Eletropaulo Metropolitana Eletricidade de São Paulo S.A.

Transcription

1 Eletropaulo Metropolitana Eletricidade de São Paulo S.A. Quarterly Financial Information (IQ) June 30, 2017 with Independent Auditor's Review Report on Quarterly information

2 IQ Quarterly Financial Information ELETROPAULO METROPOLITANA ELETRICIDADE DE SÃO PAULO S.A. 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 (Free Translation from the original in Portuguese) 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, 2017, which comprises the statement of financial position as of June 30, 2017 and the related statements of profit or loss, and of comprehensive income, for the three-month and six-month period ended on June 30,2017, and 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 with 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.

3 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. Other matters Statement of value added We also reviewed the Statement of Value Added (SVA), for the six-month period ended June 30, 2017, 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 (SP), July 25, 2017 ERNST & YOUNG Auditores Independentes S.S. CRC-2SP015199/O-6 Marcos Antonio Quintanilha Accountant CRC - 1SP132776/O-3

4 IQ Quarterly Financial Information ELETROPAULO METROPOLITANA ELETRICIDADE DE SÃO PAULO S.A. Contents Company s information Capital Structure 1 Proceeds in cash 2 Financial Statements Statement of Finnacial Position - Assets 3 Statement of Finnacial Position - Liabilities 4 Statement of Profit and Loss 5 Statements of Comprehensive Income 6 Statements of Cash Flows 7 Statements of Changes in Shareholders Equity From 01/01/2017 to 06/30/ From 01/01/2016 to 06/30/ Statements of Value Added 10 Comments on Company s Performance 11 Notes to Quarterly Financial Information 18 Comments on the Behavior of Business Projections 88 Opinion and Statements Independent Auditors Review Report - No Qualifications 93 Directors Statement on Financial Statements 95 Directors Statement on Auditors Review Report 96

5 IQ Quarterly Financial Information ELETROPAULO METROPOLITANA ELETRICIDADE DE SÃO PAULO S.A. Company s information/capital structure Number of shares Current Quarter (in thousands) 06/30/2017 Capital stock Common 55,781 Preferred 111,563 Total 167,344 Treasury shares Common - Preferred - Total - Page 1 of 102

6 IQ Quarterly Financial Information ELETROPAULO METROPOLITANA ELETRICIDADE DE SÃO PAULO S.A. Company s information/cash dividends Event Approval Ernings Beginning On Payment Type Class Action Ammount per Share Annual Shareholders' Meeting 04/20/2017 Dividends Common Annual Shareholders' Meeting 04/20/2017 Dividends Preferred Page 2 of 102

7 IQ Quarterly Financial Information ELETROPAULO METROPOLITANA ELETRICIDADE DE SÃO PAULO S.A. 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/Statement of Financial Position Assets (In thousands of Reais) Code Description Current quarter 06/30/2017 Prior year 12/31/ Total assets 13,647,784 13,565, Current Assets 3,518,155 3,719, Cash and cash equivalents 199, , Short-term investments 732, , Short-term investments valued at fair value 732, , Available for sale 732, , Accounts receivable 2,150,032 2,155, Customers 2,150,032 2,155, Consumers, concessionaires and permit holders 2,058,305 2,065, Accounts receivable - agreements 91,727 90, Inventories 31,487 23, Inventories 31,487 23, Recoverable taxes 85, , Recoverable current taxes 85, , Recoverable income tax and social contribution 23,354 34, Other recoverable taxes 61,769 68, Prepaid expenses 40,207 33, Other current assets 279, , Others 279, , Other credits 279, , Financial sector assets, Net - 44, Non-current Assets 10,129,629 9,846, Long-term assets 4,811,196 4,574, Accounts receivable 33,671 32, Accounts receivable 26,443 25, Other accounts receivable 7,228 6, Deferred taxes 1,525,862 1,552, Deferred income tax and social contribution 1,525,862 1,552, Other non-current assets 3,251,663 2,989, Guarantees and judicial deposits 524, , Other recoverable taxes 55,707 44, Financial asset related to the concession agreement 2,571,640 2,386, Others credits 99,686 67, Investments 13,082 13, Properties for investment 13,082 13, Property, plant and equipment 69,721 69, Finance Lease Agreements 69,721 69, Intangible 5,235,630 5,189, Intangible 5,235,630 5,189, Concession agreement 5,235,630 5,189,333 Page 3 of 102

8 IQ Quarterly Financial Information ELETROPAULO METROPOLITANA ELETRICIDADE DE SÃO PAULO S.A. Individual Financial Information/Statement of Financial Position Liabilities (In thousands of Reais) Code Description Current quarter 06/30/2017 Prior year 12/31/ Total Liabilities 13,647,784 13,565, Current liabilities 3,757,629 3,888, Labor and social liabilities 128, , Labor and social liabilities 128, , Local suppliers 1,521,474 1,468, Local suppliers 1,521,474 1,468, Tax liabilities 447, , Federal tax liabilities 108, , Income tax and social contribution payable 2,669 2, Other taxes payable 105, , State tax liabilities 337, , Municipal tax liabilities 1,706 1, Loans and financing 618, , Loans and financing 250, , Local currency 250, , Debentures 340, , Finance Lease 27,667 28, Other liabilities 865, , Others 865, , Dividends and Interest on shareholders equity payable 23,079 23, Government grants 3,722 3, Sector charges 312, , Others liabilities 224, , Financial sector liabilities, Net 301, Provisions 176, , Provision for Fiscal, Labor and Civil Contingencies 170, , Provision for Legal Proceedings and Others 170, , Others Provisions 5,776 6, Provisions for environmental liabilities 5,776 6, Non-current liabilities 7,150,941 6,981, Loans and financing 2,687,894 2,389, Loans and financing 604, , Local currency 604, , Debentures 2,031,626 1,830, Finance Lease 51,592 48, Other liabilities 4,090,300 4,232, Others 4,090,300 4,232, Government grants 10,175 11, Liabilities with private pension plan 3,745,967 3,777, Sector charges 59,365 56, Labor and social liabilities 1, Reversal reserve 66,085 66, Others liabilities 7,616 7, Financial sector liabilities, Net 199, , Provisions 372, , Provision for Fiscal, Labor and Civil Contingencies 369, , Provision for Legal Proceedings and Others 369, , Others liabilities 3,315 3, Provisions for environmental liabilities 3,315 3, Shareholders' equity 2,739,214 2,694, Capital stock 1,323,486 1,257, Capital reserve 692, , Special goodwill reserve on the merger 670, , Stock options granted 21,941 21, Income reserves 1,257,629 1,323, Legal reserve 248, , Statutory reserve 1,008,645 1,008, Proposed capital increase - 65, Retained earnings/losses 80, Equity valuation adjustment 1,013,233 1,050, Other comprehensive income (1,628,892) (1,628,892) Page 4 of 102

9 IQ Quarterly Financial Information ELETROPAULO METROPOLITANA ELETRICIDADE DE SÃO PAULO S.A. Individual Financial Information/Statement of Profit and Loss (In thousands of Reais) Code Description Current quarter 04/01/2017 to 06/30/2017 Prior Year Accumulated 01/01/2017 to 06/30/2017 Same Quarter of Prior Year 04/01/2016 to 06/30/2016 Prior Year Accumulated 01/01/2016 to 06/30/ Revenues 2,990,529 5,866,350 2,800,356 5,680, Cost of sales (2,858,645) (5,625,876) (2,729,726) (5,544,701) Electricity purchased for resale (1,655,644) (3,187,521) (1,501,253) (3,014,205) Electricity purchased for resale - PROINFA (58,530) (117,181) (81,135) (162,965) Charge for use of transmission and distribution system (191,505) (384,778) (216,469) (590,291) Personnel and management compensation (208,308) (411,062) (195,601) (378,696) Private pension entity (98,043) (196,056) (80,485) (159,636) Third-party services (137,987) (281,149) (148,737) (281,747) Material (16,632) (33,376) (21,234) (40,428) Construction cost (238,710) (458,757) (180,054) (322,021) Provision/Reversal allowance for doubtful accounts, net (45,664) (103,739) (91,995) (157,333) Provision/Reversal for Legal Proceedings and Others, net (6,240) (24,626) (23,830) (25,528) Depreciation and amortization (130,318) (257,859) (120,092) (235,770) Other operating expenses (71,064) (169,772) (68,841) (176,081) 3.03 Gross Income 131, ,474 70, , Income before finance results and taxes 131, ,474 70, , Finance income (expenses) (79,276) (162,220) (58,028) (75,248) Finance income 77, , , , Finance expenses (156,805) (320,521) (160,974) (305,253) Finance expenses (146,245) (313,722) (182,882) (346,721) Net foreign exchange differencies (10,560) (6,799) 21,908 41, Pre-Tax Income 52,608 78,254 12,602 60, Income taxes and social contribution (21,172) (34,238) (9,152) (26,697) Current (3,699) (7,560) (4,695) (9,330) Deferred (17,473) (26,678) (4,457) (17,367) 3.09 Net income from continued operations 31,436 44,016 3,450 34, Net income/loss for the period 31,436 44,016 3,450 34, Earnings per share - (Reais/Share) Basic ON PN Diluted ON PN Page 5 of 102

10 IQ Quarterly Financial Information ELETROPAULO METROPOLITANA ELETRICIDADE DE SÃO PAULO S.A. Individual Financial Information/Statement of Comprehensive Income (In Thousands of Reais) Code Description Current quarter 04/01/2017 to 06/30/2017 Prior Year Accumulated 01/01/2017 to 06/30/2017 Same Quarter of Prior Year 04/01/2016 to 06/30/2016 Prior Year Accumulated 01/01/2016 to 06/30/ Net income of the period 31,436 44,016 3,450 34, Other comprehensive income - - (658,865) (706,755) Actuarial valuation adjustment - - (998,281) (1,070,841) Income tax and social contribution on actuarial valuation adjustment , , Comprehensive income for the period 31,436 44,016 (655,415) (672,705) Page 6 of 102

11 IQ Quarterly Financial Information ELETROPAULO METROPOLITANA ELETRICIDADE DE SÃO PAULO S.A. Individual Financial Information/Statement of Cash Flows Indirect Method (In thousands of Reais) Code Description Prior Year Accumulated 01/01/2017 to 06/30/2017 Prior Year Accumulated 01/01/2016 to 06/30/ Net cash operating activities 342,643 1,052, Cash from operating activities 879, , Net income for the period 44,016 34, Depreciation and amortization 257, , Monetary and foreign exchange variation 9,111 8, Monetary variation of financial assets related to concession (31,797) (92,176) Allowance for doubtful accounts, Net 122, , Provision for Legal Proceedings and Others, Net 46,564 54, Cost of loans and financing (charges on debt) 225, , Pension Fund/Health Plan - CVM Deliberation No , , Interest on short-term investments (32,563) (34,486) Disposal of financial asset, intangibles to the concession agreement and PP&E 16,980 15, Deferred income taxes and social contributions 26,678 17, Shares and stock options granted Changes in assets and liabilities (57,667) 642, Consumers, concessionaires and permit holders (91,529) 209, Accounts receivable agreements (17,727) (30,226) Inventories (7,525) (23,797) Recoverable income tax and social contribution (2,597) 9, Other recoverable taxes (12,628) 11, Prepaid expenses (7,166) (1,264) Other credits (11,370) 64, Financial sector assets and liabilities 232,939 1,479, Labor and social liabilities 13,446 20, Trade accounts payable 53,220 (678,565) Income and social contribution payable Other taxes payable (57,642) 41, Sector charges (145,614) (438,021) Other liabilities (3,474) (21,837) Others (479,581) (431,440) Interest paid (charges on debt), net of capitalized interest (239,413) (249,566) Payment of income taxes and social contribution (9,682) (8,987) Payment of liabilities with pension plan entity (226,036) (173,373) Payment of Legal Proceedings and Others (43,310) (37,518) Cash interest on short-term investments received 38,860 38, Net cash investing activities (356,673) (1,121,289) Acquisitions of PP&E and intangible assets (526,988) (347,643) Financial participation of consumers 52,454 33, Purchase of short-term investments (3,542,959) (5,392,442) Sales of short-term investments 3,675,087 4,573, Purchase/sale of guarantees and judicial deposits (14,267) (16,572) Cash received on sale of property, pland and equipament and intangibles - 28, Net cash financing activities 14,736 61, New loans and debentures 326, , Payments of loans and debentures (principal) (259,817) (127,509) Cost of loans and debentures (transaction costs and premium) (36,858) (4,909) Payment of capital leasing (15,481) (10,427) Dividends and interest on shareholders' equity paid (4) Increase (reduction) in cash and cash equivalents 706 (8,153) Cash and cash equivalents - beginning balances 198, , Cash and cash equivalents - closing balances 199, ,468 Page 7 of 102

12 IQ Quarterly Financial Information ELETROPAULO METROPOLITANA ELETRICIDADE DE SÃO PAULO S.A. Individual Financial Information/Information of changes in shareholders' equity - 01/01/2017 to 06/30/2017 (In thousands of Reais) Code Description Capital Stock Capital reserve, Granted Options and Treasury Shares Income reserves Retained earnings/losses Other comprehensive income Shareholders' equity Total 5.01 Beginning balances 1,257, ,452 1,323,486 - (578,755) 2,694, Adjusted beginning balances 1,257, ,452 1,323,486 - (578,755) 2,694, Shareholders' Capital Transactions Granted Options Recognized Total comprehensive income ,016-44, Net income for the period ,016-44, Internal changes in shareholders' equity accounts 65,857 - (65,857) 36,904 (36,904) Realization of equity valuation adjustment ,915 (55,915) Income tax and social contribution on equity valuation adjustments (19,011) 19, Capital increase 65,857 - (65,857) Closing balances 1,323, ,838 1,257,629 80,920 (615,659) 2,739,214 Page 8 of 102

13 IQ Quarterly Financial Information ELETROPAULO METROPOLITANA ELETRICIDADE DE SÃO PAULO S.A. Individual Financial Information/Information of changes in shareholders' equity - 01/01/2016 to 06/30/2016 (In thousands of Reais) Code Description Capital Stock 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 9 of 102

14 IQ Quarterly Financial Information ELETROPAULO METROPOLITANA ELETRICIDADE DE SÃO PAULO S.A. Individual Financial Information/Statement of Value Added (In thousands of Reais) Code Description Prior Year Accumulated Prior Year Accumulated 01/01/2017 to 06/30/ /01/2016 to 06/30/ Revenues 9,882,092 10,262, Sales of goods, products and services 5,004,570 5,976, Other revenues 4,522,504 4,120, Construction revenue of own assets 458, , Allowance (Reversal) for doubtful accounts (103,739) (157,333) 7.02 Inputs acquired from third parties (4,952,946) (4,909,267) Cost of products, goods and services (4,065,932) (4,129,164) Materials, Energy, Services and other (721,709) (593,545) Others (165,305) (186,558) Other operating expenses (165,305) (186,558) 7.03 Gross value added 4,929,146 5,352, Retention (257,859) (235,770) Depreciation, amortization and exhaustion (257,859) (235,770) 7.05 Net value added 4,671,287 5,117, Value added received by transfer 158, , Financial income 158, , Total value added to be distributed 4,829,588 5,347, Distribution of total value added 4,829,588 5,347, Personnel 601, , Direct wages and salaries 383, , Fringe benefits 196, , FGTS 22,060 17, Taxes, fees and contributions 3,845,270 4,467, Federal 2,075,082 2,420, State 1,746,158 2,025, Other operating expenses 24,030 21, Third party capital remuneration 338, , Interest 320, , Rental 18,113 11, Shareholders' equity remuneration 44,016 34, Retained earnings /losses for the period 44,016 34,050 Page 10 of 102

15 IQ Quarterly Financial Information ELETROPAULO METROPOLITANA ELETRICIDADE DE SÃO PAULO S.A. 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, 2017, the Company served approximately 7.1 million consumers units and billed for electric energy distribution services 16,626 GWh. Page 11 of 102

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 In thousand of reais 1S17 1S16 Change R$ Change % Supply of electricity 8,558,321 10,124,740 (1,566,419) -15.5% Availability of transmission and distribution system - TUSD 510, ,094 30, % Other operating income 916,964 (185,461) 1,102, % Gross operating revenue 9,985,831 10,419,373 (433,542) -4.2% Deductions from gross revenue (4,119,481) (4,738,677) 619, % Net operating revenue 5,866,350 5,680, , % Cost of eletric energy (Parcel A) (3,689,480) (3,767,461) 77, % Operating costs (Parcel B) (1,936,396) (1,777,240) (159,156) 9.0% Operating costs (5,625,876) (5,544,701) (81,175) 1.5% Service income (Gross profit) 240, , , % Financial income (expenses) (162,220) (75,248) (86,972) 115.6% Income tax and social contribution 78,254 60,747 17, % Income taxes and social contribution (34,238) (26,697) (7,541) 28.2% Net income for the period 44,016 34,050 9, % During the semester ended June 30, 2017 the Company reported a net income of R$ 44,016, compared to a net income of R$ 34,050 for the same semester last year. The following items explain the main factors that influenced the increase of 29.3% 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 semester ended June 30, 2017 and 2016 amounts of R$ 5,866,350 and R$ 5,680,696, respectively. Operating Revenue (thousand R$) 1S17 1S16 Change % 1S17 1S16 Change % Supply of electricity 8,558,321 10,124, % 16,626 17, % Availability of transmission and distribution system - TUSD 510, , % 5,024 3, % Revenue from construction 458, , % Unbilled revenue (60,958) (62,040) -1.7% Short-term energy 89, , % 983 1, % Grants de resource of CDE 152, , % Financial sector assets and liabilities 56,658 (989,749) % PIS/COFINS - Rate differential 31,566 33, % Monetary variation of financial assets related to concession 31,797 92, % Ressarcimento - Bilateral agreement burden 77,661 - N/A Other revenue 79,945 70, % Gross operating revenue 9,985,831 10,419, % 22,633 23, % Deductions from gross operating revenue: (4,119,481) (4,738,677) -13.1% Sector charges (1,458,632) (1,732,115) -15.8% Tax charges (2,660,849) (3,006,562) -11.5% Net operating revenue 5,866,350 5,680, % Consumption (in GWh) The increase of R$ 185,654 or 3.3% of net operating revenue is explained mainly by: increase of R$ 1,046,407 in the regulatory financial assets and liabilities, particularly due to (i) the regulatory financial assets constituted (deferred) in the electric energy Page 12 of 102

17 purchase in virtue of the average price increase by higher thermal dispatches at a higher PLD and higher hydrological risk constitution; (ii) the constitution of regulatory financial assets in virtue of the return of Angra III and reduction of the CDE coverage in 2017, compared to 2016; partially offset by (iii) the unintentional overcontracting in virtue of the increased PLD and decreased ESS costs; reduction of R$ 619,196 in the deductions from the gross operating revenue, allocated to: (i) the sector charges, which decreased by R$ 273,483, particularly due to the smaller transfers to the Centralizing Tariff Flag Fund Accounts (CCRBT) in the amount of R$ 49,691, in virtue of the effectiveness of the green tariff flag in January, February and June 2017, and yellow tariff flag in March 2017 (the flag was red in April and May 2017), and the decrease by R$ 249,773 of the Energy Development Account (CDE) charges in 1S17; and (ii) the tax charges (ICMS, COFINS, PIS and ISS) that decreased by R$ 345,713, following the lower gross taxable revenue assessed in 1S17; increase by R$ 136,736 of the revenue from constructions due to the higher investment level in infrastructure of the concession in 1S17, focusing on the expansion of the service network and improvement in energy distribution services. The investments directly affected the construction revenue; however, the impact on the margin is zero. recognition of R$ 77,661 arising from the reimbursements of generation companies executing bilateral agreements with the Company for purposes of reducing agreements in compliance with the Normative Resolution No. 711, 2016; increase by R$ 30,452 or 6.3% in TUSD revenue, particularly explained by the migration of consumer units from the captive market, influencing an increased consumption by 26.3%. The factors above were partially offset by: supply reduction of the electric energy supply, which have been decreased by R$ 1,566,419 or 15.5% particularly caused by(i) the 2016 tariff adjustment, with average effect of -8.10% to the consumer, with the new tariffs in force from July 4, 2016; and (ii) the consumption from the captive market, which decreased by 6.3% particularly justified by the migration of consumer units to the free market. It is worth noting the residential class consumption, which increased by GWh or 2.1%, is still particularly influenced by the warmer temperatures in 1Q17; the reduction of R$ 135,333 or 60.2% of the revenue from the sales of energy at the spot market, due to the lower overcontracted energy volume in 1S17, a reflection of the strategy of executing bilateral agreements and bidding in MCSDs, partially offset by the increased the PLD in 1S17 x 1S 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. In the semester ended June 30, 2017, operating costs increase by 1.5% when compared to the same semester previous year, are as follows: Page 13 of 102

18 In thousands of Reais 1S17 1S16 Change R$ Change % Electricity purchased for resale / Proinfa (3,304,702) (3,177,170) (127,532) 4.0% Distribution and transmission usage charge (384,778) (590,291) 205, % Electric energy costs (Parcel A) (3,689,480) (3,767,461) 77, % Personnel and management compensation (411,062) (378,696) (32,366) 8.5% Private pension entity (196,056) (159,636) (36,420) 22.8% Third-party services and material (314,525) (322,175) 7, % Construction costs (458,757) (322,021) (136,736) 42.5% Depreciation and amortization (257,859) (235,770) (22,089) 9.4% Others costs (298,137) (358,942) 60, % Operating costs (Parcel B) (1,936,396) (1,777,240) (159,156) 9.0% Operating costs (5,625,876) (5,544,701) (81,175) 1.5% Electric 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, 2017, the electricity purchased by the Company was as follows: Electricity purchased for resale/proinfa increase by R$ 127,532 or 4.0% totaling R$ 3,304,702 in 1S17 and R$ 3,177,170 in 1S16. The following factors explain this performance: Hydrological Risk - Quotas and Itaipu - increase by R$ 261,147 justified by the low turnout in 2017, adversely affecting the GSF of the sector. The factors above were partially offset by: Purchase - CCEAR - reduction by R$ 98,458 explained by the volume of purchased energy in 1S17 being lowered by 18.3% in relation to 1S16, a consequence of the bilateral agreements executed under the Normative Resolution No. 711/2016, and the Company's bidding in MCSDs; Page 14 of 102

19 Electric energy purchased for resale - PROINFA - reduction of R$ 45,784, justified by 5.8% reduction in the purchased energy volume and reduction of PROINFA funding quotas for The graph below shows the evolution of purchased energy volume (in GWh) between the semester ended June 30, 2017 and 2016, by type of contract. Distribution and transmission used charges The composition of charges is as follow: Reduction of R$ 205,513 or 34.8% is basically due to (i) the lower ESS/EER costs by R$ 127,111 in 1S17, due to the lower dispatch from thermal power plants out of the merit order, not reflected in the energy price at the spot market, and (ii) to the adjustments referring to the retroactive relief and the financial funds of the Reserve Energy Account (CONER) recorded in 1S17 in the amount of R$ 77, Operating costs The operating costs amounted to R$ 1,936,396 in 1S17, comprised of the PMSO costs in the amount of R$ 1,023,724 and the private pension entity costs, depreciation and amortization costs and construction cost in the amount of R$ 912,672: PMSO (Personnel, Material, Services and Other): 1S17 1S16 Change R$ Change % Basic net work use (293,134) (300,306) 7, % System service charge - ESS/EER (160,919) (288,030) 127, % (-) Adjustments referring to the retroactive relief 35,460-35,460 N/A (-) Financial resources of the Reserve Energy Account - CONER (i) 42,331-42,331 N/A Energy transportation - Furnas/Itaipu (24,213) (22,938) (1,275) 5.6% National system operator - ONS (11,680) (13,720) 2, % Contract for distribution system use - CUSD (3,181) (3,365) % Connection basic network - CTEEP (20,310) (20,701) % (-) Pis/Cofins tax credits 50,868 58,769 (7,901) -13.4% Total transmission and distribution system usage charges (384,778) (590,291) 205, % PMSO costs amounted to R$ 1,023,724 in 1S17, were lowered by R$ 36,089 or 3.4% than in 1S16. The variations in the following accounts explained such performance: Page 15 of 102

20 Material and third party services: reduction by R$ 7,650 or 2.4%, particularly due to the lower expenses with the pruning process, in virtue of the alteration of the scope for selective pruning, reducing the service volume without compromising its level; partially offset by the higher expenses with cut-off and collection actions, in order to reduce the delinquency levels. Other operating expenses: reduction by R$ 60,805 or 16.9%, particularly explained by (i) the reduction by R$ 53,594 of the expenses with provision for net doubtful accounts (PCLD), particularly explained by the implementation of collection actions focused on customers with higher average ticket, by the reduction of the delinquent customer volume in 1S17, when compared to 1S16, and the lower average ticket in 1S17; and (ii) the reduction by R$ 20,915 of DIC/FIC/DMIC/DICRI fines, reflecting the improvement in the Company's quality indicators. The factors above were partially offset by: Personnel and management officers: increase of R$ 32,366 or 8.5% particularly due to the (i) the compensation and benefit adjustment in virtue of the 2016/2017 collective bargaining agreement; (ii) higher expenses with termination and retirement incentive program; and (iii) the higher expenses with medical assistance in virtue of the medical inflation in the period. Private pension entity, depreciation and amortization and construction cost Such costs amounted to R$ 912,672 in 1S17, higher by R$ 195,245 or 27.2% than that in 1S16. The variations in the following accounts explained such performance: Private retirement plan entity: increase of R$ 36,420 or 22.8% particularly due to the decrease of the discount rate, along with decrease of NTN-B in the actuarial assessment in the closing of 2015 from 7.30% to 5.80% in the actuarial assessment in the closing of Depreciation and amortization: increase of R$ 22,089 or 9.4%, particularly due to the higher software activations, from April 2016, and intangible assets of the concession, generating an increment in the depreciation and amortization expenses in virtue of the higher base of assets subject to depreciation and amortization. Construction cost: increase by R$ 136,736 or 42.5% due to the higher investment level in infrastructure of the concession in 1S17, focused on the expansion of the service network and improvement in energy distribution services. The investments directly affected the construction cost; however, the impact on the margin is zero. 2.3 Finance Results 1S17 1S16 Change R$ Change % Finance income 158, ,005 (71,704) -31.2% Finance expenses (313,722) (346,721) 32, % Net foreign exchange differencies (6,799) 41,468 (48,267) % Finance Results (162,220) (75,248) (86,972) 115.6% In 1S17, the net finance income was an expense of R$ 162,220, R$ 86,972 or 115.6% higher than the expense registered in 1S16, particularly due to the following factors: Page 16 of 102

21 increase of R$ 46,723 from the expense related to the inflation adjustment of the regulatory financial assets and liabilities, due to the greater constitution of regulatory financial liabilities in the previous tariff cycle; decrease of R$ 25,103 from the finance revenues of penalties, interests and inflation adjustments on overdue electricity bills, reflecting the reduction of average ticket and the improvement in the Company's delinquency levels; negative effect of R$ 49,034 of the foreign exchange rate differencies due to the purchase of energy from Itaipu, particularly explained by the US Dollar variation between the date of provision and date of invoice payment; The above factors were offset partially by: reduction of the interest charges by R$ 53,456, particularly due to (i) the lower interest rate between the compared semesters, since the average CDI rate in 1S17 was 11.81%, whereas it was 14.13% in 1S16; and (ii) the lower debt of the Company in 1S17, versus 1S Earnings before income tax The earnings before income tax reached R$ 78,254 in 1S17, higher by R$ 17,507 or 28.8% when compared to 1S16, particularly explained by (i) the increase in net operating revenues by R$ 185,654; (ii) the reduction of Parcel A costs in the amount of R$ 77,981, particularly in virtue of the of ESS charges and registration in 1S17 of the adjustments referring to the retroactive relief and CONER; (iii) reduction by R$ 36,089 in PMSO costs, particularly in virtue of the reduction of the PCLD expenses and DIC/FIC/DMIC/DICRI fines; partially offset by (iv) the increase by R$ 195,245 of the private pension entity expenses, depreciation and amortization and construction cost; and (v) the higher expense, in the amount of R$ 86,972, of financial result. 2.5 Income tax and social contribution The expenses of the income tax and social contribution present an increase by R$ 7,541 or 28.2% in 1S17, when compared to 1S16, following the increase by 28.8% of the earnings before income tax. The increase in R$ 9,311 of the deferred income tax and social contribution was particularly influenced by the performance of tax credits and tax benefit related to the goodwill incorporated into the corporate reorganization completed in 2016, partially offset by the reduction by R$ 1,770 of the current income tax and social contribution. Page 17 of 102

22 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 Holdings Brasil Ltda ( AES Holdings Brasil ), and 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 in Brazil, Barueri Municipality, State of Sao Paulo at Avenue Dr. Marcos Penteado de Ulhôa Rodrigues, 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, ZIP Code The Company, as mentioned in note 24, billed for electric energy distribution services 16,626 GWh and 17,741 GWh for the semester ended June 30, 2017 and 2016, serving approximately 7.1 million and 7.0 million consumers for the semester ended June 30, 2017 and 2016, 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, Corporate reorganization On December 30, 2016, the corporate reorganization process involving the Company and its former controlling companies AES Elpa S.A. ( AES Elpa ) and Brasiliana Participações S.A. ( Brasiliana Participações ) was completed. The Reorganization was performed by means of partial spin off of Brasiliana Participações and AES Elpa, with the merger of the respective spun-off archives by the Company. With the implementation of the Reorganization, AES Elpa ceased to hold the direct control of the Company, currently held by AES Holdings Brasil. The main purposes of the corporate reorganization were: (i) the simplification of the Company's shareholding and organizational structure; (ii) better efficiency in the decision-making process by means of a new shareholders' agreement; (iii) improvement in the investment liquidity and increase of future cash flow generation of the Company of R$ 693,897 until the end of the concession, which shall contribute to the reduction of its debt level; and (iv) mechanisms for better liquidity for AES Elpa's non-controlling shareholders by means of direct shareholding at the Company. Detailed information on the corporate reorganization was disclosed in the note No. 1 of the financial statements referring to December 31, Page 18 of 102

23 1.2 Proposal for migration to Novo Mercado In furtherance to the corporate reorganization which occurred on December 30, 2016, among other purposes, sought to promote higher liquidity for the Company's shares, its shareholders continue to evaluate strategic options for the Company. At the Board of Directors' Meeting held on February 23, 2017, the plan to migrate the Company's shares to the Novo Mercado segment was approved. The purposes of this initiative are: (i) increase the corporate governance and transparency from the extension of voting rights to all shareholders; (ii) increase the investment capacity necessary to for the company s growth, to the extent that it facilitates new funding by the Company, expecting the reduction of its cost of capital; and (iii) leverage the liquidity of the shares publicly traded by the Company, by consolidating the trading of securities exclusively into common stocks, increasing the attractiveness for new investors. The Company's management has already been successful in obtaining of all regulatory approvals in its Bylaws, to be in force with the share listing in the Novo Mercado. Currently, it is working in the documents to be presented to its shareholders in order to approve the migration and conversion of preferred stocks into common stocks. The Company will keep its shareholders and the market informed regarding the evolution of this matter. 2 Basis of preparation and presentation of the Interim Financial information The Company s Executive Board authorized the conclusion of the preparation of interim financial information on July 24, 2017 submitting such documents, at this date, to the analysis of the Board of Directors and to the Fiscal Council. 2.1 Declaration of conformity Interim financial information of the Company was prepared and are being presented for the semester ended June 30, 2017 in accordance with the CPC 21 (R1) intermediate statement, issued by the Accounting Pronouncements Committee (CPC) and in a manner consistent with the standards issued 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, 2017 are also in accordance with IAS 34 Interim Financial Reporting issued by the International Accounting Standards Board ( IASB ). The Interim financial information were prepared using historical cost, as basis of value, except for revaluations recorded intangible in 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. The numbers of consumer units were not reviewed by the independent auditors. Page 19 of 102

24 Operational continuity At June 30, 2017, based on facts and circumstances existing as of this date, Management evaluated Company's capacity to continue regularly doing business and is convinced that its operations are capable of generating resources to keep its business in the future. Additionally, Management is not aware of any material uncertainty that may generate significant doubts on its capacity to keep doing business in the future. Therefore, these Interim financial informations were prepared based on the assumption of continuity. This statement is based on Management's expectations regarding the Company's future and is consistent with its business plan. The Company prepares at the beginning of each year, an annual and a five-year business plan, which comprise the annual and multiannual budgets, all CAPEX, strategic plans and maintenance plans of the Company's facilities. The plans are monitored during the fiscal year by the Company s Governance Authorities, and they may be subjet to changes. Business segment All decisions made by the Company's Management are based on consolidated reports, the energy distribution service is provided by using integrated distribution facilities which are managed under consolidated basis. Consequently, the Company concluded that it has only the energy distribution service segment as reporting. Empresas.Net system In the Statement of Changes in Shareholders Equity of CVM s Empresas.Net System, used for purposes of preparing and sending documents to the CVM and BM&FBovespa, the equity valuation adjustment, although it does not correspond to "Other Comprehensive Income", is presented in the column as such, since there is not a better appropriate option for the presentation of such transactions. 2.3 Functional currency, translation of balances and transactions in foreign currency (a) Functional and presentation currency The Interim financial information was 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 in the functional currency, are translated at the effective exchange rate on the date of each transaction. Monetary assets and liabilities denominated in foreign currency are translated into the functional currency spot rate of exchange rate ruling at the reporting period-end. 3 Accounting policies and estimates The Company s interim financial information were prepared based on the same accounting practices, judgments and accounting estimates described in notes from 4.1 to 4.16 disclosed in the financial statements for the year ended December 31, Page 20 of 102

25 4. Cash and cash equivalents and short-term investments Cash and cash equivalents: Cash on bank 7,298 9,966 Cash in transit 124,256 48,711 CDB-DI (i) 67,925 - Repurchase agreement (i) - 140,096 Total 199, ,773 Short-term investment: CDB-DI (i) 725, ,552 Repurchase agreement (i) 4, ,301 Investment fund 2,112 1,005 Subtotal 732, ,858 Total 931,889 1,067,631 (i) Bank Deposit Certificates (CDB) and Repurchase Agreements were remunerated, at an average of 97.30% of CDI for the semester ended June 30, 2017 (98.38% for the year ended December 31, 2016) subject to be redeemed at any time without any revenue impairment with the issuer itself. 5. Consumers, concessionaires and permissionaires The breakdown of consumers, concessionaires and permissionaires is as follows: Balances falling due up to 90 days Balances past-due over 90 days CURRENT Consumers - Supply and others: Residential 311, ,227 65, ,531 (68,805) 666,726 Industrial 75,600 32,367 20, ,946 (10,678) 118,268 Commercial 201,687 48,076 19, ,996 (5,088) 263,908 Rural Public sector 39,032 15,286 13,435 67,753 (151) 67,602 Public lightening 20,852 16,133 3,402 40,387-40,387 Public service 31,260 3, ,733-34,733 Service others 11,105 5,980 2,876 19,961 (8) 19,953 Consumers - Financial participation 8,509 2,319 4,595 15,423-15,423 Total billed 699, , ,526 1,311,887 (84,730) 1,227,157 Unbilled 720, , ,212 Total 1,419, , ,526 2,032,099 (84,730) 1,947,369 Concessionaires and permittees: Spot market - CCEE 105, , ,518 Use of energy grid charges Reimbursement - energy auctions 5, ,313-5,313 Total 110, , ,936 Total - CURRENT 1,530, , ,526 2,143,035 (84,730) 2,058,305 NON CURRENT Consumers - Supply: Public lightening (judicial claims) ,443 26,443-26,443 Total - NON CURRENT ,443 26,443-26,443 Total - current + non current 1,530, , ,969 2,169,478 (84,730) 2,084,748 Total ADA (*) Net balance Page 21 of 102

26 Balances falling due up to 90 days Balances past-due over 90 days Total ADA (*) Net balance CURRENT Consumers - Supply: Residential 317, ,613 76, ,335 (79,696) 649,639 Industrial 55,651 39,263 28, ,550 (11,127) 112,423 Commercial 214,004 65,844 23, ,049 (9,397) 293,652 Rural (1) 169 Public sector 35,848 18,993 4,327 59,168 (176) 58,992 Public lightening 19,288 2, ,395-22,395 Public service 48,035 3,343 5,646 57,024 (1,893) 55,131 Total billed 690, , ,614 1,294,691 (102,290) 1,192,401 Unbilled 745, , ,137 Total 1,435, , ,614 2,039,828 (102,290) 1,937,538 Concessionaires and permittees: Spot market - CCEE 123, , ,351 Use of energy grid charges Reimbursement - energy auctions 4, ,082-4,082 Total 127, , ,660 Total - CURRENT 1,562, , ,614 2,167,488 (102,290) 2,065,198 NON CURRENT Consumers - Supply: Public lightening (judicial claims) ,534 25,534-25,534 Total - NON CURRENT ,534 25,534-25,534 Total - current + non current 1,562, , ,148 2,193,022 (102,290) 2,090,732 (*) Allowance for doubtful accounts (ADA) refer to note 7. Consumers choose the due dates of their monthly bills. For overdue amounts, there is an interest rate of 0.033% per day and a penalty of 2% on overdue customer bills. 6. Accounts receivable agreements The breakdown of accounts receivable - agreements is as follows: CURRENT Acknowledgement of debt: Consumers 314, ,131 Others Subtotal 314, ,886 ADA - explanatory note 7 (223,179) (201,872) Balance net of ADA 91,727 90,014 NON-CURRENT Acknowledgment of debt: Consumers 16,900 22,193 Subtotal 16,900 22,193 ADA - explanatory note 7 (9,672) (15,350) Balance net of ADA 7,228 6,843 Total current and non current 98,955 96,857 Accounts receivable by maturity date is: Balances falling due Balances past-due up to 90 days over 90 days Consumers 115,731 29, , ,806 Subtotal 115,731 29, , ,806 ADA (41,813) (16,716) (174,322) (232,851) Balance net of ADA - current and non current 73,918 13,094 11,943 98,955 Total Page 22 of 102