Eletropaulo Metropolitana Eletricidade de São Paulo S.A.

Transcription

1 Eletropaulo Metropolitana Eletricidade de São Paulo S.A. Quarterly Financial Information (IQ) June 30, 2016

2 A free translation from Portuguese into English of Independent Auditor s Review Report interim financial information prepared in Brazilian currency in accordance with accounting practices adopted in Brazil, International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB) and specific CVM standards. INDEPENDENT AUDITOR S REVIEW REPORT ON QUARTERLY INFORMATION The Shareholders, Board of Directors and Officers Eletropaulo Metropolitana Eletricidade de São Paulo S.A. Barueri - SP Introduction We have reviewed the interim financial information of Eletropaulo Metropolitana Eletricidade de São Paulo S.A. ( Company ), contained in the Quarterly Information Form (ITR) for the quarter ended June 30, 2016, which comprises the balance sheet as at June 30, 2016 and the related income statement and statement of comprehensive income for the three and six-month period then ended, and statement of changes in equity and cash flow statement for the six-month period then ended, including other explanatory information. Management is responsible for the preparation of the interim financial information in accordance with Accounting Pronouncement CPC 21 (R1) Interim Financial Reporting, and IAS 34 - Interim Financial Reporting, issued by the International Accounting Standards Board - IASB, as well as for the fair presentation of this information in conformity with the standards issued by the Brazilian Securities and Exchange Commission, applicable to the preparation of Quarterly Financial Information. Our responsibility is to express a conclusion on this interim financial information based on our review. Scope of review We conducted our review in accordance with Brazilian and International Standards on Review Engagements (NBC TR 2410 and ISRE Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively). A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion on the interim financial information Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim financial information included in the quarterly information referred to above was not prepared, in all material respects, in accordance with CPC 21 (R1) and IAS 34 applicable to the preparation of Quarterly Information, and presented consistently with the standards issued by the Brazilian Securities and Exchange Commission.

3 Other matters Statement of value added We also reviewed the statement of value added (SVA), for the six-month period ended June 30, 2016, prepared under the responsibility of Company management, whose presentation in the interim financial information is required by the standards issued by the Brazilian Securities and Exchange Commission (CVM) applicable to preparation of Quarterly Financial Information (ITR). This statement was submitted to the same review procedures previously described and, based on our review, we are not aware of any fact that would make us believe that it was not prepared, in all material respects, in accordance with the overall interim financial information. São Paulo, July 26, ERNST & YOUNG Auditores Independentes S.S. CRC-2SP015199/O-6 Marcos Antonio Quintanilha Accountant CRC-1SP132776/O-3

4 Contents Company s information Capital Structure 1 Cash Dividends 2 Financial Statements Balance Sheet - Assets 3 Balance Sheet - Liabilities 4 Income Statements 5 Statements of Comprehensive Income 6 Statements of Cash Flows 7 Statements of Changes in Shareholders Equity From 01/01/2016 to 06/30/ From 01/01/2015 to 06/30/ Statements of Value Added 10 Comments on Company s Performance 11 Notes to Quarterly Financial Information 17 Other Information Considered Significant by the Company 88 Opinion and Statements Independent Auditors Review Report - No Qualifications 92 Directors Statement on Financial Statements 93 Directors Statement on Auditors Special Review Report 94

5 Company s information/capital structure Number of shares Current Quarter (in thousands) 06/30/2016 Paid in capital Common 66,605 Preferred 100,739 Total 167,344 Treasury shares Common - Preferred - Total - Page 1 of 95

6 Company s information/cash dividends Event Approval Earnings Beginning Payment on Type Class of Shares Amount per Share (Reais/Share) Annual Shareholder s Meeting 04/28/2016 Dividends Common Annual Shareholder s Meeting 04/28/2016 Dividends Preferred Page 2 of 95

7 A free translation from Portuguese into English of the Financial information in accordance with accounting practices adopted in Brazil and in accordance with International Financial Reporting Standards (IFRS). Individual Financial Information/Balance Sheet Assets (In thousands of Reais) Code Description Current quarter 06/30/2016 Prior year 12/31/ Total assets 13,078,038 13,274, Current Assets 4,290,164 4,594, Cash and cash equivalents 138, , Short-term investments 1,200, , Short-term investments valued at fair value 1,200, , Available for sale 1,200, , Accounts receivable 2,268,801 2,619, Customers 2,268,801 2,619, Consumers, concessionaires and permit holders 2,157,105 2,530, Accounts receivable - agreements 111,696 89, Inventories 87,754 63, Inventories 87,754 63, Recoverable taxes 102, , Recoverable current taxes 102, , Recoverable income tax and social contribution 25,504 25, Other recoverable taxes 77,092 93, Prepaid expenses 37,873 36, Other current assets 454,228 1,223, Others 454,228 1,223, Other credits 236, , Financial sector assets, Net 217, , Non-current Assets 8,787,874 8,680, Long-term assets 3,582,529 3,468, Accounts receivable 35,245 35, Accounts receivable 27,508 26, Other accounts receivable 7,737 9, Deferred taxes 784, , Deferred income tax and social contribution 784, , Other non-current assets 2,762,374 2,994, Guarantees and judicial deposits 476, , Other recoverable taxes 39,268 33, Financial asset related to the concession agreement 2,180,266 2,004, Others credits 65,941 63, Financial sector assets, Net - 449, Investments 13,130 13, Properties for investment 13,130 13, Property, plant and equipment 47,038 40, Finance Lease Agreements 47,038 40, Intangible 5,145,177 5,158, Intangible 5,145,177 5,158, Concession agreement 5,145,177 5,158,378 Page 3 of 95

8 Individual Financial Information/Balance Sheet Liabilities (In thousands of Reais) Code Description Current quarter Prior year 06/30/ /31/ Total Liabilities 13,078,038 13,274, Current liabilities 3,618,220 4,520, Labor and social liabilities 124, , Labor liabilities 124, , Local suppliers 1,248,220 1,926, Local suppliers 1,248,220 1,926, Tax liabilities 572, , Federal tax liabilities 212, , Income tax and social contribution payable 2,578 2, Other taxes payable 209, , State tax liabilities 359, , Municipal tax liabilities 1,328 1, Loans and financing 878, , Loans and financing 93,562 38, Local currency 93,562 38, Debentures 766, , Finance Lease 18,307 11, Other liabilities 607,521 1,064, Other 607,521 1,064, Dividends and Interest on shareholders equity payable 42,730 42, Government grants 4,052 2, Sector charges 311, , Other liabilities 249, , Provisions 186, , Provision for Fiscal, Labor and Civil Contingencies 177, , Provision for Legal Proceedings and Others 177, , Others Provisions 8,973 9, Provisions for environmental liabilities 8,973 9, Non-current liabilities 7,292,712 5,914, Loans and financing 2,812,236 2,874, Loans and financing 612, , Local currency 612, , Debentures 2,166,976 2,367, Finance Lease 32,736 31, Other liabilities 4,143,211 2,720, Others 4,143,211 2,720, Government grants 13,897 8, Liabilities with private pension plan 3,662,161 2,604, Sector charges 37,624 32, Labor and social liabilities Reversal reserve 66,085 66, Other liabilities 7,534 8, Financial sector liabilities, Net 355, Provisions 337, , Provision for Fiscal, Labor and Civil Contingencies 336, , Provision for Legal Proceedings and Others 336, , Other liabilities 1,211 1, Provisions for environmental liabilities 1,211 1, Shareholders' equity 2,167,106 2,839, Paid in capital 1,257,629 1,257, Capital reserve 21,094 20, Stock options granted 21,094 20, Income reserves 1,251,308 1,251, Legal reserve 244, , Statutory reserve 1,007,043 1,007, Retained earnings/losses 71, Equity valuation adjustment 1,086,425 1,123, Other comprehensive income (1,520,571) (813,817) Page 4 of 95

9 Individual Financial Information/Income Statements (In thousands of Reais) Code Description Current quarter 04/01/2016 to 06/30/2016 Current Year Accumulated 01/01/2016 to 06/30/2016 Same Quarter of Prior Year 04/01/2015 to 06/30/2015 Prior Year Accumulated 01/01/2015 to 06/30/ Revenues 2,800,356 5,680,696 3,469,772 6,654, Cost of sales (2,729,726) (5,544,701) (3,382,207) (6,381,695) Electricity purchased for resale (1,501,253) (3,014,205) (2,273,004) (4,231,047) Electricity purchased for resale - PROINFA (81,135) (162,965) (57,346) (118,091) Charge for use of transmission and distribution system (216,469) (590,291) (266,127) (506,779) Personnel and management compensation (195,601) (378,696) (169,818) (330,156) Private pension entity (80,485) (159,636) (78,788) (157,594) Third-party services (148,737) (281,747) (113,472) (225,971) Material (21,234) (40,428) (10,715) (21,252) Construction cost (180,054) (322,021) (148,385) (266,237) Provision/Reversal allowance for doubtful accounts, net (91,995) (157,333) (35,138) (71,766) Provision/Reversal for Legal Proceedings and Others, net (23,830) (25,528) (15,376) (37,982) Depreciation and amortization (120,092) (235,770) (147,580) (260,534) Other operating expenses (68,841) (176,081) (66,458) (154,286) 3.03 Gross profit 70, ,995 87, , Income before financial results and taxes 70, ,995 87, , Financial income (expenses) (58,028) (75,248) (12,017) (126,222) Financial income 102, , , , Financial expenses (160,974) (305,253) (130,555) (326,733) Financial expenses (182,882) (346,721) (149,516) (285,309) Net foreign exchange expense 21,908 41,468 18,961 (41,424) 3.07 Pre-Tax Income 12,602 60,747 75, , Income taxes and social contribution (9,152) (26,697) (27,087) (51,222) Current (4,695) (9,330) (19,064) (47,751) Deferred (4,457) (17,367) (8,023) (3,471) 3.09 Net income from continued operations 3,450 34,050 48,461 95, Net income/loss for the period 3,450 34,050 48,461 95, Earnings per share - (Reais/Share) Basic ON PN Diluted ON PN Page 5 of 95

10 Individual Financial Information/Statements of Comprehensive Income (In Thousands of Reais) Code Description Current quarter 04/01/2016 to 06/30/2016 Current Year Accumulated 01/01/2016 to 06/30/2016 Same Quarter of Prior Year 04/01/2015 to 06/30/2015 Prior Year Accumulated 01/01/2015 to 06/30/ Net income of the period 3,450 34,050 48,461 95, Other comprehensive income (658,865) (706,755) Actuarial valuation adjustment (998,281) (1,070,841) Income tax and social contribution on actuarial valuation adjustment 339, , Comprehensive income for the period (655,415) (672,705) 48,461 95,261 Page 6 of 95

11 Individual Financial Information/Statements of Cash Flows Indirect Method (In thousands of Reais) Code Description Current Year Accumulated 01/01/2016 to 06/30/2016 Prior Year Accumulated 01/01/2015 to 06/30/ Net cash operating activities 1,052,039 (148,371) Cash from operating activities 856, , Net income for the period 34,050 95, Depreciation and amortization 235, , Monetary and foreign exchange variation 8,148 6, Monetary variation of financial assets related to concession (92,176) (67,172) Allowance for doubtful accounts, Net 171,564 85, Provision for Legal Proceedings and Others, Net 54,348 52, Cost of loans and financing (charges on debt) 285, , Pension Fund/Health Plan - CVM Deliberation No , , Interest income on short-term investments (34,486) (38,113) Disposal of financial asset, intangibles to the concession agreement and PP&E 15,680 50, Deferred income taxes and social contributions 17,367 3, Shares and stock options granted Changes in assets and liabilities 469,354 (718,755) Consumers, concessionaires and permit holders 209,783 (507,945) Accounts receivable agreements (30,226) 7, Inventories (23,797) Recoverable income tax and social contribution 9,381 (35,651) Other recoverable taxes 11,006 6, Prepaid expenses (1,264) (4,412) Other credits 64,645 27, Financial sector assets and liabilities 1,479,041 (915,263) Labor and social liabilities 20,112 16, Trade accounts payable (678,565) 202, Income and social contribution payable 47 62, Other taxes payable 41,936 (53,515) Cash interest on short-term investments received 38,004 57, Sector charges (438,021) 603, Payment of Legal Proceedings and Others (37,518) (56,726) Other liabilities (21,837) (27,693) Payment of liabilities with pension plan entity (173,373) (102,447) Others (273,438) (258,355) Interest paid (charges on debt) (264,451) (208,397) Payment of income taxes and social contribution (8,987) (49,958) 6.02 Net cash investing activities (1,121,289) (13,648) Acquisitions of PP&E and intangible assets (347,643) (253,401) Financial participation of consumers 33, , Purchase of short-term investments (5,392,442) (3,772,961) Sales of short-term investments 4,573,113 3,903, Purchase/sale of guarantees and judicial deposits (16,572) 7, Cash received on sale of property, pland and equipament and intangibles 28, Net cash financing activities 61, , New loans and debentures 203, , Dividends and interest on shareholders' equity paid - (4) Payments of loans and debentures (principal) (127,509) (189,253) Cost of loans and debentures (transaction costs and premium) (4,909) (3,154) Payment of capital leasing (10,427) (1,676) 6.05 Increase (reduction) in cash and cash equivalents (8,153) (25,843) Cash and cash equivalents - beginning balances 146, , Cash and cash equivalents - closing balances 138, ,417 Page 7 of 95

12 Individual Financial Information/Statements of changes in shareholders' equity - 01/01/2016 to 06/30/2016 (In thousands of Reais) Code Description Paid in capital Capital reserve, Granted Options and Treasury Shares Income reserves Retained earnings/losses Other comprehensive income Shareholders' equity Total 5.01 Beginning balances 1,257,629 20,428 1,251, ,780 2,839, Adjusted beginning balances 1,257,629 20,428 1,251, ,780 2,839, Shareholders' Capital Transactions Granted Options Recognized Total comprehensive income ,050 (706,755) (672,705) Net income for the period ,050-34, Other comprehensive income (706,755) (706,755) Actuarial valuation adjustment (1,070,841) (1,070,841) Income tax and social contribution on actuarial valuation adjustment , , Internal changes in shareholders' equity accounts ,171 (37,171) Realization of equity valuation adjustment ,320 (56,320) Income tax and social contribution on equity valuation adjustments (19,149) 19, Closing balances 1,257,629 21,094 1,251,308 71,221 (434,146) 2,167,106 Page 8 of 95

13 Individual Financial Information/Statements of changes in shareholders' equity - 01/01/2015 to 06/30/2015 (In thousands of Reais) Code Description Paid in capital Capital reserve, Granted Options and Treasury Shares Income reserves Retained earnings/losses Other comprehensive income Shareholders' equity Total 5.01 Beginning balances 1,257,629 19,203 1,116, ,615 2,567, Adjusted beginning balances 1,257,629 19,203 1,116, ,615 2,567, Shareholders' Capital Transactions Granted Options Recognized Total comprehensive income ,261-95, Net income for the period ,261-95, Internal changes in shareholders' equity accounts ,103 (37,103) Realization of equity valuation adjustment ,217 (56,217) Income tax and social contribution on equity valuation adjustments (19,114) 19, Closing balances 1,257,629 19,816 1,116, , ,512 2,663,682 Page 9 of 95

14 Individual Financial Information/Statements of Value Added (In thousands of Reais) Code Description Current Year Accumulated 01/01/2016 to 06/30/2016 Prior Year Accumulated 01/01/2015 to 06/30/ Revenues 10,262,040 11,202, Sales of goods, products and services 5,976,770 5,453, Other revenues 4,120,582 5,554, Construction revenue of own assets 322, , Allowance (Reversal) for doubtful accounts (157,333) (71,766) 7.02 Inputs acquired from third parties (4,909,267) (5,975,561) Cost of products, goods and services (4,129,164) (5,341,824) Materials, Energy, Services and other (593,545) (466,118) Others (186,558) (167,619) 7.03 Gross value added 5,352,773 5,226, Retention (235,770) (260,534) Depreciation, amortization and exhaustion (235,770) (260,534) 7.05 Net value added 5,117,003 4,966, Value added received by transfer 230, , Financial income 230, , Total value added to be distributed 5,347,008 5,166, Distribution of total value added 5,347,008 5,166, Personnel 528, , Direct wages and salaries 351, , Fringe benefits 159, , FGTS 17,710 14, Taxes, fees and contributions 4,467,891 4,249, Federal 2,420,591 2,493, State 2,025,900 1,740, Municipal 21,400 15, Third party capital remuneration 316, , Interest 305, , Rental 11,076 13, Shareholders' equity remuneration 34,050 95, Retained earnings /losses for the period 34,050 95,261 Page 10 of 95

15 Comments on AES Eletropaulo s performance 1 Profile Eletropaulo Metropolitana Eletricidade de São Paulo S.A. ( Company ) is a publicly held company with shares listed on the BM&FBovespa, authorized to operate as public utility company of electric power distribution, primarily in the distribution and trade of electricity in 24 districts of metropolitan area of São Paulo, as shown in the map below and, it has its activities regulated and inspected by the National Electric Energy Agency - ANEEL, under the Ministry of Mines and Energy. As of June 30, 2016, the Company served approximately 7.0 million consumers units and billed for electric energy distribution services 17,741 GWh. Page 11 of 95

16 The Concession Agreement for Electric Power Distribution No. 162/1998, executed on June 15, 1998 (ANEEL resolution No. 72, of March 25, 1998), shall be effective for 30 years. 2 Financial Performance Reclassified In thousand of reais 1S16 1S15 Change R$ Change % Supply of eletricity 10,124,740 8,617,583 1,507, % Availability of transmission and distribuition system - TUSD 480, ,796 83, % Other operating revenue (185,461) 2,259,732 (2,445,193) % Gross operating revenue 10,419,373 11,274,111 (854,738) -7.6% Deductions from gross revenue (4,738,677) (4,619,711) (118,966) 2.6% Net operating revenue 5,680,696 6,654,400 (973,704) -14.6% Cost of eletric energy (Parcel A) (3,767,461) (4,855,917) 1,088, % Operanting costs (Parcel B) (1,777,240) (1,525,778) (251,462) 16.5% Operanting costs (5,544,701) (6,381,695) 836, % Service income (Gross profit) 135, ,705 (136,710) -50.1% Financial income (75,248) (126,222) 50, % Income tax and social contribution (26,697) (51,222) 24, % Net income for the period 34,050 95,261 (61,211) -64.3% During the semester ended June 30, 2016 the Company reported a net income of R$ 34,050, compared to a net income of R$ 95,261 for the same period last year. The following items explain the main factors that influenced the reduction of 64.3% on the Company's results. 2.1 Net operating revenue Net operating revenue of the Company is substantially composed by the supply and distribution of electricity and its respective deductions, accumulating in the semesters ended June 30, 2016 and 2015 amounts of R$ 5,680,696 and R$ 6,654,400, respectively. Operating revenue (thousand R$) Reclassified 1S16 1S15 Change % 1S16 1S15 Change % Supply of eletricity 10,124,740 8,617, % 17,741 18, % Availability of transmission and distribution system - TUSD 480, , % 3,979 4, % Revenue from construction 322, , % Unbiled revenue (62,040) 234, % Short-term energy 224, , % 1,574 1, % Resource grants of CDE 122, , % Financial sector assets and liabilities (989,749) 1,179, % PIS/COFINS rate differantial 33,872 (81,169) % Monetary variation of financial assets related to concession 92,176 67, % Other revenue 70,686 57, % Gross operating revenue 10,419,373 11,274, % 23,294 23, % Deductions from gross operating revenue: (4,738,677) (4,619,711) 2.6% Sectorial charges (1,732,115) (2,055,214) -15.7% Tax charges (3,006,562) (2,564,497) 17.2% Net operating revenue 5,680,696 6,654, % Consumption (in GWh) The reduction of 14.6% of net operating revenue is explained mainly by: Page 12 of 95

17 Reduction of R$ 2,169,168 in financial assets and liabilities, mainly by (i) financial liabilities (deferred) constituted in 1S16, originated from the reduction of CDE costs and the electricity purchase, reflecting the reduction of these costs in the 1S16 when compared to its tariff coverage, while in 1S15 the Company had constituted (deferred) of financial assets as a result of high costs in purchasing power due to the unfavorable hydrological conditions; (ii) the largest balance of financial assets amortized in 1S16, due to net balance at the homologated on Tariff Review of 2015, justified primarily by higher power purchase costs incurred by the Company; compensated partially (iii) by the recognition (deferral) of financial asset resulting from over contracting in 1S16, originated by higher cost of acquiring energy when compared to the PLD on sale; Reduction of R$ 196,849 or 46.7% in short term revenue, due to the smaller PLD in 1S16 compared to 1S15, although the volume sold is higher (1,574 GWh in the 1S16 vs 1,131 GWh in the 1S15); Increase in revenue deductions of R$ 118,966, due to (i) taxes (ICMS, COFINS, PIS and ISS) which increased R$ 442,065, being proportional to the largest taxable gross income earned in the 1S16; partially offset (ii) sectorial charges, which decreased R$ 323,099, mainly by lower transfers to Centralized Tariff Flags Account - CCRBT - in the total of R$ 567,656, due to green tariff flag as from April 2016; partially offset by an increase of R$ 255,616 of charges of Energy Development Account CDE on 1S16; The factors above were partially offset by: Increase of R$ 1,507,157 in revenue with electric energy supply, caused mainly (i) the tariff revision of 2015 (average effect of 15.23% to the consumer) and the extraordinary tariff review of March 2, 2015 (average effect of 32% to the consumer), generating a revenue increase in all the classes of consumers (ii) higher number of consumer units, comparing the periods. On the other hand, the captive market consumption decreased 2.9%, due particularly to the negative performance (i) class of industrial consumers, which remained with negative performance in the production; and (ii) commercial consumer class, reflection of the negative performance of the commercial activity in the State of São Paulo and poor performance of the actual income in the Metropolitan Region of São Paulo, contributing to the consumption decrease in the 1S16. The decrease in consumption, including the other classes, reflects the continuity of the economic crisis and of the tariff increases that occurred in Operating costs Operating costs are divided into two categories: (i) Parcel A, which covers all nonmanageable expenses and related to the purchase and transmission of energy; and (ii) Parcel B, which corresponds to the Company's manageable costs. Page 13 of 95

18 In the semester ended on June 30, 2016, operating costs decrease by 13.1% when compared to the same semester previous year, are as follows: Reclassified In thousand of Reais 1S16 1S15 Change R$ Change % Eletricity purchase for resale/proinfa (3,177,170) (4,349,138) 1,171, % Distribution and transmission usage charge (590,291) (506,779) (83,512) 16.5% Eletric energy costs (Parcel A) (3,767,461) (4,855,917) 1,088, % Personnel and management compensation (378,696) (330,156) (48,540) 14.7% Private pension entity (159,636) (157,594) (2,042) 1.3% Third-party services and material (322,175) (247,223) (74,952) 30.3% Construction costs (322,021) (266,237) (55,784) 21.0% Depreciation and amortization (235,770) (260,534) 24, % Other costs (358,942) (264,034) (94,908) 35.9% Operating costs (Parcel B) (1,777,240) (1,525,778) (251,462) 16.5% Total operating costs (5,544,701) (6,381,695) 836, % Eletric Energy costs (Parcel A) The electricity costs (Parcel A) are composed by Electricity purchased for resale/proinfa and Distribution and transmission used charges. Electricity purchased for resale/proinfa: On June 30, 2016, the electricity purchased by the Company was as follows: Electricity purchased for resale/proinfa decrease by R$ 1,171,968 or 26.9% totaling R$ 3,177,170 in 1S16 and R$ 4,349,138 in 1S15. The following factors explain this performance: Bilateral AES Tietê - decrease of R$ 1,136,657 due to termination of the contract on December 31, 2015; Purchase - CCEAR - decrease of R$ 62,454 due reduction of the average price by approximately 33.3%, despite to higher volume of energy purchased 1S16 (46.1% higher than 1S15) Itaipu - reduction of R$ 218,335, due to reduction in average price by 18.3% and reduction of 0.7% in a volume of purchased power; Page 14 of 95

19 The factors above were partially offset by: Purchase CCEAR's AES Tietê Energia increase of R$ 30,523 related to energy purchased in 1S16 of AES Tietê Energia through CCEAR auctions. The graph below shows the evolution of purchased energy volume (in GWh) between the semesters ended June 30, 2016 and 2015, by type of contract. Distribution and transmission used charges Follows the composition of charges: 1S16 1S15 Change R$ Change % Basic network use (300,306) (338,126) 37, % System service charge - ESS/EER (288,030) (210,305) (77,725) 37.0% (-) Financial resources of the Reserve Energy Account - CONER (i) - 46,813 (46,813) % Energy transportation - Furnas/Itaipu (22,938) (23,224) % National system operator - ONS (13,720) (12,529) (1,191) 9.5% Contract for distribution system use - CUSD (3,365) (3,243) (122) 3.8% Connection basic network - CTEEP (20,701) (16,543) (4,158) 25.1% (-) PIS/COFINS tax credit 58,769 50,378 8, % Total transmission and distribution system usage charges (590,291) (506,779) (83,512) 16.5% The increase of R$ 83,512 or 16.5% due basically to (i) higher costs of ESS/EER by R$ 77,725 recorded in 1S16, (ii) the transfers of financial resources from the CONER in 2015 in a total of R$ 46,813, partially offset by; and (iii) by lower charges of use of the basic network in R$ 37, Operating costs (Parcel B) Parcel B, corresponding to Company s manageable costs amounted to R$ 1,777,240 in the 1S16, higher in R$ 251,462 or 16.5 % compared to the same semester of the previous year. The variation in the accounts that follow explain such performance: Personnel and management officers: increase R$ 48,540 or 14.7% mainly by (i) personal expenses related to recovery plan of quality indicators of the Company; (ii) the adjustment, of salaries and benefits based on the collective bargaining; and (iii) Healthcare expenditure, due to increased administrative and medical inflation rate. Page 15 of 95

20 Material and third party services: increase of R$ 74,952 or 30.3%, mainly to (i) expenses related to recovery plan of quality indicators of the Company; (ii) higher costs with cut-off and collection actions, aiming to minimize the increased nonpayment; (iii) higher expenses related to fleet maintenance and fuel. Other Costs: increase of R$ 94,908 or 35.9%, due primarily to (i) allowance for doubtful accounts, which increased R$ 85,567, mainly as a result of a higher average amount billed per consumer unit; (ii) higher expenses with DIC/FIC/DMIC/DICRI in R$ 45,544; partially offset by; (iii) decrease of disposal of assets and rights, from R$ 32,201 in 1S15 to R$ 9,341 in 1S16; and (iv) decrease of provision/reversal law suit and others expenses by R$ 12,454, as a results civil proceedings, due to the reversal of Pindamonhangaba case 1Q16, and tax proceeding, due to the remeasurement the probability of loss from probable to possible. 2.3 Financial Results Reclassified 1S16 1S15 Change R$ Change % Financial income 230, ,511 29, % Financial expenses (346,721) (285,309) (61,412) 21.5% Exchange variations, net 41,468 (41,424) 82, % Financial Results (75,248) (126,222) 50, % In 1S16, the net financial results showed an expense of R$ 75,248, lower in R$ 50,974 when compared to the expense recorded in 1S15, mainly due to the following factors: Increase of R$ 30,819 regarding financial revenue in fines, interest and monetary variation on overdue electricity bills; Positive impact of R$ 84,009 of exchanges rates incurred in Itaipu energy purchase; reflecting the appreciation of Real against dollar in 1S16, while in 1S15 there was depreciation of the real. The above factors were offset partially by: Interest of debts increased by R$ 61,747, mainly due to higher interest rate between the semesters compared. The average rate of CDI in 1S16 was 14.13%, while for the same semester of the previous year was 12.62%. Also contributed to the increase of the transactions costs the higher the Company's indebtedness at 1S16 compared to 1S15. Reduction of R$ 6,968 in financial revenues related to investments, due to lower average balance of financial investments (R$ 591,984 in 1S16 vs R$ 706,463 in 1S15). 2.4 Income tax and social contribution Decrease in the expense of income tax and social contribution (current and deferred) by R$ 24,525 on the income 1S16 compared to the same semester of previous year. Such decrease is particularly explained by the reduction of R$ 38,421 current income tax and social contribution due to the lower taxable income in 1S16, partially offset by an increase of R$ 13,896 in the deferred income tax and social contribution. Page 16 of 95

21 Explanatory Notes 1. General information Eletropaulo Metropolitana Eletricidade de São Paulo S.A. ( Company ) is a publicly held company, under private Law, directly controlled by AES Elpa S.A. and indirectly controlled by Brasiliana Participações S.A. ( Brasiliana Participações ). Brasiliana Participações is an indirect subsidiary of The AES Corporation (headquartered in the United States of America). The Company is authorized to operate as an electric power utility concessionaire, primarily in the distribution and sale of electric power in 24 cities in the metropolitan region of Greater São Paulo. Its activities are regulated and inspected by the Brazilian Power Regulatory Agency (ANEEL), which is associated with the Ministry of Mines and Energy (MME). The Company s headquarter is located at Brazil, Barueri Municipality, State of São Paulo at Dr. Marcos Penteado de Ulhôa Rodrigues Avenue, No. 939, stores 1 and 2 (ground floor) and the 1 st to the 7 th floor, Subdivision Sitio Tamboré, Tower II Condominium Castelo Branco Office Park. The Company, as mentioned in explanatory note 23, billed for electric energy distribution services 17,741 GWh and 18,262 GWh for the semester ended June 30, 2016 and 2015, serving approximately 7.0 million and 6.8 million consumers for the semesters ended June 30, 2016 and 2015, respectively. The Concession Contract for Electric Power Distribution No. 162/1998, executed on June 15, 1998 (ANEEL resolution No. 72, of March 25, 1998), shall be effective for 30 years. According to the Concession Agreement, the Company is supposed to go through Tariff Reset processes every four years, first of which took place on July 4, 2003, and through Tariff Adjustment on an annual basis. The last Tariff Reset took place on July, (please refer to explanatory note 31.4 (b.4)). 2. Basis of preparation and presentation of Financial information On July 26, 2016, the Company s management authorized the conclusion of interim financial information, submitting such documents to the approval of the Board of Directors and to the analysis by the Fiscal Council. 2.1 Declaration of conformity Financial information of the Company were prepared and are being presented for the quarter and semester ended June 30, 2016 is in accordance with the CPC 21 (R1) intermediate statement, issued by the Accounting Pronouncements Committee (CPC) and in a manner consistent with the issued standards by the Brazilian Securities and Exchange Commission (CVM), applicable for the preparation of the Quarterly Information - IQ. The Financial information for the quarter and semester ended June 30, 2016 are also in accordance withias 34 Interim Financial Reporting issued by the International Accounting Standards Board ( IASB ). Page 17 of 95

22 The Financial information were prepared using historical cost, as basis of value, except for revaluations recorded on prior years to the transition date, and for the valuation of certain financial instruments which were measured at fair value. 2.2 Basis of preparation and presentation All amounts presented in the Financial information are expressed in thousands of reais, unless otherwise indicated. Due to rounding, the figures throughout this Financial information may not accurately add up to the totals stated. Our independent auditors did not review quantitative data, such as volumes and numbers of consumer units. Reconciliation of the comparative balances: The Company, after carrying out certain topics and aiming to better presentation of its financial position and its operational and financial performance, carried out the following adjustments and reclassifications (i) in its statements of income, related to the quarter and semester ended June 30, 2015, and in its statements value added and cash flows related to the semester ended June 30, 2015, originally authorized on July 28, 2015, and (ii) in its balance sheets related to year ended December 31, 2015, originally authorized on February 15, The changes made do not alter the total assets, liabilities and equity. Balance Sheet Originally presented Ref. Reclassifications Reclassified CURRENT ASSETS Cash and cash equivalents 146, ,621 Short-term investments 384, ,557 Consumers, concessionaires and permit holders 2,530,174 2,530,174 Recoverable income tax and social contribution 25,973 25,973 Other recoverable taxes 93,450 93,450 Sundry receivables 10,011 (a) (10,011) - Accounts receivable - agreements 89,752 89,752 Other credits 321,532 (a) 10, ,543 Inventories 63,957 63,957 Prepaid expenses 36,609 36,609 Financial sector assets, Net 891, ,472 TOTAL CURRENT ASSETS 4,594,108-4,594,108 NON-CURRENT ASSETS Consumers, concessionaires and permit holders 26,451 26,451 Other recoverable taxes 33,916 33,916 Deferred income tax and social contribution 438, ,191 Guarantees and judicial deposits 443, ,126 Accounts receivable - agreements 9,215 9,215 Other credits 63,398 63,398 Financial asset related to the concession agreement 2,004,798 2,004,798 Financial sector assets, Net 449, ,428 Investments 13,130 13,130 Property, plant and equipment 40,688 40,688 Intangible 5,158,378 5,158,378 TOTAL NON-CURRENT ASSETS 8,680,719-8,680,719 TOTAL ASSETS 13,274,827-13,274,827 Page 18 of 95

23 Originally presented Ref. Reclassifications Reclassified CURRENT LIABILITIES Trade accounts payable 1,926,785-1,926,785 Loans and financing 38,286-38,286 Debentures 678, ,273 Finance Lease 11,351-11,351 Government grants 2,427-2,427 Income tax and social contribution payable 2,531-2,531 Other taxes payable 528, ,319 Dividends and Interest on shareholders equity payable 42,730-42,730 Accrued liabilities 95,857 (a) (95,857) - Labor and social liabilities 7,766 (a) 95, ,623 Consumer charges payable 690,504 (a) (690,504) - Sector charges - (a) 749, ,342 Provision for legal proceedings and others 166, ,929 Research and development and Energy efficiency 57,640 (a) (57,640) - Other liabilities 271,469 (a) (1,198) 270,271 TOTAL CURRENT LIABILITIES 4,520,867-4,520,867 NON CURRENT LIABILITIES Loans and financing 474, ,952 Debentures 2,367,850-2,367,850 Finance Lease 31,830-31,830 Government grants 8,108-8,108 Pension plan liabilities 2,604,967-2,604,967 Provision for Legal Proceedings and Others 319, ,440 Sector charges - (a) 32,295 32,295 Research and development and Energy efficiency 32,295 (a) (32,295) - Labor and social liabilities - (a) Accrued liabilities 969 (a) (969) - Reversal reserve 66,085-66,085 Other liabilities 8,319-8,319 TOTAL NON-CURRENT LIABILITIES 5,914,815-5,914,815 TOTAL SHAREHOLDERS' EQUITY 2,839,145-2,839,145 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 13,274,827-13,274,827 Page 19 of 95

24 Statements of income: Ref. Originally presented to Reclassifications Reclassified Originally presented to Reclassifications Reclassified NET OPERATING REVENUE (a and b) 3,432,530 37,242 3,469,772 6,587,228 67,172 6,654,400 OPERATING COSTS Cost of electric energy Electricity purchased for resale (a) (2,253,901) (19,103) (2,273,004) (4,272,890) 41,843 (4,231,047) Electricity purchased for resale - PROINFA (57,346) - (57,346) (118,091) - (118,091) Charge for use of transmission and distribution system (266,127) - (266,127) (506,779) - (506,779) Operating Costs Personnel and management compensation (169,818) - (169,818) (330,156) - (330,156) Private pension entity (78,788) - (78,788) (157,594) - (157,594) Third-party services (113,472) - (113,472) (225,971) - (225,971) Material (10,715) - (10,715) (21,252) - (21,252) Construction cost (148,385) - (148,385) (266,237) - (266,237) Provision allowance for doubtful accounts, net (35,138) - (35,138) (71,766) - (71,766) Provision for Legal Proceedings and Others, net (15,376) - (15,376) (37,982) - (37,982) Depreciation and amortization (147,580) - (147,580) (260,534) - (260,534) Other costs (66,458) - (66,458) (154,286) - (154,286) GROSS OPERATING COSTS (3,363,104) (19,103) (3,382,207) (6,423,538) 41,843 (6,381,695) INCOME FROM SERVICES (GROSS PROFIT) 69,426 18,139 87, , , ,705 FINANCIAL RESULTS Financial income (b) 155,780 (37,242) 118, ,683 (67,172) 200,511 Financial expenses (149,516) - (149,516) (285,309) - (285,309) Net foreign exchange variations (a) (142) 19,103 18, (41,843) (41,424) TOTAL FINANCIAL RESULTS 6,122 (18,139) (12,017) (17,207) (109,015) (126,222) PRE-TAX INCOME 75,548-75, , ,483 TOTAL TAXES (27,087) - (27,087) (51,222) - (51,222) NET (LOSS) INCOME FOR THE PERIOD 48,461-48,461 95,261-95,261 Statements of Value added Originally presented to Ref. Reclassifications Reclassified 1. REVENUE 11,135,173 (b) 67,172 11,202, INPUTS ACQUIRED FROM THIRD PARTIES (6,017,404) (a) 41,843 (5,975,561) 3. GROSS VALUE ADDED 5,117,769 (a and b) 109,015 5,226, RETENTION (260,534) - (260,534) 5. NET VALUE ADDED PRODUCED BY THE ENTITY 4,857,235 (a and b) 109,015 4,966, VALUE ADDED RECEIVED UPON TRANSFER 267,683 (b) (67,172) 200, TOTAL VALUE ADDED TO BE DISTRIBUTED 5,124,918 41,843 5,166, DISTRIBUTION OF ADDED VALUE 5,124,918 41,843 5,166,761 Employees 481, ,501 Taxes (Government) 4,249,515-4,249,515 Third party capital remuneration 298,641 (a) 41, ,484 Shareholders' equity remuneration 95,261-95,261 Page 20 of 95

25 Statements of Cash Flows Originally presented to Ref. Reclassifications Reclassified Operating activities: Net income (loss) for the period 95,261-95,261 Expenses (Income) not affecting cash and cash equivalents: Depreciation and amortization 260, ,534 Monetary and foreign exchange variation 6,900-6,900 Monetary adjustment on financial concession assets (67,172) - (67,172) Allowance for doubtful accounts, net 85,317-85,317 Provision for legal proceedings and others, net 52,779-52,779 Cost of loans and financing (charges on debt) 221, ,810 Pension fund/ health plan - CVM Rule , ,445 Interest income on short-term investments (38,113) - (38,113) Disposal of financial assets, intangibles relating to concession and property, plant and equipament 50,894-50,894 Deferred taxes and social contributions 3,471-3,471 Shares and stock options granted Changes in assets and liabilities: Consumers, concessionaires and permitees (507,945) - (507,945) Recoverable income tax and social contribution (35,651) - (35,651) Other recoverable taxes 6,776-6,776 Sundry receivables (10,454) (a) 10,454 - Inventories Accounts receivable - agreements 7,055-7,055 Prepaid expenses (4,412) - (4,412) Other credits 38,259 (a) (10,454) 27,805 Financial sector assets, Net (915,263) - (915,263) Trade accounts payable 202, ,084 Income tax and social contribution payable 62,562-62,562 Other taxes payable (53,515) - (53,515) Payment of legal proceedings and others (56,726) - (56,726) Labor and social liabilities 1,333 (a) 15,345 16,678 Accrued liabilities 15,345 (a) (15,345) - Sector charges 595,839 (a) 7, ,686 Research and development and energy efficiency 7,847 (a) (7,847) - Other liabilities (27,693) - (27,693) Cash interest on short-term investments received 57,338-57,338 Payment of obligations with pension plan entity (102,447) - (102,447) 109, ,984 Interest paid (charges on debt) (208,397) - (208,397) Income tax and social contribution paid (49,958) - (49,958) Net cash provided by (used in) operating activities (148,371) - (148,371) Net cash flow used in investing activities (13,648) - (13,648) Net cash flow provided financing activities 136, ,176 Variation in Company's net cash (25,843) - (25,843) Opening balance of cash and cash equivalents 181, ,260 Closing balance of cash and cash equivalents 155, ,417 Page 21 of 95

26 The nature of the principal reclassifications is described below: (a) In order to align the criteria for presentation to the best practices of companies in the electricity sector, the foreign exchange variation of Itaipu was reclassified to Exchange variation, net, previously presented as Operating costs totaling R$ 19,103 (income) and R$ 41,843 (expenses) in the quarter and semester ended June 30, In addition, the Company reclassified the balance sheet: The balance of Sundry debtors to Other credits, The balance of Estimated liabilities to Social and labor obligations ; The balance of Consumer charges payable and Research and development and energy efficiency to Sector charges ; The amount of ANEEL Inspector fee, presented as Other obligations to Sector charges. The reclassifications described above were also reflected in Cash flow statements as changes in assets and liabilities. (b) The Company reviewed its accounting practices and concluded that the adjustment of the financial assets subject to indemnification from the concession, originally presented as "Financial Revenue", in the financial result, could be better classified in the operating revenue group, together with further revenues related to its business purpose, since it more properly reflects its business model of electrical energy distribution and provide a better presentation as for its equity status and its performance. This conclusion is supported by the fact that: (i) (ii) The return of the distribution business, over investment in infrastructure, is determined by the fair value of the infrastructure plus the "WACC rate; Investing in infrastructure is the main activity of its business and its management model is supported on controlling construction, maintenance and operation of such infrastructure; (iii) The tariff revenues represent both the intangible assets return and a part of the financial assets return, due to the fact that both accounting assets are part of the regulatory basis of compensation. And the tariff revenues are fully recorded as part of the "Net Operating Income"; (iv) Analyses are prepared by third party specialists seeking to calculate certain performance indicators, such as: Return on Net Equity, Return on Financial Assets, Return on Operating Assets, Debt Cost and Return on Total Assets, may have relevant distortions when computed based on the previously adopted accounting practice; (v) The new classification adopted is supported by paragraph 23 of OCPC 05 - Concession Agreement. The impact of this issue for the quarter and semester ended June 30, 2015 is a reclassification of R$ 37,242 and R$ 67,172 of interest income to operating income, respectively. Page 22 of 95

27 2.3 Functional currency, translation of balances and transactions in foreign currency (a) Functional and presentation currency The Financial information were prepared and presented in Reais (R$), which is the Company s functional currency and the same used in the presentation. The functional currency was determined in accordance with the main economic environment of the Company s operation. (b) Transactions and balances Foreign currency transactions, i.e. all those that are not carried out at the Company s functional currency, are translated at the effective exchange rate on the date of each transaction. Monetary assets and liabilities in foreign currency are translated into the functional currency of Company by effective exchange rate at the financial statement date. 3. Accounting policies and estimatives The Company s interim financial information were prepared based on the same accounting practices, judgments and accounting estimates described in explanatory notes from 3.1 to 3.21 disclosed in the financial statements for the year ended December 31, Cash and cash equivalents and short-term investments Cash and cash equivalents: Cash on bank 3,270 9,879 Cash in transit 112, ,742 Repurchase agreement (i) 22,862 - Subtotal 138, ,621 Short-term investment: CDB-DI (i) 600,168 57,018 Repurchase agreement (i) 599, ,234 Investment fund (i) Subtotal 1,200, ,557 Total 1,338, ,178 (i) Bank Deposit Certificates, investment fund and Repurchase Agreements were remunerated, at an average of 96.76% of CDI for the semester ended June 30, 2016 (99.62% for the exercise ended December 31, 2015) subject to be redeemed at any time without any revenue impairment with the issuer itself. Page 23 of 95