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Financial Statements

December 31, 2010 and 2009.

1
Renova Energia S.A.
Notes to the consolidated financial statements
December 31,2010 and 2009
(In thousands of Reais, unless otherwise indicated)

Contents

Independent Auditor´s Report on Financial Statements…………………………………..………………… 3


Balance Sheet………………………………………………………………………………...………….…..... 5
Statements of Income and Comprehensive Income………………………………………….………………. 7
Statements of Changes in Consolidated Shareholders ‘Equity………………………………………………… 8
Statements of Cash Flows……………………………………………………………………………………… 10
Statements of Added Value …………………………………………………………………………………… 11
Notes to the Financial Statements ……………………………………………………………………………… 12
Renova Energia S.A.
Notes to the consolidated financial statements
December 31,2010 and 2009
(In thousands of Reais, unless otherwise indicated)

A free translations from Portuguese into English of Independent Auditor´s Report on Individual financial statements in
accordance with accounting practices adopted in Brazil and consolidated financial statements prepared in accordance with
IFRS and also with accounting practices adopted in Brazil.

INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENTS

To
The Board of Directors and Shareholders of
Renova Energia S.A.
São Paulo - SP

We have examined the individual and consolidated financial statements of Renova Energia S.A. (" Company "),
identified as Parent Company and Consolidated, respectively, comprising the balance sheet as of December 31,
2010 and the related statements of income, changes in shareholders' equity and cash flows, for the year then
ended, as well as the summary of the significant accounting practices and other explanatory notes.

Management´s responsibility for the financial statements

The Company's management is responsible for the preparation and adequate presentation of the individual
financial statements in accordance with the accounting practices adopted in Brazil and of the consolidated
financial statements in accordance with the International Financial Reporting Standards (IFRS) issued by the
International Accounting Standards Board - IASB, and in accordance with the accounting practices adopted in
Brazil, as well as for the internal controls that it deemed necessary to enable the preparation of these financial
statements free of significant distortions, regardless of whether the latter were caused by fraud or error.

Auditor´s responsibility

Our responsibility is to express an opinion on these financial statements based on our audit carried out in
accordance with the Brazilian auditing and international accounting standards. These standards require the
fulfillment of ethical requirements by the auditors and that the audit be planned and performed for the purpose of
obtaining reasonable assurance that the financial statements are free of significant distortions.

An audit involves the carrying out of procedures selected to obtain evidence related to the amounts and disclosures
presented in the financial statements. The procedures selected depend on the auditor's judgment, including an
assessment of the risks of significant distortion in the financial statements, regardless of whether the latter are
caused by fraud or error. In these risk evaluation, according to auditing standards, the auditor considers relevant
internal controls for the preparation and adequate presentation of the financial statements of the Company, to plan
the audit procedures that are appropriate in the circumstances, but not for purposes of expressing an opinion on the
efficacy of these internal controls of the Company. An audit also includes the evaluation of the adequacy of
adopted accounting practices and reasonability of accounting estimates made by Management, as well as an
assessment of the presentation of financial statements taken as a whole.

We believe that the audit evidence obtained is sufficient and appropriate to support our opinion.
Renova Energia S.A.
Notes to the consolidated financial statements
December 31,2010 and 2009
(In thousands of Reais, unless otherwise indicated)

Opinion on the individual financial statements

In our opinion, the individual aforementioned financial statements present fairly, in all material respects, the
financial position of Renova Energia S.A. as of December 31, 2010, the performance of its operations and its
cash flows, for the year then ended, in accordance with the accounting practices adopted in Brazil.

Opinion on the consolidated financial statements

In our opinion, the consolidated aforementioned financial statements present fairly, in all material respects, the
financial position of Renova Energia S.A. Participações S.A. and the consolidated financial position of the
Company S.A. at December 31, 2010, the performance of its operations and its cash flows, consolidated for the
year then ended, in conformity with International Financial Reporting Standards - IFRS issued by the
International Accounting Standards Board (IASB) and the accounting practices adopted in Brazil.

Emphasis

As described in the note 2.1.1, the individual financial statements were prepared in accordance with accounting
practices adopted in Brazil. In the case of Renova Energia S.A., these practices differ from IFRS, as far as the
individual financial statements are concerned, only as regards the valuation of investments in subsidiaries and
jointly-owned subsidiaries under the equity method, as, for IFRS purposes, they would be valued at cost or fair
value; and by the option to maintain the balance of deferred asset existing as of December 31, 2008, which for
IFRS purposes, should be totally recorded in the results.

Others

Statements of added value

We have also audited the individual and consolidated statements of value added (DVA) for the year ended
December 31, 2010, whose presentation is required by Brazilian Corporate Law for publicly-held companies and
as supplementary information under IFRS, as these standards do not require the presentation of a Statement of
added value. These statements were submitted to the same audit procedures previously described and, in our
opinion, these supplementary statements are adequately presented, in all material respects, in relation to the basic
financial statements taken as a whole.

São Paulo, February 11, 2011

KPMG Auditores Independentes


CRC 2SP014428/O-6

José Luiz Ribeiro de Carvalho


Accountant CRC 1SP141128/O-2
Renova Energia S.A.
Notes to the consolidated financial statements
December 31,2010 and 2009
(In thousands of Reais, unless otherwise indicated)

Balance sheets

December 31, 2010 and 2009

(In thousands of Reais)

Pare nt company - BR GAAP Consolidate d - IFRS

Assets Note 2010 2009 Jan 1, 2009 2010 2009 01/Jan 2009
(Reclassified) (Reclassified) (Reclassified) (Reclassified)
Current assets
Cash and cash equivalents 5 7.251 41.238 5.217 18.569 41.475 6.811
Trade accounts receivable 6 - - - 3.918 3.903 3.862
Current tax assets 8 1.118 445 328 1.274 477 620
Advances to suppliers 7 116.091 274 301 121.059 659 547
Prepayments 174 - - 576 387 340
Pledges and restricted deposits 10 59 55 55 59 55 -
Other receivables 4.852 1.608 64 105 72 136

129.545 43.620 5.965 145.560 47.028 12.316

Non-current assets
Related party transactions 9 212 40 7.347 164 40 -
Special savings bonds - - - 25 25 25
Goodwill 11 119.272 - - 119.272 - -
(-) Provision for goodwill -
at the time of the takeover (119.272) - - (119.272) - -
Investments 12 134.953 80.777 - - - -
Other investments 60 60 60 70 70 70
Fixed assets in service 13 2.927 3.765 2.789 196.310 202.433 205.597
Constructions in progress 13 33.276 23.224 11.510 77.390 24.761 11.510

171.872 108.063 21.706 285.978 240.406 228.047

301.417 151.683 27.671 431.538 287.434 240.363

See the accompanying notes to the financial statements.


Renova Energia S.A.
Notes to the consolidated financial statements
December 31,2010 and 2009
(In thousands of Reais, unless otherwise indicated)

Balance sheets

December 31, 2010 and 2009

(In thousands of Reais)

Parent company - BR GAAP Consolidated - IFRS

Liabilities Note 2010 2009 Jan 1, 2009 2010 2009 Jan 1, 2009
(Reclassified) (Reclassified) (Reclassified) (Reclassified)
Current liabilities
Suppliers 14 5.989 1.408 3.251 8.100 1.968 7.283
Loans and financing 15 - - - 6.336 5.964 4.027
Charges on loans 15 - - - 854 5.888 -
Current tax liabilities 16 787 366 413 1.263 620 911
Salaries and vacations payable 652 478 543 652 478 543
Other accounts payable 59 73 - 150 516 83

7.487 2.325 4.207 17.355 15.434 12.847

Non-current assets
Loans and financing 15 - - - 125.599 131.935 141.206
Debentures - - - - - 78.219
Related party transactions 9 1.577 3.994 4.287 - - -
Provision for unsecured liability - Enerbrás - - 3.741 - - -

1.577 3.994 8.028 125.599 131.935 219.425

Shareholders' equity 17
Capital 326.515 46.536 34.343 326.515 46.536 34.343
(-) Expenses with issue of shares (13.686) - - (13.686) - -
Capital reserves - 119.272 - - 119.272 -
Retained earnings (loss) (20.476) (20.444) (18.907) (24.245) (25.743) (26.252)

292.353 145.364 15.436 288.584 140.065 8.091

301.417 151.683 27.671 431.538 287.434 240.363

See the accompanying notes to the financial statements.


Renova Energia S.A.
Notes to the consolidated financial statements
December 31,2010 and 2009
(In thousands of Reais, unless otherwise indicated)

Statement of income
For the year ended December 31, 2010 and 2009

(In thousands of Reais)

Parent company - BR GAAP Consolidated - IFRS


Note 2010 2009 2010 2009
(Reclassified) (Reclassified)
Net Income
Supply of electric power - - 35.486 33.753
Cost of electric power and operating cost 19 - - (10.503) (9.496)
Depreciation and amortization - - (5.667) (4.909)
Operating cost - - (3.617) (2.982)
Distribution system use charges - - (1.219) (1.605)

Gross profit - - 24.983 24.257

Operating expenses 19 (13.578) (6.431) (14.880) (7.520)


Other income - 1 - 1
Administrative and general expenses (13.212) (6.289) (14.176) (7.371)
Tax expenses - (16) - (16)
Depreciation and amortization (196) (127) (204) (134)
Other expenses (170) - (500) -
Income (loss) before net financial income (loss), equity in net
income of subsidiaries and taxes (13.578) (6.431) 10.103 16.737
Financial expenses (498) (208) (12.522) (19.103)
Financial income 4.073 2.049 5.629 4.357
Net financial income (expenses) 20 3.575 1.841 (6.893) (14.746)
Equity income (loss) 11 9.971 3.053 - -
Income (loss) before taxes (32) (1.537) 3.210 1.991
Current income tax and social contribution 21 - - (1.712) (1.482)
Net income (loss) of operations (32) (1.537) 1.498 509

Attribute to :
Company´s shareholder (0,00) (1,42) 0,01 0,47

See the accompanying notes to the financial statements.


Renova Energia S.A.
Notes to the consolidated financial statements
December 31,2010 and 2009
(In thousands of Reais, unless otherwise indicated)

Statements of changes in shareholders' equity

Parent company - BR GAAP


(In thousands of Reais)

Capital Expenses with Capital Accumulated


issue of shares reserves losses Total

Balances at January 01, 2009 34.343 - - (18.907) 15.436

Income (loss) for the period - - - (1.537) (1.537)

Goodwill reserve - - 119.272 - 119.272

Capital increase 12.193 - - - 12.193

Balances at December 31, 2009 46.536 - 119.272 (20.444) 145.364

Income (loss) for the period - - - (32) (32)

Capital increase 119.272 - (119.272) - -

Capital increase - issue of shares 160.707 - - - 160.707

Expenses with issue of shares - (13.686) - - (13.686)

Balances at December 31, 2010 326.515 (13.686) - (20.476) 292.353

See the accompanying notes to the financial statements.


Renova Energia S.A.
Notes to the consolidated financial statements
December 31,2010 and 2009
(In thousands of Reais, unless otherwise indicated)

Statements of changes in shareholders' equity


Consolidated - IFRS

(In thousands of Reais)

Capital Expenses with Capital Accumulated


issue of shares reserves losses Total

Balances at January 01, 2009 34.343 - - (26.252) 8.091

Income (loss) for the period - - - 509 509

Goodwill reserve - - 119.272 - 119.272

Capital increase 12.193 - - - 12.193

Balances at December 31, 2009 46.536 - 119.272 (25.743) 140.065

Income (loss) for the period - - - 1.498 1.498

Capital increase 119.272 - (119.272) - -

Capital increase - issue of shares 160.707 - - - 160.707

Expenses with issue of shares - (13.686) - - (13.686)

Balances at December 31, 2010 326.515 (13.686) - (24.245) 288.584

See the accompanying notes to the financial statements.


Renova Energia S.A.
Notes to the consolidated financial statements
December 31,2010 and 2009
(In thousands of Reais, unless otherwise indicated)

Statements of cash fows – Indirect method


For the year ended December 31, 2010 and 2009

(In thousands of Reais)

Parent company - BR GAAP Consolidated - IFRS

2010 2009 2010 2009


(Reclassified) (Reclassified)
Cash flow from operating activities

Income (loss) for the year (32) (1.537) 1.498 509


Adjustments due to :
operational activities:
Depreciation and amortization 196 127 5.871 5.043
Charges on loan 319 (34) (6) (47)
Wrife-off of intangible assets 3.237 1.711 3.237 1.711
Interest on debentures - - - 3.247
Interest on loan - - 11.698 12.229
Escrow interest (2) - (1.063) -
Decrease in provision for unsecured liability - Enerbras - (3.741) - -
Equity in the earnings of subsidiaries (9.971) (3.053) - -
(6.253) (6.527) 21.235 22.692

Changes in assets and liabilities


(Increase) in accounts receivable - clients - - (15) (42)
Increase (decrease) in recoverable taxes (672) (117) (795) 144
(Increase) in prepaid expenses (174) - (189) (49)
(Increase) in pledges and restricted deposits (4) (197) (4) (197)
Increase (decrease) in suppliers 4.581 (1.819) 6.132 (5.315)
(Increase) decrease in advances - - 385 -
(Decrease) increase in other accounts (118.899) (1.561) (121.008) 216
(121.421) (10.221) (94.259) 17.449
(Decrease) increase in taxes and contributions payable 421 (22) 643 (242)
Interest paid on loans - - (16.732) (9.680)
Net cash generated by (invested in)
operational activities (121.000) (10.243) (110.348) 7.527

(Increase) decrease in the investment (24.056) (77.723) - -


Acquisition of property, plant and equipment in service (1.496) (1.104) (1.886) (2.487)
Acquisition of property, plant and equipment in progress (31.302) (13.424) (53.728) (14.354)
Cash flows from investing activities (56.854) (92.251) (55.614) (16.841)

Net cash generated by (invested in)


in investment activities (56.854) (92.251) (55.614) (16.841)

Cash flows from financing activities


Paid-up capital - 12.194 - 12.194
Issue of shares 160.707 - 160.707 -
Expenses with issue of shares (13.686) - (13.686) -
Renova share premium - 119.272 - 119.272
Payment of profits and dividends - - - -
(Increase) restricted deposits (245) - 2.121 (2.034)
(Decrease) Increase in debentures - - - (81.466)
Payments of loans - - (5.964) (3.995)

Increase (decrease) in loans (2.909) 7.049 (121) 7


Loan with related parties - Receipt 7.745 15.638 - 29.179
Loan with related parties - Payment (10.486) (5.273) - (16.737)
Loan with related parties (168) (3.316) (121) (12.435)
Net cash generated by (invested in)
financing activities 143.867 138.515 143.057 43.978

Increase in cash and cash equivalents (33.987) 36.021 (22.905) 34.664

Increase (decrease) in cash and cash equivalents


At the beginning of the year 41.238 5.217 41.475 6.811
At the end of the year 7.251 41.238 18.570 41.475

Increase in cash and cash equivalents (33.987) 36.021 (22.905) 34.664

See the accompanying notes to the financial statements.


Renova Energia S.A.
Notes to the consolidated financial statements
December 31,2010 and 2009
(In thousands of Reais, unless otherwise indicated)

Statements of added value


For the years ended December 31, 2010 and 2009

(In thousands of Reais)

Parent company - BR GAAP Consolidated - IFRS

2010 2009 2010 2009

Income
Sales of goods, products and services - - 35.486 33.753

Inputs acquired by third parties (include ICMS and IPI)


Cost of goods sold and services rendered - - (4.836) (4.587)
Materials, energy, outsourced services and other operating expenses (8.548) (2.803) (8.981) (3.336)

Gross added value (8.548) (2.803) 21.669 25.830

Depreciation, amortization and depletion (196) (127) (5.870) (5.043)

Net added value generated by the Company (8.744) (2.930) 15.799 20.787

Added value received as transfer


Equity income (loss) 9.971 3.053 - -
Financial income 4.073 2.049 5.629 4.357

5.300 2.172 21.428 25.144

Total added value payable 5.300 2.172 21.428 25.144

Distribution of added value


Employees
Salaries and payroll charges 3.151 1.366 3.151 1.366
Management fees 797 729 797 729
`
Taxes
Federal 137 414 1.849 2.005
State - 3 - 3
Municipal - 12 - 12

Third-party capital remuneration


Interest - - 11.698 16.300
Rents 716 977 1.249 1.529
Other 531 208 1.186 2.691

Income (loss) for the year (32) (1.537) 1.498 509

5.300 2.172 21.428 25.144

See the accompanying notes to the financial statements.


Renova Energia S.A.
Notes to the consolidated financial statements
December 31,2010 and 2009
(In thousands of Reais, unless otherwise indicated)

Renova Energia S.A.


Notes to the financial statements
Years ended December 31, 2010 and 2009
(In thousands of Reais, unless otherwise indicated)

1.Operations
Renova Energia S.A. (“Renova” or "Company" or “Parent Company”), a publicly-held company, was set up on
December 6, 2006. The business purpose of the Company is the generation and trade of electric power in all its
forms, production of fuels from natural and renewable sources, rendering of logistic support services to
environmental consulting firms or companies and holdings in the capital of other companies.

Direct and indirect ownership interests are as follows:


% Interest
12/31/2010 12/31/2009 12/01/2009
Company Consolidation Direct Indirect Direct Indirect Direct Indirect

Enerbras Centrais Elétricas S.A. Full 100 100 100


Energética Serra da Prata S.A. (*) Full 99,99 99,99 99,99
Bahia Eólica Participações S.A. (**) Full 100 100
Centrais Eolicas Ametista Ltda (**) Full 100 99
Centrais Eolicas dos Araças Ltda (**) Full 100 99
Centrais Eolicas Caetité Ltda (**) Full 100 99
Centrais Eolicas Espigão Ltda (**) Full 100 99
Centrais Eolicas Pilões Ltda (**) Full 100 99
Centrais Eolicas São Salvador Ltda (**) Full 100 99
Centrais Eolicas Ventos do Nordeste Ltda (**) Full 100 99
Renova Eólica Participações S.A. (**) Full 100 100
Centrais Eolicas Alvorada S.A (**) Full 100 99
Centrais Eolicas Candiba S.A (**) Full 100 99
Centrais Eolicas Guanambi S.A (**) Full 100 99
Centrais Eolicas Guirapá S.A. (**) Full 100 99
Centrais Eolicas Licinio de Almeida S.A. (**) Full 100 99
Centrais Eolicas Pindai S.A (**) Full 100 99
Centrais Eolicas Rio Verde S.A (**) Full 100 99
Centrais Eolicas Serra dos Salto S.A. (**) Full 100 99
Salvador Eólica Participações S.A. (**) Full 100 100
Centrais Eolicas Da Prata Ltda (**) Full 100 99
Centrais Eolicas Igaporã S.A. (**) Full 100 99
Centrais Eolicas Ilheus S.A. (**) Full 100 99
Centrais Eolicas Nossa Senhora Conceição S.A (**) Full 100 99
Centrais Eolicas Pajeú do Vento S.A (**) Full 100 99
Centrais Eolicas Planaltina S.A (**) Full 100 99
Centrais Eolicas Porto Seguro S.A (**) Full 100 99
Centrais Eolicas Tanque Ltda (**) Full 100 99
Nova Renova Ltda (**) Full 100
Centrais Elétricas Serra do Espinhaço Ltda (**) Full 100
Centrais Elétricas Seraima Ltda (**) Full 100
Centrais Eolicas Pelourinho Ltda (**) Full 100
Centrais Elétricas Morrão Ltda (**) Full 100
Centrais Elétricas Maron Ltda (**) Full 100
Centrais Elétricas Itaparica Ltda (**) Full 100
Centrais Elétricas Dourados Ltda (**) Full 100
Centrais Elétricas Botuquara Ltda (**) Full 100
Centrais Elétricas Borgo Ltda (**) Full 100
Centrais Elétricas Bela Vista Ltda (**) Full 100
Renova Energia S.A.
Notes to the consolidated financial statements
December 31,2010 and 2009
(In thousands of Reais, unless otherwise indicated)

(*) Authorization from ANEEL for a 30-year period


(**) Companies in pre-operating phase;
Enerbras Centrais Elétricas S.A ("Enerbras"), established on February 9, 2001 as a limited liability company and
converted on May 10, 2006 into a private corporation has the exclusive purpose of investing in the capital of
Energética Serra da Prata S.A., ("Espra"), a corporation headquartered in the city of Salvador, Bahia State.

The indirect subsidiary Espra was initially established as a consortium on October 30, 2003 and converted into a
private corporation on September 17, 2004. The sole business purpose of Espra is to generate and sell the electric
power of Serra da Prata Hydroelectric Complex by means of its small hydroelectric power plants (PCHs): (i)
Cachoeira da Lixa, with an installed capacity of 14.8MW; (ii) Colino 2, with an installed capacity of 16.0MW;
and (ii) Colino 1 with an installed capacity of 11.0MW, whose operating activities started in May, July and
September 2008, respectively.

On June 30, 2004, the electric power generated by Serra da Prata Hydroelectric Complex was subject to a
purchase and sales agreement entered into with ELETROBRÁS - Centrais Elétricas Brasileiras S.A. under the
Incentive Program for Alternative Electric Power Sources (PROINFA). Through these electric power purchase
and sales agreements, Espra will sell its entire electric power production which can be negotiated in the long term
for a period of twenty (20) years. The estimated annual revenue is approximately R$ 37.5 million (*) per year,
adjusted by the General Market Price Index (IGP-M) since June 2004. The authorization period of Espra is 30
years and can be extended for another 30 years.

On December 14, 2009, the Company participated in Auction 03/2009-ANEEL, for the procurement of Reserve
Energy generated exclusively by wind power, pursuant to Ordinances 147/2009 and 211/2009 of the Ministry of
Mines and Energy (MME). And committed to sell average 127MW arising from 14 wind farms located in Bahia
State. Such farms are already under implementation and shall commence their business operations by July 2012.
On October 26 and December 6, 2010, wind power plants Guanambi, Porto Seguro, Rio Verde, Alvorada,
Guirapá, Ilhéus, Candiba, Serra dos Saltos, Igaporã and Pajeú do Vento, Pindai, Planaltina, Licínio de Almeida
and Nossa Senhora, respectively, entered into an energy purchase and sale agreement with the Power
Commercialization Chamber (CCEE) for a 20-year supply term.

On August 26, 2010, the Company participated in Auction 005/10-ANEEL, for the procurement of Reserve
Energy generated exclusively by wind power, pursuant to Ordinances 555/31, of May 31, 2010 and Ordinance Nº
645, of July 15, 2010, and Ordinance nº 483, of April 22, 2010 of the Ministry of Mines and Energy - MME and
those that may be changed. And committed to sell average 78MW of installed capacity arising from six wind
farms located in Bahia State. Such farms are already under implementation and shall commence their business
operations by September 2013.

1.1Corporate reorganization
On May 29, 2009, the Company's Extraordinary Stockholders' Meetings (in accordance with the material event
notice disclosed to the market on May 31, 2009) and of RRI Participações S.A. ("RRI") approved a corporate
restructuring comprised of the following events:

i. Merger of RRI Participações S.A.

Through Board of Directors' Meetings and Extraordinary Stockholders' Meetings held on May 29, 2009,
the Boards of Directors and stockholders of the Company and of RRI approved or ratified, according to
each case, the execution of the Merger Justification and Protocol Instrument ("Protocol"), establishing the
terms and conditions of the merger of RRI into the Company and the subsequent dissolution of RRI,
Renova Energia S.A.
Notes to the consolidated financial statements
December 31,2010 and 2009
(In thousands of Reais, unless otherwise indicated)

pursuant to article 227 of Law 6404, of December 15, 1976 and amendments ("Law6404/76" and
"Merger").

ii. Increase of the capital of Renova Energia S.A.

On the same date, at an Extraordinary Stockholders' Meeting held by the Company, the stockholders
approved the increase of the Company's capital by R$ 12,193, through the issue of 284,616 new registered
common shares at a total issue price of R$ 131,465. These new shares were fully subscribed by Hourtin
Holdings S.A. ("Hourtin") and paid up as follows: (i) R$ 81,465 through the transfer of debentures issued
by Enerbras, pursuant to a report prepared for this specific purpose; and (ii) R$ 50,000 was paid up in
cash. Goodwill of R$ 119,272 was calculated on the issue of the new shares and recorded under the
Company's "Goodwill reserve" caption.

On January 15, 2010, the Company's and Hourtin Holdings S.A. (“Hourtin”)' Extraordinary Stockholders'
Meetings approved a corporate restructuring comprised of the following event:

iii. Downstream merger of Hourtin Holdings S.A.

Through Board of Directors' Meetings and Extraordinary Stockholders' Meetings held on January 15,
2010, the Boards of Directors and stockholders of the Company and of Hourtin approved or ratified,
according to each case, the execution of the Merger Justification and Protocol Instrument ("Protocol"),
establishing the terms and conditions of the merger of Hourtin into the Company and the subsequent
dissolution of Hourtin, pursuant to article 227 of Law 6404, of December 15, 1976 and amendments
("Law 6404/76" and "Merger").

Hourtin held 32.18% of the Company's shares. With the merger, the 349,544 registered common shares
without par value issued by the Company and held by Hourtin were cancelled and replaced by an equal
number of new registered common shares without par value issued by the Company, with the same rights
and obligations associated with the canceled shares. The Company's new shares were fully allocated to the
sole stockholder of Hourtin, namely InfraBrasil - Fundo de Investimento em Participações.

The remaining common shares which represent the Company's capital (0.02%) are held by the members of
the Company's Board of Directors.

The total stockholders' equity of Hourtin transferred to Renova by merger was appraised at book value,
based on an appraisal performed by an independent expert. The merger of Hourtin into Renova will result
in the dissolution of the former.

2.Basis of presentation

2.1 Statement of conformity regarding the IFRS and CPC - Accountant Statements Committee
standards

These financial statements include:

• The consolidated financial statements were prepared in accordance with the International Financial
Reporting System (IFRS) issued by the International Accounting Standards Board (IASB) and also in
accordance with the accounting practices adopted in Brazil (BRGAAP).
Renova Energia S.A.
Notes to the consolidated financial statements
December 31,2010 and 2009
(In thousands of Reais, unless otherwise indicated)

• The financial statements of the parent company are being presented in accordance with accounting
practices adopted in Brazil, in compliance with the provisions contained in the Corporation Law, and
incorporates the changes introduced through Law nº 11638/07 and 11941/09, supplemented by the new
pronouncements, interpretations and guidelines of CPC, approved by resolutions of CFC and CVM
Resolutions in 2009, in force as of January 1, 2010.

• The individual and consolidated financial statements include standards established by the Brazilian
Securities Exchange Commission (“CVM”), and specific legislation issued by Electricity Regulatory
Agency - ANEEL.

• The individual and consolidated comprehensive statements of income are not being submitted, as there
are no amounts to be presented on this concept; in other words, net income for the year is equal to the total
comprehensive net income. There is no difference between the shareholders' equity and consolidated
result presented and the shareholders' equity and result of the parent company in the individual financial
statements. Accordingly, the consolidated financial statements and the Parent Company's individual
financial statements are being presented side by side in a single set of financial statements.

These are the first consolidated statements prepared according to the IFRS, which the CPC 37 was
applied.

The issue of individual and consolidated financial statements was authorized by the Board of Directors on
February 11, 2011.

2.2 Financial statements of 2009

In 2009, the financial statements of the parent company and of the consolidated balance sheet were presented
according to accounting practices adopted in Brazil, which incorporated the changes introduced by Laws
11,638/07 and 11,941/09, supplemented by the pronouncements of the Accounting Pronouncements Committee -
CPC, approved by resolutions of the Federal Accounting Council - CFC and deliberations of the Brazilian
Securities Exchange Commission - CVM and issued up to December 31, 2008 and specific law from ANEEL.

The financial statements of the parent company and its subsidiaries are therefore being re-submitted to reflect the
accounting regulations issued in 2009 and 2010 by CPC with the objective of allowing a comparison with 2010.

2.3 Explaining the transition in the adoption of new accounting standards

Main impacts arising from the adoption of new accounting standards


These are the Company's first financial statements prepared according to IFRS.
The accountancy policies established In note 3 were applied in the preparation of the financial statements for the
year finished on 31 Dec 2010, in the comparative information presented in these financial statements for the year
finished on 31 Dec 2009and in the preparation of the opening balance assets statement for the position on 1 Jan,
2009 ( the company transition date).

2.3.2 Statements of added value – VAS

According to the CPC 09 requirement applicable to publicly-held companies and as additional information for
IFRS purposes, the Company prepared value-added statements in the individual and consolidated positions.
Renova Energia S.A.
Notes to the consolidated financial statements
December 31,2010 and 2009
(In thousands of Reais, unless otherwise indicated)

Those financial statements, with fundamentals on macroeconomic concepts, aim at presenting the Group's share in
the formation of GDP by calculating the added value not only by the Group but also that received from other
entities, and the distribution of related amounts to its employees, governmental spheres, asset leasers, loan &
financing and debt securities, controlling and minority shareholders, and other compensations representing the
transfer of wealth to third parties. Said added value represents the wealth created by the Group, generally
measured by the revenues from the sale of electric energy, less related inputs acquired from third parties and also
including the added value produced by third parties and transferred to the Company.

2.4 Measuring basis

The individual and consolidated financial statements were prepared using historical cost as the value base, except
for the valuation of certain non-current assets such as financial instruments, which are measured at fair value.

3.Summary of significant accounting policies


The accounting policies described in detail below have been consistently applied by the Company and its
subsidiaries, to all the periods presented in these individual and consolidated financial statements and in the
preparation of the opening balance sheet drawn up on January 1, 2009, for the purpose of enabling the transition to
the IFRS and Accounting Pronouncements (CPCs), except otherwise indicated.

a. Consolidation basis

The accounting criteria adopted in their calculation were uniformly applied among the various companies of
the Group.

Description of the main consolidation procedures:

• Elimination of intercompany asset and liability account balances;

• Elimination of investments of parent company in the shareholders' equity of direct and indirect
subsidiaries;

• Elimination of intercompany income and expense balances and unearned income arising from
intercompany transactions. Unrealized losses are eliminated in the same way as unrealized gains, but only
to the extent that there is no evidence of impairment;

b. Foreign currency

Transactions in foreign currency are translated into the respective functional currency of the Company and
its subsidiaries at the exchange rates on the dates of the transactions. Monetary assets and liabilities
denominated and calculated in foreign currencies on the date of presentation are reconverted into the
functional currency at the exchange rate determined on that date.

Exchange gain or loss in monetary items is the difference between the amortized cost of the functional
currency at the beginning of the period, adjusted by interest and effective payments during the period, and
the amortized cost in foreign currency at the exchange rate at the end of the presentation period.
Renova Energia S.A.
Notes to the consolidated financial statements
December 31,2010 and 2009
(In thousands of Reais, unless otherwise indicated)

c. Functional currency and presentation currency

These individual and consolidated financial statements are being presented in Brazilian Real, functional
currency of the Company. All financial information presented in Brazilian reais has been rounded to the
nearest value, except otherwise indicated

d. Use of estimates and judgments

The preparation of individual and consolidated financial statements according to IFRS and CPC standards
requires Management to make judgments, estimates and assumptions that affect the application of
accounting principles and the reported amounts of assets, liabilities, income and expenses. Actual results
may differ from these estimates.

Estimates and assumptions are reviewed in a continuous manner. Revisions related to accounting
estimates are recognized in the period when the estimates are revised. The Company reviews the estimates
and assumptions at least quarterly.

e. Cash and cash equivalents

Cash and cash equivalents cover the cash, bank deposits, other short-term marketable securities, which are
promptly convertible into a known amount of cash, with low variation risk, at market value, and are stated
at cost plus interest earned through the balance sheet date.

f. Clients

Refers to a sale of energy supply by the subsidiary ESPRA, in accordance with an agreement with the
Program for Incentive to Alternative Energy Sources (PROINFA).

g. Investments

The investments in affiliated companies were evaluated trough equity equivalence.

h. Property, plant and equipment

• Recognition and measurement

Property, plant and equipment items are stated at historical acquisition or construction cost, net of
accumulated depreciation and impairment losses, when required. The cost includes expenditures that are
directly attributable to the acquisition of assets.

The cost of the assets built by the entity includes the cost of materials and direct labor, any other costs to
bring assets to the site and the necessary conditions for them to operate as intended by management,
disassembly costs and restoration of the location where the assets are located, when applicable, and the
costs and interest of loans and financing from third parties capitalized during the construction stage, less
financial revenue from third party funds that have not been invested, when applicable.

• Depreciation
Renova Energia S.A.
Notes to the consolidated financial statements
December 31,2010 and 2009
(In thousands of Reais, unless otherwise indicated)

Depreciation is calculated over the depreciable amount, which is the cost of an asset, or other amount
substituted for cost, less its residual value. Depreciation is recognized in the income statement using the
straight-line method over the estimated useful life of each part of an item of property, plant and equipment,
since this is the method that best reflects the consumption pattern of the future economic benefits embodied
in the asset. Our depreciation rates conform to ANEEL resolutions nº02, of December 24, 1997 and nº 44 of
March 17, 1999.

The useful estimated lives for the current and comparative periods are shown in the Note 15.

The depreciation methods and residual values are reviewed at every year closing and any adjustments are
recognized as changes in accounting estimates, and useful lives are those established by ANEEL.

The Company and its subsidiary Espra chose not to value the fixed assets at deemed cost since they
understand that the accounting practice of valuing fixed assets at their historical cost, less the best estimate of
depreciation and reduction to recoverable value when required is an accounting practice that best represents
its fixed assets.

i. Intangible assets

Other intangible assets acquired with defined useful lives are carried at cost, less accumulated amortization
and accumulated impairment losses.

Amortization is calculated over the cost of the asset, or other amount substituted for cost, less its residual
value. Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of
the intangible assets, except goodwill, without a defined useful life from the date they are available for use,
since this is the method that best reflects the consumption pattern of the future economic benefits embodied
in the asset.

j. Decrease in of the recoverable value of assets ("impairment")

The carrying amounts of the Company's non-financial assets are reviewed at each reporting date for
indication of impairment. If such indication exists, the asset's recoverable amount is determined. For
goodwill and intangible assets with an undefined useful life, the recoverable value is estimated on an annual
basis.
For the year ended December 31, 2010, there was no indication, whether by internal or external information
sources, that any asset had suffered a devaluation. Therefore, the assets' recorded net book value is
recoverable.

k. Environmental licenses

Preliminary environmental licenses and installation permits, obtained in the enterprise planning and
installation stage, consecutively, are unitized and recognized as cost of the small hydroelectric power plants
and wind farms.

l. Loans and financing

Loans and financing are stated at incurred net transaction costs and are subsequently measured at amortized
cost under the effective rate method.
Renova Energia S.A.
Notes to the consolidated financial statements
December 31,2010 and 2009
(In thousands of Reais, unless otherwise indicated)

m. Employee benefits

• Short-term employee benefits

Obligations for short-term employee benefits are measured on a non-discounted basis and incurred as
expenses as the related service is rendered.

n. Provisions

A provision is set up if there is a legal or constructive obligation as a result of a past event, which can be
reliably estimated, and it is probable that an outflow of funds will be required to settle the obligation.

o. Capital

• Common and preferred shares

Common and preferred shares are classified as shareholders' equity. Preferred stock has restrict voting rights
and takes priority in the settlement of their share of capital. Mandatory minimum dividends are established
by the by-laws and when reserved through year end they are recognized as liabilities. Share issuance costs
are recognized as deductions from shareholders' equity.

p. Income

Income and expenses are recognized on the accruals basis.


The revenue from electric power sales is recognized in the income statements upon measurement and supply:
Income is not recognized if there are significant uncertainties as to its realization.

Financial revenues comprise income from interest on cash investments and loans with related parties. Interest
income is recognized in income under the effective interest method.

Financial expenses include basically loan interest expenses and financing. Borrowing costs which are not
directly attributable to the acquisition, construction, or production of a qualifying asset are recognized for in
profit or loss using the effective interest rate method.

q. Income and social contribution taxes

The income and social contribution taxes of current year are calculated based on the rates of 15% plus a
surcharge of 10% on taxable income in excess of R$ 240 for income tax and 9% on taxable income for social
contribution on net income, and take into account tax loss carryforward and negative basis of social
contribution, limited to 30% of net profit.

The income tax and social contribution expense comprises current income tax. Current taxes are recognized in
income unless they are related to the business combination, or items directly recognized in Shareholders'
equity or in Other comprehensive income.

Current taxes are the taxes payable or receivable on the taxable income or loss for the year, at tax rates enacted
or substantively enacted on the date of presentation of the financial statements, and any adjustments to taxes
payable in relation to prior years.
Renova Energia S.A.
Notes to the consolidated financial statements
December 31,2010 and 2009
(In thousands of Reais, unless otherwise indicated)

r. Income per share

The basic earnings per share are calculated based on the result for the financial year attributable to the
Company's controlling and non-controlling shareholders and the weighted average of outstanding common and
preferred shares in the respective period. The diluted earnings per share are calculated based on the mentioned
average of outstanding shares, adjusted by instruments that can potentially be converted into shares, with a
dilution effect, in the periods presented.

s. Financial instruments

Financial instruments are any transactions originating a financial asset or liability or a financial instrument of
another company. These financial instruments are initially recognized at fair value plus or minus directly
attributable transaction costs. After the initial recognition, they are measured as described below:

• Financial instruments securities held to maturity

If the Company has the intention and capacity to hold its debt instruments to maturity, these are classified as
held to maturity. Investments held to maturity are measured by the amortized cost using the effective interest
rate method, deducting any reductions in their recoverable value.

• Financial assets recorded at fair value through profit or loss

Financial assets recorded at fair value through profit or loss are measured at fair value and changes in the fair
value of such assets are recognized in the income for the year.

Determination of the fair value

The fair value of financial assets measured at fair value through profit or loss, investments held to maturity,
and financial assets available for sale is recognized at closing prices determined on financial statements
presentation date. The fair value of investments held to maturity is determined solely for disclosure purposes.

The Company and its subsidiaries fail to recognize a financial asset when the contractual rights to the cash
flows of the asset expire, or when they transfer the rights to reception of the contractual cash flows on a
financial asset in a transaction in which essentially all the risks and benefits of ownership of the financial asset
are transferred.

• Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments, but not quoted on any
active market. Such assets are initially recognized at fair value plus any transaction costs directly assignable.
After their initial recognition, loans and receivables are measured at amortized cost using the effective interest
rate method, reduced by any impairment losses.

Loans and receivables comprise trade accounts, other credits, related parties, loans and financing and others.
Renova Energia S.A.
Notes to the consolidated financial statements
December 31,2010 and 2009
(In thousands of Reais, unless otherwise indicated)

t. Statements of added value

The Company prepared individual and consolidated statements of added value in accordance with the rules
of technical pronouncement CPC 09 - Statement of Added Value, which are presented as an integral part of
the financial statements under BRGAAP applicable to publicly-held companies, whereas under IFRS they
represent additional financial information.

u. New standards and interpretations not yet adopted

Several IFRS standards, standard amendments, and interpretations issued by IASB have not yet come into
effect for the year ended December 31, 2010, as follows:

• Limited exemption from Comparative IFRS 7 Disclosures for First-time Adopters;


• Improvements to IFRS 2010;
• IFRS 9 Financial Instruments;
• Prepayment of a minimum fund requirement (Amendment to IFRIC 14);
• Amendments to IAS 32 Classification of rights issues.

The CPC (Accounting Pronouncements Committee) has not yet issued pronouncements equivalent to the
aforementioned IFRSs, although that is expected to be done before the date when they are required to come
into effect. The advanced adoption of IFRS pronouncements is conditioned to the prior approval by a
regulatory act by the Brazilian Securities Exchange Commission ("CVM").

The Company and its subsidiaries has not estimated the extent of the impact of these new rules on their
financial statements.

4. Transition to the IFRS

4.1 – Fundamentals of the transition to the IFRS

4.1.1 – Application of CPC 37

The consolidated financial statements were prepared in accordance with CPC 37, as described in note 3.
Previously, the financial statements presented till 31 Dec 2009, were prepared in accordance with the
accountancy practices adopted in Brazil, complementary rules of Comissão de Valores Mobiliários (CVM),
technical statements from Comite de Pronunciamentos Contabeis ruling on the date and the clauses stated on
Leis das Sociedades por ações.

The company prepared its opening financial statement based on the transition date of 1 Jan, 2009. On the said
date, the financial statements were prepared in accordance with CPC 37 and the Company applied the
necessary exceptions and certain optional exemptions to the full restrospective of IFRS.

4.2 – Explanation about the transition to CPC (parent company) and IFRS (consolidated)

4.2.1 – Reconciliation of Parent company Balance (CPC) and Consolidated (IFRS) on 1 Jan, 2009
Renova Energia S.A.
Notes to the consolidated financial statements
December 31,2010 and 2009
(In thousands of Reais, unless otherwise indicated)

Parent Company Consolidated

previously Ajusted previously Ajusted


Assets published (Reclassified) ajusted for CPC published (Reclassified) ajusted for IFRS

Cash and cash equivalents 5.217 5.217 6.811 6.811


Trade accounts receivable - - 3.862 3.862
Current tax assets 328 328 620 620
Advances to supp liers 301 301 547 547
Prepayments - - 340 340
Pledges and restricted dep osits 55 55 - -
Other receivables 64 64 136 136

Current 5.965 - - 5.965 12.316 - - 12.316

Non current
Related p arty transactions 7.347 - - 7.347 - - - -
Special savings bonds - - - - 25 - - 25
Pledges and restricted dep osits - - - - 10.845 - - 10.845
Goodwill (6.419) - 6.419 - - - - -
Other investments 60 - - 60 70 - - 70
Fixed assets in service 2.789 - - 2.789 205.597 - - 205.597
Constructions in progress - 11.510 - 11.510 - 11.510 - 11.510
Intangible 11.510 (11.510) - - 18.855 (11.510) (7.345) -

15.287 - 6.419 21.706 235.392 - (7.345) 228.047

Total 21.252 - 6.419 27.671 247.708 - (7.345) 240.363

Parent Company Consolidated

previously Ajusted previously Ajusted


Liabilities published (Reclassified) ajusted for CPC published (Reclassified) ajusted for IFRS

Suppliers 3.251 - - 3.251 7.283 - - 7.283


Loans and financing - - - - 4.027 - - 4.027
Charges on loans - - - - - - - -
Current tax liabilities 413 - - 413 911 - - 911
Salaries and vacations payable 543 - - 543 543 - - 543
Other accounts payable - - - - 83 - - 83
- -

Current liabilities 4.207 - - 4.207 12.847 - - 12.847

Non-current assets
Loans and financing - - - - 141.206 - - 141.206
Debentures - - - - 78.219 - - - 78.219
Related party transactions 4.287 - - 4.287 - - - -
Provision for unsecured liability - Enerbrás 3.741 - - 3.741 - - - -
Negative goodwill on the acquisition of investments - - - - 6.419 - (6.419) -

8.028 - - 8.028 225.844 - (6.419) 219.425

S hareholders' equity
Capital 34.343 34.343 34.343 - 34.343
Retained earnings (loss) (25.326) - 6.419 (18.907) (25.326) - (926) (26.252)
9.017 - 6.419 15.436 9.017 - (926) 8.091

Total 21.252 - 6.419 27.671 247.708 - (7.345) 240.363


Renova Energia S.A.
Notes to the consolidated financial statements
December 31,2010 and 2009
(In thousands of Reais, unless otherwise indicated)

4.2.2 – Reconciliation of statement of assets and liabilities in 31 Dec, 2009,


Parent Company Consolidated

previously Ajusted previously Ajusted


Assets published (Reclassified) ajusted for CPC published (Reclassified) ajusted for IFRS

Cash and cash equivalents 41.238 41.238 41.475 41.475


Trade accounts receivable - - 3.903 3.903
Current tax assets 445 445 477 477
Advances to suppliers 274 274 659 659
Prepayments - - 387 387
Pledges and restricted deposits 55 55 55 55
Other receivables 1.608 1.608 72 72

Current 43.620 - - 43.620 47.028 - - 47.028

Non current
Related party transactions - - - - - - - -
Special savings bonds - - - - 25 - - 25
Pledges and restricted deposits 197 - - 197 13.077 - - 13.077
investments 74.358 - 6.419 80.777 - - - -
others investments 60 - - 60 70 - - 70
Fixed assets in service 3.765 - - 3.765 202.433 - - 202.433
Constructions in progress - 23.224 - 23.224 - 24.761 - 24.761
Intangible 23.224 (23.224) - - 30.060 (24.761) (5.299) -

101.604 - 6.419 108.023 245.665 - (5.299) 240.366

Total 145.224 - 6.419 151.643 292.693 - (5.299) 287.394

previously Ajusted previously Ajusted


Liabilities published (Reclassified) ajusted for CPC published (Reclassified) ajusted for IFRS

Suppliers 1.408 - - 1.408 1.968 - - 1.968


Loans and financing - - - - 5.964 - - 5.964
Charges on loans - - - - 5.888 - - 5.888
Current tax liabilities 366 - - 366 620 - - 620
Salaries and vacations payable 478 - - 478 478 - - 478
Other accounts payable 73 - - 73 516 - - 516
- -

Current liabilities 2.325 - - 2.325 15.434 - - 15.434

Non-current assets
Loans and financing - - - - 131.935 - - 131.935
Related party transactions 3.994 - - 3.994 - - - -
Negative goodwill on the acquisition of investments - - - - 6.419 - (6.419) -

3.994 - - 3.994 138.354 - (6.419) 131.935

S hareholders' equity
Capital 46.536 46.536 46.536 - 46.536
Capital reserves 119.272 119.272 119.272 119.272
Retained earnings (loss) (26.863) - 6.419 (20.444) (26.863) - 1.120 (25.743)
138.945 - 6.419 145.364 138.945 - 1.120 140.065
Total 145.264 - 6.419 151.683 292.733 - (5.299) 287.434

4.2.3 – Conciliation of Parent Company Income Statement (CPC) and Consolidated (IFRS) on 31 Dec,
2009
Renova Energia S.A.
Notes to the consolidated financial statements
December 31,2010 and 2009
(In thousands of Reais, unless otherwise indicated)

Parent company Consolidated


previously Ajusted previously Ajusted
published ajusted for CPC published ajusted for IFRS
Net Income
Supply of electric power - - - 35.032 - 35.032

Deductions
Taxes and contributions on income - - - (1.279) - (1.279)

Cost of electric power and operating cost - - - (11.542) 2.046 (9.496)


Depreciation and amortization - - - (6.955) 2.046 (4.909)
Operating cost - - - (2.982) - (2.982)
Distribution system use charges - - - (1.605) - (1.605)

Gross profit - - - 22.211 2.046 24.257

Operating expenses (13.578) - (13.578) (7.520) - (7.520)


Other income - - 1 - 1
Administrative and general expenses (13.212) - (13.212) (7.371) - (7.371)
Tax expenses - - - (16) - (16)
Depreciation and amortization (196) - (196) (134) - (134)
Other expenses (170) - (170) - - -

Income (loss) before net financial income (loss), equity (13.578) - (13.578) 14.691 2.046 16.737

Financial expenses (498) - (498) (19.103) - (19.103)


Financial income 4.073 - 4.073 4.357 - 4.357
Net financial income (expenses) 3.575 - 3.575 (14.746) - (14.746)
Equity income (loss) 9.971 - 9.971 - - -
Income (loss) before taxes (32) - (32) (55) 2.046 1.991

Current income tax and social contribution - - - (1.482) - (1.482)

Net income (loss) of operations (32) - (32) (1.537) 2.046 509

Description of adjustements resulting from adoption of CPC and IFRS that affected the Parent Company and
Consolidated financial statements.
Renova Energia S.A.
Notes to the consolidated financial statements
December 31,2010 and 2009
(In thousands of Reais, unless otherwise indicated)

Assets
Current or Non current

Investment – Adjustment referent to the discount fall generated by the acquisition of Enerbras between
accumulated losses on the transition date 1 Jan, 2009 due to the application of CPC 15.

Intangible –(i) reclassification of intangible balance to fixed assets in course according to CPC 27, (ii)
intangible writte off between accumulated losses referent to pre-operational expenses from ESPRA subsidiary
according to IAS 38 definition.

Liabilities
Non current Liabilities – Adjustment between the discount and the accumulated losses generated by the
acquisition of Enerbras, on the transition date 01 Jan, 2009, due to the application of CPC 15.

Net Equity

Accumulated Profits and Losses – Adjustment between the discount and the accumulated losses generated by
the acquisition of Enerbras, on the transition date 1 Jan,2009 due to the application of CPC 15 as well as the
intangible write off against accumulated losses referent to pre-operational expenses from ESPRA subsidiary in
accordance with IAS 38 definition .

Income – due to total intangible write off on the transition date 01 Jan,2009 against accumulated profits, the
company reverted the amortizations in the period.

4.3 – Reconciliation between consolidated financial statements (IFRS) and Parent Company (CPC)

The reconciliation of net equity and results by 31 Dec, 2010, 31 Dec 2009, and 01 Jan, 2009 is demonstrated as
follows:

S hareholders' equity Net income of operations


31/12/10 31/12/09 1/1/09 31/12/10 31/12/09

Parent company (CPC) 292.353 145.364 15.436 (32) (1.537)

Write off diferred asset and


reversals of depreciation in income (3.769) (5.299) (7.345) 1.530 2.046

Consolidated (IFRS ) 288.584 140.065 8.091 1.498 509

Description of differences between accounting practices and respective adjustments:

The main difference between the consolidated financial statement (IFRS) and the parent company financial
statement (CPC) is described below:

Diferred Assets

In adoption to first presentation of statement financial consolidated in according to IFRS pronouncements, the
company administration made de write off de balance registered in intangible asset in according the IAS 38 before
the adoption, in this case in parent company. The values was keeping in balance of parent company, on time of the
Renova Energia S.A.
Notes to the consolidated financial statements
December 31,2010 and 2009
(In thousands of Reais, unless otherwise indicated)

administration opted for keeping the balance to registers for amortization process.

4.4 – Re introduction of ITR´s (quarterly information)

As requested by Deliberação CVM nº 656, de 25 de janeiro de 2011, “Art. 2º-A The opened companies wich,
until the date of presentation of financial statements of the fiscal year initiated on 1 Jan 2010, have not
reintroduced their ITR from 2010, must include explanatory notes in these anual sttements mentioning, for each
quarter of 2009 and 2010, the effect on the result and net equity due to the full adoption of 2010 rules and must re-
introduce them in total at least when of the presentation of the first ITR of 2011.

These quarters information was subject to the special revision procedures applied by the Company´s independent
auditors, in accordance with CVM requirements for Quarter Information (NPA 06 of IBRACON, including the
adjustments resulting from the adoption of new accountancy practices thus, not subject to the audit procedures.

5. Cash and cash equivalents

Parent company Consolidated


12/31/2010 12/31/2009 01/01/2009 12/31/2010 12/31/2009 01/01/2009

Cash 1 3 3 5 15 10
Banks checking account 126 1.177 45 2.093 1.402 1.632
Interest earnings bank deposits 7.124 40.058 5.169 16.471 40.058 5.169
Total 7.251 41.238 5.217 18.569 41.475 6.811

Highly liquid short-term interest earning bank deposits are promptly convertible into a known sum of cash and
subject to an insignificant risk of change of value.

These financial investments refer substantially to fixed income funds of the Interbank Deposit Certificate (CDI) of
ABN and of Votorantin, remunerated at the rate of 100.5% and 103.5%, respectively.

6. Trade accounts receivable - Consolidated

Consolidated
12/31/2010 12/31/2009 01/01/2009
Trade accounts receivable 3.919 3.903 3.862

Corresponds to amounts receivable from the sale of energy generated by the indirect subsidiary Espra, relating to
the PCHs Cachoeira da Lixa, Colino 1 and Colino 2.

The balances as of December 31 comprise current amounts exclusively related to our agreement with Eletrobras,
for which no losses are expected upon realization.
Renova Energia S.A.
Notes to the consolidated financial statements
December 31,2010 and 2009
(In thousands of Reais, unless otherwise indicated)

7. Receivables from suppliers

Parent company Consolidated


12/31/2010 12/31/2009 01/01/2009 12/31/2010 12/31/2009 01/01/2009

Advances to suppliers 116.091 274 301 120.533 659 547


Advances to imports - - - 526 - -
Total 116.091 274 301 121.059 659 547

On December 4, 2009, a "Memorandum of Understanding for the Sale of Power Generation Equipment and
Related Services Including Transportation and Erection" was entered into with BHA do Brasil Ltda. and General
Electric International, Inc.. This document regulated the principles and general rules for the supply of 1.5 wind
turbines of 1.5MW each and the related transportation services and commissions. This supply will be the subject
matter of final agreements, to be executed in 2011, between BHA do Brasil Ltda and the 14 wind farms located in
the state of Bahia as described in note n° 1, when the prepaid amounts will convert into direct supply
commitments with each SPE. The following memorandum referring to the supply of 102 generators related to
LER 2010 was signed on August 26, 2010.Therefore, the prepaid amounts are not tied to the measurement or even
to the condition of acceptance of the service or equipment. On December 31, 2010, the total amount prepaid by
the parent company to BHA do Brasil Ltda. was R$ 120,533, referring to part of the aerogenerators described
above, which will be as of May 2011.

8. Current tax assets

Current liabilities
Parent company Consolidated
12/31/2010 12/31/2009 01/01/2009 12/31/2010 12/31/2009 01/01/2009

IRRF on financial investment 1.064 435 325 1.064 435 325


PIS recoverable - 9 - 20 25 39
COFINS recoverable - - 2 94 13 181
Social contribution tax recoverable - 1 1 41 3 2
IRRF recoverable - - - - 1 73
ISS recoverable - - - 1 - -
Negative balance of Corporate Income tax 54 - - 54 - -
Total 1.118 445 328 1.274 477 620

The negative balance of IRPJ, in the amount of R$54, originating from IRRF on a money market investment of the
year 2009, will be used to offset own debts relating to the taxes and contributions administrated by the Brazilian
Internal Revenue Service.
Renova Energia S.A.
Notes to the consolidated financial statements
December 31,2010 and 2009
(In thousands of Reais, unless otherwise indicated)

9. Related party transactions

Parent company Consolidated


Assets Liabilities Income (loss) for Income (loss) for
the period ended the period ended
12/31/2010 12/31/2009 01/01/2009 12/31/2010 12/31/2009 01/01/2009 12/31/2010 12/31/2010

Espra - - 7.347 1.577 3.994 - (326) -


Enerbras - - - - - 4.287 - -
RR 164 37 - - - - 6 6
Bahia Eólica 3 1 - - - - - -
Salvador Eólica 3 1 - - - - - -
Renova Eólica 3 1 - - - - - -
CE Botuquara 2 - - - - - - -
CE Bela Vista 2 - - - - - - -
CE Serra do Espinhaço 2 - - - - - - -
CE Palmares 2 - - - - - - -
CE Borgo 2 - - - - - - -
CE Dourados 2 - - - - - - -
CE Maron 2 - - - - - - -
Nova Renova Energia 3 - - - - - 1 -
CE Itaparica 2 - - - - - - -
CE Espigão 4 - - - - - - -
CE Caetité 4 - - - - - - -
CE Ametista 4 - - - - - - -
CE Reconcavo 4 - - - - - - -
CE São Salvador 4 - - - - - - -

Total 212 40 7.347 1.577 3.994 4.287 (319) 6

The main balances of assets and liabilities on December 31, 2010, as well as the transactions that influenced
income for the year, relating to operations with related parties, result from transactions of the Company with its
parent company, subsidiaries and other related parties.

a. Accounts receivable/payable

Accounts receivable - corresponds to a loan agreement with parent company RR Participações S.A.

Accounts payable - Refers to amounts payable to the indirect subsidiary Espra. These intercompany loans
were taken out to meet cash needs.

For both (receivable and payable), the maturity date is December 31, 2013 and the amount due is subject to
adjustment by the Long-term Interest Rate (TJLP) plus interest of 0.5% per year, which will not be
capitalized.
The intercompany loan agreements were filed with the National Electric Power Agency (ANEEL).

b. Management remuneration

The remuneration of Management's key personnel in the twelve-month period ended December 31, 2010 and
2009, as required by Brazilian Securities Exchange Commission CVM Resolution 560, of December 11,
2008, reached the amount of R$ 2,468 and R$ 2,321, respectively, amounts solely comprised of short-term
benefits.
Renova Energia S.A.
Notes to the consolidated financial statements
December 31,2010 and 2009
(In thousands of Reais, unless otherwise indicated)

Remuneration of the members of the Board of Directors and Board of Executive Officers paid by the
Company.
Controladora
2010 Conselho de Administração Diretoria Estatutaria Total
Número de membros 11 5 16
Remuneração fixa anual (em R$) 136.000 1.619.214 1.755.214
Salário ou pró-labore 136.000 1.619.166 1.755.166
Beneficios diretos e indiretos n/a 48 48
Remuneração por participação em comitê n/a n/a n/a
Remuneração variável (em R$) n/a 713.110 713.110
Bônus n/a 713.110 713.110
Beneficios pós emprego n/a n/a n/a
Valor total da remuneração por orgão 136.000 2.332.324 2.468.324

Average remuneration of the Board of Directors and Board of Executive Officers

10. Pledges and restricted deposits


Parent company Consolidated
12/31/2010 12/31/2009 01/01/2009 12/31/2010 12/31/2009 01/01/2009

Current 59 55 55 59 55 -
Non-current 444 197 - 12.019 13.077 10.845
503 252 55 12.078 13.132 10.845

The consolidated sum of R$ 12,078 is composed of the balance of R$ 11,575 on December 31, 2010 presented in
non-current assets referring to the money market investment in a fixed income fund denominated "reserve account
liquidity fund" at Banco do Nordeste S.A., the objective of which is to guarantee the financing obtained for the
construction of the PCHs of the subsidiary Espra. This investment cannot be used until the final term of the
financing in 2026.

The yield of this investment reaches 97% of the variation of the Certificate of Interbank Deposit (CDI), the
balances of which at the end of the periods are already stated at market value.

The remaining balance refers to deposits related to guarantees of inventory studies, whereas these deposits are
made in favor of ANEEL - Agência Nacional de Energia Elétrica (Brazilian Electricity Regulatory Agency)
Renova Energia S.A.
Notes to the consolidated financial statements
December 31,2010 and 2009
(In thousands of Reais, unless otherwise indicated)

11. Goodwill in the takeover

Parent company
12/31/2010 12/31/2009 01/01/2009
Goodwill 119.272 - -
( - ) Provision for goodwill (119.272) - -

On January 15, 2010, one of the Company's stockholders, Hourtin Holdings S.A. ("Hourtin"), was merged into the
Company. As a result of this merger, the Company recognized a goodwill of R$ 119,272. This goodwill initially
recognized in Hourtin resulted from the acquisition of an ownership interest in the Company's capital. This
goodwill is based on expected future earnings of the Company and its subsidiaries. The assets that were
transferred to the Company at the time of the transaction supported the goodwill amount, which was recorded as a
contra entry to a capital reserve. Considering the subsequent downstream merger that took place at the beginning
of 2010, the goodwill is not justifiable from an accounting standpoint and, consequently, upon the merger, the
goodwill was fully accrued in the merged company.

12. Investments
The Company did record equity in the income of its associated companies in the amount of R$ 9,969 in 2010 and
R$3,053 in 2009.

Total Total Shareholders' Equity in net


Interest % assets liabilities equity Income ( loss) income
of subsidiaries
January 1, 2009
Enerbras Centrais Elétricas S.A. 100% 231.671 235.412 (3.741) (14.831) (14.831)
231.671 235.412 (3.741) (14.831) (14.831)
December 31, 2009

Enerbras Centrais Elétricas S.A. 100% 225.820 145.044 80.776 3.053 3.053
Wind Farms - SPE's 100% 1.537 1.537 - - -
227.357 146.581 80.776 3.053 3.053
December 31, 2010
Enerbras Centrais Elétricas S.A. 100% 224.499 133.626 90.873 10.097 10.097
Wind Farms - SPE's 100% 50.716 6.636 44.080 (126) (126)
275.215 140.262 134.953 9.971 9.971
Renova Energia S.A.
Notes to the consolidated financial statements
December 31,2010 and 2009
(In thousands of Reais, unless otherwise indicated)

Changes in the investment


Balances Capital Equity in Balances Capital Equity in Balances
01/01/2009 increase net income 12/31/2009 increase net income 12/31/2010
of subsidiaries of subsidiaries
Movement of investments

Enerbras Centrais Elétricas S.A. (10.161) 81.465 3.053 80.776 - 10.097 90.873
Wind Farms - SPE's - - - - 44.206 (126) 44.080
Total (10.161) 81.465 3.053 80.776 44.206 9.971 134.953

The shareholders' equity of Enerbras as of December 31, 2010 is R$90,873. The net income for the period is R$
10,097 and capital is R$86,636, represented by 5,170,101 shares, 4,337,536 thousand of which are common
shares, 832,562 preferred class B shares and 3 preferred class A shares.

In addition to Enerbras, the Company has holdings in another 37 companies (see note n°1). These companies are
in the pre-operational phase and their business purpose consists of developing studies, designing, implementing,
operating and exploring electric power plants using a wind energy source. On December 31, 2010 the company
increased the capital of 14 of these companies, paid up through the transfer of part of its work in progress to be
apportioned (see note° 12).

The increase in the investment in the period is shown as follows:


Renova Energia S.A.
Notes to the consolidated financial statements
December 31,2010 and 2009
(In thousands of Reais, unless otherwise indicated)

Investm ent Loss of Investm ents in


Company Additional period 31/12/2010
CENT RAIS EOLICAS ALVORADA S.A. 1.297 (5) 1.292
CENT RAIS EOLICAS CANDIBA S.A. 2.364 (5) 2.359
CENT RAIS EOLICAS GUANAMBI S.A. 2.571 (5) 2.566
CENT RAIS EOLICAS GUIRAPA S.A. 3.526 (6) 3.520
CENT RAIS EOLICAS LICINIO DE ALMEIDA S.A. 4.225 (5) 4.220
CENT RAIS EOLICAS PINDAI S.A. 4.092 (5) 4.087
CENT RAIS EÓLICAS RIO VERDE S.A. 3.635 (5) 3.630
CENT RAIS EOLICAS SERRA DO SALT O S.A. 2.270 (5) 2.265
CENT RAIS EOLICAS IGAPORÁ S.A. 5.059 (5) 5.054
CENT RAIS EOLICAS ILHEUS S.A. 2.550 (5) 2.545
CENT RAIS EÓLICAS N. S. CONCEIÇÃO S.A. 3.476 (6) 3.470
CENT RAIS EOLICAS PAJEÚ DO VENT O S.A. 3.184 (6) 3.178
CENT RAIS EOLICAS PLANALT INA S.A. 3.355 (6) 3.349
CENT RAIS EOLICAS PORT O SEGURO S.A, 1.053 (6) 1.047
CENT RAIS EOLICAS AMET IST A LT DA 219 (5) 214
CENT RAIS EOLICAS DOS ARACAS LT DA 219 (5) 214
CENT RAIS EOLICAS CAET IT E LT DA 219 (5) 214
CENT RAIS EOLICAS ESPIGAO LT DA 219 (5) 214
CENT RAIS EOLICAS PILÕES LT DA 219 (5) 214
CENT RAIS EOLICAS SAO SALVADOR LT DA 219 (5) 214
CENT RAIS EOLICAS VENT OS DO NORDEST E LT DA 219 (5) 214
CENT RAIS EÓLICAS DA PRAT A LT DA 1 (1) -
CENT RAIS ELET RICAS T ANQUE LT DA 1 (1) -
CENT RAIS ELET RICAS SERRA DO ESPINHACO LT DA 1 (1) -
CENT RAIS ELET RICAS SERAIMA LT DA 1 (1) -
CENT RAIS ELET RICAS PELOURINHO LT DA 1 (1) -
CENT RAIS ELET RICAS MORRÃO LT DA 1 (1) -
CENT RAIS ELET RICAS MARON LT DA 1 (1) -
CENT RAIS ELET RICAS IT APARICA LT DA 1 (1) -
CENT RAIS ELET RICAS DOURADOS LT DA 1 (1) -
CENT RAIS ELET RICAS BOT UQUARA LT DA 1 (1) -
CENT RAIS ELET RICAS BORGO LT DA 1 (1) -
CENT RAIS ELET RICAS BELA VIST A LT DA 1 (1) -
NOVA RENOVA ENERGIA S.A. 1 (1) -
SALVADOR EOLICA PARIT ICIPAÇÕES S.A. 1 (1) -
RENOVA EOLICA PART ICIPAÇÕES S.A. 1 (1) -
BAHIA EOLICA PART ICIPAÇÕES S.A. 1 (1) -
Total 44.206 (126) 44.080

The Company also entered into agreements on Advance for Future Capital Increase on December 31, 2010 for its
subsidiaries, as shown below:
Com pany AFAC
Centrais Elétricas Tanque Ltda 791
Centrais Elétricas Seraima Ltda 883
Centrais Elétricas Morrão Ltda 883
Centrais Eólicas da Prata Ltda 653
Centrais Eólicas Ventos do Nordeste Ltda 653
Centrais Eólicas Ventos do Nordeste Ltda 885
Renova Energia S.A.
Notes to the consolidated financial statements
December 31,2010 and 2009
(In thousands of Reais, unless otherwise indicated)

13. Property, plant and equipment

13.1 Parent company


12/31/2010 12/31/2009 01/01/2009
Annual
depreciation Historical Accumulated Historical Accumulated Net
rates % cost depreciation Net amount cost depreciation amount Net amount
(Reclassified)
Fixed assets in service
Generation
Land - - - 2.137 - 2.137 1.388
- - - 2.137 - 2.137 1.388
Administration
Machinery and equipment 10% 512 (136) 376 537 (80) 457 511
Improvements 10% 1.236 (69) 1.167 480 (33) 447 466
Furniture and fixtures 10% 669 (89) 580 327 (36) 291 300
Software 20% 564 - 564 289 - 289 -
Data processing equipment 20% 337 (103) 234 190 (52) 138 118
Vehicles 20% 6 - 6 6 - 6 6
3.324 (397) 2.927 1.829 (201) 1.628 1.401
Total fixed assets in service 3.324 (397) 2.927 3.966 (201) 3.765 2.789

Constructions in progress
Generation
To pay out 5.363 - 5.363 3.407 - 3.407 1.383
Studies and projects 22.159 - 22.159 19.817 - 19.817 10.127
Land 3.009 - 3.009 - - - -
Machinery and equipment 2.745 - 2.745 - - - -
Total constructions in progress 33.276 - 33.276 23.224 - 23.224 11.510
Total fixed assets 36.600 (397) 36.203 27.190 (201) 26.989 14.299

13.2 Cost movements (Parent company)


Capital Capital
subscription subscription Reclassifications
01/01/2009 Additions Write-offs Depreciation 12/31/2009 Transfer Additions Write-offs Depreciation 12/31/2010
SPEs Wind SPEs Wind between accounts
Farms Farms

Fixed assets in service


Generation
Land 1.388 749 - - - 2.137 - - - - (2.137) - -

Administration
Machinery and equipment 511 - - - (54) 457 - 29 - - (55) (57) 374
Improvements 466 2 - - (21) 447 - 757 - - - (36) 1.168
Furniture and fixtures 300 15 - - (24) 291 - 291 - - 52 (53) 581
Software - 289 - - - 289 - 275 - - - - 564
Data processing equipment 118 48 - - (28) 138 - 144 - - 3 (51) 234
Vehicles 6 - - - - 6 - - - - - - 6
1.401 354 - - (127) 1.628 - 1.496 - - - (197) 2.927
Total fixed assets in service 2.789 1.103 - - (127) 3.765 - 1.496 - - (2.137) (197) 2.927

Constructions in progress
Generation
To pay out - - - - - - 3.407 22.106 - (20.150) - - 5.363
Studies and projects - - - - - - 19.817 5.579 (3.237) - - - 22.159
Land - - - - - - - 872 - - 2.137 - 3.009
Machinery and equipment - - - - - - - 2.745 - - - - 2.745
Total constructions in progress - - - - - - 23.224 31.302 (3.237) (20.150) 2.137 - 33.276
Total property, plant and equipment 2.789 1.103 - - (127) 3.765 23.224 32.798 (3.237) (20.150) - (197) 36.203
Renova Energia S.A.
Notes to the consolidated financial statements
December 31,2010 and 2009
(In thousands of Reais, unless otherwise indicated)

13.3 Consolidated
12/31/2010 12/31/2009 (Reclassified) 01/01/2009
Annual
depreciation Historical Accumulated Historical Accumulated
rates % cost depreciation Net amount cost depreciation Net amount Net amount
(Reclassified)
Fixed assets in service
Generation
Land 595 - 595 2.741 - 2.741 1.992
Reservoirs, dams and ducts 3% 95.797 (5.560) 90.237 96.771 (3.302) 93.469 92.435
Buildings, civil works and improvements 3% 45.500 (3.595) 41.905 42.716 (2.095) 40.621 44.547
Machinery and equipment 4% 64.995 (4.622) 60.373 66.533 (2.778) 63.755 65.105
Furniture and fixtures 10% 80 (18) 62 87 (10) 77 -
Data processing equipment 20% 228 (65) 163 4 - 4 72
Other 20% 10 (3) 7 10 (1) 9 -
Software 20% - - - 87 - 87 -
207.205 (13.863) 193.342 208.949 (8.186) 200.763 204.151
Administration
Machinery and equipment 10% 512 (136) 376 545 (82) 463 518
Improvements 10% 1.236 (69) 1.167 480 (33) 447 466
Furniture and fixtures 10% 709 (99) 610 365 (46) 319 328
Software 20% 564 - 564 289 - 289 -
Data processing equipment 20% 355 (110) 245 205 (59) 146 128
Vehicles 20% 6 - 6 6 - 6 6
3.382 (414) 2.968 1.890 (220) 1.670 1.446
Total fixed assets in service 210.587 (14.277) 196.310 210.839 (8.406) 202.433 205.597

Constructions in progress
Generation
To pay out 34.067 - 34.067 4.943 - 4.943 1.383
Studies and projects 22.159 - 22.159 19.817 - 19.817 10.127
Land 3.009 - 3.009 - - - -
Machinery and equipment 2.745 - 2.745 - - - -
Advances to suppliers 15.410 - 15.410 - - - -
Total constructions in progress 77.390 - 77.390 24.760 - 24.760 11.510
Total fixed assets 287.977 (14.277) 273.700 235.599 (8.406) 227.193 217.107

13.4 Changes in Property, Plant and Equipment (Consolidated)


Reclassification Reclassification
01/01/2009 Additions Write-offs Depreciation 12/31/2009 Write-offs Depreciation 12/31/2010
among accounts Additions among accounts

Fixed assets in service


Generation
Land 1.992 749 - - - 2.741 - - (2.146) - 595
Reservoirs, dams and ducts 92.435 - - 3.278 (2.244) 93.469 - - (975) (2.258) 90.236
Buildings, civil works and improvements 44.547 754 - (3.285) (1.395) 40.621 342 - 2.448 (1.505) 41.906
M achinery and equipment 65.105 513 - 7 (1.870) 63.755 36 - (1.581) (1.837) 60.373
Furniture and fixtures - 11 - 73 (7) 77 6 - (14) (8) 61
Data processing equipment 72 5 - (73) - 4 6 - 211 (57) 164
Other - 10 - - (1) 9 - - - (2) 7
Software - 87 - - - 87 - - (87) - -
204.151 2.129 - - (5.517) 200.763 390 - (2.144) (5.667) 193.342
Administration
M achinery and equipment 518 - - - (55) 463 29 - (61) (57) 374
Improvements 466 2 - - (21) 447 757 - - (36) 1.168
Furniture and fixtures 328 19 - - (28) 319 291 - 57 (57) 610
Software - 316 - - (27) 289 275 - - - 564
Data processing equipment 128 21 - - (3) 146 144 - 7 (55) 242
Vehicles 6 - - - - 6 - - 4 - 10
1.446 358 - - (134) 1.670 1.496 - 7 (205) 2.968
Total fixed assets in service 205.597 2.487 - - (5.651) 202.433 1.886 - (2.137) (5.872) 196.310

Constructions in progress
Generation
To pay out 1.383 3.560 - - - 4.943 29.124 - - - 34.067
Studies and projects 10.127 11.401 (1.711) - - 19.817 5.579 (3.237) - - 22.159
Land - - - - - - 872 - 2.137 - 3.009
M achinery and equipment - - - - - - 2.745 - - - 2.745
Advances to suppliers - - - - - - 15.410 - - - 15.410
Total constructions in progress 11.510 14.961 (1.711) - - 24.760 53.730 (3.237) 2.137 - 77.390
Total property, plant and equipment 217.107 17.448 (1.711) - (5.651) 227.193 55.616 (3.237) - (5.872) 273.700
Renova Energia S.A.
Notes to the consolidated financial statements
December 31,2010 and 2009
(In thousands of Reais, unless otherwise indicated)

PP&E in use are divided into two groups:

i. Generation - Basically comprised of assets of the Serra da Prata Hydroelectric Complex and the PCHs
Cachoeira da Lixa, Colino 1 and Colino 2

ii. Management - Composed of the assets employed in the offices of the Management of Espra and the parent
company, and of machinery used for tests in the wind farms.

In November 2008, pursuant to ANEEL Normative Resolution 190 dated December 12, 2005, the unitizing
procedure was concluded with regard to the fixed assets commissioned at the Serra da Prata hydroelectric
compound. The unitized value is composed of the amount of R$11,886 referring to interest capitalized in the
construction period in 2005 and 2006.

According to articles 63 and 64 of Decree 41019 of February 26, 1957, the assets and facilities utilized in the
generation, transmission, distribution and trade of electric power are tied to these services, and cannot be removed,
divested, assigned or mortgaged without the prior and express authorization of the regulatory body.

ANEEL, through official letter 459/2001- SFF/ANEEL, of June 26, 2001, authorized the offering of emergent
rights, assets and facilities of the concession in guarantee of the performance of the obligations assumed by the
Company in the sphere of the direct financing, transfer and issue of debentures. (Note 16.1).

Depreciation of assets at the Serra da Prata hydroelectric compound was calculated according to the Electricity
Accounting and Public Service Manual, to Ordinance 815 dated November 30, 1994 issued by DNAEE
(Departamento Nacional de Águas e Energia Elétrica), and to ANEEL Resolution no. 240 of 2006.

Work in progress records expenditures in water projects, composed of basic projects and inventories that already
have authorization from ANEEL, projects of wind farms that won the reserve auction of 2009 and 2010, and of
new wind farm projects.

During the year 2010, the Company used part of its work in progress, totaling R$ 44,213, to pay up capital in 14
SPEs (Note 11).

On December 27, 2010 the Company signed a civil engineering supply agreement with the Queiroz Galvão e
Mercurius consortium, and made an advance payment in the amount of R$15,410 that is recorded under the title of
advance to supplier in the work in progress group.

14 Suppliers
Parent company Consolidated
12/31/2010 12/31/2009 01/01/2009 12/31/2010 12/31/2009 01/01/2009
Suppliers 5.989 1.408 3.251 8.100 1.968 7.283
Total 5.989 1.408 3.251 8.100 1.968 7.283

The Parents suppliers are mainly service providers and suppliers of materials for the projects under development.
In the consolidated figures, there are also sums regarding maintenance and operating costs in the subsidiary Espra.
Renova Energia S.A.
Notes to the consolidated financial statements
December 31,2010 and 2009
(In thousands of Reais, unless otherwise indicated)

15 Loans and financing (Consolidated)


12/31/2010 12/31/2009 01/01/2009
Charges Principal Charges Principal Charges Principal

Non- Non- Non- Non-


Debt cost Current Current Current Current Current Current
current current current current
Local currency
IFC - ABN Amro Real S/A 100.00% CDI + 2.5% p.a. 824 1.764 13.353 5.857 1.680 15.117 - 3.307 - 16.796
FNE - Banco do Nordeste do Brasil S/A 9.5% p.a. 30 4.572 112.246 31 4.284 116.818 32 - 3.995 121.103
TOTAL 854 6.336 125.599 5.888 5.964 131.935 32 3.307 3.995 137.899

15.1 Additional information on debt service

1. Banco Santander S.A. - Loan Agreement in the form of a credit facility, the most recent amendment dated
November 7, 2007. The main financing value upon the contracting was equal to R$ 23,253, at a 2.5% p.a.
interest rate plus updating at 100% of the CDI rate, payable every six months on the last days of January and
July, with the final portion due on May 24, 2014.

2. Banco do Nordeste do Brasil S.A. - Loan Agreement in the form of a credit facility, approved through decree
6367 dated January 30, 2008, with the participation of Enerbras and of its parent companies on June 30, 2006,
totaling R$ 120,096, at a 9.5% p.a. interest rate payable quarterly on the 30th day of each month during the
period from June 30, 2006 to June 30, 2008, and monthly therefrom on the 30th day of each month. The
agreement matures on June 30, 2026.

The following were given as security to this loan:


• The agreement matures on June 30, 2026.In March 2010, Banco do Nordeste do Brasil released a
guarantee in view of the registration of the construction.

• First-degree mortgage of the property with all the existing facilities at: (i) rural property PCH - Cachoeira
da Lixa, located in the municipality of Jucuruçu (BA); (ii) rural property PCH Colino 1 - D, E, F, located
in the municipality of Vereda (BA); First-degree mortgage of the property with all the existing facilities
at:

• Pledge on shares, entered into pursuant to articles 1,419 et seq. in the Brazilian Civil Code (Law
10405/2002) and article 39 of Law 6404/76. As an intervening party, the parent Enerbras pledged
common shares issued by Espra;

• Pledge of Rights Arising from the Authorizing Resolutions entered into pursuant to articles 1431 et seq. in
the Brazilian Civil Code (Law 10406/2002) and as permitted in paragraph 1, article 19, Decree 2003 dated
September 10, 1996, the subsidiary Espra pledges in favor of BNB:

a. a.(i) PCH Cachoeira da Lixa: Authorizing Resolution no. 697 dated December 24, 2003; (ii) PCH
Colino 1: Authorization Resolution No. 703, dated December 24, 2003; and (iii) PCH Colino 2: (i)
PCH Cachoeira da Lixa: e

b. All other rights, tangible or not, potential or otherwise, likely to be pledged pursuant to the applicable
legal and regulatory norms and the following Authorizing Resolutions: (i) PCH Cachoeira da Lixa:
Authorization Resolution No. 697 dated December 24, 2003; (ii) PCH Colino 1: Authorization
Resolution No. 703, dated December 24, 2003; (iii) PCH Colino 2: Authorizing Resolution 695 dated
December 24, 2003, with its amendments mentioned in item 'a' of the Electricity Purchase and Sale
Agreements: CT-PROINFA/PCH-MRE no. 032/2004 (PCH Cachoeira da Lixa); CT-PROINFA/PCH-
Renova Energia S.A.
Notes to the consolidated financial statements
December 31,2010 and 2009
(In thousands of Reais, unless otherwise indicated)

MRE no. 033/2004 (PCH Colino 1) and CT-PROINFA/PCH-MRE no. 034/2004 (PCH Colino 2),entered
into between Espra and ELETROBRÁS - Centrais Elétricas Brasileiras S.A.

• Assignment and Binding of Revenues from the agreements entered into with ELETROBRÁS - Centrais
Elétricas Brasileiras S.A.;

• Reserve account liquidity fund (Note 10); and


• Credit insurance to conclude the project, which owing to the conclusion of the works, is already cancelled.

15.2 Maturities of the long-term portion (principal and charges)

The portions classified in non-current assets (Consolidated) have the following payment schedule:

12/31/2010
Year of maturity

2012 7.732
2013 10.237
2014 10.996
2015 5.896
After 2015 90.738

TOTAL 125.599

16 Current tax liabilities

Parent company Consolidated


12/31/2010 12/31/2009 01/01/2009 12/31/2010 12/31/2009 01/01/2009
CSLL payable - - - 59 35 101
FGTS PAYBLE 40 25 18 40 25 18
ICMS PAYABLE 1 - 1 1 1 1
INSS payable 140 105 - 140 106 -
INSS withheld from third-parties 1 4 106 9 14 159
IOF payable 2 11 - 10 16 35
IRPJ payable - - - 191 140 261
IRRF payable 108 17 64 157 20 88
IRRF on payroll 186 153 185 186 153 185
ISS payable 3 7 1 34 63 23
PIS, COFINS and CSLL 306 43 38 436 47 40
TOTAL 787 365 413 1.263 620 911
Renova Energia S.A.
Notes to the consolidated financial statements
December 31,2010 and 2009
(In thousands of Reais, unless otherwise indicated)

17 Shareholders' equity

a. Capital

On May 7, 2010, the Company increased its capital through the capitalization of the capital reserve balance, by R$
119,272, to the new amount of R$ 165,808, divided into 108,622 nominative, book-entry shares with no par value,
of which 83,191 are common shares and 25,431 preferred shares.

On July 13, 2010, Renova Energia S.A. made its initial public offering of 10,000,000 (ten million) of Share/Unit
Deposit Certificates at R$ 15.00 per unit, composed of R$150,000. The units of Renova Energia are composed of
two preferred shares and one common share and are listed at Level 2 of BM&FBOVESPA. This offering was
settled on July 15, 2010.

On August 12, 2010, there was the settlement of the supplementary extra lot of the initial public offering of seven
hundred thirteen thousand, eight hundred (713,800) share depository certificates (units), at the price of R$15.00
per unit, totaling R$10,707.

On July 13, 2010, the Company started the payments of the respective unit distribution process in the initial public
offering. Of the gross amount of R$ 160,707, the total amount of R$13,689 was withheld as remuneration of the
companies responsible for the offering and distribution and other distribution costs, whereas the net amount
received was R$ 147,018.

On December 31, 2010 the breakdown of the company's ownership structure is shown as the chart below:

% do Capital Valor capital


Com posição acionária Ações ON Ações PN
Social Total social - R$
Quantidade Quantidade %
RR Participações 70.889.212 3.444.032 52,81% 172.423.330
Membros do Conselho de Administração 33.936 66.664 0,07% 233.352
InfraBrasil 11.651.467 23.302.933 25% 81.080.197
Santander Equity 3.904.800 7.809.600 8% 27.172.712
FIP Ambiental 4.666.666 9.333.332 10% 32.474.384
Outros 1.886.986 3.773.972 4% 13.131.153
Total 93.033.067 47.730.533 100% 326.515.128
Renova Energia S.A.
Notes to the consolidated financial statements
December 31,2010 and 2009
(In thousands of Reais, unless otherwise indicated)

18 Net operating income (Consolidated)

MWh (*) R$
12/31/2010 12/31/2009 12/31/2010 12/31/2009

Supply of electric power 224.434 224.434 36.830 35.032

(-) Deductions from revenue - - (1.344) (1.279)


COFINS - - (1.105) (1.051)
PIS - - (239) (228)
224.434 224.434 35.486 33.753

19 Operating expenses

Parent company
12/31/2010 12/31/2009
Operating expenses
General and
Manageable Total Total
administrative

Personnel, Management 3.948 3.948 2.527


Outsourced services 3.503 3.503 1.634
Rental and leases 716 716 977
Traveling 938 938 533
Depreciation 196 196 127
Provision for contingencies - - 59
Other 4.277 4.277 575
Total 13.578 13.578 6.432

Consolidated
12/31/2010 12/31/2009
Operating expenses
General and
Operation Total Total
administrative
Non-manageable
Tusd - Distribution system use charge 1.143 - 1.143 1.605
Inspection fee 76 - 76 99
1.219 - 1.219 1.704

Personnel, management - 3.948 3.948 2.527


Outsourced services 2.786 3.756 6.542 4.018
Rental and leases 1 1.248 1.249 1.529
Traveling - 970 970 533
Depreciation 5.667 204 5.871 5.043
Provision for contingencies - - - 59
Descontinuied Project 3.219 3.219 575
Other 830 1.535 2.365 1.029
9.284 14.880 24.164 15.313
Total 10.503 14.880 25.383 17.017
Renova Energia S.A.
Notes to the consolidated financial statements
December 31,2010 and 2009
(In thousands of Reais, unless otherwise indicated)

20 Financial income (loss)


Parent Company Consolidated
12/31/2010 12/31/2009 12/31/2010 12/31/2009
Financial receives
Yields from financial investments 3.979 1.828 5.268 3.016
Interest received - debentures - - - 825
Interest received - Loans 7 177 269 291
Interest received 6 - 6 182
Discounts obtained 9 42 12 43
Monetary variation 72 2 74 22
(-) Taxes and contributions - - - (22)
4.073 2.049 5.629 4.357
Financial expenses
Interest (25) (12) (40) (223)
Interest - loans (327) (144) (262) (291)
Debt Charges - - (11.699) (12.229)
Interest from debentures - - - (4.071)
Guarantee commission - - - (2.074)
IOF (137) (31) (246) (143)
Bank expenses (9) (11) (13) (16)
Fines - - - (30)
Other financial expenses - - (262) -
Exchange variance - (9) - (25)
Monetary variation - (1) - (1)
(498) (208) (12.522) (19.103)
Total 3.575 1.841 (6.893) (14.746)

21 Income and social contribution taxes


Consolidated
Income tax S ocial contribution
12/31/2010 12/31/2009 12/31/2010 12/31/2009
Deemed IRPJ and CSLL calculation basis 36.830 35.032 36.830 35.032
Rate - deemed profit 8% 8% 12% 12%
IRPJ and CSLL (2.946) (2.803) (4.420) (4.204)
Adjustments to reflect effective rate
Other revenues (1.770) (1.256) (1.770) (1.256)
IRPJ and CSLL calculation basis (4.716) (4.059) (6.190) (5.460)
Effective rate 25% 25% 9% 9%
IRPJ and CSLL calculation (1.179) (1.015) (557) (491)
Discount in excess of R$0.240 per annum 24 24 - -
IRPJ and CSLL expenses (1.155) (991) (557) (491)

The income and social contribution taxes of current year are calculated based on the rates of 15% plus a surcharge
of 10% on taxable income in excess of R$ 240 for income tax and 9% on taxable income for social contribution on
net income, and take into account tax loss carryforward and negative basis of social contribution, limited to 30%
of net profit..

The Company adopts the taxable income calculation regime, having determined the total accumulated tax loss of
R$25,119.
Renova Energia S.A.
Notes to the consolidated financial statements
December 31,2010 and 2009
(In thousands of Reais, unless otherwise indicated)

The tax presented in the consolidated position refers to the subsidiary Espra, calculated based on deemed profit.

Income and social contribution taxes under the deemed profit system are paid quarterly on the gross revenue,
considering the percentage presumption, based on the rates defined in current legislation. (Basis of estimate of 8%
and 12% on sales, income tax and social contribution, respectively, plus the calculation amount of other financial
revenue).

The income tax and social contribution figures refer to the subsidiary Espra and were prepared under the presumed
profit tax system.

22 Financial instruments

In compliance with Official Letter from the Brazilian Securities Exchange Commission CVM/SNC/SEP No.
3/2009 of November 19, 2009, CVM Instruction No. 475 of December 17, 2008, the Company made an
evaluation of its financial instruments where applicable.

Sundry considerations

The Company and its subsidiaries maintain operations with financial instruments. The management of these
instruments is done through operating strategy and internal controls, aimed at assuring liquidity, security and
profitability. The results obtained from such operations are in conformity with the policies adopted by Company's
management.

The management of the risks associated to these operations is conducted by applying practices established by
Management and includes the monitoring of levels of exposure to each market risk, and estimates of future cash
flows. Those practices establish a requirement of updating of the information in operating systems, plus
exchanging information and performing the transaction with the counterparties.

a. Market value of financial instruments – Fair value

Fair value is the amount for which an asset could be exchanged, or a liability settled, between parties
with knowledge of the deal and interest in performing it, in a transaction where none of the parties is
favored.
The concept of fair value deals with innumerous variations of metrics used for the purpose of reliably
measuring an amount.

To calculate the fair value we project the cash flows from the financial instruments up to the end of the
operations by following the contractual rules and use as a discount rate the future interbank deposit rate
disclosed by BM&F Bovespa. Some of the headings show a book balance equivalent to fair value, and
this situation occurs because the financial instruments' features are similar to those of instruments traded
in the market.

The use of different market methodologies can have a material effect on estimated realization values.
Transactions with financial instruments are stated in the balance sheet at book value, which is equivalent
to their fair value under the headings of cash and cash equivalents, trade accounts receivable, related
parties, escrow deposits, and trade accounts payable. For loans, financing and debt charges, book
balances differ from fair value.
Renova Energia S.A.
Notes to the consolidated financial statements
December 31,2010 and 2009
(In thousands of Reais, unless otherwise indicated)

Parent Company
Fair value Book value

12/31/2010 12/31/2009 12/31/2010 12/31/2009

Financial asset
Current
cash and cash equivalents 7.251 41.238 7.251 41.238
Advances to suppliers 115.655 - 115.655 -
pledges and restricted deposits 59 55 59 55
Non- current
related party transaction 212 40 212 40
pledges and restricted deposits 444 197 444 197

Financial liability
Current
Supplier 5.989 1.408 5.989 1.408
Non - current
related party transaction 1.577 3.994 1.577 3.994

Loans and financings in local currency by Banco Santander S.A. are stated as financial liabilities and are
recorded at their amortized cost, refer to loans with the specific purpose of funding investments in
electricity generation, indexed to 100% of the CDI rate, and to pre-fixed rates.

Loans and financing in domestic currency by BNB are stated as financial liabilities and are recorded at
their amortized cost, and refer to loans with the specific purpose of funding investments in electricity
generation, indexed to pre-fixed rates.
Consolidated
Fair value Book value

12/31/2010 12/31/2009 12/31/2010 12/31/2009

Financial asset
Current
cash and cash equivalents 18.569 41.475 18.569 41.475
trade accounts receivable 3.918 3.903 3.918 3.903
Advances to suppliers 120.097 - 120.097 -
pledges and restricted deposits 59 55 59 55
Non- current
related party transaction 164 40 164 40
pledges and restricted deposits 12.019 13.077 12.019 13.077

Financial liability
Current
Supplier 8.100 1.968 8.100 1.968
loans and financing 7.796 12.167 7.190 11.852
Non - current
loans and financing 128.586 132.575 125.599 131.935
Renova Energia S.A.
Notes to the consolidated financial statements
December 31,2010 and 2009
(In thousands of Reais, unless otherwise indicated)

In accordance with the similar features, and based on what is known about the financial instruments operated
by the Company, it has become possible to classify them as required by the pronouncements, whereby for
asset financial instruments we have loans and receivables, financial assets measured at fair value based on
results and held through maturity, and for liability financial instruments we have financial liabilities measured
at fair value based on results and other financial liabilities at amortized cost.
Controladora
31/12/2010 31/12/2009
Valor justo Outros ao Valor justo
Em prestimos e atraves do Mantidos até o custo Emprestimos e atraves do Mantidos até Outros ao custo
Ativos financeiros recebiveis resultado vencim ento amortizado Total recebiveis resultado o vencimento amortizado Total
Circulante
Caixa e equivalentes de caixa 7.251 7.251 41.238 41.238
Credito com Fornecedores 115.655 115.655 - -
Cauções e depósitos vinculados 59 59 55 55
Não circulante
Partes relacionadas 212 212 40 40
Cauções e depósitos vinculados 444 444 197 197

Passivos Financeiros
Circulante
Fornecedores 5.989 5.989 1.408 1.408
Não circulante
Partes relacionadas 1.577 1.577 3.994 3.994

Consolidado
31/12/2010 31/12/2009
Valor justo Outros ao Valor justo
Em prestim os e atraves do Mantidos até o custo Emprestim os e atraves do Mantidos até Outros ao custo
Ativos financeiros recebiveis resultado vencimento am ortizado Total recebiveis resultado o vencim ento am ortizado Total
Circulante
Caixa e equivalentes de caixa 18.569 18.569 41.475 41.475
Contas a receber de clientes 3.918 3.918 3.903 3.903
Credito com Fornecedores 120.097 120.097 - -
Cauções e depósitos vinculados 59 59 55 55
Não circulante -
Partes relacionadas 164 164 40 40
Cauções e depósitos vinculados 12.019 12.019 13.077 13.077

Passivos Financeiros
Circulante
Fornecedores 8.100 8.100 1.968 1.968
Empréstimos e financiamentos 7.190 7.190 11.852 11.852
Não circulante
Empréstimos e financiamentos 125.599 125.599 131.935 131.935

In order to establish a hierarchy for financial instruments with basis on their fair value, there is a need for
information that is more consistent and updated with the Company's external context. For measuring the fair
value of Company instruments, the requirements are as follows:

Level 1– prices agreed on in active markets for identical assets and liabilities;
Level 2 - different from prices charged in active markets included in Level 1 that are directly or indirectly
observable for the asset or liability;
Level 3 - for assets or liabilities that are not based on variables observable in the market;

The methods of level segregation for the fair value of the Company's financial instruments were based on an
individual analysis, considering similar operations found in the market and observing comparability criteria
that were structured taking into account the terms, amounts, grace periods, indexes and markets. The simpler
and easier the access to information on comparative instruments, the more active the market will be, and the
more restricted the information, the more restricted the market will be for measuring the instrument.
Renova Energia S.A.
Notes to the consolidated financial statements
December 31,2010 and 2009
(In thousands of Reais, unless otherwise indicated)

Parent Company Consolidated


Fair value Fair value
Mercado Mercado
12/31/2010 Similar - level 2 12/31/2010 Similar -

Financial asset
Current
cash and cash equivalents 7.251 7.251 18.569 18.569

b. Marker risk

The market risk refers to the possibility of monetary loss arising from fluctuations of variables that have
impact on prices and rates negotiated in the market. Said fluctuations impact on virtually all sectors and,
therefore, are financial risk factors.

The loans and financing taken by subsidiary Enerbras and affiliated company Espra shown in Note 15 are
from BNB, IFC - Santander. The contractual rules for financial liabilities create risks linked to those
exposures. As of December 31, 2010, the subsidiaries had a market risk associated to interbank deposit rate,
long-term interest rate and the general market price index.

To determine market risks associated to interest rates we considered the general market price index (IGP-M,
CDI and TJLP), the interbank deposit rate, and the long-term interest rate, but took into account that the
Brazilian economy has a favorable outlook for solid growth and investments in infrastructure, as exemplified
by governmental programs such as the Growth Acceleration Program. A controlled inflation and a credit
supply are important factors to obtain low-risk funding.

Considering that the market rate (or the opportunity cost of capital) is defined by this agent, bearing in mind a
risk premium compatible with the area's activities and that, as it is not possible to seek out other alternatives or
different market opportunities and/or methodologies for it estimates, the market value of this portion of
domestic loans is close to its book value, as are the other financial assets and liabilities assessed.

c. Sensitivity analysis (Consolidated)

The direct and indirect subsidiaries have loans and financings in domestic currency.
The following table considers rate scenarios with the respective impacts on the Company's income figures,
with the applicable exposures of interest rate fluctuations and other indexators, to these transactions' maturity
dates. The likely scenario was established based on the Company's business plan as approved by Management,
with balances outstanding on December 31, 2010. Scenarios II and III represent, respectively, 25% and 50%
of increase in the risk, and scenarios IV and V represent, respectively, 25% and 50% of deterioration or
reduction, for:
Renova Energia S.A.
Notes to the consolidated financial statements
December 31,2010 and 2009
(In thousands of Reais, unless otherwise indicated)

Ativo Financeiro Risco Provável (I) Cenário II Cenário III Cenário IV Cenário V
Aplicação em Caução CDI 11.575 12.216 12.857 10.934 10.292
Aplicação Financeira - ABN CDI 221 223 226 218 216
Aplicação Financeira - VOTORANTIM CDI 6.903 6.971 7.039 6.835 6.767
Aplicação Financeira - BNB CDI 9.347 9.372 9.396 9.322 9.297

Referência para ativos financeiros Aumento da taxa em 25% 50% -25% -50%
CDI - Ano 9,71%

Passivo Financeiro Risco Provável (I) Cenário II Cenário III Cenário IV Cenário V
Empréstimos e Financiamentos CDI 15.941 16.101 16.259 15.778 15.614

Referência para passivos financeiros Aumento da taxa em 25% 50% -25% -50%
CDI - Ano 9,71%

These sensitivity analyses were prepared according to Brazilian Security Exchange Commission CVM
Instruction no. 475/2008, with the purpose of measuring the impact of changes in market variables on each of
the Company's financial instruments. However, settling the transactions involving such estimates may result in
sums different from those estimated, owing to the subjectivity contained in the procedure used to prepare
these analyses.

d. Liquidity risk

The liquidity risk shows the subsidiary's ability to settle assumed obligations and determine the subsidiary's
financial capacity to adequately meet its commitments, loan maturities, and other obligations included in the
disclosures. More detailed information on loans taken by the Company is shown in Note 15.

The Company's management only makes use of credit facilities that allow great operating leverage, an
assumption confirmed by observing the characteristics of the loans taken.
In the Company's loan agreements there are no covenants stipulating accelerated maturities in case of failure
to meet requirements.

e. Credit risk

Credit risk includes the possibility that the Company may fail to realize its rights and is directly related to
headings such as cash and cash equivalents, trade accounts receivable, escrow deposits, and others.
Renova Energia S.A.
Notes to the consolidated financial statements
December 31,2010 and 2009
(In thousands of Reais, unless otherwise indicated)

In the energy sector information on operations are submitted to the regulatory agency, which maintains active
data on energy produced and consumed, and this structure results in plans for the independent and
uninterrupted operation of the electric system. Energy sales arise from auctions and agreements with other
companies, in a system that fosters reliability and keeps industry players' defaults under control.

Another credit risk source is that associated to financial investments. The management of these financial
assets is done through operating strategies and internal controls, aimed at assuring liquidity, security and
profitability.

The Company manages its risks continuously, assessing whether the practices adopted in the execution of its
activities are in line with the policies advocated by management.

The Company does not make use of equity hedging financial instruments, as it believes that the risks to which
its assets and liabilities are ordinarily exposed compensate each other in the natural course of its activities.

The management of these financial instruments is done through operating strategies, aimed at liquidity,
profitability and security. The control policy consists of permanent follow-up of the conditions engaged versus
those in force in the market. The Company does not make any speculative investments in derivatives or any
other risky assets.
Regarding financial assets from financial investments, the Company only conducts transactions with financial
institutions classified as low risk by rating agencies in order to ensure a higher profitability while aggregating
security to the results.

Management's understanding is that its contracted financial investment transactions do not expose the
Company to significant risks that might, in the future, generate material losses.

f. Transactions with derivative financial instruments

There were no transactions with derivative financial instruments during the fiscal years in question.

g. Capital management

12/31/2010 12/31/2009 01/01/2009

Loans and financing 132.789 143.758 7.334


(-) cash and cash equivalents 18.569 41.475 6.811

Dívida líquida 114.220 102.283 523

Net equity 288.584 140.065 8.091


Capital stock 402.804 242.348 8.614
financial leverage indicator - % 28% 42% 6%

The objectives of the group in managing its capital are to protect its continuity capacity in order to offer return
to shareholders and benefits to the other interested parties, besides the maintenance of an ideal capital
structure to reduce this cost. To maintain or adjust the capital structure the Group may review its dividend
payment policy, return capital to shareholders or even issue new shares or sale assets in order to reduce, for
example, the indebtedness level.
Renova Energia S.A.
Notes to the consolidated financial statements
December 31,2010 and 2009
(In thousands of Reais, unless otherwise indicated)

23 Insurance coverage
12/31/2010
Plants 182.000
Civil liability 20.000

The indirect subsidiary Espra maintains insurance contracts with coverage determined in accordance with the
orientation of specialists, considering the nature and the degree of risk, in amounts considered sufficient to cover
possible significant losses on its assets and responsibilities. The risk assumptions, due to their nature, are out of
the scope of the auditing of the financial statements, and therefore were not audited by our independent auditors.

The main values at risk with insurance coverage are R$ 202,000 for power generation and transmission.

Due to participation in the Ler 2009 and 2010 auctions and construction of the wind farms, the company has the
following insurance policies still active:

Amount Maturity Insured


Subject of the Guarantee
insured Beginning End
Surety bond guaranteeing
the faithful performance of
the obligations of National Agency of
R$ 53,910 03/29/2010 10/01/2012
implementation of the 14 Electrical Energy
Wind Energy Generation
Centers of LER 2009.
Surety bond guaranteeing
the faithful performance of
the obligations of National Agency of
R$ 29,470 12/06/2012 12/01/2013
implementation of the 06 Electrical Energy
Wind Energy Generation
Centers of LER 2010.
ICG surety bond– National Agency of
R$ 16,275 08/13/2010 04/08/2011
Guarantee – LER 2009 Electrical Energy

The company also has the following insurance policies:

Amount Maturity Insured


Subject of the Guarantee
insured Beginning End
General civil liability
insurance for directors and R$ 30,000 12/18/2010 12/18/2011 Renova Energia S.A.
officers - D&O
Civil Liability Insurance for
Public Offering of Shares - R$ 25,000 07/07/2010 07/07/2013 Renova Energia S.A.
POSI
Renova Energia S.A.
Notes to the consolidated financial statements
December 31,2010 and 2009
(In thousands of Reais, unless otherwise indicated)

24 Subsequent events
BNB and BNDES financing for the construction of the wind farms of LER 2009.

On January 3, 2011 the Company obtained the approval of financing for its 14 wind farms contracted at the 2nd
reserve auction of December 2009 (LER 2009) from the Brazilian Development Bank (BNDES) and Banco do
Nordeste (BNB). The consolidated financial volume reaches R$ 904.6 million and represents approximately 77%
of the total planned investments of R$ 1.170 billion.

The Pajeú do Vento, Planaltina, Porto Seguro, Nossa Senhora da Conceição, Guirapá, Serra do Salto, Guanambi,
Alvorada and Rio Verde wind farms obtained approval from the Senior Management of BNDES in a total
financed volume of R$588.9 million. The volume represents approximately 74% of the total investments in these
projects. The financing has an interest rate of 1.92% + TJLP (Long-term Interest Rate), up to two years of interest
and principal grace period and 16 years of amortization term. The nine farms total 195.2 MW* of installed
capacity and an 84 MW on average of firm energy contracted.

The other five wind farms of Renova Energia contracted at LER 2009, received approval from the Senior
Management of Banco do Nordeste. The financed volume is R$315.7 million, with R$183.7 million referring to
the FNE Verde line and R$132.0 million to the transfer of the PSI-FINAME line from BNDES, corresponding in
full to approximately 80% of the total investments planned in these farms.

* * *

Ricardo Delneri Roberto Honczar


Co-CEO Chief Finance Officer and Investor
Relations

Renato Amaral Ney Maron de Freitas


Co-CEO and Chief Operating Officer Director for the Environment and
Relations

Luiz Eduardo Bittencourt Freitas Reinaldo Silveira


Chief Legal and Regulatory Officer Accountant CRC 014311-0/0-S- SP