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Rating Action: Moody's changes to negative the outlook on the ratings of Eletrobras; Ratings affirmed

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Global Credit Research - 31 May 2017

New York, May 31, 2017 -- Moody's Investors Service, ("Moody's") has today changed the outlook on Centrais Eletricas Brasileiras SA-Eletrobras (Eletrobras)' ratings to negative from stable and affirmed the corporate family and senior unsecured ratings at Ba3. Today's action follows Moody's May 26, 2017 rating action in which the outlook for Brazil's government bond rating was revised to negative from stable. (For full details, please see " Moody's changes outlook on Brazil's Ba2 issuer rating to negative from stable" at link https://www.moodys.com/research/Moodys-changes-outlook-on-Brazils-Ba2-issuer-rating-to-negative--PR_367210)

Outlook Action:

..Issuer: Centrais Eletricas Brasileiras SA-Eletrobras Outlook, Changed To Negative From Stable Affirmation: ..Issuer: Centrais Eletricas Brasileiras SA-Eletrobras Corporate family rating (CFR), Affirmed at Ba3 $1750M Global Notes due 2021, Affirmed at Ba3 RATINGS RATIONALE

The ratings affirmation coupled with the outlook change to negative from stable on the ratings of the Eletrobras follows a similar rating action on Brazil's sovereign bonds ratings and reflects the close economic and financial linkages that exist between Brazil's government and Eletrobras as a government-related issuer.

Eletrobras' Ba3 ratings consider Moody's joint-default analysis for the company and our assumption for a strong likelihood of timely extraordinary support from the government of Brazil and high default dependence between Eletrobras and the government. Eletrobras' rating also incorporates two notches uplift from the company's baseline credit assessment (BCA) of b2, which indicates Moody's view of the Eletrobras' standalone credit strength, currently constrained due to relatively weak credit metrics and tight liquidity.

RATING OUTLOOK

The negative outlook for Eletrobras mainly reflects the negative outlook for Brazil's government bond rating and Moody's view that the creditworthiness of these companies continues to be highly dependent on the credit quality of the Brazilian economy.

WHAT COULD CHANGE THE RATINGS UP/DOWN

A rating or outlook change of the sovereign could result in subsequent rating actions for this company. Upward limited pressure is limited by Brazil's current rating. A rating or outlook change could also be triggered if Moody's perceives a material change in the regulatory frameworks under which this company operates, or disruptive political interference in the normal course of its businesses. Sustained deterioration or improvement in the relevant credit metrics or the liquidity profile is also a trigger for a rating change for this issuer.

The methodologies used in these ratings were Regulated Electric and Gas Utilities published in December 2013 and Government-Related Issuers published in October 2014. Please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.

Eletrobras is a holding company controlled by Brazil´s federal government, which indirectly holds 51% of Eletrobras' voting capital and 41% of its total capital. Eletrobras is the largest Brazilian electricity company,

 

responsible for 47% of the country's total high-voltage transmission lines, 31% of Brazil's total generation installed capacity and 5% of the total energy distributed in the country.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Cristiane Spercel

Vice President - Senior Analyst Infrastructure Finance Group Moody's America Latina Ltda. Avenida Nacoes Unidas, 12.551 16th Floor, Room 1601 Sao Paulo, SP 04578-903 Brazil JOURNALISTS: 800 891 2518 Client Service: 1 212 553 1653

Michael J. Mulvaney MD - Project Finance Project Finance Group JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653

Releasing Office:

Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A.

JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653

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CENTRAIS ELÉTRICAS BRASILEIRAS S.A. - ELETROBRÁS
By:	/S/ Armando Casado de Araujo
	Armando Casado de Araujo Chief Financial and Investor Relation Officer