Research. Research Released BRAZIL EQUITY RESEARCH DAILY

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1 Settlement: March 23, 2012 Released ELECTRIC UTILITIES: Power Pack Brazil BRAZILIAN MOBILE FIGURES FEBRUARY: Commercial activity to determine market leadership Ibovespa Top Gainers Daily chg. m shares Latest Price TELEMAR NORTE LESTE ON 5,09% ,20 TELEM AR PNA 4,57% ,48 JBS ON 4,38% ,35 USIMINAS ON 3,64% ,77 TELEMAR NORTE LESTE PN 2,75% ,80 Ibovespa - Top Losers Daily chg. m shares Latest Price BROOKFIELD ON -3,85% ,50 GOL LINHAS AÉREAS PN -3,83% ,57 NATURA ON -3,34% ,22 CYRELA ON -2,96% ,71 ROSSI ON -2,94% ,58 Other Stock M arkets Last Daily Chg. YTD Chg. North America Dow Jones US ,36% Nasdaq US ,16% S&P 500 US ,10% Europe Dax Xetra GR ,44% 19,55% IBEX 35 SM ,84% -0,55% CAC 40 FP ,43% 11,61% FTSE 100 LN ,11% 5,79% PSI 20 PL ,14% 1,95% Asia Nikkei JP ,95% TOP 40 SJ ,14% 5,55% M erval AR ,96% IGPA CI ,210-9,32% BUX HB ,340-0,65% 12,73% Main Economic Figures JCI IJ 4.022,168-0,06% 5,24% IPC M X ,19% RTS RU ,54% 22,73% Forecast Date Local Time (BZ) Country Indicator Reference Estimativa Bes Consensus Last 20-Mar-12 06:30 ES 18-Month Bills Spain to Sell 12-Month and 20-Mar-12 06:30 British CPI (YoY) FEB - - 3,3% 3,6% 20-Mar-12 06:30 British Core CPI YOY FEB - - 2,4% 2,6% 20-Mar-12 09:30 US US Housing Starts FEB K 699K 20-Mar-12 09:30 US US Building Permits FEB K 682K 20-Mar-12 16:00 PT Portugal Year-to-Date Budget Report Source: Bloomberg and Espirito Santo Investment Bank. Relevant Data Last Daily chg. YTD Dollar (R$/US$) 1,821 0,00% -2,47% Brent (US$) 124,60-0,55% 15,82% Source: Bloomberg. Note: Latest price refers to the adjusted close of the previous session, unless otherwise stated. Please refer to page 6 of this report for important disclosures, analyst certifications and additional information. Espirito Santo Investment Bank does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. This research report has been prepared in whole or in part by research analysts based outside the US who are not registered/qualified as research analysts with FINRA. FOR IMPORTANT DISCLOSURE INFORMATION, INCLUDING DISCLOSURES RELATED TO THE U.S. DISTRIBUTOR OF THIS REPORT, PLEASE REFER TO THE FINAL PAGES OF THIS REPORT

2 Electric Utilities ELECTRIC UTILITIES: Power Pack Brazil Absolute Share Price Performance (pg14) Last Week Best: ISA CTEEP PN +5%, AES TIETÊ ON +7% Worst: CELESC PN -5%, ELETROBRAS PNB -6% Absolute Share Price Performance (pg14) Last 3 Months Best: CEMIG PN +33%, SABESP ON +39% Worst: ELETROBRAS PNB -7%, LIGHT ON -7% This week will be marked by 12M11/4Q11 results for CESP (CESP6, R$36.6, NEUTRAL, FV R$32) on 22/Mar (Thursday after market close) and COELCE (COCE5, R$37.9, NEUTRAL, FV R$38) on 23/Mar (Friday after market close). We expect CESP to report consolidated 4Q11 EBITDA of R$472m, up 81% YoY vs. 4Q10 restated IFRS figures, mainly reflecting lower provisions versus one year ago. At the bottom line, we expect net income to total R$118.3m, from a net loss of R$124.3m in 4Q10 restated IFRS figures. We expect COELCE to report consolidated 4Q11 EBITDA of R$177m, down 4% YoY vs. 4Q10 restated IFRS figures. At the bottom line, we forecast net profit of R$104m, up 23% vs 4Q10 restated IFRS figures, mainly reflecting lower YoY net financial expenses. From the past week, we highlight: 1) Initiating Coverage of Tractebel (TBLE3, R$32.5) with NEUTRAL rating and FV of R$34/share We see upside potential limited by the negative impact that the transfer of the 50.1% stake in Jirau HPP project (IC 3,750MW) from Tractebel s controlling shareholder is likely to have on its shareholder remuneration outlook until the transactions is completed (YE13E). In our view, the 2012E-13E P/E and EV/EBITDA multiple premiums on which Tractebel s shares currently trade reflect a continued preference for privately held names and investors confidence in its track record for successful installed capacity growth. 2) Downgrading ELETROPAULO (ELPL4, R$38.9) to SELL with a new FV of R$31/share (from R$35/share), after rolling over our DCF and DDM valuations and updating our operating and financial forecasts incorporating 4Q11/12M11 results, which were reported last Tuesday (13/Mar). 4Q11adj. EBITDA (ex-one offs) was up 7% YoY to R$450m (49% above our forecast), affected by the positive combination of a 6% YoY decrease in its total costs (10% below our forecast) and tariffs that have been frozen since Jul/11 (when the company s tariff revision was postponed to Jul/12). At the bottom line, 4Q11 adj. net profit was down 7% YoY, reflecting higher taxes. Eletropaulo s Board has proposed an interim dividend of R$3.39/share (c.9% yield), down 40% YoY with 16/Apr as the ex-dividend date. Total DPS announced over 12M11 reached R$5.64/share (a c.15% yield), down 41% YoY at a c.60% payout over non-adjusted 12M11 EPS of R$ ) Reiterating our BUY rating on AES TIETE s voting shares (GETI3, R$24.1) with an updated FV of R$28/share (from R$26/share), after rolling over our valuations and updating our operating and financial forecasts to incorporate 4Q11/12M11 results, which were reported last Wednesday (14/Mar). We are also maintaining our NEUTRAL rating on the nonvoting shares (GETI4, R$26.5), with an updated FV of R$25/share (from R$23/share). 4Q11 EBITDA was up 47% YoY to R$419m, reflecting a stronger top line (driven by changed seasonal allocation of its energy sales) and a 9% YoY decrease in total costs. At the bottom line, 4Q11 net profit was up 57% YoY, to R$263m, reflecting the aforementioned improved operating results and 71% YoY lower net financial expenses. AES Tiete s Board is proposing interim dividends of R$0.63/share for GETI3 and R$0.70/share for GETI4, up 7% YoY with 16/Apr as the ex-dividend date. With this proposal, total DPS announced over 12M11 reached R$2.23/GETI3 (c.10% yield over 16/Mar closing price), and R$2.46/GETI4 (c.10% yield over 16/Mar closing price), at a consolidated payout of 109% over non-adjusted 12M11 EPS of R$2.22. Page 2 of 8

3 4) A-5 New Energy Auction postponed to 16/Aug from 26/Apr The postponement should give more time for discos to calculate and present their official estimates of additional demand from captive customers exceeding the energy balance in their current contracts from 2017 onwards. The aim of this A-5 auction is to contract the construction of new energy assets, with energy delivery expected to commence in On the supply side, hydro power plants (HPP), windpowered generation parks (WPPs), gas-fired and biomass thermo power plants (TPPs) are eligible to register for this auction. So far only 3 HPPs totaling 186MW IC have received the environmental license. São Manoel (700MW IC) and Sinop (400MW IC), considered the main projects for this auction, are still waiting for the environmental license that will enable them to sell energy in the auction. Gabriel Laera - (11) , glaera@bessecurities.com.br Paulo Eduardo Nascimento (11) , pnascimento@bessecurities.com.br Telecommunications BRAZILIAN MOBILE FIGURES FEBRUARY: Commercial activity to determine market leadership The Brazilian sector regulator has published monthly figures for February, reporting that the market added 2.44m subscribers during the month, reaching 248m subs (+19.3% YoY) and a penetration rate of approximately 126.5%. Telefonica Brasil (VIVT4.BZ, R$55.35, BUY, FV R$62.0) remained in first place with a 42.3% share of net adds, followed by Tim (TIMP3.BZ, R$11.11, BUY, FV R$13.0), which reported a 32.4% share. Oi (TNLP4.SA, R$19.80, NEUTRAL, FV R$22.0) reported a MoM increase in share of net adds (12.7% vs. 5.8% in January), while Claro s (AMX, Not Rated) share remained nearly unchanged (12.5% vs. 13.0%). Vivo maintains its leadership position in net adds Telefonica Brasil reported the largest market share of net adds among the Brazilian operators in February/12 (42.3%, 1.0m net adds), maintaining its first place position (45.2%, 1.3m net adds in January). Tim remained in second place in February, with a 32.4% market share of net adds (790.4k). Although both operators lost some market share of net adds to Oi (their combined share fell to 74.7% vs. 80.6% in January), they kept their dominant positions in net adds. This seems to support our view that the competitive environment in the sector remains fierce especially between Vivo and Tim. The market share of net adds for Oi increased (12.7%, vs. 5.8% in January), while Claro (13% in February and January) reported a stable share of net adds. Although we think Oi and Claro may become more competitive after they conclude their restructuring and operational processes, we expect Telefonica Brasil (29.9% total market share) and Tim (26.6% total market share) to continue to compete for market leadership in the short term. Competition between Tim and Telefonica Brasil remains fierce Telefonica Brasil and Tim continue to dispute the market leadership position, although Tim lagged Telefonica Brasil for the second month in a row. After losing its leadership position in December, Telefonica Brasil retook the first place in market share of net adds in January owing to its constant commercial activity (e.g., the Vivo Sempre pricing plan, where the company competes directly with Tim in the Long Distance call segment). Given that Tim has a promotional strategy already in place and brand recognition in the prepaid segment (85.6% of its client base), we forecast Tim s share to remain largely stable throughout 2012E. In February, Tim reported a 33.1% share of prepaid net adds (vs. 37.3% in January), while Telefonica Brasil came in first, with a 44.6% share. Oi: Better performance but still a long way to go After reporting the lowest market share of net adds of the major operators in January (5.8%), Oi presented an increase in its net adds share in February (12.7%), beating Claro (12.5%). In our view, Oi could improve its performance in net adds share, but we expect the company to continue focusing on its restructuring process in 1Q12. Although Claro maintained its share of net adds largely unchanged in February, it still holds third place in total market share (24.7% vs. 18.6% for Oi), suggesting that Oi still has a long way to go before it is able to reach a meaningful market position. Page 3 of 8

4 Competition continues to increase We forecast the mobile segment to continue expanding in the coming months owing to the intensive commercial activity carried out by the operators and the investments in new technologies and infrastructure. We forecast Oi to be better prepared to face the competition as soon as it concludes its corporate restructuring process. As a consequence, we expect competition in the telecom sector to be maintained and to continue to pressure the operators margins. Although we like Telefonica Brasil because of its compelling dividend yield (7.5% in 2012E), potential for synergies extraction and solid operations, we reiterate Tim as our top pick in the sector owing to its higher growth outlook and the large share of its revenues coming from the mobile segment. Bruna Mari - (11) , bmari@bessecurities.com.br Jessica Antunes (11) , jantunes@bessecurities.com.br Page 4 of 8

5 Macro Calendar Forecast Date Local Time (BZ) Country Indicator Reference Estimativa Bes Consensus Last 19-23/MAR - - BZ Brazilian Tax Collections FEB R$75.0B 72600M R$102.6B 19-23/MAR - - BZ Brazilian Economic Activity Indx MoM SA FEB -0,4% -0,3% 0,6% 19-23/MAR - - BZ Brazilian Economic Activity Indx YoY NSA FEB 1,0% - - 1,5% 22-Mar-12 09:00 BZ Brazilian IBGE CPI IPCA-15 (MoM) MAR 0,40% 0,37% 0,53% 22-Mar-12 09:00 BZ Brazilian Unemployment Rate FEB 5,9% 5,8% 5,5% 23-Mar-12 08:00 BZ Brazilian FGV CPI IPC-S 22-Mar 0,54% - - 0,47% 23-Mar-12 09:00 BZ Brazilian Broad Retail Sales (MoM) JAN 0,6% - - 1,6% 23-Mar-12 09:00 BZ Brazilian Retail Sales (MoM) JAN 1,6% 1,8% 0,3% 23-Mar-12 09:00 BZ Brazilian Broad Retail Sales (YoY) JAN 6,2% - - 4,3% 23-Mar-12 09:00 BZ Brazilian Retail Sales (YoY) JAN 5,7% - - 6,7% 23-Mar-12 10:30 BZ Brazilian Current Account - Monthly FEB -$2600M - - -$7086M 23-Mar-12 10:30 BZ Brazilian Foreign Investment FEB $3000M - - $5433M MAR - - PE Peruvian CB's Quarterly Inflation Report MAR - - AR Argentinean Budget Balance FEB M MAR - - CH Chinese HSBC Flash China Manufacturing PMI MAR ,7 20-Mar-12 06:30 ES Spain to Sell 12-Month and 18-Month Bills Mar-12 06:30 British CPI (YoY) FEB - - 3,3% 3,6% 20-Mar-12 06:30 British Core CPI YOY FEB - - 2,4% 2,6% 20-Mar-12 09:30 US US Housing Starts FEB K 699K 20-Mar-12 09:30 US US Building Permits FEB K 682K 20-Mar-12 16:00 PT Portugal Year-to-Date Budget Report Mar-12 06:30 British Public Sector Net Borrowing FEB B 21-Mar-12 09:30 CA Canadian Leading Indicators MoM FEB ,7% 21-Mar-12 11:00 MX Mexican Retail Sales (INEGI) JAN ,5% 21-Mar-12 11:00 US US Existing Home Sales FEB M 4.57M 21-Mar-12 18:00 CO Colombian Industrial Production (YoY) JAN - - 4,4% 2,4% 21-Mar-12 18:00 CO Colombian Retail Sales (YoY) JAN - - 6,9% 7,5% 21-Mar-12 18:45 NZealand GDP (QoQ) 4Q - - 0,6% 0,8% 21-Mar-12 18:45 NZealand GDP YoY 4Q - - 2,2% 1,9% 22-Mar-12 05:00 FR French PMI Manufacturing MAR P ,5 50,0 22-Mar-12 05:00 FR French PMI Services MAR P ,6 50,0 22-Mar-12 05:30 DE German PMI Manufacturing MAR A ,0 50,2 22-Mar-12 05:30 DE German PMI Services MAR A ,1 52,8 22-Mar-12 06:00 EU Euro Zone PMI Composite MAR A ,8 49,3 22-Mar-12 06:00 EU Euro Zone PMI Manufacturing MAR A ,5 49,0 22-Mar-12 06:00 EU Euro Zone PMI Services MAR A ,2 48,8 22-Mar-12 06:30 British Retail Sales w/auto Fuel (MoM) FEB ,5% 0,9% 22-Mar-12 06:30 British Retail Sales Ex Auto Fuel(MoM) FEB ,7% 1,2% 22-Mar-12 07:00 EU Euro Zone Industrial New Orders SA (MoM) JAN ,4% 3,4% 22-Mar-12 09:30 CA Canadian Retail Sales MoM JAN - - 1,8% -0,2% 22-Mar-12 09:30 CA Canadian Retail Sales Less Autos MoM JAN - - 0,5% 0,0% 22-Mar-12 09:30 US US Initial Jobless Claims 17-Mar K 22-Mar-12 11:00 US US House Price Index MoM JAN ,7% 22-Mar-12 11:00 US US Leading Indicators FEB - - 0,6% 0,4% 22-Mar-12 12:00 EU Euro Zone Consumer Confidence MAR A ,0-20,3 22-Mar-12 13:00 CO Colombian GDP (YoY) 4Q - - 5,8% 7,7% 22-Mar-12 13:00 CO Colombian GDP (Annual Growth Rate) 3-Jul - - 5,8% Mar-12 21:01 British Nationwide Consumer Confidence FEB ,0 23-Mar-12 04:45 FR French Production Outlook Indicator MAR ,0 23-Mar-12 04:45 FR French Business Confidence Indicator MAR ,0 92,0 23-Mar-12 06:00 IT Italian Retail Sales s.a. (MoM) JAN - - 0,0% -1,1% 23-Mar-12 11:00 MX Mexican Unemployment Rate FEB ,9% 23-Mar-12 11:00 US US New Home Sales FEB K 321K 23-Mar-12 11:00 MX Mexican Global Economic Indicator IGAE JAN ,51% 23-Mar-12 15:30 US US Fed's Lockhart Speaks in Washington Mar-12 16:00 AR Argentinean Industrial Production (MoM) FEB ,5% 23-Mar CO Colombian Overnight Lending Rate 23-Mar - - 5,25% 5,25% Source: Espirito Santo Investment Bank Page 5 of 8

6 IMPORTANT DISCLOSURES This report was prepared by Espírito Santo Investment Bank, a global brand name for the equity research teams of Banco Espírito Santo de Investimento, S.A., with headquarter in Lisbon, Portugal, of its Branches in Spain and Poland and of its affiliates BES Securities do Brasil, S.A Corretora de Câmbio e Valores Mobiliários, in Brazil, and Execution Noble Limited, in the United Kingdom, all authorized to engage in securities activities according to each domestic legislation. All of these entities are included within the perimeter of the Financial Group controlled by Espírito Santo Financial Group S.A. ( Banco Espírito Santo Group ). Analyst Certification Each research analyst primarily responsible for the content of this research report, in whole or in part, certifies that with respect to each security or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about those securities or issuers; the issuers were not previously informed about the content of the recommendation included in this research report and the assumptions were not validated by the issuers; (2) no part of his or her compensation is directly or indirectly related to: (a) the specific recommendations or views expressed by that research analyst in the research report; and/or (b) any services provided or to be provided by Banco Espírito Santo de Investimento, S.A. and/or by any of its affiliates to the issuer of the securities under recommendation. Moreover, each of the analysts hereby certifies that he or she has no economic or financial interest whatsoever in the companies subject to his or her opinion and does not own or trade any securities issued by the latter. Explanation of Rating System 12-MONTH RATING BUY DEFINITION Analyst expects at least 10% upside potential to fair value, which should be realized in the next 12 months NEUTRAL Analyst expects upside/downside potential of between +10% and -10% to fair value, which should be realized in the next 12 months. SELL SHORT TERM RATING ST POSITIVE Analyst expects at least 10% downside potential to fair value, which should be realized in the next 12 months DEFINITION Analyst expects the stock price to appreciate in value within 3 months of the rating assignation because of a specifically identified catalyst(s) or event(s) ST NEGATIVE Analyst expects the stock price to decline in value within 3 months of the rating assignation because of a specifically identified catalyst(s) or event(s) For further information please see Definitions and distribution of ratings on: Ratings Distribution Espirito Santo Investment Bank hereby provides the distribution of the equity research ratings in relation to the total Issuers covered and to the investment banking clients as of 31 December As at end December 2011 Total ESIB Total Investment Banking Clients (IBC) Recommendation Count % of Total Count % of IBC % of Total BUY % % 8.2% NEUTRAL % % 2.4% SELL % 0 0.0% 0.0% RESTRICTED 0 0.0% 0 0.0% 0.0% UNDER REVIEW 6 1.3% 2 3.9% 0.4% TOTAL % % As at end December 2011 Total ESIB Total Investment Banking Clients (IBC) Recommendation Count % of Total Count % of IBC % of Total SHORT TERM POSITIVE 0 0% 0 0% 0% SHORT TERM NEGATIVE 0 0% 0 0% 0% TOTAL 0 0% 0 0% Share Prices Share prices are as at the close of business on the day preceding publication, unless otherwise specified. Coverage Policy Espírito Santo Investment Bank reserves the right to choose the securities it expresses opinions on. The main criteria to choose such securities are: 1) markets in which they trade 2) market capitalisation 3) liquidity, 4) sector suitability. Espírito Santo Page 6 of 8

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