Income Statement 2017

Transcription

1 2017 Income Statement 2017 Conference Call Preferred Share Price at 12/31/2017 CLSC4 BRL 27.10/share Change in 4Q17 CLSC4: 26.1% Ibovespa: 2.84% Market Value at 12/31/2017 BRL 1,090.0 MM USD MM Free Float: 75,5% Other Indicators at 12/31/2017 Net Debt\Aj EBITDA LTM (DisCo): -0.2x EPS 4Q17 (BRL/share): 0.13 Book Value (BRL/share): Price/BV: 0.6x For more information, please access the website or contact the Investor Relations Area: Phone: Florianópolis Santa Catarina, March 29, 2018 Centrais Elétricas de Santa Catarina SA - Celesc (BM&FBOVESPA: CLSC3, CLSC4; OTC: CEDWY), holding from the energy sector, with operations in the generation, transmission, distribution of electricity and distribution of natural gas areas, announces the outcomes of the fourth quarter (4Q17) and the accumulated 2017 (12M17). The Company's financial information, except where indicated otherwise, is shown in millions of Reais (R$ million) as of December 31, Consolidated EBITDA reaches R$ million in 12M17, 6.3% above 12M16 Celesc D's billed energy grew 4.0% compared to 2017 Main highlights: Growth of 5.9% in Energy in 4Q17 in the concession area of CELESC D, totaling 5,916 GWh. In the 12M17 increase of 4.0%, totaling 23,797 GWh; Quality of service indicators: DEC added hours (3.9% reduction) and FEC was 8.35 times (reduction of 3.9%) in 12M17; Consolidated Net Operating Revenue (excluding Revenue from Construction) totaled R$ 1.8 billion in the quarter, an increase of 16.9% (+ R$ million), and in the year R$ 6.5 billion, increase of 16.7% (+ R$ million); Energy expenses (non-manageable costs) increased 20.5% (+ R$ million) in 4Q17 when compared to 4Q16. In 12M17, it recorded a growth of 12.1% (+ R$ million); PMSO (manageable costs) expenses increased by 34.7% (+ R$ million) in 4Q17 compared to 4Q16. In the twelve months of 2017, there was an increase of 11.4% (+ R$ million), the effect of the provision for IDP 2017 (R$ 72.8 million); Consolidated Net Income of R$ 4.9 million, decrease of 74.6% (-R$ 14.5 million) compared to 4Q16 (also impacted by IDP 2017) and net income of R$ 66.5 million (+ R$ 76, 3 million), growth of 777.2% compared to 12M16 (base 2016 with a net impact of contractual exposure 2014 of R$ million); Investments in electricity generation and distribution amounted to R$ million in the year, a decrease of 28.6%, considering that in 2016 the payment of the bonus grant of plants in the amount of R$ 228 million occurred. Without this effect, the growth would be 7%; The Group ended the period with a negative Net Consolidated Debt of R$ 81.9 million (net positive cash), equivalent to -0.2x Adjusted EBITDA 12M; and Celesc's preferred shares (CLSC4) appreciated 26.1% in the quarter and 70.55% in the year, a positive variation well above the Ibovespa (2.84% in the quarter and 26.86% in the year) and the ERA (-3.81% in the quarter, 10.04% in the year). Main Highlights Δ Δ Operating Indexes Celesc Distribuição - Energy Sales (GWh) ,9% ,0% Celesc Geração - Energy Billed (GWh) ,6% ,3% SCGÁS - Natural Gas Sales (thousand/m³) ,4% ,1% Financial Indexes - Consolidated () Gross Operating Revenue 2.730, ,8 15,9% , ,0 9,4% Net Operating Revenue 1.565, ,9 16,9% 5.696, ,2 16,7% Operating Costs and Expenses (1.582,3) (1.937,5) 22,4% (6.055,4) (6.795,6) 12,2% EBITDA (IFRS) 173,2 88,3-49,0% 329,3 523,2 58,9% EBITDA Margin 11,1% 4,8% 5,8% 7,9% EBITDA (IFRS - Non-Recurring) 160,8 132,2-17,8% 513,4 545,7 6,3% Adjusted EBITDA Margin 10,3% 7,2% 9,0% 8,2% Net Income (IFRS) 19,5 4,9-74,6% (9,8) 66,5 777,2% Net Margin 1,2% 0,3% -0,2% 1,0% Net income (IFRS - Non-Recurring) 11,2 20,1 79,1% 132,5 176,9 33,5% Adjusted Net Margin 0,7% 1,1% 2,3% 2,7% Investments Made in Generation and Distribution of Electricity 143,7 160,8 11,9% 685,0 489,4-28,6% 1

2 DISCLAIMER The information contained in this Income Release may include statements that represent expectations about the Company's business, financial and operational goals and projections. Any such statements are mere forecasts based on management's expectations that may not materialize and are not a guarantee of the Company's future performance. Such statements and prospective statements are and will be subject to risks, uncertainties and, depending on the case, are highly dependent on market conditions, the country's overall economic performance, industry and international markets. It should also be noted that the estimates and projections refer to the date in which they were expressed, and the Company does not undertake to publicly update or revise any of these estimates due to the occurrence of new information, future events or any other factors, subject to the current regulations to which we submit. Accordingly, none of the Company's representatives, advisors or related parties may be held liable for any decision arising out of the use of the contents of this document. The information contained in this material should not be interpreted as an offer, invitation or solicitation of offer of subscription or purchase of any securities, nor do they form the basis of a contract or commitment of any kind. TABLE OF CONTENTS 1 Introduction Celesc Distribuição S.A Operating Performance Economic-Financial Performance Regulatory Aspects of Celesc Distribuição S.A Celesc Geração Operating Performance Financial Performance Regulatory Aspects of Celesc Geração S.A SCGÁS Operating Performance Economic-Financial Performance Other Interests Holding Income of the Company's Interest in the Parent Company Dividends Consolidated Income Consolidated Economic-Financial Performance Performance in the Capital Markets ANNEXES

3 1 Overview Centrais Elétricas de Santa Catarina S.A. - CELESC is one of the largest companies in the Brazilian electric sector, with an emphasis in the distribution and energy generation areas. Structured as a Holding Company in 2006, the Company has two wholly-owned subsidiaries - Celesc Geração S.A. and Celesc Distribuição S.A. In addition, it holds the controlling interest of the Gas Company of Santa Catarina (SCGÁS) and is a partner of the companied named Dona Francisca Energética S.A. (DFESA), Companhia Catarinense de Transmissão de Energia S.A. (ECTE), Companhia Catarinense de Água e Saneamento (CASAN), and of the Usina Hidrelétrica Cubatão S.A. and EDP Transmissão Aliança SC projects. Its controlling shareholder is the State of Santa Catarina, holder of 50.2% of the Company's ordinary shares, corresponding to 20.2% of the Total Capital. CELESC Ownership and Corporate Structure December 2017 Pusuant to the Material Fact of the Acquisition of Shareholding by EDP published by the company on 12/20/2017, EDP - Energias do Brasil S.A acquired 33.1% of the ordinary shares and 1.9% of the preferred shares of PREVI - Caixa de Previdência dos Trabalhadores do Banco do Brasil, accounting for 14.5% of Celesc's total shares. The operation was approved by the Administrative Council for Economic Defense (CADE) and the National Superintendence of Predecessional Complementary (PREVIC), and was concluded on March 21, It should be noted that the EDP - Notice of Voluntary Public Offering ( Volunteer OPA ) on 03/27/2018, pursuant to the Brazilian Corporation Law and article 31 of CVM Instruction 361 from March 5, 2002, at the price of twenty-seven reais (R$ 27.00) per share, to acquire up to 7,374,000 (seven million, three hundred and seventy-four thousand) PNs issued by the Company in circulation in the market ("Shares Subject to OPA"), which correspond, on this date, to up to 32% (thirty-two percent) of the total PNs issued by CELESC, and the apportionment among the shareholders is assured, if the offer is successful and the adherence is greater than the maximum number of the OPA Target Shares to be acquired. The Price of OPA Target Shares will be adjusted if there is a declaration and/or payment of any dividends or interest on own capital by the Company until the date of the Volunteer OPA auction. The Notice foresees that the auction will be held on April 26, 2018, at 4:00 p.m., São Paulo time, through the Electronic Trading System of the BOVESPA segment of B3. 3

4 Integral Subsidiaries Celesc Distribuição S.A. The company carries energy to more than 2.8 million consumer units located in 264 municipalities in Santa Catarina (92% of the state's territory) and in Rio Negro, in Paraná. The company is still responsible for the supply of electric power to the service of four concessionaires and 16 licensees, which operate in the other municipalities of Santa Catarina. Celesc Distribuição is the 2 nd largest ICMS collector in Santa Catarina and the 6 th largest Brazilian electricity distributor in supply revenue, the 7 th in volume of distributed energy and the 10th in number of consumer units. On a monthly basis, the company distributes more than 1.8 million MWh and its annual gross sales reached the amount of R$ 11.3 billion in Celesc Geração S.A. 1 Celesc Geração is the Celesc Group subsidiary that operates in the electric power generation segment through the operation, maintenance and expansion of its own generation site and the share in energy projects, in partnerships with private investors. On December 31, 2017, the company had its own generating plant made up of 12 plants, of which 08 were Small Hydroelectric Plants - SHPs and 04 Hydroelectric Generating Plants - HGPs. In addition, the company holds a minority interest in another 08 SHPs developed in partnership with private investors, in the format of Special Purpose Companies (SPC). Celesc Geração's total generation capacity in operation in the period was MW, of which MW were related to the owned plant and 8.05 MW related to the generator set established with partners - already proportional to the Celesc Geração shareholding in these ventures. The following table presents the main features of Celesc Geração 100%: 1 Further details of the relevant regulatory and legal aspects involving the plants of the own generator site are available in item of this Release. 4

5 Ow n Generating Plants Plants 100% from Celesc Geração S.A. PLANTS Location Concession Expiration Installed Capacity (MW) Guaranteed Energy (MW) Physical Security in Quotas PCH Pery* Curitibanos/SC 07/09/2017* % PCH Palmeiras Rio dos Cedros/SC 11/07/ % PCH Bracinho Schroeder/SC 11/07/ % PCH Garcia Angelina/SC 07/07/ % PCH Cedros Rio dos Cedros/SC 11/07/ % PCH Salto Blumenau/SC 11/07/ % PCH Celso Ramos Faxinal dos Guedes/SC 03/17/ N/A PCH Caveiras Lages/SC 07/10/2018** N/A CGH Ivo Silveira Campos Novos/SC *** N/A CGH Rio do Peixe Videira/SC *** N/A CGH Piraí Joinville/SC *** N/A CGH São Lourenço Mafra/SC *** N/A Total - MW * Concession extended for another 30 years, coming into force on July 10, ** Plant w ill become CGH after expiration of the concession. *** Plants w ith a pow er of less than 5 MW are exempt from the concession act (Law / 16). The company participates in Special Purpose Companies that enable new ventures, in which Celesc Geração holds a minority interest. The following are the main characteristics of the projects that are already in operation: Projects in operation Celesc Geração S.A. holds minority Stake Plants Location Concession Expiration Installed Capacity (MW) Guaranteed Energy (MW) % Stake Celesc Geração Equivalent Installed Capacity (MW) Equivalent Guaranteed Energy (MW) PCH Rondinha Passos Maia/SC 10/05/ % PCH Prata Bandeirante/SC 05/05/ % PCH Belmonte Belmonte/SC 05/05/ % PCH Bandeirante Bandeirante/SC 05/05/ % PCH Xavantina Xanxerê/SC 04/07/ % Total - MW In recent years, driven by the strategic positioning of increasing its own generation capacity, the Company started investing in the repowering of its own plants and in the expansion of partnerships to enable projects aiming at the building of new ventures. The tables below present other ventures under development by the company and their respective stages. As for the physical guarantee (new or incremental), the company seeks to obtain an average 55% capacity factor of the total plant after expansion, a standard observed for other ventures in operation and with similar characteristics: Projects under development Celesc Geração S.A. holds 100% Plants Location Concession Experation Installed Power (MW) Pow er Addition (MW) Potência Final (MW) Expected date of commissioning STATUS PCH Celso Ramos Faxinal dos Guedes/SC 03/17/ N/D Project Review PCH Salto Blumenau/SC 11/07/ N/D** Analysis at ANEEL PCH Cedros Etapa 1 Rio dos Cedros/SC 07/11/ N/D** Inventory PCH Cedros Etapa 2 Rio dos Cedros/SC 07/11/ N/D** Inventory PCH Palmeiras Rio dos Cedros/SC 07/11/ N/D** Inventory CGH Maruim São José/SC * N/D N/A Total - MW * Power plants with a power of less than 5 MW are exempt from the concession act. ** It depends on regulatory procedures. 5

6 Projects under development Celesc Geração S.A. holds minority Stake Plants Location Concession Expiration Installed Capacity (MW) Guaranteed Energy* (MW) % Stake Celesc Geração Equivalent Installed Capacity (MW) Equivalent Guaranteed Energy* (MW) Date of entry of new capacity PCH Painel São Joaquim/SC 18/03/2043 9,20 4,80 32,5% 2,99 1,56 N/D Project Review PCH Campo Belo Campo Belo do Sul/SC 19/05/2044 9,95 4,13 30,0% 2,99 1,24 N/D Project Review PCH Garça Branca Anchieta/SC 13/03/2043 6,50 3,44 49,0% 3,19 1,69 1S18 Project started in 1S15 Total - MW 25,65 12,37 9,16 4,48 STATUS All the plants of the own generating plant and all the plants in partnership in operation participate in the Energy Reallocation Mechanism - ERM, a system for sharing hydrological risks where the participating plants transfer the generated energy surplus from their physical guarantee to the plants that generated as indicated below. As disclosed in the Notice to the Market on , the Aliança Consortium, formed by EDP - Energias do Brasil, with a 90.00% stake, and Celesc Geração, with a 10.00% interest, won the bid for Lot 21 of ANEEL Auction No. 05/2016, regarding the Bidding for the Public Service Concession of Electric Power Transmission, including the Construction, Operation and Maintenance of Transmission Facilities of the National Interconnected System, which took place at B3, by offering a discount of 34.99% or a R$ 171,824 million annual allowed revenue proposal, compared to the maximum amount of R$ 264,343 million established by Aneel. The conditions obtained in the auction result in a profitability of 12% real shareholder, above the target set in the Company's Master Plan (10%). Lot 21 was the third largest project offered at the auction, and demanded investments amounting to R$ billion. It consists of several facilities in the state of Santa Catarina, including three 525 kv transmission lines (Abdon Batista - Siderópolis 2, with 261 kilometers, Biguaçu - Siderópolis 2, with 149 kilometers, and Campos Novos - Abdon Batista with 39 kilometers); two 230 kv lines (Siderópolis 2 - Forquilhinha, with 28 kilometers, and Siderópolis 2 - Siderópolis, with 7.5 kilometers), in addition to the substation 525/230 kv Siderópolis 2, covering 29 municipalities in Santa Catarina. The facilities aim to expand the system of the southern and plateau region of the state of Santa Catarina and will also enable Celesc to connect its distribution system to the new structure, in order to bring direct benefits to critical regions in the state's energy system. The deadline for the works implementation is 60 months and the commercial start-up determined is August 2022, with a possibility for anticipation. SPE SC Transmissora Aliança SC was constituted in July and the Concession Agreement was signed in August. Currently, the project is in the environmental licensing and land management phase. The table below summarizes the main information of the venture: TRANSMITTER Location End of Concession Km Line Substations Expected date of commissionin g STATUS EDP Transmissão Aliança SC Santa Catarina 11/08/ /08/2022 Licensing Subsidiary Companhia de Gás de Santa Catarina SCGÁS SCGÁS is the second largest gas distributor in the number of municipalities served in Brazil. Santa Catarina is the third state with the largest natural gas distribution network (1,134.8 kilometers) and the third with the largest number of industries served with natural gas (227), as well as having the third largest network of vehicular gas stations ( GNV) in the country (134). 6

7 With 100% of the concession to operate natural gas distribution services in the territory of Santa Catarina, the company markets and distributes approximately 1.8 million cubic meters of natural gas on a daily basis to approximately 12.1 thousand customers. SCGÁS has a concession agreement for the operation of piped gas distribution services, signed on March 28, 1994, with a 50-year term (2044). Below is a chart of Celesc's shareholding in SCGás, of which 51% of the ordinary shares and 17% of the total share capital. Share ON Ações ON Share Ações ON PN TOTAL It should be noted that in 2013, the State Attorney General of Santa Catarina - PGE, representing the Government of the State of Santa Catarina and Celesc, filed an action to compensate SCGÁS, Petrobras Gas SA - Gaspetro, Mitsui Gás e Energia do Brasil Ltda. and Infragás S.A., questioning changes in the share capital and the Shareholders' Agreement executed in 1994, obtaining a favorable injunction in a 1 st degree judgment. Meanwhile, shareholders Mitsui Gás and Gaspetro filed an injunction, suspending the effects of such injunction in the lower court, presenting the appropriate judicial remedies. Currently, the effects of the sentence are suspended until the judgment of said appeals. Other Interests Empresa Catarinense de Transmissão de Energia ECTE Founded with the specific purpose of exploring electric power transmission lines in the South, Southeast and coastal regions of Santa Catarina, the company is a concessionaire of the LT SE Campos Novos - SE Blumenau, with a length of km. The line is responsible for transporting approximately 20% of the assured energy, to supply the demand in the concession area of Celesc Distribuição. In December 2011, the company acquired the right to build the Abdon Batista (525/230kV) and Gaspar (230/138kV) substations through the subsidiary named Companhia de Transmissão Serrana S.A. - ETSE. These lines were energized in January and March 2015, respectively. The affiliate ECTE holds a power transmission concession contract dated from November 1, 2000, with a 30-year term. For its subsidiary ETSE, the electricity transmission concession contract is dated from May 10, 2012, with a 30-year term. Celesc holds 30.88% of the Company's share capital, as shown below: 7

8 Dona Francisca Energética S.A DFESA An independent power producer, DFESA owns the Dona Francisca Hydroelectric Power Plant, built on the Jacuí River in Rio Grande do Sul, with an installed capacity of 125MW and assured energy of 80MW. The venture was inaugurated in May The affiliate DFESA has a concession agreement dated from August 28, 1998, with a 35-year term. Celesc holds 23.03% of the company's share capital, as shown below: Companhia Catarinense de Água e Saneamento CASAN As a publicly-held joint stock company controlled by the Government of the State of Santa Catarina, CASAN's role is to plan, execute, operate and explore drinkable water supply and sanitation services in its (municipal) concession areas. Currently, the services provided by the company cover 197 municipalities in Santa Catarina and 1 in Paraná, serving a population of 2.8 million consumers with treated water and 587 thousand with collection, treatment and final disposal of sanitary sewage. Celesc holds 15.48% of the Company's total share capital, as shown in the graph below: Codesc Celesc 4,5% 15,5% SC Parcerias 18% Share Ações ON Estado de SC 61,9% SC Parcerias 18% Celesc 15,5% Share Ações PN Estado de SC 66,5% SC Parcerias 18% Codesc 2,3% Celesc 15,5% TOTAL Estado de SC 64,2% Usina Hidrelétrica Cubatão S.A. As a specific Purpose Company established in 1996 for the implementation of the Cubatão Hydroelectric Power Plant, in the region of Joinville (SC), with installed capacity of 50MW. With the history of the environmental obstacles, rejection of the litigation for the concession period and consequent economic impracticability for the development of the project, the venture requested the regulatory body to amicably terminate Concession Agreement No. 04/1996 (ANEEL Case No / ). Celesc holds 40% of the Company's Share Capital, as shown below: 8

9 2.1 Celesc Distribuição S.A Operational Performance Electricity Market in Santa Catarina Celesc Distribuição S.A. Energy Load (GWh) Year 4Q 12M Brazil (GWh)* , , , ,288 Δ 2.5% 1.2% Brazilian South (GWh) ,852 98, ,075 96,456 Δ 3.2% 2.4% Carga Celesc Distribuição S.A. (GWh)** ,563 26, ,264 25,438 Δ 4.8% 3.5% Source: ONS / Celesc D * Refers to the National Interconnected System - SIN. ** Pow er injected in the distribution netw ork. The total cargo served by the concessionaire includes the portions related to the Captive Market load, the losses of the electricity system, the free consumers load, self-producers consumption units and independent producers connected to its network. Electricity Balance We can summarize the TRC (total required consumed) as the total load (measured), withdrawing the energy from free consumers (measured) and adding the total losses (internal and basic network). In the year, the Electricity Trading Chamber - CCEE accounted for 58.1% (10,749 GWh) of CCEAR contracts (quantity and availability modalities), 20.3% (3,715 GWh) Itaipú and 17.0% (3,133 GWh) Quotas, and 3.9% (713 GWh) other. 9

10 Celesc Distribuição S.A. Energy Balance (GWh) ACL 48 CCEAR (amount) 6,059 CCEAR (availability) 4,617 CCEAR Compulsory 26 ANGRA 705 ITAIPU 3,715 18,290 TOTAL CONSUMPTION REQUIRED (TRC) PROINFA 389 SHORT TERM SETTLEMENT -381 QUOTES 3,113 According to the regulation of the electricity system, Distributors must have a contracting level within the regulatory limit (currently between 100% and 105% of overcontracting), and contracting within this limit has a full tariff transfer, with the counterpart being accounted for as a financial sector asset. The amount that falls outside the regulatory range, and which is considered voluntary by the regulator, is the distributor's risk. As of the end of 2017, the company's contracting level was %, therefore, within the 100 and 105% range, thus guaranteeing the full transfer of the cost of energy purchased. Billed Energy 2 Celesc Distribuição S.A. Energy Distributed per Class (GWh) Consumer Class Number of Consumer Units Consumption (GWh) dez/16 dez/17 Δ 4T16 4T17 Δ 12M16 12M17 Δ Captive Market 2,830,942 2,898, % 3,745 3, % 16,420 15, % Residential 2,213,215 2,271, % 1,237 1, % 5,433 5, % Industrial 101, , % % 3,462 2, % Commercial 254, , % % 3,395 3, % Rural 234, , % % 1,311 1, % Other Classes 26,345 26, % % 2,819 2, % Public Entities 22,472 22, % % % Public Lighting % % % Public Service Co. 3,164 3, % % % To Other Utilities % % 1,446 1, % Free Consumers % 1,839 2, % 6,461 8, % Industrial % 1,639 1, % 5,819 7, % Commercial % % % Rural % % % Supply* % % % Total Market 2,831,997 2,899, % 5,587 5, % 22,892 23, % Residential 2,213,215 2,271, % 1,237 1, % 5,433 5, % Industrial 102, , % 2,368 2, % 9,281 9, % Commercial 255, , % % 3,828 3, % Rural 234, , % % 1,350 1, % Other Classes 26,369 26, % % 2,988 3, % Own consumption % % % *Can be reconciled by CCEE. According to the table above, energy supplied to the Captive Market increased by 1.1% (+40 GWh) in the quarter compared to the fourth quarter of 2016, reaching 3,785 GWh, reversing the downward trend of previous quarters, a performance directly influenced 2 As of 4Q17, the distributed energy considered is billed, and in the previous quarters we considered the measured energy. 10

11 by growth of the residential class. In the first nine months of the year, there was a drop of 5.0% (-817 GWh), totaling 15,603 GWh, mainly due to the migrations that have taken place throughout the year. The Free Market 3, according to the operation that occurred in 2015, which was repeated in 2016 and also in 2017, increased by 15.7% (+289 GWh) in the quarter, due to the increase in the number of free consumers, registering 823 free consumers in December of 2017, an increase of 147 units (+ 22%) compared to 12M16, when it registered 676 free consumers, and 53 compared to 9M17, when it indicated 770 free consumers. In December 2016, the Captive Market accounted for 71.8% of the total energy distributed and the Free Market 28.2%. As of December 2017, the Captive Market represents 65.6% of the total energy distributed in the Celesc Distribuição concession area and 34.4% in the Free Market. The migration from the captive to the free market is a liberality of consumers, not impacting economically on the distributor's income, as all migrated energy is likely to be either uncontracted or considered as an unintentional surplus, and the revenue from the TUSD Distribution System remains unchanged, as consumers continue to pay for the service. Of the total market served by Celesc Distribuição in the fourth quarter of 2017, the captive market accounted for 64% and free customers accounted for 36%. The graph below shows the share of each class of consumption in the captive market, between free consumers and in the total market (captive + free): Losses in Distribution According to the latest Celesc Distribuição Tariff Review (4CRT), the regulatory loss of distribution was estimated at 7.42% of the energy injected into the distribution system of the concessionaire. Of this total, 6.02% refers to the volume of technical losses and 1.40% of non-technical losses. In the last 12 months up to December 2017, global losses represented 8.57% (2,258,1 GWh) of the injected energy, of which 6.07% (1,598.1 GWh) related to technical losses defined by PRODIST - Module 7, revised at the beginning of each year, thus adjusting the 12-month moving average, and 2.50% (659.7 GWh) correspond to non-technical losses, calculated by difference. The following graph shows the development of losses in distribution in the Company's concession area: 3 The current criteria for free market migration were established in 1998 by Act 9,648/1998, which created two groups of consumers able to choose their electricity supplier. Free Consumers: This group is composed of consumer units with a load greater than or equal to 3,000 kw. These consumers can buy energy from any energy generation or commercialization agent. Special Consumers: This group is composed of consumer units with a demand greater than or equal to 500 kw served in any voltage, they can also choose their supplier, but their choice is restricted to the energy coming from the so-called incentive sources (Small Hydroelectric Power Plants - SHPs, Biomass Plants, Wind Power Plants and Qualified Cogeneration Systems). 11

12 Thus, total losses were 1.15% above the limit covered by the tariff, making an estimated value without the accumulated tariff coverage from January to December of R$ 71.1 million, 8.0% (- R$ 6.2 million) below the figure recorded at the close of 2016 (R$ 77.3 million 4 ). Considering the combination of the tariff increase from 2015 and the economic crisis, there was an increase in the number of clandestine connections (43% of non-technical losses), fraud and adulteration (32% of non-technical losses), which together with errors and measurements (14% of non-technical losses) are considered as factors causing non-technical loss. The company continuously carries out a task force to reduce and recover these losses, acting for its detection, identifying cases of suspected irregularity by means of algorithm (online verification), continuous procedure and focused on the identification of cases of fraud and/or technical deficiency, as well as integration of corporate systems, revision of work processes (inspection targets), implementation of anti-theft systems and regularization of clandestine connections, aiming to converge to regulatory limits within the current tariff cycle. Electricity Quality Celesc Distribuição SA's DEC (average duration of interruptions per consumer unit) index was hours in 2017 (3.17 hours in the quarter), 3.9% less than in 2016, which is equivalent to 101.8% of the limit established by ANEEL for In the same period, the FEC (number of interruptions per consumer unit) dropped by 3.9%, representing 8.35 interruptions (2.19 interruptions in the quarter), which is equivalent to 83.5% of the regulatory limit established for 2017 in this indicator. 4 With R$ 6.6 million related to losses of the basic network. 12

13 Noting the criteria set out in Module 8 of the Electric Energy Distribution Procedures - PRODIST, which establishes limits for global interruption indicators (DEC and FEC) for Distributors each year, with violation of individual limits (DIC, FIC and DMIC) generating a compensation by distributors to the affected consumers, automatically occurring through credit in the invoice up to two months after the calculation period, in the fourth quarter of Violation of quality indicators in their individual form generated credits to the consumer in the amount of R$ 2.6 million to Celesc Distribuição, 21% higher than in the same period as the previous year (R$ 2.1 million in 4Q16). In the year, the cost incurred was R$ 14.2 million, 15% higher than in 2016 (R$ 12.4 million). In the event of non-compliance with the annual overall targets of DEC or FEC for two consecutive years or three times in five years, as of the calendar year following the contract conclusion date or the addendum to the concession contract, the concessionaire is prohibited from distributing to the shareholders dividends or to pay interest on capital - JCP, when those amounts, individually or jointly, exceed 25% of net income. The limitation on the distribution of dividends or payment of interest on equity is effective as of January 1 of the calendar year subsequent to the year of non-compliance, remaining until the regulatory parameters are performed (Normative Resolution No. 747 from 2016) Financial-Economic Performance Celesc Distribuição S.A. Main Highlights (IFRS) Δ 12M16 12M17 Δ Gross Operating Revenue 2, , % 10, , % Deductions from Operating Revenue (1,032.1) (1,191.5) 15.4% (4,365.9) (4,362.7) -0.1% Net Revenue 1, , % 5, , % Operating Costs and Expenses (1,562.3) (1,902.9) 21.8% (5,963.8) (6,684.3) 12.1% Electricity Costs (1,145.1) (1,381.7) 20.7% (4,487.1) (5,032.6) 12.2% Operating Expenses (417.2) (544.6) 30.5% (1,476.7) (1,675.1) 13.4% Operating Results % % EBITDA % % EBITDA Margin (%) 9.6% 3.3% 3.9% 6.8% Financial Result (88.0) (1.2) 98.6% (105.0) (143.3) 36.4% LAIR % (83.2) % IR/CSLL (1.4) (17.7) 30.7 (63.4) Profit / Loss Net 9.1 (10.3) -213% (52.5) % Net Margin (%) 0.6% -0.6% -0.9% 0.5% Income highlights The main highlights in Celesc Distribuição's income in the period were: i. An expressive increased by 16.1% at the GOR (Gross Operational Revenue) in the quarter and 9.3% year-to-date, as a result of the positive effect in the line of Supply (+ 21.9% in the quarter) and Supplies (+ 21.4% in the quarter). In the year, emphasis was given to Regulatory Assets, which posted a positive income of R$ million (reversing a negative income of R$ million, in 2016). ii. NOR (Net Operating Revenues) increased by 16.5% (+ R$ million) in the quarter and 16.1% (+ R$ 962 million) in 2017 due to the same reasons mentioned above; iii. 20.7% increase in energy costs, mainly due to the increase in thermal costs; iv. Increase of 30.5% in operating expenses due, in part, to the provisions of the IDP as detailed in a specific section; v. EBITDA decreased by 59.7% in the quarter. However, it ended 2017 with an increase of 101.0% (+ R$ million); vi. The Financial Outcome was negative in the quarter by R$ 1.2 million, influenced by the R$ 19.6 million increase in the EDA's financial expenses; vii. Net Profit was negative by R$ 10.3 million due to the reasons already mentioned, however ended 2017 at R$ 33.3 million, with an increase of 163.5%, reversing the 2016 loss. EBITDA and Profit adjusted for non-recurring effects are shown below, which will be detailed in their respective topics. 13

14 Celesc Distribuição S.A. Ajusted Result* Δ 12M16 12M17 Δ Adjusted EBITDA % % Adjusted EBITDA Margin (%) 9.6% 5.9% 7.6% 7.2% Adjusted Net Profit / Loss % % Adjusted Net Margin (%) 0.6% 0.4% 1.8% 2.2% IFRS - Non Recurring Items. M argin calculation excludes Construction Revenue. Gross Operational Revenue Celesc Distribuição S.A. Gross Operating Revenue Δ 12M16 12M17 Δ GROSS OPERATING REVENUE 2, , % 10, , % Energy Supply 1, , % 8, , % Energy Sales to Distributors % % Regulatory Asset % (586.1) % Spot Energy - Short Term Market % % Availability Energy System (TUSD) % % Donations and grants* % % Income from Services % % Taxed service % % Other Revenues % % Construction Revenue % % * Includes receipt of CDE subsidy referring to Decree No. 7,891 / 2013 ** Includes VNR revenue before 4Q16 recorded as Financial Revenue The main factors influencing the GOR performance 5 : i. A 21.9% increase in the quarter in the item Revenue from Electricity Supply, reflecting the increase in captive market consumption (an increase of 1.6% in 4Q17), it should be noted that the captive market presented a negative variation in 1Q17 (-1.4%), 2Q17 (-13.3%) and 3Q17 (-4.6%). Revenue from supply with consumption classes increased by 10.37% in the quarter, registering R$ 1.99 billion in 4Q17, compared to 1.81 billion in 4Q16 (+ R$ million), with a high Residential class of 13.5% (+ R$ 92.2 million), Commercial expansion with 11.57% (+ R$ 52.6 million) and Rural expansion of 17.2% (+ R$ 20.5 million). In the year of 2017, there was a decrease of 6.25% (- R$ million), due to the decrease in the captive market in the previous quarters, as highlighted above, registering R$ 7.6 billion in 2017 compared to R$ 8.2 billion registered in 2016, emphasis on Industrial (decrease of 24.4%) and Commercial (decrease of 5.89%) classes. ii. Increase of R$ million in the quarter of Revenue with the supply of tariffs, with R$ million with red tariffs and R$ 12.7 million with yellow tariffs, noting that the yellow tariff has a reduced cost for consumers. In 2017, tariff-rate revenue totaled R$ million, an amount higher than that registered in 2016, when it reached R$ million; iii. Increase of 21.4% (+ R$ 11.4 million) in the energy supply line in the quarter and 34.8% (+ R$ 61.2 million) in 2017; iv. In Regulatory Assets/Regulatory Liabilities, a positive variation of R$ million (regulatory assets), of which R$ 42.1 million in CVA formation and R$ million were recorded as tariff-rate revenues to compensate for increases in energy costs. In 2017, it closed with regulatory assets of R$ million, broken down by R$ million in active CVA and R$ million in tariff-rate revenue; 5 It excludes Construction Revenue. In accordance with IFRS accounting standards, the corresponding cost of the same amount is recorded in operating expenses and, therefore, does not affect the Company's results. 14

15 v. Increase in revenue recorded as a 24% Electricity Network (TUSD) (+ R$ 36 million) in the quarter and 22.6% (+ R$ million) in the year, of which R$ million in the quarter (R$ million in the year) related to the availability of electricity to industrial free consumers, R$ 18.2 million (R$ 70.9 million year) to commercial free consumers and R$ 1.3 million to free rural customers (R$ 4.9 million year); vi. Donation and subsidy of R$ million in the quarter, an increase of 36.1% (+ R$ 49 million) compared to the same period in 2016, of which R$ million (against R$ million in 4Q16) to the subsidy according to decree 7,891/2013. In the year, it recorded an amount of R$ million, an increase of 6.2%, and the subsidy contributed in R$ million against R$ million in Deductions from the Gross Operating Revenue Celesc Distribuição S.A. Deductions from Operating Revenue Δ 12M16 12M17 Δ DEDUCTIONS FROM OPERATING REVENUE (1,032.1) (1,191.5) 15.4% (4,365.9) (4,362.7) -0.1% ICMS (436.1) (503.0) 15.3% (1,988.1) (1,901.5) -4.4% PIS/COFINS (238.3) (264.4) 10.9% (905.4) (976.0) 7.8% Energy Development Account - CDE (323.7) (280.0) -13% (1,267.2) (1,133.2) -10.6% Research & Development - R&D (0,5% of NOI) (7.6) (9.0) 17.8% (27.8) (32.5) 16.9% Energy Efficiency Program - EEP (0,5% of NOI) (7.6) (9.0) 17.8% (27.8) (32.5) 16.9% Aneel Regulatory Inspection Free (1.6) (1.7) 1.7% (6.3) (6.6) 4.7% Other (17.0) (124.5) 631.5% (143.3) (280.4) 95.7% The deductions represent 38.6% of GOR and its variation generally follows the variation of GOR. Below we highlight the factors that contributed to the reduction: i. Increase of 15.3% in the ICMS account in the quarter reaching R$ million. This tax follows the Revenue with Supply of Electricity, which had a reduction of 21.9%; ii. Reduction in the Energy Development Account (EDA), which totaled R$ million in the quarter (13.5% lower than in 4Q16). In the year, the reduction was 10.6%, reaching R$ 1,133.2 million, and these changes are a reflection of the reduction in the annual quota established by ANEEL; iii. ANEEL's Regulatory Inspection Fee, formerly classified as Other Operating Revenue/Expenses, had a small increase of 1.7% in the quarter, signaling R$ 1.7 million in the deduction of operating income; iv. The Other Charges item recorded R$ million in the quarter and R$ million in the year, due to the revenues related to the application of the Tariff Flags, launched as a counterparty to the Revenue item with energy supply - Tariff Flag; v. PIS/COFINS increased in 10.9% in the quarter and 7.8% in the year, registering R$ million and R$ million, respectively. This tax follows the GOR development, and together with the ICMS represents 64.4% of the Deductions. Net Operational Revenue Celesc Distribuição's Revenue shows an average annual growth of 4.4% (Revenue from Construction included) and 4.2% (excluding Construction Revenue) in the last four years, as shown below:

16 Operational Expenses and Costs Celesc Distribuição S.A. Operating Costs and Expenses Δ 12M16 12M17 Δ OPERATING COSTS AND EXPENSES (1,562.3) (1,926.3) 23.3% (5,963.8) (6,707.7) 12.5% Electric Energy Costs - Non-Manageable (1,145.1) (1,381.7) 20.7% (4,487.1) (5,032.6) 12.2% Electric Energy Purchased for Resale (1,000.6) (1,143.5) 14.3% (3,881.3) (4,318.5) 11.3% Electric grid usage charge (103.4) (224.9) 117.5% (441.5) (590.6) 33.8% PROINFA (41.1) (36.7) -10.6% (164.3) (146.8) -10.6% PMSO - Manageable Expenses (290.1) (394.1) 35.8% (884.8) (982.1) 11.0% Personnel (208.5) (268.8) 28.9% (641.1) (739.7) 15.4% Material (5.6) (4.3) -23.6% (19.4) (16.0) -17.5% Third-Party Services (51.5) (51.5) 0.0% (185.3) (179.7) -3.0% Othes Expenses (24.4) (69.5) 184.3% (39.1) (46.7) 19.4% Provision (Net) % 17.2 (51.6) % Depreciation / Amortization (48.8) (50.7) 3.8% (197.2) (200.3) 1.6% Construction Costs (128.7) (138.9) 7.9% (411.8) (441.0) 7.1% Excluding the construction cost (which has no effect on the result), the increase in the quarter was 23.3% (+ R$ million), accounting for R$ 1,926.3 million, and in the year accumulated, the increase would be 12.5% compared to the same period of the previous year, totaling R$ 6,707.7 million. Operating expenses, PMSO, (35.8% quarter and 11.0% year) as detailed will be increased by non-manageable expenses increase, Cost with energy and charges (20.7% quarter and 12.2% year) and Operating Expenses, PMSO (35.8% quarter and 11.0% year) as detailed below. Electric Energy Costs - Non-Manageable The sum of R$ 1,381.7 million in the quarter in non-manageable costs (Portion A) can be explained by the following reasons: i. Reflecting the 30.2% increase in the energy tariff and thermal origin (CCEARs/Thermal contracts), as well as an increase of 4.9% in the water-originated energy and 12.3% in the average tariff of energy purchased from ITAIPU, considering that in the total average the increase was 10.0%, as shown in the table below; ii. Increase of 117.5% (+ R$ million), totaling R$ million, with Charges for Use of the Electricity Grid (transmission and distribution system) that accompany the tariff adjustments/revisions; iii. A decrease of 10.6% (-R$ 4.4 million), totaling R$ 36.7 million in expenses with PROINFA (Changes). The table below shows the cost per modality and respective share in the Company's energy purchase tariff mix: Celesc Distribuição S.A. Purchased Energy Costs by Type of Contract Average Rate of energy Purchased by Type (R$/MWh) 4Q16 4Q17 Chg. Of Price % Share in % 4Q16 Mix Share in % 4Q17 Mix Average Rate of Tariff Adjustment* (R$/MWh) AUCTION - CCEAR / Hydro % 43.2% 31.5% AUCTION - CCEAR / Thermal % 26.1% 29.6% ITAIPU % 20.0% 21.5% BILATERAL AGREEMENTS % 1.0% 0.1% OTHER % 9.7% 17.4% 62.7 Total - (R$/MWh) % 100% 100% * The data contains forecasts of expenditures on energy purchases according to the methodology used in the accounting. The revenue with tariff flags is not included in the calculations above. This revenue is treated separately because its coverage depends on the hydrological *Resolution Homologation 2.286/

17 Sectorial Financial Assets and Liabilities (Regulatory Assets and Liabilities) The table below shows the balance of Regulatory Assets and Liabilities estimated by the Company and accrued at the end of each period. These balances are based on tariff readjustments of Celesc Distribuição and, on 12/31/2017, were prospectively recognized. Celesc Distribuição S.A. Accumulated Regulatory Assets and Liabilities in 09/30/2015 in 12/31/2015 in 03/31/2016 in 06/30/2016 in 09/30/2016 in 12/31/2016 in 03/31/2017 in 06/30/2017 in 09/30/2017 in 12/31/2017 Regulatory Assets 660, ,9 921,4 806,1 154,2 267,9 129,9 268,1 578,9 680,4 Regulatory Liabilities (247,7) (657,5) (820,5) (1.266,2) (705,9) (674,5) (769,0) (566,3) (638,2) (706,7) Net Balance 412,2 445,4 101,0 (460,1) (551,7) ( ,0) (639,1) (298,2) (59,3) (26,3) Regulatory assets amounted to R$ million, of which R$ million refers to the constitution of CVA Ativa (R$ million referring to the purchase of energy) and R$ 61.2 million to Other Securities Financial Assets corresponding to neutrality of Portion A). Regulatory liabilities totaled R$ million, of which R$ million refers to CVA Passiva (R$ million related to system charges and R$ million to EDA) and R$ million to other Sectorial Financial Liabilities (R$ 22.7 million referring to energy overcontracting in 2016 and R$ 79.8 million in tariff devolution). We highlight that in the second quarter of 2016, R$ 256 million was recognized in relation to voluntary exposure in 2014 as per Notice to the Market - Involuntary Contractual Exposition from 08/10/2016, and this amount was recorded in the regulatory asset/liability account. At the end of May 2017, there was a change in the accounting of voluntary exposure, which was now classified as a regulatory judicial contingency. PMSO Operating Expenses (Personnel, Materials, Services and Other) Below is the development of PMSO Celesc Distribution x PMSO Regulatory. The continuous reduction of the GAP (difference between the PMSO Celesc Distribuição and the Regulatory PMSO) is observed in the period. In 2017, we closed with R$ 89 million higher than the regulatory one, mainly in personnel expenses, net of the provision of R$ 72.8 million referring to the IDP Personnel The personnel and directors items are comprised of employee compensation expenses (including charges) and regular contributions to the pension plans managed by the CELOS Foundation (Private Pension Plans item) 17

18 Celesc Distribuição S.A. Total Personnel Expenses Δ Δ Personnel Total (208.5) (268.8) 28.9% (641.1) (739.7) 15.4% Personnel and Management (184.6) (250.7) 35.9% (569.5) (666.7) 17.1% Personnel and Management (174.9) (240.3) 37.4% (540.4) (635.9) 17.7% Pension Plan (9.6) (10.5) 8.5% (29.1) (30.8) 5.8% Actuarial Expense (24.0) (18.1) -24.5% (71.6) (73.0) 2.0% The increase of 28.9% (+ R$ 60.3 million) in the quarter in the Personnel and Administration item is mainly due to: (i) Increase of 0.8% (+ R$ 0.4 million) in the quarter and 7.6% (+ R$ 12.1 million) in the year in fixed funds (fixed salary, annual supplementary bonus, productivity, personal advantage, bonus of function) due to the effects of the annual adjustment provided for in the Collective Bargaining Agreement (ACT) - PCS; (ii) Rise of 0.3% (+ R$ 0.2 million) in the quarter and 5.0% (+ R $ 5.8 million) in charges (labor charges and FGTS); (iii) Expansion of 3.2% (+ R$ 0.2 million) in the quarter and 1% (+ R$ 0.3 million) in the additional risk premium; (iv) Retraction of 1.0% (- R$ 0.1 million) in the quarter and 2.4% (- R$ 0.8 million) in variable amounts (overtime 50 and 100% and overtime); (v) Increase of 5.8% (+ R$ 1.7 million) in the quarter and 8.5% (+ R$ 0.8 million) in the year in private pension expenses; (vi) PDV and IDP, of which R$ 1.9 million related to the 2012 PDV, R$ 2.3 million related to the IDP of 2016 and R$ 72.8 million related to the IDP As analyzed above, the increase of R$ 98.6 million in the year in personnel expenses in 2017 is mainly due to the PDV (Voluntary Resignation Plan) of 2012 and 2016, as well as to the IDP (Incentive Resignation Plan) of 2017 According to the notice to the market Incentived Dismissal Plan - IDP 2017 of 02/03/2018, the IDP generated a provision of R$ 72.8 million made in December 2017, but which will represent savings of R$ million over the next five years. Private Pension Plans and Actuarial Expenses Celesc Distribuição is a sponsor of the Celesc Social Security Foundation - CELOS, which administers the social security benefits plans and the health care plan offered to its employees. The Actuarial Expense recognized in the Statement of Income follows the definition in the Annual Actuarial Assessment of Post-Employment Benefits performed by independent actuaries. The estimated amount to be recognized in the year as actuarial expense in the result considers both the amount to be recorded in personnel expenses (actuarial expense) and the amount recorded as financial expenses (mathematical reserve update). In 2017, R$ million were recognized, accounting for R$ 73.1 million in personnel expenses (actuarial expenses) and R$ 42.0 million as financial expenses (updating the mathematical reserve). Celesc Distribuição S.A. Actuarial Expense to be recognixed Estimated value to Amount actually Amount actually Estimated value to be Estimated value to be be recognized in recognized in 2014 recognized in 2015 recognized in 2017 recognized in Transitional Plan Mixed Plan Plan annuity DVP DVP Healthcare Plan (5.9) Other benefits Total The table below sets forth the Actuarial Liabilities recognized on 12/31/2017 in comparison to the closing of 2016 and showing an increase in the estimated obligations of Celesc Distribuição

19 Celesc Distribuição S.A. Actuarial Liabilities in December 31, 2016 in December 31, 2017 Pension Plan 870, ,8 35,6% Mixed Plan + Transitional Plan 870, ,8 Other benefits post-employment 688,9 698,1 1,3% Healthcare Plan 582,2 652,2 VDP ,8 0,0 VDP ,2 0,0 Other benefits 39,7 45,8 Total 1.559, ,9 20,4% Short Term 162,3 139,2 Long Term 1.396, ,7 Chg. % Materials The item of Materials totaled R$ 4.3 million in the quarter, down 23.6% (-R$ 1.3 million) in the fourth quarter of The year ended with a decrease of 17.5% (-R$ 3.4 million). Among the items that contributed to the variation in the quarter and the total realized in 2017, we highlight: (i) Economy of almost million R$ 2.0 million quarter and R$ 6.0 million in the year in maintenance and conservation of company vehicles (ii) Increase of 31.58% (+ R$ 0.5 million) in the quarter in the quarter of 22.63% (+ R$ 1.2 million) in material for maintenance and maintenance of Administrative Units and Operating Units; (iii) Reduction of 16.6% (- R$ 0.4 million) in the year in ongoing maintenance materials; (iv) Increase of 3.4% in the quarter in health and safety at work. Third Parties Services Expenses with Third Parties Services totaled R$ 51.5 million in the fourth quarter of 2017 and R$ million in the accumulated amount for 2017, a reduction of 3.0% (- R$ 5.5 million) compared to the year The reduction is mainly due to (i) Reduction of R$ 7.3 million in the year in services with Labor Contractor Company; (ii) Reduction of R$ 1.6 million in the quarter with Software Support (year remained constant); (iii) Contraction of R$ 0.6 million in the quarter and R$ 0.7 million in the year in services with Conservation and Maintenance of Transformers; (iv) Retraction of R$ 2.4 million in the quarter and R$ 8.3 million in the year in meter reading services; (v) Increase of R$ 1.8 million in the quarter and R$ 5.5 million in the year in Conservation and Maintenance services for the Company's Vehicle; (vi) Increase of R$ 2.5 million in the year in services with Roçada (the quarter showed a slight decline of 1.1%); (vii) Expansion of R$ 1.1 million in the quarter and R$ 2.5 million in the year in Maintenance of Distribution Lines services; (viii) Increase of R$ 0.8 million in the quarter and R$ 1.2 million in the year, in Cutting and Relocation services; (ix) Increase of R$ 1.4 million in the year, in services with Surveillance. Other Operational Expenses Celesc Distribuição S.A. Other Operating Expenses Δ Δ Other Expenses - Total (24.4) (69.5) 184.3% (39.1) (46.7) 19.4% Leasing and Rentals (3.4) (4.6) 34.9% (13.5) (21.9) 61.9% Insurance (0.0) (0.0) -42.9% (1.9) (1.6) -19.8% Taxes (1.8) (1.0) -42.7% (6.4) (4.9) -24.2% Losses (Net) (3.6) (37.9) 952.7% (16.9) (50.4) 198.4% Other (15.6) (25.9) 65.9% (0.3) ,7% * Other Expenses: Own Consumption of Energy, Advertising, Fines, Indemnity to consumers, Donations and Grants, etc. The item Other Operational Expenses recorded a negative value of R$ 69.5 million in the quarter and R$ 46.7 million in the accumulated period of 2017, an increase of R$ 45.0 million in the quarter and R$ 7.6 million in the year in this item, compared to the same period of the previous year when the expenses were amounting to R$ 24.4 million in the quarter and R$ 39.1 million in the year. Among the factors that contributed to the increase in the quarter were: (i) Rents and lease increased in 34.9% (+ R$ 1.2 million) in the 19

20 quarter and in 61.9% (+ R$ 8.4 million) year; (ii) Taxes decreased 42.7% (- R$ 0.8 million) in the quarter and 24.2% (- R$ 1.6 million) a year; (iii) Net Losses with Credit increased by R$ 34.3 million in the quarter and R$ 33.5 million in the year, it is noteworthy that most of these credits were recorded as losses in previous quarters, and in 4Q17, of R$ 18.2 million related to textiles; (iv) Breach of Quality Standard increased by 20.9% (+ R$ 0.5 million) in the quarter and 15.01% (+ R$ 1.8 million), totaling R$ 2.6 million in 4Q17 and R$ 14.2 million in 12M17; (v) Own Consumption recorded an expense of R$ 2.1 million in the quarter (+ 14.8%) and R$ 7.6 million (- 2.8%); (vi) Civil indemnity reduced by R$ 6.1 million in the quarter and R$ 14.3 million in the year; (vii) Tax indemnity increased by R$ 15 million under Other Expenses in Provisions and Reversals of Provisions Celesc Distribuição S.A. Provisions Δ Δ Provisions, net - Total % 17.2 (51.6) % Allowance for doubtfull Accounts, net % (41.2) (48.0) 16.5% Provision for Doubtfull Accounts (17.0) (36.1) 112.0% (68.4) (91.3) 33.4% Reversal of Provision for Doubtfull Accounts % % Other Provisions, net % 58.4 (3.7) % Other Provisions (5.8) (21.3) 268.5% (36.0) (94.1) 161.4% Reversal of Other Provisions % % Main variations in provisions for estimated losses on loan losses - PECLD (i) PECLD Provisions totaled R$ 36.1 million in 4Q17 (+ R$ 19.1 million in relation to 4Q16), reflecting the Company's revenues due to the increase in electricity supply tariffs in previous years (due to water restrictions combined with economic crisis) and also to Free Consumer provisions, Taxed Service - Pole Rent (R$ 2.8 million), Financial Interest (R$ 0.7 million), Charge of the use of Electric Grids - TUSD (R$ 8.3 million) and Other Credits (R$ 15.9 million) that were not constituted; (ii) Reversal of Provision of R$ 57.9 million in the quarter, we highlight the reversal of R$ 21.4 million referring to textiles in 4Q17, of which R$ 18.2 million was recorded as a loss with no effect on the outcome. Main Variations in Other Provisions for Losses (Labor, Civil, Tax, Environmental and Regulatory Contingencies) (i) Reduction of 17.6% in Other Provisions Net, totaling R$ 36.7 million in the quarter (intensifying effect on the distributor's operating expenses); (ii) Other provisions recorded a balance of R$ 21.3 million (+ R$ 15.5 million), with a segregation of R$ 9.2 million in labor (against R$ 3.4 million in 4Q16), R$ 11.1 in civil (compared to R$ 2.4 million in 4Q16), R$ 0.2 million in Tax and R$ 0.7 million in regulation. (iii) The reversal of other provisions totaled R$ 57.9 million in the quarter, of which: R$ 8.9 million Labor (compared to R$ 9.5 million in 4Q16), R$ 36.2 million Civil (compared to R$ 40.4 million in 4Q16) and R$ 12.9 million Fiscal (Taxes). In November 2017, Celesc joined the Special Tax Regularization Program (PERT), updating tax debts already discussed, so the provision for these debts was adjusted, from R$ 16.4 million to R$ 3.6 million, meaning a reversal of a tax provision of R$ 12.9 million in 4Q17. 20

21 Adjusted EBITDA and EBITDA (non-audited) The following table sets forth the reconciliation of corporate EBITDA (ICVM No. 527/12) and also the EBITDA adjustments (Non- Recurring Effects). Celesc Distribuição S.A. EBITDA IFRS - Non-Recurring Δ Δ Profit / Loss Net 9.1 (10.3) % (52.5) % (+) Income Tax and CSLL % (30.7) % (+) Financial Result % % (+) Depreciation and Amortization % % EBITDA % % (+) Effects on Regulatory Assets and Liabilities (=) Adjusted EBITDA by Regulatory Assets and Liabilities % % (-) Non-Recurring Effects 0.0 (47.0) (202.2) (25.5) Incentived Dismissal Program - PDI (72.8) (72.8) Eletrosul Low Civil Provision 21.5 Contractual exposure 2014 (202.2) (=) EBITDA Adjusted by Non recurring Effects % % EBITDA Margin without Adjustments (IFRS) 9.6% 3.3% 3.9% 6.8% Adjusted EBITDA margin, without Construction Revenue (%) 9.6% 5.9% 7.6% 7.2% The Company ended 2017 with IFRS EBITDA of R$ million (R$ 59.3 million quarterly), being 101% (+ R$ million) higher than in The adjusted EBITDA for the year totaled R$ (+ R$ 44.6 million) and Adjusted EBITDA Margin of 7.2% (6.8% IFRS Margin). As shown in the table above, the adjustments applied in 12M17 totaled R$ 25.5 million adjustments as detailed below: i. R$ million related to involuntary exposure recorded in 2Q16; ii. R$ 21.5 million in civil provision (2Q17). iii. R$ 72.8 million (positive effect on adjusted EBITDA) related to the provision of the IDP - Incentived Dismissal Program; iv. R$ 25.8 million (negative effect on adjusted EBITDA) due to the Eletrosul Process 6. Regulatory EBITDA (Portion B Value minus Regulatory Operational Cost - PMSO) of Celesc Distribuição recorded R$ million in The negative difference of R$ million between Adjusted and Regulatory EBITDA is explained by: 1 ) R$ 88.9 million of PMSO above the regulatory limit; 2) R$ 71.1 million of losses above the regulatory limit (without tariff coverage). 6 ANEEL, by means of Order No. 4,171, ordered Eletrosul Centrais Elétricas S.A to return to Celesc the amounts related to the remuneration of the investments associated with the transmission facilities required to service the Arcelormittal Consumer received in duplicate by the transmitter. The amount established was R$ 46.3 million, restated by the accumulated IPCA from October 2012 to November 2017 plus interest rate of 5.59% real per year as of 2013, and R$ 25.7 million was recorded with the recovery of expenses and the remainder as financial revenue. 21

22 Financial Income Celesc Distribuição S.A. Financial Statement Δ Δ Financial Income % % Interest Income % % Monetary Variation % % Financial Incentive - Social Fund Interest and Arrears on Invoices % % Currency Devaluation on Energy Sold % % Financial revenue - VNR (7.2) % Exchange rate energy purchased % % Other Financial Revenues (3.2) % (10.6) % Financial Expenses (156.9) (63.8) -59.4% (461.4) (431.3) -6.5% Debt Charges (23.0) (14.9) -35.4% (125.8) (71.6) -43.1% Monetary Variation (0.1) (0.2) 61.9% (2.2) (0.7) -69.7% Adjustment of R&D and Energy Efficiency (7.4) (4.3) -42.4% (30.8) (22.9) -25.7% Exchange rate energy purchased (5.3) (3.1) -41.6% (19.0) (9.7) -48.7% Interest on Debêntures (11.1) (7.0) -36.9% (77.8) (26.9) -65.4% Regulatory Liability / Regulatory Fees (66.2) (29.4) -55.6% (156.9) (275.1) 75.3% Other Expenses (43.6) (4.9) -88.9% (48.8) (24.4) -50.1% Net Financial Result (88.0) (1.2) 98.6% (105.0) (143.3) 36.4% ** VNR update was reclassified as Gross Revenue item as of 4Q16 Financial Revenues totaled R$ 62.5 million in the quarter (R$ 288 million in the year), contraction of 9.2% in relation to 4Q16, highlighting: (i) Financial Application Income of R$ 8.8 million, decrease of 68.4%, influenced by the reduction of interest; (ii) Monetary Variation, a reduction of 31.6%, recording R$ 12.2 million, in comparison with 4Q16; (iii) Interest and Increase on Invoices, a decrease of 6.0% (R$ 26.3 million in the quarter and R$ million per year) due to the reduction in billing and very short-term delinquency, of which R$ 12.8 million (R$ 53.2 million per year) corresponding to a moratorium increase on the invoice and R$ 13.5 million (R$ 56.5 million per year) to other charges on the invoice (fine, interest in arrears); (iv) Regulatory Assets/Regulatory Fees, totaling R$ 8.2 million (R$ 50.8 million), variations in the item arise from the application of SELIC on sectorial financial assets (regulatory assets); (v) Other financial revenues increased by 309.1% (+ R$ 9.8 million). This item includes revenues from contractual fines, discount from suppliers, payment of invoices with discount. Financial Expenses were R$ 63.8 million in the quarter, a significant contraction of 59.4% (- R$ 93.2 million) in relation to the comparative period in 4Q16, while in the year the reduction was 6.5% (- R$ 30.1 million) totaling R$ million. The main factors of influence are as follows: (i) Debt charges, totaled R$ 14.9 million (R$ 71.6 million) due to: 1) Interest paid on the debt stock (R$ 4.2 million in quarter and R$ 29.5 million) and its main index (CDI rate) and 2) Reclassification of the mathematical reserve, classified as operating expense up to 3Q15, impacting R$ 10.7 million in the quarter and R$ 42 million in accumulated of 2017, but reducing operating expenses; (ii) Interest on Debentures, totaling R$ 7.0 million in the quarter and R$ 26.9 million related to funding raised in May/13 (settled in September 2016) and September/15; (iii) Regulatory Liabilities/Regulatory Ratios (SELIC) totaling R$ 29.4 in the quarter and R$ million in the year, highlighting: 1) R$ 9.8 million in the quarter and R$ 52 million in the year related to monetary restatement of regulatory liabilities; 2) R$ 19.6 million in the quarter and R$ 223 million in the EDA update; (iv) Updating of R&D and Energy Efficiency totaling R$ 4.3 million in the third quarter and R$ 22.9 million in 2017; (v) Other expenses recorded R$ 4.9 million in the quarter and R$ 24.4 million in the year, of which R$ 2.5 million (R$ 12.1 million) related to the litigation and R$ 1.2 million (R$ 6.8 million) in expenses with IOF and R$ 1.1 million (R$ 5.3 million) in other. 22

23 Net Profit and Adjusted Net Profit Celesc Distribuição S.A. NET INCOME IFRS - Non-Recurring Δ 12M16 12M17 Δ Net Income / Loss - IFRS Reported 9,1 (10,3) -213,0% (52,5) 33,3 163% (+) Effects on Regulatory Assets and Liabilities 0,0 0,0 (=) Net Income / Loss Adjusted by Regulatory Assets and Lia 9,1 (10,3) -213,0% (52,5) 33,3 163,5% (-) Efeitos Não-Recorrentes 0,0 (17,2) (154,3) (112,4) CDE Financial Update 0,0 0,0 (109,4) Low Civil Provision 0,0 Reversion of Labor Provision "Third Party" 0,0 0,0 14,2 Contractual exposure ,0 (=) Net Income Adjusted by Non-Recurring Effects 9,1 6,9-23,7% 101,7 145,8 43,3% EBITDA Margin without Adjustments (IFRS) 0,6% -0,6% -0,9% 0,5% Adjusted EBITDA margin, without Construction Revenue (%) 0,6% 0,4% 1,8% 2,2% Similarly, the analysis of Adjusted EBITDA applying to the Net Profit the same adjustments of non-recurring factors and the financial update of EDA, in the total of R$ million, one obtain an Adjusted Net Profit in the year equivalent to R$ million and Net Margin Adjusted of 2.2%, as shown below: i. R$ million related to involuntary exposure recorded in 2Q16; ii. R$ 14.2 million referring to the decrease in environmental provision (CEFA) recorded in 2Q17; iii. R$ million referring to the financial update of EDA recorded in 2Q17. iv. R$ 48.0 million (positive effect on adjusted EBITDA) related to the provision of the IDP - Incentived Dismissal Program; v. R$ 30.8 million (negative effect on adjusted EBITDA) due to the Eletrosul Proceeding; Celesc Distribuição closed 4Q17 with an Adjusted Net Profit of R$ 6.9 million, reduction of 23.7% compared to what was recorded in Indebtedness Celesc Distribuição S.A. Debts and Loans National Currency Bank Loans 110% a 121,5% CDI 235,2 64,3-72,7% Eletrobrás 5,00% 56,3 30,6-45,6% Debentures CDI + 1,30% 304,7 201,5-33,9% Debentures CDI +2,50% 0,0 0,0 Finame 2,50% a 8,70% 41,6 35,6-14,4% Mutual Celesc D/G 125% do CDI 40,2 45,5 Total Annual Interest Rate in December 31, 2016 in December 31, ,0 377,5-44,3% Short Term - Current 308,2 235,2 Long Term - 1 to 5 Five Years 365,0 140,8 Long Term - Over 5 Five Years 4,8 1,5 Δ By Type of Index The average cost of Celesc's total financial debt is 7.34% (year), being 7.50% pa the average cost of the debt linked to CDI and 6.59% pa the pre-fixed debt, being in line with the rates charged in the market. The average term of the total financial debt is 1.06 years, corresponding to 0.5% of the debt indexed to the CDI and 3.35 years to the pre-fixed debt, evidencing the shortening of the terms. 23

24 Bank loans On March 11, 2014, the Administration Council authorized the raising of R$ million at Caixa Econômica Federal, at a rate of 121.5% of CDI. The Company will have to pay off the debt until June 2018, and the current debit balance is R$ 60.0 million. The debt is being amortized in the proportion of R$ 10 million per month. On January 23, 2015, Celesc D raised funds in the amount of R$ million from Banco do Brasil to Working Capital. The payment is being made in 24 (twenty-four) monthly and successive installments and with financial charges of 110% of the CDI. The current balance of the debt is of R$ 4.1 million with a settlement period until January Eletrobrás The loans and financing contracted are for the rural electrification programs and others, and the resources come from the Global Reversion Reserve (RGR) and from the Eletrobrás Finance Fund. In general, these contracts have a grace period of 24 months, amortization in 60 months, some of which are over 96 months, with an interest rate of 5% pa. and administration rate of 2% pa. These contracts are collateralized by receivables and are accrued by ANEEL. Debentures In May 2013, the subsidiary Celesc Distribuição issued for the first time 30,000 non-convertible debentures of unsecured kind, with a fiduciary guarantee exercised by Centrais Elétricas de Santa Catarina S.A., raising funds to be used to increase working capital and investments by the Company. The Debentures were subject to public distribution with restricted placement efforts, under the terms of Instruction of the Brazilian Securities and Exchange Commission ("CVM") No. 476, from January 16, 2009, under the firm guarantee regime, and will be entitled to payment of interest rate corresponding to 100% (one hundred percent) of the accumulated variation of the average daily rates of Interbank Deposits "DI", plus a surcharge or spread of 1.30% (one hundred thirty percent) per annum, due within 72 (seventy-two) months from the issuance date. The Remuneration is paid in semiannual and consecutive installments, without a grace period, as of the Issuance Date (5/15/2013). The amortization in three (3) equal, annual and consecutive installments, the first installment being due as of the 48th (forty-eighth) month as of the Issuance Date. The Debentures have a contract commitment to present a Net Debt/EBITDA ratio of less than 2 and a maximum dividend distribution limit of 30%. The current debit balance is R$ million. Finame The loans contracted were used to purchase machinery and equipment; they have an interest rate of 2.5% pa to 8.7% pa. In the event of default, the guarantee is linked to the receivables of the contractor and is approved by ANEEL. Mútuo Celesc Distribution S.A with Celesc Geração S.A. On August 16, 2016, Celesc Geração S.A (Lender) and Celesc Distribuição (Borrower) entered into a loan agreement, with ANEEL's consent, for a period of 24 months and a 125% interest rate of CDI. Interest payments and repayment of principal will be made at the end of the operation. The lender, according to the needs of the borrower, may make financial allocations up to the limit of R$ 110 million, in the form of revolving credit, and the borrower must make a partial cover or full coverage of the balance during the term of the agreement. The current debit balance is R$ 45.4 million (Principal + Interest). Celesc Distribuição's gross financial debt totaled R$ million as of December 31, 2017, a decrease of 44.3% (- R$ million) compared to the closing of 2016 (R$ million), arising from the lower need for the working capital to meet the costs of buying electricity for resale. Loans and Financing Agenda The estimated agenda of due dates for loans and financing is set out in the following chart. 24

25 The Company ended 2017 with its financial debt representing -0.2x EBITDA in the last 12 months (-0.2x Adjusted EBITDA) and -0.1x its Net Worth as follows: Celesc Distribuição S.A. Debt Financial Debt 4Q17 in December 31, 2016 in December 31, 2017 Δ Short-Term Debt 308,2 235,2-23,7% Long-Term Debt 369,8 142,3-61,5% Total Debt 678,0 377,5-44,3% ( - ) Cash and Cash equivalents 880,9 462,5-47,5% Net Debt (202,9) (85,0) -58,1% Net Debt / EBITDA LTM -0,9x -0,2x Ajusted EBITDA LTM 421,2 465,8 10,6% Net Debt / Ajusted EBITDA LTM -0,5x -0,2x Equity 1.311, ,9-19,7% Total Debt / Equity 0,5x 0,4x Net Debt / Equity -0,2x -0,1x It is important to point out that the Market Notice EDA Installments from 07/25/2017, Celesc Distribuição divided the balance in the amount of R$ 1,166 million related to the EDA charge to the CCEE in thirty installments as of July The outstanding balance on 12/31/2017 is R$ million (Explanatory Note No. 26 of DFAC 2017). Considering the Pension Obligations, which totaled R$ 1,179.8 million as of December 31, 2017 and Other Employee Benefits (Health Plan, PDVs, others) in the amount of R$ million, the Company's Adjusted Net Debt sum R$ 1,279.4 million, which represents 2.9x 12M EBITDA and 1.2x the Company's Net Worth at the end of 2017, as shown in the table below: 25

26 Celesc Distribuição S.A. Debt + Actuarial Liabilities in December in December 31, , 2017 Δ Total Financial Debt % (+) Net Actuarial Liabilities 1, , % Pension Obligations , % Other benefits % ( - ) Deferred Taxes¹ % ( - ) Cash and Cash equivalents % Adjusted Net Debt , % Adjusted Net Debt / EBITDA LTM 4.5x 2.9x Adjusted Net Debt / Ajusted EBITDA LTM 2.4x 2.7x Adjusted Total Debt / Equity 1.4x 1.7x Adjusted Net Debt / Equity 0.8x 1.2x ¹ ITR 4T17, Explanatory Note 20.a It should be noted that the Company has already negotiated the contracts with the Inter-American Development Bank (IDB) and was approved on the Bank's Board on 11/21/17. The objective of the loan is to finance 60% of CELESC D's investment plan for the next 05 years. The contract value is up to US$ 276 million, the disbursement period will be 5 (five) years from the date of the annual interest rate \equivalent to the quarterly LIBOR plus the IDB borrowing cost and the margin applicable to ordinary capital loans of the bank, a total term of 25 (twenty-five) years with a grace period of 5.5 (five and a half) years, semi-annual interest payment and amortization. The operation has the guarantee of the Union, which, in turn, has counter-guarantees both from the State of Santa Catarina - according to State Act No. 17,274 from October 5, 2017, as amended by State Act No. 17,305 from November 6, and the Company. In order to complete the formal procedures, there will still be some steps to be taken in the Minister of Finance and at the PGFN. The final stage of the proceeding, scheduled to occur by the end of May, will be the formal referral by the President of the Republic to the Federal Senate, which issues a law authorizing the Minister of Finance to sign the contract. In addition, CELESC D obtained a favorable opinion from COFIEX, authorizing the change of the financing agent, AFD to CAF, pursuant to Resolution No. 001/0127, from 12/20/2017, to complement the counterpart resources of the loan with the IDB amounting to US$ 69 million, the proceeding will follow the same procedures as the IDB. Ratings of Celesc Distribuição and Parent Company Moody's Latin America Ltda (Moody's) assigned ratings of Ba3 issuer on a global scale and A2.br on a national scale to Celesc Distribuição S.A. (CELESC D). At the same time, Moody's assigned Ba3 and A2.br ratings to BRL million in unsecured amortizable debentures of 6-year amortizable assets due in 2019 issued by CELESC D and guaranteed by CELESC in the local market. The negative outlook reflects Moody's expectation that CELESC D, despite some deterioration in credit indicators relative to the historical performance, will achieve a gradual reduction in its operating costs, as well as securing a sufficient long-term debt to fund its investment program in fixed assets. Investments CAPEX Celesc Distribuição's investments amounted to R$ million (R$ million in materials and services, R$ 22.4 million in its own workforce and R$ 14.4 million in consumer financial participation) 7 in the fourth quarter of In the year, investments totaled R$ million (R$ million in materials and services, R$ 89.4 million in own labor and R$ 56.8 million in consumer financial participation). The table below shows the investment of the distributor indicating what comprises the Regulatory Remuneration Base (RAB): 7 Rules for Consumer Financial Share are set out in ANEEL Normative Resolution No. 414 from December 09,

27 CAPEX - Celesc Distribuição S.A. R$ MM Δ Δ Investments Celesc Distribuição % % RAB * % % Non - RAB % % Depreciation / Amortization (48.8) (50.7) 3.8% (197.2) (200.3) 1.6% CAPEX x Depreciation Ratio 2.5x 2.8x 1.9x 2.1x * RAB: Regulatory Assets Base ** Excludes Consumer Financial Interest The following graphs illustrate the CAPEX performed by the company in recent years (and its relation to Depreciation), as well as the composition of CAPEX in electric assets made in 2017, which will comprise the Regulatory Remuneration Base: The investments in the distribution network seek to meet the continuous improvement of the quality indicators (DEC and FEC) signed in the concession renewal agreement. Demand for CAPEX RAB in the current tariff cycle should be between 1.6x and 1.9x depreciation, in line with the industry average. Celesc Distribuição invested R$ 8.0 million in Research and Development (R&D) in 2017, 24.5% lower than in 2016 when it invested R$ 10.6 million. Investments in Energy Efficiency totaled R$ 50.5 million, 7.0% lower than in the same period of 2016, when R$ 54.3 million was invested. For the year 2018, according to the Notice to the Market, disclosed on December , the approved budget for materials/services, including the financial participation of the consumer, was R$ 395 million, of which R$ 349 million for Distribution Systems and R$ 46 million for General Facilities and Vehicles Regulatory Aspects of Celesc Distribuição S.A. Contract Exposure 2014 Offices ANEEL 2,642/15 and 2,078/16 In 2015, ANEEL determined the contractual exposures of the distributors for the year 2014, disclosing the amounts of involuntary exposure through Office No. 2,642/2015. For CELESC D, the amount of 117.2MW of contractual exposure was determined, of which 64.36MW were recognized as involuntary. In the face of this Office, an appeal was filed with ANEEL, which was based on 3 (three) points: (i) 2MW arising from consumers that ANEEL understood to have returned to the captive market for a voluntary act of CELESC D, which did not occur, as they returned by court order, or were only switched off; (ii) 15,818MW relating to a material error in filing a declaration form in the A-1 auction of 2013, as said amount of energy was declared in a different field of the form, in addition to the fact that said amounts had already been declared in another two auctions (A-0 from 2013 and A-0 from 2014) which were frustrated; and (iii) 35.02MW due to the extraordinary market variation that occurred as a result of the intense heat wave that struck the state in the first quarter of 2014, and consequently an annual growth of around 6.7% in the market, against a history of 2.5%. Faced with the 27

28 inoperation of contractual adjustment mechanisms in 2013 and 2014, such extraordinary market growth could not be adjusted, generating contractual exposure of around 1.5% of the market. Through Office No. 2,078/2016, the company was granted a partial recognition in order to: a) consider another 2MW average as involuntary exposure related to the cessation of activities and return to the captive market of special consumers; and b) to consider a further 15,818 average MW as an involuntary exposure due to the recognition of a material error in completing the declaration of energy needs for Auction A-1 of In view of the Office, the exposure considered by the Regulatory Body to be voluntary went from 52, 84 Average MW to Average MW, so the Company recognized in the second quarter of 2016 the amount of R$ 256 million referring to voluntary exposure in 2014, recording in 2Q16 the amount of R$ 225 million in the Financial Assets/Liabilities account of Gross Operating Revenue, with negative effect, and R$ 31 million as a financial expense (overcontracting update). CELESC D filed a Judicial Lawsuit in 2016 with the purpose of challenging Office No. 2078/2016, in order to obtain the full recognition of the contractual exposures as involuntary, at the same time as it requested the granting of an injunction to suspend the application of a rate reducer of R$ 256 million, expected to be applied together with the homologation of the Periodic Tariff Review proceeding that would occur until August 22, After the lawsuit was filed, a preliminary injunction was granted in order to avoid the application of the mentioned tariff reducer, ANEEL's decision when the Tariff Review was approved, and at the moment the company continues to discuss the merits of the lawsuit, seeking the full recognition of the contractual exposure as involuntary, and thus eliminating any tariff reducer, as well as the application of penalties by the Electricity Trading Chamber - CCEE. Recently, the judge holding the case that discusses the 2014 contract exposure, after examining ANEEL's statement on the arguments presented by Celesc D, decided to maintain the injunction previously granted, constituting a condition of stabilization for the proceeding. Contract Exposure 2014 CCEE Penalties On October 14, 2016, the CCEE issued Notification No. 1438/2015 due to the non-presentation by Celesc D of a physical guarantee or contractual coverage to cover one hundred percent of its market, based on the accounting performed in January of 2015, referring to the year 2014, indicating the applicable technical penalty in the amount of R$ 77 million. In light of this Notice Term, the Company filed a defense requesting (i) the suspension of the application of the assessed penalty until the final decisions on the merits of the lawsuits in which Celesc D discusses with ANEEL the contractual exposures of 2014; and (ii) a review of the penalty after the definitive establishment of the amounts of involuntary contractual exposure, as well as the amounts of energy to be considered for the 2014 ex-post MCSD round, should any lack of contractual ballast maintained in the year On December 22, 2016, the Administration Council of CCEE - CAD decided at its 903rd meeting to reject the defense arguments presented in the defense of TN 1438/2015. On January 4, 2017, Celesc D challenged this decision, and on January 10, 2017, at its 905th meeting, DAC faced the allegations presented by Celesc D and decided in determination No for forwarding to ANEEL the Request for Dispute filed. In view of the facts presented, ANEEL, through Office No. 180/2017, decided not to grant a suspensive effect to the Celesc D Appeal against the decision issued by the CCEE at its 903rd Meeting rejecting the defense arguments presented in the defense to Notification No.1438/2015. At the 7 th public meeting of the Board of Directors of ANEEL, held on March 7, 2017, considering the foregoing and that set forth in Case No / , it voted to hear the Request for Impulse, with a request for a suspensive effect, filed by Celesc D, in the face of a decision issued by the CCEE at the 903 rd Meeting, related to Notification Term No. 1,438, of 201, and, on merit, dismiss it. However, the rapporteur had requested the views of the rapporteur, postponing the decision. After requesting a hearing, the Request for Challenge was again reviewed by the Board of Directors of ANEEL at the 19 th Ordinary Public Meeting, knowing it, and, on merit, dismissing it as provided in Office No. 1489/

29 The Company filed a lawsuit (No ) against CCEE and ANEEL requesting the grant of an injunction in order to suspend the enforceability of the penalty imputed to Celesc D until the proceeding judicial proceeding that discusses the contractual exposure of 2014 has its developments, as well as the legal proceeding that the Jirau HPP moves in the face of ANEEL, also reaches its final appreciation of merit, being these two factors that directly impact on the maintenance of the applied penalty. After examining the request formulated, the judge holding the case uttered a decision suspending the collection by the Respondents of the above-mentioned importance, and of any other importance (of a punitive nature or not), due to the applicant's (considered voluntary) exposure in Thus, the collection of the penalty applied by CCEE is suspended. Tariff Flags The Federal Government, through Decree No. 8,401/2015, created the CCRBT Tariff-Based Resource Centralization Account (CCRBT), which established that flags should be activated whenever variations in generation costs by thermoelectric source and exposure to settlement prices in the short-term market affected the electricity distribution agents connected to the National Interconnected System (NIS). The mechanism has served as a signal for consumers to be aware of consumption during situations of low hydraulicity. For the year 2017, through Public Hearing No. 091/2016 ANEEL defined new activation ranges as well as the additional ones, considering the updating of the data and the distribution of the costs between the levels. On October 24, 2017, during a Public Meeting of the Board of Directors of ANEEL, a public hearing was approved on 061/2017 to discuss the revision of the methodology of tariff flags and the values of their activation ranges. Exceptionally, for the month of November, the additional value proposed for audience of R$ 50.00/MWh was already considered, considering the red flag level 2. According to the proposal, the value of the additional yellow flag fell from R$ 20 to R$ 10.00/MWh and the additional red flag on level 1 remains at R$ 30.00/MWh. This situation was justified due to the fact that there was no development in the situation of the reservoirs of the hydroelectric power plants in relation to the previous month and it is necessary to reinforce the actions related to the conscious use and fight against the waste. Below is a summary table with the history of the tariffs practiced in the concession area of Celesc Distribuição in 2017: Month jan/17 feb/17 mar/17 apr/17 may/17 jun/17 jul/17 aug/17 sep/17 oct/17 nov/17 dec/17 Historic tariff flags in the year 2017 Flag Green Green Yellow Red-Portion 1 Red-Portion 1 Green Yellow Red-Portion 1 Yellow Red-Portion 2 Red-Portion 2 Red-Portion 1 Extension of the Concession - Provisional Measure MP No. 579/12, Act No /13 and Decree No /15 Celesc D had the due date of its concession contract occurred on July 7, 2015 as provided in Concession Agreement 056/99. With the advent of MP No. 579/12, bringing new legal discipline for the extension of the concession agreements, on September 19, 2012, the Company filed a document ratifying the intention expressed in June of the same year with the regulatory body. In January 2013, the Provisional Measure was converted into Act No. 12,783/13, maintaining the estimated extension for 30 years. 29

30 In June 2015, Decree No. 8,461 was issued, regulating the conditions for the extension of the concession, as well as delegating to ANEEL the instrumentalization of the Addendum to the Concession Agreement, as well as the conditions affecting the quality of service, economic sustainability, tariff modality, and technical, operational and economic rationality. Subsequently, in June 2015, Aneel opened Public Hearing No. 038/15 with the purpose of discussing with the distributors and the whole company the conditions proposed for the extension, which was expired on July 13, Celesc D, as well as other distributors and the Brazilian Association of Electric Power Distributors - Abradee, presented numerous contributions seeking the improvement of the rules and the best alignment for the provision of electricity distribution service to the society of Santa Catarina with quality and sustainability. Also in June of 2015, the Federal Audit Court (TCU) issued a decision in a Precautionary Measure determining the suspension of the Extension Proceeding of Distribution Concessions for a better analysis of the justifications presented by the Ministry of Mines and Energy (MME) and ANEEL. On September 9, the TCU Plenary decided to authorize the follow-up of the extension proceeding, presenting new requirements to be met, among them the maintenance of the criteria for extinguishing the concession (Quality and Sustainability Indicators) as of the sixth year of the contract, until its final term. Based on these conditions presented by the TCU, ANEEL reopened Public Hearing No. 038/2015, in its second phase, to receive new contributions from the company, in order to comply with the determinations of the TCU, at the same time as appealing (Statement Embargoes) of the decision by the Union Audit Court, questioning some points, and proposing alternatives to the decision rendered, of which we highlight: i) Granting of a 18-month term to regulate the conditions related to governance and other parameters of Dividend and Interest distribution restrictions on Own Capital; and ii) Possibility of reviewing the Quality Indicator (DEC/FEC) parameters every 5 years, after the sixth year of the concession. After the analysis of the Embargoes by the Union Federal Court of Accounts, a new decision was rendered on October 14, 2015, providing that: i) The prior regulation of the determinants related to corporate governance and other related points becomes a recommendation and not a determination; and ii) The review of the DECi and FECi parameters can occur in each 5-year cycle according to previously discussed regulations with society. As of this decision, ANEEL incorporated the determinations of the TCU to the Addendum to the Concession Agreement, approving it at a meeting of the Board of Directors of the Agency held on October 20, 2015, so that the draft Addendum forwarded to the MME was approved through ANEEL Office No. 3,540/2015. With the order of the MME published on November 11, 2015, Celesc Distribuição approved the final version of the Fifth Addendum, maintaining the forecast of extension for 30 years, thus initiating the procedures related to its signature within the 30-day term. From then on, internal procedures were initiated with an Extraordinary Shareholders 'Meeting for the company' shareholders' appreciation, held on December 2, 2015, in addition to the necessary documentary instrumentation, culminating with the approval for the signature of the agreement and the signature of the Fifth Addendum to the Concession Agreement No. 056/1999 held on December 4, 2015 at the Ministry of Mines and Energy - MME. In the year 2016, the monitoring of the conditions for maintaining the concession began, as established in the Addendum signed. For this year, the attainment of the internal DEC and FEC goals established in the contract has already been required. During the first two years of the new cycle of the concession contract, the investments in the electric system were intensive, with some structuring works being inaugurated, such as substations, as well as other works that improve the performance of the electric system. Contributing to the improvement of performance, climatic conditions were favorable in 2016 and 2017, contributing to the adequacy of the indicators of DECi and FECi ascertained. The graph below presents the monitoring of the quality indicators until the end of

31 The new additive that extends the concession term for 30 years has imposed conditions of efficiency on the distributor, regarding the quality of the service, but also on the sustainability of the economic-financial management. During the first five years of the new contract, non-compliance of conditions for two consecutive years or any of the limits at the end of the period of the first five years will result in the termination of the concession. From the sixth year following the conclusion of the contract, non-compliance with the quality criteria for three consecutive years, or economic and financial management for two consecutive years, will lead to the opening of the expiration process. In addition, throughout the contractual period, non-compliance with the global targets for collective continuity indicators for two consecutive years or three times in five years may result in the limitation of the distribution of dividends or payment of interest on equity, while non-compliance with the indicators of economic and financial sustainability will reflect the need for capital contribution from the controlling shareholders. Below are the targets to be followed by Celesc Distribuição in the first 5 years of the extension: ATTENDED ATTENDED ¹ DECIi-Equivalent Duration of Interruption of Internal Origin per Consumer Unit; and FECi-Frequency Equivalent of Interruption of Internal Origin per Consumer UnitInterrupção de Origem Interna por Unidade Consumidora ² QRR: Regulatory integration quota or Regulatory Expenses. It will be the value defined in the last Periodic Tariff Review-RTP, plus IGP-M between the month prior to the twelve (12)months of measuring economic-financial sustainability. ³ Selic: Limited to 12.87% a.a. In relation to the Company's performance, CELESC D complied with the adjusted EBITDA requirement of greater than or equal to zero for the year 2017, provided for in the addendum to the Concession Agreement. The accumulated adjusted EBITDA determined by ANEEL's Superintendence of Economic and Financial Inspection up to the third quarter of 2017 is R$ 556 million, according to the 3rd Edition of the Distributors' Sustainability Report released in February Concession Extension - Normative Resolution No. 747/ Criteria for limiting the distribution of dividends and payments of interest on own capital Further in the context of the new addendum to the concession agreement, ANEEL, through Normative Resolution No. 747/2016, established the criteria for limiting the distribution of dividends and payment of interest on own capital. According to the resolution, in the event of non-compliance with the global goals of collective continuity indicators for two consecutive years or three times in five years, counted from the calendar year subsequent to the date of conclusion of the concession agreement or the additive term, the 31

32 concessionaire is prohibited to distribute dividends to shareholders or to pay interest on own capital, when these amounts, individually or jointly, exceed 25% of net profit. The limitation on the distribution of dividends or payment of interest on capital is effective as of January 1 of the calendar year following the year of non-compliance, remaining until the traditional DEC and FEC indicators are performed. Result Plan Celesc D was convened by ANEEL to participate in the second segment of the distributors that will go through the Income Plan, aiming at improving the quality of services under the technical and commercial aspects, in addition to the safety aspects of employees and the population, as well as monitoring of the economic-financial sustainability indicator, and consequently guaranteeing the attainment of the indicators set forth in the Concession Agreement. The Result Plan is associated with the new strategic oversight model adopted by ANEEL, with the primary objectives being the education and orientation of the agents from the electric energy sector, and the prevention of conduct that violates legislation and concession contracts. During this proceeding, Celesc D initially underwent a first phase of supervision of the technical and commercial services of electricity distribution throughout 2016, with the analysis of the outcomes from 2014 and In order to comply with this methodology, Celesc D presented to ANEEL the Improvement Plan, focusing on the Duration of Interruptions, Number of Interruptions, Timeframes for Services, Quality of Telephone Service and Internal and External Demands. The Result Plan was presented to ANEEL at the end of September/2017, with the objective of defining and presenting the actions required to meet regulatory demands, promoting the improvement of services provided to consumers, and converging to compliance with the agreement of concession, extended in 2015, thus representing a gain in the quality of services, besides being an excellent complementary management tool in search of the maintenance of the concession. The validity term of the Results Plan will be 24 months, as of September 10, 2017, with a quarterly periodic control by the regulatory body. Recently, the report of the first four months of the Result Plan was submitted to ANEEL, which was positively analyzed by the regulatory agency, according to the statements presented in a technical visit by the Chief Rapporteur of the proceeding, Dr. Tiago de Barros Correia, together with the Superintendents of Inspection of Electricity Services - IES and Regulation of Distribution Services - RDS. Celesc Distribution Tariff Revision - Resolution No , Technical Note No. 258/2016-SRE/ANEEL and Technical Note No. 287/2016-SGT/ANEEL. The Tariff Revision of Celesc Distribuição, applied as of August 22, 2016, resulted in an average tariff effect to be perceived by consumers of -4.16%, composed of the Tariff Readjustment Index (IRT) of -1.54% (economic effect resulting from the updating of Portion A and B costs), the financial component of -0.47% in the current process and the effect of the withdrawal of financial components considered in the previous ordinary process of -2.15%. In the composition of the IRT for the period , Portion A (non-manageable costs) increased by -2.20% in relation to the costs that were added in the RTE by financial component. Portion B (manageable costs) represented a variation of 0.66%. The table below details the composition of the readjustment items: Regarding the remuneration of the assets of the Regulatory Remuneration Base - BRR defined for the 4th tariff cycle, R$ 3.0 billion net (Order no. 1,920/16), was defined 8.09% referring to the WACC Real Regulatory, and depreciation rate average at 3.78% pa. 32

33 Annual Tariff Adjustment Ratifying Resolution No. 2,286 and Technical Note 236/ SGT/ANEEL The Tariff Adjustment of Celesc Distribuição, applied as of August 22, 2017, resulted in an average tariff effect to be perceived by consumers in the order of 7.85%, composed of the Tariff Readjustment Index (IRT) of 3.80% (economic effect resulting from the updating of Portion A and B costs), the financial component of 2.83% in the current process and the effect of the withdrawal of the financial components considered in the previous ordinary process, 1.22%. In the composition of the IRT for the period , Portion A (non-manageable costs) changed by 3.67% in relation to the costs that were added in the RTE by means of a financial component and Portion B (manageable costs) presented a variation of 0.13%. Public Consultancy MME No. 33/ Enhancement of the Legal Framework at the Electric Sector In July 2017, the Ministry of Mines and Energy (MME) launched the Public Consultancy No. 33, with the objective of consulting society and the agents of the electric sector regarding the proposal to improve the legal framework of the electric sector, whose guidelines were based on new technological and environmental paradigms, which have impacted the sector and the current regulation, as well as before regulatory phenomena verified during the last years, which demand a structural revision of the legal framework, seeking to improve the regulatory balance between agents, consumers and governmental public interests, in addition to the reduction in the level of judicialization faced by the electric sector currently. After numerous contributions received by MME, the Public Consultancy was closed at the end of 2017, with the recent dissemination of the guidelines aimed at the new legal frameworks to be established, whose focus is on providing mechanisms to encourage efficiency in business decisions of industry players, especially regarding security of supply, investments and socio-environmental sustainability. Another proposal is the end of the quota system for the extended plants, with the allocation of some of the economic benefit to the EDA. The removal of barriers for the participation of agents in the market, expanding the free market is also a direction outlined in the new legal framework. Improving short-term price formation criteria is also a challenge to be addressed in the new regulation. In terms of distribution, there is a focus on the separation of ballast and energy, with the creation of other transition mechanisms to mitigate the effects of the migration of consumers to the free market. There is still a focus on the rationalization of subsidies and correction of inadequate incentives for migrating to the free market. Another point addressed is the allocation of resources of the RGR for the indemnification of transmission assets. There is a review of the R&D resource utilization guidelines and incentives for alternative sources of energy. Lastly, there is a rediscussion of the structure of the regulated distribution market, seeking the modernization and creation of incentives. The calculation bases for determining penalties to the distributors will also be reviewed. Finally, there is a concern to seek the misallocation of the hydrological risk, seeking to reestablish the balance in the settlements of the short-term market. All of these guidelines are translated into a Draft Bill disclosed by the MME, which will be discussed in the National Congress soon. IASC/ ANEEL Award Consumer Perceived Quality Assessment ANEEL published on February 1, 2018 the winning distributors of the Iasc 2017 Award, the ANEEL Consumer Satisfaction Ratio, which recognizes the best assessed distributors based on the perception of residential consumers. The ratio is measured through an opinion poll conducted with consumers from all over Brazil. The analyzed variables are: Perceived quality, perceived value (cost-benefit ratio), total satisfaction, confidence in the supplier and loyalty. Celesc D has been chosen as the second best distributor in Brazil as per consumers' assessment, behind only Copel D, with a perceived equality rate of 74.43%, compared to a national average of 63.66%. In terms of satisfaction, Celesc D reached 73.90%, against 63.16% of the Brazil average. Regarding confidence, Celesc has reached 71.63%, compared to 62.27% of the national average and 43.21% of loyalty, in contrast to 37.20% of the national average. 33

34 2.2 Celesc Geração Operating Performance Production In 4Q17, 87.3 GWh of power was generated by the generating plants of Celesc Geração, 36.6% lower than the one produced in 4Q16. In the year-to-date, there was a 27.3% drop, among the factors that contributed to a reduction in the period, namely: i) The scarcity and irregular distribution of rainfall throughout the quarter and most of the year; ii) Operation of the Rio dos Cedros plant in June 2017, due to damages in the pipeline (impact of 7.8% on generation capacity and 10% on FG of the generating site); (iii) Generating Unit 4 of the Pery plant was under maintenance from January 24, 2017 through May 30, 2017 (turbine blade change and other adjustments) to increase generator efficiency; iv) The Bracinho plant was out of operation in the period from 02/08/2017 to 05/11/2017 for the automation of the plant and dams; v) Restriction of maintenance in the generators of the Salto Plant due to the water abstraction of SAMAE that supplies the municipality of Blumenau. The overall capacity factor in 2017 was 46.8%, representing 17.4 percentage points below the 2016 level (64.2%). Celesc Geração S.A. Energy Production Operating Performance (MWh) Δ Δ Own Generating Plants % % (50.4) (164.2) PCH Palmeiras % % (15.8) (35.6) PCH Bracinho % % (0.3) (14.8) PCH Garcia % % (1.8) (1.5) PCH Cedros % % (15.6) (37.8) PCH Salto % % (2.9) (11.8) PCH Celso Ramos % % (0.8) (10.5) PCH Pery % % (9.4) (40.3) PCH Caveiras % % (1.6) (4.9) CGH Ivo Silveira % % (0.6) (2.8) CGH Piraí % % (0.8) (1.3) CGH Rio do Peixe % % (0.2) (1.3) CGH São Lourenço % % (0.4) 0.0 (1.6) 0.0 Global Capacity Factor 58.4% 37.0% -21.4% 64.2% 46.8% -17.4% All the plants of the own generator site itself participate in the Energy Reallocation Mechanism (ERM), a hydrological risk sharing system where the participating plants transfer the generated energy surplus to their physical guarantee to the plants they generated below. Hence, the decrease in production verified in 2017 does not impact the company's revenue generation Financial Performance Celesc Geração S.A. Main Financial Indicators Δ Δ Gross Operating Revenue % % Deductions from Operating Revenue (3.7) (3.5) -4.7% (11.5) (15.1) 31.5% Net Revenue % % Operating Costs and Expenses (13.8) (7.3) -46.9% (68.1) (61.9) -9.1% Electricity Costs (4.4) (4.5) 0.2% (17.8) (17.6) -0.7% Operating Expenses (9.3) (2.9) -69.3% (50.3) (44.2) -12.1% Equity Result 0.6 (1.6) -341% (0.3) (3.2) 966.1% Operating Results % % EBITDA % % EBITDA Margin (%) 77.3% 85.5% 74.6% 66.9% Financial Result (4.7) (1.0) -78% (18.4) (8.5) 53.7% LAIR % % IR/CSLL (5.5) (8.8) (13.9) (26.3) Net Profit / Losses % % Net Margin (%) 32.6% 47.1% 20.0% 32.9% 34

35 Income Highlights Celesc Geração's Net Operating Revenue increased by 2.1% (+ R$ 0.7 million) in the fourth quarter of 2017, registering R$ 35.3 million, mainly reflecting the positive changes in the LDP in the quarter. In 2017, the NOR (Net Operating Revenue) expanded 18.3% as a result of the increase in average sales price (+ 49.5% excluding CCEE). The PLD in 2017 reached an average of R$ /MWh, while in 2016 the average was R$ 92.40/MWh. Adjusting the reversal of provision for impairment in the amount of R$ 3.1 million in the year, EBITDA and Adjusted Income of R$ 27.1 million (R$ 96.5 million) and R$ 14.6 million quarter (R$ 46.9 million year) respectively. Celesc Geração S.A. Adjusted Income (IFRS - Non-Recurring) Δ Δ Adjusted EBITDA (IFRS - Non-Recurring) % % Adjusted EBITDA Margin (%) 41.2% 76.7% 60.2% 64.8% Net Profit / Loss (IFRS - Non-Recurring) % % Adjusted Net Margin (%) 8.8% 41.3% 10.5% 31.5% Celesc Geração S.A. Gross Operating Revenue Δ Δ GROSS OPERATING REVENUE % % Electric Sales % % Electric Energy Supply % % Spot Energy % % Financial Income - Interest and update BO % % Gross Operating Revenue The variation in the quarter (year) is mainly explained by: i. Reduction of 28.8% (21.9%) in the energy supply account (closing of contracts); ii. Short-term energy revenue increased by 56.7% (96.4% year-on-year) due to the increase in LDP; iii. Higher level of trade in the energy supply account, which presented a positive variation of 6.8% (78.4% year); iv. Average selling price of R$ (R$ without CCEE) in the fourth quarter of 2017 versus R$ (R$ without CCEE) in the fourth quarter of 2016, a variation of 5.1% (0.1% without CCEE); v. Revenue of R$ 10.6 million (R$ 40.8 million per year) in the quarter, of which R$ 2.8 million (R$ 10 million per year) of maintenance and interest and R$ 7.8 million (R$ 30.8 million per year) on grant bonus. The table below shows the physical quantities of energy billed in the fourth quarter and in the accumulated amount for 2017 for each of the segments. Celesc Geração S.A. Energia Sold GWh Δ 12M16 12M17 Δ Electric Energy Supply % % Industrial % % Commercial, Services and Other Electric Energy Sales to distributors % % Electric Energy Trading Chamber (CCEE) % % Average Sales Price Without CCEE (R$/MWh) % % Average Sales Price With CCEE (R$/MWh) % % The energy billed increased 0.7% in the quarter (+1.1 GWh). This increase was mainly due to: (i) The 75.7% increase in the supply segment was mainly due to the start of physical guarantee quotas, in particular the Pery plant (July/17) and also due to a large part of the energy that was sold in the industry was marketed in long-term contracts with marketers; (ii) a reduction of 52.2% in the industrial 35

36 segment due to the conclusion of contracts and the consequent increase in the physical guarantee quota contracts, in particular the Pery plant, started in July, consolidating the year; (iii) Reduction of the energy marketed in the CCEE that was displaced due to physical guarantee quota contracts in the regulated contracting environment, in addition to the generation of new conventional energy contracts, a source that in 2016 was frequently settled in CCEE. The Pery Plant has been extended by the provisions of Act 12,873/2013 and the tariff reflects, only, the cost of O&M, however, the company is entitled to the indemnity of R$ million that will be received via the plant's tariff for the duration of the concession period as regulated by ANEEL Resolution 257/2017. As for the other plants that were classified under the quota system, their concession was obtained by means of an auction (Bid Notice 12/2015) with the payment of a grant bonus, thus, the tariffs of these plants reflect in addition to the cost of administration and O&M the return of the grant bonus and other investments. According to the table below, the ARG (Annual Generation Revenue) of the Celesc Generation Plants shall be charged on a monthly basis, in accordance with the Monthly Revenue specified in the Homologatory Resolution. Celesc Geração S.A. RAG Power Plants - Quotas Power Plants RAG - Monthly Quota (R$) RAG - Annual Quota (R$) Physical Security in Quotas PCH Pery** 430, ,168, % PCH Palmeiras* 1,554, ,659, % PCH Bracinho* 1,016, ,199, % PCH Garcia* 785, ,428, % PCH Cedros* 743, ,923, % PCH Salto* 528, ,341, % * Homologatory Resolution No of 4/07/2017 ** Homologatory Resolution Nº of 22/08/2017 Net Operating Revenue The Net Operating Revenue - NOR reflected the increase in the PLD between the periods. Operating Costs and Expenses Celesc Geração S.A. Operating Costs and Expenses Δ Δ OPERATING COSTS AND EXPENSES (13.8) (7.3) -46.9% (68.1) (61.9) -9.1% Electric Energy Costs (4.4) (4.5) 0.2% (17.8) (17.6) -0.7% Electric Energy Purchased for Relase + Charge (3.9) (3.9) 0.0% (15.4) (15.3) -0.3% Electric Grid Usade (0.6) (0.6) 1.2% (2.4) (2.3) -3.4% PMSO (16.5) (2.2) -86.7% (32.0) (31.6) -1.5% Personnel and Management (4.2) (3.6) -12.7% (14.6) (16.5) 13.2% Material (0.1) (0.1) 109.4% (0.3) (0.3) -21.0% Third Parties Services (1.8) (1.8) 3.3% (7.0) (7.3) 4.0% Provisions, net (10.6) % 0.0 (6.2) -41.2% Other Income / Expenses 0.1 (0.9) % 0.4 (1.3) % Provision / Reversal Test Impairment, net % % Depreciation / Amortization (5.3) (3.7) -29.0% (36.4) (15.7) -56.7% 36

37 Operating costs and expenses decreased 46.9% (-R$ 6.4 million) to R$ 7.3 million in the quarter. Energy costs remained practically constant (a small negative variation of 0.2%), registering R$ 4.5 million in the fourth quarter of Among the energy costs, we highlight the purchase of 16 MW from a conventional source for resale (marketing), which was in force until March 31, PMSO expenses contracted 86.7% (- R$ 14.3 million), signaling R$ 2.2 million, evidencing a decrease of 12.7% in personnel expenses (- R$ 0.5 million). Of note was the provision of R$ 7.0 million in the quarter and a reversal of R$ 11.2 million, resulting in a net balance of R$ 4.3 million, resulting from PECDL adjustments related to the GSF physical guarantee between the 95% guaranteed by injunction and the GSF occurred). In 2017, operating costs and expenses contracted 9.1% (- R$ 6.2 million) amounting to R$ 61.9 million, with energy costs reduced in 0.7% and PMSO 1.5% in the year (strongly influenced by the reduction of net provisions in the year). It is worth mentioning the reduction of the reversal of provisions for loss of assets (Impairment Test) recording R$ 3.1 million in 2017 versus R$ 18 million in Equity income The table below reflects Celesc Geração's Equity in 4Q17 and in the accumulated statement of Further details of these businesses are available in Celesc Geração's Overview. Celesc Geração Equity Result R$ thousand Δ Δ Rondinha Energética S.A (379.8) % (1,151.1) % Painel Energética S.A. (3.7) (40.1) % (7.2) (65.9) % Campo Belo Energética S.A. (7.3) (1.0) -85.9% (30.6) (18.8) 38.7% Companhia Energética Rio das Flores % 1, , % Xavantina Energética S.A. (55.2) (499.9) -85.9% (917.4) (1,074.1) -17.1% Garça Branca (700.7) % (748.8) (2,066.2) % EDP Transmissão Aliança SC S.A. (7.3) (16.1) Equity Result (1,563.2) % (300.6) (3,208.5) % EBITDA and Net Profit Considering R$ 3.1 million of the reversal of allowance for impairment, which is being annually accounted, with no other effect considered as non-recurring, the Adjusted EBITDA in 2017 was R$ 96.5 million and the Adjusted EBITDA Margin of 64.8%. Celesc Geração S.A. EBITDA IFRS Conciliation Δ Δ Profit / Loss Net % % (+) Income Tax and Social Contribution (+) Financial Result (+) Depreciation and Amortization EBITDA % % (-) Non-Recurring Effects SPHs Impairment Tests - Reversal of Provisi (=) Adjusted EBITDA by Non-Recurring Effects % % EBITDA IFRS Margin 77.3% 85.5% 74.6% 66.9% Adjusted Net Margin (%) 41.2% 76.7% 60.2% 64.8% Similarly to EBITDA, adjusting Net Profit to a reversal of a provision for impairment of fixed assets, the Adjusted Net Profit in 2017 was R$ 46.9 million. 37

38 Celesc Geração S.A. / Adjustments - Net Profit / Loss Δ Δ Profit / Loss Net (IFRS Reported) % % (-) Non-Recurring Effects SPHs Impairment Tests - Reversal of Provisi (=) Profit / Loss Adjusted by Non-Recurring Effec % % Net Margin (%) 32.6% 47.1% 20.0% 32.9% Adjusted Net Margin (%) 8.8% 41.3% 10.5% 31.5% Indebtedness Celesc Geração S.A. Debt Financial Debt 4Q17 in December 31, 2016 in December 31, 2017 Δ Short-Term Debt 1,9 150,7 7776,89% Long-Term Debt 148,1 0,0-100,00% Total Debt 150,0 150,7 0,44% ( - ) Cash and Cash equivalents 18,6 77,1 314,61% Net Debt 131,4 73,6-44,00% Net Debt / EBITDA LTM 1,4x 0,7 Net Debt / Ajusted EBITDA LTM 1,7x 0,8 Total Debt / Equity 0,4x 0,4 Net Debt / Equity 0,3x 0,2 Debentures On January 28, 2016, the Company approved the issuance of 15,000 simple debentures, non-convertible in to shares, unsecured, with an additional unit trust, with a unitary nominal value of R$ 10 thousand, totaling R$ 150 million, due within 24 months from the issuance date, without a monetary restatement. Remuneration interest corresponded to 125.0% of the accumulated variation of DI's average daily rates and was paid on a quarterly basis, without a grace period, in June, September, December and March, with the first payment being made on June 3, 2016 and the last payment due on the due date. The nominal unit value of Debentures will be fully amortized on the due date, except for the anticipated settlement of the debentures resulting from the anticipated redemption, extraordinary amortization or on the date of the anticipated due date. The Debentures have a contract commitment to present the Net Debt/EBITDA ratio lower than 2.5 in the first two semesters and the Net Debt/EBITDA ratio lower than 2 in the last two semesters. The resources from Celesc Geração's debenture issuance were used to pay the second installment of hydroelectric power plants that had their concession renewed at the end of The issuance was guaranteed by the holding company Celesc. In the General Meeting of Debenture Holders, the renegotiation of the 1 st Issuance of Simple Debentures by Celesc Geração was authorized, as Notice to the Market on 03/05/2018, changing the due date to 06/01/2018. Ratings for Celesc Geração and Parent Company Fitch Ratings has assigned A + (A plus) ratings to Centrais Elétricas de Santa Catarina S.A. (Celesc) and to its wholly-owned subsidiary, Celesc Geração S.A. (Celesc G). At the same time, the agency assigned the long-term national rating 'A + (bra)' (A plus (bra)) to Celesc G's first issue of debentures in the amount of up to R$ 150 million and a two-year term. The Corporate Rating Outlook is Stable. 38

39 Investments CAPEX Investments in SPEs totaled R$ 9.9 million in 2017, of which R$ 7.8 million was invested in SPE Garça Branca and R$ 1.2 million in SPE Rio das Flores. On the other hand, investments in its own generating plant amounted to R$ 6.2 million in the year, recording R$ 2.6 million in investments in the Bracinho plant, R$ 0.8 million in the Pery plant, R$ 0.7 million in the Piraí plant, R$ 0.4 million in the Rio do Peixe plant, R$ 0.4 million in São Lourenço and R$ 0.7 million in Central Administration. Celesc Geração S.A. CAPEX Acumulado 12 Meses Δ Δ Investments Celesc Geração % % Investiments in SPEs % % Own Power Plants Generating Complex % % Total investments in 2017 amounted to R$ 16.1 million, 93.2% lower than in 2016, mainly due to the accounting in 2016 of R$ million in investments resulting from the granting of the five plants acquired in the 012/2015 auction. For the year of 2018, pursuant to the Notice to the Market released on December 14, 2017, the investment budget is R$ 59.7 million, of which R$ 13.0 million for New Businesses, R$ 19.1 million for Expansions, R$ 11.2 million for Subsidiaries and R$ 16.4 million for Improvements Regulatory Aspects of Celesc Geração S.A. Ordinance MME No. 218 from May 15, 2015 The Ministry of Mines and Energy (MME), through Ordinance No. 218/2015, determined that ANEEL promoted an Auction for bidding the concessions of several Hydropower Plants, among which 05 (five) SHPs 100% owned by Celesc Geração, for which the Company's governing bodies had decided not to adhere to the terms of the early extension of the concessions, subject to the terms and conditions established in Provisional Measure 579/2012, later converted into Act 12,783/2013. According to the sectorial regulation established by said Law, after the concession ends, the plant will be tendered in the form of revenue per tariff, established through the Annual Revenue Generation - ARG. Following the publication of Provisional Measure No. 688/2015, the economic conditions for participating in the auction became considerably more attractive, as the Annual Compensation for Plant Management - GAG-O&M, the compensation for improvements - GAG - Improvements, as well as the Return on Bonus of Concession - RBO at a real rate of 9.04% pa. In return, the Grant Bonus was required as the portion of the bid to be carried out in the auction, whose winner would be the one that offered the lowest cost annual management of generation assets, expressed in R$/year. Celesc Geração won Lot C by offering a discount of 5.21% to the limit price defined for the management of generation services for the 5 plants, added to the financial contribution of R$ 228 million as Bonus. Finally, as a result of the auction, Celesc Geração signed the Concession Agreements for Generation Service No. 006/2016 and 007/2016 on January 5, SHP Palmeiras, Bracinho, Cedros and Salto plants had concessions prior to the auction from 12/15 still in force until November 7, 2016, and from that date on, the execution of the new Concession Agreement was initiated under the Quota Allocation System for Physical Assurance and Energy. Below is a list of the plants of Lot C procured by Celesc Geração: 39

40 Own Generator Park Plants included in the MME nº 218 of 05/15/2015 Plants Location Final Term of the Concession Power Installed (MW) Physical Warranty (MW) PCH Palmeiras Rio dos Cedros/SC 11/07/ PCH Bracinho Schroeder/SC 11/07/ PCH Garcia Angelina/SC 07/07/ PCH Cedros Rio dos Cedros/SC 11/07/ PCH Salto Blumenau/SC 11/07/ Total - MW The energy generated by the plants was allocated to the quota system, which is the percentage of the Energy and Power Physical Warranty allocated to the Distributors of the National Interconnected System (NIS). The quota system was 100% of the Physical Guarantee in 2016 and 70% as of January 1, Pery SHP After several studies carried out, as well as the discussions formulated with the Ministry of Mines and Energy (MME), the prospect of a very positive operating result for the Pery Plant in the new Quota Regime (MP 579/12) was concluded. The Company decided to submit a proposal for the extension of the concession of the Pery Plant in the Quotas Regime pursuant to Art. 1 of Act no. 12,783/2013 (MP 579/2012), with the withdrawal of Special and Extraordinary Resources managed in Process No. approved on July 7, 2017, with the signature of the Addendum to the Concession Agreement, extending the concession of the Pery Plant for a further 30 years in accordance with the Notice to the Market - Extension for the Concession of the Pery Plant, 07/07/2017. Celso Ramos SHP Concession With the expansion project of 7.2MW (5.6MW to 12.8MW) approved by the Regulating Body (Aneel Office No. 115/2014), the Company sent all the necessary documentation to ANEEL, and at the 8 th REGULAR PUBLIC MEETING of the Board of Directors of ANEEL, held on March 17, 2015, obtained the authorization for the beginning of the expansion works, as well as the extension of the concession term for 20 (twenty) years, based on the provisions of paragraph 7 of art. 26 of Act 9,427/1996 (Authorizing Resolution No. 5,078). The term for the works to expand the plant ends in the year In order to legitimize such authorizations, Celesc Geração signed with ANEEL the Second Addendum to the Concession Agreement No. 006/2013. Physical Warranty Adjustment Factor GSF Celesc Geração filed an Ordinary Judicial Action against the Federal Government and ANEEL requesting it to determine to CCEE the revision of the ERM calculation method, as well as to guarantee the energy supply equivalent to the physical guarantee - FG. Upon requesting an early protection, Celesc G required: i) that ANEEL determines that CCEE monthly allocates to the author an amount of energy equivalent to 100% of the Physical Guarantee; ii) if item i) is not granted, it guarantees to the author the energy equivalent to 95% of the Physical Guarantee; iii) or alternatively, an amount of electricity equivalent to what would be the total ERM generation in case there was no physical guarantee. It also required that items (i), (ii) or (iii), mentioned above, are preemptively secured until the final and unappealable decision. In summary, Celesc Geração seeks to suspend the registration of costs incurred by hydroelectric generators, resulting from the application of the Generation Scaling Factor - GSF 8, given that the frustration of hydroelectric generation in the current scenario stems both from structural and cyclical orders. The GSF represents an index that expresses the ratio between the sum of all the energy produced by the hydroelectric plants that are part of the Energy Reallocation Mechanism (ERM) and the sum of the plants' physical guarantees. Between 2005 and 2012, the annual 8 It is the division between the total generated energy and the sum of the physical guarantees of the plants participating in the ERM. This factor is applied to the physical guarantee of all the plants, resulting in the so-called "adjusted physical warranty. 40

41 GSF of the ERM was always above 100%, not burdening the hydroelectric generators. As of 2013, this scenario began to reverse, worsening severely in 2014 (90.6%), 2015 (84.7%), 2016 (86.8%) and 2017 (79.5%) when it was below 100% throughout the year. The GSF below 100% imposed on generators an adjustment in their physical guarantee under the ERM, which falls short of the amount of their energy trading contracts and which obliges generators to acquire the deficit energy at the free market price. In this context, the company is currently carrying out a strategic analysis regarding the action in the case, as well as an assessment of the market operations, in order to anticipate measures, if necessary. 2.3 SCGÁS Operational Performance The expansion in the gas volume sold was mainly due to the: i. An increase of 11.2% (+13,923k m³) in the industrial class, as the class concentrates 83.6% of the gas consumed, reflecting the improvement of the economic situation in the concession area; ii. As an increase of 14.8% (+3,243k m³) in the automotive segment, this class represents 14.1% of the total gas consumed; and iii. Increase of 8.8% (+29k m³) in the residential segment. SCGÁS S.A. Gas Sales per Segment Volume (thousand m3) Δ Δ Industrial 124, , % 514, , % Automotive (NGV) 21,940 25, % 85,520 92, % Commercial 1,381 1, % 6,143 5, % Residential % 1,301 1, % Compressed Gas (CNG) 1,935 1, % 8,017 7, % Industrial Cogeneration Commercial Cogeneration 6 27 Total 150, , % 615, , % Volume de Gás Vendido (MM m 3 ) Q16 4Q17 Below, in the graph, is the representation of each segment of consumption in the volume of sales in the quarter:

42 2.3.2 Economic-Financial Performance SCGÁS S.A. Main Financial Indicators R$ Milhões Δ Δ Gross Operating Revenue % % Deductions from Operating Revenue (39.6) (37.6) -4.9% (174.9) (140.8) -19.5% Net Operating Revenue % % Operating Costs and Expenses (135.6) (137.6) 1.4% (444.3) (526.8) 18.6% Results of Activities 3.9 (8.2) % (43.4) % EBITDA 7.4 (8.7) % (41.1) % Adjusted EBITDA Margin * (%) 5.5% -6.7% 32.2% -8.5% Financial Result 1.7 (0.2) % % IR/CSLL (7.9) (5.3) Net Profit / Loss 6.3 (10.3) % (46.1) % Net Margin Adjusted* (%) 4.7% -8.0% 19.0% -9.5% * Adjusted Margins, because they exclude Construction Revenue. The decrease of 7.3% in net operating revenue in the quarter (23.4% in 2017) is a reflection of several factors, among which the following ones stand out: i. Average reduction of 17.1% in the tariff that became effective as of July 2016, as per ARESC Resolution No. 062/2016; ii. Average reduction of 24% in tariff as of January 2017, according to ARESC Resolution No. 075/2016 (return of the positive tariff effect in 2016 by the of Gas and Transportation Pricing Readjustment Ratio - IRPGT); iii. Operating costs and expenses increased 1.4% (+ R$ 1.9 million) in the quarter and 18.6% (+ R$ 82.3 million) in the year, highlighting the variable cost (Gas purchase), which increased by 43.5% (+ R$ 36.4 million) in the quarter and 45.1% (+ R$ million) in the year, impact of exchange rate variation and the international oil basket; iv. Negative variation of 120.9% and 139.7% in EBITDA and Net Income respectively at the end of 2017, resulting from the adjustment of the IRPGT applied in the calculation of the Graph Account. It should be noted that the Graphic Account is a regulatory tool in which the differences - related to gas and transportation prices - are recorded and accumulated between the prices billed by the suppliers to the Concessionaire, according to the Supply Contracts, and those contained in the supply tariffs applied to invoices. 42

43 (20.00) (40.00) (60.00) -140% 264% 30.0% 10.0% -10.0% -30.0% -50.0% -70.0% -90.0% % % % ARESC Resolution No. 094 from December 2017 authorizes the repassing of the recovery portion and updating of the gas price, which means IRPGT (Gas and Transport Pricing Readjustment Ratio) of -9% (Graphical Account update), transferred to the tariff as of January 1, Investments The investments made in the fourth quarter of 2017 were mainly intended to the expansion of the natural gas distribution network, as shown in the table and graph below: SCGÁS S.A. CAPEX Δ Δ Distribution Grid % % Expansion % % Expenses Management Projects % % Basic Projects % % Other % % Total % % 43

44 44

45 % 35% 30% 25% 20% 15% 10% 5% 0% 110% 10% 90% 80% 70% 60% 50% 40% 30% 20% 10% (5) (15) (25) (35) % 15% 10% 5% 0% -5% -10% 10% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Income Statement Other Interests (financial data equivalent to 100% of the income of each investee) 80% 60% 40% 20% 0% 45

46 3 Holding 3.1 Income of the Company's interest in the Parent Company Holding Equity Result Δ Δ Celesc Distribuição (100%) 9.1 (10.3) % (52.5) % Celesc Geração (100%) % % SCGÁS (17%) 1.1 (1.7) % 19.7 (7.8) % ECTE (30,9%) % % DFESA (23%) % % Equity Result % % 3.2 Dividends The Management proposes to distribute to the shareholders the amount of R$ 18.9 million (pay-out of 30%) referring to the fiscal year of Proposed proceeds are R$ per ordinary share (CLSC3) and R$ per preferred share (CLSC4), thus becoming former dividends on April 30, Since 2009, the company has implemented a pay-out (percentage of net income) equal to 30%, five percentage points (5 pp) above the statutory minimum, following the current dividend distribution policy approved in its Master Plan. The chart below shows the provision history, as well as the dividend-yield provided to the Company's preferred shares CLSC4 holders. 46

47 4 Consolidated Income 4.1 Consolidated Economic-Financial Performance Consolidated Main Financial Indicators Δ Δ Gross Operating Revenue 2, , % 10, , % Deductions from Operating Revenue (1,035.7) (1,195.0) 15.4% (4,377.4) (4,377.8) 0.0% Net Revenue 1, , % 6, , % Operating Costs and Expenses (1,582.3) (1,937.5) 22.4% (6,055.4) (6,795.6) 12.2% Equity Result % % Operating Results % % EBITDA % % Adjusted EBITDA Margin, Ex-Construction Revenue (%) 11.1% 4.8% 5.8% 7.9% Financial Result (92.4) (1.9) -97.9% (120.3) (149.0) 23.9% LAIR % (26.6) % Tax and Social Contribution (6.8) (26.5) % 16.7 (89.7) % Net Profit / Losses % (9.8) % Adjusted Net Margin, Ex-Construction Revenue (%) 1.2% 0.3% -0.2% 1.0% Depreciation /Amortization (54.6) (54.9) 0.6% (235.6) (218.0) -7.4% Costruction Costs % % Among the factors that contributed to NOR expansion in the quarter and in the year, the following stand out: i. A 21.9% increase in the quarter in energy supply revenue for the subsidiary Celesc D; ii. R$ million increase in the quarter and R$ million of Revenue in the year, with the provision of tariff flags; iii. Addition of R$ million in the year for Regulatory Assets of the subsidiary Celesc D, as detailed in the respective topic; iv. Positive performance of the subsidiary Celesc Geração, as addressed in the respective topic; Applying adjustments of the non-recurring effects to the EBITDA and IFRS Net Income of the subsidiaries Celesc D and G, there was an annual increase of 6.3% and 33.5% in EBITDA and Adjusted Net Income respectively. Consolidated Adjusted Result* Δ Δ Adjusted EBITDA % % 201 Adjusted EBITDA Margin, excluding Construction Revenue (%) 10.3% 7.2% 9.0% 8.2% Adjusted Net Profit / Loss % % Adjusted Net Margin, Ex-Construction Revenue (%) 0.7% 1.1% 2.3% 2.7% * IFRS + Regulatory Assets and Liabilities - Non-Recurring itens. Gross Operating Revenue - ROB and Interest in Consolidated EBITDA ROB is composed mainly of revenues from electricity distribution activities. The graphs below indicate, respectively, the interest in Gross Revenue, EBITDA IFRS and Adjusted by company. 47

48 Consolidated Net Operating Revenue The graph below shows the development of NOR, disregarding the effects of construction revenue. 201 Consolidated Operating Costs and Expenses Consolidated Operating Costs and Expenses Δ Δ OPERATING COSTS AND EXPENSES (1,582.3) (1,937.5) 22.4% (6,055.4) (6,795.6) 12.2% Electric Energy Costs (1,148.7) (1,384.8) 20.5% (4,502.1) (5,044.9) 12.1% Electric Energy purchased for Relase (1,148.7) (1,384.8) 20.5% (4,502.1) (5,044.9) 12.1% PMSO (302.6) (407.5) 34.7% (930.5) (1,036.9) 11.4% Personnel and Management (218.7) (278.5) 27.3% (676.2) (781.5) 15.6% Material (5.7) (4.4) -22.4% (19.7) (16.2) -17.6% Third Parties Services (53.8) (54.1) 0.6% (194.6) (190.1) -2.3% Other Expenses (24.5) (70.4) 188.0% (40.0) (49.0) 22.4% Net provisions % 24.6 (54.8) % Depreciation / Amortization (54.6) (54.9) 0.6% (235.6) (218.0) -7.4% Costruction Costs (128.7) (138.9) 7.9% (411.8) (441.0) 7.1% Details of the main variations can be found in the topics of Celesc Distribuição and Celesc Geração. The following table sets forth the total expense with Personnel in consolidated terms, also detailed in the topics of distribution and generation companies. Consolidated Personnel Expenses Δ Δ Personnel - Total (218.7) (278.5) 27.3% (676.2) (781.5) 15.6% Personnel and Management (194.8) (260.4) 33.7% (604.6) (708.5) 17.2% Personnel and Management (185.1) (250.0) 35.0% (575.5) (677.7) 17.7% Private Pension (9.6) (10.5) 8.5% (29.1) (30.8) 5.8% Actuarial Expenses (24.0) (18.1) -24.5% (71.6) (73.0) 2.0% 48

49 Equity Income The table below shows the impact on Celesc Group's Consolidated Income, regarding the results of SCGÁS, ECTE, Dona Francisca Energética - DFESA and the SPEs in which Celesc Geração holds a minority interest, previously mentioned. The information regarding SCGás was presented in the respective topic. Consolidated Equity Result Δ Δ SCGÁS (17%) 1.1 (1.7) % 19.7 (7.8) % ECTE (30,9%) % % DFESA (23%) % % SPEs - Celesc Geração 0.6 (1.6) % (0.3) (3.2) 966.1% Equity Result % % EBITDA and Adjusted EBITDA IFRS EBITDA Consolidated + Regulatory Assets and Liabilities - Non-Recurring Δ Δ Profit / Loss Net % (9.8) % (+) Income Tax and Social Contribution (6.8) (26.5) % 16.7 (89.7) % (+) Financial Result (92.4) (1.9) -97.9% (120.3) (149.0) 23.9% (+) Depreciation and Amortization (54.6) (54.9) -0.6% (235.6) (218.0) -7.4% EBITDA % % Celesc Distribuicao Non-Recurring Effects 0.0 (47.0) (202.2) (25.5) Celesc Geração SHPs Impairment Test (=) Adjusted EBITDA by Non-Recurring Effects % % EBITDA Margin without Adjustments (IFRS) 11.1% 4.8% 5.8% 7.9% Adjusted EBITDA Margin, excluding Construction Revenue (%) 10.3% 7.2% 9.0% 8.2% 49

50 Financial Income Consolidated Financial Results Statement Δ Δ Financial Income % % Income from Financial Investments % % Monetary Variations % % Moratorium Interest and Accruals % % Exchange Variation Energy Purchased Regulatory Asset / Regulatory Fees % % Income from Dividends % Financial Revenue - VNR (7.2) % Other Financial Income (3.5) % (11.1) % Financial Expenses (162.1) (66.8) -58.8% (487.9) (446.3) -8.5% Debt Charges (21.6) (13.9) 35.7% (123.8) (66.4) 46.3% Monetary Variations (5.5) (3.3) 38.9% (21.1) (10.4) 50.9% Regulatory Liability / Regulatory Fees 0.0 (29.4) 0.0 (275.1) Update P&D and Energy Efficiency (7.5) (4.3) 42.3% (31.0) (23.1) 25.6% Interest and costs on Debentures (17.3) (10.9) 36.7% (98.8) (46.6) 52.8% Other Financial Expenses (110.3) (4.9) 95.6% (213.2) (24.8) 88.4% Resultado Financeiro Líquido (92.4) (1.9) 97.9% (120.3) (149.0) 23.9% ** VNR revenue was reclassified to Gross Revenue as Other Income item as of 4Q16. It should be noted that in the income statement of 2017, R$ was recorded in the 2Q17 at the financial expenses related to the EDA update for Celesc Distribuição. Consolidated Net Profit NET PROFIT IFRS + Regulatory Assets/Liabilities - Non-Recurring Effects Δ Δ Net Income / Loss - Reported IFRS % (9.8) % (+) Celesc Distribuição Effects on Regulatory Assets and Liabilities (=) Profit / Loss Adjusted by Assets / Regulatory Liabilities % (9.8) % (-) Celesc Distribuição Non-Recurring Effects 0.0 (17.2) (154.3) (112.4) (-) Celesc Geração SHPs Impairment Test (=) Adjusted Net Income % % Net Margin without Adjustments (IFRS) 1.2% 0.3% -0.2% 1.0% Adjusted Net Margin, excluding Construction Revenue (%) 0.7% 1.1% 2.3% 2.7% Indebtedness It reflects the operations already presented to the subsidiaries Celesc Distribuição and Celesc Geração. Consolidated Debt Financial Debt 4Q17 in December in December 31, , 2017 Δ Short-Term Debt % Long-Term Debt % Total Debt % ( - ) Cash and Cash equivalents % Net Debt (129.7) (81.9) -36.8% Net Debt / EBITDA LTM -0.4x -0.2x Net Debt / Ajusted EBITDA LTM -0.3x -0.2x Net Debt / Equity -0.1x 0.0x 50

51 The table below shows the Pension Obligations (actuarial liability). Consolidated Debt + Post-Employment Benefits Financial Debt + Post-Employment Benefits 4Q17 in December in December 31, , 2017 Δ Short-Term Debt % Long-Term Debt % Total Financial Debt % (+) Net Actuarial Liability 1, , % Pension Obligations , % Other benefits % ( - ) deferred tax¹ % ( - ) Cash and Cash equivalents % Adjusted Net Debt 1, ,5 20.0% Adjusted Net Debt / EBITDA LTM 3.2x 2.5x Adjusted Net Debt / Ajusted EBITDA LTM 2.1x 2.4x Adjusted Total Debt / Equity 1.0x 1.0x Adjusted Net Debt / Equity 0.5x 0.7x ¹ ITR 4Q17, Explanatory Note 20.a Ratings for Centrais Elétricas de Santa Catarina S.A. CELESC Moody's in February 2017 assigned B1 issuer ratings on a global scale and Baa1.br on a national scale to the parent company of the Celesc Group. Group Investments Celesc Investments Made in the Period 3.3% Δ Δ Electric Power Generation % % Electric Power Distribution % % Total % % For the year 2018, according to the Notice to the Market from 12/14/2017, the consolidated investment budget totals R$ million, of which R$ million in Electric Energy Distribution, R$ 59.8 million in Electric Power Generation and R$ 8 million in New Businesses. 5 Performance in the Capital Markets Celesc shares are traded on B3 under the CLSC3 codes (15,527,137 common shares - ON, 40.26%) and CLSC4 (23,044,454 preferred shares - PN, 59.74%). Since joining Level 2 of Corporate Governance in 2002, the company has joined IGC and ITAG, which are indexes made up of companies that offer transparency and protection to minority shareholders. In 2018, the company also became part of the Corporate Sustainability Index portfolio (CSI). The main Brazilian Stock Exchange ratio, Ibovespa, showed a positive return of 2.84% in the quarter and 26.86% in the accumulated index of the year. The Electric Energy Index (EEI), which measures the behavior of the main shares of the electricity sector, showed a negative valuation of 3.81% in the quarter and a positive variation of 10.04% in the last twelve months. Given this scenario, the Company's Preferred Shares - PN recorded a positive performance of 26.10% in the quarter and a valuation of 70.55% in the year. 51

52 Monitoring CLSC4 4Q16 4Q16 2Q16 3Q17 4Q17 Closing Price (R$/share) Price / Earnings 53,8x 56,4x 53,8x 55,4x 47,7x Price / Book Value 0,3x 0,3x 0,3x 0,4X 0,5X Average Traded Volume (Thousand shares) Average Traded Volume (R$ Thousand) Market Cap () Market Cap (US$ Million) Profitability (%) Profitability last 12 months (%) Profitability Ibovespa (%) Profitability Ibovespa last 12 months (%) Profitability IEE (%) Profitability IEE last 12 months (%) Source: Economática The chart below shows the CLSC4 performance against Ibovespa and EEI in recent years: 52