HIGHLIGHTS TRACTEBEL ENERGIA reports EBITDA of R$ 516.5 million in 3Q08 Average net sale contract prices 13.4% higher than 3Q07, excluding exports Florianópolis, SC, November 7, 2008 Tractebel Energia S.A. (Tractebel) - Bovespa: TBLE3, ADR: TBLEY, the largest private sector electricity generating company in Brazil, announces earnings for the third quarter 2008 (3Q08). The information in this release is shown on a consolidated basis and in accordance with Brazilian accounting principles and practices. The values are expressed in Reals, except where otherwise indicated. Xz\ Net consolidated operating revenue in 3Q08 amounted to R$ 866.2 million, a growth of 1.4% compared with 3Q07, reflecting an increase in average prices of energy sales. Unlike 3Q07, in the quarter under review Tractebel Energia did not export thermoelectricity in any significant volume to neighboring countries. The average price of sales contracts in 3Q08, net of deductions, reached R$ 101.5/MWh, 4.5% higher than the average price for the same period in 2007 - R$ 97.1/MWh. The increase was largely the result of higher average prices passed on to trading companies and free consumers. Disregarding exports, the values would have been R$ 101.1/MWh and R$ 89.1/MWh, respectively, an increase of 13.4%. EBITDA grew 0.7% in 3Q08 from R$ 513.0 million in 3Q07 to R$ 516.5 million, again a reflection of higher energy contracting prices. Reported net income for the quarter was R$ 228.7 million, corresponding to R$ 0.35 per share. On October 14, ANEEL approved the transfer of the corporate control of Tupan Energia Elétrica S.A. and Hidropower Energia S.A. to Tractebel Energia through Gama Participações Ltda. Tupan and Hidropower are the authorized operators of SHPs (small hydro plants) Rondonópolis and José Gelazio da Rocha, respectively. With these acquisitions, Tractebel Energia adds 50.3 MW in to its generating capacity. Tractebel Energia s Board of Directors approved at its meeting on November 7, 2008, the record of interest on shareholders equity relative to the period from January 1 to December 31, 2008, in the amount of R$ 176.0 million (R$ 0.2696317201 per share). 3Q08 For immediate release Additional information may be obtained by contacting the Investor Relations dept.: Manoel Zaroni Torres Finance and IR Director in office and Chief Executive Officer Antonio Previtali Jr. IR Manager previtali@tractebelenergia.com.br Phone: + 55 48 3221-7221 Conference Call and Webcast On 11/10/08: at 07:00 a.m. in Portuguese at 09:00 a.m. in English (both ET) Further details on Upcoming Events section, available on page 13. The Company approved a change in the ratio of ADRs to common shares in order to increase the liquidity of the ADR program. As from October 8, 2008, one ADR is equivalent to one common share. Visit our website www.tractebelenergia.com.br Tractebel Energia was the winner among the most shareholder-friendly companies of 2008 in the III Capital Aberto Ranking sponsored by the Capital Aberto magazine for the R$ 15 billion plus category in market capitalization. The ranking recognizes outstanding companies based on EVA, earnings per share, liquidity, corporate governance and sustainability. Summary of economic and operational indicators Tractebel - Consolidated Quarter Accumulated In Millions of R$ 3Q08 3Q07 Chg. 9M08 9M07 Chg. Gross operating revenue 966.3 928.7 4.0% 2,881.6 2,502.5 15.1% Net operating revenue (NOR) 866.2 854.4 1.4% 2,590.7 2,261.6 14.6% Result from service (EBIT) 446.1 453.6-1.6% 1,451.4 1,175.2 23.5% EBITDA (1) 516.5 513.0 0.7% 1,648.6 1,351.9 21.9% EBITDA / NOR - (%) 59.6 60.0-0.4 p.p. 63.6 59.8 3.8 p.p. Net income 228.7 272.9-16.2% 839.5 744.6 12.8% Net debt 1,769.2 877.2 101.7% 1,769.2 877.2 101.7% Energy sold (avg MW) 3,506 3,903-10.2% 3,482 3,759-7.4% Number of employees 937 911 2.9% 937 911 2.9% (1) EBITDA represents: operating results + financial results + depreciation and amortization
OPERATING PERFORMANCE Generating Complex Tractebel Energia, the largest private sector electricity generator in Brazil, operates a generating complex with a 7,203 MW capacity made up of 16 plants (nine hydro and seven thermoelectric plants), 14 of which are wholly owned by the Company and two (the Itá and Machadinho plants) operated through consortia with other companies. Power plants Hydro/ Location Installed Capactity (MW) Thermal Total Tractebel's portion Salto Santiago Hydro Iguaçu River (PR) 1,420 1,420 Salto Osório Hydro Iguaçu River (PR) 1,078 1,078 Passo Fundo Hydro Passo Fundo River (RS) 226 226 Itá Hydro Uruguai River (SC and RS) 1,450 1,127 Machadinho Hydro Uruguai River (SC and RS) 1,140 404 Cana Brava Hydro Tocantins River (GO) 450 450 Ponte de Pedra Hydro Correntes River (MT) 176 176 SHP José Gelazio da Rocha Hydro Ponte de Pedra Creek (MT) 24 24 SHP Rondonópolis Hydro Ponte de Pedra Creek (MT) 27 27 Total - Hydro 5,990 4,931 Jorge Lacerda Complex* Thermal Capivari de Baixo (SC) 857 857 Charqueadas Thermal Charqueadas (RS) 72 72 Alegrete Thermal Alegrete (RS) 66 66 William Arjona Thermal Campo Grande (MS) 190 190 Lages Thermal Lages (SC) 28 28 Total - Thermal 1,213 0.0 1,213 0.0 Total 7,203 6,144 (*) Complex comprised of 3 power plants. Projects under Construction Tractebel Energia's Generating Complex New Projects Power plants Hydro/ Location Installed Capactity (MW) Thermal Total Tractebel's portion São Salvador Hydro Tocantins River (TO) 243 243 Estreito Hydro Tocantins River (TO/MA) 1,087 435 Andrade Thermal Pitangueiras (SP) 33 17 Total 1,363 695 São Salvador. In 2Q07 Tractebel Energia acquired the total common and preferred shares issued by Company Energética São Salvador CESS and owned by SUEZ Energy South America Participações Ltda. SESA, representing 99.99% of the voting capital and 99.99% of the total capital of CESS. This company is the owner of the São Salvador hydroelectric concession, which has an installed capacity of 243.2 MW and 148.5 average MW of assured energy. For this acquisition, Tractebel paid SESA R$ 304.0 million cash in local currency, to which will be added a further R$ 18.0 million should the starting date for payments relative to the use of public good charge (UBP) coincide with the beginning of the supply of electricity originally scheduled for 2011 in the Regulated Market Electricity Commercialization Contracts CCEARs. In October 2006 CESS sold this energy through the 3rd New Energy Auction to distributors that participate in the Regulated Contracting Environment ACR, for a 30-year period, beginning January 2011. Commercial operations are expected to begin in the first quarter of 2009. 2
Estreito. The Estreito Hydroelectric Power Plant, under construction on the Tocantins River on the boundary between the states of Tocantins and Maranhão, is one of the largest generation projects in Brazil and will have an installed capacity of 1,087 MW. The project is controlled by the Consórcio Estreito, composed of SESA, which holds a stake of 40.1%, Company Vale do Rio Doce with 30.0%, Alcoa Alumínio with 25.5% and Camargo Corrêa Energia with 4.4%. In the new energy auction held on October 16, 2007, SESA sold 256 average MW output from this scheme at a price of R$ 126.57/MWh, deliveries to begin from 2012. Andrade. The Andrade Thermoelectric Power Plant, under construction in the municipal district of Pitangueiras, state of São Paulo, will have an installed capacity of 33 MW. It is to operate with sugarcane bagasse, a byproduct from Andrade Açucar e Álcool S.A. s (Guarani Group) sugar refining and ethanol distilling unit. The project is being developed by the Andrade Consortium, the component members of which are Ibitiúva Bioenergética S.A. (a subsidiary company of Tractebel Energia) with a 71.2% stake and Andrade Açúcar e Álcool S.A. (subsidiary of Açúcar Guarani S.A.) with the remaining 28.8% of the capital stock. At the 1 st Reserve Energy Auction, held on August 14, 2008, the Andrade Consortium sold 20 average MW of electricity at a price of R$ 158.11/MWh, for delivery from January 1, 2010 for a period of 15 years. Uptime Operating In 3Q08, the plants operated by Tractebel Energia recorded 98.7% uptime (excluding scheduled stoppages), 99.9% in the case of hydro generation and 92.9% for thermal generation. Production In 3Q08, electric energy production from the power plants operated by Tractebel Energia reached 9,125 GWh (4,132 average MW), a decline of 8.4% compared with 3Q07, albeit a significant increase of nearly 50% quarter on quarter. Of the total generation, the hydro plants accounted for 7,777 GWh (3,522 average MW), and the thermoelectric power plants for 1,347 GWh (610 average MW). These represent reductions of 7.0% at the hydro plants and 16.2% at the thermoelectric plants, both comparisons with 3Q07. If energy export volume in 3Q07 and generation from thermoelectric sources (representing 639 GWh 239 average MW) is excluded, generation in 3Q08 would have been 36.5% higher than in the same period for the preceding year. It is worth noting in passing, that the increase or reduction in the Company s hydroelectric generation does not necessarily result in an improvement or a deterioration in its economic and financial performance in a given period analyzed. This is due to the Energy Reallocation Mechanism (MRE), which dilutes the risks of hydroelectric generation among the MRE s participants. It is also fair to say that the increase in the Company s thermal generation mitigates exposure to the spot price (PLD), the opposite also being the case, where all other variables are unchanged. Production from the José Gelazio and Rondonópolis SHPs (small hydroelectric power plants), still pending completion of the transfer process to Tractebel Energia, has not been included in third quarter figures. Generation from the Ponte de Pedra Hydroelectric Power Plant is part of the Company s portfolio since April 29, 2008, but has not been computed into the above data either, thus allowing a direct comparison with 3Q07 production figures. With the incorporation of these assets, Tractebel Energia now has proprietary installed capacity of 6,144 MW, an increase of more than 65% when compared with the 3,719 MW in September 1998 at the time of acquisition following the privatization auction. Customers Tractebel Energia has a well-diversified customer portfolio, serving energy distribution concessionaires, trading companies and free customers (large industrial consumers) through flexible contracts both in terms of duration and volume. In addition, the Company s strategy is to diversify its sales between the different segments of the economy in the free consumer segment. 3
The Company actively pursues a policy of enhancing consumer loyalty by providing tailor-made services, thus permitting the adaptation of energy purchases to the production processes of each customer. In 3Q08, the participation of free customers in the Company s portfolio reached 34.7% of physical sales and 28.6% of gross operating revenue. This represented an increase of 1.4 p.p. and 3.2 p.p., respectively, in relation to the same period last year Breakdown of Customers by Physical Sales 7% 4% 33% 35% 33% 34% 17% 22% 18% 22% 43% 43% 45% 44% 3Q07 3Q08 9M07 9M08 Breakdown of Customers by Gross Revenues 14% 25% 13% 7% 1% 29% 27% 28% 18% 13% 17% 48% 53% 53% 54% 3Q07 3Q08 9M07 9M08 Distribution Cos. Trading Companies Free Customers Export OUTLOOK AND STRATEGY The Company has opted to maintain part of its available energy on a non-contracted basis as from 2011, when forecasts for the sector indicate a potential increase in prices. Based on data of assured energy and contracts in force on September 30, 2008, Tractebel Energia s energy balance shows that the Company s current resources, including acquisitions from third parties, is almost entirely contracted through 2010. (avg MW) 2008 2009 2010 2011 2012 2013 Own Resources 3,116 3,317 3,352 3,539 3,576 3,576 Auction Reference Gross Price Adjusted + Purchases for Resale 527 476 618 278 161 265 Gross Price Date as of 09/30/2008 = Total Resources (A) 3,643 3,793 3,970 3,817 3,737 3,841 (R$/MWh) (R$/MWh) Government Auction Sales * 160 1,034 1,234 1,382 1,638 1,638 2004-EE-2007-08 10 10 10 10 10 10 70.9 Dec-04 82.8 2005-EE-2008-08 150 150 150 150 150 150 81.6 Apr-05 92.4 2005-EE-2009-08 - 381 381 381 381 381 94.0 Oct-05 107.1 2005-NE-2010-30 - - 200 200 200 200 115.1 Dec-05 129.9 2006-NE-2009-30 - 493 493 493 493 493 128.4 Jun-06 142.4 2006-NE-2011-30 - - - 148 148 148 135.0 Nov-06 148.9 2007-NE-2012-30 - - - - 256 256 126.6 Jun-07 136.1 + Bilateral Sales 3,441 2,720 2,651 1,860 1,690 1,581 = Total Sales (B) 3,601 3,754 3,885 3,242 3,328 3,219 Balance (A - B) 42 39 85 575 409 622 Sales average net price (R$/MWh) *1 : 99.1 101.3 105.4 Purchases average net price (R$/MWh) *2 : 81.0 94.4 100.3 * XXXX-YY-WWW-ZZ, where: XXXX year of auction YY EE = existing energy or NE = new energy WWWW year of delivery start ZZ supply contract duration (in years) Energy Balance *1: Sales price is net of ICMS and taxes over revenues (PIS/COFINS, R&D), as of 09/30/08. *2: Purchase net price, considering benefits from PIS/COFINS credits, as of 09/30/08. Note: The balance refers to the settlement point. It considers the energy generated by the projects São Salvador and Estreito, which start of operations are scheduled for 1Q09 and 3Q10, respectively, besides that from Ponte de Pedra HPP from May 2008 on. It also takes into consideration the energy from SHPs Rondonópolis and José Gelazio da Rocha from January 2009 on, wich are contracted under PROINFA Program. 4
ECONOMIC AND FINANCIAL PERFORMANCE Gross Operating Revenue Gross operating revenue in 3Q08 was R$ 966.3 million, 4.0% higher than the R$ 928.7 million recorded in 3Q07. Energy exports to Argentina and Uruguay fell from R$ 125.7 million in 3Q07 to R$ 4.2 million in 3Q08. Discounting the impact of these exports, gross operating revenue would have grown 19.8%. This increase reflects in large part a combination of the following factors: (i) an increase in the average gross selling price of 15.2% from R$ 98.0/MWh in 3Q07 to R$ 112.9/MWh in 3Q08; (ii) a growth of R$ 56.1 million in revenue from transactions conducted through the Energy Trading Board (CCEE), in line with the strategy for optimizing the allocation of generation resources implemented by the Company; (iii) an increase of R$ 37.2 million in energy sales by Ponte de Pedra Energética S.A. (PPESA), a subsidiary of Tractebel Energia since April 29, 2008; (iv) sale of carbon credits during the quarter worth R$ 10.0 million generated from the Lages Cogeneration Unit and already issued by the United Nations Organization s Executive Committee of the Clean Development Mechanism with Bunge Emissions Fund Limited; and (v) fall of 3.1% in energy sales volume, due to a reduction in physical guarantees of certain thermoelectric power plants as determined by ANEEL (the Brazilian Electricity Energy Agency). Gross operating revenue was also adversely impacted by the lapsing of ANEEL s authorization excluding the Company from exposure to the spot price (PLD) for the 300 MW of imported energy under the contract signed with Companhia de Interconexão Energética (CIEN). Consolidated sales declined from 8,618 GWh (3,903 average MW) in 3Q07 to 7,740 GWh (3,506 average MW) in 3Q08, largely due to the lapsing of ANEEL s authorization excluding the Company from exposure to spot prices already mentioned and to the reduction in exports. Excluding exports, sales volume would have declined from 7,979 GWh (3,614 average MW) in 3Q07 to 7,735 GWh (3,503 average MW) in 3Q08, a reduction of 3.1%. Sales Volume - amw 3,903 3,506 3,759 3,482 3Q07 3Q08 9M07 9M08 Wholesale Market for Electric Energy Revenue from sales to the wholesale market dipped slightly from R$ 687.6 million in 3Q07 to R$ 680.9 million in 3Q08. Excluding the impact from reduced exports already mentioned, wholesale market business would have increased 20.4% from R$ 561.9 million to R$ 676.7 million, principally reflecting growth in sales to trading companies and transactions through the CCEE, as well as sales revenue from the recently acquired Ponte de Pedra Energética S.A. (PPESA). 5
Retail Market for Electric Energy The retail energy market (sales to free consumers) registered an increase of 16.2% in 3Q08 compared with the same period in 2007, increasing from R$ 235.0 million to R$ 273.1 million, reflecting the ongoing effort on the part of the Company to adjust its free consumer portfolio. The increase is substantially due to higher prices for contracting energy a trend currently common in this market as a whole. Deductions from Operating Revenue In 3Q08, deductions reported a year on year increase of 34.7% from R$ 74.3 million to R$ 100.1 million. This growth is due to higher sales to free consumers and trading companies, in replacement of export revenue, which is exempt from PIS, COFINS and ICMS taxes. Net Operating Revenue In 3Q08, net operating revenue reported an improvement of 1.4% compared with the same quarter in 2007, increasing from R$ 854.4 million to R$ 866.2 million. Excluding exports, net operating revenue would have increased by 18.3% from R$ 728.7 million in 3Q07 to R$ 862.0 million in 3Q08, a consequence of the factors already enumerated. The average price of energy sales, eliminating exports and net of deductions on gross revenue, amounted to R$ 101.1/MWh in 3Q08, 13.4% up on the price prevailing in 3Q07 of R$ 89.1/MWh. This increase is due in large part to higher average prices practiced with the trading companies and free consumers. In the period 9M08, net operating income was R$ 2,590.7 million, 14.6% better than the R$ 2,261.6 million for the same period in 2007. If export business is discounted, then net operating revenue would have risen 22.1% between the two comparative periods. Net Operating Revenue - R$ million Average Net Price - R$/MWh 2,262 2,591 97.1 101.5 90.4 100.8 854 866 3Q07 3Q08 9M07 9M08 3Q07 3Q08 9M07 9M08 Costs of Electric Energy and Services Costs were R$ 313.1 million in 3Q08, R$ 1.9 million higher than the figure recorded for 3Q07 of R$ 311.2 million. This variation was largely a reflection of the following elements: Electric power purchased for resale: an increase of R$ 87.1 million in 3Q08, reflecting the growth of 41.8% in the quantity of energy acquired for trading and the higher prices in the new contracts replacing older ones. Transactions channeled through the Energy Trading Board - CCEE: reduction of R$ 33.9 million for the quarter principally due to reduced exposure to CCEE business and reflecting a combination of the following factors: (i) the strategy of optimizing the allocation of generation resources implemented by the Company; and (ii) exposure in 3Q07 amounting to R$ 22.2 million due to allocation of thermoelectric energy generated for export. Fuel Expenses: decrease of R$ 69.4 million, in large part due to a reduction of R$ 72.7 million in the cost of mineral coal, the fuel used to generate power for export in 3Q07. 6
Depreciation and amortization: growth of R$ 9.8 million mainly due to the consolidation of depreciation of PPESA s assets, R$ 10.1 million in the quarter under review. Payroll: growth of R$ 3.1 million between comparative periods, basically reflecting the annual readjustment in salaries and benefits as well as the additional payroll overheads of R$ 0.9 million following the PPESA acquisition. Third party services: R$ 4.4 million higher compared with 3Q07, principally due to expenditures on preventive maintenance services for equipment, as well additional costs of R$ 1.6 million with the acquisition of PPESA. For the first nine months of the year, the costs of electricity and services amounted to R$ 919.2 million, 10.7% higher than the R$ 830.6 million posted for the same period in 2007. Excluding the effects stemming from the purchase of fuels for electricity exports, costs would have risen year on year by 23.2%. Selling Expenses Selling expenses are principally made up of charges for the use of, and connection to the electricity grid system and totaled R$ 67.6 million in 3Q08, 23.1% more than the figure of R$ 54.9 million in 3Q07. The increase basically reflects the 12.5% higher tariff for use of and connection to the grid system announced in July 2008, and an additional R$ 4.0 million in expenses as a result of the acquisition of PPESA. General and Administrative Expenses General and administrative expenses increased from R$ 33.2 million in 3Q07 to R$ 41.7 million in 3Q08, principally due to the increase in extraordinary expenses in the third quarter with respect to: (i) the study of new generation projects; and (ii) donations and contributions to third parties. If these extraordinary expenses are excluded, expenses would have increased by 10.7% or R$ 3.6 million, reflecting agreements with respect to legal contingencies and the growth in depreciation and amortization expenses. EBITDA and EBITDA Margin As a result of the foregoing, 3Q08 EBITDA reached R$ 516.5 million - in line with the third quarter 2007, which was R$ 513.0 million. The EBITDA margin was 59.6% in 3Q08 compared with 60.0% for the same quarter in 2007. EBITDA (R$ million) and EBITDA Margin (%) 60.0% 59.6% 59.8% 63.6% 513 517 1,352 1,649 3Q07 3Q08 9M07 9M08 EBITDA EBITDA Margin EBITDA represents: operating profit + financial result + depreciation and amortization Financial Result Financial income: in 3Q08, financial income grew R$ 4.3 million compared with the same period in 2007, due in large part to the increase of R$ 3.9 million in income from money market investments, in turn reflecting a greater level of available resources for investment in the period as well as the inclusion of PPESA s income from money market applications worth R$ 1.7 million. 7
Financial expenses: financial expenses increased R$ 64.3 million compared with 3Q07 in the light of the following variables: (i) an increase of R$ 12.0 million in interest on loans, financing and debentures, basically due to the negotiation in May 2008 of a loan in the form of Promissory Notes, and also interest charges incurred by PPESA of R$ 8.7 million; (ii) an increase of R$ 12.8 million in interest and monetary restatement on concession charges payable to ANEEL, largely due to the consolidation of amounts relating to PPESA s concession; and (iii) growth of R$ 48.4 million exchange translation expenses on loans and financing, net of an FX hedge existing in 3Q07, due to the greater appreciation in the basket of currencies comprising company debt against the Real; and (iv) a reduction of R$ 6.8 million in CPMF tax-related expenses and charges on taxes and social contributions payable. Income Tax and Social Contribution The reduction of R$ 22.2 million or 16.0% in 3Q08 in relation to the same period in 2007 is due mainly to a proportional decrease of before tax profits, reflecting the factors already discussed above. Net Income The Company registered a 3Q08 net income of R$ 228.7 million, 16.2% lower than the R$ 272.9 million for the same quarter in 2007, again the result of factors mentioned above. If we discount the impact of the increase in exchange variation of R$ 32.0 million and the reduction in energy exports of R$ 35.1 million, between comparative quarters, both net of taxes, net income for 3Q08 would have increased by 9.6%. For the 9M08 period, net income reached R$ 839.5 million, a growth of 12.8% compared with the same period in 2007 when the Company recorded a net income of R$ 744.6 million. Net income for 9M08 would have been 20.7% higher excluding the effects net of taxes arising from exchange variation of R$ 26.6 million and the year on year reduction in exports of R$ 35.1 million. Additional revenue from the recovery of PIS and COFINS charges of R$ 50.4 million in 9M08 and the reduction in income tax and social contribution of R$ 29.9 million in 9M07 due to the crediting of interest on shareholders equity should also be excluded in order to arrive at a more realistic conclusion as to company net income. Net Income - R$ million 745 840 273 229 3Q07 3Q08 9M07 9M08 Debt The Company s net debt as at September 30, 2008 (total debt less cash and cash equivalents) was R$ 1,769.2 million, 101.7% higher than the R$ 877.2 million registered as of September 30, 2007. Total gross consolidated debt, mainly in the form of loans, debentures, promissory notes and financing, totaled R$ 2,601.0 million on September 30, 2008, a 52.3% increase compared to the position on September 30, 2007. Of the total debt at the end of the period, 11.6% was foreign currency denominated (19.4% at the end of 3Q07). 8
Growth in the Company s debt is mainly due to the following factors: (i) the issue of R$ 400.0 million in promissory notes in April 2008; (ii) the drawing down of R$ 117.9 million in lines from the National Social and Economic Development Bank - BNDES and its financial agents for capital expenditures at the São Salvador Hydroelectric Power Plant; and the (iii) assumption of R$ 294.2 million in loans taken by Ponte de Pedra Energética S.A., company which acquisition was concluded in 2Q08. Performance of Net Debt - R$ million Composition of Total Debt - R$ million 877 1,769 1,708 332 1,376 2,601 302 2,299 9/30/07 9/30/08 9/30/07 9/30/08 Local Currency Foreign Currency Maturity Term Loans - R$ million 582 244 314 279 251 209 311 55 27 25 17 17 13 8 3 108 54 84 - - 2008 2009 2010 2011 2012 2013 2014 2015 From 2016 to 2023 Local Currency Foreign Currency 2024 Capital Expenditures Capital expenditures in 3Q08 amounted to R$ 165.7 million, 50.4% higher than the R$ 110.2 million registered in 3Q07. Of the total CAPEX in 3Q08 R$ 15.9 million was allocated to plant maintenance and modernization, R$ 87.8 million to construction work on the São Salvador HPP, R$ 20.4 million to acquisition of SHPs José Gelazio da Rocha and Rondonópolis, and R$ 9.2 million for the construction of the Andrade TPP. Record of Interest on Shareholders Equity Tractebel Energia s Board of Directors approved at its meeting on November 7, 2008, the record of interest on shareholders equity relative to the period from January 1st to December 31, 2008, in the amount of R$ 176.0 million (R$ 0.2696317201 per share). Distribution of profits will take place on a date to be fixed by the Board of Executive Officers and will be announced in a Notice to Shareholders. 9
SUBSEQUENT EVENTS ANEEL Approves Acquisition of Rondonópolis and José Gelazio da Rocha SHPs On October 14, 2008, ANEEL approved the transfer of a controlling shareholding in Tupan Energia Elétrica S.A. and Hidropower Energia S.A. to Tractebel Energia, through Gama Participações Ltda. Tupan and Hidropower respectively are the authorized operators of Rondonópolis and José Gelazio da Rocha SHPs. Creditor approval currently in progress is pending in order to conclude the acquisitions. Appointment of a New Finance and Investor Relations Director At the 92 nd meeting of the Board of Directors held on November 7, 2008 Philippe Dartienne was appointed the new Finance and Investor Relations Director. Mr. Dartienne will replace Marc Verstraete, who will move to another position in the GDF SUEZ Group in Europe. Mr. Dartienne, who has currently the position of Head of Planning and Financial Control at SUEZ Environnement, will take up his new position at a date which is pending on the approval of Brazilian authorities, until which time the Company s Chief Executive Officer, Manoel Zaroni Torres, will accumulate the post of Finance and Investor Relations Director. SUSTAINABILITY: COMMITMENT AND CERTIFICATIONS Tractebel Energia operates according to the principles of sustainable development, respecting the balance of environmental, social and economic dimensions in all its businesses. The guidelines that form the bedrock to the Company s plans for environmental management are contained in the Environmental Code, which governs compliance with environmental protection agency regulations as well as the interaction with the communities that live adjacent to the plants by cooperating to ensure improvement in their quality of life. All Tractebel plants are NBR ISO 9001 and NBR ISO 14001 certified, except from those acquired in 2008. The objective of NBR ISO 9001 certification is to improve internal procedures and upgrade company products and services. NBR ISO 14001 is a standard for governing environmental management systems, designed to reconcile environmental protection and prevention of pollution with the socio-economic growth of the companies. Thanks to this permanent commitment, the Company remained listed in Bovespa s (São Paulo Stock Exchange) Corporate Sustainability Stock Index (ISE), a portfolio of shares of companies considered sustainable over a long-term horizon and with an excellent performance in financial, social, environmental and corporate governance practice aspects. In 3Q07 the Management Board of Tractebel Energia established a Sustainability Committee for enhancing the Company s operations as a partner and catalyst for economic, social and environmental development in the locations where it has a presence and in accordance with its values which are professionalism, sense of partnership, team work, creation of value, respect for the environment and ethics. CORPORATE GOVERNANCE Tractebel Energia became a member of Bovespa s Novo Mercado on November 16, 2005, underscoring the Company s commitment to best corporate governance practice. The Bylaws have been adapted to comply with the new rules and procedures of the Novo Mercado s Listing Regulations. The Company s Board of Directors is now made up of nine members, one of which represents the employees and two who are independent directors. With the exception of the employees representative, all are elected by a General Shareholders Meeting. A non-permanent Fiscal Council, which is independent of management and the Company s outside auditors, is responsible for supervising management acts and examining and opining on the financial statements. 10
The Company has a Code of Ethics and maintains a structure of committees, advisory councils and formally responsible individuals for ethical issues, which are also monitored through organizational surveys. In addition to Novo Mercado regulations, Tractebel Energia complies with the precepts of the Sarbanes-Oxley act, the purpose of which is to combat unethical conduct and make the financial statements more reliable. Tractebel Energia s dividend policy establishes a minimum mandatory dividend of 30% of net income for the fiscal year, adjusted pursuant to Law 6.404/76. In addition, company policy determines the intention of paying in each calendar year dividends and/or interest on shareholders equity for a value of not less than 55% of adjusted net income in the form of semiannual payouts. AWARDS AND RECOGNITION Best Company in the Electricity Sector The Conjuntura Econômica magazine published by the Getulio Vargas Foundation s Brazilian Economics Institute (IBRE/FGV), elected Tractebel Energia as the Best Company in the Electricity Sector 2007. The award is granted annually based on the 500 Largest Brazilian Joint Stock Companies survey. Best Company for the Shareholder 2008 Tractebel Energia was ranked first in the III Listed Company Ranking, in the category: company with a market capitalization of more than R$ 15 billion. The ranking selects the most outstanding companies based on EVA economic value added, earnings per share, liquidity, corporate governance and sustainability. Honorable Mention in Corporate Governance The Brazilian Association of Listed Companies (Abrasca) elected Tractebel Energia as one of the finalists in the Best Annual Report Award among the companies earning revenues of more than one billion Reals. The Company also received an Honorable Mention in Corporate Governance, one of the five special categories, awarded to the company report that obtained the highest score among the 82 candidates. CAPITAL MARKETS Since its listing on Bovespa s Novo Mercado, Tractebel Energia has become a component of the Special Corporate Governance Stock Index (IGC) and the Special Tag Along Stock Index (ITAG), incorporating those companies offering greater protection to minority shareholders in the event of the sale of a controlling stake. The Company s shares are also included in the Corporate Sustainability Stock Index (ISE), comprising companies with a recognized commitment to social and corporate responsibility, as well as the Electric Energy Stock Index (IEE), which is a sector index made up of the more significant listed companies in the industry. Tractebel Energia s common shares are traded on the São Paulo Stock Exchange under the TBLE3 symbol. The Company s Level I American Depositary Receipts (ADRs) are also traded on the US Over-The-Counter (OTC) market under the TBLEY symbol. The Company approved the amendment to the ratio of ADRs to common shares, the purpose being to improve the liquidity of the ADR program. As from October 8, 2008 each ADR is equivalent to one common share. 11
Share Performance TBLE3 The US credit crunch, which had its beginnings in 2007, loomed larger and worsened in 3Q08, resulting in a major sell-off on the leading international bourses. In the period, the Ibovespa stock index recorded a depreciation of 23.8%, parallel with a loss of 14.5% in the IEE the Electric Power Stock Index. In line with the market as a whole, Tractebel s shares closed the quarter down: 13.4%. The Company s securities were traded on all the days the São Paulo Stock Exchange Bovespa was open for business in 2008. The daily trading volume for the quarter was R$ 15.5 million. The closing price as at September 30, 2008 was R$ 20.70/share, equivalent to a market capitalization of R$ 13.5 billion. TBLE3 vs. IBOVESPA vs IEE (Base 100 12/31/2007) 120 115 110 105 TBLE3 = R$ 20.70 IEE = 16,392 Ibovespa = 49,541 100 95 90 85 80 75 70 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 TBLE3 IEE Ibovespa 12
UPCOMING EVENTS Tractebel Energia will be holding the following events to discuss the earnings results: Conference Call with Webcast (in Portuguese) Date: November 10, 2008 Time: 7:00 a.m. (ET) / 10:00 a.m. (Brasília time) Telephones for connection: Participants in Brazil: (11) 4688.6301 Password for participants: Tractebel Conference Call with Webcast (in English) Date: November 10, 2008 Time: 9:00 a.m. (ET) / 12:00 noon (Brasília time) Telephones for connection: Participants in Brazil: (55 11) 4688.6301 Participants in USA: (1 800) 860.2442 Participants in other countries: (1 412) 858.4600 Password for participants: Tractebel The links for access will be available on the Company s website (www.tractebelenergia.com.br), at the Investors section. Replay available from November 10 to November 16, 2008. Access by calling (55 11) 4688-6312, code 494. Disclaimer This release contains information and opinions on future events subject to risks and uncertainties based on current forecasts, projections and tendencies of the Company s business. Innumerous factors can affect the estimates and suppositions on which these opinions are based. In view of these risks and uncertainties described herein, estimates and declarations with respect to future events contained in this material may not be become realities. In view of these restrictions, shareholders and investors should not take any decisions based on estimates, projections and declarations as to future events contained in this release. 13
ATTACHMENT I TRACTEBEL ENERGIA S.A. CONSOLIDATED BALANCE SHEET ASSETS Consolidated Balance Sheet In Thousands of R$ Assets 9/30/2008 6/30/2008 Current Assets 1,355,955 983,573 Cash and cash equivalents 4,369 15,206 Securities 827,470 473,066 Consumers, concessionaires and holder of permissions 396,870 384,329 Taxes and social contributon recoverable 15,180 13,026 Warehouse 54,431 47,221 Pledges and restricted deposits 1,174 1,137 Deferred assets 14,762 13,444 Advances to suppliers 5,821 7,858 Others 35,878 28,286 Non Current Assets 6,639,294 6,652,212 Long Term Assets 501,304 502,738 Concessionaires and holders of permission 602 695 Taxes and social contributon to offset 25,641 25,839 Pledges and restricted deposits 24,340 26,403 Deposits in court 156,175 155,548 Disposal of assets and rights 76,022 78,190 Deferred assets 213,617 214,116 Others 4,907 1,947 Permanent Assets 6,137,990 6,149,474 Investments 51,206 30,812 Property plant and equipment 5,945,086 5,973,789 Intangible 90,640 90,815 Deferred 51,058 54,058 Total 7,995,249 7,635,785 14
ATTACHMENT II TRACTEBEL ENERGIA S.A. CONSOLIDATED BALANCE SHEET LIABILITIES Consolidated Balance Sheet In Thousands of R$ Liabilities 9/30/2008 6/30/2008 Current Liabilities 1,968,772 1,280,085 Suppliers 217,267 240,573 Dividends and interest on shareholder s equity 583,161 2,875 Loans and financing 583,848 558,654 Debentures 45,173 29,589 Taxes and social contribution 364,421 282,342 Estimated obligations 38,833 38,694 Research and development (R&D) program obligations 60,109 56,453 Provision for contingencies 10,867 8,786 Post-employment benefits 22,544 21,719 Others 42,549 40,400 Non Current Liabilities 2,950,399 2,928,006 Long Term Liabilities 2,950,399 2,928,006 Loans and financing 1,288,650 1,217,597 Debentures 683,320 674,667 Taxes and contributons payable in installments 8,333 7,150 Estimated obligations 5,268 4,637 Provision for contingencies 71,492 77,541 Concessions payable 537,560 593,384 Post-employment benefits 317,461 314,733 Deferred fiscal liabilities 36,535 36,535 Others 1,780 1,762 Shareholders' Equity 3,076,078 3,427,694 Share capital 2,445,766 2,445,766 Capital reserves 91,695 91,695 Surplus reserves 279,392 279,392 Retained Earnings 259,225 610,841 Total 7,995,249 7,635,785 15
ATTACHMENT III TRACTEBEL ENERGIA S.A. CONSOLIDATED INCOME STATEMENT In Thousands of R$ 3Q08 3Q07 Chg. % 9M08 9M07 Chg. % Gross Operating Revenue 966,272 928,674 4.0 2,881,560 2,502,532 15.1 Deductions from operating revenue (100,073) (74,314) 34.7 (290,819) (240,942) 20.7 Net Operating Revenue 866,199 854,360 1.4 2,590,741 2,261,590 14.6 Eletric Energy and Service Costs (313,052) (311,195) 0.6 (919,210) (830,582) 10.7 Electric power purchased for resale (157,169) (70,103) 124.2 (372,042) (180,480) 106.1 Transactions conducted through the CCEE (1,424) (35,364) -96.0 (43,838) (173,740) -74.8 Fuel expenses (7,469) (76,847) -90.3 (100,016) (116,036) -13.8 Financial compensation for use of water resources (26,988) (26,386) 2.3 (62,796) (63,959) -1.8 Personnel (24,230) (21,281) 13.9 (73,561) (63,428) 16.0 Depreciation and amortization (66,874) (57,045) 17.2 (187,668) (168,956) 11.1 Costs of services rendered (2,926) (2,697) 8.5 (7,983) (7,217) 10.6 Others (25,972) (21,472) 21.0 (71,306) (56,766) 25.6 Gross Income 553,147 543,165 1.8 1,671,531 1,431,008 16.8 Operating Expenses (107,028) (89,579) 19.5 (220,149) (255,850) -14.0 Selling expenses (67,610) (54,906) 23.1 (183,077) (161,061) 13.7 General and administrative expenses (41,661) (33,202) 25.5 (118,413) (96,296) 23.0 Reversal of operational provisions, net (352) (1,471) -76.1 2,315 1,507 53.6 Favorable ruling on lawsuit - - - 76,431 - - Favorable ruling on lawsuit 2,595 - - 2,595 - - Service Income 446,119 453,586-1.6 1,451,382 1,175,158 23.5 Net Financial Income (Expenses) (101,889) (41,839) 143.5 (186,653) (94,382) 97.8 Financial income 32,980 28,721 14.8 96,243 73,974 30.1 Financial expenses (134,869) (70,560) 91.1 (282,896) (168,356) 68.0 Operating Income 344,230 411,747-16.4 1,264,729 1,080,776 17.0 Non-operating income (loss) 866 (184) -570.7 (918) (1,300) -29.4 Income Before Taxes 345,096 411,563-16.1 1,263,811 1,079,476 17.1 Income tax (85,079) (101,608) -16.3 (310,640) (244,864) 26.9 Social contribution (31,334) (37,042) -15.4 (113,647) (90,050) 26.2 Net Income for the Period 228,683 272,913-16.2 839,524 744,562 12.8 EBITDA 516,537 512,995 0.7 1,648,587 1,351,873 21.9 Net income per share 0.3503 0.4181-16.2 1.2861 1.1407 12.8 16
ATTACHMENT IV TRACTEBEL ENERGIA S.A. CONSOLIDATED STATEMENT OF CASH FLOW In Thousands of R$ 3Q08 3Q07 9M08 9M07 Operating Activities Net income for the period 228,683 272,913 839,524 744,562 Expenses (revenues) that do not affect cash: Depreciation and amortization 70,418 59,409 197,205 176,715 Net monetary variations 59,837 (3,722) 82,322 (18,574) Net interest 19,018 14,849 44,956 38,003 Favorable ruling on lawsuit - - (76,431) - Operating provision (reversion), net 2,666 838 5,333 71 Deferred income tax and social contribution (820) (4,690) (11,295) (9,915) Result of writing off of permanent assetes (855) 185 1,011 1,346 Others 122 203 366 308 Decrease (Increase) in Assets 379,069 339,985 1,082,991 932,516 Consumers and concessionaires (12,448) 19,438 (44,263) 5,210 Resources subject to payment of obligations - 13,002-21,643 Disposals, services in progress and expenditures to reimburse (2,812) (300) 204 8,268 Taxes and social contributions recoverable (1,889) (2,082) (2,080) 4,003 Collateral and linked / judicial deposits 4,192 (35,105) 59,381 10,135 Warehouse (7,210) (2,293) (4,363) 744 Pre-paid expenses 2,037 1,215 (1,584) (2,402) Others (10,345) (2,755) (4,266) (2,146) Increase (Decrease) in Liabilities (28,475) (8,880) 3,029 45,455 Suppliers 8,975 11,779 (73,083) 6,483 Loans, financing and debentures 44,072 29,664 40,580 31,426 Taxes and social contributions 81,836 109,191 85,520 247,093 Estimated obligations 764 1,483 5,711 4,989 Provision for contingencies (3,492) 2,043 (6,270) 149 Post-employment benefits (7,335) (6,873) (23,428) (22,015) Research and development 3,656 5,648 11,141 12,019 ANEEL Concession (405) (391) (1,217) (1,174) Others 1,993 (7,644) 9,311 (2,253) 130,064 144,900 48,265 276,717 Funds from Operating Activities 480,658 476,005 1,134,285 1,254,688 Investments activities (165,669) (110,200) (972,018) (536,824) Acquisitions of CESS, net of acquired cash and cash equivalents - - - (280,680) Acquisitions of stake in MAESA - - - (28,793) Acquisitions of PPESA, net of acquired cash and cash equivalents - - (635,507) - Aquisição da SEIVAL - (500) - (500) Aquisição da Tupan Hidropower (20,395) - (20,395) - Used in fixed assets and deferred items (112,812) (109,588) (266,675) (225,782) Used in intangibles (32,462) (112) (49,441) (1,069) Financing activities 28,578 17,811 (124,519) (119,515) Payment of loans, financing and debentures (25,104) (38,788) (112,317) (142,429) Financing and debentures 53,682 69,720 517,920 529,134 Payment of swap adjusts - (684) - (4,261) Payment of dividends and interest on shareholders' equity - (12,437) (530,122) (501,959) Total Effects on Cash 343,567 383,616 37,748 598,349 Cash and cash equivalents Opening balance 488,272 471,573 794,091 256,840 Closing balance 831,839 855,189 831,839 855,189 Payments made in the year 343,567 383,616 37,748 598,349 Interest on loans, financing and debentures 28,738 12,606 108,674 73,600 Income tax and social contribution 35,066 33,522 318,322 128,320 Transactions that do not affect cash Offsetting of income tax and social contribution 182 12,200 2,225 12,332 Proposed dividends and interest on shareholders' equity credited 580,299 360,066 580,299 448,066 17