ISA CTEEP REPORTS STRONG CASH GENERATION IN THE QUARTER

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2 ISA CTEEP REPORTS STRONG CASH GENERATION IN THE QUARTER Message from the Management The first quarter of 2018 was characterized by the Company s strong cash generation. The regulatory operational net revenue totaled R$ 732 million, the regulatory adjusted EBITDA was R$ 684 million with a margin of 93.4%, and the regulatory net income amounted to R$ 305 million. ISA CTEEP monitors its business based on the following pillars of management: Operations and Maintenance, Projects, Subsidiaries, Regulation, Legal and Growth. The management pillars are based on a business strategy that seeks sustainability. The Company has been reporting levels of excellence in each one of these pillars. In Operations and Maintenance, the goal is to develop activities with efficiency, quality and safety. In 1Q18, efficiency levels, which for many years has made ISA CTEEP a benchmark in the electric energy sector, were maintained. The Company is an industry leader in the development of Projects and electric energy infrastructure in all of Brazil. In 1Q18, investments in reinforcements and improvements totaled R$ 18 million. The portfolio of projects in 1Q18 was smaller, although in line with the Company s estimates. Efforts have been directed towards reaching consistently high levels of profitability in the quest for sustainable growth. The management of Subsidiaries prioritizes integration and the strengthening of the corporate governance model, which aims to align policies, processes, systems and practices, in addition to promoting greater control and financial discipline. The regulatory equity income result for the quarter was R$ 19 million. The goal in actively participating in discussions about the sector s Regulation consists in ensuring economic-financial equilibrium of the concession agreements, based on the binomial of encouraging a competitive business environment and providing benefits to society. This focus in 2018 is concentrated on the process of the tariff revision, seeking fair amounts for the RAP (Annual Allowed Revenue) value for Operations and Maintenance, as well as the WACC (Weighted Average Cost of Capital) for projects and the BRR (Regulatory Remuneration Base) so that the companies have the necessary conditions to continue investing and maintaining the quality of their operations. Another factor in discussion is the definition of the payment deadline and correction index of the financial component of the RBSE. In May, the maintenance of an 8 year payment deadline was maintained in the proposal of Eletrobras privatization bill, as well as the substitution of the correction index from the cost of capital (Ke) to WACC. In regards to Legal affairs, the Company has been successful in obtaining rulings in its favor, which reforce its focus in the reduction of contingencies. In 1Q18, ISA CTEEP was excluded from the Eletrobras / Eletropaulo lawsuit when the arbitrated agreement between the two companies was approved. With regards to the Growth pillar, the Company is working on 8 new operations obtained in successful auction bids. In 1Q18, R$ 72 million was invested in these new subsidiaries. These projects represent a commitment to invest approximately R$ 2.5 billion in the Brazilian electric system, a growth of about 35% in the Company s asset base, which is equivalent to an expansion of 80% of the current RAP. As part of this growth strategy, in April, the Company announced the acquisition of the remaining stake still not in its control of IESUL for the amount of R$ 20 million. Connections that inspire the ISA CTEEP team and generate value over time. The Management 2

3 São Paulo, May 15, 2018 ISA CTEEP - Companhia de Transmissão de Energia Elétrica Paulista ( ISA CTEEP, Company, B3: TRPL3 and TRPL4), announces its results for the first quarter of The Regulatory Results are shown in accordance with the accounting practices adopted in Brazil with the purpose of assisting with the understanding of the Company s business. Additionally, the information has been prepared in accordance with Brazilian Securities and Exchange Commission (CVM) standards and the applicable Accounting Statements Committee (CPC) and in accordance with international accounting standards (IFRS) issued by the International Accounting Standard Board (IASB) in the Attachments section of this document. Main Regulatory Indicators Consolidated (BRL million) 1Q18 1Q17 Net Revenue Adjusted EBITDA¹ Chg (%) 173.6% 214.6% Adjusted EBITDA Margin 93.4% 81.2% 12.2 b.p. Net Income % Net Margin 41.7% 34.6% 7.1 b.p. ROE² 11.0% 3.6% 7.4 b.p. *Excludes equity income and other non recurring effects and includes the Affiliate's EBITDA with the objective of presenting a more adequate vision of the Company's cash generation. ² Considers the amount value of the last 12 months 1Q18 Conference Call :00 a.m. (BRT) / 10:00 a.m. (EDT) Connection Data: Brazil: / Other Countries: / Password: ISACTEEP Link for webcast available on Investor Relations website: Investor Relations Contacts Rinaldo Pecchio Phone number: Michelle Lourenço Corda Lúcia de Luiz Cesari Gabriela Rigo Bussotti Marcos Augusto Alves de Oliveira ri@cteep.com.br 3

4 Summary 1. ISA CTEEP 1.1 ISA CTEEP Shareholder Composition Corporate Structure Growth & Innovation 7 2. Operational Peformance 8 3. Financial Performance Operational Revenue O&M Costs and Expenses Equity Income EBITDA and Margin Financial Results Net Income Comparison of Results (Regulatory vs. IFRS) Proceeds Debt Investments Capital Market Other Relevant Information Concession Renewal - Contract 059/2001 (RBNI/RBSE) Main Legal Cases Supplementary Retirement Plan Law 4.819/ Collection Lawsuit: Eletrobrás against Eletropaulo and EPTE Attachments 22 * Results in Excel spreadsheet available on the Investor Relations Website 4

5 ISA CTEEP ISA CTEEP is the largest private company in the Brazilian electricity sector and is part of the National Interconnected System ( SIN ) which incorporates the Brazilian electricity grid as a whole (with the exception of some isolated systems) and serves approximately 99% of the system s total load. Through its activities and its wholly and jointly-owned subsidiaries, ISA CTEEP is present in 17 states in the country, transmitting approximately 25% of all electricity produced in Brazil, 60% of the energy consumed in the Southeast Region and nearly 100% of the energy in the State of São Paulo. The coordination and control of the Company s installations operations and all of SIN s electric generation and transmission installations is the responsibility of the National Electric Energy System Operator ( ONS ), subject to the inspection and regulation of the National Electric Energy Agency ( ANEEL ). The Company s robust infrastructure and that of its subsidiaries accounts for an installed transformation capacity of 65,060 MVA, 18,642 kilometers of transmission lines, 25,795 kilometers of circuits and 126 substations of up to 550 kv. In the light of an increasingly demanding market and its position in a major consuming center of the country as a whole, over the past 10 years, the Company has invested about R$ 10 billion in the expansion of the system and in the application of technologies which are capable of adding value to the operating and maintenance activities, guaranteeing efficiency and quality in the rendering of its transmission services. Transmission Lines (TL) In operation Under construction Substation Line Entrance 5

6 Shareholder Composition Controlled by ISA, a multi-latin linear infrastructure systems company, ISA CTEEP has among its investors Eletrobras, the largest Brazilian electric energy group. Shareholders TRPL3 % TRPL4 % Total % ISA Capital do Brasil 57,714, % 1,286, % 59,000, % Free Float 6,770, % 98,950, % 105,720, % Eletrobras 6,289, % 52,005, % 58,295, % Others 480, % 46,944, % 47,425, % Total 64,484, % 100,236, % 164,720, % Of the Company s shares, 50% are in the hands of domestic investors* and 50%, foreign investors. Distribution of Total Capital on 03/31/2018 Europe 6% Norway: 2% of the Float Luxembourg: 2% of the Float Great Britan: 1% of the Float France: 1% of the Float United States of America 5% Singapore 2% Colombia* 36% Brazil 50% Australia 1% * Considers the stake of Isa Capital do Brasil, an investment vehicle of ISA Colombia for the acquisition of ISA CTEEP. 6

7 Corporate Structure ISA CTEEP s corporate structure includes its wholly- and jointly-owned subsidiaries as shown below: Operation Status Location RAP Cycle 2017/ (R$ million) RAP ISA CTEEP Cycle 2017/2018 (R$ million) Share (%) Consolidation ISA CTEEP Operational São Paulo (SP) 2, ,536.7 ISA CTEEP 100% Fully consolidated IE Madeira Operational Rondônia / SP ISA CTEEP 51% / Furnas 24.5% / Chesf 24.5% Equity method ERBI Under construction Paraná ISA CTEEP 50% / TAESA 50% Equity method Paraguaçu Under construction Bahia / MG ISA CTEEP 50% / TAESA 50% Equity method IE Garanhuns Operational Pernambuco ISA CTEEP 51% / Chesf 49% Equity method Aimorés Under construction Minas Gerais ISA CTEEP 50% / TAESA 50% Equity method IE Pinheiros Operational São Paulo ISA CTEEP 100% Fully consolidated Serra do Japi Operational São Paulo ISA CTEEP 100% Fully consolidated IE Aguapeí Under construction São Paulo ISA CTEEP 100% Fully consolidated Itaúnas Under construction Espírito Santo ISA CTEEP 100% Fully consolidated IE Itaquerê Under construction São Paulo ISA CTEEP 100% Fully consolidated IENNE Operational Tocantins ISA CTEEP 100% Fully consolidated IE Tibagi Under construction SP / Paraná ISA CTEEP 100% Fully consolidated IE Sul² Operational Rio Grande do Sul ISA CTEEP 100% 2 Equity method IEMG Operational Minas Gerais ISA CTEEP 100% Fully consolidated Evrecy Operational Espírito Santo ISA CTEEP 100% Fully consolidated IE Itapura Under construction São Paulo ISA CTEEP 100% Fully consolidated Total 3,985 3,429 ¹ RAP considers 100% of the project value ² Celebration of Purchase Agreement to acquire 50% of Share Capital in April/2018. The closing of the deal is subject to approvals. Growth & Innovation In an environment of rapid transformation of the electric sector, innovation is a decisive factor for success. That is why the Company continues to make improvements in processes and absorbing new technological resources, as well as identifying opportunities in new businesses. One of the growth fronts being evaluated by the Company is energy storage in batteries. In partnership with the University of São Paulo, we are studying the possibility of implementing energy storage with the potential for developing complementary forms of operations in our network. In addition, ISA CTEEP is constantly evaluating growth opportunities in the market, having recently made significant advances in this rhelm. The Company s strategy consists in expanding its presence in national territory through auctions or acquisitions. In the past two years, the Company successfully bid eight lots in ANEEL s transmission auctions, that will add a further 1.2 thousand kilometers of transmission lines and 6.0 thousand MVA of capacity to its portfolio. The new projects account for a CapEx of R$ 2.5 billion, resulting in an estimated increase in RAP of approximately R$ 400 million once all assets are operational. In accordance with its growth strategy, in October of 2017, the Company also acquired, for the sum amount of R$ 101 million, 75% of the capital stock of Interligação Norte e Nordeste ( IENNE ), securing 100% of the subsidiary s control. Additionally, in accordance with the Material Fact published on April 6 th, 2018, ISA CTEEP signed a Share Purchase Agreement with Cymi Construções e Participações S.A. ( CYMI ) to acquire 50% of the capital stock in Interligação Elétrica Sul A.A. ( IE SUL ) for R$ 20 million. The finalization of the acquisition is still subject to the approval and agreement of specific third parties. Once that is completed, the Company will hold full control of this subsidiary. The evolution of the 8 new SPE s, acquired at the auctions held over the past two years, is shown in the following table with the estimated progress for each stage of construction. The investments in the pre-operational subsidiaries are in line with the challenging estimated budget and schedule, which considers a 15% reduction in CapEx and a 12-month anticipation of entry into operation. 7

8 Auctions Subsidiiaries % ISA CTEEP Location Investment ANEEL² (BRL MM) RAP (BRL MM) Profit Regime 12/31/2017 Contract signature Implementation Deadline ANEEL Environmental License (LI) Basic Project Protocol REIDI Authorization Debentures Authorization IE Paraguaçú (Lot 3) 50% Bahia Minas Gerais Presumed Profit 02/10/17 60 months 3Q19 Auction 03/ /28/2016¹ IE Aimorés (Lot 4) 50% Minas Gerais Presumed Profit 02/10/17 60 months 3Q19 IE Itaúnas (Lot 21) 100% Espírito Santo Real Profit 02/10/17 60 months 3Q18 ERB (Lot 1) 50% Paraná 1, Presumed Profit 08/11/17 60 months 1Q20 1Q18 IE Tibagi (Lot 5) 100% São Paulo Paraná Real Profit 08/11/17 48 months 4Q18 1Q18 Auction 05/ /24/2017 IE Itaquerê (Lot 6) 100% São Paulo Real Profit 08/11/17 48 months 1Q18 IE Itapura (Lot 25) 100% São Paulo Real Profit 08/11/17 42 months IE Aguapeí (Lot 29) 100% São Paulo Real Profit 08/11/17 48 months 1Q19 2Q18 1Q18 Total 4, ¹ RAP considers inflation adjustement of cycle 2017/2018 according to REH-ANEEL 2,258/2017, of 06/27/2017 ² Considers ANEEL investment for 100% of the project on the date of the auction OPERATIONAL PERFORMANCE ISA CTEEP is a benchmark in the sector in terms of performance and constantly pursues improved levels of efficiency, closely tracking its operational indicators. Among these, of particular importance is the Index of Not Supplied Energy (EENS), obtained by the percentage between the total amount of energy that was not supplied during all of the events in the year and the total amount of demanded energy that was supplied by the Company. In 1Q18, IENS amounted to 4.66 x10-6. ISA CTEEP is remunerated according to the availability of its assets through the Annual Allowed Revenue (RAP). This means that any downtime involving its assets may incur in a loss of RAP, by means of a discount in the verified revenue (Variable Parcel PV). 8

9 FINANCIAL PERFORMANCE (Regulatory Results) Operational Revenue In 1Q18, the consolidated gross operational revenue reached R$ million, an increase of 168.0% in relation to 1Q17. This increase mainly reflects the receipt of the RBSE concession reimbursement in 1Q18 (R$ million). The increase in the gross revenue is also justified by the increase in revenue from O&M (+4.1%) as a result of the adjustment of the RAP cycle from the variation of the IPCA inflation index, the consolidation of IENNE and the entry into operation of new investments in reinforcements and improvements (+36.9%). Operational Revenue Consolidated (BRL million) 1Q18 1Q17 Chg (%) Availability of Electric Network % O&M % NI % RBSE Others (6.7%) Gross Revenue % Deductions (102.3) (43.9) 133.2% Net Revenue % The deductions from the gross revenue relates to taxes (PIS/COFINS) and regulatory charges (CDE, RGR, P&D, PROINFA and Inspection Fee) and reached R$ million in 1Q18, an increase of 133.2%, mainly due to the increase in PIS and COFINS of R$ 45.7 million regarding the RAP from the RBSE concession reimbursement in the quarter. The consolidated net operational revenue for 1Q18 was R$ million. + R$ 523 million , Q17 Gross Revenue O&M RBSE NI Anticipation & PV CDE/ PROINFA RAP IENNE Gross Revenue 1Q18 Deductions Net Revenue 1Q18 9

10 O&M Costs and Expenses Costs and expenses, ex-depreciation, recorded a decline of 5.4% in 1Q18 vs. 1Q17. This reduction is explained by the non-recurring impact of a tax compensation. Excluding this effect, costs and expenses would have reported an increase of 4% vs. an inflation of 2.7% in the period, explained by the lower capitalization of personnel costs in the projects (R$ 1 million, recurring while the Company is focused on growth) and higher expenses with fees (R$ 2 million, of which R$ 1 million is non-recurring). Costs and Expenses (BRL millions) 1Q18 Consolidated 1Q17 Chg (%) Personnel (77.7) (75.6) 2.8% Material (3.0) (2.4) 25.2% Services (27.4) (23.7) 15.6% Contingencies (1.9) (2.8) -32.3% Others (3.9) (15.9) -75.6% Sub Total (113.8) (120.3) -5.4% Depreciation (145.8) (16.3) 792.7% Total (259.7) (136.6) 90.0% The variation in costs and expenses mainly reflects: (i) a decline in the line of others, impacted by the non-recurring reimbursement of R$ 10.9 million of IPTU (municipal property tax) from the municipality of São José dos Campos, due to the negotiation of the rate applied in the years of 2007 and 2008 by the city government; partially offset by: (ii) an increase in the line of services of R$ 3.7 million due to a raise in expenses with lawyers fees (nonrecurring); and (iii) an increase in expenditures with personnel in line with the period s inflation and with reduced capitalization of personnel costs in the projects. The total administrative and O&M costs in 1Q18 reported an increase of 90.0% when compared to 1Q17, reaching R$ million, mainly due to the recognition of R$ million of depreciation relative to the RBSE concession reimbursement, which considers an amortization in 96 parcels (8 years) of the depreciation amount held back between January 2013 and June

11 Equity Income Equity income for 1Q18 reported a revenue of R$ 19.3 million, an increase of R$ 1.8 million when compared to 1Q17, when this item reported a revenue of R$ 17.5 million. The variation in the result for the IE Madeira subsidiary arises mainly from the increase in net revenue due to IPCA variation for the RAP 2017/2018 cycle and the reduction in costs and expenses. The decline in results from the IE Garanhuns subsidiary reflects the reduction in net revenue due to the negative impact of the tariff revision, which altered the WACC from 6.61% to 4.62%, reducing the RAP by 9%. The registered amount for the Aimorés, Paraguaçú and ERB1 subsidiaries are related to administrative expenses at the pre-operational phase of the projects % Q Q18 IE Madeira IE Madeira IE Garanhuns IE Garanhuns IENNE/IESUL IENNE/IESUL Aimorés/Paraguaçú/ERB Aimorés/Paraguaçú/ERB

12 EBITDA and Margin In accordance with ICVM 527/12, the consolidated EBITDA reached R$ million in 1Q18, an increase of R$ million compared to the EBITDA registered in 1Q17, mainly due to the receipt of the RBSE concession reimbursement. To reflect more adequately the operational cash generation, the Company is presenting an adjusted EBITDA totaling R$ million in 1Q18 with a margin of 93.4%. The adjusted EBITDA excludes equity income and other non-recurring and/or non-cash effects as well as includes the EBITDA of the jointly held subsidiaries (weighted by ISA CTEEP s stake). EBITDA Consolidated (BRL million) 1Q18 1Q17 Chg (%) Net income (losses) % Income and Social Contribution Taxes (tax over income) Net financial result Depreciation and amortization EBITDA ICVM 527/ Affiliates EBITDA (weighted by ISA CTEEP's share) Equity Income (19.3) (17.5) Others¹ (9.8) 0.8 Adjusted EBITDA % 20.6% 764.3% 288.9% 1.8% 10.7% % 214.6% Adjusted EBITDA Margin 93.4% 81.2% 12.2 p.p. RBSE (448.4) 0.0 Adjusted EBITDA Ex-RBSE % Adjusted EBITDA Ex-RBSE Margin 83.0% 81.2% 1.7 p.p. ¹ includes tax compensation (from "IPTU"), expenses with auctions and contingencies success fees 12

13 Financial Results The consolidated financial result reached an expense of R$ 35.3 million in 1Q18, an increase of R$ 6.0 million when compared to 1Q17, explained mainly: (i) by the increase in monetary variations and interest and charges on loans, due to the Company s higher debt level that went from R$ 1.3 billion in 1Q17 to R$ 1.9 billion in 1Q18 and the consolidation of IENNE in the balance sheet; (ii) by the hedge operation regarding the loan under Law 4131, partially offset by a reduction in interest on tax installments (REFIS) under the PERT tax amnesty program in 3Q17. Financial Result Consolildated (BRL million) 1Q18 1Q17 Var (%) Financial investment income % Monetary net variations (9.6) (7.8) 23.1% Interest costs (0.6) (6.0) (90.3%) Interest and charges on loans (31.7) (25.2) 26.0% Swap operation (4.2) Others (0.1) (0.6) (83.1%) Total (35.3) (29.3) 20.6% Net Income The increase in the net income in 1Q18 was boosted by the receipt of the RBSE concession reimbursement (R$ 216 million). +228% Q17 1Q18 13

14 Comparison of Results (Regulatory vs. IFRS) In IFRS, investments will be received over the course of the concession and are registered as a financial asset, generating construction revenue and costs. The restatement of the financial asset generates revenue from remuneration of the infrastructure. In the Regulatory accounting, investments are treated as a fixed asset and are depreciated according to their life span, and the RAP according to invoiced amounts spread over the term of the concession. The main variations between the consolidated results in IFRS and the Regulatory standards in 1Q18 are shown as follows: Consolidated DRE Regulatory IFRS Change IFRS vs. Regulatory 1Q18 1Q18 Gross Revenue Revenue on Use of Electric Network - RAP Infrastructure Revenue O&M Revenue Concession Asset Revenue RBSE Revenue Other Revenue Deductions Net Revenue Infrastructure Costs Costs of O&M and General Expenses Depreciation EBIT Equity Income Other Opertional Revenues (expenses) Result Before Financial Result and Taxes Financial Result Profit before Income and Social Contribution Taxes IR & CSLL Net Income before Participation of Non Controlling Shareholder Participation of Non Controlling Shareholder Consolidated Income/Losses Revenue: IFRS considers revenue derived from the installation of infrastructure and recognizes this over time as expenditures are incurred. Revenue from the remuneration of concession assets is considered a financial revenue, recognized by effective interest rates on the principal amount, of which the interest rate is exactly equal to the receipt of future cash calculated over the estimated life of the financial asset at the initial booked amount of this asset. In the case of the Regulatory Result, revenue is recognized at its invoiced amount (RAP). Costs: In IFRS, the costs of implementing infrastructure do not have an impact on the result, given that the results are neutralized by the revenue from the implementation of infrastructure, which is calculated by adding the rates of PIS and COFINS taxes and other charges at the value of investment cost. Depreciation: In IFRS, the concession asset is not considered a fixed asset but rather a financial one. Using IFRS, fixed assets relate largely to the goods used by the Company and are not linked to the concession agreement. In the case of the Regulatory Result, the concession asset is deemed a fixed asset with its respective depreciation. 14

15 Equity Income: The main effects of equity income are the same as those explained under revenue, costs and depreciation above. Income Tax/Social Contribution: In IFRS, IT/SC are provisioned monthly on an accrual basis and calculated pursuant to Law /14. The Company adopts real earnings methodology with a monthly estimate while the subsidiaries adopt the quarterly presumed profit regime. Since July of 2017, the Company began IT/SC payments (current) on invoiced RBSE concession reimbursement amounts. The effective consolidated rate for 1Q18 was 30.5%. PROCEEDS Under the Company s Corporate Bylaws, ISA CTEEP undertakes to pay a minimum dividend which is the highest amount between R$ 359 million and 25% of the fiscal year s net income. Additionally, there is the possibility of payment of extraordinary dividends. On April 12 th, 2018, the Company s Annual General Meeting approved the distribution of dividends for the fiscal year of 2017, amounting to R$ 585 million, equivalent to R$ per share for both types of equity. During the fiscal year of 2017, the Company paid out R$ 500 million and the remaining R$ 85 million will be distributed on June 15 th, The Company is studying a Dividend Policy which will be announced to the market upon the Board of Director s approval. DEBT The Company s reduced leverage will allow the financing of the growth cycle forecast for the next few years. In the first quarter of 2018, gross debt remained at the same level as on December 31 st, 2017, while there was a 9.5% reduction in net debt. The reduction reflects the increase in cash and cash equivalents due to the flow of receivables under the RBSE concession reimbursement. Debt (BRL million) 03/31/ /31/2017 Chg (%) Gross Debt 1, , % Short-term Debt % Long-term Debt 1, , % Consolidated Availabilities % Availabilities of ISA CTEEP and Subsidiaries % Availabilities of Partially Owned Subsidiaries* % Consolidated Net Debt 1, , % *The Company's resources are concentrated in exclusive investment funds, which are also used for the investments of the subsidiaries and partially owned subsidiaries, and refer to quotes of the investment funds with high liquidity, conversible in cash, regardless of the expiration of the assets in which they are allocated. 15

16 Established covenants and requirements for all issuances are being duly complied with by the Company. For the years 2018, 2019 and 2020, the Net Debt/EBITDA index is 3.0x. More details on financial indicators are available on Attachment V of this document. The average cost of the consolidated debt went from 8.29% per year on December 31 st, 2017 to 7.96 % per year on March 31 st, The IPCA inflation index for the past 12 months was 2.68% and the annualized CDI (Interbank Deposit Rate) for March was 6.57%. The average term of the consolidated debt on March 31 st, 2018 was 3.6 years compared to 3.3 years on December 31 st, Debt Amortization Schedule (BRL million) Debt Contracting and Indexation 03/31/ % 31% % a 2029 BNDES - TJLP Debentures - CDI/IPCA Others On May 4 th, 2018, the Company concluded its 7 th debenture issue amounting to R$ 621 million, expiring in 2025.The amount will be corrected by the variation of the IPCA inflation index. On the updated amount o fthe debentures will incide interest corresponding to 4.70% per year, on a basis of a 252-day year, calculated exponentially and cumulatively pro rata temporis from the first subscription and paying in date until the effective payment of principal. Remuneration will be paid every semester starting on the issuance date, always on the 15 th day of the months of October and April with the first payment on October 15 th, 2018 and the last, on the expiry date of the debentures on April 15 th, This is the transmission sector s first issuance to be classified under the Green Bond category in the Brazilian Capital Markets. The issuance is based on the Company s satisfactory socio-environmental performance, evaluated by an independent specialized consultancy and reflecting ISA CTEEP s contribution to renewable energy transmission. The issuance s resources are being deployed as capital injections between 2017 and 2019 in the ERB, IE Aguapei, IE Aimorés, IE Itapura, IE Itaquerê, IE Itaúnas, IE Paraguaçú and IE Tibagi projects which come from successful bids at auctions held between October 2016 and April With this issuance, ISA CTEEP reinforces its strategy of seeking competitive sources of financing in addition to its commitment to sustainability. 16

17 INVESTMENTS ISA CTEEP, its wholly- and jointly-owned subsidiaries invested R$ 97.3 million in 1Q18: (i) R$ 71.6 million was invested in pre-operational subsidiaries to pay fees to obtain environmental licensing, payment in advance to suppliers and land-related negotiations; (ii) R$ 18.3 million was invested in reinforcements and improvements which generated additional revenue for the Company from organic growth; and (iii) R$ 6.2 million was invested in operational subsidiaries Investments in pre-operational subsidiaries are in line with the forecasted challenging budget and schedule. It is important to highlight that the main investment flows of these subsidiaries will take place between the 3 rd and the 4 th year of their respective construction. Investments in reinforcements and improvements are in line with the planned budget for the quarter. Investments are not comparable between quarters since they have distinct project portfolios and depend on ANEEL s Authorizing Resolutions. The growth of investments in operational subsidiaries largely reflect the additional CapEx in IE Madeira required for the solution of pending issues. Investments (BRL million) 1Q18 1Q17 Chg (%) Reinforcements and New Connections 17,7 42,5-58% Modernization and Improvements 0,6 - - Others 1,2 - - ISA CTEEP 19,5 42,5-54% Operational 6,2 1,7 260% Pre-operational 71,6 0, % IE Itaúnas (Lot 21)* 100% 29,6 - - IE Aimorés (Lot 3)* 50% 3,9 0,1 4536% IE Paraguaçu (Lot 4)* 50% 5,8 0,1 4590% ERB (Lot 1)** 50% 11,1 - - IE Tabagi (Lot 5)** 100% 0,6 - - IE Itaquerê (Lot 6)** 100% 15,5 - - IE Itapura (Lot 25)** 100% 3,2 - - IE Iguapeí (Lot 29)** 100% 1,9 - - Total Subsidiaries 77,8 1,9 3907% Total 97,3 44,4 119% * Lots acquired in Auction 03/2015 on October 28 th, 2016 ** Lots acquired in Auction 05/2016 on April 24 th, 2017 Note: Realized investments are demonstrated in the competence vision 17

18 CAPITAL MARKETS ISA CTEEP has common ( TRPL3 ) and preferred shares ( TRPL4 ) listed and traded on in the São Paulo Stock Exchange ( B3 ) and integrates, since 2002, Level 1 of the Corporate Governance segment, enhancing values of ethics and transparency in the relationship with its shareholders and other stakeholders. The Company s equities are components of several stock indexes, among them, the Corporate Governance Index ( IGCT ), in which companies with differentiated standards of corporate governance are listed, and the Brazil 100 stock index ( IBrX 100 ), comprising companies with the most traded equities on B3. Additionally, the Company participates in an American Depositary Receipts ( ADRs ) program Rule 144A in the United States under the CTPTY (common share) and CTPZY (preferred share) symbols. The closing prices of ISA CTEEP s common and preferred equities for the quarter were R$ and R$ 66.50, respectively. The Company s market capitalization on March 31 st, 2018 was R$ 10.5 billion. For the 12-month period ending March 31 st, 2018, ISA CTEEP s preferred shares reported an annual daily trading volume on B3 of R$ 22.6 million, an average of two thousand trades of TRPL4 per day. Performance (baseline: 100) 30% 29.1% 20% 10% 0% 5.6% 2.9% 5.3% -10% Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 TRPL3 TRPL4 IBOVESPA IEEX 18

19 OTHER RELEVANT INFORMATION Concession Renewal - Contract 059/2001 (RBNI/RBSE) On September 12 th, 2012, Provisional Measure 579/2012 ( PM 579 ) was published, regulating the extension of the concession agreements for the generation, transmission and distribution of electric energy. According to the measure, expired concessions or concessions due to expire within 60 months from PM publication date, had the option of anticipating the maturity date to December of 2012 with a subsequent extension of the agreement for up to 30 years. On November 1 st, 2012, the Ministry of Mines and Energy (MME) published Interministerial Ordinance 580 in which the compensation amounts due to installations energized from June 1 st, 2000 forward, known as the Basic Network s New Installations ( RBNI ). The amount established for ISA CTEEP was R$ 2.9 billion. On the same date, the MME published Interministerial Ordinance 579, establishing the RAP amount for ISA CTEEP at R$ million starting on January 1 st, 2013 and representing a reduction of approximately 75%. On November 29 th, 2012, Provisional Measure 591 was published, authorizing the Concession Authority to pay the amount for undepreciated assets existing prior to May 31 st, 2000, known as the Basic Network s Electrical System ( RBSE ). In December of 2012, CTEEP held an Extraordinary General Meeting to decide on the anticipation of the expiration date of the Concession Agreement 059/2001 as proposed in PM 579. The Company s shareholders gave their unanimous approval to the extension of the agreement pursuant to the terms of Law 12,783/2013, and the concession was extended to December 2042, guaranteeing the Company s right to receive the amounts relative to RBNI and RBSE assets. The amounts with respect to RBNI assets, equivalent to R$ 2.9 billion, were received between 2013 and As for the RBSE assets, an independent appraisal report was requested for evaluating the investments at the New Replacement Value ( VNR ), adjusted by the depreciation up to December 31 st, In December of 2015, ANEEL ratified the value of the RBSE assets for ISA CTEEP at R$ 3.9 billion. In April of 2016, MME Ordinance 120 was published determining that the amounts approved by ANEEL for RBSE installations became a part of the Regulatory Remuneration of the electric energy transmission concessionaires starting on the tariff fixing process for 2017 for an estimated 8 year period. With the publication of ANEEL Ruling 1,484/17 of May of 2017, the total RBSE amount due to ISA CTEEP was set at R$ 4.1 billion. The initial impact of the RBSE values was the book recognition according to IFRS principles in September of 2016 under the conditions established by MME s Ordinance 120. Pursuant to the regulatory results booking method, the impact became apparent starting on the beginning of the receivement in July of Forecasted receipts (net of PIS/COFINS as of the baseline date of June of 2017) amount to R$ 12 billion until 2025, and is shown in the following schedule: 19

20 Financial Component 1,771 1,722 1,673 1,624 1,575 1, , / / / / / / / /2025 Economic Component Financial Component ex-ke Ke Assumptions according to ANEEL Normative Resolution 762/2017 IPCA (Dec/12-June/17): 34.45% WACC: 6.64% Cost of proprietary Capital (Ke): 10.74% (1st half/13) and 10.44% (Jul/13 to Jun/17) Under a preliminary injunction, which determined in temporary character, that ANEEL recalculate the RAP excluding the cost of capital (Ke) from the remuneration parcel, the Company has been receiving 85% of the RBSE amount since July of In February of 2018, MME provided a text suggesting the reform of the Electric Sector, consolidating a part of the contributions that were received in Public Hearing (PH) 33/2017. For the RBSE payment, the text proposed the same soluction as the Eletrobras privatization: (i) substitute, in the parcel of the financial component, the correction of the cost of own capital (Ke) to WACC and (ii) increase the stipulated deadline for the payment from 8 years to the remaining time of the concession (~25 years). In May of 2018, Deputado Aleluia s report was disclosed, in the instance of Eletrobras privatization, which maintains the deadline in 8 years for the payment of the financial component, according to MME Ordinance 120/2016, and amplifies its application to all transmission companies. Main Legal Cases Supplementary Retirement Plan Law 4.819/58 Governed by State Law 4,819/58, the supplementary retirement plan applies to employees of autarchies and corporations, in which the state of São Paulo is the holder of the majority of shares and exerts control, hired on or prior to May 13 th, The necessary resources to meet the charges under this plan are the responsibility of the Government of the State of São Paulo, having been implemented according to an agreement between the Finance Secretariat for the State of São Paulo (SEFAZ) and the Company, on December 10 th, The payment of the supplementary retirement benefits happened through monthly payments funded by SEFAZ. The transfer of the amount to be paid went to ISA CTEEP, and then the Company transferred that same amount to Fundação CESP which then had the responsibility of crediting the amount to the individual retirees. Since January of 2004, retiree benefits began to be processed directly by SEFAZ. With this change, changes that need to be maid in payment were verified, for instance, amounts above the ceiling amounts (equivalent to the 20

21 salary of the State governor) were not allowed to be paid. As a result, SEFAZ began to exclude the excess value from the benefits paid to retirees. Class Action Following the court dismissal of a claim, in June of 2005, the Funcesp Retirees Association ( AAFC ) obtained a preliminary injunction from the Labor Courts, determining that the previous payment in full be maintained. Since then, the processing for the payment of the benefits has reverted to the original model whereby the responsibility for the payment is that of Fundação CESP, although SEFAZ transfers the adjusted (reduced) amount to the Company and then ISA CTEEP settles the difference so that when transferred to Fundação Cesp, they are able to realize the payment to the retirees in full, as required under the injunction. In 2017, the injunction was overturned, so ISA CTEEP stopped paying the difference between August and December, which resulted in a cash equivalent impact of about R$ 50 million. In December of 2017, however, Minister Alexandre Moraes of the Federal Supreme Court ( STF ) awarded a further preliminary injunction, obliging the Company to make the additional payment to ensure full value to retirees. The Company appealed the decision and awaits a ruling from the STF. Collection Lawsuit Since 2005, SEFAZ has been transferring to the Company amounts lower than what is required to make full payment to the retirees (~70%) following an injunction handed down by the 49 th Labor Court. Consequently, ISA CTEEP has been topping up the amount to ensure full payment of retiree benefits (~30%). This amount paid by ISA CTEEP is being claimed in a collection lawsuit filed against SEFAZ. This collection lawsuit was ruled in the Company s favor by the 2 nd instance court. In August of 2017, SEFAZ lodged an appeal to the Federal Court of Appeals (STJ) and awaits examination of admissibility. As of March 31 st, 2018, the amount registered in the Company s balance sheet was R$ 1.9 billion, net of the provisions on the realization of credits realized in Collection Lawsuit: Eletrobras against Eletropaulo and EPTE In 1986, Centrais Elétricas Brasileiras S.A. ( Eletrobras ) filed an ordinary collection lawsuit against Eletropaulo regarding the balance of a financing agreement. In 1997, Eletropaulo executed a partial spinoff which resulted in the constitution of EPTE and other companies. Liabilities of any nature regarding acts practiced up to the date of the spinoff are the exclusive responsibility of Eletropaulo, except in the case of the contingent liabilities whose provisions were allocated to the spunoff companies. The provision with respect to the collection lawsuit involving Eletrobras was not allocated to EPTE and therefore, in the view of ISA CTEEP s management and that of its legal advisor s, the contingency pertains exclusively to Eletropaulo. However, at the time of the spinoff, a court deposit was made in the historical amount of R$ 4.00 to EPTE by Eletropaulo, related to the amount of which the former understood as being due to Eletrobras as the balance of the above-mentioned financing. In October of 2001, Eletrobras filed a judgement regarding the aforementioned financing agreement, collecting R$ 429 million from Eletropaulo and R$ 49 million from EPTE, understanding that EPTE would settle payment of this part with restated funds cited in the court deposit. ISA CTEEP incorporated EPTE in November 2001, assuming all its obligations and rights. In October of 2017, Eletrobras and Eletropaulo signed an Understanding Agreement, suspending the lawsuit pending eventual arbitration. On March 9 th, 2018, Eletropaulo approved an agreement for R$ 1.5 billion to discharge the debit under this lawsuit. In the ruling approving this agreement in April of 2018, ISA CTEEP was excluded from the lawsuit. 21

22 ATTACHMENTS Attachment I Regulatory Balance Sheet Assets CONSOLIDATED (BRL thousand) 03/31/18 12/31/17 CURRENT Cash and Cash Equivalents 11,749 6,585 Financial Investments 716, ,066 Accounts Receivable 230, ,469 Inventory 17,085 18,831 Recoverable taxes and conbtributions 132,735 14,162 Income taxes and social contribution 0 0 Prepaid Expenses 40,927 4,607 Credit with controlled Others 66,666 60,870 1,216, ,493 NON-CURRENT Long-Term Assets Accounts Receivable 14,974 20,329 Accounts Receivable from the State Finance Secretariat 1,363,119 1,312,791 Income taxes and social contribution 0 0 Pledges and Escrow 66,571 66,414 Others 43,228 36,674 1,487,892 1,436,208 Investments 1,218,871 1,173,378 Imobilized Assets 7,336,924 7,441,984 Intangible Assets 137, ,686 8,693,398 10,170,256 Total Assets 11,397,895 11,096,749 22

23 Liabilities and Shareholders' Equity CONSOLIDATED (BRL thousand) 03/31/18 12/31/17 CURRENT Loans and Financing 261, ,589 Debentures 183, ,852 Derivative Financial Instruments 0 0 Suppliers 49,255 69,923 Taxes and Social Charges 224,543 90,502 Taxes installments - Law 11, ,997 Regulatory Charges 32,399 16,550 Interest on Shareholders' Equity / Dividends to pay 3,111 3,112 Provisions 29,714 36,344 Amounts Payable - Fundação CESP 3,309 2,056 Others 57,876 61, , ,104 NON-CURRENT Long-Term Liabilities Loans and Financing 677, ,541 Debentures 806, ,007 Taxes installments - Law 11, Income taxes and social contribution 810, ,111 Differed PIS and COFINS 0 0 Regulatory Charges 40,848 54,250 Provisions 125, ,553 Special Liabilities - Reversion/Amortization 318,578 24,053 Others 27, ,579 2,806,281 2,850,094 Participation of Non Controlling Shareholder 201, ,939 SHAREHOLDER'S EQUITY Share Capital 3,590,020 3,590,020 Capital Reserves Income Reserves 1,402,336 1,994,141 Reavaliation Reserves 2,249,590 2,301,266 Accumulated profits and losses 301,805 (643,481) 7,745,848 7,457,551 Total Liabilities and Shareholders' Equity 11,397,895 11,096,749 23

24 Attachment II Regulatory Income Statement Result (BRL thousand) Consolidated 1Q18 1Q17 Chg (%) Gross Revenue 834, , % Availability of Electric Network 827, , % Others 6,732 7,214 (6.7%) Deductions from the Operational Revenue (102,316) (43,872) 133.2% Net Revenue 732, , % Costs and Operational Expenses (259,668) (136,638) 90.0% Personnel (77,724) (75,588) 2.8% Material (3,016) (2,408) 25.2% Services (27,374) (23,687) 15.6% Others (151,554) (34,954) 333.6% Result of Service 472, , % Financial Results (35,293) (29,269) 20.6% Income from Financial Investments 10,886 10, % Result of Liquid Monetary Variation (9,620) (7,816) 23.1% Interest costs Interest/Charges on loans (31,704) (25,154) 26.0% Others (104) (616) (83.1%) Operational Result 437, , % Equity Equivalence 19,347 17, % Other Operational Revenue/Expenses 4,747 (7) ( %) Results before Taxes 461, , % Income Tax and Social Contribution on Income (156,192) (26,521) 488.9% Current (176,613) (20,745) 751.4% Deferred 20,421 (5,776) (453.5%) Consolidated Income/Losses of the Period Before the Participation of the Non Controlling Shareholder 305,265 92, % Participation of Non Controlling Shareholder (3,460) (5,848) 100.0% Net Income 301,805 86, % 24

25 Attachment III Indirect Cash Flow Regulatory Cash Flow of operating activities CONSOLIDATED 1Q18 Net Cash by operating activities 259,864 Cash Generated by Operations 454,296 Net Income 305,265 Depreciation and amortization 145,819 Deferred taxes (20,421) Provisions for contingencies (54) Residual value of permanent assets 1,034 Amortization goodwill 9 Evrecy Amortization 597 Result of equity equivalence (19,347) Reversal of the loss provision in a Controlled Company (535) Result of acquisition of control 0 Interest and exchange variations due on assets and liabilities 41,929 Assets Variation -239,832 Real Estate Agents (14,903) Operational Warehouse 1,746 Amounts to Receive - Treasury Office (50,328) Clearing Taxes (118,573) Deposits and linked deposits 462 Prepaid expenses (36,320) Services in progress (2,834) Credit with subsidiaries 413 Others (19,495) Liabilities Variation 45,400 Suppliers (20,670) Social and Labor Obligations 134,050 Taxes installments - Law 11,941 (58,146) Regulatory charges payable 1,797 Provisions (6,630) Amounts payable - Funcesp 1,253 Obligations linked to the concession of the service 0 Others (6,254) Investments Activites Cash Flow -198,986 Purchases of Fixed Assets (64,966) Financial Aplications (119,820) Intangible 0 Investments (14,200) Financing Activities Cash Flow -55,714 News loans 697 Loan payments (26,442) Loan payments (interest) (26,508) Transactions with non-controlling shareholders (3,460) Dividends paid (1) Variation in Cash and Equivalents 5,164 Opening Balance of Cash and Cash Equivalents 6,585 Closing Balance of Cash and Cash Equivalents 11,749 Closing Balance of Cash and Cash Equivalents 5,164 25

26 Attachment IV Regulatory Income Statement for the Jointly Held Subsidiaries IEMadeira and IEGaranhuns (51% ISA CTEEP) IE MADEIRA Results (BRL millions) 1Q18 1Q17 Chg (%) Gross Operational Revenue % Operational Revenue Deductions (18.8) (17.8) 5.1% Net Operational Revenue % Costs and Expenses (9.4) (10.8) -13.3% Depreciation (34.1) (34.2) -0.3% Gross Profit % Financial Result (45.4) (44.0) 3.3% Income before IR & CSLL % IR & CSLL* (5.3) (5.3) -0.1% Net Income % CTEEP Participation % (*) Holds enterprises regarding infrastructure of transmission lines and substations of electric energy, in operation in the SUDAM areas, whose benefits were conceeded in the months of December of 2014 and 2015, respectively. The deadline to take advantage of the fiscal benefit is 10 years with a reduction of 75% of taxes over income and additionals. IE GARANHUNS Results (BRL millions) 1Q18 1Q17 Chg (%) Gross Operational Revenue % Operational Revenue Deductions (2.7) (3.6) -24.0% Net Operational Revenue % Costs and Expenses (3.3) (3.6) -9.0% Depreciation (6.2) (6.1) 2.3% Gross Profit % Financial Result (4.2) (5.5) -23.9% Income before IR & CSLL % IR & CSLL* (1.9) % Net Income % CTEEP Participation % (*) Holds enterprises regarding infrastructure of transmission lines and substations of electric energy, in operation in the SUDAM areas, whose benefits were conceeded in the months of December of 2014 and 2015, respectively. The deadline to take advantage of the fiscal benefit is 10 years with a reduction of 75% of taxes over income and additionals. 26

27 Attachment V Breakdown of Consolidated Debt (BRL thousands) Funding Charges Maturity 03/31/ /31/2017 TJLP % per year 03/15/ % per year 01/15/ BNDES TJLP 03/15/ % per year 08/15/ % per year 11/15/ CTEEP - Debentures 3 a Emissão - Single serie 116% CDI 12/16/ ª Emissão - Single serie IPCA % per year 07/15/ ª Emissão - Single serie IPCA % per year 02/15/ ª Emissão - Single serie 105.5% CDI 12/13/ CTEEP - Others Law BTMU Libor 3M % per year 07/17/ Eletrobras 8% per year 11/15/ Leasing CTEEP Total Gross Debt 1, ,586.4 IEMG TJLP % per year 04/15/ TJLP % per year 05/15/ PINHEIROS TJLP + 5.5% per year 01/15/ TJLP % per year 04/15/ TJLP % per year 02/15/ SERRA DO JAPI IENNE Subsidiaries Total Gross Debt TJLP % per year 05/15/ TJLP % per year 05/15/ % per year 05/19/ CDI + 0,56% a.m. 01/16/ Consolidated Total Gross Debt (R$ thousand) 1, ,

28 BNDES (annual verification) Infrastructure Debentures (4th and 5th issuance) International Credit - Law 4131 (quarterly verification) Simple Debentures (quarterly verification) Net Debt 03/31/2018 2,421 Net Debt 03/31/2018 1,201 Net Debt 03/31/2018 1,201 Adjusted EBITDA last 12 months 1,977 Adjusted EBITDA last 12 months 1,766 Adjusted EBITDA last 12 months 2,004 Net Debt/Adjusted EBITDA 03/31/ Net Debt/Adjusted EBITDA 03/31/ Net Debt/Adjusted EBITDA 03/31/ Shareholders' Equity 03/31/ ,321 Financial Result 03/31/ Financial Result 03/31/ Net Debt/Net Debt + Shareholders' Equity 03/31/ Adjusted EBITDA/Financial Result 03/31/ Adjusted EBITDA/Financial Result 03/31/ The main covenants to which ISA CTEEP must be a party are as follows: Financing contracts with BNDES (valid for 2018) must abide by maximum financial indicators of: Net Debt/BNDES Adjusted EBITDA 3.0 and Net Debt/(Net Debt + Equity Capital) 0.6, verified at the end of each fiscal year. For the purposes of calculating and substantiating the foregoing indices, the Company must consolidate all controlled and jointly controlled subsidiaries (pro-rated according to its stake) should its stake be 10% or higher. The 3rd Debentures issue requires full compliance with the covenants provided in BNDES financing agreements. The 4th Debentures issue must comply with the periodicity of quarterly verification, the financial indicators in the deed being: Net Debt/Adjusted EBITDA < 3.5 and Adjusted EBITDA/Financial Income > 1.5 until baseline date of June 30, 2017; from baseline date of September 30, 2017, the indicator is > The 5th Debentures issue must comply with the periodicity of quarterly verification, the financial indicators in the deed being: Net Debt/Adjusted EBITDA < 3.5 and Adjusted EBITDA/Financial Income > 1.5 until the baseline date of June 30, 2017;from the baseline date of September 30, 2017, the indicator is > The 6th Debentures issue must comply with the periodicity of quarterly verification, the financial indicators in the deed set as follows: Net Debt/Adjusted EBITDA < 3.5 and Adjusted EBITDA/Financial Income > 2.0 as from the baseline date of March 30, The Credit Agreement (Law 4131) requires the following maximum financial indicators for the full loan term based on quarterly periodicity for verification: Net Debt/Adjusted EBITDA < 3.5 Adjusted EBITDA/Net Interest Expense