above statement by investors 

and other interested parties. 

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DESCRIPTION OF CAPITAL STOCK 

The following is a summary of certain provisions of our bylaws, Brazilian Corporation Law, and CVM 

and Novo Mercado regulations that govern our capital stock, management, periodic and interim disclosures 

and other corporate matters. This summary does not purport to be complete and is qualified in its entirety by 

reference to our bylaws, the Brazilian Corporation Law, and CVM and Novo Mercado regulations. 

General 

We are a publicly-held company of authorized capital, incorporated under Brazilian law. Our 

headquarters is located at Rua Bandeira Paulista, 530, 14 th floor, in the City of São Paulo, State of São 

Paulo. Our minutes of incorporation are duly registered at the Board of Trade of the State of São Paulo 

(Junta Comercial do Estado de São Paulo), or JUCESP, under NIRE No. 35300179731, and at the CVM 

under No. 01.976-3. 

On June 13, 2005, we entered into the Agreement of Participation in the Novo Mercado, under which we, 

our managers and controlling shareholders agree to comply with all requirements in connection with 

corporate governance practices, established by the BM&FBOVESPA, to meet all the necessary requests to list 

our shares in the Novo Mercado. For more information, see “Corporate Governance Practices.” 

Share Capital 

On March 31, 2010, our capital stock amounted to R$3,182,715,954.12, divided into 158,805,204 

common shares, without par value. 

Under our bylaws, our board of directors may increase our capital stock, up to the limit of the authorized 

capital of 200,000,000 shares, irrespective of amendments to our bylaws. Any increase of our share capital 

above the authorized limit must be approved by our shareholders in an annual shareholders’ meeting. 

Pursuant to the Agreement of Participation in the Novo Mercado, we may not issue preferred shares or 

founders’ shares. 

Treasury Shares 

On March 31, 2010, we had 280,225 common shares held in treasury, in the book value of R$6.6 million. 

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History of Share Capital 

Date 

The table below demonstrates changes in our capital stock since 2002. 

General Shareholders’ 

Meeting held on 

April 5, 2002 



August 19, 2002 



October 2, 2002 









December 29, 2003 












April 18, 2005 



April 31, 2005 

Meeting of the Board of 

Directors held on 

July 12, 2005 

Meeting of the Board of 

Directors held on 

August 8, 2005 

Trading of Our Shares 

Amount 

(in thousands of reais) Amendments 

644,207 Increase in capital stock as a result of a private subscription in exchange for 

cash consideration, with an increase in the number of shares. 





717,302 Increase in capital stock as a result of a merger, with an increase in the 

number of shares. 

1,249,323 Increase in capital stock as a result of a subscription of assets or credits, with 

an increase in the number of shares. 





1,351,927 Increase in capital stock as a result of a private subscription in exchange for 




_ Reverse stock split at a rate of one new share for every 28.18 existing shares. 

2,012,583 Increase in capital stock as a result of a merger of companies and shares, 

with an increase in the number of shares. 

3,317,491 Public subscription (initial public offering of shares). 

3,182,716 Public subscription (over-allotment shares in the initial public offering of 

shares). 

On December 18, 2007, our board of directors established a policy for the trading of our shares, with 

certain relevant provisions described below: 

• our securities shall not be traded by us, our controlling shareholders, officers, directors, members of 

the fiscal council or employees with access to relevant information concerning our Company 

(“Persons Subject to the Trading Policy”); 

• our securities shall not be traded by Persons Subject to the Trading Policy who previously held 

managerial positions, within six months of such person having ceased employment with us or until 

the relevant information known to such persons is disclosed to the market; 

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• our securities shall not be traded by Persons Subject to the Trading Policy during the repurchase or 

sale of our shares by us, our subsidiaries, affiliated companies or a company under common control, 

or if, at the time, an agreement for the transfer of our control is entered into or if there is a possibility 

that a merger, acquisition, transformation, spin-off, or corporate restructuring may occur. Such 

restriction will apply only to our direct or indirect controlling shareholders, officers and directors 

during the purchase or sale of our shares, our subsidiaries, affiliated companies or other company 

under common control; and 

• pursuant to CVM regulations, our securities shall not be traded by Persons Subject to the Trading 

Policy within 15 days of the disclosure of annual and quarterly information. 

Trading in Stock Exchange 

Our shares are traded in the BM&FBOVESPA, under the listing code “ENBR3”, in the special listing 

segment in the Novo Mercado, pursuant to the Agreement of Participation in the Novo Mercado, entered into 

on June 13, 2005. 

Under certain circumstances, the CVM and the BM&FBOVESPA have the authority to, at their sole 

discretion, suspend the trading of shares of a publicly-held company. 

Trading of securities listed in the BM&FBOVESPA, including Novo Mercado and Levels 1 and 2 of 

Corporate Governance Practices, may, under certain circumstances, be affected by trading in the 

non-organized over-the-counter market. 

The physical and financial settlement of trades under the BM&FBOVESPA occurs three business days 

after the trading date. Delivery and payment of shares are executed by an independent clearing house. The 

clearing house is managed by the BM&FBOVESPA, which provides multilateral clearing and settlement of 

trades. Under BM&FBOVESPA regulations, financial settlement occurs in the Central Bank’s Reserve 

Transfer System. On the other hand, the clearing of trades occurs in the custody system of the 

BM&FBOVESPA. Both the clearing and settlement of trades are final and irrevocable. 

Restrictions on Foreign Investment 

There are no restrictions on ownership of our shares by individuals or legal entities domiciled 

abroad. However, the right to convert dividend payments and proceeds from the sale of shares into 

foreign currency and remit such amounts abroad is subject to exchange control restrictions and to foreign 

investment laws, which generally require, among other things, an electronic certificate of registration 

with the Central Bank of Brazil. 

Foreign investors may register their investments as a direct foreign investment under Law No. 4,131, or 

as portfolio foreign investment registered with the CVM, pursuant to CMN Resolution No. 2,689 and CVM 

Instruction No. 325. 

Direct foreign investors may sell their shares through private transactions in stock exchanges or in the 

over-the-counter market; however, they are generally subject to less favorable tax treatment as compared to 

foreign investors with investments in portfolios. 

Under CVM Resolution No. 2,689, foreign investors with investments in portfolios may only purchase 

and sell shares on stock exchanges or in the organized over-the-counter market, except in certain cases, such 

as the purchase of shares in public offerings, and they are usually entitled to a more favorable tax treatment as 

compared to foreign investors with direct foreign investments. 

Corporate Purpose 

Our corporate purpose, as defined in our bylaws, includes: (i) the participation in other companies as a 

shareholder or quotaholder and in the energy sector in Brazil and abroad; (ii) the management of assets 

relating to the distribution, generation and trading of different types of energy; (iii) the research, planning, 

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development and implementation of projects relating to the distribution, generation, transfer, and trading of 

different types of energy; and (iv) the provision of services to the energy industry in Brazil and/or abroad. 

Rights of our Shares 

Each common share entitles its holder to one vote at our annual and extraordinary shareholders’ 

meetings. Pursuant to Novo Mercado listing regulations, we cannot issue shares without voting rights or 

with restricted voting rights. Moreover, pursuant to our bylaws and Brazilian Corporation Law, holders 

of our common shares are entitled to dividends or other distributions made with respect to our common 

shares in proportion to their ownership in our capital stock. For more information about the payment of 

dividends and other distributions in connection with our shares, see “Dividends and Dividend Policy— 

Amounts Available for Distribution.” In case of our liquidation, holders of our shares are entitled to 

reimbursements, according to their holdings, after the payment of all liabilities. Shareholders are entitled 

to preemptive rights in the subscription of new common shares issued by us, except for certain 

restriction described under “—Preemptive Rights.” 

Under Brazilian Corporation Law, neither our bylaws nor any actions taken by our shareholders at 

shareholders’ meetings may deprive our shareholders from the following rights: 

• the right to participate in the distribution of profits; 

• the right to participate in any remaining residual assets in the event of our liquidation, in proportion 

to their respective interests in our share capital; 

• the right to supervise the management of our business, as specified in the Brazilian Corporation Law; 

• preemptive rights in the subscription of our common shares, debentures convertible into our common 

shares or warrants, except under circumstances specified in the Brazilian Corporation Law. 

See “—Preemptive Rights;” and 

• the right to withdraw from our Company in the cases set forth under Brazilian Corporation Law, as 

set forth in “—Withdrawal and Redemption Rights.” 

As long as we are listed on the Novo Mercado, we may not issue preferred shares or beneficiary founder 

shares, and in order to delist from the Novo Mercado, we must conduct a public offering. See “—Delisting 

from the Novo Mercado.” 

Shareholders’ Meetings 

Our shareholders are generally empowered at our shareholders’ meetings to take any action relating to 

our corporate purposes and to pass resolutions that they deem necessary. Shareholders at our annual 

shareholders’ meetings have the right to approve our financial statements and to determine the allocation of 

our net profits and the distribution of dividends with respect to the fiscal year ended immediately prior to the 

relevant annual shareholders’ meeting. The election of the members of our board of directors occurs at the 

annual shareholders’ meetings. However, under Brazilian Corporation Law, the member of our board of 

directors may be elected at extraordinary shareholders’ meetings. The members of the fiscal council, if one is 

instituted at the request of shareholders representing a certain number of our capital stock, may be elected at 

any shareholders’ meeting. 

An extraordinary shareholders’ meeting may be held concurrently with the annual shareholders’ meeting. 

The following actions, among others, may be taken only at shareholders’ meetings: 

• amendments to our bylaws; 

• election and removal of the members of our board of directors; 

• setting the annual compensation of the members of our board of directors, executive officers and 

members of our fiscal council, if the fiscal council has been established; 

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Quorum 

• bonuses and approval of stock splits; 

• granting of call option plans or underwriting shares to our managers and employees and to managers 

and employees of other companies, directly or indirectly controlled by us; 

• approval of management accounts and financial statements; 

• decisions, based on proposals from our board of directors, involving allocation of net profits, 

distribution of dividends and profits for the relevant fiscal year, as well as the constitution of any 

reserves, except for mandatory reserves; 

• decisions about delisting from the Novo Mercado of the BM&FBOVESPA or going private; 

• appointment of an institution or specialized company, from a list provided by our board of directors, 

that will draft a valuation report of our shares, if we go private, delist from the Novo Mercado or 

conduct public offerings, pursuant to our bylaws; 

• authorization for the issuance of convertible debentures and/or secured debentures; 

• suspension of rights of shareholders that fail to comply with obligations imposed by law or our bylaws; 

• approval of an appraisal of company assets to be used in connection with a pay-up of shares of our 

capital stock by a shareholder; 

• approval of a change in our organizational status into a sociedade limitada or into any other type of 

organizational status allowed under corporate laws; 

• approval of our transformation, merger, acquisition, spin-off; and 

• approval of our dissolution and liquidation, the election and dismissal of receivers and accounts 

presented by receivers and the election of the fiscal council required to be established during the 

period of liquidation. 

As a general rule, Brazilian Corporation Law provides that the quorum for our shareholders’ meetings 

consists of shareholders representing at least 25% of our voting capital stock on the first call and, if that 

quorum is not reached, any percentage on the second call. If the purpose of the meeting is to amend our 

bylaws, a supermajority quorum of shareholders representing at least two-thirds of our voting capital is 

required on the first call, and any percentage on the second call. 

In most cases, the affirmative vote of shareholders representing at least the majority of our shares present 

in person or represented by proxy at a shareholders’ meeting is required to ratify any proposed action, and 

abstentions are not taken into account. However, the affirmative vote of shareholders representing no less than 

one-half of our voting shares is required to, among others: 

• reduce mandatory dividends; 

• change our corporate purpose; 

• merge our company with or into another company; 

• a spin-off; 

• participate in a corporate group; 

• apply for cancellation of any voluntary liquidation; 

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• our dissolution; 

• merge our shares into another company; and 

• approval of our delisting from the Novo Mercado. 

Notice of our Shareholders’ Meeting 

Pursuant to Brazilian Corporation Law, notice of each of our shareholders’ meetings must be published at 

least three times in the Diário Oficial da União, the official register of Brazil, or in the Diário Oficial do 

Estado, the official register of the State in which our headquarters is located, and in another widely circulated 

newspaper. Our call notices are currently published in the Diário Oficial do Estado de São Paulo and the 

newspaper, Valor Econômico. The first call notice must be published at least 15 days before the shareholders’ 

meeting and the second call notice must be published 8 days before the shareholders’ meeting. Under certain 

circumstances, the CVM may require that the first notice shall occur no later than 30 days before the date that 

the agenda becomes available to the shareholders. 

Location of our Shareholders’ Meeting 

Our annual meetings are held at our headquarters, in the city of São Paulo, State of São Paulo. The 

Brazilian Corporation Law allows our shareholders to hold meetings outside our registered office in the event 

of force majeure, provided that the meetings are held in the city of São Paulo and the relevant notice 

includes a clear indication of the place where the shareholders meeting will occur. 

Who May Call Our Shareholders’ Meetings 

Our board of directors may call our shareholders’ meetings. Shareholders’ meetings also may be called by: 

• any shareholder, if our board of directors fails to call a shareholders’ meeting within 60 days after the 

date they were required to do so under applicable law or our bylaws; 

• shareholders holding at least five percent of our capital stock, if our directors fail to call a meeting 

within eight days after receipt of a request to call the meeting by shareholders, indicating the 

proposed agenda; 

• shareholders holding at least five percent of our capital stock, if our directors fail to call a meeting 

within eight days after receipt of a request to call a meeting to convene the fiscal council; and 

• our fiscal council, if the board of directors fails to call an annual shareholders’ meeting within 30 

days after the date they were required to do so. The fiscal council may also call a special 

shareholders meeting at any time, if it believes that there are important or urgent matters to be 

addressed. 

Conditions of Admission 

Shareholders attending a shareholders’ meeting must deliver proof of their status as shareholders and 

proof that they hold the shares they intend to vote. 

Our shareholders may be represented at a shareholders’ meeting by a proxy appointed less than a year 

before the meeting, which proxy must be a shareholder, a corporate officer, a lawyer, or in the case of a public 

company, a financial institution. An investment fund must be represented by an officer. 


Under Brazilian Corporation Law, the fiscal council is independent from our management and external 

auditors. The main responsibility of the fiscal council is to inspect actions by our managers, analyze the 

financial statements and report its observations to the shareholders. 

154

Our fiscal council is a non-permanent body. Whenever installed, the fiscal council must consist of 

3 members, with an equal number of alternates. Under Brazilian Corporation Law, a non-permanent fiscal 

council may be constituted at the annual shareholders’ meeting, at the request of shareholders representing at 

least 10% of shares, and will be active until the first annual shareholders’ meeting following its constitution. 

Furthermore, non-controlling shareholders representing at least 10% of shares also may elect, separately, one 

member of the fiscal council and an alternate. According to CVM Instruction 324 of January 19, 2000, this 

10% threshold may be reduced to as low as 2% of our voting shares, depending upon the size of the capital 

stock. Pursuant to a recent CVM ruling, such 10% does not refer to the number of shares that a noncontrolling 

shareholder attending the meeting must hold to elect a member of the fiscal council, but the 

number of shares held by our non-controlling shareholders for election of one member of the fiscal council. In 

addition, if we have a majority controlling shareholder or a group of controlling shareholders, non-controlling 

shareholders holding in aggregate at least 10% of our voting shares have the right to designate one member to 

the fiscal council and his or her alternate, and the remaining shareholders may elect one more member than 

the total number of members elected by the non-controlling shareholders. We currently have no fiscal council 

established. 

The members of the fiscal council may not be a member of the board of directors, executive officers, 

employee of a subsidiary or of a company of the same group, or spouse or relative of our managers. In 

addition, Brazilian Corporation Law establishes that members of the fiscal council be paid, as compensation, 

at least 10% of the average compensation of our directors, not including benefits, representation fees and 

profit sharing. 

All the new members of the fiscal council must execute an Instrument of Consent of Members of the 

Fiscal Council, which is contingent to their investiture. Under this Instrument of Consent, the new members 

of the fiscal council personally agree to comply with the Agreement of Participation in the Novo Mercado, the 

rules of the Arbitration Chamber and the listing rules of the Novo Mercado. 

Withdrawal and Redemption Rights 

Withdrawal Rights 

Shareholders who dissent from certain actions approved by our shareholders at a shareholders’ meeting 

have the right to withdraw from our Company and to receive an amount equivalent to the economic value 

of their shares. 

According to the Brazilian Corporation Law, a shareholder’s withdrawal rights may be exercised in the 

following circumstances: 

• a spin-off (in certain circumstances, as described below); 

• reduce mandatory dividends; 

• change in corporate purpose; 

• a merger with, or into, another company (in certain circumstances, as described below); 

• our participation in a centralized group of companies, as defined in Brazilian Corporation Law. 

• a merger of shares involving us, pursuant to article 252 of Brazilian Corporation Law; and 

• purchase of control of any company if the purchasing price is higher than the limits established in §2 

of article 256 of Brazilian Corporation Law. 

However, under Brazilian Corporation Law, a spin-off will trigger withdrawal rights in case of: 

• a change in our core business, except when the equity spun off becomes part of a company whose 

core business is identical to ours; 

155

• A decrease in mandatory dividends; or 

• our participation in a centralized group of companies, as defined in Brazilian Corporation Law. 

If we (i) merge with, or consolidate into, another company; (ii) have share interest in a centralized 

group of companies; (iii) merge our shares, pursuant to article 252 of Brazilian Corporation Law; or (iv) 

purchase the control of any companies, if the purchasing price is higher than the limits established in §2 of 

article 256 of Brazilian Corporation Law, our shareholders have no withdrawal rights if our shares (a) have 

liquidity, i.e., are included in the IBOVESPA index or the index of any other stock exchange, as defined by 

the CVM; and (b) are widely distributed in the market, and our controlling shareholders, the controlling 

company and other companies under common control have less than 50% of our shares. 

Withdrawal rights expire 30 days after publication of the minutes of the relevant shareholders’ meeting. 

In addition, our shareholders are entitled to reconsider any action giving rise to withdrawal rights within ten 

days after the expiration of such 30-day period if we determine that the redemption of shares by dissenting 

shareholders would jeopardize our financial stability. 

Any shareholder that exercises withdrawal rights is entitled to receive the book value of its shares, based 

on our most recent audited balance sheet approved by our shareholders. If the resolution giving rise to the 

withdrawal rights is made more than 60 days after the date of our most recent balance sheet, a shareholder 

may request that its shares be valued in accordance with a new balance sheet dated no more than 60 days prior 

to the date of the resolution date. In this case, we are obligated to pay 80% of the book value of the shares 

according to our most recent balance sheet approved by our shareholders, and the balance must be paid within 

120 days after the date of the resolution of the shareholders’ meeting that gave rise to the withdrawal rights. 

Redemption 

According to Brazilian Corporation Law, we may redeem our shares if our shareholders, representing at 

least 50% of our capital stock, approve such redemption at an extraordinary shareholders’ meeting. 

Redemption of shares shall be paid with accrued profits reserve, profits reserve or capital reserve. If all of our 

shares are not redeemed, the shares to be redeemed will be chosen through lots. 

Registration of Our Shares 

Our shares are held in book-entry form with Itaú Corretora de Valores Mobiliários S.A. The transfer of 

shares is made through an entry, made by Banco Itaú S.A., in its registration systems, debited from the selling 

shareholder’s account and credited to the buyer’s account, pursuant to a written order of the selling 

shareholder or a judicial order or authorization to effect such transfer. 

Preemptive Rights 

Under Brazilian Corporation Law and our bylaws, the board of directors may exclude preemptive rights 

or reduce the exercise period with respect to the issuance of new shares, debentures convertible into our 

shares and warrants, within the authorized capital, if the distribution of those shares is effected through a 

stock exchange, through a public offering the purpose of which is to acquire control of another company. 

Restrictions on Certain Transactions by us, our Controlling Shareholders, Directors, Officers and 

Members of the Fiscal Council 

We are subject to the rules established under CVM Instruction No. 358 in connection with transactions 

involving our securities. Therefore, we, our controlling shareholders, our directors, executive officers and 

members of our fiscal council, if one is established, any technical or consulting group, under our bylaws 

(considered insiders according to the Brazilian Corporation Law), must abstain from trading our securities, 

including our derivatives, in the following circumstances. 

• before the disclosure of any material developments in connection with our business; 

• in the case of a merger, acquisition and partial or total spin-off of our assets or our restructuring; 

156

• during the 15-day period prior to the disclosure of our quarterly and annual financial statements; or 

• with respect to our controlling shareholders, directors and officers, in the event of the acquisition or 

sale of our shares by us or the acquisition or sale of our shares by any of our subsidiaries or affiliated 

companies or any company under our common control. 

Restrictions on Related Party Transactions 

Brazilian Corporation Law prohibits a director or officer from: 

• performing any charitable act at our expenses; 

• by virtue of its position, receiving any type of direct or indirect personal advantage from third parties 

without authorization in our bylaws or from shareholder’s meetings; or 

• taking part in any corporate transaction in which the director or officer has an interest that conflicts 

with an interest of the corporation. 

Agreements with the Same Group 

According to listing regulations of the Novo Mercado, we must submit to the BM&FBOVESPA, and 

disclose information regarding, all agreements entered into between us and our subsidiaries and 

affiliated companies, directors and executive officers, controlling shareholders and subsidiaries and 

affiliates of the directors, executive officers and controlling shareholder, as well as agreements with 

other companies with which any of the above participates in the same group, with a value of more than 

R$0.2 million or 1% of our net equity, whichever is greater. 

Such disclosed information must specify the subject matter of the relevant agreement, its duration, 

amount and termination or expiration terms, and any influence which such agreement may have on the 

management or the conduction of our business. See “Related Party Transactions.” 

Purchase of Our Shares by Us 

Our bylaws entitle our board of directors to approve the acquisition of our shares to be held in treasury 

and/or subsequently sold or cancelled. The decision to acquire our shares or maintain the acquired shares in 

treasury or to cancel them may not, among other actions: 

• result in a reduction of our share capital; 

• require the use of resources greater than our retained earnings or reserves (other than the legal 

reserve, unrealized profit reserve, revaluation reserve and special non-distributed mandatory 

dividend reserves) recorded in our most recent financial statements; 

• create, directly or indirectly, any artificial demand, supply or price condition, or use any unfair 

practice as a result of any action or omission; 

• be conducted during the course of a public offering for the acquisition of our common shares; or 

• be used to purchase shares not paid-in or held by our controlling shareholder. 

We cannot hold in treasury more than 10% of our total outstanding shares, excluding the shares held by 

our controlling shareholders, and including the shares held by our subsidiaries and associate companies. 

Any acquisition of our common shares by us must be made on a stock exchange , unless prior approval 

for the acquisition outside a stock exchange is obtained from the CVM. The purchase price of any such shares 

may not exceed their market price, unless prior approval is received from the CVM. We also may purchase 

our own shares for the purpose of going private. Moreover, we may acquire or issue put or call options related 

to our shares. 

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On October 3, 2008, our board of directors approved, for 365 days, the buyback of up to 5,590,306 of our 

shares to be held in treasury and, subsequently, sold and/or cancelled without decrease in the capital stock. 

This buyback program resulted in the purchase of 2,670.000 common shares, equivalent to 47.76% of the 

limit for such purchase, for the amount of R$60,164 million. 

Disclosure of Trading of our Securities by Our Controlling Shareholder, Members of the Board of 

Directors, Officers or Members of the Fiscal Council 

Our management and members of the fiscal council or of any technical or advisory committee are 

required to disclose to the investor relations officer, to the CVM and to the BM&FBOVESPA, the number 

and type of securities issued by us, including derivatives (for controlling shareholders) that are held by them 

or by persons closely related to them, as well as any changes in their respective ownership positions within 

ten days of the end of the month in which they were traded. 

Furthermore, the listing rules of the Novo Mercado require that controlling shareholders also provide 

information in connection with trading of our securities, including derivatives and plans of future negotiations. 

Such information must include: 

• the name and qualification of the person providing the information; 

• the amount, price, type and/or class, for outstanding shares, and characteristics, for other securities; 

and 

• type of purchase (private transaction, transaction conducted in stock exchange, etc.). 

Pursuant to CVM Instruction No. 358, whenever the shareholdings of controlling shareholders and/or any 

individual or company increase by 5%, individually or together with other individuals or companies with the 

same interest, such shareholders or group of shareholders shall communicate to us the following information: 

• name and qualification of the person providing the information; 

• amount, price, type and/or class, for purchased shares, or characteristics, for other securities; 

• type of purchase (private transaction, transaction conducted in stock exchange, etc.); 

• reasons for and purpose of the acquisition; 

• information regarding any agreements relating to the exercise of voting rights or the purchase and 

sale of our securities; and 

• average price of securities of the type and/or class purchased in the last 90 days in the 

BM&FBOVESPA. 

We approved in meetings of the board of directors held on July 24, 2007 and December 18, 2007, a policy 

of disclosure of information which purpose is the establishment of our disclosure policy and use of relevant 

information under CVM Instruction No. 358, CVM Instruction No. 369, dated June 11, 2002 and CVM 

Instruction No. 449, dated March 15, 2007, with the obligations and disclosure mechanisms of such relevant 

information to the market. 

Arbitration 

We, our shareholders, our managers, and members of our fiscal council must commit to resolve, by 

means of arbitration, any and all disputes or controversies which may arise amongst themselves relating to or 

resulting from the application, validity, effectiveness, interpretation, violation and respective effects of 

provisions contained in the Brazilian Corporation Law, our bylaws, rules and regulations of the CMN, the 

Central Bank, and the CVM, as well as other rules and regulations applicable to the Brazilian securities 

market, in addition to those set forth under the listing rules of the Novo Mercado, Arbitration Regulations and 

the Novo Mercado Participation Agreement. 

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Going Private Process 

We may become a private company only if we or our controlling shareholders conduct a public tender 

offer to acquire all of our outstanding shares, pursuant to Brazilian Corporation Law, rules and regulations by 

the CVM and listing rules of the Novo Mercado. The minimum price offered must be the fair value of our 

shares, as determined in accordance with the valuation report prepared by a specialized company. 

The valuation report must be prepared by a specialized and independent company of recognized 

experience, which will be chosen at a shareholders’ meeting, from a list of three institutions proposed by the 

board of directors. Such decision requires the majority vote of outstanding shares of attending shareholders, 

blank votes are not included. The quorum for this shareholders’ meeting is no less than 20% of shareholders 

representing the outstanding shares on the first call and any number of shareholders representing the 

outstanding shares on second call. All costs in connection with the valuation report shall be fully borne by the 

offering shareholder. Shareholders holding at least 10% of our outstanding shares may require our 

management to call an extraordinary shareholders’ meeting to determine whether to perform another 

valuation report using the same or a different valuation method. This request must be made within 15 days 

following the disclosure of the price to be paid for the shares in the public offering. The shareholder, who 

makes such request, as well as those who vote in its favor, must reimburse us for any costs in connection with 

the new valuation, if the new valuation price is lower than or equal to the original valuation price. If the new 

valuation price is higher than the original valuation price, the public offering must be cancelled or conducted 

at the new valuation price. Such decision must be disclosed to the market. 

Delisting from the Novo Mercado 

We may, at any time, delist our common shares from the Novo Mercado, provided that shareholders 

representing the majority of our voting capital stock approve such action and that we give at least 30 days 

prior written notice to the BM&FBOVESPA. Our delisting from the Novo Mercado will not result in the loss 

of our registration as a publicly-held company on the BM&FBOVESPA. 

If, at a shareholders’ meeting, the shareholders decide to delist from the Novo Mercado or if our shares 

are no longer admitted for negotiation in the Novo Mercado as a result of a corporate restructuring, the 

controlling shareholder must conduct a tender offer to register our shares outside the Novo Mercado. The 

price per share in the offering must be at least equivalent to the economic value, determined by a valuation 

report prepared by a specialized and independent company of recognized experience, which will be chosen at 

a shareholders’ meeting, from a list of three institutions proposed by the board of directors. Such decision 

requires the majority vote of outstanding shares of attending shareholders, blank votes are not included. The 

quorum for this shareholders’ meeting is no less than 20% of shareholders representing the outstanding shares 

on the first call and any number of shareholders representing the outstanding shares on second call. All costs 

in connection with such valuation report must be borne by the selling shareholder. 

Pursuant to the listing rules of the Novo Mercado, in the event of a transfer of our control within 12 

months following our delisting from the Novo Mercado, the selling controlling shareholder and the 

purchasing shareholder must offer to purchase the remaining shares for the same price and conditions offered 

to the selling controlling shareholder, adjusted for inflation. 

If our common shares are delisted from the Novo Mercado, we will not be permitted to have shares listed 

on the Novo Mercado for a period of two years after the delisting date, unless there is a change of control of 

our Company after we delist. 

Sale of the Controlling Stake in Us 

Pursuant to the rules of the Novo Mercado, the sale of control in us, in one transaction or in a series of 

transactions, must obligate the acquirer to complete a public tender offer for the acquisition of all of our other 

outstanding shares on the same terms and conditions granted to the selling controlling shareholder. 

A public tender offer is also required: 

159

• when an assignment of share subscription rights or rights of other securities convertible into our 

shares results in the transfer of our control; 

• in the event of a change of control of our controlling shareholder if such shareholder is a company, in 

which case the selling controlling shareholder is required to declare to the BM&FBOVESPA the 

amount attributed to the company in the sale operation, including presenting documentation 

including such amount; and 

• when an existing shareholder becomes a controlling shareholder, by means of entering into a private 

agreement for the purchase of our shares. In this case, the acquiring shareholder must effect the 

public offer for the purchase of our remaining shares on the same terms and conditions applicable to 

the selling shareholder and is required to indemnify those shares which were bought on the stock 

exchange within the six-month period preceding the date of sale of control. The amount of such 

indemnification is the difference between the amount paid for our shares to the selling controlling 

shareholder and the amount paid by investors in stock exchanges, adjusted for inflation. 

The acquiring controlling shareholder, if applicable, shall, within six months after the acquisition of our 

control, take the necessary steps to guarantee a minimum percentage of floating shares equivalent to 25% of 

the total shares of our capital stock. 

The controlling shareholder will not be able to transfer its shares, and we will not be able to register the 

transfer of these shares, until the buyer signs the relevant instruments pursuant to which the buyer agrees to 

adhere to the regulations of the Novo Mercado and the Rules of the Market Arbitration Chamber. 

Public Offerings of Shares 

Should any of the alternatives described in the “Sale of the Controlling Stake in Us” above occur at the 

same time, it is possible to conduct a single tender offer for more than one purpose, provided that all types of 

the tender offers are compatible with no prejudice to the target public of the offering. Authorization by the 

CVM should be obtained if required by law. 

Disclosure Requirements 

As a publicly-held company, we are subject to the reporting requirements established by the Brazilian 

Corporation Law and the CVM. Furthermore, as a result of our listing on the Novo Mercado, we will be 

required to meet the information requirements set forth in the Rules of the Novo Mercado. 

Publishing of Information From Time to Time and Also at Regular Intervals 

Brazilian securities regulations require us as a publicly held corporation to furnish the CVM and the 

BM&FBOVESPA with periodic information that includes standard financial statements, annual and quarterly 

financial statements, quarterly management reports and reports of our independent auditors. Brazilian 

securities regulations also require our company to file with the CVM any shareholders’ agreements and 

notices and minutes of shareholders’ meetings. 

In addition to disclosure requirements under Brazilian Corporation Law and the CVM, pursuant to the 

listing rules of the Novo Mercado, we must disclose financial statements after the end of each quarter (except 

the last quarter of each year) and at the end of our fiscal year, including a cash flow statement which must 

indicate, at a minimum, the changes in our cash and cash equivalents, divided into operational, finance and 

investment cash flows; 

Pursuant to Law No. 11,638/07 and CVM Instruction No. 457, dated July 13, 2007, we may, by the fiscal 

year ended December 31, 2009, present our consolidated financial statements based on IFRS, which will 

replace Brazilian GAAP. As of the year ended December 31, 2010, we will be required to present our 

consolidated financial statements based on IFRS. 

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Quarterly and Annual Information 

In addition to the information required by applicable laws, annual and quarterly financial information of 

companies listed in the Novo Mercado, must also disclose: 

• consolidated balance sheet, consolidated income statement, and comments on consolidated 

performance, if any; 

• any direct or indirect ownership interest exceeding five percent of our capital stock, looking through 

to the ultimate beneficial owners; 

• the number and characteristics of a company’s securities directly or indirectly held by controlling 

shareholders, members of the board of directors and executive officers and members of the fiscal 

council; 

• changes in the number of shares held by the controlling shareholders and members of the board of 

directors, executive officers and fiscal council in the immediately preceding 12 months; 

• the number of free floating shares, and their percentage in relation to the total number of issued shares; 

• all information relating to the number and characteristics of shares directly or indirectly held by 

controlling shareholders and members of the board of directors, executive officers and fiscal council, 

as well as changes in the numbers of shares held by controlling shareholders and members of the 

board of directors, executive officers and fiscal council in the immediately preceding 12 months 

must also be included in our annual financial statements under “—Other Relevant Information;” 

• the existence of an arbitration clause; and 

• a note about the company's related party transactions. 

Disclosure of Material Developments 

Under Brazilian Corporation Law, we must disclose any material developments related to our business to 

the CVM and to the BM&FBOVESPA. We must also publish a notice of the material development. A 

material development is considered relevant if it influences the price of our securities, the choice of our 

shareholders to trade their securities or exercise any shareholders rights. 

Under special circumstances, we may request confidential treatment of certain material developments 

from the CVM. 

Public Meetings with Analysts 

According to the listing rules of the Novo Mercado, at least once a year we are required to hold a public 

meeting with analysts and any other interested parties to disclose information concerning our relevant 

economic and financial condition, projects and prospects. 

Annual Calendar 

According to the Novo Mercado regulations, we and our managers must send to the BM&FBOVESPA 

and disclose to the public, by no later than the end of January of each year, an annual calendar setting forth 

our scheduled corporate events, including information with respect to the Company, date and time of the 

events, date of publication and delivery of documents discussed in the events to the BM&FBOVESPA. 

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Amounts Available for Distribution 

DIVIDENDS AND DIVIDEND POLICY 

At each annual general shareholders’ meeting, our board of directors is required to recommend the 

allocation our net income for the preceding year, subject to a vote of our shareholders. Pursuant to Brazilian 

Corporation Law, our net income is determined as the income after deducting accumulated losses from prior 

years, income tax and social contribution and any amounts allocated to the share interest of our employees 

and managers in our net income. 

Pursuant to our bylaws, 25% of our annual adjusted net profit should be available for distribution of 

dividends and interest attributable to shareholders’ equity in any fiscal year. This amount is the mandatory 

dividend. In addition, under our Dividends Policy, at least 50% of the adjusted net profit should be available 

for distribution. This amount may be decreased if required by law or due to a company’s financial condition 

and/or future perspectives. 

The amount by which the mandatory dividend exceeds the “realized” net profits in a given year may be 

allocated to an unrealized profit reserve account. Calculation of net income and allocations to reserves, as 

well as the amounts available for distribution, are determined on the basis of our financial statements, 

prepared in accordance with Brazilian Corporation Law. See “—Dividends.” 

Reserve Accounts 

Financial statements of companies established under Brazilian law usually have two reserve accounts: 

profit reserves and capital reserves. 

Profit Reserves 

Under Brazilian Corporation Law, the profit reserves consist of the legal reserve, the unrealized profit 

reserve, the contingency reserve, the bylaws reserve and the retained earnings reserve. 

Legal Reserve 

We are required to maintain a legal reserve to which we must allocate five percent of our net profits, 

before any other allocation of reserves, until the aggregate amount of the reserve equals 20% of our capital 

stock. However, we are not required to make any allocations to our legal reserve in a year in which the legal 

reserve, when added to our other established capital reserves, exceeds 30% of our capital stock. The purpose 

of the legal reserve is to maintain our capital stock. The amount of profits allocated to establishing the legal 

reserve must be approved by our shareholders at an annual shareholders’ meeting. The legal reserve account 

is not available for the payment of dividends. The legal reserve may be used exclusively to increase our 

capital stock and offset for losses. On March 31, 2011, our legal reserve amounted to R$134.3 million. 

Bylaws Reserve 

Pursuant to the Brazilian Corporation Law, we are permitted to establish a bylaws reserve that may be 

established in accordance with our bylaws. Bylaws authorizing the allocation of a percentage of the net profits 

to the bylaws reserve may also determine the purpose, criteria for allocation and upper limit. The allocation of 

resources to such reserves may not be approved if it adversely affects the mandatory dividend. Our bylaws do 

not provide for the establishment of bylaw reserves. 

Contingency Reserves 

Pursuant to the Brazilian Corporation Law, a portion of our net profits may be allocated to a contingency 

reserve to offset the anticipated losses that are deemed probable in future fiscal years. Any amount so 

allocated in a previous fiscal year either must be reversed in the fiscal year in which the loss was anticipated, 

if the loss does not occur as projected. On March 31, 2010, the balance of our contingency profits reserve was 

R$2,300 million. 

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Retained Profits Reserves 

Under the Brazilian Corporation Law, our shareholders may decide to allocate the portion of net profits 

foreseen in a capital budget previously approved to the retained profits reserve. As of March 31, 2011, the 

balance of our retained profits reserves was R$1,252.3 million. 

Unrealized Profits Reserves 

Pursuant to Brazilian Corporation Law, the amount by which the mandatory dividend exceeds the 

“realized” net profits in a given year may be allocated to an unrealized profit reserve account. The Brazilian 

Corporation Law defines “realized” net profits as the amount by which net profits exceed the sum of: (i) net 

positive results, if any, from the equity method of accounting for earnings and losses; and (ii) the profits, 

gains or returns that will be received by the Company after the end of the subsequent fiscal year. Profits 

recorded in the unrealized profit reserve, if realized and not absorbed by losses in subsequent years, must be 

added to the first dividend distributed after the realization. On March 31, 2011, the balance of our unrealized 

profits reserve was R$187.7 million. 

Capital Reserves 

Pursuant to Brazilian Corporation Law, we may also maintain capital reserves in which we may pay 

premium in connection with the mergers, sale of founders’ shares, subscription warrants or issuance of 

debentures, tax incentives, and donations and grants for investments. Amounts allocated to our capital 

reserves are not included in the calculation of the mandatory dividend. Under Brazilian Corporation Law, 

capital reserves may only be used to (i) absorb losses that exceed accumulated earnings and profit reserves; (ii) 

redeem, reimburse or repurchase our share capital; or (iii) increase our share capital. As of March 31, 2011, 

the balance of our capital reserve was R$95.6 million. 

Dividends 

We are required by the Brazilian Corporation Law and our bylaws to hold an annual shareholders’ 

meeting no later than 4 months after the end of the fiscal year, at which time, among other matters, our 

shareholders shall deliberate on the distribution of an annual dividend. The payment of annual dividends is 

based on our audited financial statements prepared for the immediately preceding year. 

Brazilian Corporation Law requires that the bylaws of a Brazilian company specify a minimum 

percentage of the available profits for the annual distribution of dividends by the company, known as 

mandatory dividend, which must be paid to shareholders as either dividends or interest attributable to 

shareholders’ equity. According to our bylaws and the Brazilian Corporation Law, a minimum of 25% of our 

adjusted net income should be intended for the distribution and payment of the mandatory dividend to our 

shareholders. Furthermore, our Dividends Policy establishes the amount of 50%. See “—Amounts Available 

for Distribution.” 

Brazilian Corporation Law, however, allows us to suspend the mandatory dividend in any fiscal year if 

the board of directors reports to our general shareholders’ meeting that such distribution is incompatible with 

our financial condition. The fiscal council, if one is established, must prepare a report about recommendation 

of the board of directors. In addition, the board of directors is required to submit a report to the CVM setting 

out the reasons for any suspension of dividends within five days after the general shareholders meeting. Net 

income not distributed by virtue of a suspension would be allocated to a separate reserve and, if not absorbed 

by subsequent losses, would be required to be distributed as dividends as soon as the financial condition of the 

company permits such payment. 

Holders of our shares shall be paid dividends on the date determined by the board of directors based of 

their shareholdings. According to the Brazilian Corporation Law, dividends are generally required to be paid 

within 60 days following the date on which the dividend is declared, unless the shareholders’ resolution sets 

another payment date, which must occur before the end of the year in which the dividend is declared. 

Our bylaws do not require that the payment of dividends be adjusted for inflation. 

163

Shareholders have a three-year period from the date of the dividend payment to claim the dividends or 

interest on shareholders’ equity attributed to their shares, after which the aggregate amount of any unclaimed 

dividend would legally revert to us. However, it does not mean that dividends cannot be paid to shareholders 

in subsequent fiscal years. 

We may prepare our balance sheet for the six-month period or three-month period based on decision by the 

board of directors and credit or declare the payment of dividends, pursuant to the law and our bylaws. In addition, 

the annual shareholders’ meeting may, at any time, decide to distribute dividends based on existing profit reserves 

or retained earnings reserves from previous fiscal years, maintained based on decision at annual shareholders’ 

meeting, after distribution of the mandatory dividend of each fiscal year provided under our bylaws. 

Currently, the distribution of dividends in Brazil is exempt from income tax, except when such payment 

is made to beneficiaries residents and/or domiciled in countries or places that: (i) do not tax the income, or 

which maximum tax rate is lower than 20%, in connection with profits obtained outside their territory; (iii) 

whose internal laws determines confidentiality in connection with the shareholdings of companies; (iv) which 

provide tax benefits for non-resident individuals or corporations without requiring a significant business in 

such country or place; (v) which provide tax benefits for non-resident individuals or corporations provided 

they do not conduct significant business in such country or place. A possible change in Brazilian laws may 

require the payment of income taxes from the distribution of dividends. 

Our new shareholders are entitled to full payment of dividends declared as of the Settlement Date. 

Interest Attributable to Shareholders’ Equity 

Since January 1, 1996, Brazilian companies are permitted to pay interest attributable to shareholders’ equity to 

shareholders and treat those payments as a deductible expense for purposes of calculating Brazilian income tax and, 

since 1998, for the purpose of social contribution tax. The amount of tax deduction in each year is limited to the 

greater of (i) 50% of our net income (before taking into account such distribution and any deductions in connection 

with income and social contribution taxes) for the period in respect of which the payment is made; and (ii) 50% of 

retained earnings. Our bylaws allow the payment of interest attributable to shareholders’ equity as an alternative for 

the payment of dividends. The rate applied in calculating interest attributable to shareholders’ equity cannot exceed 

the prorated daily variation of the TJLP. Payments of interest attributable to shareholders’ equity, net of 

withholding income tax, may be included as part of the mandatory distribution. In accordance with applicable law, 

we are required to pay to shareholders an amount sufficient to ensure that the net amount they receive in respect of 

interest attributable to shareholders’ equity, after payment of any applicable withholding tax plus the amount of 

declared dividends, is at least equivalent to the mandatory dividend. 

Any payment of interest attributable to shareholders’ equity to the holders of our shares, whether or not 

they are Brazilian residents, is subject to Brazilian withholding tax at the rate of 15%. A 25% withholding 

tax rate is applied if the holder is a resident of a tax haven (i.e., a country that does not charge income tax, 

or that charges income tax at a maximum applicable rate lower than 20%, or which local laws impose 

restrictions on the disclosure of shareholders’ ownership or title to the investment). 

Interest paid, and to be paid, to our shareholders, calculated pursuant to the Law No. 9.249/95, is 

recorded under the line item financial expenses, pursuant to tax laws. For purposes of the financial statements, 

these amounts are presented as profits distribution in our financial statements. 

Distribution of Dividends or Interest Attributable to Shareholders’ Equity in the past Fiscal Years 

The following table sets forth the distribution of dividends or interest attributable to shareholders’ equity 

in the past five fiscal years: 

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2006 2007 2008 2009 2010 

(In millions of reais) 

Dividends ................................................................................................. – 87.3 134.2 296.3 246.6 

Interest Attributable to Shareholders’ Equity ......................................... 169.9 119.9 103.1 – 106.0 

Total ........................................................................................................ 169.9 207.2 237.3 296.3 352.6

TAXATION 

The following summary contains a description of certain Brazilian and U.S. federal income tax 

consequences of the acquisition, ownership and disposition of our common shares, but it does not purport to be 

a comprehensive description of all the tax considerations that may be relevant to a decision to purchase common 

shares. The summary is based upon the tax laws of Brazil and regulations thereunder and on the tax laws of the 

United States and regulations thereunder as in effect on the date hereof, which are subject to change. 

Although there is at present no income tax treaty between Brazil and the United States, the tax authorities of 

the two countries have had discussions that may culminate in such a treaty. No assurance can be given, however, 

as to whether or when a treaty will enter into force or how it will affect the holders of our common shares. 

Prospective shareholders should consult their own tax advisers as to the Brazilian and U.S. federal 

income tax consequences of the acquisition, ownership and disposition of such common shares in their 

particular circumstances. 

Material Brazilian Tax Considerations 

The following discussion summarizes the material Brazilian tax consequences of the acquisition, 

ownership and disposal of common shares by a holder that is not domiciled in Brazil, or a Non-Resident 

Holder. The following discussion summarizes the main tax consequences applicable under Brazilian law to a 

Non-Resident Holder of common shares in general, and, therefore, it does not specifically address all of the 

Brazilian tax considerations applicable to any particular Non-Resident Holder. It is based upon the tax laws of 

Brazil as in effect on the date of this offering memorandum, which are subject to change, and to differing 

interpretations. Any change in that law may change the consequences described below. Each prospective 

purchaser is urged to consult its own tax advisor about the particular Brazilian tax consequences to it of an 

investment in the common shares. 

The tax consequences described below do not take into account the effects of any tax treaties or 

reciprocity of tax treatment entered into by Brazil and other countries. The discussion also does not address 

any tax consequences under the tax laws of any state or locality of Brazil. This summary also does not address 

any tax issues that affect us solely, such as deductibility of expenses. 

Income Tax 

Dividends 

Dividends paid by a Brazilian corporation, such as ourselves, including stock dividends and other 

dividends paid to a Non-Resident Holder of common shares, are currently not subject to withholding income 

tax in Brazil to the extent that such amounts are related to profits generated as of January 1, 1996. Dividends 

paid from profits generated before January 1, 1996 may be subject to Brazilian withholding income tax at 

varying rates, according to the tax legislation applicable to each corresponding year. 

Interest on Shareholders’ Equity 

Law 9,249, dated December 26, 1995, as amended, allows a Brazilian corporation, such as us, to make 

distributions to shareholders of interest on shareholders’ equity and treat those payments as a deductible 

expense for purposes of calculating Brazilian corporate income tax and social contribution on net profits as 

well. These distributions may be paid in cash. For tax purposes, this deduction is limited to the daily pro rata 

variation of the Brazilian long-term interest rate, or TJLP, as determined by the Central Bank periodically, 

and the amount of the deduction may not exceed the greater of: 

• 50% of net profits (after the deduction of social contribution on net profits but before taking into 

account the provision for corporate income tax and interest on shareholders’ equity) related to the 

period in respect of which the payment is made; or 

• 50% of the sum of retained profits and profit reserves as of the date of the beginning of the period in 

respect of which the payment is made. 

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Payment of interest to a Non-Resident Holder is subject to the withholding of income tax at the rate of 

15%, or 25% if the Non-Resident Holder is domiciled in a country or location (i) that does not impose income 

tax, (ii) where the maximum income tax rate is lower than 20%, or (iii) where the local legislation imposes 

restrictions on disclosing the shareholding composition or the ownership of the investment or the ultimate 

beneficiary of the income derived from transactions carried out and attributable to a Non-Resident Holder 

(“Low of Nil Tax Jurisdictions”). These payments may be included, at their net value, as part of any 

mandatory dividend. To the extent payment of interest on shareholders’ equity is so included, the corporation 

is required to distribute to shareholders an additional amount to ensure that the net amount received by them, 

after payment of the applicable withholding income tax, plus the amount of declared dividends, is at least 

equal to the mandatory dividend. 

Capital Gains 

According to Law 10,833/03, gains related to disposal or sale of assets located in Brazil, such as common 

shares, are generally subject to income tax in Brazil, regardless of whether the sale or the disposal is made by 

the Non-Resident Holder to a resident or person domiciled in Brazil or not. 

As a rule, gains realized as a result of a transaction are the positive difference between the amount 

realized on the sale or exchange of a security over its acquisition cost. Under Brazilian law, income tax rules 

on such gains can vary depending on the domicile of the Non-Resident Holder, the type of registration of the 

investment by the Non-Resident Holder with the Central Bank and how the disposal is carried out, as 

described below. 

Capital gains assessed by a Non-Resident Holder on a sale or disposal of our units carried out on the 

Brazilian stock exchange (which includes the transactions carried out on the organized over-the-counter 

market) are: 

• exempt from income tax when assessed by a Non-Resident Holder that (1) has registered its 

investment in Brazil with the Central Bank under the rules of Resolution No. 2,689/00, which we 

refer to as a 2,689 Holder, and (2) is not a resident in a Low or Nil Tax Jurisdiction; or 

• subject to income tax at a rate of 15% in any other case, including a case of gains assessed by a Non- 

Resident Holder that is not a 2,689 Holder, and/or is a resident in a Low or Nil Tax Jurisdiction. In 

these cases, a withholding income tax of 0.005% of the sale value will be applicable and can be later 

offset with the eventual income tax due on the capital gain. 

Any other gains assessed on a disposal of our units that is not carried out on a Brazilian stock exchange 

are subject to income tax at the rate of 15%, except for a resident in a Low or Nil Tax Jurisdiction, who would 

be, in this case, subject to income tax at the rate of 25%. In the case that these gains are related to transactions 

carried out on the Brazilian non-organized over-the-counter market with intermediation, the withholding 

income tax of 0.005% shall also be applicable and can be later offset against the eventual income tax due on 

the capital gain. 

In the case of redemption of securities or capital reduction by a Brazilian corporation, such as ourselves, 

the positive difference between the amount effectively received by the Non-Resident Holder and the 

corresponding acquisition cost is treated, for tax purposes, as capital gain derived from sale or exchange of 

common shares not carried out on a Brazilian stock exchange market, and is therefore subject to income tax at 

the rate of 15% or 25%, in case of a resident in a Low or Nil Tax Jurisdiction. 

Any exercise of preemptive rights relating to the common shares will not be subject to Brazilian taxation. 

Any gain realized by a Non-Resident Holder on the disposition of preemptive rights relating to common 

shares in Brazil will be subject to Brazilian income tax according to the same rules applicable to the sale or 

disposition of common shares. 

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Discussion on Low or Nil Tax Jurisdictions 

On June 24, 2008, Law No. 11,727 introduced the concept of “privileged tax regime”, in connection with 

transactions subject to transfer pricing and thin capitalization rules, which is more comprehensive than the 

concept of Low or Nil Tax Jurisdiction. A “privileged tax regime” is considered as such the tax regime that (i) 

does not tax income or taxes it at a maximum rate lower than 20%; (ii) grants tax benefits to non-resident 

entities or individuals (a) without the requirement to carry out a substantial economic activity in the country 

or dependency or (b) contingent to the non-exercise of a substantial economic activity in the country or 

dependency; (iii) does not tax or that taxes the income generated abroad at a maximum rate lower than 20%; 

or (iv) does not provide access to information related to shareholding composition, ownership of assets and 

rights or economic transactions carried out. 

In addition, on June 04, 2010, Brazilian tax authorities enacted the Normative Ruling No. 1,037, listing: 

(i) the countries and jurisdictions deemed as Low or Nil Tax Jurisdictions or where the local legislation does 

not allow access to information related to shareholding composition of legal entities, to the ownership or to 

the identity of the effective beneficiary of the income attributed to non-residents and (ii) the privileged tax 

regimes, which definition is provided by Law No. 11,727/08, as it was described above. 

Notwithstanding the fact that the “privileged tax regime” concept was enacted in connection with transfer 

pricing and thin capitalization rules, there is no assurance that Brazilian tax authorities will not attempt to apply 

the concept of privileged tax regimes to other types of transactions. Prospective purchasers should consult with 

their own tax advisors regarding the consequences of the implementation of Law 11,727, Ordinance 1,037 and of 

any related Brazilian tax law or regulation concerning “tax haven” or “privileged tax regimes”. 

Tax on Foreign Exchange and Financial Transactions 

Foreign Exchange Transactions 

Brazilian law imposes the IOF/Exchange Tax, due on the conversion of reais into foreign currency and 

on the conversion of foreign currency into reais. 

Although the current applicable rate for most foreign exchange transactions is 0.38%, foreign exchange 

transactions related to inflows of funds to Brazil for investments made by foreign investors in the Brazilian 

financial and capital markets are generally subject to IOF/Exchange at an increased tax rate of 6%. 

Notwithstanding certain exceptions apply, which are subject to the IOF/Exchange at a 2% rate, and 

include the following types of foreign exchange transactions: (1) inflow of funds for variable rate investments 

(such as common shares) carried out by means of a Brazilian stock or future and commodities exchange by 

2,689 Holders, provided that the transactions do not involve combined derivatives that result in predetermined 

income; (2) inflow of funds for the acquisition of shares of Brazilian companies in either (a) a 

public offer of shares that is registered with the CVM or that is not required to be registered with the CVM, or 

(b) a subscription of shares, provided that, in both (a) and (b), the Brazilian company issuing the shares is 

entitled to trade its shares in a stock exchange environment; and (3) inflow of funds deriving from the change 

of the type of registration of the foreign investment from a “foreign direct investment” to an investment 

registered under the rules of Resolution No. 2,689/00, in shares traded in a Brazilian stock exchange. 

The liquidation of exchange transactions related to the outflow of funds from the Brazilian financial and 

capital markets is subject to IOF/Exchange Tax at a zero percent rate, including the liquidation of exchange 

transactions related to remittances of interest on shareholders’ equity and dividends to foreign investors 

related to the investments within the financial and capital markets. In any case, the Brazilian government may 

increase the IOF/Exchange rate at any time, up to 25%. However, any increase in rates may only apply to 

future transactions as of the date of the publication of the Brazilian government’s act. 

Tax on Transactions Involving Bonds and Securities 

Brazilian law imposes a Tax on Transactions Involving Bonds and Securities, or IOF/Bonds Tax, on 

transactions involving bonds and securities, including those carried out on a Brazilian stock exchange. The 

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IOF/Bonds Tax rate applicable to transactions involving shares is currently zero, although the Brazilian 

government may increase such rate at any time up to 1.5% per day, but only for future transactions. 

Other Brazilian Taxes 

There are no Brazilian inheritance, gift or succession taxes applicable to the ownership, transfer or 

disposal of stocks, except for gift and inheritance taxes imposed by some Brazilian states on gifts or bequests 

by individuals or entities not domiciled or residing in Brazil to individuals or entities domiciled or residing 

within such states. There are no Brazilian stamps, issues, registrations or similar taxes or duties payable by 

holders of units. 

U.S. Federal Income Taxation 

The following summary describes the principal U.S. federal income tax consequences generally relevant 

to the acquisition, ownership and disposition of the common shares. This summary discusses only the U.S. 

federal income tax considerations of holders that are initial purchasers of the common shares pursuant to this 

offering. This summary only applies to common shares held as capital assets (generally property held for 

investment) and does not discuss all the tax consequences that may be relevant to a holder in light of its 

particular circumstances or to holders subject to special rules, such as: 

• Banks and financial institutions; 

• insurance companies; 

• tax-exempt organizations; 

• real estate investment trusts; 

• regulated investment companies; 

• grantor trusts; 

• persons that received the common shares as compensation for the performance of services; 

• persons that have a functional currency other than the U.S. dollar; 

• persons that will own common shares through partnerships or other pass through entities; 

• holders who own or are deemed to own 10.0% or more, by vote, of our equity for U.S. federal 

income tax purposes; 

• dealers or traders in securities or currencies; 

• certain former citizens or long-term residents of the United States; or 

• persons that will hold the common shares as a position in a “straddle” or as a part of a “hedging,” 

“conversion” or other risk reduction transaction for U.S. federal income tax purposes. 

Moreover, this description does not address the U.S. federal estate and gift tax or alternative minimum 

tax consequences, nor any state, local or non-U.S. tax consequences of the acquisition, ownership or 

disposition of common shares. Each prospective purchaser should consult its tax advisor with respect to the 

U.S. federal, state, local and non-U.S. tax consequences of acquiring, owning and disposing of common 

shares. 

This description is based on the U.S. Internal Revenue Code of 1986, as amended (the “Code”), existing, 

proposed and temporary U.S. Treasury Regulations and judicial and administrative interpretations thereof, in 

each case as in effect and available on the date hereof. All of the foregoing are subject to change (possibly 

with retroactive effect) and differing interpretations which could affect the tax consequences described herein. 

168

For purposes of this summary, a “U.S. Holder” is a beneficial owner of the common shares who for U.S. 

federal income tax purposes is: 

• an individual who is a citizen or resident of the United States; 

• a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created 

or organized in or under the laws of the United States or any state thereof or the District of Columbia; 

• an estate the income of which is subject to U.S. federal income taxation regardless of its source; or 

• a trust if such trust validly elects to be treated as a U.S. person for U.S. federal income tax purposes or 

if a court within the United States is able to exercise primary supervision over its administration and 

one or more U.S. persons have the authority to control all of the substantial decisions of such trust. 

If a partnership (or any other entity treated as a partnership for U.S. federal income tax purposes) holds 

the common shares, the tax treatment of such partnership or a partner in such partnership will generally 

depend on the status of the partner and on the activities of the partnership. Such a partner or partnership 

considering the acquisition of common shares should consult its own tax advisor as to its tax consequences. 

Persons considering the purchase of the common shares should consult their tax advisors with regard to 

the application of the U.S. federal income tax laws to their particular situations as well as any tax 

consequences arising under the laws of any state, local or non-U.S. taxing jurisdictions. 

U.S. Internal Revenue Service Circular 230 Disclosure 

Pursuant to U.S. Internal Revenue Service Circular 230, we hereby inform you that the description 

set forth herein with respect to U.S. federal tax issues was not intended or written to be used, and such 

description cannot be used, by any taxpayer for the purpose of avoiding any penalties that may be 

imposed on the taxpayer under the U.S. Internal Revenue Code. Such description was written to 

support the promotion or marketing of the common shares. Each taxpayer should seek advice based on 

their particular circumstances from an independent tax advisor. 

Distributions 

Subject to the discussion below under “—Passive foreign investment company considerations,” the gross 

amount of any distribution made to you on the common shares other than certain distributions, if any, of 

common shares distributed pro rata to all our shareholders, before reduction for any Brazilian taxes, including 

withholding taxes on interest on shareholders’ equity, withheld therefrom, will be includible in income on the 

day on which the dividends are actually or constructively received by a U.S. Holder as a dividend to the 

extent such distributions are paid out of our current or accumulated earnings and profits as determined under 

U.S. federal income tax principles. Under current law, dividends received in taxable years beginning on or 

before December 31, 2012 by non-corporate United States investors on shares of certain non-U.S. 

corporations may be subject to U.S. federal income tax at lower rates than other types of ordinary income if 

certain conditions are met. Currently, dividends that we will pay on the common shares do not meet these 

conditions. Such dividends will not be eligible for the dividends received deduction generally allowed to 

corporate U.S. Holders. Subject to the discussion below under “—Passive foreign investment company 

considerations,” to the extent, if any, that the amount of any distribution by us on common shares exceeds our 

current and accumulated earnings and profits as determined under U.S. federal income tax principles, it will 

be treated first as a tax-free return of the U.S. Holder’s adjusted tax basis in the common shares and thereafter 

as capital gain. We do not maintain calculations of our earnings and profits under U.S. federal income tax 

principles. Therefore, U.S. Holders should expect that distributions by us generally will be treated as 

dividends for U.S. federal income tax purposes. 

The amount of any dividend paid in reais or currency other than the U.S. dollar (“Other Foreign 

Currency”) will equal the U.S. dollar value of the dividend, calculated by reference to the exchange rate in 

effect at the time the dividend is actually or constructively received by the U.S. Holder, regardless of whether 

the payment is in fact converted to U.S. dollars at that time. A U.S. Holder should not recognize any foreign 

169

currency gain or loss in respect of such dividend if such reais (or Other Foreign Currency) are converted into 

U.S. dollars on the date received by the U.S. Holder. If the reais (or Other Foreign Currency) are not 

converted into U.S. dollars on the date of receipt, however, gain or loss may be recognized upon a subsequent 

sale or other disposition of the reais (or Other Foreign Currency). Such foreign currency gain or loss, if any, 

will be U.S. source ordinary income or loss. U.S. Holders should consult with their own independent tax 

advisors regarding the treatment of any foreign currency gain or loss if the reais (or Other Foreign Currency) 

received as a dividend on the common shares is not converted into U.S. dollars on the date of receipt. 

Dividends on the common shares received by a U.S. Holder generally will be treated as foreign source 

income for U.S. foreign tax credit purposes. Subject to limitations under U.S. federal income tax law 

concerning credits or deductions for foreign taxes and certain exceptions for short-term and hedged positions, 

a Brazilian withholding tax, if any, imposed on dividends would be treated as a foreign income tax eligible for 

credit against a U.S. Holder’s U.S. federal income tax liability (or at a U.S. Holder’s election, may be 

deducted in computing taxable income if the U.S. Holder has elected to deduct all foreign income taxes for 

the taxable year). The limitation on foreign taxes eligible for the U.S. foreign tax credit is calculated 

separately with respect to specific “baskets” of income. For this purpose, the dividends on the common shares 

should generally constitute “passive category income,” or in the case of certain U.S. Holders, “general 

category income”. Further, in certain circumstances, if you have held our common shares for less than a 

specified minimum period during which you are not protected from risk of loss, or are obligated to make 

payments related to dividends, you will not be allowed a foreign tax credit for foreign taxes imposed on 

dividend income with respect to our ordinary shares. Alternatively, a U.S. Holder may take a deduction for 

the Brazilian tax if such U.S. Holder does not take a credit for any foreign income tax for that taxable year. 

The rules with respect to foreign tax credits are complex, and U.S. Holders are urged to consult their own tax 

advisors regarding the availability of the foreign tax credit under their particular circumstances. 

Sale or Exchange of Common Shares 

Subject to the discussion below under “—Passive foreign investment company considerations”, a U.S. 

Holder generally will recognize gain or loss on the sale or exchange of the common shares equal to the 

difference between the U.S. dollar amount realized (including the gross amount of the proceeds before the 

deduction of any Brazilian tax) on such sale or exchange and the U.S. Holder’s adjusted tax basis in the 

common shares. Subject to the discussion below under “—Passive foreign investment company 

considerations”, such gain or loss will be capital gain or loss. Any gain or loss recognized on a taxable 

disposition of the common shares will be capital gain or loss. If, at the time of the sale, redemption or other 

taxable disposition of common shares, a U.S. Holder is treated as holding the common shares for more than 

one year, this capital gain or loss will be long-term capital gain or loss. Otherwise, this capital gain or loss 

will be short-term capital gain or loss. In the case of certain non-corporate U.S. Holders, long-term capital 

gain generally will be subject to reduced rates of tax. Gain or loss, if any, recognized by a U.S. Holder 

generally will be treated as U.S. source gain or loss, as the case may be. The deductibility of capital losses is 

subject to limitations under the Code. If any gain from the sale or exchange of common shares is subject to 

Brazilian tax, U.S. Holders may not be able to credit such taxes against their U.S. federal income tax liability 

under the U.S. foreign tax credit limitations of the Code since such gain generally would be U.S. source 

income, unless such tax can be credited (subject to applicable limitations) against tax due on other income 

treated as derived from foreign sources. Alternatively, a U.S. Holder may take a deduction for the Brazilian 

tax if such U.S. Holder does not take a credit for any foreign income tax during that taxable year. 

While we do not believe that U.S. Holders will be entitled to a credit or deduction with respect to any 

IOF/Exchange Tax paid on their common shares (as discussed in “Taxation—Material Brazilian tax 

considerations—Tax on Foreign Exchange and Financial Transactions”), U.S. Holders should, however, be 

entitled to include the U.S. dollar amount of the IOF/Exchange Tax paid as part of their initial basis in such 

shares. U.S. Holders should consult their own advisors regarding how to account for payments not made in 

U.S. dollars. 

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Passive foreign investment company considerations 

A non-U.S. corporation will be classified as a “passive foreign investment company,” or a PFIC, for U.S. 

federal income tax purposes in any taxable year in which, after applying certain lookthrough rules, either: 

• at least 75 percent of its gross income is “passive income;” or 

• at least 50 percent of the average value of its gross assets is on assets that produce “passive income” 

or are held for the production of “passive income.” 

Passive income for this purpose generally includes dividends, interest, royalties, rents and gains from 

commodities and securities transactions with exceptions for, among other things, dividends, interest, rents and 

royalties received from certain related companies to the extent attributable (in accordance with U.S. Treasury 

Regulations) to non-passive income derived by such related companies. If the stock of a foreign corporation is 

publicly traded for the taxable year, the asset test is applied using the fair market value for purposes of 

measuring such foreign corporation’s assets. For purposes of the PFIC asset test, the aggregate fair market 

value of the assets of a publicly traded foreign corporation is generally treated as being equal to the sum of the 

aggregate value of the outstanding stock and the total amount of the liabilities of such corporation (the 

“Market Capitalization”). 

Based on certain estimates of our gross income, gross assets, the nature of our business and our Market 

Capitalization, we do not believe that we will be classified as a PFIC in our 2011 taxable year or in the future. 

However, there can be no assurance that we will not be considered a PFIC for any taxable year because the 

determination of whether we are a PFIC for a given year is based on the composition of our gross income, the 

value of our assets, Market Capitalization and activities in that year. If we are or become a PFIC, unless a U.S. 

Holder elects to be taxed annually on a mark-to-market basis with respect to the common shares (as discussed 

below), any excess distribution and gain realized on a sale, exchange or other disposition of any common 

shares will be treated as ordinary income and will be subject to tax as if (a) the excess distribution or gain had 

been realized ratably over the U.S. Holder’s holding period, (b) the amount deemed realized in each year had 

been subject to tax in each such year at the highest marginal rate for such year (other than income allocated to 

the current period or any taxable period before we became a PFIC, which would be subject to tax at the U.S. 

Holder’s regular ordinary income rate for the current year and would not be subject to the interest change 

discussed below), and (c) the interest charge generally applicable to underpayments of tax had been imposed 

on the taxes deemed to have been payable in those years. 

Qualified electing fund election and mark-to-market election 

Where a company that is a PFIC meets certain reporting requirements, a U.S. shareholder can avoid the 

PFIC consequences described above by making a “qualified electing fund,” or QEF, election to be taxed 

currently on its proportionate share of the PFIC’s ordinary income and net capital gains. However, we do not 

intend to comply with the necessary accounting and record keeping requirements that would allow a U.S. 

Holder to make a QEF election with respect to us. 

If common shares are “regularly traded” on a “qualified exchange,” a U.S. Holder may make a mark-tomarket 

election with respect to the common shares. If a U.S. Holder makes the mark-to-market election, for 

each year in which we are a PFIC, the holder will generally include as ordinary income the excess, if any, of 

the fair market value of the common shares at the end of the taxable year over their adjusted tax basis, and 

will be permitted an ordinary loss in respect of the excess, if any, of the adjusted tax basis of the common 

shares over their fair market value at the end of the taxable year (but only to the extent of the net amount of 

previously included income as a result of the mark-to-market election). If a U.S. Holder makes the election, 

the holder’s tax basis in the common shares will be adjusted to reflect the amount of any such gain or loss. 

Any gain recognized on the sale or other disposition of common shares will be treated as ordinary income. 

The common shares will be considered “marketable stock” if they are traded on a qualified exchange, other 

than in de minimis quantities, on at least 15 days during each calendar quarter. The BM&FBOVESPA may 

constitute a qualified exchange for this purpose provided it meets certain trading volume, listing, financial 

disclosure, surveillance, and other requirements set forth in applicable U.S. Treasury Regulations. However, 

we cannot be certain that our common shares will continue to trade on the BM&FBOVESPA or that our 

171

common shares will be traded on at least 15 days in each calendar quarter in other than de minimis quantities. 

U.S. Holders should be aware, however, that if we are determined to be a PFIC, the interest charge regime 

described above generally would apply to indirect distributions or gains deemed to be on U.S. Holders in 

respect of any of our subsidiaries that also may be determined to be a PFIC, as the mark-to-market election 

generally would not be effective for such subsidiaries. Each U.S. Holder should consult its own tax advisor to 

determine whether a mark-to-market election is available and the consequences of making an election if we 

were characterized as a PFIC. 

Investors in a PFIC are subject to additional U.S. filing and reporting requirements regardless of whether 

they make one of the elections described above or not. 

Backup withholding tax and information reporting requirements 

U.S. backup withholding tax and information reporting requirements generally apply to certain payments. 

Information reporting generally will apply to the distributions on, and to proceeds from the sale or redemption 

of, common shares made within the United States or by a U.S. payor or U.S. middleman to a holder of 

common shares, other than a recipient that, if required to do so, establishes that it is exempt from the 

information reporting rules, including a corporation, and certain other persons. A payor will be required to 

withhold backup withholding tax from any distributions on, or the proceeds from the sale or redemption of, 

common shares within the United States or by a U.S. payor or U.S. middleman to a holder, other than an 

exempt recipient, if such holder fails to furnish its correct taxpayer identification number or otherwise fails to 

comply with, or establish an exemption from, such backup withholding tax requirements. Backup withholding 

is not an additional tax. A U.S. Holder generally may obtain a creditor refund of any amounts withheld under 

the backup withholding rules that exceed such holder’s U.S. federal income tax liability by providing the 

required information to the U.S. Internal Revenue Service in a timely manner. 

U.S. Holders should consult their own tax advisors regarding any tax reports or filing requirements they 

may have as a result of the acquisition, ownership or disposition of the common shares. Failure to comply 

with certain reporting or filing requirements can result in the imposition of substantial penalties. 

The above summary is not intended to constitute a complete analysis of all U.S. federal income tax 

consequences relating to the acquisition, holding and disposition of common shares. Prospective 

purchasers of common shares should consult their own tax advisors concerning the tax consequences of 

their particular situations. 

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PLAN OF DISTRIBUTION 

Subject to the terms and conditions stated in the underwriting agreement among us, the selling 

shareholder, Banco Santander (Brasil) S.A., Banco Morgan Stanley S.A., Banco Itaú BBA S.A. and BES 

Investimento do Brasil S.A. – Banco de Investimento, dated July 7, 2011, or the Brazilian underwriting 

agreement, each underwriter named below has severally agreed with us to place the number of common 

shares set forth opposite their names below. 

Underwriters Number of Common Shares 

Banco Santander (Brasil) S.A. ................................................................................................................ 4,979,879 

Banco Morgan Stanley S.A. ................................................................................................................... 4,979,877 

Banco Itaú BBA S.A. ............................................................................................................................. 4,979,877 

BES Investimento do Brasil S.A. – Banco de Investimento. ................................................................. 

4,979,877 

Total ....................................................................................................................................................... 

19,919,510 

Banco Santander (Brasil) S.A., Banco Morgan Stanley S.A., Banco Itaú BBA S.A., BES Investimento do 

Brasil S.A. – Banco de Investimento will act as global coordinators and joint bookrunners. In connection with the 

placement of the common shares to investors outside Brazil, Santander Investment Securities, Inc. will act as 

international placement agent on behalf of Banco Santander (Brasil) S.A.; Morgan Stanley & Co. LLC will act as 

international placement agent on behalf of Banco Morgan Stanley, S.A., Itau BBA USA Securities, Inc. will act as 

international placement agent on behalf of Banco Itaú BBA S.A; and Banco Espírito Santo de Investimento, S.A. 

and E.S. Financial Services, Inc. will act as international placement agents on behalf of BES Investimento do Brasil 

S.A. – Banco de Investimento; and Caixa – Banco de Investimento will act as co-manager. 

The underwriting agreement provides that the obligations of the underwriters to place the common shares 

are subject to, among other conditions precedent, the absence of any material adverse change in our business, 

the delivery of certain legal opinions by our and their legal counsel in Brazil and the United States and certain 

procedures from our auditors. The underwriting agreement also provides that, if any of the placed shares are 

not settled by their respective investor, the underwriters are obligated to purchase them on a firm commitment 

basis on the settlement date, subject to certain conditions. We and the selling shareholder have also entered 

into a placement facilitation agreement dated July 7, 2011 with the international placement agents relating to 

the placement of our common shares outside Brazil, which contains conditions for the placement of common 

shares by the international placement agents similar to those of the underwriting agreement. 

The underwriters and the international placement agents propose to offer the common shares at the 

offering price set forth on the cover page of this offering memorandum within the United States to QIBs 

pursuant to exemptions from registration provided under the Securities Act and outside the United States in 

reliance on Regulation S. See “Transfer Restrictions.” 

The following table shows the offering price per common share, the underwriting discount to be paid by 

us to the underwriters and proceeds before expenses. This information is presented assuming either no 

exercise or exercise in full of the over-allotment option. 

173 

Per common 

share 

Without over- 

allotment option 

With over- 

allotment option (1) 

Offering price ................................................................................................ R$37.00 R$737,021,870.00 R$810,724,020.00 

Underwriting discount .................................................................................. R$0.81 R$16,214,481.14 R$17,835,928.44 

Proceeds before expenses to us .................................................................... R$36.19 R$720,807,388.86 R$792,888,091.56 

(1) Considering the payment of an incentive underwriting fee of 0.5%. 

The common shares have not been and will not be registered under the Securities Act or any state 

securities laws and may not be offered or sold within the United States or to, or for the account or benefit of, 

U.S. persons (as defined in Regulation S) except in transactions exempt from, or not subject to, the 

registration requirements of the Securities Act. In addition, hedging transactions involving the shares may not 

be conducted except as permitted by the Securities Act. See “Transfer Restrictions.”

In addition, until 40 days after the commencement of this offering, an offer or sale of our common shares 

within the United States by a dealer that is not participating in this offering may violate the registration 

requirements of the Securities Act if that offer or sale is made otherwise than in accordance with Rule 144A. 

In connection with this offering, Banco Morgan Stanley S.A. may engage in transactions that stabilize, 

maintain or otherwise affect the price of the common shares and may engage in stabilization activity for a 

period of up to 30 days after the date of publication of the announcement of the commencement of the 

offering. Specifically, Banco Morgan Stanley S.A. may over-allot in connection with the offering, creating a 

syndicate short position. In addition, Banco Morgan Stanley S.A. may bid for and purchase common shares in 

the open market to cover syndicate short positions or stabilize the price of the common shares. Any of these 

activities may stabilize or maintain the market price of the common shares above independent market levels 

or may delay a decline in the market price of the common shares. Banco Morgan Stanley S.A. is not required 

to perform these activities every day and may terminate these activities at any time. Reports of stabilization 

activity are required to be furnished to the CVM. 

The selling shareholder has granted to Banco Morgan Stanley S.A. an option, exercisable within 30 days 

from, and including, the date of the execution of the Brazilian Underwriting Agreement, to purchase up to 

1,991,950 additional common shares (representing up to 10% of the total number of common shares initially 

offered in this offering) to cover over-allotments, if any, at the offering price less the underwriting discount, 

provided that the decision to allocate the additional common shares is made jointly by the underwriters at the 

time the price per share is determined. Any common shares sold under the option will be sold on the same 

terms and conditions as the other common shares that are the subject of this offering. 

We, our directors and officers, our controlling shareholders and the selling shareholder have agreed with the 

underwriters and the international placement agents, for 90 days from the date of the final Brazilian prospectus, 

not to directly or indirectly, offer, sell, contract to sell, pledge or otherwise dispose of, enter into any transaction 

which is designed to, or might reasonably be expected to, result in the disposition (whether by actual disposition 

or effective economic disposition due to cash settlement or otherwise) by us or our directors and officers, our 

controlling shareholders or any affiliate of us or our controlling shareholders or any person in private with us or 

our controlling shareholders of, file (or participate in the filing of) a registration statement with the SEC in 

respect of, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position 

within the meaning of Section 16 of the Securities Act and the rules and regulations of the SEC promulgated 

thereunder in respect of any of the common shares or any securities convertible into, or exercisable or 

exchangeable for such common shares, or publicly announce an intention to effect any such transaction. Under 

such agreement, transfers of these common shares could be made in connection with, as applicable: 

(a) common shares acquired in open market transactions after the completion of the Offering, provided 

that no filing by any party in Brazil or elsewhere shall be required or shall be voluntarily made in 

connection with subsequent sales of common shares acquired in such open market transactions; 

(b) any or all of our common shares or other securities if the transfer is by (i) gift, will or intestacy, or (ii) 

distribution to partners, members or shareholders of the transferor; 

(c) a transfer of common shares to any direct family members of the transferor or to our subsidiaries; 

(d) a transfer of common shares to any charity or not-for-profit organization or trust, provided such 

transfer shall not involve a disposition for value; 

(e) as a loan to Banco Morgan Stanley, S.A. or to any entity indicated by Banco Morgan Stanley, S.A. of 

a certain number of the transferor’s common shares determined by Banco Morgan Stanley, S.A., in 

order to allow for stabilization activities carried out in accordance with the Brazilian Stabilization 

Agreement; 

(f) dispositions to any trust for the direct or indirect benefit of the transferor and/or any of the entities 

referred to in paragraph (c) above; 

174

(g) a transfer to any other person that has made such agreement, or to Affiliates or shareholders of the 

transferor; 

(h) a transfer of the transferor’s common shares to an individual solely for the purpose of making 

him/her eligible, in accordance with Brazilian law, to become a director of the Company; 

(i) a transfer as part of this offering; and 

(j) the issue of common shares in connection with stock option plans to the transferor’s employees and 

other persons which contribute to our business. 

In the cases of paragraphs (b), (c), (d), (f) and (g) above, it will be a condition of the transfer that the 

transferee execute an agreement stating that the transferee is receiving and holding the common shares subject 

to the provisions of the same lock-up agreement. We cannot assure you that Banco Santander (Brasil) S.A., 

Banco Morgan Stanley S.A., Banco Itaú BBA S.A., BES Investimento do Brasil S.A. – Banco de 

Investimento and the international placement agents will not waive these lock-up obligations, in which case 

these common shares would become eligible for sale earlier. 

We cannot predict the effect, if any, that future sales of our common shares, or the availability of such common 

shares for future sale, will have on the market price of our common shares prevailing from time to time or on our 

ability to raise capital in the future. Sales of substantial amounts of our common shares in the public market, or the 

perception that such sales could occur, could adversely affect the prevailing market price of the common shares and 

our ability to sell common shares in the future at a time and at a price that we deem appropriate. 

The offering price for the common shares will be determined by negotiations among us and the joint 

bookrunners. Among the factors considered in determining the offering price are the trading price of our 

common shares on the BM&FBOVESPA, our results of operations, our current financial condition, our future 

prospects, our markets, the economic conditions in and future prospects for the industry in which we compete, 

our management and currently prevailing general conditions in the equity securities markets, including 

current market valuations of publicly traded companies considered comparable to our Company. 

Our common shares are listed on the Novo Mercado of the BM&FBOVESPA. However, we cannot 

assure you that the prices at which the common shares will sell in the market after this offering will not be 

lower than the offering price on the cover of this offering memorandum or that an active trading market for 

the common shares will continue after this offering. We cannot assure you as to the liquidity of or the trading 

market for the common shares. 

In addition to the placement of the common shares pursuant to this offering, the underwriters, either 

directly or through their affiliates, have performed investment banking, commercial banking (such as loans, 

sureties and credit facilities) and other financial advisory services for, and commercial dealings with, us, the 

selling shareholder and our its affiliates from time to time for which they have received (and may in the future 

receive) customary fees, commissions, and expenses and other compensation. The underwriters, either 

directly or through their affiliates, may, from time to time, engage in transactions with and perform services 

for us, our affiliates and the selling shareholder and its affiliates in the ordinary course of their business. In 

addition, from time to time, certain of the underwriters, the international placement agents, their respective 

agents and affiliates may execute in the future, derivative transactions on behalf of themselves or their client 

accounts and may subscribe common shares in the offering as a way to hedge their risk exposure in 

connection with such transactions. Such transactions may have an effect on demand, price or other terms of 

the offering. 

As of the date of this offering memorandum, BES Investimento do Brasil S.A. and/or its affiliates hold or 

have held, directly or through investment funds managed by such entities, shares or equity issued by us, 

acquired ordinarily though the stock exchange in accordance to price and market conditions. As of the twelve 

month period prior to the date of this offering memorandum, such interests held by BES Investimento do 

Brasil S.A. do not and have never represented more than five per cent (5%) of the total number of our 

outstanding shares. 

175

Except as to the transactions described above, for the twelve month period immediately prior to the date 

of this offering memorandum, neither BES Investimento do Brasil S.A., nor any of its affiliates, has 

participated in (i) any public offer of common shares or securities of the selling shareholders, (ii) material 

financing transactions; or (iii) restructuring transactions involving the selling shareholder. 

WE HAVE AGREED TO INDEMNIFY THE UNDERWRITERS AND THE INTERNATIONAL 

PLACEMENT AGENTS AGAINST CERTAIN LIABILITIES, INCLUDING LIABILITIES UNDER THE 

SECURITIES ACT, OR TO CONTRIBUTE TO PAYMENTS THAT THE UNDERWRITERS OR THE 

INTERNATIONAL PLACEMENT AGENTS MAY BE REQUIRED TO MAKE BECAUSE OF ANY OF 

THOSE LIABILITIES. 

176

TRANSFER RESTRICTIONS 

Because of the following restrictions, investors are advised to consult legal counsel prior to making any 

offer, resale, pledge or other transfer of our common shares. 

Notice to Prospective Investors in the United States 

Our common shares have not been registered under the Securities Act. They may not be offered or sold 

within the United States except: 

(i) in compliance with the registration requirements of the Securities Act and all applicable securities 

laws in the states of the United States; or 

(ii) pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the 

Securities Act and any applicable securities laws of the states of the United States. 

Accordingly, our common shares are being offered and sold only: 

(iii) inside the United States to QIBs, pursuant to exemptions from registration provided under the 

Securities Act; and 

(iv) outside the United States to non-U.S. persons in reliance on Regulation S under the Securities Act. 

In addition, purchasers of our common shares may not be able to exercise the preemptive rights relating 

to the common shares unless an exemption from the registration requirements of the Securities Act is 

available or a registration statement under the Securities Act is effective with respect to those rights. We are 

not obligated to file a registration statement with respect to the common shares relating to these preemptive 

rights, and we may not file such a registration statement. 

Each purchaser of our common shares will be deemed to have represented and agreed as described below. 

1. It understands and acknowledges that the common shares have not been registered under the 

Securities Act or any other applicable securities law, are being offered in transactions not requiring 

registration under the Securities Act or any other securities law and, unless so registered, may not be 

offered, sold or otherwise transferred except in compliance with the registration requirements of the 

Securities Act, or any other applicable securities law, pursuant to an exemption from registration or 

in a transaction not subject to registration. We make no representation as to the availability of the 

exemption provided by Rule 144 under the Securities Act for resales of our common shares. 

2. It understands that the common shares (to the extent they are in certificated form in the future), 

unless otherwise determined in accordance with applicable law, will bear a legend substantially to 

the following effect: 

THIS SHARE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES 

ACT OF 1933 (THE “SECURITIES ACT”) OR WITH ANY SECURITIES REGULATORY AUTHORITY 

OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES AND MAY NOT BE 

OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) TO A PERSON THAT 

THE HOLDER AND ANY PERSON ACTING ON ITS BEHALF REASONABLY BELIEVE IS A 

QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A PURCHASING FOR 

ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A 

TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE 

TRANSACTION IN ACCORDANCE WITH RULE 903 OR 904 OF REGULATION S UNDER THE 

SECURITIES ACT OR (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE 

SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), IN EACH CASE IN 

ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED 

STATES. NO REPRESENTATION CAN BE MADE AS TO THE AVAILABILITY OF THE EXEMPTION 

PROVIDED BY RULE 144 UNDER THE SECURITIES ACT FOR RESALE OF THIS SHARE. THIS 

SHARE MAY NOT BE DEPOSITED INTO ANY UNRESTRICTED DEPOSITARY RECEIPT FACILITY 

177

ESTABLISHED OR MAINTAINED BY A DEPOSITARY BANK OTHER THAN A RULE 144A 

RESTRICTED DEPOSITARY RECEIPT FACILITY, UNLESS AND UNTIL SUCH TIME AS THIS 

SHARE IS NO LONGER A “RESTRICTED SECURITY” WITHIN THE MEANING OF RULE 144(A)(3) 

UNDER THE SECURITIES ACT. 

3. It is not an affiliate (as defined in Rule 144 under the Securities Act) of us or acting on our behalf, 

and it is either: 

• a QIB and is aware that any sale of the common shares to it will be in reliance on an exemption 

from the Securities Act. Such acquisition will be for its own account or for the account of 

another QIB; or 

• a person who, at the time the buy order for the common shares was originated, was outside the 

United States and was not a U.S. person (and was not purchasing for the account or benefit of a 

U.S. person) within the meaning of Regulation S under the Securities Act. 

4. If it is a purchaser in a sale that occurs outside the United States within the meaning of Regulation S 

under the Securities Act, it agrees that, until the expiration of a 40-day “distribution compliance” 

period within the meaning of Rule 903 of Regulation S under the Securities Act, no offer or sale of 

the common shares shall be made by it to a U.S. person or for the account or benefit of a U.S. person 

within the meaning of Rule 902(k) of the Securities Act except to a QIB and in compliance with the 

applicable selling restrictions. 

5. Pursuant to Brazilian Resolution No. 2,689, transfers of common shares, including by or between 

residents of jurisdictions outside Brazil, may be effected only in Brazil. See “Market Information.” 

6. None of us, the selling shareholder, the international placement agents and any person representing 

us or the international placement agents have made any representation to it with respect to us or the 

offering or sale of any common shares, other than the information contained in this offering 

memorandum, which has been delivered to it and upon which it is relying in making its investment 

decision with respect to the common shares. It acknowledges that no representation or warranty is 

made by the international placement agents or their agents as to the accuracy or completeness of such 

materials. It has had access to such financial and other information concerning us and the common 

shares as it has deemed necessary in connection with its decision to purchase the common shares, 

including an opportunity to ask questions of and request information from us and the international 

placement agents or their agents. 

7. It acknowledges that we, the selling shareholder, the international placement agents and their agents 

and our respective counsel will rely upon the truth and accuracy of the foregoing acknowledgments, 

representations and agreements and agrees that, if any of the acknowledgments, representations or 

agreements deemed to have been made by its purchase of common shares are no longer accurate, it 

shall notify us and the selling shareholder and the international placement agents. In the event that it 

is acquiring any common shares as a fiduciary or agent for one or more investment accounts, it 

represents that it has sole investment discretion with respect to each such account and that it has full 

power to make the foregoing acknowledgments, representations and agreements on behalf of each 

such account. In the event that an agent or representative of the purchaser is making any 

acknowledgment, representation or agreement on behalf of the purchaser, such agent or 

representative represents that it is duly authorized to execute the subscription agreement on behalf of 

the purchaser and has confirmed the foregoing acknowledgments, representations and agreements 

with the purchaser. 

8. It represents and agrees either: (A) it is not and for as long as it holds the common shares will not be 

(i) a Plan, (ii) an entity whose underlying assets are considered “plan assets” within the meaning of 

29 C.F.R. § 2510.3-101, as modified by ERISA or (iii) a non-U.S., governmental or church plan 

subject to Similar Law or (B) its purchase, holding and subsequent disposition of the common shares 

either (i) are not a prohibited transaction under ERISA or the Code and to the extent subject to 

Similar Law are otherwise permissible under all applicable Similar Laws or (ii) are entitled to 

178

exemptive relief from the prohibited transaction provisions of ERISA and the Code in accordance 

with one or more available statutory, class or individual prohibited transaction exemptions and to the 

extent subject to Similar Law are otherwise permissible under all applicable Similar Laws. 

9. It agrees not to deposit the common shares into any unrestricted depositary receipt facility for as long 

as those common shares are “restricted securities” within the meaning of Rule 144(a)(3) under the 

Securities Act. 

We acknowledge that, for so long as the common shares are “restricted securities” within the meaning of 

Rule 144(a)(3) under the Securities Act, holders of such restricted securities, and prospective purchasers (as 

designated by such holders) of such restricted securities, shall have the right to obtain upon request any 

information required to be provided by Rule 144A(d)(4) under the Securities Act during any period in which 

we are not subject to and in compliance with Section 13 or 15(d) of the Exchange Act, or we are not exempt 

from such reporting requirements pursuant to and in compliance with Rule 12g3-2(b) under the Securities 

Exchange Act of 1934, as amended. 

Notice to Prospective Investors in the European Economic Area 

In relation to each Member State of the European Economic Area which has implemented the Prospectus 

Directive (each, a “Relevant Member State”), each Initial Purchaser has represented, warranted and agreed 

that with effect from and including the date on which the Prospectus Directive is implemented in that 

Relevant Member State (the “Relevant Implementation Date”) it has not made and will not make an offer of 

common shares which are the subject of the offering contemplated by this offering memorandum to the public 

in that Relevant Member State except that it may, with effect from and including the Relevant Implementation 

Date, make an offer of such common shares to the public in that Relevant Member State: 

a) Approved prospectus: if an offer of those common shares may be made other than pursuant to Article 

3(2) of the Prospectus Directive in that Relevant Member State (a “Non-exempt Offer”), following the 

date of publication of a prospectus in relation to such common shares which has been approved by the 

competent authority in that Relevant Member State or, where appropriate, approved in another 

Relevant Member State and notified to the competent authority in that Relevant Member State, in 

accordance with the Prospectus Directive, in the period beginning and ending on the dates specified in 

such prospectus, and we have consented in writing to its use for the purpose of that Non-exempt Offer; 

b) Qualified investors: at any time to any legal entity which is a qualified investor as defined in the 

Prospectus Directive; 

c) Fewer than 100 offerees: at any time to fewer than 100 or, if the Relevant Member State has 

implemented the relevant provision of the 2010 PD Amending Directive, 150, natural or legal 

persons (other than qualified investors as defined in the Prospectus Directive), subject to obtaining 

the prior consent of the Initial Purchasers for any such offer; or 

d) Other Exempt offers: at any time in any other circumstances falling within Article 3(2) of the 

Prospectus Directive, 

provided that no such offer of common shares referred to in (b) to (d) above shall require us or the 

underwriters or representatives to publish a prospectus pursuant to Article 3 of the Prospectus Directive or 

supplement a prospectus pursuant to Article 16 of the Prospectus Directive. 

For the purposes of this provision, the expression an “offer to the public” in relation to any common 

shares in any Relevant Member State means the communication in any form and by any means of sufficient 

information on the terms of the offer and the common shares to be offered so as to enable an investor to 

decide to purchase or subscribe the common shares, as the same may be varied in that Member State by any 

measure implementing the Prospectus Directive in that Member State, the expression “Prospectus Directive” 

means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the 

extent implemented in the Relevant Member State), and includes any relevant implementing measure in the 

Relevant Member State and the expression “2010 PD Amending Directive” means Directive 2010/73/EU. 

179

We have not authorized and do not authorize the making of any offer of common shares through any 

financial intermediary on our behalf, other than offers made by the Initial Purchasers with a view to the final 

placement of the common shares as contemplated in this offering memorandum. Accordingly, no purchaser of 

the common shares is authorized to make any further offer of securities on our behalf or of the underwriters. 

Notice to Prospective Investors in Portugal 

This document has not been and will not be approved by the Portuguese Securities Market Commission 

(Comissão do Mercado dos Valores Mobiliários) and therefore the offer of the common shares by the Selling 

Shareholder is not addressed to non-qualified investors resident and/or located in Portugal and cannot be 

made to the public in Portugal or under circumstances which are deemed to be a public offer under the 

Portuguese Securities Code (Código dos Valores Mobiliários) and other securities legislation and regulations 

applicable in Portugal. 

This document may not be publicly distributed or be accessible in Portugal, nor may any publicity or 

marketing activities related to the offer of the common shares by the Selling Shareholder be conducted in Portugal. 

No tenders from investors resident and/or located in Portugal will be accepted, except if such investors 

are all qualified investors (investidores qualificados) resident and/or located in Portugal, as defined in articles 

30.º and 110.º-A of the Portuguese Securities Code, case in which the offer of our common shares might be 

made in Portugal through a private placement (oferta particular), in accordance article 110.º of that code. 

Notice to Prospective Investors in the United Kingdom 

Each of the Initial Purchasers has represented and agreed that: 

(i) it has only communicated or caused to be communicated and will only communicate or cause to be 

communicated an invitation or inducement to engage in investment activity (within the meaning of 

Section 21 of FSMA) to persons who have professional experience in matters relating to investments 

falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) 

Order 2005 or in circumstances in which Section 21(1) of FSMA does not apply to us; and 

(ii) they have complied and will comply with all applicable provisions of FSMA with respect to anything 

done by them in relation to the Securities in, from or otherwise involving the United Kingdom. 

Notice to Prospective Investors in France 

Neither this offering memorandum nor any other offering material relating to the common shares 

described in this offering memorandum has been submitted to the clearance procedures of the Autorité des 

Marchés Financiers or by the competent authority of another member state of the European Economic Area 

and notified to the Autorité des Marchés Financiers. The common shares have not been offered or sold and 

will not be offered or sold, directly or indirectly, to the public in France. Neither this offering memorandum 

nor any other offering material relating to the common shares has been or will be: 

(i) released, issued, distributed or caused to be released, issued or distributed to the public in France; or 

(ii) used in connection with any offer for subscription or sale of the common shares to the public in 

France. 

Such offers, sales and distributions will be made in France only: 

(i) to qualified investors (investisseurs qualifiés), in each case investing for their own account, all as 

defined in, and in accordance with, Article L.411-2, D.41 1-1, D.41 1-2, D.734-1, D.744-1, D.754-1 

and D.764-1 of the French Code monétaire et financier; 

(ii) to investment services providers authorized to engage in portfolio management on behalf of third 

parties; or 

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(iii) in a transaction that, in accordance with article L.411-2-II-1°-or-2°-or 3° of the French Code 

monétaire et financier and article 211-2 of the General Regulations (Règlement Général) of the 

Autorité des Marchés Financiers, does not constitute a public offer (appel public à l’épargne). 

The common shares may be resold, directly or indirectly, only in compliance with Articles L.411-1, 

L.411-2, L.412-1 and L.621-8 through L.621-8-3 of the French Code monétaire et financier. 

Notice to Prospective Investors in Germany 

The common shares offered by this offering memorandum have not been and will not be offered to the 

public within the meaning of the German Securities Prospectus Act (Wertpapierprospektgesetz). No securities 

prospectus pursuant to the German Securities Prospectus Act has been or will be published or circulated in 

Germany or filed with the German Federal Financial Supervisory Authority (Bundesanstalt für 

Finanzdienstleistungsaufsicht). This offering memorandum does not constitute an offer to the public in 

Germany, and it does not serve for public distribution of the common shares in Germany. Neither this offering 

memorandum, nor any other document issued in connection with this offering, may be issued or distributed to 

any person in Germany except under circumstances that do not constitute an offer to the public under the 

German Securities Prospectus Act. 

Notice to Prospective Investors in Italy 

The offering of the common shares has not been registered pursuant to Italian securities legislation and, 

accordingly, no common shares may be offered, sold or delivered nor may copies of the offering memorandum 

or of any other document relating to the common shares be distributed in the Republic of Italy, except: 

(i) to qualified investors (investitori qualificati), as defined pursuant to Article 100 of Legislative 

Decree No. 58 of 24 February 1998, as amended (the “Financial Services Act”) and Article 34-ter, 

first paragraph, letter b) of CONSOB Regulation No. 11971 of 14 May 1999, as amended from time 

to time (Regulation No. 11971); or 

(ii) in other circumstances which are exempted from the rules on public offerings pursuant to Article 100 

of the Financial Services Act and Article 34-ter of Regulation No. 11971. 

Any offer, sale or delivery of the common shares or distribution of copies of the offering memorandum or 

any other document relating to the common shares in the Republic of Italy under (i) or (ii) above must be: 

(a) made by an investment firm, bank or financial intermediary permitted to conduct such activities in 

the Republic of Italy in accordance with the Financial Services Act, CONSOB Regulation No. 16190 

of 29 October 2007 (as amended from time to time) and Legislative Decree No. 385 of 1 September 

1993, as amended (the “Banking Act”); and 

(b) in compliance with Article 129 of the Banking Act, as amended, and the implementing guidelines of 

the Bank of Italy, as amended from time to time, pursuant to which the Bank of Italy may request 

information on the issue or the offer of securities in the Republic of Italy; and 

(c) in compliance with any other applicable laws and regulations or requirement imposed by CONSOB 

or other Italian authority. 

Please note that in accordance with Article 100-bis of the Financial Services Act, where no exemption 

from the rules on public offerings applies, common shares which are initially offered and placed in Italy or 

abroad to qualified investors only but in the following year are systematically distributed on the secondary 

market in Italy become subject to the public offer and the prospectus requirement rules provided under the 

Financial Services Act and Regulation No. 11971. Failure to comply with such rules may result in the sale of 

such common shares being declared null and void and in the liability of the intermediary transferring the 

financial instruments for any damages suffered by the investors. 

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Notice to Prospective Investors in Hong Kong 

Each Initial Purchaser has represented and agreed that: 

(i) it has not offered or sold and will not offer or sell in Hong Kong, by means of any document, any 

common shares other than (a) to “professional investors” as defined in the Securities and Futures 

Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance, or (b) in other 

circumstances which do not result in the document being a “prospectus” as defined in the Companies 

Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the 

meaning of that Ordinance; and 

(ii) it has not issued or had in its possession for the purposes of issue, and will not issue or have in its 

possession for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement, 

invitation or document relating to the common shares, which is directed at, or the contents of which 

are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the 

securities laws of Hong Kong) other than with respect to common shares which are or are intended to 

be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in 

the Securities and Futures Ordinance and any rules made under that Ordinance. 

Notice to Prospective Investors in Japan 

No securities registration statement (“SRS”) has been filed under Article 4, Paragraph 1 of the Financial 

Instruments and Exchange Act of Japan (Act No. 25 of 1948, as amended) (“FIEA”) in relation to the shares. 

The shares are being offered in a private placement to “qualified institutional investors” 

(tekikaku-kikan-toshika) under Article 10 of the Cabinet Office Ordinance concerning Definitions provided in 

Article 2 of the FIEA (the Ministry of Finance Ordinance No. 14 of 1993, as amended) (“QIIs”), under Article 

2, Paragraph 3, Item 2 i of the FIEA. Any QII acquiring the shares in this offer may not transfer or resell those 

shares except to other QIIs. 

Notice to Prospective Investors in Singapore 

This Offering Memorandum has not been registered as a prospectus with the Monetary Authority of 

Singapore and the Securities will be offered pursuant to exemptions under the Securities and Futures Act, 

Chapter 289 of Singapore (the “SFA”). Accordingly, this Offering Memorandum and any other document or 

material in connection with the offer or sale, or invitation for subscription or purchase, of the Securities may 

not be circulated or distributed, nor may the Securities be offered or sold, or be made the subject of an 

invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to 

an institutional investor pursuant to Section 274 of the SFA, (ii) to a “relevant person” as defined in Section 

275(1) of the SFA, or any person pursuant to Section 275 (1A) of the SFA, and in accordance with the 

conditions, specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the 

conditions of, any other applicable provision of the SFA. Where the Securities are subscribed or purchased 

under Section 275 of the SFA by a relevant person which is: 

(i) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole 

business of which is to hold investments and the entire share capital of which is owned by one or 

more individuals, each of whom is an accredited investor; or 

(ii) a trust (where the trustee is not an accredited investor) whose sole whole purpose is to hold 

investments and each beneficiary of the trust is an accredited investor, 

Securities (as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries’ rights and 

interest (howsoever described) in that trust shall not be transferable within six months after that corporation or 

that trust has acquired the Securities under Section 275 of the SFA except: 

(i) to an institutional investor or a relevant person defined in Section 275(2) of the SFA (in the case of a 

corporation) where the transfer arises from an offer referred to in Section 276(3)(i)(B) of the SFA, or 

(in the case of a trust) where the transfer arises from an offer referred to in Section 276(4)(i)(B) of 

the SFA; 

182

(ii) where no consideration is or will be given for the transfer; 

(iii) where the transfer is by operation of law; or 

(iv) pursuant to Section 276(7) of the SFA. 

By accepting this Offering Memorandum, the recipient hereof represents and warrants that he is entitled 

to receive it in accordance with the restrictions set forth above and agrees to be bound by limitations 

contained herein. Any failure to comply with these limitations may constitute a violation of law. 

183

LEGAL MATTERS 

Certain legal matters in connection with this offering will be passed upon for us by Clifford Chance U.S. 

LLP with respect to U.S. law and Mattos Filho, Veiga Filho, Marrey Jr. e Quiroga Advogados with respect to 

Brazilian law. Certain legal matters in connection with this offering will be passed upon for the underwriters 

and international placement agents by Allen & Overy LLP with respect to U.S. law and by Souza, Cescon, 

Barrieu & Flesch Advogados with respect to Brazilian law. 

184

INDEPENDENT ACCOUNTANTS 

Our unaudited interim consolidated financial statements as of and for the three-month period ended 

March 31, 2011 have been reviewed by KPMG Auditores Independentes, or KPMG, in accordance with 

Brazilian and International review standards on interim accounting information (NBC TR 2410 – Review of 

Interim Financial Information Performed by the Independent Auditor of the Entity and ISERE 2410 – Review 

of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively) as stated 

in their review report included herein. KPMG’s review report contains emphasis paragraph stating that the 

individual financial statements were prepared in accordance with the accounting practices adopted in Brazil, 

which are different from IFRS, applicable to the separate financial statements, only regarding the evaluation 

of the investments in subsidiaries, associated companies and joint subsidiaries through the equity method and, 

for purposes of IFRS, it would be the cost or the fair value. Additionally, it also contains other matters 

paragraph stating that the statements of consolidated value added for the year ended December 31, 2010, were 

audited and its presentation is required by Brazilian corporate law for publicly traded companies and as 

supplementary information for IFRS, which does not required the presentation of consolidated value added. 

Our consolidated financial statements as of and for the years ended December 31, 2010 and 2009 have 

been audited by KPMG, in accordance with the Brazilian and International Standards on Auditing, as stated in 

their report included herein. KPMG’s report contains emphasis paragraphs stating that the individual financial 

statements were prepared in accordance with the accounting practices adopted in Brazil, which are different 

from IFRS, applicable to the separate financial statements, only regarding the evaluation of the investments in 

subsidiaries, associated companies and joint subsidiaries through the equity method and, for purposes of IFRS, 

it would be the cost or the fair value. Additionally, it also contains other matters paragraph stating that the 

statements and consolidated value added for the year ended December 31, 2010, were audited and its 

presentation is required by Brazilian corporate law for publicly traded companies and as supplementary 

information for IFRS, which does not require the presentation of consolidated value added. 

185

ENFORCEMENT OF JUDGMENTS AGAINST FOREIGN PERSONS 

We are incorporated under the laws of Brazil. All of our assets are located outside the United States. All 

of our directors, officers and certain of our advisors named in this offering memorandum reside in Brazil. As 

a result, you may not be able to effect service of process upon us or these other persons within the United 

States or to enforce U.S. court judgments against us or these other persons to the extent that such actions are 

predicated upon civil liability provisions of the federal securities laws of the United States. 

Our Brazilian counsel, Mattos Filho, Veiga Filho, Marrey Jr. e Quiroga Advogados, has advised that final 

conclusive judgments of United States courts for civil liabilities based upon the federal securities laws of the 

United States may be, subject to the requirements described below, enforced in Brazil. A judgment against us 

or the persons described above obtained outside Brazil would be enforceable in Brazil without reconsideration 

of the merits, upon confirmation of that judgment by the Brazilian Superior Court of Justice (Superior 

Tribunal de Justiça), or STJ. Such confirmation would occur if the foreign judgment: 

• fulfills all formalities required for its enforceability under the laws of the jurisdiction where the 

foreign judgment is granted; 

• is issued by a competent court after due service of process, which service must comply with 

Brazilian law if made against a Brazilian resident party or after sufficient evidence of our absence 

has been given as required under applicable law; 

• is final and, therefore, not subject to appeal in the jurisdiction in which it was issued; 

• is for the payment of certain amounts; 

• is authenticated by a Brazilian consular office with jurisdiction over the location where the foreign 

judgment is issued and is accompanied by a sworn translation into Portuguese; 

• is not contrary to Brazilian national sovereignty, public policy or public morality; and 

• is not equal to a proceeding in Brazil involving the same parties, based on the grounds and with the 

same subject matter, which has already been judged by Brazilian court. 

Any disputes or controversies relating to listing rules of Novo Mercado, our bylaws, Brazilian Corporate 

Law, the rules established by CMN, the Central Bank, the CVM and the BM&FBOVESPA, as well as other 

rules applicable to Brazilian capital markets in general, must be submitted to arbitration conducted in 

accordance with the Rules of the Market Arbitration Chamber established by the BM&FBOVESPA, provided 

the dispute or controversies do not involve non waiveable rights. 

The confirmation process may be time consuming and may also give rise to difficulties in enforcing the 

foreign judgment in Brazil, accordingly, we cannot assure you that confirmation would be obtained, that the 

confirmation process would be conducted in a timely manner or that a Brazilian court would enforce a 

monetary judgment for violation of the securities laws of countries other than Brazil. 

Notwithstanding the foregoing, there can be no certainty that the confirmation will be obtained, that the process 

described above will be conducted in a timely manner or that Brazilian courts will enforce a judgment for violation 

of the United States securities laws with respect to the common shares offered by this offering memorandum. 

Our Brazilian counsel has further advised us that (i) original actions based on the federal securities laws 

of the United States may be brought in Brazilian courts (provided that provisions of the federal securities laws 

of the United States do not contravene Brazilian public policy, public morality or national sovereignty) and 

that, subject to applicable law, Brazilian courts may enforce civil liabilities in such actions against us, our 

directors and executive officers, and the advisors named in this offering memorandum; and (ii) the ability of a 

judgment creditor or the other persons named above to satisfy a judgment by attaching certain assets of ours is 

limited by provisions of Brazilian law, given that assets are located in Brazil. 

186

A plaintiff (whether or not Brazilian) residing outside Brazil during the course of litigation in Brazil must 

provide a bond to guarantee court costs and legal fees if the plaintiff owns no real property in Brazil that 

could secure such payment, except in case of collection claims based on an instrument (which do not include 

the common shares issued hereunder) that may be enforced in Brazilian courts without the review of its merit 

(título executivo extrajudicial) or counterclaims as established under Article 836 of the Brazilian Code of 

Civil Procedure. The bond must have a value sufficient to satisfy the payment of court fees and defendant’s 

attorney fees, as determined by a Brazilian judge. This requirement does not apply to the enforcement of 

foreign judgments that have been duly confirmed by the STJ. 

187


INDEX TO FINANCIAL STATEMENTS 

EDP – Energias do Brasil S.A. Unaudited Interim Consolidated Financial Statements as of and for the 

three-month period ended March 31, 2011 

Independent Auditor’s Report ......................................................................................................................... F-5 

Individual and Consolidated Balance Sheets as of three-month period ended March 31, 2011 

and as of three-month period ended March 31, 2010 ................................................................................... F-7 

Individual and Consolidated Statements of Income for the three-month period ended March 31, 2011 

and as for three-month period ended March 31, 2010 .................................................................................. F-9 

2010 Statements of Changes in Shareholder’s Equity for the three-month period ended March 31, 2011 

and as for three-month period ended March 31, 201 .................................................................................. F-10 

Individual and Consolidated Statements of Value Added for the three-month period ended March 31, 2011 

and as for three-month period ended March 31, 0 ...................................................................................... F-12 

Individual and Consolidated Statements of Cash Flows for the three-month period ended March 31, 2011 

and as for three-month period ended March 31, 2010 ................................................................................ F-13 

Notes to the Financial Statements ................................................................................................................. F-14 

EDP – Energias do Brasil S.A. Financial Statements as of and for the years ended December 31 2010 

and 2009 and Report of Independent Accountants 

Independent Auditor’s Report ....................................................................................................................... F-67 

Individual and Consolidated Balance Sheets as of December 31, 2010 and 2009 ........................................ F-71 

Individual and Consolidated Statements of Income for the Years Ended 

December 31, 2010 and 2009 ..................................................................................................................... F-73 

Statements of Changes in Shareholder’s Equity for the Years Ended 

December 31, 2010 and 2009 ..................................................................................................................... F-74 

Individual and Consolidated Statements of Cash Flows for the Years Ended 

December 31, 2010 and 2009 ..................................................................................................................... F-76 

Individual and Consolidated Statements of Value Added for the Years Ended 

December 31, 2010 and 2009 ..................................................................................................................... F-77 

Notes to the Financial Statements ................................................................................................................. F-78 

F-1


� 

� 

QUARTERLY FINANCIAL 

INFORMATION 

March 31, 2011 

F-3

EDP - Energias do Brasil S.A. 

Review report on 

Quarterly Financial Information 

Quarter ended March 31, 2011 

(A free translation of the original report in Portuguese, as filed with the 

Brazilian Securities and Exchange Commission (CVM), prepared in 

accordance with the accounting practices adopted in Brazil and 

International Financial Reporting Standards - IFRS) 

F-4

Independent Auditors’ Review Report on Quarterly 

Financial Information 

(a free translation from the original in Portuguese) 

To 

The Board of Directors and Shareholders’ of 


São Paulo - SP 

Introduction 

We have reviewed the individual and consolidated interim accounting information of EDP - 

Energias do Brasil S.A. (the “Company”), contained in the Quarterly Financial Information (ITR) 

for the quarter ended March 31, 2011, comprising the balance sheet and the related statements of 

income, of comprehensive income, of changes in shareholders’ equity and of cash flows for the 

quarter then ended, which include the summary of main accounting policies and other notes to 

the financial information. 

Management is responsible for the preparation of the interim accounting information in 

accordance with technical pronouncement CPC 21 – Interim Financial Reporting and the 

consolidated interim accounting information in accordance with CPC 21 and IAS 34 – Interim 

Financial Reporting as issued by the International Accounting Standards Board (IASB), as well 

as for the presentation of these information consistent with the rules issued by the Brazilian 

Securities and Exchange Commission (CVM) applicable to the preparation of the Quarterly 

Financial Information. Our responsibility is to express a conclusion on this interim accounting 

information based on our review. 

Scope of Review 

We conducted our review in accordance with Brazilian and International review standards on 

interim accounting information (NBC TR 2410 - Review of Interim Financial Information 

Performed by the Independent Auditor of the Entity and ISRE 2410 - Review of Interim 

Financial Information Performed by the Independent Auditor of the Entity, respectively). A 

review of interim accounting information consists of making inquiries, primarily of persons 

responsible for financial and accounting matters, and applying analytical and other review 

procedures. A review is substantially less in scope than an audit conducted in accordance of 

standards on auditing and, consequently, does not enable us to obtain assurance that we would 

become aware of all significant matters that might be identified in an audit. Accordingly, we do 

not express an audit opinion. 

F-5

Conclusion on the individual quarterly accounting information 

Based on our review, nothing has come to our attention that causes us to believe that the 

individual interim accounting information included in the Quarterly Financial Information 

referred to above was not prepared, in all material respects, in accordance CPC 21 applicable to 

the preparation of interim information and presented in a manner consistent with the rules issued 

by the Brazilian Securities and Exchange Commission (CVM) applicable to Quarterly Financial 

Information (ITR). 

Conclusion on the consolidated interim accounting information 

Based on our review, nothing has come to our attention that causes us to believe that the 

consolidated interim accounting information included in the Quarterly Financial Information 

referred to above was not prepared, in all material respects, in accordance CPC 21 and IAS 34 

applicable to the preparation of interim information, and presented in a manner consistent with 

the rules issued by the Brazilian Securities and Exchange Commission (CVM) applicable to 

Quarterly Financial Information (ITR). 

Emphasis of matter paragraph 

As described in Note 2.1.2, the individual financial accounting information was prepared in 

accordance with the accounting practices adopted in Brazil. In the case of EDP - Energias do 

Brasil S.A. these practices differ from the IFRS applicable to the separate financial statements, 

only in respect to the measurement of investments in subsidiaries measured by the equity method, 

while for the IFRS purposes these investments would be measured at cost or fair value. 

Other matters 

Interim statement of value added 

We have also reviewed the individual and consolidated interim statements of value added (DVA), 

for the quarter ended March 31, 2011, for which the disclosure in the interim information is 

required in accordance with the rules issued by the Brazilian Securities and Exchange 

Commission (CVM) applicable to the preparation of Quarterly Financial Information (ITR) and 

considered supplementary information for IFRS, which does not require the disclosure of the 

statement of value added (DVA).These statements were submitted to the same review procedures 

previously described and, based on our review, nothing has come to our attention that would lead 

us to believe that they have not been adequately prepared, in all material respects, in accordance 

with the individual and consolidated interim financial accounting information taken as a whole. 

São Paulo, April 27, 2011 

KPMG Auditores Independentes 

CRC 2SP014428/O-6 

Original in Portuguese signed by 

Carlos Augusto Pires Rosane Palharim 

Contador CRC 1SP184830/O-7 Contadora CRC 1SP220280/O-9 

F-6

EDP - ENERGIAS DO BRASIL S.A. 

BALANCE SHEETS AT 

(In thousands of Reais) 

Parent company Consolidated 

Note 3/31/2011 12/31/2010 3/31/2011 12/31/2010 

ASSETS 

Current assets 

Cash and cash equivalents 5 274.805 285.812 1.015.491 1.126.449 

Accounts receivable 7 

1.121 

1.121 

8.764 

8.659 

Indemnifiable financial assets 16 

- 

- 

823 

823 

Consumers and concessionaires 6 

- 

- 

935.415 888.806 

Income and social contribution taxes 9 58.004 85.966 398.107 540.314 

Dividends receivable 28 169.312 169.312 

- 

Inventories 2.2.c - 

- 

29.097 28.112 

Pledges and restricted deposits 12 

222 

222 51.554 62.898 

Prepaid expenses 8 

76 

190 

3.896 

5.254 

Assets available for sale 35 30.106 40.801 30.106 40.801 

Other credits 14 

1.413 

1.512 174.439 172.561 

535.059 584.936 2.647.692 2.874.677 

Non-current assets 

Accounts receivable 7 



Income and social contribution taxes 9 

Deferred income and social contribution taxes 10 

Related parties 11 

Provision for capital increases advances 13 



Other credits 14 

21.707 

- 

- 

- 

12.298 

117.261 

4.105 

8.760 

- 

16.805 

180.936 

Investments 15 3.977.557 

Property, plant and equipment 17 

2.100 

Intangible assets 18 262.378 

4.242.035 

Total assets 4.958.030 

See the accompanying notes to the quarterly information. 

F-7 

21.506 

- 

- 

- 

9.784 

116.622 

4.075 

8.693 

- 

15.759 

176.439 

3.771.044 

1.894 

266.852 

4.039.790 

4.801.165 

18.475 

416.492 

65.936 

36.874 

776.023 

- 

458 

239.781 

764 

32.213 

1.587.016 

34.899 

5.337.188 

3.007.596 

8.379.683 

12.614.391 

18.755 

397.324 

63.733 

35.933 

778.680 

- 

458 

239.669 

937 

32.379 

1.567.868 

37.271 

5.303.587 

3.026.712 

8.367.570 

12.810.115





Note 3/31/2011 12/31/2010 3/31/2011 12/31/2010 

LIABILITIES and SHAREHOLDERS' EQUITY 

Current liabilities 

Suppliers 19 

4.868 

3.370 585.805 626.381 

Income and social contribution taxes 9 22.916 51.659 420.844 609.891 

Dividends 28 100.822 100.822 193.251 191.142 

Debentures 20 

- 

- 

144.645 231.730 

Loans, financing and debt charges 21 

- 

- 

372.985 375.701 

Post-employment benefits 22 

- 

3 27.582 27.611 

Estimated employee benefits and social charges 23 

8.472 

4.774 60.417 50.450 

Regulatory and sector charges 24 

- 

- 

229.600 225.380 

Use of public property 25 

- 

- 

19.340 19.440 

Provisions 26 

2.823 

1.318 30.126 30.275 

Other accounts payable 14 

4.388 

4.392 88.525 137.410 

144.289 166.338 2.173.120 2.525.411 

Non-current liabilities 

Suppliers 19 

- 

Income and social contribution taxes 9 32.924 

Deferred income and social contribution taxes 10 

- 

Debentures 20 

- 


- 

Post-employment benefits 22 

- 


378 


- 


- 

Provisions 26 26.472 

Provision for unsecured liability 15 18.306 

Reserve for reversal and amortization 2.2.r - 


42 

78.122 

- 

32.295 

1.122 

- 

- 

- 

189 

- 

- 

26.912 

19.784 

- 

47 

80.349 

458 

138.523 

291.409 

637.809 

2.090.450 

188.033 

- 

12.336 

226.658 

155.085 

2.340 

17.248 

21.601 

3.781.950 

Shareholders' equity 27 

Capital stock 3.182.716 3.182.716 3.182.716 

Capital reserves 95.598 95.598 95.598 

Profit reserves 1.386.620 1.386.620 1.386.620 

Equity evaluation adjustments (110.443) (103.842) (110.443) 

Treasury shares (6.614) (6.614) (6.614) 

Retained earnings 187.742 

- 

187.742 

4.735.619 4.554.478 4.735.619 

Non-controlling shareholders 1.923.702 

Total shareholders' equity and non-controlling shareholders 4.735.619 4.554.478 6.659.321 

Total liabilities and shareholders' equity 4.958.030 4.801.165 12.614.391 

- 

- 

- 

See the accompanying notes to the financial statements. 

F-8 

915 

137.853 

289.003 

637.593 

2.140.882 

189.228 

- 

12.913 

215.764 

153.566 

12.847 

17.248 

21.772 

3.829.583 

3.182.716 

95.598 

1.386.620 

(103.842) 

(6.614) 

- 

4.554.478 

1.900.643 

6.455.121 

12.810.115 

-


STATEMENTS OF INCOME 

PERIODS ENDED MARCH 31 

(Amounts expressed in thousands of Reais, unless otherwise indicated) 

Note 2011 2010 2011 2010 

Reclassified Reclassified 

Net operating revenue 29 - 

- 

1.384.827 1.200.408 

Electricity services cost - 

- 

- 

- 

Cost of electricity - 

- 

- 

- 

Electricity purchased for resale - 

- 

(553.148) (433.376) 

Electric power network use charges - 

- 

(156.397) (154.368) 

- 

- 

(709.545) (587.744) 

Cost operation 30 

Personnel - 

- 

(38.768) 

(38.342) 

Material and third-party services - 

- 

(50.499) 

(47.070) 

Depreciation and amortization - 

- 

(66.840) 

(66.342) 

Other operating costs - 

- 

(11.652) 

(12.850) 

- 

- 

(167.759) (164.604) 

- 

- 

(877.304) (752.348) 

Cost of service rendered to third-parties - 

- 

(537) 

(871) 

Gross operating income - 

- 

506.986 

447.189 

Operating expenses 30 

Sales expenses 147 

- 

(12.984) 

(17.446) 

General and administrative expenses (20.270) 

(13.019) 

(79.631) 

(65.166) 

Depreciation and amortization (4.555) 

(4.869) 

(31.722) 

(20.718) 

Other operating expenses 10.593 

(1.013) 

(20.840) 

(18.686) 

(14.085) 

(18.901) (145.177) (122.016) 

Service result (14.085) 

(18.901) 361.809 

325.173 

Income from equity interests 193.398 

175.933 

(2.370) 

(590) 

Financial revenues 31 10.647 

8.646 

51.566 

73.617 

Financial expenses 31 (2.218) 

(2.250) 

(95.891) (100.555) 

Financial result 8.429 

6.396 

(44.325) 

(26.938) 

Income before income and social contribution taxes 187.742 

163.428 

315.114 

297.645 

Income and social contribution taxes - current 32 - 

(239) 

(95.963) 

(93.190) 

Deferred income and social contribution taxes 32 - 

9.784 

(7.137) 

(4.028) 

- 

9.545 (103.100) 

(97.218) 

Net income before non-controlling shareholders and beneficiaries 187.742 

172.973 

212.014 

200.427 

Non-controlling shareholders - 

- 

(22.163) 

(25.010) 

Founders' shares - 

- 

(2.109) 

(2.444) 

Net income for the period 187.742 

172.973 

187.742 

172.973 

Basic and diluted net income per thousand shares - R$ 1.184 

1.091 

1.184 

1.091 


F-9 

Parent company Consolidated

F-10 

Capital Capital Profit Treasury Equity evaluation Retained Total Non- Total 

stock reserves reserves shares adjustments earnings Parent company controlling Consolidated 

Balances at December 31, 2010 3.182.716 95.598 1.386.620 

(6.614) 

(103.842) 

- 

4.554.478 

1.900.643 

6.455.121 

Net income for the period - 

Dividends proposed - 

Equity evaluation adjustments - 

Assets available for sale - 

Cash flow hedge - 

Deferred income and social contribution taxes - 

Balances at March 31, 2011 3.182.716 


STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY 


- 

- 

- 

- 

- 

- 

95.598 

- 

- 

- 

- 

- 

- 

1.386.620 

- 

- 

- 

- 

- 

- 

(6.614) 


- 

- 

- 

(10.695) 

695 

3.399 

(110.443) 

187.742 

- 

- 

- 

- 

- 

187.742 

187.742 

- 

- 

(10.695) 

695 

3.399 

4.735.619 

22.163 

896 

- 

- 

- 

- 

1.923.702 

209.905 

896 

- 

(10.695) 

695 

3.399 

6.659.321


STATEMENTS OF COMPREHENSIVE INCOME 




Other comprehensive income 


(10.695) 

Cash flow hedge 695 


3.399 

- 

- 

Comprehensive income for the period - 

181.141 

- 

- 


F-11 


2011 2010 2011 2010 

172.973 

22.605 

331 

(7.799) 

- 

188.110 

- 

187.742 

(10.695) 

695 

3.399 

181.141 

- 

172.973 

22.605 

331 

(7.799) 

188.110 

-


STATEMENTS OF ADDED VALUE 



Generation of added value 10.508 

Net operating revenue - 

Allowance for doubtful accounts and net losses - 

Deferred tax credits - 

Other revenue 10.508 

(-) Acquisition from third parties (11.681) 

Costs of purchased energy - 

Distribution and transmission system use charges - 

Electric power network use charges and system service charge - 

Materials (158) 

Third-party services (5.814) 

Other operating costs (5.709) 

Insurance (66) 

Cost of service rendered - 

Recovery of expenses 1 

Donations, contributions and subsidies - 

Provision (Reversal) for juducial contingencies 84 

Bank fees - 

Advertising and publicity 147 

Travel and hotel rate (65) 

Indemnity for electric appliances - 

Damages and accidents caused to third parties - 

Participation of professional associations (262) 

Newspapers, magazines, books, etc. (9) 

Lawsuit - 

Lack/loss in inventories - 

Other expenses - 

Expenses with R & D - 

Energy Efficiency Program - 

Sundry (5.539) 

Gross value added (1.173) 

Retentions - 


Net generated value added (5.728) 

Added value received as a transfer - 

Financial revenues 10.647 


Equity accounting result 193.398 

Total value added to distribute 198.317 

Distribution of value added 

Personnel 

- 

Direct remuneration 4.147 

Benefits 1.317 

FGTS 

Taxes, fees and contributions 

435 

Federal 1.387 

State 115 

Municipal 

Remuneration of third party capital 

- 

Interest 2.218 

Rents 

Remuneration on own capital 

956 

Interest on own capital - 

Dividends and interest on own capital - 

Beneficiaries - 

10.460 

Retained earnings 187.742 

198.202 


F-12 


2011 2010 2011 2010 

167 

- 

- 

- 

167 

(8.087) 

- 

- 

- 

(223) 

(5.025) 

(2.839) 

(3) 

- 

1 

(49) 

(1.180) 

- 

(921) 

(93) 

- 

- 

(346) 

(2) 

- 

- 

- 

- 

- 

(246) 

(7.920) 

- 

(4.869) 

(12.789) 

- 

8.646 

- 

175.933 

171.790 

- 

3.656 

453 

219 

(8.770) 

271 

- 

2.250 

738 

- 

- 

- 

(1.454) 

172.973 

171.519 

2.109.253 

2.111.686 

(12.979) 

- 

10.546 

(838.227) 

(553.148) 

(149.836) 

(6.561) 

(5.150) 

(76.395) 

(47.137) 

(639) 

- 

8 

(55) 

47 

(3) 

138 

(290) 

- 

- 

(347) 

(31) 

(176) 

- 

- 

(1.421) 

- 

(5.972) 

1.271.026 

- 

(98.562) 

1.172.464 

- 

51.566 

(22.163) 

(2.370) 

1.199.497 

- 

45.986 

11.586 

4.257 

479.805 

367.257 

2.240 

95.798 

2.717 

- 

1.675 

2.109 

1.013.430 

186.067 

1.199.497 

1.851.912 

1.866.848 

(16.797) 

- 

1.861 

(705.132) 

(433.376) 

(147.453) 

(6.915) 

(5.342) 

(72.182) 

(39.864) 

(562) 

- 

15 

(56) 

(1.140) 

(7) 

(953) 

(265) 

- 

- 

(620) 

(10) 

(3.440) 

- 

(52) 

(1.223) 

- 

2.655 

1.146.780 

- 

(87.060) 

1.059.720 

- 

73.617 

(25.010) 

(590) 

1.107.737 

- 

38.305 

11.138 

4.392 

427.921 

345.970 

1.929 

100.432 

2.233 

- 

2.009 

2.444 

936.773 

170.964 

1.107.737


STATEMENTS OF CASH FLOWS 



Operating activities - 

Income before taxes and social contribution 187.742 163.428 


- 

Indemnifiable financial assets - 

- 

Accounts receivable - 

- 

Depreciation and amortization 4.555 

4.869 

Net book value of fixed and intangible assets written off (1) 

1 

Prepaid expenses - 

- 

Suppliers - Monetary restatement - 

- 

Interest, monetary and exchange variations for loans, financing, debentures and debt 

charges - 

Use of public assets - monetary restatement and adjustment to present value - 

Provision for post-employment benefit plan - 

Provision (reversal ) and monetary restatement for civl, tax and labor contingencies 1.065 

Reserve for environmental permits - monetary restatement and adjustment to present value - 

Adjustment to present value (201) 

Ownership interests (193.398) 

Allowance for investment losses (10.506) 

Regulatory and sector charges - Provision and monetary restatement - 

Pledges and restricted deposits - monetary restatement - 

Income and social contribution taxes - monetary restatement - 

Other 

(Increase) decrease of operational assets 

- 

(10.744) 

Consumers and concessionaires - 

Income and social contribution taxes to offset 27.962 

Inventories - 

Pledges and restricted deposits (67) 


Other operational assets 

Increase (decrease) in operating liabilities 

(947) 

27.062 

Suppliers 1.498 

Other taxes and social contributions (28.114) 

Post-employment benefits - 

Estimated employee benefits and social charges 3.698 

Regulatory and sector charges - 

Use of public property - 

Provisions - 

PIS and Cofins taxes on revenue returned to consumers - Tax Situation Code 27 - 

Other operating liabilities (12) 

(22.930) 

Cash from (invested in) operational activities (6.612) 

Income and social contribution taxes paid - 

Net cash from (invested in) operational activities (6.612) 

Investing activities 

Sale (purchase) of treasury shares - 

Capital increase (3.627) 

Additions in tangible and intangible fixed assets (288) 

Net cash (invested in) investiment activities (3.915) 

Financing activities 

Related parties (450) 

Provision for capital increases advances (30) 

Dividends and interest on capital paid - 

Funding form Loans, financing and debentures - 

Repayment of loans, financing, debentures and debt charges, net of derivatives - 

Net cash from (invested in) financing activities (480) 

Net (decrease) increase in cash and cash equivalents (11.007) 

Cash and cash equivalents at the end of the period 274.805 

Cash and cash equivalents at the beginning of the period 285.812 

(11.007) 


F-13 


2011 2010 2011 2010 

- 

- 

- 

2.347 

- 

- 

(175.933) 

- 

- 

- 

- 

- 

(5.288) 

- 

15.132 

- 

(1.368) 

2 

(5.442) 

8.324 

(504) 

(15.352) 

- 

1.025 

- 

- 

- 

- 

(4) 

(14.835) 

(11.799) 

- 

(11.799) 

(1.057) 

- 

(258) 

(1.315) 

34.558 

(2.750) 

- 

- 

- 

31.808 

18.694 

252.134 

233.440 

18.694 

- 

315.114 

12.979 

3.386 

(62) 

98.562 

7.780 

827 

1.399 

66.368 

15.353 

847 

7.073 

(3) 

(553) 

2.370 

(10.506) 

14.767 

5.404 

1.373 

- 

542.478 

(61.791) 

24.981 

(4.029) 

5.828 

704 

(1.711) 

(36.018) 

(42.432) 

(77.852) 

(2.068) 

9.967 

(11.124) 

(4.559) 

(3.589) 

(48.986) 

(355) 

(180.998) 

325.462 

(91.576) 

233.886 

- 

- 

(115.840) 

(115.840) 

- 

- 

(1.675) 

7.519 

(234.848) 

(229.004) 

(110.958) 

1.015.491 

1.126.449 

(110.958) 

- 

297.645 

16.798 

207 

(56) 

87.060 

9.184 

496 

- 

62.997 

1.784 

(1.221) 

9.333 

40 

7.824 

590 

- 

11.110 

(28.264) 

19.281 

637 

495.445 

53.960 

41.141 

(2.500) 

(4.962) 

(2.698) 

(6.769) 

78.172 

(75.500) 

(62.040) 

- 

6.656 

- 

(3.404) 

(4.594) 

(3.025) 

2.540 

(139.367) 

434.250 

(57.827) 

376.423 

(1.057) 

(23.829) 

(125.102) 

(149.988) 

- 

- 

(2.021) 

(1.993) 

(187.871) 

(191.885) 

34.550 

1.136.572 

1.102.022 

34.550

1 Operational context 

�� 

�� 

�� 

�� 

EDP - Energias do Brasil S.A. (“Company” or “Energias do Brasil” or “Parent Company”), a public held company incorporated on July 24, 2000, headquarteredintheStateof 

São Paulo, has as its corporate purposes the participation in other corporations as a shareholder or quota holder, as well as in businesses and enterprises in the power 

industry in Brazil or overseas; to manage electric power, transmission, distribution and trading assets in their various forms and types; to study, plan, develop and implement 

electric power generation, transmission, distribution and trading projects in their various forms and types. 

3/31/2011 12/31/2010 

Companies Consolidation 

Direct Indirect Direct Indirect 

Distribution 

Bandeirante Energia S.A. (Bandeirante) full 

100 

Espírito Santo Centrais Elétricas S.A. (Escelsa) full 

100 

Generation - 

Energest S.A. (Energest) full 

100 

Castelo Energética S.A. (CESA) full 

- 

Costa Rica Energética Ltda. (Costa Rica) full 

- 

Pantanal Energética Ltda. (Pantanal) full 

- 

Santa Fé Energia S.A. (Santa Fé) full 

- 

Lajeado Energia S.A. (Lajeado) full 

56 

Ipueiras Energia S.A. (Ipueiras) full 

100 

Investco S.A. (Investco) full 

- 

Enerpeixe S.A. (Enerpeixe) full 

60 

Enernova S.A. (Enernova) full 

100 

Terra Verde Bioenergia Participações S.A. (Terra Verde) full 

92 

EDP Renováveis Brasil S.A. (EDP Renováveis) by the equity method 

45 

Porto do Pecém Geração de Energia S.A. (Porto do Pecém) proportional 

50 

Central Nacional da Energia Eólica S.A. (Cenaeel) by the equity method by EDP Renováveis 

- 

Elebrás Projetos Ltda by the equity method by EDP Renováveis 

- 

Trading - 

Enertrade Comercialização e Serviços de Energia S.A. (Enertrade) full 

100 

Transmission - 

Evrecy Participações Ltda. (Evrecy) full 

- 

Other - 

Enercouto S.A. (Enercouto) full 

100 

Escelsa Participações S.A. (Escelsapar) full 

100 

Omega Engenharia e Assessoria Ltda (Omega) full 

100 

1.1 Concessions 

The Company has the right to indirectly explore the following power generation, distribution and transmission concessions/licenses/permits: 

Companies State 

Inception End 

Energest ES 

231,90 

145,91 7/17/1995 7/14/2025 

CESA ES 

67,64 

36,30 7/17/1995 5/19/2029 

Pantanal MS 

52,76 

35,55 12/4/1997 12/23/2029 

Costa Rica MS 

16,00 

12,28 11/5/2001 11/5/2031 

Santa Fé ES 

29,00 

26,10 11/13/2001 11/13/2031 

Porto do Pecém CE 

720,27 

631,00 7/1/2008 7/1/2043 

Enerpeixe TO 

452,00 

271,00 11/7/2001 11/7/2036 

Investco TO 

902,50 

526,60 1/15/1998 1/15/2033 

Terra Verde SC 

140,00 

- 6/25/2009 6/25/2039 

Evrecy ES / MG 

- 

- 7/17/1995 7/17/2025 

Bandeirante SP 

- 

- 10/23/1998 10/23/2028 

Escelsa ES 

- 

- 7/17/1995 7/17/2025 

Cenaeel SC 

13,80 

2,97 8/12/2002 12/11/2032 

Elebrás RS 

151,00 55,45 8/28/2010 8/28/2032 

(*) Not reviewed by independent auditors 

Installed capacity (MWm) (*) 

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Assured energy (MWm) (*) 

Concession/ Authorization / 

Record 

% interest 

- 

- 

- 

- 

100 

51 

100 

100 

- 

- 

41 

- 

- 

- 

- 

- 

45 

45 

- 

- 

- 

100 

- 

- 

- 

- 

100 

100 

- 

100 

- 

- 

- 

- 

56 

100 

- 

60 

100 

92 

45 

50 

- 

- 

- 

100 

- 

- 

- 

100 

100 

100 

- 

- 

- 

- 

100 

51 

100 

100 

- 

- 

41 

- 

- 

- 

- 

- 

45 

45 

- 

- 

- 

100 

- 

- 

-

2 

2.1 

2.1.1 

2.1.2 

2.2 

Accounting practices 

Basis of presentation 

Consolidated quarterly information 

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The Company's consolidated quarterly information for the periods ended March 31, 2011 and 2010, as well as financial statements for the year ended December 31, 2010 

were prepared according to the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and also in accordance with 

accounting practices adopted in Brazil in conformity with the pronouncements issued by the Accounting Pronouncement Committee (CPC). 

The preparation of the consolidated quarterly information in accordance with all IFRS requires the Company's Management to make some estimates. The areas that involve 

judgment or the use of estimates that are material for consolidated quarterly information are shown in note 2.2.v. The consolidated quarterly information has been prepared 

using the historic cost as the value basis, except for the valuation of some financial instruments which are measured at fair value and by the revaluations of business 

combinations. 

The Company adopted all prevailing standards, review of standards and interpretations issued by IASB that are applicable to the quarterly information as of March 31, 2011. 

The Company's management authorized the completion of the preparation of quarterly information on April 27, 2011; the amounts in the financial statements are expressed in 

thousands of Brazilian reais, rounded to nearest 1000, unless otherwise indicated. 

The consolidated quarterly information includes financial statements of Energias do Brasil, and companies which the Company has controlling interest, directly or indirectly, 

detailed in note 1, which the years are correspondent to those of the Parent company. 

Direct subsidiaries are consolidated from acquisition date, which corresponds to the date in which the Company obtained control and continue to be consolidated to the date in 

which control ends. 

Parent company's quarterly information 

The quarterly information of the parent company is being presented in accordance with accounting practices adopted in Brazil, in compliance with the provisions contained in 

the Corporation Law, and incorporates the changes introduced through Law nº 11638/07 and 11941/09, supplemented by the new pronouncements, interpretations and 

guidelines of CPC, approved by resolutions of CFC and CVM Resolutions in 2009 and 2010. 

Summary of significant accounting policies 

The accounting practices have also been consistently applied by the Group companies and are also consistent with those adopted in the financial statements as at December 

31, 2010, published on March 3, 2010. 

a) Cash and cash equivalents (Note 5) 

Cash and cash equivalents include cash, bank deposits and other high-liquidity short-term investments, promptly convertible into a known sum of cash and subject to an 

insignificant risk of change of value, which are stated at cost, plus income accrued until the balance sheet date. 

b) Accounts receivable 

• Consumers and concessionaires (Note 6) 

Trade accounts receivable are recorded in the amount invoiced, adjusted to present value when applicable, including the respective direct taxes which include: 

(i) The amounts billed to final consumers, distributor concessionaires and trading companies of free energy, as well as the revenue referring to energy consumed and not billed; 

(ii)The calculation of the present value is performed for scheduled payments of debts of consumers of the Company, based on the capital remuneration rates, regulated by 

ANEEL and applied to the tariffs of electricity public service distributors (Average remuneration rate of the investment). The contra entry of the adjustments to present value of 

accounts receivable is against net income for the year (Note 6.4); 

(iii)The amounts receivable relating to the energy traded in the Electricity Trading Board - CCEE (Note 6.1); 

(iv) Allowance for doubtful accounts - The amounts were allocated pursuant to Accounting Instruction 6.3.2, of the Accounting Manual of the Electricity Public Service, whci 

defines as a rule the following provisioning terms for overdue credits: Home - over 90 days, Business - over 180 days and other classes - over 360 days. 

Furthermore, there was a careful analysis of the balance of consumers and concessionaires, and the amount recognized is considered sufficient to cover losses considered 

probable. The provision recognized is is considered sufficient to cover eventual losses in the realization of these assets by management. 

• Indemnifiable financial assets (Note 16) 

Subsidiaries Bandeirante, Escelsa and Evercy recognize an amount receivable from the Concession Grantor due to the unconditional right of receiving cash at the end of the 

concession, as provided for in the contract, as indemnity for the construction services carried out and not received as service provisions related to the concession. These 

financial assets are recorded at the right's present value and are calculated based on the value of assets pertaining to the concession and that will be reversible at the end of 

concession. These assets are maintained at the amortizable cost and are remunerated by the tariff calculated as the average investment remuneration rate. 

c) Inventories 

The materials used in the construction of the concession infrastructure, operation and maintenance of service provision are recorded at the average acquisition cost, not 

exceeding market value. 

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d) Investments (Note 15) 

The quarterly information of the parent company, the investments in subsidiaries and associated companies with a percentage of the voting capital above 20% or with 

significant influence, and in other companies that are part of the same group or that are under common control, is valued by the equity method. 

Other investments that do not fit in the above category are valued at cost, less provision for devaluation, when applicable. 

For company acquisitions carried out beginning as of January 1, 2009, the Company's IFRS transition date", assets, liabilities, and contingent liabilities of a subsidiary are 

measured at the corresponding fair value on acquisition date. Any amount by which acquisition cost exceeds the fair value of identifiable net assets acquired is recorded as 

goodwill. When acquisition cost is lower than the fair value of identified net assets, the difference is recorded in income. Minority interest is presented as the corresponding 

proportion of identified assets and liabilities' fair value. 

Investments in land and properties which are not part of the core operating activity of the subsidiaries are stated at acquisition cost. 

e) Infrastructure assets managed on behalf of the Concession Grantor (Notes 16 to 18) 

Infrastructure assets managed on behalf of the Concession Grantor are being presented in the groups of indemnifiable financial assets and intangible assets, due to the 

implementation of CPCs. They are as follows: 

Assets linked to the concession 

According to Articles 63 and 64 of Decree 41,019 of February 26, 1957, the assets and installations used in generation, transmission, distribution, including trading of power, 

are related to these services and cannot be disposed, sold, assigned or mortgaged without prior and formal authorization of the Regulatory Agency. 

ANEEL Resolution 20 of February 3, 1999, regulates the removal of fixed assets from the Power Public Service concessions, granting prior authorization to separate fixed 

assets not in use by the concession, when available for sale, determining that the amount from the sale should be deposited in a specific bank account for reinvestment in the 

concession. 

Liabilities related the concession 

Up to December 31, 2009, write-offs were made in Liabilities related to concession in the proportion of disabled or disposed assets, and also based on the average 

depreciation rate of distribution assets, corresponding to ventures comprised totally or partially of third-party funds and subsequently assigned to the Company. As of January 

1st, 2010, complying with the ANEEL Regulatory Resolution 396 provision, of February 23, 2010, the Company suspended the record of write-offs correspondent to the 

disabled assets. 

f) Property, plant and equipment (Note 17) 

All generating companies' tangible assets and only tangible assets not related to the distribution and transmission companies' infrastructure are recorded in Property, plant and 

equipment. Are accounted for at: i) acquisition costs plus nonrecoverable taxes on purchase; ii) any costs directly attributable to the placement of the asset in the location and 

required operating conditions, including financial charges; iii) in thermal and wind power plants, at the initial estimate of costs for disassembling and removing the item and 

restoring the location; and iv) less accumulated depreciation and impairment losses. 

The depreciation calculation basis is the asset's depreciable amount (acquisition cost less residual value) recognized in income of period, at the straight line method according 

to the estimated useful lives of each component of a property, plant and equipment item, as this method is the one that best reflects the consumption standard of future 

economic benefits incorporated to the asset. 

The residual value is the asset's remaining balance at the end of the concession, considering ANEEL's depreciation rate, since, as established in the agreement entered into 

by the Company and the Government, at the end of the concession, the assets will be transferred to the Government, which will indemnify the Company for the assets not fully 

depreciated. When the indemnity at the end of the thermal and wind power concession is not possible, no residual value is recognized and depreciation rates are adjusted so 

that all assets are depreciated within the concession. 

Depreciation methods and residual values are reviewed at end of year, possible adjustments are recognized as a change in accounting estimates and useful lives are those 

defined by ANEEL. 

On account of the provisions of the Accounting Instructions of the Accounting Manual of the Electricity Public Service and in CVM Resolution 577, of June 5, 2009, which 

approves the technical pronouncement CPC 20, the financial charges relating to the financing obtained from third parties, effectively invested in construction in progress, are 

recorded in this subgroup as cost of the respective works. 

The Company and its generating and trading subsidiaries opted not to value their fixed assets at deemed cost, as they understand that the accounting practice of valuating 

fixed assets at the historic cost less the best estimate of depreciation and allowance for impairment, when required, is the one that best represents its fixed assets. To adequate 

the property, plant and equipment basis to the recognition requirements of an asset, as determined for in CPC 27 (IAS 16), and eliminate costs that were previously 

recognized, the basis was reviewed to identify costs, such as administrative costs and foreign exchange fluctuation, to be excluded. 

g) Intangible assets (Note 18) 

Intangible assets include: 

• Concession rights: The right of concessionaires of charging users for the power distribution system construction are recorded as intangible assets. Amortization is recorded 

according to the concession remaining term. 

• Software : these are measured by the total cost of purchase, less amortization expenses. 

• Intangible assets acquired from third parties: these are measured by the total cost of purchase, less amortization expenses. 

• Development of projects: Are recognized as assets only in the development stage, provided that they comply with the requirements defined in CPC 04. 

• The permanent rights of way: are recorded at cost. 

• Concession right - use of public property: refer to the right to explore joint hydropower plants and transmission systems of Enerpeixe and Investco, compensated by monthly 

payments to the Federal Government, as agreement entered into by the parties. It is recognized at the total fair value of the right to Use the public property until the end of the 

concession agreement and amortized over the concession agreement. 

• Goodwill absorbed – refers to the spun-off portion of goodwill absorbed in the subsidiaries Bandeirante, Escelsa and Lajeado Energia, resulting from the acquisition of shares 

of the abovementioned Companies, which was accounted for in accordance with CVM Instructions nº 319/99 and nº 349/99 and, pursuant to the determination of ANEEL, is 

being amortized by the curve between the expectation of future results and the concession period of the Companies. 

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• Goodwill generated in a business combination: is recorded as the difference between the amount paid for the business acquired and the fair value of the business. 

Amortization is calculated on the asset amortizable amount (cost or other amount that replaces cost less residual value) and is recognized in income at the straight-line method 

in relation to the estimated useful lives of intangible assets other than goodwill, beginning as of the date in which they are available for use, as this method is the one that best 

reflects the consumption standard of future economic benefits incorporated to the asset. 

h) Environmental licenses 

Previous licenses and installation licenses obtained during planning and installation are recognized as plant costs, more specifically as dam costs, according to ANEEL 

accounting guide, and depreciated over the useful lives of dams. As regards operation permits obtained after the enterprise becomes operational, if environmental costs 

related to these licences are paid before the license is obtained, the amount disbursed is recorded as intangible asset - operation permits - and amortized over the license 

validity. If the license is obtained before disbursements, at the start of the license period, the estimated disbursements are provisioned and recorded as intangible asset - 

operation permits- and amortized over the license period. 

i) Reduction to the recoverable value 


Evaluated at the end of the year regarding recoverability. Considered as nonrecoverable assets when there are evidences that one or more events occurred after the initial 

recognition of the financial asset that resulted in adverse effects on the estimated future cash flow of the investment. 

Non-financial asset 

The Management of the Company reviews the net book value of property, plant and equipment and other non-current assets, including goodwill and intangible assets, on an 

annual basis to identify whether there was any evidence of unrecoverable losses of the occurrence of events or alterations in the circumstances indicating that the book value 

might not be recoverable. 

When such evidence is identified, and the net book value exceeds the recoverable value, provision is recognized adjusting the net book value to the recoverable value. 

The goodwill and the intangible assets with undefined useful life have the recovery of their value tested annually regardless of the presence of indicators of loss of value. 

j) Other current and non-current assets 

These are show at cost or realizable value, including, when applicable, income accrued up to the balance sheet date. 

k) Suppliers (Note 19) 

Mainly includes balances payable to suppliers of electricity and of charges on the use of the electricity network. 

l) Loans and financing, debt charges and debentures (Notes 20 and 21) 

Loans, financing and debentures are stated at the net amount of transaction costs incurred and subsequently measured at the amortized cost using the effective interest rate 

method. 

Loans and financing in foreign currency that have swap operations were recognized at fair value through net income for the period. 

m) Provisions 

Contingencies (Note 26.1) 

These are recognized in the balance sheet as a result of a past event, and it is probable that an economic resource will be required to settle the obligation. Provisions are 

recorded considering the best estimates of the risk specific to the liability. 

Dismantling (Note 26) 

Recognized when there is a legal or contract obligation at the end of the assets' useful lives. Accordingly, these type of provisions are recognized for power plants to cover 

responsibilities related to location and land replacement expenses. These provisions are calculated based on the current value of corresponding future responsibilities and are 

recorded as a contra entry to an increase to respective property, plant and equipment, and amortized on a straight-line basis over the expected average useful lives of the 

assets. 

Provisions are subject to annual review, in accordance with estimated future responsibilities. The provision is adjusted at the end of the year and recognized in the statement of 

income. 

(n) Use of public property (Note 25) 

It is a financial instrument maintained to maturity and stated at the amortized cost adjusted by IGP-M incurred through balance sheet date. 

Current and non-current liabilities balances are recognized at present value at the project's implicit rate. 

o) Other current and non-current liabilities 

Stated at the known or estimated amounts, plus, when applicable, the corresponding charges, monetary and exchange variations incurred up to the balance sheet date. 

p) Income and social contribution taxes (Notes 9, 10 and 32) 

Current taxes and social contribution recorded in income are calculated, at the subsidiaries CESA, Costa Rica, Pantanal, Santa Fé and Evrecy with a basis on the deemed 

taxable income, at the rates applicable according to the legislation in force, and at the parent company and other subsidiaries, current income tax is calculated with a basis on 

the taxable income (adjusted income), at the rates applicable according to the legislation in force 15%, plus 10% on the taxable income that exceeds R$240 p.a., and current 

social contribution is calculated with a basis on taxable income before income tax, through the application of the rate of 9%, both considering the offsetting of tax loss 

carryforward and negative social contribution basis, respectively, limited to 30% of the taxable income. 

Deferred income and social contribution tax assets were recorded under the heading of deferred taxes and social contribution, as of the tax loss carryforward, negative social 

contribution basis and temporary differences, considering the rates in force of the aforementioned taxes, in accordance with the provisions of CVM Resolution 273, of August 

20, 1998 and CVM Instruction 371, of June 27, 2002 and CVM Resolution 599, of September 15, 2009, and consider past profitability record and expectations of future taxable 

income based on a technical viability study. 

For purposes of calculating the taxable income and its effects on the quarterly information, the Company considered the adoption of the Transitory Tax Regime - RTT, as 

determined in MP nº 449/08 (converted into Law no. 11,941/09). 

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q) Post-employment benefits (Note 22) 

The Company has employee benefit plans including pension and retirement plans. The main benefit plans granted to the employees of the Company and its subsidiaries are 

described in notes 22.1, 22.2, 22.3 and 22.4. 

The amounts are recorded purusuant to the terms of CVM Resolution 600, of October 7, 2009. Costs, contributions and actuarial liabilities are determined annually, with a basis 

on an appraisal carried out by independent actuaries, the last of which was executed for the base date of December 31, 2010. 

Actuarial gains and losses generated by adjustments and changes to actuarial assumptions of pension and retirement plans are directly recognized in Shareholders' equity 

under Valuation adjustments to equity. 

r) Reserve for reversal and amortization 

Refers to resourced derived from the Reserve for reversal and amortization, set up until December 31, 1971 under the terms of the regulation of SPEE (Federal Decree 

41,019/57), applied by the subsidiary Bandeirante in the expansion of the Power Public Service, and interest of 5% p.a. is charged on the Fund for reversal. Its potential 

settlement will occur in accordance with determinations of the Granting Power. 

s) Capital (Note 27) 

Common shares are classified as shareholders' equity and any costs attributable to the issuance of shares and stock options are recognized as a deduction from shareholders' 

equity. 

Preferred shares are classified as shareholders' equity in case they are not redeemable, or only redeemable at the Company's discretion. Are not entitled to vote and have 

preemptive rights in the settlement of its portion of capital. 

Repurchased options classified as treasury shares and recognized as a deduction from shareholders' equity, including acquisition costs. When these shares are again made 

available to the market, the associated cost is deducted from shareholders' equity and excess or deficit is transferred to retained earnings. 

t) Dividends and interest on own capital credited (Note 28) 

The distribution of dividends and interest on own capital are recognized as a liability in the Company's financial statements at the end of year, based on the Company's by-laws. 

However, any amounts above the mandatory minimum is only provisioned on the date in which they are approved by a Shareholders' Meeting. The tax benefit of interest on 

capital is recognized in the statement of income. 

u) Income statement 

Income and expenses are recognized on the accrual basis. 

Revenue is recognized in the statement of income when all the inherent risks and benefits are transferred to the buyer. Revenue from electricity operations and services 

rendered is recognized in net income in keeping with its realization. Revenue is not recognized if there are significant uncertainties as to its realization. 

The billing of electric energy to all the consumers and concessionaires is executed monthly, in accordance with the reading calendar and supply agreements, respectively. 

The energy supplied and not billed, corresponding to the period lapsed between the date of the last reading and the closing of the balance sheet, is estimated and recognized 

as unbilled revenue. 

The power supply is billed on a monthly basis for all concessionaires. 

Financial incomes comprise interest earned in short-term investments, gains on hedge, when applicable, arrears charges on power sold, which are recognized in income. 

Financial expenses include interest, foreign exchange fluctuation and mark-to-market loans and financing and operating results swap and hedge, which are recognized in 

income. 

v) Accounting estimates 

In the preparation of individual and consolidated quarterly information in accordance with Brazilian accounting practices based on the provisions of the Brazilian Corporate Law, 

the Company's and its subsidiaries' management are required to make estimates to record certain transactions that affect assets, liabilities, income and expenses. 

The final results of these transactions and information, at the time of their effective realization in subsequent periods, may differ from these estimates, due to the lack of 

precision inherent to the process of their determination. The Company reviews the estimates and assumptions at least quarterly, except for the Post-employment benefit plans, 

as mentioned in note 2.2q. 

The main estimates related to the quarterly information refer to the recognition of impacts resulting from: Provision for allowance for doubtful accounts; Unbilled supply revenue; 

Transactions carried out in the sphere of the Electric Energy Trading Chamber - CCEE; Loss or gain of revenue – low income; Recovery of deferred taxes and social 

contribution on tax loss carryforward, negative bases and temporary differences; Measurement of financial instruments; Provisions for contingencies; Post-employment benefit 

plans; and asset impairment test. 

w) Financial instruments (Note 33) 

Financial instruments are defined as any contract that originates a financial asset to the entity and a financial liability or equity instrument to another entity. 

Non-derivative financial instruments include Cash and cash equivalents, Pledges and restricted deposits, Accounts receivable and other receivables, investments in debt and 

equity instruments, Loans, financing, Debentures and Suppliers, as well as accounts payable and Other liabilities. These financial instruments are immediately recognized on 

negotiation date, that is, when the obligation or right is formalized, and are initially recorded at fair value plus or less any directly attributable transaction costs. After the initial 

recognition, they are measured as described below: 

· Instruments held to maturity 

If the Company and/or its subsidiaries have the intention and capacity to hold to maturity their financial assets, these are classified as held to maturity. Investments held to 

maturity are measured by the amortized cost using the effective interest rate method, less any reductions in their recoverable value. 

· Instruments available for sale 

The investments of the Company and/or its subsidiaries in equity instruments and instruments of certain assets relating to debt instruments are classified as available for sale. 

Subsequent to initial recognition, they are valued at their fair value and their fluctuations, excepting reductions in their recoverable value, and the differences in foreign currency 

of these instruments, are recognized directly in shareholders' equity, net of tax impacts. When an investment fails to be recognized, the gain or loss accumulated in 

shareholders' equity is transferred to net income. 

· Financial instruments at fair value through profit or loss 

An instrument is classified at fair value through the statement of income if it is held for trading, that is, designated as such upon initial recognition. Financial instruments are 

recorded at fair value through profit or loss if the Company and/or its subsidiaries manages these investments and decides on purchases and sale based in their fair value 

according to the investment risk management strategy documented by the Company and/or its subsidiaries. After initial recognition, attributable transaction costs are 

recognized in net income when incurred. 

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· Loans and receivables 

Only non-derivative assets with fixed or determined payments that are not quoted in an active market are allocated to this category and are recognized at the amortized cost 

method or effective interest rate method. 

· Derivative financial instruments 

Derivative financial instruments are contracts with the following characteristics: 

a) Their value changes as market changes affecting interest rates, foreign exchange rates, commodities prices, etc.; 

b) No initial investment is required or the initial investment is mud lower than the investment required for similar contracts in the market; and 

c) They will always be settled in a future date. 

Derivative financial instruments are recognized on their trade date at their fair value. Subsequently, the fair value of the derivative financial instruments is reevaluated on a 

regular basis, while the gains and losses resulting from this revaluation are recorded in net income for the period, excepting as refers to the cash flow hedge derivatives, where 

the accounting treatment depends on the transaction's effectiveness. 

Hedge accounting 

Beginning in 2008, the Company and its subsidiaries started qualifying certain financial instruments for (hedge accounting). The hedge derivatives are recorded at fair value 

and gains or losses are recognized according to the hedge accounting model adopted, and for such the following requirements were met: 

i) there is formal documentation of the hedge on the start date of the relationship; 

ii) the hedge is expected to be highly effective; 

iii) the hedge effectiveness can be measured reliably; 

iv) the hedge is evaluated on a continual basis and effectively determined as being highly effective throughout the useful life of the hedge accounting structure period; and 

v) in relation to the hedge of an anticipated transaction, this must be highly probable and must present exposure to cash flow variations that could ultimately affect the result. 

The Company and its subsidiaries use financial instruments of hedge of the interest rate, foreign exchange variation and financing risk. The derivatives that do not qualify as 

hedge derivatives are recorded as trading derivatives. 

Cash flow hedge 

The effective part of the variations of the fair value of designated derivatives that qualify as cash flow hedge is recognized in Shareholders' equity – Asset revaluation reserve. 

The gains or losses of the ineffective portion of the hedge relation are recognized by counter entry in net income for the period, at the time the ineffectiveness occurs. 

Amounts accumulated in Shareholders' equity are recorded in income in the periods in which the item affects results; however, when the covered transaction results in the 

recognition of a non-financial asset or liability, gains and losses recorded in Shareholders' equity are recognized as a contra entry to the initial cost of the asset or liability. 

When a hedge instrument expires or is sold, or when the hedge relation fails to fulfill the criteria for hedge accounting, any accumulated gain or loss recorded in Shareholders' 

equity on the date is kept in Shareholders' equity until the foreseen transaction is recognized in net income. When the transaction is not expected to take place, the 

accumulated gains or losses recorded by counter entry of shareholders' equity are immediately recognized in net income. 

Effectiveness 

For a hedge relation to be classified as such, its effectiveness should be demonstrated. Hence the Company and its subsidiaries carry out prospective tests on the start date of 

the hedge relation and on each balance sheet date, perform tests prospectively and retroactively in order to demonstrate its effectiveness and that alterations in the fair value 

of the hedged item are offset by alterations in the fair value of the hedge instrument, with respect to the hedged risk. Any ineffectiveness determined is recognized in results as 

soon as it occurs. 

Derecognition 

Financial instruments are written-off provided that contract rights to cash flows expire, that is, the end of the right or obligation of receiving or delivering cash or membership 

certificate is certain. For this situation, Management, based on consistent information, records the settlement. 

This record may be written-off due to cancellation, payment, receipt or when the certificates expire. 

x) Functional currency 

The functional currency of the Company and its subsidiaries is the Real, according to the rules described in CPC 02 (R2) - Impacts on the Changes in Exchange Rates and 

Translation of Financial Statements, approved by CVM Resolution nº 640/10. 

y) Foreign currency 

Transactions in foreign currency, that is, all those that are not performed in the functional currency, are translated by the exchange rate of the dates of each transaction. 

Monetary assets and liabilities in foreign currency are translated into the functional currency at the foreign exchange rate of the closing date. Gains and losses of variations in 

the exchange rates on monetary assets and liabilities are recognized in the statement of income. Non-monetary assets and liabilities acquired or contracted in foreign currency 

are translated with a basis on the exchange rates of the dates of the transactions or on the dates of valuation at the fair value when this is used. 

z) Business combination and goodwill (Note 3) 

Business combinations are accounted for under the acquisition method. The acquisition cost is measure at the fair value of assets, equity instruments and liabilities incurred or 

assumed on exchange date. Acquired identifiable assets and liabilities and contingencies assumed on business combination are initially measured at fair value on acquisition 

date, regardless of minority interest level. 

Goodwill is the value exceeding the business combination cost regarding the interest of the acquiring company on the fair value of the acquired company's assets and liabilities, 

that is, the exceeding amounts is the portion overpaid by the acquiring company due to expected future earnings of the acquired company. 

The goodwill should not be amortized and will subject to annual impairment analysis. 

The negative goodwill is directly recognized in income by the acquiring company, when total fair value is higher than the amount paid for the business. 

aa) Commercial leases 

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made for operating leases 

(net of any incentive received from the lessor) are charged to the statement of income at the straight-line basis over the lease period. 

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ab) Concession contracts 

The Committee of Accounting Pronouncements issued in 2009, the Technical interpretation ICPC 01 – Concession contracts. This Interpretation was approved by CVM 

Resolution nº 611 of December 22, 2009. 

ICPC 01 is applicable to the public-private concession agreements in which the public entity controls or regulates the services rendered, with which infrastructure, at which price 

and to whom the service should be rendered, and is also has possession of this infrastructure. 

As concession agreements of the distributing companies and transmission company of the group EDP Energias do Brasil have these characteristics, this interpretation is 

applicable. But the agreements of the group's power plants have different characteristics, therefore, this interpretation is not applicable. 

According to ICPC 01, the infrastructure classified in this interpretation cannot be recognized as property, plant and equipment because the concessionaire does not control the 

underlying assets, and it is recognized in accordance with one of the accounting models provided for in the interpretation, depending on the type of remuneration agreed on 

between the concessionaire and the concession grantor, according to the agreement entered into by the parties, which are the financial asset model, intangible asset model 

and the bifurcated model. 

For transmission companies, the financial model is applied because they are remunerated by the Concession Grantor through power distribution companies, both for 

infrastructure construction and the transmission system made available to be used by the basic network. 

For distribution companies, the bifurcated model is applied as the companies are remunerated (i) by the Concession Grantor, regarding the infrastrucutre residual value at the 

end of the concession agreement and (ii) by users, regarding their portion of the construction work and power supply. 

ac) Earnings per share 

The basic earnings per share is calculated based on result for the period attributable to the Company's shareholders and the weighted average value of common shares 

outstanding in the respective period. Diluted earnings per share is calculated by the same indicators, and the average of oustanding shares adjuted by instruments potentially 

convertible into share, with diluting effect, in accordance with CPC 41 (IAS 33). 

2.3 Consolidated quarterly information 

The consolidated quarterly information were prepared in accordance with the standards established by CPC 36 (R1) - Consolidated statements and by the CVM Instruction 

247, of March 27, 1996 and subsequent amendments, covering Energias do Brasil and its subsidiaries (as described in Note 1). 

The accounting criteria adopted in their/its determination were applied uniformly among the various companies of the group . 

The main consolidation practices adopted were as follows: 

• Elimination of the investment of the parent company in the subsidiary companies; 

• Elimination of the balances of accounts between the parent company and the subsidiary companies and of the accounts maintained among these subsidiary companies; 

• Highlighting of non-controlling shareholders in the balance sheets and in the statements of income; 

• Business combinations have been considered since September 2008, determining acquisition cost, recognizing and measuring all assumed assets and liabilities, as well as 

minority interest, recognizing and measuring goodwill for expected future earnings, all measured on acquisition date. If the excess is negative, a gain is recognized in results 

for the period. 

• The subsidiary under joint control Porto do Pecém is being consolidated by the proportional method as from October 14, 2008. 

2.4 Presentation of information by segment 

Information per operating segment is presented consistently with the internal report provided for the operating decision maker. The main operating decision maker, in charge of 

allocating funds and evaluating performance of operating segments is the Company's Executive Board, in charge of the Group's strategic decision making (Note 37). 

2.5 New IFRS and IFRIC (IASB's International Financial Reporting Interpretations Committee) interpretations 

Some of the standards and amendments to standards and interpretations issued by IASB have not yet become effective for the period ended March 31, 2011, therefore, they 

have not been applied in the preparation of these quarterly information. 

The Company's management does not understand that the adoption of these new pronouncements and interpretations will have a material impact on the Company's financial 

statements in the period of first-time adoption. 

The Company's evaluation of the impacts of these new procedures and interpretations are as follows: 

Rules and interpretations of rules that are not yet applicable 

IFRS 9 - Financial instruments – Classification and measurement 

IFRS 9 Financial Instruments completes the first part of the project for the replacement of IAS 39 Financial Instruments: Recognition and measurement. IFRS 9 uses a simple 

approach to determine if a financial asset is measured at amortized cost or fair value. The new approach is based on the manner in which the entity manages its financial 

instruments [its business model] and the contract cash flow typical of financial assets. The standard also requires the adoption of only one method to determine the assets' 

impairment losses. This standards is effective for years starting as of January 1, 2013. The Company has not concluded its evaluation on the effect of adopting this 

interpretation. 

2.6 Investments in subsidiary under joint control – Porto do Pecém 

The balance sheet as of March 31, 2011 and the statement of income for the quarter then ended of the subsidiary under joint control in the pre-operating stage Porto do 

Pecém, are presented below: 

Assets 

Liabilities 

Current 55.528 Current 232.160 Operating expenses (3.164) 

Non-current 244.108 Non-current 1.985.744 Net financial result (12.142) 

Property, plant and equipment 2.386.478 Shareholders' equity 470.320 IRPJ & CSLL 5.204 

Intangible assets 2.110 

Total 2.688.224 

Balance sheet on 03/31/2011 - Summarized 

Total 2.688.224 

F-20 

Statement of income on 03/31/2011 - Summarized 

Net loss for the period 

(10.102)

2.7 

Reclassifications in prior periods 

�� 

�� 

�� 

�� 

For comparison purposes, the following reclassifications were made in the statements of income, individual and consolidated, presented in the quarterly information as of 

March 31, 2010: 

Resubmitted 





�� - 

- 

- 

Cost operation - 

Personnel - 




- 

- 

- 

- 

Cost of service rendered to third-parties - 


- 

Operating expenses - 

Sales expenses - 

- 


- 


- 

Other operating expenses (1.180) 

167 

(19.068) 

167 

Service result (19.068) 

167 

Income from equity interests 175.933 

- 


- 

Financial expenses (2.250) 

- 


- 

Operating income 163.261 

167 

Other revenue 167 

(167) 

Other expenses - 

- 

Other results 


167 

(167) 

163.428 

- 

Income and social contribution taxes - current (239) 

- 

Deferred income and social contribution taxes 9.784 

- 

Net income before non-controlling shareholders' and beneficiaries 

9.545 

- 


172.973 

- 



Parent company 

Reclassifications 

F-21 

- 

- 

- 

- 

Reclassified 

- 

- 

- 

- 

(13.019) 

(4.869) 

(1.013) 

(18.901) 

(18.901) 

175.933 

8.646 

(2.250) 

6.396 

163.428 

- 

163.428 

(239) 

9.784 

9.545 

172.973 

- 

- 

172.973 

Resubmitted 

1.200.408 

(433.273) 

(154.471) 

(587.744) 

(38.210) 

(47.070) 

(66.342) 

(12.819) 

(164.441) 

(752.185) 

(871) 

447.352 

(17.446) 

(65.342) 

(20.718) 

(17.779) 

(121.285) 

326.067 

(590) 

73.617 

(100.555) 

(26.938) 

298.539 

2.303 

(3.197) 

(894) 

297.645 

(93.190) 

(4.028) 

(97.218) 

200.427 

(25.010) 

(2.444) 

172.973 

Consolidated 

Reclassification 

s 

0 

- 

- 

(103) 

103 

- 

- 

(132) 

0 

(0) 

(31) 

(163) 

(163) 

- 

(163) 

- 

- 

176 

0 

(907) 

(731) 

(894) 

0 

- 

- 

- 

(894) 

(2.303) 

3.197 

894 

Reclassified 

1.200.408 

(433.376) 

(154.368) 

(587.744) 

(38.342) 

(47.070) 

(66.342) 

(12.850) 

(164.604) 

(752.348) 

(871) 

447.189 

(17.446) 

(65.166) 

(20.718) 

(18.686) 

(122.016) 

325.173 

(590) 

73.617 

(100.555) 

(26.938) 

297.645 

- 297.645 

- 

(93.190) 

(0) 

(4.028) 

- (97.218) 

(0) 200.427 

- 

(25.010) 

- 

(2.444) 

- 172.973 

-

3 Business combination 

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In September 2008, the Company exchanged the shareholding interest held in Energética Mato Grosso do Sul S.A. - Enersul for sharehodling interest held by Rede Energia 

S.A. in its subsidiaries Lajeado and Investco, and by shareholding interest held by Rede Power do Brasil S.A. in Lajeado and Tocantins. 

After this transaction, Energias do Brasil controls Investco, Lajeado and Tocantins, in compliance with the Company's strategic guideline to grow in the power generation 

segment, guaranteeing the position of controlling shareholder and manager of Investco, company that explores AHE Luís Eduardo Magalhães, with installed capacity of 902.5 

MW. Lajeado holds 73% of the voting capital of Investco. 

In accordance with IFRS 3 / CPC 15, this transaction was recognized at the acquisition method. The acquired entity's cost is due to net assets acquired, including identifiable 

intangible assets, liabilities and contingent liabilities assumed based in their estimated fair value on acquisition date. 

Investco 

Lajeado 

Energia 

Tocantins Total 

Current assets 73.651 

86.173 27.451 187.275 

Non-current assets 17.603 

48.216 20.243 86.062 

Property, plant and equipment 1.920.993 

- 

- 

1.920.993 

Intangible assets 26.994 

987.588 - 

1.014.582 

Investments - 

554.810 131.388 686.198 

Total assets acquired 2.039.241 1.676.787 179.082 3.895.110 

Current liabilities 172.305 

106.762 6.429 285.496 

Non-current liabilities 643.656 

52.060 - 

695.716 

Assumed liabilities 815.961 

158.822 6.429 981.212 

Net assets (liabilities) 

Exclusions 

1.223.280 1.517.965 172.653 2.913.898 

Beneficiaries - (266.798) (266.798) 

Elimination of investments - (554.758) (131.388) (686.146) 

Total exclusions - (821.556) (131.388) (952.944) 

Net assets 1.223.280 696.409 41.265 1.960.954 

Acquired interest 24,35% 53,69% 50,88% 

Net assets acquired 297.859 373.914 20.996 692.769 

Acquisition cost 737.215 

Other acquisition costs 6.547 

Price of preferred shares of Investco (financial instrument) (8.700) 

Total acquisition cost 735.062 

Goodwill 42.293 

Goodwill due to expected future earnings, without defined useful life, subject to annual recovery analysis and having no tax effects. 

4 Periodic tariff review and Tariff readjustment 

First periodic tariff review - Evrecy 

Transmission Concession Agreement nº 20/2008-ANEEL (resulting from the segregation of the transmission activities of Escelsa), executed on November 14, 2008 with CESA 

establishes the date of July 1, 2009 for the First Periodic Tariff Review of the transmission company and review cycle of 4 years. The entire base of assets was revalued in this 

First Periodic Tariff Review, under the terms of Normative Resolution ANEEL 338/2008. 

The First Amendment of Transmission Concession Agreement nº 20/2008-ANEEL, executed on October 13, 2009, formalizes the transfer of the Transmission Concession 

from CESA to Evrecy. 

At the 21st Ordinary Public Meeting of the Executive Board of ANEEL on June 8, 2010, the participants approved the final result of the First Periodic Tariff Review of EVRECY, 

retroactive to July 1, 2009, contained in Technical Note nº 181/2010-SRE/ANEEL. 

The tariff repositioning index was -10.32%, reducing the Allowed Annual Revenue - RAP from R$7,848 to R$7,039 for the tariff year of July 1, 2009 to June 30, 2010. 

The final adjustment installment of Evrecy for the cycle of July/2010 to June/2011, already considering the adjustments of the financial components outside the review as 

mentioned in item 57 of Technical Note 181/2010-SRE/ANEEL, was R$ 294 recorded in current liabilities which is being amortized in 12 installments as of July 2010. 

The factor that contributed most to the reduction of Evrecy's was the recalculation of the average remuneration rate of investment that was reduced by ANEEL from 9.18% p.a. 

to 7.24% p.a. The reduction of the investment average remuneration rate was applied to all transmission companies that underwent a tariff review process in 2010. 

F-22

Periodic tariff review of 2010 - Escelsa 

Tariff readjustment of 2010 - Bandeirante 

5 Cash and cash equivalents 

�� 

�� 

�� 

�� 

At a Public Board Meeting held on August 4, 2010, ANEEL approved the report that authorized the average revision of the tariffs of the company in 7.19% for the period 

beginning August 7, 2010 to August 6, 2011, including all consumer classes. Considering the financial adjustments already included in the Company's tariffs, related to the 

recovery of prior periods, the average tariff readjustment in electric energy bills is 0.21%. 

The main changes introduced: (i) Company of Reference goes from R$209,800 million to R$269,300; (ii) Xe Component of X Factor, goes from 0.00% to 0.95% to be used in 

the tariff readjustment of August/2011 and August/2012 ; and (iii) Net Regulatory Remuneration Basis from R$952,500 to R$1,297,100. 

Periodic Tariff Revisions are foreseen in the Concession Agreement and consider changes in the concessionaire’s cost structure and market, the tariff levels observed in 

similar companies, in the national and international context, and incentives for efficiency and keeping tariffs affordable. 

The tariff revision process comprises two steps. In the first step, called tariff repositioning, tariffs are set at levels covering efficient operating costs for a given level of service 

quality, with a fair and adequate remuneration of prudent investments. The second step is the calculation of the X Factor, which refers to productivity targets for the next tariff 

period. 

The new tariffs charged by the Company already include the effects of the new methods proposed in the Addendum approved by ANEEL at the Public Board Meeting held on 

February 2, 2010. 

ANEEL, in a public meeting of the Board of Officers that took place on October 5, 2010, approved the average annual tariff readjustment of 10.70%, to be applied to the 

Company's tariffs, as from October 23, 2010 to October 22, 2011, with 10.25% relating to the annual economic tariff readjustment and 0.45% referring to the pertinent financial 

components. The average readjustment perceived by consumers is 7.91%. 

Periodic Tariff Revisions are foreseen in the Concession Agreement and consider changes in the concessionaire’s cost structure and market, the tariff levels observed in 

similar companies, in the national and international context, and incentives for efficiency and keeping tariffs affordable. 

The tariff revision process comprises two steps. In the first step, called tariff repositioning, tariffs are set at levels covering efficient operating costs for a given level of service 

quality, with a fair and adequate remuneration of prudent investments. The second step is the calculation of the X Factor, which refers to productivity targets for the next tariff 

period. 

The new tariffs charged by the Company already include the effects of the new methods proposed in the Addendum approved by ANEEL at the Public Board Meeting held on 



3/31/2011 12/31/2010 3/31/2011 12/31/2010 

Cash and banks 16.936 

59.450 

304.095 

265.231 

Interest earning bank deposits - fixed income funds 

257.869 226.362 

711.396 

861.218 

Total 274.805 285.812 

1.015.491 

1.126.449 

Highly liquid short-term financial investments are promptly convertible into a known sum of cash. 

These financial investments refer substantially to bank deposit certificates and fixed income funds, remunerated at rates that range between 98.5% and 104.0% of the 

Interbank Deposit Certificate (CDI). 

The Group's exposure to interest rate risks and a sensitivity analysis of financial assets and liabilities are disclosed in note 33. 

F-23

6 Consumers and concessionaires 

Current - 

Consumers - 

Supply to final consumers - 

Billed supply - 

Residential 104.175 

Industrial 20.594 

Commerce, services and other 40.919 

Rural 11.959 

Public power - 

Federal 4.969 

State 5.616 

Municipal 5.880 

Public lighting 7.393 

Public service 9.749 

Free customers 36.523 

Unbilled supply 251.357 

Debt paid in installments 44.910 

(+) Adjustment to present value 688 

Other credits 28.580 

573.312 

Concessionaires - 

Supply - Conventional 109.768 

Short-term energy 16.370 

Electric power network use charges 8.662 

Other 12.001 

146.801 

Total current 720.113 

Non-current - 

Consumers - 



Commerce, services and other 54 


Municipal 3 

Debt paid in installments 51.798 

(-) Adjustment to present value (12.506) 

45.767 


Electricity supply - 

Short-term energy 13.523 

Piratininga 20.169 

33.692 

Total non-current 79.459 

6.1 Short-term energy 

6.2 Concessionaire– Piratininga 

6.3 Concessionaires – Conventional supply 

6.4 Adjustment to present value 

�� 

�� 

�� 

�� 

Overdue Overdue Balance Balance 

Balances up to longer than Allowance for balance at balance at 

Total 

doubtful 

to become 

overdue 

90 days 90 days accounts 3/31/2011 12/31/2010 

- 

- 

- 

- 

101.783 

28.767 

25.747 

6.844 

- 

571 

1.139 

2.360 

1.253 

933 

- 

- 

27.119 

- 

- 

196.516 

- 

112 

- 

- 

- 

112 

196.628 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

30.955 

21.064 

18.525 

3.396 

- 

120 

451 

3.855 

7.502 

16.474 

108 

- 

33.535 

- 

- 

135.985 

- 

36.468 

- 

- 

- 

36.468 

172.453 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

836 

- 

836 

836 

Consolidated 

- 

- 

- 

- 

236.913 

70.425 

85.191 

22.199 

- 

5.660 

7.206 

12.095 

16.148 

27.156 

36.631 

251.357 

105.564 

688 

28.580 

905.813 

- 

146.348 

16.370 

8.662 

12.001 

183.381 

1.089.194 

- 

- 

- 

6.418 

54 

- 

3 

51.798 

(12.506) 

45.767 

- 

- 

14.359 

20.169 

34.528 

80.295 

Refers mainly to the transactions of sale of energy, realized in the in the sphere of the Electric Energy Trading Chamber - CCEE. 

Part of the values of the assets of the distributor subsidiaries is subject to modification depending on the decision of lawsuits in progress, filed by companies from the sector, 

relating to the interpretation of rules of the market in force. 

The amounts of R$20,169 (R$20,169 on December 31, 2010) in non-current assets and of R$19,335 (R$19,335 in December 31, 2010) in current and non-current liabilities 

(Note 14), refer to sums receivable and payable, respectively, with Companhia Piratininga de Força e Luz - Piratininga, as a result of the partial spin-off of Bandeirante carried 

out on October 1, 2001, pursuant to the terms established in the spin-off protocol. 

There are no disagreements between the parties regarding the balances currently recorded, receivable and payable, which should be settled in a timely manner. 

The balance of Supply of energy includes amounts billed against Ampla Energia e Serviços S.A. - "AMPLA" (previously called Companhia de Eletricidade do Rio de Janeiro - 

CERJ), both past due and falling due, totaling R$ 39,541 on December 31, 2011 (R$39,266 on December 31, 2010), whereas of this sum R$35,923 (R$35,923 on December 

31, 2010) refers to a right obtained by an arbitral award of March 19, 2009 in response to proceedings nº 03/2005 and 04/2006, issued by Câmara FGV de Conciliação e 

Arbitragem. This arbitral award recognized that in the contract of sale of energy made by and between the parties, for the period from November 15, 2003 to August 28, 2006. 

With AMPLA having recognized the effects of the arbitral award, the subsidiary Enertrade decided to maintain the allowance for doubtful accounts corresponding to the amount 

of R$ 35,923, under discussion. 

The adjustment to present value, regulated by CPC 12, was calculated with a basis on the average remuneration of investment rate, applied by ANEEL in the tariff reviews of 

the distributors. This rate is compatible with the nature, term and risks of similar transactions under market conditions. On March 31, 2011, corresponded to 15.07% p.a. 

(15.07% p.a. on March 31, 2010), having a positive impact on the period of R$352 (R$700 positively on March 31, 2010). 

F-24 

- 

- 

- 

- 

(37.939) 

(14.434) 

(16.438) 

(625) 

- 

(44) 

(358) 

(522) 

(1.263) 

7 

- 

- 

(45.626) 

- 

- 

(117.242) 

- 

(36.537) 

- 

- 

- 

(36.537) 

(153.779) 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

(14.359) 

- 

(14.359) 

(14.359) 

- 

- 

- 

- 

198.974 

55.991 

68.753 

21.574 

- 

5.616 

6.848 

11.573 

14.885 

27.163 

36.631 

251.357 

59.938 

688 

28.580 

788.571 

- 

109.811 

16.370 

8.662 

12.001 

146.844 

935.415 

- 

- 

- 

6.418 

54 

- 

3 

51.798 

(12.506) 

45.767 

- 

- 

- 

20.169 

20.169 

65.936 

- 

- 

- 

184.924 

50.261 

62.286 

18.196 

- 

4.901 

6.069 

13.339 

20.471 

26.100 

29.992 

249.377 

50.219 

1.285 

28.578 

745.998 

- 

95.233 

27.646 

8.229 

11.700 

142.808 

888.806 

- 

- 

- 

6.418 

54 

- 

3 

50.544 

(13.455) 

43.564 

- 

- 

- 

20.169 

20.169 

63.733

7 

Accounts receivable 


8 Prepaid expenses 

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�� 

�� 

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The amount of R$22,828 (R$22,627 on December 31, 2010) refers to preferred shares of classes "A", "B" and "C" issued by subsidiary Investco, which, according to Article 8 

of said subsidiary's by-laws, these preferred shares are entitled to the right of receiving a cumulative fixed annual dividend of 3% on their respective interest in capital. Due to 

this characteristic, these shares were classified as receivable financial instruments as they meet the definition of financial assets, since the subsidiary does not have the right to 

avoid the remittance of cash or other financial asset to another entity, as determined in paragraph 19 of CPC 39. 

The estimate of fair value considered the conditions above for the payment of dividends. Annual dividend payment was considered until 2032 (end of the concession) and 

discounted to present value at the rate of 8.70% p.a. 

Consolidated 

The amount of R$18,475 (R$19,500 on December 31, 2010) refers to the renegotiation balance of the agreement for Credit Concession entered into by subsidiary Lajeado 

Energia and Tangará Energia S.A. as of August 31, 2004, approved by ANEEL through Official Letters 467/2000-SFF/ANEEL. 

The amount of R$8,764 (R$7,914 on March 31, 2010) refers to the balance of consolidation and renegotiation of the Credit Concession agreement entered into by subsidiary 

Lajeado Energia and Caiuá Distribuição de Energia S.A., as of December 31, 2006, approved by ANEEL through order nº 181-SFF/ANEEL of January 29, 2007. 


Current 

Current Non-current 

3/31/2011 12/31/2010 3/31/2011 12/31/2010 3/31/2011 12/31/2010 

Insurance premium 23 

31 

3.304 

4.548 

764 

937 

Other 53 

159 

592 

706 

- 

- 

Total 76 

190 

3.896 

5.254 

764 

937 

9 Income and social contribution taxes 


Consolidated 

Current 

Non-current 


3/31/2011 12/31/2010 3/31/2011 12/31/2010 3/31/2011 12/31/2010 3/31/2011 12/31/2010 

Assets - to offset - 

- 

- 

- 

- 

- 

- 

Income and social contribution taxes 56.235 

58.553 

- 

- 

214.152 330.787 

6.597 6.247 

ICMS 33 

5 

- 

- 

33.055 

35.241 

30.269 29.679 

PIS and COFINS 299 

235 

- 

- 

42.209 

50.145 

4 

3 

PIS AND COFINS - COSIT 27 - 

- 

- 

- 

92.636 

91.481 

- 

- 

Withholding tax on financial investments 1.405 

2.004 

- 

- 

8.436 

2.658 

- 

- 

Income tax withheld in interest on equity - 

25.138 

- 

- 

- 

25.138 

- 

- 

Other 32 

31 

- 

- 

7.619 

4.864 

4 

4 

Total 58.004 

85.966 

- 

- 

398.107 540.314 

36.874 35.933 

- 

- 

- 

- 

- 

- 

Payable - Liabilities - 

- 

- 

- 

- 

- 

- 

- 

Income and social contribution taxes - 

69 

- 

- 

95.877 207.222 

- 

- 

ICMS on rate differential 5 

5 

- 

- 

511 

40 

- 

- 

ICMS - 

- 

- 

- 

163.176 174.371 

- 

- 

PIS and COFINS - 

14.761 

- 

- 

71.505 

89.336 

- 

- 

ISS (5) 

- 

- 

- 

1.528 

840 

- 

- 

PIS, COFINS and Social Contribution - On services 

rendered by third-parties 

31 

- 

- 

- 

1.373 

205 

- 

- 

Income tax withheld at source in third - party services 

58 

- 

- 

- 

560 

73 

- 

- 

Income tax withheld in interest on equity - 

14.576 

- 

- 

- 

47.160 

- 

- 

Tax installment payment - Law No. 11941/09 21.949 

21.530 

32.924 

32.295 

73.263 

72.285 109.897 108.425 

Tax installment payment - PAEX - 

- 

- 

- 

5.727 

6.127 

28.626 29.428 

Other 878 

718 

- 

- 

7.324 

12.232 

- 

- 

Total 22.916 

51.659 

32.924 

32.295 420.844 609.891 138.523 137.853 

9.1 Taxation of operations in the Electric Energy Trading Chamber - CCEE 

As a result of the terms of article 32 of Provisional Measure 66, of August 29, 2002, converted into Law 10,637, of December 30, 2002 and of Normative Instruction 199, of 

September 12, 2002, the electric energy distributor Escelsa, as an agent member of the PowerTrading Chamber - CCEE, exercised the option for the special taxation regime 

of PIS and of COFINS on income earned in operations carried out within the sphere of that Institution. 

The main effects refer to the calculation basis levied on the net positive results and on the continuity of the application of the rate of 0.65% and 3% for PIS and COFINS, 

respectively. 

9.2 IRRF - interest on own capital 

Refers to the Withholding Tax, at the rates of 15% and 25%, levied on the amounts proposed to the shareholders as Interest on Shareholders' Equity, excepting for the 

shareholders provenly immune or exempt, in conformity with the legislation. 

F-25

9.3 Installment payment of taxes - Law 11941/09 and PAEX 

�� 

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In 2009, the adhesion to the reduction and tax installment payment program was formalized with the Federal Revenue Service - SRF, under Law 11941/09, such as of the 

subsidiaries Bandeirante, Escelsa, Energest and Enertrade, which generated a reduction of contingent liabilities (Note 26), relative to tax proceedings within the federal sphere. 

Exceptional Installment Payment - PAEX - In September 2006, subsidiary Lajeado Energia joined the Exceptional Installment Payment (PAEX) established by Provisional 

Act 303, of June 29, 2006, which addresses the payment in installments of legal entities' debts with the Federal Revenue Service (SRF), the National Treasury Attorney 

General (PGFN) and the National Institute of Social Security (INSS), in 130 monthly and successive installments (SRF/PGFN), adjusted to inflation at the long-term interest rate 

(TJLP) for debts maturing until February 28, 2003, and in 120 monthly and successive installments (IRPJ, CSLL, COFINS, PIS, CPMF, INSS and fine), adjusted to inflation at 

the SELIC rate for debts maturing from March 1, 2003 to December 31, 2005, recognized or not, enrolled or not in the Government or INSS Debt Register, even if they are 

challenged in a lawsuit proposed by the taxpayer or under the tax foreclosure stage, or under a previous installment plan, not fully paid, even if cancelled for nonpayment. 

The consolidated debt to be paid in 130 monthly installments, in accordance with the provisions of Article 1 of Provisional Act 303 of June 29, 2006 is being paid since 

September 2006. The debt balance bears monthly interest equivalent to TJLP variation. 

In 2009, PAEX formally joined the program for the reduction and installment payment of taxes according to Law 11,941/09 of the Federal Revenue Service. 

The balances on March 31, 2011 and December 31, 2010 are comprised as follows: 


3/31/2011 12/31/2010 3/31/2011 12/31/2010 

Liabilities 


- 

67.228 

67.443 

PIS/COFINS 50.127 

49.146 

116.876 

115.735 

INSS - 

- 

26.458 

26.006 

Other 4.746 

4.679 

6.951 

7.081 

Total 54.873 

53.825 

217.513 

216.265 

Out of the total amount of the adhesion to the tax payment in installment under Law No. 11941/09, part will be amortized by offsetting against funds from escrow deposits in the 

amount of R$74,211 (R$73,332 as of December 31, 2010) and part against tax credits arising from tax loss carryforwards in the amount of R$18,402 (R$44,309 as of 

December 31, 2010), and the remainder will be settled in 30 installments. 

F-26

10 Deferred income and social contribution taxes 

10.1 Assets 

Tax losses 

Negative social contribution basis 

�� 

�� 

�� 

�� 

The tax credits detailed below, calculated on tax losses carry-forward, negative social contribution basis and other amounts constituting temporary differences used for 

reducing the future tax burden, were recognized based on historical taxable profits and on budgets for generating taxable profits for the next periods at the subsidiaries 

Bandeirante, Escelsa, Enertrade, Energest, and Lajeado Energia, within a maximum period of 10 years. 

Temporary differences 

MTM DENERGE Shares 

7.394 

1.849 

Total temporary differences 1.849 

Total deferred charges 9.043 

Tax losses 454.334 

113.583 



542.193 

113.583 

Provision for allowance for doubtful accounts 

151.752 

37.938 


99.173 

24.793 

Provision for tax, civil and labor risks 

142.577 

35.645 

Provision for SWAP results 

10.977 

2.744 

Provision for inventory losses 

4.312 

1.078 

Provision for bonus - employees 

(38) 

(10) 


1.849 

Total temporary differences 104.036 

Post-employment benefits - PSAP 

Goodwill absorbed 

Nature of credits 


Temporary differences - RTT 

Consumers - adjustment to present value 

Financial charges - Recouponing 

Loans and financing in foreign currency - MTM 

Buildings, civil works and improvements - Intangible assets 

Goodwill amortization/depreciation - CPC 15 

Environmental licenses - CPC 25 

Use of public property - CPC 25 

Disassemblies - CPC 25 

Financial instruments - CPC 39 

Employee benefits - CPC 33 

Borrowing costs - CPC 20 

Total temporary differences - RTT 

Total deferred assets 

Calculation basis 

28.777 

28.777 


64.401 

720.631 

11.817 

1.756 

6 

8 

72.131 

2.170 

233.243 

811 

183.536 

48.511 

49.673 

12/31/2010 

IRPJ CSLL Total Total 

7.194 

0,00 7.194 

7.194 

0,00 2.590 

2.590 

2.590 

7.194 

2.590 

665 

665 

3.255 

9.784 

2.514 

2.514 

12.298 

9.784 

0,00 

- 

9.784 

Consolidated 

3/31/2011 

12/31/2010 


Based on the technical studies of the projections of taxable income, computed in accordance with the provisions of CVM Resolution 273, of August 20, 1998, the recovery of 

non-current tax credits is estimated in the following years: 

16.100 

180.158 

2.954 

439 

2 

2 

18.033 

543 

58.311 

203 

45.884 

12.128 

12.418 

150.916 

564.793 

2011 2012 2013 2014 2015 2016 to 2018 2019 to 2020 

125.528 

197.567 

154.064 

67.668 102.024 

34.609 

94.563 

48.798 

48.798 

13.658 

8.925 

12.830 

988 

389 

(3) 

665 

37.452 

5.796 

64.856 

1.063 

158 

1 

1 

6.492 

195 

20.992 

72 

16.517 

4.366 

4.471 

54.329 

211.231 

Non-current 

liabilities 

776.023 

The Managements of the Company and its subsidiaries prepared a projection of future taxable income on December 31, 2010, also considering its discounts at present value, 

demonstrating the capacity to realize these tax credits in the periods indicated and, for the subsidiaries Bandeirante, Escelsa and Enerpeixe, as required by CVM Instruction nº 

371, of June 27, 2002, aforesaid studies were approved by the respective Boards of Directors on February 14, 2011 and February 16, 2011 for the subsidiaries Bandeirante, 

Escelsa and Enerpeixe on February 16, 2011 for the subsidiary Investco. These estimates are periodically reviewed in order to allow the Company to record in its financial 

statements an eventual alteration in the budget for recovery of these credits on a timely basis. Consequently, the estimates may not be realized in the future, in view of the 

uncertainties inherent in these forecasts. 

Under the tax legislation in force, the tax loss and the negative basis of social contribution can be offset with future income, up to the limit of 30% of the taxable income, and are 

not subject to a statutory limitation period. 

F-27 


3/31/2011 

113.583 

48.798 

162.381 

51.596 

33.718 

48.474 

3.732 

1.467 

(13) 

2.514 

141.488 

21.896 

245.014 

4.017 

597 

3 

3 

24.525 

738 

79.303 

275 

62.401 

16.494 

16.889 

205.244 

776.023 

121.444 

54.186 

175.630 

49.303 

32.885 

47.161 

4.512 

1.208 

(13) 

135.056 

22.277 

249.137 

4.139 

756 

7 

12 

22.764 

394 

68.897 

66.228 

16.495 

16.889 

196.581 

778.680

10.1.1 Forecasted of future taxable income 

10.1.2 

10.1.3 The goodwill fiscal credit derives from: 

10.2 Liabilities 



Total temporary differences 

Total liabilities - deferred 

�� 

�� 

�� 

�� 

The forecasted of future taxable income indicates that the subsidiaries Bandeirante and Escelsa have a calculation base sufficient to recover the full balance of tax credits in 

the period as demonstrated. However, the credits up to December 31, 2010 related to PSAP and goodwill, mentioned in Explanatory Notes 10.1.2 and 10.1.3, will be realized 

financially up to 2017 and 2032, respectively, according to the amortization rules of the amounts related to them. 

The taxable credit arising from the Provision for the Pension Plan Deficit - PSAP, refers to the portion of liabilities related to benefits exceeding assets relative to the defined 

benefit pension plans at the Bandeirante subsidiary, the provision for which was effected on December 31, 2001 with a counterparty in Shareholders’ Equity, deductible on the 

occasion of the monthly payments, expected to be terminated in 2017. 

a) during 2002, at subsidiary Bandeirante, as a result of the incorporation of the portion spun off from the former parent company Enerpaulo - Energia Paulista Ltda., 

represented by the goodwill paid by Enerpaulo on the acquisition of shares issued by Bandeirante. 

b) at the subsidiary Escelsa, from the merger that occurred in April 2005, of the spun-off portion of the parent company Energias do Brasil, represented by the goodwill paid by 

the merged companies EDP 2000 Participações Ltda. and EDP Investimentos Ltda. upon the acquisition of shares issued by IVEN, which was parent company of Escelsa at 

the time; and 

c) at the subsidiary Lajeado, from the takeover of the subsidiaries EDP Lajeado and Tocantins, which occurred in November 2009, represented by the goodwill paid by the 

Company. 

The amounts were accounted for according to CVM Instructions 319/99 and 349/99, and in accordance with ANEEL’s instructions, and amortized according to the curve 

between the expectation of future results and the term of the companies’ concession. This translates into a future average annual tax credit realization of R$6,034 to subsidiary 

Bandeirante up to 2027, R$1,974 to subsidiary Escelsa up to 2025, and R$ 5,316 to subsidiary Lajeado up to 2032. 





12/31/2010 

Total 

1.122 

1.122 

1.122 

Consolidated 

3/31/2011 

12/31/2010 


Temporary differences 0,00 0,00 

MTM DENERGE Shares 0,00 1.122 

Total temporary differences 0,00 - 

- 

- 

1.122 

Temporary differences - RTT 0,00 0,00 0,00 - 

0,00 

Goodwill - CPC 15 

586.117 

146.529 

52.751 199.280 199.280 


213 

53 

20 

73 

79 


127.427 

31.857 

11.468 

43.325 

43.747 

Disassemblies - CPC 25 

2.520 

630 

226 

856 

0,00 


140.808 

35.202 

12.673 

47.875 

44.775 

Total temporary differences - RTT 0,00 214.272 

77.138 291.409 287.881 

Total liabilities - deferred 214.272 

77.138 291.409 289.003 

The change in deferred Income and social contribution taxes for the period was recorded as a credit to shareholders' equity in the amount of R$3,399 and as a charge to net 

income for the period, in the amount of R$7,137, respectively. 

F-28

11 Related parties 

�� 

�� 

�� 

�� 

Agreement's purpose 

Related parties 

Counterpart Transaction date Validity period 

3/31/2011 12/31/2010 3/31/2011 12/31/2010 2011 2010 

Sharing of expenses with 

personnel, material and outsourced 

services, approved by ANEEL 

through Order 2194/97 and 

Regulatory Resolutions 334/08 and 

423/10. 

Debt assumption agreement on the 

sale of assets of the subsidiary 

Tocantins Energia to Eletronorte. 

Loan agreement - 100% of CDI 

Selling of assets 

Bandeirante 10/19/2007 10/19/2007 to 12/07/2011 

1.094 1 378 177 

Energest 10/19/2007 10/19/2007 to 12/07/2011 

244 

Enertrade 10/19/2007 10/19/2007 to 12/07/2011 

163 12 

Enercouto 10/19/2007 10/19/2007 to 12/07/2011 

1 

Pantanal 10/19/2007 10/19/2007 to 12/07/2011 

106 12 

Investco 10/19/2007 10/19/2007 to 12/07/2011 

85 

Costa Rica 10/19/2007 10/19/2007 to 12/07/2011 

3 

Lajeado Energia 10/19/2007 10/19/2007 to 12/07/2011 

129 

Ipueiras 10/19/2007 10/19/2007 to 12/07/2011 

1 

Santa Fé 10/19/2007 10/19/2007 to 12/07/2011 

52 

Evrecy 10/19/2007 10/19/2007 to 12/07/2011 

12 

Escelsa 10/19/2007 10/19/2007 to 12/07/2011 

707 


(9) 

CESA 5/15/2003 05/15/2003 to 12/29/2011 

92.356 95.676 1.525 1.048 

Energest 12/29/2006 12/29/2006 to 12/29/2011 

2 515 

Enertrade 11/9/2009 11/09/2009 to 11/09/2010 

20 84 

Investco 12/10/2009 12/10/2009 to 11/08/2012 

5.076 4.895 180 60 

Terra Verde 

Bioenergia 

1/1/2010 01/01/2010 to 12/25/2012 

6.677 5.637 194 

Escelsapar 6/27/2005 06/27/2005 to 11/30/2012 

3.854 3.713 123 72 

Ipueiras 8/10/2009 08/10/2009 to 04/08/2011 

54 51 2 

Terra Verde 

Bioenergia 

1/15/2010 01/15/2010 to 01/15/2014 

6.647 6.647 

Total 

117.261 116.622 378 189 2.056 1.770 

11.1 Management Remuneration 

11.1.1 Compensation policy or practice of the Board of Directors, Board of Executive Officers, Fiscal Council and Committees 

(i) - Proportion of each item in total compensation, referring to the 3-month period ended March 31, 2011 

Board of Directors and Committees 

Fixed Compensation: 100% 

Board of Officers 



Not applicable 


F-29 

Assets 

Liabilities 

Income (expenses) inm 3month 

periods ended on 

March 31

11.1.2 

11.1.3 

�� 

�� 

�� 

�� 

Compensation of the Board of Directors, Fiscal Council and Board of Executive Officers payable by the Company referring to the 3-month period ended March 31, 

2011 

2011 


and Committees 

Statutory Board Total 

Number of members 8 (*) 4 (**) 12 

Fixed remuneration (in Reais) 162.000 537.134 699.134 

Salary or direct compensation (i) 162.000 453.036 615.036 

Direct and indirect benefits (ii) n/a 84.098 84.098 

Remuneration for participation in Committees n/a n/a n/a 

Other n/a n/a n/a 

Variable Compensation (in Reais) - - - 

Bonus n/a n/a n/a 

Profit sharing n/a n/a n/a 

Remuneration for partipation in meetings n/a n/a n/a 

Retribution n/a n/a n/a 


Post-employment benefits n/a n/a n/a 

Benefits derived from nomination cessation of the performance of the job n/a n/a n/a 

Share based remuneration n/a n/a n/a 

Total amount of the remuneration, by body 

( n/a ) = Not applicable 

162.000 537.134 699.134 

(*) Out of the 8 members of the Board of Directors, (7 permanent members and 1 open position), only 3 receive a compensation. 

period from April 2010 and March 2011, as approved in the Ordinary General Meeting held on April 09, 2010. 

The annual and overall remuneration of the members of the Board of Directors is up to R$860 for the 

(ii) The amount of direct and indirect benefits is composed by expenditures on private pension plans, healthcare, and estimated traveling, fuel, car, housing, etc. 

Board of 

Directors 

Statutory Board The Fiscal Council 

Number of members 8 4 - 

Amount of the highest individual remuneration (in R$) 72.000 198.000 - 

Amount of the lowest individual remuneration (in R$) 36.000 36.000 - 

Average amount of individual remuneration (in R$) 54.000 113.259 - 

12 Pledges and restricted deposits 


Current Non-current Current 

Non-current 

Note 3/31/2011 12/31/2010 3/31/2011 12/31/2010 3/31/2011 12/31/2010 3/31/2011 12/31/2010 

Judicial deposits 26 - 

- 

8.760 

8.693 

35 

35 228.922 230.337 

Pledges and restricted deposits 33.2 222 

222 

- 

- 

51.519 

62.863 10.859 9.332 

Total 222 

222 

8.760 

8.693 

51.554 

62.898 239.781 239.669 

13 Provision for capital increases advances 


Consolidated 

Assets 

Assets 

Non-current 

Non-current 

3/31/2011 12/31/2010 3/31/2011 12/31/2010 

Enercouto 500 

500 

- 

- 

Ipueiras 47 

17 

- 

- 

Terra Verde 3.100 

3.100 

- 

- 

EDP Renováveis 458 

458 

458 

458 

Total 4.105 

4.075 

458 

458 


(**) Of the four members of the Board of Officers, four are remunerated. The annual and overall remuneration of the Board of Officers is up to R$3,000 for the period from April 2010 and March 2011, as approved in the Ordinary General 

Meeting held on April 09, 2010. 

(i) Including social charges 

Average Compensation of the Board of Directors, Board of Executive Officers and Fiscal Council in the 3-month period ended March 31, 2011 

2011 


The balance of the pledges and restricted deposits' account refer basically to a portion of short-term investments of Enerpeixe, R$44,419 (R$45,575 on December 31, 2010), 

maintained in a reserve account in compliance with the financing agreements entered into on May 21, 2004 with BNDES and a bank consortium, recognized as part of the 

agreements' guarantees, as specified in item (iii) of note 21.3, and the short-term power transactions in CCEE. 

The amount of R$228,922 referring to consolidated escrow deposits is related to the following notes 9.3, 26.1.1, 26.2, 26.3. 

F-30

14 Other credits - Assets and Other accounts payable - Liabilities 

Other credits - Assets 

- 

Advances to employees 

- 

Advances to suppliers 

- 

Credits receivable - customers 

- 

Tariff modicity - low income 14.1 - 

Expenditure to refund 

45 

Energy Efficiency Program 

- 

Assets for sale 

- 

Services in progress 14.2 3 

Services rendered to third parties 

62 

Deactivations and disposals in progress 

8 

Infrastructure sharing 

- 

Derivative financial instruments 

- 

Advance - UTE Resende e Norte Capixaba 

- 

Other 14.3 1.295 

Total 1.413 

Other - Liabilities 

- 

Advances received - disposal of assets and rights 

- 

Public lighting contribution 

- 

Amounts payable to Piratininga 

- 

Sundry creditors - consumers 

- 

Sundry creditors - concessionaires 

- 

Payroll 

201 

Tariff modicity - low income 

- 

ICMS credit assignments 

- 

Interest on compulsory loan 

- 

Third party collection to be transferred 

- 

Amounts payable - Cable TV and Telephony 

- 

Tariff restitution - COSIT 27 

- 

Other 

4.187 

Total 4.388 

14.1 Tariff modicity – low income 

14.2 

�� 

�� 

�� 

�� 


Consolidated 


Current 

Non-current 

Note 3/31/2011 12/31/2010 3/31/2011 12/31/2010 3/31/2011 12/31/2010 3/31/2011 12/31/2010 

- 

15 

- 

- 

- 

42 

- 

- 

3 

62 

8 

- 

- 

- 

1.382 

1.512 

- 

- 

- 

- 

- 

- 

422 

- 

- 

- 

- 

- 

- 

3.970 

4.392 

Law 10,438, of April 26, 2002, as amended by Law 12,212, of January 20, 2010, provides on the Electric Power Social Tariff for low income consumers, which consists of tarif 

discounts on the residential tariff of the parent company Bandeirante Company. 

In compliance with Notification 1,091, of November 18, 2005, of the São Paulo State Sanitation and Power Regulatory Agency (ARSESP), through which the Regulatory 

Agency determined the review of the criteria for the register of Low income customers, the Company recorded, in 2008, the amount of R$47,640 referring to amounts to be 

returned to consumers. 

Considering that the legislation and regulation of this matter provides for the refunding of these amounts through economic subsidy, at the same time an equal amount was 

recorded in receivables, both as a contra entry to operating income. 

The total amount returned to consumers up to March 31, 2011 is R$27,397 (R$27,277 up to December 31, 2010). 

For inactive customers, measures are being taken to locate them and make the reimbursement. 

The balance on March 31, 2011, of the subsidiary Escelsa, in the amount of R$ 12,206, corresponds to estimates for the periods from March to April 2010, August to 

December 2010. 

Services in progress 

Refer to cost of services rendered by subsidiaries to third parties and related parties, including personnel, material and service expenses, directly related to the concession and 

that are calculated and recorded at the orders in progress method. 

14.3 Other credits - non-current assets 

Refer to amounts receivable for the exchange of Enersul shares with Investco shares which previously belonged to Grupo Rede Energia S.A., in the amount of R$8,637 

(R$7,591 on December 31, 2010). 

F-31 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

7.158 

9.647 

16.805 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

42 

42 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

7.158 

8.601 

15.759 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

47 

47 

- 

491 

1.259 

167 

43.745 

11.115 

4.320 

- 

85.363 

7.841 

13.231 

249 

302 

- 

6.356 

174.439 

- 

11.004 

15.080 

382 

12.962 

4.161 

2.848 

15.080 

1.687 

358 

3.732 

3.075 

7.892 

10.264 

88.525 

- 

766 

844 

167 

43.872 

11.080 

420 

- 

79.279 

8.948 

19.596 

1.126 

400 

- 

6.063 

172.561 

- 

11.004 

13.593 

382 

13.532 

4.161 

4.743 

15.200 

1.267 

358 

3.811 

2.985 

56.878 

9.496 

137.410 

- 

- 

- 

- 

- 

- 

768 

15 

- 

10.016 

- 

- 

- 

7.158 

14.256 

32.213 

- 

- 

- 

18.953 

- 

- 

- 

- 

- 

- 

- 

- 

- 

2.648 

21.601 

- 

- 

- 

- 

- 

- 

857 

15 

- 

11.149 

- 

- 

- 

7.158 

13.200 

32.379 

- 

- 

- 

18.953 

- 

- 

- 

- 

- 

- 

- 

- 

- 

2.819 

21.772

15 Investments 

15.1 Movement of investments in the period: 


Balances on 

12/31/2010 

�� 

�� 

�� 

�� 

Additions/ 

Mergers 

Investments - 

Bandeirante 820.272 

- 

Escelsa 810.083 

- 

Lajeado 646.373 

- 

Enercouto 4.744 

- 

Enerpeixe 721.530 

- 

Energest 456.273 

- 

Enertrade 44.467 

- 

Ipueiras - 

- 

Porto do Pecém (Note 2.6) 236.125 

3.627 

EDP Renováveis 25.754 

- 

Omega 104 

- 

Other 5.320 

- 

Total 3.771.045 

3.627 

Privision for unsecured liability 

Escelsapar 785 

Ipueiras 1.267 

Terra Verde 17.732 

Total 19.784 

- 

- 

- 

- 

Equity 

accounting 

- 

95.450 

47.406 

7.641 

(65) 

20.197 

27.973 

10.859 

- 

(5.051) 

(2.370) 

(3) 

- 

202.037 

171 

(1.656) 

10.124 

8.639 

Equity valuation 

adjustment 

- 

- 

- 

- 

- 

- 

- 

- 

- 

458 

- 

- 

- 

458 

- 

- 

- 

- 

Provision for losses 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

(10.506) 

(10.506) 

Transfer for 

unsecured 

liability 

- 

- 

- 

- 

- 

- 

- 

- 

389 

- 

- 

- 

- 

389 

- 

389 

- 

389 

Balances on 

03/31/2011 

- 

915.722 

857.489 

654.014 

4.679 

741.728 

484.246 

55.326 

389 

235.159 

23.384 

101 

5.320 

3.977.557 

956 

- 

17.350 

18.306 

% Direct interest 

3/31/2011 12/31/2010 

The amount of R$5,320 recorded as Other refer to investment property assets. 

Escelsapar 

Escelsapar has a provision for unsecured liability in the amount of R$ 956 (R$ 785 on December 31, 2010). 

Terra Verde 

Terra Verde Bioenergia has provision for unsecured liability in the amount of R$15,009 (R$4,885 on December 31, 2010) and at the Company, a provision for investment 

losses was recorded in the amount of R$2,340 (R$12,847 on December 31, 2010). 

At the Extraordinary General Meeting of Terra Verde Bioenergia Participações S.A., held on September 14, 2010, the Company communicated its interest in definitely 

discontinuing the implementation of the Terra Verde Project, and for this reason it presented to the meeting a proposal for dissolution of the company, but Investimento Verde, 

another shareholder, did not accept the proposal, and the quorum for the decision would depend on the favorable vote of that shareholder. In view of the mentioned fact, on 

September 20, 2010, the Company filed a lawsuit for company dissolution, Lawsuit No. 5830020101846178 being processed at the 3rd Civil Court of São Paulo. As of March 

31, 2011, subsidiary Terra Verde set up a provision for asset impairments in the amount of R$10,506, which took into account the total value of the sugarcane plantation and 

the fixed assets. Due to the provision for asset impairment, the Company was able to reverse the allowance for investment losses by the same amount, and the amount of R$ 

2,340 was left to face the possible expenses on dissolution of the company. 

Ipueiras 

Ipueiras has provision for unsecured liability in the amount of R$ 1,267 on December 31, 2010. 

Balances on 

12/31/2010 

Write-offs 

Consolidated 

Equity 

accounting 


Balances on 

03/31/2011 

Energias do Brasil 

0,00 

EDP Renováveis 

25.754 

0,00 (2.370) 

23.384 

Other 

5.320 

- 

- 

5.320 


0,00 

0,00 

- 

- 

- 

- 

0,00 

0,00 

Other 

55 

- 

- 

55 

Omega 

0,00 

0,00 - 

- 

0,00 

0,00 

Other 

520 

- 

- 

520 

0,00 0,00 

Other investments 0,00 - 

- 

0,00 

Enercouto 

1.271 

- 

- 

1.271 

Bandeirante 

3.055 

(1) 

- 

3.054 

Escelsa 

1.296 

(1) 

- 

1.295 

0,00 

Total 37.271 

(2) 

(2.370) 

34.899 

F-32 

- 

100 

100 

56 

100 

60 

100 

100 

100 

50 

45 

100 

- 

100 

100 

92 

- 

100 

100 

56 

100 

60 

100 

100 

100 

50 

45 

100 

- 

100 

100 

92

15.2 Direct interest on investments 

16 

Company 

3/31/2011 12/31/2010 

Common / 

Quotas 

Energias do Brasil - 

Bandeirante 39.091.735 

EDP Lajeado (i) - 

Enercouto 1 

Energest 1.000.572 

Enernova - 



Escelsa 5.876 

Escelsapar 10 

Ipueiras 14.722 


Porto do Pécem 99.856 

Terra Verde (ii) - 

EDP Renováveis 50.281 

�� 

�� 

�� 

�� 

Common / 

Quotas 

Paid-up capital 

stock 

0,00 0,00 - 

39.091.735 

100 

100 

0,00 0,00 - 

1 

100 

100 

1.000.572 

100 

100 

0,00 0,00 - 

465.165 

60 

60 

26.217 

100 

100 

5.876 

100 

100 

10 

100 

100 

14.722 

100 

100 

113.690 

56 

100 

99.856 

50 

50 

0,00 92 

92 

50.281 

45 

45 

(i) The subsidiaries EDP Lajeado and Tocantins were merged to Lajeado on November 30, 2009. 

(ii) The total is 100 shares. 

Indemnifiable financial assets 


Total 

Shares / Quotas owned by the 

Company (In thousand) 

Movements during the period are demonstrated as follows: 

Voting capital Paid-up capital stock Voting capital 3/31/2011 12/31/2010 3/31/2011 3/31/2010 

0,00 - 

100 

100 

0,00 - 

100 

100 

100 

100 

0,00 - 

60 

60 

100 

100 

100 

100 

100 

100 

100 

100 

56 

100 

50 

50 

92 

92 

45 

45 

Net amount at Transfers Write-offs Reclassification 

Net amount 

at 

12/31/2010 3/31/2011 

398.147 

398.147 

28.474 

28.474 

% Company's ownership interest 

Shareholders’ equity of the 

3/31/2011 12/31/2010 

Subsidiaries' net income 

subsidiaries 

(3.386) 

(3.386) 

(5.920) 

(5.920) 

417.315 

417.315 

0,00 0,00 0,00 0,00 

915.722 820.271 95.451 78.048 

0,00 0,00 0,00 0,00 

4.680 

4.745 

(65) 

(10) 

484.246 456.272 27.974 21.779 

0,00 0,00 0,00 825 

1.236.211 1.202.549 33.662 23.789 

55.325 

44.466 10.859 9.586 

857.489 810.083 47.406 59.575 

(956) 

(785) (171) 

(77) 

388 

427 

(39) 

(15) 

1.541.203 1.522.223 18.980 23.975 

235.160 236.125 (5.051) (15.755) 

(16.316) 

(5.167) (11.149) (1.290) 

51.967 

65.398 (5.265) 1.311 

Direct subsidiaries Bandeirante, Escelsa and indirect subsidiary Evrecy have the balance receivable of R$417,315 (R$398,147 on December 31, 2010) from the Concession 

Grantor due to the unconditional right of receiving cash at the end of concession, as indemnity for investments made and not recovered in the rendering of concession 

services. These financial assets reflect the remaining balance of the intangible asset not amortizable after the end of the concession period, and are calculated based on the 

cost of assets in the concession service that are reversible at the end of the concession period. This financial asset was recorded as contra entry to non-current assets, under 

intangible assets. 

F-33

17 Property, plant and equipment 

Average 

depreciation 

rate % 

�� 

�� 

�� 

�� 

Historical cost 


Consolidated 

3/31/2011 12/31/2010 3/31/2011 

12/31/2010 

Accumulated 

depreciation 

Net amount Net amount 

Average 

depreciation 

rate % 

Buildings, civil works and improvements 

Generation - 

Land - 

- 

- 

- 

- 

- 

Reservoirs, dams and water mains 

- 

- 

- 

- 

2,34 

Buildings, civil works and improvements - tangible 

- 

- 

- 

- 

3,49 

Machinery and equipment - 

- 

- 

- 

- 

4,88 

Vehicles - 

- 

- 

- 

- 

20,00 

Furniture and fixtures - 

- 

- 

- 

- 

10,00 

Other - 

- 

- 

- 

- 

- 

- 

- 

- 

- 


Land - 

- 

- 

- 

- 

- 

Buildings, civil works and 

improvements - tangible 

- 

- 

- 

- 

- 

4,00 


- 

- 

- 

- 

3,45 

- 

- 

- 

- 

- 

Management - 

- 

- 

- 

- 

Land - 

- 

- 

- 

- 

- 

Buildings, civil works and 

improvements - tangible 

10,00 

Machinery and equipment 15,47 

Vehicles 20,00 

Furniture and fixtures 10,00 

Activities not linked to concession 

Land - 


7 

968 

816 

1.574 

3.365 

Total buildings, civil works and improvements 3.365 

Construction in progress 

- 

Distribution - 

- 

Generation - 

- 


- 

Management - 

548 

Total construction in progress 548 

Total property, plant and equipment 3.913 

- 

- 

- 

- 

(3) 

(533) 

(381) 

(896) 

(1.813) 

- 

- 

- 

- 

(1.813) 

- 

- 

- 

- 

- 

- 

(1.813) 

4 

435 

435 

678 

1.552 

- 

- 

- 

- 

1.552 

- 

- 

- 

- 

548 

548 

2.100 

Movements in property, plant and equipment during the period are demonstrated as follows: 

Buildings, civil works and improvements - 

Buildings, civil works and improvements - tangible 5 

Machinery and equipment 450 

Vehicles 467 

Furniture and fixtures 711 

Total buildings, civil works and improvements 1.633 

Total construction in progress 

261 

Total property, plant and equipment 1.894 

5 

450 

467 

711 

1.633 

- 

- 

- 

- 

1.633 

- 

- 

- 

- 

261 

261 

1.894 

4,75 

10,00 

20,00 

8,88 

- 

- 

- 

10,00 

- 

- 


Entries Depreciation Write-offs 

12/31/2010 3/31/2011 

- 

- 

- 

- 

- 

- 

286 

286 


- 

(1) 

(15) 

(31) 

(33) 

(80) 

- 

(80) 

- 

- 

- 

(1) 

- 

(1) 

1 

- 

- 

- 

- 

- 

- 

- 

4 

435 

435 

678 

1.552 

548 

2.100 


164.614 

1.976.963 

776.664 

1.676.597 

3.927 

2.175 

- 

4.600.940 

- 

1 

95 

48.120 

48.216 

- 

101 

162 

4.006 

2.770 

3.182 

10.221 

- 

273 

370 

643 

4.660.020 

1 

1.419.926 

3 

874 

1.420.804 

6.080.824 

Accumulated 

depreciation 

- 

(259.170) 

(148.816) 

(309.436) 

(2.375) 

418 

- 

(719.379) 

- 

- 

(46) 

(11.831) 

(11.877) 

- 

- 

(30) 

(1.736) 

(999) 

(1.608) 

(4.373) 

- 

- 

(207) 

(207) 

(735.836) 

- 

(7.800) 

- 

- 

(7.800) 

(743.636) 


164.614 

1.717.793 

627.848 

1.367.161 

1.552 

2.593 

- 

3.881.561 

- 

1 

49 

36.289 

36.339 

- 

101 

132 

2.270 

1.771 

1.574 

5.848 

- 

273 

163 

436 

3.924.184 

1 

1.412.126 

3 

874 

1.413.004 

5.337.188 

164.614 

1.725.103 

632.093 

1.380.057 

1.691 

2.495 

- 

3.906.053 

- 

1 

51 

36.906 

36.958 

- 

101 

134 

2.341 

1.893 

1.637 

6.106 

- 

273 

173 

446 

3.949.563 

- 

1.353.548 

3 

473 

1.354.024 

5.303.587 

Property, plant and equipment in progress refer basically to investments in UTE Porto do Pecém, in the amount of R$1,192.811 (R$1,127,544 on December 31, 2010) and the 

repowering of PCHs Mascarenhas, Rio Bonito and Suiça, which total is R$115,843 (R$157,787 on December 31, 2010). 

The Transmission caption balance refer to property, plant and equipment items in service of the power generating company Costa Rica. 

The amount of depreciation of construction in progress refers to the provision for asset impairment at subsidiary Terra Verde, recorded in the first quarter of 2011 (Note 15.1) 

F-34

Buildings, civil works and improvements 

Land 164.990 

Reservoirs, dams and water mains 1.725.104 

Buildings, civil works and improvements - tangible 632.275 

Machinery and equipment 1.419.305 

Vehicles 3.583 

Furniture and fixtures 4.306 

Total buildings, civil works and improvements 3.949.563 

Total construction in progress 1.354.024 

Total property, plant and equipment 5.303.587 

18 Intangible assets 

Average 

amortization 

rate % 

�� 

�� 

�� 

�� 

Net amount Transfer to 

Net amount 

buildings, civil 

Entries 

Depreciation Write-offs Reclassificatio 

works and 

12/31/2010 n 

improvements 

3/31/2011 


0,00 0,00 0,00 0,00 0,00 164.990 

- 

3.644 

(10.003) 

(901) 

0,00 1.717.844 

- 

- 

(4.217) 

(58) 

0,00 628.000 

29 

- 

(13.512) 

2 

(117) 1.405.707 

- 

3 

(269) 

(3) 

6 

3.320 

2 

43 

(28) 

- 

0,00 4.323 

31 

3.690 

(28.029) 

(960) 

(111) 3.924.184 

70.889 

(3.690) 

(7.799) 

(420) 

0,00 1.413.004 

70.920 

- 

(35.828) 

(1.380) 

(111) 5.337.188 


Consolidated 

3/31/2011 12/31/2010 3/31/2011 

12/31/2010 

Accumulated 

amortization 


Average 

amortization 

rate % 


Accumulated 

amortization 

Net amount 

Adjusted 

net amount 

Intangible in service 0,00 0,00 0,00 0,00 

Distribution 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 

Software 0,00 0,00 0,00 - 

0,00 20,00 

4 

0,00 4 

4 

Concession right - Infrastructure 

0,00 0,00 0,00 - 

0,00 0,00 

3.934.752 (2.183.722) 1.751.030 1.740.957 

0,00 

- 

- 

- 

- 

0,00 3.934.756 (2.183.722) 1.751.034 1.740.961 

Generation 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 

Software 0,00 0,00 0,00 - 

0,00 13,96 

3.845 

(2.030) 1.815 2.009 

Permanent easement 0,00 0,00 0,00 - 

0,00 0,00 487 

0,00 487 

487 

Concession right - Environmental 

licenses 

0,00 0,00 0,00 - 

0,00 7,27 

Concession right - Use of Public 

0,00 0,00 0,00 - 

0,00 2,38 

Property (UBP) 

171.561 

(30.043) 141.518 142.920 

Concession right - Other (Note 

19.1) 

0,00 0,00 

- 

0,00 0,00 561.100 

(48.609) 512.491 521.373 

0,00 

- 

- 

- 

- 

0,00 740.847 

(81.925) 658.922 669.575 

Transmission 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 

Permanent easement 0,00 0,00 0,00 0,00 0,00 0,00 111 

0,00 111 

0,00 

0,00 

- 

- 

- 

- 

0,00 111 

- 

111 

- 

Management 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 

Software 20,00 

2.162 

(1.932) 

230 

250 

18,60 

4.655 

(3.451) 1.204 1.213 

Other 


0,00 0,00 0,00 - 

0,00 0,00 187 

0,00 187 

0,00 

19.1) 

303.563 

(41.847) 

261.716 

266.172 

303.563 

(41.847) 261.716 266.172 

0,00 305.725 

(43.779) 

261.946 

266.422 

0,00 308.405 

(45.298) 263.107 267.385 

Total Intangible in progress 0,00 305.725 

(43.779) 

261.946 

266.422 

0,00 4.984.119 (2.310.945) 2.673.174 2.677.921 

Intangible in progress 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 

Distribution 0,00 0,00 0,00 - 

0,00 0,00 259.970 

0,00 259.970 274.556 

Generation 0,00 0,00 0,00 - 

0,00 0,00 30.935 

0,00 30.935 30.667 

Management 0,00 432 

0,00 432 

430 

0,00 1.224 

0,00 1.224 1.275 

Total Intangible in progress 0,00 432 

- 

432 

430 

0,00 292.129 

- 292.129 306.498 


Goodwill on merger of parent 

company 

( - ) Provision for maintenance of 

dividends 

Amortization of provision for 

maintenance of dividends 

( - ) Goodwill accumulated 

amortization 

Goodwill 

Lajeado Energia e Investco 

0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 

0,00 0,00 0,00 

0,00 0,00 0,00 

0,00 0,00 0,00 

0,00 0,00 0,00 

0,00 

Total Intangible 0,00 306.157 

- 

- 

0,00 0,00 - 

- 

- 

(43.779) 

F-35 

- 

- 

- 

- 

- 

- 

262.378 

Consolidated 

3.854 

0,00 0,00 564.548 

0,00 0,00 (564.548) 

0,00 0,00 181.907 

0,00 0,00 (181.907) 

- 

0,00 - 

0,00 #REF! 42.293 

- 

266.852 

42.293 

0,00 5.318.541 

(1.243) 

2.611 

0,00 564.548 

0,00 (564.548) 

0,00 181.907 

0,00 (181.907) 

- 

0,00 42.293 

- 

(2.310.945) 

- 

42.293 

3.007.596 

2.786 

564.548 

(564.548) 

175.800 

(175.800) 

- 

42.293 

42.293 

3.026.712

18.1 

18.2 

�� 

�� 

�� 

�� 

Movements in tangible and intangible assets during the period are demonstrated as follows: 

Net amount at Amortization Write-off Net amount at 

Entries 

12/31/2010 3/31/2011 

Intangible in service 0,00 0,00 0,00 0,00 0,00 

Software 250 

0,00 (21) 

1 

230 

Concession right - Other 266.172 

0,00 (4.456) 

0,00 261.716 

Intangible in progress 430 

2 

0,00 0,00 432 

Total Intangible 266.852 

2 

(4.477) 

1 262.378 

Net amount at 

Entries Transfers Amortization Write-offs Reclassificatio 

n 

Net amount at 

12/31/2010 3/31/2011 

Intangible in service 0,00 0,00 0,00 0,00 0,00 0,00 0,00 

Software 3.226 

264 

0,00 (280) 

0,00 0,00 3.210 

Permanent easement 487 

0,00 0,00 0,00 0,00 111 

598 

Concession right - Environmental licenses 2.786 

0,00 0,00 (175) 

0,00 0,00 2.611 

Concession right - Infrastructure 1.740.957 

0,00 57.817 

(47.877) 

(5.787) 

5.920 1.751.030 

Concession right - Use of Public Property (UBP) 

142.920 

Concession right - Other 787.545 

Intangible in progress 306.498 

Goodwill 42.293 

Total Intangible 3.026.712 

Bandeirante 


Enerpeixe 


Pantanal 


Investco 

Total 

19 Suppliers 

Capitalization of debt charges 

0,00 0,00 (1.403) 

1 

0,00 141.518 

0,00 0,00 (13.338) 

0,00 0,00 774.207 

72.708 

(86.291) 

(2) 

(784) 

0,00 292.129 

0,00 0,00 0,00 0,00 0,00 42.293 

72.972 

(28.474) 

(63.075) 

(6.570) 

6.031 3.007.596 

Cash generating units: Bandeirante, Escelsa, Energest, Enertrade, Enerpeixe, Lajeado and Investco. 

Basis to determine recoverable amount: value in use - equity value; 

Determination of cash flows: Production and consumption volume and estimated tariffs and residual value at the end of the concession; 

Cash flow period: until the end of the concession; 

Cash flow growth rate: Generation - price evolution; Distribution - 4.2% to 4.5%; 

Discount rate used (net of taxes): average remuneration of investment rate - Generation 8.1%, Distribution 9.2% and Sales 9.4%. 

Cost Amortization Total Cost Amortization Total 

38.143 (12.633) 25.510 38.143 (12.633) 25.510 

244.620 (24.707) 219.913 538.082 (40.327) 497.755 

3.837 (868) 2.969 3.837 (868) 2.969 

3.590 - 3.590 3.590 - 3.590 

13.373 (3.639) 9.734 13.373 (3.638) 9.735 

- - - 256.408 (31.780) 224.628 

- - - 11.230 (1.210) 10.020 

303.563 (41.847) 261.716 864.663 (90.456) 774.207 

Subsidiaries Bandeirante and Escelsa capitalized in this quarter, financial charges amounting to R$6,783, (R$2,206 on March 31, 2010). 

Note 

Consolidated 

Reclassifications amounting to R$5,920 (R$9,900 on December 31, 2010) of the chart above are impacted by the transfer of intangible assets as a contra entry to 

indemnifiable financial assets, in accordance with ICPC01. 

The Company evaluated the recovery of the carrying amount of goodwill and intangible assets with indefinite useful lives based on their value in use, at the discounted cash 

flow model using the individual cash generating unit, which represents total tangible and intangible assets. 

The recoverable amount of subsidiaries' goodwill is evaluated on an annual basis, regardless of impairment indicators. Possible impairment losses are recognized in income. 

The recoverable amount is determined based on the assets value in use and are calculated using evaluation methodologies, backed by discounted cash flow techniques, 

considering market conditions, time value, and business risks. 

A set of premises was defined to determine the recoverable amount of the main investments. 

Concession right - Other 


3/31/2011 


Current 


The Company's and its subsidiaries' recovery test of goodwill and intangible assets with indefinite useful lives did not result in the recognition of losses in intangible assets. 

Consolidated 

Consolidated 

Non-current 

3/31/2011 12/31/2010 3/31/2011 12/31/2010 3/31/2011 12/31/2010 

Electricity supply 0,00 0,00 266.598 264.695 

0,00 0,00 

Free energy 19.1 0,00 0,00 54.197 

52.798 

0,00 0,00 

CCCE (short term electricity purchase) 0,00 0,00 19.936 

21.250 

0,00 0,00 

Electric power network use charges 0,00 0,00 61.774 

59.160 

0,00 0,00 

Charges for services systems 0,00 0,00 6.437 

9.546 

0,00 0,00 

Materials and services 4.868 

3.370 

176.863 218.932 

458 

915 

Total 4.868 

3.370 

585.805 626.381 

458 

915 

F-36 

Current

19.1 Free energy 

20 Debentures 

�� 

�� 

�� 

�� 

The Brazilian Electricity Regulatory Agency (ANEEL), by means of Regulatory Resolution No. 387 of December 15, 2009, changed the method for amortizing the balances of 

Loss of Revenue and Free Energy, in effect since January 2002 and limited to period established in ANEEL Resolution No. 1 of January 12, 2004. 

ANEEL Dispatch No. 2517 of August 26, 2010 disclosed the amount to be settled between generation and distribution agents by September 30, 2010, with restatement by the 

monthly Selic Rate. 

The payment by the Company is currently suspended by a determination by the Regional Federal Court of the First Region until a petition for a preliminary order included in the 

records of the injunction No. 91.2010.4.01.3400, sought by the Brazilian Association of Electric Energy Distribution Companies (ABRADEE) is examined by the judge of the 

15th Federal Court in the Federal District. 

Liabilities are being monthly adjusted to inflation at the SELIC rate variation, and R$1,399 was recorded in the period as a contra entry to financial expenses. The balance on 

March 31, 2011 is R$54,197 (R$52,798 on December 31, 2010). 

Issuer 

Issuance Settlement Frequency Series 

Quantity of 

securities 

Bandeirante 3/1/2006 3/1/2011 3rd Single 25.000 

Bandeirante 7/1/2010 6/30/2016 4th Single 39.000 

Escelsa 6/1/2006 6/1/2011 1st Single 26.400 

Escelsa 7/2/2007 7/2/2014 2nd Single 25.000 

Investco 11/1/2001 11/1/2011 1st Single 25.000 

20.1 Emissora Bandeirante 

Date 

Characteristics of the issuances 

Remuneration 

104.4% of CDI 

100% of the CDI + 1.5% 

104.4% of CDI 

105.0% of CDI 

10.50% of the IGPM 

3rd debentures issuing 

On March 1, 2006 the third debentures issuing was promoted. Those debentures are simple, book-entry nominative type, in a single series, for public subscription, with no 

guarantees (unsecured), non-convertible, with no roll-over clause option. 

The debentures issued totaled 25 thousand, with a nominal unit value is R$ 10,000.00, integrally subscripted in a total amount of R$250,000, effective for 5 (five) years, semiannual 

payments of interest and a grace period of 3 (three) years for the amortization of principal. Final maturity date is on March 1, 3, being the first amortization, of 1/3, on 

March 1, 2009, the second amortization, of 1/3, on March 1, 2010 and the third, of 1/3, on March 1, 2011. 

4th debentures issuing 

On July 1, 2010 the forth debentures issuing was promoted. Those debentures are simple, book-entry nominative type, in a single series, for public subscription, subordinated 

type, non-convertible, with no roll-over clause option. 

The debentures issued totaled 39 thousand, with a nominal unit value is R$ 10,000.00, integrally subscripted in a total amount of R$390,000, effective for 6 (five) years, semiannual 

payments of interest and a grace period of 4 (three) years for the amortization of principal. Final maturity date is on March 1, 2016, being the first amortization on July 1, 

2014. 

As remuneration on debentures' nominal value, compensatory interest is calculated based on the accumulated variation of average daily rates for overnight deposits in 

unrelated financial institutions as calculated and disclosed by CETIP ("interbank deposit rate"), with the addition of a 1.50% p.a. (one and a half percent) spread or surtax p.a., 

based on 252 business days (“Addition to the interbank deposit rate"), as described in the Bookbuilding Procedure, calculated on the Nominal Unit Value and immediately after 

the first debenture amortization date, on the Nominal Unit Value Balance, and paid at the end of each capitalization period, under the formula established in the Debenture 

Deed. The Remuneration payment has been made semiannually after the issue date, and thus the first payment will be due January 1, 2011 and the other payments on the 

first day of January and July every year until the maturity date. 

The resources were aimed at the extension of the debt, reduction of financial costs and diversification of the financing sources. 

The contract contains clauses establishing termination in the following conditions: 

(i) non-compliance by the Issuer with any monetary obligation in the Indenture, except those provided for in items “a” to “g” of subitem “Accelerated Maturity Assumptions” of 

item “Accelerated Maturity” above, not remedied in 30 (thirty) business days as from the date of non-performance; 

(ii) accelerated maturity or payment default of any monetary obligation the issuer may be subject to, either in the local or the international market, in a unit amount or 

accumulated amount exceeding forty million Brazilian reais (R$40,000,000.00) that may be proven to impair the faithful fulfillment of obligations assumed by the Company in 

the Debenture Deed; 

(iii) spin-off, merger, takeover, or any relevant form of corporate reorganization entailing a transfer of the Issuer's share control, as defined in article 116 of Corporate Law, 

except (i) if said transfer is to another company of the same economic group as the Issuer; or (ii) a prior consent has been obtained from debenture holders holding at least two 

thirds (2/3) of the debentures outstanding; or (iii) in the cases of spin-off, merger or acquisition there is assurance of the right foreseen in Law No. 6404, article 231, paragraph 

1; 

(iv) distribution of dividends above the mandatory minimum, whenever the Issuer is in default of any monetary obligation foreseen in the Debenture Deed, the Distribution 

Agreement and/or the other Offering documents; and 

(v) the Issuer's failure to maintain a Gross Debt/EBITDA financial ratio of no more than 3.5 on the calculation dates, which shall be June 30 and December 31 of each year. 

F-37 

Amount 

250.000 

390.000 

264.000 

250.000 

264.791

20.2 Issuer Escelsa 

20.3 Issuer - Investco 

�� 

�� 

�� 

�� 

1st debentures issuing 

On June 1, 2006 the first debentures issuing was promoted. Those debentures are simple, book-entry nominative type, in a single series, for public subscription, with no 

guarantees (unsecured), non-convertible, with no roll-over clause option. 

The debentures issued totaled 26,400, with a nominal unit value is R$ 10,000.00, integrally subscripted in a total amount of R$264,000, effective for 5 (five) years, semi-annual 

payments of interest and a grace period of 3 (three) years for the amortization of principal. Final maturity date is on June 1, 2011, being the first amortization, of 1/3, on June 1, 

2009, the second amortization, of 1/3, on June 1, 2010 and the third, of 1/3, on June 1, 2011. The issuing was concluded on July 5, 2006. 

As remuneration on the par value of the debentures, compensation interest will be levied and will correspond to 104.4% of the accumulation of the daily average rates of the 

overnight Interbank Deposits - DIs, "over extra group", expressed in the form of a percentage p.a., base 252 business days, calculated and divulged on a daily basis by the 

Clearing House for the Custody and Financial Settlement of Securities - CETIP (DI rates) calculated exponentially and cumulatively pro rata by business days lapsed. The 

remuneration corresponding to the capitalization periods will be due and paid semi-annually, with the first maturity on November 2, 2006 and the last on June 1, 2011. 

The resources were aimed at the extension of the debt, reduction of financial costs, diversification of the financing sources, investments for 2006 and cash adjustment for 

working capital. 


(i) non-compliance by the Issuer with any monetary obligation in the Indenture, not remedied in 1 (one) business day as from the date of non-performance; 

(ii) non-compliance by the issuer with the Covenants (Gross debt in relation to EBITDA and EBITDA of the period (+) cash in the beginning of the period (+) credit lines 

contracted but not utilized at the end of the period (+) increase in the debt amount which has been released during the period in relation to gross financing expenses of the 

period (+) debt amount settled/to be settled during the period (-) financing income related to monetary restatement and monetary increase of the energy sold during the period (- 

) financing income related to hedge and swap operations of the period, which have been complied with to date); 

(iii) petition for bankruptcy by third parties against the issuer and not duly remedied within the legal term; 

(iv) self-bankruptcy on the part of the Issuer; 

(v) settlement, dissolution or bankruptcy of the Issuer or its direct controlling company; 

(vi) if the issuer proposes an extra-judicial recovery plan to any creditor or creditor class, irrespective of having been requested or judicial ratification obtained; or if the issuer 

files a request for judicial recovery irrespective of the approval of the recovery processing or its concession by the appropriate judge; and 

(vii) cancellation of the electricity distribution concession. 

2nd debentures issuing 

On July 2, 2007 the second debentures issuing were promoted. Those debentures are simple, book-entry nominative type, in a single series, for public subscription, with no 

guarantees (unsecured), non-convertible. The debentures of this issue are not subject to scheduled repricing. 

The debentures issued totaled 25,000, with a nominal unit value is R$ 10,000.00, integrally subscripted in a total amount of R$250,000, effective for 7 (seven) years, semiannual 

payments of interest and a grace period of 5 (five) years for the amortization of principal. Final maturity date is on July 2, 2014, being the first amortization of 1/3 on July 

2, 2012, the second amortization of 1/3 on July 2, 2013 and the third, of 1/3 on July 2, 2014. The issuing was concluded on July 10, 2007. 

As remuneration on the par value of the debentures, compensation interest will be levied and will correspond to 105.0% of the accumulation of the daily average rates of the 

overnight Interbank Deposits - DIs, "over extra group", expressed in the form of a percentage p.a., base 252 business days, calculated and divulged on a daily basis by the 

Clearing House for the Custody and Financial Settlement of Accounts receivable - CETIP (DI rates) calculated exponentially and cumulatively pro rata by business days lapsed. 

The remuneration corresponding to the capitalization periods will be due and paid semi-annually, with the first maturity on January 2, 2008 and the last on July 2, 2014. 

The funds obtained in the distribution were set aside in full for the payment of Senior Notes issued by the issuer on July 15, 1997, with final maturity on July 15, 2007. 

The contract contains clauses establishing termination in the same situations already described above for the first issue. 

In October 2001, CVM registered the first issue of 25,000 non-convertible debentures at a nominal unit value of R$10,000.00 with a maturity of 120 months as from the issuing 

date (November 1st, 2001), restated as from the issuing date at the General Market Price Index (IGP-M). The annual pre-fixed rate of remuneration is 12.8% p.a, applied on 

the outstanding balance of the restated nominal unit value. These funds were invested in fixed assets and working capital for completing the construction of the UHE Luís 

Eduardo Magalhães - UHE Lajeado. 

The renegotiation conditions will be communicated by the Company and must be disclosed in the form of notices, in a newspaper of widespread circulation in the period of up 

to ten (10) business days prior to the conclusion of each Remuneration Validity Period, and must contain terms and conditions of the next remuneration period. 

If the debenture holders do not agree with the established conditions or if publication does not occur in conformity with the contract, the debenture holders may exercise the 

right to sell their debentures to Company without prejudice of the possibility of accelerated maturity requirement. Company agrees to acquire the debentures at their restated 

unit value, plus remuneration calculated pro rata defined for the overdue period when necessary. 

The 4th Addendum to the Indenture of these debentures was prepared on October 31, 2006, contemplating the amendment of item 4.5.1 of Clause IV of the Indenture, 

deciding on the use of the IGP-M - General Market Price Index for the restatement of the debentures that will be entitled to the payment of remunerative interest prefixed at the 

rate of 10.5% p.a., to take effect in the validity period of the remuneration, as from November 1, 2006. 

These debentures carried a joint guarantee from EEVP - Empresa de Eletricidade Vale Paranapanema S.A. and EDP - Energias de Portugal. The 5th Addendum to the 

Indenture of these debentures was prepared in November 2009, releasing the intervening guarantor Empresa de Eletricidade Vale Paranapanema S.A., with EDP - Energias 

de Portugal thus remaining as sole guarantor of the debentures. 

F-38

20.4 

20.5 Changes in debentures in the period are shown as follows: 

Current 

�� 

�� 

�� 

�� 

The contract contains clauses establishing accelerated maturity in the following conditions: 

a) Non-payment of the principal or interest due on account of the debentures on the respective maturity and/or amortization dates; 

b) legitimate and repeated protest against the Issuer, the defaulted value added of which is higher than R$5,000, unless the protest has been executed due to an error or mala 

fide of a third party, provided that it is validly proven by the Issuer, or if it is cancelled or if guarantees are provided in court, in any case, within the maximum period of three 

business days after its occurrence; 

c) filing for preventative composition with creditors formulated by the Issuer or by any one of the Intervenors (including any equivalent proceeding existing in accordance with 

the Portuguese legislation, with respect to EDP); 

d) dissolution or adjudication of bankruptcy of the Issuer, or by any one of the Intervenors (including any equivalent proceeding existing in accordance with the Portuguese 

legislation, with respect to EDP); 

e) non-performance by the Issuer or by the Intervenors of any obligation provided for in the Indenture, not remedied in thirty days after written notice sent by the Fiduciary 

Agent, with the exception of non-payment of principal, interest and/or any other amount due under the terms of the indenture; 

f) accelerated maturity of any debt of the Issuer or of its subsidiaries in an amount above R$5,000; 

g) statutory change of the Issuer, as well as corporate reorganization involving the Issuer and/or its assets that might, in any way, directly or indirectly affect the full performance 

of the obligations of the Issuer established in the indenture; 

h) start of enforcement of guarantee provided by the Issuer in favor of third parties, in an amount above R$5,000, unless the enforcement has been proposed by proven error 

or mala fide, or if it is suspended or annulled in up to ten business days after the service of process against the Issuer; 

i) alteration of the controlling interest of the Issuer, unless: (i) against authorization from debenture holders representing two thirds of the debentures outstanding, assembled at 

a Meeting of debenture holders especially convened by the Issuer for this purpose;(ii) there is no modification or alteration of the obligations of the Intervenors, under the terms 

of clause VII- Surety. In case of approval by the debenture holders, the Issuer shall redeem within ten business days after the date of the Meeting of debenture holders, the 

debentures of the debenture holders that did not agree with the alteration of the controlling interest of the Issuer, at their par value plus the remuneration calculated pro rata. 

For the intents and purposes of this sub-item, a "Change of Controlling Interest", will occur if the Intervenors, individually or jointly, cease their direct or indirect ownership of at 

least 51% of the voting capital of the Issuer; and 

j) the concession contract of the Issuer is revoked, suspended, dissolved, terminated or loses its effectiveness and validity, except when replaced by another grant document 

under the terms of the legislation in force. 

On March 31, 2011 the subsidiaries are in full compliance with all the restrictive clauses of the covenants provided in the debenture contracts. 

Net amount at Monetary and 

Interest 

Net amount at 

Principal 

Payments of 

Transfers Transaction costs exchange 

payments 

interest 

provided 

12/31/2010 variation 3/31/2011 

Debentures 231.730 

231.730 

Non-current 

Debentures 637.593 

637.593 

20.6 Maturity of non-current installments: 

Year 

2012 

2013 

2014 

2015 

2016 

Total 

Amount 

83.121 

83.212 

159.798 

155.732 

155.946 

637.809 

(83.333) 

(83.333) 

(28.074) 

(28.074) 

23.394 

23.394 

(202) 

(202) 

0,00 0,00 0,00 202 

- - - 202 

F-39 

289 

289 

14 

14 

841 

841 

144.645 

144.645 

0,00 637.809 

- 637.809

21 Loans, financing and debt charges 

Foreign currency 

�� 

�� 

�� 

�� 

Consolidated 

3/31/2011 12/31/2010 

Charges 

Principal 

Charges 

Principal 

Company Debt cost 

Current 

Non-current 

Current 

Non-current 

Current 

Non-current 

Current 

Non-current 

IDB -Interamerican 

62 

Development Bank 

Amortization of transaction 

Bandeirante 

Libor + 4.375%p.a. + exchange variation 

cost 

Bandeirante Libor + 4.375%p.a. + exchange variation 

- 

BNDES CESA 4.81% +exchange variation 

1 

BNDES Pantanal UMBNDES + 4.50% p.a. 

1 




Libor + 3% p.a. to 3.50% p.a. 

3.549 

Fund raising cost Porto do Pecém 0,00 - 

0,00 3.613 

Local currency 

Eletrobrás Bandeirante 

5% p.a. + 1% to 1.5% p.a (mgt. fee) 

- 

Bank Credit Bill Bandeirante 105% of CDI 

2.204 

BNDES - Banco do Brasil Bandeirante 3.3% p.a. above TJLP 

76 

BNDES - Banco Santander Bandeirante 3.3% p.a. above TJLP 

76 

BNDES - BB/CALC Bandeirante 

BNDES - BB/CALC Escelsa 

From 2.32% to 4.5% p.a. above TJLP 

from 2.32% to 3.32% p.a. above TJLP and 

4.5% p.a. fixed 

709 

973 

- 

- 

- 

- 

2.221 

(7.119) 

(4.898) 

- 

- 

- 

- 

- 

- 

10.568 

(1.318) 

294 

265 

- 

- 

9.809 

4.775 

20.400 

(-) BNDES -CALC - 

Transaction costs 

Escelsa 

0,00 

- 

- 

(43) 

Eletrobrás Escelsa 5% p.a. + 1% p.a. (mgt. fee) 

- 

- 

11.105 

Bank Credit Bill Escelsa 105% of CDI 

373 

- 

8.080 

Commercial credit note 

(-) Commercial credit note - 

Escelsa 100% of CDI 

567 

10.084 

7.000 


Escelsa 0,00 

- 

- 

(431) 

BNDES - Banco do Brasil Escelsa 3.3% p.a. above TJLP 

72 

- 

5.545 

BNDES - Banco Santander Escelsa 3.3% p.a. above TJLP 

72 

- 

5.545 

Bank Credit Bill Energest 106.6% of CDI 

462 

- 

9.600 

Santander - CDI Energest 113.50% of CDI 

170 

- 

21.355 

BNDES CESA 4.50% p.a. above TJLP 

73 

- 

6.692 

Santander - CDI CESA 113.50% of CDI 

95 

- 

11.864 

BNDES Pantanal 4.50% p.a. above TJLP 

21 

- 

3.788 

Eletrobrás Costa Rica 5.00% + 1.50% p.a. (mgt. fee) 

- 

- 

532 

BNDES Enerpeixe 4.5% p.a. above TJLP 

1.213 

- 

56.454 

Banco Itaú Enerpeixe 4.5% p.a. above TJLP 

370 

- 

17.220 

Bradesco Enerpeixe 4.5% p.a. above TJLP 

309 

- 

14.350 

Unibanco Enerpeixe 4.5% p.a. above TJLP 

247 

- 

11.480 

Banco do Brasil Enerpeixe 4.5% p.a. above TJLP 

309 

- 

14.350 

BNDES Porto do Pecém 2.77% p.a. above TJLP 

- 

- 

- 

Fund raising cost Porto do Pecém 0,00 

- 

(13.555) 

- 

BNDES - Banco do Brasil Santa Fé 1.90% p.a. above TJLP 

248 

- 

5.679 

Cumulative receivable shares Investco 3.0% p.a. 

- 

- 

4.014 

Bank Credit Bill Investco 106% of CDI 

- 

- 

- 

Amazônia Investco 11.5% p.a 

- 

- 

- 

BNDES Investco 4.00% p.a. above TJLP 

341 

- 

51.200 

Leasing - Safra S.A. Investco CDI + 1.45% p.a. 

- 

- 

- 

Result of the swaps 


0,00 8.980 

(3.471) 

329.883 


Bandeirante from 97.94% to 118.94% of CDI 

- 

- 

10.983 

Citibank Porto do Pecém USD 1.8138 

- 

- 

9.520 

Pactual Porto do Pecém 

EUR/USD 1.4040; EUR/R$ 2.73; USD/R$ 

1.9678 

- 

- 

197 

- - 20.700 

Total 12.593 

(8.369) 

360.392 

21.1 Additional information on debt service of Bandeirante 

5.937 

5.937 

11.995 

15.460 

- 

- 

98 

89 

260.419 

- 

260.606 

16.060 

40.800 

13.357 

13.357 

74.369 

95.849 

(102) 

85.205 

16.160 

124.500 

(1.218) 

12.476 

12.476 

28.800 

- 

16.482 

- 

947 

1.009 

216.405 

66.011 

55.008 

44.007 

55.008 

593.351 

- 

67.672 

77.581 

- 

- 

4.752 

- 

1.730.322 

- 

107.891 

- 

107.891 

2.098.819 

84 

- 

2 

2 

1.213 

- 

1.301 

- 

492 

82 

82 

725 

937 

- 

- 

1.390 

372 

- 

77 

77 

1.904 

1.982 

80 

1.101 

25 

- 

1.276 

389 

325 

260 

324 

- 

- 

253 

- 

9 

4 

390 

- 

12.556 

- 

- 

- 

- 

- 

- 

- 

- 

10.801 

(1.438) 

299 

270 

- 

- 

- 9.932 

- 

- 

- 

- 

- 

- 

- 

- 

- 

6.621 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

2.105 

- 

- 

- 

- 

- 

- 

- 

8.726 

- 

- 

- 

- 

4.775 

20.400 

5.937 

5.937 

8.396 

10.090 

(44) 

10.800 

8.080 

7.000 

(437) 

5.545 

5.545 

10.666 

21.355 

6.692 

11.864 

3.788 

584 

56.454 

17.220 

14.350 

11.480 

14.350 

- 

- 

5.679 

4.014 

10.000 

637 

51.082 

17 

332.256 

10.946 

8.350 

360 

- - 19.656 

13.857 

8.726 361.844 

2.711 

(240) 

174 

158 

258.917 

(7.294) 

254.426 

17.252 

40.800 

14.842 

14.842 

77.968 

93.700 

(112) 

88.286 

24.240 

124.500 

(1.323) 

13.862 

13.862 

37.333 

- 

18.156 

- 

1.893 

1.129 

230.518 

70.316 

58.596 

46.877 

58.595 

581.081 

(13.987) 

69.091 

76.861 

- 

- 

18.654 

- 

1.777.832 

2.345 

97.523 

30 

99.898 

2.132.156 

IDB - Interamerican Development Bank – External loan contract with the participation of Brazilian, Portuguese and Spanish banks, signed on March 5, 2004, amounting to 

US$100 million, drawn during the fiscal year 2004 with a two years' grace period before amortizations of principal and with final maturity in up to 8 years, being: 

(i) Tranche “A” - US$38.9 million, with principal due quarterly from May 15, 2006 to February 15, 2012, remunerated at interest calculated at annual Libor plus 4.38% annually, 

maturing quarterly as from May 15, 2004; and 

(ii) Tranche “B” - US$61.1 million with principal due quarterly from May 15, 2006 to February 15, 2009, remunerated at interest calculated at annual Libor plus 4%p.a., maturing 

quarterly as from May 15, 2004. Transaction settled on February 15, 2009. 

This financing is allocated to investment projects and is guaranteed by the Company’s electricity supply receivables, with the establishment of covenants (total debt in relation 

to total debt plus shareholders’ equity, total debt in relation to EBITDA and debt service coverage index, among other non-financial covenants), fully complied with to the 

present time. Eventual non-compliance may result in anticipation of settlement of the contract, either partially or in full. 

Exchange swap operations with hedge characteristic were executed for this loan with Banco JP Morgan S.A., on March 15, 2004 and Banco Citibank S.A., on November 13, 

2003, for exchange of original charges of the financing at BID, for remuneration based on the interval of 98% to 109.7% of the CDI and 97.94% to 118.94% of the CDI, 

respectively, maturing on the same dates of the financing agreement. This financial operation is valued at fair value, as described in Note 33 (Financial instruments). 

F-40

Eletrobrás 

�� 

�� 

�� 

�� 

Reluz Program 

(i) Contract ECF-2617/07 executed on April 9, 2007. Line of credit amounting to R$ 608, in the form of finance. Funds released in the amount of R$61 and R$547, on June 11, 

2007 and August 29, 2007, respectively. The restated debt balance carried an interest rate of 5% p.a. and a management fee of 1.5% p.a., both maturing monthly as from July 

30, 2007. The outstanding debt balance shall be paid in 60 equal monthly and consecutive installments, the first maturing on May 30, 2008 and the last one on April 30, 2013. 

The loan is guaranteed by promissory notes and an assignment on company revenues. 

(ii) Contract ECF-2656/07 executed on December 12, 2007. Line of credit amounting to R$ 3,911, in the form of finance. Funds released in the amount of R$391 and R$3,203, 

on June 18, 2008 and February 17, 2009, respectively. The debt balance carries an interest rate of 5% p.a., which was capitalized up to February 28, 2009 at a rate of 1.5% 

p.a. and a management fee of 1.5% p.a., paid monthly. The outstanding debt balance shall be paid in 60 equal monthly and consecutive installments, the first maturing on 

March 30, 2009 and the last one on February 28, 2014. On the non-disbursed balance there is a credit reserve commission of 1% p.a., maturing on the 30th of each month, up 

to the termination of the credit. The loan is guaranteed by promissory notes and an assignment on company revenues. 

(iii) Contract ECF-2657/07 executed on December 12, 2007. Line of credit amounting to R$ 10,036, in the form of finance. Funds released in the amount of R$1,004 and 

R$8,915, on February 17, 2009 and April 16, 2010, respectively. The debt balance carries an interest rate of 5% annually, which was capitalized up to April 30, 2010 and a 

management fee of 1.5% annually, paid monthly. The outstanding debt balance shall be paid in 60 equal monthly and consecutive installments, the first maturing on May 30, 

2010 and the last one on April 30, 2015. On the non-disbursed balance there is a credit reserve commission of 1% p.a., maturing on the 30th of each month, up tothe 

termination of the credit. The loan is guaranteed by promissory notes and an assignment on company revenues. 

(iv) Contract ECF-2658/07 executed on December 12, 2007. Line of credit amounting to R$ 2,946, in the form of finance. Funds released in the amount of R$295 and 

R$2,154, on June 18, 2008 and February 17, 2009, respectively. The debt balance carries an interest rate of 5% p.a., which was capitalized up to February 28, 2009 at a rate 

of 1.5% p.a. and a management fee of 1.5% p.a., paid monthly. The outstanding debt balance shall be paid in 60 equal monthly and consecutive installments, the first maturing 

on March 30, 2009 and the last one on February 28, 2014. On the non-disbursed balance there is a credit reserve commission of 1% p.a., maturing on the 30th of each month, 

up to the termination of the credit. The loan is guaranteed by promissory notes and an assignment on company revenues. 

Luz para Todos (Light for All) Program 

(i) 1st stage - Contract ECFS-019/04 - Line of credit amounting to R$ 11,523, as financing (RGR) and R$1,773 in the form of a subsidy. Contract signed on May 28, 2004, 

whereas funds in the amount of R$1,152 were released in 2004, R$2,305 in 2005, R$ 3,623 in 2006, R$ 2,262 in 2010, totaling R$ 9,342 and were released in the formofa 

subsidy in the amount of R$ 177 in 2004, R$ 355 in 2005, R$ 557 in 2006, totaling R$ 1,089. The principal amount carries an interest rate of 5% annually and a management 

fee of 1% annually, both maturing monthly as from July 30, 2004. The outstanding debt balance shall be paid in 120 equal monthly and consecutive installments, the first 

maturing on August 30, 2006 and the last one on July 30, 2016. On the non-disbursed balance there is a credit reserve commission of 1% p.a., maturing on the 30th of each 

month, up to the termination of the credit. The loan is guaranteed by promissory notes and an assignment on company revenues. 

(ii) 2nd stage - Contract ECFS 184/07 - Facility in the amount of R$12,359, as financing (RGR), there are no amounts in the form of a subsidy. Contract signed on June 25, 

2007. Resources released in the amount of R$3,708 in 2007. The principal amount carries an interest rate of 5% annually and a management fee of 1% annually, both 

maturing monthly as from October 30, 2007. The outstanding debt balance shall be paid in 120 equal monthly and consecutive installments, the first maturing on November 30, 

2009 and the last one on October 30, 2019. On the non-disbursed balance there is a credit reserve commission of 1% p.a., maturing on the 30th of each month, uptothe 

termination of the credit. The loan is guaranteed by promissory notes and an assignment on company revenues. 

Bank Credit Certificates – Agreements signed on December 5, 2006 worth a total of R$102,000, being R$ 51,000 signed with the Banco do Brasil S.A. and R$ 51,000 with 

Banco Santander Banespa S.A. The principal value of the loan carries an interest rate of 105% of CDI, capitalized daily. Principal payable in five annual installments, the first 

due on December 5, 2009 and the last on December 5, 2013 with semi-annual payments of interest as from June 5, 2007 to December 5, 2013. This operation carries a 

covenant of gross debt/EBITDA at a ratio not exceeding 3.5. The company is in compliance to the present time. Contractual conditions are identical in the case of both 

institutions. 

BNDES agreement n°. 88,425 / Agent Banco do Brasil - Signed in December 2007, for the deployment of an Investment Program from May 2006 to December 2007, being 

the first release in February 2008, in the amount of R$16,146 and the second release on May 2008, in the amount o R$19,367, with funds from BNDES (Finem/Finame) 

through Banco do Brasil, amortizable in 72 monthly installments, with the first falling due on July 15, 2008 and the last one on June 15, 2014 with interest of 3.3% p.a., indexed 

to TJLP. Guarantee, assignment of revenues equivalent to 130% of the amount of the highest financing installment. This operation establishes covenant of the Gross 

Financial Debt / EBITDA relation, at a rate no higher than 3.5, fulfilled up to now. 

BNDES agreement n°. 88,425 / Agent Banco Santander - Signed in December 2007, for the deployment of an Investment Program from May 2006 to December 2007, being 

the first release in February 2008, in the amount of R$16,146 and the second release on May 2008, in the amount o R$19,367, with funds from BNDES (Finem/Finame) 

through Banco Santander, amortizable in 72 monthly installments, with the first falling due on July 15, 2008 and the last one on June 15, 2014 with interest of 3.3% p.a., 

indexed to TJLP. Guarantee, assignment of revenues equivalent to 130% of the amount of the highest financing installment. This operation establishes covenant of the Gross 

Financial Debt / EBITDA relation, at a rate no higher than 3.5, fulfilled up to now. 

BNDES BB/ CALC - Opening of revolving credit in the Credit Limit Opening Contract ("CALC") category was approved in December 2008, in the amount of R$153,283, for 

deployment of the 2008 to 2010 Program of Investments in expansion, modernization and improvements in the electric energy distribution system. The funds approved are 

available for draft for a period of 60 months. It is a type of direct financing (without the intervention of a financial agent), created by the BNDES in 2005, aimed to simplify the 

procedures of access to facilities for large groups that represent low credit risk and favorable operating history with BNDES. The first release to Bandeirante of R$86,364 was 

made on December 23, 2009, and may be amortized in 72 months with grace period up to May 15, 2011. The first installment matures on June 15, 2011 and the last 

installment on May 15, 2017, with interest ranging from 2.32% to 3.32% p.a. above the TJLP and interest rate of 4.50% p.a., payable as of February 17, 2010 on a quarterly 

basis during the grace period and on a monthly basis after the grace period. Guarantee, assignment of revenues equivalent to 130% of the amount of the highest financing 

installment. 

F-41

21.2 

Additional information on debt service of Escelsa 

Eletrobrás 


�� 

�� 

�� 

�� 

BNDES 

(i) BNDES agreement n°. 88,426 / Agent Banco do Brasil - Signed i n December 2007, loan intended for the deployment of a Program for Investments in expansion, 

modernization and improvement of the performance of the power distribution network, being the first release of money in January 2008, in the amount of R$27,054, and the 

second release in May 2008, in the amount of R$6,106, with funds from BNDES (Finem/Finame) through Banco do Brasil, amortizable in 72 monthly installments, with the first 

falling due on July 15, 2008 and the last on June 15, 2014 and interest of 3.3% p.a., indexed to TJLP. Guarantee, assignment of revenues equivalent to 130% of the amount 

of the highest financing installment. This operation carries a covenant of gross debt/EBITDA at a ratio not exceeding 3.5. The company is in compliance to the present time. 

(ii) BNDES agreement n°. 88,426 / Agent Banco Santander - Sign ed in December 2007, loan intended for the deployment of a Program for Investments in expansion, 

modernization and improvement of the performance of the electricity distribution network, being the first release of money in January 2008, in the amount of R$27,054, and the 

second release in May 2008, in the amount of R$6,106, with funds from BNDES (Finem/Finame) through Banco Santander, amortizable in 72 monthly installments, with the 

first falling due on July 15, 2008 and the last on June 15, 2014 and interest of 3.3% p.a, indexed to TJLP. Guarantee, assignment of revenues equivalent to 130% of the 

amount of the highest financing installment. This operation carries a covenant of gross debt/EBITDA at a ratio not exceeding 3.5. The company is in compliance to the present 

time. 

(iii) BNDES /CALC - Opening of revolving credit in the Credit Limit Opening Contract ("CALC") category was approved in December 2008, in the amount of R$164,091, for 

deployment of the 2008 to 2010 Program of Investments in expansion, modernization and improvements in the electric energy distribution system. The funds approved are 

available for draft for a period of 60 months. It is a type of direct financing (without the intervention of a financial agent), created by the BNDES in 2005, aimed to simplify the 

procedures of access to facilities for large groups that represent low credit risk and favorable operating history with BNDES. The funds released to Escelsa were: R$103.8 

million and R$7.5 million on December 23, 2009 and February 24, 2011, respectively. The amounts are amortizable in 72 months and with a grace period up to May 15, 2011, 

with the first installment falling due on June 15, 2011 and the last on May 15, 2017, with interest ranging between 2.32% and 3.32% p.a. above the TJLP, and fixed interest of 

4.50% p.a., falling due as of February 17 , 2010, quarterly during the grace period and monthly after this period. Guarantee, assignment of revenues equivalent to 130% of the 

amount of the highest financing installment. 

Bank Credit Certificates – Agreements signed in February 2007 worth a total of R$40,400, being R$ 20,200 signed with the Banco do Brasil S.A. and R$ 20,200 with Banco 

Santander S.A. The principal value of the loan carries an interest rate of 105% of CDI, capitalized daily. Principal payable in five annual installments, the first due on February 9, 

2010 and the last on February 10, 2014 with semi-annual payments of interest as from August 9, 2007 to February 10, 2014. This operation carries a covenant of gross 

debt/EBITDA at a ratio not exceeding 3.5. The company is in compliance to the present time. Conditions are identical in the case of both institutions. 

Banco do Brasil - Commercial Credit Note - Agreement signed on June 24, 2010, in the amount of R$ 135,000 in the Agroindustrial Credit category, released in full on June 28, 

2010. The principal value of the loan carries an interest rate of 100% of CDI. Principal and interest maturing in 10 semi-annual installments, with the first on November 29, 2010 

and the last on May 29, 2015. This operation carries a covenant of gross debt/EBITDA at a ratio not exceeding 3.5, semi-annually. calculated. 

(i) 1st stage - Contract ECFS 031/04 - Facility in the amount of R$30,968, as financing (RGR) R$4,764, as economic subsidy granted by Eletrobrás and R$4,764 in the form of 

economic subsidy granted by the State Government of Espírito Santo–Program created by Decree nº 4,873, of November 11, 2003, coordinated by the Ministry of Mines and 

Energy and commissioned by Eletrobrás. Contract signed on May 21, 2004, whereas funds were released in the form of financing in the amount of R$9,290 in 2004, R$6,194 

in 2005, R$ 4,150 in 2006, R$ 3,095 in 2008, totaling R$ 22,729 and were released in the form of a subsidy in the amount of R$ 2,230 in 2004, R$ 4,417 in 2005, R$638 in 

2006, R$169 in 2008, totaling R$ 7,454. The principal amount carries an interest rate of 5% annually and a management fee of 1% annually, both maturing monthly as from 

October 30, 2004. The principal is payable monthly as from August 30, 2006 to July 30, 2016. The loan is guaranteed by promissory notes and an assignment on company 

revenues. On the non-disbursed balance there is a credit reserve commission of 1% p.a., maturing on the 30th of each month, up to the termination of the credit. 

(ii) 2nd stage - Contract ECFS 106/05 - Facility in the amount of R$50,304, as financing (RGR) R$7,739, as economic subsidy granted by Eletrobrás and R$7,739 in the form 

of economic subsidy granted by the State Government of Espírito Santo–Program created by Decree nº 4,873, of November 11, 2003, coordinated by the Ministry of Mines 

and Energy and commissioned by Eletrobrás. Contract signed on November 20, 2005, whereas funds were released in the form of financing in the amount of R$15,091 in 

2006, R$ 20,122 in 2007 and R$1,900 in 2010 totaling R$ 37,113 and were released in the form of a subsidy in the amount of R$ 5,522 in 2006, R$ 6,096 in 2007 and R$415 

in 2008 totaling R$12,033. The principal amount carries an interest rate of 5% p.a. and a management fee of 1% p.a., both maturing monthly as from April 30, 2006. The 

principal is payable monthly as from May 30, 2008 to April 30, 2018. The loan is guaranteed by promissory notes and an assignment on company revenues. On the nondisbursed 

balance there is a credit reserve commission of 1% p.a., maturing on the 30th of each month, up to the termination of the credit. 

(iii) 3rd stage - Contract ECFS 181/07 - Facility in the amount of R$75,764, as financing (RGR) and R$10,102, as economic subsidy granted by Eletrobrás - Program created 

by Decree nº 4873, of November 11, 2003, coordinated by the Ministry of Mines and Energy and commissioned by Eletrobrás. Contract signed on June 25, 2007. Resources 

released in the form of financing in the amount of R$42,933 in 2008. The principal amount carries an interest rate of 5% p.a. and a management fee of 1% p.a., both maturing 

monthly as from April 30, 2008. The principal is payable monthly as from April 30, 2010 to March 30, 2020. The loan is guaranteed by promissory notes and an assignment on 

company revenues. On the non-disbursed balance there is a credit reserve commission of 1% p.a., maturing on the 30th of each month, up to the termination of the credit. 

(iv) 4th stage - Contract ECFS 258/09 - Facility in the amount of R$56,737 as financing (RGR) and R$7,565, as economic subsidy granted by Eletrobrás - Program created by 

Decree 4873, of November 11, 2003, coordinated by the Ministry of Mines and Energy and commissioned by Eletrobrás. Contract signed on August 28, 2009, whereas funds 

were released in the form of financing in the amount of R$17,021 in 2009 and were released in the form of a subsidy in the amount of R$ 2,270 in 2009. The principal amount 

carries an interest rate of 5% p.a. and a management fee of 1% p.a., both maturing monthly as from January 30, 2010. The principal is payable monthly as from January 30, 

2012 to December 30, 2021. The loan is guaranteed by promissory notes and an assignment on company revenues. On the non-disbursed balance there is a credit reserve 

commission of 1% p.a., maturing on the 30th of each month, up to the termination of the credit. 

F-42

21.3 Additional information on debt service of Enerpeixe 

Direct installment 

26.184 

235.671 

7.855 

70.701 

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Reluz Program 

(i) Contract ECF-2314/04 executed on July 6, 2004. Line of credit amounting to R$ 8,823, in the form of finance. Funds were released in the amount of R$ 882, R$ 2,972, R$ 

1,323 and R$ 2,175, on October 14, 2004; May 24, 2005; September 8, 2005 and September 4, 2008, respectively. The debt balance carries an interest rate of 5% p.a., which 

was capitalized up to January 30, 2005 at a rate of 1.5% p.a. and a management fee of 1.5% p.a., paid monthly. The outstanding debt balance shall be paid in 60 equal 

monthly and consecutive installments, the first maturing on February 28, 2005 and the last one on January 30, 2011. The loan is guaranteed by promissory notes and an 

assignment on company revenues. The remuneration plus the amount of principal was settled on January 30, 2011 in a single installment. 

(ii) Contract ECF-2472/05 executed on July 12, 2007. Line of credit amounting to R$ 306, in the form of finance. Funds were released in the amount of R$ 31 on October 11, 

2007. The debt balance carries an interest rate of 5% p.a., which was capitalized up to July 30, 2008 at a rate of 1.5% annually and a management fee of 1.5% p.a., paid 

monthly. The outstanding debt balance shall be paid in 36 equal monthly and consecutive installments, the first maturing on October 30, 2008 and the last one on October 30, 

2011. The loan is guaranteed by promissory notes and an assignment on company revenues. 

(iii) Contract ECF-2488/05 executed on July 12, 2007. Line of credit amounting to R$ 261, in the form of finance. Funds were released in the amount of R$ 26 and R$ 188 on 

October 11, 2007 and November 11, 2008, respectively. The debt balance carries an interest rate of 5% p.a., which was capitalized up to November 30, 2008 at a rate of 1.5% 


December 30, 2008 and the last one on December 30, 2013. The loan is guaranteed by promissory notes and an assignment on company revenues. 

(iv) Contract ECF-2500/05 executed on July 12, 2007. Line of credit amounting to R$ 380, in the form of finance. Funds were released in the amount of R$ 38 and R$ 256 on 

October 11, 2007 and November 11, 2008, respectively. The debt balance carries an interest rate of 5% p.a., which was capitalized up to November 30, 2008 at a rate of 1.5% 


December 30, 2008 and the last one on December 30, 2013. The loan is guaranteed by promissory notes and an assignment on company revenues. 

(v) Contract ECF 2481/05 signed on September 30, 2008. Line of credit amounting to R$ 1,230, in the form of finance. Funds released in the amount of R$123 and R$801, on 

December 29, 2009 and May 21, 2010, respectively. The debt balance carries an interest rate of 5% annually, which will be capitalized up to December 30, 2011 and a 

management fee of 1.5% annually, paid monthly. The outstanding debt balance shall be paid in 60 equal monthly and consecutive installments, the first maturing on January 

30, 2012 and the last one on December 30, 2016. The loan is guaranteed by promissory notes and an assignment on company revenues. 

The balance of loans and financing reflects original financing from the BNDES of R$ 670,000, authorized by the Board of Directors of the BNDES, number 691/2003 of 

November 10, 2003 and contracted on May 21, 2004, being R$ 335,000 directly and R$ 335,000 through financial institutions as follows: 

Sub-credit 

"A" 

"B" 

"C" 

"D" 

BNDES 

7.314 

65.831 

335.000 

The major loan conditions are as follow: 

(i) Amortization: 

Itaú BBA Banco do Brasil Bradesco 

2.195 

19.749 

100.500 

6.546 

58.917 

1.829 

16.458 

83.750 

6.546 

58.917 

1.829 

16.458 

83.750 

5.237 

47.134 

1.463 

13.166 

67.000 

a) For the sub-credits "A" and "C", 12 monthly and successive installments, with the first falling due on March 15, 2007 and the last on February 15, 2008, already settled; 

b) For the sub-credits "B" and "D", 95 monthly and successive installments, with the first falling due on March 15, 2008 and the last on January 15, 2016. 

(ii) Charges: 

Indirect installment 

Unibanco 

Total amount of 

indirect installment 

a) For the subcredits "A" and "C", readjusted 3-month floating rate based on the weighted average costs of all the rates and expenses incurred by the BNDES in raising funding 

in foreign currency plus 4.5% p.a., during the period in which the guarantee granted by the indirect parent company EDP - Energias de Portugal; 

b) For the subcredits "B" and "D", TLJP – the Long Term Interest Rate plus 4.5% p.a. during the period in which the guarantee granted by EDP - Energias de Portugal S.A. is in 

full force and effect; and 

c) The abovementioned spreads can be 6% p.a. as from the effective date of the guarantee of the direct parent company Energias do Brasil, in place of the guarantee of EDP - 

Energias de Portugal, which may occur as from January 2008 only upon request from the Enerpeixe and the Company. This rate can be reduced to 5% p.a., if Energias do 

Brasil presents a minimum price-earnings ratio of 38% and Enerpeixe presents a rate of coverage of the debt service of 1.3. 

The rate of coverage of the debt service is calculated from the division of the cash generation of the activity by the debt service, based on information recorded in the financial 

statements, with semi-annual measurements in June and December. 

(iii) Guarantees and obligations: 

a) Lien on shares corresponding to 60% of the capital stock of the beneficiary held by the Company; 

b) Lien on emerging rights of the concession, including among others: 

• The beneficiary’s credit rights resulting from the sale of energy generated by UHE Peixe Angical for Bandeirante , Escelsa, Enersul, and Centrais Elétricas Matogrossenses 

S.A. – CEMAT; 

• The guarantees included in the Purchase and Sale of Energy Agreement - CCVEs. 

c) Maintenance in a financial reserve account of a value equivalent to at least three months of installments of amortization of principal, interest and charges as well as three 

months payment of the O&M Contract (Operation and Maintenance Contract), during the amortization phase; and 

d) Letter of guarantee of EDP - Energias de Portugal, governed by Portuguese laws. 

The restrictive clauses of these contracts were in full compliance on March 31, 2011. 

F-43 

26.184 

235.669 

7.316 

65.831 

335.000 

Total 

52.368 

471.340 

14.630 

131.662 

670.000

21.4 Additional Information on debt service of Investco 

BNDES 

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(i) Financing Agreement through the opening of a credit line signed with the BNDES, with the guarantee of Company’s shareholders and its controllers on September 21, 2000 

in the total amount of R$180,000, with an annual interest rate of 4% above the TJLP, payable quarterly on January 15, April 15, July 15 and October 15 of each year in the 

period between October 15, 2000 and October 15, 2002, and monthly as from November 15, 2002. The principal is being amortized in 120 monthly and consecutive 

installments according to the Increasing Amortization System (Price Table) as from November 15, 2002, and last maturity on October 15, 2012. Part of Investco’s common 

shares were given in guarantee together with a promissory note and an assignment of contractual rights. 

(ii) Credit Agreement Contract through onlending contracted with the BNDES signed with Banco Itaú, Bradesco, BBA Creditanstalt and Banco ABC, with the guarantee of 

Company’s shareholders and its controllers on September 21, 2000 for the amount of R$120,000, with an annual rate of interest of 4% over the TJLP, payable quarterly during 

the grace period. Following a grace period of 24 months, installments of principal are being amortized in 120 monthly and consecutive installments as from November 15, 

2002, and last maturity on October 15, 2012. Part of Investco’s common shares were given in guarantee together with a promissory note and an assignment of contractual 

rights. 

The operations establish restrictive contractual clauses (covenants ) of minimum capitalization level (shareholders' equity by total assets) and of cash, both fulfilled on March 

31, 2011. 

Banco da Amazônia 

Financing agreement signed on December 28, 2000, 10 for the total amount of R$44,300, to be amortized in 84 months, including a 36-month grace period, the first installment 

of principal maturing February 10, 2004 and the last on January 10, 2011 with an annual interest rate of 14%, payable monthly. During the grace period, 50% of these charges 

are payable, and the remaining 50% capitalized and incorporated in the outstanding debt balance, to be paid with the amortization of the principal installments. According to the 

addendum signed in December 2007, collateral in the form of equipment of Usina UHE Lajeado in guarantee and a bank guarantee from Unibanco S.A. were given, in the 

amount of R$ 18,937. The remuneration plus the amount of principal was settled on January 10, 2011 in a single installment. 

This contract does not have restrict contractual clause (covenants). 

Safra Leasing S.A. 

A commercial lease was signed on March 10, 2008 in the amount of R$198. The amortization period of this contract is 36 months. The financial charges are variation of the 

CDI + 1.45% p.a.. The payment of the first installment occurred on April 14, 2008 and the last installment has its maturity scheduled for March 14, 2011. The asset leased by 

the Company was a microbus for exclusive use by the employees of the Plant. The remuneration plus the amount of principal was settled on March 14, 2011 in a single 

installment. 

Bank Credit Bill 

On December 29, 2010, a credit line agreement was entered into with Banco Alfa de Investimentos S.A. in the amount of R$10,000. The amortization term of the agreement is 

90 days, in a bullet payment. Principal will bear Interest of 106% of the CDI, payable at the end of the agreement. The remuneration plus the amount of principal was settled on 

March 30, 2011 in a single installment. 

Cumulative receivable shares 

According to Article 8 of Investco's by-laws, the preferred shares of classes "A", "B" and "C", are entitled to the right of receiving a cumulative fixed annual dividend of 3% on 

their respective interest in capital. Due to this characteristic, these shares were classified as a debt instrument as they meet the definition of financial liability, since the Investco 

does not have the right to avoid the remittance of cash or other financial asset to another entity, as determined in paragraph 19 of CPC 39. 

The estimate of fair value considered the conditions above for the payment of dividends. Annual dividend payment was considered until 2033 (end of the concession) and 

discounted to present value at the rate of 8.70% p.a. 

21.5 Additional information on debt service of CESA and Pantanal 

BNDES (foreign currency) - Contract signed in February 2002 by CESA for the construction of three Small Hydroelectric Power Plants – PCH’s - Viçosa and São João in the 

state of Espírito Santo and Paraiso in the state of Mato Grosso do Sul. In fiscal year 2002, funds amounting to R$9,266 were obtained. Interest is levied on the amount of 

principal at the rate of 4.5% p.a. plus variation of UMBNDES, enforceable monthly, together with the installments of the principal with final maturity on July 16 , 2012. The 

guarantees are: (i) assignment of receivables resulting from authorizations granted by ANEEL, either from the extinguishment of the authorizations, purchase and sale of 

electricity and the right to generate electricity from its PCHs; and, (ii) the pledging of common nominative shares comprising the total stake of Energest in the CESAa. In the 

context of transfer of the concession of PCH Paraíso from CESA to Pantanal, the balances of this financing corresponding to PCH Paraíso, as well as the respective conditions 

established in the contract, were transferred to Pantanal. 

BNDES (national currency) - Contract signed in February 2002 by CESA for the construction of three Small Hydroelectric Power Plants – PCH’s - Viçosa and São João in the 

state of Espírito Santo and Paraiso in the state of Mato Grosso do Sul. In fiscal year 2002, funding amounting to R$ 30,014 and R$ 17,565 in 2004 and R$5,635 in 2007 were 

released. Interest is levied on the amount of principal at the rate of 4.5% p.a. plus variation of TJLP, enforceable monthly, together with the installments of the principal with final 

maturity on June 15 , 2012. The guarantees are: (i) assignment of receivables resulting from authorizations granted by ANEEL, either from the extinguishment of the 

authorizations, purchase and sale of electricity and the right to generate electricity from its PCHs; and, (ii) the pledging of common nominative shares comprising the total stake 

of Energest in the CESA. In the context of transfer of the concession of PCH Paraíso from CESA to Pantanal, the balances of this financing corresponding to PCH Paraíso, as 

well as the respective conditions established in the contract, were transferred to Pantanal. 

F-44

21.6 Additional information on debt service of Energest 

21.7 Additional information on debt service of Costa Rica 

21.8 Additional information on debt service of Santa Fé Energia S/A 

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Banco Santander Brasil S.A. - Contract nº 231006019 signed on February 12, 2009, in the amount of R$11,864, for the period of 60 days with final maturity on April 13, 2009, 

at the rate of 123.50% of CDI. Amortization and interest will be paid in a lump sum upon expiration of the agreement. Guarantee, surety in promissory note and Energias do 

Brasil as Intervening Guarantor. The settlements of this transaction were postponed, through amendments to the contract, and the maturity was rescheduled to March 10, 

2010, with all other original clauses maintained. On March 9, 2010, this operation had its settlement term extended to March 9, 2011, maintaining all the other clauses and 

conditions of the original contract ratified, at the rate of 113.50% of CDI. On March 9, 2011, this operation had its settlement term extended to March 5, 2012, at the rate of 

103.50% of CDI. 

BNDES - Contract signed on November 13, 2009 in the amount of R$25,404. The first amount released to CESA was R$4,863, on April 22, 2010, and the second amount 

released was R$15,141, on May 13, 2010, to be amortized in 97 and 96 months, respectively; both first installments mature on June 15, 2010 and the last installment on May 

15, 2018, with interest varying from 1.92% above TJLP and fixed interest of 4.50%. Guarantee with pledge of revenue equivalent to 1.8 times the overdue installment of this 

agreement. 

BNDES – Contract signed in October 2001 with the pass through of funds from, Itaú (leader), Alfa and Sudameris banks, to finance investments for the installation of the fourth 

turbine at UHE Mascarenhas. In fiscal year 2001, funds amounting to R$24,102 were obtained. Interest is levied on the amount of principal at the rate of 3.5% p.a., plus 

variation of TJLP (national currency) and of 3.5% p.a. plus the variation of UMBNDES (foreign currency), enforceable monthly, together with the installments of the principal 

with final maturity on October 15, 2010. The guarantee is an assignment on revenues from electricity services provided in the amount equivalent to at least one decimal point 

four times the value of the largest installment due from the beneficiary. This operation establishes covenant of the relation EBITDA/ Gross financing expenses, which has been 

complied with to date. 

Onlending of Funds Obtained in Reais Abroad – contract with Banco Santander S.A., nº 231006029 - Signed on February 12, 2009, by CESA S.A. in the amount of R$21,355, 

for the period of 60 days with final maturity on April 13, 2009, at the rate of 123.50% of CDI. Amortization and interest will be paid in a lump sum upon expiration of the 

agreement. Guarantee, surety in promissory note and Energias do Brasil S.A. as Intervening Guarantor. Through a rider to the contract, on April 13, 2009 this operation had its 

settlement term extended to June 12, 2009, maintaining all the other clauses and conditions of the original contract ratified. On June 12 this operation had its maturity date 

renegotiated to September 10, 2009, maintaining all the other clauses and conditions of the original contract. On September 10, 2009, this operation had its settlement term 

extended to March 10, 2010, maintaining all the other clauses and conditions of the original contract ratified. On March 9, 2010, this operation had its settlement term extended 

to March 9, 2011, maintaining all the other clauses and conditions of the original contract ratified, at the rate of 113.50% of CDI. On March 9, 2011, this operation had its 

settlement term extended to March 5, 2012, at the rate of 113.50% of CDI. 

Bank Credit Certificates – Agreement signed in February 2008 worth a total of R$48,000, signed with the Banco do Brasil S.A. The principal value of the loan carries an 

interest rate of 106.6% of CDI, capitalized daily. Principal payable in five annual installments, the first due on February 20, 2011 and the last on February 20, 2015 with semiannual 

payments of interest as from August 20, 2008 to February 20, 2015. This operation carries a covenant of net debt/EBITDA at a ratio not exceeding 3.5. 

Eletrobrás-Financing ECF-1,568/97 – Contract signed by Enersul, on November 4, 1997, in the amount of R$5,375, for financing of the construction of the Hydroelectric Plant 

of Costa Rica, with resources from the Investment Fund of Eletrobrás – FINEL, with interest of 6.5% p.a., ending on May 31, 2014, amortization in 180 monthly, equal and 

successive installments, with guarantee in revenue and promissory note. Contract transferred to Costa Rica Energética, through the “Private Contract for Commitment of 

Debtor Release”. 

BNDES - Agreement signed in May 2009, with onlending of funds through Banco do Brasil. Funds in the amount of R$64,000 were released on May 29, 2009 and on April 27, 

2010, the remaining balance of this contract in the amount of R$ 11,633 were released. Interest is levied on the amount of principal at the rate of 1.9% p.a. plus variation of 

TJLP, enforceable monthly, as from March 15, 2010, together with the installments of the principal with final maturity on February 15, 2024. The negotiated guarantee 

establishes the lien on shares of the beneficiary at 100% in favor of the Financial Agent. This operation establishes a covenant of the Debt Service Coverage Index (ICSD) of at 

least 1.2 times, complied with thus far. 

21.9 Additional information on debt service of Parent company under joint ownership with Porto do Pecém 

BNDES - Contract signed in July 2009. In October 2009, occurred the 1st release in the amount of R$700 million. In July 2010, occurred the 2nd release in the amount of 

R$260 million. In December 2010, occurred the 3rd release in the amount of R$120 million. The amounts released permit full repayment of the bridging loans in Brazilian reals 

and will also cover the expenditures provided for in implantation of the enterprise. The financing agreement with BNDES establishes a loan in the amount of R$1.4 billion (in 

nominal R$, excluding interest during construction), with a total period of 17 years, consisting of 14 years of amortization and grace period for payment of interest and principal 

up to July 2012. The contracted cost is of TJLP plus 2.77% p.a.. The interest will be capitalized during the construction phase. 

BID - Contract signed in July 2009. In October 2009, occurred the 1st release in the amount of R$260 million. In August 2010, occurred the 2nd release in the amount of R$50 

million. In February 2011, occurred the 3rd release in the amount of R$9 million. The financing agreement with BID establishes an A Loan in the total amount of US$ 147 

million, and B Loan in the total amount of US$ 180 million, with total term of 17 years in the A Loan and 13 years in the B Loan, with a grace period for payment of interest and 

principal up to July 2012. The initial rates of the A Loan and B Loanare Libor + 350 bps and Libor + 300 bps, respectively, with step ups throughout the period. Said long-term 

loan in US$, in turn, has already been subject to the contracting both of exchange hedge and of an interest rate swap (from Libor to fixed rate). The consortium of B-lenders is 

comprised of the banks Millenium BCP, Caixa Geral de Depósitos and Calyon. 

As of March 31, 2011, the restrictive operating clause (covenants) referring to the service agreement for the treatment of residual waters, included in the financing contract with 

BID, is not being complied with. Subsidiary Porto do Pecém obtained the postponement of the maturity to March 31, 2011 in order to eliminate this restriction. On March 30, 

2011 a new postponement to May 15, 2011 was requested. 

The other restrictive clauses are duly complied with on this date. 

F-45

21.10 Maturity of current and non-current installments (principal and charges): 

Consolidated 

Currency 

Net 

Current 

National Foreign Total 

2011 224.336 

28.940 

253.276 

2012 114.527 

5.182 

119.709 

Non-current 

338.863 

34.122 

372.985 

2012 206.393 

83.248 

289.641 

2013 286.504 

14.198 

300.702 

2014 252.680 

15.457 

268.137 

2015 338.076 

16.852 

354.928 

2016 108.305 

18.112 

126.417 

2017 76.312 

19.643 

95.955 

2018 60.060 

21.396 

81.456 

2019 56.633 

23.038 

79.671 

After 2019 350.543 

143.000 

493.543 

1.735.506 

354.944 2.090.450 

Total 2.074.369 

389.066 2.463.435 

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Hedge operation with Banco Citibank of NDFs (Non Deliverable Forwards), executed on October 17, 2007, in the total amount of US$ 639,918,000, with maturities between 

January 2008 and October 2012, with the contracted initial parity of R$/US$/US$1.8138. Considering the settlements in advance and overdue until March 31, 2011, the 

notional outstanding in this base date is US$ 328,777,000. 

Hedge operation with Banco Citibank and BTG Pactual of NDFs (Non Deliverable Forwards), executed on June 30, 2009, in the total amount of EUR 26,059,929.27, with 

maturities between July 2009 and January 2012, with the contracted initial parity of EUR/US$1.4040. Considering the settlements overdue until March 31, 2011, the notional 

outstanding in this base date is US$ 1,768,211. 

Hedge operation with Banco HSBC and BTG Pactual of NDFs (Non Deliverable Forwards), executed on June 1, 2009, in the total amount of EUR 10,134,416.94, with 

maturities between July 2009 and January 2012, with the contracted initial parity of EUR/US$ 2.7300. Considering the settlements overdue until March 31, 2011, the notional 

outstanding in this base date is US$ 489,248. 

Hedge operation with Banco Citibank and BTG Pactual of NDFs (Non Deliverable Forwards), executed on June 30, 2009, in the total amount of US$ 106,592,330.70, with 

maturities between July 2009 and January 2012, with the contracted initial parity of US$/R$ 1.9678. 

Hedge operation with Banco Citibank of NDFs (Non Deliverable Forwards), executed on June 30, 2009, in the total amount of US$ 56,162,599.70, with maturities between July 

2009 and November 2011, with the contracted initial parity of US$/R$ 1.9678. Considering the settlements overdue until March 31, 2011, the notional outstanding in this base 

date is US$ 16,884,611. 

Swap operation at Banco Citibank, contracted on October 16, 2007, in the amount of US$ 140,521,000, starting on April 2, 2012 with final maturity on October 1, 2024, where 

the Porto do Pecém pays variation of the US$ plus 5.82% p.a. in the short position and the Bank in the long position pays 100% of Libor. 

Swap operation at Banco Citibank, contracted on October 16, 2007, in the amount of US$ 186,479,000, starting on April 2, 2012 with final maturity on October 1, 2021, where 

the Porto do Pecém pays variation of the US$ plus 5.79% p.a. in the short position and the Bank in the long position pays 100% of Libor. 

Swap Operation with Banco Citibank, for the coverage of the interest capitalized during the construction of the Porto do Pecém plant related to the financing with BID, 

contracted on July 2, 2009, in the amount of US$ 1,249,288.739 (amount related to the accumulated balance estimated for 4 tranches of BID financing, and the approximate 

exposure of US$ 36,000,000) as of November 16, 2009 and final maturity on November 16, 2011, where the Company pays variation of the dollar plus 2.085% p.a. at the 

passive index edge and the Bank pays 100% of Libor at the active index edge. 

F-46

The change in the loans and financing in the period is as follows: 

Loans, financing and charges 

�� 

�� 

�� 

�� 

Consolidated 

Net amount 

Monetary Net amount 

at 

Entries 

Principal 

payments 

Payments of 

interest 

Interest provided Capitalized interest Transfers 

Adjustment to 

market value 

Adjustment to 

present value 

Cost of 

transaction 

and 

exchange 

at 

12/31/2010 variation 3/31/2011 

356.046 

940 

(85.966) 

(34.406) 

33.223 

(12) 

82.310 

0,00 (1) 

482 

(331) 352.285 

Swaps 0,00 

19.655 

0,00 (1.788) 

(1.281) 

498 

0,00 2.481 

890 

0,00 0,00 245 20.700 

375.701 

940 

(87.754) 

(35.687) 

33.721 

(12) 

84.791 

890 

(1) 

482 

(86) 372.985 


2.040.985 

6.579 

0,00 0,00 23.354 

12 

(83.431) 

0,00 457 

607 (6.004) 1.982.559 

Swaps 0,00 

99.897 

0,00 0,00 0,00 31 

0,00 (2.481) 10.443 

0,00 0,00 1 107.891 

2.140.882 

6.579 

- 

- 

23.385 

12 

(85.912) 10.443 

457 

607 (6.003) 2.090.450 

22 Post-employment benefits 



12/31/2010 3/31/2011 12/31/2010 3/31/2011 12/31/2010 

BSPS - Reserves to amortize 0,00 19.220 

19.245 

90.262 

93.998 

Assistential Programs 0,00 0,00 0,00 6.867 

6.867 

Retirement Incentive Aid - AIA 0,00 582 

582 

2.484 

2.646 

Medical Healthcare and Life Insurance 0,00 7.777 

7.780 

88.420 

85.717 

Private pension 3 

2 

3 

0,00 0,00 

Private pension plan - ENERPREV 0,00 1 

1 

0,00 0,00 

3 

27.582 

27.611 

188.033 189.228 

Pursuant to CVM Resolution 600 of October 7, 2009, as from January 1st, 2010, publicly held companies are required to account for post employment benefit liabilities based 

on rules contained in CPC 33 Technical Pronouncement. 

In accordance with CPC 33 - Employee Benefits, future obligations such as defined benefits assumed by the companies should be recognized in liabilities, net of recognized 

funds. 

22.1 Bandeirante 

Current 

3/31/2011 12/31/2010 3/31/2011 12/31/2010 

BSPS - Reserves to amortize 19.220 

19.245 

90.262 

Assistential Programs 6.867 

19.220 

19.245 

97.129 

Non-current 

Current 

Non-current 

Consolidated 

Current liabilities Non-current liabilities 

The subsidiaries Bandeirante, Escelsa, and Energest, hired independent actuaries to conduct an actuarial appraisal of defined benefits. 

93.998 

6.867 

100.865 

Structured as "Vested, Defined Benefit and Variable Contribution", managed by Fundação Cesp, a multisponsored, not-for-profit and closed pension plan entity that is 

engaged in the management and administration of pension plan benefits for the's employees and former Bandeirante's employees. 

The plan management is in the process of being transferred to EnerPrev and the transfer will be complete in the first half of 2011, in accordance with Rule 670, of September 3, 

2010, published in the Union Official Gazette (DOU) on September 6, 2010. The plan has the following characteristics: 

(i) Settled Complementary Proportional Benefit Plan - BSPS – This corresponds to the employees’ proportional benefits calculated on the basis of time of service up to March 

1998. The amount of R$113,243, as at December 31, 2010 pursuant to CVM Resolution 600 of October 7, 2009, corresponds to the portion of benefits exceeding the plan’s 

assets. Part of the commitment is being settled in 240 months as from September 1997, based on a percentage of the payroll, subject to revision semiannually to ensure 

settlement of the balance in the above period. 

This plan was effective until March 31, 1998 and is a defined benefit type which grants Settled Complementary Proportional Benefits (BSPS) in the form of lifetime income 

convertible into a pension to plan members registered as at March 31, 1998 in a defined amount proportional to accumulated years of service up to the said date conditional 

upon compliance with the regulations. The Bandeirante bears total responsibility for covering actuarial shortfalls. 

(ii) Mixed Benefits Plan – DB and DC 

• DB Plan – Effective after March 31, 1998 - Defined Benefit Plan that grants a lifetime income convertible into a pension proportional to time of service accumulated to March 

31, 1998 based on 70% of the monthly average wage over the past 36 months in active employment. In the event of death while the employee is on active service, or disability, 

the benefits comprise all the years of past service (including the accumulated period to March 31, 1998) and therefore dos not include the accumulated period of service after 

March 31, 1998 alone. The Bandeirante and plan members bear equal responsibility for covering the actuarial shortfalls. 

• DC Plan – Implemented in conjunction with the DB Plan, effective after March 31, 1998. It is a pension plan that until the time of granting the lifetime income, convertible (or 

not) into a pension, is a defined contribution plan, not generating any actuarial responsibility on the part of the subsidiary Bandeirante. Only after the act of granting of the 

lifetime income, convertible (or not) into a pension, does the pension plan become a defined benefit one, subjecting the Bandeirante to actuarial responsibility. 

F-47

22.1.1 

22.2 Escelsa 

Balance on December 31, 2010 113.243 

Net expense recognized in the quarter 1.699 

Benefits directly paid by the Company (5.435) 

Balance on March 31, 2011 109.507 

22.2.1 Retirement plans 

22.2.1.1 

22.2.1.2 

�� 

�� 

�� 

�� 

The actuarial appraisal shows as at December 31, 2010 that in the case of the defined benefits plans the present value of the actuarial liabilities, net of the fair value of the 

assets, shows a deficit as indicated below in the reconciliation of assets and liabilities of the plan with the defined benefit liability recognized in the balance sheet: 

EnerPrev - Supplementary Pension of Grupo Energias do Brasil 

Structured in the "Defined Contribution" category, under EnerPrev management and registered with CNPB - National Register of Benefit Plans at Previc. The Funding Plan is 

sustained paritarially by contributions of the sponsor and of the participant, pursuant to the PGBL Estilo de Vida Plan Regulation, under management of Bradesco Vida e 

Previdência S/A. 

As sponsor, Bandeirante contributed R$95 (R$75 in the quarter ended March 31, 2010). 

This plan has the adhesion of 211 contributors. 

Subsidiary Escelsa currently maintains retirement and pension supplementation plans on behalf of employees and former employees and other post-employment benefits, 

such as medical care, life insurance, Retirement Incentive Aid and other benefits to retirees. 

Plan I - Escelsos structured as a "Defined Benefit" plan, managed by EnerPrev-Previdência Complementar of the Group Energias do Brasil and registered with the National 

Register of Benefit Plans (CNPB) of Previc. The Funding Plan is sustained paritarially by contributions of the sponsor and of the participant, pursuant to the Benefit Plan 

Regulation. 

Plano II - Escelsos structured as a "Variable Contribution" plan, managed by EnerPrev-Previdência Complementar of the Group Energias do Brasil and registered with the 

National Register of Benefit Plans (CNPB) of Previc. The Funding Plan is sustained paritarially by contributions of the sponsor and of the participant, pursuant to the Benefit 

Plan Regulation. 

The actuarial appraisal realized as at December 31, 2010 showed that for these pension plans, the fair value of the assets exceeded the present value of the actuarial liabilities 

as indicated below: 

12/31/2010 

Present value of actuarial liabilities total or partially covered (143.214) 

Fair value of assets 239.072 

Total Deficit 95.858 

0,00 0,00 

The surplus in the defined benefit pension plans reduces the risk of an eventual actuarial liability for Escelsa. The company’s management has not recorded this asset due to 

the uncertainty of an effective reduction in the Sponsor’s contributions or of future reimbursement. 

Structured as a "Defined Contribution" plan, managed by EnerPrev-Previdência Complementar of the Group Energias do Brasil and registered with National Register of Benefit 

Plans (CNPB) of Previc, the benefit plan funding is supported by equal contributions from the sponsor company and the plan member, in accordance with the Plan Regulation. 

In addition, there is the PGBL Estilo de Vida, managed by Bradesco Vida e Previdência S/A, in which the benefit plan funding is supported by equal contributions from the 

sponsor company and the plan member, in accordance with the Plan Regulation. 

As sponsor, Escelsa contributed in the quarter with R$96 (R$59 in the quarter ended March 31, 2010). 

This plan has the adhesion of 162 contributors. 

22.2.2 Retirement incentive aid, medical care, life insurance and other benefits to retirees 

Current liabilities Non-current liabilities 

3/31/2011 12/31/2010 3/31/2011 12/31/2010 

Retirement Incentive Aid - AIA 582 

582 

2.484 

2.646 

Medical Healthcare and Life Insurance 7.777 

8.359 

7.780 

8.362 

Balances on December 31, 2010 96.725 

Net expense recognized in the quarter 4.296 

Benefits directly paid by the Company (1.850) 

Balance on March 31, 2011 99.171 

88.324 

90.808 

Retirement Incentive Aid - AIA – Benefit to employees hired up to December 31, 1981, payable on termination of the labor contract, irrespective of the reasons for such 

severance. The AIA guarantees payment of a benefit, the amount of which was calculated considering for each employee, the proportionality of the period of contribution to the 

INSS (Brazilian Social Security Service) up to October 31, 1996, the employee’s salary and the INSS benefit as at October 31, 1996. 

The actuarial evaluation carried out on the base date of December 31, 2010 determined a present obligation for Defined Benefit Plans, as shown in the reconciliation of plans' 

obligations. 

Pursuant to CVM Resolution 600 of October 7, 2009, post employment benefit liabilities should be accounted for based on rules contained in CPC 33 of Accounting 

Pronouncements Committee. To meet this requirement, the Escelsa hired independent actuaries to conduct an actuarial appraisal of these benefits according to the Projected 

Unit Credit Method. 

F-48 

85.717 

88.363

22.3 Energest 

22.3.1 

22.3.2 

Present value of actuarial liabilities total or partially covered 

Fair value of assets 

Total Deficit 

Balance on December 31, 2010 

- 

Net expense recognized in the quarter 

(105) 

Balance on March 31, 2011 (105) 

22.4 EnerPrev – Pension plans of the defined contribution type 

23 Estimated employee benefits and social charges 

�� 

�� 

�� 

�� 

The subsidiary Energest has the following liabilities with post-employment benefits: 

(i) Sponsorship of the complementary retirement and pension plans; and 

(ii) Other post employment benefits made up of Healthcare plan and other benefits to retirees. 

Pursuant to CVM Resolution 600 of October 7, 2009, post employment benefit liabilities should be accounted for based on rules contained in CPC 33 of Accounting 

Pronouncements Committee. To meet this requirement, the Company hired independent actuaries to conduct an actuarial appraisal of these benefits according to the 

Projected Unit Credit Method. 

Complementary retirement and pension plans 

The direct subsidiary Energest is the sponsor of the Complementary retirement and pension plans, managed by EnerPrev since September 19, 2008, current managing entity 

of pension plans so far managed by Fundação Escelsa de Seguridade Social – (“ESCELSOS”), a closed, non profitable private pension plan entity responsible for managing a 

group of pension plans on behalf of the subsidiary Company's employees and former employees, through two benefit plans: Benefit Plan I of the defined benefit type and 

Benefit Plan II of the defined contribution type, convertible into the defined benefit type on conversion to lifetime income. 

The actuarial appraisal realized as at December 31, 2010 showed that for these pension plans, the fair value of the assets exceeded the present value of the actuarial liabilities 

as indicated below: 

Medical care and Other benefits to retirees 

12/31/2010 


Consolidated 

3/31/2011 12/31/2010 3/31/2011 12/31/2010 

Payroll 7.388 

3.020 

51.885 

IRPJ / / CSLL 0,00 0,00 92 

INSS & FGTS 1.084 

1.754 

8.440 

Total 8.472 

4.774 

60.417 

24 Regulatory and sector charges 

Reversal Global Reserve Quota - RGR 7.883 

Collection quota to the Fuel Consumption Account - CCC 24.184 

Energy Development Account - CDE 18.607 

Financial offsetting for the use of hydric resources 7.051 

Tariff charges (ECE/ EAEEE) 31.835 

Research and development 54.069 

Energy Efficiency Program 81.739 

Inspection fee - ANEEL 1.149 

Other charges 3.083 

Total 229.600 

24.1 Research and Development (“R&D”) and Energy Efficiency Program (“EEP”) 

(986) 

2.115 

1.129 

The surplus in the defined benefit pension plans reduces the risk of an eventual actuarial liability for the Energest. The company’s management has not recorded this asset due 

to the uncertainty of an effective reduction in the Sponsor’s contributions or of future reimbursement. 

According to the same actuarial appraisal mentioned in Note 22.3, the following obligations with Medical care and other post-employment benefits to retirees that offer 

coverage for medical and dental care, medications. 

Structured in the "Defined Contribution" category, under EnerPrev management and registered with CNPB - National Register of Benefit Plans at Previc. The Funding Plan is 

sustained paritarially by contributions of the sponsor and of the participant, pursuant to the PGBL Estilo de Vida Plan Regulation, under management of Bradesco Vida e 

Previdência S/A. 

In the capacity of sponsors of this type of plan, the Companies from Grupo Energias do Brasil contributed in the quarter the sum of R$565 (R$297 in the quarter ended March 

31, 2010). 

41.384 

64 

9.002 

50.450 

The payroll item includes basically a provision for vacation, 13th salary, as well as the provision for profit sharing for the period. 

Accounts payable related to charges established in the electricity sector legislation are as follow: 

Current 

Non-current 

3/31/2011 12/31/2010 3/31/2011 12/31/2010 

12.022 

24.185 

16.188 

6.569 

31.860 

53.051 

74.489 

1.138 

5.878 

225.380 

0,00 0,00 

0,00 0,00 

0,00 0,00 

0,00 0,00 

0,00 0,00 

12.336 

9.584 

0,00 3.329 

0,00 0,00 

0,00 0,00 

12.336 

12.913 

Expenditures with R&D and PEE made by the subsidiaries are calculated under the terms of the sector legislation, of the electric energy concession contracts and are 

regulated by Normative Resolutions ANEEL nºs 300 and 316 of February 12, 2008 and May 13, 2008 respectively. The subsidiaries are obligated to invest 1% of the Net 

operating revenue adjusted in conformity with the criteria defined by ANEEL, recording the value of liability monthly by competent period. The liability is restated monthly by the 

variation of the SELIC rate up to the conclusion of the R&D and PEE (energy efficiency) projects, when its write-off occurs. 

F-49

�� 

�� 

�� 

�� 

24.2 Other charges 

Law 12911 of December 9, 2009, regulated by circular Official Letters nºs 965/2010-SFF/ANEEL and 648/2010-SAF/ANEEL, established that the concession and permit 

holders for public electrical power distribution services are obliged to collect an additional 0.3% of net operating Revenues utilizing the same criteria for the constitution of P&D 

liabilities for the purposes of indemnity the Federal Units that suffered loss of revenues as a result of ICMS tax collection on fossil fuels used to generate energy for the National 

Grid (Sistema Interligado Nacional) 

25 Use of Public Property 

The subsidiaries Enerpeixe and Investco, as retribution for the grant conceded thereto for exploration of the hydroelectric potentials of the Peixe Angical and Lajeado plants, 

respectively, pay to the Federal Government over the lifetime of the concession contracts and while they are exploring them, monthly installments equivalent to one twelfth 

(1/12) of the annual sum defined in the concession contracts, restated annually with a basis on the annual variation of IGP-M calculated by Fundação Getúlio Vargas (or 

another index that takes its place) in the months of October for Enerpeixe and December for Investco. 

In accordance with CPC 38 - Financial Instruments - Recognition and Measurement, total fair value of the obligation referring to the Use of public property until the end of the 

concession agreement was provisioned and capitalized as a contra entry to Intangible assets (Note 18) at initial recognition. 

This intangible asset is being amortized over the concession agreement period and the liability is being amortized by payment. 

Current and non-current liabilities balances are recognized at present value at the project's implicit rate. 

Changes in the period are as follows: 


Principal 

Balance on December 31, 2010 19.440 215.764 

Adjustment to present value 0,00 (7.261) 

Charges and monetary restatements 319 

22.295 

Amortizations (4.559) 

0,00 

Transfer to current 4.140 

(4.140) 

Balance on March 31, 2011 19.340 226.658 

26 Provisions – Current and non-current 


Consolidated 

Current Non-current Current Non-current 

3/31/2011 12/31/2010 3/31/2011 12/31/2010 3/31/2011 12/31/2010 3/31/2011 12/31/2010 

Civl, tax, and labor provisions and other 2.823 

1.318 

26.472 

26.912 

10.023 

9.159 143.405 140.785 

Environmental licenses 0,00 0,00 0,00 0,00 20.103 

21.116 

9.891 11.031 

Dismantling 0,00 0,00 0,00 0,00 0,00 0,00 1.789 1.750 

Total 2.823 

1.318 

26.472 

26.912 

30.126 

30.275 155.085 153.566 

0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 

26.1 Provisions for contingencies and restricted deposits – current and non-current 

26.1.1 Risk of probable loss 


Liabilities 

Assets 

Balance at Write-offs 

Balance at 

Judicial deposit 

Degrees 12/31/2010 Additions Payments Reversals 3/31/2011 3/31/2011 12/31/2010 

Labor claims 1st, 2nd and 3rd 8 

0,00 0,00 0,00 8 

5 

5 

Other 28.222 

1.744 

0,00 (679) 

29.287 

0,00 0,00 

Total 28.230 

1.744 

- 

(679) 

29.295 

5 

5 

Current 1.318 

Non-current 26.912 

Total 28.230 

Labor claims 

Civil 

Tax 

Other 

Total 

Current 

Non-current 

Total 

2.823 

26.472 

29.295 

Consolidated 

Liabilities Assets 


Balance at 

Judicial deposit 

Degrees 12/31/2010 Additions Payments Reversals 3/31/2011 

3/31/2011 12/31/2010 

1st, 2nd and 3rd 44.975 

4.180 

(2.231) 

(1.249) 

45.675 

20.996 

18.067 

1st, 2nd, 3rd and Mgt 66.156 

2.879 

(1.358) 

(840) 

66.837 

24.404 

24.154 

1st, 2nd, 3rd and Mgt 10.591 

1.038 

0,00 0,00 11.629 

2.903 

3.995 

28.222 

1.744 

0,00 (679) 

29.287 

0,00 0,00 

149.944 

9.841 

(3.589) 

(2.768) 

153.428 

48.303 

46.216 

9.159 

140.785 

149.944 

Consolidated 

The Company and its subsidiaries are parties to legal actions and administrative proceedings in several courts and with government bodies arising from the normal course of 

operations, involving tax, labor, civil and other issues. 

Based on information from its legal advisors and the analysis of pending lawsuits, managements of the Company and its subsidiaries have constituted provisions considered 

sufficient to cover losses estimated as probable for ongoing legal actions as follows: 

F-50 

10.023 

143.405 

153.428

26.1.2 Labor claims 

26.1.3 Civil 

26.1.4 Other 

Bandeirante 

Escelsa, Energest, CESA, Investco, Escelsapar and Energias do Brasil 

�� 

�� 

�� 

�� 

Bandeirante 

Refer mainly to claims for reimbursement of amounts paid in the form of tariff increases by industrial consumers due to the application of DNAEE Ordinances 38 of February 

27, 1986 and 45 of March 4, 1986 - the Cruzado Plan, in force from March to November of that year. Original values are restated based on the system practiced bythe 

Judiciary. The balance on March 31, 2011 is R$41,745 (R$40,260 on December 31, 2010). 

Enertrade 

Lawsuit filed by Enertrade, questioning the constitutionality of payments relating to the PowerDevelopment Account – CDE. 

Investco 

Indemnities 

The lawsuits of a civil nature - indemnities refer largely to the indemnities claimed by parties that consider themselves affected by the filling of the Lajeado Hydroelectric Power 

Plant reservoir or that intend to increase the indemnities received from Investco on account of the aforesaid filling. 

Expropriations 

Refer to civil actions arising from indemnities for expropriations proposed by Investco for filling the Lajeado Hydroelectric Power Plant reservoir, contesting the difference 

between Investco's deposit and the amount sought by the expropriated party. The balance of judicial deposits on March 31, 2011 is R$10,550 (R$13,308 on December 31, 

2010) and are recorded at the item Construction in progress (Note 10). 

26.2 Risk of possible loss 

26.2.1 Civil 

Law suits filed corresponding to the periods after January 1st, 1998 as per the agreement for the partial spin-off of Eletropaulo - Eletricidade de São Paulo S.A. Subsequently, 

pursuant to the Partial Spin-off Agreement of Bandeirante on October 1st, 2001, each concessionaire (Bandeirante and Piratininga) is responsible for the liabilities 

corresponding to the employees allocated to the respective regions taken over by each Company. Responsibility for corporate suits will be taken on according to the 

percentage proportion of the controllers (Bandeirante and Piratininga) as determined in the respective spin-off agreement. 

Include several lawsuits questioning, among other issues, overtime payments and hazardous work 

Refer to several lawsuits questioning, among other issues, overtime payments, hazardous work and reinstatement premiums. 

The balance provided for as at March 31, 2011 is R$30,178 (R$28,936 on December 31, 2010). 

The balance provided for as at March 31, 2011 is R$3,976 (R$3,786 on December 31, 2010). 

Refer mainly to the commitments covenanted in the exchange process of the control shares of Enersul with the control shares of Investco formerly belonging to Grupo Rede 

Energia S.A., relative to the lawsuits of various types filed against Enersul the generating events of which originated in periods when the control of Enersul was exercised by the 

Company. 

There are ongoing labor, civil and tax proceedings, the loss of which has been deemed as possible. These items are periodically reassessed, not requiring constitution of 

provisions in the quarterly information are as follows: 

Labor claims 

Civil 

Tax 

Other 

Total 

Degrees 

1st, 2nd and 3rd 

1st, 2nd, 3rd and Mgt 


Assets 

Parent company Judicial deposit 

Among the main claims where losses are deemed as possible, the highlights are as follow: 

Consolidated 

3/31/2011 3/31/2011 3/31/2011 12/31/2010 3/31/2011 12/31/2010 

1.427 

394 

72.626 

70.653 

4.807 

4.416 

157 

0,00 186.163 

180.168 

61.669 

61.685 

52.381 

4.123 

386.630 

382.891 

9.509 

11.272 

61.863 

0,00 65.594 

59.284 

0,00 0,00 

115.828 

4.517 

711.013 

692.996 

75.985 

77.373 

Investco 

The lawsuits of a civil nature refer largely to the compensation claimed by parties that consider themselves affected by the filling of the plant reservoir or that intend to increase 

the indemnities received on account of the aforesaid filling, in the amount of R$73,762 (R$69,576 on December 31, 2010). 

Due to their significant number, it is not possible to identify the current level of each one. 

Bandeirante 

In the civil sphere, the Company is a party in lawsuit nº 2000.001.127615-0, running at the 10th Civil Court of the Central Forum of the Judiciary District of Rio de Janeiro, filed 

by White Martins, discussing the existence of impacts resulting from the effectiveness of administrative rulings 38/86 and 45/86 of the dissolved DNAEE, on electric power 

consumption tariffs. In the month of April 2010, the Company complied with a legal determination of substitution of the existing procedural guarantee, of letter of guarantee by a 

bank deposit in the amount of R$ 60,951. The lawsuit is currently under appeal. 

Escelsa 

Tariff raise Common shares, relating to the escalation of electricity tariff, authorized by DNAEE Rulings nºs 38 and 45 of February 27 and March 4, 1996 under discussion 

under the judicial sphere. On March 31, 2011, these proceedings amount to R$3,005 (R$1,731 on December 31, 2010). 

F-51 

Assets 

Judicial deposit

26.2.2 Tax 

26.2.3 Other 

�� 

�� 

�� 

�� 


The Parent company is a party to administrative discussions related to the Federal Revenue Service not recognizing a corporate income tax (IRPJ) negative balance, 

determined for years 1999/2001, originated from a merged company (Magistra Participações S/A), and that totals R$50,243 (restated up to March 31, 2011). 

Bandeirante 

Bandeirante revalued the tax process risks and part of the actions previously classified as remote risk were reclassified as possible risk. 

Among the main claims where losses are deemed as possible, the highlight is the discussion in the administrative sphere regarding ICMS credits utilized by the Company in the 

period from July 2003 to December 89,098, referring to amounts of "Annulment/Return of Sale of Electric Energy" in the amount of R$89,098 (restated up to March 31, 2011). 

The Company has presented defense and is awaiting judgment. Risk value substantially increased in the last year due to the new adjustment criteria of State Law 13,918/2009 

and SF Resolution 98/2010. 

Bandeirante has other tax contingencies amounting to approximately R$91,860 (restated up to March 31, 2011) referring to the administrative discussion of non-homologated 

offsets of credits arising from IRPJ, CSLL, PIS and COFINS overpayments in 2001, as a result of COSIT Opinion 26/2002 application (taxes on RTE). 

Escelsa 

INSS tax authorities issued collection notices on: (i) exclusion self-employed and or other corporate entities, with the argument that there exists an employment relationship 

between service providers and Company; (ii) the levy of INSS tax on profit sharing and scholarship payments made to employees that are pension plan members. These tax 

collection notices amount to R$8,835 (restated up to March 31, 2011) and are currently awaiting an administrative decision. 

Several Municipal Authorities - Escelsa is discussing in court the collection of ISSQN allegedly levied on services related to the supply of electric power. Also includes payment 

demand on land occupied by posts for the electricity network and public lighting. These lawsuits amount to R$6,980 (restated up to March 31, 2011) and are awaiting lower 

court decision. 

The Company is a party to administrative discussions related to offsets not homologated by the Federal Revenue Service backed by credits recognized in court, as well as 

credits arising from IRPJ and CSLL that amount to R$57,822 (restated up to March 31, 2011). 

Enertrade 

The trading company is discussing in court the levy of ICMS on interstate electric power sales transactions amounting to R$14,042 (restated up to March 31, 2011) and 

collateralized by bank guarantees. The lawsuit is awaiting a final decision. 

There are administrative discussions about the collection of IRPJ, CSLL, PIS and COFINS debts referring to 2004/2006, arising from the non homologation of these taxes 

credit offset. These proceedings amount to R$ 10,217 (restated up to March 31, 2011). 

Based on the opinion of its legal counsel that losses are possible, the Company did not record a provision for these contingencies. 

Refer to the contingency described in note 26.1.4 

26.3 Risk of remote loss 

In addition to this, in the subsidiary companies Bandeirante, Escelsa, CESA, Escelsapar, Enetrade, Investco and Lajeado there are labor, civil and tax related proceedings 

underway, for which the chances of losing have been estimated as being remote, and for these actions the court deposit balances on March 31, 2011 stood at R$30,423. 

27 Shareholders' equity 

27.1 Capital stock 

The Company's equity capital is of R$ 3,182,716, represented by 158,805,204 shares, all of which common registered shares with no par value, with the following main 

characteristics: 

• Capital stock is exclusively represented by common shares. Each common share will grant the holder the right to one vote in the resolutions of the Company's General 

Meetings; 

• The shares are indivisible in relation to the Company. When the share belongs to more than one person, the rights vested thereupon will be exercised by the joint ownership 

representative. 

• The issuance of beneficiary parts by the Company is hereby prohibited; 

• The Company is authorized to increase the capital up to the limit of two hundred million (200,000,000) common shares regardless of statutory reform, by decision of the Board 

of Directors, which will also be responsible for establishing the terms of the issue, including price, term and form of its payment. 

• The Company may issue shares, debentures convertible into common shares and subscription bonuses within the limit of the authorized capital; and 

• At the sole discretion of the Board of Directors, it is possible to exclude or reduce the right of preference in the issues of shares, debentures convertible into shares and 

subscription bonuses, whose placement is performed through sale at a stock exchange or public subscription, under legal terms, and within the limit of the authorized capital. 

F-52

�� 

�� 

�� 

�� 

3/31/2011 

12/31/2010 

3/31/2010 

Quantity % Quantity % Quantity % Shareholders 

Shareholders of shares interest of shares interest of shares interest Shareholder 

Energias de Portugal Investments and Services, Sociedad Limitada (1) (2) 38.234.188 

Balwerk – Consult. Econômica e Particip., Soc.Unipessoal Ltda. (1) (2) 24.928.914 

EDP – Energias de Portugal, S.A. (1) (2) 39.739.013 

Treasury shares 280.225 

Other (3) 55.622.864 

Total 158.805.204 

Number of shares of controlling shareholders 102.902.115 

Number of treasury shares 280.225 

Amount of shares for board members and directors 17 

64,80 

0,18 

0,00 

24,08 

15,70 

25,02 

0,18 

35,02 

100,00 

102.902.115 

280.225 

17 

38.234.188 

24.928.914 

39.739.013 

280.225 

55.622.864 

158.805.204 

Total of non-outstanding shares 103.182.357 0,00 103.182.357 0,00 

Total of shares 158.805.204 

0,00 158.805.204 

0,00 

Total of outstanding shares 55.622.847 35,02 

55.622.847 35,02 

27.2 Allocation of net income 

12/31/2010 

Net income for the year 587.873 

Adjusted net income 587.873 

Prior year adjustments - Law nº 11,638/07 (108.122) 

Adjusted net income 479.751 

Legal reserve - 5% (23.987) 

455.764 

Destination of net income: 0,00 

Dividends proposed 113.941 

Intermediary dividends - JSCP 106.000 

Supplementary dividends 7.941 

Profit retention reserve 341.823 

Number of shares 158.524.979 

0,00 

Dividends per share - JSCP (interest on own capital) - R$ 0,668664 

Dividends per share - supplementary - R$ 0,050093 

27.3 Reserves 

The composition of the capital stock on March 31, 2011, December 31, 2010 and March 31, 2010 is shown as follows: 

(1) Shareholder with more than 5% of the voting shares. 

(2) Foreign-owned company. 

(3) There are 55,622,864 outstanding shares out of the total 158,805,204, that is, around 35.02% of the total quantity of shares. 

Treasury stock does not have equity rights. 

There are 17 lawsuits/shares in the possession of the Board of Directors. 

The Fiscal Council has not been formed since the Initial Public Offer of July 13, 2005. 

Calculation of free float: 

3/31/2011 12/31/2010 

Capital reserves 

Goodwill on merger of parent company 35.348 

35.348 

Result in the sale of treasury shares 60.250 

60.250 

95.598 

95.598 

Equity evaluation adjustments 0,00 0,00 

Actuarial (loss) / gain with Retirement benefits (114.497) 

(114.497) 

Assets available for sale (7.394) 

3.301 

Cash flow hedge (45.446) 

(46.141) 

Deferred IRPJ/CSLL 56.894 

53.495 

(110.443) 

(103.842) 

Profit reserves 0,00 0,00 

Legal 134.322 

134.322 

Profit retention 1.252.298 

1.252.298 

1.386.620 

1.386.620 

Total 1.371.775 

1.378.376 

27.3.1 Profit retention reserve 

Number of 

shares 

3/31/2011 

% interest 

64,80 

0,18 

0,00 

24,08 

15,70 

25,02 

0,18 

35,02 

100,00 

38.234.188 

24.928.914 

39.739.013 

280.225 

55.622.864 

158.805.204 

The Company's dividend policy, pursuant to the 120th meeting of the Board of Directors held on March 5, 2008, establishes the payment of a minimum amount equivalent to 

fifty percent (50%) of the adjusted net income, calculated in conformity with articles 189 and following articles of Corporation Law, which can be reduced when thus required by 

a legal or regulatory provision or, when recommendable in view of the financial situation and/or future prospects of the Company. 

Reserve for profit has been constituted pursuant to Article 196 of Law n.º 6,404/76 in support of the Company’s Capital Expenditures’ Program as set forth in the capital 

budgets submitted to (and approved by) the Ordinary General Shareholders’ Meetings. 

F-53 

12/31/2010 

Number of shares % interest 

24,08 

15,70 

25,02 

0,18 

35,02 

100,00 

yes 

yes 

yes 

0,00 

0,00

28 Dividends – assets and liabilities 

�� 

�� 

�� 

�� 

3/31/2011 12/31/2010 3/31/2011 12/31/2010 3/31/2011 12/31/2010 

Bandeirante 61.614 

61.614 

0,00 0,00 0,00 0,00 

Escelsa 36.980 

36.980 

0,00 0,00 0,00 0,00 

Energest 16.892 

16.892 

0,00 0,00 0,00 0,00 


3.896 

0,00 0,00 0,00 0,00 


10.200 

0,00 0,00 0,00 0,00 

Investco 0,00 0,00 0,00 0,00 12.197 

12.197 


39.730 

0,00 0,00 0,00 0,00 

Shareholders - Energias do Brasil 0,00 0,00 100.822 

100.822 

100.822 100.822 

Eletrobrás 0,00 0,00 0,00 0,00 70.539 

70.573 

Governo de Tocantins 0,00 0,00 0,00 0,00 2.893 

750 

Furnas Centrais Elétricas S.A. 0,00 0,00 0,00 0,00 6.800 

6.800 

Total 169.312 

169.312 100.822 

100.822 

193.251 191.142 

29 Net operating revenue 

Nº of consumers (*) 

3-month ended March 31, 

MWh (*) 

R$ 

2011 2010 2011 2010 2011 2010 

Supply 

Residential 2.366.100 

2.291.980 

1.339.135 1.273.946 446.740 414.943 


21.185 

1.022.861 1.000.528 265.734 246.402 

Commercial 195.346 

191.266 

808.854 773.711 247.462 229.625 

Rural 160.901 

153.627 

169.908 185.410 

32.956 

37.036 

Other 22.823 

21.764 

381.369 376.357 

95.728 

89.454 

(-) Transfer to TUDS (use of the distribution system) - captive clients 0,00 0,00 0,00 0,00 (555.309) (524.389) 

Unbilled supply 0,00 0,00 0,00 0,00 (263) (24.203) 

Supply 

2.767.368 

2.679.822 

3.722.127 3.609.952 533.048 468.868 

Electricity 3 

3 

135.002 144.576 165.361 137.521 

Short-term energy 0,00 0,00 0,00 0,00 21.819 

13.398 

Sales 0,00 0,00 0,00 0,00 219.802 144.978 

3 

3 

135.002 144.576 406.982 295.897 

Total supply 2.767.371 

2.679.825 

3.857.129 3.754.528 940.030 764.765 

Distribution and transmission system 120 

106 

2.339.179 2.215.539 698.023 702.084 

TUSD - others 120 

106 

2.339.179 2.215.539 141.177 175.936 

TUSD - captive clients 0,00 0,00 0,00 0,00 555.309 524.389 

Transmission System Use Tariff 0,00 0,00 0,00 0,00 1.537 

1.759 

Other operating income 0,00 0,00 0,00 0,00 106.709 

54.767 

Sub-Total 2.767.491 

2.679.931 

6.196.308 5.970.067 1.744.762 1.521.616 

(-) Deductions from operating income 0,00 0,00 0,00 0,00 (359.935) (321.208) 

P&D 0,00 0,00 0,00 0,00 (12.409) (11.449) 

Other charges 0,00 0,00 0,00 0,00 (11.835) 

(8.310) 

CCC 0,00 0,00 0,00 0,00 (72.555) (51.056) 

CDE 0,00 0,00 0,00 0,00 (55.821) (48.567) 

RGR 0,00 0,00 0,00 0,00 2.357 

(9.769) 

PIS/COFINS 0,00 0,00 0,00 0,00 (209.449) (191.912) 

ICMS 0,00 0,00 0,00 0,00 0,00 0,00 

ECE & EAEEE - onlending to CBEE 0,00 0,00 0,00 0,00 0,00 0,00 

ISS 0,00 0,00 0,00 0,00 (223) 

(145) 

Net operating revenue 

(*) Not reviewed by independent auditors. 

2.767.491 

2.679.931 

6.196.308 5.970.067 1.384.827 1.200.408 

30 Operating expenses 

Assets 


F-54 

Liabilities 

Consolidated 

Liabilities 

Consolidated

�� 

�� 

�� 

�� 

Manageable 

Personnel, Managers and Private Pension Plan Entity 0,00 7.286 

0,00 7.286 

Material 0,00 158 

0,00 158 

Third-party services 0,00 5.814 

0,00 5.814 

Depreciation 0,00 80 

0,00 80 

Amortization 0,00 4.475 

0,00 4.475 

Provisions for contingencies 0,00 0,00 (85) 

(85) 

Rental and leases 0,00 956 

0,00 956 

Other (147) 

6.056 

(10.508) 

(4.599) 

Total (147) 

24.825 

(10.593) 14.085 

Not manageable 

Electricity purchased for resale 

Foreign currency - Itaipu 1.075.268 

Local currency 3.644.431 

Use and connection charge - 

Inspection fee - 

Financial compensations 

Manageable 

- 

4.719.699 

Personnel, Managers and Private 

Pension Plan Entity 

- 

Material - 

Third-party services - 

Depreciation - 

Amortization - 

Allowance for doubtful accounts/net loss - 

Provisions for contingencies - 

Rental and leases - 

Other - 

- 

Total 

(*) Not reviewed by independent auditors. 

4.719.699 

31 Financial result 

91.818 

461.330 

156.397 

- 

- 

709.545 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

709.545 

With sales 

- 

- 

- 

- 

- 

- 

38.768 

4.316 

46.183 

23.438 

43.402 

- 

- 

186 

11.466 

167.759 

167.759 


Three-month period ended March 31, 2010 

2011 

Operating expenses 

General and 

administrative 

Consolidated 

2011 

Service cost Operating expenses 

- 

- 

- 

- 

- 

- 

- 

- 

537 

- 

- 

- 

- 

- 

- 

537 

537 

- 

- 

- 

- 

- 

- 

- 

- 

29 

- 

- 

12.979 

- 

- 

(24) 

12.984 

12.984 

Three-month period ended March 31 


Consolidated 

- 

- 

- 

- 

- 

- 

2010 

Reclassified 

2011 2010 2011 2010 

5.103 

223 

5.025 

4.869 

0,00 

1.180 

738 

1.763 

18.901 

Rendered to third- 

General and 

MWh (*) With power Operation 

With sales Other 

Total MWh (*) 

parties 


0,00 91.818 

0,00 461.330 

0,00 156.397 

3.457 

3.457 

11.247 

11.247 

14.704 724.249 

33.573 

252 

72.593 

823 

11 

5.150 

29.573 

73 

76.395 

19.671 

4 

43.113 

12.051 

0,00 55.453 

0,00 0,00 12.979 

0,00 2.010 

2.010 

2.471 

60 

2.717 

13.191 

3.726 

28.359 

111.353 

6.136 298.769 

111.353 

20.840 1.023.018 

Financial revenues 0,00 0,00 0,00 0,00 

Revenue from financial investments 7.201 

4.489 

19.621 

13.269 

Monetary variation and monetary addition from purchased energy 67 

0,00 20.378 

19.353 

Monetary restatement of judicial deposits - REFIS 0,00 0,00 (5.404) 28.026 

Monetary variations - domestic currency 0,00 1.399 

0,00 1.412 

Monetary variations - foreign currency 0,00 0,00 6.051 

0,00 

SELIC on taxes and social contributions to offset 1.119 

0,00 4.122 

1.202 

Discounts obtained 0,00 0,00 54 

25 

Adjustment to present value 0,00 186 

414 

943 

Other financial revenue 2.260 

2.572 

6.330 

9.387 

Financial expenses 

10.647 

8.646 

51.566 

73.617 

Monetary variation and monetary addition from purchased energy 0,00 0,00 (95) 

(21) 

Interest and fines on taxes 0,00 0,00 (11) 

(42) 

Debt charges 0,00 0,00 (51.841) (52.775) 

Monetary variations - domestic currency (1.151) 

(1.202) 

(2.539) 

(2.453) 

Monetary variations - foreign currency 0,00 0,00 255 

(6.257) 

Monetary restatement of environmental licenses 0,00 0,00 (3) 

0,00 

Interest and fines on ICMS 0,00 0,00 0,00 (38) 

Swap and hedge operations 0,00 0,00 (871) (1.552) 

Monetary restatements for judicial contingencies 0,00 0,00 (3.298) (2.161) 

SELIC - Free energy 0,00 (1.005) 

(1.399) (1.005) 

Monetary restatement REFIS 0,00 0,00 (1.373) (17.220) 

Mark-to-market - MTM 0,00 0,00 (11.331) 

(7.708) 

Adjustment to present value 0,00 0,00 6.202 

(3.831) 

Monetary restatement - loan agreements 0,00 0,00 (3.097) (2.559) 

Monetary restatement for the use of public property 0,00 0,00 (22.613) 

(610) 

Other financial expenses (1.067) 

(43) 

(3.877) 

(2.322) 

(2.218) 

(2.250) (95.891) (100.555) 

Total 8.429 

6.396 (44.325) (26.938) 

F-55 

Other 

Total 

Total 

2010 

Total 

Reclassified 

1.085.809 101.148 

3.526.997 332.228 

0,00 154.368 

0,00 3.013 

0,00 9.060 

4.612.806 599.817 

0,00 64.797 

0,00 5.342 

0,00 72.182 

0,00 40.382 

0,00 46.680 

0,00 16.798 

0,00 4.841 

- 

2.233 

- 22.163 

- 275.418 

4.612.806 875.235


33 

33.1 

�� 

�� 

�� 

�� 

Three-month period ended March 31 


Consolidated 

Income tax 

Social contribution 

Income tax 


2011 2010 2011 2010 2011 2010 2011 2010 

Net income before taxes and social contribution 187.742 

163.428 

187.742 163.428 315.114 297.646 315.114 297.646 

Rate 25% 25% 9% 9% 25% 25% 9% 9% 

IRPJ & CSLL (46.936) 

(40.857) 

(16.897) (14.709) (78.779) (74.412) (28.360) (26.788) 

0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 

Adjustments to reflect current rate 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 

Donations 0,00 (12) 

0,00 (4) 

(57) 

(59) 

(21) 

(20) 

Undeductible losses 0,00 0,00 0,00 0,00 62 

(7) 

22 

(2) 

Undeductible fines 0,00 0,00 0,00 0,00 (6) 

(4) 

(3) 

(1) 

Undeductible expenses (13) 

(11) 

(5) 

(4) 

(31) 

(9) 

(11) 

(3) 

Bonus to management (47) 

(56) 

(17) 

(20) 

(189) 

(150) 

(67) 

(54) 

Equity accounting result 48.350 

43.984 

17.406 

15.833 

0,00 (2.047) 

0,00 (737) 

Beneficiaries 0,00 0,00 0,00 0,00 (527) 

0,00 (190) 0,00 

Interest on own capital 0,00 0,00 0,00 0,00 0,00 (176) 

0,00 (64) 

Other 0,00 0,00 0,00 0,00 (1.110) 

0,00 (367) 0,00 

Deferred and unrecognized IRPJ & CSLL (1.354) 

(3.047) 

(487) 

(1.097) 

(7.484) 

(3.731) (2.694) (1.339) 

Prior social year adjustment - Income and social contribution taxes 0,00 7.018 

0,00 2.527 

(60) 

2.371 

0,00 598 

Deemed profit adjustment 0,00 0,00 0,00 0,00 3.570 

2.942 1.196 

993 

Additional IRPJ 0,00 0,00 0,00 0,00 72 

78 

0,00 0,00 

PAT 0,00 0,00 0,00 0,00 82 

53 

0,00 0,00 

SUDENE 0,00 0,00 0,00 0,00 11.852 

5.350 

0,00 0,00 

0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 

Income and social contribution tax expenses - 

7.019 

- 

2.526 (72.605) (69.801) (30.495) (27.417) 

Current rate 0,00 -4,29% 0,00 -1,55% 23,04% 23,45% 9,68% 9,21% 

Financial instruments 

In compliance with Directive Release CVM/SNC/SEP nº 3/2009, of November 19, 2009, and CVM Instruction nº 475, of December 17, 2008, the Company carried out a 

valuation of its financial instruments, including the derivatives, when applicable. 

General considerations 

The Company maintains operations with financial instruments. The management of these instruments is executed by means of operating strategies and internal controls aiming 

to ensure liquidity, safety and profitability. The contracting of financial instruments with hedge objectives is performed by means of a periodic analysis of the exposure to the 

financial risks (foreign exchange, interest rate etc.), which is reported regularly through risk reports made available to Management. In compliance with the Financial Risk 

Management Policy of Grupo EDP do Brasil, and with a basis on periodic analyses consubstantiated by the risk reports, specific strategies are defined for the mitigation of 

financial risks, which are approved by Management, for approval and effective operation of aforesaid strategy. The control policy consists of permanent monitoring of the 

conditions contracted versus conditions in force in the market through operating systems integrated to the SAP platform. The Company does not perform investments in 

derivatives or any other risk assets on a speculative basis. The results obtained with these operations are in line with the policies and strategies defined by Company 

Management. 

The administration of the risks associated with these operations is performed through the application of policies and strategies defined by Management and include the 

monitoring of levels of exposure of each market risk, forecast of future cash flows and establishment of limits of exposure. This policy also determines that the updating of 

information in operating systems, as well as the confirmation and effective operation of transactions with the counterparts, shall be performed with the appropriate segregation 

of duties. 

F-56

33.2 

Fair value 

�� 

�� 

�� 

�� 

Fair value is the amount by which the asset may be exchanged, or a liability settled, between parties that know the business and have the interest to make it, in a transaction 

without advantages to any of the parties. 

The fair value concept addresses several different measurement methods intended to reliably measure an amount. Some mathematical models were developed for that. 

To determine fair value, the Company projects financial instruments flow until the end of operations, considering contract rules and using the future (interbank investment 

average rate) average DI disclosed by BM&FBovespa as the discount rate.Some carrying amounts are equivalent to fair value because these financial instruments balances 

are substantially similar to those that would be obtained had they been traded in the market. 

Financial instrument transactions are presented in the balance sheet at their carrying amounts, equivalent to their fair value, under captions cash and cash equivalents, 

consumers and concessionaires, related parties, pledges and restricted deposits and suppliers. For loans, financing and debt charges and debentures, the carrying amount 

differs from fair value. 


Current 

Cash and cash equivalents 


Pledges and restricted deposits 

Denerge's shares 

Non-current 




Current 

Suppliers 

Non-current 







Consumers and concessionaires 



Other credits - derivatives 

Non-current assets 







Suppliers 

Debentures 

Loans, financing and debt charges 

Derivatives 

Regulatory and sector charges 

Use of public property 


Suppliers 

Debentures 


Derivatives 




Fair value Book value 

3/31/2011 12/31/2010 3/31/2011 12/31/2010 

274.869 

1.121 

222 

30.106 

21.707 

117.261 

4.868 

378 

450.532 

Consolidated 

285.812 

1.121 

222 

40.801 

21.506 

116.622 

3.370 

189 

469.643 

274.805 

1.121 

222 

30.106 

21.707 

117.261 

4.868 

378 

450.468 

3/31/2011 12/31/2010 3/31/2011 12/31/2010 

1.015.806 

8.764 

- 

935.415 

51.519 

30.106 

302 

18.475 

416.492 

65.936 

10.859 

585.805 

147.523 

340.025 

20.700 

229.600 

19.340 

458 

662.132 

1.921.825 

107.891 

12.336 

226.658 

6.827.967 

Fair value 

1.126.449 

8.659 

823 

888.806 

62.863 

40.801 

400 

18.755 

397.324 

63.733 

9.332 

626.381 

241.720 

342.037 

19.656 

225.380 

19.440 

915 

668.644 

2.108.264 

99.899 

12.913 

215.764 

7.198.958 

1.015.491 

8.764 

- 

935.415 

51.519 

30.106 

302 

18.475 

416.492 

65.936 

10.859 

585.805 

144.645 

352.285 

20.700 

229.600 

19.340 

458 

637.809 

1.982.559 

107.891 

12.336 

226.658 

6.873.445 

Book value 

Considering the similar characteristics and using the knowledge obtained on the Company's financial instruments, financial instruments can be classified according to 

accounting pronouncements, which classify financial assets as loans and receivables, financial assets measured at fair value through profit or loss, held-to-maturity and 

available for sale and financial liabilities as financial liabilities measured at fair value through profit or loss and other financial liabilities at amortized cost. 

F-57 

285.812 

1.121 

222 

40.801 

21.506 

116.622 

3.370 

189 

469.643 

1.126.449 

8.659 

823 

888.806 

62.863 

40.801 

400 

18.755 

397.324 

63.733 

9.332 

626.381 

231.730 

356.045 

19.656 

225.380 

19.440 

915 

637.593 

2.040.983 

99.899 

12.913 

215.764 

7.104.644








Suppliers 









Suppliers 










Other credits 


Suppliers 

Debentures 

�� 

�� 

�� 

�� 

Loans and 

receivables 

- 

22.828 

- 

- 

117.261 

140.089 

Loans and 

receivables 

- 

22.627 

- 

- 

116.622 

139.249 

Loans and 

receivables 

- 

27.239 

416.492 

1.001.351 

- 

- 

1 

- 

1.445.083 


3/31/2011 

Fair value 

through the 

statement of 

income 

274.805 

- 

- 

- 

- 

274.805 

Other at 

amortized cost 

4.868 

378 

5.246 

12/31/2010 

Fair value 

through the 

statement of 

income 

285.812 

- 

- 

- 

- 

285.812 

Other at 

amortized cost 

3.370 

189 

3.559 

Consolidated 

3/31/2011 

Fair value 

through the 

statement of 

income 

1.015.491 

- 

- 

- 

- 

- 

- 

302 

1.015.793 

Fair value 

through the 

statement of 

income 


- 

Derivatives 

128.591 



- 


- 

128.591 

- 

- 

F-58 

Held to 

maturity Available for sale Total 

- 

- 

274.805 

- 

- 

22.828 

222 

- 

222 

- 

30.106 

30.106 

- 

- 

117.261 

222 

30.106 

445.222 

Held to 


- 

- 

285.812 

- 

- 

22.627 

222 

- 

222 

- 

40.801 

40.801 

- 

- 

116.622 

222 

40.801 

466.084 

Held to 


- 

- 

1.015.491 

- 

- 

27.239 

- 

- 

416.492 

- 

- 

1.001.351 

62.378 

- 

62.378 

- 

30.106 

30.106 

- 

- 

1 

- 

- 

302 

62.378 

30.106 

2.553.360 

Other at 

amortized cost Total 

584.303 

782.454 

2.344.561 

- 

241.936 

1.960 

245.998 

4.201.212 

584.303 

782.454 

2.344.561 

128.591 

241.936 

1.960 

245.998 

4.329.803








Other credits 


Suppliers 

Debentures 

Loans and 

receivables 

- 

27.414 

398.147 

952.539 

- 

- 

- 

1.378.100 

Consolidated 

12/31/2010 

Fair value 

through the 

statement of 

income 

1.126.449 

- 

- 

- 

- 

- 

400 

1.126.849 

Fair value 

through the 

statement of 

income 

- 

- 


- 

Derivatives 

119.555 



- 

119.555 

�� 

�� 

�� 

�� 

Held to 


- 

- 

1.126.449 

- 

- 

27.414 

- 

- 

398.147 

- 

- 

952.539 

72.195 

- 

72.195 

- 

40.801 

40.801 

- 

- 

400 

72.195 

40.801 

2.617.945 

Other at 


627.296 

627.296 

869.323 

869.323 

2.397.029 

- 

254.363 

219.134 

4.367.145 

2.397.029 

119.555 

254.363 

219.134 

4.486.700 

The hierarchy of financial instruments according to fair value regulates the need for more consistent information, adjusted to the Company's external environment. The 

Company's instruments fair value measurement requirements: 

(a) Level 1– prices agreed on in active markets for identical assets and liabilities; 

(b) Level 2 - differ from asset and liability prices negotiated in active markets included in Level 1, directly or indirectly; and 

(c) Level 3 - for assets and liabilities not based on market variables. 

The methodoloty applied to classify the Company's financial instruments fair value in levels was based on an individual analysis that searched for similar transactions in the 

market. Comparison criteria were structured considering terms, amounts, grace period, indices and active markets.The simpler and easier is the access to comparative 

information, the more active is the market; the more restrict is the information, more restrict is the market to measure the instrument. 








Other credits - derivatives 




Derivatives 


Derivatives 


Consolidated 

Fair value measurement 

Similar markets 

3/31/2011 Level 2 

274.869 

30.106 

304.975 


274.869 

30.106 

304.975 

Similar markets 

3/31/2011 Level 2 

1.015.806 

302 

30.106 

20.700 

107.891 

1.174.805 

1.015.806 

302 

30.106 

20.700 

107.891 

1.174.805 

F-59

33.3 

33.3.1 

33.4 

Market risk 

�� 

�� 

�� 

�� 

The market risk is presented as the possibility of losses due to the fluctuation of variables that impact market prices and rates. This fluctuation impacts virtually all segments, 

thus representing financial risks. 

Loans and financing, and debt charges presented in note 21 refer to funds raised from BID, BNDES, Eletrobrás, Banco do Brasil and Banco Santander. Contract rules for 

financial liabilities acquired by the Company generate risks related to these exposures. As of March 31, 2011, the Company is subject to market risks associated to TJLP, CDI, 

IGP-M and US dollar and Euro changes. 

As IGP-M, TJLP and CDI are interest rate risks, we took into consideration that the Brazilian economy has a favorable scenario for robust growth and infrastructure 

investments. Inflation under control and credit offer are key risk factors to consider when raising funds linked to these indices. It should be considered that inflation growth and 

increasing SELIC rate indicate that the cost of these transactions will be higher. 

Considering the strong currency and the country risk under control, loans denominated in US dollars and Euros are considered favorable.In addition, the exchange rate risk in 

foreign currency transactions is considered. In an economy where exchange rate fluctuation is very high, this exposure may be a relevant factor to make the transaction not 

possible. The Company maintains derivatives used for hedge to control all exchange rate exposures. 

Considering that the market rate (or opportunity cost of capital) is defined by external agents, taking into account the risk premium compatible with activities in the sector, and 

lacking other alternatives or different market hypotheses and/or estimate methodologies with respect to company business and special features of the sector, the market value 

of this loan package comes close to its book value, as do the remaining financial assets and liabilities evaluated. 

Sensitivity analysis 

In the chart below, scenarios for the different indices used by the Company were considered; from interest rate and other indices fluctuation to transactions maturity. The 

probable scenario was adopted by the Company, based mainly on macroeconomic assumptions obtained from the Focus report of the Brazilian Central Bank, scenarios II and 

III consider a risk increase of 25% and 50%, respectively, and scenarios IV and V consider a risk reduction of 25% and 50%, respectively. 

These sensitivity analyses were prepared in accordance with CVM Instruction nº 475/2008, and are intended to measure the impact of changes in the market variables on each 

financial instrument of the Company. Nevertheless, the settlement of transactions involving these estimates can result in amounts different from those estimated due to the 

subjectivity that is contained in the process used in the preparation of these analyses. Information in the chart demonstrates the impact of each risk variation in the Company's 

results. 

Transaction 


Risk Up to 1 year 2 to 5 years Above 5 years Probable 

Financial investment CDI 37.084 

1.675 

- 

38.759 

Pledges and restricted deposits CDI 1.245 

2.672 

25 

3.942 


IDB US$ 432 

Loans and financing - BNDES & CALC 

TJLP 56.848 

Debentures CDI 60.993 

Debentures IGP-M 3.454 

Loans and financing - CCB CDI 15.500 

Swap - Asset leg - BID US$ 432 

Swap - Liability Leg - BID CDI (256) 

Swap - Liability Leg - NDF USD - 

Swap - Liability Leg - NDF EUR 197 

Swap - Liability Leg - (i) Libor - 

Swap - Liability Leg - (ii) Libor 4.203 

Reference value 

�� 

�� 

�� 

�� 

�� 

�� 

�� 

- 

71.546 

145.996 

- 

16.188 

- 

- 

81.539 

- 

- 

- 

- 

17.327 

- 

- 

- 

- 

- 

- 

- 

31.669 

- 

Scenario (I) Scenario (II) Scenario (III) 

432 

145.721 

206.989 

3.454 

31.688 

432 

(256) 

81.539 

197 

31.669 

4.203 

Risk increase 

by 25% 

48.449 

4.928 

540 

182.151 

258.736 

4.318 

39.610 

540 

(320) 

101.924 

246 

39.586 

5.254 

Risk increase 

by 50% 

58.139 

5.913 

648 

218.582 

310.484 

5.181 

47.532 

648 

(384) 

122.309 

296 

47.504 

6.305 

Scenario 

(IV) Scenario (V) 

Risk Risk 

reduction by reduction by 

25% 50% 

Liquidity risk 

Liquidity risk relates to the Company's capacity to settle obligations assumed. In order to determine the Company's financial capacity to meet commitments assumed, maturities 

of funds raised and other obligations are also disclosed. More details on loans raised by the Company are presented in note 21. 

The Company's management uses only credit lines that allow operating leverage; this premise is reaffirmed by the characteristics of funds effectively raised. 

The obligations' realization flows, according to contract terms, are as follows: 

Consolidated 

Aging - probable scenario 

Covenants are financial indicators that control the Company's financial health, as required by fund raising contracts. Non-compliance with covenants of loan and financing 

agreements may result in an immediate disbursement or early maturity of a liability with defined flow and periodicity. The list of each contract's covenants is presented in note 

21.Up to March 31, 2011, all covenants of contracted obligations were fully complied with. 

F-60 

29.069 

2.957 

324 

109.291 

155.242 

2.591 

23.766 

324 

(192) 

61.154 

148 

23.752 

3.152 

19.380 

1.971 

216 

72.861 

103.495 

1.727 

15.844 

216 

(128) 

40.770 

99 

15.835 

2.102

33.5 

33.6 

Contractual obligations 

Debentures 


Derivatives 


Debentures 


Derivatives 

Credit risk 

�� 

�� 

�� 

�� 

Total 

782.454 

2.334.844 

128.591 

3.245.889 

Total 

869.323 

2.425.468 

119.554 

3.414.345 

Maturity - Shortterm 

144.645 

361.805 

11.180 

517.630 

Maturity - Shortterm 

231.730 

364.702 

11.336 

607.768 

Maturities from 2 to 

4 years 

326.131 

772.741 

85.741 

1.184.613 


4 years 

326.985 

881.906 

74.579 

1.283.470 

Maturities from 5 to 6 

years 

311.678 

481.346 

- 

793.024 

Maturities from 5 to 6 

years 

310.608 

467.953 

- 

778.561 

Maturities above 

6 years 

- 

718.952 

31.670 

750.622 

Maturities above 

6 years 

The Company's most expressive financial assets are presented in captions Cash and cash equivalents (note 6) and Consumers and concessionaires (note 7). As of March 31, 

2011, Cash represents the amount immediately available and Cash equivalents are short-term investments maturing in up to 90 days that are immediately convertible into a 

known cash amount. Consumer and concessionaires balances presented in note 7 comprise the estimated flow of receivables. 

The credit risk is the possibility that the Company does not realize its rights, and this description is directly related to the accounts cash and cash equivalents, consumers and 

concessionaires, Pledges and restricted deposits, among others. 

In the electric power industry, the companies' operations are reported to the regulatory agency, which maintains updated information on power volume produced and 

consumed, permitting the preparation of plans to guarantee the system operation without interferences or interruptions. Power is traded through auctions and contracts, among 

other mechanisms, bringing reliability and control on default. The priority of concession agreements for power distribution is to serve the market without excluding low income 

population and areas with lower population density. 

- 

710.907 

33.639 

744.546 

Accepting and serving these new consumers dwelling in the concessionaire's operating area is a rule of the concession agreement. 

For the distribution of electricity, the financial instrument that may expose the subsidiaries Bandeirante and Escelsa to credit risk is Trade accounts receivable to subsidiaries; 

accounting rules are based on the regulatory agency's standards and assumptions approved by the Company's management. 

The diversification of sale of power to this consumer basis makes the Company's receivables less volatile; estimated rate of credit default is 14.38%, as shown in Note 7. 

The main tool used to mitigate the risk of non-realization of financial assets is to suspend power supply to consumers in default; before the suspension, the Company makes 

administrative collections, bill notices, etc. The Company offers to consumers several communication channels, as follows call centers, service stores and Internet. 

Short-term investments are also a source of credit risk. The management of these financial assets is done through operating strategies and internal controls, aimed at assuring 

liquidity, security and profitability. 

Specific mitigation strategies of the Financial Risk Management Policy of Grupo EDP Energias do Brasil are periodically conducted based on information from risk reports.The 

control policy consists of permanent monitoring of the conditions contracted versus conditions in force in the market through operating systems integrated to the SAP platform. 

The Company does not perform investments on a speculative basis. The results obtained with these operations are in line with the policies and strategies defined by 

Management. 

The Company contracts short-term investments only from financial institutions rated as low risk by rating agencies in order to guarantee better profitability and reliable results. 

Management understands that the contracted financial investments do not expose the Company to significant risks that might generate material losses in the future. 


Consolidated 

3/31/2011 

12/31/2010 

A derivative financial instrument is the instrument whose value is influenced by the fluctuation of a financial instrument rate or price, does not require an initial investment or the 

initial investment is much lower that that of similar contracts and is always settled in a future date, we may classify a financial instrument as derivative only when it meets all 

characteristics. 

Subsidiary Enertrade sold an electric power purchase option agreement which provides for the supply of electric power until December 31, 2011 at a more attractive price or, in 

case the option is not exercised, the counterparty should pay to the Company the resulting premium in proportion to the remaining supply period.The contract premium was 

fully recognized in the subsidiary's financial results. 

Jointly-owned subsidiary Porto do Pecém gains and losses arising from the Company's derivatives fluctuations in the year were recorded in results. For changes in subsidiary 

under joint ownership with hedge accounting , amounts are stated in shareholders' equity. 

Financial instruments that qualify for hedge accounting, cash flow hedge elected due to effective coverage during the contracting. The amounts express the proportion of 50% 

of total investment in the jointly-owned subsidiary. 

F-61

Assets 

Libor + 4.375 % p.a. Bandeirante - 




Var. US$ + Libor Porto do Pecem 150.667 



US$ Porto do Pecem (81.539) 

EUR Porto do Pecem (11) 

EUR 

Liabilities 

Porto do Pecem (186) 

713.955 

118.94% of CDI Bandeirante - 



Var. US$ + 5.79% p.a. Porto do Pecem 167.781 



R$ Porto do Pecem - 

US$ Porto do Pecem - 

R$ Porto do Pecem - 

831.563 

Total (117.608) 

�� 

�� 

�� 

�� 

The hedge transaction qualified for hedge accounting is the purchase of a NDF in the amount of US$327,000 maturing on October 1, 2012, to cover the Us dollar debt with 

BID. The alterations in the fair value of the derivative hedge instrument designated as cash flow hedge are recognized directly in shareholders' equity in the asset reserve. 

All cash flowhedge transactions were conducted by the jointly-owned subsidiary Porto do Pecém, while swaps were conducted by subsidiary Bandeirante. As of March 31, 

2011, the Company's derivatives are recorded at market value. 

The Company's derivatives market value are monthly quoted with counterparties. 

Cash flow Other Cash flow Other 

Company hedge derivatives Total hedge derivatives Total 

4.278 

1.606 

2.684 

2.148 

- 

- 

- 

- 

- 

- 

10.716 

3.234 

5.179 

3.663 

- 

- 

- 

- 

- 

- 

21.699 

(10.983) 

4.278 - 

1.606 - 

2.684 - 

2.148 - 

150.667 153.799 

113.534 115.895 

531.490 543.136 

(81.539) 274.368 

(11) 1.896 

(186) 737 

724.671 

1.089.831 

3.234 - 

5.179 - 

3.663 - 

167.781 171.934 

128.090 131.399 

535.692 546.978 

- 

342.761 

- 

2.026 

- 

997 

853.262 

1.196.095 

(128.591) 

(106.264) 

5.477 

2.055 

3.439 

2.751 

- 

- 

- 

- 

- 

- 

13.722 

4.036 

6.442 

4.562 

- 

- 

- 

- 

- 

- 

27.013 

(13.291) 

5.477 

2.055 

3.439 

2.751 

153.799 

115.895 

543.136 

274.368 

1.896 

737 

1.103.553 

4.036 

6.442 

4.562 

171.934 

131.399 

546.978 

342.761 

2.026 

997 

1.223.108 

(119.555) 

Consolidated 

Gains and losses of derivative financial instruments 

3/31/2011 12/31/2010 

Financial result Shareholders' Financial result Shareholders' 

equity equity 

Derivatives with protection purpose 

Exchange risks 12.542 

(29.994) 

9.260 (30.453) 

Total 12.542 

(29.994) 

9.260 (30.453) 

Derivatives' maturities are shown in the chart. 

Maturity 

Derivatives - net 

2011 (93.811) 

2012 (2.808) 

After 2012 (31.670) 

Receivable/payable (128.289) 

Consolidated 


40.633 

Gains and losses from the Company's subsidiaries derivative transactions on March 31, 2011 and December 31, 2010 are: 

Consolidated 

In compliance with CVM Instruction 475/2008, information on derivative financial instruments should include the hedged transaction motivation, the instrument fair value, the 

impact on the Company's results for the year and the main characteristics of the contracted instrument. These detail is shown on the table. 

F-62 

40.543

�� 

�� 

�� 

�� 

Inception 

Consolidated 

US$/EUR notional R$/US$ notional 

Fair value 

Effects on Result 

Description Subsidiary Counterpart Maturity Position 3/31/2011 12/31/2010 3/31/2011 12/31/2010 3/31/2011 12/31/2010 3/31/2011 3/31/2010 

Swap 

Assets Enertrade Bio Energias 

4/23/2010 Purchase option 

- - - - 302 400 - - 

Liabilities 12/31/2011 electricity - - - - 

302 

400 

- 

- 

Assets Bandeirante 

3/19/2004 Libor + 4.375 % p.a. 

2.595 3.244 4.226 5.284 4.278 5.477 (33) 402 

Liabilities Energia S/A Banco Citibank 2/14/2012 104.69% of CDI 9.623 11.973 290 467 

(5.345) 

(6.496) (323) 

(65) 


12/14/2004 Libor + 4.375 % p.a. 973 1.216 1.585 3.811 1.606 2.055 (12) 151 

Liabilities Energia S/A Banco Citibank 2/14/2012 118.94% of CDI 3.234 4.036 108 177 

(1.628) 

(1.981) (120) 

(26) 


4/5/2006 Libor + 4.375 % p.a. 1.298 2.027 2.114 6.352 2.684 3.439 (21) 252 

Liabilities Energia S/A Banco JP Morgan 2/14/2012 109.70% of CDI 5.179 6.442 165 266 

(2.495) 

(3.003) (186) 

(14) 


4/5/2006 Libor + 4.375 % p.a. 1.622 1.622 2.642 5.081 2.148 2.751 (17) 201 

Liabilities Energia S/A Banco JP Morgan 2/14/2012 109.50% of CDI 3.663 4.562 116 189 

(1.515) 

(1.811) (133) 

12 

Assets 

Porto do 

Pecém 

Banco Citibank 

4/2/2012 Var. USD + Libor 

93.240 93.240 151.860 151.860 150.667 153.799 - - 

Liabilities 10/01/2021 Var. USD + 5.79% p.a. 167.781 171.934 1.714 1.544 

(17.114) (18.135) (1.714) (1.544) 

Assets 

Liabilities 


Pecém 


4/2/2012 

10/01/2024 

Var. USD + Libor 70.261 

Var. USD + 5.82% p.a. 

70.261 114.434 114.434 113.534 

128.090 

115.895 

131.399 

- - 

1.458 1.306 

(14.556) (15.504) (1.458) (1.306) 

Assets 

Liabilities 


Pecém 


11/16/2009 

11/16/2011 

100% Libor 326.077 

100% USD + 2.0895% p.a 

326.077 531.082 531.082 531.490 

535.692 

543.137 

546.978 

- - 

421 924 

(4.202) 

(3.841) (421) (924) 

NDF 

Purchased 

Sold 


Pecém (i) 


17/10/2007 

11/16/2011 

USD 

USD 

172.831 179.764 281.490 292.782 (81.539) 274.368 

- 342.761 

- - 

8.167 4.952 

(81.539) (68.393) (8.167) (4.952) 

Purchased 

Sold 


Pecém 


6/30/2009 

01/16/2012 

EUR 

R$ 

- - - - - 

- 

- 

- 

- - 

- 117 

- 

- 

- (117) 

Purchased 

Sold 


Pecém 

BTG Pactual 

6/30/2009 

01/16/2012 

EUR 

USD 

629 857 893 1.217 (11) 1.896 

- 2.026 

- - 

1 44 

(11) 

(130) 

(1) 

(44) 

Purchased 

Sold 


Pecém 

BTG Pactual 

6/30/2009 

01/16/2012 

EUR 

R$ 

245 333 567 770 (186) 737 

- 997 

- - 

19 280 

(186) 

(260) 

(19) (280) 

33.7 

34 

35 

Capital management 

The purpose of the Group's capital management is to safeguard the continuous operation of the Group to offer return to shareholders and benefits to other stakeholders, as 

well as maintaining an ideal capital structure to reduce costs. 

In order to maintain or adjust its capital structure, the Group may review its dividend payment policy, return capital to shareholders and even issue new shares or sell assets to 

reduce its indebtedness level. 

2011 2010 

Total loans and debentures (Notes 20 and 21) 3.245.889 

3.385.906 

Less: Cash and cash equivalents (Note 5) (1.015.491) (1.126.449) 

Net debt 2.230.398 2.259.457 

Total shareholders' equity 6.659.322 

6.455.121 

Total capital 8.889.720 

8.714.578 

Financial leverage rate - % 25,09 25,93 

Commitments 

The Board of Directors' Meeting nº 142, of October 28, 2009, decided and approved the granting of guarantee by the Company in the total amount of R$115 million, whose 

beneficiaries are Rede Energia S.A. and Rede Power do Brasil S.A. (both pertaining to Rede Group), as collateral for the obligations supported up to that time by Rede Group 

resulting from the exchange of assets between the Company and Rede Group, in effect up to (i) the full replacement of the guarantees granted by Rede Group, or (ii) the 

issuance of a bank letter of guarantee in favor of Rede Group, whatever occurs first. 

Financial assets available for sale 

Refer to the acquisition of 5.63% of preferred shares, corresponding to 3.16% of all the shares of Denerge S.A., a close company that holds interest in companies from the 

electricity sector. In this negotiation, the Company has the option to convert Denerge shares into Rede Energia S.A. preferred shares, within a period ofuptotwoyears,atthe 

price of a possible public offer, or exercise the option of converting those shares within one year and at R$5.68 each if the public offering does not occur. As of March 31, 2011, 

these assets are marked-to-market. 

F-63

36 Insurance coverage 

37 

37.1 

Consolidated 

3/31/2011 

Substations 922.767 

Power Plants 991.412 

Stockrooms 32.029 

Buildings and contents (own) 35.518 

Buildings and contents (third parties) 65.512 

Civil liability 70.000 

Transports (materials) 7.500 

Transportation (vehicles) 12.800 

Personal accidents 684.210 

�� 

�� 

�� 

�� 

The Company and its subsidiaries hold insurance contracts with coverage determined by specialist guidance, bearing in mind the nature and level of risk, for amounts deemed 

sufficient to cover eventual significant losses on their assets and liabilities. Given their characteristics, the risk assumptions adopted are not within the scope of a review of 

quarterly information and consequently were not reviewed by independent auditors. 

The mais amounts at risk with insurance coverage are: 

Segment information 

A business segment is an identifiable component of the Group engaged in providing an individual product or service of a group of related products and services, and that is 

subject to risks and benefits that may be distinguished from other business segments. 

The Group develops a set of power supply activities, with special emphasis on the generation, distribution, transmission and trading of electric power. 

Based on internal reports, the Executive Board is responsible for evaluating the performance of several segments and deciding on fund allocation to each of the identified 

business segments. 

Segment characterization 

The amounts reported for each business segment are the result of the consolidation of subsidiaries and business units within each segment and the cancellation of 

intrasegment transactions. 

Distribution Generation Transmission Sales Other Eliminations Total 

Net operating revenue 1.030.073 

265.098 

1.539 230.912 

- 

(142.795) 1.384.827 


- 

- 

- 

- 

- 

- 


- 

- 

- 

- 

- 

- 

Electricity purchased for resale (456.194) 

(26.063) 

- 

(207.364) 

- 

136.473 (553.148) 

Electric power network use charges (139.645) 

(19.603) 

- 

(3.341) 

- 

6.192 (156.397) 

Cost operation 

(595.839) 

(45.666) 

- 

(210.705) 

- 

142.665 (709.545) 

Personnel (32.649) 

(5.072) 

(141) 

(906) 

- 

- 

(38.768) 

Material and third-party services (44.145) 

(5.814) 

(45) 

(625) 

- 

130 (50.499) 


(25.128) 

- 

(13) 

- 

- 

(66.840) 


(948) 

(7) 

(239) 

- 

- 

(11.652) 

(128.951) 

(36.962) 

(193) 

(1.783) 

- 

130 (167.759) 

(724.790) 

(82.628) 

(193) (212.488) 

- 

142.795 (877.304) 

Cost of service rendered to third-parties (537) 

- 

- 

- 

- 

- 

(537) 

Gross operating income 


304.746 

182.470 

1.346 

18.424 

- 

- 506.986 

Sales expenses (11.997) 

(68) 

- 

(1.066) 

147 

- 

(12.984) 


(13.269) 

(142) 

(1.773) (20.297) 

- 

(79.631) 

Depreciation and amortization (10) 

(27.121) 

- 

(27) 

(4.564) 

- 

(31.722) 


(12.525) 

(10) 

- 

10.593 

- 

(20.840) 

(75.055) 

(52.983) 

(152) 

(2.866) (14.121) 

- (145.177) 

Service result 229.691 

129.487 

1.194 

15.558 (14.121) 

- 361.809 

Income from equity interests - 

2.960 

- 

- 

193.398 (198.728) (2.370) 


13.965 

177 

1.208 

10.647 

(2.256) 51.566 


(54.844) 

(2) 

(260) 

(2.392) 

2.256 (95.891) 

Financial result (12.824) 

(40.879) 

175 

948 

8.255 

- 

(44.325) 


91.568 

1.369 

16.506 187.532 (198.728) 315.114 

Income and social contribution taxes - current (58.909) 

(30.887) 

(116) 

(6.051) 

- 

- 

(95.963) 

Deferred income and social contribution taxes (15.101) 

7.560 

- 

404 

- 

- 

(7.137) 

(74.010) 

(23.327) 

(116) 

(5.647) 

- 

- (103.100) 


68.241 

1.253 

10.859 187.532 (198.728) 212.014 


(3.037) 

- 

- 

- 

(19.126) (22.163) 


(2.109) 

- 

- 

- 

- 

(2.109) 


63.095 

1.253 

10.859 187.532 (217.854) 187.742 

Other information 

Current assets 1.670.784 

Non-current assets 1.130.887 

Investments 4.347 

Tangible 436 

Intangible and deferred assets 2.011.000 

Current liabilities 1.475.522 

Non-current liabilities 1.568.721 

Shareholders' equity and non-controlling 1.773.211 

530.162 

378.586 

11.785 

5.333.896 

732.895 

692.626 

2.283.730 

4.010.968 

F-64 


11.319 

19.301 

- 

- 

- 

1.683 

76 

28.861 

146.016 

18.520 

- 

659 

943 

105.965 

4.848 

55.325 

536.189 

185.161 

3.977.557 

2.197 

262.758 

144.302 

84.509 

4.735.051 

(246.778) 

(145.439) 

(3.958.790) 

- 

- 

(246.978) 

(159.934) 

(3.944.095) 

2.647.692 

1.587.016 

34.899 

5.337.188 

3.007.596 

2.173.120 

3.781.950 

6.659.321

Net operating revenue 922.837 


Electricity cost - 

Electricity purchased for resale (387.512) 

Electric power network use charges 

Cost operation 

(133.055) 

(520.567) 

Personnel (33.122) 

Material and third-party services (41.987) 



(128.223) 

(648.790) 

Cost of service rendered to third-parties (871) 



273.176 

Sales expenses (17.878) 




(67.672) 

Service result 205.504 

Income from equity interests - 





Income and social contribution taxes - current (63.566) 

Deferred income and social contribution taxes (15.403) 

(78.969) 






�� 

�� 

�� 

�� 

Distribution Generation Transmission Sales Other Eliminations Total 

227.131 

- 

- 

(14.876) 

(20.601) 

(35.477) 

(4.418) 

(4.675) 

(24.649) 

(822) 

(34.564) 

(70.041) 

- 

157.090 

(28) 

(12.314) 

(12.034) 

(9.612) 

(33.988) 

123.102 

11.239 

5.519 

(50.069) 

(44.550) 

89.791 

(24.989) 

2.223 

(22.766) 

67.025 

1.184 

(2.444) 

65.765 

1.659 

- 

- 

- 

- 

- 

(132) 

(191) 

- 

(31) 

(354) 

(354) 

- 

1.305 

- 

(148) 

0 

(12) 

(160) 

1.145 

- 

- 

(2) 

(2) 

1.143 

(69) 

- 

(69) 

1.074 

- 

- 

1.074 

148.567 

- 

- 

(127.937) 

(3.549) 

(131.486) 

(670) 

(217) 

(11) 

(565) 

(1.463) 

(132.949) 

- 

15.618 

460 

(1.716) 

(23) 

- 

(1.279) 

14.339 

- 

327 

(121) 

206 

14.545 

(4.327) 

(632) 

(4.959) 

9.586 

- 

- 

9.586 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

(13.035) 

(4.869) 

(1.013) 

(18.917) 

(18.917) 

175.933 

8.646 

(2.326) 

6.320 

163.336 

(239) 

9.784 

9.545 

172.881 

- 

- 

172.881 

(99.786) 

- 

- 

96.949 

2.837 

99.786 

- 

- 

- 

- 

- 

99.786 

- 

- 

- 

- 

- 

- 

- 

- 

(187.762) 

(2.652) 

2.652 

- 

(187.762) 

- 

- 

- 

(187.762) 

(26.194) 

- 

(213.956) 

Reclassified 

1.200.408 

- 

- 

(433.376) 

(154.368) 

(587.744) 

Current assets 1.802.192 

604.189 

10.013 115.158 586.058 (242.933) 2.874.677 

Non-current assets 1.126.863 

367.223 

19.425 

18.128 180.658 (144.429) 1.567.868 

Investments 4.347 

8.825 

- 

- 3.771.044 (3.746.945) 37.271 

Tangible 446 

5.300.563 

- 

684 

1.894 

- 5.303.587 

Intangible and deferred assets 2.015.513 

743.389 

- 

958 266.852 

- 3.026.712 

Current liabilities 1.732.693 

781.878 

1.777 

85.895 166.347 (243.179) 2.525.411 

Non-current liabilities 1.586.314 

2.301.985 

53 

4.567 

86.513 (149.849) 3.829.583 

Shareholders' equity and non-controlling 1.630.354 

3.940.326 

27.608 

44.466 4.553.646 (3.741.279) 6.455.121 

- 

38 Subsequent events 

The Annual Shareholders' Meeting held on April 7, 2011 approved the destination of net income and the payment of dividends in the amount of R$246,618 and interest on 

capital in the amount of R$106,000, referring to 2010, to be paid to shareholders without adjustments in the manner and times to be established by the Executive Board, during 

2011, and the establishment of an annual fund of up to R$860 as the global compensation of the members of the Board of Directors and up to R$3,150, as the global 

compensation of the Executive Board for the period from April 2011 to March 2012. 

F-65 


(38.342) 

(47.070) 

(66.342) 

(12.850) 

(164.604) 

(752.348) 

(871) 

447.189 

(17.446) 

(65.166) 

(20.718) 

(18.686) 

(122.016) 

325.173 

(590) 

73.617 

(100.555) 

(26.938) 

297.645 

(93.190) 

(4.028) 

(97.218) 

200.427 

(25.010) 

(2.444) 

172.973

� 

� 

� 

EDP – Energias do Brasil S.A. 

Consolidated financial statement 

December 31, 2010 and 2009 

F-66


Independent auditor's report on the 

financial statements 

Year ended December 31, 2010 

(A free translation of the original report in 

Portuguese, as filed with the Brazilian 

Securities and Exchange Commission (CVM), 

prepared in accordance with the accounting 

practices adopted in Brazil and International 

Financial Reporting Standards - IFRS) 

F-67


Rua Dr. Renata Paes de Barros, 33 

04530-904 Sao Paulo, SP - Brasil 

Caixa Postal 2467 

01060-970 Sao Paulo, SP - Brasil 

F-68 

Central Tel 

Fax 

Internet 

Independent auditor's report on the financial statements 

To the Board of Directors and Shareholders of 


Sao Paulo -SP 

55 (11) 2183-3000 

55 (11) 2183-3001 

www.kpmg.com.br 

We have audited the accompanying individual and consolidated financial statements of EDP - 

Energias do Brasil S.A. ("Company"), identified as Parent Company and Consolidated, 

respectively, which comprise the balance sheet as of December 31, 2010 and the related 

statements of income, comprehensive income, changes in shareholders' equity and cash flows 

for the year then ended, as well as a summary of the significant accounting policies and other 

explanatory notes. 

Management's responsibility for the financial statements 

The Company's management is responsible for the preparation and fair presentation of 

theindividual financial statements in accordance with the accounting practices adopted in Brazil 

and of the consolidated financial statements in accordance with the International Financial 

Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), 

and in accordance with the accounting practices adopted in Brazil, as well as for the internal 

control, which they deemed necessary to enable the preparation of these financial statements 

free of material misstatement, regardless of whether due to fraud or error. 

Auditors'responsibility 

Our responsibility is to express an opinion on these financial statements based on our audit, 

which was conducted in accordance with the Brazilian and International Standards on Auditing. 

These standards require compliance with ethical requirements by the auditor and that the audit is 

planned and performed for the purpose of obtaining reasonable assurance that the financial 

statements are free from material misstatement. 

An audit involves performing selected procedures to obtain audit evidence about the amounts 

and disclosures presented in the financial statements. The procedures selected depend on our 

judgment, including the assessment of the risks of material misstatement of the financial 

statements, whether due to fraud or error. 

In the assessment of these risks, the auditor considers the relevant internal controls for the 

preparation and fair presentation of the Company's financial statements, in order to design audit 

procedures that are appropriate in the circumstances, but not for the purpose of expressing an 

opinion on the effectiveness of the Company's internal controls. An audit also includes 

evaluating the appropriateness of the accounting policies used and the reasonableness of the 

KPMG Auditores Independentes, uma sociedade brasileira. simples 

e firma-membra da rede KPMG de firmas-membro independentes e 

afiliadas a KPMG Internationa Cooperative (" KPMG International"), 

uma entldade sUlea 

KPMG Audltores Independentes, a Brazilian entity and a member 

firm of the KPMG network of mdependent member flfms afflhated 

With KPMG International Cooperative ("KPMG Internat/ona!"), a 

Swiss entity.

accounting estimates made by Management, as well as evaluating the overall presentation of the 

financial statements taken as a whole. 

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a 

basis for our audit opinion. 

Opinion on the individual financial statements 

In our opinion, the individual financial statements referred to above present fairly, in all material 

respects, the financial position of EDP - Energias do Brasil S.A. as of December 31, 2010, and 

of its financial performance and its cash flows for the year then ended, in accordance with the 

accounting practices adopted in Brazil. 

Opinion on the consolidated financial statements 

In our opinion, the consolidated financial statements referred to above present fairly, in all 

material respects, the consolidated financial position of EDP - Energias do Brasil S.A. as of 

December 31,2010, its consolidated financial performance and its consolidated cash flows for 

the year then ended, in accordance with the International Financial Reporting Standards (IFRS) 

issued by International Accounting Standards Board (IASB) and the accounting practices 

adopted in Brazil. 

Emphasis of matter 

As described in Note 2.1.1, the individual financial statements were prepared in accordance with 

accounting practices adopted in Brazil. In the case of EDP - Energias do Brasil S.A., these 

practices differ from IFRS applicable to the separate financial statements only with respect to 

the the valuation of investments in subsidiaries by the equity method, while for the IFRS 

purposes they would be valued at cost or fair value. 

Other matters 

Statements of added value 

We have also auditedthe individual and consolidated statements of added value for the year 

ended December 31, 2010, whose presentation is required by Brazilian Corporate Law for 

publicly-held companies and as a supplementary information under IFRS, as these standards do 

not require the presentation of the statements of added value. These statements were submitted 

to the same audit procedures previously described and, in our opinion, are fairly presented in all 

their material respects, in relation to the financial statements taken as whole. 

F-69

Sao Paulo, February 21, 2011 


CRC 2SPOl4428/0-6 

Original in Portuguese signed by 

F-70





Note 12/31/2010 12/31/2009 1/1/2009 12/31/2010 12/31/2009 1/1/2009 

Assets 


Adjusted Adjusted Adjusted Adjusted 

Cash and cash equivalents 6 285,812 233,440 79,443 1,126,449 1,102,022 499,882 

Accounts receivable 8 1,121 

- 

- 

8,659 

5,999 


- 

- 

- 

823 

823 

823 


- 

- 

- 

888,806 901,781 725,432 

Taxes and social contribution 10 85,966 75,036 78,403 540,314 419,305 373,673 

Dividends receivable 29 169,312 136,108 150,109 

- 

Inventories 2.2.c - 

- 

- 

28,112 13,199 10,098 


222 2,168 2,080 62,898 69,587 76,936 


190 

4 

48 

5,254 

2,615 

8,407 

Assets available for sale 36 40,801 39,086 37,500 40,801 39,086 37,500 

Other assets 15 1,512 1,450 3,165 172,561 159,148 142,411 

584,936 487,292 350,748 2,874,677 2,713,565 1,875,162 

Noncurrent assets 

Accounts receivable 8 21,506 


- 


- 

Taxes and social contribution 10 

- 

Deferred income and social contribution taxes 11 9,784 

Related parties 12 116,622 

Advances for future capital increases 14 4,075 

Pledges and restricted deposits 13 8,693 


- 

Other assets 15 15,759 

176,439 

Investments 16 3,771,044 

Property, plant and equipment 18 1,894 

Intangible assets 19 266,852 

4,039,790 

Total assets 4,801,165 

23,380 

- 

- 

- 

- 

175,871 

69,217 

5,122 

- 

51,992 

325,582 

3,455,750 

2,038 

284,371 

3,742,159 

4,555,033 


F-71 

20,378 

- 

- 

- 

- 

144,087 

42,740 

2,944 

- 

7,227 

217,376 

2,949,106 

1,993 

454,845 

3,405,944 

3,974,068 

18,755 

397,324 

63,733 

35,933 

778,680 

- 

458 

239,669 

937 

32,379 

1,567,868 

37,271 

5,303,587 

3,026,712 

8,367,570 

12,810,115 

21,938 

325,262 

64,862 

31,078 

748,285 

- 

- 

130,797 

1,064 

49,937 

1,373,223 

30,935 

4,803,780 

2,994,969 

7,829,684 

11,916,472 

18 

248,303 

107,981 

31,084 

654,103 

22,104 

600 

153,632 

2,608 

112,275 

1,332,708 

10,391 

4,523,469 

3,138,800 

7,672,659 

10,880,529




Note 12/31/2010 12/31/2009 1/1/2009 12/31/2010 12/31/2009 1/1/2009 

Liabilities and shareholders' equity 



Suppliers 20 3,370 10,416 13,093 626,381 508,056 456,679 

Taxes and social contribution 10 51,659 31,106 15,612 609,891 454,459 369,229 

Dividends 29 100,822 75,391 74,118 191,142 144,618 159,415 

Debentures 21 

- 

- 

- 

231,730 210,029 218,842 


- 

- 257,700 375,701 572,662 869,785 


3 

- 

- 

27,611 27,181 30,871 

Estimated employee benefits and social charges 24 4,774 4,171 4,139 50,450 48,828 45,327 


- 

- 

- 

225,380 156,561 157,672 


- 

- 

- 

19,440 17,280 17,105 

Provisions 27 1,318 2,208 

- 

30,275 19,647 13,602 

Other accounts payable 15 4,392 

- 

2,208 137,410 165,967 157,070 

166,338 123,292 366,870 2,525,411 2,325,289 2,495,597 

Noncurrent liabilities 

Suppliers 20 

- 

Taxes and social contribution 10 32,295 

Deferred income and social contribution taxes 11.1 1,122 

Debentures 21 

- 


- 


- 


189 


- 


- 

Provisions 27 26,912 

Provision for unsecured liability 16 19,784 

Reserve for reversal and amortization 2.2.r - 


47 

80,349 

- 

34,146 

- 

- 

- 

- 

7,024 

- 

- 

24,469 

8,452 

- 

62 

74,153 

- 

- 

- 

- 

- 

- 

510 

- 

- 

64,396 

54,172 

- 

26 

119,104 

915 

137,853 

289,003 

637,593 

2,140,882 

189,228 

- 

12,913 

215,764 

153,566 

12,847 

17,248 

21,772 

3,829,584 

Shareholders' equity 28 

Capital stock 3,182,716 3,182,716 3,182,716 3,182,716 

Capital reserves 95,598 96,656 35,348 95,598 

Profit reserves 1,386,620 1,243,047 842,632 1,386,620 

Other comprehensive income (103,842) (50,095) (21,472) (103,842) 

Treasury shares (6,614) (6,614) (372,450) (6,614) 

Accumulated losses - (108,122) (178,679) 

- 

4,554,478 4,357,588 3,488,095 4,554,478 

Non-controlling shareholders' 1,900,643 

Total shareholders' equity and non-controlling shareholders' 4,554,478 4,357,588 3,488,095 6,455,121 

Total liabilities and shareholders' equity 4,801,165 4,555,033 3,974,068 12,810,115 

- 

0 


F-72 


- 

(0) 

- 

142,163 

261,020 

453,155 

1,957,440 

130,788 

- 

14,939 

205,564 

141,099 

0 

17,248 

45,935 

3,369,351 

3,182,716 

96,656 

1,243,047 

(50,095) 

(6,614) 

(102,807) 

4,362,903 

1,858,929 

6,221,832 

11,916,472 

(0) 

- 

34,451 

248,444 

655,786 

1,406,818 

140,636 

- 

2,847 

207,677 

267,260 

51,383 

17,248 

25,003 

3,057,553 

3,182,716 

35,348 

842,632 

(21,472) 

(372,450) 

(174,674) 

3,492,100 

1,835,280 

5,327,380 

10,880,529 

0


STATEMENTS OF INCOME 

YEARS ENDED DECEMBER 31 


Note 2010 2009 2010 2009 

Adjusted Adjusted 

Net operating income 

Electricity services cost 

Electricity cost 

30 

- 

- 5,034,316 4,621,702 


- (2,096,794) (1,866,655) 


- (601,426) (473,654) 

Operation Costs 

31 

- 

- (2,698,220) (2,340,309) 

Personnel - 

- (151,934) (146,521) 


- (203,066) (166,619) 


- (276,203) (257,197) 


- 

(30,093) (28,123) 

31 

- 

- (661,296) (598,460) 

- 

- (3,359,516) (2,938,769) 

Cost of service rendered to third-parties 31 

- 

- 

(6,050) (2,918) 



- 

- 1,668,750 1,680,015 

Sales expenses (2,132) - 

(80,252) (41,986) 

General and administrative expenses (65,960) (65,372) (262,048) (321,647) 

Depreciation and amortization (17,993) (19,920) (81,775) (76,909) 

Other operating expenses 609 (22,220) (52,657) (77,307) 

31 (85,476) (107,512) (476,732) (517,849) 

Income before financial income, equity interest and taxes (85,476) (107,512) 1,192,018 1,162,166 

Income from equity interest 16 673,282 708,248 (1,837) (407) 

Financial revenues 26,428 94,324 337,972 296,558 

Financial expenses (26,760) (48,048) (514,985) (378,570) 

Financial result 32 (332) 46,276 (177,013) (82,012) 

Other revenue 6,903 52,345 12,474 55,449 

Other expenses (13,173) (2,092) (39,937) (28,128) 

Other results (6,270) 50,253 (27,463) 27,321 

Income before income and social contribution taxes 33 581,204 697,265 985,705 1,107,068 

Income and social contribution taxes - current (3,115) (2,881) (229,254) (196,799) 

Deferred income and social contribution taxes 9,784 

- 

(19,810) (51,953) 

Net income before non-controlling shareholders' 

33 6,669 (2,881) (249,064) (248,752) 

and beneficiaries 587,873 694,384 736,641 858,316 

Non-controlling shareholders' - 

- (136,926) (146,850) 

Founders’ shares - 

- 

(17,157) (15,772) 

Net income for the year 587,873 694,384 582,558 695,694 

Basic and diluted net income per thousand shares - R$ 3,708.39 4,380.28 3,674.87 4,388.54 

Number of shares 158,805 


F-73 


158,805 

158,805 

158,805

F-74 

Balance at January 1, 2009 before adoption of new practices 3,182,716 

Adjustment - adoption of new accounting practices - 

Additional dividends proposed - 

Balances at January 1, 2009 (Adjusted ) 3,182,716 

Sale of treasury shares - 

- 

Additional dividends proposed on April 8, 2009 - 

Net income for the year - 

Destination of net income - 

- 

Legal reserve - 

Profit retention reserve - 

Additional dividends proposed - 

- 

- 

Other comprehensive income - 

Actuarial gains and losses - Post-employment benefits - 

- 


- 



- 

- 

- 

Balances at December 31, 2009 (Adjusted ) - 3,182,716 

Capital Capital Profit Treasuary Equity evaluation Retained Total Provision for Non-controlling Total 

reserves reserves shares adjustment earnings Parent company 

35,348 

- 

- 

35,348 

61,308 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

96,656 


STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY 

YEARS ENDED DECEMBER 31, 2010 AND 2009 


693,299 

- 

149,333 

842,632 

- 

(149,333) 

- 

- 

31,192 

296,318 

222,238 

- 

- 

- 

- 

- 

- 

1,243,047 

(372,450) 

- 

- 

(372,450) 

365,836 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

(6,614) 

- 

(21,472) 

- 

(21,472) 

- 

- 

- 

- 

- 

- 

- 

- 

2,357 

1,585 

(48,126) 

15,561 

- 

(50,095) 

- 

(178,679) 

- 

(178,679) 

- 

- 

694,384 

- 

(31,192) 

(296,318) 

(296,317) 

- 

- 

- 

- 

- 

- 

(108,122) 

3,538,913 

(200,151) 

149,333 

3,488,095 

427,144 

(149,333) 

694,384 

- 

- 

- 

(74,079) 

- 

- 

2,357 

1,585 

(48,126) 

15,561 

- 

4,357,588 

- 

- 

- 

- 

- 

- 

- 

- 

Reversal of dividends - 

(1,058) 

- 

- 

- 

- 

(1,058) 

Additional dividends proposed on April 9, 2010 - 

- 

(222,238) 

- 

- 

- 

(222,238) 

Net income for the year - 

- 

- 

- 

- 

587,873 

587,873 

Destination of net income - 

- 

- 

- 

- 

- 

- 

Legal reserve - 

- 

23,987 

- 

- 

(23,987) 

- 

Profit retention reserve - 

- 

341,824 

- 

- 

(341,824) 

- 

Intermediary dividends JSCP (interest on own capital) - 

- 

- 

- 

- 

(106,000) 

(106,000) 

Dividends - 

- 

- 

- 

- 

(7,940) 

(7,940) 

- 

- 

- 

- 

- 

- 

- 



- 

- 

- 

(84,320) 

- 

(84,320) 


- 

- 

- 

1,716 

- 

1,716 


- 

- 

- 

1,985 

- 

1,985 


- 

- 

- 

26,872 

- 

26,872 

Balances at December 31, 2010 3,182,716 95,598 1,386,620 

(6,614) 

(103,842) 

- 

4,554,478 


capital increase 

advances (Note 2.3) 

4,005 

- 

- 

4,005 

- 

- 

1,310 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

5,315 

- 

- 

- 

(5,315) 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

shareholders Consolidated 

1,835,280 

- 

- 

1,835,280 

- 

- 

146,850 

- 

- 

- 

(123,201) 

- 

- 

- 

- 

- 

- 

1,858,929 

- 

- 

- 

136,926 

- 

- 

- 

- 

(95,212) 

- 

- 

- 

- 

- 

1,900,643 

5,378,198 

(200,151) 

149,333 

5,327,380 

427,144 

(149,333) 

842,544 

- 

- 

(197,280) 

2,357 

1,585 

(48,126) 

15,561 

- 

6,221,832 

(1,058) 

(222,238) 

719,484 

- 

- 

(106,000) 

(103,152) 

(84,320) 

1,716 

1,985 

26,872 

6,455,121

F-75 


STATEMENTS OF COMPREHENSIVE INCOME 




2010 2009 2010 2009 



Other comprehensive income 


(84,320) 


1,716 

Cash flow hedge 1,985 


- 

26,872 

Comprehensive income for the year - 

534,126 

- 

- 


2,357 

1,585 

(48,126) 

15,561 

665,761 

- 

(84,320) 

1,716 

1,985 

26,872 

528,811 

- 

2,357 

1,585 

(48,126) 

15,561 

667,071 

-


STATEMENTS OF CASH FLOWS 




2010 2009 2010 2009 


Operational activities 0 - 

- 

- 



- 

136,926 146,850 

Expenses (revenues) not affecting cash and cash equivalents - 

- 

- 

- 


- 

67,462 39,891 


- 

661 

484 

Deferred income and social contribution taxes, net (9,784) 

- 

19,810 51,953 

Income and social contribution taxes to offset - 

- 

92 

1,725 

Depreciation and amortization 17,993 19,920 357,978 334,106 

Residual value of permanent assets written-off 323 

345 41,057 41,727 


- 

(764) 1,542 

Suppliers - 

- 

15,382 31,916 

Charges and monetary variations - 

- 

18,303 

- 

Loans, financing and debt charges - 

29,244 382,122 222,306 


- 

(6,406) 

(909) 

Post-employment benefits - CVM nº 371 - 

- 

(4,937) (14,509) 

Provisions for contingencies 9,221 26,361 30,709 65,193 

Environmental licenses - 

- 

3,109 

- 

Monetary restatement - receivables 753 

1,232 

753 

1,232 


- 

17,157 15,772 

Ownership interests (673,283) (708,248) 1,837 

407 

Loss with investments 12,847 

- 

12,847 

- 

Write-off/reserve for losses of non-monetary assets (5,315) (49,066) 

- 

(46,504) 

Provision for unsecured liability - 

(1,512) 

- 

(1,512) 


- 

47,837 44,545 

Allowance for doubtful accounts on Other regulatory assets - 

(74,764) 

- 

(74,865) 

Pledges and restricted deposits - monetary restatement - 

- 

(30,509) 32,536 

Income and social contribution taxes - monetary restatement - 

- 

24,573 

- 

Other - 

- 

1,114 

1,149 

(59,372) (62,104) 1,719,671 1,590,727 

Assets (increase) decrease - 

- 

- 

- 


- 

(27,175) (222,689) 

Income and social contribution taxes to offset (10,930) 3,367 (122,457) (35,975) 


- 

- 

694 

Inventories - 

- 

(16,205) (5,288) 

Pledges and restricted deposits (1,625) (2,266) (71,673) (2,472) 

Prepaid expenses (186) 

44 (1,748) 4,717 

Other regulatory assets 11,340 (10,797) 

(423) (45,710) 

Income receivable - 

- 

4,040 

- 

Sundry debtors - 

- 

(1,244) 

874 

Order of expenses to be reimbursed - 

- 

- 

(21) 

Other - 

- 

- 

560 

(1,401) (9,652) (236,885) (305,310) 

Liabilities increase (decrease) - 

- 

- 

- 

Suppliers (7,046) (2,676) 74,537 90,844 

Current taxes and social contributions 19,824 (16,648) 98,442 (3,718) 

Deferred income and social contribution taxes (1,121) 

- 

(1,121) 

- 

Tariff restitution - 

- 

147 

- 

Estimated personnel liabilities 603 

26 

812 

3,174 

Provisions for contingencies (7,668) 

- 

(31,031) (15,621) 

Other liabilities 4,379 (6,206) (29,078) (19,981) 


- 

- 

(1,351) 

8,971 (25,504) 112,708 53,347 

Net cash from (invested in) operational activities (51,802) (97,260) 1,595,494 1,338,765 

- 

- 

- 

- 

Cash flow of investment activities - 

- 

- 

Sale (purchase) of treasury shares (1,058) 427,144 (1,058) 427,144 

Write-offs (additions) in investments (5,000) (204,395) (4,850) (52,364) 

Capital increase (112,221) 

- 

- 

- 

Additions in tangible and intangible fixed assets (655) 

(950) (986,598) (757,013) 

Receivables in tangible and intangible fixed assets - 

- 

- 

2,984 

Dividends received 456,738 490,342 

- 

- 

Sale of ESC 90 - 

94,624 

- 

94,624 

Net cash from (invested in) investiment activities 337,804 806,765 (992,506) (284,625) 

- 

- 

- 

- 

Cash flow used in financing activities - 

- 

- 

- 

Related parties 77,117 (46,424) 

- 

- 

Capital increase advances - 

- 

- 

30,354 

Capital reduction - 

- 

(24,007) 

- 

Dividends paid (310,747) (222,140) (364,926) (292,870) 

Loans, financings and debentures - entries - 

- 

812,468 1,156,644 

Loans, financing and debt charges paid - (286,944) (1,002,101) (1,346,128) 

Cash used in financing activities (233,630) (555,508) (578,565) (452,000) 

- 

- 

- 

- 

Net increase in cash and cash equivalents 52,372 153,997 24,423 602,140 

- 

Cash and cash equivalents at the end of the year 285,812 

Cash and cash equivalents at the beginning of the year 233,440 

52,372 


F-76 

- 

233,440 

79,443 

153,997 

- 

1,126,445 

1,102,022 

24,423 

- 

1,102,022 

499,882 

602,140


STATEMENTS OF ADDED VALUE 




2010 2009 2010 2009 


Generation of added value 6,903 

50,253 7,674,464 7,032,375 


- 

7,738,065 7,013,608 


- 

(76,075) 

(36,682) 

Other revenue 6,903 

50,253 

12,474 

55,449 

(-) Acquisition from third parties (56,048) (63,529) (3,430,691) (3,052,660) 

Costs of purchased energy - 

- 

(2,286,978) (2,038,331) 

Distribution and transmission system use charges - 

- 

(652,876) (517,842) 

Materials (967) 

(617) 

(26,635) 

(29,636) 

Third-party services (26,839) (28,667) (322,117) (284,653) 

Other operating costs (28,242) (34,245) (142,085) (182,198) 

Gross value added (49,145) (13,276) 4,243,773 3,979,715 

Retentions - 

- 

- 

- 

Depreciation and amortization (17,993) (19,920) (357,978) (334,106) 

Net generated value added (67,138) (33,196) 3,885,795 3,645,609 

Added value received as a transfer - 

- 

- 

- 

Financial revenues 26,428 

94,324 

337,972 

270,927 


- 

(136,926) (146,850) 

Equity accounting result 673,282 708,248 

(1,837) 

(407) 

Total value added to distribute 632,572 769,376 4,085,004 3,769,279 

Distribution of value added 

Personnel 

- 

- 

- 

- 

Direct remuneration 14,070 

12,437 

154,514 

157,759 

Benefits 5,883 

7,076 

51,397 

44,280 

FGTS 

Taxes, fees and contributions 

1,674 

1,770 

18,026 

20,961 

Federal 8,092 

16,655 1,373,148 1,265,703 

State - 

- 

1,373,320 1,223,443 

Municipal 

Remuneration of third party capital 

- 

- 

5,697 

4,687 

Interest 11,999 

34,275 

495,632 

332,149 

Rents 

Remuneration on own capital 

2,981 

2,779 

13,555 

8,831 

Dividends and interest on own capital 113,941 

74,079 

(135,577) (210,580) 


- 

17,157 

15,772 

158,640 149,071 3,366,869 2,863,005 

Retained earnings 473,932 620,305 

718,135 

906,274 

632,572 769,376 4,085,004 3,769,279 


F-77

1 Operational context 

12/31/2010 

12/31/2009 

1/1/2009 

Companies Consolidation 

Direct Indirect Direct Indirect Direct Indirect 

Distribution 

Bandeirante Energia S.A. (Bandeirante) full 

100 

- 

Espírito Santo Centrais Elétricas S.A. (Escelsa) full 

100 

- 

Generation - 

- 

Energest S.A. (Energest) full 

100 

- 

Castelo Energética S.A. (CESA) full 

- 

100 

Costa Rica Energética Ltda. (Costa Rica) full 

- 

51 

Pantanal Energética Ltda. (Pantanal) full 

- 

100 

Santa Fé Energia S.A. (Santa Fé) full 

- 

100 

EDP Lajeado Energia S.A. (EDP Lajeado) full ( * ) 

- 

- 

Lajeado Energia S.A. (Lajeado) full 

55.86 

- 

Tocantins Energia S.A. (Tocantins) full as of 09/01/2008 ( * ) 

- 

- 

Ipueiras Energia S.A. (Ipueiras) full 

100 

- 

Investco S.A. (Investco) full 

- 

40.78 

Enerpeixe S.A. (Enerpeixe) full 

60 

- 

Enernova S.A. (Enernova) full 

- 

Terra Verde Bioenergia Participações S.A. (Terra Verde) full 

92 

- 

EDP Renováveis Brasil S.A. (EDP Renováveis) by the equity method 

45 

- 

Porto do Pecém Geração de Energia S.A. (Porto do Pecém) 

proportional 

50 

- 

Central Nacional da Energia Eólica S.A. (Cenaeel) 

by the equity method by EDP Renováveis 

- 

45 

Elebrás Projetos Ltda 

by the equity method by EDP Renováveis 

- 

45 

Trading - 

Enertrade Comercialização e Serviços de Energia S.A. (Enertrade) full 

100 


Evrecy Participações Ltda. (Evrecy) full 

- 

Other - 

Enercouto S.A. (Enercouto) full 

100 

Escelsa Participações S.A. (Escelsapar) full 

100 

Omega Engenharia e Assessoria Ltda (Omega) full 

100 

1.1 Concessions 

1.2 

Notes to the financial statements 

Years ended December 31, 2010 and 2009 


EDP - Energias do Brasil S.A. (“Company” or “Energias do Brasil” or “Parent Company”), a public held company incorporated on July 24, 2000, headquartered in the State of São Paulo, 

has as its corporate purposes the participation in other corporations as a shareholder or quota holder, as well as in businesses and enterprises in the power industry in Brazil or 

overseas; to manage electric generation, transmission, distribution and trading assets in their various forms and types; to study, plan, develop and implement electric power generation, 

transmission, distribution and trading projects in their various forms and types. 

* Merger of companies EDP Lajeado and Tocantins in Lajeado Energia on 11/30/2009. 

The Company has the right to indirectly explore the following power generation, distribution and transmission concessions/licenses/permits: 

Companies State 

- 

- 

- 

100 

- 

- 

- 

- 

Inception End 

Energest ES 

231.90 

145.91 

7/17/1995 7/14/2025 

CESA ES 

67.64 

36.30 

7/17/1995 5/19/2029 

Pantanal MS 

52.76 35.55 

12/4/1997 12/23/2029 

Costa Rica MS 

16.00 

12.28 

11/5/2001 11/5/2031 

Santa Fé ES 

29.00 

26.10 

11/13/2001 11/13/2031 

Porto Pecém CE 

720.27 

631.00 

7/1/2008 7/1/2043 

Enerpeixe TO 

452.00 

271.00 

11/7/2001 11/7/2036 

Investco TO 

902.50 

526.60 

1/15/1998 1/15/2033 

Terra Verde SC 

140.00 

- 

6/25/2009 6/25/2039 

Evrecy ES / MG - 

- 

7/17/1995 7/17/2025 

Bandeirante SP 

- 

- 

10/23/1998 10/23/2028 

Escelsa ES 

- 

- 

7/17/1995 7/17/2025 

Cenaeel SC 

13.80 

2.97 

8/12/2002 12/11/2032 

Elebrás RS 151.00 

55.45 

8/28/2010 8/28/2032 

(*) Unaudited 

Corporate restructuring 

Installed capacity (MWm) (*) 

Assured energy (MWm) (*) 

Concession/ Authorization / Record 

Transfer of EDP Renováveis investment held by Enernova for the Company. 

On September 24, 2010, the Extraordinary Shareholders' Meeting approved the capital reduction of Enernova, in the amount of R$19,446, through the cancellation of 538 common 

shares held by the Company. As reimbursement for the amount corresponding to the capital reduction of Enernova, the investment held by Enernova was transferred to the Company. 

% interest 

Merger of Enernova into Ipueiras 

As of December 31, 2010, the Extraordinary Shareholders' Meeting was held and approved the merger of subsidiary Enernova into subsidiary Ipueiras. 

F-78 

100 

100 

- 

100 

- 

- 

- 

- 

- 

55.86 

- 

100 

- 

60 

100 

92 

- 

50 

- 

- 

- 

100 

- 

- 

- 

100 

100 

- 

- 

- 

- 

100 

51 

100 

100 

- 

- 

- 

- 

40.78 

- 

- 

- 

45 

- 

45 

45 

- 

- 

- 

100 

- 

- 

- 

100 

100 

100 

59.93 

47.23 

50.88 

4.53 

60 

100 

92 

50 

100 

100 

100 

100 

51 

100 

100 

53.69 

50.88 

39.50 

45 

100

2 Accounting policies 

2.1 Basis of presentation 

2.1.1 Consolidated financial statements 

The consolidated financial statements of the Company for the years ended December 31, 2010 and 2009 were prepared in accordance with International Financial Reporting Standards 

(IFRS) issued by the International Accounting Standards Board (IASB) and also in accordance with accounting practices adopted in Brazil in conformity with the pronouncements issued 

by the Accounting Pronouncement Committee (CPC). 

The Company adopts all IFRS for the first time in its consolidated financial statements at January 1, 2009. 

The note "Transition of accounting practices to IFRS", details the main effects of the transition to IFRS in view of the Brazilian accounting practices for the Company's consolidated 

financial statements for the year ended December 31, 2009 ant the balance sheet on transition date of January 1, 2009. 

The preparation of the consolidated financial statements in accordance with all IFRS requires the Company's Management to make some estimates. The areas that involve judgment or 

the use of estimates that are material for consolidated financial statements are shown in note 2.2.v. The consolidated financial statements were prepared using the historical cost as the 

basis of value, except for the valuation of certain financial instruments, which are measured at fair value and the revaluation of business combinations. 

2.1.2 

2.1.3 

The Company adopted all standards and interpretations issued by IASB that are applicable to the financial statements as of December 31, 2010. 

The Company's management authorized the conclusion of the preparation of financial statements on February 18, 2011; the amounts in the financial statements are expressed in 

thousands of Brazilian reais, rounded to nearest 1000, unless otherwise indicated. 

The consolidated financial statements include financial statements of EDP - Energias do Brasil S.A., and companies which the Company has controlling interest, directly or indirectly, 

detailed in note 1, which years ended are consistent with those of the parent company and the accounting practices are uniform. 

Direct subsidiaries are consolidated from acquisition date, which corresponds to the date in which the Company obtained control and continue to be consolidated to the date in which 

control ends. 

Parent Company's Financial Statements 

The financial statements of the parent company are being presented in accordance with accounting practices adopted in Brazil, in compliance with the provisions contained in the 

Corporation Law, and incorporates the changes introduced by Law nº 11638/07 and 11941/09, supplemented by the new pronouncements, interpretations and guidelines of CPC, 

approved by resolutions of CFC and CVM deliberations of 2009 and 2010, applicable as from January 1, 2010. 

Financial statements of 2009 

In 2009, the financial statements of the parent company and consolidated were prepared in accordance with the accounting practices adopted in Brazil, which embodied the changes 

introduced by Laws 11638/07 and 11941/09, complemented by the pronouncements of the Accounting Pronouncements Committee (CPC), approved by resolutions of the Federal 

Accounting Council (CFC) and deliberations of the Brazilian Securities Commission (CVM) issued up to December 31, 2008. 

The financial statements of the parent company for 2009 are therefore being re-presented to reflect the accounting standards issued in 2009 and 2010 by CPC with the objective of 

permitting a comparison with 2010. 

The 2009 consolidated financial statements, as established in CVM Resolution 609/09 (CPC 37 – Initial Adoption of IFRS), were adapted to the IFRS, retroactively as from on January 1, 

2009. Accordingly, the consolidated financial statements, previously disclosed, were adjusted and are being re-presented in accordance with IFRS. 

The parent company's financial statements are therefore being submitted in conformity with the accounting standards issued by CPC in 2009 and 2010 and the financial consolidated 

statements are being submitted in conformity with international financial reporting standards issued by IASB in 2009 and 2010. The application of this set of standards at the parent 

company level did not result in differences when compared with the consolidated position. 

2.2 Summary of significant accounting policies 

The accounting policies described below have been consistently applied to all the periods presented in these individual and consolidated financial statements and in the preparation of 

the opening balance sheet as at January 1, 2009, for the purpose of enabling the transition to IFRS and CPC standards. 

The accounting policies have also been consistently applied by the Group entities. 

a) Cash and cash equivalents (Note 6) 

Cash and cash equivalents include cash, bank deposits, and other high-liquidity short-term investments, promptly convertible into a known sum of cash and subject to an insignificant 

risk of change of value, which are stated at cost, plus income accrued until the balance sheet date. 

F-79

) Accounts receivable 

• Consumers and concessionaires (Note 7) 

Trade accounts receivable are recorded in the amount invoiced, adjusted to present value when applicable, including the respective direct taxes which include: 

(i) The amounts billed to final consumers, distributor concessionaires and trading companies of free energy, as well as the revenue referring to energy consumed and not billed; 

(ii) The calculation of the present value is performed for scheduled payments of debts of consumers of the Company, based on the capital remuneration rates, regulated by ANEEL and 

applied to the tariffs of electric power public utility service distributors (average remuneration rate of the investment). The contra entry of the adjustments to present value of accounts 

receivable is against net income for the year (Note 7.4); 

(iii)The amounts receivable relating to the energy traded in the Electricity Trading Board - CCEE (Note 7.2); 

(iv) Allowance for doubtful accounts - The amounts were allocated pursuant to Accounting Instruction 6.3.2, of the Accounting Manual of the Electricity Public Utility Service, whci defines 

as a rule the following provisioning terms for overdue credits: Home - over 90 days, Business - over 180 days and other classes - over 360 days. 

Furthermore, there was a careful analysis of the balance of consumers and concessionaires, and the amount recognized is considered sufficient to cover losses considered probable. 

The provision recognized is considered sufficient to cover eventual losses in the realization of these assets by management. 

• Indemnifiable financial assets (Note 17) 

Subsidiaries Bandeirante, Escelsa and Evercy recognize an amount receivable from the Concession Grantor due to the unconditional right of receiving cash at the end of the 

concession, as provided for in the contract, as indemnity for the construction services carried out and not received as service rendered related to the concession. These financial assets 

are recorded at the right's present value and are calculated based on the residual value of assets pertaining to the concession and that will be reversible at the end of concession. These 

assets are maintained at the amortizable cost and are remunerated by the tariff calculated as the average investment remuneration rate. 

c) Inventories 

The materials used in the construction of the concession infrastructure, operation and maintenance of services rendered are recorded at the average acquisition cost, not exceeding 

market value. 

d) Investments (Note 16) 

In the financial statements of the parent compay, the investments in subsidiaries and associated companies with a percentage of the voting capital above 20% or with significant 

influence, and in other companies that are part of the same group or that are under common control, are valued by the equity method. 

Other investments that do not fit in the above category are valued at cost, less provision for loss, when applicable. 

For business combinations carried out beginning as from January 1, 2009, the Company's IFRS transition date, assets, liabilities, and contingent liabilities of a subsidiary are measured 

at the corresponding fair value on acquisition date. Any amount by which acquisition cost exceeds the fair value of identifiable net assets acquired is recorded as goodwill. When 

acquisition cost is lower than the fair value of identified net assets, the difference is recorded in income. Minority interest is presented as the corresponding proportion of identified assets 

and liabilities' fair value. 

Investments in land and properties which are not part of the core operating activity of the subsidiaries are stated at acquisition cost. 

e) Infrastructure assets managed on behalf of the Concession Grantor (Notes 17, 18 and 19) 

Infrastructure assets managed on behalf of the Concession Grantor are being presented in the groups of Indemnifiable financial assets and intangible assets, due to the implementation 

of CPCs. They are as follows: 

Assets related to the concession 

According to Articles 63 and 64 of Decree 41,019 of February 26, 1957, the assets and properties used in generation, transmission, distribution, including trading of power, are related to 

these services and cannot be disposed, sold, assigned or mortgaged without prior and formal authorization of the Regulatory Agency. 

ANEEL Resolution 20 of February 3, 1999, regulates the removal of fixed assets from the Electricity Public Utility Service concessions, granting prior authorization to separate fixed 

assets not of use to the concession, when available for sale, determining that the amount from the sale should be deposited in a specific bank account for reinvestment in the 

concession. 

Liabilities related to the concession 

Up to December 31, 2009, write-offs were made in Liabilities related to the concession in the proportion of disabled or disposed assets, and also based on the average depreciation rate 

of distribution assets, corresponding to ventures comprised totally or partially of third-party funds and subsequently assigned to the Company. As of January 1st, 2010, complying with 

the ANEEL Regulatory Resolution 396 provision, of February 23, 2010, the Company suspended the record of write-offs correspondent to the disabled assets. 

f) Property, plant and equipment (Note 18) 

All generating companies' tangible assets and only tangible assets not related to the distribution and transmission companies' infrastructure are recorded in Property, plant and 

equipment. Are accounted for at: i) acquisition costs plus nonrecoverable taxes on purchase; ii) any costs directly attributable to the placement of the asset in the location and required 

operating conditions, including financial charges; iii) in thermal and wind power plants, at the initial estimate of costs for disassembling and removing the item and restoring the location; 

iv) less accumulated depreciation and impairment losses. 

The depreciation calculation basis is the asset's depreciable amount (acquisition cost less residual value) recognized in income at the straight line method according to the estimated 

useful lives of each component of a property, plant and equipment item, as this method is the one that best reflects the consumption standard of future economic benefits incorporated to 

the asset . 

The residual value is the asset's remaining balance at the end of the concession, considering ANEEL's depreciation rate, since, as established in the agreement entered into by the 

Company and the Grantor, at the end of the concession, the assets will be transferred to the Grantor, which will indemnify the Company for the assets not fully depreciated. When the 

indemnity at the end of the concession is not possible, thermal and wind generation, no residual value is recognized and depreciation rates are adjusted so that all assets are 

depreciated within the concession. 

Depreciation methods and residual values are reviewed at end of year, possible adjustments are recognized as a change in accounting estimates and useful lives are those defined by 

ANEEL. 

On account of the provisions of the Accounting Instructions of the Accounting Manual of the Electricity Public Utility Service and in CVM Resolution 577, of June 5, 2009, which approves 

the technical pronouncement CPC 20, the financial charges relating to the financing obtained from third parties, effectively invested in construction in progress, are recorded in this 

subgroup as cost of the respective constructions. 

The Company and its generating and trading subsidiaries opted not to value their fixed assets at deemed cost, as there is an understanding that the accounting policy of valuating fixed 

assets at the historic cost less the best estimate of depreciation and allowance for impairment, when required, is the one that best represents its fixed assets. To adequate the property, 

plant and equipment basis to the recognition requirements of an asset, as determined in CPC 27 (IAS 16), and eliminate costs that were previously recognized, the basis was reviewed 

to identify costs, such as administrative costs and foreign exchange fluctuation, which were excluded. 

F-80

g) Intangible assets (Note 19) 

Intangible assets include: 

• Concession rights: The right of concessionaires of charging users for the power distribution system construction is recorded as intangible assets. Amortization is recorded according to 

the concession remaining period. 

• Software: these are measured by the total cost of purchase, less amortization expenses. 

• Intangible assets acquired from third parties: these are measured by the total cost of purchase, less amortization expenses. 

• Project developments: are recognized as assets only in the development stage, provided that they comply with the requirements defined in CPC 04. 

• The permanent easement of way: are recorded at cost. 

• Concession right - use of the public property: refer to the right to explore joint hydropower plants and transmission systems of Enerpeixe and Investco, compensated by monthly 

payments to the Federal Government, as agreement entered into by the parties. It is recognized at the total fair value of the right to use the public property until the end of the 

concession agreement and amortized over the concession agreement. 

• Incorporated goodwill – refers to the spun-off portion of Incorporated goodwill in the subsidiaries Bandeirante, Escelsa and Lajeado Energia, resulting from the acquisition of shares of 

the abovementioned companies, which was accounted for in accordance with CVM Instructions nº 319/99 and nº 349/99 and, pursuant to the determination of ANEEL, is being 

amortized by the curve between the expectation of future results and the concession period of the Companies. 

• Goodwill generated in a business combination: is recorded as the difference between the amount paid for the business acquired and the fair value of the business. 

Amortization is calculated on the asset amortizable amount (cost or other amount that replaces cost less residual value) and is recognized in income at the straight-line method in 

relation to the estimated useful lives of intangible assets other than goodwill, beginning as of the date in which they are available for use, as this method is the one that best reflects the 

consumption standard of future economic benefits incorporated to the asset. 

h) Environmental licenses 

Licenses required to initiate development projects, such as pre-installation and installation licenses, obtained during planning and installation are recognized as plant costs, more 

specifically as dam costs, according to ANEEL accounting guide, and therefore are depreciated over the useful lives of dams. Operating licenses, required to operate the assets, 

obtained or renewed after the beginning of operations, when verified the existence of environmental costs associated to the issue of that license and the disbursements are made in 

advance, that advance is registered as an intangible asset – operating licenses, and is amortized over the license period. 

If the license is obtained before disbursements, at the start of the license period, the estimated disbursements are provisioned and registered as intangible asset - operation licenses – 

and are amortized over the license period. 

i) Reduction to the recoverable value 


Evaluated at the end of the year regarding recoverability. Considered as nonrecoverable assets when there are evidences that one or more events occurred after the initial recognition 

of the financial asset and resulted in adverse effects on the estimated future cash flow of the investment. 

Non-financial assets 

The Company’s Management reviews the net book value of property, plant and equipment and other non-current assets, including goodwill and intangible assets, on an annual basis to 

identify whether there was any evidence of unrecoverable losses of the occurrence of events or alterations in the circumstances indicating that the book value might not be recoverable. 

When such evidence is identified, and the net book value exceeds the recoverable value, a provision is recognized adjusting the net book value to the recoverable value. 

Goodwill and intangible assets with undefined useful life have the recovery of their value tested annually regardless of the presence of indicators of loss of value. 

j) Other current and non-current assets 

These are show at cost or realizable value, including, when applicable, income accrued up to the balance sheet date. 

k) Suppliers (Note 20) 

Mainly includes balances payable to suppliers of electric energy and of charges on the use of the electricity network. 

F-81

l) Loans and financing, debt charges and debentures (Notes 21 and 22) 

Loans, financing and debentures are stated at the net amount of transaction costs incurred and subsequently measured at the amortized cost using the effective interest rate method. 

Loans and financing in foreign currency that have swap operations were recognized at fair value through net income for the year. 

m) Provisions 

Contingencies (Note 27.1) 

These are recognized in the balance sheet as a result of a past event, and when is probable that an economic resource will be required to settle the obligation. Provisions are recorded 

considering the best estimates of the risk specific to the liability. 

Dismantling (Note 27) 

Recognized when there is a legal or contract obligation at the end of the assets' useful lives. Accordingly, these type of provisions are recognized for power plants to cover 

responsibilities related to location and land replacement expenses. These provisions are calculated based on the current value of corresponding future responsibilities and are recorded 

as a contra entry to an increase to respective property, plant and equipment, and amortized on a straight-line basis over the expected average useful lives of the assets. 

Provisions are subject to annual review, in accordance with estimated future responsibilities. The provision is adjusted at the end of the year and recognized in the statement of income. 

(n) Use of public property (Note 26) 

It is a financial instrument maintained to maturity and stated at the amortized cost adjusted by IGP-M incurred though balance sheet date. 

Current and non-current liabilities balances are recognized at present value at the rate implicit in the project. 

o) Other current and non-current liabilities 

Stated at the known or estimated amounts, plus, when applicable, the corresponding charges, monetary and exchange variations incurred up to the balance sheet date. 

p) Income and social contribution taxes (Notes 10, 11 and 33) 

Current income and social contribution taxes recorded in income are calculated, at the subsidiaries CESA, Costa Rica, Pantanal, Santa Fé and Evrecy with a basis on the deemed 

taxable income, at the rates applicable according to the legislation in force, and at the parent company and other subsidiaries, current income tax is calculated with a basis on the taxable 

income (adjusted income), at the rates applicable according to the legislation in force 15%, plus 10% on the taxable income that exceeds R$240 per annum, and current social 

contribution is calculated with a basis on taxable income before income tax, through the application of the rate of 9%, both considering the offsetting of tax loss carryforward and negative 

social contribution basis, respectively, limited to 30% of the taxable income. 

Deferred income and social contribution tax assets were recorded under the heading of deferred income and social contribution taxes, as of the tax loss carryforward, negative social 

contribution basis and temporary differences, considering the rates in force of the aforementioned taxes, in accordance with the provisions of CVM Resolution 273, of August 20, 1998 

and CVM Instruction 371, of June 27, 2002 and CVM Resolution 599, of September 15, 2009, and consider past profitability record and expectations of future taxable income based on 

a technical viability study. 

For purposes of calculating the taxable income and its effects on the financial statements, the Company considered the adoption of the Transitory Tax Regime - RTT, as determined in 

MP nº 449/08 (converted into Law no. 11,941/09). 

q) Post-employment benefits (Note 23) 

The Company has employee benefit plans including pension and retirement plans. The main benefit plans granted to the Company's employees are described in notes 23.1, 23.2, 23.3 

and 23.4. 

The amounts are recorded in accordance to the terms of CVM Resolution 600, of October 7, 2009. Costs, contributions and actuarial liabilities are determined annually, with a basis on 

an appraisal carried out by independent actuaries, the last of which was executed for the base date of December 31, 2010. 

Actuarial gains and losses generated by adjustments and changes to actuarial assumptions of pension and retirement plans are directly recognized in Shareholders' equity under equity 

evaluation adjustment. 

r) Reserve for reversal and amortization 

Refers to resources derived from the Reserve for reversal and amortization, set up until December 31, 1971 under the terms of the regulation of SPEE (Federal Decree 41,019/57), 

applied by the subsidiary Bandeirante in the expansion of the Electricity Public Utility Service, and interest of 5% per annum is charged on the Fund for reversal, and paid per month. Its 

potential settlement will occur in accordance with determinations of the Granting Power. 

s) Capital (Note 28) 

Common shares are classified as shareholders' equity and any cost attributable to the issuance of shares and stock options are recognized as a deduction from shareholders' equity. 

Preferred shares are classified as shareholders' equity in case they are not redeemable, or only redeemable at the Company's discretion. Are not entitled to vote and have preemptive 

rights in the settlement of its portion of capital. 

Repurchased options classified as treasury shares and recognized as a deduction from shareholders' equity, including acquisition costs. When these shares are again made available to 

the market, the associated cost is deducted from shareholders' equity and excess or deficit is transferred to retained earnings. 

t) Dividends and interest on own capital credited (Note 29) 

The distribution of dividends and interest on capital are recognized as a liability in the Company's financial statements at the end of year, based on the by-laws. However, any amount 

above the mandatory minimum is only provisioned on the date in which they are approved by a Shareholders' Meeting. The tax benefit of interest on capital is recognized in the 

statement of income. 

F-82

u) Income statement 

Income and expenses are recognized on the accrual basis. 

Revenue is recognized in the statement of income when all the inherent risks and benefits are transferred to the buyer. Revenue from electric energy operations and services rendered 

is recognized in the statement of income in relation to its realization. Revenue is not recognized if there are significant uncertainties as to its realization. 

The billing of electric energy to all the consumers and concessionaires is executed monthly, in accordance with the reading calendar and supply agreements, respectively. 

The energy supplied and not billed, corresponding to the period lapsed between the date of the last reading and the balance sheet date, is estimated and recognized as unbilled 

revenue. 

The power supply is billed on a monthly basis for all concessionaires. 

Financial income comprises interest earned in short-term investments, gains on hedge, when applicable, arrears charges on power sold, which are recognized in income. 

Financial expenses include interest, foreign exchange fluctuation and mark-to-market loans and financing and operating results swap and hedge, which are recognized in income. 

v) Accounting estimates 

In the preparation of individual and consolidated financial statements in accordance with Brazilian accounting practices based on the provisions of the Brazilian Corporate Law, the 

Company's and its subsidiaries' management are required to make estimates to record certain transactions that affect assets, liabilities, income and expenses. 

The final results of these transactions and information, at the time of their effective realization in subsequent periods, may differ from these estimates, due to the lack of precision 

inherent to the process of their determination. The Company reviews the estimates and assumptions at least quarterly, except for the Post-employment benefit plans, as mentioned in 

note 2.2q. 

The main estimates related to the financial statements refer to the recognition of impacts resulting from: Provision for allowance for doubtful accounts; Unbilled supply revenue; 

Transactions carried out in the sphere of the Electric Energy Trading Chamber - CCEE; Loss or gain of revenue – low income; Recovery of deferred income and social contribution taxes 

on tax loss carryforward, negative bases and temporary differences; Measurement of financial instruments; Provisions for contingencies; Post-employment benefit plans; and Impairment 

test. 

w) Financial instruments (Note 34) 

Financial instruments are defined as any contract that originates a financial asset to the entity and a financial liability or equity instrument to another entity. 

Non-derivative financial instruments include cash and cash equivalents, collaterals and restricted deposits, trade accounts receivable and other receivables, investments in debt and 

equity instruments, loans, financing, debentures and trade accounts payable, as well as accounts payable and other obligations. These financial instruments are immediately recognized 

on negotiation date, that is, when the obligation or right is formalized, and are initially recorded at fair value plus or less any directly attributable transaction costs. Subsequent to the initial 

recognition, they are measured as described below: 

Instruments held to maturity 

If the Company and/or its subsidiaries have the intention and capacity to hold to maturity their financial assets, these are classified as held to maturity. Investments held to maturity are 

measured by the amortized cost using the effective interest rate method, less any reductions in their recoverable value. 

Instruments available for sale 

The investments of the Company and/or its subsidiaries in equity instruments and instruments of certain assets relating to debt instruments are classified as available for sale. 

Subsequent to initial recognition, they are valued at their fair value and their fluctuations, excepting reductions in their recoverable value, and the differences in foreign currency of these 

instruments, are recognized directly in shareholders' equity, net of tax impacts. When an investment fails to be recognized, the gain or loss accumulated in shareholders' equity is 

transferred to net income. 

Financial instruments at fair value through the profit and loss 

An instrument is classified at fair value through the profit and loss if it is held for trading, that is, designated as such upon initial recognition. Financial instruments are recorded at fair 

value through profit and loss if the Company and/or its subsidiaries manages these investments and decides on purchases and sale based in their fair value according to the investment 

risk management strategy documented by the Company and/or its subsidiaries. After initial recognition, attributable transaction costs are recognized in net income when incurred. 

Loans and receivables 

Only non-derivative assets with fixed or determined payments that are not quoted in an active market are allocated to this category and are recognized at the amortized cost method or 

effective interest rate method. 


Derivative financial instruments are contracts with the following characteristics: 

a) their value changes as market changes affecting interest rates, foreign exchange rates, commodities prices, etc.; 

b) No initial investment is required or the initial investment is mud lower than the investment required for similar contracts in the market; 

c) They will always be settled in a future date. 

Derivative financial instruments are recognized on their trade date at their fair value. Subsequently, the fair value of the derivative financial instruments is reevaluated on a regular basis, 

while the gains and losses resulting from this revaluation are recorded in net income for the period, excepting as refers to the cash flow hedge derivatives, where the accounting 

treatment depends on the transaction's effectiveness. 

Hedge accounting 

The Company and its subsidiaries, in addition to the procedures adopted in the financial statements of December 31, 2008, started to qualify certain financial instruments for hedge 

accounting instruments. The hedge derivatives are recorded at fair value and gains or losses are recognized according to the hedge accounting model adopted, and for such the 

following requirements were met: 

i) there is formal documentation of the hedge for the start date of the relationship; 

ii) the hedge is expected to be highly effective; 

iii) the hedge effectiveness can be measured reliably; 

iv) the hedge is evaluated on a continual basis and effectively determined as being highly effective throughout the useful life of the hedge accounting structure period; and 

F-83

v) in relation to the hedge of an anticipated transaction, this must be highly probable and must present exposure to cash flow variations that could ultimately affect the result. 

The Company and its subsidiaries use financial instruments of hedge of the interest rate, foreign exchange variation and financing risk. The derivatives that do not qualify as hedge 

derivatives are recorded as trading derivatives. 

Cash flow hedge 

The effective part of the variations of the fair value of designated derivatives that qualify as cash flow hedge is recognized in shareholders' equity – equity evaluation adjustment. The 

gains or losses of the ineffective portion of the hedge relation are recognized by counter entry in net income for the period, at the time the ineffectiveness occurs. 

Amounts accumulated in shareholders' equity are recorded in income in the periods in which the item affects results; however, when the covered transaction results in the recognition of 

a non-financial asset or liability, gains and losses recorded in shareholders' equity are recognized as a contra entry to the initial cost of the asset or liability. 

When a hedge instrument expires or is sold, or when the hedge relation fails to fulfill the criteria for hedge accounting, any accumulated gain or loss recorded in shareholders' equity on 

the date is kept in shareholders' equity until the foreseen transaction is recognized in net income. When the transaction is not expected to take place, the accumulated gains or losses 

recorded by counter entry of shareholders' equity are immediately recognized in net income for the year. 

Effectiveness 

For a hedge relation to be classified as such, its effectiveness should be demonstrated. Hence the Company and its subsidiaries carry out prospective tests on the start date of the 

hedge relation and on each balance sheet date, perform tests prospectively and retroactively in order to demonstrate its effectiveness and showing that alterations in the fair value of the 

hedged item are offset by alterations in the fair value of the hedge instrument, with respect to the hedged risk. Any ineffectiveness determined is recognized in results as soon as it 

occurs. 

Derecognition 

Financial instruments are derecognized provided that contract rights to cash flows expire, that is, the end of the right or obligation of receiving or delivering cash or membership 

certificate is certain. For this situation, Management, based on consistent information, records the settlement. 

Derecognition may ocurr due to cancellation, payment, receipt or when the certificates expire. 

x) Functional currency 

The functional currency of the Company and its subsidiaries is the Real, according to the rules described in CPC 02 (R2) - Impacts on the Changes in Exchange Rates and Translation 

of Financial Statements, approved by CVM Resolution nº 640/10. 

y) Foreign currency 

Transactions in foreign currency, that is, all those that are not performed in the functional currency, are translated by the exchange rate of the dates of each transaction. Monetary assets 

and liabilities in foreign currency are translated into the functional currency at the foreign exchange rate of the closing date. Gains and losses of variations in the exchange rates on 

monetary assets and liabilities are recognized in the statement of income. Non-monetary assets and liabilities acquired or contracted in foreign currency are translated with a basis on 

the exchange rates of the dates of the transactions or on the dates of valuation at the fair value when this is used. 

z) Business combination and goodwill (Note 4) 

Business combinations are accounted for under the acquisition method. The acquisition cost is measure at the fair value of assets, equity instruments e liabilities incurred or assumed on 

exchange date. Acquired identifiable assets and liabilities and contingencies assumed on business combination are initially measured at fair value on acquisition date, regardless of 

Goodwill is the value exceeding the business combination cost regarding the interest of the acquiring company on the fair value of the acquired company's assets and liabilities, that is, 

the exceeding amounts is the portion overpaid by the acquiring company due to expected future earnings of the acquired company. 

The goodwill should not be amortized and will subject to annual impairment analysis. 

The negative goodwill is directly recognized in income by the acquiring company, when total fair value is higher than the amount paid for the business. 

aa) Commercial leases 

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made for operating leases (net of any 

incentive received from the lessor) are charged to the statement of income at the straight-line basis over the lease period. 

ab) Concession contracts 

The Committee of Accounting Pronouncements issued in 2009, the Technical interpretation ICPC 01 – Concession contracts. This Interpretation was approved by CVM Resolution nº 

611 of December 22, 2009, with the application as from January 1, 2010 and financial 2009 statements to be disclosed together with 2010 financial statements for comparative 

purposes. 

ICPC 01 is applicable to the public-private concession agreements in which the public entity controls or regulates the services rendered, with which infrastructure, at which price and to 

whom the service should be rendered, and is also has possession of this infrastructure. 

As concession agreements of the distributing companies and transmission company of the group EDP Energias do Brasil have these characteristics, this interpretation is applicable. But 

the agreements of the group's power plants have different characteristics, therefore, this interpretation is not applicable. 

According to ICPC 01, the infrastructure classified in this interpretation cannot be recognized as property, plant and equipment because the concessionaire does not control the 

underlying assets, and it is recognized in accordance with one of the accounting models provided for in the interpretation, depending on the type of remuneration agreed on between the 

concessionaire and the concession grantor, according to the agreement entered into by the parties, which are the financial asset model, intangible asset model and the bifurcated model. 

For transmission companies, the financial model is applied because they are remunerated by the Concession Grantor through power distribution companies, both for infrastructure 

construction and the transmission system made available to be used by the basic network. 

F-84

For distribution companies, the bifurcated model is applied as the companies of this sector are remunerated [i] by the Concession Grantor, regarding the infrastrucutre residual value at 

the end of the concession agreement and (ii) by users, regarding their portion of the construction work and power supply. 

ac) Earnings per share 

The basic earnings per share is calculated based on result for the period attributable to the Company's shareholders and the weighted average value of common shares outstanding in 

the respective period. Diluted earnings per share is calculated by the same indicators, and the average of oustanding shares adjuted by instruments potentially convertible into share, 

with diluting effect, in accordance with CPC 41 (IAS 33). 

2.3 Consolidated financial statements 

The consolidated financial statements were prepared in accordance with the standards established by CPC 36 (R1) - Consolidated statements and by the CVM Instruction 247, of March 

27, 1996 and subsequent amendments, covering Energias do Brasil and its subsidiaries (as described in Note 1). 

The accounting criteria in the preparation of the financial statements were applied uniformly among the various companies of the group . 

The main consolidation policies adopted were as follows: 

• Elimination of the investment of the parent company in the subsidiary companies; 

• Elimination of the balances of accounts between the parent company and the subsidiary companies and of the accounts maintained among these subsidiary companies; 

• Highlighting of non-controlling shareholders in the balance sheets and in the statements of income; 

• Business combinations have been considered since September 2008, determining acquisition cost, recognizing and measuring all assumed assets and liabilities, as well as minority 

interest, recognizing and measuring goodwill for expected future earnings, all measured on acquisition date. If the excess is negative, a gain is recognized in results for the period. 

• The subsidiary under joint control Porto do Pecém is being consolidated by the proportional method as from October 14, 2008. 

The reconciliation of the results for the year and shareholders’ equity is shown below: 

12/31/2010 

Shareholders' 

equity 

Net income 

Parent company 4,554,478 587,873 

AFAC Enercouto provision (*) 

- 

(5,315) 

Consolidated 4,554,478 582,558 

(*) Refers to the reversal of allowance for loss of the future advance for capital increase at Enercouto. 

2.4 Presentation of information by segment 

Information per operating segment is presented consistently with the internal report provided for the operating decision maker. The main operating decision maker, in charge of allocating 

funds and evaluating performance of operating segments is the Company's Executive Board, in charge of the Group's strategic decision making (Note 38). 

2.5 New IFRS and IFRIC (IASB's International Financial Reporting Interpretations Committee) interpretations 

Some of the standards and amendments to standards and interpretations issued by IASB have not yet become effective for the year ended December 31, 2010, therefore, they have not 

been applied in the preparation of these financial statements.. 

The Company's management does not expect that the adoption of these new pronouncements and interpretations will have a material impact on the Company's financial statements in 

the period they are adopted. 

The Company's evaluation of the impacts of these new procedures and interpretations are as follows: 

Rules and interpretations of rules that are not yet applicable 

IAS 24 State-Owned Companies Disclosure and Related Party Definition (Reviewed) 

The reviewed version of IAS 24 simplifies disclosure requirements for state-owned companies and clarifies the related-party definition. The reviewed standard addresses aspects that, 

according to prior disclosure requirements and the definition of "related party" were extremely complex and difficult to apply, mainly in environments with wide governement control. It 

offers partial exemption to state-owned entities and a revised definition of related party. This change was issued in November 2009, and is effective for years starting as from January 1, 

2011. This change will not impact the Company's consolidated financial statements. 

IFRS 9 - Financial instruments – Classification and measurement 

IFRS 9 Financial Instruments completes the first part of the project for the replacement of IAS 39 Financial Instruments: Recognition and measurement. IFRS 9 uses a simple approach 

to determine if a financial asset is measured at amortized cost or fair value. The new approach is based on the manner in which the entity manages its financial instruments [its business 

model] and the contract cash flow typical of financial assets. The standard also requires the adoption of only one method to determine the assets' impairment losses. This standard is 

effective for years starting as from January 1, 2013. The Company has not concluded its evaluation on the effect of adopting this interpretation. 

IFRIC 14 - Advance Payments of Minimum Financing Requirement 

These changes correct an unintended consequence of IFRIC 14. The change is applied only to those situations in which the entity is subject to minimum financing requirements and 

anticipates contributions to comply with those requirements. The change allows that this entity calculate the benefit of such advance payment as an asset. This change is effective for 

years starting as of January 1, 2011. This change will not impact the Company's consolidated financial statements. 

F-85

2.6 Investments in subsidiary under joint control – Porto do Pecém 

The balance sheet as of December 31, 2010, of the subsidiary under joint control in pre-operating phase Porto do Pecém, is presented below: 

Assets Liabilities 


138,976 Current liabilities 227,232 Operating expenses (13,292) 

Long-term assets 

232,800 Noncurrent liabilities 1,929,800 Net financial result (111,381) 

Property, plant and equipment 2,257,506 Shareholders' equity 472,250 Other results (1,195) 

IRPJ & CSLL 42,806 

Total 2,629,282 Total 2,629,282 social (83,062) 

3 Transition to IFRS 

3.1 Transition to IFRS 

Balance sheet on 12/31/2010 - Summarized Statement of income on 12/31/2010 - Summarized 

3.1.1 Application of CPC 37 

The consolidated financial statements were prepared in accordance with CPC 37, as described in Note 2. Financial statements presented until December 31, 2009 were prepared in 

accordance with Brazilian accounting practices, CVM (Brazilian Securities and Exchange Commission) supplementary standards, technical pronouncements of the Accounting 

Pronouncements Committee effective on that date, and provisions of the Brazilian Corporate Law. 

The Company prepared its opening balance sheet as of the transition date January 1, 2009. 

In the preparation of consolidated financial statements on transition date in accordance with CPC 37, the Company applied mandatory exemptions and some optional exemptions for full 

IFRS retrospective application. 

3.1.2 Exemptions of the full retrospective application choosen by the Company 

In its consolidated financial statements, the Company adopted the following optional exemption for full retrospective application: 

a) In business combination, the Company used the exemption of CPC 37 and applied CPC 15 / IFRS 3 (R) for acquisitions as from September 2008, date in which Enersul shareholding 

control was swapped by Lajeado. 

b) Property, plant and equipment maintained at historical cost (note 2.2.f). 

3.2 Explanation on the transition to CPC (parent company) and IFRS (consolidated) 

3.2.1 Reconciliation of the parent company's balance sheet (CPC) and consolidated balance sheet (IFRS) as of January 1, 2009 

Assets 


Previously 

disclosed Adjustments 


Cash and cash equivalents 79,443 



Taxes and social contribution 78,403 


Dividends receivable 476,553 

Inventories - 

Pledges and restricted deposits 2,080 


Account for variation compensation of Installment "A" costs - 

Income receivable - 


Other assets 3,244 

639,771 





Taxes and social contribution - 


Related parties 144,087 

Advances for future capital increases 42,740 





196,998 

Investments 2,845,078 

Property, plant and equipment 1,993 

Intangible assets 490,458 

3,337,529 


- 

- 

- 

- 

- 

(326,444) 

- 

- 

- 

- 

- 

37,500 

(79) 

(289,023) 

20,378 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

20,378 

104,028 

- 

(35,613) 

68,415 

(200,230) 

F-86 

Adjusted 

to CPC 

Consolidated 

Previously 


79,443 

499,882 

- - 

- 756,801 

78,403 

360,918 

- 126,221 

150,109 

- 

- 10,098 

2,080 

76,936 

48 

8,407 

- 116,596 

- 22,500 

37,500 

- 

3,165 

144,645 

350,748 

2,123,004 

20,378 

18 

- - 

- 123,226 

- 31,084 

- 412,374 

144,087 

22,104 

42,740 

600 

2,944 

153,632 

- 2,608 

- 94,563 

7,227 

112,275 

217,376 

952,484 

- 

2,949,106 

42,103 

1,993 

6,003,885 

454,845 

1,348,455 

3,405,944 

7,394,443 

3,974,068 

10,469,931 

- 

823 

(31,369) 

12,755 

(126,221) 

- 

- 

- 

- 

(116,596) 

(22,500) 

37,500 

(2,234) 

(247,842) 

- 

248,303 

(15,245) 

- 

241,729 

- 

- 

- 

- 

(94,563) 

- 

380,224 

- 

(31,712) 

(1,480,416) 

1,790,345 

278,216 

410,598 

Adjusted 

to IFRS 

499,882 

823 

725,432 

373,673 

- 

- 

10,098 

76,936 

8,407 

- 

- 

37,500 

142,411 

1,875,162 

18 

248,303 

107,981 

31,084 

654,103 

22,104 

600 

153,632 

2,608 

- 

112,275 

1,332,708 

- 

10,391 

4,523,469 

3,138,800 

7,672,659 

10,880,529


Previously 



Suppliers 13,093 

Debt charges - 



Dividends 223,451 

Debentures - 

Loans, financing and debt charges 257,700 



Estimated employee benefits and social charges 4,218 



Provisions - 

Other accounts payable 2,208 

516,282 

- 

- 

- 

- 

(149,333) 

- 

- 

- 

- 

(79) 

- 

- 

- 

- 

(149,412) 

Adjusted 

to CPC 

13,093 

456,679 

- - 

15,612 

401,968 

- 1,969 

74,118 

313,118 

- 218,504 

257,700 

869,785 

- 30,871 

- 64,693 

4,139 

47,562 

- 157,672 

- - 

- 5,255 

2,208 

169,426 

366,870 

Previously 


2,737,502 

- 

- 

(32,739) 

(1,969) 

(153,703) 

338 

- 

- 

(64,693) 

(2,235) 

- 

17,105 

8,347 

(12,356) 

(241,905) 



- 

- 34,451 

- 


- 

- - 

248,444 

Debentures - 

- 

- 654,180 

1,606 


- 

- 1,355,008 

51,810 


- 

- 108,102 

32,534 


- 

- 18,430 

(18,430) 


- 

510 

- 

- 


- 

- 2,847 

- 


- 

- - 

207,677 

Provisions 64,396 

- 

64,396 

263,295 

3,965 

Provision for unsecured liability 54,172 

- 

54,172 

51,383 

- 

Reserve for reversal and amortization - 

- 

- 17,248 

- 


1 

26 

71,317 

(46,314) 

119,103 

1 

119,104 

2,576,261 

481,292 

- 

Shareholders’ equity - 

Capital stock 3,182,716 

- 

3,182,716 

3,182,716 

- 

Capital reserves 35,348 

- 

35,348 

35,348 

- 

Profit reserves 693,299 

149,333 

842,632 

693,299 

149,333 


(21,472) 

(21,472) 

- 

(21,472) 

Treasury shares (372,450) 

- 

(372,450) 

(372,450) 

- 

Accumulated losses - 

(178,679) (178,679) 

4,005 

(178,679) 

3,538,913 

(50,818) 3,488,095 

3,542,918 

(50,818) 

Non-controlling shareholders' - 1,613,250 

222,030 

Total liabilities and shareholders' equity 

4,174,298 


F-87 

(200,230) 

3,974,068 

10,469,931 

410,598 

Adjusted 

to IFRS 

456,679 

- 

369,229 

- 

159,415 

218,842 

869,785 

30,871 

- 

45,327 

157,672 

17,105 

13,602 

157,070 

2,495,597 

34,451 

248,444 

655,786 

1,406,818 

140,636 

- 

- 

2,847 

207,677 

267,260 

51,383 

17,248 

25,003 

3,057,553 

3,182,716 

35,348 

842,632 

(21,472) 

(372,450) 

(174,674) 

3,492,100 

1,835,280 

10,880,529

3.2.2 

Reconciliation of the parent company's balance sheet (CPC) and consolidated balance sheet (IFRS) as of December 31, 2009 

Assets 


Cash and cash equivalents 233,440 






Dividends receivable 459,317 

Inventories - 




Financial assets available for sale 39,086 

Other assets 883 

809,934 








Advances for future capital increases 69,217 





302,203 

Investments 3,251,806 

Property, plant and equipment 2,038 


Deferred charges - 

3,572,344 




Previously 


- 

- 

- 

- 

- 

- 

(323,208) 

- 

- 

- 

- 

- 

566 

(322,642) 

23,380 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

23,380 

203,944 

- 

(34,129) 

- 

169,815 

(129,448) 


Previously 


Adjusted 

to CPC 

Consolidated 

Previously 


233,440 

1,102,022 

- 

- 

- 

5,999 

- 823 

- 988,505 

(86,724) 

75,036 

413,567 

5,738 

- 128,495 (128,495) 

136,108 

- 

- 13,199 

- 

2,168 

69,587 

- 

4 

2,615 

- 

- 113,722 

(113,722) 

39,086 

39,086 

- 

1,450 

166,891 

(7,743) 

487,292 

3,037,689 

(324,124) 

23,380 

21,938 

- 325,262 

- 94,431 

(29,569) 

- 31,078 

- 

- 507,351 

240,934 

175,871 

- 

69,217 

- 

5,122 

130,797 

- 

- 1,064 

- 

- 43,608 

(43,608) 

51,993 

71,875 

(21,938) 

325,583 

3,455,750 

2,038 

284,371 

- 

3,742,159 

4,555,033 

Adjusted 

to CPC 

880,204 

24,032 

6,416,645 

1,168,909 

126 

7,609,712 

11,527,605 

493,019 

6,903 

(1,612,865) 

1,826,060 

(126) 

219,972 

388,867 

Consolidated 

Previously 


Current liabilities - 


- 

10,416 

530,414 

(22,358) 


- 

- 24,522 

(24,522) 


- 

31,106 

464,470 

(10,011) 


(222,238) 

75,391 

391,888 

(247,270) 

Debentures - 

- 

- 209,331 

698 


- 

- 548,140 

24,522 


- 

- 27,181 

- 


- 

- 47,592 

(47,592) 

Tariff restitution - 

- 

- 37,186 

(37,186) 

Estimated employee benefits and social charges 4,245 

(74) 

4,171 

51,211 

(2,383) 


- 

- 156,882 

(321) 


- 

- 17,280 


- 

2,208 

7,627 

12,020 

Other accounts payable - 

- 

- 174,438 

(8,471) 

345,604 

(222,312) 

123,292 

2,670,882 

(345,594) 





Debentures - 








Provision for unsecured liability 9,787 

Reserve for reversal and amortization - 


75,488 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

(1,335) 

- 

- 

(1,335) 

- 1,329 

(1,329) 

34,146 

142,163 

- 

- 15,546 

245,474 

- 451,929 

1,226 

- 1,903,076 

54,364 

- 104,017 

26,771 

- 58,384 

(58,384) 

7,024 

- 

- 

- 14,939 

- 

- 205,564 

24,469 

136,899 

4,200 

8,452 

- 

- 17,248 

- 

62 

101,398 

(55,463) 

74,153 

2,946,928 

Shareholders' equity 

Capital stock 3,182,716 

- 

3,182,716 

3,182,716 

Capital reserves 96,656 

- 

96,656 

96,656 

Profit reserves 1,020,809 

222,238 1,243,047 

1,020,809 

Other comprehensive income (30,178) 

(19,917) 

(50,095) 

(30,178) 

Treasury shares (6,614) 

- 

(6,614) 

(6,614) 

Retained earnings (losses) - 

(108,122) (108,122) 

5,315 

4,263,389 

94,199 4,357,588 

4,268,704 

Non-controlling shareholders' - 1,641,091 

Total liabilities and shareholders' equity 

4,684,481 

- 

F-88 

(129,448) 

(0) 

4,555,033 

(0) 

11,527,605 

- 

422,423 

- 

- 

222,238 

(19,917) 

- 

(108,122) 

94,199 

217,839 

388,867 

(0) 

Adjusted 

to IFRS 

1,102,022 

5,999 

823 

901,781 

419,305 

- 

- 

13,199 

69,587 

2,615 

- 

39,086 

159,148 

2,713,565 

21,938 

325,262 

64,862 

31,078 

748,285 

- 

- 

130,797 

1,064 

- 

49,937 

1,373,223 

30,935 

4,803,780 

2,994,969 

- 

7,829,684 

11,916,472 

Adjusted 

to IFRS 

508,056 

- 

454,459 

144,618 

210,029 

572,662 

27,181 

- 

- 

48,828 

156,561 

17,280 

19,647 

165,967 

2,325,288 

- 

142,163 

261,020 

453,155 

1,957,440 

130,788 

- 

- 

14,939 

205,564 

141,099 

- 

17,248 

45,935 

3,369,351 

3,182,716 

96,656 

1,243,047 

(50,095) 

(6,614) 

(102,807) 

4,362,903 

1,858,930 

11,916,472 

(0)

3.2.3 

Reconciliation of the parent company's statement of income (CPC) and consolidated statement of income (IFRS) as of December 31, 2009 

INCOME 

Previously 


Net operating income - 


Electricity cost - 



- 

Cost of operation - 

Personnel - 




- 

- 

Cost of service rendered to third-parties 

- 


Operating expenses - 

Sales expenses 

- 

General and administrative expenses (65,372) 

Depreciation and amortization (21,770) 

Other operating expenses (22,220) 

(109,362) 

Service result (109,362) 

Income from equity interest 

638,309 


Financial expenses (196,957) 

Financial result 47,508 


Other expenses (2,092) 

Other results 

Income before income and social contribution 

50,253 

taxes 

626,708 

Income and social contribution taxes - current (2,881) 


(2,881) 

Net income before non-controlling 

interests and beneficiaries 

623,827 



Net income for the year 623,827 

Basic and diluted net income per thousand shares - R$ 3,935.20 

F-89 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

1,850 

- 

1,850 

1,850 

69,939 

(150,141) 

148,909 

(1,232) 

- 

- 

- 

70,557 

- 

- 

- 

70,557 

- 

- 

70,557 

Adjusted 

to CPC 

Previously 


- 

4,648,348 

- 

- 

- (1,924,113) 

- (511,641) 

- 

(2,435,754) 

- 

- (146,210) 

- (166,608) 

- (251,507) 

- (28,112) 

- 

- 

- 

- 

- 

- 

(65,372) 

(19,920) 

(22,220) 

(107,512) 

(107,512) 

708,248 

94,324 

(48,048) 

46,276 

52,345 

(2,092) 

50,253 

(592,437) 

(3,028,191) 

(2,918) 

1,617,239 

(41,986) 

(322,028) 

(52,453) 

(85,814) 

(502,281) 

1,114,958 

(1,742) 

279,275 

(394,195) 

(114,920) 

55,449 

(28,127) 

27,322 

697,265 

1,025,617 

(2,881) 

(163,928) 

- (60,514) 

(2,881) 

(224,441) 

694,384 

801,176 

- (160,267) 

- (15,772) 

694,384 

4,380.28 

625,137 

3,943.46 

26,645 

(57,458) 

(37,987) 

(95,445) 

311 

11 

5,690 

11 

6,023 

(89,422) 

- 

(62,777) 

- 

(381) 

24,456 

(8,507) 

15,568 

(47,209) 

(1,335) 

(17,283) 

(15,625) 

(32,908) 

(0) 

(0) 

(0) 

(81,452) 

32,871 

(8,560) 

24,311 

(57,141) 

(13,417) 

0 

(70,558) 

Adjusted 

to IFRS 

4,621,702 

(1,866,655) 

(473,654) 

(2,340,309) 

(146,521) 

(166,619) 

(257,197) 

(28,123) 

(598,460) 

(2,938,769) 

(2,918) 

1,680,015 

(41,986) 

(321,647) 

(76,909) 

(77,307) 

(517,849) 

1,162,166 

(407) 

296,558 

(378,570) 

(82,012) 

55,449 

(28,127) 

27,322 

1,107,069 

(196,799) 

(51,953) 

(248,752) 

858,317 

(146,850) 

(15,772) 

695,695 

4,388.55

Description of the main differences in the adoption of IFRS and CPCs that affect the parent company and consolidated financial statements: 

Assets 

Current and non-current assets 

Consumers and concessionaires: Write-off of amounts referring to regulatory assets, which are not recognized because they do not comply with the conceptual framework of CPC. 

Taxes and social contribution taxes: Adjustments arising from CPCs adoption impacts. 

Income receivable: reclassification to the consumers and concessionaires. 

Assets available for sale: recognition of the shares of Denerge, as CPC 39 / IAS 32. 

Deferred income and social contribution taxes: Adjustment of short-term balance to long-term balance due to the adoption of CPC 32 / IAS 12. 

Account for variation compensation of Installment "A" costs: Write-off of amounts referring to regulatory assets as they cannot be recognized because they do not comply with the 

basic requirements for asset recognition according to CPCs conceptual structure / Framework IFRS. 

Indemnifiable financial asset: (i) reclassification at cost of the portion of the distribution companies concession infrastructure assets whose value will be recovered at the end of the 

concession period as the Concession Grantor will reimburse it as a result of ICPC 01 / IFRIC 12 adoption; (ii) interest capitalization referring to the application of CPC 20/ IAS 23 

Other assets: Reclassification of 13th salary and vacation advances account balances to the respective provisions as a result of CPC 33 / IAS 19 adoption. 

Investments: (i) write-off of the negative goodwill Energias do Brasil had recorded at acquisition of Escelsa and the negative goodwill referring to the acquisition of Investco by EDP 

Lajeado (EDP Lajeado was merged into Lajeado in September 2009) as a result of the adoption of CPC 18 / IAS 28, which determines that negative goodwill be directly recognized in 

income when incurred, (ii) reclassification of some property, plant and equipment items that qualify for the definition of investment property in accordance with CPC 28 / IAS 40 and (iii) 

adjustment of the equity in Lajeado and Energias do Brasil as a result of the change in investment amounts due to the adoption of CPC 15 / IFRS 3 

Property, plant and equipment: adjustments referring to: (i) write-off of capitalized administrative expenses in power generating companies' assets and capitalization of asset 

disassembling and removal costs of non-hydropower generating companies as a result of CPC 27 / IAS 16 application; (ii) reclassification of power distribution and transmission 

companies' assets from intangible assets to financial assets as a result of ICPC 01 / IFRIC 12 adoption; (iii) reclassification of some items that qualify for the definition of investment 

property in accordance with CPC 28 / IAS 40 to the caption investments, (iv) reclassification of items that qualify for the definition of CPC 31 and (v) allocation of goodwill as property, 

plant and equipment appreciation as a result of the application of CPC 15 / IFRS 3 in the acquisition of Lajeado and Investco. 

Intangible assets: adjustments referring to: (i) recognition of operation permits as a contra entry to CPC 25 / IAS 37 adoption; (ii) recognition of a concession right due to concession 

agreements for the use of the public properties of Enerpeixe SA and Investco SA as a a contra entry to the CPC 38 / IAS 39, adoption; (iii) reclassification of the portion of distribution 

companies' infrastructure assets whose amount will be recovered through the collection of tariff, as a result of ICPC 01 / IFRIC 12 adoption; (iv) capitalization of interest referring to CPC 

20 / IAS 23 application; (v) allocation of goodwill as a concession right (exploration of the concession area to sell power) as a result of CPC 15 / IFRS 3 application, in the acquisition of 

Lajeado and Investco; and (vi) recognition of goodwill due to expected future earnings in the acquisition of Lajeado and Investco, after the fair values of property, plant and equipment 

and intangible assets of these companies are recorded, as a result of CPC 15 / IFRS 3 application. 

Deferred charges: write-off of pre-operating expenses. 

Liabilities 

Current and non-current liabilities 

Taxes and social contribution: Adjustments arising from CPCs adoption impacts. 

Deferred income tax and social contribution : (i) recalculation of balance as a result of the implementation of CPCs applicable to years ending beginning as from January 1, 2010, for 

comparison with 2009 and (ii) adjustment of short-term balance to long-term balance as a result of CPC 32 / IAS 12 adoption. 

Off-balance account for cost variation of portion "A" and other accounts payable: write-off of amounts referring to regulatory liabilities as they cannot be recognized due to 

noncompliance with basic liability recognition concepts according to CPCs conceptual Framework IFRS. 

Estimated employee benefits and social charges: Reclassification of 13th salary and vacation advances account balances to the respective provisions as a result of CPC 33 / IAS 19 

adoption. 

Dividends: Reclassification of the portion referring to excess mandatory minimum dividend to shareholders' equity as a result of ICPC 08 adoption. 

Loans, financing and debt charges: adjustment to fair value of short-term interest of redeemable and cumulative preferred shares issued by Investco SA as they do not qualify for the 

definition of equity instrument and qualify for the definition of financial liability as a result of CPC 39 / IAS 32 application. 

Provisions: recognition of liabilities related to operation permits as they qualify for the definitions of CPC 25 / IAS 37. 

Usage of Public Property: recognition of payments due to the agreements for the concession of public properties to Enerpeixe and Investco as they qualify for recognition definitions of 

CPC 38 / IAS 39. 

Post-employment benefits: Actuarial gains and losses that were previously recognized in income are now fully recognized in shareholders' equity, under valuation adjustments to 

equity in the year they occur, according to the alternative method provided for in CPC 33 / IAS 19. 

F-90

Shareholders' equity 

Capital: adjustment to fair value of redeemable and cumulative preferred shares issued by Investco as they do not qualify for the definition of equity instrument and qualify for the 

definition of financial liability as a result of CPC 39 / IAS 32. application. 

Profit reserves: Reclassification to this caption of the portion referring to excess mandatory minimum dividend as a result of ICPC 08 adoption. 

Retained Earnings and Accumulated Losses: the adjustments made refer mainly to: (i) recognition of long-term remuneration of redeemable and cumulative preferred shares issued 

by Investco as they do not qualify for the definition of equity instrument and qualify for the definition of financial liability as a result of CPC 39 / IFRS 7 application; (ii) includes write-off of 

amounts referring to regulatory assets and liabilities not recognized due to non-compliance with CPCs conceptual structure; (iii) capitalization of interest referring to CPC 20 / IAS 23 

application, (iv) reversal of foreign exchange change and administrative expenses referring to the CPC 27 / IAS 16 application; (v) effect of inflation adjustment of the provision referring 

to UBP (use of public property) and amortization of the associated intangible assets as a result of CPC 25 / IAS 37 application; and (vi) recognition of deferred income tax assets and 

liabilities as a contra entry to said adjustments. 

Other comprehensive income: Actuarial gains and losses previously recognized in income for the year at the corridor method are now fully recognized in this caption at the alternative 

method provided for in CPC 33 / IAS 19. 

Income 

Impacts due to the adoption of the following CPCs: (i) capitalization of intangible assets interest and amortization due to CPC 20 / IAS 23 application; (ii) recognition of monetary 

adjustment to permissions due to CPC 25 / IAS 37 adoption; and (iii) write-off of amounts referring to regulatory assets and liabilities that were not recognized due to non-compliance with 

CPCs conceptual structure; (iv) adjustments referring to the write-off of administrative expenses capitalized in power generation assets as a result of CPC 27 / IAS 16 application; (v) 

Reclassification of Depreciation/Amortization balance to the caption Transmission system revenue as a result of ICPC 01 / IFRIC 12 adoption; (vi) recognition of intangible assets 

amortization referring to the concession right for the use of public property as a contra entry to CPC 38 / IAS 39 adoption; (vii) recognition of preferred shares remuneration and 

adjustment to present value; (viii) reclassification of actuarial gains and losses to shareholders' equity as a result of CPC 33 / IAS 19 adoption; (ix) recognition per the equity method of 

adjustments recognized by EDP Renovaveis. 

4 Business combination 

In September 2008, the Company exchanged the shareholding interest held in Enersul for sharehodling interest held by Rede Energia S.A. in its subsidiaries Lajeado and Investco, and 

by shareholding interest held by Rede Power do Brasil S.A. in Lajeado and Tocantins. 

After this transaction, Energias do Brasil controls Investco, Lajeado and Tocantins, in compliance with the Company's strategic guideline to grow in the power generation segment, 

guaranteeing the position of controlling shareholder and manager of Investco, company that explores AHE Luís Eduardo Magalhães, with installed capacity of 902.5 MW. Lajeado holds 

73% of the voting capital of Investco. 

In accordance with IFRS 3, this transaction was recognized at the acquisition method. The acquired entity's cost is due to net assets, including identifiable intangible assets, liabilities and 

contingent liabilities assumed based in their estimated fair value on acquisition date. 

Investco Lajeado Energia Tocantins Total 

Current assets 73,651 

86,173 27,451 187,275 

Non-current assets 17,603 

48,216 20,243 86,062 

Property, plant and equipment 1,920,993 

- 

- 

1,920,993 


987,588 - 

1,014,582 

Investments - 

554,810 131,388 686,198 

Total assets acquired 2,039,241 

1,676,787 179,082 3,895,110 

Current liabilities 172,305 

106,762 6,429 285,496 

Noncurrent liabilities 643,656 

52,060 - 

695,716 

Assumed liabilities 815,961 

158,822 6,429 981,212 

Net assets (liabilities) 

Exclusions 

1,223,280 

1,517,965 172,653 2,913,898 


(266,798) (266,798) 

Elimination of investments - 

(554,758) (131,388) (686,146) 

Total exclusions - 

(821,556) (131,388) (952,944) 

Net assets 1,223,280 696,409 41,265 1,960,954 

Acquired interest 24.35% 53.69% 50.88% 

Net assets acquired 297,859 373,914 20,996 692,769 

Acquisition cost 737,215 

Other acquisition costs 6,547 

Price of preferred shares of Investco (financial instrument) (8,700) 

Total acquisition cost 735,062 

Goodwill 42,293 

Goodwill due to expected future earnings, without defined useful life, subject to annual recovery analysis and having no tax effects. 

5 Periodic tariff review and Tariff readjustment 

First periodic tariff review - Evrecy 

Transmission Concession Agreement nº 20/2008-ANEEL (resulting from the segregation of the transmission activities of Escelsa), executed on November 14, 2008 with CESA 

establishes the date of July 1, 2009 for the First Periodic Tariff Review of the transmission company and review cycle of 4 years. The entire base of assets was revalued in this First 

Periodic Tariff Review, under the terms of Normative Resolution ANEEL 338/2008. 

The First Amendment of Transmission Concession Agreement nº 20/2008-ANEEL, executed on October 13, 2009, formalizes the transfer of the Transmission Concession from CESA to 

Evrecy. 

At the 21st Ordinary Public Meeting of the Executive Board of ANEEL on June 8, 2010, the participants approved the final result of the First Periodic Tariff Review of EVRECY, 

retroactive to July 1, 2009, contained in Technical Note nº 181/2010-SRE/ANEEL. 

The tariff repositioning index was -10.32%, reducing the Allowed Annual Revenue - RAP from R$7,848 to R$7,039 for the tariff year of July 1, 2009 to June 30, 2010. 

The final adjustment installment of Evrecy for the cycle of July/2010 to June/2011, already considering the adjustments of the financial components outside the review as mentioned in 

item 57 of Technical Note 181/2010-SRE/ANEEL, was R$ 294 recorded in current liabilities which is being amortized in 12 installments as of July 2010. 

The factor that contributed most to the reduction of Evrecy's was the recalculation of the average remuneration rate of investment that was reduced by ANEEL from 9.18% p.a. to 7.24% 

p.a. The reduction of the investment average remuneration rate was applied to all transmission companies that underwent a tax review process in 2010. 

F-91

Periodic tariff review of 2010 - Escelsa 

At a Public Board Meeting held on August 4, 2010, the Brazilian Electricity Regulatory Agency - ANEEL approved the report that authorized the average readjustment of the tariffs of the 

Company in 7.19% for the period beginning August 7, 2010 to August 6, 2011, including all consumer classes. Considering the financial adjustments already included in the Company's 

tariffs, related to the recovery of prior periods, the average tariff readjustment in electric energy bills will be 0.21%. 

The main changes introduced: (i) Company of Reference goes from R$209,800 million to R$269,300; (ii) Xe Component of X Factor, goes from 0.00% to 0.95% to be used in the tariff 

readjustment of August/2011 and August/2012 ; and (iii) Net Regulatory Remuneration Basis from R$952,500 to R$1,297,100. 

Periodic Tariff Revisions are foreseen in the Concession Agreement and consider changes in the concessionaire’s cost structure and market, the tariff levels observed in similar 

companies, in the national and international context, and incentives for efficiency and keeping tariffs affordable. 

The tariff revision process comprises two steps. In the first step, called tariff repositioning, tariffs are set at levels covering efficient operating costs for a given level of service quality, with 

a fair and adequate remuneration of prudent investments. The second step is the calculation of the X Factor, which refers to productivity targets for the next tariff period. 

The new tariffs to be charged by Escelsa already include the effects of the new methods proposed in the Addendum approved by ANEEL at the Public Board Meeting held on February 

2, 2010. 

Tariff readjustment of 2010 - Bandeirante 

The Brazilian Electricity Regulatory Agency - ANEEL, in a public meeting of the Board of Executive Officers that took place on October 5, 2010, approved the average annual tariff 

readjustment of 10.70%, to be applied to the Company's tariffs, as from October 23, 2010 to October 22, 2011, with 10,25% relating to the annual economic tariff readjustment and 

0.45% referring to the pertinent financial components 7,91%. 

Periodic Tariff Revisions are foreseen in the Concession Agreement and consider changes in the concessionaire’s cost structure and market, the tariff levels observed in similar 

companies, in the national and international context, and incentives for efficiency and keeping tariffs affordable. 

The tariff revision process comprises two steps. Periodic Tariff Revisions are foreseen in the Concession Agreement and consider changes in the concessionaire’s cost structure and 

market, the tariff levels observed in similar companies, in the national and international context, and incentives for efficiency and keeping tariffs affordable.The second step is the 

calculation of the X Factor, which refers to productivity targets for the next tariff period. 

The new tariffs to be charged by the Company already include the effects of the new methods proposed in the Addendum approved by ANEEL at the Public Board Meeting held on 


F-92

6 Cash and cash equivalents 


12/31/2010 12/31/2009 12/31/2010 12/31/2009 

Banks checking account 59,450 

29,595 

265,231 

292,711 

Financial investments - fixed income 

226,362 

203,845 

861,218 

809,311 

Total 285,812 

233,440 1,126,449 1,102,022 

Highly liquid short-term interest earning bank deposits are promptly convertible into a known sum of cash. 

These financial investments refer substantially to bank deposit certificates and fixed income funds, remunerated at rates that range between 98.5% and 104.0% of the Interbank Deposit 

Certificate (CDI). 

The Group's exposure to interest rate risks and a sensitivity analysis of financial assets and liabilities are disclosed in note 34. 

7 Consumers and concessionaires 

Overdue Overdue Balance Balance 

Balances 

to become 

overdue 

up to 

90 days 

longer than 

90 days 

Total 

Allowance for 

doubtful accounts 

balance at 

12/31/2010 

balance at 

12/31/2009 

Current - 

- 

- 

- 

- 

- 

Adjusted 

Consumers - 

- 

- 

- 

- 

- 

- 

Supply to final consumers - 

- 

- 

- 

- 

- 

- 


- 

- 

- 

- 

- 

- 

Residential 98,858 

95,867 

25,270 

219,995 

(35,071) 

184,924 

182,322 

Industrial 28,054 

22,560 

13,365 

63,979 

(13,718) 

50,261 

67,629 

Commerce, services and other 39,823 

23,588 

15,249 

78,660 

(16,374) 

62,286 

67,353 

Rural 8,839 

7,039 

3,650 

19,528 

(1,332) 

18,196 

21,655 


- 

- 

- 

- 

- 

- 

Federal 4,597 

234 

83 

4,914 

(13) 

4,901 

5,142 

State 5,565 

413 

434 

6,412 

(343) 

6,069 

6,185 

Municipal 6,126 

2,760 

5,137 

14,023 

(684) 

13,339 

12,238 

Public lighting 7,547 

4,741 

9,183 

21,471 

(1,000) 

20,471 

15,530 

Public utility service 8,489 

1,617 

16,058 

26,164 

(64) 

26,100 

26,332 

Free clients 29,219 

773 

- 

29,992 

- 

29,992 

7,554 

Unbilled supply 249,377 

- 

- 

249,377 

- 

249,377 

245,852 

Debt paid in installments 40,644 

8,042 

42,666 

91,352 

(41,133) 

50,219 

55,088 

(+) Adjustment to present value 1,285 

- 

- 

1,285 

- 

1,285 

1,881 

Other regulatory assets 28,578 

- 

- 

28,578 

- 

28,578 

28,615 

557,001 

167,634 

131,095 

855,730 

(109,732) 

745,998 

743,376 


- 

- 

- 

- 

- 

- 

Supply - Conventional 95,318 

9 

36,443 

131,770 

(36,537) 

95,233 

159,429 

Short-term energy 27,646 

- 

- 

27,646 

- 

27,646 

5,271 

Electric power network use charges 8,229 

- 

- 

8,229 

- 

8,229 

10,671 

Other 11,700 

- 

- 

11,700 

- 

11,700 

(16,966) 

142,893 

9 

36,443 

179,345 

(36,537) 

142,808 

158,405 

Total current 699,894 

167,643 

167,538 1,035,075 

(146,269) 

888,806 

901,781 

Noncurrent - 

- 

- 

- 

- 

- 

- 

Consumers - 

- 

- 

- 

- 

- 

- 


- 

- 

- 

- 

- 

- 


- 

- 

6,418 

- 

6,418 

6,929 

Commerce, services and other 54 

- 

- 

54 

- 

54 

54 

Municipal 3 

- 

- 

3 

- 

3 

3 

Debt paid in installments 50,544 

- 

- 

50,544 

- 

50,544 

55,470 

(-) Adjustment to present value (13,455) 

- 

- 

(13,455) 

- 

(13,455) 

(17,763) 

43,564 

- 

- 

43,564 

- 

43,564 

44,693 


- 

- 

- 

- 

- 

- 

Supply of electric energy 5 

- 

- 

5 

(5) 

- 

- 

Short-term energy 12,754 

- 

836 

13,590 

(13,590) 

- 

- 

Piratininga 20,169 

- 

- 

20,169 

- 

20,169 

20,169 

32,928 

- 

836 

33,764 

(13,595) 

20,169 

20,169 

Total noncurrent 76,492 

- 

836 

77,328 

(13,595) 

63,733 

64,862 

7.1 Short-term energy 

Refers mainly to the transactions of sale of energy, realized in the in the sphere of the Electric Energy Trading Chamber - CCEE. 

7.2 Concessionaire– Piratininga 

7.3 Concessionaires – Conventional supply 

With AMPLA not having recognized the effects of the arbitral award, the subsidiary Enertrade decided to maintain the allowance for doubtful accounts corresponding to the amount of R$ 

35,923, under discussion. 

7.4 Adjustment to present value 

Consolidated 

Part of the values of the assets of the distributor subsidiaries is subject to modification depending on the decision of lawsuits in progress, filed by companies from the sector, relating to 

the interpretation of rules of the market in force. 

The amounts of R$20,169 (R$20,169 in 2009) in non-current assets and of R$19,335 (R$19,335 in 2009) in Current and non-current liabilities (Note 15), refer to sums receivable and 

payable, respectively, with Companhia Piratininga de Força e Luz - Piratininga, as a result of the partial spin-off of Bandeirante carried out on October 1, 2001, pursuant to the terms 

established in the spin-off protocol. 

There are no disagreements between the parties regarding the balances currently recorded, receivable and payable, which should be settled in a timely manner. 

The balance of Supply of energy includes amounts billed against Ampla Energia e Serviços S.A. - "AMPLA" (previously called Companhia de Eletricidade do Rio de Janeiro - CERJ), 

both past due and falling due, totaling R$ 39,266 on December 31, 2010 (R$57,258 in 2010), whereas of this sum R$35,923 (R$27,684 in 2009) refers to a right obtained by an arbitral 

award of March 19, 2009 in response to proceedings nº 03/2005 and 04/2006, issued by Câmara FGV de Conciliação e Arbitragem. This arbitral award recognized that in the contract of 

sale of energy made by and between the parties, for the period from November 15, 2003 to August 28, 2006. 

The adjustment to present value, regulated by CPC 12, was calculated with a basis on the average remuneration of investment rate, applied by ANEEL in the tariff reviews of the 

distributors. This rate is compatible with the nature, term and risks of similar transactions under market conditions. On December 31, 2010 and December 31, 2009 is 15.07% per 

annum, having a positive impact on the result for the year of R$3,713 (having a negative impact of R$1,119 in 2009). 

F-93

8 



The amount of R$22,627 (R$23,380 in 2009) refers to preferred shares of classes "A", "B" and "C" issued by subsidiary Investco, which, according to Article 8 of said subsidiary's bylaws, 

are entitled to the right of receiving a cumulative fixed annual dividend of 3% on their respective interest in capital. Due to this characteristic, these shares were classified as 

receivable financial instruments as they meet the definition of financial assets, since the subsidiary does not have the right to avoid the remittance of cash or other financial asset to 

another entity, as determined in paragraph 19 of CPC 39. 

The estimate of fair value considered the conditions above for the payment of dividends. Annual dividend payment was considered until 2032 (end of the concession) and discounted to 

present value at the rate of 8.70% p.a. 

Consolidated 

The amount of R$19,500 (R$8,576 in 2009) refers to the renegotiation balance of the agreement for Credit Concession entered into by subsidiary Lajeado Energia S.A. and Tangará 

Energia S.A. as of August 31, 2004, approved by ANEEL through Official Letters 467/2000-SFF/ANEEL. 

The amount of R$7,914 (R$19,361 in 2009) refers to the consolidation and renegotiation of the Credit Concession agreement entered into by subsidiary Lajeado Energia S.A. and Caiuá 

Distribuição de Energia S.A., as of December 31, 2006, approved through SFF/ANEEL Decision 181 of January 29, 2007. 

9 Prepaid expenses 


Current 

Current Noncurrent 

12/31/2010 12/31/2009 12/31/2010 12/31/2009 12/31/2010 12/31/2009 

Insurance premium 31 

4 

4,548 

2,615 

937 

1,064 

Other 159 

- 

706 

- 

- 

- 

Total 190 

4 

5,254 

2,615 

937 

1,064 

10 Taxes and social contribution 


Consolidated 

Current 

Noncurrent 

Current 

Noncurrent 

12/31/2010 12/31/2009 12/31/2010 12/31/2009 12/31/2010 12/31/2009 12/31/2010 12/31/2009 

Assets - to offset - 

- 

- 

- 

- 

- 

- 

Income and social contribution taxes 58,553 

43,791 

- 

- 

330,787 

225,152 

- 

- 

ICMS 5 

132 

- 

- 

35,241 

36,827 

29,679 28,383 

PIS & COFINS 235 

235 

- 

- 

50,145 

43,238 

- 

- 

PIS & COFINS - COSIT 27 - 

- 

- 

- 

91,481 

75,730 

- 

- 

Withholding tax on interest on own capital 25,138 

23,630 

- 

- 

25,138 

23,630 

- 

- 

Other 2,035 

7,248 

- 

- 

7,522 

14,728 

6,254 

2,695 

Total 85,966 

75,036 

- 

- 

540,314 

419,305 

35,933 31,078 

0.00 - 

- 

- 

- 

- 

Payable - Liabilities - 

- 

- 

- 

- 

- 

- 

- 

Income and social contribution taxes 69 

2,987 

- 

- 

207,222 

134,231 

- 

- 

ICMS on rate differential 5 

5 

- 

- 

40 

415 

- 

- 

ICMS - 

- 

- 

- 

174,371 

142,927 

- 

- 

PIS & COFINS 14,761 

12,776 

- 

- 

89,336 

82,637 

- 

- 

ISS - 

- 

- 

- 

840 

662 

- 

- 

PIS, COFINS and Social Contribution - On services 

rendered by third-parties 

- 

- 

- 

- 

205 

18 

- 

- 

Withholding tax on services rendered by third-parties 

- 

- 

- 

- 

73 

38 

- 

- 

Withholding tax on interest on own capital 14,576 

- 

- 

- 

47,160 

31,104 

- 

- 

Tax installment payment - Law No. 11,941/09 21,530 

14,634 

32,295 

34,146 

72,285 

45,910 

108,425 107,124 

Tax installment payment - PAEX - 

- 

- 

- 

6,127 

5,326 

29,428 35,039 

Other 718 

704 

- 

- 

12,232 

11,191 

- 

- 

Total 51,659 

31,106 

32,295 

34,146 

609,891 

454,459 

137,853 142,163 

10.1 Taxation of operations in the Electric Energy Trading Chamber - CCEE 

As a result of the terms of article 32 of Provisional Measure n.º 66, of August 29, 2002, converted into Law n.º 10,637, of December 30, 2002 and of Normative Instruction n.º 199, of 

September 12, 2002, electric energy distributors, as agents members of the Electric Energy Trading Chamber (“CCEE”), exercised the option for the special taxation regime of PIS and 

of COFINS on income earned in operations carried out within the sphere of that Institution. 

The main effects refer to the calculation basis levied on the net positive results and on the continuity of the application of the rate of 0.65% and 3% for PIS and COFINS, respectively. 

10.2 PIS & COFINS - COSIT 27 

Distributors 

The balance of R$ 78,055 (R$ 75,730 in 2009) refers to the record of extempore PIS and COFINS credits resulting from the interpretation provided by the Internal Revenue Service in 

Answer to Inquiry COSIT 27/2008, corresponding to the credits calculated on expenditures with materials applied or consumed in the electricity supply activity and in the activity of 

depreciation charges of machinery, equipment and other fixed assets, to be offset with debits of these contributions. In accordance with ANEEL Technical Note 115/2005, the Company 

recognized initially in current liabilities in Other liabilities, an equal sum to be returned to the consumers, since said credits will influence the effective rate for PIS/COFINS to be charged 

in the future (Note 15). 

In 2011, this credit will be offset with the Brazilian Federal Revenue Service. Subsidiary Bandeirante started to refund consumers in November 2010 and subsidiary Escelsa started to 

refund consumers in December 2010, through the reduction of the effective PIS/COFINS rate, amounting to R$10,217. 

Generators 

On March 15, 2004, SRF Regulatory Instruction 404, based on Law 10,833/03, provides on the possibility of discount of PIS and COFINS credits calculated on the depreciation of assets 

incorporated to property, plant and equipment, to be used in the production of assets intended for sale and provision of service, later amended by SRF Regulatory Instruction 457/07, 

which maintaned the credit discount through depreciation calculated according to criteria established by SRF Regulatory Instruction 162/98 and SRF Regulatory Instruction 130/99 and 

introduced the option of discount through the asset acquisition value over 4 years for machinery and equipment in property, plant and equipment and 2 years for assets and provisions 

of decrees 4,955/2004, 5,173/2004, 5,222/2004, acquired beginning as of October 2004 and complying with the provisions of Article 31 of Law 10,865, of April 30, 2004. Based on this 

instruction, direct subsidiary Energest and indirect subsidiaries CESA and Investco recorded the amount of R$13,426 as of December 31, 2010. 

F-94

10.3 IRRF - interest on own capital 

Refers to the Withholding Tax, at the rates of 15% and 25%, levied on the amounts proposed to the shareholders as Interest on Shareholders' Equity, excepting for the shareholders 

provenly immune or exempt, in conformity with the legislation. 

10.4 Installment payment of taxes - Law 11941/09 and PAEX 

In 2009, the adhesion to the reduction and tax installment payment program was formalized with the Federal Revenue Service - SRF, under Law No. 11,941/09, such as of the 

subsidiaries Bandeirante, Escelsa, Energest and Enertrade, which generated a reduction of contingent liabilities (Note 27), relative to tax proceedings within the federal sphere. 

Exceptional Installment Payment - PAEX - In September 2006, subsidiary Lajeado joined the Exceptional Installment Payment (PAEX) established by Provisional Act 303, of June 29, 

2006, which addresses the payment in installments of legal entities' debts with the Federal Revenue Service (SRF), the National Treasury Attorney General (PGFN) and the National 

Institute of Social Security (INSS), in 130 monthly and successive installments (SRF/PGFN), adjusted to inflation at the long-term interest rate (TJLP) for debts maturing until February 

28, 2003, and in 120 monthly and successive installments (IRPJ, CSLL, COFINS, PIS, CPMF, INSS and fine), adjusted to inflation at the SELIC rate for debts maturing from March 1, 

2003 to December 31, 2005, recognized or not, enrolled or not in the Government or INSS Debt Register, even if they are challenged in a lawsuit proposed by the taxpayer or under the 

tax foreclosure stage, or under a previous installment plan, not fully paid, even if cancelled for nonpayment. 

The debt to be paid in 130 monthly installments, in accordance with the provisions of Article 1 of Provisional Act 303 of June 29, 2006 is being paid since September 2006. The debt 

balance bears monthly interest equivalent to TJLP variation. 

In 2009, PAEX formally joined the program for the reduction and installment payment of taxes according to Law 11,941/09 of the Federal Revenue Service. 

The balance on December 31, 2010 and 2009 is comprised as follows: 


Consolidated 

12/31/2010 12/31/2009 12/31/2010 12/31/2009 

Liabilities 


- 

67,443 

53,942 

PIS/COFINS 49,146 

45,362 

115,735 

111,443 

INSS - 

- 

26,006 

21,926 

Other 4,679 

3,418 

7,081 

6,088 

Total 53,825 

48,780 

216,265 

193,399 

Of the total tax amount to be paid in installments according to Law 11,941/09, R$73,332 (R$73,332 in 2009) will be offset against escrow deposits and R$44,309 (R$44,309 in 2009) will 

be offset against tax credits from tax loss carryforwards, and the remaining amount will be settled in 30 installments. 

F-95

11 Deferred income and social contribution taxes 

11.1 Assets 


Consolidated 

Noncurrent 

Noncurrent 

12/31/2010 12/31/2009 12/31/2010 12/31/2009 

Adjusted 

IRPJ on tax losses 0.00 0.00 100,447 

134,365 

Negative bases of social contribution 2,590 

0.00 46,627 

58,852 

IRPJ & CSLL on other temporary additions 0.00 0.00 153 

60 

IRPJ & CSLL on other temporary differences 0.00 0.00 112,471 

107,792 

IRPJ & CSLL on provision for pension deficit - PSAP 0.00 0.00 22,277 

22,956 

IRPJ & CSLL on incorporated tax credit - Goodwill 0.00 0.00 249,136 

265,997 

IRPJ & CSLL on other temporary differences - RTT 0.00 0.00 247,569 

158,263 

Total 

2,590 

- 

778,680 

748,285 

Nature of credits Calculation basis 

Tax losses 


Total deferred charges 


12/31/2010 

IRPJ CSLL Total 

28,777 

7,194 

0.00 7,194 

28,777 

0.00 2,590 

2,590 

0.00 7,194 

2,590 

9,784 

7,194 

2,590 

9,784 

Consolidated 

12/31/2010 

12/31/2009 




Tax losses 485,777 

121,444 

0.00 121,444 

141,854 

Negative social contribution basis 602,060 

0.00 54,186 

54,186 

61,548 


0.00 121,444 

54,186 

175,630 

203,402 

Provision for allowance for doubtful accounts 

145,009 

36,252 

13,051 

49,303 

38,522 


30,742 

7,686 

2,767 

10,453 

14,558 

Provision for tax, civil and labor risks 

138,721 

34,680 

12,481 

47,161 

45,990 

Provision for SWAP results 

191,102 

47,776 

17,199 

64,975 

39,396 

Provision for inventory losses 

53,224 

13,306 

4,791 

18,097 

17,633 

Provision for bonus - employees 

(38) 

(10) 

(3) 

(13) 

552 

Total temporary differences 139,690 

50,286 

189,975 

156,650 

Post-employment benefits - PSAP 

65,522 

16,380 

5,897 

22,277 

22,956 

Goodwill absorbed 

732,753 

183,189 

65,948 

249,137 

265,997 

0.00 0.00 0.00 0.00 0.00 

Temporary differences - RTT 0.00 0.00 0.00 0.00 0.00 

Consumers - adjustment to present value 

12,169 

3,042 

1,097 

4,139 

5,400 

Financial charges - Recouponing 

2,225 

556 

200 

756 

1,434 

Loans and financing in foreign currency - MTM 

20 

5 

2 

7 

(139) 

Fixed assets in service - Intangible assets 

34 

9 

3 

12 

67 

Goodwill amortization/depreciation - CPC 15 

66,954 

16,738 

6,026 

22,764 

12,790 


1,157 

290 

104 

394 

299 


202,641 

50,660 

18,237 

68,897 

70,591 


16,955 

4,239 

1,526 

5,765 

(1,830) 

Employee benefits - CPC 33 

114,497 

28,624 

10,303 

38,927 

10,668 

Total temporary differences - RTT 0.00 104,163 

37,498 

141,661 

99,280 

Total deferred assets 

564,866 

213,815 

778,680 

748,285 

2011 2012 2013 2014 2015 2016 to 2018 2019 a 2020 Noncurrent 

114,634 

254,323 

150,767 

72,826 

94,620 

34,580 

56,930 

778,680 

11.1.1 Forecasted future taxable income 

11.1.2 

The tax credits detailed below, calculated on tax losses carry-forward, negative social contribution basis and other amounts constituting temporary differences used for reducing the 

future tax burden, were recognized based on historical taxable profits and on budgets for generating taxable profits for the next fiscal periods at the subsidiaries Bandeirante, Escelsa, 

Enertrade, Energest, and Lajeado, within a maximum period of 10 years. 

Based on technical studies of taxable income projections calculated according to CVM Instruction 273, of August 20, 1998, the recovery of the non-current tax credits for the following 

fiscal periods is estimated at: 

The Managements of the Company and its subsidiaries prepared a projection of future taxable income on December 31, 2010, also considering its discounts at present value, 

demonstrating the capacity to realize these tax credits in the periods indicated and, for the subsidiaries Bandeirante, Escelsa and Enerpeixe, as required by CVM Instruction nº 371, of 

June 27, 2002, aforesaid studies were approved by the respective Boards of Directors on February 14, 2011 and February 16, 2011 for the subsidiary Investco. These estimates are 

periodically reviewed in order to allow the Company to record in its financial statements an eventual alteration in the budget for recovery of these credits on a timely basis. Consequently, 

the estimates may not be realized in the future, in view of the uncertainties inherent in these forecasts. 

Under the tax legislation in force, the tax loss and the negative basis of social contribution can be offset with future income, up to the limit of 30% of the taxable income, and are not 

subject to a statutory limitation period. 

The forecasted future taxable income indicates that the subsidiaries Bandeirante and Escelsa have a calculation base sufficient to recover the full balance of tax credits in the period as 

demonstrated. However, the credits up to December 31, 2010 related to PSAP and goodwill, mentioned in Explanatory Notes 11.1.2 and 11.1.3, will be realized financially up to 2017 

and 2032, respectively, according to the amortization rules of the amounts related to them. 

The taxable credit arising from the Provision for the Pension Plan Deficit - PSAP, refers to the portion of liabilities related to benefits exceeding assets relative to the defined benefit 

pension plans at the Bandeirante subsidiary, the provision for which was effected on December 31, 2001 with a counterparty in Shareholders’ Equity, deductible on the occasion of the 

monthly payments, expected to be terminated in 2017. 

F-96

11.1.3 The goodwill fiscal credit derives from: 

a) during 2002, at the subsidiary Bandeirante, as a result of the incorporation of the portion spun off from the former controlling company Enerpaulo - Energia Paulista Ltda., represented 

by the goodwill paid by Enerpaulo on the acquisition of shares issued by Bandeirante. 

b) at the subsidiary Escelsa, from the merger that occurred in April 2005, of the spun-off portion of the parent company Energias do Brasil, represented by the goodwill paid by the 

merged companies EDP 2000 Participações Ltda. and EDP Investimentos Ltda. upon the acquisition of shares issued by IVEN, which was parent company of Escelsa at the time. 

c) at the subsidiary Lajeado, from the takeover of the subsidiaries EDP Lajeado and Tocantins, which occurred in November 2009, represented by the goodwill paid by the Company 

The amounts were accounted for according to CVM Instructions 319/99 and 349/99, and in accordance with ANEEL’s instructions, and amortized according to the curve between the 

expectation of future results and the term of the companies’ concession. This translates into a future average annual tax credit realization of R$6,034 to subsidiary Bandeirante up to 

2027, R$1,974 to subsidiary Escelsa up to 2025, and R$ 5,316 to subsidiary Lajeado up to 2032. 

11.2 Liabilities 

Income tax 


Total 

Noncurrent 

Total 




12/31/2010 12/31/2010 12/31/2009 

825 

297 

1,122 

1,122 

1,122 

212,502 

76,501 

289,003 

289,003 

289,003 

191,926 

69,094 

261,020 

261,020 

261,020 

12/31/2009 


0.00 0.00 

(3,300) 

Total temporary differences 0.00 (825) 

Total liabilities - deferred 

Consolidated 

Nature of credits Calculation basis 

Consolidated 

12/31/2010 

12/31/2009 




Temporary differences 0.00 0.00 0.00 - 


(3,300) 

(825) 

(297) 

(1,122) 

- 

Total temporary differences 0.00 (825) 

(297) 

(1,122) 

- 

Temporary differences - RTT 0.00 0.00 0.00 - 

0.00 

Goodwill - CPC 15 

(586,117) (146,529) 

(52,751) 

(199,280) (199,280) 


(233) 

(58) 

(21) 

(79) 

(65) 


(128,668) 

(32,167) 

(11,580) 

(43,747) 

(45,435) 


(131,690) 

(32,923) 

(11,852) 

(44,775) 

(15,546) 

Employee benefits - CPC 33 0.00 0.00 0.00 - 

(694) 

Total temporary differences - RTT 0.00 

0.00 

(211,677) 

(76,204) 

(287,881) (261,020) 

Total liabilities - deferred (212,502) 

(76,501) 

(289,003) (261,020) 

0.00 

0.00 

12/31/2010 


The change in deferred income tax and social contribution for the year was recorded as a credit to shareholders' equity in the amount of R$22,881 and as a charge to net income for the 

year, in the amount of R$19,230, respectively. 

F-97 

(825) 

(825) 

(297) 

(297) 

(297) 

(1,122) 

(1,122) 

(1,122) 

0.00 

- 

-

12 Related parties 

Agreement's purpose 


Total disposal of the Company's 

quotas 

Sharing of expenses with 

personnel, material and 

outsourced services, approved by 

ANEEL through Order 2194/97 

and Regulatory Resolutions 

334/08 and 423/10. 

Debt assumption agreement on 

the sale of assets of the 

subsidiary Tocantins Energia to 

Eletronorte. 









Selling of assets 

Counterpart 


Assets 

Liabilities 

Income (expenses) for the 

year 

Transaction 

date Validity period 

12/31/2010 12/31/2009 12/31/2010 12/31/2009 2010 2009 

ESC90 6/30/09 6/30/09 

79,780 


1 243 177 399 

Energest 10/19/07 10/19/2007 to 12/07/2011 

3 

Enertrade 10/19/07 10/19/2007 to 12/07/2011 

12 

Escelsa 10/19/07 10/19/2007 to 12/07/2011 

351 28 


6,594 (9) 


10 

CESA 5/15/03 5/15/2003 to 12/29/2011 

95,676 87,440 4,912 4,592 

Energest 12/29/06 12/29/2006 to 12/29/2011 

2 59,989 2,342 1,650 

Enertrade 11/9/09 11/09/2009 to 11/09/2010 

20,588 195 199 

Investco 12/10/09 12/10/2009 to 11/08/2012 

4,895 4,355 389 

Terra Verde 

Bioenergia 

1/1/10 1/1/2010 to 12/25/2012 

5,637 

Escelsapar 6/27/05 6/27/2005 to 11/30/2012 

3,713 2,900 165 

Ipueiras 8/10/09 8/10/2009 to 4/8/2011 

51 5 

Terra Verde 

Bioenergia 

1/15/10 1/15/2010 to 1/15/2014 

6,647 

Total 

116,622 175,871 189 7,024 7,829 86,396 

Consolidated 

Income 

(expenses) for 

the year 

Transaction 

Agreement's purpose Counterpart date Validity period 

2009 


Total disposal of the Company's 

ESC90 06/30/09 06/30/09 

79,780 

Total 

79,780 

F-98

12.1 Directors' Fees 

12.1.1 Compensation policy or practice of the Board of Directors, Board of Executive Officers, Fiscal Council and Committees 

(i) - Proportion of each item in total compensation, referring to the year of 2010 



12.1.2 

12.1.3 

Board of Executive Officers 


Variable Compensation: 20% 


Not applicable 

Compensation of the Board of Directors, Fiscal Council and Board of Executive Officers payable by the Company in the year of 2010 

Board of Directors Statutory Board Total 

Number of members 8 4 12 

Annual fixed remuneration (in Reais) 550,000 1,721,519 2,271,519 

Salary or director compensation 550,000 1,721,519 2,271,519 

Direct and indirect benefits n/a n/a n/a 

Remuneration for participation in Committees n/a n/a n/a 


Variable Compensation (in Reais) n/a 585,000 585,000 

Bonus n/a 585,000 585,000 

Profit sharing n/a n/a n/a 

Remuneration for partipation in meetings n/a n/a n/a 

Retribution n/a n/a n/a 


Post-employment benefits n/a n/a n/a 

Benefits motivated by the cessation of the performance of the job n/a n/a n/a 

Remuneration based on shares n/a n/a n/a 

Total amount of the remuneration, by body 550,000 2,306,519 2,856,519 

( n/a ) = Not applicable 

2010 

2010 

Board of Directors Statutory Board 

The Board of 

Inspectors 

Number of members 8 4 - 

Amount of the highest individual remuneration (in R$) 135,000 1,063,333 - 

Amount of the lowest individual remuneration (in R$) 90,000 197,426 - 

Average amount of individual remuneration (in R$) 103,750 576,630 - 

Of the eight Company's Board members, only four are remunerated. 



Average Compensation of the Board of Directors, Board of Executive Officers and Fiscal Council in the first year of 2010 

Those present at the Ordinary General Meeting held on April 9, 2010 approved the annual and overall remuneration of the members of the Board of Directors, of its Committees and of 

the Senior Management of up to R$3,860, for April 2010 to March 2011. 

F-99

13 Pledges and restricted deposits 


Current 

Noncurrent Current 

Noncurrent 

Note 12/31/2010 12/31/2009 12/31/2010 12/31/2009 12/31/2010 12/31/2009 12/31/2010 12/31/2009 

Judicial deposits 27 - 

2,168 

8,693 

5,122 

35 

2,203 230,337 117,735 

Pledges and restricted deposits 34.2 222 

- 

- 

- 

62,863 

67,384 

9,332 13,062 

Total 222 

2,168 

8,693 

5,122 

62,898 

69,587 239,669 130,797 

The balance of the account collaterals and escrow deposits refer basically to a portion of short-term investments of Enerpeixe, R$47,575 (2009 - R$54,070), maintained in a reserve 

account in compliance with the financing agreements entered into on May 21, 2004 with BNDES and a bank consortium, recognized as part of the agreements' guarantees, as specified 

in item (iii) of note 22.3, and the short-term power transactions in CCEE. 

The amount of R$230,337 referring to consolidated escrow deposits is related to the following notes 10.4, 27.1.1, 27.2, 27.3. 

14 Advances for future capital increases 


Consolidated 

Assets 

Assets 

Noncurrent 

Noncurrent 

12/31/2010 12/31/2009 12/31/2010 

Energest - 

35,040 

- 

Enercouto 500 

- 

- 

Enernova - 

31,077 

- 

Ipueiras 17 

- 

- 

Terra Verde 3,100 

3,100 

- 

EDP Renováveis 458 

- 

458 

Total 4,075 

69,217 

458 

15 Other receivables - Assets and Other accounts payable - Liabilities 


Current 

Noncurrent 

Current 

Noncurrent 

Note 12/31/2010 12/31/2009 12/31/2010 12/31/2009 12/31/2010 12/31/2009 12/31/2010 12/31/2009 


Other credits - Assets 

- 

- 

- 

- 

- 

- 

- 

- 

Advances to employees 

15 

24 

- 

- 

766 

760 

- 

- 

Advances to suppliers 

- 

53 

- 

13,350 

844 

1,248 

- 

13,350 

Credits receivable - clients 

- 

- 

- 

- 

167 

167 

- 

- 


15.1 

- 

- 

- 

- 

43,872 

61,791 

- 

- 

Expenses to be reimbursed 42 34 0 0 11080 10402 0 0 

Energy Efficiency Program 

- 

- 

- 

- 

420 

3,568 

857 

1,520 

RGR to offset 

- 

- 

- 

- 

- 

777 

- 

- 

Assets for sale 

- 

- 

- 

- 

- 

- 

15 

15 

Deactivations in progress 

- 

16 

- 

- 

- 

110 

- 

- 

Services in progress 

15.2 

3 

683 

- 

- 

79,279 

47,741 

- 

- 

Services rendered to third parties 

62 

- 

- 

- 

8,948 

5,394 11,149 14,449 

Tax and consignments on payroll 

- 

- 

- 

- 

- 

1,809 

- 

- 

Deactivations and disposals in progress 

8 

- 

- 

- 

19,596 

14,094 

- 

69 

Infrastructure sharing 

- 

- 

- 

- 

1,126 

1,138 

- 

- 


- 

- 

- 

- 

400 

- 

- 

- 

Advance - UTE Resende e Norte Capixaba 

- 

- 

7,158 

6,844 

- 

- 

7,158 

6,844 

Capital decrease 

- 

- 

- 

24,887 

- 

- 

- 

- 

Other 

15.3 

1,382 

640 

8,601 

6,911 

6,063 

10,149 13,200 13,690 

Total 1,512 

1,450 

15,759 

51,992 

172,561 

159,148 32,379 49,937 

Other - Liabilities 

- 

- 

- 

- 

- 

- 

- 

- 

Advances received - disposal of assets and rights 

- 

- 

- 

- 

11,004 

10,037 

- 

- 

Public lighting contribution 

- 

- 

- 

- 

13,593 

11,798 

- 

- 

Amounts payable to Piratininga 

- 

- 

- 

- 

382 

382 18,953 18,953 

Sundry creditors - consumers 

- 

- 

- 

- 

13,532 

14,636 

- 

- 

Sundry creditors - concessionaires 

- 

- 

- 

- 

4,161 

4,161 

- 

- 

Payroll 

422 

- 

- 

- 

4,743 

4,702 

- 

- 


- 

- 

- 

- 

15,200 

22,804 

- 

- 

ICMS credit assignments 

- 

- 

- 

- 

1,267 

2,390 

- 

- 

Interest on compulsory loan 

- 

- 

- 

- 

358 

373 

- 

- 

Third party collection to be transferred 

- 

- 

- 

- 

3,811 

7,676 

- 

- 

Amounts payable - Cable TV and Telephony 

- 

- 

- 

- 

2,985 

2,398 

- 

- 

Tariff restitution - COSIT 27 

10.2 

- 

- 

- 

- 

56,878 

75,730 

- 

- 

Capital decrease 

- 

- 

- 

- 

- 

- 

- 

24,007 

Other 

3,970 

- 

47 

62 

9,496 

8,880 

2,819 

2,975 

Total 4,392 

- 

47 

62 

137,410 

165,967 21,772 45,935 

F-100

15.1 Tariff modicity – low income 

Law 10,438, of April 26, 2002, as amended by Law 12,212, of January 20, 2010, provides on the Electric Power Social Tariff for low income consumers, which consists of tariff discounts 

on the residential tariff. 

In compliance with Notification 1,091, of novemeber 18, 2005, of the São Paulo State Sanitation and Power Regulatory Agency (ARSESP), through which the Regulatory Agency 

determined the review of the criteria for the register of low income customers, the Company recorded, in 2008, the amount of R$47,640 referring to amounts to be returned to 

consumers. 

Considering that the legislation and regulation of this matter provides for the refunding of these amounts through economic subsidy, at the same time an equal amount was recorded in 

receivables, both as a contra entry to operating income. 

The total amount returned to consumers up to December 31, 2010 is R$27,277 (R$24,836 in 2009). 

The Company reviewed the classification basis and the initial position is now R$29,698. The amount of R$12,779 was recorded as a charge to Operating expenses. 

For inactive customers, measures are being taken to locate them and make the reimbursement. 

The balance on December 31, 2010, of the subsidiary Escelsa, in the amount of R$ 12,780, corresponds to estimates for the period from March to April 2010 and from August to 

December 2010. 

15.2 Services in progress 

Refer to cost of services rendered by subsidiaries to third parties and related parties, including personnel, material and service expenses during the provision of services by the 

Company, directly related to the concession and that are calculated and recorded at the orders in progress method. 

15.3 Other regulatory assets - non-current assets 

Refers to amounts receivable for the exchange of Enersul shares with Investco shares which previously belonged to Grupo Rede Energia S.A., in the amount of R$7,591 

16 Investments 

16.1 Movement of investments in the period 

Balances on 

12/31/2009 

Additions/ 

Mergers 


Adjusted 

Investments - 

Bandeirante 815,089 

- 

Escelsa 774,465 

- 

Lajeado 643,789 

- 

Enercouto - 

5,315 

Enerpeixe 662,548 

- 

Energest 283,935 

95,331 

Enertrade 50,698 

- 

Ipueiras 1 

Porto do Pecém (Note 2.6) 224,906 

51,440 

EDP Renováveis - 

25,188 

Omega - 

130 

Other 320 

4,999 

Total 3,455,751 182,403 

Unsecured liability 

Enernova (*) 4,194 

Escelsapar 2,382 

Enercouto 470 

Ipueiras - 

Terra Verde 1,406 

Total 8,452 

( * ) Enernova was merged into Ipueiras as of December 31, 2010. 

(5,404) 

- 

- 

- 

- 

(5,404) 

Equity accounting 

- 

278,238 

178,567 

78,010 

(74) 

70,982 

96,204 

16,734 

(48) 

(41,531) 

(769) 

(26) 

- 

676,287 

1,095 

(1,597) 

27 

- 

3,479 

3,004 

Dividends / 

JSCP (interest on 

own capital) 

- 

(239,688) 

(120,665) 

(75,426) 

- 

(12,000) 

(19,197) 

(22,965) 

- 

- 

- 

- 

(489,941) 

The amount of R$2,418 recorded as Other refer to investment property assets. 

Escelsapar 

Escelsapar has a provision for unsecured liability in the amount of R$ 785 (R$ 2,382 in 2009). 

Terra Verde 

Ipueiras 

Ipueiras has provision for unsecured liability in the amount of R$ 1,267. 

Parent company % Direct interest 

- 

- 

- 

- 

- 

- 

Equity valuation 

adjustment 

- 

(33,367) 

(22,284) 

- 

- 

- 

- 

- 

1,310 

- 

- 

- 

(54,341) 

- 

- 

- 

- 

- 

- 

Provision for losses 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

12,847 

12,847 

Transfer for 

unsecured liability 

Terra Verde has provision for unsecured liability in the amount of R$ 4,885 (R$1,406 in 2009), R$131 of which refers to unrealized income. 

- 

- 

- 

- 

(497) 

- 

- 

- 

47 

- 

1,335 

- 

- 

885 

115 

- 

(497) 

1,267 

- 

885 

Balances on 

12/31/2010 

12/31/2009 12/31/2010 

- 

- 

- 

820,272 

100 

100 

810,083 

100 

100 

646,373 

56 

56 

4,744 

- 

100 

721,530 

60 

60 

456,273 

100 

100 

44,467 

100 

100 

- 100 

236,125 

50 

50 

25,754 

- 

45 

104 

- 

100 

5,319 

3,771,044 

- 

- 

On September 14, 2010, via Extraordinary General Meeting, the Company manifested its interest in permanently withdrawing its participation in the Terra Verde project, with the 

subsequent dissolution of the corporate alliance with the shareholder Investimento Verde, the proposal for which was not accepted. Given the fact mentioned, the Company filed law suit 

n°5830020101846178 at the 3rd Civil Courtª for the City of Sã o Paulo on September 20, 2010 soliciting the total dissolution of the corporation. To prepare for any eventual expenditures 

with the dissolution of the corporation a provision was made for investment losses, at a total of R$12,847, registered as a liability. 

F-101 

- 

785 

- 

1,267 

17,732 

19,784 

100 

100 

100 

- 

92 

- 

100 

100 

100 

92

Balances on 

12/31/2009 

Adjusted 

Additions Write-offs Equity accounting Merger 

Balances on 

12/31/2010 

Energias do Brasil 0.00 0.00 - 

EDP Renováveis 0.00 5,742 

0.00 (769) 

20,781 

25,754 

Other 

320 

5,000 

- 

- 

0.00 5,320 

0.00 - 

- 

- 

0.00 - 

Lajeado 0.00 - 

- 

- 

0.00 - 

Other 

205 

- 

(150) 

- 

0.00 55 

0.00 0.00 - 

Omega 0.00 - 

- 

- 

0.00 - 

Other 0.00 520 

- 

- 

0.00 520 

0.00 0.00 - 

Enernova 0.00 - 

- 

- 

0.00 - 

EDP Renováveis 

21,849 

- 

- 

(1,068) 

(20,781) 

- 

0.00 - 

- 

- 

0.00 0.00 

Other investments 0.00 - 

- 

- 

0.00 0.00 

Enercouto 

1,271 

- 

- 

- 

0.00 1,271 

Bandeirante 

3,262 

- 

(207) 

- 

0.00 3,055 

Escelsa 

4,028 

- 

(2,732) 

- 

0.00 1,296 

Total 30,935 

16.2 Direct interest on investments 

17 

Company 

12/31/2010 12/31/2009 

Common / 

Quotas 

Energias do Brasil - 

Bandeirante 39,091,735 

EDP Lajeado (i) - 

Enercouto 1 

Energest 1,000,572 

Enernova 1 



Escelsa 5,876 

Escelsapar 10 

Ipueiras 14,722 


Porto do Pécem 99,856 

Terra Verde (ii) - 

EDP Renováveis 50,281 

11,262 

Shares / Quotas owned by the 

Company (In thousand) 

Common / 

Quotas 

(3,089) 

(1,837) 

Paid-up capital stock Voting capital 

0.00 0.00 - 

39,091,735 

100 

100 

0.00 0.00 - 

1 

100 

100 

1,000,572 

100 

100 

1 

100 

100 

465,165 

60 

60 

26,217 

100 

100 

5,876 

100 

100 

10 

100 

100 

14,722 

100 

100 

113,690 

56 

100 

99,856 

50 

50 

0.00 92 

92 

0.00 45 

45 

(i) The subsidiaries EDP Lajeado and Tocantins were merged to Lajeado on November 30, 2009. 

(ii) The total is 100 shares. 

Consolidated 

12/31/2010 

% Company's ownership interest 

- 

Paid-up capital 

stock 

37,271 

12/31/2009 Shareholders’ equity of the subsidiaries 

Voting capital 12/31/2010 12/31/2009 12/31/2010 12/31/2009 

0.00 - 

100 

100 

0.00 - 

100 

100 

100 

100 

100 

100 

60 

60 

100 

100 

100 

100 

100 

100 

100 

100 

56 

100 

50 

50 

92 

92 

0.00 - 

Subsidiaries' net income 

0.00 0.00 0.00 0.00 

820,271 

815,089 278,238 279,828 

0.00 0.00 0.00 (202,509) 

4,745 

(469) 

(101) 

(52) 

456,272 

283,934 96,203 70,928 

474 

(5,529) 

599 (3,765) 

1,202,549 1,104,247 118,302 121,464 

44,466 

50,698 16,734 25,043 

810,083 

774,465 178,567 155,223 

(785) 

(2,382) 

1,597 

(440) 

(47) 

1 

(48) 

(4) 

1,522,223 1,502,833 154,412 109,054 

236,125 

224,905 (41,531) 36,794 

(5,167) 

(1,528) (3,639) (1,518) 

65,398 

0.00 4,082 

0.00 


Direct subsidiaries Bandeirante, Escelsa and indirect subsidiary Evrecy have the receivable balance of R$397,324 (R$325,262 in 2009) from the Concession Grantor due to the 

unconditional right of receiving cash at the end of concession, as indemnity for investments made and not recovered in the rendering of concession services. These financial assets 

reflect the remaining balance of the intangible asset not amortizable after the end of the concession period, and are calculated based on the cost of assets in the concession service that 

are reversible at the end of the concession period. This financial asset was recorded as contra entry to noncurrent assets, under intangible assets. 

F-102

18 Property, plant and equipment 

Average 

depreciation 

rate % 

Fixed assets in service - tangible 

- 

Generation - 

Land 

Reservoirs, dams and water mains 


- 


Vehicles - 


- 


Land - 


- 


- 

Administration - 

Land - 


10.00 

Machinery and equipment 10.00 

Vehicles 20.00 

Furniture and fixtures 10.00 

- 


- 

Land - 



- 

Total fixed assets in service - 

Construction in progress 

- 

Generation - 


Administration - 

Total construction in progress - 

Total fixed assets - 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

8 

967 

817 

1,575 

3,367 

- 

- 

- 

- 

- 

3,367 

- 

- 

261 

261 

3,628 

Movements during the year are demonstrated as follow: 


12/31/2010 12/31/2009 12/31/2010 

12/31/2009 

Accumulated 

depreciation 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

(3) 

(517) 

(350) 

(864) 

(1,734) 

- 

- 

- 

- 

- 

(1,734) 

- 

- 

- 

- 

(1,734) 


- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

5 

450 

467 

711 

1,633 

- 

- 

- 

- 

- 

1,633 

- 

- 

261 

261 

1,894 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

5 

331 

188 

861 

1,385 

- 

- 

- 

- 

- 

1,385 

- 

- 

653 

653 

2,038 

Average depreciation 

rate % 

- 

- 

- 

2.34 

3.49 

4.88 

20.00 

10.00 

- 

- 

- 

4.00 

3.45 

- 

- 

- 

4.75 

10.00 

20.00 

- 

- 

- 

10.00 

10.00 

- 

- 

- 

- 

- 

- 

- 


- 

- 

164,614 

1,974,131 

776,650 

1,676,428 

4,045 

2,120 

4,597,988 

- 

1 

96 

48,498 

48,595 

- 

101 

164 

4,004 

2,769 

3,175 

10,213 

- 

273 

17 

370 

660 

4,657,456 

1,353,548 

3 

473 

1,354,024 

6,011,480 

Net amount 

Entries 

Transfer to fixed 

assets in service 

Depreciation Write-offs 

Net amount 

Tangible assets 12/31/2009 12/31/2010 

Fixed assets in service - 

- 

- 

- 

- 

- 

Fixed assets in service - tangible 5 

- 

326 

(2) 

(324) 

5 

Machinery and equipment 331 

- 

182 

(63) 

- 

450 

Vehicles 188 

- 

392 

(112) 

(1) 

467 

Furniture and fixtures 861 

- 

- 

(150) 

- 

711 

Total fixed assets in service 1,385 

- 

900 

(327) 

(325) 

1,633 

Total construction in progress 

653 

509 

(900) 

- 

(1) 

261 

Total fixed assets - tangible and intangible 2,038 

509 

- 

(327) 

(326) 

1,894 

Tangible assets 

Fixed assets in service 

Adjusted 

Land 164,889 

Reservoirs, dams and water mains 1,723,987 

Fixed assets in service - tangible 646,486 

Machinery and equipment 1,427,558 

Vehicles 2,473 

Furniture and fixtures 4,138 

Total fixed assets in service 3,969,531 

Total construction in progress 834,249 

Total fixed assets - tangible and intangible 4,803,780 

Accumulated 

depreciation 

- 

- 

- 

(249,028) 

(144,557) 

(296,371) 

(2,354) 

375 

(691,935) 

- 

- 

(45) 

(11,592) 

(11,637) 

- 

- 

(30) 

(1,663) 

(876) 

(1,538) 

(4,107) 

- 

- 

(17) 

(197) 

(214) 

(707,893) 

- 

- 

- 

- 

(707,893) 


Transfer to fixed 

Entries 

Depreciation Write-offs Reclassification 

assets in service 

12/31/2009 12/31/2010 

101 

18,876 

1 

4,740 

44 

17 

23,779 

600,841 

624,620 

0.00 0.00 0.00 0.00 164,990 

23,021 

(40,780) 

- 

0.00 1,725,104 

3,248 

(16,884) 

(576) 

0.00 632,275 

42,502 

(53,641) 

(1,854) 

0.00 1,419,305 

2,309 

(966) 

(277) 

0.00 3,583 

351 

(107) 

(93) 

0.00 4,306 

71,431 

(112,378) 

(2,800) 

- 

3,949,563 

(71,622) 

- 

(12,849) 

3,405 1,354,024 

(191) (112,378) 

(15,649) 

3,405 5,303,587 


Property, plant and equipment in progress refer basically to investments in UTE Porto do Pecém, in the amount of R$1,127.544 and the repowering of PCHs Mascarenhas, Rio Bonito 

and Suiça, which total R$157,787. 

The Transmission caption balance refer to property, plant and equipment items in service of the power generating company Costa Rica. 


Reclassifications amounting to R$3,405 of the chart above refer to the refunding of the assets acquisition of SPE Couto Magalhães, in the amount of R$72, totaling a debt of R$3,477, 

which was transferred from intangible assets. 

F-103 

Consolidated 

- 

- 

164,614 

1,725,103 

632,093 

1,380,057 

1,691 

2,495 

3,906,053 

- 

1 

51 

36,906 

36,958 

- 

101 

134 

2,341 

1,893 

1,637 

6,106 

- 

273 

- 

173 

446 

3,949,563 

1,353,548 

3 

473 

1,354,024 

5,303,587 

Adjusted 

- 

164,616 

1,723,986 

646,294 

1,387,015 

1,408 

2,034 

3,925,353 

- 

1 

53 

38,390 

38,444 

- 

- 

140 

2,150 

1,066 

1,889 

5,245 

- 

273 

- 

216 

489 

3,969,531 

832,667 

283 

1,299 

834,249 

4,803,780

19 Intangible assets 

Average 

amortization 

rate % 


Accumulated 

amortization 

Intangible in service 0.00 0.00 0.00 - 

Distribution 0.00 0.00 0.00 - 

Software 0.00 0.00 0.00 - 

12/31/2009 

Consolidated 

12/31/2010 

12/31/2009 


Average 

amortization rate % 

Adjusted - 

0.00 - 

0.00 20.00 

Concession right - Infrastructure 

0.00 0.00 0.00 - 

0.00 - 

0.00 

- 

- 

- 

- 

- 

Generation 0.00 0.00 0.00 0.00 0.00 - 

Software 0.00 0.00 0.00 - 

0.00 13.96 

Permanent easement 0.00 0.00 0.00 - 

0.00 - 

Concession right - Environmental 

licenses 

0.00 0.00 0.00 - 

Concession right - Use of Public 

Property (UBP) 

0.00 0.00 0.00 - 


19.1) 

0.00 0.00 

- 

0.00 

- 

- 

- 

Administration 0.00 0.00 0.00 - 

Software 4.35 

2,161 

(1,911) 

250 

Other 


0.00 0.00 0.00 - 

19.1) 

303,563 

(37,391) 

266,172 

0.00 305,724 

(39,302) 

266,422 

Total Intangible in service 4.35 305,724 

(39,302) 

266,422 

Intangible in progress 0.00 0.00 0.00 - 

Distribution 0.00 0.00 0.00 - 

Generation 0.00 0.00 0.00 - 

Administration 0.00 430 

0.00 430 

Total Intangible in service 

Goodwill 

0.00 430 

- 

430 

Lajeado Energia e Investco 

- 

- 

- 

- 

- 

- 

Total Intangible 0.00 306,154 

The movement of intangible in the year is as follows: 


12/31/2010 

(39,302) 

266,852 


0.00 - 

0.00 - 

0.00 - 

- 

- 

0.00 - 

190 

11.68 

0.00 - 

283,775 

283,965 

- 

283,965 

- 

0.00 - 

0.00 - 

0.00 - 

406 

- 

406 

- 

- 

- 

284,371 

- 

- 


Accumulated 

amortization 

Net amount 

Adjusted net 

amount 

0.00 0.00 0.00 Adjusted 

0.00 0.00 0.00 0.00 

5 

(1) 

4 

0.00 

3,885,287 (2,144,330) 1,740,957 1,712,633 

3,885,292 (2,144,331) 1,740,961 1,712,633 

0.00 0.00 0.00 0.00 

3,845 

(1,836) 

2,009 

2,192 

487 

0.00 487 

310 

3,855 

171,561 

(1,069) 

(28,641) 

2,786 

142,920 

562 

148,534 

561,100 

(39,727) 521,373 561,975 

740,848 

(71,273) 669,575 713,573 

0.00 0.00 0.00 0.00 

4,575 

(3,362) 

1,213 

616 

0.00 0.00 0.00 0.00 

303,563 

(37,391) 266,172 283,775 

308,138 

(40,753) 267,385 284,391 

4,934,278 (2,256,357) 2,677,921 2,710,597 

0.00 0.00 0.00 0.00 

274,556 

0.00 274,556 213,365 

30,667 

0.00 30,667 27,318 

1,275 

0.00 1,275 

1,396 

306,498 

- 

306,498 242,079 

42,293 

42,293 

5,283,069 

Net amount at 

Entries 

Transfer to 

intangible in 

service 

Amortization Reclassification 

Net amount at 

12/31/2009 

Adjusted 

12/31/2010 

Intangible in service 0.00 0.00 0.00 0.00 0.00 0.00 

Concession right - Environmental licenses 190 

0.00 151 

(91) 

0.00 250 

Concession right - Other 283,775 

0.00 0.00 (17,574) 

(29) 

266,172 

Intangible in progress 406 

146 

(151) 

0.00 29 

430 

Total Intangible 284,371 

146 

- 

(17,665) 

- 

266,852 

Consolidated 

- 

- 

(2,256,357) 

Net amount at 

Entries 

Transfer to 

intangible in 

service 

Amortization Write-offs Reclassification 

Net amount at 

12/31/2009 

Adjusted 

12/31/2010 

Intangible in service - 

- 

- 

- 

- 

- 

0.00 

Software 2,618 

2 

1,261 

(743) 

(1) 

(161) 

2,976 

Permanent easement 310 

- 

16 

- 

- 

161 

487 

Concession right - Environmental licenses 752 

166 

2,898 

(780) 

- 

- 

3,036 

Concession right - Infrastructure 1,712,633 

2,311 

231,846 

(187,421) 

(29,794) 

11,382 1,740,957 

Concession right - Use of Public Property (UBP) 148,534 

- 

- 

(5,613) 

(1) 

- 

142,920 

Concession right - Other 845,750 

- 

- 

(58,176) 

- 

(29) 787,545 

Intangible in progress 242,079 

385,296 

(317,800) 

- 

(1,624) 

(1,453) 306,498 

Goodwill 42,293 

- 

- 

- 

- 

- 

42,293 

Total Intangible 

Total Intangible 

2,994,969 

387,775 

(81,779) (252,733) 

(31,420) 

9,900 3,026,712 

Reclassifications amounting to R$9,900 of the chart above are impacted by the transfer of intangible assets as a contra entry to indemnifiable financial assets, in accordance with 

ICPC01, in the amount of R$14,277, and refunding referring to the assets acquisition of SPE Couto Magalhães, in the amount of R$900, totaling a credit of R$3,477, which was 

transferred from intangible assets to tangible assets. 

The Company evaluated the recovery of the carrying amount of goodwill and intangible assets with indefinite useful lives based on their value in use, at the discounted cash flow model 

using the individual cash generating unit, which represents total tangible and intangible assets. 

The recoverable amount of subsidiaries' goodwill is evaluated on an annual basis, regardless of impairment indicators. Possible impairment losses are recognized in income. The 

recoverable amount is determined based on the assets value in use and are calculated using evaluation methodologies, backed by discounted cash flow techniques, considering market 

conditions, time value, and business risks. 

A set of premises was defined to determine the recoverable amount of the main investments: 

Cash generating units: Bandeirante, Escelsa, Energest, Enertrade, Enerpeixe, Lajeado and Investco. 

Basis to determine recoverable amount: value in use - equity value; 

Determination of cash flows: Production and consumption volume and estimated tariffs and residual value at the end of the concession; 

Cash flow period: until the end of the concession; 

Cash flow growth rate: Generation - price evolution; Distribution - 4.2% to 4.5%; 

Discount rate used (net of taxes): average remuneration of investment rate - Generation 8.1%, Distribution 9.2% and Commercialization 9.4%. 

The Company's and its subsidiaries' recovery test of goodwill and intangible assets with indefinite useful lives did not result in the recognition of losses in intangible assets. 

F-104 

42,293 

42,293 

3,026,712 

42,293 

42,293 

2,994,969

19.1 

19.2 

Concession right - Other 

Bandeirante 


Enerpeixe 


Pantanal 


Investco 

Total 

Capitalization of debt charges 

20 Suppliers 

Cost Amortization Total Cost Amortization Total 

38,143 (12,269) 25,874 38,143 (12,269) 25,874 

244,620 (20,793) 223,827 538,082 (31,027) 507,055 

3,837 (838) 2,999 3,837 (838) 2,999 

3,590 3,590 3,590 3,590 

13,373 (3,491) 9,882 13,373 (3,491) 9,882 

- 256,408 (28,422) 227,986 

- 11,230 (1,071) 10,159 

303,563 (37,391) 266,172 864,663 (77,118) 787,545 

Subsidiaries Bandeirante and Escelsa capitalized financial charges amounting to R$29,558, retroactive to January1, 2009, and R$16,231 was recorded in shareholders' equity under 

Retained earnings in 2009 and R$13,327 was recorded as Financial expenses in 2010. The annual average capitalization rate for the charges was 9.81%. 

Note 

Noncurrent 

12/31/2010 12/31/2009 12/31/2010 12/31/2009 12/31/2010 

Supply of electric energy 0.00 0.00 264,695 

236,391 

0.00 

Free energy 20.1 0.00 0.00 52,798 

37,416 

0.00 

CCCE (short term electric energy purchase) 0.00 0.00 21,250 

2,690 

0.00 

Electric power network use charges 0.00 0.00 59,160 

55,871 

0.00 

Charges for services systems 0.00 0.00 9,546 

587 

0.00 

Materials and services 3,370 

10,416 

218,932 

175,101 

915 

Total 3,370 

10,416 

626,381 

508,056 

915 

20.1 Free energy 

The Brazilian Electricity Regulatory Agency (ANEEL), by means of Regulatory Resolution No. 387 of December 15, 2009, changed the method for amortizing the balances of Loss of 

Revenue and Free Energy, in effect since January 2002 and limited to period established in ANEEL Resolution No. 1 of January 12, 2004. 

21 Debentures 

Issuer 

Issuance Settlement Frequency Series 

Quantity of 

securities 

Remuneration Amount 

Bandeirante 

3/1/2006 3/1/2011 3rd Single 25,000 104.4% of CDI 

100% of the CDI + 

250,000 

Bandeirante 1/7/2010 6/30/2016 4th Single 39,000 1.5% 390,000 

Escelsa 6/1/2006 6/1/2011 1st Single 26,400 104.4% of CDI 264,000 

Escelsa 7/2/2007 7/2/2014 2nd Single 25,000 105.0% of CDI 250,000 

Investco 11/1/2001 11/1/2011 1st Single 25,000 10.50% of the IGPM 264,791 

21.1 Issuer Bandeirante 

12/31/2010 

Consolidated 


Current 

Current 

The payment by the Company is currently suspended by a determination by the Regional Federal Court of the First Region until a petition for a preliminary order included in the records 

of the injunction No. 91.2010.4.01.3400, sought by the Brazilian Association of Electric Energy Distribution Companies (ABRADEE) is examined by the judge of the 15th Federal Court in 

the Federal District. 

Liabilities are being monthly adjusted to inflation at the SELIC rate variation, and R$15,381 was recorded as a contra entry to financial expenses. The balance on December 31, 2010 is 

R$52,798 (R$37,416 in 2009). 

Date 


ANEEL Dispatch No. 2517 of August 26, 2010 disclosed the amount to be settled between generation and distribution agents by September 30, 2010, with restatement by the monthly 

Selic Rate. 

Characteristics of the issuances 

3rd debentures issuing 

On March 1, 2006 the third debentures issuing was promoted. Those debentures are simple, book-entry nominative type, in a single series, for public subscription, with no guarantees 

(unsecured), non-convertible, with no roll-over clause option. 

The debentures issued totaled 25 thousand, with a nominal unit value is R$ 10,000.00, integrally subscripted in a total amount of R$250,000, effective for 5 (five) years, semi-annual 

payments of interest and a grace period of 3 (three) years for the amortization of principal. Final maturity date is on March 1, 2011, being the first amortization, of 1/3, on March 1, 2009, 

the second amortization, of 1/3, on March 1, 2010 and the third, of 1/3, on March 1, 2011. The issuing was concluded on April 7, 2006. 

As remuneration on the par value of the debentures, compensation interest will be levied and will correspond to 104.4% of the accumulation of the daily average rates of the overnight 

Interbank Deposits - DIs, "over extra group", expressed in the form of a percentage per year, base 252 business days, calculated and divulged on a daily basis by the Clearing House for 

the Custody and Financial Settlement of Securities - CETIP (DI rates) calculated exponentially and cumulatively pro rata by business days lapsed. The remuneration corresponding to 

the capitalization periods will be due and paid semi-annually, with the first maturity on September 1, 2006 and the last on March 1, 2011. 




(ii) non-compliance by the issuer with the Covenants (Gross debt in relation to EBITDA and EBITDA of the period (+) cash in the beginning of the period (+) credit lines contracted but not 

utilized at the end of the period (+) increase in the debt amount which has been released during the period in relation to gross financing expenses of the period (+) debt amount settled/to 

be settled during the period (-) financing income related to monetary restatement and monetary increase of the energy sold during the period (-) financing income related to hedge and 

swap operations of the period, which have been complied with to date); 

F-105


(vi) petition for self-bankruptcy on the part of the issuer; 


(vi) if the issuer proposes an extra-judicial recovery plan to any creditor or creditor class, irrespective of having been requested or judicial ratification obtained; or if the issuer files a 

request for judicial recovery irrespective of the approval of the recovery processing or its concession by the appropriate judge; and 


On December 31, 2010 the Company is in full compliance with all the restrictive clauses of the Covenants provided in the debenture contracts. 

4th debentures issuing 

On July 1, 2010 the forth debentures issuing was promoted. Those debentures are simple, book-entry nominative type, in a single series, for public subscription, subordinated type, nonconvertible, 

with no roll-over clause option. 

The debentures issued totaled 39 thousand, with a nominal unit value is R$ 10,000.00, integrally subscripted in a total amount of R$390,000, effective for 6 (six) years, semi-annual 

payments of interest and a grace period of 4 (four) years for the amortization of principal. Final maturity date is on July 1, 2016, being the first amortization on July 1, 2014. 

As remuneration on debentures' nominal value, compensatory interest is calculated based on the accumulated variation of average daily rates for DIs - overnight deposits in unrelated 

financial institutions as calculated and disclosed by CETIP ("interbank deposit rate"), with the addition of a 1.50% (one and a half percent) spread or surtax per year, based on 252 

business days (“Addition to the interbank deposit rate"), as described in the Bookbuilding Procedure, calculated on the Nominal Unit Value and immediately after the first debenture 

amortization date, on the Nominal Unit Value Balance, and paid at the end of each capitalization period, under the formula established in the Debenture Deed. The Remuneration 

payment will be made semiannually after the issue date, and thus the first payment will be due January 1, 2011 and the other payments on the first day of January and July every year 

until the maturity date. 



(i) non-compliance by the Issuer with any monetary obligation in the Indenture, except those provided for in items “a” to “g” of subitem “Accelerated Maturity Assumptions” of item 

“Accelerated Maturity” above, not remedied in 30 (thirty) business days as from the date of non-performance; 

(ii) accelerated maturity or payment default of any monetary obligation the issuer may be subject to, either in the local or the international market, in a unit amount or accumulated 

amount exceeding forty million Brazilian reais (R$40,000,000.00) that may be proven to impair the faithful fulfillment of obligations assumed by the Company in the Debenture Deed; 

(iii) spin-off, merger, takeover, or any relevant form of corporate reorganization entailing a transfer of the Issuer's share control, as defined in article 116 of Corporate Law, except (i) if 

said transfer is to another company of the same economic group as the Issuer; or (ii) a prior consent has been obtained from debenture holders holding at least two thirds (2/3) of the 

debentures outstanding or (iii) in the cases of spin-off, merger or acquisition there is assurance of the right foreseen in Law No. 6404/76, article 231, paragraph 1; 

(iv) distribution of dividends above the mandatory minimum, whenever the Issuer is in default of any monetary obligation foreseen in the Debenture Deed, the Distribution Agreement 

and/or the other Offering documents; and 

(v) the Issuer's failure to maintain a Gross Debt/EBITDA financial ratio of no more than 3.5 on the calculation dates, which shall be June 30 and December 31 of each year. 

F-106

21.2 Issuer Escelsa 

1st debentures issuing 

On June 1, 2006 the first debentures issuing was promoted. Those debentures are simple, book-entry nominative type, in a single series, for public subscription, with no guarantees 

(unsecured), non-convertible, with no roll-over clause option. 

The debentures issued totaled 26,400, with a nominal unit value is R$ 10,000.00, integrally subscripted in a total amount of R$264,000, effective for 5 (five) years, semi-annual 

payments of interest and a grace period of 3 (three) years for the amortization of principal. Final maturity date is on June 1, 2011, being the first amortization, of 1/3, on June 1, 2009, the 

second amortization, of 1/3, on June 1, 2010 and the third, of 1/3, on June 1, 2011. The issuing was concluded on July 5, 2006. 




the capitalization periods will be due and paid semi-annually, with the first maturity on November 2, 2006 and the last on June 1, 2011. 

The resources were aimed at the extension of the debt, reduction of financial costs, diversification of the financing sources, investments for 2006 and cash adjustment for working 

capital. 



(ii) non-compliance by the issuer with the Covenants (Gross debt in relation to EBITDA and EBITDA of the period (+) cash in the beginning of the period (+) credit lines contracted but not 

utilized at the end of the period (+) increase in the debt amount which has been released during the period in relation to gross financing expenses of the period (+) debt amount settled/to 

be settled during the period (-) financing income related to monetary restatement and monetary increase of the energy sold during the period (-) financing income related to hedge and 

swap operations of the period, which have been complied with to date); 


(iv) self-bankruptcy on the part of the Issuer; 


(vi) if the issuer proposes an extra-judicial recovery plan to any creditor or creditor class, irrespective of having been requested or judicial ratification obtained; or if the issuer files a 

request for judicial recovery irrespective of the approval of the recovery processing or its concession by the appropriate judge; and 


2nd debentures issuing 

On July 2, 2007 the second debentures issuing was promoted. Those debentures are simple, book-entry nominative type, in a single series, for public subscription, subordinated type, 

non-convertible. The debentures of this issue are not subject to scheduled repricing. 

The debentures issued totaled 25,000, with a nominal unit value is R$ 10,000.00, integrally subscripted in a total amount of R$250,000, effective for 7 (seven) years, semi-annual 

payments of interest and a grace period of 5 (five) years for the amortization of principal. Final maturity date is on July 2, 2014, being the first amortization of 1/3 on July 2, 2012, the 

second amortization of 1/3 on July 2, 2013 and the third, of 1/3 on July 2, 2014. The issuing was concluded on July 10, 2007. 




the capitalization periods will be due and paid semi-annually, with the first maturity on January 2, 2008 and the last on July 2, 2014. 

The funds obtained in the distribution were set aside in full for the payment of Senior Notes issued by the issuer on July 15, 1997, with final maturity on July 15, 2007. 

The contract contains clauses establishing termination in the same situations already described above for the first issue. 

21.3 Issuer - Investco 

In October 2001, Brazilian Securities Commission - CVM registered the first issue of 25,000 non-convertible debentures at a nominal unit value of R$10,000.00 with a maturity of 120 

months as from the issuing date (November 1st, 2001), restated as from the issuing date at the IGP-M. The annual pre-fixed rate of remuneration is 12.8% p.a, applied on the 

outstanding balance of the restated nominal unit value. These funds were invested in fixed assets and working capital for completing the construction of the UHE Luís Eduardo 

Magalhães - UHE Lajeado. 

The renegotiation conditions will be communicated by Investco and must be disclosed in the form of notices, in a newspaper of widespread circulation in the period of up to ten (10) 

business days prior to the conclusion of each Remuneration Validity Period, and must contain terms and conditions of the next remuneration period. 

If the debenture holders do not agree with the established conditions or if publication does not occur in conformity with the contract, the debenture holders may exercise the right to sell 

their debentures to Investco without prejudice of the possibility of accelerated maturity requirement. Investco agrees to acquire the debentures at their restated unit value, plus 

remuneration calculated pro rata defined for the overdue period when necessary. 

The 4th Addendum to the Indenture of these debentures was prepared on October 31, 2006, contemplating the amendment of item 4.5.1 of Clause IV of the Indenture, deciding on the 

use of the IGP-M - General Market Price Index for the restatement of the debentures that will be entitled to the payment of remunerative interest prefixed at the rate of 10.5% per annum, 

to take effect in the validity period of the remuneration, as from November 1, 2006. 

These debentures carried a joint guarantee from EEVP - Empresa de Eletricidade Vale Paranapanema S.A. and EDP - Energias de Portugal. The 5th Addendum to the Indenture of 

these debentures was prepared in November 2009, releasing the intervening guarantor Empresa de Eletricidade Vale Paranapanema S.A., with EDP - Energias de Portugal thus 

remaining as sole guarantor of the debentures. 

The contract contains clauses establishing accelerated maturity in the following conditions: 

a) Non-payment of the principal or interest due on account of the debentures on the respective maturity and/or amortization dates; 

b) legitimate and repeated protest against the Issuer, the defaulted value added of which is higher than R$5,000, unless the protest has been executed due to an error or mala fide of a 

third party, provided that it is validly proven by the Issuer, or if it is cancelled or if guarantees are provided in court, in any case, within the maximum period of three business days after its 

occurrence; 

c) filing for preventative composition with creditors formulated by the Issuer or by any one of the Intervenors (including any equivalent proceeding existing in accordance with the 

Portuguese legislation, with respect to EDP); 

d) dissolution or adjudication of bankruptcy of the Issuer, or by any one of the Intervenors (including any equivalent proceeding existing in accordance with the Portuguese legislation, 

with respect to EDP); 

e) non-performance by the Issuer or by the Intervenors of any obligation provided for in the Indenture, not remedied in thirty days after written notice sent by the Fiduciary Agent, with the 

exception of non-payment of principal, interest and/or any other amount due under the terms of the indenture; 

F-107

21.4 

f) accelerated maturity of any debt of the Issuer or of its subsidiaries in an amount above R$5,000; 

g) statutory change of the Issuer, as well as corporate reorganization involving the Issuer and/or its assets that might, in any way, directly or indirectly affect the full performance of the 

obligations of the Issuer established in the indenture; 

h) start of enforcement of guarantee provided by the Issuer in favor of third parties, in an amount above R$5,000, unless the enforcement has been proposed by proven error or mala 

fide, or if it is suspended or annulled in up to ten business days after the service of process against the Issuer; 

i) alteration of the controlling interest of the Issuer, unless: (i) against authorization from debenture holders representing two thirds of the debentures outstanding, assembled at a 

Meeting of debenture holders especially convened by the Issuer for this purpose;(ii) there is no modification or alteration of the obligations of the Intervenors, under the terms of clause 

VII- Surety. In case of approval by the debenture holders, the Issuer shall redeem within ten business days after the date of the Meeting of debenture holders, the debentures of the 

debenture holders that did not agree with the alteration of the controlling interest of the Issuer, at their par value plus the remuneration calculated pro rata. For the intents and purposes 

of this sub-item, a "Change of Controlling Interest", will occur if the Intervenors, individually or jointly, cease their direct or indirect ownership of at least 51% of the voting capital of the 

Issuer; and 

j) the concession contract of the Issuer is revoked, suspended, dissolved, terminated or loses its effectiveness and validity, except when replaced by another grant document under the 

terms of the legislation in force. 

On December 31, 2010, the subsidiaries are in full compliance with all the restrictive clauses of the covenants provided in the debenture contracts. 

21.5 Changes in debentures for the year are shown as follow: 

Current 

Net amount at Net amount at 

12/31/2009 Entries 

Debentures 210,029 

210,029 

Noncurrent 


453,155 

Principal 

payments 

0.00 (208,671) 

- (208,671) 

387,186 

387,186 

21.6 Maturity of non-current installments: 

Year 

2012 

2013 

2014 

2015 

2016 

Total 

Amount 

83,098 

83,189 

160,698 

155,197 

155,411 

637,593 

Payments of interest Interest provided Transfers Transaction costs 

(56,935) 

(56,935) 

77,358 

77,358 

202,801 

202,801 

0.00 0.00 0.00 (202,801) 

- - - (202,801) 

F-108 

1,012 

1,012 

(274) 

(274) 

Monetary and 

exchange variation 

6,136 

6,136 

327 

327 

12/31/2010 

231,730 

231,730 

637,593 

637,593

22 Loans, financing and debt charges 

Consolidated 

12/31/2010 12/31/2009 

Charges Principal 

Charges Principal 

Company debt cost 

Current Noncurrent Current Noncurrent Current Noncurrent Current Noncurrent 

Foreign currency - 

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 

IDB - Banco Interamericano 

de Desenvolvimento Bandeirante 

Libor + 4.375%p.a. + exchange 

variation 

84 

0.00 10,801 

2,711 

154 

0.00 11,287 14,120 

Amortization of transaction 

cost 

Bandeirante 

Libor + 4.375%p.a. + exchange 

variation 

0.00 0.00 (1,438) 

(240) 

0.00 0.00 (1,438) (1,678) 

Banco Santander Brasil S.A Energest 4.81% +exchange variation 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 

BNDES Energest UMBNDES + 3.50% p.a. 0.00 0.00 0.00 0.00 2 

0.00 292 

0.00 

Banco Santander Brasil S.A Cesa 4.81% +exchange variation 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 

BNDES Cesa UMBNDES + 4.50% p.a. 2 

0.00 299 

174 

2 

0.00 311 

493 

BNDES Pantanal UMBNDES + 4.50% p.a. 2 

0.00 270 

158 

3 

0.00 281 

445 

BID - Banco Interamericano 

Libor + 3%p.a. to 3.50% p.a. 1,213 

0.00 0.00 258,917 

1,063 

0.00 0.00 213,204 

de Desenvolvimento 


Fund raising cost Porto do Pecém - 

0.00 0.00 0.00 (7,294) 

0.00 0.00 0.00 0.00 

- 

1,301 - 9,932 254,426 1,224 - 10,733 226,584 

Local currency - 

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 

Eletrobrás Bandeirante 5% p.a. + 1% to 1.5% p.a. (mgt. fee) 0.00 0.00 4,775 

17,252 

0.00 0.00 2,571 12,327 

Bank credit bill Bandeirante 105% of CDI 492 

0.00 20,400 

40,800 

482 

0.00 20,400 61,200 

Interest on reversal fund Bandeirante 5% p.a. 0.00 0.00 0.00 0.00 73 

0.00 0.00 0.00 

BNDES FINAME Bandeirante from 4% p.a. to 5% p.a. above TJLP 0.00 0.00 0.00 0.00 5 

0.00 1,015 

0.00 

BNDES - Banco do Brasil Bandeirante 3.3% p.a. above TJLP 82 

0.00 5,937 

14,842 

106 

0.00 5,936 20,778 

BNDES - Banco Santander Bandeirante 3.3% p.a. above TJLP 

From 2.32% to 4.5% p.a. above 

82 

0.00 5,937 

14,842 

106 

0.00 5,937 20,778 

BNDES - BB/CALC Bandeirante TJLP 

from 2.32% to 3.32% p.a. above 

725 

0.00 8,396 

77,968 

170 

0.00 0.00 86,364 

BNDES - BB/CALC Escelsa TJLP and 4.5% p.a. fixedo 

937 

0.00 10,090 

93,700 

199 

0.00 0.00 103,790 

HSBC - Promissory notes Bandeirante CDI + 1.3% p.a. 0.00 0.00 0.00 0.00 13,178 

0.00 230,000 

0.00 

(-) BNDES -CALC - 


Escelsa 

- 

0.00 0.00 (44) 

(112) 

0.00 0.00 (29) 

(183) 

Eletrobrás Escelsa 5%p.a.+1 %p.a.(mgt. fee) 0.00 0.00 10,800 

88,286 

110 

0.00 11,242 96,112 

Bank credit bill Escelsa 105% of CDI 1,390 

0.00 8,080 

24,240 

1,402 

0.00 8,080 32,320 

Commercial credit note Escelsa 100% of CDI 372 

6,621 

7,000 

124,500 

0.00 0.00 0.00 0.00 

(-) Commercial credit note - 

- 

0.00 0.00 (437) 

(1,323) 

0.00 0.00 0.00 0.00 


Escelsa 

BNDES Escelsa 4.8% p.a. above TJLP 0.00 0.00 0.00 0.00 21 

0.00 3,280 

0.00 

BNDES - Banco do Brasil Escelsa 3.3% p.a. above TJLP 77 

0.00 5,545 

13,862 

99 

0.00 5,545 19,407 

BNDES - Banco Santander Escelsa 3.3% p.a. above TJLP 77 

0.00 5,545 

13,862 

99 

0.00 5,545 19,407 

Bank credit bill Energest 106.6% of CDI 1,904 

0.00 10,666 

37,333 

1,552 

0.00 0.00 48,000 

BNDES Energest 3.50% p.a. above TJLP 0.00 0.00 0.00 0.00 30 

0.00 3,294 

0.00 

Santander - CDI Energest 113.50% of CDI 1,982 

0.00 21,355 

0.00 669 

0.00 21,354 

0.00 

BNDES CESA 4.50% p.a. above TJLP 80 

0.00 6,692 

18,156 

47 

0.00 4,189 

6,284 

Santander - CDI CESA 113.50% of CDI 1,101 

0.00 11,864 

0.00 371 

0.00 11,864 

0.00 

BNDES Pantanal 4.50% p.a. above TJLP 25 

0.00 3,788 

1,893 

42 

0.00 3,788 

5,681 

Eletrobrás Costa Rica 5.00% + 1.50% p.a. (mgt. fee) 0.00 0.00 584 

1,129 

0.00 0.00 535 

1,641 

BNDES Enerpeixe 4.5% p.a. above TJLP 1,276 

0.00 56,454 

230,518 

1,528 

0.00 56,454 286,971 

Banco Itau Enerpeixe 4.5% p.a. above TJLP 389 

0.00 17,220 

70,316 

466 

0.00 17,220 87,536 

Bradesco Enerpeixe 4.5% p.a. above TJLP 325 

0.00 14,350 

58,596 

388 

0.00 14,350 72,947 

Unibanco Enerpeixe 4.5% p.a. above TJLP 260 

0.00 11,480 

46,877 

311 

0.00 11,480 58,357 

Banco do Brasil Enerpeixe 4.5% p.a. above TJLP 324 

0.00 14,350 

58,595 

388 

0.00 14,350 72,945 

BNDES Porto do Pecém 2.77% p.a. above TJLP 0.00 2,105 

0.00 581,081 

0.00 1,329 

0.00 346,810 

Fund raising cost Porto do Pecém - 

0.00 0.00 0.00 (13,987) 

0.00 0.00 0.00 0.00 

BNDES - Banco do Brasil Santa Fé 1.90% p.a. above TJLP 253 

0.00 5,679 

69,091 

634 

0.00 4,032 62,380 

Cumulative receivable shares Investco 3.0% p.a. 0.00 0.00 4,014 

76,861 

0.00 0.00 0.00 83,567 

Bank credit bill Investco 106% of CDI 9 

0.00 10,000 

0.00 0.00 0.00 0.00 0.00 

Banco da Amazônia Investco 11.5% p.a 4 

0.00 637 

0.00 247 

0.00 7,632 

636 

BNDES Investco 4.00% p.a. above TJLP 390 

0.00 51,082 

18,654 

575 

0.00 46,745 67,643 

Leasing - Safra S.A. Investco CDI + 1.45% p.a. 0.00 0.00 17 

0.00 0.00 0.00 69 

17 

- 

12,556 8,726 332,256 1,777,832 23,298 1,329 516,878 1,673,715 

Result of the Swaps 

- 

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 

BID - Banco Interamericano 

0.00 0.00 

de Desenvolvimento Bandeirante from 97.94% to 118.94% of CDI 

10,946 

2,345 

0.00 0.00 10,610 10,994 

Citibank Porto do Pecém USD 1.8138 0.00 0.00 8,350 

97,523 

0.00 0.00 8,383 44,703 

Pactual Porto do Pecém 

EUR/USD 1.4040; EUR/R$ 2.73; 

USD/R$ 1.9678 

0.00 0.00 

360 

30 

0.00 0.00 

1,536 

116 

- 

- - 19,656 99,898 - - 20,529 55,813 

Total - 

13,857 

8,726 

361,844 

2,132,156 

24,522 

1,329 548,140 1,956,112 

22.1 Additional information on debt service of Bandeirante 

IDB - Interamerican Development Bank – External loan contract with the participation of Brazilian, Portuguese and Spanish banks, signed on March 5, 2004, amounting to US$100 

million, drawn during the fiscal year 2004 with a two years' grace period before amortizations of principal and with final maturity in up to 8 years, being: 

(i)Tranche “A” - US$38.9 million, with principal due quarterly from May 15, 2006 to February 15, 2012, remunerated at interest calculated at annual Libor plus 4.38% annually, maturing 

quarterly as from May 15, 2004; and 

(ii)Tranche “B” - US$61.1 million with principal due quarterly from May 15, 2006 to February 15, 2009, remunerated at interest calculated at annual Libor plus 4%p.a., maturing quarterly 

as from May 15, 2004. Transaction settled on February 15, 2009. 

This financing is allocated to investment projects and is guaranteed by the Company’s electricity supply receivables, with the establishment of covenants (total debt in relation to total 

debt plus shareholders’ equity, total debt in relation to EBITDA and debt service coverage index, among other non-financial covenants), fully complied with to the present time. Eventual 

non-compliance may result in anticipation of settlement of the contract, either partially or in full. 

Exchange swap operations with hedge characteristic were executed for this loan with Banco JP Morgan S.A., on March 15, 2004 and Banco Citibank S.A., on November 13, 2003, for 

exchange of original charges of the financing at BID, for remuneration based on the interval of 98% to 109.7% of the CDI and 97.94% to 118.94% of the CDI, respectively, maturing on 

the same dates of the financing agreement. This financial operation is valued at fair value, as described in Note 35 (Financial instruments). 

F-109

Eletrobrás 

Reluz Program 

(i) Contract ECF-2617/07 executed on April 9, 2007. Line of credit amounting to R$ 608, in the form of finance. Funds released in the amount of R$61 and R$547, on June 11, 2007 and 

August 29, 2007, respectively. The restated debt balance carried an interest rate of 5% annually and a management fee of 1.5% annually, both maturing monthly as from July 30, 2007. 

The outstanding debt balance shall be paid in 60 equal monthly and consecutive installments, the first maturing on May 30, 2008 and the last one on April 30, 2013. The loan is 

guaranteed by promissory notes and an assignment on company revenues. 

(ii) Contract ECF-2656/07 executed on December 12, 2007. Line of credit amounting to R$ 3,911, in the form of finance. Funds released in the amount of R$391 and R$3,203, on June 

18, 2008 and February 17, 2009, respectively. The debt balance carries an interest rate of 5% annually, which was capitalized up to February 28, 2009 at a rate of 1.5% annually and a 

management fee of 1.5% annually, paid monthly. The outstanding debt balance shall be paid in 60 equal monthly and consecutive installments, the first maturing on March 30, 2009 and 

the last one on February 28, 2014. On the non-disbursed balance there is a credit reserve commission of 1% p.a., maturing on the 30th of each month, up to the termination of the 

credit. The loan is guaranteed by promissory notes and an assignment on company revenues. 

(iii) Contract ECF-2657/07 executed on December 12, 2007. Line of credit amounting to R$ 10,036, in the form of finance. Funds released in the amount of R$1,004 and R$8,915, on 

February 17, 2009 and April 16, 2010, respectively. The debt balance carries an interest rate of 5% annually, which was capitalized up to April 30, 2010 and a management fee of 1.5% 

annually, paid monthly. The outstanding debt balance shall be paid in 60 equal monthly and consecutive installments, the first maturing on May 30, 2010 and the last one on April 30, 

2015. On the non-disbursed balance there is a credit reserve commission of 1% p.a., maturing on the 30th of each month, up to the termination of the credit. The loan is guaranteed by 

promissory notes and an assignment on company revenues. 

(iv) Contract ECF-2658/07 executed on December 12, 2007. Line of credit amounting to R$ 2,946, in the form of finance. Funds released in the amount of R$295 and R$2,154, on June 

18, 2008 and February 17, 2009, respectively. The debt balance carries an interest rate of 5% annually, which was capitalized up to February 28, 2009 at a rate of 1.5% annually and a 

management fee of 1.5% annually, paid monthly. The outstanding debt balance shall be paid in 60 equal monthly and consecutive installments, the first maturing on March 30, 2009 and 

the last one on February 28, 2014. On the non-disbursed balance there is a credit reserve commission of 1% p.a., maturing on the 30th of each month, up to the termination of the 

credit. The loan is guaranteed by promissory notes and an assignment on company revenues. 


(i) 1st stage - Contract ECFS-019/04 - Line of credit amounting to R$ 11,523, as financing (RGR) and R$1,773 in the form of a subsidy. Contract signed on May 28, 2004, whereas 

funds in the amount of R$1,152 were released in 2004, R$2,305 in 2005, R$ 3,623 in 2006, R$ 2,262 in 2010, totaling R$ 9,342 and were released in the form of a subsidy in the 

amount of R$ 177 in 2004, R$ 355 in 2005, R$ 557 in 2006, totaling R$ 1,089. The principal amount carries an interest rate of 5% annually and a management fee of 1% annually, both 

maturing monthly as from July 30, 2004. The outstanding debt balance shall be paid in 120 equal monthly and consecutive installments, the first maturing on August 30, 2006 and the 

last one on July 30, 2016. On the non-disbursed balance there is a credit reserve commission of 1% p.a., maturing on the 30th of each month, up to the termination of the credit. The 

loan is guaranteed by promissory notes and an assignment on company revenues. 

(ii) 2nd stage - Contract ECFS 184/07 - Facility in the amount of R$12,359, as financing (RGR), there are no amounts in the form of a subsidy. Contract signed on June 25, 2007. 

Resources released in the amount of R$3,708 in 2007. The principal amount carries an interest rate of 5% annually and a management fee of 1% annually, both maturing monthly as 

from October 30, 2007. The outstanding debt balance shall be paid in 120 equal monthly and consecutive installments, the first maturing on November 30, 2009 and the last one on 

October 30, 2019. On the non-disbursed balance there is a credit reserve commission of 1% p.a., maturing on the 30th of each month, up to the termination of the credit. The loan is 


Bank Credit Certificates – Agreements signed on December 5, 2006 worth a total of R$102,000, being R$ 51,000 signed with the Banco do Brasil S.A. and R$ 51,000 with Banco 

Santander Banespa S.A. The principal value of the loan carries an interest rate of 105% of CDI, capitalized daily. Principal payable in five annual installments, the first due on December 

5, 2009 and the last on December 5, 2013 with semi-annual payments of interest as from June 5, 2007 to December 5, 2013. This operation carries a covenant of gross debt/ EBITDA 

at a ratio not exceeding 3.5. The company is in compliance to the present time. Contractual conditions are identical in the case of both institutions. 

F-110

22.2 

BNDES agreement n°. 88,425 / Agent Banco do Brasil - Signed in December 2007, for the deployment of an Investment Program from May 2006 to December 2007, being the first 

release in February 2008, in the amount of R$16,146 and the second release on May 2008, in the amount o R$19,367, with funds from BNDES (Finem/Finame) through Banco do 

Brasil, amortizable in 72 monthly installments, with the first falling due on July 15, 2008 and the last one on June 15, 2014 with interest of 3.3% per annum, indexed to TJLP. Guarantee, 

assignment of revenues equivalent to 130% of the amount of the highest financing installment. This operation establishes covenant of the Gross Financial Debt / EBITDA relation, at a 

rate no higher than 3.5, fulfilled up to now. 

BNDES agreement n°. 88,425 / Agent Banco Santander - Signed in December 2007, for the deployment of an Investment Program from May 2006 to December 2007, being the first 

release in February 2008, in the amount of R$16,146 and the second release on May 2008, in the amount o R$19,367, with funds from BNDES (Finem/Finame) through Banco 

Santander, amortizable in 72 monthly installments, with the first falling due on July 15, 2008 and the last one on June 15, 2014 with interest of 3.3% per annum, indexed to TJLP. 

Guarantee, assignment of revenues equivalent to 130% of the amount of the highest financing installment. This operation establishes covenant of the Gross Financial Debt / EBITDA 

relation, at a rate no higher than 3.5, fulfilled up to now. 

BNDES BB/CALC - Opening of revolving credit in the Credit Limit Opening Contract ("CALC") category was approved in December 2008, in the amount of R$153,283, for deployment 

of the 2008 to 2010 Program of Investments in expansion, modernization and improvements in the electric energy distribution system. The funds approved are available for draft for a 

period of 60 months. It is a type of direct financing (without the intervention of a financial agent), created by the BNDES in 2005, aimed to simplify the procedures of access to facilities for 

large groups that represent low credit risk and favorable operating history with BNDES. The first release to Company of R$86,364 was made on December 23, 2009, and may be 

amortized in 72 months with grace period up to May 15, 2011. The first installment matures on June 15, 2011 and the last installment on May 15, 2017, with interest ranging from 2.32% 

to 3.32% per year above the TJLP and interest rate of 4.50% per year, payable as of February 17, 2010 on a quarterly basis during the grace period and on a monthly basis after the 

grace period. Guarantee, assignment of revenues equivalent to 130% of the amount of the highest financing installment. 

HSBC - Promissory Notes - On May 7, 2009, the Board of Directors of Bandeirante approved the contracting of a short-term facility, materialized by the issuance of a Promissory Note. 

The promissory notes were issued in certificated form and will be deposited at Banco Bradesco S/A. The remuneration corresponds to the accumulated variation of the average daily 

rates of the overnight interbank deposits (DI), calculated and published daily by CETIP, capitalized from a spread corresponding to 1.30% per annum. The value of each Note 

corresponds to R$1,000, and 230 notes were issued in the total amount of R$230,000. The remuneration plus the amount of principal was settled on May 31, 2010 in a single 

installment. 

Additional information on debt service of Escelsa 

BNDES 

(i) Agreement signed in August 2006 with onlending of funds through Banco Alfa for the investment program in substations and electricity transmission and distribution. In fiscal year 

2006, funds amounting to R$17,320 were obtained. The principal amount carries an annual interest rate of 4.8% + TJLP (the long term interest rate), payable monthly as from October 

15, 2006, jointly with principal payments and a final maturity on September 15, 2010. The agreed guarantee represents a percentage of the monthly receivables from power services 

corresponding to the minimum amount of 130% of the principal installments and debt charges. The remuneration plus the amount of principal was settled on September 15, 2010. 

(ii) BNDES agreement n°. 88,426 / Agent Banco do Brasil - Signed in December 2007, loan intended for the deployment of a Program for Investments in expansion, modernization and 

improvement of the performance of the electricity distribution network, being the first release of money in January 2008, in the amount of R$27,054, and the second release in May 

2008, in the amount of R$6,106, with funds from BNDES (Finem/Finame) through Banco do Brasil, amortizable in 72 monthly installments, with the first falling due on July 15, 2008 and 

the last on June 15, 2014 and interest of 3.3% per annum, indexed to TJLP. Guarantee, assignment of revenues equivalent to 130% of the amount of the highest financing installment. 

This operation carries a covenant of gross debt/EBITDA at a ratio not exceeding 3.5. The company is in compliance to the present time. 

(iii) BNDES agreement n°. 88,426 / Agent Banco Santander - Sig ned in December 2007, loan intended for the deployment of a Program for Investments in expansion, modernization 

and improvement of the performance of the electricity distribution network, beiing the first release of money in January 2008, in the amount of R$27,054, and the second release in May 

2008, in the amount of R$6,106, with funds from BNDES (Finem/Finame) through Banco Santander, amortizable in 72 monthly installments, with the first falling due on July 15, 2008 and 

the last on June 15, 2014 and interest of 3.3% per annum, indexed to TJLP. Guarantee, assignment of revenues equivalent to 130% of the amount of the highest financing installment. 

This operation carries a covenant of gross debt/EBITDA at a ratio not exceeding 3.5. The company is in compliance to the present time. 

(iv) BNDES /CALC - Opening of revolving credit in the Credit Limit Opening Contract ("CALC") category was approved in December 2008, in the amount of R$164,091, for deployment 

of the 2008 to 2010 Program of Investments in expansion, modernization and improvements in the electric energy distribution system. The funds approved are available for draft for a 

period of 60 months. It is a type of direct financing (without the intervention of a financial agent), created by the BNDES in 2005, aimed to simplify the procedures of access to facilities for 

large groups that represent low credit risk and favorable operating history with BNDES. The 1st release to Escelsa of R$ 103.8 million took place on December 23, 2009 amortizable in 

72 months and with a grace period up to May 15, 2011, with the first installment falling due on June 15, 2011 and the last on May 15, 2017, with interest ranging between 2.32% and 

3.32% per annum above the TJLP, and fixed interest of 4.50% per annum, falling due as of February 17 , 2010, quarterly during the grace period and monthly after this period. 

Guarantee, assignment of revenues equivalent to 130% of the amount of the highest financing installment. 

Bank Credit Certificates – Agreements signed in February 2007 worth a total of R$40,400, being R$ 20,200 signed with the Banco do Brasil S.A. and R$ 20,200 with Banco Santander 

S.A. The principal value of the loan carries an interest rate of 105% of CDI, capitalized daily. Principal payable in five annual installments, the first due on February 9, 2010 and the last 

on February 10, 2014 with semi-annual payments of interest as from August 9, 2007 to February 10, 2014. This operation carries a covenant of gross debt/EBITDA at a ratio not 

exceeding 3.5. The company is in compliance to the present time. Conditions are identical in the case of both institutions. 

Banco do Brasil - Commercial Credit Note - Agreement signed on June 24, 2010, in the amount of R$ 135,000 in the Agroindustrial Credit category, released in full on June 28, 2010. 

The principal value of the loan carries an interest rate of 100% of CDI. Principal and interest maturing in 10 semi-annual installments, with the first on November 29, 2010 and the last on 

May 29, 2015. This operation carries a covenant of gross debt/EBITDA at a ratio not exceeding 3.5, semi-annually calculated. 

F-111

Eletrobrás 


(i) 1st stage - Contract ECFS 031/04 - Facility in the amount of R$30,968, as financing (RGR) R$4,764, as economic subsidy granted by Eletrobrás and R$4,764 in the form of economic 

subsidy granted by the State Government of Espírito Santo–Program created by Decree nº 4,873, of November 11, 2003, coordinated by the Ministry of Mines and Energy and 

commissioned by Eletrobrás. Contract signed on May 21, 2004, whereas funds were released in the form of financing in the amount of R$9,290 in 2004, R$6,194 in 2005, R$ 4,150 in 

2006, R$ 3,095 in 2008, totaling R$ 22,729 and were released in the form of a subsidy in the amount of R$ 2,230 in 2004, R$ 4,417 in 2005, R$638 in 2006, R$169 in 2008, totaling R$ 

7,454. The principal amount carries an interest rate of 5% annually and a management fee of 1% annually, both maturing monthly as from October 30, 2004. The principal is payable 

monthly as from August 30, 2006 to July 30, 2016. The loan is guaranteed by promissory notes and an assignment on company revenues. On the non-disbursed balance there is a 

credit reserve commission of 1% p.a., maturing on the 30th of each month, up to the termination of the credit. 

(ii) 2nd stage - Contract ECFS 106/05 - Facility in the amount of R$50,304, as financing (RGR) R$7,739, as economic subsidy granted by Eletrobrás and R$7,739 in the form of 

economic subsidy granted by the State Government of Espírito Santo–Program created by Decree nº 4,873, of November 11, 2003, coordinated by the Ministry of Mines and Energy 

and commissioned by Eletrobrás. Contract signed on November 20, 2005, whereas funds were released in the form of financing in the amount of R$15,091 in 2006, R$ 20,122 in 2007 

and R$1,900 in 2010 totaling R$ 37,113 and were released in the form of a subsidy in the amount of R$ 5,522 in 2006, R$ 6,096 in 2007 and R$415 in 2008 totaling R$12,033. The 

principal amount carries an interest rate of 5% annually and a management fee of 1% annually, both maturing monthly as from April 30, 2006. The principal is payable monthly as from 

May 30, 2008 to April 30, 2018. The loan is guaranteed by promissory notes and an assignment on company revenues. On the non-disbursed balance there is a credit reserve 

commission of 1% p.a., maturing on the 30th of each month, up to the termination of the credit. 

(iii) 3rd stage - Contract ECFS 181/07 - Facility in the amount of R$75,764, as financing (RGR) and R$10,102, as economic subsidy granted by Eletrobrás - Program created by Decree 

nº 4873, of November 11, 2003, coordinated by the Ministry of Mines and Energy and commissioned by Eletrobrás. Contract signed on June 25, 2007. Resources released in the form 

of financing in the amount of R$42,933 in 2008. The principal amount carries an interest rate of 5% annually and a management fee of 1% annually, both maturing monthly as from April 

30, 2008. The principal is payable monthly as from April 30, 2010 to March 30 , 2020. The loan is guaranteed by promissory notes and an assignment on company revenues. On the nondisbursed 

balance there is a credit reserve commission of 1% p.a., maturing on the 30th of each month, up to the termination of the credit. 

(iv) 4th stage - Contract ECFS 258/09 - Facility in the amount of R$56,737 as financing (RGR) and R$7,565, as economic subsidy granted by Eletrobrás - Program created by Decree 

4873, of November 11, 2003, coordinated by the Ministry of Mines and Energy and commissioned by Eletrobrás. Contract signed on August 28, 2009, whereas funds were released in 

the form of financing in the amount of R$17,021 in 2009 and were released in the form of a subsidy in the amount of R$ 2,270 in 2009. The principal amount carries an interest rate of 

5% annually and a management fee of 1% annually, both maturing monthly as from January 30, 2010. The principal is payable monthly as from January 30, 2012 to December 30, 

2021. The loan is guaranteed by promissory notes and an assignment on company revenues. On the non-disbursed balance there is a credit reserve commission of 1% p.a., maturing 

on the 30th of each month, up to the termination of the credit. 

Reluz Program 

(i) Contract ECF-2313/04 executed on July 6, 2004. Line of credit amounting to R$ 2,647, in the form of finance. Funds were released in the amount of R$ 265, R$ 476, R$ 529 and R$ 

838, on October 14, 2004; May 24, 2005; September 8, 2005 and September 4, 2008, respectively. The restated debt balance carried an interest rate of 5% annually and a 

management fee of 1.5% annually, both maturing monthly as from October 30, 2004. The outstanding debt balance shall be paid in 48 equal monthly and consecutive installments, the 

first maturing on February 28, 2006 and the last one on February 28, 2010. The loan is guaranteed by promissory notes and an assignment on company revenues. The remuneration 

plus the amount of principal was settled on February 28, 2010. 

(ii) Contract ECF-2314/04 executed on July 6, 2004. Line of credit amounting to R$ 8,823, in the form of finance. Funds were released in the amount of R$ 882, R$ 2,972, R$ 1,323 and 

R$ 2,175, on October 14, 2004; May 24, 2005; September 8, 2005 and September 4, 2008, respectively. The debt balance carries an interest rate of 5% annually, which was capitalized 

up to January 30, 2005 at a rate of 1.5% annually and a management fee of 1.5% annually, paid monthly. The outstanding debt balance shall be paid in 60 equal monthly and 

consecutive installments, the first maturing on February 28, 2005 and the last one on January 30, 2011. The loan is guaranteed by promissory notes and an assignment on company 

revenues. 

(iii) Contract ECF-2472/05 executed on July 12, 2007. Line of credit amounting to R$ 306, in the form of finance. Funds were released in the amount of R$ 31 on October 11, 2007. The 

debt balance carries an interest rate of 5% annually, which was capitalized up to July 30, 2008 at a rate of 1.5% annually and a management fee of 1.5% annually, paid monthly. The 

outstanding debt balance shall be paid in 36 equal monthly and consecutive installments, the first maturing on October 30, 2008 and the last one on October 30, 2011. The loan is 


(iv) Contract ECF-2488/05 executed on July 12, 2007. Line of credit amounting to R$ 261, in the form of finance. Funds were released in the amount of R$ 26 and R$ 188 on October 

11, 2007 and November 11, 2008, respectively. The debt balance carries an interest rate of 5% annually, which was capitalized up to November 30, 2008 at a rate of 1.5% annually and 

a management fee of 1.5% annually, paid monthly. The outstanding debt balance shall be paid in 60 equal monthly and consecutive installments, the first maturing on December 30, 

2008 and the last one on December 30, 2013. The loan is guaranteed by promissory notes and an assignment on company revenues. 

(v) Contract ECF-2500/05 executed on July 12, 2007. Line of credit amounting to R$ 380, in the form of finance. Funds were released in the amount of R$ 38 and R$ 256 on October 

11, 2007 and November 11, 2008, respectively. The debt balance carries an interest rate of 5% annually, which was capitalized up to November 30, 2008 at a rate of 1.5% annually and 

a management fee of 1.5% annually, paid monthly. The outstanding debt balance shall be paid in 60 equal monthly and consecutive installments, the first maturing on December 30, 

2008 and the last one on December 30, 2013. The loan is guaranteed by promissory notes and an assignment on company revenues. 

(vi) Contract ECF 2481/05 signed on September 30, 2008. Line of credit amounting to R$ 1,230, in the form of finance. Funds released in the amount of R$123 and R$801, on 

December 29, 2009 and May 21, 2010, respectively. The debt balance carries an interest rate of 5% annually, which will be capitalized up to December 30, 2011 and a management fee 

of 1.5% annually, paid monthly. The outstanding debt balance shall be paid in 60 equal monthly and consecutive installments, the first maturing on January 30, 2012 and the last one on 

December 30, 2016. The loan is guaranteed by promissory notes and an assignment on company revenues. 

F-112

22.3 Additional information on debt service of Enerpeixe 

The balance of loans and financing reflects original financing from the BNDES of R$ 670,000, authorized by the Board of Directors of the BNDES, number 691/2003 of November 10, 

2003 and contracted on May 21, 2004, being R$ 335,000 directly and R$ 335,000 through financial institutions as follows: 

Direct 

installment 

Sub-credit BNDES 

"A" 

"B" 

"C" 

"D" 

26,184 

235,671 

7,314 

65,831 

335,000 

7,855 

70,701 

2,195 

19,749 

100,500 

The major loan conditions are as follow: 

(i) Amortization: 

6,546 

58,917 

1,829 

16,458 

83,750 

22.4 Additional Information on debt service of Investco 

6,546 

58,917 

1,829 

16,458 

83,750 

Unibanco 

5,237 

47,134 

1,463 

13,166 

67,000 

a) For the subcredits "A" and "C", readjusted 3-month floating rate based on the weighted average costs of all the rates and expenses incurred by the BNDES in raising funding in 

foreign currency plus 4.5% annually, during the period in which the guarantee granted by the indirect parent company EDP - Energias de Portugal S.A. is in full force and effect; 

b)For the subcredits "B" and "D", TLJP – the Long Term Interest Rate plus 4.5% annually during the period in which the guarantee granted by EDP - Energias de Portugal S.A. is in full 

force and effect; and 

c) The abovementioned spreads can be 6% annually as from the effective date of the guarantee of the direct parent company Energias do Brasil, in place of the guarantee of EDP - 

Energias de Portugal, which may occur as from January 2008 only upon request from the Enerpeixe and the Company. This rate can be reduced to 5% per annum, if Energias do Brasil 

presents a minimum price-earnings ratio of 38% and Enerpeixe presents a rate of coverage of the debt service of 1.3. 

The rate of coverage of the debt service is calculated from the division of the cash generation of the activity by the debt service, based on information recorded in the financial 

statements, with semi-annual measurements in June and December. 

(iii) Guarantees and obligations: 

a) Lien on shares corresponding to 60% of the capital stock of the beneficiary held by the Company; 

b) Lien on emerging rights of the concession, including among others: 

• The beneficiary’s credit rights resulting from the sale of energy generated by UHE Peixe Angical for Bandeirante , Escelsa, Enersul, and Centrais Elétricas Matogrossenses S.A. – 

CEMAT; 

• The guarantees included in the Purchase and Sale of Energy Agreement - CCVEs. 

c) Maintenance in a financial reserve account of a value equivalent to at least three months of installments of amortization of principal, interest and charges as well as three months 

payment of the O&M Contract (Operation and Maintenance Contract), during the amortization phase; and 

d) Letter of guarantee of EDP - Energias de Portugal, governed by Portuguese laws. 

The restrictive clauses of these contracts were in full compliance on December 31, 2010. 

(i) Financing Agreement through the opening of a credit line signed with the BNDES, with the guarantee of Company’s shareholders and its controllers on September 21, 2000 in the 

total amount of R$180,000, with an annual interest rate of 4% above the TJLP, payable quarterly on January 15, April 15, July 15 and October 15 of each year in the period between 

October 15, 2000 and October 15, 2002, and monthly as from November 15, 2002. The principal is being amortized in 120 monthly and consecutive installments according to the 

Increasing Amortization System (Price Table) as from November 15, 2002, and last maturity on October 15, 2012. Part of Company’s common shares were given in guarantee together 

with a promissory note and an assignment of contractual rights. 

Banco da Amazônia 

Itaú BBA Banco do Brasil 

Financing agreement signed on December 28, 2000, 10 for the total amount of R$44,300, to be amortized in 84 months, including a 36-month grace period, the first installment of 

principal maturing February 10, 2004 and the last on January 10, 2011 with an annual interest rate of 14%, payable monthly. During the grace period, 50% of these charges are payable, 

and the remaining 50% capitalized and incorporated in the outstanding debt balance, to be paid with the amortization of the principal installments. According to the addendum signed in 

December 2007, collateral in the form of equipment of Usina UHE Lajeado in guarantee and a bank guarantee from Unibanco S.A. were given, in the amount of R$ 18,937. 

This contract does not have restrict contractual clause (covenants) 

Indirect installment 

a) For the sub-credits "A" and "C", 12 monthly and successive installments, with the first falling due on March 15, 2007 and the last on February 15, 2008, already settled; 

b) For the sub-credits "B" and "D", 95 monthly and successive installments, with the first falling due on March 15, 2008 and the last on January 15, 2016. 

(ii) Charges: 

BNDES 

Bradesco 

(ii) Credit Agreement Contract through onlending contracted with the BNDES signed with Banco Itaú, Bradesco, BBA Creditanstalt and Banco ABC, with the guarantee of Company’s 

shareholders and its controllers on September 21, 2000 for the amount of R$120,000, with an annual rate of interest of 4% over the TJLP, payable quarterly during the grace period. 

Following a grace period of 24 months, installments of principal are being amortized in 120 monthly and consecutive installments as from November 15, 2002, and last maturity on 

October 15, 2012. Part of Company’s common shares were given in guarantee together with a promissory note and an assignment of contractual rights. 

The operations establish restrictive contractual clauses (covenants) of minimum capitalization level (shareholders' equity by total assets) and of cash, both fulfilled on December 31, 

2010. 

F-113 

Total amount of 

indirect 

installment 

26,184 

235,669 

7,316 

65,831 

335,000 

Total 

52,368 

471,340 

14,630 

131,662 

670,000

22.5 

Safra Leasing S.A. 

A commercial lease was signed on March 10, 2008 in the amount of R$198. The amortization period of this contract is 36 months. The financial charges are variation of the CDI + 

1.45% annually. The payment of the first installment occurred on April 14, 2008 and the last installment has its maturity scheduled for March 14, 2011. The asset leased by the 

Company was a microbus for exclusive use by the employees of the Plant. 


On December 29, 2010, a credit line agreement was entered into with Banco Alfa de Investimentos S.A. in the amount of R$10,000. The amortization term of the agreement is 90 days, 

in a bullet payment. Principal will bear Interest of 106% of the CDI, payable at the end of the agreement. 

The estimate of fair value considered the conditions above for the payment of dividends. Annual dividend payment was considered until 2032 (end of the concession) and discounted to 

present value at the rate of 8.70% p.a. 

Additional information on debt service of Castelo Energética S.A’s debt servicing - CESA and Pantanal Energética Ltda. 

BNDES (foreign currency) - Contract signed in February 2002 by CESA for the construction of three Small Hydroelectric Power Plants – PCH’s - Viçosa and São João in the state of 

Espírito Santo and Paraiso in the state of Mato Grosso do Sul. In fiscal year 2002, funds amounting to R$9,266 were obtained. Interest is levied on the amount of principal at the rate of 

4.5% per annum plus variation of UMBNDES, enforceable monthly, together with the installments of the principal with final maturity on July 16 , 2012. The guarantees are: (i) 

assignment of receivables resulting from authorizations granted by ANEEL, either from the extinguishment of the authorizations, purchase and sale of electricity and the right to generate 

electricity from its PCHs; and, (ii) the pledging of common nominative shares comprising the total stake of the Company. In the context of transfer of the concession of PCH Paraíso 

from Company to Pantanal Energética Ltda. (Pantanal), the balances of this financing corresponding to PCH Paraíso, as well as the respective conditions established in the contract, 

were transferred to Pantanal. 

BNDES (national currency) - Contract signed in February 2002 for the construction of three Small Hydroelectric Power Plants – PCH’s - Viçosa and São João in the state of Espírito 

Santo and Paraiso in the state of Mato Grosso do Sul. In fiscal year 2002, funding amounting to R$ 30,014 and R$ 17,565 in 2004 and R$5,635 in 2007 were released. Interest is levied 

on the amount of principal at the rate of 4.5% per annum plus variation of TJLP, enforceable monthly, together with the installments of the principal with final maturity on June 15 , 2012. 

The guarantees are: (i) assignment of receivables resulting from authorizations granted by ANEEL, either from the extinguishment of the authorizations, purchase and sale of electricity 

and the right to generate electricity from its PCHs; and, (ii) the pledging of common nominative shares comprising the total stake of Energest in the Company. In the context of transfer of 

the concession of PCH Paraíso from Company to Pantanal, the balances of this financing corresponding to PCH Paraíso, as well as the respective conditions established in the contract, 

were transferred to Pantanal. 

Banco Santander Brasil S.A. - Contract nº 231006019 signed on February 12, 2009, in the amount of R$11,864, for the period of 60 days with final maturity on April 13, 2009, at the 

rate of 123.50% of CDI. Amortization and interest will be paid in a lump sum upon expiration of the agreement. Guarantee, surety in promissory note and Energias do Brasil as 

Intervening Guarantor. The settlements of this transaction were postponed, through amendments to the contract, and the maturity was rescheduled to March 10, 2010, with all other 

original clauses maintained. On March 09, 2010, this operation had its settlement term extended to March 9, 2011, maintaining all the other clauses and conditions of the original 

contract ratified, at the rate of 113.50% of CDI. 

BNDES - Contract signed on November 13, 2009 in the amount of R$25,404. The first amount released was R$4,863, on April 22, 2010, and the second amount released was 

R$15,141, on May 13, 2010, to be amortized in 97 and 96 months, respectively; both first installments mature on June 15, 2010 and the last installment on May 15, 2018, with interest 

varying from 1.92% above TJLP and fixed interest of 4.50%. Guarantee with pledge of revenue equivalent to 1.8 times the overdue installment of this agreement. 

22.6 Additional information on debt service of Energest 

BNDES – Contract signed in October 2001 with the pass through of funds from, Itaú (leader), Alfa and Sudameris banks, to finance investments for the installation of the fourth turbine at 

UHE Mascarenhas. In fiscal year 2001, funds amounting to R$24,102 were obtained. Interest is levied on the amount of principal at the rate of 3.5% per annum, plus variation of TJLP 

(national currency) and of 3.5% per annum plus the variation of UMBNDES (foreign currency), enforceable monthly, together with the installments of the principal with final maturity on 

October 15, 2010. The guarantee is an assignment on revenues from electricity services provided in the amount equivalent to at least 1 (one decimal point four) times the value of the 

largest installment due from the beneficiary. This operation establishes covenant of the relation EBITDA/ Gross financing expenses, which has been complied with to date. 

Onlending of Funds Obtained in Reais Abroad – contract with Banco Santander S.A., nº 231006029 - Signed on February 12, 2009, by CESA S.A. in the amount of R$21,355, for the 

period of 60 days with final maturity on April 13, 2009, at the rate of 123.50% of CDI. Amortization and interest will be paid in a lump sum upon expiration of the agreement. Guarantee, 

surety in promissory note and EDP - Energias do Brasil S.A. as Intervening Guarantor. Through a rider to the contract, on April 13, 2009 this operation had its settlement term extended 

to June 12, 2009, maintaining all the other clauses and conditions of the original contract ratified. On June 12 this operation had its maturity date renegotiated to September 10, 2009, 

maintaining all the other clauses and conditions of the original contract. On September 10, 2009, this operation had its settlement term extended to March 10, 2010, maintaining all the 

other clauses and conditions of the original contract ratified. On March 09, 2010, this operation had its settlement term extended to March 9, 2011, maintaining all the other clauses and 

conditions of the original contract ratified, at the rate of 113.50% of CDI. 

Bank Credit Certificates – Agreement signed in February 2008 worth a total of R$48,000, signed with the Banco do Brasil S.A. The principal value of the loan carries an interest rate of 

106.6% of CDI, capitalized daily. Principal payable in five annual installments, the first due on February 20, 2011 and the last on February 20, 2015 with semi-annual payments of 

interest as from August 20, 2008 to February 20, 2015. This operation carries a covenant of gross debt/EBITDA at a ratio not exceeding 3.5. 

F-114

22.7 Additional information on debt service of Costa Rica 

Eletrobrás-Financing ECF-1,568/97 – Contract signed by Enersul, on November 4, 1997, in the amount of R$5,375, for financing of the construction of the Hydroelectric Plant of Costa 

Rica, with resources from the Investment Fund of Eletrobrás – FINEL, with interest of 6.5% per annum, ending on May 31, 2014, amortization in 180 monthly, equal and successive 

installments, with guarantee in revenue and promissory note. Contract repassed to Costa Rica Energética, through the “Private Contract for Commitment of Debtor Release”. 

22.8 Additional information on debt service of Santa Fé Energia S/A 

BNDES - Agreement signed in May 2009, with onlending of funds through Banco do Brasil. Funds in the amount of R$64,000 were released on May 29, 2009 and on April 27, 2010, the 

remaining balance of this contract in the amount of R$ 11,633 were released. Interest is levied on the amount of principal at the rate of 1.9% per annum plus variation of TJLP, 

enforceable monthly, as from March 15, 2010, together with the installments of the principal with final maturity on February 15, 2024. The negotiated guarantee establishes the lien on 

shares of the beneficiary at 100% in favor of the Financial Agent. This operation establishes a covenant of the Debt Service Coverage Index (ICSD) of at least 1.2 times, complied with 

thus far. 

22.9 Additional information on debt service of subsidiary under joint ownership Porto do Pecém 

BNDES - Contract signed in July 2009. In October 2009, occurred the 1st release in the amount of R$700 million. In July 2010, occurred the 2nd release in the amount of R$260 million. 

The amounts released permit full repayment of the bridging loans in Brazilian reals and will also cover the expenditures provided for in implantation of the enterprise. The financing 

agreement with BNDES establishes a loan in the amount of R$1.4 billion (in nominal R$, excluding interest during construction), with a total period of 17 years, consisting of 14 years of 

amortization and grace period for payment of interest and principal up to July 2012. The contracted cost is of TJLP plus 2.77% per annum. The interest will be capitalized during the 

construction phase. 

IDB - Contract signed in July 2009. In October 2009, occurred the 1st release in the amount of US$260 million. In August 2010, occurred the 2nd release in the amount of US$50 million. 

The financing agreement with BID establishes an A Loan in the total amount of US$ 147 million, and B Loan in the total amount of US$ 180 million, with total term of 17 years in the A 

Loan and 13 years in the B Loan, with a grace period for payment of interest and principal up to July 2012. The initial rates of the A Loan and B Loanare Libor + 350 bps and Libor + 300 

bps, respectively, with step ups throughout the period. Said long-term loan in US$, in turn, has already been subject to the contracting both of exchange hedge and of an interest rate 

swap (from Libor to fixed rate). The consortium of B-lenders is comprised of the banks Millenium BCP, Caixa Geral de Depósitos and Calyon. 

As of December 31, 2010, the restrictive operating clause (covenants) referring to the service agreement for the treatment of residual waters, included in the financing contract with IDB, 

is not being complied with. Subsidiary Porto do Pecém obtained the postponement of the maturity to March 31, 2011 in order to eliminate this restriction. 

The other restrictive clauses are duly complied with on this date. 


Hedge operation with Banco Citibank of NDFs (Non Deliverable Forwards), executed on October 17, 2007, in the total amount of US$ 639,918,000, with maturities between January 

2008 and October 2012, with the contracted initial parity of R$/US$ 1.8138. Considering the settlements in advance and overdue until December 31, 2010, the notional outstanding in 

this base date is US$330.592.716. 

Hedge operation with Banco Citibank and BTG Pactual of NDFs (Non Deliverable Forwards), executed on June 30, 2009, in the total amount of EUR 26,059,929.27, with maturities 

between July 2009 and January 2012, with the contracted initial parity of EUR/USD1,4040. Considering the settlements overdue until December 31, 2010, the notional outstanding in 

this base date is US$3.667.242. 

Hedge operation with Banco HSBC and BTG Pactual of NDFs (Non Deliverable Forwards), executed on July 1, 2009, in the total amount of EUR 10,134,416.94, with maturities between 

July 2009 and January 2012, with the contracted initial parity of EUR/US$ 2.7300. Considering the settlements overdue until December 31, 2010, the notional outstanding in this base 

date is US$1.014.692. 

Hedge operation with Banco Citibank and BTG Pactual of NDFs (Non Deliverable Forwards), executed on June 30, 2009, in the total amount of US$ 106,592,330.70, with maturities 

between July 2009 and January 2012, with the contracted initial parity of US$/R$ 1.9678. 

Hedge operation with Banco Citibank of NDFs (Non Deliverable Forwards), executed on June 30, 2009, in the total amount of US$ 56,162,599.70, with maturities between July 2009 

and November 2011, with the contracted initial parity of US$/R$ 1.9678. Considering the settlements overdue until December 31, 2010, the notional outstanding in this base date is 

US$28.650.392. 

Swap operation at Banco Citibank, contracted on October 16, 2007, in the amount of US$ 140,521,000, starting on April 2, 2012 with final maturity on October 1, 2024, where the 

Company pays variation of the US$ plus 5.82% per annum in the short position and the Bank in the long position pays 100% of LIBOR. 

Swap operation at Banco Citibank, contracted on October 16, 2007, in the amount of US$ 186,479,000, starting on April 2, 2012 with final maturity on October 1, 2021, where the 

Company pays variation of the US$ plus 5.79% per annum in the short position and the Bank in the long position pays 100% of LIBOR. 

Swap Operation with Banco Citibank, for the coverage of the interest capitalized during the construction of the Porto do Pecém plant related to the financing with BID, contracted on July 

2, 2009, in the amount of US$ 1,249,288,739 (amount related to the accumulated balance estimated for 4 tranches of BID financing, and the approximate exposure of US$ 36,000,000) 

as of November 16, 2009 and final maturity on November 16, 2011, where the Company pays variation of the dollar plus 2.085% per annum at the passive index edge and the Bank 

pays 100% of LIBOR at the active index edge. 

F-115

22.10 Maturity of current and non-current installments (principal and charges): 

Maturity 

Current 

National Foreign Total 

2011 344,812 

30,889 375,701 

Noncurrent 

344,812 

30,889 375,701 

2012 307,603 

75,848 383,451 

2013 283,704 

14,087 297,791 

2014 249,775 

15,336 265,111 

2015 326,684 

16,720 343,405 

2016 104,765 

17,970 122,735 

2017 73,616 

19,489 

93,105 

2018 57,990 

21,228 

79,218 

2019 54,655 

22,857 

77,512 

After 2019 334,458 

144,096 478,555 

1,793,251 

347,632 2,140,882 

Total 2,138,063 

378,521 2,516,583 

The change in the loans and financing for the year is as follows: 

Net amount 

at 


552,135 

Swaps 

20,527 

572,662 

13,240 


1,901,627 

Swaps 

55,813 

1,957,440 

(505,399) 

0.00 (18,314) 

13,240 (523,713) 

412,042 

23 Post-employment benefits 

Consolidated 

Currency 

0.00 (44,820) 

412,042 

(44,820) 

(164,641) 

(3,422) 

(168,063) 

157,570 

1,991 

159,561 

0.00 0.00 39,673 

0.00 723 

0.00 40,396 

(1,376) 

305,221 

0.00 9,365 

(1,376) 

314,586 

1,143 

Consolidated 

Current 

Noncurrent 

(305,221) 

0.00 (9,365) 

1,143 (314,586) 

Consolidated 



12/31/2010 12/31/2009 12/31/2010 12/31/2009 

Bandeirante 0.00 0.00 0.00 0.00 

BSPS - Reserves to amortize 19,245 

14,121 

93,998 

61,918 

Assistential Programs 0.00 6,890 

6,867 

0.00 

Escelsa 0.00 0.00 0.00 0.00 

Retirement Incentive Aid - AIA 582 

582 

2,646 

2,543 

Medical Healthcare and Life Insurance 7,780 

5,588 

85,717 

66,327 

EDP - Energias do Brasil 0.00 0.00 0.00 0.00 

Private pension 3 

0.00 0.00 0.00 

Evrecy 0.00 0.00 0.00 0.00 

Private pension plan - ENERPREV 1 

0.00 0.00 0.00 

27,611 

27,181 

189,228 

130,788 

0.00 0.00 239 

8,995 

8,995 

0.00 (262) 

The subsidiaries Bandeirante, Escelsa, and Energest, hired independent actuaries to conduct an actuarial appraisal of defined benefits. 

97,698 

97,698 

(943) 

0.00 0.00 513 

0.00 239 

(430) 

3,930 

0.00 - 

(262) 

3,930 

(11,947) 

(152) 

(12,099) 

Net amount 

at 

12/31/2009 

Entries 

Principal 

payments 

Payments of 

interest 

Interest provided 

Capitalized 

interest 

Transfers 

Adjustment to 

market value 

Adjustment to 

present value 

Transaction 

costs 

Monetary 

and 

exchange 

variation 

12/31/2010 

Pursuant to CVM Resolution 600 of October 07, 2009, as from January 1st, 2010, publicly held companies are required to account for post employment benefit liabilities based on rules 

contained in CPC 33 Technical Pronouncement. 

In accordance with CPC 33 - Employee Benefits, future obligations such as defined benefits assumed by the companies should be recognized in liabilities, net of recognized funds. 

F-116 

356,046 

19,655 

375,701 

2,040,985 

99,897 

2,140,882

23.1 Bandeirante 

BSPS - Reserves to amortize 19,245 

14,121 

Assistential Programs 6,890 

12/31/2010 12/31/2009 12/31/2010 12/31/2009 

19,245 

Current 

21,011 

Fair value of 

the plan assets 

93,998 

6,867 

100,865 

Fair value of the 

plan assets 

Opening balance (430,120) 

354,080 

Cost of current service 1,664 

Interest cost (47,185) 

Earnings expected from assets 

Actuarial gains or (losses ) recognized in shareholders' 

0.00 40,638 

equity 

(32,761) 

(17,794) 

Contribution paid by employees (2,033) 

2,033 

Contribution paid by the company 0.00 18,234 

Benefits paid by the plan 23,996 

(23,996) 

Closing balance (486,439) 

373,195 

Adjusted 

61,918 

61,918 

The plan management is in the process of being transferred to EnerPrev and the transfer will be complete in the first half of 2011, in accordance with Rule 670, of September 3, 2010, 

published in the Union Official Gazette (DOU) on September 6, 2010. The plan has the following characteristics: 

This plan was effective until March 31, 1998 and is a defined benefit type which grants Settled Complementary Proportional Benefits (BSPS) in the form of lifetime income convertible 

into a pension to plan members registered as at March 31, 1998 in a defined amount proportional to accumulated years of service up to the said date conditional upon compliance with 

the regulations. The company bears total responsibility for covering actuarial shortfalls. 

(ii) Mixed Benefits Plan – BD and CD 

• BD Plan – Effective after March 31, 1998 - Defined Benefit Plan that grants a lifetime income convertible into a pension proportional to time of service accumulated to March 31, 1998 

based on 70% of the monthly average wage over the past 36 months in active employment. In the event of death while the employee is on active service, or disability, the benefits 

comprise all the years of past service (including the accumulated period to March 31, 1998) and therefore dos not include the accumulated period of service after March 31, 1998 alone. 

The company and plan members bear equal responsibility for covering the actuarial shortfalls. 

• CD Plan – Implemented in conjunction with the BD Plan, effective after March 31, 1998. It is a pension plan that until the time of granting the lifetime income, convertible (or not) into a 

pension, is a defined Contribution Plan, not generating any actuarial responsibility on the part of the Company. Only after the act of granting of the lifetime income, convertible or not into 

a pension, does the pension plan become a defined benefit one, subjecting the company to actuarial responsibility. 

The actuarial appraisal shows as at December 31, 2010 that in the case of the defined benefits plans the present value of the actuarial liabilities net of the fair value of the assets and of 

unrecognized actuarial losses, shows a deficit as indicated below in the reconciliation of assets and liabilities of the plan with the defined benefit liability recognized in the balance sheet: 

Expected contributions of subsidiary Bandeirante in 2011 amount to R$19,246. 

2010 2009 

Cost of current service 1,064 

983 

Interest cost 47,185 

46,591 

Earnings expected from assets (40,638) 

(34,749) 

Expected employee contributions (2,728) 

(2,608) 

Total 4,883 

10,217 

2010 

Noncurrent 

Structured as "Vested, Defined Benefit and Variable Contribution", managed by Fundação Cesp, a multisponsored, not-for-profit and closed pension plan entity that is engaged in the 

management and administration of pension plan benefits for the Company's employees and former employees. 

(i) Settled Complementary Proportional Benefit Plan - BSPS – This corresponds to the employees’ proportional benefits calculated on the basis of time of service up to March 1998. The 

amount of R$113,243, as at December 31, 2010 pursuant to CVM Resolution 600 of December 07, 2009, corresponds to the portion of benefits exceeding the plan’s assets. Part of the 

commitment is being settled in 240 months as from September 1997, based on a percentage of the payroll, subject to revision semiannually to ensure settlement of the balance in the 

above period. 

Recognized 

(liability) 

(76,040) 

0.00 1,664 

0.00 (47,185) 

40,638 

(50,555) 

18,234 

(113,244) 


plan assets 

(422,199) 

1,625 

(46,591) 

16,553 

0.00 (2,121) 

0.00 22,613 

(430,120) 


plan assets 

312,153 

0.00 45,603 

2,121 

0.00 16,816 

(22,613) 

354,080 

Recognized 

(liability) 

(110,046) 

0.00 1,625 

0.00 (46,591) 

45,603 

0.00 16,553 

The net expense with the Supplementary Retirement and Pension Plans of Bandeirante - PSAP/Bandeirante, recognized in the income of 2010 and 2009 in counter entry to the Postemployment 

benefits account , has the following breakdown: 

Pursuant to CVM Resolution 600 of October 07, 2009, post employment benefit liabilities should be accounted for based on rules contained in CPC 33 Technical Pronouncement. To 

meet this requirement, the Company hired independent actuaries to conduct an actuarial appraisal of these benefits according to the Projected Unit Credit Method. 

Actuarial gains and losses are recorded under Valuation adjustments to equity, in shareholders' equity, in the period of occurrence. As of December 31, 2010, the actuarial loss balance 

is R$48,513 (R$2,042 actuarial gain as of December 31, 2009). The historical analysis of adjustments arising from actuarial gains and losses is as follows: 

F-117 

2009 

0.00 

16,816 

0.00 

(76,040)

12/31/2010 12/31/2009 12/31/2008 12/31/2007 12/31/2006 

Adjustments from the experience with plan assets 

Actuarial (Gains)/losses of assets 17,794 

(10,854) 

16,490 

35,402 

12,413 

Percentage of (Gains)/losses related to the plan total assets 

Adjustments from the experience with plan obligations 

4.77% 3.07% 5.28% 12.15% 5.52% 

Actuarial (Gains)/losses of obligations 32,761 

(16,553) 

(9,382) 

13,888 

19,147 

Percentage of (Gains)/losses related to the plan total assets 

Plan situation 

6.73% 3.85% 2.22% 3.42% 4.89% 

Present value of fully or partially covered obligations (486,439) (430,120) 

(422,199) 

(406,171) (391,882) 

Fair value of assets 373,195 

354,080 

312,153 

291,471 

224,990 

Plan situation (113,244) 

(76,040) 

(110,046) 

(114,700) (166,892) 

Asset class Allocation % 

Debt instruments 

84.00% 

Shares 

12.45% 

Real estate 

0.37% 

Other 

3.18% 

Total 

100.00% 

Asset class 

Expected 

allocation 

Expected return Expected allocation Expected return 

Debt instruments 82.40% 11.20% 81.04% 10.75% 

Shares 14.40% 13.29% 14.01% 13.25% 

Real estate 0.60% 11.20% 4.95% 10.75% 

Other 2.60% 10.77% 

Total 100.00% 11.49% 100.00% 11.00% 

2010 2009 

Active participants 

Assisted participants 

829 

With deferred benefits 132 

Retirees and pensioners 572 

704 

Total 1,533 

893 

131 

531 

662 

1,555 

2010 2009 

Economic 

Discount rate 10.75% p.a. 11.20% p.a. 

Expected rate of return on assets 11.49% p.a. 11.00% p.a. 

Future salary increases 5.55% p.a. 5.55% p.a. 

Growth of benefits in pension plans and benefit plans 4.50% p.a. 4.50% p.a. 

23.2 Escelsa 

The main classes of plan assets are as follows: 

The expected return rate of the assets was determined considering the allocation goal and expected return of each asset class, as follows: 

Inflation 4.50% p.a. 4.50% p.a. 

Demographic 

Mortality table 

Mortality table for disabled people 

Disability table 

Turnover table 

2010 

We present below the demonstration of the number of Plan participants: 

The main assumptions utilized in this actuarial appraisal were as follows: 

2009 

The effective return of plan assets was R$22,843, compared to an expected return of R$40,638 at the beginning of the year, resulting in actuarial loss of R$17,794. 

RP 2000 Geracional RP 2000 Geracional 

RP 2000 Disabled RP 2000 Disabled 

Wyatt 85 Class 1 


Null as from 3 years of participation in 

the Benefit Plan 

Null as from 3 years of participation in the 

Benefit Plan 

Subsidiary Escelsa currently maintains retirement and pension supplementation plans on behalf of employees and former employees and other post-employment benefits, such as 

medical care, life insurance, Retirement Incentive Aid and other benefits to retirees. 

F-118

23.2.1 Retirement plans 

Plan I - Escelsos structured as a "Defined Benefit" plan, managed by EnerPrev-Previdência Complementar of the Group Energias do Brasil and registered with the National Register of 

Benefit Plans (CNPB) of Previc. The Funding Plan is sustained paritarially by contributions of the sponsor and of the participant, pursuant to the Benefit Plan Regulation. 

Plan II - Escelsos structured as a "Variable Contribution" plan, managed by EnerPrev-Previdência Complementar of the Group Energias do Brasil and registered with the National 

Register of Benefit Plans (CNPB) of Previc. The Funding Plan is sustained paritarially by contributions of the sponsor and of the participant, pursuant to the Benefit Plan Regulation. 

Structured as a "Defined Contribution" plan, managed by EnerPrev-Previdência Complementar of the Group Energias do Brasil and registered with National Register of Benefit Plans 

(CNPB) of Previc, the benefit plan funding is supported by equal contributions from the sponsor company and the plan member, in accordance with the Plan Regulation. In addition, 

there is the PGBL Estilo de Vida, managed by Bradesco Vida e Previdência S/A, in which the benefit plan funding is supported by equal contributions from the sponsor company and the 

plan member, in accordance with the Plan Regulation. 

In the capacity of sponsor, the subsidiary Escelsa contributed R$314 in the year (R$163 in 2009). 

This plan has the adhesion of 159 collaborators. 

The actuarial appraisal realized as at December 31, 2010 showed that for these pension plans, the fair value of the assets exceeded the present value of the actuarial liabilities as 

indicated below: 

2010 2009 


plan assets 

Fair value of the plan 

assets 

Restriction to 

asset recognition 

Opening balance (132,626) 

200,084 

67,458 

Cost of current service (217) 

0.00 (217) 


0.00 (14,194) 

Earnings expected from assets 0.00 22,312 

22,312 

Actuarial gains or (losses ) 

recognized in shareholders' equity 

(7,782) 

28,137 

Contribution paid by the company 0.00 144 

Contribution paid by employees (166) 

166 

Benefits paid by the plan 11,771 

(11,771) 

Closing balance (143,214) 

239,072 


plan assets 


assets 


plan assets 

(120,453) 

187,553 

(67,100) 

(262) 

0.00 262 

(12,929) 

0.00 12,929 

0.00 22,450 

(22,450) 

0.00 

20,355 

(9,016) 

144 

0.00 115 

0.00 (116) 

116 

0.00 10,150 

(10,150) 

95,858 

(132,626) 

200,084 

The surplus in the defined benefit pension plans reduces the risk of an eventual actuarial liability for the Company. The Company's management did not record this asset as the effective 

redudtion of contributions from the sponsor company or the reversal of amounts in the future are not assured. 

As the sponsor company, Escelsa contributes a monthly amount proportional to the contribution of EnerPrev members, in accordance with the conditions established in each benefit 

plan. 

The historical analysis of adjustments from actuarial gains and losses is as follows: 

12/31/2010 12/31/2009 12/31/2008 12/31/2007 12/31/2006 


Actuarial (Gains)/losses of assets (28,137) 

(1,972) 

19,700 

(8,562) 

(5,171) 

Percentage of (Gains)/losses related to the plan total assets -11.77% -0.99% 10.50% -3.90% -2.60% 



9,016 

(8,448) 

12,582 

10,766 

Percentage of (Gains)/losses related to the plan total assets 5.43% 6.80% -7.01% 10.11% 9.00% 


Present value of obligations not covered (143,214) 


Plan situation 95,858 


Debt securities 

Shares 52.06% 

Real estate 0.58% 

Other 0.98% 

Total 100% 

2010 

2009 

Expected Expected 

Asset class 

allocation return Expected allocation Expected return 


Shares 14.40% 13.29% 20.00% 13.25% 

Real estate 0.60% 11.20% 10.00% 10.75% 

Other 2.60% 10.77% 0.00 0.00 

Total 100.00% 11.49% 100.00% 11.25% 

(132,626) 

200,084 

67,458 

12/31/2010 

12/31/2009 

Plan I Plan II Plan I Plan II 

Active participants 3 845 3 879 

With deferred benefits 11 10 

Retirees and pensioners 726 207 730 204 

Total 729 

1,063 

733 

1,093 

(120,453) 

187,553 

67,100 


The effective return of plan assets in the year was R$50,449, compared to an expected return of R$22,312 in the beginning of the year, resulting in actuarial gain of R$28,137. 

We present below the demonstration of the number of Plan participants: 

F-119 

9,016 

(115) 

0.00 

0.00 

(67,458) 

(124,413) 

219,500 

95,087 

(119,591) 

198,889 

79,298

The main assumptions utilized in this actuarial appraisal of the benefits were as follows: 

Economic 

Discount rate 

Expected rate of return on assets 

Future salary increases 

Growth of benefits in pension plans and benefit plans 

Inflation 

Demographic 


Mortality table for invalids 



Economic 

Discount rate 

Expected rate of return on assets 

Future salary increases 


Inflation 

Demographic 





23.2.2 Retirement incentive aid, medical care, life insurance and other benefits to retirees 



12/31/2010 12/31/2009 12/31/2010 12/31/2009 

Retirement incentive aid - A IA 582 

582 

2,646 

2,543 

Medical care and Life Insurance 7,780 

5,588 

85,717 

66,327 

8,362 

6,170 

88,363 

68,870 

2010 2009 


plan assets 

The defined benefit liability opening balance recognized in the balance sheet (75,040) 



Past service cost (2,663) 

Special cost due to end of benefit 11,202 

Actuarial gains or (losses ) recognized in shareholders' equity (33,765) 

Benefits directly paid by the company 12,025 

The defined benefit liability closing balance recognized in the balance sheet (96,725) 

Unrecognized past service cost (30,429) 

Present value of actuarial liabilities completely unsecured (127,154) 

Plan I 

Plan I 


assets 

(55,428) 

(572) 

(5,998) 

0.00 

0.00 

(25,182) 

12,140 

(75,040) 

0.00 

(75,040) 

In 2011, expected contributions from subsidiary Escelsa for these benefits amount to R$8,362. 

These benefits' net expenses in 2010 and 2009 recognized in income as a contra entry to Post-employment benefits is as follows: 

2010 2009 

Cost of current service 425 


Past service cost 2,663 

Special cost due to end of benefit (11,202) 

Total (55) 

10.75% p.a. 

11.49% p.a. 

5.55% p.a. 

4.50% p.a. 

4.50% p.a. 

AT 2000 RP 2000 Geracional 

RP 2000 Disabled 




4.50% p.a. 

4.50% p.a. 

572 

5,998 

6,570 

2010 

2009 

Plan II 

Plan II 

10.75% p.a. 

11.49%a.a. 

5.55% p.a. 

4.50% p.a. 

4.50% p.a. 

Null as from 3 years of participation Null as from 3 years of participation 

in the Benefit Plan in the Benefit Plan 

11.20% p.a. 11.25% p.a. 

11.25%a.a. 

11.25%a.a. 

5.55% p.a. 5.55% p.a. 

4.50% p.a. 

4.50% p.a. 

AT 2000 

RP 2000 Geracional 

RP 2000 Disability RP 2000 Disability 



Null as from 3 years of participation Null as from 3 years of participation 

in the Benefit Plan 

in the Benefit Plan 

Retirement Incentive Aid - AIA – Benefit to employees hired up to December 31, 1981, payable on termination of the labor contract, irrespective of the reasons for such severance. The 

AIA guarantees payment of a benefit, the amount of which was calculated considering for each employee, the proportionality of the period of contribution to the INSS (Brazilian Social 

Security Service) up to October 31, 1996, the employee’s salary and the INSS benefit as at October 31, 1996. 

The actuarial evaluation carried out on the base date of December 31, 2010 determined a present obligation for Defined Benefit Plans, as shown in the reconciliation of plans' 

obligations. 

As established by CVM Resolution 600, of October 7, 2009, the accounting of liabilities arising from post-employment benefits should be based on the rules established in CPC33. To 

meet this requirement, the Company hired independent actuaries to conduct an actuarial appraisal of these benefits according to the Projected Unit Credit Method. 

F-120

12/31/2010 12/31/2009 12/31/2008 12/31/2007 12/31/2006 



25,182 

(10,884) 

1,601 

(138) 

Percentage of (Gains)/losses related to the plan total assets 26.55% 33.56% -19.64% 2.42% -1.94% 


Present value of obligations fully uncovered (127,154) 

Plan situation (127,154) 

The sensitivity analysis of medical costs trend rate variation is as follows: 

Core premises 

Defined Benefit Obligation 118,051 


Economic 

Discount rate 


Long-term medical inflation 

Inflation 

Demographic 





+1% -1% 

132,013 

106,245 

6,915 

5,839 

Economic 

AIA (Retirement Incentive Aid) 

Discount rate 

11.20% p.a. 

Growth of benefits in pension plans and benefit plans 4.50% p.a. 

n/a 


Inflation 

Demographic 





23.3 Energest 

23.3.1 

Actuarial gains and (losses) are recorded in Valuation adjustments to equity, in shareholders' equity, in the period in which they occur. As of December 31, 2010, the balance is 

(R$65,984) ((R$32,219) as of December 31, 2009). The historical analysis of adjustments from actuarial gains and losses is as follows: 

Medical Care to Retirees 


Medical cost trend rate variation 

The subsidiary Energest currently maintains the following retirement and pension supplementation plans on behalf of collaborators and former collaborators, managed by the entities 

listed below: 

The subsidiary Energest has the following liabilities with post-employment benefits: 

(i) Sponsorship of the complementary retirement and pension plans; and 

(ii )Other post employment benefits made up of healthcare plan and other benefits to retirees. 

Pursuant to CVM Resolution 600 of October 07, 2009, post employment benefit liabilities should be accounted for based on rules contained in CPC 33 of Accounting Pronouncements 

Committee. To meet this requirement, the Company hired independent actuaries to conduct an actuarial appraisal of these benefits according to the Projected Unit Credit Method. 

The actuarial appraisal realized as at December 31, 2010 showed that for these pension plans, the fair value of the assets exceeded the present value of the actuarial liabilities as 

indicated below: 

(75,040) 

(75,040) 

AIA (Retirement Incentive Aid) Medical care 

(55,428) 

(55,428) 

4.50% p.a. 4.50% p.a. 




0% 

2010 




0.00 

(66,045) 

(66,045) 

(7,131) 

(7,131) 

10.75% p.a. 10.75% p.a. 10.75% p.a. 

4.50% p.a. n/a 

n/a 9.5%p.a. in 2011, decreased linearly to 5.5%p.a. 

up to 2019 

4.50% p.a. 

n/a 

4.50% p.a. 

Medical care 

Life Insurance 

11.20% p.a. 11.20% p.a. 

n/a 

4.50% p.a. 

9.5%p.a. in 2010, decreased linearly to 

5.5%p.a. up to 2018 

n/a 

Life Insurance Other benefits to retirees 

10.75% p.a. 




n/a 


n/a 

0.00 

Other benefits to retirees 

11.20% p.a. 

4.50% p.a. 

n/a 

4.50% p.a. 4.50% p.a. 




RP 2000 Disabled RP 2000 Disabled RP 2000 Disabled 




n/a 


0% 0.00 

n/a 

0.00 

Complementary retirement and pension plans 

The parent company Energest is the sponsor of the complementary retirement and pension plans, managed by EnerPrev since September 19, 2008, current managing entity of pension 

plans so far managed by Fundação Escelsa de Seguridade Social – (“ESCELSOS”) and Fundação Enersul, a closed entity, not for profit private pension plan entity responsible for 

managing a group of pension plans on behalf of the subsidiary Energest's employees and former employees, through two benefit plans: Benefit Plan I of the defined benefit type and 

Benefit Plan II of the defined contribution type, convertible into the defined benefit type on conversion to lifetime income. 

F-121 

2009 

4.50% p.a. 

4.50% p.a. 4.50% p.a. 

n/a 

4.50% p.a.

Opening balance 

Fair value of 


(1,340) 


Interest cost (144) 

Earnings expected from assets 

Actuarial gains or (losses ) recognized in shareholders' 

- 

equity 

459 

Contribution paid by the company - 

Contribution paid by employees (7) 

Contribution paid by the company - 

Benefits paid by the plan 71 

Closing balance (986) 


plan assets 

2,782 

- 

- 

(615) 

- 

5 

7 

7 

(71) 

2,115 


plan assets 

1,442 

(25) 

(144) 

(615) 

459 

5 

- 

7 

- 

1,129 


plan assets 

(850) 

133 

(92) 

- 

(622) 

- 

(2) 

- 

93 

(1,340) 


plan assets 

2,469 

- 

- 

398 

- 

2 

2 

4 

(93) 

2,782 


plan assets 

(1,619) 

(133) 

92 

(398) 

12/31/2010 12/31/2009 12/31/2008 12/31/2007 12/31/2006 


Actuarial (Gains)/losses of assets 930 

(130) 

(182) 

(515) 

(113) 

Percentage of (Gains)/losses related to the plan total assets 43.97% -4.67% -7.37% -46.23% -24.41% 


Actuarial (Gains)/losses of obligations (489) 

622 

182 

37 

46 

Percentage of (Gains)/losses related to the plan total assets -49.59% 46.42% 21.41% 19.27% 40.35% 


Present value of obligations not covered (986) 


Plan situation 1,129 


Debt instruments 

Shares 

Real estate 

Other 

Total 

88,33%. 

9.19% 

0.82% 

1.66% 

100.00% 

Expected 

allocation 

Expected 

return 

2009 

Expected allocation Expected return 

Asset class 


Shares 20.00% 13.25% 14.40% 13.29% 

Real estate 10.0% 10.75% 0.60% 11.20% 

Other 2.60% 10.77% 

Total 100.00% 11.25% 100.00% 11.49% 

We present below the demonstration of the number of plan participants: 

Plan I Plan II Total 

Active participants 3 

879 

882 

Assisted participants - 

With deferred benefits 10 

10 

Retirees and pensioners 730 

204 

934 

Total 733 

1,093 

1,826 

2010 2009 

The surplus in the defined benefit pension plans reduces the risk of an eventual actuarial liability for the Company. The company’s management has not recorded this asset due to the 

uncertainty of an effective reduction in the Sponsor’s contributions or of future reimbursement. 

In its function as sponsor, the company makes a monthly payment proportional to EnerPrev members’ contributions as established in each benefits plan. 

The historical analysis of adjustments arising from actuarial gains and losses is as follows: 


2010 

The effective return of the plan assets in the year was (R$615), in comparison with an expected return of R$315 in the beginning of the year, resulting in actuarial loss of R$930. 

F-122 

(1,340) 

2,782 

1,442 

(850) 

2,469 

1,619 

622 

(2) 

- 

(4) 

- 

(1,442) 

(192) 

1,114 

922 

(114) 

463 

349

23.3.2 

The main assumptions utilized in this actuarial appraisal of the benefits were as follows: 

2010 

Plan I 

Plan II 

Economic 




Average long-term inflation 


Capaciy factor - salaries and benefits 100% 100% 

Demographic 





2,009 

Economic 

Plan I Plan II 







Demographic 





Unrecognized past service cost 

Present value of actuarial liabilities completely unsecured 

2010 

Fair value of 


1,651 

1,651 

The Company's expected contributions to this benefits for 2011 amount to R$9. 

The sensitivity analysis of medical costs trend rate variation is as follows: 

Medical Care to Retirees Core 

Medical cost trend rate variation 

+1% -1% 

Defined Benefit Obligation 1,567 

1,840 

1,343 

10% p.a. in 2009, decreased linearly to 

5.5% p.a. up to 2018 


RP 2000 Disability 





5.5% p.a. up to 2018 

10% p.a. in 2009, decreased linearly to 5.5% 

p.a. up to 2018 





Benefit Plan 


p.a. up to 2018 





Wyatt 85 Class 1 Wyatt 85 Class 1 

Null as from 3 years of participation in Null as from 3 years of participation in the 


Benefit Plan 

Retirement incentive aid, medical care, life insurance and other benefits to retirees. 

According to the same actuarial appraisal mentioned in Note 21.3, the following obligations with other post-employment benefits were assessed: 

Medical care and other benefits to retirees - Medical care, dental care, medicines, and when it is proved that there is a special dependent, a benefit corresponding to 50% of subsidiary 

Energest minimum salary; and 

The actuarial evaluation carried out as of December 31, 2010 determined a present obligation for defined benefit plans, as shown in the reconciliation of plans obligations: 

F-123


Economic 







Demographic 





Economic 







Demographic 





23.4 EnerPrev – Pension plans of the defined contribution type 

23.5 EDP Renováveis, Enerpeixe and Evrecy 

24 Estimated personnel liabilities 

Medical care 


Consolidated 

12/31/2010 12/31/2009 12/31/2010 12/31/2009 


Payroll 3,020 

3,869 

41,384 

42,607 

PIS / COFINS 0.00 0.00 0.00 0.00 

IR / CSLL 0.00 0.00 64 

0.00 

INSS & FGTS 1,754 

302 

9,002 

6,221 

Total 4,774 

4,171 

50,450 

48,828 


5.5% p.a. up to 2018 


5.5% p.a. up to 2018 

2010 

Other benefits to retirees 


p.a. up to 2018 






Null as from 3 years of participation in Null as from 3 years of participation in the 


Benefit Plan 


p.a. up to 2018 




Wyatt 85 Class 1 Wyatt 85 Class 1 

In the capacity of sponsors of this type of plan, the Companies from Grupo Energias do Brasil contributed the sum of R$1,662 in the year (R$983 in 2009). 

2009 

Medical care Other benefits to retirees 




Benefit Plan 

EnerPrev is a closed, not for profit private pension plan entities and was created in the end of 2006 in order to centrally manage the pension plans of companies within the Group 

Energias do Brasil. EnerPrev manages its own plan and a private plan through Bradesco Vida e Previdência S.A. consisting of benefits of the Defined Contribution type, not generating 

any actuarial responsibility on the part of the Sponsors. 

The applications of the benefit plans managed by Enerprev for the direct subsidiary Enerpeixe and the indirect subsidiaries EDP Renováveis and Evrecy were authorized in the first half 

of 2010. 

The Payroll account basically includes accrued vacation pay and respective social charges and provision for profit sharing and gainsharing. 

F-124

25 Regulatory and sector charges 

Accounts payable related to charges established in the electricity sector legislation are as follow: 

Current 

Noncurrent 

12/31/2010 12/31/2009 12/31/2010 12/31/2009 

Reversal Global Reserve Quota - RGR 12,022 

2,929 

0.00 0.00 

Collection quota to the Fuel Consumption Account - CCC 24,185 

4,114 

0.00 0.00 

Energy Development Account - CDE 16,188 

16,443 

0.00 0.00 

Financial offsetting for the use of hydric resources 6,569 

5,820 

0.00 0.00 

Tariff charges (ECE/ EAEEE) 31,860 

31,952 

0.00 0.00 

Research and development 58,929 

40,488 

9,584 

11,511 

Energy Efficiency Program 74,489 

52,879 

3,329 

3,428 

Use of Public Property - UBP - Granting rights 0.00 1,135 

0.00 0.00 

Inspection fee - ANEEL 1,138 

801 

0.00 0.00 

Total 225,380 

156,561 

12,913 

14,939 

25.1 Research and Development (“R&D”) and Energy Efficiency Program (“EEP”) 

Expenditures with R&D and PEE made by the subsidiaries are calculated under the terms of the sector legislation, of the electric energy concession contracts and are regulated by 

Normative Resolutions ANEEL nºs 300 and 316 of February 12, 2008 and May 13, 2008 respectively. The subsidiaries are obligated to invest 1% of the Net operating revenue adjusted 

in conformity with the criteria defined by ANEEL, recording the value of liability monthly by competent period. The liability is restated monthly by the variation of the SELIC rate up to the 

conclusion of the R&D and PEE (energy efficiency) projects, when its write-off occurs. 

25.2 Other charges 

Law nº 12.911 of December 9, 2009, regulated by circular Official Letters nºs 965/2010-SFF/ANEEL and 648/2010-SAF/ANEEL, established that the concession and permit holders for 

public electrical power distribution services are obliged to collect an additional 0.3% of net operating Revenues utilizing the same criteria for the constitution of R&D liabilities for the 

purposes of indemifying the Federal Units that suffered loss of revenues as a result of ICMS tax collection on fossil fuels used to generate energy for the National Grid (Sistema 

Interligado Nacional). 

26 Use of Public Property 

The subsidiaries Enerpeixe and Investco, as retribution for the concession granted there to for exploration of the hydroelectric potentials of the Peixe Angical and Lajeado plants, 

respectively, pay to the Federal Government over the lifetime of the concession contracts and while they are exploring them, monthly installments equivalent to one twelfth (1/12) of the 

annual sum defined in the concession contracts, restated annually with a basis on the annual variation of IGP-M calculated by Fundação Getúlio Vargas (or another index that takes its 

place) in the months of October for Enerpeixe and December for Investco. 

In accordance with CPC 38 - Financial Instruments - Recognition and Measurement, total fair value of the obligation referring to the Use of public property until the end of the concession 

agreement was provisioned and capitalized as a contra entry to Intangible assets (Note 19) at initial recognition. 

This intangible asset is being amortized over the concession agreement period and the liability is being amortized by payment. 

Current and noncurrent liabilities balances are recognized at present value at the project's implicit rate. 

Changes in the year are as follows: 

Current Noncurrent 

Principal 0.00 0.00 

Balances at December 31, 2009 17,280 

205,564 

Entries 0.00 0.00 

Adjustment to present value (1,446) 

0.00 

Charges and monetary restatements 11,838 

18,247 

Amortizations (16,279) 

0.00 

Transfer to current 8,047 

(8,047) 

Balances at December 31, 2010 19,440 

215,764 

27 Provisions – Current and non-current 

Consolidated 


Consolidated 

12/31/2010 12/31/2009 12/31/2010 12/31/2009 


Civl, tax, and labor provisions and other 28,230 

26,677 

149,944 

148,016 

Environmental licenses 0.00 0.00 32,147 

11,124 

Disassemblies 0.00 0.00 1,750 

1,606 

Total 28,230 

26,677 

183,841 

160,746 

0.00 0.00 0.00 0.00 

0.00 0.00 0.00 0.00 

Current 1,318 

2,208 

30,275 

19,647 

Noncurrent 26,912 

24,469 

153,566 

141,099 

28,230 

26,677 

183,841 

160,746 

The Company and its subsidiaries are parties to legal actions and administrative proceedings in several courts and with government bodies arising from the normal course of operations, 

involving tax, labor, civil and other issues. 

F-125

27.1 Provisions for contingencies and restricted deposits – current and non-current 

27.1.1 Risk of probable loss 

Based on information from its legal advisors and the analysis of pending lawsuits, managements of the Company and its subsidiaries have constituted provisions considered sufficient to 

cover losses estimated as probable for ongoing legal actions as follows: 




Balance at 

Judicial Deposit 

Degrees 12/31/2009 Additions Payments Reversals 12/31/2010 12/31/2010 12/31/2009 

Labor claims 1st, 2nd and 3rd 0.00 157 

(144) 

(5) 

8 

5 

486 

Tax 1st, 2nd, 3rd and Mgt 2,249 

0.00 0.00 (2,249) 

0.00 0.00 4,724 

Other 24,428 

16,589 

(7,524) 

(5,271) 

28,222 

0.00 2,080 

Total 26,677 

16,746 

(7,668) 

(7,525) 

28,230 

5 

7,290 

Current 2,208 

Noncurrent 24,469 

Total 26,677 

27.1.2 Labor claims 

27.1.3 Civil 

27.1.4 Other 

Consolidated 


Balance at Write-offs Balance at 


Degrees 12/31/2009 Additions Payments Reversals 12/31/2010 

12/31/2010 12/31/2009 

Labor claims 1st, 2nd and 3rd 46,506 

28,744 

(9,018) 

(21,257) 

44,975 

18,067 

7,529 

Civil 

1st, 2nd, 3rd and Mgt 66,189 

20,785 

(9,194) 

(11,624) 

66,156 

24,154 

10,441 

Tax 

1st, 2nd, 3rd and Mgt 10,893 

10,246 

(6,526) 

(4,022) 

10,591 

3,995 

5,227 

Other 

24,428 

16,589 

(7,524) 

(5,271) 

28,222 

0.00 8,836 

Total 

148,016 

76,364 

(32,262) 

(42,174) 

149,944 

46,216 

32,033 

Current 

Noncurrent 

Total 

Bandeirante 

11,117 

136,899 

148,016 

As of December 31, 2010, the balances as of December 31, 2009, amounting to R$2,208, were reclassified for better comparability from noncurrent liabilities to current liabilities under 

caption Other, referring to the exchange of Enersul shares for shares held by Investco that were previously held by Grupo Rede, and the amount R$1,282 related to the provision for 

penalties due to supply interruption was reclassified from Other receivables in current liabilities, in subsidiary Escelsa. 

Law suits filed corresponding to the periods after January 1st, 1998 as per the agreement for the partial spin-off of Eletropaulo - Eletricidade de São Paulo S.A. Subsequently, pursuant 

to the Partial Spin-off Agreement of Bandeirante on October 1st, 2001, each concessionaire (Bandeirante and Piratininga) is responsible for the liabilities corresponding to the 

employees allocated to the respective regions taken over by each Company. Responsibility for corporate suits will be taken on according to the percentage proportion of the controllers 

(Bandeirante and Piratininga) as determined in the respective spin-off agreement. 

Escelsa, Energest, CESA, Investco, Escelsapar and EDP 

Bandeirante 

Refer mainly to claims for reimbursement of amounts paid in the form of tariff increases by industrial consumers due to the application of DNAEE Ordinances 38 of February 27, 1986 

and 45 of March 4, 1986 - the Cruzado Plan, in force from March to November of that year. Original values are restated based on the system practiced by the Judiciary. The balance as 

at December 31, 2010 is R$40,260 (R$41,814 in 2009). 

1,318 

26,912 

28,230 

9,159 

140,785 

149,944 

Several suits question among other matters, overtime payments, hazardous work claims and reinstatement premiums. 

The balance provided for as at December 31, 2010 is R$16,039 (R$18,718 in 2009). 

Several lawsuits questioning, among other issues, overtime payments, hazardous work and reinstatement premiums. 


Enertrade 

Lawsuit filed by Enertrade, questioning the constitutionality of payments relating to the Energy Development Account – CDE. 


Refers mainly to the commitments covenanted in the exchange process of the control shares of Enersul with the control shares of Investco formerly belonging to Grupo Rede Energia 

S.A., relative to the lawsuits of various types filed against Enersul the generating events of which originated in periods when the control of Enersul was exercised by the Company. 

F-126

27.2 Risk of possible loss 

27.2.1 Civil 

27.2.2 Tax 

There are ongoing labor, civil and tax proceedings, the loss of which has been deemed as possible. These items are periodically reassessed, not requiring constitution of provisions in 

the financial statements and are as follow: 

Labor claims 

Civil 

Tax 

Other 

Total 

Degrees 

1st, 2nd and 3rd 



Assets 

Assets 

Parent 

company 


Consolidated Judicial Deposit 

12/31/2010 12/31/2010 12/31/2010 12/31/2009 12/31/2010 12/31/2009 

688 

394 

70,653 

47,789 

4,416 

5,008 

0.00 0.00 180,168 

104,631 

61,685 

136 

51,878 

4,123 

382,891 

100,127 

11,272 

17,645 

55,553 

0.00 59,284 

0.00 0.00 0.00 

108,119 

4,517 

692,996 

252,547 

77,373 

22,789 

Among the main claims where losses are deemed as possible, the highlights are as follow: 

Investco 

The lawsuits of a civil nature refer largely to the compensation claimed by parties that consider themselves affected by the filling of the plant reservoir or that intend to increase 

compensation received on account of the aforesaid filling, in the amount of R$69,576 (R$62,213 in 2009). 

Due to their significant number, it is not possible to identify the current level of each one. 

Bandeirante 

In the civil sphere, the subsidiary Bandeirante is a party in lawsuit nº 2000.001.127615-0, running at the 10th Civil Court of the Central Forum of the Judiciary District of Rio de Janeiro, 

filed by White Martins, discussing the existence of impacts resulting from the effectiveness of administrative rulings 38/86 and 45/86 of the dissolved DNAEE, on electric power 

consumption tariffs. In the month of April 2010, the company complied with a legal determination of substitution of the existing procedural guarantee, of letter of guarantee by a bank 

deposit in the amount of R$ 60,951. The lawsuit is currently under appeal. 

Escelsa 

Tariff raise, relating to the escalation of electricity tariff, authorized by DNAEE Rulings nºs 38 and 45 of February 27 and March 4, 1996 under discussion under the judicial sphere. On 

December 31, 2010, this proceeding amounts to R$ 1,731 (R$ 11,597 in 2009). 


The parent company is a party to administrative discussions related to the Federal Revenue Service not recognizing a corporate income tax (IRPJ) negative balance, determined for 

years 1999/2001, originated from a merged company (Magistra Participações S/A), and that totals R$ 49,638. 

Bandeirante 

Among the main claims where losses are deemed as possible, the highlight is the discussion in the administrative sphere regarding ICMS credits utilized by the subsidiary Bandeirante in 

the period from July 2003 to December 88,281, referring to amounts of "Annulment/Return of Sale of Electric Energy" in the amount of R$88,281. The subsidiary Bandeirante has 

presented defense and is awaiting judgment. Risk value substantially increased in the last year due to the new adjustment criteria of State Law 13,918/2009 and SF Resolution 98/2010. 

Subsidiary Bandeirante has other tax contingencies amounting to approximately R$90,772 referring to the administrative discussion of non-homologated offsets of credits arising from 

IRPJ, CSLL, PIS and COFINS overpayments in 2001, as a result of COSIT Opinion 26/2002 application (taxes on RTE). 

Escelsa 

INSS tax authorities issued collection notices on: (i) exclusion self-employed and or other corporate entities, with the argument that there exists an employment relationship between 

service providers and Company; (ii) the levy of INSS tax on profit sharing and scholarship payments made to employees that are pension plan members. These tax collection notices 

amount to R$8,685 and are currently awaiting an administrative decision. 

Several Municipal Authorities - Subsidiary Escelsa is discussing in court the collection of ISSQN allegedly levied on services related to the supply of electric power. Also includes 

payment demand on land occupied by posts for the electricity network and public lighting. These lawsuits amount to R$6,904 and are awaiting lower court decision. 

Subsidiary Escelsa is a party to administrative discussions related to offsets not homologated by the Federal Revenue Service backed by credits recognized in court, as well as credits 

arising from IRPJ and CSLL overpayment and negative balances that amount to R$57,241. 

Enertrade 

The trading company is discussing in court the levy of ICMS on interstate electric power commercialization transactions amounting to R$13,963 and collateralized by bank guarantees. 

The lawsuit is awaiting a final decision. 

There are administrative discussions about the collection of IRPJ, CSLL, PIS and COFINS debts referring to 2004/2006, arising from the non homologation of these taxes credit offset. 

These proceedings amount to R$9,772 on December 31, 2010. 

Based on the opinion of its legal counsel that losses are possible, the Company did not record a provision for these contingencies. 

27.2.3 Other 

Refer to the contingency described in note 27.1.4 

F-127

27.3 Risk of remote loss 

In addition to this, in the subsidiary companies Bandeirante, Escelsa CESA, Escelsapar, Enertrade, Investco, Lajeado there are labor, civil and tax related proceedings underway, for 

which the chances of losing have been estimated as being remote, and for these actions the court deposit balances on December 31, 2010 stood at R$33,416. 

28 Shareholders' equity 

28.1 Capital stock 

The Company's equity capital is of R$ 3,182,716, represented by 158,805,204 shares, all of which common registered shares with no par value, with the following main characteristics: 

• Capital stock is exclusively represented by common shares. Each common share will grant the holder the right to one vote in the resolutions of the Company's General Meetings; 

• The shares are indivisible in relation to the Company. When the share belongs to more than one person, the rights vested thereupon will be exercised by the joint ownership 

representative. 

• The issuance of beneficiary parts by the Company is hereby prohibited; 

• The Company is authorized to increase the capital up to the limit of two hundred million (200,000,000) common shares regardless of statutory reform, by decision of the Board of 

Directors, which will also be responsible for establishing the terms of the issue, including price, term and form of its payment. 

• The Company may issue shares, debentures convertible into common shares and subscription bonuses within the limit of the authorized capital; and 

• At the sole discretion of the Board of Directors, it is possible to exclude or reduce the right of preference in the issues of shares, debentures convertible into shares and subscription 

bonuses, whose placement is performed through sale at a stock exchange or public subscription, under legal terms, and within the limit of the authorized capital. 

The composition of the capital stock on December 31, 2010, and December 31, 2009 is shown as follows: 

12/31/2010 

12/31/2009 

Quantity % Quantity % Controlling 

Shareholders of shares interest of shares interest shareholder 

Energias de Portugal Investments and Services, Sociedad Limitada (1) (2) 38,234,188 

24.08 

38,234,188 

24.08 yes 

Balwerk – Consult. Econômica e Particip., Soc.Unipessoal Ltda. (1) (2) 24,928,914 

15.70 

24,928,914 

15.70 yes 

EDP – Energias de Portugal, S.A. (1) (2) 39,739,013 

25.02 

39,739,013 

25.02 yes 

Electricidade de Portugal Internacional, SGPS, S.A. 0.00 0.00 0.00 0.00 yes 

Herald Securities INC. (2) 0.00 0.00 0.00 0.00 yes 

Treasury shares 280,225 

0.18 

280,225 

0.18 

0.00 0.00 

Other (3) 55,622,864 

35.02 

55,622,864 

35.02 

0.00 0.00 

Total 158,805,204 

100 

158,805,204 

100 

0.00 

(1) Shareholder with more than 5% of the voting shares. 

(2) Foreign-owned company. 

(3) There are 55,622,864 outstanding shares out of the total 158,805,204, that is, around 35.02% of the total quantity of shares. 

Treasury stock does not have equity rights. 

There are 17 lawsuits/shares in the possession of the Board of Directors. 

The Fiscal Council has not been formed since the Initial Public Offer of July 13, 2005. 

Calculation of free float: 

F-128

Number of shares of controlling shareholders 102,902,115 

64.80 

102,902,115 

Number of shares - reciprocal interest 0.00 0.00 0.00 0.00 

Number of treasury shares 280,225 

Number of shares for members and directors 17 

Total of non-outstanding shares 103,182,357 0.00 103,182,357 0.00 

Total of shares 158,805,204 

0.00 158,805,204 

0.00 

Total of outstanding shares 55,622,847 35.02 

55,622,847 35.02 

28.2 Allocation of net income 

12/31/2010 


Adjusted net income 587,873 

Prior year adjustments - Law nº 11,638/07 (108,122) 

Adjusted net income 479,751 

Formation of legal reserve - 5% (23,987) 

455,764 

Allocation of net income: 


Intermediary dividends - Interest on Own Capital 106,000 

Supplementary dividends 7,941 

Profit retention reserve 341,823 

Number of shares 158,524,979 

Dividends per share - Interest on Own Capital - R$ 0.668664 

Dividends per share - supplementary - R$ 0.050093 

28.3 Reserves 

12/31/2010 12/31/2009 

Capital reserves 0.00 Adjusted 

Goodwill on merger of parent company 95,598 

96,656 

95,598 

96,656 

Equity valuation adjustments 0.00 0.00 

Actuarial (loss) / gain with Retirement benefits (114,497) 

(30,177) 

Financial assets available for sale 3,301 

1,585 

Cash flow hedge (30,453) 

(31,763) 

Income tax and social contribution - deferred 37,807 

10,260 

(103,842) 

(50,095) 

Profit reserves 0.00 0.00 

Legal 134,322 

111,951 

Profit retention 1,252,298 1,131,096 

1,386,620 1,243,047 

Total 1,378,376 1,289,608 

28.3.1 Profit retention reserve 

Number of shares 

12/31/2010 

% interest 

0.18 

0.00 

Number of shares 

The Company's dividend policy, pursuant to the 120th meeting of the Board of Directors held on March 5, 2008, establishes the payment of a minimum amount equivalent to fifty percent 

(50%) of the adjusted net income, calculated in conformity with articles 189 and following articles of Corporation Law, which can be reduced when thus required by a legal or regulatory 

provision or, when recommendable in view of the financial situation and/or future prospects of the Company. 

Description of the capital reserves' nature: 

- Goodwill in the takeover of parent company referring to the corporate restructuring performed in the year 2005 in the amount of R$ 35,348; and 

- Result in the sale of treasury shares in 2009 in the amount of R$ 60,251. 

Reserve for profit retention has been constituted pursuant to Article 196 of Law 6404/76 in support of the Company’s Capital Expenditures’ Program as set forth in the capital budgets 

submitted to the Ordinary General Shareholders’ Meetings. 

F-129 

280,225 

12/31/2009 

17 

% interest 

64.80 

0.18 

0.00

29 Dividends – assets and liabilities 

12/31/2010 12/31/2009 12/31/2010 12/31/2009 12/31/2010 12/31/2009 

Adjusted Adjusted Adjusted 

Bandeirante 61,614 

51,439 

0.00 0.00 0.00 0.00 

Escelsa 36,980 

34,637 

0.00 0.00 0.00 0.00 

Energest 16,892 

15,550 

0.00 0.00 0.00 0.00 


5,969 

0.00 0.00 0.00 0.00 


12,012 

0.00 0.00 0.00 0.00 

Investco 0.00 0.00 0.00 0.00 12,197 

11,282 


16,501 

0.00 0.00 0.00 0.00 

Shareholders - Energias do Brasil 0.00 0.00 100,822 

75,391 

100,822 

75,391 

Eletrobrás 0.00 0.00 0.00 0.00 70,573 

49,187 

Governo de Tocantins 0.00 0.00 0.00 0.00 750 

750 

Furnas Centrais Elétricas S.A. 0.00 0.00 0.00 0.00 6,800 

8,008 

Total 169,312 136,108 

100,822 

75,391 

191,142 

144,618 

30 Net operating revenue 

Assets 


Consolidated 

Liabilities Liabilities 

Nº of consumers (*) 

Consolidated 

MWh (*) 

R$ 

12/31/2010 12/31/2009 12/31/2010 12/31/2009 12/31/2010 12/31/2009 

Supply of electric energy Adjusted 

Residential 2,342,008 2,282,266 4,893,570 

4,704,227 

2,055,588 1,906,291 


20,876 4,290,504 

3,906,217 

1,344,924 1,226,847 

Commerce, services and other 193,808 

191,440 2,897,925 

2,781,321 

1,104,002 1,049,630 

Rural 160,201 

150,226 

660,799 

609,038 

147,924 

126,068 

Public power 17,855 

18,461 

513,891 

499,958 

194,401 

186,798 

Public lighting 2,228 

2,145 

521,232 

513,244 

114,613 

110,640 

Public utility service 2,304 

2,197 

433,464 

412,245 

117,524 

111,607 

Own consumption 261 

253 

13,836 

13,695 

0.00 0.00 

Total billed supply 2,740,606 2,667,864 14,225,221 

13,439,945 

5,078,976 4,717,881 

(-) ICMS 0.00 0.00 0.00 0.00 0.00 0.00 

Residential 0.00 0.00 0.00 0.00 (462,368) (430,096) 

Industrial 0.00 0.00 0.00 0.00 (257,974) (241,566) 

Commerce, services and other 0.00 0.00 0.00 0.00 (229,756) (218,438) 

Rural 0.00 0.00 0.00 0.00 (19,043) 

(8,582) 

Public power 0.00 0.00 0.00 0.00 (28,655) 

(27,298) 

Public lighting 0.00 0.00 0.00 0.00 (23,965) 

(23,091) 

Public utility service 0.00 0.00 0.00 0.00 (25,104) 

(24,006) 

0.00 0.00 0.00 0.00 (1,046,865) (973,077) 

Total billed supply, net of RTE and ICMS 0.00 0.00 0.00 0.00 4,032,111 3,744,804 

Unbilled supply 0.00 0.00 0.00 0.00 (21,319) 

56,252 

Billed supply - free clients 0.00 0.00 0.00 0.00 387,317 

417,581 

(-) ICMS on billed supply - free clients 0.00 0.00 0.00 0.00 (40,573) 

(57,831) 

Tariff modicity - low income 0.00 0.00 0.00 0.00 25,299 

24,096 

Supply of electric energy 3 

3 9,020,954 

8,226,810 

579,782 

561,476 

Trading supply 0.00 0.00 0.00 0.00 430,165 

364,504 

ECE & EAEEE 0.00 0.00 0.00 0.00 (6) 

(14) 

Transfer to tariff of use of the system of 

0.00 

0.00 

0.00 

0.00 

0.00 

0.00 

0.00 

0.00 

5,392,776 

0.00 

5,110,868 

0.00 

distribution - captive clients 

(-) ICMS on transfer to tariff of use of the system of 

0.00 0.00 0.00 0.00 (2,616,278) (2,580,193) 

distribution - captive clients 

0.00 0.00 0.00 0.00 550,937 

536,545 

Total supply of electric energy 0.00 0.00 0.00 0.00 3,327,435 3,067,220 

0.00 0.00 0.00 0.00 0.00 0.00 

Distribution and transmission system 0.00 0.00 0.00 0.00 0.00 0.00 

Transfer to tariff of use of the system of distribution - other 

(-) ICMS on tariff of use of the system of 

120 

107 9,034,008 

7,423,297 

918,956 

694,657 

distribution - other 

0.00 0.00 0.00 0.00 (286,214) (191,478) 

Transfer to tariff of use of the system of distribution - captive clients 0.00 0.00 0.00 0.00 2,616,278 2,580,193 

(-) ICMS on tariff of use of the system of distribution - captive clients 

0.00 0.00 0.00 0.00 (550,937) (536,545) 

0.00 0.00 0.00 0.00 2,698,083 2,546,827 

Other operating income 0.00 0.00 0.00 0.00 0.00 0.00 

Short-term energy 0.00 0.00 0.00 0.00 147,777 

37,841 

Taxed services and other 0.00 0.00 0.00 0.00 191,118 

139,334 

Total other operating income 0.00 0.00 0.00 0.00 338,895 

177,175 

0.00 0.00 0.00 0.00 6,364,413 5,791,222 

(-) Deductions from revenue 0.00 0.00 0.00 0.00 0.00 0.00 

PEE and R&D 0.00 0.00 0.00 0.00 (45,922) 

(42,653) 

Other charges 0.00 0.00 0.00 0.00 (44,634) 

(34,270) 

CCC 0.00 0.00 0.00 0.00 (221,389) (169,833) 

CDE 0.00 0.00 0.00 0.00 (194,264) (197,311) 

RGR 0.00 0.00 0.00 0.00 (43,595) 

(41,890) 

PIS/COFINS 0.00 0.00 0.00 0.00 (779,572) (680,719) 

ICMS 0.00 0.00 0.00 0.00 0.00 (2,332) 

ISS 0.00 0.00 0.00 0.00 (721) 

(512) 

0.00 0.00 0.00 0.00 (1,330,097) (1,169,520) 

Total 

(*) Not audited by independent auditors 

2,740,729 2,667,974 32,280,183 

29,090,052 

5,034,316 4,621,702 

F-130

31 Operating expenses 



2010 2009 

With 

commercialization 

General and 


Other Total Total 

Manageable 0.00 0.00 0.00 0.00 0.00 

Personnel, Managers and Private Pension Plan Entity 0.00 21,627 

0.00 21,627 

21,283 

Material 0.00 967 

0.00 967 

617 

Third-party services 0.00 26,839 

0.00 26,839 

28,667 

Depreciation and amortization 0.00 17,993 

0.00 17,993 

19,920 

Provisions for contingencies 0.00 0.00 (609) 

(609) 

22,220 

Rental and leases 0.00 2,981 

0.00 2,981 

2,779 

Other 2,132 

13,546 

0.00 15,678 

12,026 

Total 2,132 

83,953 

(609) 

85,476 

107,512 

2010 2009 

Not manageable 

Electricity purchased for resale 

Adjusted 

Itaipu 391,340 

0.00 0.00 0.00 0.00 0.00 391,340 454,213 

Auction 974,377 

0.00 0.00 0.00 0.00 0.00 974,377 711,812 

PROINFA 69,135 

0.00 0.00 0.00 0.00 0.00 69,135 60,643 

Bilateral contracts 777,460 

0.00 0.00 0.00 0.00 0.00 777,460 800,746 

Short-term energy - CCEE 67,184 

0.00 0.00 0.00 0.00 0.00 67,184 68,319 

Other suppliers 81,717 

0.00 0.00 0.00 0.00 0.00 81,717 21,978 

Use and connection charge 561,010 

0.00 0.00 0.00 0.00 0.00 561,010 502,340 

Charge - CCEE 95,423 

0.00 0.00 0.00 0.00 0.00 95,423 20,315 

Energy Efficiency Program 0.00 0.00 0.00 0.00 0.00 0.00 0.00 272 

PIS/COFINS (319,426) 

0.00 0.00 0.00 0.00 0.00 (319,426) (300,057) 

Inspection fee 0.00 0.00 0.00 0.00 0.00 12,631 

12,631 11,587 

Financial compensations 0.00 0.00 0.00 0.00 0.00 30,491 

30,491 27,567 

2,698,220 

- 

- 

- 

- 

43,122 2,741,342 2,379,735 

Manageable 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 

Personnel, Managers and Private Pension Plan Entity 

0.00 151,934 

442 

0.00 114,085 

219 

266,680 

Material 0.00 16,021 

1,596 

0.00 4,686 

13 

22,316 

Third-party services 0.00 187,045 

3,547 

139 

133,518 

250 

324,499 

Depreciation and amortization 0.00 276,203 

0.00 0.00 81,775 

0.00 357,978 

Allowance for doubtful accounts/net losses 0.00 0.00 0.00 76,911 

0.00 0.00 76,911 

Provisions for contingencies 0.00 0.00 0.00 0.00 0.00 6,521 

6,521 

Rental and leases 0.00 746 

7 

0.00 8,607 

209 

9,569 

PIS/COFINS 0.00 (2,043) 

0.00 0.00 (33,021) 

0.00 (35,064) 

Other 0.00 31,390 

458 

3,202 

34,173 

2,323 

71,546 

- 

661,296 

6,050 

80,252 

343,823 

9,535 1,100,956 

Total 2,698,220 

661,296 

6,050 

80,252 

343,823 

52,657 3,842,298 

32 Financial result 

With electric 

energy 

Service cost 

Operation 

Rendered to 

third-parties 

With Trading 

Consolidated 


General and 



Consolidated 

2010 2009 2010 2009 


Financial revenues 0.00 0.00 0.00 0.00 

Revenue from financial investments 10,098 

3,731 

65,791 

29,091 

PIS/COFINS on financial revenues (7) 

0.00 (7) 

(27) 

Monetary variation and moratory addition from sold energy 0.00 0.00 76,379 

78,995 

Monetary variation and moratory addition from purchased energy 0.00 0.00 1,992 

0.00 

Monetary restatement of judicial deposits - REFIS 0.00 0.00 33,417 

0.00 

Monetary variations - domestic currency 1,656 

0.00 10,032 

(3,774) 

Monetary variations - foreign currency 0.00 4 

16,325 

62,764 

SELIC on taxes and social contributions to offset 5,179 

5,385 

27,553 

10,080 

Discounts obtained 0.00 0.00 9 

12 

Adjustment to present value 753 

(4,281) 

87,675 

(5,185) 

Other financial revenue 8,749 

89,485 

18,806 

120,835 

Gain on the disposal of foreign exchange securities 0.00 0.00 0.00 3,767 

26,428 

94,324 

337,972 

296,558 

Financial expenses 0.00 0.00 0.00 0.00 

Interest and fines on taxes (6,606) 

0.00 (6,606) 

0.00 

Debt charges (779) 

(29,858) 

(226,822) 

(259,786) 

Monetary variations - domestic currency (4,592) 

0.00 (17,156) 

(14,351) 

Monetary variations - foreign currency 0.00 (2) 

(52) 

13,083 

Charges on fiscal contingencies 0.00 (13,774) 

(11,225) 

(33,941) 

Swap and hedge operations 0.00 0.00 (18,162) 

(16,629) 

SELIC - Free energy 0.00 0.00 (14,452) 

(32,033) 

Monetary restatement REFIS 0.00 0.00 (22,512) 

0.00 

Mark-to-market - MTM 0.00 0.00 (52,960) 

(9,511) 

Adjustment to present value 0.00 0.00 (88,894) 

(1,201) 

Monetary restatement - loan agreements 0.00 0.00 (11,752) 

0.00 

Other financial expenses (14,783) 

(4,414) 

(44,392) 

(24,201) 

(26,760) 

(48,048) 

(514,985) 

(378,570) 

Total (332) 

46,276 

(177,013) 

(82,012) 

F-131 

Other 

Total Total 

261,586 

24,236 

284,653 

334,106 

36,682 

34,858 

8,833 

0.00 

94,847 

1,079,801 

3,459,536


34 

34.1 


Consolidated 

Income tax 


Income tax 


2010 2009 2010 2009 2010 2009 2010 2009 

Net income before income and social contr. taxes 581,204 

697,265 

581,204 

697,265 

985,705 1,107,069 985,705 1,107,069 

Rate 25% 25% 9% 9% 25% 25% 9% 9% 

IRPJ & CSLL (145,301) (174,316) 

(52,308) 

(62,754) 

(246,426) (276,767) (88,713) (99,636) 

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 

Adjustments to reflect current rate 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 

Donations (33) 

(89) 

(12) 

(32) 

(817) 

(1,485) 

(294) 

(536) 

Depreciation 0.00 0.00 0.00 0.00 0.00 724 

0.00 260 

Undeductible losses 0.00 0.00 0.00 0.00 (2,709) 

(387) 

(975) 

(139) 

Undeductible fines (1) 

(1) 

0.00 0.00 (82) 

(23) 

(29) 

(8) 

Undeductible expenses (52) 

547 

(19) 

197 

(223) 

165 

(80) 

60 

Bonus to management (125) 

(604) 

(45) 

(217) 

(534) 

(642) 

(193) 

(230) 

Research and development 0.00 0.00 0.00 0.00 1,472 

660 

530 

207 

Allowance for Doubtful Accounts 0.00 0.00 0.00 0.00 (209) 

(63) 

(75) 

(23) 

Equity accounting result 168,321 

176,714 

60,595 

63,617 

0.00 103 

0.00 36 

REFIS program 0.00 3,130 

0.00 1,127 

0.00 16,790 

0.00 6,044 

Interest on own capital (13,396) 

(37,227) 

(4,823) 

(13,401) 

39,177 

12,706 14,103 

4,575 

Other 0.00 0.00 0.00 0.00 (1,777) 

15,303 

(641) 5,510 

Deferred and unrecognized IRPJ & CSLL (9,413) 

29,727 

(3,389) 

10,701 

(14,454) 

23,018 

(5,204) 8,775 

DIPJ adjustments regarding previous year 4,176 

0.00 2,494 

0.00 12,165 

(2,767) 

1,253 

1,170 

Deemed profit adjustment 0.00 0.00 0.00 0.00 10,545 

9,444 

3,594 

3,265 

Tax incentives 0.00 0.00 0.00 0.00 24 

0.00 0.00 0.00 

Additional IR (Income Tax ) 0.00 0.00 0.00 0.00 288 

298 

0.00 0.00 

PAT 0.00 0.00 0.00 0.00 299 

314 

0.00 0.00 

Rouanet Law 0.00 0.00 0.00 0.00 1,439 

2,063 

0.00 0.00 

Sport 0.00 0.00 0.00 0.00 0.00 441 

0.00 0.00 

FIA 0.00 0.00 0.00 0.00 315 

190 

0.00 0.00 

SUDENE 0.00 0.00 0.00 0.00 29,167 

21,833 

0.00 0.00 

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 

Income and social contribution tax expenses 4,176 

(2,119) 

2,493 

(762) 

(172,340) (178,082) (76,724) (70,670) 

Current rate -0.72% 0.30% -0.43% 0.11% 17.48% 16.09% 7.78% 6.38% 

Financial instruments 

In compliance with Directive Release CVM/SNC/SEP nº 3/2009, of November 19, 2009, and CVM Instruction nº 475, of December 17, 2008, the Company carried out a valuation of its 

financial instruments, including the derivatives, when applicable. 

General considerations 

The Company maintains operations with financial instruments. The administration of these instruments is executed by means of operating strategies and internal controls aiming to 

ensure liquidity, safety and profitability. The contracting of financial instruments with hedge objectives is performed by means of a periodic analysis of the exposure to the financial risks 

(foreign exchange, interest rate etc.), which is reported regularly through risk reports made available to Management. In compliance with the Financial Risk Management Policy of Grupo 

EDP do Brasil, and with a basis on periodic analyses consubstantiated by the risk reports, specific strategies are defined for the mitigation of financial risks, which are approved by 

Management, for approval and effective operation of aforesaid strategy. The control policy consists of permanent monitoring of the conditions contracted versus conditions in force in the 

market through operating systems integrated to the SAP platform. The Company does not perform investments in derivatives or any other risk assets on a speculative basis. The results 

obtained with these operations are in line with the policies and strategies defined by Company Management. 

The administration of the risks associated with these operations is performed through the application of policies and strategies defined by Management and include the monitoring of 

levels of exposure of each market risk, forecast of future cash flows and establishment of limits of exposure. This policy also determines that the updating of information in operating 

systems, as well as the confirmation and effective operation of transactions with the counterparts, shall be performed with the appropriate segregation of duties. 

F-132

34.2 

Fair value 

Fair value is the amount by which the asset may be exchanged, or a liability settled, between parties that know the business and have the interest to make it, in a transaction without 

advantages to any of the parties. 

The fair value concept addresses several different measurement methods intended to reliably measure an amount. Some mathematical models were developed for that. 

To determine fair value, financial instruments flow until the end of operations is projected, according to contract rules, and forward interbank investment average rate, disclosed by 

BM&FBovespa, is used as the discount rate. Some carrying amounts are equivalent to fair value because these financial instruments balances are substantially similar to those that 

would be obtained had they been traded in the market. 

Financial instrument transactions are presented in the balance sheet at their carrying amounts, equivalent to their fair value, under captions cash and cash equivalents, consumers and 

concessionaires, related parties, collaterals and escrow deposits and trade accounts payable. For loans, financing and debt charges and debentures, the carrying amount differs from 

fair value. 


Fair value 

Book value 

12/31/2010 12/31/2009 12/31/2010 12/31/2009 


Current 


285,812 

233,440 

285,812 

233,440 


1,121 

- 

1,121 

- 


Assets available for sale 

222 

- 

222 

- 


Noncurrent 

40,801 

39,086 

40,801 

39,086 


21,506 

23,380 

21,506 

23,380 


116,622 

175,871 

116,622 

175,871 


Current 

Suppliers 

Noncurrent 



Current 

3,370 

189 

10,416 

7,024 

Cash and cash equivalents 1,126,449 



8,659 

Consumers and concessionaires 888,806 



62,863 

Denerge's shares 40,801 

Other regulatory assets - derivatives 

Noncurrent 

400 


18,755 

Indemnifiable financial assets 397,324 

Consumers and concessionaires 63,733 


3,370 

189 

10,416 

7,024 

Consolidated 

Fair value 

Book value 

12/31/2010 12/31/2009 12/31/2010 12/31/2009 

1,102,022 

823 

5,999 

901,781 

67,384 

39,086 

- 

21,938 

325,262 

64,862 

13,062 

1,126,449 

823 

8,659 

888,806 

62,863 

40,801 

400 

18,755 

397,324 

63,733 

9,332 

1,102,022 

823 

5,999 

901,781 

67,384 

39,086 

- 

21,938 

325,262 

64,862 

13,062 


Current 


508,056 

626,381 

508,056 


217,013 

231,730 

210,029 

Loans, financing and debt charges 342,037 517,742 356,045 552,133 

Derivatives 19,656 

20,529 

19,656 

20,529 

Regulatory and sector charges 225,380 

156,561 

225,380 

156,561 


Noncurrent 

19,440 

17,280 

19,440 

17,280 

Suppliers 

915 

- 

915 

- 

Debentures 

668,644 

468,222 

637,593 

453,155 

Loans, financing and debt charges 2,108,264 1,784,074 2,040,983 1,901,627 

Derivatives 

99,899 

55,813 

99,899 

55,813 


12,913 

14,939 

12,913 

14,939 


215,764 

205,564 

215,764 

205,564 

Considering the similar characteristics and using the knowledge obtained on the Company's financial instruments, financial instruments have to be classified according to accounting 

pronouncements, which classify financial assets as loans and receivables, financial assets measured at fair value through profit or loss, held-to-maturity and available for sale and 

financial liabilities as financial liabilities measured at fair value through profit or loss and other financial liabilities at amortized cost. 

F-133









Suppliers 









Suppliers 










Other regulatory assets - derivatives 

Loans and 

receivables 

22,627 

116,622 

139,249 


12/31/2010 

Fair value 

through the 

statement of 

income Held to maturity Available for sale Total 

285,812 

285,812 

22,627 

222 

222 

285,812 

Other at 


3,370 

3,370 

189 

189 

3,559 

3,559 

Loans and 

receivables 

23,380 

175,871 

199,251 

222 

40,801 

40,801 

40,801 

116,622 

466,084 

12/31/2009 

Fair value 

through the 

statement of 


233,440 

233,440 

23,380 

233,440 

Other at 


10,416 

10,416 

7,024 

7,024 

17,440 

17,440 

Loans and 

receivables 

27,414 

398,147 

952,539 

1,378,100 

- 

39,086 

39,086 

39,086 

175,871 

471,777 

Consolidated 

12/31/2010 

Fair value 

through the 

statement of 


1,126,449 

1,126,449 

27,414 

398,147 

952,539 

72,195 

72,195 

400 

1,126,849 

72,195 

Fair value 

through the 

statement of Other at 


income amortized cost Total 

Suppliers 

627,296 

627,296 

Debentures 


869,323 

869,323 

2,397,029 

2,397,029 

Derivatives 

119,555 

119,555 


254,363 

254,363 

Use of public property 219,134 

219,134 

119,555 4,367,145 

4,486,700 

F-134 

40,801 

40,801 

40,801 

400 

2,617,945









Loans and 

receivables 

27,937 

326,085 

966,643 

1,320,665 

12/31/2009 

Fair value 

through the 

statement of 


1,102,022 

1,102,022 

27,937 

326,085 

966,643 

80,446 

80,446 

1,102,022 

80,446 

Fair value 

through the 

statement of Other at 


income amortized cost Total 

Suppliers 

508,056 

508,056 

Debentures 

663,184 

663,184 


2,453,760 

2,453,760 

Derivatives 

76,342 

76,342 


171,500 171,500 

Use of public property 222,844 

222,844 

76,342 4,019,344 

4,095,686 


Current 





Current 

Derivatives 

Noncurrent 

Derivatives 

39,086 

39,086 

The hierarchy of financial instruments according to fair value regulates the need for more consistent information, adjusted to the Company's external environment. The Company's 

instruments fair value measurement requirements: 

(a) Level 1– prices agreed on in active markets for identical assets and liabilities; 

(b) Level 2 - differ from asset and liability prices negotiated in active markets included in Level 1, directly or indirectly; 

(c) Level 3 - for assets and liabilities not based on market variables. 

The methodoloty applied to classify the Company's financial instruments fair value in levels was based on an individual analysis that searched for similar transactions in the market; 

comparison criteria were structured considering terms, amounts, grace period, indices and active markets. The simpler and easier is the access to comparative information, the more 

active is the market; the more restrict is the information, more restrict is the market to measure the instrument. 


Current 



Other regulatory assets - derivative 



Identical 

Without an 

markets Similar markets active market 

12/31/2010 Level 1 Level 2 Level 3 

285,812 

40,801 

326,613 

- 

285,812 

40,801 

326,613 

Consolidated 


Identical 

Without an 

markets Similar markets active market 

12/31/2010 Level 1 Level 2 Level 3 

1,126,449 

40,801 

400 

1,126,449 

40,801 

400 

19,656 19,656 

99,899 99,899 

1,287,205 

- 

1,287,205 

- 

- 

F-135 

39,086 

2,542,219

34.3 

34.3.1 

34.4 

Market risk 

The market risk is presented as the possibility of losses due to the fluctuation of variables that impact market prices and rates. This fluctuation impacts virtually all segments, thus 

representing financial risks. 

Loans and financing, and debt charges presented in note 22 refer to funds raised from BID, BNDES, Eletrobrás, Banco do Brasil and Banco Santander. Contract rules for financial 

liabilities acquired by the Company generate risks related to these exposures. As of December 31, 2010, the Company is subject to market risks associated to TJLP, CDI, IGP-M and US 

dollar and Euro changes. 

As IGP-M, TJLP and CDI are interest rate risks, we took into consideration that the Brazilian economy has a favorable scenario for robust growth and infrastructure investments. Inflation 

under control and credit offer are key risk factors to consider when raising funds linked to these indices. It should be considered that inflation growth and increasing SELIC rate indicate 

that the cost of these transactions will be higher. 

Considering the strong currency and the country risk under control, loans denominated in US dollars and Euros are considered favorable. In addition, the exchange rate risk in foreign 

currency transactions is considered. In an economy where exchange rate fluctuation is very high, this exposure may be a relevant factor to make the transaction not possible. The 

Company maintains derivatives used for hedge to control all exchange rate exposures. 

Considering that the market rate (or opportunity cost of capital) is defined by external agents, taking into account the risk premium compatible with activities in the sector, and lacking 

other alternatives or different market hypotheses and/or estimate methodologies with respect to company business and special features of the sector, the market value of this loan 

package comes close to its book value, as do the remaining financial assets and liabilities evaluated. 

Sensitivity analysis 

In the chart below, scenarios for the different indices used by the Company were considered; from interest rate and other indices fluctuation to transactions maturity. The probable 

scenario was adopted by the Company, based mainly on macroeconomic assumptions obtained from the Focus report of the Brazilian Central Bank, scenarios II and III consider a risk 

increase of 25% and 50%, respectively, and scenarios IV and V consider a risk reduction of 25% and 50%, respectively. 

These sensitivity analyses were prepared in accordance with CVM Instruction nº 475/2008, and are intended to measure the impact of changes in the market variables on each financial 

instrument of the Company. Nevertheless, the settlement of transactions involving these estimates can result in amounts different from those estimated due to the subjectivity that is 

contained in the process used in the preparation of these analyses. Information in the chart demonstrates the impact of each risk variation in the Company's results. 

Transaction 


Financial Investments 



IDB 

Loans and financing - BNDES & CALC 

Debentures 

Debentures 


Commercial credit note 

Swap - Liability Leg - BID 

Swap - Liability Leg - NDF 

Swap - Liability Leg - NDF 

Swap - Liability Leg - (i) 

Swap - Liability Leg - (ii) 

Reference value 

CDI - 10.0% 

TJLP - 6.0% 

US$ - R$1.6662 

EUR - R$2.2280 

Libor - 0.45400% 

IGP-M - 5.0% 

Risk Probable 

Consolidated 

Scenario (I) Scenario (II) Scenario (III) Scenario (IV) Scenario (V) 

Risk increase by 

25% 

Risk increase by 

50% 

Risk reduction by 

25% 

Risk reduction by 

50% 

�� 

�� 

�� 

�� 

�� 

�� 

�� 

�� 

�� 

�� 

�� 

�� 

�� 

�� 

�� 

Liquidity risk 

Liquidity risk relates to the Company's capacity to settle obligations assumed. In order to determine the Company's financial capacity to meet commitments assumed, maturities of funds 

raised and other obligations are also disclosed. More details on loans raised by the Company are presented in note 22. 

The Company's management uses only credit lines that allow operating leverage; this premise is reaffirmed by the characteristics of funds effectively raised. 

Covenants are financial indicators that control the Company's financial health, as required by fund raising contracts. Non-compliance with covenants of loan and financing agreements 

may result in an immediate disbursement or early maturity of a liability with defined flow and periodicity. The list of each contract's covenants is presented in note 21. Up to December 31, 

2010, all covenants of contracted obligations were fully complied with. 

The obligations' realization flows, according to contract terms, are as follows: 

F-136

34.5 

34.6 


Debentures 


Derivatives 


Debentures 


Derivatives 

Consolidated 

Total Maturities in 2011 

869,323 231,730 

2,397,028 281,961 

119,555 

72,234 

3,385,906 585,925 

Total Maturities in 2010 

663,184 209,950 

2,455,912 

74,190 

577,209 

3,193,286 787,159 


2014 

326,985 

936,208 

13,681 

1,276,874 

12/31/2009 


2013 

369,723 

839,692 

58,598 

1,268,013 

Maturities from 

2015 to 2016 

310,608 

467,953 

778,561 

Maturities from 

2014 to 2015 

83,511 

446,479 

529,990 

Maturities up to 

2016 

710,906 

33,640 

744,546 

Maturities up to 

2015 

The Company's most expressive financial assets are presented in captions Cash and cash equivalents (note 6) and Consumers and concessionaires (note 7). As of December 31, 

2010, Cash represents the amount immediately available and Cash equivalents are short-term investments maturing in up to 90 days that are immediately convertible into a known cash 

amount. Consumer and concessionaires balances presented in note 7 comprise the estimated flow of receivables. 

Credit risk 

The credit risk is the possibility that the Company does not realize its rights, and this is directly related to the accounts cash and cash equivalents, consumers and concessionaires, 

collaterals and escrow deposits, among others. 

In the electric power industry, the companies' operations are reported to the regulatory agency, which maintains updated information on power volume produced and consumed, 

permitting the preparation of plans to guarantee the system operation without interferences or interruptions. Power is traded through auctions and contracts, among other mechanisms, 

bringing reliability and control on default. The priority of concession agreements for power distribution is to serve the market without excluding low income population and areas with 

lower population density. 

Accepting and serving these new consumers dwelling in the concessionaire's operating area is a rule of the concession agreement. 

For subsidiaries Bandeirante and Escelsa, distribution companies, the financial instrument that may expose them to credit risk is Trade accounts receivable; accounting rules are based 

on the regulatory agency's standards and assumptions approved by the Company's management. 

The diversification of the power consumer basis makes the Company's receivables less volatile; estimated rate of credit default is 14.31%, as shown in note 7. 

The main tool used to mitigate the risk of non-realization of financial assets is to suspend power supply to consumers in default; before the suspension, the Company makes 

administrative collections, bill notices, etc. The Company offers to consumers several communication channels, as follows call centers, service stores and Internet. 

Short-term investments are also a source of credit risk. The management of these financial assets is done through operating strategies and internal controls, aimed at assuring liquidity, 

security and profitability. 

Specific mitigation strategies of the Financial Risk Management Policy of Grupo EDP Energias do Brasil are periodically conducted based on information from risk reports. The control 

policy consists of permanent monitoring of the conditions contracted versus conditions in force in the market through operating systems integrated to the SAP platform. The Company 

does not perform investments on a speculative basis. The results obtained with these operations are in line with the policies and strategies defined by Management. 

The Company contracts short-term investments only from financial institutions rated as low risk by rating agencies in order to guarantee better profitability and reliable results. 

Management understands that the contracted financial investments do not expose the Company to significant risks that might generate material losses in the future. 


12/31/2010 

A derivative financial instrument is the instrument whose value is influenced by the fluctuation of a financial instrument rate or price, does not require an initial investment or the initial 

investment is much lower than that of similar contracts and is always settled in a future date. 

Subsidiary Enertrade sold an electric power purchase option agreement which provides for the supply of electric power until December 31, 2011 at a more attractive price or, in case the 

option is not exercised, the counterparty should pay to the Company the resulting premium in proportion to the remaining supply period. The contract premium was fully recognized in the 

Company's financial results. 

Gains and losses arising from the Company's derivatives fluctuations in the year were recorded in the income statement, and gains and losses associated with hedge accounting 

registered in the jointly controlled subsidiary Porto do Pecém, were recorded in shareholders' equity. 

Financial instruments that qualify for hedge accounting as cash flow hedge, were elected due to effectiveness coverage tests. The amounts express the proportion of 50% of total 

investment in the jointly controlled subsidiary. 

The hedge transaction qualified for hedge accounting is the purchase of a NDF in the amount of US$327,000 maturing on October 1, 2012, to cover the Us dollar debt with BID. The 

changes in the fair value of the derivative hedge instrument designated as cash flow hedge are recognized directly in shareholders' equity in equity evaluation adjustment. 

All cash flowhedge transactions were conducted by the jointly controlled subsidiary Porto do Pecém, while swaps were conducted by subsidiary Bandeirante. As of December 31, 2010, 

the Company's derivatives are recorded at market value. 

The Company's derivatives market values are monthly quoted with counterparties. 

F-137 

592,532 

15,592 

608,124

Var. USD + Libor 


USD 

EUR 

Var. USD + 5.79% p.a. 

Var. USD + 5.82% p.a. 

R$ 

USD 

R$ 

153,799 

115,895 

543,136 

274,368 

1,896 

737 

1,089,831 

171,934 

131,399 

546,978 

342,761 

2,026 

997 

Libor + 4.375 % p.a. 5,477 

Libor + 4.375 % p.a. 2,055 

Libor + 4.375 % p.a. 3,439 

Libor + 4.375 % p.a. 2,751 

13,722 

104.69% of CDI 11,973 

118.94% of CDI 4,036 

109.70% of CDI 6,442 

109.50% of CDI 4,562 

Total 

1,196,095 

(106,264) 

Total 

Gains and losses from the Company's subsidiaries derivative transactions in 2010 are as follows: 

Consolidated 

Gains and losses of derivative financial instruments 

12/312010 12/312009 

Financial result hareholders' equity Financial result Shareholders' 

�� líquido equity 

Derivatives with protection purpose 

Exchange risks �� 779 

Exchange risks �� 433 

Exchange risks �� 67,780 

30,453 

10,562 

31,764 

Exchange risks �� 3,504 

14,366 

71,284 

30,453 

26,140 

31,764 

Derivatives' maturities are shown in the chart. 

Consolidated 

Derivatives 

Maturity (net) 

2011 (72,234) 

2012 (13,681) 

After 2012 (33,640) 

Balance payable (119,555) 


12/31/2010 12/31/2010 

Cash Flow Hedge SWAP 

Assets Assets 


EUR 

Liabilities Liabilities 

Var. USD + 2.0895% p.a. 

In compliance with CVM Instruction 475/2008, information on derivative financial instruments should include the hedged transaction motivation, the instrument fair value, the impact on 

the Company's results for the year and the main characteristics of the contracted instrument. This detail is shown on the table. 

F-138 

27,013 

(13,291)

Inception 

CONSOLIDATED 

USD/EUR notional Notional R$/USD 

Fair value 

Impacts in income 

Description Subsidiary Counterpart Maturity Position 12/31/2010 12/31/2009 12/31/2010 12/31/2009 12/31/2010 12/31/2009 12/31/2010 12/31/2009 

Swap 

Assets 

Enertrade Bio Energias 

4/23/2010 

Electric power 

purchase option 

- - - - 

400 

Liabilities 12/31/2011 agreement 

- 

400 

Assets 

Energest S/A 

Banco Santander 

S/A 3/14/2008 USD + 4.81% p.a. 

- - - - 

- 

Liabilities 2/12/2009 111.90% of CDI - 

- 

Assets 

Castelo 

Energética 

S/A 

Banco Santander 

S/A 

3/14/2008 USD + 4.81% p.a. 

- - - 

- 


- 

Assets 

Bandeirante 

Energia S/A 

Banco Citibank 3/19/2004 

- 

Libor + 4.00 % p.a. 

- - - 

- 


- 

Assets 

Bandeirante 

Energia S/A 


3,244 

Libor + 4.375 % p.a 

5,837 5,405 10,163 

5,477 

Liabilities 2/14/2012 104.69% of CDI 11,973 

(6,496) 

Assets 

Bandeirante 

Energia S/A 


- 

Libor + 4.00 % p.a. 

- - - 

- 


- 

Assets 

Bandeirante 

Energia S/A 


1,216 

Libor + 4.375 % p.a 

2,189 2,026 3,811 

2,055 


(1,981) 

Assets 

Bandeirante 

Energia S/A 

Banco JP Morgan 4/5/2006 

- 

Libor + 4.00 % p.a. 

- - - 

- 


- 

Assets 

Bandeirante 

Energia S/A 


2,027 

Libor + 4.375 % p.a 

3,648 3,377 6,352 

3,439 


(3,003) 

Assets 

Bandeirante 

Energia S/A 


1,622 

Libor + 4.375 % p.a 

2,918 2,703 5,081 

2,751 


(1,811) 

Assets 

Bandeirante 

Energia S/A 


- 

Libor + 4.00 % p.a. 

- - - 

- 


- 

Assets 

Bandeirante 

Energia S/A 


USD 

- - - - 

- 


- 

Assets 

Bandeirante 

Energia S/A 


EURO 

- - - - 

- 


- 

Assets 

Bandeirante 

Energia S/A 


USD 

- - - - 

- 


- 

Assets 


Pecém 



93,240 93,240 155,356 155,356 

153,799 

Liabilities 10/1/2021 Var. USD + 5.79% p.a. 171,935 

(18,136) 

Assets 


Pecém 



70,261 70,261 117,069 117,069 

115,895 

Liabilities 10/1/2024 Var. USD + 5.82% p.a. 131,399 

(15,504) 

F-139 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

10,531 

21,151 

(10,620) 

- 

- 

- 

3,950 

7,200 

(3,250) 

- 

- 

- 

6,621 

11,483 

(4,862) 

5,297 

8,169 

(2,872) 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

157,482 

165,934 

(8,452) 

118,806 

125,944 

(7,138) 

400 

- 

400 

- 

- 

- 

- 

- 

- 

- 

- 

- 

242 

1,755 

(1,513) 

- 

- 

- 

91 

659 

(568) 

- 

- 

- 

152 

994 

(842) 

121 

702 

(581) 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

11,568 

(11,568) 

9,889 

(9,889) 

- 

- 

- 

(411) 

368 

779 

(249) 

184 

(433) 

(60) 

139 

(199) 

(3,594) 

1,973 

(5,567) 

(22) 

49 

(71) 

(1,347) 

993 

(2,340) 

(37) 

77 

(114) 

(2,246) 

1,160 

(3,406) 

(1,797) 

765 

(2,562) 

(30) 

58 

(88) 

- 

1 

(1) 

- 

4 

(4) 

(6) 

8 

(14) 

22,523 

(22,523) 

19,021 

(19,021)

Assets 


Pecém 


100% Libor 

326,077 140,408 543,309 233,948 

543,137 

Liabilities 11/16/2011 100% USD + 2.0895% p.a 546,978 

(3,841) 

NDF 

Purchased 


Pecém (i) 


USD 

179,764 195,505 299,523 325,750 

274,368 

Sold 11/16/2011 USD 342,761 

(68,393) 

Purchased 


Pecém 


EUR 

10,959 - 18,260 

- 

Sold 1/16/2012 R$ - 

- 

Purchased 


Pecém 

BTG Pactual 6/30/2009 

EUR 

857 17,726 1,909 29,535 

1,896 

Sold 1/16/2012 USD 2,026 

(130) 

Purchased 


Pecém 

BTG Pactual 6/30/2009 

EUR 

333 13,164 742 21,934 

737 

Sold 1/16/2012 R$ 997 

(260) 

34.7 

35 

36 

Capital management 

The purpose of the Group's capital management is to safeguard the continuous operation of the Group to offer return to shareholders and benefits to other stakeholders, as well as 

maintaining an ideal capital structure to reduce costs. 

In order to maintain or adjust its capital structure, the Group may review its dividend payment policy, return capital to shareholders and even issue new shares or sell assets to reduce its 

indebtedness level. 

2010 2009 

Total loans and debentures (Notes 21 and 22) �� 

Less: cash and cash equivalents (Note 6) (1,126,449) (1,102,022) 

Net debt 2,259,457 2,091,264 

Total shareholders' equity 6,455,121 6,221,832 

Total capital �� 

Financial leverage rate - % �� 

Commitments 

The Board of Directors' Meeting nº 142, of October 28, 2009, decided and approved the granting of guarantee by the Company in the total amount of R$115 million, whose 

beneficiaries are Rede Energia S.A. and Rede Power do Brasil S.A. (both pertaining to Rede Group), as collateral for the obligations supported up to that time by Rede Group resulting 

from the exchange of assets between the Company and Rede Group, in effect up to (i) the full replacement of the guarantees granted by Rede Group, or (ii) the issuance of a bank letter 

of guarantee in favor of Rede Group, whatever occurs first. 

Financial assets available for sale 

Refer to the acquisition of 5.63% of preferred shares, corresponding to 3.16% of all the shares of Denerge S.A., a close company that holds interest in companies from the electricity 

sector. In this negotiation, the Company has the option to convert Denerge shares into Rede Energia S.A. preferred shares, within a period of up to two years, at the price of a possible 

public offer, or exercise the option of converting those shares within one year and at R$5.68 each if the public offering does not occur. As of December 31, 2010, these assets are 

marked-to-market. 

37 Insurance coverage 

The Company and its subsidiaries hold insurance contracts with coverage determined by specialist guidance, bearing in mind the nature and level of risk, for amounts deemed sufficient 

to cover eventual significant losses on their assets and liabilities. Given the nature of the risk assumptions, these are not part of the scope of an audit of financial statements, and 

consequently, were not examined by independent auditors. The mais amounts at risk with insurance coverage are: 

Consolidated 

12/31/2010 

Substations 2,325,539 

Power Plants 991,413 

Stockrooms 32,029 

Buildings and contents (own) 35,518 

Buildings and contents (third parties) 65,513 

Civil liability 167,600 

Transports (materials) 17,500 

Transportation (vehicles) 13,350 

Personal accidents 626,712 

F-140 

7,692 

11,404 

(3,712) 

305,062 

338,345 

(33,283) 

11,285 

10,959 

326 

17,904 

17,726 

178 

36,887 

38,539 

(1,652) 

2,450 

(2,450) 

43,624 

(43,624) 

- 

83 

(83) 

166 

(166) 

9,892 

(9,892) 

4,104 

11,356 

(7,252) 

24,576 

11,973 

12,603 

39,752 

19,367 

20,385 

29,521 

14,383 

15,138

38 

38.1 

Segment information 

A business segment is an identifiable component of the Group engaged in providing an individual product or service of a group of related products and services, and that is subject to 

risks and benefits that may be distinguished from other business segments. 

The Group develops a set of power supply activities, with special emphasis on the generation, distribution, transmission and trading of electric power. 

Based on internal reports, the Executive Board is responsible for evaluating the performance of several segments and deciding on fund allocation to each of the identified business 

segments. 

Segment characterization 

The amounts reported for each business segment are the result of the consolidation of subsidiaries and business units within each segment and the cancellation of intrasegment 

Distribution Generation Transmission Commercialization Other Eliminations 2010 




3,762,738 1,004,121 

6,223 

741,414 

- 

(480,180) 5,034,316 

Electricity purchased for resale (1,796,829) 

(56,020) 

- 

(697,466) 

- 

453,521 (2,096,794) 

Electric power network use charges (543,948) 

(83,837) 

- 

- 

- 

26,359 (601,426) 

Cost of operation 

(2,340,777) (139,857) 

- 

(697,466) 

- 

479,880 (2,698,220) 

Personnel (128,725) 

(19,613) 

(688) 

(2,908) 

- 

- 

(151,934) 

Material and third-party services (173,432) 

(26,811) 

(567) 

(2,556) 

- 

300 (203,066) 

Depreciation and amortization (173,309) (102,839) 

- 

(55) 

- 

- 

(276,203) 

Other operating costs (26,434) 

(1,333) 

(66) 

(2,260) 

- 

- 

(30,093) 

(501,900) (150,596) 

(1,321) 

(7,779) 

- 

300 (661,296) 

(2,842,677) (290,453) 

(1,321) 

(705,245) 

- 

480,180 (3,359,516) 

Cost of service rendered to third-parties (3,785) 

(2,174) 

- 

(91) 

- 

- 

(6,050) 



916,276 

711,494 

4,902 

36,078 

- 

- 1,668,750 

Sales expenses (69,566) 

(1,638) 

- 

(6,916) 

(2,132) 

- 

(80,252) 


(42,407) 

(199) 

(6,708) 

(66,012) 

- 

(262,048) 


(49,539) 

- 

(109) 

(17,993) 

- 

(81,775) 


(36,948) 

(45) 

- 

2,716 

- 

(52,657) 

(248,802) (130,532) 

(244) 

(13,733) 

(83,421) 

- 

(476,732) 

Service result 667,474 

580,962 

4,658 

22,345 

(83,421) 

- 1,192,018 

Income from equity interest - 

3,479 

- 

- 

673,282 (678,598) (1,837) 


126,822 

188 

2,940 

26,429 

(8,430) 337,972 

Financial expenses (190,887) (304,478) 

(6) 

(777) 

(27,267) 

8,430 (514,985) 

Financial result (864) (177,656) 

182 

2,163 

(838) 

- 

(177,013) 


1,776 

- 

42 

6,903 

- 

12,474 


(3,238) 

- 

(57) 

(13,173) 

(5,315) (39,937) 

Other results (14,401) 

(1,462) 

- 

(15) 

(6,270) 

(5,315) (27,463) 

Income before income and social contribution taxes 652,209 

405,323 

4,840 

24,493 

582,753 (683,913) 985,705 


(83,179) 

(293) 

(9,716) 

(3,115) 

- 

(229,254) 


30,902 

- 

1,957 

9,784 

- 

(19,810) 

Net income befor minority interest 

(195,404) 

(52,277) 

(293) 

(7,759) 

6,669 

- 

(249,064) 

and beneficiaries 456,805 

353,046 

4,547 

16,734 

589,422 (683,913) 736,641 

Minority interest - 

(21,237) 

- 

- 

- 

(115,689) (136,926) 


(17,157) 

- 

- 

- 

- 

(17,157) 


314,652 

4,547 

16,734 

589,422 (799,602) 582,558 


Current assets 1,802,192 

Non-current assets 1,126,863 

Investments 4,347 

Tangible 446 

Intangible and deferred assets 2,015,513 

Current liabilities 1,732,693 

Noncurrent liabilities 1,586,314 

Shareholders' equity and non-controlling 1,630,354 

604,189 

367,223 

8,825 

5,300,563 

743,389 

781,878 

2,301,986 

3,940,326 

F-141 

10,013 

19,425 

- 

- 

- 

1,777 

53 

27,608 

Consolidated - 2010 

115,158 

18,128 

- 

684 

958 

85,895 

4,567 

44,466 

586,058 

180,658 

3,771,044 

1,894 

266,852 

166,347 

86,512 

4,553,647 

(242,933) 

(144,429) 

(3,746,945) 

- 

- 

(243,179) 

(149,849) 

(3,741,279) 

2,874,677 

1,567,868 

37,271 

5,303,587 

3,026,712 

2,525,411 

3,829,583 

6,455,122

Distribution Generation Transmission Commercialization Other Eliminations 2009 




3,446,206 

979,133 

4,223 

763,231 

- 

(571,091) 4,621,702 

Electricity purchased for resale (1,620,182) 

(39,612) 

- 

(750,540) 

- 

543,679 (1,866,655) 

Electric power network use charges (421,177) 

(78,266) 

- 

- 

- 

25,789 (473,654) 

Cost of operation 

(2,041,359) (117,878) 

- 

(750,540) 

- 

569,468 (2,340,309) 

Personnel (125,000) 

(18,241) 

(311) 

(2,969) 

- 

- 

(146,521) 

Material and third-party services (138,883) 

(27,894) 

(11) 

(1,454) 

- 

1,623 (166,619) 


(96,126) 

- 

(15) 

- 

- 

(257,197) 

Other operating costs (22,905) 

(3,649) 

(11) 

(1,558) 

- 

- 

(28,123) 

(447,844) (145,910) 

(333) 

(5,996) 

- 

1,623 (598,460) 

(2,489,203) (263,788) 

(333) 

(756,536) 

- 

571,091 (2,938,769) 

Cost of service rendered to third-parties (2,918) 

- 

- 

- 

- 

- 

(2,918) 



954,085 

715,345 

3,890 

6,695 

- 

- 1,680,015 

Sales expenses (75,944) 

(2,096) 

- 

36,054 

- 

- 

(41,986) 


(52,325) 

(22) 

(7,289) 

(65,426) 

- 

(321,647) 


(43,761) 

- 

(200) 

(19,920) 

- 

(76,909) 


(33,229) 

(15) 

- 

(22,422) 

- 

(77,307) 

(307,198) (131,411) 

(37) 

28,565 

(107,768) 

- 

(517,849) 

Service result 646,887 

583,934 

3,853 

35,260 

(107,768) 

- 1,162,166 

Income from equity interest - 

12,483 

- 

- 

708,248 (721,138) 

(407) 


100,727 

- 

2,852 

94,326 

(17,908) 296,558 

Financial expenses (163,338) (184,049) 

(3) 

(850) 

(48,238) 

17,908 (378,570) 

Financial result (46,777) 

(83,322) 

(3) 

2,002 

46,088 

- 

(82,012) 


77 

- 

12 

52,345 

- 

55,449 


(14,460) 

- 

- 

(2,092) 

1,309 (28,128) 

Other results (9,870) 

(14,383) 

- 

12 

50,253 

1,309 27,321 

Income before income and social contribution taxes 590,240 

498,712 

3,850 

37,274 

696,821 (719,829) 1,107,068 


(95,192) 

(177) 

(212) 

(2,881) 

- 

(196,799) 


16,918 

- 

(12,019) 

- 

- 

(51,953) 

Net income befor minority interest 

(155,189) 

(78,274) 

(177) 

(12,231) 

(2,881) 

- 

(248,752) 

and beneficiaries 435,051 

420,438 

3,673 

25,043 

693,940 (719,829) 858,316 

Minority interest - 

5,482 

- 

- 

- 

(152,332) (146,850) 


(15,772) 

- 

- 

- 

- 

(15,772) 


410,147 

3,673 

25,043 

693,940 (872,161) 695,694 


Current assets 1,613,751 

Non-current assets 991,481 

Investments 7,290 

Tangible 489 

Intangible and deferred assets 1,925,998 

Current liabilities 1,676,924 

Noncurrent liabilities 1,272,531 

Shareholders' equity and non-controlling 1,589,554 

39 Subsequent events 

690,324 

320,218 

20,720 

4,800,493 

783,588 

665,462 

2,307,342 

3,642,540 

5,321 

20,086 

- 

- 

- 

1,149 

93 

24,165 

151,763 

16,159 

- 

760 

1,009 

93,989 

25,004 

50,698 

488,400 

329,789 

3,455,750 

2,038 

284,374 

123,301 

81,843 

4,355,207 

(235,995) 

(304,510) 

(3,452,825) 

- 

- 

(235,537) 

(317,462) 

(3,440,331) 

On January 14, 2011, indirect subsidiary Elebrás signed, in conjunction with Banco do Brasil, the first amendment to the bridge financing contract whose funds are to be used in the wind 

plant Tramandaí project, whereby the Company is jointly liable and main payer, and that changes (i) the credit amount to R$307,000; (ii) the contract maturity to June 30, 2011; (iii) 

interest to 108% of CDI on the balance disbursed; (iv) interest to 109% for amounts disbursed from January 14, 2011 to February 4, 2011; and (v) financial charges corresponding to 

CDI percentage, agreed on between the parties. On January 17, 2011, a second amendment was signed changing financial charges maturity to June 16, 2011 at 108% of CDI. 

On January 24, 2011, direct subsidiary EDP Renováveis Brasil and Banco do Brasil entered into a financing contract amounting to R$80,000, whereby the Company becomes jointly 

liable and the main payer, maturing on June 30, 2011, and bearing interest (i) of 110% of CDI for amounts released until March 31, 2011 and (ii) defined as a percentage of CDI agreed 

on between the parties for amounts released beginning as of April 1, 2011. 

F-142 

Consolidated 

2,713,565 

1,373,223 

30,935 

4,803,780 

2,994,969 

2,325,289 

3,369,351 

6,221,833


Espírito Santo 

Investment 

Bank 

19,919,510 SHARES 

EDP – ENERGIAS DO BRASIL S.A. 

COMMON STOCK 

________________________ 

OFFERING MEMORANDUM 

July 7, 2011 

________________________ 

Banco Itaú BBA Morgan Stanley Santander 

_______________ 

Caixa – Banco de Investimento

19919510 COMMON SHARES EDP – Energias do Brasil SA

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