UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
o | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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o | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number: 001-34129
CENTRAIS ELÉTRICAS BRASILEIRAS S.A. — ELETROBRAS |
(exact name of registrant as specified in its charter) |
BRAZILIAN ELECTRIC POWER COMPANY |
(translation of registrant’s name into English) |
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Federative Republic of Brazil |
(jurisdiction of incorporation or organization) |
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Avenida Presidente Vargas, 409 — 9th floor, Edifício Herm. Stoltz — Centro, CEP 20071-003, Rio de Janeiro, RJ, Brazil |
(address of principal executive offices) |
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Armando Casado de Araujo Chief Financial Officer and Chief Investor Relations Officer (55 21) 2514-6435 — df@eletrobras.com.br Avenida Presidente Vargas 409, 13th floor, 20071-003 - Rio de Janeiro — RJ — Brazil |
(Name, telephone, e-mail and/or facsimile number and address of company contact person) |
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class |
| Name of each exchange on which registered |
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American Depositary Shares, evidenced by American Depositary Receipts, each representing one Common Share |
| New York Stock Exchange |
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Common Shares, no par value* |
| New York Stock Exchange |
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American Depositary Shares, evidenced by American Depositary Receipts, each representing one Class B Preferred Share |
| New York Stock Exchange |
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Preferred Shares, no par value* |
| New York Stock Exchange |
* Not for trading but only in connection with the registration of the American Depositary Shares pursuant to the requirements of the SEC.
Securities registered or to be registered pursuant to Section 12(g) of the Act: None.
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None.
The number of outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 2016 was:
| 1,087,050,297 Common Shares |
| 146,920 Class A Preferred Shares |
| 265,436,883 Class B Preferred Shares |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
o Yes x No
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
o Yes x No
Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days
x Yes o No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
o Yes x No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer x |
| Accelerated filer o |
| Non-accelerated filer o |
| Emerging growth company o |
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards* provided pursuant to Section 13(a) of the Exchange Act. o
*The term ‘‘new or revised financial accounting standard’’ refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP o |
| IFRS x |
| Other o |
Indicate by check mark which financial statement item the registrant has elected to follow.
o Item 17 x Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b 2 of the Exchange Act.).
o Yes x No
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Material Modifications to the Rights of Security Holders and Use of Proceeds | 170 | |
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Purchases of Equity Securities by the Issuer and Affiliated Purchasers | 173 | |
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F-1 |
EXHIBITS
EXHIBIT 3.2 | BYLAWS |
EXHIBIT 8.1 | SUBSIDIARIES OF ELETROBRAS |
EXHIBIT 12.1 | CERTIFICATION |
EXHIBIT 12.2 | CERTIFICATION |
EXHIBIT 13.1 | CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE U.S. SARBANES-OXLEY ACT OF 2002 |
EXHIBIT 13.2 | CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE U.S. SARBANES-OXLEY ACT OF 2002 |
PRESENTATION OF FINANCIAL AND OTHER INFORMATION
In this annual report, unless otherwise indicated or the context otherwise requires, all references to “we,” “our,” “ours,” “us” or similar terms refer to Centrais Elétricas Brasileiras S.A. — Eletrobras and its consolidated subsidiaries.
We prepare our consolidated annual financial statements in compliance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
For certain statutory purposes, such as providing reports to our shareholders located in Brazil and determining dividend payments, other profit distributions and tax liabilities in Brazil, we also prepare, as is required, a parent company and consolidated statutory financial statements in accordance with accounting practices adopted in Brazil and with IFRS as issued by the IASB, which must be filed with the Brazilian Exchange Commission (Comissão de Valores Mobiliários - CVM) within three months after the year end and approved by our shareholders general ordinary meeting to comply with the Brazilian Corporate Law.
As we postponed the filing of our financial statements for 2015 and 2014 included herein until we were able to quantify the effects of the Independent Investigation, as explained in Item 4.E “Compliance,” our financial statements included herein and our statutory financial statement have a different date of authorization for issue, which results in certain events being recorded in different periods in these two sets of financial statements. Since the consolidated financial statements for statutory purposes were issued in Brazil prior to the date that we filed our annual reports on Form 20-F for 2014 and 2015, these events have been recorded in periods that are different than those being considered for purposes of the financial statements included herein. Our 2014 and 2015 consolidated financial statements included herein include the accounting of three subsequent events that have a quantitative impact under IAS 10 — Events after the Reporting Period, as they provided evidence of conditions that existed at the reporting date. First, our 2014 and 2015 consolidated financial statements reflect the conclusions of the Independent Investigation which resulted, respectively, in the expensing of costs of R$195.127 million and R$15.996 million that had been improperly capitalized to our assets and a reversal of impairment losses recorded of R$132.443 million and R$11.514 million, respectively. Likewise, in 2014, we recognized a loss of R$91.464 million in our results of equity method investments related to the SPE Norte Energia S.A, as mentioned on Note 4.XI to the financial statements. Second, at the time we filed our 2014 statutory financial statements with the CVM on March 30, 2015, we had made certain estimates with respect to the value of some claims against us with respect to the inflation component in the compulsory loans contingencies. In the fourth quarter of 2015 there was an adverse decision by the Brazilian Supreme Court that required us to revise and add R$4.141 billion to our estimates relating to this matter. This additional provision was recorded as an adjusting event in our 2014 financials included in this annual report. Third, our 2014 financial statements included herein reflect the reversal of a R$1.1 billion provision that we had recorded in our 2015 statutory financial statements filed with the CVM in view of the November 2015 judicial decision that conceded the merit to the ICMS (value added tax) reimbursement claim dispute in favor to our subsidiary Amazonas D, as a subsequent adjusting event that brought information about facts and circumstances existing as of December 31, 2014. In our statutory financial statements filed with the CVM, we reflected the second and third adjustments above in our 2015 financial statements and the first one was recognized in our 2016 statutory financial statements filed with CVM. We did not restate or adjust our 2014 or 2015 financial statements filed with the CVM in Brazil, which speak as of their respective date of authorization for their issue. As we made a number of adjustments to our 2014 and 2015 consolidated financial statements included herein with respect to the Independent Investigation and certain subsequent events which were reflected in our statutory accounts for 2016, our consolidated financial statements included herein as of and for the year ended December 31, 2016 also differ from our statutory financial statements for that year. As all three events mentioned above were already reflected in our statutory financial statements and the financial statements included herein on or prior to December 31, 2016, our shareholders equity as of December 31, 2016 is the same in both sets of financial statements.
The table set forth below describes the differences between our Profit (Loss) as per our statutory Brazilian consolidated financial statements filed with the CVM and our Profit (Loss) as per our consolidated financial statements included herein as of and for the years indicated:
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| 12/31/2016 |
| 12/31/2015 |
| 12/31/2014 |
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| (R$ Thousand) |
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Profit (Loss) for the year under statutory Consolidated Financial Statements (CVM Filed) |
| 3,513,276 |
| (14,953,658 | ) | (2,962,502 | ) |
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Reversal Impairment Angra III - 2014 |
| (129,799 | ) | — |
| 129,799 |
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Reversal Impairment Simplicio - 2014 |
| (2,644 | ) | — |
| 2,644 |
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Reversal Impairment Angra III - 2015 |
| (11,514 | ) | 11,514 |
| — |
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subsequent events - Compulsory Loan - 2015 |
| — |
| 4,141,503 |
| (4,141,503 | ) |
subsequent events - Amazonas Energia |
| — |
| (1,100,499 | ) | 1,100,499 |
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Investigation Findings Angra III |
| 141,313 |
| (11,514 | ) | (129,799 | ) |
Investigation Findings Simplicio |
| 2,644 |
| — |
| (2,644 | ) |
Investigation Findings Maua 3 |
| 67,166 |
| (4,482 | ) | (62,684 | ) |
Investigation Findings - equity (SPEs) |
| 91,464 |
| — |
| (91,464 | ) |
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Total |
| 158,630 |
| 3,036,522 |
| (3,195,151 | ) |
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Profit (Loss) for the year under Consolidated Financial Statements (SEC Filed) |
| 3,671,906 |
| (11,917,136 | ) | (6,157,653 | ) |
On September 26, 2014, our shareholders approved the acquisition of a 50.9% interest in Celg Distribuição S.A. (“CELG-D”). We acquired an interest in CELG-D on January 27, 2015 for R$59.5 million. On February 14, 2017, we entered into a sale and purchase agreement with Companhia Celg de Participações — CELGPAR and Enel Brasil S.A. for the sale of our shares in CELG-D. We consolidated the financial statements of CELG-D as from October 1, 2014, 2015 and 2016, but as of December 2015 and 2016, we accounted for CELG-D as assets held for sale in our consolidated balance sheet, and, accordingly, limited the long-term effects of depreciation and amortization of those assets, as from December 31, 2015.
During the Extraordinary General Meeting of Shareholders held on July 22, 2016, our shareholders did not renew the concessions of six distribution companies, CEPISA, CEAL, Eletroacre, CERON, Boa Vista Energia and Amazonas D and that by December 31, 2017 we intend to transfer the control of these distribution, companies . In case we do not privatize the distribution companies by December 31, 2017, our distribution segment may be classified as discontinued operations, based on IFRS 5. The effect of the termination of the concessions will mostly alter future periods. On April 20, 2016, the Ministry of Mines and Energy published Ordinance No. 120, which regulates the conditions for receipt of remuneration relating to eletric power transmission assets existing on May 31, 2000, referred to as installations of the Existing Basic Network (RBSE) and other Transmission Installations (RPC), which have not been depreciated or amortized, pursuant to Paragraph 2 of Article 15 of Law No. 12,783/2013. As of December 31, 2016, we accounted for R$36.6 billion as compensation with respect to the RBSE and RPC assets. For further information, see “Item 5 — Operating and Financial Review and Prospects — Principal Factors Affecting our Financial Performance — Transmission RBSE Payment.”
On April 6 and September 9, 2016, the Federal Government, as our controlling shareholder, approved AFACs in the amounts of R$1,000 million and R$970 million, respectively. We used these funds to cover capital expenses for 2016, as provided in our budget. On November 22, 2016, the Federal Government approved an additional AFAC in the amount of R$963.1 million, which we used for the implementation of the Director Plan of Business and Management for the period of 2017 to 2021.
In this annual report, the term “Brazil” refers to the Federative Republic of Brazil and the phrase “Brazilian Government” refers to the federal government of Brazil. The term “Central Bank” refers to the Brazilian Central Bank. The terms “real” and “reais” and the symbol “R$” refer to the legal currency of Brazil. The terms “U.S. dollar” and “U.S. dollars” and the symbol “U.S.$” refer to the legal currency of the United States of America.
Certain figures in this document have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.
Terms contained within this annual report have the following meanings:
· AFAC: Advance for Future Capital Increase;
· Amazonas Energia, which engaged in generation, transmission and distribution in the State of Amazonas until 2015 when our shareholders approved its corporate split into Amazonas D and Amazonas GT;
· Amazonas D or Amazonas Distribuição: Amazonas Distribuidora de Energia S.A, a distribution company wholly owned by Eletrobras and operating in the State of Amazonas;
· Amazonas GT or Amazonas Energia Geração e Transmissão: Amazonas Geração e Transmissão de Energia S.A., a generation and transmission company wholly owned by Eletrobras and operating in the State of Amazonas;
· ANDE: Administración Nacional de Electricidad;
· ANEEL: Agência Nacional de Energia Elétrica, the Brazilian Electric Power Agency;
· Average tariff or rate: total sales revenue divided by total MWh sold for each relevant period, including unbilled electricity. Total sales revenue, for the purpose of computing average tariff or rate, includes both gross billings before deducting VAT and other taxes and unbilled electricity sales upon which such taxes have not yet accrued;
· Basic Network: interconnected transmission lines, dams, energy transformers and equipment with voltage equal to or higher than 230 kV, or installations with lower voltage as determined by ANEEL;
· BNDES: Banco Nacional de Desenvolvimento Econômico e Social, the Brazilian Development Bank;
· Boa Vista Energia; Boa Vista Energia S.A., a distribution company operating in the city of Boa Vista, in the State of Roraima;
· Brazilian Anticorruption Law: Law No. 12,846/2013 and Decree No. 8,420/2015;
· Brazilian Corporate Law: Law No. 6,404 of December 15, 1976, as amended;
· Capacity charge: the charge for purchases or sales based on contracted firm capacity whether or not consumed;
· CCC Account: Conta de Consumo de Combustível, or Fuel Consumption Account;
· CCEAR: Contratos de Comercialização de Energia no Ambiente Regulado, contracts for the commercialization of energy in the Regulated Market;
· CCEE: Câmara de Comercialização de Energia Elétrica, the Brazilian electric energy trading chamber;
· CDE Account: Conta de Desenvolvimento Energético, the energy development account;
· CEAL: Companhia Energética de Alagoas, a distribution company operating in the State of Alagoas (Ceal);
· CELG-D: CELG-Distribuição S.A., a former distribution subsidiary of Eletrobras;
· Cepel: Centro de Pesquisas de Energia Elétrica, a research center of the Brazilian electric sector;
· CEPISA: Companhia Energética de Piauí, a distribution company operating in the State of Piauí (Cepisa);
· CERON: Centrais Elétricas de Rondônia, a distribution company operating in the State of Rondônia (Ceron);
· CGTEE: Companhia de Geração Térmica de Energia Elétrica, a generation subsidiary of Eletrobras;
· Chesf: Companhia Hidro Elétrica do São Francisco, a generation and transmission subsidiary of Eletrobras;
· CMN: Conselho Monetário Nacional, the highest authority responsible for Brazilian monetary and financial policy;
· CNEN: Comissão Nacional de Energia Nuclear S.A., the Brazilian national commission for nuclear energy;
· CNPE: Conselho Nacional de Política Energética, the advisory agency to the President of the Republic of Brazil for the formulation of policies and guidelines in the Energy sector;
· Concessionaires or concessionaire companies: companies to which the Brazilian Government transfers rights to supply electrical energy services (generation, transmission, distribution) to a particular region in accordance with agreements entered into between the companies and the Brazilian Government pursuant to Law No. 8,987 (dated February 1995), as amended, and Power Sector Law (together, the “Concessions Laws”);
· CVM: Comissão de Valores Mobiliarios, the Brazilian securities and exchange commission;
· Distribution: the transfer of electricity from the transmission lines at grid supply points and its delivery to consumers through a distribution system. Electricity reaches consumers such as residential consumers, small industries, commercial properties and public utilities at a voltage of 220/127 volts;
· Distributor: an entity supplying electrical energy to a group of customers by means of a distribution network;
· DOJ: the U.S. department of justice;
· Electricity Regulatory Law: Law No. 10,848 (Lei do Setor Elétrico), enacted on March 15, 2004, as amended, and which regulates the operations of companies in the electricity industry;
· Eletroacre: Companhia de Eletricidade de Acre, a distribution company operating in the State of Acre (Eletroacre);
· Eletrobras Participações S.A., a holding company subsidiary created to hold equity investments;
· Eletrobras: Centrais Elétricas Brasileiras S.A. — Eletrobras;
· Eletronorte: Centrais Elétricas do Norte do Brasil S.A., a generation and transmission subsidiary of Eletrobras;
· Eletronuclear: Eletrobras Termonuclear S.A., a generation subsidiary of Eletrobras;
· Eletrosul: Eletrosul Centrais Elétricas S.A., a generation and transmission subsidiary of Eletrobras;
· Energy charge: the variable charge for purchases or sales based on actual electricity consumed;
· Environmental Crimes Act: Law No. 9,605, dated February 12, 1998, as amended;
· Final consumer (end user): a party who uses electricity for its own needs;
· FND: Fundo Nacional de Desestatização, the national privatization fund;
· Free consumers: customers that were connected to the system after July 8, 1995 and have a contracted demand above 3 MW at any voltage level; or customers that were connected to the system prior to July 8, 1995 and have a contracted demand above 3 MW at voltage level higher than or equal to 69 kV;
· Free Market or ACL: Ambiente de Contratação Livre, the Brazilian unregulated energy market;
· Furnas: Furnas Centrais Elétricas S.A., a generation and transmission subsidiary of Eletrobras;
· GCE: Câmara de Gestão da Crise de Energia Elétrica, the Brazilian energy crisis management chamber;
· Gigawatt (GW): one billion watts;
· Gigawatt hour (GWh): one gigawatt of power supplied or demanded for one hour, or one billion watt hours;
· High voltage: a class of nominal system voltages equal to or greater than 100,000 volts (100 kVs) and less than 230,000 volts (230 kVs);
· Hydroelectric plant or hydroelectric facility or hydroelectric power unity (HPU): a generating unit that uses water power to drive the electric generator;
· IFRS: International Financial Reporting Standards as issued by the International Accounting Standards Board;
· IGP-M: Índice Geral de Precos-Mercado, the Brazilian general market price index, similar to the retail price index;
· Independent Investigation: the independent internal investigation carried out by the law firm, Hogan Lovells US LLP, for the purpose of assessing the potential existence of irregularities, including violations of the U.S. Foreign Corrupt Practices Act of 1977 (FCPA), the Brazilian Anticorruption Law and our Code of Ethics;
· Installed capacity: the level of electricity which can be delivered from a particular generating unit on a full-load continuous basis under specified conditions as designated by the manufacturer;
· Interconnected Power System or SIN: Sistema Interligado Nacional, systems or networks for the transmission of energy, connected together by means of one or more links (lines and/or transformers);
· Isolated System: generation facilities not connected to the SIN;
· Itaipu: Itaipu Binacional, the hydroelectric generation facility owned equally by Brazil and Paraguay;
· Kilovolt (kV): one thousand volts;
· Kilowatt (kW): 1,000 watts;
· Kilowatt Hour (kWh): one kilowatt of power supplied or demanded for one hour;
· Lava Jato investigation: see Item 3.D “Key Information-Risk Factors- Risks Relating to our Company,” Item 3.D “Key Information-Risk Factors- Risks Relating to Brazil,” Item 4.E “Compliance,” Item 5 “Operating and Financial Review and Prospectus,” Item 15 “Controls and Procedures” and Item 18 “Financial Statements;”
· Megawatt (MW): one million watts;
· Megawatt hour (MWh): one megawatt of power supplied or demanded for one hour, or one million watt hours;
· Mixed capital company: pursuant to Brazilian Corporate Law, a company with public and private sector shareholders, but controlled by the public sector;
· MME: Ministério de Minas e Energia, the Brazilian Ministry of Mines and Energy;
· National Environmental Policy Act: Law No. 6,938, dated August 31, 1981, as amended;
· Northeast region: the States of Alagoas, Bahia, Ceará, Maranhão, Paraíba, Pernambuco, Piauí, Rio Grande do Norte and Sergipe;
· Odebrecht: Odebrecht S.A., Brazilian conglomerate that provides engineering and infrastructure construction services;
· ONS: Operador Nacional do Sistema Elétrico, the national system operator;
· Power Sector Law: Law No. 9,074 of July 7, 1995, as amended;
· Procel: Programa Nacional de Combate ao Desperdício de Energia Elétrica, the national electrical energy conservation program;
· Proinfa: Programa de Incentivo às Fontes Alternativas de Energia, the program for incentives to develop alternative energy sources;
· Regulated Market or ACR: Ambiente de Contratação Regulada, the Brazilian regulated energy market;
· RGR Fund: Reserva Global de Reversão, a fund we administer, funded by consumers and providing compensation to all concessionaires for non-renewal or expropriation of their concessions used as source of funds for the expansion and improvement of the electrical energy sector;
· 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;
· Small Hydroelectric Power Plants or PCHs: Pequena Central Hidrelétrica, hydroelectric power plants with capacity from 1 MW to 30 MW;
· Substation: an assemblage of equipment which switches and/or changes or regulates the voltage of electricity in a transmission and distribution system;
· TFSEE: Taxa de Fiscalização de Serviços de Energia Elétrica, the fee for the supervision of electricity energy services;
· Thermoelectric plant or thermoelectric power unity (TPU): a generating unit which uses combustible fuel, such as coal, oil, diesel natural gas or other hydrocarbon as the source of energy to drive the electric generator;
· Transmission: the bulk transfer of electricity from generating facilities to the distribution system at load center station by means of the transmission grid (in lines with capacity between 69 kV and 525 kV);
· TWh: Terawatt hour (1,000 Gigawatt hours);
· U.S. GAAP: generally accepted accounting principles in the United States;
· UBP Fund: Fundo de Uso de Bem Público, the public asset use fund;
· Volt (V): the basic unit of electric force analogous to water pressure in pounds per square inch; and
· Watt: the basic unit of electrical power.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This annual report includes certain forward-looking statements, including statements regarding our intent, belief or current expectations or those of our officers with respect to, among other things, our financing plans, trends affecting our financial condition or results of operations and the impact of future plans and strategies. These forward-looking statements are subject to risks, uncertainties and contingencies including, but not limited to, the following:
· general economic, regulatory, political and business conditions in Brazil and abroad;
· interest rate fluctuations, inflation and the value of the real in relation to the U.S. dollar;
· changes in volumes and patterns of customer electricity usage;
· competitive conditions in Brazil’s electricity generation, transmission and distribution markets;
· the effects of competition;
· our level of debt and ability to obtain financing;
· the likelihood that we will receive payment in connection with account receivables;
· changes in rainfall and the water levels in the reservoirs used to run our hydroelectric power generation facilities;
· our financing and capital expenditure plans;
· our ability to serve our customers on a satisfactory basis;
· existing and future governmental regulation as to electricity rates, electricity usage, competition in our concession area and other matters;
· our ability to execute our business strategy, including our growth strategy;
· adoption of measures by the granting authorities in connection with our concession agreements;
· changes in other laws and regulations, including, among others, those affecting tax and environmental matters;
· future actions that may be taken by the Brazilian Government, our controlling shareholder;
· the outcome of the ongoing corruption Investigations and any new facts or information that may arise in relation to the Lava Jato investigation, or any other corruption-related investigations in Brazil, including any accounting, legal, reputational and political effects;
· the outcome of our tax, civil and other legal proceedings, including class actions or enforcement or other proceedings brought by governmental and regulatory agencies; and
· other risk factors as set forth under “Item 3.D, Risk Factors.”
The forward-looking statements referred to above also include information with respect to our capacity expansion projects that are in the planning and development stages. In addition to the above risks and uncertainties, our potential expansion projects involve engineering, construction, regulatory and other significant risks, which may:
· delay or prevent successful completion of one or more projects;
· increase the costs of projects; and
· result in the failure of facilities to operate or generate income in accordance with our expectations.
The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect” and similar words are intended to identify forward-looking statements. We undertake no obligation to update publicly or revise any forward-looking statements as a result of new information, future events or otherwise. In light of these risks and uncertainties, the forward-looking information, events and circumstances discussed in this annual report might not occur. Our actual results and performance could differ substantially from those anticipated in our forward-looking statements.
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
Background
The tables below present our selected financial data as of and for years ended December 31, 2016, 2015, 2014, 2013 and 2012. Our selected financial data as of December 31, 2016 and 2015 and for each of the years in the three year period ended December 31, 2016 were derived from our consolidated financial statements, which appear elsewhere in this annual report prepared in accordance with IFRS, as issued by the IASB. We also revised our selected financial data as of and for the year ended December 31, 2012 as a result of an adjustment to reflect the assets and liabilities at the remeasured present value of the minimum lease payments. Because we did not restate these consolidated financial statements, and the related financial data to reflect the adoption of IFRS 11 at January 1, 2013, they are not comparable to our consolidated financial statements and the financial data as of and for the years ended December 31, 2016, 2015, 2014 and 2013. Following the completion of the first phase of the Independent Investigation in October, 2016, which was intended to identify illicit acts that had a material effect on the Company’s financial statements, we continue to implement compliance procedures. For this second phase of the Independent Investigation, in April 2017 we entered into a new temporary contract with Hogan Lovells US LLP and with the members of the Independent Commission (as defined below). Based on the findings to date, we do not expect these additional procedures to materially impact our financial statements in future periods.
On September 26, 2014, our shareholders approved the acquisition of a 50.9% interest in CELG-D. We acquired this interest in CELG-D on January 27, 2015 for R$59.5 million. On February 14, 2017, we entered into a sale and purchase agreement with Companhia Celg de Participações — CELGPAR and Enel Brasil S.A. for the sale of our shares in CELG-D.
During the Extraordinary General Meeting of Shareholders held on July 22, 2016, our shareholders did not renew the concessions of six distribution companies, CEPISA, CEAL, Eletroacre, CERON, Boa Vista Energia and Amazonas D and that by December 31, 2017 we intend to transfer the control of these distribution companies. Once we determine the conditions for these transactions, our distribution segment may be classified as discontinued operations, based on IFRS 5. The effect of the termination of the concessions will mostly alter future periods.
On April 20, 2016, the Ministry of Mines and Energy published Ordinance No. 120, which regulates the conditions for receipt of remuneration relating to power eletric transmission assets existing on May 31, 2000, referred to as installations of the RBSE and RPC, which have not been depreciated or amortized, pursuant to Paragraph 2 of Article 15 of Law No. 12,783/2013. As of December 31, 2016, we accounted for R$36.6 billion as compensation with respect to the RBSE and RPC assets. For further information, see “Item 5 — Operating and Financial Review and Prospects — Principal Factors Affecting our Financial Performance — Transmission RBSE Payment.”
The following paragraphs discuss some important features of the presentation of the selected financial data and our consolidated financial statements. These features should be considered when evaluating the selected financial data.
A. Selected Financial Data
Selected Consolidated Balance Sheet Data
|
| As of December 31, |
| ||||||||
|
| 2016 |
| 2015 |
| 2014 |
| 2013 |
| 2012 |
|
|
| (R$ thousands) |
| ||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| 679,668 |
| 1,393,973 |
| 1,407,078 |
| 3,597,583 |
| 2,501,515 |
|
Marketable securities |
| 5,497,978 |
| 6,842,774 |
| 3,730,345 |
| 6,095,908 |
| 6,352,791 |
|
Accounts Receivable |
| 4,402,278 |
| 4,137,501 |
| 4,427,216 |
| 3,587,282 |
| 4,082,695 |
|
Financial asset of concession agreements |
| 2,337,513 |
| 965,212 |
| 3,437,521 |
| 1,168,002 |
| 318,293 |
|
Loans and financings |
| 3,025,938 |
| 3,187,226 |
| 2,696,021 |
| 2,838,503 |
| 2,611,830 |
|
Reimbursement rights |
| 1,657,962 |
| 2,265,242 |
| 3,673,639 |
| 10,910,073 |
| 7,302,160 |
|
Indemnifications — Law No. 12,783 |
| — |
| — |
| 3,738,295 |
| 3,476,495 |
| 8,882,836 |
|
Assets helds for sale |
| 4,406,213 |
| 4,623,785 |
| — |
| — |
| — |
|
Other Receivables |
| 7,265,102 |
| 6,021,683 |
| 7,441,078 |
| 7,405,987 |
| 9,817,716 |
|
Total current assets |
| 29,272,652 |
| 29,437,396 |
| 30,551,193 |
| 39,079,834 |
| 41,869,836 |
|
Total non-current assets |
| 141,226,777 |
| 120,049,383 |
| 113,926,357 |
| 99,514,556 |
| 100,784,392 |
|
Total assets |
| 170,499,429 |
| 149,486,779 |
| 144,477,550 |
| 138,594,389 |
| 142,654,228 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and shareholders’ equity: |
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
| 31,138,510 |
| 28,099,643 |
| 19,284,008 |
| 25,620,305 |
| 25,232,091 |
|
Non-current liabilities |
| 95,295,992 |
| 79,806,543 |
| 71,540,193 |
| 51,396,788 |
| 49,352,870 |
|
Capital stock |
| 31,305,331 |
| 31,305,331 |
| 31,305,331 |
| 31,305,331 |
| 31,305,331 |
|
Other shareholders’ equity |
| 12,759,596 |
| 10,275,262 |
| 22,348,018 |
| 30,271,965 |
| 36,763,936 |
|
Total liabilities and shareholders’ equity |
| 170,499,429 |
| 149,486,779 |
| 144,477,550 |
| 138,594,389 |
| 142,654,228 |
|
Non-controlling interest |
| (138,543 | ) | (352,792 | ) | 308,949 |
| 195,198 |
| 196,648 |
|
Selected Consolidated Statements of Profit and Loss Data
|
| For the year ended December 31, |
| ||||||||
|
| 2016 |
| 2015 |
| 2014 |
| 2013 |
| 2012 |
|
|
| (R$ thousands) |
| ||||||||
Net operating revenue |
| 60,748,853 | (1) | 32,588,838 |
| 30,137,807 |
| 23,835,644 |
| 28,014,296 |
|
Operating expenses / costs |
| (45,842,328 | ) | (42,612,287 | ) | (33,786,137 | ) | (29,215,079 | ) | (27,652,911 | ) |
Investigation Findings |
| — |
| (15,996 | ) | (195,127 | ) | — |
| — |
|
Financial result |
| (5,929,311 | ) | (1,699,025 | ) | 694,625 |
| 376,684 |
| 1,839,213 |
|
Result/(loss) before participation in associates and other investments |
| 8,977,214 |
| (11,738,470 | ) | (3,148,832 | ) | (5,002,751 | ) | 2,200,598 |
|
Result of participation in associates and other investments |
| 3,205,511 |
| 531,446 |
| (1,308,304 | ) | 177,768 |
| 612,202 |
|
Income/(loss) before effects of Law No. 12,783 |
| 12,182,725 |
| (11,207,024 | ) | (4,457,135 | ) | (4,824,983 | ) | 2,812,800 |
|
Effects — Law No. 12,783 |
| — |
| — |
| — |
| — |
| (10,085,380 | ) |
Income/(loss) before income tax and social contribution |
| 12,182,725 |
| (11,207,024 | ) | (4,457,135 | ) | (4,824,983 | ) | (7,272,580 | ) |
Income tax and Social Contribution |
| (8,510,819 | ) | (710,112 | ) | (1,700,518 | ) | (1,366,678 | ) | 490,642 |
|
Net income (loss) for the year |
| 3,671,906 |
| (11,917,136 | ) | (6,157,653 | ) | (6,191,661 | ) | (6,781,938 | ) |
Attributable to controlling shareholders |
| 3,584,529 |
| (11,405,085 | ) | (6,226,206 | ) | (6,186,949 | ) | (6,735,202 | ) |
Attributable to non-controlling shareholders |
| 87,377 |
| (512,051 | ) | 68,553 |
| (4,712 | ) | (46,736 | ) |
Net Income (loss) of the year per share (Basic) |
| 2.65 |
| (8.43 | ) | (4.60 | ) | (4.57 | ) | (4.98 | ) |
Net Income (loss) of the year per share (Diluted) |
| 2.62 |
| (8.43 | ) | (4.60 | ) | (4.57 | ) | (4.98 | ) |
(1) Our net operating revenue for 2016 includes R$28.6 billion attributable to the transmission RBSE payment described in “Item 5 — Operating and Financial Review and Prospects — Principal Factors affecting our Financial Peformance — Transmission RBSE Payment.”
Brazilian Corporate Law and our by-laws provide that we must pay our shareholders mandatory dividends equal to at least 25% of our adjusted net income for the preceding fiscal year. In addition, our by-laws require us to give: (i) class “A” preferred shares a priority in the distribution of dividends, at 8% each year over the capital linked to those shares; and (ii) class “B” preferred shares that were issued on or after June 23, 1969 a priority in the distribution of dividends, at 6% each year over the capital linked to those shares. In addition, preferred shares must receive a dividend at least 10% higher than the dividend paid to the common shares. For further information regarding dividend payments and circumstances in which dividend payments may not be made, see “Risk Factors—Risks
Relating to our Shares and ADS—You may not receive dividend payments if we incur net losses or our net profit does not reach certain levels.”
The following table sets out our proposed dividends for the periods indicated:
|
| Year |
| ||||
|
| 2016 |
| 2015(1) |
| 2014(1) |
|
|
| (R$) |
| ||||
Common Shares |
| — |
| — |
| — |
|
Class A Preferred Shares |
| 2.17825658673 | (2) | — |
| — |
|
Class B Preferred Shares |
| 1.63369244005 | (2) | — |
| — |
|
(1) In the financial statements as of and for the year ended December 31, 2014, we did not propose any dividends; however in our 55th Shareholders Meeting held on April 30, 2015 we approved the payment of dividends relating to the balance of the profit reserve account of R$26 million in favor of our Class A Preferred shareholders and Class B Preferred shareholders. This amount was paid in 2015.
(2) Dividend proposed by our management. Our General Shareholders Meeting held on April 28, 2017 approved the adjustment of these amounts between January 1, 2017 and the payment date (which may occur until December 31, 2017) by the SELIC rate variation.
The following table sets forth a summary of dividends/interest on own capital declared per share for the periods presented, at the time declared.
Dividend per Share
|
| Declared |
| Paid(1) |
| Declared |
| Paid(1) |
| ||||||||
|
| On 12/31/2011 |
| On 5/29/2012 |
| On 12/31/2012 |
| On 9/20/2013 |
| ||||||||
|
| R$ |
| US$ |
| R$ |
| US$ |
| R$ |
| US$ |
| R$ |
| US$ |
|
Common |
| 1.231779162 |
| 2.310571353 |
| 0.399210837 |
| 0.195356416 |
| 0.399210837 |
| 0.195356416 |
| 1.280047007 |
| 0.641820601 |
|
Preferred A |
| 2.178256581 |
| 4.085973695 |
| 2.178256581 |
| 1.065944008 |
| 2.178256581 |
| 1.065944008 |
| 2.263612588 |
| 1.134984250 |
|
Preferred B |
| 1.633692440 |
| 3.064480279 |
| 1.633692440 |
| 0.799458008 |
| 1.633692440 |
| 0.799458008 |
| 1.697709445 |
| 0.851238189 |
|
|
| Declared |
| Paid(1) |
| Declared |
| Paid(1) (2) |
| ||||||||
|
| On 12/31/2013 |
| On 5/29/2014 |
| On 12/31/2014 |
| On 6/30/2015 |
| ||||||||
|
| R$ |
| US$ |
| R$ |
| US$ |
| R$ |
| US$ |
| R$ |
| US$ |
|
Common |
| 0.39921083663 |
| 0.17640779347 |
| 0.39921083663 |
| 0.17640779347 |
| 0.00 |
| 0.00 |
| 0.00 |
| 0.00 |
|
Preferred A |
| 2.17825658673 |
| 0.96255262339 |
| 2.17825658673 |
| 0.96255262339 |
| 0.00 |
| 0.00 |
| 0.10384693436 |
| 0.03340311183 |
|
Preferred B |
| 1.63369244005 |
| 0.72191446754 |
| 1.63369244005 |
| 0.72191446754 |
| 0.00 |
| 0.00 |
| 0.10384693436 |
| 0.03340311183 |
|
|
| Declared |
| Paid |
| Declared(2) |
| ||||||
|
| On 12/31/2015 |
| 2016 |
| On 12/31/2016 |
| ||||||
|
| R$ |
| US$ |
| R$ |
| US$ |
| R$ |
| US$ |
|
Common |
| — |
| — |
| — |
| — |
| — |
| — |
|
Preferred A |
| — |
| — |
| — |
| — |
| — |
| — |
|
Preferred B |
| — |
| — |
| — |
| — |
| — |
| — |
|
(1) Adjusted by SELIC rate variation.
(2) In the financial statements as of and for the year ended December 31, 2014, we did not propose any dividends; however, in our 55th Shareholders’ General Meeting held on April 30, 2015 we approved the payment of dividends relating to the balance of the profit reserve account of R$26 million in favor of our Class A Preferred shareholders and Class B Preferred shareholders. This amount was paid in 2015.
Exchange Controls and Foreign Exchange Rates
The Brazilian foreign exchange system allows the purchase and sale of foreign currency and the international transfer of reais by any person or legal entity, regardless of the amount, subject to certain regulatory procedures.
Since 1999, the Central Bank has allowed the real/U.S. dollar exchange rate to float freely, and since then, the real/U.S. dollar exchange rate has fluctuated considerably. In 2011, the real depreciated 12.6% against the U.S. dollar. In 2012, the real depreciated 8.9% against the U.S. dollar. In 2013, the real depreciated 14.6% against the U.S. dollar. In 2014, the real depreciated 11.8% against the U.S. dollar. In 2015, the real depreciated 31.0% against the U.S. dollar. In 2016, the real appreciated 18.0% against the U.S. dollar. In the past, the Central Bank has intervened occasionally to control instability in foreign exchange rates.
We cannot predict whether the Central Bank or the Brazilian Government will continue to allow the real to float freely or will intervene in the exchange rate market through a currency band system or otherwise. We cannot assure that the real will not continue to appreciate substantially or depreciate against the U.S. dollar in the near future.
The following table sets forth the period end, average, high and low selling rates published by the Central Bank expressed in reais per U.S.$ for the years and dates indicated.
|
| Reais per U.S. Dollar |
| ||||||
Year Ended |
| Period-end |
| Average |
| Low |
| High |
|
December 31, 2011 |
| 1.8758 |
| 1.6746 |
| 1.5345 |
| 1.9016 |
|
December 31, 2012 |
| 2.0435 |
| 1.9550 |
| 1.7024 |
| 2.1121 |
|
December 31, 2013 |
| 2.3426 |
| 2.1605 |
| 1.9528 |
| 2.4457 |
|
December 31, 2014 |
| 2.6562 |
| 2.3547 |
| 2.1974 |
| 2.7403 |
|
December 31, 2015 |
| 3.9048 |
| 3.3387 |
| 2.5754 |
| 4.1949 |
|
December 31, 2016 |
| 3.2591 |
| 3.4851 |
| 3.1193 |
| 4.1557 |
|
The following table sets forth the period end, high and low commercial market/foreign exchange market selling rates published by the Central Bank expressed in reais per US$ for the periods and dates indicated.
|
| Reais per U.S. Dollar |
| ||||||
Month |
| Period end |
| Average |
| Low |
| High |
|
January 2017 |
| 3.1270 |
| 3.1966 |
| 3.1270 |
| 3.2729 |
|
February 2017 |
| 3.0993 |
| 3.1042 |
| 3.0510 |
| 3.1479 |
|
March 2017 |
| 3.1684 |
| 3.1279 |
| 3.0765 |
| 3.1735 |
|
April 2017 (through April 25, 2017) |
| 3.1577 |
| 3.1261 |
| 3.0923 |
| 3.1577 |
|
Brazilian law provides that, whenever there is a serious imbalance in Brazil’s balance of payments or there are serious reasons to foresee a serious imbalance, temporary restrictions may be imposed on remittances of foreign capital abroad. We cannot assure you that such measures will not be taken by the Brazilian Government in the future. See “Item 3.D, Risk Factors — Risks Relating to Brazil.”
We currently maintain our financial books and records in reais. For ease of presentation, however, certain consolidated financial information contained in this annual report has been presented in U.S. dollars. See “Item 8, Financial Information.”
B. Capitalization and Indebtedness
Not applicable.
C. Reasons for the Offer and Use of Proceeds
Not applicable.
D. Risk Factors
Risks Relating to our Company
As a state-controlled company involved in many large infrastructure projects in Brazil, we or our employees may be accused, in the media or otherwise, of accepting illegal payments.
As a result of our NYSE listing, we are subject to the U.S. Foreign Corrupt Practices Act of 1977 (as amended), or FCPA, and the disclosure requirements under the U.S. Securities Exchange Act of 1934. In addition, we are subject to broad anti-corruption legislation that has recently become effective in Brazil. In 2009, the Federal Police commenced an investigation called “Operação Lava Jato” (the “Lava Jato investigation”) which, according to official sources, is an investigation into the existence of an alleged corruption scheme involving Brazilian companies acting in various sectors of the Brazilian economy. Since 2014, the Brazilian Federal Prosecutor office has focused part of its investigation on irregularities involving contractors and suppliers used by state-owned companies and uncovered a broad payment scheme that involved a range of participants. In addition to criminal charges in Brazil, the U.S. Securities and Exchange Commission (“SEC”) and Department of Justice (“DoJ”) have also commenced investigations in relation to the Lava Jato investigation and a group of plaintiffs in the United States has commenced a class action lawsuit against us under the U.S. Securities laws. In light of these actions, the Brazilian media and the CVM have begun to question some special purpose entities and other transactions between third party contractors and us referred to in Lava Jato investigation.
Although no criminal charges have been brought against us as part of Lava Jato investigation, the Brazilian Federal Prosecutor’s Office investigated irregularities involving certain of our employees, contractors and suppliers, as well as certain contractors and suppliers of special purpose entities (“SPEs”) in which we hold minority interests, involved in the construction of power generation plants.
As a response to allegations of illegal activities appearing in the media in 2015 relating to companies that provided services to our subsidiary Eletronuclear (specifically, the “Angra 3” nuclear power plant), and to certain SPEs in which we hold a minority stake, our Board of Directors, although not required to do so, hired the law firm Hogan Lovells US LLP on June 10, 2015 to undertake an independent internal investigation for the purpose of assessing the potential existence of irregularities, including violations of the FCPA, the Brazilian Anticorruption Law and our code of ethics. The Independent Investigation focused on identifying potential illegal activities that could have an impact on our financial statements and was subject to oversight by an Independent Commission (Comissão Independente para Gestão da Investigação), whose creation was approved by our Board of Directors on July 31, 2015 (the “Independent Commission”). The Independent Commission was composed of Ms. Ellen Gracie Northfleet, a former justice of the Brazilian Supreme Court, Mr. Durval José Soledade Santos, a former director of the CVM, and the Engineer Mr. Manuel Jeremias Leite Caldas. The Independent Investigation is now complete. However, we continue to perform additional procedures related to the investigation in order to improve our internal controls and to review and assess any further information that comes to light as part of the on-going Lava Jato investigation. For this second phase, we entered into a temporary contract with Hogan Lovells US LLP. We also made a change to the Independent Commission due to the scope of the additional procedures; and one member, Mr.Manuel Jeremias Leite Caldas, was replaced by Mr. Julio Sergio Cardozo, a well known accounting expert.
Eletrobras, Hogan Lovells and the Independent Commission have been closely monitoring the investigations and cooperating with Brazilian and United States authorities, including the Federal Courts (Justiça Federal); the Federal Prosecutors’ Office (Ministério Público Federal or “MPF); the CVM; the Council for Economic Defense (Conselho Administrativo de Defesa Economica or “CADE”), the DoJ, and the SEC, among others, and have responded to requests for information and documents from these authorities in instances where the Independent Committee identified contracts where irregularities may have occurred. We evaluated those contracts and internal investigations and, when applicable, suspended those contracts. We also took administrative measures in relation to employees and officers involved in the activities identified by the Independent Investigation, including, when applicable, the suspension or termination of employees.
On April 29, 2015, the Federal Police commenced the “Operation Radioactivity” under the 16th phase of “ the Lava Jato” investigation, which resulted in the imprisonment of a former officer of our subsidiary Eletronuclear. This former officer was sentenced to 43 years in prison, by the judge of the 7th Federal Court of the District of Rio de Janeiro, for passive bribery, money laundering, obstruction of justice, tax evasion and participation in a criminal organization. On July 6, 2016, the Federal Police commenced “Operation Pripyat”, in which the Federal Police served arrest warrants issued by the judge of the 7th Federal Court of the District of Rio de Janeiro against five former officers, officers who had already been suspended by our Board of Directors as well as other parties. Formal charges of corruption, money laundering and obstruction of justice were filed against those former officers by Federal Prosecutors Office on July 27, 2016. On April 7, 2017, the 7th Federal Court of the District of Rio de Janeiro revoked the preventive arrest order against these officers on the basis that they played a minor part in any possible corruption scheme. We are continuing to assist the prosecution in these criminal proceedings. For more information concerning civil charges filed against us, please see the risk factor entitled “ — We may incur losses and spend time and money defending pending litigation and administrative proceedings.”
We cannot ensure that we will not become the subject of any criminal or further civil anti-corruption action brought under U.S. or Brazilian law if any illegal acts or regulatory failures come to light. Any potential future anti-corruption-related action brought against us could result in charges against us or, members of our management, significant fines and penalties, reputational harm, distraction from our ongoing business and other unforeseen material adverse effects.
We have been investigating events allegedly incompatible with our ethics and integrity standards. Eventual failures to timely detect or remedy any events of this nature could have material adverse effect on our results of operations and financial condition.
Our business, including relationships with third parties, is guided by ethical principles. We recently updated our Code of Ethics and adopted a number of conduct commitments and internal policies (such as guidelines for compliance with Anti-Corruption Policy) designed to guide interested parties, such as management, employees and contractors and reinforce our principles and rules for ethical behavior and professional conduct.
We are subject to the risk that employees and management, whether of our companies or of the special purpose entities (SPEs), in which we hold equity interests, our contractors, or any person doing business with us may engage in fraudulent activity, corruption or bribery and fail to comply with our internal controls and procedures, by means of, for example, misappropriation or manipulation of our assets for their personal or business advantage to our detriment. This risk is heightened by the fact that we conduct many of our operations through subsidiaries, as well as SPEs or consortia over which we do not have corporate control. Although we have a number of systems in place intended to identify, monitor and mitigate these risks, our systems are relatively new and may not be effective in all circumstances.
Any findings or allegations of lapses in adherence to these principles could lead to project delays, investigations, higher costs and expenses, reduced management focus on our ongoing business and lower levels of revenues and profits from any affected projects. In addition, certain of the financing agreements for the development of our plants, some of which are guaranteed by us,
contain acceleration clauses which could be triggered upon default. In the event of a default, certain of these financing agreements could be accelerated. These defaults or the acceleration of these financing agreements may also give other lenders the right to accelerate pursuant to cross-default provisions. Accordingly, acceleration of these financing agreements could adversely affect our results of operations and financial condition. For more information relating to possible defaults under our financing and capital market obligations please see the risk factor entitled“ — We have substantial liabilities and are exposed to short-term liquidity constraints, which could make it difficult for us to obtain financing for our planned investments and adversely affect our financial condition and results of operations.”
We cannot ensure that employees and management whether of our companies or of the SPEs in which we hold ownership interests, or partners and third parties, will comply with our ethical principles. Any failure — real or perceived — to follow these principles or comply with applicable governance or regulatory obligations could harm our reputation, limit our ability to obtain financing, and otherwise have a material adverse effect on our results of operations and financial condition.
If we are unable to remedy the material weaknesses in our internal controls, the reliability of our financial reporting and the preparation of our consolidated financial statements may be materially adversely affected.
Pursuant to SEC regulations, our management, fiscal council and internal auditors, evaluate the effectiveness of our disclosure controls and procedures, including the effectiveness of our internal control over financial reporting. Our internal controls over financial reporting are designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles. As a result of our management’s evaluation of the effectiveness of our disclosure, controls and procedures in 2016, our management determined that these controls and procedures were not effective due to material weaknesses in our internal controls over financial reporting. The material weaknesses identified were:
1 — We did not maintain an effective control environment, especifically regarding the lack of timely remedial actions related to previous years;
2 — We did not maintain adequate controls regarding the preparation of the financial statements and related disclosures, including lacking an appropriate timing analysis and reconciliations from Amazonas D and Furnas;
3 — We did not maintain effective internal controls regarding the adequate monitoring of the investments in specific purpose entities (SPEs), including failure to identify and monitor the physical and financial execution of the relevant investment projects evaluated under the equity method, lack of technical and financial terms review related to construction contracts before the bid process, adequate analysis of the proposals made by suppliers and lack of evaluation and monitoring of progress and budget of projects; and
4 — We did not fully implement internal controls over the Risk, Corruption Prevention and Compliance Program, considering the requirements of the North American legislation (FCPA) and also of the Brazilian Anticorruption Law; including an effective whistleblower channel due to inadequate completeness controls.
If our efforts to remediate the material weaknesses are not successful, we may be unable to report our results of operations for future periods accurately and in a timely manner and make our required filings with government authorities, including the SEC. There is also a risk that there could be accounting errors in our financial reporting, and we cannot be certain that in the future additional material weaknesses will not exist or otherwise be discovered. Any of these occurrences could adversely affect our business and operating results and could generate negative market reactions, potentially leading to a decline in the price of our shares, ADS and debt securities.
Furthermore, in light of the Lava Jato investigation, our material weaknesses on financial reporting may result in a situation whereby if an illegal act were to occur, our internal systems and controls may not be sufficient for any such action to come to the attention of our management.
Any potential SEC and DoJ investigations regarding the possibility of non-compliance with the U.S. Foreign Corrupt Practices Act could adversely affect us. Violations of this or other laws may require us to pay fines and penalties, undertake remedial measures, and agree to post-settlement monitoring, and expose us and our employees to criminal sanctions and civil suits.
In January 2017, we signed tolling agreements with the SEC and DoJ agreeing to extend the statute of limitations regarding any potential violations. In connection with any potential SEC or DoJ investigation, there can be no assurance that we will not be required to pay fines and penalties or provide other financial relief, or consent to injunctions or orders on future conduct or suffer other
penalties, including undertaking other remedial measures and agree to post-settlement monitoring, any of which could have a material adverse effect on us.
The Lava Jato investigation is ongoing and new information may be disclosed. As such, our estimates may be under or overestimated, which could thus lead to us having to resubmit our financial statements and cause a material adverse impact in our results of operations and financial condition. This could impact the market value of our securities.
Given that the Lava Jato investigation is still ongoing we may have to make adjustments to certain line items of our financial statements in the event the investigations lead to a discovery of materially relevant differences between the accounted amounts in such line items.
Our internal investigations into the allegations made as part of the Lava Jato investigation intend to identify possible illegal payments and other illegal acts that may have occurred in projects in which we and our subsidiaries hold equity interest, either directly or through special purpose entities. One of the possible consequences of illegal payments to the consortia of contractors, suppliers, or other service providers would be the capitalization of undue amounts in the accounting entries relating to any affected projects.
In October 2016, the Independent Investigation completed the first phase of the investigation with the goal of identifying any illegal acts that could result in material distortions in our consolidated financial statements. During this stage, the investigation identified cases of overbilling relating to fraudulent biding processes resulting from the use of bribes and kickbacks that were paid by certain suppliers and contractors of some of our subsidiaries and SPEs hired since 2008. For further information relating to the Independent Investigation see “Information on the Company-E. Compliance.”
In April 2017, as a consequence of the plea bargain agreements entered into by executives of the major Brazilian construction conglomerate, Odebrecht, the Federal Supreme Court requested that investigations should be initiated to investigate the conduct of politicians who were referred to in those agreements. Other official investigations may be initiated against individuals who are subject to the jurisdiction of lower courts.
Certain allegations of potential illegal acts were made public in respect of the Santo Antonio project, in which we hold an indirect minority interest through our subsidiary Furnas. Hogan Lovells, under the direct supervision of the Independent Committee, continues to monitor plea bargaining agreements that are made public as well as other information published by the press concerning the development of the “Lava Jato” investigation.
To determine the financial impact to be recognized in our consolidated financial statements, management took into consideration the conclusions reached and findings identified in the Independent Investigation in addition to the conclusions reached and findings identified to date by the Prosecutors overseeing the Lava Jato investigation. As the Lava Jato investigation is still ongoing and the Federal Prosecutors Office may take a considerable amount of time to conclude its investigations, new relevant information may come to light in the future, which could result in material distortions in our financial statements and cause us to make further adjustments to certain line items.
The operational and financial results of the operating subsidiaries that we own and the SPEs and consortia in which we invest may adversely affect our strategies, results of operations and financial condition.
We conduct our business mainly through our operating subsidiaries and SPEs and consortia, in which we hold equity interests and which were created specifically to participate in public auctions for concessions in the generation and transmission segments. We generally use SPEs when we enter into partnerships to explore new ventures. For the purposes of Rule 3-09 of Regulation S-X, the SPEs that hold the Santo Antônio and Jirau projects were considered significant subsidiaries as of and for the year ended December 31, 2014. For the year ended December 31, 2015, no minority owned subsidiary met the Regulation S-X or Rule 3-09 significant subsidiary criteria and for the year ended December 31, 2016, CTEEP, a transmission company in which we hold a minority interest, was considered a significant subsidiary.
Our ability to meet our financial obligations is therefore related in part to the cash flow and earnings of our subsidiaries, SPEs and consortia and the distribution or other transfer of those earnings to us in the form of dividends, loans or other advances and payment. Given the significant decrease in generation and transmission tariffs in recent years and the current adverse macro-economic conditions in Brazil, the operational and financial results of these operating subsidiaries, SPEs and consortia may be adversely affected.
Further, as we do not control the management of the SPEs or consortia their management practices may not be aligned with ours, which could lead to sanctions or penalties being imposed on them. Any deterioration in the results of operations or financial condition of the SPEs or consortia or any sanctions or penalties imposed on them may have a negative effect on our results of operations or financial condition. In order to standardize the management of the SPEs in which we hold equity interests, we developed a uniform corporate governance model that we are currently implementing across all our subsidiaries which will aim to follow this model when they invest in future SPEs or consortia. If the uniform corporate governance model is not implemented fully we may not be fully protected against any possible penalties or sanctions that may be imposed on these SPEs or consortia for future conduct, which could in turn result in reputational harm and adverse effects on our results of operations and financial condition.
Some of our operating subsidiaries, SPEs or consortia are, or in the future may be, subject to loan agreements that require that any indebtedness of these operating subsidiaries, SPEs or consortia to us be subordinate to the indebtedness under those loan agreements. Our operating subsidiaries, SPEs and consortia are separate legal entities. Any right we may have to receive assets of any operating subsidiary or SPE or other payments upon their liquidation or reorganization will be effectively subordinated to the claims of the creditors of that operating subsidiary, SPE or consortia (including tax authorities, trade creditors and lenders to such subsidiaries), except to the extent that we are a creditor of the relevant operating subsidiary, SPE or consortia, in which case our claims would still be subordinated to any security interest in the assets of that operating subsidiary, SPE or consortium and indebtedness of that operating subsidiary, SPE or consortium senior to the interest we hold.
Due to the length of time required to fully implement our compliance program, we may be subject to sanctions and penalties related to the enforcement of the FCPA and the Brazilian Anticorruption Law.
In mid-2014 our Board of Directors approved our compliance program (Plano de Implementação do Programa de Compliance), pursuant to (i) the Brazilian Anticorruption Law, and (ii) the U.S. laws and regulations applicable to companies that have their securities listed on the NYSE, such as the FCPA. Pursuant to our policies, all of our and our subsidiaries’ employees, management, partners and third parties must follow all applicable anti-corruption laws and regulations, whether in Brazil or overseas. On December 22, 2014, our Board of Executive Officers approved our compliance manual (Manual de Compliance referente às leis Anticorrupção). Each of our subsidiaries nominated compliance managers and assistants (Gerentes e Assistentes de Compliance) which together form the compliance commission (Comissão Diretiva de Compliance) of the Eletrobras group.
In December 2015, we updated our Compliance Manual. In August 2016, our Board of Directors created a Compliance Officer (Diretoria de Conformidade) to specifically address issues relating to enterprise risk management, internal controls and corporate integrity. The Board elected Mrs. Lucia Casasanta to fill the compliance role. Our Board of Directors and Executive Officers monitors the implementation of our compliance program by reviewing advances and setbacks.
We are implementing our compliance program as part of the “Eletrobras 5 Dimensions Program” based on guidance for state-owned companies, issued by Ministerio da Transparencia Fiscalização e Controle (CGU), in compliance with Decree No. 8,420/2015. Given the complexity of the implementation of this kind of program, it may not be fully operational until early 2018. The Eletrobras 5 Dimensions Program includes: (i) the commitment of our Board of Directors to fully implement the compliance program, the existence of the Compliance Officer role as well as her/his periodic reporting to the Board of Directors and to the Fiscal Council (with Audit Committee role) related to the ongoing compliance procedures; (ii) the development of a corruption risk assessment program to identify and protect the areas of a company in the energy sector which are most vulnerable to corruption; (iii) formal guidelines for compliance with our Anti-Corruption Policy, review of the procurement policies and procedures ; (iv) training of the employees, members of the management and of the Fiscal Council of the guidelines and integration of the Code of Ethics and Conduct Commitments, including formalizing procedures to mitigate the risk of corruption and training our employees regarding our compliance procedure and the risks of corruption; and (v) implementation of an independent whistleblower channel, annual internal audits to evaluate our compliance, including implementing due diligence for third parties and conducting background checks when appointing the members of Board of Directors, Board of Officers and Fiscal Council. In late 2016, we updated our Code of Ethics and Conduct.
Until the program is fully implemented, or if the program fails to identify corruption or fraud once it is implemented or we do not successfully remediate future issues that arise, we could be exposed to financial losses, restrictions on securities offerings, or civil and criminal liability in the United States and in Brazil.
The renewal of our concessions pursuant to Law No. 12,783/2013 or Law No. 13,182/2015 may adversely affect our results of operations and financial condition.
The Brazilian Government enacted Law No. 12,783/2013, or Law No. 12,783, in order to regulate the terms and conditions for the renewal of concessions for the generation and transmission of electricity which were due to expire between 2015 and 2017. Law No.
12,783 provides that companies may, only once, renew their generation, transmission and distribution concessions for a further thirty-year term, provided they accept certain conditions established by ANEEL, such as the revised tariffs to be calculated by ANEEL, and submit to the agency’s quality standards.
On December 4, 2012, we renewed the generation and transmission concessions which were due to expire between 2015 and 2017 of our subsidiaries Chesf, Eletronorte, Eletrosul and Furnas for a further 30 years pursuant to Law No. 12,783. By doing so, we accepted the application of the annual tariffs for generation and transmission (Receita Anual Permitida) as remuneration for the operation and maintenance of our generation and transmission activities in accordance with the MME’s Ordinance Nos. 578 and 579, both enacted in 2012.
Further, the Brazilian Government enacted Law No. 13,182/2015 to regulate the terms for the renewal, for a further thirty years, of the generation concessions and including the Sobradinho and Itumbiara hydroelectric power plants. On November 3, 2015, Chesf renewed the concession of the Sobradinho hydroelectric power plant. In order for Furnas to renew the concession for the Itumbiara hydroelectric power plant for a further 30 year term starting from February 27, 2020, it will have to follow certain conditions provided for in Law No. 13,182/2015, as partially amended by Law No. 13,299/2016. The law established that the supply for agreements entered into by Furnas pursuant to auctions should commence on January 1, 2016, and terminate on February 26, 2035, subject to gradual annual decreases in the energy supplied under those agreements from February 27, 2030 to February 26, 2035, when the entire physical guarantee of the Itumbiara power plant will be allocated to the quotas regime established by Law No. 12,783. Further, pursuant to the current legislation, the energy not sold by the Itumbiara power plant will be subject, form February 27, 2020, to the quota regime established by Law No. 12,783. Furnas approved the renewal of the concession of the Itumbiara hydroelectric power plant, however, the reference price established by the law might not be attractive to consumers in future auctions to be held until December 2019 for the hiring of the physical guarantee. As of the date of this annual report, Furnas held four auctions to sell energy produced by the Itumbiara power plant, on January 19, 2016, November 7, 2016, December 16, 2016 and February 21, 2017, selling part, but not all, of the total volume available. We cannot guarantee that the legality of Law No. 13,182/2015 and of Law No. 13,299/2016 will not be questioned, nor that all conditions needed to turn the renewal of the Itumbiara concession into an economically feasible project will be met, which could have an advserse effect on our results of operations and financial condition.
The amount of any payments to be received following the renewal of our concessions, which were due to expire between 2015 and 2017, may not be sufficient to cover our investments in these concessions. Further, we cannot estimate when and on what terms payments in respect of generation concessions will be made.
In respect of our generation and transmission concessions, by agreeing to the renewal of the concessions, which were due to expire between 2015 and 2017, we accepted payments as compensation for the unamortized undepreciated portion of our assets relating to those concessions. As of December 31, 2016, pursuant to Law No. 12,783, we were awarded the total payments of R$36.6 billion in relation to our transmission concessions. For further information, please see “—Principal Factors Affecting our Financial Performance— Transmission RBSE Payment.”
On April 20, 2016, MME enacted Instruction No, 120, which regulates the conditions under which the payments in connection with the RBSE transmission assets are to be received and which establishes that the amounts homologated by ANEEL referring to these assets should be merged into the Regulatory Asset Basis (Base de Remuneração Regulatória), increased with respect to compensation for the cost of equity from January 1, 2013 to July 2017 when the tariff process will take place in order to include such payments, and, from this date, the compensation of these assets will be determined through WACC, the weighted average cost of capital, defined by ANEEL, until the effective date of payment. The WACC is calculated as an average between the cost of equity of the shareholders and of third parties, which is the cost of financial debts.
The amounts related to RBSE, once updated and paid, will be added to the Permitted Annual Revenues (“RAPs” - Receitas Anuais Permitidas) of the relevant projects which were renewed in 2012, as from the 2017 tariff review, increased by the compensation related to the cost of equity mentioned above. The compensation and depreciation installments will be defined according to the methodologies of the Periodic Tariff Review of Revenues from Existing Concessionaires (Revisão Tarifária Periódica das Receitas das Concessionárias Existentes), approved by ANEEL, and the Regulatory Asset Basis will be depreciated considering the residual life span of the assets and will be updated using the IPCA index. Starting with the 2017 tariff process, the compensation through the application of WACC will be applicable for an eight-year period.
However, certain associations of energy consumers have legally questioned these increases, claiming that these charges would be improper, especially regarding the compensation for the cost of equity, and that those differences should be paid from public resources, and not passed on to consumers. In the event that the consumers succeed in their lawsuits and are able to entirely or partially reverse the collection of theseamounts, our financial results might be materially adversely affected. On April 10, 2017, a partial injunction was granted in favor of these associations in order to exclude the tariff that the associations had to pay in relation to the compensation provided for by Portaria MME 120/2016. Should the partial injunction remain in effect, the lawsuit be decided
against us, and/or new lawsuits be filed by other consumers associations from the regulated market with the Brazilian Government not assuming the obligation to pay for these credits, we might not receive the total amount of the assets accounted in our financial statement, or might be required to make an accounting provision. ANEEL has not yet defined the criteria for the indemnification of generation assets, which may be below the amount claimed by us.
The value of the revised tariffs we calculated as part of the renewal of the concessions within the ambit of Law No. 12,783 based on our expected expenses, costs and revenues may be lower than the tariffs we will eventually receive.
Law No. 12,783 determines, among other things, the tariffs to be charged by concessionaires based on costs of operation and maintenance, charges, taxes and payments for the use of the transmission and distribution systems. By agreeing to renew our concessions early, we made certain assumptions about the assets of Furnas, Chesf, Eletronorte and Eletrosul that may not materialize over time, particularly in relation to planned cost reductions. As a result, the tariffs our subsidiaries will receive in time may be lower than predicted, may not cover the amounts actually invested or may be paid only after a significant amount of time, which could materially adversely affect our results of operations and financial condition.
Under the current rules for the tariff review for generation and transmission concessions, we might not receive the full amount to compensate us for costs incurred in relation to the operation and maintenance of these concessions and any expenses in relation to these assets.
In Brazil, the regulatory model adopted for transmission companies is based on the traditional English price/revenue cap model. According to this model, ANEEL determines the revenues to be charged by the companies, which must cover any costs of capital, operation and maintenance considered efficient. As is the case for distribution companies, the regulation mechanisms for transmission companies are the tariff review, which occurs every five years, and the annual tariff readjustment, which is a monetary adjustment of the tariffs charged. These mechanisms depend on the concession agreement of each company. At the time of the tariff review, the objective of ANEEL is to recalculate the costs for the efficient operation and maintenance of the system managed by the transmission company. Companies with high operating costs comparative to similar companies only receive partial compensation.
It is also incumbent upon ANEEL to determine the revenues to be charged by the generating companies, holding assets with renewed concession agreements or resulting from concessions auctions (both cases in accordance with Law No. 12,783). The Annual Generation Revenue (RAG) is the amount to which the generating companies have the right to provide the physical guarantee of a hydroelectric plant. RAG is calculated taking into account the regulatory costs of operation, maintenance, administration, compensation and amortization of the hydroelectric plant, being adjusted annually, in addition to being reviewed every 5 years.
According to the current regulations, to recognize the required investiments to maintain the adequate service provision, ANEEL determined that generating companies must present investment plans, every 5 years, to be approved by the Agency, so compensation starts to be paid after the plant starts to operate. However, ANEEL is promoting a review of this methodology, which consists in establishing a regulatory amount to cover investments in improvements, to be included in the fixed revenue of the concession. This revenue will then be adjusted annually, with no the need for a tariff review process.
If our transmission companies do not perform properly or ANEEL chooses to maintain the current process of reviewing transmission revenues, we will be exposed to the possibility of not being adequately compensated for the costs and expenses of investments on these assets. This may affect our results of operations and financial condition. Should this not occur, the risk of not having our investments properly remunerated by ANEEL will continue and might materially adversely affect our operation results and financial condition.
There are no guarantees that our existing concession contracts will be renewed and, if so, on what terms.
We carry out our generation, transmission and distribution activities pursuant to concession agreements entered into with the Brazilian Government through ANEEL.
The Brazilian Government may renew any existing concessions that were not renewed pursuant to Law No. 12,783 and Law No. 13,182/2015, for an additional period of 30 years without the need to carry out a new public bidding process. If we request a renewal, the Brazilian Government may renew the concession on less favorable terms. This applies to approximately 41% of our corporate generation assets and 9.1% of our corporate transmission assets, other than Itaipu and our nuclear power plants Angra I and Angra II.
Given the Brazilian Government’s discretion in relation to the renewal of concessions, we may face considerable competition during the renewal process. Consequently, we cannot give you any assurances that our concessions will be renewed or renewed on similar terms.
Every five years the physical guarantees for our plants can be revalued and we may incur additional costs having to purchase energy to comply with existing agreements, which could reduce our revenues.
Order MME No. 622/2016 published and opened to public consultation the Ordinary Review Report of Energy for Physical Guarantees of hydroelectric power plants (Relatório Revisão Ordinária de Garantia Física de Energia) and the Reviewed Amounts of Energy for Physical Guarantees of hydroelectric power plants (Valores Revistos de Garantia Física de Energia das Usinas Hidrelétricas Despachadas) operating in the SIN. The impacts to our group could trigger changes to the system’s total physical guarantees which are still under analysis, as the result of the public consultation has not yet been disclosed. We expect the process to be concluded in 2017 and the review to be applied from 2018 onwards. Possible changes to the physical guarantee in 2018 could impact our plants as follows: Boa Esperança (a decrease of 5%), Paulo Afonso Complex — Moxotó (a decrease of 5%); Corumbá I (a decrease of 5%); Curuá-Una (a decrease of 3.3%); Funil (a decrease of 5%); Furnas (a decrease of 2.8%); Itumbiara (a decrease of 5%); Sobradinho (a decrease of 5%); Tucuruí I and II (a decrease of 3.2%), among others.
The decrease in the physical guarantee, especially for those plants that have not had their concessions renewed yet, could impact our revenues and increase our expenses due to the need to purchase energy to comply with sale and purchase agreements already in effect.
The value of any government bonds that we might receive in exchange for our credits in Itaipu might be less than the value of such credits.
Law No. 12,783 authorized the Brazilian Government to acquire any of the credits we hold against Itaipu as a result of our financing of the construction of the Itaipu hydroelectric power plant, in exchange for Brazilian Government bonds (títulos da dívida pública mobiliária) of an equivalent value. Should the Brazilian Government acquire these credits, the value of any government bonds transferred to us in the future may be worth less than the value of our credits in Itaipu and could materially adversely affect our results of operations and financial condition.
We are controlled by the Brazilian Government, the current policies and priorities of which directly affect our operations and may conflict with interests of our investors.
The Brazilian Government, as our controlling shareholder, exercises substantial influence on the strategic orientation of our business. The Brazilian Government also has the power to appoint seven out of the ten members of our Board of Directors and, through them, a majority of the executive officers responsible for our day-to-day management. Additionally, the Brazilian Government currently holds the majority of our voting shares. Consequently, the Brazilian Government has the majority of votes at our shareholders’ meetings, which empowers it to approve most matters prescribed by law, including the following: (i) the partial or total sale of the shares of our subsidiaries and affiliates; (ii) increase our capital stock; (iii) determine our dividend distribution policy, as long as it complies with the minimum dividend distribution regulated by law; (iv) issuances of securities in the domestic market and internationally; (v) corporate spin-offs and mergers; (vi) swaps of our shares or other securities; and (vii) the redemption of different classes of our shares, independent from approval by holders of the shares and classes that are subject to redemption.
Our operations impact the commercial, industrial and social development promoted by the Brazilian Government. Therefore, we may incur costs or engage in transactions that may not necessarily meet the interest of our other investors.
We have substantial liabilities and are exposed to short-term liquidity constraints, which could make it difficult for us to obtain financing for our planned investments and adversely affect our results of operations and financial condition.
In order to finance the capital expenditures needed to meet our long-term growth objectives, we have incurred a substantial amount of debt. As our cash flow from operations in recent years has not been sufficient to fund our capital expenditures, debt service and payment of dividends, our debt has significantly increased since 2012. In 2016, we were able to reduce our debt by 1.7% to R$45,620 million as of December 31, 2016, compared to R$46,398 million as of December 31, 2015. However, our debt, net of cash, cash equivalents and marketable securities, increased by 3.2% to R$39,196 million as of December 31, 2016 compared to R$37,966 million as of December 31, 2015. 71% of our existing debt (principal), or R$32.6 billion, will mature in the next five years. In order to meet out growth objectives, maintain our ability to fund our operations and amortize scheduled debt maturities, we will need to raise significant amounts of debt capital from a broad range of funding sources as well as sell selected assets. To service our debt after meeting our capital expenditure targets, we have relied upon, and may continue to rely upon, a combination of cash flows provided by our operations, drawdowns under our available credit facilities, our cash and short-term financial investments balance, the incurrence
of additional indebtedness, the receipt of payments from the government for concessions renewed pursuant to Law No. 12,783 and the sale of assets, such as our recent sale of CELG-D. Following the downgrade of the sovereign ratings, we lost our Fitch’s, Moody’s and Standard & Poor’s investment grade ratings. Any further lowering of our credit ratings may have adverse consequences on our ability to obtain financing or may impact our cost of financing, also making it more difficult or costly to refinance maturing obligations. If, for any reason, we are faced with continued difficulties in accessing debt financings or there is any delay in us receiving amounts due to us under the payments from the government, this could hamper our ability to make capital expenditures in the amounts needed to maintain our current level of investments or our long-term targets. In addition, it could impair our ability to timely meet our principal and interest payment obligations with our creditors.
We are subject to certain covenants, non-compliance with which may allow the lenders under the relevant facilities to accelerate their commitments.
We are party to a number of international and Brazilian financing facilities as borrower and guarantor. The bonds we issued in the international capital markets and our existing credit facilities require that we comply with a number of financial and non-financial covenants, such as the provision of financial statements by certain deadlines and the provision of an unqualified audit report, among others. We may not be able to comply with such covenants, which could trigger certain events of defaults and, consequently, permit the relevant lenders to accelerate the loans, potentially allowing other lenders to rely on their cross-acceleration provisions. Should any lender make this request, it could allow other lenders to use the same arguments and also to ask for the cross-accelerated provisions. However, on an agreed basis, these same lenders may grant waivers regarding the breach of covenants, temporarily or not, and not ask for the corss-accelerated provisions. However, we cannot guarantee that the relevant lenders will grant us waivers for any breaches of our covenants in the future, and any covenant breach may result in circumstances that usually lead to defaults in other loans.
We are subject to rules limiting borrowing by public sector companies and may not be able to obtain sufficient funds to complete our proposed capital expenditure programs.
In respect of capital expenditures for expansion, modernization, research, infrastructure and environmental projects, in 2016 we disbursed R$8.7 billion and, in 2015, R$10.4 billion. For 2017 our current budget provides for approximately R$8.9 billion of capital expenditures. We cannot assure you that we will be able to finance our proposed capital expenditure programs from either our cash flow or external resources. Moreover, as a state controlled company, we are subject to certain rules limiting our indebtedness and investments and must submit our proposed annual budgets, including estimates of the amounts of our financing requirements and sources of our financing, to the Ministry of Planning, Budget and Management and the Brazilian Congress for approval. Thus, if our operations do not fall within the parameters and conditions established by such rules and the Brazilian Government, we may have difficulty in obtaining the necessary financing authorizations, which could create difficulties in raising funds.
If we are unable to obtain funds, our ability to invest in capital expenditures for expansion and maintenance may be adversely impacted, which would materially adversely affect the execution of our growth strategy, particularly our investment in large scale projects, which could materially adversely affect our results of operations and financial condition.
The amounts we receive from the Fuel Consumption Account are insufficient to cover costs related to thermoelectric generation of energy.
The Brazilian Government introduced the Fuel Consumption Account, or CCC Account, in 1973. The purpose of the CCC Account was to equalize the costs of energy generation for electricity companies located in areas where the generation is mainly thermoelectric and, therefore, more expensive in order to avoid peaks in the tariffs paid by end consumers in such locations. We have administered the CCC Account ever since, making the relevant payments to the beneficiaries. Until 2013, the CCC Account was funded through quotas paid by companies operating in the energy sector. However, following the enactment of Law No. 12,783, funds from the CDE Account are now the main funds of the CCC Account.
The generation costs of the Isolated System are partially covered by the CCC Account, however, such reimbursement amounts are important to complement the revenues of our distribution companies due to the high generation costs and technical and commercial losses in the region. Our distribution subsidiaries have incurred substantial debt with third party fuel suppliers, especially as a result of the delay in the transfer of funds from the CCC Account in recent years. Our distribution subsidiaries have incurred penalties and interest payments as a result of non-payment of their debts, which are not fully covered by the CCC Account.
In December 2014, certain of our distribution subsidiaries renegotiated overdue amounts with third party fuel and gas suppliers. As of December 31, 2016, these amounts totaled approximately R$11 billion, which were negotiated and formalized through instruments of acknowledgment of debt, which are to be paid in 120 monthly instalments that are updated using the SELIC rate. In December 2014, our distribution subsidiaries also commenced renegotiations with the CDE Account, established by the Ministerial Order MME/MF No. 652/2014, as the distribution companies are using the credits owed to them under the CDE Account as collateral for their debt
renegotiations with their suppliers. We guarantee the instruments that are being renegotiated with these fuel suppliers in relation to any values not covered by the receivables owed to them under the CDE Account or CCC Account.
Further, during the period from January 1, 2015 to July 2015, we incurred further debt with oil fuel and natural gas suppliers for approximately R$7 billion as of December 31, 2016 due to the continuing default of our distribution subsidiaries. The distribution subsidiaries alongside us are still negotiating further agreements with third party fuel suppliers for debt incurred to date. In order to pay for parts of these debts, the distribution companies are lenders of new credits to the CDE Account/CCC Account, as provided in Interministerial Order MME/MF No. 372/2015. However, the renegotiation of this debt has not yet occurred, and the distribution companies continue to incur penalties and accrue interest to fuel suppliers, besides potentially being cut off from the supply at any time.
On February 7, 2017, ANEEL issued Resolution No. 2,202/2017, published on August 2, 2017, which approved the annual budget of the CDE Account for 2017 and suspends the transfer of credits expected by our distribution companies, in accordance with the Interministerial Orders MME/MF Nº 652/2014 and 372/2015. As mentioned above, a significant portion of these credits serve as coverage for the payment of debts with fuel suppliers that were incurred by the distribution companies in 2014 and 2015. The budget that ANEEL approved for 2017 also reduced the CCC Account/CDE Account budget forecast regarding expenses of the distribution companies in the current year.
Currently, ANEEL is inspecting our distribution companies regarding the credits they hold against the CCC Account/CDE Account, especially those that serve as payment coverage and guarantee for debts with fuel suppliers. Should these amounts be questioned and/or partially or fully disallowed, we might have to review the renegotiation of debts with our fuel suppliers; the payment of debts might be accelerated; and/or we might be ordered to fully guarantee the debts not covered by the credits under the CCE Account/CDE Account. The disallowance of the CCE Accounts/CDE Accounts credits might also cause specific accounting adjustments and impacts on our financial statements. The irregularity in the payment of debts with the suppliers might also entail the interruption of fuel supply, disabling our distribution companies to generate energy and causing them to incur in high costs due to the the acquisition of energy for resale from the market. Moreover, any further delay in funds being transferred from the CCC Account to us and our distribution subsidiaries may also adversely affect the cash flow of these companies.
As the manager of certain sectorial funds, we are exposed to mismanagement claims.
We currently manage certain accounts and funds such as the CCC Account, the CDE Account and the RGR Fund in addition to government programs, such as Luz para Todos, Procel and Proinfa. These funds and programs are managed pursuant to rules and regulations enacted by ANEEL and the MME. Accordingly, ANEEL and other oversight bodies, such as the Federal Audit Courts (“the TCU”), may not agree with how we interpreted certain provisions for the management of these accounts and/or funds. Accordingly, we may be exposed to significant penalties for non-compliance with these rules, and may need to reimburse these funds any amounts that might be considered improperly managed. Further, we are subject to civil and criminal liability for the management of third party funds.
In January 2014, ANEEL commenced an administrative proceeding determining that we reimburse the RGR Fund the historical amount of approximately R$2 billion updated by the SELIC rate. We appealed against this decision. On May 10, 2016, ANEEL dismissed the first appeal and determined that we indemnify the RGR Fund for that amount. In June 2016, Law No. 13,299/2016 was enacted. As a result, we have filed a new appeal requesting compliance with the new law, which allowed us to compensate the credits that we accelerated in the past in respect of the RGR Fund with the reimbursement required by ANEEL. On September 27, 2016, ANEEL partially granted our appeal, however, on the understanding that it was our responsibility to reimburse the RGR Fund in the amount of R$2,037.8 million (the historical amount of December 31, 2011), to be adjusted by an annual interest rate of 5% due in monthly installments between January 2017 and 2026. We continue to dispute the amount and, consequently, we appealed this decision. We cannot assure you, however, that this new appeal will be granted. Moreover, under Decree No. 9,022/2017, ANEEL will review the amount mentioned above and issue an act determining the reimbursement of resources from us to the RGR Fund.
In addition, in December 2015, we became aware that we made certain improper payments while managers of the RGR Fund regarding the payment of installments, to certain generation and distribution concessionaires that renewed their concessions in 2013, related to the first tranche of credits considered not impaired and not redeemed under Law No 12,783/2013. Among the concessionaries that received improper additional payment, some of them are our generation and transmission subsidiaries. Hence, such amounts must be returned to the RGR Fund. We voluntarily informed the TCU and ANEEL about the payments so they can request reimbursement. We are investigating this further internally in order to determine responsibility. ANEEL, through Resolution No. 84, dated January 13, 2017, determined that we and our subsidiaries return these amounts to the CDE Account and RGR Fund in the historical amount of R$604.2 million. We will reimburse the RGR Fund in six equal monthly instalments, which will be updated from the payment date to the actual reimbursement date. We are discussing the conditions for reimbursements with ANEEL. However, if the companies that received the improper additional payments do not reimburse those amounts, we might be asked to reimburse any shortfall due to RGR.
Law No 13,360/2016, regulated by Decree 9,022/2017, determined that the budget, the management, and the movement of the CDE Account, the CCC Account and the RGR Fund will be under our responsibility until April 30, 2017, or until ANEEL transfers this
responsibility to CCEE. However, we will still have to answer to the supervisory bodies for the management of the funds/accounts during the period they remain under our management.In addition, as of April 30, 2017, Decree No 9,022 will edited establish that we will send on a monthly basis, to CCEE the documentation showing the amounts to be transferred and receivedfor the fulfillment of the Luz para Todos program and of the loan agreements executed as part of the CDE Account and the RGR Fund. Further, we will remain responsible for managing the loan agreements with recourse to the RGR Fund that were executed by November 17, 2016. It is our responsibility, according to the Decree: (i) to charge the loan in accordance with the schedule established in the clauses of each agreementt; and (ii) to reimburse the RGR Fund, while debtor under these agreements, the resources related to the amortization, the agreement interest rate, and the credit reserve rate in no more than five days from the date mentioned in the loan agreement, even in the case of eventual contract default by the agents of the electricity sector. We do not agree with the provision that established that we are responsible for the payment of debts of loan agreements entered into by agents of the electricity sector, because we only acted as managers of the RGR Fund. However, if the decree is not amended in the future, we might have to reimburse any defaulted installments or incur penalties and default interest as provided in the agreements.
Any of these events could subject us to liability, which in turn could have a material adverse effect on our results of operations and financial condition.
We may be unable to fully implement our strategy.
Our ability to reach the principal objectives of our strategy depends on a series of factors, among them, our ability to:
· Implement an operational efficiency plan aimed at reducing costs, increasing revenues and improving the quality and reliability of our services;
· Decrease our leverage and our net debt to EBITDA ratio;
· Grow our business in a sustainable and profitable manner, considering the appropriate levels of leverage;
· Improve our business model, corporate governance and management; and
· Improve our human resources allocation in light of the new regulations of the Brazilian energy sector.
We cannot guarantee that we will be able to accomplish these objectives and those specified in see “Item B. Business Overview-Strategy” in their entirety or successfully. Any impact on the main elements of our strategy may adversely affect our financial condition and results of operations. For further information regarding our strategy, see “Item B. Business Overview-Strategy.”
If any of our assets were deemed assets dedicated to providing an essential public service, they would not be available for liquidation in the event of our bankruptcy and could not be subject to attachment to secure a judgment.
Law No. 11,101/2005, or the New Bankruptcy Law, governs judicial recovery, extrajudicial recovery and liquidation proceedings and replaces the debt reorganization judicial proceeding known as concordata (reorganization) for judicial and extrajudicial recovery. The New Bankruptcy Law provides that its provisions do not apply to government owned and mixed capital companies (such as Eletrobras). However, the Brazilian Federal Constitution establishes that mixed capital companies, such as Eletrobras, which operate a commercial business, will be subject to the legal regime applicable to private corporations in respect of civil, commercial, labor and tax matters. Accordingly, it is unclear whether or not the provisions relating to judicial and extrajudicial recovery and liquidation proceedings of the New Bankruptcy Law would apply to us. Nevertheless, Law No. 12,767/2012 provides that judicial and extrajudicial recovery do not apply to public entity concessionaires until the termination of those concessions.
We believe that a substantial portion of our assets, including our generation assets, our transmission network and our limited distribution network, would be deemed by Brazilian courts to be related to providing an essential public service. Accordingly, these assets would not be available for liquidation in the event of our bankruptcy or available for attachment to secure a judgment. In either case, these assets would revert to the Brazilian Government pursuant to Brazilian law and the terms of our concession agreements. Although the Brazilian Government would in such circumstances be under an obligation to compensate us in respect of the reversion of these assets, we cannot assure you that the level of compensation received would be equal to the market value of the assets and, accordingly, our financial condition and results of operations may be affected.
We may be liable for damages, subject to further regulation and have difficulty obtaining financing if there is a nuclear accident involving our subsidiary Eletronuclear.
Our subsidiary Eletronuclear, as an operator of nuclear power plants, is subject to strict liability under Brazilian law for damages in the event of a nuclear accident caused by the operations of nuclear power plants Angra I and Angra II. The Vienna Convention on Civil Liability for Nuclear Accidents, or the Vienna Convention, became binding in Brazil in 1993. The Vienna Convention provides that an operator of a nuclear installation, such as Eletronuclear, in a jurisdiction which has adopted legislation implementing the Vienna Convention, will be strictly liable for nuclear damages. As of December 31, 2016, our Angra I and Angra II nuclear power plants were insured for nuclear risk in the event of a nuclear accident for the total amount, per power plant, of US$500 million for material damages and of US$239.7 million for civil liability.
The Angra I and Angra II nuclear power plants operate under the supervision of the Brazilian nuclear regulatory authority, or CNEN, and are subject to periodic inspections by international agencies, such as the International Atomic Energy Agency and the World Association of Nuclear Operators. Eletronuclear invests approximately R$100 million per year in the modernization and incorporation of the latest safety requirements for the plants.
Eletronuclear carried out an extensive reassessment of the risk associated with environmental issues and in response made minor adjustments to certain protection barriers. In addition, Eletronuclear verified the conditions for responding to accidents following the stress test procedures adopted by the European Union for nuclear plants under construction or in operation in Europe. As a result of this verification process, Eletronuclear implemented several complementary safety measures.
Eletronuclear seeks to comply with all preventative and safety actions, however, it cannot guarantee that, in the event of a nuclear accident that its insurance will be sufficient. Accordingly, our financial condition and results of operations may be affected if a nuclear accident were to occur.
Furthermore, our Angra III nuclear power plant has been subject to extensive delays and has never been operational. If we are unable to conclude the construction of the Angra III power plant, our financial condition and results of operations could be materially adversely affected.
In 2009, Eletronuclear started the construction of a new nuclear plant, called Angra III. Construction stopped in 2015 when the media reported allegations of potential illegal activities by companies that provide services to Eletronuclear in respect of the Angra III nuclear power plant. As of the date of this annual report, Eletronuclear has executed 60% of the original project and invested R$8.9 billion. In 2016, we revised the total budget for the Angra III project and changed the forecasted date for operation of the Angra III nuclear power plant to December 2022. As a result, in 2016 we recognized an impairment in the amount of R$2,886 million and recorded an onerous contract of R$1,350 million in respect of this project. The amount of accumulated impairments recognized on our balance sheet totalled R$8.949 billion as of December 31, 2016 and R$1.350 billion in accumulated onerous contract.
We are currently seeking to review the tariff of Angra III and the authorization of CNPE to resume the construction and are also looking for new sources of funding. If we are not succesful, we will be liable as guarantor under a R$6.15 billion financing (under which R$3.48 billion are outstanding as of December 31, 2016) provided by BNDES to Eletronuclear for the construction of the Angra III plant, in addition to other accounting liabilities which we may record, which could materially adversely affect our financial condition and results of operations.
We are currently looking for purchasers for our distribution companies in the Northern and Northeastern regions of Brazil but if we are unable to find any purchasers we may have to bear the costs related to the dissolution and any prior obligations of those distribution companies.
During the Extraordinary General Meeting of Shareholders held on July 22, 2016, our shareholders decided not to renew the concessions of our six distribution subsidiaries CEPISA, CEAL, Eletroacre, CERON, Boa Vista Energia and Amazonas Energia, and that by December 31, 2017 we intend to transfer the control of these subsidiaries, in compliance with Law No. 13,360. The shareholders also approved that these distribution companies can continue distributing energy until December 31, 2017 provided the funds necessary for operation, maintenance and new investments will be received from customer charges or government funding. The shareholders also approved the resolution to return the concessions to government control at any time if control has not been transferred by December 31, 2017, or if the Government ceases to allocate resources to fund these companies at any time or the tariff does not represent proper compensation. If we return these concessions, they will be subject to new bids in the future.
On August 3, 2016, the MME issued decrees that named those distribution subsidiaries as temporarily responsible for distributing public energy so as to assure the continuity of the service, in accordance with article 9, paragraph 1, of Law No. 12,783. According to these decrees, the distribution companies will provide these services, in a provisional manner, against payment of the proper compensation, until the effective transfer of control of these companies, or until December 31, 2017, whichever occurs first .In
addition, Boa Vista Energia is responsible for the rendering of services in the concession area of CERR, a state company of the government of Roraima. Pursuant to paragraph 4 of article 9 of Law No 12,783, during the temporary service provision period, the distribution companies may borrow and/or receive funds from the CCC Account, the CDE Account and the RGR Fund, subject to ANEEL’s approval.
However, as we continue to be a majority stakeholder of the distribution companies, we cannot guarantee that we will successfully transfer the corporate control of all of them by the end of 2017. In this event, we might be required by ANEEL to continue providing distribution services for these companies for an extended period of time. Accordingly, we may have to bear the costs related to the dissolution of any of these distribution companies that might remain under our control. Those costs could include the termination of employees and other obligations. Furthermore, we may have to pay expenses related to obligations the distribution companies might have had untilt he end of the temporary service provision period or related to obligations in which we act as guarantor, which could have a material adverse effect on our consolidated financial position, results of operations and cash flows in the future.
We may incur losses and spend time and money defending pending litigation and administrative proceedings.
We are currently a party to numerous legal proceedings relating to civil, administrative, environmental, labor, tax and corporate claims filed against us. These claims involve substantial amounts of money and other remedies. Several individual disputes account for a significant part of the total amount of claims against us. We have established provisions for all amounts in dispute that represent a a present obligation as a result of a past event and is probable there will be outflow of resources that embodies economic benefits to settle the referred obligation in the view of our legal advisors and in relation to those disputes that are covered by laws, administrative decrees, decrees or court rulings that have proven to be unfavorable. As of December 31, 2015, we provisioned a total aggregate amount of approximately R$14.1 billion in respect of our legal proceedings, of which R$0.6 billion were related to tax claims, R$12.5 billion were related to civil claims and R$1 billion were related to labor claims. As of December 31, 2016, we provisioned a total aggregate amount of approximately R$20.7 billion in respect of our legal proceedings, of which R$0.6 billion were related to tax claims, R$18.7 billion were related to civil claims and R$1.4 billion were related to labor claims. (See “Item 8.A, Consolidated Financial Statements and Other Information — Litigation” and note 30 to our consolidated financial statements).
Our subsidiary Chesf is a defendant in a proceeding filed by Companhia Brasileira de Projetos e Obras and Mendez Júnior in respect of certain amendments to the construction agreement of the Xingó plant. An appeal and a special appeal are currently before the Brazilian Superior Court of Justice. One of the main issues relates to the application of a factor for monetary restatement. Furthermore, the Federal Court of Recife, in the State of Pernambuco, had blocked R$497.2 million of Chesf’s assets in August 2016 in connection with this ongoing litigation. However, on January 24, 2017, the court reversed the decision, unblocking the assets. If the court decides against Chesf, it may have to pay up to R$1.2 billion to the plaintiffs.
Between July 22, 2015 and August 15, 2015, two putative securities class action complaints were filed against us and certain of our employees in the United States District Court for the Southern District of New York (SDNY). On October 2, 2015, these actions were consolidated and the Court appointed lead plaintiffs, Dominique Lavoie and the City of Providence. The plaintiffs filed a consolidated amended complaint on December 8, 2015 purportedly on behalf of investors who purchased our U.S. exchange-traded securities between August 17, 2010 and June 24, 2015, and filed a second amended complaint on February 26, 2016.
The second amended complaint alleges, among other things, that we and the individual defendants knew or should have known about alleged fraud committed against us by a cartel of construction firms, as well as bribes and kickbacks allegedly solicited and received by our employees; that we and the individual defendants made material misstatements and omissions regarding the alleged fraud; and that our stock price declined when the alleged fraud was disclosed.
On March 27, 2017, the court granted in part and denied in part ourdefendants’ motion to dismiss the second amended complaint. All claims against José Antonio Muniz Lopes, our former CEO, were dismissed, as were scheme liability claims against José da Costa Carvalho Neto, our former CEO, and Armando Casado de Araújo, our current CFO, under Section 10(b) of the Exchange Act and Rule 10b-5(a) and (c) promulgated thereunder. The motion to dismiss was otherwise denied as to the remaining claims. The decision does not create any financial obligation for us, and the case will now move into the class certification and discovery phases. The deadline to answer the second amended complaint is May 5, 2017. These legal proceedings, if decided against us, could have a material adverse effect on our consolidated financial position, results of operations and cash flows in the future. For further information, see See “Item 8.A, Consolidated Financial Statements and Other Information — Litigation — Environmental Proceedings”.
In the event that claims involving a material amount for which we have no provisions were to be decided against us, or in the event that the estimated losses turn out to be significantly higher that the provisions made, the aggregate cost of unfavorable decisions could have a material adverse effect on our financial condition and results of operations. In addition, our management may be required to direct its time and attention to defending these claims, which could preclude them from focusing on our core business. Depending on
the outcome, certain litigation could result in restrictions in our operations and have a material adverse effect on certain of our businesses.
We may incur losses in legal proceedings in respect of compulsory loans made from 1962 through to 1993.
Pursuant to Law No. 4,156 of November 28, 1962 certain end-users of electricity were required to make “compulsory loans” to us (through collections by distributors) in order to provide funds for the development of the electricity sector. Industrial customers consuming over 2,000 kWh of electricity per month were required to pay an amount equivalent to 32.5% of each electricity invoice to us in the form of a compulsory loan, which was repayable by us within 20 years of draw-down. Interest on the compulsory loans accrues at IPCA — E plus 6.0% per annum. Law No. 7,181 of December 20, 1983, extended the compulsory loan program until December 31, 1993 and provided that such loans may, subject to shareholder approval, be repaid by us in the form of an issue of preferred shares at book value, in lieu of cash.
We made available to eligible customers upon the first and second conversion of credits from the compulsory loan approximately 42.5 billion class “B” preferred shares and upon the third conversion of credits from the compulsory loan, about 27.2 billion class “B” preferred shares. In addition, our shareholders approved on April 30, 2008 the issuance of additional preferred shares to eligible customers at book value in repayment of our remaining compulsory loans. If additional shares are issued in the future and the book value of such shares is less than their market value, the value of existing shareholders’ shares may be subject to dilution. On December 31, 2008, we recorded approximately R$215 million for debts for compulsory loans that had not yet been converted, which, at any time, by decision of our shareholders, may be refunded to industrial consumers, through issuing class “B” preferred shares, in accordance with the proceedings described above.
As of December 31, 2016, consumers filed a large number of lawsuits against us questioning the monetary adjustments, understated inflation and interest calculations related to the repayment of the compulsory loans. In the third quarter of 2015, the STJ issued decisions defining the parameters for the method to calculate such executions, accepting some of the claims made by us, although not entirely, causing adjustments to the calculation methods adopted by us and the risk classification of these claims and consequent difference in the provision for contingencies. We filed an appeal with the STF, however, as ofthe date of this annual report, it had not yet been decided. The total amount involved in these lawsuits is not adjusted for monetary restatement and required expert assessment to be estimated reliably. In the course of enforcement proceedings, we were required to pledge certain of our assets, consisting mainly of shares held by us in other electricity sector companies. As of December 31, 2016, we provisioned R$13.9 billion to cover losses arising from unfavorable decisions relating to these lawsuits. We are discussing joint responsibility in certain judgements with the Government but as of the date of this annual report, the subject still had not yet been decided by the STJ.
In the course of the execution processes, we must offer as a guarantee some of our assets, which consist mainly of the preferred shares held by us in other companies in the energy sector.
We are also involved in numerous lawsuits related to the repayment of the compulsory loans, in which consumers seek to exercise the option to convert their credits presented by bonds payable to the bearer. These bonds are called “obrigações da Eletrobras” and are subject to expiration, which has already passed. Although we believe that we have no further liability in respect of these bonds because they are expired, any legal interpretation that the bonds have not expired could adversely affect our results of operations and financial condition.
Judgments may not be enforceable against our directors or officers.
All of our directors and officers named in this annual report reside in Brazil. We, our directors and officers and our Fiscal Council members, have agreed to accept service of process in the United States only in specific transactions. Substantially all of our assets, as well as the assets of these persons, are located in Brazil. As a result, it may not be possible to effect service of process within the United States or other jurisdictions outside Brazil upon these persons, attach their assets, or enforce against them or us in United States courts, or the courts of other jurisdictions outside Brazil, judgments predicated upon the civil liability provisions of the securities laws of the United States or the laws of other jurisdictions.
We and our subsidiaries may be required to make substantial contributions to the pension plans of our current and former employees which we sponsor.
Pursuant to Supplementary Law No. 108/2001 and Supplementary Law No. 109/2001 and the terms of the pensions plans themselves, we and our subsidiaries are required to make contributions to the pension plans of our current and former employees. If there is a mismatch in the reserves of the pension plans and the amount of resources available to the plans, we (as sponsors) and the pension plan beneficiaries must contribute to the pension plan to re-establish the plan’s balance.
In 2016, the pension plans that we and our subsidiaries sponsor recorded a deficit of R$2.5 billion. In 2015, the deficit was R$2.0 billion. Our subsidiaries and we made contributions to our respective pension plans which amounted to approximately R$473.9 million in 2016, and R$425 million in 2015.
Some pension plans that we sponsor had to approve a balance for the technical deficit which included the amounts to be balanced and the payment terms. The implementation of the balance plan results in the payment of an extraordinary contribution by the participants and sponsors, in order to recover the balance of the plan. Such payments may materially adversely affect our results of operations and financial condition.
Our insurance coverage may be insufficient to cover potential losses.
Our business is generally subject to a number of risks and hazards, including industrial accidents, labor disputes, unexpected geological conditions, changes in the regulatory environment, environmental hazards and weather and other natural phenomena. Additionally, we and our subsidiaries are liable to third parties for losses and damages caused by any failure to provide generation, transmission and distribution services.
Our insurance covers only part of the losses that we may incur. We are currently in the process of renegotiating our insurance policies at a group level to ensure uniform coverage and adequate protection for all our operations. Nevertheless, we believe that we maintain insurance in amounts that are adequate to cover material damages to our plants caused by fire, general third-party liability for accidents and operational risks. If we are unable to renew our insurance policies from time to time or losses or other liabilities occur that are not covered by insurance or that exceed our insurance limits, we could be subject to significant unexpected additional losses.
We do not have alternative supply sources for the key raw materials that our thermal and nuclear plants use.
Our thermal plants operate on coal, natural gas and/or oil and our nuclear plants rely on processed uranium. In each case, we are entirely dependent on third parties for the provision of these raw materials. In the event that supplies of these raw materials become unavailable or may not be purchased on reasonable terms for any reason, we do not have alternative supply sources and, therefore, the ability of our thermal and/or nuclear plants, as applicable, to generate electricity would be materially adversely affected, which may materially adversely affect our financial condition and results of operations.
Risks Relating to Brazil
Allegations of political corruption against the Brazilian federal government and the Brazilian legislative branch could create economic and political instability.
Members of the federal government and the Brazilian legislative branch have faced allegations of political corruption. As a result, a number of politicians, including senior federal officials and congressmen, resigned or have been arrested. Currently, elected officials and other public officials in Brazil are being investigated for allegations of unethical and illegal conduct identified during Lava Jato investigation being conducted by the Office of the Brazilian Federal Prosecutor.
Further, in December 2015, the Brazilian Congress opened impeachment proceedings against the then President Dilma Rousseff alleging non-compliance with the fiscal responsibility law. On April 17, 2016, the Brazilian Congress voted in favor of the admissibility of the impeachment proceedings and the Brazilian Senate voted in favor of commencing the impeachment process on May 11, 2016, removing Ms. Rousseff from the presidency for up to 180 days to defend herself in her impeachment trial. Brazil’s Vice President, Michel Temer, was named Acting President of Brazil on May 12, 2016, in response to Ms. Rousseff’s temporary removal from office. As Acting President, Mr. Temer has full presidential powers to govern Brazil, and has appointed a new cabinet to govern during the impeachment period. On August 31, 2016, the Brazilian Senate voted in favor of the impeachment, thereby removing Ms. Rousseff from office through the end of her term, and Mr. Temer was sworn in as the country’s new president. Mr. Temer will remain in office until January 2019, when the next President is sworn in following the next Presidential election which is schedule for October 2018. The impeachment proceedings have resulted in volatility and we expect that there may be continued volatility in the Brazilian markets, affecting the trading prices of securities issued by Brazilian issuers during Mr. Temer’s term. We cannot predict how Mr. Temer’s policies will affect the Brazilian economy.
The potential outcome of Lava Jato investigation is unknown and could have further adverse impacts on general market perception of the Brazilian economy and on the Brazilian economy itself. The President of Brazil has powers to indirectly appoint the majority of our directors. Accordingly, any further change in the Brazilian government could lead to further changes in our management. We cannot predict whether the outcome of Lava Jato investigation will lead to continuing instability or whether new allegations against Brazilian government officials will arise in the future. In addition, we cannot predict the outcome of any such allegations nor their
effect on the Brazilian economy and, consequently, our results of operations. These and other future developments in the Brazilian economy and governmental policies may materially adversely affect us.
The Brazilian Government has exercised, and continues to exercise, significant influence over the Brazilian economy. Brazilian economic and political conditions and investor perception of these conditions have a direct impact on our business, financial condition, results of operations and prospects.
The Brazilian economy has been characterized by the significant involvement of the Brazilian Government, which often changes monetary, credit, exchange and other policies to influence Brazil’s economy. The Brazilian Government’s actions to control inflation and effect other policies have often involved wage and price controls, depreciation of the real, controls over remittances of funds abroad, intervention by the Central Bank to affect base interest rates and other measures. We have no control over, and cannot predict, what measures or policies the Brazilian Government may take in the future. Our business, financial condition, results of operations and prospects may be adversely affected by changes in Brazilian Government policies, as well as general factors including, without limitation:
· Brazilian economic growth;
· inflation;
· interest rates;
· variations in exchange rates;
· exchange control policies;
· liquidity of the domestic capital and lending markets;
· fiscal policy and changes in tax laws;
· allegations of corruption against political parties, elected officials or other public officials, including allegations made in relation to Lava Jato investigation; and
· other political, diplomatic, social and economic policies or developments in or affecting Brazil.
Changes in, or uncertainties regarding the implementation of, the policies listed above could contribute to economic uncertainty in Brazil, thereby increasing the volatility of the Brazilian securities market and the value of Brazilian securities traded abroad.
Historically, the level of the country’s political stability has influenced the performance of the Brazilian economy and political crises have affected the confidence of investors and the general public, which resulted in economic deceleration and heightened volatility in the securities issued abroad by Brazilian companies. Currently, Brazilian markets are experiencing heightened volatility due to the uncertainties derived from the ongoing Lava Jato investigation and its impacts on the Brazilian economy and political environment. Any developments in Lava Jato investigation (foreseeable and unforeseeable) could have a material adverse effect on the Brazilian economy and on our results of operations and financial condition.
Additionally, after reaching 7.5% in 2010, the Brazilian Gross Domestic Product, or GDP, has declined, indicating a steady economic slowdown. Growth rates were 3.9% in 2011, 1.8% in 2012, 2.7% in 2013 and 0.1% in 2014. In 2015, the economy contracted by 3.9% and further contracted by 3.6% in 2016. Our results of operations and financial condition have been, and will continue to be, affected by the growth rate of GDP in Brazil. In years in which the Brazilian GDP does not grow, there tends to be a decrease in the demand for power. Further, it may also lead to an increase in commercial losses and customer defaults. We cannot assure that GDP will increase or remain stable in the future. Future developments in the Brazilian economy may affect Brazil’s growth rates and, consequently, the consumption of energy. As a result, these developments could impair our results of operations and financial condition.
The stability of the Brazilian real is affected by its relationship with the U.S. dollar, inflation and Brazilian Government policy regarding exchange rates. Our business could be adversely affected by any recurrence of volatility affecting our foreign currency-linked receivables and obligations.
In the past, the Brazilian Government has implemented several economic plans, and has used a wide range of foreign currency control mechanisms to cope with high degrees of volatility of the Brazilian currency. Recently, after a relatively long period of stability, the real became extremely volatile again in 2014 and 2015, however, starting to appreciate again in mid-2016. Nevertheless, the exchange rate between the real and the dollar reached R$3.26, R$3.90 and R$2.66 to U.S.$1.00 on December 31, 2016, 2015 and 2014, respectively.
Because of the volatility and the uncertainty of the factors that impact the exchange rate, it is difficult to predict future movements in the exchange rate. In addition, the Brazilian Government may change its foreign currency policy. Any governmental interference in the exchange rate, or the implementation of exchange control mechanisms, could influence the exchange rate. These exchange rate scenarios may have adverse effects on us as they may adversely affect the value of our receivables from Itaipu, which are denominated in U.S. dollars, as well as any of our indebtedness denominated in U.S. dollars.
As of December 31, 2016, approximately 27% of our consolidated indebtedness (of R$45,620 million), which amounted to R$12,091 million, was denominated in foreign currencies, of which R$11,795 million (or approximately 26% of our consolidated indebtedness) was denominated in U.S. dollars. As of December 31, 2015, approximately 33% of our consolidated indebtedness (of R$46,398 million), which amounted to R$15,283 million, was denominated in foreign currencies, of which R$14,851 million (or approximately 32% of our consolidated indebtedness) was denominated in U.S. dollars.
Inflation, and the Brazilian Government’s measures to curb inflation, may further contribute significantly to economic uncertainty in Brazil and materially adversely impact our operating results.
Brazil has historically experienced high rates of inflation, particularly prior to 1995. Inflation, as well as government efforts to combat inflation, had significant negative effects on the Brazilian economy. More recently, inflation rates were 6.29% in 2016, 10.67% in 2015, 6.41% in 2014, 5.91% in 2013 and 5.84% in 2012, as measured by the IPCA, the National Consumer Price Index, compiled by IBGE (Brazilian Institute of Geography and Statistics).
Brazil may experience high levels of inflation in the future. The Brazilian government may introduce policies to reduce inflationary pressures, which could have the effect of reducing the overall performance of the Brazilian economy. Some of these policies may have an effect on our ability to access foreign capital or reduce our ability to execute our future business and management plans.
The Brazilian government’s measures to control inflation have often included maintaining a tight monetary policy with high real interest rates. These policies have contributed to limiting the size and attractiveness of the local debt markets, requiring borrowers like us to seek additional foreign currency funding in the international capital markets. To the extent that there is economic uncertainty in Brazil, which weakens our ability to obtain external financing on favorable terms, the local Brazilian market may be insufficient to meet our financing needs, which in turn may materially adversely affect us.
The vote by the U.K. electorate in favor of the U.K. exit from the European Union could adversely impact our business, results of operations and financial condition.
On June 23, 2016, the U.K. electorate voted in a general referendum in favor of the U.K. exiting from the European Union, so-called Brexit. On March 20, 2017, the U.K. gave formal notice under Article 50 of the Treaty on European Union of its intention to leave the European Union. The on-going process of negotiations between the U.K. and the European Union will determine the future terms of the U.K’s relationship with the European Union, including access to European Union markets either during the transitional period or more permanently. The announcement of Brexit caused significant volatility in global stock markets and currency exchange rate fluctuations. The effects of Brexit will depend on any agreements the U.K. makes to retain access to E.U. markets either during the transitional period or more permanently. Brexit could adversely affect European or worldwide economic or market conditions and could contribute to instability in global financial markets. In addition, Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the U.K. determines which E.U. laws to replace or replicate. Any of these effects of Brexit, and others we cannot anticipate, could have a material adverse effect on our business, results of operations or financial condition.
Risks Relating to the Brazilian Power Industry
We are subject to impacts related to the hydrological conditions.
We are subject to hydrological risks derived from adverse weather conditions such as flooding of certain rivers and excessively low flow rates in other rivers. Accordingly, the Interconnected Power System, or SIN, uses the MRE (Mecanismo de Realocação de Energia), an association of energy sellers to share the hydrological risks existing in the market.
The Generation Scaling Factor, or GSF, represents the relation between the total production and collateral of the hydroelectric energy generators of the SIN that are part of the MRE, which represents the volume of energy in energy generation contracts. If there are excessively low flow rates, the hydroelectric generators will have to obtain energy in the short term market pursuant to the PLD.
As Brazil experienced an unusually severe drought between 2012 and 2015, its energy generation was below its expected levels. Following the enactment of Law No. 12,783, only generation companies which hold concessions which were not renewed
pursuant to its terms and are due to expire remain exposed to this risk. As some of our subsidiaries hold concessions due to expire, we and our subsidiaries are exposed to this risk. Accordingly, in the event that there are unfavorable hydrological conditions our results of operations and financial condition may be affected. As this risk is systemic, and even though we are currently adopting strategies to reduce the impact of this risk, we cannot guarantee that this risk will be completely mitigated or avoided.
We act as commercial agent for the energy generated by Itaipu in the regulated market making available the total volume of energy agreed between the quota holders. Decree No. 8,401, of February 4, 2015, passed on the hydrological risk related to the MRE, which we accounted for until 2014, to the distribution concessionaires. Currently, we pay the other costs related to the financial settlement with CCEE, which are reimbursed to us in the following fiscal year.
Generally, unfavorable hydrological conditions that result in a reduced supply of electricity to the Brazilian market could cause, among other things, the implementation of broad electricity conservation programs, including mandatory reductions in electricity consumption or the imposition of special taxes or charges on the sector to finance the costs of production of new thermal power plants, which are usually more expensive. In addition, we might incur higher costs in our distribution subsidiaries due to the need to purchase electricity for resale which would impact the cash flows of our distribution companies. Accordingly, it is possible that prolonged periods of reduced precipitation levels might adversely affect our financial condition and results of operations.
We could be penalized by ANEEL for failing to comply with the terms of our concession agreements and applicable legislation and we may not recover the full value of our investment in the event that any of our concession agreements are terminated.
We carry out our generation, transmission and distribution activities in accordance with concession agreements we execute with the Brazilian Government through ANEEL. The length of such concessions varies from 20 to 35 years. ANEEL may impose penalties on us in the event that we fail to comply with any provision of our concession agreements and of the legislation and regulation applicable to the electricity sector. Depending on the extent of the non-compliance, these penalties could include substantial fines (in some cases up to two percent of our gross revenues in the fiscal year immediately preceding the assessment), restrictions on our operations (such as exclusion from upcoming auctions), intervention or termination of the concession. ANEEL may also terminate our concessions prior to their due date in the event that we fail to comply with their provisions, are declared bankrupt or are dissolved, or in the event that ANEEL determines that such termination would serve the public interest (see “Item 4.B, Business Overview — Generation — Concessions”).
Because of delays in the conclusion of the construction of certain transmission lines, we are prohibited by ANEEL to participate in auctions in this sector until the end of 2017. We cannot assure you that we will not be penalized again by ANEEL for a future breach of our concession agreements or that our concessions will not be terminated in the future. In the event that ANEEL were to terminate any of our concessions before their expiration date, the compensation we recover for the unamortized portion of our investment may not be sufficient for us to recover the full value of our investment and, accordingly, could have a material adverse effect on our financial condition and results of operations.
We may be subject to administrative intervention if we provide our services in an inadequate manner or violate contractual obligations, regulations and other legal obligations.
Law No. 12,767/2012 permits ANEEL to intervene in electric power concessions considered part of the public service in order to guarantee adequate levels of service as well as compliance with the terms and conditions under the concession contract, regulations and other relevant legal obligations.
If ANEEL were to intervene in concessions as part of an administrative procedure, management would have to present a recovery plan to correct any violations and failures that gave rise to the intervention. Should the recovery plan be dismissed or not presented within the timelines stipulated by the regulations, ANEEL may, among other things, expropriate or forfeit the concession, reallocate our assets or adopt measures which may alter our shareholding structure.
If the holders of our concessions are subject to an administrative intervention, we and our subsidiaries may be subject to an internal reorganization in accordance with the recovery plan presented by management, which may adversely affect our financial condition and results of operations. In addition, should the recovery plan be rejected by the administrative authorities, ANEEL would be able to use its powers described above, which could have an adverse impact on our financial condition and results of operations.
Our generation, transmission and distribution activities are regulated and supervised by the Brazilian Government. Our business could be adversely affected by any regulatory changes or by termination of the concessions prior to their expiration dates, and any indemnity payments for the early terminations may be less than the full amount of our investments.
According to Brazilian law, ANEEL has the authority to regulate and supervise the generation, transmission and distribution activities of electrical energy concessionaries, such as us and our subsidiaries, including investments, additional expenses, tariffs and the passing of costs to customers, among other matters. Regulatory changes in the electrical energy sector are hard to predict and may have a material adverse impact on our financial condition and results of operations.
Concessions may be terminated early through expropriation and/or forfeiture. Granting authorities may expropriate concessions in the interest of the public as expressly provided for by law, in which case granting authorities carry out the service during the concession period. A granting authority may declare the forfeiture of concessions after ANEEL or the MME conduct an administrative procedure and declare that the concessionaire (a) did not provide proper service for more than 30 consecutive days and did not present any acceptable alternative to ANEEL or to ONS, or failed to comply with the applicable law or regulation; (b) lost the technical, financial or economic conditions required to provide the service properly; and/or (c) did not comply with the fines charged by the granting authority.
Penalties are set forth in ANEEL Resolution No. 63, of 2004, and include warnings, substantial fines (in certain cases up to 2.0% of the revenue for the fiscal year immediately preceding the evaluation), restrictions on the concessionaire’s operations, intervention or termination of the concession.
We may contest any expropriation or forfeiture and will be entitled to receive compensation for our investments in expropriated assets that have not been fully amortized or depreciated. However, the indemnity payments may not be sufficient to fully recover our investments, which could materially adversely affect our financial condition and results of operations.
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 such damages.
Under Brazilian law, we are strictly liable for direct and indirect damages resulting from the inadequate supply of electricity to distribution companies, such as abrupt interruptions or disturbances arising from the generation, distribution or transmission systems. Accordingly, we may be held liable for such damages even if we are not at fault. As a result of the inherent uncertainty involved in these matters, we do not maintain any provisions in relation to potential damage, and these interruptions or disturbances may not covered by our insurance policies or may exceed the coverage limits of such policies.
Accordingly, if we are found liable to pay damages in a material amount, our financial condition and results of operations would be materially adversely affected to a greater degree than those claims where we have recorded provisions.
We are subject to strict safety, health and environmental laws and regulations that may become more stringent in the future and may result in increased liabilities and increased capital expenditures.
Our operations are subject to comprehensive federal, state and local safety, health and environmental legislation as well as supervision by agencies of the Brazilian Government that are responsible for the implementation of such laws. Among other things, these laws require us to obtain environmental licenses for the construction of new facilities or the installation and operation of new equipment required for our business. The rules are complex and may change over time, making our ability to comply with the applicable requirements more difficult, thereby precluding our continuing or future generation, transmission and distribution operations.
We see increasing health and safety requirements as a trend in our industry. Moreover, private individuals, non-governmental organizations and public authorities have certain rights to commence legal proceedings to obtain injunctions to suspend or cancel the licensing process in case of any noncompliance with the law.
The failure to comply with environmental laws and regulations can result in administrative and criminal penalties, irrespective of the recovery of damages or indemnification payments for irreversible damages. Administrative penalties may include summons, fines, temporary or permanent bans, the suspension of subsidies by public bodies and the temporary or permanent shutdown of commercial activities. With regard to criminal liability, individual transgressors are subject to the following criminal sanctions: (i) custodial sentence — imprisonment or confinement; (ii) temporary interdiction of rights; and (iii) fines. The sanctions imposed on legal entities are: (a) temporary interdiction of rights; (b) fines; and (c) rendering of services to the community. The penalties relating to the temporary interdiction of rights applicable to legal entities can correspond to: (1) partial or total interruption of activities; (2) temporary shutdown of establishment, construction work or activity; and (3) prohibition of contracting with governmental authorities and obtaining governmental subsides, incentives or donations.
Further, under Brazil’s environmental legislation, the corporate veil may be lifted to guarantee the payment of costs related to environmental damages, whenever the legal entity is deemed by a court to be an obstacle to reimbursement of damages caused to the environment.
Environmental regulations require us to perform environmental impact studies on future projects and obtain regulatory permits.
We must conduct environmental impact studies and obtain regulatory permits for our current and future projects. We cannot assure you that these environmental impact studies will be approved by the Brazilian Government, that public opposition will not result in delays or modifications to any proposed project or that laws or regulations will not change or be interpreted in a manner that could materially adversely affect our operations or plans for the projects in which we have an investment. We believe that concern for environmental protection is also an increasing trend in our industry. Although we consider environmental protection when developing our business strategy, changes in environmental regulations, or changes in the policy of enforcement of existing environmental regulations, could materially adversely affect our results of operations and our financial condition by delaying the implementation of electricity projects, increasing the costs of expansion.
Construction, expansion and operation of our electricity generation, transmission and distribution facilities and equipment involve significant risks that could lead to lost revenues or increased expenses.
The construction, expansion and operation of facilities and equipment for the generation, transmission and distribution of electricity involve many risks, including, but not limited to, the following:
· the inability to obtain required governmental permits and approvals;
· the unavailability of equipment;
· supply interruptions;
· work stoppages;
· labor unrest;
· social unrest;
· interruptions by weather and hydrological conditions;
· unforeseen engineering and environmental problems;
· increases in electricity losses, including technical and commercial losses;
· construction and operational delays, or unanticipated cost overruns;
· issues related to the sale of energy;
· the unavailability of adequate funding; and
· expenses related to the operation and maintenance segment cannot be fully approved by ANEEL.
For example, we experienced work stoppages during the construction of our Jirau, Santo Antônio hydroelectric plants and the Belo Monte plant which we own through an SPE. We do not have insurance coverage for some of these risks, particularly for those related to weather conditions.
In 2016, Norte Energia S.A and the shareholders of Norte Energia S.A filed an arbitration proceeding against us about the interpretation of a provision of Norte Energia’s shareholders’ agreement. The provision established a right of first refusal to enter into a purchase and sale agreement of 20% of the average secured energy generated by Belo Monte and which was designated for the Free Market. While the arbitration is ongoing, the shareholders are attempting to reach a consensus to agree on Free Market agreements, which, once executed by the shareholders and submitted to BNDES, would allow the release of energy worth up to R$2 billion.
BNDES has already contracted for this amount and will be credited to the company by BNDES once it receives a copy of the purchase and sale agreement duly executed by all parties. If the interpretation of the disputed section of the shareholders’ agreement and the respective arbitration award are unfavorable to us, our financial condition and results of operations may be adversely impacted.
Furthermore, the implementation of investments in the transmission sector has suffered delays due to the difficulty to obtain the necessary government permits and approvals. This has led to delays in investments in generation due to the lack of transmission lines to drain production. If we experience any of these or other unforeseen risks, we may not be able to generate, transmit and distribute electricity in amounts consistent with our projections, which may have a material adverse effect on our financial condition and results of operations.
Risks Relating to our Shares and ADS
If you hold our preferred shares, you will have extremely limited voting rights.
In accordance with the Brazilian Corporate Law and our by-laws, holders of the preferred shares, and, by extension, holders of the ADS representing them, are not entitled to vote at our shareholders’ meetings, except in very limited circumstances. This means, among other things, that a preferred shareholder is not entitled to vote on corporate transactions, including mergers or consolidations with other companies. Our principal shareholder, who holds the majority of common shares with voting rights and controls us, is therefore able to approve corporate measures without the approval of holders of our preferred shares. Accordingly, an investment in our preferred shares is not suitable for you if voting rights are an important consideration in your investment decision.
Exercise of voting rights with respect to common and preferred shares involves additional procedural steps.
When holders of common shares are entitled to vote, and in the limited circumstances where the holders of preferred shares are able to vote, holders may exercise voting rights with respect to the shares represented by ADS only in accordance with the provisions of the deposit agreement relating to the ADS. There are no provisions under Brazilian law or under our by-laws that limit ADS holders’ ability to exercise their voting rights through the depositary bank with respect to the underlying shares. However, there are practical limitations upon the ability of ADS holders to exercise their voting rights due to the additional procedural steps involved in communicating with such holders. For example, holders of our shares will receive notice and will be able to exercise their voting rights by either attending the meeting in person or voting by proxy or also voting at distance through a voting bulletin. ADS holders, by comparison, will not receive notice directly from us. Rather, in accordance with the deposit agreement, we will provide the notice to the depositary bank, which will in turn, as soon as practicable thereafter, mail to holders of ADS the notice of such meeting and a statement as to the manner in which instructions may be given by holders. To exercise their voting rights, ADS holders must then instruct the depositary bank how to vote their shares. Because of this extra procedural step involving the depositary bank, the process for exercising voting rights will take longer for ADS holders than for holders of shares. ADS for which the depositary bank does not receive timely voting instructions will not be voted at any meeting.
If we issue new shares or our shareholders sell shares in the future, the market price of your ADS may be reduced.
Sales of a substantial number of shares, or the belief that this may occur, could decrease the prevailing market price of our common and preferred shares and ADS by diluting the shares’ value. If we issue new shares or our existing shareholders sell shares they hold, the market price of our common and preferred shares, and of the ADS, may decrease significantly. Such issuances and sales also might make it more difficult for us to issue shares or ADS in the future at a time and a price that we deem appropriate and for you to sell your securities at or above the price you paid for them. Our controlling shareholder, the Brazilian Government, may decide to capitalize us for a variety of reasons therefore diluting existing shareholders and ADS holders.
Political, economic and social events as well as the perception of risk in Brazil and in other countries, including the United States, European Union and emerging countries, may affect the market prices for securities in Brazil, including Eletrobras shares.
The Brazilian securities market is influenced by economic and market conditions in Brazil, as well as in other countries, including the United States, European Union and emerging countries. Despite the significant different economic conjecture between these countries and Brazil, investors’ reactions to events in these countries may have a relevant adverse effect on the market value of Brazilian securities, especially those listed on the stock exchange. Crisis in the United States, European Union or emerging countries may reduce investors’ interest in Brazilian companies, including Eletrobras. For example, the prices of shares listed on BM&FBOVESPA have been historically affected by fluctuations of the American interest rate as well as the variations of the main indexes for North-American shares. Events in other countries and capital markets may adversely affect the market price of Eletrobras shares to the extent that, in the future, it could difficult or prevent access to capital markets and investment financing on acceptable terms.
Exchange controls and restrictions on remittances abroad may adversely affect holders of ADS.
You may be adversely affected by the imposition of restrictions on the remittance to foreign investors of the proceeds of their investments in Brazil and the conversion of reais into foreign currencies. The Brazilian Government imposed remittance restrictions for approximately three months in late 1989 and early 1990. Restrictions like these would hinder or prevent the conversion of dividends, distributions or the proceeds from any sale of our shares, as the case may be, from reais into U.S. dollars and the remittance of the U.S. dollars abroad. We cannot assure you that the Brazilian Government will not take similar measures in the future.
Exchanging ADS for the underlying shares may have unfavorable consequences.
As an ADS holder, you benefit from the electronic certificate of foreign capital registration obtained by the custodian for our preferred shares underlying the ADS in Brazil, which permits the custodian to convert dividends and other distributions with respect to the preferred shares into non-Brazilian currency and remit the proceeds abroad. If you surrender your ADS and withdraw preferred shares, you will be entitled to continue to rely on the custodian’s electronic certificate of foreign capital registration for only five business days from the date of withdrawal. Thereafter, upon the disposition of or distributions relating to the preferred shares unless you obtain your own electronic certificate of foreign capital registration or you qualify under Brazilian foreign investment regulations that entitle some foreign investors to buy and sell shares on Brazilian stock exchanges without obtaining separate electronic certificates of foreign capital registration you would not be able to remit abroad non-Brazilian currency. In addition, if you do not qualify under the foreign investment regulations you will generally be subject to less favorable tax treatment of dividends and distributions on, and the proceeds from any sale of, our preferred shares.
If you attempt to obtain your own electronic certificate of foreign capital registration, you may incur expenses or suffer delays in the application process, which could delay your ability to receive dividends or distributions relating to our preferred shares or the return of your capital in a timely manner. The depositary’s electronic certificate of foreign capital registration may also be adversely affected by future legislative changes.
You may not receive dividend payments if we incur net losses or our net profit does not reach certain levels.
Under Brazilian Corporate Law and our by-laws, we must pay our shareholders a mandatory distribution equal to at least 25% of our adjusted net profit for the preceding fiscal year, with holders of preferred shares having priority of payment. Our by-laws require us to prioritize payments to holders of our preferred shares of annual dividends equal to the greater of 8% (in the case of our class “A” preferred shares (subscribed up to June 23, 1969) and 6% (in the case of our class “B” preferred shares (subscribed after June 24, 1969), calculated by reference to the capital stock portion of each type and class of stock.
If we realize a net profit in an amount sufficient to make dividend payments, at least the mandatory dividend is payable to holders of our preferred and common shares. After payment of the mandatory dividend, we can retain profits as statutary profit reserves for investments or capital reserves. If we incur net losses or realize net profits in an amount insufficient to make dividend payments, including the mandatory dividend, our management may recommend that dividend payments be made using the statutary profit reserve after accounting for the net losses for the year and any losses carried forward from previous years. In the event that we are able to declare dividends, our management may nevertheless decide to defer payment of dividends or, in limited circumstances, not to declare dividends at all. We cannot make dividend payments from our legal reserve and capital reserve accounts.
Additionally, in accordance with the Brazilian Corporate Law if we post net income for the year which is characterized, in whole or in part, as not having been financially unrealized, according to the parameters defined in this law, management may choose to create a reserve of unrealized profits. This reserve can be used to absorb any losses. Any amounts remaining after absorption of losses will be distributed as a dividend when the profit which is subject to this retention is financially realized and such dividend payment will be added to any dividend payment made in the year in which such profit is realized.
You may not be able to exercise preemptive rights with respect to the preferred or common shares.
You may not be able to exercise the preemptive rights relating to the preferred or common shares underlying your ADS unless a registration statement under the United States Securities Act of 1933, as amended, (the “Securities Act”), is effective with respect to those rights or an exemption from the registration requirements of the Securities Act is available. We are not obligated to file a registration statement with respect to the shares relating to these preemptive rights, and we cannot assure you that we will file any such registration statement. Unless we file a registration statement or an exemption from registration applies, you may receive only the net proceeds from the sale of your preemptive rights by the depositary or, if the preemptive rights cannot be sold, they will be allowed to lapse and accordingly your ownership position relating to the preferred or common shares will be diluted.
Changes in Brazilian tax laws may have an adverse impact on the taxes applicable to a disposition of our shares or ADS.
Law No. 10,833 of December 29, 2003 provides that the disposition of assets located in Brazil by a non-resident to either a Brazilian resident or a non-resident is subject to taxation in Brazil, regardless of whether the disposition occurs outside or within Brazil. This provision results in the imposition of income tax on the gains arising from a disposition of our common or preferred shares by a non-resident of Brazil to another non-resident of Brazil. There is no judicial guidance as to the application of Law No. 10,833 and, accordingly, we are unable to predict whether Brazilian courts may decide that it applies to dispositions of our ADS between non-residents of Brazil. However, in the event that the disposition of assets is interpreted to include a disposition of our ADS, this tax law would accordingly result in the imposition of withholding taxes on the disposition of our ADS by a non-resident of Brazil to another non-resident of Brazil.
ITEM 4. INFORMATION ON THE COMPANY
Overview
Directly and through our subsidiaries, we are involved in the generation, transmission and distribution of electricity in Brazil. As of December 31, 2016, we contributed, including our subsidiaries, SPEs and 50% of Itaipu to approximately 31% of the installed power generating capacity within Brazil. We share control of Itaipu but do not consolidate their results. Through our subsidiaries, we are also responsible for approximately 47% of the installed transmission capacity above 230 kV in Brazil. Our revenues derive mainly from:
· the generation of electricity and its sale to electricity distribution companies and free consumers;
· the transmission of electricity on behalf of other electricity concessionaires; and
· the distribution of electricity to end consumers.
For the year ended December 31, 2016, we derived 31.7%, 53.9% and 27.3% of our net operating revenues (before eliminations) from our electricity generation, transmission, and distribution businesses, respectively. For the year ended December 31, 2016, our net revenues after eliminations were R$60.7 billion, compared to R$32.6 billion for the year ended December 31, 2015.
Our capital expenditures for fixed assets, intangible assets and concession assets in 2016, 2015 and 2014 were R$3.7 billion, R$7.7 billion and R$6.2 billion respectively.
A. History and Development
General
We were established on June 11, 1962 as a mixed capital company with limited liability and unlimited duration. We are subject to Brazilian Corporate Law. Our executive offices are located at SCN Setor Comercial Norte, Quadra 06, Conjunto A, Bloco A, 6º and 8�� floors, parte, Ed. Venâncio 3000, Asa Norte, CEP 70716-900, Brasília, DF, Brazil. Our telephone number is +55 21 2514 4637. Our legal name is Centrais Elétricas Brasileiras S.A. — Eletrobras and our commercial name is Eletrobras.
Capital Expenditures
In the last three years, as per the table below, we have invested an average of R$10.17 billion per year in expansion, modernization, research, infrastructure and environmental quality. Approximately 17.8% was invested in our generation segment, 17.0% in our transmission segment and the balance in our distribution segment and other investments.
Nature of Investments |
| 2016 |
| 2015 |
| 2014 |
|
Subtotal Own Investments |
| 4,215.55 |
| 6,059.52 |
| 6,264.54 |
|
Generation |
| 1,092.34 |
| 2,162.98 |
| 2,182.88 |
|
Transmission |
| 1,204.92 |
| 1,855.35 |
| 2,111.04 |
|
Distribution |
| 861.15 |
| 791.20 |
| 577.46 |
|
Maintenance - Generation |
| 201.16 |
| 330.97 |
| 393.75 |
|
Maintenance - Transmission |
| 315.62 |
| 405.51 |
| 477.95 |
|
Maintenance - Distribution |
| 274.78 |
| 212.19 |
| 151.35 |
|
Outros (Research, Infrastructure and Environmental Quality) |
| 265.59 |
| 301.33 |
| 370.10 |
|
Subtotal Financial Investments |
| 4,495.44 |
| 4,334.26 |
| 5,140.80 |
|
Nature of Investments |
| 2016 |
| 2015 |
| 2014 |
|
Generation |
| 3.450,52 |
| 3,181.30 |
| 3,703.65 |
|
Transmission |
| 1.044,92 |
| 1,152.96 |
| 1,437.14 |
|
Total |
| 8,710.99 |
| 10,393.79 |
| 11,405.33 |
|
Our core business is the generation and transmission of energy and we intend to invest in these segments in the upcoming years. Companies are selected to construct new generation units and transmission lines through a tender process. It is, therefore, difficult to predict the precise amounts that we will invest in these segments going forward. We are, however, working to secure a significant number of new contracts either alone or as part of a consortium with the private sector.
During the Extraordinary General Meeting of Shareholders held on July 22, 2016, our shareholders did not renew the concessions of six distribution companies, CEPISA, CEAL, Eletroacre, CERON, Boa Vista Energia and Amazonas D, that by December 31, 2017 we intend to transfer the control of these distribution companies. In case we do not privatize the distribution companies by December 31, 2017, our distribution segment may be classified as discontinued operations, based on IFRS 5. The effect of the termination of the concessions will mostly alter future periods. Our shareholders also determined that the distributions companies can continue to be responsible for the distribution of public energy until December 31, 2017, provided all the necessary funds for these companies to keep their operations ongoing, perform maintenance and make new investments will be funded through customer charges or government funding. Our shareholders also agreed to return the distribution concessions to the Government if their control has not been transferred by December 31, 2017. If we return such concessions, they will be subject to new bids in the future.
Under the EPE 10 Year Plan, Brazil estimates that it will have 211,615 km of transmission lines and 206.4 GW of installed generation capacity by 2024, from 150.3 GW in 2016. These investments by Brazil will represent approximately R$376 billion. As the current largest market participant based on length of transmission lines, we expect to participate in some of these new investments. In accordance with the new Business Plan, launched in November 2016, we believe that from 2017 to 2021 we will invest approximately R$35.7 billion in our generation, transmission and distribution businesses. Since we are looking to privatize our distribution companies by 2017, we expect that the investment in the distribution segment will only be for the year 2017. For these investments in generation and transmission, we expect to use the funding derived from our net cash flows as well as from accessing national and international capital markets and through bank financings.
B. Business Overview
Strategy
Our main strategic objectives are to achieve sustained growth and profitability, while maintaining our position as a leader in the Brazilian electricity sector. In order to achieve these objectives, our main strategies are as follows:
· Expand and improve efficiency in our generation and transmission business. Our business is focused on our core operations in the Brazilian generation and transmission markets. Our strategy is to select and optimize opportunities that arise in the auction process for new generation plants and transmission lines in accordance with the Electricity Regulatory Law. By focusing on generation and transmission, we believe that we will be able to maximize profits by improving efficiency in the operation and maintenance of our assets and capitalizing on opportunities arising from greenfield projects or from the selective acquisition of existing assets. Additionally, as a strategy to reduce our debt, we may consider selling some of our assets. Our Corporate Strategy Plan for 2015 to 2030 reinforces our target to achieve a global leadership position in clean energy production by 2030, while maintaining our rates of return at competitive levels, as set forth in our Vision of the Eletrobras System for 2030: “To be among the top three global clean energy companies and among the ten largest electric energy companies in the world, with profitability comparable to the sector’s best and being recognized by all its stakeholders.”
· Limit our exposure to our distribution business. We continue to prepare our distribution companies for privatization until December 31, 2017. In November 2016 Celg-D was sold through an auction of BM&FBovespa with a 28% premium and the agreement was signed in February 2017. The transfer of control of the six remaining distribution companies was approved by the 165th Extraordinary General Meeting of Shareholders, held on June 24, 2016 and these companies are included in the Federal Government privatization plan called “Crescer.” These companies continue to render services to the consumers on a temporary basis until their privatization. Notwithstanding, these six distribution companies continue to use their best efforts to reduce operational costs and increase their regulatory asset base.
· We seek to maintain high corporate governance standards and to promote sustainability in order to enhance our brand value as well as the market appreciation of our stock. We use a corporate governance model based on the principles of transparency and equity, defining roles and responsibilities of the Board of Directors, Fiscal Council and Board of Executive Officers. The requirements and responsibilities of our governance bodies are reflected in our bylaws
and internal policies. We provide guidelines for the members of our Board of Directors and Fiscal Council, as well as for our representatives to subsidiaries and special purpose entities (SPEs). These guidelines specify the way of acting, selecting, indicating, evaluating and qualifying representatives of governance bodies. In 2016, we reviewed and updated our Code of Ethics, aiming to adapt to the new Brazilian legislation focused on ethics and integrity. In addition, our bylaws provide for situations of conflict of interest, according to which the officer or director is prohibited from voting on matters that conflict with his or her interests or which refer to third parties under his or her influence. In order to avoid possible conflicts and the use of confidential and strategic information, the Chief Executive Officer and the officers are not allowed to carry out administrative or consulting roles in companies in the private sector, concessionaires of public electric energy services or in private companies of the electric sector that are not subsidiaries, controlled companies, SPEs and state-owned concessionaires and in which hawse have an equity interest and in which they may be appointed for the respective Boards of Directors and Fiscal Council. In addition, in 2016, we improved our governance practices with respect to the qualification of our managers, requiring that any candidate for such positions to comply with the requirements of Laws No. 6,404/1976 and Law No. 13,303/2016, Decree No. 8,945/2016, our bylaws, as well as other legal and regulatory applicable requirements, such as the database of sanctions as applied by the Ethics Commission, as per article 22 of Decree No. 6,029/2007, and the websites of the CVM, Federal Audit Court (Tribunal de Contas da União — TCU), State Audit Court (Tribunal de Contas do Estado — TCE) and Superior Electoral Court (Tribunal Superior Eleitoral - TSE). In compliance with Law No. 13,303/2016 and with Decree No. 8,945/2016, we created the Transitional Internal Elegibility Committee (Comissão Interna Transitória de Elegibilidade - “CITE”). CITE assists our shareholders in appointing members of the Board of Directors and Fiscal Council by indicating whether they comply with the requirements and prohibitions of article 21, item I, of Decree No. 8,945/2016. CITE encompasses our holding company and all of our controlled companies.
· Our shares are listed on three stock markets: the São Paulo Stock Exchange — BM&FBOVESPA (ELET3 and ELET6), in which it is listed as Corporate Governance Level 1; the Madrid Stock Exchange (XELTO and XELTB), through the LATIBEX Program; and the New York Stock Exchange — NYSE (EBR and EBR-B), in which it trades Level 2 American Depositary Receipts (ADRs). We use compliance with the numerous regulations from the stock exchanges as a roadmap for the continuous implementation of best practices in corporate governance. Our current corporate governance standards fully reflect the orientations of our newly released Corporate Strategic Plan for 2015 to 2030 and are included in the audit and administration manuals, the internal regulations of the Board of Directors and Audit Committee as well as our by-laws. We believe that the continuing improvement of our corporate governance standards will help us achieve growth, profitability and increased market share as a result of the positive effect these standards have on our brand, both domestically and internationally. As part of this strategy, we established controls and procedures, in accordance with the Sarbanes Oxley Act of 2002. For a further discussion of our internal controls please see “Item 15 — Controls and Procedures” and “Risk Factors — Risks Relating to our Company — If we are unable to remedy the material weaknesses in our internal controls, the reliability of our financial reporting and the preparation of our consolidated financial statements may be materially adversely affected.” In addition, we are a signatory to the United Nations Global Compact, the world’s largest corporate responsibility initiative, and, for the ninth consecutive year, were selected as a member of BM&FBOVESPA’s ISE Corporate Sustainability Index for the tenth consecutive year. From 2011 to 2016, we were included in the Dow Jones Sustainability Emerging Markets Index.
· Selectively identify growth opportunities in certain international markets. In accordance with our Corporate Strategic Plan for 2015 to 2030, our aim is to improve our generation and transmission businesses outside Brazil in order to achieve higher rates of return than those we realize in Brazil. Our strategic goal is to generate new energy that can be added to the Interconnected Power System and to integrate certain electrical power systems in the Americas.
Our Board of Directors approved, on November 9, 2016, our Business and Management Master Plan (PDNG) for the five-year period 2017-2021 or PDNG 2017-2021. PDNG 2017-2021, which is based on ourStrategic Plan 2015-2030, includes a set of initiatives to achieve the strategic goals, maintainingin alignment with our Business Identity - Mission, Vision and Values - presented in our Strategic Plan 2015-2030. It considers the set of three strategic elements (pillars) shown in the following figure with their respective initiatives:
· We seek to improve our governance and compliance practices through the following actions:
1. Alignment of Bylaws and Approval Thresholds;
2. Implementation of the 5 Dimension Compliance Program;
3. Elimination of material weaknesses; and
4. Implementation of an approach for listing in indexes and obtaining Corporate Governance Awards.
· We seek to improve our financial discipline practices through the following actions:
1. Decrease of investments;
2. Privatization of Distribution Companies;
3. Sale of Administrative Real Estate;
4. Sale of Equity Interests in certain SPEs;
5. Tax Optimization; and
6. Corporate restructuring aimed at benefiting from tax credits.
· We seek to improve our operational excellence practices through the following actions:
1. Organizational Restructuring;
2. Extraordinary Retirement Plan (PAE);
3. Implementation of the PRO-ERP enterprise software;
4. Shared Services Center;
5. Decreasing Administrative Costs;
6. Decreasing overtime, dangerous exposure and standby additional payments;
7. Regulatory Strategy for our generation and transmission; and
8. Joint commercialization of energy among our group.
Generation
Our principal activity is the generation of electricity. Net revenues (including financial revenues at the holding company level) from generation represented 31.7%, 61.8% and 70.7% of our net operating revenues (before eliminations) in the years ended December 31, 2016, 2015 and 2014, respectively.
Pursuant to Law No. 5,899, of July 5, 1973, and Decree 4,550, of December 27, 2002, we must transfer all energy contracted by Itaipu to distribution companies in the Southern, Southeastern and midwestern regions in Brazil (see “Item 5, Operating and Financial Review and Prospects — Electric Power Market — Itaipu”).
We had an installed capacity of 46,857 MW as of December 31, 2016, 45,391 MW as of December 31, 2015 and 44,156 MW as of December 31, 2014. The increase in capacity over these periods reflects continuous growth. Additionally, we have approximately 14,000 MW in planned projects throughout Brazil through 2024, out of which 13,000 MW are currently under construction and 1,000 MW which constructions are yet to begin. Partnerships and corporate ventures are included among these 14,000 MW, being 8,100 MW equivalent to ownership interest we hold. We have feasibility studies in partnership for an additional capacity of approximately 21,309 MW.
The map below shows the geographic location of our generation assets as of December 31, 2016:
Concessions
As of December 31, 2016, we operated under the following concessions/authorizations granted by ANEEL for our generation businesses:
Concessions/Authorizations |
| State |
| Type of Plant |
| Installed |
| End of Concession |
| Began Service or |
|
|
|
|
|
|
|
|
|
|
|
Operational projects |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CGTEE |
|
|
|
|
|
|
|
|
|
|
Candiota III — Phase C |
| Rio Grande do Sul |
| Thermal |
| 350.00 |
| July 2041 |
| January 2011 |
P. Médici (Candiota) |
| Rio Grande do Sul |
| Thermal |
| 383.00 |
| July 2015 |
| January 1974 |
|
|
|
|
|
|
|
|
|
|
|
Chesf |
|
|
|
|
|
|
|
|
|
|
Araras |
| Ceará |
| Hydro |
| 4.00 |
| July 2015 |
| February 1967 |
Boa Esperança (Castelo Branco) |
| Piauí |
| Hydro |
| 237.30 |
| December 2042 |
| January 1970 |
Camaçari(1) |
| Bahia |
| Thermal |
| 346.80 |
| August 2027 |
| February 1979 |
Complexo de Paulo Afonso e Apolônio Sales |
| Bahia |
| Hydro |
| 4,279.60 |
| December 2042 |
| January 1955 |
Curemas |
| Paraíba |
| Hydro |
| 3.52 |
| November 2024 |
| June 1957 |
Funil |
| Bahia |
| Hydro |
| 30.00 |
| December 2042 |
| March 1962 |
Luiz Gonzaga (Itaparica) |
| Pernambuco |
| Hydro |
| 1,479.60 |
| December 2042 |
| February 1988 |
Pedra |
| Bahia |
| Hydro |
| 20.00 |
| December 2042 |
| April 1978 |
Sobradinho |
| Bahia |
| Hydro |
| 1,050.30 |
| February 2052 |
| April 1979 |
Xingó |
| Sergipe |
| Hydro |
| 3,162.00 |
| December 2042 |
| April 1994 |
|
|
|
|
|
|
|
|
|
|
|
Eletronorte |
|
|
|
|
|
|
|
|
|
|
Araguaia(4) |
| Mato Grosso |
| Thermal |
| 20.0 |
| (14) |
| April 2016 |
Coaracy Nunes |
| Amapá |
| Hydro |
| 78.00 |
| December 2042 |
| October 1975 |
Complexo de Tucuruí |
| Pará |
| Hydro |
| 8,535.00 |
| July 2024 |
| November 1984 |
Curuá-Una |
| Pará |
| Hydro |
| 30.30 |
| July 2028 |
| April 1977 |
Rio Acre |
| Acre |
| Thermal |
| 45.49 |
| April 2025 |
| December 1994 |
Rio Branco I(3) |
| Acre |
| Thermal |
| 18.65 |
| July 2020 |
| February 1998 |
Rio Branco II(3) |
| Acre |
| Thermal |
| 32.75 |
| July 2020 |
| April 1981 |
Rio Madeira(2) |
| Rondônia |
| Thermal |
| 119.35 |
| September 2018 |
| April 1968 |
Samuel |
| Rondônia |
| Hydro |
| 216.75 |
| September 2029 |
| July 1989 |
Santana |
| Amapá |
| Thermal |
| 177.74 |
| September 2019 |
| March 1993 |
Santarém(4) |
| Pará |
| Thermal |
| 18.75 |
| Undetermined |
| June 1914 |
Senador Arnon Afonso Farias de Mello |
| Roraima |
| Thermal |
| 85.99 |
| August 2024 |
| December 1990 |
|
|
|
|
|
|
|
|
|
|
|
Furnas |
|
|
|
|
|
|
|
|
|
|
Batalha |
| Minas Gerais |
| Hydro |
| 52.50 |
| August 2041 |
| May 2014 |
Corumbá I |
| Goiás |
| Hydro |
| 375.00 |
| December 2042 |
| April 1997 |
Funil |
| Rio de Janeiro |
| Hydro |
| 216.00 |
| December 2042 |
| April 1969 |
Furnas |
| Minas Gerais |
| Hydro |
| 1,216.00 |
| December 2042 |
| March 1963 |
Itumbiara |
| Goiás/Minas Gerais |
| Hydro |
| 2,082.00 |
| February 2020 |
| February 1980 |
Luis Carlos Barreto (Estreito) |
| SP/Minas Gerais |
| Hydro |
| 1,050.00 |
| December 2042 |
| January 1969 |
Manso(5) |
| Mato Grosso |
| Hydro |
| 212.00 |
| February 2035 |
| October 2000 |
Marimbondo |
| SP/Minas Gerais |
| Hydro |
| 1,440.00 |
| December 2042 |
| April 1975 |
Mascarenhas de Moraes |
| Minas Gerais |
| Hydro |
| 476.00 |
| October 2023 |
| April 1973 |
Porto Colômbia |
| Minas Gerais/SP |
| Hydro |
| 320.00 |
| December 2042 |
| March 1973 |
Roberto Silveira (Campos) |
| Rio de Janeiro |
| Thermal |
| 30.00 |
| July 2027 |
| April 1977 |
Santa Cruz(6) |
| Rio de Janeiro |
| Thermal |
| 500.00 |
| July 2015 |
| March 1967 |
Serra da Mesa(5) |
| Goiás |
| Hydro |
| 1,275.00 |
| November 2039 |
| April 1998 |
Simplício |
| Rio de Janeiro |
| Hydro |
| 305.70 |
| August 2041 |
| June 2013 |
|
|
|
|
|
|
|
|
|
|
|
Eletronuclear |
|
|
|
|
|
|
|
|
|
|
Angra I |
| Rio de Janeiro |
| Nuclear |
| 640.00 |
| December 2024 |
| January 1985 |
Angra II |
| Rio de Janeiro |
| Nuclear |
| 1,350.00 |
| August 2040 |
| September 2000 |
|
|
|
|
|
|
|
|
|
|
|
Eletrosul |
|
|
|
|
|
|
|
|
|
|
Barra do Rio Chapéu |
| Santa Catarina |
| Hydro |
| 15.15 |
| May 2034 |
| February 2013 |
Concessions/Authorizations |
| State |
| Type of Plant |
| Installed |
| End of Concession |
| Began Service or |
Capão do Inglês |
| Rio Grande do Sul |
| Wind |
| 10.00 |
| May 2049 |
| December 2015 |
Coxilha Seca |
| Rio Grande do Sul |
| Wind |
| 30.00 |
| May 2049 |
| December 2015 |
Wind Cerro Chato I |
| Rio Grande do Sul |
| Wind |
| 30.00 |
| August 2045 |
| January 2012 |
Wind Cerro Chato II |
| Rio Grande do Sul |
| Wind |
| 30.00 |
| August 2045 |
| August 2011 |
Wind Cerro Chato III |
| Rio Grande do Sul |
| Wind |
| 30.00 |
| August 2045 |
| June 2011 |
Galpões |
| Rio Grande do Sul |
| Wind |
| 8.00 |
| May 2049 |
| December 2015 |
João Borges |
| Santa Catarina |
| Hydro |
| 19.00 |
| December 2035 |
| July 2013 |
Megawatt Solar |
| Santa Catarina |
| Solar |
| 0.93 |
| Not applicable |
| September 2014 |
Passo São João |
| Rio Grande do Sul |
| Hydro |
| 77.00 |
| August 2041 |
| March 2012 |
São Domingos |
| Mato Grosso do Sul |
| Hydro |
| 48.00 |
| December 2037 |
| June 2013 |
Governandor Jayme Canet Junior (Previously Mauá) |
| Paraná |
| Hydro |
| 363.14 |
| July 2042 |
| November 2012 |
|
|
|
|
|
|
|
|
|
|
|
Amazonas GT |
|
|
|
|
|
|
|
|
|
|
Aparecida |
| Amazonas |
| Thermal |
| 166.50 |
| July 2020 |
| February 1984 |
Balbina |
| Amazonas |
| Hydro |
| 249.75 |
| March 2027 |
| January 1989 |
Flores |
| Amazonas |
| Thermal |
| 80 |
| August 2016 |
| February 2008 |
Iranduba |
| Amazonas |
| Thermal |
| 25 |
| August 2016 |
| November 2010 |
Mauá |
| Amazonas |
| Thermal |
| 124 |
| July 2020 |
| April 1973 |
São José |
| Amazonas |
| Thermal |
| 50 |
| August 2016 |
| February 2008 |
|
|
|
|
|
|
|
|
|
|
|
Amazonas Energia |
|
|
|
|
|
|
|
|
|
|
Isolated system |
| Amazonas |
| Thermal |
| 406.8 |
|
|
|
|
Operational SPEs |
|
|
|
|
|
|
|
|
|
|
Baguari |
| Minas Gerais |
| Hydro |
| 140.00 |
| August 2041 |
| September 2009 |
Banda de Couro(16) |
| Bahia |
| Wind |
| 32.9 |
| July 2049 |
| March 2016 |
Baraunas II(16) |
| Bahia |
| Wind |
| 25.9 |
| July 2049 |
| March 2016 |
Baraúnas I |
| Bahia |
| Wind |
| 32.90 |
| April 2049 |
| November 2015 |
Belo Monte(19) |
| Pará |
| Hydro |
| 1,988.70 |
| August 2045 |
| April 2016 |
Caiçara I |
| Rio Grande do Norte |
| Wind |
| 27.00 |
| June 2047 |
| November 2015 |
Caiçara II |
| Rio Grande do Norte |
| Wind |
| 18.00 |
| July 2047 |
| November 2015 |
Cerro Chato IV, V, VI, Ibirapuitã e Trindade |
| Rio Grande do Sul |
| Wind |
| 25.20 |
| March 2047 |
| November 2013 |
Chuí 09 |
| Rio Grande do Sul |
| Wind |
| 17.90 |
| May 2049 |
| October 2015 |
Chuí I to V, and Minuano I and II |
| Rio Grande do Sul |
| Wind |
| 144.00 |
| April 2047 |
| May 2015 |
Dardanelos |
| Mato Grosso |
| Hydro |
| 261.00 |
| July 2042 |
| August 2011 |
Foz de Chapecó |
| Rio Grande do |
| Hydro |
| 855.00 |
| November 2036 |
| October 2010 |
Geribatu I a X |
| Rio Grande do Sul |
| Wind |
| 258.00 |
| April 2047 |
| February 2015 |
Jirau(7) |
| Rondônia |
| Hydro |
| 3,750.00 |
| August 2043 |
| September 2013 |
Junco I |
| Rio Grande do Norte |
| Wind |
| 24.00 |
| July 2047 |
| November 2015 |
Junco II |
| Rio Grande do Norte |
| Wind |
| 24.00 |
| July 2047 |
| November 2015 |
Mangue Seco 2 |
| Rio Grande do Norte |
| Wind |
| 26.00 |
| June 2032 |
| September, 2011 |
Morro Branco I |
| Bahia |
| Wind |
| 32.90 |
| April 2049 |
| October, 2015 |
Mussambê |
| Bahia |
| Wind |
| 32.90 |
| February 2049 |
| October, 2015 |
Parque Eólico Miassaba 3 |
| Rio Grande do Norte |
| Wind |
| 68.50 |
| August 2045 |
| May 2014 |
Parque Eólico Rei dos Ventos 1 |
| Rio Grande do Norte |
| Wind |
| 58.50 |
| December 2045 |
| May 2014 |
Parque Eólico Rei dos Ventos 3 |
| Rio Grande do Norte |
| Wind |
| 60.10 |
| December 2045 |
| May 2014 |
Pedra Branca |
| Bahia |
| Wind |
| 30.00 |
| February 2046 |
| March 2013 |
Peixe Angical |
| Tocantins |
| Hydro |
| 498.80 |
| November 2036 |
| June 2006 |
Retiro Baixo |
| Minas Gerais |
| Hydro |
| 82.00 |
| August 2041 |
| March 2010 |
Rouar S.A. |
| Uruguai- |
| Wind |
| 65.10 |
| December 2034 |
| December 2014 |
Santa Joana I(12) |
| Piauí |
| Wind |
| 30.00 |
| June 2049 |
| January 2016 |
Santa Joana III(12) |
| Piauí |
| Wind |
| 29.60 |
| June 2049 |
| January 2016 |
Concessions/Authorizations |
| State |
| Type of Plant |
| Installed |
| End of Concession |
| Began Service or |
Santa Joana IV(12) |
| Piauí |
| Wind |
| 27.200 |
| June 2049 |
| January 2016 |
Santa Joana V(12) |
| Piauí |
| Wind |
| 28.90 |
| June 2049 |
| January 2016 |
Santa Joana VII(12) |
| Piauí |
| Wind |
| 28.90 |
| June 2049 |
| February 2016 |
Santo Augusto IV(12) |
| Piauí |
| Wind |
| 28.90 |
| June 2049 |
| January 2016 |
Santa Joana IX |
| Piauí |
| Wind |
| 29.60 |
| August 2035 |
| August 2015 |
Santa Joana X |
| Piauí |
| Wind |
| 29.60 |
| August 2035 |
| July 2015 |
Santa Joana XI |
| Piauí |
| Wind |
| 29.60 |
| August 2035 |
| July 2015 |
Santa Joana XII |
| Piauí |
| Wind |
| 28.90 |
| August 2035 |
| July 2015 |
Santa Joana XIII |
| Piauí |
| Wind |
| 29.60 |
| August 2035 |
| July 2015 |
Santa Joana XV |
| Piauí |
| Wind |
| 28.90 |
| August 2035 |
| July 2015 |
Santa Joana XVI |
| Piauí |
| Wind |
| 28.90 |
| August 2035 |
| July 2015 |
Santo Antônio(8) |
| Rondônia |
| Hydro |
| 3,568.30 |
| June 2043 |
| March 2012 |
São Pedro do Lago |
| Bahia |
| Wind |
| 28.9 |
| February 2046 |
| March 2013 |
Serra das Vacas I |
| Pernambuco |
| Wind |
| 23.90 |
| June 2049 |
| December 2015 |
Serra das Vacas II |
| Pernambuco |
| Wind |
| 22.30 |
| June 2049 |
| December 2015 |
Serra das Vacas III |
| Pernambuco |
| Wind |
| 22.24 |
| June 2049 |
| December 2015 |
Serra das Vacas IV |
| Pernambuco |
| Wind |
| 22.30 |
| June 2049 |
| December 2015 |
Serra do Facão |
| Goiás |
| Hydro |
| 212.60 |
| November 2036 |
| July 2010 |
Serra do Navio |
| Amapá |
| Thermal |
| 23.30 |
| May 2037 |
| June 2008 |
Sete Gameleiras |
| Bahia |
| Wind |
| 30.00 |
| February 2046 |
| March 2013 |
Teles Pires(10) |
| Pará/Mato Grosso |
| Hydro |
| 1,819.80 |
| June 2046 |
| November 2015 |
Três Irmãos(9) |
| SP |
| Hydro |
| 807.50 |
| October 2044 |
| October 2014 |
Verace 24 to 27 |
| Rio Grande do Sul |
| Wind |
| 57.30 |
| June 2049 |
| November 2015 |
Verace 28 to 31 |
| Rio Grande do Sul |
| Wind |
| 57.30 |
| June 2049 |
| December 2015 |
Verace 34 to 36 |
| Rio Grande do Sul |
| Wind |
| 48.30 |
| June 2049 |
| December 2015 |
Corporate projects in development |
|
|
|
|
|
|
|
|
|
|
Angra III |
| Rio de Janeiro |
| Nuclear |
| 1,405.00 |
| December 2062 |
| January 2023 |
Anta |
| Rio de Janeiro/ |
| Hydro |
| 28.00 |
| August 2041 |
| UG1 (September |
Casa Nova I |
| Bahia |
| Wind |
| 180.00 |
| Not applicable |
| undefined |
Casa Nova II |
| Bahia |
| Wind |
| 28.00 |
| May 2049 |
| December 2017 |
Casa Nova III |
| Bahia |
| Wind |
| 24.00 |
| May 2049 |
| December 2017 |
Mauá 3 |
| Amazonas |
| Thermal |
| 590.7 |
| November, 2044 |
| April 2017 |
SPE projects in development |
|
|
|
|
|
|
|
|
|
|
Acauã |
| Bahia |
| Wind |
| 12.00 |
| April 2049 |
| October 2017 |
Angical 2 |
| Bahia |
| Wind |
| 14.00 |
| April 2049 |
| May 2017 |
Arapapá |
| Bahia |
| Wind |
| 10.00 |
| April 2049 |
| October 2017 |
Belo Monte |
| Pará |
| Hydro |
| 11,233.10 |
| August 2045 |
| April 2016 |
Bom Jesus |
| Ceará |
| Wind |
| 18.00 |
| April 2049 |
| December 2018 |
Cachoeira |
| Ceará |
| Wind |
| 12.00 |
| April 2049 |
| December 2018 |
Caititú 2 |
| Bahia |
| Wind |
| 14.00 |
| April 2049 |
| November 2017 |
Caititú 3 |
| Bahia |
| Wind |
| 14.00 |
| April 2049 |
| December 2017 |
Carcará |
| Bahia |
| Wind |
| 10.00 |
| April 2049 |
| January 2018 |
Carnaúba I |
| Rio Grande do Norte |
| Wind |
| 22.00 |
| July 2049 |
| December 2018 |
Carnaúba II |
| Rio Grande do Norte |
| Wind |
| 18.00 |
| July 2049 |
| December 2018 |
Carnaúba III |
| Rio Grande do Norte |
| Wind |
| 16.00 |
| July 2049 |
| December 2018 |
Carnaúba V |
| Rio Grande do Norte |
| Wind |
| 24.00 |
| July 2049 |
| December 2018 |
Cervantes I |
| Rio Grande do Norte |
| Wind |
| 16.00 |
| July 2049 |
| December 2018 |
Cervantes II |
| Rio Grande do Norte |
| Wind |
| 12.00 |
| July 2049 |
| December 2018 |
Coqueirinho 2 |
| Bahia |
| Wind |
| 20.00 |
| June 2049 |
| May, 2017 |
Corrupião 3 |
| Bahia |
| Wind |
| 14.00 |
| April 2049 |
| February 2018 |
Concessions/Authorizations |
| State |
| Type of Plant |
| Installed |
| End of Concession |
| Began Service or |
Famosa I |
| Rio Grande do Norte |
| Wind |
| 22.50 |
| May 2047 |
| October 2018 |
Jandaia |
| Ceará |
| Wind |
| 28.80 |
| August 2047 |
| November 2019 |
Jandaia I |
| Ceará |
| Wind |
| 19.20 |
| July 2047 |
| November 2019 |
Nossa Senhora de Fátima |
| Ceará |
| Wind |
| 28.80 |
| August 2047 |
| November 2019 |
Papagaio |
| Bahia |
| Wind |
| 18.00 |
| June 2049 |
| September 2017 |
Pau Brasil |
| Ceará |
| Wind |
| 15.00 |
| March 2047 |
| October 2018 |
Pitimbu |
| Ceará |
| Wind |
| 18.00 |
| March 2049 |
| December 2018 |
Punaú I |
| Rio Grande do Norte |
| Wind |
| 24.00 |
| July 2049 |
| December 2018 |
Rosada |
| Rio Grande do Norte |
| Wind |
| 30.00 |
| May 2047 |
| October 2018 |
Concessions/Authorizations |
| State |
| Type of Plant |
| Installed |
| End of Concession |
| Began Service or |
|
|
|
|
|
|
|
|
|
|
|
São Caetano |
| Ceará |
| Wind |
| 25.20 |
| April 2049 |
| December 2018 |
São Caetano I |
| Ceará |
| Wind |
| 18.00 |
| April 2049 |
| December 2018 |
São Clemente |
| Ceará |
| Wind |
| 19.20 |
| July 2047 |
| November 2019 |
São Galvão |
| Ceará |
| Wind |
| 22.00 |
| March 2049 |
| December 2018 |
São Januário |
| Ceará |
| Wind |
| 19.20 |
| June 2047 |
| November 2019 |
São Manoel |
| Mato Grosso/Pará |
| Hydro |
| 700.00 |
| April 2049 |
| January 2018 |
São Paulo |
| Ceará |
| Wind |
| 17.50 |
| March 2047 |
| October 2018 |
Sinop |
| Mato Grosso |
| Hydro |
| 408.00 |
| December 2047 |
| December, 2018 |
Tamanduá Mirim 2 |
| Bahia |
| Wind |
| 24.00 |
| June 2049 |
| June 2017 |
Teiú 2 |
| Bahia |
| Wind |
| 14.00 |
| April 2049 |
| October 2017 |
|
|
|
|
|
|
|
|
|
|
|
Planned SPE projects |
|
|
|
|
|
|
|
|
|
|
Arara Azul |
| Rio Grande do Norte |
| Wind |
| 27.50 |
| November 2049 |
| October 2018 |
Bentevi |
| Rio Grande do Norte |
| Wind |
| 15.00 |
| November 2049 |
| October 2018 |
Itaguaçu da Bahia |
| Bahia |
| Wind |
| 28.00 |
| September 2049 |
| February 2019 |
Ouro Verde I |
| Rio Grande do Norte |
| Wind |
| 27.50 |
| November 2049 |
| October 2018 |
Ouro Verde II |
| Rio Grande do Norte |
| Wind |
| 30.00 |
| November 2049 |
| October 2018 |
Ouro Verde III |
| Rio Grande do Norte |
| Wind |
| 25.00 |
| November 2049 |
| October 2018 |
Santa Rosa |
| Ceará |
| Wind |
| 20.00 |
| October 2049 |
| October 2018 |
Serra do Mel I |
| Rio Grande do Norte |
| Wind |
| 28.00 |
| October 2049 |
| October 2018 |
Serra do Mel II |
| Rio Grande do Norte |
| Wind |
| 28.00 |
| October 2049 |
| October 2018 |
Serra do Mel III |
| Rio Grande do Norte |
| Wind |
| 28.00 |
| November 2049 |
| October 2018 |
Uirapuru |
| Ceará |
| Wind |
| 28.00 |
| October 2049 |
| October 2018 |
Ventos de Angelim |
| Ceará |
| Wind |
| 24.00 |
| November 2049 |
| October 2018 |
Ventos de Santa Luiza |
| Bahia |
| Wind |
| 28.00 |
| September 2049 |
| February 2019 |
Ventos de Santa Madalena |
| Bahia |
| Wind |
| 28.00 |
| September 2049 |
| February 2019 |
Ventos de Santa Marcella |
| Bahia |
| Wind |
| 28.00 |
| September 2049 |
| February 2019 |
Ventos de Santa Vera |
| Bahia |
| Wind |
| 28.00 |
| September 2049 |
| February 2019 |
Ventos de Santo Antônio |
| Bahia |
| Wind |
| 28.00 |
| September 2049 |
| February 2019 |
Ventos de São Bento |
| Bahia |
| Wind |
| 28.00 |
| September 2049 |
| February 2019 |
Ventos de São Cirilo |
| Bahia |
| Wind |
| 28.00 |
| September 2049 |
| February 2019 |
Ventos de São João |
| Bahia |
| Wind |
| 28.00 |
| September 2049 |
| February 2019 |
Ventos de São Rafael |
| Bahia |
| Wind |
| 28.00 |
| September 2049 |
| February 2019 |
(1) The capacity corresponds to five machines, which total 346,803 MW. The plan can run on oil and natural gas. We requsted the cancellation of the concession for the Camaçari thermal plants. This request is currently being proceesed by ANEEL. Pursuant to ANEEL requirements, only unit number 3 is currently in operation, which can generate 69.12 MW. The total installed capacity will be adjusted when ANEEL makes a final decision.
(2) Pursuant to ANEEL Dispatch number 23, dated January 28, 2014, the assets of Rio Madeira have been declared unserviceable
(3) ANEEL Dispatch number 136, dated January 28, 2014, recommended the MME the extinction of the authorization of s Rio Branco I and Rio Branco II
(4) Pursuant to Order MME No. 88, dated February 27, 2014, the Santarém plant concession is temporary and reserved for emergency situations. ANEEL Procedural Order 338, dated February 02, 2015, changed the installed capacity of the Santarém plant, from 10.00 MW to 18.75 MW. Both the Araguaia and Santarém plants are not assets owned by Eletronorte and use temporary equipment and O&M service lease agreements to comply with MME Orders 088/2014 (Santarém) and 333/2015 (Araguaia).
(5) Shared UHE’s, however Furnas acquires the share of its partner through energy purchase agreements - considering physical guarantee and total generation of each UHE.
(6) The total of 500MW does not include the generation capacity of units 3 and 4, which have had their operations temporarily suspended by ANEEL, pursuant to Dispatch number 3,263 dated October 19, 2012. This value, however, includes 150 MW which is not currently available, due to delays in the construction of the plant. When the plant is complete, units 11 and 21 will function in combination with units 1 and 2. The assured energy of 401.2 MW is in respect of the installed capacity of 500 MW.
(7) Operating with 3,750 MW.
(8) 44 units (of a total of 50) operating by the fourth quarter of 2016, totaling 3,150.43 MW, out of total power of 3,568 MW.
(9) Cesp did not renew the Três Irmãos plant concession in November 2011. In Auction No. 002/2014 - ANEEL, which took place on March 28, 2014, the Furnas consortium (49.9%) and FIP CONSTANTINOPLA consortium (50.1%) won the concession for the Três Irmãos plant, with a proposal for contracting an electric power generation service, for the lower Generation Asset Management Cost (GAG), including the costs of operation, maintenance, administration, compensation and amortization of the hydroelectric plant, when applicable, under the regime Article 8 of Law No. 12,783/2013, for a period of 30 years as of the effective date of the respective Concession Agreement, which was entered into in October 2014.
(10) All five generating units are operating.
(11) Currently in the process of obtaining environmental permits.
(12) Chapada do Piauí II Holding S.A. incorporated the shares of the SPEs Ventos de Santa Joana I, III, IV, V, VII and Santo Augusto IV Energia Renováveis S.A.
(13) 1,988.7 MW under operation. Began operations in 2016.
(14) ANEEL under Resolution No. 5.682, in August 2016, authorized Eletronorte to operate the Araguaia plant, under the PIEE regime, in Querência, (MT). The authorization remained in force until January 2017, but its operation is maintained until 2019 or until the entry into operation of the Structural Solution for Charges Supply in the Baixo Araguaia Region, according to the Ordinance MME No. 333 of July 21, 2015.
Source: Eletrobras System.
Types of Plants
Hydroelectric power plants accounted for 89.1% of our total power generated in 2016, compared to 87.9% in 2015 and 87.7% in 2014.
We also generate electricity through our thermal and nuclear plants. Thermal plants accounted for 3.6% of our total power generated in 2016, compared to 5.0% in 2015 and 5.2% in 2014. Nuclear plants accounted for 7.2% of our total power generated in 2016, compared to 7.1% in 2015 and 7.1% in 2014.
The following table sets out the total amount of electricity generated in the periods indicated, measured in megawatt hours, broken down by type of plant:
|
| Year Ended December 31, |
| ||||
|
| 2016 |
| 2015 |
| 2014 |
|
|
| (MWh) |
| ||||
Type of plant: |
|
|
|
|
|
|
|
Hydroelectric(1) |
| 195,375,915.67 |
| 183,912,559.88 |
| 191,970,101.40 |
|
Thermal |
| 7,841,685.90 |
| 10,519,882.87 |
| 11,411,711.52 |
|
Nuclear |
| 15,864,289.07 |
| 14,808,265.57 |
| 15,433,251.78 |
|
Total(2) |
| 219,081,890.64 |
| 209,240,708.32 |
| 218,815,064.70 |
|
(1) Including 100% of the Itaipu plant.
(2) Does not consider MWh produced by any wind plant.
Hydroelectric Plants
Hydroelectric plants are our most cost-efficient source of electricity, although efficiency is significantly dependent on meteorological factors, such as the level of rainfall. Based on our experience with both types of plants, we believe construction costs for hydroelectric plants are higher than for thermal plants; however, the average useful life of hydroelectric plants is longer. We use our hydro-powered plants to provide the bulk of our primary and back-up electricity generated during peak periods of high demand. During periods of rapid change in supply and demand, hydroelectric plants also provide greater production flexibility than our other forms of electric generation because we are able to instantly increase (or decrease) output from these sources, in contrast to thermal or nuclear facilities where there is a time lag while output is adjusted.
As of December 31, 2016, we owned and operated 47 hydroelectric plants. In addition, we hold a 50.0% interest in Itaipu, the other 50.0% of which is owned by a Paraguayan governmental entity and participations in the Peixe Angical (40.0%), Jirau (40.0%), Serra do Facão (49.5%), Retiro Baixo (49.0%), Foz do Chapecó (40.0%), Baguari (15.0%), Dardanelos (49%) Santo Antônio (39.0%), Teles Pires (49%), Três Irmãos (49.9%) and Belo Monte (49.98%) plants. Also, we have participation in the Serra Mesa (48.5%), Manso (70.0%) and Mauá (49.0%). The ONS is solely responsible for determining, in any year, how much electricity each of our plants should generate. As of December 31, 2016, the total installed capacity of our hydroelectric plants was 40,870 MW (including 50.0% of Itaipu and our participations in the SPEs referred to above). The following table sets out information with respect to hydroelectric plants owned by us and with partners as of December 31, 2016 and for the year then ended:
|
| Installed(1) |
| Assured Energy(2) |
| Began Service |
|
|
| (MW) |
| ||||
Hydroelectric plants: |
|
|
|
|
|
|
|
Araras |
| 4.00 |
| — |
| February 1967 |
|
Baguari(3) |
| 140.00 |
| 80.00 |
| September 2009 |
|
Balbina |
| 249.75 |
| 132.50 |
| January 1989 |
|
Barra do Rio Chapéu |
| 15.15 |
| 8.61 |
| February 2013 |
|
Batalha |
| 52.50 |
| 48.80 |
| May 2014 |
|
Boa Esperança (Castelo Branco) |
| 237.30 |
| 143.00 |
| January 1970 |
|
Coaracy Nunes(4) |
| 78.00 |
| 62.6 |
| October 1975 |
|
Complexo de Paulo Afonso(5) and Piloto |
| 4,279.60 |
| 2,225.00 |
| January 1955 |
|
Corumbá I |
| 375.00 |
| 209.00 |
| April 1997 |
|
Curemas |
| 3.52 |
| 1.00 |
| June 1957 |
|
Curuá-Una |
| 30.30 |
| 24.00 |
| April 1977 |
|
Dardanelos(6) |
| 261.00 |
| 154.90 |
| August 2011 |
|
Foz do Chapecó(7) |
| 855.00 |
| 432.00 |
| October 2010 |
|
Funil |
| 216.00 |
| 121.00 |
| April 1969 |
|
Funil (Chesf) |
| 30.00 |
| 10.91 |
| March 1962 |
|
Furnas |
| 1,216.00 |
| 598.00 |
| March 1963 |
|
Itaipu(8) |
| 14,000.00 |
| 8,577.00 |
| March 1985 |
|
Itumbiara |
| 2,082.00 |
| 1,015.00 |
| February 1980 |
|
Jirau(9) |
| 3,750.00 |
| 2,184.60 |
| September 2013 |
|
João Borges |
| 19.00 |
| 10.14 |
| July 2013 |
|
Luis Carlos Barreto (Estreito) |
| 1,050.00 |
| 495.00 |
| January 1969 |
|
Luiz Gonzaga (Itaparica) |
| 1,479.60 |
| 959.00 |
| February 1988 |
|
Manso (70%)(10) |
| 212 |
| 92.00 |
| October 2000 |
|
Marimbondo |
| 1,440.00 |
| 726.00 |
| April 1975 |
|
|
| Installed(1) |
| Assured Energy(2) |
| Began Service |
|
|
| (MW) |
| ||||
Mascarenhas de Moraes |
| 476.00 |
| 295.00 |
| April 1973 |
|
Gov. Jayme Canet Jr. (Previously Mauá)(11) |
| 363.14 |
| 96.9 |
| November 2012 |
|
Passo São João |
| 77.00 |
| 41.10 |
| March 2012 |
|
Pedra |
| 20.00 |
| 3.74 |
| April 1978 |
|
Peixe Angical(12) |
| 498.80 |
| 280.50 |
| June 2006 |
|
Porto Colômbia |
| 320.00 |
| 185.00 |
| March 1973 |
|
Retiro Baixo(13) |
| 82.00 |
| 38.50 |
| March 2010 |
|
Samuel |
| 216.75 |
| 92.70 |
| July 1989 |
|
Santo Antônio(14) |
| 3,568.30 |
| 2,424.20 |
| March 2012 |
|
São Domingos |
| 48.00 |
| 36.40 |
| Junee 2013 |
|
Serra da Mesa (48.5%)(10) |
| 1,275 |
| 671.00 |
| April 1998 |
|
Serra do Facão(15) |
| 212.60 |
| 182.40 |
| July 2010 |
|
Simplício |
| 305.70 |
| 175.4 |
| June 2013 |
|
Sobradinho |
| 1,050.30 |
| 531.00 |
| April 1979 |
|
Teles Pires |
| 1,819.80 |
| 567.40 |
| November 2015 |
|
Três Irmãos(16) |
| 807.50 |
| 217.50 |
| October 2014 |
|
Tucuruí |
| 8,535.00 |
| 4,140.00 |
| November 1984 |
|
Xingó |
| 3,162.00 |
| 2,139.00 |
| April 1994 |
|
(1) The installed capacity of Itaipu is 14,000 MW. Itaipu is equally owned by Brazil and Paraguay.
(2) Assured energy is the maximum amount per year that each plant is permitted to sell in auctions/supply to the Interconnected Power System, an amount determined by ONS. Any energy produced in excess of assured energy is sold in the Free Market.
(3) We own 15.0% of the Baguari plant. Figures in this table refer to the entire capacity/utilization of the plant.
(4) The Coaracy Nunes plant is part of the isolated system and does not have an assured energy restriction.
(5) Complexo de Paulo Afonso has five (5) plants.
(6) We own 49.0% of the Dardanelos plant. Figures in this table refer to the entire capacity/utilization of the plant.
(7) We own 40.0% of the Foz do Chapecó plant. Figures in this table refer to the entire capacity/utilization of the plant.
(8) We own 50.0% of the Itaipú plant. Figures in this table refer to the entire capacity/utilization of the plant.
(9) We own 40.0% of the Jirau plant. Figures in this table refer to the entire capacity/utilization of the plant.
(10) We own 48.46% of the Serra Mesa plant and 70.0% of the Manso plant. Figures in this table refer to the entire capacity/utilization of each plant.
(11) We own 49.0% of the Mauá plant. Figures in this table refer to the entire capacity/utilization of the plant.
(12) We own 40.0% of the Peixe Angical plant. Figures in this table refer to the entire capacity/utilization of the plant.
(13) We own 49.0% of the Retiro Baixo plant. Figures in this table refer to the entire capacity/utilization of the plant.
(14) We own 39.0% of the Santo Antônio plant. As of December 31, 2016, the installed operating capacity was 3,150.43 MW.
(15) We own 49.5% of the Serra do Facão plant. Figures in this table refer to the entire capacity/utilization of the plant.
(16) We own 49.9% of the Três Irmãos plant. Figures in this table refer to the entire capacity/utilization of the plant.
The following table describes the energy generated by the hydroelectric plants owned by us, the assured energy and the actual operational utilization as of December 31, 2016. We have converted the measurement of the assured energy to MWh so that we can compare it against the energy generated.
|
| Assured |
| Generated |
| Actual |
|
|
| (MWh) |
| (%) |
| ||
Hydroelectric plants: |
|
|
|
|
|
|
|
Balbina |
| 1,158,948.00 |
| 466,756.25 |
| 40.3 | % |
Barra do Rio Chapéu |
| 75,423.60 |
| 67,029.01 |
| 88.9 | % |
Batalha |
| 427,488 |
| 107,235.85 |
| 25.1 | % |
Boa Esperança (Castelo Branco) |
| 1,252,680 |
| 906,408.73 |
| 72.4 | % |
Coaracy Nunes |
| 548,376 |
| 500,106.68 |
| 91.2 | % |
Complexo de Paulo Afonso e Piloto |
| 19,491,000 |
| 7,106,173.57 |
| 36.5 | % |
Corumbá I |
| 1,830,840 |
| 1,200,780.83 |
| 65.6 | % |
Curemas |
| 8,760 |
| 2.99 |
| 0.0 | % |
|
| Assured |
| Generated |
| Actual |
|
|
| (MWh) |
| (%) |
| ||
Curuá-Uma |
| 210,240 |
| 163,562.38 |
| 77.8 | % |
Funil(Furnas) |
| 1,059,960 |
| 677,989.49 |
| 64.0 | % |
Funil (Chesf) |
| 95,571.60 |
| 21,881.96 |
| 22.9 | % |
Furnas |
| 5,238,480 |
| 3,087,620.58 |
| 58.9 | % |
Itumbiara |
| 8,891,400 |
| 4,625,646.25 |
| 52.0 | % |
João Borges |
| 88,826.40 |
| 77,763.63 |
| 87.5 | % |
Luis Carlos Barreto (Estreito) |
| 4,336,200 |
| 2,737,021.32 |
| 63.1 | % |
Luiz Gonzaga (Itaparica) |
| 8,400,840 |
| 3,134,197.03 |
| 37.3 | % |
Manso (70%)(2) |
| 805,920 |
| 624,564.63 |
| 77.5 | % |
Marimbondo |
| 6,359,760 |
| 6,198,129.39 |
| 97.5 | % |
Mascarenhas de Moraes |
| 2,584,200 |
| 1,671,113.97 |
| 64.7 | % |
Gov. Jayme Canet Jr. (Previously Mauá)(3) |
| 848,581.20 |
| 1,348,173.67 |
| 158.9 | % |
Passo São João |
| 360,036 |
| 396,513.57 |
| 110.1 | % |
Pedra |
| 32,762.40 |
| 29,968.20 |
| 91.5 | % |
Porto Colômbia |
| 1,620,600 |
| 1,519,290.28 |
| 93.7 | % |
Samuel |
| 812,052 |
| 502,385.11 |
| 61.9 | % |
São Domingos |
| 318,864 |
| 253,335.45 |
| 79.4 | % |
Serra da Mesa(2) |
| 5,877,960 |
| 3,251,634.76 |
| 55.3 | % |
Simplício |
| 1,536,504 |
| 818,611.53 |
| 53.3 | % |
Sobradinho |
| 4,651,560 |
| 1,468,453.76 |
| 31.6 | % |
Tucuruí |
| 36,266,400 |
| 25,752,222.97 |
| 71.0 | % |
Xingó |
| 18,737,640 |
| 8,152,383 |
| 43.5 | % |
Total |
| 133,927,873.20 |
| 76,866,957.48 |
| 57.4 | % |
(1) Excluding (i) Itaipu, which is owned equally by Brazil and Paraguay; and (ii) any energy generated through our participation in SPEs.
(2) We own 48.46% of the Serra Mesa plant and 70.0% of the Manso plant. Figures in this table refer to the entire capacity/utilization of the plant.
(3) We own 49.0% of the Mauá plant. Figures in this table refer to the entire capacity/utilization of the plant.
See “ — Concessions” for information on the hydroelectric power plants operated by Chesf, Eletronorte and Furnas.
Hydroelectric utilities in Brazil are required to pay a royalty fee of 6.75% of the power generated to the Brazilian states and municipalities in which a plant is located or in which land may have been flooded by a plant’s reservoir for the use of hydrological resources. Fees are established independently by each state and/or municipality as applicable and are based on the amount of energy generated by each utility and are paid directly to the states and municipalities. Fees for the states and municipalities in which we operate were R$362 million in 2016, compared to R$348.9 million in 2015 and R$387 million in 2014. These fees are included as operating costs in our consolidated financial statements.
Our subsidiaries have acquired concessions for the construction of 8 new hydroelectric power plants. Belo Monte partially commenced operations in 2016, despite still being under construction. Information regarding these new plants is set out in the table below:
|
| Installed |
| Construction |
| Service begins/began(1) |
|
|
| (MW) |
|
|
|
|
|
New plants: |
|
|
|
|
|
|
|
Belo Monte(1) |
| 11,233.0 |
| August 2011 |
| April 2016 |
|
Coxilha Rica(3) |
| 18.0 |
| — |
| — |
|
Santo Antônio(2) |
| 3,568.3 |
| August 2008 |
| March 2012 |
|
Santo Cristo(3) |
| 19.5 |
| — |
| — |
|
São Manoel |
| 700.0 |
| August 2014 |
| January 2018 |
|
|
| Installed |
| Construction |
| Service begins/began(1) |
|
|
| (MW) |
|
|
|
|
|
Sinop |
| 408.0 |
| December 2013 |
| December 2018 |
|
Anta |
| 28.0 |
| March 2007 |
| May 2018 |
|
(1) Installed capacity of 1,988 MW in operation.
(2) 44 turbines operating, totaling 3,150.4 MW of installed capacity.
(3) With respect to Santo Cristo there is an intention to disinvest or form a partnership. Public Call for investors is under study. and as regards Coxilha Rica there are issues in obtaining the relevant licenses from IPHAN (Instituto do Patrimônio Histórico e Artístico Nacional).
We intend to finance these plants from cash flow from operations, future indemnification payments received pursuant to Law No. 12,783/2013, receivables from loans granted to Itaipu and, if necessary, from financing obtained in the international capital markets and/or multilateral agencies.
Thermal Plants
As of December 31, 2016, we owned and operated 114 thermal plants, including a 49.00% interest in the Serra do Navio plant. Thermal plants include coal, oil and gas power generation units. The total installed capacity of our thermal plants was 2,991.74 MW as of December 31, 2016, compared to 3,782 MW as of December 31, 2015 and 4,150 MW as of December 31, 2014.
The following table sets out information regarding our thermal plants as of December 31, 2016 and for the year ended:
|
| Assured |
| Generated |
| Actual Operational |
|
|
| (MWh) |
| (%) |
| ||
Araguaia(3) |
| — |
| — |
| 100.00 |
|
Aparecida |
| 1,629,360 |
| 508,809 |
| 31.2 |
|
AS São José |
| 167,283 |
| 130,277.42 |
| 77.9 |
|
Camaçari |
| 401,187 |
| 11,924.42 |
| 3.0 |
|
Candiota III — Phase C |
| 1,936,485.60 |
| 1,472,397.34 |
| 76.0 |
|
FO Flores |
| 700,800 |
| 213,659.09 |
| 30.5 |
|
Iranduba |
| 219,000 |
| 138,177.93 |
| 63.1 |
|
Mauá |
| 1,137,048 |
| 841,320.75 |
| 74.0 |
|
P. Médici (Candiota) |
| 349,173.60 |
| 808,308.58 |
| 231.5 |
|
Rio Acre |
| — |
| — |
| 100.0 |
|
Rio Branco I(4) |
| — |
| — |
| 100.0 |
|
Rio Branco II(4) |
| — |
| — |
| 100.0 |
|
Rio Madeira |
| — |
| — |
| 100.0 |
|
Roberto Silveira (Campos) |
| 183,960 |
| 16,548.60 |
| 9.0 |
|
Santa Cruz |
| 3,514,512 |
| 2,085,985.37 |
| 59.4 |
|
Santana |
| 195,348 |
| 4,438.94 |
| 2.3 |
|
Santarém |
| — |
| 895.02 |
| 100.0 |
|
Others Isolated System |
| 1,572,980.64 |
| 1,608,943.12 |
| 102.3 |
|
Total |
| 12,007,137.84 |
| 7,841,685.90 |
| 65.3 |
|
(1) Assured Energy is only determined in respect of plants from the Interconnected Power System, but not the Isolated system. Most of our thermal plants are part of the Isolated system.
(2) Generated Energy does not include energy generated through our participations in SPEs.
(3) ANEEL under Resolution No. 5.682, in August 2016, authorized Eletronorte to operate the Araguaia plant, under the PIEE regime, in Querência, Mato Grosso. The authorization remained in force until January 2017, but its operation is maintained until 2019 or until the entry into operation of the Structural Solution for Charges Supply in the Baixo Araguaia Region, according to the Ordinance MME No. 333 of July 21, 2015.
(4) ANEEL Dispatch No.136, dated January 28, 2014, recommended to MME the termination of the authorization for Rio Branco I and Rio Branco II.
Each of our thermal plants operates on coal, gas or oil. The fuel for the thermal plants is delivered by road, rail, pipeline or waterway, depending on the plant’s location.
We seek to operate our thermal plants at a consistent, optimal level in order to provide a constant source of electricity production. Our thermal plants are significantly less efficient and have significantly shorter useful lives, than our hydroelectric plants. We incurred gross expenditure for fuel purchased for energy production of R$759 million for 2016, compared to R$1,250 million for 2015 and R$1,480 million for 2014, which were reimbursed to us from the CCC Account in accordance with Law No. 12,111.
We have recovered a substantial portion of the thermal plants’ excess operating costs, which correspond to the difference between the cost of a thermal plant and the cost of a hydroelectric plant, through reimbursements pursuant to the CCC Account. The Brazilian Government created the CCC Account in 1973 for the purpose of building financial reserves to cover the costs of using fossil fuel thermal power plants, which are more expensive to operate than hydroelectric plants, in the Basic Network and the Interconnected Power System should a power shortage create a need for increased production of thermal power plants. Consumers through electricity distributors in Brazil were required to contribute annually to the CCC Account, which in effect served as an insurance fund against an extraordinary situation, such as a rainfall shortage, which would require increased use of thermal plants. The aggregate amount of the annual required contribution was calculated on the basis of the current year’s cost of fuel estimates for all thermal plants. Each utility was then allocated a proportional contribution towards the aggregate amount based on such utility’s total electricity sales during the previous year. In 1993, the scope of the CCC Account was extended to include a portion of the costs of thermal electricity generation in isolated, non-integrated grids in remote areas of Brazil’s northern region.
Each of Amazonas D, Eletroacre, CERON and Eletronorte (up to 2015) received CCC Account reimbursement for the purchase of fuel used at its thermal plant and the difference between the costs associated with generation in the SIN and Isolated System. CGTEE received amounts from the CCC Account to subsidize parts of its costs related with the acquisition of coal. We currently administer the CDE and CCC Account until April 30, 2017, or until ANEEL decides to certify the transfer of responsibilities to CCEE. Pursuant to Law No. 12,783 the CCC account is funded with amounts from the CDE account. The additional costs for fuel used in the operation of thermoelectric power plants in the Isolated System are now being covered by the CCC account. Reimbursements from the CCC Account for the fuel costs of thermal plants connected to the Basic Network were phased out in conjunction with the development of a competitive wholesale market. Following this phase out, we have had to bear the entire operating costs of our thermal plants connected to the SIN.
The following tables set forth information relating to the price paid and amount of fuel purchased for use in our thermal plants in the periods indicated:
|
| Year Ended December 31, |
| ||||
|
| 2016 |
| 2015 |
| 2014 |
|
|
| (R$ thousands) |
| ||||
Type of fuel |
|
|
|
|
|
|
|
Coal |
| 120,750 |
| 86,832 |
| 161,000 |
|
Light oil |
| 1.732.720 |
| 3,808,140 |
| 4,861,400 |
|
Crude Oil |
| 38,580 |
| 60,295 |
| 51,000 |
|
Gas |
| 1,936,632 |
| 747,640 |
| 686,930 |
|
Uranium |
| 371,900 |
| 286,949 |
| 308,600 |
|
Others |
| 56,490 |
| 0 |
| 0 |
|
|
|
|
|
|
|
|
|
Total |
| 4,257,072 |
| 4,989,856 |
| 6,068,930 |
|
|
| Year Ended December 31, |
| ||||
|
| 2016 |
| 2015 |
| 2014 |
|
Type of fuel |
|
|
|
|
|
|
|
Coal (tons) |
| 2,562,911 |
| 2,263,988 |
| 2,346,210 |
|
Light oil (litres) |
| 520,472,422 |
| 757,822,681 |
| 647,661,682 |
|
Crude Oil (tons) |
| 23,032 |
| 33,728 |
| 33,829 |
|
Gas (m3) |
| 1,814,616,225 |
| 1,736,443,823 |
| 1,603,888,527 |
|
Uranium (Kg) |
| 377,454 |
| 228,784 |
| 255,672 |
|
Others |
| 98,525,050 |
| 0 |
| 0 |
|
Nuclear Plants
Nuclear power plants represent approximately 2% of the total installed electricity generation capacity in Brazil. The ONS (National Operator of the Electric System), the organization responsible for the charge dispatch of the Brazilian electric system considers that it is important to have nuclear power plants in operation in Brazil. According to the Brazilian Constitution, the ownership and operation of nuclear power plants must remain a monopoly of the Brazilian State. Accordingly, we continue to own 99.9% of Eletronuclear.
Through Eletronuclear, we operate two nuclear power plants, Angra I, with an installed capacity of 640 MW and Angra II, with 1,350 MW. In addition, Eletronuclear started the construction of a new nuclear plant, called Angra III, during the second half of 2009. Respectively, on March 5, 2009 and May 31, 2010, IBAMA (Environmental Brazilian Institute) and CNEN (National Commission on Nuclear Energy) issued the “Installation License” and the “Construction License” for Angra III.
As of December 31, 2016 we estimated that the construction would be concluded by 2022. However, due to the interruption of the construction of the Angra III, we and Eletronuclear are awaiting a Resolution of CNPE (National Council of Energy Policy), which will determine the dates of resumption of construction and start of commercial operation of the plant. Once constructed, Angra III will have an installed capacity of 1,405 MW. As of December 31, 2016 we estimated that the total cost of construction would be approximately R$26.5 billion.
The following table sets out information regarding our nuclear plants as of December 31, 2016 and for the year then ended:
|
| Installed |
| Generated |
| Assured |
| Began Service(3) |
|
|
| (MW) |
| (MWh) |
|
|
| ||
Nuclear plant: |
|
|
|
|
|
|
|
|
|
Angra I |
| 640 |
| 5,092,874.784 |
| 4,478,083 |
| January 1, 1985 |
|
Angra II |
| 1,350 |
| 10,771,414.121 |
| 10,582,085 |
| September 1, 2000 |
|
|
|
|
|
|
|
|
|
|
|
Total |
| 1,990 |
| 15,864,288.905 |
| 15,060,168 |
|
|
|
(1) Gross Generated Energy.
(2) For our nuclear plants, assured energy is not limited by ONS, but by the regulatory body.
(3) Commercial operation in: Angra I — January 1985 and Angra II — September 2000.
Angra I operated at 90.6% capacity in 2016 in line with industry standards. Accordingly, the gross generated energy of Angra I was 5,092,874.8 MWh/yr in 2016.
Angra II operated at 90.8% capacity in 2016 in line with industry standards. Accordingly, the gross generated energy of Angra II was 10,771,414.1 MWh/yr in 2016.
Both Angra I and Angra II utilize uranium obtained pursuant to a contract with Indústrias Nucleares Brasileiras, or INB, a Brazilian Government-owned company responsible for processing uranium used at our Angra I and Angra II nuclear plants. The fuel elements are shipped by truck to the nuclear plant and under the terms of the contract; Eletronuclear bears responsibility for the safe delivery of that fuel. To date, Eletronuclear (and the previous owner of Angra I — Furnas) has experienced no material difficulty in the transportation of fuel to Angra I and Angra II. In addition, low-level nuclear waste (such as filters and certain resins) is stored in specially designed containers in an interim storage site on the grounds of the plants. As is the case with many other countries, Brazil has not yet devised a permanent storage solution for nuclear waste. High-level nuclear waste (spent nuclear fuel) is stored in the fuel cells (compact storage racks in the fuel pool) of the plants. The liability relating to the decommissioning of nuclear power plants Angra I and Angra II is provided for in our financial statements. The amount of this provision is supported by a technical report of a working group of Eletronuclear created in 2013. In relation to Angra I, the estimated decommissioning cost as of December 31, 2016 is, at present value, R$587.7 million and in relation to Angra II, the estimated decommissioning cost as of December 31, 2016 is, at present value, R$288.4 million. The economic useful life of the plants was estimated to be 40 years. Eletronuclear makes monthly provisions for the estimated present values of the decommissioning costs related to Angra I and Angra II.
The electricity generated by Eletronuclear during the year ended December 31, 2016 was sold pro rata among a group of energy distribution companies at a regulated price pursuant to ANEEL Resolution No. 2,006/2015 of December 15, 2015. These sales resulted in a fixed income of R$2,862 million during the year ended December 31, 2016.
Due to financial difficulties at Eletronuclear and also due to problems in hiring engineering services, civil construction and electromechanical construction services, as a result of the Lava Jato investigation, the constriction of Angra III is momentarily interrupted. We and Eletronuclear are awaiting guidance from the Federal Government, through MME and from CNPE on the resumption of construction activities for the plant. In the meantime, Eletronuclear has taken all necessary measures in order to preserve the construction site, the civil structures already built and the materials, components and equipment already acquired, in order to resume the constructions activities as soon as the Federal Government authorizes the resumption of Angra III construction.
We have recorded impairments in respect of this project in the total amount of the asset. In respect of Angra III, we recorded an accumulated impairment and onerous contracts of R$10,299.6 million and R$6,063.4 million as of December 31, 2016 and 2015, respectively. In addition, as of December 31, 2016, we recorded a provision for onerous contracts in respect of the Angra III plant in the amount of R$1.3 billion. For further information see notes 19 and 33 to our financial statements.
Sales of Electricity Generated
We sold approximately R$19,252 million of electricity in 2016, compared to R$19,576 million in 2015 and R$21,113.5 million in 2014. These sales are made only to distribution companies (which constitute the main sources of sales of electricity generated) or free consumers. We own certain distribution companies that operate in the midwestern, northern and northeastern regions of Brazil and we sell a relatively small portion of the electricity we generate to these distribution companies, which does not give rise to revenues in our generation segment as discussed in “ — Distribution.”
We sell the electricity generated pursuant to both supply contracts with industrial end-users and to an auction process for sales to distribution companies. The following table sets forth, by type of sale, sales of electricity generated in the regions we served in the
periods presented:
|
| Year Ended December 31, |
| ||||||||||
|
| 2016 |
| 2015 |
| 2014 |
| ||||||
|
| (MWh) |
| (R$ |
| (MWh) |
| (R$ |
| (MWh) |
| (R$ |
|
Type of sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Through auctions and initial contracts (energy charge) |
| 46,078,399 |
| 12,885,622 |
| 45,487,632 |
| 12,310,243 |
| 41,391,581 |
| 12,175,362 |
|
Maintenance and operating revenue |
| 68,130,390 |
| 2,178,699 |
| 66,654,337 |
| 1,882,637 |
| 68,789,819 |
| 1,803,127 |
|
Through free market agreements or bilateral contracts (energy charge) |
| 25,354,950 |
| 4,187,522 |
| 34,728,231 |
| 5,383,361 |
| 41,877,430 |
| 7,135,079 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
| 139,563,739 |
| 19,251,843 |
| 146,870,200 |
| 19,576,241 |
| 152,058,830 |
| 21,113,568 |
|
(1) Energy sold in the regulated market and according to a new methodology which excludes CCEE’s energy liquidation, does not consider the energy sales from Itaipu.
With respect to supply contracts, the amount that we receive from each sale is determined on the basis of a “capacity charge” and “energy charge” (or, in some cases, both). A capacity charge is based on a guaranteed capacity amount specified in MW and is charged without regard to the amount of electricity actually delivered. The charge is for a fixed amount (and so is not dependent on the amount of electricity that is actually supplied). In contrast, an energy charge is based on the amount of electricity actually used by the recipient (and is expressed in MWh). Our purchases of Itaipu electricity, and our trade of Itaipu electricity to distributors, are paid for on the basis of a capacity charge (including a charge for transmission paid to Furnas). Our sales of electricity (through our subsidiaries Chesf and Eletronorte) to final consumers, especially to industrial customers, are billed on the basis of both a capacity charge and an energy charge. With respect to auction sales, as discussed in “The Brazilian Power Industry — Regulation under the Electricity Regulatory Law,” invitations to participate in auctions are prepared by ANEEL and, in the event that we are successful, we enter into sale and purchase contracts with the relevant distribution company for an amount of electricity that is proportionate to such company’s estimated demand over the contract period.
Transmission
Transmission of Electricity
Billings in our transmission segment are fixed by ANEEL, which sets a fixed billing each year. Net revenues (including updates from the internal rate of return) from transmission represented 53.23% of our total net revenues before eliminations in 2016, compared to 16.37% in 2015 and 15.78% in 2014. The electricity that we generate is transported through Brazil’s tension transmission network, with 63,571 km of transmission lines belonging to us as of December 31, 2016, compared to 60,997 km as of December 31, 2015 and 60,502 km as of December 31, 2014. Including our partnerships with private companies in SPEs/Consortia we have approximately 70,201 km in operation as of December 31, 2016. For further information, see “ — Lending and Financing Activities — Equity Participation.” In Brazil, the majority of hydroelectric plants are located a considerable distance from the major load centers and therefore, in order to reach consumers, an extensive transmission system has been developed. Transmission is the bulk transfer of electricity, at very high voltages (from 230 kV to 750 kV), from the generation facilities to the distribution systems at the load centers by means of the transmission grid. SIN is an interconnected power system in Brazil that links the northern and northeastern regions to the southern and southeastern regions. Coordinating the transmission systems is necessary to optimize the investments and operating costs and to ensure reliability and adequate load supply conditions throughout SIN.
The map below shows the geographic location of our transmission assets as of December 31, 2016:
Transmission Concessions
As of December 31, 2016, our transmission operations were carried out pursuant to the following concessions granted by ANEEL (excluding transmission operations carried out through any SPEs):
|
| Total |
| Voltage |
| Average years |
|
|
| (km) |
| (kV) |
|
|
|
Furnas |
| 20,086 |
| 25 – 750 |
| 26.5 |
|
Chesf |
| 20,314 |
| 69 – 500 |
| 26.7 |
|
Eletrosul |
| 10,991 |
| 69 – 500 |
| 26.3 |
|
Eletronorte |
| 11,777 |
| 69 – 500 |
| 26.8 |
|
Amazonas GT |
| 403 |
| 230 |
| Undefined |
|
Due to the development of the hydroelectric resources of the Amazon region, which requires the transmission of large amounts of energy, Brazil has developed the Interconnected Power System. A national transmission grid provides generators with access to customers in all regions. The following table sets forth the length of transmission lines (in km) by subsidiary and by voltage as of December 31, 2016:
|
| 750 kV |
| 600 kV |
| 525/500 |
| 345 kV |
| 230 kV |
| 138 kV |
| 132/ 13.8kV |
| Total |
|
Company: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chesf |
| — |
| — |
| 5,372 |
| — |
| 14,168 |
| 463 |
| 311 |
| 20,314 |
|
Eletronorte |
| — |
| — |
| 3,243 |
| — |
| 7,372 |
| 959 |
| 203 |
| 11,777 |
|
Eletrosul |
| — |
| — |
| 3,769 |
| — |
| 5,255 |
| 1,898 |
| 69 |
| 10,991 |
|
Furnas |
| 2,698 |
| 1,612 |
| 4,849 |
| 6,305 |
| 1,929 |
| 2,528 |
| 165 |
| 20,086 |
|
Amazonas GT |
| — |
| — |
| — |
| — |
| 403 |
| — |
| — |
| 403 |
|
Total(2) |
| 2,698 |
| 1,612 |
| 17,233 |
| 6,305 |
| 29,127 |
| 5,848 |
| 748 |
| 63,571 |
|
(1) DC means direct current.
(2) This table does not include transmission lines owned by SPEs in which we participate. Had such transmission lines been included, the total would be 70,201 km.
The following table sets forth, on a consolidated basis, the percentage of the total transmission grid above 230 kV in Brazil that we were responsible for as of December 31, 2016, considering our participations in SPEs:
|
| 750 kV |
| 600 kV |
| 525/500 |
| 400 kV |
| 345 kV |
| 230 kV |
| Total |
|
Entity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eletrobras |
| 100.00 |
| 30.88 |
| 43.25 |
| 0.00 |
| 62.17 |
| 54.06 |
| 46.97 |
|
Others |
| 0.00 |
| 69.12 |
| 56.75 |
| 100.00 |
| 37.83 |
| 45.94 |
| 53.03 |
|
Total |
| 100.00 |
| 100.00 |
| 100.00 |
| 100.00 |
| 100.00 |
| 100.00 |
| 100.00 |
|
(1) DC means direct current.
Except in relation to a small portion of transmission lines of Eletronorte located in the isolated system, the transmission lines in the Interconnected Power System are fully integrated and known as the main grid.
We operate as part of an integrated and coordinated national electricity system for Brazil. The Concessions Law authorizes us to charge fees for the use of our transmission system by other electricity companies.
In December 31, 2016, we owned approximately 47% of all transmission lines in Brazil (230 kV and above) and we received tariffs that are paid by the users of the Main Grid. The amount of our annual revenues from transmission were R$4,112 million in 2016, compared to R$5,611 million in 2015 and R$4,701 million in 2014.
We also receive a tariff (R$2,169.30 per MW/month in December 31, 2016) for the transmission of the Itaipu generation, as Furnas owns the transmission system available exclusively for this power plant. This system comprises the 750 kV AC Itaipu/Ivaiporã and the 600 kV DC Itaipu/Ibiúna transmission lines, that are not part of the Main Grid.
As a generation company, we also must pay those charges related to the use of the transmission system. Taking into account all transmission lines in Brazil (230 kV and above), this means paying 16% of the total charges to use the entire transmission system.
Losses of electricity in our transmission system were, in 2016, approximately 2.02% of all electricity transmitted in the system.
Expansion of Transmission Activities
In 2016, we invested R$2.5 billion in transmission activities, of which R$1.52 billion were invested in our facilities and R$1.0 billion were invested through partnerships, representing 78% of the total investment budget for 2016 in transmission activites in the amount of R$3.2 billion.
The major transmission projects currently under development are:
(i) Development of a 2,092km long 800kV continuous transmission line with a transmission capacity of 4,000 MW for the integration of the Belo Monte hydroelectric plant, together with State Grid of China. The amount invested is R$4.5 billion and the project is expected to be completed in 2018.
(ii) Development of a 847 km long 500 kV transmission line, for the integration of northeast, mid-west and southeast region of Brazil. The amount invested is R$917.58 million and the project is expected to be completed in the second quarter of 2017.
(iii) Development of a 967 km long 500 kV transmission line, in the southeast region of Brazil. The amount invested is R$1.57 billion and the project is expected to be completed in 2018.
Electric Power Transmission in Brazil
Transportation of large volumes of electricity over long distances is made by way of a grid of transmissions lines and substations with high voltages (from 230 kV to 750 kV), known as the Basic Network. Any electric power market agent that produces or consumes power is entitled to use the Basic Network.
Transmission lines in Brazil are usually very long, since most hydroelectric plants are usually located away from the large centers of power consumption. Today, the country’s system is almost entirely interconnected. Only the State of Roraima and parts of the states of Pará, Amazonas, Amapá and Rondônia are still not connected to the Interconnected Power System. In these states, supply is made by small thermal plants or hydroelectric plants located close to their respective capital cities.
The Interconnected Power System provides for the exchange of power among the different regions when a region faces problems generating hydroelectric power due to a drop in their reservoir levels. As the rainy seasons are different in the south, southeast, north and northeast of Brazil, the higher voltage transmission lines (500 kV or 750 kV) make it possible for locations with insufficient power output to be supplied by generating centers that are in a more favorable location.
The operation and management of the Basic Network is the responsibility of ONS, which is also responsible for managing power dispatching from plants on optimized conditions, involving use of the Interconnected Power System hydroelectric reservoirs and fuel thermal plants.
As of December 31, 2016 our transmission system, which consists of a set of transmission lines interconnected to substations, was composed of approximately 63,387 kilometers of transmission lines, including participation in SPE corresponding to approximately 47% of the total lines in Brazil with a voltage higher or equal to 230 KV.
Besides operating and maintaining this system in accordance with the standards of performance and quality required by ANEEL, we have actively participated in the expansion of transmission lines through concessions in auctions conducted by ANEEL, alone or through consortiums, as well as through permits for reinforcements of the current system.
· Brazil has a total of seven medium and large interconnections with other countries in South America, five of them operated by us, as set forth below:
· with Paraguay, through four 500 kV transmission lines connecting Usina de Itaipu to Margem Direita (Paraguay) substation and the Foz do Iguaçu in Brazil substation. Itaipu’s 50 Hz energy sector is then transported to the Ibiúna substation in São Paulo through a direct current transmission system with a capacity of 6,300 MW;
· with Uruguay, through Rivera’s frequency converter station in Uruguay, with a capacity of 70 MW and a 230 kV transmission line connecting it to the Livramento substation in Brazil;
· with Argentina, through Uruguaiana’s frequency converter station in Brazil, with a capacity of 50 MW and a 132 kV transmission line connecting it to Paso de los Libres in Argentina;
· with Venezuela, through a 230 kV transmission line with a capacity of 200 MW, which connects the city of Boa Vista, in the State of Roraima, to the city of Santa Elena in Venezuela; and
· with Uruguay, through a 500 kV transmission line, in 50 Hz with a capacity of 500 MW connecting the Melo converter (Uruguay) to Substation Candiota (Brazil).
The power generating, distributing and selling companies and free consumers had free access agreements governing their use of transmission lines on equivalent terms with those of agents that entered the market after free access became compulsory. In this free market environment, transmission tariffs are determined based on the effective use that each party that accesses the Basic Network makes of it.
Distribution
Distribution of Electricity
Our distribution companies operate in seven Brazilian states and are made up of Amazonas D, CEAL, CEPISA, Eletroacre, CERON, Boa Vista Energia and CELG-D.
On September 26, 2014, our majority shareholders approved the acquisition of a 50.9% stake in CELG-D. Accordingly, the balance sheet of CELG-D was fully consolidated in our balance sheet on December 31, 2014 and the results of operations and cash flows of CELG-D consolidated in the statement of operations and cash flows as from October 1, 2014. On May 13, 2015, the Brazilian government approved Decree No. 8,449, which included CELG-D in the National Privatization Program (PND). Accordingly, we and Celgpar we deposited our shares in CELG-D in the National Privatization Fund (FND). Our general meeting of shareholders, held on December 28, 2015, approved the sale of CELG-D shares. The privatization process was organized by BMF&BOVESPA and carried out in the first half of 2016. However, the Bidding Committee for the CELG-D Privatization Auction, designated by Ordinance PRESI 093/2016 - BNDES dated June 29, 2016, announced in August 2016 that the offer was canceled due to the lack of bidders. On September 14, 2016, the Investment Partnership Program of the Presidency of the Republic (PPI) revised the privatization conditions approved by the National Privatization Council (CND) and BNDES in order to launch a new bid in 2016 to privatize CELG-D. The Presidency of the Republic’s Investment Partnerships Program approved Resolution No. 7/2016, in which the new minimum conditions and new sales price of CELG-D. The new market value approved by CELG-D’s PPI - (Investment Partnerships Program) was R$4.484 billion. However, considering the debts and other liabilities in the amount of R$2.656 billion, as of June 2016, the net value of CELG-D was set at R$1.792 billion. The auction to privatize CELG-D occurred in November 2016 and on February 14, 2017 we signed the agreement for the sale of CELG-D with the winner of the auction, Enel. Brasil S.A. CELG-D was consolidated in our financial statements until Februray 2017.
During the Extraordinary General Meeting held on July 22, 2016, our shareholders approved the non-renewal of the CEPISA, CEAL, Electroacre, CERON, Boa Vista Energy, and Amazonas D concessions. With Provisional Measure 735/2016, later converted into Law No. 13,360, we will transfer control of the distribution companies until December 31, 2017.
On July 26, 2016, the Ministry of Mines and Energy, through Ministerial Ordinance No. 388/2016, defined the terms and conditions for the Provision of Public Service by federal public administration body or entity, establishing that operational generation of cash flow to insure investments in sufficient quantity for the replacement of assets and the payment of interest on debt, in addition to maintaining sectoral compliance. In addition, during the temporary regime, individual compensation related to quality indicators may be reversed for investments in the concession, with no tariff burden.
On August 3, 2016, the Ministry of Mines and Energy designated the companies Amazonas D, Eletroacre, CERON, with the issuance of MME Ordinances No. 420, 421 422, 423, 424 and 425, and CEPISA, CEAL and Boa Vista Energia as responsible for providing the public electricity distribution service, with a view to ensuring continuity of service until December 31, 2017 or until the assumption of the new concessionaire, whichever occurs first.
In 2016, Companhia Energética de Roraima, a company controlled by the state of Roraima, was not allowed to renew its electricity distribution concession. The MME named Boa Vista Energia as the company authorized and responsible for the provision of public electricity distribution services in the interior of the state of Roraima as of December 31, 2016. This authorization will remain until a new concessionaire is authorized to operate the concession until December 31, 2017, whichever occurs first.
On September 13, 2016, ANEEL’s board unanimously decided: (a) to establish Public Hearing No. 063/2016, by documentary exchange, from September 15 to October 15, 2016, with a view to obtaining subsidies and additional information for the improvement of the regulation of Ordinance MME No. 388/2016, which deals with the terms and conditions for the provision of the public electricity distribution service by a body or entity of the Federal Public Administration; and (b) that the draft Normative Resolution submitted to the Public Hearing should be effective immediately, and any adjustments resulting from the contributions of the Public Hearing may have retroactive effects at the beginning of the term.
On October 6, 2016, ANEEL issued Offices No. 352, 353, 354, 355, 355, 356 and 357 - DR / ANEEL giving the first guidelines for the preparation of the Temporary Provision of Distribution Services Plan, defining the targets for improvement quality in terms of DEC (Equivalent Duration of Interruption) and FEC (Equivalent Frequency of Interruption), reduction of energy losses and reduction of operating costs.
On November 29, 2016, after the analysis of the contributions from the Public Hearing 063/2016, ANEEL issued Normative Resolution No. 748/2016, establishing the terms and conditions for the provision of the public electricity distribution service by the
designated distribution company, in accordance with article 9 of Law No. 12,783, of January 11, 2013 and Ordinance No. 388, of July 26, 2016-MME.
Distribution Companies
The following companies in our group undertake distribution activities pursuant to distribution concessions granted by ANEEL:
· Amazonas D, which distributes electricity to the city of Manaus, in the State of Amazonas, pursuant to a concession that ends on July 7, 2015. During the Extraordinary General Meeting held on July 22, 2016, our shareholders did not renew the concession. The company was responsible for providing the public electricity distribution service, with a view to ensuring continuity of service until December 31, 2017 or until the assumption of the new concessionaire, whichever occurs first;
• Boa Vista Energia, which distributes electricity to the city of Boa Vista, in the State of Roraima, pursuant to a concession that ends on July 7, 2015. During the Extraordinary General Meeting held on July 22, 2016, our shareholders did not renew the concession. The company was responsible for providing the public electricity distribution service, with a view to ensuring continuity of service until December 31, 2017 or until the assumption of the new concessionaire, whichever occurs first;
· CEAL, which distributes electricity in the State of Alagoas pursuant to a concession that ends on July 12, 2015. During the Extraordinary General Meeting held on July 22, 2016, our shareholders did not renew the concession. The company was responsible for providing the public electricity distribution service, with a view to ensuring continuity of service until December 31, 2017 or until the assumption of the new concessionaire, whichever occurs first;
• CELG-D, which distributes electricity in the State of Goiás, pursuant to a concession that ends on July 7, 2015. The concession was renewed until July 7, 2045; however, we sold our interest in this company pursuant to a sale and purchase agreement dated February 14, 2017 to Enel;
· CEPISA, which distributes electricity in the State of Piauí pursuant to a concession that ends on July 12, 2015. During the Extraordinary General Meeting held ouron July 22, 2016, our shareholders did not renew the concession. The company was responsible for providing the public electricity distribution service, with a view to ensuring continuity of service until December 31, 2017 or until the assumption of the new concessionaire, whichever occurs first;
· CERON, which distributes electricity in the State of Rondônia pursuant to a concession that ends on July 12, 2015. During the Extraordinary Shareholders’ Meeting held on July 22, 2016, our shareholders did not renew the concession. The company was responsible for providing the public electricity distribution service, with a view to ensuring continuity of service until December 31, 2017 or until the assumption of the new concessionaire, whichever occurs first; and
• Eletroacre, which distributes electricity in the State of Acre pursuant to a concession that ends on July 12, 2015. During the Extraordinary General Meeting held on July 22, 2016, our shareholders did not renew the concession. The company was responsible for providing the public electricity distribution service, with a view to ensuring continuity of service until December 31, 2017 or until the assumption of the new concessionaire, whichever occurs first.
The table below indicates relevant operational numbers of our distribution companies as of December 31, 2016:
Company |
| Number of |
| Number of |
| Distribution |
| Substations |
|
Amazonas D |
| 945,179 |
| 62 |
| 47,932 |
| 24 |
|
CEAL |
| 1,117,108 |
| 102 |
| 42,744 |
| 40 |
|
CEPISA |
| 1,227,333 |
| 224 |
| 90,839 |
| 84 |
|
CERON |
| 609,080 |
| 52 |
| 57,885 |
| 60 |
|
Eletroacre |
| 254,200 |
| 22 |
| 20,071 |
| 15 |
|
Boa Vista Energia |
| 112,180 |
| 1 |
| 3,663 |
| 3 |
|
CELG-D |
| 2,825,172 |
| 237 |
| 215,635 |
| 329 |
|
Amazonas D, CEAL, CEPISA, CERON, Boa Vista Energia and Eletroacre operate in particularly challenging market conditions — the North and Northeastern regions of Brazil are among the poorest regions in the country. One of our principal continuing challenges in respect of these companies is reducing the amount of commercial losses (principally being the theft of electricity) and customer defaults that these companies suffer from.
Management Structure for our Distribution Activities
As of May 2014, the governance model changed to accommodate a local President for each distribution company, with the same five corporate officers for all distribution companies, with the exception of Amazonas D, who had a dedicated executive board.
In October 2016, following our option to not renew the concessions, when the temporary provision of public services for energy distribution was established, we implemented a new management structure with exclusive officers at each of the companies.
Transmission and Distribution System
Our transmission and distribution network consists of overhead transmission lines and sub-stations with varying voltage ranges. The clients we serve through our distribution network are classified by voltage level. With respect to our distribution to state utilities and industrial companies, we distribute electricity at higher voltage levels (up to 750 kV), while we distribute to residential and certain commercial companies at lower voltage levels (either at 230 kV, 138 kV, 34.5 kV and 13.8 kV).
System Performance
The following table sets forth information concerning our electricity losses for our distribution companies, and the frequency and duration of electricity outages per customer per year for the periods indicated:
|
| Year Ended December 31, |
| ||||
|
| 2016 |
| 2015 |
| 2014 |
|
Technical losses |
| 9.53 | % | 9.57 | % | 9.51 | % |
Commercial losses |
| 16.68 | % | 15.12 | % | 14.11 | % |
|
|
|
|
|
|
|
|
Total electricity losses |
| 26.21 | % | 24.69 | % | 23.62 | % |
|
|
|
|
|
|
|
|
Outages: |
|
|
|
|
|
|
|
Frequency of outages per customer per year (number of outages) |
| 21.21 |
| 25.26 |
| 26.88 |
|
Duration of outages per customer per year (in hours) |
| 30.88 |
| 38.68 |
| 39.89 |
|
Average response time (in minutes) |
| 321.98 |
| 384.43 |
| 321.98 |
|
Electricity Losses
We experience two types of electricity losses: technical losses and commercial losses. Technical losses are those that occur in the ordinary course of our distribution of electricity. Commercial losses are those that result from illegal connections, fraud or billing errors. Total electricity losses for our distribution business were 26.21% of energy generated and bought in the year ended December 31, 2016 compared to 24.69% of energy generated and bought in the year ended December 31, 2015 and 23.62% of energy generated and bought in the year ended December 31, 2014.
Commercial losses at these companies reached 16.68% of the electricity generated and sold during the year. Compared to the year 2015, there was an increase of 1.5%, due to the slowdown in Brazil’s economic activity, which led to a reduction in household income and to a decrease in consumption by industries.
Our distribution companies received U.S.$270.5 million in funds through a loan agreement signed in February 2011 with the World Bank, under a project called the Energy + Project. This amount was applied to improve the quality of our services and reduce losses and, consequently, to strengthen the operational revenues of the distributors. As these distribution companies are up for sale, we have suspended the loan and will not request any further disbursements.The following table sets out information regarding total losses in our distribution segment recorded by each distribution company set forth below:
|
| Year Ended December 31, |
| ||||
|
| 2016 |
| 2015 |
| 2014 |
|
|
| (percentages) |
| ||||
Company: |
|
|
|
|
|
|
|
Amazonas D |
| 43.16 |
| 40.43 |
| 37.63 |
|
Boa Vista Energia |
| 12.44 |
| 11.57 |
| 11.53 |
|
CEAL |
| 26.71 |
| 25.23 |
| 24.81 |
|
CELG-D |
| 12.84 |
| 11.93 |
| 12.94 |
|
CEPISA |
| 30.66 |
| 30.48 |
| 29.30 |
|
CERON |
| 29.76 |
| 26.74 |
| 23.24 |
|
Eletroacre |
| 24.27 |
| 23.32 |
| 23.65 |
|
Emergencies in the Electrical System:
The following table shows the average total response time to reinstate the supply of energy to the consumers in 2016 (in minutes).
|
| Year Ended December 31, |
|
|
| AST — Average service time |
|
Company: |
|
|
|
Eletroacre |
| 428.87 |
|
CEAL |
| 228.89 |
|
Amazonas D |
| 324.28 |
|
CEPISA |
| 403.90 |
|
CERON |
| 302.37 |
|
Boa Vista Energia |
| 121.15 |
|
CELG-D |
| 219.69 |
|
Customers
The following table sets forth our total distribution of electricity in terms of MWh and gross revenues, by type of user, for the periods indicated:
|
| Year Ended December 31, |
| ||||
|
| 2016 |
| 2015 |
| 2014 |
|
|
| (MWh) |
| ||||
Distribution to: |
|
|
|
|
|
|
|
Industrial |
| 4,599,425 |
| 5,262,677 |
| 5,566,288 |
|
Residential |
| 11,525,285 |
| 11,527,085 |
| 10,971,668 |
|
Commercial |
| 6,027,120 |
| 6,253,194 |
| 6,029,746 |
|
Rural |
| 2,180,303 |
| 2,076,915 |
| 2,038,532 |
|
Public Lighting |
| 1,480,825 |
| 1,436,622 |
| 1,331,245 |
|
Other |
| 2,968,575 |
| 2,960,647 |
| 2,886,727 |
|
Total |
| 28,781,531 |
| 29,517,140 |
| 28,824,206 |
|
Tariffs
The energy tariff is the price charged per unit of energy (R$/kWh). The price of electric energy is based on the costs incurred from the generation until it becomes available to consumers, as well as its availability, which is 24 hours per day, seven days per week.
The price of energy should therefore be sufficient to cover the costs of operation and expansion of all the electrical elements that make up the system, from the generating plant to the low voltage connecting branch to consumers. These costs should basically cover the investments made in the network and its daily operation, which should result in low failure rates and shorter service times for possible repairs.
As expected, besides these costs, which are directly related to the physical components of the system, there are charges and taxes. In summary, the electric energy tariff for the consumers in the concession area of the distributing companies is composed of:
· Electric energy purchase costs;
· Costs related to the use of the distribution system;
· Costs related to the use of the transmission system;
· Technical and non-technical losses; and
· Various charges and taxes.
Energy purchase costs are those arising from the contracting of amounts of energy through regulated auctions. The distributing company buys an amount of energy that it considers sufficient to service its captive market. Energy costs are allocated to the so-called Energy Tariff (ET) and passed on to consumers without profit margins.
Costs related to the use of the distribution system are included in the Distribution System Use Tariff (DSUT), such as capital expenses and costs of operation and maintenance of the distribution networks.
Costs related to electrical losses are divided into two: technical losses and non-technical losses. Technical losses are inherent in any electrical circuit. Any conductor wire has electrical resistance, which will cause the transformation of the passage of electric current into heat. Thus, all consumers pay for the technical energy losses derived from their own consumption. Non-technical losses are due to theft and measurement problems. In Brazil, depending on the concession area, non-technical losses account for a large part of the cost of electricity. This means that regular consumers pay part of the irregular consumption of consumers making use of these illegal practices.
Taxes are divided into: PIS/PASEP - PIS (Programas de Integração Social) and COFINS (Contribuição para Financiamento da Seguridade Social) and ICMS (Imposto sobre Circulação de Mercadoria). ICMS, which varies from state to state, can account for up to 30% of a costumer’s electricity bill.
Sector Charges
Charges are those contributions that are included in the electric energy tariff, but are not taxes, they are contributions established by law, whose values are established by resolutions or orders of the regulatory agency ANEEL - National Agency of Electric Energy. Each charge aims at obtaining resources and financing specific needs of the electricity segment.
Charge |
| Purpose |
|
|
|
CCC - Fuel Consumption Account (Conta de Consumo de Combustíveis) (abolished by MP 579, |
| To subsidize the thermal generation in the Isolated Systems (mainly in the northern region of Brazil). |
with main costs covered by CDE) |
|
|
|
|
|
RGR - Global Reversal Reserve (Reserva Global de Reversão) (abolished by MP 579, with main costs covered by CDE) |
| To indemnify assets related to the concession and promote the expansion of the electric energy sector. |
|
|
|
TFSEE - Inspection Fee for Electric Energy Services (Taxa de Fiscalização de Serviços de E. Elétrica) |
| To provide funds for ANEEL’s operation. |
|
|
|
CDE - Energy Development Account (Conta de Desenvolvimento Energético) |
| To promote energy development from alternative sources; provide for the globalization of the energy service; and subsidize the tariff of low-income residential consumers; fund the RGR Fund and CCC Account. |
|
|
|
ESS — System Service Charges (Encargos de Serviço do Sistema) |
| To subsidize the maintenance of the reliability and stability of Interconnected Power System. |
|
|
|
PROINFA - Alternative Sources Incentive Program (Programa de Incentivo às Fontes Alternativas) |
| To subsidize alternative energy sources, generally more expensive than the conventional sources. |
|
|
|
P&D - Research and Development and Energy Efficiency (Pesquisa e Desenvolvimento e Eficiência Energética) |
| To promote scientific and technological research related to electricity and the sustainable use of natural resources. |
|
|
|
ONS — System National Operator (Operador Nacional do Sistema) |
| Coordination and control of the operation of the electric power generation and transmission facilities in the Interconnected Power System and by planning the operation of the isolated system. |
|
|
|
CFURH - Financial Compensation for the Use of Water Resources (Compensação Financeira pelo Uso de Recursos Hídricos) |
| Provide financial compensation for the use of water and productive land for the purpose of electric power generation. |
Tariff Flags
Another cost added to the energy tariffs is the tariff flag, in which the seasonal cost of energy generation, i.e. the price variation to generate electricity according to the time of year, rainfall volume, water availability, among other variables, is signalled directly to the final consumer.
Groups, Sub-Groups, Classes and Sub-Classes:
For the supply and corresponding tariff, some definitions are established allowing to differentiating the network users. Groups are defined according to the service voltage. The sub-groups of group A are defined according to the service voltage. Group B is divided into type of customer and service.
Group A à Service with voltage higher than 2.3 kV
Group B à Service with voltage equal to or lower than 2.3 kV
The sub-groups of group A are defined according to the service voltage.
· Service with voltage equal to or higher than 230 kV
· Service with voltage from 88 kV to 138 kV
· Service with 69 kV voltage
· Service with voltage from 30 kV to 44 kV
· Service with voltage lower than 2.3 kV (underground system)
The sub-groups of group B are defined according to the type of customer/service.
· Home service
· Rural service
· Other types of service
· Public Lighting Service
Billing Procedures
The procedure we use for billing and payment for electricity supplied to our customers is determined by customer category. Meter readings and invoicing take place on a monthly basis for low voltage consumers, with the exception of rural consumers whose meters are read in intervals varying from one to three months, as authorized by relevant regulation. Bills are prepared from meter readings or on the basis of estimated usage. Low voltage customers are billed within five business days after the invoice date. In case of nonpayment, a notification of nonpayment accompanied by the next month’s invoice is sent to the customer and a period of 15 days is provided to satisfy the amount owed to us. If payment is not received within three business days after the 15-day period, the customer’s electricity supply is suspended. High voltage customers are billed on a monthly basis with payment required within five business days after the invoice date. In the event of non-payment, a notice is sent to the customer two business days after the due date, giving a deadline of 15 days to make payment. If payment is not made within three business days after the notice, the customer is subject to discontinuation of service.
On December 31, 2016, 2015 and 2014, delinquent customers represented, on average, 9.62%, 10.39% and 11.29%, respectively.
Purchase of Electricity for Distribution
We purchased 27,068,462 MWh of electricity for distribution in 2016, compared to 26,611,981 MWh in 2015 and 25,331,060 MWh in 2014. Our distribution companies purchase electricity from suppliers through bilateral contracts and through contracts resulting from the public auction process of a set of generation companies that offer bids that set the maximum price at which they will deliver electricity. After all bids are received, the average price of all bids is calculated and this is the price that will be paid for the auction contracts. The contracting is done with all the generation companies that won the auction.
Lending and Financing Activities
Loans Made by Us
Brazilian law allows us to only lend to our subsidiaries. Historically, Brazilian law allowed us to act as lender to our subsidiaries and to public energy utilities under our control. While certain of those subsidiaries are no longer in our group, the majority of our loans are to related parties. Prior to the privatization of the Brazilian electricity industry that began in 1996, this was a particularly widespread part of our operations because most companies in the industry were state-owned, allowing us to engage in lending activities to them. However, as the result of privatization, the number of companies to whom we may lend has diminished and lending is no longer a significant aspect of our business. The total amounts we recorded on our balance sheet: R$13.2 billion as of December 31, 2016, R$17.6 billion as of December 31, 2015 and R$14.7 billion as of December 31, 2014. Of this total amount, loans to Itaipu accounted for R$10.8 billion as of December 31, 2016, R$14.8 billion as of December 31, 2015 and R$11.7 billion as of December 31, 2014.
Sources of Funds
We obtain funding for our lending activities from loans from financial institutions and offerings in the international capital markets. As of December 31, 2016, our consolidated long-term debt was R$39,787 million, compared to R$42,174 million as of
December 31, 2015 and R$34,608 million as of December 31, 2014, with the majority of our foreign currency debt (approximately 98% over the three-year period) denominated in U.S. dollars. Further details of our borrowings are set out in “ — Liquidity and Capital Resources — Cash Flows.”
In addition, we utilize borrowings from the RGR Fund, which we administer, to on-lend to our subsidiaries and other electricity companies. As of December 31, 2016, 2015 and 2014, we incurred interest at 5.0% in respect of borrowings from the RGR Fund and charge an average administrative fee of up to 2.0% on funds which we on-lend to subsidiaries and other entities.
Equity Participation
We act as a minority participant in private sector generation and transmission companies and joint ventures. We are also authorized to issue guarantees for those companies in which we participate as an equity investor. We are constantly considering investments in a number of such companies, focusing primarily on those in line with our strategy of building on our core businesses of generation and transmission (see “Item 7.B, Related Party Transactions”).
The current participations that we have are in private sector generation and transmission companies and joint ventures. Participation is determined primarily on merit and profitability criteria based on our managerial controls.
The table below shows an estimate of the total percentage of our participation in transmission lines as of December 31, 2016:
Special Purpose Company/Consortium |
| Object of investment |
| Eletrobras Participation |
|
|
|
|
|
Belo Monte Transmissora de Energia S.A. |
| Converter Station CA/CC, ±800 kV, 3,850 MW, with Substation 500 kV Estreito; and Transmission Line with ±800 kV Xingu - Estreito. |
| Eletronorte (24.5%) |
|
|
|
|
|
Fronteira Oeste Transmissora de Energia S.A. |
| Santo Ângelo/Maçambará |
| Eletrosul (51%) |
|
|
|
|
|
Mata de Santa Genebra Transmissora S.A. |
| Itatiba — Bateias; |
| Furnas (49.9%) |
|
|
|
|
|
Paraíso Transmissora de Energia S.A. |
| Paraíso 2-Chapadão; |
| Eletrosul (24.5%) |
|
|
|
|
|
Paranaíba Transmissora de Energia S.A. |
| Barreiras II — Rio das Éguas; |
| Furnas (24.5%) |
|
|
|
|
|
TDG Transmissora Delmiro Gouveia S.A. |
| Transmission Line São Luiz II/ São Luiz III |
| Chesf (49%) |
|
|
|
|
|
Transenergia Goiás S.A. |
| Serra da Mesa — Niquelândia; Niquelândia — Barro Alto |
| Furnas (99%) |
|
|
|
|
|
Transnorte Energia S.A. |
| Eng. Lechuga (AM) — Equador (RR) e Equador (RR) — Boa Vista (RR), double circuit and Substations Equador (RR) Boa Vista (RR) |
| Eletronorte (49%) |
|
|
|
|
|
Triângulo Mineiro Transmissora S.A. |
| Marimbondo II — Assis |
| Furnas (49%) |
|
|
|
|
|
Vale do São Bartolomeu Transmissora de Energia S.A. |
| Luziânia — Brasília Leste; |
| Furnas (39%) |
The table below shows an estimate of the total percentage of our participation in transmission substations as of December 31, 2016:
Special Purpose Company/Consortium |
| Object of investment |
| Eletrobras Participation |
|
|
|
|
|
Belo Monte Transmissora de Energia S.A. |
| Converter Station CA/CC,±800 kV, -4,000 MW, with Substation 500 kV Xingu; |
| Furnas (24.5%) |
|
|
|
|
|
Fronteira Oeste Transmissora de Energia |
| Pinhalzinho, with 230/138 kV (ATF1); |
| Eletrosul (51%) |
|
|
|
|
|
Mata de Santa Genebra Transmissora S.A. |
| Substation Santa Bárbara D’Oeste 440 kV, Static Compensation (-300+300) Mvar |
| Furnas (49.9%) |
|
|
|
|
|
Paraíso Transmissora de Energia S.A. |
| Substation Campo Grande 2 with 1 three-phase reactor 230 kV of 20 Mvar. |
| Eletrosul (24.5%) |
|
|
|
|
|
Triângulo Mineiro Transmissora S.A. |
| Substation Marimbondo II, 04 single-phase reactors 500 kV of 45.3 Mvar (each) and Substation Assis, 7 single-phase reactors 500 kV of 45.3 Mvar (each). |
| Furnas (49%) |
|
|
|
|
|
Vale do São Bartolomeu Transmissora de Energia S.A. |
| Substation Brasília Leste, 6 single-phase transformers 500/138 of 180 MVA (each). |
| Furnas (39%) |
|
|
|
|
|
Paranaíba Transmissora de Energia S.A. |
| 500 kV Transmission Line in Substation Barreiras II, Rio das Éguas, Luziânia and Pirapora II. |
| Furnas (24.5%) |
|
|
|
|
|
TDG Transmissora Delmiro Gouveia S.A. |
| Substation Aquiraz 2, 03 three-phase transformers 230/69kV, 150 MVA (each) and Substation Pecém 2, 9 single-phase autotransformers 500/230kV, 400 MVA (each) |
| Chesf (49%) |
Special Purpose Company/Consortium |
| Object of investment |
| Eletrobras Participation |
|
|
|
|
|
Transenergia Goiás S.A. |
| 230 kV Transmission Line at Substation Serra da Mesa, Niquelândia and Barro Alto |
| Furnas (99%) |
|
|
|
|
|
Transnorte Energia S.A. |
| SE Boa Vista, 2 three-phase autotransformers 500/230 kV de 400 MVA (each) and 1 static compensator 230 kV -120/150 Mvar. |
| Eletronorte (49%) |
The table below shows an estimate of the total percentage of our participation in generation assets as of December 31, 2016:
Special Purpose Company/Consortium |
| Object of investment |
| Eletrobras Participation |
|
|
|
|
|
Amapari Energia S.A. |
| Serra do Navio |
| Eletronorte (49%) |
|
|
|
|
|
Baguari Geração de Energia S.A. |
| Baguari |
| Furnas (30.6%) |
|
|
|
|
|
Banda de Couro Energética S.A. |
| Windfarm Banda de Couro |
| Chesf (1.8%) |
|
|
|
|
|
Baraúnas I Energética S.A. |
| Windfarm Baraúnas I |
| Chesf (49%) |
|
|
|
|
|
Baraúnas II Energética S.A. |
| Windfarm Baraúnas II |
| Chesf (1.6%) |
|
|
|
|
|
Brasventos Eolo Geradora de Energia S.A. |
| Windfarm Rei dos Ventos 1 |
| Eletronorte (24.5%) |
|
|
|
|
|
Brasventos Miassaba 3 Geradora de Energia S.A |
| Windfarm Miassaba 3 |
| Eletronorte (24.5%) |
|
|
|
|
|
Chuí IX S.A. |
| Windfarm Chuí 09 |
| Eletrosul (99.99%) |
|
|
|
|
|
Cia. Hidrelétrica Teles Pires |
| Teles Pires (8) |
| Furnas (24.5%) |
|
|
|
|
|
EAPSA - Energia Águas Da Pedra S.A. |
| Dardanelos |
| Eletronorte (24.5%) |
|
|
|
|
|
Enerpeixe S.A. |
| Peixe Angical |
| Furnas (40%) |
|
|
|
|
|
Eólica —Chuí Holding S.A. |
| Windfarms Chuí I to V, and Minuano I and II |
| Eletrosul (49%) |
|
|
|
|
|
Eólica Livramento S.A. (9) |
| Windfarms de Cerro Chato IV, V, VI, Ibirapuitã and Trindade |
| Eletrosul (59%) |
|
|
|
|
|
Eólica Serra das Vacas I S.A. (5) |
| Serra das Vacas I |
| Chesf (49%) |
|
|
|
|
|
Eólica Serra das Vacas II S.A. (5) |
| Serra das Vacas II |
| Chesf (49%) |
|
|
|
|
|
Eólica Serra das Vacas III S.A. (5) |
| Serra das Vacas III |
| Chesf (49%) |
|
|
|
|
|
Eólica Serra das Vacas IV S.A. (5) |
| Serra das Vacas IV |
| Chesf (49%) |
|
|
|
|
|
ESBR Participações S.A. |
| Jirau (2) |
| Chesf (20%) |
|
|
|
|
|
Foz de Chapecó Energia S.A. |
| Foz de Chapecó |
| Furnas (40%) |
|
|
|
|
|
Hermenegildo I S.A. |
| Windfarms Verace 24 to 27 |
| Eletrosul (99.99%) |
|
|
|
|
|
Hermenegildo II S.A. |
| Windfarms Verace 28 to 31 |
| Eletrosul (99.99%) |
|
|
|
|
|
Hermenegildo III S.A. (10) |
| Windfarms Verace 34 to 36 |
| Eletrosul (99.99%) |
|
|
|
|
|
Madeira Energia S.A. |
| Santo Antônio (6) |
| Furnas (39%) |
|
|
|
|
|
Morro Branco I Energética S.A. |
| Windfarm Morro Branco I |
| Chesf (49%) |
|
|
|
|
|
Mussambê Energética S.A. |
| Windfarm Mussambê |
| Chesf (49%) |
|
|
|
|
|
Norte Energia S.A. |
| Belo Monte |
| Chesf (15%) |
|
|
|
|
|
Pedra Branca S.A. |
| Pedra Branca |
| Chesf (49%) |
|
|
|
|
|
Rei dos Ventos 3 Geradora de Energia S.A. |
| Windfarm Rei dos Ventos 3 |
| Eletronorte (24.5%) |
Special Purpose Company/Consortium |
| Object of investment |
| Eletrobras Participation |
|
|
|
|
|
Retiro Baixo Energética S.A. |
| Retiro Baixo |
| Furnas (49%) |
|
|
|
|
|
Santa Vitória do Palmar S.A. |
| Windfarms Geribatu I to X |
| Eletrosul (49%) |
|
|
|
|
|
São Pedro do Lago S.A. |
| São Pedro do Lago |
| Chesf (49%) |
|
|
|
|
|
Serra do Facão Energia S.A. |
| Serra do Facão |
| Furnas (49.47%) |
|
|
|
|
|
Sete Gameleiras S.A. |
| Sete Gameleiras |
| Chesf (49%) |
|
|
|
|
|
Tijoá Participações e Investimentos S.A. |
| Três Irmãos (7) |
| Furnas (49.9%) |
|
|
|
|
|
U.E.E. Caiçara I S.A. (4) |
| Windfarm Caiçara I |
| Chesf (49%) |
|
|
|
|
|
U.E.E. Caiçara II S.A. (4) |
| Windfarm Caiçara II |
| Chesf (49%) |
|
|
|
|
|
U.E.E. Junco I S.A. (4) |
| Windfarm Junco I |
| Chesf (49%) |
|
|
|
|
|
U.E.E. Junco II S.A (4) |
| Windfarm Junco II |
| Chesf (49%) |
|
|
|
|
|
V. de Santa Joana I Energia Renováveis S.A. |
| Windfarm Santa Joana I |
| Chesf (49%) |
|
|
|
|
|
V. de Santa Joana III Energia Renováveis S.A. |
| Windfarm Santa Joana III |
| Chesf (49%) |
|
|
|
|
|
V. de Santa Joana IV Energia Renováveis S.A. |
| Windfarm Santa Joana IV |
| Chesf (49%) |
|
|
|
|
|
V. de Santa Joana V Energia Renováveis S.A. |
| Windfarm Santa Joana V |
| Chesf (49%) |
|
|
|
|
|
V. de Santa Joana VII Energia Renováveis S.A. |
| Windfarm Santa Joana VII |
| Chesf (49%) |
|
|
|
|
|
V. de Santo Augusto IV Energia Renováveis S.A. |
| Windfarm Santo Augusto IV |
| Chesf (49%) |
|
|
|
|
|
V. de Santa Joana IX Energia Renováveis S.A. (3) |
| Windfarm Santa Joana IX |
| Chesf (49%) |
|
|
|
|
|
V. de Santa Joana X Energia Renováveis S.A. (3) |
| Windfarm Santa Joana X |
| Chesf (49%) |
|
|
|
|
|
V. de Santa Joana XI Energia Renováveis S.A. (3) |
| Windfarm Santa Joana XI |
| Chesf (49%) |
|
|
|
|
|
V. de Santa Joana XII Energia Renováveis S.A. (3) |
| Windfarm Santa Joana XII |
| Chesf (49%) |
|
|
|
|
|
V. de Santa Joana XIII Energia Renováveis S.A. (3) |
| Windfarm Santa Joana XIII |
| Chesf (49%) |
|
|
|
|
|
V. de Santa Joana XV Energia Renováveis S.A. (3) |
| Santa Joana XV |
| Chesf (49%) |
|
|
|
|
|
V. de Santa Joana XVI Energia Renováveis S.A. (3) |
| Windfarm Santa Joana XVI |
| Chesf (49%) |
Brazilian Government Programs
In addition to the Proinfa program created by the Brazilian Government in 2002 to create certain incentives for the development of alternative sources of energy (discussed more fully in “The Brazilian Power Industry — Proinfa”), we also participate in four additional Brazilian Government programs:
· the Programa Reluz (Relighting Program), a program introduced in order to bring basic lighting to the main public areas of certain municipalities in Brazil;
· the Programa Procel (Conservation Program), a program that aims to promote energy conservation and efficiency;
· Luz Para Todos (Light for All), a program that aims to bring electricity to an additional 12 million people in Brazil; and
· Programa de Desenvolvimento Tecnológico e Industrial (Program of Technological and Industrial Development), a program to coordinate research and development activities in the Brazilian electricity sector and promote the development and manufacture of equipment required to ensure the development of the sector.
Any funds used by us in respect of these programs come from the Brazilian Government itself, in the form of funds allocated for the sector, and accordingly we do not use our own funds for these programs.
We also participate in other initiatives using our own funds, one of which is the Projeto Ribeirinhas, or Riverbank Communities Project. Through this initiative, we aim to evaluate the applicability and sustainability of technologies based on renewable resources of energy in certain small communities living in the Amazon region.
Research and Development
See “Item 5.C, Research and Development, Patents and Licenses.”
International Activities
In 2016, we refocused our international strategy, seeking to primarily act in projects of regional integration and renewable energy generation in Latin America. Accordingly, we are further developing studies for the hydroeletric opportunities at the border with Bolivia and Argentina, in addition to studies about the integration of inter-regional transmission systems involving Brazil, Guyana, French Guyana and Suriname.
Uruguay
The partnership between us and the Uruguyan State company Administración Nacional de Usinas y Transmisiones Elétricas (UTE), led to the development of the wind farm Artilleros (Wind Park Artilleros - 65MW). This project received its permanent qualification as part of Uruguay’s electric power network in 2016.
Northern Arc Project
We advanced the feasibility studies related to the Northern Arc Project. This project is a transmission system of approximately 1,900 km long that will allow the transfer of energy through new generation ventures between Brazil, Guyana, Suriname and French Guyana. The pre-feasibilty studies were sponsored and coordinated by the Inter-American Development Bank, which is part of the World Bank, and were concluded in November 2016.
Environmental
General
Environmental issues can significantly impact our operations. For example, large hydroelectric plants can cause the flooding of large areas of land and the relocation of large numbers of people. The Brazilian Constitution gives both the Brazilian Government and state and local governments power to enact laws designed to protect the environment and to issue regulations under such laws. While the Brazilian Government has the power to promulgate general environmental regulations, state and local governments have the power to enact more stringent environmental regulations. Accordingly, most of the environmental regulations in Brazil are state and local rather than federal.
Any failure to comply with environmental laws and regulations may result in criminal liability, irrespective of the strict liability to perform environmental remediation and to indemnify third parties for environmental damages. These failures may also subject us to administrative penalties such as fines, suspension of public agency subsidies or injunctions requiring us to discontinue, temporarily or permanently, the prohibited activities.
In order to build a hydroelectric plant, Brazilian electricity companies must comply with a number of environmental safeguards. For projects for which the environment impact is considered significant, such as generation projects with an output above 10 MW, as well as transmission lines above 230 kV, together with certain other environmentally sensitive projects, first, a comprehensive environmental impact study (estudo de impacto ambiental, or EIA) must be prepared by external experts who make recommendations as to how to minimize or compensate the impact of the plant on the environment. The study, together with a specific environmental report (relatório de impacto ambiental, or RIMA) on the project prepared by the company, is then submitted to federal, state or local governmental authorities, depending on the projected impact, for analysis and approval. Such study and report are used for the
environmental licensing of the project, which is generally carried out by means of a three stage licensing process, which comprises (i) a license to attest the feasibility of the project (Licença Prévia or LP), (ii) a license to begin work (Licença de Instalação or LI), and (iii) a license to operate the project (Licença de Operação or LO).
In addition, the company is required by law to devote a percentage of the total cost of any investment in new projects with a significant environmental impact to environmental preservation. According to federal law and a recent decision by the Brazilian Supreme Court, such percentage shall range from zero to 0.5%. However, in the State of Rio de Janeiro, the State determined that the compensation percentage shall range from 0.5% to 1.1%. As federal and state law may provide for different percentages, this amount may be judicially challenged or changed by the competent authority by publication of a further law. Since the early 1980’s, the Brazilian electricity sector has endeavored to improve its treatment of the social and environmental aspects of power project planning, implementation and operation. In general, our generation subsidiaries are in compliance with applicable environmental regulations in Brazil, and the environmental policies and guidelines of the electricity sector. Our generation and transmission facilities benefit from certain exemptions to licensing requirements because their operations commenced before the applicable environmental legislation. Nonetheless, some environmental authorities have issued notices of infringement alleging the absence of environmental licenses. See “Item 8.A, Consolidated Financial Statements and Other Information — Litigation — Environmental Proceedings.”
As of December 31, 2016, our subsidiary Eletronuclear operated two nuclear power plants in the State of Rio de Janeiro, Angra I and Angra II and a third nuclear power plant, Angra III, is under construction. Because Eletronuclear initiated its activities before the enactment of an environmental legislation, Angra I was licensed by CNEN under the nuclear and environmental regulations in effect at that time. Currently, Brazilian law requires the issuance of: (i) an authorization for nuclear enterprises by CNEN; and (ii) an environmental license issued by the Instituto Brasileiro do Meio Ambiente e Recursos Naturais Renováveis (or IBAMA, the Brazilian Federal environmental authority).
Regarding the environmental licenses, a study group formed by the Federal Public Attorney’s Office, CNEN, IBAMA, the Fundação Estadual de Engenharia do Meio Ambiente (or FEEMA, which was one of the environmental authorities in the State of Rio de Janeiro, currently unified in one single entity, the Instituto Estadual do Ambiente or INEA), Eletronuclear and Eletrobras prepared a Termo de Ajustamento de Conduta (a Conduct Adjustment Agreement or TAC) according to which the guidelines for the environmental licensing update procedure should be established. Angra II has obtained all the environmental licenses necessary for its operations, but the Federal Public Attorney’s Office challenged its renewal, which it conditioned upon the compliance with a TAC and according to which Eletronuclear should implement a program in order to improve emergency plans, environmental monitoring programs and effluents treatment systems. Until these obligations are accomplished, IBAMA and CNEN should abstain from issuing any definitive licenses or authorizations for the operation of Angra II. An assessment comprising the accomplishments of the TAC was issued by IBAMA to the Public Attorney in June 2006. After evaluation of the status of completion of these conditions, IBAMA issued a report concluding that all technical conditions compiled in the TAC were satisfied. In March 2014, IBAMA issued an Unified LO for the nuclear installations in operation at the CNAAA site — Angra I, Angra II and the Radwaste Management Centre (including initial storage facilities), which is valid until March 2024. Eletronuclear also holds a LI in connection with the construction of Angra III, in effect until March 2020, and other applicable environmental licenses for other buildings and facilities within the site of the nuclear power plants.
For the environmental licensing of the Angra III, Eletronuclear has to comply with the conditions set forth in Previous License No. 279/2008 and Installation License No. 591/2009 granted by IBAMA. Eletronuclear entered into TCs (Termos de Compromisso) with the Municipalities of Angra dos Reis in October 2009 and Paraty and Rio Claro in February 2010. Eletronuclear has to implement public policy projects in the Environmental, Civil Defense, Social Assistance, Education, Construction and Public Services, Economic Activities, Health, Sanitation and Cultural areas of these Municipalities until the commencement of operations at Angra III. In the event Eletronuclear does not comply with the TCs, it may ultimately not obtain the operating license for the Angra III plant.
With respect to CNEN’s license, both nuclear power plants currently have their own Authorization for Permanent Operation (Autorização de Operação Permanente — AOP). The AOP of Angra I will expire in August 2024, and the AOP of Angra II will expire in June 2041.
Eletronuclear is strictly liable for nuclear accidents as an operator of nuclear plants in Brazil. See “Item 3.D, Risk Factors — Risks Relating to Our Company — We may be liable for damages, subject to further regulation and have difficulty obtaining financing if there is a nuclear accident involving our subsidiary Eletronuclear.”
Energy Conservation
Over the past 20 years, the Brazilian Government has implemented a number of actions directed to energy conservation on the electricity sector. The Brazilian Government normally finances these actions and we administer them. The most important project in this area is the Procel.
The Programa de Conservação de Energia Elétrica — Procel (the national electric conservation program) was created in 1985 to improve energy efficiency and rationalization of the use of natural resources throughout Brazil. MME coordinates the program and we are responsible for its execution. The main objective of Procel is to encourage cooperation among various sectors of Brazilian society to improve energy conservation both on the production and consumer sides.
Alternative Electricity Sources
In 2002 the Brazilian Government created the Programa de Incentivo às Fontes Alternativas de Energia Elétrica — Proinfa (the program for the development of alternative electricity sources), with the objective of diversifying the Brazilian energy matrix by searching for regional solutions with the use of renewable energy sources.
The Brazilian Power Industry
General Provisions
According to Regulation No. 555, dated December 28, 2015, MME approved a ten-year expansion plan (Plano Decenal de Expansão de Energia Elétrica or PDE 2024), which provides guidance to the Brazilian government and to all agents in the Brazilian energy industry in order to ensure that there is a sustainable supply of energy in Brazil, including electricity, taking into consideration environmental needs, the Brazilian economy and a business’ technical capabilities.
The studies carried out in the PDE include a plan for the next ten years and are subject to annual reviews which take into account, among other aspects, changes in the forecast for the growth of electricity consumption and the re-evaluations of the economical and operational feasibility of the generation projects, as well as the estimates regarding the expansion of transmission lines.
According to ANEEL, in December 2016, when taking into account the SIN generating units, the power generators installed in the isolated systems and in the generators owned by individuals, Brazil had a total installed capacity of 150.3 GW.
Currently, the SIN is divided into four electric sub-systems: South-East/Mid-West, South, North-East and North.
In addition to the SIN, there are also the isolated systems, i.e., those systems that do not make part of the SIN, are generally located in the Northern and North-Eastern regions of Brazil, have as sole source of energy the electricity generated by coal-fired and oil-fuelled thermal plants which are extremely pollutants and have a generation cost three to four times higher than, for instance, a hydro-electric power station. The CCC account was introduced by article 13, III of Law No. 5899, of July 5, 1973, as amended, with the purpose of generating financial reserves payable to distribution companies and to some generation companies (all of which should make annual contributions to the CCC Account) in order to cover some of the costs of the operation of thermoelectric plants in the event of adverse hydrological conditions, and also, as set in Law No. 12,111/2009, of subsidizing the electricity generated by the “isolated systems” in order to allow consumers of the isolated systems to bear charges for electricity equivalent to the charges borne by consumers served by hydraulic generation (Law No. 12,783 terminated the apportionment of the benefit of reduction of the costs for fuel consumption within electric energy generation and funds from the CDE Account became the main funds for the CCC Account). There is currently a significant discrepancy between charges paid by consumers in the Northern and Northeastern regions when compared to what is charged from the Southern/South-Eastern Region consumers. Therefore, interconnecting the isolated systems to the SIN would enable consumers from these regions to have access to hydroelectric energy sources, which results in reduced production costs and a convergence of prices in these regions to other regions of the country.
Accordingly, the PDE further intends to integrate the isolated systems to the SIN. Such integration would be carried out through the construction of the transmission lines of Jauru/Vilhena (230kV), Tucuruí/Manaus (Cariri) (500kV), Jurapari/Macapá (230kV), Manaus/Boa Vista (500kV) and Rio Branco/Feijó/Cruzeiro do Sul (230kV) within the shortest term possible, given that the preliminary analysis for implementing the integration project has already been concluded.
In addition to the integration of the Isolated System, the PDE also provides for the expansion of electricity generation through the improvement of the generation capacity, defined by the PDE as the execution of a set of works aimed at enhancing the capacity and efficiency while modernizing the already existing power plants, which should not represent a lot in terms of ensured power but would contribute to meet the increase in the highest level expected of electricity demand.
According to ANEEL, the total installed electricity generation capacity in Brazil in 2016 was 150.3 GW with 4,710 operating ventures. Currently, there are 220 ventures under construction and another 630 with permits granted. An additional generation capacity of 25 GW is expected in the coming years.
Pursuant to the EPE 10 Year Plan, Brazil’s total installed power generation capacity is projected to increase to 206.4 GW by 2024, of which 117 GW is projected to be hydroelectric and 79 GW to be thermoelectric and from other sources.
Directly and through our subsidiaries, we are involved in the generation, transmission and distribution of electricity in Brazil. As of December 31, 2016, we contributed, including our subsidiaries, SPEs and 50% of Itaipu Binacional to approximately 31% of the installed power generating capacity within Brazil and are responsible for approximately 47% of the installed transmission capacity above 230 kV. In addition, some Brazilian states control entities involved in the generation, transmission and distribution of electricity. The remainder of the market is held by several companies including Cemig, Copel, Engie, CPFL and Duke. Certain of these companies have entered into joint venture arrangements in the past. In net revenue terms, we believe we are the largest generation and transmission company in Brazil. We mainly compete for generation and transmission businesses through a competitive auction process.
Historical Background
The Brazilian Constitution provides that the development, use and sale of energy may be undertaken directly by the Brazilian Government or indirectly through the granting of concessions, permissions or authorizations. Historically, the Brazilian power industry has been dominated by generation, transmission and distribution concessionaires controlled by the Brazilian Government. This changed during Fernando Henrique Cardoso’s administration (1995-2002), during which many state controlled companies were privatized in an effort to increase efficiency and competition. In recent years, the Brazilian Government has taken a number of measures to remodel the power industry. In general, these measures were aimed at increasing the role of private investment and eliminating foreign investment restrictions, thus increasing overall competition in the power industry.
In particular, the Brazilian Government has taken the following measures:
· The Brazilian Constitution was amended in 1995 by Constitutional Amendment No.��6 to allow foreign companies to invest in Brazilian companies that hold power generation concessions. Prior to this amendment, all generation concessions were held either by a Brazilian individual or an entity controlled by Brazilian individuals or by the Brazilian Government;
· The Brazilian Government enacted Law No. 8,987 on February 13, 1995 as amended by Law No. 11,196 of November 21, 2005 and Law No. 11,445 of January 5, 2007 (or the Concessions Law) and Law No. 9,074 on July 7, 1995, as amended (or the Power Concessions Law), that together: (i) required that all concessions for the provision of energy related services be granted through public bidding processes; (ii) gradually allowed certain electricity consumers with significant demand, designated “free consumers,” to purchase electricity directly from suppliers holding a concession, permission or authorization; (iii) provided for the creation of generation entities (or Independent Power Producers) which, by means of a concession, permission or authorization, may generate and sell, for their own account and at their own risk, all or part of their electricity to free consumers, distribution concessionaires and trading agents, among others; (iv) granted free consumers and electricity suppliers open access to all distribution and transmission systems; and (v) eliminated the need for a concession to construct and operate power projects with capacity from 1 MW to 30 MW, including PCHs, although an authorization or permission from ANEEL or MME is required, as the case may be;
· Beginning in 1995, a portion of the controlling interests held by us and various states in certain generation and distribution companies were sold to private investors. At the same time, certain state governments also sold their stakes in major distribution companies;
· In 1998, the Brazilian Government enacted Law No. 9,648 (or the Power Industry Law) to overhaul the basic structure of the electricity industry. The Power Industry Law provided for the following:
· the establishment of a self-regulated body responsible for coordinating the purchase and sale of electric energy available in the Interconnected System (Mercado Atacadista de Energia Elétrica — MAE), or the Wholesale Energy Market — MAE, an entity which replaced the prior system of regulated generation prices and supply contracts. The Wholesale Energy Market — MAE was later replaced by the CCEE;
· a requirement that distribution and generation companies enter into initial energy supply agreements (or the Initial Supply Contracts) generally “take or pay” commitments, at prices and volumes approved by ANEEL. The main purpose of the Initial Supply Contracts was to ensure distribution companies access to a stable electricity supply at prices that guaranteed a fixed rate of return for the electricity generation companies during the transition period leading to the establishment of a free and competitive electricity market;
· the creation of the National Electricity System Operator (Operador Nacional do Sistema Elétrico), or ONS, a non-profit, private entity responsible for the operational management of the generation and transmission activities of the Interconnected Power System; and
· the establishment of public bidding processes for concessions for the construction and operation of power plants and transmission facilities.
· In 2001, Brazil faced a serious energy crisis that lasted until the end of February 2002. As a result, the Brazilian Government implemented measures that included:
· a program for the rationing of electricity consumption in the most adversely affected regions, namely the southeast, central-west and northeast regions of Brazil; and
· the creation of the CGE, which passed a series of emergency measures that provided for reduced electricity consumption targets for residential, commercial and industrial consumers in the affected regions by introducing special tariff regimes that encouraged the reduction of electricity consumption.
· In March 2002, the CGE suspended the emergency measures and electricity rationing as a result of large increases in supply (due to a significant rise in reservoir levels) and a moderate reduction in demand, and accordingly, the Brazilian Government enacted new measures in April 2002 that, among other things, stipulated an extraordinary tariff readjustment to compensate financial losses incurred by the electricity suppliers as a result of the mandatory electricity rationing.
· On March 15, 2004, the Brazilian Government enacted the Law No. 10,848 and on July 30, 2004, the Decree No. 5,163, or the Electricity Regulatory Law, in an effort to further restructure the power industry with the ultimate goal of providing consumers with secure electricity supplies combined with low tariffs, which law was regulated by a number of decrees enacted by the Brazilian Government in July and August of 2004, and is still subject to further regulation to be issued in the future. See “— Challenges to the Constitutionality of the Electricity Regulatory Law.”
· At the end of 2012, the Brazilian Government enacted two Provisional Measures (Medidas Provisórias or MP) that have considerably changed the Brazilian electric energy sector overview, namely MP 577, dated as of August 29, 2012 and MP 579, dated as of September 11, 2012. Both of them were approved and converted into Law No. 12,767, dated as of December 27, 2012 and Law No. 12,783, dated as of January 11, 2013, respectively. In general, the MPs provided the regulation in connection with the intervention of the granting authority in the concessions as well as the renewal of the electric energy generation, distribution and transmission concessions, respectively.
· In 2016, two Provisional Measures (Medidas Provisórias or MP) were enacted by the Brazilian Government, namely MP 706, dated as of December 28, 2015 and MP 735, dated as of June 22, 2016. Both of them were approved, but only MP 706 was converted into Law No. 13,299, dated as of June 21, 2016. Especially for the distribution sector, such acts are of major relevance as they give special treatment to the distribution concessions located in the regions not integrated to the National Interconnected Grid — SIN yet. Such measures aimed to create a new regulatory framework capable to provide more sustainable financial conditions to such concessions to meet their outstanding duties with their fuel suppliers and, therefore, create a more favorable environment to potential investors on the National Privatization Program — PND. Nonetheless, as such acts provide for some kind of special treatment to part of the distribution companies and also authorize the utilization of the CDE funds to cover the fuel debts of the concessionaires, we cannot guarantee that they would not have their legality/constitutionality challenged by other agents of the industry who might be adversely impacted, including the consumers and other concessionaires which will not benefit from the legal measures.
Concessions
The companies or consortia that wish to build or operate facilities for generation, transmission or distribution of electricity in Brazil must apply to MME or to ANEEL, as representatives of the Brazilian Government, for a concession, permission or authorization, as the case may be. Concessions grant rights to generate, transmit or distribute electricity in the relevant concession area for a specified period, though a concession may be revoked at any time at the discretion of MME, following consultation with ANEEL. This period is usually 35 years for new generation concessions, and 30 years for new transmission or distribution concessions.
The Concession Law establishes, among other things, the conditions that the concessionaire must comply with when providing electricity services, the rights of the consumers, and the obligations of the concessionaire and the granting authority. Furthermore, the concessionaire must comply with regulations governing the electricity sector. The main provisions of the Concession Law are as follows:
· Adequate service. The concessionaire must render adequate service equally with respect to regularity, continuity, efficiency, safety, and accessibility.
· Use of land. The concessionaire may use public land or request the granting authority to expropriate necessary private land for the benefit of the concessionaire. In that case, the concessionaire must compensate the private landowners affected.
· Strict liability. The concessionaire is strictly liable for all damages arising from the provision of its services.
· Changes in controlling interest. The granting authority must approve any direct or indirect change in the concessionaire’s controlling interest.
· Intervention by the granting authority. The granting authority may intervene in the concession, by means of an administrative proceeding, to ensure the adequate performance of services, as well as full compliance with applicable contractual and regulatory provisions. Such intervention procedure was regulated by MP No. 577/2012, duly converted into Law No. 12,767/2012.
· Termination of the concession. The termination of the concession agreement may be accelerated by means of expropriation and/or forfeiture. Expropriation is the early termination of a concession for reasons related to the public interest that must be expressly declared by law. Forfeiture must be declared by the granting authority after a final administrative ruling that the concessionaire, among other things: (i) has failed to render adequate service or to comply with applicable law or regulation; (ii) no longer has the technical, financial or economic capacity to provide adequate service; or (iii) has not complied with penalties assessed by the granting authority. The concessionaire may contest any expropriation or forfeiture in the courts. The concessionaire is entitled to indemnification for its investments in expropriated assets that have not been fully amortized or depreciated, after deduction of any amounts for fines and damages due by the concessionaire.
· Expiration. When the concession expires, all assets, rights and privileges that are materially related to the rendering of the electricity services revert to the Brazilian Government. Following the expiration, the concessionaire is entitled to indemnification for its investments in assets that have not been fully amortized or depreciated at the time of expiration.
Penalties
Law No. 9,427 of December 26, 1996, as amended, enacted by the Brazilian Government and supplemented by ANEEL’s regulation govern the imposition of sanctions against the agents of the electricity sector and classify the appropriate penalties based on the nature and importance of the breach (including warnings, fines, temporary suspension from the right to participate in bidding procedures for new concessions, licenses or authorizations and forfeiture). For each breach, the fines can be up to 2.0% of the revenue of the concessionaire in the 12-month period preceding any assessment notice or, for independent producers or self producers, the estimated amount of energy produced in the same period. Some infractions that may result in fines relate to the failure of the agent to request ANEEL’s approval, including the following (pursuant to ANEEL Resolution No. 63/2004, as amended from time to time):
· entering into certain related party transactions;
· sale or assignment of the assets related to services rendered as well as the imposition of any encumbrance (including any security, bond, guarantee, pledge and mortgage) on them or any other assets related to the concession or the revenues of the electricity services;
· changes in direct or indirect controlling interest of the holder of the authorization or concession; and
· non-compliance with the schedule for the beginning of the commercial operation of the power plant, as previously approved by ANEEL through the relevant contract.
With respect to contracts executed between related parties that are submitted for ANEEL’s approval, ANEEL may seek to impose restrictions on the terms and conditions of these contracts and, in extreme circumstances, determine that the contract be terminated early.
Furthermore, ANEEL has the institutional role of controlling the transactions of the energy industry, requiring that such transactions (change of control of the agents of the electric energy sector) be submitted to its prior approval before its implementation.
Renewal of the Concessions — Law No. 12,783
In 2012, the Brazilian Government enacted MP No. 579/2012, which was converted into Law No. 12,783. Among other provisions, the main purpose of this normative act is to regulate the renewal conditions for electric energy generation, distribution and transmission concessions.
Law No. 12,783 (i) establishes the conditions for the renewal of electric energy generation, distribution and transmission concessions; (ii) assures a tariff reduction; and (iii) creates a quotas system, which isby the allocation of portions of the power generated by the hydroelectric plants to each distribution concessionaire operating in the SIN.
The concessions for the Sobradinho and Itumbiara hydroelectric plants are an exception to Law No. 12,783 and were renewed pursuant to Law No. 13,182. Accordingly, these concessions are not subject to the quote allocation system through February 9, 2022, when these concessions will gradually transition to the quota-allocation system. For further information see “Risk Factors—The
renewal of our concessions pursuant to Law No. 12,783/2013 or Law No. 13,182/2015, adversely affected our financial condition and results of operations” and “Risk Factors—Any hydroelectric generation concessions renewed pursuant to Law No. 12,783 and Law No. 13,182/15 are subject to a quota allocation regime.”
(i) Conditions for the renewal of electric energy generation, distribution and transmission concessions
The granting authority may extend the maturing concessions of electric energy generation, distribution and transmission companies for a maximum period of 30 additional years, as long as the current concessionaires accept new specific conditions legally imposed in order to assure the continuity of the electric energy supply and the tariff-reduction.
The main terms and conditions for the renewal of concession imposed by Law No. 12,783 are:
· Hydroelectric generation: The renewal is subject to (i) a tariff determined by ANEEL, (ii) the commercialization in accordance with the quota allocation system and (iii) compliance with quality standards established by ANEEL;
· Self-Producer (Autoprodutor): For the renewal of the concession the Self-Producer will be deemed to provide additional payment for the use of the public assets which will be used by the Federal Government to reduce the energy tariff charged to consumers;
· Thermal Generation: The renewal must be requested by the concessionaire at least twenty four (24) months prior to expiration of the concession. If requested, the renewal will be granted for a maximum period of twenty (20) years;
· Power Transmission: The renewal of transmission concessions is subject to the reduction of the annual permitted revenue (Receita Anual Permitida or RAP, which is the annual value received by the concessionaire for rendering public transmission services) calculated by ANEEL as well compliance with quality standards established by ANEEL.
· Power Distribution: The renewal is subject to specific conditions set forth in Decree No. 8,461 that regulates the criteria for the renewal of distribution concessions pursuant to Law No. 12,783. The renewal of distribution concessions pursuant to Decree No. 8,461 requires that concession holders meet certain criteria for: (i) the quality of the distribution services provided, and (ii) the compliance with certain financial ratios. The concessions that are not renewed in accordance with the terms and conditions established by Law No. 12,783 will revert to ANEEL at the maturity of the existing concession. Any concessions reverted to ANEEL will be subject to a new bidding procedure conducted by ANEEL pursuant to Law No. 8,666/1993. As a result of the bidding procedure, the generation, transmission or distribution assets will be granted to a concessionaire for a maximum period of 30 years. The concession holder will remain responsible for rendering public services, under the terms and conditions set forth in Law No. 12,783, until the new concession holder takes over the relevant distribution assets. In December 2015, CELG-D renewed its distribution concession for a further 30 years and on Februaray, 2017 we signed the sale agreement of CELG-D with Enel Brasil S.A. On July 22, 2016, our shareholders decided not to renew some of our distribution concessions in the Brazilian North and Northeast regions, namely those concessions held by: CEPISA; CEAL; Eletroacre; CERON; Boa Vista Energia; and Amazonas D. As a result of our decision to not renew such concessions, they shall be rebidded in the near future. According to the new rules established by the Provisional Measure No. 735, for the bid of the concessions under its direct or indirect control, the Federal Government is also authorized to transfer the control of the companies. In addition to that, for these specific concessions, the Granting Authority is also authorized, as its own discretion and within the first 5 (five) years of the concession agreement, to defer the obligations undertaken by the new services provider upon the execution of an amendment to the agreement.
If a concession is renewed, the concessionaire will be entitled to a payment corresponding to the amount of investment made by the concessionaire for non-amortized reversible assets. These assets will be valued according to the methodology provided by ANEEL called the new replacement value (valor novo de reposição). Pursuant to this methodology, the value of an asset is calculated as if it were being acquired on the date of the calculation of the new replacement value. In general terms, the accumulated depreciation and amortization of an asset are considered as of the start of operations of the assets through December 31, 2012.
ANEEL and MME are responsible for determining the value of the non-amortized investments within these energy concessions to be renewed. As of December 31, 2015, we have received the full amount for the first tranche of indemnification payments made pursuant to Law No. 12,783. This amounted to R$14.4 billion, using values of December 2012.
Indemnification payments claimed for generation assets in accordance with Normative Resolution ANEEL 596/2013:
|
| Amount |
| Amount |
| Amount |
|
|
| (millions of reais) |
| ||||
Eletronorte |
| — |
| — |
| — |
|
Chesf |
| 487 |
| 4,802 |
| — |
|
Furnas |
| 995 |
| 1,311 |
| — |
|
Eletrosul |
| — |
| — |
| — |
|
Total |
| 1,482 |
| 6,113 |
| — |
|
The table below shows amounts requested to ANEEL for the second tranche of indemnification payments made pursuant to Law No. 12,783, which totaled R$36.6 billion as of December 31, 2016. It also shows the compensation payments claimed for transmission assets, related to the Electricity Transmission Assets (RBSE), held on May 31, 2000, and other Transmission Facilities—RPC, not depreciated and not amortized, as per the second paragraph of Article 15 of Law No. 12,783, which totaled R$36.6 billion as of December 31, 2016.
|
| Amount |
| Amount |
| Amount |
| VNR Update — IPCA |
|
|
| (millions of reais) |
| ||||||
Eletronorte |
| 2,926 |
| 2,579 |
| 1,733 |
| 3,596 |
|
Chesf |
| 5,627 |
| 5,092 |
| 1,187 |
| 9,378 |
|
Furnas |
| 10,699 |
| 9,000 |
| 4,530 |
| 14,031 |
|
Eletrosul |
| 1,061 |
| 1,007 |
| 520 |
| 1,596 |
|
Total |
| 20,313 |
| 17,678 |
| 7,970 |
| 28,601 |
|
On April 20, 2016, the MME published Ordinance No. 120, which regulates the conditions for receiving the credits related to the Electricity Transmission Assets (RBSE), held on May 31, 2000, and other Transmission Facilities - RPC, not depreciated and not amortized, as per the second paragraph of Article 15 of Law No. 12,783. According to MME Ordinance No. 120/2016, the remuneration of these assets will be as follows:
i. By the cost of capital corresponding to the assets, consisting of remuneration and depreciation, increased by taxes due under the 2017 tariff process. The remuneration will be the result of the Weighted Average Capital Cost and depreciation, which will be paid according to the useful life of each asset incorporated into the Regulatory Remuneration Basis;
ii. The capital cost not incorporated, from the extension of the concessions to the tariff process, will be adjusted for inflation and remunerated by the capital cost;
iii. As of the 2017 tariff process, the cost of capital will be remunerated by the Weighted Average Capital Cost for a period of eight years.
Accordingly, on December 31, 2016, we estimated the adjusted value of those credits, considering the conditions of the MME Ordinance No. 120/2016 and recorded such estimates in our accounting records in 2016. On December 31, 2016, we accounted for R$36.6 billion to be received in relation to the RBSE assets. Regarding the compensation for the generation segment, ANEEL and MME have not yet approved the final figures and payment conditions.
(ii) Tariff-reduction
According to Law No. 12,783, the tariff reduction will be the result of: (i) the reduction of the sector charges, such as the CCC Account, the CDE Account and the RGR Fund; (ii) the new calculation of tariffs and RAPs of the renewed concessions as mentioned above; and (iii) investments provided by the Federal Government.
(iii) Quota Allocation System
Law No. 12,783 also creates a mechanism for the allocation of the power generated by the hydroelectric plants connected to the SIN, whose concessions were renewed under this new regulatory framework, to the Regulated Market. The installed generation capacity of such plants is divided in equal quotas that are allocated to distribution companies, pursuant to regulations enacted by ANEEL. The purpose of the quotas allocation system is to increase the amount of energy available to the distribution concessionaires and reduce the tariff charged to the final consumer. The quotas and the portion of energy allocated to the distribution concessionaires will be reviewed from time to time by ANEEL.
Administrative Intervention in Concessions
In August 2012 the Brazilian Government enacted Law No. 12,767/2012 in order to regulate ANEEL’s intervention in the concessionaires to ensure the quality of the services provided by concessionaires and the performance of legal, regulatory and contract obligations.
In addition, Law No. 12,767/2012 regulates the termination of the concession in case of liquidation or bankruptcy of the concessionaire or forfeiture of the concession. Furthermore, this law sets forth an administrative proceeding which is required for the termination of the concession.
As for corporate reorganization procedures (recuperação judicial ou extrajudicial) involving energy concessionaires, Law No. 12,767/2012 changed the regulatory framework as it forbids energy concessionaires to initiate judicial or extrajudicial procedures. See “Item 3.D, Risk Factors — Risks Relating to the Brazilian Power Industry” for more details.
Power Contracting Deficit of Distribution Companies
At the beginning of 2014, due to adverse hydrological conditions, electricity distribution companies faced a contractual deficit in connection with their consumers’ demand for nearly 3,500 MW. Accordingly, energy distribution companies had to purchase electricity from thermoelectric plants to secure the supply of Brazilian’s national electricity demand. Such electricity was acquired at high rates.
The Federal Government announced on March 13, 2014 certain measures to assist distribution companies to face these unexpected higher costs and expenses during the period between February to December 2014, namely: (i) an electricity commercialization auction held by ANEEL and MME on April 2014, to off-set the power contracting deficit of power distribution companies; and (ii) a financial contribution by the National Treasury of R$11.2 billion, through the CDE account.
The Federal Government also allowed CCEE to enter into financial transactions in the amount of up to R$17.8 billion to assist distribution companies. Accordingly, the Federal Government issued Decree No, 8,221, dated April 1, 2014, creating the Regulated Market Account (Conta no Ambiente de Contratação Regulada or CONTA-ACR) which will receive the funding required for hiring and payment of financial obligations. With the purpose to make payments related to the financing contracted by CCEE, distribution companies shall, after the 2015 tariff review cycle, transfer specific amounts defined by ANEEL to CDE.
The first loan, for R$11.2 billion was disbursed in April, 2014 and the second loan, for R$6.6 billion, was disbursed in August 2014. Of this amount, R$537.6 million were allocated to the following distribution subsidiaries: CEAL (R$302.7 million), CEPISA (R$141 million), Amazonas Energia (R$27.2 million), CERON (R$11.3 million) and Eletroacre (R$55.4 million).
In May 2013, ANEEL created a multi-tariff system, which adjusts the tariffs to reflect the cost of generating power. This system was in tests until the end of 2014 and became fully effective as of January 2015. The main purpose of the multi-tariff system is to present to consumers in a transparent way the cost of producing energy.
Principal Authorities
Ministry of Mines and Energy
MME is the Brazilian Government’s primary regulator of the power industry acting as the granting authority on behalf of the Brazilian Government, and empowered with policy-making, regulatory and supervising capacities. The Brazilian Government, acting primarily through MME, will undertake certain duties that were previously under the responsibility of ANEEL, including drafting guidelines governing the granting of concessions and the issuance of directives governing the bidding process for concessions relating to public services and public assets.
ANEEL
The Brazilian power industry is regulated by ANEEL, an independent federal regulatory agency. ANEEL’s primary responsibility is to regulate and supervise the power industry in line with the policy dictated by MME and to respond to matters which are delegated to it by the Brazilian Government and by MME. ANEEL’s current responsibilities include, among others: (i) administering concessions for electricity generation, transmission and distribution activities, including the approval of electricity tariffs; (ii) enacting regulations for the electricity industry; (iii) implementing and regulating the exploitation of energy sources, including the use of hydroelectric energy; (iv) promoting the public bidding process for new concessions; (v) settling administrative disputes among electricity generation entities and electricity purchasers; and (vi) defining the criteria and methodology for the determination of transmission tariffs.
National Energy Policy Council
On August 6, 1997, pursuant to Article 2 of Law No. 9,478, CNPE was created to advise the Brazilian president with respect to the development and creation of national energy policy. The CNPE is presided over by the Minister of Mines and Energy, and the majority of its members are ministers of the Brazilian Government. The CNPE was created to optimize the use of Brazil’s energy resources, to assure the supply of electricity to the country and to periodically review the use of regular and alternative energy to determine whether the nation is properly using a variety of sources of energy and is not heavily dependent on a particular source.
National Electricity System Operator
The ONS was created in 1998 by Law No. 9,648 dated May 27, 1998. The ONS is a non-profit private entity comprised of concessionaires, other legal entities holding permissions or authorizations in the electrical energy market, and consumers connected to SIN. The Electricity Regulatory Law granted the Brazilian Government the power to nominate three executive officers to ONS’s board of executive officers. The primary role of the ONS is to coordinate and control the generation and transmission operations in the Interconnected Power System, subject to ANEEL’s regulation and supervision. The objectives and principal responsibilities of the ONS include: operational planning for the generation industry, organizing the use of the domestic Interconnected Power System and international interconnections, guaranteeing that all parties in the industry have access to the transmission network in a non-discriminatory manner, assisting in the expansion of the energy system, proposing plans to MME for extensions of the Basic Network (which proposals must be taken into account in planning expansion of the transmission system) and submitting rules for the operation of the transmission system for ANEEL’s approval. Generators must declare their availability to ONS, which then attempts to establish an optimal electricity dispatch program.
Energy Trading Chamber
On August 12, 2004, the Brazilian Government enacted a decree setting forth the regulations applicable to CCEE. On November 10, 2004 the CCEE succeeded the Wholesale Energy Market — MAE, the market in which all large electricity generation companies, energy traders and importers and exporters of electricity had participated and on which the spot price of electricity was determined. CCEE assumed all of the assets and operations of the Wholesale Energy Market (which had previously been regulated by ANEEL).
One of the principal roles of CCEE is to conduct public auctions on the Regulated Market, see “— The Electricity Regulatory Law; the Free Market and the Regulated Market — The Regulated Market.” In addition, the CCEE is responsible, among other things, for: (i) registering all the energy purchased through CCEARs, and the agreements resulting from market adjustments and the volume of electricity contracted in the Free Market, see “— The Electricity Regulatory Law; the Free Market and the Regulated Market — The Free Market;” and (ii) accounting and clearing of short-term transactions.
CCEE’s members include generation, distribution and trading companies, as well as free consumers. Its board of directors is composed of four directors appointed by its members and one director, who serves as chairman of the board of directors, appointed by the MME.
MME determines the maximum price of the energy sold in the regulated market through auctions, as specified under Decree No. 5,163 of 2004.
Energy Research Company
On August 16, 2004 the Brazilian Government enacted a decree creating EPE, a state-owned company which is responsible for conducting strategic research on the energy industry, including with respect to electrical energy, oil, gas, coal and renewable energy sources. The research carried out by EPE is subsidized by the MME as part of its policymaking role in the energy industry.
Furthermore, EPE is the entity in charge of the technical qualification of the projects participating in the bids promoted by ANEEL for sale of energy.
Energy Industry Monitoring Committee
The Electricity Regulatory Law authorized the creation, under Federal Decree No. 5,175 of August 9, 2004, of the Comitê de Monitoramento do Setor Elétrico (Energy Industry Monitoring Committee or CMSE), which acts under the direction of MME. The CMSE is responsible for monitoring the supply conditions of the system and for proposing preventive action (including demand-related action and contracting for a supply-side reserve) to restore service conditions where applicable.
Electric Power Transmission in Brazil
Transportation of large volumes of electricity over long distances is made by way of a grid of transmissions lines and substations with high voltages (from 230 kV to 750 kV), known as the Basic Network. Any electric power market agent that produces or consumes power is entitled to use the Basic Network.
Transmission lines in Brazil are usually very long, since most hydroelectric plants are usually located away from the large centers of power consumption. Today, the country’s system is almost entirely interconnected. Only the State of Roraima and parts of the states of Pará, Amazonas, Amapá and Rondônia are still not connected to the Interconnected Power System. In these states, supply is made by small thermal plants or hydroelectric plants located close to their respective capital cities.
The Interconnected Power System provides for the exchange of power among the different regions when a region faces problems generating hydroelectric power due to a drop in their reservoir levels. As the rainy seasons are different in the south, southeast, north and northeast of Brazil, the higher voltage transmission lines (500 kV or 750 kV) make it possible for locations with insufficient power output to be supplied by generating centers that are in a more favorable location.
The operation and management of the Basic Network is the responsibility of ONS, which is also responsible for managing power dispatching from plants on optimized conditions, involving use of the Interconnected Power System hydroelectric reservoirs and fuel thermal plants.
Our transmission system, which consists of a set of transmission lines interconnected to substations, is comprised of approximately 60,997 kilometers of transmission lines, corresponding to approximately 47% of the total lines in Brazil with a voltage higher or equal to 230 KV.
Besides operating and maintaining this system in accordance with the standards of performance and quality required by ANEEL, we have actively participated in the expansion of transmission lines through concessions in auctions conducted by ANEEL, alone or through consortiums, as well as through permits for reinforcements of the current system.
The major transmission projects under development are: (i) TL 525 kVGuaiba 3 — Capivari do Sul; (ii) TL 230 kV Camaçari IV — Pirajá Pituaçu — Pirajá; (iii) TL 800 kV Xingu — Estreito; (iv) ; (iv) LT 230 kV Eunapólis — Teixeira de Freitas II C2 (BA); (v) Interligação Manaus — Boa Vista (AM/RR); (vi) Interligação Brasil — Uruguai (RS); and (vii) LT 500 kV Bom Despacho 3 — Ouro Preto 2 (MG).
· Brazil has a total of six medium and large interconnections with other countries in South America, four of them operated by us, as set forth below:
· with Paraguay, through four 500 kV transmission lines connecting Usina de Itaipu to Margem Direita (Paraguay) substation and the Foz do Iguaçu in Brazil substation. Itaipu’s 50 Hz energy sector is then transported to the Ibiúna substation in São Paulo through a direct current transmission system with a capacity of 6,300 MW;
· with Uruguay, through Rivera’s frequency converter station in Uruguay, with a capacity of 70 MW and a 230 kV transmission line connecting it to the Livramento substation in Brazil;
· with Argentina, through Uruguaiana’s frequency converter station in Brazil, with a capacity of 50 MW and a 132 kV transmission line connecting it to Paso de los Libres in Argentina; and
· with Venezuela, through a 230 kV transmission line with a capacity of 200 MW, which connects the city of Boa Vista, in the State of Roraima, to the city of Santa Elena in Venezuela.
In the transitional environment (2002-2005), there was a gradual decline in the amounts of power contracted under Initial Supply Contracts, the generating companies paid for the use of the transmission line grid, whereas distributors were required to pay two types of transmission tariffs: (i) nodal tariffs, associated with each connection point from where these distributors demand voltage; and
(ii) the transmission tariff, associated with the Initial Supply Contracts, which was applied to part of the demand contracted in that environment. Once the amounts under the Initial Supply Contracts dropped to zero, the power generating, distributing and selling companies and free consumers had free access agreements governing their use of transmission lines on equivalent terms with those of agents that entered the market after free access became compulsory. In this free market environment, transmission tariffs are determined based on the effective use that each party that accesses the Basic Network makes of it.
The Electricity Regulatory Law; the Free Market and the Regulated Market
The Electricity Regulatory Law introduced material changes to the regulation of the power industry with a view to: (i) remedying the deficiencies in the Brazilian electric system and (ii) creating incentives to ensure growth in the electrical energy sector to support Brazilian economic and social development. Through this law, legislators attempted to protect the distribution concessionaires’ captive consumers and to make low cost electrical energy continuity, which has a minimal environmental impact, available. The key features of the Electricity Regulatory Law included:
· Creation of: (i) the Regulated Market, in which the purchase and sale of electrical energy must follow rules imposed by ANEEL and must occur through CCEE; and (ii) a market specifically addressed to certain participants (e.g., free consumers and commercialization companies), that will permit a certain degree of competition with respect to the Regulated Market, called the Free Market, in which parties are free to negotiate the terms and conditions of their purchase and sale agreements;
· Restrictions on certain activities of distributors, so as to ensure that they focus only on their core business to guarantee more efficient and reliable services to captive consumers;
· Elimination of self-dealing, to provide an incentive to distributors to purchase electricity at the lowest available prices rather than buying electricity from related parties; and
· Respect for contracts executed prior to the Electricity Regulatory Law, in order to provide stability to transactions carried out before its enactment.
The Electricity Regulatory Law also excludes us and our subsidiaries Furnas, Chesf, Eletronorte, Eletrosul, Electronuclear, and CGTEE from the National Privatization Program, which is a program created by the Brazilian Government in 1990 with a view to promote the privatization process of state-owned companies. All Distribution companies of Eletrobras are included in the Investments Partnership Program of the Presidency of the Republic (Programa de Parceria de Investimentos da Presidência da República — PPI).
Challenges to the Constitutionality of the Electricity Regulatory Law
Some aspects of the Provisional Measure No. 144, as of December 10 2003, which originated the Electricity Regulatory Law, are being challenged in the Brazilian Supreme Court in Lawsuits No. 3090 and 3100. The provisional requests of both lawsuits were denied by the Brazilian Supreme Court in a decision published on October 26, 2007. A final decision on this matter is subject to majority vote of the 11 judges, provided that a quorum of at least eight justices must be present. To date, the Brazilian Supreme Court has not reached a final decision and we do not know when such a decision may be reached. The Brazilian Supreme Court ruled by six votes to four to deny the provisional measure requested to suspend the effects of the Electricity Regulatory Law until the final decision on the case has been made; however, a final decision remains pending. Therefore, the Electricity Regulatory Law is in force as of March 15, 2004 to present date. Regardless of the Supreme Court’s final decision, certain portions of the Electricity Regulatory Law relating to restrictions on distribution companies performing activities unrelated to the distribution of electricity, including sales of energy by distribution companies to free consumers and the elimination of self-dealing are expected to remain in full force and effect.
In the event all or a relevant portion of the Electricity Regulatory Law is determined unconstitutional by the Brazilian Supreme Court, the regulatory scheme introduced by the Electricity Regulatory Law may lose its effectiveness, generating uncertainty as to how the Brazilian Government will define the rules for the electrical energy sector. Considering that we have already purchased virtually all of our electricity needs through our subsidiaries both in the ACR and ACL and that the pass through to tariffs of such electricity is expected to continue to be regulated by the regime predating the Electricity Regulatory Law, irrespective of the outcome of the Supreme Court’s decision, we believe that in the short term, the effects of any such decision on our activities should be relatively limited. The exact effect of an unfavorable outcome of the legal proceedings on us and the electricity industry as a whole is difficult to predict, but it could have an adverse impact on our business and results of operations even in the short term (see “Risk Factors — Risks Relating to the Brazilian Power Industry”).
Also, the Electricity Regulatory Law and the electricity regulatory framework as a whole have been recently changed in some important aspects by the enactment of Law No. 13,299/16 and the Provisional Measure No. 735/16. Especially for the distribution sector, such acts are of major relevance as they give special treatment to the distribution concessions located in the regions not integrated to the National Interconnected Grid — SIN yet. Such measures aimed to create a new regulatory framework capable to
provide more sustainable financial conditions to such concessions to meet their outstanding duties with their fuel suppliers and, therefore, create a more favorable environment to potential investors in the midst on the National Privatization Program — PND.
Nonetheless, as such acts provide for some kind of special treatment to part of the distribution companies and also authorize the utilization of the CDE funds to cover the fuel debts of the concessionaires, we cannot guarantee that they would not have their legality/constitutionality challenged by other agents of the industry who might be adversely impacted, including the consumers and other concessionaires which will not benefit from the legal measures.
Markets for the Trading of Electricity
Under the Electricity Regulatory Law, electricity purchase and sale transactions may be carried out in two different market segments: (i) the Regulated Market, which contemplates the purchase by distribution companies through public bids of all electricity necessary to supply their captive consumers; and (ii) the Free Market, which encompasses purchase of electricity by non-regulated entities (such as free consumers and energy traders).
Nevertheless, electricity generated by plants qualified under the Proinfa, nuclear power plants and Itaipu are governed by a special regime for commercialization and, therefore, are not subject to either the Regulated or the Free Market. The electricity generated by Itaipu, the most relevant among energy sources governed by a separate regime including Decree 4,550 of December 27, 2002, is sold to us and sold to distribution concessionaires in the south and center-south-eastern power markets in proportion to their market share in those markets. The rates at which Itaipu-generated electricity is traded are denominated in U.S. dollars and established pursuant to a treaty between Brazil and Paraguay. As a consequence, Itaipu rates rise or fall in accordance with the variation of the U.S. dollar/real exchange rate. Changes in the price of Itaipu-generated electricity are, however, subject to full pass-through to distribution tariffs.
The Regulated Market
Distribution companies must meet market demand by supplying electricity primarily purchased in public auctions in the Regulated Market. Distribution companies, however, may purchase electricity from: (i) generation companies that are connected directly to such distribution company, except for hydro generation companies with capacity higher than 30 MW and certain thermo generation companies; (ii) electricity generation projects participating in the initial phase of the Proinfa; and certain power distribution companies in the south and center-south-eastern power markets, and (iii) the Itaipu hydroelectric plant.
Electricity public auctions for new generation projects are held: (i) five years before the initial delivery date (referred to as “A-5” auctions); and (ii) three years before the estimated initial delivery date (referred to as “A-3” auctions). Electricity auctions from existing power generation facilities are held (i) one year before the estimated initial delivery date (referred to as “A-1” auctions) and/or (ii) the same year of the estimated initial delivery date (referred to as “A” auctions). Additionally, the Brazilian Government, directly or indirectly through ANEEL, carries out public auctions for the sale of electrical energy to energy distributors to allow distributors to adjust their volume of electrical energy as necessary to meet their customers’ demands, or Market Adjustments.
The public auctions are prepared by ANEEL in compliance with guidelines established by MME, including the requirement to use the lowest bid as the criteria to determine the winner of the auction.
Each generation company that participates in the auction must execute a contract for purchase and sale of electricity with each distribution company in proportion to the distribution companies’ respective estimated demand for electricity. The CCEARs for both “A-5” and “A-3” auctions have a term of between 15 and 30 years, and the CCEARs for “A-1” auctions have a term between three and 15 years. The CCEARs for “A” auctions have a term between one to 15 years. The CCEARS for alternative energy sources are between 10 and 30 years. The only exception to these rules relates to the market adjustment auction, in which the generation and the distribution companies will enter into two-year bilateral agreements that must be registered with ANEEL and CCEE.
The regulations also establish a pass-through tariff mechanism called Annual Reference Value, which limits the amounts of electric energy acquisition costs that can be passed through to final consumers. The Annual Reference Value corresponds to the weighted average of the electricity prices in the “A-5” and “A-3” auctions, calculated for all distribution companies.
The Annual Reference Value creates an incentive for distribution companies to contract for their expected electricity demand in the “A-5” auctions, where the prices are expected to be lower than in “A-3” auctions. ANEEL allows companies to pass on their electrical energy acquisition costs to final consumers pursuant to the following criteria: (i) in the A-5 auctions, companies are permitted to pass on all costs to consumers, subject to the limitations referred to below; (ii) in the A-3 auctions companies are permitted to: (a) pass all acquisition costs for energy acquired in A-5 auctions up to 2% of the difference between the energy acquired in A-3 auctions during the year and the distributor’s energy requirements; and (b) pass on whichever of the following is less — the A-5 auctions and in the A-3 auctions; (iii) in the A-1 auctions, companies are permitted to pass on all costs to consumer; (iv) in the Market Adjustments auctions
and in the acquisitions of energy directly from a generation plant connected to the distributors’ electric system (except as set forth in law), companies are permitted to pass on all costs up to the Annual Reference Value to consumer; and (v) in the alternative energy source auctions and others determined by the Brazilian government, companies are permitted to pass on all costs to consumer.
ANEEL maintains the economic value of the Annual Reference Value by adjusting the Annual Reference Value pursuant to the monetary adjustment index agreed upon in the CCEARs.
The Electricity Regulatory Law establishes the following limitations on the ability of distribution companies to pass through costs to consumers:
· No pass-through of costs for electricity purchases that exceed 103.0% of actual demand;
· The pass-through of electricity acquisition costs from new electricity generation projects equal to the difference between the minimum purchase threshold (96% of repossessed energy contracted pursuant to the Electricity Regulatory Law) and the energy purchased in the A-1 auctions will be limited to the weighted average amount (in reais/MWh) of the acquisition prices in the A-1 auctions, except that this limit is applicable solely: (i) in the first three years following A-1 auctions in which the minimum purchase threshold was not reached; (ii) to the CCEARs relating to portion of energy acquired in A-3 and A-5 auctions with the highest price;
· MME will establish the maximum acquisition price for electricity generated by existing projects; and
· If distribution companies do not comply with the obligation to fully contract their demand, the pass-through of the costs from energy acquired in the CCEE short-term market will be the lower of the Price of Liquidation of Differences (PLD) and the Annual Reference Value.
Auctions in the Regulated Market, subject to the conditions set forth in the respective requests for proposals, may originate two types of CCEARs: (i) Contratos de Quantidade de Energia (Energy Agreements); and (ii) Contratos de Disponibilidade de Energia (Capacity Agreements).
Under an Energy Agreement, a generator commits to supply a certain amount of electricity and assumes the risk that the electricity supply could be adversely affected by hydrological conditions and low reservoir levels, among other conditions, that could interrupt the supply of electricity, in which case the generator will be required to purchase the electricity elsewhere in order to comply with its supply commitments. Under a Capacity Agreement, a generator commits to make a specified amount of capacity available to the Regulated Market. In this case, the revenue of the generator is guaranteed and the distribution companies face the risk of a supply shortage. However, the increased prices of electricity due to a supply shortage are passed on by the distribution companies to consumers.
The Electricity Regulatory Law sets forth that all electricity generation, distribution and trading companies, independent power producers and free consumers must inform MME, by the first of August of each year, of their estimated electricity demand or estimated electricity generation, as the case may be, for each of the subsequent five years. To encourage power distribution companies to make accurate estimates and to enter into power purchase agreements accordingly, pass-through tariffs, as mentioned above, are permitted provided that the purchased power stays within 103.0% of the distribution company’s actual power demand. Surpluses and shortages of power distribution companies concerning power acquisitions in the Regulated Market may be offset against each other by means of an offsetting mechanism managed by CCEE. According to the Electricity Regulatory Law, electricity distribution entities are entitled to pass on to their customers the costs related to electricity purchased through public auctions as well as any taxes and industry charges related to public bids, subject to certain limitations related to the inability of distribution companies to accurately forecast demand.
In this context, it is important to mention that 2015 was marked by a substantial augmentation in the tariffs, leading to a drop in the energy consumption and to the migration of potentially free consumers to the Free Market (ACL). Fearing that this scenario would get worse, ANEEL approved Normative Resolution No. 711/2016 (Resolução Normativa nº 711/2016) dated as of April 19, 2016, aiming the development of mechanisms that would adequate the levels of contracting of energy by distributors. The Resolution establishes criteria and conditions of possible bilateral agreements between signatory parties of CCEARs. The bilateral agreement may involve the following formats: (i) entire or partial temporary reduction of the contracted energy; (ii) partial permanent reduction of the contracted energy or; (iii) contract termination. Overall, the Normative Resolution nº 711/2016 brings an important regulatory alteration by eliminating both the postponement of the start of the supply period and the transferring of the contractual position to another distributor.
Electrical Energy Trading Convention
ANEEL Resolutions No. 109, of October 26, 2004, No. 210, of February 24, 2006 and No. 637, of December 5, 2014, are the most relevant regulation that govern the Convenção de Comercialização de Energia Elétrica (the Electrical Energy Trading Convention) which regulates the organization and functioning of CCEE and the electrical energy trading conditions and defines, among others: (i) the rights and obligations of CCEE agents; (ii) the penalties to be imposed on defaulting agents; (iii) the means of dispute resolution; (iv) trading rules in the Regulated and Free Markets; and (v) the accounting and clearing process for short-term transactions.
CCEE is a non-profit organization whose members are all agents of the Brazilian power sector (certain agents are not mandatory members of CCEE and may be represented by other members). CCEE is responsible for (i) registering the conditions concerning power amounts and terms set forth in all power purchase agreements, whether entered into in the Regulated Market or the Free Market; and (ii) the accounting and liquidation of the power market, including the power surpluses and shortages spot market, among other attributions. CCEE is governed by a board of directors comprised of five members, four being nominated by the referred agents while its president is nominated by MME.
The Free Market
The Free Market covers freely negotiated electricity sales between generation concessionaires, Independent Power Producers, self-generators, energy traders, importers of energy and free consumers. The Free Market also includes bilateral contracts between generators and distribution companies executed before the enactment of the Electricity Regulatory Law, until they expire. Upon expiration, new contracts must be entered into in accordance with the Electricity Regulatory Law guidelines.
Such an extended period of notice seeks to assure that, if necessary, the construction of cost-efficient new generation could be finalized in order to supply the re-entry of free consumers into the Regulated Market. State-owned generators may sell electricity to free consumers, but as opposed to private generators, they are obligated to do so through a public process that guarantees transparency and equal access for all interested parties.
Free Consumers
According to the Electricity Regulatory Law, a free consumer may elect to: (i) continue to procure power from a local distribution company; (ii) buy power directly from an independent producer or from self-producers with surplus power; (iii) buy power from a power trade agent; or (iv) purchase energy from other free consumers by mans of assignment.
The Electricity Regulatory Law does not permit distribution concessionaires to sell power to free consumers directly (except under certain regulatory conditions).
The Electricity Regulatory Law further establishes that the option to become a free consumer is subject to the prior expiration or termination of its power purchase agreement with the power distribution company. In the event that the power purchase agreement has an indefinite term, the migration to the Free Market is permitted only in the year following receipt of a migration notice by the power distribution company, provided that this notice is presented by July 15 of such year. Once a consumer has migrated to the Free Market, it may only return to the Regulated Market once it has given the relevant distribution company five years’ notice, although the distribution company may reduce that term at its discretion.
The Electricity Regulatory Law has, in principle, established some conditions and power and consumption thresholds that define which consumers could qualify as “free consumers.” These thresholds may be gradually reduced over the years by ANEEL so as to allow an increasing number of consumers to make this election, until such time as all consumers from all the different classes can choose which supplier they want to procure power from.
The law assures suppliers and their respective consumers free access to the grid subject to the payment of tariffs for the use of the electric power grids and connection costs. All regulatory charges to which captive consumers are subject are added to these tariffs in order to assure fair and equal treatment between captive and free consumers.
The regulations above are intended (i) to avoid arbitrage between captive and free markets by Free Consumers, prohibiting opportunistic migrations, as well as (ii) to protect power distribution companies by making the captive market more predictable. Further, ANEEL must regulate the migration to the Free Market without increasing captive market tariffs.
Restricted Activities of Distributors
Distribution companies are not permitted to, except as otherwise provided by Law 9,074/1995: (i) develop activities related to the generation or transmission of electricity; (ii) sell electricity to free consumers, except for those in their concession area and under the same conditions and tariffs maintained with respect to captive customers in the Regulated Market; (iii) hold, directly or indirectly, any interest in any other company, corporation or partnership; or (iv) develop commercial activities that are unrelated to their respective concessions, except for those permitted by law or in the relevant concession agreement. Generators are not allowed to hold equity interests in excess of 10.0% in distribution companies or to hold a controlling shareholding interest in distribution companies.
Elimination of Self-Dealing
Since the purchase of electricity for captive consumers will be performed through the Regulated Market, so-called self-dealing is no longer permitted, except in the context of agreements that were duly approved by ANEEL before the enactment of the Electricity Regulatory Law. Distribution companies may, however, enter into power purchase agreements with related parties, provided that such agreements are the result of power auctions conducted in the Regulated Market. Before the Electricity Regulatory Law, such companies were permitted to meet up to 30.0% of their electricity needs through electricity that was acquired from affiliated companies.
Ownership Limitations
In 2000, ANEEL established limits on the concentration of certain services and activities within the power industry. Under such limits, with the exception of companies participating in the National Privatization Program (which needed only to comply with such limits once their final corporate restructuring is accomplished) no power company (including both its controlling and controlled companies) could: (i) own more than 20.0% of Brazil’s installed capacity, 25.0% of the installed capacity of the southern/southeastern/mid-western region of Brazil or 35.0% of the installed capacity of the northern/northeastern region of Brazil, except if such percentage corresponded to the installed capacity of a single generation plant; (ii) own more than 20.0% of Brazil’s distribution market, 25.0% of the southern/southeastern/mid-western distribution market or 35.0% of the northern/northeastern distribution market, except in the event of an increase in the distribution of electricity exceeding the national or regional growth rates; or (iii) own more than 20.0% of Brazil’s trading market with final consumers, 20.0% of Brazil’s trading market with non-final consumers or 25.0% of the sum of the above percentages.
In accordance with paragraph one, Article 31 of the Electricity Regulatory Law, we and our subsidiaries Furnas, Chesf, Eletronorte, Eletrosul, Electronuclear, and CGTEE were excluded from the National Privatization Program. Accordingly, we were subject to the limits and conditions imposed on the participation of agents in the activities of the electricity sector, in accordance with ANEEL Resolution No. 278/2000, which is aimed at achieving effective competition between agents and preventing a concentration in the services and activities undertaken by agents within the electricity sector.
On November 10, 2009, ANEEL issued Resolution No. 378, which revoked and replaced Resolution No. 278/2000 and established that ANEEL, upon identifying an act that may result in unfair competition or in significant control of the generation, transmission and distribution markets, must notify the Secretary of Economic Law (Secretaria de Direito Econômico, or SDE) of the Ministry of Justice, pursuant to art. 54 of Law No. 8,884 of June 11, 1994. After notification, the SDE must inform the antitrust authority, the CADE. If necessary, the SDE will require ANEEL to analyze potential infractions under Resolution No. 378, while CADE must determine any applicable punishment, which may vary from pecuniary penalties to the dissolution of the company, pursuant to articles 23 and 24 of the abovementioned law.
Although the legislation currently in force does not provide for specific thresholds for the identification of market concentration, as we hold a participation in the Brazilian market equivalent to 31% of the total installed capacity of the country, our activities are under constant supervision by the regulators and we are requested, on a regular basis, to update our corporate chain and investments, as well as to detail our activities and influence in the Brazilian electricity market.
Tariffs for the Use of the Distribution and Transmission Systems
ANEEL oversees tariff regulations that govern access to the distribution and transmission systems and establish tariffs for the use of and access to said systems. The tariffs are: (i) network usage charges, which are charges for the use of the proprietary local grid of distribution companies (or TUSD); and (ii) a tariff for the use of the transmission system, which is the Basic Network and its ancillary facilities (or TUST). Additionally, distribution companies in the Southern/Southeastern Interconnected Power System pay specific charges for the transmission of electricity generated at Itaipu and for access to the transmission system.
TUSD
The TUSD is paid by generators, free consumers and special consumers for the use of the distribution system of the distribution company to which the relevant generator or free consumer is connected and are revised annually according to an inflation index. The amount to be paid is based on a formula set forth by ANEEL Resolution No. 657/2015 and may vary pursuant to a number of different factors, including, for instance, costs of the network, operating costs and energy losses, among others. Our distribution companies receive the TUSD paid by free consumers in their concession areas and by some other distribution companies which are connected to our distribution system.
TUST
The TUST is paid by distribution companies and uses, including generators, free consumers and special consumers, for the use of the Basic Network. The amount to be paid is based on a formula set by ANEEL Resolution No. 67/2004, as amended by ANEEL Resolution No. 442/2011, and it may vary pursuant to a number of different factors. According to criteria established by ANEEL, owners of the different parts of the transmission grid have transferred the coordination of their facilities to the ONS in return for receiving regulated payments from users of the transmission system. Network users, including generation companies, distribution companies and free consumers, have signed contracts with the ONS entitling them to use the transmission grid in return for the payment of published tariffs. Other parts of the grid that are owned by transmission companies but which are not considered part of the transmission grid are made available directly to the interested users who pay a specified fee to the relevant transmission company.
Contract for Access to the Intermediary Connection System — Access Charge
Some distribution companies, especially in the State of São Paulo, access the Basic Network through an intermediary connection system located between their respective distribution lines and the Basic Network. This connection is formalized by means of a Contract for the Access to the Intermediary Connection System entered into with transmission concessionaires that own such facilities. Compensation for the transmission companies is regulated by ANEEL and is defined in accordance with the cost of the assets used, whether they are their exclusive property or shared among the electricity industry agents. The correspondent compensation incidental to the use of the intermediary connection system is revised annually by ANEEL according to an inflation index and to the costs relating to the assets.
Itaipu Transportation Charge
The Itaipu plant has an exclusive transmission grid operated in alternating and continuous voltage, which is not considered to be part of the Basic Network or of the intermediary connection system. The use of such system is compensated by a specific charge, denominated the Itaipu transportation charge, paid by those companies entitled to quotas of the electricity from Itaipu, in proportion to their quotas.
Distribution Tariffs
Distribution tariff rates are subject to review by ANEEL, which has the authority to adjust and review tariffs in response to changes in electricity purchase costs and market conditions. When adjusting distribution tariffs ANEEL divides the costs of distribution companies between: (i) costs that are beyond the control of the distributor (or Parcel A costs); and (ii) costs that are under the control of distributors (or Parcel B costs). The readjustment of tariffs is based on a formula that takes into account the division of costs between the two categories.
Each distribution company’s concession agreement provides for an annual tariff adjustment (reajuste anual). In general, Parcel A costs are fully passed through to consumers. Parcel B costs, however, are adjusted for inflation in accordance with the IGP-M index.
Electricity distribution companies are also entitled to revisão periódica (revisions) every five years. These revisions are aimed at: (i) assuring that revenues are sufficient to cover Parcel B operating costs and that adequate compensation for essential investments for the services within the scope of each such company’s concession; and (ii) determining the “X factor,” which is an efficiency factor based on three components: (a) expected gains of productivity from increase in scale; (b) evaluations by consumers (verified by ANEEL); and (c) labor costs.
Accordingly, upon the completion of each periodic revision, application of the X factor requires distribution companies to share their productivity gains with final consumers.
The pass-through of electricity purchase costs under supply agreements negotiated before the enactment of the Electricity Regulatory Law is subject to a ceiling based on a value established by ANEEL for each different source of energy (such as hydroelectric,
thermoelectric and alternative sources of energy). This ceiling is adjusted annually in order to reflect increases in costs incurred by generators. That adjustment takes into account: (i) inflation; (ii) costs incurred in hard currency; and (iii) fuel related costs (such supply of natural gas). Costs incurred correspond to at least 25.0% of all costs incurred by generators.
In addition, concessionaires of electricity distribution are entitled to revisão extraordinária (extraordinary review) of tariffs, on a case by case basis, to ensure their financial equilibrium and compensate them for unpredictable costs, including taxes, that significantly change their cost structure.
In terms of commercial conditions, ANEEL Resolution No. 547, of April 16, 2013 provided for a new informative system for the consumers, with the inclusion of flags (green, yellow and red) in the consumers’ invoice which indicate whether the energy provider expects an increase or decrease in the energy price for the following month, according to the energy prices established by ANEEL for each subsystem. The additional revenue obtained by the concessionaire due to the use of this flag system will be considered in the readjustment and review procedures described above.
According to the MP 735, the 2016 tariff review shall reflect the incorporation of the losses of 2015. Then, from 2017 to 2025, it will be applied an annual reducer of 10% of these incorporated losses, regarding the 2015 tariff review established by ANEEL. The new rule allows the use of the resources obtained by the Executive Power in connection with the bid of the concessions (bônus de outorga) to cover the fuel expenses incurred, until April, 2016, by the utilities companies located in the Isolated System, which did not have access to the resourced of CDE due to the non-compliance with the efficiency goals
For the concessions which were not renewed, the rules of MME Ordinance No. 388, dated July 26, 2016 will apply until the concession is rebidded and a new controller undertakes the services under a new concession agreement which will set forth the tariff policies. In general terms Ordinance No. 388/2016 establishes the following regarding the costs split between Parcel A and Parcel B:
Parcel A includes:
(i) Energy sector charges;
(ii) Electricity purchased;
(iii) Connection and usage charges for the transmission and distribution systems; and
(iv) Non-recoverable revenues.
Parcel B costs, as usual, are determined by subtracting the entire Parcel A costs from the distribution company’s revenues.
Finally, ANEEL has recently launched a Public Hearing to discuss with the industry the necessary changes in the calculation methodology of the distribution tariffs applicable to the renewed concessions. Also, the proposed regulation could eventually be extended to the non-renewed concession agreements upon express adhesion. The idea is to ANEEL to calculate yearly the revenues that each concession will require to cover their costs and return on investments. We cannot predict in which terms the new regulation will be approved but we expect a more favorable treatment to the future revenues as ANEEL is willing to mitigate the effects of the non-manageable costs and market fluctuation on the tariffs of the distribution companies.
ANEEL enacted, on September 13, 2016, a Resolution to establish the conditions that will guarantee the continuity of the services rendered by the utilities companies located in the North and Northeast of Brazil in the context of the termination of such concessions. The services will be temporarily rendered by Distribuition Companies of Eletrobras and the established conditions include the normalization of the transference of sectorial funds, adjustment and review of the tariffs in order to guarantee tariff coverage, and access to loans from Reversion Global Fund (Reserva Global de Reversão). Although the resolution is already valid, it is currently under the procedure of public hearing (from September 15 to October 15), which may introduce some changes to the original text, according to ANEEL’s discretion.
Incentive Programs for Alternative Sources of Electricity
Thermoelectric Priority Program
In 2000, a federal decree created the Programa Prioritário de Termeletricidade (the Thermoelectric Priority Program or PPT), for purposes of diversifying the Brazilian energy matrix and decreasing its strong dependency on hydroelectric plants. The benefits granted to thermoelectric plants under the PPT include: (i) guaranteed gas supply for 20 years; (ii) assurance that costs related to the acquisition of the electricity produced by thermoelectric plants will be transferred to tariffs up to a normative value determined by ANEEL; and (iii) guaranteed access to a BNDES special financing program for the power industry.
Proinfa
In 2002, the Proinfa program was established by the Brazilian Government to create certain incentives for the development of alternative sources of energy, such as wind energy projects, Small Hydroelectric Power Plants and biomass projects. As with some other social programs, we are involved in the administration of the Proinfa program.
Under the Proinfa program, we purchase electricity generated by these alternative sources for a period of up to 20 years and transfer it to free consumers and certain electricity distribution companies (which are responsible for including the costs of the program in the tariffs for all final consumers in their respective concession area, except for low-income consumers). In its initial phase, the Proinfa program is limited to a total contracted capacity of 3,300 MW (1,100 MW for each of the three alternative energy sources).
In its second phase, which should start after the 3,300 MW limit is reached, the Proinfa program is intended, in a period of up to 20 years, to have contracted capacity equivalent to 10.0% of the annual domestic consumption of electricity. Upon the success of electricity auctions promoted by the Federal Governmental, the second phase of Proinfa has not yet been launched.
Research and Development — R & D
Concessionaires and companies authorized to engage in public power distribution, generation and transmission businesses are required to invest annually at least 1.0% of their net operating income in electric power research and development. Companies that only generate power from wind, biomass and Small Hydroelectric Power Plants are not subject to this requirement.
Regulatory Charges
Global Reversion Reserve Fund
In certain circumstances, power companies are compensated for assets used in connection with a concession if the concession is eventually revoked or is not renewed. In 1971, the Brazilian Congress created a Reserva Global de Reversão (a Global Reversion Reserve Fund or RGR Fund) designed to provide funds for such compensation. In February 1999, ANEEL revised the assessment of a fee requiring all distributors and certain generators operating under public service regimes to make monthly contributions to the RGR Fund at an annual rate equal to 2.5% of the company’s fixed assets in service, but not to exceed 3.0% of total operating revenues in any year. In recent years, no concessions have been revoked or have failed to be renewed, and in recent years the RGR Fund has been used principally to finance generation and distribution projects. With the introduction of MP No. 517/2010, the RGR Fund is scheduled to be phased out by 2035, and ANEEL is required to revise the tariff so that the consumer will receive some benefit from the termination of the RGR Fund. In accordance with Law No. 12,783, distribution concessions, transmission concessions granted after September 12, 2012 and all renewed generation and transmission concessions are no longer required to pay RGR charges as of January 1, 2013. Following the enactment of Law No. 12,783, funds from the CDE Account are now the main funds of the CCC Account.
Public Use Fund
The Brazilian Government has imposed a fee on Independent Power Producers reliant on hydrological resources, except for Small Hydroelectric Power Plants, similar to the fee levied on public industry companies in connection with the RGR Fund. Independent Power Producers are required to make contributions to the Fundo de Uso de Bem Público (the Public Use Fund or UBP Fund) according to the rules of the corresponding public bidding process for the granting of concessions. We received the UBP Fund payments until December 31, 2002. All payments to the UBP Fund since December 31, 2002 are paid directly to the Brazilian Government.
Fuel Consumption Account
Distribution companies, and generation companies that sell directly to final consumers, must contribute to the Conta de Consumo de Combustível (the Fuel Consumption Account or CCC Account). The CCC Account was created in 1973 to generate financial reserves to cover elevated costs associated with the increased use of thermoelectric energy plants, in the event of a rainfall shortage, given the higher marginal operating costs of thermoelectric energy plants compared to hydroelectric energy plants. In February, 1998, the Brazilian Government provided for the phasing out of the CCC Account. Subsidies from the CCC Account have been phased out over a three-year period beginning in 2003 for thermoelectric energy plants constructed prior to February 1998 and belonging to the Interconnected Power System. Thermoelectric plants constructed after that date will not be entitled to subsidies from the CCC Account. In April 2002, the Brazilian Government established that subsidies from the CCC Account would continue to be paid to those thermoelectric plants located in isolated regions for a period of 20 years in order to promote generation of electricity in those regions.
Law No. 13,299, dated June 26, 2016 amended the formula for calculation of the CCC Account relating to the Isolated System, previously provided by Law No. 12,111 dated December 2009. According to Law No. 12,111, the amount of the reimbursement through the CCC Account is equal to the total cost of generation minus the total amount of energy utilized by the agent at the average unitary energy price determined at auctions of the Interconnected system. The law determined that the energy sector fees were to be included in the calculation of the average cost of energy in the Regulated Market. Law No. 13,299, in turn, sets forth the exclusion of the fees related to the average energy price from January 1, 2017 to December 31, 2020, increasing the value to be reimbursed to energy distributors in the Isolated System. Each year, from January 2021 to December 2034, 1/15 of the energy sector fees will be added to the average energy price until 2035, when the totality of the fees shall be dully incorporated into the price again.
However, Law No. 12,783 extinguished the apportionment of the benefit of reduction of the costs for fuel consumption within electric energy generation.
Energy Development Account
In 2002, the Brazilian Government instituted the Conta de Desenvolvimento Energético (Energy Development Account or CDE Account), which is funded through annual payments made by concessionaires for the use of public assets, penalties and fines imposed by ANEEL and, since 2003, the annual fees to be paid by agents offering electricity to final consumers, by means of a charge to be added to the tariffs for the use of the transmission and distribution systems. These fees are adjusted annually. The CDE Account was created to support the: (i) development of electricity production throughout the country; (ii) production of electricity by alternative energy sources; and (iii) universalization of energy services throughout Brazil. The CDE Account will be in effect for 25 years and is regulated by ANEEL and as of May, 2017, the CDE Account will be managed by CCEE, under Law No. 13,360.
The Electricity Regulatory Law establishes that the failure to pay the contribution to the RGR Fund, Proinfa program, the CDE Account, the CCC Account, or payments due by virtue of purchase of electricity in the Regulated Market or from Itaipu prevents the non-paying party from receiving a tariff readjustment (except for an extraordinary review) or receiving resources arising from the RGR Fund, CDE Account or CCC Accounts.
Electricity Reallocation Mechanism
The Mecanismo de Realocação de Energia (energy reallocation mechanism) provides financial protection against hydrological risks for hydro-generators according to energy commercialization rules in effect, to mitigate the shared hydrological risks that affect the generators and assure the optimal use of the hydroelectric resources of the Interconnected Power System.
The mechanism guarantees that all the generators that participate in it will be able to sell the amount of electricity which they have contracted to sell under long-term contracts as determined by ANEEL, which we refer to as “assured electricity,” irrespective of their actual electricity production, provided that the power plants participating in the mechanism, as a whole, have generated sufficient electricity. In other words, the mechanism reallocates electricity, transferring surplus electricity from those generators whose generation was in excess of their assured electricity, to those whose generation was less than assured electricity. The effective generation dispatch is determined by the ONS, which takes into account nationwide electricity demand, the hydrological conditions of the Interconnected Power System and transmission limitations.
Reimbursement of the generation costs of the relocated electricity is provided to compensate generators that relocate electricity to the system in excess of their assured electricity. Generators are reimbursed for their variable operational costs (except fuel) and costs for the use of water. The total costs of the relocated electricity (from all generators that provided electricity to the energy reallocation mechanism) are then combined and paid by the generators that receive electricity from the mechanism.
The mechanism includes all hydroelectric power plants subject to the centralized dispatching of the ONS, small hydroelectric stations that opt to participate in the mechanism and thermal power plants with centralized dispatching, included in the Initial Supply Contracts and whose fuel costs are subsidized by the Fuel Consumption Account. Since 2003, the Fuel Consumption Account power plants only partially participated in the mechanism, due to the gradual reduction of the subsidy.
Electric Power Services Supervision Fee — TFSEE
ANEEL also the Electric Power Services Supervision Fee (or TFSEE), which is a supervision fee from electric power services agents and concessionairespursuant to Law No. 9,427 of December 26, 1996, as amended by Law No. 12,111 of December 9, 2009, and Law No. 12,783. The TFSEE is charged at the rate of 0.4% of the annual economic benefit posted by the agent or concessionaire. The economic benefit is determined based on the installed capacity of authorized generating and transmitting concessionaires or on annual sales income posted by distribution concessionaires. This fee is collected by ANEEL in twelve monthly installments.
Financial Compensation For Use Of Water Resources (CFURH)
The states, the Federal District, and municipalities, as well as direct public federal administration bodies all receive financial compensation from generating companies for use of water resources and loss of productive land due to the flooding of the area for the construction and generation of electric power. CFURH is based on power output and paid to the states and municipalities in which the plant or reservoir is situated. ANEEL is responsible for the collection and management of such fee. This charge is not assessed on Small Hydroelectric Power Plants, as they are exempt from this requirement.
Emergency Capacity Charge (ECE)
ECE was created as provided for in Article 1 of Law No. 10,438 of April 26, 2002, as amended by Law No. 12,212 of January 20, 2010. It is assessed proportionally to the final individual total consumption of all consumers served by the Interconnected Power System and classified as a specific tariff charge. ANEEL ruled that its basis would be the cost of contracting generating capacity or voltage estimated by Comercializadora Brasileira de Energia Emergencial (or CBEE) in any given year.
Rationing
The Electricity Regulatory Law establishes that, in a situation where the Brazilian Government decrees a compulsory reduction in the consumption of electricity in a certain region, all energy amount agreements in the Regulated Market, registered within CCEE in which the buyer is located, must have their volumes adjusted in the same proportion to the consumption reduction.
The Effects of the New Bankruptcy Law on Us
On February 9, 2005, the Brazilian Government enacted Law No. 11,101, or the New Bankruptcy Law. The New Bankruptcy Law, which came into effect on June 9, 2005, governs judicial recovery, extrajudicial recovery and liquidation proceedings and replaces the debt reorganization judicial proceeding known as concordata (reorganization) for judicial recovery and extrajudicial recovery. The New Bankruptcy Law provides that its provisions do not apply to government owned and mixed capital companies. However, the Brazilian Federal Constitution establishes that mixed capital companies, such as Eletrobras, which operate a commercial business, will be subject to the legal regime applicable to private corporations in respect of civil, commercial, labor and tax matters. Therefore it is unclear whether or not the provisions in connection with judicial and extrajudicial recovery and liquidation proceedings of the New Bankruptcy Law would apply to us.
Judicial Recovery
In order to request judicial recovery, a debtor must fulfill the following requirements: (i) conduct its business in a regular manner for more than two years; (ii) not be bankrupt (or, in the event that the debtor was bankrupt in the past, then all obligations arising therefrom must have been declared extinguished by a judgment not subject to appeal); (iii) not have been granted a judicial recovery or special judicial recovery in the five or eight years prior to its request, respectively; and (iv) not have been convicted of (or not have a controlling partner or manager who has been convicted of) a bankruptcy crime. All claims in existence at the time of the request for judicial recovery are subject to such procedure (including potential claims), except for claims of tax authorities, creditors acting as fiduciary owners of real or personal properties, lessors, owners or committed sellers of real estate, including for real estate developments, or owners under sale agreements with a title retention clause (paragraph 3 of Article 49 of the New Bankruptcy Law). The judicial recovery can be implemented by means of one or more of the following transactions, amongst others (i) the granting of special terms and conditions for the payment of the debtor’s obligations; (ii) spin-off, merger, transformation of the company, incorporation of a wholly-owned subsidiary or the assignment of quotas or shares; (iii) transfer of corporate control; (iv) partial or total replacement of the debtor’s management, as well as the granting to its creditors the right to independently appoint management and the power of veto; (v) capital increase; (vi) leasing of its premises; (vii) reduction in wages, compensation of hours and reduction of the workday, by means of collective bargaining; (viii) payment in kind or the renewal of the debtor’s debts; (ix) creation of a company composed of creditors; (x) partial sale of assets; (xi) equalization of the debtor’s financial charges; (xii) constitution of an usufruct on the company; (xiii) shared management of the company; (xiv) issuance of securities; and (xv) creation of a special purpose company for purposes of receiving the debtor’s assets.
However, pursuant to Law No. 12,767/2012, energy concessionaires may no longer initiate judicial or extrajudicial corporate reorganization procedures (recuperação judicial ou extrajudicial) until their concessions expire.
Extrajudicial Recovery
The New Bankruptcy Law also created the extrajudicial recovery mechanism, by means of which a debtor who meets the requirements for the judicial recovery (as outlined above) may propose and negotiate with its creditors an extrajudicial recovery plan, which must be submitted to the court for approval. Once approved, such a plan will constitute a valid means of enforcement. The extrajudicial
recovery is not applicable, however, to any claims relating to labor- or workplace related accidents, as well as to any claims excluded from judicial recovery. In addition, the request for court approval of an extrajudicial recovery plan will does not impose a moratorium on the rights, suits and enforcement proceedings of creditors not subject to such plan, and those creditors will still be able to request the debtor’s bankruptcy.
As mentioned above, energy concessionaires may no longer initiate judicial or extrajudicial corporate reorganization procedures (recuperação judicial ou extrajudicial) until their concessions expire.
Liquidation
The New Bankruptcy Law changed the order in which claims are classified in the context of liquidation proceedings to the following order, which is set out in order of priority: (i) labor claims in general (limited to a maximum amount of 150 times the minimum monthly Brazilian wage per creditor) and labor claims related to indemnification for workplace accidents; (ii) claims of secured creditors (limited to the amount of the guarantee); (iii) tax claims (except for tax fines); (iv) personal claims enjoying special privileges (as defined in other statutes); (v) personal claims enjoying general privileges (among others, unsecured creditors who have provided goods or services to the debtor during its judicial recovery and creditors who are so defined in other statutes); (vi) unsecured debts (creditors not provided for in the preceding items, labor creditors whose claims exceed the 150-minimum monthly wages limitation, and creditors whose claims exceed the amount of their respective guarantees); (vii) contractual fines and monetary fines arising from the disobedience of statutes; and (viii) subordinated debts (as provided for by law or in an agreement, and creditors who are partners or managers of the debtor company but not in the context of a labor relationship). The New Bankruptcy Law establishes that only a creditor claiming for an amount in excess of 40 times the minimum monthly Brazilian wage can commence liquidation proceedings. However, it is permitted for creditors to commence a class action in order to comply with the minimum amount mentioned above. The New Bankruptcy Law also extended (i) the time period in which a debtor must present its defense in connection with a request for its bankruptcy from 24 hours to ten days, and (ii) the suspension period during which no assets may be sold or liquidated from 60 to 90 days (from either the date of filing the bankruptcy petition, the request for judicial recovery or from the date of the first protest of a note due to its non-payment by the company).
The Effects of Government-Controlled Companies Law on Us
Law No. 13,303 of June 30, 2016, establishes the rules applicable to state-owned companies, government-controlled companies and their subsidiaries, regulating the Article 173 of the Constitution of the Republic of 1988 (“Law of Government-Controlled Companies”).
The main subject of the Law of Government-Controlled Companies is linked to governance rules that have become applicable to state-owned and government-controlled companies, which are now forced to adopt higher standards for disclosure of technical and financial information, and to follow some specified criteria for the appointment of their officers and executives.
Among the new criteria set forth by the law, there are two highlights: the appointee is required to have an academic background and previous business experience in areas related to the business of the state-owned or government-controlled company where they would be working; and it is prohibited to appoint members of political parties or members of the legislative branch, as well as third parties related to them.
In addition, the law strengthens the entire governance structure and internal and external controls of state-owned and government-controlled companies, establishing the obligation for periodic public disclosure of technical and financial reports, maintenance of a statutory independent committee of internal audit, and mandatory submission to external auditing by independent audit firms, as well as by the audit bodies of public administration, such as the Federal, State and City Accounting Courts.
It was also defined by the Law of Government-Controlled Companies the social function of state-owned or government-controlled companies, which is the promotion of the public interest related to their business, which should be guided by an efficient economic management and a rational management of resources ensuring sustainable economic growth aiming to increase the access by consumers to the products and services provided by such company, to develop national technologies in order to for improve the products and provision of services and to promote environmentally sustained and socially responsible practices, always in an economically justified way.
Furthermore, the Law of Government-Controlled Companies establishes rules about public biddings for hiring and for the execution of contracts by state-owned or government-controlled companies, aiming to increase the transparency and effectiveness of internal and external controls connected to the appropriateness of the proceedings.
Although the rule came into force immediately after its publication, the state-owned or government-controlled companies have up to 24 (twenty four) months to adapt to the new legal requirements.
Regarding Eletrobras, many of the requirements set out in the Law of Government-Controlled Companies relating to the disclosure of technical and financial reports, as well as to the audit and internal control structure, are already met by the company and will be subject to review by the Board of Directors in order to strengthen and improve our governance structure, which already could be seen in the last election for the Board of Directors, which fully complied with the criteria for appointment of members and the percentage of participation of independent members set forth in the rule.
Other adjustments will be promoted by us within the deadline established by the law for the adaptation of government-controlled companies to the new requirements.
C. Organizational Structure
As of December 31, 2016, we operated generation, transmission and distribution activities in Brazil through the following thirteen regional subsidiaries,Itaipu and 178 SPEs and non-controlling interests in 25 companies:
· Itaipu, a plant in which we and a Paraguayan governmental entity (ANDE) each hold a 50.0% interest and which we believe is one of the world’s largest hydroelectric plants by volume of energy generated;
· Furnas, which engages in generation and transmission activities in the southeast and part of the midwest regions of Brazil;
· Chesf, which engages in generation and transmission in the northeast region of Brazil;
· Eletronorte, which engages in generation, transmission and limited distribution activities in the north and part of the midwest regions of Brazil;
· Eletronuclear, which owns and operates two nuclear plants, Angra I and Angra II, and is is constructing a third, Angra III;
· Amazonas D, which engages in distribution in the State of Amazonas. Amazonas Energia operates an area that, until March, 2008, was operated by Ceam, which was previously directly held by us but no longer exists as a standalone operating company;
· Amazonas GT: which engages in generation and transmission activites in the State of Amazonas;
· Eletrosul, which engages in transmission activities in the State of Santa Catarina, Rio Grande do Sul, Mato Grosso do Sul and Paraná;
· CEPISA, which engages in distribution activities in the State of Piauí;
· CEAL, which engages in distribution activities in the State of Alagoas;
· CERON, which engages in distribution activities in the State of Rondônia;
· Boa Vista Energia, which engages in distribution activities in the State of Roraima;
· CGTEE, which owns and operates thermal plants in the south region of Brazil; and
· Eletroacre, which engages in distribution activities in the State of Acre.
On February 14, 2017, we sold our stake in Celg-D.
We are also the main sponsor of Cepel, the largest technological research and development center in the electricity industry in Latin America.
Moreover, we also hold a majority interest in Eletrobras Eletropar, a holding company that holds minority interests in the following five Brazilian distribution companies: (i) AES Eletropaulo Metropolitana de Eletricidade de São Paulo S.A — AES Eletropaulo; (ii) Energias do Brasil S.A. — Energias do Brasil; (iii) Companhia de Transmissão de Energia Elétrica Paulista — CTEEP; (iv) Empresa Metropolitana de Águas e Energia S.A. — EMAE; and (v) Companhia Piratininga de Força e Luz — CPFL. Eletropar also holds a majority interest in Eletronet S.A.
The following organizational chart shows our summarized shareholder structure and subsidiaries as of the date of this annual report (we also have minority shareholdings in 25 utility companies throughout Brazil, not indicated in this chart):
In 2016, we did not participate in the capital increase of Energisa S.A. and Energisa Mato Grosso-Distribuidora de Energia S.A., meaning that our shareholding was reduced and we currently hold 2.31% and 22.01% respectively of the capital stock of those companies.
On November 30, 2016, the CELG-D Privatization Auction took place, whereby CELG-D was acquired by Enel Brasil S.A. for a total amount of R$2.19 billion, with a premium of 28% in relation to the minimum price approved by our 166th Extraordinary General Meeting of Shareholders. On February 14, 2017, we entered into a sale agreement for CELG-D and received approximately R$1.07 billion from Enel Brasil S.A. for our total shareholding and, in the first offer, approximately R$0.5 million from the employees of CELG-D who decided to exercise the right to purchase CELG-D’s shareholding. The second offer to employees is still pending, as well as the liquidation of the remainder, and at the end of the process we will receive R$1.14 billion.
In 2016, we subscribed for new shares of CTEEP (Companhia Transmissão Energia Elétrica Paulista) and AES Tietê Energia S.A., having disbursed R$81.5 million and R$12.2 million, respectively, in order not to dilute our shareholding in relation to the total share capital of these companies, which is 35.4% and 7.94%, respectively.
We made capital contributions to SPE Norte Energia, proportional to our 15% equity interest, which totaled R$600 million in 2016. Our subsidiaries, Chesf and Eletronorte, made contributions in the same SPE in the total amount of R$1,399.2 million, relating to their participation.
In 2016, we authorized Centrales Hidroeléctricas de CentroAmérica S.A. (CHC) to sell its total shares in Centrales Hidroeléctricas de Nicarágua S.A. (CHN) for US$44.2 million. We held a 50% interest in the company and, through a share repurchase process, we
already received a net value of US$20.5 million. The CHC is still in the process of liquidation, so it still appears in our corporate structure.
We still hold a stake in 175 SPEs in Brazil, of which 137 are generation companies and 41 are transmission companies, mostly with a participation of up to 49% of the share capital, and three other partnerships in foreign SPEs, as well as minority interests in 25 electricity companies.
D. Property, Plant and Equipment
Our principal assets consist on hydroelectric generation plants and transmission networks which are located all over Brazil. The book value of our total property, plant and equipment as of December 31, 2016, December 31, 2015 and December 31, 2014 was R$26,813 million, R$29,547 million and R$31,168 million, respectively. As a result of the existing large hydroelectric power capacity still available in Brazil, we believe hydroelectric energy will continue to have a prominent role in providing for the growth in consumption of electrical energy.
E. Compliance
In accordance with our Code of Ethics and Conduct, we do not tolerate corruption or other any illegal business practices of our employees, contractors or suppliers, and, accordingly, we have undertaken the corporate governance and compliance initiatives described in this annual report.
In order to remedy material weaknesses that are identified by our compliance team we are constantly monitoring and improving our compliance program, in accordance with best practices as set forth by the FCPA requirements and the Brazilian Anticorruption Law. In addition, during 2015 and 2016, we made substantive improvements our compliance program to increase its performance and reliability, such as the creation of the “Eletrobras 5 Dimensions Compliance Program.”
The “Eletrobras 5 Dimensions Compliance Program” is a company-wide plan that we are developing and implementing in order to comply with international corporate governance standards, laws and regulations, including the U.S. Sarbanes-Oxley Act of 2002, the FCPA, the Brazilian Anticorruption Law, Law of Government-Controlled Companies (Law No. 13,303/2016), rules and guidelines issued by the SEC, CVM, the Brazilian Institute of Corporate Governance (IBGC) and the OECD, among others. A summary of our material weaknesses and remediation program is discussed in Item 15 of this annual report.
The “Eletrobras 5 Dimensions Program” is also based on the guidelines proposed by COSO (Committee of Sponsoring Organizations of the Treadway Commission) and by the Ministerio da Transparência Fiscalização e Controle (CGU) for the implementation of compliance program for state-owned companies.
The structure of the “Eletrobras 5 Dimensions Compliance Program” is based on five elements that constitute the basis for developing a culture of integrity within the company, as shown in the following image:
Each element of the “Eletrobras 5 Dimensions Compliance Program” has a set of activities with different characteristics, including:
1. Development of the Management Environment for the Compliance Program - The commitment of our senior management and managers to promoting a culture of compliance with anti-corruption laws — starting at the top and providing regular training for our employees and suppliers. In addition to carrying out an Internal Investigation as further described below, we replaced our entire Board of Directors, hired a new CEO, created and filled an executive officer position for a Risk Management and Compliance Officer and worked with our independent Compliance Department to help coordinate compliance activities across our subsidiaries. The Risk Management and Compliance Officer oversees the implementation of the 5 Dimensions program and liaises with the compliance managers of each subsidiary on a weekly basis.
2. Periodic Analysis of the Risk Matrix - We identify and evaluate the risk of certain events, especially the risk of fraud and corruption in our operations, so that the actions of the “Eletrobras 5 Dimensions Compliance Program” remain focused on the items that are most relevant to us. To achieve this goal, we constantly monitor our compliance program to identify points of improvement and provide an anonymous hotline for employees and service providers to report any illegal or suspicious activities without the fear of retaliation.
3. Structure and implementation of policies and procedures of our compliance program — We are reviewing and implementing certain policies and procedures to remedy material weaknesses related to compliance controls and comply with new legislation and requirements from regulators, such as: the establishment of a code of ethic, procurement and donations rules, rules for nominating board members and officers, SPE manual to guide board of directors’ decision, among other. Also, we are currently reviewing the process for receiving, addressing and answering complaints, with the goal of improving the effectiveness of our whistleblower program in addition to hiring a specialized third party channel and establishing policies for the consequences. Regarding our relationship with third parties, we implemented contractual provision and are currently structuring and implementing forms, statements and other due diligence procedures for major third-party groups.
4. Effective Communication and training - in 2016, we conducted training which addressed trends, perspectives and challenges of compliance, outlined relevant provisions of applicable antibribery laws and their effect on us, as described in the “Eletrobras 5 Dimensions Compliance Program.” The training was directed primarily at those professionals who have a greater exposure to corruption risks, such as individuals from our procurement, joint-venture management and donations activities. We have also created an e-learning about ethics and compliance for all of our employees, which was viewed by 17,563 professionals (or 74% of our workforce) and received positive ratings from 86% of those participants.
5. Program monitoring, application of remediation measures and penalties — We are implementing the recommended procedures from the team that conducted the Independent Investigation in addition to taking measures related to the findings of the Independent Investigation (contract with suppliers and employees suspension and/or termination). We have also set up our own reporting channel that assures anonymity and confidentiality for whistleblowers and other internal reporting. The channel is managed by an Ombudsman and the complaints are handled by different committees depending on their nature. Monthly reports of management and how complaints are dealt with are issued and submitted to the Fiscal Council (adapted to the Audit Committee functions).
Independent Investigation
As a response to allegations of illegal activities appearing in the media in 2015 relating to companies that provide services to our subsidiary Eletronuclear (specifically, regarding the Angra III nuclear power plant), and to certain SPEs in which we hold a minority stake, our Board of Directors, although not required to do so, hired the law firm Hogan Lovells US LLP to undertake the Independent Investigation.
The Independent Investigation was subject to oversight by a commission that was created by our Board of Directors on July 31, 2015. This commission was composed of Ms. Ellen Gracie Northfleet, a retired Federal Supreme Court judge, Mr. Durval José Soledade Santos, former director of the CVM, and the Engineer Mr. Manuel Jeremias Leite Caldas. Mr. Manuel Jeremias Leite Caldas is no longer a member of the Independent Commission and Mr. Julio Sergio Cardozo, a well known accounting expert, will replace him.
On April 29, 2015, the Federal Police commenced the “Operation Radioactivity” as part of the Lava Jato investigation, which resulted in the imprisonment of a former officer of our subsidiary Eletronuclear. This former officer was sentenced to 43 years in prison, by the judge of the 7th Federal Criminal Court, for passive bribery, money laundering, obstruction of justice, tax evasion and participation in a criminal organization. On July 6, 2016, the Federal Police commenced “Operation Pripyat”, in which the Federal Police served arrest warrants issued by the judge of the 7th Federal Court of the District of Rio de Janeiro against former officers of Eletronuclear, officers who had already been suspended by our Board of Directors as well as other parties. Formal charges of corruption, money laundering and obstruction of justice were filed against these former officers by the Federal Prosecutors office on July 27, 2016. On April 7, 2017, the 7th Federal Court of the district of Rio de Janeiro revoked the preventative arrest order against these officers on the basis that they played a minor part in any possible corruption scheme. We are assisting the prosecution in these criminal proceedings.
The Independent Investigation team has completed the first phase of the investigation designed to identify potential illegal activities that could have an impact on our consolidated financial statements. As part of this first phase, the Independent Investigation discovered overcharges related to fraudulent bids arising from cartels and bribes that would have been paid through certain contractors and suppliers hired since 2008. The financial impacts of these findings are presented herein in the results of the years ended December 31, 2014 and December 31, 2015.
We continue to implement compliance procedures following the conclusion of the Independent Investigation. As part of the continuation of the Independent Investigation, we are monitoring plea bargain agreements that are made public as well as other information published by the press and any other developments in the Lava Jato investigation.
We, Hogan Lovells and the Independent Commission have been closely monitoring the official investigations and cooperating with Brazilian and United States authorities, including Brazilian Federal Courts (Justiça Federal); MPF; CVM; CADE, TCU, DoJ, and SEC, among others, and have responded to requests for information and documents from these authorities. In January 2017, we signed tolling agreements with the SEC and DoJ agreeing to extend the statute of limitations regarding any potential violations.
We have also reviewed material contracts and identified suppliers that had their contracts terminated due to their involvement in the Lava Jato and commenced applicable administrative measures in order to suspend or terminate, when applicable, their employment contracts with Eletrobras. In April 2017, as a consequence of the plea bargaining agreements entered into by executives of the major Brazilian construction conglomerate, Odebrecht, the Federal Supreme Court requested that investigations should be initiated to investigate the conduct of politicians who were referred to in those agreements. Other official investigations may be initiated against individuals who are subject to the jurisdiction of lower courts.
Certain allegations of potential illegal acts were made public in April 2017 in respect of the Santo Antonio project, in which we hold an indirect minority stake through our subsidiary Furnas.
Hogan Lovells, under the direct supervision of the Independent Committee, continue to monitor plea bargain agreements that are made public as well as other information published by the press and development in the “Lava Jato” investigation. Our management believes the allegations related to the Santo Antonio project, made public so far, will not
impact materially our consolidated financial statements, since we recognized an impairment charge under IAS 36 — Impairment of Assets in an amount sufficient to cover the alleged values.
As a result of the Independent Investigation, we have made the necessary adjustments to our financial statements as of and for the years ended December 31, 2014 and 2015. To determine the financial impact to be recognized in our consolidated financial statements, management took into consideration the conclusions reached and findings identified by the Independent Investigation and the conclusions reached and findings identified to date by the ongoing Lava Jato investigation.
In January 2017, our Board of Directors authorized us to enter into a tolling agreement with U.S. authorities, extending the statute of limitation for any potential violations. Entering into these agreements shows that we have been cooperating and acting in good faith with the U.S. authorities.
In addition, we have undertaken the following measures:
· Seeking indemnification from contractors and individuals who have caused us damage, whether due to active corruption, payments of undue advantages to executives of our subsidiaries, or by charging a surcharge on the works carried out by our subsidiaries. We are also analyzing measures to seek damages and holding accountable our former executives who have been convicted under operations Radioactivity and Pripyat.
· Implementing the “Eletrobras 5 Dimensions Compliance Program,” which includes elaborating, reviewing, implementing and training our employees and suppliers in our policies and procedures, especially those related to management of suppliers, corruption risks and analysis of complaints.
· Updating our Code of Ethics and Conduct.
· Analysing compliance with the requirements of the state-owned companies’ statute (Law No. 13,303/2016) and implementing proceedings such as background checks for all our potential officers, directors and members of the Fiscal Council as well as for our subsidiaries and the SPEs in which they, or we, invest.
· Regular and specific training for certain target members of our staff who are most exposed to the risk of corruption.
· Ethics and integrity e-learning for all employees, including officers and directors.
· Adopting procedures for the hiring of an independent reporting channel. By implementing the independent reporting channel, we will unify the management and analysis of reports for all our companies, as approved by our Board of Directors.
ITEM 4A. UNRESOLVED STAFF COMMENTS
Not applicable
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following discussion should be read in conjunction with our audited Consolidated Financial Statements included elsewhere in this annual report.
Overview
Directly and through our subsidiaries, we are involved in the generation, transmission and distribution of electricity in Brazil. Our revenues derive mainly from:
· the generation of electricity through our subsidiaries and its sale to electricity distribution companies and free consumers, which in 2016, 2015 and 2014 accounted for R$17,755 million, or 29.23%, R$17,849 million, or 54.77% and R$17,348 million, or 57.56% of our total net revenues, respectively. In 2016, of R$17,711 million in revenue, R$ 1,626 million was from operation and maintenance and R$16,084 million was from exploration.
· the transmission of electricity, which in 2016, 2015 and 2014 accounted for R$33,555 million, or 55.24%, R$5,665 million, or 17.38% and R$4,978 million, or 16.52% of our total net revenues, respectively. In 2016, of R$33,555 million in revenue, R$31,952 million was from operation and maintenance and R$1,604 million was from exploration. In 2016, R$28.6 billion of our transmission revenue is attributable to RBSE payments as further described in “— Principal Factors Affecting our Financial Performance — Transmission RBSE Payment;” and
· the distribution of electricity to end consumers, which in 2016, 2015 and 2014 accounted for R$11,592 million, or 19.08%, R$11,471 million, or 35.20% and R$9,391 million, or 31.16% of our total net revenues, respectively.
The primary drivers of our financial performance are demand for electricity (which in turn is impacted by macroeconomic conditions and external events such as electricity rationing, which occurred in 2001 and 2002) and the pricing of electricity (which is determined as set out in “Item 4.B, The Brazilian Power Industry”). Although levels of electricity consumption now exceed those that existed before the energy crisis that occurred in 2001 and 2002, that energy crisis continues to impact our recognition of revenues and, accordingly, our results of operations.
Principal Factors Affecting our Financial Performance
The Effects of Law No. 12,783
In 2012, the Brazilian Congress converted Provisional Measure No. 579/2012 into Law No. 12,783, which materially changed the Brazilian electricity sector. The law allowed current holders of concessions to operate electricity generation and transmission assets, which were due to expire during the years 2015 through 2017, to renew those concessions for an additional maximum period of 30 years effective January 1, 2013, but at significantly lower tariff levels. As an option under the law, Eletrobras and other concessionaires could have entered into a potentially competitive bidding process to renew their generation and transmission concessions. Law No. 12,783 also affected distribution concessions by lowering the tariffs and, affected renewal of distribution concessions.
In 2013, there was a change of regime in the revenue framework with respect to renewed generation and transmission concessions requiring the exploration method and the operating and maintenance methods to be separately disclosed pursuant to Law 12,783. For these reasons, as of 2013 companies that renewed generation and transmission concessions pursuant to Law No. 12,783 have received lower tariff payments in relation to these assets than the payments made before Law No. 12,783 was enacted. For renewal generation concessions there is a new business model, pursuant to which the tariff covers just a standard operating and maintenance cost plus a margin of 10%, rather than the non renewal generation concession which the company could sell the generated energy.
Under Law No. 12,783, the Federal Government agreed to indemnify Eletrobras and other electricity concessionaires for part of the value of non-amortized investments Eletrobras and other concessionaires made during the term of their concessions. Some of these indemnity payments have been agreed and paid, while others have been estimated for purposes of financial statements based on information available to Eletrobras, see note 2.1 (Public Service Eletric Power Concessions) to our consolidated financial statements.
The shareholders of Eletrobras approved the renewal of generation and transmission concessions under the new law despite the nonrecurring R$10.09 billion write off in our assets on December 31, 2012, and the significant expected negative impact on revenues from the relevant concessions in subsequent periods.
In respect of distribution concessions, in 2015, the Federal Government enacted Decree No. 8,461 that regulates the criteria for the renewal of distribution concessions pursuant to Law No. 12,783. The renewal of distribution concessions pursuant to Decree No. 8,461 requires that concession holders meet certain criteria for (i) the quality of the distribution services provided, and (ii) the compliance with certain financial ratios. The Provisional Measure No. 735/2016 established the possibility that we could transfer our shareholding in the distribution companies, which our subsidiaries that do not have an approved extension of their concessions, or that the Federal Government could bid for those subsidiaries that converted the Provisional Measure continues to permit these transfers.
Generation Scaling Factor
Over the course of 2015, the financial effects of the Generation Scaling Factor, or GSF, on the generation companies which are part of the Energy Relocation Mechanism, or MRE, were discussed.
There was a broad sector debate on the effects of and solutions for the GSF from an administrative, regulatory, business and legal perspective. Law No. 13,203/2015, dated December 8, 2015, and ANEEL Resolution No. 684/2015, dated December 11, 2015, which established the criteria for the approval and the conditions for the renegotiation of the hydrological risk were enacted as a result of Provisional Measure No. 688/2015 (which was amended 78 times) and the ANEEL Public Hearing No. 32/2015.
We note that, before the enactment of Law No. 13,203/2015, all existing hydrological risk was entirely supported by the hydraulic generation agents which were part of the MRE. Accordingly, when the GSF was valued below 1.0, that is, when the total hydraulic generation for the power plants forming the MRE was below the total Physical Guarantee, the difference was split between all hydraulic generators, according to the proportions of their physical guarantees. Depending on the contracting situation of each hydraulic generator, it could be necessary to acquire the additional energy on the short term market. After the enactment of Law No. 13,203/2015, the generators may share the hydrologic risk with consumers, through the payment of the “risk premium.”
The GSF was valued below 1.0, that is, when the total hydraulic generation for the power plants forming the MRE was below the total Physical Guarantee, the difference was split between all hydraulic generators, according to the proportions of their physical guarantees. Depending on the contracting situation of each hydraulic generator, it could be necessary to acquire the additional energy on the short term market. After the enactment of Law No. 13,203/2015, the generators may share the hydrologic risk with consumers, through the payment of the “risk premium.”
We have acted in the GSF debates, particularly in the discussions relating to Itaipu’s GSF (addressed by Decree No. 8.401/2015), during public hearing held by ANEEL, in the discussions with the Associação Brasileira das Empresas Geradoras de Energia Elétrica, or ABRAGE, and on several meetings with the MME, and ABRAGE. Further, we also contributed by initiating proceedings with the aim of setting a limit to the GSF and removing the effects of defaults in the Câmara de Comercialização de Energia Elétrica, or CCEE.
The assessment of products available in the context of the renegotiation of the hydrological risk, such as those listed in Resolution No. 684/2015, took into account the following: plant marketing profile for the regulated contracting environment (ACR) and free environment (ACL), hedging strategy, contract termination predictions, energy simulations, Economic and Financial Feasibility studies (VPL by product type), analysis of the accounting impact, duration of Concession Agreements, cost of risk premium, legal analysis, additional risks related to the Contracting of Energy Reserves, projections for Net Price of Differences (PLD) and allocation of secondary energy, among others.
Investment in CELG-D and in Distribution Companies
On September 26, 2014, our shareholders approved the acquisition of a 50.9% interest in CELG-D. We acquired this interest in CELG-D on January 27, 2015 for R$59.5 million. On February 14, 2017, we entered into a sale and purchase agreement with Companhia Celg de Participações — CELGPAR and Enel Brasil S.A. for the sale of our shares in CELG-D. We consolidated the financial statements of CELG-D as from October 1, 2014, 2015 and 2016, but as of December 2015 and 2016, we accounted for CELG-D as assets held for sale in our consolidated balance sheet, and accordingly limited the long-term effects of depreciation and amortization of those assets as from December 31, 2015.
During the Extraordinary General Meeting of Shareholders held on July 22, 2016, our shareholders did not renew the concessions of six distribution companies, CEPISA, CEAL, Eletroacre, CERON, Boa Vista Energia, and Amazonas D, and by December 31, 2017 we intend to transfer the control of these distribution, companies. The shareholders also approved that these distribution companies can be responsible for the distribution of public energy until December 31, 2017 if all the necessary funds for these companies to keep their operations ongoing, perform maintenance and make new investments shall be allocated by customer charges or government funding. The shareholders also approved to return, at any time, the distribution concessions to Government control if control has not been transferred by December 31, 2017, or if the Federal Government, at any time, ceases to allocate resources to fund these companies or the tariff does not represent proper compensation. If Eletrobras returns such concessions, they will be subject to new bids in the future. Once we determine the conditions for these transactions, our distribution segment may be classified as discontinued operations, based on IFRS 5. The effect of the termination of the concessions will mostly alter future periods.
Transmission RBSE Payment
On April 20, 2016, the Ministry of Mines and Energy confirmed, in MME Ordinance No. 120, the basis for us to account for a compensation of R$36.6 billion as of December 31, 2016 with respect to reimbursements related to our transmission assets existing in 2000. We accounted for this payment R$3.0 billion as short-term assets and the remaining R$33.6 billion as long-term assets.
Certain associations of energy consumers have legally questioned these increases, claiming that these charges would be improper, especially regarding the compensation for the cost of equity, and that those differences should be paid from public resources, and not passed on to consumers. On April 10, 2017, a partial injunction was granted in favor of these associations in order to exclude the tariff that the associations had to pay in relation to the compensation provided for by Portaria MME No. 120/2016. However, based on a legal opinion from external counsel, we understand that the decisions rendered to date do not interfere with the right to receive RBSE assets as established by Law No. 12,783 / 2013 and MME Ordinance No. 120/2016 which guarantees the right to receive the amounts regarding the RBSE, even if it is through a direct payment by the Federal Government of Brazil. For further information, see Note
47.8 to our consolidated financial statements and Item 3.D “Key Information-Risk Factors- Risks Relating to our Company- The amount of any payments to be received following the renewal of our concessions, which were due to expire between 2015 and 2017, may not be sufficient to cover our investments in these concessions.”
Brazilian Macroeconomic Conditions
Brazilian GDP
Brazil recorded a 3.6% decrease in its GDP as of December 31, 2016; a 3.85% decrease in its GDP for the year ended December 31, 2015 and a 0.1% increase for the year ended 2014, as reported by the Central Bank of Brazil using data provided by the IBGE.
The decrease was due to poor performance, according to the supply perspective, in agriculture (6.6%), services (2.7%) and industry (3.8%). Of these three sectors, only the agriculture and livestock sector advanced in the fourth quarter, with a 1% increase; industry and services decreased by 0.7% and 0.8%, respectively. In terms of demand, domestic consumption of households declined by 4.2% in relation to the year 2015, to a large extent the movement was influenced by the increase in credit and the decrease in income.
SELIC rate
As of April 18, 2013, the Central Bank began a monetary tightening cycle, pursuant to which it successively increased the SELIC rate, which is the benchmark interest rate for securities issued by the Brazilian government, from 7.25%, effective as of October 11, 2012, to 14.25% effective as of August 31, 2016. As of December 31, 2016, the SELIC rate was 13.75%
Inflation
The IGP-M inflation index increased to 10.5% for the year ended December 31, 2015 from 3.7% for the year ended December 31, 2014. From January 1, 2016 to December 31, 2016 the IGP-M inflation index increased to 7.19%.
The IPCA inflation index increased to 10.6% for the year ended December, 2015 from 6.4% for the year ended December 31, 2014. Inflation measured by this index for 2016 was 6.29%, and was therefore lower than in 2015. In its Fourth Quarter Inflation Report of March 2017, BACEN notes that the deceleration in this index in relation to the previous year was mainly due to the appreciation of the Real against the dollar.
Exchange rate
The real apreciated against the U.S. dollar to R$3.26 as of December 31, 2016 compared to R$3.90 as of December 31, 2015. The real was R$2.66 against the U.S. dollar as of December 31, 2014. In December 30, 2014 the Central Bank announced the extension of its foreign exchange intervention program, which it commenced in August 22, 2013. Pursuant to this program the Central Bank announced that it would offer US$0.5 billion of derivatives (swap agreements) until the end of March 2015. On March 24, 2015, the Central Bank announced that it would not extend the program. For further information on how the real to U.S. dollar exchange rates affect our results, see “—Exchange Rate Variations.”
The following table shows data relating to Brazilian GDP growth, inflation and the real/U.S. dollar exchange rate for the years indicated:
|
| Year Ended December 31, |
| |||||||
|
| 2016 |
| 2015 |
| 2014 |
| |||
|
|
|
|
|
|
|
|
| ||
GDP growth rate |
|
| (3.60 | )% |
| (3.85 | )% |
| 0.15 | % |
Inflation (IGP-M) |
|
| 7.19 | % |
| 10.54 | % |
| 3.67 | % |
Inflation (IPCA) |
|
| 6.29 | % |
| 10.67 | % |
| 6.41 | % |
Appreciation (depreciation) of the real vs. the U.S. dollar |
|
| (18.0 | )% |
| 47.01 | % |
| 13.39 | % |
Period-end exchange rate — US$ 1.00 |
| R$ | 3.2591 |
| R$ | 3.9048 |
| R$ | 2.6562 |
|
Average exchange rate — US$ 1.00 |
| R$ | 3.4851 |
| R$ | 3.3387 |
| R$ | 2.3547 |
|
Sources: Fundação Getúlio Vargas, Ipeadata Instituto Brasileiro de Geografia e Estatística and the Central Bank.
Electric Power Market
Electricity consumption in Brazil decreased 1% in 2016. This was a smaller rate of decrease than the GDP decrease for the same period, which was 3.6%. This decrease was mainly caused by decreased demand in the industrial segment, which recoreded a reduction of 2.7%, and in the commercial segment, which recorded a reduction of 2.5%. Data published by Empresa de Pesquisa
Energética — EPE shows that total power consumption in Brazil for 2016 was 460,379 GWh, which represents a decrease of 1.0% in relation to 2015.
The electric power consumption in Brazil by geographic region is presented below:
Energy Consumption in the Network (GWh):
Consumption Class |
|
|
|
|
|
|
|
|
| 2016 |
| 2015 |
| Variation |
|
Region |
| Residential |
| Industrial |
| Commercial |
| Others |
| Total |
| Total |
| % |
|
North |
| 9,440.57 |
| 14,890.5 |
| 5,094.37 |
| 4,640.78 |
| 34,066.19 |
| 33,410.55 |
| 2.0 | % |
Northeast |
| 26,908.11 |
| 23,332.1 |
| 14,319.60 |
| 15,584.24 |
| 80,144.07 |
| 79,979.00 |
| 0.2 | % |
Southeast |
| 64,828.73 |
| 86,782.9 |
| 47,031.19 |
| 31,280.10 |
| 229,922.91 |
| 234,162.15 |
| (1.8 | )% |
South |
| 20,714.54 |
| 30,580.5 |
| 14,563.02 |
| 15,859.95 |
| 81,718.01 |
| 81,990.16 |
| (0.3 | )% |
Mid-West |
| 11,001.07 |
| 8,667.3 |
| 7,176.64 |
| 7,683.08 |
| 34,528.04 |
| 34,859.75 |
| (1.0 | )% |
Consumption Class |
|
|
|
|
|
|
|
|
| 2015 |
| 2014 |
| Variation |
|
Region |
| Residential |
| Industrial |
| Commercial |
| Others |
| Total |
| Total |
| % |
|
North |
| 9,073.67 |
| 14,886.73 |
| 4,942.68 |
| 4,507.47 |
| 33,410.55 |
| 32,363.65 |
| 3.2 | % |
Northeast |
| 26,113.52 |
| 24,610.06 |
| 14,097,57 |
| 15,157.85 |
| 79,979.00 |
| 80,746.43 |
| 1.0 | % |
Southeast |
| 64,618.96 |
| 89,681.30 |
| 48,870.73 |
| 30,991.17 |
| 234,162.15 |
| 242,513.17 |
| 3.4 | % |
South |
| 20,352.64 |
| 31,079.55 |
| 15,158.75 |
| 15,399.21 |
| 81,990.16 |
| 87,420.08 |
| 6.2 | % |
Mid-West |
| 10,864.99 |
| 8,601.53 |
| 7,345.87 |
| 8,047.36 |
| 34,859.75 |
| 34,380.93 |
| 1.4 | % |
Source: Permanent Committee of Analysis and Monitoring of Electric Power Market — Copam/EPE. 2016 data under review. 2015 data reviewed by EPE.
Itaipu
Itaipu, one of the world’s largest hydroelectric plants, is jointly owned by Brazil and Paraguay and was established and is operated pursuant to a treaty between those countries.
Pursuant to the Itaipu treaty, we are entitled to trade not only the 50.0% of electricity produced by Itaipu that, through us, Brazil owns, but also that part of Paraguay’s share of electricity not used by Paraguay. As a result we act as a commercial agent of approximately 95.0% of the electricity produced by Itaipu. Articles 7 and 8 of Law No. 5,899 of July 5, 1973 set out the framework which distribution companies use to calculate the total amount of energy purchased from Itaipu.
While Itaipu produces a large amount of electricity, the Itaipu treaty requires that sales of Itaipu electricity be made on a no-profit basis, with no net effect on our results of operations.
In order to effect the “no profit” requirement, profits from the sale of Itaipu electricity are credited in subsequent periods to residential and rural consumers of electricity through the Interconnected Power System through their electricity bills and losses are taken into account by ANEEL in calculating tariffs for electricity in subsequent periods.
Pursuant to Law No. 11,480/2007, we were able to apply an “adjustment factor” to any financial contracts entered into between us and Itaipu and any credit assignments entered into between us and the Brazilian Federal Treasury prior to December 31, 2007. The aim of this “adjustment factor” was to offset the impact of the rate of inflation in the United States on the U.S. dollar payments. Accordingly, this “adjustment factor” measures the rate of inflation by reference to the consumer price index (CPI) and another index which tracks changes in industry prices. This law was repealed and Decree No. 6,265 of November 22, 2007 came into force which determines that a rate equivalent to the previous “adjustment factor” is to be passed on to distribution companies on an annual basis.
For discussion of accounting treatment of Itaipu, see note 3.10, subsection IV of our consolidated financial statements.
Exchange Rate Variations
Fluctuations in the value of the real against the U.S. dollar, particularly devaluations and/or depreciation of the real, have had and will continue to have an effect on the results of our operations. In particular, pursuant to the Itaipu treaty, all revenues from Itaipu are denominated in U.S. dollars. Because the financial statements of Itaipu Binacional are prepared in U.S. dollars and translated to reais at the exchange rate published by the Central Bank at the period end, any movement in the exchange rate between the real and the U.S. dollar can have a major impact on our results, in particular the “Foreign exchange and monetary gain” component of the line item “Financial income (expense), net.”
However, because pursuant to the Itaipu treaty the operation of Itaipu is not permitted to have any net effect on our operating results, any loss or gain incurred as a result of any appreciation or depreciation of the U.S. dollar against the real, among other things, will subsequently be compensated for by the tariffs we charge to our residential and rural consumers. In our income statement, the effects of Itaipu on the line items described above are netted out and recorded in the line item “Deferred loss from Itaipu.” Until that compensation takes place, the accumulated results of profits or losses from Itaipu operations, net of compensation through tariff adjustments, is carried on our balance sheet as a current asset under “Reimbursement rights.”
Regulated Distribution Tariffs
For 2016, 18.39% of our net operating revenues (before eliminations) were derived from the distribution of electricity. The distribution companies generally produce losses, which are likely to continue as the tariffs that may be charged by distribution companies are regulated and adjusted by ANEEL only in accordance with the process set out in “Item 4.B Business Overview — The Brazilian Power Industry — Distribution Tariffs.”
The Federal Government enacted Decree No. 8,461, that regulates the criteria for the renewal of distribution concessions pursuant to Law No. 12,783. The renewal of distribution concessions pursuant to Decree No. 8,461 requires that concession holders meet certain criteria for: (i) the quality of the distribution services provided, and (ii) the compliance with certain financial ratios.
During the Extraordinary General Meeting of Shareholders held on July 22, 2016, our shareholders did not renew the concessions of six distribution companies, CEPISA, CEAL, Eletroacre, CERON, Boa Vista Energia and Amazonas D and that by December 31, 2017 we intend to transfer the control of these distribution companies. The shareholders also approved that this distributions companies can be responsible for the distribution of public energy until December 31, 2017 if all the necessary funds for these companies to keep their operations ongoing, perform maintenance and make new investments shall be allocated by customer charges or government funding. The shareholders also approved to return, at any time, the distribution concessions to Government control if its control has not been transferred by December 31, 2017, or if the Federal Government, at any time, ceases to allocate resources to fund these companies or the tariff does not represent proper compensation. If Eletrobras returns such concessions, they will be subject to new bids in the future. Once we determine the conditions for these transactions, our distribution segment may be classified as discontinued operations, based on IFRS 5. The effect of the termination of the concessions will mostly alter future periods.
On August 3, 2016, the MME issued decrees Nos. 420, 421, 422, 424 and 425 naming, respectively, the Distributors Amazonas Energia, Eletroacre, Ceron, Cepisa, Ceal and Boa Vista as temporarily responsible for distributing public energy so as to assure the continuity of the service, in accordance with article 9, paragraph 1, of Law No. 12,783 of January 11, 2013.
According to such decrees, the Distributors shall provide the indicated services, in a provisional manner, against payment of the proper compensation, until the effective transfer of control of the Distributors, or until December 31, 2017, whichever occurs first, in accordance with the terms provided in Decree MME 338 of July 26, 2016 and article 9 of Law No. 12,783/2013.
Fixed Transmission Revenues
Similarly to the energy generation, a large part of the electric transmission concessions were renewed under Law No. 12,783 and began to be remunerated through Operation and Maintenance tariffs.
Transmission Lines, whose concessions were not renewed yet in accordance with Law No. 12,783, have a fixed annual remuneration, called Annual Allowed Revenue — RAP. This remuneration is allocated through an auction promoted by the Regulator Agency, in which the winner will be the one who offers the lowest RAP.
Due to the characteristics of the Brazilian generation park, predominantly hydro and the territorial dimension of Brazil, the transmission cost is shared by all users. The transmission use of system charges are collected through the Transmission use of System Tariff (TUST).
Critical Accounting Policies
In preparing our consolidated financial statements included in this annual report, we made estimates and assumptions that we consider reasonable based on our historical experience and other factors. The presentation of our financial condition and results of operations requires that our management make estimates about inherently uncertain matters, such as the book value of our assets, our liabilities and, consequently, our results of operations. Our financial presentation would be materially affected if we were to use different estimates or if we were to change our estimates in response to future events. To provide an understanding of how our management forms its judgments about future events, including the factors and assumptions underlying those estimates, we have identified the following critical accounting policies. We have set out below a summary of our critical accounting policies. For further information please refer to Note 3 to our consolidated financial statements.
Deferred tax assets and liabilities
The estimates of taxable income, the basis for the analysis of realization of net deferred tax assets are based on annual budgets and strategic plan, both reviewed periodically. However, future taxable income may be higher or lower than estimates made by management when the need to recognize or not the deferred tax asset amount was identified.
Provision for impairment of long-lived assets
We adopt variables and assumptions in determining the recovery of long-lived assets in order to determine the recoverable value of assets and recognition of impairment when necessary. Our management established judgments based on historical experience related to the asset, the group of assets or of the cash-generating unit that are applied. These judgments may not materialize in the future. Also, the useful life adopted by us is in accordance with the practices determined by ANEEL as applicable on assets linked to the concession of power, which may vary due to the periodic review of the economic useful life of assets, in force. Additionally, the useful life is limited to the concession term only for the operations based on IFRIC 12.
Also the variables and assumptions used by us and our subsidiaries in determining discounted cash flows for recognition of impairment of long-lived assets may vary due to inherently uncertain events. These events include: maintenance of levels of energy consumption; growth rate of economic activity in the country; availability of water resources; and determination of the value of reversion at the end of the concession period. Law No. 12,783/2013, enacted on January 11, 2013, defined the new replacement value (VNR) as the identification basis for public service concessions. We have determined that the identification basis will be based on the VNR, for generation and transmission assets, and by the base value of Regulatory Asset Base (Base Remuneração Regulatória) for distribution assets, based on its VNR value. These are the bases used to determine the indemnity at the end of concession period for generation, transmission and distribution of electricity. For further information, please see Note 3.XI and changes in impairments made during the year in Note 19 to our consolidated financial statements. Another significant variable is the discount rate used to discount cash flows.
Basis of determination of compensation by the Federal Government on concessions
Law No. 12,783/2013, enacted on January 11, 2013, defined the new replacement value (VNR) as the identification basis for public service concessions. We adopt, for the concessions not yet renewed, the assumption that the assets are reversible at the end of the concession contracts, with the right to receive a compensation from Federal Government on investments not yet amortized at the lower net book value and the new estimated replacement value. Following this assumption, for the concessions already renewed we have maintained the receivables with the Federal Government relating to the Rede Básica do Sistema Existente — RBSE, the investments made after the basic design of power plants and transmission lines (modernization and improvements), and the thermal generation assets. Such values are subject to approval by ANEEL. In 2016, MME enacted Instruction No. 120, which regulates the conditions under which the payments in connection with the RBSE transmission assets are to be received and establishes that the amounts homologated by ANEEL referring to these assets should be merged into the Regulatory Asset Basis (Base de Remuneração Regulatória), increased with respect to compensation for the cost of equity from January 1, 2013 to July 2017 when the tariff process will take place in order to include such payments, and, from this date, the compensation of these assets will be determined through WACC, the weighted average cost of capital, defined by ANEEL, until the effective date of payment. The WACC is calculated as an average between the cost of equity of the shareholders and of third parties, which is the cost of financial debts. The amounts related to RBSE, once updated and paid, will be added to the Permitted Annual Revenues (“RAPs” - Receitas Anuais Permitidas) of the relevant projects which were renewed in 2012, as from the 2017 tariff review, increased by the compensation related to the cost of equity mentioned above. The compensation and depreciation installments will be defined according to the methodologies of the Periodic Tariff Review of Revenues from Existing Concessionaires (Revisão Tarifária Periódica das Receitas das Concessionárias Existentes), approved by ANEEL, and the Regulatory Asset Basis will be depreciated considering the residual life span of the assets and will be updated using the IPCA index. Starting with the 2017 tariff process, the compensation through the application of WACC will be applicable for an eight-year period. For further information regarding the effects of Law No. 12,783, please see Note 2.1 to our consolidated financial statements.
We have defined the new replacement value (NRV) as a way of measuring the amount to be indemnified by the Federal Government for the share of generation and transmission assets not fully depreciated by the end of the concession. For transmission assets this was defined by the Regulatory Asset Base — RAB.
Useful life of fixed assets
We adopt the criteria defined in ANEEL Resolution 367 of June 2, 2009, in determining the estimated useful life of fixed assets, limited to the concession term for the operations that are based on IFRIC 12, pursuant to the understanding that they fairly represent such lifespan.
Provision for asset decommission
We recognize provisions for decommissioning liabilities for the assets related to our thermonuclear power plants. In order to calculate the amount of the provision, assumptions and estimates are made regarding the discount rates, the expected decommissioning cost and removal of the entire power plant from the location and the expected period of the referred costs. The cost estimate is based on legal and environmental requirements for decommission and removal of the entire plant, as well as the prices of goods and services to be used at the end of the useful life.
Actuarial liabilities
Actuarial liabilities are determined by actuarial calculations prepared by independent actuaries based on the life expectancy of the participant, average retirement age and inflation. However, the actual experiences could be different from these actuarial assumptions.
Provision for labor, tax and civil matters
Provisions for labor, tax and civil matters are based, on the evaluation of management and internal and external legal counsel. The provision amounts recognized based on the estimated amounts to settle the obligations. Contingent obligations do not result in recognition of provisions and the estimated possible losses are disclosed in consolidated financial statements. This assessment is supported by the judgment of management, along with its legal counsel, considering case law, decisions in the courts, the history of any agreements and decisions, the experience of management and legal counsel, as well as other relevant aspects.
Allowance for doubtful accounts
We recognize an allowance for doubtful accounts for accounts receivable that management believes is unlikely to be collected in full.
Valuation of financial instruments
We use valuation techniques that include information that are not based on observable market data to estimate the fair value of certain types of financial instruments. Note 43 of our consolidated financial statements presents information on key assumptions used in determining the fair value of financial instruments, as well as the sensitivity analysis of these assumptions. We believe that the selected valuation techniques and assumptions used are appropriate for determining the fair value of financial instruments.
Onerous contracts
We use the assumptions related to economic costs and benefits of each contract to determine the existence or not of an onerous contract. In the case of long term commitments as sale and purchase of energy, the estimate in determining the amount of provision for the future sale of the contract is the historical average PLD approved by our management as a basis for the calculation of the provision for onerous contracts exclusively for accounting, as well as the discount rate applied to the cash flows. The actual values of the PLD over the years may be higher or lower to the assumptions we used. In addition, we may have onerous contracts on concessions where the current expected cost for operation and maintenance is not fully covered by the revenues.
As an example, we were a party to a number of contracts for the sale of electricity in connection with concessions that were scheduled to expire in the years 2015 through 2017. With the implementation of Law No. 12,783, many of these contracts became “onerous” to us, as they were based on old tariff levels. At the prior tariff levels, these contracts were expected to be profitable, but based on the new reduced tariff levels, the contracts will result in further losses to us.
Description of Principal Line Items
Operating Revenues
Electrical Energy Sales
We derive our revenues from the generation, transmission and distribution of electricity, as set out below:
· revenues in our generation segment derive from the commercialization and sale to distribution companies and free consumers of electricity that we have generated. Revenues from our electricity generation segment are recognized based on the output delivered at rates specified under contract terms or prevailing regulatory rates. For generation concessions renewed pursuant to Law No. 12,783/2013, there was a change of regime in the revenue framework, whereas the exploration method and the operating and maintenance methods are required by the law to be separately disclosed beginning in 2013;
· revenues from our transmission segment derive from the construction, operation and maintenance of transmission networks for other electricity concessionaires and certain revenues arising from applying inflation and other indexes to the value of our investments. Revenues received from other concessionaires using our basic transmission network are recognized in the month that the services are provided to the other concessionaires. These revenues are fixed each year by the Brazilian Government. These revenues also include as financial revenue the value calculated over receivables registered as financial assets (formerly recorded as “Property, Plant and Equipment”), based on fees calculated from the receipt of annual permitted revenues (Receita Anual Permitida), or RAP (which is based on gross RAP minus the amount allocated for operations and maintenance revenue) until the concession agreements for energy transmission services terminate. In 2016, this line item included the R$28.6 billion in transmission RBSE payments further described in “— Principal Factors Affecting our Financial Performance — Transmission RBSE Payment.” For transmission concessions renewed pursuant to Law No. 12,783/2013, there was a change of regime in the revenue framework, whereas the exploration method and the operating and maintenance methods are required by the law to be separately disclosed beginning in 2013; and
· revenues in our distribution segment derive from the sale to end consumers of electricity that we purchase from generation companies and also some electricity that we generate in thermal plants in certain isolated areas in the north region of Brazil for distribution, as well as certain revenues from the construction, operation and maintenance of distribution networks. Electricity distribution sales to final customers are recognized when power is provided. Invoices for these sales are rendered on a monthly basis. Unbilled revenues from the billing cycle up to the end of each month are estimated based on the prior month’s billing and are accrued at the end of the month. Differences between estimated and actual unbilled revenues, if any, are recognized in the following month.
· On November 25, 2014, ANEEL decided to add the concession and permit agreements of the Brazilian electricity distribution companies, incorporating the balances of the receivables from Parcel A and other financial items in calculation of indemnity, when the concession expires. This event requires that the balance be recognized for any differences from Parcel A and other financial components not yet recovered or liquidated. The total revenue from Parcel A and other financial items as of December 31, 2016 is R$339 million. See note 37 to our consolidated financial statements for further information.
Other Operating Revenues
Other operating revenues derive from telecommunication companies using certain parts of our infrastructure to install telecommunication lines, and other revenues which are not related to the electricity services.
Taxes on Revenues
Taxes on revenues consist of Imposto sobre a Circulação de Mercadorias e Serviços — ICMS (or VAT), a sales tax charged on gross revenues. These taxes do not apply to revenyes frm the transmission RBSE payments described in “— Principal Factors Affecting our Financial Performance — Transmission RBSE Payment.” We are subject to different VAT rates in the different states in which we operate, with the VAT rates ranging from 7.0% to 27.0%. Pursuant to applicable regulations, we are not liable for any taxes on revenues in our transmission segment.
Additionally, we are subject to two federal taxes imposed on the gross revenues of corporate entities: the Program of Social Integration (Programa de Integração Social) — PIS/PASEP and Contribution for the Financing of Social Security (Contribuição para o Financiamento da Seguridade Social) — COFINS.
Regulatory Charges on Revenues
These deductions from gross revenues comprise payments made to the CCC Account, the RGR Fund, the CDE Account, PROINFA and similar charges levied on electricity sector participants. Regulatory charges are calculated in accordance with formulas established by ANEEL, which differ according to the type of sector charges, and thus there is no direct correlation between revenues and sector charges.
Operating Costs and Expenses
Personnel, Supplies and Services
Our operating costs and expenses related to personnel, supplies and services primarily consist of daily administrative expenses for employees, equipment and infrastructure, as well as expenses related to outsourcing security, maintenance and external consultants and advisors. Due to the diverse nature of these expenses, we apply certain subjective criteria to allocate such expenses to our operational activities. These expenses do not include raw material costs used to generate power.
Electricity Purchased for Resale
Our distribution and generation segments both purchase electricity for resale. Electricity purchased in the distribution segment is purchased from generators. Electricity purchased in the generation segment represents the Paraguayan portion of the energy from Itaipu that is sold to distribution companies defined under the Itaipu treaty as well as to other generators or traders with a view to complying with the powe load demand.
Fuel for Electricity Production
The cost of fuel is a significant component of our operating expenses. Most of these costs, under the Isolated System, are subsequently reimbursed from the CCC Account, pursuant to Law No. 12,111.
Use of the Grid
These costs represent charges for transmission of energy over the power lines of third parties.
Interest Payments and Penalties
These costs represent interest payments in respect of our financing with third parties as well as potential penalties for late payments.
Depreciation and Amortization
This represents depreciation and amortization for our property, plant, equipment and intangible assets. We record property, plant and equipment as construction or acquisition costs, as applicable, less accumulated depreciation calculated based on the straight-line method, at rates that take into consideration the estimated useful lives of the assets. Repair and maintenance costs that extend the useful lives of the related assets are capitalized, while other routine costs are charged to our result of operations. Interest relating to debt obtained from third parties incurred during the construction period is capitalized. Amortization of intangible and financial assets, included in the scope of IFRIC 12, is based on the concession period.
Operating Costs
This reflects charges we make in respect of: (i) legal proceedings to which we are party; (ii) bad debt expense and impairments; (iii) onerous contracts; and (iv) other matters.
Donations and Contributions
This reflects expenses relating to investments in new information technology and research and development, as well as investments in cultural programs and sponsorships.
Other Operating Costs
Our other operating costs comprise a number of miscellaneous costs that we incur as part of our day-to-day operations. The most significant components are: (i) costs of leasing goods such as generation units for the Isolated System; (ii) costs of operations and maintenance of our facilities that provide for electricity services; (iii) telecommunication costs comprising primarily costs incurred for
telephone and internet services; (iv) insurance costs, including insurance for our facilities and property; and (v) costs of disposal of assets, primarily transformers.
Results of Equity Method Investees
Results arising from the equity in the profit and loss of associates and joint ventures accounted for using the equity method.
Financial Income (Expenses), Net
Financial Income
This reflects interest income and commissions we receive from loans we made in accordance with the provisions of Brazilian law that permitted us to act as a lender to certain public utility companies (see “Item 4.B, Business Overview — Lending and Financing Activities” for a description of our outstanding loans to other Brazilian utility companies).
Financial Expenses
This principally reflects payments of dividends to our shareholders, as well as debt and leasing expenses. This also reflects the U.S. dollar/real exchange rate variation relating to Itaipu.
Foreign Exchange and Monetary Gain (Loss)
Foreign exchange gain (losses) mainly relate to our financial loan to Itaipu, as the underlying currency of this loan is the U.S. dollar, and this represents our largest exposure to foreign currency risk. A devaluation or depreciation of the real against the U.S. dollar increases our revenues, as it increases the value of our assets from Itaipu, although the effect of this contribution is netted out, as discussed above. An appreciation of the real decreases our revenues because it decreases the value of our assets from Itaipu, although the effect of this contribution is similarly netted out as a depreciation of the cost of construction of Itaipu.
A. Operating Results
Presentation of Segmentation Information
Segment information is intended to provide insight into the way we manage and evaluate our businesses. The accounting policies for each segment are the same as those described in the summary of significant accounting policies. We continue to segment our core operations in the Brazilian generation, transmission, and distribution markets. Inter-segment balances have not been eliminated.
Please see note 44 to our consolidated financial statements for information on revenues from external customers and intersegment revenues.
The following table shows our revenues and operating expenses as a percentage of net operating revenues with eliminations:
|
| Year Ended December 31, |
| Year Ended December 31, |
| ||||||||
|
| 2016 |
| 2015 |
| 2014 |
| 2016 |
| 2015 |
| 2014 |
|
|
| (In R$ thousands) |
| ||||||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
Eletricity sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribuition |
| 28.4 | % | 53.4 | % | 37.0 | % | 17,223,231 |
| 17,396,769 |
| 11,144,232 |
|
Generation |
| 29.1 | % | 55.2 | % | 59.5 | % | 17,686,440 |
| 17,988,931 |
| 17,935,103 |
|
Transmission |
| 55.9 | % | 18.5 | % | 16.9 | % | 33,967,317 |
| 6,031,625 |
| 5,100,632 |
|
Other operating revenues |
| 3.5 | % | 4.5 | % | 4.4 | % | 2,110,924 |
| 1,471,741 |
| 1,332,197 |
|
Taxes on revenues |
| (12.6 | )% | (24.5 | )% | (14.5 | )% | (7,643,642 | ) | (7,986,568 | ) | (4,369,343 | ) |
Regulatory charges on revenues |
| (4.3 | )% | (7.1 | )% | (3.3 | )% | (2,595,417 | ) | (2,313,660 | ) | (1,005,014 | ) |
Net operating revenues |
| 100.0 | % | 100.0 | % | 100.0 | % | 60,748,853 |
| 32,588,838 |
| 30,137,807 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
| (75.5 | )% | (130.48 | )% | (112.8 | )% | (45,842,327 | ) | (42,628,284 | ) | (33,981,264 | ) |
Financial income/(expenses), net |
| (9.8 | )% | (5.2 | )% | 2.3 | % | (5,929,311 | ) | (1,699,025 | ) | 694,625 |
|
Gains/(losses) on results of affiliated companies |
| 5.3 | % | 1.6 | % | (4.3 | )% | 3,205,511 |
| 531,446 |
| (1,308,304 | ) |
Income before income tax and social contribution |
| 20.1 | % | (34.0 | )% | (14.8 | )% | 12,182,725 |
| (11,207,024 | ) | 4,457,135 |
|
Income tax |
| (14.0 | )% | (2.2 | )% | (5.6 | )% | (8,510,819 | ) | (710,112 | ) | 1,700,518 |
|
Minority interests |
| 0.0 | % | 0.0 | % | 0.0 | % | — |
| — |
| — |
|
Net income (loss) |
| 6.0 | % | (36.26 | )% | (25.8 | )% | 3,671,906 |
| (11,917,136 | ) | (6,157,653 | ) |
The following table shows our revenues and operating expenses as a percentage of net operating revenues without eliminations:
|
| Year Ended December 31, |
| Year Ended December 31, |
| ||||||||
|
| 2016 |
| 2015 |
| 2014 |
| 2016 |
| 2015 |
| 2014 |
|
|
| (In R$ thousands) |
| ||||||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
Eletricity sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribuition |
| 27.3 | % | 50.3 | % | 35.3 | % | 17,223,231 |
| 17,396,769 |
| 11,144,232 |
|
Generation |
| 31.7 | % | 57.3 | % | 61.3 | % | 19,951,530 |
| 19,824,713 |
| 19,333,712 |
|
Transmission |
| 53.9 | % | 17.4 | % | 16.2 | % | 33,967,317 |
| 6,031,625 |
| 5,100,632 |
|
Other operating revenues |
| 3.4 | % | 4.8 | % | 4.3 | % | 2,132,721 |
| 1,653,801 |
| 1,340,865 |
|
Taxes on revenues |
| (12.1 | )% | (23.1 | )% | (13.9 | )% | (7,643,642 | ) | (7,986,568 | ) | (4,369,343 | ) |
Regulatory charges on revenues |
| (4.1 | )% | (6.7 | )% | (3.2 | )% | (2,595,417 | ) | (2,313,660 | ) | (1,005,014 | ) |
Net operating revenues |
| 100.0 | % | 100.0 | % | 100.0 | % | 63,035,740 |
| 34,606,680 |
| 31,545,084 |
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
| (95.7 | )% | (144.48 | )% | (114.5 | )% | (60,340,732 | ) | (50,112,665 | ) | (36,124,531 | ) |
Financial income/(expenses), net |
| (9.3 | )% | (4.7 | )% | 2.2 | % | (5,872,901 | ) | (1,625,062 | ) | 706,909 |
|
Gain (Loss) on results of affiliated companies |
| 33.7 | % | (17.6 | )% | (5.0 | )% | 21,251,801 |
| (6,091,974 | ) | (1,575,940 | ) |
Income (loss) before income tax and social contribution |
| 28.7 | % | (67.1 | )% | (17.3 | )% | 18,073,907 |
| (23,223,022 | ) | (5,448,478 | ) |
Income tax |
| (13.5 | )% | (2.1 | )% | (5.4 | )% | (8,510,819 | ) | (710,112 | ) | (1,700,518 | ) |
Net income |
| 15.2 | % | (69.2 | )% | (22.7 | )% | 9,563,088 |
| (23,933,134 | ) | (7,148,996 | ) |
Reclassification
In order to improve the presentation of our financial results, we reclassified the results from the generation operations of our subsidiaries Amazonas D and Boa Vista for the years ended December 31, 2015 and 2014, to distribution segment.
Year ended December 31, 2016 compared to year ended December 31, 2015
Consolidated Results
This section is an overview of our consolidated results of operations, net of inter-segment eliminations, which are discussed in greater detail with respect to each segment below.
Net Operating Revenues
Net operating revenues for 2016 increased by R$28,160 million, or 86.40%, to R$60,749 million in 2016 from R$32,589 million in 2015. This increase was principally due to an increase of R$27,891 million, in our transmission operating revenues to R$33,556 million in 2016 from R$5,665 million in 2015, due to confirmation from the Ministry of Mines and Energy of a compensation of R$28.6 billion with respect to reimbursements related to our transmission assets existing in 2000. For further information, please see “—Principal Factors Affecting our Financial Performance— Transmission RBSE Payment.”
Operating Costs and Expenses
Operating costs and expenses for 2016 increased by R$3,214 million, or 7.54%, to R$45,842 million in 2016 from R$42,628 million in 2015.
The increase was largely due to:
· operating provisions, which increased by R$3,281 million, or 28.32%, to R$14,868 million in 2016 from R$11,587 million in 2015, due to certain provisions for onerous contracts in our distribution and transmission segments, as further detailed below and certain provisions for contingencies made in our distribution segment, as further described below;
· payroll and related charges, which increased by R$868 million, or 9.14%, to R$10,363 million in 2016 from R$9,495 million in 2015, due to an increase in salaries in line with inflation; and
· electricity purchased for reselling, which increased by R$498 million, or 4.62%, to R$11,264 million in 2016 from R$10,766 million in 2015, due to the amount of electricity we were required to purchase pursuant to the Proinfra program, under which tariffs increased by 30% in 2016 compared to 2015.
This was partially offset by a decrease in:
· fuel for electricity production, which decreased by R$490 million, to R$760 million in 2016 from R$1,250 million in 2015, due to (i) decreased generation activity at our thermal plants due to improved hydrological conditions in 2016 and (ii) the State of Amapá, for which Eletronorte used to produce energy, becoming part of the Interconnected Energy System, requiring less fuel to be purchased for electricity generation; and
· the investigation findings which we accounted for in the amount of R$16.0 million in 2015 but which had no impact in 2016.
Financial Income (Expenses), Net
Financial income (expenses), net resulted in expenses of R$5,929 million in 2016 compared to R$1,699 million in 2015. The increase in expenses was mainly due to:
• monetary adjustment, which increased by R$ 4,003 million in 2016, from income of R$ 2,403 million to a loss of R$ 1,600 million in 2016, mainly due to adjustments for monetary variations in respect of the compulsory loans.
Results of Equity Method Investees
Our equity in the results of our investments accounted for under the equity method increased by R$2,675 million to income of R$3,206 million in 2016 from income of R$531 million in 2015, due to positive results of CTEEP in which which reported income of R$1.7 billion in 2016 compared to income of R$118 million in 2015 due to remuneration accounted for in 2016 and ESBR, which reported income of R$524 million in 2016 compared to an expense of R$280 million in 2015 due to a reversal of the provision related to the liability exemption and CEEE-GT, which reported income of R$301million in 2016 compared to income of R$14 million in 2015.
Income Taxes
The effective tax rate for 2016 was 51% compared to 4.96% in 2015. Income taxes and social contribution increased by R$7,801 million to an expense of R$8,511 million in 2016 from an expense of R$710 million in 2015. The increase was primarily due to the recognition of deferred taxes of R$9,724 million in connection with the compensation in the transmission segment as further described in “— Principal Factors Affecting our Financial Performance — Transmission RBSE Payment.”
Net Income (Loss)
As a result of the factors discussed above, we reported a net profit of R$3,672 million in 2016 compared to a net loss of R$11,917 million in 2015.
Results of Generation Segment
Net Operating Revenues
Net operating revenues for the generation segment increased by R$589 million, or 3.4%, to R$17,711 million in 2016 from R$17,122 million in 2015 due to the factors set out below.
Electricity Sales
Electricity sales increased by R$208 million, or 1.4%, to R$15,270 million in 2016 from R$15,062 million in 2015. This increase was due to increases in the tariffs in line with inflation, partially off-set by a decrease in the volume of energy sold from 158.2 TWh in 2015 to 162.1 TWh in 2016 due to the adverse economic scenario in Brazil.
Regulatory Charges on Revenues
Regulatory charges on revenues increased by R$134 million, or 22.04%, to R$742 million in 2016 from R$608 million in 2015 due to increased operational revenues. For a description of the calculation of regulatory charges on revenues please see “—Description of Principal Line Items—Operating Revenues— Regulatory Charges on Revenues.”
Operating Costs and Expenses
Operating costs and expenses for the generation segment increased by R$578 million, or 2.8%, to R$21,046 million in 2016 from R$20,469 million in 2015.
The primary drivers of the decrease in operating costs and expenses were:
· operating provisions, which decreased by R$509 million, or 6.79%, to R$6,979 million in 2016 from R$7,487 million in 2015, due to the fact that impairments decreased to R$3.4 billion in 2016 from R$5.5 billion in 2015, of which R$4,962 million related to the Angra III plant in 2015 compared to R$2,886 million in 2016 reflecting delays in the date we expect the plant to become operational. This decrease was partially off-set by the charges for onerous contracts that we made in respect of the Angra III plant in 2016 in the amount of R$1.3 billion;
· fuel for electricity production, which decreased by R$512 million, or 44.83% to R$630 million in 2016, from R$1,142 million in 2015, due to (i) decreased generation activity at our thermal plants due to improved hydrological conditions in 2016 and (ii) the fact that the State of Amapá, for which Eletronorte used to produce energy, became part of the Interconnected Energy System; and
· the investigation findings which we accounted for in the amount of R$16.0 million in 2015 but which had no impact in 2016.
This decrease in costs and expenses was partially offset by:
· electricity purchased for resale, which increased by R$1,228 million, or 26.62% to R$5,841 million in 2016 from R$4,613 million in 2015, due to the amount of electricity we were required to purchase pursuant to the Proinfa program, under which tariffs increased by 30% in 2016 compared to 2015.
Income Taxes
Income taxes and social contribution was a tax benefit of R$698 million in 2016, compared to an expense of R$127 million in 2015. The change was primarily due to the recognition of deferred tax assets in 2016 from a negative base for social contribution charges in the amount of R$680 million.
Results of Transmission Segment
Net Operating Revenues
Net operating revenues for the transmission segment increased by R$27,890 million to R$33,556 million in 2016 from R$5,665 million in 2015, due to the factors set out below.
Updates from the internal rate of return
Updates from the internal rate of return increased by R$28,568 million to R$29,406 million in 2016 from R$838 million in 2015 due to confirmation from the Ministry of Mines and Energy of a compensation of R$36.6 billion with respect to reimbursements related to our transmission assets existing in 2000. For further information, please see “—Principal Factors Affecting our Financial Performance— Transmission RBSE Payment.”
Operation and Maintenance
Operation and maintenance of revenue increased by R$270 million, or 8.7%, to R$3,386 million in 2016 from R$3,116 million in 2015 primarily as a result of: (i) the deployment of new investments, namely by Furnas and Chesf, and (iii) the annual review of annual permitted revenues in line with inflation.
Regulatory Charges on Revenues
Regulatory charges on revenues increased by R$23 million, or 14.9%, to an expense of R$185 million in 2016 from an expense of R$161 million in 2015 primarily as a result of the increase in our revenues in 2016. For a description of the calculation of taxes on revenues please see “—Description of Principal Line Items—Operating Revenues—Regulatory Charges on Revenues.”
Operating Costs and Expenses
Operating costs and expenses for the transmission segment increased by R$97 million, or 1.3%, to R$7,359 million in 2016 from R$7,262 million in 2015.
The primary drivers of the increase in operating costs and expenses were:
· operating charges, which increased by R$930 million, or 55.3%, to R$2,613 million in 2016 from R$1,683 million in 2015, due to the impairment for contract No. 61 of R$1.9 billion by Chesf in 2016 compared to the impairment of R$174 million by Chesf in 2015. This was partially offset by the reversal of an impairment for contract No. 62 in the amount of R$729 million by Furnas in 2016, compared to the constitution of a provision for impairment of R$120 million by Furnas in 2015; and
· payroll and related charges, which increased by R$454 million, or 14.9%, to R$3,501 million in 2016 from R$3,046 million in 2015, due to an increase in salaries in line with inflation.
This increase in these costs and expenses was partially offset by:
· construction — transmission, which decreased by R$903 million, or 43.5%, to R$1,174 million in 2016 from R$2,078 million in 2015, due to decreased investments in the transmission segment due to the adverse macroeconomic conditions in Brazil.
Income Taxes
Income taxes and social contribution benefit increased by R$9,417 million to R$9,141 million in 2016, from a tax benefit of R$277 million in 2015. The increase was primarily due to the recognition of deferred taxes of R$9,724 million in connection with the RBSE payment referred to above.
Results of Distribution Segment
Net Operating Revenues
Net operating revenues for the distribution segment increased by R$121 million, or 1.1%, to R$11,592 million in 2016 from R$11,471 million in 2015, primarily due to an increase in tariffs in line with inflation.
Taxes on Revenues
Taxes on revenues increased by R$25 million, or 0.5%, to R$5,414 million in 2016 from R$5,389 million in 2015 primarily as a result of increased revenue. For a description of the calculation of taxes on revenues please see “—Description of Principal Line Items—Operating Revenues—Taxes on Revenues.”
Regulatory Charges on Revenues
Regulatory charges on revenues increased by R$120 million, or 7.7%, to R$1,663 million in 2016 from R$1,543 million in 2015 primarily as a result of the increase in income from our distribution subsidiaries. For a description of the calculation of regulatory charges on revenues please see “—Description of Principal Line Items—Operating Revenues—Regulatory Charges on Revenues.”
Operating Costs and Expenses
Operating costs and expenses for the distribution segment increased by R$1,968 million, or 14.5%, to R$15,572 million in 2016 from R$13,604 million in 2015.
The primary drivers of the increase in operating costs and expenses were:
· payroll and related charges, which increased by R$114 million, or 4.7%, to R$2,548 million in 2016 from R$2,434 million in 2015, due to an increase in salaries in line with inflation; and
· operating charges increased by R$2,062 million, from R$617 million in 2015 to R$2,679 million in 2016, due to (i) onerous contracts at Amazonas-D of R$813 million; (ii) charges for claims of R$531 million due to the independent producers of energy at Amazonas-D; and (iii) a charges made by us in respect of funding costs incurred by us due to probable delays on receiving reimbursements under the CCC Account.
This increase in these costs and expenses was partially offset by:
· electricity purchased for reselling, which decreased by R$197 million, or 2.6%, to R$7,263 million in 2016 from R$7,461 million in 2015, mainly due to the fact that CELG-D purchased R$540 million less energy for resale in 2016 as a result of the adverse economic scenario in Brazil and the fact that various consumers purchased energy on the free market. This was partially offset by the fact that CERON purchased R$268 million more energy for reselling as it generated less energy due to adverse hydrological conditions.
Results of Administration Segment
Net Operating Revenues
Net operating revenues for the administration segment decreased by R$171 million, or 49.0%, to R$177 million in 2016 from R$348 million in 2015 primarily due to the fact that we purchase the SPEs Norte Brasil Transmissora and Construtora Integração for R$171 million.
Operating Costs and Expenses
Operating costs and expenses for the administration segment increased by R$7,586 million, or 86.42%, to R$16,364 million in 2016 from R$8,778 million in 2015.
The primary drivers of the increase in operating costs and expenses were:
· operating charges increased by R$7,561 million from R$7,192 million in 2015 to R$14,753 million in 2016, due to: uncovered liabilities which increased at: (a) Amazonas-D by R$2,624 million, to R$4,968 million in 2016 from R$2,344 million in 2015; (b) Eletronuclear by R$3,750 million, to R$4,072 million in 2016 from R$322 million; and
· payroll and related charges which increased by R$331 million, or 43.2% to R$1,096 million in 2016 from R$766 million in 2015, due to costs of the Independent Investigation in the amount of R$291 million.
Resust of Equity Method Investees
Our equity in the results of investments accounted for using the equity method for the administration segment increased by R$26,827 million to R$20,735 million in 2016 from an expense of R$6,092 million in 2015 mainly due to the positive results of our associates, which were largely profitable due to the RBSE payment mentioned above: (a) Furnas made a profit of R$9 billion in 2016 compared to a loss of R$70 million in 2015; (b) Chesf made a profit of R$4 billion in 2016 compared to a loss of 70 million in 2015; (c) Eletronorte made a profit of R$3.5 billion in 2016 compared to a profit of R$ 101.6 million in 2015; (d) Eletrosul made a profit of R$1.1 billion in 2016 compared to a loss of R$912 million in 2015; and (e) CTEEP made a profit of R$1.7 billion compared to a profit of R$114 million in 2015.
Financial Results
Financial results for the administration segment decreased by R$4,938 million to an expense of R$979 million in 2016 from income of R$3,959 million in 2015 substantially due to:
· exchange variations, net which decreased by R$1,795 million to an expense of R$500 million in 2016 from income of R$1,295 million in 2015, due to the 18% depreciation of the real against the U.S. dollar in 2016 compared to 2015 and the variation in the financial asset Itaipu that results in a decrease of R$1,500 million in such exchange variation; and
· results from monetary variation, which decreased by R$3,272 million to an expense of R$1,983 million in 2016 from income of R$1,289 million in 2015, due to adjustments for monetary variations in respect of the compulsory loans, as further described in “— Risk Factors— Risks Relating to our Company— We may incur losses in legal proceedings in respect of compulsory loans made from 1962 through to 1993.”
Income Taxes
Income taxes and social contribution expense for the administration segment decreased by R$803 million, to R$68 million in 2016 from an expense of R$871 million in 2015. In 2016 we reversed a liability of deferred tax credits due to the 18% depreciation of the real against the U.S. dollar in 2016 compared to 2015.
Year ended December 31, 2015 compared to year ended December 31, 2014
Consolidated Results
This section is an overview of our consolidated results of operations, net of inter-segment eliminations, which are discussed in greater detail with respect to each segment below.
Net Operating Revenues
Net operating revenues for 2015 increased by R$2,451 million, or 8.13%, to R$32,589 million in 2015 from R$30,138 million in 2014. This increase was due to:
· an increase of R$2,080 million, or 22.15%, in our distribution operating revenues to R$11,471 million in 2015 from R$9,391 million in 2014, principally due to the consolidation of CELG-D’s results with our results for 2015, which in 2014 were only consolidated with our results for the final three-month period of 2014; and
· an increase of R$687 million, or 13.80%, in our transmission operating revenues to R$5,665 million in 2015 from R$4,978 million in 2014, due to (i) a 22.5% increase in operating and maintenance revenue, and (ii) a 17.3% increase in tariffs and annual permitted revenues. These increases are a result of the annual tariff revision, which was positively influenced by (a) an increase in inflation of 10.67% as measured by the IPCA for 2015, and (b) the deployment of 503 km of new transmission lines.
This increase was partially off-set by:
· a slight decrease of R$27 million, or 0.16%, in our generation operating revenues to R$17,122 million in 2015 from R$17,095 million in 2014.
Operating Costs and Expenses
Operating costs and expenses for 2015 increased by R$8,647 million, or 25.45%, to R$42,628 million in 2015 from R$33,981 million in 2014.
The increase was largely due to:
· operating charges, which increased by R$6,924 million to R$11,587 million in 2015 from R$4,663 million in 2014, due to: (i) the recognition of impairments of R$5,980 million, R$4,962 million of which relate to the Angra III plant based on (a) the date that we expect the plant to become operational and (b) changes in the discount rate used to make the impairment tests, due to Brazilian macroeconomic conditions (for further information in respect of delays of the Angra III plant, please see note 20 to our consolidated financial statements), and; (ii) the consolidation of CELG-D’s results with our results for 2015, which were only consolidated with our results for the final three-month period of 2014;
· payroll and related charges, which increased by R$1,010 million, or 11.90%, to R$9,495 million in 2015 from R$8,485 million in 2014, due to (a) an increase in salaries following the 2015 collective bargaining agreement; and (b) the addition of further employees as a result of our acquisition of CELG-D in September 2014; and
· electricity purchased for reselling, which increased by R$341 million, or 3.27%, to R$10,766 million in 2015 from R$10,425 million in 2014, due to the consolidation of CELG-D’s results with our results for 2015, which were only consolidated with our results for the final three-month period of 2014. Excluding CELG-D’s expenses for the purchase of energy for resale, the amount of energy purchased for resale increased to R$8,378 million in 2015 from R$7,820 million in 2014, principally due to: (i) a decrease in provisions for doubtful accounts, and (ii) improved hydrological conditions in 2015.
The increase in these costs and expenses was partially offset by a decrease in:
· fuel for electricity production, which decreased by R$230 million, to R$1,250 million in 2015 from R$1,480 million in 2014, due to less generation at our thermal powered plants as a result of improved hydrological conditions in 2015; and
· the investigation findings in the amount of R$16.0 million in 2015 when compared to R$195.1 million in 2014.
Financial Income (Expenses), Net
Financial income (expenses), net resulted in expenses of R$1,699 million in 2015 compared to income of R$695 million in 2014. The increase in expenses was mainly due to:
· debt charges, which increased by R$2,975 million, or 88.41%, to R$6,340 million in 2015 from R$3,365 million in 2014, due to (i) the increase in the SELIC rate from 11.75% as of December 31, 2014 to 14.15% as of December 31, 2015; and (ii) the depreciation of approximately 45% of the real against the U.S. dollar in 2015; and
· remuneration for indemnification — Law No. 12,783, which decreased by R$904 million, or 88.7%, to an expense of R$115 million in 2015 from R$1,019 million in 2014, due to reimbursements made to the CDE Account for indemnification amounts received in excess in 2015.
This increase in expenses was partially offset by an increase in financial income from monetary restatement, net which increased by R$2,057 million, or 594.18%, to R$2,403 million in 2015 from R$346 million in 2014, due to an increase in the IPCA and IGP-M inflation indices that apply to loans granted by us.
Results of Equity Method Investees
Our equity in the results of investments accounted for using the equity method was income of R$531 million in 2015 compared to a loss of R$1,308 million in 2014, due to the negative results of Madeira Energia, an SPE, which reported income of R$7 million in 2015 compared to a loss of R$861 million in 2014, and CEEE-GT, which reported income of R$14 million in 2015 compared to a loss of R$91 million in 2014 and CEEE-D, which reported a loss of R$10 million in 2015 comapred to a loss of R$145 million in 2014.
Income Taxes
The effective tax rate for 2015 was 4.96% compared to 26.21% in 2014. Income taxes and social contribution expense decreased by R$991 million to an expense of R$710 million in 2015 from an expense of R$1,701 million in 2014. The decrease was primarily due to the fact that: (i) we reported a greater gross loss in 2015, and (ii) we derecognized certain of Chesf’s and Furnas’ deferred tax assets in 2014.
Net Loss
As a result of the factors discussed above, our net loss increased by R$5,759 million to R$11,917 million in 2015 from R$6,158 million in 2014.
Results of Generation Segment
Net Operating Revenues
Net operating revenues for the generation segment decreased by R$27 million, or 0.16%, to R$17,122 million in 2015 from R$17,095 million in 2014 due to the factors set out below.
Electricity Sales
Electricity sales decreased by R$62 million, or 0.41%, to R$15,062 million in 2015 from R$15,124 million in 2014. This decrease was due to decreases in revenues from: (i) energy sold on the Free Market; (ii) Eletronuclear, due to the scheduled interruption of operations at the Angra II plant in October 2015; and, (iii) CGTEE, due to interruptions at the Candiota III plant, which resulted in the production of less energy and penalties for generation at less than the required levels.
Regulatory Charges on Revenues
Regulatory charges on revenues decreased by R$127 million, or 17.28%, to R$608 million in 2015 from R$735 million in 2014 due to decreased operational revenues. For a description of the calculation of regulatory charges on revenues please see “—Description of Principal Line Items—Operating Revenues— Regulatory Charges on Revenues.”
Operating Costs and Expenses
Operating costs and expenses for the generation segment increased by R$5,830 million, or 39.83%, to R$20,469 million in 2015 from R$14,639 million in 2014.
The primary drivers of the increase in operating costs and expenses were:
· operating charges, which increased by R$9,108 million, to R$7,488 million in 2015 from income of R$1,620 million in 2014, due to the fact that (i) impairments increased to R$5,470 million in 2015 from R$252 million in 2014, R$4,962 million of which relate to the Angra III plant based on (a) the date that we expect the plant to become operational, and (b) changes in the discount rate used to make the impairment tests, due to Brazilian macroeconomic conditions (for further information in respect of delays of the Angra III plant please see explanatory note 20 to our consolidated financial statements), and (ii) onerous contracts changed to an expense of R$102 million in 2015 from income of R$1,577 million in 2014 due to reversions by Chesf in respect of the Itaparica and Camaçari plants and by Energia Sustentável do Brasil S.A. in respect of Jirau;
· the investigation findings in the amount of R$16.0 million in 2015 when compared to R$195.1 million in 2014; and
· other expenses, which increased by R$97 million, or 30.22% to R$418 million in 2015 from R$321 million in 2014, due to (i) an increase of R$87 million in costs related to leases and rents which increased in 2015 in line with inflation as reported by IPCA, and (ii) bad debt expense in the amount of R$59 million.
This increase in costs and expenses was partially offset by:
· electricity purchased for resale, which decreased by R$2,866 million, or 38.32% to R$4,613 million in 2015 from R$7,479 million in 2014, due to a decrease in the amount of energy sold on the Free Market; and
· fuel for electricity production, which decreased by R$125 million, or 9.87% to R$1,142 million in 2015, from R$1,267 million in 2014, due to decreased generation activity at our thermal plants due to improved hydrological conditions in 2015.
Income Taxes
Income taxes and social contribution expense decreased by R$3,872 million to R$127 million in 2015, from R$3,999 million in 2014. The decrease was primarily due to the fact that (i) we reported a greater pre-tax loss in 2015 and (ii) we derecognized certain of Chesf’s and Furnas’ deferred tax assets in 2014.
Results of Transmission Segment
Net Operating Revenues
Net operating revenues for the transmission segment increased R$687 million, or 13.80%, to R$5,665 million in 2015 from R$4,978 million in 2014, due to the factors set out below.
Operation and Maintenance
Operation and maintenance of revenue increased R$516 million, or 19.85%, to R$3,116 million in 2015 from R$2,600 million in 2014 primarily as a result of: (i) new revenues from investments to improve our transmission system, (ii) the deployment of new investments, and (iii) the annual review of annual permitted revenues.
Regulatory Charges on Revenues
Regulatory charges on revenues increased R$5 million, or 3.18%, to an expense of R$162 million in 2015 from an expense of R$157 million in 2014 primarily as a result of the increase in our revenues in 2015. For a description of the calculation of taxes on revenues please see “—Description of Principal Line Items—Operating Revenues—Regulatory Charges on Revenues.”
Updates from the internal rate of return
Updates from the internal rate of return increased by R$124 million, or 17.37%, to R$838 million in 2015 from R$714 million in 2014 due to a 17.3% increase in the annual permitted revenues, which increased in line with the IPCA inflation index.
Operating Costs and Expenses
Operating costs and expenses for the transmission segment increased by R$2,559 million, or 54.41%, to R$7,262 million in 2015 from R$4,703 million in 2014.
The primary drivers of the increase in operating costs and expenses were:
· operating charges, which increased by R$1,705 million to an expense of R$1,683 million in 2015 from income of R$22 million in 2014, due to: (i) the enactment of new regulations by ANEEL in 2014 (Resolution ANEEL No. 642 e No. 643/2014), which allowed our transmission subsidiaries to constitute new financial assets, and (ii) onerous contracts entered into by Chesf and Furnas;
· payroll and related charges, which increased by R$286 million, or 10.36%, to R$3,046 million in 2015 from R$2,760 million in 2014, due to an increase in salaries in line with inflation;
· construction — transmission, which increased by R$292 million, or 16.35%, to R$2,078 million in 2015 from R$1,786 million in 2014, due to increased investments in the transmission segment, which resulted in the deployment 503 km of new transmission lines; and
· other expenses, which increased by R$274 million to R$382 million in 2015 from of R$108 million in 2014, due to the elimination of accounting effects as a result of operations between two of our subsidiaries.
Income Taxes
Income taxes and social contribution benefit decreased by R$2,241 million to R$277 million in 2015 from R$2,518 million in 2014. The decrease was primarily due to the fact that we derecognized deferred tax assets in 2014.
Results of Distribution Segment
Net Operating Revenues
Net operating revenues for the distribution segment increased by R$2,080 million, or 22.15%, to R$11,471 million in 2015 from R$9,391 million in 2014 due to the factors set out below. This increase was primarily due to an increase in revenues from the sale of energy which increased by R$6,120 million, or 59.94%, to R$16,330 million in 2015 compared to R$10,210 million in 2014.
Taxes on Revenues
Taxes on revenues increased by R$2,912 million to R$5,389 million in 2015 from R$2,477 million in 2014 primarily as a result of increased revenues due to the consolidation of CELG-D’s results with our results for 2015, which were only consolidated with our results for the final three-month period of 2014. For a description of the calculation of taxes on revenues please see “—Description of Principal Line Items—Operating Revenues—Taxes on Revenues.”
Regulatory Charges on Revenues
Regulatory charges on revenues increased by R$1,431 million to R$1,543 million in 2015 from R$112 million in 2014 primarily as a result of an increase in income from our distribution subsidiaries, which was substantially impacted by the results of CELG-D, which were consolidated with our results for 2015, but were only consolidated with our results for the final three-month period of 2014. For a description of the calculation of regulatory charges on revenues please see “—Description of Principal Line Items—Operating Revenues—Regulatory Charges on Revenues.”
Operating Costs and Expenses
Operating costs and expenses for the distribution segment increased by R$5,937 million, or 77.44%, to R$13,604 million in 2015 from R$7,667 million in 2014.
The primary drivers of the increase in operating costs and expenses were:
· payroll and related charges increased by R$658 million, or 37.05%, to R$2,434 million in 2015 from R$1,776 million in 2014, due to increased headcount due to the acquisition of CELG-D and an increase in salaries in line with inflation;
· electricity purchased for reselling increased by R$3,664 million, or 96.50%, to R$7,461 million in 2015 from R$3,797 million in 2014, due to the acquisition of CELG-D and an increase in costs related to the purchase of fuel by Amazonas D, which purchases petroleum for its generation and distribution; and
· operating charges increased by R$1,160 million from income of R$543 million in 2014 to an expense of R$617 million in 2015, due to an impairment in the amount of R$94 million and an increase in bad debt expense of R$643 million, which was mainly due to changes in the criteria used to determine the allowance for doubtful accounts by our distribution subsidiaries, principally CELG-D.
Income Taxes
Income taxes and social contribution benefit decreased by R$11 million to R$11 million in 2015 from R$22 million in 2014. The decrease was primarily due to the fact that we reported a greater pre-tax loss in 2015.
Results of Administration Segment
Net Operating Revenues
Net operating revenues for the administration segment increased by R$266 million to R$348 million in 2015 from R$82 million in 2014 primarily due to the acquisition of transmission concession 10/2009 from our subsidiary Eletrosul.
Operating Costs and Expenses
Operating costs and expenses for the administration segment decreased by R$338 million, or 3.7%, to R$8,778 million in 2015 from R$9,116 million in 2014.
The primary driver of the increase in operating costs and expenses were:
· operating charges decreased by R$489 million, or 6.4%, from R$7,681 million in 2014 to R$7,192 million in 2015, due to: (i) R$4.1 billion in compulsory loans which were recognized only in 2014 due to a register of subsequent events described in Notes 47 and 30 of our consolidated financial statements, (ii) uncovered liabilities which increased at: (a) Amazonas Energia by R$1,929 million, to R$2,344 million in 2015 from R$415 million in 2014; (b) CEPISA by R$601 million, to R$563 million in 2015 from R$38 million in 2014; and (c) CERON by R$645 million to R$457 million in 2015 from R$189 million in 2014.
Results of Equity Method Investees
Our equity in the results of investments accounted for using the equity method for the administration segment changed by R$4,516 million to a loss of R$6,092 million in 2015 from a loss of R$1,576 million in 2014 mainly due to expenses which increased at: (a) Eletronuclear by R$3,792 million to R$4,791 million in 2015 from R$999 million in 2014; and (b) Eletrosul by R$876 million to an expense of R$912 million in 2015 from income of R$36 million in 2014.
Financial Results
Financial results for the administration segment increased by R$1,496 million, or 60.71%, to R$3,959 million in 2015 from R$2,463 million in 2014 substantially due to:
· exchange variation, net which increased by R$619 million, or 91.6%, to income of R$1,295 million in 2015 from income of R$676 million in 2014, due to a 45% depreciation of the real against the U.S. dollar in 2015;
· revenue from financial investments, which increased by R$169 million, or 38.5%, to income of R$608 million in 2015 from income of R$439 million in 2014, due to an increase in the SELIC rate from 11.75% as of December 31, 2014 to 14.15% as of December 31, 2015; and
· revenue from financial and loans, which increased by R$597 million, or 24.77%, to income of R$3,008 million from income of R$2,411 million in 2014, due to (i) increase in the SELIC rate from 11.75% as of December 31, 2014 to 14.15% as of December 31, 2015; and (ii) the depreciation of approximately 45% of the real against the U.S. dollar in 2015.
This increase was partially off-set by an increase in:
· debt charges, which increased R$947 million, or 62.72%, to an expense of R$2,457 million in 2015 from an expense of R$1,510 million in 2014, due to (i) increase in the SELIC rate from 11.75% as of December 31, 2014 to 14.15% as of December 31, 2015; and (ii) the depreciation of approximately 45% of the Brazilian real against the U.S. dollar in 2015.
Income Taxes
Income taxes and social contribution expense for the administration segment increased by R$629 million to R$871 million in 2015 from R$242 million in 2014. Despite the fact that our financial reporting pre-tax loss increased substantially when compared to 2014, our expenses with income tax reporting purposes increased due to the fact that in 2014 we reported a net loss. In 2014, we did not recognize current taxes and only recognized deferred taxes on temporary differences incurred in 2014. In 2015, we incurred a fiscal profit, as a large portion of our financial reporting expenses corresponded to temporary and permanent differences that were used to calculate our fiscal profit, such as compulsory loans expenses, which increased to R$5.7 billion in 2015 from R$308 million in 2014, and equity pick-up expenses, which increased to R$6.1 billion in 2015 from R$278 million in 2014. This resulted in a current income tax expense and an increase in our deferred income taxes expenses to R$480 million in 2015 from R$236 million in 2014.
B. Liquidity and Capital Resources
Our main sources of liquidity derive from the cash generated by our operations and from loans received from various sources, including the RGR Fund (established to compensate electricity concessionaires for uncompensated expenses when the concessions ended), loans from third parties, including certain international agencies, and realizations of various investments we have made with Banco do Brasil S.A. and Caixa Econômica Federal, with whom we are required by law to deposit any surplus cash assets. In addition, on October 20, 2011 we issued US$1.75 billion 5.75% notes due in 2021.
We require funding principally in order to finance the upgrade and expansion of our generation and transmission facilities and in order to repay our maturing debt obligations. In addition, through our subsidiaries, we are bidding in auctions for new transmission lines and new generation contracts. In the event that we are successful in any of these auctions, we will need additional cash to fund investments necessary to expand the applicable operations.
From time to time, we consider potential new investment opportunities and we may finance such investments with cash generated by our operations, loans, issuances of debt and equity securities, capital increases or other sources of funding that may be available at the relevant time. At present we have the ability to fund up to R$4.1 billion of capital expenditure out of existing resources without the need to access the capital markets. Those funds represent a portion of the revenues we have generated from our sales of electricity and the interest we have received from our lending activities.
Sources of financing for working capital and for investments in long-term assets
Our main sources of financing for working capital and investments in fixed assets in the last three years are: indemnities from concessions renewed under the terms in Law No. 12,783 approved by the granting authority; (ii) receivables related to the financing granted to Itaipu, (iii) our own operational cash flows; (iv) loans from domestic and international lenders such as Caixa Econômica Federal (“CEF”) Banco do Brasil S.A. (“BB”) and the National Bank for Social and Economic Development (“BNDES”); and (v) loans from international credit agencies. In addition, our sources of financing include investments that we are required to make with BB, considering that we are required to deposit available funds with these federal financial institutions.
The main uses of resources by us refer to (i) payment or renegotiation of debt; (ii) funding the improvement and expansion of its generation, transmission and distribution projects; (iii) possibility of participation, through our subsidiaries, in public bidding processes in connection with new transmission lines and new generation agreements, since, if we succeed in any of these bidding processes, we will need additional resources to fund the required investments to expand the applicable operations.
Similar to other companies in our sector, we monitor our obligations based on the financial leverage ratio. This ratio corresponds to the net debt divided by total capital. The net debt corresponds to total loans and financings (excluding amounts related to RGR and including short-term and long-term loans and financings, as set forth in the consolidated balance sheet), minus cash and cash equivalents. The total capital is calculated by adding-up the shareholders’ equity (as set forth in the consolidated balance sheet) and the net debt.
Our main uses of funds in 2016 were for investments in the amount of R$8,710.9 million and debt service obligations of R$8,344.1 million. We meet these requirements with (1) cash and cash equivalents, long-term financial investments and resources generated from operating activities (totaling R$10,619.2 million), (2) long-term financing (totaling R$3,503.4 million), and (3) AFAC (totaling R$2,932.4 million). Our management believes that we have sufficient sources of liquidity to meet our financial commitments through the combined use of our operating cash flow, the receipt of all indemnities already approved by grantor as a result of Law No. 12,783 and proceeds from loans and financing already contracted and that could be taken if necessary. As of December 31, 2016, we were in a working capital deficiency position (i.e., consolidated total current liabilities exceed consolidated total current assets). In order to remediate our current working capital deficiency situation, our Board of Directors has approved a strategic business plan aiming to reduce investments, privatize the distribution companies, sell administrative properties, sell certain SPEs, structure a tax planning strategy in order to optimize our tax costs and improve the use of tax credits, implement a voluntary redundancy plan and create a shared service center.
Cash Flows
The following table summarizes our net cash flows for the periods presented:
|
| For the Year Ended December 31, |
| ||||
|
| 2016 |
| 2015 |
| 2014 |
|
|
| (in R$ thousand) |
| ||||
Net Cash Flows: |
|
|
|
|
|
|
|
Provided by operating activities |
| 1,888,738 |
| 6,980,474 |
| 5,192,461 |
|
Used in investing activities |
| (5,473,806 | ) | (9,012,552 | ) | (10,637,002 | ) |
Provided by (used in) financing activities |
| 2,870,763 |
| 2,018,973 |
| 3,254,036 |
|
Cash Flow from Operating Activities
Our cash flows from operating activities primarily result from:
· the sale and transmission of electricity to a stable and diverse base of retail and wholesale customers at fixed prices;
· the payment of financial charges;
· the payment of global reverse reserve charges;
· amounts received from allowed annual revenue;
· the receipt of financial asset compensation;
· the receipt of financial charges;
· the payment of income taxes and social contributions;
· income received from investments in equity securities;
· the additional pension payments;
· the payment of legal provisions;
· judicial deposits; and
· restricted deposits for legal proceedings in cases where we are a plaintiff in a proceeding and are ordered to pay a deposit to the relevant court.
Cash flows from operating activities have been sufficient to meet operating and capital expenditures requirements during the periods under discussion.
In 2016, our cash flows from operating activities decreased by R$5.09 billion, to R$1.89 billion in 2016 from R$6.98 billion in 2015. This variation was primarly due to the fact that we did not receive an indemnity payment in 2016, while we received and indemnity payment in the amount of R$4.0 billion in 2015.
In 2015, our cash flows from operating activities increased by R$1.8 billion, to R$6.98 billion in 2015 from R$5.2 billion in 2014. This variation was due to an increase in indemnity payments received to R$4.0 billion in 2015 from R$2.8 billion in 2014.
Cash Flows from Investing Activities
Our cash flows from investing activities primarily reflect:
· investment acquisitions, being partnerships we enter into with third parties in the private sector in relation to the operation of new plants;
· acquisitions of fixed assets, being primarily investments in equipment necessary for operational activities;
· loans and financing - payment;
· acquisition of fixed assets;
· acquisition of intangible assets;
· acquisition of concession assets;
· acquisition /capital increase in subsidiary;
· advances for future capital increases;
· net cash flow of subsidiary acquisition; and
· dividends paid by our subsidiaries.
In 2016, our cash flows from investing activities decreased by R$3.5 billion, or 39.26%, to an outflow of R$5.5 billion in 2016 from an outflow of R$9 billion in 2015. This variation was due to a decrease of R$2.4 billion in the acquisition of fixed assets and R$1.2 billion in acquisition of concession assets.
In 2015, our cash flows from investing activities decreased by R$1.6 billion, or 15.27%, to an outflow of R$9 billion in 2015 from an outflow of R$10.6 billion in 2014. This variation was due to a decrease of R$1.5 billion in capital contributions made to our subsidiaries and SPEs in the 2015 and an increase of R$2.0 billion in amounts received for loans and financing granted, which were partially off-set by an increase of R$ 1.3 billion in amounts disbursed in relation to the deployment of the following fixed assets: Complexo Eólico Hermenegildo, VamCruz, Santo Sé II, Chapada do Piauí I, Geribatu, Chuí, Serra das Vacas, Santo Antônio and Jirau.
Cash Flows from Financing Activities
Our cash flows used in financing activities primarily reflect interest income we receive from short-term and long-term loans made to non-affiliated companies that operate in the Brazilian electricity sector.
In 2016, our cash flows from financing activities increased by R$0.9 billion, to an inflow of R$2.9 billion in 2016 from an inflow of R$2 billion in 2015. This variation was mainly due to a decrease of R$0.8 billion in principal payments in respect of loans and financing, a decrease in loans and financing of R$3.9 billion obtained by Furnas (R$1.7 billion), Eletrosul (R$0.7 billion), Chesf (R$0.7 billion) and Eletronuclear (R$0.5 billion) and partially off-set by an increase of R$2.9 billion in advance for future capital increase obtained from Federal Government and the increase of R$1 billion due to transfer of the Global Reversion Reserve.
In 2015, our cash flows from financing activities decreased R$1.2 billion, to an inflow of R$2 billion in 2015 from an inflow of R$3.2 billion in 2014. This variation was mainly due to an increase of R$2.1 billion in principal payments in respect of loans and financing entered into by us and partially off-set by a decrease of R$792 million in payments made to our shareholders for dividends and interest on capital.
Relationship between Appropriated Retained Earnings and Cash Flows
As of December 31, 2016, our balance sheet reflected retained reserves of R$1.7 million, which consisted of our statutory reserves but do not include unpaid shareholders’ remuneration (see “Item 8.A, Consolidated Financial Statements and Other Information—Policy on dividend distribution”).
Capital Expenditure
In the last three years, we have invested an average of R$10.17 billion per year in expansion, modernization, research, infrastructure and environmental quality. Approximately 17.8% was invested in our generation segment, 17.0% in our transmission segment and the balance in our distribution segment and other investments.
Our core business is the generation and transmission of energy and we intend to invest in these segments in the upcoming years.
Under the EPE 10 Year Plan (2014-2024), it is estimated that Brazil will have 211,615 km of transmission lines and 206.4 GW of installed generation capacity by 2024 from 150.3 GW in 2016. These investments by Brazil will represent approximately R$376 billion. As the current largest market participant based on length of transmission lines, we expect to participate in some of these new investments. In accordance with the new Business Plan, launched in November 2016, we believe that from 2017 to 2021 we will invest approximately R$35.7 billion in our generation, transmission and distribution businesses. Since we are looking to privatize our
distribution companies by 2017, we believe that the investment in the distribution segment will only be for the year 2017. For these investments in generation and transmission, we expect to use the funding derived from our net cash flows as well as from accessing national and international capital markets and through bank financings.
Our capital expenditures for fixed assets, intangible assets and concession assets in 2016, 2015 and 2014 were R$3.7 billion, R$7.7 billion and R$6.1 billion, respectively. These values are the budgeted values and do not match the cash flow amounts due to the accounting consolidation process and intercompany elimination.
C. Research and Development, Patents and Licenses
Research and Development
The main activities of research, development and innovation for the Eletrobras System are carried out by the Electric Energy Research Center (Cepel), a non-profit entity founded in 1974 by us and our subsidiaries: Chesf, Eletronorte, Eletrosul and Furnas. The Center’s mission is to develop and deploy sustainable technology solutions for the generation, transmission and distribution of electricity by means of Research, Development and Innovation activities (R & D + I) for the Brazilian electricity sector. Eletrobras is the primary sponsor of Cepel and has the technical support of the Center in the coordination of important national programs such as “Light for All” (Luz para Todos), the “National Electric Energy Conservation Program” (Procel), “Incentives for Alternative Sources of Electric Energy Program” (Proinfa) and “Efficient Public Lighting” (ReLuz). Cepel also participates in the elaboration of the National Energy and the Decennial Power Plans of Eletrobras. In order to support its research activities, Cepel created a complex of 34 laboratories, some accredited by the Instituto Nacional de Metrologia (the Brazilian National Metrology Institute), that perform a wide variety of experiments, technology services and tests. Noteworthy are the laboratories of High-Voltage and High-Power — the largest of their kind in the Southern Hemisphere — and the Laboratory of Ultra-High Voltage, in its final stages of implementation having only one similar worldwide. In addition, the Center has two reference and demonstration units: CRESESB, to promote the use of solar and wind energy, and CATE, to promote the efficient use of electricity. In line with the guidelines of the Committee of Technological Politics (CPT), Cepel prioritizes strategic and structuring projects, distributed among seven main research areas, each one carried on by specific department: (i) DEA — Energy Optimization and Environment; (ii) DRE — Electrical Networks; (iii) DAS — Systems Automation; (iv) DLE — Lines and Stations; (v) DTD — Distribution Technology; (vi) DTE — Special Technologies; and (vii) Laboratories (Experimental Research) — DLA and DLF Departments.
The Cepel’s activities have important role in supporting to our core business of generation, transmission, distribution and commercialization of electric energy.
Patents and Licenses
Among others, we have registered “Eletrobras” as a trademark with the Instituto Nacional de Propriedade Industrial — INPI (the Brazilian National Industrial Property Institute). Further, Cepel has twenty-eight patents, Eletronorte has fifty-one patents, Eletrosul has six patents and Furnas has nine patents registered with the INPI relating to equipment and manufacturing processes. In addition, Furnas has three patents registered in the United States, one patent registered in Canada and Cepel has six patents registered outside Brazil.
Insurance
We maintain insurance for, fire, natural disasters, accidents involving third parties, certain other risks associated with the transportation and assembly of equipment, construction of plants, and multirisks. Our subsidiaries and Itaipu have similar insurance coverage. We do not have insurance coverage for business interruption risk because we do not believe that the high premiums are justified by the low risks of a major disruption, considering the energy available in the Interconnected Power System. We believe that we maintain insurance that is both customary in Brazil and adequate for the business in which we engage.
D. Trend Information
Our management has identified the following key trends, which contain certain forward-looking information and should be read in conjunction with “Cautionary Statement Regarding Forward-Looking Information” and “Item 3.A, Risk Factors.” Fundamentally, we believe these trends will allow us to continue to grow our business and improve our corporate image:
· electricity is in constant demand: unlike certain industries which are particularly vulnerable to cyclical conditions in the market and/or seasonality, the demand for electricity is constant. We believe we will continue to have the ability to set tariffs in accordance with market conditions, particularly in the generation segment. Although tariffs in the transmission segment are set by the Brazilian Government each year, we believe that these tariffs will continue to increase;
· participation in future auctions will allow us to grow: we expect to participate in an increasing number of future new energy auctions, as well as new transmission auctions, and will, accordingly need to invest in new power generation plants
(hydroelectric, wind, biomass and thermal) and new transmission lines in order to expand the existing grid and keep our current market share. We also believe that by focusing on generation and transmission, we will be able to maximize profits by improving efficiency in our existing infrastructure and capitalizing on opportunities arising from new infrastructure;
· revenues from third parties for maintenance of facilities: although the core of our business will remain the generation and transmission segments, we have successfully increased our revenues in recent periods by using our expertise to provide maintenance services for other companies in our industry. Our subsidiary Eletronorte has been the key conduit for this. We expect this trend to continue, thereby improving our financial position;
· an increasing focus on environmental, health and safety concerns: there is a trend in Brazil and globally towards increasing concerns for the protection of the environment. This impacts us in various ways, including dealing with social and political issues that may arise when we seek to construct new facilities (particularly in remote areas of Brazil) and reduced carbon emission targets from facilities that rely on fossil fuel. One of the key challenges for us will be to balance these environmental concerns against the growth of our business, as these concerns naturally can increase cost pressures. There is also an increasing trend in Brazil towards more stringent health and safety requirements with respect to operating permits for our facilities, which similarly imposes cost pressure challenges on our business; and
· effect of Law No. 12,783: Law No. 12,783 will continue to affect the manner in which we account for our concessions. We expect to renew additional contracts for the maximum period of 30 years at significantly lower tariff levels. As a result, we may continue to write down the value of our renewed concessions and record “onerous contracts” in cash generation.
E. Off-Balance Sheet Arrangements (in R$ thousand)
We act as guarantor, in proportion to our equity interests, in several projects whose guaranteed amounts are described below in R$ thousands:
Company |
| Project |
| Financing |
| Modality |
| Company |
| Value of |
| Balance |
| Balance |
| End of |
Eletrobras |
| Norte Energia |
| BNDES |
| SPE |
| 15.00 | % | 2,025,000 |
| 2,275,156 |
| 22,752 |
| 1/15/2042 |
Eletrobras |
| Norte Energia |
| CEF |
| SPE |
| 15.00 | % | 1,050,000 |
| 1,218,880 |
| 12,189 |
| 1/15/2042 |
Eletrobras |
| Norte Energia |
| BTG Pactual |
| SPE |
| 15.00 | % | 300,000 |
| 348,251 |
| 3,483 |
| 1/15/2042 |
Eletrobras |
| Norte Energia |
| Contract Performance Bond |
| SPE |
| 15.00 | % | 39,225 |
| 39,225 |
| 392 |
| 4/30/2019 |
Eletrobras |
| Rouar |
| CAF |
| SPE |
| 50.00 | % | 31,833 |
| 31,833 |
| 318 |
| 9/30/2017 |
Eletrobras |
| Mangue Seco II |
| BNB |
| SPE |
| 49.00 | % | 40,951 |
| 36,132 |
| 361 |
| 10/14/2031 |
Eletrosul |
| ESBR |
| BNDES |
| SPE |
| 20.00 | % | 727,000 |
| 874,307 |
| 8,743 |
| 8/15/2034 |
Eletrosul |
| ESBR |
| BNDES |
| SPE |
| 20.00 | % | 232,500 |
| 244,931 |
| 2,449 |
| 1/15/2035 |
Eletrosul |
| ESBR |
| BNDES REPASSE |
| SPE |
| 20.00 | % | 717,000 |
| 890,130 |
| 8,901 |
| 8/15/2034 |
Eletrosul |
| ESBR |
| BNDES REPASSE |
| SPE |
| 20.00 | % | 232,500 |
| 239,625 |
| 2,396 |
| 1/15/2035 |
Eletrosul |
| Cerro Chato I, II and III |
| Banco do Brasil |
| Corporate |
| 100.00 | % | 223,419 |
| 100,313 |
| 1,003 |
| 7/15/2020 |
Eletrosul |
| RS Energia |
| BNDES |
| Corporate |
| 100.00 | % | 126,221 |
| 54,213 |
| 542 |
| 6/15/2021 |
Eletrosul |
| Artemis Transmissora de Energia |
| BNDES |
| Corporate |
| 100.00 | % | 170,029 |
| 27,544 |
| 275 |
| 10/15/2018 |
Eletrosul |
| UHE Mauá |
| BNDES |
| Corporate |
| 100.00 | % | 182,417 |
| 138,514 |
| 1,385 |
| 1/15/2028 |
Eletrosul |
| UHE Mauá |
| BNDES/Banco do Brasil |
| Corporate |
| 100.00 | % | 182,417 |
| 138,534 |
| 1,385 |
| 1/15/2028 |
Eletrosul |
| UHE Passo de São João |
| BNDES |
| Corporate |
| 100.00 | % | 183,330 |
| 127,838 |
| 1,278 |
| 7/15/2026 |
Eletrosul |
| SC Energia |
| BNDES/Banco do Brasil |
| Corporate |
| 100.00 | % | 50,000 |
| 11,741 |
| 117 |
| 5/15/2019 |
Eletrosul |
| SC Energia |
| BNDES/BDRE |
| Corporate |
| 100.00 | % | 50,000 |
| 11,711 |
| 117 |
| 5/15/2019 |
Eletrosul |
| SC Energia |
| BNDES |
| Corporate |
| 100.00 | % | 103,180 |
| 23,551 |
| 236 |
| 5/15/2019 |
Eletrosul |
| SC Energia |
| BNDES |
| Corporate |
| 100.00 | % | 67,017 |
| 24,590 |
| 246 |
| 3/15/2021 |
Eletrosul |
| UHE São Domingos |
| BNDES |
| Corporate |
| 100.00 | % | 207,000 |
| 173,333 |
| 1,733 |
| 6/15/2028 |
Eletrosul |
| RS Energia |
| BNDES |
| Corporate |
| 100.00 | % | 41,898 |
| 31,327 |
| 313 |
| 3/15/2027 |
Eletrosul |
| RS Energia |
| BNDES |
| Corporate |
| 100.00 | % | 9,413 |
| 7,670 |
| 77 |
| 8/15/2027 |
Eletrosul |
| RS Energia |
| BNDES |
| Corporate |
| 100.00 | % | 12,000 |
| 7,941 |
| 79 |
| 8/15/2027 |
Eletrosul |
| UHE Passo de São João |
| BNDES |
| Corporate |
| 100.00 | % | 14,750 |
| 10,565 |
| 106 |
| 7/15/2026 |
Eletrosul |
| Eletrosul Corporate Projects |
| Banco do Brasil |
| Corporate |
| 100.00 | % | 250,000 |
| 195,696 |
| 1,957 |
| 11/15/2023 |
Eletrosul |
| Teles Pires |
| BNDES |
| SPE |
| 24.50 | % | 296,940 |
| 336,361 |
| 3,364 |
| 2/15/2036 |
Eletrosul |
| Teles Pires |
| BNDES/Banco do Brasil |
| SPE |
| 24.50 | % | 294,000 |
| 333,196 |
| 3,332 |
| 2/15/2036 |
Eletrosul |
| Teles Pires |
| Issuance of Debentures |
| SPE |
| 24.50 | % | 160,680 |
| 170,199 |
| 1,702 |
| 5/30/2032 |
Eletrosul |
| Livramento Holding |
| BNDES |
| SPE |
| 49.00 | % | 91,943 |
| 22,206 |
| 222 |
| 6/15/2030 |
Eletrosul |
| Chuí Holding |
| BNDES |
| SPE |
| 49.00 | % | 186,082 |
| 179,100 |
| 1,791 |
| 12/15/2031 |
Eletrosul |
| Transmissora Sul Brasileira de Energia S.A. |
| BNDES |
| SPE |
| 80.00 | % | 209,974 |
| 180,788 |
| 1,808 |
| 7/15/2028 |
Eletrosul |
| Transmissora Sul Brasileira de Energia S.A. |
| Issuance of Debentures |
| SPE |
| 80.00 | % | 62,040 |
| 88,054 |
| 881 |
| 9/15/2026 |
Eletrosul |
| Costa Oeste Transmissora de Energia S.A. |
| BNDES |
| SPE |
| 49.00 | % | 17,846 |
| 14,962 |
| 150 |
| 11/1/2022 |
Company |
| Project |
| Financing |
| Modality |
| Company |
| Value of |
| Balance |
| Balance |
| End of |
Eletrosul |
| Santa Vitória do Palmar Holding S.A. |
| BNDES |
| SPE |
| 49.00 | % | 197,950 |
| 215,684 |
| 2,157 |
| 6/16/2031 |
Eletrosul |
| Santa Vitória do Palmar Holding S.A. |
| BRDE |
| SPE |
| 49.00 | % | 98,000 |
| 108,290 |
| 1,083 |
| 6/16/2031 |
Eletrosul |
| Santa Vitória do Palmar Holding S.A. |
| Issuance of Debentures |
| SPE |
| 49.00 | % | 44,100 |
| 55,678 |
| 557 |
| 6/15/2028 |
Eletrosul |
| Transmissora Sul Litorânea do Brasil |
| BNDES |
| SPE |
| 51.00 | % | 252,108 |
| 231,974 |
| 2,320 |
| 2/15/2029 |
Eletrosul |
| Complexo São Bernardo |
| KfW |
| Corporate |
| 100.00 | % | 29,854 |
| 45,709 |
| 457 |
| 12/30/2038 |
Eletrosul |
| Complexo São Bernardo |
| KfW |
| Corporate |
| 100.00 | % | 136,064 |
| 157,988 |
| 1,580 |
| 12/30/2042 |
Eletrosul |
| Complexo Eólico Livramento - Entorno II |
| CEF |
| Corporate |
| 100.00 | % | 200,000 |
| 212,844 |
| 2,128 |
| 8/7/2017 |
Eletrosul |
| Eletrosul 2 Corporate Projects |
| BTG Pactual |
| Corporate |
| 100.00 | % | 250,000 |
| 285,310 |
| 2,853 |
| 3/2/2017 |
Eletrosul |
| Eólica Hermenegildo I S/A |
| BNDES |
| SPE |
| 99.99 | % | 109,566 |
| 109,042 |
| 1,090 |
| 6/15/2032 |
Eletrosul |
| Eólica Hermenegildo I S/A |
| BRDE |
| SPE |
| 99.99 | % | 47,764 |
| 49,474 |
| 495 |
| 6/15/2032 |
Eletrosul |
| Eólica Hermenegildo II S/A |
| BNDES |
| SPE |
| 99.99 | % | 109,590 |
| 109,080 |
| 1,091 |
| 6/15/2032 |
Eletrosul |
| Eólica Hermenegildo II S/A |
| BRDE |
| SPE |
| 99.99 | % | 47,775 |
| 47,854 |
| 479 |
| 6/15/2032 |
Eletrosul |
| Eólica Hermenegildo III S/A |
| BNDES |
| SPE |
| 99.99 | % | 93,367 |
| 92,933 |
| 929 |
| 6/15/2032 |
Eletrosul |
| Eólica Hermenegildo III S/A |
| BRDE |
| SPE |
| 99.99 | % | 40,703 |
| 40,771 |
| 408 |
| 6/15/2032 |
Eletrosul |
| Eólica Chuí IX S/A |
| BNDES |
| SPE |
| 99.99 | % | 31,561 |
| 31,414 |
| 314 |
| 6/15/2032 |
Eletrosul |
| Eólica Chuí IX S/A |
| BRDE |
| SPE |
| 99.99 | % | 13,758 |
| 13,781 |
| 138 |
| 6/15/2032 |
Eletronorte |
| São Luis II and III |
| BNDES |
| Corporate |
| 100.00 | % | 13,653 |
| 7,859 |
| 79 |
| 11/15/2024 |
Eletronorte |
| Miranda II |
| BNDES |
| Corporate |
| 100.00 | % | 47,531 |
| 20,069 |
| 201 |
| 11/15/2024 |
Eletronorte |
| Ribeiro Gonç./Balsas |
| BNB |
| Corporate |
| 100.00 | % | 70,000 |
| 57,300 |
| 573 |
| 6/3/2031 |
Eletronorte |
| Lechuga/J. Teixeira |
| BASA |
| Corporate |
| 100.00 | % | 25,720 |
| 19,860 |
| 199 |
| 1/10/2029 |
Eletronorte |
| Nobres Substation |
| BNDES |
| Corporate |
| 100.00 | % | 10,000 |
| 6,567 |
| 66 |
| 3/15/2028 |
Eletronorte |
| Miramar/Tucuruí Substation |
| BNDES |
| Corporate |
| 100.00 | % | 31,000 |
| 21,539 |
| 215 |
| 8/15/2028 |
Eletronorte |
| Expansion of Lechuga Substation |
| BNDES |
| Corporate |
| 100.00 | % | 35,011 |
| 24,878 |
| 249 |
| 10/15/2028 |
Eletronorte |
| Norte Brasil Transmissora |
| BNDES |
| SPE |
| 49.00 | % | 514,500 |
| 458,514 |
| 4,585 |
| 12/15/2029 |
Eletronorte |
| Norte Brasil Transmissora |
| Issuance of Debentures |
| SPE |
| 49.00 | % | 98,000 |
| 139,868 |
| 1,399 |
| 9/15/2026 |
Eletronorte |
| Linha Verde Transmissora |
| BASA |
| Corporate |
| 100.00 | % | 185,000 |
| 201,441 |
| 2,014 |
| 11/10/2032 |
Eletronorte |
| Manaus Transmissora |
| BNDES |
| SPE |
| 30.00 | % | 120,300 |
| 95,822 |
| 958 |
| 12/15/2026 |
Eletronorte |
| Energy Transmission Station |
| BNDES |
| Corporate |
| 100.00 | % | 505,477 |
| 390,994 |
| 3,910 |
| 11/15/2028 |
Eletronorte |
| Energy Transmission Station |
| BASA |
| Corporate |
| 100.00 | % | 221,789 |
| 201,375 |
| 2,014 |
| 10/15/2031 |
Eletronorte |
| Energy Transmission Station |
| BASA |
| Corporate |
| 100.00 | % | 221,789 |
| 214,959 |
| 2,150 |
| 7/10/2031 |
Eletronorte |
| Rio Branco Transmissora |
| BNDES |
| Corporate |
| 100.00 | % | 138,000 |
| 109,763 |
| 1,098 |
| 3/15/2027 |
Eletronorte |
| Transmissora Matogrossense Energia |
| BASA |
| SPE |
| 49.00 | % | 39,200 |
| 36,975 |
| 370 |
| 2/1/2029 |
Eletronorte |
| Transmissora Matogrossense Energia |
| BNDES |
| SPE |
| 49.00 | % | 42,777 |
| 29,411 |
| 294 |
| 5/15/2026 |
Eletronorte |
| Rei dos Ventos 1 Eolo |
| BNDES |
| SPE |
| 24.50 | % | 30,851 |
| 26,829 |
| 268 |
| 10/15/2029 |
Eletronorte |
| Brasventos Miassaba 3 |
| BNDES |
| SPE |
| 24.50 | % | 30,984 |
| 26,936 |
| 269 |
| 10/15/2029 |
Eletronorte |
| Rei dos Ventos 3 |
| BNDES |
| SPE |
| 24.50 | % | 32,533 |
| 28,276 |
| 283 |
| 10/15/2029 |
Company |
| Project |
| Financing |
| Modality |
| Company |
| Value of |
| Balance |
| Balance |
| End of |
Eletronorte |
| Belo Monte Transmissora de Energia S.A. |
| Itau BBA |
| SPE |
| 24.50 | % | 49,735 |
| 49,854 |
| 499 |
| 4/26/2017 |
Eletronorte |
| Belo Monte Transmissora de Energia S.A. |
| Santander |
| SPE |
| 24.50 | % | 49,000 |
| 49,119 |
| 491 |
| 4/26/2017 |
Eletronorte |
| Belo Monte Transmissora de Energia S.A. |
| State Grid Brazil S.A. |
| Corporate |
| 100.00 | % | 294,700 |
| 318,795 |
| 3,188 |
| 7/28/2029 |
Eletronorte |
| Belo Monte Transmissora de Energia S.A. |
| ABC |
| SPE |
| 24.50 | % | 18,375 |
| 19,264 |
| 193 |
| 5/31/2017 |
Eletronorte |
| Belo Monte Transmissora de Energia S.A. |
| Bank of China |
| SPE |
| 24.50 | % | 6,125 |
| 6,310 |
| 63 |
| 4/30/2017 |
Eletronorte |
| Belo Monte Transmissora de Energia S.A. |
| PINE |
| SPE |
| 24.50 | % | 6,125 |
| 6,392 |
| 64 |
| 5/31/2017 |
Eletronorte |
| Belo Monte Transmissora de Energia S.A. |
| China Construction Bank |
| SPE |
| 24.50 | % | 93,100 |
| 96,894 |
| 969 |
| 3/31/2017 |
Eletronorte |
| Belo Monte Transmissora de |
| ICBC |
| SPE |
| 24.50 | % | 9,800 |
| 9,849 |
| 98 |
| 6/30/2017 |
Company |
| Project |
| Financing |
| Modality |
| Company |
| Value of |
| Balance |
| Balance |
| End of |
|
| Energia S.A. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eletronorte |
| Norte Energia |
| BNDES |
| SPE |
| 19.98 | % | 2,697,300 |
| 3,030,508 |
| 30,305 |
| 1/15/2042 |
Eletronorte |
| Norte Energia |
| CEF |
| SPE |
| 19.98 | % | 1,398,600 |
| 1,623,548 |
| 16,235 |
| 1/15/2042 |
Eletronorte |
| Norte Energia |
| BTG Pactual |
| SPE |
| 19.98 | % | 399,600 |
| 463,871 |
| 4,639 |
| 1/15/2042 |
Eletronorte |
| Implementation of PAR and PMIS |
| BNDES |
| Corporate |
| 100.00 | % | 361,575 |
| 322,784 |
| 3,228 |
| 12/15/2023 |
Eletronorte |
| Porto Velho Transmissora de Energia |
| BNDES |
| Corporate |
| 100.00 | % | 283,411 |
| 245,676 |
| 2,457 |
| 8/15/2028 |
Eletronorte |
| Reinforcement of Working Capital Structure |
| CEF |
| Corporate |
| 100.00 | % | 400,000 |
| 391,658 |
| 3,917 |
| 4/30/2019 |
Eletronorte |
| UHE Sinop |
| BNDES |
| SPE |
| 24.50 | % | 256,270 |
| 175,203 |
| 1,752 |
| 6/15/2038 |
Eletronuclear |
| Angra III |
| BNDES |
| Corporate |
| 100.00 | % | 6,146,256 |
| 3,480,338 |
| 34,803 |
| 6/15/2036 |
Chesf |
| ESBR |
| BNDES |
| SPE |
| 20.00 | % | 727,000 |
| 874,307 |
| 8,743 |
| 8/15/2034 |
Chesf |
| ESBR |
| BNDES |
| SPE |
| 20.00 | % | 232,500 |
| 244,931 |
| 2,449 |
| 1/15/2035 |
Chesf |
| ESBR |
| BNDES REPASSE |
| SPE |
| 20.00 | % | 717,000 |
| 890,130 |
| 8,901 |
| 8/15/2034 |
Chesf |
| ESBR |
| BNDES REPASSE |
| SPE |
| 20.00 | % | 232,500 |
| 239,625 |
| 2,396 |
| 1/15/2035 |
Chesf |
| Manaus Transmissora |
| BNDES |
| SPE |
| 19.50 | % | 78,195 |
| 62,284 |
| 623 |
| 12/15/2026 |
Chesf |
| Norte Energia |
| BNDES |
| SPE |
| 15.00 | % | 2,025,000 |
| 2,275,156 |
| 22,752 |
| 1/15/2042 |
Chesf |
| Norte Energia |
| CEF |
| SPE |
| 15.00 | % | 1,050,000 |
| 1,218,880 |
| 12,189 |
| 1/15/2042 |
Chesf |
| Norte Energia |
| BTG Pactual |
| SPE |
| 15.00 | % | 300,000 |
| 348,251 |
| 3,483 |
| 1/15/2042 |
Chesf |
| IE Madeira |
| BASA |
| SPE |
| 24.50 | % | 65,415 |
| 77,112 |
| 771 |
| 7/10/2032 |
Chesf |
| IE Madeira |
| BNDES |
| SPE |
| 24.50 | % | 455,504 |
| 376,324 |
| 3,763 |
| 2/15/2030 |
Chesf |
| IE Madeira |
| Issuance of Debentures |
| SPE |
| 24.50 | % | 85,750 |
| 122,200 |
| 1,222 |
| 3/18/2025 |
Chesf |
| Chesf 1 Corporate Projects |
| Banco do Brasil |
| Corporate |
| 100.00 | % | 500,000 |
| 256,404 |
| 2,564 |
| 9/28/2018 |
Chesf |
| Chesf 2 Corporate Projects |
| CEF |
| Corporate |
| 100.00 | % | 400,000 |
| 253,531 |
| 2,535 |
| 2/27/2019 |
Chesf |
| IE Garanhuns S/A |
| BNDES |
| SPE |
| 49.00 | % | 175,146 |
| 154,009 |
| 1,540 |
| 12/15/2028 |
Chesf |
| Chesf 3 Corporate Projects |
| BNDES |
| Corporate |
| 100.00 | % | 727,560 |
| 393,417 |
| 3,934 |
| 6/15/2029 |
Chesf |
| Chesf 4 Corporate Projects |
| BNDES |
| Corporate |
| 100.00 | % | 475,454 |
| 238,320 |
| 2,383 |
| 6/15/2029 |
Chesf |
| UHE Sinop |
| BNDES |
| SPE |
| 24.50 | % | 256,270 |
| 175,203 |
| 1,752 |
| 6/15/2038 |
Chesf |
| Chesf 5 Corporate Projects |
| CEF |
| Corporate |
| 100.00 | % | 200,000 |
| 202,616 |
| 2,026 |
| 9/6/2021 |
Furnas |
| UHE Batalha |
| BNDES |
| Corporate |
| 100.00 | % | 224,000 |
| 150,921 |
| 1,509 |
| 12/15/2025 |
Furnas |
| UHE Simplício |
| BNDES |
| Corporate |
| 100.00 | % | 1,034,410 |
| 647,658 |
| 6,477 |
| 7/15/2026 |
Furnas |
| UHE Baguari |
| BNDES |
| Corporate |
| 100.00 | % | 60,153 |
| 36,357 |
| 364 |
| 7/15/2026 |
Furnas |
| SUNDRY |
| Banco do Brasil |
| Corporate |
| 100.00 | % | 750,000 |
| 758,618 |
| 7,586 |
| 10/31/2018 |
Furnas |
| BASA 2008 Rollover |
| Banco do Brasil |
| Corporate |
| 100.00 | % | 208,312 |
| 220,535 |
| 2,205 |
| 2/7/2018 |
Furnas |
| Innovation Projects |
| FINEP |
| Corporate |
| 100.00 | % | 268,503 |
| 161,366 |
| 1,614 |
| 11/15/2023 |
Furnas |
| Corporate Financing |
| Banco do Brasil |
| Corporate |
| 100.00 | % | 400,000 |
| 379,973 |
| 3,800 |
| 12/6/2023 |
Furnas |
| UHE Santo Antônio |
| BNDES |
| SPE |
| 39.00 | % | 1,594,159 |
| 1,999,596 |
| 19,996 |
| 3/15/2034 |
Furnas |
| UHE Santo Antônio |
| BNDES |
| SPE |
| 39.00 | % | 1,574,659 |
| 2,064,091 |
| 20,641 |
| 3/15/2034 |
Furnas |
| UHE Santo Antônio |
| BASA |
| SPE |
| 39.00 | % | 196,334 |
| 238,746 |
| 2,387 |
| 12/15/2030 |
Furnas |
| UHE Santo Antônio |
| Issuance of Debentures |
| SPE |
| 39.00 | % | 163,800 |
| 218,533 |
| 2,185 |
| 1/24/2023 |
Furnas |
| UHE Santo Antônio |
| Issuance of Debentures |
| SPE |
| 39.00 | % | 273,000 |
| 242,225 |
| 2,422 |
| 3/1/2024 |
Furnas |
| UHE Foz do Chapecó |
| BNDES |
| SPE |
| 40.00 | % | 435,508 |
| 376,498 |
| 3,765 |
| 9/15/2027 |
Furnas |
| UHE Foz do Chapecó |
| BNDES |
| SPE |
| 40.00 | % | 217,754 |
| 190,533 |
| 1,905 |
| 9/15/2027 |
Furnas |
| UHE Foz do Chapecó |
| BNDES |
| SPE |
| 40.00 | % | 4,009 |
| 2,861 |
| 29 |
| 9/15/2027 |
Furnas |
| Centroeste de Minas |
| BNDES |
| SPE |
| 49.00 | % | 13,827 |
| 8,929 |
| 89 |
| 4/15/2023 |
Furnas |
| Rei dos Ventos 1 Eolo |
| BNDES |
| SPE |
| 24.50 | % | 30,851 |
| 26,829 |
| 268 |
| 10/15/2029 |
Furnas |
| Brasventos Miassaba 3 |
| BNDES |
| SPE |
| 24.50 | % | 30,984 |
| 26,936 |
| 269 |
| 10/15/2029 |
Furnas |
| Rei dos Ventos 3 |
| BNDES |
| SPE |
| 24.50 | % | 32,533 |
| 28,276 |
| 283 |
| 10/15/2029 |
Furnas |
| IE Madeira |
| BASA |
| SPE |
| 24.50 | % | 65,415 |
| 77,112 |
| 771 |
| 7/10/2032 |
Furnas |
| IE Madeira |
| BNDES |
| SPE |
| 24.50 | % | 455,504 |
| 376,324 |
| 3,763 |
| 2/15/2030 |
Company |
| Project |
| Financing |
| Modality |
| Company |
| Value of |
| Balance |
| Balance |
| End of |
Furnas |
| IE Madeira |
| Issuance of Debentures |
| SPE |
| 24.50 | % | 85,750 |
| 122,200 |
| 1,222 |
| 3/18/2025 |
Furnas |
| Teles Pires |
| BNDES |
| SPE |
| 24.50 | % | 296,940 |
| 336,361 |
| 3,364 |
| 2/15/2036 |
Furnas |
| Teles Pires |
| BNDES/Banco do Brasil |
| SPE |
| 24.50 | % | 294,000 |
| 333,196 |
| 3,332 |
| 2/15/2036 |
Furnas |
| Teles Pires |
| Issuance of Debentures |
| SPE |
| 24.50 | % | 160,680 |
| 197,578 |
| 1,976 |
| 5/31/2032 |
Furnas |
| Caldas Novas Transmissão |
| BNDES |
| SPE |
| 49.90 | % | 2,418 |
| 1,759 |
| 18 |
| 5/15/2023 |
Furnas |
| Caldas Novas Transmissão |
| BNDES |
| SPE |
| 49.90 | % | 5,536 |
| 4,655 |
| 47 |
| 3/15/2028 |
Furnas |
| Belo Monte Transmissora de Energia S.A. |
| State Grid Brazil S.A. |
| Corporate |
| 100.00 | % | 294,700 |
| 318,471 |
| 3,185 |
| 7/28/2029 |
Furnas |
| Belo Monte Transmissora de Energia S.A. |
| ABC |
| SPE |
| 24.50 | % | 18,375 |
| 19,264 |
| 193 |
| 5/31/2017 |
Furnas |
| Belo Monte Transmissora de Energia S.A. |
| Bank of China |
| SPE |
| 24.50 | % | 6,125 |
| 6,310 |
| 63 |
| 4/30/2017 |
Furnas |
| Belo Monte Transmissora de Energia S.A. |
| PINE |
| SPE |
| 24.50 | % | 6,125 |
| 6,313 |
| 63 |
| 5/31/2017 |
Furnas |
| Belo Monte |
| China |
| SPE |
| 24.50 | % | 93,100 |
| 96,894 |
| 969 |
| 3/31/2017 |
|
| Transmissora de Energia S.A. |
| Construction Bank |
|
|
|
|
|
|
|
|
|
|
|
|
Furnas |
| Belo Monte Transmissora de Energia S.A. |
| ICBC |
| SPE |
| 24.50 | % | 9,800 |
| 9,849 |
| 98 |
| 6/30/2017 |
Furnas |
| Mata de Santa Genebra |
| Issuance of Debentures |
| SPE |
| 49.90 | % | 234,031 |
| 244,019 |
| 2,440 |
| 6/30/2017 |
Furnas |
| 2012-2014 Investment Plan |
| BNDES |
| Corporate |
| 100.00 | % | 441,296 |
| 224,125 |
| 2,241 |
| 6/15/2029 |
Furnas |
| Empresa de Energia São Manoel |
| BNDES |
| SPE |
| 33.33 | % | 437,996 |
| 345,656 |
| 3,457 |
| 12/12/2038 |
Furnas |
| Empresa de Energia São Manoel |
| Issuance of Debentures |
| SPE |
| 33.33 | % | 93,332 |
| 98,119 |
| 981 |
| 12/15/2018 |
Amazonas |
| Amazonas |
| Acknowledgement of Debt - Petrobras/BR |
| Corporate |
| 100.00 | % | 2,405,979 |
| 2,831,333 |
| 28,313 |
| 1/30/2025 |
Eletroacre |
| Eletroacre |
| Acknowledgement of Debt - Petrobras/BR |
| Corporate |
| 100.00 | % | 91,774 |
| 82,979 |
| 830 |
| 1/30/2025 |
Boa Vista |
| Boa Vista |
| Acknowledgement of Debt - Petrobras/BR |
| Corporate |
| 100.00 | % | 19,320 |
| 16,101 |
| 161 |
| 12/31/2024 |
Cepisa |
| Corporate Project |
| CEF |
| Corporate |
| 100.00 | % | 94,906 |
| 50,749 |
| 507 |
| 8/30/2026 |
Ceal |
| Ceal Corporate Project |
| Banco IBM S/A |
| Corporate |
| 100.00 | % | 10,736 |
| 6,742 |
| 67 |
| 12/31/2019 |
Total |
|
|
|
|
|
|
|
|
| 47,014,782 |
| 44,813,837 |
| 448,138 |
|
|
We recorded under the operational provisions for noncurrent liabilities the fair value of the amounts guaranteed by us over resources already disbursed by the financing banks. The provision is made based on the fair value of our guarantee, as shown below:
|
| Provision Value |
|
Guarantees owed on 12/31/2012 |
| 189,113 |
|
Changes in the period |
| 83,682 |
|
Guarantees owed on 12/31/2013 |
| 272,795 |
|
Changes in the period |
| 115,165 |
|
Guarantees owed on 12/31/2014 |
| 387,960 |
|
Changes in the period |
| 30,266 |
|
Guarantees owed on 12/31/2015 |
| 418,226 |
|
Changes in the period |
| 29,912 |
|
Guarantees owed on 12/31/2016 |
| 448,138 |
|
a) UHE Simplício - project of our subsidiary Furnas, with an installed generating capacity of 333.7 MW*. The project has 100% Furnas participation. Accordingly, the guarantee 100% of the financing.
b) UHE Jirau — SPE Energia Sustentável do Brasil, formed by the subsidiaries Eletrosul, CHESF and GDF Suez Energy, with installed capacity of 3,750 MW*. For the project two loans were taken out with BNDES, one direct and the other indirect, via intermediary banks, to be paid in 240 months. We guarantee the participation of each of our subsidiaries-Eletrosul (20%) and CHESF (20%).
c) UHE Santo Antônio — SPE Santo Antônio Energia, formed by Furnas, CEMIG, Fundo de Investimentos em Participação Amazônica Energia — FIP, Construtora Norberto Odebrecht S/A, Odebrecht Investimentos em Infraestrutura Ltda. and Andrade Gutierrez Participações S/A, with an installed capacity of 3,568 MW*. We are consenting intervening party in afinancing with BNDES and with Banco da Amazônia, with our intervention limited to the participation of Furnas (39%).
d) UHE Foz do Chapecó — SPE Foz do Chapecó Energia, whose power plant has an installed capacity of 855 MW*, with us guaranteeing of the contractual instruments with the BNDES, totaling, in substitution of a bank financing previously contracted, limited to the percentage of Furnas in shareholding the SPE (40%).
e) Norte Brasil Transmissora — SPE — with participation of Eletronorte (24.5%) and Eletrosul (24.5%) and has as its objective the implementation, operation and maintenance of the Porto Velho/Araraquara transmission line, with an extension of 2,375 km*.
f) Manaus Transmissora de Energia — SPE — which has the participation of Eletronorte (30%) and Chesf (19.5%) has as its objective to implement and operate 4 substations and a 585 km transmission line (LT Oriximiná/Itacoatiara/Cariri). We provides guarantee on two loans in this project (BASA and BNDES).
g) IE Madeira — SPE Interligação Elétrica — with participation of Furnas (24.5%) and Chesf (24.5%). In this project, there is a counter guaranteed by us in the bank financing contracts, in guarantee of the short-term loan from the BNDES, limited to the participation of its subsidiaries. There is also a short-term loan from BNDES, in which we act as an intervening party in proportion to our subsidiaries interested in the SPE.
h) UHE Belo Monte — SPE Norte Energia, with an installed capacity of 11,233 MW, of Chesf (15%), Eletronorte (19.98%) and Eletrobras (15%) in addition to other partners. The provision of our guarantee in favor of the SPE for the obligations by the insurer JMALUCELLI, under the guarantee insurance contract. We are also involved in a short term loan agreement with the BNDES.
i) Angra III — we are a guarantor for the financing of Eletronuclear with BNDES, to build the corporate project of the UTN Angra III.
j) Norte Energia S.A. — a closed capital special-purpose company, for the purpose of performing all activites needed for the implementation, maintenance, and exploration of the Belo Monte Hydroelectric Power Plant (UHE Belo Monte). We hold 49.98% of the capital of Norte Energia.
k) Teles Pires — a special purpose company, with the participation of Eletrosul (24.5%), Furnas (24.5%), Neoenergia (50.1%) and Odebrecht Energia (0.9%). It has an installed power of 1,820 megawatts, enough to supply a population of 5 million inhabitants.
l) Amazonas D — a closed capital company, our subsidiary. Responsible for provision of the public service of distribution of electricity to 22 cities in the state of Amazonas.
We do not have any other off-balance sheet arrangements that have or reasonably likely to have a current or future effect on its financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources other than the transactions described above.
F. Contractual Obligations
We set out below, on a consolidated basis, our long-term debt, long-term purchase obligations, leasing obligations, actuarial debt and obligations for asset retiring for the periods, including contractual interest obligations, when applicable, presented as follows:
|
| Payments due by period as of |
| ||||||||
|
| 2018 |
| 2019 |
| 2020 |
| 2021 |
| 2022 |
|
|
| (in R$ millions) |
| ||||||||
Long-term debt obligations |
| 15,719 |
| 7,274 |
| 7,274 |
| 7,274 |
| 8,298 |
|
Leasing obligations |
| 140 |
| 140 |
| 140 |
| 140 |
| 475 |
|
Post-employment benefits |
| 1,146 |
| 1,643 |
| 1,867 |
| 2,122 |
| 1,893 |
|
Decommissioning of nuclear power plants (1) |
| — |
| — |
| — |
| — |
| 2,090 |
|
Purchase obligations |
| 4,155 |
| 5,456 |
| 5,152 |
| 3,146 |
| 15,643 |
|
Generation |
| 1,351 |
| 1,357 |
| 1,332 |
| 1,237 |
| 9,311 |
|
Transmission |
| — |
| — |
| — |
| — |
| — |
|
Distribution |
| 2,804 |
| 4,099 |
| 3,820 |
| 1,909 |
| 6,332 |
|
TOTAL |
| 21,160 |
| 14,513 |
| 14,433 |
| 12,682 |
| 28,399 |
|
(1) Decommissioning of nuclear power plants.
The decommissioning of nuclear power plants relates to the asset retirement obligation for these plants and the costs to be incurred at the end of their useful lives.
Decommissioning can be understood as a set of measures taken to safely decommission a nuclear plant, reducing residual radioactivity to levels that permit the site of the plant to be classified as of restricted use or of unrestricted use.
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. Board of Directors and Senior Management
We are managed by our Conselho de Administração (or Board of Directors), composed of up to ten members, and by our Board of Executive Officers, which currently consists of seven members. Our by-laws also provide for a permanent Conselho Fiscal (or Fiscal Council), which is made up of five effective members and their respective alternates. Pursuant to our by-laws, all members of our Board of Directors, Board of Executive Officers and Fiscal Council must be Brazilian citizens.
Board of Directors
The members of our Board of Directors are elected at the general shareholders meeting for a term of one year, reelection being permitted. As our majority shareholder, the Brazilian Government has the right to appoint seven members of our Board of Directors, of which six are appointed by the MME and one by the Ministério do Estado do Planejamento, Orçamento e Gestão (the Planning, Budget and Management Ministry). The minority shareholders have the right to elect one member, the holders of preferred shares without voting rights representing at least ten percent of our total capital have the right to elect one member and one director shall be elected as a representative of the employees of the company. Currently, our Board of Directors is composed of nine members. One of the members of the Board of Directors is appointed as Chairman. The address of our Board of Directors is Av. Presidente Vargas, 409 13º andar — Rio de Janeiro.
Historically, our Board of Directors meets once a month and when called by a majority of the directors or the Chairman. Among other duties, our Board of Directors is responsible for: (i) establishing our business guidelines; (ii) determining the corporate organization of our subsidiaries or any equity participation by us in other legal entities; (iii) approving our entering into any loan agreement and determining our financing policy; and (iv) approving any guarantee in favor of any of our subsidiaries in connection with any financial agreement.
The table below sets out the current members of our Board of Directors and their respective positions. The mandate of each member of our Board of Directors expires at the next Ordinary Shareholders’ Meeting. Six members were elected by the Brazilian Government except for Mozart de Siqueira Campos Araújo and Jose Paes Rangel, who were elected by our minority shareholders. Jailson José Medeiros Alves was elected as a representative of our employees. On August 2, 2016, Jailson José Medeiros Alves was replaced by Carlos Eduardo Rodrigues Pereira. Given the lack of the minimum quorum in our by-laws the holders of preferred shares representing at least ten percent of our total capital were not able to elect one member of the Board of Directors under the Extraordinary Shareholders’ Meeting held on July 22, 2016. On April 28, 2017, our shareholders elected new members of the Board of Directors, who will join the management upon execution of the instruments of investiture.
Name |
| Position |
José Luiz Alqueres |
| Chairman |
Wilson Pinto Ferreira Junior |
| Director |
Vicente Falconi Campos |
| Director |
Ana Paula Vitali Janes Vescovi |
| Director |
Elena Landau |
| Director |
Carlos Eduardo Rodrigues Pereira |
| Director |
Mozart de Siqueira Campos Araújo |
| Director |
Esteves Pedro Colnago Júnior |
| Director |
José Pais Rangel |
| Director |
José Luiz Alqueres — Board Member: Mr. José Luiz Alqueres holds a degree in engineer from Pontifícia Universidade Católica do Rio de Janeiro in 1966. He subsequently attended social science at IFCS-UFRJ and did post-graduation courses in Brazil, the United States and France. He was a professor at PUC-Rio, FAU-UFRJ, IBMEC and FGV. He was National Energy Secretary in 1992. He was CEO of CERJ, Eletrobras, Alstom do Brasil, MDU do Brasil, Light Serviços de Eletricidade S.A. He also worked at Banco Nacional de Desenvolvimento Econômico e Social - BNDES, and he also held the position of officer of BNDESPAR and Banco Bozano Simonsen in addition to being member of several boards of directors of companies such as Calyon-Credit Lyonnais, FIP-Pactual, Rio Bravo and large companies from the energy sector such as Itaipu, Furnas, Chesf, Eletrosul, Eletronuclear, Cesp, CEMIG, EDP, CPFL, among others. He is currently partner and officer of JLA — JL Alquéres Consultores Associados Ltda., Rio Bravo Investimento.
Wilson Pinto Ferreira Junior — Board Member: Mr. Wilson Pinto Ferreira Junior holds a degree in Electrical Engineering from Escola de Engenharia da Universidade Mackenzie in 1981 as well as a degree in Business Administration from Faculdade de Ciências Econômicas, Contábeis e Administrativas da Universidade Mackenzie in 1983. He subsequently obtained a master’s degree in Energy from Universidade de São Paulo (USP) as well as several specializations, among which Work Safety Engineering (Universidade Mackenzie), Marketing (Fundação Getúlio Vargas) and Electricity Distribution Administration (Swedish Power Co.). In Companhia Energética de São Paulo (Cesp) he has held several positions, including Distribution Officer (1995 to 1998). He was Chief Executive Officer of RGE from 1998 to 2000, chairman of the Board of Directors of Bandeirante Energia S.A. from 2000 to 2001 and Chief Executive Officer of CPFL Paulista between 2000 and 2002. In 2002 he also was appointed Chief Executive Officer of CPFL Energia, position he has occupied up to 2016. He has also acted as President of Brazilian Association of Electricity Distributors — Abradee (Associação Brasileira de Distribuidores de Energia Elétrica) between the years of 2009 and 2010. He is the chairman of the board of directors of Furnas, Chesf, Eletronorte and Eletrosul.
Vicente Falconi Campos - Board Member: Mr. Vicente Falconi Campos holds a degree in Engineering from Universidade Federal de Minas Gerais (UFMG) in 1963 and holds diplomas of M.Sc. and Ph. D. in Egineering by Colorado School of Mines, USA, obtained in 1968 and 1971. Founder and chariman of the board of directors of FALCONI — Consultores de Resultados, the largest management consulting company in Brazil. He is a board member of AmBev, Gerdau Group, Vale, Amil (“United Health”), Petrobras, B2W, among others. He is an emeritus professor of UFMG. He has been awarded the Medal Order of Rio Branco for services rendered to the nation. Chosen by the American Society for Quality Control as one of the “21 voices of the 21st century.” He has worked at JUSE — Union of Japanese Scientists and Engineers.
Ana Paula Vitali Janes Vescovi — Board Member: Mrs. Ana Paula Vitali Janes holds a degree in Economics from Universidade Federal do Espírito Santo. She holds a master degree in Public Sector Economy from Universidade de Brasília (2001) and a master degree in Public Administration from Escola Brasileira de Administração Pública da Fundação Getúlio Vargas do Rio de Janeiro — FGV/RJ. Between 2007 and 2010 she was president of Instituto Jones dos Santos Neves and Secretary of the State of Espírito Santo. Between 2010 and 2014 she was assistant to Senator Ricardo Ferraço. Between 2015 and 2016 she was Finance Secretary of the State of Espírito Santo and is currently National Treasury Secretary.
Elena Landau — Board Member: Mrs. Elena Landau holds a degree in Economics from Pontifícia Universidade Católica do Rio de Janeiro (PUC-RIO) in 1976 and holds a master degree in Economics from PUC-RIO in 1982. Moreover, she is a lawyer graduated from PUC-RIO in 2006 and holds a post-graduation certificate on Corporate Law and Capital Markets from Fundação Getúlio Vargas FGV/RJ (2003) as well as a “Short Course on Regulation” from London School of Economics (2008). Since 2007 she is a partner at Sérgio Bermudes law firm. Between 2010 and 2011 she was Vice-President of the Electric Energy Commission from the Rio de Janeiro State Bar (OAB/RJ) and between 2007 and 2011 she was Coordinator of the Regulatory Legal Committee of ABCE — Associação Brasileira de Companhias de Energia Elétrica. Since 2010 she became general counsel of ABCE. Moreover, she has held several leadership positions in the public and private initiatives, such as Manager Officer of Bear Stearns Investment Bank in Brazil, officer of BNDES, responsible for the National Privatization Program (“Programa Nacional de Desestatização”), BNDES CEO Special Advisor, Sub-Chief of the Economic Department of National Industry Confederation (Confederação Nacional da Indústria). She is also currently a member of the bord of directors of Comgas.
Carlos Eduardo Rodrigues Pereira — Board Member: Mr. Carlos Eduardo Rodrigues Pereria holds a degree in electrical engineer from Universidade Federal do Rio de Janeiro (UFRJ). He holds a master’s degree in electrical engineering from COPPE/UFRJ (with emphasis on Electromagnetic Transients). He holds a MBA in Economy and Energy Management from COPPEAD/UFRJ, a certificate from IBGC on Formation of Members of Boards of Directors, a certificate on International Accounting Rules from FIPECAFI and a certificate in Regulation from FGV. At the beginning of his career in the power industry he worked at the Transmission Management Office of ONS, the National System Operator, where he remained between 2003 and 2004. He has also worked, between 2006 and 2010, at the laboratories of Centro de Pesquisas de Energia Elétrica (CEPEL), at the then denominated Lines and Stations Department (Departamento de Linhas e Estações), in researches related to the high-tension area. In 2010, he joined Eletrobras to work at the Transmission Planning Studies Division. In 2015, he started working at the Advisory Office for Regulation Management and Institutional Relations, where he remains up to this date.
Mozart de Siqueira Campos Araújo — Board Member: Mr. Mozart de Siqueira Campos Araújo holds a master degree in electrical engineer from Univerisidade de Pernambuco (UPE) in 1976, and holds a Ph.D. degree in electrical technology from Institut National Polytechnique of Grenoble, France, in 1979. He is also an associate professor since 1996 at the graduation course for electrical engineering at UPE as well as an executive of Itamarati Norte S.A. — Agropecuária (Energy/Investments company of the Brennand group). Since 2005 he is the chairman of the board of directors of ABAGEL — Associação Brasileira de Geração de Energia Limpa.
Esteves Pedro Colnago Júnior — Mr. Esteves Pedro Colnago Júnior holds a degree in Economics from Universidade de Brasília in 1996 and holds a master degree in Economic Sciences from Universidade de Brasília (2004). In addition, he has obtained a post-graduation certificate in Public Accounting, also from Universidade de Brasília, in 2000. Since 1998 he is an analyst of the Central
Bank of Brazil. Moreover, he was the General Coordinator of the Economic Policy Secretariat of the Ministry of Finance between 2005 and 2011 as well as Programs Officer of the Executive Secretariat of the Ministry of Finance between 2011 and 2015. In 2015 he held the positions of Programs Officer and Deputy Executive Secretary to the Executive Secretariat of the Ministry of Planning, Budget and Management, position he currently holds. Mr. Esteves Colnago Júnior is a member of the board of directors of Instituto de Resseguros do Brasil (IRB), he was once chairman of Conselho de Recursos do Sistema Financeiro Nacional (CRSFN) and professor of Instituto de Ensino Superior de Brasília (IESB).
José Pais Rangel — Mr. José Pais Rangel is a lawyer with great experience on publicly-held companies, having exercised the following roles at the Central Bank of Brazil: Capital Markets Inspector, Inspection Supervisor of Capital Markets, Inspection Regional Head of Capital Markets, Head of Public Debt Department, Market Transactions Manager, Project Coordinator and responsible for implementation of SELIC system in the Brazilian Financial Market, Founder and member of the Board of Trustees of CENTRUS — Fundação Banco Central de Previdência Privada, Coordinator of the Privatization Program of companies contolled by the Central Bank of Brazil, Chairman of the board of directors of Cia. América Fabril, member of the board of directors of Cia. Fábrica de Tecidos Dona Isabel, Advisor of the Presidency of the Republic — SEPLAN/Special Privatization Committee, Chief Executive Officer of Cia. Nacional de Tecidos Nova América, and liquidator of the following state-owned companies: DIGIBRÁS (Empresa Digital Brasileira S.A.), DIGIDATA (Eletrônica S.A.) and PROEL (Processos Eletrônicos Ltda.). He currently holds the following positions: Vice-President of Banco Clássico S.A., member of the board of directors of Companhia Distribuidora de Gás do Rio de Janeiro — CEG, member of the board of directors of Tractebel Energia S.A., member of the board of directors of Kepler Weber S.A. and member of the board of directors of Cia. Energética de Minas Gerais — CEMIG (all publicly-held companies). He is an Investment Funds Manager duly authorized by the CVM.
Board of Executive Officers
Our Board of Executive Officers is currently made up of seven members appointed by our Board of Directors for an unified three-year term, reelection being permitted. Historically, our Board of Executive Officers meets every week, or when called by a majority of the officers or by the Chief Executive Officer. Our Board of Executive Officers determines our general business policy, is responsible for all matters related to our day-to-day management and operations and is the highest controlling body with regards to the execution of our guidelines. We have no control over appointments of our officers because all such appointments are made by our board of directors. The address of our Board of Executive Officers is Av. Presidente Vargas, 409 13º andar — Rio de Janeiro.
The members of our current Board of Executive Officers were appointed by our Board of Directors and their names and titles are set out below:
Name |
| Position |
Wilson Pinto Ferreira Junior |
| Chief Executive Officer |
Armando Casado de Araújo |
| Chief Financial and Investor Relations Officer |
Carlos Eduardo Gonzalez Baldi |
| Chief Generation Officer |
Alexandre Vaghi de Arruda Aniz |
| Chief Administrative and Legal Officer |
Luiz Henrique Hamann |
| Chief Distribution Officer |
José Antonio Muniz Lopes |
| Chief Transmission Officer |
Lucia Maria Martins Casasanta |
| Chief Compliance Officer |
Mr. Wilson Pinto Ferreira Junior — Chief Executive Officer: See “ — Board of Directors.”
Mr. Armando Casado de Araújo — Chief Financial Officer and Investor Relations Officer: Mr. Araújo has over 30 years of experience in the domestic electric power sector. He worked for Eletronorte as Budget Superintendent, Financial Superintendent and Chief Financial Officer Assistent since 1977. He was then appointed President of the Integração Transmissão de Energia S.A. He has worked at Eletrobras since June 2008 when he became the assistant to and substitute of the Chief Financial Officer. He was appointed as Chief Financial Officer and Investor Relations Officer on March 30, 2010. Mr. Araújo holds a degree in Business Administration from Faculdade de Ciências Exatas, Administrativas e Sociais de Brasília, and has completed several post-graduate courses in Finance. He is a member of the board of directors of Chesf and CGTEE.
Mr. Carlos Eduardo Gonzalez Baldi - Chief Generation Officer: Mr. Carlos Eduardo Gonzalez Baldi is a Mechanical Enggineer who graduated from Universidade Federal Fluminense (UFF) in 1988. He holds a post-graduation certificate in Solid Mechanics from Pontifícia Universidade Católica do Rio de Janeiro (PUC/RJ) obtained in 1994 and a specialization in Welding Engineering from the German Welding Association — DSV Mannheim GmbH obtained in 1995. He also holds a MBA in Business Management from Fundação Getúlio Vargas (2005) and is currently obtaining a certificate in Corporate Law at Fundação Getúlio Vargas. Since 2010 he is a partner and officer of HLCE — Consultoria e Assessoria Empresarial Ltda. Between 2011 and 2012 he was the Chief Executive Officer of the Pecém Harbor Project at Energia Pecém. He is also currently the Chief Executive Officer of VLT Carioca.
Mr. Alexandre Vaghi de Arruda Aniz — Chief Administrative and Legal Officer: Mr. Aniz is a lawyer, graduated from Mackenzie University and specialized in Corporate Income Tax by Apet. He served as vice president and acting president of the Commercial Registry of the State of São Paulo. In the private sector he was the CEO and chairman of the Board of Directors of 3e Energia e Participações S.A. He was an assistant of the Deputy Samuel Moreira, and chief of the office of the Deputy. He is also a chairman of the board of directors of Eletropar and a member of the board of directors of Eletronet.
Mr. Luiz Henrique Hamann — Chief Distribution Officer: Luiz Henrique Hamann is a Business Administrator who graduated from Faculdade Católica de Ciências Humanas/DF and who holds a MBA in Business Management from Fundação Dom Cabral. Between 2011 and 2013, and also between 2015 and 2016, Mr. Luiz Henrique Hamann was Assistant to Eletrobras’ Chief Financial and Investor Relations Officer. Between 2013 and 2015 he was Chief Executive Officer of Companhia Energética de Roraima (CERR).
Mr. José Antonio Muniz Lopes — Chief Transmission Officer: Mr. Lopes was appointed Chief Executive Officer of Eletrobras on March 6, 2008. On March 4, 2008 at the Extraordinary General Stockholders Meeting he was elected a member of our Board of Directors. Mr. Lopes has held several executive positions in companies in the Eletrobras group, such as Chief Executive Officer and Director of Planning and Engineering at Eletronorte respectively from 1996 to 2003 and 1989 to 1990, Chief Executive Officer, Managing Director and Chief Financial Officer at Chesf from 1992 to 1994 and Chief Executive Officer at Eletrobras from March 2008 to February 2011. Mr. Lopes was also Deputy Director of the National Department of Energy Development — DNDE of theMME, where he also served as the Executive Secretary. Mr. Lopes holds a degree in Electrical Engineering from the Universidade Federal de Pernambuco. He is an expert in the Brazilian electricity sector in which he has worked for more than 30 years.
Ms. Lucia Maria Martins Casasanta — Chief Compliance Officer: Ms. Lucia Maria Martins Casasanta is an Economist graduate from Universidade Federal de Minas Gerais in 1983, as well, as an Accountant graduate from Universidade Santa Úrsula, in Rio de Janeiro, in 1993. She also holds a master degree in Business Administration from IBMEC RJ, in 2016, and a post-graduation certificate in Financial Management from Fundação Dom Cabral, in 1984. Her professional experience includes 30 years working with Audit & Risk Management functions, of which 13 years as a Partner. Between 1984 and 2002 she acted as an auditor at Arthur Andersen, holding positions ranging from trainee to partner. From 2002 to 2013 she acted as an Audit and Risk Management partner at Deloitte. She is also a coordinator of Rio de Janeiro’s chapter of Instituto Brasileiro de Governança Corporativa (IBGC) and a member of the Compliance Committee at Brazilian Fast Food Corp. — BFFC.
B. Compensation
The compensation of our Board of Directors, Board of Executive Officers and Fiscal Council is determined by our shareholders at the Ordinary Shareholders’ Meeting held within the first four months of the financial year. That compensation may also include a profit sharing amount at the discretion of our shareholders.
For 2016, 2015 and 2014, the aggregate consolidated compensation paid to our Directors, Officers and members of the Fiscal Council (excluding that paid by Itaipu) was R$52.3 million, R$42.8 million and R$35.9 million, respectively.
C. Board Practices
Service Contracts
We do not have service contracts with any member of our Board of Directors, Board of Executive Officers or Fiscal Council.
Fiscal Council
Our Fiscal Council is established on a permanent basis and consists of five members and five alternates elected at the annual shareholders meeting for renewable one-year terms. The Brazilian Government has the right to appoint three of the members of our Fiscal Council, and both the minority shareholders and the holders of our preferred shares without voting rights, have the right to appoint one member each. The fiscal Council was adapted in 2006 to comply with the requirements of the Sarbanes-Oxley Act and it functions like an Audit Committee.
In addition, the Fiscal council supervises management to ensure compliance with our By-Laws and constitutive documents obligations.
The current members of our Fiscal Council as of December 31, 2016, set out in the table below, and respective alternates were elected during the general shareholders meeting held during April 29, 2016 and in which we elected five members and respective alternates to the Fiscal Council. Their terms of office are due to end at the ordinary shareholder meeting scheduled for 2017.
The meetings occur monthly, although, meeting may also occur on an ad hoc basis whenever called by the President of the Council.
Member |
| Alternate |
Eduardo Cesar Pasa |
| David Meister |
Agnes Maria de Aragão da Costa |
| Leila Przytyk |
Luis Felipe Vital Nunes Pereira |
| Fabiana Magalhães Almeida Rodopoulos |
Ronaldo Dias |
| João Gustavo Specialski Silveira |
Aloisio Macario Ferreira de Souza |
| Patrícia Valente Stierli |
D. Employees
As of December 31, 2016, we (excluding Itaipu) had a total of 23,190 salaried employees compared to 22,205 employees as of December 31, 2015 and 22,215 as of December 31, 2014. Eletrobras as a holding company, excluding Itaipu and other subsidiaries, had 982 employees as of December 31, 2016.
As a mixed capital company, we cannot hire employees without a public contest. A public contest involves us placing advertisements in the Brazilian press for open positions and inviting applicants to sit an examination. The last public contest at the holding company took place in 2010, as a result of which we hired approximately 35 new employees. Over the course of 2016, CEAL, CEPISA and Boa Vista Energia held a public contest in order to meet the Termo de Ajuste de Conduta. Public contests for Eletronuclear and Eletrosul were approved and Furnas has an ongoing valid public contest. In total, we hired 1,137 new employees in 2016
The following table sets out the number of employees hired by our companies in the periods indicated:
|
| Number of Outsourced |
| ||
Subsidiary |
| 2016 |
| 2015 |
|
Eletronorte |
| 0 |
| 362 |
|
Furnas |
| 1,070 |
| 1,178 |
|
Total |
| 1,070 |
| 1,540 |
|
The national collective bargaining agreement encompasses all subsidiaries of Eletrobras and its purpose is to unify procedures and policies by having all negotiations with employees’ representatives taking place concurrently.
These negotiations are made on a national level with representatives of several unions and associations, such as: Federação Nacional dos Urbanitários; Federação Nacional dos Engenheiros; Federação Nacional dos Trabalhadores em Energia, Água e Meio Ambiente; Federação Nacional dos Administradores; Federação Interestadual do Sindicato de Engenheiros; Federação Nacional dos Técnicos Industriais; Federação Regional dos Urbanitários do Nordeste; Federação Nacional das Secretárias e Secretários; Sindicato Nacional dos Advogados e Procuradores de Empresas Estatais; and Sindicatos dos Urbanitários de Alagoas, Rio de Janeiro, Distrito Federal, Amapá, Rondônia, Roraima, Maranhão, Amazonas, Mato Grosso, amongst others. There are 86 unions distributed throughout these Federations, and Federação Nacional dos Urbanistas —FNU and Federação Nacional dos Trabalhadores em Energia, Água e Meio Ambiente — FENATEMA represent 85% of the unions.
During the negotiation process of the national collective bargaining agreement in 2016, the unions went on strike for an undetermined time and the Eletrobras Companies filed a collective bargaining for the strike in the Superior Labor Court (Tribunal Superior do Trabalho — TST). The collective bargaining agreement 2016/2018, which covers all of the Eletrobras companies’s empolyess, has already been concluded with the mediation of the Deputy-Justice of the Court.
The provisions of the previously existing collective bargaining agreement were renewed, with the replacement of IPCA, as disclosed by Instituto Brasileiro de Geografia e Estatística — IBGE, having the following results:
(i) 5% of readjustement retroacting to May 1, 2016, with payment made in the payroll of July 2016;
(ii) 9.28% applied to the base salary table of April 30, 2016, with payment made in September 15, 2016; and
(iii) for the second year of the national collective bargaining agreement 2016/2018, the adjustment corresponds to the full IPCA rate regarding the period between May 1, 2016 and April 30, 2017, entering into effect on May 1, 2017, for the employees with work contracts valid in this date.
E. Share Ownership
As of December 31, 2016 none of the members of the Fiscal Council held our shares. The following tables show current ownership of our shares by members of our Board of Directors and Board of Executive officers:
Board of Directors
Name |
| Number of |
| Number of |
|
José Luiz Alqueres |
| — |
| — |
|
Wilson Pinto Ferreira Junior |
| — |
| — |
|
Vicente Falconi Campos |
| 2,260,800 | (1) | — |
|
Ana Paula Vitali Janes Vescovi |
| — |
| — |
|
Elena Landau |
| — |
| — |
|
Esteves Pedro Colnago Júnior |
| — |
| — |
|
Carlos Eduardo Rodrigues Pereira |
| — |
| — |
|
José Pais Rangel |
| 56,000 |
| 32,000 |
|
Mozart de Siqueira Campos Araújo |
| — |
| — |
|
(1) Through exclusive fund Star Tours.
Board of Executive Officers
Name |
| Number of |
| Number of |
|
Wilson Pinto Ferreira Junior |
| — |
| — |
|
Armando Casado de Araújo |
| — |
| — |
|
Carlos Eduardo Gonzalez Baldi |
| — |
| — |
|
Alexandre Vaghi de Arruda Aniz |
| — |
| — |
|
Luiz Henrique Hamann |
| — |
| — |
|
José Antonio Muniz Lopes |
| — |
| 1 |
|
Lucia Maria Martins Casasanta |
| — |
| — |
|
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. Major Shareholders
As of December 31, 2016, the aggregate amount of our outstanding capital stock was R$31,305 million, consisting of 1,087,050,297 outstanding common shares, together with 146,920 outstanding class “A” preferred shares and 265,436,883 outstanding class “B” preferred shares. This represented 80.3%, 0.01% and 19.6% of our aggregate outstanding capital stock respectively.
As of December 31, 2015, the aggregate amount of our outstanding capital stock was R$31,305 million, consisting of 1,087,050,297 outstanding common shares, together with 146,920 outstanding class “A” preferred shares and 265,436,883 outstanding class “B” preferred shares. This represented 80.3%, 0.01% and 19.6% of our aggregate outstanding capital stock respectively.
The following tables show information relating to beneficial ownership in our common and preferred shares as of December 31, 2016 and December 31, 2015:
As of December 31, 2016
|
|
|
|
|
| Class A Preferred |
| Class B Preferred |
|
|
|
|
| ||||
Shareholder |
| Common Shares |
| Shares |
| Shares |
| Total |
| ||||||||
|
| (number) |
| % |
| (number) |
| % |
| (number) |
| % |
| (number) |
| % |
|
Brazilian Government |
| 554,395,652 |
| 51 | % |
|
|
|
| 1,544 |
| 0 | % | 554,397,196 |
| 41 | % |
BNDES Participações S.A |
| 141,757,951 |
| 13 | % |
|
|
|
| 18,691,102 |
| 7 | % | 160,449,053 |
| 12 | % |
BNDES |
| 74,545,264 |
| 7 | % |
|
|
|
| 18,262,671 |
| 7 | % | 92,807,935 |
| 7 | % |
FND |
| 45,621,589 |
| 4 | % |
|
|
|
|
|
| 0 | % | 45,621,589 |
| 3 | % |
FGHAB |
| 1,000,000 |
| 0 | % |
|
|
|
|
|
| 0 | % | 1,000,000 |
| 0 | % |
CEF |
| 2,722,864 |
| 0 | % |
|
|
|
|
|
| 0 | % | 2,722,864 |
| 0 | % |
Others |
| 267,006,977 |
| 25 | % | 146,920 |
| 100.00 | % | 228,481,566 |
| 86 | % | 495,635,463 |
| 37 | % |
Under BM&FBOVESPA Custody |
| 265,466,269 |
| 24 | % | 81,492 |
| 55.47 | % | 209,002,148 |
| 79 | % | 474,549,909 |
| 35 | % |
Resident |
| 135,209,344 |
| 12 | % | 81,491 |
| 55.47 | % | 78,955,135 |
| 30 | % | 214,245,970 |
| 16 | % |
Non Resident |
| 99,806,957 |
| 9 | % | 1 |
| 0.00 | % | 113,291,398 |
| 43 | % | 213,098,356 |
| 16 | % |
J.P. Morgan Chase Bank |
| 30,449,968 |
| 3 | % | 0 |
| 0.00 | % | 16,755,615 |
| 6 | % | 47,205,583 |
| 3 | % |
Others |
| 1,540,708 |
| 0 | % | 65,428 |
| 44.53 | % | 19,479,418 |
| 7 | % | 21,085,554 |
| 2 | % |
Resident |
| 1,540,462 |
| 0 | % | 65,401 |
| 44.51 | % | 19,479,205 |
| 7 | % | 21,085,068 |
| 2 | % |
Non Resident |
| 246 |
| 0 | % | 27 |
| 0.02 | % | 213 |
| 0 | % | 486 |
| 0 | % |
Total |
| 1,087,050,297 |
| 100 | % | 146,920 |
| 100 | % | 265,436,883 |
| 100 | % | 1,352,634,100 |
| 100 | % |
As of December 31, 2015
Shareholder |
| Common Shares |
| Class A Preferred |
| Class B Preferred |
| Total |
| ||||||||
|
| (number) |
| % |
| (number) |
| % |
| (number) |
| % |
| (number) |
| % |
|
Brazilian Government |
| 554,395,652 |
| 51.00 | % |
|
|
|
| 1,544 |
| 0.00 | % | 554,397,196 |
| 40.99 | % |
BNDES Participações S.A |
| 141,757,951 |
| 13.04 | % |
|
|
|
| 18,691,102 |
| 7.04 | % | 160,449,053 |
| 11.86 | % |
BNDES |
| 74,545,264 |
| 6.86 | % |
|
|
|
| 18,262,671 |
| 6.88 | % | 92,807,935 |
| 6.86 | % |
FND |
| 45,621,589 |
| 4.20 | % |
|
|
|
|
|
| 0.00 | % | 45,621,589 |
| 3.37 | % |
FGHAB |
| 1,000,000 |
| 0.09 | % |
|
|
|
|
|
| 0.00 | % | 1,000,000 |
| 0.07 | % |
CEF |
| 8,701,564 |
| 0.80 | % |
|
|
|
|
|
| 0.00 | % | 8,701,564 |
| 0.64 | % |
FGI |
|
|
| 0.00 | % |
|
|
|
| 8,750,000 |
| 3.30 | % | 8,750,000 |
| 0.65 | % |
Others |
| 261,028,277 |
| 24.01 | % | 146,920 |
| 100.00 | % | 219,731,566 |
| 82.78 | % | 480,906,763 |
| 35.55 | % |
Under BM&FBOVESPA Custody |
| 259,494,572 |
| 23.87 | % | 81,384 |
| 55.39 | % | 206,903,805 |
| 77.95 | % | 466,479,761 |
| 34.49 | % |
Resident |
| 124,893,621 |
| 11.49 | % | 81,383 |
| 55.39 | % | 90,516,497 |
| 34.10 | % | 215,491,501 |
| 15.93 | % |
Non Resident |
| 53,229,265 |
| 4.90 | % | 1 |
| 0.00 | % | 95,124,435 |
| 35.84 | % | 148,353,701 |
| 10.97 | % |
J.P. Morgan Chase Bank |
| 81,371,686 |
| 7.49 | % |
|
| 0.00 | % | 21,262,873 |
| 8.01 | % | 102,634,559 |
| 7.59 | % |
Others |
| 1,533,705 |
| 0.14 | % | 65,536 |
| 44.61 | % | 12,827,761 |
| 4.83 | % | 14,427,002 |
| 1.07 | % |
Resident |
| 1,533,459 |
| 0.14 | % | 65,509 |
| 44.59 | % | 12,827,548 |
| 4.83 | % | 14,426,516 |
| 1.07 | % |
Non Resident |
| 246 |
| 0.00 | % | 27 |
| 0.02 | % | 213 |
| 0.00 | % | 486 |
| 0.00 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
| 1,087,050,297 |
| 100 | % | 146,920 |
| 100 | % | 265,436,883 |
| 100 | % | 1,352,634,100 |
| 100 | % |
B. Related Party Transactions
We administer certain funds, including the RGR fund, CCC Account and CDE Account, on behalf of the Brazilian Government, our controlling shareholder. According to Provisional Measure No. 735, as from May 2017 the funds will be transferred to CCEE.
We sometimes act together with other Brazilian state owned companies or governmental entities. These activities are mainly in the areas of technical cooperation and research and development. In 2000, our Board of Directors approved the execution of a Technical
and Financial Cooperation Agreement between ourselves and the MME, for us to perform feasibility studies in relation to the Brazilian hydrographic base, with the purpose of identifying potential sites for the future construction of hydroelectric plants.
In addition, we have also made a number of loans to our subsidiaries. For further details please see the description in “Item 4. B, Information on the Company — Business Overview — Lending and Financing Activities — Loans Made by Us.”
We believe our transactions with related parties are conducted on market terms.
For further information see note 45 to our consolidated financial statements.
C. Interests of Experts and Counsel
Not applicable.
A. Consolidated Financial Statements and Other Information
See “Item 18. Consolidated Financial Statements.”
Litigation
As of December 31, 2016, we were a party to numerous legal proceedings relating to civil, administrative, environmental, labor and tax claims filed against us. These claims involve substantial amounts of money and other remedies. Several individual disputes account for a significant part of the total amount of claims against us. We have established provisions for all amounts in dispute considering that in this cases where there is a present obligation (legal or constructive) as a result of a past event, it is probable (more likely than not) there will be an outflow of resources that embodies economic benefits to settle the referred obligation, and the amount to settle the obligation can be estimated reliably. As of December 31, 2016, we provisioned a total aggregate amount of approximately R$20,729 million in respect of our legal proceedings, of which R$591 million were related to tax claims, R$18,730 million were related to civil claims and R$1,409 million were related to labor claims.
Investor Class Actions
Between July 22, 2015 and August 15, 2015, two putative securities class action complaints were filed against us and certain of our employees in the United States District Court for the Southern District of New York (SDNY). On October 2, 2015, these actions were consolidated and the Court appointed lead plaintiffs, Dominique Lavoie and the City of Providence. The plaintiffs filed a consolidated amended complaint on December 8, 2015 purportedly on behalf of investors who purchased our U.S. exchange-traded securities between August 17, 2010 and June 24, 2015, and filed a second amended complaint on February 26, 2016.
The second amended complaint alleges, among other things, that we and the individual defendants knew or should have known about alleged fraud committed against us by a cartel of construction firms, as well as bribes and kickbacks allegedly solicited and received by our employees; that we and the individual defendants made material misstatements and omissions regarding the alleged fraud; and that our stock price declined when the alleged fraud was disclosed.
The plaintiffs have not specified the amount of damages they are seeking, although such amount, when specified, could be material to us. On April 15, 2016, we filed a motion to dismiss the second amended complaint, which was fully briefed and then submitted to the Court on June 17, 2016.
On March 27, 2017, the Court issued a decision that granted in part and denied in part defendants’ motion to dismiss the second amended complaint. All claims against José Antonio Muniz Lopes Lopes, our former CEO, were dismissed, as were scheme liability claims against José da Costa Carvalho Neto, our former CEO, and Armando Casado de Araújo, our current CFO, under Section 10(b) of the Exchange Act and Rule 10b-5(a) and (c) promulgated thereunder. The motion to dismiss was otherwise denied as to the remaining claims. The decision does not create any financial obligation for us, and the case will now move into the class certification and discovery phases. The deadline to answer the second amended complaint currently is May 5, 2017. These legal proceedings, if decided against us, could have a material adverse effect on our consolidated financial position, results of operations and cash flows in the future.
Criminal Proceedings
With respect to the criminal proceedings involving former Eletronuclear employees, we are cooperating with the prosecution, resulting in us being granted access to court documents and allowing us to question witnesses and co-defendants.
Labor Proceedings
As of December 31, 2016, we were party to a number of labor proceedings brought by our employees, former employees and employees of some of our service providers against us, involving a total amount of R$1,409 million. Most of those proceedings relate to overtime compensation and its indirect effects, salary equalization, pension payments and payment of rescisory amounts. Although we are a party to a significant number of labor proceedings, we believe that none of those proceedings, when considered individually, could materially adversely affect our results of operations or financial condition.
In connection with successive attempts by the Brazilian Government to curb Brazil’s high inflation rates, Brazilian companies have in the past been required by law to disregard in each year part of the inflation for that year when calculating wage increases for its employees. Like most other Brazilian companies, we have been defendants in lawsuits brought before labor courts by labor unions or individual employees seeking compensation for lost wages resulting from the implementation of the Brazilian Government’s antiinflationary plans, in particular: (i) the plan implemented in 1987 by the then Minister of Finance, Luiz Carlos Bresser Pereira (the Bresser Plan); (ii) the plan implemented in early 1989 (the Summer Plan); and (iii) the plan implemented in 1990 by the then President, Fernando Collor de Melo (the Collor Plan). Some of the collective lawsuits brought against us in respect to such plans have been definitively decided by the Federal Supreme Court in our favor.
The Union of Workers in Urban Industries of the state of Alagoas, in the capacity of procedural substitute, brought a labor claim on behalf of employees of Ceal who are seeking supposed salary differences in light of the implementation of the Bresser Plan. The lawsuit is currently in execution process to ratify the lower court’s calculations in the amount of R$722 million. The amounts were contested by CEAL by submitting two arguments: one restricted to the reference date and another contesting the amounts presented by the Union without restriction to the reference date. If the restriction to the reference date is accepted, calculations will be reduced to R$3.4 million and the amount accrued by CEAL and assessed by legal counsels as more likely than not that an outflow is restricted to the reference date. The 5th Panel of the Superior Labor Court started to judge the appeal discussing the need to examine the pre-execution arguments. The reporting judge, Judge Emmanoel Pereira, and Judge Maria Helena Mallmann voted for dismissal of the appeal. The process is currently under analysis by Judge Caputo Bastos. As of December 31, 2016, we recognized a provision of R$11.1 million in our consolidated financial statements.
Compulsory Loans
Pursuant to Law No. 4,156 of November 28, 1962 certain end-users of electricity were required to make “compulsory loans” to us (through collections by distributors) in order to provide funds for the development of the electricity sector. Industrial customers consuming over 2,000 kWh of electricity per month were required to pay an amount equivalent to 32.5% of each electricity invoice to us in the form of a compulsory loan, which was repayable by us within 20 years of draw-down. Interest on the compulsory loans accrues at IPCA — E plus 6.0% per annum. Law No. 7,181 of December 20, 1983, extended the compulsory loan program until December 31, 1993 and provided that such loans may, subject to shareholder approval, be repaid by us in the form of an issue of preferred shares at book value, in lieu of cash.
We made available to eligible customers upon the first and second conversion of credits from the compulsory loan approximately 42.5 billion class “B” preferred shares and upon the third conversion of credits from the compulsory loan, about 27.2 billion class “B” preferred shares. In addition, our shareholders approved on April 30, 2008 the issuance of additional preferred shares to eligible customers at book value in repayment of our remaining compulsory loans. If additional shares are issued in the future and the book value of such shares is less than their market value, the value of existing shareholders’ shares may be subject to dilution. On December 31, 2008, we recorded approximately R$215 million for debts for compulsory loans that had not yet been converted, which, at any time, by decision of our shareholders, may be refunded to industrial consumers, through issuing class “B” preferred shares, in accordance with the proceedings described above.
As of December 31, 2016, there were 5,047 outstanding lawsuits filed by consumers against us questioning the monetary adjustments, understated inflation and interest calculations related to the repayment of the compulsory loans. Of those lawsuits, 1,954 have been decided against us and are currently at the execution phase. The total amount involved in these lawsuits is unadjusted for monetary correction and required expert assessment to be estimated with accuracy. In the course of execution proceedings, we have been required to pledge some of our assets, consisting mainly of preferred shares held by us in other electricity sector companies. As of December 31, 2016, we provisioned R$13.9 billion to cover losses arising from unfavorable decisions in these lawsuits.
The dispute was taken to the Superior Court of Justice (STJ), which ruled on the merits. An appeal, however, was filed at the Supreme Court (STF) and is pending judgment.
Although the matter was brought before the Supreme Court, in view of the Superior Court’s decision, issued according to Article 543-C of the 1973 Civil Procedure Code, the claims filed continue to be processed regularly and some decisions against us have already been issued. We have been ordered to pay the inflation adjustment differences for that period and, as a result, many enforcement claims have been filed. In such claims, the parties are discussing how to calculate the amount due.
However, during the third quarter of 2015, the Superior Court issued decisions setting the parameters for these calculations, taking into consideration some arguments by us, but not all of them, which resulted in adjustments to our calculation methodology and risk classification for these claims and the consequent changes in the provisions for contingencies. As this decision was considered a subsequent event for our 2014 financial statements, under IAS 10, we have reflected an additional R$4.1 billion in provisions relating to those compulsory loans.
We are also involved in approximately 2,039 pending lawsuits related to the repayment of the compulsory loans, in which consumers seek to exercise the option to convert their credits presented by bonds payable to the bearer. These bonds are called “obrigações da Eletrobras.” However, we believe we have no further liability in respect of these bonds because they have an expiration date for presentation and this date has now passed.
Tax Proceedings
Annulment Claim
This is a claim for annulment regarding a tax credit determined in administrative proceeding No. 16682.720330/2012 (collection of PIS/COFINS on RTE and Itaipu). On July 6, 2015, Furnas made a judicial deposit in the amount required at the time, totaling R$117.3 million. Furnas has yet to file its response. No impact is expected considering that there was a judicial deposit of the amount involved. As of December 31, 2016, the total amount provisioned was R$143.1 million.
Tax Judicial Proceeding No. 0075104-45.2016.814.030
This concerns a tax assessment notice concerning the lack of payment of the fee for the Control, Monitoring and Supervision of Activities of Exploration and Utilization of Water Resources, or TFHR, intended to finance the monitoring and use of water resources in the State ofPará from April to June 2015.
At the administrative sphere, the impugnation, appeal and motion for review were rejected. The administrative proceeding was subsequently dismissed. A judicial lawsuit was filed and is being discussed before the Pará State Court, or TJPA. An injunction was granted suspending the need for payment of the debt, as well as to avoid any action seeking the collection of TFHR, even if related to other periods. The State of Pará filed an interlocutory appeal. The injunction was suspended by the appeal judge responsible for the report on the interlocutory appeal. On account of this suspension Eletronorte filed a new appeal that is yet to be reviewed by TJPA. In addition, given that ANEEL informed it was an interested party to the lawsuit, the court records have been submitted to the Federal Courts, but the Federal judge rejected acceptance of the lawsuit due to lack of authority, and, accordingly, the court records will be submitted back to TJPA, a State Court.
Without this injunction the tax became once again due, thus enabling the State of Pará to file a Tax Foreclosure (Lawsuit No. 0023173-66.2016.4.01.3900 in course before the 6th Federal Court of Belém). Under this lawsuit, assets of Eletronorte have been indicated as being subject to a judgment lien, but the State of Pará has not yet informed if they are in agreement with these assets. In addition, the State of Pará made an out-of-court protest of bill that caused Eletronorte to file a claim to suspend the protest of bill (Lawsuit No. 0023107-86.2016.4.01.3900). However, as of the date of this annual report no injunction has been obtained under this lawsuit.
Pará state law is also being disputed before the Federal Supreme Court (STF) by means of Direct Action of Unconstitutionality (Ação Direta de Inconstitucionalidade) No. 5374 filed by Confederação Nacional da Indústria — CNI. Eletronorte has asked to join this lawsuit as amicus curiae and is currently waiting to be accepted. Under this lawsuit the Federal Government Attorney’s Office (Procuradoria Geral da República) has issued an opinion in which it requests this state law of Pará to be declared unconstitutional and that its effectiveness should be suspended. The amount involved is R$354.7 million as of December 31, 2016.
Tax Administrative Proceeding No. 16682.721.073/2014-51
Tax administrative proceedings relating to the collection of a fine regarding the social contribution due as a result of the offset made by Furnas without using PER/DCOMP. A tax assessment notice was issued seeking to collect social contribution, default interest and a proportional fine because of the disallowance made by the tax agent due to the use of credits by Furnas related tax losses recorded in
2007. This proceeding is currently in the administrative appeal stage. As of December 31, 2016, the amount involved is R$277.4 million.
Civil Proceedings
Expropriation of Lands
Our subsidiaries are normally involved in a number of legal proceedings related to the expropriation of land used for the construction of hydroelectric plants, particularly in the northern and northeastern regions. Most of those proceedings are related to the indemnification paid to the populations affected by the construction of the reservoirs and environmental or economic damages inflicted on the affected populations and neighboring cities. The main lawsuits related to expropriation involving our subsidiaries are described below.
In northern Brazil, Eletronorte is involved in several proceedings related to the expropriation of lands for the construction of the hydroelectric plant of Balbina, in the State of Amazonas. The lawsuits related to the Balbina expropriation involve the value to be paid for the expropriated land and the legality of the ownership of the affected land claimed by alleged landowners. The total amount involved, which has been recognized as a provision, was approximately R$283.5 million.
Mendes Jr.
As of December 31, 2012, Chesf was involved in significant litigation proceedings with Mendes Jr., a Brazilian construction contractor. Chesf and Mendes Jr. entered into an agreement in 1981 providing for certain construction work to be performed by Mendes Jr. The agreement, as amended, provided that, in the event of delays in payments due by Chesf to Mendes Jr., Mendes Jr. would be entitled to default interest at the rate of 1.0% per month, plus indexation to take account of inflation. During the performance of the work, payments by Chesf were delayed and Chesf subsequently paid default interest at the rate of 1.0%, plus indexation, on such delayed payments. Mendes Jr. alleged that as it had been required to fund itself in the market in order not to interrupt the construction work, it was entitled to be reimbursed in respect of such funding at market interest rates, which were much higher than the contractual default interest rate.
The lower court judge dismissed Mendes Jr.’s claims and Mendes Jr. appealed to the Appellate Court of the State of Pernambuco, or the Appellate Court. The Appellate Court reinstated Mendes Jr.’s claims and ultimately declared Chesf liable to reimburse Mendes Jr.’s funding costs in respect of the delayed payments at market rates, plus legal fees of 20.0% of the amount of the dispute, with the total being indexed at market rates until the actual payment date. Chesf’s appeal of the Appellate Court’s order to the Federal Superior Court, or STJ, was dismissed on jurisdictional grounds. Mendes Jr. then filed a second lawsuit in a State court in Pernambuco to order Chesf to pay for the actual losses incurred by Mendes Jr., and to determine the amount payable. In the enforcement proceedings, the lower court ruled in favor of Mendes Jr., but the Appellate Court ruled in favor of Chesf, annulling the lower court’s judgment in the enforcement proceedings. Mendes Jr. appealed this ruling of the Appellate Court to the STJ and to the Federal Supreme Court, which were rejected. At the same time, the Brazilian government also requested the STJ to permit the government to participate in the proceedings as Chesf’s assistant. In December 1997, the STJ decided that: (i) the second proceedings should be recommenced from the trial court phase; (ii) the Brazilian government should participate in the proceedings as Chesf’s assistant; and (iii) the second proceedings should be heard before Brazilian federal courts instead of the state courts to which it was originally submitted. The second proceedings recommenced in the Brazilian federal courts to determine the final amount to be paid by Chesf to Mendes Jr. An expert was called to determine the amount of the claim, and had his finding challenged by Chesf. As a consequence, the court decided to reject the expert’s opinion but fixed the criteria which should be applied to determine the amount due. Mendes Jr. has appealed, requesting that the court require Chesf to pay the amount determined by the expert. Chesf and the Brazilian government have also appealed, requesting that the lawsuit should be terminated since there is no evidence Mendes Jr. obtained loans to conclude the construction. On October 25, 2010, the Regional Federal Court of the 5 Region held the appeals filed by Chesf and the Brazilian government and ruled the lawsuit had no merit. Mendes Junior filed an appeal against this decision before the 5 Region Federal Court, which was denied.
Mendes Junior filed an appeal against such denial, which was rejected by the Brazilian Superior Court of Justice on March 19, 2015. Mendes Junior then filed a final appeal before the Brazilian Federal Supreme Court against the decision of the Brazilian Superior Court of Justice, this final appeal was denied by the single Justice and is now pending judgment by the relevant chamber. The initial amount pleaded by the plaintiffs was of approximately R$7 billion (not considering inflation). As of December 31, 2016, we had no provisions related to this matter. Considering the decision of the Regional Federal Court, the Brazilian Superior Court of Justice and the Brazilian Federal Supreme Court, the likelihood of a financial obligation at the conclusion of this matter has been assessed as remote. See note 30 to our consolidated financial statements.
Xingó Plant “K Factor”
As of December 31, 2016, Chesf was also involved in litigation with the consortium responsible for building the Xingó plant, or the Xingó Consortium, and we recognized a provision of R$1,287 million in our consolidated financial statements. In connection with the construction of the Xingó plant, Chesf and the Xingó Consortium entered into a construction agreement that was amended in 1988 to provide for an additional inflation adjustment (referred to as the “K factor”) to be added to certain monetary correction payments required to be made by Chesf to the Xingó Consortium under the agreement. This amendment resulted in payments by Chesf to the Xingó Consortium that were higher than the payments that the original Request For Proposal, or RFP, for this project indicated would be paid to the successful bidder.
In 1994, Chesf unilaterally ceased applying the K factor to its payments to the Xingó Consortium (and consequently reduced its payments to the Xingó Consortium to the amount that Chesf would have had to pay if the K factor had not been applied to such payments) and filed a lawsuit against the Xingó Consortium seeking reimbursement for the additional amounts paid pursuant to the K factor adjustment, claiming that the use of an indexation system more favorable to the Xingó Consortium than the one originally provided for by the RFP was illegal under public bidding rules. The Xingó Consortium also filed a lawsuit against Chesf requiring full payment of the amounts due applying the K factor. Chesf’s lawsuit was rejected and Xingó Consortium’s lawsuit was decided favorably to the plaintiff, ordering Chesf to pay the amounts corresponding to the application of the K factor. Chesf and the Brazilian government, which is acting as the first’s assistant on the lawsuit, have appealed to the Superior Court. In August, 2010, the Superior Court granted one of those special appeals submitted by Chesf, reducing the value of the cause, which means a substantial reduction in the honorariums that may be paid in the main lawsuit. The same Superior Court rejected the remaining special appeals submitted by Chesf and the Federal Union, and therefore maintained the decision of the Pernambuco State Court, which dismissed the declaratory action filed by Chesf and granted the counterclaim submitted by the defendants, which resulted in Chesf submitting requests for clarification, which went to trial in December 2012, and were concluded in December 2013, and were all rejected.
At the same time, and since the conclusion of the processing of the fact in the ordinary instances, the defendants have been taking various initiatives before the ordinary Pernambuco State Court, to obtain enforcement of the sum requested in the counterclaim.
In August 2013, the defendants took the initiative before the 12th Civil Court of Recife, in the State of Pernambuco, to obtain provisional enforcement of the sums which, by their own calculations, would be the correction of the sum granted them by the Pernambuco State Court. In this case, Chesf was ordered to pay the sums in question, but submitted a “pre-enforcement challenge” (pointing out, supported by Superior Court case law, various irregularities in the procedures that would immediately disallow this provisional enforcement, without prejudice to other specific topics challenged in the calculations of the defendants themselves due to the Pernambuco State Court’s ruling). After a response from the defendants and a response from Chesf, on December 31, 2013 the process was awaiting court examination of this “challenge.” On August 22, 2014 the pre-enforcement challenge was dismissed, and the seizure via the Central Bank electronic system of R$948.7 million was ordered. A surety bond was offered for R$1.3 billion in place of the online seizure, which was accepted on August 28, 2014 by the Judge of the 12th Civil Court, who ordered the immediate release of the sum seized. An appeal filed by the Consortium caused the suspension on September 15, 2014 of the effects of the decision which ordered the release of the sum; however, on September 24, 2014, the court quashed the Requests for Clarification filed by Chesf regarding the provisional execution, for lacking the condition of admissibility, and therefore revoked the constriction measures ordered incidentally.
The Consortium filed a claim, assigned to the 6th Civil Chamber of the Pernambuco State Court on November 6, 2014. According to the second instance award published on January 13, 2015, the complaint was not acknowledged. In view of a motion for clarification filed by the defendants a new award was granted on February 3, 2015, in which the previous decision to not acknowledge the complaint was reversed. Under this new award the Court accepted the liquidation offered by the defendant with the subsequent submission of the court records to the judicial accountant for the proper calculations. Chesf filed an interlocutory appeal and an appeal for amendment of judgment in order to contest this new award granted by the Court, given that the first award had already resolved on not proceeding with the preliminary foreclosure. However, the interlocutory appeal was denied and, on April 13, 2015, the appeal for amendment of judgment was rejected under the argument that these were measures to simply postpone the effect of the award, having, therefore, the second award of the Court been maintained with the subsequent submission of the court records to the judicial accountant for the proper calculations. The Consortium submitted an interlocutory appeal which allowed the judge of the 12th Civil Court of Recife to proceed with an account pledge of R$1 billion, excluding attorneys’ fees. As of December 31, 2015, the Judiciary branch blocked R$360 million from that account. The Consortium appealed the requirement that 25% of Chesf’s revenues should be pledged and that the amount previously blocked should be released. However, the judge, and the Pernambuco State Court, rejected this appeal.
On February 24, 2016, a new decision of the 12th Civil Court of Recife granted a request to pledge government bonds held by Chesf in order to, supplement the amount that had already been blocked. The 12th Civil Court of Recife accepts preliminary procedures that seek to foreclose existing awards (“cumprimento provisório de sentença”). Under this procedure, which has been requested by the Consortium, (i) the judge approved the calculation elaborated by the judicial accountant that resulted in a preliminary principal amount award (dated as of April 2015) of approximately R$1.035 billion and with which Chesf disagrees; (ii) the guarantee insurance presented by Chesf, which had been accepted by the judge, was later rejected by the Pernambuco State Court; (iii) as of September
2016 financial banking assets of Chesf have been pledged in the approximate amount of R$500 million; and (iv) Chesf filed interlocutory appeal and a claim that are yet to be reviewed by the Pernambuco State Court. Chesf has also filed special and extraordinary appeals before the Superior Court of Justice (STJ) and before the Federal Supreme Court (STF), respectively. The special appeal is yet to be reviewed by the STJ while extraordinary appeal will only be judged by the STF after the STJ has granted an award on the matter.
Considering the development of all of the proceedings referred to above and the appellate rulings Management, based on the opinion of its legal advisors and on calculations that took into account the suspension of payments related to Factor K and their respective monetary correction, determined it would recognize a R$1,169.3 million provision as of December 31, 2016 under “Non-Current Liabilities”, and an additional R$ 117.7 million in relation to the amount of the conviction in receivership fees in favor of the patrons of the parties adverse to Chesf (these fixed at the rate of 10% on the value of the main conviction plus R$ 100 thousand).
Chesf — Fazenda Aldeia Litigation
The trustees of the estate of Aderson Moura de Souza and his wife commenced a suit for damages against Chesf with respect to 14,400 hectares of land. A lower court determined that there were grounds for the claim and ordered Chesf to pay R$50 million, corresponding to the principal amount plus interest and monetary restatement. In December 2008, Chesf filed an appeal with Court of Justice of the State of Bahia. On March 2009, this lawsuit was transferred to the federal courts, which nullified the order for damages. The 1st Region Federal Court partially affirmed the original order, but its decision has been suspended as one of the judges has requested more time to rule on the case. On June 30, 2011, Chesf’s appeal was granted partial relief. According to a decision published on June 24, 2011, the court rejected the plaintiff’s appeal. On September 30, 2011, a termination action was filed before the 1st Region Federal Court. On December 31, 2011, an injunction to interrupt the execution of the main proceeding was granted. As of December 31, 2015, we had not yet received the judgment of the appeal. In January 2016, the Federal Prossecutor Officer opined for the termination of the action. Chesf has recognized a provision of R$100 million in relation to this proceeding. For a further discussion of this suit, see note 30 to our financial statements as of and for the year ended December 31, 2016.
Amazonas D as debtor in several energy supply agreements
Amazonas D is a defendant in lawsuits seeking payments, fines and charges for alleged delays and defaults caused by Amazonas D in fulfilling obligations arising from contracts with Independent Power Producers - PIE’s. These lawsuits are the result of Amazonas D’s lack of payment or delayed payment of invoices. These lawsuits were filed against our subsidiary Amazonas D, and we have been named a defendant in them as we are the guarantor and main debtor of Amazonas D in several energy supply agreements.
As for the claims related to this subject matter, some have been dismissed (decisions favorable to us) by lower courts while others were granted (unfavorable to us) also by lower courts, and others are pending judgment. In the cases that were judged against us, we have filed appeals that are currently pending judgment.
The cases that were dismissed or have not yet been judged by lower courts had their chances of loss estimated as being unlikely, considering that there is no present obligation for each of these cases and therefore no provision have been recongnized. However, the claims that were judged against us had their risk rating adjusted to probable, since they are mainly related to the examination of facts and evidences, it is unlikely that the higher courts will overturn the lower court’s decisions. The amount recognized as a provision as of December 31, 2016 was R$965 million for Amazonas D.
Amazonas D - Gas Supply Contract — CIGÁS — Limitation of the Volume of Gas
Regarding the amount of the CCC Account for generation costs of our subsidiary Amazonas D, there is a possibility that the amount of the reimbursement from the CCC Account, Order No. 314 of February 2, 2016, will not be sufficient to cover the Daily Contracted Quantity (“QDC”) of 5,420,000 m3 / day as established in the Natural Gas Purchase and Sale Agreement, between Amazonas D and CIGAS/Petrobras.
In 2017, ANEEL through Ratifying Resolution No. 2,202, which approved the annual budget of the CDE Account for the year 2017, maintained the same limitation for reimbursement referring to the gas volume at the level of 2016. Amazonas D entered motions for reconsieration with ANELL given the budget limitations imposed by ANEEL, which are pending review.
However, with regard to the limitation of the reimbursement of the volume of gas, Amazonas D assesses the risk of materialization of the financial outlay as low, as it understands that ANEEL cannot create a provision that limits the coverage of the reimbursement of generation costs defined by Law No. 12,119/2009 and reinforced by Law No. 13,299/2016.
Additionally, Amazonas D considers that the favorable decision issued by an appellate court in a similar case should allow for the complete reimbursement of the costs of generation, removing the effects of the limitations imposed. Ultimately, Amazonas D believes that in the unlikely event of a limitation imposed by ANEEL in relation to the reimbursement of the volume of gas, there would be an economic-financial review subject to review of relevant gas contract or a review of the price of gas by the ANP in order to compensate for this imbalance.
The amounts involved in the limitation of the reimbursement for the volume of gas in 2015 and 2016 are R$340 million and R$378 million, respectively.
Amazonas D - Oil Reimbursement — ANEEL Ratifying Resolution No. 427/2011
Provisional Measure No. 466/2009, subsequently converted into Law No. 12,111/2009, provided that the CCC Account would reimburse not only the total cost of the fuel, but also the total cost of the energy generation of the Isolated System, deducting from the average cost of the energy determined for the regulated environment. Law No. 12,111/2009 and Decree No. 7,246/2010 does not impose or establish any limitation on the full reimbursement provided.
However, together with Law No. 12,111/2009, and Decree No. 7,246/2010, ANEEL Normative Resolution No. 427 established limitations on the reimbursement of the costs of acquisition of fuels establishing a reference price. Amazonas D understands that reimbursement from the CCC Account is a right without any limitation, however the company had to file for an injuction in order to guarantee the reimbursement provided for in Law No. 12,111/2009, without any limitation.
Through this lawsuit, a Second Instance Decision was handed down, which guarantees Amazonas D the full reimbursement of the generation costs, rejecting the effects of ANEEL Ratifying Resolution No. 427/2011. As a result, it is currently enforced by the decision that granted the requested injunction, in order to ensure full reimbursement of fuel consumption costs without any limitation. In this manner, Amazonas D remains fully reimbursed for its generation costs
Amazonas D understands that the risk of losing the lawsuit is low because of the decision already handed down, which is reinforced by Law No. 13,299/2016, which has the benefit of providing funds for the payment of reimbursements of fuel acquisition expenses incurred up to April 30, 2016 by concessionaires holding the concessions dealt with in Law No. 12,111/2009, but not reimbursed due to the economic and energy efficiency requirements referred to in paragraph 12 of article 3 of this law.
Accordingly, ANEEL Technical Note No. 331/2016, of September 12, 2016, also included below, provides that there is a need for adjustments to theNormative Resolution No. 427/2011 pursuant to Law No. 13,299/2016.
Changes to the CCC Account
As a result of the publication of Law no. 13,299, of 6/21/2016, which amended, among others, provisions of Law No. 12,111, of 2009, it is necessary to adjust the normative act of ANEEL that regulates the management and processing of the CCC Account.
Accordingly, in view of Normative Resolution No. 427/2011 the points to be reviewed are identified below. In the first place and being presented as an item of major economic and financial impact on the distributors benefited, article 3 of Law No. 13,299/2016 is cited, which provides for the reimbursement of costs, proven, but not refunded pursuant to the economic and energy efficiency requirements in paragraph 12 of the article 3 of Law No. 12,111/2010, including monetary updates, up to April 30, 2016.
Consequently, and considering that Law No. 13,299/2016 guarantees the full reimbursement of the cost of fuel up to April 30, 2016, the estimated value in litigation after April 2016 is approximately R$96.7 million.
Eletronorte civil lawsuit
A lawsuit by Sul América Companhia Nacional de Seguros against Eletronorte claiming the reimbursement of amounts paid by it to Albrás Aluminio Brasileiro S.A., or Albras, pursuant to obligations due under insurance contracts.
The main arguments of the plaintiff are the following: the responsibility of the insurance claim was allegedly the interruption of the supply of electricity to the industrial complex, which is the subject of a specific contract between Albras and Eletronorte. The main arguments of the defendant are the following: the statute of limitations should apply, absence of strict liability, no fault and unforeseeable circumstances, which are causes to exclude liability.
The ruling of the 1st instance judge upheld the request of the plaintiff and ordered Eletronorte to pay the plaintiff R$55.7 million, including monetary restatement pursuant to the variation of the INPC index from the date of preparation of the calculations presented
in the lawsuit and interest at a rate of 1% per month since service of process. The parties submitted appeals against the decision, and the appeal filed by Eletronorte was dismissed and the plaintiff’s appeal was upheld.
Eletronorte filed an appeal against such decision, and the decision of such additional appeal confirmed that in cases of late payments not involving individuals and upon absence of extrajudicial challenge by the party who caused the damage, the interest starts flowing from the moment service of process is made for the amounts paid administratively and, for payment of additional indemnification, from the moment service of process was made in the lawsuit filed by the insured entity against the insurers before the Justice of the State of Rio de Janeiro.
Eletronorte filed a motion for clarification, which was denied. Both the plaintiff and Eletronorte then filed special appeals with the superior court of justice, which were admitted. The special appeals are pending judgement. The amount involved is of R$237.3 million.
Consumers class action
Lawsuit filed by the National Consumers Association (ANDECO).
This is a class action, in progress at the 18th Civil Court of Brasília, filed by ANDECO against us, Amazonas Energia, Eletroacre, CEAL, CELG-D, CEPISA, CERON and Boa Vista Energia.
The plaintiff alleges that, in the absence of ANEEL’s authorization, the prorated collection of non-technical losses (fraud, theft, measurement errors, billing and delivery without measurement) is undue and that the distribution companies should be ordered to return two times the amounts charged in the period from 2010 to 2014, according to their respective balance sheets. The plaintiff also asks for the annulment of all ANEEL Resolutions that allow the collection and inclusion in the invoices of amounts charged for non-technical losses.
The plaintiff requested a preliminary injunction to suspend the collection, and the underlying ANEEL Resolutions, which was rejected. The proceeding was then redistributed to the 21st Federal Court of Brasília, after ANEEL joined the claim. The federal judge determined that all decisions taken so far would be maintained and, moving forward, determined that ANEEL and the Federal Government should be summoned and should present a defense.
On August 8, 2016, there was a resdistribution of the records of the 21st Federal Circuit Court of Brasília with an initial order maintaining the acts until then practiced in the civil sphere and determining the subpoena of ANEEL and the Union to present the defense, with a subsequent response from the plaintiff.
Environmental Proceedings
We are required to comply with strict environmental laws and regulations that subjected us and/or our subsidiaries to be signatories to Conduct Adjustment and Consent Agreements, or TACs. If we do not follow the provisions of these TACs, we are subject to significant fines and other penalties. We have not recorded any provisions in respect of these TACs.
Acquisition of energy of Belo Monte destined to the Free Market
We and our subsidiaries, Chesf and Eletronorte, hold a total of 49.98% of the share capital of the SPE Norte Energia S.A. (NESA), which is responsible for the construction of the Belo Monte hydroelectric power plant.
There was a disagreement between the partners as to the application of clause 6.7 of the Shareholder Agreement, which deals with the exercise of rights of preference to conclude the purchase contract for the price of R$130.00/MWh (in April 2010) for the acquisition of 20% of the average energy assured, by us from the energy of Belo Monte energy intended for the Free Contracting Environment - ACL.
Some members of NESA claim that we have an obligation to purchase this energy. We understand that there in no such obligation but rather a right of first refusal. The Shareholders’ Agreement provides that conflicts are resolved through arbitration. Accordingly, the Shareholders’ Assembly of Norte Energia S.A. (NESA) ruled in April 2016 due to the initiation of this legal proceeding.
In the present arbitration procedure, we with support from ourexternal lawyers have assessed that it is more likely than not that a present legal or constructive obligation exists from a past event.
Additionally, in the event that we are not successful in the arbitration proceeding in progress, we estimates the potential for losses of up to R$2.2 billion in the purchase and sale operation of this energy, considering the values as of December 31, 2016. For this estimate, we used internal price assumptions and percentages.
Explanatory Notes
For a further discussion of ongoing litigation involving us and our subsidiaries see Note 30 to our consolidated financial statements.
Policy on Dividend Distribution
Brazilian Corporate Law and our by-laws provide that we must pay our shareholders a mandatory distribution equal to at least 25.0% of our adjusted net income for the preceding fiscal year. In addition, our by-laws require us to give: (i) class “A” preferred shares a priority in the distribution of dividends, at 8% each year over the capital linked to those shares; and (ii) class “B” preferred shares that were issued on or after June 23, 1969 a priority in the distribution of dividends, at 6% each year over the capital linked to those shares. In addition, preferred shares must receive a dividend 10% over the dividend paid to the common shares.
The following table sets out our dividends proposed for the periods indicated:
|
| Year |
| ||||
|
| 2016(1) |
| 2015(1) |
| 2014(1) |
|
|
| (R$) |
| ||||
Common Shares |
| — |
| — |
| — |
|
Class A Preferred Shares |
| 2.17825658673 | (2) | — |
| — |
|
Class B Preferred Shares |
| 1.63369244005 | (2) | — |
| — |
|
(1) In our financial statement as of and for the year ended December 31, 2014 there was no Declared Dividends, but our 55th Shareholders Meeting approved the payment of the balance the profit reserve account in the amount of R$26 million in favor of our Class A Preferred shareholders and Class B Preferred shareholders. This amount (as adjusted) was paid in 2015.
(2) Dividend proposed by our management. Our General Shareholders Meeting held on April 28, 2017 approved the adjustment of these amounts between January 1, 2017 and the payment date (which may occur until December 31, 2017) by the SELIC rate variation.
B. Significant Changes
None.
A. Offer and Listing Details
Offer and Listing Details — Common Shares
Our common shares commenced trading on the Brazilian stock exchanges on September 7, 1971. The following table sets forth the reported high and low closing sale prices for our common shares on the BM&FBOVESPA and the approximate average daily trading volume for the annual periods indicated.
|
| Nominal reais |
| Average Daily |
| ||
|
| High |
| Low |
| Trading Volume |
|
|
|
|
|
|
| (millions of shares) |
|
2012 |
| 19.36 |
| 6.16 |
| 2.052 |
|
2013 |
| 8.10 |
| 4.41 |
| 2.510 |
|
2014 |
| 8.60 |
| 4.57 |
| 2.607 |
|
2015 |
| 8.66 |
| 4.72 |
| 2.037 |
|
2016 |
| 25.76 |
| 4.88 |
| 2.247 |
|
Source: São Paulo Stock Exchange.
The following table sets forth the reported high and low closing sale prices for our common shares on the BM&FBOVESPA and the approximate average daily trading volume for the quarterly periods indicated:
|
| Nominal reais |
| Average Daily |
| ||
|
| High |
| Low |
| Trading Volume |
|
|
|
|
|
|
| (millions of shares) |
|
First Quarter 2014 |
| 6.60 |
| 4.57 |
| 2.516 |
|
Second Quarter 2014 |
| 7.98 |
| 6.39 |
| 2.427 |
|
Third Quarter 2014 |
| 8.60 |
| 6.15 |
| 2.361 |
|
Fourth Quarter 2014 |
| 7.16 |
| 5.15 |
| 3.125 |
|
First Quarter 2015 |
| 6.04 |
| 4.90 |
| 1.711 |
|
Second Quarter 2015 |
| 8.66 |
| 5.88 |
| 1.189 |
|
Third Quarter 2015 |
| 6.17 |
| 4.72 |
| 1.371 |
|
Fourth Quarter 2015 |
| 6.34 |
| 4.97 |
| 1.908 |
|
First Quarter 2016 |
| 7.31 |
| 4.88 |
| 1.529 |
|
Second Quarter 2016 |
| 13.20 |
| 6.17 |
| 2.941 |
|
Third Quarter 2016 |
| 24.07 |
| 12.79 |
| 2.165 |
|
Fourth Quarter 2016 |
| 25.76 |
| 18.97 |
| 2.323 |
|
First Quarter 2017 |
| 23.20 |
| 17.10 |
| 1.341 |
|
Source: São Paulo Stock Exchange.
The following table sets forth the reported high and low closing sale prices for our common shares on the BM&FBOVESPA and the approximate average daily trading volume for the periods indicated:
|
| Nominal reais |
| Average Daily |
| ||
|
| High |
| Low |
| Trading Volume |
|
|
|
|
|
|
| (millions of shares) |
|
June 2015 |
| 7.04 |
| 5.88 |
| 1.938 |
|
July 2015 |
| 6.17 |
| 5.26 |
| 1.295 |
|
August 2015 |
| 5.86 |
| 4.72 |
| 1.255 |
|
September 2015 |
| 5.53 |
| 4.81 |
| 1.567 |
|
October 2015 |
| 5.79 |
| 4.97 |
| 1.795 |
|
November 2015 |
| 6.34 |
| 5.42 |
| 2.025 |
|
December 2015 |
| 5.99 |
| 5.47 |
| 1.914 |
|
January 2016 |
| 5.82 |
| 4.88 |
| 1.454 |
|
February 2016 |
| 6.33 |
| 5.58 |
| 1.135 |
|
March 2016 |
| 7.31 |
| 5.70 |
| 1.936 |
|
April 2016 |
| 7.03 |
| 6.17 |
| 1.297 |
|
May 2016 |
| 8.20 |
| 6.95 |
| 3.290 |
|
June 2016 |
| 13.20 |
| 8.22 |
| 4.010 |
|
July 2016 |
| 17.63 |
| 12.79 |
| 2.697 |
|
August 2016 |
| 22.53 |
| 17.60 |
| 2.206 |
|
September 2016 |
| 24.07 |
| 12.79 |
| 2.165 |
|
October 2016 |
| 23.91 |
| 18.97 |
| 2.051 |
|
November 2016 |
| 25.76 |
| 22.10 |
| 3.340 |
|
December 2016 |
| 24.84 |
| 22.00 |
| 1.615 |
|
Source: São Paulo Stock Exchange.
In the United States, our common shares trade in the form of ADS. The following table sets forth the reported high and low closing sale prices for our ADS representing common shares on the NYSE and the approximate average daily trading volume for the periods indicated:
|
| US$ per ADS |
| Average Daily |
| ||
|
| High |
| Low |
| Trading Volume |
|
|
|
|
|
|
| (millions of shares) |
|
June 2015 |
| 2.20 |
| 1.86 |
| 0.501 |
|
July 2015 |
| 1.93 |
| 1.56 |
| 0.524 |
|
August 2015 |
| 1.65 |
| 1.27 |
| 0.570 |
|
September 2015 |
| 1.40 |
| 1.17 |
| 0.560 |
|
October 2015 |
| 1.48 |
| 1.23 |
| 0.548 |
|
November 2015 |
| 1.62 |
| 1.30 |
| 0.456 |
|
December 2015 |
| 1.52 |
| 1.31 |
| 0.496 |
|
January 2016 |
| 1.42 |
| 1.14 |
| 0.329 |
|
February 2016 |
| 1.60 |
| 1.37 |
| 0.362 |
|
March 2016 |
| 1.99 |
| 1.44 |
| 0.524 |
|
April 2016 |
| 2.21 |
| 1.61 |
| 0.443 |
|
May 2016 |
| 2.27 |
| 1.89 |
| 1.449 |
|
June 2016 |
| 3.94 |
| 2.32 |
| 1.014 |
|
July 2016 |
| 5.34 |
| 3.82 |
| 0.439 |
|
August 2016 |
| 6.87 |
| 5.30 |
| 0.344 |
|
September 2016 |
| 7.44 |
| 5.84 |
| 0.169 |
|
October 2016 |
| 7.39 |
| 5.81 |
| 0.301 |
|
November 2016 |
| 7.54 |
| 6.42 |
| 0.172 |
|
December 2016 |
| 7.09 |
| 6.41 |
| 0.121 |
|
Source: New York Stock Exchange.
Offer and Listing Details — Preferred Shares
The following table sets forth the reported high and low closing sale prices for our Class B preferred shares on the BM&FBOVESPA and the approximate average daily trading volume for the annual periods indicated.
|
| Nominal reais |
| Average Daily |
| ||
|
| High |
| Low |
| Trading Volume |
|
|
|
|
|
|
| (millions of shares) |
|
2012 |
| 27.49 |
| 7.30 |
| 1.724 |
|
2013 |
| 13.70 |
| 8.03 |
| 2.013 |
|
2014 |
| 12.64 |
| 6.25 |
| 1.768 |
|
2015 |
| 11.17 |
| 5.85 |
| 1.639 |
|
2016 |
| 29.70 |
| 8.16 |
| 1.786 |
|
Source: São Paulo Stock Exchange.
The following table sets forth the reported high and low closing sale prices for our Class B preferred shares on the BM&FBOVESPA and the approximate average daily trading volume for the quarterly periods indicated:
|
| Nominal reais |
| Average Daily |
| ||
|
| High |
| Low |
| Trading Volume |
|
|
|
|
|
|
| (millions of shares) |
|
First Quarter 2013 |
| 13.70 |
| 9.69 |
| 1.961 |
|
Second Quarter 2013 |
| 12.75 |
| 8.03 |
| 2.620 |
|
Third Quarter 2013 |
| 10.47 |
| 8.11 |
| 1.873 |
|
Fourth Quarter 2013 |
| 12.00 |
| 9.88 |
| 1.587 |
|
First Quarter 2014 |
| 10.88 |
| 8.50 |
| 1.916 |
|
Second Quarter 2014 |
| 12.64 |
| 9.55 |
| 1.721 |
|
Third Quarter 2014 |
| 12.53 |
| 10.10 |
| 1.461 |
|
Fourth Quarter 2014 |
| 10.66 |
| 6.25 |
| 1.989 |
|
First Quarter 2015 |
| 8.40 |
| 5.85 |
| 1.928 |
|
Second Quarter 2015 |
| 10.60 |
| 7.29 |
| 1.737 |
|
Third Quarter 2015 |
| 9.10 |
| 6.91 |
| 1.371 |
|
Fourth Quarter 2015 |
| 11.17 |
| 8.60 |
| 1.534 |
|
First Quarter 2016 |
| 11.21 |
| 8.16 |
| 1.797 |
|
Second Quarter 2016 |
| 18.68 |
| 10.14 |
| 2.052 |
|
Third Quarter 2016 |
| 29.70 |
| 17.42 |
| 1,658 |
|
Fourth Quarter 2016 |
| 28.67 |
| 23.75 |
| 1.637 |
|
First Quarter 2017 |
| 26.75 |
| 21.56 |
| 1.064 |
|
Source: São Paulo Stock Exchange.
The following table sets forth the reported high and low closing sale prices for our Class B preferred shares on the BM&FBOVESPA and the approximate average daily trading volume for the periods indicated:
|
| Nominal reais |
| Average Daily |
| ||
|
| High |
| Low |
| Trading Volume |
|
|
|
|
|
|
| (millions of shares) |
|
June 2015 |
| 9.94 |
| 8.47 |
| 1.156 |
|
July 2015 |
| 9.04 |
| 8.05 |
| 1.114 |
|
August 2015 |
| 8.85 |
| 6.91 |
| 1.103 |
|
September 2015 |
| 9.10 |
| 7.51 |
| 1.908 |
|
October 2015 |
| 10.19 |
| 8.60 |
| 1.362 |
|
November 2015 |
| 11.17 |
| 9.93 |
| 2.124 |
|
December 2015 |
| 10.83 |
| 9.95 |
| 1.153 |
|
January 2016 |
| 10.14 |
| 8.16 |
| 1.640 |
|
February 2016 |
| 10.34 |
| 9.50 |
| 1.563 |
|
March 2016 |
| 11.21 |
| 9.90 |
| 2.135 |
|
April 2016 |
| 11.23 |
| 10.14 |
| 1.786 |
|
May 2016 |
| 13.51 |
| 11.65 |
| 2.034 |
|
June 2016 |
| 18.68 |
| 12.96 |
| 2.121 |
|
July 2016 |
| 22.04 |
| 17.42 |
| 1.860 |
|
August 2016 |
| 28.65 |
| 22.50 |
| 1.607 |
|
September 2016 |
| 29.70 |
| 23.87 |
| 1,512 |
|
October 2016 |
| 27.55 |
| 23.75 |
| 2.049 |
|
November 2016 |
| 28.67 |
| 25.20 |
| 1.856 |
|
December 2016 |
| 27.28 |
| 24.71 |
| 1.035 |
|
Source: São Paulo Stock Exchange.
In the United States, our Class B preferred shares trade in the form of ADS. The following table sets forth the reported high and low closing sale prices for our ADS representing Class B preferred shares on the NYSE and the approximate average daily trading volume for the periods indicated:
|
| US$ per ADS |
| Average Daily |
| ||
|
| High |
| Low |
| Trading Volume |
|
|
|
|
|
|
| (millions of shares) |
|
June 2015 |
| 3.14 |
| 2.69 |
| 0.066 |
|
July 2015 |
| 2.85 |
| 2.40 |
| 0.070 |
|
August 2015 |
| 2.56 |
| 1.94 |
| 0.078 |
|
September 2015 |
| 2.29 |
| 1.99 |
| 0.170 |
|
October 2015 |
| 2.66 |
| 2.18 |
| 0.148 |
|
November 2015 |
| 2.99 |
| 2.53 |
| 0.194 |
|
December 2015 |
| 2.83 |
| 2.36 |
| 0.126 |
|
January 2016 |
| 2.52 |
| 1.99 |
| 0.114 |
|
February 2016 |
| 2.66 |
| 2.34 |
| 0.106 |
|
March 2016 |
| 3.08 |
| 2.53 |
| 0.062 |
|
April 2016 |
| 2.23 |
| 1.59 |
| 0.194 |
|
May 2016 |
| 3.80 |
| 3.25 |
| 0.147 |
|
June 2016 |
| 5.73 |
| 3.57 |
| 0.091 |
|
July 2016 |
| 6.87 |
| 5.24 |
| 0.214 |
|
August 2016 |
| 8.85 |
| 6.86 |
| 0.044 |
|
September 2016 |
| 9.26 |
| 7.30 |
| 0.067 |
|
October 2016 |
| 8.67 |
| 7.22 |
| 0.107 |
|
November 2016 |
| 8.65 |
| 7.37 |
| 0.038 |
|
December 2016 |
| 8.30 |
| 7.29 |
| 0.057 |
|
Source: New York Stock Exchange.
We have an insignificant number of Class A preferred shares, with no material effect on the trading volume on the BM&FBOVESPA.
As a result, as of December 31, 2016, our capital stock was comprised of a total of 1,352,634,100 shares, of which 1,087,050,297 are common shares, 146,920 are class “A” preferred shares and 265,436,883 are class “B” preferred shares.
There are no restrictions on ownership of our preferred shares or common shares by individuals or legal entities domiciled outside Brazil.
The right to convert dividend payments and proceeds from the sale of shares into foreign currency and to remit such amounts outside Brazil is subject to restrictions under foreign investment regulations which generally require, among other things, that the relevant investments have been registered with the Central Bank. Banco Santander S.A., as custodian for our common and class “B” preferred shares represented by the ADS, has registered with the Central Bank on behalf of the Depositary the common and class “B” preferred shares that it will hold. This enables holders of ADS to convert dividends, distributions or the proceeds from any sale of such common and class “B” preferred shares, as the case may be, into U.S. dollars and to remit such U.S. dollars abroad. However, holders of ADS could be adversely affected by delays in, or a refusal to grant any, required government approval for conversions of Brazilian currency payments and remittances abroad of the common and preferred “B” shares underlying our ADS.
In Brazil, there are a number of mechanisms available to foreign investors interested in trading directly on the Brazilian stock exchanges or on organized over-the-counter markets.
Under the regulations issued by the Resolution No. 4,373 issued by the National Monetary Council, foreign investors seeking to trade directly on a Brazilian stock exchange or on an organized over-the-counter market must meet the following requirements:
· investments must be registered with a custody, clearing or depositary system authorized by CVM or the Central Bank;
· trades of securities are restricted to transactions involving securities for acquisition or sale traded on the stock exchanges or organized over-the-counter markets authorized by the CVM, or such other cases as may be set forth in the applicable CVM regulations from time to time;
· they must establish a representative in Brazil which must be a financial institution or an institution duly authorized by the Central Bank;
· they must appoint at least one custodian duly authorized by the CVM; and
· they must register with the CVM and register the inflow of funds with the Central Bank.
If these requirements are met, foreign investors will be eligible to trade directly on the Brazilian stock exchanges or on organized over-the-counter markets. These rules extend favorable tax treatment to all foreign investors investing pursuant to these rules. See “Item 10.E, Taxation.” These regulations contain certain restrictions on the offshore transfer of the title of the securities, except in the case of corporate reorganizations effected abroad by a foreign investor.
A certificate of foreign capital registration has been issued in the name of the Depositary with respect to the ADS and is maintained by Banco Santander S.A., as custodian for our common and class “B” preferred shares represented by the ADS, on behalf of the Depositary. Pursuant to such certificate of foreign capital registration, we expect that Depositary will be able to convert dividends and other distributions with respect to the common and class “B” preferred shares represented by ADS into foreign currency and remit the proceeds outside of Brazil.
In the event that a holder of ADS exchanges such ADS for common or class “B” preferred shares, such holder will be entitled to continue to rely on the Depositary’s certificate of foreign capital registration for five business days after such exchange, following which such holder must seek to obtain its own certificate of foreign capital registration with the Central Bank. Thereafter, any holder of common or class “B” preferred shares may not be able to convert into foreign currency and remit outside Brazil the proceeds from the disposition of, or distributions with respect to, such common and class “B” preferred shares, unless such holder qualifies under Resolution No. 4,373 or obtains its own certificate of foreign capital registration. A holder that obtains a certificate of foreign capital registration will be subject to less favorable Brazilian tax treatment than a holder of ADS. See “Item 10.E, Taxation — Material Brazilian Tax Considerations.”
Under current Brazilian legislation, the Brazilian Government may impose temporary restrictions on remittances of foreign capital abroad in the event of a serious imbalance or an anticipated serious imbalance of Brazil’s balance of payments. For approximately six months in 1989 and early 1990, the Brazilian Government froze all dividend and capital repatriations held by the Central Bank that were owed to foreign equity investors in order to conserve Brazil’s foreign currency reserves. These amounts were subsequently released in accordance with Brazilian Government directives. There can be no assurance that the Brazilian Government will not impose similar restrictions on foreign repatriations in the future.
B. Plan of Distribution
Not applicable.
C. Markets
Our common shares are traded under the symbol “ELET3” and our class “B” preferred shares are traded under the symbol “ELET6” on the BM&FBOVESPA S.A. — Bolsa de Valores, Mercadorias e Futuros (the São Paulo Stock Exchange or BM&FBOVESPA). The Rio de Janeiro Stock Exchange trades only Brazilian federal, state and municipal public debt or carries out privatization auctions. Stocks and bonds are traded exclusively on the BM&FBOVESPA. As of September 30, 2016 (the most recent date such information was available), we had approximately 23,330 record holders.
Our ADRs are listed on the NYSE. As of December 31, 2016, we had 2,263 beneficial and 15 registered holders of ADS representing common shares and 719 beneficial and 8 registered holders of ADS representing preferred shares.
Trading, Settlement and Clearance
Regulation of the Brazilian Securities Market
The Brazilian securities markets are regulated by the Comissão de Valores Mobiliários (the “CVM”), which was granted regulatory authority over the stock exchanges and securities markets by Brazilian Law No. 6,385, enacted on December 7, 1976 (“Brazilian Securities Law”) and Brazilian Law No. 6,404, enacted on December 15, 1976 (“Brazilian Corporate Law”), and also by Conselho Monetário Nacional (the “CMN”) and the Central Bank which possesses, among other powers, licensing authority over brokerage firms and regulates foreign investment and foreign exchange transactions.
The Brazilian securities markets are governed by the Brazilian Securities Law and the Brazilian Corporate Law, as well as regulations issued by the CVM, the Central Bank and the CMN. These laws and regulations provide for, among other things, disclosure requirements applicable to issuers of traded securities, restrictions on insider trading and price manipulation and protection of minority shareholders. On January 3, 2002, the CVM issued Instruction No. 358 which amended the rules applicable to the disclosure of relevant facts, which became effective on April 18, 2002. The CVM has also issued several instructions regarding disclosure requirements, namely, Instructions No. 361 and No. 400 for the regulation of public offerings, Instruction No. 380 for the regulation of
internet offerings and Instruction No. 381 for the regulation of independent auditors. Instruction No. 480 for the regulation of the registration of security issuers admitted to negotiation in regulated markets in Brazil, and Instruction No. 481 for the regulation of information and the public request of proxy for shareholders meetings. Instruction No. 480 also requests that publicly held companies disclose a reference form (Formulário de Referência) which maintains a permanently updated record containing relevant information on the issuer. We believe we are currently in accordance with all applicable Brazilian corporate governance standards.
Under the Brazilian Corporate Law, a company is either public, a companhia aberta, or private, a companhia fechada. All public companies are registered with the CVM and are subject to reporting and regulatory requirements. A company registered with the CVM may have its securities traded either on the Brazilian stock exchange markets, including the BM&FBOVESPA, or in the Brazilian over-the-counter market. The shares of a public company may also be traded privately, subject to certain limitations. To be listed on the BM&FBOVESPA, a company must apply for registration with the BM&FBOVESPA and the CVM and is subject to regulatory requirements and disclosure requirements.
Trading on the BM&FBOVESPA
In 2000, the trading activities of shares in Brazil were reorganized through the execution of memoranda of understanding by the Brazilian regional stock exchanges. Under the memoranda, all Brazilian shares are publicly traded exclusively on the São Paulo Stock Exchange — BM&FBOVESPA (BM&FBOVESPA S.A. - Bolsa de Valores, Mercadorias e Futuros).
BOVESPA was a not-for-profit entity owned by its member brokerage firms. In 2008, BOVESPA was converted into a Brazilian publicly-held company and renamed BM&FBOVESPA, as a result of a merger between BOVESPA and the Brazilian Mercantile & Futures Exchange (Bolsa de Mercadorias e Futuros — BM&F). BM&FBOVESPA is currently the most important Brazilian institution to intermediate equity market transactions and it is the only securities, commodities and futures exchange in the country. Trading on such exchange is carried out by member brokerage firms.
The trading of securities on the BM&FBOVESPA may be suspended at the request of a company in anticipation of material announcement. Trading may also be suspended on the initiative of the BM&FBOVESPA or the CVM based on or due to, among other reasons, a belief that a company has provided inadequate information regarding a significant event or has provided inadequate responses to inquiries by the CVM or the BM&FBOVESPA.
Trading in securities listed on the BM&FBOVESPA, including the Novo Mercado, Levels 1 and 2, and other two access segments named Bovespa Mais and Bovespa Mais Nível 1 Segments of Differentiated Corporate Governance Practices, may be carried out off the exchanges in the unorganized over-the-counter market in certain specific circumstances.
Although the Brazilian securities market is the largest in Latin America in terms of capitalization, it is smaller and less liquid than the major U.S. and European securities markets. Moreover, the BM&FBOVESPA is significantly less liquid than the NYSE, or other major exchanges in the world.
Although all of the outstanding shares of a listed company may be traded on the BM&FBOVESPA, fewer than half of the listed shares are actually available for trading by the public, the remainder being held by small groups of controlling persons, by government entities or by one main shareholder. The relative volatility and illiquidity of the Brazilian securities markets may substantially limit your ability to sell the preferred shares at the time and price you desire and, as a result, could negatively impact the market price of these securities.
In order to reduce volatility, the BM&FBOVESPA has adopted a “circuit breaker” system pursuant to which trading sessions may be suspended for a period of 30 minutes, one hour or a longer period whenever specified indices of the BM&FBOVESPA fall below the limits of 10%, 15% and 20% respectively, in relation to the index levels for the previous trading session.
When shareholders trade in shares on the BM&FBOVESPA, the trade is settled in three business days after the trade date. The delivery of and payment for shares are made through BM&FBOVESPA, which handles the multilateral settlement of both financial obligations and transactions involving securities. According to applicable regulations, financial settlement is carried out through a Central Bank system and the transactions involving the sale and purchase of shares are settled through BM&FBOVESPA. All deliveries against final payment are irrevocable.
Trading on the Brazilian stock exchanges by non-residents of Brazil is subject to registration procedures.
Corporate Governance Practices
In 2000, the BM&FBOVESPA introduced three special listing segments, known as Levels 1 and 2 of Differentiated Corporate Governance Practices and Novo Mercado, aimed at fostering a secondary market for securities issued by Brazilian companies listed on the BM&FBOVESPA, by prompting these companies to follow good practices of corporate governance. The listing segments were designed for the trading of shares issued by companies voluntarily undertaking to abide by corporate governance practices and disclosure requirements in addition to those already imposed by Brazilian law. These rules generally increase shareholders’ rights and enhance the quality of information provided to shareholders. Recently, the BM&FBOVESPA has revised the Levels 1 and 2 of Differentiated Corporate Governance Practices and Novo Mercado rules in two occasions. The first round of amendments to the Novo Mercado rules became effective on February 6, 2006, and the first round of amendments to Levels 1 and 2 of Differentiated Corporate Governance Practices became effective on February 10, 2006. The second and most recent round of amendments to the Novo Mercado rules and the Levels 1 and 2 of Differentiated Corporate Governance Practices became effective on May 10, 2011.
Recently BM&FBovespa put in discussion changes to the Novo Mercado and Nível 2 rules, and a public hearing is ongoing to receive investors, law firms, banks and other capital markets participants’ contributions to improve the rules.
As of the effective date, in order to become a Nivel 1 (Level 1) company, in addition to the obligations imposed by applicable law, an issuer must agree to: (i) ensure that shares representing at least 25% of its total capital are effectively available for trading; (ii) adopt offering procedures that favor widespread ownership of shares whenever making a public offering; (iii) comply with minimum quarterly disclosure standards; (iv) follow stricter disclosure policies with respect to transactions made by its controlling shareholders, members of its board of directors and its officers involving securities issued by the issuer; (v) submit any existing shareholders’ agreements and stock option plans to the BM&FBOVESPA; (vi) make a schedule of corporate events available to its shareholders; (vii) elaborate and disclose a securities trading policy applicable to the company, its controlling shareholders, board members and management, as well as the members of other statutory bodies of the company with technical and consultancy functions; (viii) elaborate and disclose a code of conduct establishing the values and principles that shall serve as a guidelines for the company’s activities and relationship with the management, staff, service providers and other entities and individuals affected by the company; and (ix) prohibit holding dual positions as Chairman and Chief Executive Officer (or primary executive officer) of the company.
To become a Nivel 2 (Level 2) company, in addition to the obligations imposed by applicable law, an issuer must agree, among other things, to: (i) comply with all of the listing requirements for Level 1 companies; (ii) grant tag-along rights for all of its shareholders in connection with a transfer of control of the company, offering the same price paid per share for controlling block common shares; (iii) grant voting rights to holders of preferred shares in connection with certain corporate restructurings and related party transactions, such as: (a) any change of the company into another corporate entity; (b) any merger, consolidation or spin-off of the company; (c) approval of any transactions between the company and its controlling shareholder, including parties related to the controlling shareholder; (d) approval of any valuation of assets to be delivered to the company in payment for shares issued in a capital increase; (e) appointment of an expert to ascertain the fair value of the company’s shares in connection with any deregistration and delisting tender offer from Level 2; and (f) any changes to these voting rights, which will prevail as long as the agreement for adhesion to the Level 2 segment with the BM&FBOVESPA is in effect; (iv) have a board of directors comprised of at least five members, out of which a minimum of 20% of the directors must be independent, with a term limited to two years; (v) prepare annual consolidated financial statements in English, including cash flow statements, in accordance with international accounting standards, such as U.S. GAAP or International Financial Reporting Standards, or IFRS; (vi) effect a tender offer by the company’s controlling shareholder (the minimum price of the shares to be offered will be determined by an appraisal process), if it elects to delist from the Level 2 segment; (vii) adhere exclusively to the rules of the BM&FBOVESPA Arbitration Chamber for resolution of disputes between the company and its investors; (viii) cause the Board of Directors to elaborate and disclose a previous and justified opinion in relation to any and all public offers for the acquisition of shares issued by the company analyzing, among other aspects, the impacts of the offer on the company’s and shareholders’ interests, as well as on the liquidity of the shares issued by the company, and containing a final and justified recommendation for the acceptance or rejection of the offer by the shareholders; and (ix) not to include in the company’s by-laws provisions that (a) restrict the number of votes of a shareholder or of a group of shareholders to percentages below 5% (five percent) of the voting shares, except for the cases of denationalization or of limits imposed by the laws and regulations applicable to the company; and, except as otherwise provided by the law or regulations (b) require a qualified quorum for matters that shall be submitted to the general shareholders’ meeting, or (c) restrict the exercise of a favorable vote by shareholders or burden shareholders that vote in favor of a suppression or change of by-laws provisions.
To be listed in the Novo Mercado segment of the BM&FBOVESPA, an issuer must meet all of the requirements described above under Level 1 and Level 2, in addition to issuing only common (voting) shares.
On September 26, 2006 we entered into an agreement with the BM&FBOVESPA to list our preferred shares on the Level 1 segment, effective on the date immediately after the date of publication of the announcement in Brazil of the listing, pursuant to which we agreed to comply, and continue to be compliant with all of the requirements of a Level 1 listing.
On September 2015, BM&FBovespa created a special corporate governance program named “Programa Destaque em Governança de Estatais” focused on state-owned publicly held companies, or state-owned companies that may issue an IPO, aiming to encourage these companies to improve their corporate governance practices.
The program intends to increase the trust in the relationship between investors and state-owned companies after the corruption episodes that occurred in Brazil. The program presents some concrete and direct measures that collaborate to decrease uncertainty regarding the management of the business as well as information disclosure, mainly regarding the public interest and its limits over the politician element related to it.
Joining the Program is voluntary and the companies can choose between two different categories according to their intended governance and disclosure levels.
In addition, on June 30, 2016, Brazilian government enacted Law No. 13,303 which establishes the rules applicable to state-owned companies, government-controlled companies and their subsidiaries, regulating Article 173 of the Brazilian Constitution of 1988 (“Law of State-owned Companies”).
The main subject of the Law of State-owned Companies is linked to governance rules that have become applicable to state-owned and government-controlled companies, which are now forced to adopt higher standards of disclosure of technical and financial information, and to follow some specific criteria for the appointment of their officers and executives.
Among the new criteria set forth by the law, there are two highlights: the appointees are required to have an academic background and previous business experience in areas related to the business of the state-owned or government-controlled company where they would be working; and the state-owned companies are prohibited to appoint members of political parties or members of the legislative branch, as well as third parties related to them.
In addition, the law strengthens the entire governance structure and internal and external controls of state-owned and government-controlled companies, establishing the obligation for periodic public disclosure of technical and financial reports, maintenance of a statutory independent committee of internal audit, and mandatory submission to external auditing by independent audit firms, as well as by the audit bodies of public administration, such as the Federal, State and City Accounting Courts.
It was also defined by the Law of State-owned Companies the social function of state-owned or government-controlled companies, which is the promotion of the public interest related to their business, which should be guided by an efficient economic management and a rational management of resources ensuring sustainable economic growth aiming to increase the access by consumers to the products and services provided by such company, to develop national technologies in order to improve the products and provision of services and to promote environmentally sustained and socially responsible practices, always in an economically justified way.
Furthermore, the Law of State-owned Companies establishes rules about public biddings for hiring and for the execution of contracts by state-owned or government-controlled companies, aiming to increase the transparency and effectiveness of internal and external controls connected to the appropriateness of the proceedings.
Although the rule came into force immediately after its publication, the state-owned or government-controlled companies have up to 24 months to adapt to the new legal requirements.
Investment in our Preferred Shares by Non-Residents of Brazil
Investors residing outside Brazil, including institutional investors, are authorized to purchase equity instruments, including our preferred shares, on the Brazilian stock exchange provided that they comply with the registration requirements set forth in Resolution No. 4,373 of the CMN and CVM Instruction No. 560, as of March 27, 2015. With certain limited exceptions, under Resolution No. 4,373 investors are permitted to carry out any type of transaction in the Brazilian financial capital markets involving a security traded on a stock, future or organized over-the-counter market. Investments and remittances outside Brazil of gains, dividends, profits or other payments under our preferred shares are made through the exchange market.
In order to become a Resolution No. 4,373 investor, an investor residing outside Brazil must:
· appoint at least one representative in Brazil that will be responsible for complying with registration and reporting requirements and procedures with the Central Bank and the CVM. Such representative must be a financial institution or an institution duly authorized by the Central Bank that will be jointly and severally liable for the representative’s obligations;
· through its representative, register itself as a foreign investor with the CVM and register the investment with the Central Bank;
· appoint at least one custodian duly authorized by the CVM;
· appoint a representative in Brazil for taxation purposes;
· obtain a taxpayer identification number from the Brazilian federal tax authorities — Receita Federal (the Brazilian Internal Revenue); and
· securities and other financial assets held by foreign investors pursuant to Resolution No. 4,373 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 by foreign investors are generally restricted to transactions involving securities for acquisition or sale in stock exchanges or organized over-the-counter markets licensed by the CVM or such other cases as may be set forth in the applicable CVM regulations from time to time.
Significant Differences between our Corporate Governance Practices and NYSE Corporate Governance Standards
We are subject to the NYSE corporate governance listing standards. As a foreign private issuer, the standards applicable to us are considerably different to the standards applied to U.S. listed companies. Under the NYSE rules, we must comply with the following corporate governance rules: (i) we must satisfy the requirements of Rule 10A-3 of the Exchange Act, including having an audit committee (Fiscal Council) or audit board, pursuant to an applicable exemption available to foreign private issuers, that meets certain requirements, as discussed below; (ii) we must provide the NYSE with annual and interim written affirmations as required under the NYSE corporate governance rules; (iii) we must provide prompt certification by our chief executive officer of any material non-compliance with any corporate governance rules; and (iv) we must provide a brief description of the significant differences between our corporate governance practices and the NYSE corporate governance practices required to be followed by U.S. listed companies. The discussion of the significant differences between our corporate governance practices and those required of U.S. listed companies follows below.
Majority of Independent Directors
The NYSE rules require that a majority of the board must consist of independent directors. Independence is defined by various criteria, including the absence of a material relationship between the director and the listed company. Although Brazilian law does not have a similar requirement, Novo Mercado and Level 2 rules require that listed companies have a board of directors comprised of at least five members, out of which a minimum of 20% of the directors must be independent pursuant to the different criteria defined in the regulations (such as absence of material relationship between a director and the listed company or the controlling shareholder). The Level 1 segment of BM&FBOVESPA in which we are listed only requires the board to be comprised of a minimum of three members and does not require any participation by independent directors and, therefore, under Brazilian law and the rules of the Level 1, neither our Board of Directors nor our management is required to test the independence of directors before their election to the board. Nevertheless, both Brazilian Corporate Law and the CVM have established rules that require directors to meet certain qualification requirements and that address the compensation and duties and responsibilities of, as well as the restrictions applicable to, a company’s executive officers and directors. While our directors meet the qualification requirements of Brazilian Corporate Law and the CVM, as well as the Level 1 segment of BM&FBOVESPA, we do not believe that a majority of our directors would be considered independent under the NYSE test for director independence. Brazilian Corporate Law and our by-laws require that our directors be elected by our shareholders at a general shareholders’ meeting.
In addition, on June, 30, 2016, Brazilian government promulgated the Law of State-owned Companies that among other definitions, establishes minimum requirements for managers appointment, such as: I - (a) to have a minimum professional experience of ten years with public or private segment related to the intended state-owned company, or in other related segments regarding the superior managing position that he or she was appointed; or (b) to have a minimum professional experience of four years in one of such positions: superior manager position in similar companies considering the size or the business of the intended state-owned company; (b.1) to have occupied trustily positions or functions equal to and DAS-4 or superior in the public segment; (b.2) have been teacher or researcher in subjects related to the intended state-owned company business; (b.3) to have a minimum self-employed professional experience of four years in activities direct or indirectly related to the intended state-owned company business; (c) to have academic degree in areas that regard the intended state-owned company business; II — do not fall under the the non-admission hypothesis; and III — do not be declared ineligible regarding Complementary Law No. 64 of 1990.
Although the Law of State-owned Companies came into force immediately after its publication, the state-owned companies have up to 24 (twenty four) months to adapt to the new legal requirements. Regardless of this fact, the last election of our members of the Board of Directors and of our Executive Officers fully complied with these rules.
Executive Sessions
NYSE rules require that the non-management directors must meet at regularly scheduled executive sessions without management present. Brazilian Corporate Law does not have a similar provision. According to Brazilian Corporate Law, up to one-third of the members of the Board of Directors can be elected to the Board of Executive Officers. The remaining non-management directors are not expressly empowered to serve as a check on management, and there is no requirement that those directors meet regularly without management. As a result, the non-management directors on our board do not typically meet in executive session.
Nominating/Corporate Governance Committee
NYSE rules require that listed companies have a nominating/corporate governance committee composed entirely of independent directors and governed by a written charter addressing the committee’s required purpose and detailing its required responsibilities, which include, among other things, identifying and selecting qualified board member nominees and developing a set of corporate governance principles applicable to the company. Brazilian law does not have a similar requirement.
The Law of State-owned Companies establishes that state-owned companies must have an Internal Committee to monitor and evaluate the appointment proceedings and the fulfillment of the minimum requirements for the new management members.
Although the Law of State-owned Companies came into force immediately after its publication, the state-owned companies have up to 24 (twenty four) months to adapt to the new legal requirements. In January 25, 2017 we created an internal temporary commission of appointment to check the fulfillment of the indicated members for our management.
Compensation Committee
NYSE rules require that listed companies have a compensation committee composed entirely of independent directors and governed by a written charter addressing the committee’s required purpose and detailing its required responsibilities, which include, among other things, reviewing corporate goals relevant to the chief executive officer’s compensation, evaluating the chief executive officer’s performance, approving the chief executive officer’s compensation levels and recommending to the board non-chief executive officer compensation, incentive-compensation and equity-based plans. We are not required under applicable Brazilian law to have a compensation committee.Under Brazilian Corporate Law, the total amount available for compensation of our directors and executive officers and for profit-sharing payments to our executive officers is established by our shareholders at the annual general meeting. The Board of Directors is then responsible for determining the individual compensation and profit-sharing of each executive officer, as well as the compensation of our board and committee members. In making such determinations, the board reviews the performance of the executive officers, including the performance of our chief executive officer, who typically excuses himself from discussions regarding his performance and compensation.
Audit Committee
NYSE rules require that listed companies have an audit committee that: (i) is composed of a minimum of three independent directors who are all financially literate; (ii) meets the SEC rules regarding audit committees for listed companies; (iii) has at least one member who has accounting or financial management expertise; and (iv) is governed by a written charter addressing the committee’s required purpose and detailing its required responsibilities. However, as a foreign private issuer, we need only to comply with the requirement that the audit committee meet the SEC rules regarding audit committees for listed companies. Brazilian Corporate Law requires State-Owned Companies to have a permanent Fiscal Council composed of three to five members who are elected at the general shareholders’ meeting.
In addition, the new Law of State-owned Companies establishes that state-owned companies must have an Internal Auditing Committee, which will have functions listed in the state-owned company’s bylaws, such as: (i) deciding about hiring and dismissing independent auditors; (ii) supervising the independent auditors activities, evaluating their independence, the provided service’s quality and if these services fit the company’s necessity; (iii) supervising the activities developed in the Internal Controls and Internal Auditing department and the activity of financial statements production of the state-owned company; (iv) monitoring the quality and the integrity of the internal control mechanisms and about the financial statements and releases that were disclosed by the state-owned company; (v) evaluating and monitoring the company’s risk exposures related to: (a) management pay; (b) assets utilization; and (c) expenses; (vi) evaluating and monitoring the Internal Audit Department and the thirty parties transactions fulfillment in accordance with the management; (vii) releasing an annual report regarding information about activities, results, conclusions and recommendations from the Audit Committee, registering conflictual opinions about the financial statements from the management, the Internal Audit Department and the Internal Fiscal Council; and (viii) evaluating the reasonability of the standards about actuarial calculations, as well as actuarial results of retirement plans which was kept by pension fund when the state-owned company sponsors closed pension entities. Although the Law of State-owned Companies came into force immediately after its publication, the state-owned companies have up to 24 (twenty four) months to adapt to the new legal requirements.
Shareholder Approval of Equity Compensation Plans
NYSE rules require that shareholders be given the opportunity to vote on all equity compensation plans and material revisions thereto, with limited exceptions. Under Brazilian Corporate Law, shareholders must approve all stock option plans. In addition, any issuance of new shares is subject to shareholder approval.
NYSE rules require that listed companies adopt and disclose corporate governance guidelines. Although applicable Brazilian law does not have a similar requirement, we have adopted corporate governance guidelines which are set forth in the Code of Corporate Governance Practices of Eletrobras (“Código das Práticas de Governança Corporativa da Eletrobras”). Additionally, we have also adopted and observe a disclosure policy, which requires the public disclosure of all relevant information pursuant to guidelines set forth by the CVM, as well as an insider trading policy, which, among other things, establishes black-out periods and requires insiders to inform management of all transactions involving our securities.
Code of Business Conduct and Ethics
NYSE rules require that listed companies adopt and disclose a code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for directors or executive officers. BM&F Bovespa has a similar requirement for companies that are listed under Level 1, Level 2 or in the Novo Mercado corporate governance segments, and in 2010 we have introduced the Ethics Code of Eletrobras Companies (“Código de Ética Único das Empresas Eletrobras”) which provides for the ethical principles to be observed by all the members of the board of directors, executive officers, employees, outsourced staff, service providers, trainees and young apprentices.
We recently updated our Code of Ethics and adopted a number of conduct commitments and internal policies (such as guidelines for compliance with our Anti-Corruption Policy) designed to guide the behavior of the relevant parties, such as our management, employees and contractors and reinforce our principles and rules for ethical behavior and professional conduct.
The Law of State-owned Companies establishes that all the state-owned companies must have their own Code of Conduct which will provide guidelines and conduct standards for all the activities developed by the state-owned company. Companies must create a division to receive complaints and denouncements related to non-compliance with the Code.
Although the Law of State-owned Companies came into force immediately after its publication, the state-owned companies have up to 24 (twenty four) months to adapt to the new legal requirements.
Internal Audit Function
NYSE rules require that listed companies maintain an internal audit function to provide management and the audit committee with ongoing assessments of the company’s risk management processes and system of internal control. Brazilian law does not have a similar requirement.
D. Selling Shareholders
Not applicable.
E. Dilution
Not applicable.
F. Expenses of the Issue
Not applicable.
ITEM 10. ADDITIONAL INFORMATION
A. Share Capital
Not applicable.
B. Memorandum and Articles of Association
Corporate Purpose
Our by-laws provide that our corporate purposes are:
(1) to construct and operate power plants and transmission lines to generate and distribute electric energy and to enter into related business transactions, such as the trade of electric energy;
(2) to cooperate with the government to establish national energy policy;
(3) to give financial support to our subsidiaries;
(4) to promote and support research of interest to the energy sector, connected with the generation, transmission and distribution of electric energy, as well as studies regarding the utilization of reservoirs for various purposes;
(5) to contribute to the training of the technical personnel required by the Brazilian electric energy sector by means of specialized courses; we may also grant assistance to educational entities in Brazil or abroad; and
(6) to cooperate technically and administratively with our subsidiaries and the government.
Our Board of Directors do not have the power to vote on compensation to themselves. Only our shareholders may approve such matters. There are no prescribed age limits for retirement of members of our Board of Directors.
Description of our Capital Stock
General
We are a mixed capital company, authorized by and constituted in accordance with Brazilian Law No. 3,890-A of April 25, 1961. We are registered with the Brazilian tax authorities with CNPJ no. 00.001.180/0001-26.
Our share capital is divided into three types of shares: common shares, class “A” preferred shares (which were issued before June 23, 1969) and class “B” preferred shares (which have been issued since June 23, 1969).
In September 2006, we entered into an agreement with the BM&FBOVESPA to list our shares on the Level 1 segment of BM&FBOVESPA’s corporate governance, the effectiveness of which began on September 29, 2006. Trading in our shares on the Level 1 began on September 29, 2006.
History of our Capital Stock
Our share capital was R$31,305 million as of December 31, 2016.
Treasury Shares
We hold no treasury shares and we do not have a program for repurchasing our shares.
Rights Attaching to Our Shares
Common Shares
Each of our common shares entitles its holder to one vote on all matters submitted to a vote of shareholders at an annual or special shareholders’ general meeting. In addition, upon our liquidation, holders of our shares are entitled to share all of our remaining assets, after payment of all of our liabilities, ratably in accordance with their respective participation in the total amount of the issued and outstanding common shares. Holders of our common shares are entitled to participate on all future capital increases by us.
Preferred Shares
Our preferred shares have different attributes to our common shares as the holders of our preferred shares are not entitled to vote at annual or special shareholders’ general meetings but have preferential a right to reimbursement of capital, distribution of dividends and priority on insolvency. Our preferred shares cannot be converted into common shares.
Class “A” preferred shares, and bonus shares related to such shares, are entitled to a dividend of 8% per annum, in priority to the distribution of other dividends, to be divided equally between them. Class “B” preferred shares, and bonus shares related to such shares, are entitled to a dividend of 6% per annum, in priority to the distribution of other dividends, to be divided equally between them. An unpaid dividend is not payable in future years for Class “A” and Class “B” preferred shares. The Class “A” preferred shares and the class “B” preferred shares rank equally on a liquidation.
In addition, the preferred shares are entitled to receive a dividend at least ten percent above the dividend paid to each common share.
Transfer of Our Shares
Our shares are not subject to any share transfer restrictions. Whenever a transfer of ownership of shares occurs, the finance company with which such shares are deposited may collect from the transferring shareholder the cost of any services in connection with the Brazilian transfer thereof, subject to maximum rates established by the CVM.
Pre-emption Rights
No pre-emption rights apply on the transfer of our shares.
Redemption
We cannot redeem our shares.
Registration
Our shares are held in book-entry form with J.P. Morgan Chase Bank N.A., which will act as the custodian agent for our shares. Transfer of our shares will be carried out by means of book entry by J.P. Morgan Chase Bank N.A. in its accounting system, debiting the share account of the seller and crediting the share account of the buyer, upon a written order of the transferor or a judicial authorization or order to affect such transfers.
Notification of Interests in Our Shares
Any shareholder that acquires or disposes of 5% or more of our capital stock of any class is obliged to notify the Company immediately upon completion of the transaction. Such obligation also applies to the holders of ADRs, convertible debentures and stock options. After the receipt of such notification, the Company shall inform such transaction by means of a notice which shall be uploaded in the site of CVM and duly update its corporate information in its Reference Form (Formulário de Referência) within seven business days of the occurrence of the transaction.
Shareholders’ General Meetings
Brazilian corporation law does not allow shareholders to approve matters by written consent obtained as a response to a consent solicitation procedure. All matters subject to approval by the shareholders must be approved in a duly convened general meeting. There are two types of shareholders’ meetings: ordinary and extraordinary. Ordinary meetings take place once a year within 120 days of our fiscal year end and extraordinary meetings can be called whenever necessary.
Shareholders’ meetings are called by our board of directors. Notice of such meetings is posted to shareholders and, in addition, notices are placed in a newspaper of general circulation in our principal place of business and on our website at least 15 days before the meeting.
Shareholders’ meetings take place at our headquarters in Brasília. Shareholders may be represented at a shareholders’ meeting by attorneys-in-fact who are: (i) shareholders of the company; (ii) a Brazilian lawyer; (iii) a member of our management; or (iv) a financial institution.
At duly convened meetings, our shareholders are able to take any action regarding our business. The following actions can only be taken by our shareholders in general meeting:
· approving our annual accounts;
· electing and dismissing the members of our board of directors and our fiscal council;
· amending our by-laws;
· approving our merger, consolidation or spin-off;
· approving our dissolution or liquidation as well as the election and dismissal of liquidators and the approval of their accounts;
· granting stock awards and approving stock splits or reverse stock splits;
· approving stock option plans for our management and employees; and
· approving the payment of dividends.
Board of Directors, Board of Executive Officers and Fiscal Council
The Board of Directors is composed of ten members, seven of which are appointed by the controlling shareholder; one by the minority shareholders, one by the minority shareholders holders of preferred shares; and one by the employees, all of them nominated for a period of one year wih the possibility of reelection. However, in 2016, the election of the seven members of the Board of Directors which the majority shareholder is entitled to appoint adopted the multiple vote proceedure, as a result of a request from a minority shareholder that represents more than 0.5% of our corporate capital. Thus, the majority shareholder appointed six members of the Board of Directors out of the seven members it was entitled to, while the seventh was appointed by the minority shareholders. In 2016, out of the nine members of the Board of Directors, two members are independent members according to BM&FBOVESPA and IBGC (Instituto Brasileiro de Governança Corporativa) criteria; eight out of nine members are non-executives, i.e. do not take part on the daily management of the company, and one out of nine members is an executive, our CEO.
The Fiscal Council is responsible for overseeing the actions of the managers and opine on our financial health. Its attributions are set forth in our Bylaws and procedural rules included in out Internal Regulation. The Fiscal Council is a permanent management body and complies with the requirements determined by the SEC to act as an Audit Committee since 2006, having among its members a financial specialist with additional attributions as required by the SEC:
· To express opinion on retaining independent auditors;
· To express opinion on hiring of specialized consulting advisors, when necessary, to fulfill its obligations;
· Manage its own budget; and
· To receive, analyse and adequately deal with complaints and claims made by third parties or employees, even if anonymously, regarding internal accounting proceedings and controls.
The Fiscal Council is composed of five members and respective alternates, three of which are appointed by the controlling shareholder; one by the minority shareholders and one by the minority shareholders holders of preferred shares.
The Board of Executive Officers is responsible for the management of our business in accordance with the strategic guidelines established by the Board of Directors. The Board of Executive Officers is composed of seven members, including the CEO, elected by the Board of Directors. Its responsibilities are determined by our Internal Regulations and Bylaws, as well as by the applicable laws. The term of office of the Officers is up to three years, with the possibility of reelection, and there is no succession plan in place.
On July 22, 2016, the Board of Directors elected our seven Officers, including our current CEO, Mr. Wilson Pinto Ferreira Junior.
Qualifications
All members of our Board of Directors, Board of Executive Officers and Fiscal Council must be Brazilian citizens. Our by-laws also provide that the certain people may not be appointed to the management of the company, including those who: are disqualified by the CVM, have been declared bankrupt or have been convicted of certain offenses such as bribery and crimes against the economy.
In addition, on June, 30, 2016, Brazilian government promulgated the Law of State-owned Companies that among other definitions, establishes minimum requirements for managers appointment, such as: I - (a) to have a minimum professional experience of ten years with public or private segment related to the intended state-owned company, or in other related segments regarding the superior managing position that he or she was appointed; or (b) to have a minimum professional experience of four years in one of such positions: superior manager position in similar companies considering the size or the business of the intended state-owned company; (b.1) to have occupied trustily positions or functions equal to and DAS-4 or superior in the public segment; (b.2) have been teacher or researcher in subjects related to the intended state-owned company business; (b.3) to have a minimum self-employed professional experience of four years in activities direct or indirectly related to the intended state-owned company business; (c) to have academic degree in areas that regard the intended state-owned company business; II — do not fall under the the non-admission hypothesis; and III — do not be declared ineligible regarding Complementary Law No. 64 of 1990.
The minutes of the shareholders’ or directors’ meeting that appoints a member of the Board of Directors or the Board of Executive Officers, respectively, must detail the qualifications of such person and specify the period of their mandate.
Appointment
The members of our Board of Directors are elected at the general shareholders meeting for a renewable term of one year.
As our majority shareholder, the Brazilian Government has the right to appoint seven members of our Board of Directors, of which six are appointed by the MME and one by the Planning, Budget and Management Ministry. The other common shareholders have the right to elect one member, the holders of preferred shares without voting rights representing at least ten percent of our total capital have the right to elect one member and one member shall be elected as the representative of the employees, by means of an election organized by the company and the union entities. One of the members of the Board of Directors is appointed President of the company.
Pursuant to Article 140 of Law No. 6,404, of December 15, 1976 (the “Brazilian Corporate Law”), the members of the Board of Directors shall be elected by means of Shareholders Meetings and may be removed at anytime.
Under Article 141, paragraph 4, of Brazilian Corporate Law, minority shareholders may appoint a member of the Board of Directors, as follows:
(i) holders of common shares representing at least 15% of the total common shares with voting rights may appoint one member to the Board of Directors and its respective alternate;
(ii) holders of preferred shares representing at least 10% of the total capital stock of a company may appoint one member to the Board of Directors and its respective alternate; and
(iii) if the percentages set forth in items (i) and (ii) are not met by the holders of common shares and preferred shares, holders of common shares and holders of preferred shares representing together more than 10% of the total capital of a company may jointly appoint one member to the Board of Directors and its respective alternate.
Those rights may only be exercised by shareholders that prove their continuous share ownership during the last three months prior to Eletrobras’ shareholders’ meeting.
Those rights are reflected in Eletrobras’ bylaws (as stated above) and, accordingly, are not applicable in addition to such provisions.
In addition, Article 141 of the Brazilian Corporate Law and CVM regulations determine that shareholders holding more than 5% of the voting capital are entitled to request that cumulative voting rights (voto múltiplo) so as to increase their chances of electing at least one member to the Board of Directors. Under the cumulative voting process, each voting share is entitled to a number of votes equal to the number of board seats being filled at the relevant shareholders’ meeting, such votes which can be cast to a single or more candidates. As a result of cumulative voting, controlling shareholders may be prevented from controlling all seats of the board, while minority shareholders may be allowed to appoint at least one member of that body. Shares participating in the cumulative voting process will not be counted for the purposes of appointing board members in the circumstances described in (i) through (iii) above (and vice versa).
In order to ensure that the majority of board members is elected by the controlling shareholder, Brazilian Corporate Law provides that whenever the election of board members uses cumulative voting and holders of common or preferred shares elect board members in separate elections, the controlling shareholder will always have the right to elect such board members in a number equal to the number elected by the other shareholders plus one member, even if that results in the board having more members than the number set forth in the company’s bylaws (Article 141, paragraph 7, of the Brazilian Corporate Law).
Brazilian Corporate Law also provides that, whenever cumulative voting is adopted and the general shareholders meeting removes any member from office, all members will be automatically removed from office and a new election shall take place. In other situations of vacancy, if no substitute members were elected along with effective members, the next shareholders’ meeting shall elect all members of the board.
The members of our Board of Executive Officers are appointed by our Board of Directors for a three-year term.
The Brazilian Government has the right to appoint three of the members of our Fiscal Council, and both the minority shareholders and the holders of our preferred shares have the right to appoint one member each.
Meetings
Under our by-laws, our Board of Directors shall meet at least once a year without the presence of the CEO and twice a year with the presence of our independent auditors. Historically, our Board of Directors meets once per month and when called by a majority of the directors or the Chairman. Among other duties, our Board of Directors is responsible for: (i) establishing our business guidelines; (ii) determining the corporate organization of our subsidiaries or any equity participation by us in other legal entities; (iii) determining
our loans and financing policy; and (iv) approving any guarantee in favor of any of our subsidiaries on any financial agreement. Directors cannot participate in discussions or vote in relation to matters in which they are otherwise interested.
Our Board of Executive Officers ordinarily meets every week, or when called by a majority of the officers or by the President. Our Board of Executive Officers determines our general business policy, is responsible for all matters related to our day-to-day management and operations, and is the highest controlling body with regards to the execution of our guidelines. Members of our Board of Executive Officers cannot participate in discussions or vote in relation to matters in which they are otherwise interested.
The Fiscal Council meets once per month.
Disclosure Obligations
Our disclosure obligations are determined by the Manual de Divulgação e Uso de Informações Relevantes e Política de Negociação de Valores Mobiliários de Emissão da Eletrobras (Guide to Disclosure and Use of Relevant Information and Policy for the Negotiation of Securities issued by Eletrobras), a copy of which is available on our website. Information found at this website is not incorporated by reference into this annual report.
C. Material Contracts
Our Itaipu operations are made pursuant to a treaty entered into on April 26, 1973 between the Brazilian Government and the government of Paraguay. A translation of this treaty is included as an exhibit to this annual report. The material terms of this treaty are described in “Item 5. Operating and Financial Review and Prospects.”
D. Exchange Controls
The right to convert dividend or interest payments and proceeds from the sale of shares into foreign currency and to remit such amounts outside Brazil is subject to restrictions under foreign investment legislation which generally requires, among other things, that the relevant investments have been registered with the Central Bank and the CVM. Such restrictions on the remittance of foreign capital abroad may hinder or prevent the custodian for our preferred shares represented by our ADS or the holders of our preferred shares from converting dividends, distributions or the proceeds from any sale of these preferred shares into U.S. dollars and remitting the U.S. dollars abroad. Holders of our ADS could be adversely affected by delays in, or refusal to grant any, required government approval to convert Brazilian currency payments on the preferred shares underlying our ADS and to remit the proceeds abroad.
Resolution No. 4,373 of the National Monetary Council provides for the issuance of depositary receipts in foreign markets in respect of shares and other securities of Brazilian publicly-held issuers. The ADS program was approved under Annex V to Resolution No. 1,289, known as Annex V Regulations by the Central Bank and the CVM prior to the issuance of the ADS. Accordingly, the proceeds from the sale of ADS by ADR holders outside Brazil are free of Brazilian foreign investment controls, and holders of the ADS are entitled to favorable tax treatment. See “Item 10.E, Taxation — Material Brazilian Tax Considerations.”
Under Resolution No. 4,373 of the CMN, foreign investors registered with the CVM may buy and sell Brazilian securities, including our preferred shares, on Brazilian stock exchanges without obtaining separate certificates of registration for each transaction. Registration is available to qualified foreign investors, which principally include foreign financial institutions, insurance companies, pension and investment funds, charitable foreign institutions and other institutions that meet certain minimum capital and other requirements. Resolution No. 4,373 also extends favorable tax treatment to registered investors. See “Item 10.E, Taxation — Material Brazilian Tax Considerations.”
Pursuant to the Resolution No. 4,373 foreign investors must: (i) appoint at least one representative in Brazil with the ability to perform actions regarding the foreign investment and which must be a financial institution or an institution duly authorized by the Central Bank; (ii) appoint at least one custodian duly authorized by the CVM; (iii) obtain registration as a foreign investor with CVM; and (iv) register the foreign investment with the Central Bank.
The securities and other financial assets held by a foreign investor pursuant to Resolution No. 4,373 must be registered or maintained in deposit accounts or under the custody of an entity duly licensed by the Central Bank or by the CVM or be registered in register, clearing and custody systems authorized by the Central Bank or by the CVM. In addition, the trading of securities is restricted to transactions carried out on the stock exchanges or over-the-counter markets licensed by the CVM or such other cases as may be set forth in the applicable CVM regulations from time to time.
Registered Capital
Amounts invested in our shares by a non-Brazilian holder who qualifies under Resolution No. 4,373 and obtains registration with the CVM, or by the depositary representing an ADS holder, are eligible for registration with the Central Bank. This registration (the amount so registered is referred to as registered capital) allows the remittance outside Brazil of foreign currency, converted at the commercial market rate, acquired with the proceeds of distributions on, and amounts realized through, dispositions of our shares. The registered capital per share purchased in the form of an ADS, or purchased in Brazil and deposited with the depositary in exchange for an ADS, will be equal to its purchase price (stated in U.S. dollars). The registered capital per share withdrawn upon cancellation of an ADS will be the U.S. dollar equivalent of: (i) the average price of a share on the Brazilian stock exchange on which the most shares were traded on the day of withdrawal or; (ii) if no shares were traded on that day, the average price on the Brazilian stock exchange on which the most shares were traded in the fifteen trading sessions immediately preceding such withdrawal. The U.S. dollar equivalent will be determined on the basis of the average commercial market rates quoted by the Central Bank on these dates.
A non-Brazilian holder of shares may experience delays in effecting Central Bank registration, which may delay remittances abroad. This delay may adversely affect the amount in U.S. dollars, received by the non-Brazilian holder.
A certificate of registration has been issued in the name of the depositary with respect to the ADS and is maintained by the custodian on behalf of the depositary. Pursuant to the certificate of registration, the custodian and the depositary are able to convert dividends and other distributions with respect to the shares represented by our ADS into foreign currency and remit the proceeds outside Brazil. In the event that a holder of ADS exchanges such ADS for shares, such holder will be entitled to continue to rely on the depositary’s certificate of registration for five business days after such exchange, following which such holder must seek to obtain its own certificate of registration with the Central Bank. Thereafter, any holder of shares may not be able to convert into foreign currency and remit outside Brazil the proceeds from the disposition of, or distributions with respect to, such shares, unless the holder is a duly qualified investor under Resolution No. 4,373 or obtains its own certificate of registration. A holder that obtains a certificate of registration will be subject to less favorable Brazilian tax treatment than a holder of ADS. See “Item 10.E, Taxation — Material Brazilian Tax Considerations.”
If the holder does not qualify under Resolution No. 4,373 by registering with the CVM and the Central Bank and appointing a representative in Brazil, the holder will be subject to less favorable Brazilian tax treatment than a holder of ADS. Regardless of qualification under Resolution No. 4,373, residents in tax havens are subject to less favorable tax treatment than other foreign investors. See “Item 10.E, Taxation — Material Brazilian Tax Considerations.”
Under current Brazilian legislation, the Brazilian Government may impose temporary restrictions on remittances of foreign capital abroad in the event of a serious imbalance or an anticipated serious imbalance of Brazil’s balance of payments. For approximately six months in 1989 and early 1990, the Brazilian Government froze all dividend and capital repatriations held by the Central Bank that were owed to foreign equity investors, in order to conserve Brazil’s foreign currency reserves. These amounts were subsequently released in accordance with Brazilian Government directives. There can be no assurance that the Brazilian Government will not impose similar restrictions on foreign repatriations in the future. See “Item 3.D, Risk Factors — Risks Relating to Brazil.”
E. Taxation
The following discussion addresses the material Brazilian and United States federal income tax consequences of acquiring, holding and disposing of our shares or ADS.
This discussion is not a comprehensive discussion of all the tax considerations that may be relevant to a decision to purchase our shares or ADS and is not applicable to all categories of investors, some of which may be subject to special rules, and does not specifically address all of the Brazilian and United States federal income tax considerations applicable to any particular holder. It is based upon the tax laws of Brazil and the United States as in effect on the date of this annual report, which are subject to change, possibly with retroactive effect, and to differing interpretations. Any change in such law may have an impact on the consequences described below. Each prospective purchaser is urged to consult its own tax advisor about the particular Brazilian and United States federal income tax consequences to it of an investment in our shares or ADS. This discussion is also based upon the representations of the depositary and on the assumption that each obligation in the deposit agreement among us, J.P. Morgan Chase Bank, N.A., as depositary, and the registered holders and beneficial owners of our ADS, and any related documents, will be performed in accordance with its terms.
Although there presently is 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. We cannot assure you, however, as to whether or when a treaty will enter into force or how it will affect holders of our shares or ADS.
Material Brazilian Tax Considerations
The following discussion is a summary of the material Brazilian tax considerations regarding the acquisition, ownership and disposition of our shares or ADS by a holder that is not domiciled in Brazil for purposes of Brazilian taxation and which has registered its investment in such securities with the Central Bank (in each case, a Non-Resident Holder). 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 municipality of Brazil.
Introduction
Pursuant to Brazilian law, foreign investors may invest in the shares under Central Bank Resolution No. 4,373.
Resolution No. 4,373 allows foreign investors to invest in Brazilian financial and capital markets, provided that some requirements therein described are fulfilled. In accordance with Resolution No. 4,373, the definition of foreign investor includes individuals, legal entities, mutual funds and other collective investment entities, domiciled or headquartered abroad.
Pursuant to Resolution No. 4,373, foreign investors must: (i) appoint at least one representative in Brazil with powers to perform actions relating to the foreign investment and which must be a financial institution or an institution duly authorized by the Central Bank; (ii) register the foreign investment with the Central Bank; (iii) appoint at least one custodian duly authorized by the CVM; (iv) appoint a representative in Brazil for Taxation purposes; and (v) obtain a taxpayer identification number from the Brazilian Federal Tax Authorities (which will be requested by CVM). For more details about the requirements to be met in order to qualify as foreign investor under Resolution No. 4,373, see “Item 9.C, Markets — Investment in our Preferred Shares by Non-Residents of Brazil.”
Securities and other financial assets held by foreign investors pursuant to Resolution No. 4,373 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 stock exchanges or organized over-the-counter markets licensed by the CVM, except for such other cases as may be set forth in the applicable CVM regulations from time to time.
Income tax
For purposes of Brazilian taxation, there are two types of Non-Resident Holders of our shares or ADS: (i) Non-Resident Holders that are not resident or domiciled in a “Tax Haven” jurisdiction (i.e., a country or location that does not impose income tax or where the maximum income tax rate is lower than 17% - this rate was reduced from 20% to 17% as of December 1, 2014 - or where the internal legislation imposes restrictions to disclosure of shareholding composition or the ownership of the investment), and that, in the case of holders of our shares, are registered before the Central Bank and the CVM being able to invest in Brazil in accordance with Resolution No. 4,373 (“Registered Holder”); and (ii) other Non-Resident Holders, which include any and all non-residents of Brazil who invest in equity securities of Brazilian companies through any other means and all types of investor that are located in Tax Haven. The investors mentioned in item (i) above which are registered with the Central Bank and the CVM being able to invest in Brazil in accordance with Resolution No. 4,373, are subject to a favorable tax regime in Brazil, as described below. Nonetheless, there can be no assurance that the current preferential treatment for holders of ADS and Non-Resident Holders of preferred or common shares under Resolution No. 4,373 will continue or will not be changed in the future.
Dividends. Historically, dividends paid by a Brazilian company, such as ourselves, including dividends paid to a Non-Resident Holder, were not subject to income tax withholding in Brazil, to the extent that such amounts were related to profits generated as of January 1, 1996. Dividends related to profits generated prior to January 1, 1996 may be subject to Brazilian withholding tax at varying rates, depending on the year the profits were generated.
On May 13, 2014, Law No. 12,973 was enacted aiming to align the taxable basis of federal taxes with the accounting basis assessed pursuant to IFRS (as adopted in Brazil since 2008). According to such law, which is in effect as of 2015, dividends distributed based on accounting profits generated in 2014 and exceeding taxable profits (ascertained in accordance with the Brazilian Generally Accepted Accounting Principles valid up to December 31, 2007, or “BR GAAP 2007”) shall be subject to withholding tax at rates of 15% (general rule) or 25% (in case the beneficiary is located in a “Tax Haven” jurisdiction), unless the taxpayer opts to be submitted to the early effects of Law No. 12,973 in 2014 - in this scenario, both accounting profits and taxable profits would be the same and no taxation would occur. As the new taxation rules are mandatory for fiscal years beginning on or after January 1, 2015, dividends that relate to profits generated on or after January 1, 2015 are not subject to withholding tax.
Capital Gains. As a general rule, capital gains realized as a result of a disposition transaction are the positive difference between the amount received on the disposition of the assets and the respective acquisition cost. Under Brazilian law, income tax 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 disposition is carried out, as described below.
(a) Sale of ADS
Gains realized outside Brazil by a Non-Resident Holder on the disposition of ADS to another Non-Resident Holder should not be subject to Brazilian tax. However, according to Law No. 10,833, enacted on December 29, 2003, or Law No. 10,833, gains recognized on the disposition of assets located in Brazil by a Non-Resident Holder, whether to other Non-Resident Holders or Brazilian holders, are subject to taxation in Brazil. This rule is applicable regardless of whether the disposition is conducted in Brazil or abroad. Although we believe that the ADS do not fall within the definition of assets located in Brazil for purposes of Law No. 10,833 because they represent securities issued and renegotiated in an offshore exchange market, considering the general and unclear scope of such provisions, as well as the lack of a judicial court ruling in respect thereto, we are unable to predict whether such understanding will ultimately prevail in the courts of Brazil.
If such argument does not prevail, it is important to mention that with respect to the cost of acquisition to be adopted for calculating such gains, Brazilian law has conflicting provisions regarding the currency in which such amount must be determined. It is possible to sustain that the capital gains should be based on the positive difference between the cost of acquisition of the shares registered with the Brazilian Central Bank in foreign currency and the value of disposal of those shares in the same foreign currency. However, considering the unclear scope of applicable regulations, assessments have been issued adopting the cost of acquisition in Brazilian currency.
(b) Conversion of shares into ADS
The deposit of our shares in exchange for ADS may be subject to Brazilian tax on capital gains at the rate of up to 25%, if the acquisition cost of the shares, in the case of other market investors under Resolution No. 4,373, or the amount otherwise previously registered with the Central Bank as a foreign investment in the preferred or common shares is lower than:
(i) the average price per preferred or common share on a Brazilian stock exchange on which the greatest number of such shares were sold on the day of deposit; or
(ii) if no preferred or common shares were sold on that day, the average price on the Brazilian stock exchange on which the greatest number of preferred or common shares were sold in the 15 trading sessions immediately preceding such deposit.
In such case, the difference between the amount previously registered, or the acquisition cost, as the case may be, and the average price of the shares calculated as set forth above will be considered to be a capital gain. Although there is no clear regulatory guidance, such taxation should not apply to the case of Registered Holders.
(c) Conversion of ADS into shares
Although there is no clear regulatory guidance, the exchange of ADS for shares should not be subject to Brazilian tax. Non-Resident Holders may exchange ADS for the underlying shares, sell the shares on a Brazilian stock exchange and remit abroad the proceeds of the sale within five business days from the date of exchange (in reliance on the depositary’s electronic registration), with no tax consequences.
Upon receipt of the underlying shares in exchange for ADS, Non-Resident Holders may also elect to register with the Central Bank the U.S. dollar value of such shares as a foreign portfolio investment under Resolution No. 4,373, which will entitle them to the tax treatment referred above.
Alternatively, the Non-Resident Holder is also entitled to register with the Central Bank the U.S. dollar value of such shares as a foreign direct investment under Law No. 4,131/62, in which case the respective sale would be subject to the tax treatment applicable to transactions carried out of by a Non-Resident Holder that is not a Registered Holder.
(d) Common and Preferred shares negotiated in Brazil
Capital gains realized by Non-Resident Holder on the disposition of shares sold on the Brazilian stock exchange (which includes the transactions carried out on the organized over-the-counter market):
· are subject to the withholding income tax at a zero percent rate, when realized by a Non-Resident Holder that (a) has registered its investment in Brazil before the Central Bank. (a Registered Holder under the regulations of Resolution No. 4,373); and (b) is not resident in a Tax Haven; and
· in all other cases, including gains realized by a Non-Resident Holder that is not a Registered Holder or a Registered Holder that is resident or domiciled in Tax Haven, subject to progressive rates ranging from 15% to 22.5% for capital gains earned as from January 1, 2017. In this case, a withholding income tax of 0.005% over the sale price shall be applicable and withheld by the intermediary institution (i.e., a broker) that receives the order directly from the Non-Resident Holder, which can be later offset against any income tax due on the capital gain and which will be collected by the Non-Resident Holder’s tax representative in Brazil.
Any other capital gains realized on the disposition of assets including transactions that are not carried out on the Brazilian stock exchange are subject to the following tax treatment: (1) when realized by any Non-Resident Holder that is not resident or domiciled in Tax Haven, income tax at progressive rates ranging from 15.0% to 22.5% (as of January1, 2017) or a flat tax rate of 15%, as the case may be; and (2) income tax at the rate of 25.0% when realized by a Non-Resident Holder domiciled or resident in a Tax Haven.
In the cases above, if the gains are related to transactions conducted on the Brazilian non-organized over-the-counter market with intermediation, the withholding income tax of 0.005% shall also be applicable and withheld by the intermediary institution (i.e., a broker) that receives the order directly from the Non-Resident Holder, which can be later offset against any income tax due on the capital gain and which will be collected by the Non-Resident Holder’s tax representative in Brazil.The Non-Resident Holder will not need to file a Brazilian tax return with the Brazilian tax authorities.
As of January 2017, Law No. 13,259/2016 increased the income tax rates applicable to gains realized by Brazilian individuals on sale or disposition of shares not carried out on a Brazilian stock exchange from a flat tax rate of 15.0% to progressive rates varying from 15% to 22.5%. This increased income tax rate does affect the rates applicable to Non-Resident Holders. Although the above described tax rates are intended to reflect such new tax regime and the related tax effects to Non-Resident Holders, considering the unclear scope of Law No. 13,259/2016, each prospective purchaser is urged to consult its own tax advisor with respect to potential impacts of Law No. 13,259/2016.
Any exercise of preemptive rights relating to the preferred or common shares or ADS will not be subject to Brazilian withholding income tax. Any gain on the sale or assignment of preemptive rights relating to shares by the depositary on behalf of holders of ADS will be subject to Brazilian income taxation according to the same rules applicable to the sale or disposal of shares.
Payments of Interest Attributable to Shareholders’ Equity. In accordance with Law No. 9,249, dated December 26, 1995, as amended, Brazilian corporations may make payments to shareholders characterized as distributions of interest on own capital and treat those payments as a deductible expense for the purposes of calculating Brazilian corporate income tax and, as from 1997, social contribution on net profits, as far as certain limits are observed. Such interest is limited to the daily pro rata variation of the TJLP as determined by the Central Bank from time to time and the amount of deduction cannot exceed the greater of:
· 50% of the net income (after the social contribution on net profits and before the provision for corporate income tax, and the amounts attributable to shareholders as interest on net equity) for the period in respect of which the payment is made; or
· 50% of the sum of retained profits and profits reserves as of the date of the beginning of the period in respect of which the payment is made.
Payments of interest on own capital in respect of the preferred or common shares paid to shareholders who are either Brazilian residents or Non-Resident Residents, including holders of ADS, are subject to Brazilian income withholding tax at the rate of 15%, or 25% in case of shareholders domiciled in a Tax Haven and shall be deductible by us as long as the payment of a distribution of interest is approved by our shareholders.
These distributions 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 Brazilian withholding income tax, plus the amount of declared dividends, is at least equal to the mandatory dividend. If we pay interest attributable to shareholders’ equity in any year, and the payment is not recorded as part of the mandatory distribution, no additional amounts would be required to be paid by us, with respect to the mandatory dividend amount. The payment of interest on owner capital may be determined by our board of directors. We cannot assure you that our board of directors will not determine that future distributions of profits may be made by means of interest on owner capital instead of by means of dividends. Payments of interest on shareholder’s equity to Non-Resident Holders may be converted into U.S. dollars and remitted outside Brazil, subject to applicable exchange controls, to the extent that the investment is registered with the Central Bank.
Discussion on Low or Nil Tax Jurisdictions
On June 24, 2008, Law No. 11,727 was enacted establishing the concept of a “privileged tax regime.” Under this new law, a “privileged tax regime” is considered to apply to a jurisdiction that meets any of the following requirements: (i) it does not tax income
or taxes income at a maximum rate lower than 20%; (ii) it grants tax advantages to a non-resident entity or individual (a) without requiring substantial economic activity in the jurisdiction of such non-resident entity or individual or (b) to the extent such non-resident entity or individual does not conduct substantial economic activity in the jurisdiction of such non-resident entity or individual; (iii) it does not tax income generated abroad, or imposes tax on income generated abroad at a maximum rate lower than 20%; or (iv) restricts the ownership disclosure of assets and ownership rights or restricts disclosure about the execution of economic transactions.
In addition, on June 7, 2010, Brazilian Tax Authorities enacted Ordinance No. 1,037, listing (i) the countries and jurisdictions considered Tax Haven Jurisdictions, and (ii) the Privileged Tax Regimes. According to Section 24-B of Law No. 9,430, as amended by Law No. 11,727/08, the Executive Branch is empowered to reduce or reinstate the income tax rate of 20% as the element to define a Tax Haven Jurisdiction or a Privileged Tax Regime. Recently, on November 28, 2014, Ruling n° 488/2014 was published and established that the rate of 20% is reduced to 17% in connection with countries, locations and jurisdiction aligned with international tax transparency standards, as per definition to be provided by Brazilian Federal Revenue Service. It is expected that further guidance will be provided by Brazilian Federal Revenue Service and also that the list of Tax Haven Jurisdictions and Privileged Tax Regimes be updated.
Although the interpretation of the current Brazilian tax legislation could lead to the conclusion that the above-mentioned concept of “privileged tax regime” should apply only for the purposes of Brazilian transfer pricing and thin capitalization rules, it is unclear whether such concept would also apply to investments carried out in the Brazilian financial and capital markets for purposes of this law. There is no judicial guidance as to the application of Law No. 11,727 of June 24, 2008 and, accordingly, we are unable to predict whether the Brazilian Internal Revenue Service or the Brazilian courts may decide that the “privileged tax regime” concept shall be applicable to deem a Non-Resident Holder as a Tax Haven resident when carrying out investments in the Brazilian financial and capital markets. In the event that the “privileged tax regime” concept is interpreted to be applicable to transactions carried out in the Brazilian financial and capital markets, this tax law would accordingly result in the imposition of taxation on a Non-Resident Holder that meets the privileged tax regime requirements in the same manner and to the same extent applicable to a Tax Haven resident.
Moreover, Law No. 12,249 of June 11, 2010, applied the privileged tax regime concept to other income remitted abroad. Although the concept of privileged tax regime should not affect the tax treatment of a Non-Resident Holder described above, it is not certain whether subsequent legislation or interpretations by the Brazilian tax authorities regarding the definition of “privileged tax regime” will extend such a concept to the tax treatment of a Non-Resident Holder described above.
Tax on Foreign Exchange and Financial Transactions
Foreign Exchange Transactions (IOF/Exchange)
Brazilian law imposes a Tax on Foreign Exchange Transactions, or “IOF/Exchange,” triggered by the conversion of reais into foreign currency and on the conversion of foreign currency into reais.
Pursuant to Decree No. 6,306/07, as amended, IOF/Exchange may be levied on foreign exchange transactions, affecting either or both the inflow or outflow of investments. The IOF rates are set by the Brazilian executive branch, and the highest applicable rate is 25%. Currently, for most exchange transactions, the rate of IOF/Exchange is 0.38%.
The rate of IOF/Exchange tax imposed on foreign exchange transactions carried out by a foreign investor for the purpose of investing in the financial and capital markets may vary from time to time as defined by the government and the rates may be different based on the type of investment as well as the time in which such investment is maintained in Brazil.
The inflow of foreign funds for the purchase of shares under Resolution No. 4,373 is subject to 0% IOF/Exchange rate and the same 0% rate levies on the remittance of dividends and payments of interest on shareholder’s equity. Although it is not clearly regulated, the conversion of reais into dollars for payment of dividends to holders of ADS should also benefit from the 0% IOF/Exchange rate. The inflow of funds derived from the ADS cancelation for purposes of investing in shares is also subject to a 0% rate of IOF/Exchange.
Tax on Transactions involving Bonds and Securities (IOF/Bonds Tax)
Brazilian law imposes a Tax on Transactions Involving Bonds and Securities, known as “IOF/Bonds Tax.” Currently, the rate of IOF/Bonds Tax applicable to transactions involving common or preferred shares is zero, although the Brazilian government may increase such rate at any time, up to 1.5% per day, but only in respect to future transactions.
The conversion of shares into ADRs or shares into ADS was not taxable before November 17, 2009. Following the enactment of Decree No. 7,011 of November 18, 2009, these transactions started to be taxed by the IOF/Bonds Tax at the rate of 1.5% over the transaction value (obtained by multiplying the number of shares/units converted by its closing price at the day before the conversion, or, in the case no negotiation was made on that day, by the last closing price available). However, in view of a subsequent change in the applicable legislation (Decree No. 8,165 of December 23, 2013), the rate was reduced to 0%.
Other Relevant Brazilian Taxes
Some Brazilian states impose gift and inheritance tax on gifts or bequests made by individuals or entities not domiciled or residing in Brazil to individuals or entities domiciled or residing within such states. There are no Brazilian stamp, issue, registration or similar taxes or duties payable by holders of our shares or ADS.
Registered Capital. The amount of an investment in shares held by a Non-Brazilian Holder who qualifies under Resolution No. 4,373 and obtains registration with the CVM, or by the depositary, as the depositary representing such holder, is eligible for registration with the Central Bank. Such registration allows the remittance outside of Brazil of any proceeds of distributions on the shares, and amounts realized with respect to disposition of such shares. The amounts received in Brazilian currency are converted into foreign currency through the use of the commercial market rate. The registered capital for preferred or common shares purchased in the form of ADS or purchased in Brazil, and deposited with the depositary in exchange for ADS will be equal to their purchase price (in U.S. dollars) to the purchaser. The registered capital for shares that are withdrawn upon surrender of ADS, as applicable, will be the U.S. dollar equivalent of the average price of preferred or common shares, as applicable, on a Brazilian stock exchange on which the greatest number of such shares, as applicable, was sold on the day of withdrawal. If no preferred or common shares, as applicable, were sold on such day, the registered capital will refer to the average price on the Brazilian stock exchange on which the greatest number of such shares, as applicable, was sold in the 15 trading sessions immediately preceding such withdrawal. The U.S. dollar value of the preferred or common shares, as applicable, is determined on the basis of the average commercial market rate quoted by the Central Bank on such date or, if the average price of such shares is determined under the last preceding sentence, the average of such average quoted rates on the same 15 dates used to determine the average price of the shares.
A Non-Resident Holder of our shares may experience delays in effecting such action, which may delay remittances abroad. Such a delay may adversely affect the amount, in U.S. dollars, received by the Non-Resident Holder.
Material United States Federal Income Tax Consequences
The following discussion describes the material United States federal income tax consequences of purchasing, holding and disposing of our shares or ADS. This discussion applies only to beneficial owners of our ADS or shares that are “U.S. Holders,” as defined below. This discussion is based on the U.S. Internal Revenue Code of 1986, as amended, or the Code, its legislative history, existing final, temporary and proposed Treasury Regulations, administrative pronouncements by the United States Internal Revenue Service, or IRS, and judicial decisions, all as currently in effect and all of which are subject to change (possibly on a retroactive basis) and to different interpretations.
This discussion does not purport to address all United States federal income tax consequences that may be relevant to a particular holder and you are urged to consult your own tax advisor regarding your specific tax situation. This discussion does not address any aspect of U.S. federal taxation other than U.S. federal income taxation (such as the estate and gift tax or the Medicare tax on net investment income). The discussion applies only to U.S. Holders who hold our shares or ADS as “capital assets” (generally, property held for investment) under the Code and does not address the tax consequences that may be relevant to U.S. Holders in special tax situations including, for example:
· financial institutions or insurance companies;
· tax-exempt organizations;
· broker-dealers;
· traders in securities that elect to mark to market;
· real estate investments trusts, regulated investment companies, partnership or grantor trusts;
· investors whose functional currency is not the United States dollar;
· United States expatriates;
· holders that hold our shares or ADS as part of a hedge, straddle or conversion transaction; or
· holders that own, directly, indirectly, or constructively, 10% or more of the total combined voting power, if any, of our shares or ADS.
Except where specifically described below, this discussion assumes that we are not a passive foreign investment company, or PFIC, for United States federal income tax purposes. Please see the discussion in “Item 10. E, Taxation — Material United States Federal Income Tax Consequences — Passive Foreign Investment Company Rules” below. Further, this discussion does not address the alternative minimum tax consequences of holding our shares or ADS or the indirect consequences to holders of equity interests in partnerships or other entities that own our shares or ADS. In addition, this discussion does not address the state, local and non-U.S. tax consequences of holding our shares or ADS.
You should consult your own tax advisor regarding the United States federal, state, local and non-U.S. income and other tax consequences of purchasing, owning, and disposing of our shares or ADS in your particular circumstances.
You are a “U.S. Holder” if you are a beneficial owner of shares or ADS and you are for United States federal income tax purposes:
· an individual who is a citizen or resident of the United States;
· a corporation, or any other entity taxable as a corporation, created or organized in or under the laws of the United States, any state thereof, or the District of Columbia;
· an estate the income of which is subject to United States federal income tax regardless of its source; or
· a trust if a court within the United States is able to exercise primary supervision over its administration and one or more United States persons have the authority to control all substantial decisions of the trust.
If a partnership holds shares or ADS, the tax treatment of a partner will generally depend upon the status of the partner and upon the activities of the partnership. A prospective investor who is a partner of a partnership holding our shares or ADS should consult its own tax advisor regarding the specific tax consequences of the purchase, ownership and disposition of the shares or ADS.
Ownership of ADS in General
For United States federal income tax purposes, if you are a holder of ADS, you generally will be treated as the owner of the shares represented by such ADS. Deposits and withdrawals of shares by a U.S. Holder in exchange for ADS generally will not result in the realization of gain or loss for United States federal income tax purposes.
The U.S. Treasury has expressed concerns that parties to whom receipts similar to the ADS are released may be taking actions that are inconsistent with the claiming of foreign tax credits by U.S. Holders of ADS and that would also be inconsistent with the claiming of the reduced tax rate described below applicable to dividends received by certain non-corporate U.S. Holders. Accordingly, the analysis of the creditability of Brazilian taxes and the availability of the reduced rate for dividends received by certain non-corporate holders could be affected by actions taken by parties to whom the ADS are released.
Distributions on Shares or ADS
The gross amount of distributions made to you of cash or property with respect to your shares or ADS, before reduction for any Brazilian taxes withheld therefrom, will be includible in your income as dividend income to the extent such distributions are paid out of our current or accumulated earnings and profits as determined under United States federal income tax principles. Such dividends will not be eligible for the dividends received deduction generally allowed to corporate U.S. Holders. Subject to applicable limitations, including holding period limitations, and the discussion above regarding concerns expressed by the U.S. Treasury, dividends paid to non-corporate U.S. Holders of ADS will be taxable at a maximum rate of 20.0%.
If you are a U.S. Holder, and we pay a dividend in Brazilian reais, any such dividend will be included in your gross income in an amount equal to the U.S. dollar value of Brazilian reais on the date of receipt by you or, in the case of ADS, the depositary, regardless of whether or when the payment is in fact converted into U.S. dollars. If the dividend is converted into U.S. dollars on the date of receipt, a U.S. Holder generally should not be required to recognize foreign currency gain or loss in respect of the dividend income.
If you are a U.S. Holder, dividends paid to you with respect to your shares or ADS will be treated as foreign source income, which may be relevant in calculating your foreign tax credit limitation. Subject to certain conditions and limitations, Brazilian tax withheld on dividends may be credited against your U.S. federal income tax liability. Instead of claiming a credit, you may, at your election, deduct such otherwise creditable Brazilian taxes in computing your taxable income, subject to generally applicable limitations under U.S. law. The rules governing foreign tax credits and deductions for non-U.S. taxes are complex and, therefore, you should consult your own tax advisor regarding the applicability of these rules in your particular circumstances.
Sale or Exchange or other Taxable Disposition of Shares or ADS
A U.S. Holder generally will recognize capital gain or loss upon the sale, exchange or other taxable disposition of our shares or ADS measured by the difference between the U.S. dollar value of the amount realized and the U.S. Holder’s adjusted tax basis in the shares or ADS. Any gain or loss will be long-term capital gain or loss if the shares or ADS have been held for more than one year. Long-term capital gains of certain U.S. holders (including individuals) are eligible for reduced rates of United States federal income taxation. The deductibility of capital losses is subject to certain limitations under the Code.
If Brazilian tax is withheld on the sale or other disposition of a share or ADS, the amount realized by a U.S. Holder will include the gross amount of the proceeds of that sale or other disposition before deduction of the Brazilian tax. Capital gain or loss, if any, realized by a U.S. Holder on the sale, exchange or other taxable disposition of a share or ADS generally will be treated as United States source income or loss for United States foreign tax credit purposes. Consequently, in the case of a disposition of a share that is subject to Brazilian tax imposed on the gain (or, in the case of a deposit, in exchange for an ADS or share, as the case may be, that is not registered pursuant to Resolution No. 4,373, on which a Brazilian capital gains tax is imposed), the U.S. Holder may not be able to benefit from the foreign tax credit for that Brazilian tax unless the U.S. Holder can apply the credit against United States federal income tax payable on other income from non-U.S. sources in the appropriate income category. Alternatively, the U.S. Holder may take a deduction for the Brazilian tax if it does not elect to claim a foreign tax credit for any non-U.S. taxes paid during the taxable year.
Passive Foreign Investment Company Rules
In general, a non-U.S. corporation is a PFIC with respect to a U.S. Holder if, for any taxable year in which the U.S. Holder holds stock in the non-U.S. corporation, at least 75% of its gross income is passive income or at least 50% of the value of its assets (determined on the basis of a quarterly average) produce passive income or are held for the production of passive income. For this purpose, passive income generally includes, among other things, dividends, interest, rents, royalties and gains from the disposition of investment assets (subject to various exceptions). Based upon the nature of our current and projected income, assets and activities, we do not believe the shares or ADS were for the preceding taxable year nor do we expect them to be, shares of a PFIC for United States federal income tax purposes. However, the determination of whether the shares or ADS constitute shares of a PFIC is a factual determination made annually and thus may be subject to change. Because these determinations are based on the nature of our income and assets from time to time, as well as certain items that are not directly in our control, such as the value of our shares and ADS and involve the application of complex tax rules the application of which to our business is not always entirely clear, no assurances can be provided that we will not be considered a PFIC for the current or any past or future tax year.
If we are treated as a PFIC for any taxable year during which you are a U.S. Holder, various adverse consequences could apply to you. Neither gains nor dividends would be subject to the reduced tax rates discussed above that are applicable in certain situations. Rather, gain recognized by you on a sale or other disposition of the shares or ADS would be allocated ratably over your period for the shares or ADS. The amounts allocated to the taxable year of the sale or disposition and to any year before we became a PFIC would be taxed as ordinary income. The amount allocated to each other taxable year would be subject to tax at the highest rate in effect for individuals or corporations, as appropriate, and an interest charge would be imposed on such tax as if it had not been paid from the original due date for your tax return for such year. Further, any distribution in respect of shares or ADS in excess of 125 percent of the average of the annual distributions on shares or ADS received by you during the preceding three years or, if shorter, your holding period would be subject to taxation as described above. Certain elections may be available (including a mark to market election) to U.S. persons that may mitigate the adverse consequences resulting from PFIC status. In any case, you would be subject to additional U.S. tax form filing requirements.
Backup Withholding and Information Reporting
In general, dividends on our shares or ADS, and payments of the proceeds of a sale, exchange or other disposition of shares or ADS, paid within the United States or through certain United States-related financial intermediaries to a U.S. Holder are subject to information reporting and may be subject to backup withholding at a current maximum rate of 28% unless the holder: (i) establishes, if required to do so, that it is an exempt recipient; or (ii) in the case of backup withholding, provides an accurate taxpayer identification number and certifies that it is a U.S. person and has not lost its exemption from backup withholding has occurred.
You can credit amounts withheld under these rules against your United States federal income tax liability, or obtain a refund of such amounts that exceed your United States federal income tax liability, provided that the required information is furnished to the IRS.
You should consult your own tax advisors concerning any U.S. reporting requirements that may arise out of your ownership or disposition of ADS or shares in light of your particular circumstances. The penalty for failing to comply with reporting requirements can be significant.
F. Dividends and Paying Agents
Not applicable.
G. Statement by Experts
Not applicable.
H. Documents on Display
Statements contained in this annual report regarding the contents of any contract or other document are complete in all material respects, however, where the contract or other document is an exhibit to this annual report, each of these statements is qualified in all respects by the provisions of the actual contract or other documents.
We are subject to the informational requirements of the Exchange Act applicable to a foreign private issuer. Accordingly, we will be required to file reports and other information with the SEC, including annual reports on Form 20-F and reports on Form 6-K. You may inspect reports and copy reports and other information filed with or furnished to the SEC at the SEC’s Public Reference Room located at 100 F Street, N.E., Washington, D.C. 20549. For further information, call the SEC at 1-800-SEC-0330. In addition, the SEC maintains an internet website that contains filings, reports and other information regarding issuers who, like us, file electronically with the SEC. The address of that website is http://www.sec.gov.
As a foreign private issuer, we are exempt under the Exchange Act from, among other things, the rules prescribing the furnishing and content of proxy statements, and members of our Board of Directors and Board of Executive Officers and our principal shareholders are exempt from reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, as a foreign private issuer, we will not be required under the Exchange Act to file periodic reports and consolidated financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act.
We also file periodic reports and consolidated financial statements with the CVM, located at Rua Sete de Setembro, 111, Rio de Janeiro, Rio de Janeiro 20159-900, Brazil.
I. Subsidiary Information
Not applicable.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The risks inherent in our market sensitive instruments are potential losses that may arise from adverse changes to interest rates and/or foreign exchange rates. We are subject to market risk resulting from changes in interest rates because such changes may affect the cost at which we obtain financing. We are subject to exchange rate risk with respect to our debt denominated in foreign currencies. We are also subject to the risk of volatility in the equity markets due to our investments in our affiliates and investments held at fair value.
Interest Rate Risks
As of December 31, 2016, our total indebtedness was R$45,620 million, of which 63%, or R$28,884 million, was linked to variable interest rates. Our debts are mainly indexed to the following interest rates: (i) CDI (28% of our indebtedness), (ii) TJLP (22% of our indebtedness), (iii) LIBOR (6% of our indebtedness) and (iv) SELIC (4% of our indebtedness).
Exchange Rate Risks
As of December 31, 2016, approximately 27% of our total consolidated indebtedness of R$45,620 million was denominated in foreign currencies. As of December 31, 2016, total consolidated indebtedness denominated in foreign currencies R$11,794 million, or approximately 26% of our total debt was denominated in U.S. dollars.
Financial Hedge Policy
As a defense measure against these exposures we have a financial hedge policy, which has been approved by our Board of Executive Officers on October 30, 2009.
This policy contains a priority ranking, which emphasizes structural solutions by contemplating the natural balance of exposed positions.
Later, operations with other types of financial instruments may also be analyzed. Finally, the transactions with financial derivatives are analyzed, which will only be carried out in a complementary way and with the sole purpose of protecting those assets and liabilities indexed to us and to our subsidiaries which evidence mismatches and which cannot constitute financial leverage or third parties lending operation.
With respect to the interest rate risk, much of the exposure to Libor was mitigated through derivative transactions in 2011 and 2012, and whose residual exposure is being reduced over time. As for the other floating rates to which we are exposed, we perform, in line with our financial hedge policy, ongoing assessments of the risks of existing interest rates in order to ascertain the need to carry out new hedging transactions to mitigate the risks that are deemed relevant. However, there is no expectation that there will be a significant change in our exposure to interest rates.
With respect to the exchange rate risk, we have prioritised over the years the structural solution to mitigate the risk through foreign currency funding (between 2009 and 2011), thus substantially reducing the exchange rate risk to which we were exposed. As a result, the main focus of this risk for us has been having our cash flows denominated in foreign currency. For that purpose, we permanently assess the need to conduct operations to mitigate the exchange rate risks that are deemed relevant. Accordingly, due to the structural solution implemented previously, no significant change in the risk associated with the exchange variation in the year 2017 is expected.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
12.D. American Depositary Shares
Fees payable by the holders of our ADS
J.P. Morgan Chase Bank, N.A. serves as the depositary for both of our common and preferred ADS. ADR holders are required to pay various fees to the depositary, and the depositary may refuse to provide any service for which a fee is assessed until the applicable fee has been paid.
ADR holders are required to pay the depositary: (i) an annual fee of US$0.02 per ADS for administering the ADR program and (ii) amounts in respect of expenses incurred by the depositary or its agents on behalf of ADR holders, including expenses arising from compliance with applicable law, taxes or other governmental charges, facsimile transmission, or conversion of foreign currency into U.S. dollars. In both cases, the depositary may decide in its sole discretion to seek payment by either billing holders or by deducting the fee from one or more cash dividends or other cash distributions.
ADR holders are also required to pay additional fees for certain services provided by the depositary, as set forth in the table below:
Depositary Action |
| Associated fee |
Issuance, delivery, reduction, cancellation or surrender of ADS |
| US$5.00 per 100 ADS |
|
|
|
Any cash distribution to registered ADS holders |
| US$0.02 (or less) per ADS |
|
|
|
Transfer rates (to the extent not prohibited by the rules of the primary stock exchange upon which the ADS are listed) |
| US$1.50 per ADR or ADRs |
Depositary reimbursements
In accordance with the deposit agreement entered between the depositary and us, the depositary reimburses us for certain expenses we incur in connection with the ADR program. From January 1 to December 31, 2016, our depositary bank reimbursed us the gross amount of US$5,556,421.50.
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
Not applicable.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
Not applicable.
ITEM 15. CONTROLS AND PROCEDURES
(a) Disclosure Controls and Procedures
We carried out an evaluation under the supervision of, and with participation of, our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, including those defined in United States Exchange Act Rule 13a-15e, as of the year ended December 31, 2016. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective controls and procedures can only provide reasonable assurance of achieving their control objectives.
As a result of this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of December 31, 2016, and that the design and operation of our disclosure controls and procedures were not effective to provide reasonable assurance that all material information relating to our company was reported as required because material weaknesses in the current operation of our internal control over financial reporting were identified as described below.
(b) Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities and Exchange Act of 1934. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that (a) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (b) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (c) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of the effectiveness of internal control to future periods are subject to the risk that controls may become inadequate because of changes in conditions, and that the degree of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of our internal controls over financial reporting as of December 31, 2016. In 2015, we implemented COSO (2013) Internal Control — Integrated Framework. Based on this assessment, our management concluded that, as of December 31, 2016, our internal control over financial reporting was not effective because material weaknesses existed. A material weakness is a control deficiency, or combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the annual consolidated financial statements will not be prevented or detected on a timely basis. The material weaknesses identified were:
1 — We did not maintain an effective control environment, especifically regarding the lack of timely remedial actions related to previous years;
2 — We did not maintain adequate controls regarding the preparation of the financial statements and related disclosures, including lack of appropriate timing analysis and reconciliations from Amazonas D and Furnas;
3 — We did not maintain effective internal controls regarding the adequate monitoring of the investments in specific purpose entities (SPEs), including failure to identify and monitor the physical and financial execution of the relevant investment projects evaluated under the equity method, lack of technical and financial terms review related to construction contracts before the bid process, adequate analysis of the proposals made by suppliers and lack of evaluation and monitoring of progress and budget of projects; and
4 — We did not fully implement internal controls over the Risk, Corruption Prevention and Compliance Program, considering the requirements of the North American legislation (FCPA) and also of the Brazilian legislation (Law No. 12,846/2013 - anti-corruption law); including an effective whistleblower channel due to inadequate completeness controls.
Remediation of Material Weakness
In order to remedy the material weakness related to the significant number of deficiencies on reporting of financial information that have not been corrected in a timely manner, we strengthened, together with our subsidiaries, the importance of appointing individuals to be in charge of the internal control environment throughout its different business areas and have also set targets for managers of these areas. Additionally, with a view to reducing the existing deficiencies, our companies are promoting actions in corporate governance, risk management and management of internal controls areas. We are currently implementing plans to address these qualitative and quantitative deficiencies. We are restructuring our operational structure, as well as changing our corporate governance process. The strategic plan 2017-2021 focus on five main priorities: ensuing financial sustainability of the company; pursuing operational excellence; strengthening corporate governance; focusing on generation and transmission; and disposing of non-core assets.
To remedy the material weaknesses in internal controls which ensure the review/proper monitoring of the preparation of financial statements and related disclosures, we are implementing a shared service integrating accounts payable, procurement process, contract management which may reduce the risk of not timely identifying accounting adjustments caused by the failure from suppliers to deliver goods and services. Amazonas D is implementing a monitoring system to control fuel consumption for power generation in its thermoelectric plants which may improve the controls of fuel inventory and consumption process.
Efforts to remedy the deficiencies regarding the material weakness related to controls to ensure the proper monitoring of the SPEs investments are currently ongoing, including implementation of integrated SPE management process. We issued a SPE Manual describing and guiding the main practices on how to make and manage new investments. For pre-existing investments, we are performing a gap analysis of the provisions of existing shareholders’ agreements with those described in the SPE Manual to the Board of Directors’ decision.
We have been improving and enhancing our compliance program, in order to remedy the related material weakness, according to the FCPA’s requirements and the Brazilian Anticorruption Law. Throughout 2015 and 2016 we have implemented a series of steps to increase the sophistication and effectiveness of our compliance program.
The “Eletrobras 5 Dimensions Compliance Program” is a company-wide plan that we are developing and implementing in order to comply with international corporate governance standards, laws and regulations, including the U.S. Sarbanes-Oxley Act of 2002, the FCPA, the Brazilian Anticorruption Law, the Law of Government-Controlled Companies (Law No. 13,303/2016), the rules and guidelines issued by the SEC, the CVM, the Brazilian Institute of Corporate Governance (IBGC) and the OECD, among others. A summary of the main issues of our program under implementation is discussed below:
· Fraud and corruption risk assessment will be implemented to the subsidiary, business unit, process and job function levels.
· Reporting Channel: we have set up our own reporting channel that assures anonymity and confidentiality for whistleblowers and other internal reporting. The channel is managed by an Ombudsman and the complaints are handled by different committees depending on their nature (aspects of conduct, ethics and corruption). Monthly reports of management and how complaints are dealt with are issued and submitted to the Fiscal Council (adapted to the Audit Committee functions). We are currently reviewing the process design to receive, treat and answer complaints, seeking to improve its effectiveness by hiring a specialized third party channel and establishing policies for the consequences.
· �� Contractual Provisions / Due Diligence: our contractual arrangements with third parties have compliance provisions intended to comply with Brazilian and North American anti-corruption legislation. We are currently structuring and implementing forms, statements and other due diligence procedures for major third-party groups.
ITEM 15T. CONTROLS AND PROCEDURES
Not applicable.
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
Our board of directors has determined that Luis Felipe Vital Nunes Pereira, a member of our Fiscal Council, is an “audit committee financial expert” as defined by current SEC rules and meets the independence requirements of the SEC and the NYSE listing standards. For a discussion of the role of our Fiscal Council, see “Item 6.C, Board Practices — Fiscal Council.”
The Code of Ethics and Conduct is the main document to guide the actions of our group, as it sets out and reinforces the commitments that we assume with our customers.
Determined to act on the four pillars of governance - transparency, equity, accountability and corporate responsibility - we has been reshaping ourselves to face the new challenges that lie ahead. New legislation on the subject was the main driver for the revision of our Code of Ethics and Conduct, and internally, we created the Compliance Department in 2016, founded on three pillars: risk management, internal controls and corporate integrity.
In 2016, our Code of Ethics was revised to comply with the new laws enacted in Brazil, which focus on ethics and integrity, and:
· Law No. 12,257/2011 (“Access to Information Law”);
· Law No. 12,529/2011 (“Anti-Trust Law”);
· Law No. 12,813/2013 (“Conflicts of Interest Law”);
· Law No. 12,846/2013 (“Clean Company Law”) and Regulatory Decree No. 8,420, dated March 18, 2015;
· Law No. 13,303/2016 (“State-Owned Companies Law”); and
· Normative Instruction MP/CGU No. 01, dated May 10, 2016 (regarding Governance and Risk Management).
The launch of the new version of the Code of Ethics and Conduct took place on December 9, 2016, the International Day against Corruption, as part of the III Week of Ethical Culture and is available on our website at: www.eletrobras.com/instrumentosgestaoepoliticas.
We also created, in 2008, a “whistleblower channel” in order to receive “complaints,” by any person (provided such complaint is directly and monthly reported to the Fiscal Council), regarding any “dishonest or unethical conduct,” “accounting, internal accounting controls, or auditing matters” and any equally confidential and anonymous submissions of “concerns” of the same type by our employees and associates. The “whistleblower channel” can be accessed through our website or by letter sent to our headquarters marked for the attention of our Fiscal Council.
In 2015 we improved our process in order to report all the complaints directly to the Fiscal Council. In 2016 and 2015, respectively, 88 and 30 issues related to fraud and corruption conduct were reported to different channels, being 35 reported through the “whistleblower channel.” None of them had financial impact on our results of operations. We have not granted any implicit or explicit waivers from any provision of our code of ethics since its adoption.
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table sets forth by category of service the total fees for services provided to us by KPMG Auditores Independentes, during the fiscal years ended December 31, 2016 and 2015.
|
| 2016 |
| 2015 |
|
|
| (R$) |
| ||
Audit Fees |
| 46,748,814.22 |
| 16,156,966.56 |
|
Audit-Related Fees |
|
|
|
|
|
Tax Fees |
| — |
| — |
|
All Other Fees |
| — |
| — |
|
Total |
| 46,748,814.22 |
| 16,156,966.56 |
|
Audit Fees
Audit fees consist of the fees paid to KPMG Auditores Independentes and its affiliates, in connection with the audits of our annual consolidated financial statements and internal controls, interim reviews of our quarterly financial information comfort letters, procedures related to the audit of income tax provisions in connection with the audit and the review of our consolidated financial statements.
Audit Related and Tax Fees
No audit-related and tax fees were paid to KPMG Auditores Independentes for the fiscal years ended December 31, 2016, 2015 and 2014.
All Other Fees
No other fees were paid to KPMG Auditores Independentes for the fiscal years ended December 31, 2016, 2015 and 2014.
Fiscal Council Pre-Approval Policies and Procedures
The Fiscal Council recommends to the Board of Directors for approval, the entity to be hired to provide independent audit services to us and our subsidiaries and its compensation, as well as its replacement. The engagement of an independent auditor for non-audit services is subject to previous approval of the audit committee in respect to compliance with independence rules. For more information regarding our Board of Directors and Fiscal Council, see “Item 6.C. Board of Directors Practices.”
ITEM 16D. EXEMPTION FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
We have designated and empowered our Fiscal Council to perform the role of an audit committee pursuant to Rule 10A-3 of the Exchange Act. We are required by both the SEC and the NYSE listed company audit committee rules to comply with Rule 10A-3 of the Exchange Act, which requires that we either establish an audit committee, composed of members of our Board of Directors, that meets specified requirements or designate and empower our Fiscal Council to perform the role of the audit committee in reliance on the exemption set forth in Rule 10A-3(c)(3) of the Exchange Act. We believe that our Fiscal Council satisfies the independence and other requirements of Rule 10A-3 of the Exchange Act, which would apply in the absence of our reliance on the exemption.
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
Not applicable.
ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
Not applicable.
ITEM 16G. CORPORATE GOVERNANCE
See “Item 9.C, Markets — Significant Differences between our Corporate Governance Practices and NYSE Corporate Governance Standards.”
See “Item 18, Financial Statements.”
Please see our consolidated financial statements beginning on page F-1. In 2016, our affiliate CTEEP was a significant associated under Rule 3-09 of Regulation S-X and, accordingly, we will file financial statements for that entity as of and for the year ended December 31, 2016 as an amendment to this annual report. In 2015, none of our affiliated entities was a significant entity under Rule 3-09 of Regulation S-X. In 2014, Madeira Energia S.A. and Energia Sustentável do Brasil Participações S.A. constituted significant entities accounted for under the equity method under Rule 3-09 of Regulation S-X, and, accordingly, we will file financial statements for those entities as of and for the year ended December 31, 2016 as an amendment to this annual report. In addition, we have included beginning on page F-6 the audit reports by other auditors with respect to the financial statements of Madeira Energia S.A., Norte Energia S.A. and CTEEP as of and for the year ended December 31, 2016. These audit reports are referred to in the report of our external auditors, KPMG Auditores Independentes, with respect to our consolidated financial statements as of and for the year ended December 31, 2016.
2.1 Amended and Restated Deposit Agreement dated October 18, 2002 between Centrais Elétricas Brasileiras S.A. — Eletrobras and J.P. Morgan Chase Bank, N.A., incorporated herein by reference from our Registration Statement on Form 20-F, filed July 21, 2008, File No. 001-34129.
2.2 The total amount of long-term debt securities of our company and our subsidiaries under any one instrument does not exceed 10% of the total assets of our company and our subsidiaries on a consolidated basis. We agree to furnish copies of any or all such instruments to the SEC upon request.
3.2 By-Laws of Centrais Elétricas Brasileiras S.A. — Eletrobras (English translation), dated December 23, 2011.
4.1 Itaipu treaty signed by Brazil and Paraguay — Law No. 5,899 of July 5, 1973, incorporated herein by reference from our Registration Statement on Form 20-F, filed July 21, 2008, File No. 001-34129.
8.1 List of subsidiaries.
12.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer of Centrais Elétricas Brasileiras S.A. — Eletrobras.
12.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer of Centrais Elétricas Brasileiras S.A. — Eletrobras.
13.1 Section 906 Certification of Chief Executive Officer of Centrais Elétricas Brasileiras S.A. — Eletrobras.
13.2 Section 906 Certification of Chief Financial Officer of Centrais Elétricas Brasileiras S.A. — Eletrobras.
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
| CENTRAIS ELÉTRICAS BRASILEIRAS S.A. — ELETROBRAS | ||
|
| ||
April 29, 2017 | By: | /s/ Wilson Pinto Ferreira Junior | |
|
| Name: | Wilson Pinto Ferreira Junior |
|
| Title: | Chief Executive Officer |
|
|
| |
| By: | /s/ Armando Casado de Araújo | |
|
| Name: | Armando Casado de Araújo |
|
| Title: | Chief Financial and Investor Relations Officer |
CENTRAIS ELÉTRICAS BRASILEIRAS S.A. — ELETROBRAS
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2016 and 2015, and for each of the years in the three-year period ended December 31, 2016.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
Centrais Elétricas Brasileiras S.A. — Eletrobras
We have audited the accompanying consolidated balance sheets of Centrais Elétricas Brasileiras S.A. — Eletrobras and subsidiaries (the “Company”) as of December 31, 2016 and 2015, and the related consolidated statements of profit and loss, comprehensive income and loss, changes in equity, and cash flows for each of the years in the three-year period ended December 31, 2016. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We did not audit the financial statements of Madeira Energia S.A (a 39.00 percent owned investee Company), Norte Energia S.A (a 49.98 percent owned investee Company) and Companhia Transmissão de Energia Elétrica Paulista — CTEEP (a 36.05 percent owned investee Company). The Company’s investment in Madeira Energia S.A at December 31, 2016 and 2015 was R$ 2,503,260 thousand and R$ 2,896,068 thousand, respectively, and its equity in net loss was R$ 240,708 thousand, net earnings of R$ 7,030 thousand and net loss of R$ 861,144 thousand for the years ended December 31, 2016, 2015 and 2014, respectively, the investment in Norte Energia S.A at December 31, 2016 and 2015 was R$ 5,358,861 thousand and R$ 3,378,325 thousand after consolidating adjustments, and equity in net loss of R$ 18,665 thousand and R$ 23,958 thousand after consolidating adjustments, for the years ended December 31, 2016 and 2015, respectively and the investment in Companhia Transmissão de Energia Elétrica Paulista — CTEEP at December 31, 2016 was R$ 2,592,701 thousand and equity on net earnings was R$1,704,057 thousand for the year ended December 31, 2016, after consolidating adjustments. The financial statements of Madeira Energia S.A., Norte Energia S.A. and Companhia Transmissão de Energia Elétrica Paulista — CTEEP were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for Madeira Energia S.A., Norte Energia S.A. and Companhia Transmissão de Energia Elétrica Paulista — CTEEP is based solely on the reports of the other auditors.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of the other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Centrais Elétricas Brasileiras S.A. — Eletrobras and subsidiaries as of December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2016, in conformity with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
As further described in Note 15 to the consolidated financial statements, the subsidiaries of the distribution segment and the power generation subsidiaries Eletrobras Termonuclear S.A. (Eletronuclear), Companhia de Geração Térmica de Energia Elétrica (CGTEE) and Amazonas Geração e Transmissão de Energia S.A. have continued to incur operating losses and have current liabilities in excess of current assets, and the associates Belo Monte Transmissora de Energia S.A., ESBR Participações S.A., Madeira Energia S.A., Norte Energia S.A., Mata de Santa Genebra Transmissão S.A, and Teles Pires Participações S.A. each have current liabilities in excess of their respective current assets on December 31, 2016. The financial statements of these subsidiaries and associates have been prepared assuming these subsidiaries and associates will continue as a going concern. The Company’s consolidated financial statements to not include any adjustments that might result from the outcome of this uncertainty.
As further described in Notes 4.XI and 30.b.1) to the consolidated financial statements, the Company is a defendant in two class action lawsuits initiated in the United States of America that alleges, among other things, that the Company and the individual defendants knew or should have known about alleged fraud committed against the Company by a cartel of construction firms, as well as bribes and kickbacks allegedly solicited and received by the Company’s employees; that the Company and the individual defendants made material misstatements and omissions regarding the alleged fraud; and that the Company’s stock price declined when the alleged fraud was disclosed. Although no provision has been made in the Company’s consolidated financial statements, the ultimate outcome of these legal proceedings could have a material adverse effect on the Company’s consolidated financial position, results of operations and cash flows in the future. The Company´s net loss for the year ended December 31, 2014 and 2015 was increased by R$ 154,147 thousand and by R$ 4,482 thousand as a result of previously capitalized costs, net of impairment charges and investment on equity method investee which have been written off, representing the estimated amounts linked to unlawful activities that Eletrobras subsidiaries and associate overpaid for the acquisition of property, plant and equipment.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Centrais Elétricas Brasileiras S.A. — Eletrobras’ internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated April 28, 2017 expressed an adverse opinion on the effectiveness of Centrais Elétricas Brasileiras S.A. — Eletrobras’ internal control over financial reporting.
/s/ KPMG Auditores Independentes |
|
KPMG Auditores Independentes |
|
Rio de Janeiro, Brazil
April 28, 2017
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
Centrais Elétricas Brasileiras S.A. - Eletrobras
We have audited Centrais Elétricas Brasileiras S.A. — Eletrobras’ (“Company” or “Eletrobras”) internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Eletrobras’ management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, including the accompanying “Managements Annual Report on Internal Control over Financial Reporting”. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (Unites States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with generally accepted accounting principles. A Company’s internal control over financial reporting includes those policies and procedures that (1) pertain the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will
not be prevented or detected on a timely basis. Material weaknesses related to (i) previous internal control deficiencies remediation; (ii) the financial statement preparation process; (iii) monitoring of the investments in specific purpose entities (SPEs); and (iv) risk, corruption prevention and compliance program monitoring; has been identified and included in management’s assessment. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements of Eletrobras. These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2016 consolidated financial statements, and this report does not affect our report dated April 28, 2017, which expressed an unqualified opinion on those consolidated financial statements.
In our opinion, because of the effects of the aforementioned material weaknesses on the achievement of the objectives of the control criteria, Centrais Elétricas Brasileiras S.A. - Eletrobras has not maintained effective internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
We do not express an opinion or any other form of assurance on management’s statements referring to corrective actions taken after December 31, 2016, relative to the aforementioned material weaknesses in internal control over financial reporting.
/s/ KPMG Auditores Independentes |
|
KPMG Auditores Independentes |
Rio de Janeiro, Brazil
April 28, 2017
To the Board of Directors and Shareholders Madeira Energia S.A. – MESA
We have audited the consolidated balance sheet of Madeira Energia S.A. – MESA and its subsidiary (the “Company”) as of December 31, 2016 and 2015, and the related consolidated statements of operations, comprehensive loss, changes in equity and of cash flows for each of the three years in the period ended December 31, 2016. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the auditing standards generally accepted in the United States of America and in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Madeira Energia S.A. – MESA and its subsidiary as of December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2016 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
/s/ PricewaterhouseCoopers Auditores Independentes |
|
PricewaterhouseCoopers Auditores Independentes |
|
São Paulo - Brazil
April 28, 2017
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of
CTEEP — Companhia de Transmissão de Energia Elétrica Paulista S.A.
We have audited the consolidated statements of financial position of CTEEP — Companhia de Transmissão de Energia Elétrica Paulista S.A. as of December 31, 2016, and the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing 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 control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of CTEEP — Companhia de Transmissão de Energia Elétrica Paulista S.A. as of December 31, 2016 and the consolidated results of its operations and its cash flows for the year then ended, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
ERNST & YOUNG |
|
Auditors Independentes S.S. |
|
CRC-2SP015199/O-6 |
|
|
|
/s/ Marcos Antonio Quintanilha |
|
Marcos Antonio Quintanilha |
|
Accountant CRC-1SP132776/O-3 |
|
São Paulo, Brazil
April 28, 2017
To Board of Directors and Shareholders
Norte Energia S.A.
We have audited the balance sheet of Norte Energia S.A. (the “Company”) as of December 31, 2016 and 2015, and the related statements of income, of comprehensive income, of changes in equity and of cash flows for each of the two years in the period then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the auditing standards generally accepted in the United States of America and in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Norte Energia S.A. at December 31, 2016 and 2015, and the results of its operations and its cash flows for each of the two years in the period then ended in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Brasília - Brazil |
|
April 26, 2017 |
|
|
|
|
|
/s/ PricewaterhouseCoopers Auditores Independentes |
|
PricewaterhouseCoopers Auditores Independentes |
|
CENTRAIS ELÉTRICAS BRASILEIRAS S.A - ELETROBRAS AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2016 AND 2015
( in thousands of reais )
|
| NOTE |
| 12/31/2016 |
| 12/31/2015 |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT |
|
|
|
|
|
|
|
Cash and cash equivalent |
| 5 |
| 679,668 |
| 1,393,973 |
|
Restricted cash |
| 5 |
| 1,681,346 |
| 647,433 |
|
Marketable Securities |
| 6 |
| 5,497,978 |
| 6,842,774 |
|
Accounts Receivable, net |
| 7 |
| 4,402,278 |
| 4,137,501 |
|
Financial assets - concessions and Itaipu |
| 17 |
| 2,337,513 |
| 965,212 |
|
Financing and loans |
| 8 |
| 3,025,938 |
| 3,187,226 |
|
Fuel Consumption Account - CCC |
| 25 |
| 195,966 |
| 195,966 |
|
Dividends Receivables |
| 9 |
| 318,455 |
| 309,360 |
|
Recoverable taxes |
| 10 |
| 1,085,520 |
| 716,651 |
|
Income tax and social contribution |
| 10 |
| 1,086,367 |
| 1,475,598 |
|
Reimbursement rights |
| 11 |
| 1,657,962 |
| 2,265,242 |
|
Inventories |
|
|
| 540,895 |
| 631,669 |
|
Nuclear fuel inventory |
| 12 |
| 455,737 |
| 402,453 |
|
Derivative financial instruments |
| 43 |
| 127,808 |
| 21,307 |
|
Hydrological risk |
| 14 |
| 109,535 |
| 195,830 |
|
Assets held for sale |
| 42 |
| 4,406,213 |
| 4,623,785 |
|
Others |
|
|
| 1,663,473 |
| 1,425,416 |
|
TOTAL CURRENT ASSETS |
|
|
| 29,272,652 |
| 29,437,396 |
|
|
|
|
|
|
|
|
|
NON-CURRENT |
|
|
|
|
|
|
|
LONG-TERM ASSETS |
|
|
|
|
|
|
|
Reimbursement rights |
| 11 |
| 7,507,024 |
| 8,238,140 |
|
Financing and loans |
| 8 |
| 10,158,306 |
| 14,400,394 |
|
Accounts Receivable, net |
| 7 |
| 2,079,025 |
| 1,833,457 |
|
Marketable Securities |
| 6 |
| 247,235 |
| 194,990 |
|
Nuclear fuel inventory |
| 12 |
| 675,269 |
| 578,425 |
|
Recoverable taxes |
| 10 |
| 1,705,414 |
| 2,623,186 |
|
Income tax and social contribution |
| 10 |
| 2,327,866 |
| 3,067,591 |
|
Guarantees and restricted deposits |
|
|
| 6,259,272 |
| 5,079,707 |
|
Fuel Consumption Account - CCC |
| 25 |
| 6,919 |
| 13,331 |
|
Financial assets - Concessions and Itaipu |
| 17 |
| 52,749,546 |
| 28,416,433 |
|
Derivative financial instruments |
| 43 |
| 100,965 |
| 25,004 |
|
Advances for future capital increase |
| 13 |
| 1,617,916 |
| 1,215,532 |
|
Hydrological risk |
| 14 |
| 457,677 |
| 598,161 |
|
Others |
|
|
| 1,228,145 |
| 1,487,335 |
|
|
|
|
| 87,120,579 |
| 67,771,686 |
|
|
|
|
|
|
|
|
|
INVESTMENTS |
| 15 |
|
|
|
|
|
Accounted for-by the equity method |
|
|
| 25,173,611 |
| 20,685,806 |
|
Maintained at fair value |
|
|
| 1,357,923 |
| 1,177,260 |
|
|
|
|
| 26,531,534 |
| 21,863,066 |
|
|
|
|
|
|
|
|
|
FIXED ASSETS, NET |
| 16 |
| 26,812,925 |
| 29,479,479 |
|
|
|
|
|
|
|
|
|
INTANGIBLE ASSETS, NET |
| 18 |
| 761,739 |
| 935,151 |
|
|
|
|
|
|
|
|
|
TOTAL NON-CURRENT ASSETS |
|
|
| 141,226,777 |
| 120,049,383 |
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
|
| 170,499,429 |
| 149,486,779 |
|
The accompanying notes are an integral part of these consolidated financial statements
CENTRAIS ELÉTRICAS BRASILEIRAS S.A - ELETROBRAS AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2016 AND 2015, CONTINUED
( in thousand reais )
|
| NOTE |
| 12/31/2016 |
| 12/31/2015 |
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
CURRENT |
|
|
|
|
|
|
|
Financing and loans |
| 22 |
| 5,833,547 |
| 4,224,448 |
|
Debentures |
| 23 |
| 12,442 |
| 357,226 |
|
Compulsory Loan |
| 24 |
| 48,193 |
| 57,630 |
|
Suppliers |
| 20 |
| 9,659,301 |
| 10,128,507 |
|
Advances from clients |
| 21 |
| 620,781 |
| 648,236 |
|
Taxes payable |
| 26 |
| 1,336,089 |
| 1,556,578 |
|
Income tax and social contribution |
| 26 |
| 606,848 |
| 581,344 |
|
Shareholders’ compensation |
| 28 |
| 462,891 |
| 43,522 |
|
Provisions for Onerous contracts |
| 33 |
| 1,093,678 |
| 9,073 |
|
Payroll |
|
|
| 1,188,149 |
| 1,018,788 |
|
Reimbursement obligations |
| 11 |
| 1,167,503 |
| 396,208 |
|
Post-employment benefits |
| 29 |
| 107,571 |
| 114,861 |
|
Provisions for litigation |
| 30 |
| 1,083,475 |
| 590,725 |
|
Regulatory fees |
| 27 |
| 647,201 |
| 695,400 |
|
Leasing |
| 22 |
| 136,662 |
| 132,972 |
|
Derivatives financial instruments |
| 43 |
| 6,946 |
| 20,608 |
|
Liabilities associated to assets held for sale |
| 42 |
| 5,175,013 |
| 5,575,009 |
|
Others |
|
|
| 1,952,220 |
| 1,948,508 |
|
TOTAL CURRENT LIABILITIES |
|
|
| 31,138,510 |
| 28,099,643 |
|
|
|
|
|
|
|
|
|
NON-CURRENT |
|
|
|
|
|
|
|
Financing and loans |
| 22 |
| 39,786,881 |
| 42,173,812 |
|
Suppliers |
| 20 |
| 9,782,820 |
| 9,449,421 |
|
Debentures |
| 23 |
| 188,933 |
| 205,248 |
|
Advances from clients |
| 21 |
| 592,215 |
| 659,082 |
|
Compulsory Loan |
| 24 |
| 460,940 |
| 466,005 |
|
Asset decomission obligation |
| 31 |
| 1,402,470 |
| 1,201,186 |
|
Fuel Consumption Account - CCC |
| 25 |
| 482,179 |
| 452,948 |
|
Provisions for litigation |
| 30 |
| 19,645,954 |
| 13,556,129 |
|
Post-employment benefits |
| 29 |
| 2,368,077 |
| 1,858,824 |
|
Provisions for Onerous contracts |
| 33 |
| 2,659,305 |
| 1,549,412 |
|
Reimbursement obligations |
| 11 |
| 1,516,313 |
| 2,483,378 |
|
Leasing |
| 43 |
| 1,032,842 |
| 1,119,183 |
|
Concessions payable - use of public property |
|
|
| 63,337 |
| 59,644 |
|
Advances for future capital increase |
| 32 |
| 3,310,409 |
| 219,294 |
|
Derivatives financial instruments |
| 43 |
| 43,685 |
| 78,521 |
|
Regulatory fees |
| 27 |
| 615,253 |
| 462,195 |
|
Taxes payable |
| 26 |
| 1,059,880 |
| 900,309 |
|
Income tax and social contribution |
| 26 |
| 8,305,606 |
| 1,003,796 |
|
Others |
|
|
| 1,978,893 |
| 1,908,156 |
|
TOTAL NON-CURRENT LIABILITIES |
|
|
| 95,295,992 |
| 79,806,543 |
|
|
|
|
|
|
|
|
|
EQUITY |
|
|
|
|
|
|
|
Capital stock |
| 35 |
| 31,305,331 |
| 31,305,331 |
|
Capital reserves |
| 35 |
| 13,867,170 |
| 26,048,342 |
|
Profit reserves |
| 35 |
| 3,018,682 |
| — |
|
Adjustments to equity |
|
|
| 33,261 |
| 39,452 |
|
Accumulated losses |
|
|
| — |
| (12,339,801 | ) |
Accumulated other comprehensive loss |
|
|
| (4,004,625 | ) | (3,113,481 | ) |
Values recognized in OCI classified as assets held for sale |
|
|
| (16,349 | ) | (6,458 | ) |
Equity attributable to owners of the Company |
|
|
| 44,203,470 |
| 41,933,385 |
|
|
|
|
|
|
|
|
|
Non-controlling interests |
|
|
| (138,543 | ) | (352,792 | ) |
TOTAL EQUITY |
|
|
| 44,064,927 |
| 41,580,593 |
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND EQUITY |
|
|
| 170,499,429 |
| 149,486,779 |
|
The accompanying notes are an integral part of these consolidated financial statements
CENTRAIS ELÉTRICAS BRASILEIRAS S.A. - ELETROBRAS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PROFIT AND LOSS FOR THE YEARS ENDING ON DECEMBER 31, 2016, 2015 AND 2014
( in thousands of reais )
|
| NOTE |
| 12/31/2016 |
| 12/31/2015 |
| 12/31/2014 |
| |||
|
|
|
|
|
|
|
|
|
| |||
NET OPERATING REVENUE |
| 37 |
| 60,748,853 |
| 32,588,838 |
| 30,137,807 |
| |||
|
|
|
|
|
|
|
|
|
| |||
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
| |||
Energy purchased for resale |
| 40 |
| (11,264,044 | ) | (10,766,227 | ) | (10,424,699 | ) | |||
Charges upon use of electricity network |
|
|
| (1,805,434 | ) | (1,737,959 | ) | (1,523,379 | ) | |||
Fuel to produce electricity |
|
|
| (759,826 | ) | (1,249,836 | ) | (1,479,633 | ) | |||
Construction |
|
|
| (2,381,630 | ) | (3,237,537 | ) | (2,899,648 | ) | |||
Personnel, supplies and services |
| 39 |
| (10,363,211 | ) | (9,495,417 | ) | (8,485,373 | ) | |||
Remuneration and indemnity |
|
|
| (362,702 | ) | (348,874 | ) | (386,824 | ) | |||
Depreciation |
|
|
| (1,558,387 | ) | (1,417,856 | ) | (1,387,034 | ) | |||
Amortization |
|
|
| (285,398 | ) | (424,744 | ) | (390,262 | ) | |||
Donations and contributions |
|
|
| (219,417 | ) | (215,116 | ) | (251,415 | ) | |||
Operating Charges (Reversals), Net |
| 41 |
| (14,867,952 | ) | (11,586,767 | ) | (4,663,221 | ) | |||
Voluntary Redundancy Plan |
|
|
| — |
| — |
| (219,299 | ) | |||
Investigation Findings |
|
|
| — |
| (15,996 | ) | (195,127 | ) | |||
Others |
|
|
| (1,974,327 | ) | (2,131,954 | ) | (1,675,350 | ) | |||
|
|
|
| (45,842,328 | ) | (42,628,283 | ) | (33,981,264 | ) | |||
|
|
|
|
|
|
|
|
|
| |||
OPERATING PROFIT (LOSS) BEFORE FINANCIAL RESULT |
|
|
| 14,906,525 |
| (10,039,445 | ) | (3,843,457 | ) | |||
|
|
|
|
|
|
|
|
|
| |||
FINANCIAL RESULT |
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
| |||
Financial Revenue |
|
|
|
|
|
|
|
|
| |||
Income from interest, commissions and fees |
|
|
| 1,154,010 |
| 1,128,406 |
| 1,071,107 |
| |||
Income from financial investments |
|
|
| 1,086,578 |
| 1,122,643 |
| 1,020,654 |
| |||
Additional interest on energy |
|
|
| 320,836 |
| 709,404 |
| 323,300 |
| |||
Monetary adjustment gain |
|
|
| 2,549,308 |
| 3,765,236 |
| 841,821 |
| |||
Exchange variation gain |
|
|
| 4,985,602 |
| 10,251,948 |
| 3,293,940 |
| |||
Remuneration for indemnifications — Law 12,783/13 |
|
|
| — |
| 115,407 |
| 1,018,952 |
| |||
Updating regulatory asset |
|
|
| 231,107 |
| 229,608 |
| — |
| |||
Gains on derivatives |
|
|
| 218,714 |
| — |
| 382,614 |
| |||
Other financial income |
|
|
| 677,235 |
| 629,589 |
| 747,433 |
| |||
|
|
|
|
|
|
|
|
|
| |||
Financial expenses |
|
|
|
|
|
|
|
|
| |||
Debt charges |
|
|
| (6,375,836 | ) | (6,340,459 | ) | (3,448,734 | ) | |||
Lease Charges |
|
|
| (303,381 | ) | (273,391 | ) | (279,716 | ) | |||
Charges on shareholders’ funds |
|
|
| (200,857 | ) | (40,511 | ) | (87,047 | ) | |||
Monetary adjustment loss |
|
|
| (4,149,223 | ) | (1,362,380 | ) | (495,680 | ) | |||
Exchange variation loss |
|
|
| (4,848,040 | ) | (10,219,318 | ) | (2,998,387 | ) | |||
Updating regulatory liabilities |
|
|
| (174,485 | ) | (130,502 | ) | — |
| |||
Loss on derivatives |
|
|
| — |
| (221,666 | ) | — |
| |||
Other financial expenses |
|
|
| (1,100,879 | ) | (1,063,039 | ) | (695,632 | ) | |||
|
|
|
| (5,929,311 | ) | (1,699,025 | ) | 694,625 |
| |||
|
|
|
|
|
|
|
|
|
| |||
PROFIT (LOSS) BEFORE RESULTS OF EQUITY INVESTMENTS, TAXES AND SOCIAL CONTRIBUTIONS |
|
|
| 8,977,214 |
| (11,738,470 | ) | (3,148,832 | ) | |||
|
|
|
|
|
|
|
|
|
| |||
RESULTS OF EQUITY METHOD INVESTMENTS |
| 38 |
| 3,205,511 |
| 531,446 |
| (1,308,304 | ) | |||
|
|
|
|
|
|
|
|
|
| |||
PROFIT (LOSS) BEFORE TAXES AND SOCIAL CONTRIBUTIONS |
|
|
| 12,182,725 |
| (11,207,024 | ) | (4,457,135 | ) | |||
|
|
|
|
|
|
|
|
|
| |||
Current income tax and social contribution |
| 26 |
| (619,044 | ) | (546,812 | ) | (82,483 | ) | |||
Deferred income tax and social contribution |
| 26 |
| (7,891,775 | ) | (163,300 | ) | (1,618,035 | ) | |||
TOTAL INCOME TAXES AND SOCIAL CONTRIBUTIONS |
|
|
| (8,510,819 | ) | (710,112 | ) | (1,700,518 | ) | |||
|
|
|
|
|
|
|
|
|
| |||
Net Income (Loss) for year |
|
|
| 3,671,906 |
| (11,917,136 | ) | (6,157,653 | ) | |||
|
|
|
|
|
|
|
|
|
| |||
AMOUNT ATTRIBUTED TO OWNERS OF THE COMPANY |
|
|
| 3,584,529 |
| (11,405,085 | ) | (6,226,206 | ) | |||
AMOUNT ATTRIBUTED TO NON-CONTROLLING INTERESTS |
|
|
| 87,377 |
| (512,051 | ) | 68,553 |
| |||
|
|
|
|
|
|
|
|
|
| |||
PROFIT (LOSS) BASIC PER SHARE |
| 36 |
| R$ | 2.65 |
| R$ | (8.43 | ) | R$ | (4.60 | ) |
PROFIT (LOSS) DILUTED PER SHARE |
| 36 |
| R$ | 2.62 |
| R$ | (8.43 | ) | R$ | (4.60 | ) |
The accompanying notes are an integral part of these consolidated financial statements
CENTRAIS ELÉTRICAS BRASILEIRAS S.A - ELETROBRAS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY AS OF DECEMBER 31, 2016, 2015 AND 2014
( in thousand reais )
|
|
|
|
|
| PROFIT RESERVES |
|
|
| EQUITY |
|
|
| ACCUMULATED |
| EQUITY |
| NON- |
|
|
| ||||||
|
| CAPITAL |
| CAPITAL |
| LEGAL |
| STATUTORY |
| RETAINED |
| UNREALIZED |
| ADDITIONAL |
| ADJUSTMENT |
| ACCUMULATED |
| COMPREHENSIVE |
| OWNERS OF THE |
| CONTROLLING |
| TOTAL |
|
On December 31, 2013 |
| 31,305,331 |
| 26,048,342 |
| 2,233,017 |
| 2,989,936 |
| — |
| — |
| 433,962 |
| 68,368 |
| — |
| (1,696,858 | ) | 61,382,098 |
| 195,198 |
| 61,577,296 |
|
Additional dividends |
|
|
|
|
|
|
|
|
|
|
|
|
| (433,962 | ) |
|
|
|
|
|
| (433,962 | ) |
|
| (433,962 | ) |
Investment acquisition |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
| 43,252 |
| 43,252 |
|
Financial charges - Decreto 2.673/98 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
|
| — |
|
Accumulative conversion adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (58,137 | ) | (58,137 | ) |
|
| (58,137 | ) |
Post-employment benefit adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (407,875 | ) | (407,875 | ) |
|
| (407,875 | ) |
Fair value of available for sale financial instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 77,888 |
| 77,888 |
|
|
| 77,888 |
|
Deferred Income tax and social contribution over other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (26,482 | ) | (26,482 | ) |
|
| (26,482 | ) |
Adjustment of Subsidiary / Associates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (993,232 | ) | (993,232 | ) | 1,946 |
| (991,286 | ) |
Derivative Financial instruments - Hedge |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (11,412 | ) | (11,412 | ) |
|
| (11,412 | ) |
Equity valuation adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (25,421 | ) | 25,421 |
|
|
| — |
|
|
| — |
|
Statutory reserves releases |
|
|
|
|
|
|
| 67,141 |
|
|
|
|
|
|
|
|
| (67,141 | ) |
|
| — |
|
|
| — |
|
Net Income (Loss) for year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (6,226,206 | ) |
|
| (6,226,206 | ) | 68,553 |
| (6,157,653 | ) |
Proposed dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
|
| — |
|
|
| — |
|
Unclaimed compensation to shareholders - Prescribed |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 41,720 |
|
|
| 41,720 |
|
|
| 41,720 |
|
Approval of additional dividends by Annual General Meeting |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
|
| — |
|
|
| — |
|
Statutory reserves losses |
|
|
|
|
|
|
| (3,031,055 | ) |
|
|
|
|
|
|
|
| 3,031,055 |
|
|
| — |
|
|
| — |
|
As of December 31, 2014 |
| 31,305,331 |
| 26,048,342 |
| 2,233,017 |
| 26,022 |
| — |
| — |
| — |
| 42,947 |
| (3,195,151 | ) | (3,116,108 | ) | 53,344,400 |
| 308,949 |
| 53,653,349 |
|
Accumulative conversion adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 67,482 |
| 67,482 |
|
|
| 67,482 |
|
Post-employment benefit adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 247,803 |
| 247,803 |
|
|
| 247,803 |
|
Fair value of financial instruments available for sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (113,241 | ) | (113,241 | ) |
|
| (113,241 | ) |
Deferred Income tax and social contribution over other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 38,502 |
| 38,502 |
|
|
| 38,502 |
|
Adjustment of Subsidiary / Associates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2,415 |
| (243,909 | ) | (241,494 | ) | (149,690 | ) | (391,184 | ) |
Financial instruments - hedge |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (468 | ) | (468 | ) |
|
| (468 | ) |
Equity valuation adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (3,495 | ) | 3,495 |
|
|
| — |
|
|
| — |
|
Net Income (Loss) for year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (11,405,085 | ) |
|
| (11,405,085 | ) | (512,051 | ) | (11,917,136 | ) |
Proposed dividends |
|
|
|
|
|
|
| (26,022 | ) |
|
|
|
|
|
|
|
|
|
|
|
| (26,022 | ) |
|
| (26,022 | ) |
Unclaimed shareholders’ compensation - statute of limitations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 21,508 |
|
|
| 21,508 |
|
|
| 21,508 |
|
Approval of additional dividends by Annual General Meeting |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
|
| — |
|
|
| — |
|
Absorption of losses |
|
|
|
|
| (2,233,017 | ) |
|
|
|
|
|
|
|
|
|
| 2,233,017 |
|
|
| — |
|
|
| — |
|
As of December 31, 2015 |
| 31,305,331 |
| 26,048,342 |
| — |
| — |
| — |
| — |
| — |
| 39,452 |
| (12,339,801 | ) | (3,119,939 | ) | 41,933,385 |
| (352,792 | ) | 41,580,593 |
|
Accumulative conversion adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (32,286 | ) | (32,286 | ) |
|
| (32,286 | ) |
Post-employment benefit adjustments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (178,854 | ) | (178,854 | ) |
|
| (178,854 | ) |
The accompanying notes are an integral part of these consolidated financial statements
CENTRAIS ELÉTRICAS BRASILEIRAS S.A - ELETROBRAS AND SUBSIDIARIESS
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME AND LOSS FOR YEARS ENDING ON DECEMBER 31, 2016, 2015 AND 2014
( in thousands of reais )
|
| 12/31/2016 |
| 12/31/2015 |
| 12/31/2014 |
|
|
|
|
|
|
|
|
|
Profit (loss) in the year |
| 3,671,906 |
| (11,917,136 | ) | (6,157,653 | ) |
|
|
|
|
|
|
|
|
Other comprehensive income (loss) which may not be reclassified to net profit or loss |
|
|
|
|
|
|
|
Foreign currency translation adjustments |
| (32,284 | ) | 121,353 |
| (42,279 | ) |
Actuarial gains and losses |
| (1,143,119 | ) | (236,798 | ) | (971,565 | ) |
Deferred Income tax and social contributions |
| — |
| — |
| (404,332 | ) |
|
|
|
|
|
|
|
|
Other comprehensive income (loss) which may be reclassified to net profit or loss |
|
|
|
|
|
|
|
Cash flow hedge |
| 11,683 |
| (468 | ) | (12,320 | ) |
Deferred Income tax and social contributions |
| — |
| — |
| 309 |
|
Fair value of financial instruments available for sale |
| 165,863 |
| (109,493 | ) | 99,820 |
|
Deferred Income tax and social contributions |
| (56,393 | ) | 37,228 |
| (33,939 | ) |
Comprehensive income of subsidiaries, affiliates and jointly-controlled companies |
| 280,682 |
| 33,383 |
| (464,478 | ) |
Deferred Income tax and social contributions |
| 9,296 |
| 1,274 |
| 411,480 |
|
|
|
|
|
|
|
|
|
Other items in comprehensive loss |
| (764,272 | ) | (153,521 | ) | (7,574,957 | ) |
|
|
|
|
|
|
|
|
Total comprehensive income (loss) of the year |
| 2,143,362 |
| (12,224,178 | ) | (7,574,957 | ) |
|
|
|
|
|
|
|
|
Portion attributable to controlling shareholders owners of the Company |
| 1,929,113 |
| (11,562,437 | ) | (7,643,510 | ) |
Portion attributable to non-controlling shareholders interests |
| 214,249 |
| (661,741 | ) | 68,553 |
|
|
|
|
|
|
|
|
|
|
| 2,143,362 |
| (12,224,178 | ) | (7,574,957 | ) |
The accompanying notes are an integral part of these consolidated financial statements
CENTRAIS ELÉTRICAS BRASILEIRAS S.A - ELETROBRAS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDING ON DECEMBER 31, 2016, 2015 AND 2014
(in thousand reais)
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
| 12/31/2016 |
| 12/31/2015 |
| 12/31/2014 |
|
|
|
|
|
|
|
|
|
|
|
Profit (Loss) before income tax and social contribution |
|
|
| 12,182,725 |
| (11,207,024 | ) | (4,457,135 | ) |
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net profit (loss) to net cash provided by operating activities : |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
| 1,843,785 |
| 1,842,600 |
| 1,777,296 |
|
Net monetary variations |
|
|
| 1,599,915 |
| (914,656 | ) | (1,329,742 | ) |
Net exchange variations |
|
|
| (137,562 | ) | 863,808 |
| 291,510 |
|
Financial charges |
|
|
| 5,525,207 |
| 2,001,687 |
| (109,124 | ) |
Income from financial assets |
| 37 |
| (29,406,261 | ) | (838,087 | ) | (714,409 | ) |
Result of equity method investees |
| 38 |
| (3,205,511 | ) | (531,446 | ) | 1,308,304 |
|
Bad debt expense (reversals) |
| 41 |
| 351,673 |
| 658,679 |
| (122,662 | ) |
Provisions for litigation |
| 41 |
| 3,994,158 |
| 2,932,120 |
| 7,797,129 |
|
Impairment of assets |
| 41 |
| 5,681,017 |
| 5,830,959 |
| 16,903 |
|
Provisions (reversals) onerous contracts |
| 41 |
| 2,194,498 |
| 366,477 |
| (1,800,401 | ) |
Provision for voluntary redundancy plan |
| 41 |
| — |
| — |
| 219,299 |
|
Impairment (reversal) for investment losses |
| 41 |
| 1,479,088 |
| 489,753 |
| (1,414,171 | ) |
Reversal of impairment loss of financial assets |
| 41 |
| — |
| — |
| (791,868 | ) |
Impairment losses on fixed asset |
| 41 |
|
|
| — |
| 235,064 |
|
Provision for environmental |
| 41 |
|
|
| — |
| 104,904 |
|
Provision (reversal) hydrological risk - GSF |
| 41 |
| (451,340 | ) | 451,340 |
| — |
|
Provision CCC - ANEEL |
| 41 |
| 741,623 |
| — |
| — |
|
Fees on the global reversal reserve |
|
|
| 220,420 |
| 253,348 |
| 308,167 |
|
Adjustment fair value / market value |
|
|
| 28,864 |
| 157,066 |
| 170,509 |
|
Minor shareholders’ share |
|
|
| (132,389 | ) | 775,835 |
| (103,868 | ) |
Interest on resources from shareholders’ |
|
|
| 200,857 |
| 40,511 |
| 87,047 |
|
Derivatives |
|
|
| (218,714 | ) | 221,666 |
| (392,354 | ) |
Investigation Findings |
|
|
| — |
| 15,996 |
| 195,127 |
|
Others |
|
|
| 732,229 |
| 333,761 |
| 513,693 |
|
|
|
|
| (8,958,443 | ) | 14,951,417 |
| 6,246,352 |
|
|
|
|
|
|
|
|
|
|
|
Changes in: |
|
|
|
|
|
|
|
|
|
Accounts receivables |
|
|
| (583,469 | ) | 130,905 |
| (441,152 | ) |
Marketable securities |
|
|
| 1,292,551 |
| (2,886,138 | ) | 2,366,099 |
|
Reimbursement rights |
| 11 |
| 1,338,396 |
| (700,320 | ) | 2,991,052 |
|
Inventories |
| 12 |
| 90,774 |
| (119,055 | ) | 133,229 |
|
Nuclear fuel inventory |
|
|
| (150,128 | ) | 20,930 |
| (150,590 | ) |
Financial asset - Itaipu and public service concessions |
|
|
| 1,036,633 |
| 1,886,785 |
| 136,864 |
|
Assets held for sale |
|
|
| 217,572 |
| (4,623,785 | ) | — |
|
Hydrological risk |
|
|
| 226,779 |
| (342,651 | ) | — |
|
Others |
|
|
| 215,588 |
| 357,948 |
| (317,166 | ) |
|
|
|
| 3,684,696 |
| (6,275,381 | ) | 4,718,336 |
|
|
|
|
|
|
|
|
|
|
|
Suppliers |
|
|
| (156,294 | ) | 3,094,034 |
| 7,669,536 |
|
Advances from clients |
| 21 |
| (61,195 | ) | (57,349 | ) | (53,898 | ) |
Leasing |
|
|
| (82,651 | ) | (74,506 | ) | (67,166 | ) |
Payroll |
|
|
| 80,116 |
| (165,866 | ) | (153,105 | ) |
Reimbursement obligations |
| 11 |
| (888,864 | ) | 2,491 |
| (7,534,600 | ) |
Regulatory fees |
| 27 |
| 104,859 |
| (382,423 | ) | 29,997 |
|
Liabilities associated to assets held for sale |
|
|
| (399,996 | ) | 5,575,009 |
| — |
|
Others |
|
|
| 71,559 |
| 1,152,395 |
| (383,602 | ) |
|
|
|
| (1,332,466 | ) | 9,143,785 |
| (492,838 | ) |
Cash generated from operations |
|
|
| 5,576,512 |
| 6,612,797 |
| 6,014,715 |
|
|
|
|
|
|
|
|
|
|
|
Payment of finacial charges |
|
|
| (3,766,612 | ) | (2,805,404 | ) | (1,222,341 | ) |
Payment of global reverse reserve charges |
|
|
| (138,869 | ) | (952,355 | ) | (216,209 | ) |
Amounts received from allowed annual revenue |
|
|
| 1,226,501 |
| 965,764 |
| 703,266 |
|
Receipt of financial asset compensation |
|
|
| — |
| 4,027,661 |
| 2,773,092 |
|
Receipt of financial charges |
|
|
| 1,122,490 |
| 1,113,278 |
| 172,000 |
|
Payment of income taxes and social contributions |
|
|
| (1,229,862 | ) | (610,223 | ) | (667,150 | ) |
Income received from investment in equity securities |
|
|
| 694,003 |
| 412,874 |
| 106,232 |
|
Additional pention payments |
|
|
| (229,766 | ) | (201,469 | ) | (387,296 | ) |
Payment of legal provisions |
| 30 |
| (739,361 | ) | (904,505 | ) | (1,177,462 | ) |
Judicial deposits |
|
|
| (626,298 | ) | (677,944 | ) | (906,386 | ) |
Net cash provided by operating activities |
|
|
| 1,888,738 |
| 6,980,474 |
| 5,192,461 |
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and financing |
|
|
| 3,638,561 |
| 7,543,513 |
| 7,410,882 |
|
Payment of loans and financing - principal |
|
|
| (4,543,612 | ) | (5,381,995 | ) | (3,238,117 | ) |
Payment of shareholders remuneration |
|
|
| (5,790 | ) | (23,056 | ) | (814,993 | ) |
Payment of refinancing tax and contributions - principal |
|
|
| (132,879 | ) | (117,058 | ) | (103,785 | ) |
Advances for future capital increase from shareholders |
|
|
| 2,906,180 |
| — |
| — |
|
Global Reversion Reserve Resources |
|
|
| 1,007,112 |
| — |
| — |
|
Others |
|
|
| 1,191 |
| (2,431 | ) | 49 |
|
Net cash provided by financing activities |
|
|
| 2,870,763 |
| 2,018,973 |
| 3,254,036 |
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTMENT ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and financing - receipt |
|
|
| (242,154 | ) | (751,524 | ) | (255,379 | ) |
Loans and financing - payment |
|
|
| 2,398,790 |
| 2,539,101 |
| 506,264 |
|
Acquisition of fixed assets |
|
|
| (1,691,089 | ) | (4,139,891 | ) | (2,801,858 | ) |
Acquisition of intangible assets |
|
|
| (79,076 | ) | (384,307 | ) | (117,046 | ) |
Acquisition of concession assets |
|
|
| (1,910,773 | ) | (3,153,701 | ) | (3,262,535 | ) |
Acquisition /capital increase in subsidiary |
|
|
| (3,272,685 | ) | (2,433,066 | ) | (3,903,911 | ) |
Advances for future capital increases |
|
|
| (622,688 | ) | (737,631 | ) | (906,024 | ) |
Net cash flow of subsidiary acquisition |
|
|
| — |
| — |
| 159,703 |
|
Others |
|
|
| (54,131 | ) | 48,467 |
| (56,216 | ) |
Net cash used in investment activities |
|
|
| (5,473,806 | ) | (9,012,552 | ) | (10,637,002 | ) |
|
|
|
|
|
|
|
|
|
|
Net decrese in cash and cash equivalents for the year |
|
|
| (714,305 | ) | (13,105 | ) | (2,190,505 | ) |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at the beginning of the year |
| 5 |
| 1,393,973 |
| 1,407,078 |
| 3,597,583 |
|
Cash and cash equivalents at the end of the year |
| 5 |
| 679,668 |
| 1,393,973 |
| 1,407,078 |
|
The accompanying notes are an integral part of these consolidated financial statements
CENTRAIS ELÉTRICAS BRASILEIRAS S.A.
Eletrobras
(Publicly Company)
CNPJ 00.001.180/0001-26
Notes to the consolidated financial statements for the years ending
December 31, 2016, 2015 and 2014
(In thousands of reais)
NOTE 1 - OPERATIONAL CONTEXT
Centrais Elétricas Brasileiras S.A. (Eletrobras or the Company) is a publicly traded company, headquartered in Brasília - DF - Setor Comercial Norte, Quadra 6, Conjunto A, Bloco A — Ed. Venâncio 3000, Asa Norte, registered with the Brazilian Securities Commission (CVM) and the Securities and Exchange Commission (SEC), with stock traded on the Exchanges of São Paulo (BOVESPA) in Brazil, Madrid (LATIBEX) in Spain, and New York (NYSE) in the United States of America. The Company is a joint stock company controlled by the Federal Government. Its has as its corporate objective the performance of studies, projects, construction and operation of generating plants, transmission lines and electricity distribution, as well as the conclusion of acts of commerce arising out of these activities. Its has as its objective, in addition, to provide financing, to provide guarantees in Brazil and abroad, to the public service companies ofelectricity and that are under its control and in favor of technical-scientific research entities; to promote and support research of interest to the electricity sector, in particularactivities of generation, transmission and distribution, as well as to conduct studies of the utilization of water catchment areas for multiple purposes; to contribute to the training of the technical personnel required by the Brazilian electricity sector, as well as in the preparation of skilled workers through specialized courses and it may also grant aid to educational institutions of the country or scholarships abroad, and makingagreements with entities that collaborate in the training of specialized technical personnel; to collaborate, technically and administratively, with the companies in relation to which it participates in shareholding and with the Ministry of Mines and Energy.
The Company performs the function of holding, managing investments in corporate participations, holding a controlling share interest in six direct companies of generation and/or transmission of electric energy, as listed below:
· Furnas Centrais Elétricas S.A. (FURNAS);
· Centrais Elétricas do Norte do Brasil S.A. (ELETRONORTE);
· Companhia Hidro Elétrica do São Francisco (CHESF);
· ELETROSUL Centrais Elétricas S.A.;
· Eletrobras Termonuclear S.A. (ELETRONUCLEAR); and
· Companhia de Geração Térmica de Energia Elétrica (CGTEE).
Beyond the control of generation and/or transmission of electric energy companies, as listed above, the Company holds a direct controlling interest in seven electricity distribution companies:
· Boa Vista Energia S.A. (Boa Vista);
· Companhia de Eletricidade do Acre (Eletroacre);
· Centrais Elétricas de Rondônia (Ceron);
· Companhia Energética de Alagoas (Ceal);
· Companhia Energética do Piauí (Cepisa);
· CELG Distribuição S.A. (CELG D); and
· Amazonas Distribuidora de Energia S.A. (Amazonas D).
On December 31, 2015, the Company classified the assets and liabilities of the subsidiary CELG D as an asset held for sale, as the Company was committed with the sale of the controlling interest held in that subsidiary, which was confirmed in a privatization auction on November 30, 2016. This sale was completed on February 14, 2017, when the CELG D Stock Purchase Agreement was signed by and between Eletrobras, Companhia Celg de Participações (CELGPAR), and ENEL BRASIL S/A, according to the schedule established . More information is available in Note 42.
On July 22, 2016, during the 165th General Extraordinary Meeting, it was deliberated not to renew the concessions of the electricity distribution subsidiaries of Eletrobras Group. During that General Extraordinary Meeting, it was deliberated to transfer the majority control, by December 31, 2017, of Eletrobras distribution companies, provided that prior to the transfer of the distribution company to its new owner, the distribution company receives from the Federal Government or through tariffs all resources and remuneration necessary to operate, maintain, and make investments relating to the public utility services of each distribution company. (See Note 2)
On July 1, 2015, the subsidiary Amazonas Energia started in the unbundling process, where electricity generation and transmission activities, until then provided by Amazonas Distribuidora, were separated from its distribution activity. Thus, a new company was created in Eletrobras, named Amazonas Geração e Transmissão de Energia S.A. (“Amazonas GT”), under direct control of Amazonas D. The second phase of the unbundling process, which is ongoing, will conclude the corporate restructuring.
The Company still holds majority control of Eletrobras Participações S.A. (Eletropar). In addition, it holds equity interests in Itaipu Binacional (Itaipu) (through a system of joint control as under the International Treaty signed by the Governments of Brazil and Paraguay), Inambari Geração de Energia S.A., and Rouar S.A. (through a system of joint control with the state-owned Uruguayan company Usinas y Transmisiones Eléctricas de Uruguay [UTE]).
The Company has is an indirect controller or participates in a minority role directly or indirectly in a number of other companies in the segments of generation, transmission, and distribution of electricity (see Note 15).
The commercialization of generated energy is based on two distinct market environments, being one regulated (energy destined for distribution concessionaires) and another characterized by freely contracted agreements (free market). Law No. 10,848 of March 15, 2004, provides differentiation between energy coming from new ventures and existing companies, determining the realization of separate auctions for each of these markets.
The Company is authorized, directly or through its associates or subsidiaries, to associate itself, with or without contribution of resources, to establish business consortia or participation in companies, with or without a controlling power abroad, intended directly or indirectly for the exploration of production or transmission or distribution of electricity.
The Company has been responsible, in addition, for sectoral resource management, represented by the Global Reversal Reserve (or RGR), Energy Development Account (CDE), and Fuel Consumption Account (CCC). These funds finance programs of the Federal Government for universalization of access to electricity, public lighting efficiency, incentives for alternative sources of electrical energy, electrical energy conservation and the purchase of fossil fuels used in isolated systems of electric power generation, whose financial movements do not affect the results of the Company (except for administrative fees in certain Funds).
Provisional Measure No. 735 of June 23, 2016 established that the activities relating to the management and administration of the sector funds Global Reversal Reserve (RGR), Energy Development Account (CDE), and Fuel Consumption Account (CCC), for which Eletrobras has been responsible up until now, are to be transferred to the Electricity Trading Chamber (CCEE). On November 17, 2016, this provisional measure was converted into Law 13,360, establishing that by April 30, 2017, the activities relating to the management and administration of these funds will be transferred to the Electricity Trading Chamber (CCEE).
With the transfer of these activities to the CCEE, Eletrobras will continue to dedicate itself, with more exclusive focus, to its electricity generation, transmission and distribution, and commercialization businesses, in adherence to its strategic vision of acting in energy markets in a comprehensive, profitable, and sustainable manner.
The Company also acts as marketing agent of electric power for Itaipu Binacional and for the agents participating in the Incentive Program for Alternate Sources of Electrical Energy (PROINFA) and the National Electricity Conservation Program (PROCEL).
The issuance of these consolidated financial statements was authorized by the Board of Directors, on April 28, 2017.
NOTE 2 - PUBLIC SERVICE ELECTRIC POWER CONCESSIONS
Eletrobras, through its subsidiaries and Itaipu, owns 46.908 GW* of installed capacity, 70,148 thousand kilometers* of transmission lines and seven power distributors that serve approximately 7 million* consumers.
The Company, through its subsidiaries or minority interest investees, holds various public service electric power concessions, for which the details, installed capacity and expiration dates are listed below:
(*) Information not audited by the independent auditors.
I — Concessions under O&M — renewed - Law 12,783/13
· Electric power generation and authorization
Concessions under O&M
Concessions/Permits |
| Location |
| Installed |
| Expiration |
|
|
|
|
|
|
|
UHE Paulo Afonso I |
| BA |
| 180 |
| 12/31/2042 |
UHE Paulo Afonso II |
| BA |
| 443 |
| 12/31/2042 |
UHE Paulo Afonso III |
| BA |
| 794 |
| 12/31/2042 |
UHE Paulo Afonso IV |
| BA |
| 2,462 |
| 12/31/2042 |
UHE Apolônio Sales |
| BA |
| 400 |
| 12/31/2042 |
UHE Luiz Gonzaga (Itaparica) |
| BA |
| 1,480 |
| 12/31/2042 |
UHE Xingó |
| SE |
| 3,162 |
| 12/31/2042 |
UHE Furnas |
| MG |
| 1,216 |
| 12/31/2042 |
UHE Luiz Carlos Barreto de Carvalho |
| SP / MG |
| 1,050 |
| 12/31/2042 |
UHE Marimbondo |
| SP / MG |
| 1,440 |
| 12/31/2042 |
UHE Porto Colômbia |
| SP / MG |
| 320 |
| 12/31/2042 |
UHE Funil |
| MG |
| 216 |
| 12/31/2042 |
UHE Corumbá I |
| GO |
| 375 |
| 12/31/2042 |
UHE Serra da Mesa |
| GO |
| 1,275 |
| 11/12/2039 |
UHE Funil |
| BA |
| 30 |
| 12/31/2042 |
UHE Pedra |
| BA |
| 20 |
| 12/31/2042 |
UHE Boa Esperança |
| PI |
| 237 |
| 12/31/2042 |
UHE Coaracy Nunes |
| AP |
| 78 |
| 12/31/2042 |
*Information not audited by the independent auditors
· Electric Power ransmission
Contract |
| Holder |
| Period (years) |
| Expirations |
|
|
|
|
|
|
|
057/2001 |
| Eletrosul |
| 30 |
| 12/31/2042 |
058/2001 |
| Eletronorte |
| 30 |
| 12/31/2042 |
061/2001 |
| Chesf |
| 30 |
| 12/31/2042 |
062/2001 |
| Furnas |
| 30 |
| 12/31/2042 |
(*) Not audited by independent auditors.
II – Main Exploitation Concessions
· Electric power generation and authorization
Exploitation Concessions - GENERATION
Concessions/Permits |
| Location |
| Installed |
| Concession |
|
UHE Sobradinho |
| BA |
| 1050.30 |
| 2022 |
|
UTE Camaçari |
| BA |
| 346.80 |
| 2027 |
|
UHE Belo Monte (12) |
| PA |
| 11233.10 |
| 2045 |
|
UHE Tucuruí |
| PA |
| 8535 |
| 2024 |
|
UHE Samuel |
| RO |
| 216.75 |
| 2029 |
|
UTE Rio Madeira |
| RO |
| 119.35 |
| 2018 |
|
UTE Santana |
| AP |
| 177.74 |
| 2019 |
|
UTE Santarém |
| PA |
| 14.76 |
| 2034 |
|
UTE Electron (7) |
| AM |
| 121.10 |
| 2020 |
|
UHE Dardanelos |
| MT |
| 261 |
| 2042 |
|
UHE Mauá |
| PR |
| 177.90 |
| 2042 |
|
UHE Jirau (1) |
| RO |
| 3750 |
| 2043 |
|
UTE Presidente Médici — Candiota I and II (2) |
| RS |
| 446 |
| 2015 |
|
UTE Candiota III |
| RS |
| 350 |
| 2041 |
|
UTE Tabatinga (13) |
| AM |
| 316.40 |
| 2016 |
|
UTE Belem de Simões (13) |
| AM |
| 316.40 |
| 2016 |
|
UHE Balbina |
| AM |
| 249.75 |
| 2027 |
|
UHE Aparecida |
| AM |
| 282.50 |
| 2020 |
|
UTE Mauá |
| AM |
| 409.50 |
| 2020 |
|
UTE Santa Cruz (6) |
| RJ |
| 500 |
| 2015 |
|
UHE Mascarenhas de Moraes |
| MG |
| 476 |
| 2023 |
|
UHE Itumbiara |
| MG / GO |
| 2082 |
| 2020 |
|
UHE Manso |
| MT |
| 212 |
| 2035 |
|
UHE Simplício/Anta |
| RJ / MG |
| 305.70 |
| 2041 |
|
UHE Peixe Angical |
| TO |
| 498.75 |
| 2036 |
|
UHE Baguari (11) |
| MG |
| 140 |
| 2041 |
|
UHE Foz do Chapecó |
| Uruguay |
| 855 |
| 2036 |
|
UTN Angra I |
| RJ |
| 640 |
| 2024 |
|
UTN Angra II |
| RJ |
| 1350 |
| 2041 |
|
UTN Angra III |
| RJ |
| 1405 |
| 40 years |
|
UHE Piloto (5) |
| BA |
| 2 |
| 2015 |
|
UHE Araras (5) |
| CE |
| 4 |
| 2015 |
|
UHE Curemas |
| PB |
| 3.52 |
| 2024 |
|
EOL São Pedro do Lago |
| BA |
| 30 |
| 2046 |
|
EOL Pedra Branca |
| BA |
| 30 |
| 2046 |
|
EOL Sete Gameleiras |
| BA |
| 30 |
| 2046 |
|
EOL Caiçara I |
| RN |
| 27 |
| 2047 |
|
EOL Junco I |
| RN |
| 24 |
| 2047 |
|
EOL Junco II |
| RN |
| 24 |
| 2047 |
|
EOL Caiçara II |
| RN |
| 18 |
| 2047 |
|
EOL Casa Nova |
| BA |
| 180 |
| 2043 |
|
EOL Casa Nova II |
| BA |
| 28 |
| 2049 |
|
Exploitation Concessions - GENERATION
Concessions/Permits |
| Location |
| Installed |
| Concession |
|
EOL Casa Nova III |
| BA |
| 24 |
| 2049 |
|
EOL Baraúnas I |
| BA |
| 32.90 |
| 2049 |
|
EOL Morro Branco I |
| BA |
| 32.90 |
| 2049 |
|
EOL Mussambê |
| BA |
| 32.90 |
| 2049 |
|
EOL Santa Joana XI |
| PI |
| 29.60 |
| 2049 |
|
EOL Santa Joana XVI |
| PI |
| 28.90 |
| 2049 |
|
EOL Santa Joana X |
| PI |
| 29.60 |
| 2049 |
|
EOL Santa Joana XIII |
| PI |
| 29.60 |
| 2049 |
|
EOL Santa Joana XII |
| PI |
| 28.90 |
| 2049 |
|
EOL Santa Joana XV |
| PI |
| 28.90 |
| 2049 |
|
EOL Santa Joana IX |
| PI |
| 29.60 |
| 2049 |
|
EOL Acauã Energia |
| BA |
| 12 |
| 2049 |
|
EOL Arapapá Energia |
| BA |
| 10 |
| 2049 |
|
EOL Angical 2 |
| BA |
| 14 |
| 2049 |
|
EOL Teiú 2 |
| BA |
| 14 |
| 2049 |
|
EOL Caititú 2 |
| BA |
| 14 |
| 2049 |
|
EOL Carcará |
| BA |
| 10 |
| 2049 |
|
EOL Corrupião 3 |
| BA |
| 14 |
| 2049 |
|
EOL Caititú 3 |
| BA |
| 14 |
| 2049 |
|
EOL Papagaio |
| BA |
| 18 |
| 2049 |
|
EOL Coqueirinho 2 |
| BA |
| 20 |
| 2049 |
|
EOL Santa Joana IV |
| PI |
| 27.20 |
| 2049 |
|
EOL Serra das Vacas I |
| PE |
| 23.92 |
| 2049 |
|
EOL Santa Joana V |
| PI |
| 28.90 |
| 2049 |
|
EOL Serra das Vacas II |
| PE |
| 22.30 |
| 2049 |
|
EOL Serra das Vacas III |
| PE |
| 22.24 |
| 2049 |
|
EOL Serra das Vacas IV |
| PE |
| 22.30 |
| 2049 |
|
EOL Santa Joana III |
| PI |
| 29.60 |
| 2049 |
|
EOL Santa Joana I |
| PI |
| 28.90 |
| 2049 |
|
EOL Santo Augusto IV |
| PI |
| 28.90 |
| 2049 |
|
EOL Santa Joana VII |
| PI |
| 28.90 |
| 2049 |
|
EOL Tamanduá Mirim 2 |
| BA |
| 24.00 |
| 2049 |
|
EOL Banda de Couro |
| BA |
| 32.90 |
| 2049 |
|
EOL Baraúnas II |
| BA |
| 25.90 |
| 2049 |
|
UHE CuruáUna |
| PA |
| 30.30 |
| 2028 |
|
UTE Rio Acre |
| AC |
| 45.49 |
| 2025 |
|
UTE Rio Branco I |
| AC |
| 18.65 |
| 2020 |
|
UTE Rio Branco II |
| AC |
| 32.75 |
| 2020 |
|
UTE Senador Arnon Afonso Farias |
| RR |
| 85.99 |
| 2024 |
|
UTE Serra do Navio |
| SE |
| 23.30 |
| 2037 |
|
EOL Miassaba 3 |
| RN |
| 68.47 |
| 2045 |
|
EOL Rei dos Ventos 3 |
| RN |
| 60.12 |
| 2045 |
|
UHE Passo São João |
| RS |
| 77 |
| 2041 |
|
UHE São Domingos |
| MS |
| 48 |
| 2037 |
|
PCH Barra do Rio Chapéu |
| SC |
| 15.20 |
| 2034 |
|
Exploitation Concessions - GENERATION
Concessions/Permits |
| Location |
| Installed |
| Concession |
|
PCH João Borges |
| SC |
| 19 |
| 2035 |
|
PCH Coxilha Rica (4) |
| SC |
| 18 |
| 2042 |
|
PCH Santo Cristo (3) |
| SC |
| 19.50 |
| 2042 |
|
EOL Capão do Inglês |
| RS |
| 10 |
| 2049 |
|
EOL Coxilha Seca |
| RS |
| 30 |
| 2049 |
|
EOL Galpões |
| RS |
| 8 |
| 2049 |
|
EOL Chuí I |
| RS |
| 24 |
| 2047 |
|
EOL Chuí II |
| RS |
| 22 |
| 2047 |
|
EOL Chuí IV |
| RS |
| 22 |
| 2047 |
|
EOL Chuí V |
| RS |
| 30 |
| 2047 |
|
EOL Chuí VI |
| RS |
| 24 |
| 2047 |
|
EOL Chuí VII |
| RS |
| 22 |
| 2047 |
|
EOL Chuí 09 |
| RS |
| 17.90 |
| 2049 |
|
EOL Cerro Chato IV (10) |
| RS |
| 10 |
| 2047 |
|
EOL Cerro Chato V (10) |
| RS |
| 12 |
| 2047 |
|
EOL Cerro Chato VI (10) |
| RS |
| 24 |
| 2047 |
|
EOL Cerro dos trindades (10) |
| RS |
| 8 |
| 2047 |
|
EOL Ibirapuitã |
| RS |
| 24 |
| 2047 |
|
EOL Verace 24 |
| RS |
| 19.70 |
| 2049 |
|
EOL Verace 25 |
| RS |
| 7.20 |
| 2049 |
|
EOL Verace 26 |
| RS |
| 14.30 |
| 2049 |
|
EOL Verace 27 |
| RS |
| 16.10 |
| 2049 |
|
EOL Verace 28 |
| RS |
| 12.50 |
| 2049 |
|
EOL Verace 29 |
| RS |
| 17.90 |
| 2049 |
|
EOL Verace 30 |
| RS |
| 17.90 |
| 2049 |
|
EOL Verace 31 |
| RS |
| 9 |
| 2049 |
|
EOL Verace 34 |
| RS |
| 14.30 |
| 2049 |
|
EOL Verace 35 |
| RS |
| 12.50 |
| 2049 |
|
EOL Verace 36 |
| RS |
| 21.50 |
| 2049 |
|
EOL Geribatu I |
| RS |
| 20 |
| 2047 |
|
EOL Geribatu II |
| RS |
| 20 |
| 2047 |
|
EOL Geribatu III |
| RS |
| 26 |
| 2047 |
|
EOL Geribatu IV |
| RS |
| 30 |
| 2047 |
|
EOL Geribatu V |
| RS |
| 30 |
| 2047 |
|
EOL Geribatu VI |
| RS |
| 18 |
| 2047 |
|
EOL Geribatu VII |
| RS |
| 30 |
| 2047 |
|
EOL Geribatu VIII |
| RS |
| 26 |
| 2047 |
|
EOL Geribatu IX |
| RS |
| 30 |
| 2047 |
|
EOL Geribatu X |
| RS |
| 28 |
| 2047 |
|
Megawatt Solar |
| SC |
| 0.93 |
| — |
|
EOL Cerro Chato I |
| RS |
| 30 |
| 2045 |
|
EOL Cerro Chato II |
| RS |
| 30 |
| 2045 |
|
EOL Cerro Chato III |
| RS |
| 30 |
| 2045 |
|
UTE São Jerônimo (7) |
| RS |
| 20 |
| 2015 |
|
UTE Nutepa (7) |
| RS |
| 24 |
| 2015 |
|
Exploitation Concessions - GENERATION
Concessions/Permits |
| Location |
| Installed |
| Concession |
|
UTE Cidade Nova (7) |
| AM |
| 29.70 |
| 2015 |
|
UTE Iranduba |
| AM |
| 50 |
| 2020 |
|
UTE Distrito (7) |
| AM |
| 124.70 |
| 2015 |
|
UTE São José |
| AM |
| 50 |
| 2017 |
|
UTE Flores |
| AM |
| 95.40 |
| 2017 |
|
UTE Roberto Silveira |
| RJ |
| 30 |
| 2027 |
|
UHE Batalha |
| MG / GO |
| 52.50 |
| 2041 |
|
UHE Retiro Baixo |
| MG |
| 82 |
| 2041 |
|
Três Irmãos |
| Tietê |
| 807.50 |
| 2044 |
|
Serra do Facão |
| GO |
| 212.58 |
| 2036 |
|
EOL Rei dos Ventos 1 |
| RN |
| 58.45 |
| 2045 |
|
EOL Famosa I |
| RN |
| 22.50 |
| 2047 |
|
EOL Pau Brasil |
| CE |
| 15 |
| 2047 |
|
EOL Rosada |
| RN |
| 30 |
| 2048 |
|
EOL São Paulo |
| CE |
| 17.50 |
| 2047 |
|
EOL Bom Jesus |
| CE |
| 18 |
| 2049 |
|
EOL Cachoeira |
| CE |
| 12 |
| 2049 |
|
EOL Pitimbu |
| CE |
| 18 |
| 2049 |
|
EOL Jandaia |
| CE |
| 28.80 |
| 2047 |
|
EOL Jandaia I |
| CE |
| 19.20 |
| 2047 |
|
EOL São Caetano |
| CE |
| 25.20 |
| 2049 |
|
EOL São Caetano I |
| CE |
| 18 |
| 2049 |
|
EOL São Clemente |
| CE |
| 19.20 |
| 2047 |
|
EOL São Galvão |
| CE |
| 18 |
| 2049 |
|
EOL Carnaúba I |
| RN |
| 22 |
| 2049 |
|
EOL Carnaúba II |
| RN |
| 18 |
| 2049 |
|
EOL Carnaúba III |
| RN |
| 16 |
| 2049 |
|
EOL Carnaúba V |
| RN |
| 24 |
| 2049 |
|
EOL Cervantes I |
| RN |
| 16 |
| 2049 |
|
EOL Cervantes II |
| RN |
| 12 |
| 2049 |
|
EOL Punaú I |
| RN |
| 24 |
| 2049 |
|
EOL Arara Azul |
| RN |
| 27.50 |
| 2049 |
|
EOL Bentevi |
| RN |
| 15 |
| 2049 |
|
EOL Ouro Verde I |
| RN |
| 27.50 |
| 2049 |
|
EOL Ouro Verde II |
| RN |
| 30 |
| 2049 |
|
EOL Ouro Verde III |
| RN |
| 25 |
| 2049 |
|
EOL Santa Rosa |
| CE |
| 20 |
| 2049 |
|
EOL Uirapuru |
| CE |
| 28 |
| 2049 |
|
EOL Ventos de Angelim |
| CE |
| 24 |
| 2049 |
|
EOL Serra do Mel I |
| RN |
| 28 |
| 2049 |
|
EOL Serra do Mel II |
| RN |
| 28 |
| 2049 |
|
EOL Serra do Mel III |
| RN |
| 28 |
| 2049 |
|
EOL Itaguaçu da Bahia |
| BA |
| 28 |
| 2049 |
|
EOL Ventos de Santa Luiza |
| BA |
| 28 |
| 2049 |
|
EOL Ventos de Santa Madalena |
| BA |
| 28 |
| 2049 |
|
Exploitation Concessions - GENERATION
Concessions/Permits |
| Location |
| Installed |
| Concession |
|
EOL Ventos de Santa Marcella |
| BA |
| 28 |
| 2049 |
|
EOL Ventos de Santa Vera |
| BA |
| 28 |
| 2049 |
|
UHE Santo Antônio (Mesa) (11) |
| BA |
| 417.2 |
| 2043 |
|
UHE Santo Antônio Mesa (8) |
| BA |
| 3150.80 |
| 2043 |
|
EOL Ventos de Santo Antônio |
| BA |
| 28 |
| 2049 |
|
EOL Ventos de São Bento |
| BA |
| 28 |
| 2049 |
|
EOL Ventos de São Cirilo |
| BA |
| 28 |
| 2049 |
|
EOL Ventos de São João |
| BA |
| 28 |
| 2049 |
|
EOL Ventos de São Rafael |
| BA |
| 28 |
| 2049 |
|
EOL São Januário |
| CE |
| 19.20 |
| 2047 |
|
EOL Nsa Sra de Fátima |
| CE |
| 28.80 |
| 2047 |
|
UHE Sinop |
| MT |
| 400 |
| 2049 |
|
UHE São Manoel |
| PA |
| 700 |
| 2049 |
|
EOL Brasventos Eolo |
| RN |
| 58.45 |
| 2045 |
|
UHE Teles Pires (9) |
| PA/MT |
| 1819.80 |
| 2046 |
|
(1) On November 22, 2016, the last Generation Units were commissioned. On December 16, 2016, the UHE Jirau was inaugurated with its complete installed capacity.
(2) The contracts for energy sale relating to the Presidente Médici Plant were finalized on December 31, 2016. CGTEE proceeded in disconnecting Phase B of the aforesaid Plant beginning on 03/01/17. Phase A must be deactivated in December of 2017.
(3) Currently in the Installation Licensing phase, to begin operations 22 months after issuance of the Installation License.
(4) Start of construction and operation to be determined, due to the negative opinion of the Institute of National Historic and Artistic Heritage.
(5) Plants not operational with an expired concession agreement, awaiting authorization of the ANEEL for dissolution of the contract.
(6) Plant concession not yet extended.
(7) Plant is deactivated.
(8) On 12/31/2016, there were 44 commercially operating generators with a total of 50 plants.
(9) In August 2016, implementation of the UHE Teles Pires was completed, as an SPE, with commercial launch of the last three generation units, with installed capacity totaling 1,819.80 MW (*).
(10) Suspension of operation of the wind parks is being reviewed by the courts, due to the accident which occurred in December 2014.
(11) Projects still being implemented.
(12) Plant in partial operation.
(13) Ministry of Mining and Energy Ordinance No. 25 of February 11, 2016, authorizing lease to service locations from the isolated systems serviced by Amazonas D.
(*) Information not audited by the independent auditors.
The concession contract No. 067/2000, of UTEs Presidente Médici (Phases A and B), São Jerônimo, and Nutepa owned by subsidiary CGTEE ended on July 7, 2015.
As set forth in the concession contract and in the applicable legislation, the subsidiary CGTEE formalized, in the proper time, the interest to renew the concession of those plants.
To date, the Concession grantor has not taken a final position on the abovesubsidiary’s request and, therefore, until the end of the process, the subsidiary CGTEE will keep on exploring these units under the same terms as the current concession. The Concession grantor has not provided an estimate termto conclude this process.
The decision on the renewal of the concession shall be subject to analyzis by the subsidiary CGTEE, following presentation of the position by the Concession grantor.
II.I – Generation under Special Administration
On July 2, 2016, ownership of the small hydroelectric plants that were under special administration of Furnas, according to the terms of Law No. 12,783/2013, was transferred to Cemig Geração e Transmissão S.A. through additives to Concession contracts No. 014/2016 and 012/2016.
Generation Companies under Special Administration as per Law No. 12,783/2013
Concessions/Permits |
| Installed Capacity |
| Concession Year |
|
Dona Rita |
| 2.41 |
| 06/2013 |
|
Sinceridade |
| 1.42 |
| 04/2013 |
|
Neblina |
| 6.47 |
| 04/2013 |
|
Ervália |
| 6.97 |
| 07/2015 |
|
Coronel Domiciano |
| 5.04 |
| 07/2015 |
|
(*) Information not audited by the independent auditors.
III — Electric Power Transmission
Contract |
| Name |
| % |
| KM |
| SE |
| Location |
| Term |
| Expires |
|
002/2006 |
| INTESA - Integração Transmissora de |
| 12.00 | % | 695.0 |
| — |
| TO/GO |
| 30 |
| 2036 |
|
004/2010 |
| TDG - Transmissora Delmiro Gouveia S.A. |
| 49.00 | % | 156.0 |
| — |
| MA/CE |
| 30 |
| 2040 |
|
005/2004 |
| STN - Sistema de Transmissão Nordeste |
| 49.00 | % | 546.0 |
| — |
| PI/CE |
| 30 |
| 2034 |
|
005/2007 |
| LT Funil - Itapebi, C3 |
| 100 | % | 223.0 |
| — |
| BA |
| 30 |
| 2037 |
|
005/2008 |
| LT Jardim - Penedo - 230 kV, C1 |
| 100 | % | 110.0 |
| — |
| SE/AL |
| 30 |
| 2038 |
|
005/2012 |
| LT Jardim - Nossa Senhora do Socorro - 230 kV; LT Messias - Maceió II - 230 kV; SE Nossa Senhora do Socorro 230/69 kV ; SE Maceió II, |
| 100 | % | 21.3 |
| — |
| SE/AL/BA |
| 30 |
| 2042 |
|
006/2004 |
| SE Elev. Usina de Curemas; SE Elev. Usina Term. Camaçari; SE Elev. Usina de Sobradinho |
| 100 | % | — |
| 1 |
| PB/BA |
| 30 |
| 2027 |
|
006/2009 |
| LT Pirapama II - Suape II - 230 kV, C1, C2; LT Suape III - Suape II - 230 kV, C1, C2; SE Suape II - 500/230 kV (600 MVA ); SE Suape III - 230/69 kV |
| 100 | % | 49 |
| — |
| PE |
| 30 |
| 2039 |
|
007/2005 |
| LT Milagres - Tauá - 230 kV, C1; SE Tauá II - 230 kV |
| 100 | % | 208.1 |
| 1 |
| CE |
| 30 |
| 2035 |
|
007/2010 |
| SE Camaçari IV - 500/230 kV |
| 100 | % |
|
| 1 |
| BA |
| 30 |
| 2040 |
|
008/2005 |
| LT Milagres - Coremas - 230 kV, C2 |
| 100 | % | 119.8 |
| — |
| CE/PB |
| 30 |
| 2035 |
|
008/2011 |
| Extremoz Transmissora do Nordeste - |
| 100 | % | 285 |
| — |
| RN/PB |
| 30 |
| 2041 |
|
009/2011 |
| LT Morro do Chapéu II - Irecê - 230 kV; SE Morro do Chapéu II 230 kV |
| 100 | % | 65 |
| 1 |
| BA |
| 30 |
| 2041 |
|
010/2007 |
| LT Ibicoara - Brumado - 230 kV, C1 |
| 100 | % | 94.5 |
| — |
| BA |
| 30 |
| 2037 |
|
010/2008 |
| Marumbi Transmissora de Energia S.A. |
| 19.50 | % | 559.0 |
| — |
| PA/AM |
| 30 |
| 2038 |
|
010/2011 |
| LT Paraíso - Lagoa Nova II - 230 kV; SE Lagoa Nova II 230 kV; SE Ibiapina II 230 kV |
| 100 | % | 65.4 |
| 2 |
| RN/CE |
| 30 |
| 2041 |
|
012/2007 |
| LT Paraíso - Açu II - 230 kV, C2; LT Picos - Tauá II - 230 kV, C1 |
| 100 | % | 316 |
| — |
| PI/CE/RN |
| 30 |
| 2037 |
|
013/2010 |
| SE Arapiraca III - 230/69 kV |
| 100 | % | — |
| 1 |
| AL |
| 30 |
| 2040 |
|
014/2008 |
| LT 230 kV Eunápolis - Teixeira de Freitas II, C1; SE Teixeira de Freitas II - 230/138 kV |
| 100 | % | 145 |
| 1 |
| BA |
| 30 |
| 2038 |
|
014/2010 |
| SE Pólo 230/69 kV |
| 100 | % | — |
| 1 |
| BA |
| 30 |
| 2040 |
|
015/2009 |
| Interligação Elétrica do Madeira S.A . |
| 24.50 | % | 2,375 |
|
|
| RO/SP |
| 30 |
| 2039 |
|
015/2012 |
| LT Camaçari IV - Pirajá - 230 kV; LT Pituaçu - Pirajá - 230 kV; SE Pirajá 230/69 kV |
| 100 | % | 50 |
| 1 |
| BA |
| 30 |
| 2042 |
|
017/2009 |
| LT Paulo Afonso III - Zebu II - 230 kV, C1, C2; LT Pau Ferro - Santa Rita II - 230 kV; SE Santa Rita II - 230/69 kV ; SE Zebu - 230/69 kV ; SE Natal III - |
| 100 | % | 107.5 |
| 3 |
| PE/PB/AL/RN |
| 30 |
| 2039 |
|
Contract |
| Name |
| % |
| KM |
| SE |
| Location |
| Term |
| Expires |
|
017/2011 |
| LT Teresina II - Teresina III - 230 kV; SE Teresina III at 230/69 kV |
| 100 | % | 26 |
| 1 |
| PI |
| 30 |
| 2041 |
|
017/2012 |
| SE Mirueira II 230/69 Kv; SE Jaboatão II 230/69 kV |
| 100 | % | — |
| 2 |
| PE |
| 30 |
| 2042 |
|
018/2009 |
| LT Eunápolis - Teixeira de Freitas II - 230 kV, C2 |
| 100 | % | 152 |
| — |
| BA |
| 30 |
| 2039 |
|
018/2011 |
| LT Recife II - Suape II - 500 kV - C2 |
| 100 | % | 44 |
| — |
| PE |
| 30 |
| 2041 |
|
018/2012 |
| LT Mossoró II - Mossoró IV - 230 kV; LT Ceará-Mirim II - Touros II - 230 kV; LT Russas II - Banabuiu C2- 230 kV; SE Touros II, 230 kV; SE Mossoró IV , 230 kV |
| 100 | % | 206.2 |
| 2 |
| RN |
| 30 |
| 2042 |
|
019/2010 |
| LT C. Mirim II - João Camara II - 230 kV, C1; LT Extremoz II - C. Mirim - 230 kV, C1; LT Paraíso - Açu II - 230 kV, C3; LT Paraíso - Açu II - 230 kV , C3; LT Açu II - Mossoró II - 230 kV, C2; SE Extremoz II - 230 kV; SE João Câmara - 230 kV |
| 100 | % | 298.9 |
| 2 |
| RN |
| 30 |
| 2040 |
|
019/2011 |
| LT Camaçari IV - Sapeaçu - 500 kV; LT Sapeaçu - Sto. Antonio de Jesus - 230 kV |
| 100 | % | 136 |
| — |
| RN |
| 30 |
| 2041 |
|
019/2012 |
| LT Igaporã II - Igaporã III - 230 kV, C1, C2; LT Igaporã III - Pindaí II - 230 kV; SE Igaporã III 500/230 kV; SE Pindaí II 230 kV |
| 100 | % | 60.3 |
| 2 |
| BA |
| 30 |
| 2042 |
|
020/2010 |
| LT Bom Jesus da Lapa II - Igaporã II - 230 kV; SE Igaporã - 230 kV |
| 100 | % | 115 |
| 1 |
| BA |
| 30 |
| 2040 |
|
021/2010 |
| LT Sobral III - Acaraú II, - 230 kV; SE Acaraú II - 230 kV |
| 100 | % | 91,3 |
| 1 |
| CE |
| 30 |
| 2040 |
|
022/2011 |
| Interligação Elétrica Garanhuns S.A. |
| 49 | % | 666 |
| — |
| AL/PE/PB |
| 30 |
| 2041 |
|
061/2001 |
| Various Projects |
| 100 | % | 18967.2 |
| — |
| PE/CE/SE/ BA/AL/PI/ MA /PB/RN |
| 30 |
| 2042 |
|
034/2001 |
| Expansion of South-Southeast Interconnection |
| 100 | % | 664 |
| — |
| PR/SP |
| 30 |
| 2031 |
|
001/2009 |
| LT 230 kV - SE Ribeiro Gonçalves / SE Balsas |
| 100 | % | — |
| — |
| PI/MA |
| 30 |
| 2039 |
|
007/2008 |
| LT 230 kV - SE São Luis II / São Luis III |
| 100 | % | — |
| — |
| MA |
| 30 |
| 2038 |
|
057/2001 |
| Various Projects |
| 100 | % | 9637.34 |
| — |
| — |
| 30 |
| 2042 |
|
005/2009 |
| SE Missões - 230/69 kV (150 MVA) |
| 100 | % | — |
| 1 |
| — |
| 30 |
| 2039 |
|
008/2014 |
| SE 230/138 kV Ivinhema 2, 2 x 150 MVA |
| 100 | % | — |
| 7 |
| — |
| 30 |
| 2044 |
|
012/2010 |
| LT Monte Claro - Garibaldi |
| 100 | % | 32.7 |
| — |
| RS |
| 30 |
| 2040 |
|
004/2008 |
| LT P. Médici - Santa Cruz 1 230kV |
| 100 | % | 237,4 |
| — |
| RS |
| 30 |
| 2038 |
|
009/2010 |
| LT 500 kv - LT Jorge Texeira / Lechuga, Double Circuit |
| 100 | % | — |
| — |
| AM |
| 30 |
| 2040 |
|
002/2009 |
| LT 500 kV - LT Presidente Dutra-São Luis II /SE Miranda II |
| 100 | % | — |
| — |
| MA |
| 30 |
| 2039 |
|
010/2005 |
| LT Campos Novos - Blumenau C2 |
| 100 | % | 357.8 |
| — |
| SC |
| 30 |
| 2035 |
|
005/2006 |
| LT Campos Novos - Pólo 525 kV |
| 100 | % | 257.43 |
| — |
| SC/RS |
| 30 |
| 2036 |
|
Contract |
| Name |
| % |
| KM |
| SE |
| Location |
| Term |
| Expires |
|
004/2004 |
| LT Salto Santiago - Ivaiporã - Cascavel Oeste |
| 100 | % | 371.9 |
| — |
| PR |
| 30 |
| 2034 |
|
003/2009 |
| LT Bom Despacho 3 - Ouro Preto 2 |
| 100 | % | 180 |
| — |
| MG |
| 30 |
| 2039 |
|
006/2005 |
| LT Macaé - Campos 3 |
| 100 | % | 90 |
| — |
| RJ |
| 30 |
| 2035 |
|
006/2010 |
| LT Mascarenhas - Linhares |
| 100 | % | 99 |
| — |
| ES |
| 30 |
| 2040 |
|
007/2006 |
| LT Tijuco Preto - Itapeti - Nordeste |
| 100 | % | 100 |
| — |
| SP |
| 30 |
| 2036 |
|
004/2005 |
| Centroeste Minas |
| 49 | % | 66 |
| — |
| MG |
| 30 |
| 2035 |
|
002/2010 |
| Goiás Transmissão |
| 49 | % | 296 |
| 1 |
| GO |
| 30 |
| 2040 |
|
013/2009 |
| IE Madeira |
| 25 | % | 2375 |
| — |
| RO |
| 30 |
| 2039 |
|
028/2009 |
| Transenergia Goiás |
| 49 | % | 188 |
| — |
| GO |
| 30 |
| 2039 |
|
009/2009 |
| Transenergia Renovável |
| 49 | % | 763 |
| 5 |
| — |
| 30 |
| 2039 |
|
024/2009 |
| Transenergia São Paulo |
| 49 | % | — |
| 1 |
| SP |
| 30 |
| 2039 |
|
012/2005 |
| Transirapé |
| 25 | % | 65 |
| 2 |
| MG |
| 30 |
| 2035 |
|
005/2005 |
| Transudeste |
| 25 | % | 140 |
| — |
| MG |
| 30 |
| 2035 |
|
003/2011 |
| Caldas Novas Transmissão S.A. |
| 50 | % | — |
| 1 |
| — |
| 30 |
| 2041 |
|
010/2012 |
| Luziana - Niquelândia Transmissora S.A. |
| 49 | % | — |
| 2 |
| — |
| 30 |
| 2042 |
|
007/2013 |
| Paranaíba Transmissora |
| 25 | % | 967 |
| — |
| — |
| 30 |
| 2043 |
|
004/2013 |
| Triângulo Mineiro |
| 49 | % | 296.5 |
| — |
| — |
| 30 |
| 2043 |
|
014/2013 |
| Vale do S. Bartolomeu |
| 39 | % | 94.5 |
| 1 |
| — |
| 30 |
| 2043 |
|
001/2014 |
| Mata de Sta. Genebra Transmissora |
| 50 | % | 847 |
| 3 |
| — |
| 30 |
| 2044 |
|
003/2014 |
| Lago Azul |
| 50 | % | 69 |
| — |
| — |
| 30 |
| 2044 |
|
014/2014 |
| Belo Monte |
| 25 | % | 2092 |
| 4 |
| — |
| 30 |
| 2044 |
|
014/2011 |
| LT Xavantes-Pirineus |
| 100 | % | 40 |
| — |
| GO |
| 30 |
| 2041 |
|
011/2010 |
| SE Ijuí 2 SE Nova Petrópolis 2 SE Lajeado Grande SE Caxias 6 |
| 100 | % | — |
| 1 |
| RS |
| 30 |
| 2040 |
|
002/2011 |
| SE Foz do Chapecó |
| 100 | % | — |
| 1 |
| SC |
| 30 |
| 2041 |
|
016/2012 |
| SE Zona Oeste |
| 100 | % | — |
| 1 |
| RJ |
| 30 |
| 2012 |
|
082/2002 |
| SPE Etau |
| 27 | % | 188 |
| — |
| SC/RS |
| 30 |
| 2032 |
|
002/2005 |
| SPE Uirapuru |
| 75 | % | 120 |
| — |
| PR |
| 30 |
| 2035 |
|
016/2009 |
| SPE Norte Brasil |
| — |
| — |
| — |
| RO/SP |
| 30 |
| 2039 |
|
001/2012 |
| Costa Oeste Transmissora de Energia |
| 49 | % | 151.5 |
| — |
| PR |
| 30 |
| 2042 |
|
008/2012 |
| Marumbi Transmissora de Energia S.A. |
| 20 | % | 29.04 |
| — |
| PR |
| 30 |
| 2042 |
|
007/2014 |
| Fronteira Oeste |
| 51 | % | 273 |
| — |
| — |
| 30 |
| 2044 |
|
004/2012 |
| TSBE - Transmissora Sul Brasileira de Energia S/A |
| 80 | % | 783 |
| — |
| RS |
| 30 |
| 2042 |
|
020/2012 009/2004 |
| TSBE - Transmissora Sul Litorânea de Energia S/A |
| 51 | % | 468 |
| — |
| RS |
| 30 |
| 2042 |
|
058/2001 |
| Transmissão Rede Básica |
| 100 | % | — |
| — |
| Sundry |
| 30 |
| 2042 |
|
013/2011 |
| SE Nobres 230/138 kV |
| 100 | % | — |
| — |
| MG |
| 30 |
| 2041 |
|
Contract |
| Name |
| % |
| KM |
| SE |
| Location |
| Term |
| Expires |
|
012/2011 |
| SE Miramar 230/69 kV |
| 100 | % | — |
| — |
| Amazonas D / Roraima |
| 30 |
| 2041 |
|
004/2011 |
| SE Lucas do Rio Verde 230/138 kV |
| 100 | % | — |
| — |
| MatoGrosso |
| 30 |
| 2031 |
|
014/2012 |
| LT Lechuga - Jorge Teixeira, C3, 230 kV, 3x150 MVA |
| 100 | % | — |
| — |
| Amazonas |
| 30 |
| 2043 |
|
015/2009 |
| Rectifier Station No. 01 CA/CC, 800/+-600 kV 310MW Inverter Station No. CC/CA +-600/500 kV - 2950 MW |
| 100 | % | — |
| — |
| RO/SP |
| 30 |
| 2039 |
|
022/2009 |
| Rio Branco Transmissora de Energia |
| 100 | % | — |
| — |
| Sundry |
| 30 |
| 2039 |
|
009/2014 |
| LT 230 kV Rio Branco 1 - Feijó/ LT 230kv Feijó - Cruzeiro do Sul |
| 100 | % | — |
| — |
| AC |
| 30 |
| 2034 |
|
008/2004 |
| Amazônia Eletronorte Transmissora de Energia |
| 49 | % | 193 |
| — |
| MT |
| 30 |
| 2034 |
|
003/2008 |
| Brasnorte Transmissora de Energia S.A. |
| 50 | % | 402 |
| — |
| MT |
| 30 |
| 2038 |
|
002/2006 |
| Integração Transmissora de Energia |
| 37 | % | 695 |
| — |
| TO/GO |
| 30 |
| 2036 |
|
023/2009 |
| Transmissora Matogrossense de Energia S.A. |
| 49 | % | 348 |
| — |
| MT |
| 30 |
| 2039 |
|
010/2008 |
| Manaus Construtora Ltda./Manaus Transmissora de Energia |
| — |
| 559 |
| — |
| PA/AM |
| 30 |
| 2038 |
|
022/2009 |
| Norte Brasil Transmissora de Energia |
| — |
| 666 |
| — |
| RO/SP |
| 30 |
| 2039 |
|
021/2009 |
| Linha Verde Transmissora de Energia S.A. |
| 100 | % | 987 |
| — |
| RO/MT |
| 30 |
| 2039 |
|
014/2014 |
| Rio Branco Transmissora de Energia |
| 25 | % | 2093 |
| — |
| PA/TO/GO/MG |
| 30 |
| 2044 |
|
003/2012 |
| Transnorte Energia S.A. |
| 49 | % | 715 |
| — |
| AM/RR |
| 30 |
| 2032 |
|
554/2010 |
| Interconexão Brasil-Uruguai |
| 100 | % | 62.8 |
| — |
| — |
| 30 |
| 2040 |
|
023/2014 |
| 1 Frequency Converter and 132 kV Transmission Lines |
| 100 | % | 12.5 |
| — |
| — |
| 30 |
| 2044 |
|
002/2015 |
| Paraíso - Paraíso Transmissora de Energia S.A. |
| 100 | % | 283 |
| — |
| PR |
| 30 |
| 2045 |
|
001/2015 |
| LT Gravataí - Subterrânea LT Porto Alegre |
| 100 | % | — |
| — |
| RS |
| 30 |
| 2045 |
|
062/2001 |
| Various Projects |
| 100 | % | 18975.5 |
| 63 |
| RJ/SP/PR/MG/GO/TO/DF/ES/MT |
| 30 |
| 2043 |
|
008/2010 |
| MGE Transmissão |
| 49 | % | 258 |
| 1 |
| MG/ES |
| 30 |
| 2040 |
|
Energia Olímpica |
| Energia Olímpica |
| 50 | % | 94.5 |
| 1 |
| SpecialRegime |
|
|
| Special Regime |
|
(*) Information not audited by the independent auditors.
· Electric Power Distribution
Exploitation Concessions - DISTRIBUTION
Concessions/Permits |
| Geographic Region |
| Municipalities |
| Concession |
|
|
|
|
|
|
|
Companhia de Eletricidade do Acre (Eletroacre) |
| State of Acre |
| 22 |
| 2015 |
Centrais Elétricas de Rondônia (Ceron) |
| State of Rondônia |
| 52 |
| 2015 |
Companhia Energética de Alagoas (Ceal) |
| State of Alagoas |
| 102 |
| 2015 |
Companhia Energética do Piauí (Cepisa) |
| State of Piauí |
| 224 |
| 2015 |
Amazonas Energia |
| State of Amazonas |
| 62 |
| 2015 |
Boa Vista Energia |
| State of Roraima |
| 1 |
| 2015 |
(*) Information not audited by the independent auditors
On October 15, 2012, the distribution companies of Eletrobras whose concessions expired in 2015 were entitled to state their interest in extending the concession for an additional period of 30 years, which they did within the established time.
The decree No. 8,461 of June 2, 2015 established the terms for a 30-year extension of the Electricity Distribution Concessions to which Article 7 of Law No. 12,783 of January 11, 2013 refers.
On July 22, 2016, during the 165th General Extraordinary Meeting of Centrais Elétricas Brasileiras S.A. - Eletrobras, it was resolved not to renew the concessions of the energy distribution subsidiaries from Eletrobras Group: Companhia Energética do Piauí — CEPISA; Companhia Energética de Alagoas — CEAL; Companhia de Eletricidade do Acre — ELETROACRE; Centrais Elétricas de Rondônia S.A. — CERON; Boa Vista Energia S.A.; and Amazonas Distribuidora de Energia S.A. (collectively referred to as the “Distribution Companies”).
Also during the 165th General Extraordinary Meeting, it was resolved that by December 31, 2017, majority control of Eletrobras’ subsidiary Distribution Companies is to be transferred, as per the terms of Law 12,783/2013, with the new wording given by way of Provisional Measure 735 of June 22, 2016, provided that, before the transfer of the distributor for the new controller, the Distributor receives directly, by Federal Government or through tariffs, all resources and remuneration necessary to operate, maintain, and make investments that are related to public services respective Distributor, maintaining the economic and financial balance of the Distributor without any contribution of funds, in any way,by Eletrobras and also was approved to be returned at any time, the granting of the sales and to be adopted the provisions of its settlement,, in the following cases:
(i) Transfer of majority control is not made by December 31, 2017. Since these are federal state companies, the transfer of majority control of the Distribution Companies must bein compliance to the rules from the National Privatization Plan (“PND”), particularly Law No. 9,491 of September 9, 1997, and the National Privatization Council (“CND”) is responsible for approving the operational modality to be applied to each privatization event. Eletrobras also reports that the Distribution Companies were included in the Partnerships and Investments Program (“PPI”) created under Provisional Measure 727/2016, in order to facilitate privatization; or
(ii) The respective Distributor, stop receiving directly from the Federal Government or through tariffs, until his transfer to the new controller, all resources and remuneration necessary to operate, maintain, and make investments that are related to public services of the respective Distributor, maintaining the economic and financial balance of the Distributor, without any injection of funds, in any way, by Eletrobras.
The Company also decided that the distribution subsidiaries that did not have their concessions renewed will, upon the consent of the Grantor, remain responsible for the operation and maintenance of public distribution services on their locations until the transfer of their equity control under Provisional Measure 735/2016, which should occur by December 31, 2017.
During this period, as mentioned above, the Distribution Companies should receive adequate remuneration for the provision of distribution services, without any injection of funds by holding Eletrobras, as approved by the 165th General Extraordinary Shareholders Meeting.
On August 3, 2016, the Ministry of Mines and Energy Ordinances Number 420, 421, 422, 423, 424, and 425 were published, establishing that the Distribution Companies Amazonas Distribuidora de Energia S.A., Companhia e Eletricidade do Acre — ELETROACRE, Centrais Elétricas e Rondônia S.A. — CERON, Companhia Energética do Piauí — CEPISA, Companhia Energética de Alagoas — CEAL, and Boa Vista Energia S.A. would be temporarily responsible for the provision of electricity distribution public utility service, in order to guarantee the continuity of service, as per the terms of Article 9, Paragraph One of Law 12,783 of January 11, 2016.
On September 13, 2016, the ANEEL ruled: (i) to hold a Public Hearing in order to gather support and additional information to improve the regulations from MME Ordinance No. 388/2016, which pertains to the terms and conditions for provision of electric power distribution utility service by an entity or body of the Federal Government; and (ii) to determine that the draft of the Regulatory Resolution submitted for the Public Hearing take immediate effect, with any adjustments resulting from the contributions given during the Public Hearing must take retroactive effect.
On October 6, 2016, the ANEEL issued Document 352/2016-DR/ANEEL, providing the initial guidelines for preparation of the Temporary Plan for Provision of Distribution Services, defining the targets for quality improvements, in terms of DEC and FEC, reduction in energy losses, and reduction in operational costs.
Moreover, on September 13, 2016, by way of Law No. 13,334/2016 (conversion of Provisional Measure No. 727/2016), the Federal Government created the Investment Partnerships Program (PPI) which, among other attributes, absorbed the competencies of the National Privatization Program (PND).
On November 1, 2016, Decree No. 8,893 was issued by the Federal Government, defining as a national priority, within the scope of the PPI, the Privatization of the aforementioned Eletrobras Distribution Companies, designating the BNDES to take responsibility for the privatization process.
Because these are federal state companies, the transfer of majority control of the Distribution Companies must be n compliance with the rules from the National Privatization Plan (“PND”), particularly Law No. 9,491 of September 9, 1997, and the National Privatization Council (“CND”) is responsible for approving the operational modality to be applied to each privatization event.
In light of this, Eletrobras Group Distribution Companies registered their financial assets in the corresponding proportion, until December 31, 2017, which is the deadline to remain responsible for the operation and maintenance of the public utilities of the distribution companies.
2.1. Extension of public electric power concessions
On September 12, 2012, Provisional Measure 579/2012 (MP 579) was published, regulating the extension of the electricity generation, transmission, and distribution concessions granted prior to publication of Law No. 8,987 of 1995, and attained by Law No. 9,074 of 1995. On September 14, 2012, Decree 7,805 was published, which regulates MP 579.
According to MP 579, electricity generation, transmission, and distribution concessions already expired or to expire within 60 months of publication of the MP had the option to terminate early in December 2012, with a one-time extension, at the discretion of the Concession Authority, for up to 30 years. However, for transmission activities, the extension would require express acceptance of the following conditions, among others: i) fixed revenue pursuant to criteria established by the ANEEL; ii) amounts established as remuneration for assets; and iii) submission to the service quality standards established by the ANEEL.
Throught Normative Resolutions 589 and 596, the National Electricity Energy Agency (ANEEL), for purposes of remuneration, defined the criteria for calculation of the New Replacement Value (VNR) for the existing transmission assets on May 31,2000, which still has not been depreciated (RBSE), and the criteria and procedures for calculation the share of investments linked to reversible assets, not yet amortized or depreciated, for hydroelectric plants, whose concessions were extended or not, pursuant to Law No. 12,783.
· Energy Generation Assets
On October 2, 2015, the subsidiary Furnas also submitted documentation attesting to the investments associated with the reversible assets, not yet amortized or depreciated, from the Corumbá, Funil, Furnas, Luiz Carlos de Barreto de Carvalho, Maribondo, and Porto Colômbia hydroelectric plants, with total installed capacity of 4,617 MW*, whose concessions were extended under Law 12,783/2013, in order to request supplemental generation remuneration. The documentation submitted indicates a base value of R$ 1,311,900 for such supplemental remuneration, while the residual book value of the assets themselves, on October 2, 2015, was R$ 995,718.
On December 11, 2014, the subsidiary Chesf submitted documentation to ANEEL attesting to the investments associated with reversible goods, not yet amortized or depreciated, from the Xingó, Paulo Afonso I, II, III, and IV, Apolônio Sales (Moxotó), Luiz Gonzaga (Itaparica), Boa Esperança, Pedra, and Funil hydroelectric plants, with total installed capacity of 9,208.5 MW*, whose concessions were extended under Law 12,783/2013, in order to request supplemental generation remuneration. The documentation submitted indicates a base value of R$ 4,802,300 for such supplemental remuneration, while the residual book value of the assets themselves, on Thursday, December 11, 2014, was R$ 487,822.
Remuneration relating to certain assets under extended concessions remains unapproved by the Concession Authority, in the following amounts:
|
| 12/31/2016 |
| ||||||
Description |
| Chesf |
| Furnas |
| CGTEE |
| Total |
|
Generation |
|
|
|
|
|
|
|
|
|
Modernizations and improvements |
| 487,822 |
| 995,718 |
| — |
| 1,483,540 |
|
Thermal generation |
| — |
| 704,792 |
| 356,937 |
| 1,061,729 |
|
|
| 487,822 |
| 1,700,510 |
| 356,937 |
| 2,545,269 |
|
|
| 12/31/2015 |
| ||||||
Description |
| Chesf |
| Furnas |
| CGTEE |
| Total |
|
Generation |
|
|
|
|
|
|
|
|
|
Modernizations and improvements |
| 487,822 |
| 995,718 |
| — |
| 1,483,540 |
|
Thermal generation |
| — |
| 557,409 |
| 356,937 |
| 914,346 |
|
|
| 487,822 |
| 1,553,127 |
| 356,937 |
| 2,397,886 |
|
Until the concession grantor approves these compensation amounts, including definition on means, term to receive, and applicable compensation, these amounts will not be monetarily corrected, but kept at the historical cost.
· Power Electric Transmission Assets
Pursuant to Regulatory Resolution 589 of December 10, 2013, the subsidiaries below submitted to the ANEEL their appraisals of the electricity transmission assets existing on May 31, 2000 (“Appraisal Report”) for the purposes of remuneration of the installations of the Basic Grid of the Existing System (RBSE) established in Article 15, Paragraph 2 of Law 12,783/13.
Appraisal Report
Company |
| Data |
| R$ |
|
Eletrosul |
| 07/14/2015 |
| 1,060,632 |
|
Chesf |
| 03/06/2015 |
| 5,627,200 |
|
Furnas |
| 05/21/2015 |
| 10,699,000 |
|
Eletronorte |
| 09/03/2015 |
| 2,926,000 |
|
The ANEEL, as of the date of these financial statements, submitted approval of the remunerations for power electric transmission assets existing on May 31, 2000 for the subsidiaries Eletrosul, Chesf, Furnas, and Eletronorte, pursuant to the rules from Regulatory Resolution 589, on the base date of December 31, 2012, as follows:
ANEEL Approval
Company |
| Data |
| R$ |
|
Eletrosul |
| 07/14/2015 |
| 1,007,043 |
|
Furnas |
| 12/15/2015 |
| 8,999,520 |
|
Chesf |
| 08/03/2016 |
| 5,092,384 |
|
Eletronorte |
| 10/18/2016 |
| 2,579,312 |
|
On April 20, 2016, the Ministry of Mines and Energy (MME) published Ordinance No. 120, which regulates the conditions for receipt of remuneration relating to power electric transmission assets existing on May 31, 2000, referred to as installations of the Existing
System Base Network (RBSE) and other Transmission Installations (RPC), which have not been depreciated or amortized, pursuant to Paragraph 2 of Article 15 of Law 12,783/2013.
On October 14, 2016, the ANEEL submitted Technical Note No. 336/2016 of October 6, 2016 in Public Hearing No. 068/2016, such Technical Note which establishes the procedures to be used to calculate the capital cost to be added to the Permitted Annual Revenue of each transmission concessionaire covered by Law No. 12,783/2013, in accordance with MME Ordinance No. 120/2016.
Covered under Ordinance No. 120 are the reversible assets that have not been depreciated through December 31, 2012, when these companies opted for early expiration of certain concession agreements, as per the terms of Law No. 12,783/13 (conversion of MP 579/12 to law).
Remuneration for these assets will occur as follows:
(i) at the capital cost corresponding to the assets, comprised of remuneration and depreciation plus taxes owed beginning with the 2017 tariff process; while remuneration will be given at the Weighted Average Capital Cost and depreciation will be paid based on the useful life of each asset included in the Regulatory Remuneration Base;
(ii) the capital cost not incorporated from the extensions of the concessions through the tariff process will be updated and remunerated at the actual capital cost;
beginning with the 2017 tariff process, the capital cost will be remunerated at Weighted Average Capital Cost for a period of eight years.
The Ordinance in question states that the amounts owed will comprise the regulatory remuneration base for the companies, that is, they will be passed on by way of energy tariffs for consumers, beginning with the 2017 tariff process. In addition to remunerating the assets, the Ordinance also establishes that the capital cost incurred by the companies shall be included in the aforesaid amounts.
As on December 31, 2016, the estimated updated amounts of the expenses relating to investments, expansions, and/or improvements to certain assets from the extended concessions are as follows:
|
| 12/31/2016 |
| ||||||||
Transmission |
| Chesf |
| Eletronorte |
| Eletrosul |
| Furnas |
| Total |
|
Basic Grid - existing services (RBSE)- Historic Balance |
| 1,187,029 |
| 1,732,910 |
| 520,332 |
| 4,530,060 |
| 7,970,331 |
|
VNR Update - IPCA and remuneration |
| 9,377,718 |
| 3,595,672 |
| 1,596,127 |
| 14,031,035 |
| 28,600,552 |
|
Total value of updated financial assets |
| 10,564,747 |
| 5,328,582 |
| 2,116,459 |
| 18,561,095 |
| 36,570,883 |
|
Effect on 2016 profit and loss |
|
|
|
|
|
|
|
|
|
|
|
Operating revenue |
| 9,377,718 |
| 3,595,672 |
| 1,596,127 |
| 14,031,035 |
| 28,600,552 |
|
Income taxes |
| (3,188,424 | ) | (1,222,528 | ) | (542,683 | ) | (4,770,552 | ) | (9,724,187 | ) |
Net effect |
| 6,189,294 |
| 2,373,144 |
| 1,053,444 |
| 9,260,483 |
| 18,876,365 |
|
The preceding accounts were calculated based on the assumptions established above, considering the interpretation with respect to MME Ordinance 120/2016, seeking to reflect in these financial statements the best estimate of the Company. However, should any regulations or acts come to be made by the ANEEL that may change the foregoing, including with respect to the 2017 tariff process, the start of which corresponds to the moment that payment of the aforementioned credits will begin, the amounts recorded may be reviewed and adjusted as appropriate, if necessary.
Please see Note 47.8 for a relevant subsequente event relating to this subject.
(*) Information not audited by the independent auditors.
NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these consolidated financial statements are defined below. These policies have been applied consistently in all of the periods presented, unless otherwise mentioned.
3.1. Basis of Preparation
The preparation of the consolidated financial statements requires the use of certain critical accounting estimates, as well as the judgment of the Administration of the Company, in application of the accounting policies of Eletrobras. Those transactions, disclosures, or balances that require a greater level of judgment, which have greater complexity and for which assumptions and estimated are significant, are reported in Note 4.
The consolidated financial statements have been prepared on the basis of historic cost, except in the case of certain financial instruments measured at fair value and certain assets associated with concessions that have been measured at New Replacement Value - VNR (generation and transmission companies) or at Regulatory Remuneration Basis - BRR (distribution companies). Historic cost is generally based on the fair value of the considerations paid on the date of the transactions.
These consolidated financial statements are presented in Brazilian Reais, which is the operating currency of the Company and its subsidiaries and associated companies. All financial information presented in Reais were rounded to the nearest thousand, except when otherwise indicated.
The Administration of the Company confirms that all information of relevance from the consolidated financial statements is displayed with evidence, corresponding to the same information used by the Administration in its management activities.
(a) Consolidated financial statements
These consolidated financial statements of the Company have been prepared in accordance with the International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (IASB).
These consolidated financial statements are not equivalent to the statutory financial statement of the Company as issued under the requirements of the Brazilian jurisdiction. Also, because the date of authorization for issue of these consolidated financial statements is different from the date when the consolidated financial statements were issued in Brazil, there are differences due to adjusting events after the reporting period, under IAS 10 — Events after the Reporting Period
For certain statutory purposes, such as providing reports to our shareholders located in Brazil and determining dividend payments and other profit distributions and tax liabilities in Brazil, we have prepared and will continue to be required to prepare parent company and consolidated statutory financial statements in accordance accounting practices adopted in Brazil and with IFRS, filed in the Brazilian Exchange Commission (Comissão de Valores Mobiliários — CVM) and prepared, approved and filed in the CVM until three months after the year end to comply with the Brazilian Corporate Law.
(b) Changes in the accounting policies and disclosures
(b.1) Changes to the IFRS and new interpretations that must be applied beginning in the current fiscal without significant effects on the consolidated financial statements.
During the current fiscal year, the Company applied various amendments to and interpretations of the IFRS issued by the IASB, which took effect for accounting periods beginning January 1, 2016. These annual alterations and improvements did not have a material impact on the consolidated financial statements, and are described below:
Revision of IAS 16 and IAS 38— The purpose of this modification is to include information on the concept of future expected reductions in the price of sale and to clarify the method of depreciation based on revenue generated by an activity.
Revision of IFRS 11— this alteration requires that the party acquiring equity interest in a joint operation constituting a business, as defined in IFRS 3 apply the principles from IFRS 3, excepting those that contradict IFRS 11. A joint business also requires disclosure of the relevant information required under IFRS 3 and other rules on business combinations.
Revision of IFRS 10 and IAS 28— Clarifies that in a transaction between an investor and associate or joint venture, recognition of the gains or losses depends on whether the goods sold or contributed constitute a business.
Revision of IAS 1— Clarifications on the process of judgment for disclosures in the Financial Statements. The changes to IAS 1 offer guidelines regarding application of the concept of materiality in practice.
In addition, in 2016, improvements regarding annual review of the 2012-2014 cycle took effect for the following standards: IFRS 5 - Noncurrent assets held for sale and Discontinued operations, IFRS 7 - Financial instruments: Disclosures, IAS 19 - Employee benefits, and IAS 34 - Interim financial statements.
(b.2) New and revised standards and interpretations already issued and not yet adopted.
The International Accounting Standards Board (IASB) published or amended the following accounting pronouncements, guidelines, or interpretations, whose adoption should be made mandatory in subsequent periods:
Standards |
| Key Requirements |
| Position of the Company |
| Applicable Beginning |
Amendment to IAS 12 Recognition of deferred tax assets for unrealized losses |
| Clarifies the accounting treatment of deferred tax assets for unrealized losses in debt instruments measured at fair value. |
| The Company does not hold any debt instruments calculated at fair value, and as such, the amendment to this standard will have no impact on the consolidated financial statements of the Company. |
| January 1, 2017 |
Amendments to IAS 7 Disclosure Initiative |
| Amends IAS 7 Statement of Cash Flows to clarify that entities must provide disclosures which allow users of the financial statements to assess the changes in liabilities resulting from financing activities, including changes resulting from cash flows and other changes:
- Disclosures of variations in liabilities resulting from financing activities: (i) changes in cash flows from financing activities; (ii) changes resulting from the obtaining or loss of control of subsidiaries or other businesses; (iii) effect of exchange rate variations; (iv) changes in fair value; and (v) other changes. The IASB defines liabilities resulting from financing activities as liabilities “for which the cash flows were or will be classified in the Statement of Cash Flows as cash flows from financing activities”. - New disclosure requirements refer also to changes in financial assets, in the event that they also meet this definition. - Changes in liabilities resulting from financing activities must be disclosed separately from changes in other assets and liabilities. |
| In order to adhere to the amendments to IAS 7, the Company will present a reconciliation of the opening and closing balances of liabilities with changes resulting from financing activities, as required in the text of the standard. |
| January 1, 2017 |
IFRS 15 Recognition of Revenue (new pronouncement) |
| Establishes a simple and clear model for accounting treatment of revenue from contracts with customers, and, when it becomes effective, it will replace the current guidelines for recognition of revenue in IAS 18 - Revenue, IAS 11 - Construction Contracts and the related interpretations, in which the entity must recognize revenue to represent the transfer (or commitment) of goods or services to customers so as to reflect the consideration expected to be exchanged for those goods and services. |
| The Administration of the Company has not yet completed its initial assessment of the impacts from adoption of this pronouncement on the consolidated financial statements, due to the complexity of the pronouncement and of the consolidated operations of Eletrobras considering that it will be necessary read and reassess several contracts and it could affect the recognition of estimates. The Administration wonder that some revenue may have anticipated recognition than it is today while some costs may be deferred and the impacts will be felt beyond the accounting scenario (transfer of assets from customers and take or pay agreements, for instance). As such, the impacts are not yet known, and the Administration expects to disclose additional quantitative information prior to adopting the standard. |
| January 1, 2018 |
IFRS 9(1) Financial Instruments |
| Establishes a new model for classification of financial assets, based on the characteristics of the cash flows and on the business model used to generate the asset. Changes the principles for recognition of impairment of financial assets from losses incurred to a model based on expected losses. Establishes new requirements relating to hedge accounting. |
| The effective impact of adoption of IFRS 9 on the financial statements of the Company in 2018 cannot be estimated reliably and will depend on the decisions and judgments that the Company will make in the future. The new standard will require that the Company review its accounting processes and internal controls relating to classification and measurement of financial instruments, and these alterations are not yet finalized. |
| January 1, 2018 |
Standards |
| Key Requirements |
| Position of the Company |
| Applicable Beginning |
IFRS 16 Leasing (new pronouncement) |
| Introduces a single model for recognition of leases in the balance sheet for lessees. A lessee recognizes a right of use asset which represents its right to use the active under lease, and a leasing liability which represents its obligation to make lease payments. Optional exemptions are available for short-term leases and low value items. The accounts of the lessor remain similar to the current standard, meaning that lessors will continue to classify leases in financial or operating income. IFRS 16 replaced the existing leasing standards, including IAS 17 Commercial Leasing Operations, and IFRIC 4, SIC 15, and SIC 27 - Supplemental Aspects of Commercial Leasing Operations. |
| The Company has contracts which fall within the scope of this new standard, and analysis of the impacts of adoption of this pronouncement as to the method of transition to recognition of right of use assets to offset an obligation has not yet been completed, given the complexity of the new pronouncement and the number of contracts that could potentially fall within the scope of this standard. However, the Company expect an increase in the assets and liabilities, considering the possibility to recognize a new obligation together with a new assets in the other side of the balance sheet. In addition, the impacts are not limited to the balance sheet once that are also changes over the life of the contract leases. As such, it was not possible to estimate the impacts on the consolidated financial statements of the Company. |
| January 1, 2019 |
(1) The details regarding IFRS 9 (Financial Instruments) are shown in the table below.
Details of IFRS 9- Financial Instruments
Approach |
| Key Requirements |
| Position of the Company |
Classification Financial Assets |
| IFRS 9 includes a new approach to classification and measurement of financial assets that reflects the business model in which the assets are managed and their cash flow characteristics. |
| Based on its preliminary assessment, the Company does not believe that the new classification requirements, if applied on December 31, 2016, would have a significant impact on the accounting treatment of accounts receivable, loans, investments in debt securities, and investments in equity securities measured at fair value. As on December 31, 2016, the Company had equity investments classified as available for sale with a fair value of R$1,357,923, which are held for long-term strategic purposes If these investments continue to be held for the same purpose in initial application of IFRS 9, the Company may decide to classify them as FVTOCI or FVTPL. The Company has not yet reached a conclusion in this regard. In FVTOCI classification, all gains and losses in fair value would be recorded in other comprehensive income, and there would be no impairment losses recognized in income and no gains or losses would be reclassified to income when sale occurs. In FVTPL classification, all fair value gains and losses would be recognized in income as they occur, increasing the volatility in the Company’s results. |
Impairment - Financial Assets and Contractual Assets |
| IFRS 9 replaces the “incurred losses” model from IAS 39 with a prospective “expected credit losses” model. This will require a significant judgment with respect to the method and changes in economic factors affecting expected credit losses, which will be determined based on weighted probabilities. |
| The Company believes that impairment losses will become more volatile for assets in the model from IFRS 9. However, the Company has not yet completed the impairment methodology to be applied as under IFRS 9. |
Classification Financial Liabilities |
| IFRS 9 retains a large part of the requirements from IAS 39 for classification of financial liabilities. |
| As on December 31, 2016, the Company has financial liabilities measured at fair value through profit or loss totaling R$50,631. It is the understanding of the Company that the impact on fiscal year profits or losses would not be material were the Company to apply IFRS 9, and the Company has not yet conducted analysis of the impacts. |
Hedge Accounting |
| In initial application of IFRS 9, the Company can choose to continue applying the requirements for hedge accounting from IAS 39 instead of the new requirements from IFRS 9. |
| The Company records the gains or losses relating to the ineffective part of the cash flow hedge in fiscal year profits and losses, and the changes resulting from the effective part are recognized as other comprehensive income. With adoption of IFRS 9, the Company may choose to record |
Approach |
| Key Requirements |
| Position of the Company |
|
| strategies of the Company, and that the Company applies a more qualitative and prospective approach to assess the effectiveness of the hedge. IFRS 9 also introduces new requirements for the rebalancing of hedge relationships and prohibits voluntary discontinuation of hedge accounting. Pursuant to the new model, it is likely that more risk management strategies, particularly those that hedge a certain risk component (other than foreign currency risk) of a non-financial item, could qualify for hedge accounting. Pursuant to IAS 39, for all cash flow hedges, the amounts accumulated in the cash flow hedge reserves are reclassified to profits and losses in the same period in which the expected cash flows of the hedged item affect profits and losses. However, pursuant to IFRS 9, for cash flow hedges for foreign currency risk associated with planned purchases of non-financial assets, the amounts accumulated in the cash flow hedge reserve and in the cost of hedging reserve will be included directly in the initial cost of the non-financial asset when it is recognized. |
| changes in the fair value of the future component separately, as a cost of hedging. In this case, these changes would be recognized in OCI and accumulated in a hedge cost reserve as a separate component within net equity, accounted for later in the same way as the accumulated gains and losses in the cash flow hedge reserve. Preliminary assessment by the Company indicated that the types of hedge relationships that the Company currently designates must meet the requirements from IFRS 9 if the Company is to make certain planned changes in its internal documentation and monitoring processes. |
(c) Incorporation of Subsidiaries
On August 26, 2016, during an Extraordinary General Shareholders Meeting, the shareholders of the subsidiary Eletronorte approved incorporation of Linha Verde Transmissora de Energia S.A. (LVTE), a subsidiary special purpose company of the Company, seeking to simplify the legal structure and reduce administrative, operating, and tax costs, as well as to maximize efficiency. As a result of this incorporation, LVTE was dissolved and Eletronorte became its successor.
3.2. Basis for Consolidation and Investments in Subsidiaries
The following accounting policies are applied in preparing the consolidated financial statements, which include the equity interests of the Company and its subsidiaries.
In the consolidated financial statements, the financial information of subsidiaries and of joint ventures, as well as associated companies, is recognized using the equity method, initially recognized by their cost value and then adjusted for purposed of recognition of the Company in profit or loss and other comprehensive income of the associate.
When necessary, the financial statements of subsidiaries, joint ventures, and associated subsidiaries are adjusted to match the accounting policies adopted by the Company.
The subsidiaries, joint ventures, and associated companies are essencially headquartered in Brazil.
(a) Subsidiaries
Subsidiaries are all entities that are controlled by Eletrobras. Eletrobras controls an entity when it is exposed to or entitled to variable returns arising from its involvement with the entity, and when it has the ability to affect those returns because of the power it exercises over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to Eletrobras. Consolidation in interrupted from the date on which Eletrobras ceases to have control.
The consolidated financial statements include the financial statements of the Company and its subsidiaries.
The profits and losses of the subsidiaries acquired or disposed of during the year are included in the consolidated statements of profit and loss and comprehensive income beginning on the date of the effective acquisition and through the date of effective disposal, as applicable.
All transactions, balances, revenues, and expenses between the businesses of the Company are fully eliminated in the consolidated financial statements.
The Company adopts the following principal consolidation practices:
a) Elimination of the investments of the investor in the subsidiairies, offsetting the equity interest in the respective net equity accounts;
b) Elimination of intercompany receivables and payables;
c) Elimination of intercompany revenues and expenses;
d) Reporting of the minority non-controlling interest in equity and in the consolidated statement of profit and loss of the subsidiary companies
The Company uses comprehensive consolidation criteria, as described in the table below. The equity interest is given over the total capital of the subsidiary.
|
| 31/12/2016 |
| 31/12/2015 |
| ||||
|
| Equity |
| Equity |
| ||||
Subsidiaries |
| Direct |
| Indirect |
| Direct |
| Indirect |
|
Amazonas Energia |
| 100 | % | — |
| 100 | % | — |
|
Boa Vista Energia |
| 100 | % | — |
| 100 | % | — |
|
Ceal |
| 100 | % | — |
| 100 | % | — |
|
CELG-D (1) |
| 51 | % | — |
| 51 | % | — |
|
Cepisa |
| 100 | % | — |
| 100 | % | — |
|
Ceron |
| 100 | % | — |
| 100 | % | — |
|
CGTEE |
| 99.99 | % | — |
| 100 | % | — |
|
Chesf |
| 99.58 | % | — |
| 100 | % | — |
|
Eletroacre |
| 96.71 | % | — |
| 94 | % | — |
|
Eletronorte |
| 99.48 | % | — |
| 99 | % | — |
|
Eletronuclear |
| 99.91 | % | — |
| 100 | % | — |
|
Eletropar |
| 83.71 | % | — |
| 84 | % | — |
|
Eletrosul |
| 99.88 | % | — |
| 100 | % | — |
|
Furnas |
| 99.56 | % | — |
| 100 | % | — |
|
Chuí IX |
| — |
| 99.99 | % | — |
| 99.99 | % |
Coxilha Seca (3) |
| — |
| — |
| — |
| 99.99 | % |
Paraíso |
| — |
| 100 | % | — |
| — |
|
Hermenegildo I |
| — |
| 99.99 | % | — |
| 99.99 | % |
Hermenegildo II |
| — |
| 99.99 | % | — |
| 99.99 | % |
Hermenegildo III |
| — |
| 99.99 | % | — |
| 99.99 | % |
Linha Verde Transmissora (2) |
| — |
| — |
| — |
| 100.00 | % |
Uirapuru |
| — |
| 75 | % | — |
| 75 | % |
Energia dos Ventos V |
| — |
| 99.99 | % | — |
| 99.99 | % |
Energia dos Ventos VI |
| — |
| 99.99 | % | — |
| 99.99 | % |
Energia dos Ventos VII |
| — |
| 99.99 | % | — |
| 99.99 | % |
Energia dos Ventos VIII |
| — |
| 99.99 | % | — |
| 99.99 | % |
Energia dos Ventos IX |
| — |
| 99.99 | % | — |
| 99.99 | % |
Extremoz Transmissora do Nordeste S/A |
| — |
| 100.00 | % | — |
| 100.00 | % |
Transenergia Goiás S.A. |
| — |
| 99.99 | % | — |
| 98.35 | % |
Complexo Eólico Pindaí I |
|
|
|
|
|
|
|
|
|
Acauã Energia S.A. |
| — |
| 99.93 | % | — |
| 99.93 | % |
Angical 2 Energia S.A. |
| — |
| 99.96 | % | — |
| 99.96 | % |
Arapapá Energia S.A. |
| — |
| 99.90 | % | — |
| 99.90 | % |
Caititu 2 Energia S.A. |
| — |
| 99.96 | % | — |
| 99.96 | % |
Caititu 3 Energia S.A. |
| — |
| 99.96 | % | — |
| 99.96 | % |
Carcará Energia S.A. |
| — |
| 99.96 | % | — |
| 99.96 | % |
Corrupião 3 Energia S.A. |
| — |
| 99.96 | % | — |
| 99.96 | % |
Teiú 2 Energia S.A. |
| — |
| 99.95 | % | — |
| 99.95 | % |
Complexo Eólico Pindaí II |
|
|
|
|
|
|
|
|
|
Coqueirinho 2 Energia S.A. |
| — |
| 99.98 | % | — |
| 99.98 | % |
Papagaio Energia S.A. |
| — |
| 99.96 | % | — |
| 99.96 | % |
Complexo Eólico Pindaí III |
|
|
|
|
|
|
|
|
|
Tamanduá Mirim 2 Energia S/A |
| — |
| 83.01 | % | — |
| 83.01 | % |
(1) Subsidiary classified as noncurrent asset held for sale (see Note 42).
(2) Incorporated company (see Note 3.1 c).
(3) Company dissolved in 2016.
The consolidated financial statements include the balances and transactions of the exclusive funds whose only shareholders are the Company and its subsidiaries, comprised of public and private bonds and debentures with low-risk and high-liquidity classification.
(a.1) Changes in the Group equity in existing subsidiaries
In the consolidated financial statements, changes in the Company’s stakes in subsidiaries not resulting in loss of control by the Group over the subsidiaries are recorded as capital transactions. The balances of the interests of the Company and of non-controlling shareholders are adjusted to reflect changes in their respective non-controlling interests. The difference between the amount upon which basis the non-controlling interests are adjusted and the fair value of the considerations paid or received is recorded directly in net equity and attributed to the owners of the Company.
When the Company loses the shareholding control of a subsidiary, the gain or loss is recognized in the statement of profit and loss and is calculated as the difference between: (i) the sum of the fair value of the considerations received and of the fair value of the residual stake; and (ii) the previous balance of the assets (including goodwill) and liabilities of the subsidiary and minority interests, if any. All amounts previously reported in “Other comprehensive income” relating to the subsidiary are accounted for as if the Company had directly disposed of the corresponding assets and liabilities of the subsidiary (i.e., reclassified to profit and loss or transferred to another net equity account, as required or permitted under the applicable IFRS). The fair value of any investment held in the former subsidiary on the date of loss of control is considered as the fair value in initial recognition for subsequent accounting as per IAS 39 Financial Instruments: Recognition and Measurement, or, where applicable, the cost in the initial recognition of an investment in an associated company or joint venture.
(b) Investments in Associates
Associates are entities over which the Company has significant influence and which do not qualify as a subsidiary or as a joint venture.
Any amount exceeding the cost of acquisition for the Company’s stake in the net fair value of the assets, liabilities, and identifiable contingent liabilities of the associated company on the date of acquisition is recorded as goodwill. Goodwill is added to the book value of the investment. Any amount of the Company’s stake in the net fair value of the assets, liabilities, and identifiable contingent liabilities exceeding the cost of acquisition, after revaluation, is immediately recorded in profits and losses.
When the portion of an associated company’s losses corresponding to the Company exceeds the equity interest in that associated company (including any long-term stake which, in essence, is included in the net investment in the associated company), the Company ceases to recognize its stake in additional losses. Additional losses are recognized only if the Company has incurred in legal or constructive obligations or has made payment on behalf of the associated company.
(c) Joint ventures
A joint venture is a contractual agreement by which the Company and other parties perform an economic activity subject to joint control, a situation in which the decisions on strategic financial policies and operations relating to the activities of the joint venture require approval of all parties that share the control.
When a subsidiary of the Company directly exercises its activities by way of a joint venture, the Company’s stake in the jointly controlled assets and any liabilities incurred jointly with the
other partners is recorded in the Financial Statements of the respective subsidiary and classified according to its nature. The liabilities and expense incurred directly relating to interests in jointly controlled assets are recorded using the accrual method. Any gains resulting from the sale or use of the Company’s stake in the returns on the jointly controlled assets and its stake in any expenses incurred by the joint venture are recorded when it is likely that the economic benefits associated with the transactions will be transferred to/from the Company and their value can be reliably measured.
3.3. Cash and cash equivalents
Cash and cash equivalents include cash, bank deposits, other short-term investments of high liquidity with original maturities up to three months and with insignificant risk of change in value.
3.4. Accounts receivables and allowance for doubtful accounts
The accounts receivable from customers (consumers and resellers) are composed of credits resulting from the billed and un-billed supply and delivery of electric energy, based on an estimate, including those resulting from energy Commercialization within the Electricity Trading Chamber (CCEE) accounted for using the accrual method, and are recognized initially at fair value, and subsequently measured at amortized cost less the allowance for doubtful accounts.
The balance includes the supply of energy not yet billed, resulting primarily from distribution activities, which is measured using estimates based on the historic consumption of MWh.
Accounts receivable are normally settled within a period of up to 45 days, and so the book values substantially represent the fair values on the reporting dates.
If the period for receipt is equal to or less than one year, receivables are classified under current assets. Otherwise, they are included in noncurrent assets (Note 7).
3.5. Fuel Consumption Account (CCC)
Per the terms of Law 8,631 of March 4, 1993, the Company manages the values collected by the electricity utility concessionaires for credit to the Fuel Consumption Account (CCC), corresponding to the annual quotas used to cover fuel expenses for electric power generation. The amounts recorded in current assets, offset in current liabilities, correspond to the resources available held in an associated bank account, and the fees unpaid by the concessionaires. The amounts recorded in assets are corrected based on the profitability of the investment, representing restricted cash on hand that cannot be used for other purposes.
Transactions with the CCC do not affect the consolidated profit or loss statement of the Company.
3.6. Guarantees and Associated Deposits
The amounts recorded are intended for legal and/or contractual purposes. They are valued at acquisition cost plus interest and monetary adjustment pursuant to the relevant legal provisions, adjusted for the provision for losses in realization, where applicable. Redemption of these amounts occurs at the conclusion of the related judicial proceedings with which these deposits are associated.
3.7. Inventories and Fuel (CCC)
Inventories are recorded at average of the cost of acquisition, net of allowances for losses, where applicable, and do not exceed the replacement cost or net realizable value. The net realizable value corresponds to the estimated price of sale of the inventories, deducting all estimated costs for conclusion and costs necessary to complete the sale.
Warehouse and fuel inventories (CCC) are classified under current assets and are recognized at average cost of acquisition, which does not exceed market value.
3.8. Nuclear Fuel Inventory
Composed of uranium concentrate in stock, the corresponding services, and the nuclear fuel components used at the Angra I and Angra II thermonuclear plants, recorded at cost of acquisition.
Preproduction, when uranium and the services necessary for production are acquired, they are classified as long-term noncurrent assets, shown under the Nuclear Fuel Inventory heading. During the production phase, the portion relating to the expected consumption for the next 12 months is classified in current assets.
The consumption of the components of nuclear fuel is appropriated proportionally in the profit and loss of the year, considering the monthly energy effectively generated with respect to total energy expected for each fuel component. Inventories are mesured periodically with valuation of the nuclear fuel components used in the electricity generation process and are stored in the used fuel tank.
3.9. Fixed Assets, Net
Fixed Assets are measured by the historic cost less accumulated depreciation and any accumulated impairment losses. The historic cost includes expenses directly attributed to the acquisition of the assets, and also includes, in the case of qualifying assets, borrowing costs capitalized pursuant to the accounting policies of the Company. These assets are classified in the appropriate fixed assets categories when they are completed and ready for their intended use. Depreciation of these assets begins when they are ready for their intended use on the same basis as other fixed assets.
Depreciation is recognized based on the estimated useful life of each asset using the linear method, so that once the useful life has ended, the value of the cost less its residual value is fully written-off (except for lands and construction in progress). The Company considers that the estimated useful life of each asset is similar to the depreciation rates determined by the ANEEL, which are considered by the market as acceptable to express adequately. In addition, with regard to the Company’s understanding of the current regulatory framework for concessions, including Law 12,783/2013, indemnification at the end of the concession was considered, based on the lesser of either the VNR or the residual book value, this being the factor that is considered when measuring a fixed asset (see details in Note 16).
Assets held under financial commercial leasing are depreciated based on their expected useful life in the same way as owned assets, or over a shorter period, if applicable, in accordance with the terms of the lease agreement in question.
An item of fixed assets is written off after it is disposed of or when there are no future economic benefits resulting from the continued use of the asset. Any gains or losses in the sale or disposal of a fixed assets item are calculated as the difference between the amounts received in the sale and the book value of the asset, recognizing the result in fiscal year profits and losses.
3.9.1. Borrowing Costs
Each month, interest and, if applicable, the exchange variation incurred on loans and financing are added to the cost of acquisition of the fixed asset in formation, considering the following criteria for capitalization:
a) The capitalization period occurs when the qualified asset is in the construction phase, and capitalization of interest ceases when the item is available for use;
b) Interest is capitalized considering the weighted average rate on the loans and financing in effect on the date of capitalization or, for those assets in relation to which specific loans were obtained, the rates of these specific loans;
c) The interest capitalized on a monthly basis cannot exceed the value of the interest expenses determined during the capitalization period;
d) The capitalized interest is depreciated considering the same criteria and estimated useful life determined for the corresponding item.
Gains on investments resulting from temporary allocation of funds obtained with specific loans and financing not yet expensed with the qualifying asset are deducted from the costs of loans and financing eligible for capitalization, when the effect is material.
All other costs from loans and financing are recognized in profits and losses for the fiscal year in which they are incurred.
3.10. Concession Agreements
The Company has concession agreements in the electric power generation, transmission, and distribution segments, signed with the Concession grantor (the Brazilian Federal Government) for periods of between 20 and 35 years, being allcontracts, by segment, are quite similar in terms of the rights and obligations of the concessionaire and the concession authority. The terms of the main concessions are described in Note 2.
I — Tariff System
a) The tariff system for electric power distribution is controlled by the ANEEL, and the respective rates are adjusted annually and revised every four years with the aim of maintaining the economic/financial balance of the concessionaire, considering the appropriate investments made and the cost and expense structure of the company in question. Users are charged directly for the services, using as a basis the volume of energy consumed and the authorized rate (see Note 17).
b) The electric power transmission tariff system is regulated by ANEEL and rates are revised periodically, based on the established Annual Permitted Revenue (RAP), which is updated annually using an inflation index, and is subject to periodic revisions to cover new
investments and any other aspects relating to the economic/financial balance of the concession contracts. This billing system was adjusted upon renewal of the concessions directly affected by Law 12,783/2013.
c) Until 2004, the electricity generation tariff system was based, in general, on regulated rates, and since then, as part of the changes in the regulation of this sector, the base rate was changed to a pricing system, where electricity generation companies can freely participate in electricity auctions for the regulated market, using in such cases a base price, while the final price is determined based on the competition between the auction participants. In addition, electricity generation companies can enter into bilateral sale agreements with consumers that fall under the category of free consumers (this definition is based on the energy demand in MW). This billing system was adjusted upon renewal of the concessions directly affected by Law 12,783/2013.
II — Transmission and Distribution Concessions
The concession contracts regulate the exploitation of public electric power distribution and transmission services by the Company, where:
1) Electric power distribution
a) The agreement establishes which services the operator must provide and to whom (consumer class) the services must be provided;
b) The contract establishes performance standards for utility services in order to maintain and improve the quality of service for consumers, while the concessionaire has the obligation, upon delivery of the concession, to return the infrastructure in the same conditions in which it was received upon execution of the agreements. In order to meet these obligations, investments are made regularly throughout the term of the concession. As such, the assets associated with the concession may at times be replaced prior to the end of the concession;
c) At the end of the concession, the assets associated with the infrastructure must be reverted to the concession authority through payment of an indemnity determined based on the depreciated Regulatory Remuneration Basis (BRR).
2) Electric power transmission
a) The price (tariff) is regulated and is called Annual Permitted Revenue (RAP). The electricity transmission company cannot negotiate prices with users. For some contracts, the RAP is fixed and subject to monetary adjustment based on a price index once annually. For all other contracts, the RAP is subject to monetary adjustment using a price index once annually and revised every five years. In general, the RAP of any electricity transmission company is subject to annual revision for increases in the assets and the operating expenses resulting from modifications, reinforcements, and expansions of installations. The rate levels (RAP) were altered upon renewal of the concessions directly affected by Law 12,783/2013.
b) The assets are reversible at the end of the concession, with the right to receive an indemnity (in cash) from the concession authority on investments not yet amortized, determined using the new replacement value (VNR). There are still assets from renewed concessions that are pending approval by ANEEL, which are pending indemnification (see Note 2.1).
II.1 — Application of IFRIC 12 - Service Concession Agreements, applicable to the public/private concession agreements in which the public entity:
a) Controls or regulates the type of services that can be supplied using the underlying infrastructures;
b) Controls or regulates the price at which the services are provided;
c) Controls/holds a significant interest in the infrastructure at the end of the concession.
A public/private concession typically has the following characteristics:
a) Infrastructure that underlies the concession is used to provide services;
b) An agreement/contract between the concession authority and the operator;
c) The operator provides a set of services during the concession;
d) The operator receives remuneration during the length of the concession agreement, directly from the concession authority, from the users of the infrastructure, or both;
e) The infrastructure is transferred to the concession authority at the end of the concession, typically without charge but sometimes at a cost.
In accordance with IFRIC 12, the concession infrastructure that falls within the scope of this standard is not recognized by the concessionaire as fixed assets, because it is considered that the operator does not control these assets, and so they are recognized according to one of the following accounting models, depending on the type of remuneration which the concession authority agrees to deliver to the operator under the terms of the agreement:
1) Financial asset model
This model is applicable when the concessionaire has the unconditional right to receive certain monetary amounts regardless of the level of use of the infrastructure under concession, and this results in the recording of a financial asset, which was classified as loans and receivables (generation and transmission) or available for sale (distribution).
2) Intangible asset model
This model is applicable when the concessionaire, as part of the concession, is remunerated based on the level of use of the infrastructure (credit and demand risk) with respect to the concession, which results are recognized as an intangible asset.
3) Mixed model
This model applies when the concession simultaneously includes remuneration commitments guaranteed by the concession authority and remuneration commitments that depend on the level of use of the concession infrastructure.
Based on the characteristics established in the electricity distribution concession agreements of the Company and its subsidiaries and on the regulatory requirements, the following assets are recognized for the electricity distribution business:
a) The estimated portion of investments made that have not been amortized or depreciated at the end of the concession is classified as a financial asset because it constitutes an unconditional right to receive cash or another financial asset directly from the concession authority; and
b) The remaining portion of the financial asset (residual value) will be classified as an intangible asset by virtue of the fact that its recovery is subject to the use of the public utility, which in this case is the consumption of energy by consumers.
The infrastructure received or constructed in distribution activities is recovered through two cash flows, namely:
a) Partly through the consumption of energy by consumers (issuance of monthly bills reflecting metered energy and power consumed/sold) during the concession agreement; and
b) Partly as indemnification of the reversible assets at the end of the concession term, which is received directly from the concession authority or from another party designated by the concession authority.
This indemnity will be made based on the portions of the investments associated with reversible assets that are not yet amortized or depreciated, which have been made in order to guarantee the continuity of the service provided.
The electric power distribution concessions of its subsidiaries are not onerous. As such, there are no fixed financial obligations and payments to be made to the concession grantor.
For electric power transmission activities, the Permitted Annual Revenue (RAP) is received from the companies that use the infrastructure by way of a transmission system usage tariff (TUST). This tariff is calculated by apportionment between the transmission users of certain specific values: (i) the RAP of all transmission companies; (ii) the services provided by the national Operator System (ONS); and (iii) the regulatory fees.
The concession grantor has delegated monthly payment of the RAP to the generation companies, distributors, free consumers, exporters, and importers, and because this payment is guaranteed under the transmission regulatory framework, it constitutes an unconditional contractual right to receive cash or other financial assets, and thus the credit risk is low.
Considering that the Company is not exposed to credit and demand risks and that the revenue is calculated based on the availability of the transmission line, all infrastructure was recorded under financial assets.
The financial assets also include the indemnity to be made based on the portions of the investments associated with reversible assets that are not yet amortized or depreciated, which have been made in order to guarantee the continuity of the service provided.
III. Generation Concessions
a) Hydroelectric and thermal generation - The concessions not directly affected by Law 12,783/2013 do not fall under the scope of IFRIC 12, given the pricing
characteristics and lack of a regulated rate. Beginning on January 1, 2013, the concessions directly affected by Law 12,783/2013, which previously fell outside the scope of IFRIC 12, now are subject to these accounting standards, considering the shift in pricing system to one of regulated rates for these concessions, in the same mold as that which was already applied to distribution concessions.
b) Nuclear generation - Here there is a defined rate system, though nuclear generation contracts differ from other generation contracts, as they constitute an authorization rather than a concession. There is no definitive end for this authorization, and there are no significant asset controls performed by the concession authority at the end of the authorization period.
IV. Itaipu Binacional
a) Itaipu Binacional is governed by a 1973 Binational Treaty in which rate conditions were established, serving as the basis for determination of rates to cover the expenses and debt servicing of the Company;
b) The tariff basis and the commercialization terms will remain in effect through 2023, corresponding to a significant portion of the plant’s useful life; after 2023, the base rate and marketing terms must be revised;
c) The tariff basis for Itaipu was established on a weighted basis to allow payment of debt servicing, with final maturity in 2023, and to support operation and maintenance expenses;
d) The commercialization of Itaipu was subrogated to the Company on the basis of contracts signed previously with the distribution companies, such contracts which previously defined the payment conditions;
e) By way of Law 10,438 of April 26, 2002, the commitments to purchase and transfer Itaipu Binacional electricity services to the distribution concessionaires were subrogated to the Company; previously these commitments were assumed by Furnas and Eletrosul, both Company subsidiaries, by way of contracts with the electricity distribution concessionaires. Debts resulting from the marketing of Itaipu Binacional energy were renegotiated with the Company, resulting in financing agreements. These agreements were initially recorded at fair value and subsequently measured at amortized cost, using the effective interest method.
f) The terms of the treaty guarantee reimbursement to the Company, even in cases of lack of energy generation capacity or operational problems with the plant.
V. Financial Assets - Public Utility Concessions.
The Company records a receivable from the concession authority (or whoever is designated by that authority) when it has an unconditional right to receive cash at the end of the concession by way of indemnity for the investments that are made by the electricity distribution, transmission, and generation companies and that are not recovered through provision of services relating to the concession. These financial assets are recorded at present value of the respective rights and are calculated based on the estimated portion of the investments made and not yet amortized or depreciated at the end of the concession. Remuneration for distribution assets is based on the regulatory weighted average cost of capital (WACC), such factor which is included in the base rate, while remuneration for
transmission and generation assets is based on the internal rate of return of the respective project. In the case of generation, only those assets associated with concessions directly affected by Law 12,783/2013 and formed after publication of that Law are considered as financial assets subject to remuneration in the same way as transmission companies, provided that acquisition of such assets is approved by MME and ANEEL.
These receivables are classified as either current and noncurrent assets, considering when the amounts are expected to be received, using the termination dates of the concessions as a basis.
3.11. Intangible Assets, Net
The Company recognizes as an intangible asset the right to charge users for the services provided for distribution of electricity (for generation of the Amazonas Energia infrastructure, which has an exclusive connection with the distribution activity of this Company, and is also classified as intangible). The intangible asset is the residual value of construction income earned for the construction or acquisition of infrastructure held by the Company and the value of the financial asset in relation to the unconditional right to receive cash at the end of the concession as compensation.
The asset is presented net of accrued amortization and of losses due to the reduction in recoverable value (impairment), when applicable.
The amortization of intangible assets reflects the pattern in which the future economic benefits are expected to be consumed by the Company, or the end of the concession period, whichever occurs first. The consumption pattern of assets is related to their economic useful life, considering that the assets constructed by the Company are part of the basis of calculation for measuring the tariff for concession services.
The amortization of the intangible asset begins when it is available for use, at its location and in the necessary condition for it to be able to operate in the manner intended by the Company. Depreciation ceases when the asset has been fully consumed or written down, or is not longer integrated in the calculation base of the tariff for concession services, whichever occurs first.
The Company annually performs a recoverability of assets test using the present value method of the future cash flows generated by the asset, assuming no active market for the assets connected with the concession. (See Note 19).
Intangible assets include the usage rights of the concession, but also include goodwill on acquisition of investments and specific expenses associated with the acquisition of rights, as well as, when applicable the respective costs of deployment.
Intangible assets with defined useful lives, purchased separately, are recognized at cost, deducting amortization and losses due to the reduction in the accrued recoverable value. Amortization is recognized linearly based on the estimated useful life of the assets. The estimated useful life and the depreciation method are reviewed at the end of each financial year and the effect of any changes in the estimate is accounted for prospectively.
Intangible assets with indefinite useful lives, purchased separately, are recorded at cost, deducting amortization and losses due to the reduction in the accrued recoverable value.
3.11.1. Concessions for Valuable Consideration (Use of Public Asset - UBP)
The Company and certain subsidiaries have contracts for concessions for valuable consideration with the Government for the use of public assets for the generation of electric power in certain plants.
The values identified in the contracts are the future prices and, therefore, the Company and those subsidiaries have adjusted these contracts to the present value based on the discount rate determined on the date of the obligation.
The update of the obligation in relation to the discount rate and monetary variation, defined in the concession agreement, is capitalized in the asset, during the construction of the power plants and from the date of entry into commercial operation, and is recognized as income.
These assets are recorded in intangible assets offsetting the noncurrent liabilities.
3.11.2. Expenses with Studies and Projects
Expenses incurred with studies and projects, including feasibility studies and hydroelectric plant inventories and power transmission lines, are recognized as operating expenditures when incurred, until there is proof of the economic viability of their use or the granting of the concession or authorization. From the date of concession and/or authorization for use of the public service of electricity or the evidence of economic viability of the project, the expenses incurred are capitalized as cost of development of the project. Currently, the Company does not have capitalized amounts regarding spending on studies and projects.
3.12. Recognition of the receivables and the Parcel A obligations and other financial components
On November 25, 2014, ANEEL decided to add the concession contracts and permits of the electricity distribution companies in Brazil in order to eliminate any uncertainty with regard to the recognition and realization of time differences, whose values are passed annually on to the tariff for electrical energy distribution — Parcel A (CVA) and other financial components. Pursuant to the addendum issued by ANEEL, the regulatory body guarantees that the CVA values and other financial components will be incorporated in the calculation of compensation at the end of the concession.
The addendum to the Concession Contracts, represented a new element that ensures, from its date, the right or imposes an obligation on the concessionaire receiving or paying for the assets and liabilities in relation to the counterparty — the Granting Authority. This new event changes, from that date, the environment and the previously existing contractual terms and extinguishes the uncertainties regarding the ability to realize the asset or enforce the liability. These are conditions that differ from those which occurred previously.
The effects of the addendum to the concession agreement and permission are not an accounting policy change, but of a change circumstance that was applied prospectively. Therefore, the record of the amounts receivable (obligations) was effected in asset (or financial liability) accounts, where appropriate, in contrast to the income or loss for the financial year (income from sale of goods and services).
3.13. Impairment of non-financial assets, excluding goodwill
At the end of each financial year, the Company assesses whether there is any indication that their non-financial assets have suffered any loss due to a reduction in recoverable value. If an indication exists, the recoverable amount of the asset is estimated in order to measure the amount of that loss. When it is not possible to estimate the recoverable amount of an asset individually, the Company calculates the recoverable amount of the cash-generating unit to which the asset belongs.
When a reasonable and consistent allocation basis can be identified, the corporate assets are also allocated to the individual cash-generating units or to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.
In assessing the usage value, estimated future cash flows are discounted to present value at a discount rate that reflects current market assessment: the time value of the currency and the risks specific to the asset for which the future cash flow estimation was performed.
If the recoverable value of an asset (or cash-generating unit) calculated is less than its book amount, the book value of the asset (or cash-generating unit) is reduced to its recoverable value. The loss due to a reduction in recoverable value is recognized immediately in income.
When the loss due to a reduction in the recoverable value is subsequently reversed, an increase in the book value of the asset (or cash-generating unit) occurs, in relation to the revised estimate of its recoverable value. This increase may not exceed the book value that would have been determined if no loss due to the reduction in recoverable value had been recognized for the asset (or cash-generating unit) in previous years. The reversal of the loss due to a reduction in recoverable value is recognized immediately in income.
3.14. Goodwill
The goodwill arising from a business combination is stated at cost on the date of the business combination, net of accumulated loss in recoverable value, if applicable.
For testing purposes of reduction in recoverable value, the goodwill is allocated to each of the Company’s cash-generating units (or groups of cash-generating units) that will benefit from the synergies of the combination.
As the investment operations of the Company are linked to operations subject to concession contracts, the goodwill arising from the acquisition of such entities represents the entitlement right of concession with defined useful life, being recognized as an intangible asset of the concession, and the depreciation made in accordance with the period of the concession.
3.15. Noncurrent assets held for sale
Noncurrent assets and groups of assets are classified as held for sale when their book value is recovered primarily by way of a sale transaction and not through continued use. This condition is met only when the asset (or group of assets) is available for immediate sale in its current state, subject only to the usual terms for sale of that asset (or group of assets), and when sale is considered to be highly likely. Management must be committed to the sale, expecting that, in recognition, it can be considered as a concluded sale within one year from the date of classification.
When the Company is committed to a plan for sale involving loss of control of a subsidiary, provided the criteria described in the preceding paragraph are met, all assets and liabilities of the subsidiary are classified as held for sale in the consolidated financial statements, even if after the sale the Company still holds equity in the company.
The noncurrent assets (or groups of assets) classified as held for sale are measured at the lesser of either the previously recorded book value or the fair value less cost of sale. The related assets and liabilities are shown in a segregated manner in the balance sheet.
3.16. Business combinations
In the consolidated financial statements, business acquisitions are accounted for by the acquisition method. The consideration transferred in the business combination is measured at fair value. This fair value is calculated by the sum of the fair values of the assets transferred to the Company and of the liabilities entered into by the Company, at the date of purchase, with the old controllers of the purchased company and the shares issued by the Company in exchange for control of the purchased company. Acquisition-related costs are generally recognized in the income when incurred.
At the date of acquisition, the assets acquired and liabilities assumed that are identifiable are recognized by the fair value at the date of acquisition, except for:
· assets or deferred tax liabilities and assets and liabilities related to benefit agreements with employees, which are recognized and measured in accordance with IAS 12 - Income Taxes and IAS 19 - Employee Benefits, respectively;
· liabilities or equity instruments, related to payment arrangements based on shares of the purchased company or payment arrangements based on Group shares, concluded in substitution of payment arrangements based on shares of the purchased company that are measured in accordance with IFRS 2 - Payments Based on Shares at the date of purchase; and
· assets (or groups for disposal) classified as held for sale in accordance with IFRS 5 Non-Current Assets Held for Sale and Discontinued Operations, which are measured according to this standard.
The goodwill is measured as the excess of the sum of: (1) the consideration transferred; (2) the value of the non-controlling shares of the purchased company and; (3) the fair value of the shares of the purchaser previously held in the purchased company (if any) over the net values, at the date of purchase, of the assets acquired and liabilities assumed that are identifiable. If, after the valuation, the net values of the identifiable assets acquired and liabilities assumed at the date of acquisition are greater than the sum of: (1) the consideration transferred; (2) the value of the non-controlling shares in the purchased company; and (3) the fair value of the shares of the purchaser previously held in the purchased company (if any), that excess is recognized immediately in income as a gain.
The non-controlling shares, corresponding to the current holdings and which give their holders the right to a proportional share of the net assets of the entity, in the case of liquidation, may be initially measured at fair value. They may also be measured on the basis of the proportional part of the non-controlling shares in the recognized values of the identifiable net assets of the purchased company. The selection of the method of measurement is made on a transaction by transaction basis. Other types of non-controlling shares are measured at their fair value or, where applicable, as described in another IFRS.
When the consideration transferred by the Company, in a business combination, includes assets or liabilities resulting from an agreement of the contingent consideration, the contingent consideration is measured at fair value at the date of acquisition. In addition, it is included in the consideration transferred in the business combination. The variations in the fair value of contingent consideration, classified as measurement period adjustments, are adjusted retroactively, with the corresponding adjustments in the goodwill. Measurement period adjustments correspond to adjustments resulting from additional information obtained during the “measurement period” and the related facts and circumstances existing at the date of acquisition. The measurement period shall not exceed one year from the date of purchase.
Subsequent accounting for variations in the fair value of the contingent consideration, not classified as measurement period adjustments, depends on the form of classification of the contingent consideration. The contingent consideration classified as equity is not revalued on the dates of subsequent financial statements and its corresponding liquidation is accounted for in equity. The contingent consideration classified as an asset or liability is revalued on the dates of subsequent financial statements in accordance with IAS 39, or IAS 37 - Provisions, Contingent Liabilities and Contingent Assets, as applicable, and the corresponding gain or loss is recognized in the income.
When a business merger is performed in stages, the shares previously held by the Company in the purchased company are revalued at fair value at the date of acquisition (i.e. the date on which the Company acquires the control) and the corresponding gain or loss, if any, is recognized in the income. The values of the shares in the purchased company prior to the date of acquisition, which were previously recognized in “other comprehensive income” are reclassified in the income, to the extent that such treatment is appropriate if that participation is divested.
If the initial accounting for a business combination is incomplete at the close of the period in which this combination occurred, the Company records the provisional values of the items whose accounting is incomplete. These provisional values are adjusted during the measurement period (see above), or additional assets and liabilities are recognized to reflect the new information obtained related to facts and circumstances existing at the date of acquisition which, if known, would have affected the values recognized at that date.
Business combinations that occurred up to December 31, 2008 were accounted for in accordance with CVM Instruction 247/1996. The goodwill and negative goodwill recorded on acquisitions of holdings of non-controlling shareholders after January 1, 2009, the date of initial adoption of the IFRS, are allocated entirely to the concession contract and recognized in the intangible assets.
3.17. Taxation
Expenses related to income tax and social contributions represent the sum of the current and deferred taxes. Additionally, the option of calculating taxes on the results of the Company is by the method of actual profits.
3.17.1. Current taxes
Income tax (IRPJ) and social contributions (CSLL) expenses are based on the taxable income for the year. Taxable income differs from income presented in the income statement because it excludes taxable income or expenses deductible in other periods, in addition to deleting items that are not taxable or not deductible on a permanent basis. Income tax and social
contributions expenses are calculated individually for each company based on the Company’s current rates at the end of the period.
3.17.2. Deferred taxes
The deferred income tax and social contributions are recognized at the end of each reporting period, on temporary differences between the balances of assets and liabilities recognized in the financial statements and the corresponding tax bases used in the computation of taxable income, including the balance of tax losses, when applicable. The deferred tax liabilities are generally recognized for all taxable temporary differences and deferred asset taxes are recognized on all deductible temporary differences, only when it is probable that the Company will present sufficient future taxable income in relation to which these deductible temporary differences can be utilized.
The recovery of the balance of deferred asset taxes is reviewed at the end of each reporting period and, when it is no longer probable that future taxable income will be available to allow the recovery of all or part of asset the balance of the asset is adjusted by the amount which is expected to be recovered.
Deferred asset and liability taxes are measured by the tax rates applicable in the period in which the liability is expected to be settled or the asset is realized, based on tax rates provided for by the legislation in effect at the end of each reporting period, or when new legislation has been substantially approved. The measurement of deferred tax on liabilities and assets reflects the tax consequences that would result in the manner which the Company expects, at the end of each reporting period, to recover or liquidate the book value of these assets and liabilities.
The current and deferred taxes are recognized in the income, except when they correspond to items recorded in other comprehensive income, or directly in equity, in which case the current and deferred taxes are also recognized in other comprehensive income or directly in net equity, respectively. When the current and deferred taxes originate from the initial accounting for a business combination, the tax effect is considered in the accounting of the business combination.
3.18. Financial instruments
Assets and financial liabilities are recognized when an entity of the Company is a party to the contractual provisions of the instrument.
Assets and financial liabilities are initially measured at fair value.
Transaction costs directly attributable to the acquisition or issue of financial assets and liabilities (except for financial assets and liabilities recognized at fair value in the income) are added or deducted from the fair value of the assets or financial liabilities, if applicable, after the initial recognition. Transaction costs directly attributable to the acquisition of financial assets and liabilities at fair value through profit or loss are recognized immediately in profit or loss.
3.18.1. Financial assets
Financial assets are classified into the following specific categories: financial assets at fair value through profit or loss, investments held to maturity, financial assets available for sale and loans and receivables. The classification depends on the nature and purpose of the financial assets and is determined on the date of initial recognition.
1) Financial assets at fair value through profit or loss
A financial asset is classified as held for negotiation if:
(a) it is purchased primarily to be sold in the short term; or
(b) on initial recognition if is part of a portfolio of identified financial instruments that Eletrobras manages as a group and has a recent actual pattern of short-term income taking; or
(c) it is a derivative that has been designated as an effective hedge instrument.
A financial asset held for negotiation, in addition, can be designated at fair value through profit or loss on initial recognition if:
(a) such a designation eliminates or reduces significantly an inconsistent measurement or recognition that would otherwise would arise; or
(b) the financial asset is part of a managed group of assets or financial liabilities or both, and
(c) their performance is evaluated on a fair value basis, in accordance with a documented risk management strategy or investment of the Company, and when information about the grouping is provided internally on the same basis; or
(d) it is part of a contract containing one or more embedded derivatives and IAS 39 - Financial instruments: Recognition and Measurement permits the combined contract (asset or liability) to be fully assigned to fair value through profit or loss.
Financial assets are classified at fair value through profit or loss when they are held for negotiation with the purpose of selling in the short term or designated by fair value through profit or loss.
Financial liabilities at fair value through profit or loss are shown at fair value, and gains or losses are recognized in the profit or loss. Net gains and losses recognized in the profit or loss incorporate the dividends or interest earned by the financial asset, being included under other financial income and expenses in the profit or loss.
Investments held to maturity
Investments held to maturity are non-derivative financial assets with fixed or determinable payments and fixed maturity that the Company has the positive intention and ability to hold to maturity. After initial recognition, investments held to maturity are measured at amortized cost using the effective interest method, less any loss due to a reduction in recoverable value.
(a) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables (including trade accounts receivable and others, cash and cash equivalents, accounts receivable of Installment A and others) are initially recorded at their purchase price, which is the fair value of the price paid, including transaction expenses. After initial recognition, they are measured at amortized cost
value using the effective interest method, less any loss due to a reduction of the recoverable amount.
The interest income is recognized by applying the effective interest rate.
(a) Financial assets available for sale
Financial assets available for sale are non-derivative financial assets that are designated as available for sale and not classified as:
1) Financial assets at fair value through profit or loss
2) Investments held to maturity, or
3) Loans and receivables.
Changes in the book value of financial assets available for sale related to variations in exchange rates, income from interest calculated using the effective interest method and dividends on stock investments available for sale are recognized in income. Changes in the fair value of available for sale financial assets are recognized in Other comprehensive results. When the investment is disposed of or a reduction in the recoverable amount occurs, the cumulative gain or loss previously recognized in the Other comprehensive income account is reclassified to profit or loss.
3.18.2. Reduction in recoverable value of non-financial assets
Financial assets, except those designated at fair value through the profit or loss, are evaluated for indicators of a reduction in recoverable value at the end of each reporting period. The losses due to a reduction in recoverable value are recognized if, and only if, there is objective evidence of a reduction in recoverable value of the financial asset as a result of one or more events that occurred after their initial recognition, with an impact on the estimated future cash flows of that asset.
In the case of equity investments classified as available for sale, a significant or prolonged decline in the fair value of the title, below its cost, it is also evidence that the assets are deteriorated. If any evidence of this type exists for financial assets available for sale, the cumulative loss will be removed from equity and recognized in the consolidated income statement. This cumulative loss is measured as the difference between the acquisition cost and the current fair value, less any impairment loss on recoverable value, over the financial asset previously recognized in the income. Recoverable value losses recognized in the income statement on equity instruments are not reversed through the consolidated income statement. If, in a subsequent period, the fair value of a debt instrument classified as available for sale increases and the increase can be objectively related to an event that occurred after the loss on the recoverable value has been recognized in income, the loss on the recoverable value is reversed through an entry in income.
For certain categories of financial assets, such as accounts receivable, assets are evaluated collectively, even if they do not present evidence that they are recorded for the value greater than that recoverable, when evaluated on an individual basis. Objective evidence of a reduction in the recoverable value for a portfolio of receivables may include: the past experience of the Company in the collection of payments and the increase in the number of late payments, after the average period of receipt, as well as observable changes in national or local economic conditions related to non-payment of receivables.
For financial assets recorded at the amortized cost value, the amount of the reduction in recoverable value recorded corresponds to: the difference between the book value of the asset and the present value of the estimated future cash flows, discounted by the original effective interest rate of the financial asset.
For financial assets recorded at cost, the amount of the loss due to the reduction in the recoverable value corresponds to the difference between the book value of the asset and the present value of the estimated future cash flows, discounted by the current rate of return for a similar financial asset. That loss due to the reduction in the recoverable value will not be reversed in subsequent periods.
The book value of the financial asset is reduced directly by loss due to the reduction in the recoverable value for all financial assets with the exception of receivables, where the book value is reduced through the use of a provision. Subsequent recoveries of amounts previously provisioned are credited to the provision. Changes in the book value of the provision are recognized in the income.
For financial assets recorded at amortized cost, if in a subsequent period the amount of the loss from the reduction in the recoverable value decreases and the decrease can be related objectively to an event occurring after the reduction in the recoverable value has been recognized, the previously recognized loss is reversed through income, since the book value of the investment at the date of this reversal does not exceed the amortized cost if the reduction in the recoverable value had not been recognized.
3.18.3. De-recognition of financial assets
The Company desrecognize a financial asset only when the contractual rights to the cash flows from the asset expire or are transferred along with the risks and benefits of ownership. If the Company does not transfer or retain substantially all the risks and rewards of ownership of the financial asset, but continue to control the transferred asset, the Company recognizes the participation retained and its liabilities on the values that it will have to pay. If retains substantially all the risks and rewards of ownership of the financial asset transferred, the Company continues to recognize this asset, in addition to a loan guaranteed by the income received.
In writing down a financial asset, the difference between the book value of the asset and the sum of the consideration received and receivable and the accrued gain or loss that has been recognized in the Other comprehensive income account and accrued in equity is recognized in income.
3.18.4. Financial liabilities and equity instruments
Debt and equity instruments issued by an entity of Eletrobras are classified as financial liabilities or equity, in accordance with the nature of the contractual agreement and the definitions of financial liabilities and equity instruments. An equity instrument is a contract that evidences a residual interest in the assets of a company after deducting all its liabilities. Equity instruments issued by Eletrobras are recognized when resources are received, net of direct costs of issuance.
Financial liabilities are classified as financial liabilities at fair value through income or other financial liabilities.
The other financial liabilities, which include loans and financing, suppliers, and other accounts payable are measured at amortized cost value using the effective interest method.
The effective interest method is used for calculating the amortized cost of a financial liability and to allocate its interest expense for the period. The effective interest rate is the rate that exactly discounts the estimated future cash flows (including fees and points paid or received that constitute an integral part of the effective interest rate, transaction costs and other premiums or discounts) throughout the estimated life of the financial liability or, where appropriate, for a smaller period, for the initial recognition of the net book value.
3.18.5. De-recognition of financial liabilities
The Company writes down financial liabilities only when the Company’s obligations are extinguished and cancelled or when they expire. The difference between the book value of financial liabilities written down and the consideration paid and payable is recognized in income.
3.18.6. Financial guarantee contracts
A financial guarantee contract consists of contract that requires the issuer to make specified payments in order to reimburse the holder for loss incurred due to the fact the debtor specified does not make the payment on the due date, according to the initial or amended terms of the debt instrument.
Financial guarantees are initially recognized in the financial statements at fair value on the date of issuance of the guarantee. Subsequently the obligations concerning guarantees are measured by the greatest initial value less the depreciation rates recognized, and the best estimate of the value required to liquidate the guarantee.
These estimates are defined on the basis of experience with similar transactions and in the history of past losses and in the judgment of the administration of the Company. Fees received are recognized based on the straight-line method over the life of the guarantee. Any increased obligations in relation to guarantees are presented when occurring in the operating expenses (see Note 22).
3.18.7. Derivative financial instruments
The Company has derivative financial instruments to manage its exposure to interest rate and foreign exchange risks, including fixed-term exchange contracts, interest rate and currency swaps. Note 43 includes more detailed information about the derivative financial instruments.
Derivatives are initially recognized at fair value on the date of the contract, and are subsequently remeasured at fair value at the end of the financial year. Any gains or losses are recognized in income immediately, unless the derivative is designated and effective as a hedge instrument; in this case, the moment of recognition in income depends on the nature of the hedging relationship (see Item 3.18.9).
3.18.8. Embedded derivatives
Derivatives embedded in non-derivative, principal contracts are treated as a separate derivative when their risks and characteristics are not closely related to those of the principal contracts and these are not measured at fair value through profit or loss.
3.18.9. Hedge accounting
The Company has a policy for hedging and derivative financial instruments accounting designated as hedging operations, which are initially recognized at fair value on the date on which the derivative contract is taken out, being also subsequently revalued at fair value. Derivatives are presented as financial assets when the fair value of the instrument is positive, and as liabilities when the fair value is negative.
When entering into a hedge, the Company documents the relationship between hedging instrument and the hedged item, with its objectives in risk management and its strategy to assume various hedging transactions. Additionally, when entering into the hedge and in an ongoing basis, the Company documents if the hedge instrument used in a hedging relationship is highly effective in offsetting changes in fair value or cash flow of the hedged item attributable to the risk of the hedge.
For the purpose of hedge accounting, the Company uses the following classifications:
(a) Hedging at the fair value
Changes at the fair value of the derivatives are designated and classified as fair value hedges are recorded in income with any changes in the fair value of the hedged items attributable to the risk covered. Changes in the fair value of the hedging instruments and the hedged item, attributable to the risk of hedging are recognized in income.
The hedge accounting is discontinued prospectively when the Company cancels the hedging relationship, the hedging instrument expires or is sold, terminated or executed, or when it is not longer classified as hedge accounting. The adjustment to fair value of the hedge item, originating from the risk of hedging, is recorded in profit or loss from that date.
(b) Cash flow hedging
The effective portion of changes in the fair value of derivatives, which is designated and qualified as hedging of cash flow, is recognized in the other comprehensive income account. The gains or losses related to the part not effective are recognized immediately in income.
The values previously recognized in other comprehensive income account and accrued in equity are reclassified to the income in the financial year in which the item which is the subject of the hedge is recognized in income.
Hedge accounting is discontinued when the Company cancels the hedging relationship, the hedging instrument expires or is sold, terminated or executed, or does not qualify any more as hedge accounting. Any gains or losses recognized in other comprehensive income and accrued in equity, as of that date, remain in equity and are recognized when the forecasted transaction is ultimately recognized in income. When nothing more is expected than the projected transaction to occur, the gains or losses accrued and deferred in equity are recognized immediately in income.
The Company uses derivative financial instruments for its management of financial risks, as described in Note 43. Beginning on October 1, 2013, the Company adopted accounting procedures for hedging in conformance with the provisions of IAS 39 for the purpose of reducing the volatility in the financial statements generated by the marketing of derivative
financial instruments and greater transparency of the Risk Management activities of the Company.
From the date it entering into the hedge, the Company designates its hedges of interest rates as a Cash Flow Hedge, and, accordingly, the effective variation of the fair value of the hedging instruments will be represented in the Other comprehensive income account. As the debt protected is recognized in the financial results, the variation of the fair value represented in Other comprehensive income of the hedge is recognized in the financial results based on the effective interest rate. Each quarter the Company performs effectiveness tests to assess whether the derivative instruments effectively protect and should continue to protect related debt. If during the effectiveness test there is an ineffective portion, this value is recognized immediately in the financial results.
Each hedge relationship is documented so that the debt protected is identified, the derivative, the objective, the strategy of risk management, the contractual terms are designated for Hedge Accounting and the method of measurement of prospective and retrospective effectiveness is indicated.
3.19. Post-employment benefits
3.19.1. Retirement obligations
The Company and its subsidiaries sponsor various pension plans, which are generally funded by payments to these pension funds, determined by periodic actuarial calculations. The Company has defined benefit plans and also defined and variable contribution plans. In defined contribution plans, the Company makes fixed contributions into a separate entity. Additionally, it does not have any legal obligations to make contributions, if the fund does not have sufficient assets to pay all employees the benefits relating to the services provided in the current and previous periods tied to this kind of plan. A defined benefit plan is different from a defined contribution plan, since, in these defined benefit plans, a retirement benefit amount that an employee will receive on retirement is established, usually dependent on one or more factors such as age, length of service and remuneration. In this type of plan, the Company has an obligation to honor the commitment, if the fund does not have sufficient assets to pay all employees the benefits relating to the services provided in the current and previous periods connected with this kind of plan.
The liability recognized in the Balance Sheet with respect to defined benefit plans is the present value of the defined benefit obligation on the date of the balance sheet, less the fair value of the assets of the plan. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows. Interest rates used in this discount are consistent with market securities, which are denominated in the currency in which the benefits will be paid and that have upcoming maturities of those of the respective obligation of the pension plan.
Actuarial gains and losses arising from adjustments based on experience, in changes in actuarial assumptions and the income of the assets of the plan, are debited or credited in other comprehensive income.
Service costs passed on are recognized immediately in income in the period of occurrence of a change of the plan.
With regard to defined contribution plans, the Company makes the payment of contributions in a mandatory, contractual or voluntary manner. The Company has no additional payment
obligations once the contribution is made. The contributions are recognized as employee benefit expense when due. Contributions made in advance are recognized as an asset in the proportion in which a cash refund or a reduction in the future payments may be available.
3.19.2. Other post-employment obligations
Some subsidiaries of the Company offer post-retirement health care benefits to their employees, in addition to life insurance for active and inactive employees. The entitlement to these benefits is usually conditional upon the employee staying in the job until retirement age and the completion of a minimum time of service, or the disability of the employee in relation to being an active employee.
The expected costs of these benefits are accrued over the period of employment, employing the same accounting methodology that is used for the defined benefit pension plans. Actuarial gains and losses arising from adjustments based on experience, in changes in actuarial assumptions, are debited or credited in other comprehensive income, in the period expected for remaining service of the employees. These obligations are evaluated annually by qualified, independent actuaries.
3.19.3 Termination Benefits
Termination benefits are payable when employment is terminated by Eletrobras before the normal retirement date, or whenever an employee accepts voluntary termination in exchange for these benefits. Eletrobras recognizes termination benefits on theearliest of: (i) when Eletrobras can no longer withdraw the offer of these benefits; and (ii) when the entity recognizes the restructuring costs that are within the scope of the IAS 37 and involve the payment of termination benefits. In the case of an offer made to encourage voluntary termination, termination benefits are measured based on the number of employees who, hopefully, will accept the offer. The benefits that expire after 12 months from the balance sheet date are discounted to present value.
3.20. Provisions
Provisions are recognized for present obligations (legal or constructive) resulting from past events, for which it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognized as a provision is the best estimate of the considerations required to liquidate the obligation at the end of each reporting period, taking into consideration the risks and uncertainties related to the obligation. When the provision is measured on the basis of estimated cash flows to settle the obligation, its recongized based on the present value of those cash flows (in which the effect of the time value of money is relevant).
When some or all of the economic benefits, required for the liquidation of a provision, can be recovered from a third party, an asset is recognized if, and only if, the reimbursement is virtually certain and the value can be measured reliably.
3.20.1. Provisions for asset decommissioning
As provided for in IAS 37 - Provisions, Contingent Liabilities and Contingent Assets a provision throughout the economic useful life of thermonuclear plants is constituted. The purpose of this provision is to allocate to its period of operation the costs to be incurred in
relation to its technical and operational deactivation, at the end of its useful life, estimated at 40 years.
The values are charged to income or loss for the financial year at present value based on annual rates fixed in U.S. dollars, the ratio of 1/40 of the estimated expenses, recorded immediately and converted by the exchange rate at the end of each period of validity (see Note 31).
3.20.2. Provision for legal obligations connected with legal proceedings
Provisions for legal contingencies are recognized when it is considered more likely than not the Company’s defence will be unsuccessful and the amount to settle the obligation and be reliably esitimated.
3.20.3. Onerous contracts
Provisions for present obligations resulting from contracts for variable consideration are recognized when the unavoidable costs to satisfy the obligations of the contract exceed the economic benefits expected to be received throughout the same contract.
3.21. Advance for future capital increase
Advances of resources received from the controlling shareholder and for capital contribution shall be granted in an irrevocable character. They are classified as noncurrent liabilities when the number of shares to be issued is not known, and they are initially recognized at fair value and subsequently updated by the contractually established index.
3.22. Share capital
Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction of the value entered, net of taxes.
When the Company purchases its own shares (treasury shares), the amount paid, including any directly attributable incremental costs (net of income taxes), is deducted from the shareholders’ equity of the Company until the shares are cancelled or reissued. When these shares are subsequently reissued, any value received, net of any additional costs of the transaction, directly attributable and the respective effects of the income tax and social contribution, is included in shareholders’ equity of the Company.
3.23. Interest on shareholders’ equity and dividends
Interest on shareholders’ equity is imputed to dividends for the year being calculated taking as a limit a percentage on the equity, using the Long-Term Interest Rate — TJLP established by the Brazilian Government, as required by law, limited to 50% of net income for the year or 50% of the income reserves, before including the income from the period, whichever is greater.
The value of dividends above the mandatory minimum established by Law or another legal instrument, not yet approved in the General Assembly, are presented in shareholders’ equity, in a specific account called additional proposed dividends.
3.24. Other comprehensive income
Other comprehensive income includes income and expense items that are not recognized in the income statement. The components of other comprehensive income include:
a) Actuarial gains and losses on defined benefit pension plans;
b) Gains and losses arising from conversion of financial statements of foreign operations;
c) Equity valuation adjustment on the income and loss on in the remeasurement of financial assets available for sale; and
d) Equity valuation adjustment relating to the effective portion of gains or losses on hedging instruments in the hedging of cash flow.
3.25. Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable, deducting any estimates of returns and other similar deductions.
3.25.1. Sale of energy and services
a) Generation and Distribution
Distribution revenue is classified as: i) Supply (sale) of Electrical Power to distributors; ii) Electrical power supply to the consumer, and; iii) Electrical Power in the Short-Term market.Revenue is measured at the fair value of the consideration received or receivable, net of taxes and of any discounts incident on it. Revenue from energy sales and services is recognized when it is probable that the economic benefits associated with the transactions will flow to the Company; the value of the revenue can be measured reliably; the risks and benefits related to the sale were transferred to the buyer; the costs incurred or to be incurred related to the transaction can be measured reliably; and the Company no longer holds control and responsibility over the energy sold. Construction revenue connected with the segment of electric power distribution and part of generation covered in the scope of the IFRIC 12 are also included.
For generating concessions renewed under Law 12,783/2013, there was a change of the price system for tariffs, with periodic tariff review in the same manner already applied to the transmission activity up to then. The rate is calculated on the basis of operation and maintenance costs, plus the rate of 10%, with the revenue being recorded for coverage of operation and maintenance expenses on the basis of the cost incurred.
b) Transmission
1) Financial revenue arising from the remuneration of the financial asset, until the end of the concession period, earned in a prorated manner takes into consideration the average rate of return on investments.
2) Revenue for coverage of operation and maintenance expenses on the basis of the cost incurred.
3) REvenue from infrastructure development is recognized in the results in relation to the stage of completion of the work, in accordance with the stipulations in the IAS 11 and
measured based on fair values. Infrastructure development costs are recognized as they are incurred. The margin of construction adopted is established as being equal to zero, considering that:
(i) The Company activity is the transmission of electricity;
(ii) The entire income of construction is related to the construction of infrastructure for its activity, i.e., the transmission of electricity;
(iii) The Company outsources the infrastructure construction with unrelated parties.
3.25.2. Dividends and interest revenue
Dividend is recognized when the shareholder’s right to receive this dividend is established and provided that it is probable that the future economic benefits will flow to the Company and the value of the revenue can be measured reliably.
Interest revenue interest is recognized when it is probable that the future economic benefits will flow to the Company and the value of the income can be measured reliably. The interest revenue is recognized by the straight-line method, based on time and at the effective interest rate on the amount of the outstanding principal. The effective interest rate is the one that discounts exactly the estimated future cash receipts during the estimated life of the financial asset in relation to the initial net book value of this asset.
3.26. Leasing
Financial commercial Leasing Operations are capitalized in property, plant and equipment that the Company holds rights over tangible assets intended for the maintenance of its activities, arising from financial commercial leasing that transfer to the lessee the benefits, risks and control of assets. At the beginning of the financial lease, these assets are capitalized at the lower value between the fair value of the leased and the present value of the minimum lease payments.
The financial leases are recorded as if they were a financed purchase, recognizing, at the time of purchase, a fixed asset and a financing liability (lease). Each installment paid of the lease is allocated partly to liabilities and partly to financial charges, so that in this manner a constant rate on the open debt balance is obtained. The corresponding obligations, net of finance charges, are included in other long-term liabilities.
Interest and other financial expenses are recognized in the income statement during the lease period, in order to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The fixed asset acquired through financial leasing (a) is classified as Non-Current Assets being amortized over its useful life (Note 22.4).
3.27. Government grants
Government grants are not recognized until there is reasonable assurance that the Company will meet the related conditions and that the subsidies will be received. Government subsidies are recognized systematically in the results during the periods in which the Company recognizes as expenses the related costs that the subsidy intends to compensate. Government subsidies receivable as compensation for expenses already incurred, with the purpose of offering immediate financial support to the Company, without corresponding future
costs, are recognized in results of the period in which they are received and allocated to the income reserve and are not intended for the distribution of dividends.
3.28. Scheduled downtimes
Costs incurred prior to and during the shutdowns of power plants and transmission lines are charged to income in the period in which they are incurred.
3.29. Earnings (Loss) per share
Basic earnings per share are calculated by dividing the income attributable to shareholders of the Company by the weighted average number of outstanding shares (total shares less the treasury shares). Diluted earnings per share are calculated by adjusting the weighted average number of shares outstanding to assume conversion of all diluted potential shares, in accordance with IAS 33.
3.30. Operating Segments, Geographic and Other Information
Operating segments are defined as components of an entity that: a) engages in business activities from which it may earn revenues and incur in expenses, b) whose operating results are regularly reviewed by the entity’s chief operating decision maker-CODM to make decisions about resources to be allocated to the segments and asses its performance, and c) for which discrete financial information is available. The Company’s chief operating decision maker is the Board of Directors. The Company has determined that is has the following operating segments:
(I) Generation, consisting of the generation of electricity and its sale to electricity distribution companies and free customers, and trading activities;
(II) Transmission, consisting of transmission of electricity on behalf of electricity concessionaires;
(III) Distribution, consisting of transmission of electricity on behalf of electricity concessionaires; and
(IV) Management, consisting of any items that cannot be attributed to the other segments, particularly those linked to the corporate financial management, compulsory loans, equity investments and other expenses;
(V) Eliminations, consisting of intercompany transactions eliminated for consolidation purposes.
Transactions between these operating segments are determined on a carried out at prices and conditions that are defined by the parties, that take into consideration the terms that could be applied in the market with unrelated parties.
Segment net profit (loss) for the period, as included in the internal management reports reviewed by the Company’s CODM, is used to measure segment performance. Segment net profit (loss) for the period is determined using the same accounting policies to determined consolidated net profit and loss for the year.
Segment assets as included in the internal management reports reviewed by the Company’s CODM consists of fixed assets and intangible assets. Segment assets is determined using the same accounting policies used to determine consolidated fixed assets and consolidated intangible assets.
Segment liabilities information is not provided to the CODM and, therefore, have not been disclosed.
Substantially all of the Company’s revenue are from external customers located in Brazil and all of the Company’s non-current assets are physically substantially located in Brazil.
Information about revenues by products and services from external customers is included in Note 37 and Note 44.
There are no revenues derived from a single customer that represents 10 percent or more of the Company’s consolidated total revenue for the years ended December 31, 2016, 2015 and 2014.
NOTE 4 — ACCOUNTING ESTIMATED AND JUDGMENTS
In applying the accounting policies, the Company’s management shall make judgments and make estimates about the carrying amounts of revenues, expenses, assets and liabilities and the disclosure in the notes to the date of the financial statements, for which are easily obtained from other sources. The estimates and associated assumptions are based on historical experience and other factors considered relevant. The estimates and underlying assumptions are reviewed continuously. The effects of revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or also in subsequent periods if the revision affects both this period and future periods.
Although these estimates and assumptions are continually monitored and reviewed by the Company’s management and its subsidiaries, the materialization of the book value of revenues, expenses, assets and liabilities is inherently uncertain because it requires the use of judgment.
The following are the key assumptions of accounting estimates assessed as most critical by the Company’s management and its subsidiaries concerning the future and other key sources of uncertainty that can lead to significant adjustments to the carrying amounts of assets and liabilities within the next periods:
I. Deferred tax assets and liabilities
Estimates for taxable income (the basis for analysis of realization of net deferred tax assets) are based on the annual budgets and the strategic plan, both which are periodically reviewed, and on the history of profitability. However, future taxable incomes can be greater or less than the estimated used by the Administration when determining whether or not there the amount of the deferred tax asset should be recognzied (see Note 10).
II. Impairment of long-term assets
Management of the Company has considered assumptions and technical data to prepare the impairment testing for long-term assets, in order to verify that the book value of PP&E and intangible assets is not higher than the recoverable future value, and where this is the case, an impairment loss is recognized. Assumptions are used in this process, based on the historic experience managing the asset, group of assets, or cash-generating unit, as well as valuation practices commonly used in the market. Such assumptions may eventually be proven inaccurate, including with regard to estimated useful life. At present, the useful life adopted by the Company is in accordance with the practices specified by the ANEEL, applicable to assets linked to public electricity concessions, which can vary as a result of the periodic analysis of the useful life of the assets. In addition, the useful life is limited to the term of the concession.
Various inherently uncertain events also impact the determining of the variables and assumptions used by the Management of the Company and of its subsidiaries when calculating discounted future cash flows for the purpose of recognizing the recoverable value of long-term assets. These factors include: maintaining the levels of electricity consumption; rate of economic growth in the country; availabillity of water resources; and other factors relating to the end of concession periods for electricity utilities, particularly regarding the value of reversal at the end of the concession period. For the value of reversal at the end of the concession, the Company assumes for generation and transmission that indemnification is contractually established, where applicable, at the amount of the new replacement value (VNR, in Portuguese). These are the expected amounts of indemnification at the end of the electricity generation and transmission concession period (see accounting practices in Note 2.1 and movements in provisions during the fiscal year in Note 19). The most important variable was the discount rate used in the cash flows, with definition of a specific percentage for the generation segment (6.33%). The rate used for Angra 3 considers the specific characteristics of the nuclear segment, as well as certain assumptions relating to financing, the specific capital structure of the project, and levered beta calculated using ANEEL assumptions. The percentage used was 5.44%.
III. Basis for determining indemnification on concessions by the Federal Government
Law 12,783/2013, enacted on January 11, 2013, defined the new replacement value (VNR) as the basis for calculating indemnification by the authority granting concession for utility concessions. For concessions not yet extended, the Company adopted the assumption that the assets can be reversed at the end of the concession agreements. Based on this assumption, for concessions that have already been extended, the receivables from the authority granting concession were maintained with regard to the Basic Grid of the Existing System (RBSE), for investments made subsequent to the base project of the power plants and transmission lines (modernization and improvements)
and for the thermal generation assets. These amounts are subject to authorization by ANEEL as reported in Note 2.1. The Company adopted the new replacement value (VNR) as a means of calculating the amount to be indemnified by the Authority Granting Concession for the portion of generation and transmission assets not fully depreciated by the end of the concession. For distribution assets, the Regulatory Asset Base (BRR) was defined for this calculation.
IV. Useful life of fixed assets
The Administration of the Company uses the criteria defined in ANEEL Resolution 367 of June 2, 2009 when determining the estimated useful life of permanent assets, limited to the concession period, as they are understood to adequately represent useful life (see Note 16).
V. Provision for asset decommission
The Company recognizes a provision for obligations relating to the decommissioning of assets relating to its thermonuclear power plants. To determine the amount of the provision, assumptions and estimates are made regarding discount rates, the estimated cost to decommission and remove the entire plant from the site, and the expected time at which such costs are incurred (see Note 31). The estimate of the costs is based on the legal and environmental requirements for the decommissioning and removal of the entire plant, as well as the prices of products and services to be used at the end of useful life.
VI. Actuarial obligations
The actuarial obligations are determined using actuarial calculations prepared by independent actuaries based on the expected life of the participant (AT-2000 table), average age of retirement, and inflation. Nevertheless, the actual future results of the benefits could be different from current results and those recorded in the books (see Note 29).
VII. Provision for labor, tax, and civil matters
Provisions for labor, tax, and civil matters, when applicable, are recognized when there are present obligations (legal or constructive) resulting from past events, it is probable (more likely than not) there will be an outflow of resources that embodies economic benefits to settle the obligation, and a reliable estimate of the amount to settle the obligation and a reliable estimate of the amount to settle the obligation can be made. This assessment is made using the judgment of management including advice from its legal counsel, considering case law, decisions in the courts, the history f any agreements and decisions, the experience of management and legal counsel, as well as other relevant aspects. (see Note 30).
VIII. Allowance for doubtful accounts —ADA
The Company establishes an allowance for doubtful accounts for receivables and loans which the Administration understands to be uncertain in terms of actual receipt. The ADA for customers is calculated based on receivables more than 90 days past due for residential class consumers, 180 days past due for commercial class consumers, and 360 days past due for industrial, rural, government, and utility class consumers. It also considers an individual analysis of the receivables and the balance of each consumer,
based on the Administration’s experience with regard to effective losses, as well as the existence of real guarantees.
The ADA for loans granted is established based on the amounts of receivables that are past due. The ADA is reversed once the debt is settled or renegotiated.
IX. Valuation of financial instruments
As described in Note 43, the Administration of the Company uses valuation techniques which include information that is not based on observable market data to estimate the fair value of certain kinds of financial instruments. Note 43 shows the information on the main assumptions used to determine the fair value of financial instruments, as well as the sensitivity analysis of these assumptions. The Administration of the Company and its subsidiaries believes that the valuation techniques selected and the assumptions used are adequate to determining the fair value of financial instruments.
X. Onerous contracts
The Company and its subsidiaries use assumptions relating to the economic costs and benefits of each contract to determine whether or not any onerous contracts exist. In the case of long-term commitments for purchase and sale of energy, one of the critical estimates to determining the provisioned amount for future sale under the contract is the average historic Settlement Price for Differences (PLD) approved by the Administration of the Company as an assumption to calculate the provision for onerous contracts, solely for accounting purposes, as well as the discount rate used for cash flows. The actual values of the PLD and/or of items considered within the discount rate may over the years be higher or lower than those corresponding to the assumptions used by the Company. In addition, the Company can also have onerous contracts in concessions where the current expected cost for operations and maintenance is not fully covered by revenue (see Note 33).
XI. Risks relating to legal and regulatory compliance
a) Lava Jato
In response to investigations carried out as part of the “Lava Jato Operation” regarding irregularities involving officials, contractors, and suppliers of Eletrobras and of special purpose companies (SPEs) in which Eletrobras holds minority interests, in 2015, the Board of Directors of the Company decided to begin an investigative procedure, given the risk that such irregularities could affect some of the main investments of Eletrobras.
In order to conduct this investigation, the Company hired the American law firm Hogan Lovells US LLP, which is widely known for its specialization in investigatory actions, and established the Independent Investigation Management Commission (CIGI), comprised of independent and reputable specialists that were hired to oversee the investigation process.
The investigation process followed the principles adopted by the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) for procedures of this nature, given that since 2008, when Eletrobras was first listed on the New York Stock Exchange with American Deposit Receipts (ADRs), it became subject to American laws governing capital markets, particularly with respect to the regulations established under the U.S. Securities and Exchange Acts. These laws and regulations include the Foreign Corrupt Practices Act (FCPA), which criminalizes acts of corruption such as payments to officials of foreign governments,
political parties, and foreign candidates for political office in exchange for business or economic advantage.
In this context, the scope of the independent internal investigation includes assessment of the existence of any irregularities, including violations of the FCPA, Brazilian legislation, the Code of Ethics, and the integrity policies of Eletrobras.
Over the course of 2015 and 2016, as part of the Lava Jato Operation, the Radioatividade and Pripyat operations resulted in prison sentences for former executives from Eletronuclear, as well as other parties. Eletrobras has cooperated with authorities in sharing information gathered by the independent investigation, and even assisting the prosecution against the defendants in these criminal proceedings.
In order to facilitate and guarantee the progress of the investigations, the administration of the Company has adopted the governance measures required and/or recommended by Hogan Lovells and by the Independent Commission. Since the start of the investigation, Eletrobras replaced its entire Board of Directors, hired a new CEO, and has strengthened its compliance structure. In mid-2016, the Compliance Department was created, which is responsible for coordinating the compliance program and for managing risks at the Company and at its subsidiaries.
In this same regard, Eletrobras reviewed specific contracts in which the investigations identified potential irregularities, such contracts which were suspended when any irregularities were found.
With regard to the employees and directors involved in the situations identified by the investigation, Eletrobras has already taken punitive measures, including suspension and termination of employment. At present, possible legal action is being considered against these officials, and Eletrobras is already in negotiations with the Office of the Attorney General with respect to the filing of civil suits.
In October 2016, the independent investigation completed the stage whose objective was to identify illegal acts that could result in material misstatements in the consolidated financial statements of the Company. During this stage, cases of overpricing were determined by the Independent Investigation relating to illegal activities that were paid by certain suppliers and contractors contracted since 2008 by some subsidiaries and SPEs of the Company.
a.1) Summary of the conclusions of the Independent Investigation
The final reports from the Independent Investigation include certain findings with their related qualitative and estimated quantitative financial statements impacts (disclosures and/or accounting) in some but not all of the power generation projects included in the scope of the investigation. The Independent Investigation reports determined overpricing related to bribery and bid-rigging (a form of fraud in which a commercial contract is promised to one party even though for the sake of appearance several other parties also present a bid. This practice is illegal in most countries.) activities deemed to be of an illicit nature, in some contracts, since 2008, with certain contractors and suppliers of the affected projects. The range of bribery estimated impacts was from 1% to 6% of the contract price and certain other fixed amounts, and the bid-rigging estimated impacts is 10% of payments related to one specific contract (R$ 16 million). The impacts of the Independent Investigation on the financial statements are presented below under item “Impacts on the Consolidated Financial Statements”.
The Independent Investigation included findings related to bid-rigging and bribes that would have been paid by certain contractors and suppliers hired by subsidiaries of the Company, as well as certain contractors and suppliers of some of SPEs not controlled by the Company.
The Independent Investigation included findings related to bribes that would have been received by certain former personnel or personnel of subsidiaries or SPEs not controlled by the Company.
The Independent Investigation discovered bribes used to fund improper payments to political parties, elected officials or other public officials, individual contractor personnel, former personnel of subsidiaries or SPEs of Eletrobras and other individuals involved in bid-rigging. Most of alleged improper payments were made by the contractors and suppliers and by intermediaries acting on behalf of those contractors and suppliers.
In addition, the final reports from the Independent Investigation included separate findings related to possible overpricing on some of the power generation projects included on its scope of investigation. As the Independent Investigation did not conclude that such possible overpricing was caused by unlawful activity, the Company’s management does not believe that this possible overpricing would impact its consolidated financial statements.
a.2) Impacts on the consolidated financial statements
In order to determine the adjustments or disclosures in the Company’s consolidated financial statements as a result of the investigation, management took into consideration the conclusions reached and findings reported in each one of the final investigation reports which were approved by the Independent Commission, the Board of Directors, the Audit Committee (Fiscal Council) and the Board of Executive Officer, those in charge of the Company´s governance.
The Company concluded that, under International Accounting Standard IAS 16 — Property, Plant and Equipment, the amounts attributable to overpricing due to bribes and/or to bid-rigging activities deemed to be of an illicit nature, should not have been capitalized as part of the cost of its property, plant and equipment — PP&E or in the PP&E of its SPEs not controlled by the Company. Those amounts that had been capitalized as part of the contract price are not a cost attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
However, the Company was unable to determine each of the periods prior to 2014 in which the adjustments should be recorded in its consolidated financial statements because of the following:
· The information made available to the Company by the Independent Investigation or otherwise available to the Company identified the contractors and suppliers involved in the overpricing scheme and a range period of time it was in effect and indicates certain affected contracts, but did not specify individual contractual payments that include overcharges or the reporting periods in which overpayments may have occurred (the investigation reports and findings
determined that there was no reasonable basis to establish or estimate the specific periods and the amounts of overpricing that occurred);
· As most of these alleged overpayments were made by outside contractors and suppliers, we cannot identify the exact amounts and periods that the Company may have overpaid. The information to determine the amount by which the Company was potentially overcharged by these contractors and suppliers was not contained within the Company’s accounting records or internal control systems. Also, the information used in this investigation was limited to the Company’s internal information, and that of its subsidiaries and SPEs not controlled by the Company, did not provide sufficient information to determine the amounts of such overpayments prior to 2014 and a period by period basis;
· Because the alleged overpayments were of an illicit nature, even though the depositions available to the investigation team revealed certain information that allowed the total estimate to be made, they did not provide sufficient information to determine the periods prior to 2014 when the overpayments have occurred, and specific records of these activities were not expected to be available; and
· The investigation underway by the Brazilian authorities is focused on determining the involvement of the people under investigation with illegal acts, and not on obtaining quantitative information on each one of the prior periods. In addition, Brazilian legislation does not allow unrestricted access to internal records and documents of suppliers in civil lawsuits and, therefore, we did not expect to have information with respect to prior periods.
As previously discussed, there was not sufficient information to allow the Company to determine the specific period during which the Company made specific overpayments, thus the Company concluded that, after exhausting all reasonable efforts, it was impracticable to determine the period-specific effects prior to 2014 of the overpayments on its consolidated financial statement, accordingly, the adjustment for the overpayments incorrectly capitalized was recognized in the 2014. The Company believes this approach was the most appropriate pursuant to the requirements of IFRS for the correction of an error.
The Company also has not recovered and could not estimate any recoverable amounts potentially overpaid at that time. Any amounts ultimately recovered would be recognized as income when received or when their realization becomes virtually certain.
Consequently, as permitted under IAS 8 — Accounting Policies, Changes in Accounting Estimates and Errors, the Company charged to expense in its 2014 consolidated financial statements the cumulative estimated amounts of illegal payments made for all periods prior to 2015.
For the amounts of illegal payments identified by the Company, which relate to contracts/amendments entered after December 31, 2014, they were charged to expense in the Company’s 2015 financial statements.
The Company did not identify any amounts after December 31, 2015 that may have been affected by the overpricing scheme.
Therefore, in 2014, the Company expensed the total of R$ 195.1 million of capitalized costs representing estimated amounts that Eletrobras subsidiaries overpaid for the acquisition of property, plant and equipment since 2008, and, as a result, an amount of R$ 132.4 million related to impairment losses recognized in 2014 by these Eletrobras subsidiaries have been reversed. Likewise, the Company recognized a loss of R$ 91.5 million in its results from equity method investments related to certain equity investees (SPEs not controlled by the Company). The amounts included both the findings from the final reports of the Hogan Lovells independent investigation and the corresponding borrowing costs and other charges capitalized.
Additionally, based on the final reports of the Independent Investigation relating to financial and accounting matters, the Company expensed in 2015 R$ 16.0 million related to contracts/amendments entered after December 31, 2014, and, as a result, an amount of R$ 11.5 million related to impairment losses previously recognized by these Eletrobras subsidiaries have been reversed.
The summary of these cumulative adjustments to the 2015 and 2014 consolidated balance sheets and consolidated statement of profit or loss are as follows:
Investigation findings |
| Dec 2015 |
| Dec 2014 |
|
Angra 3 |
| (11,514 | ) | (129,799 | ) |
Mauá 3 |
| (4,482 | ) | (62,684 | ) |
Sim plício |
| — |
| (2,644 | ) |
|
| (15,996 | ) | (195,127 | ) |
Balance Sheets |
| Dec 2015 |
| Dec 2014 |
|
Fixed Assets |
|
|
|
|
|
Cost |
| (15,996 | ) | (195,127 | ) |
Impairment |
| 11,514 |
| 132,443 |
|
Equity method investments |
| — |
| (91,464 | ) |
|
| (4,482 | ) | (154,147 | ) |
Statements of profit and loss |
| Dec 2015 |
| Dec 2014 |
|
Investigations findings |
| (15,996 | ) | (195,127 | ) |
Impairment charges (Operating charges) |
| 11,514 |
| 132,443 |
|
Results of equity method investments |
| — |
| (91,464 | ) |
|
| (4,482 | ) | (154,147 | ) |
Eletrobras is implementing various governance and remediation actions, adopting measures to investigate the allegations relating to the Lava Jato Operation, while assessing the possibility of seeking compensation for damages suffered as a result of illegal conduct.
However, while the Independent Investigation has completed the stage for accounting recognition of illegal acts, additional procedures relating to the investigation process are ongoing, particularly with regard to certain aspects as discussed with the enforcement commissions of the SEC and the DOJ (“Additional Procedures”).
Based on the current understanding of Eletrobras, it is not expected that these Additional Procedures will introduce additional relevant information that could cause material impacts on its financial statements. However, federal prosecutors have not yet completed the “Lava Jato Operation” investigations, and it could take a considerable amount of time to complete all the
related fact-finding procedures. As such, new information of relevance could be revealed in the future, which could lead to Eletrobras recording additional adjustments in its financial statements.
In January 2017, the Board of Directors of Eletrobras approved negotiations for the hiring of an American law firm to conduct the Aditional Procedures. During that meeting, the Board of Directors authorized the signing of certain legal instruments with American authorities (“Tooling Agreement” and “Statute of Limitation The Second Consecutive”), extending the statute of limitation for investigative actions. The signing of these documents demonstrates the cooperation and good faith of Eletrobras with respect to American authorities, handling corporate matters involved with clarity and transparency.
In order to continue with the Additional Procedures as discussed with the American and Brazilian regulators, Eletrobras is conducting a tender to contract an American law firm.
However, due to the tender procedures to which Eletrobras is subject as a member of the Indirect Federal Administration, the hiring of the American firm that will conduct the Aditional Procedures is not yet complete.
In order to guarantee the continuity of the Additional Procedures while this tender process is underway, Eletrobras has extended until July 2017 its prior contract with Hogan Lovells.
In April 2017, as a consequence of the plea bargaining agreements entered into by executives of the major Brazilian construction group, Odebrecht, the Federal Supreme Court requested that investigations should be initiated to investigate the conduct of politicians who were referred to in those agreements. These investigations refer exclusively to those individuals over who the Federal Supreme Court has exclusive jurisdiction. Also, other official investigations may be initiated against individuals who are subject to the jurisdiction of lower courts.
Certain allegations of potential illegal acts were made public in respect of the Santo Antonio project, in which we hold an indirect minority take through our subsidiary Furnas.
Hogan Lovells, under the direct supervision of the Independent Committee, continues to monitor plea bargaining agreements that are made public as well as other information published by the press and the development of the “Lava Jato” investigation. In case the allegations related to the Santo Antonio project turn out to be true, our management believes that there will not be a material impact on our consolidated financial statements, since we recognized impairment charges under IAS 36 — Impairment of Assets, in an amount sufficient to cover the alleged values.
c) Legal proceedings involving the Company — Class Action
On July 22, 2015 and August 15, 2015, two putative class actions suits were filed against Eletrobras and some of our employees in the United States District Court of the Southern District of New York (SDNY) (see Note 30 and Note 47.10).
NOTE 5 — CASH, CASH EQUIVALENT, AND RESTRICTED CASH
|
| 12/31/2016 |
| 12/31/2015 |
|
I - Cash and cash equivalents: |
|
|
|
|
|
Cash and bank deposits |
| 295,549 |
| 656,505 |
|
Short term securities |
| 384,119 |
| 737,468 |
|
|
| 679,668 |
| 1,393,973 |
|
|
|
|
|
|
|
II - Restricted Cash: |
|
|
|
|
|
CCC Resources |
| 393,520 |
| 346,874 |
|
Commercialization - Itaipu |
| 256,192 |
| 47,082 |
|
Commercialization - PROINFA |
| 998,380 |
| 232,785 |
|
RGR Funds |
| 33,254 |
| 20,692 |
|
|
| 1,681,346 |
| 647,433 |
|
|
| 2,361,014 |
| 2,041,406 |
|
The financial resources are held with Banco do Brasil S.A., as per the terms of the specific legislation for Mixed Economy Companies under control of the Federal Government, as in Decree Law 1,290 of December 3, 1973, with the amendments resulting from Central Bank of Brazil Resolution 4,034 of November 30, 2011, which established new mechanisms for allocations of the companies comprising the Indirect Federal Administration.
Financial applications for immediate liquidity are included in extra-market financial investment funds, which are targeted to achieve returns based on the average rate of reference from the Special Settlement and Custody System — SELIC, for the acronym in Portuguese.
The balances considered as cash equivalents are high-liquidity short-term investments that can promptly be converted to a known cash amount, subject to an insignificant risk of change in value and held with the purpose of meeting short-term cash commitments, including for general cash management at the Company.
Restricted Cash - These are resources collected by the respective funds which are used exclusively to uphold the regulatory provisions governing the funds, and are not available to the Company. The variation in this balance is due primarily to the trading of electricity of Proinfa. For more information, see Note 7 (a).
NOTE 6 — MARKETABLE SECURITIES
Trough Central Bank of Brazil’s Resolution No. 3,284 of May 25, 2005, it was established that any investment of resources resulting from revenues of public companies or mixed economy companies of the Indirect Federal Administration can only be made in extra-market investment funds administered by the Federal Savings Bank and by Banco do Brasil S.A., so the Company and its subsidiaries invest their resources in extra-market funds backed by primarily long-term government bonds, use of which considers both the short-term corporate investment program, as well as the maintaining of the Company’s operating cash position.
With respect to the beneficiary parties, the adjustment is made to present value. The investment certificates resulting from tax incentives for the Northeast Investment Fund (FINOR) and the Amazônia Investment Fund (FINAM) are adjusted for provisions for losses, and as such, are shown in net amounts.
The breakdown of marketable securities is as follows:
CURRENT
Securities |
| Custodian and |
| Expires |
| Index |
| 31/12/2016 |
| 31/12/2015 |
|
LFT |
| Banco do Brasil |
| More than 90 days |
| SELIC |
| 292,043 |
| 195,368 |
|
LTN |
| Banco do Brasil |
| More than 90 days |
| Pre-fixed |
| 4,963,575 |
| 4,691,729 |
|
LTN |
| CEF |
| More than 90 days |
| Pre-fixed |
| 39,513 |
| 214,210 |
|
NTN-B |
| Banco do Brasil |
| More than 90 days |
| IPCA |
| 18,803 |
| 467,735 |
|
NTN-B |
| CEF |
| More than 90 days |
| IPCA |
| 14,325 |
| — |
|
NTN-F |
| Banco do Brasil |
| More than 90 days |
| Pre-fixed |
| 95,914 |
| 191,693 |
|
Committed Options |
| CEF |
| — |
| — |
| 58,356 |
| 1,082,039 |
|
Committed Options |
| Banco do Brasil |
| — |
| — |
| 2,298 |
| — |
|
OTHER |
| — |
| — |
| — |
| 13,151 |
| — |
|
TOTAL CURRENT |
|
|
|
|
|
|
| 5,497,978 |
| 6,842,774 |
|
NONCURRENT
Securities |
| Custodian and |
| Expires |
| Index |
| 31-12-2016 |
| 31-12-2015 |
|
NTN-B |
| Banco do Brasil |
| More than 90 days |
| IPCA |
| 434 |
| 405 |
|
FINOR/FINAM |
| — |
| — |
| — |
| 876 |
| 916 |
|
BENEFICIARY SHARES |
| — |
| — |
| — |
| 244,420 |
| 190,847 |
|
OTHER |
| — |
| — |
| — |
| 1,505 |
| 2,822 |
|
TOTAL NONCURRENT |
|
|
|
|
|
|
| 247,235 |
| 194,990 |
|
6.1 — BENEFICIARY PARTIES - Securities acquired as a result of the restructuring of the Company’s investment in the subsidiary INVESTCO S.A. These assets guarantee annual returns equal to 10% of the earnings of the aforesaid companies, paid together with dividends, and will be redeemed at maturity in October 2032, through their conversion into preferred shares in the capital stock of the these companies, as shown below:
|
| 31/12/2016 |
| 31/12/2015 |
|
Lajeado Energia |
| 451,375 |
| 451,375 |
|
Paulista Lajeado |
| 49,975 |
| 49,975 |
|
Ceb Lajeado |
| 151,225 |
| 151,225 |
|
Face Value |
| 652,575 |
| 652,575 |
|
Present Value Adjustment |
| (408,155 | ) | (461,728 | ) |
Present Value |
| 244,420 |
| 190,847 |
|
NOTE 7 – ACCOUNTS RECEIVABLE, NET
|
| 12/31/2016 |
| 12/31/2015 |
| ||||||||
CURRENT |
| Maturing |
| Maturity in |
| More than 90 |
| Renegotiated |
| Total |
| Total |
|
AES ELETROPAULO |
| 30,574 |
| — |
| 2 |
| — |
| 30,576 |
| 18,072 |
|
AES SUL |
| 28,326 |
| — |
| — |
| — |
| 28,326 |
| 24,294 |
|
AMPLA |
| 24,686 |
| 131 |
| — |
| — |
| 24,817 |
| 26,661 |
|
CEA |
| 10,052 |
| 19,204 |
| 4,555 |
| 267,217 |
| 301,028 |
| 244,567 |
|
CEB |
| 4,694 |
| 520 |
| 2 |
| — |
| 5,216 |
| 5,820 |
|
CEEE |
| 27,147 |
| — |
| — |
| — |
| 27,147 |
| 29,908 |
|
CELESC |
| 44,187 |
| — |
| — |
| — |
| 44,187 |
| 44,085 |
|
CELPA |
| 43,127 |
| 1,297 |
| 7,812 |
| 11,568 |
| 63,804 |
| 66,292 |
|
CELPE |
| 20,347 |
| — |
| 56 |
| — |
| 20,403 |
| 22,568 |
|
CEMAR |
| 22,836 |
| 1 |
| — |
| — |
| 22,837 |
| 23,803 |
|
CEMIG |
| 34,691 |
| — |
| — |
| — |
| 34,691 |
| 37,797 |
|
CESP |
| 1,656 |
| — |
| — |
| — |
| 1,656 |
| 6,428 |
|
COELBA |
| 32,561 |
| — |
| 58 |
| — |
| 32,619 |
| 36,067 |
|
COELCE |
| 30,834 |
| — |
| — |
| — |
| 30,834 |
| 30,935 |
|
COPEL |
| 79,278 |
| — |
| — |
| — |
| 79,278 |
| 67,248 |
|
CPFL |
| 18,206 |
| — |
| 165 |
| — |
| 18,371 |
| 14,247 |
|
EBE |
| 9,614 |
| — |
| — |
| — |
| 9,614 |
| 7,968 |
|
ELEKTRO |
| 41,123 |
| — |
| — |
| — |
| 41,123 |
| 42,180 |
|
ENERGISA |
| 30,919 |
| 2,609 |
| 76,517 |
| — |
| 110,045 |
| 87,498 |
|
ENERSUL |
| 11,416 |
| — |
| — |
| — |
| 11,416 |
| 16,368 |
|
ESCELSA |
| 18,783 |
| — |
| 60 |
| — |
| 18,843 |
| 17,517 |
|
LIGHT |
| 51,949 |
| — |
| 123 |
| — |
| 52,072 |
| 55,978 |
|
PIRATININGA |
| 2,451 |
| — |
| 54 |
| — |
| 2,505 |
| 3,269 |
|
RGE |
| 27,626 |
| 7 |
| — |
| — |
| 27,633 |
| 27,096 |
|
Debt Rollover (b) |
| — |
| — |
| — |
| 23,601 |
| 23,601 |
| 22,840 |
|
CCEE Trading |
| 147,128 |
| 120,601 |
| 232,006 |
| — |
| 499,735 |
| 439,478 |
|
Use of Electricity Network |
| 229,646 |
| 2,177 |
| 31,983 |
| — |
| 263,806 |
| 251,341 |
|
PROINFA (a) |
| 281,658 |
| 14,954 |
| 58,418 |
| — |
| 355,030 |
| 379,214 |
|
Residential Consumer |
| 378,900 |
| 318,257 |
| 131,411 |
| 155,983 |
| 984,551 |
| 814,377 |
|
Industrial Consumer |
| 181,646 |
| 43,538 |
| 254,142 |
| 108,357 |
| 587,683 |
| 638,646 |
|
Rural Consumer |
| 23,050 |
| 20,656 |
| 13,961 |
| 12,773 |
| 70,440 |
| 104,625 |
|
Commerce, services, and other activities |
| 202,576 |
| 85,632 |
| 68,572 |
| 78,504 |
| 435,284 |
| 414,529 |
|
Government |
| 113,149 |
| 87,934 |
| 146,741 |
| 102,681 |
| 450,505 |
| 495,686 |
|
Other |
| 932,202 |
| 37,949 |
| 150,150 |
| 34,150 |
| 1,154,451 |
| 909,544 |
|
(-) ADA (c) |
| (79,422 | ) | (76,501 | ) | (874,341 | ) | (431,585 | ) | (1,461,849 | ) | (1,289,445 | ) |
|
| 3,057,616 |
| 678,966 |
| 302,447 |
| 363,249 |
| 4,402,278 |
| 4,137,501 |
|
|
| 12/31/2016 |
| 12/31/2015 |
| ||||||||
NONCURRENT |
| Maturing |
| Maturity in |
| More than 90 |
| Renegotiated |
| Total |
| Total |
|
CEB |
| — |
| — |
| 14,111 |
| — |
| 14,111 |
| 14,111 |
|
CELPA |
| 368 |
| — |
| — |
| — |
| 368 |
| 19,317 |
|
Trading in CCEE |
| — |
| — |
| 293,560 |
| — |
| 293,560 |
| 293,560 |
|
Use of Electricity Network |
| — |
| — |
| 6,276 |
| — |
| 6,276 |
| 6,276 |
|
PROINFA (a) |
| — |
| — |
| — |
| 76,441 |
| 76,441 |
| 125,383 |
|
Debt Rollover (b) |
| — |
| — |
| — |
| 568,635 |
| 568,635 |
| 489,556 |
|
Government |
| — |
| — |
| — |
| 582,501 |
| 582,501 |
| 290,965 |
|
Residential Consumer |
| — |
| — |
| — |
| 79,251 |
| 79,251 |
| 50,220 |
|
Industrial Consumer |
| — |
| — |
| — |
| 48,039 |
| 48,039 |
| 49,584 |
|
Rural Consumer |
| — |
| — |
| — |
| 5,921 |
| 5,921 |
| 65,673 |
|
Commerce, services, and other activities |
| — |
| — |
| — |
| 88,649 |
| 88,649 |
| 175,812 |
|
Other |
| — |
| — |
| — |
| 749,090 |
| 749,090 |
| 683,203 |
|
(-) ADA (c) |
| — |
| — |
| (313,947 | ) | (119,870 | ) | (433,817 | ) | (430,203 | ) |
|
| 368 |
| — |
| — |
| 2,078,657 |
| 2,079,025 |
| 1,833,457 |
|
TOTAL |
| 3,057,984 |
| 678,966 |
| 302,447 |
| 2,441,906 |
| 6,481,303 |
| 5,970,958 |
|
(a) Electricity Trading - PROINFA
Electricity trading transactions within the Incentives for Alternative Electricity Sources Program (PROINFA) generated a positive net balance of R$ 693,094 in the 2016 fiscal year (a negative net balance of R$ 355,526 on December 31, 2015), such balance which did not affect the fiscal year net profit and loss of the Company, as this amount is included under the Reimbursement Obligations heading. In the retail consumers balance an amount of R$ 431,471 from PROINFA is recorded for the parent company (R$ 504,597 on December 31, 2015).
(b) Renegotiated Credits
These represent the amounts resulting from the consolidation of debts from past due energy supply accounts of consumers in default and with future maturity, collected in energy bills.
Debt rollover renegotiated credits relate to a credit assignment agreement between the Federal Government and the subsidiaries Furnas and Eletrosul, pursuant to the Public Sector Finance Correction Program (Law No. 8,727 of November 5, 1993). The Federal Government assumed, refinanced, and rescheduled debt in 240 accounts that had fallen due since April 1994. If a balance remains unpaid at the end of a 20-year period, as the Federal Government delivers only the resources received from the states, which in turn are restricted by law in commitment levels of revenues, the installment will be extended for another 120 months. These represent R$ 592,236 on December 31, 2016 (R$ 512,396 on December 31, 2015).
(c) Allowance for doubtful accounts (PCLD, in Portuguese)
The subsidiaries establish and maintain allowances for doubtful accounts, based on an analysis of the amounts included in expired receivables and the history of losses, the total amount of which is considered by the Administration to be sufficient to cover any losses in the realization of these assets.
The balance of the ADA is as follows:
|
| 12/31/2016 |
| 12/31/2015 |
|
Consumers |
| 569,269 |
| 609,403 |
|
Retailers |
| 765,620 |
| 591,171 |
|
CEA |
| 267,217 |
| 225,514 |
|
CCEE - Short-term Energy |
| 293,560 |
| 293,560 |
|
|
| 1,895,666 |
| 1,719,648 |
|
The subsidiary Furnas has a provision established in 2007 totaling R$ 293,560. This provision represents historic amounts relating to the trading of energy within the defunct Energy Wholesale Market (MAE) for the period from September 2000 to September 2002, settlement of which is suspended due to injunctions granted in suits filed by electricity distribution concessionaires against ANEEL and the MAE (now the CCEE).
Changes in the ADA for customer electricity accounts in the consolidated statement are as follows:
Balance on December 31, 2013 |
| 1,916,808 |
|
|
|
|
|
(+) Charged to bad debt expenses for the year |
| 559,141 |
|
(-) Reversal |
| (475,221 | ) |
(-) Writeoff |
| (340,965 | ) |
Balance on December 31, 2014 |
| 1,659,763 |
|
|
|
|
|
(+) Charged to bad debt expenses for the year |
| 832,632 |
|
(-) Reversal |
| (286,629 | ) |
(-) Writeoff |
| (486,118 | ) |
Balance on December 31, 2015 |
| 1,719,648 |
|
|
|
|
|
(+) Charged to bad debt expenses for the year |
| 948,248 |
|
(-) Reversal |
| (337,719 | ) |
(-) Writeoff |
| (434,511 | ) |
Balance on December 31, 2016 |
| 1,895,666 |
|
The establishing and reversal of the ADA were recognized in period profits and losses as Operating Charges/Reversals, Net (Note 41). The amounts recognized as ADA and the related receivable amounts are written-off when there is no longer any expectation of recovery of the amounts.
NOTE 8 – FINANCING AND LOANS
|
| 12/31/2016 |
| ||||||
|
| CHARGES |
| PRINCIPAL |
| ||||
|
| CURRENT |
|
|
| NON |
| ||
|
| Avg Rate |
| Value |
| CURRENT |
| CURRENT |
|
|
|
|
|
|
|
|
|
|
|
ITAIPU |
| 7.13 |
| — |
| 1,693,328 |
| 9,086,250 |
|
CEMIG |
| 5.19 |
| 359 |
| 19,537 |
| 48,147 |
|
COPEL |
| 5.03 |
| 255 |
| 14,187 |
| 36,398 |
|
CEEE |
| 5.00 |
| 140 |
| 4,465 |
| 19,763 |
|
AES ELETROPAULO |
| 5.00 |
| 339,278 |
| 10,561 |
| — |
|
ENERGISA - MT |
| 9.62 |
| 2,255 |
| 94,468 |
| 168,000 |
|
ENERGISA - MT |
| 11.31 |
| 879 |
| 30,047 |
| 59,486 |
|
ENERGISA - MS |
| 5.22 |
| 161 |
| 11,341 |
| 18,510 |
|
CELPA |
| 5.00 |
| 70,777 |
| 291,809 |
| 266,757 |
|
CEMAR |
| 1.74 |
| 843 |
| 53,531 |
| 163,303 |
|
CESP |
| 5.09 |
| 92 |
| 5,569 |
| 9,904 |
|
COELCE |
| 5.00 |
| 191 |
| 9,860 |
| 28,337 |
|
COSERN |
| 5.00 |
| 13 |
| 1,874 |
| 769 |
|
COELBA |
| 5.00 |
| 423 |
| 22,788 |
| 61,749 |
|
ESCELSA |
| 5.00 |
| 147 |
| 10,833 |
| 18,626 |
|
GLOBAL |
| 5.00 |
| 106,275 |
| 44,100 |
| — |
|
CELESC DISTRIB. |
| 5.00 |
| 327 |
| 27,435 |
| 30,973 |
|
OTHER |
|
|
| 83,340 |
| 332,788 |
| 141,334 |
|
(-) ADA |
|
|
| (184,080 | ) | (74,258 | ) | — |
|
|
|
|
| 421,675 |
| 2,604,263 |
| 10,158,306 |
|
|
| 12/31/2015 |
| ||||||
|
| CHARGES |
| PRINCIPAL |
| ||||
|
| CURRENT |
|
|
| NON |
| ||
|
| Avg Rate |
| Value |
| CURRENT |
| CURRENT |
|
|
|
|
|
|
|
|
|
|
|
ITAIPU |
| 7.11 |
| — |
| 1,894,766 |
| 12,907,368 |
|
CEMIG |
| 5.09 |
| 973 |
| 54,104 |
| 134,907 |
|
COPEL |
| 6.39 |
| 471 |
| 35,102 |
| 50,744 |
|
CEEE |
| 5.00 |
| 199 |
| 9,320 |
| 23,884 |
|
AES ELETROPAULO |
| 10.00 |
| 338,017 |
| 10,561 |
| — |
|
CELPE |
| 5.00 |
| 69 |
| 8,395 |
| 5,199 |
|
CELG |
| 8.12 |
| 1,249 |
| 188,502 |
| 51,048 |
|
ENERGISA - MT |
| 9.19 |
| 2,549 |
| 52,942 |
| 255,206 |
|
ENERGISA - MT |
| 10.58 |
| 998 |
| 20,031 |
| 87,231 |
|
ENERGISA - MS |
| 5.21 |
| 222 |
| 12,426 |
| 28,968 |
|
CELPA |
| 5.00 |
| 70,479 |
| 248,059 |
| 274,415 |
|
CEMAR |
| 2.12 |
| 1,080 |
| 69,842 |
| 205,017 |
|
CESP |
| 5.09 |
| 123 |
| 5,569 |
| 15,056 |
|
COELCE |
| 5.00 |
| 237 |
| 10,769 |
| 36,678 |
|
COSERN |
| 5.00 |
| 23 |
| 2,161 |
| 2,499 |
|
COELBA |
| 5.00 |
| 533 |
| 23,833 |
| 82,762 |
|
ESCELSA |
| 5.00 |
| 206 |
| 12,593 |
| 28,609 |
|
GLOBAL |
| 5.00 |
| 94,327 |
| 44,100 |
| — |
|
CELESC DISTRIB. |
| 5.00 |
| 593 |
| 36,529 |
| 56,696 |
|
OTHER |
|
|
| 70,852 |
| 105,470 |
| 154,108 |
|
(-) ADA |
|
|
| (163,607 | ) | (77,440 | ) | — |
|
|
|
|
| 419,593 |
| 2,767,633 |
| 14,400,394 |
|
Financing and loans granted are made with the Company’s own resources, in addition to sector resources and external resources collected through international development agencies, financial institutions, and funds received from bond issuance in the international financial market.
Of the total loans granted by Eletrobras, on December 31, 2016, R$ 4,908,816 (R$ 4,582,081 on December 31, 2015) relate to transfers from the RGR sector fund, included under the Financing and Loans heading.
All financing and loans granted are backed by formal contracts signed with the borrowers. Receipt of these values, for the most part, is established in monthly installments, payable over an average period of 10 years, with an average interest rate of 9.82% per annum, weighted by the balance of the portfolio.
Financing and loans granted by the parent company, with currency exchange adjustment clause, represent nearly 32% of the total portfolio (42% on December 31, 2015). Those which include adjustment based on indexes representing domestic prices in Brazil correspond to 68% of the portfolio (58% on December 31, 2015).
The market values of these assets are near to their book values, given that they are specific sector transactions formed in part through resources from Sector Funds, and that they do not have similar conditions as a parameter for market value valuation.
The reduction in the balance of loan receivables during the fiscal year is due primarily to the exchange variation calculated on loans granted to Itaipu, resulting from the devaluation of the dollar against the real from the end of 2015 to the end of 2016. The dollar fell by nearly 18% in this period.
The long-term portions of financing and loans granted, based on contractually stipulated cash flows, mature in variable installments, as shown below:
2018 |
| 2019 |
| 2020 |
| 2021 |
| 2022 |
| After 2022 |
| Total |
|
2,136,483 |
| 2,185,507 |
| 2,192,415 |
| 2,295,718 |
| 1,059,144 |
| 289,039 |
| 10,158,306 |
|
More information on the details of these balances is found in Note 45 on Related Parties.
8.1 — AES Eletropaulo/CTEEP — Court Action
The Company has receivables owed by Eletropaulo Eletricidade de São Paulo S.A., relating to court proceedings underway between AES Eletropaulo and CTEEP.
On September 18, 2015, a partial ruling was given in the case brought against Eletropaulo, giving notice that Eletropaulo is responsible for payment of the amounts owed as a result of loans not repaid on their respective maturity dates to Eletrobras, and not to Companhia de Transmissão de Energia Elétrica Paulista (“CTEEP”).
As a result, the Company has a credit of R$ 2,656,542 on December 31, 2016 (R$ 2,382,255 on December 31, 2015), R$ 349,839 (R$ 348,578 on December 31, 2015) which is already recorded in assets, under loans and financing, corresponding to the part considered to be undisputed by the Company. Final recognition of the entire loan will occur when repayment is considered to be practically certain.
8.2 — Allowance for Doubtful Accounts
The Company establihses an allowance for doubtful accounts at a value of R$ 258,338 (R$ 241,047 on December 31, 2015) corresponding to the principal and debt servicing of default debtors.
This amount is deemed sufficient by the Administration of the Company to cover any losses in these assets, based on an analysis of the portfolio’s behavior.
This allowance includes credits owed by Celpa, a subsidiary of Equatorial Energia, in an amount of R$ 11,001 on December 31, 2016 (R$ 14,194 on December 31, 2015). This allowance was deemed necessary, considering the judicial reorganization process which Celpa is undergoing.
Changes in the ADA for financing and loans granted by the Company are as follows:
Balance on December 31, 2013 |
| 494,345 |
|
(+) Charged to bad debt expenses for the year |
| 49,985 |
|
(-) Reversals |
| (319,037 | ) |
Balance on December 31, 2014 |
| 225,293 |
|
(+) Charged to bad debt expenses for the year |
| 19,367 |
|
(-) Reversals |
| (3,613 | ) |
Balance on December 31, 2015 |
| 241,047 |
|
(+) Charged to bad debt expenses for the year |
| 20,521 |
|
(-) Reversals |
| (3,230 | ) |
Balance on December 31, 2016 |
| 258,338 |
|
The establishing and reversal of the ADA were recoginzed in period profits and losses as Operating Charges/Reversals, Net (Note 41). The amounts recorded as ADA the related financing and loan assets are written off when there is no longer any expectation of recovery of the amounts.
NOTE 9 — DIVIDENDS RECEIVABLES
The amounts shown refer to dividends and interest on equity investments, net of Income Tax Withheld at Source, where applicable, held by the Company.
|
| 12/31/2016 |
| 12/31/2015 |
|
CURRENT |
|
|
|
|
|
Lajeado Energia |
| 50,009 |
| 76,325 |
|
CEMAR |
| 25,506 |
| 22,911 |
|
CTEEP |
| 48,634 |
| 20 |
|
Goiás Transmissão |
| 17,936 |
| 23,857 |
|
STN - Sist. de Transm. Nordeste S.A. |
| 8,974 |
| — |
|
Transenergia Renovável |
| 14,762 |
| 13,979 |
|
MGE Transmissão |
| 6,547 |
| 11,447 |
|
Manaus Construtora |
| 9,178 |
| 9,178 |
|
Serra do Facão |
| — |
| 9,154 |
|
Transenergia São Paulo |
| 2,557 |
| 4,275 |
|
ETAU |
| 5,616 |
| 257 |
|
Baguari |
| — |
| 2,462 |
|
Transudeste |
| 1,256 |
| 1,033 |
|
Uirapuru |
| 2,507 |
| 2,288 |
|
IE Madeira |
| 30,630 |
| 27,589 |
|
Transirape |
| 678 |
| 678 |
|
Enerpeixe |
| 26,446 |
| 34,686 |
|
Chapecoense |
| 24,625 |
| 22,288 |
|
EAPSA |
| 4,743 |
| 2,181 |
|
Other |
| 37,851 |
| 44,752 |
|
|
| 318,455 |
| 309,360 |
|
NOTA 10 — RECOVERABLE TAXES AND INCOME TAX AND SOCIAL CONTRIBUTIONS
10.1 — Tax credits
|
| 12/31/2016 |
| 12/31/2015 |
|
Current assets: |
|
|
|
|
|
Income tax - withheld |
| 886,598 |
| 574,083 |
|
PIS/PASEP/COFINS payable |
| 119,057 |
| 58,349 |
|
ICMS recoverable |
| 48,368 |
| 40,538 |
|
Other |
| 31,497 |
| 43,681 |
|
|
| 1,085,520 |
| 716,651 |
|
|
|
|
|
|
|
Noncurrent assets: |
|
|
|
|
|
ICMS credits (a) |
| 1,217,268 |
| 1,724,692 |
|
PIS/COFINS credits (a) |
| 469,764 |
| 877,386 |
|
Other |
| 18,382 |
| 21,108 |
|
|
| 1,705,414 |
| 2,623,186 |
|
(a) ICMS, PIS/PASEP, and COFINS credits
The Company has included in noncurrent assets a total of R$ 1,687,032 on December 31, 2016 (R$ 2,602,078 on December 31, 2015) for PIS, COFINS, and ICMS credits. Of this total, R$ 1,197,990 (R$ 2,150,827 on December 31, 2015) corresponds to taxes and contributions on acquisition of fuel by the subsidiary Amazonas.
According to Paragraph 8 of Law 12,111/2009, the aforementioned taxes and contributions must be reimbursed to the CCC when realized, and so a liability of the same amount is maintained under Reimbursement Obligations (see Note 11).
(b) Unconstitutionality of the PIS/PASEP and COFINS
The Federal Supreme Court (STF) ruled that Paragraph 1 of Article 3 of Law 9,718/98 is unconstitutional, such paragraph which expanded the basis for calculation of PIS/PASEP and COFINS, at the time giving a new meaning to the concept of turnover. The new concept came to include all revenues earned by the legal person, regardless of the type of activity performed and the accounting classification adopted. This provision had no constitutional backing, and was later the subject of a constitutional amendment.
Based on the National Tax Code (CTN), the subsidiaries of Eletrobras seek recognition of their right to the credit and reimbursement of the amount overpaid as a result of the unconstitutionality of the expanded basis of calculation for those taxes. As of the date of these financial statements, there has been no final ruling on the matter.
The companies of Eletrobras do however have potential tax credits for PIS/PASEP and COFINS, which are being determined, and as such, they are not recorded in these financial statements, as the Supreme Court ruling benefits only the companies that filed the extraordinary appeals resulting in the respective case.
10.2 — Income tax and social contributions
|
| 12/31/2016 |
| 12/31/2015 |
|
Current assets: |
|
|
|
|
|
Prepaid taxes / Negative balance |
| 1,086,367 |
| 1,475,598 |
|
|
|
|
|
|
|
Noncurrent assets: |
|
|
|
|
|
Negative balance |
| 1,488,158 |
| 1,645,382 |
|
Deferred IRPJ/CSLL |
| 839,708 |
| 1,422,209 |
|
|
| 2,327,866 |
| 3,067,591 |
|
|
|
|
|
|
|
Noncurrent liabilities: |
|
|
|
|
|
Deferred IRPJ/CSLL |
| 8,305,606 |
| 1,003,796 |
|
10.3 — Composition of deferred income tax and social contributions
|
| 12/31/2016 |
| 12/31/2015 |
| ||||||||
|
| Assets |
| Liabilities |
| Net asset |
| Assets |
| Liabilities |
| Net asset |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eletronorte |
| 2,203,754 |
| (1,364,046 | ) | 839,708 |
| 1,529,640 |
| (219,692 | ) | 1,309,948 |
|
|
| 2,203,754 |
| (1,364,046 | ) | 839,708 |
| 1,529,640 |
| (219,692 | ) | 1,309,948 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eletrosul |
| 649,997 |
| (963,106 | ) | (313,109 | ) | 457,629 |
| (345,368 | ) | 112,261 |
|
Eletrobras |
| — |
| (320,560 | ) | (320,560 | ) | — |
| (733,289 | ) | (733,289 | ) |
Furnas |
| 680,613 |
| (5,284,897 | ) | (4,604,284 | ) | 258,709 |
| (453,084 | ) | (194,375 | ) |
Chesf |
| 202,252 |
| (3,254,553 | ) | (3,052,301 | ) | — |
| (65,070 | ) | (65,070 | ) |
Eletropar |
| — |
| (15,352 | ) | (15,352 | ) | — |
| (11,062 | ) | (11,062 | ) |
|
| 1,532,862 |
| (9,838,468 | ) | (8,305,606 | ) | 716,338 |
| (1,607,873 | ) | (891,535 | ) |
|
| 12/31/2016 |
| 12/31/2015 |
|
Deferred tax assets: |
|
|
|
|
|
|
|
|
|
|
|
Provisions for litigation |
| 128,391 |
| 68,066 |
|
Allowance for doubtful accounts |
| 119,327 |
| 56,047 |
|
Other operating charges and accrued liabilities |
| 429,504 |
| 407,319 |
|
Adjustment under Law 11,638/2007 - RTT (IFRS) |
| 239,679 |
| — |
|
Unrealized tax credits |
| 205,239 |
| — |
|
Tax Credit w/o Tax Loss and Carryforward (a) |
| 2,394,400 |
| 1,607,466 |
|
Other |
| 220,076 |
| 107,080 |
|
Total assets |
| 3,736,616 |
| 2,245,978 |
|
|
|
|
|
|
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
|
|
|
Assets exchange variations |
| — |
| 416,810 |
|
Financial instruments available for sale |
| 320,560 |
| 316,479 |
|
Accelerated depreciation |
| 113,793 |
| 81,255 |
|
Income from renegotiated energy credits |
| 259,183 |
| 221,871 |
|
Adjustment under Law 11,638/2007 - RTT (IFRS) |
| 205,285 |
| 488,425 |
|
Remuneration from Basic Grid - Existing Systems |
| 9,726,549 |
| — |
|
Other |
| 577,144 |
| 302,725 |
|
Total liabilities |
| 11,202,514 |
| 1,827,565 |
|
(a) In the 2016 fiscal year, the subsidiary Eletronorte recorded a total of R$ 680,028 for deferred tax assets from temporary differences, tax losses, and social contribution carryforwards. The subsidiary was able to recognize these assets based on its history of profitability and expected generation of future taxable earnings, based on a technical viability study that allowed for this maneuver, and due to the existence of deferred tax losses and the effects of restated RBSE indemnification.
10.4 — Income tax and social contributions reported in other comprehensive income
|
| 12/31/2016 |
| 12/31/2015 |
|
Deferred taxes |
|
|
|
|
|
Originated from income and expenses recognized in other comprehensive income |
|
|
|
|
|
Compensation of fair value of financial instruments available for sale |
| (56,393 | ) | 37,228 |
|
Equity in comprehensive income of subsidiaries, associated companies, and joint ventures |
| 9,296 |
| 1,274 |
|
|
|
|
|
|
|
Total income tax and social contributions recorded in other comprehensive income |
| (47,097 | ) | 38,502 |
|
NOTE 11 — REIMBURSEMENT RIGHTS AND OBLIGATIONS
|
| 12/31/2016 |
| 12/31/2015 |
|
Reimbursement rights |
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS |
|
|
|
|
|
CCC (a) |
| 1,977,183 |
| 2,118,184 |
|
ANEEL Provision - CCC (b) |
| (741,624 | ) | — |
|
CDE Reimbursement (c) |
| 347,876 |
| 147,058 |
|
Electricity Sector Remuneration (d) |
| 74,527 |
| — |
|
|
| 1,657,962 |
| 2,265,242 |
|
|
|
|
|
|
|
NONCURRENT ASSETS |
|
|
|
|
|
CCC (a) |
| 9,871,342 |
| 8,238,140 |
|
Portion from Gas Transportation (a.1) |
| (2,364,318 | ) | — |
|
|
| 7,507,024 |
| 8,238,140 |
|
|
|
|
|
|
|
Reimbursement obligations |
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES |
|
|
|
|
|
CCC (a) |
| 129,403 |
| 19,423 |
|
PROINFA |
| 292,146 |
| 299,632 |
|
CDE Reimbursement (c) |
| 45,373 |
| 77,153 |
|
Electricity Sector Remuneration (d) |
| 700,581 |
| — |
|
|
| 1,167,503 |
| 396,208 |
|
|
|
|
|
|
|
NONCURRENT LIABILITIES |
|
|
|
|
|
CCC (a) |
| 1,516,313 |
| 2,483,378 |
|
|
| 1,516,313 |
| 2,483,378 |
|
a) Fuel consumption account (CCC) of isolated systems
The fund, created by Law no. 5,899/1973, was originally intended to prorate fuel costs used to generate electricity in the Interconnected Systems. Since 1992, the mechanism for prorating fuel costs was extended to systems not integrated into the National Interconnected System (SIN), called Isolated Systems, located mostly in the Northern region of Brazil. Through Law no. 9,648/1998, the CCC began to also include costs with enterprises that promote current or future savings for the fund, known as subrogations. In addition, the Law determined that coverage for the Interconnected Systems would end at the end of 2005.
With the advent of the Law 12,111/2009 and of Decree 7,246/2010, the method of subsidy for power generation in isolated systems was changed. The subsidy for the CCC which until then only subsidized fuel costs, shall reimburse the difference between the total cost of generation of electricity and the value of the corresponding quantity of electric power for the average cost of power and energy sold in the Regulated Contracting Environment—ACR, of the National Interconnected System—SIN.
The total cost of electric power generation in isolated systems includes the costs relating to:
· energy and associated power contracting;
· generation itself for the distribution of electricity;
· charges and taxes;
· investments made; and
· purchase of fuel.
This includes, also, in the total cost of generating the remaining costs associated with the provision of the service of electric energy in remote regions of isolated systems, characterized by a great dispersion of consumers and the absence of economies of scale.
The fuel consumption account refers to amounts receivable and received of the CCC in the respective periods. On December 31, 2016, the Company has a receivable of R$ 11,848,525 (R$ 10,356,324 as of December 31, 2015) and a liability of R$ 1,645,716 (R$ 2,502,801 as of December 31, 2015) in compensation obligations.
After the enactment of Law No. 12,783, there is no longer an obligation to make contributions to the CCC Account. Despite this, the CCC Account has not been eliminated. Available balances will continue to be distributed to generation and distribution companies which incurred additional expenses as a result of the use of thermoelectric plants in case of unfavorable hydroelectric conditions. In order to ensure the continued viability of the CCC Account, Law No. 12,783 permits transfers to be made between the Energy Development Account (“CDE”) and the CCC Account.
a.1) Gas Supply Contract (CIGÁS Amazonas D) — Price Difference on the Gas Transportation Portion
The Gas Contract establishes for the transportation portion an “open book” mode, this type of contract, as the name states: “open book,” is characterized by the reimbursement of direct and indirect costs of the contractor and remuneration for the investment comes through a fixed rate to be applied to the total costs proven to have been incurred.
In this context, after the consolidation of all investments, the costs with construction of the Urucu-Coari-Manaus gas pipeline were deemed to by the Committee to Review the Transportation Portion and passed on to the transportation portion. The variables that comprised the price of the transportation portion were not duly consolidated between the parts of the Committee, which include the proof of all investment in building the gas pipeline, the return rate on the investment, rental of the Urucu LGP pipeline. Given this, an average price was used that was an amount between the two values presented by each company that composed the Committee for the transportation portion.
Given the controversy, ANEEL in turn, given the transfer of costs for the gas contract under the CCC, went on to deliberate on this matter in process no. 48500.000289/2014-66.
On December 15 of 2015, by Ratifying Resolution no. 2,005/2015, ANEEL confirmed the price of the transportation portion for the natural gas in the value of R$ 11.4867/MMBtu* (base Dec/2009). However, the decision was appealed by Petrobras and ABRACE.
On June 14 of 2016, the National Petroleum Agency (ANP), by Dispatch no. 643, corrected the tariff calculated above, and approved and ratified the applicable tariff in the value of R$ 12.0371/MMBtu (base Dec/2009) which allows the remuneration of all investments, costs and expenses attributable to providing the service of highway transportation of gas. We point out that the ANP in this context is driven by ANEEL.
Thus, the matter of defining a tariff for the transportation of gas was regulated on October 18 of 2016, by Ratifying Resolution no. 2,159/2016, ANEEL, which set the limit for the purpose of reimbursement by the CCC of the transportation portion of the natural gas contract between Amazonas D and Cigás, at R$ 12.0371/MMBtu (base Dec/2009) (without taxes), which should be applied, with the appropriate corrections, from the beginning of the invoicing for said contract.
Ratifying Resolution 2,159/2016, acting retroactively to the beginning of the supply under the contract with the new approved transportation tariff, determines that Eletrobras, as administrator of the Fuel Consumption Account (CCC), account for the values reimbursed above the set price and inform the result to ANEEL within a term of 60 days, ending on December of 2016. The value involved in this matter is R$ 2.1 billion.
The contract in clause 8.1.2.1.9.2 “b” and clause 10.8 deal with the possibility of the value used provisionally being greater than the final one, Cigás will return to Amazonas Energia the sum overpaid plus late fees.
Supported by legal opinion no. 204/2016 issued by its external legal consultants, the Company understands that in counterpart to the right of reimbursement from the CCC fund for R$ 2,364,318, there will be a right to reimbursement from Petrobras in the amount recognized under the entry suppliers (note 20).
(*) Information not audited by the independent auditors.
b) ANEEL Provision - CCC
On February 7 of 2017, ANEEL issued Ratifying Resolution No. 2,202, which approved the budget for 2017 in the Energy Development Account (CDE), and in doing so, suspended the transfer of sums that were established in the renegotiations established by inter-Ministry Ordinances MME/MF numbers 652/2014 and 372/2015 (named “1st and 2nd CCD”) between the distributors Amazonas D, Ceron, Eletroacre and Boa Vista (named “distributors”) and
Petrobras Distribuidora S.A., the guarantees for which are the receivables of the CCC, the surety bond of its controller, Eletrobras.
The distributors are creditors of the Fuel Consumption Account (CCC), especially after 2009, according to the regime of Act no. 12,111, of December 09, 2009, since they’re responsible for providing the public service of distribution of electricity in the Isolated System.
Starting with Law 12,783/2013, the Energy Development Account (CDE) was responsible for providing resources for expenditures in the Fuel Consumption Account (CCC). However, sufficient resources were not transferred to the distributors to cover the subsidies set out in Law no. 12,111/2009. Consequently, distributors were unable to make the payments to their suppliers, especially those responsible for providing fuel for the generation of energy in the Isolated System.
In order to equate the debts that the Energy Development Account (CDE) had to distributors, regulatory and structural provisions were adopted, such as the issuance of Decree no. 8,370 (by which Art. 36, paras. 1 to 4 of Decree no. 4,541, of 12/23/2002, was amended) and Inter-Ministry Ordinances by the Ministry of Mines and Energy and the Ministry of Finance nos. 652, of December 10, 2014 and 372, of August 04, 2015, to allow that said credits owed to distributors be renegotiated in installments and in a manner compatible with the budgetary conditions of the Energy Development Account (CDE).
Part of these credits are a ballast for the payment of debts to fuel suppliers that were renegotiated by the distributors in 2014 and 2015, observing the flow of payment from the above-mentioned Inter-Ministry Ordinances MME/MF.
In 2014, renegotiations were signed between the distributors and the Energy Development Account (CDE) established by Inter-Ministry Ordinance MME/MF number 652/2014. The renegotiations between the distributors and the Energy Development Account (CDE), authorized by Inter-Ministry Ordinance MME/MF number 372/2014 (CDE), had not been signed as of December 31, 2016.
The budget approved by ANEEL for 2017, in addition to reducing the planned current expenditure with CCC/CDE, did not consider many of the sums that were renegotiated under Inter-Ministry Ordinances numbers 652/2014 and 372/2015.
The Distribution companies of Eletrobras affected filed a request for reconsideration, with a suspensive effect, against Ratifying Resolution no. 2,202.
On February 24 of 2017, ANEEL issued Resolution nº 582, not granting such suspensive effect, with the subject matter still subject to the reviewed by the Board of Directors of ANEEL.
On March 2 of 2017, the Ministry of Mines and Energy (MME) published Ordinance no. 81, which establishes in the schedule for use of CDE resources, for the budget of 2017, for payment of the sum equivalent to the monthly installments to be paid between January and December of 2017, for the renegotiations entered into between the distributors and the Sector fund by December 31, 2016 between the distributors and the CDE/CCC, which are therefore the ones encompassed by Inter-Ministry Ordinance MME/MF numbers 652/2014.
On March 7 of 2017, through Ratifying Resolution no. 2,204, of March 7, 2017, ANEEL amended Ratifying Resolution no. 2,202, of February 7, 2017, which approved the annual CDE/CCC budget for 2017, including in the current budget the portions related to the CCD.
As such, the 2017 budget of the CDE/CCC account set out in Ratifying Resolution no. 2.204 remained with the reduction in resources destined to the CDE/CCC Account for the year of 2017, but there was a provision for the release of resources equivalent to the monthly payments to be paid between January and December of 2017, related to the 1st and 2nd CCD.
The Company believes that the resources that were disallowed by ANEEL will remain in that situation until the oversight reprocessing the CCC account for the estimated period between July of 2009 and June of 2016 is concluded by ANEEL.
Based on the above-described events, the Company recognized a provision for partial loss, as described below:
1) overdue portion of the resources established by MME/MF Ordinance 652/2014, overdue by December 31, 2016;
2) 2017 portions established by MME/MF Ordinance 372/2015, that had not yet been renegotiated with the CDE/CCC Fund;
3) sum for the current 2017 budget that the Company estimates it will not receive since ANEEL made the cut to the budget;
4) resources related to operations to buy and sell electricity with Termonorte II renegotiated between the subsidiaries Eletronorte and ED Rondônia.
The amount of the provision was determined based on the funding costs considering the resources which will not be reimbursed by the CCC Fund in 2017. The interest rate used as the premise for our estimate was CDI (13.63%) + 5.54% p.a.
As such, on December 31, 2016, the Company recognized a provision in the sum of R$ 741,624 under the item reimbursement rights — CCC.
c) CDE Reimbursement
Law 12,783/13, Decree 7,945/13 as amended by Decree No. 8,203/14 and the subsequent Decree 8,221/14, promoted some amendments on the contracting of energy and the objectives under the sector responsibility of the Energy Development Account — CDE, and also instituted (i) the transfer of resources from the CDE to concessionaires for the distribution costs of hydroelectric risks, involuntary exhibit, ESS - Energy Security and CVA ESS and Energy for the period 2013 to January 2014 and (ii) the transfer through the Electric Energy Trading Chamber (CCEE) to concession holders of the distribution of costs related to involuntary exposure and the order of thermoelectric plants from February, 2014.
The effects of these items were recorded as a cost reduction in relation to electric power purchased for resale (Note 40) offsetting the compensation rights - CDE/CCEE reimbursement, in accordance with IAS 20 - Subsidy and Government Assistance.
d) Electrical Sector Remuneration (RBNI — Basic Network of New Investments)
On January 13 of 2017, through order no. 084/2017, ANEEL determined that Eletrobras, as manager, return to the Energy Development Account (“CDE”) and Global Reverse Reserve (“RGR”) the historical sum of R$ 604,239, updated by the correction indices established in Inter-Ministry Ordinance no. 580/MME/MF, of November 1 of 2012, from the date these payments were made until the effective date of return of said sector funds. The current value being R$ 700,581.
The return of the sum will be done in 6 equal monthly installments, duly updated to the date of effective payment, starting on July 1 of 2017.
Eletrobras will charge the amounts owed by the concessionaires who were overpaid, including from its subsidiaries, so as to refund the resources to CDE and RGR in accordance with ANEEL order 084.
NOTE 12 — NUCLEAR FUEL INVENTORY
Below is the composition of the long-term inventory of nuclear fuel intended for the operation of UTN Angra I and UTN Angra II:
|
| 12/31/2016 |
| 12/31/2015 |
|
CURRENT |
|
|
|
|
|
Components ready for use |
| 455,737 |
| 402,453 |
|
|
| 455,737 |
| 402,453 |
|
NONCURRENT |
|
|
|
|
|
Components ready for use |
| 523,501 |
| 441,223 |
|
Uranium concentrate |
| 50,965 |
| 7,723 |
|
In process - nuclear fuel |
| 100,803 |
| 129,479 |
|
|
| 675,269 |
| 578,425 |
|
|
| 1,131,006 |
| 980,878 |
|
Inventories are stated at cost or net realizable value, whichever is less, broken down as follows:
a) Uranium concentrate and ongoing services (for the transformation of the uranium concentrate into nuclear fuel elements) are recorded by their cost of acquisition;
b) Nuclear fuel elements—are available in the core of the reactor and the Used Fuel Pool inventory (PCU)—allocated to the reults for the year on the basis of their use in the electricity generation process.
NOTE 13 — ADVANCES FOR FUTURE CAPITAL INCREASE
The Company and its subsidiaries present, under non-current assets, values corresponding to advances for future capital increase in the following investments:
|
| 12/31/2016 |
| 12/31/2015 |
|
SPEs: |
|
|
|
|
|
Energia Sustentável do Brasil |
| 535,200 |
| 141,400 |
|
Chuí Holding S.A. - Eolicas do Sul |
| 431,913 |
| 431,913 |
|
Livramento Holding S.A. - Eolicas do Sul |
| 220,027 |
| 173,860 |
|
Companhia Energética Sinop |
| — |
| 73,500 |
|
TDG Transmissora Delmiro Gouveia |
| 101,000 |
| 101,000 |
|
TSLE - Transmissora Sul Litorânea de Energia |
| 87,394 |
| 84,847 |
|
Geradora Eólica Itaguaçu da Bahia SPE S.A. |
| 67,130 |
| — |
|
Santa Vitória do Palmar Holding S.A. - Eólicas do Sul |
| 37,946 |
| 36,492 |
|
Itaguaçu da Bahia Energias Renováveis S.A. |
| — |
| 34,300 |
|
Fronteira Oeste Transmissora de Energia S.A. |
| 16,144 |
| 14,155 |
|
Vamcruz I Participações S.A. |
| 43,099 |
| 66,892 |
|
Chapada do Piauí II Holding S.A. |
| 35,213 |
| — |
|
Eólica Serra das Vacas Holding S.A. |
| 9,442 |
| 25,005 |
|
|
| 1,584,508 |
| 1,183,364 |
|
Other investments |
| 33,408 |
| 32,168 |
|
|
| 1,617,916 |
| 1,215,532 |
|
NOTE 14 — HYDROLOGICAL RISK
In 2014 and 2015, the country faced adverse hydrological conditions, a fact which triggered a series of consequences to the electrical sector. Specifically to the generators participating in the Energy Reallocation Mechanism - MRE, the low generation of energy from hydraulic power plants at levels below the MRE Physical Guarante caused a reduction in the MRE adjustment factor or Generation Scaling Factor (GSF).
This reduction interfered directly with the delivery of energy for the fulfillment of supply agreements, since due to the insufficiency of electricity, generators were exposed to the Difference Settlement Price - PLD on the short-term market in order to be able to honor their agreements, incurring negative economic and financial effects.
Law no. 13,203, of December 08, 2015, establishes, among other matters, the conditions for renegotiations of the hydrological risk of generating electricity for agents participating in the Energy Realocation Mechanism. According to the provisions of Art. 1 of that code, the hydrological risk can be renegotiated, as long as ANEEL consents, and with retroactive effects starting on January 1 of 2015, by counterpart from the electricity generation agents.
Given the provisions of the Law, ANEEL, through Regulatory Resolution no. 684, of December 11, 2015, established the criteria and other conditions for renegotiation.
If the conditions and criteria set out in the law are observed, the SFF (ANEEL’s Finacial Oversight Office) is of the understanding that the companies interested in renegotiation are fully capable of quantifying the amounts of electricity that are eligible both for the ACR and for the ACL. We point out that not only is the information on the amounts known to the company, but the decision to renegotiate belongs to its administrators, and the Regulatory Agency would only be responsible for ratifying the values. If the information supplied by the companies adhering to the renegotiation are consistent with the premises established in legislation, there would be no discretion by the regulator as to ratifying the renegotiation. The GSF was recalculated, resulting in an amount that will be compensated with the risk premiums calculated by the subsidiaries that chose to join the renegotiation: Eletronorte, Eletrosul, Furnas and Amazonas GT.
The composition of the amounts accounted due to the renegotiation of hydrological risk, for contracts signed in the scope of the Regulated Contracting Environment (ACR), are the following:
|
| 12/31/2016 |
| 12/31/2015 |
|
UHE Tucuruí |
| 195,840 |
| 312,414 |
|
UHE Serra da Mesa |
| 154,449 |
| 189,367 |
|
UHE Mascarenhas de Moraes |
| 63,186 |
| 79,076 |
|
UHE Itumbiara |
| 42,680 |
| 67,487 |
|
UHE Simplício |
| 42,289 |
| 54,371 |
|
UHE Batalha |
| 20,175 |
| 13,813 |
|
UHE Balbina |
| 13,262 |
| 24,928 |
|
UHE Mauá |
| 13,839 |
| 14,968 |
|
UHE Manso |
| 10,743 |
| 25,939 |
|
UHE Passo São João |
| 5,471 |
| 5,918 |
|
UHE São Domingos |
| 5,277 |
| 5,709 |
|
|
| 567,212 |
| 793,991 |
|
Total Current Assets |
| 109,535 |
| 195,830 |
|
Total Noncurrent Assets |
| 457,677 |
| 598,161 |
|
TOTAL |
| 567,212 |
| 793,991 |
|
NOTE 15 — INVESTMENTS
|
| 12/31/2016 |
| 12/31/2015 |
|
Accounted for using Equity Method |
|
|
|
|
|
a) Associated companies |
|
|
|
|
|
CEEE-GT |
| 676,332 |
| 448,274 |
|
EMAE |
| 292,355 |
| 307,195 |
|
CTEEP |
| 2,592,701 |
| 942,732 |
|
CEMAR |
| 729,888 |
| 653,419 |
|
Lajeado Energia |
| 218,262 |
| 219,173 |
|
CEB Lajeado |
| 72,989 |
| 80,353 |
|
Paulista Lajeado |
| 26,143 |
| 23,507 |
|
Energisa MT |
| 394,774 |
| 385,318 |
|
Energética Águas da Pedra S.A. |
| 216,294 |
| 208,795 |
|
|
| 5,219,738 |
| 3,268,766 |
|
b) Joint ventures |
|
|
|
|
|
|
|
|
|
|
|
Inambari |
| 101 |
| 115 |
|
Mangue Seco II |
| 17,934 |
| 16,889 |
|
CHC* |
| — |
| 98,514 |
|
Norte Energia (Belo Monte) |
| 5,358,861 |
| 3,378,325 |
|
Rouar |
| 97,157 |
| 111,775 |
|
Madeira Energia S.A. (MESA) |
| 2,503,260 |
| 2,896,068 |
|
ESBR Participações S.A. |
| 3,331,923 |
| 2,807,626 |
|
Interligação Elétrica do Madeira S.A. |
| 1,090,107 |
| 912,098 |
|
Norte Brasil Transmissora de Energia S.A. |
| 975,886 |
| 887,528 |
|
Manaus Transmissora de Energia S.A. |
| 650,961 |
| 621,873 |
|
Enerpeixe S.A. |
| 375,174 |
| 561,282 |
|
Teles Pires Participações |
| 799,926 |
| 662,564 |
|
Chapecoense Geração S.A. (Chapecoense) |
| 493,555 |
| 415,501 |
|
Belo Monte Transmissora de Energia |
| 1,069,359 |
| 391,058 |
|
Interligação Elétrica Garanhuns S.A. |
| 360,072 |
| 318,972 |
|
Mata de Santa Genebra |
| 230,685 |
| 30,336 |
|
Goiás Transmissão S.A. |
| 170,313 |
| 190,245 |
|
Companhia Energética Sinop S.A. |
| 430,751 |
| 179,052 |
|
STN - Sistema de Transmissão Nordeste S.A. |
| 202,898 |
| 176,941 |
|
Integração Transmissora de Energia S.A. |
| 201,033 |
| 175,572 |
|
Transnorte Energia S.A. |
| 148,748 |
| 148,373 |
|
Chapada Piauí II Holding S.A. |
| 117,701 |
| 142,187 |
|
MGE Transmissão S.A. |
| 111,344 |
| 136,755 |
|
Transmissora Sul Brasileira de Energia S.A. |
| 277,474 |
| 270,252 |
|
Transenergia Renovável S.A. (Transenergia) |
| 153,390 |
| 128,418 |
|
Retiro Baixo Energética S.A. (Retiro Baixo) |
| 127,229 |
| 121,774 |
|
Brasnorte Transmissora de Energia S.A. |
| 127,338 |
| 120,873 |
|
Chapada Piauí I Holding S.A. |
| 104,060 |
| 109,497 |
|
Empresa de Energia São Manoel |
| 418,460 |
| 103,314 |
|
Paranaíba |
| 147,656 |
| 100,726 |
|
Eólica Serra das Vacas Holding S.A. |
| 94,614 |
| 97,374 |
|
Transmissora Matogrossense de Energia S.A. |
| 106,480 |
| 97,154 |
|
Triângulo Mineiro Transmissora |
| 128,765 |
| 82,555 |
|
Transmissora Sul Litorânea de Energia S.A. |
| 140,280 |
| 134,739 |
|
Other |
| 1,287,595 |
| 1,280,581 |
|
|
| 21,851,090 |
| 17,906,906 |
|
SUBTOTAL |
| 27,070,828 |
| 21,175,672 |
|
Impairment for losses in investments |
| (1,897,217 | ) | (489,866 | ) |
TOTAL |
| 25,173,611 |
| 20,685,806 |
|
(*) On July 22 of 2016, the Company sold all of its shares in Centrales Hidrelectricas de Centroamerica (“CHC”), corresponding to 50% of the capital in the subsidiary.
|
| 12/31/2016 |
| 12/31/2015 |
|
Investments recongized at fair value |
|
|
|
|
|
|
|
|
|
|
|
AES Tietê |
| 437,197 |
| 437,532 |
|
Coelce |
| 251,938 |
| 196,429 |
|
Energisa S.A. |
| 148,661 |
| 124,104 |
|
Cesp |
| 129,096 |
| 87,023 |
|
Celpa |
| 48,895 |
| 42,379 |
|
Celesc |
| 65,920 |
| 41,513 |
|
CELPE |
| 21,688 |
| 28,859 |
|
COPEL |
| 29,207 |
| 24,492 |
|
CGEEP |
| 15,895 |
| 17,662 |
|
CEB |
| 8,305 |
| 6,130 |
|
AES Eletropaulo |
| 23,660 |
| 17,603 |
|
Energias do Brasil |
| 26,229 |
| 17,888 |
|
CPFL Energia |
| 45,431 |
| 25,861 |
|
Other |
| 105,801 |
| 109,785 |
|
|
| 1,357,923 |
| 1,177,260 |
|
15.1 — Impairment losses on investments
|
| 12/31/2016 |
| 12/31/2015 |
|
INAMBARI |
| 101 |
| 115 |
|
CHC |
| — |
| 98,513 |
|
ESBR Participações S.A. |
| — |
| 15,500 |
|
Madeira Energia S.A. |
| 93,932 |
| 97,010 |
|
Teles Pires Participações |
| 325,388 |
| 230,823 |
|
Empresa de Energia São Manoel |
| 71,916 |
| 47,905 |
|
Belo Monte Transmissora de Energia |
| 362,939 |
| — |
|
Companhia Energética Sinop |
| 324,250 |
| — |
|
Norte Brasil Transmissora S.A. |
| 323,202 |
| — |
|
Manaus Transmissora de Energia S.A. |
| 334,580 |
| — |
|
Other |
| 60,909 |
| — |
|
|
| 1,897,217 |
| 489,866 |
|
15.2 Change of investments
The movement of the most relevant investments of the company is indicated below:
Subsidiaries and associated companies |
| Balance on |
| Capital |
| Other |
| AFAC |
| Capital |
| Dividends |
| Equity |
| Disposal* |
| Balance on |
|
CHANGE IN INVESTMENTS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mangue Seco II |
| 16,889 |
| — |
| — |
| — |
| — |
| (191 | ) | 1,236 |
| — |
| 17,934 |
|
CHC* |
| 98,513 |
| — |
| (8,713 | ) | — |
| — |
| — |
| (1,969 | ) | (87,831 | ) | — |
|
Norte Energia (Belo Monte) |
| 3,378,325 |
| 1,399,201 |
| — |
| 600,000 |
| — |
| — |
| (18,665 | ) | — |
| 5,358,861 |
|
Inambari |
| 115 |
| — |
| — |
| — |
| — |
| — |
| (14 | ) | — |
| 101 |
|
CEEE-GT |
| 448,274 |
| — |
| (73,004 | ) | — |
| — |
| — |
| 301,062 |
| — |
| 676,332 |
|
EMAE |
| 307,195 |
| — |
| (31,068 | ) | — |
| — |
| 3,211 |
| 13,017 |
| — |
| 292,355 |
|
CTEEP |
| 942,732 |
| 1,116 |
| — |
| 56,854 |
| (22,888 | ) | (89,171 | ) | 1,704,057 |
| — |
| 2,592,701 |
|
CEMAR |
| 653,419 |
| — |
| — |
| — |
| — |
| (57,661 | ) | 134,130 |
| — |
| 729,888 |
|
Lajeado Energia |
| 219,173 |
| (1 | ) | — |
| — |
| — |
| (59,291 | ) | 58,381 |
| — |
| 218,262 |
|
CEB Lajeado |
| 80,353 |
| — |
| (2 | ) | — |
| — |
| (21,501 | ) | 14,139 |
| — |
| 72,989 |
|
Paulista Lajeado |
| 23,507 |
| — |
| — |
| — |
| — |
| (1,739 | ) | 4,375 |
| — |
| 26,143 |
|
Rouar |
| 111,775 |
| — |
| (18,751 | ) | — |
| — |
| — |
| 4,133 |
| — |
| 97,157 |
|
Energisa MT |
| 385,318 |
| — |
| (1,146 | ) | — |
| (17,536 | ) | (4,555 | ) | 32,694 |
| — |
| 394,774 |
|
Madeira Energia S.A. (MESA) |
| 2,896,068 |
| 152,100 |
| — |
| — |
| (304,200 | ) | — |
| (240,708 | ) | — |
| 2,503,260 |
|
ESBR Participações S.A. |
| 2,807,626 |
| — |
| — |
| — |
| — |
| — |
| 524,297 |
| — |
| 3,331,923 |
|
Interligação Elétrica do Madeira S.A. |
| 912,098 |
| — |
| — |
| — |
| — |
| (31,069 | ) | 209,078 |
| — |
| 1,090,107 |
|
Norte Brasil Transmissora de Energia S.A. |
| 887,528 |
| — |
| — |
| — |
| — |
| — |
| 88,358 |
| — |
| 975,886 |
|
Manaus Transmissora de Energia S.A. |
| 621,873 |
| — |
| — |
| — |
| — |
| (3,885 | ) | 32,973 |
| — |
| 650,961 |
|
Enerpeixe S.A. |
| 561,282 |
| — |
| — |
| — |
| (140,000 | ) | (96,630 | ) | 50,522 |
| — |
| 375,174 |
|
Teles Pires Participações |
| 662,564 |
| 196,982 |
| — |
| — |
| — |
| — |
| (59,620 | ) | — |
| 799,926 |
|
Chapecoense Geração S.A. (Chapecoense) |
| 415,501 |
| — |
| — |
| — |
| — |
| (24,625 | ) | 102,679 |
| — |
| 493,555 |
|
Belo Monte Transmissora de Energia |
| 391,058 |
| 667,869 |
| — |
| — |
| — |
| — |
| 10,432 |
| — |
| 1,069,359 |
|
Interligação Elétrica Garanhuns S.A. |
| 318,972 |
| 735 |
| — |
| — |
| — |
| (4,111 | ) | 44,476 |
| — |
| 360,072 |
|
Mata de Santa Genebra |
| 30,336 |
| 207,084 |
| — |
| — |
| — |
| — |
| (6,735 | ) | — |
| 230,685 |
|
Energética Águas da Pedra S.A. |
| 208,795 |
| — |
| — |
| — |
| — |
| (47,313 | ) | 54,812 |
| — |
| 216,294 |
|
Goiás Transmissão S.A. |
| 190,245 |
| — |
| — |
| — |
| — |
| — |
| (19,932 | ) | — |
| 170,313 |
|
Empresa de Energia São Manoel |
| 103,314 |
| 418,987 |
| — |
| — |
| — |
| — |
| (103,841 | ) | — |
| 418,460 |
|
Companhia Energética Sinop S.A. |
| 179,052 |
| 127,489 |
| — |
| 127,488 |
| — |
| — |
| (3,278 | ) | — |
| 430,751 |
|
STN - Sistema de Transmissão Nordeste S.A. |
| 176,941 |
| — |
| — |
| — |
| — |
| (50,837 | ) | 76,794 |
| — |
| 202,898 |
|
Integração Transmissora de Energia S.A. |
| 175,572 |
| — |
| — |
| — |
| — |
| (6,263 | ) | 31,724 |
| — |
| 201,033 |
|
Transnorte Energia S.A. |
| 148,373 |
| — |
| — |
| — |
| — |
| — |
| 375 |
| — |
| 148,748 |
|
Chapada Piauí II Holding S.A. |
| 142,187 |
| — |
| — |
| — |
| — |
| — |
| (24,486 | ) | — |
| 117,701 |
|
MGE Transmissão S.A. |
| 136,755 |
| — |
| — |
| — |
| — |
| — |
| (25,411 | ) | — |
| 111,344 |
|
Transmissora Sul Brasileira de Energia S.A. |
| 270,252 |
| — |
| — |
| — |
| — |
| — |
| 7,222 |
| — |
| 277,474 |
|
Transenergia Renovável S.A. (Transenergia) |
| 128,418 |
| — |
| — |
| — |
| — |
| (4,703 | ) | 29,675 |
| — |
| 153,390 |
|
Retiro Baixo Energética S.A. (Retiro Baixo) |
| 121,774 |
| — |
| — |
| — |
| — |
| (2,107 | ) | 7,562 |
| — |
| 127,229 |
|
Brasnorte Transmissora de Energia S.A. |
| 120,873 |
| — |
| — |
| — |
| — |
| (4,225 | ) | 10,690 |
| — |
| 127,338 |
|
Chapada Piauí I Holding S.A. |
| 109,497 |
| — |
| — |
| 14,040 |
| — |
| — |
| (19,477 | ) | — |
| 104,060 |
|
Paranaíba |
| 100,726 |
| 24,441 |
| — |
| 12,250 |
| — |
| — |
| 10,239 |
| — |
| 147,656 |
|
Eólica Serra das Vacas Holding S.A. |
| 97,374 |
| — |
| — |
| 4,551 |
| — |
| — |
| (7,311 | ) | — |
| 94,614 |
|
Transmissora Matogrossense de Energia S.A. |
| 97,154 |
| — |
| — |
| — |
| — |
| — |
| 9,326 |
| — |
| 106,480 |
|
Triângulo Mineiro Transmissora |
| 82,555 |
| 29,253 |
| — |
| — |
| — |
| — |
| 16,957 |
| — |
| 128,765 |
|
Transmissora Sul Litorânea de Energia S.A. |
| 134,739 |
| — |
| — |
| — |
| — |
| — |
| 5,541 |
| — |
| 140,280 |
|
Other |
| 1,280,582 |
| 20,689 |
| 19,903 |
| 24,386 |
| (55,474 | ) | (49,731 | ) | 47,240 |
| — |
| 1,287,595 |
|
TOTAL INVESTMENTS |
| 21,175,672 |
| 3,245,945 |
| (112,781 | ) | 839,569 |
| (540,098 | ) | (556,397 | ) | 3,106,749 |
| (87,831 | ) | 27,070,828 |
|
Subsidiaries and associated companies |
| Balance on |
| Capital |
| Other |
| AFAC |
| Capital |
| Dividends |
| Others |
| Equity |
| Balance on |
|
CHANGE OF INVESTMENTS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EÓLICA MANGUE SECO |
| 16,726 |
| — |
| — |
| — |
| — |
| — |
| — |
| 163 |
| 16,889 |
|
CHC |
| 79,081 |
| — |
| 33,187 |
| — |
| — |
| — |
| — |
| (13,753 | ) | 98,514 |
|
NORTE ENERGIA (BELO MONTE) |
| 2,585,114 |
| 245,249 |
| — |
| 245,249 |
| 326,671 |
| — |
| — |
| (23,958 | ) | 3,378,325 |
|
INAMBARI |
| 164 |
| — |
| 1 |
| — |
| — |
| — |
| — |
| (50 | ) | 115 |
|
CEEE-GT |
| 449,336 |
| — |
| (16,795 | ) | — |
| — |
| — |
| 1,560 |
| 14,173 |
| 448,274 |
|
EMAE |
| 275,214 |
| — |
| 9,271 |
| — |
| — |
| (1,416 | ) | — |
| 24,126 |
| 307,195 |
|
CTEEP |
| 946,187 |
| — |
| (949 | ) | — |
| — |
| (120,648 | ) | — |
| 118,142 |
| 942,732 |
|
CEMAR |
| 554,817 |
| — |
| — |
| — |
| — |
| (23,176 | ) | — |
| 121,778 |
| 653,419 |
|
REDE LAJEADO |
| 206,282 |
| — |
| 39 |
| — |
| — |
| (24,162 | ) | — |
| 37,014 |
| 219,173 |
|
CEB LAJEADO |
| 71,723 |
| — |
| 11 |
| — |
| — |
| (8,966 | ) | — |
| 17,586 |
| 80,353 |
|
CEEE-D |
| 7,476 |
| — |
| 2,956 |
| — |
| — |
| — |
| — |
| (10,432 | ) | — |
|
PAULISTA LAJEADO |
| 18,119 |
| — |
| — |
| — |
| — |
| 925 |
| — |
| 4,463 |
| 23,507 |
|
ROUAR |
| 70,044 |
| — |
| 34,202 |
| — |
| — |
| — |
| — |
| 7,529 |
| 111,775 |
|
ENERGISA MT |
| 376,031 |
| — |
| 587 |
| — |
| — |
| (4,218 | ) | — |
| 12,918 |
| 385,318 |
|
ESBR Participações S.A. |
| 2,907,364 |
| 180,000 |
| — |
| — |
| — |
| — |
| — |
| (279,738 | ) | 2,807,626 |
|
Empresa de Energia São Manoel |
| (594 | ) | 105,667 |
| — |
| — |
| — |
| — |
| — |
| (1,759 | ) | 103,314 |
|
Madeira Energia S.A. |
| 2,724,068 |
| 164,970 |
| — |
| — |
| — |
| — |
| — |
| 7,030 |
| 2,896,068 |
|
Norte Brasil Transmissora de Energia S.A. |
| 842,103 |
| — |
| — |
| — |
| — |
| — |
| — |
| 45,425 |
| 887,528 |
|
Interligação Elétrica do Madeira S.A. |
| 822,342 |
| — |
| — |
| — |
| — |
| (27,991 | ) | — |
| 117,747 |
| 912,098 |
|
Enerpeixe S.A. |
| 555,860 |
| — |
| — |
| — |
| — |
| (62,685 | ) | — |
| 68,107 |
| 561,282 |
|
Belo Monte Transmissora de Energia |
| 12,081 |
| 194,040 |
| — |
| — |
| 194,040 |
| — |
| — |
| (9,103 | ) | 391,058 |
|
Paranaíba Transmissora de Energia S.A. |
| 67,383 |
| 29,400 |
| — |
| — |
| — |
| — |
| — |
| 3,943 |
| 100,726 |
|
Transnorte Energia S.A. |
| 51,656 |
| — |
| — |
| — |
| 106,330 |
| — |
| — |
| (9,613 | ) | 148,373 |
|
Manaus Transmissora de Energia S.A. |
| 547,784 |
| 17,420 |
| — |
| — |
| 26,800 |
| (50 | ) | — |
| 29,919 |
| 621,873 |
|
Teles Pires Participações |
| 496,425 |
| 252,278 |
| — |
| — |
| — |
| — |
| — |
| (86,139 | ) | 662,564 |
|
Chapecoense Generation S.A. |
| 364,522 |
| — |
| — |
| — |
| — |
| (22,288 | ) | — |
| 73,267 |
| 415,501 |
|
Transmissora Sul Brasileira de Energia S.A. |
| 275,960 |
| 16,000 |
| — |
| — |
| — |
| 2,660 |
| — |
| (24,368 | ) | 270,252 |
|
Energética Águas da Pedra S.A. |
| 184,632 |
| 2,450 |
| — |
| — |
| 2,450 |
| (3,455 | ) | — |
| 22,718 |
| 208,795 |
|
Interligação Elétrica Garanhuns S.A. |
| 181,526 |
| 116,865 |
| — |
| — |
| — |
| (5,780 | ) | — |
| 26,361 |
| 318,972 |
|
Companhia Energética SINOP S.A. |
| 177,772 |
| — |
| — |
| — |
| — |
| — |
| — |
| 1,280 |
| 179,052 |
|
Integração Transmissora de Energia S.A. |
| 169,450 |
| — |
| — |
| — |
| — |
| (19,575 | ) | — |
| 25,697 |
| 175,572 |
|
STN - Sistema de Transmissão Nordeste S.A. |
| 163,434 |
| — |
| — |
| — |
| — |
| (31,968 | ) | — |
| 45,475 |
| 176,941 |
|
Santa Vitória do Palmar Holding S.A. |
| 157,627 |
| — |
| — |
| — |
| — |
| 1,163 |
| — |
| (108,567 | ) | 50,223 |
|
Transmissora Sul Litorânea de Energia S.A. |
| 139,719 |
| — |
| — |
| — |
| — |
| — |
| — |
| (4,980 | ) | 134,739 |
|
GOIÁS TRANSMISSÃO S.A. |
| 138,436 |
| — |
| — |
| — |
| — |
| (14,757 | ) | — |
| 66,566 |
| 190,245 |
|
MGE TRANSMISSÃO S.A. |
| 118,953 |
| — |
| — |
| 1,960 |
| — |
| (4,634 | ) | — |
| 20,476 |
| 136,755 |
|
Brasnorte Transmissora de Energia S.A. |
| 115,568 |
| — |
| — |
| — |
| — |
| (4,067 | ) | — |
| 9,372 |
| 120,873 |
|
Retiro Baixo Energia S.A. |
| 111,906 |
| — |
| — |
| 2,695 |
| — |
| — |
| — |
| 7,173 |
| 121,774 |
|
Transenergia Renovável S.A. |
| 96,813 |
| — |
| — |
| — |
| — |
| (7,172 | ) | — |
| 38,777 |
| 128,418 |
|
VAMCRUZ PARTICIPAÇÕES S.A. |
| — |
| 392 |
| 72,995 |
| — |
| — |
| (523 | ) | — |
| 504 |
| 73,368 |
|
BAGUARI ENERGIA S.A. |
| 85,815 |
| — |
| — |
| — |
| — |
| (9,320 | ) | — |
| 6,226 |
| 82,721 |
|
Transmissora Matogrossense de Energia S.A. |
| 85,368 |
| — |
| — |
| — |
| — |
| (1,531 | ) | — |
| 13,317 |
| 97,154 |
|
Transenergia São Paulo S.A. |
| 83,116 |
| — |
| — |
| 1,960 |
| — |
| — |
| — |
| 6,065 |
| 91,141 |
|
Others |
| 1,275,443 |
| 257,946 |
| 62,431 |
| 60,391 |
| 106,470 |
| 574,834 |
| (766,887 | ) | (125,551 | ) | 1,445,077 |
|
TOTAL INVESTMENTS |
| 18,608,846 |
| 1,582,677 |
| 197,936 |
| 312,255 |
| 762,761 |
| 181,199 |
| (765,327 | ) | 295,326 |
| 21,175,672 |
|
(*) On July 22 of 2016, the Company sold all of its shares in Centrales Hidrelectricas de Centroamerica (“CHC”), corresponding to 50% of the invested company capital.
Subsidiaries and associated companies |
| Balance on |
| Capital |
| Other comprehensive |
| Capital Gain / |
| Dividends and interest |
| Equity |
| Balance on |
|
CHANGE OF INVESTMENTS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ITAIPU BINACIONAL |
| 117,130 |
| — |
| 15,680 |
| — |
| — |
| — |
| 132,810 |
|
EÓLICA MANGUE SECO |
| 17,058 |
| — |
| — |
| — |
| — |
| (332 | ) | 16,726 |
|
CHC |
| 29,119 |
| 49,613 |
| 5,866 |
| — |
| — |
| (5,517 | ) | 79,081 |
|
NORTE ENERGIA (BELO MONTE) |
| 2,104,536 |
| 682,227 |
| — |
| — |
| — |
| (201,649 | ) | 2,585,114 |
|
INAMBARI |
| 9,148 |
| — |
| — |
| — |
| — |
| (8,984 | ) | 164 |
|
CEEE-GT |
| 544,711 |
| — |
| (4,067 | ) | — |
| — |
| (91,308 | ) | 449,336 |
|
EMAE |
| 153,960 |
| — |
| (28,446 | ) | — |
| (1,730 | ) | 151,430 |
| 275,214 |
|
CTEEP |
| 931,580 |
| 83,106 |
| — |
| (30,005 | ) | (91,996 | ) | 53,502 |
| 946,187 |
|
CEMAR |
| 463,394 |
| — |
| — |
| — |
| (20,865 | ) | 112,288 |
| 554,817 |
|
REDE LAJEADO |
| 232,907 |
| — |
| 50 |
| — |
| (40,305 | ) | 13,630 |
| 206,282 |
|
CEB LAJEADO |
| 83,644 |
| — |
| 14 |
| — |
| (19,354 | ) | 7,419 |
| 71,723 |
|
CEEE-D |
| 146,649 |
| — |
| 5,945 |
| — |
| — |
| (145,118 | ) | 7,476 |
|
PAULISTA LAJEADO |
| 27,669 |
| — |
| — |
| — |
| (6,454 | ) | (3,096 | ) | 18,119 |
|
ROUAR |
| 18,427 |
| 34,392 |
| 9,985 |
| — |
| — |
| 7,240 |
| 70,044 |
|
CEMAT |
| 334,294 |
| — |
| 2,255 |
| 18,852 |
| (4,861 | ) | 25,491 |
| 376,031 |
|
ESBR PARTICIPAÇÕES S.A. |
| 2,752,140 |
| 618,000 |
| (1,200 | ) | — |
| — |
| (461,576 | ) | 2,907,364 |
|
MADEIRA ENERGIA S.A. |
| 2,506,082 |
| 1,079,130 |
| — |
| — |
| — |
| (861,144 | ) | 2,724,068 |
|
NORTE BRASIL TRANSMISSORA DE ENERGIA S.A. |
| 462,170 |
| 386,245 |
| — |
| — |
| — |
| (5,857 | ) | 842,558 |
|
INTERLIGAÇÃO ELÉTRICA DO MADEIRA S.A. |
| 685,927 |
| 80,850 |
| — |
| — |
| (7,362 | ) | 62,927 |
| 822,342 |
|
ENERPEIXE S.A. |
| 525,379 |
| — |
| — |
| — |
| (26,058 | ) | 56,539 |
| 555,860 |
|
MANAUS TRANSMISSORA DE ENERGIA S.A. |
| 525,558 |
| — |
| — |
| — |
| — |
| 22,226 |
| 547,784 |
|
TELES PIRES PARTICIPAÇÕES S.A. |
| 525,582 |
| — |
| — |
| — |
| — |
| (29,157 | ) | 496,425 |
|
CHAPECOENSE GENERATION S.A. |
| 345,388 |
| — |
| — |
| — |
| (9,512 | ) | 28,646 |
| 364,522 |
|
TRANSMISSORA SUL BRASILEIRA DE ENERGIA S.A. |
| 167,403 |
| 98,400 |
| — |
| — |
| (1,220 | ) | 11,377 |
| 275,960 |
|
ENERGÉTICA ÁGUAS DA PEDRA S.A. |
| 189,062 |
| — |
| — |
| — |
| (12,838 | ) | 8,408 |
| 184,632 |
|
INTERLIGAÇÃO ELÉTRICA GARANHUNS S.A. |
| 98,659 |
| 66,150 |
| — |
| — |
| — |
| 16,717 |
| 181,526 |
|
COMPANHIA ENERGÉTICA SINOP S.A. |
| — |
| 182,591 |
| — |
| — |
| — |
| (4,819 | ) | 177,772 |
|
INTEGRAÇÃO TRANSMISSORA DE ENERGIA S.A. |
| 160,151 |
| — |
| — |
| — |
| (13,091 | ) | 22,390 |
| 169,450 |
|
STN - SISTEMA DE TRANSMISSÃO NORDESTE S.A. |
| 195,154 |
| — |
| — |
| — |
| (77,734 | ) | 46,014 |
| 163,434 |
|
SANTA VITÓRIA DO PALMAR HOLDING S.A. |
| 185,970 |
| (29,400 | ) | — |
| — |
| (1,163 | ) | 2,220 |
| 157,627 |
|
TRANSMISSORA SUL LITORÂNEA DE ENERGIA S.A. |
| 16,901 |
| 125,455 |
| — |
| — |
| — |
| (2,637 | ) | 139,719 |
|
GOIÁS TRANSMISSÃO S.A. |
| 131,579 |
| — |
| 7,350 |
| — |
| — |
| (493 | ) | 138,436 |
|
MGE TRANSMISSÃO S.A. |
| 106,371 |
| — |
| 28,616 |
| — |
| (6,812 | ) | (9,222 | ) | 118,953 |
|
BRASNORTE TRANSMISSORA DE ENERGIA S.A. |
| 105,921 |
| — |
| — |
| — |
| — |
| 9,647 |
| 115,568 |
|
RETIRO BAIXO ENERGIA S.A. |
| 113,181 |
| — |
| — |
| — |
| — |
| (1,275 | ) | 111,906 |
|
TRANSENERGIA RENOVÁVEL S.A. |
| 78,241 |
| — |
| — |
| — |
| (5,744 | ) | 24,316 |
| 96,813 |
|
PARANAÍBA TRANSMISSORA DE ENERGIA S.A. |
| 17,801 |
| 47,285 |
| — |
| — |
| — |
| 2,297 |
| 67,383 |
|
BAGUARI ENERGIA S.A. |
| 92,437 |
| — |
| (315 | ) | — |
| (5,457 | ) | (850 | ) | 85,815 |
|
TRANSMISSORA MATOGROSSENSE DE ENERGIA S.A. |
| 75,656 |
| — |
| — |
| — |
| (1,470 | ) | 11,182 |
| 85,368 |
|
TRANSENERGIA SÃO PAULO S.A. |
| 49,632 |
| — |
| — |
| — |
| (10,493 | ) | 43,977 |
| 83,116 |
|
OTHERS |
| 989,998 |
| 621,071 |
| (7,697 | ) | 8 |
| (38,877 | ) | (359,182 | ) | 1,205,321 |
|
TOTAL INVESTMENTS |
| 16,316,569 |
| 4,125,115 |
| 34,036 |
| (11,145 | ) | (403,396 | ) | (1,452,333 | ) | 18,608,846 |
|
15.3 Information of the market value of invested companies
Publicly Traded |
| Accounting |
|
|
| Market Value(*) |
| ||
Companies |
| Method |
| Share |
| 12/31/2016 |
| 12/31/2015 |
|
|
|
|
|
|
|
|
|
|
|
CTEEP |
| Equity method |
| 36.05 | % | 3,744,704 |
| 2,589,826 |
|
CEMAR |
| Equity method |
| 33.55 | % | 1,363,366 |
| 989,887 |
|
AES Tiete |
| Market value |
| 7.94 | % | 437,197 |
| 437,532 |
|
ENERGISA MT |
| Equity method |
| 22.01 | % | 397,129 |
| 335,109 |
|
COELCE |
| Market value |
| 7.06 | % | 251,938 |
| 196,429 |
|
ENERGISA S.A. |
| Market value |
| 2.31 | % | 148,661 |
| 116,497 |
|
CESP |
| Market value |
| 2.05 | % | 129,096 |
| 87,023 |
|
CEEE-GT |
| Equity method |
| 32.59 | % | 259,193 |
| 76,904 |
|
CEEE-D |
| Equity method |
| 32.59 | % | 93,076 |
| 65,302 |
|
EMAE |
| Equity method |
| 40.44 | % | 123,692 |
| 60,404 |
|
CELPA |
| Market value |
| 0.99 | % | 48,895 |
| 42,379 |
|
CELESC |
| Market value |
| 10.75 | % | 65,920 |
| 41,513 |
|
AES Eletropaulo |
| Market value |
| 1.25 | % | 23,660 |
| 32,098 |
|
CPFL Energia |
| Market value |
| 0.18 | % | 45,431 |
| 25,861 |
|
CELPE |
| Market value |
| 1.56 | % | 21,688 |
| 28,859 |
|
COPEL |
| Market value |
| 0.56 | % | 29,207 |
| 24,492 |
|
Energias do Brasil |
| Market value |
| 0.31 | % | 26,229 |
| 20,357 |
|
CGEEP - DUKE |
| Market value |
| 0.47 | % | 15,895 |
| 17,662 |
|
CEB |
| Market value |
| 2.10 | % | 8,305 |
| 6,130 |
|
CELGPAR |
| Market value |
| 0.07 | % | 207 |
| 92 |
|
(*) Based on price of shares in the database.
15.4 Summary of the information of the jointly controlled and associated projects
I - Assets and Liabilities
12/31/2016 |
| ||||||||||||||||||||||||
ASSETS |
| LIABILITIES |
| ||||||||||||||||||||||
|
|
|
| Current |
| Noncurrent |
|
|
| Current |
| Noncurrent |
|
|
|
|
| ||||||||
Joint Ventures and Associated |
| Interest |
| Cash and |
| Other |
| Financial |
| Other |
| Total |
| Loans |
| Other |
| Loans and |
| Other |
| Net Equity |
| Total |
|
Norte Energia S.A. |
| 49.98 | % | 205,796 |
| 577,981 |
| 36,345,981 |
| 409,376 |
| 37,539,134 |
| 630,932 |
| 989,348 |
| 24,984,318 |
| 435,958 |
| 10,498,578 |
| 37,539,134 |
|
Madeira Energia S.A. (MESA) |
| 39.00 | % | 57,974 |
| 570,886 |
| 22,440,401 |
| 2,007,822 |
| 25,077,083 |
| 602,359 |
| 1,891,836 |
| 14,465,955 |
| 1,698,316 |
| 6,418,617 |
| 25,077,083 |
|
ESBR Participações S.A. |
| 40.00 | % | 74,219 |
| 560,964 |
| 22,175,679 |
| 886,818 |
| 23,697,680 |
| 340,189 |
| 906,710 |
| 10,904,779 |
| 3,216,193 |
| 8,329,809 |
| 23,697,680 |
|
Teles Pires Participações |
| 49.44 | % | 27,907 |
| 143,105 |
| 5,145,968 |
| 441,642 |
| 5,758,622 |
| 357,288 |
| 196,203 |
| 3,175,138 |
| 412,000 |
| 1,617,993 |
| 5,758,622 |
|
Interligação Elétrica do Madeira S.A. |
| 49.00 | % | 188,838 |
| 536,105 |
| 4,948,367 |
| 75,684 |
| 5,748,994 |
| 199,759 |
| 188,943 |
| 1,660,706 |
| 1,394,465 |
| 2,305,121 |
| 5,748,994 |
|
Belo Monte Transmissora |
| 49.00 | % | 216,126 |
| 11,936 |
| 4,012,330 |
| — |
| 4,240,392 |
| 1,730,241 |
| 297,513 |
| — |
| 82,518 |
| 2,130,120 |
| 4,240,392 |
|
Norte Brasil Transmissora de Energia S.A. |
| 49.00 | % | 52,759 |
| 302,936 |
| 3,704,987 |
| — |
| 4,060,682 |
| 81,504 |
| 162,467 |
| 1,133,913 |
| 691,192 |
| 1,991,606 |
| 4,060,682 |
|
Chapecoense Geração S.A. (Chapecoense) |
| 40.00 | % | 280,082 |
| 297,214 |
| 2,895,327 |
| 185,466 |
| 3,658,089 |
| 137,753 |
| 253,650 |
| 1,292,239 |
| 732,750 |
| 1,241,697 |
| 3,658,089 |
|
Manaus Transmissora de Energia S.A. |
| 49.50 | % | 38,909 |
| 171,939 |
| 42,199 |
| 2,607,266 |
| 2,860,313 |
| 73,426 |
| 168,352 |
| 741,918 |
| 556,510 |
| 1,320,107 |
| 2,860,313 |
|
Empresa de Energia São Manoel |
| 33.33 | % | 38,221 |
| 510 |
| 2,383,308 |
| 259,447 |
| 2,681,486 |
| 3,928 |
| 64,665 |
| 1,014,509 |
| 342,992 |
| 1,255,392 |
| 2,681,486 |
|
Serra do Facão Energia S.A. |
| 49.47 | % | 31,248 |
| 44,680 |
| 1,950,905 |
| 149,492 |
| 2,176,325 |
| 46,135 |
| 181,816 |
| 366,117 |
| 1,534,414 |
| 47,843 |
| 2,176,325 |
|
Enerpeixe S.A. |
| 40.00 | % | 81,402 |
| 54,031 |
| 1,571,686 |
| 55,652 |
| 1,762,771 |
| 2,299 |
| 212,062 |
| 348,332 |
| 262,143 |
| 937,935 |
| 1,762,771 |
|
Companhia Energética SINOP S.A. |
| 49.00 | % | 119,037 |
| 5,742 |
| 1,377,142 |
| 5,449 |
| 1,507,370 |
| — |
| 66,050 |
| 540,128 |
| 21,153 |
| 880,039 |
| 1,507,370 |
|
Interligação Elétrica Garanhuns S.A. |
| 49.00 | % | 23,631 |
| 95,674 |
| 1,190,415 |
| 26,622 |
| 1,336,342 |
| 33,209 |
| 69,845 |
| 282,910 |
| 215,537 |
| 734,841 |
| 1,336,342 |
|
Chapada Piauí I Holding S.A. |
| 49.00 | % | 27,445 |
| 18,502 |
| 883,960 |
| 392,127 |
| 1,322,034 |
| 34,224 |
| 159,296 |
| 462,236 |
| 470,946 |
| 195,332 |
| 1,322,034 |
|
Chapada Piauí II Holding S.A. |
| 49.00 | % | 15,640 |
| 20,228 |
| 788,559 |
| 492,512 |
| 1,316,939 |
| 22,354 |
| 19,646 |
| 559,680 |
| 549,622 |
| 165,637 |
| 1,316,939 |
|
Paranaíba |
| 24.50 | % | 6,107 |
| 20,870 |
| 1,228,931 |
| 42,042 |
| 1,297,950 |
| 45,624 |
| 8,235 |
| 564,667 |
| 76,745 |
| 602,679 |
| 1,297,950 |
|
Santa Vitória do Palmar |
| 49.00 | % | 8,830 |
| 15,903 |
| 1,071,713 |
| 31,878 |
| 1,128,324 |
| 23,903 |
| 47,291 |
| 719,797 |
| 159,335 |
| 177,998 |
| 1,128,324 |
|
TSLE |
| 51.00 | % | 6,208 |
| 52,774 |
| 2,389 |
| 915,427 |
| 976,798 |
| 37,231 |
| 54,633 |
| 417,621 |
| 192,255 |
| 275,058 |
| 976,798 |
|
Mata de Santa Genebra |
| 49.90 | % | 13,567 |
| 11,326 |
| 859,203 |
| 36,111 |
| 920,207 |
| 481,894 |
| 25,772 |
| — |
| 30,246 |
| 382,295 |
| 920,207 |
|
Energética Águas da Pedra S.A. |
| 49.00 | % | 49,380 |
| 52,713 |
| 733,188 |
| 30,765 |
| 866,046 |
| 34,944 |
| 79,854 |
| 311,061 |
| 13,046 |
| 427,141 |
| 866,046 |
|
STN - Sistema de Transmissão Nordeste S.A. |
| 49.00 | % | 15,357 |
| 207,636 |
| 527,763 |
| 14,959 |
| 765,715 |
| 20,327 |
| 63,515 |
| 122,497 |
| 145,298 |
| 414,078 |
| 765,715 |
|
TSBE |
| 80.00 | % | 23,295 |
| 28,669 |
| 57 |
| 644,361 |
| 696,382 |
| 25,153 |
| 8,796 |
| 308,860 |
| 6,730 |
| 346,843 |
| 696,382 |
|
Goiás Transmissão S.A. |
| 49.00 | % | 10,190 |
| 5,900 |
| 632,207 |
| 9,794 |
| 658,091 |
| 16,787 |
| 42,929 |
| 196,031 |
| 54,767 |
| 347,577 |
| 658,091 |
|
Integração Transmissora de Energia S.A. |
| 49.00 | % | 35,157 |
| 121,899 |
| 460,389 |
| 11,739 |
| 629,184 |
| 31,514 |
| 19,563 |
| 90,735 |
| 88,147 |
| 399,225 |
| 629,184 |
|
Chuí |
| 49.00 | % | 29,813 |
| 13,843 |
| 552,147 |
| 15,780 |
| 611,583 |
| 24,094 |
| 28,560 |
| 324,800 |
| 448,533 |
| (214,404 | ) | 611,583 |
|
Vamcruz I Participações S.A. |
| 0.00 | % | 59,333 |
| 21,630 |
| 502,591 |
| — |
| 583,554 |
| 18,784 |
| 11,065 |
| 241,956 |
| 123,069 |
| 188,680 |
| 583,554 |
|
Eólica Serra das Vacas Holding S.A. |
| 0.00 | % | 12,695 |
| 7,599 |
| 511,454 |
| — |
| 531,748 |
| 16,069 |
| 60,117 |
| 224,145 |
| 53,972 |
| 177,445 |
| 531,748 |
|
Triângulo Mineiro Transmissora |
| 49.00 | % | 615 |
| 904 |
| 496,575 |
| 4,853 |
| 502,947 |
| 17,942 |
| 9,651 |
| 138,349 |
| 79,219 |
| 257,786 |
| 502,947 |
|
Transenergia Renovável S.A. (Transenergia) |
| 49.00 | % | 15,542 |
| 7,127 |
| 469,052 |
| 4 |
| 491,725 |
| 12,089 |
| 27,037 |
| 106,116 |
| 33,443 |
| 313,040 |
| 491,725 |
|
Retiro Baixo Energética S.A. (Retiro Baixo) |
| 49.00 | % | 19,222 |
| 10,998 |
| 363,575 |
| 13,073 |
| 406,868 |
| 13,418 |
| 11,325 |
| 107,348 |
| 11,097 |
| 263,680 |
| 406,868 |
|
CTEEP |
| 36.05 | % | 4,524 |
| 1,675,820 |
| 67,300 |
| 12,168,997 |
| 13,916,641 |
| 71,679 |
| 526,292 |
| 432,472 |
| 5,514,529 |
| 7,371,669 |
| 13,916,641 |
|
Lajeado Energia |
| 47.07 | % | 184,658 |
| 102,337 |
| 1,643,236 |
| 108,816 |
| 2,039,047 |
| 11,228 |
| 312,652 |
| 76,219 |
| 370,633 |
| 1,268,315 |
| 2,039,047 |
|
I — Assets and Liabilities
12/31/2015 |
| ||||||||||||||||||||||||
ASSETS |
| LIABILITIES |
| ||||||||||||||||||||||
|
|
|
| Current |
| Noncurrent |
|
|
| Current |
| Noncurrent |
|
|
|
|
| ||||||||
Joint Ventures and Associated |
| Interest |
| Cash and |
| Other |
| Financial |
| Other |
| Total |
| Loans |
| Other |
| Loans and |
| Other |
| Net Equity |
| Total |
|
Belo Monte Transmissora de Energia |
| 49.00 | % | 332,604 |
| 4,199 |
| 920,165 |
| — |
| 1,256,968 |
| 453,882 |
| 46,277 |
| — |
| 8,733 |
| 748,076 |
| 1,256,968 |
|
Brasnorte Transmissora de Energia S.A. |
| 49.71 | % | 16,467 |
| 24,149 |
| 279,599 |
| — |
| 320,215 |
| 11,280 |
| 13,838 |
| — |
| 51,941 |
| 243,156 |
| 320,215 |
|
Chapecoense Geração S.A. |
| 40.00 | % | 176,308 |
| 180,185 |
| 3,075,967 |
| 162,724 |
| 3,595,184 |
| 136,322 |
| 311,290 |
| 1,404,553 |
| 704,268 |
| 1,038,751 |
| 3,595,184 |
|
Companhia Energética Sinop |
| 49.00 | % | 53,385 |
| 3,445 |
| 844,733 |
| 2,491 |
| 904,054 |
| 328,022 |
| 56,012 |
| — |
| 19,609 |
| 500,411 |
| 904,054 |
|
Energética Águas da Pedra S.A. |
| 49.00 | % | 61,765 |
| 39,300 |
| 753,115 |
| 17,353 |
| 871,533 |
| 34,917 |
| 54,031 |
| 339,843 |
| 12,178 |
| 430,564 |
| 871,533 |
|
Enerpeixe S.A. |
| 40.00 | % | 82,946 |
| 76,736 |
| 1,596,186 |
| 50,194 |
| 1,806,062 |
| — |
| 172,744 |
| — |
| 230,114 |
| 1,403,204 |
| 1,806,062 |
|
ESBR Participações |
| 40.00 | % | — |
| 908,570 |
| 21,685,558 |
| 1,655,056 |
| 24,249,184 |
| — |
| 1,422,013 |
| 11,299,857 |
| 4,508,251 |
| 7,019,063 |
| 24,249,184 |
|
Interligação Elétrica do Madeira S.A. |
| 49.00 | % | 41,833 |
| 646,081 |
| 4,149,365 |
| — |
| 4,837,279 |
| 197,250 |
| 151,399 |
| 2,215,079 |
| 546,746 |
| 1,726,805 |
| 4,837,279 |
|
Interligação Elétrica Garanhuns S.A. |
| 49.00 | % | — |
| 33,485 |
| 1,114,685 |
| 16,723 |
| 1,164,893 |
| — |
| — |
| 339,848 |
| 174,081 |
| 650,964 |
| 1,164,893 |
|
Intesa - Integração Transmissora de Energia S.A. |
| 49.00 | % | 36,235 |
| 112,742 |
| 496,085 |
| — |
| 645,062 |
| 31,182 |
| 9,001 |
| 120,166 |
| 93,573 |
| 391,140 |
| 645,062 |
|
Madeira Energia S.A. |
| 39.00 | % | 299,963 |
| 1,308,256 |
| 22,180,387 |
| 1,182,376 |
| 24,970,982 |
| 450,779 |
| 1,700,678 |
| 14,061,238 |
| 1,507,190 |
| 7,251,097 |
| 24,970,982 |
|
Manaus Transmissora de Energia S.A. |
| 49.50 | % | 32,198 |
| 188,813 |
| 2,376,236 |
| 9,351 |
| 2,606,598 |
| 69,707 |
| 272,606 |
| 786,943 |
| 310,270 |
| 1,167,072 |
| 2,606,598 |
|
Norte Brasil Transmissora de Energia S.A. |
| 49.00 | % | 51,937 |
| 265,098 |
| 3,425,883 |
| — |
| 3,742,918 |
| 78,941 |
| 263,100 |
| 1,171,337 |
| 426,938 |
| 1,802,602 |
| 3,742,918 |
|
Norte Energia S.A. |
| 49.98 | % | 489,804 |
| 442,450 |
| 29,964,727 |
| 271,620 |
| 31,168,601 |
| — |
| 719,033 |
| 23,280,595 |
| 229,708 |
| 6,939,265 |
| 31,168,601 |
|
Santa Vitória do Palmar |
| 49.00 | % | — |
| 31,227 |
| 1,004,762 |
| 22,957 |
| 1,058,946 |
| — |
| 182,126 |
| 749,633 |
| 24,692 |
| 102,495 |
| 1,058,946 |
|
Serra do Facão Energia S.A. |
| 49.47 | % | 31 |
| 52,441 |
| 2,044,386 |
| 99,362 |
| 2,196,220 |
| 41,126 |
| 163,051 |
| 401,137 |
| 1,499,884 |
| 91,022 |
| 2,196,220 |
|
STN - Sistema de Transmissão Nordeste S.A. |
| 49.00 | % | — |
| 60,313 |
| 699,181 |
| 3,866 |
| 763,360 |
| — |
| — |
| 162,093 |
| 240,162 |
| 361,105 |
| 763,360 |
|
Teles Pires Participações |
| 49.40 | % | 130,877 |
| 98,058 |
| 4,886,124 |
| 236,137 |
| 5,351,196 |
| 191,893 |
| 293,229 |
| 3,392,921 |
| 80,097 |
| 1,393,056 |
| 5,351,196 |
|
TSBE |
| 80.00 | % | — |
| 46,675 |
| 659,575 |
| — |
| 706,250 |
| — |
| 30,639 |
| 337,796 |
| — |
| 337,815 |
| 706,250 |
|
TSLE |
| 51.00 | % | — |
| 49,433 |
| 914,407 |
| — |
| 963,840 |
| — |
| 91,522 |
| 495,271 |
| 112,850 |
| 264,197 |
| 963,840 |
|
Chapada do Piauí I Holding S.A. |
| 49.00 | % | — |
| 51,418 |
| 809,359 |
| 132 |
| 860,909 |
| — |
| — |
| 523,242 |
| 160,933 |
| 176,734 |
| 860,909 |
|
Chapada do Piauí II Holding S.A. |
| 49.00 | % | — |
| 85,298 |
| 864,913 |
| — |
| 950,211 |
| — |
| — |
| 512,068 |
| 189,113 |
| 249,030 |
| 950,211 |
|
Chuí Holding S.A. |
| 49.00 | % | — |
| 65,150 |
| 609,778 |
| 12,747 |
| 687,675 |
| — |
| 57,429 |
| 373,979 |
| 413,628 |
| (157,361 | ) | 687,675 |
|
Companhia Energética do Maranhão (CEMAR) |
| 33.55 | % | 310,893 |
| 1,963,260 |
| 2,573,627 |
| 271,559 |
| 5,119,339 |
| 253,910 |
| 711,799 |
| 1,997,641 |
| 207,715 |
| 1,948,274 |
| 5,119,339 |
|
Lajeado Energia |
| 40.07 | % | 161,062 |
| 92,153 |
| 48 |
| 1,445,794 |
| 1,699,057 |
| 6,483 |
| 243,394 |
| 448,216 |
| 2,616 |
| 998,348 |
| 1,699,057 |
|
CTEEP |
| 35.37 | % | 3,120 |
| 580,539 |
| 45,812 |
| 6,217,757 |
| 6,847,228 |
| 213,312 |
| 155,268 |
| 665,649 |
| 476,794 |
| 5,336,205 |
| 6,847,228 |
|
CEEE-GT |
| 32.59 | % | 38,171 |
| 454,210 |
| 555,108 |
| 1,871,335 |
| 2,918,824 |
| 29,247 |
| 298,881 |
| 282,253 |
| 826,489 |
| 1,481,954 |
| 2,918,824 |
|
Energisa MT |
| 27.52 | % | 192,754 |
| 1,198,769 |
| 1,909,436 |
| 1,365,792 |
| 4,666,751 |
| 170,545 |
| 918,080 |
| 1,297,616 |
| 930,884 |
| 1,349,626 |
| 4,666,751 |
|
CEEE-D |
| 32.59 | % | 73,961 |
| 801,912 |
| 2,165,618 |
| 274,473 |
| 3,315,964 |
| 4,954 |
| 1,346,254 |
| 474,965 |
| 1,973,387 |
| (483,596 | ) | 3,315,964 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
| 1,137,504 |
| 994,618 |
| 10,606,468 |
| 1,661,908 |
| 14,400,498 |
| 1,128,125 |
| 1,838,403 |
| 3,176,337 |
| 1,836,613 |
| 6,421,018 |
| 14,400,498 |
|
II — Income
12/31/2016 |
| ||||||||||||
Joint Ventures and Associated Companies |
| Net operating revenue |
| Financial revenue |
| Financial expenses |
| Income taxes |
| Net profits (losses) |
| Depreciation and amortization |
|
Norte Energia S.A. |
| 654,543 |
| 25,268 |
| (175,959 | ) | 18,640 |
| (76,967 | ) | (88,813 | ) |
Madeira Energia S.A. (MESA) |
| 2,802,554 |
| 146,200 |
| (1,551,719 | ) | (23,636 | ) | (617,200 | ) | (674,767 | ) |
ESBR Participações S.A. |
| 2,386,172 |
| 73,078 |
| (1,134,269 | ) | (722,295 | ) | 1,310,746 |
| (663,663 | ) |
Teles Pires Participações |
| 713,680 |
| 36,607 |
| (321,778 | ) | 87,812 |
| (121,799 | ) | (181,471 | ) |
Interligação Elétrica do Madeira S.A. |
| 830,043 |
| 28,693 |
| (233,143 | ) | (173,345 | ) | 404,887 |
| (5,065 | ) |
Belo Monte Transmissora |
| — |
| 233,318 |
| (136,430 | ) | (70,868 | ) | 17,748 |
| (144 | ) |
Norte Brasil Transmissora de Energia S.A. |
| 461,368 |
| 10,771 |
| (131,351 | ) | (143,807 | ) | 161,966 |
| (1,157 | ) |
Chapecoense Geração S.A. (Chapecoense) |
| 799,516 |
| 43,111 |
| (246,887 | ) | (122,060 | ) | 242,143 |
| (86,449 | ) |
Manaus Transmissora de Energia S.A. |
| 266,126 |
| — |
| — |
| (52,455 | ) | 83,876 |
| (853 | ) |
Empresa de Energia São Manoel |
| — |
| 19,705 |
| (20,069 | ) | 160,159 |
| (310,897 | ) | — |
|
Serra do Facão Energia S.A. |
| 282,673 |
| 4,402 |
| (210,833 | ) | 28,620 |
| (43,176 | ) | (100,578 | ) |
Enerpeixe S.A. |
| 309,696 |
| 6,446 |
| (47,824 | ) | (4,223 | ) | 126,307 |
| (50,171 | ) |
Companhia Energética SINOP S.A. |
| — |
| — |
| — |
| 2,958 |
| (5,735 | ) | (6,387 | ) |
Interligação Elétrica Garanhuns S.A. |
| 230,909 |
| 5,310 |
| (29,010 | ) | (60,567 | ) | 90,768 |
| (53 | ) |
Chapada Piauí I Holding S.A. |
| 112,103 |
| 2,089 |
| (98,497 | ) | (4,129 | ) | (39,749 | ) | (30,785 | ) |
Chapada Piauí II Holding S.A. |
| 98,876 |
| 2,646 |
| (94,495 | ) | (3,695 | ) | (49,971 | ) | (28,621 | ) |
Paranaíba |
| 141,956 |
| 3,456 |
| (57,397 | ) | (21,544 | ) | 41,792 |
| (19,456 | ) |
Santa Vitória do Palmar |
| 101,857 |
| 4,216 |
| (68,349 | ) | (4,139 | ) | 75,503 |
| (51,020 | ) |
TSLE |
| 103,330 |
| 3,222 |
| (68,980 | ) | (18,041 | ) | 10,861 |
| (52 | ) |
Mata de Santa Genebra |
| 69,788 |
| 13,358 |
| (86,721 | ) | 3,365 |
| (6,403 | ) | (35 | ) |
Energética Águas da Pedra S.A. |
| 220,698 |
| — |
| — |
| (20,038 | ) | 107,265 |
| (25,950 | ) |
STN - Sistema de Transmissão Nordeste S.A. |
| 160,739 |
| 3,001 |
| (29,561 | ) | 43,921 |
| 156,718 |
| (47 | ) |
TSBE |
| 56,552 |
| 4,314 |
| (36,988 | ) | (2,809 | ) | 9,028 |
| (11 | ) |
Goiás Transmissão S.A. |
| (35,469 | ) | 2,754 |
| (19,761 | ) | 164 |
| (40,679 | ) | (254 | ) |
Integração Transmissora de Energia S.A. |
| 100,314 |
| 4,504 |
| (13,971 | ) | (7,035 | ) | 61,070 |
| (25 | ) |
Chuí |
| 56,486 |
| 6,006 |
| (39,276 | ) | (3,279 | ) | (57,043 | ) | (34,658 | ) |
Vamcruz I Participações S.A. |
| 65,723 |
| 2,988 |
| (23,057 | ) | (2,788 | ) | 6,070 |
| (19,058 | ) |
Eólica Serra das Vacas Holding S.A. |
| 62,690 |
| (13 | ) | (38,262 | ) | (1,961 | ) | (14,919 | ) | (20,839 | ) |
Triângulo Mineiro Transmissora |
| 31,551 |
| 79,398 |
| (10,050 | ) | (26,781 | ) | 34,605 |
| — |
|
Transenergia Renovável S.A. (Transenergia) |
| 65,994 |
| 2,086 |
| (11,966 | ) | (2,931 | ) | 60,560 |
| (31 | ) |
Retiro Baixo Energética S.A. (Retiro Baixo) |
| 63,181 |
| 1,922 |
| (14,802 | ) | (2,680 | ) | 17,200 |
| (10,460 | ) |
CTEEP |
| 7,789,240 |
| 76,684 |
| (186,613 | ) | (2,333,912 | ) | 4,764,896 |
| (9,061 | ) |
Lajeado Energia |
| 589,060 |
| 23,940 |
| (140,539 | ) | (63,690 | ) | 177,292 |
| (72,837 | ) |
12/31/2015 |
| ||||||||||||
Joint Ventures and Associated Companies |
| Net operating revenue |
| Financial revenue |
| Financial expenses |
| Income taxes |
| Net profits (losses) |
| Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Belo Monte Transmissora de Energia |
| 881,398 |
| 55,344 |
| (53,783 | ) | (8,599 | ) | (18,260 | ) | (52 | ) |
Brasnorte Transmissora de Energia S.A. |
| 36,641 |
| 1,623 |
| (2,473 | ) | (9,035 | ) | 20,099 |
| — |
|
Chapecoense Geração S.A. |
| 738,792 |
| 32,149 |
| (143,821 | ) | (119,721 | ) | 183,166 |
| (34,867 | ) |
Companhia Energética Sinop |
| — |
| 3,362 |
| 15,052 |
| 2,491 |
| 10,119 |
| (179 | ) |
Energética Águas da Pedra S.A. |
| 188,908 |
| 5,194 |
| (30,325 | ) | (7,187 | ) | 37,489 |
| (20,430 | ) |
Enerpeixe S.A. |
| 435,627 |
| 8,389 |
| (46,278 | ) | (8,150 | ) | 170,269 |
| (49,385 | ) |
ESBR Participações S.A. |
| 2,412,946 |
| 13,446 |
| (686,016 | ) | 348,386 |
| (699,349 | ) | (433,313 | ) |
Interligação Elétrica Garanhuns S.A. |
| 279,257 |
| 3,105 |
| (25,245 | ) | (27,667 | ) | 53,798 |
| (26 | ) |
Interligação Elétrica do Madeira S.A. |
| 610,279 |
| 25,100 |
| (249,207 | ) | (102,072 | ) | 240,216 |
| (103 | ) |
Intesa - Integração Transmissora de Energia S.A. |
| 92,484 |
| 3,701 |
| (13,744 | ) | (13,408 | ) | 51,267 |
| — |
|
Madeira Energia S.A. |
| 2,604,869 |
| 161,751 |
| (1,128,693 | ) | 614,983 |
| 18,026 |
| (480,611 | ) |
Manaus Transmissora de Energia S.A. |
| 174,519 |
| 5,064 |
| (79,158 | ) | (29,656 | ) | 52,446 |
| — |
|
Norte Brasil Transmissora de Energia S.A. |
| 340,080 |
| 4,357 |
| (138,058 | ) | (63,807 | ) | 113,850 |
| — |
|
Norte Energia S.A. |
| 120,653 |
| 93,444 |
| (86,679 | ) | 23,886 |
| (40,819 | ) | (6,195 | ) |
Santa Vitória do Palmar Holding S.A. |
| 94,618 |
| 2,061 |
| (88,409 | ) | (3,499 | ) | (227,750 | ) | (46,109 | ) |
Serra do Facão Energia S.A. |
| 280,164 |
| 3,318 |
| (272,574 | ) | 62,402 |
| (135,032 | ) | (43,587 | ) |
STN - Sistema de Transmissão Nordeste S.A. |
| 159,741 |
| 3,805 |
| (28,589 | ) | (23,234 | ) | 92,806 |
| (111 | ) |
Teles Pires Participações |
| 354,316 |
| 14,978 |
| (184,328 | ) | 57,671 |
| (188,695 | ) | (57,283 | ) |
Transmissora Sul Brasileira de Energia S.A. |
| 73,863 |
| 4,407 |
| (35,495 | ) | (3,442 | ) | (31,964 | ) | (10 | ) |
Transmissora Sul Litorânea de Energia S.A. |
| 150,922 |
| 2,077 |
| (63,619 | ) | 495 |
| (19,026 | ) | — |
|
Chapada do Piauí I Holding S.A. |
| 44,733 |
| 265 |
| (44,205 | ) | (1,455 | ) | (19,511 | ) | (12,104 | ) |
Chapada do Piauí II Holding S.A. |
| — |
| — |
| (4,590 | ) | — |
| (4,813 | ) | — |
|
Chuí Holding S.A. |
| 73,031 |
| 271 |
| (23,104 | ) | (2,348 | ) | (233,111 | ) | (18,222 | ) |
Companhia Energética do Maranhão (CEMAR) |
| 2,738,793 |
| 388,912 |
| (368,729 | ) | (79,311 | ) | 363,803 |
| (127,052 | ) |
Lajeado Energia |
| 489,975 |
| 23,351 |
| (67,944 | ) | (26,879 | ) | 92,373 |
| (28,767 | ) |
CTEEP |
| 1,089,287 |
| 121,244 |
| (125,566 | ) | (85,270 | ) | 504,430 |
| (7,776 | ) |
CEEE-GT |
| 671,279 |
| 247,884 |
| (195,384 | ) | 66,419 |
| 84,947 |
| (26,445 | ) |
Energisa MT |
| 3,483,404 |
| 255,036 |
| (378,233 | ) | (24,433 | ) | 45,246 |
| (118,601 | ) |
CEEE-D |
| 3,376,936 |
| 460,746 |
| (532,921 | ) | 40,766 |
| (514,244 | ) | (58,633 | ) |
15.4.1 — Information of consolidated subsidiaries — Distribution Companies:
(a) Celg Distribuição — CELG-D - On September 26, 2014, the Company acquired 51% of the ordinary stock of CELG D, becoming the parent company of CELG D (see Note 43). CELG D is a privately held corporation, and holds concession for delivery of electricity; it was established on March 23, 2007. Eletrobras holds 51% of the capital stock, and CELGPAR holds 49%.
Celg-D holds concessions for electricity distribution in 237 municipalities, 391 districts and towns in the State of Goiás, with 2,826,562 consumers, covering an area of 336,871 km²*, governed by Concession Agreement No. 63 of August 25, 2000, entered into by and between ANEEL, CELG D, and the then majority shareholder.
Celg-D had its concession extended as per the signing on December 29 of 2015, of the fifth amendment to concession agreement no. 63/2000 — ANEEL, see Note 2.1.
On December 31 of 2015, the Company classified the subsidiary in question as an asset held for sale, since the Company was committed to disposing of shareholding control over said subsidiary, which was realized in the Privatization auction that occurred on November 30 of 2016. On February 14 of 2017, the contract to buy and sell CELG D shares was signed between Eletrobras, Companhia Celg de Participações (CELGPAR), and ENEL BRASIL S/A, as per the established schedule. For more detail, see Note 42.
(*) Information not audited by the independent auditors.
15.4.2 — Information of consolidated subsidiaries — Generation and Transmission Companies:
(a) Eletrosul Centrais Elétricas S.A. - its main purpose is transmission and generation of electricity directly or through holdings in Specific Purpose Companies. The Company performs studies, projects, construction, operation, and maintenance of facilities for electricity transmission and generation systems, such activities which are regulated.
(b) Companhia Hidro Elétrica do São Francisco (CHESF) - electricity utility concessionaire whose purpose is to generate, transmit, and market electricity. Its generation and hydrothermal system predominantly uses hydroelectric plants, which account for 97% of total production. CHESF operations in electricity generation include 13 hydroelectric plants and 1 thermoelectric plant, for a total installed power of 10,613 MW*, and in the transmission activity the system is comprised of 119 substations and 20,313.3 Km* of high voltage lines.
On December 31 of 2015, the processes needed for the effective withdrawal of CTEEP from the shareholding composition of SPE Extremoz Transmissora do Nordeste (ETN S.A.) were concluded with the regulatory agency (ANEEL). As such, the subsidiary Chesf now holds 100% of the interest in Extremoz.
At the end of 2015, Chesf purchased control over SPE Tamanduá Mirim 2 Energia S.A., belonging to Complexo Eólico Pindaí III, by permanent dilution of the interest of the partner Sequoia Cpaital Ltda. in said venture. As such, the subsidiary Chesf now holds control with 83.01% of the interest in this venture.
(c) Centrais Elétricas do Norte do Brasil S.A. (Eletronorte) - public utility electricity concessionaire, controlled by the Company, with operations primarily in the State of Acre, Amapá, Amazonas, Maranhão, Mato Grosso, Pará, Rondônia, Roraima, and Tocantins. The operations of the Company with electricity generation include 4 hydroelectric plants, with installed capacity of 8,860.05 MW* and 8 thermoelectric plants, with a capacity of 521.82 MW*, giving an installed capacity of 9,381.87 MW*. Electricity transmission is made using a system comprised of 11,617.12 Km* of transmission lines, 56 substations in the National Interconnected System (SIN), 190.20 Km* of transmission lines, 1 substation in the isolated system, totaling 11,807.32 Km* of transmission lines and 57 substations.
(d) Furnas Centrais Elétricas S.A. (FURNAS) - this Company subsidiary acts in generation, transmission, and commercialization, predominantly in the region covered by the Federal District and the States of São Paulo, Minas Gerais, Rio de Janeiro, Paraná, Espírito Santo, Goiás, Mato Grosso, Pará, Tocantins, Rondônia, Rio Grande do Sul, Santa Catarina, Rio Grande do Norte, Ceará, and Bahia, in addition to holding stakes in Specific Purpose Companies. The electricity production system operated by Furnas is comprised of 10 wholly owned hydroelectric plants, 2 in partnership with private enterprise and 8 under the special-purpose company (SPE) regime, with an installed capacity of 16,586.26 MW*, and two thermoelectric plants with 530 MW* of total installed power.
(*) Information not audited by the independent auditors.
15.4.3 — Other Companies
a) Companhia Energética do Maranhão (CEMAR) - electricity utility concessionaire, which plans, constructs, and explores electricity sub-transmission, transformation, distribution, and marketing systems.
The Company holds concessions for electricity distribution in 217 municipalities in the State of Maranhão, under Concession Agreement No. 60 of August 28, 2000, executed with ANEEL, which remains effective through August 2030, and can be extended for another 30-year period.
b) Eletrobras Participações S.A. (Eletropar) - Company subsidiary whose corporate purpose is investment in other companies. On December 15 of 2015, the General Assembly of Creditors of Eletronet S.A., for which Eletropar is agent of Furnas, Chesf and Eletronorte, decided to settle the obligations of Eletronet, and a legal declaration of extingion of obligations and conclusion of bankruptcy was filed, normal activities were resumed and other relevant effects produced.
c) Companhia Estadual de Geração e Transmissão de Energia Elétrica (CEEE-GT) — a publicly traded company whose majority shareholder is the State of Rio Grande do Sul, through the Companhia Estadual de Energia Elétrica Participações (CEEE-Par), which holds 65.92% of the total capital stock. The purpose of the Concessionaire is to explore systems of production and transmission of electricity.
d) Companhia Transmissão de Energia Elétrica Paulista (CTEEP) - a publicly traded company authorized to operate as electricity utility concessionaire, having as its main activities the planning, construction, and operation of electricity transmission systems.
On December 31, 2016, CTEEP determined and recognized in accounting the effects of updating the financial asset of the facilities of the updated so-called Basic Existing Grid System (RBSE), with an impact of R$ 7,318,500 on financial assets, R$ 6,503,600 on net operating revenue (R$ 814,900 for deferred PIS and COFINS), R$ 2,211,200 in the provisions for deferred income tax and social contributions, and R$ 4,292,400 on net profit (impacts on total effects, in the Company these impacts are reflected in the proportion of its shareholding).
e) Centrais Elétricas do Pará S.A. - CELPA — publicly traded company, under equity control of Equatorial Energia S.A. (Equatorial), which operates in the distribution and generation of electricity in the State of Pará, serving consumers in 143 municipalities, pursuant to Concession Agreement 182/1998, signed on July 28, 1998, with period of concessions of 30 years, and expiration on July 28, 2028. In addition to the distribution agreement, CELPA holds Generation Concession Agreement 181/98 for 34 Thermoelectric Plants, 11 which it owns and 23 which belong to third parties, for exploration of electricity generation for a period of 30 years, with expiration on July 28, 2028, renewable for an additional 30-year period. As of December 31, 2016, this subsidiary had net current capital of R$ 950,562 (net current capital of R$ 350,275 on December 31 of 2015), the results determined a net equity of R$ 2,118,012 (R$ 1,844,970 on December 31 of 2015) and accumulated profits of R$ 351,556 (loss of R$ 392,340 on December 31 of 2015).
All debts owed by the subsidiary until the date of filing of its petition for bankruptcy recovery, even those not yet due, with all legal exceptions, must be paid according to the judicial recovery plan approved on September 1, 2012, during a general meetings of creditors.
f) Empresa Metropolitana de Águas e Energia S.A. — EMAE - the concessionaire of a hydroenergy complex located in Alto Tietê, centered on the Henry Borden Hydroelectric Plant. EMAE also has the UHE Rasgão and the UHE Porto Góes, both on the Tietê River. In the Paraíba Valley, municipality of Pindamonhangaba, UHE Isabel is installed, which is currently not operating. On December 31, 2016, this subsidiary had net current capital of R$ 127,875 (R$ 112,812 on December 31 of 2015).
g) Energisa Mato Grosso — Distribuidora de Energia S.A. (Energisa MT) - a publicly traded company under the equity control of Energisa, S.A., acting in the electricity distribution area, in addition to generation using thermal plants to serve isolated systems in its concession area, which covers the State of Mato Grosso, serving consumers in 141 municipalities. Pursuant to Concession Agreement 03/1997, signed on December 11, 1997, the concession term is for 30 years, with expiration on December 11, 2027, renewable for an additional 30-year period. In addition to the distribution agreement, the Company has Generation Concession Agreement 04/1997, for 3 Thermoelectric Plants with their respective associated substations, with expiration on December 10, 2027.
h) Norte Energia S.A. - a specific purpose company, privately held, with the purpose of conducting all activities necessary for installation, operation, maintenance, and exploration of the Belo Monte Hydroelectric Plant (UHE Belo Monte) on the River Xingu, located in the State of Pará, and of the facilities for transmission with interest restricted to the generating plant. The Company holds 49.98% of the capital stock of Norte Energia. This subsidiary has spent significant sums on costs for organization, development and pre-operation, which, according to estimates and projections, should be absorbed by revenue from future operations. The subsidiary will need financial resources from its shareholders and from third parties in significant amounts in order to complete its Hydroelectric Plant. On December 31, 2016, the subsidiary had a negative current net capital of R$ 836,503 (R$ 359,526 on December 31 of 2015).
i) Madeira Energia S.A. — a privately held company, incorporated on August 27, 2007, with the purpose of construction and exploration of the Santo Antonio Hydroelectric Plant located on the River Madeira, municipality of Porto Velho, State of Rondônia, and of its Associated Transmission System. The Company holds 39% of the voting capital of Madeira Energia S.A. (MESA). The subsidiary incurred expenses with the project for construction of the Santo Antonio Hydroelectric Plant, which, according to financial projections prepared by its administration, should be absorbed by revenue from operations.
On December 31, 2016, the subsidiary MESA, in which Furnas holds 39% of the voting capital, had net current liabilities totaling R$ R$ 1,865,335 (R$ 543,238 on December 31 of 2015). In order to correct its negative current capital, the subsidiary enjoys financial contributions from its shareholders. Part of this total reflects a impairment on the part of the expected value of revenue from reimbursable expenditures with the Consórcio Construtor Santo Antônio (CCSA).
This receivable originated from the signing of the 2nd addendum to the Concession Agreement with the ANEEL, based on submission of a timeline for commercial operations by the CCSA, anticipating, for the second time, the launch of operations of the generating units, such commitment being signed then, as part of the Contract for Installation of the Santo Antonio UHE and the “Terms and Conditions”. However, this timeline was not met, meaning that the net result of this calculation generates for MESA a right to compensation with the CCSA.
In order to verify the calculation of this reimbursable expenditure, the CCSA requested application of Clause 31.1.2.1.1 of the EPC Contract, which presents a contractual limit of R$ 122.00/MWh* for transfer of the cost for purchase of energy. In light of this consideration, the MESA Executive Board conducted, during the fiscal year ending on December 31, 2014, additional review, changing its estimate as to the realizable value of the asset (the above-quoted right to reimbursement with the CCSA). As such, for the total value of the reimbursable expenditure of R$ 1,508,567 a impairment was recognized whose value on December 31, 2016 was R$ 678,551, which reflects the expected net value received of R$ 885,086 on December of 2016 (R$ 830,016 on December 31, 2015).
In order to settle questions as to the use of the contract limiter considered in the calculation of part of the net results of early use of the schedule for the power plant to begin commercial operation, established in the 2nd Addendum to the Concession Agreeemnt signed with the National Electrical Energy Agency (“ANEEL”), which originated said impairment, the subsidiary filed with the International Arbitration Chamber of International Commerce (“ICC”), the filing of a process of arbitration with the CCSA, which is confidential, in the terms of ICC Arbitration Regulations. The arbitration tribunal was installed in January of 2017.
By means of another confidential arbitration procedure initiated in 2014 against MESA and with the Market Arbitration Chamber (CAM no. 048/2014), the partners SAAG Investimentos S.A. (SAAG) and Cemig Geração e Transmissão S.A. substantially questioned part of the capital increase approved in MESA destined to the payment of claims from the Consórcio Construtor Santo Antônio (“CCSA”), in the approximate value of R$ 780 million based on the failure to determine the values supposedly owed by the CCSA and prior approval from the Board of Directors, as required by the Bylaws and Shareholder Agreement of MESA, as well as the existence of credits the CCSA owed it, eligible for compensation, in a sum greater than the claims.
The challenge of the portion of the above-mentioned capital increase was based on the absence of determination of the values supposedly owed by the CCSA and prior approval by the Board of Directors, as required by the Bylaws and Shareholder Agreement of MESA, as well as the existence of credits the CCSA owed it, eligible for compensation, in a sum greater than the claims.
Prior to the installation of the arbitration procedure, the arbitration Applicants obtained a preparatory court injunction which suspended the term for these shareholders to exercise the first right of refusal in subscribing to and paying in for their proportional share of the MESA capital increase. Due to the granting of said injunction, all of the effects of the deliberations in relation to the SAAG and Cemig GT and their shareholdings in MESA were also suspended, including in regards to the dilution and penalties established in the MESA Shareholder Agreement.
(*) Information not audited by the independent auditors.
In 2016, the Market Arbitration Chamber recognized in full the right of the Applicants and ordered the annulment of the contested acts.
Given this final abitral determination, FURNAS and the Applicants of Arbitration Procedure CAM no. 048/2014 are analyzing all measures to be taken to implement the decision in favor of the investors.
j) ESBR Participações S.A. (ESBRP) — ESBR Participações S.A. (“ESBRP”), a privately held company, its sole company purpose is investment in the Special Purpose Company (SPE) called Energia Sustentável do Brasil S.A. (“ESBR”), which holds the concessions for use of public good for exploration of the Jirau Hydroelectric Plant, currently being constructed on the Madeira River in the State of Rondônia. The company holds 40% of ESBRP capital. On December 31, 2016, the subsidiary had a negative current net capital of R$ 611,716 (R$ 513,443 on December 31 of 2015), accumulated losses of R$ 801,902 (R$ 2,112,648 on December 31 of 2015), and net equity of R$ 8,329,809 (R$ 7,019,063 on December 31 of 2015).
k) Interligação Elétrica do Madeira S.A. (IEMadeira) - incorporated on December 18, 2008 with the purpose of exploring the concession for public utility electricity transmission, particularly the transmission lines and substations connected to Lots D and F from Tender No. 007/2008 of ANEEL: The Porto Velho - Araraquara transmission line entered into commercial operation on August 1, 2013. The Inverting and Correcting stations entered into commercial operation on May 12, 2014. The company holds 49% of the capital of IE Madeira.
l) Manaus Transmissora de Energia S.A. - is a privately held company, incorporated on April 22, 2008, with the specific purpose of exploring public utility concessions for electricity transmission, provided by way of installation, operation, maintenance, and construction of transmission installations for the Brazilian interconnected electrical system, according to the standards established in legislation and regulations in effect.
The SPE holds concession for construction, operation, and maintenance of transmission lines of 500 kV* Oriximiná/Cariri CD, SE Itacoatiara 500/138 kV*, and SE Cariri 500/230 kV*.
The concession agreement was signed on October 16, 2008 for a period of thirty years; operating activities began in 2013.
The Company holds 49.50% of the capital of Manaus Transmissora de Energia S.A.
m) Teles Pires Participações S.A. — the object of this company is investing in Companhia Hidrelétrica Teles for the implementation of the Hidrelétrica Teles Pires power plant. The Company holds 49.44% of the capital of Teles Pires Participações S.A. On December 31, 2016, the subsidiary had a negative working capital of R$ 382,479 (R$ 256,187 on December 31 of 2015) and net assets of R$ 1,167,993 (R$ 1,393,056 on December 31 of 2015).
(*) Information not audited by the independent auditors.
n) Mata de Santa Genebra Transmissora S.A. — a special purpose, closed capital company, its purpose is to perform all activities necessary to the implementation, operation, maintenance and exploration of the Mata de Santa Genebra Transmission System, composed of three transmission lines that cross cities in the states of São Paulo and Paraná. The Company holds 49.9% of Mata de Santa Genebra Transmissora S.A. On December 31, 2016, the subsidiary had a negative working capital of R$ 482,773, and net assets of R$ 382,295.
o) Belo Monte Transmissora de Energia SPE S.A. — special purpose company for the purpose of performing all activities necessary to the implementation, operation, maintenance and exploration of the CC Xingu/Estreito Transmission Line and associated facilities that cross cities in the States of Pará, Tocantins, Goiás and Minas Gerais. The Company holds 49% of Belo Monte Transmissora de Energia SPE S.A. On December 31, 2016, the subsidiary had a negative working capital of R$ 1,799,692 (R$ 163,356 on December 31 of 2015), and net assets of R$ 2,130,120 (R$ 748,076 on December 31 of 2015).
p) Companhia Estadual de Distribuição de Energia Elétrica (CEEE-D) — a public corporation whose controlling shareholder is the State of Rio Grande do Sul through Companhia Estadual de Energia Elétrica Participações (CEEE-Par), a company holding 65.92% of its total capital. The object of the Concessionaire is to distribute electricity to 72 cities in Rio Grande do Sul, serving approximately 4 million consumer units. As of December 31, 2016, the subsidiary has a negative working capital of R$ 1,040,749 (R$ 475,335 on December 31 of 2015), the result determined an outstanding liability of R$ 1,236,010 (R$ 483,596 on December 31 of 2015) and accumulated losses of R$ 2,416,289 (R$ 1,889,110 on December 31 of 2015). As such, on December 31, 2016, the investment in this subsidiary is at zero.
q) Amazonas GT — its main activities are the generation and transmission of electricity in the state of Amazonas. On December 31, 2016, the subsidiary has a negative working capital of R$ 307,876 (R$ 517,988 on December 31 of 2015), outstanding liabilities of R$ 158,036 (net equity of R$ 192,667 on December 31 of 2015), and accumulated losses of R$ 593,456 (R$ 243,206 on December 31 of 2015) and depends on financial support from the Company. On July 1 of 2015, the subsidiary was constituted as a company under the control of Amazonas D, due to the deverticalization process of Amazonas Energia (see Note 1).
(*) Information not audited by the independent auditors.
15.6.3 — Companies under Management
a) Companhia de Eletricidade do Amapá - CEA - on November 12, 2012, the Company signed a memorandum of understanding, seeking to participate in the financial restructuring process of the company Companhia de Elextricidade do Amapá.
The Company and the State of Amapá entered into a Shareholders Agreement and a Management Agreement on September 12, 2013, seeking to achieve economic/financial recovery of CEA which, after implementation, offers the option for purchase by the Company of equity control of the recovered company. To this end, the Company assumes executive management of CEA, through its majority representation on the Board of Directors, and through indication of two members of the Executive Board of CEA, which will subsequently be replaced by professionals contracted from the market.
In this process, the State of Amapá obtained financing from the Federal Government, in order to settle debts of CEA with Eletrobras and other providers, in addition to preparing a Contingency Plan that will be forwarded for approval by ANEEL.
b) Companhia Energética de Roraima (CERR) - on November 26, 2012, the Company signed a memorandum of understanding, seeking to participate in the financial restructuring process of the company Companhia Energética de Roraima. This process establishes that the Company may assume control of CERR through acquisition of equity control of the company.
The Company and the Government of the State of Roraima initially entered into a Shareholders Agreement and a Management Agreement, respecting the necessary authorizations, seeking to achieve economic/financial recovery of CERR which, after implementation in full, offers the option for purchase by the Company of equity control of the recovered company. To this end, the Company assumes executive management of CERR, through its majority representation on the Board of Directors, and through indication of two members of the Executive Board of CERR, which will subsequently be replaced by professionals contracted from the market.
In this process, the Government of the State of Roraima obtained financing, in order to settle debts of CERR with Eletrobras and other providers, in addition to preparing a Contingency Plan that will be forwarded for approval by ANEEL.
According to an Order from the Ministry of Mines and Energy (MME), on August 03 of 2016, the Companhia Energética de Roraima (CERR), a company under control of the State of Roraima, had its request for renewal of the concession for electricity distribution services denied, which had been granted it by MME Ordinance 920, of November 5, 2016.
As such, according to Article 9, paragraph one, of Law 12,783/2013, the Ministry of Mines and Energy designated Eletrobras’ subsidiary Boa Vista Energia S.A. (“Boa Vista”) as responsible for providing the public utility of electricity distribution in the area of the CERR concession at the time, in the interior of the state of Roraima, until a new concessionaire assumes in a new tender to be held or until December 31 of 2017, whichever occurs first.
Due to the non-renewal of the concession of Companhia Energética de Roraima (CERR), the shareholder agreement entered into between Eletrobras and the state of Roraima, on September 12 of 2013, for shared administration of CERR, lost its validity, as established in the same instrument.
The obligations contracted by Boa Vista in the temporary provision of the utility will be assumed by the new concessionaire, in the terms of the tender notice to be issued by the Conceding Authority, and it is not up to Eletrobras or Boa Vista, during the period of temporary provision of services, to contribute any fudning to CERR, not even for the maintenance or operation of distribution services.
15.6.4 — Special Purpose Entities
During recent years, Eletrobras’ Companies have formalized investments in partners for projects with private business, where the Company serves as a minority shareholder, while retaining preferential shares. These projects seek to involve the Company in the electricity generation and transmission sector, and their values are reflected under Assets - Investments.
In this same regard, considering the need to expand investment in the Electricity Sector, the companies controlled by the Company hold stakes, also as minority shareholders, with ordinary shares, in various companies with concession to provide electricity services, classified under Assets - Investments. The most significant investments in special purpose companies are the following:
Investments in Joint Ventures and Associated Companies
Name |
| Purpose |
| Company |
| % Equity |
| Other Shareholders |
| % Equity |
| Situation |
| HQ |
|
Sistema de Transmissão Nordeste - STN |
| Transmission |
| Chesf |
| 49.00 | % | Alusa |
| 51.00 | % | In Operation |
| Brazil |
|
Manaus Construtora Ltda. |
| Construction - Transmission |
| Chesf |
| 19.50 | % | Abengoa |
| 50.50 | % | In Operation |
| Brazil |
|
|
|
|
| Eletronorte |
| 30.00 | % |
|
|
|
|
|
|
|
|
Energia Sustentável do Brasil - ESBR |
| Generation - UHE Jirau |
| Chesf |
| 20.00 | % | GDF Suez Energy Latin America Ltda. |
| 40.00 | % | In Operation |
| Brazil |
|
|
|
|
| Eletrosul |
| 20.00 | % | Mizha Participações S.A. |
| 20.00 | % |
|
|
|
|
Intesa - Integração Transmissora de Energia |
| Transmission |
| Chesf |
| 12.00 | % | Brasil Energia |
| 51.00 | % | In Operation |
| Brazil |
|
|
|
|
| Eletronorte |
| 37.00 | % |
|
|
|
|
|
|
|
|
Interligação Elétrica do Madeira S.A. |
| Transmission |
| Chesf |
| 24.50 | % | CTEEP |
| 51.00 | % | In Operation |
| Brazil |
|
|
|
|
| Furnas |
| 24.50 | % |
|
|
|
|
|
|
|
|
TDG - Transmissora Delmiro Gouveia S.A. |
| Transmission |
| Chesf |
| 49.00 | % | ATP Engenharia Ltda |
| 51.00 | % | Pre-Operational |
| Brazil |
|
|
|
|
| Chesf |
| 15.00 | % | Petros |
| 10.00 | % |
|
|
|
|
Norte Energia S.A. |
| Generation - UHE Belo Monte |
| Eletronorte |
| 19.98 | % | Other |
| 39.77 | % | Pre-Operational |
| Brazil |
|
|
|
|
| Eletrobras |
| 15.00 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| TAESA |
| 52.60 | % |
|
|
|
|
Empresa Transmissora do Alto Uruguai - ETAU |
| Transmission |
| Eletrosul |
| 27.42 | % | DME Energetica |
| 10.00 | % | In Operation |
| Brazil |
|
|
|
|
|
|
|
|
| CEEE-GT |
| 10.00 | % |
|
|
|
|
Enerpeixe S.A. |
| Generation - UHE Peixei Angical |
| Furnas |
| 40.00 | % | EDP |
| 60.00 | % | In Operation |
| Brazil |
|
Norte Brasil Transmissora de Energia S.A. |
| Transmission |
| Eletronorte |
| 49.00 | % | Abengoa |
| 51.00 | % | In Operation |
| Brazil |
|
Fronteira Oeste Transmissora de Energia S.A. |
| Transmission |
| Eletrosul |
| 51.00 | % | CEEE-GT |
| 49.00 | % | In Operation |
| Brazil |
|
|
|
|
|
|
|
|
| Bimetal |
| 26.99 | % |
|
|
|
|
Amazônia Eletronorte Transmissora de Energia |
| Transmission |
| Eletronorte |
| 49.00 | % | Alubar |
| 10.76 | % | In Operation |
| Brazil |
|
|
|
|
|
|
|
|
| Linear |
| 13.25 | % |
|
|
|
|
Amapari Energia S.A. |
| Generation - UTE Serra do Navio |
| Eletronorte |
| 49.00 | % | MPX Energia S.A. |
| 51.00 | % | In Operation |
| Brazil |
|
Brasnorte Transmissora de Energia S.A. |
| Transmission |
| Eletronorte |
| 49.71 | % | Taesa |
| 38.70 | % | In Operation |
| Brazil |
|
|
|
|
|
|
|
|
| Alusa |
| 41.00 | % |
|
|
|
|
Companhia Transudeste de Transmissão |
| Transmission |
| Furnas |
| 25.00 | % | Cemig |
| 24.00 | % | In Operation |
| Brazil |
|
|
|
|
|
|
|
|
| EATE |
| 10.00 | % |
|
|
|
|
|
|
|
|
|
|
|
| Alusa |
| 41.00 | % |
|
|
|
|
Companhia Transirapé de Transmissão |
| Transmission |
| Furnas |
| 24.50 | % | Cemig |
| 24.00 | % | In Operation |
| Brazil |
|
|
|
|
|
|
|
|
| EATE |
| 10.00 | % |
|
|
|
|
Chapecoense |
| Generation - UHE Foz do Chapecó |
| Furnas |
| 40.00 | % | CPFL |
| 51.00 | % | In Operation |
| Uruguay |
|
|
|
|
|
|
|
|
| CEEE-GT |
| 9.00 | % |
|
|
|
|
Serra do Facão Energia |
| Generation - UHE Serra do Facão |
| Furnas |
| 49.47 | % | Alcoa Alumínio |
| 34.97 | % | In Operation |
| Brazil |
|
|
|
|
|
|
|
|
| DME Energética |
| 10.08 | % |
|
|
|
|
|
|
|
|
|
|
|
| Camargo Corrêa |
| 5.48 | % |
|
|
|
|
Retiro Baixo |
| Generation - Retiro Baixo |
| Furnas |
| 49.00 | % | Orteng |
| 25.50 | % | In Operation |
| Brazil |
|
|
|
|
|
|
|
|
| Arcadis Logos |
| 25.50 | % |
|
|
|
|
Baguari Energia |
| Generation - UHE Baguari |
| Furnas |
| 30.61 | % | Cemig |
| 69.39 | % | In Operation |
| Brazil |
|
Companhia de Transmissão Centroeste de Minas |
| Transmission |
| Furnas |
| 49.00 | % | Cemig |
| 51.00 | % | In Operation |
| Brazil |
|
Transenergia Renovável S.A. |
| Transmission |
| Furnas |
| 49.00 | % | GEBRAS Participações Ltda. |
| 51.00 | % | In Operation |
| Brazil |
|
Vamcruz I Participações S.A. |
| Wind Farm Generation |
| Chesf |
| 49.00 | % | Other |
| 51.00 | % | Pre-Operational |
| Brazil |
|
Complexo Sento Sé I |
| Generation - EOL Pedra Branca, EOL São Pedro do Lago, EOL Sete Gameleiras |
| Chesf |
| 49.00 | % | Brennand Energia |
| 51.00 | % | In Operation |
| Brazil |
|
Interligação Elétrica Garanhuns S.A. |
| Transmission |
| Chesf |
| 49.00 | % | CTEEP |
| 51.00 | % | Pre-Operational |
| Brazil |
|
Chuí Holding |
| Generation - Wind Farm |
| Eletrosul |
| 49.00 | % | Rio Bravo |
| 51.00 | % | In Operation |
| Brazil |
|
Livramento |
| Generation - Cerro Chato IV, V, VI, Ibirapuitã |
| Eletrosul |
| 59.00 | % | Rio Bravo |
| 41.00 | % | In Operation |
| Brazil |
|
Santa Vitória do Palmar |
| Generation - Verace I through X |
| Eletrosul |
| 49.00 | % | Rio Bravo |
| 51.00 | % | In Operation |
| Brazil |
|
TSBE - Transmissora Sul Brasileira de Energia S/A |
| Transmission |
| Eletrosul |
| 80.00 | % | Copel |
| 20.00 | % | In Operation |
| Brazil |
|
TSLE - Transmissora Sul Litorânia de Energia S.A. |
| Transmission |
| Eletrosul |
| 51.00 | % | CEEE-GT |
| 49.00 | % | In Operation |
| Brazil |
|
Marumbi Transmissora de Energia S.A. |
| Transmission |
| Eletrosul |
| 20.00 | % | Copel |
| 80.00 | % | In Operation |
| Brazil |
|
Costa Oeste Transmissora de Energia |
| Transmission |
| Eletrosul |
| 49.00 | % | Copel |
| 51.00 | % | In Operation |
| Brazil |
|
Teles Pires Participações S.A. |
| Generation - UHE Teles Pires |
| Eletrosul |
| 24.72 | % | Neoenergia |
| 50.60 | % | In Operation |
| Brazil |
|
|
|
|
| Furnas |
| 24.70 | % |
|
|
|
|
|
|
|
|
Transmissora Matogrossense de Energia S.A. |
| Transmission |
| Eletronorte |
| 49.00 | % | Alupar |
| 46.00 | % | In Operation |
| Brazil |
|
|
|
|
|
|
|
|
| Mavi |
| 5.00 | % |
|
|
|
|
Construtora Integração |
| Transmission |
| Eletronorte |
| 49.00 | % | Abengoa |
| 51.00 | % | In Operation |
| Brazil |
|
Transnorte Energia S.A. |
| Transmission |
| Eletronorte |
| 49.00 | % | Alupar |
| 51.00 | % | Pre-Operational |
| Brazil |
|
Brasvento Eolo Geradora Energia |
| Generation - EOL Rei dos Ventos |
| Eletronorte |
| 24.50 | % | J. Malucelli |
| 51.00 | % | In Operation |
| Brazil |
|
|
|
|
| Furnas |
| 24.50 | % |
|
|
|
|
|
|
|
|
Brasventos Miassaba 3 Geradora |
| Generation - EOL Miassaba 3 |
| Eletronorte |
| 24.50 | % | J. Malucelli |
| 51.00 | % | Pre-Operational |
| Brazil |
|
|
|
|
| Furnas |
| 24.50 | % |
|
|
|
|
|
|
|
|
Rei dos Ventos 3 Geradora |
| Generation - EOL Rei dos Ventos 3 |
| Eletronorte |
| 24.50 | % | J. Malucelli |
| 51.00 | % | Pre-Operational |
| Brazil |
|
|
|
|
| Furnas |
| 24.50 | % |
|
|
|
|
|
|
|
|
Luziânia — Niquelândia Transmissora S.A. |
| Transmission |
| Furnas |
| 49.00 | % | State Grid Corporation of China |
| 51.00 | % | Pre-Operational |
| Brazil |
|
Caldas Novas Transmissão |
| Transmission |
| Furnas |
| 49.90 | % | Desenvix |
| 22.50 | % | In Operation |
| Brazil |
|
|
|
|
|
|
|
|
| Santa Rita |
| 12.50 | % |
|
|
|
|
|
|
|
|
|
|
|
| CEL |
| 12.52 | % |
|
|
|
|
Goiás Trasnmissão S.A. |
| Transmission |
| Furnas |
| 49.00 | % | Bogotá |
| 51.00 | % | In Operation |
| Brazil |
|
Madeira Energia S.A. |
| Generation - UHE Santo Antônio |
| Furnas |
| 39.00 | % | Odebrecht Energia |
| 18.60 | % | In Operation |
| Brazil |
|
|
|
|
|
|
|
|
| SAAG Investimentos S.A. |
| 12.40 | % |
|
|
|
|
|
|
|
|
|
|
|
| Cemig |
| 10.00 | % |
|
|
|
|
|
|
|
|
|
|
|
| Fundo de Investimento em Participações Amazônia Energia |
| 20.00 | % |
|
|
|
|
MGE - Transmissão |
| Transmission |
| Furnas |
| 49.00 | % | Gebbras Participações Ltda |
| 51.00 | % | In Operation |
| Brazil |
|
Investments in Joint Ventures and Associated Companies
Name |
| Purpose |
| Company |
| % Equity |
| Other Shareholders |
| % Equity |
| Situation |
| HQ |
|
Triângulo Mineiro Transmissora S.A. |
| Transmission |
| Furnas |
| 49.00 | % | FIP Participações Caixa Milão |
| 51.00 | % | In Operation |
| Brazil |
|
Paranaíba Transmissora de Energia S.A. |
| Transmission |
| Furnas |
| 24.50 | % | Copel |
| 24.50 | % | In Operation |
| Brazil |
|
|
|
|
|
|
|
|
| State Grid |
| 51.00 | % |
|
|
|
|
Central Eólica Famosa I |
| Generation - Parque Eólico Famosa I |
| Furnas |
| 49.00 | % | PF Participações Ltda |
| 51.00 | % | Pre-Operational |
| Brazil |
|
Central Eólica Pau Brasil |
| Generation - Parque Eólico Pau Brasil |
| Furnas |
| 49.00 | % | PF Participações Ltda |
| 51.00 | % | Pre-Operational |
| Brazil |
|
Central Eólica Rosada |
| Generation - Parque EOL Rosada |
| Furnas |
| 49.00 | % | PF Participações Ltda |
| 51.00 | % | Pre-Operational |
| Brazil |
|
Central Eólica de São Paulo |
| Generation - Parque EOL Rosada |
| Furnas |
| 49.00 | % | PF Participações Ltda |
| 51.00 | % | Pre-Operational |
| Brazil |
|
Vale do São Bartolomeu |
| Transmission |
| Furnas |
| 39.00 | % | FIP Participações Caixa Milão |
| 51.00 | % | Pre-Operational |
| Brazil |
|
|
|
|
|
|
|
|
| CELG GT |
| 10.00 | % |
|
|
|
|
Investments in Joint Ventures and Associated Companies
Name |
| Purpose |
| Company |
| % Equity |
| Other Shareholders |
| % Equity |
| Situation |
| HQ |
|
Punaú I |
| Generation - EOL Punaú I |
| Furnas |
| 49.00 | % | FIP Participações Caixa Milão |
| 50.99 | % | Pre-Operational |
| Brazil |
|
|
|
|
|
|
|
|
| CGE Punaú I |
| 0.01 | % |
|
|
|
|
Carnaúba I |
| Generation - EOL Carnaúba I |
| Furnas |
| 49.00 | % | FIP Participações Caixa Milão |
| 50.99 | % | Pre-Operational |
| Brazil |
|
|
|
|
|
|
|
|
| CGE Carnaúba I |
| 0.01 | % |
|
|
|
|
Carnaúba II |
| Generation - EOL Carnaúba II |
| Furnas |
| 49.00 | % | FIP Participações Caixa Milão |
| 50.99 | % | Pre-Operational |
| Brazil |
|
|
|
|
|
|
|
|
| CGE Carnaúba II |
| 0.01 | % |
|
|
|
|
Carnaúba III |
| Generation - EOL Carnaúba III |
| Furnas |
| 49.00 | % | FIP Participações Caixa Milão |
| 50.99 | % | Pre-Operational |
| Brazil |
|
|
|
|
|
|
|
|
| CGE Carnaúba III |
| 0.01 | % |
|
|
|
|
Carnaúba V |
| Generation - EOL Carnaúba V |
| Furnas |
| 49.00 | % | FIP Participações Caixa Milão |
| 50.99 | % | Pre-Operational |
| Brazil |
|
|
|
|
|
|
|
|
| CGE Carnaúba V |
| 0.01 | % |
|
|
|
|
Cervantes I |
| Generation - EOL Cervantes I |
| Furnas |
| 49.00 | % | FIP Participações Caixa Milão |
| 50.99 | % | Pre-Operational |
| Brazil |
|
|
|
|
|
|
|
|
| CGE Cervantes I |
| 0.01 | % |
|
|
|
|
Cervantes II |
| Generation - EOL Cervantes II |
| Furnas |
| 49.00 | % | FIP Participações Caixa Milão |
| 50.99 | % | Pre-Operational |
| Brazil |
|
|
|
|
|
|
|
|
| CGE Cervantes II |
| 0.01 | % |
|
|
|
|
Bom Jesus |
| Generation - EOL Bom Jesus |
| Furnas |
| 49.00 | % | FIP Participações Caixa Milão |
| 51.00 | % | Pre-Operational |
| Brazil |
|
Cachoeira |
| Generation - EOL Cachoeira |
| Furnas |
| 49.00 | % | FIP Participações Caixa Milão |
| 51.00 | % | Pre-Operational |
| Brazil |
|
Pitimbu |
| Generation - EOL Pitimbu |
| Furnas |
| 49.00 | % | FIP Participações Caixa Milão |
| 51.00 | % | Pre-Operational |
| Brazil |
|
São Caetano I |
| Generation - EOL São Caetano I |
| Furnas |
| 49.00 | % | FIP Participações Caixa Milão |
| 51.00 | % | Pre-Operational |
| Brazil |
|
São Caetano |
| Generation - EOL São Caetano |
| Furnas |
| 49.00 | % | FIP Participações Caixa Milão |
| 51.00 | % | Pre-Operational |
| Brazil |
|
São Galvão |
| Generation - EOL São Galvão |
| Furnas |
| 49.00 | % | FIP Participações Caixa Milão |
| 51.00 | % | Pre-Operational |
| Brazil |
|
Companhia Energética Sinop S.A. |
| Generation - UHE Sinop |
| Eletronorte |
| 24.50 | % | FIP Participações Caixa Milão |
| 51.00 | % | Pre-Operational |
| Brazil |
|
|
|
|
| Chesf |
| 24.50 | % |
|
|
|
|
|
|
|
|
Belo Monte Transmissora de Energia S.A. |
| Transmission |
| Eletronorte |
| 24.50 | % | State Grid Brazil Holding (SGBH) |
| 51.00 | % | Pre-Operational |
| Brazil |
|
|
|
|
| Furnas |
| 24.50 | % |
|
|
|
|
|
|
|
|
Tijoa Participações e Investimentos |
| Generation - UHE Três Irmãos |
| Furnas |
| 49.90 | % | Fundo de Investimento em Participações Constantinopla |
| 50.10 | % | Pre-Operational |
| Brazil |
|
São Manoel |
| Generation - UHE São Manoel |
| Furnas |
| 33.33 | % | CWEI (Brasil) Participações |
| 33.30 | % | Pre-Operational |
| Brazil |
|
|
|
|
|
|
|
|
| EDP Brasil |
| 33.40 | % |
|
|
|
|
Itaguaçu da Bahia |
| Generation - EOL Itaguaçu da Bahia |
| Furnas |
| 49.00 | % | Salus FIP |
| 49.00 | % | Pre-Operational |
| Brazil |
|
|
|
|
|
|
|
|
| Casa dos Ventos Energia Renovável |
| 2.00 | % |
|
|
|
|
Complexo Sento Sé II |
| Generation - EOL Baraúnas I; Morro Branco I and Mussambê |
| Chesf |
| 49.00 | % | Brennand Energia S.A. |
| 50.90 | % | In Operation |
| Brazil |
|
|
|
|
|
|
|
|
| Brennand Energia Eólica |
| 0.10 | % |
|
|
|
|
Complexo Sento Sé III |
| Generation - EOL Baraúnas II and Banda de Couro |
| Chesf |
| 49.00 | % | Brennand Energia S.A. |
| 50.90 | % | In Operation |
| Brazil |
|
|
|
|
|
|
|
|
| Brennand Energia Eólica |
| 0.10 | % |
|
|
|
|
Complexo Chapada do Piauí I |
| Generation - EOL Ventos de Santa Joana IX through XIII; XV and XVI |
| Chesf |
| 49.00 | % | ContourGlobal do Brasil Holding |
| 36.00 | % | In Operation |
| Brazil |
|
|
|
|
|
|
|
|
| Salus - Fundo de Investimento em Participações |
| 14.90 | % |
|
|
|
|
|
|
|
|
|
|
|
| Ventos Santa Joana Energias |
| 0.10 | % |
|
|
|
|
Investments in Joint Ventures and Associated Companies
Name |
| Purpose |
| Company |
| % Equity |
| Other Shareholders |
| % Equity |
| Situation |
| HQ |
|
Complexo Chapada do Piauí II |
| Generation - EOL Ventos de Santa Joana I, III through V, VI and Ventos Santo Augusto IV |
| Chesf |
| 49.00 | % | ContourGlobal do Brasil Holding |
| 46.00 | % | In Operation |
| Brazil |
|
|
|
|
|
|
|
|
| Salus - Fundo de Investimento em Participações |
| 4.90 | % |
|
|
|
|
|
|
|
|
|
|
|
| Ventos Santa Joana Energias |
| 0.10 | % |
|
|
|
|
Complexo Serra das Vacas |
| Generation - EOL Serra das Vacas I - IV |
| Chesf |
| 49.00 | % | PEC Energia |
| 51.00 | % | In Operation |
| Brazil |
|
Transenergia São Paulo |
| Transmission |
| Furnas |
| 49.00 | % | J. Malucelli |
| 51.00 | % | In Operation |
| Brazil |
|
Lago Azul Transmissora |
| Transmission |
| Furnas |
| 49.90 | % | Celg GT |
| 50.10 | % | In Operation |
| Brazil |
|
Mata de Sta. Genebra Transmissora |
| Transmission |
| Furnas |
| 49.90 | % | Copel |
| 50.10 | % | In Operation |
| Brazil |
|
Energia Olímpica |
| Transmission |
| Furnas |
| 49.90 | % | Light S.A. |
| 50.10 | % | Pre-Operational |
| Brazil |
|
Manaus Transmissora de Energia S.A. |
| Transmission |
| Eletronorte |
| 30.00 | % | Abengoa |
| 50.50 | % | In Operation |
| Brazil |
|
|
|
|
| Chesf |
| 19.50 | % |
|
|
|
|
|
|
|
|
Inambari Geração de Energia (Igesa) |
| UHE Inambari |
| Furnas |
| 19.61 | % | OAS |
| 51.00 | % | In Operation |
| Brazil/Peru |
|
|
|
|
| Eletrobras |
| 29.40 | % |
|
|
|
|
|
|
|
|
Companhia Transleste de Transmissão |
| Transmission |
| Furnas |
| 24.00 | % | Alusa |
| 41.00 | % | In Operation |
| Brazil |
|
|
|
|
|
|
|
|
| Cemig |
| 25.00 | % |
|
|
|
|
|
|
|
|
|
|
|
| EATE |
| 10.00 | % |
|
|
|
|
Investments in Joint Ventures and Associated Companies
Name |
| Purpose |
| Company |
| % Equity |
| Other Shareholders |
| % Equity |
| Project Status |
| HQ |
|
Energética Águas da Pedra S.A. |
| Generation - UHE Dardanelos |
| Chesf |
| 24.5 | % | Neoenergia |
| 51.00 | % | In Operation |
| Brazil |
|
|
|
|
| Eletronorte |
| 24.5 | % |
|
|
|
|
|
|
|
|
Rouar S.A. |
| Generation - Parque EOL in Colônia |
| Eletrobras |
| 50.0 | % | UTE |
| 50.00 | % | In Operation |
| Uruguay |
|
Companhia de Eletricidade do Amapá - CEA |
| Distribution |
| Eletrobras |
| 1.50 | % | Government of the State of Amapá |
| 98.50 | % | In Operation |
| Brazil |
|
CEB - LAJEADO |
| Generation - UHE CEB Lajeado |
| Eletrobras |
| 40.07 | % | CEB |
| 59.93 | % | In Operation |
| Brazil |
|
Lajeado Energia |
| Generation and Marketing |
| Eletrobras |
| 40.07 | % | EDP - Energias do Brasil S.A. |
| 55.86 | % | In Operation |
| Brazil |
|
|
|
|
|
|
|
|
| Government of the State of Tocantins |
| 4.07 | % |
|
|
|
|
Paulista Lajeado |
| Generation and Marketing |
| Eletrobras |
| 40.07 | % | Cia. Jaguari de Geração de Energia |
| 59.93 | % | In Operation |
| Brazil |
|
AES Tiete |
| Generation |
| Eletrobras |
| 7.94 | % | AES Corp |
| 24.28 | % | In Operation |
| Brazil |
|
|
|
|
|
|
|
|
| BNDSPart |
| 28.33 | % |
|
|
|
|
|
|
|
|
|
|
|
| Other |
| 39.45 | % |
|
|
|
|
Companhia Energética de Brasília - CEB |
| Generation - Transmission - Distribution |
| Eletrobras |
| 2.10 | % | Federal District (DF) |
| 80.20 | % | In Operation |
| Brazil |
|
|
|
|
|
|
|
|
| Other |
| 17.70 | % |
|
|
|
|
Companhia Estadual de Energia Elétrica - CEEE-D |
| Distribution |
| Eletrobras |
| 32.59 | % | CEE Participações |
| 65.92 | % | In Operation |
| Brazil |
|
|
|
|
|
|
|
|
| Other |
| 1.49 | % |
|
|
|
|
Companhia Estadual de Energia Elétrica - CEEE-GT |
| Generation - Transmissão |
| Eletrobras |
| 32.59 | % | CEE Participações |
| 65.92 | % | In Operation |
| Brazil |
|
|
|
|
|
|
|
|
| Other |
| 1.49 | % |
|
|
|
|
Centrais Elétricas de Santa Catarina - CELESC |
| Distribution |
| Eletrobras |
| 10.75 | % | State of Santa Catarina |
| 20.20 | % | In Operation |
| Brazil |
|
|
|
|
|
|
|
|
| Angra Volt FIA |
| 14.46 | % |
|
|
|
|
|
|
|
|
|
|
|
| Poland Fia |
| 7.53 | % |
|
|
|
|
|
|
|
|
|
|
|
| Other |
| 47.06 | % |
|
|
|
|
Centrais Elétricas do Pará - CELPA |
| Distribution |
| Eletrobras |
| 0.99 | % | Equatorial Energia S.A. |
| 96.18 | % | In Operation |
| Brazil |
|
|
|
|
|
|
|
|
| Other |
| 2.83 | % |
|
|
|
|
Companhia Energética de Pernambuco - CELPE |
| Distribution |
| Eletrobras |
| 1.56 | % | Neoenergia |
| 89.65 | % | In Operation |
| Brazil |
|
|
|
|
|
|
|
|
| Other |
| 8.79 | % |
|
|
|
|
Companhia Energética do Maranhão São Luís - CEMAR |
| Distribution |
| Eletrobras |
| 33.55 | % | Equatorial Energia |
| 65.11 | % | In Operation |
| Brazil |
|
|
|
|
|
|
|
|
| Other |
| 1.34 | % |
|
|
|
|
Energisa MT |
| Distribution |
| Eletrobras |
| 22.01 | % | Rede Energia S.A. |
| 57.67 | % | In Operation |
| Brazil |
|
|
|
|
|
|
|
|
| Energisa |
| 8.90 | % |
|
|
|
|
|
|
|
|
|
|
|
| Other |
| 11.42 | % |
|
|
|
|
Companhia Energetica de São Paulo - CESP |
| Generation - Marketing |
| Eletrobras |
| 2.05 | % | Treasury of the State of São Paulo |
| 36.98 | % | In Operation |
| Brazil |
|
|
|
|
|
|
|
|
| Other |
| 60.97 | % |
|
|
|
|
Duke Energy Gereração |
| Generation |
| Eletrobras |
| 0.47 | % | Duke Energy Internat. Brasil Ltda |
| 94.28 | % | In Operation |
| Brazil |
|
|
|
|
|
|
|
|
| Other |
| 5.25 | % |
|
|
|
|
Companhia Energética do Ceara - COELCE |
| Distribution |
| Eletrobras |
| 7.06 | % | Enel Brasil |
| 58.87 | % | In Operation |
| Brazil |
|
|
|
|
|
|
|
|
| Enersis Américas |
| 15.18 | % |
|
|
|
|
|
|
|
|
|
|
|
| Other |
| 18.89 | % |
|
|
|
|
Companhia Paranaense de Energia - COPEL |
| Generation - Transmissão |
| Eletrobras |
| 0.56 | % | State of Paraná |
| 31.07 | % | In Operation |
| Brazil |
|
|
|
|
|
|
|
|
| BNDESPAR |
| 23.96 | % |
|
|
|
|
|
|
|
|
|
|
|
| Other |
| 44.41 | % |
|
|
|
|
CTEEP |
| Transmission |
| Eletrobras |
| 35.39 | % | ISA Capital do Brasil |
| 35.91 | % | In Operation |
| Brazil |
|
|
|
|
|
|
|
|
| Other |
| 28.70 | % |
|
|
|
|
EMAE |
| Generation |
| Eletrobras |
| 39.02 | % | Treasury of the State of São Paulo |
| 38.99 | % | In Operation |
| Brazil |
|
|
|
|
|
|
|
|
| Other |
| 21.99 | % |
|
|
|
|
Energisa Holding |
| Generation - Transmission - Distribution |
| Eletrobras |
| 2.31 | % | Gipar S/A |
| 30.95 | % | In Operation |
| Brazil |
|
|
|
|
|
|
|
|
| GIF IV Fundo de Investimentos em Participações |
| 14.54 | % |
|
|
|
|
|
|
|
|
|
|
|
| Other |
| 52.20 | % |
|
|
|
|
(*) Information not audited by the independent auditors
15.7 — Invesments pledges as guarantee
Given the fact that the Company has several pending judicial proceedings in which it stands as defendant (See Note 30), assets are offered in guarantee, in the appeals of these judicial proceedings, which represent 9.56% as of December 31, 2016 (8.60% on December 31 of 2015) of the total investment portfolio, as follows:
12/31/2016 |
| ||||||
EQUITY |
| VALUE OF |
| PERCENTAGE |
| INVESTMENT |
|
HOLDINGS |
| INVESTMENT |
| LOCKED |
| LOCKED |
|
|
|
|
|
|
|
|
|
CTEEP |
| 2,543,906 |
| 99.89% |
| 2,541,091 |
|
EMAE |
| 282,091 |
| 100% |
| 282,091 |
|
CESP |
| 129,096 |
| 99.76% |
| 128,783 |
|
AES TIETE |
| 437,197 |
| 99.97% |
| 437,052 |
|
COELCE |
| 251,938 |
| 94.51% |
| 238,111 |
|
CGEEP |
| 15,895 |
| 100% |
| 15,895 |
|
ENERGISA MT |
| 394,774 |
| 100% |
| 394,774 |
|
CELPA |
| 48,895 |
| 100% |
| 48,895 |
|
CELPE |
| 21,688 |
| 100% |
| 21,688 |
|
CEEE - GT |
| 676,332 |
| 100% |
| 676,332 |
|
ENERGISA S.A. |
| 148,661 |
| 95.76% |
| 142,354 |
|
CELESC |
| 65,920 |
| 99.98% |
| 65,905 |
|
CEMAR |
| 729,888 |
| 99.16% |
| 723,779 |
|
CEB Lajeado |
| 72,989 |
| 99.97% |
| 72,965 |
|
SUBTOTAL |
| 5,819,270 |
|
|
| 5,789,715 |
|
NOTE 16 — FIXED ASSETS, NET
The items under fixed assets relate primarily to infrastructure for electric power generation under concessions not extended in the terms of Law 12,783/13.
The property that comprises the fixed assets of the Company, listed and identified as public utility concession assets, cannot be sold or given in guarantee to third parties.
Special Obligations (obligations relating to concessions) correspond to funds received from consumers for the purpose of contributing to the execution of the expansion projects necessary to meet electricity supply requests and are allocated to the corresponding projects. The assets acquired with the corresponding funds are recorded under the fixed assets of the Company, pursuant to the provisions established by ANEEL. By virtue of the nature of these contributions, they do not represent effective financial obligations, as they will not be returned to the consumers.
|
| 12/31/2016 |
| ||||||||
|
| Gross value |
| Accumulated |
| Obligations linked to |
| Impairment |
| Net value |
|
In service |
|
|
|
|
|
|
|
|
|
|
|
Generation |
| 47,456,125 |
| (23,064,664 | ) | (538,375 | ) | (12,141,003 | ) | 11,712,083 |
|
Administration |
| 2,491,860 |
| (1,514,448 | ) | (9,292 | ) | — |
| 968,119 |
|
Distribution |
| 1,398,468 |
| (499,344 | ) | — |
| — |
| 899,124 |
|
|
| 51,346,453 |
| (25,078,456 | ) | (547,667 | ) | (12,141,003 | ) | 13,579,326 |
|
In progress |
|
|
|
|
|
|
|
|
|
|
|
Generation |
| 12,353,688 |
| — |
| — |
| — |
| 12,353,688 |
|
Administration |
| 879,911 |
| — |
| — |
| — |
| 879,911 |
|
|
| 13,233,599 |
| — |
| — |
| — |
| 13,233,599 |
|
|
| 64,580,052 |
| (25,078,456 | ) | (547,667 | ) | (12,141,003 | ) | 26,812,925 |
|
|
| 12/31/2015 |
| ||||||||
|
| Gross value |
| Accumulated depreciation |
| Obligations linked to |
| Impairment |
| Net value |
|
In service |
|
|
|
|
|
|
|
|
|
|
|
Generation |
| 46,003,180 |
| (21,740,065 | ) | (633,602 | ) | (8,540,131 | ) | 15,089,382 |
|
Administration |
| 2,444,828 |
| (1,445,137 | ) | (25,518 | ) | — |
| 974,173 |
|
Distribution |
| 1,398,468 |
| (441,647 | ) | — |
| — |
| 956,821 |
|
|
| 49,846,476 |
| (23,626,849 | ) | (659,120 | ) | (8,540,131 | ) | 17,020,376 |
|
In progress |
|
|
|
|
|
|
|
|
|
|
|
Generation |
| 11,659,196 |
| — |
| — |
| — |
| 11,659,196 |
|
Administration |
| 799,908 |
| — |
| — |
| — |
| 799,908 |
|
|
| 12,459,104 |
| — |
| — |
| — |
| 12,459,104 |
|
|
| 62,305,580 |
| (23,626,849 | ) | (659,120 | ) | (8,540,131 | ) | 29,479,480 |
|
Movement of Fixed Assets
|
| Balance on |
| Additions |
| Transfer |
| Write-offs |
| Balance on |
|
Generation/Marketing |
|
|
|
|
|
|
|
|
|
|
|
Inservice |
| 46,003,180 |
| 184,468 |
| 1,287,960 |
| (19,483 | ) | 47,456,125 |
|
Accumulated depreciation |
| (21,740,065 | ) | (1,363,922 | ) | 27,098 |
| 12,225 |
| (23,064,664 | ) |
Inprogress |
| 11,659,196 |
| 2,106,303 |
| (1,355,214 | ) | (56,596 | ) | 12,353,689 |
|
Provision for impairment of assets |
| (8,540,131 | ) | (4,020,332 | ) | 14,048 |
| 405,412 |
| (12,141,003 | ) |
Special obligations linked to the Concession |
| (633,602 | ) | (2,540 | ) | (6,951 | ) | 104,718 |
| (538,375 | ) |
|
| 26,748,577 |
| (3,096,023 | ) | (33,059 | ) | 446,276 |
| 24,065,771 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution |
|
|
|
|
|
|
|
|
|
|
|
Commercialleasing |
| 1,398,468 |
| — |
| — |
| — |
| 1,398,468 |
|
Accumulated depreciation |
| (441,647 | ) | (57,697 | ) | — |
| — |
| (499,344 | ) |
|
| 956,821 |
| (57,697 | ) | — |
| — |
| 899,124 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Administration |
|
|
|
|
|
|
|
|
|
|
|
Inservice |
| 2,444,828 |
| 49,578 |
| 217,570 |
| (220,116 | ) | 2,491,860 |
|
Accumulated depreciation |
| (1,445,137 | ) | (149,132 | ) | (100,422 | ) | 180,243 |
| (1,514,448 | ) |
Inprogress |
| 799,908 |
| 136,791 |
| (56,719 | ) | (69 | ) | 879,911 |
|
Special obligations linked to the Concession |
| (25,518 | ) | — |
| — |
| 16,226 |
| (9,292 | ) |
|
| 1,774,081 |
| 37,236 |
| 60,429 |
| (23,716 | ) | 1,848,030 |
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
| 29,479,479 |
| (3,116,484 | ) | 27,370 |
| 422,560 |
| 26,812,925 |
|
|
| Balance on |
| Additions |
| Transfers |
| Deductions |
| Reclassification |
| Investigation |
| Reclassification |
| Balance on |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Generation / Trade |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In service |
| 43,466,067 |
| 886 |
| 776,531 |
| (304,835 | ) | 1,349,221 |
| — |
| 715,310 |
| 46,003,180 |
|
Accrued depreciation |
| (19,292,806 | ) | (1,226,683 | ) | (10,486 | ) | 57,138 |
| (914,576 | ) | — |
| (352,652 | ) | (21,740,065 | ) |
In progress |
| 7,547,759 |
| 3,908,372 |
| (804,186 | ) | (54,567 | ) | 1,022,207 |
| (15,996 | ) | 55,606 |
| 11,659,196 |
|
Provision for recovery of assets (impairment) (a) |
| (2,955,233 | ) | (5,729,304 | ) | — |
| 167,261 |
| — |
| 11,514 |
| (34,369 | ) | (8,540,131 | ) |
Special Obligations Linked to the Concession |
| (455,808 | ) | — |
| (86,113 | ) | 4,084 |
| (87,157 | ) | — |
| (8,608 | ) | (633,602 | ) |
|
| 28,309,979 |
| (3,046,729 | ) | (124,254 | ) | (130,919 | ) | 1,369,695 |
| (4,482 | ) | 375,287 |
| 26,748,577 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease |
| 1,398,468 |
| — |
| — |
| — |
| — |
| — |
| — |
| 1,398,468 |
|
Accrued depreciation |
| (383,950 | ) | (57,697 | ) | — |
| — |
| — |
| — |
| — |
| (441,647 | ) |
|
| 1,014,518 |
| (57,697 | ) | — |
| — |
| — |
| — |
| — |
| 956,821 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In service |
| 2,396,288 |
| 24,358 |
| 34,701 |
| (10,519 | ) | — |
| — |
| — |
| 2,444,828 |
|
Accrued depreciation |
| (1,302,020 | ) | (132,790 | ) | (22,854 | ) | 12,527 |
| — |
| — |
| — |
| (1,445,137 | ) |
In progress |
| 713,710 |
| 206,275 |
| (84,236 | ) | (35,841 | ) | — |
| — |
| — |
| 799,908 |
|
Special Obligations Linked to the Concession |
| (26,927 | ) | — |
| — |
| 1,409 |
| — |
| — |
| — |
| (25,518 | ) |
|
| 1,781,051 |
| 97,843 |
| (72,389 | ) | (32,424 | ) | — |
| — |
| — |
| 1,774,081 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
| 31,105,548 |
| (3,006,583 | ) | (196,643 | ) | (163,343 | ) | 1,369,695 |
| (4,482 | ) | 375,287 |
| 29,479,479 |
|
|
| Balance on |
| Additions |
| Transfers |
| Deductions |
| Acquisition |
| Investigation |
| Balance on |
|
Generation / Trade |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In service |
| 41,832,824 |
| 2,694 |
| 1,549,753 |
| 80,796 |
| — |
|
|
| 43,466,067 |
|
Accrued depreciation |
| (18,140,950 | ) | (1,190,061 | ) | (5,887 | ) | 44,092 |
| — |
| — |
| (19,292,806 | ) |
In progress |
| 7,059,539 |
| 2,594,000 |
| (1,798,121 | ) | (112,532 | ) | — |
| (195,127 | ) | 7,547,759 |
|
Provision for recovery of assets (impairment) (a) |
| (2,699,425 | ) | (731,552 | ) | 22,273 |
| 321,028 |
| — |
| 132,443 |
| (2,955,233 | ) |
Special Obligations Linked to the Concession |
| (460,289 | ) | — |
| — |
| 4,481 |
| — |
| — |
| (455,808 | ) |
|
| 27,591,699 |
| 675,081 |
| (231,982 | ) | 337,865 |
| — |
| (62,684 | ) | 28,309,979 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease |
| 1,398,468 |
| — |
| — |
| — |
| — |
| — |
| 1,398,468 |
|
Accrued depreciation |
| (326,310 | ) | (57,640 | ) | — |
| — |
| — |
| — |
| (383,950 | ) |
|
| 1,072,158 |
| (57,640 | ) | — |
| — |
| — |
| — |
| 1,014,518 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In service |
| 2,112,331 |
| 111,902 |
| 87,572 |
| (31,768 | ) | 116,251 |
| — |
| 2,396,288 |
|
Accrued depreciation |
| (1,179,851 | ) | (148,973 | ) | (20,889 | ) | 47,693 |
| — |
| — |
| (1,302,020 | ) |
In progress |
| 679,380 |
| 93,262 |
| (78,532 | ) | (12,601 | ) | 32,201 |
| — |
| 713,710 |
|
Special Obligations Linked to the Concession |
| (28,212 | ) | — |
| — |
| 2,927 |
| (1,642 | ) | — |
| (26,927 | ) |
|
| 1,583,648 |
| 56,191 |
| (11,849 | ) | 6,251 |
| 146,810 |
| — |
| 1,781,051 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
TOTAL |
| 30,247,505 |
| 673,632 |
| (243,831 | ) | 344,116 |
| 146,810 |
| (62,684 | ) | 31,105,548 |
|
In these financial statements of December 31, 2016, Eletrobras recognized as a loss in capitalized costs under permanent assets the total of R$ 211,123, representing estimated values which the subsidiaries of Eletrobras paid improperly. From this sum, the value of R$ 143,957 was already recognized under the item impairment, causing a partial reversal of the previously recognized impairment amount. (see Note 4 - XI)
Average depreciation rate and accumulated depreciation:
|
| 12/31/2016 |
| 12/31/2015 |
| ||||
|
| Average rate of |
| Accumulated |
| Average rate of |
| Accumulated |
|
Generation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hydro |
| 2.53% |
| 15,920,174 |
| 2.30% |
| 15,191,209 |
|
Nuclear |
| 3.93% |
| 4,439,098 |
| 3.33% |
| 4,048,041 |
|
Thermal |
| 4.03% |
| 2,542,610 |
| 3.80% |
| 2,418,294 |
|
Wind |
| 6.89% |
| 161,681 |
| 6.88% |
| 81,935 |
|
Marketing |
| 3.15% |
| 1,101 |
| 3.15% |
| 586 |
|
|
|
|
| 23,064,664 |
|
|
| 21,740,065 |
|
|
|
|
|
|
|
|
|
|
|
Distribution |
| 3.00% |
| 499,344 |
| 3.00% |
| 441,647 |
|
|
|
|
| 499,344 |
|
|
| 441,647 |
|
|
|
|
|
|
|
|
|
|
|
Administration |
| 6.00% |
| 1,514,448 |
| 6.73% |
| 1,445,137 |
|
|
|
|
| 1,514,448 |
|
|
| 1,445,137 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
| 25,078,456 |
|
|
| 23,626,849 |
|
NOTE 17 — FINANCIAL ASSETS (LIABILITIES) - CONCESSIONS AND ITAIPU
|
| 12/31/2016 |
| 12/31/2015 |
|
Transmission Concessions |
|
|
|
|
|
Financial Assets - Annual Permitted Revenue |
| 42,743,612 |
| 10,807,585 |
|
Financial Assets - Indemnable Concessions |
| 3,630,829 |
| 8,365,177 |
|
|
| 46,374,441 |
| 19,172,762 |
|
Distribution Concessions |
|
|
|
|
|
Financial Assets - Indemnable Concessions |
| 4,935,236 |
| 4,119,004 |
|
Portion A receivables and other financial items III |
| (9,254 | ) | 86,102 |
|
|
| 4,925,982 |
| 4,205,106 |
|
Generation Concessions |
|
|
|
|
|
Financial Assets - Indemnable Concessions |
| 2,585,720 |
| 2,554,211 |
|
|
|
|
|
|
|
|
| 53,886,143 |
| 25,932,079 |
|
|
|
|
|
|
|
Financial Assets - Itaipu (item I) |
| 1,200,916 |
| 3,449,566 |
|
|
|
|
|
|
|
Total Financial Assets |
| 55,087,059 |
| 29,381,645 |
|
|
|
|
|
|
|
Financial Assets - Current |
| 2,337,513 |
| 965,212 |
|
Financial Assets - Noncurrent |
| 52,749,546 |
| 28,416,433 |
|
|
|
|
|
|
|
Total Financial Assets |
| 55,087,059 |
| 29,381,645 |
|
17.1 — Financial Assets - Public utility electricity concession
The financial assets - concession header, in the amount of R$ 53,895,397, with R$ 3,574,114 recorded in current assets and R$ 50,321,283 recorded in noncurrent assets, on December 31, 2016 (R$ 25,845,977 on December 31, 2015) refers to the realizable financial assets held by the companies in Eletrobras, in the distribution concessions, calculated by applying the mixed model, and in generation and transmission concessions, by application of the financial model, both established in IFRIC 12.
On April 20 of 2016, the Ministry of Mines and Energy published Ordinance no. 120, which regulated the conditions for receipt of remunerations related to the electricity transmission assets existing on May 31 of 2000, named facilities in the Basic Existing Grid (RBSE) and other Transmission Facilities (RPC), not depreciated or amortized, as per paragraph two of Article 15 of Law 12,783/2013.
On December 31, 2016, the amount of R$ 36,570,883, the estimate of updated amounts in relation to the electricity transmission assets existing on May 31 of 2000 under the item Financial Assets Permitted Annual Revenue, with R$ 2,950,042 classified under current, and R$ 33,620,841 under noncurrent (see Note 2.1).
17.2 — Amounts receivable from Parcel A and other financial items
On November 25, 2014, ANEEL decided to amend the concession and permit agreements of the Brazilian electricity distribution companies, incorporating the balances of the receivables from Installment A and other financial items in calculation of compensations, when the concession expires. The aforementioned event requires that the balance be recorded of any differences from Installment A and other financial components not yet recovered or liquidated.
(*) Information not audited by the independent auditors.
17.2.1 — Compensation Account for Variation of items in Parcel A - CVA
Joint Ministerial Directive of the Ministries of Finance and of Mines and Energy No. 25, of January 24, 2002, established the Compensation Account for Variation of items in “Installment A” (CVA), with the purpose of recording the variations in cost, negative and positive, in the period between annual rate adjustments, with respect to the items established in the electricity distribution concession agreements.
These variations are determined based on the difference between the expenses effectively incurred and the expenses estimated at the time the rate is established in the annual rate adjustment. The values considered in the CVA undergo monetary adjustment based on the SELIC rate.
The amounts recorded under current (assets and liabilities) relate to values already approved by ANEEL upon completion of the rate adjustment in 2015, and the totals recorded under noncurrent represent an estimate of the CVA to be approved at the next rate adjustment in 2016.
|
| 12/31/2016 |
| 12/31/2015 |
|
Parcel “A” |
|
|
|
|
|
CVA |
|
|
|
|
|
CCC |
| 1,219 |
| 1,219 |
|
CDE |
| 13,538 |
| 208,466 |
|
Base Network |
| 130 |
| 7,537 |
|
Cost of Acquisition of Electricity |
| 46,103 |
| 169,591 |
|
Itaipu Transport |
| (369 | ) | — |
|
PROINFA |
| 30,663 |
| (2,907 | ) |
ESS and EER |
| 30,273 |
| (55,683 | ) |
Neutrality of Sector Charges |
| 6,808 |
| (658 | ) |
Overcontracting |
| (48,684 | ) | (169,615 | ) |
Other financial components |
| (88,935 | ) | (71,848 | ) |
|
|
|
|
|
|
Total amounts from Parcel A and other financial items |
| (9,254 | ) | 86,102 |
|
|
|
|
|
|
|
Current assets |
| 436,596 |
| 578,654 |
|
Noncurrent assets |
| 22,131 |
| 38,252 |
|
|
|
|
|
|
|
Current liabilities |
| (461,180 | ) | (514,424 | ) |
Noncurrent liabilities |
| (6,801 | ) | (16,380 | ) |
|
|
|
|
|
|
Total |
| (9,254 | ) | 86,102 |
|
17.2.2 — Other financial items
· CUSD financial adjustment - in adherence with the provisions from Article 7 of the Joint Ministerial Directive No. 25/2002;
· Neutrality of Sector-specific Charges - this refers to calculation of the monthly differences between the values of each item from sector-specific charges in the period of reference and the respective amounts included in the previous process;
· Exposure to Price Differences between Sub-markets - this refers to the rating of financial risks resulting from price differences between sub-markets, pursuant to Article 28 of Decree No. 5,163/2004.
· Energy Overcontracting Transfer/Short-term Market Exposure - pursuant to REN No. 255/2007, as amended by REN No. 305/2008 and 609/2014, and in accordance with the criteria established in Dispatch No. 4,225/2013;
· Eletronuclear Differential - corresponds to the difference between the rate used and the rate of reference between Furnas and Eletronuclear, as established by Law No. 12,111/2009.
· Other - corresponds to the sum of all other values recorded by ANEEL as Financial Guarantees in regulated energy contracting (CCEAR), DIC/FIC compensation transfer, and others.
17.3 — Fee Adjustment
The concession agreements signed between the electricity distributors and the Federal Goverment, through ANEEL, establish that the price of energy paid by consumers will be adjusted annually. This adjustment, given the methodology established by ANEEL, can be positive or negative, and occurs annually on the anniversary date of the distributor.
According to the concession agreement, the concessionaire’s revenue is divided into two portions: A and B. Portion A, responsible for about 70% of the tariff value, lists the costs considered not manageable by the distributor, that is, costs that are not directly controlled by the Company, such as energy bought for resale to consumers and charges and taxes set by law.
Portion B, which represents about 30% of the tariff value, calculates the so-called manageable costs. These are the ones the concessionaire has full and direct capability of managing, such as personnel costs, material costs and other activities linked directly to the operation and maintenance of distribution services, depreciation costs and remuneration from investments made by the Company to fulfill the service.
17.4 — Tariff Flags
Starting in 2015, energy bills will operate under the Tariff Flags System. The green, yellow and red flags will indicate whether energy will cost more or less, depending on the conditions for generation of electricity.
Electricity in Brazil is generated predominantly by hydroelectric power plants. In order to work, these power plants depend on rains and on the level of water in reservoirs. When there is little water stored, thermoelectric power plants can be switched on in order to save water in the hyderoelectric power plant reservoirs. With this, the cost of generation increases, because these power plants are moved by fuel such as natural gas, charcoal, fuel oil and diesel. On the other hand, whent here is a lot of stored water, the thermal plants do not need to be switched on and the cost of generation is lower.
Ratifying Resolution no. 1,826, of November 25, 2014, published by ANEEL and which prices the Company’s tariffs, already established the pricing in the tariff structure. The application of these flags became mandatory starting in January of 2015.
These flags will be Green, Yellow or Red, and will apply depending on load service conditions, given by the sum of the Difference Settlement Price (PLD), Marginal Operating Cost (CMO), and the Energy Safety System Service Charges (ESS_SE).
The flags were adopted considering the following criteria: The green flag will apply when energy costs less than R$ 200/MWh*, meaning conditions favorable to the generation of energy, with no addition to the fee. The yellow flag when the cost of operating the system is between R$ 200/MWh* and R$ 350/MWh*: less favorable generation conditions, with an addition of R$ 2.00 to the fee per 100 kW/h* for consumers. The red flag will apply when the cost of operating is more than R$ 350/MWh*: more costly generation conditions with R$ 3.50 added to the fee per 100 kW/h* consumed.
In short, the flags system, which began in January 2015, reflects the generation conditions and indicates to consumers the option to reduce consumption and influence the final cost of power generation. The system does not represent a proper increase in the fee , this is just a different way to present a cost that would be included in the fee, although with no visibility to the consumer, and that would be equally supported at the time of annual fee adjustment.
In the period of January 1 of 2015 to February 29 of 2016, the red flag was applied due to costlier conditions. In March of this year, generation costs were more favorable, and the yellow flagwas applied. Since April of 2016, the green tariff flag has been applied, except in November, when the yellow flag was. The green flag results in no increases to the cost of consumers’ energy bills.
(*) Information not audited by the independent auditors.
NOTE 18 — INTANGIBLE ASSETS, NET
|
| BALANCE ON |
| ADDITIONS |
| WRITE-OFFS |
| COST/SERVICE |
| BALANCE ON |
|
Linked to Concession - Generation |
| 146,173 |
| (3,645 | ) | 592 |
| 8,757 |
| 151,877 |
|
In service |
| 90,720 |
| (47,022 | ) | 592 |
| 67,147 |
| 111,437 |
|
Intangible Assets |
| 188,433 |
| 11,604 |
| — |
| 63,682 |
| 263,719 |
|
Accumulated Amortization |
| (97,287 | ) | (18,178 | ) | — |
| 3,465 |
| (112,000 | ) |
Special Obligations |
| (298 | ) | — |
| 592 |
| — |
| 294 |
|
Impairment |
| (128 | ) | (40,448 | ) | — |
| — |
| (40,576 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
Underway |
| 55,453 |
| 43,377 |
| — |
| (58,390 | ) | 40,440 |
|
Intangible Assets |
| 69,602 |
| 43,377 |
| (64 | ) | (44,342 | ) | 68,573 |
|
Special Obligations |
| (8,959 | ) | — |
| 64 |
| — |
| (8,895 | ) |
Impairment |
| (5,190 | ) | — |
| — |
| (14,048 | ) | (19,238 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
Linked to Concession - Distribution |
| 248,518 |
| (439,561 | ) | 64,240 |
| 233,052 |
| 106,249 |
|
In service |
| 136,482 |
| (454,961 | ) | 61,477 |
| 269,334 |
| 12,332 |
|
Intangible Assets |
| 1,859,648 |
| 19,951 |
| (23,186 | ) | 316,641 |
| 2,173,054 |
|
Accumulated Amortization |
| (1,660,646 | ) | (232,167 | ) | 4,846 |
| (1,492 | ) | (1,889,459 | ) |
Special Obligations |
| (62,520 | ) | (5,689 | ) | 79,817 |
| (45,815 | ) | (34,207 | ) |
Impairment |
| — |
| (237,056 | ) | — |
| — |
| (237,056 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
Underway |
| 112,036 |
| 15,400 |
| 2,763 |
| (36,282 | ) | 93,917 |
|
Intangible Assets |
| 131,709 |
| 18,122 |
| 2,124 |
| (39,057 | ) | 112,898 |
|
Special Obligations |
| (19,673 | ) | (2,722 | ) | 639 |
| 2,775 |
| (18,981 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
Linked to Concession - Transmission |
| 88,392 |
| (3,010 | ) | — |
| (1,545 | ) | 83,837 |
|
In service |
| 87,091 |
| (3,010 | ) | — |
| (1,545 | ) | 82,536 |
|
Intangible Assets |
| 91,151 |
| 500 |
| — |
| (4,107 | ) | 87,544 |
|
Accumulated Amortization |
| (4,060 | ) | (3,510 | ) | — |
| 2,562 |
| (5,008 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
Underway |
| 1,301 |
| — |
| — |
| — |
| 1,301 |
|
Intangible Assets |
| 1,301 |
| — |
| — |
| — |
| 1,301 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Not Linked to Concession (Other Intangible Assets) |
| 452,068 |
| 6,132 |
| 1,852 |
| (40,276 | ) | 419,776 |
|
Administration |
|
|
|
|
|
|
|
|
|
|
|
In service |
| 831,315 |
| 22,682 |
| — |
| (3,489 | ) | 850,508 |
|
Accumulated Amortization |
| (478,484 | ) | (52,861 | ) | — |
| (9,514 | ) | (540,859 | ) |
Impairment |
| (40,743 | ) | — |
| 1,852 |
| — |
| (38,891 | ) |
Underway |
| 160,150 |
| 36,311 |
| — |
| (27,273 | ) | 169,188 |
|
Other |
| (20,170 | ) | — |
| — |
| — |
| (20,170 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
| 935,151 |
| (440,084 | ) | 66,684 |
| 199,988 |
| 761,739 |
|
|
| BALANCE ON |
| ADDITIONS |
| WRITE-OFFS |
| COST/SERVICE |
| RECLASSIFICATION |
| BALANCE ON |
|
Linked to Concession - Generation |
| 500,285 |
| 37,336 |
| (8,826 | ) | (7,335 | ) | (375,287 | ) | 146,173 |
|
In service |
| 424,526 |
| (5,897 | ) | (8,826 | ) | 7,022 |
| (326,105 | ) | 90,720 |
|
Intangible Assets |
| 902,720 |
| 9,507 |
| (15,506 | ) | 7,022 |
| (715,310 | ) | 188,433 |
|
Accumulated Amortization |
| (434,599 | ) | (15,340 | ) | — |
| — |
| 352,652 |
| (97,287 | ) |
Special Obligations |
| (15,033 | ) | — |
| 6,744 |
| — |
| 7,991 |
| (298 | ) |
Impairment |
| (28,562 | ) | (64 | ) | (64 | ) | — |
| 28,562 |
| (128 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underway |
| 75,759 |
| 43,233 |
| — |
| (14,357 | ) | (49,182 | ) | 55,453 |
|
Intangible Assets |
| 96,261 |
| 43,304 |
| — |
| (14,357 | ) | (55,606 | ) | 69,602 |
|
Special Obligations |
| (14,695 | ) | (71 | ) | — |
| — |
| 5,807 |
| (8,959 | ) |
Impairment |
| (5,807 | ) | — |
| — |
| — |
| 617 |
| (5,190 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Linked to Concession - Distribution |
| 357,791 |
| (93,029 | ) | (7,459 | ) | (8,785 | ) | — |
| 248,518 |
|
In service |
| 210,979 |
| (122,113 | ) | (8,683 | ) | 56,299 |
| — |
| 136,482 |
|
Intangible Assets |
| 1,764,919 |
| 150,278 |
| (144,414 | ) | 88,865 |
| — |
| 1,859,648 |
|
Accumulated Amortization |
| (1,469,338 | ) | (246,100 | ) | 54,792 |
| — |
| — |
| (1,660,646 | ) |
Special Obligations |
| (83,592 | ) | (26,291 | ) | 80,939 |
| (33,576 | ) | — |
| (62,520 | ) |
Impairment |
| (1,010 | ) | — |
| — |
| 1,010 |
| — |
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underway |
| 146,812 |
| 29,084 |
| 1,224 |
| (65,084 | ) | — |
| 112,036 |
|
Intangible Assets |
| 165,156 |
| 32,425 |
| 452 |
| (66,324 | ) | — |
| 131,709 |
|
Special Obligations |
| (19,354 | ) | (3,341 | ) | 772 |
| 2,250 |
| — |
| (19,673 | ) |
Impairment |
| 1,010 |
| — |
| — |
| (1,010 | ) | — |
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Linked to Concession - Transmission |
| 4,558 |
| 83,735 |
| — |
| 99 |
| — |
| 88,392 |
|
In service |
| 3,233 |
| 83,734 |
| — |
| 124 |
| — |
| 87,091 |
|
Intangible Assets |
| 3,565 |
| 87,462 |
| — |
| 124 |
| — |
| 91,151 |
|
Accumulated Amortization |
| (332 | ) | (3,728 | ) | — |
| — |
| — |
| (4,060 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underway |
| 1,325 |
| 1 |
| — |
| (25 | ) | — |
| 1,301 |
|
Intangible Assets |
| 1,325 |
| 1 |
| — |
| (25 | ) | — |
| 1,301 |
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Not Linked to Concession (Other Intangible Assets) |
| 502,737 |
| 5,036 |
| (16,692 | ) | (39,013 | ) | — |
| 452,068 |
|
Administration |
|
|
|
|
|
|
|
|
|
|
|
|
|
In service |
| 765,557 |
| 1,605 |
| (2,698 | ) | 66,851 |
| — |
| 831,315 |
|
Accumulated Amortization |
| (420,336 | ) | (56,295 | ) | 146 |
| (1,999 | ) | — |
| (478,484 | ) |
Impairment |
| (42,595 | ) | — |
| 1,852 |
| — |
| — |
| (40,743 | ) |
Underway |
| 141,483 |
| 59,726 |
| (6,278 | ) | (34,781 | ) | — |
| 160,150 |
|
Other |
| 58,628 |
| — |
| (9,714 | ) | (69,084 | ) | — |
| (20,170 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
| 1,365,371 |
| 33,078 |
| (32,977 | ) | (55,034 | ) | (375,287 | ) | 935,151 |
|
|
| Balance on |
| ADDITIONS |
| DEDUCTIONS |
| RECLASSIFICATION |
| Balance on |
|
Related to Concession - Generation |
| 172,777 |
| (52,569 | ) | 14,884 |
| — |
| 500,285 |
|
In service |
| 69,386 |
| (72,144 | ) | 16,652 |
| — |
| 424,526 |
|
Intangible asset |
| 503,573 |
| — |
| (5,193 | ) | — |
| 902,720 |
|
Accrued amortization |
| (405,854 | ) | (72,144 | ) | — |
| — |
| (434,599 | ) |
Special obligations |
| (28,333 | ) | — |
| — |
| — |
| (15,033 | ) |
Impairment |
| — |
| — |
| 21,845 |
| — |
| (28,562 | ) |
In Progress |
| 103,391 |
| 19,575 |
| (1,768 | ) | — |
| 75,759 |
|
Intangible asset |
| 118,086 |
| 19,575 |
| (1,768 | ) | — |
| 96,261 |
|
Special obligations |
| (14,695 | ) | — |
| — |
| — |
| (14,695 | ) |
Impairment |
| — |
| — |
| — |
| — |
| (5,807 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
Related to Concession - Distribution |
| 220,077 |
| (213,998 | ) | 65,730 |
| 103,160 |
| 357,791 |
|
|
|
|
|
|
|
|
|
|
|
|
|
In service |
| 90,884 |
| (237,636 | ) | (8,594 | ) | 91,659 |
| 210,979 |
|
Intangible asset |
| 1,478,117 |
| 1,729 |
| (54,245 | ) | 125,165 |
| 1,764,919 |
|
Accrued amortization |
| (1,061,958 | ) | (252,262 | ) | 7,260 |
| — |
| (1,469,338 | ) |
Special obligations |
| (280,405 | ) | — |
| 22,922 |
| (33,506 | ) | (83,592 | ) |
Onerous concession contract |
| — |
| — |
| — |
| — |
| — |
|
Impairment |
| (44,870 | ) | 12,897 |
| 15,469 |
| — |
| (1,010 | ) |
In Progress |
| 129,193 |
| 23,638 |
| 74,324 |
| 11,501 |
| 146,812 |
|
Intangible asset |
| 154,296 |
| 20,218 |
| 1,790 |
| 11,501 |
| 165,156 |
|
Special obligations |
| (22,693 | ) | — |
| (156 | ) | — |
| (19,354 | ) |
Impairment |
| (2,410 | ) | 3,420 |
| 72,690 |
| — |
| 1,010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Related to Concession - Transmission |
| 7,359 |
| (3,825 | ) | — |
| — |
| 4,558 |
|
|
|
|
|
|
|
|
|
|
|
|
|
In service |
| 2,252 |
| (32 | ) | — |
| — |
| 3,233 |
|
Intangible asset |
| 2,552 |
| — |
| — |
| — |
| 3,565 |
|
Accrued amortization |
| (300 | ) | (32 | ) | — |
| — |
| (332 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
In Progress |
| 5,107 |
| (3,793 | ) | — |
| — |
| 1,325 |
|
Intangible asset |
| 5,107 |
| (3,793 | ) | — |
| — |
| 1,325 |
|
|
|
|
|
|
|
|
|
|
| — |
|
Unrelated to Concession (Other intangible assets) |
| 388,369 |
| 116,461 |
| (1,871 | ) | — |
| 502,737 |
|
Management |
|
|
|
|
|
|
|
|
|
|
|
In service |
| 637,973 |
| 149 |
| — |
| — |
| 765,557 |
|
Accrued amortization |
| (342,318 | ) | (58,970 | ) | (2,005 | ) | — |
| (420,336 | ) |
Impairment |
| — |
| 2,733 |
| — |
| — |
| (42,595 | ) |
In Progress |
| 126,550 |
| 75,375 |
| 153 |
| — |
| 141,483 |
|
Others (1) |
| (33,836 | ) | 97,174 |
| (19 | ) | — |
| 58,628 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
| 788,582 |
| (153,931 | ) | 78,743 |
| 103,160 |
| 1,365,371 |
|
Intangible assets are primarily amortized during the concession period.
The final term of concession for Eletrobras distributors expired on July 7, 2015. As mentioned in Note 2, the distribution companies in Eletrobras re-split the installment of the financial asset in the appropriate proportion by December 31 of 2017, the deadline to remain responsible for operating and maintaining the public services of distributors.
NOTE 19 — IMPAIRMENT OF LONG-LIVED ASSETS
The Company estimated the recoverable value of its long-term assets based on the value in use, considering that there is no active market for the infrastructure related to the concession. The value in use is appraised based on the present value of the estimated future cash flow.
The assumptions used consider the Management’s best estimate of future trends in the electricity sector and are based both on external sources of information and historic data from cash generating units. The cash flow was projected based on the operating results and projections of the Company until the end of the concession. When the need was identified to reduce the recoverable value of long-term assets, this impairment chage is recognized in the period results, under Operating Charges/Recoveries, Net.
The following assumptions were considered:
· Growth compatible with historic data and growth perspectives on the Brazilian economy;
· Discount rate (after tax) specific for each segment: 6.33% for generation (except nuclear), 6.02% for transmission, and 6.01% for distribution (7.50% for generation, 7.00% for transmission, and 7.01% for distribution in 2015) obtained using the methodology generally applied by the market, taking into consideration the weighted average cost of capital;
· The Company treated all of its projects as independent cash-generating units.
In the first semester of 2016, the Company changed the expectation for its conclusion of the Angra 3 power plant, with a new planned date of beginning of entry into operations of December 2022. On December 2015, this projection was for December 2020. In the same period, the total budget for the venture was updated based on June of 2016, so as to reflect the impact of the sharp fluctuations in inflation and exchange rate indices, in addition to the rescheduling of activities due to the new work schedule.
The methodology applied in the impairment test of the power plant considers costs already realized by the date of these Financial Statements as recoverable assets, compared to a discounted cash flow extended until the end of the economic lifespan of the Power Plant, which is 40 years, starting from the new date of entry into operation, December of 2022, considering the economic lifespan to be the term of a license compatible with the Angra Power Plant in a similar project.
The discount rate was calculated by the WACC (Weighted Average Cost of Capital) method, considering traditional parameters usually used on the market.
Taking this new date for the commencement of operations into consideration, the Company revised the assumptions for the Angra 3 power plant and adjusted the recoverability test in June of 2016.
The main assumptions used in the recoverability test for this power plant are described below:
· Organic growth compatible with historic data and contractual tariff adjustments for inflation;
· Given the specific financing characteristics, the discount rate was calculated considering the specific capital structure of the project, which resulted in a discount rate for June 2016 and December 2016 of 5.47%. These calculations considered, in addition to the traditional parameters, the beta calculated by ANEEL, leveraging the capital structure of the project. Due to the lack of nuclear power assets in Brazil, ANEEL applied a beta based on American companies with at least two nuclear generation plants;
· The contractual fee for the Angra 3 power plant is R$ 148.65/MWh. For the impairment test, for the base date of June 30, 2016, the tariff used was adjusted by the contractually established indices, resulting in a value of R$ 234.18/MWh;
The basis used at the time to calculate that tariff had no equivalency to the service cost of the power plant, and was also not compatible with the average used in thermal power plant auctions at the time, and therefore is at a different and lower level than its follower, and does not provide an economic and financial balance to the venture;
· The Angra 2 and Angra 3 power plants originate from similar projects, and for this reason the parameter of costs for Angra 2 and Angra 3 were used. It so occurs that there will be a gain in costs/productivity when Angra 3 goes into operation, since not all cost generating activities will have to be duplicated, since common departments will work with both power plants;
The synergies found for this project, considering internal studies, based on the use of Company labor, pointed to a level of around 25.4%, a percentage that was used to estimate the PMSO operating cost of the Angra 3 power plant, in the impairment test.
Despite the changes to the project’s schedule, the Company has been assuring the preservation and integrity of the work already done, and will take measures to implement the actions on a performance level, aiming to recover the possible impacts on the schedule of works for the Angra 3 Power Plant.
The Company´s analysis was a negative Net Present Value (NPV) for the Angra 3 power plant of R$ 10,155,202. That amount resulted in a total negative entry in the 2016 results of R$ 4,091,748, with the counterpart of a recorded additional loss by impairment in the permanent asset of Angra 3 of R$ 2,414,479, and an additional provision for onerous contracts of R$ 1,677,269 (see Note 33). Of this amount, R$ 141,313 is estimated amount that was improperly paid to purchase assets found in the investigation conducted by the Company. (see Note 4.XI)
Since June 30, 2016, the date used to calculate the impairment of Angra 3, the Management found that the events that occurred did not result in representative changes to the assumptions used in the impairment test of the Angra 3 Power Plant on June of 2016. The main assumptions approved by the Management remained, such as the forecast for entry into operations and total budget for the project.
There were no material changes to the exchange rate partially linked to the project’s budget, and the 5.44% discount rate used by Eletrobras for Angra 3,does not affect the impairment test done in June of 2016.
The Company updated the calculation for the base date of December 31, 2016, considering the update of assumptions used on June 30 of 2016, resulting in an increase of R$ 471,460, totaling the sum of R$ 2,885,939 recognized in fiscal 2016.
The Company continues to monitor estimates and risks associated with the determination of the recoverable value from this project, and as new negotiations, studies or information are produced, the Company will updatethe business plan for the project, any accounting impact.
The accumulated value for the recoverable amount impairment for the Angra 3 Power Plant, on December 31, 2016, is R$ 8,949,393 (R$ 6,063,454 on December 31 of 2015).
On December 31, 2016, the accumulated value of the recoverable amount impairment for all of the Company’s projects is R$ 16,107,910 (R$ 10,568,996 on December 31 of 2015).
The analysis determined the need to recognize/ (reverse) an impairment for losses in the following ventures during 2016:
Generation
Cash-generating Unit |
| 12/31/2015 |
| Additions |
| Reversals |
| 12/31/2016 |
|
UTN Angra 3 |
| 5,922,141 |
| 3,027,252 |
| — |
| 8,949,393 |
|
UHE Samuel |
| 417,632 |
| 18,228 |
| — |
| 435,860 |
|
UHE Batalha |
| 559,345 |
| — |
| (151,642 | ) | 407,703 |
|
Candiota Fase B |
| 119,939 |
| 236,126 |
| — |
| 356,065 |
|
Casa Nova I |
| 163,496 |
| 161,373 |
| — |
| 324,869 |
|
UHE Simplício |
| 380,220 |
| — |
| (37,892 | ) | 342,328 |
|
UTE Camaçari |
| 343,765 |
| — |
| (39,854 | ) | 303,911 |
|
UHE Serra da Mesa |
| — |
| 199,184 |
| — |
| 199,184 |
|
Eólica Hermenegildo III |
| 75,598 |
| 69,721 |
| — |
| 145,319 |
|
Eólica Hermenegildo II |
| 65,815 |
| 77,214 |
| — |
| 143,029 |
|
UHE Passo São João |
| 118,132 |
| 12,160 |
| — |
| 130,292 |
|
Eólica Hermenegildo I |
| 56,301 |
| 73,468 |
| — |
| 129,769 |
|
UTE Coaracy Nunes |
| 77,551 |
| — |
| — |
| 77,551 |
|
PCH João Borges |
| 44,038 |
| 8,492 |
| — |
| 52,530 |
|
UHE São Domingos |
| 44,703 |
| — |
| (451 | ) | 44,252 |
|
PCH Rio Chapéu |
| 37,279 |
| 4,476 |
| — |
| 41,755 |
|
Eólica Chuí IX |
| 22,631 |
| 14,397 |
| — |
| 37,028 |
|
UTE Santana |
| 27,840 |
| — |
| — |
| 27,840 |
|
UTE Mauá III |
| 102,191 |
| — |
| (102,191 | ) | — |
|
Other |
| 81,717 |
| 130,247 |
| (159,826 | ) | 52,138 |
|
Total |
| 8,660,335 |
| 4,032,338 |
| (491,856 | ) | 12,200,816 |
|
Cash-generating Unit |
| 12/31/2014 |
| Additions |
| Reversals |
| 12/31/2015 |
|
UTN Angra 3 |
| 960,544 |
| 4,961,597 |
| — |
| 5,922,141 |
|
Candiota II Fase B |
| 35,412 |
| 84,527 |
| — |
| 119,939 |
|
Eólica Coxilha Seca |
| — |
| 81,142 |
| — |
| 81,142 |
|
UHE Samuel |
| 340,888 |
| 76,744 |
| — |
| 417,632 |
|
Eólica Hermenegildo III |
| — |
| 75,598 |
| — |
| 75,598 |
|
Eólica Hermenegildo II |
| — |
| 65,815 |
| — |
| 65,815 |
|
UHE Simplício |
| 440,276 |
| — |
| (60,056 | ) | 380,220 |
|
Eólica Hermenegildo I |
| — |
| 56,301 |
| — |
| 56,301 |
|
UTE Mauá |
| — |
| 102,191 |
| — |
| 102,191 |
|
UTE Aparecida |
| — |
| 50,508 |
| — |
| 50,508 |
|
UTE Camaçari |
| 365,709 |
| — |
| (21,944 | ) | 343,765 |
|
UTE Batalha |
| 553,622 |
| 5,723 |
| — |
| 559,345 |
|
UHE Passo São João |
| 151,311 |
| — |
| (33,179 | ) | 118,132 |
|
Casa Nova |
| 111,515 |
| 51,981 |
|
|
| 163,496 |
|
Others |
| 230,853 |
| — |
| (26,742 | ) | 204,111 |
|
Total |
| 3,190,130 |
| 5,612,127 |
| (141,921 | ) | 8,660,336 |
|
Transmission
Cash-generating Unit |
| 12/31/2015 |
| Additions |
| Reversals |
| 12/31/2016 |
|
CC 061-2001 |
| 174,389 |
| 1,902,617 |
| — |
| 2,077,006 |
|
LT Jauru Porto Velho |
| 126,025 |
| 185,520 |
| — |
| 311,545 |
|
CC 018-2012 Mossoró Ceará Mirim |
| 100,497 |
| — |
| — |
| 100,497 |
|
CC 005-2012 Jardim NSra Socorro |
| 89,830 |
| — |
| — |
| 89,830 |
|
CC 006-2009 Suape II and III |
| 88,101 |
| — |
| — |
| 88,101 |
|
CC 014-2008 Eunápolis TFreitas |
| 64,773 |
| 17,222 |
| — |
| 81,995 |
|
CC 020-2010 Igaporâ BJLapa |
| 69,268 |
| — |
| — |
| 69,268 |
|
LT Ribeiro Gonçalves - Balsas |
| 35,574 |
| 29,426 |
| — |
| 65,000 |
|
CC 017-2009 Natal III Sta Rita |
| 59,517 |
| — |
| — |
| 59,517 |
|
LT Funil-Itapebi |
| 54,597 |
| — |
| (1,056 | ) | 53,541 |
|
LT Camaçari IV - Sapeaçu |
| 39,552 |
| 10,554 |
| — |
| 50,106 |
|
CC 010-2011 Paraíso Lagoa Nova |
| 44,800 |
| — |
| — |
| 44,800 |
|
SE Coletora Porto Velho |
| 34,123 |
| 9,850 |
| — |
| 43,973 |
|
LT Recife II - Suape II |
| 28,325 |
| 14,828 |
| — |
| 43,153 |
|
CC 010-2007 Ibicoara Brumado |
| 40,611 |
| — |
| — |
| 40,611 |
|
CC 017-2012 Mirueira Jaboatão |
| 31,184 |
| — |
| — |
| 31,184 |
|
CC 018-2009 Eunáp TFreitas C2 |
| 30,232 |
| — |
| — |
| 30,232 |
|
SE Caxias / Ijuí / N. Petrópolis / Lajeado |
| 32,259 |
| — |
| (4,706 | ) | 27,553 |
|
CC 019-2012 Igaporã Pindaí |
| 21,506 |
| — |
| — |
| 21,506 |
|
LT Presidente Médice - Santa Cruz |
| 27,339 |
| — |
| (6,728 | ) | 20,611 |
|
CC 015-2012 Camaçari IV Pirajá |
| 18,060 |
| — |
| — |
| 18,060 |
|
LT Campos Novos - Nova Santa Rita |
| 30,822 |
| — |
| (13,975 | ) | 16,847 |
|
Other |
| 65,098 |
| 322,187 |
| (102,183 | ) | 285,102 |
|
|
| 1,306,482 |
| 2,492,204 |
| (128,648 | ) | 3,670,038 |
|
Cash-generating Unit |
| 12/31/2014 |
| Additions |
| Reversals |
| 12/31/2015 |
|
CC 061-2001 |
| — |
| 174,389 |
| — |
| 174,389 |
|
Correction/Inversion Station |
| 43,909 |
| — |
| (43,909 | ) | — |
|
CC 005-2012 Jardim NSra Socorro |
| 46,788 |
| 43,042 |
| — |
| 89,830 |
|
CC 018-2012 Mossoró Ceará Mirim |
| 61,681 |
| 38,816 |
| — |
| 100,497 |
|
CC 019-2012 Igaporã Pindaí |
| 59,678 |
| — |
| (38,172 | ) | 21,506 |
|
LT Ribeiro Gonçalves - Balsas |
| 73,317 |
| — |
| (37,743 | ) | 35,574 |
|
Linha Verde Transmissora de Energia S/A |
| 100,494 |
| — |
| (35,788 | ) | 64,706 |
|
SE Coletora Porto Velho |
| — |
| 34,123 |
| — |
| 34,123 |
|
CC 010-2011 Paraíso Lagoa Nova |
| 12,246 |
| 32,554 |
| — |
| 44,800 |
|
CC 020-2010 Igaporâ BJLapa |
| 37,669 |
| 31,599 |
| — |
| 69,268 |
|
CC 018-2009 Eunáp TFreitas C2 |
| 7,784 |
| 22,448 |
| — |
| 30,232 |
|
CC 015-2012 Camaçari IV Pirajá |
| — |
| 18,060 |
| — |
| 18,060 |
|
CC 006-2009 Suape II and III |
| 105,933 |
| — |
| (17,832 | ) | 88,101 |
|
CC 017-2012 Mirueira Jaboatão |
| 20,290 |
| 10,894 |
| — |
| 31,184 |
|
CC 014-2008 Eunápolis TFreitas |
| 53,962 |
| 10,811 |
| — |
| 64,773 |
|
CC 017-2009 Natal III Sta Rita |
| 48,837 |
| 10,680 |
| — |
| 59,517 |
|
LT Campos Novos - Nova Santa Rita |
| 22,089 |
| 8,733 |
| — |
| 30,822 |
|
SE Miranda II |
| — |
| 7,079 |
| — |
| 7,079 |
|
Other |
| 275,043 |
| 66,978 |
| — |
| 342,021 |
|
Total |
| 969,720 |
| 510,206 |
| (173,444 | ) | 1,306,482 |
|
Distribution
Concession |
| 12/31/2015 |
| Additions |
| Reversals |
| 12/31/2016 |
|
Amazonas D |
| — |
| 63,610 |
| — |
| 63,610 |
|
Cepisa |
| 290,247 |
| — |
| (199,362 | ) | 90,885 |
|
Eletroacre |
| 90,808 |
| — |
| (90,808 | ) | — |
|
Ceron |
| 59,885 |
| 35,245 |
| (59,883 | ) | 35,247 |
|
Ceal |
| — |
| 32,446 |
| — |
| 32,446 |
|
Boa Vista |
| 17,281 |
| — |
| (2,413 | ) | 14,868 |
|
Total |
| 458,221 |
| 131,301 |
| (352,466 | ) | 237,056 |
|
Concession |
| 12/31/2014 |
| Additions |
| Reversals |
| 12/31/2015 |
|
Amazonas D |
| 119,041 |
| — |
| (119,041 | ) | — |
|
Cepisa |
| 232,442 |
| 98,383 |
| (40,578 | ) | 290,247 |
|
Eletroacre |
| 60,026 |
| 54,924 |
| (24,142 | ) | 90,808 |
|
Ceron |
| 84,503 |
| 23,914 |
| (48,532 | ) | 59,885 |
|
Boa Vista |
| — |
| 77,400 |
| — |
| 77,400 |
|
Total |
| 496,012 |
| 254,621 |
| (232,293 | ) | 518,340 |
|
The impairment recognized in the balance sheet, by operating segment, is shown below:
|
| 12/31/2016 |
| ||||||
|
| Generation |
| Transmission |
| Distribution |
| Total |
|
Fixed Assets, Net |
| 12,141,003 |
| — |
| — |
| 12,141,003 |
|
Intangible assets, Net |
| 59,813 |
| — |
| 237,056 |
| 296,869 |
|
Financial Assets |
| — |
| 3,670,038 |
| — |
| 3,670,038 |
|
Total |
| 12,200,816 |
| 3,670,038 |
| 237,056 |
| 16,107,910 |
|
|
| 12/31/2015 |
| ||||||
|
| Generation |
| Transmission |
| Distribution |
| Total |
|
Fixed Assets, Net |
| 8,540,131 |
| — |
| — |
| 8,540,131 |
|
Intangible assets, Net |
| 120,205 |
| — |
| — |
| 120,205 |
|
Financial Assets |
| — |
| 1,306,482 |
| 518,340 |
| 1,824,822 |
|
Total |
| 8,660,336 |
| 1,306,482 |
| 518,340 |
| 10,485,158 |
|
NOTE 20 — SUPPLIERS
|
| 12/31/2016 |
| 12/31/2015 |
|
CURRENT |
|
|
|
|
|
Goods, materials, and services |
| 7,987,651 |
| 8,369,303 |
|
Energy purchased for resale |
| 1,482,755 |
| 1,514,499 |
|
CCEE - Short-term Energy |
| 188,895 |
| 244,705 |
|
|
| 9,659,301 |
| 10,128,507 |
|
|
|
|
|
|
|
NONCURRENT |
|
|
|
|
|
Goods, materials, and services |
| 8,200,930 |
| 7,782,562 |
|
Energy purchased for resale |
| 1,581,890 |
| 1,666,859 |
|
|
| 9,782,820 |
| 9,449,421 |
|
|
|
|
|
|
|
|
| 19,442,121 |
| 19,577,928 |
|
Liabilities with suppliers represent transactions with the supply of goods, materials and services. Current liabilities with suppliers mainly represents the current debt with BR Distribuidora S.A. in the sum of R$ 2,275,768 with Companhia de Gás do Amazonas — Cigás in the sum of R$ 3,484,755, for the supply of oil derivatives for the production of electricity.
The contract between Petrobrás and Cigás, with the intervenience and consent of Amazonas D, whose object is the sale by Petrobras, and the purchase by Cigás, for the purposes of thermoelectric generation or as an Independent Electrical Energy Produer (PIE), has a specific clause in which the credits that Cigás has with Amazonas D overdue for over forty five days and that were transferred to Petrobras are automatically assigned to the latter, regardless of any notification. As such, from the amount of R$ 3,484,755, R$ 2,063,073 are assigned to Petrobras.
In addition to the balances described above, liabilities with the suppliers of goods, materials and services, are recorded as two private Debt Acknowledgment instruments, as well as a respective payment plan signed with Petrobras Distribuidora S/A by the subsidiary Amazonas D, for the supply of petroleum derivatives, signed on December 31, 2014, in the amounts of i) 1st CCD in the amount of R$ 3,257,366, for which the balance owing is R$ 3,849,402; and ii) 2nd CCD in the amount of R$ 2,925,921, for which the balance owing is R$ 3,463,584. The instruments will be amortized in 120 monthly payments, on a daily prorated basis, from the date of signing of
the contract until the maturity date. The first payment was due on February 20, 2015, and the last on January 1, 2015. In addition to the contracts, the amount of R$ 1,018,441 corresponds to the 3rd CCD, which is still in the approvals phase, with a balance owing is R$ 1,205,588.
On December 31,2016, the Company recognized a right to reimbursement with Petrobras of R$ 2,364,318, for the price difference in the transportation portion for natural gas. For a futher discussion, see Note 11 a.1.
NOTE 21 — ADVANCES FROM CLIENTS
|
| 12/31/2016 |
| 12/31/2015 |
|
CURRENT |
|
|
|
|
|
Advance sale of energy — ALBRAS |
| 60,504 |
| 54,832 |
|
Customer advances - PROINFA |
| 560,277 |
| 593,404 |
|
|
| 620,781 |
| 648,236 |
|
NONCURRENT |
|
|
|
|
|
Advance sale of energy — ALBRAS |
| 592,215 |
| 659,082 |
|
|
| 592,215 |
| 659,082 |
|
|
|
|
|
|
|
TOTAL |
| 1,212,996 |
| 1,307,318 |
|
21.1 — ALBRAS
The subsidiary Eletronorte sold electricity to ALBRAS in 2004 for supply during a 20-year period, at an average 750 MW*/month, through December 2006, and an average 800 MW*/month from January 2007 to December 2024, using the UHE Tucuruí balance rate as a parameter, plus an added premium, calculated based on the price of aluminum on the London Metal Exchange (LME) in England. This price established became an embedded derivative (See Note 43).
Based on these conditions, ALBRAS made an advanced purchase of electricity credits, with advance payment of R$ 1,200,000, which was recorded as a credit, in MW, of an average 43 MW*/month from June 2004 to December 2006 and average 46 MW*/month from January 2007 to December 2024, to be amortized during the period of supply, in monthly portions expressed in those average MW, according to the rate in force in the billing month, as detailed below:
|
| Contract Date |
|
|
| ||
CUSTOMER |
| Initial |
| Final |
| Volume in Average Megawatts (MW) |
|
Albrás |
| 07/01/2004 |
| 12/31/2024 |
| 750 through 12/31/2006 and 800 beginning 01/01/2007 from 353.08 to 492 |
|
BHP |
| 07/01/2004 |
| 12/31/2024 |
|
|
The position and movement of this liability are demonstrated as follows:
Balance on |
| Amortization |
| Gains |
| Balance on |
| Current |
| Noncurrent |
|
713,914 |
| (66,867 | ) | 5,672 |
| 652,719 |
| 60,504 |
| 592,215 |
|
21.2 — PROINFA
PROINFA, established by Law 10,438/2002 as amended, diversifyies the Brazilian energy matrix with renewable energy sources, through economic leveraging of available resources and applicable technologies.
The Company ensures the purchase of the electricity produced for a 20-year period, beginning in 2006, and transfers this energy to the distribution concessionaires, free consumers, and independent producers, excluding low-income consumers, in the proportion of their consumption.
The distribution and transmission concessionaires pay the Company the value of energy in shares, equal to the cost corresponding to the interest held by captive consumers, free consumers, and independent producers connected to their installations, in twelfths, in the month prior to that of the energy consumption.
The operations relating to the purchase and sale of energy in the context of PROINFA do not affect the results of the Company.
(*) Information not audited by the independent auditors.
NOTE 22 — FINANCING AND LOANS
22.1 — Global Reversion Reserve (RGR)
The Company is authorized to withdraw amounts from the RGR, applying them to fund expansion of the Brazilian electric sector, the improvement of the electricity services and the futhering of Federal Government programs.
When, the Company withdraw amounts from the RGR, acknowledging a debt to the fund, it invests in specific projects, whose objective is:
a) expansion of electricity distribution services;
b) incentive for alternative sources of electric energy;
c) studies of inventory and feasibility of utilization of hydraulic potentials;
d) deployment of power generating plants up to 5,000 kW*, intended solely for public service in populated communities served by an isolated electrical system;
e) efficient public lighting;
f) electrical energy conservation by improving the quality of products and services;
g) universalization of access to electricity.
Eletrobras will pay back the resources withdrawn from the RGR and used in granting loans to companies whithin the Brazilian electric sector, with interest of 5% per annum.
In 2016, the balance of resources taken from the Fund totaled R$ 6,647,839 (R$ 6,439,374 on December 31, 2015), included under the item Financing and loans, liabilities.
The assets of the RGR Fund are not part of these statements, as it is a separate entity from the Company.
22.2 — Composition of loans and financing:
|
| 12/31/2016 |
| ||||||
|
| FEES |
| PRINCIPAL |
| ||||
|
| CURRENT |
|
|
| NON |
| ||
|
| Avg Rate |
| Value |
| CURRENT |
| CURRENT |
|
Financial Institutions |
|
|
|
|
|
|
|
|
|
Foreign Currency |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inter-American Development Bank (IBD) |
| 4.40 | % | 1,382 |
| 85,242 |
| 374,763 |
|
Corporación Andino de Fomento (CAF) |
| 2.31 | % | 4,607 |
| 469,378 |
| 360,566 |
|
Kreditanstalt fur Wiederaufbau (KFW) |
| 2.73 | % | 15 |
| 4,349 |
| 199,347 |
|
Eximbank |
| 2.00 | % | 433 |
| 61,287 |
| 30,633 |
|
BNP Paribas |
| 1.17 | % | 362 |
| 114,476 |
| 457,904 |
|
Other |
|
|
| 5,119 |
| 128,296 |
| 641,808 |
|
|
|
|
| 11,918 |
| 863,028 |
| 2,065,021 |
|
Bonus |
|
|
|
|
|
|
|
|
|
Expires 07/30/2019 |
| 6.87 | % | 109,546 |
| — |
| 3,259,100 |
|
Expires 10/27/2021 |
| 5.75 | % | 67,672 |
| — |
| 5,703,425 |
|
|
|
|
| 177,218 |
| — |
| 8,962,525 |
|
Other |
|
|
|
|
|
|
|
|
|
MORGAN |
|
|
| — |
| — |
| 10,846 |
|
LLOYDS |
|
|
| — |
| — |
| 1,299 |
|
|
|
|
| — |
| — |
| 12,145 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 189,136 |
| 863,028 |
| 11,039,691 |
|
Domestic Currency |
|
|
|
|
|
|
|
|
|
Global Reversal Reserve |
|
|
| — |
| — |
| 6,647,839 |
|
Banco do Brasil |
|
|
| 69,704 |
| 900,478 |
| 2,138,476 |
|
Federal Savings Bank |
|
|
| 112,956 |
| 1,088,475 |
| 9,230,810 |
|
BNDES |
|
|
| 595,993 |
| 1,160,612 |
| 8,890,627 |
|
Banco da Amazônia |
|
|
| 16,289 |
| 226,500 |
| 404,998 |
|
Promissory Notes |
|
|
| 35,310 |
| 250,000 |
| — |
|
Santander |
|
|
| — |
| 177,311 |
| 354,622 |
|
State Grid |
|
|
| — |
| — |
| 318,471 |
|
Other Financial Institutions |
|
|
| 22,119 |
| 125,636 |
| 761,347 |
|
|
|
|
| 852,371 |
| 3,929,012 |
| 28,747,190 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,041,507 |
| 4,792,040 |
| 39,786,881 |
|
|
| 12/31/2015 |
| ||||||
|
| FEES |
| PRINCIPAL |
| ||||
|
| CURRENT |
|
|
| NON |
| ||
|
| Avg Rate |
| Value |
| CURRENT |
| CURRENT |
|
Financial Institutions |
|
|
|
|
|
|
|
|
|
Foreign Currency |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inter-American Development Bank (IBD) |
| 4.40 | % | 2,197 |
| 102,130 |
| 551,140 |
|
Corporación Andino de Fomento (CAF) |
| 2.73 | % | 6,462 |
| 562,372 |
| 994,374 |
|
Kreditanstalt fur Wiederaufbau (KFW) |
| 2.73 | % | 19 |
| — |
| 251,801 |
|
Eximbank |
| 2.00 | % | 839 |
| 71,187 |
| 106,769 |
|
BNP Paribas |
| 1.57 | % | 396 |
| 136,192 |
| 685,780 |
|
Other |
|
|
| 4,243 |
| 126,161 |
| 757,302 |
|
|
|
|
| 14,156 |
| 998,042 |
| 3,347,166 |
|
Bonus |
|
|
|
|
|
|
|
|
|
Expires 07/30/2019 |
| 6.87 | % | 114,839 |
| — |
| 3,904,800 |
|
Expires 10/27/2021 |
| 5.75 | % | 70,944 |
| — |
| 6,833,400 |
|
|
|
|
| 185,783 |
| — |
| 10,738,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 199,939 |
| 998,042 |
| 14,085,366 |
|
|
|
|
|
|
|
|
|
|
|
Domestic Currency |
|
|
|
|
|
|
|
|
|
Global Reversal Reserve |
|
|
| — |
| — |
| 6,439,373 |
|
Banco do Brasil |
|
|
| 76,226 |
| 402,598 |
| 5,861,368 |
|
Federal Savings Bank |
|
|
| 97,404 |
| 196,538 |
| 6,759,638 |
|
BNDES |
|
|
| 564,986 |
| 1,230,372 |
| 7,332,179 |
|
Promissory Notes |
|
|
| 9,135 |
| 200,000 |
| — |
|
Other Financial Institutions |
|
|
| — |
| 249,208 |
| 1,695,888 |
|
|
|
|
| 747,751 |
| 2,278,716 |
| 28,088,446 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 947,690 |
| 3,276,758 |
| 42,173,812 |
|
Controller
Eletrobras signed a contract to open credit in the gross value of R$ 6,500,000 with Caixa Econômica Federal and Banco do Brasil, at a remuneration of 119.5% of the accumulated variation of the DI Rate, to meet its needs for working capital and its investment plan. Until December 31 of 2014, the Company funded its first two disbursement installments in a total value of R$ 4,500,000, with R$ 2,769,231 disbursed by Banco do Brasil, and R$ 1,730,769 by Caixa Econômica Federal. The first and second installments of the disbursement will have a grace period for payment of principal until August 24 of 2016 and November 25 of 2016, respectively. The third disbursement installment, withdrawn on January 30 of 2015, in the sum of R$ 2,000,000, with R$ 1,230,769 disbursed by Banco do Brasil, and R$ 769,231 by Caixa Econômica Federal, which had grace period for payment of the principal until February 25, 2016.
Subsidiary Eletrosul
On March 7 of 2016, the subsidiary Eletrosul issued a second round of commercial promissory notes, in a unique series, composed of 500 commercial promissory notes with a nominal value per unit of R$ 500,000, R$ 250,000 of which matured on March 2,2017, remunerated at 100% of the accumulated variation of average daily rates of DI + a spread of 3.5% p.a. On January 25, 2017, the Company liquidated 500 promissory notes from the second issuance, in the full value of R$ 289,751,000 (principal + remuneration).
Subsidiary Eletronuclear
On June 28 of 2013, contract no. 0410.351-27/2013 was signed between the subsidiary Eletronuclear and Caixa Econômica Federal (CEF) in the sum of R$ 3,800,000, for financing of some of the Angra 3 ventures. The term of the agreement is 25 years, starting from the date of its signing, with an interest rate of 6.5% p.a. On March 21 of 2016 a second request for disbursement was made to CEF, for R$ 478,000.
A decision by the board of the National Development Bank (BNDES), on July 12 of 2016, authorized renegotiation of the debt of contract no. 10.2.2032.1, signed between the BNDES and this subsidiary on February 23, 2011, suspending the beginning of payment of the principal on the debt and partially suspending the payment of interest determined monthly. In relation to debt charges, the payment of 70% of the interest was suspended from July 15, 2016 to February 15, 2017. During this period, 30% of the interest amount determined will be settled financially, and the remainder will be capitalized into the balance owing. Starting on March 15 of 2017, the subsidiary will have to apply the full value of charges determined monthly.
Subsidiary Furnas
During fiscal 2016, the first and fourth disbursements for the contract of Furnas were released by BNDES, totaling R$ 232,799; release of the sixty to 14th disbursements in the Loan Agreement with State Grid Brazil Holding totaling R$ 158,872; release of the financing for the subsidiary Furnas from Caixa Econômica Federal (FINISA) in the value of R$ 1,130,000; and the renegotiation of the installments for April, May, June and July of 2016 in principal and charges for loasn and financing from Eletrobras (ECF and ECR), in November of 2016, in the value of R$ 194,950.
Subsidiary Eletronorte
On January 12 of 2017, the Management of Eletronorte approved, on January 12 of 2017, a loan of R$ 500,000 from Caixa Econômica Federal through Bank Credit Note (CCB), with the approval of Eletrobras, to strengthen the cash flow of the subsidiary (see explanatory note 47). The credit line will be made available as funding is required.
22.3 — Composition of loans and financing (by currency and indexer):
The debts are guaranteed by the Federal Goverment and/or Eletrobras, and are subject to charges, whose average rate in 2016 is 9.65% p.a. (9.40% p.a. in 2015), and have the following profile:
|
| 12/31/2016 |
| 12/31/2015 |
| ||||
|
| Balance in thousands of |
| % |
| Balance in thousands |
| % |
|
Foreign currency |
|
|
|
|
|
|
|
|
|
USD, no index |
| 9,242,584 |
| 20 | % | 11,121,630 |
| 24 | % |
USD, LIBOR |
| 2,551,902 |
| 6 | % | 3,729,245 |
| 8 | % |
EURO |
| 203,712 |
| 0 | % | 251,820 |
| 1 | % |
IENE |
| 92,353 |
| — |
| 178,794 |
| — |
|
Other |
| 1,304 |
| — |
| 1,858 |
| — |
|
Subtotal |
| 12,091,855 |
| 27 | % | 15,283,347 |
| 33 | % |
|
|
|
|
|
|
|
|
|
|
Domestic currency |
|
|
|
|
|
|
|
|
|
CDI |
| 12,701,548 |
| 28 | % | 11,410,983 |
| 25 | % |
IPCA |
| 531,933 |
| — |
| 532,754 |
| 1 | % |
TJLP |
| 10,063,827 |
| 22 | % | 6,594,316 |
| 14 | % |
SELIC |
| 1,675,353 |
| 4 | % | 2,636,254 |
| 6 | % |
Other |
| 1,359,417 |
| 3 | % | 3,287,732 |
| 7 | % |
Subtotal |
| 26,332,078 |
| 58 | % | 24,462,039 |
| 53 | % |
|
|
|
|
|
|
|
|
|
|
No index |
| 7,196,495 |
| 16 | % | 6,652,874 |
| 14 | % |
|
|
|
|
|
|
|
|
|
|
Total |
| 45,620,428 |
| 100 | % | 46,398,260 |
| 100 | % |
The long-term portion of loans and financing have their maturity scheduled as follows:
2018 |
| 2019 |
| 2020 |
| 2021 |
| 2022 |
| After 2022 |
| Total |
|
6,439,604 |
| 7,745,876 |
| 3,697,570 |
| 8,849,279 |
| 7,481,779 |
| 5,572,772 |
| 39,786,881 |
|
22.4 — Commercial financial leasing operation:
The nominal value used in the calculation of assets and liabilities arising from these contracts was determined by reference to the value set for contracting monthly power, multiplied by the installed capacity (60 to 65 MW*) and by the number of months of the contract validity.
The reconciliation of the total of future minimum payments on financial leases of the Company and its present value is shown in the table below:
|
| 12/31/2016 |
| 12/31/2015 |
|
|
|
|
|
|
|
Less than one year |
| 212,698 |
| 209,226 |
|
More than one and less than five years |
| 836,902 |
| 836,902 |
|
More than five years |
| 714,854 |
| 924,081 |
|
Charges for future financing on financial leases |
| (594,950 | ) | (718,054 | ) |
Total minimum payments for financial leases |
| 1,169,504 |
| 1,252,155 |
|
|
|
|
|
|
|
Less than one year |
| 136,662 |
| 132,972 |
|
More than one and less than five years |
| 558,094 |
| 431,363 |
|
More than five years |
| 474,748 |
| 687,820 |
|
Present value of payments |
| 1,169,504 |
| 1,252,155 |
|
22.5 — GUARANTEES
The Company participates in the capacity of an intervening guarantor for several companies whose secured amounts, projections and amounts already paid are shown in the following tables:
Company |
| Project |
| Financing Bank |
| Modality |
| Company |
| Value of |
| Balance |
| Balance |
| End of |
|
Eletrobras |
| Norte Energia |
| BNDES |
| SPE |
| 15.00 | % | 2,025,000 |
| 2,275,156 |
| 22,752 |
| 1/15/2042 |
|
Eletrobras |
| Norte Energia |
| CEF |
| SPE |
| 15.00 | % | 1,050,000 |
| 1,218,880 |
| 12,189 |
| 1/15/2042 |
|
Eletrobras |
| Norte Energia |
| BTG Pactual |
| SPE |
| 15.00 | % | 300,000 |
| 348,251 |
| 3,483 |
| 1/15/2042 |
|
Eletrobras |
| Norte Energia |
| Contract Performance Bond |
| SPE |
| 15.00 | % | 39,225 |
| 39,225 |
| 392 |
| 4/30/2019 |
|
Eletrobras |
| Rouar |
| CAF |
| SPE |
| 50.00 | % | 31,833 |
| 31,833 |
| 318 |
| 9/30/2017 |
|
Eletrobras |
| Mangue Seco II |
| BNB |
| SPE |
| 49.00 | % | 40,951 |
| 36,132 |
| 361 |
| 10/14/2031 |
|
Eletrosul |
| ESBR |
| BNDES |
| SPE |
| 20.00 | % | 727,000 |
| 874,307 |
| 8,743 |
| 8/15/2034 |
|
Eletrosul |
| ESBR |
| BNDES |
| SPE |
| 20.00 | % | 232,500 |
| 244,931 |
| 2,449 |
| 1/15/2035 |
|
Eletrosul |
| ESBR |
| BNDES REPASSE |
| SPE |
| 20.00 | % | 717,000 |
| 890,130 |
| 8,901 |
| 8/15/2034 |
|
Eletrosul |
| ESBR |
| BNDES REPASSE |
| SPE |
| 20.00 | % | 232,500 |
| 239,625 |
| 2,396 |
| 1/15/2035 |
|
Eletrosul |
| Cerro Chato I, II and III |
| Banco do Brasil |
| Corporate |
| 100.00 | % | 223,419 |
| 100,313 |
| 1,003 |
| 7/15/2020 |
|
Eletrosul |
| RS Energia |
| BNDES |
| Corporate |
| 100.00 | % | 126,221 |
| 54,213 |
| 542 |
| 6/15/2021 |
|
Eletrosul |
| Artemis Transmissora de Energia |
| BNDES |
| Corporate |
| 100.00 | % | 170,029 |
| 27,544 |
| 275 |
| 10/15/2018 |
|
Eletrosul |
| UHE Mauá |
| BNDES |
| Corporate |
| 100.00 | % | 182,417 |
| 138,514 |
| 1,385 |
| 1/15/2028 |
|
Eletrosul |
| UHE Mauá |
| BNDES/Banco do Brasil |
| Corporate |
| 100.00 | % | 182,417 |
| 138,534 |
| 1,385 |
| 1/15/2028 |
|
Eletrosul |
| UHE Passo de São João |
| BNDES |
| Corporate |
| 100.00 | % | 183,330 |
| 127,838 |
| 1,278 |
| 7/15/2026 |
|
Eletrosul |
| SC Energia |
| BNDES/Banco do Brasil |
| Corporate |
| 100.00 | % | 50,000 |
| 11,741 |
| 117 |
| 5/15/2019 |
|
Eletrosul |
| SC Energia |
| BNDES/BDRE |
| Corporate |
| 100.00 | % | 50,000 |
| 11,711 |
| 117 |
| 5/15/2019 |
|
Eletrosul |
| SC Energia |
| BNDES |
| Corporate |
| 100.00 | % | 103,180 |
| 23,551 |
| 236 |
| 5/15/2019 |
|
Eletrosul |
| SC Energia |
| BNDES |
| Corporate |
| 100.00 | % | 67,017 |
| 24,590 |
| 246 |
| 3/15/2021 |
|
Eletrosul |
| UHE São Domingos |
| BNDES |
| Corporate |
| 100.00 | % | 207,000 |
| 173,333 |
| 1,733 |
| 6/15/2028 |
|
Eletrosul |
| RS Energia |
| BNDES |
| Corporate |
| 100.00 | % | 41,898 |
| 31,327 |
| 313 |
| 3/15/2027 |
|
Eletrosul |
| RS Energia |
| BNDES |
| Corporate |
| 100.00 | % | 9,413 |
| 7,670 |
| 77 |
| 8/15/2027 |
|
Eletrosul |
| RS Energia |
| BNDES |
| Corporate |
| 100.00 | % | 12,000 |
| 7,941 |
| 79 |
| 8/15/2027 |
|
Eletrosul |
| UHE Passo de São João |
| BNDES |
| Corporate |
| 100.00 | % | 14,750 |
| 10,565 |
| 106 |
| 7/15/2026 |
|
Eletrosul |
| Eletrosul Corporate Projects |
| Banco do Brasil |
| Corporate |
| 100.00 | % | 250,000 |
| 195,696 |
| 1,957 |
| 11/15/2023 |
|
Eletrosul |
| Teles Pires |
| BNDES |
| SPE |
| 24.50 | % | 296,940 |
| 336,361 |
| 3,364 |
| 2/15/2036 |
|
Eletrosul |
| Teles Pires |
| BNDES/Banco do Brasil |
| SPE |
| 24.50 | % | 294,000 |
| 333,196 |
| 3,332 |
| 2/15/2036 |
|
Eletrosul |
| Teles Pires |
| Issuance of Debentures |
| SPE |
| 24.50 | % | 160,680 |
| 170,199 |
| 1,702 |
| 5/30/2032 |
|
Eletrosul |
| Livramento Holding |
| BNDES |
| SPE |
| 49.00 | % | 91,943 |
| 22,206 |
| 222 |
| 6/15/2030 |
|
Eletrosul |
| Chuí Holding |
| BNDES |
| SPE |
| 49.00 | % | 186,082 |
| 179,100 |
| 1,791 |
| 12/15/2031 |
|
Eletrosul |
| Transmissora Sul Brasileira de Energia S.A. |
| BNDES |
| SPE |
| 80.00 | % | 209,974 |
| 180,788 |
| 1,808 |
| 7/15/2028 |
|
Eletrosul |
| Transmissora Sul Brasileira de Energia S.A. |
| Issuance of Debentures |
| SPE |
| 80.00 | % | 62,040 |
| 88,054 |
| 881 |
| 9/15/2026 |
|
Eletrosul |
| Costa Oeste Transmissora de Energia S.A. |
| BNDES |
| SPE |
| 49.00 | % | 17,846 |
| 14,962 |
| 150 |
| 11/1/2022 |
|
Eletrosul |
| Santa Vitória do Palmar Holding S.A. |
| BNDES |
| SPE |
| 49.00 | % | 197,950 |
| 215,684 |
| 2,157 |
| 6/16/2031 |
|
Eletrosul |
| Santa Vitória do Palmar Holding S.A. |
| BRDE |
| SPE |
| 49.00 | % | 98,000 |
| 108,290 |
| 1,083 |
| 6/16/2031 |
|
Eletrosul |
| Santa Vitória do Palmar Holding S.A. |
| Issuance of Debentures |
| SPE |
| 49.00 | % | 44,100 |
| 55,678 |
| 557 |
| 6/15/2028 |
|
Eletrosul |
| Transmissora Sul Litorânea do Brasil |
| BNDES |
| SPE |
| 51.00 | % | 252,108 |
| 231,974 |
| 2,320 |
| 2/15/2029 |
|
Eletrosul |
| Complexo São Bernardo |
| KfW |
| Corporate |
| 100.00 | % | 29,854 |
| 45,709 |
| 457 |
| 12/30/2038 |
|
Eletrosul |
| Complexo São Bernardo |
| KfW |
| Corporate |
| 100.00 | % | 136,064 |
| 157,988 |
| 1,580 |
| 12/30/2042 |
|
Eletrosul |
| Complexo Eólico Livramento - Entorno II |
| CEF |
| Corporate |
| 100.00 | % | 200,000 |
| 212,844 |
| 2,128 |
| 8/7/2017 |
|
Eletrosul |
| Eletrosul 2 Corporate Projects |
| BTG Pactual |
| Corporate |
| 100.00 | % | 250,000 |
| 285,310 |
| 2,853 |
| 3/2/2017 |
|
Eletrosul |
| Eólica Hermenegildo I S/A |
| BNDES |
| SPE |
| 99.99 | % | 109,566 |
| 109,042 |
| 1,090 |
| 6/15/2032 |
|
Eletrosul |
| Eólica Hermenegildo I S/A |
| BRDE |
| SPE |
| 99.99 | % | 47,764 |
| 49,474 |
| 495 |
| 6/15/2032 |
|
Eletrosul |
| Eólica Hermenegildo II S/A |
| BNDES |
| SPE |
| 99.99 | % | 109,590 |
| 109,080 |
| 1,091 |
| 6/15/2032 |
|
Eletrosul |
| Eólica Hermenegildo II S/A |
| BRDE |
| SPE |
| 99.99 | % | 47,775 |
| 47,854 |
| 479 |
| 6/15/2032 |
|
Eletrosul |
| Eólica Hermenegildo III S/A |
| BNDES |
| SPE |
| 99.99 | % | 93,367 |
| 92,933 |
| 929 |
| 6/15/2032 |
|
Eletrosul |
| Eólica Hermenegildo III S/A |
| BRDE |
| SPE |
| 99.99 | % | 40,703 |
| 40,771 |
| 408 |
| 6/15/2032 |
|
Eletrosul |
| Eólica Chuí IX S/A |
| BNDES |
| SPE |
| 99.99 | % | 31,561 |
| 31,414 |
| 314 |
| 6/15/2032 |
|
Eletrosul |
| Eólica Chuí IX S/A |
| BRDE |
| SPE |
| 99.99 | % | 13,758 |
| 13,781 |
| 138 |
| 6/15/2032 |
|
Eletronorte |
| São Luis II and III |
| BNDES |
| Corporate |
| 100.00 | % | 13,653 |
| 7,859 |
| 79 |
| 11/15/2024 |
|
Eletronorte |
| Miranda II |
| BNDES |
| Corporate |
| 100.00 | % | 47,531 |
| 20,069 |
| 201 |
| 11/15/2024 |
|
Eletronorte |
| Ribeiro Gonç./Balsas |
| BNB |
| Corporate |
| 100.00 | % | 70,000 |
| 57,300 |
| 573 |
| 6/3/2031 |
|
Eletronorte |
| Lechuga/J. Teixeira |
| BASA |
| Corporate |
| 100.00 | % | 25,720 |
| 19,860 |
| 199 |
| 1/10/2029 |
|
Eletronorte |
| Nobres Substation |
| BNDES |
| Corporate |
| 100.00 | % | 10,000 |
| 6,567 |
| 66 |
| 3/15/2028 |
|
Eletronorte |
| Miramar/Tucuruí Substation |
| BNDES |
| Corporate |
| 100.00 | % | 31,000 |
| 21,539 |
| 215 |
| 8/15/2028 |
|
Eletronorte |
| Expansion of Lechuga Substation |
| BNDES |
| Corporate |
| 100.00 | % | 35,011 |
| 24,878 |
| 249 |
| 10/15/2028 |
|
Eletronorte |
| Norte Brasil Transmissora |
| BNDES |
| SPE |
| 49.00 | % | 514,500 |
| 458,514 |
| 4,585 |
| 12/15/2029 |
|
Eletronorte |
| Norte Brasil Transmissora |
| Issuance of Debentures |
| SPE |
| 49.00 | % | 98,000 |
| 139,868 |
| 1,399 |
| 9/15/2026 |
|
Eletronorte |
| Linha Verde Transmissora |
| BASA |
| Corporate |
| 100.00 | % | 185,000 |
| 201,441 |
| 2,014 |
| 11/10/2032 |
|
Eletronorte |
| Manaus Transmissora |
| BNDES |
| SPE |
| 30.00 | % | 120,300 |
| 95,822 |
| 958 |
| 12/15/2026 |
|
Eletronorte |
| Energy Transmission Station |
| BNDES |
| Corporate |
| 100.00 | % | 505,477 |
| 390,994 |
| 3,910 |
| 11/15/2028 |
|
Eletronorte |
| Energy Transmission Station |
| BASA |
| Corporate |
| 100.00 | % | 221,789 |
| 201,375 |
| 2,014 |
| 10/15/2031 |
|
Eletronorte |
| Energy Transmission Station |
| BASA |
| Corporate |
| 100.00 | % | 221,789 |
| 214,959 |
| 2,150 |
| 7/10/2031 |
|
Eletronorte |
| Rio Branco Transmissora |
| BNDES |
| Corporate |
| 100.00 | % | 138,000 |
| 109,763 |
| 1,098 |
| 3/15/2027 |
|
Eletronorte |
| Transmissora Matogrossense Energia |
| BASA |
| SPE |
| 49.00 | % | 39,200 |
| 36,975 |
| 370 |
| 2/1/2029 |
|
Company |
| Project |
| Financing Bank |
| Modality |
| Company |
| Value of |
| Balance |
| Balance |
| End of |
|
Eletronorte |
| Transmissora Matogrossense Energia |
| BNDES |
| SPE |
| 49.00 | % | 42,777 |
| 29,411 |
| 294 |
| 5/15/2026 |
|
Eletronorte |
| Rei dos Ventos 1 Eolo |
| BNDES |
| SPE |
| 24.50 | % | 30,851 |
| 26,829 |
| 268 |
| 10/15/2029 |
|
Eletronorte |
| Brasventos Miassaba 3 |
| BNDES |
| SPE |
| 24.50 | % | 30,984 |
| 26,936 |
| 269 |
| 10/15/2029 |
|
Eletronorte |
| Rei dos Ventos 3 |
| BNDES |
| SPE |
| 24.50 | % | 32,533 |
| 28,276 |
| 283 |
| 10/15/2029 |
|
Eletronorte |
| Belo Monte Transmissora de Energia S.A. |
| Itau BBA |
| SPE |
| 24.50 | % | 49,735 |
| 49,854 |
| 499 |
| 4/26/2017 |
|
Eletronorte |
| Belo Monte Transmissora de Energia S.A. |
| Santander |
| SPE |
| 24.50 | % | 49,000 |
| 49,119 |
| 491 |
| 4/26/2017 |
|
Eletronorte |
| Belo Monte Transmissora de Energia S.A. |
| State Grid Brazil S.A. |
| Corporate |
| 100.00 | % | 294,700 |
| 318,795 |
| 3,188 |
| 7/28/2029 |
|
Eletronorte |
| Belo Monte Transmissora de Energia S.A. |
| ABC |
| SPE |
| 24.50 | % | 18,375 |
| 19,264 |
| 193 |
| 5/31/2017 |
|
Eletronorte |
| Belo Monte Transmissora de Energia S.A. |
| Bank of China |
| SPE |
| 24.50 | % | 6,125 |
| 6,310 |
| 63 |
| 4/30/2017 |
|
Eletronorte |
| Belo Monte Transmissora de Energia S.A. |
| PINE |
| SPE |
| 24.50 | % | 6,125 |
| 6,392 |
| 64 |
| 5/31/2017 |
|
Eletronorte |
| Belo Monte Transmissora de Energia S.A. |
| China Construction Bank |
| SPE |
| 24.50 | % | 93,100 |
| 96,894 |
| 969 |
| 3/31/2017 |
|
Eletronorte |
| Belo Monte Transmissora de Energia S.A. |
| ICBC |
| SPE |
| 24.50 | % | 9,800 |
| 9,849 |
| 98 |
| 6/30/2017 |
|
Eletronorte |
| Norte Energia |
| BNDES |
| SPE |
| 19.98 | % | 2,697,300 |
| 3,030,508 |
| 30,305 |
| 1/15/2042 |
|
Eletronorte |
| Norte Energia |
| CEF |
| SPE |
| 19.98 | % | 1,398,600 |
| 1,623,548 |
| 16,235 |
| 1/15/2042 |
|
Eletronorte |
| Norte Energia |
| BTG Pactual |
| SPE |
| 19.98 | % | 399,600 |
| 463,871 |
| 4,639 |
| 1/15/2042 |
|
Eletronorte |
| Implementation of PAR and PMIS |
| BNDES |
| Corporate |
| 100.00 | % | 361,575 |
| 322,784 |
| 3,228 |
| 12/15/2023 |
|
Eletronorte |
| Porto Velho Transmissora de Energia |
| BNDES |
| Corporate |
| 100.00 | % | 283,411 |
| 245,676 |
| 2,457 |
| 8/15/2028 |
|
Eletronorte |
| Reinforcement of Working Capital Structure |
| CEF |
| Corporate |
| 100.00 | % | 400,000 |
| 391,658 |
| 3,917 |
| 4/30/2019 |
|
Eletronorte |
| UHE Sinop |
| BNDES |
| SPE |
| 24.50 | % | 256,270 |
| 175,203 |
| 1,752 |
| 6/15/2038 |
|
Eletronuclear |
| Angra III |
| BNDES |
| Corporate |
| 100.00 | % | 6,146,256 |
| 3,480,338 |
| 34,803 |
| 6/15/2036 |
|
Chesf |
| ESBR |
| BNDES |
| SPE |
| 20.00 | % | 727,000 |
| 874,307 |
| 8,743 |
| 8/15/2034 |
|
Chesf |
| ESBR |
| BNDES |
| SPE |
| 20.00 | % | 232,500 |
| 244,931 |
| 2,449 |
| 1/15/2035 |
|
Chesf |
| ESBR |
| BNDES REPASSE |
| SPE |
| 20.00 | % | 717,000 |
| 890,130 |
| 8,901 |
| 8/15/2034 |
|
Chesf |
| ESBR |
| BNDES REPASSE |
| SPE |
| 20.00 | % | 232,500 |
| 239,625 |
| 2,396 |
| 1/15/2035 |
|
Chesf |
| Manaus Transmissora |
| BNDES |
| SPE |
| 19.50 | % | 78,195 |
| 62,284 |
| 623 |
| 12/15/2026 |
|
Chesf |
| Norte Energia |
| BNDES |
| SPE |
| 15.00 | % | 2,025,000 |
| 2,275,156 |
| 22,752 |
| 1/15/2042 |
|
Chesf |
| Norte Energia |
| CEF |
| SPE |
| 15.00 | % | 1,050,000 |
| 1,218,880 |
| 12,189 |
| 1/15/2042 |
|
Chesf |
| Norte Energia |
| BTG Pactual |
| SPE |
| 15.00 | % | 300,000 |
| 348,251 |
| 3,483 |
| 1/15/2042 |
|
Chesf |
| IE Madeira |
| BASA |
| SPE |
| 24.50 | % | 65,415 |
| 77,112 |
| 771 |
| 7/10/2032 |
|
Chesf |
| IE Madeira |
| BNDES |
| SPE |
| 24.50 | % | 455,504 |
| 376,324 |
| 3,763 |
| 2/15/2030 |
|
Chesf |
| IE Madeira |
| Issuance of Debentures |
| SPE |
| 24.50 | % | 85,750 |
| 122,200 |
| 1,222 |
| 3/18/2025 |
|
Chesf |
| Chesf 1 Corporate Projects |
| Banco do Brasil |
| Corporate |
| 100.00 | % | 500,000 |
| 256,404 |
| 2,564 |
| 9/28/2018 |
|
Chesf |
| Chesf 2 Corporate Projects |
| CEF |
| Corporate |
| 100.00 | % | 400,000 |
| 253,531 |
| 2,535 |
| 2/27/2019 |
|
Chesf |
| IE Garanhuns S/A |
| BNDES |
| SPE |
| 49.00 | % | 175,146 |
| 154,009 |
| 1,540 |
| 12/15/2028 |
|
Chesf |
| Chesf 3 Corporate Projects |
| BNDES |
| Corporate |
| 100.00 | % | 727,560 |
| 393,417 |
| 3,934 |
| 6/15/2029 |
|
Chesf |
| Chesf 4 Corporate Projects |
| BNDES |
| Corporate |
| 100.00 | % | 475,454 |
| 238,320 |
| 2,383 |
| 6/15/2029 |
|
Chesf |
| UHE Sinop |
| BNDES |
| SPE |
| 24.50 | % | 256,270 |
| 175,203 |
| 1,752 |
| 6/15/2038 |
|
Chesf |
| Chesf 5 Corporate Projects |
| CEF |
| Corporate |
| 100.00 | % | 200,000 |
| 202,616 |
| 2,026 |
| 9/6/2021 |
|
Furnas |
| UHE Batalha |
| BNDES |
| Corporate |
| 100.00 | % | 224,000 |
| 150,921 |
| 1,509 |
| 12/15/2025 |
|
Furnas |
| UHE Simplício |
| BNDES |
| Corporate |
| 100.00 | % | 1,034,410 |
| 647,658 |
| 6,477 |
| 7/15/2026 |
|
Furnas |
| UHE Baguari |
| BNDES |
| Corporate |
| 100.00 | % | 60,153 |
| 36,357 |
| 364 |
| 7/15/2026 |
|
Furnas |
| SUNDRY |
| Banco do Brasil |
| Corporate |
| 100.00 | % | 750,000 |
| 758,618 |
| 7,586 |
| 10/31/2018 |
|
Furnas |
| BASA 2008 Rollover |
| Banco do Brasil |
| Corporate |
| 100.00 | % | 208,312 |
| 220,535 |
| 2,205 |
| 2/7/2018 |
|
Furnas |
| Innovation Projects |
| FINEP |
| Corporate |
| 100.00 | % | 268,503 |
| 161,366 |
| 1,614 |
| 11/15/2023 |
|
Furnas |
| Corporate Financing |
| Banco do Brasil |
| Corporate |
| 100.00 | % | 400,000 |
| 379,973 |
| 3,800 |
| 12/6/2023 |
|
Furnas |
| UHE Santo Antônio |
| BNDES |
| SPE |
| 39.00 | % | 1,594,159 |
| 1,999,596 |
| 19,996 |
| 3/15/2034 |
|
Furnas |
| UHE Santo Antônio |
| BNDES |
| SPE |
| 39.00 | % | 1,574,659 |
| 2,064,091 |
| 20,641 |
| 3/15/2034 |
|
Furnas |
| UHE Santo Antônio |
| BASA |
| SPE |
| 39.00 | % | 196,334 |
| 238,746 |
| 2,387 |
| 12/15/2030 |
|
Furnas |
| UHE Santo Antônio |
| Issuance of Debentures |
| SPE |
| 39.00 | % | 163,800 |
| 218,533 |
| 2,185 |
| 1/24/2023 |
|
Furnas |
| UHE Santo Antônio |
| Issuance of Debentures |
| SPE |
| 39.00 | % | 273,000 |
| 242,225 |
| 2,422 |
| 3/1/2024 |
|
Furnas |
| UHE Foz do Chapecó |
| BNDES |
| SPE |
| 40.00 | % | 435,508 |
| 376,498 |
| 3,765 |
| 9/15/2027 |
|
Furnas |
| UHE Foz do Chapecó |
| BNDES |
| SPE |
| 40.00 | % | 217,754 |
| 190,533 |
| 1,905 |
| 9/15/2027 |
|
Furnas |
| UHE Foz do Chapecó |
| BNDES |
| SPE |
| 40.00 | % | 4,009 |
| 2,861 |
| 29 |
| 9/15/2027 |
|
Furnas |
| Centroeste de Minas |
| BNDES |
| SPE |
| 49.00 | % | 13,827 |
| 8,929 |
| 89 |
| 4/15/2023 |
|
Furnas |
| Rei dos Ventos 1 Eolo |
| BNDES |
| SPE |
| 24.50 | % | 30,851 |
| 26,829 |
| 268 |
| 10/15/2029 |
|
Furnas |
| Brasventos Miassaba 3 |
| BNDES |
| SPE |
| 24.50 | % | 30,984 |
| 26,936 |
| 269 |
| 10/15/2029 |
|
Furnas |
| Rei dos Ventos 3 |
| BNDES |
| SPE |
| 24.50 | % | 32,533 |
| 28,276 |
| 283 |
| 10/15/2029 |
|
Furnas |
| IE Madeira |
| BASA |
| SPE |
| 24.50 | % | 65,415 |
| 77,112 |
| 771 |
| 7/10/2032 |
|
Furnas |
| IE Madeira |
| BNDES |
| SPE |
| 24.50 | % | 455,504 |
| 376,324 |
| 3,763 |
| 2/15/2030 |
|
Furnas |
| IE Madeira |
| Issuance of Debentures |
| SPE |
| 24.50 | % | 85,750 |
| 122,200 |
| 1,222 |
| 3/18/2025 |
|
Furnas |
| Teles Pires |
| BNDES |
| SPE |
| 24.50 | % | 296,940 |
| 336,361 |
| 3,364 |
| 2/15/2036 |
|
Furnas |
| Teles Pires |
| BNDES/Banco do Brasil |
| SPE |
| 24.50 | % | 294,000 |
| 333,196 |
| 3,332 |
| 2/15/2036 |
|
Furnas |
| Teles Pires |
| Issuance of Debentures |
| SPE |
| 24.50 | % | 160,680 |
| 197,578 |
| 1,976 |
| 5/31/2032 |
|
Furnas |
| Caldas Novas Transmissão |
| BNDES |
| SPE |
| 49.90 | % | 2,418 |
| 1,759 |
| 18 |
| 5/15/2023 |
|
Furnas |
| Caldas Novas Transmissão |
| BNDES |
| SPE |
| 49.90 | % | 5,536 |
| 4,655 |
| 47 |
| 3/15/2028 |
|
Furnas |
| Belo Monte Transmissora de Energia S.A. |
| State Grid Brazil S.A. |
| Corporate |
| 100.00 | % | 294,700 |
| 318,471 |
| 3,185 |
| 7/28/2029 |
|
Furnas |
| Belo Monte Transmissora de Energia S.A. |
| ABC |
| SPE |
| 24.50 | % | 18,375 |
| 19,264 |
| 193 |
| 5/31/2017 |
|
Furnas |
| Belo Monte Transmissora de Energia S.A. |
| Bank of China |
| SPE |
| 24.50 | % | 6,125 |
| 6,310 |
| 63 |
| 4/30/2017 |
|
Furnas |
| Belo Monte Transmissora de Energia S.A. |
| PINE |
| SPE |
| 24.50 | % | 6,125 |
| 6,313 |
| 63 |
| 5/31/2017 |
|
Furnas |
| Belo Monte Transmissora de Energia S.A. |
| China Construction Bank |
| SPE |
| 24.50 | % | 93,100 |
| 96,894 |
| 969 |
| 3/31/2017 |
|
Furnas |
| Belo Monte Transmissora de |
| ICBC |
| SPE |
| 24.50 | % | 9,800 |
| 9,849 |
| 98 |
| 6/30/2017 |
|
Company |
| Project |
| Financing Bank |
| Modality |
| Company |
| Value of |
| Balance |
| Balance |
| End of |
|
|
| Energia S.A. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Furnas |
| Mata de Santa Genebra |
| Issuance of Debentures |
| SPE |
| 49.90 | % | 234,031 |
| 244,019 |
| 2,440 |
| 6/30/2017 |
|
Furnas |
| 2012-2014 Investment Plan |
| BNDES |
| Corporate |
| 100.00 | % | 441,296 |
| 224,125 |
| 2,241 |
| 6/15/2029 |
|
Furnas |
| Empresa de Energia São Manoel |
| BNDES |
| SPE |
| 33.33 | % | 437,996 |
| 345,656 |
| 3,457 |
| 12/12/2038 |
|
Furnas |
| Empresa de Energia São Manoel |
| Issuance of Debentures |
| SPE |
| 33.33 | % | 93,332 |
| 98,119 |
| 981 |
| 12/15/2018 |
|
Amazonas |
| Amazonas |
| Acknowledgement of Debt - Petrobras/BR |
| Corporate |
| 100.00 | % | 2,405,979 |
| 2,831,333 |
| 28,313 |
| 1/30/2025 |
|
Eletroacre |
| Eletroacre |
| Acknowledgement of Debt - Petrobras/BR |
| Corporate |
| 100.00 | % | 91,774 |
| 82,979 |
| 830 |
| 1/30/2025 |
|
Boa Vista |
| Boa Vista |
| Acknowledgement of Debt - Petrobras/BR |
| Corporate |
| 100.00 | % | 19,320 |
| 16,101 |
| 161 |
| 12/31/2024 |
|
Cepisa |
| Corporate Project |
| CEF |
| Corporate |
| 100.00 | % | 94,906 |
| 50,749 |
| 507 |
| 8/30/2026 |
|
Ceal |
| Ceal Corporate Project |
| Banco IBM S/A |
| Corporate |
| 100.00 | % | 10,736 |
| 6,742 |
| 67 |
| 12/31/2019 |
|
Total |
|
|
|
|
|
|
|
|
| 47,014,782 |
| 44,813,837 |
| 448,138 |
|
|
|
The company included in the item other liabilities, under noncurrent liabilities, the fair value of sums guaranteed by the Company on resources already released by the financing banks. The provision is based on the fair value of Eletrobras’ guarantee, as shown below:
|
| Provisioned Value: |
|
Guarantee owed on 12/31/2013 |
| 272,795 |
|
Period changes |
| 115,165 |
|
Guarantee owed on 12/31/2014 |
| 387,960 |
|
Period changes |
| 30,266 |
|
Guarantee owed on 12/31/2015 |
| 418,226 |
|
Period changes |
| 29,912 |
|
Guarantee owed on 12/31/2016 |
| 448,138 |
|
a) UHE Simplício - project of the subsidiary Furnas, with an installed generating capacity of 333.7 MW*. The project has 100% Furnas participation. Therefore, the guarantee of the Company is 100% of the financing.
b) UHE Jirau - SPE Energia Sustentável do Brasil, formed by the subsidiaries Eletrosul, CHESF and GDF Suez Energy, with installed capacity of 3,750 MW*. For the project two loans were taken out with BNDES, one direct and the other indirect, via intermediary banks, to be paid in 240 months. The company is guaranteeing the participation of each of its subsidiaries-Eletrosul (20%) and CHESF (20%).
c) UHE Santo Antônio - SPE Santo Antônio Energia, formed by Furnas, CEMIG, Fundo de Investimentos em Participação Amazônica Energia — FIP, Construtora Norberto Odebrecht S/A, Odebrecht Investimentos em Infraestrutura Ltda. and Andrade Gutierrez Participações S/A, with an installed capacity of 3,568 MW*. The Company is a consenting intervening party in financing with the BNDES and with the Banco da Amazônia, with its intervention limited to the participation of Furnas (39%).
d) UHE Foz do Chapecó - SPE Foz do Chapecó Energia, whose power plant has an installed capacity of 855 MW*, has the Company as guarantor of the contractual instruments with the BNDES, totaling, in substitution of Bank Financing previously contracted, limited to the percentage of Furnas in SPC (40%).
e) Norte Brasil Transmissora de Energia -SPC, with participation of Eletronorte (24.5%) and Eletrosul (24.5%) and has as its objective the implementation, operation and maintenance of the Porto Velho/Araraquara transmission line, with an extension of 2,375 km*.
f) Manaus Transmissora de Energia -SPC, which has the participation of Eletronorte (30%) and Chesf (19.5%) has as its objective to implement and operate 4 substations and a 585 km transmission line (LT Oriximiná/Itacoatiara/Cariri). The company provides guarantees on two loans in this project (BASA and BNDES).
g) IE Madeira - SPC Interligação Elétrica, with participation of Furnas (24.5%) and Chesf (24.5%). In this project, there is a counter guarantee of the Company in the Bank Financing Contracts, in guarantee of the short-term loan from the BNDES, limited to the participation of its subsidiaries. There is also a short-term loan from BNDES, in which the company acts as an intervening party in proportion to its subsidiaries.
h) UHE Belo Monte -SPC Norte Energia, with an installed capacity of 11,233 MW*, of Chesf (15%), Eletronorte (19.98%) and Eletrobras (15%) in addition to other partners. The provision of the guarantee of the Company in favor of the SPC for the obligations by the insurer JMALUCELLI, under the guarantee insurance contract. The Company is also involved in a short term loan agreement with the BNDES.
i) Angra III — the company is the guarantor for the financing of Eletronuclear with the BNDES, to build the corporate project of the UTN Angra III.
j) Norte Energia S.A. — a closed capital special-purpose company, for the purpose of performing all activites needed for the implementation, maintenance, and exploration of the Belo Monte Hydroelectric Power Plant (UHE Belo Monte). The Company holds 49.98% of the capital of Norte Energia.
k) Teles Pires — special purpose company, with the participation of Eletrosul (24.5%), Furnas (24.5%), Neoenergia (50.1%) and Odebrecht Energia (0.9%). It has an installed power of 1,820 megawatts, enough to supply 5 million inhabitants.
l) Amazonas D — a closed capital company, subsidiary of the Company. Acting as responsible for provision of the public service of distribution of electricity to 22 cities in the state of Amazonas.
(*) Information not audited by the independent auditors
NOTE 23 — DEBENTURES
Parent |
| Issuer |
| Date of |
| Main characteristics |
| Interest |
| Expires |
| Balance on |
| Balance on |
|
Eletronorte |
| Issued by ETE (incorporated by Eletronorte in March 2014) |
| 06/2011 |
| Private subscription of first issuance of Parent Company made out to the Amazon Development Fund (FDA) and custodied by the contract operator, Banco da Amazônia S.A., with real guarantee and bond, in four series, all convertible to stock in the SPE, with or without voting rights. |
| TJLP + 1.65% p.a. |
| 7/10/2031 |
| 201,375 |
| 219,803 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eletrosul |
| SPE Chuí IX - 1st Issuance |
| 10/20/2014 |
| Simple debentures, not convertible to stock, in a single series, unsecured, with additional real guarantee and bond subject to public distribution with restricted distribution efforts. |
| 100% CDI + spread of 1.90% p.a. |
| 1/18/2016 |
| — |
| 25,807 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eletrosul |
| SPE Chuí IX - 2nd Issuance |
| 5/20/2015 |
| Simple debentures, not convertible to stock, in a single series, unsecured, with additional real guarantee and bond subject to public distribution with restricted distribution efforts. |
| 100% CDI + spread of 3.45% p.a. |
| 1/18/2016 |
| — |
| 11,355 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eletrosul |
| SPE Hermenegildo I - 1st Issuance |
| 10/20/2014 |
| Simple debentures, not convertible to stock, in a single series, unsecured, with additional real guarantee and bond subject to public distribution with restricted distribution efforts. |
| 100% CDI + spread of 1.90% p.a. |
| 1/18/2016 |
| — |
| 81,751 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eletrosul |
| SPE Hermenegildo I - 2nd Issuance |
| 5/20/2015 |
| Simple debentures, not convertible to stock, in a single series, unsecured, with additional real guarantee and bond subject to public distribution with restricted distribution efforts. |
| 100% CDI + spread of 3.45% p.a. |
| 1/18/2016 |
| — |
| 33,073 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eletrosul |
| SPE Hermenegildo II - 1st Issuance |
| 10/20/2014 |
| Simple debentures, not convertible to stock, in a single series, unsecured, with additional real guarantee and bond subject to public distribution with restricted distribution efforts. |
| 100% CDI + spread of 1.90% p.a. |
| 1/18/2016 |
| — |
| 81,751 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eletrosul |
| SPE Hermenegildo II - 2nd Issuance |
| 5/20/2015 |
| Simple debentures, not convertible to stock, in a single series, unsecured, with additional real guarantee and bond subject to public distribution with restricted distribution efforts. |
| 100% CDI + spread of 3.45% p.a. |
| 1/18/2016 |
| — |
| 17,673 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eletrosul |
| SPE Hermenegildo III - 1st Issuance |
| 10/20/2014 |
| Simple debentures, not convertible to stock, in a single series, unsecured, with additional real guarantee and bond subject to public distribution with restricted distribution efforts. |
| 100% CDI + spread of 1.90% p.a. |
| 1/18/2016 |
| — |
| 69,039 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eletrosul |
| SPE Hermenegildo III - 2nd Issuance |
| 5/20/2015 |
| Simple debentures, not convertible to stock, in a single series, unsecured, with additional real guarantee and bond subject to public distribution with restricted distribution efforts. |
| 100% CDI + spread of 3.45% p.a. |
| 1/18/2016 |
| — |
| 22,222 |
|
|
|
|
|
|
|
|
|
|
|
|
| 201,375 |
| 562,474 |
|
Total Current Liabilities |
|
|
|
|
|
|
|
|
| 12,442 |
| 357,226 |
| ||
Total Noncurrent Liabilities |
|
|
|
|
|
|
|
|
| 188,933 |
| 205,248 |
|
NOTE 24 — COMPULSORY LOAN
The Compulsory Loan on the consumption of electric energy, established by Law 4,156/1962 in order to generate resources for expansion of the Brazilian electric sector, was eliminated by Law 7,181 of December 20, 1983, which set the date of December 31, 1993 as the deadline for the collection.
In the first phase of this compulsory loan, which ended with the advent of Law-Decree 1,512/1976, the collection of the tax reached many classes of energy consumers, and taxpayer credits were represented by bearer bonds issued by the Company.
The second time, which began with the provisions in the aforementioned Law-Decree, the Compulsory Loan in question began to be charged only from industries with a monthly energy consumption higher than 2,000 kwh*, and taxpayer credits were no longer represented by bonds, but simply carried by the Company.
The remaining Compulsory Loan balance, after the fourth conversion into shares, on April 30 of 2008, related to credits created from 1988 to 2004, is registered under current and non-current liabilities, maturing starting in 2008, and are remunerated at the rate of 6% a year, plus monetary update based on the variation of the IPCA-E, and as of 2016, correspond to R$ 509,133 (R$ 523,635 on December 31, 2015), of which R$ 460,940 are non-current (R$ 466,005 on December 31, 2015).
The Bearer Bonds issued due to the Compulsory Loan are not securities, are not tradable on the stock market, are not priced and are not payable. In this way, the Company’s management clarifies that the Company has no debentures in circulation.
The issuance of these securities was legally mandatory, and not a corporate decision by the Company. Likewise, its taking by bondholders was not an act of their will, but a legal duty, by force of Law 4,156/1962.
The CVM (Brazilian securities commission), issued a decision by its collegiate issued in administrative process CVM RJ 2005/7230, lodged by holders of the mentioned securities, affirmed in a document that “the obligations issued by the Company due to Law 4,156/1962 cannot be considered market securities.”
The CVM also understood that there is no irregularity in the procedures adopted by the Company in its Financial Statements, with regards to the aforementioned obligations, neither in the publishing of the existence of legal action.
The unenforceability of those Bearer Obligations was reinforced by decisions of the Supreme Court, which corroborated the understanding that those securities have prescribed and are not valid for guaranteeing tax enforcement.
Therefore, the Bearer Obligations issued in the first phase of this compulsory loan, as decided by the CVM, are not to be confused with debentures. In addition, by force of the provisions of Article 4, § 11 of Law 4,156/1962, and Article 1 of Decree 20,910/1932, they are unenforceable, a condition confirmed in Informational 344 of the Supreme Court (STJ), which states that these Obligations cannot be used as guarantees for tax enforcement action, since they are not liquid and are not debentures.
As such, the liabilities related to the Compulsory Loan refer to residual credits, created from 1988 to 1994, from industrial consumers with consumption greater than 2,000 kWh*, in the second phase of this Compulsory Loan, as well as to interest on those credits not claimed, as shown:
|
| 12/31/2016 |
| 12/31/2015 |
|
CURRENT |
|
|
|
|
|
Interest Payable |
| 48,193 |
| 57,630 |
|
|
|
|
|
|
|
NONCURRENT |
|
|
|
|
|
Credits collected |
| 460,940 |
| 466,005 |
|
TOTAL |
| 509,133 |
| 523,635 |
|
NOTE 25 — FUEL CONSUMPTION ACCOUNT — CCC
The Fuel Consumption Account (CCC), created by Decree 73,102, of November 7, 1973, is intended to combine the prorating of fuel consumption costs in the generation of thermoelectric energy, especially in the Northern region of the country.
According to Law 8,631, of March 04, 1993, the Company manages the sums collected by the concessionaire of the public service of electrical energy, and credits them to the Fuel Consumption Account (CCC), for the annual fees destined to expenditures with fuel for the generation of electrical energy. The sums recorded under current assets, in counterpart to current liabilities, are funds available, kept in a restricted account, and the amounts not paid by concessionaires.
|
| 12/31/2016 |
| 12/31/2015 |
|
Current assets |
| 195,966 |
| 195,966 |
|
Noncurrent Assets |
| 6,919 |
| 13,331 |
|
Total |
| 202,885 |
| 209,297 |
|
|
|
|
|
|
|
Current liabilities |
| — |
| — |
|
Noncurrent liabilities |
| 482,179 |
| 452,948 |
|
Total |
| 482,179 |
| 452,948 |
|
The enactment of law 12,783/2013 extinguished the mandatory nature of contributing to this charge, for concessionaires of the public service of electrical energy.
On June 23 of 2016, Provisional Measure no. 735 establishes that, starting on January 1 of 2017, the activities related to the management and administration of the sector funds RGR, CDE, and CCC will be transferred to the Electricity Marketing Chamber (CCEE). On November 17 of 2016, this provisional measure was converted into Law 13,360, establishing that the activities related to the management and administration of these funds must be transferred to the Electricity Marketing Chamber (CCEE) by April 30 of 2017.
NOTE 26 — TAXES PAYABLE AND INCOME TAX AND SOCIAL CONTRIBUTIONS — LIABILITY
26.1 — Taxes payable
|
| 12/31/2016 |
| 12/31/2015 |
|
Current liabilities: |
|
|
|
|
|
Taxes Withheld at Source (IRRF) |
| 288,537 |
| 239,721 |
|
PASEP and COFINS |
| 314,435 |
| 577,998 |
|
ICMS |
| 214,385 |
| 211,659 |
|
PAES / REFIS |
| 175,462 |
| 185,441 |
|
IR/CS installment |
| 37,679 |
| — |
|
INSS/FGTS |
| 134,907 |
| 139,792 |
|
ISS |
| 41,585 |
| 40,844 |
|
Other |
| 129,099 |
| 161,123 |
|
Total |
| 1,336,089 |
| 1,556,578 |
|
|
| 12/31/2016 |
| 12/31/2015 |
|
Noncurrent liabilities: |
|
|
|
|
|
PASEP and COFINS |
| 204,284 |
| 75,323 |
|
Deferred PASEP and COFINS |
| 40,319 |
| 181,991 |
|
PAES / REFIS |
| 589,200 |
| 595,691 |
|
IR/CS installment |
| 135,016 |
| — |
|
INSS/FGTS |
| 32,847 |
| 31,884 |
|
Other |
| 58,214 |
| 15,420 |
|
Total |
| 1,059,880 |
| 900,309 |
|
26.2 — Income tax and social contributions
|
| 12/31/2016 |
| 12/31/2015 |
|
Current liabilities: |
|
|
|
|
|
Current income tax |
| 447,236 |
| 431,712 |
|
Current social contributions |
| 159,612 |
| 149,632 |
|
|
| 606,848 |
| 581,344 |
|
Noncurrent liabilities: |
|
|
|
|
|
Deferred IRPJ/CSLL |
| 8,305,606 |
| 1,003,796 |
|
26.3 — Reconciliation of expense with income tax and social contributions
|
| 12/31/2016 |
| 12/31/2015 |
| 12/31/2014 |
| ||||||
|
| IRPJ |
| CSLL |
| IRPJ |
| CSLL |
| IRPJ |
| CSLL |
|
Profit (loss) before IRPJ and CSLL |
| 12,182,725 |
| 12,182,725 |
| (11,207,024 | ) | (11,207,024 | ) | (4,457,135 | ) | (4,457,135 | ) |
Taxable base |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total IRPJ and CSLL calculated at 25% and 9%, respectively |
| (3,045,681 | ) | (1,096,445 | ) | 2,801,756 |
| 1,008,632 |
| 1,114,284 |
| 401,142 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effects of additions and exclusions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from dividends |
| 25,838 |
| 9,301 |
| 15,563 |
| 20,350 |
| 25,555 |
| 9,198 |
|
Equity method |
| 801,378 |
| 288,496 |
| 132,862 |
| 47,830 |
| (304,210 | ) | (109,516 | ) |
Tax losses offset |
| 172,498 |
| 62,099 |
| — |
| — |
| — |
| — |
|
Establishing of tax credits |
| 500,021 |
| 180,007 |
| — |
| — |
| — |
| — |
|
Deferred taxes unrecognized/written off |
| (4,044,525 | ) | (1,465,668 | ) | (4,001,603 | ) | (1,402,293 | ) | (2,805,474 | ) | (1,086,660 | ) |
Deferred taxes recognized from previous fiscal years |
| — |
| — |
| — |
| — |
| 812,366 |
| 294,192 |
|
Tax incentives |
| 185,217 |
| — |
| 18,088 |
| — |
| 111,197 |
| 2,075 |
|
Donations |
| (35,439 | ) | (12,758 | ) | — |
| — |
| — |
| — |
|
Other additions and exclusions |
| (781,878 | ) | (253,278 | ) | 476,987 |
| 171,715 |
| (121,746 | ) | (42,921 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue (expenses) from IRPJ and CSLL |
| (6,222,572 | ) | (2,288,246 | ) | (556,347 | ) | (153,765 | ) | (1,168,029 | ) | (532,490 | ) |
Effective rate |
| -51.08 | % | -18.78 | % | 4.96 | % | 1.37 | % | 26.21 | % | 11.95 | % |
26.4 — Tax Incentives - SUDENE
Provisional Measure 2.199-14, of August 24, 2001, amended by Law 11.196, of November 21, 2005, allowed companies located in the Northeast Region with ventures in the infrastructure sector considered by act of the Executive branch to be a priority for regional
development, to reduce the income tax amount owed for the purpose of investing in projects of installation, expansion, modernization or diversification.
Regarding concession contracts nos. 006/2004 of generation, and no. 061/2001 of transmission (both signed by the CHESF), the right to the incentive reducing 75% of income tax covers the years of 2008 to 2017. For transmission contracts numbers 008/2005 and 007/2005, the right to the reduction incentive was granted for the period of 2011 to 2020. For contracts with a tax incentive, the income tax rate of 25% becomes 6.25%.
26.5 — Special payment plan - PAES
The subsidiaries Furnas, Eletrosul, Eletroacre and Distribuição Alagoas chose to refinance tax debts. The financing term is limited to 180 months, and the balance owed is corrected by the long-term interest rate (TJLP) and SELIC rate.
26.6 — Tax Recovery Program (REFIS) — Law 12,865/2013
On December 30, 2013, Furnas chose the REFIS, for processes related to the PASEP, COFINS and PASEP/COFINS taxes.
The financing term is limited to 180 months, and the balance owing is corrected by the SELIC.
26.7 — Deferred PASEP and COFINS on Active Foreign Exchange Variance
On April 1 of 2015, Decree no. 8,426 was published, which reestablished the rates of 0.65% and 4%, respectively, for the PIS/PASEP and COFINS due on financial revenue earned by legal entities subject to the non-cumulative incidence regime, valid starting on July 1 of 2015.
However, with the advent of Decree no. 8,451, published on May 19 of 2015, the Federal Government reestablished the PIS/PASEP and COFINS rates due on financial revenue from monetary variances to zero, because of the exchange rate, derived from: (I) operations to export goods and services abroad; and (ii) obligations contracted by the legal entity, including loans and financing.
Since Decree no. 8,451 established that the rate of zero will be maintained only for the above-mentioned operations, the Controller, when settling the corresponding transactions, now collects the PIS/PASEP and COFINS contributions due on monetary variances derived from the fluctuation of the foreign currency observed in the loan agreements granted by the Company.
In this context, due to the deferral of taxation on exchange variances when settling operations, the Controller maintains in the deferred noncurrent PIS/PASEP and COFINS liabilities, on December 31, 2016, the sums of R$ 311 (R$ 25,440 on December 31 of 2015) and R$ 1,911 (R$ 156,551 on December 31 of 2015), respectively.
NOTE 27 — REGULATORY FEES
|
| 12/31/2016 |
| 12/31/2015 |
|
CURRENT LIABILITIES |
|
|
|
|
|
RGR Fee |
| 56,083 |
| 154,753 |
|
CDE Fee |
| 53,733 |
| 38,979 |
|
PROINFA Fee |
| 14,152 |
| 45,819 |
|
Compensation for use of water resources |
| 72,456 |
| 56,932 |
|
Electricity Services Inspection Fee |
| 29,819 |
| 5,223 |
|
Research and Development (R&D) |
| 126,071 |
| 356,920 |
|
Energy Efficiency Program (PEE) |
| 258,590 |
| 24,397 |
|
Other |
| 36,297 |
| 12,377 |
|
|
| 647,201 |
| 695,400 |
|
NONCURRENT LIABILITIES |
|
|
|
|
|
RGR Fee |
| 21,093 |
| 8,184 |
|
Research and Development (R&D) |
| 528,865 |
| 404,623 |
|
Energy Efficiency Program (PEE) |
| 65,295 |
| 49,388 |
|
|
| 615,253 |
| 462,195 |
|
|
|
|
|
|
|
TOTAL |
| 1,262,454 |
| 1,157,595 |
|
27.1 — Global Reversal Reserve - RGR
Concessionaires of the Public Service of Electrical Energy are responsible for contributing to the formation of the RGR, by paying a share named Reversal and Takeover of Electrical Energy Services, of up to 2.5% of the value of investments made by concessionaires and permit-holders, limited to 3% of annual revenue. The value of the share is calculated as a component of the cost of concessionaire’s service.
Concessionaires pay their annual share into the Fund, which is not controlled by the Company, in an attached bank account managed by the Company, which manages the account within the limits established by Law 5,655/1971 and later amendments, also not reflected in the Company’s Financial Statements, since it is an entity independent of the Company.
According to Art. 20 of Law no. 12,431, of 2011, this fee was extended until 2035, whereas it had originally been established to expire at the end of 2010. With the publishing of Law 12,783/2013, starting on January 1, 2013, the following were no longer required to pay into the RGR annually:
a) concessionaires and permit-holders of the public service of electrical energy distribution;
b) concessionaires of the public service of electrical energy transmission tendered after September 12, 2012; and
c) concessionaires of the public service of transmission and generation of electrical energy renewed in accordance with Law 12,783/2013.
27.2 — Energy Development Account (CDE)
The Energy Development Account (CDE) is intended to promote the development of energy in the states, projects to universalize electrical energy services, the program to subsidize low-income consumers, and expansion of the natural gas grid to serve states that do not yet have pipelines.
The CDE was created on April 26 of 2002, is managed by the Company, fulfilling a program set out by the Ministry of Mines and Energy, and does not affect the Company’s results.
The CDE is also used to guarantee the competitiveness of energy produced from alternative sources (eolic, small hydroelectric plants and biomass) and from national mineral coal.
Starting in 2013, as one of the instruments to enable a reduction in light bills, this contribution was reduced to 25% of the current rate.
27.3 — PROINFA
The Federal government program for the development of projects to diversify Brazil’s energy grid and foster alternative sources of electrical energy, created by Law 10,438, of April 2002, is managed by the Company and seeks regional solutions for the use of renewable energy sources.
The PROINFA establishes the operation of 144 plants, totaling 3,299.40 MW* of installed capacity. The plants in the program account for the generation of approximately 12,000 GWh/year—an amount capable of supplying about 6.9 million residences and equivalent to 3.2% of the total annual consumption in the country. The 3,299.40 MW* contracted are divided into 1,191.24 MW* from 63 Small Hydroelectric Plants (PCHs), 1,422.92 MW* from 54 eolic plants, and 685.24 MW* from 27 biomass plants. This energy is guaranteed contracting for 20 years by the Company. Operations performed under PROINFA do not affect the Company’s results (which is responsible for payment).
(*) Information not audited by the independent auditors
27.4 — Financial compensation for the use of water resources
Financial compensation for the use of water resources for the purposes of generating electrical energy was instituted by the Federal Constitution of 1988, and are a percentage that concessionaires of hydroelectric generation pay for the use of water resources. ANEEL manages the collection and distribution of resources among beneficiaries: States, cities and entities directly managed by the Federal Goverment.
As established by Law 8,001, of March 13, 1990, with the amendments given by Laws 9,433/1997, 9,984/2000 and 9,993/2000, 45% of the resources are destined for cities affected by the UHE reservoirs, while states are entitled to another 45%. The Federal Goverment gets 10% of the total. Generators characterized as Small Hydroelectric Plants (PCHs) are exempt from payment of this financial compensation.
The concessionaires pay 6.75% of the value of energy produced as Financial Compensation.
27.5 — Fee for Oversight of Electrical Energy Services
The Fee for Oversight of Electrical Energy Services (TFSEE) was created by Law 9,427, of December 26, 1996, and regulated by Decree 2,410, of November 28, 1997, to create revenue for the National Electrical Energy Agency, to cover its administrative and operating expenses.
The TFSEE is equivalent to 0.5% of the economic value added by the concessionaire, permit-holder or authorization holder, including in cases of independent production and self-production, the exploration of services and electrical energy facilities.
The TFSEE is owed since January 1 of 1997, and is set annually by ANEEL and paid in twelve monthly installments.
27.6 — Research and Development — R&D
Electricity concessionaires are obligated every year to invest the sum of at least 1% of their adjusted net operating revenue into research and development of the electrical sector, in the terms of Law no. 9,991, of July 24, 2000.
R&D resources are intended to cost the studies and research on planning and expansion of the energy system, as well as on inventory and feasibility required to take advantage of hydroelectric potential.
Complying with the order of said legal devices, in counterpart to the entries recorded in liabilities, with the concessionaires account as, in research and development, and is a deduction from operating revenue.
NOTE 28 — SHAREHOLDERS’ COMPENSATION
|
| 12/31/2016 |
| 12/31/2015 |
|
Current |
|
|
|
|
|
Unclaimed dividends |
| 25,312 |
| 40,518 |
|
Dividends withheld from previous years |
| 1,837 |
| 3,004 |
|
Fiscal year minimum mandatory dividends |
| 435,742 |
| — |
|
|
| 462,891 |
| 43,522 |
|
28.1 — Dividends Retained from Previous Fiscal Years
In January, 2010, The Company’s board of directors ordered payment of the balance of the Special Undistributed Dividend Reserve, in four annual payments starting in fiscal 2010, inclusive.
28.2 — Unclaimed Dividends
The balance of the remuneration to shareholders, demonstrated in current liabilities, contains the sum of R$ 24,339 (R$ 40,518 on December 31, 2015) with the controller, and R$ 25,312 (R$ 41,333 on December 31 of 2015) in the consolidated, referring to unclaimed remuneration from the years of 2013, 2014 and 2015. The remuneration for 2011 and earlier has prescribed, in accordance with the Company’s bylaws.
28.3 — Minimum mandatory dividends in the year
The Company’s bylaws establish as minimum mandatory dividend 25% of the net profit, adjusted as per corporate legislation, respecting the minimum remuneration for preferred shares in classes A and B, of 8% and 6%, respectively, of the nominal value of the company capital for these types and classes of shares, and with the possibility of payment of interest on equity (see Note 35).
NOTE 29 — POST-EMPLOYMENT BENEFITS
29.1 — Post employment benefits
The companies in Eletrobras sponsor pension plans for their employees, as well as post-employment medical assistance plans and life insurance in certain cases. Those benefits are classified as defined benefits (DB) and defined contributions (CD).
Due to the decentralized structure of Eletrobras, each segment sponsors its own package of employee benefits. In general, the Group offers its current and future retirees and its dependents pension benefits, and post-employment medical assistance and life insurance, as presented in the following chart:
Types of retirement benefits sponsored by Eletrobras’ companies
|
| Pension plans |
| Other retirement benefits | ||||||
Company |
| BD Plan |
| Salary Plan |
| CD Plan |
| Life Insurance |
| Health Plan |
Eletrobras |
| X |
|
|
| X |
| X |
| X |
Amazonas |
| X |
|
|
| X |
|
|
|
|
Boa Vista |
| X |
|
|
| X |
|
|
| X |
Ceal |
| X |
|
|
| X |
|
|
| X |
Cepisa |
| X |
|
|
| X |
|
|
|
|
Ceron |
|
|
|
|
| X |
|
|
|
|
CGTEE |
| X |
|
|
|
|
|
|
|
|
Chesf |
| X |
| X |
| X |
| X |
|
|
Eletroacre |
|
|
|
|
| X |
|
|
|
|
Eletronorte |
| X |
|
|
| X |
| X |
| X |
Eletronuclear |
| X |
|
|
|
|
|
|
| X |
Eletrosul |
| X |
|
|
| X |
|
|
| X |
Furnas |
| X |
|
|
| X |
| X |
| X |
The retirement benefit plan normally exposes the Group to actuarial risks, such as investment risk, interest rate risk, longevity risk, and salary risk.
Investment Risk |
| The current value of the liability of the defined pension benefit plan is calculated using a set discount rate due to the remuneration of high quality private securities; if the return on the assets of the plan is under that rate, the plan will run a deficit. At the moment, the plan’s investment is relatively balanced in stocks, debt instruments and real estate. Due to the long-term nature of plan liabilities, the pension fund’s board considers it appropriate that a reasonable portion of the plan’s assets should be invested in shares and real estate, to leverage the return generated by the fund. |
|
|
|
Interest Rate Risk |
| A reduction in the interest rate of the securities will increase the plan’s liability. However, this will be partially compensated by an increased return on the plan’s debt securities. |
|
|
|
Longevity Risk |
| The current value of the defined benefit plan’s liability is calculated by referencing the best estimate of the mortality of plan participants during and after employment. An increase in the life expectation of plan participants will increase the plan’s liability. |
|
|
|
Salary Risk |
| The current value of the defined benefit plan’s liability is calculated by referencing the future salaries of plan participants. Therefore, an increase in the salary of plan participants would increase the plan’s liability. |
The charts below present a reconciliation of the present value of the defined benefit obligations and the fair value of assets whose values are recorded on the balance sheets for pension benefits and for all other post-employment benefits. Next we will present the consolidated results of Eletrobras group. The most recent actuarial valuation of plan assets and of the present value of the defined benefits obligation was conducted on December 31, 2016.
The balance of post-employment obligations is presented below:
Retirement benefit obligations - amounts recorded in the |
| 2016 |
| 2015 |
|
Pension plans |
| 2,214,342 |
| 1,693,130 |
|
Health and life insurance plans |
| 253,212 |
| 272,296 |
|
Other retirement benefit obligations |
| 8,093 |
| 8,259 |
|
Total retirement benefit obligations |
| 2,475,647 |
| 1,973,685 |
|
Current |
| 107,571 |
| 114,861 |
|
Noncurrent |
| 2,368,076 |
| 1,858,824 |
|
a) Reconciliation of the liabilities of the pension plans and other benefits
Defined benefit retirement plans - Amounts recorded in balance sheet |
| 2016 |
| 2015 |
| 2014 |
|
|
|
|
|
|
|
|
|
Present value of actuarial obligations partially or fully covered |
| 21,682,893 |
| 17,867,309 |
| 18,494,073 |
|
Fair value of plan assets (-) |
| (22,025,946 | ) | (18,905,009 | ) | (19,300,597 | ) |
Net liabilities (assets) |
| (343,054 | ) | (1,037,700 | ) | (806,524 | ) |
|
|
|
|
|
|
|
|
Effect of restriction on assets |
| 2,077,026 |
| 1,890,266 |
| 1,916,652 |
|
Actuarial debt contracted between sponsor and plan |
| 1,397,984 |
| 842,672 |
| 1,271,936 |
|
Financial debt contracted between sponsor and plan |
| 15,479 |
| 58,543 |
| 191,664 |
|
Other pension benefits |
| 171,289 |
| 99,214 |
| — |
|
Value of retirement benefit liabilities (assets) |
| 2,214,342 |
| 1,693,130 |
| 1,885,914 |
|
|
|
|
|
|
|
|
|
Current net cost of service |
| (71,682 | ) | (53,494 | ) | (47,310 | ) |
Net interest cost |
| 103,593 |
| 125,220 |
| 70,338 |
|
Actuarial expense (revenue) recorded for fiscal year |
| 31,911 |
| 71,727 |
| 23,028 |
|
Other retirement benefits - Amounts recorded in balance sheet and |
| 2016 |
| 2015 |
| 2014 |
|
|
|
|
|
|
|
|
|
Present value of actuarial obligations partially or fully covered |
| 253,212 |
| 272,296 |
| 374,252 |
|
Fair value of plan assets (-) |
| — |
| — |
| — |
|
Net liabilities (assets) |
| 253,212 |
| 272,296 |
| 374,252 |
|
|
|
|
|
|
|
|
|
Value of other retirement benefit liabilities (assets) |
| 253,212 |
| 272,296 |
| 374,252 |
|
|
|
|
|
|
|
|
|
Current cost of service |
| 13,711 |
| 14,147 |
| 19,238 |
|
Net interest cost |
| 35,601 |
| 43,639 |
| 42,626 |
|
Actuarial expense (revenue) recorded for fiscal year |
| 49,312 |
| 57,786 |
| 61,864 |
|
b) Disclosure of Defined Pension Benefits
Consolidated results of defined pension benefits — reconciliation of present value of the obligations of the defined benefit:
Defined benefit pension plans - Changes in present value of actuarial obligations |
| 2016 |
| 2015 |
|
|
|
|
|
|
|
Value of actuarial obligations at the start of the year |
| 17,867,309 |
| 18,494,073 |
|
Parent company held for sale (*) |
| — |
| (68,269 | ) |
Current cost of service |
| 75,475 |
| 86,483 |
|
Interest on actuarial obligation |
| 2,262,079 |
| 2,167,943 |
|
Benefits paid during the year (-) |
| (1,576,185 | ) | (1,455,594 | ) |
(Gain) loss on actuarial obligations resulting from remeasurement |
| 3,054,215 |
| (1,357,326 | ) |
Actuarial (gains) losses resulting from changes in demographic assumptions |
| 213,883 |
| 25,321 |
|
Actuarial (gains) losses resulting from changes in financial assumptions |
| 2,723,761 |
| (1,309,909 | ) |
Actuarial (gains) losses resulting from experience adjustments |
| 116,571 |
| (72,738 | ) |
Present value of actuarial obligations at the end of the year |
| 21,682,893 |
| 17,867,309 |
|
Consolidated results of defined pension benefits — reconciliation of the fair value of the plan assets:
Defined benefit pension plans - Changes in and composition of fair value of assets |
| 2016 |
| 2015 |
|
Fair value of assets at the start of the year |
| 18,905,009 |
| 19,300,597 |
|
Parent company held for sale (*) |
| — |
| (63,327 | ) |
Benefits paid during the fiscal year (-) |
| (1,576,185 | ) | (1,455,594 | ) |
Contributions from participants during the fiscal year |
| 147,157 |
| 139,977 |
|
Contributions from employer during the fiscal year |
| 281,376 |
| 211,355 |
|
Expected yield on assets during the year |
| 2,423,501 |
| 2,291,003 |
|
Gain (loss) on plan assets (excluding interest revenue) |
| 1,845,088 |
| (1,519,001 | ) |
Fair value of assets at the end of the year |
| 22,025,946 |
| 18,905,009 |
|
Effective yield on assets during the year |
| 4,268,589 |
| 772,002 |
|
* Acquisition/ classification of asset held for sale of the susidiary (See Note 42)
Consolidated results of defined pension benefits — Amounts recoginzed in Other Comprehensive Income:
|
| 2016 |
| 2015 |
| 2014 |
|
Accumulated Other Comprehensive Income (OCI) from Pension Program |
| 3,482,507 |
| 2,321,962 |
| 1,945,074 |
|
|
| 2016 |
| 2015 |
| 2014 |
|
Actuarial gains (losses) recorded in OCI during the fiscal year, net of deferred taxes - Pension Program |
| (1,160,545 | ) | (376,887 | ) | (1,298,178 | ) |
c) Disclosure of Other Post-Employments Benefits
Consolidated results of other post-employment benefits — reconciliation of the present value of the defined benefit obligations:
Other retirement benefits - Changes in present value of actuarial obligations |
| 2016 |
| 2015 |
| 2014 |
|
Value of actuarial obligations at the start of the year |
| 272,296 |
| 364,821 |
| 360,173 |
|
Current cost of service |
| 13,187 |
| 14,147 |
| 19,260 |
|
Interest on actuarial obligation |
| 34,855 |
| 43,639 |
| 42,604 |
|
Benefits paid during the year |
| (30,013 | ) | (11,249 | ) | (14,977 | ) |
(Gain) loss on actuarial obligations resulting from remeasurement |
| (37,113 | ) | (139,062 | ) | (32,808 | ) |
Actuarial (gains) losses resulting from changes in demographic assumptions |
| (3,190 | ) | (29,682 | ) | 29,384 |
|
Actuarial (gains) losses resulting from changes in financial assumptions |
| 27,039 |
| (49,624 | ) | 119,803 |
|
Actuarial (gains) losses resulting from experience adjustments |
| (62,580 | ) | (59,756 | ) | (181,995 | ) |
Present value of actuarial obligations at the end of the year |
| 253,212 |
| 272,296 |
| 360,173 |
|
Consolidated result of other post-employment benefits — Sums recognized in Other Comprehensive Income:
|
| 2016 |
| 2015 |
| 2014 |
|
Accumulated Other Comprehensive Income (OCI) - Other retirement benefits |
| 9,213 |
| 46,326 |
| 185,388 |
|
|
| 2016 |
| 2015 |
| 2014 |
|
Actuarial gains (losses) recorded in fiscal year OCI - Other retirement benefits |
| 37,113 |
| 139,062 |
| 32,808 |
|
d) Actuarial and economic assumptions
The actuarial assumptions presented below are used to determine the defined benefit obligation and expenses for the year.
Economic Cases
|
| 2016 |
| 2015 |
Annual actuarial discount interest rate (i) |
| 10.95% to 11.17% |
| 13.16% to 13.27% |
Actual annual actuarial discount interest rate |
| 5.70% to 5.91% |
| 7.26% to 7.36% |
Projected average increase in salaries |
| 4.97% to 9.02% |
| 5.50% to 9.57% |
Projected average increase in benefits |
| 4.97% |
| 5.50% |
Actual annual rate of change in medical costs |
| 0% to 4.43% |
| 0% to 6.18% |
Average annual inflation rate |
| 4.97% |
| 5.50% |
Expected returns on plan assets (ii) |
| 10.95% to 11.17% |
| 13.16% to 13.27% |
Demographic Cases
|
| 2016 |
| 2015 |
Turnover rate |
| 0%; GAMA - Exp. Turnover; T1 Service Table Soft 20%; 80% T1 Service Table |
| 0%; 2.80%; 80% T1 Service Table |
Active and inactive mortality table |
| AT-2000 BASIC; AT-83 BASIC F; AT-2000 (D10%/D5%/D30%); AT-2000 (soft 10%); |
| AT-2000; AT-2000 BASIC; AT-83 BASIC F; AT-2000 (D10); AT-2000 (soft 10%); AT-83 BASIC M |
Mortality Table for Disabled |
| AT-83; AT-83 (soft 10%); AT-49 DES 2 years; MI-85; AT-49 M; AT-49 M&F; AT-49 (M&F) AGR 100%; RP-2000 Disable; AT-83M (repaired at 5%); RP 2000 Disable M&F; RRB-1983 |
| AT-83; AT-83 (D10); AT-49 DES 2 years; MI-85; AT-49 M; AT-49 M&F; AT-49 (M&F) AGR 100%; RP-2000 Disable; AT-83M (repaired at 5%); RP 2000 Disable M&F; RRB-1983 |
Disability Table |
| Light Weak, Medium, and Strong; Alvaro Vindas |
| Light Weak, Medium, and Strong; Muller; Alvaro Vindas; TASA-1927 (soft 30%) |
% married on date of retirement |
| 95% |
| 95% |
Age different between men and women |
| 4 years |
| 4 years |
(i) Long-term interest rate
(ii) Represents the maximum and minimum return rates of asset plans
The definition of this rate took into account the market practice of Federal government bonds, according to the criteria recommended by national and international standards, for terms similar to those of the flow of obligations of the benefits program, for the duration.
The global expected return rate is the weighted average of expected returns from the various categories of plan assets. The Management’s valuation of expected return is based on historical return trends and market analysts’ forecasts for the assets during the life of the respective obligation. The current return of BD plan assets on December 31, 2016 was R$ 263,620 (R$ 153,404 in 2015) at the Parent Company, and R$ 4,268,589 (R$ 772,002 in 2015) in the Consolidated group.
e) Employer contributions
On December 31, 2016, the contributions made by the Parent Company to the creation of mathematical provisions for benefits under the CD Plan reached R$ 18,562 (R$ 16,983 in 2015) and R$ 214,783 (R$ 213,626 in 2015) in the Consolidated group.
On December 31, 2016, the contributions made by the Parent Company to the creation of mathematical provisions for benefits under the BD Plan reached R$ 45,349 (R$ 15,451 in 2015) and R$ 259,196 (R$ 211,355 in 2015) in the Consolidated group.
The Parent Company expects to contribute R$ 93,253 to the defined benefit plan in the next year, and R$ 325,635 in the Consolidated.
The average weighted duration of the defined benefit obligation of the Parent Company is 7.49 years, and the average in the Consolidated group is 9.42 years.
An analysis of the expected maturation of non-discounted benefits of post-employment defined benefit plans:
|
| Less than |
| Between |
| Between |
| More than |
|
|
|
On December 31, 2016 |
| 1 year |
| 1-2 years |
| 2-5 years |
| 5 years |
| Total |
|
Pension Program |
| 1,578,766 |
| 1,578,991 |
| 4,713,361 |
| 32,743,493 |
| 40,614,611 |
|
f) The actuarial assumptions relevant to determining the defined obligation are: discount rate, medical cost, and mortality. The following sensitivity analyses were determined based on reasonably possible changes to the respective assumptions which occurred at the end of the reporting period, all other assumptions remaining constant.
Parent Company
· If the discount rate were 0.25% higher (lower), the defined benefit obligation would be reduced by R$ 39,922 (increased by R$ 41,441).
· If the medical costs were 0.25% higher (lower), the defined benefit obligation would have an increase of R$ 52 (reduction of R$ 51).
· If life expectancy increased (decreased) in a year for men and women, the defined benefit obligation would increase by R$ 48,682 (decrease by R$ 49,476).
Consolidated Group
· If the discount rate were 0.25% higher (lower), the defined benefit obligation would be reduced by R$ 516,154 (increased by R$ 538,965).
· If the medical costs were 0.25% higher (lower), the defined benefit obligation would have an increase of R$ 4,278 (reduction of R$ 4,509).Consolidated group.
· If life expectancy increased (decreased) in a year for men and women, the defined benefit obligation would increase by R$ 422,940 (decrease by R$ 433,452).
The sensitivity analysis presented may not be representative of the real change in the defined benefit obligation, since it is not likely that the change would occur in isolated assumptions, considering that some assumptions may be correlated.
Additionally, when presenting the sensitivity analysis, the present value of the defined benefit obligation was calculated by the projected unit credit method at the end of the reporting period, which is equal to that used to calculate the liability of the defined benefit obligation recognized on the balance sheet.
There was no change in relation to previous years in the methods and assumptions used to prepare the sensitivity analysis.
g) Sums included in the fair value of plan assets
Asset Category |
| 2016 |
| 2015 |
|
Immediately Available Amounts |
| 10,361 |
| 1,508 |
|
Realizable |
| 913,902 |
| 888,620 |
|
Credit of Private Deposits |
| 364,800 |
| 393,107 |
|
Fixed Income Investments |
| 16,409,421 |
| 13,723,072 |
|
Equity Investments |
| 2,545,552 |
| 2,126,328 |
|
Investments in Funds |
| 1,231,716 |
| 1,159,361 |
|
Asset Category |
| 2016 |
| 2015 |
|
Real Estate Investments |
| 823,129 |
| 841,652 |
|
Structured Investments |
| 451,874 |
| 385,741 |
|
Loans and Financing |
| 563,357 |
| 526,007 |
|
Other |
| 76,172 |
| 89,360 |
|
(-) Funds receivable from sponsor |
| (421,767 | ) | (408,644 | ) |
Asset Category |
| 2016 |
| 2015 |
|
(-) Operational liabilities |
| (111,563 | ) | (97,585 | ) |
(-) Contingent liabilities |
| (503,233 | ) | (437,104 | ) |
(-) Investment funds |
| (117,356 | ) | (91,827 | ) |
(-) Administrative funds |
| (192,172 | ) | (167,243 | ) |
(-) Pension funds |
| (18,249 | ) | (27,344 | ) |
Total assets |
| 22,025,946 |
| 18,905,009 |
|
The fair value of capital and debt instruments is determined based on market prices quoted in active markets, while the fair value of securities investments are not based on market prices quoted in active markets.
NOTE 30 — PROVISION FOR LITIGATION
The Company and its subsidiaries are partly nvolved in various lawsuits in progress in the courts, particularly in labor and civil spheres, which are in various stages.
On the closing date of these financial statements, the company has the following provisions for legal obligations connected with lawsuits, the timing and ultimate payment amounts depend on the specific court outcomes for each lawsuit:
a) Provisions recognized:
|
| 12/31/2016 |
| 12/31/2015 |
|
CURRENT |
|
|
|
|
|
Labor |
| 39,373 |
| 21,100 |
|
Tax |
| 4,415 |
| — |
|
Civil |
| 1,039,687 |
| 569,625 |
|
|
| 1,083,475 |
| 590,725 |
|
|
|
|
|
|
|
NONCURRENT |
|
|
|
|
|
Labor |
| 1,369,292 |
| 984,066 |
|
Tax |
| 586,429 |
| 644,466 |
|
Civil |
| 17,690,233 |
| 11,927,597 |
|
|
| 19,645,954 |
| 13,556,129 |
|
|
| 20,729,429 |
| 14,146,854 |
|
These provisions during this period evolved as follows:
Balance as of 12/31/2015 |
| 14,146,854 |
|
Additions |
| 6,598,015 |
|
Reversals of provisions |
| (2,721,344 | ) |
Monetary correction |
| 3,505,998 |
|
Write-offs |
| (60,733 | ) |
Payments |
| (739,363 | ) |
Balance as of 12/31/2016 |
| 20,729,429 |
|
a.1) Civil lawsuits
Parent Company
i. Monetary Correction Claim concerning the Compulsory Loan
The company is subject to a number of claims relating to the application of monetary correction, especially relating to the criteria applied to accounting credits of the Compulsory Loan on consumption of electricity.
These lawsuits were created in order to confute the monetary correction system determined by legislation governing the Compulsory Loan, and applied by the Company.
Credits of the compulsory loan were fully paid by the Company throughout of shares conversions with monetary correction based on legislation.
The difference has been presented to the Superior Court of Justice (STJ), which defined that the case has merit. The case, however, is currently subject to appeals to the Federal Supreme Court (STF), which are pending judgment.
Despite the appeals, due to STJ’s decision, it was decided under the terms in article 543-C in the Code of Civil Procedure of 1973, claims filed, have progressed through the courts and there have been several judgments for the payment of monetary adjustment differences, despit this judgment there is no agreement between Eletrobras and the plaintiffs for the calculation any amount.
However, in the third quarter of 2015, the STJ issued decisions defining the parameters for the method to calculate the adjudicated claims, accepting some, but not all, of the arguments made by Eletrobras, resulting inadjustments to the calculation methods adopted by Eletrobras and the risk classification of these claims.
The Company maintains a provision for these civil matters of R$ 13,901,602 on December 31, 2016 (R$ 9,279,041 on December 31, 2015) relating to these proceedings.
ii. Amazonas GT and Eletrobras
It is important to consider the existence of proceedings filed against Amazonas GT, where Eletrobras was included as defendant, as it appeared as guarantor and main debtor of Amazonas in several electricity supply contracts.
These proceedings arise out of payments, fines, and fees charged due to alleged delays and defaults by Amazonas GT in compliance with obligations related to these contracts.
Specifically in these contracts for the supply of energy in which Eletrobras is the guarantor, the Company mains the provision of R$ 531,198 (R$ 484,254 on December 31, 2015), tied to assets of the same amount of Amazonas GT.
iii. Amazonas D and Eletrobras
A Proceeding that disputes any delays in the payment by Amazonas D to Produtore Independente de Energia (PIE), Companhia Energética Manauara S/A, as Eletrobras was included in a passive role, due to being obligated as the guarantor and principal debtor of this contract for supply of energy,as of December 31, 2016, the Company recognized the amount of R$ 12,635 (R$ 144,487 on December 31, 2015) as a provision for this matter.
Consolidated
1) CGTEE
KFW Bank seeks to recover amounts from CGTEE in relation to a loan that KFW claims CGTEE is a guarantor. KFW claims repayments due (recorded as contractual fines), interest on overdue loans, late payment interest on overdue repayments and claims for damages. CGTEE does not recognize the guarantees, and is a party to a legal action arguing the false nature of the guarantees. CGTEE has received the Official Letter No. 2677/2013/CGCI-DRCI-SNJ-MJ, 4/12/2013, from the Ministry of Justice, which forwards the Letter Rogatory notifying the action of collection of KFW in relation to the Frankfurt Regional Court, for the guarantee of four contracts of the Winimport S/A Thermal Electric Plant. Three hearings have been conducted in Germany. The court ruled in May 2016 in favor of KFW for the amount of EUR 69,708. CTEEP filed an appeal in june 2016. The reasons for the appeal were presentedin September 2016. The next step will be the statement of KFW about the appeal. The probability KFW’s appeal will be unsuccessful is more likely than not and therefore a provison of R$ 235,668 was recognized as of December 31, 2016.
2) Chesf
i. Nullification
Chesf is the plaintiff of a legal action in which seeks the partial Nullification of the addendum (K Factor analytical correction of prices) regarding the construction agreement for the Xingó Hydroelectric Plant, signed with the consortium formed by Companhia Brasileira de Projetos e Obras, CONSTRAN S.A.-Construções e Comércio and Mendes Junior Engenharia S.A. (defendants in this proceeding). Chesf requests the return of double the sums paid for K Factor, valued at approximately R$ 350,000 (values at the time, converted into reais). The same defendants, in addition to contesting the fact, filed, in parallel, a counterclaim requesting the condemnation of Chesf for payments due arising from the same contractual addendum not timely paid by the Company (partial disallowance of the K Factor between July 1990 and December 1993, pursuant to Act no. 8,030/1990, and full suspension of payment of the K Factor, from January 1994 to January 1996).
After a long procedure in ordinary instances, including a dispute in relation to the judiciary branch responsible for its processing and decision (Chesf and the Federal Goverment, assisting it in the proceeding, agreeing to the jurisdiction of the Regional Federal Court of the 5th Region, in the light of Act no. 8,197/1991, agreed to be the jurisdiction of the State Court, this understanding being ratified by the Court of Justice of Pernambuco/TJPE — the Superior Court of Justice/STJ, when requested to comment on the matter, he did not hear the corresponding special appeal for exclusively procedural reasons), the legal action of Chesf was dismissed and the counterclaim of the defendant was upheld, both decisions being handed down by the TJPE.
Chesf and the Federal Goverment, in the course of the proceeding — due to incidental matters — and especially at its end in ordinary instances, presented special and extraordinary appeals. In the main proceedings, the Federal Supreme Court/STF has not heard the extraordinary appeal, due to non-existence of direct constitutional matters in the dispute. STJ, on August 2010, dismissed the special appeal of Chesf (RESP. 726,446), allowing the presentation by the Company of motions for reconsideration, which was initiated in December 2012 and completed in December 2013. Both were dismissed and the objective of the Motions for Reconsideration were also denied. Following this, the motions for reconsideration were presented in a special appeal. In February 2016, motions for reconsideration of the jurisdiction of the Special Court of the STJ were rejected outright by the Reporting Judge,
Minister Luiz Felipe Solomon. Chesf filed a regulatory appeal of that decision, which was denied by the Special Court and is pending publication.
In December, Chesf filed an Incidental Provisional Protection Petition in the records of the RESP no. 1.530.912/PE, which was granted, providing suspensive effect to stop the enforcement of the judgment issued by the TJPE until a final decision of the special appeal.
At the same time, and since the conclusion of the proceedings made before the ordinary instances, the defendant has been taking in the ordinary instances of the judiciary of the State of Pernambuco, various initiatives to promote the enforcement of the amount petitioned in counterclaim.
Consequently, in November 1998 a request for provisional enforcement in relation to the temporary protective order of the court was filed, but this initiative was suspended by order of the STJ.
Subsequentely, the same defendant formulated a liquidation proceeding of the temporary decision that held in its favor - and not without previously, in turn, having been denied, due to lack of jurisdiction, the Federal Court, the decision was overturned by the TJPE at the request of the defendant-, it was dismissed without merit due to the decision of the first instance that, when appealed, was overturned by the TJPE, which upheld, to a large extent, the appeal, (AI 205.097-7), in relation to the claim of the defendant, ratifying, with exclusions, the second final expert report for arbitration of the amounts presented in fact in the first instance. In addition, in this same case, and after the subsequent review of the various motions articulated by all parties to the proceedings, the same TJPE accepted the claim of Chesf to the extent of excluding from the former ratification of the values the improper accrued computation of contractual and legal late interest, thereby reducing considerable the amount recognized in favor of the defendants.
Once the liquidation matter was reviewed in the ordinary instances of the Judicial Branch of the State or Permambuco, all the parties to the proceedings filed appeals in the higher courts - in the case of Chesf, a special appeal to the STJ (pointing out various procedural irregularities and manifest reductions still legally necessary in the liquidation amount initially ratified by the TJPE) and an extraordinary appeal to the STF (pointing out procedural matters related to fundamental constitutional guarantees).
It is also should be noted, in this same fact - the liquidation proceeding -, that independent from the previously referenced special and extraordinary appeals pending review, there is a legal addition in course before the STJ RESP 1.366.295, where, already after the validity of Act. no. 9,469/1997, the jurisdiction of the proceeding and judgment of that legal action was disputed again (Chesf and the Federal Goverment, assisting it in the proceeding, agree on the jurisdiction of the Federal Court; the defendant considers the Judicial Branch of the State of Pernambuco as having jurisdiction): in this in this appeal there was a denial from the Second Chamber of the STJ, followed by motions for reconsideration. In March 2016 there was a review of the referenced motions for reconsideration with identical results, and this decision was published in December 2016.
In August 2013 the defendant, after the completion of the liquidation proceedings before the ordinary instances — and without prejudice to the appeals to the aforementioned higher courts -, took the initiative before the 12th Circuit Court of Recife — PE to promote the provisional enforcement of the amounts, which referenced in the April/2015 amounted to a sum of R$ 1,035 millions. There was an on-line determination of attachment made, via
Bacenjud, with several initiatives of incidence concerning the assets of CHESF. Up to December 31, 2015 the amounts blocked totaled R$ 360 million. The consortium petitioned requesting 25% of the invoicing of Chesf to be attached, and the amount until then that was blocked was released without the presentation of suitable collateral. This petition was dismissed by the Court, and this decision was later upheld by the TJPE. In February 2016 a new decision of 12th Circuit Court of the District of Recife granted the request for attachment on Government bonds held by Chesf, in order to complement, up to the amount of the condemnation, the amount already locked. Against this measure, a regulatory appeal was filed with the TJPE, which is pending decision. The National Treasury Secretariat reported the impossibility of compliance with this determination and, therefore, the Banco do Brasil and Caixa Economica Federal were officially informed. In March 2016, the Caixa Econômica Federal blocked the amount of R$ 125 million, applicable to funds of that institution.
A complaint was filed by Chesf, in May 2016, seeking the suspension of the provisional enforcement and as a consequence, the blocking measures, an injunction was granted by the Substitute Judge Roberto Maia on 6/6/2016 and revoked in June 2016, restoring the blocking situation, without, in practice, having produced its effects. A new petition for reconsideration/grievance was filed by Chesf on 6/15/2016, received as a grievance in June 2016 and it was determined to send a summons to the aggrieved parties. Given the addition of new documents by Chesf, the Reporting Judge Eduardo Augusto Paurá Peres ordered the Consortium to respond concerning the new documents, to review the claims, pursuant to art. 437, §1º, of the CPC1 (Civil Procedure Code 1).
Management of the Company, with the assistance of its legal advisors, updated the provision in its non-current liabilities in the approximate amount of R$ 1,169,311 and made other additions of R$ 117,700 on Decembrer 31, 2016, relating to the value of the condemnation in defeated party fees in favor of the parties opposing Chesf (these were set at 10% over the value of the principal condemnation plus R$ 100,000.00), all of the above being taken especially in reference, on one hand, the decision handed down by the TJPE in the liquidation action (proposed by the Xingó Consortium — CBPO/CONSTRAN/Mendes Junior), currently in course before the STJ under no. RESP 1.530.912, distributed in that court and still there awaiting proceedings and judgment with attibution of suspensive effect in the appeal (there is, in the same proceeding, also an Extraordinary Appeal sent to the Federal Supreme Court) and, on the other hand, the values on the books for which (including as raised in the Special Appeal referenced above) there is a conviction of non-suit/non-application to the case. There is no forecast for when the outcome of this lawsuit will be known.
ii. Indemnification Action
Lawsuit for compensation of 14,400 hectares of land from the Aldeia farm, filed with the Sento Sé (BA) county on behalf of the estate of Anderson Moura de Souza and his wife (distribution and action at the time under number 0085/1993, currently 0000023-22.1993.805.0242). The sentence in the first instance granted the request and condemned Chesf to pay the sum of R$ 50,000 as principal, interest and monetary correction. On December 31, 2008, Chesf filed an appeal to the Bahia state court and the process was transferred to the Federal Justice due to intervention by the Federal Goverment as assistant (being updated under number 0003437-77.2011.4.01.3305). In June 2011 the appeal filed by Chesf was partially upheld.before the Federal Regional Court of the First Region, with the appeal being denied to the plaintiff. In September 2011 the Rescissory Action (0054126-49.2011.4.01.0000) was adjudicated before the Federal Regional Court of the First Region, which granted an injunction on December 31, 2011 determining the supsension of the enforcement of the principal proceeding, which is on going. The company has a provision for
R$ 100,000 in its non-current liabilities for this matter. Rescissory Action was still pending decision.
3) Eletronorte
i. Expropriation Action - UHE Balbina:
The Company filed expropriations with the intention of compensating the owners of the areas affected by the formation of the Balbina Hydroelectric Power Plant (AM) reservoir. Most of the proceedings are in the fulfillment of sentence phase. There is a discussion regarding the legitimacy of the deeds presented by the expropriated parties, and in fact the Federal Public Prosecutor has filed a class action lawsuit contesting those deeds. the Company has provisioned as of December 31, 2016,R$ 283,428 (December 31, 2015 — R$ 375,449).
ii. Indemnification Action — Sul America Companhia Nacional de Seguros
This relates to the refund of values to Sul America Companhia Nacional de Seguros due to the payment made to Albrás Alumínio Brasileiro S.A. for the claim incurred because of interruption in the supply of electricity. The provision recognized as of December 31, 2016 was R$ 237,299 (R$ 236,731 as of December 31, 2015).
4) Amazonas D
iii. Delays in Payments to Produtores Independentes de Energia
The Company is a party in 14 legal actions filed by Produtores Independentes de Energia (PIE), GERA - Geradora de Energia do Amazonas S/A, Breitener Jaraqui S/A, Companhia Energética Manauara S/A and Rio Amazonas Energia S.A., in which the following is disputed: a) annulment of the fine applied by the Company due to the delay by PIE in start-up of its plant; b) collection of invoicing differences of the portion of the price of energy relating to the supply of fuel sued in the operation of the plant, bringing questions concerning the constant formula in annex G; and c) collection of the differences of amounts resulting from the expiration of the CPMF tax.
Due to new procedural changes, the Directors reassessed the likelihood of the legal proceedings in conjunction with legal advisors, and based on their best estimate, on December 31, 2016 the updated amount provisioned for this matter is R$ 965,517.
b) Contingent liabilities, for which no provisions are recognized:
|
| 12/31/2016 |
| 12/31/2015 |
|
|
|
|
|
|
|
Labor |
| 3,901,704 |
| 1,228,770 |
|
Tax |
| 10,431,673 |
| 6,253,906 |
|
Civil |
| 43,942,534 |
| 23,715,573 |
|
|
| 58,275,911 |
| 31,198,249 |
|
b.1) Civil lawsuits
Parent Company
i. Compulsory Loan
These civil lawsuits in the Parent Company have as their objective the application of monetary restatement criteria concerning credits booked of the Compulsory Loan constituted beginning in 1978.
These claims have as their objective to challenge systematic restatement determined by the legislation governing the Compulsory Loan and applied by the company. The credits were fully paid by the company through stock conversions using as a basis for updating the current legislation.
ii. Class Action Lawsuits
On July 22, 2015 and August 15, 2015, two putative securities class action complaints were filed against Eletrobras and some of our employees in the United States District Court in the Southern District of New York (SDNY). On October 2, 2015, these legal actions were consolidated and the court appointed as principal plaintiffs, Dominique Lavoie and the city of Providence. The plaintiffs filed a consolidated addendum to the complaint on December 8, 2015 allegedly on behalf of investors who bought our North American trading securities from August 17, 2010 to June 24, 2010 to 2015, and filed a second addendum to the complaint on February 26, 2016.
The second complaint added claims, among other things, that Eletrobras and the individual defendants knew or should have known about the alleged fraud committed against the company by a cartel of contractors, as well as bribes and kickbacks allegedly requested and received by employees of Eletrobras; and that Eletrobras and the individual defendants made erroneous statements and omissions in relation to the alleged fraud; and the price of shares in Eletrobras declined when the alleged fraud was disclosed.
The plaintiffs did not specify a value for compensation that they are seeking, such value, when specified, may be material for Eletrobras. On April 15, 2016 Eletrobras submitted a Motion to Dismiss the second amended complaint, which was summarized and then fully presented to the Court on June 17, 2016. Eletrobras is defending itself vigorously against the allegations made in the lawsuit.
On March 9, 2017, a hearing was held concerning the Motion to Dismiss of Eletrobras in the Class Action lawsuit, removing impediments both for the plaintiff as well as for Eletrobras providing the opportunity to present oral arguments before the Court, informing the office that was contracted, Davis Polk & Wardell LLP, that the Judge John G. Koeltl has concentrated his efforts in questioning the parties about the existence of materiality in the infraction imputed to the Company materiality and the management.
In this context, the oral defense of Eletrobras argued that there was no materiality under the quantitative point of view, as the impacts on the the financial statements of the company were not significant. The law office considered that only an administrator of the holding company was cited in the complaints (which has not yet been tried in Brazil in relation to his culpability), and which is insignificant compared to the size of the corporation and the small adjustment caused to its financial statements.
On March 27, 2017 the result of the hearing of the Motion to Dismiss was issued, and the Court partially accepted the arguments of Eletrobras and partially accepted the arguments of the plaintiffs. The proceeding now will pass to the class certification and discovery phase, without creating yet a financial obligation for Eletrobras.
Eletrobras’ management believes that these class action claims, in themselves, do not create a present obligation as a result of a past event. Further the dispute is still in its preliminary stages, and the outcome of the dispute is subject to considerable uncertainty, it is not possible, at this stage, for the Management of Eletrobras to estimate with any reliability the potential loss or range of loss, if any, that may result from the final resolution of these legal proceedings. Therefore, no provision is recognized in the consolidated financial statements of Eletrobras. The final results of these lawsuits may have a material adverse effect in relation to the consolidated financial position of Eletrobras, on the results of operations and on its future cash flows.
iii. Compensation by Eletrobras - RGR
Regarding the actions with risk assessment for possible contingencies, we stress that the administrative process driven by the National Electric Energy Agency-ANEEL, by means of Order No. 63, of January 13, 2014, which determined the compensation by Eletrobras for the account of RGR in the historical amounts R$ 1,924,188 and R$ 113,577, referring, respectively, to the amortization of the debt balance of financing not refunded to the RGR and the appropriation of the financial burden of the Fund during the period from 1998 to 2011. The updated value of the claim is R$ 2,460,930. Due to ANEEL Order no. 2,585/16 of 09/27/2016, the decision was reformed by defining that the amounts due to RGR Fund must be upgraded by the interest of 5%, as provided for in the legislation governing the Sector Fund.
The aforementioned Order determines, furthermore, that the amounts will be corrected to the reference rate of the Extra-Market Fund of the Banco do Brasil of the date on which it should have been returned to the RGR until the effective return to the aforementioned sector fund. Eletrobras, in dissent in relation to the contradictory position of ANEEL, filed an administrative appeal on January 24, 2014, alleging tht the compensation falls under statutes of limitation, the non-existene of any illegal act being practiced by it, and the good faith objective of the administration of the funds.
On May 10, 2016, ANEEL determined that the funds should be returned by Eletrobras to RGR, in relation to funds supposed not transferred, in the scope of the management of the fund, pursuant to ANEEL Order no. 63/2014. Eletrobras, in dessent in relation to the conclusion of the Executive Board of ANEEL regarding the matter, filed an appeal with the Judicial Branch seeking the annulment of the conclusion of ANEEL concerning this order.
In August 9, 2016, the Executive Board of ANEEL approved the suspension until September 30, 2016 of its decision handed down on May 10, 2016.
On September 27, 2016, the Executive Board of ANEEL determined that Eletrobras must return these funds to RGR beginning in January 2017, in monthly installments.
iv. The transfer rate for power from Itaipu
On December 19, 2013, ANEEL published Resolutio no. 1,674, establishing the transfer rate for power from Itaipu for 2014 in the amount equivalent to US$ 26.05 per month, not taking into consideration the component related to the negative balance of the trading account of energy from Itaipu, amounting R$ 881,785, as informed by Eletrobras.
Eletrobras, understanding that decision of the Agency was wrong, filed a motion for reconsideration on January 2, 2014, claiming that the resolution violates the provisions of
Decree No. 4,550/2002 in various provisions, and therefore is illegal and contrary to the principles of the hierarchy of laws and of the prohibition of illicit enrichment.
The petition of Eletrobras was granted, to recognize that the values corresponding to the defaults on payments of distributors to Eletrobras should be considered in the balance of the account of electric energy from Itaipu, determining that the expenditure incurred in bad debt and other debts of shareholders could be compensated, in an updated form, when setting the power transfer rate for the year 2015. On December 31, 2016, the value of the claim is R$ 1,109,973.
v. Acquisition of energy of Belo Monte destined to the ACL
Eletrobras and its subsidiaries CHESF and Eletronorte hold a total of 49.98% of the share capital of the SPE Norte Energia S.A. (NESA), the latter being responsible for the construction of the Belo Monte hydroelectric power plant.
There was a disagreement between the partners as to the application of clause 6.7 of the Shareholder Agreement, which deals with the exercise of rights of preference to conclude the purchase contract for the price of R$ 130.00/MWh (in April 2010) for the acquisition of 20% of the average energy assured, by Eletrobras from the energy of Belo Monte energy intended for the Free Contracting Environment - ACL.
Some members of NESA claim that Eletrobras has an obligation to purchase this energy. Eletrobras understands that there in no such obligation and, indeed, the right of first refusal. The Shareholders’ Agreement provides that conflicts are resolved through arbitration. Accordingly, the Shareholders’ Assembly of Norte Energia S.A. (NESA) ruled in April 2016 due to the initiation of this legal proceeding.
In this arbitration procedure, Eletrobras in consultation with its external lawyers, has assessed that it is more likely than not it will prevail in the arbitration process and therefore it does not have a legal or constructive obligation has arisen from a past event.
Additionally, in the event that Eletrobras is not successful in the arbitration proceeding in progress, the Company estimates the potential for losses of up to R$ 2.212 billion in the purchase and sale operation of this energy, considering the values as of December 31, 2016. For this estimate internally established price assumptions and the percentage of participation in the corporate investment of Eletrobras and its subsidiaries in Belo Monte were used as the basis of the cost of capital of Eletrobras.
Consolidated
1) Distributors
Lawsuit filed by the National Association of Consumers (ANDECO)
This is a Civil Action, in process at the 18th Civil Court of Brazil, filed by ANDECO against Eletrobras, Eletrobras Amazonas, Eletrobras Acre, Eletrobras Alagoas, CELG, Eletrobras Piauí, Eletrobras Rondônia and Eletrobras Roraima, having been attributed to the matter the amount of R$ 27,196,824, resulting from the double indemnity sum of the alleged amounts due by the defendants, as shown in the table below:
Company |
| Losses |
| Legal Double |
|
CELG Distribuição S.A. |
| 3,373,930 |
| 6,747,860 |
|
Eletrobras Distribuição Acre S.A. |
| 250,570 |
| 501,140 |
|
Eletrobras Amazonas Distribuição de Energia S.A. |
| 4,813,561 |
| 9,627,122 |
|
Eletrobras Distribuição Alagoas S.A. |
| 1,948,106 |
| 3,896,212 |
|
Eletrobras Distribuição Piaui S.A. |
| 1,833,144 |
| 3,666,288 |
|
Eletrobras Distribuição Rondônia S.A. |
| 1,261,910 |
| 2,523,820 |
|
Eletrobras Distribuição Roraima S.A. |
| 117,191 |
| 234,382 |
|
Total |
| 13,598,412 |
| 27,196,824 |
|
The plaintiff alleges that, in the absence of ANEEL’s plaintiffization, the prorated collection of non-technical losses (fraud, theft, measurement errors, billing and delivery without measurement) is improper and that, therefore, distributors should be ordered to reimburse (Double Indemnity), the amounts charged in the period from 2010 to 2014, according to their respective balance sheets. It also calls for the annulment of all ANEEL Resolutions that allow the collection and inclusion in the invoices of amounts charged for non-technical losses.
The plaintiff requested a preliminary injunction to suspend collection, as well as suspending the ANEEL resolutions permitting this, the petition was denied. The Magistrate determined to subpoena ANEEL in relation to whether it was interested in being part of the lawsuit, which responded positively, resulting, as a consequence, in the denial of jurisdiction and the reassignment of the matter to the Federal Court.
In August 2016, there was a resdistribution of the records of the 21st Federal Circuit Court of Brasília with an initial order maintaining the acts until then practiced in the civil sphere and determining the subpoena of ANEEL and the Federal Goverment to present the defense, with a subsequent response from the plaintiff.
2) Amazonas D
i. Gas Supply Contract — CIGÁS — Limitation of the Volume of Gas
Regarding the amount of the Fuel Consumption Account (CCC) referring to the generation costs of the subsidiary Amazonas Distribuidora de Energia, there is a possibility of non-neutrality in the gas contract, due to Aneel Order No. 314 of February 2, 2016, which established the amount of natural gas to be reimbursed by CCC in 2016 at a level lower than the Daily Contracted Quantity (“QDC”) of 5,420,000 m3 / day as established in the Natural Gas Purchase and Sale Agreement, between Amazonas Distribuidora and CIGAS/Petrobras.
In March 2017, ANEEL, through Ratifying Resolution no. 2,202/2017, which approved the annual budget of the Energy Development Account — CDE for the year 2017, maintained the same limitation of reimbursement referring to the gas volume at the level of 2016. The Company entered Motions for Reconsideration with ANEEL given the budget limitations imposed by them, which are pending review.
However, with regard to limitation of the reimbursement of the volume, the company assesses as low the risk of materialization of the financial outlay, as it understands that ANEEL cannot create a provision that limits the coverage of the reimbursement of generation costs defined by Act no. 12,119/2009 and reinforced by Act 13,299/2016.
Additionally this favorable decision issued in the Second Instance in a similar case ensures to the Company the complete reimbursement of costs of generation, removing the effects of the limitations imposed. Ultimately, the Company believes that in the unlikely event of the
limitation imposed by ANEEL in relation to the reimbursement of the Volume of Gas, there would be an economic-financial review subject to review of the gas contract in reference or furthermore a review of the Price of Gas by the ANP in order to compensate for this disparity.
The amounts involved in the limitation of the reimbursement for the volume of gas in the fiscal years of 2015 and 2016 are 340 million and 378 million reais respectively.
ii. Oil Reimbursement — ANEEL Ratifying Resolution No. 427/2011
With the advent of Provisional Measure no. 466/2009, subsequently converted to Act no. 12,111/2009, the sector legislation provided that CCC would reimburse not only the total cost of the fuel, but also the total cost of the energy generation of the isolated systems, deducting from the average cost of the energy determined for the regulated environment. Regulatory Law no. 12,111/2009 and Decree no. 7,246/2010 did not impose or establish any limitation to the full reimbursement provided.
However, together with Regulatory Law no. 12,111, of 2009, and Decree no. 7,246 of 2010, ANEEL the Normative Resolution no. 427 established limitations on the reimbursement of costs of acquisition of fuels establishing a reference price.
The Company understands that reimbursement from the CCC is a net and certain right, without any limitation, accordingly it was necessary to file for an injuction in order to guarantee the reimbursement provided for in Law 12,111/2009, without any limitation.
Through the aforementioned lawsuit, a Second Instance Decision was handed down, which guarantees the Company the full reimbursement of the generation costs, rejecting the effects of Aneel Ratifying Resolution No. 427/2011. As a result, it is currently enforced by the decision that granted the requested injunction, in order to ensure full reimbursement of fuel consumption costs without any limitation. In this manner, the Company remains fully reimbursed for its generation costs.
The Company understands that the risk of losing the lawsuit is low because of the Decision already handed down, which is reinforced by Law no. 13,299/2016, which has the benefit of providing funds for the payment of reimbursements of fuel acquisition expenses incurred up to April 30, 2016 by concessionaires holding the concessions dealt with in Law no. 12,111/2009, but not reimbursed due to the economic and energy efficiency requirements referred to in § 12 of art. 3 of that Law.
Accordingly, ANEEL Technical Note no. 331/2016, dated September 12, 2016, also included in its item ii. 1 - “CCC Changes”, provides that there is a need for adjustments to Normative Resolution 427/2011 pursuant to Law no. 13,299/2016, as we see:
ii.1 CCC Changes
a. As a result of the publication of Law no. 13,299, of 6/21/2016, which amended, among others, provisions of Law No. 12,111, of 12/9/2009, it is necessary to adjust the normative act of ANEEL that regulates the management and processing of the CCC.
b. Therefore, in view of the Normative Resolution No. 427/2011 the points to be reviewed are identified below. In the first place and being presented as an item of major economic and financial impact on the
distributors benefited, art. 3 of Law No. 13,299/2016 is cited, which provides for the reimbursement of costs, proven, but not refunded pursuant to the economic and energy efficiency requirements in § 12 of the art. 3 of Law no. 12,111/2010, including monetary updates, up to 4/30/2016.
Consequently, and considering that Law no. 13,299/2016 guarantees the full reimbursement of the cost of fuels up to April 30, 2016, the estimated value in litigation after April 2016 is approximately R$ 96,694.
3) CEAL
This involves a Consumer Class Action Suit in process in the 3rd Civil Circuit Court of the District of Maceió/AL, proposed by the Instituto Sal da Terra, with the objective of condemning CEAL to individual moral damages in the amount equivalent to R$ 10 (ten thousand reais) for each of the 30,000 (thirty thousand) consumers affected by the sending of a letter from SERASA informing them that their names would be listed as delinquent payers.
The fact that originated the aforementioned legal action occurred as a result of the action by SERAS, which generated, without the authorization or request of CEAL, the referenced letters to the consumers, who, in their majority, already had paid their electric bills.
The classification was made in a rather conservative manner, given that various lines of defense set out in the response of CEAL, which entailed the future dismissal of the lawsuit, with one of them being the passive illegitimacy of CEAL due to the fact that the initiative or authorization in relation to sending of the letters informed the consumers of the possibility of their names being listed as delinquent payers.
On February 10, 2015, a judicial reconciliation hearing was conducted between the Instituto Sal da Terra and CEAL, however, in this hearing the parties did not reach an agreement. In this same hearing, the parties requested the Magistrate to review the petition to denounce à lide, as well as the review of the preliminarybem como a apreciação das preliminares raised in the response of CEAL, in which the Magistrate determined a vinda dos autos à conclusão to deliberate with respect to what was requested in the hearing by the parties.
The proceedings have been concluded by the Magistrate, since February 10, 2015, awaiting the judicial decision, given that the action already had responded to by CEAL, as well as the Instituto Sal da Terra already filed its response in relation to their response The total amount of individual indemnifications sought is R$ 300,000.
4) Chesf
i. Accounting and payment by Aneel of the market transactions.
A lawsuit filed by AES Sul Distribuidora Gaúcha de Energia (proceeding no. 2002.34.00.026509-0 — 15th Federal Circuit Court — DF), seeks the accounting and payment by ANEEL of market transactions related to the positive exposure (profit) obtained by not opting for the relief (insurance) in December of 2000. An interlocutory decision issued in the interlocutory appeal lodged under a Grievance Instrument by AES Sul (Process no. 2002.01,00.040870-5) filed against ANEEL resulted in a payment of approximately R$ 110,000 with payment stipulated for November 2008.
To suspend the enforcement of debt, the following legal measures were adopted on that occasion: 1) filing of the Petition of Stay of the Preliminary Order in the STJ; 2) filing of Writ of Mandamus in the Federal District Court of Justice - TJDF and 3) filing of a petition postulating the entry of Chesf in the proceeding, as a necessary, passive co-plaintiff. The procedures 2 and 3 were accepted, with the consequent reform of the preliminary order and suspension of the debt in question. Chesf joined the lawsuit as a necessary, passive co-plaintiff and contested the action. On December 31, 2011, the Federal Regional Court of the 1st Region determined the writ of mandumus (measure 2), filed by Chesf to be admissible and AES files a Special Appeal, and after this was denied, it filed an appeal. The action was determined to be inadmissibleand the motions for clarification were denied, resulting therefore in the filing of the appeal by the plaintiff. On December 31, 2012 counter-arguments were offered by Chesf, which are pending of the documents by the TRF — 1st Region. On December 31, 2013, the TRF -1st Region determined that the MS filed by Chesf (measure 2) to be admissible. Resp of AES, judged. Writ of Mandamus upheld. Action determined to be inadmissible Motions for Clarification denied. In March 2014, the Appeal filed by AES Distribuidora Gaúcha de Energia was ruled on and granted by the TRF 1st Region. Chesf filed motions for clarification against the judgment that granted the appeal, which were denied. On December 31, 2015 the judgment that denied the motions for reconsidderation were pending publication. The judgment was published in January 2016. Chesf and the other defendants filed an appeal with the objective of prevaling on the dissenting vote.
Based on the assessment of its legal advisors, the administration classified the risk of loss of this legal action as “possible”, with an estimated amount of R$ 110,000.
ii. Labor Class Action Lawsuit - Union Hub of Rural Workers of the São Francisco Sub-District
Labor Class action lawsuit filed by the Federal Public Prosecutor in the Judiciary subsection Paulo Afonso — BA (process no. 2490-83.2012.4.01.3306), which aims to obtain a court order declaring the non-existence of the Agreement Addendum of 1986, signed in 1991, between Chesf and representatives of the Union Hub of Rural Workers of the São Francisco. The value attributed to the casue was R$ 1,000,000. A decision was issued that declared the nullity of the agreement of 1991 between CHESF and the Union Hub, which changed the form of calculation of the VMT to the equivalent of 2.5 minimum salaries, as well as determining the payment of the differences determined, from 1991, between the amout effectively paid and the value of 2.5 minimum salaries, corrected monetarily and with late interest added for each family that received or still receives VMT, for the respective period that it received it and which is under the territorial jurisdiction of this Judicial Subsection, except for cases of resettled persons who signed the terms of an extrajudicial agreement and the public document of donation with that requested, renouncing the benefits of the VMT, as well as the right of the interested parties to the receipt of installments affected by the five-year period, from the filing of the lawsuit. Appeals were filed by Chesf and the MPF against the decision, which are pending judgment and distributed to the Federal Reporting Appeals Court Judge Neviton Guedes - Fifth Chamber in November 2016. However, as of December 31, 2016, the report and vote have not been issued.
iii. Shared Generation Installations — ICGs
Process No. 33328-13.2015.4.01.3400 — 15th Federal Court of the Judicial Section of the Federal District. This is a public civil action filed by ANEEL aimed to collect from Chesf alleged losses that end users of electricity incurred with delays in works related to the so-called Shared Generation Facilities—ICGs. This loss amounts to R$ 1,470,885. Chesf received a summons, and filed a its response in December 2015 ANEEL filed a response. The judge denied the request by Chesf for the production of evidence. In October 2016, the referenced proceeding was concluded for sentencing.
5) Eletronorte
Collection by CNEC of monetary correction and late payment interest: legal action of collection file by CNEC - Consórcio Nacional de Engenheiros Consultores S.A., with the objection of receiving monetary correction and interest for late payment of invoices, due to desproportionate monetary correction in relation to the actual value of the currency, by suppression and use of indices divorced from contractual reality. The Company maintains that the parties completed all pending items, by signing “Contract of Recognition, Consolidation and Payment of Debts and other Agreements” and, that, the right claimed is specified and removed. On December 31, 2016 the value of the proceeding is R$ 1,093,210 (2015 — R$ 1,090,591).
6) Eletrosul
Eletrosul has a participation of 49% of the value of the shares with a possible loss of Consórcio Energético Cruzeiro do Sul — CECS, in the amount of R$ 450,469, whose principal discussion of possible risk with respect to the action of indemnification filed by the plaintiff Mineradora Tibagiana Ltda. Mineradora alleges that it holds a mining work authorizaion issued by the National Department of Mineral Production — DNPM and affirms that the mining work authorization obtained provides for legitimate possession and domain in the area in the region around Rio Tibagi. The claimed indemnification refers to the alleged losses in the mining activities in relation to the construction work of the Plant. On December 31, 2016 the value attributed to this claim is R$ 220,730.
b.2) Tax-related
Parent Company
It is a Special Appeal of Disagreement, filed by the National Finance Attorney, based on Article 7, II, of the Internal Regulations of the Superior Chamber of Tax Resources, against the rightful Ruling No. 202-19,201, unanimous, of the Second Chamber of the First Taxpayer Council.
In the case, a Notice of Infraction was served on Eletrobras, with the requirement to pay COFINS for taxable events which occurred in the period of February 1999 to November 2002, specifically regarding financial income earned from financing, loan and financial assignment contracts, and exchange fluctuations, derived from contracts between Eletrobras and Itaipu Binacional.
Eletrobras defended itself from the challenge, alleging that it excluded the revenue in question from the COFINS taxable based supported by Clause XII, subsection “b” of the Brazil-Paraguay Treaty, which was the object of Legislative Decree No.23, of May 30, 1973.
Despite the challenge submitted, the tax requirement made by the Office of the Brazilian Federal Revenue Service in Brasilia was maintained, where Eletrobras filed a voluntary appeal, which was granted by the 2nd Chamber of the Taxpayer Council.
The Federal Goverment (National Finance), filed a special appeal of disagreement, requesting annulment of the ruling, and that appeal is pending trial.
In this manner, the last decision of the Taxpayer Council was favorable to Eletrobras, and the Company consider the decision to be fully consistent with Federal Supreme Court case law. The case value as of December 31, 2016 is R$ 475,085 (December 31, 2015 - R$ 448,841).
Consolidated
1) Eletronuclear
The tax enforecement action filed by the State of Rio de Janeiro in 2009, whose objective is the credit of the ICMS — Tax on Circulation of Goods and Services, allegedly incident on importation of goods, whose process and guarantee number is 0003767-29.2009.8.19.0001, amount to R$ 86,396, updated to R$ 100,573.
2) CEAL
On April 19, 2005, the State Secretariat of Finance Alagoas (SEFAZ/AL) filed against CEAL the Infraction Notice no. 99.33828-001.
The infraction notice imposes on CEAL the collection of ICMS incident on commercial losses resulting from the operation of economic activities of electric power distribution. According to the State Tax Authorities, the proceedings are due to the fact that CEAL has provided electric power without the issuance of the respective fiscal documentation in the period between January 2000 and January 2005.
The preliminary injunction suspending the enforceability of the tax credit is currently in force. The proceedings before the Magistrate concluded on May 19, 2014, pending judicial decision, as the action has been contested by the State of Alagoas and by CEAL, its respons already having been filed in relation to. The proceeding has been concluded by the Magistrate on May 19, 2014 and is pending judicial decision, given than the action already has been contested by the State of Alagoas, as well as CEAL, which already has filed its repsonse to the writ of contest. The corrected balance on December 31, 2016 is R$ 352,500.
b.2) Labor Related
i. Labor actions - Responsibility for the subsidiary
Several labor actions are being processed in which Eletrobras is called to the proceeding in the capacity of being responsible for its subsidiary, arising from the understanding in Labor Law that Eletrobras is part of an economic group. In these proceedings, Eletrobras will only be liable for the payment, in the event of the judicial recognition of the existence of an economic group and if the original employer does not make the payment, which is why the amount of R$ 2,066,335 is classified as a possible risk. In relation to some of the value that will be paid, of this amount, there will still be the possibility of Eletrobras, being reimbursed by the employer.
For all of the matters described in Item b above, no provisions have been recognized as it is probable (more likely than not) that the Company will be successful in its defense of these claims and therefore it does not have a legal or constructive obligation resulting of a past event.
c) Processes where the likelihood of an outflow of resources embodying economical benefits is assessed as remote and also don’t result in the recognition of provisions.
Chesf
Collection lawsuit underway by the contractor Construtora Mendes Júnior S.A., hired to build the Itaparica hydroelectric plant, due to alleged financial losses resulting from a delay in the payment of invoices by the Company. The legal action is considered by its administrators and supported by the legal advisors of the Company as a remote risk of loss.
In this collection lawsuit, contractor Construtora Mendes Júnior S.A. obtained a sentence from the 4th Civil Court, which was later annulled, which sentenced Chesf must pay a sum which, including attorney’s fees and monetary correction until August of 1996, calculated by the criteria determined by the court, would be approximately R$ 7,000,000, a sum which has not been updated since. The Federal Public Prosecutor submitted a statement requesting that the entire process be dismissed, and on the merits, requested that it be inadmissible. The contractor Construtora Mendes Júnior S.A. filed appeals to the Supreme Court (ARESP), and on December 31, 2012, in that instance, the Federal Public Prosecutor issued an opinion finding that the appeals should be rejected, and on December 31, 2012, in that instance, the Federal Public Prosecutor issued an opinion opining for the the denial of the appeal, which was judged inadmissible in September 2014.
Mendes Junior has filed a Regulatory Appeal, converted into REsp and presented to be judged on December 4, 2014, with oral statements presented by the all parties involved. Mendes Junior has filed a Regulatory Appeal, converted into REsp and presented to be judged on December 4, 2014, with oral statements presented by the parties. Because Judge Benedito Gonçalves asked to see the files, the session was suspended, and resumed on December 18, 2014, when the First Panel, unanimously, decided upon rejecting the Special Appeal filed by Mendes Júnior. The decision was published on March 19, 2015. Mendes Júnior filed motions for clarification, which were denied by the STJ.
After the motions were denied, Mendes Júnior filed an extraordinary appeal, which was denied continuence, this was the subject of an appeal (ARE 971.889) that is pending judgment after distribution, in which continuance of the appeal was denied.
A regulatory appeal was filed by Mendes Júnior that is pending judgment. On December 31, the proceeding was concluded for judgment.
NOTE 31 — ASSET DECOMMISSION OBLIGATION
The Company recognizes decommissioning obligations in thermonuclear power plants, which consist of a program of activities required by the National Nuclear Energy Commission (CNEN), which allows dismantling these nuclear facilities safely and with a minimal impact on the environment, at the end of their operating cycle.
Given the specific characteristics of operating and maintaining thermonuclear power plants, whenever there are changes to the estimated cost of demobilization, due to new studies and new technological advancements, the decommissioning charges should be changed so as to adjust the balance of the obligation to the new reality.
In the calculation of the adjustment to the present value of the obligation for demobilization, the total estimated cost for decommissioning is considered, discounted at a rate of 6.02% per annum which represents the cost of capital of the company, from the end of the economic useful life of each plant up to the balance sheet date.
Balance of Liabilities, at Present Value, on 12/31/2013 |
| 1,136,342 |
|
Adjustment to Present Value/Exchange Variation during period |
| 178,138 |
|
Balance of Liabilities, at Present Value, on 12/31/2014 |
| 1,314,480 |
|
Adjustment to Present Value/Exchange Variation during period |
| (113,294 | ) |
Balance of Liabilities, at Present Value, on 12/31/2015 |
| 1,201,186 |
|
Adjustment to Present Value/Exchange Variation during period |
| 201,284 |
|
Balance of Liabilities, at Present Value, on 12/31/2016 |
| 1,402,470 |
|
NOTE 32 — ADVANCES FOR FUTURE CAPITAL INCREASE
The resources come from the National Treasury and are earmarked for the projects below:
|
| 12/31/2016 |
| 12/31/2015 |
|
Federal Government Contribution to Future Capital Increase |
| 3,060,373 |
| — |
|
Acquisition of Equity Stake CEEE/CGTEE |
| 224,097 |
| 196,544 |
|
Banabuí - Fortaleza Transmission Line |
| 3,783 |
| 3,318 |
|
UHE de Xingó |
| 10,629 |
| 9,322 |
|
Transmission Line in the State of Bahia |
| 1,664 |
| 1,459 |
|
Federal Electricity Access Fund - Law 5,073/66 |
| 9,863 |
| 8,650 |
|
|
| 3,310,409 |
| 219,294 |
|
The entry of the funds in the Company in the amounts of R$ 1,000,000 and R$ 970,000 was approved, on April 6 and September 9, 2016, respectively, through Advances for the Future Increase of Capital (“AFAC”), made by the controlling sharedholder the Federal Government. The referenced funds will be earmarked for covering capital expenses for the year of 2016, provided in the budget of Eletrobras Holding, being prohibited the utilization of these funds for transfer, under any heading, to subsidiary distributors of Eletrobras. On November 22, 2016, an new inflix of funds occured in the Company in the amount of R$ 936,180 under the heading of AFAC realized by the Federal Government, destined to make viable the execution of the Director Plan of Business and Mangement for the period of 2017 to 2021 (“PNDG 2017-2021”).
The AFACs realized on April 6 and September 9 of 2016 were necessary to reinforce the sources of necessary funds for compliance with the Global Expenditures Program (PDG) 2016, approved by Decree no. 8,632, of September 30, 2015, due to the frustration of entry of some funds provided originally in its capital budget, such as: (i) the non-receipt of expected dividens from some investments due to losses that occurred in the fiscal period of 2015; (ii) non-receipt, up to this date, of the amounts related to additional indemnifications from the renewed generation and transmission concessions in accordance with Law no. 12,783/2013, due to the necessity to wait for regulatory legislation from the Granting Authority in relation to the conditions for the referenced payment; and, (iii) the difficulty of accessing, at this time, the debt market due to current macroeconomic and sector conditions.
NOTE 33 — PROVISIONS FOR ONEROUS CONTRACTS
|
| BALANCE ON |
| ADDITIONS |
| REVERSALS |
| BALANCE ON |
|
|
|
|
|
|
|
|
|
|
|
Transmission |
|
|
|
|
|
|
|
|
|
Contract 062/2001 |
| 729,478 |
| — |
| (729,478 | ) | — |
|
LT Recife II - Suape II |
| 51,024 |
| — |
| (9,561 | ) | 41,463 |
|
LT Camaçari IV - Sapeaçu |
| 99,080 |
| 15,421 |
| — |
| 114,501 |
|
Other |
| 16,467 |
| — |
| (5,946 | ) | 10,521 |
|
|
| 896,049 |
| 15,421 |
| (744,985 | ) | 166,485 |
|
Generation |
|
|
|
|
|
|
|
|
|
Camaçari |
| 80,441 |
| — |
| (80,441 | ) | — |
|
Funil |
| 83,788 |
| — |
| (20,364 | ) | 63,424 |
|
Coaracy Nunes |
| 228,091 |
| 142,490 |
| — |
| 370,581 |
|
Marimbondo |
| 79,924 |
| 155,882 |
| — |
| 235,806 |
|
Angra 3 |
| — |
| 1,677,269 |
| (327,028 | ) | 1,350,241 |
|
Other |
| 130,072 |
| 414,241 |
| (57,300 | ) | 487,013 |
|
|
| 602,316 |
| 2,389,882 |
| (485,133 | ) | 2,507,065 |
|
Distribution |
|
|
|
|
|
|
|
|
|
Ceal |
| — |
| 7,809 |
| — |
| 7,809 |
|
Cepisa |
| — |
| 65,382 |
| — |
| 65,382 |
|
Ceron |
| — |
| 191,325 |
| — |
| 191,325 |
|
Boa Vista |
| 60,120 |
| — |
| (57,897 | ) | 2,223 |
|
Amazonas D |
| — |
| 812,694 |
| — |
| 812,694 |
|
|
|
|
|
|
|
|
|
|
|
|
| 60,120 |
| 1,077,210 |
| (57,897 | ) | 1,079,433 |
|
|
|
|
|
|
|
|
|
|
|
|
| 1,558,485 |
| 3,482,513 |
| (1,288,015 | ) | 3,752,983 |
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities |
| 9,073 |
| 1,142,502 |
| (57,897 | ) | 1,093,678 |
|
|
|
|
|
|
|
|
|
|
|
Total Noncurrent Liabilities |
| 1,549,412 |
| 2,340,011 |
| (1,230,118 | ) | 2,659,305 |
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
| 1,558,485 |
| 3,482,513 |
| (1,288,015 | ) | 3,752,983 |
|
|
| Balance on |
| PROVISIONS |
| REVERSALS |
| Balance on |
|
|
|
|
|
|
|
|
|
|
|
Transmission |
|
|
|
|
|
|
|
|
|
Contract 062/2001 |
| 608,488 |
| 120,990 |
| — |
| 729,478 |
|
LT Recife II - Suape II |
| 7,657 |
| 43,367 |
| — |
| 51,024 |
|
LT Camaçari IV - Sapeaçu |
| 2,917 |
| 96,163 |
| — |
| 99,080 |
|
Others |
| 13,028 |
| 6,108 |
| (2,669 | ) | 16,467 |
|
|
| 632,090 |
| 266,628 |
| (2,669 | ) | 896,049 |
|
Generation |
|
|
|
|
|
|
|
|
|
Camaçari |
| 91,122 |
| — |
| (10,681 | ) | 80,441 |
|
Funil |
| 132,219 |
| — |
| (48,431 | ) | 83,788 |
|
Coaracy Nunes |
| 30,361 |
| 197,730 |
| — |
| 228,091 |
|
Furnas |
| 168,701 |
| — |
| (168,701 | ) | — |
|
Marimbondo |
| 25,989 |
| 53,935 |
| — |
| 79,924 |
|
Others |
| 51,406 |
| 78,666 |
| — |
| 130,072 |
|
|
| 499,798 |
| 330,331 |
| (227,813 | ) | 602,316 |
|
Distribution |
|
|
|
|
|
|
|
|
|
Ceal |
| — |
| 60,120 |
| — |
| 60,120 |
|
|
| — |
| 60,120 |
| — |
| 60,120 |
|
|
|
|
|
|
|
|
|
|
|
|
| 1,131,888 |
| 657,079 |
| (230,482 | ) | 1,558,485 |
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities (*) |
| 1,687 |
| 7,386 |
| — |
| 9,073 |
|
|
|
|
|
|
|
|
|
|
|
Total Non-Current Liabilities |
| 1,130,201 |
| 649,693 |
| (230,482 | ) | 1,549,412 |
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
| 1,131,888 |
| 657,079 |
| (230,482 | ) | 1,558,485 |
|
|
| Balance on |
| PROVISIONS |
| REVERSALS |
| Balance on |
|
|
|
|
|
|
|
|
|
|
|
Transmission |
|
|
|
|
|
|
|
|
|
Contract 062/2001 |
| 875,272 |
| 647,484 |
| (914,268 | ) | 608,488 |
|
Others |
| — |
| 23,602 |
| — |
| 23,602 |
|
|
| 875,272 |
| 671,086 |
| (914,268 | ) | 632,090 |
|
Generation |
|
|
|
|
|
|
|
|
|
Itaparica |
| 863,146 |
| — |
| (863,146 | ) | — |
|
Jirau |
| 711,881 |
| — |
| (711,881 | ) | — |
|
Camaçari |
| 267,117 |
| — |
| (175,995 | ) | 91,122 |
|
Funil |
| 95,903 |
| 131,385 |
| (95,068 | ) | 132,220 |
|
Mauá-Klabin |
| 19,853 |
| — |
| (19,853 | ) | — |
|
Coaracy Nunes |
| 88,545 |
| — |
| (58,184 | ) | 30,361 |
|
Others |
| 30,425 |
| 260,138 |
| (44,468 | ) | 246,095 |
|
|
| 2,076,870 |
| 391,523 |
| (1,968,595 | ) | 499,798 |
|
|
|
|
|
|
|
|
|
|
|
Distribution |
|
|
|
|
|
|
|
|
|
Intangible |
| 295,259 |
| — |
| (295,259 | ) | — |
|
|
| 295,259 |
| — |
| (295,259 | ) | — |
|
|
| 3,247,401 |
| 1,062,609 |
| (3,178,122 | ) | 1,131,888 |
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities (*) |
| 3,066 |
| 221 |
| (1,600 | ) | 1,687 |
|
|
|
|
|
|
|
|
|
|
|
Total Non-Current Liabilities |
| 3,244,335 |
| 1,062,388 |
| (3,176,522 | ) | 1,130,201 |
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
| 3,247,401 |
| 1,062,609 |
| (3,178,122 | ) | 1,131,888 |
|
The amount of the provision for onerous contracts maintained on December 31, 2016 was R$ 952,728 (R$ 1,270,274 on December 31, 2015) arises a from concession contracts extended under Law No. 12,783/13, due to the tariff determined presenting an imbalance in regards to current operating and maintenance costs. Given this, the present obligation according to each contract was recognized and measured as a provision, and may be reversed due to adjustments in the cost reduction and/or tariff revision program.
Angra 3
The Company revised the total budget for the Angra III project and the forecasted date for operation othe Angra III Nuclear Plant was changed to December of 2022. Accordingly, in the fiscal period of 2016, the Company recognized an impairment in the amount of R$ 2,885,939 (see Note 19) of the asset in relation to this project and a surplus value in relation to this asset of R$ 1,677,269, recognized as an onorous contract.
NOTE 34 — LONG-TERM OPERATING COMMITMENTS
The Company’s long-term operating commitments, mainly related to purchase agreements for electrical energy and fuel, are:
34.1. — Purchase of energy
Companies |
| 2018 |
| 2019 |
| 2020 |
| 2021 |
| 2022 |
| After 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amazonas D |
| 796,284 |
| 865,926 |
| 953,503 |
| 1,026,234 |
| 1,106,388 |
| 3,098,995 |
|
CGTEE |
| 228,948 |
| 228,948 |
| 220,695 |
| 220,695 |
| 220,696 |
| 220,695 |
|
Chesf |
| 267,690 |
| 267,690 |
| 268,420 |
| 177,700 |
| 177,700 |
| 2,130,450 |
|
Distribuidora Alagoas |
| 752,200 |
| 828,480 |
| 902,263 |
| 881,572 |
| 922,479 |
| 922,480 |
|
Distribuidora Piauí |
| 854 |
| 837 |
| 768 |
| 774 |
| 808 |
| 280,767 |
|
Distribuidora Roraima |
| — |
| 1,047,758 |
| 528,156 |
| — |
| — |
| — |
|
Distribuidora Rondônia |
| 1,254,994 |
| 1,355,922 |
| 1,435,240 |
| — |
| — |
| — |
|
Eletrosul |
| 246,262 |
| 249,674 |
| 240,274 |
| 238,361 |
| 229,981 |
| 2,518,069 |
|
Furnas |
| 607,914 |
| 610,976 |
| 602,903 |
| 600,055 |
| 593,571 |
| 3,220,238 |
|
Total |
| 4,155,146 |
| 5,456,210 |
| 5,152,222 |
| 3,145,390 |
| 3,251,623 |
| 12,391,694 |
|
34.2 — Fuel Suppliers
Companies |
| 2018 |
| 2019 |
| 2020 |
| 2021 |
| 2022 |
| After 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amazonas D |
| 2,964,692 |
| 3,104,682 |
| 2,987,003 |
| 2,754,647 |
| 2,878,525 |
| 19,497,308 |
|
CGTEE |
| 115,345 |
| 115,345 |
| 115,345 |
| 115,345 |
| 115,345 |
| 230,690 |
|
Eletronuclear |
| — |
| — |
| 1,000,000 |
| 600,000 |
| 316 |
| 8,762,700 |
|
Total |
| 3,080,037 |
| 3,220,027 |
| 4,102,348 |
| 3,469,992 |
| 2,994,186 |
| 28,490,698 |
|
The main activity in the purchase of fuel is in the subsidiary Eletronuclear, which has contracts signed with Indústrias Nucleares Brasileiras - INB for the purchase of Nuclear Fuel for the production of electrical energy, to recharge thermonuclear power plants (UTN) Angra I and Angra II, as well as to deploy UTN Angra III and recharge it in the future.
The subsidiary Amazonas has a long-term commitment for the purchase of natural gas to generate thermoelectrical energy with Companhia de Gás Natural do Amazonas — CIGÁS. The final term of the contract is 11/30/2030.
34.3 — Sale of Energy
Companies |
| 2018 |
| 2019 |
| 2020 |
| 2021 |
| 2022 |
| After 2022 |
|
Amazonas GT |
| 558,760 |
| 558,760 |
| 446,298 |
| 319,638 |
| 319,638 |
| 1,331,970 |
|
CGTEE |
| 474,699 |
| 474,699 |
| 474,699 |
| 474,699 |
| 474,699 |
| 949,398 |
|
Chesf |
| 824,510 |
| 864,700 |
| 864,700 |
| 810,660 |
| 866,400 |
| 10,178,500 |
|
Eletrosul |
| 652,352 |
| 548,036 |
| 493,293 |
| 491,945 |
| 491,945 |
| 7,419,496 |
|
Eletronuclear |
| 3,087,989 |
| 3,087,989 |
| 3,087,989 |
| 3,087,989 |
| 3,087,989 |
| — |
|
Furnas |
| 3,054,451 |
| 3,054,451 |
| 1,730,187 |
| 1,726,353 |
| 1,726,353 |
| 27,531,632 |
|
Distribuidora Rondônia |
| 2,304,857 |
| 2,549,537 |
| 2,835,530 |
| — |
| — |
| — |
|
Total |
| 10,957,618 |
| 11,138,172 |
| 9,932,696 |
| 6,911,284 |
| 6,967,024 |
| 47,410,996 |
|
34.4 — Enviromental Commitments
Companies |
| 2018 |
| 2019 |
| 2020 |
| 2021 |
| 2022 |
| After 2022 |
|
Eletronuclear |
| — |
| 1,136,165 |
| 428,893 |
| 779,449 |
| 348,957 |
| — |
|
Eletronorte |
| 20,000 |
| 20,000 |
| 20,000 |
| 20,000 |
| 20,000 |
| 16,000 |
|
Total |
| 20,000 |
| 1,156,165 |
| 448,893 |
| 799,449 |
| 368,957 |
| 16,000 |
|
Angra 3
Commitment agreements assumed with the cities of Angra dos Reis, Rio Claro and Paraty, in which Eletronuclear committed to sign specific agreements of an environmental nature linked to the UTN Angra III, to conduct programs and projects in accordance with the conditions established by IBAMA.
Tucurí
Due to legal requirements related to the expansion projects for the Hydroelectric Power Plant Tucuruí and raising its reservoir levels from 72 to 74 meters, there was a need to license this venture with the State Environmental Secretariat (Sema) for the state of Pará, and that agency set a condition for approval of the Installation Permit (LI) that Eletronorte implement various environmental mitigation and compensation programs.
* Information not audited by independent auditors
34.5 — Purchase of Fixed and Intangible Assets
Companies |
| 2018 |
| 2019 |
| 2020 |
| 2021 |
|
|
|
|
|
|
|
|
|
|
|
Chesf |
| 398,045 |
| — |
| — |
| — |
|
Eletronuclear |
| 2,490,036 |
| 471,533 |
| — |
| — |
|
Eletrosul |
| 102,039 |
| 103,662 |
| 122,631 |
| 161,188 |
|
Total |
| 2,990,120 |
| 575,195 |
| 122,631 |
| 161,188 |
|
Contracts signed with various suppliers for the purchase of equipment for the subtitution in fixed assets, primarily, for the Angra 1, Angra 2 and Angra 3 plants, necessary for the maintenance and operation of these assets.
The Company continues to evaluate the continuity of the project of the Angra III Nuclear Plant, which may impact the commitments for acquisition of fixed assets and intangibles.
34.6 — Acquisition of input materials
Companies |
| 2018 |
| 2019 |
| 2020 |
|
|
|
|
|
|
|
|
|
CGTEE |
| 29,352 |
| 29,352 |
| 29,352 |
|
Total |
| 29,352 |
| 29,352 |
| 29,352 |
|
The subsidiary CGTEE is purchasing calcium to control emissions of waste at its plants.
34.7 — Commitments — Jointly controlled ventures
The values of jointly controlled commitments are presented below for the proportion of participation of the companies.
34.7.1 — Purchase of fixed assets
The Company has contracted for acquisiton of fixed assets with suppliers relating to shareholder participation in Special Purpose Enterprises (SPE), as presented below:
Companies |
| 2018 |
| 2019 |
| 2020 |
| 2021 |
| 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Eletronorte |
|
|
|
|
|
|
|
|
|
|
|
CCBM |
| 26,799 |
| — |
| — |
| — |
| — |
|
ELM |
| 14,578 |
| 2,078 |
| 2,078 |
| 2,078 |
| 6,829 |
|
Other |
| 4,061 |
| — |
| — |
| — |
| — |
|
Total |
| 45,438 |
| 2,078 |
| 2,078 |
| 2,078 |
| 6,829 |
|
34.7.2 — Use of public goods
Companies |
| 2018 |
| 2019 |
| 2020 |
| 2021 |
| 2022 |
| After 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Norte Energia S.A. |
| 3,288 |
| 3,288 |
| 3,031 |
| 3,031 |
| 3,031 |
| 29,176 |
|
Energética Águas da Pedra S.A. |
| 370 |
| 370 |
| 370 |
| 370 |
| 370 |
| 1,054 |
|
Total |
| 3,288 |
| 3,288 |
| 3,031 |
| 3,031 |
| 3,031 |
| 29,176 |
|
34.7.3 — Capital contribution
The Company has future commitments signed regarding an interest in Special Purpose Companies (SPEs) in the form of advances for future capital increases, as presented below:
Companies |
| 2018 |
| 2019 |
| 2020 |
| 2021 |
| 2022 |
| After 2022 |
|
Norte Energia S.A. |
| 347,599 |
| 18,150 |
| — |
| — |
| — |
| — |
|
Belo Monte Transmissora de Energia SPE S.A. |
| 87,000 |
| — |
| — |
| — |
| — |
| — |
|
Transnorte Transmissora de Energia S.A. |
| 88,200 |
| — |
| — |
| — |
| — |
| — |
|
Complexo Famosa |
| 4,000 |
| — |
| 55,000 |
| 55,000 |
| 55,000 |
| 55,000 |
|
Complexo Eólico Baleia |
| — |
| — |
| 63,000 |
| 63,000 |
| 63,000 |
| 63,000 |
|
Complexo Eólico Punaú |
| 8,000 |
| — |
| 80,000 |
| 80,000 |
| 80,000 |
| 80,000 |
|
Holding Brasil Ventos |
| 393,000 |
| 428,000 |
| 38,000 |
| 38,000 |
| 38,000 |
| 38,000 |
|
Complexo Eólico Itaguaçú Da Bahia |
| 22,000 |
| — |
| 157,000 |
| 157,000 |
| 157,000 |
| 157,000 |
|
Empresa de Energia São Manoel S.A. |
| 10,000 |
| — |
| — |
| — |
| — |
| — |
|
Complexo Eólico Pindaí I |
| 68,125 |
| — |
| — |
| — |
| — |
| — |
|
Complexo Eólico Pindaí II |
| 15,430 |
| — |
| — |
| — |
| — |
| — |
|
Complexo Eólico Pindaí III |
| 19,390 |
| — |
| — |
| — |
| — |
| — |
|
Chapada do Piauí II Holding S.A. |
| 20,717 |
| — |
| — |
| — |
| — |
| — |
|
Interligação Elétrica Garanhuns S.A. |
| 1,070 |
| — |
| — |
| — |
| — |
| — |
|
Complexo Eólico Sento Sé II |
| 20,717 |
| — |
| — |
| — |
| — |
| — |
|
Complexo Eólico Sento Sé III |
| 20,717 |
| — |
| — |
| — |
| — |
| — |
|
Extremoz Transmissora do Nordeste - ETN S.A. |
| 9,260 |
| — |
| — |
| — |
| — |
| — |
|
Transmission Auction 004/2014 - Lot A |
| 84,331 |
| 84,331 |
| — |
| — |
| — |
| — |
|
Total |
| 1,305,640 |
| 530,481 |
| 393,000 |
| 393,000 |
| 393,000 |
| 393,000 |
|
NOTE 35 — EQUITY
35.1. — Capital Stock
The Capital Stock as of December 31, 2016 is R$ 31,305,331 (R$ 31,305,331 in December 2015) and its shares have no face value. Preferred stock have no voting rights and are not convertible into common stock, however, they have priority in the reimbursement of capital and distribution of dividends at the annual rate of 8% for class “A” shares (subscribed to by June 23, 1969) and 6% for class “B” shares (subscribed to by June 24 of 1969), calculated on the capital corresponding to each class of shares.
The capital stock is represented by 1,352,634,100 book-entry shares, and is distributed, by main shareholders and types of shares, on December 31, 2016, as follows:
12/31/2016 |
| ||||||||||||||||
|
| ORDINARY |
| PREFERRED |
| TOTAL CAPITAL |
| ||||||||||
SHAREHOLDER |
| QUANTITY |
| % |
| Series A |
| % |
| Series B |
| % |
| QUANTITY |
| % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Goverment |
| 554,395,652 |
| 51.00 |
| — |
| — |
| 1,544 |
| 0.00 |
| 554,397,196 |
| 40.99 |
|
BNDESPAR |
| 141,757,951 |
| 13.04 |
| — |
| — |
| 18,691,102 |
| 7.04 |
| 160,449,053 |
| 11.86 |
|
BNDES |
| 74,545,264 |
| 6.86 |
| — |
| — |
| 18,262,671 |
| 6.88 |
| 92,807,935 |
| 6.86 |
|
Banco Clássico |
| 68,750,900 |
| 6.32 |
| — |
| — |
| — |
| — |
| 68,750,900 |
| 5.08 |
|
American Depositary Receipts — ADRs |
| 30,449,968 |
| 2.80 |
| — |
| — |
| 16,755,615 |
| 6.31 |
| 47,205,583 |
| 3.49 |
|
Other |
| 217,150,562 |
| 19.98 |
| 146,920 |
| 100.00 |
| 211,725,951 |
| 79.77 |
| 429,023,433 |
| 31.72 |
|
|
| 1,087,050,297 |
| 100.00 |
| 146,920 |
| 100.00 |
| 265,436,883 |
| 100.00 |
| 1,352,634,100 |
| 100.00 |
|
12/31/2015 |
| ||||||||||||||||
|
| ORDINARY |
| PREFERRED |
| TOTAL CAPITAL |
| ||||||||||
SHAREHOLDER |
| QUANTITY |
| % |
| Series A |
| % |
| Series B |
| % |
| QUANTITY |
| % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal Goverment |
| 554,395,652 |
| 51.00 |
| — |
| — |
| 1,544 |
| 0.00 |
| 554,397,196 |
| 40.99 |
|
BNDESPAR |
| 141,757,951 |
| 13.04 |
| — |
| — |
| 18,691,102 |
| 7.04 |
| 160,449,053 |
| 11.86 |
|
BNDES |
| 74,545,264 |
| 6.86 |
| — |
| — |
| 18,262,671 |
| 6.88 |
| 92,807,935 |
| 6.86 |
|
FND |
| 45,621,589 |
| 4.20 |
| — |
| — |
| — |
| — |
| 45,621,589 |
| 3.37 |
|
FGHAB |
| 1,000,000 |
| 0.09 |
| — |
| — |
| — |
| — |
| 1,000,000 |
| 0.07 |
|
CEF |
| 8,701,564 |
| 0.80 |
| — |
| — |
| — |
| — |
| 8,701,564 |
| 0.64 |
|
FGI |
| — |
| — |
| — |
| — |
| 8,750,000 |
| 3.30 |
| 8,750,000 |
| 0.65 |
|
Other |
| 261,028,277 |
| 24.01 |
| 146,920 |
| 100.00 |
| 219,731,566 |
| 82.78 |
| 480,906,763 |
| 35.55 |
|
|
| 1,087,050,297 |
| 100.00 |
| 146,920 |
| 100.00 |
| 265,436,883 |
| 100.00 |
| 1,352,634,100 |
| 100.00 |
|
Of the total of 429,023,433 shares in the hands of minority shareholders 260,304,425, or 60.7%, are owned by non-resident investors, being 130,257,171 common shares, 28 preferred shares of class “A” and 130,047,226 preferred shares of class “B”.
Of the total shareholders that reside abroad, 30,449,968 common shares and 16,755,615 class “B” preferred shares are held in custody, and tied to American Depositary Receipts (ADRs) program.
35.2 — Capital Reserves
|
| 12/31/2016 |
| 12/31/2015 |
|
Compensation for insufficient remuneration (CRC) |
| 6,779,931 |
| 18,961,102 |
|
Goodwill in issuance of stock |
| 3,384,310 |
| 3,384,310 |
|
Special - Decree/Law 54,936/1964 |
| 387,418 |
| 387,418 |
|
Monetary correction in 1978 opening balance sheet |
| 309,655 |
| 309,655 |
|
Monetary correction in 1987 Compulsory Loan |
| 2,708,432 |
| 2,708,432 |
|
Donations and grants - FINOR, FINAM, and others |
| 297,424 |
| 297,424 |
|
|
| 13,867,170 |
| 26,048,342 |
|
On April 29, 2016 at the fifty-sixth Ordinary General Assembly the destination was deliberated of the financial results of the fiscal year ending on December 31, 2015, with the utilization the capital reserve for the absorption of the amount of R$ 12,181,171 equivalent to the account for accrued losses for the fiscal year, exceeding the profit reserves.
35.3 — Profit reserve
|
| 12/31/2016 |
| 12/31/2015 |
|
Legal (Article 193, Law 6,404/1976) |
| 171,295 |
| — |
|
Statutory (Article 194, Law 6,404/1976) |
| 1,747,209 |
| — |
|
Unrealized Earnings (Article 197, Law 6,404/1976) |
| 386,375 |
| — |
|
Earnings Withheld (Article 196, Law 6,404/1976) |
| 713,803 |
| — |
|
|
| 3,018,682 |
| — |
|
35.3.1 — Legal reserve
This is constituted based on 5% of the net profit determined in each fiscal year, which, in accordance with Law 6,404/1976, should be withheld before any other destination for the constitution of the legal reserve, which shall not exceed 20% of the share capital or 30% of the share capital when the amount of capital reserves is increased. The legal reserve has as its purpose to ensure the integrity of the social capital and may only be used to offset losses or to increase capital.
35.3.2 — Statutory Reserve
|
| 12/31/2016 |
|
Investments (50% of Net Earnings) |
| 1,712,950 |
|
Studies and Projects (1% of Net Earnings) |
| 34,259 |
|
|
| 1,747,209 |
|
The articles of incorporation of the Company define that the General Assembly will destine, in addition ot the legal reserve, calculated on the net profits of the fiscal year:
I — 50%, as a reserve for investments, intended for application in public electric power utilities, for which the accrued balance may not exceed seventy-five percent of the paid-in social capital; and II - 1% as a reserve for studies and projects intended to attend to the execution of studies and projects of technical/economic feasability of the electric energy sector, for which the accrued balance may not exceed two percent of the paid-in social capital.
II — 1% as a reserve for studies and projects, intended to cover the execution of studies and projects of technical-economic mobility of electric energy sector, whose accumulated balance may not exceed two percent of capital stock.
35.3.3 — Unrealized Profits
In the fiscal year in which the amount of the mandatory minimum dividends, calculated per the terms of the articles of incorporation, excees the portion realized of the net profits of the fiscal year, the General Assembly may, through a proposal of the adminstrative bodies, destine the excess amount to the constitution of a reserve for unrealized profits. The reserve for unrealized profits may only be used to pay the mandatory dividend and the unrealized profits of each year that are the first to be realized in cash will be considered as integral parts of the reserve, as long as these profits are not absorbed by losses calculated in fiscal periods.
35.3.4 — Retained Earnings
This is intended for the application of projected investments in the capital budget, in which the general assembly may, through a proposal of the administrative bodies, deliberate to retain a portion of the of the net earnings of the period previously approved by it.
35.4 — Remuneration to the Shareholders
I. — Relative to the fiscal period
The articles of incorporation of the Company establish as a mandatory minimum divident 25% of net profit, adjusted pursuant to corporate legislation, respecting the minimum remuneration for preferred shares of classes A and B, of the nominal value of
shareholder equity relating to these types and classe of shares, providing for the possibility of payment of interest on shareholder equity.
Eletrobras’ Preferred A and B shares, which were subscribed until June 23, 1969, will have priority on the distribution of dividends, which 8% and 6%, respectively rate per annum will affect the equity on each type and class of shares, to be equally apportioned among them.
Below, in the form of intereset on shareholder equity imputed to the minimum dividence, pursuant to applicable legislation, as well as the total value of the remuneration proposed to the shareholders, to be deliberated in the General Ordinary Assembly:
Fiscal Year Net Income: |
| 3,425,899 |
|
(-) Legal Reserve (5% of Net Income) |
| (171,295 | ) |
(+) Realization of Revaluation Reserve |
| 10,442 |
|
(+) Unclaimed Shareholder Remuneration - Elapsed |
| 16,303 |
|
= Taxable Base |
| 3,281,349 |
|
Distribution of Income
Fiscal Year Net Income: |
| 3,425,899 |
|
Minimum Statutory Remuneration Payable |
| (433,962 | ) |
Establishing of Legal Reserve (5% of net earnings) |
| (171,295 | ) |
Establishing of Statutory Reserve for Investments (50% of net earnings) |
| (1,712,950 | ) |
Establishing of Statutory Reserve for Studies and Projects (1% of net earnings) |
| (34,259 | ) |
Establishing of Unrealized Earnings Reserve |
| (386,375 | ) |
Establishing of Reserve for Withheld Earnings (Article 196 of LSA) |
| (713,803 | ) |
Realization of Revaluation Reserve |
| 10,442 |
|
Unclaimed shareholder remuneration |
| 16,303 |
|
Final Balance of Accumulated Income |
| — |
|
In 2016, Eletrobras attributed the remuneration to the sharedholders, in the form of interest on shareholder equity — JCP in the amount of R$ 433,962, imputed to the dividends of the fiscal period in accordance with the statutory provisions, whose remuneration per share is as follows:
Compensation per share - Expressed in R$ |
| 12/31/2016 |
|
Class A Preferred Shares |
| 2.1783 |
|
Class B Preferred Shares |
| 1.6337 |
|
In accordance with the current tax legislation, concerning the value of remuneration proposed to the shareholders, under the heading of JCP, Income Tax withheld at the Source is incident - IRRF (R$ 65,094) and the net portion of the income tax of the JCP to be distributed to the shareholders is R$ 368,868.
Monetary updates are incident on the remuneration proposed beginning of January 1, 2017 up to the effective date of initiation of payment, and this date will be deliberated by the General Ordinary Assembly, which will review the present Financial Statements and proposal for destination of the results of this fiscal period.
NOTE 36 — EARNINGS PER SHARE
(a) Basic
Basic earnings per common share is calculated by dividing the earnings attributable to Company’s Common shareholders by the weighted average amount of common shares outstanding during the year, which excludes common shares bought by the Company and carried as treasury shares. Preferred share has priority on minimum dividends distribution, but its participation rights on earnings, once the minimum dividends is satisfied, is equivalent to common share, thus earnings per preferred share is calculated using the same method applied to common share.
Basic
12/31/2016 |
| ||||||||
Numerator |
| Ordinary |
| Preferred A |
| Preferred B |
| Total |
|
Income attributable to each class of shares |
| 2,880,723 |
| 389 |
| 703,417 |
| 3,584,529 |
|
Denominator |
| Ordinary |
| Preferred A |
| Preferred B |
| Total |
|
Weighted average number of shares |
| 1,087,050 |
| 147 |
| 265,437 |
| 1,352,634 |
|
% of shares with respect to total |
| 80.37 | % | 0.01 | % | 19.62 | % | 100.00 | % |
|
|
|
|
|
|
|
|
|
|
Basic profit or loss per share (R$) |
| 2.65 |
| 2.65 |
| 2.65 |
|
|
|
12/31/2015 |
| ||||||||
Numerator |
| Ordinary |
| Preferred A |
| Preferred B |
| Total |
|
Loss attributable to each class of shares |
| (9,165,746 | ) | (1,239 | ) | (2,238,100 | ) | (11,405,085 | ) |
Denominator |
| Ordinary |
| Preferred A |
| Preferred B |
| Total |
|
Weighted average number of shares |
| 1,087,050 |
| 147 |
| 265,437 |
| 1,352,634 |
|
% of shares with respect to total |
| 80.37 | % | 0.01 | % | 19.62 | % | 100.00 | % |
|
|
|
|
|
|
|
|
|
|
Basic and diluted profit or loss per share (R$) |
| (8.43 | ) | (8.43 | ) | (8.43 | ) |
|
|
12/31/2014 |
| ||||||||
Numerator |
| Ordinary |
| Preferred A |
| Preferred B |
| Total |
|
Loss attributable to each class of shares |
| (5,003,718 | ) | (676 | ) | (1,221,811 | ) | (6,226,206 | ) |
Denominator |
| Ordinary |
| Preferred A |
| Preferred B |
| Total |
|
Weighted average number of shares |
| 1,087,050 |
| 147 |
| 265,437 |
| 1,352,634 |
|
% of shares with respect to total |
| 80.37 | % | 0.01 | % | 19.62 | % | 100.00 | % |
|
|
|
|
|
|
|
|
|
|
Basic and diluted profit or loss per share (R$) |
| (4.60 | ) | (4.60 | ) | (4.60 | ) |
|
|
(b) Diluted
To calculate the diluted result per share, the Company shall assume the exercise of options, subscription bonuses, and similar dilutives of the company. The assumed values arising from these instruments must be considered as having been received from the issuance of common shares at the average market price of the common shares during the period. On December 31, 2016, the 15,759,561 potential dilutive common shares, referring to the compulsory loan, were included in the calculation of the weighted average number of shares due to dilutive effect in 2016 and the antidilutive effect in 2015 and 2014, as shown below.
12/31/2016 |
| ||||||||||
Numerator |
| Ordinary |
| Preferred A |
| Preferred B |
| Preferred B |
| Total |
|
Income attributable to each class of shares |
| 2,847,920 |
| 385 |
| 40,816 |
| 695,408 |
| 3,584,529 |
|
Denominator |
| Ordinary |
| Preferred A |
| Preferred B |
| Preferred B |
| Total |
|
Weighted average number of shares, in thousands |
| 1,087,050 |
| 147 |
| 15,580 |
| 265,437 |
| 1,368,214 |
|
% of shares with respect to total |
| 79.45 | % | 0.01 | % | 1.14 | % | 19.40 | % | 100.00 | % |
|
|
|
|
|
|
|
|
|
|
|
|
Diluted profit or loss per share (R$) |
| 2.62 |
| 2.62 |
| 2.62 |
| 2.62 |
|
|
|
NOTE 37 — NET OPERATING REVENUE
|
| 12/31/2016 |
| 12/31/2015 |
| 12/31/2014 |
|
OPERATING REVENUE |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Generation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supply of energy for distribution companies |
| 12,885,622 |
| 12,310,243 |
| 12,175,362 |
|
Supply of energy for end consumers |
| 2,945,506 |
| 3,571,809 |
| 3,317,103 |
|
Short-term electricity |
| 1,242,016 |
| 1,811,552 |
| 3,817,976 |
|
Revenue from Operation and Maintenance of Renewed Concessions |
| 2,178,699 |
| 1,882,637 |
| 1,803,127 |
|
Revenue from Construction of Renewed Plants |
| 41,316 |
| 148,403 |
| 240,040 |
|
Financial Effect of Itaipu |
| (346,638 | ) | 234,425 |
| (97,740 | ) |
|
| 18,946,521 |
| 19,959,069 |
| 21,255,868 |
|
Transmission |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from Operation and Maintenance of Renewed Lines |
| 2,735,999 |
| 2,504,239 |
| 1,207,090 |
|
Revenue from operation and Maintenance |
| 239,691 |
| 191,372 |
| 994,178 |
|
Revenue from Construction |
| 1,174,703 |
| 2,077,616 |
| 1,786,195 |
|
Financial - Return on Investment |
| 29,406,261 |
| 838,087 |
| 714,409 |
|
|
| 33,556,654 |
| 5,611,314 |
| 4,701,872 |
|
Distribution |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supply of Electricity |
| 15,208,202 |
| 14,835,424 |
| 7,310,337 |
|
Revenue from Construction |
| 1,165,611 |
| 1,011,518 |
| 873,413 |
|
CVA and other financial items |
| (339,405 | ) | 324,120 |
| 38,477 |
|
|
| 16,034,408 |
| 16,171,062 |
| 8,222,227 |
|
|
|
|
|
|
|
|
|
Other Revenue |
| 2,450,329 |
| 1,484,431 |
| 1,339,294 |
|
|
|
|
|
|
|
|
|
|
| 70,987,912 |
| 43,225,876 |
| 35,519,261 |
|
|
|
|
|
|
|
|
|
(-) Deductions from operating revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(-) ICMS |
| (4,000,750 | ) | (3,877,677 | ) | (1,683,781 | ) |
(-) PASEP and COFINS |
| (3,642,892 | ) | (4,108,891 | ) | (2,685,562 | ) |
(-) Sector fees |
| (2,550,473 | ) | (2,313,660 | ) | (1,005,014 | ) |
(-) Other deductions (including ISS) |
| (44,944 | ) | (336,810 | ) | (7,097 | ) |
|
| (10,239,059 | ) | (10,637,038 | ) | (5,381,454 | ) |
|
|
|
|
|
|
|
|
Net operating revenue |
| 60,748,853 |
| 32,588,838 |
| 30,137,807 |
|
On April 20, 2016, the Ministry of Mines and Energy - MME published Ordinance No. 120 which regulated the conditions for receipt of remuneration relating to electric power transmission assets existing on May 31, 2000, called the facilities of the Basic Network of the Existing System - RBSE and other Transmission Facilities - RPC, not depreciated and not amortized, in accordance with the second paragraph of article 15 of Law 12,783/2013.
On December 31, 2016, the Company made its estimation of updated values relating to electric power transmission assets existing on May 31, 2000, recognizing the amount of R$ 28,600,552, under the heading Financial Income - Return on Investment in the transmission segment (See Note 2.1).
NOTE 38 — RESULTS OF EQUITY METHOD INVESTMENTS
|
| 12/31/2016 |
| 12/31/2015 |
| 12/31/2014 |
|
Investments in associated companies |
|
|
|
|
|
|
|
Interest on equity |
| 6,010 |
| — |
| 10,611 |
|
Equity method |
| 3,029,734 |
| 379,743 |
| (1,518,268 | ) |
|
| 3,035,744 |
| 379,743 |
| (1,507,657 | ) |
|
|
|
|
|
|
|
|
Other investments |
|
|
|
|
|
|
|
Interest on equity |
| 1,026 |
| 2,010 |
| 20,008 |
|
Dividends |
| 101,510 |
| 62,045 |
| 98,477 |
|
Remuneration of investments in partnerships |
| — |
| 10,402 |
| 24,429 |
|
Capital returns - ITAIPU |
| 84,768 |
| 77,246 |
| 56,439 |
|
Other |
| (17,537 | ) | — |
| — |
|
|
| 169,767 |
| 151,703 |
| 199,353 |
|
|
| 3,205,511 |
| 531,446 |
| (1,308,304 | ) |
38.1 — Investigation
As a result of the investigation, the Company recognized the loss of R$ 91,464 in 2014, under equity method line item above (See Note 4.XI)
NOTE 39 — PERSONNEL, SUPPLIER AND SERVICES
|
| 12/31/2016 |
| 12/31/2015 |
| 12/31/2014 |
|
Personnel |
| 6,548,572 |
| 6,004,845 |
| 5,609,320 |
|
Materials |
| 329,599 |
| 318,410 |
| 310,276 |
|
Services |
| 3,485,040 |
| 3,172,162 |
| 2,565,777 |
|
|
| 10,363,211 |
| 9,495,417 |
| 8,485,373 |
|
NOTE 40 — ENERGY PURCHASED FOR RESALE
|
| 12/31/2016 |
| 12/31/2015 |
| 12/31/2014 |
|
|
|
|
|
|
|
|
|
Energy purchased for resale |
|
|
|
|
|
|
|
Supply |
| 5,714,743 |
| 4,931,606 |
| 5,030,149 |
|
Trading in CCEE |
| 2,425,240 |
| 2,998,109 |
| 2,864,480 |
|
PROINFA |
| 3,106,129 |
| 2,818,660 |
| 2,502,382 |
|
Other |
| 17,931 |
| 17,852 |
| 27,689 |
|
|
| 11,264,043 |
| 10,766,227 |
| 10,424,700 |
|
NOTE 41 — OPERATING CHARGES (REVERSALS), NET
|
| 12/31/2016 |
| 12/31/2015 |
| 12/31/2014 |
|
Guarantees |
| 29,913 |
| 30,265 |
| 115,166 |
|
Litigation charges (Note 30) |
| 3,994,158 |
| 2,942,245 |
| 7,797,129 |
|
ADA - Consumers and Retailers |
| 334,383 |
| 642,924 |
| 83,921 |
|
ADA - Financing and Loans (Note 8) |
| 17,290 |
| 15,755 |
| (269,051 | ) |
Onerous Contracts (Note 33) |
| 2,194,498 |
| 366,477 |
| (1,800,401 | ) |
Impairment (Reversal) for Losses in Investments |
| 1,479,088 |
| 489,752 |
| (1,414,171 | ) |
Impairment (Note 19) |
| 5,681,019 |
| 5,979,596 |
| 377,551 |
|
ANEEL CCC charges |
| 741,623 |
| — |
| — |
|
Market Value Adjustment |
| 41 |
| 67,107 |
| 110,902 |
|
Impairment for Financial Assests Loss |
| — |
| — |
| (791,868 | ) |
BRR Impairment |
| — |
| (148,637 | ) | (360,648 | ) |
Fixed Asset Loss |
| — |
| — |
| 235,064 |
|
Provision for environmental |
| — |
| — |
| 104,904 |
|
Hydrological Risk |
| (451,340 | ) | 451,340 |
| — |
|
Other |
| 847,279 |
| 749,943 |
| 474,723 |
|
|
| 14,867,952 |
| 11,586,767 |
| 4,663,220 |
|
Impairment/(Reversal) for Losses on Investments
The Company has made adjustments to the results of the subsidiaries, in order to standardize the accounting policies of these companies with those adopted by the Company, and it additionally recognized charges for losses on investments, totaling an amount in the period of December 31, 2016 of R$ 1,479,088 (reversal of R$ 610,747). For more information, see note 15.
ANEEL — CCC Charge
On February 7, 2017, ANEEL issued Ratifying Resolution No. 2.202 that approved the budget for the year of 2017 of the CDE account. The budget approved by ANEEL initially did not contemplate the values that were the objective of renegotiation signed in 2014 and 2015 between the distributors Amazonas D, Ceron, Eletroacre and Boa Vista (referred to as “distributors”) and Petrobras B/R Distribuidora. These Acknowledgement of Debt Agreements, referred to as “CCDs” had been previously authorized by the applicable legislation and approved by ANEEL.
On March 7, 2017, through Ratifying Resolution No. 2.204, of March 7, 2017, ANEEL amended Ratifying Resolution No. 2.202, of February 7, 2017, which approves the annual budget of the CDE Account for the year 2017, including in the budgets the amounts relating to the CCDs. (more information see Note 11).
Hydrologic Risk
In December 2015 the subsidiary Eletronorte provisioned R$ 451,340 due to exposure to risk resulting from acceptance of the renegotiation of hydrologic risk. During the period of 2016, after the acceptance by several companies of the renegotiation, the risk of exposure of Eletronorte did not materialize, this fact resulted in a new assessment of the risk associated with current events, as well as the assessment of the situation of Eletronorte in accounting for short-term energy, characterized as an energy seller up to the closure of the period. Given these aspects, the maintenance of the accrued liability is not required. Accordingly, the subsidiary Eletronorte reversed the accrued liability in its entirety in 2016.
NOTE 42 — ASSETS HELD FOR SALE
42.1. Acquisition of shareholding control over CELG - D
On September 26, 2014, in an Extraordinary General Meeting, Eletrobras approved the acquisition of a controlling interest in CELG - Distribuição S.A.- CELG - D.
The Company concluded the process of purchasing CELG-D by paying and transferring, on 01/27/2015, 76,761,267 common shares issued by CELG-D, corresponding to 50.93% of the Distributor’s capital, for the sum of R$ 59,454.
On December 28, 2015, at an Extraordinary Meeting, Eletrobras approved the sale of the shareholding control of CELG-D at a privatization auction to be promoted by BM&FBOVESPA, according to the minimum price and conditions set forth in Resolution No. 11/2015 by the National Privatization Council — CND. On December 31, 2015, the Company classified the assets and liabilities of the CELG D as assets held for sale, given than the Company is committed to disposal of the shareholder control of said subsidiary.
On November 30, 2016, the Privatization Auction Number 02/2016 of CELG D was conducted in the Securities Exchange of São Paulo - BM&FBOVESPA and the successful bid was that of the company ENEL BRASIL S/A (“Successful Bidder”).
On January 24, 2017, the Administrative Council of Economic Defense - CADE authorized the completion of the privatization operation of CELG D.
On January 31, 2017, the National Electric Energy Agency (“ANEEL”) approved the acquisition of CELG D by ENEL BRASIL S/A, through Authoritative Resolution number 6,182/2017.
On February 14, 2017, the purchase and sale contract for the shares of CELG D was signed between Eletrobras, Companhia Celg de Participações — CELGPAR and ENEL BRASIL S/A, in accordance with the established timetable. Eletrobras received, on this date, the amount of R$ 1,065,266 for this disposal of assets.
The principal assets and liabilities of the subsidiary CELG D classified as held for sale on December 31, 2016, are shown below:
|
| 12/31/2016 |
| 12/31/2015 |
|
Cash and cash equivalents |
| 76,144 |
| 82,182 |
|
Receivables |
| 988,093 |
| 1,112,469 |
|
Taxes and social contributions |
| 149,570 |
| 170,440 |
|
Court deposits |
| 212,420 |
| 136,761 |
|
Financial Assets |
| 62,296 |
| 199,497 |
|
PP&E, net |
| 44,983 |
| 43,328 |
|
Intangible Assets, net |
| 2,065,418 |
| 1,908,127 |
|
Reimbursable Assets - FUNAC |
| 650,065 |
| 672,615 |
|
Other assets |
| 157,224 |
| 298,366 |
|
Total assets of CELG D classified as held for sale |
| 4,406,213 |
| 4,623,785 |
|
|
|
|
|
|
|
Suppliers |
| 1,467,436 |
| 1,983,890 |
|
Loans and financing |
| 1,085,476 |
| 1,304,503 |
|
Taxes and social contributions |
| 277,612 |
| 360,553 |
|
Sector fees |
| 706,039 |
| 428,332 |
|
Retirement benefits |
| 149,698 |
| 146,800 |
|
Provisions for contingencies |
| 669,729 |
| 568,100 |
|
Other liabilities |
| 819,023 |
| 782,831 |
|
Liabilities of CELG D associated with assets classified as held for sale |
| 5,175,013 |
| 5,575,009 |
|
NOTE 43 —FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
43.1 — Management of Capital Risk
The Company’s objectives in managing its capital are safeguarding its continuity so as to offer a return to shareholders and benefits to other interested parties, in addition to pursuing an optimal capital structure so as to reduce this cost. The purchase or sale of financial assets are recognized on the date of negotiation.
In order to maintain or adjust capital structure, the Company may revise its dividend payment policy, return capital to shareholders, or issue new shares or sell assets in order to reduce, for example, the level of debt.
The Company, consistent with other companies in the sector, monitors capital based on the financial leveraging index. This index is the net debt divided by total capital. The net debt, in turn, is total loans (including short- and long-term loans, as demonstrated in the consolidated balance sheet), subtracted from cash and cash equivalents, and securities. Total capital is determined by adding net equity, as demonstrated in the consolidated balance sheet, to net debt.
|
| 12/31/2016 |
| 12/31/2015 |
|
Total loans and financing |
| 45,620,428 |
| 46,398,260 |
|
(-) Cash and cash equivalents and marketable securities |
| 6,424,881 |
| 8,431,737 |
|
Net debt |
| 39,195,547 |
| 37,966,523 |
|
(+) Total Net Equity |
| 44,064,927 |
| 41,580,593 |
|
Total Capital |
| 83,260,474 |
| 79,547,116 |
|
Financial Leverage Index |
| 47 | % | 48 | % |
43.2 — Classification by category of financial instruments
The accounting balances of financial assets and liabilities represent a reasonable approximation of fair value. The Company uses the hierarchy to measure the fair value of its financial instruments:
|
| Measurement |
| 12/31/2016 |
| 12/31/2015 |
|
|
|
|
|
|
|
|
|
FINANCIAL ASSETS (Current/Noncurrent) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
| 679,668 |
| 1,393,973 |
|
|
|
|
|
|
|
|
|
Loans and receivables |
|
|
| 78,991,610 |
| 59,238,499 |
|
Customers |
| Amortized cost |
| 6,481,303 |
| 5,970,958 |
|
Loans and financing |
| Amortized cost |
| 13,184,244 |
| 17,587,620 |
|
Reimbursement rights |
| Amortized cost |
| 9,164,986 |
| 10,503,382 |
|
Financial Asset - Generation and Transmission |
| Amortized cost |
| 13,590,194 |
| 25,176,539 |
|
Financial Assets - Transmission (RBSE) |
| Fair value |
| 36,570,883 |
| — |
|
|
|
|
|
|
|
|
|
Held to maturity |
|
|
| 246,801 |
| 193,669 |
|
Securities |
| Amortized cost |
| 246,801 |
| 193,669 |
|
|
|
|
|
|
|
|
|
Measured at Fair Value through profit/loss |
|
|
| 5,727,185 |
| 6,890,406 |
|
Securities |
| Fair value |
| 5,498,412 |
| 6,844,095 |
|
Derivative instruments |
| Fair value |
| 228,773 |
| 46,311 |
|
|
|
|
|
|
|
|
|
Available for sale |
|
|
| 6,283,905 |
| 5,382,366 |
|
Investments (equity stakes) |
| Fair value |
| 1,357,923 |
| 1,177,260 |
|
Financial assets - Distribution |
| Fair value |
| 4,925,982 |
| 4,205,106 |
|
|
|
|
|
|
|
|
|
FINANCIAL LIABILITIES (Current/Noncurrent) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Measured at Amortized Cost |
|
|
| 69,184,723 |
| 70,733,967 |
|
Suppliers |
| Amortized cost |
| 19,442,121 |
| 19,577,928 |
|
Loans and financing |
| Amortized cost |
| 45,620,428 |
| 46,398,260 |
|
Debentures |
| Amortized cost |
| 201,375 |
| 562,474 |
|
Reimbursement obligations |
| Amortized cost |
| 2,683,816 |
| 2,879,586 |
|
Commercial leasing |
| Amortized cost |
| 1,169,504 |
| 1,252,155 |
|
Concessions payable UBP |
| Amortized cost |
| 67,479 |
| 63,564 |
|
|
|
|
|
|
|
|
|
Measured at Fair Value through profit/loss |
|
|
| 50,631 |
| 99,129 |
|
Derivative instruments |
| Fair value |
| 44,017 |
| 80,269 |
|
Derivative Instruments (Hedge) |
| Fair value |
| 6,614 |
| 18,860 |
|
43.2.1 — Techniques of evaluation and information used
a) Cash and cash equivalents: held for trading in the short term and measured at fair value, being recognized directly in the financial results.
b) Short and long-term securities - usually held for short-term trading and measured at fair value, being recognized directly in the financial results.
c) Customers: are recorded at their nominal value, similar to the fair values and the probable realizable values The renegotiated credits are recorded assuming the intention to hold them until maturity, at their probable realizable values, similar to fair values.
d) Financial assets of the concession: are financial assets that represent the unconditional right to receive a certain amount at the end of the period of the concession. They are classified as loans and receivables.
e) Derivatives: are measured at fair value and recognized directly in the results or in the shareholders’ equity, depending on the type of each designation of the derivative.
f) Right to Compensation: Assets that represent the right to reimbursement of the CCC, relating to the costs of generation of electric energy in the Isolated Systems, including the cost relating to the procurement of energy and of power associated with the generation itself in order to attend to the public service of distribution of electric energy, to the charges of the electric sector and taxes and, additionally, to the investments performed, are financial assets. These are classified as loans and receivables.
g) Corporate Equity Investments: refer to permanent investments in other companies, valued by the equity method.
h) Suppliers: are measured by known or estimated amounts including, when applicable, the corresponding charges and monetary and/or exchange variations, incurred up to the date of the balance sheet, and its approximate book value of its fair value.
i) Debentures: are measured at amortised cost, using the effective interest rate method. The Company believes that these instruments approximate their fair values, except where these debentures have a Unit Price — PU on the secondary market close to the period of the report.
j) Loans and financing: are measured at amortized cost, using the effective interest rate method. The market values of loans and financing obtained are similar to their book values.
k) Commercial Leasing: The nominal value used in the calculation of liabilities caused by these contracts has been determined by taking as a reference the value fixed for the procurement of monthly contracted power, multiplied by the installed capacity (60 to 65 MW*) and by the number of months of validity of the contract.
l) Compensation Obligations: refer to amounts of advances and taxes (ICMS, PIS and COFINS) to be returned to the CCC Fund.
m) Other financial instruments: the fair values are similar to their book values, given that: (i) they have an average time period of receipt/payment of less than 60 days; (ii) they are concentrated in fixed income securities, remunerated at the CDI rate; and (iii) there are no similar instruments with comparable maturities and interest rates.
(*) Information not audited by independent auditors
43.2.2 — Fair value estimate:
The financial assets and liabilities recorded at fair value were classified and disclosed according to the following levels:
|
| 12/31/2016 |
| ||||||
|
| LEVEL1 |
| LEVEL2 |
| LEVEL3 |
| TOTAL |
|
FINANCIAL ASSETS (Current/Noncurrent) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale |
| 1,357,923 |
| 4,925,982 |
| — |
| 6,283,905 |
|
Investments (equity stakes) |
| 1,357,923 |
| — |
| — |
| 1,357,923 |
|
Financial assets - Distribution concessions |
| — |
| 4,925,982 |
| — |
| 4,925,982 |
|
Measured at Fair Value through profit/loss |
| — |
| 42,298,068 |
| — |
| 42,298,068 |
|
Securities |
| — |
| 5,498,412 |
| — |
| 5,498,412 |
|
Derivative instruments |
| — |
| 228,773 |
| — |
| 228,773 |
|
Financial Assets - Transmission (RBSE) |
| — |
| 36,570,883 |
| — |
| 36,570,883 |
|
FINANCIAL LIABILITIES (Current/Noncurrent) |
|
|
|
|
|
|
|
|
|
Measured at Fair Value through profit/loss |
| — |
| 50,631 |
| — |
| 50,631 |
|
Derivative instruments |
| — |
| 44,017 |
| — |
| 44,017 |
|
Derivative Instruments (Hedge) |
| — |
| 6,614 |
| — |
| 6,614 |
|
|
| 12/31/2015 |
| ||||||
|
| LEVEL1 |
| LEVEL2 |
| LEVEL3 |
| TOTAL |
|
FINANCIAL ASSETS (Current/Noncurrent) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale |
| 1,177,260 |
| 4,205,106 |
| — |
| 5,382,366 |
|
Investments (equity stakes) |
| 1,177,260 |
| — |
| — |
| 1,177,260 |
|
Financial assets - Distribution concessions |
| — |
| 4,205,106 |
| — |
| 4,205,106 |
|
Measured at Fair Value through profit/loss |
| — |
| 6,890,406 |
| — |
| 6,890,406 |
|
Securities |
| — |
| 6,844,095 |
| — |
| 6,844,095 |
|
Derivative instruments |
| — |
| 46,311 |
| — |
| 46,311 |
|
FINANCIAL LIABILITIES (Current/Noncurrent) |
|
|
|
|
|
|
|
|
|
Measured at Fair Value through profit/loss |
| — |
| 99,129 |
| — |
| 99,129 |
|
Derivative instruments |
| — |
| 99,129 |
| — |
| 99,129 |
|
Level 1 — prices quoted (not adjusted) on active markets, liquid and visible for identical assets and liabilities accessible on the date of measurement;
Level 2 — prices quoted (adjusted or not) for similar assets and liabilities on active markets, other entries not observable in level 1, directly or indirectly, in terms of asset or liability, and
Level 3 — assets and liabilities not priced or where prices or valuation techniques are supported by a small or non-existent market, not observable or liquid. In this level, the estimated fair value becomes highly subjective.
The fair value of financial instruments traded in active markets (such as securities carried for trading and available for sale) is based on market prices quoted on the balance sheet date. A market is seen as active if quoted prices are promptly and regularly available from an exchange, distributor, broker, group of industries, pricing service, or regulatory agency, and the prices represent real market transactions which occur regularly on purely commercial bases.
The quoted market price used for financial assets carried by the Company and its subsidiaries is the current competitive price. These instruments are in Level 1. The instruments in Level 1 include mainly equity investments of the FTSE 100 classified as securities for trade or available for sale.
The fair value of financial instruments not traded on active markets (such as over the counter derivatives) is determined using valuation techniques. These valuation techniques maximize the use of information adopted by the market where it is available, and rely as little as possible on the entity’s specific estimates. If all relevant information required for the fair value of an instrument is adopted by the market, the instrument will be included in Level 2.
If one or more relevant pieces of information is not based on data adopted by the market, the instrument will be included in level 3.
Specific valuation techniques used to assess financial instruments include:
· Quoted market prices or quotes from financial institutions or brokers for similar instruments.
· The fair value of interest rate swaps is calculated by the present value of estimated future cash flows based on yield curves adopted by the market.
· The fair value of forward exchange rate contracts is determined based on future exchange rates on the balance sheet date, with the resulting value discounted from the present value.
Other techniques, such as discounted cash flow analysis, which are used to determine the fair value of remaining financial instruments, and counterparty credit risk in swap operations.
43.3 — Financial Risk Management:
In the exercise of its activities, the Company is affected by risk events that could compromise its strategic objectives. The main objective of risk management is to anticipate and minimize the adverse effects of such events on the Company’s business and economic and financial results.
The Company defined operating and financial policies and strategies to manage financial risks, approved by internal committees and by management, which aim to confer liquidity, safety and profitability to its assets, and maintain set debt levels and profile for financial and economic flows.
The main financial risks identified in the process of risk management are:
43.3.1 — Exchange rate risk
This risk arises from the possibility of the Company having its economic and financial statements affected by exchange rate fluctuations. The Company is exposed to financial risks that cause volatility in its results and in its cash flow. The Company has significant exposure between assets and liabilities indexed in foreign currency, especially to the United States dollar, arising mainly from financing contracts with Itaipu Binacional.
In this context, the Company’s financial hedging policy was approved. The objective of the current policy is to monitor and mitigate the exposure to market variables that could impact the Company and its’ subsidiaries’ assets and liabilities, thus reducing the effects of undesirable fluctuations in these variables on their financial statements.
With this, said policy aims to get the Company’s results to accurately reflect its real operating performance, and its projected cash flow to be less volatile.
Along with the policy, the creation of a Financial hedge committee was formed within the scope of the Financial Office, whose main function is to define the strategies and hedge instruments to be submitted to the Company’s Executive Management.
Taking into account the various forms of hedging the Company’s non-hedged items, the approved policy lists a scale of priorities. First a structural solution, and only in residual cases, the use of operations with derivative financial instruments.
When operations with financial derivatives are performed, the Company’s hedge policy is followed, and they may not constitute financial leveraging or the concession of credit to third parties.
a) — Composition of balances in foreign currency and sensitivity analysis:
In the following charts, scenarios were considered for indices and rates, with their respective effects on the Company’s profit and loss. For the sensitivity analysis, the probable scenario used for 2016 and 2017 was forecasts and/or estimates based fundamentally on macroeconomic assumptions obtained from the Focus report, published by the Central Bank, and Economic Outlook 86, published by the OECD (Organisation for Economic Co-operation and Development).
Sensitivity analyses were conducted on financial instruments, assets and liabilities, which present exposure to the exchange rate and which could bring material losses to the Company, in four different scenarios, based on the above-mentioned probable scenario: two considering currency valuation, and another two considering a devaluation of those currencies.
The sensitivity analyses were created in accordance with CVM Guidance 475/2008, with the objective of measuring the impact of changes in market variables on each of the Company’s financial instruments. Therefore, these are projections based on assessments of macroeconomic scenarios, and do not mean that the transactions will have the values presented in the analysis period considered.
(a.1) Risk of exchange rate apreciation:
|
|
|
| Balance on 12/31/2016 |
| Effect on profit/loss - revenue (expense) |
| ||||||
|
|
|
| Foreign |
| Reais |
| Scenario I - |
| Scenario II |
| Scenario III |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Loans obtained |
| 3,619,606 |
| 11,794,486 |
| (693,155 | ) | (3,815,065 | ) | (6,936,975 | ) |
USD |
| Loans granted |
| 3,304,835 |
| 10,770,787 |
| 630,893 |
| 3,481,313 |
| 6,331,733 |
|
|
| Financial assets - Itaipu |
| 368,481 |
| 1,200,916 |
| 70,343 |
| 388,158 |
| 705,972 |
|
|
| Impact on profit/loss - USD |
|
|
|
|
| 8,081 |
| 54,406 |
| 100,731 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EURO |
| Loans obtained |
| 59,263 |
| 203,712 |
| (7,858 | ) | (60,751 | ) | (113,643 | ) |
|
| Impact on profit/loss - EURO |
|
|
|
|
| (7,858 | ) | (60,751 | ) | (113,643 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IENE |
| Loans obtained |
| 3,308,957 |
| 92,353 |
| (4,769 | ) | (29,050 | ) | (53,330 | ) |
|
| Impact on profit/loss - IENE |
|
|
|
|
| (4,769 | ) | (29,050 | ) | (53,330 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IMPACT ON PROFIT/LOSS IN CASE OF APPRECIATION IN EXCHANGE RATES |
|
|
|
|
| (4,546 | ) | (35,395 | ) | (66,243 | ) |
(1) Assumptions adopted:
|
|
|
|
|
|
|
| Probable |
| 25% |
| 50% |
|
|
| USD |
|
|
|
|
| 3.450 |
| 4.313 |
| 5.175 |
|
|
| EURO |
|
|
|
|
| 3.570 |
| 4.463 |
| 5.355 |
|
|
| IENE |
|
|
|
|
| 0.029 |
| 0.037 |
| 0.044 |
|
(a.2) Risk of exchange rate depreciation:
|
|
|
| Balance on 12/31/2016 |
| Effect on profit/loss - revenue (expense) |
| ||||||
|
|
|
| Foreign |
| Reais |
| Scenario I - |
| Scenario II |
| Scenario III |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Loans obtained |
| 3,619,606 |
| 11,794,486 |
| (693,155 | ) | 2,428,756 |
| 5,550,666 |
|
USD |
| Loans granted |
| 3,304,835 |
| 10,770,787 |
| 630,893 |
| (2,219,527 | ) | (5,069,947 | ) |
|
| Financial assets - Itaipu |
| 368,481 |
| 1,200,916 |
| 70,343 |
| (247,472 | ) | (565,287 | ) |
|
| Impact on profit/loss - USD |
|
|
|
|
| 8,081 |
| (38,243 | ) | (84,568 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EURO |
| Loans obtained |
| 59,263 |
| 203,712 |
| (7,858 | ) | 45,034 |
| 97,927 |
|
|
| Impact on profit/loss - EURO |
|
|
|
|
| (7,858 | ) | 45,034 |
| 97,927 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IENE |
| Loans obtained |
| 3,308,957 |
| 92,353 |
| (4,769 | ) | 19,511 |
| 43,792 |
|
|
| Impact on profit/loss - IENE |
|
|
|
|
| (4,769 | ) | 19,511 |
| 43,792 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IMPACT ON PROFIT/LOSS IN CASE OF DEPRECIATION IN EXCHANGE RATES |
|
|
|
|
| (4,546 | ) | 26,302 |
| 57,151 |
|
(1) Assumptions adopted:
|
|
|
|
|
|
|
| Probable |
| -25% |
| -50% |
|
|
| USD |
|
|
|
|
| 3.450 |
| 2.588 |
| 1.725 |
|
|
| EURO |
|
|
|
|
| 3.570 |
| 2.678 |
| 1.785 |
|
|
| IENE |
|
|
|
|
| 0.029 |
| 0.022 |
| 0.015 |
|
43.3.2 — Interest rate risk
This risk associated to the possibility of the Company suffering accounting losses due to fluctuation in market interest rates, affecting its financial statements by raising financial expenses with foreign capital raising contracts, mainly, referenced by the Libor rate.
The Company monitors its exposure to the Libor rate and contracts derivative operations to minimize this exposure, as per its Financial Hedging Policy.
a) — Composition of balances by indexer and sensitivity analysis
The composition of debt by indexer, either in national or foreign currency, is broken down in Note 22, item a.
In the following charts, scenarios were considered for indices and rates, with their respective impacts on the Company’s results. For the sensitivity analysis, the probable scenario used for 2016 was forecasts and/or estimates based fundamentally on macroeconomic assumptions obtained from the Focus report, published by the Central Bank, and Economic Outlook 86, published by the OECD (Organisation for Economic Co-operation and Development).
Sensitivity analyses were conducted on financial instruments, assets and liabilities, which could bring material losses to the Company, in four different scenarios, based on the above-mentioned probable scenario: two considering the appreciation of indices, and another two considering a depreciation of those indices.
The sensitivity analyses were created in accordance with CVM Guidance 475/2008, with the objective of measuring the impact of changes in market variables on each of the Company’s financial instruments. Therefore, these are projections based on assessments of macroeconomic scenarios, and do not mean that the transactions will have the values presented in the analysis period considered.
All scenarios used a likely exchange rate for the dollar to convert into reais the effect on the results of risks linked to fluctuations of the LIBOR. In this sensitivity analysis, no exchange effect is being considered due to valuation or devaluation of the probable exchange rate scenario. The impact of valuation or devaluation of the dollar exchange rate in the probable scenario is presented in item 43.3.1 of this note.
a.1) LIBOR
|
|
|
| Balance of Debt/Notional |
| Effect on profit/loss - revenue (expense) |
| ||||||
|
|
|
| In USD |
| In Reais |
| Scenario I - |
| Scenario II |
| Scenario III |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Loans obtained |
| 783,152 |
| 2,551,902 |
| (3,679,955 | ) | (4,599,943 | ) | (5,519,932 | ) |
LIBOR |
| Derivative |
| 650,000 |
| 2,118,025 |
| 3,054,285 |
| 3,817,856 |
| 4,581,428 |
|
|
| Total |
|
|
|
|
| (625,670 | ) | (782,087 | ) | (938,505 | ) |
| (1) Assumptions adopted: |
|
|
|
|
|
| 12/31/2016 |
| Probable |
| 25% |
| 50% |
|
|
| USD |
|
|
| 3.2585 |
| 3.4500 |
|
|
|
|
|
|
| LIBOR |
|
|
| N/A |
| 136.20 | % | 170.25 | % | 204.30 | % |
a.2) — National indices
· risk of appreciation of interest rates:
|
|
|
|
|
| Effect on profit/loss - revenue (expense) |
| ||||
|
|
|
| Balance on 12/31/2016 |
| Scenario I - Likely |
| Scenario II |
| Scenario III |
|
|
|
|
|
|
|
|
|
|
|
|
|
CDI |
| Loans obtained |
| 12,701,548 |
| (1,206,647 | ) | (1,508,309 | ) | (1,809,971 | ) |
|
| Impact on profit/loss - CDI |
|
|
| (1,206,647 | ) | (1,508,309 | ) | (1,809,971 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
TJLP |
| Loans obtained |
| 10,063,827 |
| (754,787 | ) | (943,484 | ) | (1,132,181 | ) |
|
| Debentures issued |
| 201,375 |
| (15,103 | ) | (18,879 | ) | (22,655 | ) |
|
| Impact on profit/loss - TJLP |
|
|
| (769,890 | ) | (962,363 | ) | (1,154,835 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
IGPM |
| Commercial leasing |
| 1,169,504 |
| (55,084 | ) | (68,855 | ) | (82,625 | ) |
|
| Loans granted |
| 241,721 |
| 11,385 |
| 14,231 |
| 17,078 |
|
|
| Impact on profit/loss - IGPM |
|
|
| (43,699 | ) | (54,623 | ) | (65,548 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
SELIC |
| Loans obtained |
| 1,675,353 |
| (159,159 | ) | (198,948 | ) | (238,738 | ) |
|
| Impact on profit/loss - SELIC |
|
|
| (159,159 | ) | (198,948 | ) | (238,738 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
IPCA |
| Loans obtained |
| 531,933 |
| 25,267 |
| 31,584 |
| 37,900 |
|
|
| Impact on profit/loss - IPCA |
|
|
| 25,267 |
| 31,584 |
| 37,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
IMPACT ON PROFIT/LOSS - APPRECIATION OF INDEXES |
|
|
| (2,154,128 | ) | (2,692,659 | ) | (3,231,191 | ) |
(1) Assumptions adopted:
|
|
|
|
|
| Probable |
| 25% |
| 50% |
|
|
| CDI |
|
|
| 9.50 | % | 11.88 | % | 14.25 | % |
|
| IPCA |
|
|
| 4.75 | % | 5.94 | % | 7.13 | % |
|
| TJLP |
|
|
| 7.50 | % | 9.38 | % | 11.25 | % |
|
| IGPM |
|
|
| 4.71 | % | 5.89 | % | 7.07 | % |
|
| SELIC |
|
|
| 9.50 | % | 11.88 | % | 14.25 | % |
· risk of depreciation of interest rates:
|
|
|
|
|
| Effect on profit/loss - revenue (expense) |
| ||||
|
|
|
| Balance on |
| Scenario I - |
| Scenario II |
| Scenario III |
|
|
|
|
|
|
|
|
|
|
|
|
|
CDI |
| Loans obtained |
| 12,701,548 |
| (1,206,647 | ) | (904,985 | ) | (603,324 | ) |
|
| Impact on profit/loss - CDI |
|
|
| (1,206,647 | ) | (904,985 | ) | (603,324 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
TJLP |
| Loans obtained |
| 10,063,827 |
| (754,787 | ) | (566,090 | ) | (377,394 | ) |
|
| Debentures issued |
| 201,375 |
| (15,103 | ) | (11,327 | ) | (7,552 | ) |
|
| Impact on profit/loss - TJLP |
|
|
| (769,890 | ) | (577,418 | ) | (384,945 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
IGPM |
| Commercial leasing |
| 1,169,504 |
| (55,084 | ) | (41,313 | ) | (27,542 | ) |
|
| Loans granted |
| 241,721 |
| 11,385 |
| 8,539 |
| 5,693 |
|
|
| Impact on profit/loss - IGPM |
|
|
| (43,699 | ) | (32,774 | ) | (21,849 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
SELIC |
| Loans obtained |
| 1,675,353 |
| (159,159 | ) | (119,369 | ) | (79,579 | ) |
|
| Impact on profit/loss - SELIC |
|
|
| (159,159 | ) | (119,369 | ) | (79,579 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
IPCA |
| Loans obtained |
| 531,933 |
| 25,267 |
| 18,950 |
| 12,633 |
|
|
| Impact on profit/loss - IPCA |
|
|
| 25,267 |
| 18,950 |
| 12,633 |
|
|
|
|
|
|
|
|
|
|
|
|
|
IMPACT ON PROFIT/LOSS - DEPRECIATION OF INDEXES |
|
|
| (2,154,128 | ) | (1,615,596 | ) | (1,077,064 | ) |
(1) Assumptions adopted:
|
|
|
|
|
| Probable |
| -25% |
| -50% |
|
|
| CDI |
|
|
| 9.50 | % | 7.13 | % | 4.75 | % |
|
| IPCA |
|
|
| 4.75 | % | 3.56 | % | 2.38 | % |
|
| TJLP |
|
|
| 7.50 | % | 5.63 | % | 3.75 | % |
|
| IGPM |
|
|
| 4.71 | % | 3.53 | % | 2.36 | % |
|
| SELIC |
|
|
| 9.50 | % | 7.13 | % | 4.75 | % |
According to interest rate swap contracts, the Company agrees to exchange the difference between fixed and floating interest rate values calculated from the notional value agreed to. Such contracts allow the Company to mitigate the risk of a change in interest rates on the fair value of debt issued at fixed interest rates, and in the exposure of cash flows to floating rate debt issued. The fair value of interest rate swaps at the end of the year and the inherent credit risk in this kind of contract, are shown next. The average interest rate is based on outstanding balances payable at the end of the year.
The following chart shows the value of principal and the remaining term for outstanding interest rate swap contracts at the end of the reporting period:
|
|
|
| Amounts |
|
|
|
|
| Fair Values |
| ||
Type |
| Transaction |
| (notional) |
| Rates used |
| Expires |
| 12/31/2016 |
| 12/31/2015 |
|
Libor X Pre-tax |
| 03/2011 |
| 50,000 |
| 3.2780 | % | 8/10/2020 |
| (2,642 | ) | (5,497 | ) |
Libor X Pre-tax |
| 04/2011 |
| 100,000 |
| 3.3240 | % | 8/10/2020 |
| (5,437 | ) | (11,266 | ) |
Libor X Pre-tax |
| 09/2012 |
| 25,000 |
| 1.6795 | % | 11/27/2020 |
| 157 |
| (226 | ) |
Libor X Pre-tax |
| 10/2012 |
| 25,000 |
| 1.6295 | % | 11/27/2020 |
| 211 |
| (133 | ) |
Libor X Pre-tax |
| 11/2012 |
| 75,000 |
| 1.6285 | % | 11/27/2020 |
| 636 |
| (394 | ) |
Libor X Pre-tax |
| 12/2012 |
| 75,000 |
| 1.2195 | % | 11/29/2017 |
| 82 |
| (307 | ) |
Libor X Pre-tax |
| 13/2012 |
| 75,000 |
| 1.2090 | % | 11/29/2017 |
| 88 |
| (286 | ) |
Libor X Pre-tax |
| 14/2012 |
| 50,000 |
| 1.2245 | % | 11/29/2017 |
| 53 |
| (211 | ) |
Libor X Pre-tax |
| 15/2012 |
| 50,000 |
| 1.1670 | % | 11/29/2017 |
| 73 |
| (134 | ) |
Libor X Pre-tax |
| 16/2012 |
| 50,000 |
| 1.1910 | % | 11/29/2017 |
| 65 |
| (166 | ) |
Libor X Pre-tax |
| 17/2012 |
| 50,000 |
| 1.2105 | % | 11/29/2017 |
| 58 |
| (192 | ) |
Libor X Pre-tax |
| 18/2012 |
| 25,000 |
| 1.1380 | % | 11/29/2017 |
| 42 |
| (47 | ) |
|
| TOTAL |
| 650,000 |
|
|
|
|
| (6,614 | ) | (18,860 | ) |
Operations classified as cash flow hedges generated in the fiscal period a comprehensive positive result of R$ 11,684 in the year. (negative result of R$ 468 on December 31, 2015).
With the designation of swaps for hedge accounting, in the year ending on December 31, 2016, the Company recognized R$ 14,160 as financial expenses related to swaps. (R$ 20,996 on December 31, 2015).
43.3.3 — Price risk — commodities
In 2004, the subsidiary Eletronorte signed long-term contracts for the supply of electrical energy to three of its main clients. Part of the income from these long-term contracts is associated with the payment of a premium linked to the international aluminum price, quoted on the London Metal Exchange (LME) as a base asset in determining monthly premiums.
The premium can be considered a component of a hybrid (combined) contract, which includes a non-derivative contract that harbors a derivative, so the cash flow of the combined instrument in certain circumstances varies as if it were an isolated derivative.
Following are the contract details:
|
| Contract Date |
|
| ||
CUSTOMER |
| Initial |
| Final |
| Volume in Average Megawatts (MW) |
Albrás |
| 07/01/2004 |
| 12/31/2024 |
| 750 through 12/31/2006 and 800 beginning 01/01/2007 |
BHP |
| 07/01/2004 |
| 12/31/2024 |
| 315 MW |
These contracts include the concept of a cap and floor band related to the price of aluminum as quoted on the LME. The maximum and minimum price limit on the LME are US$ 2,773.21/ton and US$ 1,450.00/ton, respectively.
In order to attribute a fair value to the hybrid part of a contract, it is necessary to identify the main components that quantify the amount billed monthly. The main contract variables are: the amount of energy sold (MWh*), the price attributed to the LME and the exchange rate in the billing period.
Considering that the premium is associated to the price of the aluminum commodity on the LME, it is possible to attribute a fair value to these contracts. The LME price was quoted in December 2016 at US$ 1,722.17/ton, which represented a positive variance of 15.17% in relation to the price in December, 2015 which was US$ 1,495.35/ton.
In the same year of the analysis, the real lost value compared to the dollar, with the exchange rate going from R$ 3.87 to R$ 3.35. The decrease in aluminum price contributed to minimize the expected fair value of derivatives, compensating the devaluation of the dollar in the period.
The loss in the operation with derivatives in 2016 was R$ 182,462 (gains on 12/31/2014 R$ 213,599) and is shown in the statement of profit and loss.
* Information not audited by the independent auditors
a) — Sensitivity analysis on embedded derivatives indexed to aluminum price
Sensitivity analyses were conducted on energy supply contracts for intensive consumers Albras and BHP, since they have a contractual clause linking the premium to the variance in aluminum price on the international market.
In this way, a sensitivity was obtained for such hybrid contracts to the variance in the price of the premium earned, as per the chart below. The volatility components in the premium are basically: price of primary aluminum on the LME, the exchange rate, and CDI (interbank deposit) rate. Below we see the impact of each scenario on the company’s results.
For scenario II (50% reduction) the expected price per ton of aluminum offered on the LME is below the minimum price for determination of the contract premium (US$ 1,450), hence the value goes to zero, affecting the marking to market of the embedded derivative.
As to the variance obtained between scenarios III and IV (increase of 25% and 50%), the big variance seen is due to the application of those percentages to the exchange rate, aluminum price, and CDI.
The sensitivity analyses were created in accordance with CVM Guidance 475/2008, with the objective of measuring the impact of changes in market variables on each of the Company’s financial instruments. Therefore, these are projections based on assessments of macroeconomic scenarios, and do not mean that the transactions will have the values presented in the analysis period considered.
Balance on |
| Scenario I (+25%) |
| Scenario II |
228,773 |
| 686,496 |
| 886,555 |
43.3.4 — Credit risk
This risk arises from the possibility of the Company and its subsidiaries suffering losses resulting from a difficulty to realize their receivables from clients, and from counterparty financial institutions in operations defaulting.
Through its subsidiaries, the Company operates in markets generating and transmitting electrical energy, supported by contracts signed in a regulated environment. The Company seeks to minimize its credit risk by means of guarantee mechanisms involving client receivables, and when applicable, through bank guarantees. In the distribution sector, the Company, through its subsidiaries, monitors default rates by analyzing specifics on its clients.
The credit risk related to client receivables (see note 7) is concentrated on distribution activities, in the sum of R$ 2,395,918 or 38% (R$ 2,178,241 or 35% on December 31, 2015) of the outstanding balance at the end of the year on December 31, 2016, and its main characteristic is the high level of diffusion since it considers a significant volume of sales to residential consumers.
Regarding loan receivables granted (see note 8), except for the financial operation with the joint subsidiary Itaipu, whose credit risk is low due to the inclusion of the cost of loans in the energy marketing fee of the joint subsidiary, as defined in the terms of the international treaty signed between the governments of Brazil and Paraguay, the concentration of credit risk with any other counterparty individually did not exceed 5% of the outstanding balance during the year.
The excess cash availability is invested in exclusive non-market funds, according to specific regulations from the Brazilian Central Bank. This fund is composed entirely of government bonds custodied by the Selic, with no exposure to counterparty risk.
In any relationships with financial institutions, the Company has a practice of performing operations only with low risk institutions as deemed by rating agencies, and which fulfill preset and formalized equity requirements. In addition, credit limits are defined, which are periodically revised.
When derivative operations are conducted on the over-the-counter market, they contain counterparty risks which, given the problems presented by financial institutions in 2008 and 2009, are relevant. In order to mitigate this risk, the Company instituted an accreditation standard for financial institutions, in order to perform derivative operations. This standard defines criteria regarding size, rating and expertise in the derivatives market, in order to select institutions that may perform operations with the Company. The Company currently selects the 20 best financial institutions twice a year, based on the mentioned criteria, as accredited institutions to perform derivative operations with the Company. In addition, the company has developed a methodology to control exposure to accredited institutions, that sets limits on the volume of operations to be performed with each one.
The Company monitors the credit risk of its swap operations, according to IFRS 13, but does not account for this risk of non-performance in the fair value balance of each derivative because, based on the net exposure to credit risk, the Company can record its swap portfolio on the books given a unforced transaction between the parties on the valuation date. The Company considers the risk of non-performance only in the backtesting analysis of each relationship designated for hedge accounting.
In addition, the Company is exposed to credit risk related to financial guarantees granted to banks by the Controller. The Company’s maximum exposure is the maximum amount the Company will have to pay if the guarantee is enforced.
43.3.5 — Liquidity risk
The liquidity needs of the Company and its subsidiaries are the responsibility of the treasury and fund-raising departments, which continually monitor short-, medium- and long-term cash flows, both estimated and realized, seeking to avoid possible discrepancies and resulting financial losses, and guarantee liquidity requirements for operating needs.
The table below analyzes the non-derivative financial liabilities of Eletrobras by maturation range, for the period remaining on the balance sheet until the contractual maturation date. The contractual interests obligations are also contractual repayment/maturation is based on the most recent date Eletrobras must settle the respective obligations, when applicable.
|
| 12/31/2016 | |||||||||
|
| Payment flow | |||||||||
FINANCIAL LIABILITIES |
| Up to 1 |
| 1 to 2 |
| 2 to 5 |
| More than 5 |
| Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
Measured at Amortized Cost |
| 20,420,991 |
| 19,541,472 |
| 25,956,948 |
| 12,925,271 |
| 78,844,681 |
|
Suppliers |
| 9,659,301 |
| 3,518,140 |
| 3,487,328 |
| 2,777,352 |
| 19,442,121 |
|
Loans and financing |
| 9,440,941 |
| 15,718,925 |
| 21,822,739 |
| 8,297,782 |
| 55,280,386 |
|
Debentures |
| 12,442 |
| 10,300 |
| 41,200 |
| 137,433 |
| 201,375 |
|
Reimbursement obligations |
| 1,167,503 |
| 152,339 |
| 146,051 |
| 1,217,923 |
| 2,683,816 |
|
Commercial leasing |
| 136,662 |
| 139,524 |
| 418,571 |
| 474,748 |
| 1,169,504 |
|
Concessions payable UBP |
| 4,142 |
| 2,244 |
| 41,060 |
| 20,033 |
| 67,479 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Measured at Fair Value through profit/loss |
| 6,946 |
| 43,685 |
| — |
| — |
| 50,631 |
|
Derivative instruments |
| 6,946 |
| 43,685 |
| — |
| — |
| 50,631 |
|
|
| 12/31/2015 | |||||||||
|
| Payment flow | |||||||||
FINANCIAL LIABILITIES |
| Up to 1 |
| 1 to 2 |
| 2 to 5 |
| More than 5 |
| Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
Measured at Amortized Cost |
| 18,331,212 |
| 19,570,442 |
| 28,492,678 |
| 23,999,600 |
| 90,393,931 |
|
Suppliers |
| 10,128,507 |
| 3,163,442 |
| 3,195,654 |
| 3,090,325 |
| 19,577,928 |
|
Loans and financing |
| 7,312,379 |
| 16,138,249 |
| 24,723,419 |
| 17,884,178 |
| 66,058,224 |
|
Debentures |
| 357,226 |
| 31,668 |
| 57,202 |
| 116,378 |
| 562,474 |
|
Reimbursement obligations |
| 396,208 |
| 145,399 |
| 137,252 |
| 2,200,727 |
| 2,879,586 |
|
Commercial leasing |
| 132,972 |
| 91,684 |
| 339,679 |
| 687,820 |
| 1,252,155 |
|
Concessions payable UBP |
| 3,920 |
| — |
| 39,472 |
| 20,172 |
| 63,564 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Measured at Fair Value through profit/loss |
| 20,608 |
| 78,521 |
| — |
| — |
| 99,129 |
|
Derivative instruments |
| 20,608 |
| 78,521 |
| — |
| — |
| 99,129 |
|
As of December 31, 2016, the Company was in a working capital deficiency position (i.e., consolidated total current liabiliites exceed consolidated total current assets). In order to remediate to the Company´s new working capital deficiency situation, the Board of Directors of the Company has approved a strategic business plan aiming to reduce investments, privatize the distribution companies, sell administrative properties, sell some on SPEs, structure a tax planning strategy in order to optimize the Company´s taxation costs and improve the use of tax credits, implement a voluntary redundancy plan and create a shared service center.
43.4 — Embedded derivatives related to debentures convertible into stock
The subsidiary Eletronorte entered into an agreement for the issuance of debentures, in June, 2011, and the release of resources starting in 2013, along with Banco da Amazônia S.A. (BASA), which manages the resources of Fundo de Desenvolvimento da Amazônia (Amazon Region Development Fund or FDA), to raise funds for project implementation.
Since that agreement had a clause regarding the option to convert such debentures into Company stock, with a limit of 50% of issued debentures, Sudam’s opinion is that it is possible assign a value to the amount that would be assigned to Sudam if such conversion is made.
To determine the value, a valuation was made of the previously invested company, by estimating the value of its stock and the current value of the agreement, by using parameters for determining the value of the derivative.
The gain determined in the period ending on December 31, 2016 is R$ 36,252 (a gain of R$ 27,292 on December 31, 2015) and is presented in the statement of results of the period.
43.4.1 — Sensitivity Analyses
Sensitivity analyses of the debentures agreement were carried out, since there is a contractual clause that refers to the option of converting such debentures into stock of the subsidiary Eletronorte.
In the following analysis, different scenarios for the TJLP (long-term interest rate) were taken into account, with the corresponding impacts on Company results. For the sensitivity analysis, for a potential scenario, estimates and/or expectations for 2016 and 2017 were used, which were basically based on macroeconomic assumptions obtained from the FOCUS Report, distributed by the Central Bank.
Sensitivity analyses were carried out for the curve of debt service payments of Fundo de Desenvolvimento da Amazônia (Amazon Region Development Fund or FDA), since it has a contractual clause regarding the option to convert 50% of Company stock on the date of actual settlement of stock.
According to IAS 39, hybrid agreements with associated volatile elements, whether they are price indexes and/or commodities, must be marked to market. In this manner, financial statements will reflect the fair value of the operation on each date of evaluation.
Accordingly, a variation in relation to the expectation of realization of the TJLP was sensitized.
It is possible to verify, below, the impact of each scenario on Company results.
|
| Balance on |
| Scenario I (-25%) |
| Scenario II (-50%) |
| Scenario I (+25%) |
| Scenario II (+50%) |
|
2016 |
| 44,017 |
| 37,488 |
| 30,774 |
| 50,122 |
| 55,673 |
|
The net profit per share is calculated through the adjustment of the weighted average quantity of common shares in circulation in order to assume the conversion of all potential diluitive common shares. The Company has only one category of potential diluitive common shares in circulation: convertible debt (compulsory loans). It is assumed that the convertible debt was converted into common shares and that the net profit is adjusted to eliminate the financial expense minus the fiscal effect.
NOTE 44 — OPERATING SEGMENT INFORMATION
The operating segment information, corresponding to December 31, 2016, December 31, 2015 and December 31, 2014 are as follows:
|
|
|
|
|
|
|
| 12/31/2016 |
|
|
|
|
|
|
| ||
|
|
|
| Generation |
| Transmission |
|
|
|
|
|
|
| ||||
|
| Management |
| Exploration |
| O&M System |
| Exploration |
| O&M System |
| Distribution |
| Inter- |
| Total |
|
Net operating revenue |
| 177,405 |
| 16,084,829 |
| 1,626,261 |
| 1,604,010 |
| 31,951,699 |
| 11,591,536 |
| (2,286,887 | ) | 60,748,853 |
|
Operating costs and expenses |
| (16,363,987 | ) | (15,152,642 | ) | (2,558,582 | ) | (2,516,547 | ) | (4,842,825 | ) | (18,906,149 | ) | 14,498,405 |
| (45,842,327 | ) |
Operating profit/loss Before financial result |
| (16,186,582 | ) | 932,187 |
| (932,321 | ) | (912,537 | ) | 27,108,874 |
| (7,314,613 | ) | 12,211,518 |
| 14,906,526 |
|
Financial profit/loss |
| (978,970 | ) | (1,743,807 | ) | (619,292 | ) | (179,444 | ) | 306,918 |
| (2,658,306 | ) | (56,410 | ) | (5,929,311 | ) |
Profit/loss on Equity Interests |
| 21,251,801 |
| — |
| — |
| — |
| — |
| — |
| (18,046,290 | ) | 3,205,511 |
|
Income tax and social contributions |
| (67,593 | ) | 532,531 |
| 165,617 |
| (167,351 | ) | (8,974,023 | ) | — |
| — |
| (8,510,819 | ) |
Net period earnings (losses) |
| 4,018,656 |
| (279,089 | ) | (1,385,996 | ) | (1,259,332 | ) | 18,441,769 |
| (9,972,919 | ) | (5,891,182 | ) | 3,671,906 |
|
|
| 12/31/2015 | |||||||||||||||
|
|
|
| Generation |
| Transmission |
|
|
|
|
|
|
| ||||
|
| Management |
| Exploration |
| O&MSystem |
| Exploration |
| O&MSystem |
| Distribution |
| Inter- |
| Total |
|
Net operating revenue |
| 348,022 |
| 15,374,584 |
| 1,747,836 |
| 1,839,339 |
| 3,826,056 |
| 11,470,843 |
| (2,017,842 | ) | 32,588,838 |
|
Operating costs and expenses |
| (8,777,628 | ) | (18,881,866 | ) | (1,586,974 | ) | (3,253,891 | ) | (4,008,317 | ) | (13,603,990 | ) | 7,484,381 |
| (42,628,284 | ) |
Operating profit/loss Before financial result |
| (8,429,606 | ) | (3,507,282 | ) | 160,862 |
| (1,414,552 | ) | (182,261 | ) | (2,133,147 | ) | 5,466,539 |
| (10,039,446 | ) |
Financial profit/loss |
| 3,958,904 |
| (1,281,380 | ) | (656,829 | ) | (573,184 | ) | (240,949 | ) | (2,831,624 | ) | (73,962 | ) | (1,699,024 | ) |
Profit/loss on Equity Interests |
| (6,091,974 | ) | — |
| — |
| — |
| — |
| — |
| 6,623,420 |
| 531,446 |
|
Income tax and social contributions |
| (870,858 | ) | (126,772 | ) | 89 |
| 256,947 |
| 19,553 |
| 10,929 |
| — |
| (710,112 | ) |
Net period earnings (losses) |
| (11,433,534 | ) | (4,915,434 | ) | (495,878 | ) | (1,730,789 | ) | (403,657 | ) | (4,953,842 | ) | 12,015,997 |
| (11,917,136 | ) |
|
| 12/31/2014 | |||||||||||||||
|
|
|
| Generation |
| Transmission |
|
|
|
|
|
|
| ||||
|
| Management |
| Exploration |
| O&MSystem |
| Exploration |
| O&MSystem |
| Distribution |
| Inter- |
| Total |
|
Net operating income |
| 81,591 |
| 15,539,810 |
| 1,555,217 |
| 1,998,366 |
| 2,979,323 |
| 9,390,777 |
| (1,407,277 | ) | 30,137,807 |
|
Costs and Operational Expenses |
| (9,115,663 | ) | (12,882,939 | ) | (1,755,679 | ) | (1,911,569 | ) | (2,791,777 | ) | (7,666,904 | ) | 2,143,267 |
| (33,981,263 | ) |
Financing |
| (9,034,072 | ) | 2,656,871 |
| (200,462 | ) | 86,797 |
| 187,546 |
| 1,723,873 |
| 735,990 |
| (3,843,456 | ) |
Financial income |
| 2,463,318 |
| (135,757 | ) | 420,005 |
| (270,551 | ) | (30,111 | ) | (1,739,995 | ) | (12,284 | ) | 694,625 |
|
Income from equity |
| (1,575,940 | ) | — |
| — |
| — |
| — |
| — |
| 267,636 |
| (1,308,304 | ) |
Income tax and social contribution |
| (242,095 | ) | (2,690,448 | ) | (1,308,867 | ) | 3,422,263 |
| (903,792 | ) | 22,421 |
| — |
| (1,700,518 | ) |
Net profit (loss) of the year |
| (8,388,789 | ) | (169,334 | ) | (1,089,324 | ) | 3,238,509 |
| (746,357 | ) | 6,299 |
| 991,342 |
| (6,157,653 | ) |
The inter-segment elimination column is represented by adjustments occurred between segments in order to reconcile the reportable segments with the Company’s profit or loss for the years presented. The amounts presented above are related substantially to results of the equity method in associates in the amounts of R$ 18,046,290 in 2016, R$ 6,623,420 in 2015 and R$ 267,636 in 2014 and recognition of unfunded liabilities over interests held in subsidiaries in the amounts of R$ 12,155,108 in 2015, R$ 5,392,577 in 2015 and R$ 831,851 in 2014.
The inter-segment eliminations related to interests income and expenses are presented in the table below. There are no reconciliations from different accounting policies.
In order to improve the presentation of our financial results, we reclassified the results from the generation operations of our subsidiaries Amazonas D and Boa Vista for the years ended December 31, 2015 and 2014 to distribution segment.
Interest income and expenses by segment:
12/31/2016 |
| ||||||||||||
|
| Management |
| Generation |
| Transmission |
| Distribution |
| Inter-segment elimination |
| Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest revenue |
| 3,479,762 |
| 28,623 |
| 36,498 |
| — |
| (2,390,873 | ) | 1,154,010 |
|
Interest expense |
| (2,613,556 | ) | (1,744,244 | ) | (1,101,056 | ) | (3,579,897 | ) | 2,662,917 |
| (6,375,836 | ) |
Total |
| 866,206 |
| (1,715,621 | ) | (1,064,558 | ) | (3,579,897 | ) | 272,044 |
| (5,221,826 | ) |
12/31/2015 |
| ||||||||||||
|
| Management |
| Generation |
| Transmission |
| Distribution |
| Inter-segment elimination |
| Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest revenue |
| 3,007,812 |
| 25,755 |
| 34,199 |
| — |
| (1,939,360 | ) | 1,128,406 |
|
Interest expense |
| (2,456,810 | ) | (1,418,341 | ) | (1,062,270 | ) | (3,268,435 | ) | 1,865,398 |
| (6,340,458 | ) |
Total |
| 551,002 |
| (1,392,586 | ) | (1,028,071 | ) | (3,268,435 | ) | (73,962 | ) | (5,212,052 | ) |
12/31/2014 |
| ||||||||||||
|
| Management |
| Generation |
| Transmission |
| Distribution |
| Inter-segment elimination |
| Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest revenue |
| 2,410,701 |
| 24,682 |
| 34,139 |
| — |
| (1,398,415 | ) | 1,071,107 |
|
Interest expense |
| (1,510,250 | ) | (993,809 | ) | (817,066 | ) | (1,521,002 | ) | 1,393,393 |
| (3,448,734 | ) |
Total |
| 900,451 |
| (969,127 | ) | (782,927 | ) | (1,521,002 | ) | (5,022 | ) | (2,377,627 | ) |
Income from external consumers per segment:
|
| 12/31/2016 |
| ||||||
|
| Generation |
| Transmission |
| Distribution |
| Total |
|
Supply (sale) of Electricity |
| 12,885,622 |
| — |
| — |
| 12,885,622 |
|
Supply of Electricity |
| 2,945,506 |
| — |
| 15,208,202 |
| 18,153,708 |
|
Short-term electricity |
| 1,242,016 |
| — |
| — |
| 1,242,016 |
|
CVA and other financial items |
| — |
| — |
| (339,405 | ) | (339,405 | ) |
Financial Effect of Itaipu |
| (346,638 | ) | — |
| — |
| (346,638 | ) |
Revenue from operation and maintenance |
| 2,178,699 |
| 2,975,690 |
| — |
| 5,154,389 |
|
Revenue from construction |
| 41,316 |
| 1,174,703 |
| 1,165,611 |
| 2,381,630 |
|
Financial - Return on Investment |
| — |
| 29,406,261 |
| — |
| 29,406,261 |
|
Total gross revenue |
| 18,946,521 |
| 33,556,654 |
| 16,034,408 |
| 68,537,583 |
|
|
| 12/31/2015 | |||||||
|
| Generation |
| Transmission |
| Distribution |
| Total |
|
Supply (sale) of Electricity |
| 12,310,243 |
| — |
| — |
| 12,310,243 |
|
Supply of Electricity |
| 3,571,809 |
| — |
| 14,835,424 |
| 18,407,233 |
|
Short-term electricity |
| 1,811,552 |
| — |
| — |
| 1,811,552 |
|
CVA and other financial items |
| — |
| — |
| 324,120 |
| 324,120 |
|
Financial Effect of Itaipu |
| 234,425 |
| — |
| — |
| 234,425 |
|
Revenue from operation and maintenance |
| 1,882,637 |
| 2,695,611 |
| — |
| 4,578,248 |
|
Revenue from construction |
| 148,403 |
| 2,077,616 |
| 1,011,518 |
| 3,237,537 |
|
Financial - Return on Investment |
| — |
| 838,087 |
| — |
| 838,087 |
|
Total gross revenue |
| 19,959,069 |
| 5,611,314 |
| 16,171,062 |
| 41,741,445 |
|
|
| 12/31/2014 | |||||||
|
| Generation |
| Transmission |
| Distribution |
| Total |
|
Supply (sale) of energy |
| 12,213,839 |
| — |
| — |
| 12,213,839 |
|
Supply of energy |
| 3,317,103 |
| — |
| 7,310,337 |
| 10,627,440 |
|
Short term energy |
| 3,817,976 |
| — |
| — |
| 3,817,976 |
|
CVA and other financial items |
| — |
| — |
| 1,339,294 |
| 1,339,294 |
|
Itaipu financial effect |
| (97,740 | ) | — |
| — |
| (97,740 | ) |
Income from operation and maintenance |
| 1,803,127 |
| 2,201,268 |
| — |
| 4,004,395 |
|
Construction income |
| 240,040 |
| 1,786,195 |
| 873,413 |
| 2,899,648 |
|
Financial - Investment return |
| — |
| 714,409 |
| — |
| 714,409 |
|
Total gross income |
| 21,294,345 |
| 4,701,872 |
| 9,523,044 |
| 35,519,261 |
|
Intersegment Income:
|
| 12/31/2016 | |||||||
|
| Management |
| Generation |
| Transmission |
| Total |
|
|
|
|
|
|
|
|
| �� |
|
Supply (sale) of Electricity from distribution segment |
| — |
| 1,127,914 |
| — |
| 1,127,914 |
|
Supply (sale) of Electricity from generation segment |
| — |
| 726,513 |
| — |
| 726,513 |
|
Revenue from Transmission - O&M from generation segment |
| — |
| — |
| 286,936 |
| 286,936 |
|
Revenue from Transmission - O&M from distribution segment |
| — |
| — |
| 123,727 |
| 123,727 |
|
Revenue from interest, generation segment |
| 552,746 |
| — |
| — |
| 552,746 |
|
Revenue from interest, transmission segment |
| 836,583 |
| — |
| — |
| 836,583 |
|
Revenue from interest, distribution segment |
| 1,001,544 |
| — |
| — |
| 1,001,544 |
|
Total |
| 2,390,873 |
| 1,854,427 |
| 410,663 |
| 4,655,963 |
|
|
| 12/31/2015 | |||||||
|
| Management |
| Generation |
| Transmission |
| Total |
|
|
|
|
|
|
|
|
|
|
|
Supply (sale) of Electricity from distribution segment |
| — |
| 928,993 |
| — |
| 928,993 |
|
Supply (sale) of Electricity from generation segment |
| — |
| 486,478 |
| — |
| 486,478 |
|
Revenue from Transmission - O&M from generation segment |
| — |
| — |
| 307,418 |
| 307,418 |
|
Revenue from Transmission - O&M from distribution segment |
| — |
| — |
| 112,893 |
| 112,893 |
|
Revenue from interest, generation segment |
| 477,484 |
| — |
| — |
| 477,484 |
|
Revenue from interest, transmission segment |
| 757,365 |
| — |
| — |
| 757,365 |
|
Revenue from interest, distribution segment |
| 704,511 |
| — |
| — |
| 704,511 |
|
Total |
| 1,939,360 |
| 1,415,471 |
| 420,311 |
| 3,775,142 |
|
|
| 12/31/2014 | |||||||
|
| Management |
| Generation |
| Transmission |
| Total |
|
|
|
|
|
|
|
|
|
|
|
Supply (sale) of Electricity from distribution segment |
| — |
| 306,695 |
| — |
| 306,695 |
|
Supply (sale) of Electricity from generation segment |
| — |
| 698,061 |
| — |
| 698,061 |
|
Revenue from Transmission - O&M from generation segment |
| — |
| — |
| 338,374 |
| 338,374 |
|
Revenue from Transmission - O&M from distribution segment |
| — |
| — |
| 64,147 |
| 64,147 |
|
Revenue from interest, generation segment |
| 252,750 |
| — |
| — |
| 252,750 |
|
Revenue from interest, transmission segment |
| 638,405 |
| — |
| — |
| 638,405 |
|
Revenue from interest, distribution segment |
| 507,260 |
| — |
| — |
| 507,260 |
|
Total |
| 1,398,415 |
| 1,004,756 |
| 402,521 |
| 2,805,692 |
|
Additions to non-current assets by segment:
|
| 12/31/2016 | |||||||||
|
| Management |
| Generation |
| Transmission |
| Distribution |
| Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Assets |
| 186,369 |
| 2,290,771 |
| — |
| — |
| 2,477,140 |
|
Intangible assets |
| 58,993 |
| 54,981 |
| 500 |
| 38,073 |
| 152,547 |
|
Total |
| 245,362 |
| 2,345,752 |
| 500 |
| 38,073 |
| 2,629,687 |
|
|
| 12/31/2015 | |||||||||
|
| Management |
| Generation |
| Transmission |
| Distribution |
| Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Assets |
| 230,633 |
| 3,909,258 |
| — |
| — |
| 4,139,891 |
|
Intangible assets |
| 61,331 |
| 52,811 |
| 87,463 |
| 182,703 |
| 384,308 |
|
Total |
| 291,964 |
| 3,962,069 |
| 87,463 |
| 182,703 |
| 4,524,199 |
|
|
| 12/31/2014 |
| ||||||
|
| Management |
| Generation |
| Distribution |
| Total |
|
|
|
|
|
|
|
|
|
|
|
Fixed Assets |
| 205,164 |
| 2,596,694 |
| — |
| 2,801,858 |
|
Intangible assets |
| 75,524 |
| 19,575 |
| 34,844 |
| 129,943 |
|
Total |
| 280,688 |
| 2,616,269 |
| 34,844 |
| 2,931,801 |
|
Non-current Assets per segment:
|
| 12/31/2016 | |||||||||
|
| Management |
| Generation |
| Transmission |
| Distribution |
| Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Assets |
| 1,848,030 |
| 24,065,771 |
| — |
| 899,124 |
| 26,812,925 |
|
Intangible assets |
| 419,775 |
| 151,877 |
| 83,837 |
| 106,249 |
| 761,738 |
|
Total |
| 2,267,805 |
| 24,217,648 |
| 83,837 |
| 1,005,373 |
| 27,574,663 |
|
|
| 12/31/2015 | |||||||||
|
| Management |
| Generation |
| Transmission |
| Distribution |
| Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Assets |
| 1,774,081 |
| 26,748,578 |
| — |
| 956,821 |
| 29,479,480 |
|
Intangible assets |
| 452,068 |
| 146,173 |
| 88,392 |
| 248,518 |
| 935,151 |
|
Total |
| 2,226,149 |
| 26,961,916 |
| 88,392 |
| 1,205,339 |
| 30,481,796 |
|
|
| 12/31/2014 | |||||||||
|
| Management |
| Generation |
| Transmission |
| Distribution |
| Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Assets |
| 1,781,051 |
| 28,309,979 |
| — |
| 1,014,518 |
| 31,105,549 |
|
Intangible assets |
| 502,737 |
| 500,285 |
| 4,558 |
| 357,791 |
| 1,365,371 |
|
Total |
| 2,283,788 |
| 28,810,264 |
| 4,558 |
| 1,372,309 |
| 32,470,920 |
|
Non-cash items per segment:
|
| 12/31/2016 | |||||||||
|
| Management |
| Generation |
| Transmission |
| Distribution |
| Total |
|
Depreciation and amortization |
| 201,993 |
| 1,562,407 |
| 3,510 |
| 75,875 |
| 1,843,785 |
|
Charges (reversals) of Onerous Contracts, net |
| — |
| 1,904,749 |
| (729,564 | ) | 1,019,313 |
| 2,194,498 |
|
Impairment of assets |
| (1,852 | ) | 3,396,523 |
| 2,363,556 |
| (221,165 | ) | 5,537,062 |
|
Total |
| 200,142 |
| 6,863,679 |
| 1,637,502 |
| 874,023 |
| 9,575,346 |
|
|
| 12/31/2015 | |||||||||
|
| Management |
| Generation |
| Transmission |
| Distribution |
| Total |
|
Depreciation and amortization |
| 189,085 |
| 1,242,709 |
| 3,728 |
| 407,078 |
| 1,842,600 |
|
Impairment of assets |
| (1,663 | ) | 5,470,206 |
| 336,762 |
| 22,328 |
| 5,827,633 |
|
Charges (reversals) of Onerous Contracts, net |
| — |
| 102,518 |
| 263,959 |
| — |
| 366,477 |
|
Total |
| 187,422 |
| 6,815,433 |
| 604,449 |
| 429,406 |
| 8,036,710 |
|
|
| 12/31/2014 | |||||||||
|
| Management |
| Generation |
| Transmission |
| Distribution |
| Total |
|
Depreciation and amortization |
| 205,016 |
| 1,255,492 |
| 32 |
| 316,756 |
| 1,777,296 |
|
Impairment of assets |
| 13,935 |
| 5,470,206 |
| 336,762 |
| 22,328 |
| 5,843,231 |
|
Charges (reversals) of Onerous Contracts, net |
| — |
| (1,577,072 | ) | (243,182 | ) | (295,259 | ) | (2,115,513 | ) |
Total |
| 218,951 |
| 5,148,626 |
| 93,612 |
| 43,825 |
| 5,505,014 |
|
NOTE 45 — TRANSACTIONS WITH RELATED PARTIES
The final controlling company of the Company is União (the Federal Goverment) that holds 51% of common stock of the Company (See Note 35).
Company transactions with its subsidiaries, controlled companies and special purpose entities are carried out at prices and conditions that are defined by the parties, also taking into consideration the terms that could be applied in the market with unrelated parties. Among the main operations that took place with related parties, we would like to point out loans and financing granted with the above-mentioned conditions and/or according to specific legislation on such matters. The other operations were based also taking into consideration conditions that could be usual in the market.
|
|
|
| 12/31/2016 |
| 12/31/2015 |
| ||||||||
COMPANIES |
| NATURE OF TRANSACTION |
| ASSETS |
| LIABILITIES |
| INCOME |
| ASSETS |
| LIABILITIES |
| INCOME | �� |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FEDERAL GOVERNMENT |
| Customer |
| 2,245 |
| — |
| — |
| 19,535 |
| — |
| — |
|
| Other assets |
| 1,991 |
| — |
| — |
| — |
| — |
| — |
| |
| Loans and financing payable |
| — |
| 31,483,757 |
| — |
| — |
| 19,833,145 |
| — |
| |
| Suppliers (BR Distribuidora) |
| — |
| 5,937,476 |
| — |
| — |
| 3,773,502 |
| — |
| |
| Reimbursement obligations (RBNI) |
| — |
| 700,582 |
| — |
| — |
| — |
| — |
| |
| Other Revenue |
| — |
| — |
| 51,403 |
| — |
| — |
| 96,432 |
| |
|
|
|
| 4,236 |
| 35,660,802 |
| 51,403 |
| 19,535 |
| 23,606,647 |
| 96,432 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NATIONAL TREASURY |
| Obligations |
| — |
| 2,705,947 |
| — |
| — |
| 3,940,898 |
| — |
|
|
|
|
| — |
| 2,705,947 |
| — |
| — |
| 3,940,898 |
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NORTE BRASIL |
| Customers |
| 203 |
| — |
| — |
| — |
| — |
| — |
|
| Suppliers |
| — |
| 1,538 |
| — |
| — |
| 1,459 |
| — |
| |
| Financial revenue |
| — |
| — |
| 1,035 |
| — |
| — |
| — |
| |
| Other expenses |
| — |
| — |
| (14,267 | ) | — |
| — |
| (14,636 | ) | |
|
|
|
| 203 |
| 1,538 |
| (13,232 | ) | — |
| 1,459 |
| (14,636 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ETAU |
| Other receivables |
| 10 |
| — |
| — |
| 9 |
| — |
| — |
|
| Interest on equity/dividends receivable |
| 5,616 |
| — |
| — |
| 257 |
| — |
| — |
| |
| Suppliers |
| — |
| 4 |
| — |
| — |
| 3 |
| — |
| |
| Revenue from services rendered |
| — |
| — |
| 928 |
| — |
| — |
| 350 |
| |
| Other Revenue |
| — |
| — |
| 10 |
| — |
| — |
| 9 |
| |
| Fees for use of electricity network |
| — |
| — |
| (43 | ) | — |
| — |
| (38 | ) | |
|
|
|
| 5,626 |
| 4 |
| 895 |
| 266 |
| 3 |
| 321 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ESBR |
| Customers |
| 9,487 |
| — |
| — |
| 4,526 |
| — |
| — |
|
| Advances for future capital increase |
| 535,200 |
| — |
| — |
| 141,400 |
| — |
| — |
| |
| Suppliers |
| — |
| 17,630 |
| — |
| — |
| 27,876 |
| — |
| |
| Energy purchased for resale |
| — |
| 17,206 |
| — |
| — |
| — |
| — |
| |
| Expenses, energy purchased |
| — |
| — |
| (399,299 | ) | — |
| — |
| (219,637 | ) | |
| Revenue from use of Electricity |
| — |
| — |
| 48,206 |
| — |
| — |
| — |
| |
| Other Revenue |
| — |
| — |
| 7,369 |
| — |
| — |
| — |
| |
| Financial Expenses |
| — |
| — |
| (15,484 | ) | — |
| — |
| — |
| |
|
|
|
| 544,687 |
| 34,836 |
| (359,208 | ) | 145,926 |
| 27,876 |
| (219,637 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COSTA OESTE |
| Dividends/interest on equity receivable |
| 300 |
| — |
| — |
| 1,713 |
| — |
| — |
|
| Advances for future capital increase |
| — |
| — |
| — |
| — |
| — |
| — |
| |
| Suppliers |
| — |
| 1 |
| — |
| — |
| 1 |
| — |
| |
| Fees for use of electricity network |
| — |
| — |
| (12 | ) | — |
| — |
| (10 | ) | |
|
|
|
| 300 |
| 1 |
| (12 | ) | 1,713 |
| 1 |
| (10 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TSBE - Transmissora Sul Brasileira de Energia S.A. |
| Other receivables |
| 8 |
| — |
| — |
| 11 |
| — |
| — |
|
| Suppliers |
| — |
| 7 |
| — |
| — |
| 7 |
| — |
| |
| Revenue from services rendered |
| — |
| — |
| 2,736 |
| — |
| — |
| 12,557 |
| |
| Other Revenue |
| — |
| — |
| 83 |
| — |
| — |
| 76 |
| |
| Fees for use of electricity network |
| — |
| — |
| (82 | ) | — |
| — |
| (70 | ) | |
|
|
|
| 8 |
| 7 |
| 2,737 |
| 11 |
| 7 |
| 12,563 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIVRAMENTO |
| Customers |
| 153 |
| — |
| — |
| — |
| — |
| — |
|
| Other receivables |
| 213 |
| — |
| — |
| — |
| — |
| — |
| |
| Advances for future capital increase |
| 220,027 |
| — |
| — |
| 173,860 |
| — |
| — |
| |
| Other assets |
| 64,310 |
| — |
| — |
| 64,310 |
| — |
| — |
| |
| Revenue from services rendered |
| — |
| — |
| 659 |
| — |
| — |
| — |
| |
| Revenue from use of electricity network |
| — |
| — |
| 256 |
| — |
| — |
| — |
| |
| Fees for use of electricity network |
| — |
| — |
| — |
| — |
| — |
| (2 | ) | |
| Other Revenue |
| — |
| — |
| — |
| — |
| — |
| 179 |
| |
|
|
|
| 284,703 |
| — |
| 915 |
| 238,170 |
| — |
| 177 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Customers |
| 51 |
| — |
| — |
| — |
| — |
| — |
|
SANTA VITÓRIA |
| Other receivables |
| 581 |
| — |
| — |
| — |
| — |
| — |
|
| Advances for future capital increase |
| 37,946 |
| — |
| — |
| 36,492 |
| — |
| — |
| |
| Other assets |
| 29,400 |
| — |
| — |
| 29,400 |
| — |
| — |
| |
| Revenue from services rendered |
| — |
| — |
| 919 |
| — |
| — |
| — |
| |
| Revenue from use of electricity network |
| — |
| — |
| 632 |
| — |
| — |
| — |
| |
| Other Revenue |
| — |
| — |
| 158 |
| — |
| — |
| — |
| |
|
|
|
| 67,978 |
| — |
| 1,709 |
| 65,892 |
| — |
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MARUMBI |
| Advances for future capital increase |
| 880 |
| — |
| — |
| — |
| — |
| — |
|
| Dividends/interest on equity receivable |
| 961 |
| — |
| — |
| 775 |
| — |
| — |
| |
| Suppliers |
| — |
| 2 |
| — |
| — |
| 2 |
| — |
| |
| Other Revenue |
| — |
| — |
| — |
| — |
| — |
| 14 |
| |
| Fees for use of electricity network |
| — |
| — |
| (23 | ) | — |
| — |
| (8 | ) | |
|
|
|
| 1,841 |
| 2 |
| (23 | ) | 775 |
| 2 |
| 6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CHUÍ |
| Customers |
| 28 |
| — |
| — |
| 431,913 |
| — |
| — |
|
| Other receivables |
| 288 |
| — |
| — |
| — |
| — |
| — |
| |
| Advances for future capital increase |
| 431,913 |
| — |
| — |
| — |
| — |
| — |
| |
| Revenue from services rendered |
| — |
| — |
| 1,041 |
| — |
| — |
| — |
| |
| Revenue from use of electricity network |
| — |
| — |
| 356 |
| — |
| — |
| — |
| |
|
|
|
| 432,229 |
| — |
| 1,397 |
| 431,913 |
| — |
| — |
|
|
|
|
| 12/31/2016 |
| 12/31/2015 |
| ||||||||
COMPANIES |
| NATURE OF TRANSACTION |
| ASSETS |
| LIABILITIES |
| INCOME |
| ASSETS |
| LIABILITIES |
| INCOME |
|
TDG |
| Receivables |
| 225 |
| — |
| — |
| 355 |
| — |
| — |
|
| Advances for future capital increase |
| 101,000 |
| — |
| — |
| 101,000 |
| — |
| — |
| |
| Suppliers |
| — |
| 115 |
| — |
| — |
| 169 |
| — |
| |
| Revenue from services rendered |
| — |
| — |
| 2,688 |
| — |
| — |
| 4,217 |
| |
| Fees for use of electricity network |
| — |
| — |
| (1,432 | ) | — |
| — |
| (1,580 | ) | |
|
|
| 101,225 |
| 115 |
| 1,256 |
| 101,355 |
| 169 |
| 2,637 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MANAUS TRANSMISSÃO |
| Dividends/interest on equity receivable |
| 3,934 |
| — |
| — |
| 50 |
| — |
| — |
|
| Advances for future capital increase |
| 415 |
| — |
| — |
| 26,800 |
| — |
| — |
| |
| Other assets |
| 1,067 |
| — |
| — |
| 1,067 |
| — |
| — |
| |
| Suppliers |
| — |
| 1,994 |
| — |
| — |
| 1,810 |
| — |
| |
| Other liabilities |
| — |
| — |
| — |
| — |
| 8 |
| — |
| |
| Other Revenue |
| — |
| — |
| — |
| — |
| — |
| 2,573 |
| |
| Fees for use of electricity network |
| — |
| — |
| (1,679 | ) | — |
| — |
| (20,825 | ) | |
|
|
| 5,416 |
| 1,994 |
| (1,679 | ) | 27,917 |
| 1,818 |
| (18,252 | ) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MADEIRA ENERGIA |
| Other receivables |
| 359,959 |
| — |
| — |
| — |
| — |
| — |
|
| Financial revenue |
| — |
| — |
| 55,759 |
| — |
| — |
| — |
| |
|
|
| 359,959 |
| — |
| 55,759 |
| — |
| — |
| — |
| |
| Dividends/interest on equity receivable |
| 30,630 |
| — |
| — |
| 27,589 |
| — |
| — |
| |
| Suppliers |
| — |
| 1,547 |
| — |
| — |
| 1,475 |
| — |
| |
| Accounts payable |
| — |
| 335 |
| — |
| — |
| 526 |
| — |
| |
| Revenue from services rendered |
| — |
| — |
| 199 |
| — |
| — |
| 602 |
| |
| Other expenses (revenue) |
| — |
| — |
| — |
| — |
| — |
| 495 |
| |
| Fees for use of electricity network |
| — |
| — |
| (51,903 | ) | — |
| — |
| (53,169 | ) | |
|
|
| 30,630 |
| 1,882 |
| (51,704 | ) | 27,589 |
| 2,001 |
| (52,072 | ) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MANAUS CONSTRUÇÃO |
| Dividends/interest on equity receivable |
| 9,178 |
| — |
| — |
| 9,178 |
| — |
| — |
|
|
|
| 9,178 |
| — |
| — |
| 9,178 |
| — |
| — |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STN |
| Receivables |
| 304 |
| — |
| — |
| 273 |
| — |
| — |
|
| Dividends/interest on equity receivable |
| 8,974 |
| — |
| — |
| — |
| — |
| — |
| |
| Suppliers |
| — |
| 842 |
| — |
| — |
| 1,042 |
| — |
| |
| Revenue from services rendered |
| — |
| — |
| 3,503 |
| — |
| — |
| 3,231 |
| |
| Fees for use of electricity network |
| — |
| — |
| (9,887 | ) | — |
| — |
| (10,362 | ) | |
|
|
| 9,278 |
| 842 |
| (6,384 | ) | 273 |
| 1,042 |
| (7,131 | ) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INTESA - Integração Transmissora de Energia S.A. |
| Interest on equity/dividends receivable |
| 1,172 |
| — |
| — |
| 1,209 |
| — |
| — |
|
| Customers |
| 548 |
| — |
| — |
| — |
| — |
| — |
| |
| Other assets |
| — |
| — |
| — |
| 317 |
| — |
| — |
| |
| Suppliers |
| — |
| 1,577 |
| — |
| — |
| 1,482 |
| — |
| |
| Other Revenue |
| — |
| — |
| 4,154 |
| — |
| — |
| 3,673 |
| |
| Other expenses |
| — |
| — |
| (6,300 | ) | — |
| — |
| — |
| |
| Fees for use of electricity network |
| — |
| — |
| (7,719 | ) | — |
| — |
| (14,503 | ) | |
|
|
| 1,720 |
| 1,577 |
| (9,865 | ) | 1,526 |
| 1,482 |
| (10,830 | ) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EAPSA — Energética Águas da Pedra S.A. |
| Customers |
| 190 |
| — |
| — |
| 352 |
| — |
| — |
|
| Dividends/interest on equity receivable |
| 4,743 |
| — |
| — |
| 2,181 |
| — |
| — |
| |
| Other Revenue |
| — |
| — |
| — |
| — |
| — |
| 1,557 |
| |
|
|
| 4,933 |
| — |
| — |
| 2,533 |
| — |
| 1,557 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SETE GAMELEIRAS |
| Customers |
| 9 |
| — |
| — |
| 8 |
| — |
| — |
|
| Dividends/interest on equity receivable |
| 293 |
| — |
| — |
| 437 |
| — |
| — |
| |
|
|
| 302 |
| — |
| — |
| 445 |
| — |
| — |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S. PEDRO DO LAGO |
| Customers |
| 9 |
| — |
| — |
| 36 |
| — |
| — |
|
| Other receivables |
| 31 |
| — |
| — |
| — |
| — |
| — |
| |
| Dividends/interest on equity receivable |
| 341 |
| — |
| — |
| 371 |
| — |
| — |
| |
| Revenue from services rendered |
| — |
| — |
| 341 |
| — |
| — |
| 335 |
| |
|
|
| 381 |
| — |
| 341 |
| 407 |
| — |
| 335 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PEDRA BRANCA |
| Customers |
| 9 |
| — |
| — |
| 8 |
| — |
| — |
|
| Dividends/interest on equity receivable |
| 757 |
| — |
| — |
| 542 |
| — |
| — |
| |
|
|
| 766 |
| — |
| — |
| 550 |
| — |
| — |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BRASVENTOS MIASSABA |
| Customers |
| 89 |
| — |
| — |
| 152 |
| — |
| — |
|
| Other assets |
| 75 |
| — |
| — |
| 1 |
| — |
| — |
| |
| Revenue from use of electricity network |
| — |
| — |
| 1,415 |
| — |
| — |
| 709 |
| |
| Other Revenue |
| — |
| — |
| — |
| — |
| — |
| 604 |
| |
|
|
| 164 |
| — |
| 1,415 |
| 153 |
| — |
| 1,313 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BRASVENTOS EOLO |
| Customers |
| 76 |
| — |
| — |
| 129 |
| — |
| — |
|
| Advances for future capital increase |
| 316 |
| — |
| — |
| 316 |
| — |
| — |
| |
| Other assets |
| 64 |
| — |
| — |
| 1 |
| — |
| — |
| |
| Revenue from use of electricity network |
| — |
| — |
| 666 |
| — |
| — |
| 605 |
| |
| Other Revenue |
| — |
| — |
| 540 |
| — |
| — |
| 517 |
| |
|
|
| 456 |
| — |
| 1,206 |
| 446 |
| — |
| 1,122 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ENERPEIXE |
| Customers |
| 285 |
| — |
| — |
| 282 |
| — |
| — |
|
| Interest on equity/dividends receivable |
| 26,446 |
| — |
| — |
| 34,686 |
| — |
| — |
| |
| Suppliers |
| — |
| 10 |
| — |
| — |
| — |
| — |
| |
| Revenue from services rendered |
| — |
| — |
| 379 |
| — |
| — |
| 13 |
| |
| Revenue from use of electricity network |
| — |
| — |
| 2,475 |
| — |
| — |
| 2,287 |
| |
|
|
| 26,731 |
| 10 |
| 2,854 |
| 34,968 |
| — |
| 2,300 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TRANSLESTE |
| Interest on equity/dividends receivable |
| 282 |
| — |
| — |
| — |
| — |
| — |
|
| Suppliers |
| — |
| 179 |
| — |
| — |
| 164 |
| — |
| |
| Fees for use of electricity network |
| — |
| — |
| (1,544 | ) | — |
| — |
| (1,515 | ) | |
|
|
| — |
| 179 |
| (1,544 | ) | — |
| 164 |
| (1,515 | ) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TRANSUDESTE |
| Customers |
| 15 |
| — |
| — |
| 14 |
| — |
| — |
|
| Other receivables |
| 14 |
| — |
| — |
| 13 |
| — |
| — |
| |
| Interest on equity/dividends receivable |
| 1,256 |
| — |
| — |
| 1,033 |
| — |
| — |
| |
| Suppliers |
| — |
| 111 |
| — |
| — |
| 102 |
| — |
| |
| Revenue from services rendered |
| — |
| — |
| 169 |
| — |
| — |
| 157 |
| |
| Other Revenue |
| — |
| — |
| 182 |
| — |
| — |
| 165 |
| |
| Fees for use of electricity network |
| — |
| — |
| (976 | ) | — |
| — |
| (947 | ) | |
|
|
| 1,285 |
| 111 |
| (625 | ) | 1,060 |
| 102 |
| (625 | ) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TRANSIRAPE |
| Interest on equity/dividends receivable |
| 678 |
| — |
| — |
| 678 |
| — |
| — |
|
| Suppliers |
| — |
| 111 |
| — |
| — |
| 90 |
| — |
| |
| Fees for use of electricity network |
| — |
| — |
| (885 | ) | — |
| — |
| (739 | ) | |
|
|
| 678 |
| 111 |
| (885 | ) | 678 |
| 90 |
| (739 | ) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CENTROESTE |
| Customers |
| 8 |
| — |
| — |
| 63 |
| — |
| — |
|
| Other receivables |
| 62 |
| — |
| — |
| — |
| — |
| — |
| |
| Dividends/interest on equity receivable |
| 59 |
| — |
| — |
| 59 |
| — |
| — |
| |
| Suppliers |
| — |
| 58 |
| — |
| — |
| 54 |
| — |
| |
| Revenue from services rendered |
| — |
| — |
| 894 |
| — |
| — |
| 1,068 |
| |
| Other Revenue |
| — |
| — |
| 97 |
| — |
| — |
| 89 |
| |
| Fees for use of electricity network |
| — |
| — |
| (672 | ) | — |
| — |
| (645 | ) | |
| Other expenses |
| — |
| — |
| (1 | ) | — |
| — |
| — |
| |
|
|
| 129 |
| 58 |
| 318 |
| 122 |
| 54 |
| 512 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BAGUARI |
| Customers |
| 23 |
| — |
| — |
| 22 |
| — |
| — |
|
| Dividends/interest on equity receivable |
| — |
| — |
| — |
| 2,462 |
| — |
| — |
| |
| Advances for future capital increase |
| 316 |
| — |
| — |
| 315 |
| — |
| — |
| |
| Revenue from use of electricity network |
| — |
| — |
| 212 |
| — |
| — |
| 193 |
| |
|
|
| 339 |
| — |
| 212 |
| 2,799 |
| — |
| 193 |
|
|
|
|
| 12/31/2016 |
| 12/31/2015 |
| ||||||||
COMPANIES |
| NATURE OF TRANSACTION |
| ASSETS |
| LIABILITIES |
| INCOME |
| ASSETS |
| LIABILITIES |
| INCOME |
|
RETIRO BAIXO |
| Dividends/interest on equity receivable |
| 2,107 |
| — |
| — |
| 1,225 |
| — |
| — |
|
| Advances for future capital increase |
| 1,225 |
| — |
| — |
| — |
| — |
| — |
| |
| Financial Revenue |
| — |
| — |
| — |
| — |
| — |
| 7,173 |
| |
|
|
| 3,332 |
| — |
| — |
| 1,225 |
| — |
| 7,173 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SERRA FACÃO ENERGIA |
| Dividends/interest on equity receivable |
| 80 |
| — |
| — |
| 9,154 |
| — |
| — |
|
| Revenue from services rendered |
| — |
| — |
| 142 |
| — |
| — |
| 154 |
| |
| Other expenses |
| — |
| — |
| (20 | ) | — |
| — |
| — |
| |
|
|
| 80 |
| — |
| 122 |
| 9,154 |
| — |
| 154 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CHAPECOENSE |
| Other receivables |
| 740 |
| — |
| — |
| 740 |
| — |
| — |
|
| Interest on equity/dividends receivable |
| 24,625 |
| — |
| — |
| 22,288 |
| — |
| — |
| |
|
|
| 25,365 |
| — |
| — |
| 23,028 |
| — |
| — |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INAMBARI |
| Other Revenue |
| — |
| — |
| 34 |
| — |
| — |
| 30 |
|
|
|
| — |
| — |
| 34 |
| — |
| — |
| 30 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TRANSENERGIA RENOVÁVEL |
| Interest on equity/dividends receivable |
| 14,762 |
| — |
| — |
| 13,979 |
| — |
| — |
|
| Suppliers |
| — |
| 64 |
| — |
| — |
| 57 |
| — |
| |
| Fees for use of electricity network |
| — |
| — |
| (723 | ) | — |
| — |
| (706 | ) | |
| Financial Expenses |
| — |
| — |
| (1 | ) | — |
| — |
| — |
| |
|
|
| 14,762 |
| 64 |
| (724 | ) | 13,979 |
| 57 |
| (706 | ) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MGE TRANSMISSÃO |
| Customers |
| 16 |
| — |
| — |
| 15 |
| — |
| — |
|
| Other receivables |
| 161 |
| — |
| — |
| 148 |
| — |
| — |
| |
| Interest on equity/dividends receivable |
| 6,547 |
| — |
| — |
| 11,447 |
| — |
| — |
| |
| Suppliers |
| — |
| 113 |
| — |
| — |
| 119 |
| — |
| |
| Revenue from services rendered |
| — |
| — |
| 1,679 |
| — |
| — |
| 1,685 |
| |
| Other Revenue |
| — |
| — |
| 183 |
| — |
| — |
| 167 |
| |
| Fees for use of electricity network |
| — |
| — |
| (1,393 | ) | — |
| — |
| (1,389 | ) | |
| Financial Expenses |
| — |
| — |
| (6 | ) | — |
| — |
| — |
| |
|
|
| 6,724 |
| 113 |
| 463 |
| 11,610 |
| 119 |
| 463 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GOIAS TRANSMISSÃO |
| Other receivables |
| 254 |
| — |
| — |
| 229 |
| — |
| — |
|
| Interest on equity/dividends receivable |
| 17,936 |
| — |
| — |
| 23,857 |
| — |
| — |
| |
| Suppliers |
| — |
| 192 |
| — |
| — |
| 204 |
| — |
| |
| Revenue from services rendered |
| — |
| — |
| 3,258 |
| — |
| — |
| 2,331 |
| |
| Fees for use of electricity network |
| — |
| — |
| (2,340 | ) | — |
| — |
| (2,327 | ) | |
| Financial Expenses |
| — |
| — |
| (9 | ) | — |
| — |
| — |
| |
|
|
| 18,190 |
| 192 |
| 909 |
| 24,086 |
| 204 |
| 4 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TRANSENERGIA GOIAS |
| Other receivables |
| 29 |
| — |
| — |
| — |
| — |
| — |
|
| Dividends/interest on equity receivable |
| 465 |
| — |
| — |
| — |
| — |
| — |
| |
| Suppliers |
| — |
| 22 |
| — |
| — |
| — |
| — |
| |
| Revenue from services rendered |
| — |
| — |
| 58 |
| — |
| — |
| — |
| |
| Other Revenue |
| — |
| — |
| 169 |
| — |
| — |
| — |
| |
| Fees for use of electricity network |
| — |
| — |
| (100 | ) | — |
| — |
| — |
| |
|
|
| 494 |
| 22 |
| 127 |
| — |
| — |
| — |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TRANS. SÃO PAULO |
| Customers |
| 7 |
| — |
| — |
| 18 |
| — |
| — |
|
| Other receivables |
| — |
| — |
| — |
| 83 |
| — |
| — |
| |
| Interest on equity/dividends receivable |
| 2,557 |
| — |
| — |
| 4,275 |
| — |
| — |
| |
| Suppliers |
| — |
| 39 |
| — |
| — |
| 13 |
| — |
| |
| Revenue from services rendered |
| — |
| — |
| 1,701 |
| — |
| — |
| 976 |
| |
| Other Revenue |
| — |
| — |
| 198 |
| — |
| — |
| 78 |
| |
| Fees for use of electricity network |
| — |
| — |
| (336 | ) | — |
| — |
| (297 | ) | |
|
|
| 2,564 |
| 39 |
| 1,563 |
| 4,376 |
| 13 |
| 757 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CALDAS NOVAS |
| Customers |
| 15 |
| — |
| — |
| — |
| — |
| — |
|
| Other receivables |
| — |
| — |
| — |
| 73 |
| — |
| — |
| |
| Interest on equity/dividends receivable |
| 1,038 |
| — |
| — |
| 452 |
| — |
| — |
| |
| Suppliers |
| — |
| 3 |
| — |
| — |
| 3 |
| — |
| |
| Revenue from services rendered |
| — |
| — |
| 891 |
| — |
| — |
| 724 |
| |
| Other Revenue |
| — |
| — |
| 175 |
| — |
| — |
| 160 |
| |
| Fees for use of electricity network |
| — |
| — |
| (36 | ) | — |
| — |
| — |
| |
|
|
| 1,053 |
| 3 |
| 1,030 |
| 525 |
| 3 |
| 884 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IE GARANHUNS |
| Interest on equity/dividends receivable |
| 9,891 |
| — |
| — |
| 5,780 |
| — |
| — |
|
| Suppliers |
| — |
| 529 |
| — |
| — |
| — |
| — |
| |
| Revenue from services rendered |
| — |
| — |
| 445 |
| — |
| — |
| — |
| |
|
|
| 9,891 |
| 529 |
| 445 |
| 5,780 |
| — |
| — |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LUZIÂNIA NIQUELÂNDIA TRANSMISSORA |
| Customers |
| 7 |
| — |
| — |
| 6 |
| — |
| — |
|
| Suppliers |
| — |
| 16 |
| — |
| — |
| — |
| — |
| |
| Revenue from services rendered |
| — |
| — |
| 616 |
| — |
| — |
| 110 |
| |
| Other Revenue |
| — |
| — |
| 80 |
| — |
| — |
| 30 |
| |
| Fees for use of electricity network |
| — |
| — |
| (197 | ) | — |
| — |
| (105 | ) | |
|
|
| 7 |
| 16 |
| 499 |
| 6 |
| — |
| 35 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TSLE - Transmissora Sul Litorânea de Energia S.A. |
| Other receivables |
| 3 |
| — |
| — |
| 18 |
| — |
| — |
|
| Advances for future capital increase |
| 87,394 |
| — |
| — |
| 84,847 |
| — |
| — |
| |
| Suppliers |
| — |
| 11 |
|
|
| — |
| — |
| — |
| |
| Accounts payable |
| — |
| — |
| — |
| — |
| 11 |
| — |
| |
| Revenue from services rendered |
| — |
| — |
| 812 |
| — |
| — |
| 570 |
| |
| Other Revenue |
| — |
| — |
| 41 |
| — |
| — |
| 51 |
| |
| Fees for use of electricity network |
| — |
| — |
| (131 | ) | — |
| — |
| (81 | ) | |
|
|
| 87,397 |
| 11 |
| 722 |
| 84,865 |
| 11 |
| 540 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NORTE ENERGIA (Belo Monte) |
| Customers |
| 3,965 |
| — |
| — |
| 390 |
| — |
| — |
|
| Other assets |
| — |
| — |
| — |
| 54 |
| — |
| — |
| |
| Advances for future capital increase |
| — |
| — |
| — |
| 326,671 |
| — |
| — |
| |
| Revenue from services rendered |
| — |
| — |
| — |
| — |
| — |
| 39,258 |
| |
| Other Revenue |
| — |
| — |
| 57,119 |
| — |
| — |
| 423 |
| |
|
|
| 3,965 |
| — |
| 57,119 |
| 327,115 |
| — |
| 39,681 |
|
|
|
|
| 12/31/2016 |
| 12/31/2015 |
| ||||||||
COMPANIES |
| NATURE OF TRANSACTION |
| ASSETS |
| LIABILITIES |
| INCOME |
| ASSETS |
| LIABILITIES |
| INCOME |
|
AETE |
| Other assets |
| 191 |
| — |
| — |
| 24 |
| — |
| — |
|
| Suppliers |
| — |
| 175 |
| — |
| — |
| 160 |
| — |
| |
| Revenue from services rendered |
| — |
| — |
| 2,533 |
| — |
| — |
| — |
| |
| Other Revenue |
| — |
| — |
| — |
| — |
| — |
| 2,251 |
| |
| Other expenses |
| — |
| — |
| 2,124 |
| — |
| — |
| (2,126 | ) | |
|
|
| 191 |
| 175 |
| 4,657 |
| 24 |
| 160 |
| 125 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BRASNORTE |
| Other assets |
| 855 |
| — |
| — |
| 106 |
| — |
| — |
|
| Suppliers |
| — |
| 99 |
| — |
| — |
| 88 |
| — |
| |
| Other Revenue |
| — |
| — |
| — |
| — |
| — |
| 3,523 |
| |
| Other expenses |
| — |
| — |
| (1,177 | ) | — |
| — |
| (1,176 | ) | |
|
|
| 855 |
| 99 |
| (1,177 | ) | 106 |
| 88 |
| 2,347 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TME - TRANSMISSORA MATOGROSSENSE DE ENERGIA |
| Customers |
| 22 |
| — |
| — |
| — |
| — |
| — |
|
| Suppliers |
| — |
| 239 |
| — |
| — |
| 214 |
| — |
| |
| Other expenses |
| — |
| — |
| (21 | ) | — |
| — |
| (2,221 | ) | |
|
|
| 22 |
| 239 |
| (21 | ) | — |
| 214 |
| (2,221 | ) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TRANSNORTE |
| Customers |
| 66 |
| — |
| — |
| — |
| — |
| — |
|
| Suppliers |
| — |
| 36 |
| — |
| — |
| 36 |
| — |
| |
| Other expenses |
| — |
| — |
| (333 | ) | — |
| — |
| — |
| |
| Fees for use of electricity network |
| — |
| — |
| — |
| — |
| — |
| (186 | ) | |
|
|
| 66 |
| 36 |
| (333 | ) | — |
| 36 |
| (186 | ) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CTEEP |
| Loans and financing |
| 154 |
| — |
| — |
| 196 |
| — |
| — |
|
| Dividends receivable |
| 1,630 |
| — |
| — |
| 2,187 |
| — |
| — |
| |
| Other assets |
| 641 |
| — |
| — |
| — |
| — |
| — |
| |
| Reimbursement rights (RBNI) |
| 39,114 |
| — |
| — |
| — |
| — |
| — |
| |
| Revenue from interest, fees, charges, and exchange variation |
| — |
| — |
| 17 |
| — |
| — |
| 17 |
| |
|
|
| 41,539 |
| — |
| 17 |
| 2,382 |
| — |
| 17 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EMAE |
| Dividends/interest on equity receivable |
| 6,213 |
| — |
| — |
| 1,416 |
| — |
| — |
|
| Other expenses |
| — |
| — |
| 227 |
| — |
| — |
| (89 | ) | |
|
|
| 6,213 |
| — |
| 227 |
| 1,416 |
| — |
| (89 | ) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Triângulo Mineiro Trans. S.A. |
| Other receivables |
| 11 |
| — |
| — |
| 11 |
| — |
| — |
|
| Other Revenue |
| — |
| — |
| — |
| — |
| — |
| 25 |
| |
| Revenue from services rendered |
| — |
| — |
| 198 |
| — |
| — |
| 578 |
| |
|
|
| 11 |
| — |
| 198 |
| 11 |
| — |
| 603 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CEPEL |
| Operating expenses |
| — |
| — |
| (12,670 | ) | — |
| — |
| (11,525 | ) |
|
|
| — |
| — |
| (12,670 | ) | — |
| — |
| (11,525 | ) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paranaíba Transmissora de Energia S.A. |
| Other receivables |
| — |
| — |
| — |
| 70 |
| — |
| — |
|
| Revenue from services rendered |
| — |
| — |
| 667 |
| — |
| — |
| 792 |
| |
| Fees for use of electricity network |
| — |
| — |
| (527 | ) | — |
| — |
| — |
| |
|
|
| — |
| — |
| 140 |
| 70 |
| — |
| 792 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FRONTEIRA OESTE (FOTE) |
| Other receivables |
| 1,822 |
| — |
| — |
| 1,042 |
| — |
| — |
|
| Advances for future capital increase |
| 16,144 |
| — |
| — |
| 14,155 |
| — |
| — |
| |
| Revenue from services rendered |
| — |
| — |
| 777 |
| — |
| — |
| 1,042 |
| |
| Other Revenue |
| — |
| — |
| 15 |
| — |
| — |
| — |
| |
| Fees for use of electricity network |
| — |
| — |
| (1 | ) | — |
| — |
| — |
| |
|
|
| 17,966 |
| — |
| 777 |
| 15,197 |
| — |
| 1,042 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vale do São Bartolomeu Transmissora de Energia S.A. |
| Customers |
| 12 |
| — |
| — |
| 220 |
| — |
| — |
|
| Other receivables |
| 389 |
| — |
| — |
| — |
| — |
| — |
| |
| Advances for future capital increase |
| — |
| — |
| — |
| 7,943 |
| — |
| — |
| |
| Suppliers |
| — |
| 7 |
| — |
| — |
| — |
| — |
| |
| Revenue from services rendered |
| — |
| — |
| 760 |
| — |
| — |
| 373 |
| |
| Other Revenue |
| — |
| — |
| 515 |
| — |
| — |
| 1,704 |
| |
| Fees for use of electricity network |
| — |
| — |
| (53 | ) | — |
| — |
| — |
| |
|
|
| 401 |
| 7 |
| 1,222 |
| 8,163 |
| — |
| 2,077 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SINOP |
| Advances for future capital increase |
| — |
| — |
| — |
| 73,500 |
| — |
| — |
|
|
|
| — |
| — |
| — |
| 73,500 |
| — |
| — |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MATA DE SANTA GENEBRA |
| Other receivables |
| 1 |
| — |
| — |
| 2 |
| — |
| — |
|
| Other Revenue |
| — |
| — |
| 9 |
| — |
| — |
| 292 |
| |
| Other expenses |
| — |
| — |
| — |
| — |
| — |
| 4 |
| |
|
|
| 1 |
| — |
| 9 |
| 2 |
| — |
| 296 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LAGOA AZUL TRANSMISSORA |
| Customers |
| — |
| — |
| — |
| 396 |
| — |
| — |
|
| Other receivables |
| 8 |
| — |
| — |
| — |
| — |
| — |
| |
| Suppliers |
| — |
| 27 |
| — |
| — |
| — |
| — |
| |
| Revenue from services rendered |
| — |
| — |
| 368 |
| — |
| — |
| — |
| |
| Other Revenue |
| — |
| — |
| 106 |
| — |
| — |
| 395 |
| |
| Fees for use of network |
| — |
| — |
| (53 | ) | — |
| — |
| — |
| |
|
|
| 8 |
| 27 |
| 421 |
| 9,028 |
| — |
| 395 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EÓLICA ITAGUAÇU DA BAHIA SPE S.A. |
| Other expenses |
| — |
| — |
| — |
| — |
| — |
| (1 | ) |
|
|
| — |
| — |
| — |
| — |
| — |
| (1 | ) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ITAGUAÇU DA BAHIA ENERGIAS RENOVÁVEIS |
| Advances for future capital increase |
| 67,130 |
| — |
| — |
| 34,300 |
| — |
| — |
|
| Revenue from services rendered |
| — |
| — |
| 1 |
| — |
| — |
| — |
| |
|
|
| 67,130 |
| — |
| 1 |
| 34,300 |
| — |
| — |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EÓLICA VENTOS DE SANTA LUIZA SPE S.A. |
| Other expenses |
| — |
| — |
| — |
| — |
| — |
| (1 | ) |
|
|
| — |
| — |
| — |
| — |
| — |
| (1 | ) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EÓLICA VENTOS DE SANTA MADALENA SPE S.A. |
| Other expenses |
| — |
| — |
| — |
| — |
| — |
| (1 | ) |
|
|
| — |
| — |
| — |
| — |
| — |
| (1 | ) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EÓLICA VENTOS DE SANTA MARCELLA SPE S.A. |
| Other expenses |
| — |
| — |
| — |
| — |
| — |
| (1 | ) |
|
|
| — |
| — |
| — |
| — |
| — |
| (1 | ) |
|
|
|
| 12/31/2016 |
| 12/31/2015 |
| ||||||||
COMPANIES |
| NATURE OF TRANSACTION |
| ASSETS |
| LIABILITIES |
| INCOME |
| ASSETS |
| LIABILITIES |
| INCOME |
|
EÓLICA VENTOS DE SANTA VERA SPE S.A. |
| Other expenses |
| — |
| — |
| — |
| — |
| — |
| (1 | ) |
|
|
| — |
| — |
| — |
| — |
| — |
| (1 | ) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EÓLICA VENTOS DE SANTO ANTONIO SPE S.A. |
| Other expenses |
| — |
| — |
| — |
| — |
| — |
| (1 | ) |
|
|
| — |
| — |
| — |
| — |
| — |
| (1 | ) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EÓLICA VENTOS DE SÃO BENTO SPE S.A. |
| Other expenses |
| — |
| — |
| — |
| — |
| — |
| (1 | ) |
|
|
| — |
| — |
| — |
| — |
| — |
| (1 | ) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EÓLICA VENTOS DE SÃO CIRILO SPE S.A. |
| Other expenses |
| — |
| — |
| — |
| — |
| — |
| (1 | ) |
|
|
| — |
| — |
| — |
| — |
| — |
| (1 | ) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EÓLICA VENTOS DE SÃO JOÃO SPE S.A. |
| Other expenses |
| — |
| — |
| — |
| — |
| — |
| (1 | ) |
|
|
|
| — |
| — |
| — |
| — |
| — |
| (1 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EÓLICA VENTOS DE SÃO RAFAEL SPE S.A. |
| Other expenses |
| — |
| — |
| — |
| — |
| — |
| (1 | ) |
|
|
|
| — |
| — |
| — |
| — |
| — |
| (1 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BELO MONTE TRANSMISSORA SPE S.A. |
| Other receivables |
| 553 |
| — |
| — |
| 194,040 |
| — |
| — |
|
| Other assets |
| 584 |
| — |
| — |
| — |
| — |
| — |
| |
| Financial Expenses |
| — |
| — |
| (288 | ) | — |
| — |
| (1 | ) | |
|
|
| — |
| — |
| (288 | ) | — |
| — |
| (1 | ) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ITAIPU |
| Loans and financing |
| 10,770,787 |
| — |
| — |
| 14,802,134 |
| — |
| — |
|
| Dividends receivable |
| 4,314 |
| — |
| 1,952 |
| 1,952 |
| — |
| — |
| |
| Revenue from interest, fees, charges, and exchange variation |
| — |
| — |
| — |
| — |
| — |
| 6,009,406 |
| |
| Expenses from interest, fees, charges, and exchange variation |
| — |
| — |
| (1,417,999 | ) | — |
| — |
| — |
| |
|
|
| 10,775,100 |
| — |
| (1,416,047 | ) | 14,804,087 |
| — |
| 6,009,406 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SANTO ANTONIO ENERGIA |
| Customers |
| 12,289 |
| — |
| — |
| 9,501 |
| — |
| — |
|
| Other receivables |
| 748 |
| — |
| — |
| 130,253 |
| — |
| — |
| |
| Revenue from services rendered |
| — |
| — |
| 3,240 |
| — |
| — |
| 3,005 |
| |
| Revenue from use of electricity network |
| — |
| — |
| 60,653 |
| — |
| — |
| 43,352 |
| |
| Financial revenue |
| — |
| — |
| 26,747 |
| — |
| — |
| — |
| |
| Revenue from sale of Electricity |
| — |
| — |
| 72,051 |
| — |
| — |
| 64,924 |
| |
| Other expenses |
| — |
| — |
| (723 | ) | — |
| — |
| — |
| |
|
|
| 13,037 |
| — |
| 161,968 |
| 139,754 |
| — |
| 111,281 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ELETROS |
| Contributions payable - sponsor |
| — |
| 31,059 |
| — |
| — |
| 23,555 |
| — |
|
| Provisions |
| — |
| 394,035 |
| — |
| — |
| 244,685 |
| — |
| |
| Sponsor contributions |
| — |
| — |
| (33,156 | ) | — |
| — |
| (31,693 | ) | |
| Fees |
| — |
| — |
| (2,644 | ) | — |
| — |
| (2,410 | ) | |
|
|
| — |
| 425,094 |
| (35,800 | ) | — |
| 268,240 |
| (34,103 | ) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CEEE-GT |
| Loans and financing |
| — |
| — |
| — |
| 4,883 |
| — |
| — |
|
| Reimbursement rights (RBNI) |
| 15,039 |
| — |
| — |
| — |
| — |
| — |
| |
| Revenue from interest, fees, and charges |
| — |
| — |
| 85 |
| — |
| — |
| 607 |
| |
|
|
| 15,039 |
| — |
| 85 |
| 4,883 |
| — |
| 607 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ENERGISA MT |
| Loans and financing |
| 264,723 |
| — |
| — |
| 310,697 |
| — |
| — |
|
| Dividends receivable |
| 396 |
| — |
| — |
| 4,403 |
| — |
| — |
| |
| Revenue from interest, fees, and charges |
| — |
| — |
| 29,002 |
| — |
| — |
| 30,911 |
| |
|
|
| 265,119 |
| — |
| 29,002 |
| 315,100 |
| — |
| 30,911 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CEMAR |
| Loans and financing |
| 217,676 |
| — |
| — |
| 275,939 |
| — |
| — |
|
| Dividends receivable |
| 25,506 |
| — |
| — |
| — |
| — |
| — |
| |
| Revenue from interest, fees, and charges |
| — |
| — |
| 20,359 |
| — |
| — |
| 28,387 |
| |
|
|
| 243,182 |
| — |
| 20,359 |
| 275,939 |
| — |
| 28,387 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LAJEADO ENERGIA |
| Dividends receivable |
| 9,692 |
| — |
| — |
| 86,589 |
| — |
| — |
|
|
|
| 9,692 |
| — |
| — |
| 86,589 |
| — |
| — |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CEB Lajeado |
| Dividends receivable |
| — |
| — |
| — |
| 13,980 |
| — |
| — |
|
| Revenue from interest, fees, and charges |
| — |
| — |
| 672 |
| — |
| — |
| — |
| |
|
|
| — |
| — |
| 672 |
| 13,980 |
| — |
| — |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paulista Lajeado |
| Dividends receivable |
| 1,210 |
| — |
| — |
| 3,077 |
| — |
| — |
|
|
|
| 1,210 |
| — |
| — |
| 3,077 |
| — |
| — |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CEEE-D |
| Loans and financing |
| 24,368 |
| — |
| — |
| 28,520 |
| — |
| — |
|
| Revenue from interest, fees, and charges |
| — |
| — |
| 1,854 |
| — |
| — |
| 2,673 |
| |
|
|
| 24,368 |
| — |
| 1,854 |
| 28,520 |
| — |
| 2,673 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Companhia Celg de Participações - CELGPAR |
| Other liabilities - Mutual |
| — |
| — |
| — |
| — |
| 117,080 |
| — |
|
| Financial Expenses |
| — |
| — |
| — |
| — |
| — |
| 7,543 |
| |
|
|
| — |
| — |
| — |
| — |
| 117,080 |
| 7,543 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CELG Geração e Transmissão - CELG GT |
| Reimbursement rights (RBNI) |
| 6,809 |
| — |
| — |
| — |
| — |
| — |
|
| Suppliers |
| — |
| — |
| — |
| — |
| 1,779 |
| — |
| |
| Other liabilities |
| — |
| — |
| — |
| — |
| 50,355 |
| — |
| |
| Fees for use of electricity network |
| — |
| — |
| — |
| — |
| — |
| 13,493 |
| |
| Actuarial expenses |
| — |
| — |
| — |
| — |
| — |
| 484 |
| |
| Financial Expenses |
| — |
| — |
| — |
| — |
| — |
| 129 |
| |
|
|
| 6,809 |
| — |
| — |
| — |
| 52,134 |
| 14,106 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOZ DO CHAPECÓ |
| Customers |
| 456 |
| — |
| — |
| 434 |
| — |
| — |
|
| Other receivables |
| 123 |
| — |
| — |
| — |
| — |
| — |
| |
| Revenue from services rendered |
| — |
| — |
| 258 |
| — |
| — |
| 134 |
| |
| Revenue from use of electricity network |
| — |
| — |
| 5,209 |
| — |
| — |
| 4,672 |
| |
|
|
| 579 |
| — |
| 5,467 |
| 434 |
| — |
| 4,806 |
|
|
|
|
| 12/31/2016 |
| 12/31/2015 |
| ||||||||
COMPANIES |
| NATURE OF TRANSACTION |
| ASSETS |
| LIABILITIES |
| INCOME |
| ASSETS |
| LIABILITIES |
| INCOME |
|
TIJOA PARTICIPAÇÕES E INVESTIMENTOS S.A. |
| Customers |
| 385 |
| — |
| — |
| 352 |
| — |
| — |
|
| Revenue from use of electricity network |
| — |
| — |
| 4,319 |
| — |
| — |
| 3,739 |
| |
|
|
| 385 |
| — |
| 4,319 |
| 352 |
| — |
| 3,739 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CSE CENTRO DE SOLUÇÕES ESTRATÉGICAS S.A. |
| Revenue from services rendered |
| — |
| — |
| — |
| — |
| — |
| 167 |
|
|
|
| — |
| — |
| — |
| — |
| — |
| 167 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EMPRESA DE ENERGIA SÃO MANOEL S.A. |
| Revenue from services rendered |
| — |
| — |
| 5,874 |
| — |
| — |
| — |
|
| Other expenses |
| — |
| — |
| — |
| — |
| — |
| (47,905 | ) | |
|
|
| — |
| — |
| 5,874 |
| — |
| — |
| (47,905 | ) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ENERGIA OLÍMPICA S.A. |
| Other Revenue |
| — |
| — |
| — |
| — |
| — |
| 1 |
|
|
|
| — |
| — |
| — |
| — |
| — |
| 1 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TELES PIRES PARTICIPAÇÕES |
| Financial Expenses |
| — |
| — |
| (851 | ) | — |
| — |
| — |
|
| Other expenses |
| — |
| — |
| — |
| — |
| — |
| (115,412 | ) | |
|
|
| — |
| — |
| (851 | ) | — |
| — |
| (115,412 | ) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CIA HIDREL TELES PIRES |
| Customers |
| 4,560 |
| — |
| — |
| 1,954 |
| — |
| — |
|
| Suppliers |
| — |
| (531 | ) | — |
| — |
| — |
| — |
| |
| Energy purchased for resale |
| — |
| 7,685 |
| — |
| — |
| — |
| — |
| |
| Accounts payable |
| — |
| 6,704 |
| — |
| — |
| 2,218 |
| — |
| |
| Revenue from services rendered |
| — |
| — |
| — |
| — |
| — |
| 3,253 |
| |
| Other Revenue |
| — |
| — |
| — |
| — |
| — |
| — |
| |
| Revenue from use of electricity network |
| — |
| — |
| 36,105 |
| — |
| — |
| 9,926 |
| |
| Energy purchased for resale |
| — |
| — |
| (128,858 | ) | — |
| — |
| (18,614 | ) | |
|
|
| 4,560 |
| 13,858 |
| (92,753 | ) | 1,954 |
| 2,218 |
| (5,435 | ) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
VAMCRUZ PARTICIPAÇÕES S.A. |
| Dividends |
| — |
| — |
| — |
| 523 |
| — |
| — |
|
| Advances for future capital increase |
| 43,099 |
| — |
| — |
| 66,892 |
| — |
| — |
| |
|
|
| 43,099 |
| — |
| — |
| 67,415 |
| — |
| — |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rei dos Ventos |
| Other Revenue |
| — |
| — |
| 1 |
| — |
| — |
| — |
|
|
|
| — |
| — |
| 1 |
| — |
| — |
| — |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rei dos Ventos 3 Geradora de Energia S.A. |
| Receivables |
| 78 |
| — |
| — |
| 75 |
| — |
| — |
|
| Revenue from use of electricity network |
| — |
| — |
| 685 |
| — |
| — |
| 622 |
| |
|
|
| 78 |
| — |
| 685 |
| 75 |
| — |
| 622 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CHAPADA DO PIAUÍ I S.A. |
| Receivables |
| 21 |
| — |
| — |
| — |
| — |
| — |
|
| Other assets |
| 492 |
| — |
| — |
| 14,040 |
| — |
| — |
| |
|
|
| 513 |
| — |
| — |
| 14,040 |
| — |
| — |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eólica Serra das Vacas Holding S.A. |
| Advances for future capital increase |
| 9,442 |
| — |
| — |
| 25,005 |
| — |
| — |
|
|
|
| 9,442 |
| — |
| — |
| 25,005 |
| — |
| — |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chapada do Piauí II Holding S.A. |
| Customers |
| 29 |
| — |
| — |
| — |
| — |
| — |
|
| Advances for future capital increase |
| 35,213 |
| — |
| — |
| — |
| — |
| — |
| |
|
|
| 35,242 |
| — |
| — |
| — |
| — |
| — |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BARAÚNAS I |
| Dividends |
| 26 |
| — |
| — |
| — |
| — |
| — |
|
|
|
| 26 |
| — |
| — |
| — |
| — |
| — |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MUSSAMBÊ |
| Dividends |
| 143 |
| — |
| — |
| — |
| — |
| — |
|
|
|
| 143 |
| — |
| — |
| — |
| — |
| — |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MORRO BRANCO I |
| Dividends |
| 62 |
| — |
| — |
| — |
| — |
| — |
|
|
|
| 62 |
| — |
| — |
| — |
| — |
| — |
|
NOTE 46 — REMUNERATION OF KEY PERSONNEL
The remuneration of the Company’s key personnel (directors and advisers) is as follows:
|
| 12/31/2016 |
| 12/31/2015 |
| 12/31/2014 |
|
Compensation of Directors and Administrators |
| 40,228 |
| 33,625 |
| 28,021 |
|
Salaries and social charges |
| 8,006 |
| 6,511 |
| 5,934 |
|
Other |
| 4,045 |
| 2,700 |
| 1,938 |
|
|
| 52,279 |
| 42,836 |
| 35,893 |
|
NOTE 47 — SUBSEQUENT EVENTS
47.1 — Disposal of the shareholding control of CELG Distribuição S.A. - CELG D at the privatization auction.
On February 14, 2017, the purchase and sale contract for the shares of CELG Distribuição S.A. (“CELG D”) was signed between Eletrobras, Companhia Celg de Participações — CELGPAR and ENEL BRASIL S/A, in accordance with established schedule.
Eletrobras received, on this date, the amount of R$ 1,065,266 for this disposal of assets and recogmized a gain on the sale amouting R$ 1,613,898.
47.2 — ANEEL Order no. 84
ANEEL, through Order No. 84 of January 13, 2017, determined that Eletrobras, in the capacity of the manager, must return to the Energy Development Account (“CDE”) and Global Reversion Reserve (“RGR”) the historical amount of R$ 604,239 resulting from the payment of the 1st installment of claims provided for in Provisional Measure no. 579, of September 11, 2012, converted into Law No. 12,783, of January 11, 2013, provided mainly to the electric utilities companies.
This amount must be updated by the same correction indices provided in the Interministerial Ordinance no. 580/MME/MF, of November 1, 2012, beginning from the date on which these payments were made until the date of actual return to the aforementioned sector funds. The return of the amount must be made in 6 (six) equal, monthly installments, duly updated until the date of effective payment, beginning on July 1, 2017.
With regard to the amounts due by subsidiaries of the company, approximately R$ 501,000 is already provisioned in relation to the historical values.
Eletrobras will make the collection of the amounts owed by the concessionaires, including the subsidiaries of Eletrobras, in order to make the return of the funds to the CDE and RGR, pursuant to ANEEL Order 084 of January 13, 2017.
47.3 — Contribution of capital in the subsidiary companies of the subsidiary Eletrosul
SPE |
| Event |
| Value |
|
Chuí IX |
| AFAC |
| 618 |
|
ESBR |
| AFAC |
| 13,600 |
|
Fronteira Oeste |
| AFAC |
| 19,380 |
|
Hermenegildo I |
| AFAC |
| 729 |
|
Hermenegildo II |
| AFAC |
| 729 |
|
Hermenegildo III |
| AFAC |
| 1,525 |
|
Livramento |
| AFAC |
| 1,439 |
|
Teles Pires |
| Capital |
| 12,700 |
|
Paraíso |
| AFAC |
| 110 |
|
Total |
|
|
| 50,830 |
|
47.4 — Fund of Investment in Credit Rights — FIDC
The subsidiary Eletrosul structured the credit operation through the issuance of shares of the Fund of Investment in Credit Rights Infinity DI (FIDC Infinity DI) in the amount of R$ 690,000 tied to the receivables of the ANEEL Transmission Concession Contract no. 057/2001, in order to raise funds for allocation to the investment plan of the Company, reimbursement of expenses, expenses or debts related to its investment projects, as well as the early redemption of all of the Promissory Notes of the 2nd issue of Eletrosul, due March 2, 2017 in a total value of R$ 289,751. The conditions of the operation have been approved by the Board of Directors of Eletrosul in June 21, 2016 and its payment occurred on January 24, 2017. The public offering of distribution of senior shares issued by the FIDC Infinity DI was registered with the CVM under no. CVM/SRE/RFD/2017/001 on January 12, 2017. ANEEL ratified the operation through Order No. 2,854, of October 31, 2016.
Details of the FIDC:
· Amortization Period: 5 years
· Lack of Principal: 2 years
· Book value of the senior shares: R$ 690 million
· Net amount of subordinate shares: R$ 60 million;
· Amortization of the principal: customized, from the 24th month
· Amortization of interest: monthly
· Interest Rate of Senior Shares: CDI Rate + 2% per annum
47.5 — Payment of the promissory notes (Eletrosul)
On January 25, 2017, the subsidiary Eletrosul made the payment of the 500 promissory notes relating to the second issue in the total amount of R$ 289,751 (principal + remuneration).
47.6 — Approval of credit line (Eletronorte)
On January 12, 2017 the Administration of the Company approved, through the mediation of Eletrobrás, the assumption of loans with the Caixa Econômica Federal, in the amount of R$ 500,000, with the objective of reinforcing the financial cash flow of the Company.
47.7 — Annual budget of the Energy Development Account - CDE
On February 7, 2017, ANEEL issued Ratifying Resolution No. 2,202 that approved the budget for the year of 2017 of the CDE account. The budget approved by ANEEL initially did not contemplate the values that were the objective of renegotiation signed in 2014 and 2015 between the distributors Amazonas D, Ceron, Eletroacre and Boa Vista (referred to as “distributors”) and Petrobras/BR Distribuidora. These Acknowledgement of Debt Agreements, referred to as “CCDs” had been previously authorized by the applicable legislation and approved by ANEEL.
On February 14, 2017, the distributors affected by the budget cut of ANEEL filed the petition for reconsideration, with suspensory effect, against the Ratifying Resolution no. 2,202, which was denied by ANEEL.
On March 2, 2017, the Ministry of State for Mines and Energy published Ordinance No. 81 anticipating the financial programming resources from the CDE Account and the inclusion, for the year of 2017, of the month installments to be paid between January and December of 2017 relating to the Acknowledgement of Debt Agreements signed up to December 31, 2016 between the distributors and Petrobras/BR Distribuidora.
On March 7, 2017, through Ratifying Resolution No. 2,204, of March 7, 2017, ANEEL amended Ratifying Resolution No. 2,202, of February 7, 2017, which approves the annual budget of the CDE Account for the year 2017, including in the budgets the amounts relating to the CCDs.
The Company believes that the funds, which have been annotated by ANEEL, will remain in that position until the supervision of the reprocessing of the CCC account in the period between July 2009 and June 2016 is completed.
Accordingly, the Company on December 31, 2016, recognized a provision in the amount of R$ 741,623 under the heading of Rights of Compensation — CCC (see Note 11).
47.8 — Injunction against remuneration of the indemnifications of the transmission companies
The Brazilian Association of Large Consumers in the Free Market (Associação Brasileira de Grandes Consumidores Livres) ABRACE and others filed an action in court, with a petition for an injunction against the Federal Government of Brazil and the National Electric Energy Agency (Agência Nacional de Energia Elétrica) ANEEL referring to the remuneration of indemnifications of the transmission companies that had renewed certain of their concessions prior to their original maturities in 2013.
As of December 31, 2016, Eletrobras through its subsidiaries has recognized a total of R$ 36,6 billion in relation to these assets.
On April 10th, 2017 a partial interlocutory injunction was granted in favor of ABRACE and others within the judicial process brought by ABRACE and others against the Federal Government and ANEEL, aiming the suspension of the tariff effects regarding the payment of the assets considered not depreciated that existed in March 31, 2000 (“RBSE”), owed by the transmission segment companies that renewed their concession contracts, in 2013, under the terms of Law No. 12,783/2013.
The interlocutory injunction granted in favor of ABRACE and others did not approve all claims, including the suspension of full payment of the transmission system usage tariff (TUST). However, the interlocutory injunction was granted to exclude from the tariffs to be paid by the claimants only, the portion that refers to the remuneration stated in article 1, third paragraph of MME Ordinance No. 120/2016, which establishes capital cost not incorporated since the extension of the concessions contracts until the tariff process.
Based on a legal opinion from external counsel, the Company understands that the decisions rendered to date do not interfere with the right to receive RBSE assets as established by Law No. 12,783 / 2013 and in MME Ordinance No. 120/2016, which granted the right to receive such amounts, even if it is ultimately due by the Federal Government of Brazil. Thus, the Company understands that there has been no objective evidence of impairment.
47.9 — Suspension of the Tariff Review for distribution service providers
On January 24, 2017 Ministry of Energy Ordinance no. 23 was published, revoking article 4 of MME Ordinance no. 422/2016 that contemplated in it content that the Company would have a tariff review on August 31, 2017.
On March 27, 2017 the result of the hearing of the motion to dismiss was issued, and the Court partially accepted the arguments of Eletrobras and partially accepted the arguments of the plaintiffs. The proceeding now will pass to the class certification and discovery phase, without creating a financial obligation for Eletrobras. (See note 30).
Wilson Ferreira Junior
President
Armando Casado de Araujo Lucia Casasanta Luiz Henrique Hamann |
| Carlos Eduardo Gonzalez Baldi Alexandre Vaghi de Arruda Aniz José Antônio Muniz Lopes |
Rodrigo Vilella Ruiz
Accountant