19919510 COMMON SHARES EDP – Energias do Brasil SA

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
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