19919510 COMMON SHARES EDP – Energias do Brasil SA

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
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