ISA CTEEP - 3Q17 Results 1

Transcription

1 ISA CTEEP - 3Q17 Results 1

2 ISA CTEEP ANNOUNCES RESULTS FOR 3Q17 São Paulo, October 30, 2017 ISA CTEEP - Companhia de Transmissão de Energia Elétrica Paulista (B3: TRPL3 and TRPL4), announces its results for the third quarter of The following financial and operating information for the periods shown below is in accordance with generally accepted accounting practices in Brazil (IFRS), except where otherwise stated. HIGHLIGHTS 3Q17 Debt on July 13, ISA CTEEP signed an international credit agreement pursuant to the conditions under Law 4131/1962 for R$ million with a restatement factor of 101.4% of CDI. PERT - the Company signed up to PERT - Special Tax Regularization Program, this positively impacting financial revenue by R$ 50.9 million, a result of the reduction in fines and interest (REFIS). RTP Periodic Tariff Revision: The first phase of Public Hearing 41/2017 began on August 01 for obtaining input for the regulation of the periodic revision of RAPs - Annual Allowed Revenue for the electric energy transmission installations. Specifically, this phase covered the rules for calculating the Regulatory Remuneration Base BRR and Other Revenues in accordance with Technical Note 118/2017. On August 26, the second phase of PH 41/2017 was initiated for establishing: (i) the regulatory operating costs (O&M) according to the parameters of TN 160/2017 and TN 164/2017; and (ii) the methodology and criteria for defining the weighted average cost of capital (WACC) for remunerating investments under the conditions of TN 161/2017. ISA CTEEP is to contribute to the findings of both phases of the Public Hearing. Complementary Retirement Plan: Law 4819/58: on August 02, 2017, the 2 nd instance judge of the São Paulo Courts handed down a ruling on class and civil action processes favorable to ISA CTEEP. Consequently, the Finance Department of the state government of São Paulo - SEFAZ began processing the retirees payroll as from August Acquisition of IENNE: on October 05, 2017, the Company concluded the acquisition of 100% of the shares of the capital stock of IENNE, 50% of the shares being purchased from ISOLUX and 25% from CYMI. The acquisition amount was R$ million. As from September, IENNE s figures were consolidated in the balance sheet of ISA CTEEP. RBSE: The cycle for receiving RAP under the RBSE concession extension reimbursement process began in accordance with the conditions established by MME - Ministry of Mines Ordinance 120/2017, excluding the cost of capital (Ke) parcel, and in line with the ruling in the preliminary court injunction. Key Indicators Consolidated IFRS REGULATORY (R$ million) 3Q17 3Q17 3Q16 exex-rbse RBSE 3Q16 3Q17 3Q16 Net Revenues , EBITDA , EBITDA Margin 83.4% 66.2% 105.6% 100.3% 86.0% 39.5% Net Income , Net Margin 61.0% 55.9% 88.0% 67.4% 41.9% 18.2% Raiting - Fitch AAA(bra) ISA CTEEP - 3Q17 Results 2

3 CONTENTS ISA CTEEP... 4 Economic-Financial Performance - IFRS... 9 Economic-Financial Performance Regulatory Investments Capital Markets Attachments Attachment I Balance Sheet - IFRS Attachment II Income Statement - IFRS (R$ thousand) Attachment III Cash Flow IFRS (R$ thousand) Attachment IV - Breakdown of Consolidated Debt (R$ thousand) Attachment V - Breakdown of Debt of Jointly Controlled Subsidiaries - (R$ thousand) Attachment VI Subsidiaries VII Regulatory Balance Sheet Attachment VIII Regulatory Income Statement Attachment IX Regulatory Cash Flow Attachment X Regulatory Income Statement for the Jointly Controlled Subsidiaries IEMadeira and IEGaranhuns (51% ISA CTEEP) ISA CTEEP - 3Q17 Results 3

4 ISA CTEEP As one of the leading energy transmission concessionaires in the private sector in Brazil, ISA CTEEP is currently responsible for the annual transmission of about 24% of all electricity produced in the country, 60% of the energy consumed in the Southeast Region and nearly 100% in the state of São Paulo. Through its activities and its wholly- and jointly-owned companies, the Company has a footprint in 17 Brazilian states: Rio Grande do Sul, Santa Catarina, Paraná, São Paulo, Minas Gerais, Espírito Santo, Rondônia, MatoGrosso, Mato Grosso do Sul, Goiás, Tocantins, Maranhão, Piauí, Paraíba, Pernambuco, Alagoas and Bahia. Viewed by the National Electric Energy Agency - ANEEL as a bellwether in operating efficiency and quality of service indicators, ISA CTEEP and its subsidiaries have an installed transformation capacity of 64,799 MVA with 18,642 kilometers of transmission lines, 25,785 km of circuits, 2,347 kilometers of proprietary optic fiber cables and 126 high voltage substations up to 550 kv. The company adopts market benchmarks such as the Dow Jones Sustainability Index (DJSI) and the Ethos Indicators for Sustainable and Responsible Business for guiding its sustainability initiatives. Since 2011, it has also been a signatory to the United Nations Global Compact, a formal commitment on the part of organizations worldwide for mobilizing actions around ten principles relating to Human Rights, Labor Rights, Environmental Protection and Combatting Corruption. This year, the Company was elected the best company in the Brazilian energy sector by Exame magazine as well as being ranked one of the Best Companies to Work For by Great Place to Work (GPTW), an international institution which promotes organizational climate surveys in 53 countries. The chart below shows ISA CTEEP s participation, in GWh, in the National Interconnected System (SIN) for the period from 2013 to September GWh 526, , , , , , , , , , , , , ,044 99, M17 CTEEP Others ISA CTEEP - 3Q17 Results 4

5 Shareholding Breakdown Controlled by ISA, a multi-latina linear infrastructure systems company, CTEEP s investors include Eletrobras, the largest electric energy group in Brazil, and more than 60 thousand individual and corporate shareholders from different countries. Those shareholders with more than 5% of common or preferred shares are highlighted below. Preferred shares are held 72% by domestic investors and 28% by foreign investors. Common Shares TRPL3 64,484,433 Common Shares (39% of total Capital Stock) Preferred Shares TRPL4 100,236,393 Preferred Shares (61% of total Capital Stock) Total Capital Stock 164,720,826 Shares 35.4% 89.5% 46.7% 9.8% 0.7% 51.9% 1.4% 35.9% 28.7% Corporate Structure ISA CTEEP s corporate structure comprises its wholly- or jointly-owned subsidiaries as shown below: IEMG IE Pinheiros Serra do Japi IE Madeira 51% IE Garanhuns 51% IESUL 50% +1 Evrecy Itaúnas (Lote 21*) IE Tibagi (Lote 5**) IE Aguapeí (Lote 29**) IE Itaquerê (Lote 6**) IE Itapura (Lote 25**) ERB 50% (Lote 1**) Aimorés 50% (Lote 3*) Paraguaçu 50% (Lote 4*) IENNE Consolidação Integral Consolidação via Equivalência Patrimonial (*) ANEEL Auction 013/2015 Part II of 10/28/2016 (**) ANEEL Auction 05/ /24/2017 ISA CTEEP - 3Q17 Results 5

6 Operating Excellence The Brazilian electricity system is made up of a few stand alone electric energy transmission systems and the National Interconnected System (SIN), the national grid, serving more than 98% of the Brazilian population. The coordination and control of SIN s electric power generation and transmission installations are the responsibility of the National Electric System Operator (ONS) under the supervision and regulation of ANEEL (National Electric Energy Agency). The sector s consolidated regulatory framework is set out under Law /2004, governing the rules for the functioning and activities of electricity generation, transmission, distribution and commercialization. Compliance with these rules is subject to ANEEL inspection. ISA - CTEEP is remunerated according to the uptime of its assets through the Annual Allowed Revenue (RAP). Consequently, any downtime in its assets may result in reduced remuneration for the Company via a discount from revenue due from operations. ISA CTEEP is a bellwether in the sector in terms of performance and the striving for improved levels of efficiency, closely tracking operating indicators. Among these, of particular importance is Expected Energy Not Supplied (EENS), the percentage between total expected energy not supplied relative to all events in the year and total energy demand supplied by the company. In 2016, EENS was approximately on attended load. The results reported by the company were among the best for this indicator. For the first time in 10 years, in August 2017, ISA CTEEP recorded an EENS for one month equivalent to 0 (zero), an indication of the declining trend reported for the past few years. The organization also adopted world-class benchmarks such as the indicators used in The International Transmission Operations & Maintenance Study (ITOMS) program. ISA CTEEP is the only Brazilian company to be a component of this program - designed to measure the performance of transmission companies in several different countries, assessing their performance in relation to the levels of service and cost. The company is a benchmark in the ITOMS in various aspects, among these, the cost of substation maintenance. The following indicators is a summary of ISA CTEEP s operating performance from 2013 to 9M17. Asset Uptime (09/30/2017) 99,75% 99,50% 99,55% M M M17 Transmission lines Transformers Reactors Goal ISA CTEEP - 3Q17 Results 6

7 Annual Revenue Readjustment Ratifying Resolution 2258 of June 30, 2017 establishes the new RAPs for CTEEP and Subsidiaries for the uptime of the transmission installations incorporated in the Basic Network and Other Transmission Installations for the 12-month cycle from July 01, 2017 to June 30, According to RR 2.258, the total RAP and the amount corresponding to the adjustment parcel (PA) and expansion of ISA CTEEP, agreement 059/2001, net of PIS and COFINS, standing at R$ million on July 1, 2016, was increased to R$ 2,536.9 million on July 01, equivalent to an increase of % or R$ 1,643.5 million. The variation reflects: i. the start to the RBSE reimbursement process - excluding the Ke portion - for the amount of R$ 1,552.4 million, ii. iii. iv. monetary restatement 1 for the 2017/2018 (IPCA inflation index) totaling R$ 30.0 million; the entry into operations of new reinforcement and improvement projects during the 2016/2017 cycle with a corresponding increase in RAP of R$ 41.3 million, 59% of these projects being energized in the Basic Network - RB and 41% in Other Transmission Installations DIT; the positive variation in the adjustment parcel compared with the preceding cycle of R$ 3.5 million (R$ 29.5 million negative PA for the 2017/2018 cycle as compared with the R$ 33.2 million negative PA for the 2016/2017 cycle), principally due to the retroactive receipt of R$ 17.0 million RAP for energized reinforcements and improvements during the 2016/2017 cycle without previously defined revenues, with the right to RAP as from the subsequent tariff cycle (2017/2018 cycle) and the anticipated reimbursement of R$ 43.7 million; and v. the increase of R$ 16.0 million in the RAP for expansion and related to investments already authorized by ANEEL forecasted to become operational during the course of the next cycles. Total RAP and amounts corresponding to PA and Expansion of the Wholly-owned Subsidiaries IEMG, IEPinheiros, Serra do Japi, Evrecy and IENNE, net of PIS and COFINS, which was R$ million on July 01, 2016, increased to R$ million on July 01, 2017, thus an increase of R$ 0.6 million, largely due to the periodic tariff revision (RTP) which restated the cost of third party capital at the IEMG and IE Pinheiros subsidiaries (agreement 021/20117). Following the revision process for IEMG, WACC was altered from 10.13% to 7.34% and in agreement 021/2017 at IE Pinheiros, from 6.61% to 4.62%. Total RAP and amounts corresponding to PA and Expansion of the Jointly Held Subsidiaries IEMadeira, IEGaranhuns and IESul, net of PIS and COFINS, on July 1, 2017 standing at R$ million, increased to R$ million on July 01, 2017, an increase of R$ 59.4 million (10.7%). The variation reflects the following factors: (i) monetary restatement 1 for the cycle of R$ 23.0 million, (ii) positive variation in the PA of R$ 48.9 million (R$ 35.6 million of negative PA for the 2017/2018 cycle against R$ 84.5 million negative PA for the 2016/2017 cycle); and (iii) the Periodic Tariff Revision at IE Garanhuns altering the WACC from 6.61% to 4.62%. Total RAP for ISA CTEEP, its Wholly- and Jointly-owned Subsidiaries, net of PIS and COFINS, to be allocated in twelve monthly installments during the period July 01, 2017 to June 2018 breaks down as follows: 1 Accumulated IPCA and IGPM inflation indexes for the period were 3.60% and 1.57%, respectively. The table on page 8 shows information in detail. ISA CTEEP - 3Q17 Results 7

8 CONTROLADORA Dealership Contract Index RAP Cycle Inflation Improvements RBSE RAP Cycle PA Expansion RAP Future RAP Future PA Expansion REH REH cycles* cycles CTEEP 059/2001 IPCA , ,457.5 (29.5) , (33.2) 92.9 CONTROLADAS (100% Cteep) RAP RAP RAP RAP Dealership Contract Index Cycle Inflation Improvements RTP Cycle PA Expansion Future Future PA Expansion REH REH cycles* cycles IEMG 004/2007 IPCA (0.5) 18.3 (1.1) (1.2) 0.0 EVRECY 020/2008 IGP-M (1.2) (0.5) / (0.2) (0.3) 0.0 IE PINHEIROS 015/ (1.3) (2.6) 0.0 IPCA 018/ (0.2) (0.3) / (0.8) 5.6 (0.3) (0.2) 0.0 IEJAPI 026/2009 IPCA (4.9) (0.6) /2001 IGP-M (1.3) (1.6) 0.0 IENNE 001/2008 IPCA (2.6) (3.1) 0.0 Total (1.3) (13.2) (10.5) 1.6 TOTAL CTEEP CONSOLIDATED 1, , ,655.5 (42.7) , ,077.7 (43.7) 94.5 COLIGADAS Dealership Contract Index RAP Cycle Inflation Improvements RTP RAP Cycle PA Expansion RAP Future RAP Future PA Expansion REH REH cycles* cycles IESUL (50% Cteep) 013/ (0.3) (0.4) 0.0 IPCA 016/ (0.6) (1.1) 1.5 IEMADEIRA (51% 013/ (15.5) (46.1) 0.0 IPCA Cteep) 015/ (13.4) (33.8) 0.0 IEGARANHUNS (51% Cteep) 022/2011 IPCA (12.7) 87.3 (5.8) (3.0) 0.0 Total (12.7) (35.6) (84.5) 1.5 ISA CTEEP - 3Q17 Results 8

9 Economic-Financial Performance - IFRS Gross Operating Revenue On September 30, 2016, the amount relating to SE installations was recalibrated and booked to the accounts in line with the conditions in Ordinance 120/2016 and ANEEL Technical Note 336/2016. This had an effect on Gross Revenue (Remuneration of the Concession Assets) in the amount of R$ 7,111.7 million in 3Q16. The booked extraordinary items ( ex-rbse ) will not be considered when explaining the variations between 3Q17 and 3Q16. Consolidated Gross Operating Revenue ex-rbse was R$ million, a decline of 12.4% compared with 3Q16 ex-rbse. This was largely due to a reduction of 22.1% in remuneration revenues from the concession assets. Gross Revenue (R$ million) Company Consolidated 3Q17 3Q16 Δ% 9M17 9M16 Δ% 3Q17 3Q16 Δ% 9M17 9M16 Δ% Infrastructure % % % % Operation and Maintenance Compensation Asset Concession (3.9%) % (7.9%) % (10.8%) % (22.1%) (9.9%) Others % % (1.9%) % Total (3.5%) 1, % (12.4%) 1, , % Remuneration RBSE Concession Assets ,111.7 (94.1%) 1, ,111.7 (82.0%) ,111.7 (94.1%) 1, ,111.7 (82.0%) Total ,468.3 (89.8%) 2, ,032.4 (71.4%) ,581.5 (89.1%) 2, ,215.7 (70.3%) Revenue from Infrastructure - Revenue from the implementation of infrastructure for electricity transmission services under the concession services agreements is recognized as and when expenditures are incurred. Consolidated Infrastructure Revenue amounted to R$58.8 million in 3Q17, up 14.5% from the R$ 51.3 million in 3Q16, due mainly to progress in reinforcement projects for replacing transformer banks, upgrading and substitution of circuit breakers and switch gear at the Taubaté, Bauru, Mongaguá and Milton Fornasaro substations. Revenue from Operating and Maintenance Services In 3Q17, consolidated Revenue from Operating and Maintenance services amounted to R$ million, a drop of 7.9% compared with R$ million in 3Q16. Justification for this fall is largely due to: (i) a reduction in Energy Development Account (CDE) tariffs to free consumers of R$ 1.7 million, (ii) reduction in the prorating of the system surplus of R$ 14.2 million, (iii) negative variation of R$ 6.1 million in the Variable Parcel (PV), attenuated by (iv) positive variation of R$ 4.1 million with respect to IGPM/IPCA inflation indices on the RAP of 2016/2017 to produce the new amount for the 2017/2018 cycle; and (v) entry into operation of new projects generating an additional R$ 3.4 million. Revenue from Remuneration of Concession Assets - Interest income is recognized at the effective rate of interest on the balance of investments, the effective rate being that which equals the rate for future cash receivables, calculated over the estimated life of the financial asset in relation to its initial book value. Consolidated Revenue from Remuneration of Concession Assets excluding the RBSE effect amounted to R$ million in 3Q17, a fall of 22.1% compared with R$ million in 3Q16 ex-rbse, mainly reflecting: (i) the adjustment in the RAP 2017/2018 cycle of R$ 91.7 million in 3Q17, compared with R$ million in 3Q16; and (ii) the restatement of the financial asset amounting to R$ 87.9 million in 3Q17 compared with R$ 67.1 million in 3Q16. Other Revenues - Revenues relate to leasing income from telecoms companies and from maintenance and technical analysis services contracted by third parties. In 3Q17, these revenues totaled R$ 5.9 million, flat in relation to 3Q16 when this same item reported R$ 6.0 million. ISA CTEEP - 3Q17 Results 9

10 Deductions from Operating Revenue Deductions from consolidated operating revenue reached R$ 85.3 million in 3Q17 taking into account the deferred PIS and COFINS provision of R$ 38.6 million with respect to the remuneration of the RBSE concession asset. In 3Q16, deductions amounted to R$ million incorporating the deferred PIS/COFINS provision of R$ million arising from the booking of the right to indemnification for Existing Service (SE) facilities according to ANEEL Technical Note 336/2016 criteria. Net Operating Revenue Net Operating Revenue in 3Q17 was R$ million, principally reflecting remuneration of the RBSE concession asset of R$ million in the period. Excluding this effect, consolidated net revenue for 3Q17 was R$ million. In 3Q16, the impact of the recognition of the RBSE was R$ 6,316.0 million, an overall net revenue of R$ 6, Excluding this effect, revenue would have been R$ million. R$ million 6, , , , % , % , , Q16 RBSE 3Q16 3Q17 3Q17 RBSE 9M16 com RBSE 9M16 9M17 9M17 com RBSE Company RBSE Subsidiaries ISA CTEEP - 3Q17 Results 10

11 O&M and Infrastructure Costs and Expenses O&M costs and expenses in 3Q17 were R$ million, a decrease of 7.0% in relation to R$ million in 3Q16. The variation in costs and expenses reflects in large part the reversal in contingency expenses with an impact on results of R$ 10.9 million, in the light of the greater number of agreements reached with respect to labor actions, reversal of provisions for civil actions following judicial decisions in favor of the Company, a reduction in the amounts involved and a revision of the outlook for contingencies. The following table shows a breakdown in O&M costs and expenses for the period: Costs and expenses O&M (R$ millions) Company Consolidated 3Q17 3Q16 Δ% 9M17 9M16 Δ% 3Q17 3Q16 Δ% 9M17 9M16 Δ% Perssonel (72.3) (71.0) 1.9% (214.7) (197.1) 8.9% (75.2) (73.7) 2.1% (222.7) (204.7) 8.8% Services (3.8) (2.6) 46.7% (7.1) (5.4) 32.2% (4.0) (2.2) 81.6% (7.4) (5.3) 41.0% Material (30.2) (31.2) (3.2%) (80.7) (79.4) 1.6% (32.1) (33.7) (4.9%) (85.5) (84.3) 1.4% Depreciation (2.3) (2.1) 6.3% (6.7) (6.1) 9.9% (2.5) (2.3) 7.4% (7.3) (6.7) 9.4% Contingencies 8.7 (1.2) (856.0%) 20.4 (8.7) (334.1%) 8.2 (1.0) (887.1%) 19.8 (8.5) (332.4%) Others (11.0) (13.5) (18.9%) (41.7) (42.2) (1.1%) (11.6) (13.0) (10.9%) (43.6) (41.8) 4.2% Total (110.8) (121.6) -8.9% (330.5) (338.7) % (117.2) (126.0) -7.0% (346.7) (351.2) -1.3% Consolidated infrastructure costs amounted to R$ 53.4 million in 3Q17, up 14.8% from R$ 46.5 million in 3Q16. This variation is in line with the increase in infrastructure revenue following the realization of reinforcement and improvement projects, mainly at the Controlling Company. Costs and expenses infrastructure (R$ millions) Company Consolidated 3Q17 3Q16 Δ% 9M17 9M16 Δ% 3Q17 3Q16 Δ% 9M17 9M16 Δ% Total (51.7) (44.9) 15.1% (156.8) (94.1) 66.6% (53.4) (46.5) 14.8% (161.5) (101.1) 59.7% ISA CTEEP - 3Q17 Results 11

12 Equity Income The equity income account in 3Q17 reported a revenue of R$ 45.9 million, a decline of 76.3% from the R$ million posted for 3Q16. The variation in results from the IEMadeira subsidiary is principally a reflection of: (i) a reduction in net revenue of R$ million due to the adjustment in the RAP 2017/2018 cycle (R$ 97.1 million in 3Q17 and R$ million in 3Q16); (ii) an increase in general and administrative costs/expenses of R$ 3.5 million; (iii) the financial result contributed positively with R$ 2.4 million; and (iv) a reduction in income tax and social contribution overheads of R$ 41.1 million following a revision of the effective rate of income tax after factoring in the SUDAM tax break. The fall in the result for the IEGaranhuns subsidiary represents a variation of R$55.9 million due to: (i) a reduction in net revenue amounting to R$88.3 million, principally due to the adjustment of the RAP 2017/2018 cycle and the negative impact arising from the tariff revision which reduced the RAP by 9%; (ii) the financial result had a positive impact of R$0.9 million and (iii) a reduction in income tax and social contribution overheads in the -2,1 amount of R$33.2 million following a revision of the rate of income tax after the factoring in of the SUDENE tax break. -1,1 The amount shown for the Aimorés and Paraguçú subsidiaries relates to administrative expenses during the pre-operational phase of the projects. (R$ million) , , IEMadeira IEGaranhuns IENNE/IESUL Aimorés/Paraguaçú/ ERB 1 ISA CTEEP - 3Q17 Results 12

13 Other Operating Revenues (expenses) - Regularity The result for other operating revenues (expenses) reported revenue of R$ 32.4 million, principally due to the recognition of negative goodwill on the acquisition of the remaining 75% stake in IENNE s capital stock. On September 15, 2017 and October 05, 2017, the Company settled payment for the acquisition of the 50% and 25% stakes in IENNE s capital stock from Isolux and Cymi for R$ 68.5 million and R$ 32.7 million respectively, totaling R$ million, corresponding to the offered price and monetarily restated. As a result of the ISA operation, CTEEP became the holder of 100% control of IENNE's operations, following the approval of the Regulatory Body of September 29, Acquisition IENNE - R$ million Shareholders' Equity 09/30/ Adjustment to fair value (215.2) Assets and liabilities at fair value Participation fee 75% Amount paid (101.2) Buy Advantage The fair value of the acquired assets, liabilities assumed and calculation of negative goodwill were established in a preliminary report prepared by an independent consultancy based on the balance sheet as of September 30, Reassessment of interest 25% Book value of the investment (25% ) Fair value of investment (25% ) 53.1 Loss arising from the acquisition of control IENNE (53.8) Reevaluation of the original 25% stake in IENNE at fair value. FINAL RESULT 4.2 Financial Result The consolidated financial result amounted to revenue of R$ 21.9 million in 3Q17, as against an expense of R$ 25.4 million reported in 3Q16. The variation is principally a reflection of signing up to the Special Tax Regularization Program PERT with the respective reduction in interest and fines, generating a gain in active interest of R$ 50.9 million. The result also reflected a reduction in interest and charges on debentures following partial settlement in December 2016 of the 1 st issue (2 nd series) and the 3 rd issue (single series). Financial Result (R$'million) Company Consolildated 3Q17 3Q16 Δ% 1S17 1S16 Δ% 3Q17 3Q16 Δ% 1S17 1S16 Δ% Interest Receivable % % % % Monetary (net) (6.1) (5.4) 12.8% (22.4) (21.6) 3.9% (6.1) (5.5) 11.9% (22.6) (21.4) 5.5% Currency Swap (4.6) (4.6) (4.6) (4.6) Interest and expenses on loans (25.7) (32.6) (21.1%) (78.8) (94.2) (16.3%) (30.5) (36.8) (17.0%) (91.0) (107.0) (14.9%) Others 1.0 (0.7) (240.8%) 0.8 (0.7) (207.0%) 1.0 (0.8) (230.7%) 0.6 (0.9) (164.9%) Total 21.3 (28.0) 176.2% (41.7) (84.2) 50.4% 21.9 (25.4) (186.3%) (33.9) (79.4) (57.3%) ISA CTEEP - 3Q17 Results 13

14 Income Tax and Social Contribution The Company sets aside a monthly provision for income tax and social contribution payments against net income on an accrual basis. The Controlling Company is taxed according to the real profit regime while the subsidiaries are taxed according to their presumed profit. Results from the implementation of infrastructure for electricity transmission services and remuneration of the concession asset (ICPC 01) are recognized on an accrual basis and taxed on a cash (effective receipt) basis, in accordance with the tax legislation. Consolidated income tax and social contribution generated an expense of R$ million in 3Q17, reflecting the constitution of deferred income tax and social contribution of R$ million and the restatement of the financial asset with respect to the RBSE installations. In 3Q16, income tax and social contribution posted an expense of R$ 2,192.8 million, principally due to the constitution of R$ 2,147.4 million in provisions for deferred income tax and social contribution and reflecting the impact from booking the RBSE. The effective tax rate in 3Q17 was 29.0% compared with 32.6% in 3T16. Net Income Net Income in 3Q17 amounted to R$ million, the effect of R$ million in remuneration from the RBSE concession asset. Excluding the latter, net income would have been R$ million, a year-on-year decrease of 44.5%. (R$ million) 4, , , , % , % Q16 RBSE 3Q16 3Q17 3Q17 9M16 com RBSE 9M16 9M17 ISA CTEEP - 3Q17 Results 14

15 EBITDA and EBITDA Margin In accordance with ICVM 527/12, Consolidated EBITDA excluding the remuneration from the RBSE concession asset was R$ million in 3Q17 while the EBITDA Margin was 66.2%. EBITDA (R$ million) Company Consolidated 3Q17 3Q16 1H17 1H16 3Q17 3Q16 1H17 1H16 Net Income , , , , , ,742.4 Income tax and social contribuition , , , ,252.9 Financial Results (21.3) (21.9) Depreciation and Amortization EBITDA ICVM 527/ , , , , , ,083.2 EBITDA Margin ICVM nº 527/ % 101.9% 87.0% 99.3% 83.4% 100.3% 82.5% 97.2% RBSE , , , , , ,316.0 EBITDA ex-rbse Margem EBITDA ex-rbse 78.7% 140.1% 69.8% 94.0% 66.2% 105.6% 62.5% 78.9% ISA CTEEP - 3Q17 Results 15

16 Economic-Financial Performance Regulatory 2 The Company begins to receive RAP receivables from the RBSE according to the conditions of Ordinance 120/2016 and TN 336/2016. Gross Operating Revenue Regulatory In 3Q17, Consolidated Gross Operating Revenue reached R$ million, an increase of 143.8% in relation to the R$ million in 3Q16. This increase reflects the impact of R$ million in RAP following the start of payments from the RBSE according to conditions under Ordinance 120/2016 and ANEEL Technical Note 336/2016. Quarterly revenue was also impacted by adjustment to the RAP 2017/2018 cycle as well as the entry into operation of new investments. Gross Revenue (R$ million) The electrical Interconnection Revenues RBSE Company Consolidated 3Q17 3Q16 Δ% 9M17 9M16 Δ% 3Q17 3Q16 Δ% 9M17 9M16 Δ% % % % % Others % % (1.9%) % Total % 1, % % 1, % Deductions from Operating Revenue Regulatory Deductions from operating revenue were R$ 70.9 million in 3Q17, an increase of 89.3% compared to R$ 37.5 million for 3Q16, principally due to PIS and COFINS charges of R$ 33.8 million, a reflection of the RBSE RAP. 2 Regulatory Result: Relates to figures from regulatory accounting statements for ISA CTEEP and its Controlled Subsidiaries, which independent auditors audit only at the end of each fiscal year (regulatory results for 3Q17 were not reviewed by the auditors). The main difference relative to corporate statements is the non-application of ICPC 01 (IFRIC 12). ICPC 01 has a material effect on the Financial Statements of the Company and its Subsidiaries, particularly in connection with the booking of investments made in transmission assets, which impacts the Financial Assets and PP&E accounts, and alters the structure and presentation of Income Statements. Hence, our purpose in disclosing this information is merely to assist in understanding ISA CTEEP s business. ISA CTEEP - 3Q17 Results 16

17 Net Operating Revenue Regulatory Consolidated Net Operating Revenue in 3Q17 reached R$ million, an increase of 153.2% compared with 3Q16 when this item posted R$ million, principally in the light of initial flows of RBSE revenue with an impact of R$ million in 3Q17. (R$ million) 1.082, Q16 3Q17 9M16 9M17 Company Subsidiaries O&M Costs and Expenses Regulatory Total O&M costs and expenses, ex-depreciation for 3Q17, recorded a 9.1% decline compared with 3Q16, registering million. The variation in costs and expenses reflects in large part the reversal in contingencies with an impact on results of R$ 10.9 million, in the light of the greater number agreements reached with respect to labor actions (R$ 6.7 million), reversal of provisions for civil actions (R$ 3.7 million) following judicial decisions in favor of the Company, a reduction in the amounts involved, a revised outlook for contingencies and variation in social security processes (R$ 0.5 million). Total O&M costs and expenses in 3Q17 reported an increase of 86% in relation to 3Q16 to R$ million with the recognition of R$ million in RBSE-related depreciation, incorporating the amortization in 96 installments (8 years) of the accumulated amount of depreciation between January 2013 and June Below is a breakdown of O&M costs and expenses for the period: Cost and Expenses (R$ millions) Company Consolidated 3Q17 3Q16 Δ% 9M17 9M16 Δ% 3Q17 3Q16 Δ% 9M17 9M16 Δ% Personnel (72.3) (71.1) 1.7% (214.8) (196.4) 9.4% (75.2) (73.8) 1.9% (222.8) (203.9) 9.3% Material (3.6) (3.1) 14.3% (8.3) (9.1) -9.2% (3.7) (3.2) 15.2% (8.6) (9.4) -8.4% Services (30.1) (31.5) -4.5% (80.8) (78.4) 3.0% (31.7) (33.6) -5.7% (84.8) (82.8) 2.4% Contingencies 8.7 (1.2) % 20.4 (8.7) % 8.1 (1.0) % 19.8 (8.5) % Others (10.9) (13.5) -19.3% (41.7) (42.0) -0.6% (11.6) (13.9) -16.4% (43.5) (43.3) 0.4% Sub Total (108.2) (120.4) -10.1% (325.2) (334.6) -2.8% (114.1) (125.5) -9.1% (339.9) (347.8) -2.3% Depreciation (139.5) (8.6) % (160.0) (24.0) 565.7% (148.0) (15.4) 860.4% (182.8) (43.9) 316.8% Total (247.7) (129.0) 92.0% (485.2) (358.7) 35.3% (262.1) (140.9) 86.0% (522.7) (391.7) 33.4% ISA CTEEP - 3Q17 Results 17

18 Equity Income Regulatory Equity income for 3Q17 was R$ 4.4 million, a decline of 45% in relation to income of R$ 8.0 million in 3Q16. The variation in the result of the IE Madeira subsidiary is mainly due to: (i) adjustment of the 2017/2018 RAP cycle; (ii) the financial result produced a positive impact of R$ 2.4 million; and (iii) a reduction in income tax and social contribution expenses following a revised tax rate with the inclusion of SUDAM tax break. The decline in the result for IEGaranhuns represents largely the adjustment to the 2017/2018 RAP cycle with a negative impact following the tariff review which adjusted the WACC of 6.61% down to 4.62% and reduced the RAP by 9%. The amount shown for the Aimorés and Paraguçú subsidiaries relates to administrative expenses during the preoperational phase of the projects. (R$ million) 1, , , Q16 3Q17 9M16 9M17 IEMadeira IEGaranhuns IENNE/IESUL Aimorés/Paraguaçú/ERB 1 ISA CTEEP - 3Q17 Results 18

19 Other Operating Revenues (expenses) Regulatory The result for other operating revenues (expenses) reported a revenue of R$ 32.4 million due to the recognition of negative goodwill and adjustment for the acquisition of the remaining 75% in IENNE s capital stock. On September 15, 2017 and October 05, 2017, the Company settled payment with Isolux and Cymi for the acquisition of the 50% and 25% stakes in IENNE s capital in the amounts of R$ 68.5 million and R$ 32.7 million respectively, totaling R$ million, corresponding to the monetarily restated offered price. As a result of the ISA operation, CTEEP became the holder of 100% control of IENNE's operations, following the approval of the Regulatory Body of September 29, Acquisition IENNE - R$ million Shareholders' Equity 09/30/ Adjustment to fair value (78.1) Assets and liabilities at fair value Participation fee 75% Amount paid (101.2) Buy Advantage 58.0 The fair value of the acquired assets, liabilities assumed and calculation of negative goodwill were established in a preliminary report prepared by an independent consultancy based on the balance sheet as of September 30, Reassessment of interest 25% Book value of the investment (25% ) 72.6 Fair value of investment (25% ) Loss arising from the acquisition of control IENNE 53.1 (19.5) Reevaluation of the original 25% stake in IENNE at fair value. FINAL RESULT 38.4 ISA CTEEP - 3Q17 Results 19

20 Net Income Regulatory Net Income in 3Q17 reached R$ million, an increase of 392.0% in relation to 3Q16 when the Company reported earnings at R$ 46.4 million, and including R$ million from RBSE Q16 3Q17 9M16 9M17 Current RBSE PERT IENNE Contingencies EBITDA and EBITDA Margin ICVM 527/12 Regulatory Pursuant to ICVM 527/12, consolidated EBITDA was R$ million in 3Q17, an increase of R$ million over the EBITDA recorded in 3Q16 of R$ million, given the initial payments of RBSE receivables. EBITDA margin in 3Q17 was 86.0%. Excluding the impact of RBSE RAP receivables, EBITDA of 3Q17 was R$ million, an increase of R$ 42.0 million. EBITDA (R$ million) Company Consolidated 3Q17 3Q16 9M17 9M16 3Q17 3Q16 9M17 9M16 Net Income Income tax and social contribuition Financial Results (21.3) (21.9) Depreciation and Amortization EBITDA ICVM 527/12 #REF! #REF! 90.0 #REF! #REF! #REF! #REF! #REF! #REF! EBITDA Margin 87.4% 47.6% 76.5% 55.7% 86.0% 46.3% 72.9% 52.8% Receita RBSE EBITDA ex RBSE Margem EBITDA ex RBSE 67.0% 47.6% 64.9% 55.7% 65.7% 46.3% 61.2% 52.8% ISA CTEEP - 3Q17 Results 20

21 IFRS vc Regulatory Net Income In accordance with IFRS principles, investments are recorded as a financial asset to be settled over the course of the concession, generating construction revenue and cost. When restated, the financial asset generates revenue from infrastructure remuneration. Under the regulatory regimen, investments are treated as PP&E, depreciated in line with their useful life while revenue (RAP) is recognized according to sales over the concession period. The main differences between IFRS and Regulatory consolidated results in 3Q17 are as follows: Net Income IFRS Net Revenue Cost and Expenses 54.0 Depreciation Equity Others 34.3 IR and CSLL 68.3 Net Income Regulatory % Net Operating Revenue: Infrastructure Reversal Reversal of R$ 58.8 million and Infrastructure Remuneration Revenue of R$ million, mainly due to the RBSE remuneration, combined with the recognition of the Regulatory RAP of R $ million and reversal of PIS and CONFINS Deferred charges of R$ 14.4 million, totaling the negative adjustment of R$ million. Infrastructure and O & M Costs: Reversal of Infrastructure and O & M implementation Costs totaling R$ 54.0 million. Depreciation and Amortization: Inclusion of depreciation expense and amortization of property, plant and equipment Regulatory. of R$ million. Equity in subsidiaries: Adjustments in subsidiaries by the adoption of IFRIC 12, which mainly affect the accounting of Infrastructure and Concession Assets (financial assets). IR & CSLL: Deferred IR and CSSL reversal on IFRS adjustments. Beginning in 2015, the IR / CSLL tax base is the IFRS with recognition of deferred tax on the results of infrastructure and remuneration of the concession assets, recognized by competence and offered to taxation for the effective receipt.. ISA CTEEP - 3Q17 Results 21

22 Capital Structure Debt* Consolidated gross debt on September 30, 2017 stood at R$ 1,771.2 million, a 75.3% increase in relation to the end of 2016, when outstandings were R$ 1,010.4 million, reflecting: (i) the issue of Infrastructure Debentures of R$ million in March 2017; (ii) the foreign loan under Law 4131/1962 for USD 50.0 million in July 2017 at a cost of currency variation + three month LIBOR % p.a. and; (iii) a line of R$ million from the Brazilian Development Bank - BNDES in August 2017 for the acquisition of machinery and equipment for implementing the Investments Plan for the period 2016 and ISA CTEEP s consolidated cash and cash equivalents amounted to R$ million on September 30, 2017, an increase of 87.8% compared with December 31, 2016, when the Company reported R$ million. This increase is largely due to initial income of cash from RBSE receivables. Consequently, consolidated net debt amounted to R$ 1,133.1 million, an increase of 69.2 % in relation to net debt for year-end Debt (R$ million) 3Q Δ% Debt 1, , % Short-term Debt % Long-term Debt 1, % Cash CTEEP and 100%* % Net Debt 1, % Cash* % Net Debt Consolidated 1, % (*) The Company's funds are concentrated in exclusive investment funds that are also used for investments of controlled and jointly controlled subsidiaries and quotas in liquid investment funds that can be promptly converted into cash, regardless of the maturities of the assets allocated to them. The principal covenants to which ISA CTEEP is a party are set forth below: BNDES financing agreements (Valid for 2017) must comply with the maximum financial indicators in the agreements: Net Debt/Adjusted EBITDA BNDES 3.5 and Net Debt/(Net Debt + Shareholders Equity) 0.6, both calculated annually at the end of the fiscal year. For the purposes of calculating and substantiating these indices, the Company must consolidate all of its subsidiaries and jointly controlled subsidiaries (proportionally to the stake held) conditional on its stake being 10% or more. 1 st Debenture Issue should comply with the financial indicators in the debenture agreement as follows: Net Debt/Consolidated Adjusted EBITDA 3.5 and Adjusted EBITDA Debentures/Financial Result 3.0 calculated on a quarterly basis. 3 rd Debenture Issue requires full compliance with the financial indicators contained in the BNDES financing agreements. 4 th Debenture Issue should comply with the financial indicators in the indenture agreement as follows: Net Debt/Adjusted EBITDA < 3.5 and Adjusted EBITDA/Financial Result > 1.5 until the verification on the baseline date of June 30, 2017 and as from the verification on the baseline date of September 30, 2017, th Debenture issue requires full compliance with the financial indicators set forth in the indenture agreement, as follows: Net Debt/Adjusted EBITDA < 3.5 and Adjusted EBITDA/Financial Result > 1.5 until the verification on the baseline date of June 30, 2017 and, as from verification on the baseline date of September 30, 2017, 2.0. The Law 4131 Loan Agreement is subject to compliance with the following indicators: Net Financial Debt/Adjusted EBITDA 3.5 and Adjusted EBITDA/Net Interest Expenses 2.0. The Company is in full compliance with the covenants and requirements enshrined in the indenture agreements of all the Debenture issues. ISA CTEEP - 3Q17 Results 22

23 The average cost of the consolidated debt declined from 11.4 % p.a. on December 31, 2016 to 8.8% on September 30, The accumulated IPCA for the past 12 months was 2.54% and the annualized CDI (Interbank Deposit Rate) for September 2017 was 8.14%. The average consolidated debt maturity on September 30, 2017 was 3.3 years, up from the year-end of 3.9 years. Below is the consolidated debt amortization schedule (Controlling Company and Wholly and Jointly-controlled Subsidiaries), the breakdown of their respective financing liabilities and respective indexers. The Net Debt/EBITDA indicator is set at 3.00 for 2018, 2019 and R$ million a a 2033 Company Subsidiaries Contracted Debt and Indexer 3Q17 Contracted Debt and Indexer % 27.0% % 36.8% 46.8% % BNDES - TJLP Debêntures - CDI/IPCA Outros (*) The complete breakdown of the debt of CTEEP and its wholly- and jointly-controlled entities can be found in the Attachments to the present document. ISA CTEEP - 3Q17 Results 23

24 Investments In the accumulated nine month period of 2017, ISA CTEEP, its wholly- and jointly-controlled subsidiaries invested a total of R$ million, as follows: (i) R$ million in new connections, modernization and improvements that generate additional revenues for the Company once the investment projects are energized; (ii) R$ 43.2 million in investments via subsidiaries for the completion of work in progress as well as eventual improvements, reinforcements and new connections, contributing to the eventual generation of further revenue for the Company; and (iii) R$ 17.7 million in capitalization of labor overheads, corporate and telecommunications projects. Of the total projects portfolio, 132 were energized during 2017 at a total investment of R$ million generating a RAP of R$ 30.5 million. New SPC s Status Below is the evolution of the new SPE's, related to the last two leillões of transmission. Auction Auction 03/ /28/2016 Auction 05/ /24/2017 Subsidiárias IE Aimorés (Lot 3) IE Paraguaçú (Lot 4) IE Itaúnas (Lot 21) ERB (Lot 1) IE Tabagi (Lot 5) IE Itaquerê (Lot 6) IE Itapura (Lot 25) IE Iguapeí (Lot 29) % ISA CTEEP 50% Minas Gerais /10/17 60 months 50% Bahia Minas Gerais Signing of Executive Construction Environmental Licensing Basic Project REIDI Framework the Contract Project Deadline ANEEL IBAMA EIA/RIMA ONS. MME MME RFB /10/17 60 months 100% Espiríto Santo /10/17 60 months 50% Paraná /11/17 60 months 100% Location São Paulo Paraná ANEEL Investmente (R$ MM) RAP (R$ MM) /11/17 60 months 100% São Paulo /11/17 60 months 100% São Paulo /11/17 60 months 100% São Paulo /11/17 60 months Forecast 10/05/18 Environmental waiver Environmental waiver Forecast 02/22/19 Forecast 04/30/18 Not started Forecast 04/30/18 Not started Forecast 03/10/21 Not started Environmental waiver Environmental waiver Not started Forecast 03/30/18 Forecast 05/30/18 Forecast 04/30/18 Forecast 05/30/18 Forecast 04/30/18 Forecast 08/30/18 Not started Forecast 09/30/18 Not started Forecast 03/30/18 Forecast 03/30/19 Forecast 04/18/18 Forecast 04/13/18 Forecast 04/13/18 Forecast 04/13/18 Forecast 04/13/18 Forecast 04/13/18 Not started Not started Not started Not started Not started ISA CTEEP - 3Q17 Results 24

25 Subsequent Event IENNE In accordance with the material fact published on October 5, 2017, the Company completed the acquisition of 100% of all the shares of the capital stock of IENNE, namely 50% of the shares held by Isolux and 25% held by CYMI. ISA CTEEP - 3Q17 Results 25

26 Capital Markets Closing prices of ISA-CTEEP s common and preferred shares (B3: TRPL3 and TRPL4) as at the end of 3Q17 were R$ and R$ 68.32, respectively, corresponding to a variation of 1.69% and 5.87%, respectively, in relation to December 31, During the same period, the Ibovespa reported an appreciation of 24.68% and the Electric Energy Stock Index (IEE) 14.54%. 30% 20% 10% 0% 23.4% 14.4% 5.3% 1.7% -10% -20% jan-17 fev-17 mar-17 abr-17 mai-17 jun-17 jul-17 ago-17 set-17 TRPL3 TRPL4 IBOVESPA IEEX For the nine months ending September 30, 2017, the preferred shares of ISA CTEEP reported an average daily trading volume on the B3 of R$ 24.7 million. Trade Financial - 12/31/2016 (R$ million) Total R$ Million Daily Average / Day R$ 24.7 Million 0 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 With a daily average of 2,052 trades, ISA CTEEP s preferred shares recorded a total of thousand transactions in Trade Volume - 12/31/2016 (units) 8, Total Trade: 383,375 Daily: 2,052 6, , , Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 ISA CTEEP - 3Q17 Results 26

27 Attachments Attachment I Balance Sheet - IFRS COMPANY CONSOLIDATED Assets (R$' 000) 09/30/ /31/ /30/ /31/2016 CURRENT ASSETS Cash and Banks 7,127 1,609 10,711 4,524 Financial Investments 393, , , ,138 Trade Account Receivable 1,764,185 1,091,764 1,935,546 1,221,016 Inventory 41,966 35,796 43,892 37,723 Recoverable taxes and conbtributions 138,306 8, ,732 8,563 Prepaid Expenses 13,806 10,104 13,850 10,303 Others 64,281 60,054 65,669 62,077 2,423,620 1,332,054 2,839,436 1,680,344 NON-CURRENT ASSETS Long-Term Assets Trade Account Receivable 9,874,970 9,222,081 11,395,225 10,225,808 Amounts Receivable from the State Finance Secret 1,276,251 1,150,358 1,276,251 1,150,358 Tax benefit - incorporated goodwill Pledges and Escrow 64,159 70,166 64,169 70,175 Inventory 17,257 25,438 22,992 32,512 Deferred taxes Others 5,772 1,570 34,401 13,572 11,238,409 10,469,613 12,793,038 11,492,425 Investments 3,035,549 2,757,784 1,846,265 1,826,930 Property, Plant and Equipment 23,073 25,424 23,157 25,457 Intangible Assets 15,371 18,219 36,565 41,843 3,073,993 2,801,428 1,905,987 1,894,231 Total Assets 16,736,021 14,603,095 17,538,461 15,067,000 ISA CTEEP - 3Q17 Results 27

28 COMPANY CONSOLIDATED Liabilities and Shareholders' Equity 09/30/ /31/ /30/ /31/2016 CURRENT LIABILITIES Loans and Financing 202,441 32, ,483 71,679 Bonds 207, , , ,368 Suppliers 5, , ,857 39,279 49,483 41,482 Taxes, Fees and Contributions 233,737 28, ,387 30,053 Taxes installments 75,396 17,540 75,396 17,540 Regulatory Charges 23,792 12,598 25,369 12,751 Interest on Shareholders' Equity 0 139, ,946 Provisions 40,307 32,562 41,625 33,610 Amounts Payable - Fundação CESP 4,468 5,495 4,468 5,495 Others 70,200 49,715 74,804 53, , , , ,971 NON-CURRENT LIABILITIES Long-Term Liabilities Loans and Financing 380, , , ,472 Bonds 614, , , ,931 Taxes installments 0 119, ,857 PIS and COFINS 1,050, ,480 1,164, ,445 Income tax and social contribuition 2,392,710 2,068,537 2,500,801 2,106,603 Regulatory Charges 35,906 29,374 39,573 32,509 Provisions for Contingencies 129, , , ,035 Others 29,288 24,053 29,288 24,053 4,632,987 3,933,956 5,166,035 4,171,905 Minority interest , ,733 SHAREHOLDERS' EQUITY Paid-up Capital 2,372,437 2,372,437 2,372,437 2,372,437 Capital Reserves 1,217,583 1,217,583 1,217,583 1,217,583 Revenue Reserves 6,527,704 6,527,704 6,527,704 6,527,704 Profits / Losses 1,075, ,075,868 0 Advance for future capital increases ,194,258 10,118,390 11,194,258 10,118,390 Total Liabilities and Shareholders' Equity 16,736,021 14,603,094 17,538,460 15,066,999 ISA CTEEP - 3Q17 Results 28