Académique Documents
Professionnel Documents
Culture Documents
0 million in 3Q13
Total energy consumption in 3Q13 was 1.7% higher than in 3Q12, totaling 5,581 GWh, driven by the increase in consumption in the commercial and other segments, which grew by 2.5% and 3.8% respectively; In the quarter, consolidated net revenue, excluding revenue from construction, came to R$ 1,615.2 million, 3.8% up on 3Q12. All the Companys business segments recorded a revenue upturn, led by commercialization, which increased by 102.5%; Consolidated EBITDA1 amounted to R$ 722.0 million, 161.1% higher than in 3Q12, positively impacted by the one-off transfer of funds from the Energy Development Account (CDE), ratified by ANEEL in the tariff review, totaling R$303.4 million, due to the reimbursement of purchased energy costs from previous quarters. Excluding this effect, EBITDA increased an expressive amount of 51.4%; Net income moved up by 282.1% over 3Q12, totaling R$321.5 million, also affected by the transfer of CDE funds, which had a positive impact of R$200.3 million on net income. Excluding this effect, net income grew by 44.1%; Non-technical energy losses in the last 12 months closed the quarter at 43.8% of billed energy in the lowvoltage market (ANEEL criterion), 1.6 p.p. down on December 2012. Collections stood at 97.9% of billed consumption, in line with the level recorded in the same quarter in 2012. Provisions for Past Due Accounts (PCLD) represented 2.0% of gross billed energy, totaling R$37.1 million, in line with 3Q12. The Company closed 3Q13 with net debt of R$4,151.6 million, 2.4% up on June 2013. The net debt/EBITDA ratio stood at 2.68x; On November 5th, Aneel approved the tariff review of Light SESA with an average positive effect of 3.65%, to be applied from November 7th, 2013 on.
Operational Highlights (GWh) Grid Load* Billed Energy - Captive Market Consumption in the concession area** Transported Energy - TUSD** Sold Energy - Generation Commercializated Energy (Esco) Financial Highlights (R$ MN) Net Revenue*** EBITDA EBITDA Margin*** Net Income Net Debt Capex 3Q13 3Q12 Var. % 9M13 9M12 Var. % 8,563 4,682 5,581 899 1,201 1,052 3Q13 8,501 0.7% 27,092 4,645 0.8% 15,209 5,486 1.7% 17,884 840 7.0% 2,676 1,287 -6.6% 3,643 519 102.8% 3,175 3Q12 Var. % 9M13 26,784 1.2% 14,940 1.8% 17,419 2.7% 2,479 7.9% 4,104 -11.2% 1,303 143.6% 9M12 Var. % 4.1% 40.3% 6.8 p.p. 73.6% 23.4% -8.6%
1,615 1,556 3.8% 5,147 4,946 722 277 161.1% 1,355 966 44.7% 17.8% 26.9 p.p. 26.3% 19.5% 321 84 282.1% 458 264 4,152 3,365 23.4% 4,152 3,365 155 199 -22.1% 482 528
* Own Load + network use ** Does not consider CSN, due to its migration to the basic network *** Does not consider construction revenue
EBITDA is calculated in accordance with CVM Instruction 527/2012 and represents net income + income and social contribution tax + the net financial expense + depreciation and amortization.
Conference Call:
Total shares: 203,934,060 Free Float: 76,262,655 shares (37.40%) Market Cap (11/07/13): R$4,095 million Webcast: www.light.com.br Presentation of 3Q12 and 9M12 Results
Date: 11/11/2013 Time: 4:00 p.m. (Brazil) // 1:00 p.m. (US ET) Fax: +55 (21) 2211-2787 Phone numbers: +55 (11) 2188 0155 // +1 (646) 843 6054 E-mail: ri@light.com.br Website: ri.light.com.br
The Companys 3Q12 and 9M12 results were reclassified due to a change in accounting practices in regard to consolidating the results of Lights jointly-owned subsidiaries, in accordance with IFRS 11 (CPC 19 R2). The reclassification affected the income statement accounts, but had no impact on net income, since the results of these jointly-owned subsidiaries began to be booked under equity income. The following companies are no longer consolidated: Renova Energia, Guanhes Energia, EBL, Lightger, Axxiom, Amaznia Energia and E-Power. For further information, see Exhibit V. The income statement of these jointly-owned subsidiaries, proportional to Lights interest in each, is included as Exhibit VI to this release. This information should be regarded as complementary, exclusively for comparative purposes, since it is not in accordance with Brazilian accounting practices.
Table of Contents
1. The Company ............................................................................................................................ 4 2. Operating Performance ............................................................................................................ 5 2.1 Distribution .......................................................................................................................... 5 Energy Balance................................................................................................................... 9 Energy Losses ..................................................................................................................... 9 Collection ......................................................................................................................... 12 Operating Quality ............................................................................................................ 13 2.2 Generation......................................................................................................................... 14 2.3 Commercialization and Services ........................................................................................ 14 3. Financial Performance ............................................................................................................ 14 3.1 Net Revenue ...................................................................................................................... 15 Consolidated .................................................................................................................... 15 Distribution ...................................................................................................................... 16 Generation ....................................................................................................................... 17 Commercialization and Services .................................................................................... 17 3.2 Costs and Expenses ........................................................................................................... 18 Consolidated .................................................................................................................... 18 Distribution ...................................................................................................................... 18 Generation ....................................................................................................................... 21 Commercialization and Services ..................................................................................... 22 3.3 EBITDA ............................................................................................................................... 22 Consolidated .................................................................................................................... 22 Distribution ...................................................................................................................... 24 Generation ....................................................................................................................... 25 Commercialization and Services ..................................................................................... 25 3.4 Consolidated Financial Results .......................................................................................... 26 3.5 Debt ................................................................................................................................... 27 3.6 Net Income ........................................................................................................................ 29 3.7 Investments ....................................................................................................................... 30 Generation Capacity Expansion Projects ....................................................................... 32 4. Cash Flow ................................................................................................................................ 35 5. Corporate Governance ............................................................................................................ 36 6. Capital Markets ....................................................................................................................... 36 7. Recent Events .......................................................................................................................... 39 8. Disclosure Program ................................................................................................................. 40
1. The Company Light S.A. is a holding company that controls subsidiaries and affiliated companies in three main business segments: energy distribution, generation and commercialization/services. In order to increase the transparency of its results and provide investors with a better basis for evaluation, Light also presents its results by business segment. The Companys corporate structure in September 2013 is shown below:
100%
100%
51%
100%
25.5%
100%
100%
100%
100%
51%
20%
CR Zongshen E-Power Fabricadora de Veculos S.A.
Lightger S.A.
Light Amaznia Light Esco Lightcom Solues em Energia Prestao de Comercializadora de Energia S.A. Eletricidade Servios S.A. S.A. Ltda.
Instituto Light
21.99%
100%
100%
9.77%
33%
EBL Cia de
Eficincia Energtica S.A.
51%
Distribution
Generation
Institutional Systems
Electric Vehicles
OPERATING INDICATORS N of Consumers (thousand) N of Employees Average provision tariff - R$/MWh Average provision tariff - R$/MWh (w/out taxes) Average energy purchase cost - R$/MWh Installed generation capacity (MW)* Assured energy (MW)* Pumping and internal losses (MW) Available energy (Average MW) Net Generation (GWh) Load Factor
Does not include purchase on spot. * Includes proportionate share of associates
3Q13 4,093 4,245 399 281 124 942 685 87 598 1,142 62.4%
3Q12 4,011 4,203 443 308 117 942 685 87 598 1,132 66.0%
1.7% 5,581
840
899
2.5% 1,854 207 1,647 983 613 370 -0.2% 982 643 338 3Q13 894 47 847 3Q12 3.8% 4,645 928 48 880 3Q13 3Q12 3Q13 4,682
1,627
3Q12
3Q13
3Q12
3Q13
3Q12
Residential
Commercial
Others
Total
Total energy consumption in Light SESAs concession area (captive clients + transport of free clients2) came to 5,581 GWh in 3Q13, 1.7% up on 3Q12, chiefly due to the 2.5% increase in commercial consumption and the 3.8% upturn in the others segment, mainly driven by government. If consumption by the free client CSN is taken into account, total consumption came to 6,042 GWh in 3Q13, 2.4% higher than the 5,900 GWh recorded in 3Q12. Residential consumption totaled 1,818 GWh in the quarter, accounting for 32.6% of the total market, 0.9% up on 3Q12 despite the 0.8 C year-on-year average temperature drop. Commercial clients consumed 1,854 GWh in 3Q13, 2.5% more than in 3Q12, accounting for 33.2% of the total. Another 19 clients joined the free market in 3Q13, having been recorded under captive clients in 3Q12, resulting in a 13.7 GWh period increase in free market consumption. Industrial consumption amounted to 982 GWh, equivalent to 17.6% of the total market, stable in relation to the same period last year. This performance was driven by the free market, which recorded growth of
To preserve comparability with the market approved by ANEEL in the traffic adjustment process, the billed energy of the free consumer CSN was excluded, in view of this clients then planned migration to the core network. Energy consumption by CSN totaled 461 GWh in 3Q13 and 414 GWh in 3Q12.
2
5.0%, chiefly due to the steel industry. Between July and September 2013, five clients migrated from the captive to the free market, totaling 15.4 GWh. The others category, which accounted for 16.6% of the total market, posted an upturn of 3.8% over 3Q12. All segments recorded an improvement, with the rural, government and public utility categories, which represented 0.2%, 6.5% and 6.1% of the total market, respectively, reporting respective increases of
TOTAL ENERGY CONSUMPTION (GWh) (CAPTIVE + FREE) - 9 MONTHS
2.7% 17,419 2,479 17,884 2,676
5.2% 5,615 555 5,061 5,909 637 2,924 5,271 1,780 1,144 9M12 2,927 1,888 1,039 9M13 2,762 144 2,618 9M12 0.1% 2.7% 2,837 151 2,686 9M13 9M12 9M13 15,209
14,940
9M12
9M13
9M12
9M13
Residential
Commercial
Others
Total
Total energy consumption in Light SESAs concession area (captive clients + transport of free clients3) amounted to 17,884 GWh in 9M13, 2.7% up on the same period in 2012, primarily influenced by the performance of the commercial sector. Excluding the effect of the suspension of long-term default clients in 2012, which reduced 9M13 billed consumption by 43 GWh, consumption increased by 2.9% between the periods. If consumption of the free client CSN is taken into account, total consumption came to 19,186 GWh in 9M13, versus 18,587 GWh in 9M12.
To preserve comparability with the market approved by ANEEL in the tariff adjustment process, the billed energy of the free consumer CSN was excluded, in view of this clients then planned migration to the core network. Energy consumption by CSN totaled 1,302 GWh in 9M13 and 1,168 GWh in 9M12.
Residential consumption totaled 6,212 GWh in 9M13, 1.5% up on 9M12 and accounting for 34.7% of the total market, due to the termination of contracts with clients with long-term default and the reclassification of condominiums from the residential to the commercial segment. Excluding these effects, residential consumption increased by 4.9%. Average monthly consumption climbed from 180.4 kWh in 9M12 to 184.9 kWh in 9M13. Commercial clients consumed 5,909 GWh, 5.2% up year-on-year and accounting for 33.0% of the total, fueled by the reclassification of condominiums from the residential to the commercial segment and the excellent performance of the retail segment, which recorded upturn of 2.3%, corresponding to share of 29.4%. Excluding the condominium reclassification effect, commercial consumption grew by 2.4%. In 9M13, twelve clients migrated to the free market, representing total consumption of 28 GWh. In addition, the 66 existing free market clients consumed 71 GWh more than in 9M12. In 9M13, industrial consumption amounted to 2,927 GWh, in line with 9M12. Five clients migrated to the free market between the two periods, representing consumption of 38 GWh. In the others category, which accounted for 15.9% of the total market, consumption increased by 2.7% year-on-year. All segments recorded an upturn, with the rural, government and public utility categories, which represented 0.2%, 6.6% and 5.7% of the total market, respectively, reporting respective increases of 1.0%, 2.1% and 2.9%.
Energy Balance
DISTRIBUTION ENERGETIC BALANCE - GWh Position: January - September 2013
PROINFA 376.5 CCEAR Light Energia 35.5 ITAIPU (CCEE) 3,995.1 AUCTIONS (CCEE) 5,415.7 NORTE FLU (CCEE) 4,750.9 OTHERS(*) (CCEE) 839.3 SHARES 5,434.1 ANGRA I & II 667.3 Billed Energy 15,208.6
Residential 6,212.1 Industrial 1,039.1 Commercial 5,271.4 Losses + Non Billed Energy 5,949.9 Others 2,685.9
Required E. (CCEE)
21,514.4
296.7 59.2
(*) Others = Purchase in Spot - Sale in Spot. Note: 1) At Light S.A., there is intercompany power purchase/sale elimination 2) Power purchase data as of 10/08/2013 (subject to change)
Energy Balance (GWh) = Grid Load - Energy transported to utilities - Energy transported to free customers* = Own Load
- Captive market consumption Low Voltage Market Medium Voltage Market
3Q12 Var. % 9M13 9M12 Var. % 8,501 0.7% 27,092 26,784 1.2% 741 -4.7% 1,935 2,054 -5.8% 1,285 5.6% 3,999 3,712 7.7% 6,475 0.4% 21,159 21,018 0.7% 4,645 0.8% 15,209 14,940 1.8%
3,032 1,613 1.4% -0.4% 10,133 5,075 9,856 5,085 2.8% -0.2%
Energy Losses
Non-technical energy losses totaled 5,905 GWh in the last 12 months, accounting for 43.7% of billed energy in the low-voltage market (ANEEL criterion), 1.7 p.p. down on the 12 months ended December 2012. Light SESAs total energy losses amounted to 8,552 GWh, or 23.3% of the grid load, in the 12 months ended September 2013, 0.3 p.p. down on December
Non tecnical losses / Low Voltage market 12 months
5,615 43.1% 33.8% 6,007 45.4% 6,029 44.9% 5,953 44.2% 5,922 43.8%
33.3%
32.8%
32.4%
32.0%
33.3%
32.8%
32.4%
32.0%
Sep-12
Dec-12 Mar-13 Jun-13 Sep-13 Non-Technical Losses % Low Voltage Mkt Regulatory Losses Losses (GWh)
Sep-12
Dec-12 Mar-13 Jun-13 Sep-13 Non-Technical Losses % Low Voltage Mkt Regulatory Losses Losses (GWh)
2012.
In order to improve the reduction in non-technical energy losses, Light has been continuously investing in initiatives that include conventional fraud inspection procedures, the upgrading of network and measurement systems, and the Zero Loss Area program (APZ). The main highlights are as follows:
Consumer unit inspections: this initiative is directed at low38,372
Normalized Costumers
44,308 15.5%
voltage residential clients, who are selected by an intelligence system. The Company conducted 44,308 regularization
9M12 9M13
procedures in 9M13, 15.5% up on the 38,372 recorded in 9M12), resulting in the incorporation of 143.5 GWh, versus 92.3 GWh in the same period last year. However, recovered energy climbed by 39.5%, from 92.7 GWh, in 3Q12, to 129.3 GWh. The assertiveness ratio increased 11 p.p. year-on-year, demonstrating the improved efficiency of the potential fraudulent client selection process.
Indirect low-voltage inspections: the inspection of major clients
92.7 129.3 39.5%
for an important share of Lights energy incorporation and recovery. In 3Q13, the Company conducted 1,235 such regularizations, up from 1,382 in the same period in 2012, despite this reduction, there was a gain in efficiency with incorporated and recuperation witch increased 7.8 GWh to 16.1 GWh and
Energy Incorporation (GW)
143.5 55.5% 92.3
(centralized metering system) devices are installed in areas with high loss rates, with or without the support of Pacifying Police Units (UPPs). The UPPs give Light more room for maneuver in regard to combating default or energy theft. The Company installed 9,917 such devices in UPP-protected areas in 3Q13, resulting in the incorporation of 26 GWh. In areas outside the sphere of the UPPs, Light installed 24,462 devices, with the incorporation of 40.9 GWh. The goal is achieve 460,000 by yearend.
Zero Loss Areas (APZ): in August 2012, the Company created the
9M12
9M13
APZ Project, based on a combination of electronic metering and a shielded network, supported by dedicated teams of technicians and customer relations personnel with clearly defined targets, whose compensation is tied to improving loss and default
set-12 set-13
indicators in their respective areas. A typical APZ has around 15,000 clients. The project, known commercially as Light Legal, which receives support from SEBRAE in regard to the training of partnering micro-entrepreneurs, closed September 2013 with 22 operational APZs and 364,000 clients in the Baixada Fluminense region, and the citys west and north sides. The 2013 goal is to reach a total of 30,000 Light Legal units, comprising around 400,000 clients (10% of the total clients of Light). Since the beginning of the project, the APZs in place have already resulted in an average 26.5 p.p. reduction in non-technical energy losses on low-voltage billings and an average revenue increase of 6.6 p.p. The results per installed APZ through September are shown below:
10
Communities
Neighborhood Curicica Realengo Cosmos Sepetiba Caxias 1 e 2 Belford Roxo 1 e 2 Vigrio Geral Caxias 3 Nova Iguau 1 Nova Iguau 2 Nilpolis Nilpolis Convencional Ricardo de Albuquerque Mesquita Cabritos/Tabajaras/Chapu Mangueira/Babilnia Coelho da Rocha Batan Total
Client Numbers 13,125 10,182 38,132 19,857 13,935 20,436 16,198 17,675 33,129 20,756 10,388 11,089 25,701 9,038 6,387 17,738 8,625 292,391
Non-Technical Losses / Low Voltage Market * 11.2% 15.0% 19.3% 30.6% 25.8% 26.6% 15.2% 20.7% 29.9% 23.5% 27.9% 13.7% 16.3% 30.2% 11.5% 14.3% 9.6% 21.2%
Collection Rate 98.8% 98.6% 105.3% 97.4% 95.1% 95.5% 99.5% 98.4% 97.7% 96.8% 94.9% 97.2% 97.9% 95.8% 97.1% 95.8% 105.2% 98.6%
* Reflects the results accumulated until sep/13 since the begining of the implementation of each APZ.
Since the beginning of the pacification process in lowincome communities in the state of Rio de Janeiro in 2009, Light has increased its presence in these areas in order to improving the quality of supply and avoid energy theft.
Areas Santa Marta Cidade de Deus 1 Chapu Mangueira Babilnia Cabritos Tabajaras Formiga Batan Borel
Losses Before Current 95.00% 52.10% 62.70% 62.30% 73.30% 61.80% 60.50% 8.30% 34.67% 14.60% 12.80% 10.12% 11.47% 9.71%
Collection Before Current 0.20% 23.10% 16.20% 5.40% 1.40% 9.50% 31.40% 1.20% 9.40% 97.61% 95.69% 101.88% 97.05% 97.18% 95.74% 93.10% 105.24% 88.96%
11
Up to September 2013, the Company had installed 89,000 electronic meters in the communities. Of the 34 communities with Pacifying Police Units, Light is present in 17 and has already concluded the remodeling of the network in nine, recording an average 52.9 p.p. loss reduction (from 64.1% to 11.2%) and an average 87.5 p.p. increase in timely payments (from 9.6% to 97.1%), as can be seen in the adjacent table. Collection The third-quarter collection rate stood at 97.9% of billed consumption, 0.1 p.p. on 3Q12. Collection in the retail segment increased by 1.7 p.p., mainly reflecting the ongoing program to combat default. The decline from 99.8% to 95.7% in government segment collection can be explained by the collection of the lot due in the last business day of September, which was received on the following day and consequently booked only in October. Without this effect, collection came to 99.1% in 3Q13.
Retail Large Costumers 9M11 Public Sector 9M12 9M13 Total 94.9% 97.5% 100.9%
95.7%
97.7% 97.8%
Retail
Total
2.3 p.p. more than in 9M12, once again with all segments recording more than 100%, primarily due to the ongoing program to combat default with the progressive installation of electronic meters, more efficient collection procedures, the implementation of the APZs, the increasing number of disconnections, and the change in the criterion for treating clients with
3.2% 3.0%
long-term default. In 3Q13, provisions for past due accounts (PCLD) totaled R$37.1 million, representing 2.0% of gross
Dec-11
Dec-12
Sep-12
Jun-12
Mar-12
provisioned in 3Q12. In the 12-month period ended September 2013, excluding the non-recurring provisioning in 4Q12, PCLD represented 1.3% of
PCLD 3Q13 37.1
PCLD/ROB
Mar-13
Jun-13
12
Sep-13
Sep-11
gross billed energy, 1.1 p.p. down year-on-year, once again reflecting the constant initiatives to reduce default and the change in the criterion for treating clients with long-term default as of February 2012.
Operating Quality In 3Q13, 321 medium-voltage distribution circuits were inspected/maintained, 617 transformers were replaced and 23,762 trees were pruned. In the underground distribution network, 6,563 transformer vaults and 13,864 manholes were inspected. In addition, 51 transformers, 41 switches and 368 protectors were maintained. In the 12 months through September, the moving average of the equivalent length of interruption indicator (DEC), expressed in time, registered 20.53 hours, while that of the equivalent frequency of interruption indicator (FEC), expressed in occurrences, stood at 9.15 times. Despite the increase in the 12-month moving average due to the poor results in December 2012, the emergency action plan, implemented in June 2013 and characterized by more intensive tree pruning and energy network maintenance measures, is already showing
DEC e FEC - 12 months
20.53 16.14 9.15 3.55 3.36 1.79 1.76
7.64
DEC Sep-12
FEC Sep-13
DEC 3Q12
FEC 3Q13
13
Light Energia sold 1,201.4 GWh in 3Q13, 6.6% down year-on-year, primarily reflecting lower spot market sales, which came to 39.0 GWh this quarter, 40.8% less than in 3Q12, due to the systems exceptionally poor hydrological conditions, impacted by low reservoir levels. The Generation Scaling Factors (GSF) in July, August and September came to 102.80%, 102.47% and 101.07%, respectively, versus 106.04%, 105.44% and 98.26%, in the same months in 2012. Energy sold on the captive market (ACR) totaled 258.0 GWh, 74.3% down year-on-year, chiefly due to the maturity of the energy sale contracts acquired at the mega-auction in 2004, equivalent to 345 average MW. These contracts were renegotiated on the free market (ACL), whose energy sales moved up by 318.2% as a result, reaching 904.4 GWh, with better price conditions. Year-to-date energy sales totaled 3,646.3 GWh, 11.2% down on 9M12, mainly due to poor hydrological conditions, impacted by the delayed start of the rainy season and the consequent low level of hydro plant reservoirs.
In the third quarter of 2013, direct energy sales by Light Esco and LightCom, from conventional and subsidized sources, totaled 1,052.1 GWh, versus 518.7 GWh in the same period last year. This important growth of 102.8 % was mainly due to the fact that a large number of agreements which were closed last year became effective in 2013. In particular, we began deliveries of energy to two major clients, whose combined consumption is approximately 220 average MW.
3Q12 3Q13 9M12 518.7 1,052.1 143.6% 1,303.3
3,175.0
9M13
Also in 3Q13, in the service segment, the Company entered into an agreement for the sale of surplus energy from the co-generation project with a large beverage company. Currently, Light Esco has 12 projects under development, including the above-mentioned co-generation project, with total investments of around R$85 million. In the first nine months of 2013, energy sales totaled 3,175.0 GWh, 143.6% up on the 1,303.3 GWh recorded in 9M12.
14
Consolidated
Net Revenue (R$ MN) Distribution Billed consumption Non billed energy Network use (TUSD) Short-Term (Spot) Others Subtotal (a) Construction Revenue Subtotal (a') Generation Generation Sale (ACR+ACL) Short-Term Others Subtotal (b) Commercialization and Services Energy Sales Services Subtotal (c) Others and Eliminations (d) Total w/out construction revenue (a+b+c+d) Total (a'+b+c+d)
3Q13 1,273.2 5.8 116.0 34.2 19.6 1,448.9 122.4 1,571.3 124.6 6.2 2.0 132.9 162.7 11.1 173.9 (140.4) 1,615.2 1,737.6
3Q12 1,244.6 3.7 142.7 10.5 14.7 1,416.2 170.3 1,586.5 90.5 4.2 2.4 97.0 68.5 17.3 85.8 (42.7) 1,556.4 1,726.7
Var.% 2.3% 58.0% -18.8% 226.5% 33.7% 2.3% -28.1% -1.0% 37.7% 49.4% -13.1% 37.0% 137.4% -35.7% 102.5% 229.2% 3.8% 0.6%
9M13 4,615.0 (120.1) 401.7 39.2 57.4 4,993.3 455.2 5,448.5 385.3 19.4 5.5 410.2 497.3 23.4 520.7 (777.0) 5,147.1 5,602.3
9M12 4,012.6 6.7 423.6 28.1 56.7 4,527.6 470.0 4,997.6 261.2 38.6 5.8 305.5 173.8 30.3 204.1 (91.7) 4,945.6 5,415.5
Var.% 15.0% -5.2% 39.7% 1.3% 10.3% -3.1% 9.0% 47.5% -49.8% -5.8% 34.2% 186.1% -22.7% 155.1% 747.3% 4.1% 3.4%
Balance of the settlement on the CCEE The subsidiary Light SESA counts revenues and costs, with zero margin, related to services of construction or improvement in infrastructure used in services of electricity distribution.
Consolidated net operating revenue totaled 1,737.6 million in 3Q13, 0.6% up on 3Q12. Excluding revenue from construction, which has a neutral effect on net income, consolidated net revenue increased by 3.8% to 1,615.2 million. All of the Companys operational segments recorded growth, led by generation and commercialization, thanks to energy sales to the free market at higher prices, replacing older sales contracts to the captive market. Excluding construction revenue, consolidated net revenue totaled R$5,147.1 million in 9M13, 4.1% up on 9M12.
15
Distribution
Net revenue from distribution totaled R$1,571.3 million in 3Q13, 1.0% less than in 3Q12. Excluding revenue from construction, net revenue from distribution amounted to R$1,448.9 million, 2.3% up year-on-year. The improvement was mainly due to the 1.7% upturn in total market consumption and the average 12.27% increase in the captive market energy tariff as of November 7, 2012, partially offset by the extraordinary tariff review of January 24, 2013, which reduced tariffs by 19.63% on average. Electric Energy Consumption - (GWh) 3Q13
Industrial 6% 338.0 Others 16% 880.2 Residential 33% 1,817.5
180.5
567.7
434.4
The distribution market consists mostly of the residential and commercial segments, which together accounted for 72% of 3Q13 energy sales revenue. Free market sales accounted for 8%.
Excluding revenue from construction, net revenue from distribution came to R$4,993.3
million in 9M13, 10.3% up year-on-year, chiefly due to the 2.7% increase in market consumption.
Generation
Net revenue from generation totaled R$132.9 million, 37.0% more than in 3Q13, chiefly due to the substantial 318.2% increase in the volume of energy sold on the free market (ACL), whose contract prices are higher than on the captive market, where this energy was previously sold. The average sale price, net of taxes, weighted by both markets, stood at R$107.5/MWh in 3Q13, 45.0% up on the R$74.1/MWh recorded in the same period in 2012.
16
In 9M13, net revenue totaled R$410.2 million, 34.2% up on 9M12, primarily due to the higher price and volume of energy contracts traded on the free market (ACL), as well as the increase in the
Commercialization and Services Net revenue from commercialization and services stood at R$173.9 million in 3Q13, 102.5%
up on 3Q12, chiefly due to the substantial period increase in energy prices and sales volume, primarily as a result of the reallocation of Light Energias captive market contracts terminated at the close of last year to the free market. The average sales price, net of taxes, totaled R$154.7/MWh in 3Q13, 17.0% more than the R$132.3/MWh recorded in 2Q12.
Year-to-date net revenue totaled R$520.7 million, 155.1% up on the first nine months of last year.
17
Consolidated
Costs and Expenses (R$ MN) Distribution Distribution w/out Construction Revenue Generation Commercialization Others and Eliminations Consolidated w/out Construction Revenue Consolidated
In the third quarter of 2013, operating costs and expenses totaled R$1, 114.6 million, 28.2% down year-onyear. Excluding construction costs, consolidated costs and expenses also declined by 28.2% in relation to 3Q12, mainly driven by the 28.8% reduction in costs and expenses from the distribution segment, reflecting the transfer of CDE funds, ratified by ANEEL in the tariff review, totaling R$303.4 million. Without this effect, operating costs and expenses excluding construction costs fell by 6.2%. Eliminations totaled R$140.1 million, 242.4% up year-on-year, chiefly due to Light Escos energy purchases from Light Energia. In 9M13, consolidated costs and expenses, excluding construction costs, totaled R$ 4,082.0 million, 4.1% less than in 9M12.
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Distribution
Costs and Expenses (R$ MN) Non-Manageable Costs and Expenses Energy Purchase costs Costs with Charges and Transmission CDE Fund Others (Mandatory Costs) Manageable Costs and Expenses PMSO Personnel Material Outsourced Services Others Provisions Depreciation and Amortization Other Operacional/Revenues Expenses Construction Revenue Total costs w/out Construction Revenue Total Costs 3Q13 (614.6) (811.2) (102.3) 303.4 (4.6) (311.5) (182.5) (65.6) (4.0) (97.2) (15.7) (41.0) (86.0) (1.9) (122.4) (926.1) (1,048.5) 3Q12 (1,003.1) (781.3) (217.6) (4.2) (298.6) (178.5) (69.3) (5.8) (86.3) (17.1) (52.3) (69.3) 1.5 (170.3) (1,301.8) (1,472.1) Var.% -38.7% 3.8% -53.0% 7.3% 4.3% 2.3% -5.3% -30.8% 12.7% -8.4% -21.6% 24.1% -28.1% -28.9% -28.8% 9M13 (2,872.8) (2,756.0) (406.6) 303.4 (13.6) (987.0) (568.8) (203.9) (11.6) (294.4) (58.9) (152.8) (250.5) (14.8) (455.2) (3,859.8) (4,315.0) 9M12 (3,082.4) (2,440.5) (629.4) (12.5) (954.3) (516.0) (195.8) (13.2) (260.6) (46.4) (222.9) (212.9) (2.5) (470.0) (4,036.7) (4,506.7) Var.% -6.8% 12.9% -35.4% 9.2% 3.4% 10.2% 4.1% -11.7% 13.0% 26.8% -31.4% 17.7% 489.8% -3.1% -4.4% -4.3%
In 3Q13, distribution costs and expenses fell by 28.8% over 3Q12. Excluding construction costs, total costs and expenses declined by 28.9%, reflecting the non-recurring effect of the transfer of CDE funds, ratified by ANEEL in the tariff review, totaling R$303.4 million. Without this effect, distribution costs and expenses, excluding construction costs, fell by 5.6% over 3Q12. Year-to-date distribution costs and expenses, excluding construction costs, totaled R$3,859.8 million, 4.4% lower than in 9M12.
9M12
AUCTIONS NORTE FLU
9M13
ITAIPU SPOT
Purchased energy costs increased by 3.8% over 3Q12, chiefly due to the increase in the difference settlement price (PLD) from R$131.1/MWh, in 3Q12, to R$183.6/MWh, which resulted in higher expenses with Availability Contracts, due to thermal plant dispatch by the National System Operator (ONS). Other contributing factors included the contract adjustment with UTE Norte Fluminense in November 2012, and the depreciation of the Real, which impacted the cost of energy acquired from Itaipu.
56.2% 53.3%
Costs with charges and transmission fell by 53.0%, mainly due to the reduction in the network usage charge, as a result of the renewal of certain transmission companies contracts. The following table gives a breakdown of non-manageable costs:
Non-Manageable Costs and Expenses (R$ MN) Energy Purchase costs Itaipu TPP Norte Fluminense Short-Term Energy (Spot)
Hydrological Risk CDE - Hydrological Risk Quotas Exposure CDE - Quotas Exposure Others
9M12 AUCTIONS SPOT NORTE FLU PROINFA 9M13 ITAIPU
Energy Auctions
Availabilities Contracts Others
(376.8)
(205.0) (171.8)
(400.7)
(106.8) (293.9)
-6.0%
91.9% -41.5%
(1,421.7)
(667.2) (754.5)
(1,277.2)
(305.9) (971.2)
11.3%
118.1% -22.3%
(102.3)
21.5 (24.7) (56.7) (42.4)
(217.6)
(21.4) (131.8) (64.4) -
-53.0%
-200.3% -57.0% -34.2% -
(406.6)
(278.9) 168.9 (160.2) (136.4)
(629.4)
(67.4) (392.4) (169.6) -
-35.4%
313.8% -59.2% -19.6% -
(4.2) (1,003.1)
7.3% -38.7%
(12.5) (3,082.4)
9.2% -6.8%
Non-manageable costs are passed on to consumer tariffs and any increase or reduction in such costs in relation to the regulatory level constitutes a regulatory asset or liability (CVA) balance, to be taken into account in the next tariff readjustment, but which is not recorded in the income statement in accordance with International Financial Reporting Standards (IFRS). These regulatory liabilities totaled R$329.2 million in 3Q13, mainly due to the booking of the one-off transfer of CDE funds in the amount of R$303.4 million, versus regulatory assets of R$118.7 million in 3Q12.
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The average purchased energy cost, excluding spot market purchases, amounted to R$131.5/MWh in 3Q13, 3.5% up on the R$127.0/MWh recorded in 3Q12.
Manageable Costs and Expenses In 3Q13, manageable operating costs and expenses, comprising personnel, material, outsourced services, provisions, depreciation and others, totaled R$311.5 million, 4.3% up on 3Q12.
Costs and expenses from personnel, materials, outsourced services and others (PMSO) totaled R$182.5 million in 3Q13, 2.3% up on 3Q12, chiefly due to the 12.7% increase in
outsourced services, in turn mainly due to higher expenses with: (i) the success fee for consulting firms related to the improvement in the collection processes and compensation of amounts paid due to the nonachievement of the quality indicators, totaling R$5.0 million; and (ii) the progress of the APZ project, totaling R$4.0 million. The provisions line amounted to R$41.0 million, 21.6% down on 3Q12, mainly explained by a non-recurring reversal of R$10.7 million in labor provisions. Provisions for past due accounts (PCLD) amounted to R$37.1 million in the quarter, virtually iddentical to the 3Q12 figure. The depreciation and amortization line increased by 24.1%, chiefly due to the high volume of investments and intensive use of assets.
Generation
Operating Costs and Expenses (R$ MN) Personnel Material and Outsourced Services Purchased Energy (CUSD) Depreciation Other Operacional/Revenues Expenses Others (includes provisions) Total 3Q13 (5.7) (4.9) (9.1) (14.4) (0.4) (7.1) (41.7) 3Q12 (5.8) (4.6) (9.7) (14.0) (0.1) (7.6) (41.8) Var.% -2.5% 6.6% -5.8% 3.1% 193.1% -6.1% -0.4% 9M13 (17.3) (13.7) (27.0) (41.9) (0.3) (22.9) (123.1) 9M12 (16.4) (12.7) (21.1) (42.0) 1.8 (24.4) (114.8) Var.% 5.6% 7.9% 27.9% -0.3% -114.5% -6.2% 7.2%
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In 3Q13, Light Energias costs and expenses amounted to R$41.7 million, in line with 3Q12. The increase in the materials and outsourced services, depreciation and other operational revenues/expenses lines were offset by the reductions in the personnel, purchased energy and others lines. Third-quarter costs and expenses were broken down as follows: personnel (13.6%), materials and outsourced services (11.9%), CUSD/CUST distribution/transmission system usage/purchased energy (21.9%), depreciation and others (52.6%). PMSO per MWh generated by Light Energias plants stood at R$14.7/MWh in 3Q13, versus R$15.0/MWh in 3Q12. In 9M13, Light Energias costs and expenses came to R$123.1 million, 7.2% up on 9M12, due to the purchase of energy generated by Paracambi SHP totaling R$11.4 million.
Costs and expenses totaled R$164.5 million in 3Q13, 108.1% higher than in the third quarter of 2012, mainly due to purchased energy costs, which grew by 127.7% over 3Q12, due to the higher volume of energy purchased for commercialization. Year-to-date costs and expenses totaled R$497.2 million, a year-on-year upturn of 166.9%, also explained by higher purchased energy costs.
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Consolidated EBITDA (R$ MN) Distribution Generation Commercialization Others and eliminations Total EBITDA Margin (%)
Consolidated EBITDA totaled R$722.0 million in 3Q13, 161.1% up on 3Q12, accompanied by an EBITDA margin5 of 44.7%, up by 26.9 p.p. The transfer of CDE funds, ratified by ANEEL in the tariff review, totaling R$303.4 million, contributed to the growth of the distribution companys EBITDA, as well as to the consolidated figure. Excluding this effect, consolidated EBITDA increased by 51.4% over 3Q12. All the Companys business segments posted an upturn in EBITDA and distribution increased its period share of consolidated EBITDA from 66.3% to 84.1%, while the share of the generation segment fell from 31.2% to 14.3%.
EBITDA is calculated in accordance with CVM Instruction 527/2012 and refers to net income + income and social contribution taxes + net financial expenses + depreciation and amortization. 5 Revenue from construction was not considered in the calculation of the consolidated and distribution EBITDA margins, due to the booking of revenues and costs with a zero margin.
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Distribution - 66.3% (EBITDA margin: 13.0%) Generation - 31.2% (EBITDA margin: 89.0%)
Commercialization - 1.6% (EBITDA margin: 6.8%)
( 8)
( 2)
12
404 59
EBITDA 3Q12
Net Revenue
NonManagable Costs
Provisions
Equity Pikup
EBITDA 3Q13
When adjusted for the CVA, i.e. regulatory assets and liabilities that are taken into account in the next cycle of distribution tariff adjustments, reflecting, therefore, potential gross cash generation, adjusted EBITDA came to R$392.8 million in 3Q13, 0.6% down year-on-year. Note that third-quarter CVA was impacted by the transfer of CDE funds, ratified by ANEEL in the tariff review, totaling R$303.4 million.
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7.6% 40.3%
(21)
(109)
1,158
1,355 966
1,246
1,246
Net Revenue
Equity Pickup
NonManageable Costs
In 9M13, EBITDA came to R$1,355.1 million, 40.3% up year-on-year, with an EBITDA margin of 26.3%.
Including the CVA, EBITDA totaled R$1,246.4 million, 7.6% higher than in 9M12.
Distribution The distribution companys EBITDA totaled R$618.8 million in 3Q13, 236.7% up on 3Q12. This
result was impacted by the transfer of CDE funds, ratified by ANEEL in the tariff review, totaling R$303.4 million. Excluding this effect, the distribution companys EBITDA moved up by 71.6% over 3Q12, chiefly due to the increase in net revenue, influenced by the market growth associated with the reduction of expenses with provisions. The EBITDA margin6 stood at 42.7%, 26.9 p.p. up on 3Q12. When adjusted for the CVA, distribution EBITDA came to R$289.6 million, 4.3% down year-on-year. In 9M13, the distribution company posted EBITDA of R$1,021.5 million, 45.1% up year-on-year. This result was impacted by the transfer of CDE funds, ratified by ANEEL in the tariff review, totaling R$303.4 million. Excluding this effect, EBITDA grew by 2.0% over 9M12. Including the CVA, adjusted year-to-date EBITDA
6
Revenue from construction was not considered in the calculation of the consolidated and distribution EBITDA margins, due to the booking of revenues and costs with a zero margin.
Provisions
25
EBITDA 9M12
EBITDA 9M13
came to R$912.7 million, 1.8% higher than in the same period in 2012. The EBITDA margin came to 26.3%, 6.8 p.p. up on 9M12.
Generation
Light Energia recorded 3Q13 EBITDA of R$104.9 million, 21.5% up on 3Q12, due to the repricing of energy sales contracts and the increased volume of energy sold on the free market (ACL), where contract prices are higher than on the captive market (ACR). The EBITDA margin stood at 79.0%, 10.0 p.p. down on 3Q12. In 9M13, EBITDA from generation amounted to R$324.4 million, up 29.5% in relation to 9M12. EBITDA margin stood at 79.1% in 9M13, 2.9 p.p. lower than in 9M12.
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The 3Q13 financial result was a negative R$121.4 million, 7.8% more than the negative R$112.6 million recorded in 3Q12. Financial revenue totaled R$78.5 million in 3Q13, 155.7% higher than in the same period in 2012, mainly due to income from financial investments, which increased by 246.2% in the same period. Further upward pressure came from the other financial revenues line, whose main effect was the updating of the distribution asset base in line with the new repositioning value (VNR), totaling R$14.6 million, and the adjustment of escrow deposits in the amount of R$2.9 million. Financial expenses came to R$199.9 million, 39.5% up on 3Q12, chiefly due to: (i) the 31.9% upturn in debt expenses due to the Companys increased leverage, reflecting the upturn in the benchmark interest rate (Selic), and (ii) the R$19.2 million increase in expenses from the monetary and exchange variation, mainly impacted by the negative semiannual adjustment of the guarantee of the loan from the National Treasury. The 9M13 financial result was a negative R$355.8 million, a 2.1% improvement over 9M12.
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3.5 Debt
R$ MN Brazilian Currency Light SESA Debenture 4th Issue Debenture 7th Issue Debenture 8th Issue Debenture 9th Issue - series A Debenture 9th Issue - series B Eletrobras CCB Bradesco Working Capital - Santander BNDES (CAPEX) BNDES FINEM Banco do Brasil Others Light Energia Debenture 1st Issue Debenture 2st Issue Debenture 3st Issue BNDES (CAPEX) BNDES FINEM Others Light ESCO BNDES - PROESCO Foreing Currency Light SESA National Treasury Merril Lynch BNP Citibank Bank Tokyo - Mitsubishi Light Energia Citibank Gross Debt Cash Net Debt (a) Braslight Debt (b) Adjusted Net Debt (a+b)
Short Term 566.8 529.6 0.0 25.2 14.4 24.2 12.4 0.5 104.5 80.6 121.0 142.8 1.5 2.6 33.2 7.5 4.8 0.9 7.0 12.9 0.0 4.0 4.0 19.8 19.0 10.6 5.9 1.9 0.5 0.1 0.8 0.8 586.6
% 9.5% 8.9% 0.0% 0.4% 0.2% 0.4% 0.2% 0.0% 1.8% 1.4% 2.0% 2.4% 0.0% 0.0% 0.6% 0.1% 0.1% 0.0% 0.1% 0.2% 0.0% 0.1% 0.1% 0.3% 0.3% 0.2% 0.1% 0.0% 0.0% 0.0% 0.0% 0.0% 9.9%
Long Term 4,584.3 3,885.0 0.0 649.1 469.6 995.2 597.1 6.2 300.0 535.5 182.3 150.0 683.5 171.4 423.6 29.9 24.4 34.3 15.7 15.7 784.2 605.8 37.9 105.9 105.2 223.0 133.8 178.4 178.4 5,368.5
% 77.0% 65.2% 0.0% 10.9% 7.9% 16.7% 10.0% 0.1% 5.0% 9.0% 3.1% 2.5% 11.5% 2.9% 7.1% 0.5% 0.4% 0.6% 0.3% 0.3% 13.2% 10.2% 0.6% 1.8% 1.8% 3.7% 2.2% 3.0% 3.0% 90.1%
Total 5,151.1 4,414.7 0.0 674.3 484.0 1,019.4 609.5 6.7 404.5 80.6 656.5 325.1 151.5 2.6 716.7 178.9 428.4 30.8 31.4 47.2 0.0 19.7 19.7 804.0 624.8 48.5 111.8 107.1 223.5 133.9 179.2 179.2 5,955.1 1,803.5 4,151.6 1,058.4 5,210.0
% 86.5% 74.1% 0.0% 11.3% 8.1% 17.1% 10.2% 0.1% 6.8% 1.4% 11.0% 5.5% 2.5% 0.0% 12.0% 3.0% 7.2% 0.5% 0.5% 0.8% 0.0% 0.3% 0.3% 13.5% 10.5% 0.8% 1.9% 1.8% 3.8% 2.2% 3.0% 3.0% 100.0%
117.9
940.5
The Company closed 3Q13 with gross debt of R$5,955.1 million, 2.4% less than at the end of June 2013, and 31.1%, or R$1.4 billion, up year-on-year, due to period funding operations: (i) the disbursement of
28
R$145 million from the BNDES to Light SESA in the last 12 months; (ii) the disbursement of R$150 million from Banco do Brasil to Light SESA (February 2013); (iii) a foreign-currency loan of R$121 million from Banco Tokyo-Mitsubishi to Light SESA, hedged against foreign exchange exposure through a Real swap transaction (March 2013); (iv) the disbursement of R$56 million from the BNDES to Light SESA (May 2013); and (v) Light SESAs 9th debenture issue, totaling R$1.6 billion, with Banco do Brasil (June 2013), divided into two series, the first comprising R$1.0 billion at the CDI interbank rate plus 1.15% and the second, of R$600 million, at the variation in the IPCA consumer price index plus 5.74%. The funds were used for investments, working capital and the prepayment of R$500 million in Commercial Notes issued in May 2013 and R$375 million in more expensive debt, including R$160 million from the 5th debenture issue, at a cost of the CDI plus 1.5%. The net debt/EBITDA ratio moved up from 2.62x in June 2013 to 2.68x in September 2013. As a result, the Company is still respecting its net debt/EBITDA covenant limit of 3.0x.
773.4 1008.9 802.0 666.0 437.4 440.8 545.4 440.7
Covenants Multiple R$ MN
+ + = Gross Debt Swap Pension Fund Cash Net Debt for covenants (a) EBITDA (12 months) Provision Other Operational Revenues/Expenses Regulatory Assets and Liabilities (CVA) Financial CVA EBITDA for covenants (b)
Sep-13 Jun-13
5,955.1 (97.1) 1,058.4 1,803.5 5,112.8 1,839.0 404.0 348.1 29.3 14.0 1,910.2 2.68
2012
6,101.3 4,666.0 (97.5) (29.4) 1,066.6 1,054.7 2,045.2 392.9 5,025.2 5,298.4 1,402.5 1,456.2 416.2 475.2 363.0 375.6 477.2 330.4 14.0 14.0 1,918.9 1,872.2 2.62 2.83
+ + =
The Company also has a covenant for the EBITDA/interest expense ratio, which should be higher than 2.5x. The result for this indicator in September was 4.46x. It is worth
2013 149.7
557.2
2014
2015
2016
2017
2018
2019
2020
2021
After 2021
noting that non-compliance with the covenant only occurs if the limits determined by the indicators are not respected for two consecutive or four alternate quarters. The Companys debt has an average term to maturity of 4.3 years, 0.1 of a year above the average term in 2Q13. The average cost of Real-denominated debt was 8.8% p.a., in line with the end-of-June figure. In September, 13.5% of total debt was denominated in foreign currency, but considering hedges against exchange exposure, only 0.4% of this total was exposed to foreign currency risk, in line with the previous quarter. Lights FX hedge policy consists of protecting cash flow from foreign-currency-denominated debt
29
falling due within the next 24 months (principal and interest) through the use of non-cash swap instruments with premier financial institutions. Funding via Central Bank Resolution 4131, from Merrill Lynch, BNP, Citibank and Bank Tokyo-Mitsubishi, was contracted with swaps for the entire term of the debt.
( 9) (182) (17) 445 (217) 78 162 84 Adjusted NI3Q12 Regulatory Assets and Liabilities 3Q12 EBITDA Financial Result Taxes Others 3Q13 321 104 Regulatory Adjusted NI Assets and 3Q13 Liabilities
Light posted net income of R$321.5 million in 3Q13, 282.1% up on the R$84.1 million recorded in 3Q12, with an impact of R$200.3 million from the transfer of CDE funds, ratified by ANEEL in the tariff review. Excluding this effect, third-quarter net income came to R$1212 million, 44.1% up year-on-year, explained by market growth and a reduction in provisions. Adjusting for the portion of purchased energy costs to be passed on in the next tariff adjustment through the creation of regulatory assets and liabilities (CVA) not recorded in the income statement, adjusted net income came to R$104.2 million, 35.9% down on 3Q12. Year-to-date net income amounted to R$458.3 million, 73.6% more than in 9M12. Including the CVA, adjusted 9M13 net income stood at R$386.5 million, 1.1% down year-on-year.
30
9M12
EBITDA
Financial Result
Taxes
Others
9M13
3.7 Investments
CAPEX (R$MN) Distribution Network reinforcement and expansion Losses Others Administration Commercial./ Energy Efficiency Generation Total
Light invested R$482.2 million in the first nine months of 2013, 8.6% less than in 9M12.
The distribution segment absorbed R$393.9 million (representing 81.7% of the total), 18.3% down on 9M12. Of this total: (i) R$253.5 million went to the development of distribution and expansion networks, including the underground network, to keep pace with market growth, strengthen the network and improve quality; and (ii) R$133.4 million went to the energy loss combat project (network protection, electronic meters and fraud regularization). Commercialization and energy efficiency Investments increased from R$3.8 million in 9M12 to R$53.8 million in 9M13, due to the co-generation project with a major beverage company.
31
Generation Capacity Expansion Projects One of the pillars of Lights Strategic Plan is to increase the share of energy generation in its results. With this in mind, the Company has announced several projects to boost installed generating capacity, which now totals 942 MW. With the incorporation of the scheduled expansion projects, the position on
Current Generation Park Existing Power Plants Fontes Nova Nilo Peanha Pereira Passos Ilha dos Pombos Santa Branca Elevatrias Renova SHPP Paracambi Total Installed Capacity (MW)* 132 380 100 187 56 74 13 942 Assured Energy (MW)* 104 335 51 115 32 (87) 40 10 600 Operation Start 1942 1953 1962 1924 1999 2008 2012 Act Date Concession / Authorization Expiration Date 2026 2026 2026 2026 2026 2033 2031
Generation Capacity Expansion Projects New Projects Installed Capacity (MW)* Assured Energy (MW)* 8 114 13 4 3 3 3 127 19 23 19 24 24 3 11 4 262 Operation Start 2015 feb-15 sep-14 sep-14 dec-14 mar-15 jan-14 mar-14 jan-17 sep-15 2015/2016 jan-16 jan-17 apr-15 Concession / Authorization Expiration Date 2031 2045 2032 2032 2032 2031 2046 2047 N/a 2050 N/a 2051 2052 2050
SHPP Lajes 9 Belo Monte 280 Guanhes 22 Dores de Guanhes 7 Senhora do Prto 6 Jacar 5 Fortuna II 5 Renova 245 LER 2010 37 A-3 2011 48 A-5 2012 5 LER 2013 35 PPA 88 Mercado Livre I 5 Mercado Livre II 21 Mercado Livre III 7 Total 556 *Light's proportional Participation 51% Light 21.99% Light 2.49% Light
32
The third quarter of 2013 was marked by the following events related to projects for expanding Lights generating capacity: Lajes SHP
The basic project has already been approved by ANEEL. In June 2013, ANEEL altered the public service
exploration regime to independent energy producer. As a result, the SHP obtained a 50% reduction in TUSD and TUST fees. Once the construction company is defined, it will be possible to begin the works, with startup scheduled for 2015, given that the project has already been granted an installation license. The 17 MW turbine will be installed in the old powerhouse of the Fontes Velha power plant. In addition to increasing generating capacity, the project also brings certain other benefits, such as increasing operational flexibility, upgrading supply of the CEDAE water main, controlling the Pira Rivers water level, and improving the quality of the water in the Lajes Reservoir.
Guanhes Energia Guanhes Energia S.A. is a special purpose company created to implement the Dores de Guanhes, Senhora do Porto, Jacar and Fortuna II SHPs, all of which located in the state of Minas Gerais, with a joint installed capacity of 44 MW. Guanhes Energias shareholders are Light Energia S.A (51%) and CEMIG Gerao e Transmisso S.A (49%). The Senhora do Porto and Dores de Guanhes SHPs are scheduled for start-up in the third quarter of 2014, while the Jacar and Fortuna II SHPs are expected to begin operations in the fourth quarter of 2014 and first quarter of 2015, respectively.
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The 2010 LER wind farms are composed of 100 wind turbines, and the ongoing works include construction and electromechanical works and turbine delivery and assembly. All foundations have already been laid and 99 turbines have already been delivered, 79 of which are already fully assembled. The mediumvoltage networks, substations and 230kV transmission lines are also being installed. The ongoing works at A-3 2011 refer to construction works and the delivery of turbines. Of the total of 130 wind turbines, 45 have already been delivered, including 11 ready, and 106 foundations have been laid.
Sale of 73.7 average MW (installed capacity of 159.0 MW) in the 2012 Reserve Energy Auction (LER 2013).
At the 2013 Reserve Energy Auction (LER 2013), Renova sold 73.7 average MW to be generated by nine wind farms located in the state of Bahia, with a joint installed capacity of 159.0 MW. The contracts resulting from this sale will be executed with the Electricity Commercialization Chamber (CCEE). The contracts will have a term of 20 years, with electricity supply beginning on September 1, 2015. The lots were sold for an average price of R$106.02 per MWh, which will be adjusted annually as of September 1, 2013 in line with the IPCA consumer price index. Following the LER 2013 auction, the Renova had a contracted installed capacity of 1,449.4 MW, 1,407.6 MW of which from wind farms and 41.8 MW from SHPs, commercialized in the captive and free markets.
34
4. Cash Flow
R$ MN Cash in the Beginning of the Period (1) Net Income Social Contributions & Income Tax Net Income before Social Contributions & Income Tax Provision for Delinquency Depreciation and Amortization Loss (gain) on intangible sales / Residual value of disposals fixed asset Losses (gains) on financing exchange activities Net Interests and Monetary Variations Braslight Atualization / provisions reversal Equity Pikup Financial Assets of the Concession Others Subtotal Working Capital Contingencies Deferred Taxes Braslight CDE fund Others Taxes Paid Interest Paid Cash from Operating Activities (2) Finance Obtained Dividends Loans and financing payments Financing Activities (3) Disposal of Assets/Intangible Fixed Assets/Intangible/Financial Assets Inflow/Acquisitions on Investment Investment Activities (4) Cash in the End of the Period (1+2+3+4) Cash Generation (2+3+4)
3Q13 2,037.3 321.5 178.6 500.1 37.1 100.5 (1.1) 16.7 108.1 21.2 (4.0) 1.5 (14.6) 8.7 774.2 (162.3) (20.4) 0.9 (30.3) (303.4) (51.7) (7.6) (62.1) 137.1 1.2 (229.4) (228.2) (143.8) (15.0) (158.8) 1,787.3 (250.0)
3Q12 473.1 84.1 (3.7) 80.4 39.3 84.1 1.6 (2.6) 96.2 25.4 19.1 (18.3) 6.0 331.2 (83.6) (25.9) 91.7 (28.1) (21.5) (9.8) (70.9) 183.1 863.3 (88.8) 774.4 3.1 (300.5) (44.7) (342.0) 1,088.5 615.5
9M13 230.4 458.3 248.4 706.7 114.6 292.6 9.2 79.6 288.7 91.1 56.2 2.6 (27.7) (45.8) 1,567.7 34.7 (58.3) (7.2) (88.1) (303.4) (161.4) (88.1) (209.4) 686.6 2,434.7 (74.8) (887.6) 1,472.4 (535.3) (66.6) (601.9) 1,787.3 1,557.0
9M12 652.5 264.0 82.1 346.1 173.2 256.2 3.9 13.4 312.7 85.6 72.2 (18.5) (11.6) 1,233.0 (165.0) (64.2) 3.2 (117.5) (54.5) (70.2) (219.6) 545.1 863.3 (73.7) (260.9) 528.6 4.9 (597.9) (44.7) (637.7) 1,088.5 436.0
The Company closed 3Q13 with a cash position of R$1,787.3 million, after a negative cash generation of R$250 million in the period. Financing activities contributed to this result, given the amortization of loans and financing totaling R$229.4 million. From the operational standpoint, purchased energy costs impacted the working capital account, and cash from operating activities amounted to R$137.1 million in 3Q13, versus R$183.1 million in 3Q12.
5. Corporate Governance On September 30, 2013, the capital stock of Light S.A. comprised 203,934,060 common shares, 97,629,463 of which outstanding. The following chart shows Lights current shareholding structure:
BTG PACTUAL
14.29% 2.74% 28.57% 5.50% 28.57% 5.50% 75% 19.23% 25% 6.41%
SANTANDER
FIP REDENTOR
CEMIG
VOTORANTIM
BANCO DO BRASIL
28.57% 5.50%
PARATI
25.64%*
MINORITY
3.19% 0.42% 96.81% 100%
REDENTOR ENERGIA
100% 13.03%
FOREIGN
55.19%
NATIONAL
44.81%
CEMIG
26.06%
RME
13.03%
Controller Group 52,1%
LEPSA
13.03%
BNDESPAR
11.86%
MARKET
36.01%
Free Float 47,9%
36
6. Capital Markets Lights shares have been listed in the BM&FBovespas Novo Mercado trading segment since July 2005, therefore adhering to the best corporate governance practices and the principles of transparency and equity, in addition to granting special rights to minority shareholders. Light S.A.s shares are included in the following indices: Ibovespa, IGC (Corporate Governance Index), IEE (Electric Power Index), IBrX (Brazil Index), ISE (Corporate Sustainability Index), ITAG (Special Tag Along Stock Index) and IDIV (Dividend Index). They are also traded on the U.S. over-the-counter (OTC) market as Level 1ADRs, under the ticker LGSXY. At the end of September, Light S.A.s shares (LIGT3) were priced at R$18.93. The Companys market cap
BM&F BOVESPA (spot market) - LIGT3 Daily Average Number of shares traded (Thousand) Number of Transactions Traded Volume (R$ Million) Quotation per shares: (Closing)* Share Valuing (Quarter) IEE Valuing (Quarter) Ibovespa Valuing (Quarter)
*Ajusted by earnings.
9M13
9M12
934.2 727.3 3,226 2,694 17.2 18.7 R$ 18.93 R$ 23.51 -13.2% -14.1% -6.1% -7.7% -14.1% 4.3%
The charts below give a breakdown of the Companys free float in September 2013.
Foreigners
Europe 23.4%
Foreign 55.2%
37
The chart below shows the performance of Lights stock between January 2, 2012 and November 7, 2013.
-7.1% Ibovespa
90
-19.1% IEE
80 70 60 50
Dividends
Lights dividend payment policy establishes a minimum payout equivalent to 50% of adjusted net income, calculated in compliance with article 189 of Brazilian Corporate Law and pursuant to Brazilian accounting practices and the regulations of the Brazilian Securities and Exchange Commission (CVM).
100%
100.0%
97.2%
50%
2007
2008 Payout
2009
2010
2011
2012
38
8.2% 4.2%
9.9% 1.7%
8.1%
8.1%
5.4% 2.4%
351 203
408 187
87
170 92
1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 1H13
7. Recent Events
Dividends
Interest on Equity
Dividend Yeld*
The
Extraordinary
Shareholders Meeting of October 16, 2013, approved the election of Carlos Antonio Decezaro as an alternate member of the Companys Board of Directors due to the resignation of Mrcio Lus Domingues da Silva.
On October 8, 2013, Aneel decided to submit to the Ministry of Mining and Energy MME the application filed by the Lights subsidiary Itaocara Energia to termination of the Concession Agreement 12/2001, which regulates the construction and operation of hydroelectric Itaocara, with favorable pronouncement to it. The auction of HPP Itaocara is expected to take place on December 13, 2013, as the edict Auction n 10/2013, still in Public Hearing.
On August 8, 2013, Light Energia approved the execution of an Investment Agreement with RR Participaes S.A. (RR), Cemig GT, Renova Energia and Chipley SP Participaes S.A. (Chipley), aiming to regulate the entry of Cemig GT in Renovas controlling block, as well as the partial or full acquisition by Chipley of the capital stock of Brasil PCH S.A. (Brasil PCH), pursuant to the Brasil PCHs Stock Purchase Agreement, executed between Cemig GT and Petrleo Brasileiro S.A. Petrobras on June 14, 2013 and assigned by Cemig GT to Chipley.
The capital of Renova will be increased, with the assignment by Light Energia and RR to Cemig
GT of the preemptive right related to the subscription to new common shares issued by
39
Renova, and a new shareholders agreement will be entered into between RR, Light Energia and Cemig GT. The share issue price on the reference date of December 31, 2012 will be R$16.23 per share, which would be equivalent to R$48.68 per unit, totaling R$1,414,732,900 to be subscribed and paid up by Cemig GT. The amounts will be restated based on the CDI variation as from December 31, 2012. After the transaction, Light Energia will hold equity interest between 11.7% and 15.9% in Renovas total capital stock. Brasil PCHs acquisition was subject to the preemptive and tag along rights of the other shareholders of Brasil PCH. In accordance with the Material Facts disclosed by Renova and Companhia Energtica de Minas Gerais Cemig, shareholders of Chipley, having ended the term for exercising the preemptive and tag along rights related to the transaction for the acquisition of 49% of all shares of Brasil PCH held by Petrleo Brasileiro S.A. (Petrobras), no shareholder exercised his preemptive right and only the shareholder Jobelpa S.A. (Jobelpa), holder of 2% of the shares of Brasil PCH, exercised his tag along right. Consequently, Chipley will acquire an interest of 51% in Brasil PCH (49% stake of Petrobras and 2% stake of Jobelpa), sand the control of Brasil PCH will be shared with the other shareholder, which holds the remaining 49%. The price for the acquisition of 51% of Brasil PCH is R$676,530,600, on the reference date of December 31, 2012, and will be restated based on the CDI variation plus 2% p.a. until the date of effective payment. Funds raised from the capital increase and not used for the acquisition of 51% of Brasil PCH will strengthen Renovas cash and may be used in Renovas wind farm projects already contracted and/or other opportunities for growth in renewable energy assets. Brasil PCH has the ownership of 13 small hydroelectric power plants located in the states of Minas Gerais, Rio de Janeiro, Esprito Santo and Gois, all of them operational, with total installed capacity of 291 MW and assured energy of 194 average-MW, contracted until 2028 and 2029 through Proinfa. Tanto a operao quanto o aumento de capital esto sujeitos a uma srie de condies suspensivas e comerciais, dentre as quais a aprovao pelo Conselho Administrativo de Defesa Econmica CADE e pela Aneel.
40
On November 5, 2013, the Brazilian Electricity Regulatory Agency (ANEEL or Agency) has approved the tariff repositioning of Light SESA, considering the new financial component, applicable only in the next 12 months, and the elimination of the financial component currently present in Light SESAs tariffs, consumers will see an average increase of 3.65% in electricity bills as from November 7, 2013. With reference to non-technical energy losses, the percentage to be recognized in the tariff will be 40.41% on the low voltage market, remaining unchanged over the cycle. The amount corresponding to the difference between this percentage and a reference figure that starts from 31.37%, at the beginning of the cycle, until it reaches 30.5% in 2018, will be invested in the Companys energy-loss-combating program and addressed as Special Obligations, outside the Regulatory Remuneration Base. The progress of the energy-loss-combating program will be monitored by ANEEL as a condition for maintaining the level of 40.41%. Regarding the Regulatory Asset Base (RAB), the amounts approved were R$ 11,974,212 for the gross RAB and R$ 6,711,307, for the net RAB. The average depreciation rate for the 4th cycle was defined as 3.81%.
41
8. Disclosure Program
Schedule Teleconference 11/11/2013, Monday, at 4:00 p.m. (Brazilian Time) and at 1:00 p.m. (NY Time), with simultaneous translation to English Access conditions: Webcast: link on site www.light.com.br/ri (portuguese and english) Conference Call - Dial number: Brazil: +55 (11) 2188 0155 EUA: +1 (646) 843-6054 Other countries: +1 866 890 2584 Access code: Light
Contact Luis Felipe Negreiros de S Gustavo Werneck Souza Carlos Cotrim Rodrigues Pereira Marcelle Henriques Pelajo
Forward-looking Statements
The information on the Companys operations and its Managements expectations regarding its future performance was not reviewed by independent auditors. Statements about future events are subject to risks and uncertainties. These statements are based on beliefs and assumptions of our Management, and on information currently available to the Company. Statements about future events include information about our intentions, beliefs or current expectations, as well as of the Company's Board of Directors and Officers. Exceptions related to statements and information about the future also include information about operating results, likely or presumed, as well as statements that are preceded by, followed by, or including words such as "believes", "might", "will", "continues", "expects", "estimates", "intends", "anticipates", or similar expressions. Statements and information about the future are not a guarantee of performance. They involve risks, uncertainties and assumptions because
42
they refer to future events, thus depending on circumstances that might or might not occur. Future results and creation of value to shareholders might significantly differ from the ones expressed or suggested by forward-looking statements. Many of the factors that will determine these results and values are beyond LIGHT S.A.'s control or forecast capacity.
43
LIGHT SESA Net Operating Revenue Operating Expense Other Operating Revenuess/Expenses Operating Result EBITDA Financial Result Result before taxes and interest Net Income EBITDA Margin*
* Does not consider Construction Revenue
3Q13 1,571.4 (1,046.6) (1.9) 522.9 608.9 (100.7) 422.2 270.5 42.0%
3Q12 1,586.5 (1,473.6) 1.5 114.5 183.8 (88.6) 25.8 43.0 13.0%
9M13 5,076.0 (4,300.2) (14.8) 761.0 1,011.5 (295.3) 465.7 301.4 20.3%
9M12 4,997.6 (4,504.2) (2.5) 490.9 703.8 (300.9) 190.1 156.7 15.5%
LIGHT ENERGIA Net Operating Revenue Operating Expense Other Operating Revenuess/Expenses Operating Result Equity Pickup EBITDA Financial Result Result before taxes and interest Net Income EBITDA Margin COMMERCIALIZATION AND SERVICES Net Operating Revenue Operating Expense Operating Result EBITDA Financial Result Result before taxes and interest Net Income EBITDA Margin
3Q13 132.9 (41.3) (0.4) 91.2 (0.7) 104.9 (25.7) 66.6 42.6 79.0% 3Q13 173.9 (162.1) 11.7 11.8 4.8 14.0 9.4 6.8%
3Q12 97.0 (41.7) (0.1) 55.2 17.2 86.4 (17.3) 55.1 43.8 89.0% 3Q12 85.8 (78.7) 7.2 6.9 0.3 7.1 4.9 8.1%
Var. % 37.0% -1.0% 193.1% 65.3% 21.5% 49.2% 20.7% -2.7% Var. % 102.5% 106.0% 64.1% 70.1% 98.1% 89.5% -
9M13 410.2 (122.8) (0.3) 287.1 (4.6) 324.4 (66.3) 217.9 141.5 79.1% 9M13 520.7 (489.8) 30.9 31.0 4.6 28.0 18.8 6.0%
9M12 305.5 (116.6) 1.8 190.7 17.8 250.6 (58.9) 149.6 107.2 82.0% 9M12 204.1 (185.2) 18.8 18.4 0.3 18.1 12.4 9.0%
Var. % 34.2% 5.3% 50.5% 29.5% 12.5% 45.7% 32.0% Var. % 155.1% 164.4% 63.8% 68.8% 54.5% 52.3% -
44
Consolidated - R$ MN NET OPERATING REVENUE OPERATING EXPENSE Personnel Material Outsourced Services Purchased Energy Depreciation Provisions Construction Revenue Other Operating Revenuess/Expenses Others OPERATING RESULT EQUITY PICKUP EBITDA ( ) FINANCIAL RESULT Financial Income Financial Expenses RESULT BEFORE TAXES AND INTEREST SOCIAL CONTRIBUTIONS & INCOME TAX DEFERRED INCOME TAX NET INCOME
1
3Q12 1,737.6 (1,114.6) (74.6) (7.8) (112.1) (628.4) (100.5) (41.2) (122.4) (0.2) (27.4) 623.0 (1.5) 722.0 (121.4) 78.5 (199.9) 500.1 (27.5) (151.1) 321.5
3Q13 1,726.7 (1,552.0) (78.7) (7.8) (100.6) (1,032.2) (83.6) (53.3) (170.3) 1.7 (27.2) 174.7 18.3 276.6 (112.6) 30.7 (143.3) 80.4 (28.7) 32.4 84.1
Var. % 0.6% -28.2% -5.1% -0.6% 11.4% -39.1% 20.2% -22.8% -28.1% 0.8% 256.6% 161.1% 7.9% 155.4% 39.5% 521.9% -3.9% 282.1%
9M13 5,602.3 (4,537.3) (231.0) (14.8) (331.6) (2,947.5) (292.6) (153.2) (455.2) (15.1) (96.3) 1,065.1 (2.6) 1,355.1 (355.8) 232.1 (587.9) 706.7 (103.5) (144.9) 458.3
9M12 5,415.5 (4,724.6) (221.3) (16.6) (295.7) (3,160.5) (256.2) (224.3) (470.0) (0.5) (79.6) 690.9 18.5 965.6 (363.3) 118.4 (481.8) 346.1 (89.8) 7.6 264.0
Var. % 3.4% -4.0% 4.4% -10.9% 12.1% -6.7% 14.2% -31.7% -3.1% 3140.1% 21.0% 54.2% 40.3% -2.1% 96.0% 22.0% 104.2% 15.3% 73.6%
( ) EBITDA as of CVM Instruction 527/2012: Net Income + Social Contributions and Income Taxes + Net Financial Result + Depreciation/Amortization (*) The consolidated financial statements include the Light S.A. and its subsidiaries and affiliates. These financial statements were eliminated from equity consolidated companies, the balances of receivables and payables, revenues and expenses between the companies.
45
46
R$ Million TOTAL ASSET TOTAL LIABILITIES TOTAL DIFFERENCE Net difference (period) Net difference (accumulated)
Jun-13 Mar-13 653.0 (77.4) 575.6 119.3 220.4 500.6 (44.3) 456.3 101.2 101.2
Jun-12 Mar-12 174.4 (76.0) 98.4 75.7 73.6 177.8 (155.1) 22.7 (2.1) (2.1)
47
EXHIBIT V
Light has ceased to consolidate the results of its jointly-owned subsidiaries in its financial statements since January 1st, 2013, in accordance with accounting pronouncement CPC 19 and as approved by CVM Resolution 694/12. Pursuant to the new rule, these results should be regarded as investments and recognized in accordance with the equity income method, replacing the pro-rata consolidation method adopted up to the end of 2012. As a result, the Company no longer consolidates the following jointlyheld direct and indirect subsidiaries on a pro-rata basis: Renova Energia, Guanhes Energia, Lightger, Axxiom, Amaznia Energia, and E-Power. The change had no impact on the Companys net income, resulting only in alterations to individual accounts in the consolidated income statement as a counterentry to the equity income account.
The consolidated financial information for 3Q13 is in accordance with the new accounting practice; however, for comparative purposes, the information for the third quarter of 2012 was duly adjusted to retrospectively reflect the change.
Consolidated Income Statement - R$ MN NET OPERATING REVENUE OPERATING EXPENSE Other Operating Revenues/Expenses OPERATING RESULT EQUITY PICKUP EBITDA FINANCIAL RESULT Other Operating Revenues/Expenses RESULT BEFORE TAXES AND INTEREST SOCIAL CONTRIBUTIONS & INCOME TAX DEFERRED INCOME TAX NET INCOME
Published 3Q12 1,748.0 (1,566.4) 181.5 269.5 (116.6) 16.4 81.4 (30.0) 32.7 84.1
Adjustments (21.3) 12.7 1.7 (6.9) 18.3 7.1 4.0 (16.4) (1.0) 0.6 0.3 -
Reclassified 3Q12 1,726.7 (1,553.7) 1.7 174.7 18.3 276.6 (112.6) 80.4 (29.4) 33.1 84.1
48
Consolidated Income Statement - R$ MN NET OPERATING REVENUE OPERATING EXPENSE Other Operating Revenues/Expenses OPERATING RESULT EQUITY PICKUP EBITDA FINANCIAL RESULT Other Operating Revenues/Expenses RESULT BEFORE TAXES AND INTEREST SOCIAL CONTRIBUTIONS & INCOME TAX DEFERRED INCOME TAX NET INCOME
Published 9M12 5,450.2 (4,751.7) 698.5 959.1 (363.2) 14.2 349.5 (93.2) 7.7 264.0
Adjustments (34.6) 27.5 (0.5) (7.1) 18.5 (43.5) (0.2) (14.2) (3.4) 2.8 0.6 -
Reclassified 9M12 5,415.5 (4,724.2) (0.5) 691.4 915.5 (363.3) 346.1 (90.4) 8.3 264.0
49
This information is complementary and is exclusively for comparative purposes, since it is not in accordance with Brazilian accounting practices.
REPORTED CONSOLIDATED
RENOVA 22.0%
LIGHTGER 51.0%
EBL 33.0%
AXXIOM 51.0%
AMAZNIA 25.5%
ELIMINATION
TOTAL
NET REVENUE OPERATING EXPENSE OPERATING RESULT EQUITY PICKUP EBITDA FINANCIAL RESULT RESULT BEFORE TAXES AND INTEREST SOCIAL CONTRIBUTIONS & DIFERRED/INCOME TAX NET INCOME
REPORTED CONSOLIDATED
RENOVA 22.0%
LIGHTGER 51.0%
EBL 33.0%
AXXIOM 51.0%
AMAZNIA 25.5%
ELIMINATION
TOTAL
NET REVENUE OPERATING EXPENSE OPERATING RESULT EQUITY PICKUP EBITDA FINANCIAL RESULT RESULT BEFORE TAXES AND INTEREST SOCIAL CONTRIBUTIONS & DIFERRED/INCOME TAX NET INCOME
(1.4) (1.4)
50
LIGHT S.A. STATEMENTS OF FINANCIAL POSITION SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 (In thousands of Brazilian reais - R$) Parent Company ASSETS 9.30.2013 12.31.2012 Consolidated 9.30.2013 12.31.2012 Restated 230,356 15,266 1,441,588 30,348 196,985 6,730 1,954 42,171 35,070 166,718 2,167,186 289,429 118,878 830,033 1,573,349 224,073 470 2,786 557,350 1,635,255 3,748,638 8,980,261 11,147,447
Note 4 5 6 7 7
Cash and cash equivalents Marketable securities Consumers, concessionaires, permissionaires and clients Inventories Taxes and contributions Income tax and social contribution Prepaid expenses Dividends and interest on equity receivable Receivables from services rendered Receivables from swap transactions Other receivables TOTAL CURRENT ASSETS Consumers, concessionaires, permissionaires and clients Taxes and contributions Deferred taxes Concessions' financial assets Escrow deposits Receivables from swap transactions Other receivables Investments Property, plant and equipment Intangible assets TOTAL NON-CURRENT ASSETS TOTAL ASSETS
32 10
45,469 3,858 191 19,210 148 6,665 75,541 289 3,031,033 672 3,031,994 3,107,535
1,787,341 16,168 1,120,532 31,332 186,582 22,626 13,434 46,383 97,051 506,066 3,827,515 264,942 115,506 679,642 1,759,627 268,101 124 2,786 629,815 1,660,444 3,813,047 9,194,034 13,021,549
6 7 8 9 19 32 10 12 13 14
51
LIGHT S.A. STATEMENTS OF FINANCIAL POSITION SEPTEMBER 30, 2013 AND DECEMBER 31, 2012 (In thousands of Brazilian reais - R$)
Note
Trade payables Taxes and contributions Income tax and social contribution Loans, borrowings and financial charges Debentures and financial charges Payable swap transactions Dividends and interest on equity payable Estimated liabilities Regulatory charges Post-employment benefits Other payables TOTAL CURRENT LIABILITIES Loans, borrowings and financial charges Debentures and financial charges Payable swap transactions Taxes and contributions Deferred taxes Provisions Post-employment benefits Other payables TOTAL NON-CURRENT LIABILITIES EQUITY Capital stock Profit reserves Proposed additional dividends Equity valuation adjustments Other comprehensive income Retained earnings TOTAL EQUITY TOTAL LIABILITIES AND EQUITY
14 15 15 16 17 32
18 21 22
619,426 84,075 64,041 497,130 89,481 91,770 59,833 61,456 118,439 194,106 1,879,757 2,032,636 3,335,828 44 189,425 223,791 578,364 1,255,256 134,210 7,749,554
814,469 82,353 50,353 342,949 118,793 1,597 74,792 46,826 111,716 116,107 190,733 1,950,688 1,920,482 1,855,261 4,532 195,751 227,905 583,152 1,254,631 129,362 6,171,076
16 17 32 15 8 19 21 22
24
52
LIGHT S.A. INCOME STATEMENTS FOR THE THREE- AND NINE-MONTH PERIODS OF 2013 AND 2012 (In thousands of Brazilian reais - R$) Parent Company 7/1/2013 to 9/30/2013 Note 1/1/2013 to 9/30/2013 7/1/2012 to 9/30/2012 1/1/2012 to 9/30/2012 7/1/2013 to 9/30/2013 Consolidated 1/1/2013 to 9/30/2013 7/1/2012 to 9/30/2012 Restated 1/1/2012 to 9/30/2012 Restated
NET REVENUE COST OF OPERATIONS GROSS PROFIT OPERATING EXPENSES Selling expenses General and administrative expenses Other revenues Other expenses EQUITY IN THE EARNINGS (LOSSES) OF SUBSIDIARIES PROFIT BEFORE FINANCIAL RESULT AND TAXES FINANCIAL RESULT Revenues Expenses PROFIT BEFORE INCOME TAX AND SOCIAL CONTRIBUTION Current income tax and social contribution Deferred income tax and social contribution PROFIT FOR THE PERIOD Attributed to the controlling shareholders BASIC EARNINGS PER SHARE (R$ / Share) DILUTED EARNINGS PER SHARE (R$ / Share)
26 28
(6,653) (6,653) 463,881 157,720 457,228 1,097 1,109 (12) 458,325 458,325 458,325 2.247 2.247
(2,011) (2,011) 93,196 31,687 91,185 (7,064) 405 (7,469) 84,121 84,121 84,121 0.412 0.412
(8,751) (8,751) 277,514 94,355 268,763 (4,808) 2,758 (7,566) 263,955 263,955 263,955 1.294 1.294
1,737,581 (945,651) 791,930 (168,947) (63,890) (104,825) 5,730 (5,962) (1,465) (498) 621,518 (121,444) 78,496 (199,940) 500,074 (29,296) (149,310) 321,468 321,468 1.576 1.576
5,602,342 (4,008,516) 1,593,826 (528,745) (196,047) (317,599) 4,818 (19,917) (2,572) (874) 1,062,509 (355,783) 216,785 (572,568) 706,726 (102,124) (146,277) 458,325 458,325 2.247 2.247
1,726,731 (1,381,525) 345,206 (170,517) (68,095) (104,082) 5,474 (3,814) 18,308 6,225 192,997 (112,580) 30,737 (143,317) 80,417 (28,654) 32,358 84,121 84,121 0.412 0.412
5,415,547 (4,154,891) 1,260,656 (569,745) (256,621) (312,658) 8,008 (8,474) 18,519 6,296 709,430 (363,327) 118,565 (481,892) 346,103 (89,776) 7,628 263,955 263,955 1.294 1.294
28
30
31 31
321,468 321,468
25 25
1.576 1.576
LIGHT S.A. STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE- AND NINE-MONTH PERIODS OF 2013 AND 2012 (In thousands of Brazilian reais - R$)
Parent Company 7/1/2013 to 9/30/2013 1/1/2013 to 9/30/2013 7/1/2012 to 9/30/2012 1/1/2012 to 9/30/2012 7/1/2013 to 9/30/2013
Consolidated 1/1/2013 to 9/30/2013 7/1/2012 to 9/30/2012 Restated 84,121 84,121 84,121 1/1/2012 to 9/30/2012 Restated 263,955 263,955 263,955
Profit for the period Other comprehensive income TOTAL COMPREHENSIVE INCOME Attributed to the controlling shareholders
53
LIGHT S.A. STATEMENT OF CHANGES IN EQUITY - PARENT COMPANY AND CONSOLIDATED FOR THE NINE-MONTH PERIOD OF 2013 (In thousands of Brazilian reais - R$) PROFIT RESERVES PROPOSED ADDITIONAL DIVIDENDS 91,770 (91,770) EQUITY VALUATION ADJUSTMENTS 451,556 (17,121) 434,435 RETAINED EARNINGS (ACCUMULATED LOSSES) 171,997 17,121 458,325 647,443 OTHER COMPREHENSIVE INCOME (171,997) (171,997)
CAPITAL STOCK BALANCE ON DECEMBER 31, 2012 - Restated Realization of equity valuation adjustment Write-off of realization of equity valuation adjustment Dividends approved at the Annual Shareholders' Meeting and paid (R$0.45 / share) Profit for the period BALANCE ON SEPTEMBER 30, 2013 2,225,822 2,225,822
TOTAL
LIGHT S.A. STATEMENT OF CHANGES IN EQUITY - PARENT COMPANY AND CONSOLIDATED FOR THE NINE-MONTH PERIOD OF 2012 (In thousands of Brazilian reais - R$) PROFIT RESERVES PROPOSED ADDITIONAL DIVIDENDS EQUITY VALUATION ADJUSTMENTS RETAINED EARNINGS (ACCUMULATED LOSSES) OTHER COMPREHENSIVE INCOME
CAPITAL STOCK
LEGAL RESERVE
PROFIT RETENTION
TOTAL
BALANCE ON DECEMBER 31, 2011- Restated Realization of equity valuation adjustment Dividends approved at the Annual Shareholders' Meeting and paid (R$0.89 / share) Profit for the period Interest on equity (R$0.35 / share) BALANCE ON SEPTEMBER 30, 2012 - Restated
2,225,822 2,225,822
178,288 178,288
163,407 163,407
181,501 (181,501) -
(39,978) -
(39,978)
3,182,906
54
LIGHT S.A. CASH FLOW STATEMENTS FOR THE NINE-MONTH PERIODS OF 2013 AND 2012 (In thousands of Brazilian reais - R$) Parent Company 1/1/2013 to 9/30/2013 1/1/2012 to 9/30/2012 Consolidated 1/1/2013 to 9/30/2013 1/1/2012 to 9/30/2012 Restated
Net cash from operating activities Cash provided by (used in) operations Profit before income tax and social contribution Allowance for doubtful accounts Depreciation and amortization Loss (gain) from the sale or write-off of intangible assets /property, plant and equipment Foreign exchange and monetary losses (gains) from financial activities Provisions for contingencies and escrow deposits /restatement Adjustment to present value and prepayment of receivables Expenses with interest on loans and debentures Charges and monetary variation of post-employment obligations Swap variation Equity in the earnings (losses) of subsidiaries Remuneration of the concession's financial assets Changes in assets and liabilities Marketable securities Consumers, concessionaires and permissionaires Dividends and interest on equity received Taxes and contributions Inventories Receivables from services rendered Prepaid expenses Escrow deposits CDE subsidy Other assets Trade payables Estimated liabilities Taxes and contributions Regulatory charges Provisions Post-employment benefits Other liabilities Interests paid Income tax and social contributions paid Net cash from investing activities Revenue from the sale of intangible asset Acquisition of property, plant and equipment items Acquisition of intangible assets Investments / acquisitions in investments Financial investments Net cash provided by (used in) financing activities Dividends and interest on equity paid New loans, borrowings and debentures Amortization of loans, borrowings and debentures Increase (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of period Cash and cash equivalents at the end of period
62,572 (5,556) 458,325 (463,881) 68,128 67,480 1,922 (5) 166 (16) 1,522 (273) 172 (1,561) (5) (1,274) (24,294) (24,294) (74,792) (74,792) (36,514) 45,469 8,955
69,467 (13,559) 263,955 (277,514) 83,026 74,686 (9,608) 170 (45) 9,062 (91) 105 9,381 (634) (35,189) (35,189) (73,741) (73,741) (39,463) 55,057 15,594
686,557 1,567,689 706,726 114,563 292,607 9,194 79,556 56,160 4,996 283,745 91,059 (45,786) 2,572 (27,703) (881,132) (8,868) 225,984 (90,200) (984) (4,212) (11,480) (46,712) (303,416) (95,796) (178,785) 13,005 83,030 (50,260) (58,264) (88,102) 31,408 (209,393) (88,087) (601,932) (83,159) (452,155) (74,584) 7,966 1,472,360 (74,792) 2,434,710 (887,558) 1,556,985 230,356 1,787,341
545,122 1,232,971 346,103 173,165 256,162 3,865 13,368 72,170 32,411 280,267 85,627 (11,648) (18,519) (687,849) (7,317) (111,086) (99,089) (11,187) (39,210) (9,791) (18,767) (32,711) 1,539 12,021 102,288 3,748 (64,151) (117,546) (6,798) (219,620) (70,172) (637,690) 4,881 (43,126) (554,780) (44,665) 528,616 (73,741) 863,258 (260,901) 436,048 652,492 1,088,540
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LIGHT S.A. STATEMENTS OF VALUE ADDED FOR THE NINE-MONTH PERIODS OF 2013 AND 2012 (In thousands of Brazilian reais - R$) Parent Company 1/1/2013 to 9/30/2013 1/1/2012 to 9/30/2012 Consolidated 1/1/2013 to 9/30/2013 1/1/2012 to 9/30/2012 Restated 8,046,607 7,749,782 469,990 (173,165) (3,955,676) (3,160,543) (795,133) 4,090,931 (256,162) (256,162) 3,834,769 137,084 18,519 118,565 3,971,853 3,971,853 227,794 173,657 33,693 14,062 6,382 2,936,578 1,174,392 1,756,002 6,184 543,526 482,076 45,137 16,313 263,955 71,376 192,579
Revenues Sale of goods, products and services Revenue related to the construction of own assets Recording/reversal of allowance for doubtful accounts Inputs acquired from third parties Cost of products, goods and services sold Material, energy, outsourced services and other Gross value added Retentions Depreciation and amortization Net value added produced by the entity Value added received through transfer Equity in the earnings (losses) of subsidiaries Financial revenues Total value added to distribute Distribution of value added Personnel Direct remuneration Benefits Government Severance Fund for Employees (FGTS) Other Taxes, fees and contributions Federal State Municipal Value distributed to providers of capital Interest Rental Other Value distributed to shareholders Dividends and interest on equity Retained earnings The notes are an integral part of the interim financial information.
(3,203) (3,203) (3,203) (3,203) 464,990 463,881 1,109 461,787 461,787 3,166 2,858 128 180 285 285 11 11 458,325 458,325
(5,670) (5,670) (5,670) (5,670) 280,272 277,514 2,758 274,602 274,602 2,902 2,758 82 62 191 191 7,554 7,554 263,955 71,376 192,579
7,698,752 7,358,074 455,241 (114,563) (3,766,829) (2,947,493) (819,336) 3,931,923 (292,607) (292,607) 3,639,316 214,213 (2,572) 216,785 3,853,529 3,853,529 228,696 167,746 38,541 17,477 4,932 2,520,927 865,769 1,648,427 6,731 645,581 586,177 42,143 17,261 458,325 458,325
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CONVENIENCE TRANSLATION INTO ENGLISH FROM THE ORIGINAL PREVIOUSLY ISSUED IN PORTUGUESE
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Table of Contents
1. OPERATIONS ............................................................................................................................ 59 2. GROUPS ENTITIES .................................................................................................................. 59 3. APPROVAL AND SUMMARY OF THE MAIN ACCOUNTING PRACTICES ADOPTED IN THE PREPARATION OF THE INTERIM FINANCIAL INFORMATION ................................. 63 4. CASH AND CASH EQUIVALENTS ......................................................................................... 74 5. MARKETABLE SECURITIES .................................................................................................... 74 6. CONSUMERS, CONCESSIONAIRES, PERMISSIONAIRES AND CLIENTS ..................... 75 7. RECOVERABLE TAXES ............................................................................................................ 76 8. DEFERRED TAXES .................................................................................................................... 77 9. CONCESSIONS FINANCIAL ASSETS .................................................................................... 77 10. OTHER RECEIVABLES.............................................................................................................. 78 11. INVESTMENTS.......................................................................................................................... 79 12. PROPERTY, PLANT AND EQUIPMENT ............................................................................... 84 13. INTANGIBLE ASSETS ............................................................................................................... 86 14. TRADE PAYABLES .................................................................................................................... 89 15. TAXES PAYABLE ....................................................................................................................... 90 16. LOANS, BORROWINGS AND FINANCIAL CHARGES ....................................................... 91 17. DEBENTURES AND FINANCIAL CHARGES......................................................................... 94 18. REGULATORY CHARGES ........................................................................................................ 97 19. PROVISIONS.............................................................................................................................. 97 20. CONTINGENCIES ................................................................................................................... 100 21. POST-EMPLOYMENT BENEFITS ........................................................................................ 105 22. OTHER PAYABLES.................................................................................................................. 106 23. RELATED-PARTY TRANSACTIONS ..................................................................................... 107 24. EQUITY ..................................................................................................................................... 112 25. EARNINGS PER SHARE ......................................................................................................... 113 26. NET REVENUE ........................................................................................................................ 113 27. ELECTRIC POWER SUPPLY .................................................................................................. 114 28. OPERATING COSTS AND EXPENSES ................................................................................. 115 29. ELECTRIC POWER PURCHASED FOR RESALE................................................................. 116 30. FINANCIAL RESULT ............................................................................................................... 116 31. RECONCILIATION OF TAXES IN INCOME STATEMENT ............................................... 117 32. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT ............................................... 118 33. INSURANCE ............................................................................................................................. 130 34. SEGMENT REPORTING ........................................................................................................ 131 35. NON-CASH TRANSACTIONS ............................................................................................... 133 36. EVENTS AFTER THE REPORTING PERIOD ....................................................................... 134
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NOTES TO THE PARENT COMPANY AND CONSOLIDATED INTERIM FINANCIAL INFORMATION FOR THER QUARTER ENDED SEPTEMBER 30, 2013. (In thousands of Brazilian reais R$, unless otherwise stated)
1. OPERATIONS
Light S.A. (Company or Light), the Company is engaged in to a publicly-held company headquartered in the city and state of Rio de Janeiro - Brazil, is to hold equity interests in other companies, as partner or shareholder, and the direct or indirect exploration, as applicable, of electric power services, including electric power generation, transmission, sale and distribution systems, as well as other related services. The Company is listed in the New Market (Novo Mercado) segment of the BM&FBOVESPA So Paulo Securities, Commodities and Futures Exchange (BM&FBOVESPA), under the ticker LIGT3, and in the U.S. over-the-counter (OTC) market, under the ticker LGSXY.
2. GROUPS ENTITIES
a) Direct Subsidiaries Light Servios de Eletricidade S.A. (Light SESA 100%) a publicly-held corporation, headquartered in the city and state of Rio de Janeiro, engaged in the distribution of electric power, with a concession area comprising 31 cities in the state of Rio de Janeiro, including its capital. Light Energia S.A. - (Light Energia 100%) a publicly-held corporation, headquartered in the city and state of Rio de Janeiro, whose main activities are to (a) study, plan, construct, operate and explore systems of electric power generation, transmission, sales, and related services that have been legally granted or that may be granted or authorized to it or to companies in which it holds or may come to hold a controlling interest; (b) to hold interests in other companies as a partner, shareholder or quotaholder. It comprises the Pereira Passos, Nilo Peanha, Ilha dos Pombos, Santa Branca and Fontes Novas plants, with a total installed capacity of 855 MW. Light Energia holds interest in the following subsidiaries and jointly-owned subsidiaries:
Central Elica So Judas Tadeu Ltda. (So Judas Tadeu 100%) - a company at the pre-operational stage whose main activity will be the generation and sale of electric power through a wind power plant located in the state of Cear, with 18 MW nominal power. Central Elica Fontainha Ltda. (Fontainha 100%) a company at the preoperational stage whose main activity will be the generation and sale of electric power through a wind power plant located in the state of Cear, with 16 MW nominal power.
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Renova Energia S.A. (Renova Energia - 22.0%, jointly-owned subsidiary) a corporation whose main activity is the generation of electric power through renewable alternative sources, such as small hydroelectric power plants (PCHs), wind and solar power plants. Renova Energia holds direct or indirect interests totaling 1,290 MW contracted, 336 MW of which in operation. It is jointly owned by Light Energia (22.0%) and RR Participaes S.A. (22.0% in controlling group). The companies in which Renova Energia holds interests are listed below:
Interests - RENOVA
Enerbras Centrais Eltricas S.A. Centrais Elicas Planaltina S.A. Centrais Elicas Caetit Ltda. * Nova Renova Energia S.A. Bahia Elica Participaes S.A. Centrais Elicas Pinda S.A. Centrais Elicas Igapor S.A. Centrais Elicas Licnio de Almeida S.A. Centrais Elicas Candiba S.A. Centrais Elicas Ilhus S.A. Salvador Elica Participaes S.A. Centrais Elicas Alvorada S.A. Centrais Elicas Paje do Vento S.A. Centrais Elicas Arapu Ltda. * Centrais Eltricas Bela Vista Ltda. * Renova Comercializadora de Energia S.A * Centrais Coxilha Alta Ltda. * Centrais Elicas Itapu III Ltda* Centrais Elicas Itapu VI Ltda* Centrais Elicas Itapu IX Ltda* Centrais Elicas Itapu XII Ltda* Centrais Elicas Itapu XV Ltda* Centrais Elicas Itapu XVIII Ltda* Centrais Elicas Itapu XXI Ltda*
(d) (i) (i) (d) (i) (i) (i) (i) (i) (i) (i) (i) (i) (d) (d) (d) (d) (i) (i) (i) (i) (i) (i) (i)
Energtica Serra da Prata S.A. Centrais Elicas Rio Verde S.A. Centrais Elicas Guirap S.A. Centrais Elicas Nossa Senhora Conceio S.A. Centrais Elicas Guanambi S.A. Centrais Elicas Porto Seguro S.A. Centrais Elicas Serra do Salto S.A. Renova Elica Participaes S.A. Centrais Eltricas Borgo Ltda. * Centrais Eltricas Dourados Ltda. * Centrais Eltricas Maron Ltda. * Centrais Eltricas Serra do Espinhao Ltda. * Centrais Elicas Ametista Ltda. * Centrais Eltricas Cedro Ltda. * Centrais Eltricas Riacho de Santana Ltda. * Centrais Elicas Lenois Ltda. * Centrais Elicas Itapu I Ltda* Centrais Elicas Itapu IV Ltda* Centrais Elicas Itapu VII Ltda* Centrais Elicas Itapu X Ltda* Centrais Elicas Itapu XIII Ltda* Centrais Elicas Itapu XVI Ltda* Centrais Elicas Itapu XIX Ltda* Renovapar S.A
(i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (i) (d) (d) (d) (i) (i) (i) (i) (i) (i) (i) (d)
Renova PCH Ltda. * Centrais Elicas Espigo Ltda. * Centrais Elicas Pelourinho Ltda. * Centrais Elicas Piles Ltda. * Centrais Elicas So Salvador Ltda. * Centrais Eltricas Morro Ltda. * Centrais Eltricas Serama Ltda. * Centrais Eltricas Tanque Ltda. * Centrais Elicas dos Araas Ltda. * Centrais Elicas da Prata Ltda. * Centrais Eltricas Botuquara Ltda. * Centrais Eltricas Itaparica Ltda. * Centrais Eltricas Conquista Ltda. * Centrais Eltricas Santana Ltda. * Centrais Elicas Recncavo Ltda. * Centrais Elicas Itapu II Ltda* Centrais Elicas Itapu V Ltda* Centrais Elicas Itapu VIII Ltda* Centrais Elicas Itapu XI Ltda* Centrais Elicas Itapu XIV Ltda* Centrais Elicas Itapu XVII Ltda* Centrais Elicas Itapu XX Ltda*
(d) (i) (i) (i) (d) (i) (i) (i) (i) (i) (d) (d) (d) (d) (d) (i) (i) (i) (i) (i) (i) (i)
(d)
The indirect interest held in Renova PCH Ltda., Nova Renova Energia S.A., Centrais Eltricas Botuquara Ltda. and Centrais Eltricas Itaparica Ltda. is 21.7%, while in other companies it is 21.9%.
Guanhes Energia S.A. (Guanhes Energia - 51%, jointly-owned subsidiary) a privately-held corporation in the pre-operational stage, headquartered in the city of Belo Horizonte, state of Minas Gerais, was created with the purpose of implementing and exploring small hydroelectric power plants (PCHs) in the state of Minas Gerais, with total installed capacity of 44.80 MW. The startup of the first PCH is scheduled for May 2014 and the last one for August 2014. The company is a jointly-owned subsidiary of Light Energia (51%) and Cemig Gerao e Transmisso S.A. - Cemig GT (49%).
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Light Esco Prestao de Servios S.A. - (Light Esco 100%) a privately-held corporation, headquartered in the city and state of Rio de Janeiro, whose main activity is the purchase, sale, import, export of electric and thermal power, gases and industrial utilities, and provision of advisory services in the energy sector. The company is a member of the Maracan Solar consortium, which manages the photovoltaic plant, installed on the top of the Maracan stadium (51%). EDF Consultoria em Projetos de Gerao de Energia Ltda. holds a 49% interest in this consortium. Aneel granted to Light Esco the authorization to become an independent producer of electric power. Light Esco also holds interests in the following jointly-owned subsidiary:
EBL Companhia de Eficincia Energtica S.A. (EBL 33.3%, jointly-owned subsidiary) a company engaged in providing energy efficiency solutions and services and rental of equipment and facilities at units owned or rented by Telemar Norte Leste S.A. It is jointly owned by Light Esco (33.3%), Ecoluz S.A. (33.4%) and Petrobrs Distribuidora S.A. (33.3%).
Lightcom Comercializadora de Energia S.A. (Lightcom 100%) a privately-held corporation, headquartered in the city and state of So Paulo, engaged in the purchase, sale, import, export and provision of advisory services in the energy sector. Itaocara Energia Ltda. - (Itaocara Energia 100%) a company in the pre-operational stage, will be primarily engaged in the design, construction, installation, operation and exploration of electric power generation plants. It holds interest in the UHE Itaocara consortium, which was formed for the exploration of the Itaocara Hydroelectric Power Plant (51%). Cemig Gerao e Transmisso S.A. Cemig GT holds a 49% interest. Light Solues em Eletricidade Ltda. (Light Solues - 100%) a limited liability company whose main activity is to provide services to low voltage clients, including the assembly, remodeling and maintenance of facilities in general. Instituto Light para o Desenvolvimento Urbano e Social (Light Institute - 100%) a nonprofit private company, engaged in participating in social and cultural projects, focused on the cities social and economic development, affirming the Companys ability to be socially responsible. b) Jointly-owned subsidiaries Lightger S.A. (Lightger) a privately-held corporation whose purpose is to participate in auctions for concessions, authorizations and permissions for new electric power plants. On December 24, 2008, Lightger obtained the installation license that authorized the start of the construction of the Paracambi small hydroelectric power plant (PCH) and obtained its operation license on November 10, 2011. The turbine began operating in the third quarter of 2012. The company is jointly owned by Light S.A (51%) and Cemig Gerao e Transmisso S.A. - Cemig GT (49%). Axxiom Solues Tecnolgicas S.A. (Axxiom) a privately-held corporation, headquartered in the city of Belo Horizonte, state of Minas Gerais, whose purpose is to offer technology solutions and systems for the operational management of public
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utility concessionaires, including electric power, gas, water and sewage companies. It is jointly owned by Light S.A (51%) and Companhia Energtica de Minas Gerais - CEMIG (49%). CR Zongshen E-Power Fabricadora de Veculos S.A. (E-Power) a privately-held company in the pre-operational stage whose purpose will be to manufacture Kasinski two-wheel electric vehicles. Light S.A. and CR Zongeshen Fabricadora de Veculos S.A., referred to as Kasinski are the companys shareholders, holding 20% and 80%, respectively, of E-Powers registered common shares. Amaznia Energia Participaes S.A. (Amaznia Energia) a privately-held corporation whose purpose is to hold an interest, as a shareholder, in Norte Energia S.A. (NESA), which holds the concession for the use of public assets to explore the Belo Monte Hydroelectric Power Plant, on Xingu river, in the state of Par. It is jointly owned by Light S.A. (25.5%) and Cemig Gerao e Transmisso S.A. - Cemig GT (74.5%). Amaznia Energia holds a 9.8% interest in NESA, with significant influence on management, but without joint control. c) Concessions and authorizations
Concessions / Authorizations Light SESA and Light Energia PCH Paracambi - Lightger Itaocara Hydroeletric Power Plant - Itaocara Consortium (1) Wind Power Plants - Renova Energia Wind Power Plants - Renova Energia Wind Power Plants - Renova Energia Centrais Elicas So Salvador Ltda PCH Cachoeira da Lixa - Renova Energia PCH Colino 2 - Renova Energia PCH Colino 1 - Renova Energia PCH Dores de Guanhes - Guanhes Energia PCH Senhora do Prto - Guanhes Energia PCH Jacar - Guanhes Energia PCH Fortuna II - Guanhes Energia Date Jun/1996 Feb/2001 Mar/2001 Aug/2011 Mar/2011 until May/2011 Apr/2012 May/2013 Dec/2003 Dec/2003 Dec/2003 Nov/2002 Oct/2002 Oct/2002 Dec/2001 Expiration Jun/2026 Feb/2031 Mar/2036 Aug/2045 Mar/2046 until May/2046 Apr/2047 May/2048 Dec/2033 Dec/2033 Dec/2033 Nov/2032 Oct/2032 Oct/2032 Dec/2031
(1)
In accordance with Note 11, Itaocara Energia submitted to Aneel the request for termination of the Concession Agreement 12/2001 and the process in currently in progress. d) Light Group Consolidation
As determined by CPC 19 Joint Arrangements (IFRS 11), approved by CVM Resolution 694/12, effective as of January 1, 2013, interests in joint ventures will be recognized as investment and accounted for under the equity method instead of under the proportionate consolidation method, used until December 31, 2012.
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Accordingly, the consolidated quarterly information includes the shareholdings of the Company and its subsidiaries, which are consolidated as follows:
9.30.2013 Percentage of interest (%) Direct Light Servios de Eletricidade S.A. Light Energia S.A. Central Elica Fontainha Ltda Central Elica So Judas Tadeu Ltda Light Esco Prestao de Servios S.A. Lightcom Comercializadora de Energia S.A. Light Solues em Eletricidade Ltda. Instituto Light para o Desenvolvimento Urbano e Social Itaocara Energia Ltda. 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Percentage of interest (%) Indirect 12.31.2012 Percentage of interest (%) Direct 100.0 100.0 100.0 100.0 Percentage of interest (%) Indirect -
3. APPROVAL AND SUMMARY OF THE MAIN ACCOUNTING PRACTICES ADOPTED IN THE PREPARATION OF THE INTERIM FINANCIAL INFORMATION
The authorization for the conclusion of this interim financial information was given by the Companys Management on November 7, 2013. The parent company interim financial information was prepared pursuant to the CPC Technical Pronouncement 21 (R1) Joint Arrangements and the consolidated interim financial information was prepared in accordance with the CPC Technical Pronouncement 21 (R1) and the IAS international standard 34 Interim Financial Reporting issued by the International Accounting Standards Board IASB. The presentation of this information complies with the standards issued by the Brazilian Securities and Exchange Commission CVM, applicable to the preparation of Interim Financial Information (ITR). IAS 34 requires Management to use certain accounting estimates. The consolidated financial information has been prepared based on historical cost, except for specific financial assets and financial liabilities that are measured at fair value. The parent company financial statements, prepared for statutory purposes, present investments in subsidiaries measured by the equity method of accounting, in accordance with the Brazilian legislation. Thus, these parent company financial statements have not been prepared under IFRS, which require the valuation of these investments in the parent companys separate financial statements at fair value or cost. This parent company and consolidated financial information does not include all the information and disclosures required in the parent company and consolidated annual financial statements and, therefore, should be read together with the parent company and consolidated financial statements for the year ended December 31, 2012, published on April 4, 2013, which have been prepared in accordance with International
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Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and the accounting practices adopted in Brazil (BR GAAP). The Company has chosen to present the parent company and consolidated financial information as a single set of accounts, since there are no differences between the parent company and consolidated equity and results. This financial information is presented in Real, which is the functional currency of the Company, its subsidiaries, jointly-owned subsidiaries and associated companies. All financial information presented in Real was rounded up to thousands, except when indicated otherwise.
a) Standards and interpretations effective as of January 1, 2013
IFRS 10 - CPC 36 (R13) - Consolidated Financial Statements - replaces the parts of IAS 27 Consolidated and Separate Financial Statements that deal with consolidated financial statements. SIC-12 Consolidation Special Purpose Entities was excluded with the issue of IFRS 10. According to IFRS 10, there is only one consolidation basis, that is, control. IFRS 10 also includes a new definition of control. Management has not identified impacts arising from this new rule. IFRS 11 - CPC 19 (R2) - Joint Arrangements replaces IAS 31 and establishes how joint arrangements should be classified in the financial statements. In accordance with the rule, the structure of a joint arrangement is no longer the main factor to determine the type of business and, consequently, the respective accounting. Joint ventures will be accounted for under the equity method and the proportionate consolidation method will no longer be permitted. The Company no longer proportionally consolidates its direct and indirect jointly-owned subsidiaries Renova Energia, Guanhes Energia, EBL, Lightger, Axxiom, Amaznia Energia and E-Power as of January 1, 2013. These changes did not have an impact on the Companys net income; however, they impacted the individual lines in the consolidated statement of income against the equity income and a reduction in consolidated assets and liabilities against an increase in investments, as shown below. There was also impact between lines in the consolidated statements of cash flows and of value added. IFRS 12 - CPC 45 - Disclosure of Interests in Other Entities is a disclosure rule applicable to entities with interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities. In general, disclosure requirements under IFRS 12 are more comprehensive than the current rules. The impact is increased disclosure of information of its jointly-owned subsidiaries, included in Note 11. IFRS 13 - CPC 46 - Fair Value Measurement presents a single source of guidance for fair value measurements and disclosures. The rule defines the fair value, presents a structure for measurement and requires disclosures.
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Management has not identified any impact arising from this new standard. Changes to IAS 1 - CPC 26 (R1) - Presentation of Items of Other Comprehensive Income - allow the presentation of the income statement and other comprehensive income in a single statement or in two separate and consecutive statements. However, the changes to IAS 1 require additional disclosures in the section of other comprehensive income so that other comprehensive income items are grouped into two categories: (a) items that will not be subsequently reclassified in the income statement; and (b) items that will be subsequently reclassified in the income statement in accordance with certain conditions. Management has not identified relevant impacts arising from this new standard. IAS 19 (revised in 2011) - CPC 33 (R1) - Employee Benefits they change the accounting of the defined benefit plans, including: a) the elimination of the corridor approach; b) the immediate recognition of the cost of past services in the income statement c) the recognition of actuarial gains and losses in other comprehensive income, as incurred; and d) the replacement of interest expenses and the expected returns on the plans assets by a net interest amount, calculated through the application of the discount rate to the net defined benefit assets or liabilities. As the Company already immediately recognized actuarial gains and losses in other comprehensive income and there were no significant differences in the expected return rates on assets and discount rates that could impact the financial information, the only impact was the reclassification of retained earnings to other comprehensive income in equity, as the Company chose not to transfer the amounts recognized in other comprehensive income in equity. IAS 27 (revised in 2011) - CPC 35 (R2) - Separate Financial Statements reflects changes in the accounting of non-controlling interest and deals mainly with the accounting of changes in interests in subsidiaries after control is obtained, the accounting of the loss of control in subsidiaries and the allocation of income or loss to controlling and non-controlling interests in a subsidiary. Management has not identified impacts arising from this new standard. IAS 28 (revised in 2011) - CPC 18 (R2) - Investments in Associates and Joint Ventures: The changes introduced to IAS 28 were intended to clarify that: (i) an investment in an associate must be treated as a single asset for impairment testing purposes in accordance with IAS 36 - CPC 01 (R1); Impairment of Assets; (ii) any impairment loss to be recognized must not be allocated to specific assets (specifically goodwill); and (iii) impairment reversals are recorded as an adjustment to the associates book value provided that and to the extent that the recoverable amount of the investment increases. Management has not identified impacts arising from this new standard.
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Changes to IFRS 7 - CPC 40 (R1) - Offsetting Financial Assets and Financial Liabilities - Introduce new disclosure requirements for financial assets and financial liabilities which are offset in the statement of financial position. Management has not identified impacts arising from this new standard. The adoption of the new standards as of January 1, 2013, as provided for by CPC 23 (IAS 8) Accounting Policies, Changes in Accounting Estimates and Errors, impacted the balances as of January 1, 2012 and the results as of January 1, 2012, which were duly adjusted for comparative purposes in this interim financial information, as presented below:
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i.
TOTAL CURRENT ASSETS Consumers, concessionaires, permissionaires and clients Taxes and contributions Deferred taxes Concessions' financial assets Escrow deposits Receivables from swap transactions Other receivables Investments Property, plant and equipment Intangble assets TOTAL NON-CURRENT ASSETS TOTAL ASSETS
LIABILITIES Trade payables Taxes and contributions Income tax and social contribution Loans, borrowings and financial charges Debentures and financial charges Payable swap transactions Dividends and interest on equity payable Estimated liabilities Regulatory charges Post-employment benefits Other liabilities TOTAL CURRENT LIABILITIES Loans, borrowings and financial charges Debentures and financial charges Swap income payable Taxes and contributions Deferred taxes Provisions Post-employment benefits Other liabilities TOTAL NON-CURRENT LIBILITIES
12.31.2012 Published 861,823 85,791 50,353 391,010 151,832 1,597 74,792 48,578 111,716 116,107 193,062 2,086,661 2,200,721 1,922,495 4,532 195,751 320,224 583,171 1,254,631 132,702 6,614,227 12.31.2012 Published 2,225,822 256,535 91,770 451,556 3,025,683 11,726,571
Adjustments (1) (47,354) (3,438) (48,061) (33,039) (1,752) (2,329) (135,973) (280,239) (67,234) (92,319) (19) (3,340) (443,151)
12.31.2012 Restated 814,469 82,353 50,353 342,949 118,793 1,597 74,792 46,826 111,716 116,107 190,733 1,950,688 1,920,482 1,855,261 4,532 195,751 227,905 583,152 1,254,631 129,362 6,171,076 12.31.2012 Restated 2,225,822 256,535 91,770 451,556 (171,997) 171,997 3,025,683 11,147,447
EQUITY Capital stock Profit reserve Proposed additional dividends Equity valuation adjustments Other comprehensive income (loss) Retained earnings TOTAL EQUITY TOTAL LIABILITIES AND EQUITY
(1) (2)
These reclassifications refer to the adoption of IFRS 11 - CPC 19 (R2). These reclassifications refer to the adoption of IAS 19 (R1) - CPC 33 (R1).
67
ii.
Consolidated statements of income for the three and nine-month periods ended September 30, 2012.
Consolidated 7.1.2012 to 9.30.2012 Published NET REVENUE COST OF OPERATION GROSS PROFIT OPERATING EXPENSES Selling expenses General and administrative expenses Other revenues / (expenses) 1,747,996 (1,389,155) 358,841 (160,890) (69,086) (108,206) 16,402 Adjustments (1) 7.1.2012 to 9.30.2012 Restated 1,726,731 (1,381,525) 345,206 (170,517) (68,095) (104,082) 1,660
EQUITY IN THE EARNINGS (LOSSES) OF SUBSIDIARIES EARNINGS BEFORE THE FINANCIAL RESULT AND TAXES FINANCIAL RESULT Revenues Expenses RESULT BEFORE INCOME TAX AND SOCIAL CONTRIBUTION Current income tax and social contribution Deferred income tax and social contribution NET INCOME FOR THE PERIOD
Consolidated 1.1.2012 to 9.30.2012 Published NET REVENUE COST OF OPERATION GROSS PROFIT OPERATING EXPENSES Selling expenses General and administrative expenses Other revenues / (expenses) 5,450,179 (4,170,699) 1,279,480 (566,850) (258,770) (322,247) 14,167 Adjustments (1) 1.1.2012 to 9.30.2012 Restated 5,415,547 (4,154,891) 1,260,656 (569,745) (256,621) (312,658) (466)
EQUITY IN THE EARNINGS (LOSSES) OF SUBSIDIARIES EARNINGS BEFORE THE FINANCIAL RESULT AND TAXES FINANCIAL RESULT Revenues Expenses RESULT BEFORE INCOME TAX AND SOCIAL CONTRIBUTION Current income tax and social contribution Deferred income tax and social contribution NET INCOME FOR THE PERIOD
(1)
68
iii.
Consolidated statement of cash flows for the nine-month period ended September 30, 2012.
1.1.2012 to 9.30.2012 Published Adjustments (1) 1.1.2012 to 9.30.2012 Restated
Net cash from operating activities Cash from operations Profit before income tax and social contribution Allowance for doubtful accounts Depreciation and amortization Loss (gains) from sale of intangible assets / Property, plant and equipment Foreign exchange and monetary losses (gains) from financial activities Provision for contingencies and escrow deposits / Restatement Adjustment to present value and prepayment of receivables Interest expenses on loans Charges and monetary variation of post-employment obligations Swap variations Equity in the earnings (losses) of subsidiaries Gain from dilution in Renova Changes in assets and liabilities Marketable securities Consumers, concessionaires and permissionaires Taxes and contributions Inventories Receivables from services rendered Prepaid expenses Escrow deposits Other assets Trade payables Estimated liabilities Taxes and contributions Regulatory charges Provisions Post-employment benefits Other liabilities Interest paid Income tax and social contribution paid Net cash from investing activities Receivables from sale of intangible assets Acquisition of property, plant and equipment items Acquisition of intangible assets Investments / Acquisitions in investments Net cash from dilution in Renova Net cash provided by (used in) financing activities Dividends and interest on equity paid New loans, borrowings and debentures Amortization of loans, borrowings and debentures Increase (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period
454,901 1,243,610 349,459 173,165 260,591 3,865 13,057 72,170 32,411 269,177 85,627 (15,912) (788,709) (7,317) (123,662) (87,758) (11,187) (40,771) (9,899) (16,193) (27,012) (67,720) 12,680 52,525 3,748 (64,151) (92,023) (17,648) (222,149) (70,172) (585,989) 4,881 (205,819) (436,883) (12,803) 64,635 535,215 (73,741) 910,006 (301,050) 404,127 772,548 1,176,675
90,221 (10,639) (3,356) (4,429) 311 11,090 (11,648) (18,519) 15,912 100,860 12,576 (11,331) 1,561 108 (2,574) (5,699) 69,259 (659) 49,763 (25,523) 10,850 2,529 (51,701) 162,693 (117,897) (31,862) (64,635) (6,599) (46,748) 40,149 31,921 (120,056) (88,135)
545,122 1,232,971 346,103 173,165 256,162 3,865 13,368 72,170 32,411 280,267 85,627 (11,648) (18,519) (687,849) (7,317) (111,086) (99,089) (11,187) (39,210) (9,791) (18,767) (32,711) 1,539 12,021 102,288 3,748 (64,151) (117,546) (6,798) (219,620) (70,172) (637,690) 4,881 (43,126) (554,780) (44,665) 528,616 (73,741) 863,258 (260,901) 436,048 652,492 1,088,540
(1)
69
iv.
Consolidated statement of value added for the nine-month period ended September 30, 2012.
1.1.2012 to 9.30.2012 Published Adjustments (1) 1.1.2012 to 9.30.2012 Restated
Revenues Sale of goods, products and services Revenue related to construction of own assets Recording (reversal) of allowance for doubtful accounts Inputs acquired from third parties Cost of products, goods and services sold Materials, energy, outsourced services and others Gross value added Retentions Depreciation and amortization Net value added produced by the entity Value added received through transfer Equity in the earnings of subsidiaries Financial income Total value added to distribute Value added distribution Personnel Direct compensation Benefits FGTS Other Taxes and contibutions Federal State Municipal Value distributed to providers of capital Interests Rental Other Value distributed to shareholders Dividends and interest on equity Retained earnings
8,243,101 7,786,220 630,046 (173,165) (4,166,362) (3,167,463) (998,899) 4,076,739 (260,591) (260,591) 3,816,148 142,223 142,223 3,958,371 3,958,371 186,730 132,593 33,693 14,062 6,382 2,941,086 1,178,446 1,756,002 6,638 566,600 505,150 45,137 16,313 263,955 71,376 192,579
(196,494) (36,438) (160,056) 210,686 6,920 203,766 14,192 4,429 4,429 18,621 (5,139) 18,519 (23,658) 13,482 13,482 41,064 41,064 (4,508) (4,054) (454) (23,074) (23,074) -
8,046,607 7,749,782 469,990 (173,165) (3,955,676) (3,160,543) (795,133) 4,090,931 (256,162) (256,162) 3,834,769 137,084 18,519 118,565 3,971,853 3,971,853 227,794 173,657 33,693 14,062 6,382 2,936,578 1,174,392 1,756,002 6,184 543,526 482,076 45,137 16,313 263,955 71,376 192,579
(1)
70
v.
772,548 8,171 1,383,620 27,430 134,551 90,947 2,180 84,964 3,801 173,550 2,681,762 298,538 95,622 836,411 656,473 263 268,505 754 7,979 54,086 1,985,833 4,174,900 8,379,364 11,061,126
(120,056) (1,330) (1,267) (363) (2,241) (3,716) (128,973) (3,609) (128) 405,002 (384,759) (293,909) (277,403) (406,376)
652,492 8,171 1,382,290 27,430 133,284 90,947 1,817 82,723 3,801 169,834 2,552,789 298,538 95,622 836,411 656,473 263 264,896 754 7,851 459,088 1,601,074 3,880,991 8,101,961 10,654,750
LIABILITIES Trade payables Taxes and contributions Income tax and social contribution Loans, borrowings and financial charges Debentures and financial charges Payable swap transactions Dividends and interest on equity payable Estimated liabilities Regulatory charges Post-employment benefits Other liabilities TOTAL CURRENT LIABILITIES Loans, borrowings and financial charges Debentures and financial charges Swap income payable Taxes and contributions Deferred taxes Provisions Post-employment benefits Other liabilities TOTAL NON-CURRENT LIBILITIES
12.31.2011 Published 757,158 84,349 40,272 304,554 213,740 787 73,741 47,379 112,356 80,525 227,154 1,942,015 1,853,748 1,790,132 976 200,263 342,391 515,678 1,090,684 153,411 5,947,283
Adjustments (1)
1.1.2012 Restated 751,667 83,145 40,272 262,844 213,740 787 73,741 45,848 112,356 80,525 214,930 1,879,855 1,609,164 1,790,132 976 200,263 242,759 515,678 1,090,684 153,411 5,603,067
EQUITY Capital stock Profit reserve Proposed additional dividends Equity valuation adjustments Other comprehensive income (loss) Retained earnings (accumulated losses) TOTAL EQUITY TOTAL LIABILITIES AND EQUITY
12.31.2011 Published
Adjustments (2)
1.1.2012 Restated
(1) (2)
These reclassifications refer to the adoption of IFRS 11 - CPC 19 (R2). These reclassifications refer to the adoption of IAS 19 (R1) - CPC 33 (R1).
71
vi.
LIABILITIES Trade payables Taxes and contributions Income tax and social contribution Dividends and interest on equity payable Estimated liabilities Post-employment benefits Other payables TOTAL CURRENT LIABILITIES Post-employment benefits Other payables TOTAL NON-CURRENT LIBILITIES EQUITY Capital stock Profit reserves Proposed additional dividends Equity valuation adjustments Other comprehensive income Retained earnings TOTAL EQUITY TOTAL LIABILITIES AND EQUITY
12.31.2012 Published 458 1,640 2 74,792 392 11 3,514 80,809 142 901 1,043
Adjustments (2) -
12.31.2012 Restated 458 1,640 2 74,792 392 11 3,514 80,809 142 901 1,043
(171,997) 171,997 -
(2)
72
vii.
ASSETS Cash and cash equivalents Income tax and social contribution Prepaid expenses Dividends and interest on equity receivable Services rendered receivable Other receivables TOTAL CURRENT ASSETS Escrow deposits Investments Property, plant and equipment TOTAL NON-CURRENT ASSETS TOTAL ASSETS
12.31.2011 Published 55,057 3,395 182 78,510 150 13,763 151,057 215 3,105,456 672 3,106,343 3,257,400
Adjustments (2) -
1.1.2012 Restated 55,057 3,395 182 78,510 150 13,763 151,057 215 3,105,456 672 3,106,343 3,257,400
LIABILITIES Trade payables Taxes and contributions Income tax and social contribution Dividends and interest on equity payable Estimated liabilities Other liabilities TOTAL CURRENT LIABILITIES
Adjustments (2) -
EQUITY Capital stock Profit reserve Proposed additional dividends Equity valuation adjustments Other comprehensive income (loss) Retained earnings (accumulated losses) TOTAL EQUITY TOTAL LIABILITIES AND EQUITY 2,225,822 341,695 181,501 472,356 (49,546) 3,171,828 3,257,400 (39,978) 39,978 2,225,822 341,695 181,501 472,356 (39,978) (9,568) 3,171,828 3,257,400
(2)
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Money available Short-term financial investments Bank deposit certificate (CDB) Total
The short-term investments are highly liquid and convertible into know amounts cash and are subject to a floating rate represented by transactions purchased from financial institutions trading in the domestic financial market, at market terms and rates. These short-term investments have a daily repurchase commitment by the counterparty financial institution (the repurchase rate is previously agreed upon by the parties), and yield according to the variation of the interbank deposit rate (CDI), with immaterial loss of value in case of early redemption. The short-term investments yield an average of 99.7% of the CDI. The Company's exposure to interest rate risks and a sensitivity analysis of financial assets and liabilities are reported in Note 32.
5. MARKETABLE SECURITIES
These securities involve short-term bank deposit certificates (CDB) in the amount of R$16,168 (R$15,266 as of December 31, 2012) in the consolidated financial information, forming the underlying assets of certain surety bonds pledged in power auctions, and also other proceeds from the sale of assets that were held for reinvestment in the electric grid system or investments to mature within three months or longer with loss of value in case of early redemption. Marketable securities yield an average of 96.5% of the CDI.
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Consolidated 9.30.2013 Current Non-Current Total Current 12.31.2012 - Restated Non-Current Total
Billed sales Unbilled sales Debt payment in installments Sales within the scope of CCEE Supply and charges related to the use of electric network Other receivables
(449,689) 1,120,532
An allowance for doubtful accounts was set up based on certain premises and in an amount deemed sufficient by Management to meet any asset realization losses. In the first nine months of 2013, bad debts were written-off in the amount of R$386,779 (R$300,147 in the first nine months of 2012), mainly related to bills overdue for a long time, and within tax deductibility criteria. The write-offs were realized against allowance for doubtful accounts already recorded, thus, not impacting net income in the period. The balances of debt repayment facilities were adjusted to their present value, as applicable. The present value is determined for each relevant consumer debt renegotiation (debt repayment facilities) based on such interest rate as will reflect the term and risk associated with each individual transaction, on average 1% per month. Outstanding balances and receivables in connection with invoiced electric power sales and debt repayment programs are summarized as follows:
Matured balances Billed sales and renegotiated debts Residential Industrial Commercial Rural Public sector Public lighting Public utility Total Maturing balance Overdue up to 90 days 106,956 12,936 39,986 270 28,749 10,535 10,240 209,672 Overdue over 90 days 61,408 30,612 310,644 536 105,071 23,314 11,774 543,359 9.30.2013 399,413 63,682 493,758 1,759 235,865 47,012 126,916 1,368,405 TOTAL 12.31.2012 748,565 155,968 547,770 1,818 227,316 42,411 140,843 1,864,691 Allowance for doubtful accounts 9.30.2013 (59,197) (29,509) (306,699) (528) (37,873) (11,034) (4,849) (449,689) 12.31.2012 (373,982) (37,068) (253,039) (621) (46,144) (11,000) (51) (721,905)
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Balance on December 31, 2011 Additions/(Reversals) Write-offs Balance on September 30, 2012
The Companys exposure to credit risks related to consumers, concessionaires, permissionaires and clients is reported in Note 32.
7. RECOVERABLE TAXES
Consolidated 9.30.2013 Current Non-current Total Current 12.31.2012 - Restated Non-current Total
Taxes and Contributions ICMS to offset PIS/COFINS to offset Other Income Tax and Social Contribution Tax credits Prepayments Total
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8. DEFERRED TAXES
Consolidated 9.30.2013 Assets Liabilities Income tax / Income tax / Social Social contribution contribution Allowance for doubtful accounts Provision for profit sharing Provision for labor contingencies Provision for tax contingencies Provision for civil contingencies Regulatory assets and liabilities unrecognized by IFRS Pension Plan Complement - CVM 600 Others Tax losses Social contribution losses Financial asset remuneration Derivative financial instruments Deemed cost - Light Energia Gross deferred tax asset/ (liability) Net amounts Net deferred tax asset/ (liability) 146,007 6,516 64,394 70,095 60,854 173,440 106,973 27,488 194,265 72,962 922,994 (243,352) 679,642 (64,418) (148,191) (30,080) (224,454) (467,143) 243,352 (223,791) Net Income tax / Social contribution 146,007 6,516 64,394 70,095 60,854 109,022 106,973 27,488 194,265 72,962 (148,191) (30,080) (224,454) 455,851 455,851 12.31.2012 - Restated Assets Liabilities Net Income tax / Income tax / Income tax / Social Social Social contribution contribution contribution 238,440 6,205 64,081 69,728 62,512 143,423 107,021 25,429 201,394 75,528 993,761 (163,728) 830,033 (138,773) (19,585) (233,275) (391,633) 163,728 (227,905) 238,440 6,205 64,081 69,728 62,512 143,423 107,021 25,429 201,394 75,528 (138,773) (19,585) (233,275) 602,128 602,128
Balance on January 1, 2012 Additions (a) Reclassification of ANEEL Resolution 472/12 Balance on September 30, 2012
(b)
(a)
Transfer resulting from the split of assets upon startup, pursuant to IFRIC 12/ICPC 01 (see Note 13). (b) Reclassification pursuant to Aneel Normative Resolution 474/12 (see Note 13).
77
Consolidated 9.30.2013 Current Advances to suppliers and employees Account receivable from the sale of property Public lighting fee Expenditures to refund Subsidy to low-income segment Subsidy to Economic development council - CDE (a) Assets and rights for disposal Other (b) Total 54,014 12,046 54,939 35,662 12,110 303,416 33,879 506,066 Non-current 2,147 639 2,786 Total 54,014 12,046 54,939 35,662 12,110 303,416 2,147 34,518 508,852 Current 45,481 12,046 52,902 27,043 10,275 18,971 166,718 12.31.2012 - Restated Non-current 2,147 639 2,786 Total 45,481 12,046 52,902 27,043 10,275 2,147 19,610 169,504
(a) (b)
Grant arising from Decree 7945/13, as described below. Referring to other receivables.
Due to the unfavorable hydroelectric conditions since the end of 2012, including low levels in hydroelectric power plants reservoirs, the dispatch of thermal plants was geared at the maximum level and, taking into account the concessionaires exposure in the short-term market, which arises from the allocation of quotas of physical guarantee of electricity and power, associated with the termination of the agreements of the 6th and 7th auctions of new energy due to the revocation of the plants authorization by Aneel, the distributors cost of electricity increased significantly at the end of 2012 and beginning of 2013. Due to this scenario and the fact that distribution concessionaires do not influence such costs, the Brazilian Federal Government issued Decree 7945/13, which establishes the transfer of funds from the Energy Development Account (CDE) to neutralize part of these effects for distributors in the period. The funds covered by CDE transfers totaled R$764,647 by September 30, 2013, of which:
R$461,231 refers to (i) System Service Charges (ESS) (dispatch out of the order of priority for energy security) in the amount of R$168,947; (ii) Hydrological Risk (Energy Reallocation Mechanism (MRE) of the quotas) in the amount of R$131,862; and (iii) Exposure to the Difference Settlement Price (PLD) limited to the amount not covered by the allocation of quotas, in the amount of R$160,422. According to CPC 07 Government Grants and Assistance, this amount was recognized to offset incurred costs, recorded in trade payables, under current assets, with a corresponding entry to Electricity purchased for resale in the income statement. Of this amount, R$457,524 was already offset with the settlement in CCEE up to September 30, 2013, remaining R$3,707 to be offset. R$303,416 refers to CDI transfer relating to energy purchase costs up to August 2013, defined in the 2013 tariff review process, which will be transferred in November 2013. According to CPC 07 Government Grants and Assistance, this amount was recognized to offset costs incurred, recorded in CDE Grants, in
78
other accounts receivable, under current assets, with a corresponding entry to Electricity purchased for resale in the income statement.
11. INVESTMENTS
Parent Company 9.30.2013 Accounted for under the equity method: Light SESA Light Energia Renova Energia S.A (b) Guanhes Energia S.A (b) Light Esco EBL Energia LightCom Light Solues Lightger Itaocara Energia (a) Axxiom Amaznia Energia (a) E-Power Subtotal Goodwill on future profitability Other permanent investments Subtotal Total Investments
(a)
(a)
12.31.2012
2,490,230 686,466 102,539 18,993 2,379 45,339 24,269 5,200 93,029 132 3,468,576 2,092 2,092 3,470,668
2,188,815 578,819 108,904 9,017 2,042 41,909 24,567 5,160 69,576 132 3,028,941 2,092 2,092 3,031,033
376,759 86,766 685 45,339 5,200 93,029 132 607,910 2,092 19,813 21,905 629,815
381,383 36,476 712 41,909 5,160 69,576 132 535,348 2,092 19,910 22,002 557,350
(b)
Companies at pre-operational stage Refers to investments calculated based on the adjusted equity for purposes of equity in the earnings (losses) of subsidiaries
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Information on subsidiaries (consolidated) and jointly-owned subsidiaries (equity income and proportional balances) are as follows:
Parent Company Equity Subsidiaries and jointly-owned subsidiaries - Interests 9.30.2013 12.31.2012 Dividends and interest on equity Dividends and interest on equity receivable received 9.30.2013 12.31.2012 9.30.2013 9.30.2012 Profit / (loss) for the period
9.30.2013
9.30.2012
Light SESA Light Energia Light Esco LightCom Light Solues Lightger Itaocara Energia Axxiom Amaznia Energia E-Power
100.0% 100.0% 100.0% 100.0% 100.0% 51.0% 100.0% 51.0% 25.5% 20.0%
2,490,230 686,466 102,539 18,993 2,379 45,339 24,269 5,200 93,029 132 3,468,576
2,188,815 578,819 108,904 9,017 2,042 41,909 24,567 5,160 69,576 132 3,028,941
(270) (270)
156,743 107,212 9,224 3,126 624 1,116 1,836 759 (864) (456) 279,320 -
Consolidated Equity Jointly-owned subsidiaries Interests 9.30.2013 Light Energia Renova Energia Guanhes Energia Light Esco EBL Energia Lightger Axxiom Amaznia Energia E-Power 33.0% 51.0% 51.0% 25.5% 20.0% 685 45,339 5,200 93,029 132 425,508 712 41,909 5,160 69,576 132 360,603 (16,163) 37,486 14,352 1,786 107 3,393 38 (843) 161 1,116 759 (864) (456) 18,519 22.0% 51.0% 217,117 64,006 218,405 24,709 (16,163) 37,486 14,352 (909) 17,803 12.31.2012 Restated Capital stock to be paid up 12.31.2012 Restated Funds allocated to capital increase 9.30.2013 12.31.2012 Restated Profit / (loss) for the period 9.30.2012 Restated
9.30.2013
9.30.2013
80
Other information:
Parent Company Paid-up capital Subsidiaries and jointlyowned subsidiaries Light SESA Light Energia Light Esco LightCom Light Solues Lightger Itaocara Energia Axxiom Amaznia Energia E-Power 9.30.2013 2,082,365 77,422 79,584 4,500 1,350 40,408 29,562 4,692 95,353 777 12.31.2012 2,082,365 77,422 79,584 4,500 1,350 40,408 29,562 4,692 71,059 777 Total assets 9.30.2013 10,702,162 2,019,095 305,916 46,396 3,764 110,409 62,281 17,550 93,028 459 12.31.2012 8,968,355 2,399,532 155,789 31,400 2,496 112,816 61,344 8,382 69,659 459
Consolidated Paid-up capital Jointly-owned subsidiaries ] 9.30.2013 12.31.2012 Restated 9.30.2013 12.31.2012 Restated Total assets
Light Energia Renova Energia Guanhes Energia Light Esco EBL Energia Lightger Axxiom Amaznia Energia E-Power 367 40,408 4,692 95,353 777 367 40,408 4,692 71,059 777 693 110,409 17,550 93,028 459 749 112,816 8,382 69,659 459 223,778 26,520 224,168 26,520 720,565 102,525 589,972 66,966
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Changes in subsidiaries (consolidated) and jointly-owned subsidiaries (equity income) in the nine-month periods ended September 30:
Parent Company Capital increase 24,294 24,294 Proposed additional dividends (33,897) (14,643) (48,540) Parent Company Capital increase Proposed additional dividends (142,422) (49,316) (20,864) (3,556) (216,158) Consolidated 12.31.2012 Restated Light Energia Renova Energia Guanhes Energia Light Esco EBL Energia Lightger Axxiom Amaznia Energia E-Power Total 712 41,909 5,160 69,576 132 535,348 24,294 74,584 (22) (22) Consolidated 1.1.2012 Restated Light Energia Renova Energia Guanhes Energia Light Esco EBL Energia Lightger Axxiom Amaznia Energia E-Power Total 551 40,678 4,427 37,545 140 443,712 7,703 486 44,665 2 219 1 151 373 161 1,116 759 (864) (456) 18,519 712 41,796 5,405 44,385 321 507,269 360,371 36,476 17,803 378,174 36,476 Capital increase Other Equity method 9.30.2012 Restated (3,786) (112) 37 2 2 1,786 107 3,393 38 (843) 685 45,339 5,200 93,029 132 607,910 381,383 36,476 50,290 (3,715) (909) 376,759 86,766 Capital increase Dividends paid Other Equity method 9.30.2013 (1,810) Equity method (550) Equity method (3,637) 3,085 (1) (1) 2 2 464,431 301,415 141,544 11,915 6,891 337 3,431 (297) 38 (843)
12.31.2012
Other
9.30.2013
Light SESA Light Energia Light Esco LightCom Light Solues Lightger Itaocara Energia Axxiom Amaznia Energia E-Power Total
2,188,815 578,819 108,904 9,017 2,042 41,909 24,567 5,160 69,576 132 3,028,941
2,490,230 686,466 102,539 18,993 2,379 45,339 24,269 5,200 93,029 132 3,468,576
1.1.2012
Other
9.30.2012
Light SESA Light Energia Light Esco LightCom Lightger Light Solues Itaocara Energia Axxiom Amaznia Energia E-Power Total
2,314,175 670,064 55,072 5,821 40,678 1,520 23,472 4,427 37,545 140 3,152,914
156,743 107,212 9,224 3,126 1,116 624 1,836 759 (864) (456) 279,320
2,328,496 727,959 89,893 8,502 41,794 1,979 24,591 5,186 44,385 170 3,272,955
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The full balances of jointly-owned subsidiaries in the nine-month period ended September 30, 2013, which were recorded under the equity method, are as follows:
AXXIOM ASSETS Current Cash and cash equivalents Other Non-current Total assets LIABILITIES Current Loans, borrowings and debentures Other Non-current Loans, borrowings and debentures Other Equity Total liabilities INCOME STATEMENT Net revenue from sales Cost of sales Gross profit General and administrative expenses Net financial result Earnings before income tax and social contribution Income tax and social contribution Profit (loss) for the period 25,582 (19,706) 5,876 (5,333) 543 (468) 75 14,031 5,780 8,251 10,187 10,012 175 10,194 34,412 29,142 8,624 20,518 5,270 34,412
E-POWER
AMAZNIA
LIGHTGER
RENOVA
GUANHES
EBL
15,800 7,765
25 25 2,074 2,099
364,814 364,820
326
Consortia
The Company, through the subsidiary Itaocara Energia, holds a 51.0% interest in the UHE Itaocara consortium, while Cemig Gerao e Transmisso S.A. Cemig GT holds the other 49.0%. The consortium aims to explore the Itaocara Hydroelectric Power Plant. Assets and liabilities balances referring to the participation in the Consortium are incorporated into the subsidiarys balances. On December 28, 2011, IBAMA granted the preliminary license and on July 29, 2013, Itaocara Hydroelectric Power Plant obtained the installation license allowing the beginning of works. On August 9, 2013, the subsidiary Itaocara Energia requested the termination of the Concession Agreement 12/2001 to Aneel, as per Article 4 - A of Law 9074/2005, introduced by Law 12839/2013. The decision is based on the fact that the necessary time of revenue to obtain return on investment was jeopardized after 12 years of the concession term have elapsed before the release of the Installation Environmental License.
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Based on said Article, the Company understands that there will be no significant loss in the investments made in the project so far because it is entitled to the following rights: (i) the release of guarantees of compliance with obligations concerning the Concession Agreement; (ii) the non-payment for the Use of Public Asset; and (iii) the reimbursement for costs incurred in the preparation of studies or plans. The investments recorded as asset in Itaocara Energia are basically costs necessary to obtain the Previous Environmental License, the Installment Environmental License and the projects feasibility.
The Company, through its subsidiary Light Esco S.A., holds a 51.0% interest in the Maracan Solar consortium, whereas EDF Consultoria em Projetos de Gerao de Energia Eltrica Ltda. EDF Consultoria holds 49% interest. The consortium aims at the development, construction and operation of a photovoltaic plant with capacity of 391 kWp, installed on the top of the Maracan stadium. The construction has been concluded in the second quarter of 2013.
The Company, through its subsidiary Light Energia S.A., is a party to the gua Limpa Hydroelectric Power Plant Consortium, in the state of Mato Grosso, with a 51% interest, and the other party is Cemig Gerao e Transmisso S.A CEMIG GT, with a 49% interest. The consortiums purpose is to implement, operate, maintain and commercially explore the project. There were no relevant expenses incurred until September 30, 2013.
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The statement below summarizes the changes in property, plant and equipment:
Consolidated Balance on 12.31.2012 Restated PROPERTY, PLANT AND EQUIPMENT IN SERVICE Costs Land Reservoir, dams and water mains Buildings, works and improvements Machinery and equipment Vehicles Fixtures and furnishings Total Property, Plant and Equipment in Service - Cost (-) Depreciation Reservoir, dams and water mains Buildings, works and improvements Machinery and equipment Vehicles Fixtures and furnishings Total Property, Plant and Equipment in Service - Depreciation PROPERTY, PLANT AND EQUIPMENT IN PROGRESS Land Reservoir, dams and water mains Buildings, works and improvements Machinery and equipment Vehicles Fixtures and furnishings Studies and plans Total Property, Plant and Equipment in Progress Total property, plant and equipment 98 94,598 71,213 153,080 777 26,893 3,573 350,232 1,635,255 48 6,998 6,381 68,282 101 1,078 271 83,159 27,307 (2,118) (10,220) (2,266) (32,540) (139) (1,515) (382) (47,062) 146 91,376 75,328 188,822 739 26,456 3,462 386,329 1,660,444 (794,581) (159,300) (719,720) (12,183) (114,076) (1,799,860) (15,772) (4,126) (32,656) (299) (2,999) (55,852) 7,792 7,792 (810,353) (163,426) (744,584) (12,482) (117,075) (1,847,920) 104,975 1,250,008 259,008 1,320,849 13,060 136,983 3,084,883 (9,910) (9,910) 10,992 1,447 34,268 7 348 47,062 104,975 1,261,000 260,455 1,345,207 13,067 137,331 3,122,035 Transfers to service Balance on 9.30.2013
Additions
Write-offs
Consolidated Balance on 12.1.2012 Restated PROPERTY, PLANT AND EQUIPMENT IN SERVICE Costs Land Reservoir, dams and water mains Buildings, works and improvements Machinery and equipment Vehicles Fixtures and furnishings Total Property, Plant and Equipment in Service - Cost (-) Depreciation Reservoir, dams and water mains Buildings, works and improvements Machinery and equipment Vehicles Fixtures and furnishings Total Property, Plant and Equipment in Service - Depreciation PROPERTY, PLANT AND EQUIPMENT IN PROGRESS Land Reservoir, dams and water mains Buildings, works and improvements Machinery and equipment Vehicles Fixtures and furnishings Studies and plans Total Property, Plant and Equipment in Progress Total property, plant and equipment 39 73,782 69,106 82,245 898 28,726 3,851 258,647 1,601,074 48 4,960 5,392 24,917 7,726 83 43,126 (11,378) (2) (3,334) (2) (8,405) (5,055) (2,059) (15,519) (546) 87 78,742 66,093 102,105 898 36,452 1,875 286,252 1,585,816 (777,517) (155,822) (688,378) (23,547) (110,020) (1,755,284) (15,824) (4,525) (30,619) (1,045) (3,279) (55,292) 9,267 9,267 (793,341) (160,347) (718,997) (15,325) (113,299) (1,801,309) 104,976 1,254,194 257,466 1,317,059 29,847 134,169 3,097,711 788 3 785 (12,599) (12,599) 3,340 9,375 2,258 14,973 104,976 1,254,194 260,809 1,327,219 17,248 136,427 3,100,873 Additions Write-offs Transfers to service Balance on 9.30.2012 Restated
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In the first nine months of 2013, R$481 (R$351 in the first nine months of 2012) was carried over to property, plant and equipment as interest capitalization, with average capitalization rate of 8.2 p.a. (i) Annual depreciation rates: The schedule below summarizes significant depreciation rates, based on the assets estimated useful lives and in line with Aneel Resolution 474, of February 7, 2012:
GENERATION Bus Circuit breaker Buildings Water intake equipment Water intake structure Generator Reservoirs, dams and water mains Local communication system Water turbine % 2.50 3.03 3.33 3.70 2.86 3.33 2.00 6.67 2.50 Buildings Equipment in general Vehicles SALES % 3.33 6.25 14.29 ADMINISTRATION Buildings Equipment in general Vehicles % 3.33 6.25 14.29 TRANSMISSION System conductor Equipment in general System structure Recloser % 2.70 6.25 2.70 4.00
The Company did not identify signs of impairment of its fixed assets. The concession agreements of the hydroelectric power plants and PCHs establish that at the end of each concessions term the granting authority will determine the amount to be indemnified to the subsidiaries, so that Management understands that the value of fixed assets not depreciated at the end of concession will be reimbursed by the granting authority.
Consolidated 9.30.2013 Accumulated amortization (3,859,552) (454,269) (4,313,821) (4,313,821) 12.31.2012 Restated Net value 2,992,212 114,813 3,107,025 523,077 182,945 706,022 3,813,047 Net value 2,953,990 97,641 3,051,631 494,691 202,316 697,007 3,748,638
Historical cost Concession right of use Other (a) In service Concession right of use Other
(a)
Intangible assets exclude special obligations comprising contributions made by the federal government, states, municipalities and consumers, any unqualified donations ( not subject to any consideration to the benefit of donor) and grants intended as investments in the concession of the electric power distribution utility. The balance of
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special obligations as of September 30, 2013 totaled R$174,606 (R$153,288 as of December 31, 2012). Investments in the distribution network are initially recorded in intangible assets under development, during the construction period. When they are finalized and in compliance with ICPC 01, the investments are divided into two parts (bifurcated), the first of which is recorded in intangible assets in service, related to the amount that will be amortized during the concession term, and the other is transferred to the concessions financial assets and will be received as indemnification at the end of the concession. Intangible assets in progress includes inventories of project materials in the amount of R$100,577 as at September 30, 2013 (R$92,843 as at December 31, 2012), as well as a provision for inventory devaluation in the amount of R$2,104 (R$2,104 as at December 31, 2012). The Company has not identified signs of impairment of its other intangible assets. In the first nine months of 2013, a total amount of R$16,049 (R$9,175 in the first nine months of 2012) was carried over to intangible assets as interest capitalization, with average capitalization rate of 8.2% p.a. The infrastructure used by subsidiary Light SESA is associated with the distribution service, and therefore cannot be removed, disposed of, assigned, conveyed, or encumbered as mortgage collateral without the prior written authorization of the granting authority, which authorization, if given, is regulated by Resolution Aneel 20/99. Below are the changes in the intangible assets:
Consolidated Balance on 12.31.2012 Restated In service Concession right of use Other Total Intangible Assets in Service (-) Amortization Concession right of use Other Total Intangible Assets in Service/Amortization In progress Concession right of use Other Total Intangible Assets in Progress Total 494,691 202,316 697,007 3,748,638 447,539 21,146 468,685 231,456 (7,076) (419,153) (40,517) (459,670) (159,971) 523,077 182,945 706,022 3,813,047 (3,699,954) (428,162) (4,128,116) (211,122) (26,107) (237,229) 51,524 51,524 (3,859,552) (454,269) (4,313,821) 6,653,944 525,803 7,179,747 (58,600) (58,600) 256,420 43,279 299,699 6,851,764 569,082 7,420,846 Additions Write-offs Transfer between the accounts (a) Balance on 9.30.2013
(a)
Includes transfer of R$159,971 to Concession Financial Asset, as a result of the split of assets upon startup, pursuant to IFRIC 12/ICPC 01.
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Consolidated Balance on 1.1.2012 Restated In service Concession right of use Other Total Intangible Assets in Service (-) Depreciation Concession right of use Other Total Intangible Assets in Service/Amortization In progress Concession right of use Other Total Intangible Assets in Progress Total 799,364 226,749 1,026,113 3,880,991 453,312 29,565 482,877 285,167 (646) (478,934) (23,365) (502,299) (280,947) 773,742 232,949 1,006,691 3,884,565 (3,458,622) (400,647) (3,859,269) (178,991) (18,719) (197,710) 2,243 2,243 (3,635,370) (419,366) (4,054,736) 6,216,753 497,394 6,714,147 (2,889) (2,889) 199,303 22,049 221,352 6,413,167 519,443 6,932,610 Additions Write-offs Transfer between the accounts (a) Balance on 9.30.2012 Restated
(a)
Includes reclassification of R$118,288 referring to Aneel Normative Resolution 474/12 (see Note 10) and transfer of R$162,659 to Concession Financial Asset, as a result of the split of assets upon startup, pursuant to IFRIC 12/ICPC 01. It is the responsibility of Aneel to determine the estimated economic useful lives of each piece of distribution infrastructure assets for pricing purposes, as well as for the purpose of calculating the amount of the relevant compensation payable upon expiration of the concession term. This estimate is revised from time to time, represents the best estimate concerning the assets' useful lives, and is accepted in the market as appropriate for accounting and regulatory purposes. Management understands that amortization of the concession's right of use must be consistent with the return expected on each infrastructure asset, via the applicable rates. Thus, intangible assets are amortized over the expected length of such return, limited to the term of the concession. The main amortization rates, based on the assets estimated useful lives, were changed by Aneel Resolution 474. In the first quarter of 2012, this change resulted in the reclassification of R$118,288 from intangible assets to financial assets, without changing the other accounting procedures arising from the adoption of IFRIC 12/OCPC 5 Concession Agreements.
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Below, the main amortization rates, in accordance with Aneel Resolution 474, of February 7, 2012, are as follows:
DISTRIBUTION Bank of capacitors Distribution key System conductor Circuit breaker Buildings System structure Meter Voltage regulator Recloser Transformer % 6.67 6.67 3.57 3.03 3.33 3.57 6.77 4.35 4.00 4.00
Use of Public Asset (UPA) Pursuant to OCPC 05, generation concession agreements understand that the right and corresponding liability simultaneously rely on concessionaire upon the signature of the concession agreement (authorization), the intangible asset is initially measured at cost (in the instrument of ownership). In case of fixed granting, the cost corresponds to the amount already expensed and to be expensed shall be recognized at present value, as per provisions of the Accounting Pronouncement CPC 12 Fair Value Adjustment. The Company has onerous concession agreement in Itaocara consortium. The balance of UPA recorded under current and non-current liabilities against other payables totaled R$35,092 as at September 30, 2013 (R$33,957 as at December 31, 2012) see Note 22.
9.30.2013 49,684 25,466 2,215 61,113 132,401 112,934 88,995 146,618 619,426
12.31.2012 Restated 89,607 52,520 2,216 57,790 227,936 118,707 91,978 173,715 814,469
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Aneel Resolution 387 as of December 15, 2009, published on January 12, 2010, concluded the process of calculating the Revenue Loss and Free Energy closing balances after the conclusion of the Extraordinary Tariff Review - RTE, and also determined the amounts of any reimbursement operators should pay each other, as applicable, and payments shall be made on April 9, 2011. However, said reimbursements are suspended according to injunction filed by the Brazilian Association of Electricity Distribution Operators (ABRADEE) on April 7, 2011. The balance was ratified at R$48,985 and the variation, since ratification, resulting from adjustment by SELIC (overnight lending rate) variation amounts to R$12,128. The Companys exposure to credit risks related to suppliers is reported in Note 32.
Consolidated 9.30.2013 Current Taxes and Contributions ICMS payable Installment Payments - Law 11941/09 PIS/COFINS payable Other Income Tax and Social Contribution IRRF payable Provision for income tax / social contribution Total 84,075 3,628 18,786 51,140 10,521 64,041 425 63,616 148,116 Non-current 189,425 189,425 189,425 Total 273,500 3,628 208,211 51,140 10,521 64,041 425 63,616 337,541 Current 82,353 16,009 18,069 35,686 12,589 50,353 451 49,902 132,706 12.31.2012 - Restated Non-current 195,751 195,751 195,751 Total 278,104 16,009 213,820 35,686 12,589 50,353 451 49,902 328,457
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7,377 5,575 12,952 500 75,000 80,000 82,621 29,651 29,651 12,680 34,989 42,069 42,069 4 4 6,965 230 119 109 457 1,083 103 75 434 1,338 440,151 453,103
2,466 463 277 344 1,872 1,290 144 6,856 29,470 590 1,516 288 303 341 131 494 643 695 80 1 3 7 1 1 14 986 1,607 37,171 44,027
2,466 463 7,654 5,919 1,872 1,290 144 19,808 500 104,470 80,590 1,516 82,909 29,954 29,992 12,811 35,483 42,712 42,764 4 4 7,045 231 119 109 460 1,090 104 76 434 1,352 986 1,607 477,322 497,130
86,790 (64,322) 60,560 (45,133) 105,925 105,193 401,400 133,800 784,213 6,198 300,000 150,000 76,600 76,600 63,403 157,449 189,312 188,711 1 1 19 19 24,379 134 10 72 648 1,535 257 181 8,767 4,127 1,248,423 2,032,636
86,790 (64,322) 60,560 (45,133) 105,925 105,193 401,400 133,800 784,213 6,198 300,000 150,000 76,600 76,600 63,403 157,449 189,312 188,711 1 1 19 19 24,379 134 10 72 648 1,535 257 181 8,767 4,127 1,248,423 2,032,636
89,256 (64,322) 61,023 (45,133) 7,654 111,844 107,065 402,690 133,944 804,021 6,698 404,470 80,590 151,516 82,909 106,554 106,592 76,214 192,932 232,024 231,475 1 1 23 23 31,424 365 129 181 1,108 2,625 361 257 9,201 5,479 986 1,607 1,725,745 2,529,766
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The chart below shows the contractual terms and conditions applicable to our loans and borrowings as at September 30, 2013:
Principal Amortization Financing Entity TN - Par Bond TN - Collateral - Par Bond TN - Discount Bond TN - Collateral - Discount Bond TN - C. Bond Merril Lynch BNP Citibank Citibank - Energia Bank Tokyo - Mitsubishi Eletrobrs CCB Bradesco Working Capital - Santander Banco do Brasil BNDES - FINEM BNDES - FINEM direct BNDES - FINEM +1 BNDES - FINEM direct PSI BNDES - Capex 11/12 Subcred.2 BNDES - Capex 11/12 Subcred.3 BNDES - Capex 11/12 Subcred.3 BNDES - Capex 11/12 Subcred.4 BNDES - Capex 11/12 Subcred.4 BNDES - Capex 11/12 Subcred.13 BNDES - Capex 11/12 Subcred.14 BNDES - Capex 11/12 Subcred.17 BNDES - Capex 11/12 Subcred.18 BNDES - Capex 11/12 L.Energia BNDES - PROESCO 1st funding BNDES - PROESCO 2nd funding BNDES - PROESCO 3rd funding BNDES - PROESCO 3rd funding BNDES - PROESCO 4th funding BNDES - PROESCO 4th funding BNDES - PROESCO 5th funding BNDES - PROESCO 5th funding BNDES - PROESCO 6th funding BNDES - PROESCO 7th funding BNDES - PROESCO 8th funding BNDES - PROESCO SP_Market Date of signature 4/29/1996 4/29/1996 4/29/1996 4/29/1996 4/29/1996 11/7/2011 10/17/2011 8/23/2012 10/2/2012 3/11/2013 Several 10/18/2007 9/3/2010 2/25/2013 11/5/2007 11/30/2009 11/30/2009 11/30/2009 12/6/2011 12/6/2011 12/6/2011 12/6/2011 12/6/2011 12/6/2011 12/6/2011 12/6/2011 12/6/2011 4/10/2012 9/16/2008 4/17/2009 4/12/2010 4/12/2010 9/15/2010 9/15/2010 11/16/2010 11/16/2010 7/29/2011 9/27/2011 6/26/2013 1/19/2012 Currency US$ US$ US$ US$ US$ US$ EURO US$ US$ US$ R$ R$ R$ R$ URTJLP URTJLP URTJLP R$ URTJLP URTJLP URTJLP URTJLP URTJLP URTJLP URTJLP URTJLP URTJLP URTJLP URTJLP URTJLP R$ URTJLP URTJLP R$ URTJLP R$ URTJLP URTJLP URTJLP URTJLP Interest rate p.a. Exchange variation+ 6 U$ Treasury Libor6M+0.8+Ev U$ Treasury Exchange variation+ 8 CDI + 0.65 CDI + 1.30 CDI + 1 CDI + 1.10 CDI + 0.90 5.00% CDI + 0.85 CDI + 1.4 109.3% of CDI TJLP + 4.3 TJLP + 2.58 TJLP + 3.58 4.50% TJLP + 1.81 TJLP + 2.21 TJLP + 3.21 TJLP + 2.21 TJLP + 3.21 TJLP + 2.21 TJLP + 3.21 TJLP + 2.21 TJLP + 3.21 TJLP + 1.81 TJLP + 2.51 TJLP + 2.5 4.50% TJLP + 2.18 TJLP + 2.05 5.50% TJLP + 2.05 5.50% TJLP + 1.81 TJLP + 1.81 TJLP + 2.18 TJLP + 1.81 Effective rate 15.82% 0.00% 11.26% 0.00% 17.82% 8.14% 8.84% 8.52% 8.63% 8.41% 5.00% 8.36% 8.95% 8.29% 9.30% 7.58% 8.58% 4.50% 6.81% 7.21% 8.21% 7.21% 8.21% 7.21% 8.21% 7.21% 8.21% 6.81% 7.51% 7.50% 4.50% 7.18% 7.05% 5.50% 7.05% 5.50% 6.81% 6.81% 7.18% 6.81% Beginning 2024 2024 2024 2024 2004 2014 2014 2017 2017 2016 1988 2012 2014 2017 2009 2011 2011 2011 2013 2013 2013 2013 2013 2013 2013 2013 2013 2013 2009 2009 2010 2010 2011 2011 2011 2011 2012 2012 2014 2012 Payment Lump sum Lump sum Lump sum Lump sum Half-yearly Half-yearly Lump sum Half-yearly Half-yearly Lump sum Monthly and Quarterly Annual Lump sum Lump sum Monthly Monthly Monthly Monthly Monthly Monthly Monthly Monthly Monthly Monthly Monthly Monthly Monthly Monthly Monthly Monthly Monthly Monthly Monthly Monthly Monthly Monthly Monthly Monthly Monthly Monthly End 2024 2024 2024 2024 2014 2016 2014 2018 2018 2016 2019 2017 2014 2017 2014 2017 2017 2019 2019 2019 2019 2019 2019 2019 2019 2019 2019 2018 2015 2014 2015 2015 2016 2016 2016 2016 2017 2017 2023 2017
On February 25, 2013, the Company raised R$150,000 through Commercial Credit Notes (CCN) with Banco do Brasil for working capital purposes. On March 11, 2013, the Company raised R$116,880 with Bank Tokyo-Mitsubishi for working capital purposes. On May 15, 2013, the subsidiary Light SESA conducted its 2nd issue of Commercial Promissory Notes totaling R$500,000. Despite the 180-day maturity of promissory Notes, except for early maturity or total redemption as set forth in the agreement, they were paid on June 28, 2013, when R$1,600,000 was raised from the 9th issue of debentures of subsidiary Light SESA, as disclosed in Note 17. On May 23, 2013, the total of R$56,431 was received, referring to the 2011/2012 BNDES borrowing agreement of the subsidiary Light SESA. In addition to the collaterals indicated above, loans are guaranteed by receivables in the approximate amount of R$71,431 (R$103,333 as at December 31, 2012).
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On September 30, 2013, the Company has available credit facilities totaling R$350,000. The principal of consolidated loans and borrowings, classified in non-current liabilities, matures as follows (excluding financial charges) in the period ended September 30, 2013:
Consolidated Local currency 2014 2015 2016 2017 2018 after 2018 Total 125,838 278,532 277,125 386,844 135,714 44,370 1,248,423 Foreign currency 128,051 42,928 173,940 267,600 133,800 37,894 784,213 Total 253,889 321,460 451,065 654,444 269,514 82,264 2,032,636
Below, the consolidated loans and borrowings breakdown for the periods:
Consolidated Principal Balance on December 31, 2012 - Restated Loans and borrowings obtained Monetary and exchange rate variations Financial charges provisioned Financial charges paid Amortization of borrowings Amortization of funding costs Financial charges capitalized to principal Charges capitalized to intangible assets/ property, plant and equipment Balance on September 30, 2013 2,247,233 842,687 79,556 (684,138) 191 210 2,485,739 Charges 16,198 121,087 (109,578) (210) 16,530 44,027 Total 2,263,431 842,687 79,556 121,087 (109,578) (684,138) 191 16,530 2,529,766
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Consolidated Principal Balance on January 1, 2012 - Restated Loans and borrowings obtained Monetary and exchange rate variations Financial charges provisioned Financial charges paid Amortization of borrowings Amortization of funding costs Charges capitalized to intangible assets/ property, plant and equipment Balance on September 30, 2012 - Restated 1,851,370 363,258 13,368 (124,683) 191 2,103,504 Charges 20,638 112,546 (88,748) 9,526 53,962 Total 1,872,008 363,258 13,368 112,546 (88,748) (124,683) 191 9,526 2,157,466
Total principal amount is stated net of loans-related costs - BNDES, as provided for in CVM Resolution 556/08, which approved technical pronouncement CPC 08 Transaction Costs and Premium on the Issue of Marketable Securities. The Companys exposure to interest rate, foreign currency and liquidity risks related to loans and borrowings is reported in Note 32.
Covenants Bradescos bank credit certificates, loans with Banco Santander and with BNDES, classified as current and non-current, require that the Company maintain certain debt ratios and covenants. In the third quarter of 2013, the Company was in conformity with all required debt covenants.
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Below, contractual conditions of debentures on a consolidated basis in the quarter ended September 30, 2013:
Principal amortization Financing Entity Debentures 4th Issue (Light SESA) Debentures 5th Issue (Light SESA) Debentures 7th Issue (Light SESA) Debentures 8th Issue (Light SESA) Debentures 9th Issue Series A (Light SESA) Debentures 9th Issue Series B (Light SESA) Debentures 1st Issue (Light Energia) Debentures 2nd Issue (Light Energia) Debentures 3rd Issue (Light Energia) Date of signature 6/30/2005 1/22/2007 5/2/2011 8/24/2012 6/15/2013 6/15/2013 4/10/2011 12/29/2011 8/24/2012 Currency TJLP CDI CDI CDI CDI IPCA CDI CDI CDI Interest rate p.a. TJLP + 4% CDI + 1.50% CDI + 1.35% CDI + 1.18% CDI + 1.15% IPCA + 5.74% CDI + 1.45% CDI + 1.18% CDI + 1.18% Effective rate 9.00% 9.34% 8.90% 8.71% 8.68% 12.01% 9.00% 8.71% 8.71% Beginning 2009 2012 2015 2015 2018 2020 2015 2016 2015 Payment Monthly Quarterly Annual Annual Half-yearly Half-yearly Annual Annual Annual End 2015 2014 2016 2026 2021 2023 2016 2019 2026
On June 15, 2013, Light SESA conducted its 9th issue of unsecured, non-convertible debentures in two series, amounting to R$1,600,000. On July 22, 2013, the full extraordinary amortization of the 5th Issue of Debentures of subsidiary Light SESA was performed, in the total amount of R$161,507. The funds used in the amortization were raised by Light SESA through its 9th Issue of Debentures. Thus, Light SESA early settled the 5th Issue, conducted on January 22, 2007, at the total original value of R$1,000,000, with original maturity in January 2014. Total principal amount is reported net of debentures issue costs, as provided for in CVM Resolution 556/08, which approved the technical pronouncement CPC 08 Transaction Costs and Premium on the Issue of Marketable Securities. Installments related to principal of debentures, classified in non-current liabilities, have the following maturities (financial charges not included) in the period ended September 30, 2013:
9.30.2013 2014 2015 2016 2017 2018 after 2018 Total 5 452,564 558,418 147,669 392,718 1,784,454 3,335,828
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Consolidated Principal Balance on December 31, 2012 - Restated Debentures issued Financial charges provisioned Financial charges paid Amortization of debentures Funding costs Amortization of funding costs Balance on September 30, 2013 1,944,302 1,600,000 (203,420) (7,977) 2,942 3,335,847 Charges 29,752 159,525 (99,815) 89,462 Total 1,974,054 1,600,000 159,525 (99,815) (203,420) (7,977) 2,942 3,425,309
Consolidated Principal Balance on January 1, 2012 - Restated Debentures issued Financial charges provisioned Financial charges paid Amortization of debentures Amortization of funding costs Balance on September 30, 2012 - Restated 1,969,973 500,000 (136,218) 2,192 2,335,947 Charges 33,899 146,286 (130,872) 49,313 Total 2,003,872 500,000 146,286 (130,872) (136,218) 2,192 2,385,260
The Companys exposure to interest rate, foreign currency and liquidity risks related to debentures is reported in Note 32. Covenants The 7th, 8th and 9th issue of debentures of the subsidiary Light SESA and the 1st, 2nd and 3rd issue of debentures of the subsidiary Light Energia require the maintenance of indebtedness indexes and coverage of interest rates. In the third quarter of 2013, the Company complied with all the covenants required.
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19. PROVISIONS
The Company is a party in tax, labor and civil lawsuits in several courts. Management periodically assesses the risks of contingencies related to these proceedings, and based on the legal counsels opinion it records a provision when unfavorable decisions are probable and whose amounts are quantifiable. Below is the breakdown of provisions and changes in the first nine months of 2013:
Consolidated NON-CURRENT Balance on December 31, 2012 - Restated Additions Adjustments Write-offs - payments Write-offs - reversals Balance on September 30, 2013 Escrow deposits (a) Balance on September 30, 2013 31,185 5,450 3,622 40,257 Labor 179,082 4,415 (3,963) (16,520) 163,014 Civil 183,859 36,571 9,991 (47,251) (4,187) 178,983 Tax 197,032 1,704 17,735 216,471 Other 23,179 1,097 3,774 (7,050) (1,104) 19,896 Total 583,152 43,787 31,500 (58,264) (21,811) 578,364
(a)
The total amount of R$268,101 is recorded under escrow deposits as at September 30, 2013 (R$224,073 as at December 31, 2012), of which R$40,257 (R$50,911 as at December 31, 2012) refer to claims with recorded provision. Other deposits are basically related to labor, civil and tax claims.
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Below are the changes in provisions in the first nine months of 2012:
Consolidated NON-CURRENT Balance on December 31, 2011 Additions Adjustments Write-offs - payments Write-offs - reversals Balance on September 30, 2012 Escrow deposits Balance on September 30, 2012 49,199 9,631 4,375 63,205 Labor 150,121 7,215 (14,430) (17,642) 125,264 Civil 163,572 49,940 9,077 (41,590) (144) 180,855 Tax 186,478 9,177 195,655 Other 15,507 12,861 2,736 (8,131) (281) 22,692 Total 515,678 70,016 20,990 (64,151) (18,067) 524,466
Provision for labor proceedings: These labor proceedings mainly involve the following matters: overtime; hazardous work wage premium; equal pay; pain and suffering, difference of 40% fine of FGTS (Government Severance Indemnity Fund for Employees) derived from the adjustment due to understated inflation and occupational accident civil liability. Provision for civil proceedings:
Accrued Value (probable loss) 9.30.2013 Civil proceedings "Cruzado" Plan Total
(a)
(a)
The Provision for civil proceedings comprises lawsuits in which the Company and its subsidiaries are defendants and it is probable the claim will result in a loss in the opinion of the respective attorneys. The claims mainly involve alleged moral and property damage due to the Companys ostensive behavior fighting irregularities in the network, as well as consumers challenging the amounts paid. Lawsuits in the Special Civil Court are mostly related to matters regarding consumer relations, such as improper collection, undue power cut, power cut due to delinquency, network problems, various irregularities, bill complaints, meter complaints and problems with ownership transfer. There is a limit of 40 minimum monthly wages for claims under procedural progress at the Special Civil Court. Accruals are based on the separation of the six main reasons for complaints for the Company and its subsidiaries which represent 78.3% of the lawsuits filed; a block with all the reasons related to accidents; and a block for Other Reasons. For the six main offenders and other reasons block, an adjusted average is used considering 95% of the sample i.e. excluding the 2.5% highest and lowest amounts - the average of the last 12 months of condemnation
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(b)
amount. And, in the case of the accident block, the average of the last 12 months of condemnation amount is considered. Provision for tax proceedings:
Accrued Value (probable loss) 9.30.2013 INSS tax deficiency notice INSS quarterly ICMS Other Total
(a)
(a)
The provision recorded mainly refers to litigation on the application of State Law 3188/99, which restricted the appropriation of ICMS credits incurred on the acquisition of assets destined to fixed assets, requiring that credit occur by installments, while this restriction was not provided for in the Supplementary Law 87/96.
Other Provisions: Below is the regulatory contingency arising from administrative issues pending with Aneel:
Deficiency Notice Aneel 071/2011 - SFE This deficiency notice was issued on November 30, 2011 under the argument that any failure to comply with Module 8 PRODIST (Procedures for the Distribution of Electric Power at the National Electric System), more specifically referring to the process of data collection and calculation of individual and collective continuity indicators, as well as financial indemnity owed to consumers whose individual continuity indicators were infringed. Aneel applied a fine in the relevant amount of R$17,719. Subsidiary Light SESA filed an appeal on February 6, 2012, in view of excessive penalty applied, contesting among the facts, lack of reasoning and proportionality of dosimetry applied when calculating the fine. In view of the maintenance of excessive penalty applied and the chances of partial success of appeal filed, Light SESA accrued R$6,194 (R$5,857 as at December 31, 2012), through report of its legal counsels and awaits decision of Aneel.
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20. CONTINGENCIES
The Company is a party to lawsuits that Management believes that risk of loss is less than probable, based on the opinion of its legal counsels. Therefore, no provision was established. Contingencies with possible loss are broken down as follows:
Consolidated 9.30.2013 Balance Civil Labor Tax Total 186,278 278,884 3,482,600 3,947,762 Number of proceedings 14,054 1,051 419 15,524 Balance 204,902 291,575 3,268,200 3,764,677 12.31.2012 Number of proceedings 13,792 1,072 213 15,077
Irregularities Subsidiary Light SESA has several lawsuits where irregularities are discussed, arising from commercial losses due to irregular connections, clandestine connections, meters alteration and equipment theft, known in Portuguese as gatos. Most of the litigations are based on the evidence of irregularity and amounts charged by the concessionaire in view of such evidence. The amount currently assessed represented by these claims is R$39,932 (R$45,154 as at December 31, 2012). Amounts charged and bills Many litigations are currently in progress and discuss amounts charged by the subsidiary Light SESA for services provided, such as demand amounts, consumption amounts, financial charges, rates, insurances, among other. The amount currently assessed represented by these claims is R$44,199 (R$34,148 as at December 31, 2012). Accidents Subsidiary Light SESA is defendant in lawsuits filed by victims and/or their successors, regarding accidents with Lights electric power grid and/or service provision for several causes. The amount currently assessed represented by these claims is R$28,511 (R$24,475 as at December 31, 2012).
Discontinuance and suspension There are several lawsuits in progress to discuss service discontinuance, whether by fortuitous cases or events of force majeure, or for purposes of intervention in the electrical system, among other
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reasons, and also service suspension, whether for indebtedness, denied access or meters replacement, among other facts for suspension. The amount currently assessed represented by these claims is R$16,514 (R$15,218 as at December 31, 2012).
Equipment and network Subsidiary Light SESA has litigations due to electronic meters used to measure energy consumption. Litigations address several themes, such as meter functionality, approval by metrological agency, among others and, also, litigations about its network, due to its extension, removal or even financial contribution of the client to install the network. The amount currently assessed represented by these claims is R$7,416 (R$7,434 as at December 31, 2012). Regarding civil litigations, we point out the lawsuit filed in the first quarter of 2012 by Companhia Siderrgica Nacional - CSN against subsidiary Light SESA, where CSN claims approximately R$100,000 as indemnity for service discontinuance occurred at its Consumer Unit of Volta Redonda. We point out that out of amount claimed, R$88,000 only refer to the service discontinuance occurred on November 10, 2009, affecting 40% of Brazilian territory and over 90% of Paraguay, which only evidences that causes go beyond Light SESAs scope of operation, as electric power distribution company. Moreover, the ONS report concluded that the origin and causes of this service discontinuance was Furnas responsibility. Thus, the Companys exposure to risk is R$35,531 (R$35,531 as at December 31, 2012). b) Tax
ICMS Commercial Losses (Tax Deficiency Notices Nos. 03326780-8, 04011949-7, 03.326.784-0 and 04.028.752-6) - These refer to tax deficiency notices aiming at collecting ICMS, Government Fund to Combat Poverty - FECP and penalty (from Jan/1999 to Dec/2003 and Jan/2006 to Dec/2010) as Light SESA failed to pay deferred ICMS and FECP in operations preceding the distribution of electric power, i.e., in operations carried out between generation and distribution company, in view of commercial losses. The subsidiary Light SESA objected these tax assessments. Two tax deficiency notices are pending judgments in the lower administrative court and other two notices received unfavorable decisions in the lower administrative court, against which Light SESA filed voluntary appeals. The amount currently assessed represented by these claims totaled R$1,328,300 (R$1,273,200 as at December 31, 2012).
IRRF (withholding income tax) over dividends (Proceedings 16682.721195/2011-02 and 16682.720657/2012-47) In 2011, the subsidiary Light SESA received a tax deficiency notice aiming the collection of withholding income tax (IRRF) over amounts paid by the Company in 2007 as dividends, under the allegation that these derived from no profit, originated from recording of deferred tax assets in the income statement, then, characterized as payments without cause subject to tax levy. In view of absolute regular
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standing of accounting, corporate and tax procedures adopted, the Company filed an objection, which was deemed groundless. The Company filed a Voluntary Appeal, which is pending judgment. On July 6, 2012, Light SESA received another tax deficiency notice on this matter, now concerning the amounts paid in 2008, against which submitted a statement of discontentment, under the alleged defense of previous deficiency notice, which was dismissed. The Voluntary Appeal is pending judgment. The amount currently assessed represented by the first deficiency notice is R$371,600 (R$362,500 as at December 31, 2012), while the amount for the second deficiency notice is R$233,000 (R$227,200 as at December 31, 2012).
LIR/LOI - IRPJ/CSLL (Proceedings 16682.720216/2010-83, 15374-001.757/200813 and 16682.721091/2011-90) The subsidiary Light SESA filed a writ of mandamus mainly discussing the taxation of profit of the subsidiaries LIR and LOI abroad, more specifically, it advocated that income tax and social contribution should be levied on profit only, not on equity in the earnings of subsidiaries (a broader concept that includes exchange variations as provided for by IN 213/02). The decision was unfavorable to the Light SESA and, subsequently, due to Refis, it fully waived the right claimed in the proceeding. Accordingly, the procedure has been changed to tax equity in the earnings of subsidiaries, in accordance with the decision of the writ of mandamus. Tax authorities disagreed with this procedure and issued a deficiency notice to Light SESA for the fiscal years 2004 to 2008, requiring taxation on profit only. For 2004, a tax foreclosure case has been filed and is pending judgment of the motion to stay execution. For 2005, the voluntary appeal was sustained and the tax deficiency notice was canceled. For the amounts relating to 2006 to 2008, the Company is awaiting the decision of the Voluntary Appeals by the Administrative Tax Appeals Council (CARF). According to the legal counsels, the claim may possibly result in a loss involving the amount of R$438,600 as at September 30, 2013 (R$426,116 on December 31, 2012). Normative Instruction (NI) 86 (Proceeding 10707000751/2007-15 - (2003 through 2005) - This deficiency notice was issued to assess a fine on the Company for alleged failure to make electronic filings as required by NI 86/2001, for calendar years 2003 through 2005. The voluntary appeal filed by subsidiary Light SESA was dismissed, upon which a special appeal was filed and also deemed groundless. Motion for clarification of judgment is pending. The amount currently assessed represented by this claim is R$305,000 (R$294,400 as at December 31, 2012). Inspection Fee for Occupancy and Permanence in Zones, Routes and Public Areas (TFOP) The subsidiary Light SESA has several lawsuits discussing TFOP, levied by the municipality of Barra Mansa. Light SESA filed motion to dismiss the execution of these lawsuits and at the Federal Supreme Court STF, obtained injunction sentencing the suspension of collections until judgment of Extraordinary Appeal n 640286. The amount currently assessed represented by these claims is R$256,497 (R$179,309 as at December 31, 2012).
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ICMS Rheem (Proceeding E-04/892.090/99) - This is a tax deficiency notice to collect ICMS (State VAT), in view of subsidiary Light SESA's utilization of ICMS accumulated credits of Rheem Embalagens Ltda. to acquire inputs and raw material in the state of Rio de Janeiro. Objection was deemed groundless. Voluntary Appeal was filed which was rejected. Light's appeal was also filed which was rejected. At the moment, the subsidiary is awaiting the decision in order to take the proper measures. The amount currently assessed represented by this claim is R$145,900 (R$137,932 as at December 31, 2012). ICMS on low-income subsidy (Proceedings E-34/059.150/2004 and E04/054.753/2011) - Tax Deficiency Notices drawn up to charge ICMS (State VAT) on amounts of economic subsidy relating to low-income consumers of electric power arising from Global Reversal Reserve Funding. In the first case, Light SESA's objection was deemed groundless. An appeal was lodged by subsidiary Light SESA with the Taxpayers Council, which was partially sustained to remove taxation on consumption up to 50 kWh (exempt from tax). In the second case, the Company filed an objection, which was deemed groundless. An appeal was lodged with the Taxpayers Council, which decided that this case shall return to the inspection authority for further information. The amount currently represented by the first claim is R$94,100 (R$88,600 as at December 31, 2012) and the second claim is R$34,400 (R$32,200 as at December, 31, 2012). c) Labor
The main labor claims involve: equal pay and related accretions, overtime and related accretions, occupational accident, risk premium difference and pain and suffering.
Equal pay and related accretions the claimants intend to receive wage differences alleging that they exercise or exercised activities identical to other employees or former employees activities, with the same productivity and technical perfection, but they received different wages. The amount currently assessed represented by this claim is R$20,489 (R$24,321 on December 31, 2012). Overtime and related accretions the claimants intend to receive overtime pay, alleging that they performed their activities beyond standard working hours and overtime has not been paid or offset. The amount currently assessed represented by this claim is R$62,360 (R$58,617 on December 31, 2012). Occupational accident employees/former employees or service providers involved in occupational accidents attribute responsibility to Light, claiming indemnifications and life annuity. The amount currently assessed represented by this claim is R$12,858 (R$14,690 on December 31, 2012).
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Risk premium difference in the past, the Company used to pay a 30% difference of base salary up to April 2012, as per 2011/2012 Collective Bargaining Agreement. The amount currently assessed represented by this claim is R$57,845 (R$72,776 on December 31, 2012). Pain and suffering claim based on several grounds: persecution, moral harassment, lack of security (operations in risk area) and others. The amount currently assessed represented by this claim is R$25,722 (R$35,547 on December 31, 2012).
Below, we point out lawsuits in progress, whose chances of losses are remote, with relevant amounts under dispute, which, in case of unfavorable decision, may impact the Company, its subsidiaries and jointly-owned subsidiaries:
PASEP/PIS (Proceeding 15374002130/2006-18) It refers to the Offset Disallowance made by the Company of PASEP credits with PIS debts. The Companys objection was deemed groundless. Voluntary Appeal was filed. CARF rendered decision sentencing the case should remand to the lower court to determine the credit in dispute. The amount currently assessed represented by this claim is R$270,500 (R$265,900 as at December 31, 2012). IRRF - Disallowance of tax offset - LIR/LOI (Proceeding 10768.002.435/2004-11) - There is no confirmation from Brazilian Tax Authority regarding the tax offsets related to withholding income tax credits on financial investments and withholding income tax credits on the payment of energy accounts by government bodies, offset due to outstanding balance of Corporate Income Tax in the reference year of 2002. The motion to disagree filed by Light SESA subsidiary was deemed groundless. The voluntary appeal lodged by Light SESA is pending judgment. In view of the favorable decision received in August 2012 referring to the proceeding 18471002113/2004-09, which directly impacts this case, the chances of losses to remote. The amount currently assessed represented by this claim is R$209,700 (R$204,800 as at December 31, 2012).
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Consolidated Current Balance on December 31, 2012 Amortizations in the period Restatements in the period Transfer to current Balance on September 30, 2013 114,835 (87,351) 86,096 4,338 117,918 Non-current 939,863 4,963 (4,338) 940,488 Total 1,054,698 (87,351) 91,059 1,058,406
Consolidated Current Balance on January 1, 2011 - Restated Amortizations in the period Restatements in the period Transfer to current Balance on September 30, 2012 80,525 (83,404) 85,627 39,917 122,665 Non-current 1,090,684 (39,917) 1,050,767 Total 1,171,209 (83,404) 85,627 1,173,432
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(a)
In accordance with Concession Agreement 12/2001 dated March 15, 2001, which governs the development of the potential hydroelectric power of the Paraba do Sul river in the municipalities of Itaocara and Aperib, subsidiary Itaocara Energia Ltda. should pay to the federal government, by way of a fee owing to use of a public asset, as of the start-up date and until the concession expires or while the potential hydroelectric power is explored, monthly installments equal to one twelfth (1/12) of the proposed annual payment of R$2,017, duly escalated against the variation of the IGP-M, or any other index as shall replace the former. The corresponding entry to liability escalation is recognized as an intangible asset during the construction and licensing phase, without any impact on results. Following start-up, the escalation will be recognized directly in the income statement (see Note 13). In June 2012, an injunction was granted suspending the payments for the Use of Public Assets. Thus, the Company understands that the amount must be fully recorded under non-current liabilities. On August 9, 2013, the subsidiary Itaocara Energia requested the termination of the Concession Agreement 12/2001 to Aneel, as per Article 4 - A of Law 9074/2005, introduced by Law 12839/2013, as detailed in Note 11. On May 29, 2013, the Decree 8020 was published, granting the anticipated transfer of CDE funds to cover discounts on tariffs for some consumer classes, referring to period from May to November 2013. Thus, on June 3, 2013, a total of R$49,371 was transferred, of which R$35,265, referring to the months of May through September, were recorded in income statement, and R$14,106, referring to the months of October and November, were recorded under liabilities as Anticipation of CDE Transfer, and will be recognized in income statement in accordance with the reference month.
(b)
(c)
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(A)
4,024
8,906
(B)
205
259
(1,574)
(738)
(C)
782
2,495
4,784
10,151
(D)
197
163
863
1,068
(E)
392
1,614
(2,423)
(7,605)
(F)
11
12
95
72
(G)
(11,387)
(6,077)
(H)
(2,270)
(I)
21
25
192
(J)
327
1,374
(3,962)
(K)
1,058,406
1,054,698
(91,059)
(85,627)
i. Agreements executed with related parties (A) Strategic agreement - Purchase of electric power between Light SESA and CEMIG Balance sheet groups: Trade payables x Trade receivables Relationship: CEMIG (party of the controlling group) Original amount: R$614,049 Duration: Jan/2006 to Dec/2038 Terms of agreement: Price established in the regulated market Conditions of termination or expiration: 30% of remaining balance
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Remaining balance: R$266,546 (B) Strategic agreement - Purchase of electric power between Light SESA and CEMIG Balance sheet groups: Trade payables x Trade receivables Relationship: CEMIG (party of the controlling group) Original amount: R$37,600 Duration: Jan/2010 to Dec/2039 Terms of agreement: Price established in the regulated market Conditions of termination or expiration: 30% of remaining balance Remaining balance: R$57,874 (C) Strategic agreement - Sale of electric power between Light Energia and CEMIG Balance sheet groups: Trade payables x Trade receivables Relationship: CEMIG (party of the controlling group) Original amount: R$156,239 Duration: Jan/2005 to Dec/2013 Terms of agreement: Price established in the regulated market Conditions of termination or expiration: N/A Remaining balance: R$994 (D) Strategic agreement Collection of distribution system usage charges between Light SESA and CEMIG Balance sheet groups: Trade payables x Trade receivables Relationship: CEMIG (party of the controlling group) Original amount: N/A Duration: as of Nov/2003 Terms of agreement: Price established in the regulated market Conditions of termination or expiration: N/A Remaining balance: R$197
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(E) Strategic agreement Commitment to the basic electric network usage charges between Light SESA and CEMIG Balance sheet groups: Trade payables x Trade receivables Relationship: CEMIG (party of the controlling group) Original amount: N/A Duration: as of Dec/2002 Terms of agreement: Price established in the regulated market Conditions of termination or expiration: N/A Remaining balance: R$392 (F) Strategic agreement - Commitment to the basic electric network usage charges between Light Energia and CEMIG Balance sheet groups: Trade payables x Trade receivables Relationship: CEMIG (party of the controlling group) Original amount: N/A Duration: as of Dec/2002 Terms of agreement: Price established in the regulated market Conditions of termination or expiration: N/A Remaining balance: R$11 (G) Strategic agreement Sale of electric power between Lightger and Light Energia Balance sheet groups: Trade payables x Trade receivables Relationship: Lightger (jointly-owned subsidiary) Original amount: R$217,213 Duration: Dec/2002 to Jan/2028 Terms of agreement: Price established in the regulated market Conditions of termination or expiration: N/A Remaining balance: N/A (H) Strategic agreement - Sale of electric power between Lightger and CEMIG Balance sheet groups: Trade payables x Trade receivables Relationship: CEMIG (party of the controlling group) Original amount: R$208,818 Duration: Dec/2010 to Jun/2028 Terms of agreement: Price established in the regulated market Conditions of termination or expiration: N/A Remaining balance: N/A
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(I) Strategic agreement Commitment to the basic electric network usage charges between Light SESA and Lightger Balance sheet groups: Trade payables Relationship: Lightger (under common control) Original amount: N/A Duration: as of Dec/2010. Undetermined duration. Terms of agreement: Price established in the regulated market Conditions of termination or expiration: N/A Remaining balance: R$21
(J) Strategic agreement Consulting services between Light SESA and Axxiom Balance sheet groups: Other payables Relationship: Light Axxion (under common control) Original amount: N/A Duration: as of Dec/2010. Undetermined maturity. Conditions of agreement: IGP-M Conditions of termination or expiration: N/A Remaining balance: R$327
(K) Pension plan Fundao de Seguridade Social (Social Security Foundation) BRASLIGHT Balance sheet groups: Post-employment benefit Relationship: Braslight Original amount: R$535,052 Duration: Jun/2001 to Jun/2026 Conditions of agreement: IPCA + 6% p.a. Conditions of termination or expiration: N/A Remaining balance: R$1,058,406
The subsidiary Light Energia has a purchase agreement of 400 MW of installed power capacity from the portfolio projects of its jointly-owned subsidiary Renova Energia S.A., and 200 MW will be made available from 2015 to 2035 and 200 MW from 2016 to 2036. Related-party transactions have been executed in accordance with the agreements between the parties.
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ii. Management compensation Policy regarding compensation of the Board of Directors, Executive Board and Fiscal Council (consolidated). Below is the pro-rata share of each component to the aggregate compensation for the first nine months of 2013.
Consolidated Board of Directors Fixed Compensation (%) Variable Compensation (%) Other (%) Total 100% 100.0 Fiscal Council 100% 100.0 Statutory Board of Executive Offcers 61% 34% 5% 100.0
Compensation paid by the Company to the Board of Directors, Executive Board and Fiscal Council in the first nine months of 2013:
Consolidated Board of Directors Statutory Board of Executive Offcers 8.0 491 409 82 491 6,993 4,137 658 2,198 3,844 3,182 662 531 11,368
Nine-month period
Fiscal Council
Total
Number of members
(a)
10.0
39.2 8,718 5,574 658 2,486 3,844 3,182 662 531 13,093
Fixed compensation for the period Salary or compensation for management services rendered Direct and indirect benefits Other (c) Variable compensation for the period Bonus Other Benefits due to the termination of exercise of position Total compensation per body
Average compensation of the Board of Directors, Executive Board and Fiscal Council in the first nine months of 2013:
Consolidated Board of Directors 21.2 99 49 48 Statutory Board of Executive Offcers 8.0 79 39 41 1,958 988 1,146
Nine-month period
Fiscal Council
Number of members
(a)
10.0
Highest individual compensation (b) Lowest individual compensation (b) Average individual compensation
(b)
(a) (b)
Number of members calculated through the periods weighted average. Excluding Social Security and FGTS charges. (c) Including Social Security and FGTS charges.
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Overall management compensation at the parent company Light S.A. for the first nine months of 2013 is R$1,609.
24. EQUITY
As at September 30, 2013, there are 203,934,060 non-par and book-entry common shares of Light S.A. (203,934,060 as at December 31, 2012), recorded as capital stock in the total amount of R$2,225,822 (R$2,225,822 as at December 31, 2012), as follows:
9.30.2013 Number of shares % Interest 12.31.2012 Number of shares % Interest
SHAREHOLDERS Controlling Group RME Rio Minas Energia Participaes S.A. Companhia Energtica de Minas Gerais S.A. Luce Empreendimentos e Participaes S.A. Other BNDES Participaes S.A. - BNDESPAR Public Overall Total
Light S.A. is authorized to increase its capital up to the limit of 203,965,072 common shares through resolution of the Board of Directors, regardless of amendments to the bylaws. However, this increase is to occur exclusively upon the exercise of the warrants issued, strictly pursuant to the conditions of the warrants (Bylaws, Article 5, paragraph 3). The Annual Shareholders Meeting held on April 26, 2013 declared dividends relating to the profit reserve recorded in the statement of financial position as at December 31, 2012, totaling R$91,770 (forty-five centavos (R$0.45) per share), to be paid by December 31, 2013. On April 30, 2013, the Company paid interest on equity, declared in 2012, in the gross amount of R$86,672, net of R$74,792
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3rd Quarter 2013 NUMERATOR Profit for the period DENOMINATOR Weighted average number of common shares Basic and diluted earnings per share in R$ 203,934,060 1.576 203,934,060 0.412 321,468 84,121 2012
458,325
263,955
203,934,060 2.247
203,934,060 1.294
In the three- and nine-month periods ended September 30, 2013 and 2012, there are no differences between basic and diluted earnings per share.
Nine-month period 2013 2012 Restated 7,039,336 39,937 594,361 469,990 72,966 3,181 8,219,771 (1,755,632) (432,449) (3,677) (2,191,758) (247,608) (189,261) (105,291) (4,981) (9,967) (21,870) (9,967) (10,399) (13,122) (612,466) (2,804,224)
Supply (Note 27) Leases, rentals and other Revenue from network usage Revenue from construction Revenue from services rendered CDE grant Taxed service fee GROSS REVENUE ICMS PIS / COFINS Other REVENUE TAXES Fuel Consumption Account - CCC Energy Development Account - CDE Global Reversal Reserve - RGR Energy Research Company - EPE National Technological Development Fund - FNDCT Energy Efficiency Program - PEE Research and Development - R&D Other charges - Proinfa Other charges - ex-isolated CONSUMER CHARGES TOTAL DEDUCTIONS
2,081,106 14,222 150,684 122,392 21,007 21,159 991 2,411,561 (483,130) (149,317) (1,346) (633,793) (17,727) (2,397) (1,589) (3,179) (6,558) (3,179) (5,558) (40,187) (673,980)
6,694,694 43,784 510,948 455,241 49,145 56,424 3,079 7,813,315 (1,648,273) (435,767) (3,361) (2,087,401) (890) (53,181) (7,191) (5,066) (10,131) (20,997) (10,131) (15,985) (123,572) (2,210,973)
NET REVENUE
1,737,581
1,726,731
5,602,342
5,415,547
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The Companys revenue is influenced by temperature variation in its concession area. During the summer, revenue increases since cooling equipment is used more frequently. PIS and COFINS reconciliation in income statement:
Consolidated 3 Quarter 2012 Restated 2,606,882 170,319 2,436,563 9.25% (225,382)
rd
2013
2013
Gross Revenue (-) Revenue from construction PIS and COFINS Revenue Nominal rate PIS and COFINS PIS and COFINS receivables and additions Energy Purchase Sector Charges ICMS - Tax Replacement Other PIS and COFINS on profit or loss Effective PIS and COFINS rate
GWh (a) 2013 2012 Restated 1,801 370 1,627 13 359 176 279 21 4,646 4,646 1,220 157 1,377 6,023 2013
R$ 2012 Restated 663,894 94,891 524,456 1,223 127,600 29,111 63,365 1,504,540 532,243 3,994 2,040,777 129,827 15,949 145,776 2,186,553
2012
Residential Industrial Commerce, services and other Rural Public sector Public lighting Public utility Own consumption Billed sales ICMS (State VAT) Unbilled sales (net of ICMS) TOTAL SUPPLY
(c)
3,744,331 8,184 314,707 11,482 11,493 729 1,435 456 4,092,817 4,092,817 4,092,817
3,665,098 10,541 310,100 11,473 11,417 730 1,595 443 4,011,397 4,011,397 4,011,397
1,818 338 1,647 14 363 176 292 37 4,685 4,685 1,162 225 1,387 6,072
611,567 75,777 490,133 669 116,282 26,667 57,002 1,378,097 473,073 6,513 1,857,683 180,096 43,327 223,423 2,081,106
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Residential Industrial Commerce, services and other Rural Public sector Public lighting Public utility Own consumption Billed sales ICMS (State VAT) Unbilled sales (net of ICMS) TOTAL SUPPLY (c) Electric power auction Short-term energy TOTAL SUPPLY OVERALL TOTAL
3,744,331 8,184 314,707 11,482 11,493 729 1,435 456 4,092,817 4,092,817 4,092,817
3,665,098 10,541 310,100 11,473 11,417 730 1,595 443 4,011,397 4,011,397 4,011,397
6,212 1,039 5,271 40 1,187 517 862 80 15,208 15,208 3,540 294 3,834 19,042
6,117 1,144 5,061 39 1,163 511 840 65 14,940 14,940 3,575 814 4,389 19,329
2,149,062 216,441 1,563,093 2,255 378,082 79,950 170,699 4,559,582 1,618,541 (126,614) 6,051,509 579,989 63,196 643,185 6,694,694
2,247,939 270,017 1,634,995 7,118 401,309 85,047 183,212 4,829,637 1,728,694 7,428 6,565,759 401,248 72,329 473,577 7,039,336
(a)
Not revised by independent auditors Number of invoiced bills in September 2013, with and without consumption (c) Light SESA
(b)
3rd Quarter
Energy expenses EXPENSES Personnel and administrative Material Outsourced services Electricity purchased for resale (Note 29) Depreciation and amortization Construction Other Total 2013 (628,368) (628,368) 2012 Restated (1,032,150) (1,032,150) Operating expenses 2013 (46,531) (7,046) (52,377) (90,398) (122,392) 1,461 (317,283) 2012 Restated (49,826) (6,408) (43,751) (73,345) (170,319) (5,726) (349,375)
Nine-month period
Energy expenses 2013 (2,947,493) (2,947,493) 2012 Restated (3,160,543) (3,160,543) Operating expenses 2013 (144,421) (12,665) (151,643) (263,131) (455,241) (33,922) (1,061,023) 2012 Restated (140,132) (13,596) (128,710) (225,715) (469,990) (16,205) (994,348)
Consolidated
3rd Quarter
Selling expenses 2012 Restated (5,224) (510) (22,441) (289) (39,310) (321) (68,095) General and Administraive expenses 2013 2012 Restated (23,626) (899) (34,440) (9,954) (14,002) (21,161) (104,082)
Nine-month period
Selling expenses 2012 Restated (14,693) (1,083) (65,886) (860) (173,165) (934) (256,621) General and administraive expenses 2013 2012 Restated (66,447) (1,908) (101,120) (29,587) (51,180) (62,416) (312,658)
OPERATING EXPENSES
2013
2013
Personnel and administrative Material Outsourced services Depreciation and amortization Allowance for doubtful accounts Provision for contingencies/success/judicial deposits Other Total
Consolidated 3rd Quarter OTHER Other operating revenues Other operating expenses Total 2013 5,730 (5,962) (232) 2012 Restated 5,474 (3,814) 1,660 Nine-month period 2013 4,818 (19,917) (15,099) 2012 Restated 8,008 (8,474) (466)
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Consolidated
3 rd Quarter
GWh (a) 2013 Connection charges Spot market energy Network usage charges UTE Norte Fluminense Itaipu - Binacional Energy transportation - Itaipu National Electric System Operator (O.N.S.) PROINFA ESS Other contracts and electric power auctions CDE grant
(b)
Nine-month period
R$ GWh (a) 2012 Restated (7,446) 487 (118,303) (237,767) (144,876) (12,529) (4,580) (28,350) (21,414) (433,719) (23,653) (1,032,150) 2013 1,011 4,751 3,995 377 11,553 21,687 2012 359 4,768 4,010 390 12,213 21,740 2013 (8,810) (46,604) (145,613) (809,956) (482,197) (12,931) (14,207) (93,953) (109,962) (1,508,918) 303,416 (17,758) (2,947,493) R$ 2012 Restated (22,353) (37,586) (355,152) (708,340) (418,991) (35,516) (14,948) (86,621) (67,406) (1,369,171) (44,459) (3,160,543)
2013 (3,310) 8,963 (51,527) (272,920) (172,295) (4,421) (4,130) (31,087) (3,223) (394,542) 303,416 (3,292) (628,368)
Not revised by independent auditors Refers to CDE transfer relating to electric energy purchase costs up to August 2013 granted in the 2013 tariff review process. For further details, see Note 10.
(b)
(a)
3rd Quarter
2013 REVENUES Interest on electricity bills and debts paid in installments Income from investments Swap transactions Restatement of judicial deposits NRV restatement Other financial revenue (a) Total Financial Revenue 15,445 39,119 2,932 14,610 6,390 78,496 16,714 11,333 2,690 30,737 2012 Restated
Nine-month period
2013 2012 Restated
EXPENSES Restatement of provision for contingencies Expenses with tax liabilities Debt charges Foreign exchange and monetary variation Swap transactions Advances of receivables Adjustment to present value of accounts receivable Fines due to discontinuity Other financial expenses (a) Total Financial Expenses FINANCIAL RESULT (2,045) (3,220) (138,909) (16,663) (8,686) (5,934) (7,374) (17,109) (199,940) (121,444) (5,122) (4,536) (114,621) 2,571 (5,952) (3,357) (4,704) (7,596) (143,317) (112,580) (27,313) (15,875) (374,804) (79,556) (4,996) (44,951) (25,073) (572,568) (355,783) (20,976) (13,785) (355,031) (13,368) (30,913) (1,498) (30,465) (15,856) (481,892) (363,327)
(a)
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Reconciliation of effective and nominal rates in the provision for income tax and social contribution:
Parent Company 3rd Quarter 2013 Earnings before income tax and social contribution (LAIR) Nominal income tax and social contribution rate Income tax and social contribution at the tax rates established by the current legislation Effect of income tax and social contribution over permanent additions and exclusions Equity in the earnings (losses) of subsidiaries Interest on equity expenses Unrecognized deferred tax credits - CVM 371/02 - Light S.A. Income tax and social contribution on profit or loss Current income tax and social contribution on profit or loss Deferred income tax and social contribution on profit or loss Effective income tax and social contribution rate (894) 0.0% 0.0% 321,468 34% (109,299) (5) 110,198 2012 84,121 34% (28,601) 31,687 (3,174) 88 Nine-month period 2013 458,325 34% (155,831) (17) 157,720 (1,872) 0.0% 2012 263,955 34% (89,745) 94,355 (3,174) (1,436) 0.0%
Consolidated 3rd Quarter 2013 2012 Restated 80,417 34% (27,342) (564) 6,224 24,268 301 626 191 3,704 (28,654) 32,358 -4.6% Nine-month period 2013 2012 Restated 346,103 34% (117,675) 4,475 6,296 24,268 (1,223) 2,081 (370) (82,148) (89,776) 7,628 23.7%
Earnings before income tax and social contribution (LAIR) Nominal income tax and social contribution rate Income tax and social contribution at the tax rates established by the current legislation Effect of income tax and social contribution over permanent additions and exclusions Equity in the earnings (losses) of subsidiaries Interest on equity expenses Unrecognized deferred tax credits - CVM 371/02 - Light S.A. Tax incentives Other Income tax and social contribution on profit or loss Current income tax and social contribution on profit or loss Deferred income tax and social contribution on profit or loss Effective income tax and social contribution rate
500,074 34% (170,026) (8,055) (498) (895) 112 756 (178,606) (29,296) (149,310) 35.7%
706,726 34% (240,287) (6,396) (874) (1,872) 1,106 (78) (248,401) (102,124) (146,277) 35.1%
On September 30, 2013, Light S.A. had an unrecognized asset balance on income tax and social contribution losses amounting to R$40,699, in view of uncertainties regarding its realization.
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Consolidated 9.30.2013 ASSETS Cash and cash equivalents (Note 4) Marketable securities (Note 5) Concessionaires and permissionaires (Note 6) Services receivable Swaps Concessions' financial assets (Note 9) Other receivables (Note 10) Total LIABILITIES Trade payables (Note 14) Loans and borrowings (Note 16) Debentures (Note 17) Dividends and interest on equity payable Swaps Other payables (Note 22) Total 619,426 2,529,766 3,425,309 91,770 44 328,316 6,994,631 619,426 2,472,031 3,338,064 91,770 44 328,316 6,849,651 814,469 2,263,431 1,974,054 74,792 6,129 320,095 5,452,970 814,469 2,620,086 2,073,100 74,792 6,129 320,095 5,908,671 Book value 1,787,341 16,168 1,385,474 46,383 97,175 1,759,627 508,852 5,601,020 Fair value 1,787,341 16,168 1,385,474 46,383 97,175 1,759,627 508,852 5,601,020 12.31.2012 - Restated Book value 230,356 15,266 1,731,017 42,171 35,540 1,573,349 169,504 3,797,203 Fair value 230,356 15,266 1,731,017 42,171 35,540 1,573,349 169,504 3,797,203
In compliance with CVM Rule 475/2008 and CVM Resolution 604/2009, which revoked Resolution 566/2008, the description of accounting balances and fair values of financial instruments stated in the statement of financial position on September 30, 2013 are identified as follows:
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Cash and cash equivalents Financial investments in bank deposit certificates are classified as loans and receivables.
Marketable securities Financial investments in bank deposit certificates are classified as loans and receivables.
Consumers, concessionaries and permissionaires (trade receivables) These are classified as loans and receivables, measured at the amortized cost, being recorded at their original values and subject to a provision for losses and adjustment to present value, where applicable.
Concessions financial assets These are classified as available for sale, measured at their fair value at initial recognition. After initial recognition, interest is calculated through the effective interest rate method and recognized in the income statement under financial income, while the changes in the fair value are recognized in other comprehensive income.
Trade payables Accounts payable to suppliers of materials and services required in the operations of the Company, the amounts of which are known or easily determinable, added, where applicable, of relevant charges, escalation and/or exchange costs incurred at the end of the reporting period. These balances are classified as other financial liabilities and were recognized at their amortized cost, which is not significantly different from their fair value.
Loans, borrowings and debentures These are measured by the amortized cost method. Fair value was calculated at interest rates applicable to instruments with similar nature, maturities and risks, or based on market quotations of these securities. The fair value for BNDES financing is identical to the accounting balance, since there are no similar instruments, with comparable maturities and interest rates. These financial instruments are classified as other financial liabilities.
Other assets and liabilities Other receivables and payables, classified as "loans and receivables, are measured at amortized cost and stated at their original values, accrued of, where applicable, corresponding charges, monetary and/or currency variations incurred up to the end of the reporting period or subject to a provision for losses, where applicable.
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Swaps These are measured at fair value. A determination of fair value used available information on the market and usual pricing methodology: the face value (notional) evaluation for long position (in U.S. dollars) until maturity date and discounted at present value of clean coupon rates, published in bulletins of Securities, Commodities and Futures Exchange BM&FBovespa.
It is worth mentioning that estimated fair value of financial assets and liabilities was determined by means of information available on the market and appropriate valuation methodologies. Nevertheless, meaningful judgment was required when interpreting market data to produce the most appropriate fair value estimate. a) Financial instruments by category on September 30, 2013:
ASSETS
Total
Total
Total
Total
Cash and cash equivalents (Note 4) Marketable securities (Note 5) Concessionaires and permissionaires (Note 6) Services rendered Dividends receivable Swaps Concession's financial assets (Note 9) Other receivables (Note 10) Total
97,175 97,175
1,759,627 1,759,627
35,540 35,540
1,573,349 1,573,349
Parent Company 9.30.2013 12.31.2012 9.30.2013 Fair value through profit or loss
LIABILITIES
Amortized cost
Total
Amortized cost
Total
Amortized cost
Total
Amortized cost
Total
Trade payables (Note 14) Loans and borrowings (Note 16) Debentures (Note 17) Dividends and interest on equity payable Swaps Other payables (note 22) Total
44 44
b) Policy concerning derivative instruments The Company has a policy of using derivative instruments that has been approved by its Board of Directors. According to this policy, the debt service (principal plus interest and charges) denominated in foreign currency maturing within 24 months is to be hedged, except no speculative transaction is allowed, whether using derivatives or any other risky asset. In line with the policy standards, the Company does not have any options, swaps, callable swaps, flexible options, derivatives embedded in other products, derivativestructured transactions and so-called exotic derivatives. Furthermore, the statement above the Notes that the Company use cashless exchange rate swaps (US$ vs. CDI), of which the Notional Contract Value is equal to the amount of the debt service denominated in foreign currency maturing in 24 months.
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c) Risk management and goals achieved Management of derivative instruments is achieved through operating strategies with a view to liquidity, profitability and safety. Our control policy consists of ongoing enforcement of policy standards concerning the use of derivative instruments, as well as continued monitoring of agreed upon rates versus market rates. d) Market risk During the normal course of its businesses, the Company and its subsidiaries are exposed to the market risks related to currency variations and interest rates, as evidenced in the chart below: Debt breakdown (excluding financial charges):
Consolidated 9.30.2013 R$ USD EUR Total - Foreign Currency CDI IPCA TJLP Other Total - Local Currency Total 691,971 105,193 797,164 3,343,719 597,096 1,000,393 83,214 5,024,422 5,821,586 % 11.9 1.8 13.7 57.4 10.3 17.2 1.4 86.3 100.0 12.31.2012 - Restated R$ 509,253 95,017 604,270 2,399,253 1,097,381 90,631 3,587,265 4,191,535 % 12.1 2.3 14.4 57.2 26.2 2.2 85.6 100.0
On September 30, 2013, according to the chart above, the foreign currencydenominated debt is R$797,164, or 13.7% of total debt (R$604,270, corresponding to 14.4% on December 31, 2012). Financial derivative instruments were contracted for the amount of foreign currencydenominated debt service to expire within 24 months, in the swap modality, whose notional value as at September 30, 2013 stood at US$299,883 (US$240,206 as at December 31, 2012) and 34,969 (34,969 as at December 31, 2012), according to the policy for utilization of derivative instruments approved by the Board of Directors. Thus, including the swaps, the foreign exchange exposure represents 0.77% of total debt (0.41% as at December 31, 2012).
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Below, we provide a few considerations and analyses on risk factors impacting on business of Light Groups companies:
Currency risk
Considering that a portion of loans and borrowings is denominated in foreign currency, the Company uses derivative financial instruments (swap operations) to hedge against service associated with these debts (principal plus interest and commissions) to expire within 24 months in addition to the swap of previously mentioned rates. Funds raised as per BACEN Resolution 4131 from Merrill Lynch, BNP, Citibank and Bank TokyoMitsubishi were already contracted with swap for the entire duration of the debt, duly previously approved by the Board of Directors. Derivative operations, comprising currency swaps and interest, the latter reported below, resulted in a R$45,786 gain in the nine-month period of 2013 (gain of R$11,648 in the first nine months of 2012). The net amount of swap operations as at September 30, 2013, considering the fair value, is positive at R$97,131 (positive at R$29,411 as at December 31, 2012), as shown below:
Starting Date Maturity Date Notional Value Contracted (US$/EURO) Fair Value Sept.2013 (R$) Assets Fair Value Sept.2013 (R$) Liabilities Fair Value Sept/13 (R$) Balance
Institution
Currency
Light Receives
Light Pays
Bank Tokyo - Mitsubishi Ita Ita HSBC HSBC HSBC Citibank Citibank Citibank Citibank Citibank Citibank Bank of America BNP
US$ US$ US$ US$ US$ US$ US$ US$ US$ US$ US$ US$ US$ EURO
US$+2.33% US$+2.42% US$+3.07% US$+1.67% US$ US$ US$+Libor+1.66% US$+Libor+1.66% US$+Libor+1.66% US$+Libor+1.5988% US$+Libor+1.5988% US$+Libor+1.5988% Libor+2.5294% Euro+4.6823%
100% CDI + 0.90% 100% CDI 100% CDI 100% CDI 83.29% CDI 82.65% CDI 100% CDI + 1.00% 100% CDI + 1.00% 100% CDI + 1.00% 100% CDI + 1.10% 100% CDI + 1.10% 100% CDI + 1.10% 100%CDI + 0.65% 100%CDI+1.30%
3.11.2013 4.11.2012 12.28.2011 10.9.2012 9.20.2013 9.20.2013 8.23.2012 8.23.2012 8.23.2012 10.2.2012 10.2.2012 10.2.2012 11.10.2011 10.21.2011
3.11.2016 4.11.2014 10.10.2013 10.10.2014 4.10.2015 10.9.2015 2.23.2017 8.23.2017 2.23.2018 4.3.2017 10.2.2017 4.3.2018 11.10.2016 10.21.2014 Total
60,000 2,715 2,970 1,338 1,431 1,432 33,333 33,333 33,333 26,666 26,666 26,666 50,000 34,969 334,852
15,115 766 676 124 6,027 6,111 6,265 3,724 3,767 3,861 24,871 21,200 92,507
15,115 766 676 124 (14) (30) 6,027 6,111 6,265 3,724 3,767 3,861 24,871 21,200 92,463
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Institution
Currency
Light Receives
Light Pays
Starting Date
Maturity Date
Notional Value Contracted (US$/EURO) 61 2,715 2,970 1,338 3,065 58 33,333 33,333 33,333 26,666 26,666 26,666 50,000 34,969 275,173
Fair Value Dec.2012 (R$) Assets 11 470 354 1,005 16 16,554 13,225 31,635
Fair Value Dec.2012 (R$) Liabilities (4) (421) (579) (598) (1,410) (1,569) (1,548) (6,129)
Fair Value Dec.2012 (R$) Balance 11 470 354 (4) 1,005 16 (421) (579) (598) (1,410) (1,569) (1,548) 16,554 13,225 25,506
Bradesco Ita Ita HSBC HSBC HSBC Citibank Citibank Citibank Citibank Citibank Citibank Bank of America BNP
US$ US$ US$ US$ US$ US$ US$ US$ US$ US$ US$ US$ US$ EURO
US$+2.72% US$+2.42% US$+3.07% US$+1.67% US$+3.58% US$+2.95% US$+Libor+1.66% US$+Libor+1.66% US$+Libor+1.66% US$+Libor+1.5988% US$+Libor+1.5988% US$+Libor+1.5988% Libor+2.5294% Euro+4.6823%
100% CDI 100% CDI 100% CDI 100% CDI 100% CDI 100% CDI 100% CDI + 1.00% 100% CDI + 1.00% 100% CDI + 1.00% 100% CDI + 1.10% 100% CDI + 1.10% 100% CDI + 1.10% 100%CDI + 0.65% 100%CDI+1.30%
3.10.2011 4.11.2012 12.28.2011 10.9.2012 4.12.2011 9.12.2011 8.23.2012 8.23.2012 8.23.2012 10.2.2012 10.2.2012 10.2.2012 11.10.2011 10.21.2011
3.12.2013 4.11.2014 10.10.2013 10.10.2014 4.10.2013 9.12.2013 2.23.2017 8.23.2017 2.23.2018 4.3.2017 10.2.2017 4.3.2018 11.10.2016 10.21.2014 Total
The amount recorded was measured by its fair value as at September 30, 2013. All operations with derivative financial instruments are registered in clearing houses for the custody and financial settlement of securities and there is no margin deposited in guarantee. Operations have no initial cost. Below, the sensitivity analysis for foreign exchange rates fluctuations, showing possible impacts on financial result of the Company and its subsidiaries. The methodology used in the Probable Scenario considered the best estimate for the foreign exchange rate as at September 30, 2014. It is worth highlighting that, as this refers to a sensitivity analysis of the impact on the financial result of the next 12 months, debt balances as at September 30, 2013 were considered. It is worth mentioning that the behavior of debt and derivatives balances will observe their respective contracts, and the balance of temporary cash investments will fluctuate according to the need or available funds of the Company and its subsidiaries.
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Below is the exchange rate sensitivity analysis, showing the effects on income statement before taxes, based on rates and projections of the following sources: Top 5 Bacen, Ita, HSBC, Bradesco and Blommberg.
R$ Risk Operation FINANCIAL LIABILITIES National Treasury Collateral Merril Lynch BNP (EURO) Bank Tokyo - Mitsubishi Citibank DERIVATIVES Swaps Swaps TOTAL Reference for financial assets and financial liabilities R$/US$ exchange rate (end of the period) R$/EURO exchange rate (end of the period) 2.3700 3.2200 USD USD USD EURO USD USD National USD EURO 299,883 34,969 (69,384) 49,082 (50,000) (34,854) (60,000) (180,000) (50,849) (9,714) 6,872 (7,000) (7,406) (8,400) (25,200) 49,390 41,984 7,406 (1,458) (262,852) (50,824) 35,953 (36,625) (35,556) (43,950) (131,850) 255,222 219,666 35,556 (7,630) +25% 2.9625 4.0250 (474,855) (91,934) 65,035 (66,250) (63,706) (79,500) (238,500) 461,054 397,348 63,707 (13,801) +50% 3.5550 4.8300 Debt (USD and EUR) Probable Scenario (I) Scenario (II) + 25% Scenario (III) + 50%
With the chart above, it is possible to identify that the partial hedge against foreign currency-denominated debt (only limited to debt service to expire within 24 months), as when R$/US$ quote increases, liabilities financial expense also increases but financial revenues of derivatives also partially offset this negative impact and viceversa.
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Institution
Light Receives
Light Pays
Starting Date
Maturity Date
HSBC
CDI+0.85%
101.9%CDI+(TJLP-6%)
10.18.2011
10.18.2017 Totais
Institution
Light Receives
Light Pays
Starting Date
Maturity Date
HSBC
CDI+0.85%
101.9%CDI+(TJLP-6%)
10.18.2011
10.18.2017 Total
Below, the sensitivity analysis for interest rates fluctuations, showing possible impacts on the Companys income statement before taxes. The methodology used in the Probable Scenario considered the best estimate for the interest rate on September 30, 2014. It is worth highlighting that, as this refers to a sensitivity analysis of the impact on the financial result in the following 12 months, debt and investment balances on September 30, 2013 were considered. It is worth mentioning that the behavior of debt and derivatives balances will observe their respective contracts, and the balance of investments will fluctuate according to the need or available funds of the Company.
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Below is the interest rate sensitivity analysis, showing the effects on income statement before taxes, based on rates and projections of the following sources: Top 5 Bacen, Ita, HSBC, Bradesco and Blommberg.
R$ Operation Risk Probable Scenario (I) 156,404 CDI 156,404 (475,049) (2) (70,145) (49,953) (105,562) (68,443) (18,689) (45,058) (3,176) (31,545) (8,685) (6,621) (3,952) (7,489) (11,804) (15,029) (17,059) (2) (2) (131) (279) (316) (1,884) (1,224) (7,999) (43,295) CDI CDI TJLP (45,529) 1,117 1,117 (361,940) 10.00% 10.00% 5.00% 6.00% Scenario (II) + 25% 195,561 195,561 (566,009) (2) (84,710) (60,489) (127,891) (76,918) (22,535) (54,563) (3,845) (38,410) (10,480) (7,680) (4,469) (8,549) (13,904) (17,555) (19,580) (2) (2) (148) (324) (361) (2,219) (1,434) (9,939) (63,083) (61,457) 1,078 (2,704) (433,531) +25% 12.50% +25% 12.50% 6.25% 7.50% Scenario (III) + 50% 234,739 234,739 (655,332) (2) (98,986) (70,816) (149,774) (85,286) (26,304) (63,877) (4,502) (45,138) (12,240) (8,728) (4,980) (9,597) (15,982) (20,054) (22,074) (2) (2) (165) (368) (405) (2,551) (1,642) (11,857) (81,974) (76,488) 1,039 (6,525) (502,567) +50% 15.00% +50% 15.00% 7.50% 9.00%
FINANCIAL ASSETS Financial investments FINANCIAL LIABILITIES Debentures 4th issue Debentures 7th issue Debentures 8th issue Debentures 9th issue (Series A) Debentures 9th issue (Series B) Debentures 1st issue Debentures 2nd issue Debentures 3rd issue CCB Bradesco CCB Bco Santander Direct BNDES Finem Direct BNDES TJLP Direct BNDES TJLP+1% SESA Bndes Capex 11/12 - Subcred.2 SESA Bndes Capex 11/12 - Subcred.3 SESA Bndes Capex 11/12 - Subcred.4 SESA Bndes Capex 11/12 - Subcred.17 SESA Bndes Capex 11/12 - Subcred.18 BNDES - FINEM Direct BNDES - FINEM BNDES - FINEM +1 BNDES - Capex 11/12 PPROESCO Banco do Brasil R$150 MM DERIVATIVES Currency swaps Interest rate swaps Interest rate swaps TOTAL Reference for FINANCIAL ASSETS CDI (% end of the period) Reference for FINANCIAL LIABILITIES CDI (% end of the period) TJLP (% end of the period) IPCA (% end of the period) TJLP CDI CDI CDI IPCA CDI CDI CDI CDI CDI TJLP TJLP TJLP TJLP TJLP TJLP TJLP TJLP TJLP TJLP TJLP TJLP TJLP CDI
Credit Risk
It refers to the Company eventually suffering losses deriving from default of counterparties or financial institutions depositary of funds or temporary cash investments. To mitigate these risks, the Company uses all collection tools allowed by the regulatory body, such as disconnection for delinquency, debit losses and
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permanent monitoring and negotiation of outstanding positions. Credit risk of receivables is diluted due to the Companys client base. Item "a" of this Note contains a summary of the financial instruments broken down by category, including the Company's maximum credit risk. Concerning financial institutions, the Company only carries out low-risk operations, classified by rating agencies. The Company has a policy of not concentrating its portfolio in certain financial institution. Therefore, the policys principle is to control the portfolio concentration through limits imposed to the Groups and monitoring financial institutions through their equity and ratings. Through its policy, the Company will be able to invest in fixed income products and Interbank Deposit Rate (CDI)-indexed post-fixed income and post-fixed government bonds. The definition of the groups for allocation of resources is described below, as well as the percentage of current share in the Companys portfolio:
Group 1 federal banks; equity: not applicable; minimum rating: Not applicable; percentage in the portfolio: 65.8% Group 2 Financial Institutions with Equity higher than or equal to R$7 billion; Minimum Rating: AA (S&P and Fitch) or Aaa (Moodys). Percentage in the portfolio: 22.6%. Group 3 Financial institutions with Equity between R$1 billion and R$7 billion; Minimum Rating: AA (S&P and Fitch) or Aaa (Moody's). Percentage in the Portfolio: 10.4%. Group 4 Financial Institutions with Equity between R$500 million and R$1 billion; Minimum Rating: A (S&P and Fitch) or A2 (Moodys). Percentage in the portfolio: 1.2%. Group 5 - Only Financial Institutions with restricted court deposits. Percentage in the portfolio: 0.0%.
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Liquidity risk
Liquidity risk relates to the Company's ability to settle its liabilities. In order to determine the ability to satisfactorily meet its financial liabilities, the streams of maturities for funds raised and other liabilities are reported with the Company's statements. Further information on the loans and debentures can be found in detail in Notes 16 and 17. The Company has raised funds through its operations, from financial market transactions and from affiliate companies, primarily allocated to support its investment plan and in managing its cash for working capital and liability management purposes. The Company manages the liquidity risk by continuously monitoring expected and real cash flows and combining the maturity profiles of its financial liabilities. The realization flow concerning future liabilities as per the relevant terms and conditions that include future interests up to the maturity date is summarized in the statement below:
Consolidated Interest rate instruments: 1 to 3 months 3 months to 1 year 1 to 5 years More than 5 years Total
Floating Loans, borrowings and debentures Fixed rate Loans, borrowings and debentures Trade payables Swap (17,271) (619,426) 1,450 (38,357) (29,828) (977,149) 68,689 (44,456) (1,077,233) (619,426) 40,311 (316,017) (551,487) (3,979,415) (2,501,052) (7,347,971)
a) Capital Management The Company manages its capital with the purpose of safeguarding its capacity to continuously offer return to shareholders and benefits to other shareholders, in addition to maintaining the ideal capital structure to reduce costs.
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In order to maintain or adjust its capital structure, the Company either reviews the dividend payment policy and returns capital to shareholders or issues new shares and sells assets to reduce the indebtedness level, for instance.
Parent Company 9.30.2013 Debt from borrowings, loans and debentures (-) Cash and cash equivalents Net debt (A) Equity (B) Financial leverage ratio - % (A (B+A)) 8,955 (8,955) 3,392,238 0% 12.31.2012 45,269 (45,269) 3,025,683 -2% Consolidated 9.30.2013 5,955,075 1,787,341 4,167,734 3,392,238 55% 12.31.2012 Restated 4,237,485 230,356 4,007,129 3,025,683 57%
b) Hierarchical Fair Value There are three types of classification levels for the fair value of financial instruments. This hierarchy prioritizes unadjusted prices quoted in an active market for financial assets or liabilities. The classification of hierarchical levels can be presented as follows:
Level 1 - Data originating from an active market (unadjusted quoted price) that can be accessed on a daily basis, including on the date of fair value measurement. Level 2 - Different data originating from the active market (unadjusted quoted price) included in Level 1, extracted from a pricing model based on data observable in the market. Level 3 - Data extracted from a pricing model based on data that are not observable in the market.
Consolidated Fair Value Measurement 9.30.2013 ASSETS Concession's financial assets (Note 10) Swaps Total LIABILITIES Swaps Total 44 44 44 44 1,759,627 97,175 1,856,802 97,175 97,175 1,759,627 1,759,627 Identical markets Level 1 Similar markets Level 2 Without active market Level 3
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Consolidated Fair Value Measurement 12.31.2012 Restated ASSETS Concession's financial assets (Note 9) Swaps Total LIABILITIES Swaps Total 6,129 6,129 6,129 6,129 1,573,349 35,540 1,608,889 35,540 35,540 1,573,349 1,573,349 Identical markets Level 1 Similar markets Level 2 Without active market Level 3
The market value of a security corresponds to its maturity amount brought to present value through the discount factor obtained based on the market interest curve in reais. Regarding the concessions financial assets, classified as available for sale, the inclusion in level 3 was due to the fact that the relevant factors for the valuation at fair value were not publicly observable. The changes between the years and the respective gains and losses in the income statement for the year are described in Note 9; there was no impact on equity this year.
33. INSURANCE
On September 30, 2013, the Light Group had insurances covering its main assets, including: Operational Risk Insurance - it covers damages caused to hydroelectric and thermoelectric power plants, including, but not limited to its machinery, steam turbines, gas turbines, generators, boilers, transformers, channels, tunnels, dams, spillway, civil works, offices and warehouses. All assets are insured under the Operational Risks modality, with All Risks coverage, including the transmission and distribution lines up to 1,000 feet from generation site. Directors and Officers Liability Insurance (D&O) - It has the purpose of protecting Executives from losses and damages resulting from the performance of their activities inherent to the position as Directors, Officers and Managers of the Company. General and Civil Liability Insurance - focuses on the payment of indemnity if the Company is deemed civilly liable by a final and unappealable court decision or deal authorized by the insurance company, in relation to remedies for property damage and involuntary personal injury caused to third parties and also those related to pollution, contamination, sudden and/or accidental leakage.
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Financial Guarantee Insurance Energy Trading and Judicial. Property Insurance Comprehensive Business (Leased Properties). International Transport Insurance Imports, Corporate Travel Insurance and Personal Insurance. The assumptions of risks adopted, given their nature, are not included in the scope of an audit firm, accordingly, they were not revised by independent auditors. Below, a summarized breakdown of main insurance policies considered by Management:
Term Amount Insured RISKS Directors & Officers (D&O) Civil and general liabilities Operating risks From 8/10/2013 10/31/2013 10/31/2013 To 8/11/2013 8/11/2013 8/11/2013 R$40,350 R$20,000 R$ 4,881,192 Gross Premium (including cost of policy + IOF) R$158 R$855 R$1,856
Maximum limit of liability (LMR) is R$300,000 - Indemnity Total Value in Risk of R$4,881,192
Segment reporting was prepared according to CPC 22 (Information by Segment), equivalent to IFRS 8, and is reported in relation to the business of the Company, identified based on their management structure and internal management information. The Company's Management considers the following segments: power distribution, power generation, power trading and others (including the holding company). The eliminations comprise intersegment balances, transactions and interests. The Company is segmented according to its operation, which has different risks and compensation. No Companys client accounts for more than 10% of revenue or receivables.
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Segment information for the nine-month periods ended September 30, 2013 and 2012 and for the year ended December 31, 2012 is presented below:
Distribution Assets: Current assets Long-term assets Investments Property, plant and equipment Intangible assets Total Assets Liabilities and equity: Current liabilities Non-current liabilities Equity Total Liabilities and Equity 1,607,208 6,604,725 2,490,229 10,702,162 3,582,273 3,098,006 19,623 227,880 3,774,380 10,702,162
Generation
Sales
Other
Eliminations
Consolidated 9.30.2013
Distribution
Generation
Sales
Other
Eliminations
Assets: Current assets Long-term assets Investments Property, plant and equipment Intangible assets Total Assets Liabilities and equity: Current liabilities Non-current liabilities Equity Total Liabilities and Equity 1,737,944 5,041,597 2,188,814 8,968,355 155,446 1,195,900 603,386 1,954,732 59,324 9,923 117,921 187,168 81,306 1,043 3,027,684 3,110,033 (83,332) (77,387) (2,912,122) (3,072,841) 1,950,688 6,171,076 3,025,683 11,147,447 1,915,449 3,090,462 19,756 231,250 3,711,438 8,968,355 127,567 1,593 418,007 1,370,838 36,727 1,954,732 129,894 24,060 676 32,361 177 187,168 77,608 290 3,031,033 806 296 3,110,033 (83,332) (77,387) (2,912,122) (3,072,841) 2,167,186 3,039,018 557,350 1,635,255 3,748,638 11,147,447
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Nine-month period
Distribution
Generation
Sales
Other
Eliminations
Consolidated 2013
NET REVENUE OPERATING COSTS AND EXPENSES Equity in the earnings (losses) of subsidiaries FINANCIAL RESULT Financial income Financial expenses RESULT BEFORE TAXES Social contribution Income tax PROFIT (LOSS)
410,158 (123,431) (1,198) (66,226) 10,326 (76,552) 219,303 (19,969) (54,656) 144,678
465,712 (442,272) (19) 4,623 6,154 (1,531) 28,044 (2,544) (6,694) 18,806
7,334 (13,450) 463,076 1,143 1,153 (10) 458,103 (113) (133) 457,857
5,602,342 (4,537,261) (2,572) (355,783) 216,785 (572,568) 706,726 (66,157) (182,244) 458,325
Nine-month period
Distribution
Generation
Sales
Other
Eliminations
NET REVENUE OPERATING COSTS AND EXPENSES Equity in the earnings (losses) of subsidiaries FINANCIAL RESULT Financial income Financial expenses RESULT BEFORE TAXES Social contribution Income tax PROFIT (LOSS)
305,546 (115,163) 17,805 (56,158) 7,836 (63,994) 152,030 (13,634) (29,348) 109,048
391,605 (373,949) 159 317 1,314 (997) 18,132 (1,556) (4,226) 12,350
1,949 (10,019) 278,067 (4,794) 2,782 (7,576) 265,203 (41) (28) 265,134
5,415,547 (4,724,636) 18,519 (363,327) 118,565 (481,892) 346,103 (24,347) (57,801) 263,955
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The acquisition price for 51% of ownership interest in Brasil PCH is R$676,530 on the base date of December 31, 2012 and will be adjusted for inflation at CDI variation plus 2% p.a. up to the effective payment date. The capital increase that exceeds the amount used for acquisition of 51% of ownership interest in Brasil PCHs will reinforce Renovas cash and may be invested in the wind power projects that have been already contracted and/or other growth opportunities in renewable energy. Brasil PCH owns 13 small hydroelectric power plants, located in the states of Minas Gerais, Rio de Janeiro, Esprito Santo and Gois, all at operational stage, with total installed capacity of 291 MW and assured energy of 194 average MW, contracted up to 2028 and 2029, through Proinfa. Both the operation and the capital increase are subject to several precedent and commercial conditions, such as the approval by the Brazilian Antitrust Authority CADE and Aneel. c) Tariff review On November 5, 2013, the tariff review process of the subsidiary Light SESA was approved by Aneel. Considering the new financial component exclusively applicable to the following 12 months and the removal of the financial component currently included in Light SESAs tariffs, the consumers electricity bills will have an average increase of 3.65% as of November 7, 2013. Regarding non-technical losses, the percentage to be recognized in tariff will be 40.41% on the low voltage market, constant during the cycle. The value corresponding to the difference between this percentage and a reference value starting from 31.37% in the beginning of the cycle until reaching 29.69% in 2018 will be invested in the Companys fight against loss program and recorded as Special Obligations, separate from the Regulatory Remuneration Base. The evolution of the outcome of anti-loss program will be monitored by Aneel as a condition to maintain the percentage at the level of 40.41%. The gross Regulatory Remuneration Base value ratified was R$11,974,212 and the net base was R$6,711,307. The average depreciation rate of assets for the 4th cycle is 3.81%. In addition, the amount relating to electric energy purchase and ESS costs up to August 2013 was authorized, which will be transferred through CDE funds in cash in November 2013, totaling R$303,416.
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BOARD OF DIRECTORS SITTING MEMBERS Srgio Alair Barroso Humberto Eustquio Csar Mota Raul Belens Jungmann Pinto Maria Estela Kubitscheck Lopes Djalma Bastos de Morais Jos Carlos Aleluia Costa Rutelly Marques da Silva Luiz Carlos da Silva Cantdio Junior Guilherme Narciso de Lacerda David Zylbersztajn Carlos Alberto da Cruz ALTERNATE MEMBERS Luiz Fernando Rolla Csar Vaz de Melo Fernandes Fernando Henrique Schuffner Neto Carmen Lcia Claussen Kanter Wilson Borrajo Cid Jos Augusto Gomes Campos Carlos Antonio Decezaro Marcelo Pedreira de Oliveira Jalisson Lage Maciel Almir Jos dos Santos Magno dos Santos Filho
FISCAL COUNCIL SITTING MEMBERS Francisco Luiz Moreira Penna Aristteles Luiz Menezes Vasconcellos Drummond Eduardo Grande Bittencourt Rogrio Fernando Lot Ernesto Costa Pierobon ALTERNATE MEMBERS Aliomar Silva Lima Ari Barcelos da Silva Ronald Gasto Andrade Reis Francisco Vicente Santana Silva Telles Andre Gustavo Salcedo Teixeira Mendes
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BOARD OF EXECUTIVE OFFICERS Paulo Roberto Ribeiro Pinto Chief Executive Officers Joo Batista Zolini Carneiro Chief Financial and Investor Relations Officer Andreia Ribeiro Junqueira e Souza Human Resources Officer Paulo Carvalho Filho Corporate Management Officer Evandro Leite Vasconcelos Energy and Business Development Officer (temporarily) Ricardo Cesar Costa Rocha Distribution Officer Fernando Antnio Fagundes Reis Legal Officer Luiz Otvio Ziza Mota Valadares Communication Officer
CONTROLLERSHIP SUPERINTENDENCE Roberto Caixeta Barroso Controllership Superintendent CPF 013.011.556-83 CRC-MG 078086/O-8 Suzanne Lloyd Gasparini Accountant - Accounting Manager CPF 081.425.517-56 CRC-RJ 107359/O-0
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Deloitte Touche Tohmatsu Av. Presidente Wilson, 231 22 Rio de Janeiro RJ 20030-905 Brasil Tel: + 55 (21) 3981-0500 Fax:+ 55 (21) 3981-0600 www.deloitte.com.br
(Convenience Translation into English from the Original Previously Issued in Portuguese) REPORT ON REVIEW OF INTERIM FINANCIAL INFORMATION To the Shareholders, Board of Directors and Management of Light S.A. Rio de Janeiro - RJ Introduction We have reviewed the accompanying individual and consolidated interim financial information of Light S.A. (the Company), identified as Parent and Consolidated, included in the Interim Financial Information Form (ITR) for the quarter ended September 30, 2013, which comprises the balance sheet as at September 30, 2013 and the related income statements and statements of comprehensive income for the three- and nine-month periods then ended, statements of changes in equity, and statements of cash flows for nine-month period then ended, including the explanatory notes. The Companys management is responsible for the preparation of the individual interim financial information in accordance with CPC 21 (R1) - Interim Financial Reporting and the consolidated interim financial information in accordance with CPC 21 (R1) and IAS 34 - Interim Financial Reporting, issued by the International Accounting Standards Board (IASB), as well as for the presentation of such information in accordance with the standards issued by the Brazilian Securities and Exchange Commission (CVM), applicable to the preparation of Interim Financial Information (ITR). 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 of interim financial information (NBC TR 2410 and ISRE 2410 - 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 the 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 individual interim financial information Based on our review, nothing has come to our attention that causes us to believe that the accompanying individual interim financial information included in the ITR referred to above is not prepared, in all material respects, in accordance with CPC 21(R1) applicable to the preparation of Interim Financial Information (ITR) and presented in accordance with the standards issued by the CVM.
Conclusion on the consolidated interim financial information Based on our review, nothing has come to our attention that causes us to believe that the accompanying consolidated interim financial information included in the ITR referred to above is not prepared, in all material respects, in accordance with CPC 21(R1) and IAS 34 applicable to the preparation of Interim Financial Information (ITR) and presented in accordance with the standards issued by the CVM. Emphases of Matter Corresponding figures for the year ended December 31, 2012 and the three- and ninemonth periods ended September 30, 2012 As mentioned in Note 3 to the Interim Financial Information Form (ITR), item a, due to a change in accounting practice, the amounts corresponding to the individual and consolidated balance sheet as at December 31, 2012 and the individual and consolidated interim financial information corresponding to the income statements and statements of comprehensive income for the three- and nine-month periods then ended, and statements of changes in equity, statements of cash flows and statements of value added (supplemental information) for the nine-month period ended September 30, 2012, presented for purposes of comparison, have been adjusted and are presented as required by CPC 23/IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors and CPC 26 (R1)/IAS 1 Presentation of Financial Statements. Our conclusion is not modified with respect to this matter. Transfers of funds from the Energy Development Account - CDE Without modifying our conclusion on the interim individual and consolidated financial information for the three- and nine-month periods ended September 30, 2013, we draw attention to the matter mentioned in Note 11 to the Interim Financial Information Form (ITR), relating to the fact that subsidiary Light Servios de Eletricidade S.A. recorded in the form of a reduction of the cost of energy purchased for resale transfers of funds from the Energy Development Account (CDE) already homologated by Agncia Nacional de Energia Eltrica - Aneel, established by Decree 7945/13. Other matters Statements of value added We have also reviewed the individual and consolidated interim statements of value added (DVA), for the nine-month period ended September 30, 2013, prepared under the responsibility of the Companys management, the presentation of which is required by the standards issued by the CVM applicable to the preparation of Interim Financial Information (ITR), and is considered as supplemental information for IFRS that does not require the presentation of a DVA. These statements were subject to the same review procedures described above and, based on our review, nothing has come to our attention that causes us to believe that they are not prepared, in all material respects, in relation to the individual and consolidated interim financial information in accordance with CPC 21, taken as a whole.
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Audit of the balance sheet as of January 1, 2012 The examination of the individual and consolidated balance sheets, as of January 1, 2012, now restated as a result of the matters described in Note 3 to the Interim Financial Information Form (ITR), pursuant to CPC 23 - Accounting Policies, Changes in Accounting Estimates and Errors and CPC 26 (R1) - Presentation of Financial Statements, was conducted under the responsibility of other auditors whose audit report is dated May 10, 2013. The accompanying individual and consolidated interim financial information has been translated into English for the convenience of readers outside Brazil. Rio de Janeiro, November 7, 2013
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