EDP - Energias do Brasil S.A. Consolidated financial statement

Transcription

1 EDP - Energias do Brasil S.A. financial statement December 31, 2013 and 2012

2 EDP - ENERGIAS DO BRASIL S.A. STATEMENT OF FINANCIAL POSITIONS AT (In thousands of Reais) Parent company Note 12/31/ /31/ /01/ /31/ /31/ /01/2012 ASSETS Reclassified Reclassified Reclassified Reclassified Current assets Cash and cash equivalents Accounts receivable Indemnifiable financial assets Consumers and concessionaires Tax and social contribution Related parties Dividends receivable Inventory Pledges and restricted deposits Prepaid expenses Income receivable Financial assets available for sale Other credits Non-current assets held for sale Non-current assets Accounts receivable Indemnifiable financial assets Consumers and concessionaires Tax and social contribution Deferred income tax and social contribution Related parties Advances on future capital increases Pledges and restricted deposits Other credits Investments Investment properties Property, plant and equipment Intangible assets Total assets See the accompanying notes to the financial statements.

3 EDP - ENERGIAS DO BRASIL S.A. STATEMENT OF FINANCIAL POSITIONS AT (In thousands of reais) Parent company Note 12/31/ /31/ /01/ /31/ /31/ /01/2012 LIABILITIES and SHAREHOLDERS' EQUITY Reclassified Reclassified Reclassified Reclassified Current assets Suppliers Tax and social contribution Dividends Debentures Loans, financing and debt charges Post-employment benefits Estimated employee liabilities and social charges Regulatory and industry charges Use of public property Provisions Other accounts payable Non-current liabilities held for sale Non-current Tax and social contribution Deferred income tax and social contribution Debentures Loans, financing and debt charges Post-employment benefits Related parties Regulatory and industry charges Use of public property Provisions Provision for unsecured liabilities Reserve for reversals and amortization Other accounts payable Shareholders' equity Capital stock Capital reserves Profit reserves Other comprehensive income ( ) ( ) ( ) ( ) ( ) ( ) Treasury shares (6.614) (6.614) (6.614) (6.614) (6.614) (6.614) Retained earnings - (17.659) (19.478) - (17.659) (19.478) Shareholders' equity attributed to the owners of equity Non-controlling interests Total shareholders' equity Total liabilities and shareholders' equity See the accompanying notes to the financial statements.

4 EDP - ENERGIAS DO BRASIL S.A. STATEMENTS OF INCOME YEARS ENDED DECEMBER 31 (Amounts expressed in thousands of Reais, unless otherwise indicated) Parent company Note Reclassified Reclassified Revenue Cost of production for electricity services Electricity service cost Electricity purchased for resale - - ( ) ( ) Electricity network utilization charges - - ( ) ( ) - - ( ) ( ) Cost of operations 33 Personnel - - ( ) ( ) Third-party materials and services - - ( ) ( ) Depreciation and amortization - - ( ) ( ) Other operating costs - - (30.498) (7.044) - - ( ) ( ) - - ( ) ( ) Cost of services rendered to third-parties - - ( ) ( ) Gross income Operating revenue and expenses 33 Sales expenses - (484) (52.438) (11.827) General and administrative expenses ( ) (49.523) ( ) ( ) Depreciation and amortization (6.563) (6.209) (64.683) (66.415) Other operating income and expenses (1.887) (16.443) (33.989) (17.513) ( ) (72.659) ( ) ( ) Income (loss) before financial result (loss), taxes and ownership interest ( ) (70.882) Income from equity interests ( ) ( ) Financial revenue Financial expenses 34 ( ) (49.821) ( ) ( ) Financial result (72.157) (22.736) ( ) ( ) Income (loss) before income taxes Income tax and social contribution - current (1.995) (1.243) ( ) ( ) Deferred income tax and social contribution (5.526) (97.168) (1.243) ( ) ( ) Net result (loss) for the year Attributable to controlling shareholders Attributable to non-controlling interests Income per share attributable to shareholders Basic earnings per share (Reais / Shares) ON 0, , , ,72221 Diluted earnings per share (Reais / Shares) ON 0, , , ,72221 See the accompanying notes to the financial statements.

5 EDP - ENERGIAS DO BRASIL S.A. STATEMENTS OF COMPREHENSIVE INCOME YEARS ENDED DECEMBER 31 (In thousands of Reais) Parent company Reclassified Reclassified Net result (loss) for the year Other comprehensive income Actuarial gains and losses - Post-employment benefit plan ( ) ( ) Financial assets available for sale (1.519) (2.707) (1.519) (2.707) Equity income (loss) on other comprehensive income of subsidiaries 16 (26) Cash flow hedge (4.138) (4.138) Deferred income tax and social contribution Comprehensive income for the year Attributable to controlling shareholders Attributable to non-controlling interests See the accompanying notes to the financial statements.

6 EDP - ENERGIAS DO BRASIL S.A. STATEMENTS OF CASH FLOW YEARS ENDED DECEMBER 31 (In thousands of Reais) Parent company Reclassified Reclassified Cash flow from operating activities Income before income tax and social contribution Adjustments for reconciliation of income to cash from operations Allowance for doubtful accounts and net losses Fair value of indemnifiable financial assets - - (14.193) ( ) Depreciation and amortization Net book value of assets and intangible assets written off Gains and losses in the disposal of assets and rights - - (48.763) (2.867) Prepaid expenses Suppliers - Monetary restatement - Energia Livre Debt charges and monetary variations on loans, financing and debentures Use of public property - monetary restatement and adjustment to present value Provision for post-employment benefit plan Provisions and monetary restatement for civil, tax and labor contingencies Provisions for environmental permits - monetary restatement and adjustment to present value Adjustment to present value (6.712) (4.425) Income from equity interests ( ) ( ) Allowance for investment losses (20.978) (12.567) (24.438) Regulatory and industry charges - Provision and monetary restatement Pledges and restricted deposits linked to lawsuits - price-level restatement - - (7.347) (13.713) Income and social contribution taxes - monetary restatement Monetary (reversal) restatement - contingent consideration - - (4.222) Others (87.016) (94.820) (Increase) decrease in operating assets Consumers and concessionaires ( ) Income and social contribution taxes to offset (18.397) (9.331) (45.271) Inventory (7.639) Pledges and restricted deposits (3.234) (7.786) Prepaid expenses (7) 135 (1.720) Income receivable (1.325) Cash and cash equivalents - Investment held for sale - - ( ) - Other operating assets 226 (2.603) (35.366) (47.909) (16.679) (15.033) ( ) ( ) Increase (decrease) in operating liabilities Suppliers (58.609) Other tax and social contribution (77.186) Post-employment benefits - - (32.451) (33.529) Estimated employee liabilities and social charges (385) Regulatory and industry charges - - (91.984) (47.974) Provisions (7.262) - (83.913) (62.712) PIS and Cofins taxes on revenue returned to consumers - Tax Situation Code (74) Use of public property - - (11.364) (19.258) Other operating liabilities 32 (469) (20.232) (123) ( ) Cash in operating activities (81.030) (91.297) Income and social contribution taxes paid - - ( ) ( ) Cash in operating activities (81.030) (91.297) Net cash from investing activities Disposal (addition) of investment (7.017) (6.463) Dividends received Accounts received Additions in assets, intangible and financial assets, indemnifiable (16.145) (3.247) ( ) ( ) Disposal of assets and rights Net cash invested in investing activities ( ) ( ) Net cash from financing activities Related parties (47.144) (74.731) (43.213) ( ) Pledges and restricted deposits Advance on future capital increase ( ) ( ) (98.600) ( ) Capital increase (decrease) ( ) - Dividends and interest on capital paid ( ) ( ) ( ) ( ) Funding from Loans, financing and debentures Repayment of principal of loans, financing and debentures ( ) - ( ) ( ) Debt charges, net of derivatives (23.295) - ( ) ( ) Contingent consideration - - (6.177) (96.010) Net cash (invested in) from financing activities ( ) ( ) ( ) Net increase (decrease) in cash and cash equivalents ( ) ( ) Cash and cash equivalents at the end of the year Cash and cash equivalents at the beginning of the year ( ) ( ) See the accompanying notes to the financial statements.

7 EDP - ENERGIAS DO BRASIL S.A. STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 2013 and 2012 (In thousands of Reais) Other comprehensive Retained Total Parent Non-controlling Total Capital stock Capital reserves Profit reserves Treasury shares income earnings Company interests consolidated Balances as at December 31, (6.614) (45.795) Prior-year adjustments ( ) (19.478) (19.478) (165) (19.643) Balances at January 1, 2012 (Reclassified) (6.614) ( ) (19.478) Capital reserves (48.942) - Approved additional dividend - General Shareholders' Meeting on 04/10/ ( ) ( ) - ( ) Net profits for the year Allocation of net income Legal reserve (17.082) Intermediary dividends JSCP (interest on own capital) ( ) ( ) ( ) ( ) Approved additional dividend ( ) Other comprehensive income Financial assets available for sale (2.707) - (2.707) - (2.707) Equity income (loss) on other comprehensive income of subsidiaries ( ) - ( ) (26) ( ) Deferred income tax and social contribution Balances as at December 31, (6.614) ( ) (17.659) Other comprehensive Retained Total Parent Non-controlling Total Capital stock Capital reserves Profit reserves Treasury shares income earnings Company interests consolidated Balances as at December 31, (6.614) (51.721) Prior-year adjustments ( ) (17.659) (17.659) (158) (17.817) Balances at December 31, 2012 (Reclassified) (6.614) ( ) (17.659) Capital transaction (Note 16.2) - - (8.417) (8.417) (6.999) Equity evaluation adjustment - (1.608) (1.608) Approved additional dividend - General Shareholders' Meeting on 04/10/ ( ) ( ) - ( ) Distribution of Profit Reserve Annual Shareholders' Meeting held on April 10, (45.686) (45.686) - (45.686) Net profits for the year Allocation of net income Legal reserve (17.905) Intermediary dividends JSCP (interest on own capital) (29.190) (29.190) ( ) ( ) Approved additional dividend (60.239) (60.239) - (60.239) Approved additional dividend ( ) Other comprehensive income Financial assets available for sale (1.519) - (1.519) - (1.519) Equity income (loss) on other comprehensive income of subsidiaries Deferred income tax and social contribution Balances as at December 31, (6.614) ( ) See the accompanying notes to the financial statements.

8 EDP - ENERGIAS DO BRASIL S.A. STATEMENTS OF ADDED VALUE YEARS ENDED DECEMBER 31 (In thousands of Reais) Parent company Reclassified Reclassified Generation of value added Net operating income Allowance for doubtful accounts and net losses - - (52.437) (9.640) Deferred tax credits Revenue related to the construction of company assets Revenue from construction Other revenue (11.457) (-) Inputs acquired from third parties (69.147) (51.439) ( ) ( ) Costs of purchased energy - - ( ) ( ) Electricity network utilization charges - - ( ) ( ) Electricity network use charges and system service charges - - (32.661) - Materials (11.744) (4.813) ( ) (88.557) Third-party services (50.050) (29.582) ( ) ( ) Infrastructure construction costs - - ( ) ( ) Other operating costs (7.353) (17.044) ( ) ( ) Gross value added (63.291) (23.565) Retentions Depreciation and amortization (6.563) (6.209) ( ) ( ) Net generated value added (69.854) (29.774) Added value received as a transfer Financial revenue Equity accounting result ( ) ( ) Total value added to distribute Distribution of value added Personnel Direct remuneration Benefits FGTS Taxes, rates and contributions Federal State Municipal Third-party capital remuneration Interest Rentals Remuneration on own capital Interest on own capital Non-controlling interests Dividends Founders' shares Retained earnings See the accompanying notes to the financial statements.

9 1 Operating context EDP - Energias do Brasil S.A. (Company or Energias do Brasil or Parent company), corporation, publicly traded, which was incorporated on July 24, 2000, headquartered in the municipality of São Paulo, has as its corporate purpose the participation in other companies as a shareholder or quotaholder, as well as in businesses and enterprises in the electrical power industry in Brazil or overseas, to manage electricity generation, transmission, distribution and sales of electricity in various forms and types; to study, plan, develop, and implement projects in distribution, generation, transmission, and sale of electricity in all of its forms and means. The Company has the following interests in subsidiaries, joint ventures and associates: Companies Classification Consolidation Direct Indirect Direct Indirect Distribution Bandeirante Energia S.A. (EDP Bandeirante) Subsidiary full 100,00-100,00 - Espírito Santo Centrais Elétricas S.A. (EDP Escelsa) Subsidiary full 100,00-100,00 - Generation Energest S.A. (Energest) Subsidiary full 100,00-100,00 - Costa Rica Energética Ltda. (Costa Rica) Subsidiary full - 51,00-51,00 Pantanal Energética Ltda. (Pantanal) Subsidiary full - 100,00-100,00 Santa Fé Energia S.A. (Santa Fé) Subsidiary full - 100,00-100,00 Lajeado Energia S.A. (Lajeado) Subsidiary full 55,86-55,86 - Companhia Energética do Jari - (CEJA) Subsidiary full 100,00-100,00 - ECE Participações S.A. (ECE Participações) Subsidiary full - 100,00-100,00 Investco S.A. (Investco) Subsidiary full - 40,78-40,78 Enerpeixe S.A. (Enerpeixe) Subsidiary full 60,00-60,00 - Empresa de Energia Cachoeira Caldeirão S.A. (Cachoeira Caldeirão) Subsidiary full 100, Terra Verde Bioenergia Participações S.A. (Terra Verde) Subsidiary full Porto do Pecém Geração de Energia S.A. (Porto do Pecém) Joint venture by the equity method Porto do Pecém Transportadora de Minérios S.A. (Pecém TM) Joint venture by the equity method Pecém Operação e Manutenção de Unidades de Geração Elétrica S.A. (Pecém OM) EDP Renováveis Brasil S.A. (EDP Renováveis) 100,00-92,00-50,00-50,00-50,00-50,00-50,00-50,00-45,00-45,00 - Central Nacional de Energia Eólica S.A. (Cenaeel) Associated company by the equity method by EDP - 45,00-45,00 Renováveis Elebrás Projetos S.A. (Elebrás) Associated company by the equity method by EDP - 45,00-45,00 Renováveis Central Eólica Baixa do Feijão I S.A. (Feijão I) Associated company by the equity method by EDP - 45,00-45,00 Renováveis Central Eólica Baixa do Feijão II S.A. (Feijão II) Associated company by the equity method by EDP - 45,00-45,00 Renováveis Central Eólica Baixa do Feijão III S.A. (Feijão III) Associated company by the equity method by EDP - 45,00-45,00 Renováveis Central Eólica Baixa do Feijão IV S.A. (Feijão IV) Associated company by the equity method by EDP - 45,00-45,00 Renováveis Central Eólica Aventura S.A. (Aventura) Associated company by the equity method by EDP - 45, Renováveis Trading EDP - Comercialização e Serviços de Energia S.A. (EDP Comercializadora) Joint venture Associated company Subsidiary by the equity method by the equity method 100,00-100,00 - Others Enercouto S.A. (Enercouto) Subsidiary full 100,00-100,00 - EDP GRID Gestão de Redes Inteligentes de Distribuição S.A. (EDP GRID) Subsidiary full 100,00-100,00 - Resende Engenharia e Assessoria Ltda (Resende) Subsidiary full 100,00-100,00 - full % Interest 12/31/ /31/2012 Mabe Construções e Administração de Projetos Ltda (Mabe) Associated company by the equity method 50, Comercializadora de equipamentos y materiais Mabe Ltda (Mabe Chile) Associated company by the equity method by Mabe Construções - 50,

10 1.1 Concessions The Company has the right to indirectly explore the following power generation, concessions/licenses/permits/distribution: Under operation Concession/ Authorization / Record Companies Power Plants Description Grant State Installed capacity (MWm) (*) Assured energy (MWm) (*) Inception End Distribution EDP Bandeirante Public service Concession SP 0,00 0,00 10/23/ /23/2028 EDP Escelsa Public service Concession ES 0,00 0,00 07/17/ /17/2025 Generation Energest Concession/ Authorization ES / MG 299,53 191,67 07/17/ /19/2029 Pantanal PCH Paraíso / UHE Assis Chateaubriand Independent producer Concession MS 52,76 34,28 12/04/ /23/2029 Santa Fé PCH Francisco Gros Independent producer Authorization ES 29,00 16,40 11/13/ /13/2031 Costa Rica PCH Costa Rica Independent producer Authorization MS 16,00 11,06 11/05/ /05/2031 Enerpeixe UHE Peixe Angical Independent producer Concession TO 498,75 280,50 11/07/ /07/2036 Investco UHE Luiz Eduardo Magalhães Independent producer Concession TO 902,50 526,60 01/15/ /15/2033 Porto do Pecém UTE Porto do Pecém I Independent producer Authorization CE 180,07 157,75 07/01/ /01/2043 Cenaeel UEE's Horizonte e Água Doce Independent producer Record SC 4,80 1,00 08/12/ /11/2032 Elebrás UEE Elebrás Cidreira I Independent producer Authorization RS 70,00 24,14 09/05/ /05/2032 (*) Not audited by independent auditors. UHE's Mascarenhas e Suiça/ PCH's Viçosa, São João, Alegre, Fruteiras, Jucu and Rio Bonito Independent Producer/Public Service Under construction phase Installed capacity (MWm) (*) Concession/ Authorization / Record Assured energy (MWm) (*) Inception End Companies Power Plants Description Grant State Generation ECE Participações UHE Santo Antonio do Jari Independent producer Concession PA/AP 373,40 217,70 12/21/ /31/2044 Cachoeira Caldeirão UHE Cachoeira Caldeirão Independent producer Concession AP 219,00 129,70 05/29/ /29/2048 Baixa do Feijão I UEE Baixa do Feijão I Independent producer Authorization RN 30,00 14,80 08/14/ /14/2047 Baixa do Feijão II UEE Baixa do Feijão II Independent producer Authorization RN 30,00 14,40 08/14/ /14/2047 Baixa do Feijão III UEE Baixa do Feijão II Independent producer Authorization RN 30,00 14,30 08/14/ /14/2047 Baixa do Feijão IV UEE Baixa do Feijão IV Independent producer Authorization RN 30,00 13,70 08/14/ /14/2047 Central Eólica Aventura UEE Aroeira Independent producer Authorization RN 30, (**) 0/jan Central Eólica Aventura UEE Jericó Independent producer Authorization RN 30, (**) 0/jan Central Eólica Aventura UEE Umbuzeiros Independent producer Authorization RN 30, (**) 0/jan EDP Renováveis do Brasil S.A. UEE Aventura I Independent producer Authorization RN 26, (**) 0/jan 35 years as from the publication of the Authorization 35 years as from the publication of the Authorization 35 years as from the publication of the Authorization 35 years as from the publication of the Authorization (*) Not audited by independent auditors. (**) Refers to initial Assured energy and is subject to changes after publication of Authorization Characteristics of concessions, authorizations and registrations Distribution Concession contracts of the subsidiaries EDP Bandeirante and EDP Escelsa The main liabilities set forth in the concession agreements are as follows: Concession grantor: inspection of compliance with the contract; to ensure the adequate provision of the service; to extend the term of the contract to ensure the quality of the service at adequate costs; to adjust the tariffs to ensure the economic and financial balance of the concession agreement; and, upon the receipt of the concession, to refund, as provided for in the law, the portions of associated investments which are not amortized or not depreciated on the date of the transfer, discounting, in the event of forfeiture, amounts of contractual fines and damage caused by EDP Bandeirante and EDP Escelsa. EDP Bandeirante and EDP Escelsa must: keep the record of assets and facilities continuously updated; keep the equipment in perfect working condition, and have the technical conditions to ensure the continuity and efficiency of the services; charge for the supply of electric power at the tariffs approved by the Concession Grantor; and make the investments required to ensure the provision of the service. Generation Regarding the Generation agreements, when operating the Hydroelectric Power Plants, the concessionaires will have considerable independence in the management of their businesses, which includes measures related to investments, personnel, materials and technology, provided that they comply with the provisions of the concession agreements, the standards of the electric power industry and the instructions of the Concession grantor and Brazilian Electricity Regulatory Agency (Agência Nacional de Energia Elétrica - ANEEL). The concession contracts establish that the price applicable to the electric power generated will be freely negotiated by the concessionaires and buyers, pursuant to article 10 of Law no. 9648/98, and articles 27 and 28 of Law no /02, worded by Laws no /02 and 10848/04. The concession contracts establish that, once the concession term has ended, the assets and facilities linked to the exploration of hydroelectric power plants can be returned to the Concession grantor, with the carrying out of the necessary analyses and appraisals, as well as the determination of the indemnity due to the concessionaires, which is based on the dates and amounts of their respective incorporation into the electric system. Concession contract of the subsidiary Energest Mascarenhas and Suiça HydroPower Plants (UHEs) and Alegre, Fruteiras, Jucú and Rio Bonito Small Hydropower Plants (PCHs) The term of the concessions of the UHEs of the parent company can be extended for a period of up to 20 years, pursuant to paragraph 20 of article 40 of Law no. 9074/95, worded by article 80 of Law no /04, based on the specific technical reports prepared by ANEEL inspectors, provided that the Hydroelectric Power Plants are being operated in compliance with the conditions set forth in the related concession agreements and the legislation of the electric power industry, and in a manner that properly protects the consumers' interests. Through ANEEL Authorizing Resolutions no. 4020/13 and 3926/13 Suíça Hydropower Plant and Alegre, Fruteiras, Jucú and Rio Bonito Small Hydropower Plants had their exploration system changed from Public Service to Independent Producer. As of December 31, 2013, the concession agreements had not yet been amended to reflect the Independent Producer modality; these agreements are currently in the possession of the ANEEL to be amended and signed. 9

11 Concession contract of the subsidiary Pantanal UHE Assis Chateaubriand The concession contract determines that, at the exclusive discretion of the Grantor, and for the purpose of ensuring the continuity and quality of the electric power generated, the concession term can be extended for a period not exceeding its original term, at the request of the concessionaire. Through ANEEL Order no. 896/13, the Hydropower Plant had its exploration system changed from Public Service to Independent Producer and, in December 2013, the concession agreement was amended. Concession contract of the indirect subsidiary Investco and direct subsidiary Lajeado Investco and Lajeado has part of the Concession agreement to operate the assets for a 35-year period starting on the date of the publication in the Official Gazette (January 15, 1998) and ending on January 15, 2033, and the concession term may be extended at the request of the concessionaires. The mentioned hydroelectric power plant is operating with five turbines, with a capacity of MW each, with a total installed capacity of 902.5MW and an assured capacity of 823.3MW. Investco is the sole owner of the assets that comprise the Lajeado hydroelectric power plant, but is not the exclusive holder of the Concession agreement. The concession of the Lajeado hydroelectric power plant is jointly held by: CEB Lajeado S.A. - holder of 19.80%, Lajeado Energia S.A. - holder of 72.27%, Paulista Lajeado Energia S.A. - holder of 6.93% and Investco - holder of 1%. Therefore, the aforementioned companies, together with Investco, are the concessionaires of the Lajeado hydroelectric power plant. Of the total assured capacity, concessionaires of UHE Lajeado must allocate MW and 2,877,660MWh/year for sale to electric power distribution concessionaires by the end of the concession term. In the event that concessionaires are unable to deliver the aforementioned electric power amount, they shall refund the market agents with which it has commitments. At the end of the concession period, all assets and facilities linked to the Hydroelectric Power Plant will be incorporated into the Brazilian Federal Government's assets, and the concessionaires will be refunded for any investments made and not yet amortized, provided that the latter have been authorized by ANEEL and subjected to an ANEEL audit. The electricity generated by the Lajeado hydroelectric power plant is used and traded on an "Independent Producer" basis, pursuant to the provisions of the Concession agreement, by the aforementioned concessionaires, in proportion to their interests. A lease agreement was entered into for the assets of the Lajeado hydroelectric power plant consortium with the concessionaires of this power plant, under which the lease is proportionate to the concessionaires' interest in the Concession Agreement. Therefore, in addition to the revenue accrued from the sales of electricity proportionately to its interest, Investco also accrues revenue from the lease of the assets of the Lajeado hydroelectric power plant. Concession contract of the subsidiary ECE Participações The initial concession term provided for a 30-year period starting on December 21, 1987, the date of the publication of the concession notice. The 4th addendum signed on January 23, 2012 extended the concession term up to December 31, The concession term can be extended based on the specific technical reports prepared by ANEEL inspectors, at the discretion of ANEEL, upon the request of the concessionaire, provided that the hydroelectric power plant is being operated in compliance with the conditions set forth in the related concession agreement and the legislation of the electric power industry, and in a manner that properly protects the consumers' interests. The basic design of the UHE Jari was altered on July 27, 2011, by ANEEL Order no. 3080, increasing from 300 MW to MW of installed capacity. On May 23, 2012, the Ministry of Mines and Energy (Ministério de Minas e Energia - MME), through MME Ordinance no. 35/12, published a review of the physical guarantee, rising from to average MW (Main Power House average MW and Secondary Power House 3.2 average MW). At auction A-5 held in December 2010, 190 average MW was sold, corresponding to a utilization factor of 65% of the installed capacity, already approved by ANEEL for the 30-year period ending on December 31, On December 14, 2012, the Company sold, in the A-5 Auction, the additional energy of the Jari Hydropower Plant. The energy sold totaled 20.9 MWm. The sale of this energy did not imply any additional investment in the project. Concession contracts of the subsidiary Cachoeira Caldeirão The expected deadline for start of supply is January 2017, which will last a 30-year period, at the price of R$95.31 per MWh, adjusted by the Broad Consumer Price Index (IPCA). The electricity to be generated by the Cachoeira hydroelectric power plant will be used and traded on an "Independent Producer" basis, pursuant to the provisions of the concession contract. The concession agreement will be effective for a 35-year period starting from the date of execution, and an extension is not foreseen by the current legislation. Concession contract of the subsidiary Enerpeixe The concession term is 35 years starting from the date of the execution of the concession agreement (November 7, 2001). The concession term can be extended based on the specific technical reports prepared by ANEEL inspectors, at the discretion of ANEEL, upon the request of the concessionaire, provided that the hydroelectric power plant is being operated in compliance with the conditions set forth in the related concession agreement and the legislation of the electric power industry, and in a manner that properly protects the consumers' interests. The request for an extension of the concession term should be submitted within 36 months before the expiry of the concession agreement, together with proof of compliance with tax and social security liabilities, as well as with commitments and charges assumed with the Public Administration bodies of the electric power generation industry. In the event the power generated is lower than the assured power and contracted and/or used capacity, Enerpeixe will have to refund the other agents operating on an integrated basis for the remainder of the amounts contracted and/or used, pursuant to the legislation, criteria and standards of the Control, Optimization and Computational Intelligence Group Applied to the Electric Power Systems (Grupo de Controle, Otimização e Inteligência Computacional Aplicados a Sistemas de Energia Elétrica - GCOI) in force, using tariffs defined by ANEEL. At any time, to safeguard public interest and as provided for in the prevailing legislation, the Concession grantor can carry out an expropriation by paying a previous indemnity to the concessionaires for assets which have not yet depreciated. The amount of the indemnity will be determined by audit to be conducted by the Concession grantor. Should the forfeiture of the concession be declared, the Concession grantor will indemnify the concessionaires for investments made during the contract term, but not yet amortized or depreciated, provided that these investments have been approved, deducting the amounts of penalties and damages that may have arisen from the event that led to the forfeiture. Authorizations of the direct subsidiary Energest (Viçosa and São João PCHs) and indirect subsidiaries Costa Rica (Costa Rica PCH), Pantanal (Paraíso PCH) and Santa Fé (Francisco Gros PCH) The authorizations of the PCHs will remain in force for a term of 30 years and may be extended at the discretion of ANEEL, pursuant to Article 7 of Resolutions 110/99 and 111/99. The electricity generated by the Authorized entity is intended to be marketed under the independent production of electricity modality, in accordance with the conditions set forth in Articles 12, 15 and 16 of Law no. 9074/95, regulated by Decree no. 2003/96. At the end of the duration of this Authorization, if there is no extension, the assets and facilities linked to the production of electricity will become the property of the Federal Government, through compensation of investments realized, provided they have been previously authorized but not yet amortized, as determined by an ANEEL audit. 10

12 2 Preparation basis and accounting practices 2.1 Preparation basis Statement of Conformity The consolidated financial statements were prepared and are being presented in accordance with accounting practices adopted in Brazil, including the pronouncements issued by the Accounting Pronouncements Committee (Comitê de Pronunciamentos Contábeis - CPC) and according to the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB). The presentation of individual and consolidated statement of value added (Demonstração do Valor Adicionado - DVA), is required by Brazilian Corporate Law and by the accounting practices adopted in Brazil applicable to public companies. IFRS do not require the presentation of this statement. As a result, under IFRS, such a statement is presented as supplementary information, without prejudice to the set of financial statements. The financial statements of the Parent Company were prepared in accordance with accounting practices adopted in Brazil, in compliance with the provisions contained in the Corporation Law, and incorporates the changes introduced through Law no /07 and 11941/09, supplemented by the new pronouncements, interpretations and guidelines of the CPC, approved by resolutions of the Federal Accounting Council (Conselho Federal de Contabilidade - CFC) and Brazilian Securities Commission (Comissão de Valores Mobiliários - CVM) and specific laws of the ANEEL, when they do not conflict with the accounting practices adopted in Brazil and/or international accounting practices. The individual financial statements present investments in subsidiaries, joint ventures and associates accounted for using the equity method, in conformity with Brazilian Corporate Law. Therefore, these individual financial statements are not considered to be fully consistent with IFRS, since IFRS provide that these investments be measured in the Parent company's separate financial statement either at fair value or at cost. Since there is no difference between consolidated shareholders' equity and consolidated net income attributable to the equity owners of the parent company in the consolidated financial statements prepared under IFRS and BR GAAP, and the Parent Company's shareholders' equity and net income in the parent company financial statements under BR GAAP, the Company elected to present the accompanying individual and consolidated financial statements in a single set of information, side by side. The Company's management authorized the completion of the preparation of financial statements on February 26, Direct and indirect subsidiaries are consolidated from their acquisition dates, which correspond to the dates on which the Company obtained control, and they will continue to be consolidated until the date on which this control ceases. Measurement basis The individual and consolidated financial statements were prepared considering the historical cost as a value basis and assets available for sale and financial assets and liabilities (including derivative instruments) measured at fair value. Functional and presentation currency The Company's functional currency is the Brazilian real and the individual and consolidated financial statements are presented in Brazilian reais, rounded to the nearest whole number, unless otherwise indicated. Summary of significant accounting policies The accounting practices described in detail below have been consistently applied by the Company and subsidiaries, jointly-controlled subsidiaries and associated companies to the years presented in these individual and consolidated financial statements. a) Cash and cash equivalents (Note 5) Cash and cash equivalents include cash, bank deposits, and high-liquidity short-term investments, promptly convertible into a known sum of cash and subject to low risk of change of market value, which are stated at fair value that corresponds to cost, plus interest accrued until the statement of financial position date. b) Accounts receivable Consumers and concessionaires (Note 6) Trade accounts receivable are recorded in the amount billed or to be billed, adjusted to present value when applicable, including the respective direct taxes under the responsibility of the Company, which include: (i) The amounts billed to final consumers, concessionaires, distributors and trading companies, as well as the revenue referring to energy consumed and not billed; and (ii) The amounts receivable relating to the energy traded in the Council for the Commercialization of Electric Energy (Câmara de Comercialização de Energia Elétrica - CCEE) (Note 6.2). The calculation of the present value is performed for scheduled payments of debts of consumers of the Company, based on the capital remuneration rates, regulated by ANEEL and applied to the tariffs of electricity public service distributors (average remuneration rate of the investment). The contra entry of the adjustments to present value of accounts receivable is against net income for the year (Note 34); Allowance for doubtful accounts - The amounts were allocated pursuant to Accounting Instruction 6.3.2, of the Accounting Manual of the Electricity Public Service, which defines as a standard the following provisioning terms for overdue credits: residential for more than 90 days; commercial for more than 180 days; and other classes over 360 days. Furthermore, there is careful analysis of the balance of consumers and concessionaires, and the amount formed is considered sufficient to cover possible losses in the realization of these assets. Indemnifiable financial assets (Note 18) EDP Bandeirante and EDP Escelsa recognize an amount receivable from the Concession grantor due to the unconditional right of receiving cash at the end of the concession, as provided for in the contract, as indemnity for the construction services carried out and not received as service provisions related to the concession. These financial assets are recorded to reflect the best estimate of the New Replacement Value (Valor Novo de Reposição - VNR), according to criteria established by regulation of the Concession Grantor and are based on an agreed methodology and updated by the General Consumer Price Index (Índice de Preços de Mercado - IGP-M) on the value of assets in service belonging to the concession that will be reversible at the end of the concession. c) Inventory (Note 11) The materials used in the construction of the concession infrastructure, operation and maintenance of service provision are recorded at cost or net realizable value, whichever is lower. The method of valuation of inventories is the weighted average cost. d) Investments (Note 16) The financial statements of the Parent company, the investments in subsidiaries and associated companies with a percentage of the voting capital above 20% or with significant influence, and in other companies that are part of the same Grupo EDP - Energias do Brasil or that are under common control, are valued by the equity method. Subsidiaries Subsidiaries are all entities (including special purpose entities) over which the Company has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights (voting capital). The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Company controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Company. They are deconsolidated from the date that control ceases. 11

13 Associated companies and jointly-controlled subsidiaries Associates are all entities over which the Company has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Jointly-owned subsidiaries are all entities over which the Group has joint control with one or more parties. Investments in joint arrangements are classified as joint ventures depending on each investor s rights and liabilities relating to the arrangement. Investments in associated companies and joint ventures are accounted for under the equity method, and are initially recognized at cost. The investment of Grupo EDP - Energias do Brasil in associates and joint ventures includes the goodwill identified on acquisition, net of any accumulated impairment losses. The Company's share of the profits or losses of its associated companies and joint ventures associates is recognized in the statement of income, and the share of the movements in reserves is recognized directly against the Company's shareholders' equity. When the Company's share of the losses of an associated company or joint venture is equal to or exceeds the carrying amount of the investment, including any other receivables, the Company does not recognize any additional losses unless the Company has assumed liabilities or made payments to the associated company or jointly-controlled subsidiary. Unrealized gains from transactions between Grupo EDP - Energias do Brasil and its associates and joint ventures are eliminated to the extent of Grupo EDP - Energias do Brasil s interest in them. Unrealized losses are also eliminated unless the transaction provides evidence of a loss (impairment) of the asset transferred. The accounting policies of associated companies are altered, where necessary, to ensure consistency with the policies adopted by Grupo EDP - Energias do Brasil. Concession right According to Technical Interpretation Accounting Pronouncements Committee (Interpretação Técnica do Comitê de Pronunciamentos Contábeis) ICPC 09, Concession Rights are classified as investments net of deferred taxes, in the parent company. e) Investment properties (Note 19) Investments in land and properties which are not part of the core operating activity of the Company and its subsidiaries are stated at acquisition cost, allowance for loss, when applicable. f) Infrastructure assets managed to the Concession Grantor (Notes 18 and 21) Infrastructure assets managed by the Concession Grantor are being presented in the groups of indemnifiable financial assets, property, plant and equipment and intangible assets, due to the implementation of CPCs. According to Articles 63 and 64 of Decree no /57, the infrastructure assets used in generation and distribution, including trading of power, are related to these services and cannot be disposed, sold, assigned or mortgaged without prior and formal authorization of the Regulatory Agency. ANEEL Resolution no. 20/99 regulates the removal of fixed assets from the Power Public Service concessions, granting prior authorization to separate assets not of use to the concession, when available for sale, determining that the amount from the sale should be deposited in a specific bank account for reinvestment in the concession. g) Property, plant and equipment (Note 20) All generating companies' tangible assets and only tangible assets not related to the distribution companies' infrastructure are recorded in Property, plant and equipment. They are accounted for at: i) acquisition costs plus nonrecoverable taxes on purchase; ii) any costs directly attributable to the placement of the asset in the location and required operating conditions; iii) financial charges relating to the financing obtained from third parties, effectively invested in construction in service; iv) for thermal and wind power plants, at the initial estimate of costs for disassembling and removing the item and restoring the location; and v) less accumulated depreciation and impairment losses. The depreciation calculation basis is the asset's depreciable amount (acquisition cost less residual value). Depreciation is recognized in the income statement on a straight line basis in accordance with the estimated useful life of each component of a property, plant and equipment item, as this method best reflects the consumption pattern of future economic benefits incorporated into the asset. The depreciation rates for assets of hydroelectric plants are in accordance with Normative Resolution no. 474/12 issued by ANEEL, new depreciation rates for assets in service were established, starting January 01, 2012, altering Tables I and XVI of the Manual of Asset Control in the Electricity Sector (Manual de Controle Patrimonial do Setor Elétrico - MCPSE), approved by Resolution no. 367/09. The depreciation rates reflect the useful lives of the assets and are used by the Company to calculate the depreciation of its Property, plant and equipment items. The residual value is the asset's remaining Balance on the end of the concession, since, as established in the agreement entered into by the subsidiaries and the Federal government, at the end of the concession, the assets will be transferred to the Federal government, which will indemnify the subsidiaries for the assets not fully depreciated. When the indemnity at the end of the thermal and wind power concession/authorization is not available, no residual value is recognized and depreciation rates are adjusted so that all assets are depreciated within the concession/authorization. In the case of hydroelectric plants operating under the independent producer system, the Company believes that there is a right to compensation of the residual value of the related and reversible assets, since this is provided in the concession agreement, supported by its legal advisors and considering the facts and circumstances available at the time. Any changes will be monitored and the impacts of any such changes will be analyzed. At the end date of the concession, for the purposes of calculating the indemnity for the assets linked to the concession which are revertible to the Federal Government, the residual value of the assets will be adjusted in accordance with a criterion to be defined by ANEEL. Depreciation methods and residual values are reviewed at the end of each fiscal year, possible adjustments are recognized as a change in accounting estimates. h) Intangible assets (note 21) Intangible assets include: Concession rights: the right of concessionaires to charging users for the power distribution system construction and for the use of infrastructure are recorded as intangible assets at cost plus financial charges, when applicable. Amortization is recorded up to the remaining concession term; Software: these are measured by the total cost of purchase, less amortization expenses; Concession rights - other: these are measured by the total cost of purchase, less amortization expenses; Development of projects: these are recognized as assets from the development stage, provided that they comply with the requirements defined in CPC 04 (R1); The permanent rights of use: these are recorded at cost of acquisition and are not amortized; Concession right - Use of Public Property (Uso do bem público - UBP): this refers to the right to explore the hydropower generating potential and associated transmission system of the hydropower plants of the subsidiaries Investco, Enerpeixe and Pantanal. This obligation is recorded on the date of the Installation Permit (Licença de Instalação - LI) for developments under construction and, on the date of execution of the agreement, for developments in operation which had their exploration modality changed to concession for consideration, at present value, as a contra entry to intangible assets. For developments under construction, the amounts are capitalized at the present value of the obligation up to the date of start of operations, when they start to be amortized over the concession period, or another period that may be set forth in the concession agreement; Goodwill incorporated: this refers to the spun-off portion of goodwill incorporated in subsidiaries EDP Bandeirante, EDP Escelsa and Lajeado, deriving from the acquisition of said companies shares, which was accounted for in accordance with CVM Instruction no. 319/99 and 349/99 and ICPC 09 and, as determined by ANEEL, is being realized based on the curve of expected future income over the company s concession period; and Goodwill is the value exceeding the business combination cost regarding the interest of the acquiring company on the fair value of the acquired company's assets and liabilities, that is, the exceeding amounts is the portion overpaid by the acquiring company due to expected future earnings of the acquired company. In acquisitions in which the Company attributes fair value to non-controlling interests, the determination of goodwill also includes the value of any non-controlling interest in the acquiree, and goodwill is determined considering the Company's and non-controlling interests. The goodwill should not be amortized, but is subject to impairment test. Amortization is calculated on the asset amortizable amount (cost or other amount that replaces cost less residual value) and is recognized in income at the straight-line method in relation to the estimated useful lives of intangible assets other than goodwill, beginning as of the date in which they are available for use, as this method is the one that best reflects the consumption standard of future economic benefits incorporated to the asset. Useful lives of intangible assets related to concession rights are lower than the remaining terms of concession contracts. Intangible assets with undefined useful life are not amortized, but are tested annually for impairment, according to note 2.2.j below. In accordance with the provisions of the Accounting Instructions of the Accounting Manual of the Electricity Public Service and in CVM Resolution no. 672/11, which approves the technical pronouncement CPC 20 (R1), the financial charges relating to the financing obtained from third parties, effectively invested in Intangible assets in service, are recorded in this subgroup as a cost of the respective works. 12

14 i) Environmental permits (Notes 21 and 29) Previous licenses and installation licenses obtained during planning and installation are recognized as plant costs, more specifically as dam costs, according to ANEEL accounting guide, and depreciated over the useful lives of dams. As regards operation permits obtained after the enterprise becomes operating, if environmental costs related to these licenses are paid before the license is obtained, the amount disbursed is recorded as an intangible asset - operation permits - and amortized over the license validity. If the license is obtained before disbursements, at the start of the license period, the estimated disbursements are provisioned and recorded as intangible asset - operation permits - and amortized over the license period. j) Reduction to the recoverable value Financial assets Evaluated at the end of each year regarding recoverability. Considered as nonrecoverable assets when there are evidences that one or more events occurred after the initial recognition of the financial asset that resulted in adverse effects on the estimated future cash flow of the investment. Non-financial assets The Management of the Company and its subsidiaries reviews the net book value of property, plant and equipment, investment property and intangible assets, including goodwill and intangible assets, on an annual basis to identify whether there was any evidence of unrecoverable losses or evidence of the occurrence of events or alterations in the circumstances indicating that the book value might not be recoverable. The recoverable amounts have been determined based on its value in use. When such evidence is identified, and the net book value exceeds the recoverable value, provision is formed adjusting the net book value to the recoverable value. The intangible assets with undefined useful life have the recovery of their book value tested annually regardless of any indication of loss of value, when applicable. k) Other current and non-current assets These are presented at cost or realizable value, including, when applicable, income accrued up to the statement of financial position date. l) Suppliers (Note 22) Mainly includes balances payable to suppliers of material, services, electricity and of charges on the use of the electricity network. Amounts are accounted on the accrual basis. m) Loans and financing, debt charges and debentures (Notes 23 and 24) Loans, financing and debentures are stated at the net amount of transaction costs incurred and subsequently measured at the amortized cost using the effective interest rate method or fair value. Swap operations were recognized at fair value through profit or loss for the year. n) Provisions (Note 29) Contingencies (Note 29.1) These are recognized in the statement of financial position as a result of a past event, where it is probable that an economic resource will be required to settle the obligation and that can be reliably estimated. Provisions are recorded considering the best estimates of the risk specific to the liability. Contingent consideration (Note 29.3) Contingent liabilities acquired from a business combination are initially measured at fair value on the acquisition date. At the closing of the year, these liabilities are adjusted by the effective interest rate and variations of fair value. o) Use of public property (Note 28) It corresponds to the amounts established in the concession agreements as consideration for the right to operate the hydroelectric power plants and associated transmission systems of the subsidiaries Enerpeixe, Investco and Pantanal, calculated through the expiry of the concession agreements and recognized at present value at the underlying rates provided for in the respective agreements (Note 2.2, item h). p) Other current and non-current liabilities Stated at the known or estimated amounts, plus, when applicable, the corresponding charges, monetary and exchange variations incurred up to the statement of financial position date. q) Income and social contribution taxes (Notes 8, 9 and 35) The current income and social contribution taxes recorded in income are calculated in indirect subsidiaries Costa Rica and Santa Fé, based on the deemed profit method, where income and social contribution tax bases were computed considering tax rates of 8% and 12%, respectively, calculated on the amount of gross revenue in accordance with current legislation, and the current income tax is calculated in the parent company and other subsidiaries considering taxable income at the tax rate applicable under the current legislation, of 15%, with a surtax of 10% on taxable income exceeding R$240 per year, and the current social contribution tax is calculated considering taxable income before income tax, at a tax rate of 9%. Both of these are assessed considering the offsetting of tax loss carryforward and negative social contribution basis, limited to 30% of the taxable income, when applicable. Deferred income and social contribution tax assets and liabilities were recorded, as of the tax loss carryforward, negative social contribution basis and temporary differences and events resulting from the Law no /07 RTT, considering the rates in force of the aforementioned taxes, in accordance with the provisions of CVM Resolution no. 599/09 and CVM Instruction no. 371/02, and consider past profitability record and expectations of future taxable income based on a technical viability study. The current and deferred income and social contribution tax assets and liabilities are stated at their net amount, as requested by the Technical Pronouncement CPC 32. Income and social contribution tax expenses comprise current and deferred taxes, and they are recognized in the income statement unless they relate to items directly recognized in Shareholders' equity. On March 23, 2010, the subsidiary EDP Escelsa obtained Incorporation Report no. 26/2010 from Development of the Northeast Region (Superintendência do Desenvolvimento do Nordeste - SUDENE), attesting to the fulfillment of all the legal conditions and requirements stipulated for recognition of the right to the reduction of 75% of the rate of Income Tax and Non-Reimbursable Surcharges, calculated with a basis on the income from the exploration relating to the municipalities from the northern region of the state, which are from the area of activity of SUDENE, for a period of 10 years as of the fiscal year 2010, filed at the Unit of the Brazilian Internal Revenue Service (Receita Federal do Brasil - RFB), with jurisdiction over the municipality of its head office. On December 22, 2009, the subsidiary Energest obtained from the SUDENE Incentive-Granting Report no. 176/2009, attesting to compliance with all legal conditions and requirements for the recognition of the right to a 75% reduction in the Income Tax rate and Additional non-reimbursable taxes calculated based on operating profit, on 33.08% of the revenue generated by the Mascarenhas power plant located in the Municipality of Baixo Guandu in Espírito Santo State, corresponding to 28.16% of the Company's total revenue, for a ten-year period beginning in the 2005 fiscal year. In compliance with the determinations of Administrative Ruling 2091-A of December 28, 2007 of the Ministry of National Integration, the entity that regulates the benefit, the amount of unpaid income tax cannot be distributed to the partners or shareholders, which can only be used for compensation of loss or capital increase. Since the year ended December 31, 2008, the Tax incentive reserve in subsidiary Enerpeixe has been comprised of tax incentives granted by the Superintendência do Desenvolvimento da Amazônia - SUDAM, referring to the reduction of the Corporate Income Tax (IRPJ) rate. The amount of this government subsidy is being excluded from the calculation basis of the dividends, in accordance with article 195-A of Law no. 6,404/76 amended by Law no. 11,638/07, as it can only be used to increase share capital or absorb possible losses. The tax incentives mentioned above are recorded in the subsidiaries financial statements, as required by CPC 07 (R1) Government Grants. 13

15 r) Post-employment benefits (Note 25) The Company and its subsidiaries have employee benefit plans of the defined contribution and defined benefit types, including pension and retirement plans. Pursuant to CVM Resolution no. 695/12, post employment benefit liabilities should be accounted for based on standards contained in CPC 33 (R1) of the Accounting Pronouncement Committee. To meet this requirement, the Company and its subsidiaries hired independent actuaries to conduct an actuarial appraisal of the benefits according to the Projected Unit Credit Method, and the last was performed at the base date of December 31, Actuarial gains and losses generated by adjustments and changes to actuarial assumptions of defined benefit plans are directly recognized in Shareholders' equity under Other comprehensive income in the year. Past service costs are fully recognized in the period they occur in income (loss) in the Personnel account and financial income (loss) of the benefit will be recognized at net amount based on the discount rate. The liabilities of the defined contribution plans are recognized as personnel expenses in the statement of income for the period in which the services are rendered. s) Reserve for reversal and amortization Refers to resources derived from the Reserve for reversal and amortization, set up until December 31, 1971 under the terms of the regulation of SPEE (Federal Decree no /57), applied by the subsidiary EDP Bandeirante in the expansion of the Power Public Service, and interest of 5% per annum is charged on the Fund for reversal, paid monthly. Its potential settlement will occur in accordance with determinations of the Concession grantor. t) Capital stock (Note 30) Ordinary shares are classified as stock capital and any costs attributable to the issuance of shares and stock options are recognized as a deduction from shareholders' equity, net of any tax effects. Preferred shares are classified as shareholders' equity in case they are not redeemable, or only redeemable at the Company's discretion. Are not entitled to vote and have preemptive rights in the settlement of its portion of capital. Repurchased shares classified as treasury shares are recognized as a deduction to shareholders' equity, including the corresponding acquisition costs. When these shares are again made available to the market, the corresponding cost is deducted from shareholders' equity and any excess or deficit is transferred to retained earnings. u) Dividends and interest on own capital (Note 31) The distribution of dividends and interest on own capital are recognized as a liability in the Company's financial statements at the end of year, based on the by-laws. However, any amounts above the mandatory minimum is only provisioned on the date on which they are approved by a Shareholders' Meeting. The tax benefit of interest on own capital is recognized in the statement of income. v) Income determination Income and expenses are recognized on the accrual basis. The main criteria for the recognition and measurement, are presented below: (i) Revenue from electricity operations and services rendered is recognized in the statement of income in accordance with its realization. Revenue is not recognized if there are significant uncertainties as to its realization. The billing of electricity to all consumers and concessionaires is processed monthly, in accordance with the reading calendar and supply agreements, respectively; (ii) The energy supplied and not billed, corresponding to the period elapsed between the date of the last reading and the closing of the statement of financial position, is estimated and recognized as unbilled revenue; (iii) The power supply is billed on a monthly basis for all concessionaires; (iv) The recognition of construction revenue is directly associated with additions to intangible assets in progress (Concession right - Infrastructure), without incorporating a profit margin into this construction activity in accordance with Technical Interpretation ICPC 01 (R1) - Concession Contracts. Construction revenue arises from the allocation of the hours worked by the technical teams, materials used, measurement of outsourced services rendered and other costs directly allocated to it. This revenue is recorded as a contra-entry to the cost of infrastructure construction for the same amount; (v) Financial revenues include interest earned from interest earning bank deposits, hedge instrument gains, when applicable, and arrears charges on power sold; and (vi) Financial expenses include interest, foreign exchange fluctuation and mark-to-market loans and financing and operating results swap and hedge, when applicable. w) Use of estimate and judgment In the preparation of individual and consolidated financial statements in accordance with Brazilian accounting practices and international accounting practices, it is required that the Management of the Company and its subsidiaries make estimates to record certain transactions that affect assets, liabilities, income and expenses. The final results of these transactions and information, at the time of their effective realization in subsequent periods, may differ from these estimates, due to the lack of precision inherent in the process of their determination. The Company and its subsidiaries review the estimates and assumptions at least quarterly, except for the Post-employment benefit plans which is reviewed on a 6-month basis and yearly for impairment losses. The main estimates that represent significant risk likely to cause adjustments to the financial statements, refer to the recording of the effects arising from: Allowance for doubtful accounts (note 2.2 item b); Unbilled supply revenue (Note 2.2, item v); Transactions carried out in the sphere of the CCEE (note 2.2 item b); Recovery of deferred income and social contribution taxes on tax loss carryforward, negative basis and temporary differences (Note 2.2, item q); Measurement of financial instruments (Note 2.2, item x); Provisions for contingencies (note 2.2 item n); Post-employment benefit plans (note 2.2 item r); Asset impairment test (note 2.2 item j); Provision for contingent consideration (note 2.2 item n); and Evaluation of the useful life of tangible and intangible assets (note 2.2 item g & h). x) Financial instruments (Note 37) Financial instruments are defined as any contract that originates a financial asset to the entity and a financial liability or equity instrument to another entity. Non-derivative financial instruments include Cash and cash equivalents, Pledges and restricted deposits, Accounts receivable and other receivables, investments in debt and equity instruments, Loans, Financing, Debentures and Suppliers, as well as accounts payable and Other liabilities. These financial instruments are immediately recognized on the negotiation date, that is, when the obligation or right is formalized, and are initially recorded at fair value plus or less any directly attributable transaction costs. After the initial recognition, they are measured as described below: Instruments held to maturity If the Company and/or its subsidiaries have the intention and capacity to hold to maturity their financial instruments, these are classified as held to maturity. Investments held to maturity are measured by the amortized cost using the effective interest rate method, less any reductions in their recoverable value. Financial instruments at fair value through profit or loss An instrument is classified at fair value through profit and loss if it is held for trading, that is, designated as such upon initial recognition. Financial instruments are recorded at fair value through profit or loss if the Company and/or its subsidiaries manages these investments and decides on purchases and sale based on their fair value according to the investment risk management strategy documented by them. After initial recognition, attributable transaction costs are recognized in the statement of income when incurred. Loans and receivables Only non-derivative assets with fixed or determined payments that are not quoted in an active market are allocated to this category, initially recognized at their fair value plus any attributable transaction cost. After initial recognition, loans and receivables are measured at amortized cost using the effective interest method less any impairment losses. Instruments available for sale Non-derivative financial assets classified as available for sale or not classified in any of the prior categories are designated in this category. The indemnifiable financial assets of subsidiaries are classified as available for sale. Subsequent to initial recognition, these financial assets are recorded to reflect the best estimate of the VNR, as described in note 2.2. item b, which is equivalent to fair value, calculated according to criteria established by regulation of the Concession Grantor. The effects of this measurement are recognized directly in profit or loss, using the effective interest rate method. 14

16 Derivative financial instruments Derivative financial instruments are contracts with the following characteristics: a) their value changes as market changes affecting interest rates, foreign exchange rates, commodities prices, etc.; b) no initial investment is required or the initial investment is much lower than the investment required for similar contracts in the market; and c) they will always be settled on a future date. Derivative financial instruments are recognized on their trade date at their fair value. Subsequently, the fair value of the derivative financial instruments is reevaluated on a regular basis, while the gains and losses resulting from this revaluation are recorded in income (loss) for the year. Hedge accounting Subsidiaries and jointly-controlled subsidiaries qualify certain financial instruments for hedge accounting. The hedge derivatives are recorded at fair value and gains or losses are recognized according to the hedge accounting model adopted and for such the following requirements were met: i) there is formal documentation of the hedge on the start date of the relationship; ii) the hedge is expected to be highly effective; iii) the hedge effectiveness can be measured reliably; iv) the hedge is evaluated on a continual basis and effectively determined as being highly effective throughout the useful life of the hedge accounting structure period; and v) in relation to the hedge of an anticipated transaction, this must be highly probable and must present exposure to cash flow variations that could ultimately affect the statement of income. The Company and its subsidiaries use financial instruments of hedge of the interest rate, and foreign exchange variation. The derivatives that do not qualify as hedge derivatives are recorded as trading derivatives. Derecognition of financial instruments Financial instruments are written-off provided that contract rights to cash flows expire, that is, the end of the right or obligation of receiving or delivering cash or membership certificate is certain. For this situation, Management, based on consistent information, records the settlement. The low may be due to cancellation, payment, receipt or when the debts expire. y) Foreign currency Transactions in foreign currency, that is, all those that are not performed in the functional currency, are translated by the exchange rate of the dates at each transaction. Monetary assets and liabilities in foreign currency are translated into the functional currency at the foreign exchange rate of the closing date. Gains and losses of variations in the exchange rates on monetary assets and liabilities are recognized in the statement of income. Non-monetary assets and liabilities acquired or contracted in foreign currency are translated with a basis on the exchange rates of the dates of the transactions or on the dates of valuation at the fair value when this is used. z) Business combination Business combinations are accounted for under the acquisition method. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity instruments issued by the Company. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement, when applicable. Acquisition-related costs are recognized in the statement of income for the year as incurred. Identifiable assets acquired and the liabilities and contingent liabilities assumed in a business combination are initially measured at their acquisition-date fair values. The Company recognizes the non-controlling interest in the acquiree at fair value or at the non-controlling interest's proportionate share of the fair value of the acquiree's net assets. The measurement of the non-controlling interest is made on an acquisition-by-acquisition basis. The negative goodwill (gain on bargain purchase) is directly recognized in the statement of income by the acquiring company, when total fair values are higher than the amount paid for the business. aa) Lease contracts Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made for operating leases (net of any incentive received from the lessor) are charged to the statement of income at the straight-line basis over the lease period. ab) Concession contracts The CPC issued in 2009, the Technical interpretation ICPC 01 (R1) Concession contracts. This Interpretation was approved by CVM Resolution no. 677/11. ICPC 01 (R1) is applicable to public-private concession agreements in which the public entity controls or regulates the services rendered, with which infrastructure, at which price and to whom the service should be rendered, and is also has possession of this infrastructure. As concession agreements of the distributing companies of Grupo EDP - Energias do Brasil have these characteristics, this interpretation is applicable. But the agreements of the group's power plants have different characteristics, therefore, this interpretation is not applicable. According to ICPC 01, the infrastructure classified in this interpretation cannot be recognized as property, plant and equipment because the concessionaire does not control the underlying assets, and it is recognized in accordance with one of the accounting models provided for in the interpretation, depending on the type of remuneration agreed on between the concessionaire and the concession grantor, according to the agreement entered into by the parties, which are the financial asset model: of the financial asset, intangible asset and bifurcated models. In distribution, the bifurcated model is applied since it is remunerated: (i) by the Concession Grantor, regarding the infrastructure residual value at the end of the concession agreement; and (ii) by users for their part in the construction services and electricity supply service. ac) Income per share The basic earnings per share is calculated based on net income for the year attributable to the Company's shareholders and the weighted average value of ordinary shares outstanding in the respective period. Diluted earnings per share is calculated by the same indicators, and the average of outstanding shares adjusted by instruments potentially convertible into share, with diluting effect, in accordance with CPC 41 - Income per share, approved by CVM Resolution no. 636/10. There is no difference between Basic and Diluted income per share. 2.3 financial statements The consolidated financial statements were prepared in accordance with the standards established by CPC 36 (R3) - statements approved by the CVM Resolution no. 698/12 covering the Company and its subsidiaries (as described in Note 16). The main consolidation practices adopted were as follows: Elimination of the investment of the parent company in the subsidiary companies; Elimination of the balances of accounts between the parent company and the subsidiary companies and of the accounts maintained among these subsidiary companies; Recognition of non-controlling interests in the statement of financial position and in the statement of income; Business combinations have been considered since September 2008, determining the acquisition cost, recognizing and measuring all assumed assets and liabilities, as well as non-controlling interests, recognizing and measuring goodwill for expected future earnings, all measured on acquisition date. If the excess is negative, a gain is recognized in the result for the year; Consolidation of entities in which the Grupo EDP - Energias do Brasil holds less than 50%: the Company is an indirect parent company of Investco, with an equity interest of 40.78%. The Company is a direct parent company of Lajeado, which holds 73% of the voting capital and 62.39% of the total capital stock of Investco, assuring Lajeado of sufficient voting rights and the power to direct Investco s activities. Consequently, the Company is an indirect parent company of Investco and, therefore, Investco was fully consolidated in the financial statements. Joint arrangements: The Company holds 50% of the voting rights in its joint arrangements in Porto do Pecém, Pecém TM and Pecém OM. The Company holds joint control because, pursuant to the terms of the arrangements, decisions about the relevant activities require the unanimous consent of the parties sharing control. The Company s joint arrangements are structured as closed companies and, pursuant to the terms of the arrangements, the Company and the other party to the arrangements are granted rights to these closed corporations' net assets. For this reason, these arrangements are classified as joint ventures. Previously, Porto do Pecém, Pecém TM and Pecém OM were classified as subsidiaries of the Company and accounted for on a proportional consolidation basis. See note

17 2.4 Presentation of information by segment Information per operating segment is presented consistently with the internal report provided for the operating decision maker. The main operating decision maker, in charge of allocating funds and evaluating performance of operating segments is the Company's Executive Board, in charge of the strategic decision-making of Grupo EDP - Energias do Brasil (Note 40). 2.5 New IFRS and interpretations IFRIC (IASB's International Financial Reporting Interpretations Committee) Some of the standards and amendments to standards and interpretations issued by IASB have not yet become effective for the year ended December 31, 2013, therefore, they have not been applied in the preparation of these financial statements. The CPC has not yet issued the respective pronouncements and corresponding amendments to the new and revised IFRS and IFRIC previously presented. Due to the commitment of CPC and CVM to keep the standards in force consistent with the updates made by the IASB, these pronouncements and amendments should be edited by the CPC and approved by the CVM prior to their date of compulsory application New and revised standards and interpretations already issued by the IASB and not adopted by the Company The Company is assessing and has not yet decided on the effects and the applicability of the standards below, which are applicable as of January 1, 2014, except for IFRS 9, with effect as of January 1, IFRIC 21 - Taxes IFRIC 21 is an interpretation of IAS 37 Provisions, Contingent Liabilities and Contingent Assets. IAS 37 establishes criteria for the recognition of a liability, one of which is that the Company must have a present obligation as a result of a past event (known as the obligation generating event). This interpretation clarifies that the obligation generating event that generates the obligation of paying a fee is the activity that triggers fee payment, as described in pertinent legislation IAS 32 - Compensation of financial assets and liabilities Amendments to IAS 32 clarify existing adoption issues concerning requirements for offsetting of assets and liabilities. Specifically, these amendments clarify the meaning of currently has the legal right to offset" and concurrently realization and settlement. IAS 36 - Impairment of assets: Disclosure of non-financial assets recoverable amounts IASB published changes to IAS 36 related to the disclosure of non-financial assets recoverable amounts. Changes introduced by IAS 36 require the entity to disclose depreciated assets recoverable value, which is based on fair value less estimated disposal costs. There are also amendments incorporated in IAS 36, following the introduction of IFRS 13 - Fair Value: measurement and disclosure, which are corrected by this amendment elimination of the requirement to disclose the recoverable amount of cash generating units to intangible assets with indefinite useful lives and/or goodwill, if no impairment losses have been recognized. IAS 39 - Financial Instruments - Novation of derivatives and hedge accounting On June 28, 2013, IASB issued an amendment to IAS 39 Derivative Financial Instruments, which introduces an exemption from the obligation to discontinue the hedge accounting of derivative financial instruments when the counterparty to the agreement is changed due to a legal requirement and provided that certain conditions are met. This amendment was introduced as a response to the new rules for entering into derivative financial instruments, which must now be traded through clearing houses. This situation will result in the novation of the contractual positions for the contracts in effect, which, without the aforementioned exemption, would require the recording of the discontinuation of a significant part of the hedge relationships recognized. IFRS 9 - Financial instruments IFRS 9 Financial Instruments addresses the classification, measurement and recognition of financial assets and liabilities. IFRS 9 was issued in November 2009 and revised in October 2010, replacing the portions of IAS 39 relating to the classification and measurement of financial instruments. This standard requires the classification of financial assets, at initial recognition, in two categories: measure at fair value and measured at amortized cost. The basis of classification depends on the entity's business model and the contractual cash flow characteristics of the financial instruments. For financial liabilities, the main change is that, in cases where the fair value option is adopted, the value resulting from this change in fair value due to the credit risk of the entity itself is recorded in other comprehensive income and not in the income statement, except when this results in an accounting mismatch. New and revised standards and interpretations already issued by the CPC adopted by the Company after January 1, CPC 18 (R2) Investments in associated companies, subsidiaries and jointly controlled venture (IAS 28) Includes a reference to Joint Ventures. As with the previous version of CPC 18, this standard includes references to Investments in Subsidiaries, which were not included in the IAS 28 version (issued by the IASB), but are needed in Brazil due to the rule contained in Brazilian Corporate Law that in individual financial statements, investments in subsidiaries must be valued using the equity method of accounting. The Company assessed the impacts of the revision of this accounting pronouncement (CPC) and identified not material impacts. CPC 19 (R2) - Joint Arrangements (IFRS 11) The analysis of joint ventures starts to be based on the rights and liabilities of the parties sharing control rather than on the legal format. There are two types of joint ventures: joint operations and joint ventures. Joint operations arise when the investors have rights to the assets and obligations for the liabilities related to the business. The joint operator must recognize its assets, liabilities, revenues and expenses. Joint ventures are joint arrangements whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement, and are recognized under the equity method of accounting. Proportional consolidation is no longer permitted. The Company has joint ventures, namely Porto do Pecém, Pecém TM and Pecém OM. Since January 1, 2013, these joint ventures have no longer been proportionally consolidated and started to be accounted for under the equity method of accounting (Note 17). CPC 33 (R1) - Employee benefits (IAS 19) The revision includes substantial changes to the text of IAS 19. The main modifications of this standard relate to defined benefit plans: (i) elimination of usage of the corridor method, and only full recognition of actuarial gains and losses on the date of the financial statements in Other Comprehensive Income shall be effective, a practice already used by the Company since the initial adoption of the IFRS in 2010; (ii) fully recognition of past service costs in income; and (iii) recognition of financial expenses/revenue of the plan, which is now recognized at its net value based on the discount rate. The modifications to IAS 19 are effective for annual periods beginning on or after January 1, 2013 and require retroactive adoption. As provided for in CPC 23, changes in accounting practices require retrospective application to adjust the results for prior periods, which are presented for comparison with the current period, to ensure consistency of accounting practices, as if the accounting practices had been effective from the start of the earliest period presented. The related impacts are presented in Note 3. CPC 36 (R3) - financial statements (IFRS 10) This standard requires the parent company to present its consolidated interim accounting information as if it were a single economic entity, replacing the requirements previously contained in IAS 27 and Separate Financial Information, and SIC 12 Consolidation Special Purpose Entities. The details of the changes were set out in IFRS 10. The Company and its subsidiaries assessed the impacts of the revision of this accounting pronouncement (CPC) and identified material impacts. CPC 45 -Disclosure of Interests in Other Entities (IFRS 12) Include the disclosure requirements for all types of investments in other entities, including joint arrangements, associates, structured entities and off-statement of financial position entities. CPC 46 - Measurement at Fair Value (IFRS 13) IFRS 13 introduces a single basis for fair value measurements and the disclosure of this information. The quantitative and qualitative disclosures, based on the threetier fair value hierarchy currently required for financial instruments, were extended to include all assets and liabilities. The Company's management believes that the adoption of this new standard resulted in a more comprehensive disclosure of financial statements. 16

18 3 3.1 Reclassification of prior years In January 2013, the following CPCs became effective: CPC 18 (R2), CPC 19 (R2), CPC 33 (R1), CPC 36 (R3), CPC 45 and CPC 46. Some of these CPC s brought changes to the Company s accounting practices and, as provided for in CPC 23, changes in accounting practices require retrospective application to the oldest year presented for comparison purposes. As required by CPC 26 (R1), when there are changes in accounting practices or reclassification of prior-year balances in the Company or its subsidiaries, the Company must present a third statement of financial position at the beginning of the period preceding the current period. Therefore, for comparison purposes, we present the effects of the adjustments related to December 31, 2012 and January 1, (a) Changes in practice The Company s Management has identified changes in the accounting practices adopted up to December 31, 2012 as a result of the changes to CPCs (Note 2.5.2) and the revision of accounting criteria used in the recording of the UBP. Therefore, reclassifications were made in order to better present amounts previously disclosed: (i) CPC 33 (R1) - Employee benefits: Full recognition in the income statement of prior service costs of post-employment benefits which were previously deferred over the average realization period of the benefit; (ii) UBP recognition: The Company considers the moment when the LI is obtained to recognize the UBP, since it is the milestone necessary for the fulfillment of the feasibility conditions of the business. Previously, the UBP was recognized upon the start of the operations of the generating units, through the Operating Permit (Licença de Operação - LO), which is the moment when the venture is authorized to produce electric power. However, after analyzing the OCPC 05 and the practice in the Brazilian electricity industry, we have changed our accounting practices to use the obtaining of the LI to account for the UBP. (iii) CPC 19 (R2) - Recognition as Joint Venture: Joint ventures were recognized in accordance with IFRS 11. In accordance with the first-time adoption, the impact for the Company involved the companies Porto do Pecém, Pecém TM and Pecém OM, which ceased to be proportionally consolidated. (b) Reclassification (i) CPC 26 (R1): Net presentation of liabilities relating to Research and development (Pesquisa e desenvolvimento - P&D) and Energy Efficiency Program (Programa de eficiência energética - PEE) programs, net of ongoing services related to such programs; (ii) CPC 33 (R1): Reclassification of actuarial gains and losses of Profits reserves to other comprehensive income; (iii) CPC 32: Reconciliation of income tax and social contribution; (iv) Reclassification to net presentation of other taxes (ICMS, PIS and COFINS) not covered by CPC 32; (v) Reclassification of non-manageable operating expenses related to the System Service Charge (ESS) from the Electric Grid Usage Charges line item to the Electricity Purchased for Resale line item, pursuant to ANEEL Order 3262 of September 27, 2013; (vi) Reclassification of Adjustment to present value previously presented by reducing the account Financial revenue to Financial expense. Statement of financial positions Parent company The adjustments and reclassification are as follows: (i) CPC 33 (R1) - Recognition, by the equity method of past service costs of post-employment benefits that were previously deferred over the average period of realization of the benefit in the amount of R$17,659; (ii) CPC 33 (R1) - Reclassification of actuarial gains and losses of Profit reserves to other comprehensive income totaling R$285,207; (iii) CPC 32 - Net presentation of Income and Social Contribution Taxes on income in the amount of R$1,243; (iv) Reclassification to net presentation of other taxes (PIS, COFINS and IRRF) not covered by CPC 32 in the amount of R$19,962; (v) Reclassification from Other accounts payable to Post-employment benefits for a better presentation of the accounting balances amounting to R$11. 01/01/2012 ASSETS Current assets CPC 26 Presentation Net of P&D and PEE CPC 33 (R1) - Employee CPC 32 benefits Income tax CPC 19 (R2) - Recogni- tion as Joint UBP Reclassified Adjusted Venture recognition balance Cash and cash equivalents ,00 0,00 0,00 (61.870) 0,00 0, Tax and social contribution ,00 0,00 ( ) (2.584) 0,00 (97.042) Inventory ,00 0,00 0,00 (26.839) 0,00 0, Pledges and restricted deposits ,00 0,00 0,00 (8.378) 0,00 0, Prepaid expenses ,00 0,00 0,00 (636) 0,00 0, Other credits ( ) 0,00 0,00 (2.783) 0,00 0, Non-current Disclosed ( ) - ( ) ( ) - (97.042) Tax and social contribution ,00 0,00 0,00 (8.145) 0,00 0, Deferred income tax and social contribution , ,00 ( ) 0,00 0, Related parties ,00 0,00 0, ,00 0, Prepaid expenses 496 0,00 0,00 0,00 (496) 0,00 0, ( ) Investments ,00 (19.480) 0, ,00 0, Property, plant and equipment ,00 0,00 0,00 ( ) 0,00 0, Intangible assets ,00 0,00 0,00 (662) , (19.480) - ( ) Total assets ( ) (9.358) ( ) ( ) (97.042)

19 01/01/2012 LIABILITIES AND SHAREHOLDERS' EQUITY Current assets Suppliers ,00 0,00 0,00 (84.036) 0,00 0, Tax and social contribution ,00 0,00 ( ) (322) 0,00 (97.042) Loans, financing and debt charges ,00 0,00 0,00 ( ) 0,00 0, Estimated employee liabilities and social charges ,00 0,00 0,00 (1.887) 0,00 0, Regulatory and industry charges ( ) 0,00 0,00 0,00 0,00 0, Provisions ,00 0,00 0,00 (6.891) 0,00 0, Other accounts payable ,00 0,00 0,00 (341) 0,00 0, Non-current liabilities Disclosed CPC 26 Presentation Net of P&D and PEE CPC 33 (R1) - Employee benefits CPC 32 Income tax CPC 19 (R2) - Recognition as Joint Venture UBP recognition Reclassified ( ) - ( ) ( ) - (97.042) Deferred tax and social contribution ,00 0,00 0,00 (93.288) 0,00 0, Loans, financing and debt charges ,00 0,00 0,00 ( ) 0,00 0, Post-employment benefits , ,00 0,00 0,00 0, Use of public property ,00 0,00 0,00 0, , Provisions ,00 0,00 0,00 (1.908) 0,00 0, Adjusted balance ( ) Shareholders' equity Profit reserves , ,00 ( ) 0,00 0, Other comprehensive income (45.796) 0,00 ( ) 0, ,00 0,00 ( ) Retained earnings (losses) - 0,00 (39.047) 0, ,00 0,00 (19.478) (39.047) Non-controlling interests (77) - (90) Total shareholders' equity and non-controlling interests (39.124) Total liabilities and shareholders' equity ( ) (9.358) ( ) ( ) (97.042) /31/2012 ASSETS Current assets Cash and cash equivalents ,00 0,00 0,00 (1.003) 0,00 0, Consumers and concessionaires ,00 0,00 0,00 (99.757) 0,00 0, Tax and social contribution ,00 0,00 (93.784) (17.799) 0,00 ( ) Related parties 359 0,00 0,00 0, ,00 0, Inventory ,00 0,00 0,00 (69.030) 0,00 0, Pledges and restricted deposits ,00 0,00 0,00 (649) 0,00 0, Prepaid expenses 957 0,00 0,00 0,00 (253) 0,00 0, Other credits (98.926) 0,00 0,00 (31.249) 0,00 0, Non-current assets Disclosed CPC 26 Presentation Net of P&D and PEE CPC 33 (R1) - Employee benefits CPC 32 Income tax CPC 19 (R2) - Recognition as Joint Venture UBP recognition Reclassified Adjusted balance (98.926) - (93.784) ( ) - ( ) Tax and social contribution ,00 0,00 0,00 (8.258) 0,00 0, Deferred income tax and social contribution , ,00 ( ) 0,00 0, Related parties ,00 0,00 0, ,00 0, (85.469) Investments ,00 0,00 0, ,00 0, Property, plant and equipment ,00 0,00 0,00 ( ) 0,00 0, Intangible assets ,00 0,00 0,00 (730) , ( ) Total assets (98.926) (93.784) ( ) ( )

20 12/31/2012 LIABILITIES AND SHAREHOLDERS' EQUITY Current assets Suppliers ,00 0,00 0,00 ( ) 0,00 0, Tax and social contribution ,00 0,00 (93.784) (3.409) 0,00 ( ) Loans, financing and debt charges ,00 0,00 0,00 (95.970) 0,00 0, Post-employment benefits ,00 8 0,00 0,00 0, Estimated employee liabilities and social charges ,00 0,00 0,00 (2.649) 0,00 0, Regulatory and industry charges (98.926) 0,00 0,00 0,00 0,00 0, Provisions ,00 0,00 0,00 (2.895) 0,00 0, Other accounts payable ,00 0,00 0,00 (7.200) 0,00 (11) Non-current liabilities Disclosed CPC 26 Presentation Net of P&D and PEE CPC 33 (R1) - Employee benefits CPC 32 Income tax CPC 19 (R2) - Recognition as Joint Venture UBP recognition Reclassified (98.926) 8 (93.784) ( ) - ( ) Deferred tax and social contribution ,00 (138) 0,00 0,00 0,00 0, Loans, financing and debt charges ,00 0,00 0,00 ( ) 0,00 0, Post-employment benefits , ,00 0,00 0,00 0, Use of public property ,00 0,00 0,00 0, , Provisions ,00 0,00 0,00 (2.079) 0,00 0, Other accounts payable ,00 0,00 0,00 (66.865) 0,00 0, Adjusted balance ( ) Shareholders' equity Profit reserves , ,00 ( ) 0,00 0, Other comprehensive income (51.721) 0,00 ( ) 0, ,00 0,00 ( ) Retained earnings (losses) - 0,00 (17.659) 0,00 0,00 0,00 0,00 (17.659) (17.659) Non-controlling interests (158) - 0, Total shareholders' equity and non-controlling interests (17.817) Total liabilities and shareholders' equity (98.926) (93.784) ( ) ( ) Statement of income Parent company CPC 33 (R1) - Employee benefits: The recognition of prior service costs in the subsidiaries had an equity accounting impact on the Result from equity interests caption of R$1, Disclosed Order 3.262/13 CPC 33 (R1) Employee benefits CPC 19 (R2) - Recognition as Joint Venture Reclassified Adjusted balance Revenue ( ) Electricity service cost Costs of electricity Electricity purchased for resale ( ) ( ) 0, ( ) Electricity network utilization charges ( ) , ( ) ( ) ( ) Cost of production for electricity Cost of raw materials used (5.533) (5.533) Cost of operations Personnel ( ) 0,00 0, ,00 ( ) Depreciation and amortization ( ) 0,00 0, ,00 ( ) Other operating costs (13.525) 0,00 0, ,00 (7.044) ( ) ( ) ( ) ( ) Gross income Operating revenue and expenses General and administrative expenses ( ) 0, ,00 ( ) Depreciation and amortization (66.486) 0,00 0, ,00 (66.415) Other operating income and expenses (17.501) 0,00 0,00 (12) 0,00 (17.513) ( ) ( ) Service result Income from equity interests (2.898) ( ) - ( ) Financial revenue ,00 0,00 (642) Financial expenses ( ) 0,00 0, (4.508) ( ) Financial result ( ) ( ) Income (loss) before income taxes Deferred income tax and social contribution (44.588) 0,00 (942) (51.638) 0,00 (97.168) ( ) - (942) (51.638) - ( ) Net result (loss) for the period (1.821)

21 3.3 Statement of cash flow Parent company The adjustments and reclassification are as follows: (i) CPC 33 (R1) - Employee benefits: The recognition of prior service costs in the subsidiaries had an equity accounting impact on the Equity interests caption of R$1,819; (ii) Reclassification of items of adjustment to net profits, and the reduction of the caption Other to the caption of Adjustment to present value in the amount of R$4, Cash flow from operating activities Disclosed CPC 33 (R1) - Employee benefits CPC 19 (R2) - Recognition as Joint Venture Reclassifications for a better classification Adjusted balance Income before income tax and social contribution Adjustments for reconciliation of income to cash from operations 0,00 0,00 0,00 0,00 0,00 Allowance for doubtful accounts and net losses ,00 0, Indemnifiable financial assets - Write-off ,00 0,00 (8.701) - Depreciation and amortization ,00 (2.850) 0, Net book value of assets and intangible assets written off ,00 (11) (24.397) Gains with the disposal of assets and rights 0,00 0,00 0,00 (2.867) (2.867) Prepaid expenses ,00 0,00 (1.569) Debt charges and monetary variations on loans, financing and debentures ,00 (45.370) (3.231) Provision for post-employment benefit plan (2.770) 0,00 0, Adjustment to present value ,00 0,00 (1.194) Income from equity interests , (1.819) Allowance for investment losses (20.978) 0,00 0,00 (3.460) (24.438) Income and social contribution taxes - monetary restatement ,00 0, Monetary restatement - contingent consideration (521) 0,00 0, Others ,00 (706) (36.031) (Increase) decrease in operating assets Consumers and concessionaires ( ) 0, (638) ( ) Income and social contribution taxes to offset (60.599) 0, ,00 (45.271) Inventory (49.431) 0, ,00 (7.639) Pledges and restricted deposits (57) 0,00 (7.729) 0,00 (7.786) Prepaid expenses ,00 (879) Accounts receivable ,00 0,00 (4.191) - Other operating assets (64.233) 0, (11.728) (47.909) ( ) (14.988) ( ) Increase (decrease) in operating liabilities 0,00 0,00 0,00 0,00 Suppliers ,00 (40.520) 0, Other tax and social contribution ,00 (3.087) (8) Estimated employee liabilities and social charges ,00 (56) 0, Regulatory and industry charges (50.402) 0,00 0, (47.974) Provisions (66.537) 0, ,00 (62.712) Use of public property 0,00 0,00 0,00 (19.258) (19.258) Other operating liabilities (6.026) 0,00 (6.607) (123) (46.445) (4.328) Cash (invested in) received from operating activities (55.347) Net cash (invested in) received from operating activities (55.347) Net cash from investing activities Additions to Property, plant and equipment and intangible assets ( ) 0, ,00 ( ) Disposal of assets and rights 0,00 0,00 0, Net cash (invested in) from investing activities ( ) ( ) Net cash from financing activities Related parties (1.298) 0,00 ( ) ( ) Advance on future capital increase (66.345) 0,00 0,00 ( ) ( ) Capital increase (decrease) 0,00 0,00 ( ) Funding from Loans, financing and debentures ,00 (60.618) 0, Repayment of principal on loans, financing, and debentures ( ) 0, ,00 ( ) Debt charges, net of derivatives ( ) 0, ,00 ( ) Contingent consideration (96.011) 0,00 0,00 1 (96.010) Use of public property (19.258) 0,00 0, Net cash (invested in) from financing activities ( ) - ( ) ( ) Net decrease (increase) in cash and cash equivalents ( ) ( ) Cash and cash equivalents at the end of the period ,00 (1.003) 0, Cash and cash equivalents at the beginning of the period ,00 (61.870) 0, ( ) ( ) 20

22 3.4 Statement of added value Parent company CPC 33 (R1) Employee benefits: The recognition of costs of past services in the subsidiaries generated an equity pick-up effect on the caption Equity in result of subsidiaries in the amount of R$1, Disclosed CPC 33 (R1) - Employee benefits Adaptation to CPC 09 CPC 19 (R2) - Recognition as Joint Venture Order 3.262/13 Generation of value added ( ) Net operating income ,00 0,00 ( ) 0, Revenue related to the construction of company assets ,00 0,00 ( ) 0, Other revenue ,00 0,00 (74.446) 0, (-) Inputs acquired from third parties ( ) ( ) Costs of purchased energy ( ) 0,00 0, ( ) ( ) Electricity network utilization charges ( ) 0,00 0, ( ) Materials ( ) 0,00 0, ,00 (88.557) Third-party services ( ) 0,00 0, ,00 ( ) Other operating costs ( ) 0,00 0, ,00 ( ) Gross value added Retentions 0,00 0,00 0,00 0,00 0,00 0,00 Depreciation and amortization ( ) 0,00 0, ,00 ( ) Net generated value added Added value received as a transfer 0,00 0,00 0,00 0,00 0,00 0,00 Financial revenue , (1.323) 0, Equity accounting result (2.898) ( ) 0,00 0,00 ( ) Adjusted balance Total value added to distribute ( ) Distribution of value added 0,00 0,00 0,00 0,00 0,00 0,00 Personnel (2.770) 0,00 (21.529) 0, Direct remuneration (2.751) 0,00 (15.565) 0, Benefits (19) 0,00 (4.886) 0, FGTS ,00 0,00 (1.078) 0, Taxes, rates and contributions , , Federal , , State ,00 0,00 (48) 0, Municipal ,00 0,00 (46) 0, Third-party capital remuneration , ( ) 0, Interest , ( ) 0, Rentals ,00 0,00 (898) 0, Remuneration of own capital ,00 0, Non-controlling interests ,00 0, (1.825) (75.559) Retained earnings ( ) ( ) Significant events in the year CNPE Resolution no. 03/2013 The Grupo EDP - Energias do Brasil generation and trading companies, through the Brazilian Association for Independent Electricity Producers (Associação Brasileira dos Produtores Independentes de Energia Elétrica - APINE), the Brazilian Association for Clean Energy Generation (Associação Brasileira de Geração de Energia Elétrica - ABRAGEL), the Brazilian Association for Energy Traders (Associação Brasileira dos Agentes Comercializadores de Energia Elétrica - ABRACEEL) and the Brazilian Association for Thermoelectric Generators (Associação Brasileira de Geradores Termelétricas - ABRAGET), filed lawsuits to suspend the effects of Resolution no. 03/2013 of the Brazilian Energy Policy Council (Conselho Nacional de Politica Energética - CNPE), enacted by the Federal Government, which introduced sharing between all agents of the energy market of the costs incurred for the additional dispatch of thermal plants for energy security purposes due to the shortage of rain System Service Charge (Encargo de Serviço do Sistema ESS). In summary, the theses defended in the lawsuits cover the reversal of the burden of use of the system, which makes the producer and/or trader bear such costs not in compliance with the laws and standards applicable to the Electric Sector, as well as the offense to the principle of legal reserve, and unlawful appropriation of competence of the National Congress for creation of grant without the enactment of Law and without expectation of economic and financial compensation. From May 2013 to June 2013, injunctions were obtained in the common lawsuits filed by the Associations that represent power generators and traders, which rendered the provisions of Articles 2 and 3 of CNPE Resolution no. 03/2013 null and void and prevented the inclusion of energy generators and traders in the cost sharing calculated pursuant to this Resolution. In August 2013, the Federal Regional Court (Tribunal Regional Federal - TRF) granted the Federal Government s request to suspend the effects of the injunction, restoring the effectiveness of Articles 2 and 3 of CNPE Resolution no. 03/2013 for the members of ABRACEEL. In the lawsuit filed by APINE, the Federal Regional Court decided to maintain the appeal filed by the Federal Government until the final ruling of the lawsuit. Based on the facts and reasons above, the Company s and its subsidiaries legal counsel classifies the risk of loss as possible, and therefore a provision is not recognized, according to CPC 25 - Provisions, Contingent Liabilities and Contingent Assets. The consolidated contingency amounts to R$14,

23 Return of the indirect subsidiary Couto Magalhães The Company had the grant of the Concession Agreement no. 021/2002, with the National Agency of Electric Energy ANEEL, in respect to the construction of Couto Magalhães Hydroelectric Power Plant (UHE Couto Magalhães), with installed capacity of 150 MW, guaranteed power of MWm, for a period of 35 years up to April 23, In 2011, 9 years after the grant of the Concession Agreement, IBAMA, through Official Letter no. 892/11, informed the definitive disapproval of the request for environmental license. In view of the impossibility to implement the UHE Couto Magalhães, on March 15, 2012, the Company filed a request to the MME and to ANEEL, according to Administrative Process no / , whereby it was requested: (i) the amicable rescission of the Concession Agreement; (ii) the return of the guarantee of full compliance with the liabilities of the Concession Agreement provided for in subclause 9, of Clause 7; (iii) the consequent non-collection of the UBP amount; and (iv) the refund of costs incurred by the petitioners in the preparation of environmental studies. On July 10, 2013, Law no was published, allowing the generation concessionaires granted up to March 15, 2004 which did not commence operations up to December 31, 2013, to request within 30 days: (i) the rescission of their concession agreements, being assured to them, as applicable, the release or refund of the guarantees of compliance with the liabilities under the Concession Agreement; (ii) the non-payment of UBP during the validity of the Concession Agreement; (iii) the refund of costs incurred in the preparation of studies or projects that might be approved for future tender. On July 19, 2013, the ratification of the request for termination of Concession Agreement no. 021/2002 of the Couto Magalhães Hydroelectric Power Plant was filed with the ANEEL, in compliance with the guidelines of Ordinance no. 243/2013 of the MME. On September 5, 2013, the ANEEL Executive Board, in its Extraordinary Public Meeting, approved the termination of the concession of the Couto Magalhães Hydroelectric Power Plan. In the sequence, the process was sent to the MME, which called the Concessionaires to sign the Agreement of Rescission of the Concession Agreement no. 021/2002 on November 27, As per the Termination, concessionaires are released from the payment of UBP charges, and accordingly, the return of the guarantee and reimbursement of the costs incurred to develop the environmental studies will be made upon future bid. Finally, on December 10, 2013, the Company requested from ANEEL the return of the guarantees of full compliance, as bank guarantee, as provided for in the aforementioned Law and Agreement of Rescission. Selling of assets - Indirect subsidiary Pantanal On August 1, 2013, the indirect subsidiary Pantanal transferred the assets of the São João I Power Plants, with an installed capacity of 0.664MW, São João II Power Plant, with an installed capacity of 0.600MW, and Coxim Power Plant, with an installed capacity of 0.400MW, to two Special Purpose Entities (SPEs) (fully-owned subsidiaries of Pantanal); the assets of the São João I and São João II Power Plants will be transferred to São João Energia Ltda., and those of the Coxim Power Plant to Coxim Energia Ltda. Pantanal and YU Empreendimentos Imobiliários e Participações Ltda. entered into an Agreement for Purchase and Sale of Shares and Other Covenants for the assets related to the aforementioned plants, totaling R$5,000, and, on September 1, 2013, the control of both SPEs was transferred to YU. Start of Commercial Operation of the Second generating unit of Porto do Pecém I On March 27, 2012, the Brazilian Power Regulatory Agency (ANEEL) approved an amendment to the schedule for the implementation of the thermal power plant Energia Pecém (Energia Pecém or the Development), as well as the supply start date provided for in the Power Trading Agreements in the Regulated Market (CCEAR). By unanimous agreements, the entrance into operation of the two generating units of the Porto do Pecém I Thermal Power Plant was postponed to July 23, However, the joint venture Porto do Pecém would not be able to make the two generating units available for business operations, which would oblige it to fulfill its power reserve replacement obligations set forth in the Power Trading Agreements in the Regulated Market (CCEAR) through the acquisition of third parties' electrical power contracts. On July 12, 2012, Porto do Pecém filed a petition to ANEEL requesting the full suspension of section 3 of Regulatory Resolution no. 165/05 and the approval of the monthly payment of the lower amount between: (i) the electric power purchase agreement entered into by the plant to guarantee its sales in the Regulated Trading Environment, and; (ii) the power price in the original sales agreement, for Power Trading Agreements in the Regulated Environment (CCEARs) according to the availability, such as the cost the consumer would have if the plant were operating. On March 5, 2013, ANEEL through Order 643 determined that, while Regulatory Resolution no. 165/05 remains in force, is considered the ballast recomposition performed by the Porto do Pecém, for purposes of transfer to the original contracts, and consequently the rate for end users, the lower value considering: (i) the value of power under the agreement of ballast recomposition; and (ii) the Cost Benefit Index ICB of UTE Porto do Pecém I, updated according to Order no /09- SEM/SRG. On April 22, 2013, Energia Pecém filed with ANEEL a Request for Reconsideration of this decision, with a view to recovering the difference between the Online ICB (monthly cost of the Electricity Sale Contracts in the Regulated Environment (CCEARs) of the availability type, calculated as if the plant were operating) and the Auction ICB. On November 19, 2013, ANEEL accepted the Request for Reconsideration filed by Porto do Pecém, in view of Order no. 643/13, so as to apply the provision of Regulatory Resolution no. 165/05, for the delay of UTE Porto de Pecém I, dismissing, however, the adoption of items II (CVU) and III (PLD + 10%) of article 3, and it should be considered, for purposes of repass, the lowest value between the monthly cost of the agreement for replacement of the ballast and the price of power under the original sales agreement, calculated as if the power plant were in operation, provided that the agreement entered into for replacement of ballast meets the requirements of the standards that address the recording, homologation and approval of the agreement of purchase of power, as per ANEEL Order no /13. This decision meant an additional repass of R$107,800 was recorded in the result of November 2013 of Porto do Pecém. The Company recorded the effect of such gain in its result under the equity method, in proportion to its share in Porto do Pecém (50%). 22

24 Below are, in chronological order, the Orders/Official Letters that originated the entry into operation of the generating units: Date Order ANEEL Official Letter Installed capacity (kw) Situation Generating unit 01 12/01/2012 Generating unit 02 05/10/ /22/ /12/ /29/ , as at November 30, , as at May 9, 2013 (*) The Company had to adjust the backing amount that is equivalent to the difference Commercial operation startup Commercial operation startup under test. 240, as at May 13, /2013, as at May 31, /2013, as at June 21, /2013, as at July 4, Established that CCEE should consider the amount of power it is able to provide to the proportional system at 240 kw. (*) Established that CCEE should consider the amount of power it is able to provide to the proportional system at 270 kw. (*) Established that CCEE should consider the amount of power it is able to provide to the proportional system at 330 kw. (*) Established that CCEE should consider the amount of power it is able to provide to the proportional system at 360 kw. (*) As from this date, the company no longer needs to adjust the backing amount. 4.5 Reimbursement for unavailability in excess of that used in the calculation of the Physical Guarantee On April 9, 2013, a request for compliance with Subclause of the Electricity Sale Contracts in the Regulated Environment (CCEARs) entered into through Auction no. 01/2007 was filed with ANEEL. The Electricity Trading Chamber (CCEE) is claiming reimbursements due to non-compliance with the dispatch by the National Electric System Operator (ONS) in the plant s full capacity. These reimbursements have been claimed since December 2012, which was when Generating Unit 01 started commercial operations. The company Porto do Pecém understands that the calculation that has been performed does not comply with the CCEARs entered into. These reimbursements have been calculated on an hourly basis instead of using a 60-month period, which was the only rule available at the time of the Auction. This request is being analyzed by the ANEEL Board of Officers. Regulations of the Power Industry The year 2013 was marked by significant changes to the legal and regulatory framework applied to the electric power industry. We emphasized: (i) Law no. 12,767, of December 27, 2012, that governs the extinction of electric power utility concessions and the temporary provision of service under intervention for adequacy of the electric power utility, and (ii) Provisional Measure no. 579, of September 11, 2012, which governs generation, transmission and distribution concessions, on reduction of sector charges and on tariff reasonableness. With these introduced measures, federal government sought to discipline conditions for intervention in concessions considered to have unwise management, solve the issue of concessions expiring in the period, and guarantee the reduction of electric power bills to end consumers beginning as of January The average reduction foreseen for all of Brazil was 20.2%, resulting from two areas: Renewal of concessions overdue (13%) and Decrease in Industry charges (7%). Provisional Measure no. 579, enacted into Law no. 12,783 on January 11, 2013, established that generation and transmission concessionaires who bid before February 13, 1995 (Article 19 of Law no. 9,074) and whose contracts are expiring from 2015 to 2017, could extend their concessions in advance, provided that they provide full power physical guarantees to the quota regime to be distributed proportionately to each distributor s market. Transmission concessionaires would have their tariff calculated only to cover operating, maintenance, charge and tax costs, as assets related to service provision were already fully amortized. As regards Sector Charges, contributions to the Fuel Consumption Account (CCC) and to the General Handover Reserve (RGR) were no longer charged from consumers, while the contribution to the Energy Development Account (CDE) was reduced, beginning as of January 2013, to 25% of its original value. All eligible Transmission companies adhered to conditions established for advanced concession renewal; however, Generation companies did not do the same, preventing the use of a significant portion of involved energy for the quota system. Accordingly, sources of funds that would permit reaching the goal of reducing electric power bills had to be reviewed. The Enactment of Provisional Measure no. 605 on January 23, 2013 increased the usage scope of CDE (Energy Development Account) funds, providing funds to offset discounts applied to tariffs and offset the effect of not adhering to the expansion of electric power generation concessions. Through Decree no. 7891/13, discounts to the following tariffs: social low income, rural activity, water and sewage treatment, sanitation, and irrigation are no longer funded by other consumers tariffs, permitting the promised reduction. Monthly, ANEEL homologated CDE funds amount to be transferred by Centrais Elétricas Brasileiras S. A. - Eletrobrás to each distributor in order to cover the abovementioned discounts. To define monthly amounts transferred during 2013, ANEEL used the market considered in the last tariff proceeding and the difference between tariffs with and without discount. Beginning as of 2014, Aneel will define a methodology for the transfer of funds, considering the differences between estimated and realized amounts. On January 24, 2013, through Approving Decisions no. 1,415 for EDP Bandeirante and no. 1,442 for EDP Escelsa, ANEEL approved the Extraordinary Tariff Review (RTE) specifically for the adjustment of costs: purchase of electricity, transmission and industry charges. Once costs not manageable by the company were reduced, supply tariffs were reduced without impact on distributors margin. 23

25 4.6 These effects will be felt by consumers at the end of January The main changes that allowed the reduction of the account were: i) Reduction of power purchase costs deriving from the allocation of power quotas of generating plants with renewed concessions; ii) Reduction in energy transmission; iii) Reduction in industry charges; and iv) Removal of cross subsidies from the tariff structure. According to a decision of the Electric Sector Monitoring Board (CMSE) resulting from unfavorable hydrologic conditions in 2012 and the first months of 2013, the National System Operator (ONS) started to use the available thermic power generation capacity to maintain hydroelectric plants reservoirs level. As this refers to a more expensive source for which there is no tariff coverage, distribution concessionaires started to accrue a balance in the Recoverable Parcel A Power Cost Adjustments (CVA) Account to transfer it in subsequent tariff proceedings. In order to avoid transferring these costs to the consumer, Decree no. 7,891 was amended on March 7, 2013, whose article 4-A, paragraph 4, ordered the ANEEL to approve the Energy Development Account (CDE) amounts to be passed on by Eletrobrás to cover: (i) monthly, the distribution concessionaires exposure in the spot market arising from the placement of quotas of physical guarantee of power and capacity and from the non-adhesion to the extension of electric power generation concessions; and (ii) in tariff processes conducted in the twelve months subsequent to March 8, 2013, the full or partial amount of the positive result of the Compensation Account for Variations in Parcel A Items (CVA), arising from the electric power acquisition cost and dispatch expenses in thermoelectrical power plants for energy security purposes. On April 2, 2013, Technical Note no. 83 was issued by ANEEL s Economic Regulation Superintendency (SRE), presenting the calculation of the amounts for Eletrobrás to transfer to the Electric Power Trading Chamber (CCEE), using the Energy Development Account (CDE) as a source of funds. The proposed calculation included this transfer to cover the following CCEE accounting costs: i) exposure to hydrological risk on contracts for physical guarantee share; ii) charges for current system services related to operations of plants based on merit by a decision of the CMSE (electrical sector monitoring committee); and iii) involuntary exposure related to the fact that some hydroelectric plants have not joined the sharing system, together with the fact that an auction to re-contract reposition amount for 2013 was not held. After conducting the Public Hearing, ANEEL published, on May 7, 2013, its Regulatory Resolution no. 549, regulating the transfer of Energy Development Account (CDE) funds to distribution companies as established in Decree 7891 and added its joint approval to the agency s acts issued until that date. In its article 2, Resolution no. 549/13 specifically dealt with the form of transferring positive balances of energy purchases and System Service Charges, which is the purpose of the Compensation Account for Variations of Parcel A Items (CVA), referred to in the Administrative Rule no. 25 of January 24, Additionally, the regulation established that ANEEL will publish, in each ordinary tariff review to be conducted until March 7, 2014, the amount of the funds of the Energy Development Account (CDE) transferred by Eletrobrás to distribution concessionaires to cover those costs. That transfer is due in all cases meeting at least one of the following criteria: i) the average tariff effect in the distribution company s tariff review exceeds three percent in the tariff revision and eight percent in the tariff adjustment; and ii) the balance of CVA energy purchase and System Service Charges (ESS) exceeds two percent of the distribution company s economic revenue established in the tariff process. The transfer can be partial if the positive balances of energy purchase CVA and of System Service Charges are greater than the amount required to reach the limits established. The amount is calculated taking into account the balances of energy purchase CVA and System Service Charges recorded until the 5th business day prior to the adjustment or tariff revision, and the transfer of funds from the Energy Development Account (CDE) to the distribution company will be made in a single installment, until the 10th business day counting from the publication of the Approval Resolution of the respective tariff process. ANEEL Ratifying Resolution no. 1576, of July 30, 2013, ratified the result of the 6th Periodic Tariff Review (Revisão Tarifária Periódica - RTP) of EDP Escelsa, and approved a reimbursement of R$90,670, reimbursed by Eletrobrás in September ANEEL Ratifying Resolution no. 1641, of October 22, 2013, ratified the result of the Annual Tariff Review of the EDP Bandeirante and approved the amount of R$237,874, reimbursed by Eletrobrás in December Tariff Review - EDP Escelsa ANEEL Ratifying Resolution no. 1576, of July 30, 2013, ratified the result of the 6th Periodic Tariff Review applied as from August 7, The tariff repositioning is 4.12%, with 1.32% relating to the economic repositioning and 2.80% referring to the pertinent financial components. In relation to the tariff practiced at present, the average effect perceived by captive consumers is -1.05%, whereas the average effect for high and medium voltage consumers is 2.17% while that for low voltage consumers is -3.14%. During the rental periodic tariff revision, within every three years at EDP Escelsa, ANEEL recalculates the regulatory costs which may be managed by the distribution company (Parcel B) that include the operating costs, evaluates the investments made (Regulatory Remuneration Basis - BRR) and the capital remuneration. Nonmanageable costs (Parcel A), which include the energy purchased from generation companies, energy transportation, industry charges and financial restatements, are adjusted based on the price variation in the twelve previous months. The X Factor Approved by As from this tariff review cycle, becomes a function of the Components "Pd" (productivity gains), "T" (trajectory to adaptation of operating costs) and "Q" (incentive to quality), which were ratified in: Pd 0.99%; T 1.68%, and the Q component will be calculated in the next tariff process. The main financial adjustment recognized by ANEEL in this tariff review process was the balance of Parcel A Items Variation Account (CVA), totaling R$125,057, relating to the difference between the ratified costs and the costs actually incurred by EDP Escelsa from June 2012 to May Of this amount, EDP Escelsa is receiving a total of R$34,387 via tariffs and other R$90,670 from the Energy Development Account (CDE) to reduce the impact on the tariffs to be applied to the end users. In the composition of the tariff repositioning of 2013, the following components merit special emphasis: Remuneration on Capital and Regulatory Reintegration Quota, derived from the ratified Regulatory Remuneration Base. The Gross Remuneration Base is R$2.758 billion and the Net Remuneration Base is R$1.566 billion. 24

26 EDP Escelsa requested that the valuation of the investment made during the incremental period be carried out based on the price database for the period between cycles, due to the existence of different tax regimes. The ANEEL Board of Officers accepted this request and the related effects will be considered in the 2014 tariff adjustment. 4.7 Tariff Readjustment EDP Bandeirante ANEEL Ratifying Resolution no. 1641, of October 22, 2013, ratified the result the Annual Tariff Review of EDP Bandeirante applied as from October 23, The tariff repositioning is 10.36%, with 9.92% relating to the economic repositioning and 0.44% referring to the pertinent financial components. In relation to the tariff practiced at present, the average effect to be perceived by captive consumers is 5.83%, whereas the average effect for high and medium voltage consumers is 4.50% while that for low voltage consumers is 6.85%. In the tariff adjustment process, ANEEL considers the cost variation that the companies experienced over the course of the previous twelve months. The calculation formula includes manageable costs (Parcel B), which are subject to the incidence of IGP-M adjusted by X Factor and non-manageable costs (Parcel A), such as power purchased from generators, charges (Transportation of electricity), sector charges besides financial adjustments recognized by ANEEL, i.e, in the Parcel A Items Variation Account (CVA). The X Factor approved for this tariff adjustment was 1.08%, whereby Pd (productivity gains) was 1.08%, "T" (trajectory to adaptation of operating costs) 0.00% and Q (incentive for quality) 0.00%. The tariff adjustment index approved includes the amortization of the second of three installments of the balance of the regulatory liability (R$78,094, adjusted for inflation) arising from the postponement of the date for application of the results of the Third Periodic Tariff Review (3RTP), totaling R$28,001, whereas the last installment will be settled in the 2014 Tariff Adjustment. The main financial adjustment recognized by ANEEL in this tariff review process was the balance of Parcel A Items Variation Account (CVA), totaling R$287,763, relating to the difference between the ratified costs and the costs actually incurred by the Company from August 2012 to July In addition to this amount, the Company will also be transferred R$49,889 and R$237,874, reimbursed in December 2013 from the Energy Development Account (CDE) to reduce the impact on the tariffs to be applied to the end users. EDP Bandeirante: Breakdown of the Tariff Repositioning of rd Tariff Review Cycle 4.8 Provisional Measure no. 627/13 and Normative instruction 1397/13 of Brazil s Internal Revenue Service (Receita Federal) Provisional Measure (MP) no. 627 of November 11, 2013, and Normative instruction 1397 of Brazil s Internal Revenue Service of September 16, 2013, brought significant changes to the federal tax rules. The provisions of PM will enter into force as of the calendar year 2015, with the option of early application of its provisions as of the calendar year Among the principal changes in tax laws, the MP revokes the Transition Tax Regime (RTT) and implements other changes. The aforementioned MP has already received more than 500 amendments and the Company and its subsidiaries will await its conversion into Law for a further and more conclusive analysis. The Company and its subsidiaries prepared a study of possible effects that could arise from the adoption of the new standard and in a preliminary evaluation it concluded that its early adoption, or not, would not result in material impacts on the financial statements. 25

27 Sale of equity interest On December 6, 2013, the Company informed the market of its partnership with CWE Investment Corporation (CWEI) and CWEI Brasil Participações (CWEI Brasil), wholly-owned subsidiaries of China Three Gorges (CTG), for joint investments in the Brazilian power market. Under the partnership, the Company signed on this date the Purchase and Sale Agreement and the Shareholders agreement in respect of the sale of 50% of its interest in CEJA and Cachoeira Caldeirão. The agreement provides for the joint participation of the parties in power projects in Brazil, under a balanced shareholding structure, with shared control, balance of rights and decision making based on consensus between the parties. For the sale of CEJA, the value of the transaction was R$490,000 and, in addition, CWEI Brasil will assume the commitment of capital contributions up to the conclusion of the construction of UHE Jari, estimated at R$81,000. For the sale of Cachoeira Caldeirão, the cost of entry of CWEI Brasil will correspond to the reimbursement of costs incurred by EDP - Energias do Brasil and the commitment of capital contributions up to the conclusion of the construction estimated at R$294,000, in proportion to the acquired interest. Under the Agreement, the conclusion of the operation is subject to approval by ANEEL, the National Economic and Social Development Bank BNDES, Chinese regulatory bodies and other provisions of a corporate and contractual nature necessary to consummate the disposal of control, which are expected to take place in the first half of As required by CPC 19 (R2) Joint Business (IFRS 11), with the conclusion of the operations and after the aforementioned approvals, CEJA and Cachoeira Caldeirão will be accounted for under the equity method and should result in a capital gain estimated in the net profits for 2014 of R$160,000. EDP GRID Obtaining of registry for Multimedia Communication Services On December 13, 2012, EDP GRID obtained from the National Telecommunications Agency - Anatel authorization, through PVST / SPV Term no. 637-Anatel, for provision, under closed regime, of Multimedia Communication Services - SCM. The SCM is the fixed telecommunication service which offers, nationally and internationally, the transmission, emission and reception of multimedia information to subscribers of an area of provision of service. On December 16, 2013, it was registered with Anatel the communication of change of the corporate name from Escelsa Participações S.A. to EDP GRID Gestão de Redes Inteligentes de Distribuição S.A, the address of the head office and corporate purpose according to the Extraordinary Shareholders Meeting of August 12, EDP GRID has focused its efforts to begin its activities in telecommunications services and, also, in electric power, with focus on the integration and convergence of many areas that fall into the concept of the smart electric network. Concession of São Manuel Hydric Power Plant On December 13, 2013 the Company informed the market that Consórcio Terra Nova, established between the Company and Furnas Centrais Elétricas S.A, was the winner of the A-5 auction held by ANEEL, in regard to the concession of São Manoel Hydric Power Plant, which will be built in the limit of the States of Mato Grosso and Pará, on Teles Pires river. The main characteristics of the project are: (i) installed capacity of 700 MW; (ii) power sold in the Regulated Contracting Environment ACR of MW average; (iii) sale price in the ACR of R$83.49/MWh adjusted every year by the IPCA; (iv) beginning of the Power Trading Agreement CCEAR in May 2018; (v) term of the CCEAR of 30 years; and (vi) total estimated investment (not considering inflation and capitalized interest) of R$2.7 billion. The project financing considers having a long term debt with an estimated leverage of up to 66%. Concession of Aroeira, Jericó, Umbuzeiros and Aventura I Eolic Power Plants The affiliate EDP Renováveis, on December 13, 2013, sold average 45 MW of power on the A-5 Auction, through four eolic power plants: Aroeira, Jericó, Umbuzeiros and Aventura I. The projects are located in the state of Rio Grande do Norte, northeastern Brazil. Together, the projects total 116MW installed capacity. The sale of energy within the Free Contracting Environment (ACL) has a term of 20 years, beginning in 2018, at a price of R$109/MWh. 5 Cash and cash equivalents Parent company 12/31/ /31/ /31/ /31/2012 Cash and banks Interest earning bank deposits - fixed income Total Highly liquid short-term financial investments are promptly convertible into a known sum of cash and are subject to an insignificant risk of change of value. The Company and its subsidiaries are entitled to request advance redemption of said securities, without penalties or loss of profitability. The Parent company s financial investments refer substantially to bank deposit certificates and debentures, remunerated at rates that range between 93.00% and % of the Interbank Deposit Certificate (CDI) rate. The average rate of the Grupo EDP - Energias do Brasil s application ranges from 90.00% to %. The calculation of the fair value of financial investments, when applicable, is based on the market quotations for the instrument, or market information that permits this calculation, taking into consideration the projected future rates of similar instruments. The Grupo EDP - Energias do Brasil s exposure to interest rate risks and a sensitivity analysis of financial assets and liabilities are disclosed in note

28 6 Consumers and concessionaires Overdue for Allowance for Overdue up to more than 90 doubtful Net balance on Netbalance on Note Balances due 90 days days Total accounts 12/31/ /31/2012 Current Consumers 0,00 0,00 0,00 0,00 0,00 0,00 0,00 Billed supply 0,00 0,00 0,00 0,00 0,00 0,00 0,00 Residential (22.558) Industrial (37.073) Commerce, services and other (10.075) Rural (438) Government 0,00 0,00 0,00 0,00 0,00 0,00 0,00 Federal (38) State (353) Municipal (206) Public lighting (232) Public service (471) Free customers , Unbilled supply ,00 0, , Debt paid in installments (76.026) (+) Adjustment to present value (1.506) 0,00 0,00 (1.506) 0,00 (1.506) (1.458) Other credits , , ( ) Concessionaires 0,00 0,00 0,00 0,00 0,00 0,00 0,00 Electricity supply (518) Short-term energy ,00 0, , Electricity network utilization charges ,00 0, , Others ,00 0, , (518) Total current ( ) Non-current assets 0,00 0,00 0,00 0,00 0,00 0,00 0,00 Consumers 0,00 0,00 0,00 0,00 0,00 0,00 0,00 Billed supply 0,00 0,00 0,00 0,00 0,00 0,00 0,00 Industrial ,00 0, (3.227) Commerce, services and other 18 0,00 0, , ,00 Debt paid in installments ,00 0, (645) (-) Adjustment to present value 6.3 (14.493) 0,00 0,00 (14.493) 0,00 (14.493) (13.507) (3.872) Concessionaires 0,00 0,00 0,00 0,00 0,00 0,00 0,00 Short-term energy 836 0, (4.281) 0,00 0,00 Others ,00 0, (119) (4.400) Total non-current (8.272) Concessionaires Electricity supply Out of the amount shown in the heading Electricity supply we emphasize that EDP Comercializadora carried out sales transactions for the supply of electrical power with jointly-owned Enterprise Porto do Pecém. On December 31, 2013, the result of these operations amounted to R$110, Short-term energy Of the balance of R$21,198 as of December 31, 2013, R$9,738 refers to EDP Comercializadora regarding transactions of sale of energy, realized in the in the sphere of CCEE. As of December 31, 2012, the balance of R$75,980 recorded in this line item has the same nature, but refers mostly to the subsidiaries EDP Bandeirante and EDP Escelsa. 6.3 Adjustment to present value The adjustment to present value, in line with CPC 12, was calculated based on the average remuneration of the investment rate, applied by ANEEL in the tariff reviews of the distributors. This rate is compatible with the nature, term and risks of similar transactions at market conditions. As of December 31, 2013, this rate corresponded to % per year. (15.07% per annum at EDP Escelsa and 11.36% per annum at EDP Bandeirante on December 31, 2012), affecting the result of distributors for the period positively by R$1,033 (negatively by R$4,156 on December 31, 2012). 6.4 Provision for allowance for doubtful accounts As described in note 2.2 item b, subsidiaries EDP Bandeirante and EDP Escelsa, based on Accounting Instruction of the Electricity Sector Accounting Manual, established a provision for doubtful accounts: i) Residential: overdue for more than 90 days; ii) Commercial: overdue for more than 180 days; and iii) Other classes: overdue for more than 360 days. For installment payment of debits, the subsidiaries adopt the following criteria: i) Low voltage costumers: installment past due for over 90 days, a provision is made at the full balance of the installments; ii) Medium and high voltage customers: installment past due for over 60 days, a provision is made at the full balance of the installments; and iii) Government: installment past due for over 60 days, a provision is made at the full balance of the installments, deducting the amounts covered through submission of the funds citation. Furthermore, there is a careful analysis of the balance of Consumers and concessionaires, and the amount formed is considered sufficient to cover possible losses in the realization of these assets. The Company's exposure to credit risks is disclosed in Note

29 7 Accounts receivable Parent company Current assets Non-current Current assets Non-current 12/31/ /31/ /31/ /31/ /31/ /31/ /31/ /31/2012 Assignment of Credit - Tangará Energia S.A Assignment of Credit - Rede Energia S.A Redeemable preferred shares of classes "A", "B" and "C" Others 27 Total Parent company The amount of R$24,476 (R$24,004 on December 31, 2012) refers to the principal of redeemable preferred shares of classes "A", "B" and "C" issued by the subsidiary Investco. Additionally, according to Article 8 of this subsidiary's by-laws, shareholders are entitled to the right of receiving a cumulative fixed annual dividend of 3% on their respective interest in the capital. Due to that feature, the shares were classified as a financial instrument in the category of loan and receivables as they meet the definition of financial assets, since the subsidiary does not have the right to avoid the remittance of cash or other financial assets to another entity, as established in paragraph 19 of CPC 39. The estimate of fair value considered the conditions above for the payment of dividends. Annual dividend payment was considered until 2032 (end of the concession) and discounted to present value at the rate of 8.70% p.a. Assignment of Credit - Tangará Energia S.A.: refers to the renegotiating balance of the Credit Assignment contract made by and between the subsidiary Lajeado Energia S.A. and Tangará Energia S.A., on August 31, 2004, approved by ANEEL through Directive Releases no. 467/00-SFF/ANEEL and 1706/04-SFF/ANEEL, with the following conditions: original amount of the agreement of R$18,199; payment term of 120 months; grace period of 18 months; remuneration of 100% of CDI; and payment ending by February 29, A promissory note was provided as a guarantee in the amount of the debit balance. Assignment of Credit - Rede Energia S.A.: refers to the balance of the consolidation and renegotiation of the Credit Assignment contract made by and between the subsidiary Lajeado and Rede Energia S.A. on December 31, 2006, approved by ANEEL through Order no. 181-SFF/ANEEL of January 29, 2007, with the following conditions: original amount of the agreement of R$23,532; payment term of 86 months; grace period of 24 months; remuneration of 100% of CDI plus 2% p.a.; and payment ending by February 29, A promissory note was provided as guarantee by Tangará in the amount of the debit balance. 8 Tax and social contribution Balance as at 12/31/2012 Addition Monetary restatement Parent company Federal tax Payments offsetting Reclassification Transfer Balance as at 12/31/2013 Assets - to offset Reclassified Income and social contribution taxes (36.955) PIS and COFINS (602) 234 Withholding tax on financial investments Income tax withheld in interest on equity (1.201) Others (29) 135 Total (36.955) Current Total Payable - Liabilities Income and social contribution taxes ICMS PIS and COFINS ISS PIS, COFINS and Social Contribution - On services rendered by third-parties (1.995) (335) (18.956) - (602) (200) (1.782) Income tax withheld at source on third party services Income tax withheld in interest on equity Tax installment payment - Law 11941/09 REFIS - conversion to income (911) (17.664) (5.833) (10.725) Others Total (21.446) (36.955) Current Non-current assets Total

30 Assets - to offset Balance as at 12/31/2012 Addition Write-offs Reclassified Monetary restatement Advances / Payments Federal tax offsetting Reclassification Transfer Transferred to assets held for sale Balance as at 12/31/2013 Income and social contribution taxes (76.416) (199) ( ) (242) ICMS (10) - (36.224) PIS and COFINS (5) - ( ) (43.887) PIS AND COFINS - COSIT (9.077) Withholding tax on financial investments (46) (8.464) (1.488) Income tax withheld in interest on equity (1.201) ISS (1.484) Others (5) - 10 (12.591) (130) (3.210) Total (5) (99.629) - ( ) (45.617) Current Non-current assets Total Payable - Liabilities Income and social contribution taxes (47.449) (567) - ( ) ICMS on rate differential (11.692) (1.079) 171 ICMS ( ) (10) - (36.224) PIS and COFINS ( ) (54.115) - ( ) ISS (17.330) (1.484) (9) - (1.817) PIS, COFINS and Social Contribution - On services rendered by third-parties (20.493) (34) Income tax withheld at source on third party services (6.790) (55) 919 Income tax withheld in interest on equity (36.745) (30.861) Tax installment payment - Law 11941/ (39.027) REFIS - conversion to income Others (2) 76 (90.942) (12.592) (198) - (423) Total (2) ( ) (99.629) - ( ) (3.408) Current Non-current assets Total Income and social contribution taxes - Parent company The recorded amounts refer mostly to tax withholdings at source and respective restatements based on the Selic (Central Bank) rate, for prior periods. That balance is mostly offset with withholding income tax on declared interest on capital. 8.2 PIS and COFINS As a result of the terms of Article 32 of Provisional Measure no. 66/02, converted into Law no /02 and of Normative Instruction 199/02, the subsidiaries EDP Escelsa and EDP Comercializadora, as an agent member of the CCEE, exercised the option for the special taxation regime of PIS and COFINS on income earned in operations carried out within the sphere of that Institution. The main effects refer to the calculation basis levied on the net positive results and on the continuity of the application of the rate of 0.65% and 3% for PIS and COFINS, respectively. 8.3 ICMS - Assets to offset - The subsidiaries EDP Bandeirante and EDP Escelsa present balance of R$69,560, which include: (i) ICMS credits arising from the acquisition of assets in the amount of R$57,314, which, pursuant to paragraph 5 of section 20 of Supplementary Law no. 87/96 are offset at the rate of 1/48 per month; and (ii) R$12,246 referring to the purchase of ICMS credits from third parties to be offset against ICMS due on power sales. This transaction is allowed by the State of São Paulo ICMS Regulation, Decree no /00, in article 73, item II, sub-item a. The balance payable to the credit provider in the amount of R$4,602 on December 31, 2013 (R$22,042 on December 31, 2012) is shown in Note ICMS - Liabilities payable - Subsidiaries EDP Bandeirante and EDP Escelsa presented a balance of R$119,945, referring to state VAT on distribution companies electricity invoices. 8.5 Tax installment payment - Law no /09, REFIS - conversion to income and PAEX In 2009, the Company and its subsidiaries formally joined the program for the reduction and installment payment of taxes according to Law no. 11,941/09 of the Federal Revenue Service - "REFIS IV". As at June 30, 2011, the Company, as well as its subsidiaries EDP Bandeirante, EDP Escelsa, Energest and EDP Comercializadora realized the consolidation of the debts included in the installment plan. 29

31 Tax installment payment - Laws no /09 and 12865/13 Parent company Out of the total amount of the debt of R$46,396 as of December 31, 2013, R$41,537 was split into 180 installments, of which 130 installments of R$322 remain to be paid, to be monthly restated by the SELIC rate, and for the remaining amount of R$4,859 there are judicial deposits in the same amount, which expect appropriation by the Federal government (in accordance with article 32 of PGFN/RFB administrative ruling no. 06/09), and when that is done this liability will be written off. On October 10, 2013 Law no was published, reopening the term of payment in installments implemented by Law no /09 for debits that had not been included in the program in The term for new inclusion was extended up to December 31, 2013 and the Company formalized in December 2013 with the Federal Revenue Service of Brazil - RFB the inclusion of IRPJ and CSLL debits into the new program in the amount of R$8,673. The effect of adhesion to the program was a reduction of R$4,672 (R$1,642 of interest and R$3,030 of fines and charges) of the IRPJ and CSLL contingency recorded in liabilities. Of the remaining balance in the amount of R$4,001, the Company used tax losses and social contribution tax loss carryforwards in the amount of R$2,006 to offset interest and fine, conversion of judicial deposits in the amount of R$1,898 and the remaining debit was settled through cash payment in the amount of R$97. In September 2006, the subsidiary Lajeado adhered to the Exceptional Payment in Installments PAEX, implemented by the Provisional Measure no. 303/06, which addresses the payment in installments of debits of legal entities before the Federal Revenue Secretariat SRF, the Office of Attorney-General of the National Treasury PGFN and the National Institute of Social Security - INSS, of IRPJ, CSLL, COFINS, PIS, CPMF, INSS debits and fine. In 2009, PAEX formally joined the program for the reduction and installment payment of taxes according to Law no. 11,941/09 - "REFIS IV". As at June 30, 2011, the subsidiary consolidated the debts included in the installment plan. Out of the consolidated total amount of the debt of R$116,440 as of December 31, 2013, which includes the Company and subsidiaries Lajeado, Investco, EDP Bandeirante, EDP Escelsa and Energest, R$71,948 was split into installments and will be monthly restated by the SELIC rate and for the remaining R$44,492 there are judicial deposits in the amount of R$83,460, which await appropriation by the Federal Government (in accordance with article 32 of PGFN/RFB administrative ruling No. 06/09), and when that is done, this liability will be written off. On October 10, 2013 Law no was published, reopening the term of payment in installments implemented by Law no /09 for debits that had not been included in the program in The term for new inclusion was extended up to December 31, 2013 and the Company and its subsidiaries EDP Escelsa, Investco, Lajeado, EDP GRID and Energest formalized in December with the RFB the inclusion of federal debits into the new program in the amount of R$11,674. The effect of the adhesion to the program was a reduction of R$6,870 (R$2,365 of interest and R$4,505 of fines and charges) of the contingency recorded in liabilities. Of the remaining balance in the amount of R$6,350, the Company used tax losses and social contribution tax loss carryforwards in the amount of R$2,535 to offset interest and fine, conversion of judicial deposits in the amount of R$3,439 and the remaining debit was settled through cash payment in the amount of R$1, Deferred income and social contribution taxes 9.1 Parent company Parent company Non-current liabilities 12/31/2013 Result 12/31/ /31/2013 Nature of credits IRPJ CSLL Total Total Total Tax losses 0,00 0, Negative social contribution basis 0,00 0, Temporary differences 0,00 0,00 0,00 0,00 0,00 MTM Rede shares Total temporary differences Income from deferred income tax and social contribution The change in the deferred income and social contribution taxes in the Parent company was recorded as an offset to the credit for the year in the amount of R$2,006 to the credit in Shareholders' Equity in the amount of R$

32 9.2 The tax credits detailed below, calculated on tax losses carried forward, the negative social contribution basis and other amounts constituting temporary differences used for reducing the future tax burden, were recognized based on historical taxable profits and on budgets for generating taxable profits for the next years at the subsidiaries Energest, Lajeado, Porto do Pecém, Enerpeixe, EDP Bandeirante, EDP Escelsa, EDP Comercializadora within a maximum period of 10 years. 12/31/ /31/ /31/ /31/ Nature of credits IRPJ CSLL Total Total IRPJ CSLL Total Total IRPJ/CSLL IRPJ/CSLL Reclassified Reclassified Reclassified Tax losses , ,00 0, (10.343) (7.134) Negative social contribution basis 0, ,00 0, (3.723) (2.568) Temporary differences Provision for allowance for doubtful accounts (14.066) (9.702) (4) (1) (5) (12) (14.804) Post-employment benefits (181) (65) (246) (332) Provision for tax, civil and labor risks Non-current assets Non-current liabilities Result (1.091) (393) (1.484) (855) (1.005) (551) Provision for swap results (5.742) (2.068) (7.810) (3.732) 0,00 0, (4.078) (4.566) Provision for inventory losses ,00 0, (195) 559 MTM Rede shares 0,00 0,00 0, ,00 0,00 Total temporary differences (253) (90) (343) (17.517) Post-employment benefits - PSAP ,00 0,00-0,00 (321) (3.844) Goodwill incorporated ,00 0,00-0,00 (16.296) (16.590) 0,00 0,00 0,00 0,00 0,00 0,00-0,00 0,00 0,00 Temporary differences - RTT 0,00 0,00 0,00 0,00 0,00 0, ,00 0,00 Consumers - adjustment to present value ,00 0, Pre-operating expenses 0,00 0,00 0,00-0,00 0, ,00 Financial charges - Recouponing 0,00 0,00 0,00-0,00 0, ,00 (144) Loans and financing in foreign currency - MTM (94) 0,00 0, (181) Construction in service - Intangible assets 0,00 0,00 0,00-0,00 0, (5.814) Goodwill - CPC 15 (R1) 0,00 0,00 0, ,00 0,00 Goodwill amortization/depreciation - CPC 15 (R1) 0,00 0,00 0,00 - (29.684) (10.686) (40.370) (34.952) Environmental permits - CPC 25 (134) (49) (183) (294) (2.214) (97) Use of public property - CPC (8.152) (2.935) (11.087) (10.387) Fair value of indemnifiable financial assets - ICPC 01 (R1) (29.158) (10.495) (39.653) (34.829) 0,00 0, (4.824) (34.829) Financial instruments - CPC (22.190) Employee benefits - CPC 33 (R1) ,00 0, ,00 19 Total temporary differences - RTT (49.515) Total deferred assets / liabilities Income from deferred income tax and social contribution (5.526) (97.168) The change in the deferred Income and Social Contribution tax assets and liabilities for the year was recorded as an offset to the credit for the year in the amount of R$5,526 to the debit in Shareholders' Equity in the amount of R$41,133 and debt liabilities in the amount of R$2,541. The amount of R$200,349 refers to the reclassification to Assets available for Sale of balances related to Cachoeira Caldeirão, ECE Participações and CEJA Provision for pension deficit - PSAP The taxable credit arising from the Provision for the Pension Plan Deficit - PSAP of Bandeirante refers to the portion of liabilities related to the benefits exceeding he assets of the Defined benefit pension plans within the Bandeirante subsidiary, the provision for which was effected on December 31, 2001 with a counter entry in Shareholders Equity, deductible on the occasion of the monthly payments, expected to be terminated in Goodwill incorporated The goodwill fiscal credit derives from: a) in the subsidiary EDP Bandeirante, of the amalgamation occurred in year 2002; the incorporation of the spin off portion of the former parent company Enerpaulo - Energia Paulista Ltda., represented by the goodwill paid by Enerpaulo on the acquisition of shares issued by EDP Bandeirante; b) in the subsidiary EDP Escelsa, of the amalgamation occurred in April 2005; the spin-off portion of the Parent company, represented by the merged companies EDP 2000 Participações Ltda. and EDP Investimentos Ltda. on the acquisition of shares issued by IVEN, the controlling company of EDP Escelsa at that time; and c) the incorporation of the subsidiaries EDP Lajeado and Tocantins within the subsidiary Lajeado, dated November 2009, represented by the goodwill paid by the Subsidiary. The amounts were accounted for in accordance with CVM Instructions no. 319/99 and 349/99, and in accordance with ANEEL s instructions, and used according to the curve between the expectations of future results and the terms of the subsidiaries concession. This translates into a future average annual tax credit realization of R$6,003 for the subsidiary Bandeirante up to 2027, R$1,955 for the subsidiary EDP Escelsa up to 2025, and R$5,030 for the subsidiary Lajeado up to Provision for payment of preferred shares (Financial instruments - CPC 39) In December 2012, the subsidiary Investco reassessed the calculation of deferred income tax and social contribution on gains from the adoption of the CPCs associated with the classification of preferred shares (Class PNA, PNB, and PNC) as financial instruments, in accordance with CPC 39, in such a way as to adapt to the expectations of future realization Tax losses Under the tax legislation in force, the tax loss and the negative basis of social contribution can be offset with future income, up to the limit of 30% of the taxable income, and are not subject to a statutory limitation period. 31

33 9.2.5 Future taxable income The forecast future taxable income indicates that the subsidiaries EDP Bandeirante, EDP Escelsa and Lajeado have a calculation basis sufficient to recover the full balance of tax credits. The credit related to goodwill, mentioned in Note 9.2.2, will be realized financially up to 2032, according to the amortization standards of the amounts related to them. The Management of the Company and its subsidiaries prepared a projection of future taxable income on December 31, 2013, also considering its discounting to present value, demonstrating the capacity to realize these tax credits in the periods indicated and, for the subsidiaries EDP Bandeirante, EDP Escelsa, Investco and Enerpeixe, as required by CVM Instruction no. 371/02, the aforesaid studies were approved by the respective Boards of Directors on February 17, These estimates are reviewed quarterly so that potential changes in the recovery prospects for these credits can be considered in the interim accounting information. Consequently, the estimates may not be realized in the future, in view of the uncertainties inherent in these forecasts. Based on the study, the subsidiaries expect to recover the deferred tax credits over the following years: Non-current The values contained in the interval from 2022 and 2023 refer to temporary differences that will be realized before the end of the concession. 10 Related parties The balances of assets and liabilities, as well as the transactions of the Company and its subsidiaries with its parent company, key management and other related parties, which influenced the result of the period, in connection with related-party transactions presented as follows: Parent company Agreements purpose Counterpart Revenue (expenses) for the Assets Liabilities year ended December 31 Transaction date Validity period 12/31/ /31/ /31/ /31/ Related parties Sharing of expenses with corporate managers, approved by ANEEL. Bandeirante through Order 205/13 Sharing of expenses with property rentals, condominium expenses, telecommunications expenses, approved by ANEEL through Order 2807/13 EDP Bandeirante Up to the publication of a new 07/01/ ,00 0, ANEEL Resolution Up to the publication of a new Energest 07/01/ ,00 0, ANEEL Resolution Up to the publication of a new 07/01/ ,00 0, ANEEL Resolution Up to the publication of a new Pantanal 07/01/ ,00 0, ANEEL Resolution Up to the publication of a new Investco 07/01/ ,00 0, ANEEL Resolution Up to the publication of a new Lajeado 07/01/ ,00 0, ANEEL Resolution Up to the publication of a new Santa Fé 07/01/ ,00 0, ANEEL Resolution Up to the publication of a new EDP Escelsa 07/01/ , ANEEL Resolution EDP Bandeirante 01/01/ /01/ /31/ ,00 0, Energest 01/01/ /01/ /31/ ,00 0, EDP Comercializadora EDP Comercializadora 01/01/ /01/ /31/ ,00 0, Enercouto 01/01/ /01/ /31/ ,00 0, ECE Participações 01/01/ /01/ /31/ ,00 0, Instituto EDP 01/01/ /01/ /31/ ,00 0, Pantanal 01/01/ /01/ /31/ ,00 0, Investco 01/01/ /01/ /31/ ,00 0, Lajeado 01/01/ /01/ /31/ ,00 0, CEJA 01/01/ /01/ /31/ ,00 0, Evrecy 01/01/ /01/ /31/2014 0,00 0,00 0,00 0,00 0,00 21 Cachoeira Caldeirão Up to the publication of a new 07/01/ ,00 0,00 0, ,00 ANEEL Resolution EDP Escelsa 01/01/ /01/ /31/ Reimbursement related to the EDP Partners event EDP Portugal 12/19/2013 0, ,00 0,00 0, ,00 32

34 Loan agreement - 100% of CDI Energest 07/19/ /19/ /18/2013 0,00 0,00 0,00 0,00 0, Energest 05/15/ /15/ /21/2013 0,00 0,00 0,00 0,00 0,00 0,00 Energest 11/08/ /08/ /17/ ,00 0,00 0, ,00 EDP Comercializadora 11/09/ /09/ /06/ ,00 0,00 0, ,00 EDP GRID 06/27/ /27/ /29/2014 0, ,00 0, Investco 12/10/ /10/ /08/2012 0,00 0,00 0,00 0,00 0, EDP Bandeirante 01/24/ /24/ /31/2013 0,00 0,00 0,00 0, ,00 Loan agreement - 102% of CDI. Terra Verde 01/01/2010 Undetermined 0, ,00 0, Loan agreement - 110% of CDI. Pecém OM 12/05/ /05/ /31/ ,00 0, Loan agreement - 105% of CDI. Porto do Pecém 09/24/ /24/ /09/ ,00 0, MABE 10/04/ /04/ /31/ ,00 0,00 0, ,00 Agreement of consulting services. Cenaeel 12/01/ /01/ /30/ ,00 0, Elebrás 12/01/ /01/ /30/ ,00 0, EDP Renováveis 12/01/ /01/ /30/ ,00 0, Agreement of pass-through of EDP Guarantee on loan Renováveis 0,00 0, ,00 0,00 0, (Spain) Selling of assets Terra Verde 01/15/ /15/ /15/2014 0, ,00 0,00 0,00 0,00 Total related parties Current Non-current assets Advances on future capital increase AFAC AFAC Resende 07/02/2013 Undetermined ,00 0,00 0,00 0,00 0,00 Terra Verde 12/31/2008 Undetermined ,00 0,00 0,00 0,00 CEJA 06/01/2012 Undetermined 0, ,00 0,00 0,00 0,00 EDP GRID 12/30/2013 Undetermined ,00 0,00 0,00 0,00 0,00 Total

35 Agreements purpose Counterpart Revenue (expenses) for the Assets Liabilities year ended December 31 Transaction date Validity period 12/31/ /31/ /31/ /31/ Other credits Reimbursement due to Porto do shortfall of generation Pecém 12/31/2012 Undetermined ,00 0, Concessionaires Related parties Porto do Pecém Porto do Pecém 12/31/2012 Undetermined ,00 0, /01/ /01/ /31/ ,00 0,00 0, , Agreement of consulting services EDP Renováveis 12/01/ /01/ /30/ ,00 0, Cenaeel 12/01/ /01/ /30/ ,00 0, Elebrás 12/01/ /01/ /30/ ,00 0, Debt confession record between Instituto EDP and the EDP Bandeirante, approved by ANEEL through Order 3821/11. Instituto EDP 10/01/ /30/ ,00 0, Sharing of expenses with property rentals, condominium expenses, telecommunications expenses, approved by ANEEL through Order 2807/13 Instituto EDP 01/01/ /01/ /31/ ,00 0, Cachoeira Caldeirão ECE Participações Up to the publication of a new 07/01/ ,00 0,00 0, ,00 ANEEL Resolution 01/01/ /01/ /31/ ,00 0,00 0, ,00 CEJA 01/01/ /01/ /31/ ,00 0,00 0, ,00 EDP Renováveis 01/01/ /01/ /31/ ,00 0,00 6 0,00 Reimbursement related to the EDP Partners event EDP Portugal 12/19/2013 0, ,00 0,00 0, ,00 Agreement of pass-through of Guarantee on loan EDP Renováveis (Spain) 0, ,00 0,00 0, Porto do Loan agreement - 105% of CDI. 09/24/2012 9/24/ /09/ ,00 0, Pecém Loan agreement - 110% of CDI. Pecém OM 12/05/ /05/ /31/ ,00 0, Loan agreement - 105% of CDI. MABE 10/04/ /04/ /31/ ,00 0,00 0, ,00 Total related parties Current Non-current assets The Agreement for Sharing between related parties is divided into two types: Agreement for the Sharing of Activities and the Allocation of Expenditure and Infrastructure Sharing Agreement: a) Agreement for the Sharing of Activities and the Allocation of Expenditure: From January 1, 2011, EDP - Energias do Brasil is responsible for contracting Agreements for the Sharing of Activities and the Allocation of Expenditure which include the corporate areas activities. The distribution of expenses salaries and payroll taxes of EDP - Energias do Brasil's corporate managers and employees who create policies and guidelines to be followed by the economic group's companies and the appropriation is made based on the activities carried out for each party through the timesheet. The request for approval of the 3rd Addendum to the Agreements for Activity Sharing and Expenditure Allocation after December 7, 2011 was not consented by ANEEL, as communicated in the Order no. 174, on January 18, On May 22, 2012, Regulatory Resolution ANEEL no. 489 altered Regulatory Resolution no. 334/08, allowing, through analysis by ANEEL, the extension of the consent already granted to human resource sharing agreements resulting from the segregation of activities established by Law no /04, until the new Regulatory Resolution that will govern hiring between related parties in the electricity industry, has taken effect. On June 28, 2012, through Order no. 2149, ANEEL approved the drafts of the 2nd and 3rd Addenda to the Agreement for the Sharing of Activities and the Allocation of Expenditure, entered into between the Company and its subsidiaries for the sharing of corporate managers, as requested in document no / , effective through the date established by the new sole paragraph of Article 27 of Regulatory Resolution no. 334/08, amended by Regulatory Resolution no. 489/12. ANEEL pronounced, through Circular Letter no. 883, dated September 11, 2012, that the concessionaires, licensees and authorized parties interested in the extension of the period of consent granted by ANEEL, must imperatively file an expression of interest by October 11, On October 10, 2012, the Company requested the adjustment of the Agreement for Sharing of Activities and Allocation of Expenditure, so that the agreement only takes effect on July 01, 2012 and for the period from January 01, 2012 to June 30, 2013 is fully assumed by the Company, effective through the date established by the new sole paragraph of article 27, Regulatory Resolution no. 334/08, amended by Regulatory Resolution no. 489/12, which were approved through ANEEL Order 205, January 25, Currently, ANEEL is analyzing the sharing of human resources in the Public Consultation 12/2013, whose period of contributions ended on December 31, At the time of disclosure of the result, companies will have a period in which to submit a new request of sharing for approval and the agreement in force will be postponed up to approval by ANEEL. 34

36 10.1 b) Agreements of Sharing of Infrastructure Services: On April 14, 2011, ANEEL through Order no approved the Agreements of Sharing of Infrastructure Services whose purpose is the distribution of costs related to renting of properties, condominium and telecommunications expenses between the following companies: (i) Head office in São Paulo - SP having as Contractor EDP - Energias do Brasil and as Contracting Parties EDP Escelsa, EDP Bandeirante and Energest; (ii) Operational Center in Serra ES having as Contractor EDP Escelsa and as Contracting Parties Energest, Enerprev, Santa Fé, EDP GRID and EDP Renováveis; (iii) Office in Campo Grande MS having as Contractor Energest and as Contracting Party Pantanal. These agreements are valid for 48 months as of January 1, The changes in the apportionment rates should be submitted every year to previous approval by ANEEL, and accordingly, Order no , of May 17, 2012, approved the first Amendment to the Agreements of the Head Office in São Paulo. In June 2013, due to the address change of the head office of Grupo EDP in São Paulo, amendments were made to the Infrastructure Service Sharing Agreements. Up to the publishing of these amendments, on August 7, 2013, through Order no. 2807/13, the costs incurred in the months of June and July 2013 were fully born by EDP Energias do Brasil and then repassed to the Contracting parties in September With the sale of part of the land of the Operational Center of EDP Escelsa, in June 2013, the first Amendments to the Private Instrument of Sharing of Infrastructure Services were signed between the companies sharing costs in the state of Espírito Santo (EDP Escelsa, Energest, Santa Fé, EDP Renováveis, EDP GRID and Enerprev). On November 20, 2013, through Order no , ANEEL approved the documents, observing the maintenance of the requirements and conditions contained in Order no /11. The apportionment of costs was suspended in the period from July to November 2013, which were fully repassed to the Contracting parties in December Transactions made with related parties that are reported as shared expenses and infrastructure with related parties were carried out in the normal course of business, without any incremental profit margin. The co-signatures provided by the shareholder are described in the Note on Guarantees (Note 39.2) Direct parent company The direct parent company of the Company is EDP Energias de Portugal S.A Relationship of the Company with each party EDP The counterparties Bandeirante, Cachoeira Caldeirão, Energest, EDP Comercializadora, Lajeado, EDP Escelsa, Terra Verde, EDP GRID, Enercouto, Resende and CEJA are direct subsidiaries of the Company. The counterparties Pantanal, Investco, Costa Rica, Santa Fé and ECE Participações are the Company's indirect subsidiaries. The counterparties EDP Renováveis, Cenaeel, Elebrás, Instituto EDP and EDP Renováveis (Spain) are associated companies. The counterparties Pecém TM, Pecém OM, Porto do Pecém and MABE are joint ventures Management remuneration Compensation policy or practice for the Board of Directors, Executive Board and Fiscal Council. Proportion of each item of total compensation, related to the period ended December 31, 2013: Board of Directors Fixed Compensation: 100% Board of Officers Fixed compensation: 75% Variable compensation: 25% Fiscal Council Fixed Compensation: 100% Total compensation of the Board of Directors, Board of Officers and Fiscal Council payable by the Company referring to the period ended December 31, 2013 (in R$) Parent company Board of 2013 Directors Statutory Board Fiscal Council Total Number of members 4 (*) 5 (**) 3 (***) 12 Fixed Compensation (in R$): Salary or direct compensation Direct and indirect benefits (i) n/a n/a Compensation for participation in committees n/a n/a Social Charges Variable Compensation (in R$): n/a n/a Bonus n/a n/a Social Charges n/a n/a Total amount of the remuneration (n/a) = Not applicable (*) Out of the eleven positions of the Board of Directors (8 full members and 3 vacants), only four receive compensation. The annual and overall remuneration of the members of the Board of Directors is up to R$860,000 for the period from April 2013 to March 2014, as approved in the Ordinary General Meeting on April 10, (**) Of the six positions of the Statutory Board, five receive compensation, and out of five members, one perform two functions (Officer, Vice-President of Finance and Investor Relations and Director Vice-President of Management Control). The annual and overall remuneration of the Board of Officers is up to R$5,600,000 for the period from April 2013 to March 2014, as approved in the Ordinary General Meeting on April 10, (***) Out of the three positions of the Fiscal Council, all receive compensation. The annual and overall remuneration of the members of the Board of Directors was up to R$42,409 for the period from April 2012 to March 2013, as approved in the Ordinary General Meeting on April 10, The Fiscal Council was not set up for the period from April 2013 to March 2014 due to the lack of minimum 2% voting quorum established by the Securities Commission (CVM) Instruction No. 324/00 as approved in the Annual Shareholders Meeting held on April 10, (i) The Health Insurance, Dental Care and Social Security and Meal voucher plans were calculated as benefits. 35

37 Maximum, minimum and average individual remuneration of members of the Board of Directors, Board of Officers and Fiscal Council at the year ended December 31, 2013 (in R$) 2013 Board of Directors Statutory Board Fiscal Council Number of members Amount of the highest individual remuneration Amount of the lowest individual remuneration Average amount of individual remuneration Inventory 12/31/ /31/2012 Stockroom material Wastes and scrap Total Pledges and restricted deposits Parent company Current assets Non-current Current assets Non-current Note 12/31/ /31/ /31/ /31/ /31/ /31/ /31/ /31/2012 Judicial deposits Pledges and restricted deposits Total Non-current assets and liabilities held for sale Parent company In 2013, the subsidiaries EDP Bandeirante and EDP Escelsa prepared a study of the stocks of measurement equipment that had been removed from the consumer units in the period from 2009 to 2012, due to operational issues. The study showed that the equipment was not in operating conditions to be reapplied to new consumer units, and therefore the subsidiaries decided to sell this equipment. Additionally, the subsidiaries revised their stock policy, due to a better performance of their suppliers (punctuality) and better planning of the market demands, which permitted them to improve the use of the existing stocks and reduce the volumes of purchases, maximizing the stock turnover. The balance of the pledges and restricted deposits account presented in current and non-current of the consolidated refers basically to a portion of short-term investments of the subsidiary Enerpeixe in the amount of R$38,656 (R$53,758 on December 31, 2012), maintained in a reserve account in compliance with the financing agreements entered into on May 21, 2004 with BNDES and a bank consortium, recognized as part of the agreements' guarantees and the short-term power transactions in CCEE. Refers to the sale of 50% of interest held by the Company in CEJA and Cachoeira Caldeirão to CWEI Brasil. For further details, see note 4.9. Because it refer to assets for which the sale of control is highly probable, all assets and liabilities were classified in a separate line of the statement of financial position. Because it does not qualify as discontinued operation, no change was made in the disclosure of the statement of income. Cachoeira Caldeirão 12/31/2013 CEJA () Total Current assets Cash and cash equivalents Tax and social contribution Prepaid expenses Other credits Non-current liabilities Tax and social contribution Deferred income tax and social contribution Pledges and restricted deposits Prepaid expenses Property, plant and equipment Intangible assets Assets subtotal Transaction cost Total non-current assets held for sale

38 Cachoeira Caldeirão 12/31/2013 CEJA () Total Current assets Suppliers Tax and social contribution Debentures Loans, financing and debt charges Estimated employee liabilities and social charges Provisions Other accounts payable Non-current Deferred income tax and social contribution Debentures Loans and financing Related parties Use of public property Provisions Other accounts payable Total non-current liabilities held for sale Net balance (1.414) Transaction cost Total non-current assets held for sale (Parent company) Information on the Statement of cash flows Cachoeira Caldeirão 12/31/2013 CEJA () Net cash (invested in) from operating activities (2.817) Net cash invested in investment activities ( ) ( ) ( ) Net cash from financing activities Net increase in cash and cash equivalents Total 14 Financial assets available for sale Refers to the acquisition of 5.63% of preferred shares, corresponding to 3.16% of all the shares of Denerge S.A., a closely held company that holds interests in companies in the electricity industry. In this negotiation, the Company had the option to convert Denerge shares into Rede Energia S.A. preferred shares, within a period of up to two years from September 11, 2008, at the price of a possible public offer. After this period, if the public offering does not take place, the Company should exercise the option to convert the shares within one year at the fixed price of R$5.68 per share. On September 15, 2011, the option for converting was exercised, resulting in the transfer of Denerge shares held by the company into shares of Rede Energia S.A., with recognition of a mark-to-market loss against income for that year, amounting to R$12,808, with a counter entry in Other comprehensive income. As at December 31, 2013, the change in the balance is of R$1,519, written-off against other comprehensive income, and R$7,261, recognized in income (loss) for the year. 37

39 15 Other credits - Assets and Other accounts payable Liabilities Parent company Current assets Non-current Current assets Non-current Note 12/31/ /31/ /31/ /31/ /31/ /31/ /31/ /31/2012 Other credits - Assets Advances to employees Advances to suppliers Credits receivable - customers Low income subsidy Tariff modicity - low income Expenditure to be refunded Energy Efficiency Program Post-employment benefits Assets for sale Deactivations in progress Services in progress Services rendered to third parties Deactivations and disposals in service Infrastructure sharing Derivative financial instruments Other tariff grants Reimbursement CDE Collection agreements Others Total Other - Liabilities Advances received - disposal of assets and rights Public lighting contribution Sundry creditors - consumers Payroll Tariff modicity - low income ICMS credit assignments Interest on compulsory loan Third party collection to be transferred Amounts payable - Cable TV and Telephony Others Total Tariff modicity- low income In compliance with the Notification Term no /05, whereby the Regulatory Agency of Sanitation and Energy of the State of São Paulo - ARSESP determined the correction of criteria of registry of the measurement equipment installed in residential consumer units, changing from biphasic to monophasic with retroactive effect to year 2002, EDP Bandeirante, in the year 2010, revised the billings of Low-income residential consumers, involving the refund of values. EDP Bandeirante recorded, in 2008, the amount of R$47,640 related to amounts to be returned to consumers, as they had been originally billed at the undiscounted tariff. In 2010 the classification basis was adjusted and consequently the initial position changed to R$29,698. The refund to the consumers began to be made after the billing of March 2009 and, as adjusted with ANEEL/ARSESP, as EDP Bandeirante confirms the refund, it has the right to be repaid as an economic subsidy, as established in the regulation in force Up to December 31, 2013 EDP Bandeirante had already refunded the amount of R$19,035. In December 2013, ARSESP concluded the inspection at EDP Bandeirante, validating the shipment of the partial amount net of the respective taxes of R$10,371 to ANEEL, aiming at the homologation and receipt of the grant. Customers have not yet been refunded the amount of R$10,663 of active and inactive consumer units. As EDP Bandeirante confirms the refund and ARSESP validates the amounts, new homologations net of taxes should be made by ANEEL aiming at the economic subsidy. Since the refunds are made through compensation in monthly billings, the cases of inactive consumer units should require measures by EDP Bandeirante in order to identify the new location of the customer to make the refund. Assets for sale Of the total amount of R$45,170 on December 31, 2012, R$41,685, referring to the balance receivable of EDP Escelsa in relation to the sale of property, according to the Real Estate Purchase & Sale Commitment signed by the Subsidiary on November 27, 2012 with Campo Participações Imobiliárias S/A, the object of which is the commitment to sell the proportion of 85,300 m² of a property with a total area of 107, m² (Registered with the Real Estate Registry Office in Serra/ES), located at Rodovia BR 101 Norte, 3,450, Planalto de Carapina, Municipality of Serra, State of Espírito Santo. The amounts proposed from the sale substantially exceeded the book value of the respective assets, generating a gain on disposal of R$52,685. The process of unbundling and demobilization was concluded in September 2013, leading to the respective write-off of the amounts recognized in liabilities and, consequently, with the recording of the gain from the disposal. Other tariff grants As provided for in Article 13, item VII, of Law no /2002, with wording given by Provisional Measure 605/13 and in compliance with the provisions of Article 3 of Decree no. 7891/2013, which refers to grants of CDE funds, transferred by Eletrobrás to the subsidiaries EDP Bandeirante and EDP Escelsa, related to discounts of Rural activity, irrigation, water treatment, sewage and sanitization taken from the tariff structure beginning on January 24, The provisions in Decree no of May 29, 2013, modified the provisions of Decree 7891 of January 23, 2013, and allowed ANEEL to authorize the advance transfer for receiving Energy Development Account (CDE) funds to cover the discounts levied on tariffs and a balance tariff reduction as approved by ANEEL through its Order no of May 29, 2013, referring to the periods of May to November EDP Escelsa received in part the amount of R$49,522 in October 2013 and EDP Bandeirante received in full in June ANEEL through Homologation Resolution no , of July 30, 2013, approved the amount to be repassed by Eletrobrás to EDP Escelsa, in the proper period from December 2013 to July 2014 in the amount of R$9,606 per month. ANEEL through Homologation Resolution no , of October 22, 2013, approved the amount to be repassed by Eletrobrás and EDP Bandeirante, in the proper period from December 2013 to September 2014 in the amount of R$3,273 per month. 38

40 15.4 Reimbursement CDE The balance of R$2,167 refers to amounts receivable from Eletrobrás by EDP Bandeirante, as reimbursement of costs arising from exposure to the hydrological risk of the physical guarantee quota agreements, System Service Charges and involuntary exposure related to the non-adhesion to the quota system by certain hydroelectric power plants, according to the Decree no. 7,891/13 (Note 4.5) for the months of November and December Other creditors and debtors - current and non-current Refers to amounts receivable for the exchange of the Company's shares with Companhia na Empresa Energética de Mato Grosso do Sul S.A. - Enersul shares which previously belonged to Grupo Rede Energia S.A., amounting to R$11,700 (R$11,036 as at December 31, 2012). The Company has contingent liabilities in the amount of R$40,590 as shown in note Investments 16.1 Movement of investments in the period Parent company % Direct interest Balances as at 12/31/2012 Additions Write-offs Equity accounting Dividends/Inte rest on own capital Other comprehensive income Provision for losses Transfer Transfer for unsecured liability Balance as at 12/31/ /31/ /31/2012 EDP Bandeirante (52.120) ,00 100,00 EDP Escelsa (40.899) (20.383) ,00 100,00 Lajeado ( ) ( ) ,86 55,86 Lajeado (Goodwill) (2.697) - (1.608) ,86 55,86 Enercouto (141) ,00 100,00 Enerpeixe ( ) ,00 60,00 Energest (63.160) (380) ,00 100,00 EDP Comercializadora (68) (39.985) ,00 100,00 CEJA (48) (75.099) (13.153) - 100,00 100,00 Porto do Pecém ( ) ,00 50,00 Pecém TM ,00 50,00 Pecém OM (162) ,00 50,00 EDP Renováveis ,00 45,00 Resende (36) ,00 100,00 EDP Grid ,00 100,00 Mabe Brasil (1) - - (17) ,00 - Others (320) (5.000) ( ) ( ) (17) (80.099) (11.362) Concession right EDP Bandeirante (1.457) Enerpeixe (116) Lajeado (3.538) Porto do Pecém (Note 17) (117) Pantanal (890) (569) Goodwill Lajeado e Investco (890) (5.797) ( ) ( ) (17) (80.099) (17.159) Of the total Write-offs of R$252,658, R$251,380 refer to the reduction of Capital stock of the subsidiary Lajeado approved at the AGE held on May 3, 2013, which was considered excessive. Said decrease was approved by ANEEL by means of Order no. 1520, of May 15, Of the total Transfer of R$80,099, R$75,099 refer to the transfer of the balance of Investments of the subsidiary CEJA to the caption Noncurrent assets held for sale in the Parent Company (Note 13) and R$5,000 refer to the transfer of the balance of Investments to the caption Real Estate for investment. In accordance with ICPC09, Concession Right and Goodwill are accounted for as investments in the parent company. Balances as at 12/31/2012 Additions Write-offs Equity accounting Other comprehensive income Take-over Other investments Balance as at 12/31/2013 EDP Energias do Brasil EDP Renováveis ,00 0, ,00 0,00 0, Porto do Pecém ,00 ( ) ,00 0, Pecém TM 338 0,00 0, ,00 0,00 0, Pecém OM 369 0,00 0,00 (162) 0,00 0,00 0, Others ,00 (320) 0,00 0,00 0,00 (5.000) - 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 Lajeado 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 Others 55 0,00 (55) 0,00 0,00 0,00 0,00-0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 Resende 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 Others 520 0,00 0,00 0,00 0,00 0,00 (520) - 0,00 0,00 0,00 0,00 0,00 0,00 0,00 EDP Comercializadora 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 BBCE 200 0,00 0,00 0,00 0,00 0,00 0, ,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 Other investments 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 Enercouto ,00 0,00 0,00 0,00 0,00 0, Total (375) ( ) ,00 (5.520)

41 16.2 Changes in provision for unsecured liability Parent company % Direct interest Balances as at 12/31/2012 Additions Equity accounting Provision for losses Transfer Trans-fer for investment Balance as at 12/31/ /31/ /31/2012 Provision for unsecured liability EDP GRID (5.543) ,00 100,00 CEJA (13.153) - 100,00 100,00 Cachoeira Caldeirão (2.015) ,00 - Terra Verde (16.115) 155 (1.444) ,00 92,00 Total (21.658) (1.444) (2.015) (11.362) 287 The total balance in the Transfer caption refers to the balance of investments of the subsidiary Cachoeira Caldeirão, transferred to the Non-current assets held for sale caption in the Parent Company (Note 13). The increases in the period refer to a capital increase in all subsidiaries. Terra Verde Terra Verde has a provision for unsecured liabilities amounting to R$278 (R$16,236 as at December 31, 2012) and at the Company, a provision for investment losses was recorded amounting to R$9 (R$1,455 on December 31, 2012). At the Extraordinary General Meeting of Terra Verde, held on September 14, 2010, the Company communicated its interest in definitely discontinuing the implementation of the Terra Verde Project, and for this reason it presented to the meeting a proposal for dissolution of the company, but Investimento Verde Participações Ltda. (Investimento Verde), which did not accept the proposal. In view of this fact, on September 20, 2010, the Company filed a lawsuit for company dissolution, Lawsuit no being processed at the 3rd Civil Court of São Paulo. On December 22, 2011, the Company and Investimento Verde entered into an Agreement for Transaction and Other Covenants to suspend and, consequently, settle the lawsuits and other controversies. Through this document, the Company would acquire the shares held by Investimento Verde after fulfilling certain conditions. This transaction involved the amount of R$6,500, adjusted on a daily pro rata basis, by the General Consumer Price Index (IGP-M), to be paid by the Company as soon as the conditions precedent had been met. On March 27, 2013, after addressing all conditions, the Company and Investimento Verde decided to terminate the Shareholders Agreement executed between the parties on June 17, 2008, generating losses to the Company of R$8,417 recorded in shareholders' equity against Retained earnings. On the same date, the Company delivered to Investimento Verde the Basic Engineering Project of UTE Terra Verde and, as a result, Investimento Verde declared and guaranteed that the Company no longer has any responsibility for possible inconsistency, inaccuracy, insufficiency or untruthfulness relating to the Basic Project, even those arising from actions, facts or omissions occurring before that date, thus irrevocably and irreversibly waiving any claim and/or right that it might have against the Company or its subsidiary Terra Verde. In view of the facts described above, in a General and Extraordinary Shareholders Meeting held on November 29, 2013, Terra Verde s shareholders decided on the dissolution of the company. Currently, the dissolution is in the phase of registration with the competent bodies. After the dissolution has been completed, the balance of the investment will be written off to profit for the year. 40

42 16.3 Direct interests in investments Shares / Quotas owned by the Company (In thousands) 12/31/ /31/2012 % of Company's ownership interest Shareholders' equity 12/31/ /31/2012 Total assets Liabilities (Current and noncurrent) (Provision for unsecured liability) Revenue Income (loss) for the period Company Ordinary / Quotas Ordinary / Quotas Capital stock paid-up Voting capital Paid-up capital stock Voting capital 12/31/ /31/ /31/ /31/ /31/ /31/ /31/ /31/ /31/ /31/2012 EDP Bandeirante ,00 100,00 100,00 100, EDP Escelsa ,00 100,00 100,00 100, Energest ,00 100,00 100,00 100, Lajeado ,86 100,00 55,86 100, CEJA ,00 100,00 100,00 100, (7.018) 0,00 0,00 (6.183) (36.348) Enerpeixe ,00 60,00 60,00 60, Cachoeira Caldeirão ,00 100,00 0,00 0, , ,00 (2.014) 0,00 0,00 0,00 (2.015) 0,00 Enercouto ,00 100,00 100,00 100, ,00 0,00 (140) (257) EDP Comercializadora ,00 100,00 100,00 100, EDP Grid ,00 100,00 100,00 100, (3.073) 0,00 0, (1.557) Porto do Pecém ,00 50,00 50,00 50, ( ) ( ) Pecém TM ,00 50,00 50,00 50, (188) Pecém OM ,00 50,00 50,00 50, ,00 (162) (136) Terra Verde (i) - 0,00 100,00 100,00 92,00 92, (278) (17.647) 0,00 0,00 (164) (623) EDP Renováveis ,00 45,00 45,00 45, ,00 0, (6.441) Evrecy ,00 100,00 100,00 0,00 0,00 0,00 0,00 0,00 0,00 0, , Mabe Brasil ,00 50,00 50,00 0,00 0, , , , ,00 (47.084) 0,00 Resende ,00 100,00 100,00 100, ,00 0,00 (37) (6) (i) The total is 100 shares Non-controlling interests The total interest of non-controlling shareholders in the statement of financial position as of December 31, 2013 is R$1,679,956, R$10,435 of which refers to Costa Rica, R$483,754 to Investco, R$660,388 to Lajeado and R$525,379 to Enerpeixe. Dividends paid to non-controlling shareholders for the year ended December 31, 2013 are as follows: R$5,006 corresponding to Costa Rica; R$85,194 corresponding to Enerpeixe; R$ corresponding to Lajeado; R$19,987 corresponding to Investco. The summarized information on the cash flows of the subsidiaries that hold non-controlling interests is presented below: 12/31/2013 Costa Rica Investco Enerpeixe Lajeado Total Cash in operating activities Net cash invested in investing activities (908) (7.159) (6.704) Net cash invested in operational activities (10.751) (94.892) ( ) ( ) ( ) Net increase in cash and cash equivalents (2.286) (71.436) (41.409) (98.494)

43 16.5 Reconciliation of financial information of investments Below is a reconciliation of the main investment balances: Subsidiaries Joint venture EDP Bandeirante EDP Escelsa Lajeado Enerpeixe Energest Porto do Pecém Shareholders equity at December Capital increase Distribution of dividends to the shareholders (52.120) ( ) (40.899) ( ) ( ) ( ) ( ) ( ) (99.562) ( ) - - Net profits (loss) for the period ( ) ( ) Other comprehensive income (47.241) (20.384) ( ) 222 (60) - - (379) (1.376) (8.276) Reversal of dividends Capital reduction and distribution of reserves ( ) Shareholders equity at December Percentage of equity interest - % 100,00% 100,00% 100,00% 100,00% 55,86% 55,86% 60,00% 60,00% 100,00% 100,00% 50,00% 50,00% Participation in the investment Founders' shares ( ) ( ) Tax benefit Retained earnings (8.883) (6.470) Book balance of investment in the Parent company Non-controlling interests

44 17 Joint venture by the equity method 17.1 Financial statements The Statement of financial positions as at December 31, 2013 and 2012, the Statements of Income and the Statement of Comprehensive Income for the years ended December 31, 2013 and 2012 of Porto do Pecém, a joint venture are presented below in summarized form as required by the Technical Pronouncement CPC 45 - Disclosure in Other Entities: Porto do Pecém Assets Current assets Cash and cash equivalents Other current assets Non-current assets Deferred income tax and social contribution Other non-current assets Property, plant and equipment Intangible assets Total assets Statement of financial positions 12/31/ /31/2012 Liabilities 12/31/ /31/2012 Current assets Tax and social contribution Loans, financing and debt charges Other current liabilities Non-current assets Loans and financing Other non-current liabilities Shareholders' Equity Total liabilities and shareholders' equity Statement of income Revenue Cost of production for electricity services Depreciation and amortization Operating revenue and expenses Financial result Income and social contribution taxes - current and deferred Net result (loss) for the period Net result (loss) for the period Other comprehensive income Cash flow hedge Deferred income tax and social contribution Comprehensive income for the period Statement of comprehensive income ( ) ( ) (58.136) (2.840) (9.413) (8.379) ( ) (48.259) ( ) ( ) ( ) ( ) (6.270) (5.862) ( ) ( ) 17.2 Provisions for civil, tax and labor contingencies and restricted deposits current and non-current In addition, the financial information summarized above details contingent liabilities: Risk of probable loss On December 31, 2013 and 2012, there were no contingencies whose risk of loss was classified as probable. Risk of possible loss Civil Proceeding no Writ of Mandamus with injunction request (issued based on Public Civil Lawsuit No ) before (i) The State of Ceará, (ii) Brazilian Environment Institute (IBAMA) (iii) State Environment Superintendence of the State of Ceará - SEMACE and (iv) Porto do Pecém Geração de Energia S.A., requiring judicial approval which determines, in sum, that (i) works of implementing the Pecém Energy Facility should be discontinued, in the area of the Industrial Complex, until the failures and omissions pointed out by MPF are resolved by SEMACE, as well as that (ii) SEMACE will issue a renewal of the already granted licenses, or any new environmental license for the project in question, only when said failures and omissions are rectified. Proceedings no and no Public civil lawsuits brought by the Federal Public Ministry (MPF), aiming to protect collective rights and interests related to the Anacé Indian community, seeking to avoid expropriation and resettlement of this ethnic group from its traditional land, that is, to protect the possible land rights of Anacé Indians. For that, it requested an injunction to cancel environment licensing of projects developed in the area and discontinuation of all works Contractual commitments and guarantees Contractual commitments On December 31, 2013, commitments by obligations from purchases and liabilities from operating rentals (which are not recorded in the consolidated financial statements), are presented per maturity, as follows: Liabilities with operating leases Obligations from purchases 12/31/2013 Between 1 and 3 years Between 3 and 5 years Above 5 years Total Up to 1 year Interests falling due of loans and financing Guarantees Type of guarantee offered 12/31/ /31/2012 Value Value ,

45 18 Indemnifiable financial assets The subsidiaries EDP Bandeirante and EDP Escelsa have a balance of R$779,354 (R$690,278 as at December 31, 2012) in the non-current from the Concession grantor related to the unconditional right to receive cash at the end of concession, as an indemnity for investments made and not recovered in the rendering of services granted. These financial assets are valued at their fair value, based on the VNR of assets pertaining to the concession issued on the basis of valuation report regulatory compensation - BRR and updated by the IGP-M until the statement of financial position date and that will be reversible to the Concession grantor at the end of concession. The movement in the year is as follows: Net amount as at 12/31/2012 Transfer of intangible Fair value Write-offs Net amount as at 12/31/2013 Indemnifiable financial assets (9.723) Total (9.723) Non-current assets Investment properties The balances on December 31, 2013 refer to investments in land and properties that are not part of the operating activity of the Company and its subsidiaries, but generate income. These investment properties are stated at acquisition cost. As of December 31, 2013, the fair value of these properties was calculated in accordance with a valuation performed by the Company and its subsidiaries, based on information obtained in the market. In accordance with the fair value hierarchy established by CPC 46, these investment properties fall into Level 2 measurement. Book balance as at 12/31/2013 Fair value as at 12/31/2013 EDP - Energias do Brasil EDP Bandeirante EDP Escelsa Energest Pantanal Property, plant and equipment Average depreciation rate % Historical cost 12/31/2013 Accumulated depreciation Net amount Parent company Average depreciation rate % Historical cost 12/31/2012 Accumulated depreciation Net amount Construction in service Administration Construction in service 6,25 8 (5) 3 6,25 8 (5) 3 Machinery and equipment 12, (886) , (688) 593 Vehicles 14, (750) , (611) 670 Furniture and fixtures 6, (866) , (1.076) 514 Total construction in service (2.507) (2.380) Construction in service Distribution Administration Total construction in service Liabilities related to the concession Total property, plant and equipment (2.507) (2.380) 5.004

46 Average depreciation rate % Historical cost 12/31/2013 Accumulated depreciation Net amount Average depreciation rate % Historical cost 12/31/2012 Accumulated depreciation Net amount Construction in service Generation Land Reservoirs, dams and water mains 1, ( ) , ( ) Construction in service 1, ( ) , ( ) Machinery and equipment 1, ( ) , ( ) Vehicles 9, (2.842) , (2.987) 900 Furniture and fixtures 2, (1.497) 918 5, (1.274) ( ) ( ) Related system of transmission Land Construction in service 3, (3.969) , (3.711) Machinery and equipment 3, (26.747) , (23.085) (30.716) (26.796) Administration - Land Construction in service 3, (49) 115 3, (43) 121 Machinery and equipment 12, (1.782) , (2.386) Vehicles 14, (2.018) , (1.825) Furniture and fixtures 5, (1.453) , (2.008) (5.302) (6.262) Activities not linked to concession - Land Furniture and fixtures 6, (276) 88 6, (257) (276) (257) 197 Total construction in service ( ) ( ) Construction in service Distribution Generation (7.800) Administration Total construction in service (7.800) Total property, plant and equipment ( ) ( ) Movements during the year are demonstrated as follow: Parent company Net amount Net amount at as at 31/12/2012 Acquisitions Transfers Depreciation Write-offs 12/31/2013 Construction in service Construction in service Machinery and equipment (200) Vehicles (164) (92) 942 Furniture and fixtures (92) (83) Total construction in service (456) (175) Total construction in service (3.353) - (482) Total property, plant and equipment (802) (456) (657) Net amount as at 12/31/2012 Acquisitions Capitalized interest Transfer Depreciation Write-offs Transferred to assets held for sale Reclassificati on Net amount as at 12/31/2013 Construction in service Land ,00 0,00 0,00 0,00 (4.510) 0,00 0, Reservoirs, dams and water mains ,00 0, (40.261) (3.690) 0, Construction in service ,00 0, (16.999) (886) 0,00 (345) Machinery and equipment ,00 0, (60.452) (9.096) (10) (16.363) Vehicles ,00 0, (805) (95) (18) (100) Furniture and fixtures , (396) (198) 0,00 (61) Total construction in service ( ) (18.475) (28) Total construction in service (27.135) 0,00 (9.287) ( ) Total property, plant and equipment (853) ( ) (27.762) ( ) For the year ended December 31, 2013 there has been no indication, whether through external or internal sources of information, that any asset had suffered devaluation. Therefore, as of December 31, 2013, we understand that the net book value recorded for the assets is recoverable and, consequently, there was no need for the Administration of the Company and its subsidiaries to perform the recoverability test on them.

47 20.1 Acquisitions - The acquisitions basically refer to the construction of the Santo Antônio do Jari Hydropower Plant, with balances recorded as follows: R$172,227 in the "Construction in service caption and R$191,424 in the Machinery and equipment caption; and to the construction of Cachoeira Caldeirão Hydropower Plant, with balances recorded as follows: R$143,484 in the Reserves, dams and water mains caption and R$50,072 in the Machinery and equipment caption. Construction of UHE Santo Antônio do Jari The indirect subsidiary ECE Participações signed an EPC (Engineering Procurement and Construction) contract under the full turnkey model with the consortium made up of the companies, CESBE S.A Engenharia e Empreendimentos, Alstom Brasil Energia and Transporte Ltda e Areva Koblitz S.A. The construction of the Santo Antônio do Jari HPP has progressed according to schedule: The Installation License for the project was issued in June 2011 and construction began in August 2011 and forecast to be finished by the end of In the year 2012, licenses for specific installation were also issued for: (i) the construction of the 230 kv transmission line (TL) for connection to the Basic Network; and (ii) the implementation of the Project for the Relocation of the village of São Francisco do Iratapuru. The investment corresponding to the Company s share amounted to R$457,914 excluding capitalized interest in the project of R$26,903. The project's total projected investment could range from R$1,270 thousand to R$1,410 thousand. Construction UHE Cachoeira Caldeirão The subsidiary Cachoeira Caldeirão signed an EPC (Engineering Procurement and Construction) contract under the full turnkey model with the consortium made up of the companies CESBE S.A. Engenharia e Empreendimentos, Alstom Brasil Energia e Transporte Ltda. and Bardella S.A. Indústrias Mecânicas for the construction of Cachoeira Caldeirão Hydroelectric Power Plant. The construction of Cachoeira Caldeirão HPP has progressed according to schedule. The Installation License for the project was issued in August 5, 2013 and construction began in the same month, and forecast to be finished by The investment corresponding to the Company s share amounted to R$200,191, excluding capitalized interest in the project of R$7,232. The total investment forecast for the project is between R$1.1 and R$1.3 billion, 14% of which is expected to be made in 2013, 42% in 2014, 37% in 2015 and 7% in Transfers to assets held for sale The total balance in the Transfer caption transferred to assets held for sale refers to property, plant and equipment of the companies CEJA and Cachoeira Caldeirão, which are recorded under "Non-current assets held for sale", in accordance with Notes 4.9 and Reclassification In order to comply with ANEEL Normative Resolution No. 367/09, in 2013, the subsidiaries performed a physical and accounting reconciliation of equity assets. There were no significant adjustments arising from the reconciliation, only reclassifications between property, plant and equipment categories in order for the basis of property, plant and equipment to better comply with the aforementioned Resolution. 21 Intangible assets 12/31/2013 Parent company 12/31/2012 Average amortization rate % Historical cost Accumulated amortization Net amount Average amortization rate % Historical cost Accumulated amortization Net amount Intangible assets in service 0,00 Administration 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 Software 19, (2.446) , (2.139) 631 Total Intangibles in service 0, (2.446) (2.139) 631 Intangible in service 0,00 0,00 Administration 0, , , , Total Intangibles in service 0, Total Intangibles (2.446) (2.139) 1.670

48 12/31/ /31/2012 Reclassified Reclassified Note Average amortization rate % Historical cost Accumulated amortization Net amount Average amortization rate % Historical cost Accumulated amortization Net amount Intangible assets in service 0,00 Distribution 0,00 Concession rights - Infrastructure 4, ( ) , ( ) Concession right - Other , (15.184) , (15.184) ( ) ( ) Generation 0,00 Software 12, (1.805) , (3.111) 969 Permanent easement 0, , , , Concession right - Environmental permits 7, (2.826) , (2.325) Concession right - Use of Public Property - UBP , (46.095) , (39.864) Concession right - Other , ( ) , ( ) ( ) ( ) Permanent easement 0, , , , Administration - - Software 19, (7.270) , (4.511) (7.270) (4.511) Total Intangibles in service ( ) ( ) Intangible in service 0,00 Distribution 0, , , , Generation 0, , , , Administration 0, , , , Total Intangibles in service Activities not linked to concession #DIV/0! 0,00 0,00 - #DIV/0! 0,00 0,00 0,00 Goodwill in the incorporation of parent company , , , , ( - ) Provision for maintenance of dividends 0,00 ( ) 0,00 ( ) 0,00 ( ) 0,00 ( ) Amortization of provision for maintenance of dividends 0, , , , ( - ) Goodwill accumulated amortization 0,00 ( ) 0,00 ( ) 0,00 ( ) 0,00 ( ) Goodwill Lajeado Energia and Investco , , , , Total Intangibles ( ) ( ) The movement of intangible in the year is as follows: Parent company Net amount Net amount at at 12/31/2012 Acquisitions Transfers Amortization 12/31/2013 Intangible assets in service Software 631 0, (308) Intangible in service 0,00 0,00 0,00 0,00 0,00 Other intangible in progress (303) 0, Total intangible assets (308) Reclassification to property, Net amount at Capitalized Transfers to indemnifiable Transferred to assets plant and equipment and Net amount at 12/31/2012 Acquisitions interest Transfers financial Amortization Write-offs held for sale investment 12/31/2013 Intangible assets in service Software ,00 0, ,00 (1.106) (9) (8) 0, Permanent easement 781 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0, Concession right - Environmental permits ,00 0,00 0,00 0,00 (535) 0,00 0,00 0, Concession rights - Infrastructure ,00 0, (84.606) ( ) (14.855) 0,00 0, Concession right - Use of Public Property - UBP Concession right - Other Intangible in service Concession right - Use of Public Property - UBP ,00 0, ,00 (5.613) 0,00 0,00 0, ,00 0,00 0,00 0,00 (36.266) (890) ( ) 0, ,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0, ,00 (3.112) 0,00 0,00 (919) (15.272) 0,00 - Other intangible in progress ( ) 0,00 0,00 (5.255) (12.378) (9.728) Goodwill ,00 0,00 0,00 0,00 0,00 0,00 0,00 0, Total intangible assets (84.606) ( ) (21.928) ( ) (9.728) In compliance with ANEEL Normative Resolution No. 367/09, the subsidiaries EDP Bandeirante and EDP Escelsa performed a physical inventory count and prepared a physical and accounting reconciliation of the assets, which resulted in the preparation of a report by a specialized firm. Supported by this report, due to the accounting surpluses identified, the subsidiaries recorded an adjustment of R$59,738 as a debit to the Amortization of operating expenses caption (Note 33), with a corresponding entry to Intangible Assets Concession Right Infrastructure, in accordance with OCPC05.

49 The Company evaluated the recovery of the carrying amounts of goodwill and intangible assets based on their value in use, based on the discounted cash flow model for each individual cash generating unit, which represents the total Property, plant and equipment and Intangible assets. The recoverable amount of subsidiaries' goodwill is evaluated on an annual basis, regardless of impairment indicators. Possible impairment losses are recognized in income. The recoverable amount is determined based on the assets value in use and are calculated using evaluation methodologies, backed by discounted cash flow techniques, considering market conditions, time value, and business risks. A set of assumptions was defined to determine the recoverable amount of the main investments: Cash generating units: EDP Bandeirante, EDP Escelsa, Energest, EDP Comercializadora, Enerpeixe, Lajeado, Investco and Porto do Pecém; Basis to determine recoverable amount: value in use - equity value; Determination of cash flows: production and consumption volume and estimated tariffs and residual value at the end of the concession, calculated based on the new replacement value (VNR); Term used for cash flow: until the end of the concession; Average BRR restatement rate (Distribution companies), energy sale agreements (generation companies) and operating costs: IGP-M/IPCA assumption: 5.2% p.a.; and Discount rate used (net of taxes): average remuneration of investment rate: Generation: 7.6% p.a.; Distribution: 8.2% p.a.; Trading: 9.1% p.a On December 31, 2013, the Company's and its subsidiaries' recovery testing of goodwill and intangible assets did not result in the recognition of losses in intangible assets. In the period, there was no evidence of unrecoverable losses or the occurrence of events or alterations in circumstances indicating that the book value might not be recoverable. Concession right - Other 12/31/2013 EDP Bandeirante Lajeado Enerpeixe Porto do Pecém Pantanal Investco Total Cost Amortization Total (16.641) (55.301) (1.187) (127) (4.698) ( ) ( ) As a result of the business combination, in accordance with CPC 15, the difference between amount paid for the acquired business and market value was recorded. Concession rights are measured at investment total acquisition cost less amortization expenses. Amortization occurs in accordance with concession period Goodwill in the takeover of parent company Refers to the spun-off portion of goodwill incorporated in subsidiaries EDP Bandeirante, EDP Escelsa and Lajeado, deriving from the acquisition of said companies shares, which was accounted for in accordance with CVM Instruction no. 319/99 and no. 349/99 and ICPC 09 and, as determined by ANEEL, is being realized based on the curve of expected future income over the company s concession period. Goodwill Lajeado e Investco In September 2008, the goodwill amounting to R$42,293 from the business combination, when the Company exchanged the shareholding interest held in Enersul for the shareholding interest held by Rede Energia S.A. in its subsidiaries Lajeado and Investco, and by shareholding interest held by Rede Power do Brasil S.A. in Lajeado and Tocantins Energia S.A. Goodwill is subject to the analysis of annual recovery without tax effects. Concession right - Use of Public Property - UBP It is recognized at the total fair value of the right related to use the public property until the end of the concession agreement and is amortized over the concession agreement or other period as indicated in the concession agreement. 22 Suppliers Parent company Current assets Current assets Note 12/31/ /31/ /31/ /31/2012 Electricity supply 0,00 0, Energia livre ,00 0, Electricity network utilization charges 0,00 0, CCEE Operations 0,00 0, Materials and services Total Energia livre The Brazilian Power Regulatory Agency (ANEEL), by means of Regulatory Resolution 387/09, changed the method for amortizing the balances of Loss of Revenue and Energia Livre, in effect since January 2002 and limited to the period established in ANEEL Resolution 1/04. ANEEL Order no. 2517/10, disclosed the amount to be settled between the generation and distribution agents, with restatement at the monthly SELIC Rate. This settlement should have occurred up to September 30, In order to avoid such payments, ABRADEE (Brazilian Association of Electric Power Distributors), representing distributors in Brazil, among them subsidiaries EDP Bandeirante and EDP Escelsa (Proceeding no th Federal Court in the Federal District) request for an injunction for suspension of said action, which was deferred. As at May 9, 2013, however, a decision was issued considering this action extinct, without deciding on the merit, because elected action was improper (Injunction). However, payments by subsidiaries EDP Bandeirante and EDP Escelsa remain suspended, in light of the filing of an Appeal against said decision, to which staying effects were attributed (thus, effects of sentence unfavorable to distributors were suspended). Note that distributing companies filed, in parallel, a lawsuit with the same purpose as the Injunction, but this was also extinct under the argument that another action with the same parties, same claim and same actual and legal bases (lis pendens) already existed. In view of this decision, an Appeal will also be filed with the Federal Regional Court of the 1st Region, awaiting judgment. Liabilities is monthly adjusted to inflation at the SELIC rate variation, and R$5,231 (R$5,006 on December 31, 2012) was recorded for the year as a contra entry to financial expenses (Note 34).

50 (Amounts expressed in thousands of Reais, unless otherwise indicated) 23 Debentures 23.1 Composition of Debentures balance Parent company Charges 12/31/2013 Principal Charges 12/31/2012 Principal Fiduciary Agent Company Quantity of securities Unit value Total amount Issuing date Contract term Purpose Debt cost Payment method Current assets Current assets Non-current Total Current assets Non-current Current assets Non-current Total Pentágono S.A. Distribuidora de Títulos e Valores Mobiliários EDPE st issue as at August 28, /28/ /28 /2014 Investments in electricity generation assets 105.0% of CDI Principal and interest in single statement in the end , , , (-) Issuance costs EDPE 0,00 0,00 (530) 0,00 0,00 0,00 0,00 Monthly amortization 0,00 (58) 0,00 (58) 0,00 0,00 0,00 (412) (412) Pentágono S.A. Distribuidora de Títulos e Valores Mobiliários EDPE nd issue as at April 11, /11/ /11 /2016 General investments by the Company CDI % Half-annual interest and amortization in two equal installments in April 2015 and April , ,00 0,00 0,00 0,00 - (-) Issuance costs EDPE 0,00 0,00 (500) 0,00 0,00 0,00 0,00 Monthly amortization 0,00 0,00 (355) (355) 0,00 0,00 0,00 0,00 - Total Charges 12/31/ /31/2012 Principal Charges Principal Fiduciary Agent Company Quantity of securities Unit value Total amount Issuing date Contract term Purpose Debt cost Payment method Current assets Current assets Non-current Total Current assets Non-current Current assets Non-current Total Pentágono S.A. Distribuidora de Títulos e Valores Mobiliários EDP Escelsa /02/ /02/ /02 /2014 Debt extension. Payment of Senior Notes with maturity on 07/15/ % of CDI Annual principal and interest (six-month period) 0, , ,00 0, (-) Issuance costs EDP Escelsa 0,00 0,00 0,00 0,00 0,00 0,00 0,00 Monthly amortization 0,00 (45) 0,00 (45) 0,00 0,00 (136) (45) (181) SLW Corretora de Valores e Câmbio Ltda. (-) Issuance costs EDP Bandeirante EDP Bandeirante Annual principal and Cash restructuring to the debt payment /01/ /01/ /30 CDI % interest (six-month ,00 0, and working capital financing. /2016 period) 0,00 0,00 0,00 0,00 0,00 0,00 0,00 Monthly amortization 0,00 (483) (322) (805) (535) 0,00 0,00 (805) (1.340) Oliveira Trust Energest st issue as at April 23, /23/ /23 /2017 Debt extension, working capital financing and financing of its capital expenses (CAPEX). CDI % Annual principal starting April 2016 and six-month period interest , ,00 0, (-) Issuance costs Energest 0,00 0,00 (635) 0,00 0,00 0,00 0,00 Monthly amortization 0,00 0,00 (400) (400) 0,00 0,00 0,00 (541) (541) Pentágono S.A. Principal and interest in 1st issue as at Investments in electricity generation Distribuidora de Títulos e EDPE /28/ / % of CDI single statement in the , , ,00 August 28, 2012 assets Valores Mobiliários /2014 end (-) Issuance costs EDPE 0,00 0,00 (530) 0,00 0,00 0,00 0,00 Monthly amortization 0,00 (58) 0,00 (58) 0,00 0,00 0,00 (412) (412) Pentágono S.A. Distribuidora de Títulos e Valores Mobiliários EDPE nd issue as at April 11, /11/ /11 /2016 General investments by the Company CDI % Half-annual interest and amortization in two equal installments in April 2015 and April , ,00 0,00 0,00 0,00 - (-) Issuance costs EDPE 0,00 0,00 (500) 0,00 0,00 0,00 0,00 Monthly amortization 0,00 0,00 (355) (355) 0,00 0,00 0,00 0,00 - Oliveira Trust CEJA st issue as at October 24, /24/ /11 /2013 Debt extension. Settlement of the Bank Credit Notes(CCBs) used in the acquisition of the Jari % of CDI Principal and interest in single statement in the end 0,00 0,00 0, , , (-) Issuance costs CEJA 0,00 0,00 (83) 0,00 0,00 0,00 0,00 Monthly amortization 0,00 0,00 0,00-0,00 0,00 (37) 0,00 (37) Pentágono S.A. Payment to shareholders as Annual principal and Laejado reimbursement of shares arising from a Distribuidora de Títulos e /25/ /25 CDI % interest (six-month , ,00 0,00 0,00-0,00 Energia reduction in capital stock carried out as at Valores Mobiliários /2019 period) 05/03/2013 Laejado (-) Issuance costs 0,00 0,00 0,00 0,00 0,00 0,00 0,00 Monthly amortization 0,00 0,00 (3.016) (3.016) 0,00 0,00 0,00 0,00 - Energia Total For more information on guarantees, see Note

51 (Amounts expressed in thousands of Reais, unless otherwise indicated) 23.2 Changes in debentures for the year: Parent company Amortization Net amount at of Net amount at Accrued transaction 12/31/2012 Acquisitions Payments interest Transfers cost 12/31/2013 Current assets Debentures Principal - 0,00 0,00 0, , Interest - 0,00 (21.466) , Transaction cost - 0,00 0,00 0,00 (557) 498 (59) - - (21.466) ,00 Non-current 0,00 Debentures Principal ,00 0,00 ( ) 0, Interest ,00 0, (35.954) 0,00 - Transaction cost (412) (500) 0,00 0, ,00 (355) ( ) Amortization Net amount at of Monetary and Net amount at Accrued transaction exchange 12/31/2012 Acquisitions Payments interest Transfers cost variation 12/31/2013 Current assets Debentures Principal ( ) 0, ,00 ( ) Interest ,00 ( ) ,00 (14.886) Transaction cost (708) (502) 0,00 0,00 (2.734) (587) ( ) ( ) ,00 Non-current 0,00 Debentures Principal ,00 0,00 ( ) 0,00 ( ) Interest ,00 0, (44.006) 0,00 (8.514) - Transaction cost (1.803) (6.781) 0,00 0, , (4.093) ( ) - ( ) Maturity of current and non-current installments: Maturity Parent company Current assets Non-current liabilities , , , Total

52 (Amounts expressed in thousands of Reais, unless otherwise indicated) Debentures issued by the Company and its subsidiaries are not convertible into shares. The main sections of the agreements that provide for termination are described below. The full sections can be consulted in the prospectuses for each issue. (i) non-compliance by the Issuer with any monetary obligation in the Indenture, not remedied in the period established by the Indenture; (ii) failure to comply with any obligation related to the principal and/or yield not resolved within the stipulated period; (iii) spin-off, merger, takeover, or any relevant form of corporate reorganization entailing a transfer of the Issuer's share control, as defined in article 116 of Corporate Law, except: (i) if said transfer is to another company of the same economic group as the Issuer; or (ii) a prior consent has been obtained from debenture holders holding at least two thirds (2/3) of the debentures outstanding; or (iii) in the cases of spun-off, merger or acquisition there is assurance of the right foreseen in Law No. 6404, article 231, paragraph 1; (iv) Applicable to EDP Bandeirante and EDP Escelsa: the Issuer's failure to maintain a Gross Debt/EBITDA financial ratio or EBITDA adjusted for the distribution companies of no more than 3.5 on the calculation dates, which shall be June 30 and December 31 of each year. Annual Debentureholders Meeting of subsidiaries EDP Bandeirante and EDP Escelsa, held on April 30, 2013, approved the change in definition of EBITDA for the calculation of financial indices included in issue deeds of debentures outstanding in both distributors. Adjusted EBITDA will mean income before financial expenses, taxes, depreciation and amortization adjusted with assets and liabilities of the Parcel A Cost Variation Memorandum Account A (CVA), over contracting and neutrality of industry charges ; (v) Applicable to Lajeado and Energest: the Issuer's failure to maintain a Gross Debt/EBITDA financial ratio of no more than 3.5 on the calculation dates, which shall be December 31 of each year; (vi) petition for self-bankruptcy; (vii) settlement, liquidation, dissolution or bankruptcy; (viii) the issuer proposing an extra-judicial recovery plan to any creditor or creditor class, irrespective of this having been requested or any judicial ratification having been obtained; (ix) applicable to Lajeado: concession loss, provided that this loss does not exceed 10% of the net revenue, and if this loss may prejudice compliance with other issues obligations; (x) notification of a final and unappealable adverse judgment in a lawsuit, at an amount higher than R$50,000 in Energest, and R$75,000 in the Company as guarantor, in Lajeado and Cachoeira Caldeirão, provided that such conviction could jeopardize the faithful fulfillment of the liabilities; (xi) applicable to EDP Bandeirante and EDP Escelsa: accelerated maturity or payment default of any monetary liabilities the issuer may be subject to, either in the local or the international market, in a unit amount or accumulated amount exceeding forty thousand Brazilian Reais (R$40,000) that may be proven to impair the faithful fulfillment of obligations assumed by the Company in the Debenture Deed; and (xii) applicable to Lajeado: termination of one or more Agreements for Purchase and Sale of Electricity entered into by the Issuer which represent a reduction in the amount of revenues in excess of 20% (twenty per cent) in relation to its total revenues. On December 31, 2013, the Company and the subsidiaries EDP Bandeirante, EDP Escelsa, Energest and Lajeado are in full compliance with all the restrictive clauses of the covenants provided in the debenture contracts. 50

53 (Amounts expressed in thousands of Reais, unless otherwise indicated) Loans, financing and debt charges Composition of balance of Loans, financing and debt charges 31/12/ /12/2012 Charges Principal Charges Principal Contracted Contracting Company amount date Amount released Contract term Purpose Covenants Debt cost Payment method Current assets Non-current Current assets Non-current Total Current assets Non-current Current assets Non-current Total Reclassified Reclassified Foreign currency Expansion and reinforcement of the electrical network of the EDP 02/19/2012 Bandeirante's distribution area, for maintenance and supply Gross debt in relation to EBITDA Payment at the end of contract EIB - European Investment Bank Bandeirante EUR 45,000 02/17/2012 EUR 15,000 02/17/2018 quality improvement and for reducing system losses. ratio equal or below 3.5. Libor % p.a. and six-month interest 423 0,00 0, ,00 0, (-) EIB - Transaction cost EDP Bandeirante (110) 02/17/2012 (110) 02/19/ /17/2018 0,00 0,00 0,00 Monthly amortization of transaction cost 0,00 0,00 0,00 (75) (75) 0,00 0,00 0,00 (93) (93) EIB - European Investment Bank EDP Escelsa EUR 45,000 02/17/2012 EUR 15,000 02/19/ /17/2018 Expansion and reinforcement of the electrical network of the Escelsa's distribution area, for maintenance and supply quality improvement and for reducing system losses. Gross debt in relation to EBITDA ratio equal or below 3.5. Libor % p.a. Payment at the end of contract and six-month interest 424 0,00 0, ,00 0, Local currency Eletrobrás Reluz - ECF 2617/07 Eletrobrás Reluz - ECF 2656/07 Eletrobrás Reluz - ECF 2657/07 Eletrobrás Reluz - ECF 2658/07 Eletrobrás Reluz - ECF 2779/09 Eletrobrás Reluz - ECF 2800/09 Eletrobrás LPT - ECFS 019/04 Eletrobrás LPT - ECFS 184/07 EDP Bandeirante /09/ EDP Bandeirante /12/ EDP Bandeirante /12/ EDP Bandeirante /12/ EDP Bandeirante /18/ EDP Bandeirante /27/ EDP Bandeirante /28/ EDP Bandeirante /25/ /30/ /30/2013 Reluz Program - Municipality of Aparecida/SP 0,00 5% p.a % p.a (mgt. fee) Monthly principal and interest 0,00 0,00 0,00 0,00-0,00 0, , /30/ /28/2014 Reluz Program - Municipality of Taubaté/SP 0,00 5% p.a % p.a (mgt. fee) Monthly principal and interest 0,00 0, , ,00 0, /30/ /30/2015 Reluz Program - Municipality of Guarulhos/SP 0,00 5% p.a % p.a (mgt. fee) Monthly principal and interest 0,00 0, ,00 0, /30/ /28/2014 Reluz Program - Municipality of Suzano/SP 0,00 5% p.a % p.a (mgt. fee) Monthly principal and interest 0,00 0, , ,00 0, /30/ /30/2017 Reluz Program - Municipality of Guaratinguetá/SP 0,00 5% p.a % p.a (mgt. fee) Monthly principal and interest 12 0, , /30/ /30/2017 Reluz Program - Municipality of Mogi das Cruzes/SP 0,00 5% p.a % p.a (mgt. fee) Monthly principal and interest 12 0, , /30/ /30/2016 Luz para Todos (Light for All) Program 0,00 5% p.a. + 1% p.a. (mgt. fee) Monthly principal and interest 0,00 0, ,00 0, /30/ /30/2019 Luz para Todos (Light for All) Program 0,00 5% p.a. + 1% p.a. (mgt. fee) Monthly principal and interest 0,00 0, ,00 0, EDP 06/05/2007 Gross debt in relation to EBITDA Annual principal and interest Banco do Brasil and Santander - Bank Credit Bill Bandeirante /05/ /05/2013 Working capital ratio equal or below % of CDI (six-month period) 0,00 0,00 0,00 0, , , EDP 06/22/2011 Principal and interest in single Banco do Brasil - Commercial credit note Bandeirante /22/ /06/2014 Working capital 0,00 100% of CDI statement in the end , , , , EDP 07/15/2008 Gross debt in relation to EBITDA BNDES - Banco do Brasil Bandeirante /27/ /15/2014 Investment Program in May 2006 ratio equal or below % p.a. above TJLP Monthly principal and interest 10 0, , , EDP 07/15/2008 Gross debt in relation to EBITDA BNDES - Banco Santander Bandeirante /27/ /15/2014 Investment Program in May 2006 ratio equal or below % p.a. above TJLP Monthly principal and interest 10 0, , , EDP BNDES - BB/CALC Bandeirante /29/ BNDES - BB/CALC EDP Escelsa /29/ (-) BNDES -CALC - Transaction costs EDP Escelsa (205) 01/29/2009 (205) Eletrobrás Reluz - ECF 2481/05 EDP Escelsa /30/ Eletrobrás Reluz - ECF 2488/05 EDP Escelsa /12/ Eletrobrás Reluz - ECF 2500/05 EDP Escelsa /12/ Eletrobrás LPT - ECFS 031/04 EDP Escelsa /21/ Eletrobrás LPT - ECFS 106/05 EDP Escelsa /20/ Eletrobrás LPT - ECFS 181/07 EDP Escelsa /25/ Eletrobrás LPT - ECFS 258/09 EDP Escelsa /28/ /17/2010 Programs for investment in electric power generation, Gross debt in relation to EBITDA 4.5% p.a. and 1.81% to 3.32% 06/17/2019 distribution and transmission segments. ratio equal or below 3.5. p.a. above TJLP Monthly principal and interest 254 0, , /17/2010 Programs for investment in electric power generation, Gross debt in relation to EBITDA 4.5% p.a. and 1.81% to 3.32% 05/15/2017 distribution and transmission segments. ratio equal or below 3.5. p.a. above TJLP Monthly principal and interest 269 0, , /17/2010 Monthly amortization of transaction cost 05/15/2017 0,00 0,00 0,00 0,00 0,00 (22) (22) (44) 0,00 0,00 (30) (45) (75) 01/30/ /30/2016 Reluz Program - Municipality of Viana/ES 0,00 5% p.a. +1.5% p.a. (mgt. fee) Monthly principal and interest 0,00 0, ,00 0, /30/ /30/2013 Reluz Program - Municipality of Alfredo Chaves/ES 0,00 5% p.a. +1.5% p.a. (mgt. fee) Monthly principal and interest 0,00 0,00 0,00 0,00-0,00 0, , /30/ /30/2013 Reluz Program - Municipality of Santa Maria de Jetiba/ES 0,00 5% p.a. +1.5% p.a. (mgt. fee) Monthly principal and interest 0,00 0,00 0,00 0,00-0,00 0, , /30/ /30/2016 Luz para Todos (Light for All) Program 0,00 5% p.a % p.a (mgt. fee) Monthly principal and interest 0,00 0, ,00 0, /30/ /30/2018 Luz para Todos (Light for All) Program 0,00 5% p.a % p.a (mgt. fee) Monthly principal and interest 0,00 0, ,00 0, /30/ /30/2020 Luz para Todos (Light for All) Program 0,00 5% p.a % p.a (mgt. fee) Monthly principal and interest 0,00 0, ,00 0, /30/ /30/2021 Luz para Todos (Light for All) Program 0,00 5% p.a % p.a (mgt. fee) Monthly principal and interest 0,00 0, ,00 0, /09/2007 Gross debt in relation to EBITDA Annual principal and interest Banco do Brasil and Santander - Bank Credit Bill EDP Escelsa /09/ /10/2014 Working capital ratio equal or below % of CDI (six-month period) 298 0, , /29/2010 Gross debt in relation to EBITDA Principal and interest in single statement in the end Banco do Brasil - Commercial credit note EDP Escelsa /24/ /29/2015 Working Capital ratio equal or below % of CDI /27/2011 Principal and interest in single statement in the end Banco do Brasil - Commercial credit note EDP Escelsa /27/ /9/2014 Working capital 0,00 100% of CDI , , ,00 0,00 0, (-) Banco do Brasil - Commercial credit note - Transaction costs EDP Escelsa (2.025) 06/24/2010 (2.025) ,00 0,00 0,00 Cost 0,00 0,00 0,00 0,00-0,00 0,00 (392) (517) (909) 07/15/2008 Investment Program in expansion, modernization and improvement of the performance of the power distribution Gross debt in relation to EBITDA BNDES - Banco do Brasil EDP Escelsa /27/ /15/2014 network. ratio equal or below % p.a. above TJLP Monthly principal and interest 9 0, , , Investment Program in expansion, modernization and 07/15/2008 improvement of the performance of the power distribution Gross debt in relation to EBITDA BNDES - Banco Santander EDP Escelsa /27/ /15/2014 network. ratio equal or below % p.a. above TJLP Monthly principal and interest 9 0, , , Banco do Brasil - Bank Credit Bill EDP Escelsa /04/ (-) Banco do Brasil - Bank Credit Bill - Transaction costs EDP Escelsa (1.689) 10/04/2012 (1.689) Banco do Brasil - Bank Credit Bill 21/ EDP Escelsa /13/ (-) Transaction cost EDP Escelsa /13/ /04/ /24/2014 Financing for the sale of electricity for agribusiness. 0, % of CDI 10/04/ /24/2014 0,00 0,00 0,00 02/13/ /03/2015 Working capital 0, % and 98.5% of CDI 02/13/ /03/2015 0,00 0,00 0,00 Payment at the end of contract and interest (six-monthly) , , , , Monthly amortization of transaction cost 0,00 0,00 (637) 0,00 (637) 0,00 0,00 (842) (637) (1.479) Principal and interest in single statement in the end of contract 0, , ,00 0,00 0,00 0,00 - Monthly amortization of transaction cost 0,00 0,00 0,00 (718) (718) 0,00 0,00 0,00 0,00-02/20/2011 Gross debt in relation to EBITDA Annual principal and interest Banco do Brasil - Bank Credit Bill Energest /20/ /20/2015 Deployment of Small Hydroelectric Plant (PCH) of Santa Fé. ratio equal or below % of CDI (six-month period) 673 0, ,

54 (Amounts expressed in thousands of Reais, unless otherwise indicated) Charges 12/31/ /31/2012 Principal Charges Principal Contracted Contracting Company amount Total date Amount released Contract term Purpose Covenants Debt cost Payment method Current assets Non-current Current assets Non-current Current assets Non-current Current assets Non-current Total 06/15/ % p.a. and 1.92% above TJLP BNDES Energest /13/ /15/2018 Investment Program 0,00 Monthly principal and interest 26 0, , /30/ /31/2014 Eletrobrás Reluz - ECF 1568/97 Costa Rica /04/ Construction of the Hydroelectric Plant Costa Rica. 0, % % p.a. (mgt. fee) Monthly principal and interest 2 0, , , BNDES Enerpeixe /21/ /17/ /15/2016 Deployment of the Hydroelectric Power Plant Peixe Angelical. i. Rate of coverage of the debt service, greater or equal to 1.3. ii. Restriction for payment of dividends. 4.5% p.a. above TJLP Monthly principal and interest 446 0, , Banco Itaú Enerpeixe /21/ /17/ /15/2016 Deployment of the Hydroelectric Power Plant Peixe Angelical. i. Rate of coverage of the debt service, greater or equal to 1.3. ii. Restriction for payment of dividends. 4.5% p.a. above TJLP Monthly principal and interest 136 0, , Bradesco Enerpeixe /21/ /17/ /15/2016 Deployment of the Hydroelectric Power Plant Peixe Angelical. i. Rate of coverage of the debt service, greater or equal to 1.3. ii. Restriction for payment of dividends. 4.5% p.a. above TJLP Monthly principal and interest 113 0, , Banco Itaú Enerpeixe /21/ /17/ /15/2016 Deployment of the Hydroelectric Power Plant Peixe Angelical. i. Rate of coverage of the debt service, greater or equal to 1.3. ii. Restriction for payment of dividends. 4.5% p.a. above TJLP Monthly principal and interest 91 0, , Banco do Brasil Enerpeixe /21/ /17/ /15/2016 Deployment of the Hydroelectric Power Plant Peixe Angelical. i. Rate of coverage of the debt service, greater or equal to 1.3. ii. Restriction for payment of dividends. 4.5% p.a. above TJLP Monthly principal and interest 113 0, , i. Rate of coverage of the debt service, greater or equal to 1.2. ii. Rate of coverage of the own capital, greater or equal to 30%. 04/15/2010 iii. Restriction for payment of dividends. BNDES - Banco do Brasil Santa Fé /11/ /15/2024 Deployment of Small Hydroelectric Plant (PCH) of Santa Fé 1.90% p.a. above TJLP Monthly principal and interest 160 0, , % p.a. Annual dividends and payment of the principal , , Cumulative receivable shares Investco 0,00 01/00/1900 0,00 0,00 A, B and C redeemable preferred shares 0,00 BNDES ECE Participações /13/ /13/ /15/2031 Implementation of the UHE Jari's construction project. i. Rate of coverage of the debt service, greater or equal to 1.20 during the amortization period. ii. rate of own capital: Shareholders equity over total assets equal or greater than 25%. 1.86%. above TJLP Monthly principal and interest after 06/15/ ,00 0,00 0,00 0, ,00 0, ECE Monthly amortization of transaction cost 12/13/ /15/2031 0,00 0,00 0,00 (-) BNDES - Transaction costs Participações (1.474) 12/13/2012 (1.474) 0,00 0,00 0,00 0,00-0,00 0,00 0,00 (1.460) (1.460) Result of swaps VC hedge and EDP 02/19/2012 Goldman Sachs debt interest rate 02/09/2012 0,00 Hedge against EIB financing. 0, % of CDI Interest (six-month period) 767 0,00 0,00 0, ,00 0,00 0, Bandeirante 02/17/2018 with BEI VC hedge and 02/19/2012 Goldman Sachs EDP Escelsa debt interest rate 02/09/2012 0,00 Hedge against EIB financing. 0, % of CDI Interest (six-month period) 767 0,00 0,00 0, ,00 0,00 0, /17/2018 with BEI Total Debts are realized at cost and swap results are realized at market prices. For more information on guarantees, see Note

55 24.2 Changes in loans and financing for the year: Current assets Net amount at Adjustment Adjustment Amortization Monetary and Transfer to Net amount at Interest Interest paid to market to present of transaction exchange liabilities held 12/31/2012 Acquisitions Payments accrued in Transfers value value cost variation for sale 12/31/2013 Loans and financing Principal ( ) (4.573) 0, ,00 0,00 0,00 0,00 0, Interest ,00 ( ) (22.878) ,00 0,00 0,00 80 (4.164) Transaction cost (1.264) (1.540) 0,00 0,00 0,00 (1.373) 0,00 0, ,00 0,00 (659) ( ) (22.878) (4.164) Non-current Loans and financing Adjustment Adjustment Amortization Monetary and Transfer to Net amount at Interest Interest paid to market to present of transaction exchange liabilities held Net amount at 12/31/2012 Acquisitions Payments accrued in Transfers value value cost variation for sale 12/31/2013 Principal ,00 0, ( ) , ( ) Interest ,00 0, ,00 (26.428) 0,00 (547) 0,00 0,00 0, Transaction cost (2.752) (1.276) 0,00 0,00 0, ,00 0,00 0,00 0, (1.332) ( ) ( ) Maturity of current and non-current installments (principal and interest): Type of currency Maturity Local Foreign Total Current Non-current assets , , , , up to , up to , up to , Total Post-employment benefits The Company and its subsidiaries currently maintains retirement and pension supplementation plans for employees and former employees and other postemployment benefits, such as medical care, life insurance, Retirement Incentive Aid and other benefits for retirees. Pursuant to CVM Resolution no. 695/12, post employment benefit liabilities should be accounted for based on standards contained in CPC 33 (R1). To comply with this requirement, direct subsidiaries EDP Bandeirante, EDP Escelsa, Investco and Energest and indirect subsidiary Investco contracted independent actuaries to conduct an actuarial appraisal of these benefits using the Projected Unit Criterion Method. On December 13, 2012, CVM Resolution no. 695, which changed CPC 33 to version (R1), was approved with application beginning as of January 1, Accordingly, past service costs started to be fully recognized in income for the period in which they occurred. The direct subsidiaries EDP Escelsa and Energest and the indirect subsidiary Investco retrospectively applied this change in accounting practice to 2011 and 2010, which is when the events took place, based on CPC 23 Accounting Policies, Changes in Accounting Estimates and Correction of Errors. Parent company Current assets Current assets Non-current 12/31/ /31/ /31/ /31/ /31/ /31/2012 Reclassified Reclassified BSPS - Reserves to amortize 0,00 0,00 0, , Assistance Programs 0,00 0,00 0, Retirement Incentive Aid - AIA 0,00 0, Medical Healthcare and Life Insurance 0,00 0, Private pension plan ,00 0,00 Private pension plan - EnerPrev 0,00 0, ,00 0,

56 25.1 EDP Bandeirante Current assets Non-current 12/31/ /31/ /31/ /31/2012 BSPS - Reserves to amortize Assistance Programs Private pension plan Private pension plan - EnerPrev 0, , ,00 0, ,00 0, ,00 0,00 0, The subsidiary EDP Bandeirante currently maintains retirement and pension supplementation plans for collaborators and former collaborators, as follows: Retirement plans Defined benefit plans and variable contribution plans Structured in the category "Paid-in, Defined benefit and Variable Contribution", as from June 1, 2011, the Benefit Plan PSAP/Bandeirante started to be managed by EnerPrev, a private entity specialized in complementary private pension plans, sponsored by Grupo EDP - Energias do Brasil, which has purpose of managing a set of pension plans for the subsidiary Bandeirante's employees and former employees, and the rights and duties of participants and also those of EDP Bandeirante, as provided for in the Regulations of PSAP/Bandeirante. The plan has the following characteristics: (i) Settled Complementary Proportional Benefit Plan (Plano de Benefício Suplementar Proporcional Saldado - BSPS) This corresponds to the employees proportional benefits calculated on the basis of time of service up to March 1998, when was in force. Is a defined benefit type which grants BSPS in the form of lifetime income convertible into a pension for plan members registered as at March 31, 1998 in a defined amount proportional to the accumulated years of service up to the said date conditional upon compliance with the regulations. The subsidiary EDP Bandeirante bears total responsibility for covering any actuarial shortfalls determined by Enerprev; (ii) Mixed Benefits Plan Defined Benefit (Benefício Definido - BD) e Defined Contribution (Contribuição Definida - CD) BD Plan Effective after March 31, Defined Benefit Plan that grants a lifetime income convertible into a pension proportional to time of service accumulated to March 31, 1998 based on 70% of the monthly average wage over the past 36 months in active employment. In the event of death while the employee is in active service, or disability, the benefits include all of the years of past service (including the accumulated period up to March 31, 1998) and therefore do not include the accumulated period of service after March 31, 1998 alone. The subsidiary EDP Bandeirante and the plan members bear equal responsibility for covering any actuarial shortfalls determined by Enerprev. CD Plan Implemented in conjunction with the DB Plan, effective after March 31, It is a pension plan that until the time of granting the lifetime income, convertible (or not) into a pension, is a defined contribution plan, not generating any actuarial responsibility on the part of the subsidiary EDP Bandeirante. Only after the act of granting the lifetime income, convertible (or not) into a pension, does the pension plan become a defined benefit one, subjecting EDP Bandeirante to actuarial responsibilities. Although the actuarial valuation performed by independent actuaries hired by EDP Bandeirante as of December 31, 2013 showed that, in the Defined Benefit plans, the present value of the actuarial liabilities, net of the fair value of the assets, presents a surplus, the balance was not recorded due to a restriction to the recognition of this asset, in accordance with CPC 33 (R1), since the actual reduction of the sponsor s contributions or the reversal of amounts in the future is not guaranteed. Moreover, EDP Bandeirante has a commitment due to the actuarial deficit calculated by Enerprev, according to guidelines of CGPC Resolution no. 26/2008, which is being settled in 240 months as from September 1997, based on a percentage of the payroll, subject to revision semiannually to ensure settlement of the balance in the above period. The actuarial assumptions used by EDP Bandeirante meet the provisions of CPC 33 (R1) while the actuarial assumptions used by Enerprev meet CGPC Resolution no. 26/2008. A series of assumptions may be realized differently from as calculated in EDP Bandeirante s actuarial valuation due to factors such as changes in economic or demographic assumptions and changes in the provisions of the plan or in the legislation applicable to pension plans. The plan s liabilities are calculated using a discount rate, which is established based on the yield of government securities of the NTN-B type. Therefore, in the event the yield of the plan s assets differs from that of NTN-B government securities, there will be an actuarial gain or loss increasing or reducing the actuarial deficit/surplus of this benefit. The plan s investment practices are governed by the search for and maintenance of liquid assets which provide the necessary yield to comply with its liabilities in the short, medium and long term, maintaining a balance between assets and obligations, with a view to generating a liquidity which is compatible with the growth and protection of capital, thus achieving a long-term balance between the assets and the needs set forth by the future actuarial flows. The changes in this Defined Benefit in the statement of financial position during the year are as follows: Present value of the plan liabilities Fair value of the plan assets Recognized (liability) Present value of the actuarial liabilities Fair value of the plan assets Recognized (liability) Opening balance recognized ( ) ( ) ( ) (94.167) Cost of current service 136 0, ,00 93 Interest cost (67.768) 0,00 (67.768) (58.925) 0,00 (58.925) Earnings expected from assets 0, , Actuarial gains/(losses) recognized in shareholders' equity (77.897) ( ) (71.578) Contributions paid by EDP Bandeirante 0, , Contribution paid by employees (2.436) (2.107) Benefits paid by the plan (30.967) (27.792) - Recognized (liability) ( ) ( ) ( ) 54

57 The actuarial gain on present value of the plan s liabilities of R$231,392, calculated as of December 31, 2013, mainly arose from the increase in the discount rate in this valuation. In 2012, the actuarial loss was R$122,405. Expected contributions of EDP Bandeirante for this plan during 2014 amount to R$17,510. The maturities of the benefit plan, calculated by the actuarial valuation, consider the following future payment stream: Maturity Current 2014 Non-current assets Medical Healthcare and Life Insurance Total The net expense for the Supplementary Retirement and Pension Plans of Bandeirante PSAP/Bandeirante, recognized in income and actuarial gains and losses recognized in other comprehensive income, both in counter entry to the Post-employment benefits account. The effects on income are as follows: Service cost Cost of current service Interest cost Expected employee contributions (2.267) (1.864) Components of defined benefit costs recognized in profit or loss Re-measurement of the net amount of the defined benefit liability Return on plan assets (excluding amounts included in net finance costs) Actuarial (gains) losses arising from experience adjustments Actuarial (gains) losses arising from changes in financial assumptions Adjustments to restrictions to the defined benefit asset Components of defined benefit costs recognized in other comprehensive results Total (50.827) (1.106) (9.284) ( ) ,00 ( ) ( ) The balance of actuarial loss, net of Income and social contribution taxes is R$27,573 on December 31, 2013 (actuarial loss of R$73,733 on December 31, 2012). The main classes of plan assets are as follows: 12/31/ /31/2012 Asset class Active Market Allocation % Allocation % Debt instruments Quoted 88,90% 89,50% Shares Quoted 8,90% 8,40% Real estate Quoted 0,30% 0,30% Others Unquoted 1,90% 1,80% Total 100,00% 100,00% This plan's participants are broken down as follows: 12/31/ /31/2012 Active participants Assisted participants 0,00 0,00 With deferred benefits Retirees and pensioners Total The sensitivity analysis arising from the risk of change in the discount rate and mortality table is presented below, considering only the change in the hypotheses mentioned in each line. Sensitivity analysis Post-employment benefits (PSAP) Core premises Discount rate Increase in the discount rate by 0.5% (30.266) Decrease in the discount rate by 0.5% Mortality If the plan s participants were only one year younger than their actual age

58 The main assumptions utilized in this actuarial appraisal were as follows: Economic Discount rate - nominal Future salary increases Growth of benefit plans Inflation 12.00% p.a. from 6.40% p.a. up to 2016, decreased to 5.65% p.a. as of % p.a. 5.00% p.a. 9.30% p.a. from 6.90% p.a. up to 2016, decreased to 5.79% p.a. as of % p.a. 5.00% p.a. Demographic Mortality table Mortality table for invalids Disability table RP 2000 Gerational RP 2000 Gerational RP 2000 Disabled RP 2000 Disabled Wyatt 85 Class 1 Wyatt 85 Class EDP Escelsa Current liabilities Non-current liabilities 12/31/ /31/ /31/ /31/2012 Reclassified Retirement Incentive Aid - AIA Medical Healthcare and Life Insurance Private pension plan 20 0,00 0,00 0,00 Private pension plan - EnerPrev ,00 0, EDP Escelsa currently maintains retirement and pension supplementation plans for employees and former employees and other post-employment benefits, such as medical care, life insurance, Retirement Incentive Aid and other benefits for retirees Retirement plans Defined benefit plans and variable contribution plans Plan I - Escelsos structured as a Defined benefit plan, managed by EnerPrev - Previdência Complementar of the Grupo EDP - Energias do Brasil and registered with the National Register of Benefit Plans (Cadastro Nacional dos Planos de Benefícios - CNPB) and in the National Superintendency of Private Pension Plans (Superintendência Nacional de Previdência Complementar - PREVIC). The Funding Plan is sustained parietally by contributions of the sponsor and of the participant, pursuant to the Benefit Plan Regulations. Plan II - Escelsos structured as a Variable Contribution plan, managed by EnerPrev-Previdência Complementar of the Grupo EDP - Energias do Brasil and registered with the CNPB of PREVIC. The Funding Plan is sustained parietally by contributions of the sponsor and of the participant, pursuant to the Benefit Plan Regulations. A series of assumptions may be realized differently from as calculated in the actuarial valuation due to factors such as changes in economic or demographic assumptions and changes in the provisions of the plan or in the legislation applicable to pension plans. The plans liabilities are calculated using a discount rate, which is established based on the yield of government securities of the NTN-B type. Therefore, in the event the yield of the plans assets differs from that of NTN-B government securities, there will be an actuarial gain or loss increasing or reducing the actuarial deficit/surplus of these benefits. The plans investment practices are governed by the search for and maintenance of liquid assets which provide the necessary yield to comply with their liabilities in the short, medium and long term, maintaining a balance between assets and obligations, with a view to generating a liquidity which is compatible with the growth and protection of capital, thus ensuring a long-term balance between the assets and the needs set forth by the future actuarial flows. The actuarial appraisal realized as at December 31, 2013 showed that for these pension plans, the fair value of the assets exceeded the present value of the actuarial liabilities as indicated below: Present value of the actuarial liabilities Fair value of the plan assets Restriction for recognition of assets Recognized asset Present value of the actuarial liabilities Fair value of the plan assets Restriction for recognition of assets Opening balance recognized ( ) (90.055) 0,00 ( ) (98.551) Cost of current service (854) 0, ,00 (394) 0, Interest cost (17.130) 0, ,00 (15.699) 0, Earnings expected from assets 0, (25.525) 0,00 0, (27.961) Past service cost (27.977) 0, ,00 0,00 0,00 0,00 Actuarial/Gains (losses) (8.292) (34.605) 0,00 (26.995) Contributions paid by EDP Escelsa 0, (383) 0,00 0, (210) Contribution paid by employees (382) 382 0,00 0,00 (206) 206 0,00 Benefits paid by the plan (14.326) 0,00 0, (12.024) 0,00 Change in the recovery of the surplus 0,00 0,00 0, ,00 0,00 0,00 Closing balance ( ) ( ) ( ) (90.055) The surplus in the defined benefit pension plans reduces the risk of an eventual actuarial liability for EDP Escelsa. EDP Escelsa's management did not record the asset arising from actuarial surplus of Plan I as the effective reduction of contributions from the sponsor or the reversal of amounts in the future are not assured. As regards the actuarial surplus calculated for Plan II, EDP Escelsa recorded as an asset the present value of R$1,638 arising from the reduction in future contributions, as authorized by the PREVIC through Ordinance no. 664/

59 As the sponsor company, EDP Escelsa contributes a monthly amount proportional to the contributions of EnerPrev members, in accordance with the conditions established in each benefit plan. EDP Escelsa paid contributions in 2013 amounting to R$2,931 (R$2, ). The maturities of the benefit plan, calculated by the actuarial valuation, consider the following future payment stream: Maturity Current 2014 Plan I Plan II Non-current assets Total The main classes of plan assets are as follows: 12/31/ /31/2012 Asset class Active Market Allocation % Allocation % Debt instruments Quoted 90,51% 91,09% Shares Quoted 8,20% 7,60% Real estate Quoted 0,45% 0,44% Others Unquoted 0,84% 0,87% Total 100,00% 100,00% These plans participants are broken down as follows: Plan I Plan II Plan I Plan II Active participants Assisted participants 0,00 0,00 0,00 0,00 With deferred benefits 0, ,00 15 Retirees and pensioners Total The sensitivity analysis arising from the risk of change in the discount rate and mortality table is presented below, considering only the change in the hypotheses mentioned in each line. Sensitivity analysis Plan I Plan II Core premises Discount rate Increase in the discount rate by 0.5% (341) (251) Decrease in the discount rate by 0.5% Mortality If the plan s participants were only one year younger than their actual age The main assumptions utilized in this actuarial appraisal of the benefits were as follows: Economic Discount rate - nominal Future salary increases Growth of benefit plans Inflation Plan I 2013 Plan II 12.00% p.a % p.a. from 6.40% p.a. up to 2016, decreased to 5.65% p.a. as of % p.a. 5.00% p.a. from 6.40% p.a. up to 2016, decreased to 5.65% p.a. as of % p.a. 5.00% p.a. Plan I 9.30% p.a. 9.30% p.a. from 6.90% p.a. up to 2016, decreased to 5.79% p.a. as of % p.a. 5.00% p.a Plan II from 6.90% p.a. up to 2016, decreased to 5.79% p.a. as of % p.a. 5.00% p.a. Demographic Mortality table Mortality table for invalids Disability table AT 2000 AT 2000 AT 2000 AT 2000 RP 2000 Disabled RP 2000 Disabled RP 2000 Disabled RP 2000 Disabled Wyatt 85 Class 1 Wyatt 85 Class 1 Wyatt 85 Class 1 Wyatt 85 Class 1 57

60 Retirement incentive aid (AIA), medical care, life insurance and other benefits to retirees: Defined benefit Retirement Incentive Aid (Auxílio de Incentivo a Aposentadoria - AIA): Benefit to employees hired up to December 31, 1981, payable on termination of the labor contract, irrespective of the reasons for such severance. The AIA guarantees the payment of a benefit, the amount of which was calculated considering, for each employee, the proportion of the period of contribution to the Brazilian Social Security Service (Instituto Nacioanl do Seguro Social - INSS) up to October 31, 1996, the employee s salary and the INSS benefit as at October 31, 1996; and Medical care, life insurance and other benefits to retirees: Coverage for medical and dental care, medications, life insurance, and in proven cases, existence of dependents with special needs, corresponding to 50% of the EDP Escelsa s minimum salary. The actuarial evaluation carried out as of December 31, 2013 determined a present obligation for defined benefit plans. A series of assumptions may be realized differently from as calculated in the actuarial valuation due to factors such as changes in economic or demographic assumptions and changes in the provisions of the benefits or in the legislation applicable to them. Most of the benefits' liabilities consist of the grant of lifetime benefits to participants. For this reason, increases in life expectancy will result in an increase in the plans liabilities. These benefits are sensitive to inflation, and inflation higher than expected in this valuation will result in an increase in liabilities. We present below the changes for the year in the defined benefit liability recognized in the statement of financial position: Present value of the actuarial liabilities Restriction for recognition of assets Present value of the actuarial liabilities Restriction for recognition of assets Reclassified Reclassified Opening balance recognized ( ) ( ) ( ) ( ) 0,00 Cost of current service (3.655) (3.655) (2.331) (2.331) 0,00 Interest cost (34.935) (34.935) (21.565) (21.565) 0,00 Past service cost (6.669) (6.669) 0,00 0,00 0,00 Special cost due to end of benefit 0,00 0,00 (130) (130) 0,00 Actuarial/Gains (losses) (30.885) (30.885) ( ) ( ) 0,00 Benefits paid by the plan Closing balance recognized ( ) ( ) ( ) ( ) The actuarial loss of R$30,885 in the present value of liabilities, calculated in the actuarial valuation made as of December 31, 2013, arose mostly from the revision of the aging factor and the change in discount rate in that appraisal. On December 31, 2012, there was an actuarial loss of R$163,650. In 2014, expected contributions from EDP Escelsa for these benefits during 2014 amount to R$24,152. The maturities of the benefit plan, calculated by the actuarial valuation, contemplate the following future payment stream: Maturity Current 2014 Non-current assets Medical Healthcare and Life Insurance AIA (Retirement Incentive Aid) Total

61 These benefit's net expenses recognized in income and actuarial gains and losses recognized in other comprehensive income as a contra entry to Postemployment benefits are as follows: Service cost Cost of current service Interest cost Past service cost ,00 Special cost due to end of benefit 0, Components of defined benefit costs recognized in profit or loss Re-measurement of the net amount of the defined benefit liability Actuarial (gains) losses arising from changes in demographic assumptions Actuarial (gains) losses arising from experience adjustments Actuarial (gains) losses arising from changes in financial assumptions Components of defined benefit costs recognized in other comprehensive results Total , ( ) The prior service cost totaling R$6,669 calculated in the year refers to the enrollment of 137 new participants in the Life Insurance benefit, as a result of court decisions. Actuarial gains and losses derived from actuarial appraisals are recorded as Other comprehensive income, in the shareholders' equity, and recognized in the period of occurrence. The balance on December 31, 2013, of actuarial loss, net of Income and social contribution taxes is R$229,119 (R$208,735 on December 31, 2012). The number of participants considered in the actuarial valuation is summarized below: Medical Healthcare and Life Insurance Medical Retirement Healthcare Incentive Aid - and Life AIA Insurance Retirement Incentive Aid - AIA Active participants Assisted participants 0,00 0,00 0,00 0,00 Retirees and pensioners , ,00 Total The sensitivity analysis arising from the risk of change in the discount rate and mortality table is presented below, considering only the change in the hypotheses mentioned in each line. Sensitivity analysis Retirement incentive aid Medical and Dental care Benefits to retirees Life Insurance Core premises Discount rate Increase in the discount rate by 0.5% (18) (22.735) (201) (810) Decrease in the discount rate by 0.5% Mortality If the plan s participants were only one year younger than their actual age 0,

62 The main assumptions utilized in this actuarial appraisal were as follows: Economic Discount rate - nominal Future salary increases Growth of benefit plans Long-term medical inflation Inflation Aging factor Demographic Mortality table Mortality table for invalids Disability table AIA (Retirement Incentive Aid) 12.00% p.a. from 6.40% p.a. up to 2016, decreased to 5.65% p.a. as of 2017 RP 2000 Disabled 2013 Medical care n/a 5.00% p.a. n/a 5.00% p.a. 5.00% p.a % per year in 2014, n/a decreased linearly to 5.5% per n/a n/a year up to % p.a. 5.00% p.a. 5.00% p.a. 5.00% p.a. n/a 3.00% p.a. n/a n/a RP 2000 Gerational RP 2000 Gerational RP 2000 Gerational RP 2000 Gerational RP 2000 Disabled Wyatt 85 Class 1 Wyatt 85 Class 1 Life Insurance 12.00% p.a % p.a % p.a. n/a RP 2000 Disabled Wyatt 85 Class 1 Other benefits to retirees from 6.40% p.a. up to 2016, decreased to 5.65% p.a. as of 2017 RP 2000 Disabled Wyatt 85 Class 1 Economic Discount rate - nominal Future salary increases Growth of benefit plans Long-term medical inflation Inflation Aging factor Demographic Mortality table Mortality table for invalids Disability table 2012 AIA (Retirement Incentive Aid) Medical care Life Insurance 9.30% p.a. 9.30% p.a. 9.30% p.a. 9.30% p.a. from 6.90% p.a. up to 2016, decreased to 5.79% p.a. as of 2017 n/a n/a 6.90% p.a. 5.00% p.a. n/a 5.00% p.a. 5.00% p.a. n/a 5.00% p.a. 5.00% p.a. 5.00% p.a. 5.00% p.a. n/a 1.50% p.a. n/a n/a 0,00 0,00 0,00 0,00 RP 2000 Gerational RP 2000 Gerational RP 2000 Gerational RP 2000 Disabled Wyatt 85 Class % p.a. in 2013, decreased linearly to 6% p.a. up to 2024 RP 2000 Disabled n/a RP 2000 Disabled Other benefits to retirees RP 2000 Gerational RP 2000 Disabled Wyatt 85 Class 1 n/a Wyatt 85 Class 1 n/a 25.3 Investco Investco currently maintains retirement and pension supplement plans to collaborators and former collaborators and benefits from Medical care, based on Law no. 9656/98. Current assets Non-current 12/31/ /31/ /31/ /31/2012 Reclassified Medical care - Law 9656/ Private pension plan 2 0,00 0,00 0,00 Private pension plan - EnerPrev 6 0,00 0,00 0, Medical care - Law no. 9656/98: Defined benefit Pursuant to Law no. 9656/98, employees who pay a pre-determined monthly contribution for the healthcare insurance plan are entitled to continue as part of a similar plan, in the event of dismissal or retirement, for a determined period of time, in accordance with legislation relating to Healthcare Insurance Plans. Investco's current model, signed on April 14, 2005 with Unimed falls under this legislation. The actuarial evaluation carried out as of December 31, 2013 determined a present obligation for defined benefit plans, as shown in the reconciliation of plan liabilities: Reclassified Present value of the actuarial liabilities Recognized (liability) Present value of the actuarial liabilities Recognized (liability) Opening balance recognized (976) (976) (676) (676) Cost of current service (122) (122) (106) (106) Interest cost (90) (90) (69) (69) Actuarial gains/(losses) recognized in shareholders' 461 (125) 461 (125) equity Closing balance recognized (727) (727) (976) (976) In 2014, expected contributions of Investco for this plan amount to R$29. 60

63 These benefit's net expenses recognized in income and actuarial gains and losses recognized in other comprehensive income as a contra entry to Postemployment benefits are as follows: Service cost Cost of current service Interest cost Components of defined benefit costs recognized in profit or loss Actuarial (gains) losses arising from experience adjustments Actuarial (gains) losses arising from changes in financial assumptions Components of defined benefit costs recognized in other comprehensive results Total (196) (49) (265) 174 (461) 125 (249) 300 Actuarial gains and losses derived from actuarial appraisals are recorded as Other comprehensive income, in the shareholders' equity, and recognized in the year of occurrence. The balance on December 31, 2013, of actuarial loss, net of Income and social contribution taxes is R$50 (actuarial loss in the amount of R$254 on December 31, 2012). The number of participants considered in the actuarial valuation is summarized below: Medical Healthcare and Life Insurance Active participants Total The analysis of the sensitivity to changes in the discount rate and mortality table is as follows: Sensitivity analysis Medical and Dental care Core premises 727 Discount rate 0,00 Increase in the discount rate by 0.5% (40) Decrease in the discount rate by 0.5% 44 Mortality 0,00 If the plan s participants were only one year younger than their actual age 1 The results presented above were achieved by altering only the hypotheses mentioned in each line. The main assumptions utilized in this actuarial appraisal were as follows: Economic Discount rate - nominal Long-term medical inflation Inflation % p.a % p.a. in 2014, decreased linearly to 6.05% p.a. up to % p.a % p.a % per year in 2013, decreased linearly to 6% per year up to % p.a. Demographic Mortality table Mortality table for invalids Disability table RP 2000 Gerational RP 2000 Disabled Wyatt 85 Class 1 RP 2000 Gerational RP 2000 Disabled Wyatt 85 Class Energest Energest currently maintains retirement and pension supplementation plans to employees and former employees and other post-employment benefits, such as medical care, life insurance, Retirement Incentive Aid and other benefits to retirees. Current assets Non-current 12/31/ /31/ /31/ /31/2012 Reclassified Reclassified Retirement Incentive Aid - AIA ,00 0,00 Medical Healthcare and Life Insurance Private pension plan 24 0,00 0,00 0,00 Private pension plan - EnerPrev ,00 0,

64 Retirement plans Defined benefit plan and variable contribution plan Energest is the sponsor of the complementary retirement and pension plans, managed by EnerPrev since October 2008, which is the current managing entity of the pension plans previously managed by Fundação Escelsa de Seguridade Social ( ESCELSOS ), a closed, non profitable private pension plan entity responsible for managing a group of pension plans for the subsidiary Energest's employees and former employees, through two benefit plans: benefit Plan I of the defined benefit type and Benefit Plan II of the variable contribution type, convertible into the defined benefit type on conversion to lifetime income. Energest is the sponsor of the complementary retirement and pension plans, managed by Fundação Enersul, a closed, non profit private pension plan entity responsible for managing a group of pension plans for Energest s employees and former employees, through two benefit plans: benefit Plan I of the defined benefit type and Benefit Plan II of the variable contribution type, convertible into the defined benefit type on conversion to lifetime income. The actuarial appraisal realized as at December 31, 2013 showed that for these pension plans, the fair value of the assets exceeded the present value of the actuarial liabilities as indicated below. Present value of the actuarial liabilities Fair value of the plan assets Restriction for recognition of assets Present value of the actuarial liabilities Fair value of the plan assets Restriction for recognition of assets Opening balance recognized (1.516) (1.313) (1.187) (1.456) Cost of current service (105) 0, (51) 0,00 51 Interest cost (139) 0, (118) 0, Earnings expected from assets 0, (261) 0, (292) Past service cost (149) 0, ,00 0,00 - Actuarial/Gains (losses) 668 (562) (106) (201) (80) 281 Contributions paid by Energest 0,00 25 (25) 0,00 15 (15) Contribution paid by employees (17) 17 - (7) 7 - Benefits paid by the plan 59 (59) - 48 (48) Closing balance recognized (1.199) (1.312) (1.516) (1.313) The surplus in the defined benefit pension plans reduces the risk of an eventual actuarial liability for the Energest. The Energest s management has not recorded this asset due to the uncertainty of an effective reduction in the Sponsor s contributions or of future reimbursement. In its function as sponsor, Energest makes a monthly payment proportional to the members contributions of these plans, as established in each benefits plan. Energest paid contributions totaling R$152 during the year (R$ ). The real return on the plan's assets in the year was R$301, compared to the return estimated early in the year of R$261, thus generating an actuarial loss of R$562 not recorded in shareholders' equity due to the unfeasibility of recognizing the aforementioned surplus. The main classes of plan assets are as follows: 2012 Asset class 12/31/ /31/2012 Captive Market Allocation % Allocation % Debt instruments Quoted 94,13% 89,12% Shares Quoted 3,47% 8,57% Real estate Quoted 0,93% 0,88% Others Unquoted 1,47% 1,43% Total 100,00% 100,00% We present below the composition of the number of plan participants. Plan I Plan II Plan I Plan II Active participants 0, ,00 41 Assisted participants 0,00 0,00 0,00 0,00 With deferred benefits 0,00 2 0,00 4 Retirees and pensioners Total The analysis of the sensitivity to changes in the discount rate and mortality table is as follows: Sensitivity analysis Plan I Plan II Core premises Discount rate Increase in the discount rate by 0.5% (20) (16) Decrease in the discount rate by 0.5% Mortality If the plan s participants were one year younger than their actual age 12 (3) The results presented above were achieved by altering only the hypotheses mentioned in each line. 62

65 The main assumptions utilized in this actuarial appraisal of the benefits were as follows: Economic Discount rate - nominal Future salary increases Growth of benefit plans Inflation Plan I 12.00% p.a. from 6.40% p.a. up to 2016, decreased to 5.65% p.a. as of % p.a % p.a. from 6.40% p.a. up to 2016, decreased to 5.65% p.a. as of ,00 Plan I 5.00% p.a Plan II 9.30% p.a. from 6.90% p.a. up to 2016, decreased to 5.79% p.a. as of % p.a. 5.00% p.a. 5.00% p.a. 5.00% p.a. 0,00 Plan II 5.00% p.a. 9.30% p.a. from 6.90% p.a. up to 2016, decreased to 5.79% p.a. as of , % p.a. 0,00 Demographic Mortality table Mortality table for invalids Disability table RP 2000 Gerational RP 2000 Disabled Wyatt 85 Class 1 RP 2000 Gerational RP 2000 Disabled Wyatt 85 Class 1 RP 2000 Gerational RP 2000 Disabled n/a RP 2000 Gerational RP 2000 Disabled Wyatt 85 Class Retirement Incentive Aid (AIA), medical care and other benefits to retirees: Defined benefit Current assets Non-current 12/31/ /31/ /31/ /31/2012 Retirement Incentive Aid - AIA ,00 0,00 Medical Healthcare and Life Insurance Private pension plan 24 0,00 0,00 0,00 Private pension plan - EnerPrev ,00 0, Retirement Incentive Aid - AIA Benefit for employees hired up to December 31, 1981, payable on termination of the labor contract, irrespective of the reasons for such severance. The AIA guarantees the payment of a benefit, the amount of which was calculated considering, for each employee, the proportion of the period of contribution to the INSS up to October 31, 1996, the employee s salary and the INSS benefit as at October 31, 1996; and Medical care and other benefits for retirees - Medical care, dental care, medicines, and when it is proved that there is a special dependent, a benefit corresponding to 50% of Company s minimum salary. The actuarial evaluation carried out as of December 31, 2013 determined a present obligation for defined benefit plans, as shown below in the movements during the year of the defined benefit liability recognized in the statement of financial position. Present value of the actuarial liabilities Recognized (liability) Present value of the actuarial liabilities Recognized (liability) Opening balance recognized (6.446) (6.446) (3.865) (3.865) Cost of current service (199) (199) (143) (143) Interest cost (595) (595) (392) (392) Actuarial gains/(losses) recognized in shareholders' equity (573) (573) (2.086) (2.086) Benefits paid by the plan Closing balance recognized (7.775) (7.775) (6.446) (6.446) 2013 The actuarial loss of R$573 in the present value of liabilities, calculated in the actuarial valuation made as of December 31, 2013, arose mostly from the revision of aging factor and the change in discount rate in that appraisal. In 2012, the actuarial loss was R$2,086. Expected contributions from Energest for these benefits during 2014 amounted to R$228. These benefit's net expenses recognized in income and actuarial gains and losses recognized in other comprehensive income as a contra entry to Postemployment benefits are as follows: Service cost Cost of current service Interest cost Components of defined benefit costs recognized in profit or loss Re-measurement of the net amount of the defined benefit liability Actuarial (gains) losses arising from changes in demographic assumptions Actuarial (gains) losses arising from experience adjustments Actuarial (gains) losses arising from changes in financial assumptions Components of defined benefit costs recognized in other comprehensive results Total 763 0, (3.130) Actuarial gains and losses derived from actuarial appraisals are recorded as Other comprehensive income, in the shareholders' equity, and recognized in the period of occurrence. The balance as at December 31, 2013 of actuarial losses, net of Income and social contribution taxes is R$3,014 (R$2,635 as at December 31, 2012). 63

66 The number of participants considered in the actuarial valuation is summarized below: Medical Healthcare and Life Insurance Retirement Incentive Aid (AIA) Medical Healthcare and Life Insurance Retirement Incentive Aid - AIA Active participants Assisted participants 0,00 0,00 0,00 0,00 Retirees and pensioners 12 0,00 7 0, Total The analysis of the sensitivity to changes in the discount rate and mortality table is as follows: Sensitivity analysis Retirement incentive aid Medical and Dental care Benefits to retirees Core premises Discount rate Increase in the discount rate by 0.5% 0,00 (510) (26) Decrease in the discount rate by 0.5% 0, Mortality If the plan s participants were only one year younger than their actual age 0, The results presented above were achieved by altering only the hypotheses mentioned in each line. The main assumptions utilized in this actuarial appraisal were as follows: 2013 Economic Discount rate - nominal Future salary increases Growth of benefit plans Long-term medical inflation Inflation Aging factor AIA (Retirement Incentive Aid) 12.00% p.a. from 6.40% p.a. up to 2016, decreased to 5.65% p.a. as of % p.a. n/a 5.00% p.a. n/a 11.59% per year in 2014, n/a decreased linearly to 6.05% per year up to 2025 n/a Medical care 5.00% p.a. 5.00% p.a. Other benefits to retirees 12.00% p.a. from 6.40% p.a. up to 2016, decreased to 5.65% p.a. as of % p.a. n/a 5.00% p.a. 3.00% p.a. n/a Demographic Mortality table Mortality table for invalids Disability table RP 2000 Gerational RP 2000 Disabled Wyatt 85 Class 1 RP 2000 Gerational RP 2000 Disabled Wyatt 85 Class 1 RP 2000 Gerational RP 2000 Disabled Wyatt 85 Class Economic Discount rate - nominal Future salary increases Growth of benefit plans Long-term medical inflation AIA (Retirement Incentive Aid) Medical care 9.30% p.a. 9.30% p.a. from 6.90% p.a. up to 2016, decreased to 5.79% p.a. as of % p.a. n/a n/a n/a 11.44% p.a. in 2013, decreased linearly to 6% p.a. up to 2024 Other benefits to retirees 9.30% p.a. 6.90% p.a. 5.00% p.a. n/a Inflation Aging factor 5.00% p.a. n/a 5.00% p.a. 1.50% p.a. 5.00% p.a. n/a Demographic Mortality table Mortality table for invalids Disability table RP 2000 Gerational RP 2000 Gerational RP 2000 Gerational RP 2000 Disabled RP 2000 Disabled RP 2000 Disabled Wyatt 85 Class 1 Wyatt 85 Class 1 Wyatt 85 Class EnerPrev Pension plans of the defined contribution type EnerPrev is a closed, non profit private pension plan entity which was created at the end of 2006 in order to manage the pension plans of companies within Grupo EDP - Energias do Brasil centrally. EnerPrev manages its own benefit plan of the Defined Contribution type recorded in the CNPB Plans at the PREVIC and the Company and its subsidiaries manage a contracted PGBL (Free Benefit Generating Plan) through Bradesco Vida e Previdência S.A., not generating any actuarial liability for the Company and its subsidiaries. The Funding Plan is sustained parietally by contributions of the sponsors and participants, pursuant to the Benefit Plan Regulations. In the capacity of the sponsors of this type of plans, the Company contributed with R$912 in the year (R$770 on December 31, 2012) and the subsidiaries contributed with R$3,057 in the year (R$2,331 on December 31, 2012). This plan has the adhesion of 84(*) Company collaborators and 975(*) subsidiaries' collaborators. (*) Not audited by independent auditors. 64

67 26 Estimated employee liabilities and social charges Parent company 12/31/ /31/ /31/ /31/2012 Payroll IRPJ / CSLL 0,00 0,00 0,00 18 INSS & FGTS Total The payroll item includes a provision for vacation, basically, as well as the provision for profit sharing for the year. 27 Regulatory and industry charges Accounts payable related to charges established in the electricity industry legislation are as follow: Note Balance as at 12/31/2012 Additions Monetary restatement Payments Write-off Balance as at 12/31/2013 Reclassified Share of Global Reversion Reserve - RGR ,00 (11.221) (1.627) Quota of Fuel Consumption Account (CCC) ,00 (28.066) 0,00 - Interest on reversal fund ,00 (875) 0,00 - Energy Development Account - CDE ,00 (79.588) 0, Financial Compensation for the Use of Water Resources ,00 (35.913) 0, Tariff charges (ECE/ EAEEE) ,00 (62) 0, Research and development - P&D (32.149) 0, Energy Efficiency Program - PEE (24.434) 0, Inspection fee - ANEEL ,00 (13.418) 0, Other charges ,00 0,00 (2.462) 0,00 - Total ( ) (1.627) Current Non-current assets Total Research and Development ( P&D ) and Energy Efficiency Program ( PEE ) Expenditure on P&D and PEE made by the subsidiaries are calculated under the terms of the industry legislation, of the electrical energy concession contracts and are regulated by ANEEL Normative Resolutions no. 316/08, applied until September 2012 and amended by Normative Resolution no. 504/12, referring to P&D and no. 300/08, applied until May 2013 and amended by Normative Resolution no. 556/13, regarding the Energy Efficiency Program. Subsidiaries must apply 1% of the net operating revenue adjusted in accordance with the criteria defined by ANEEL, recording the liability amount monthly, on an accruals basis. The liability is adjusted monthly by the variation of the SELIC benchmark interest rate up to the month the expenditures are incurred, and is stated net of all the investments made. 28 Use of public property The Use of Public Property (UBP) is a granted right arising from tenders where the concession holder delivers, or promises to deliver, economic resources in exchange for the right to explore the object of the concession throughout the period provided for in the contract. The UBP will be paid throughout the concession period as from the start of commercial operations or delivery of the energy provided for in the Electricity Sale Contract in the Regulated Environment (CCEAR), whichever occurs first, as established in the Concession Contracts or using other term when indicated in the concession contract for operating enterprises that had its type changed to onerous concession. Amount of the installment Interest rate Discount rate Amortization period Subsidiary Balance as at 12/31/2012 Balance as at 12/31/2013 Investco IGP-M 6,00% 2033 Enerpeixe IGP-M 6,00% 2036 Pantanal IPCA 7,60% 2018 Total The total fair value of the obligation referring to the use of public property was provisioned and capitalized as a counter entry to Intangible assets (Note 21) upon initial recognition. The provision for payments for the use of Public Property was recognized in accordance with CPC 25, and CPC 38 was adopted for fair value estimation. Intangible assets of subsidiaries Enerpeixe and Investco are amortized over the concession agreement period and intangible assets of Pantanal are amortized over five years. The liability is amortized through payment. Current and non-current liabilities balances are recognized at their present value at the project's implicit rate. Changes in the year are as follows: Current assets Balances as at 12/31/2012 Acquisitions Adjustment to present value Charges and monetary restatements Amortizations Transfer Transfer to Liability Maintained Sale Balances as at 12/31/2013 Use of public property (33) 618 (20.682) (33) 618 (20.682) Non-current liabilities Use of public property (13.574) (21.059) (15.272) (13.574) (21.059) (15.272)

68 29 Provisions Parent company Current assets Non-current Current assets Non-current Note 12/31/ /31/ /31/ /31/ /31/ /31/ /31/ /31/2012 Provisions for civil, tax and labor contingencies Environmental permits Contingent consideration Total Provisions for civil, tax and labor contingencies and restricted deposits The Company and its subsidiaries are parties to lawsuits and administrative proceedings in several courts and with government bodies arising from the normal course of its operations, involving tax, labor, civil and other issues Risk of probable loss Based on information from its legal advisors and the analysis of pending lawsuits, the management of the Company and its subsidiaries have constituted provisions considered sufficient to cover losses estimated as probable for ongoing lawsuits, as follow: Liabilities Parent company Write-offs Judicial deposits Degrees Balance as at Monetary Reclassificati Balance as at 12/31/2012 Additions Payments Reversals restatement on 12/31/ /31/ /31/2012 Labor 1st, 2nd and 3rd ,00 0, , Civil st, 2nd, 3rd and M (3.261) 0,00 0,00 0,00-0,00 0,00 Tax st, 2nd, 3rd and M (2.006) 0, (1.995) - 0,00 0,00 Others ,00 (12.522) , ,00 0,00 Total (5.267) (12.522) (1.995) Current ,00 0,00 Non-current assets Total Assets Labor Civil Tax Others Total Liabilities Write-offs Assets Judicial deposits Degrees Balance as at Monetary Reclassificati Balance as at 12/31/2012 Additions Payments Reversals restatement on 12/31/ /31/ /31/2012 1st, 2nd and 3rd (43.029) (26.786) , , 2nd, 3rd and M (29.280) (9.061) , , 2nd, 3rd and M (3.450) (23) (3.568) (1.357) (12.522) , ,00 0, (77.116) (48.392) (3.568) Current Non-current assets Total ,00 0, Labor EDP Bandeirante Lawsuits have been filed corresponding to the periods after January 1st, 1998 according to the agreement for the partial spin-off of Eletropaulo - Eletricidade de São Paulo S.A. Subsequently, pursuant to the Partial Spin-off Agreement of Bandeirante on October 1st, 2001, each concessionaire (Bandeirante and Piratininga) is responsible for the liabilities corresponding to the employees allocated to the respective regions taken over by each Company. Responsibility for corporate suits will be taken on according to the percentage proportion of the controllers (Bandeirante and Piratininga) as determined in the respective spin-off agreement. Include several lawsuits disputing, among other issues, overtime payments and hazardous work. Based on the assessment by legal advisors, there were additions and reversals in the reserve for labor contingencies, mainly due to the change in the assessment of the risk arising from the progress of the respective lawsuits. The balance provided on December 31, 2013, amounting to R$21,530 (R$18,676 on December 31, 2012). EDP Escelsa Among several labor claim lawsuits, we emphasize 32 collective lawsuits, involving several employees who question the changes made in the job and salary plan from 2002 to On June 30, 2013, an agreement was reached with 95% of the workers represented by the trade union of the category, totaling R$21,583, ratified in July 2013 by the Judge of the 4th Labor Court of Vitória and settled in August As a result of the aforementioned agreement, a reserve for contingencies was recorded in the year, totaling R$21,583, to the debit of the Manageable operating expenses caption Provisions for Civil, tax and labor contingencies. In addition, the calculations referring to the other workers who have not yet accepted the agreement are awaited, the estimated accrued amount of which is R$420 as of December 31, EDP Escelsa, Energest, Investco, EDP GRID, Enerpeixe and EDP - Energias do Brasil Refers to several lawsuits that, in general, relate to overtime payment, salary equalization, joint responsibility involving service providing companies, indemnity for pain and suffering/ property damage, and pension supplements, among others. The balance provided on December 31, 2013 amounting to R$45,930 (R$44,500 on December 31, 2012). 66

69 Civil EDP Bandeirante Refer mainly to claims for reimbursement of amounts paid in the form of tariff increases by industrial consumers due to the application of DNAEE Ordinances no. 38/86 and 45/86 (the Cruzado Plan), in force from February to November of that year. Original values are restated based on the system used by the Judiciary. As of December 31, 2013, the balance is R$35,945 (R$37,158 as of December 31, 2012), emphasizing: Lawsuit no , in progress at the 10th Civil Court of the Central Forum of the Judiciary District of Rio de Janeiro, discussing the existence of affects resulting from administrative rulings no. 38/86 and 45/86 of the dissolved DNAEE, on electrical power consumption tariffs for the period from September 2000 onwards. In April 2010, the Company complied with a legal determination of substitution of the letter of guarantee by a judicial deposit in the amount of R$60,951 and in June 2011, a complement of judicial deposit was made in the amount of R$10,627. EDP Bandeirante submitted various pronouncements and appeals targeting the suspension of the exaction of the amount, and to reverse the determination of the deduction of the percentage of 16.66% on the monthly bills of White Martins, until the release (June 8, 2011), in payment, of the amount of R$60,951 deposited initially, was authorized without the provision of collateral. On June 10, 2011, White Martins obtained this deposit, monetarily restated to R$66,072. Notwithstanding the raising of the aforesaid deposit, the amount of R$10,627 remains on deposit with the court, and there are also appeals pending before the Court of Appeals of Rio de Janeiro and the Superior Court of Justice discussing the matter. The accounting record was presented in order to reduce the judicial deposit against a decrease in the provision made for this contingency. The remaining balance as of December 31, 2013 is R$16,652 (R$13,994 on December 31, 2012). EDP Escelsa Refer mainly to claims for reimbursement of amounts paid in the form of tariff increases by industrial consumers due to the application of DNAEE Ordinances no. 38/86 and 45/86 (the Cruzado Plan), in force from March to November of that year. Original values are restated based on the system used by the Judiciary. As of December 31, 2013, the balance is R$2,461 (R$2,644 as of December 31, 2012). Investco Indemnities The lawsuits of a civil nature - indemnities refer largely to the indemnities claimed by parties that consider themselves affected by the filling of the Lajeado Hydroelectric Power Plant reservoir or that intend to increase the indemnities received from the subsidiary Investco on account of the aforesaid filling. Expropriations Refer to civil lawsuits, resulting from indemnification as expropriation proposed by Investco to fill the reservoir of UHE Lajeado, in which the difference between the amount deposited by Investco and the amount estimated by the expropriated. The balance of judicial deposits as at December 31, 2013 is of R$14,305 (R$14,209 as at December 31, 2012) and is recorded at the item Construction in service - Land (Note 20). Energest Energest was a party to arbitration proceeding A70309 being conducted by the São Paulo Engineering Institute s Mediation and Arbitration Board. Filed by EDEX Engenharia against Energest, legal successor by merger of Castelo Energética S.A., which had claimed a failure to meet liabilities established in the agreement between CESA and EDEX for building the São João PCH power plant. Energest made a payment of R$5,813 related to the decision against it in the arbitration proceeding, and Energest retained an amount of approximately R$1,005, referring to blocking orders issued by the Labor Court against EDEX. Due to the definitive closing of the lawsuit, no provisions were recorded as of December 31, 2013 (R$6,701 as of December 31, 2012) Tax EDP Bandeirante EDP Bandeirante is facing lawsuits related to ICMS on electricity bills, which are classified as probable losses. The balance as at December 31, 2013 is R$4,285 (R$4,285 as at December 31, 2012). There is also an administrative proceeding involving a requirement relating to the use of ICMS credits, originating from the reversal of debt from canceled invoices. The balance provided on December 31, 2013 amounting to R$225 (R$219 on December 31, 2012). EDP GRID The National Social Security Institute (INSS) issued a notification demanding social security contribution for disregarding the company's classification of certain service providers as independent workers and other legal entities, with the argument that there are employment relationships between the service providers and EDP GRID. In December 2013, EDP GRID included the debts in the Installment Payment Program established by Law no /2009 (REFIS) whose Instrument for Adherence was reopened by Law no /13, which led to the write-off of the provision. As at December 31, 2012, this allowance was R$2,446. EDP Escelsa EDP Escelsa is party to litigation regarding claims for service taxes and urban property taxes, which are classified as probable losses, for which updated provisions recorded as of December 31, 2013 amount to R$281 (R$321 at December 31, 2012). It also challenged the fine imposed by the National Social Security Institute (INSS). As of December 31, 2013, EDP Escelsa included the debt in the Tax in Installments Program established by Law no /2009 (REFIS Special Tax Debt Refinancing Program) since the deadline for adhesion was reopened by Law no /13, and this led to the write-off of the provision in the amount of R$909 (R$723 as of December 31, 2012) Others EDP Energias do Brasil In the Company, the proceedings classified as Other refer mainly to the commitments covenanted in the exchange process of the control shares of Enersul with the control shares of Investco formerly belonging to group Rede Energia S.A., relative to the lawsuits of various types filed against Enersul the generating events of which originated in periods when the control of Enersul was exercised by the Company, the balance on December 31, 2013 is R$40,590 (R$37,987 on December 31, 2012). EDP Bandeirante and EDP Escelsa For the subsidiaries EDP Bandeirante and EDP Escelsa, part of the balance of this account includes notices of infraction published by ANEEL during an inspection proceedings that are in the appeals phase, amounting to R$6,

70 Risk of possible loss There are ongoing labor, civil and tax proceedings, the loss of which has been deemed as possible. These items are periodically reassessed, not requiring constitution of provisions in the consolidated financial statements and are as follow: Labor Civil Tax Others Total Degrees 1st, 2nd and 3rd 1st, 2nd, 3rd and Mgt 1st, 2nd, 3rd and Mgt Parent company Assets Assets Balance as at Judicial deposits Balance as at Balance as at Judicial deposits 12/31/ /31/ /31/ /31/ /31/ /31/ /31/ /31/ ,00 0, ,00 0, ,00 0, Among the main claims where losses are deemed as possible, the highlights are as follow: Labor EDP Escelsa Refers to several lawsuits disputing, among other issues, overtime payments and hazardous work and reintegration. The estimated amount on December 31, 2013 is R$47,503 (R$71,689 on December 31, 2012) Civil EDP - Energias do Brasil The group EDP - Energias do Brasil generation and trading companies, through the Brazilian Association for Independent Electricity Producers (APINE), the Brazilian Association for Clean Energy Generation (ABRAGEL), the Brazilian Association for Energy Traders (ABRACEEL) and the Brazilian Association for Thermoelectric Generators (ABRAGET), filed lawsuits to suspend the effects of Resolution no. 03/2013 of the Brazilian Energy Policy Council (Cadastro Nacional dos Planos de Benefícios - CNPE), enacted by the Federal Government, which introduced a sharing between all agents of the energy market of the costs incurred for the additional dispatch of thermal sources (oil, coal and gas) due to the shortage of rain (System Service Charge ESS). From May 2013 to June 2013, injunctions were obtained in the common lawsuits filed by the Associations that represent power generators and traders, which rendered the provisions of Articles 2 and 3 of CNPE Resolution no. 03/2013 null and void and prevented the inclusion of energy generators and traders in the cost sharing calculated pursuant to this Resolution. In August 2013, the Federal Regional Court (TRF) granted the Federal Government s request to suspend the effects of the injunction, restoring the effectiveness of Articles 2 and 3 of CNPE Resolution no. 03/2013 for the members of ABRACEEL. In the lawsuit filed by APINE, the Federal Regional Court decided to maintain the appeal filed by the Federal Government until the final ruling of the lawsuit. Based on the aforementioned facts and arguments, the legal counsel of the Company and its subsidiaries classified the risk of an unfavorable outcome as possible, which is why no reserve has been recorded. On December 31, 2013, the estimated amount is R$14,394. EDP Bandeirante EDP Bandeirante is party to lawsuit no , in progress at the 7th Civil Court of the Central Forum of the Judiciary District of Rio de Janeiro, filed by White Martins, discussing the existence of affects resulting from administrative rulings no. 38/86 and 45/86 of the dissolved DNAEE, on electrical power consumption tariffs for the period from December 1986 to September On September 23, 2011, a sentence unfavorable to EDP Bandeirante was rendered, accepting the request by the plaintiff plus inflation and late interest as at June 1, EDP Bandeirante filed an appeal against this decision, which was partially granted for the purpose of limiting the sentencing of EDP Bandeirante to the validity period of Administrative Ruling 153/86 (in force until March 1987). In view of this decision, EDP Bandeirante and White Martins filed motions for clarification that were rejected. Currently, judgments on appeals filed by both parties with the Higher Court of Justice are still awaited. It is important to emphasize that there is an understanding in the higher courts to the effect that the amounts paid are only refundable in the freeze period, a period that is not discussed in this lawsuit, for which reason the degree of risk remained possible. The estimated amount on December 31, 2013 is R$90,459 (R$76,017 on December 31, 2012). EDP Bandeirante is a party to public civil action no , being processed by the 3rd Federal Civil Court of Belo Horizonte, filed by the Collective Interest Defense Association (ADIC), and claiming indemnity for material damages arising from the tariff adjustment (Parcel A). In that lawsuit, a decision was issued determining exclusion of the defendant concessionaires, and only the ANEEL was maintained. The lawsuit was suspended until, recently, the Superior Court of Justice (STJ) determined that the Judge of the 3rd Federal Civil Court was competent to judge all collective lawsuits challenging the Parcel A issue. The amount estimated as of December 31, 2013 is R$57,812 (R$48,556 as of December 31, 2012). Investco The lawsuits of a civil nature refer mainly to the compensation claimed by parties that consider themselves affected by the filling of the plant reservoir or that intend to increase compensation received administratively from Investco on account of the aforesaid filling, amounting to R$88,070 as at December 31, 2013 (R$87,505 as at December 31, 2012). EDP Escelsa EDP Escelsa is a party to the public civil action no , being processed by the 3rd Civil Court of the Central Judicial District of Belo Horizonte, filed by the Collective Interest Defense Association (ADIC), and claiming indemnity for material damages arising from the tariff adjustment (Parcel "A"). On June 27, 2011, the lawsuit was dismissed without prejudice, and the exclusion of the Distributors as Defendants in the lawsuit was determined. Appeals were filed against this decision by the Public Attorney's Office and the Public Prosecution Office. The appeal filed by the Public Attorney's Office was deemed groundless. The appeal filed by the Public Prosecution Office is awaiting judgment. The estimated amount on December 31, 2013 is R$25,727 (R$21,608 on December 31, 2012). 68

71 Tax EDP - Energias do Brasil The Company is a party to administrative discussions related to the Federal Revenue Service not recognizing a corporate income tax (IRPJ) negative balance, determined for the years 1999/2001, originating from a merged company (Magistra Participações S.A.), and that totals R$65,795 as at December 31, On December 31, 2012, these lawsuits totaled R$70,875. EDP Bandeirante Among the main claims where losses are deemed possible, the most significant is the discussion at the administrative level regarding ICMS credits utilized by EDP Bandeirante in the period from July to December 2003, referring to "Annulment/Return of Sale of electrical Energy" amounting to R$116,344 restated up to December 31, 2013 (R$111,498 as at December 31, 2012). EDP Bandeirante has presented its defense and is awaiting judgment. The risk value has substantially increased due to the new adjustment criteria of State Law no /09. The subsidiary also has an administrative proceedings relating to the use of ICMS credit, originating from the reversal of debt of canceled invoices, amounting to R$23,216 through December 31, 2013 (R$22,556 as at December 31, 2012). EDP Bandeirante has presented its defense and is awaiting judgment. EDP Bandeirante has other tax contingencies amounting to approximately R$172,278, restated up to December 31, 2013 (R$167,977 as at December 31, 2012) referring to the administrative discussion of non-homologated offsets of credits arising from IRPJ, CSLL, PIS and COFINS overpayments in 2001, as a result of the application of COSIT Opinion 26/02 (taxes on RTE). EDP Bandeirante has filed a lawsuit relating to COFINS for the period 1993 to 1995, in a joinder with AES Eletropaulo. The dispute refers to the right to the future use of the amnesty brought by Provisional Measures nos and , granted to taxpayers that failed to pay taxes as they considered them inappropriate. In the second instance judgment, the right to amnesty was partially confirmed, excluding the portion concerning the charges of Decree Law 1025/69. The external consultants sponsoring the lawsuit classified the contingency referring to the charges as a possible loss. The restated amount up to December 31, 2013 totaled R$104,186 (R$102,485 as of December 31, 2012). The proceeding is currently awaiting the judgment of an Appeal to the Higher Courts. EDP Bandeirante is contesting assessments of the City Hall that requires the payment of a fine for alleged breach of ancillary liabilities related to the installation of electricity poles. The contingency amount on December 31, 2013 is R$39,659 (R$21,915 on December 31, 2012). EDP Escelsa INSS tax authorities issued social security contribution on: (i) not considering self-employed and other legal entities, claiming the existence of employment bond between service providers and EDP Escelsa; (ii) the levy of INSS tax on profit sharing and scholarship payments made to employees that are pension plan members. These restated notices up to December 31, 2013 amount to R$7,148 (R$7,401 on December 31, 2012) and are currently awaiting an administrative decision. Sundry municipal authorities: EDP Escelsa is discussing in court the collection of ISSQN allegedly levied on services related to the supply of electrical power. Also includes payment demand on land occupied by posts for the electricity network and public lighting. On December 31, 2013, these restated lawsuits amount to R$11,198 (R$9,363 on December 31, 2012) and are awaiting lower court decision. EDP Escelsa also has administrative and court proceedings with regard to tax offsetting issues not ratified by the federal tax authorities, based on credits recognized in court, as well as negative IRPJ and CSLL balances resulting from IRPJ, CSLL, PIS, and COFINS overpayments made in 2001, as a result of applying Opinion COSIT 26/2002 (taxes on RTE) totaling R$105,851 as at December 31, 2012 (R$102,670 as at December 31, 2012). EDP Comercializadora EDP Comercializadora is discussing in court the levy of ICMS on interstate electric power sales transactions amounting to R$16,165 on December 31, 2013 (R$16,165 on December 31, 2012) which is collateralized by bank guarantees. The risk value has substantially increased due to the new adjustment criteria of the State of Minas Gerais. The proceeding is currently awaiting the judgment. There are administrative discussions about the collection of IRPJ, CSLL, PIS and COFINS debts referring to 2004/2006, arising from the non accreditation of the offsetting of these taxes credits. The restated amount up to December 31, 2013 totaled R$13,512 (R$13,044 as of December 31, 2012) Others Refer to the contingency described in note Risk of remote loss In addition to this, in the subsidiary companies EDP Bandeirante, EDP Escelsa, Energest, EDP GRID, Investco and Lajeado there are labor, civil and tax related proceedings underway, for which the chances of loss have been estimated as remote, and for these actions the court deposit balances as at December 31, 2013 amount to R$33,231 (R$29,391 as at December 31, 2012). EDP Bandeirante, through the Energy Trade Association of the State of São Paulo (SindiEnergia) filed two collective injunctions against the Finance Department of the state of São Paulo to obtain a suspension of the effects of Decrees No /10 and 55867/10. Both lawsuits received favorable decisions that have been confirmed up until now by the judgment of the appeal in the São Paulo State Court of Justice, and are awaiting judgment. EDP Bandeirante and its external advisors consider that the case has a remote likelihood of unfavorable outcome. The estimated amount under the terms of the Decrees as of December 31, 2013 is R$166,540 (R$117,031 on December 31, 2012) Environmental permits The amount of R$11,540 on December 31, 2013 (R$19,172 on December 31, 2012) refers mostly to provisions for the costs of providing construction licenses, installing and operating generating power plants, related to the requirements of governmental agencies. These costs are either associated with the Basic Environmental Project or are in addition to it, and their main objectives are reforestation, acquisition and regularization of rural and urban areas, recovery and improvement of roads, electrical and sanitary infrastructures, and the implementation of conservation units. These costs are recognized under the heading of Property, plant and equipment, since they are associated with the Basic Environmental Project, and are therefore treated as power plant costs. The balance of this provision is recognized at the best estimate and monetarily restated based on the general market price index (IGP-M). 69

72 29.3 Contingent consideration As part of the agreement for the acquisition of ECE Participações by CEJA and the transfer of the additional 10% of the concession of the Jari Hydroelectric Power Plant to ECE Participações, executed into in 2011, contingent consideration amounts were agreed with the former owners. Up to December 31, 2013, the amount of R$91,944 was paid by CEJA and R$10,244 by ECE Participações referring to extension of the concession agreement, increase of the power plant capacity and approval of the Infrastructure Development Incentive. In conformity with the agreement, the original amount of R$19,000 (CEJA) and R$2,111 (ECE Participações), relating to approval with all the competent Government Authorities and publication of the fiscal benefit of rate differential due in interstate purchases of machinery, apparatuses, equipment, their parts and other materials, as well as imported products without a similar national product (DIFAL), subject matter of Agreement ICMS No. 53, of July 6, Since, at December 31, 2013, the DIFAL tax benefit had not been granted and that was the deadline established in the agreement for the contingent considerations to be provided, the balance payable to former proprietors, in the restated amount of R$23,427 (CEJA) and R$2,626 (ECE Participações) was reversed, with a contra entry in income. All other contingent considerations were honored by the former proprietors, and no further obligations to said proprietors by either CEJA or ECE Participações were outstanding. 30 Shareholders' equity 30.1 Capital stock The Company's capital stock is of R$3,182,716, fully subscribed and paid-up, represented by 476,415,612 shares, all of which are ordinary registered shares with no par value, with the following main characteristics: Capital stock is exclusively represented by ordinary shares. Each ordinary share will grant the holder the right to one vote on the resolutions of the Company's General Meetings; The shares are indivisible in relation to the Company. When the share belongs to more than one person, the rights vested thereupon will be exercised by the joint ownership representative; The issue of beneficiary parts by the Company is prohibited; The Company is authorized to increase the capital up to the limit of two hundred million (200,000,000) ordinary shares regardless of statutory reforms, by decision of the Board of Directors, which will also be responsible for establishing the terms of the issue, including the price, term and form of its payment; The Company may issue shares, debentures convertible into ordinary shares and subscription bonuses within the limit of the authorized capital; and At the sole discretion of the Board of Directors, it is possible to exclude or reduce the right of preference in the issues of shares, debentures convertible into shares and subscription bonuses, whose placement is performed through sale at a stock exchange or public subscription, under legal terms, and within the limit of the authorized capital. The composition of the capital stock on December 31, 2013, and 2012 is shown as follows: 12/31/ /31/2012 Shareholder Number of Number of Controlling shares % interest shares % interest shareholder Energias de Portugal Investments and Services, Sociedad Limitada (1) (2) , ,31 yes Balwerk - Consult. Econômica e Particip., Soc.Unipessoal Ltda. (1) (2) , ,70 yes Board members and Directors Treasury shares (4) , ,18 Others (3) , ,81 Total , ,00 (1) Shareholder with more than 5% of the voting shares. (2) Foreign-owned company. (3) There are 232,602,924 outstanding shares out of the total 476,415,612 that is, around 48.81% of the total quantity of shares. (4) Treasury stock does not have equity rights. Calculation of free float: 12/31/ /31/2012 Number of shares % interest Number of shares % interest Number of controlling shares , ,01 Number of treasury shares , ,18 Number of shares from Board members and Directors 48 0, ,00 Total of non-outstanding shares Total shares Total free shares , ,81 The shares of EDP - Energias do Brasil are henceforth included in the Bovespa index On January 7, 2013, the Company notified the market that the stock has been included in the Bovespa index with a share of 0.645%. The new portfolio of Ibovespa is henceforth composed of 69 shares. The Bovespa Index ( Ibovespa ) is one of the most important performance indicators of Brazilian stock market quotes. Its importance lies in the fact that Ibovespa portrays the behavior of the instruments traded on the BM&FBovespa index of the listed companies that are most representative of the Brazilian economy. 70

73 30.2 Allocation of net income The Company's dividend policy, pursuant to the 120th meeting of the Board of Directors held on March 5, 2008, proposes the payment of a minimum amount equivalent to fifty percent (50%) of the adjusted net income, calculated in conformity with Article 189 and subsequent articles of the Corporation Law, which can be reduced when required by a legal or regulatory provision or when advisable in view of the financial situation and/or future prospects of the Company. The General and Special Shareholders' Meeting held on April 10, 2013 approved the allocation of net profits, with payment of dividends of R$324,563 referring to 2012, to be paid throughout Of this amount, R$130,422 refers to Interest on capital attributable to dividends decided and approved in the 175th Board of Directors meeting held on December 26, 2012, to be paid without adjustments, and R$194,140 refers to Dividends to be paid with no adjustment to holders of the Company s ordinary shares. On December 18, 2013, the Board of Directors of the Company approved the credit of interest on shareholders' equity, in the gross amount of R$29,190, attributable to the dividends to be distributed by the Company on a payment date to be decided on. 12/31/2013 0,00 Net profits for the year Prior year adjustments - Law no. 11,638/07 (17.659) Adjusted net profits Legal reserve - 5% (17.905) Allocation of net income: Intermediary dividends - JSCP Supplementary dividends Approved additional dividend Number of shares Dividends per share - R$- JSCP 0,06138 Dividends per share - R$- Supplementary dividends 0, , Reserves Note 12/31/ /31/2012 Capital reserves Goodwill in the incorporation of parent company Result of the disposal of treasury shares Other capital reserves Other comprehensive income ,00 0,00 Actuarial (loss) / gain with post-employment benefits ( ) ( ) Financial assets available for sale Cash flow hedge (44.045) (55.425) Deferred IRPJ/CSLL (1.392) (1.908) ( ) ( ) Profit reserves 0,00 0,00 Legal Profit retention Additional dividend proposed Total ,00 0, Reserve for profit The reserve for profit has been constituted pursuant to Article 196 of Law 6404/76 in support of the Company's Capital Expenditure Program as set forth in the capital budgets submitted to the Ordinary General Shareholders' Meetings Other comprehensive income The changes in Other comprehensive income in the year is as follows: Balance as at 12/31/2012 Gain Losses Provision IRPJ/CSLL Balance as at 12/31/2013 Financial assets available for sale ,00 (1.519) Equity income (loss) on other comprehensive income of subsidiaries ( ) ( ) (41.558) ( ) ( ) ( ) (41.041) ( ) 71

74 30.4 Non-controlling interests The non-controlling interests correspond to the interests that other shareholders hold in our subsidiaries. The balance includes founders shares issued by Lajeado and belonging to Centrais Elétricas Brasileiras S.A. Eletrobrás Founders' shares Lajeado, in an Extraordinary General Meeting, held on February 15, 2006, approved an amendment in its by-laws, and created: (i) 53,210,337 registered preferred nonconvertible and nonvoting shares, entitled to earn dividends 10% higher than those paid to a common share; and (ii) 10,000 founders shares, without par value, negotiable and unrelated to the Company s capital stock, granting their holders the right to a possible credit against Lajeado, in an amount equivalent to 10% of the annual profit earned by Lajeado, observing the provisions of Law 6404/76. These shares, as well as the founders shares, were fully subscribed and acquired on this date by Centrais Elétricas Brasileiras S.A. Eletrobrás. The duration of the founders shares is until October 31, 2032, when they will they will be automatically converted into Class A preference shares (Article 14 of the bylaws) corresponding to 5.084% of the total shares issued by Lajeado (Article 14, Paragraphs 1 and 2 of the bylaws), if they have not been redeemed. The redemption can occur at any time at the decision of Lajeado until the end of the duration of the founders shares. Lajeado understands that the securities called founders shares meets the requirements of items 16C and 16D of CPC 39, and, as such, they must be classified as an equity instrument. In addition, the item AG26 of CPC 39 establishes that, when payments to holders of cumulative or non-cumulative preferred shares are made in accordance with the issuer s criteria, the shares are equity instruments. Therefore, we consider that common shares, preferred shares and founders shares must all be classified as the same type of instruments, i.e., equity instruments, since basically they have the same features. Considering the divergence in understanding by the independent auditors of fiscal year 2012, Lajeado, in order to support the book records entered, sought legal opinion and a second opinion, which corroborated the understanding held by Management since 2006 regarding the adopted manner of accounting classification, i.e. as equity instruments. On February 25, 2013, the independent auditors report issued on that date presented a qualification. The independent auditor has expressed understanding that the characteristics of these beneficiary parts are those of a hybrid instrument, and that the referenced balance cannot be, according to accounting practices adopted in Brazil and the IFRSs, fully recorded in the net equity account and the substantial part must be recorded as a liability, reflecting at least the amount of cash that Lajeado must pay to the holder of the beneficiary parts during its validity term. In view of the divergence in understanding between the auditor and Lajeado regarding the accounting classification of founders shares, on February 20, 2013, the Company filed a formal consultation in the Brazilian Securities Commission (CVM). On May 29, 2013, the CVM, through its official letter CVM/SEP/GEA- 5/No. 167/2013, transmitted its initial understanding, but requested further information to evaluate the matter. On November 14, 2013, by means of official letter CVM/SEP/GEA-5/No. 346/2013, CVM completed its understanding and concluded that there are no elements indicating that the accounting criteria adopted by Lajeado would result, in any material respects, in a failure to meet the applicable accounting standards. CVM also informed that the proceeding had been archived. Therefore, as set forth above, the accounting for founders shares, since their creation in 2006, as capital instruments is classified in Lajeado s financial statements in accordance with Brazilian accounting practices and IFRS. 31 Dividends Assets and liabilities Parent company Assets Liabilities Liabilities 12/31/ /31/ /31/ /31/ /31/ /31/2012 EDP Bandeirante ,00 0,00 0,00 0,00 EDP Escelsa ,00 0,00 0,00 0,00 Energest ,00 0,00 0,00 0,00 EDP Comercializadora ,00 0,00 0,00 0,00 Enerpeixe ,00 0,00 0,00 0,00 Shareholders Investco 0,00 0,00 0,00 0, Lajeado ,00 0,00 0,00 0,00 Shareholders - Energias do Brasil 0,00 0, Eletrobrás 0,00 0,00 0,00 0, Governo de Tocantins 0,00 0,00 0,00 0, Furnas Centrais Elétricas S.A. 0,00 0,00 0,00 0, Total The dividends will be received up to December 31,

75 32 Revenue The revenue amounting to R$992 of the parent company (R$1,777 as at December 31, 2012) basically refers to agreements on consulting services rendered to EDP Renováveis. No. of consumers (*) MWh (*) R$ Note Supply Residential Industrial Commercial Rural Government Public lighting Public service Own consumption ,00 0,00 (-) Transfer to TUSD - captive customers 0,00 0,00 0,00 0,00 ( ) ( ) Unbilled supply 0,00 0,00 0,00 0,00 (76.023) Electricity supply Short-term energy 0,00 0, Trading 0,00 0,00 0,00 0, Revenue with power operations Availability of distribution and transmission system TUSD - others TUSD - captive clients 0,00 0,00 0,00 0, TUSD - unbilled 0,00 0,00 0,00 0,00 (15.256) (3.005) TUST 0,00 0,00 0,00 0,00 0, Revenue from construction 0,00 0,00 0,00 0, Other operating income 32.2 and ,00 0,00 0,00 0, Gross operating income (-) Operating income deductions ( ) ( ) Taxes on income 0,00 0,00 0,00 0,00 ( ) ( ) ICMS 0,00 0,00 0,00 0,00 ( ) ( ) PIS/COFINS 0,00 0,00 0,00 0,00 ( ) ( ) ISS 0,00 0,00 0,00 0,00 (1.043) (1.091) Consumer charges 0,00 0,00 0,00 0,00 ( ) ( ) P&D and PEE 0,00 0,00 0,00 0,00 (56.353) (51.439) CCC 0,00 0,00 0,00 0,00 (14.033) ( ) CDE 0,00 0,00 0,00 0,00 (64.653) ( ) RGR 0,00 0,00 0,00 0,00 (8.885) (53.272) PROINFA - Free consumers 0,00 0,00 0,00 0,00 (43.800) (43.806) Other charges 0,00 0,00 0,00 0,00 0,00 (12.052) Revenue (*) Not audited by independent auditors Revenues from Exceeding of Demand and Surplus Reactive Energy ANEEL determined, through Normative Resolution no. 463/11, that the amounts originating from the billing of fines for Surpassing of Demand and consumption of Surplus Reactive Power, as from the contractual date of tariff review referring to the 3rd tariff review cycle, in the case of the Company, as of October 23, 2011, determined the accounting as Special liabilities previously recorded as Operating Income in progress of the current amounts. On the occasion of the 4th tariff review cycle, 2015 in the EDP Bandeirante's case, and 2016 for EDP Escelsa, the amount accumulated in this subaccount, up to the date of the asset appraisal report, should be transferred to the normal account of special Liabilities, when it will receive the normal treatment of the contra account of depreciation of the respective assets allocated as investments originating from these Special obligations. Despite this determination, the subsidiaries, through the Brazilian Association of Electric Power Distributors (ABRADEE), challenged the aforementioned accounting treatment of these revenues in court. On February 8, 2012, the preliminary judicial authorization requested by ABRADEE on Ordinary Action No , being heard in the 6th Court of Federal Court of Distrito Federal (JFDF) was fully granted. The judicial decision had the effect of: a) suspending the treatment of revenues from exceeding of demand and reactive energy surplus mentioned in paragraphs 9 to 11 of item ("Exceeding of Demand and Reactive Energy Surplus") of item 3.1 ("Revenues Inherent to Distribution System") of Sub-Module 2.7 ("Other Revenues") attached to ANEEL Regulatory Resolution No. 463/11; b) suspending the determination of separate accounting of those revenues as if they were special liabilities; and c) granting a preliminary authorization of an inhibiting nature to determine that ANEEL is to abstain from practicing any act tending to require fulfillment of said provisions (which precludes the adoption of other measures for achieving the same effect). On June 19, 2012, the Federal Regional Court of the 1st Region stayed the bill of review lodged by ANEEL, on which occasion the injunction initially granted by the first instance court was suspended and, accordingly, the effectiveness of ANEEL Regulatory Resolution no. 463/11 was reestablished. Also being awaited for is the determination by court whether there are grounds in the interlocutory appeal. In the lower court, expert examinations requested by the Brazilian Association of Electricity Distribution Companies (ABRADEE) are being awaited for In the opinion of the Company s legal counsel, the likelihood of an unfavorable outcome for that lawsuit is classified as possible; however, the subsidiaries recorded the special obligation in their books. The balance as of December 31, 2013, is R$96,320 (R$50,132 as of December 31, 2012). Other revenues - Reimbursement due to shortfall of generation In subsidiaries EDP Bandeirante and EDP Escelsa inclusions were made of R$87,098 referring to amounts owed by generating companies to distribution companies in connection with indemnification for insufficient generation. Other revenues Grants Decree 7891/13 established a broader scope for the application of CDE resources, which were used to subsidize the tariff discounts established by law, such as the social tariff for people on a low income, rural, water, sewage and sanitation, and irrigators. Thus, the revenue difference earned due to the application of the mentioned discounts is no longer indemnified by means of tariffs for other consumers, and are, then, indemnified by means of Energy Development Account subventions. In the fiscal year, subsidiaries EDP Bandeirante and EDP Escelsa recorded the earning of the amount of R$176,215, out of which R$136,251 has been received. 73

76 33 Operating expenses Parent company 2013 Operating expenses 2012 General and administrative Others Total Total Manageable Personnel, Managers and Private pension entity (i) , Material , Third-party services , Depreciation 456 0, Amortization , Provisions for civil, tax and labor contingencies 0, Rentals and leases , Gains and losses from deactivating and disposing of assets 0, ,00 Others (1.345) (7.439) Total (i) In compliance with the best market practices, pursuant to the Corporate Sustainability Index (ISE) of BM&FBovespa, we present the Company s investment in training, which is divided into: leadership development; development of corporate projects; training courses and technical and behavioral seminaries; scholarship; and development of languages. Of the total amount of R$29,743 recorded under Personnel, management and private pension entity", R$960 (R$734 on December 31, 2012) refers to training. Note Costs of electricity Services cost Operation Rendered to third-parties 2013 Sales Operating expenses General and administrativ e Others Total 2012 Total Not manageable Electricity purchased for resale Foreign currency - Itaipu ,00 0,00 0,00 0,00 0, Local currency ,00 0,00 0,00 0,00 0, Electricity network utilization charges ,00 0,00 0,00 0,00 0, Inspection fee 0,00 0,00 0,00 0,00 0, Financial offsetting 0,00 0,00 0,00 0,00 0, Manageable Personnel, Managers and Private pension entity (i) Material Third-party services Depreciation Amortization 0, , , , , , , , , , ,00 0, , , ,00 0, , Allowance for doubtful accounts/net losses 0,00 0,00 0, ,00 0, Provisions for civil, tax and labor contingencies 0,00 0,00 0,00 0,00 0, Rentals and leases 0, ,00 0, , Gains and losses from deactivating and disposing 33.3 of assets 0,00 0,00 0,00 0,00 0,00 (17.783) (17.783) Fair value of indemnifiable financial assets 0,00 0,00 0,00 0,00 0,00 (14.193) (14.193) ( ) Infrastructure construction costs 0,00 0, ,00 0,00 0, Others , , (31.627) (13.763) Total (i) In compliance with the best market practices, pursuant to the Corporate Sustainability Index (ISE) of BM&FBovespa, we present the Company s investment in training, which is divided into: leadership development; development of corporate projects; training courses and technical and behavioral seminaries; scholarship; and development of languages. Of the total amount of R$373,212 recorded under Personnel, management and private pension entity", R$4,977 (R$4,463 on December 31, 2012) refers to training Non-manageable expenditures Based on ANEEL s Regulatory Resolution 549, of May 7, 2013 (Note 3.2), which set forth the rules for the transfer of Energy Development Account to cover the costs of: (i) Charges for Services Systems - ESS; (ii) exposure to the spot market in connection with hydrological risk; (iii) involuntary exposure to the spot market; and (iv) the Portion A Variation Adjustment Account ( CVA ) related to energy purchases and System Service Charges, in accordance with established criteria, subsidiaries EDP Bandeirante and EDP Escelsa in the year recorded the amount of R$594,739 to the credit of heading Electric power purchased for resale, having been fully reimbursed in the year. Amortization In the year, subsidiaries EDP Bandeirante and EDP Escelsa made a supplementary amortization in the amount of R$59,738, arising from their physical and accounting reconciliation, as detailed in Note 21. Gains and losses from deactivating and disposing of assets During the year, the process of disassembly related to the sale of a property (Note 15.2) was concluded, which is why EDP Escelsa recorded a gain of R$52,685. Others Includes the amount of R$26,500 arising from inventory sales (Note 11). 74

77 34 Financial result Parent company Financial revenue Revenue from financial investments Adjustment to present value - Preferred shares , Monetary variation and monetary addition from sold energy 0,00 0, Swap and hedge operations 0,00 0, Monetary restatement of judicial deposits 0,00 0, Monetary restatement of judicial deposits - REFIS Provisions and monetary restatement for civil, tax and labor contingencies 0,00 0, ,00 Monetary restatement - loan agreements Monetary variations - domestic currency 0,00 0, Monetary variations - foreign currency 0,00 0,00 0,00 7 SELIC on tax and social contributions to offset Mark-to-market - MTM 0,00 0,00 0, Discounts obtained 0,00 0, Adjustment to present value 0,00 0, Remuneration of preferred shares ,00 0,00 Contractual fine 0,00 0, (-) Capitalized interest 0,00 0,00 (8.436) 0,00 Other financial revenue Financial expenses Monetary variation and monetary addition from purchased energy 0,00 0,00 (8.299) (4.266) Interest and fines on taxes 0,00 0,00 (227) (182) Debt charges (75.164) (11.158) ( ) ( ) Monetary variations - domestic currency (4.529) (5.176) (5.629) (8.539) Monetary variations - foreign currency (2) 0,00 (11.890) (12.309) Monetary restatement of environmental permits 0,00 0,00 (704) (1.632) Interest and fines on ICMS 0,00 0,00 (5.981) (756) Adjustment to present value - Preferred shares 0,00 0,00 (6.576) (2.953) Provisions and monetary restatement for civil, tax and labor contingencies (418) (2) (20.072) (22.655) SELIC - Energia Livre 0,00 0,00 (5.231) (5.006) Provision for devaluation of securities (7.263) (10.497) (7.263) (10.497) Monetary restatements - REFIS (4.633) (3.176) (9.858) (10.367) Mark-to-market - MTM 0,00 0,00 (710) 0,00 Adjustment to present value 0,00 0,00 (2.376) (4.508) Monetary restatement - loan agreements 0,00 0,00 (829) Monetary restatement for the use of public property 0,00 0,00 (28.395) (32.245) Adjustment to present value of the use of public property 0,00 0,00 (2.750) 217 Post-employment benefits 0,00 0,00 (49.629) (26.870) (-) Capitalized interest 0,00 0, Other financial expenses (17.689) (19.812) (40.327) (40.047) ( ) (49.821) ( ) ( ) Total (72.157) (22.736) ( ) ( ) 75

78 35 Income and social contribution taxes Parent company Income tax Social contribution Profit before income and social contribution taxes Rate 25% 25% 9% 9% IRPJ and CSLL (Income tax) (93.939) (86.177) (33.818) (31.024) 0,00 0,00 0,00 0,00 Adjustments to reflect effective rate 0,00 0,00 0,00 0,00 IRPJ and CSLL on permanent additions and exclusions 0,00 0,00 0,00 0,00 Donations (775) (503) (279) (181) Undeductible losses 0,00 (68) 0,00 (25) Undeductible fines (9) (5) (3) (2) Bonuses to management members (244) (333) (88) (120) Equity accounting result REFIS program , ,00 Interest on own capital (38.656) (19.046) (13.916) (6.855) Others 0,00 0,00 0,00 0,00 (Addition) Reversal of permanent differences (6.811) (4.382) (2.580) (1.577) Additional corporate income tax 0, ,00 0,00 IRPJ and CSLL expenses 103 (909) (92) (334) Effective rate -0,03% 0,26% 0,02% 0,10% Income tax Social contribution Profit before income and social contribution taxes Rate 25% 25% 9% 9% IRPJ and CSLL (Income tax) ( ) ( ) (73.225) (70.097) 0,00 0,00 0,00 0,00 Adjustments to reflect effective rate 0,00 0,00 0,00 0,00 Donations (1.688) (1.310) (607) (472) Undeductible losses (1.405) (5.978) (505) (2.153) Undeductible fines 150 (26) 56 (9) Undeductible expenses (256) (391) (92) (141) Bonuses to management members (991) (857) (356) (310) Equity accounting result (35.106) (26.681) (12.640) (9.605) REFIS program , ,00 Interest on own capital Others 0, ,00 0,00 Others 0,00 0,00 0,00 0,00 Unrecognized deferred income and social contribution taxes (28.705) 394 (10.464) (Addition) Reversal of permanent differences (14.529) (15.407) (5.362) (5.544) Prior fiscal year adjustment - Income tax and social contribution Adjusted deemed profit Additional corporate income tax ,00 0,00 Programa de Alimentação do Trabalhador (Worker Meal Program) ,00 0,00 Cultural and Artistic Incentive ,00 0,00 Donations to sports activities 0, ,00 0,00 Donations to children's and adolescent foundations 0, ,00 0,00 SUDENE/ ADA ,00 0,00 IRPJ and CSLL expenses ( ) ( ) (80.659) (73.315) Effective rate 21,98% 21,85% 9,91% 9,41% 36 Income per share The Company's basic earnings per share for the years presented is calculated by dividing the net income attributable to the holders of Company ordinary shares by the weighted average number of ordinary shares held by the shareholders. In 2013, the Company had no liability financial instruments convertible into Company shares, or transactions that had a dilutive or anti- dilutive effect on the earnings per share of the year. Therefore, the "basic" earnings per share that was calculated for the year equals the "diluted" earnings per share, in accordance with the requirements of CPC 41. The calculation of "basic and diluted" earnings per share is presented in the table below: Net income for the year attributable to shareholders Weighted average of the number of common shares with controlling shareholders (thousands) Basic and diluted earnings per share (R$/share) Parent company , , , ,

79 Financial instruments In compliance with Official Circular Letter CVM/SNC/SEP 3/09, Official Circular Letter CVM/SNC/SEP 2/11 and CVM Instruction 475/08, the Company and its subsidiaries conduct an assessment of their financial instruments, including derivatives, when applicable. General considerations The Company and its subsidiaries carry out operations with financial instruments. The management of these instruments is executed by means of operating strategies and internal controls aiming to ensure credit, liquidity, safety and profitability. The contracting of financial instruments with hedging objectives is performed by means of a periodic analysis of the exposure to the financial risks (foreign exchange, interest rate etc.), which is included in regular risk reports to Management. In compliance with the Financial Risk Management Policy of Grupo EDP - Energias do Brasil, and based on periodic analyses consubstantiated by the risk reports, specific strategies are defined for the mitigation of financial risks, which are approved by Management, for the effective operation of the strategy. The control policy consists of permanent follow-up of the conditions engaged versus those in force in the market by means of operating systems integrated to platform SAP. The Company and its subsidiaries do not perform investments in derivatives or any other risk assets on a speculative basis. The results obtained with these operations are in line with the policies and strategies defined by the Management of the Company and its subsidiaries. The administration of the risks associated with these operations is performed through the application of policies and strategies defined by Management and include the monitoring of levels of exposure of each market risk, forecast of future cash flow and the establishment of limits of exposure. This policy also determines that the updating of information in operating systems, as well as the confirmation and effective operation of transactions with the counterparts, shall be performed with the appropriate segregation of duties. Classification of financial instruments Financial assets Current assets Note Levels 12/31/ /31/ /31/ /31/2012 Cash and cash equivalents 5 Fair value through profit or loss Level Cash and cash equivalents 5 Fair value through profit or loss Level Accounts receivable 7 Loans and receivables Level Related parties 10 Fair value through profit or loss Level Pledges and restricted deposits 12 Assets held to maturity Level Financial assets available for sale 14 Available for sale Level Non-current assets 0,00 0,00 0,00 0,00 0,00 0,00 Accounts receivable 7 Loans and receivables Level Related parties 10 Fair value through profit or loss Level Financial liabilities Current liabilities Category Parent company Fair value Book value Suppliers 22 Other at amortized cost Level Debentures 23 Other at amortized cost Level , ,00 Non-current liabilities 0,00 0,00 0,00 0,00 0,00 0,00 Debentures 23 Other at amortized cost Level Related parties 10 Fair value through profit or loss Level

80 Financial assets Current assets Note 12/31/ /31/ /31/ /31/2012 Category Levels Fair value Book value Cash and cash equivalents 5 Fair value through profit or loss Level Cash and cash equivalents 5 Fair value through profit or loss Level Accounts receivable 7 Loans and receivables Level Consumers and concessionaires 6 Loans and receivables Level Related parties 10 Fair value through profit or loss Level Pledges and restricted deposits 12 Held to maturity Level Income receivable Fair value through profit or loss Level Financial assets available for sale 14 Available for sale Level Non-current assets Accounts receivable 7 Loans and receivables Level Indemnifiable financial assets 18 Available for sale Level Consumers and concessionaires 6 Loans and receivables Level Related parties 10 Fair value through profit or loss Level Pledges and restricted deposits 12 Held to maturity Level Other credits - Derivatives 15 Fair value through profit or loss Level Financial liabilities Current liabilities Suppliers 22 Other at amortized cost Level Debentures 23 Other at amortized cost Level Loans, financing and debt charges 24 Fair value through profit or loss Level Loans, financing and debt charges 24 Other at amortized cost Level Derivatives 15 Fair value through profit or loss Level Use of public property 28 Other at amortized cost Level Non-current liabilities Debentures 23 Other at amortized cost Level Loans and financing 24 Fair value through profit or loss Level Loans and financing 24 Other at amortized cost Level Use of public property 28 Other at amortized cost Level Fair value Fair value is the price that would be received for the sale of an asset or be paid to transfer a liability in a non-forced transaction between market participants at the measurement date. The fair value concept addresses several different measurement methods intended to reliably measure this amount. Some mathematical models have been developed for that purpose. To determine the fair value, the Company and its subsidiaries project financial instruments cash flow until the end of operations, considering contract standards, including post-fixed rates, and using the future (interbank investment average rate) average DI disclosed by BM&FBovespa as the discount rate. Some carrying amounts are equivalent to the fair value because these financial instruments balances are substantially similar to those that would be obtained had they been traded in the market. Financial instrument transactions are presented in the statement of financial position of the Company and its subsidiaries at their carrying amounts, equivalent to their fair value except for certain loans, financings and debt and debenture charges, which in this case, may be different from their fair value. The additional information on the assumptions used for determining the fair values are disclosed below, taking into account their timing and the weighting of each financial instrument: (i) Cash and cash equivalents: Management applies its risk policies, and the balance represents the cost plus interest, with immediate liquidity, equivalent to fair value. Under Management's policies, investments are consolidated by investee and credit rating in order to allow the evaluation of the concentration and credit risk exposure. That maximum exposure is also measured considering the shareholders' equity of the Financial Institution; (ii) Accounts receivable: comprised by credit assignment agreements between subsidiary Lajeado and the companies Tangará Energia S.A. and Rede Energia S.A.. Also recorded under this heading are the redeemable Class A, B, and C preferred shares issued by Investco. Both financial instruments have their features detailed in Note 7; (iii) Consumers and concessionaires: the calculation of the present value is performed for scheduled payments of debts of consumers of the Company, based on the capital remuneration rates, regulated by ANEEL and applied to the tariffs of electricity public service distributors (average remuneration rate of the investment). The counter entry of the adjustments to present value of accounts receivable is against the financial income of the Company; (iv) The related parties account comprises agreements for cost sharing under ANEEL regulation, and loan and lease agreements without conflicting interest, under real market conditions considering only the due amounts without any additions whatsoever; 78

81 (v) Pledges and restricted deposits: are presented at fair value, in compliance with the financing agreements with BNDES and a bank consortium, recognized as part of the agreements' guarantees, as specified in Note 24. In addition, for noncurrent assets, there are amounts from spot-market transactions at the Electric Energy Trading Chamber that are provided as guarantee, and deposits linked to the debts to the National Development Bank of subsidiaries Santa Fé, Pantanal and Enerpeixe; (vi) Financial assets available for sale: Rede Energia group shares are recorded as available for sale and marked to market by means of BMF&Bovespa quotations (Note 14); (vii) Indemnifiable financial assets: subsidiaries EDP Bandeirante and EDP Escelsa recognize an amount receivable from the Concession grantor due to the unconditional right of receiving cash at the end of the concession, as provided for in the contract, as indemnity for the construction services carried out and not received as service provisions related to the concession. These financial assets are recorded at the right's present value and are calculated based on the value of assets pertaining to the concession and that will be reversible at the end of concession; (viii) Other credits - Derivatives: are calculated internally under the discounted cash flow method based on market sources disclosed by BM&FBovespa. Measured at fair value by means of policies adopted by the management of the Company and its subsidiaries to mitigate the risk of exposure to exchange rates and foreign exchange. Evidencing is described in Note 37.6 for Derivative financial instruments. They are composed by fair value hedge account of EDP Escelsa and EDP Bandeirante; (ix) Suppliers: change continuously and is composed mostly of energy supply agreements and network use charges at rates established by the regulated market. Accordingly, the fair value is equivalent to the transaction price; (x) Debentures, loans, financing and debt charges: are valued using the pricing model individually applied for each transaction, taking into account future payment flows, based on contractual conditions and discounts to present value at rates obtained through market interest rate curves, based, whenever possible, on information obtained from the BM&FBovespa website. Thus, a security's market value corresponds to its value at maturity (redemption amount) brought to present value by the discount factor; and (xi) Use of public property: refers to a financial instrument stated at amortized cost with restatement at the general market price index (IGP-M) incurred through the statement of financial position date. Current and non-current liabilities balances are recognized at their present value. For the subsidiaries Enerpeixe and Investco, the discount rate is 6%, which represents the average cost of capital at the time the concession agreements were entered into. For indirect subsidiary Pantanal, the discount rate is 7.6%, which also represents the capital remuneration rate (WACC) Financial instruments were not restated in the years. Measurement at fair value The hierarchy of financial instruments according to their fair value regulates the need for more consistent information, adjusted for the external environment of the Company and its subsidiaries. The instruments fair value measurement requirements of the Company and its subsidiaries are as follow: (a) Level 1 prices agreed on in active markets for identical assets and liabilities; (b) Level 2 - differ from asset and liability prices negotiated in active markets included in Level 1, directly or indirectly; and (c) Level 3 - for assets and liabilities that are not based on market variables. They are generally obtained internally or from sources not considered as deriving from the market. The methodology applied to classify the financial instruments fair value of the Company and its subsidiaries in levels classified as fair value through profit or loss, held to maturity or available for sale were based on an individual analysis that searched for similar transactions in the market. Comparison criteria were structured considering terms, amounts, grace period, indices and active markets. The simpler and easier is the access to comparative information, the more active is the market, the more restricted the information, the more restricted is the market to measure the instrument Market risk The market risk is presented as the possibility of losses due to the fluctuations of variables that affect market prices and rates. This fluctuation affects virtually all segments, thus representing financial risks. Loans, financing, debt charges and debentures raised by the Company and its subsidiaries presented in notes 23 and 24 have the following counterparties: BEI, BNDES, Eletrobrás, Banco do Brasil, Banco Santander, Banco Itaú, Banco Bradesco, Goldman Sachs, Pentágono Distribuidora de Títulos e Valores Mobiliários, SLW Corretora de Valores and Oliveira Trust. Contract standards for financial liabilities acquired by the Company and its subsidiaries generate risks related to these exposures. As of December 31, 2013, the Company and its subsidiaries are subject to market risks associated to TJLP, CDI, US dollar and Libor. As TJLP and CDI represent interest rate risks, we took into consideration that the Brazilian economy has a favorable scenario for robust growth and infrastructure investment. Inflation being under control and credit availability are key risk factors to consider when raising funds linked to these indices. It should be considered that in a scenario of inflation growth and increasing SELIC, the cost of these transactions could be higher. Considering the strong currency and that the country s risk is under control, loans denominated in US Dollars and Euros are considered favorable for the Company and its subsidiaries. In addition, the exchange rate risk in foreign currency transactions is considered. In an economy where exchange rate fluctuation is very high, this exposure may be a relevant factor to make the transaction not possible. Subsidiaries EDP Bandeirante and EDP Escelsa hold swap derivatives for economic hedging purposes by controlling all exposures to exchange variation and interest connected with those liabilities. Considering that the market rate (or opportunity cost of capital) is defined by external agents, taking into account the risk premium compatible with activities in the industry, and lacking other alternatives or different market hypotheses and/or estimate methodologies with respect to company business and special features of the industry, the market value of this loan package comes close to its book value, as do the remaining assets and liabilities evaluated. 79

82 Sensitivity analysis In the chart below, scenarios for the different indices used by the Company and its subsidiaries were considered, from interest rate and other indices fluctuation to transactions maturity. The probable scenario was adopted by the Company and its subsidiaries, based mainly on macroeconomic assumptions obtained from the Focus report of the Central Bank. Scenarios II and III consider a risk increase of 25% and 50%, respectively, and Scenarios IV and V consider a risk reduction of 25% and 50%, respectively. These sensitivity analyses were prepared in accordance with CVM Instruction no. 475/08, and are intended to measure the impact of changes in market variables on each financial instrument of the Company and its subsidiaries. Nevertheless, the settlement of transactions involving these estimates can result in amounts different from those estimated due to the subjectivity inherent in the process used for the preparation of these analyses. Information in the chart demonstrates the impact of each risk variation in the results of the Company and its subsidiaries. Parent company Aging - Probable scenario Scenario (I) Scenario (II) Scenario (III) Scenario (IV) Scenario (V) Transaction Risk Up to 1 year 2 5 year Above 5 years Probable Increased risk by 25% Increased risk by 50% Decreased risk by 25% Decreased risk by 50% Financial instruments (assets) CDI , (5.508) (11.017) Financial instruments (liabilities) CDI (49.787) (39.265) 0,00 (89.052) (19.993) (39.620) (30.640) (36.378) - (67.018) (14.485) (28.603) Aging - Probable scenario Scenario (I) Scenario (II) Scenario (III) Scenario (IV) Scenario (V) Transaction Risk Up to 1 year 2 5 year Above 5 years Probable Increased risk by 25% Increased risk by 50% Decreased risk by 25% Decreased risk by 50% Financial instruments (assets) CDI , (44.439) (88.979) Financial instruments (liabilities) CDI ( ) ( ) (11.473) ( ) ( ) ( ) Derivative financial instruments CDI (7.156) (25.534) 0,00 (32.690) (7.792) (15.442) (73.664) ( ) (11.473) ( ) ( ) ( ) Transaction Financial instruments (liabilities) TJLP (45.761) ( ) (71.874) ( ) (44.992) (90.018) (45.761) ( ) (71.874) ( ) (44.992) (90.018) Transaction Financial instruments (liabilities) Dollar (27.810) (55.616) (27.810) (55.616) Transaction Financial instruments (liabilities) Libor - 6M (1.998) (21.112) 0,00 (23.110) (4.614) (9.228) Derivative financial instruments Libor - 6M , (4.614) (9.228) The futures curves of the financial indicators CDI, TJLP, LIBOR and US$ are as projected by the market and are aligned with the expectations of the management of the Company and of its subsidiaries (in the case of the consolidated statement) The indicators had their ranges as shown below: CDI between 7.75% and 10.50%; CDI between 5.00% and 5.50%; Libor 6M between 0.431% and 4.451%; and Dollar from 2.18 to Liquidity risk Liquidity risk relates to the capacity of the Company and its subsidiaries to settle their liabilities. In order to determine the financial capacity of the Company and its subsidiaries to meet the commitments assumed, the maturities of funds raised and other liabilities are also disclosed. More detailed information about the contracted amounts and those released is presented in notes 23 and 24. The management of the Company and its subsidiaries uses only credit lines that allow operating leverage. This premise is reaffirmed by the characteristics of funds effectively raised. Covenants are financial indicators that control the financial health of the Company and its subsidiaries, as required by fund raising contracts. Non-compliance with covenants of loan, financing and debentures agreements may result in an immediate disbursement or early maturity of a liability with defined flow and periodicity. The list of each contract's covenants is presented in notes 23 and 24. Up to December 31, 2013, all covenants of contracted liabilities were fully complied with. net working capital, corresponding to the difference between current assets and current liabilities as of December 31, 2013, was a negative R$108,907 (R$333,458 as of December 31, 2012). Management understands that the Company has reasonable liquidity, despite its negative net working capital, and enjoys the proper conditions to comply with its short-term operating liabilities in every line of business it operates. In the Distribution, specifically at EDP Escelsa, the tariff revision approved in August 2013 will provide part of the funds required to pay commitments foreseen for the short term; whereas loans, financing and debentures maturing in 2014 are being analyzed and structured to be refinanced in order to increase the distribution company s average debt term. For generation, companies whose plants are in operation generate, throughout the year, operating funds of energy sale or lease agreements or flow of dividends that are sufficient to pay short-term obligations. The most expressive financial assets of the Company and its subsidiaries are presented in captions Cash and cash equivalents (Note 5) and Consumers and concessionaires (Note 6) and Indemnifiable financial assets (Note 18). As of December 31, 2013, the Company and its subsidiaries have in cash an immediately available amount and cash equivalents, which are immediate-liquidity financial investments promptly convertible into known cash amounts. Consumer and concessionaire balances presented in Note 6 comprise the estimated flow of receivables. For Indemnifiable financial assets, the balance presented corresponds to the amount receivable from the Concession Grantor at the end of the concession and it is measured at the new replacement value. In addition to controlling the covenants linked to liquidity risk, there are contracted guarantees (Note 39.2) for the headings of loans, financing and debentures. Those contractual guarantees are the maximum that the Company and its subsidiaries may be required to settle, in accordance with the terms of the financial guarantee agreements, if the full guaranteed amounts are put to execution by the creditors for lack of payment. For the heading Energy Purchase, guarantees are mostly linked to receivables of the Company and its subsidiaries, and can be changed in case of possible credit losses in the receivables. The liquidity risks assigned to the headings of Loans, financing and debentures refer to interest about to mature and not yet recorded and are detailed in Note

83 Credit risk The credit risk is the possibility that the Company and its subsidiaries might not realize their rights, and this is directly related to the accounts cash and cash equivalents, consumers and concessionaires, pledges and restricted deposits, among others. In the electrical power industry, the operations carried out are reported to the regulatory agency, which maintains updated information on power volume produced and consumed. Permitting the preparation of plans to guarantee the system operation without interferences or interruptions. Power is traded through auctions and contracts, among other mechanisms, bringing reliability and control on default. The priority of concession agreements for power distribution is to serve the market without excluding the low income population and areas with lower population density. Accepting and serving these new consumers dwelling in the concessionaire's operating area is a standard of the concession agreement. For the distribution of electricity, the financial instrument that may expose the subsidiaries to credit risk is Trade accounts receivable. The rules for the composition of the allowance for doubtful accounts are in compliance with the fundamentals established by the regulatory agency and assumptions approved by the subsidiaries management. The diversification of sales of power to this consumer group makes the subsidiaries' receivables less volatile, and the estimated rate of credit default is 11.68%, as shown in Note 6. The main tool used to mitigate the risk of non-realization of financial assets is to suspend power supply to consumers in default. Before the suspension, the subsidiaries make administrative collections, bill notices, etc. The subsidiaries offer to consumers several communication channels, as follows call centers, service stores and Internet. Short-term investments are also a source of credit risk. The management of these financial assets is through operating strategies based on internal policies and controls, aimed at assuring liquidity, security and profitability. Specific mitigation strategies of the Financial Risk Management Policy of Grupo EDP - Energias do Brasil are periodically conducted based on risk reports. Decisions regarding financial investments are oriented by a Financial Risk Management Policy for the Company and its subsidiaries, which establishes conditions and limits of exposure to market, liquidity and credit risks assessed by specialized rating agencies. The policy determines levels of concentration of investments at financial institutions in accordance with the bank's rating and the total sum of investments of the Company and its subsidiaries, in order to maintain a balanced proportion that is less subject to loss. Management understands that the contracted financial investments do not expose the Company and its subsidiaries to significant risks that might generate material losses in the future. Derivative financial instruments A derivative financial instrument is the instrument whose value is influenced by the fluctuation of a financial instrument rate or price, does not require an initial investment, or the initial investment is much lower than those of similar contracts and is always settled at a future date. Only if all those characteristics are met can a financial instrument be classified as a derivative. All transactions with derivatives in the consolidated refer to EDP Bandeirante and EDP Escelsa. The subsidiaries have contracted for a derivative financial instrument classified as a swap, which is a fair-value hedge accounting instrument intended to hedge the recognized liability with the European Investment Bank (BEI). Those agreements are fully effective for the exposure to interest rate and exchange variation risks, since the contracted derivatives establish an exchange rate and the replacement of the Libor by the interbank deposit rate under the same conditions and amounts contracted in the financing with the EIB. The notional amount and the flows of payment and receiving of principal and interest are the same for the hedge instrument and the covered position in the initial recognition. Gains and losses arising from fluctuations during the year in the derivatives held by EDP Bandeirante and EDP Escelsa were charged to income. The fair value of the derivatives held by EDP Bandeirante and EDP Escelsa is calculated internally under the fair value methodology. Changes in the derivative s fair value are recognized in income together with the changes in the hedged item. 81

84 Derivative financial instruments 12/31/ /31/2012 Company Swaps Total Swaps Total Asset leg Libor % p.a. EDP Escelsa Libor % p.a. EDP Bandeirante Liability leg 93.40% of CDI EDP Escelsa % of CDI EDP Bandeirante Total Gains and losses from the subsidiaries derivative transactions on December 31, 2013 and 2012 are: Derivative financial instruments - Gains and losses 12/31/2013 Financial result 12/31/2012 Financial result 31/12/2012 Shareholders equity Derivatives intended for protection Exchange risks ,00 Total The net maturity of derivatives is shown in the table below. Maturity Derivatives - net 2014 (1.534) After Receivable/ (payable) In compliance with CVM Instruction 475/08, information on derivative financial instruments should include the motivation for the hedged transaction, the instrument s fair value, the impact on the results of the subsidiaries for the year and the main characteristics of the contracted instrument. These details are shown in the following table. Inception Notional US$/EUR Notional R$/US$ Fair value Effects on income (loss) Description Subsidiary Counterpart Maturity Position 12/31/ /31/ /31/ /31/ /31/ /31/ /31/ /31/2012 Swap Banco Libor 6M + 9/2/ Assets EDP Escelsa Goldman 1,275 % p.a. Liabilities Sachs 20/2/ % of CDI Assets Liabilities EDP Bandeirante Banco Goldman Sachs 9/2/2012 Libor 6M + 1,275 % p.a /2/ % of CDI 0,00 0,00 0,00 0, Assets 19/3/2004 Libor + 4,375 % p.a. 0,00 0,00 0,00 0,00 0,00 0,00 0,00 (97) EDP Bandeirante Banco Liabilities Citibank 14/2/ % of CDI 0,00 0,00 0,00 0,00 0,00 0,00 0, (129) Assets Banco 14/12/2004 Libor + 4,375 % p.a. 0,00 0,00 0,00 0,00 0,00 0,00 0,00 (36) Liabilities EDP Bandeirante Citibank 14/2/ % of CDI 0,00 0,00 0,00 0,00 0,00 0,00 0, (48) Assets 5/4/2006 Libor + 4,375 % p.a. 0,00 0,00 0,00 0,00 0,00 0,00 0,00 (59) EDP Bandeirante Banco JP Liabilities Morgan 14/2/ % of CDI 0,00 0,00 0,00 0,00 0,00 0,00 0, (78) Assets 5/4/2006 Libor + 4,375 % p.a. 0,00 0,00 0,00 0,00 0,00 0,00 0,00 (49) EDP Bandeirante Banco JP Liabilities Morgan 14/2/ % of CDI 0,00 0,00 0,00 0,00 0,00 0,00 0, (62) 82

85 37.7 Capital management The purpose of the Grupo EDP - Energias do Brasil s capital management is to safeguard business continuity of the Group in order to offer returns to shareholders and benefits to other stakeholders, as well as maintaining an optimal capital structure to reduce costs. In order to maintain or adjust its capital structure, Grupo EDP - Energias do Brasil may review its dividend payment policy, return capital to shareholders and even issue new shares or sell assets to reduce its indebtedness level Total loans and debentures 23 and Less: cash and cash equivalents 5 ( ) ( ) Net debt Total shareholders' equity Total capital Financial leverage index - % 27,19 28, Non-cash transactions In accordance with CPC 03 (R2), investing and financing transactions not requiring the use of cash or cash equivalents should not be included in the statement of cash flows. During the reporting year, the subsidiaries' activities that did not involve cash and, consequently, are not included in the statement of cash flows, are as follows: (i) The subsidiaries CEJA, ECE Participações, Cachoeira Caldeirão, EDP Bandeirante and EDP Escelsa capitalized debt charges to fixed and intangible assets amounting to R$46,022 for the year; and (ii) In the year the Company posted dividends payable in the amount of R$160,718. Contractual commitments and guarantees Contractual commitments On December 31, 2013, commitments through obligations from purchases and liabilities from operating rentals (which are not recorded in the financial statements), are presented per maturity, as follows: Parent company 12/31/2013 Obligations from purchases Due debenture interest Total Up to 1 year 1 3 years 3 5 years Above 5 years , ,00 0, /31/2013 Total Up to 1 year 1 3 years 3 5 years Above 5 years Liabilities with operating leases ,00 Obligations from purchases Interests falling due of loans, financing and debentures The contractual commitments of the Company and its subsidiaries referred to in the table above are at present value and essentially reflect agreements and commitments necessary to the normal course of the operating activities of the Company and its subsidiaries. The average cost of capital of the Company and its subsidiaries was used as the discount rate. Liabilities from purchases essentially include responsibilities related to the long-term agreements referring to the product and service provisions within the scope of the operating activities of the companies of the Group. 83

86 39.2 Guarantees Parent company Type of guarantee offered 12/31/ /31/ /31/ /31/ ,00 0, ,00 0, ,00 0, ,00 0, ,00 0, Shareholder's co-signature: A co-signature is a personal guarantee for payment of a security. The co-signatory promises to pay a debt if the debtor does not do so. Once the security has expired, the creditor may charge both debtor and co-signatory. On December 31, 2013, the balance of the Parent company and, in full, is related to the life insurance contracts. Blocked deposit: These are deposits in a reserve account in compliance with loan agreements entered into with financial institutions, mostly with BNDES. As of December 31, 2013, the balance, entirely in the parent company, refers to judicial deposits for tax lawsuits and court actions. Entirely in the, refers to loan and financing agreements. Bank guarantee: An agreement whereby a financial institution (the guarantor) warrants compliance with an obligation by its customers (the principals), which may be granted for several types of transactions and especially those related to foreign trade. A guarantee is nothing more than a written ancillary commitment issued by the financial institution. On December 31, 2013, the balance of the Parent company and, in full, is related to the loans and financing contracts. Corporate guarantee: A guarantee that ensures satisfaction to a creditor for an obligation assumed by the debtor, if he does not do so. The corporate guarantees were issued by EDP - Energias do Brasil and by EDP - Eletricidade de Portugal S.A. for the Group's subsidiaries. As at December 31, 2013, the balance refers entirely to loan and financing agreements. Receivables in guarantee: Article 28-A in the General Law of Concessions (Law no. 8987/95), which provides for the likelihood of public utilities assigning under a fiduciary arrangement a portion of their operating credits as security in long-term loan agreements - of at least five years - intended for investment in the concession. Public utilities may assign their receivables as guarantees for loans entered into by these concessionaires, under the Securitization of Receivables model, in which a project is secured by future operating revenue arising from the project itself, after becoming operational. As at December 31, 2013, the full balance was related to energy sale agreements. Promissory notes: this is a promise to pay, whereby the issuer commits itself directly with the beneficiary to pay the latter a certain sum of money. As at December 31, 2013, the balance mostly refers to loan and financing agreements. Lien on shares: It is a right that consists of the delivery of shares as a guarantee. As at December 31, 2013, the entire balance of Liens on shares refers to loan and financing agreements. The final responsibility for the shares provided as guarantees at subsidiaries Santa Fé, Enerpeixe and Investco rests with EDP - Energias do Brasil in the proportion of its ownership interest. Insurance bond: Insurance bond is a type of guarantee for government agencies and private companies, the purpose of which is to guarantee the adequate fulfillment of the liabilities set forth in the contract executed by the parties, as described in the policy. For private companies, we find this type of insurance in contracts entered into with third parties, and its purpose is to eliminate or annul the risk of non-compliance by suppliers, service providers etc. As at December 31, 2013, the balance, entirely at Parent Company, is related to a warranty of participation in Auction 06/2012 (A-5) - Cachoeira Caldeirão. In the consolidated statement, it refers, in its majority, to a builder s warranty. Pledge of Rights: Pledge of emerging rights of the concession of Lajeado, UHE Assis Chateaubriand (Pantanal), and Peixe Anglical (Enerpeixe) hydroelectric power plants, and Francisco Gros (Santa Fé) small hydroelectric power plant, comprehending but not limited to the following items: a) the right to generate electricity; b) the electricity to be generated; and c) guarantees established in energy purchase and sale agreements in a regulated environment. As at December 31, 2013, the balance refers entirely to loan and financing agreements. 40 Segment information A business segment is an identifiable component of the Group engaged in providing an individual product or service of a group of related products and services, and that is subject to risks and benefits that may be distinguished from other business segments. Grupo EDP - Energias do Brasil develops a set of power supply activities, with special emphasis on the generation, distribution, trading of electrical power. Based on internal reports, the Board of Officers is responsible for evaluating the performance of several segments and deciding on the allocation of funds to each of the identified business segments. 84

87 40.1 Segment characterization The amounts reported for each business segment are the result of the consolidation of subsidiaries and business units within each segment and the cancellation of intra-segment transactions. The column Holding refers to the parent company, and origin of this income is substantially related to the evaluation of investment in subsidiaries, associated companies and jointly-controlled subsidiaries by the equity accounting method, as required by the accounting practices adopted in Brazil Statement of income Distribution Generation Trading Holding company Others Elimination Total Revenue ,00 ( ) Cost of production for electricity services 0,00 0,00 0,00 0,00 0,00 0,00 - Electricity service cost 0,00 0,00 0,00 0,00 0,00 0,00 - Electricity purchased for resale ( ) ( ) ( ) 0,00 0, ( ) Electricity network utilization charges ( ) (83.294) (13.833) 0,00 0, ( ) ( ) ( ) ( ) ( ) 2013 Cost of operations Personnel ( ) (29.002) (5.181) 0,00 0,00 0,00 ( ) Third-party materials and services ( ) (30.167) (3.325) 0,00 0, ( ) Depreciation and amortization ( ) ( ) (63) 0,00 0,00 0,00 ( ) Other operating costs (27.017) (3.157) (324) 0,00 0,00 0,00 (30.498) ( ) ( ) (8.893) ( ) ( ) ( ) ( ) ( ) Cost of services rendered to third-parties ( ) (1.064) (235) ( ) Gross income Operating revenue and expenses Sales expenses (55.012) ,00 0,00 0,00 (52.438) General and administrative expenses ( ) (65.607) (9.703) ( ) (312) 0,00 ( ) Depreciation and amortization (8.449) (49.410) (261) (6.563) 0,00 0,00 (64.683) Other operating revenue and expenses (12.526) (19.597) (4) (1.887) 25 0,00 (33.989) ( ) ( ) (8.641) ( ) (287) - ( ) Income (loss) before financial result (loss), taxes and ownership interest ( ) (287) Income from equity interests - ( ) ( ) ( ) Financial revenue (11.388) Financial expenses ( ) ( ) (5.821) ( ) (390) ( ) Financial result ( ) ( ) (3.724) (72.157) ( ) Income (loss) before income taxes ( ) Income tax and social contribution - current ( ) ( ) (21.084) (1.995) 0,00 0,00 ( ) Deferred income tax and social contribution (14.315) (451) ,00 (5.526) ( ) ( ) (21.535) ( ) Net result (loss) for the year ( ) Attributable to controlling shareholders ( ) Attributable to non-controlling interests 0, ,00 0,00 0,00 0,

88 Distribution Generation Trading Holding company Others Eliminations Total Reclassified Revenue ( ) Cost of production for electricity services 0,00 0,00 0,00 0,00 0,00 0,00 - Electricity service cost 0,00 0,00 0,00 0,00 0,00 0,00 - Electricity purchased for resale ( ) (92.146) ( ) 0,00 0, ( ) Electricity network utilization charges ( ) (94.007) (15.503) 0,00 0, ( ) ( ) ( ) ( ) ( ) Cost of operations Personnel ( ) (28.386) (4.280) 0,00 (525) 0,00 ( ) Third-party materials and services ( ) (28.846) (3.307) 0,00 (1.186) ( ) Depreciation and amortization ( ) ( ) (56) 0,00 0,00 0,00 ( ) Other operating costs (3.699) (2.670) (546) 0,00 (129) 0,00 (7.044) ( ) ( ) (8.189) - (1.840) ( ) ( ) ( ) ( ) - (1.840) ( ) Cost of services rendered to third-parties ( ) (790) (294) - (1.963) - ( ) Gross income Operating revenue and expenses Sales expenses (44.162) (1.519) (484) (25) 0,00 (11.827) General and administrative expenses ( ) (46.960) (6.764) (49.523) (1.093) 0,00 ( ) Depreciation and amortization (9.383) (32.512) (223) (6.209) 0,00 (18.088) (66.415) Other operating revenue and expenses (42.586) (16.443) (38) 0,00 (17.513) ( ) ( ) (72.659) (1.156) (18.088) ( ) Income (loss) before financial revenue (loss), taxes and ownership interest (70.882) (17.687) Income from equity interests 0,00 ( ) 0, ,00 ( ) ( ) Financial revenue (10.073) Financial expenses ( ) ( ) (265) (49.821) (722) ( ) Financial result (59.866) ( ) (22.736) (295) - ( ) Income (loss) before income taxes ( ) Income tax and social contribution - current (26.539) ( ) (5.844) (1.243) (448) 0,00 ( ) Deferred income tax and social contribution (61.021) (29.091) (13.205) 0,00 0, (97.168) (87.560) ( ) (19.049) (1.243) (448) ( ) Net result (loss) for the year ( ) Attributable to controlling shareholders ( ) Attributable to non-controlling interests 0, ,00 0,00 0,00 0, Statement of financial positions Distribution Generation Trading 12/31/2013 Holding company Others Eliminations Total Current assets ( ) Non-current assets ( ) Investments 0, ,00 ( ) Investment properties , ,00 0, Property, plant and equipment Intangible assets Current liabilities ( ) Non-current liabilities Total shareholders' equity and non-controlling interests ( ) Distribution Generation Trading 12/31/2012 Holding company Others Eliminations Total Reclassified Current assets ( ) Non-current assets ( ) Investments 0,00 ( ) ( ) Investment properties ,00 0,00 0,00 0,00 0, Property, plant and equipment Intangible assets Current liabilities ( ) Non-current liabilities ( ) Total shareholders' equity and non-controlling interests (262) ( )

89 41 Insurance coverage The Company and its subsidiaries hold insurance contracts with coverage determined by specialist guidance, bearing in mind the nature and level of risk, for amounts deemed sufficient to cover eventual significant losses on their assets and liabilities. Given their characteristics, the risk assumptions adopted are not within the scope of a review of financial statements and consequently were not reviewed by independent auditors. The main amounts at risk with insurance coverage are: 12/31/ /31/2013 Substations 0, Power Plants 0, Stockrooms 0, Buildings and contents (own) 0, Buildings and contents (third parties) Civil liability Transports (material) 0, Transportation (vehicles) Personal accidents Environment 43 Subsequent events 43.1 The balance presented as Civil Liability in the Parent Company is structured down as follows: (i) General civil liability, with coverage of up to R$6,000; (ii) Environmental civil liability, with coverage of R$12,803; and (iii) Civil Liability of management members and Officers (D&O), with coverage of R$40,562, extensible to its subsidiaries. In relation to the policies of items (i) and (ii), the Company and the following subsidiaries are insured: EDP Bandeirante, EDP Escelsa, Energest, Pantanal, Santa Fé, Cenaeel, Elebrás, EDP Comercializadora, Lajeado Energia and Investco. Subsidiaries EDP Bandeirante, EDP Escelsa, Santa Fé, Pantanal, Energest, Investco, and Enerpeixe are subject to the wide-ranging Brazilian environmental legislation in the federal, state and local levels. Legislation compliance is inspected by governmental bodies and agencies that may impose administrative sanctions against them for possible non-compliance with the legislation. Environment-related expenditures in 2013 amounted to R$19,916 (R$44,743 as of December 31, 2012). Out of that total expenditure, the amount capitalized in the year under the headings of fixed assets and intangible assets was R$15,675, related to biodiversity and landscape protection and environment management and protection. With contra-entry in income for the year the amount of R$4,241 was recorded, related to the Soil and Underground Water Monitoring in all Company facilities, and waste management. As described in note 4.4, the joint venture Porto do Pecém filed a request for compliance with Subclause of the Electricity Sale Contracts in the Regulated Environment (CCEARs) entered into through Auction No. 01/2007 with ANEEL. The company Porto do Pecém understands that the calculation being conducted for compensation of unavailability does not comply with the CCEARs entered into. On January 7, 2014, Porto do Pecém filed a lawsuit with a request for preliminary injunction to get ANEEL to abstain immediately from applying the rule of checking the unavailability of the thermoelectric power plant Porto do Pecém I on an hourly basis. On January 24, 2014, the Company succeeded in obtaining the preliminary injunction suspending the application of the unavailability calculation on an hourly basis for Porto do Pecém I thermoelectric power plant on an hourly basis. The judge established that, until the grounds of the lawsuit were reviewed, the calculation would be made with basis on the average for the past 60 months Sale of São Manoel Hydroelectric Unit construction rights On February 7, 2014, the Company communicated to the market that, in the context of the partnership between the Company, CWE Investment Corporation (CWEI) and CWEI Brasil Participações (CWEI Brasil), wholly-owned subsidiaries of China Three Gorges (CTG), it signed the purchase and sale agreement to sell 33.3% of the rights to build the hydroelectric power plant to CWEI Brazil (Note 4.11). CWEI Brazil will reimburse the costs incurred by the Company and take the future capital commitments through the end of the construction, and the project s risks and benefits in the proportion of the acquired ownership interest. Under the agreement s terms, the completion of the transaction is subject to the prior approval of the ANEEL, the Chinese regulatory bodies and other corporate and contractual actions required for the effective transfer of control, expected to occur in the second half of Regulatory Remuneration Basis EDP Escelsa Parent company Reimbursement for unavailability in excess of that used in the calculation of the Physical Guarantee - Porto do Pecém The ANEEL, by means of Order 287 of February 10, 2014, after analyzing the appeal filed by EDP Escelsa, changed the net Regulatory Remuneration Basis for purposes of the 3rd Tariff Review Cycle, from R$1,566 billion to R$1,591 billion and the gross Regulatory Remuneration Basis from R$2,758 billion to R$2,791 billion, and the depreciation rate to 3.91% per year rd debentures issuing On February 12, 2014, the Board of Directors of the Company approved the 3rd issue of Single Debentures. That issuance, whose funds will be allocated for the partial payment of the Company s first nonconvertible debentures will amount to R$300,000 at a cost of Interbank Deposit Rate plus 0.72% per year, and a term of 18 months. The settlement of that issuance is scheduled for February 26, Sale of equity interest On February 11, 2014, the ANEEL in its 4th Ordinary Board Meeting decided to consent to the transfer of 50% of the Company s direct ownership interest in Cachoeira Caldeirão and CEJA, to CWEI Brazil. On February 21, 2014, Authorizing Resolution No was published in the Federal Official Gazette, supporting the decision of the 11th. However, said resolution did not include CEJA and is expected to be confirmed by a subsequent publication by ANEEL. The completion of the transaction is also subject to the approval by the Brazilian Development Bank (BNDES), Chinese regulatory bodies and other corporate and contractual actions required for control to be transferred (Note 4.9). 87

90 2013 Management Report MESSAGE FROM THE CHIEF EXECUTIVE OFFICER In 2013, we had a challenging year, which showed our ability to adapt to the market s needs and changes. More than simply establishing goals, we worked to include everyone in each project, by sharing responsibilities and achievements with all levels of the organization. The commercial start-up of Pecém I thermoelectric power plant and the progress we made in the works of Jari and Cachoeira Caldeirão hydroelectric power plants were major achievements this year, and provided evidence of our team s attention to details and dedication. Winning the 700-MW São Manoel hydroelectric power plant at the A-5 Auction in partnership with Furnas S.A. strengthened our strategy of growth with generation assets, and the Company s focus now is on executing construction projects within the established schedules and budget was a year also marked by some uncertainty in the electric sector. To deal with the volatile environment, the Company adopted prudent solutions and persisted in the face of the challenges, aiming to strengthen its credibility in the market and guarantee the pursued results. From the standpoint of the Distribution segment, the Third Tariff Review cycle of EDP Escelsa and the annual tariff adjustment of EDP Bandeirante emphasized our focus on optimizing costs, efficiency and productivity. Both companies recorded positive progress, not only from an economic and financial standpoint, but also in commercial and technical quality aspects. In addition, we worked by using the synergy between the Group s business units, seeking to provide balance to the relationship between the regulated and the free market in order to achieve maximum customer retention in our portfolio, and, once more, achieve an environment where our commercialization segment could achieve positive results. Innovation and sustainability also played major roles in the Company. Reinventing itself through the years to adjust to changes and the needs of customers and other stakeholders which is a major requirement for a company s success. At EDP, innovation is more than adopting a technological standpoint; it is a way of doing business, working for the present time and projecting the future. The Smart Grid project implemented in the city of Aparecida, state of São Paulo, shows our technological pioneering. That initiative turned into a model of good practices and will be reproduced in the municipalities of Domingos Martins and Marechal Floriano, both in the state of Espirito Santo. Implementing an increasing number of energy efficiency projects and expanding the presence of the EDP Institute in the locations where the Company operates are examples of the Company s determination. An example of the results of those actions was the recognition of EDP Escelsa as a finalist of the National Quality Award and of EDP Bandeirante as a highlight in the Customers category for the second consecutive year. We also invested in the Company s principal asset, its people. Aspects such as health and safety and incentives for professional development and engagement are considered strategic points in our management policy and are the core of our business model. For that purpose, actions have been implemented to further improve the Group companies efficiency and productivity, namely the insourcing of some areas and the adoption of the Open Space concept at the head office. Those results are the merit of the previous administration, to which I owe my gratitude and send my congratulations. We are grateful to our customers and business partners for our long-lasting relationship, to the shareholders for their faith in our administration, and to the employees for their dedication and professionalism. Miguel Setas President of EDP Energias do Brasil CORPORATE ORGANIZATION CHART EDP Energias do Brasil is a holding company with investments in energy generation, distribution and trading. In the generation segment, it controls the operations of conventional-source enterprises (hydroelectric power plants, small hydroelectric power plants and thermoelectric power plants) and renewable sources (wind power plants) and is present in ten Brazilian states (Espírito Santo, Mato Grosso, Mato Grosso do Sul, Tocantins, Ceará, Santa Catarina, Rio Grande do Sul, Pará, Amapá and Rio Grande do Norte). In the distribution segment, it operates in two states (São Paulo and Espirito Santo). Finally, in the trading segment it negotiates energy purchase and sale agreements with counterparts all over Brazil. 88

91 2013 Management Report ALTERATIONS OF A CORPORATE NATURE On March 27, 2013, EDP Energias do Brasil completed the acquisition of MABE, the Engineering, Procurement and Construction firm in charge of managing the works of Pecém I thermoelectric power plant. Bank guarantees for performance of the enterprises were maintained. On July 19, 2013, Enercouto filed with ANEEL the termination of the agreement for the concession of Couto Magalhães hydroelectric power plant, which was conditioned to existence of a legal requirement, and the termination was approved by the ANEEL Board on September 5, Subsequently, the process was forwarded to the Ministry of Mines and Energy, which summoned the concessionaires to sign the Termination. After execution of the Termination, concessionaires were released from the payment of UBP charges, and accordingly, the return of the guarantee and reimbursement of the costs incurred to develop the environmental studies was requested. On August 1, 2013, the indirect subsidiary Pantanal Energética Ltda. transferred the assets of São João I and II and Coxim hydroelectric generating units to two special-purpose companies. Pantanal and YU Empreendimentos Imobiliários e Participações Ltda. entered into an Agreement for Purchase and Sale of Shares and Other Covenants for the assets related to the aforementioned plants and, on September 1, 2013, the control of both SPEs was transferred to YU. On August 12, 2013 the subsidiary Escelsa Participações S.A., by means of an Extraordinary General Meeting, made changes in its main offices, and approved a new reading for its by-laws, and changed its name to EDP Grid Gestão de Redes Inteligentes de Distribuição S.A. On December 6, 2013, EDP Energias do Brasil established a partnership with CWE Investment Corporation and CWEI Brasil, wholly-owned subsidiaries of China Three Gorges, for investing jointly in the Brazilian energy market. The agreement foresees the joint operation of the parties under a balanced and shared ownership structure. It also entered into purchase and sale agreements related to Santo Antônio do Jari and Cachoeira Caldeirão hydroelectric units. EDP Energias do Brasil will sell 50% of its interest in the enterprises, subject to approval by ANEEL, the National Development Bank, Chinese regulatory bodies and other corporate and contractual matters, scheduled for the first half of

92 2013 Management Report On December 16, 2013, EDP Energias do Brasil obtained the concession of São Manoel hydroelectric unit to be built in the state of Mato Grosso, with an installed capacity of 700 MW, physical guarantee of average MW and a foreseen investment of R$ 2.7 billion. The energy sale was for 30 years, beginning May 2018, at R$ 83.49/MWh. In the same auction, EDP Energias do Brasil, through its subsidiary EDP Renováveis Brasil, also sold 45 average MW by means of four wind power generating enterprises located in the state of Rio Grande do Norte, with an installed capacity of 116 MW. That energy sale was for 20 years, beginning January 2018, at R$109/MWh. EDP Energias do Brasil communicated to the market, on December 31, 2013, that Mr. Miguel Setas was elected the Company s Director President (Chief Executive Officer) to replace Ms. Ana Maria Fernandes, for the period On the same date, Mr. Miguel Amaro was re-elected for the coming term to accumulate the positions of Vice-President of Finance and Investor Relations, Director Vice-President of Management Control and Vice President Director of Distribution; Luiz Otavio Henriques, as Director Vice-President for Generation; and Carlos Andrade, as Director Vice-President for Trading. On February 4, 2014, an Extraordinary General Meeting was held and approved the appointment of Ms. Ana Maria Fernandes to the position of Chairman of the Board of Directors, of Mr. Miguel Setas to the position of Vice Chairman of the Board of Directors, and Mr. Miguel Amaro to be a new member of the Board of Directors. MACROECONOMIC SCENARIO AND THE POWER INDUSTRY From January to September 2013, the GDP of Brazil grew 2.4% 1 compared to the same period of the previous year. According to the Focus Market Report 2 issued by the Central Bank of Brazil, the country is expected to grow 2.3% in Family consumption showed growth of 2.4% 1 in the accumulated figure from January through September , boosted by the favorable conditions regarding employment, income, consumer credit and inflation stability (5.86% until September ). Workers average income increased 2.2% 5 and the unemployment rate closed the month at 5.3% 6. Those factors also contributed to the 3.9% 7 growth in the sales of retailers in Brazil through September The Gross Fixed Capital Formation grew 6.5% from January through September , and conducted the investment rate 9 from 18.7% in September 2012 to 19.1% of GDP in September 2013 (+ 0.4 p.p.). Industrial activity grew 1.2% from January through September 2013, mostly influenced by the moderate recovery of the global economy and the downturn in exports. Over the last 12 months, with a basis on September 2013, exports decreased 2.8% and amounted to USD billion 10. In 2013, the Euro Zone 11 had GDP reductions of 1.2%, 0.6% and 0.3% in the first, second and third quarters, respectively, in relation to the same period in the previous year. In those same periods, the US GDP had modest growths of 1.3%, 1.6% and 2.0% in the same comparison periods. In the domestic environment, physical production from January to September 2013 increased by 1.6% compared to that recorded in the same period in the previous year, with highlights in automotive vehicle production, which expanded 11.2%, as well as oil refining and alcohol production (+7,7%). In the realm of monetary policy, the year was marked by a squeeze cycle, with an increase of 2.75 percentage points in the basic interest rate (Selic rate), closing the year at 10.0% per year (compared to 7.25% in January 2013). That increase was intended to curb inflation and provide currency stability. The context described above affected electric power consumption behavior in In Brazil, total energy consumption 12 was 463,740 GWh, 3.5% higher than in the previous year. The highlight was the performance in the residential and commercial class, with growth of 6.1% and 5.7% in 2013, respectively, in relation to ) Source IBGE 2 ) 12/27/ ) In relation to the accumulated from January to September ) Source Central Bank. 5 ) Source IBGE. Considering the metropolitan areas of Recife, Salvador, Belo Horizonte, Rio de Janeiro, São Paulo and Porto Alegre (Sept/2013 vs Sept/2012). 6 ) Source: Central Bank 7 ) Source IBGE Monthly survey by the commercial sector. 8 ) Source IBGE In relation to the accumulated from January to September ) Source IBGE 10 ) Source Central Bank. In relation to the accumulated from January to September ) Source OECD 01/22/ ) Source EPE 90

93 2013 Management Report REGULATORY ENVIRONMENT REGULATORY ALTERATIONS The year of 2013 was characterized by major changes in the regulatory scenario of the Brazilian electric sector. Previously, on September 11, 2012, the Federal Government enacted Provisional Measure No. 579/2012, where it established measures for reducing the electric energy tariff in all regions of Brazil by 20% in average. The measures adopted to make up that reduction came through the advance renewal of generation and transmission concessions that would end from 2015 to 2017, and the reduction or elimination of sectorial charges. Provisional Measure No. 579/2012 was turned into Law No. 12,783 on January 11, 2013, and established that power generation and transmissionn concessionaires whose concession agreements would end from 2015 to 2017 had the option of extending their concessions in advance in accordance with proposals stipulated by the Federal Government. Generation concessionaires that accepted the proposal of advance renewal of concession agreements assumed the commitment of turning the physical guarantee of their plants into the system of quotas distributed between distribution companies. The quotas were established and divided in proportion with the market of each distribution company. Accordingly, generation companies started being entitled to receive tariffs that would be sufficient to cover their operating and maintenance costs, charges and taxes. Investments in fixed assets in service that were not depreciated by the end of the concession agreement will be indemnified at their New Replacement Value. Regarding sector Charges, Fuel Consumption Account (CCC) and Global Reversal Reserves (RGR) were extinguished and the Energy Development Account (CDE) was reduced by 75% of its value. On January 23, 2013, with the enactment of Provisional Measure No. 605, the Energy Development Account also started allocating funds to the distribution companies to cover (i) discounts applied in electricity tariffs and (ii) the involuntary exposure to the energy spot market, arising from the non-adhesion to the extension of the concessions by generating companies. Said Provisional Measure amended Law No. 10,438/2002, which determines the destination of CDE funds. The effects of these changes came into effect as of January 24, 2013 the Brazilian National Electricity Agency ANEEL approved the Extraordinary Tariff Review (RTE) specifically for the adjustment of power costs, transmission costs and industry charges, of all electricity distributors in the country. Accordingly, nonan impact on the distribution manageable costs comprising the Portion A of supply tariffs were reduced without companies margin, since the manageable costs comprising Portion B remained unchanged. On March 7, 2013, Decree no. 9,745, altered the wording of Decree no. 7,891, of January 23, 2013, to permit that distribution concessionaires additional costs deriving from deployment of thermal power plants for power security may be covered by the CDE. Accordingly, Eletrobrás, a company that manages industry funds, started to transfer to distribution concessionaires, on a monthly basis, funds to cover costs related to (i) generation allocated in the ambit of MRE (power reallocation mechanism) (share hydrological risk) (ii) restitution amount not covered by shares (involuntary exposure) (iii) additional cost referring to the deployment of thermal power plants off merit order (ESS power security charge), occurred from January to December 2013, and (iv) annual amounts homologated by ANEEL to fully or partially cover positive result of Compensation Account for Variations in Parcel A Items (CVA) deriving from electric power acquisition cost and to ESS (System Service Charge). Funds from CDE are detailed below. 91

94 2013 Management Report Another relevant change that occurred in 2013 was the change in economic calculation of power purchase cost published in Order 4,225, of December 10, This cost started to be calculated by multiplying required power, net of PROINFA power, by the average tariff of power purchase agreements in force on the tariff process date. This measure changes the amount considered for over-contracting and calculation of short-term financial income. In addition, that Order determined that approved changes should become effective upon share allocation of Angra 1 and 2 and of shares resulting from Law 12,783/2013, that is, retroactive to January Accordingly, tariff coverage was increased to face required power costs and corresponding reduction in lost power costs that were not transferred to final consumers but borne by the Company s shareholders (disallowance). TARIFF REVIEWS AND TARIFF ADJUSTMENTS On August 6, 2013, ANEEL approved results of the sixth tariff review of EDP Escelsa through approval resolution no. 1,576/2013. The tariff repositioning is 4.12%, with 1.32% relating to the economic repositioning and 2.80% referring to the pertinent financial components. In relation to the previously tariff practiced, the average effect perceived by captive consumers was -1.05%, whereas the average effect for high and medium voltage consumers was 2.17% while that for low voltage consumers was -3.14%. The main financial adjustment recognized by ANEEL in this tariff review process was the balance of CVA, totaling R$ 34.4 million, relating to the difference between the ratified costs and the costs actually incurred by the Company from May 2012 to April In addition to this amount, EDP Escelsa also received R$90.7 million from the CDE in order to reduce the impact on the tariffs to be applied to the end users. Average annual tariff readjustment granted to EDP Bandeirante was 10.36%, reallocating tariffs for the period of October 23, 2013 to October 22, Of this percentage, 9.92% refers to the economic adjustment and 0.44% relates to financial components. The tariff adjustment index approved includes the amortization of the second of three installments of the balance of the regulatory liability arising from the postponement of the date for application of the results of the Third Periodic Tariff Review, totaling R$ 28 million. The last installment was left to the 2014 tariff adjustment. The main financial adjustment recognized by ANEEL in this tariff review process was the balance of CVA, totaling R$ 288 million, relating to the difference between the ratified costs and the costs actually incurred by the Company from August 2012 to July Of this amount, EDP Bandeirante will receive R$50 million via tariffs and the remaining R$238 million were already received by means of a transfer of the CDE to reduce the impact on the tariffs to be applied to the end users, pursuant to Decree no. 7,891, as amended by Decree no. 7,945. AUCTIONS There were seven auctions held in 2013 in the Regulated Environment: two Auctions A-5 in August 23 and December 13, Auction A-3 on November 18, Reserve Auction in August 23, Auction A-1 in December 17 and two Adjustment Auctions in March 27 and August 8. Adjustment Auctions ended without negotiation as a result of PLD (Difference in Settlement Price) high prices presented during The Reserve Auction traded an average of MW of wind power at the average price of R$110.51/MWh. Auction A-1 traded an average of 2,571 MW distributed among three products from January 2014 to December Average sale prices were R$177.22/MWh (2014), R$150.84/MWh (2015) and R$149.99/MWh (2016). There was a frustration of 40.9% in relation to replacement amounts requested by distribution companies. The first Auction A-5 of 2013 traded an average of MW at average price of R$124.97/ MWh, with frustration of 76.82% of distribution companies demand. Auction A-3 traded an average of MW at the average price of R$124.43/MWh, covering all load growth foreseen for The second Auction A-5 traded an average of 1,599.5 MW at the average price of R$109.93/MWh. 92

95 2013 Management Report BUSINESS AREAS* (*) The operating information has not been audited by the Independent Auditors. GENERATION The generation sector is the main strategic vector for the growth of EDP Energias do Brasil businesses. The Company ended 2013 with installed capacity of 2,195 MW. The increase in relation to the 2,012 MW of installed capacity in 2012 is due to the commercial start-up of the first unit of the Pecém I Thermoelectric Power Plant (180 MW, proportional to the Company s 50% shareholding) and the current capacity increase of UHE Mascarenhas (4.5 MW). With the start of UHE Santo Antônio do Jarí operations in 2015, of Wind power plants Baixa do Feijão I, II, III and IV in 2016, of UHE Cachoeira Caldeirão in 2017, of UHE São Manoel and of wind power plants Aroeira, Jericó, Umbuzeiros and Aventura I in 2018, installed capacity foreseen for 2018 will be 3,593 MW. UTE PECÉM I In 2013, UTE Pecém I, in a partnership of 50% with Eneva S.A, (720 MW), counted on the full operation of two Generating Units. Unit I started commercial operations on December 1, 2012 and Unit II on May 10, UTE Pecém I presented average availability of 61% in 2013, Unit I presented availability of 52% and Unit II of 75%. Following the adoption of IFRS 11, CPC 19 (R2), beginning as of 1Q13, UTE Pecém I started to be recorded in the Company s income under equity in investees. Income for the year and due notes are presented below. *Amounts correspond to 50% of interest of EDP Energias do Brasil The first half of 2013 was impacted by the delay in starting Unit II commercial operations. Net revenues were impacted by ICB (cost effectiveness) transfer of backing purchase and non-manageable expenditures were impacted by power purchase. On November 19, 2013, ANEEL accepted ICB Online claim (CCEAR s monthly cost per availability, calculated as if the plant were in commercial operation), generating positive impact of R$53.9 million on UTE income. Beginning as of the third quarter of 2013, UTE Pecém I stopped incurring costs with power purchase, however, non-manageable costs have been impacted by additional inputs necessary for plant deployment (coal, diesel, lime, etc.), which is a reflex of interruptions in Units I and II during the year. Another important impact was the reimbursement due to unavailability, which impacted 2013 income by R$122.4 million. However, on January 24, 2014, UTE Pecém I communicated to the market that the 15 th Federal Court of the Federal District granted Early Relief canceling calculation of unavailability costs on an hourly basis, with immediate enforcement. Reimbursement calculation will be based on the average of 60 months. Net profits were impacted by the following effects on financial income, in addition to those mentioned above: (i) end of BNDES and BID financing interest capitalization, (ii) amortization of financing interest with respective effective swap contract settlements, (iii) reversal of amounts recorded in shareholders' equity as a result of hedge accounting ineffectiveness and (iv) loan interest. Accumulated investment in 2013 totaled R$127.3 million. 93

96 2013 Management Report PROJECTS UNDER CONSTRUCTION UHE SANTO ANTÔNIO DO JARÍ: In 2011, EDP Energias do Brasil acquired, through its sub Companhia Energética do Jarí CEJA, ECE Participações S.A., exploration rights over UHE Santo Antônio do Jarí (373,4 MW), which is being built on the border of Pará and Amapá States, on Araguari river. BAIXA DO FEIJÃO WIND FARMS: EDP Renováveis Brasil S.A., a company in which EDP Energias do Brasil retains 45% interest, sold energy at the Auction A-5, held on December 20, The project has installed capacity of 120 MW and consists of four wind power generation projects: Baixa do Feijão I, II, III and IV, located in Rio Grande do Norte State. UHE CACHOEIRA CALDEIRÃO: In the Auction A-5, held by ANEEL, on December 14, 2012, EDP Energias do Brasil obtained the concession of Cachoeira Caldeirão Water Power Station (219MW), which is being built in the state of Amapá, on Araguari River. UHE SÃO MANOEL: At Auction A-5 carried out by ANEEL on December 13, 2013, EDP Energias do Brasil, in a partnership with Furnas S.A, obtained the concession of Central Hídrica de São Manoel (700 MW), which will be built on the border of Mato Grosso and Pará States, on Teles Pires river. The project sold average MW for a period of 30 years. WIND FARMS (Aroeira, Jericó, Umbuzeiros and Aventura I): EDP Renováveis Brasil S.A., a company in which EDP Energias do Brasil retains 45% interest, sold energy at the Auction A-5, held on December 13, This project has total installed capacity of 116 MW and consists of four wind generation projects located in Rio Grande do Norte State. INVESTMENT IN GENERATION In the generation segment, investment reached R$785.3 million in 2013, 73.0% higher than the same period of prior year, mainly due to the construction of UHE s hydroelectric plants Santo Antônio do Jari (R$487.4 million) and Cachoeira Caldeirão (R$236.0 million). UHE Santo Antônio do Jari construction work is approximately 89% complete and it is expected to start commercial operations in January Construction work of UHE Cachoeira do Caldeirão began in August 2013 and it is expected to start commercial operations in January DISTRIBUTION The distribution activities are developed by two concessionaires, which cater to around 3.0 million customers, in regions that house a total population of approximately 7.8 million people. 94

97 2013 Management Report INVESTMENT IN DISTRIBUTION Investments made in 2013 by EDP Energias do Brasil in distribution totaled R$ million with a 38% reduction compared to PERFORMANCE INDICATORS The service rendering quality indicators remained within the limits of the standards established by the regulatory agency, and presented an improvement in comparison with the prior year in both distribution companies, reflecting investments in network expansion and modernization, and the integration and automation of operating centers. Note: ANEEL target refers to 2013 DEC: Equivalent Duration of Interruption by Customer; FEC: Equivalent Frequency of Interruption by Customer; 95

98 2013 Management Report LOSSES Non-technical losses recorded a 0..3 p.p. decrease in EDP Bandeirante and a 0.5 compared to December p.p. in EDP Escelsa, when In 2013, EDP Bandeirante and EDP Escelsa disbursed R$ 59.7 million in programs to curb losses. Of the total sum of resources allocated to thesee programs, R$ 30.6 million were for operating investments (replacement of meters, installation of special network, remote metering and correction of clandestine connections) and R$ 29.1 million for manageable expenses (inspections and removal of irregular connections). During the year, our concessionaires carried out approximately thousand inspections, and 23.8 thousand clandestine connection regularizations, removing thousand irregular connections that resulted in the recovery of revenue of about R$ million. COMMERCIALIZATION EDP Comercialização e Serviços de Energia S.A is responsible for the energy trading activities and rendering of services to the free market, both inside and outside of the concession areas of the two distributors of EDP Energias do Brasil. The company ended 2013 with 223 customers, up 6.2% over the prior year (210 customers). In 2013, the energy traded amounted to 12,390 GWh, an increase of 10.1% over the previous year. In 2013, the commercialization company presented an increase of 28.2% in EBITDA. Net profits were R$43.2 million, 12.3% higher than the same period of prior year. Both increases are the result of short- and long-term negotiation strategy and concentrated seasonality in the first half of 2013, when the trading company was benefited by PLD increase in the 1Q13 (average of R$326.3/MWh). 96

99 2013 Management Report OPERATING PERFORMANCE Energy sold to end customers: the 2.2% growth of distribution companies captive market in 2013 is the result of performances in residential, commercial and rural classes. Increased consumption of residential and commercial classes is justified by the rise in the number of customers, increased workers average earnings, and employment stability. In addition, rural class growth was driven by increased power consumption for irrigation due to low rain volume from January to November in the north of Espírito Santo State. Energy in transit (USD): the 6.4% growth in 2013 is due to resumption of industrial production in the EDP Bandeirante concession region and to the migration of 34 captive customers to the free market (27 from EDP Bandeirante concession region and seven from EDP Escelsa). In generation, volume of power sold in 2013 totaled 10,898.8 GWh, 15.3% higher than the prior year (9,450.3 GWh) as a result of the start of UTE Pecém I commercial operation. Generating unit I started commercial operation on December 1, 2012 and generating unit II on May 10, In trading, volume of traded energy reached 12,390.1 GWh in 2013, an increase of 10.1% in relation to the prior year (11,254.1 GWh) resulting from long-term negotiation strategy and seasonality concentrated in the beginning of the year. 97

100 2013 Management Report ANALYSIS OF ECONOMIC/FINANCIAL PERFORMANCE - CONSOLIDATED Net operating revenue In 2013, net operating revenue reached R$7,096.5 million, 9.9% higher than the prior year. Excluding the construction revenue, net operating revenue was R$ 6,770.8 million, which is 8.9% higher than the previous year. The main factors contributing to net revenue evolution are as follows: Growth of 2.2% in the volume of energy sold to end customers; 6.4% increase in volume of energy in transit in the distribution system (USD); Increase in other operating income that reflects CDE (Energy Development Account) grants to distribution companies, supplying funds to compensate for tariff discounts to the low income population, rural activity, water treatment, sewage, sanitation and irrigation; Reduction in distribution companies power tariffs (Law no. 12,783/2013) and reduction in tariffs applied to tariff reviews and adjustments; Adjustment to generating companies tariffs and increase in power sales of short-term contracts with higher prices. In 2013, tariffs were an average of 17.3% higher than those in 2012; Increase of 10.1% in volume of power sales in the free market. 98

101 2013 Management Report Operating expenses Operating expenses, not considering the construction cost, totaled R$ 5,317.7 million in 2013, 7.4% more than in the previous year. Non-manageable expenses are related to costs with purchased energy for resale, charges for use of the power network and the inspection fee and others, and totaled R$ 4,157.3 million in 2013, 1.5% above the previous year. Non-manageable expenditures were neutralized by CDE contributions to distribution companies, totaling R$594 million in In the generation segment, POCP (short-term operating procedure) impacted the first half of the year, partially mitigated by the seasonality strategy. Manageable expenditures, excluding construction costs, depreciation and amortization, reached R$957.8 million in 2013, 36.6% higher than the prior year. This increase is due to the non-recurring effect of VNR (new replacement value) bookkeeping in the 4Q12, retroactive to the 1Q12, with an impact of R$102.4 million on distribution companies. Depreciation and amortization totaled R$402.6 million in 2013, 19.3% higher than the prior year due to the provision for inventory adjustment resulting from physical inventory count carried out to comply with ANEEL Resolution no. 367/2009 (+R$33.5 million at EDP Bandeirante and +R$26.2 million at EDP Escelsa). EBITDA and EBITDA Margin EBITDA (income before income tax, financial income, depreciation and amortization) reached R$1,655.7 million in 2013, 16.6% higher than the prior year. The EBITDA margin increased 1.7 p.p., reaching 24.5%. Financial result In 2013, net financial income reached R$299.1 million, 51.5% higher than the prior year. Financial revenue totaled R$182.1 million, 7.5% lower than 2012 due to decrease in remuneration of taxes and social contributions to offset. Financial expenses increased 22.4% due to (i) increase in indebtedness by R$803.4 million and the resulting increase in debt charges by R$86.1 million and (ii) increase of R$22.8 million in post-employment benefits due to adjustment in actuarial assumptions. Net profits Net profits totaled R$ million in 2013, up 9.4% over the previous year. In addition to the above-mentioned effects, net profits were impacted by income from shareholding interest due to recognition of UTE Pecém I negative income under equity in investees (-R$ 141,2 million), in accordance with IFRS 11, CPC 19 (R2). Indebtedness The consolidated gross debt totaled R$ 3,259.4 million in December 2013, an increase of 32.7% in relation to December 2012 (R$2,455.6 million), and in both periods disregarded the debt of UHEs Cachoeira Caldeirão and Santo Antônio do Jari. Average debt term for December 2013 was 2.45 years, compared to 2.73 in December Gross indebtedness and average term variations in 2013 occurred mainly due to: (i) second issue of debentures of the Parent company in the amount of R$ million; (ii) releases totaling R$26.8 million from distribution companies BNDES CALC credit line; (iii) R$68 million of funds raised by EDP Escelsa through the Rural and Agribusiness Credit line; (iv) first issuance of debentures by Lajeado Energia in the amount of R$450.0 million; (v) amortization of the first installment of the second issuance of debentures by EDP Escelsa in the amount of R$83.3 million; and (vii) other amortization of long-term debts at the generation and distribution companies. 99

102 2013 Management Report Evolution of debt (R$ million) The average cost of the Group's debt in December 2013 was 8.62% per year, compared to 9.78% per year in late 2012, taking into consideration capitalized interest on the debts and charges incurred in the last year. Decrease in average cost is due to reductions to average Selic and TJLP in 2013, when compared to 2012, in addition to having new debts indexed to CDI. Net consolidated debt reached R$2,335.3 million in 2013, 23% higher than the prior year result (R$1,895.0 million). This increase is due to the 32.7% growth of gross consolidated debt and to the increase in cash and cash equivalents by R$363.5 million in The net debt/ebitda ratio ended the year at 1.41 times, compared to 1.34 times in December Detail of the financing disbursed in 2013 Holding company On February 22, 2013, short-term credits were raised by EDP Energias do Brasil (R$201.0 million) and settled with the second issuance of simple debentures. On September 11, 2013, EDP Energias do Brasil S.A. completed the second issue of single debentures in the amount of R$ 500 million. CDI % p.a. is levied on this amount, with payments of half-annual interest and principal in two equal installments. The first one will mature in April 2015 and the second will mature in April Distribution On February 15, 2013, EDP Escelsa signed with Banco do Brasil a loan contract of the Rural and Agribusiness Credit line, in the amount of R$68 million at interest rate of 102.5% of CDI, as an average, with principal and interest maturing in a single installment in February On April 26, 2013, EDP Escelsa and EDP Bandeirante received BNDES releases of R$7.0 million and R$19.8 million, respectively. TJLP interest is levied on this amount with spread varying from 3.21% to 1.81% p.a., with monthly payment of interest and principal beginning as of July 2013 and ending in July Generation On August 19, 2013, Lajeado Energia signed a contract in the amount of R$ 450 million for promissory notes with Banco do Bradesco and Banco do Brasil. Interest of 0.47% p.a. above CDI is levied on Promissory Notes value. Principal and interest in a single statement matured on February 14, In addition to capital reduction approved by its shareholders and regulatory agency (ANEEL), funds were distributed to shareholders in proportion to their respective interest in the Company. On December 6, 2013, Promissory Notes were settled with the first Issuance of Simple Debentures in the Parent Company. On December 6, 2013, Lajeado Energia carried out its first issuance of simple debentures in the amount of R$450 million, with interest of CDI % p.a., to be paid on a half-annual basis with amortizations in equal installments in November 2017, 2018 and Issuance was carried out with Banco Bradesco and Banco do Brasil with term of six years. Funds were used to fully settle Promissory Notes previously issued by the Company, extending its debt profile. 100

103 2013 Management Report RATINGS OF EDP ENERGIAS DO BRASIL AND ITS DISTRIBUTION COMPANIES INVESTMENTS The investments of EDP Energias do Brasil totaled R$ 1,140.4 million in 2013, with a decrease of 62.7% in relation to the funds allocated to the business areas in the previous year. The main reason for this increase is generation projects under construction. More details are available in the specific items of investments in distribution and generation of this management report. 101

104 2013 Management Report THE CAPITAL MARKET On December 31, 2013, EDP Energias do Brasil stock was quoted at R$ 11.35, closing the year with a devaluation of 4.9%, surpassing the IEE and Ibovespa, which dropped 8.8% and 15.5%, respectively. The market value of the Company on December 31, 2013 was R$ 5.4 billion. The Company s shares were traded on all trading days in 2013, totaling million shares traded and a daily average of 1,980.3 thousand shares, and financial volume totaled R$ 5,841.7 million with a daily average of R$ 23.6 million. Additionally, as from January 7, 2013, the Company s shares were included in the IBOVESPA index. OWNERSHIP STRUCTURE On December 31, 2013, the Company's capital stock was represented in full by 476,415,612 nominative ordinary shares. Of the total number of shares there were 232,602,924 in circulation, in compliance with the BM&FBOVESPA New Market Listing Regulations and 840,675 shares remain in the treasury. REMUNERATION OF SHAREHOLDERS On April 11, 2014, the Company's Board of Directors will be submitting to the approval of an Ordinary General Meeting (AGO) the payment of dividends of R$ million, corresponding to R$ 0.78 per share maintaining the shareholder remuneration stable in relation to the prior year. CORPORATE GOVERNANCE BOARD OF DIRECTORS The Board of Directors as at December 31, 2013 was formed by eight members, including an executive director and four independent board members. The board members are elected by the General Meeting for a term of office of one year, with possibility of reelection. The Extraordinary Shareholders' Meeting held on February 4, 2014 approved Ms. Ana Maria Fernandes to occupy the function of President of the Board of Directors, Mr. Miguel Setas for the function of Vice-President of the Board of Directors, and Mr. Miguel Amaro as the new member of the Board of Directors. Accordingly, the Board of Directors now has nine members, including two executive officers and four independent members. The body is responsible for establishing general business policies and guidelines, including the long-term strategy, for electing members of the Board of Executive Directors and for overseeing its operation, besides the activities defined by law and in the Company's Bylaws. EDP do Brasil is bound by arbitration in the Market Arbitration Panel, pursuant to the Arbitration Clause contained in its by-laws. The Board of Directors has three Advisory Committees, which are: the Audit Committee, Remuneration Committee, and Sustainability and Corporate Governance Committee. The committees are responsible for advising the Board of Directors in decisions regarding the subject matters submitted. All are formed exclusively by three board members that can request information and suggestions from members of the Board of Officers or from members of the Company's Management. Guidelines and documents related to corporate governance are available on the Investor Relations website EXECUTIVE BOARD The Board of Officers is formed by four members elected by the Board of Directors for a term of office of three years. It is responsible for managing business and adopting necessary or convenient acts, and for executing the decisions of the Board of Directors. The four members of the current Executive Board were re-elected for a term of three years (in force until December 2016, with the possibility of reelection). The résumés of the officers can be found at the Investor Relations website SUSTAINABILITY, INNOVATION AND CORPORATE RESPONSIBILITY For the eighth year in a row, EDP Energias do Brasil remained in the Corporate Sustainability Index (ISE) of BM&FBovespa. With the consolidation of the Innovability area, in 2013, the Company strengthened its commitment to carry out its businesses on a sustainable and innovative basis, following international parameters and reference on this 102

105 2013 Management Report type of management. For EDP, Innovability is the application of Innovation transforming good ideas into value to guarantee business development through shared value generation and stakeholders satisfaction. Together with Top Management, the Innovability area is responsible for defining EDP s Innovation and Sustainability strategy and for preparing and following up action plans and improvements in business areas in order to incorporate and improve its processes, always with the bias of invariability, aimed at aligning the Company s management to its vision and strategy. Based on its Sustainable Development Principles ( EDP formalizes its operation guidelines in the Code of Ethics ( and in Corporate Policies ( which reflect these commitments. The Instituto EDP is responsible for the relationship of EDP Energias do Brasil in the fields of culture, sport and education with related parties in the areas in which the Company has influence. The development of projects includes a series of variables, namely particular features of each location and aspect and initiatives of the organizations of civil society in these locations, creating the potential for synergies between the parties. The programs and projects of the Institute, such as the Voluntary Program, Dentistas do Bem, EDP nas Escolas and EDP Solidária continued presenting concrete results. STRATEGY AND MANAGEMENT The year 2013 was marked by the establishment of a corporate strategy focused on the long term. EDP Energias do Brasil created programs that establish goals up to This strategy emphasizes the importance of innovation and sustainability for the Group and is based on the main demands of stakeholders of the Company s value chain, such as shareholders, customers, employees and the environment. The three strategic pillars guided growth, superior efficiency and controlled risk have become a fact, with an increase in the generation and sales of energy; more efficient distribution based on innovation - and customer service quality. All this ensures risk control. The Balanced Scorecard (BSC) has continued to be the management tool used in EDP since 2005, revised yearly. It is the tool that guides workers' actions. Additionally, the Kaizen and Lean methodologies and the ISO and OHSAS certification systems support execution of the corporate strategy. RELATIONSHIPS WITH CUSTOMERS In 2013, distribution companies of EDP Energias do Brasil held multidisciplinary Work Groups intended to improve services provided and consequently, reduce customer complaints. This included implementation of electronic invoices, review of and adjustments to reference files to improve the reading process, training of call center employees and electricians, among others. These measures also contributed to reduce complaints to ANEEL s ombudsman, increasing by 8% the IASC (ANEEL index of customer satisfaction) of the two distribution companies. At EDP Comercializadora, the post-sale area guarantees interaction with customers, allowing frequent information exchange flow for business management, and seeking to offer products and services that meet their demands. The last satisfaction survey identified the following theme: skilled performance of activities, transparent communication, transparent billing, fast and skilled answers to customers, trust, sustainability, ethics and average power price. PEOPLE MANAGEMENT EDP Energias do Brasil ended 2013 with 2,756 employees. The Company has an extensive benefit program for its employees and dependents, including: supplementary pension, medical and dental care, meal allowance and food vouchers, group life insurance, transportation vouchers, supplementation of sick pay and accident pay, medication allowance, daycare assistance and allowance for special dependents. Remuneration strategy is guaranteed by the analysis of EDP Group remuneration in relation to the market. As part of this policy, merit is assessed and applied on an annual basis. In 2013, Climate Survey was also conducted and its results will be presented in The Group s companies held management and training programs focused on developing strategic competences. Among the main activities developed for the Human Resources department in 2013, its educational and capacity programs have stood out, such as its Electricians School and welfare initiatives geared to coworkers, such as the Conciliar (Conciliatory) Program. The Electricians School is a partnership with SENAI for the education of unemployed individuals in communities where EDP no Brasil functions. It entails around 480 hours of training 103

106 2013 Management Report over four months, a period in which EDP guarantees course costs. Concerning the Generation School, the focus is to increase operators abilities to act in integrated maintenance and operation. Aimed at achieving a balance between personal and professional lives, the Programa Conciliar is based on four pillars: health and wellbeing, support to families, citizenship and culture. RESEARCH AND DEVELOPMENT (P&D) Research and Development (P&D) activities are based on ANEEL rules and on development of applied technology. The research and development projects have been established to achieve improved energy generation and distribution processes based on criteria related to operations efficiency, risk reduction and optimization of income. At distribution companies, R$7.5 million was invested with emphasis on efficient distribution projects, and Smart Grids, among others. For generation, the amount invested was R$8.5 million in projects for quality, environment and alternative power sources, for example studies on intermittent source mininetworks. INNOVATION EDP Energias do Brasil is concerned with promotion of innovation and creativity, and the search for new market opportunities that generate technological development and knowledge management in the area of energy. The ClimaGrid project, which is part of Plano Tecnológico Empresa (Company Technological Plan), was implemented in the system operation and distribution centers of EDP Bandeirante and EDP Escelsa. The technology has a database that stores historical weather information in real time and allows weather forecasts. In 2013, the project was recorded as innovative technology for adaptation to climate change at the United Nations Convention on Climate Change Scenario. At the end of 2013, the Bolsa de Inovação (Innovation Scholarship) program reached its 11th Challenge. Since the First Challenge, 226 solutions were approved for implementation by the Innovation Team (the innovation committee composed of directors and managers from various departments of the company). In addition, the Company launched its I-Mentors 2.0 program and started to recruit new employees that will take part in training to encourage creativity and development of new projects and businesses in all of the EDP Group s teams and locations. One of the Company s highlights in 2013 was the InovCity Project s results, which integrates technological innovation and social innovation in the intelligent city concept. Through its programs, it will benefit the environment in the long term through the programs of electric mobility, public lighting with LEDs, energy efficiency programs but also society through initiatives to improve customer service, smart metering, and the social/educational projects promoted by the EDP Institute. The project started in 2012 in the city of Aparecida, and was replicated in 2013 in two municipalities of Espírito Santo. Created in 2010, Prêmio EDP Inovação 2020 is an initiative of the EDP Group to encourage innovation, sustainability and entrepreneurship in Brazil. The fourth edition of this award presented significant changes in relation to the prior edition, namely: the central theme changed from CleanTech to Intelligent Cities, and awards were distributed as financial investments for projects, travel to the Silicon Valley, and mentoring following the award. As a result, 250 enrollments were placed, of which 30 were selected for the second stage. In this stage, participants received on-line training on entrepreneurship that was offered by Luxr and Endeavor to create the project s business model. AWARDS AND ACKNOWLEDGEMENTS In 2013, EDP Energias do Brasil was distinguished with the following awards: (i) Innovation challenge. Promoted by project Management Innovation Exchange (MIX), an international platform aimed at collecting and sharing actions of companies on management innovation around the world. More than 140 programs were enrolled and the EDP case was selected together with companies such as Whirlpool, Shell, Cisco and Danone as one of the best global innovation practices. (ii) Certificado Selo Top Employers, an award granted in 2013 to companies with best HR policies. (iii) RHs Mais Admirados do Brasil in the category State Highlights (SP). (iv) For the fifth time, the Company won the Prêmio Época Empresa Verde, which acknowledges companies and their practices in the ambit of environment strategy and are evaluated in areas such as: power efficiency, conscious use of water, garbage destination, transportation, incorporation of environmental criteria into product and service development, and reduction of green-house gas emissions (vi) Honorable Mention in the 9 th Latin American Exhibit of Electric Vehicles, Components and New Technologies. Study Evaluation of possible scenarios, experimentation and measurement of impacts of electric vehicles on Bandeirante and Escelsa distribution systems was acknowledged among ten other works selected on electric transportation (vii) Enerpeixe received the golden seal 104

107 2013 Management Report of the Selo de Energia Sustentável (sustainable power seal) program. Conducted by PricewaterhouseCoopers (PwC), this analysis placed Peixe Angical Hydroelectrical Plant among the first three in score. (viii) Prêmio Fundação COGE - Melhorando Vidas e Preparando o Futuro, in the category People Training and Development for the School of Electricians program. The EDP initiative was acknowledged in the category of social responsibility. (ix) The two distribution companies of the EDP Group in Brazil were acknowledged by Prêmio Nacional de Qualidade PNQ Ciclo 2013 promoted by FNQ (the national quality foundation). (x) EDP Bandeirante received a certificate from ABESCO (Brazilian association of power preservation services) for the program Boa Energia na Comunidade (good energy in the community). This certificate was granted during the 10 th COBEE (Brazilian congress on power efficiency), the industry s main event dedicated to efficient use of power as well as water and fuels, which took place in São Paulo. (VI) ABRACONEE (Brazilian association of the electric power industry accountants) granted to the EDP Group the second rank in the category Company Group for the preparation of the Company s 2012 financial statements. AUDITORES INDEPENDENTES According to the terms of CVM Instruction 381, of January 14, 2003, the Company signed a contract with PricewaterhouseCoopers Auditores Independentes (PwC), in April 2013, to provide audit services for its interim financial statements. PwC began providing services in April During the process of contracting PwC, the Company considered the nature of services not related to the audit that PwC and its member firms were performing in the Company. These services included a contract for the provision of payroll services in the amount of R$2.3 million, which was originally contracted on November 1, The Company and PwC decided to terminate that contract as soon as possible, and services were concluded on September 24, While the contract was in the discontinuation stage, the Company and PwC adopted specific safeguard measures to reduce threats to independence, pursuant to the terms of CFC Resolution no. 1,311/10, which approves NBC PA 290 Independence Audit and Review Engagements. These measures included segregation between the team providing payroll services and the team providing external audit services, and the contracting by EDP Group s management of another independent audit firm to apply audit procedures on payroll for the period in which it was processed by the PwC s member firm. Management understands that adopted safeguard measures were adequate to preserve required independence and objectivity in performing external audit services. Also in 2013, PwC provided agreed-on procedure services in the ambit of program Luz Para Todos (light for all) to comply with Regulatory Agency requirements. These engagements and engagements previously mentioned were included in 2013 and total R$2,375. These services surpassed 77% of the audit contract price. The services were concluded in The Company operations policy and that of the other companies in the EDP Group in relation to non-audit related services with the audit company is based on the principles that preserve the independence of the independent auditor. FINANCIAL STATEMENTS In compliance with the Brazilian Accounts receivable Commission's Instruction No. 480/09, article 25, we hereby declare that we have reviewed and agree with the financial statements for the years ended December 31, 2013 and These were prepared according to the accounting practices adopted in Brazil International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB). 105

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