ISA CTEEP 2017 Results 1

Transcription

1 ISA CTEEP 2017 Results 1

2 ISA CTEEP ANNOUNCES 2017 RESULTS São Paulo, February 26, 2018 ISA CTEEP - Companhia de Transmissão de Energia Elétrica Paulista ( ISA CTEEP, Company, B3: TRPL3 and TRPL4), announces its 2017 results. The information has been prepared in accordance with Brazilian Securities and Exchange Commission (CVM) standards and the applicable Accounting Statements Committee announcements (CPCs), and is in accordance with international accounting standards (IFRS) as published by the International Accounting Standard Board (IASB). In addition, the Company announces its Regulatory Results in accordance with the accounting practices accepted in Brazil. The main difference from corporate statements lies in the non-application of ICPC 01 (IFRIC 12). ICPC 01 has material impact on the Financial Statements of the Company and its Subsidiaries, particularly in terms of entries associated with investments in transmission assets, with reflections on the Financial Assets and Property, Plant and Equipment lines, and changes in the structure and presentation of Earnings Statements. The purpose of the disclosure of Regulatory Results is merely to assist in understanding ISA CTEEP s business. Operational and financial information is provided in Brazilian Reais (R$). Their grand totals may vary because of rounding. Regulatory Results are audited by independent auditors only at the end of each fiscal year¹ HIGHLIGHTS RBSE: validation of the final amount of the RBSE, for a total of R$4.1 billion (Dec/12), and beginning of the Annual Allowed Revenue ( RAP ) receipts in July 2017 (17/18 cycle at R$1.5 billion, with R$823.4 million impact in revenues and R$661.3 million impact in cash in 2017), pursuant to Ministry of Mines and Energy Ordinance No. 120/2017, ex- cost of equity (Ke) in compliance with a temporary court order. Maintenance of the Other Transmission Installations ( DITs ) and respective RAPs: Resolution No. 781/2017 excluded installations under the Company concession from the transfer proposal for DITs from electric power transmission companies to discos. ANEEL Auction 05/2016: Winning bidder for 5 lots, 1 of which in partnership with TAESA. Total projected ANEEL investment of R$3.2 billion (ISA CTEEP share of R$2.2 billion) and total RAP with a discount of R$396.3 million. IENNE Acquisition: Acquisition of IENNE s remaining shares (75%). The amount of the acquisition was R$101.2 million. IENNE was consolidated into ISA CTEEP s balance sheet in September 2017 as a wholly-owned subsidiary. Dividends from Subsidiaries: In 2017 R$63.8 million in dividends were received from subsidiaries Evrecy, IE Pinheiros, Serra do Japi and IEMG. Distribution of Earnings: Changes in the minimum dividend rule to the larger amount between R$359 million and 25% of the net income for the period (IFRS), applicable as from the EGM s resolution of December 18, Management proposes the payment of R$585.1 million in dividends to the shareholders for fiscal year 2017, corresponding to R$ per share for both classes of share with a payout of 43% (125% ex-rbse). During fiscal year 2017, R$ million was distributed to shareholders. Financial: Reduction of the average cost of debt from 11.4% p.a. in Dec/16 to 8.3% p.a. in Dec/17, maintaining Investment Grade rating by Fitch. Awards: named best energy company in Brazil by Exame magazine, and one of the Best Companies to Work by Great Place to Work (GPTW) Tariff Revision: Commencement of Public Hearing (PH) ANEEL No. 41/2017, for inputs on the regulation of the periodic revision of the RAPs for electric energy transmission installations. The PH s first phase addressed rules for calculating the Regulatory Remuneration Base ( BRR ) and Other Revenues, as proposed in Technical Note No. 118/2017. The second phase of PH No. 41/2017 addressed regulatory operating costs (O&M) pursuant to TN No. 160/2017 and TN No. 164/2017 and (ii) the methodology and criteria for defining the weighted average cost of capital (WACC) for investments remuneration, as per TN No. 161/2017. ISA CTEEP made contributions to the two phases of the PH and awaits ANEEL s position. ISA CTEEP 2017 Results 2

3 Key Indicators Consolidated IFRS REGULATORY (R$ million) ex-rbse ex-rbse Net Revenues 2, , , , , EBITDA 2, , , EBITDA Margin 76.2% 54.2% 95.1% 70.3% 76.0% 51.3% Net Income 1, , Net Margin 51.3% 36.4% 63.6% 51.2% 35.7% 25.8% Raiting - Fitch AAA(bra) Note: ¹ 2017 regulatory results have not yet been audited and will be reviewed by independent auditors (E&Y) until April Note: ² the table shows the consolidated net income before the controlling shareholders participation. For the purposes of payout calculation, it is considered Net Income minus participation in investment funds association with the IE Madeira and IE Garanhuns subsidiaries. ISA CTEEP 2017 Results 3

4 SUMMARY ISA CTEEP... 5 Economic-Financial Performance - IFRS... 8 Economic-Financial Performance Regulatory Investments Capital Markets Attachments Attachment I Balance Sheet IFRS Attachment II Income Statement IFRS (R$ thousand) Anexo III Cash Flow IFRS (R$ thousand) Attachment IV Breakdown of Consolidated Debt (R$ thousand) Attachment V Breakdown of Controlled Affiliates - (R$mil) Attachment VI Subsidiaries Attachment VII Regulatory Balance Sheet Attachment VIII Regulatory Income Statement Attachment IX Regulatory Indirect Cash Flow Attachment X Regulatory Income Statement for Affiliates IEMadeira and IEGaranhuns (51% ISA CTEEP) ISA CTEEP 2017 Results 4

5 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 25% 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, ISA CTEEP has a footprint in 17 Brazilian states: Rio Grande do Sul, Santa Catarina, Paraná, São Paulo, Minas Gerais, Espírito Santo, Rondônia, Mato Grosso, Mato Grosso do Sul, Goiás, Tocantins, Maranhão, Piauí, Paraíba, Pernambuco, Alagoas and Bahia. ISA CTEEP and its subsidiaries have an installed transformation capacity of 65,060 MVA with 18,642 kilometers of transmission lines, 25,795 km of circuits, and 126 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. Shareholding Structure Controlled by ISA, a multi-latin 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 76% by domestic investors and 24% 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 89.5% 46,8% 35.4% 9.8% 0.7% 51.9% 1.3% 35.8% 28.8% ISA Capital do Brasil Eletrobras Others ISA CTEEP 2017 Results 5

6 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 IENNE*** IE Tibagi (Lot 5**) IE Aguapeí (Lot 29**) IE Itaquerê (Lot 6**) IE Itapura (Lot 25**) ERB 50% (Lot 1**) Paraguaçú 50% (Lot 3*) Aimorés 50% (Lot 4*) Itaúnas (Lot 21*) Fully Consolidated Equity Method Consolidation (*) ANEEL Auction 013/2015 Part II of 10/28/2016 (**) ANEEL Auction 05/ /24/2017 (***) From September 2017 ISA CTEEP 2017 Results 6

7 Operating Performance Operating Excellence The Brazilian electrical system is formed by some isolated systems and by the National Interconnected System (SIN), which serves approximately 99% of the total system load. 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 10,848/2004, governing the rules for the functioning and the 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 benchmark in the sector in terms of performance and constantly pursues improved levels of efficiency, closely tracking operating indicators. Among these, of particular importance is Expected Energy Not Supplied (IENS), the percentage between total expected energy not supplied relative to all events in the year and total energy demand supplied by the Company. The Company also adopts 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 substations and transmission lines maintenance. The following indicators summarize ISA CTEEP s operating performance from 2013 to Asset Uptime Transmission lines Transformers Reactors ISA CTEEP 2017 Results 7

8 Economic-Financial Performance - IFRS Gross Operating Revenue On September 30, 2016, the amount relating to the existent system ( SE ) installations was recalibrated and booked to the accounts in line with the conditions in MME 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$7,328.5 million in The explanation for the variation between 2017 and 2016 will not consider this extraordinary impact (ex-rbse). Consolidated Gross Operating Revenue ex-rbse was R$1,554.7 million in 2017, up 7.5% from 2016 ex-rbse, due mainly to a 43.8% increase in revenue from infrastructure. Gross Revenue (R$ million) Δ% Δ% Infrastructure % % Operation and Maintenance Compensation Asset Concession Company Consolidated % % % (5.7%) Others % % Total 1, , % 1, , % Remuneration RBSE Concession Assets 1, ,318.5 (79.6%) 1, ,318.5 (79.6%) Total 2, ,558.0 (66.5%) 3, ,774.3 (65.2%) Revenue from Infrastructure - Revenue from the implementation of infrastructure for electricity transmission services under the concession services agreements is recognized when expenditures are incurred. Consolidated Infrastructure Revenue amounted to R$247.1 million in 2017, up 43.8% from 2016 s R$171.9 million. This was mainly due to the progress in reinforcement projects for replacing transformer banks, upgrading and substitution of circuit breakers and switch gear at the Taubaté, Bauru and Milton Fornasaro substations. Revenue from Operating and Maintenance Services In 2017, consolidated Revenue from Operating and Maintenance services amounted to R$880.9 million, up 5.4% from 2016 s R$835.8 million. The increase is mainly justified by (i) a R$51.2 million positive variation in IGPM/IPCA index from the 2016/2017 to the 2017/2018 RAP Cycles, (ii) an increase in Energy Development Account (CDE) tariffs to free consumers of R$19.4 million, (iii) startup of new projects in the amount of R$8.7 million, offset by (iv) reduction in the prorating of the system surplus of R$28.5 million and (v) a variable share in the amount of R$9.2 million. Revenue from Remuneration of Concession Assets Revenue from Remuneration of Concession Assets is recognized at the effective rate of interest on the balance of investments. The effective rate of interest is that which equals future estimated cash inflows over the financial asset s lifetime and the same asset s initial book value. Consolidated Revenue from Remuneration of Concession Assets excluding the RBSE effect amounted to R$400.6 million in 2017, down 5.7% from 2016 ex-rbse, at R$424.7 million. This is mainly a reflection of the adjustment to the 2017/2018 RAP cycle in the amount of R$91.7 million in 2017, from R$163.2 million in 2016, and the restatement of the financial asset. Other Revenues - Revenues relate to leasing income from telecoms companies and from maintenance and technical analysis services contracted by third parties. In 2017, these revenues were R$26.1 million, up 11.4% from 2016 s R$23.4 million, due mainly to a 44% increase in technical analysis services rendered to telephony companies. ISA CTEEP 2017 Results 8

9 Deductions from Operating Revenue Deductions from consolidated operating revenue were R$349.3 million in 2017, taking into account the deferred PIS and COFINS provisions of R$138.4 million for the remuneration of the RBSE concession asset. In 2016, deductions were R$988.7 million, with the effects of deferred PIS/COFINS provision in the amount of R$814.9 million, generated by the booking of the rights inherent to SE installations, according to the criteria provided in ANEEL Technical Note 336/2016. Net Operating Revenue Consolidated Net Operating Revenue in 2017 was R$2,701.1 million, due mainly to the remuneration of the RBSE concession asset in the amount of R$1,357.4 million over the period. Ex- RBSE, the consolidated net revenue for 2017 was R$1,343.7 million, up 5.8% from the ex-rbse Consolidated Net Revenue for 2016 at R$1,282.5 million. R$ million 7, , , , , , , , , , , , , , , , ex-rbse ex-rbse 5.8% 5.8% 1.343, , , ,0 171,7 171, ex-rbse ex-rbse RBSE RBSE Company Company Subsdiaries Subsdiaries ISA CTEEP 2017 Results 9

10 O&M and Infrastructure Costs and Expenses O&M costs and expenses in 2017 were R$498.2 million, up 4.7% from 2016 s R$475.8 million. The change in costs and expenses mainly reflects the increase in personnel costs and expenses as a result of: (i) the structural change in the work force, which aims at increasing the Company's efficiency; (ii) the collective bargaining agreement in the period; (iii) of the change in accounting criteria for investments in the new projects for expenses that were previously capitalized, with no impact on cash disbursements. The increase was partially offset by the reversal of R $ 26.1 million in contingency expenses. The reversal in contingencies is due to the higher number of reductions in labor-claims contingencies as a result of labor court decisions that are more beneficial to the Company, for a positive impact of R$13.3 million on results. Civil-law contingencies, in turn, produced a positive impact of R$12.7 million due to the reversal of provisions for legal proceedings arising from favorable legal developments and the reduction of the amounts involved after a prognosis review. The following table shows the breakdown in O&M costs and expenses for the period: Costs and expenses O&M (R$ millions) Company Consolidated Δ% Δ% Perssonel (291.2) (265.1) 9.8% (302.5) (275.2) 9.9% Services (15.9) (12.8) 24.3% (17.2) (13.1) 31.3% Material (123.0) (117.6) 4.6% (130.8) (125.0) 4.6% Depreciation (8.8) (8.3) 5.8% (9.6) (9.1) 5.9% Contingencies 26.1 (1.5) (1788.8%) 26.1 (1.5) (1871.3%) Others (60.5) (52.5) 15.3% (63.3) (51.9) 23.6% Total (473.2) (457.9) 3.4% (498.2) (475.8) 4.7% Consolidated infrastructure costs were R$225.4 million in 2017, up 44.2% from 2016 s R$156.4 million. The change is in line with the increase in infrastructure revenues stemming from the increased execution of reinforcement projects, mainly at the Controlling Company. Costs and expenses infrastructure (R$ millions) Company Consolidated Δ% Δ% Total (204.2) (149.0) 37.0% (225.4) (156.4) 44.2% ISA CTEEP 2017 Results 10

11 Other Operating Revenues (Expenses) The other operating revenues (expenses) reported an expense of R$55.0 million, an increase of 96.9% compared to 2016 when the expense was R$27.9 million, mainly due to a provision R$57.2 million for the reversal of Existing System installations pursuant to Article 5 of Resolution ANEEL No. 762/2017. This was partially offset by the result of an advantage in the acquisition of IENNE for the amount of R$5.0 million. In 2016, the amount reflects largely the constitution of the liability to cover a collection from Eletrobras for reimbursement of part of the NI amount worth R$24.4 million. Equity Income Equity income in 2017 reported R$124.8 million in revenues, down 53.4% from 2016 s R$267.7 million. The reduction of the subsidiary IE Madeira results is mainly due to the decrease in net revenue because of the adjustment in RAP 2017/2018 cycle and of the provision for variable parcel (PV), in the amount of R$35.0 million, as a consequence of the delay in starting up the substation, partially offset by positive impact on the financial result, due to the reduction of interest and charges on the debt and reduction in deferred income tax expenses by the revision of the SUDAM benefit effective tax rate. The drop in subsidiary IEGaranhuns s results is mainly due to the increase in costs and expenses explained by its first full year in operation, and to the reduction in net revenue as a consequence of the adjustment in RAP 2017/2018 cycle and the negative impact of the tariffs revision (9% drop in RAP). This was partly offset by a reduction in deferred income tax expenses because of the SUDENE benefit review on tax rate. The amount shown for the Aimorés, Paraguçú and ERB subsidiaries relates to administrative expenses during the preoperational phase of the projects. (R$ million) % IE Madeira IE Garanhuns IENNE/IESUL Aimorés/Paraguaçú/ERB1 ISA CTEEP 2017 Results 11

12 Financial Result The consolidated financial result amounted to expenses of R$66.2 million in 2017, from R$109.9 million in expenses in This variation is mainly a reflection of the non-recurring R$53.8 million reduction in interest and charges from adherence in 3Q17 to the Special Tax Regularization Program PERT, booked in the other line, combined with a reduction in interest and charges on debentures due to the partial settlement, in December 2016, of the 1 st issue (2 nd series) and the 3 rd issue; and the lower average cost of debt, which dropped from 11.4% p.a. in December 2016 to 8.3% p.a. on December 31, Financial Result (R$'million) Company Consolildated Δ% Δ% Interest Receivable (56.5%) (35.1%) Monetary (net) (31.8) (34.0) (6.4%) (32.0) (33.9) (5.6%) Interest and expenses on loans (103.9) (126.9) (18.1%) (122.2) (143.8) (15.0%) Others 44.1 (0.0) (0.3) - Total (73.0) (118.2) 38.2% (66.2) (109.9) (39.8%) 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 and subsidiary IENNE are taxed according to the real profit regime while the other operational controlled companies (IEMG, IE Pinheiros, Serra do Japi and Evrecy) 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$595.6 million in 2017, reflecting the constitution of deferred income tax and social contribution of R$461.5 million due to the restatement of the financial asset associated with accounts receivable from RBSE, which will be included into the taxable base as they are effectively received. Starting in July 2017, the Company began paying IR/CSLL (current) on RBSE revenues. The effective rate in 2017 was 30%. In 2016 IR/CSLL expenses were R$ million, due mainly to the constitution of R$2,211.2 million in provision for deferred IR/CSLL, reflecting the impact of the booking of the RBSE. ISA CTEEP 2017 Results 12

13 Net Income Net Income in 2017 was R$1,385.5 million, due to the R$895.9 million impact from remuneration of the RBSE concession asset. Ex this effect, net income would have been R$489.6 million, down 25.5% from This is mainly due to the drop in equity income results and the provision for the reversal of discontinued RBSE installations, partly offset by the non-recurring effects of adherence to the PERT and contingencies reversal. (R$ million) 4, , , ,9 489,6 656,9-25,5% 489, ex-rbse 2017 ex-rbse RBSE EBITDA and EBITDA Margin In accordance with ICVM 527/12, Consolidated EBITDA in 2017 was R$2,059.5 million and the margin was 76.2%. Excluding the remuneration from the RBSE concession asset and the provision for discontinued installations, EBITDA was R$759.2 million in 2017, with 54.2% EBITDA margin. The 15.8% drop in EBITDA ex-rbse from 2016 reflects the poorer performance of subsidiaries IE Madeira and IE Garanhuns. ISA CTEEP 2017 Results 13

14 EBITDA (R$ million) Company Consolidated Net Income 1, , , ,949.3 Income tax and social contribuition , ,333.9 Financial Results Depreciation and Amortization EBITDA ICVM 527/12 2, , , ,404.8 EBITDA Margin ICVM nº 527/ % 97.4% 76.2% 95.1% RBSE 1, , , ,503.6 EBITDA ex-rbse Margem EBITDA ex-rbse 59.9% 81.7% 54.2% 70.3% ISA CTEEP 2017 Results 14

15 Economic-Financial Performance Regulatory The Company began to receive RAP receivables from the RBSE according to the conditions of Ordinance 120/2016 and TN 336/2016. Gross Operating Revenue Regulatory In 2017, Consolidated Gross Operating Revenue was R$2,039.4 million, up 85.5% from 2016 s R$1,099.5 million. The increase is due to the R$823.4 million impact on RAP because of the July 2017 commencement of RBSE receipts as provided in Ordinance 120/2016 and TN 336/2016. Revenues in 2017 were also affected by RAP 2017/2018 adjustment and the entry into operation of new investments in reinforcements generating R$49.0 million in additional RAP in Gross Revenue (R$ million) The electrical Interconnection Revenues RBSE Company Consolidated Δ% Δ% 1, % 1, , % Others % % Total 1, % 2, , % Deductions from Operating Revenue Regulatory Deductions from operating revenue were R$261.5 million in 2017, up 76.4% from 2016 s R$148.3 million. This was mainly due to PIS and COFINS and sectoral charges of R$76.2 million associated with the RAP from the RBSE, which billings began in July ISA CTEEP 2017 Results 15

16 Net Operating Revenue Regulatory Consolidated Net Operating Revenue in 2017 was R$1,777.8 million, up 86.9% from 2016 s R$951.2 million. This was mainly due to the beginning of the receipts flow from RBSE in July, for an impact of R$747.2 million in Net Revenue also increased due to the RAP 2017/2018 adjustment and startup of new investments. (R$ million) % 1, , ex-rbse RBSE Company Subsidiaries ISA CTEEP 2017 Results 16

17 O&M Costs and Expenses Regulatory O&M costs and expenses ex-depreciation in 2017 were up 3.0% from 2016, reaching R$ 483, million. The change in costs and expenses mainly reflects the increase in personnel costs and expenses as a result of: (i) the structural change in the work force, which aims at increasing the Company's efficiency; (ii) the collective bargaining agreement in the period; (iii) of the change in accounting criteria for investments in the new projects for expenses that were previously capitalized, with no impact on cash disbursements. The increase was partially offset by the reversal of R $ 26.1 million in contingency expenses. The reversal in contingencies is due to the higher number of reductions in labor-claims contingencies as a result of labor court decisions that are more beneficial to the Company, for a positive impact of R$13.3 million on results. Civil-law contingencies, in turn, produced a positive impact of R$12.7 million due to the reversal of provisions for legal proceedings arising from favorable legal developments and the reduction of the amounts involved after a prognosis review. O&M costs and expenses in 2017 were up 53.4% from 2016, reaching R$811.2 million. This was mainly due to the recognition of R$ million in depreciation of the RBSE, which takes account of the 96-installment (8-year) payment of the accumulated depreciation from January 2013 to June Below is a breakdown of O&M cost and expenses for the period: Cost and Expenses (R$ millions) Company Consolidated Δ% Δ% Personnel (291.1) (265.3) 9.7% (302.3) (275.2) 9.8% Material (13.0) (13.3) -2.5% (13.6) (13.7) -1.1% Services (122.2) (118.0) 3.6% (130.0) (124.3) 4.6% Contingencies 27.0 (1.5) % 26.1 (1.5) % Others (61.3) (52.5) 16.8% (63.3) (54.2) 16.8% Sub Total (460.6) (450.6) 2.2% (483.0) (468.9) 3.0% Depreciation (295.5) (33.2) 791.1% (328.2) (60.1) 446.5% Total (756.1) (483.7) 56.3% (811.2) (528.9) 53.4% ISA CTEEP 2017 Results 17

18 Equity Income Regulatory Equity Income in 2017 was R$18.3 million in revenues, down 39.4% from 2016 s R$30.2 million. The reduction of the subsidiary IE Madeira results is mainly due to the decrease in net revenue because of the adjustment in RAP 2017/2018 cycle and of the provision for variable parcel (PV), in the amount of R$35.0 million, as a consequence of the delay in starting up the substation, partially offset by positive impact on the financial result, due to the reduction of interest and charges on the debt and reduction in deferred income tax expenses by the revision of the SUDAM benefit effective tax rate. The drop in subsidiary IEGaranhuns s results is mainly due to the negative impact of the tariff review that changed WACC from 6.61% to 4.62% and reduced RAP by 9%, and to the increase in costs and expenses explained by its first full year in operation. The amount shown for the Aimorés and Paraguçú subsidiaries relates to administrative expenses during the pre-operational phase of the projects. (R$ million) % IE Madeira IE Garanhuns IENNE/IESUL Aimorés/Paraguaçú/ERB1 ISA CTEEP 2017 Results 18

19 Other Operating Revenues (expenses) Regulatory Results show other operating revenues of R$35.3 million, mainly due to the recognition of the acquisition of a controlling stake in IENNE equivalent to 75% of equity stock, in the amount of R$38.4 million, which took place in 3Q17. The company paid Isolux and Cymi, for 50% and 25% stakes in IENNE s equity stock, the amount of R$101.2 million, which corresponds to the offered price with inflation restatement. Because of the transaction, ISA CTEEP became the controlled of 100% of IENNE s operations ever since the Regulator s approval on September 29, Net Income Regulatory Net income in 2017 was R$635.5 million, up 158.5% from 2016, due mainly: (i) to the commencement of RBSE RAP receipts in the amount of R$329.8 million, (ii) the acquisition of the controlling interest in IENNE (R$38.4 million), (iii) adherence to the PERT (R$ 31 million) and (iv) the reversal of contingencies (R$26.1 million). (R$ million) 158.5% ISA CTEEP 2017 Results 19

20 EBITDA ND EBITDA Margin ICVM 527/12 Regulatory In accordance with ICVM 527/12, Consolidated EBITDA in 2017 was R$1,350.8 million in 2017, up R$862.8 million from 2016 s R$488 million EBITDA. This was mainly the result of the commencement of RBSE RAP receipts. EBITDA margin in 2017 was 76%. Ex-RBSE s RAP, EBITDA in 2017 was R$603.6 million, up R$115.6 million from EBITDA (R$ million) Company Consolidated 3Q Q Net Income Income tax and social contribuition Financial Results Depreciation and Amortization EBITDA ICVM 527/12 1,297.0 #REF! #REF! ,350.8 #REF! #REF! EBITDA Margin 79.2% 54.2% 76.0% 51.3% RBSE EBITDA ex RBSE EBITDA ex RBSE Margin 61.7% 54.2% 58.6% 51.3% ISA CTEEP 2017 Results 20

21 IFRS vs Regulatory Net Income (ex RBSE) 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 accounting methodology, investments are treated as PP&E, depreciated in line with their lifetime while revenue (RAP) is recognized according to sales over the concession period. The main differences between IFRS and Regulatory consolidated results in 2017 are as follows: IFRS Net Income Net operating revenue Infrastructure and O&M Costs Depreciation Amortization Equity Income Other Operating Expenses/Income IR /CSLL Regulatory Net Income , % Net Operating Revenue: Reversal of Infrastructure Revenue of R$247.1 million and Infrastructure Remuneration Revenue of R$1,896.4 million, combined with recognition of Regulatory RAP of R$1,132.4 million and the reversal of Deferred PIS and CONFINS of R$87.8 million, for a total negative adjustment of R$923.4 million. Infrastructure and O&M Costs: Reversal of Infrastructure and O&M implementation costs of R$231 million. Depreciation and Amortization: Inclusion of depreciation and amortization expense for regulatory Property, Plant and Equipment of R$318.6 million. Equity Income: Adjustments to subsidiaries for the adoption of IFRIC 12 criteria, affecting mainly the booking of Infrastructure and Concession Asset (financial asset) revenues. Income tax and Social Contribution: Reversal of deferred IR and CSSL on IFRS adjustments. As from 2015, the taxable base for collecting income tax and social contribution is according to IFRS principles whereby deferred taxes on infrastructure and remuneration results from the concession asset are recognized on an accrual basis and taxed on effective receipt. ISA CTEEP 2017 Results 21

22 Capital Structure Debt Increased indebtedness is a consequence of the optimization of the Company s capital structure to support its growth cycle. Funding was raised as follows: (i) 5 th issue of infrastructure debentures of R$300 million, in March 2017; (ii) international credit agreement pursuant to Law 4131/1962, in the amount of R$160 million, in July 2017; (iii) the contracting of R$ 152 million with BNDES in August and November 2017, for the acquisition of machinery and equipment for the implementation of the Investment Plan for 2016 and 2017; and (iv) 6 th Infrastructure Debentures issue of R$ 350 million in December ISA CTEEP s consolidated cash and cash equivalents amounted to R$ million on December 31, 2017, up 81.0% from December 31, 2016 s R$ million. This increase is mainly due to the commencement of cash receipts from RBSE in July 2017 and the volume of funding raised in the period. Therefore, net consolidated debt was R$1,326.3 million, up 98.0% from net debt at yearend Debt (R$ million) Δ% Debt 1, , % Short-term Debt % Long-term Debt 1, % Cash ISA CTEEP and 100% % Net Debt 1, % Availability jointly controlled* % 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 company is duly compliant with the covenants and requirements set forth in each issue. Additional information on financial indicators are available in Attachment IV to this document. The average cost of debt dropped from 11.4 % p.a. on December 31, 2016 to 8.3% p.a. on December 31, IPCA in 2017 was 2.95% and CDI was 6.99%. The consolidated debt s average maturity on December 31, 2017 was 3.3 years, from 3.4 years at the end of 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 3.0x for 2018, 2019 and ISA CTEEP 2017 Results 22

23 R$ million to to 2033 Company Subsidiaries 2017 Debt 2016 Debt 18.4% 30.9% 50.1% 49.9% 50.6% BNDES - TJLP Debêntures - CDI/IPCA Others ISA CTEEP 2017 Results 23

24 Investments In 2017, ISA CTEEP, its wholly- and jointly-controlled subsidiaries invested a total of R$294.9 million, as follows (i) R$197.9 million in reinforcements, new connections, modernization and improvements that generate additional revenues for the company; (ii) R$85.4 million in investments via subsidiaries for the completion of work in progress, as well as any improvements, reinforcements that will contribute to generate additional revenues for the Company; and (iii) R$11.6 million in corporate and telecommunications projects. Of the total projects portfolio, 194 were energized in 2017 with investments of R$167.0 million and RAP of R$49.0 Million. The associated RAP increased by 17% due mainly to the revision of the Prices Bank in the 2017/2018 tariffs cycle Investment Plan is of up to R$679.5 million, as follows (i) R$220.0 million in reinforcements, new connections, modernization and improvements at the Controlling Company; (ii) R$440.4 million in investments via the new subsidiaries and for the completion of work under way of the original IEMadeira and IEGaranhuns projects, in addition to reinforcements and improvements to the other subsidiaries; and (iii) R$19.1 million in capitalization of labor and corporate projects. Capex R$ (million) ISA CTEEP Complementary Projects and New Connections Improvements Others 2017 Budget 2017 % 2018 Budget 266,6 183,5-31% 191,8 73,4 14,4-80% 28,2 16,2 11,6-29% 19,1 Subtotal CTEEP 356,2 209,4-41% 239,0 SUBSIDIARIES (Total investments weighted by the participation of CTEEP) Operational 125,7 56,3 123,1 Pre-operational 31,9 29,1 317,4 IE Itaúnas (Lot 21)* 100% 9,1 5,2-43% 75,2 IE Aimorés (Lot 3)* 50% 12,6 2,2-83% 17,6 IE Paraguaçu (Lot 4)* 50% 10,2 2,8-72% 27,9 ERB (Lot 1)** 50% 0 7,1 n.a 18,3 IE Tabagi (Lot 5)** 100% 0 1,2 n.a 16,4 IE Itaquerê (Lot 6)** 100% 0 9,2 n.a 109,0 IE Itapura (Lot 25)** 100% 0 0,2 n.a 21,8 IE Iguapeí (Lot 29)** 100% 0 1,1 n.a 31,3 Subtotal Subsidiárias 157,6 85,4-46% 440,4 TOTAL 513,8 294,9-43% 679,5 (*) ANEEL Auction 03/2015 of 10/28/2016 (**) ANEEL Auction 05/2016 of 04/24/2017 ISA CTEEP 2017 Results 24

25 Growth Projects Status The evolution of the eight new SPEs is highlighted in the table below, with estimates of progress in the stages. The investments in the pre-operational subsidiaries are on budget and on time, according to challenging schedule, which considers a reduction in the average term of around 12 months for start-up. Auctions Subsidiiaries % ISA CTEEP Location Investiment ANEEL² (R$ MM) RAP (R$ MM) Profit Regime 12/31/2017 Contract signature Implementation Deadline ANEEL Environmental License (LI) Basic Project Protocol REIDI Authorization Debentures Authorization IE Paraguaçú (Lot 3) 50% Bahia Minas Gerais Presumed Profit 02/10/17 60 months 3Q19 Auction 03/ /28/2016¹ IE Aimorés (Lot 4) 50% Minas Gerais Presumed Profit 02/10/17 60 months 3Q19 IE Itaúnas (Lot 21) 100% Espírito Santo Real Profit 02/10/17 60 months 3Q18 ERB (Lot 1) 50% Paraná 1, Presumed Profit 08/11/17 60 months 1Q20 1Q18 Auction 05/ /24/2017 IE Tibagi (Lot 5) IE Itaquerê (Lot 6) 100% São Paulo Paraná Real Profit 08/11/17 48 months 4Q18 1Q18 100% São Paulo Real Profit 08/11/17 48 months 1Q18 IE Itapura (Lot 25) 100% São Paulo Real Profit 08/11/17 42 months IE Aguapeí (Lot 29) Total 100% São Paulo Real Profit 08/11/17 48 months 1Q19 2Q18 1Q18 4, ¹ RAP considers inflation restatement for the 2017/2018 cycle according to REH-ANEEL No 2,258/2017, 06/27/2017 ² Consider ANEEL investment for 100% of the project on the base date of the auction ISA CTEEP 2017 Results 25

26 Capital Markets On December 31, 2017, the Company s equity stock was represented by 64,484,433 common shares (TRPL3) and 100,236,393 preferred shares (TRPL4), for 164,720,826 shares traded on the São Paulo Stock Exchange (B3). The 2017 closing prices of ISA CTEEP s common and preferred shares (B3: TRPL3 e TRPL4) were R$58.77 and R$66.90, respectively. The Company s market value on December 31, 2017 was R$10.5 billion and free float was 64% of all shares. Over the course of 2017, CTEEP s preferred shares posted average trading volume at B3 of R$24.4 million, down 10.9% from The total traded volume of TRPL4 for the year was R$6,005 million. Average daily trades with preferred shares were 2,077, down 20.5% from 2016 s average. CTEEP s preferred shares logged thousand trades in % 20% 10% 0% 26.9% 10.0% 3.1% -0.4% -10% -20% Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 TRPL3 TRPL4 IBOVESPA IEEX Trade Financial - 12/31/2017 (R$ million) 80 Total R$6,005 Million Daily Average / Day R$ 24.4 Million Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Trade Volume - 12/31/2017 (units) 6, Total Trade: 510,910 Daily: 2,077 4, , Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Source: Economática ISA CTEEP 2017 Results 26

27 Attachments Attachment I Balance Sheet IFRS COMPANY CONSOLIDATED Assets (R$' 000) 12/31/ /31/ /31/ /31/2016 CURRENT ASSETS Cash and Banks 3,031 1,609 6,585 4,524 Financial Investments 346, , , ,138 Trade Account Receivable 1,746,061 1,091,764 1,924,928 1,221,016 Inventory 34,896 35,796 37,639 37,723 Recoverable taxes and conbtributions 11,725 8,248 14,162 8,563 Prepaid Expenses 4,604 10,104 4,607 10,303 Others 47,131 60,054 45,722 62,077 2,193,735 1,332,054 2,643,709 1,680,344 NON-CURRENT ASSETS Long-Term Assets Trade Account Receivable 9,690,468 9,222,081 11,213,952 10,225,808 Amounts Receivable from the State Finance Secret 1,312,791 1,150,358 1,312,791 1,150,358 Tax benefit - incorporated goodwill Pledges and Escrow 66,389 70,166 66,414 70,175 Inventory 32,388 25,438 37,034 32,512 Deferred taxes Others 8,107 1,570 37,187 13,572 11,110,143 10,469,613 12,667,378 11,492,425 Investments 3,089,974 2,757,784 1,880,845 1,826,930 Property, Plant and Equipment 22,782 25,424 22,879 25,457 Intangible Assets 16,493 18,219 37,362 41,843 3,129,249 2,801,428 1,941,086 1,894,231 Total Assets 16,433,127 14,603,095 17,252,173 15,067,000 ISA CTEEP 2017 Results 27

28 COMPANY CONSOLIDATED Liabilities and Shareholders' Equity 12/31/ /31/ /31/ /31/2016 CURRENT LIABILITIES Loans and Financing 209,511 32, ,589 71,679 Bonds 182, , , ,368 Suppliers 66,114 39,279 69,923 41,482 Taxes, Fees and Contributions 86,118 28,373 90,502 30,053 Taxes installments 57,997 17,540 57,997 17,540 Regulatory Charges 14,973 12,598 16,550 12,751 Interest on Shareholders' Equity 3, ,946 3, ,946 Provisions 35,108 32,562 36,344 33,610 Amounts Payable - Fundação CESP 2,056 5,495 2,056 5,495 Others 52,852 49,715 61,179 53, , , , ,971 NON-CURRENT LIABILITIES Long-Term Liabilities Loans and Financing 393, , , ,472 Bonds 801, , , ,931 Taxes installments 0 119, ,857 PIS and COFINS 1,032, ,480 1,147, ,445 Income tax and social contribuition 2,308,785 2,068,537 2,418,125 2,106,603 Regulatory Charges 50,378 29,374 54,250 32,509 Provisions for Contingencies 121, , , ,035 Others 30,556 24,053 30,556 24,053 4,737,717 3,933,956 5,263,413 4,171,905 Minority interest , ,733 SHAREHOLDERS' EQUITY Paid-up Capital 3,590,020 2,372,437 3,590,020 2,372,437 Capital Reserves 0 1,217, ,217,583 Revenue Reserves 7,394,031 6,527,704 7,394,031 6,527,704 Profits / Losses Advance for future capital increases ,984,717 10,118,390 10,984,717 10,118,390 Total Liabilities and Shareholders' Equity 16,433,127 14,603,094 17,252,173 15,066,999 ISA CTEEP 2017 Results 28

29 Attachment II Income Statement IFRS Results Company Consolidated (R$ '000) Δ% Δ% Operating revenue 2,864,941 8,558,047 (66.5%) 3,050,502 8,774,336 (65.2%) Construction 225, , % 247, , % Operation and Maintenance 865, , % 880, , % Financial 1,745,059 7,557,589 (76.9%) 1,896,406 7,743,248 (75.5%) Others 29,626 26, % 26,068 23, % Deductions from Operating Revenue (335,479) (975,449) (65.6%) (349,309) (988,720) (64.7%) Net operating revenue 2,529,462 7,582,598 (66.6%) 2,701,193 7,785,616 (65.3%) Cost and Expenses (677,474) (606,876) 11.6% (723,673) (632,208) 14.5% Personnel (302,994) (285,520) 6.1% (315,320) (295,948) 6.5% Material (171,537) (85,711) 100.1% (186,476) (86,643) 115.2% Services (159,733) (173,317) (7.8%) (173,819) (183,406) (5.2%) Others (43,210) (62,328) (30.7%) (48,058) (66,211) (27.4%) Gross Revenue 1,851,988 6,975,722 (73.5%) 1,977,520 7,153,408 (72.4%) Equity 228, ,824 (46.5%) 124, ,706 (53.4%) Other Operating Expenses/Income (54,958) (27,939) 96.7% (55,006) (27,939) 96.9% Previous to the Net Financial Income and Taxes 2,025,337 7,374,607 (72.5%) 2,047,321 7,393,175 (72.3%) Financial Results (72,966) (118,152) (38.2%) (66,215) (109,929) (39.8%) Interest Receivable 18,609 42,785 (56.5%) 44,147 68,032 (35.1%) Monetary (net) (30,153) (33,989) (11.3%) (30,357) (33,902) (10.5%) Interest and expenses on loans (103,922) (126,939) (18.1%) (122,227) (143,799) (15.0%) Others 42,500 (9) ( %) 42,222 (260) ( %) Operating Income 1,952,371 7,256,455 (73.1%) 1,981,105 7,283,246 (72.8%) Income tax and social contribuition (586,859) (2,324,143) (74.7%) (595,645) (2,333,912) (74.5%) Current (346,610) (71,797) 382.8% (354,491) (79,301) 347.0% Deferred (240,249) (2,252,346) (89.3%) (241,154) (2,254,611) (89.3%) Net Income Before Minority Interest 1,365,512 4,932,312 (72.3%) 1,385,460 4,949,334 (72.0%) Minority interest (19,948) (17,022) 17.2% Net Income 1,365,512 4,932,312 (72.3%) 1,365,512 4,932,312 (72.3%) ISA CTEEP 2017 Results 29

30 Attachment III Cash Flow IFRS (R$ thousand) Cash Flow of operating activities Company Consolidated Net Cash by operating activities 448, , , ,464 Cash provided by operating 1,546, ,951 1,690, ,529 Net Income 1,365,513 4,932,312 1,385,461 4,949,334 Update of Accounts Receivable Law SE 0 (7,318,492) 0 (7,318,492) PIS and COFINS Deferred 86, ,739 9, ,423 Depreciation and amortization 8,873 8,313 87,778 9,061 IR and CSLL deferred 240,249 2,252, ,154 2,254,611 Lawsuits (49,809) (63,749) (49,809) (64,041) Residual value of permanent asset disposals and donations 260 5, ,340 Tax benefit - Goodwill Active amortization of concession in the acquisition of the subsidiary 2,490 2,490 2,490 2,490 Reversal of the loss provision in a Controlled Company (2,195) (2,276) (2,195) (2,276) Equity (228,307) (426,824) (124,806) (257,706) Interest and monetary and exchange variations on assets and liabilities 127, , , ,749 Result of acquisition of control (5,042) 0 (5,042) 0 Changes in Assets -1,123, ,754-1,152, ,686 Trade accounts receivable (1,122,684) (205,384) (1,160,553) (279,070) Inventories (6,050) 5,501 (4,438) (84) Taxes and contributions to offset (3,379) (3,320) (3,316) (2,800) Pledges and restricted deposits 6, , Other 1,448 11,234 8,888 10,046 Changes in Liabilities 26,490 10,858 31,109 4,621 Suppliers 26,835 7,455 27,395 6,532 Taxes and social charges payable 57,768 1,548 59,683 1,636 Taxes installments - Law 11,941 (86,777) (16,927) (86,777) (16,927) Regulatory charges payable 19,917 (12,170) 20,423 (11,856) Provisions 2,546 3,734 2,668 3,853 Amounts payable - Cesp (3,439) (649) (3,439) (649) Other 9,640 27,867 11,156 22,032 Cash flow of investment activities -312, , , ,999 Financial Investments (221,808) 106,376 (237,724) 103,916 Minority interest 0 0 (19,948) (17,085) Purchase of property, plant and equipment (1,235) (5,745) (1,303) (5,767) Intangible assets (3,552) (5,718) (4,038) (5,721) Investments (149,924) (2,394) (149,924) (2,394) Dividends 63,800 78, ,050 Cash purchased in business combination Cash flow of financing activities -134, , , ,074 News loans 962, , , ,407 Loan payments (including interest) (298,647) (332,767) (346,849) (375,706) Dividends paid (636,118) (109,710) (636,118) (109,710) Capital Increase 0 97,373 28,600 97,373 Amounts receivable - State Finance Department (162,433) (184,438) (162,433) (184,438) Change in Cash -1,422-1,511 2,060-1,611 Opening Balance of Cash and Cash Equivalents 1,609 3,120 4,524 6,135 Closing Balance of Cash and Cash Equivalents 3,031 1,609 6,584 4,524 ISA CTEEP 2017 Results 30

31 Attachment IV Breakdown of Consolidated Debt (R$ thousand) FUNDING CHARGES MATURITY TJLP + 1.8% year 15/03/29 214, , % year 15/01/24 61,926 72,291 BNDES 4.00% year 15/08/ % year 15/11/19 4,418 6,723 TJLP 15/03/29 9 1,918 TJLP + 2,6% a.a 15/03/32 155,607 0 Debentures CTEEP 2nd Issuance IPCA + 8.1% year 15/12/ ,306 Single Series 116% CDI 02/07/14 169, ,547 4th Issuance - Single Series IPCA %year 07/15/ , ,447 5th Issuance - Single Series IPCA + 5,0373%aa 15/02/24 309, th Issuance - Single Series 105,65% CDI 13/12/20 350,115 0 Banks CTEEP 4131_BTMU Law VC+Libor 3M+0.28year 17/07/18 166,026 0 Eletrobras 8% year 15/11/ Leasing TOTAL CTEEP: 1,586, ,860 BNDES IEMG TJLP + 2.4% year 15/04/23 27,908 32, % year 15/05/26 30,589 33,965 PINHEIROS TJLP + 2.6% year 15/01/21 30,993 41, year 15/04/23 9,660 11,471 TJLP + 2.1% year 15/02/28 5,526 6,005 SERRA DO JAPI IENNE TJLP + 1.9% year 8,50% a.a.* 15/05/26 19/05/30 32, ,674 35,577 0 TJLP + 1.5% year CDI + 1,35% a.a 15/05/26-27,776 9,348 30,743 0 TOTAL SUBSIDIARIES 356, ,590 Total Consolidated (R$ mil) 1,942,988 1,010,450 ISA CTEEP 2017 Results 31

32 BNDES (annual verification) Net Debt 12/31/2017 (consolidated with jointly-owned subsidiaries) Infrastructure Debentures (4th and 5th issue) International Credit - Law 4131 (quarterly verification) Simple Debentures (quarterly verification) 2,590 Net Det 12/31/2017 1,326 Net Det 12/31/2017 1,326 Adjusted Ebitda¹ last 12 months 1,505 Adjusted Ebitda² last 12 months 1,295 Adjusted Ebitda² last 12 months 1,295 Net Debt/Adjusted Ebitda 12/31/2017 Net Debt/Adjusted Ebitda 12/31/ Net Debt/Adjusted Ebitda 12/31/2017 Net Debt/Adjusted Ebitda 12/31/ Net Debt/Adjusted Ebitda 12/31/ Shareholders Equity 12/31/ ,090 Financial Result³ 12/31/ Financial Result³ 12/31/ Net Debt / Net Debt + SE 12/31/ Adjusted Ebitda /Financial Result 12/31/ Adjusted Ebitda /Financial Result 12/31/ Net Debt / Net Debt +SE 12/31/ Adjusted Ebitda /Financial Result 12/31/ ¹ excluding mainly the effects of IFRS, considering RAP revenues, and consolidating affiliates by equity equivalence. ² excluding mainly the effects of IFRS, considering RAP revenues. ³ financial revenue/financial expense The main covenants to which ISA CTEEP must submit are as follows: Financing contracts with BNDES (valid for 2017) must abide by maximum financial indicators of: Net Debt/BNDES Adjusted EBITDA 3.5 and Net Debt/(Net Debt + Equity Capital) 0.6, at the end of each fiscal year. For the purposes of commuting and proving the foregoing indices, the Company must consolidate all controlled and jointly controlled companies (pro-rata its stake), as long as has a stake of 10% or higher. The 1 st Debentures issue must abide by the covenants of the deed, as follows: Net Debt/Consolidated Adjusted EBITDA 3.5 and Debentures Adjusted EBITDA /Financial Income 3.0, computed quarterly. The 3 rd Debentures issue requires full compliance with the covenants provided in BNDES financing contracts. The 4 th Debentures issue must abide by the covenants provided in the deed, as follows: Net Debt/Adjusted EBITDA < 3.5 and Adjusted EBITDA/Financial Income > 1.5 until the determination for reference date June 30, 2017; beginning with the determination to be made for reference date September 30, 2017, the indicator will become > The 5 th Debentures issue must abide by the covenants provided in the deed, as follows: Net Debt/Adjusted EBITDA < 3.5 and Adjusted EBITDA/Financial Income > 1.5 until the determination for reference date June 30, 2017; beginning with the determination to be made for reference date September 30, 2017, the indicator will become > The 6 th Debentures issue must abide by the covenants provided in the deed, as follows: Net Debt/Adjusted EBITDA < 3.5 and Adjusted EBITDA/Financial Income > 2.0 starting from the determination to be made for reference date March 30, The Credit Agreement (4131) requires the following covenants for the duration of the transaction, to be determined quarterly: Net Debt/Adjusted EBITDA < 3.5 and Adjusted EBITDA/Net Interest Expense 2.0. ISA CTEEP 2017 Results 32