Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. 

Form 20-F ___X___ Form 40-F _______

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes _______ No___X____

Date: 30/11/2017 IT DFP/DFF/DDE 001/2017

DFP/DFF/DDE Joint Technical Information

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Appendices

Tariff Level

Analysis and Results of Amazonas Energia Analysis and Results of Boa Vista Energia Analysis and Results of Ceal Analysis and Results of Cepisa Analysis and Results of Ceron Analysis and Results of Eletroacre

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1. OBJECTIVE

This Technical Information is intended to support the decision of Eletrobras’ Management concerning the sale of controlling interest of the distribution companies - Amazonas Energia Distribuidora S.A. – Amazonas Distribuidora de Energia (AmE D), Boa Vista Energia S.A – Boa Vista Energia, Companhia Energética de Alagoas S.A. – Ceal, Companhia Energética do Piauí S.A. – Cepisa, Centrais Elétricas de Rondônia S.A. – Ceron, Companhia de Eletricidade do Acre S.A. – Eletroacre, in privatization auction according to modeling approved by the Board of the Investment Partnership Program – CPPI, by means of Resolution 20, dated November 8, 2017, amended by Resolution 28, dated November 22, 2017, based on studies performed by BNDES. The privatization process will result in the adoption by such companies of a legal regime similar to the one of other non-state agents operating in the national energy supply segment.

In this vein, the 2015-2030 Strategic Plan, approved on November 26, 2014, by means of RES/DEL 775/2014, defines the generation and transmission sectors as a main part of its business portfolio or core business, excluding the distribution segment, rendering clear the need for repositioning Eletrobras in this segment.

2. DISCLAIMER

It should be noted that, for all the distribution companies, the basic data and the assumptions adopted in the economic and financial projections, and in the business modeling, were defined by BNDES - the Brazilian Development Bank, in its own independent process, without the interference of Eletrobras.

The first version of the BNDES’ study was sent to Eletrobras on September 27, 2017, through the AD Official Letter no. 22/2017 of BNDES. Subsequently, a new version was submitted to Eletrobras on October 19, 2017, through AD/DEADE3 Official Letter no. 18/2017 and, finally, on November 01, 2017, BNDES presented the final version of the study through the AD/DEADE3 Official Letter no. 20/2017, which was approved by CPPI

Resolution 20/2017.

Said CPPI Resolution was enacted based on Decree 9192, dated

November 6, 2017, and was amended by CPPI Resolution 28/2017.

The modeling proposed by BNDES includes the sale of Amazonas Distribuidora de Energia S.A. without Amazonas Geração e Transmissão de Energia S.A., i.e., already unbundled.

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001/2017

Therefore, the realization of the sale of AmE D depends on the conclusion of the so-called unbundling process established in Paragraph 5, Article 4 of Law 9074, dated July 7, 1995, which defines that the concessionaires, the permit holders and the authorized electric energy public utility companies that operate under the National Interconnected System -SIN cannot develop activities of generation and transmission of electric energy, among others.

3. PDNG 2017 - 2021

In November 2016, the Board of Directors of Eletrobras – CAE, by means of DEL 224/2016, approved the Master Plan of Business and Management of Eletrobras Companies - PDNG 2017 - 2021, which encompasses targets and projects for accomplishing the strategic goals of the companies of Eletrobras System and keep alignment with the Corporate Identity of Eletrobras – Mission, Vision for 2030 and Values.

2017-2021 PDNG is centered upon three cornerstones or strategies, as shown below:

(i) Governance and compliance, by means of the strategic alignment, risk management and compliance;

(ii) Financial discipline, aiming to reduce its net and gross debt, by means of privatizations, demobilization of operating and non-operating assets;

(iii) Operating excellence, by means of the reduction of their costs with respect to the current costs and increase of its current revenues, upon operating restructuring, Encouraged Retirement Plan - PAI, Center of Shared Service and automation.

Thus, the privatization of the distribution companies is part of the scenario of economic and financial balance of Eletrobras, since it will avoid large disbursements of funds necessary to finance the immediate cash deficit and the large investments established in the new concession cycles of each of these distribution companies.

It should be noted that the disposal of the distribution companies’ controlling stake will greatly help achieving the target of reducing the net debt/EBITDA indicator, thus reducing the future needs for Eletrobras’ fund raising.

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It should also be pointed out that, since they are federal state-owned companies, the transfer of the shareholding controls of these distribution companies shall abide by the rules of PPI - Program of Partnerships and Investments, created by Provisional Measure no. 727/2016, converted into Law 13334, dated May 12, 2016, in order to facilitate the privatization.

In this sense, the inclusion of the distribution companies of Eletrobras in PPI happened upon the Resolution 3/2016 of CPPI, which, among other conditions, defined that the privatization of the distribution companies should happen over the 2nd half of 2017. This decision of CPPI was legitimized with the issuance of Decree 8893, dated November 1, 2016, which defined the PPI projects which will be treated as a national priority in the energy and mining industries and, recently, by Decree 9192, dated November 6, 2017, which provides, pursuant to Law No. 12783/2013, for the bidding of distribution and transmission concessions associated with the transfer of control of a legal entity providing public electricity service.

ELETROBRAS

Eletrobras acquired the equity control of a set of state-owned utility service companies in the North and Northeast regions in order to promote its economic and financial balance and aiming at the privatization of such companies. In this sense, Law 9619 / 98 authorized Eletrobras to purchase the respective controlling stake of the state electricity distribution utility service companies: Ceal, Cepisa, Ceron and Eletroacre, with funds of the General Reversal Reserve - RGR. The privatization process of such companies was legally supported by their inclusion in the National Privatization Program - PND. Later, by means of Provisional Measure no. 1985-25/2000 (transformed in MP no. 2181-45/2001), Eletrobras was also authorized to acquire the controlling stake of Companhia Energética do Amazonas - CEAM, which was included in the PND on January 22, 2007 by means of Decree 6026/2007. This company was dissolved by merger into Manaus Energia S.A., originating Amazonas Energia, currently Amazonas Distribuidora de Energia S.A.

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Law 9619 of April 2^nd, 1998 also provides that, once effected the acquisition control of the aforementioned companies, they would be included in the PND, and it would fall upon Eletrobras to implement any and all economic, financial and administrative measures required to privatize the company, as per Law 9491 of September 9^th, 1997.

After assuming the respective controlling stake, Eletrobras was in charge of managing such energy distribution companies, as well as making investments required to foster the continuity of the distribution utility services provided by them. It is worth mentioning that the influence of Eletrobras should be temporary and would end with the effective privatization of the energy distribution companies. BNDES, at the time and in acting as privatization process manager, was in charge of conducting such processes, which were indeed initiated. At that occasion, the referred financial institution hired technical advisories in order to evaluate companies and proceeded to follow up such services.

Due to several reasons, the Privatization Program was not implemented in the 1990s, and the distribution companies, which initially would be managed by Eletrobras for a short period of time, became permanent investments. In a parallel process, focusing on the operation of its business group in the generation and transmission segments, Eletrobras split up Eletronorte, forming with the supply assets from Manaus and Boa Vista, respectively, Manaus Energia and Boa Vista Energia, independent companies also intended to be privatized. Later, CEAM was incorporated by Manaus Energia, whose process finished in 2008. In the following year, the name of the supplier was altered and became Amazonas Energia S.A.

It is important to highlight that during this whole time the federal-owned distribution utility service companies were not removed from the PND, even with the change of the sector management policy that took place after 2002. This fact is even more relevant considering that Eletrobras and its subsidiaries Eletrosul, Eletronorte, Chesf, Cgtee and Furnas were removed from the PND by Act 10848 of March 15^th, 2004, which revoked article 5 of Law 9.648, dated May 27, 1998; The table hereunder presents the controlling shares of Eletrobras in the capital of the distribution companies aimed in this process.

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4.2 ECONOMIC, FINANCIAL AND OPERATIONAL PERFORMANCE OF

ENERGY DISTRIBUTION COMPANIES

Despite the contributions made by Eletrobras around R$ 22.9 billion (amounts adjusted by SELIC until Jun./17) since the year 2000, estimates show that the energy suppliers still need large sums of resources not only to finance expansion, but also to cover operating deficits and working capital, particularly by debt service, purchase of energy, at high indices of technical and commercial losses and the unbalances in the transfers of Fuel Consumption Account – CCC to insolated systems.

In addition to the disbursed amounts, Eletrobras made the payment of R$ 638.2 million for the state governments to acquire the distribution companies, with funds withdrawn from RGR Fund, which, adjusted until Jun./2017 at the rate of 5% per annum (rate that adjusts the debt balance of RGR fund for inflation), reaches the amount of R$ 1.4 billion¹. Thus, it can be considered that, concerning updated amounts, Eletrobras has already spent R$

¹ It is worth emphasizing that the historical amount of R$ 173.1 million paid to acquire Manaus Energia is not part of the sum paid to State Governments, as the former was acquired from Eletronorte, currently undergoing a corporate restructuring.

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distribution activity with six energy distribution companies, an amount that does not consider R$ 5.3 billion of the debt balance (Jun./2017) from loans granted with ordinary resources from Eletrobras.

One may confidently affirm that the conditions of the service provided to local populations have improved over the years, such as, for instance, the increase of distribution network extension and the reduction of DEC and FEC indicators. However, it was not possible to reach the operating and quality indexes in any of the companies set out by the Brazilian Electricity Regulatory Agency - ANEEL. Additionally, even though there was no success in reverting the negative financial situation of most of those companies and no financial return of the invested capital, some earnings were relevant for the served populations and for the local economies.

In an analysis made in 2008 concerning the issues faced by energy distribution companies and the causes behind the unsatisfactory performance, factors of regulatory and organizational nature were identified. The first is related to the fact that changes to the Brazilian Power Sector model prioritized the interconnected system, while specific rules for the insolated systems were left to be analyzed in a future moment.

Higher loss and default indices, and in many cases, higher operating costs compared to private utility service companies, in view of legal requirements for contracting goods and services, contributed to the observed economic and financial imbalances.

Not only the difficulties and issues resulted from the specific regime of state-owned companies aggravated the scenario of operational and financial difficulty currently faced by

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energy distribution companies ,but also other peculiar factors, the vast and poorly populated concession area (approximately 30% of the Brazilian territory with only 6.5% of the Brazilian population), the geographic dispersion of the managed assets, social aspects of the areas where companies operate, and in some cases, with outdated tariffs², where the peculiarity of the isolated systems, and mainly of the Amazon rainforest, all imposed more operating costs that are currently not reflected in the adopted tariffs.

It is also worth mentioning that energy distribution companies have faced difficulties in reaching the goals set out by ANEEL, mainly concerning default of clients, nontechnical losses, service interruption indexed and operating costs. Part of the problems is due to the precarious nature of the distribution utility system, considering the entire amount of resources invested in these companies, which increases maintenance costs of the network and will result in the significant needs for investments by the new controller.

Following the awarding of a sizeable number of concessions related generation, transmission and distribution of electric power in 2015, the Federal Government amended Act 12783, of January 11^th, 2013, conversion of the Provisional Measure 579 of September 11^th 2012, which allowed the extension of such concessions, at the discretion of the granting power, a single time, for the term of up to 30 (thirty) years, in order to ensure the continuity, efficiency of the service provided and the lower tariff value.

Extension of concessions related to generation and transmission of electric energy was anticipated to January 2013, as per Decrees 7805 of September 4^th, 2012 and Decree 7850 of November 30^th, 2012, which regulated Provisional Measure 579/2012.

Concerning the distribution utility concessions, considering that such activity is already strongly regulated by ANEEL, there was no need to anticipate the extension of such concessions. This way, the regulation of Article 7 of Law 12783/2013 was implemented with the homologation of Decree 8461, dated June 2, 2015.

² For Cepisa and AmE D, assets considered in the shielded remuneration base are well beyond the totality of unitized and operating assets of such companies, which results in a low remuneration of the invested capital and in low tariffs, contributing to operating deficits presented by them.

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Article 1 of Decree 8461/2015 allowed the extension of distribution utility concessions for 30 (thirty) years considering the compliance with the following criteria:

(i) efficiency with relation to the quality of the service provided, calculated by means of indicators “Equivalent Interruption Duration of Internal Origin per Consuming Unit” (DECi) and “Equivalent Interruption Frequency of Internal Origin per Consuming Unit”
(FECi);

(ii) efficiency with relation to the economic and financial management, calculated by means of EBITDA and indebtedness level;

On June 9^th, 2015, ANEEL, with the purpose of obtaining subsidies and additional information and of improving the amendment term draft to the distribution utility concession contract, in accordance with Decree 8461/2015, summoned Public Hearing –AP 38/2015, by means of documental interexchange, between June 10^th and July 13^th, 2015. This Public Hearing was reopened between September 25^th and October 5^th, 2015 with the purpose of collecting subsidies and additional information solely concerning the subclause included in the amendment term draft to the contract, to apply the objective criteria set forth in Decree 8461/2015, enticers of the concession extinction, related to the assessment of the quality of the service and of the economic and financial management as per the terms of determination 9.7.2 from Court Decision 2253/2015 of the Federal Court of Accounts – TCU.

The result of AP 38/2015 was the publication of ANEEL Dispatch 3540/2015, which approved the draft of the amendment term or concession contract of electric energy distribution companies, with the purpose of extending them and submitted the referred processes to the Ministry of Mines and Energy.

Considering the need to extend theterm to conclude studies related to the draft of the amendment term or concession contract of electric energy distribution companiess made available by ANEEL, by the interested parties, in order to allow concessionaires to foster all business–related arrangements for decision-making and to make possible a detailed assessment by its controllers, it was then homologated Provisional Measure 706 of December 28^th, 2015, converted in Act 13299 of June 21st, 2016, which granted term of

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up to 210 (two-hundred and ten) days to allow the concessionaire to sign a concession contract or amendment term following decision of the granting power for the respective extension.

Considering the enlargement of the term for decision-making concerning the extension of energy distribution concessions, Eletrobras hired an independent consulting company, Deloitte Touche Tohmatsu, to perform the economic and financial assessment of its suppliers with the purpose of providing subsidies to its decision-making bodies.

At first, it is worth emphasizing that the studies prepared by Deloitte had as main premises the transfer of the controlling stake of energy distribution companies in 2017 and the benefits resulting from PLC 11/2016. Additionally, it was performed an analysis of the amendment term draft to the concession contracts.

ANEEL, aiming to establish annual targets in compliance with the provisions under Decree 8461/2015, ascertained the methodology in Technical Note 335/2015-SCT-SFE-SFF-SRD-SEM/ANEEL for the period ending in September 2014. The results are included in the chart below. For the calculation of interest, Selic was considered at 12.75% p.a. The 111% spread implies a cost of 14.15% p.a.

Source: ANEEL, Technical Note 0335/2015-SCT-SFE-SFF-SRD-SEM/ANEEL.
Note: values in BRL million.

Additionally, Deloitte assessed the EBITDA and the indebtedness forecasted for the distribution companies of Eletrobras, as well as the need for disbursements of capital and the amounts of the debts of these distribution companies of ordinary funds (RO) of

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Eletrobras based on the position of June 30, 2016, in such a way to check if they would meet the targets indicated by ANEEL. The results are included in the tables below.

³ PLC 11/2016 – Bill for Conversion of the Provisional Measure 706/2015, which ended up with the sanction of Law 13299/2016.

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The tables above show that, in order to meet the economic and financial sustainability goals defined by ANEEL, it would be necessary to capitalize on the companies to make possible the payment of all RO’s debts to Eletrobras, as well as new capital contributions up to 2025, which would total R$ 12.1 billion, on the date of the studies, considering the scenario with the benefits of PLC 11/2016 and the neutrality of the natural gas contract signed with Cigás/Petrobras, existing in AmE D. Out of this amount, R$ 7.1 billion would be in 2016 and R$ 4.0 billion would be for the payment of RO’s debts, and R$ 3.0 billion for investments and other. In the alternative scenario, without the benefits of PLC 706/2016 and with the neutrality of the gas contract of AmE D, the need for disbursements of capital is expected to increase up to BRL 22.9 billion. Out of this amount, BRL 9.0 billion would be earmarked for 2016, out of which, BRL 4.0 billion should be used to pay the RO debts and BRL 4.9 billion would be allocated in investments and other disbursements.

Thus, the studies pointed out that the extension of Eletrobras’ distribution utility service concessions would only be viable if the Federal Government contributed capital directly to the distribution companies, through the assignment of the preemptive rights by Eletrobras, in compliance with Law 6,404/1976 and Decree 1,091/1994, in the total amount required to meet the targets set by ANEEL, until the sale of the controlling interest of the distribution companies.

In addition to this, not only the high level of indebtedness of the distribution companies is noteworthy, but also their litigations. The table below shows, in a simplified form, the

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assets and liabilities of the distribution companies in December 2015, which were taken into consideration in Deloitte’s assessments.

Source: Eletrobras Financial Statements as of December 31, 2015

In this regard, the following should be underlined: i) the unavailability of Eletrobras to dispose of or arrange funds to make the said disbursements of capital given its level of indebtedness and the country's adverse macroeconomic situation; ii) the efforts to achieve the targets defined by ANEEL were relatively severe; and iii) PLC 11/2016 could not be converted into Law, increasing the risks for Boa Vista and AmE D, and generating risks and uncertainties about the feasibility of maintaining the concessions of these distribution companies.

In view of the foregoing, on July 22, 2016, the Eletrobras’ shareholders, through the 165th Extraordinary General Meeting, decided, by majority vote, not to extend the concessions of the Eletrobras’ distribution companies, pursuant to Decree No. 8461, dated June 2, 2015, of ANEEL Order no. 3540, dated October 20, 2015, of Provisional Measure no. 706/2015, dated December 28, 2015, of the Ministry of Mines and Energy Order (without number), dated December 28, 2015, and the draft contractual instrument issued by ANEEL.

In addition to this, the shareholders approved, by majority vote, the liquidation of the distribution companies Cepisa, Ceal, Eletroacre, Ceron, Boa Vista Energia and AmE D, allowing the transfer of controlling shareholder, as long as it happened until December 31,

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2017, under the terms of Paragraph 1-A of Article 8, Law no. 12783/2013, with the new wording given by Provisional Measure No. 735/2016, converted into Law 13360/2016, provided that, until the transfer of the distribution company to the new controller, the distribution company received, directly from the Federal Government or through a tariff, all the resources and remuneration necessary to operate, maintain and make the investments which are connected to the public utilities of the respective distribution company, maintaining the economic and financial balance of the Distribution company, without any contribution of resources, at any title, by Eletrobras.

On that occasion, Eletrobras' shareholders decided to approve that, should the transfer of control not occur until the date of December 31, 2017, all necessary steps should be taken to liquidate these electricity distribution utility service companies, under the terms of item 11 of the 165th EGM’s draft,, as transcribed below:

11. Approving, by majority vote, that the concession of distribution companies Companhia Energética de Piauí - CEPISA; Companhia Energética de Alagoas - CEAL; Companhia de Eletricidade do Acre -ELETROACRE; Centrais Elétricas de Rondônia S.A - CERON; Boa Vista Energia S.A; and Amazonas Distribuidora de Energia S.A be returned at any time and that the provisions of its liquidation are adopted, in the following events: (i) the transfer of controlling interest referred to in Item 9 above is not performed until December 31, 2017;"

4.4 TEMPORARY PROVISION OF DISTRIBUTION SERVICE

Law 12783/2013, in its Article 9 established that, if there was no extension of term of concession and aiming to ensure the continuance of the service provision, the holder may, after maturity remain in charge of the electricity services provision until the new utility service company assumes the responsibility, abiding by the conditions established under the Law.

Considering the decision of the shareholders of Eletrobras for the non-extension of its distribution concessions, the Ministry of Mines and Energy enacted the MME Ordinance 388, dated July 26, 2017, which establishes the terms and conditions for the Provision of the Public Utility of Distribution of Electric Energy by and Agency or Department of the Federal Government, under the terms of Article 9, paragraph 1 of Law 12783/2013. The

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said Service Provision shall be applicable to the areas whose concession has not been extended, under the terms of the said Law, Decree no. 7805/2012 and Decree no. 8461/2015, with the purpose of ensuring the service continuance.

In this context, by means of the MME Ordinances numbers 420, 421, 422, 423, 424 and 425, the distribution companies of Eletrobras Amazonas Energia SA, Companhia de Eletricidade do Acre, Centrais Elétricas de Rondônia SA - CERON, Companhia Energética of the Piauí - CEPISA, Companhia Energética de Alagoas - CEAL, and Boa Vista Energia SA were appointed as Responsible for the Provision of the Public Service of Distribution of Electric Energy, in order to ensure the continuance of the service in the established areas.

Additionally, by means of MME Ordinance no. 425, dated August 3, 2016, and by means of Order of Minister of Mines and Energy, on August 11, 2016, the concession that was owned by Companhia Energética de Roraima - CERR was terminated, and Boa Vista Energia became the temporary provider of the distribution service, effective as of January 1. 2017, in the area previously served by CERR.

On September 14, 2016, ANEEL opened the Public Hearing 063/2016, with the purpose of obtaining subsidies for the improvement of the regulation of MME Ordinance no. 388/2016 referred to above.

Additionally, as a result of the need for immediate application of the provisions proposed in the said Public Hearing, under the penalty of hindering the continuance and adequacy of the service provided, ANEEL provisionally published Order 2447/2016. The said hearing ended up with the publication of the Normative Resolution 748/2016 and Homologation Resolution 2184/2016. In this last Resolution, the monthly value to be received by each distribution company as loan of RGR was homologated⁴, and referred to as appropriate remuneration. This amount was calculated by ANEEL to eliminate the monthly cash deficits of these companies, based on financial information for 2015, since Eletrobras was precluded, by decision of its shareholders, to disburse new funds to the distribution companies.

⁴ Initially, the funds of RGR would be loans that the new controlling shareholder was expected to pay in 48 months after the execution of the concession contract, out of which, 12 months would stand as grace period for interests and principal, and 36 months would be for amortization purposes, at the cost of 111% of Selic. However, the current understanding of ANEEL and MME is that the payment of these RGR loans would significantly burden the future controlling shareholder of the distributors, reducing the attractiveness of the companies, and may frighten interested parties into the auction. Thus, by means of Technical Note 149/2017, a ANEEL, according to MME, there is positioning for the loan of RGR to start being paid by the consumer, through the tariff, between the 6th and the 30th year of the new concession.

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In October 2016, ANEEL forwarded to the distribution companies of Eletrobras the Instrument of Commitment and Temporary Distribution Service Provision Plan. The Instrument of Commitment is an instrument whereby the shareholders of the distribution companies undertake the commitment to abide by the conditions for the continuity and appropriateness of the service provided, especially with respect to the following parameters: (i) compliance with the industry rules; (ii) loss of electricity; (iii) operating costs; (iv) Equivalent Duration of Interruption per Consumer Unit (DEC); (v) Equivalent Frequency of Interruption per Consumer Unit (FEC); (vi) Quality of information provided to ANEEL; and (vii) compliance with ANEEL’s inspection regulations. The Temporary

Distribution Service Provision Plan establishes the conditions to ensure the continuity and the appropriate provision of the distribution service until the bidding and assumption of the new utility service company, for approval by Eletrobras. The instruments above were approved by the Board of Executive Officers of Eletrobras by means of Resolution 636/2016.

It should be noted that during the precarious concession period of the Distribution companies, both MME and ANEEL participated actively in the management of the distribution companies appointed for the provision of services. In MME Ordinance no. 388/2016, it was established, in its chapter IV, that the provision of the service would be monitored, inspected and regulated by ANEEL.

Aiming this purpose, ANEEL, by means of Normative Resolution no. 748/2016, ruled down, among other measures, that the senior management of the appointed distribution companies should monthly attend ANEEL, as of January 2017, which has been happening, to render accounts concerning the execution of the agreed on Temporary Service Plan, in order to present the results achieved concerning each of the indicators followed, as well as the actions implemented and under implementation to comply with said plan.

In addition to this, reports, certified by the respective Fiscal Boards, regarding the compliance with the Temporary Provision of the Service until its actual conclusion, are submitted quarterly to ANEEL, based on the income of the fourth quarter of 2016, as a condition for receiving the transfers of resources of CCC, CDE, RGR, and the application of tariff adjustments and reviews.

In this sense, a working group was created in the Agency by ANEEL Ordinance No. 4416 / 2017, to monthly monitor the compliance with the Temporary Service Plans.

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In addition to this working group, another group was created, within the scope of the

MME’s Electric Energy Office, through the SEE/MME Ordinance no. 4, dated September 22,

2016, for monthly monitoring of the provision of public energy distribution utility. This group includes members of the Executive Office/MME, Office of Electric Energy/MME, Office of Planning and Energy Development/MME and Economic Advisory/MME, as well as the Power Commercialization Chamber–(CCEE) and Eletrobras.

5. CURRENT STATUS OF DISTRIBUTION COMPANIES

Taking into account the position of June 30, 2017, the accrued net equity of all six distribution companies was negative by R$ 14.8 billion, already considering past and successive conversions of debt into capital. The total debt of these distribution companies is about BRL 30 billion. Out of this total, R$ 468.10 million are debts with the RGR fund, R$ 5.5 billion are debts with Eletrobras – Ordinary Resources or RO, R$ 15.8 billion with Petrobras, R$ 4.2 billion of obligation of reimbursement to the CCC Fund, and the remaining balance are debts with banking institutions and related parties.

Table 11.Summary of Loans and Financings (Jun./2017) – R$ million

Source: Eletrobras

Regarding the total loans and financings of the distribution companies with Petrobras (which includes debts connected to BR Distribuidora), the distribution companies Amazonas Energia, Boa Vista Energia, Eletroacre and Ceron executed, with Petrobras/BR, debt settlement agreement - DSA, which are based on the supply of fuel by Petrobras and BR Distribuidora. In these CCDs, Eletrobras is guarantor and, on the base date of 06/30/2017, the guaranteed balance was nearly R$ 3 billion.

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As it will be demonstrated in the tables below, Eletrobras’ energy distribution companies have been showing recurring losses in the last five years. Except for the year 2014, where Eletroacre, Cepisa and Ceron made a profit, in all other years, all companies presented losses, with 2016 being the worst year in history, with a total loss of R$ 7.0 billion. Out of this amount, 40% is explained only by the financial result that, year on year, has been aggravating the performance of companies, which ranged from R$ 950 million, in 2013, to R$ 2.8 billion, in 2016, as income. The financial result is highly impacted by the stock of debts of RO and RGR, but mainly due to the adjustment for inflation of the debt of fuel (oil and gas) with Petrobras/BR Distribuidora, which, in August 2017, amounted to R$ 15.8 billion.

Analyzing EBITDA, once again excepting 2014, in the other years, the set of six distribution companies obtained a negative cash generation. In other words, revenues generated from operating activities are not even enough to cover the costs and expenses connected to the companies’ operation. Thus, it can be concluded that the operational activity of the distribution companies does not generate a positive margin for the Eletrobras’ distribution companies, although there are subsidies from the CDE CCC Fund

Accrued losses over the last years have brought consequences to the net equity of the companies. Since 2011, Eletrobras’ distribution companies have been showing a negative net equity, even with the constant contributions made by Eletrobras, as already referred to. In December 2016, the equity of the six distribution companies was negative at R$ 13.3 billion; in June 2017, it already accumulates R$ 14.8 billion, which shows its constant deterioration.

The tables below show the evolution of some economic and financial indicators, considering the consolidated and individual position of the six distribution companies:

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Global level of investments of Eletrobras’ energy distribution companies from the period 2009-2016 shows a growing curve in the first four years, up to 2012. After the publication of Provisional Measure 579/2012, converted into Law 12783/2013 and the associated reduction of the revenues of Eletrobras, the level of investment of the distribution companies entered a decreasing curve as for the financial incapacity of Eletrobras to maintain the contributions of resources in these companies. It also contributed to the shrinkage of the investment levels.

However, investments in the distribution business posted a strong increase in 2015, and continued with this trend in 2016, when the amount invested reached R$ 1.13 billion (highest nominal value in the period), R$ 861.2 million out of which in expansion, and R$ 274.8 million in maintenance of the electric distribution network, with funds coming from IBRD, connected to the Project Energia + and RGR, notably in the so-called post-designation period, in the wake of the above MME Ordinances.

According to this sense, the historical data of the last seven years on the operating indicators of Eletrobras’ distribution companies may be checked below and, as can be seen, out of the four indicators (DEC, FEC, Energy Losses and Active Default), only the index of loss on injected energy did not show a downward trend, remaining at levels close to those of 2010, greatly influenced by the performance of AmE D, which has the highest weight among the indicators. Losses of AmE D on injected energy starts the series by 42.5% in 2010, drops towards 37,6% in 2014, rising again to 43.1% in 2016.

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Source: Suppliers – Eletrobras

Based on the data presented, it can be concluded that regardless of the investments made – around R$ 870 million (annual) to expand and improve the electricy distribution system, contributing to an average annual growth of 8.6% of the distribution network extension

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(2011-2016) and of 4.4% in the number of clients, it was not possible to improve the economic and financial results of such companies.

It is important to emphasize that since 2003, it has been observed a concern of Eletrobras’ management with the losses caused by the maintenance of companies under its control. However, it was not possible to solve this issue. As shown by the graphs above, progress was made, but the speed of improvements is not in line with the goals set out by the regulator or even with the amounts practiced by comparable companies, thus worsening the economic and financial crises of Eletrobras’ energy distribution companies..

5.1 RIGHTS AND OBLIGATIONS WITH CCC FUND

The financial and economic unbalance of the distribution companies operating in the Northern region of Brazil over the last years was found to be strongly impacted by the generation cost of oil-powered thermal power plants. Law 12111 of December 9, 2009, which provides for the electric energy services in Isolated Systems, sets forth that part of such costs⁵ is reimbursed by the Fuel Consumption Account - CCC. Following the homologation of Act 12783 of January 11^th, 2013, conversion of Provisional Measure 579 of September 11^th, 2012, it was established that the granting to CCC would be made by the Energy Development Account - CDE. However, resources from CCC/CDE were not sufficient to achieve the financial and economic balance of such distribution companies. In view of this, there was a growing accumulation of past due debts since the distribution companies did not have the financial conditions to pay the fuel purchased from Petrobras and BR Distribuidora, considerably increasing the gas and oil debt of these companies over recent years.

The debt of AmE D, Boa Vista Energia, Eletroacre and Ceron with Petrobras and BR Distribuidora updated as of August 2017 reached the figure of R$ 15.8 billion. Out of this total, R$ 10,7 billion are negotiated under debt settlement agreement (DSA) with Petrobras and BR Distribuidora, signed in December 2014, in the payment conditions of 120 installments adjusted based on Selic, which currently, according to the reference date, has 89 installments not matured. Part of this fuel debt is backed by CCC receivables, also

⁵ Total cost of thermal generation in the isolated system above the average energy prince in the interconnected system is reimbursed by CCC. Concerning this right to reimbursement, ANEEL adopts a cutting factor on the difference between the effective energy losses of the company and the level of regulatory losses.

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substantiated in CCD, also signed in 2014, between AmE D, Ceron, Eletroacre and Boa Vista and the CDE/CCC Fund, based on express normative authorization.

Table 17. Debt of distribution companies with Petrobras/BR (BRL thousand)

Source: Eletrobras

It should be noted that ANEEL is under the process of inspecting the amounts released by CCC to the distribution companies during the period from 2009 to 2016, with unfavorable results already presented to the Company, which has a direct impact on the CCD contracts executed between the CDE / CCC Fund and distribution companies Amazonas Energia, Ceron, Eletroacre and Boa Vista, as can be seen in ANEEL Order 2504/2017, rectified on 10/27/2017 (AmE D) and Technical Notes SFF-SFG-SRG/ANEEL no. 110/2017 (Ceron), no. 90/2017 (Eletroacre) and no. 177/2017 (Boa Vista).

Based on the table above, it can be observed that ANEEL's inspection established a value to be refunded to the CCC/CDE fund by all distribution companies, except for Boa Vista Energia, which had its debt claim diminished and, if this understanding prevails, the value currently booked as debt claim in the distribution companies’ balance sheets, can become

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a liability of R$ 4 billion in the sum of the four distribution companies, resulting in a potential loss of up to R$ 12.4 billion.

In this sense, it should be noted that the debt claims, which may be assumed by Eletrobras, at the discretion of the General Meeting, according to the modeling of BNDES approved by CPPI, are under discussion within the Administrative Proceedings at ANEEL, AmE D (Proceeding nº 48500.004972/2016-34), Ceron (Proceeding no. 48500.005104/2016-71), Eletroacre (Proceeding no. 48500.005103/2016) and Boa Vista (Proceedings no. 48500.000588/2017 and 48500.000587/2017), with the dispute of the results of the inspections performed by the Agency with respect to the movement of funds of the Fuel Consumption Account – CCC earmarked for the said companies. Therefore, its realization depends on the decision of ANEEL, with the possibility of judicial treatment in the case of administrative setbacks with ANEEL.

It must be observed that, in the hypothetical event that the Regulatory Agency’s understanding is not reformed, while maintaining the inspection’s conclusion that the companies are indebted to the CCC Fund, except for Boa Vista Energia, such debt claims may be written off from Eletrobras’ Assets, and it is also necessary to recognize a liability of R$ 4 billion, which is not recognized in connection with the Administrative Appeal, namely:

For EletrobrasThe riskconnected to the assumption of these debt claims with the CCC Funds is the occurrence ofa potential loss of up to R$ 12.4 billion, impacting the Company's income and equity, when and in case the administrative and/or judicial discussion has an unfavorable outcome to Eletrobras.

Despite the information described above, it is worth mentioning, according to the legal opinion prepared by the law firm Décio Freire and Associados, dated September 18, 2017, referring to Administrative Proceeding no. 48500.004972/2016-34 above (AmE D), that, to the best of its knowledge, while there is no decision of the ANEEL’s Board wholly or partially ratifying the conclusions set forth in ANEEL Order No. 2.504/2017, there is no administrative act that implies an obligation to reimburse the fund. Additionally, the opinion considers that there is a solid legal basis for the review of ANEEL’s rulings and

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ultimately states that it is too early to provide for any potential loss connected to said Administrative Proceeding or to disclose the matter in questions in explanatory notes to the Financial Statements, as reproduced below:

“Under all of the circumstances described above, we believe there is a solid legal basis for reviewing the provisions under the Technical Notes numbers 52/2017-SFF-SFG-SRG and 141/2017-SFF-SFG-SRG, as well as a manifest failure to comply with decisions rendered by Federal Regional Court of the 1st Region, in the records of Writ of Mandamus no. 0026107-81.2012.4.01.3400.

This way, we understand that it is too early to provide for any potential loss connected to the Administrative Proceeding in question, or to disclose the matter in explanatory notes to the Financial Statements.”

It should be noted that CPPI Resolution 28/2017 rectified CPPI Resolution no. 20/2017, in its Article 3, Paragraph 1, which shall read as follows:

"In addition to the adjustments provided for in the head provision of this article, Eletrobras may, at the discretion of the General Meeting, undertake the rights and obligations of the distribution companies, referring to the Fuel Consumption Account - CCC and the Energy Development Account -CDE, recognized in the Financial Statements of the Distribution companies at the base date of the studies considering the adjustments up to June 30, 2017, including the rights connected to Item IX of Article 13 of Law 10438, dated April 26, 2002, with the new wording given by Law 13299, dated June 21, 2016, and Eletrobras shall, on the other hand, undertake the rights and/or obligations in an equivalent amount.” (emphasis added)

Accordingly, CPPI authorized the General Meeting of Eletrobras to decide whether or not to assume the rights and obligations connected to the CCC/CDE recognized in the distribution companies’ Financial Statements, dated June 30, 2017, amounting to R$ 8.47 billion, detailed in tables 17 and 18. And, therefore, the debts that may be assumed are limited to such value.

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6. MANAGEMENT OF THE PROCESS OF PRIVATIZATION OF THE DISTRIBUTION COMPANIES

BNDES, by means of Article 2 of Decree 8893/2016, was designated as responsible for the performance and follow-up of the process of privatization of the distribution companies of Eletrobras, with the following competences:

(i) disclosing and providing, as the case may be, the relevant information exclusively connected to the process of privatization referred to in the head provision, including for meeting the demand of the Board of the Partnership and Investment Program of the Presidency of the Republic and the other competent powers;

(ii) carrying out the engagement of consulting company, audit and other specialized services necessary for the performance of privatizations;

(iii) promoting the articulation with the system of distribution of securities and the stock exchange;

(iv) choosing and registering companies of renowned repute and traditional operation in the trading of capital, transfer of controlling interest, same and lease of assets; and

(v) preparing the documentation of processes of privatization for appraisal of the Federal Court of Accounts.

6.1 COSTS WITH THE PRIVATIZATION PROCESS

Decree No. 2,594, of May 15, 1998, which puts forth regulations relating to Law No. 9,491/1997, establishes that, abiding by the standards approved by CNB, expenses with third-party services incurred by the management body directly or indirectly responsible for executing and monitoring the privatization process shall be reimbursed by Eletrobras, the holder of the Brazilian Depositary Receipts ("BDR").

BNDES, in keeping with the provisions under Decree 8893/2016, by means of SUP/AD Letter 01/2017, has submitted, for appraisal by Eletrobras, a contract draft covering the remuneration and reimbursement owed to the Bank, as responsible for the performance and follow-up of the process of privatization of the distribution companies of Eletrobras.

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The execution of an agreement about the remuneration and reimbursement owed to BNDES was approved by the Board of Executive Officers and the Board of Directors of Eletrobras by Resolution 54, dated January 24, 2017, and Deliberation 28, dated January 25, 2017, respectively.

6.2 REMUNERATION OF BNDES

According to the article 25 of Decree No. 2,594/1998, for carrying out the role of manager, BNDES, Manager of the FND, shall be entitled to remuneration of two tenths one percent (0.2%) of the net value calculated on the sale of the shares, minus expenses incurred with third parties to cover its operating costs.

According to the remuneration and reimbursement agreement executed between BNDES and Eletrobras, the compensation of BNDES (Manager of FND) shall be paid when the privatization process of the last distribution company is settled. In addition to this, Eletrobras is responsible for paying the necessary services engaged by BNDES for the privatization process, amounting up to BRL 34,935,570.42. Lastly, in the event of the sale of any of the distribution companies, Eletrobras shall pay BNDES the amount of BRL 318,000.00, adjusted by IPCA as of the date of execution of the remuneration contract, with regard to each distribution company that has not been sold.

Therefore, it should be noted that Resolution 20/2017 of CPPI, which approves the transfer of the controlling interest of the distribution companies held by Eletrobras, in its Article 18 established that the remuneration of BNDES, as well as the reimbursement of expenses performed with third party, shall be as agreed with Eletrobras.

However, it’s worth mentioning that Paragraph 2, Article 11 of Decree 9192/ 2017 establishes that:

“Article 11. BNDES shall pay a remuneration for the performance of its activities, in accordance with the provisions of this Decree, as well as reimbursement of expenses incurred with third party.

Paragraph 1 The payments referred to in the caput shall be the responsibility of the controlling shareholder, as the legal entity responsible for the service of electric energy distribution or transmission.

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Paragraph 2 The notice may establish that the bidding winner referred to in Article 1 and Article 9 makes the payments referred to in the caput.”

7. CONDITIONS FOR THE DISPOSAL OF CONTROLLING STAKE

As provided for in Article 15 of Law 9491/1997, the general conditions for privatization and the minimum price shall be defined by CND. Given that CPPI succeeded CND, the conditions and minimum price shall be defined by CPPI.

The minimum prince, according to Article 31 of Decree 2594/1998, is based on economic and financial assessments prepared by independent consulting firms engaged by BNDES. Note that, in the case of difference between the values ascertained by the consulting companies in excess of 20%, CPPI is entitled to determine the engagement of an outsourced assessor, to state its position, in up to sixty days, about the assessments, event in which the respective assessment shall also base the ascertainment of the minimum price.

Therefore, CPPI published Resolution no. 20, dated November 8, 2017, as amended by Resolution no. 28, dated November 22, 2017, defining the conditions of sale, as well as the minimum price, which in this case will be at the set price. The most relevant items include the following:

(i) Sale of common and/or preferred shares held by Eletrobras of at least 1(one) common share of the capital of the distribution company, at the total amount of BRL 50,000.00, in each of the six Eletrobras’ distribution companies ;

(ii) Eletrobras shall remain the holder of one (1) common share in each distribution company;

(iii) The payment for the shares held by Eletrobras shall be made in cash and in local currency;

(iv) The Eletroacre’s minority shareholders shall be entitled to sell their shares to the new controlling shareholder, under the same conditions and prices paid for Eletrobras’ shares;

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(v) Eletrobras shall, before the transfer of controlling interest, make adjustments in the distribution companies, upon conversion of capital or assumption of the debts of the distribution companies with Eletrobras and/or third parties, according to the numbers presented in Table below;

(vi) At the discretion of the General Meeting, Eletrobras may undertake the rights and obligations of the distribution companies, related to the Fuel Consumption Account - CCC and the Energy Development Account - CDE, recognized in the Financial Statements of the Distribution companies on the base date of the studies, considering the adjustments up to June 30, 2017, including the rights connected to item IX of article 13 of Law 10438, dated April 26, 2002, with the new wording given by Law 13299, dated June 21, 2016, and, in such respect, Eletrobras should undertake, on the other hand, in a commutative manner, the rights and/or obligations at an equivalent value;

(vii) AmE D maysettle the debts with Eletrobras upon transfer of all the shares issued by Amazonas Geração e Transmissão S.A – Amazonas GT in favor of Eletrobras and/or third party, with this value deducted from the adjustment for AmE

D, defined in Item (v);

also be conditional on the execution and judicial homologation of an agreement concerning the payment of salary differences arising from the Bresser Plan, based on

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from the sale of the distribution companies’ shares, after the applicable deductions;

(x) The notice of privatization shall define the amount of shares of each distribution company to be offered in the auction of privatization, and each lot shall be acquired in full by the same purchaser;

(xi) The new controlling shareholder shall perform a new increase of capital of the distribution companies, upon subscription and payment, according to the minimum amounts presented in the next Table;

Table 20. Increase of capital on the distribution companies by the new controlling shareholder

(xii) Offering to employees and retirees, qualified according to notice of auction, of at least ten percent (10%) of all shares held by Eletrobras prior to the sale to the winning bidder, with an approximate discount of ten percent (10%) of the minimum price per share;

(xiii) The new controlling shareholder shall compensate Eletrobras for the amount of the discount of the shares purchased by the employees and retirees;

(xiv) The shares not purchased by the employees and retirees shall be compulsorily purchased by the new controller, so that Eletrobras will remain with only one (1) share;

(xv) The approval of the transfer of controlling interest by ANEEL and by the Administrative Council for Economic Defence - CADE shall be conditioned to:

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capital at up to 30%, which may be through the conversion of the debts that Eletrobras still holds against the distribution companies, in capital, according to the values in Table 30. The term for exercising the option shall be up to six (6) months, as of the date of execution of the purchase agreement; and

(xviii) Remuneration of BNDES under Decree no. 8893/2016 and Decree no. 9192, dated November 6, 2017, as well as reimbursement of expenses incurred with third party, in the manner contracted with Eletrobras.

8. DISPOSAL MODELING OF THE CONTROLLING STAKE

As already referred to, BNDES was responsible for engaging the consulting, audit and other specialized services required for performing the privatizations.

Thus, two independent consulting firms were engaged to perform the assessments of economic and financial, technical, legal, sale structure modeling thematic areas, without limitation, which were the following: Ceres Inteligência Financeira Ltda. (Ceres), which performed the economic and financial assessment (service A), and the Mais Energia B Consortium (Service B), comprising the companies Price Waterhouse Coopers Corporate Finance & Recovery Ltda., Siglasul Consultoria Ltda. and the law firm Loeser e Portela Advogados, which performed the other assessments, including the economic and financial and the modeling of the structure of sale.

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8.1 METHODOLOGY ADOPTED FOR THE ECONOMIC AND FINANCIAL ASSESSMENT

The methodology applied in the economic and financial assessments was the Discounted Cash Flow (DCF), as defined in Article 30 of Decree 2594, dated May 15, 1998. This methodology is based on the hypothesis of the value of a project to depend on its capacity of generating wealth in the future. Estimates of revenues, costs, expenses, investments and other working capital needs, in addition to all items that affect the cash flow of the project, for a certain period of time.

As the values of the generated cash flow are given in different times, they should be summed and compared at the same instant of time (present value). Thus, the net balances calculated in each period are brought to present value by a discount rate that reflects the risks inherent to the business added to the opportunity cost of risk-averse investors, that is to say, a rate of attractiveness that will reflect the opportunity cost of the business capital providers.

The discount rate adopted by the consultants is explained in the studies and was ascertained by parameters of the values generally offered by government bonds , which incorporate a specific risk of the activity and is calculated based on the model of assessment of assets, the Capital Asset Pricing Model (CAPM). By means of this model, the cost of own capital (Ke) of the project is calculated.

For project value calculations, the cost of equity (KE) and the cost of third-party capital (Kd) are weighted in proportion to the capital structure used in the project, resulting in the WACC (Weighted Average Cost of Capital) of the project. Thus, the assessments adopted the criteria of nominal Discounted Cash Flow – (DCF), having the December 31st, 2016, as the base date. The discount rate used was WACC (Weighted Average Cost of Capital).

The assessments were based on the grant of a new concession over the period of 30 (thirty) years, as of March 1, 2018, until February 29, 2048.

Besides that, the two consulting companies engaged performed the economic and financial assessments of the distribution companies based on the regulatory framework for the distribution sector, which encompasses the tariff reviews, with five-year periodicity, and the annual tariff adjustments between cycles, and on the economic cornerstone of the actual forecasts, especially those connected to the costs incurred and the invested

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capitals. Also the costs and expenses, taxes, associated working capital, estimated indemnities and contingencies and actual disbursements in the composition of the business flow were considered. The assessments have also considered the results of the accounting and legal due diligences performed by Service B.

From the regulatory point of view, as a result of the Public Hearings 094/2016 and 032/2017 of ANEEL and the MME Public Query no. 37/2017, in the economic and financial assessments, several relaxations of regulatory parameter were introduced, thus allowing conditions to rebalance the concession. Such relaxations, as well as the characteristics and peculiarities of the Brazilian Electricity Sector, were also considered in the sale modeling.

It’s worth mentioning that the flexibilization of these parameters will be applied in the first five years of the concession, including adjustments in the regulatory curves of losses and PMSO, and after the fifth year, the amortization of loans with RGR resources obtained during the designation period shall be considered as well.

In addition to the economic and financial assessments, the consulting companies also performed the assessment by market multiples, which is used to improve the robustness of the analyses about the sum ascertained, based on the relation between the market values or those of the similar transactions and operating indicators. This approach is based on the idea that similar assets have similar future returns.

9. DISPOSAL MODELING OF THE CONTROLLING STAKE

The modeling of privatization approved by CPPI, through the Resolution no. 20/2017, and established in “Product 11: Proposal of Modeling of Privatization of each Distribution Company, attached to this IT, combines corporate aspects, the manner of capitalization, the process of sale, aiming to increase the chance of success in attracting investors, as well as offer the maximum competitiveness to arrange bests conditions of offer to be received.

The modeling, in accordance with the paragraph 1 of Article 31 of Decree 2.594, dated May 15, 1998, is based on the assumption that the difference between the enterprise value calculated by the two consulting companies is smaller than 20%, as, if that weren’t so, CND would be entitled to order the outsourcing of an assessor to state its positioning, in up to sixty days, about the assessments, event in which the respective assessment shall

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also serve as basis for the ascertainment of the minimum price, which shall be a fixed price, in this case.

For the calculation of the percentage difference, the following metric was used. The table below shows the amounts of percentages for each distribution company.

Source: Eletrobras preparation, based on the economic and financial assessments, Service A and Service B.

Given the foregoing assumption, according to the assessments in Products 11 attached, the base value of the valuation is calculated from the simple average of the equity values resulting from the economic and financial assessments performed by Service A and Service B. The table below shows the starting equity value of each distribution company.

Source: Eletrobras preparation, based on the economic and financial assessments, Service A and Service B.

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Besides this, the modeling, aiming to achieve an equity value equal to zero, makes certain adjustments, which are in the individual analysis of each distribution company, which are Appendices to this IT.

Another premise adopted by the modeling is that the distribution companies will have the sale value set at R$ 50,000.00, for Eletrobras.

In general, the modeling proposed consists in the holding of auction jointly with the grant of a new concession and the disposal of the controlling stake of the distribution company. This way, a new concession is granted for the public service of electricity distribution to the distribution company itself, and the controlling interest is transferred to the new controlling shareholder.

The auction, per distribution company and sequential, shall be performed in two stages, as follows:

Source: Product 11: Proposal of Modeling of Privatization, Service B.

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In stage 1, in order to enable the privatization and increase the attractiveness of the business, the capital structure of the distribution companies should be adjusted, so that the shares have at least a symbolic value in their transference. Additionally, the sale of shares of the distribution companies to the investor is made together with the offering to employees and retirees, which shall be discussed further on. In this stage, Eletrobras remains with one share, for future decision (stage 2) of continuing or not in the partnership.

In stage 2, there is estimate for the subscription of shares by the new investor, through capital contribution to be made on a date concurrent to the assumption of control. It should be noted that, at this stage, Eletrobras is given the possibility to continue as a shareholder of the distribution company, increasing its interest at up to 30% of the total shares, within a period of six months after the purchase and sale contract. If Eletrobras chooses not to increase its shareholding, after the term of six months, this 1 share is sold to the new investor.

In addition to this, the auctions of the distribution companies shall be sequential, and shall be performed in B3 stock exchange, which is the substitute of BM&FBOVESPA. In the first two auctions, there will be a Right of Participation in the second stage of subsequent auctions. As of the 2nd until the 5th auction, the investors that have won at least one preceding auction, may remove their envelopes from the auction before opened.

Lastly, the auction winner shall be the investor that places the bid with the highest deduction of the tariff provided for each distribution company. If the reduction is higher than one hundred percent (100%), the difference between the bid and one hundred percent (100%) shall be considered as bonus of grant, to be paid by the winning bidder to the Federal Government.

9.1 ADJUSTMENTS TO THE EQUITY VALUE OF THE DISTRIBUTION COMPANIES

According to the modeling reports of Service B, the modeling of sale was performed based on the results of the due diligence reports and the economic and financial assessments performed by the consultants. However, for the final proposal of capital and corporate structuring of the distribution company, additional adjustments, already included in the modeling, were necessary. The adjustments made follow the stages below.

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9.1.1 ADJUSTMENTS TO CONTEMPLATE THE UPDATES IN THE BALANCE SHEET UNTIL JUNE 2017

The sale modeling considers, as a way to mitigate any financial divergences between the base date of valuation (December 2016) and the last balance available of the distribution companies (June 2017), updates connected to the balance accounts connected to the indebtedness and the working capital, in addition to specific accounting adjustments.

The breakdown of the adjustments is under Products 11: Proposal of Modeling of Privatization, attached to this IT.

a) Advance for Future Capital Increase - AFAC

For the case that the distribution company has AFAC, another adjustment is made, and the amounts connected to the AFAC’s considered obligations with Eletrobras. The table below shows the AFAC’s, per distribution company, adjusted until October 2017.

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b) Tax adjustments – tax loss and negative base

The economic and financial assessments of the distribution companies considered the use of part of the Tax Losses (Income Tax – IRPF) and Negative Base (Social Contribution on the Net Profit – CSLL) in the first half of 2017 for settling debts, admitted under the scope of the Tax Regularity Program – PRT. For the modeling of sale, such values were deducted from the fiscal balances existing in December 2016, base date used in the economic and financial assessment.

9.1.2 ADJUSTMENT OF THE FLEXIBILIZATION OF REGULATORY PARAMETERS

In the case of the distribution companies Ceal, considering the scenario of the agreement of the Bresser Plan adopted in CPPI Resolution 20/2017, and Cepisa, the equity value was positive due to the regulatory relaxations granted, reason why the relaxed parameters were adjusted so that equity value of these distribution companies was equal to zero. Therefore, this excludes the possibility that consumers in the concession areas in question will have to bear special tariff adjustments in addition to those necessary for the companies holding the concession to operate in financial balance.

9.2 STOCK OFFERING TO EMPLOYEES AND RETIREES

The stock offering to employees and retirees follows the provisions of Article 38 of Decree 2594/1998, which ensures to employees and retirees the offering of part of the shares representing the capital of the companies included in PND. Nonetheless, in accordance with the sole paragraph of this article, the said offering shall be at least ten percent of the shares of the capital directly or indirectly held by the Federal Government.

Thus, the sales modeling proposed contemplates such legal provision, and the offering is performed concomitantly to the auction of privatization, however, its implementation is conditioned to winning the bidding procedure, i.e., upon actual transfer of controlling interest.

The modeling also establishes that, to negotiate the stocks, the employees and retirees shall need to be qualified, and engage a custody agent, institution authorized and accredited at B3, the new name of BM&FBOVESPA. This definition is based on Article 39 of Decree 2594/1998, which establishes that the interest of employees in the purchase of

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shares shall be optional, by means of the investment club referred to in Decree 2430, dated December 17, 1997, established to legally representing them, including as substitutes in proceedings.

In addition to this and in accordance with the paragraph 4 of Article 30 of said Decree, the modeling of sale provides for that the shares to employees and retirees and public in general may have prices and conditions different from those object of the disposal of controlling stake. This way, employees and retirees will have the prerogative to purchase the shares at a price lower than the price to be paid by the new controlling shareholder of the company, under the scope of the auction.

After the offering stage to employees and retirees, the discount offered to employees and retirees shall be compensated to Eletrobras by the investor as well asstocks that have not been sold.

9.3 SHAREHOLDING OPTION OF ELETROBRAS

As mentioned above, the modeling of sale of the distribution companies provides for the possibility that Eletrobras increases its interest up to 30% of the total of shares within a term up to six months after the auction. Such prerogative is aimed at allowing that Eletrobras recovers part of the investments made through the receipt of the dividends or the future increase of value and subsequent sale of its shareholding.

For this case, it is suggested that Eletrobras has the right to increase its shareholding in the distribution company after the privatization of the company, with the alternative not only of capital disbursements, but also the additional conversion of debt into shares. Therefore, Eletrobras does not necessarily need to disburse capital to the distribution company if it intends to exercise such option, using the remaining debt credits that it may have against the privatized company.

In the event that Eletrobras has an interest in increasing its interest, legal and usual procedures for capitalization of the company should be followed, considering the rights of minority shareholders — including employees and retirees that purchase shares of the distribution company. The financial conditions of the capitalization, as such, for the value of market per share, shall be the same as those of stage 2 and performance of auction.

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It should be noted that, should Eletrobras increase its interest in the distribution company, the modeling recommends that the Holding maintains minimal roles in the management and governance of the distribution company. Thus, the attractiveness of the sale of the distribution company would not be reduced as a result of the sharing of its management, allowing the widest degree of freedom to the new investor.

It should be noted that, at this time, there are no elements to support the decision regarding the continuity of Eletrobras in these companies with an interest of up to 30% of the new capital, as provided for in CPPI Resolution no. 20/2017, given that the ascertainment of the forecast of the return that the new shareholding may warrant to Eletrobras depends on variables not explained in the modeling performed BNDES.

Additionally, there are determinant variables for the decision-making process connected to the new disbursement of capital, such as identification of member and which its efforts and terms for economic recovery of the company shall be, in such a way that Eletrobras’ decision to make new disbursements, upon conversion of the remaining debts in each one of the companies shall be subject to new analysis, to be timely performed.

Even though, the values to be capitalized by Eletrobras in stage 2 should be emphasized, as pointed out in the assessments conducted by BNDES, in the case of increase of its interest in the distribution companies to 30%. The numbers are presented in Table 30 hereunder.

9.4 REQUIREMENTS FOR COMPLETING THE DISPOSAL OF THE CONTROLLING STAKE

The requirements for completing the operation of sale of distribution companies’ stocks are as follows:

(i) approval of the transaction by Eletrobras’ General Meeting, pursuant to Article 41, I of Eletrobras' Bylaws, and according to the provisions authorized by the respective CPPI concerning the conditions of privatization of distribution companies;

(ii) abidance by the terms set forth in Decree 9192/2017, within fifteen days from its publication, which was rendered official by Eletrobras through Letter CTA-PR 558/2017, dated November 21, 2017, sent to the Ministry of Mines and Energy;

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the approval by the General Meeting of Eletrobras and TCU; homologation of the result of the auction; and adjudication on the object of the auction by the Ministry of Mines and Energy;

(vi) receipt of the governmental and regulatory authorizations necessary for the acquisition by the winning bidder of the controlling interest in the distribution company, namely: a) from the Administrative Council for Economic Defense and b) ANEEL;

(vii) execution of the Share Purchase Agreement of the distribution company, payment of the price by the winning bidder, and transfer of the shares in the respective corporate books of the distribution company;

(viii) performance of stock option to the employees and retirees of the distribution company, under the terms of Law 9491/1997 and CPPI Resolution; and

(ix) After the transfer of the shares, submission to ANEEL of the documents provided for in article 27 of Law No. 8987/1995 and ANEEL Normative Resolution 484/2012.

In addition to this, CPPI Resolution 20/2017 establishes that the new controller, as mentioned above, shall, concurrently with the purchase of the controlling interest of the distribution company, make a new capital increase in the distribution companies, through subscription and payment, according to the following minimum values:

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10. ANALYSIS OF RESULTS PER DISTRIBUTION COMPANY

This item presents, in a summary form, the results of the economic and financial assessments by the distribution company, after the adjustments referred to in Item 8.3 of this IT were made, according to the case of each distribution company.

The table below, prepared based on the modeling proposed by Service B – Product 11:

The Proposal of Modeling of Privatization” of each distribution company show the basic valuation amounts, the adjustments, and the ending valuation.

Source: Own preparation, based on Product 11: Proposal of Modeling of Privatization of each distribution company, Service B.

The final Valuation value shown in the table above shows the adjustment value required by Eletrobras to bring the Equity Value to zero. However, since the set value of the distribution companies’ sales is defined at R$ 50,000.00, the total adjustment amount per distribution company, except CCC debt claims and debts, according to CPPI resolution, was as follows:

• Amazonas Energia: Eight Billion Nine Hundred Eleven Million and Eight Hundred Sixty-six Thousand and Five Hundred and Fifty-eight Brazilian Reais and Ninety- four Cents (BRL 8.911.866.558,94).
• Boa Vista: Three Hundred Forty-two Million, One Hundred Twenty Thousand, Four Hundred and Eighty-six Brazilian Reais and Twenty Cents (BRL 342,120,486.20);
• Ceal: Fifty Thousand Brazilian Reais (BRL 50,000.00);
• Cepisa: Fifty Thousand Brazilian Reais (BRL 50,000.00);
• Ceron: One Billion, Eight Hundred Seventy-two Million, Five Hundred Twenty-two Thousand, Four Hundred and Sixty-three Brazilian Reais and Forty-two Cents (BRL
  1,872,522,463.42) ;

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• ELETROACRE: One Hundred Thirty Million, Seven Hundred and Seventy-nine Thousand and Seventy-one Brazilian Reais and Ninety-nine Cents (BRL
  113,779,871.99) ;

As can be observed, the BNDES study considered two scenarios for CEAL, one considering the agreement in grieving regarding the Bresser Plan, and another not considering it The PPI, according to CPPI Resolution 20/2017, opted for the scenario with the agreement, thus defining the need for an adjustment of R$ 50,000.00 in CEAL. This subject will be further addressed hereunder.

The following tables present the impact on Eletrobras arising from the capitalization and assumption of debts, in the following CCC debt claim scenarios: (i) included in the distribution companies’ balance sheet as of 06/30/2017; and (ii) resulting from the inspection carried out by ANEEL:

Source: Own preparation, based on Product 11: Proposal of Modeling of Privatization of each distribution company, Service B.

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Source: Own preparation, based on Product 11: Proposal of Modeling of Privatization of each distribution company, Service B.

Considering (i) the amounts in Table 26 above, (ii) that CPPI Resolution 20/2017 defined the adjustment in Ceal amounting to R$ 50,000.00, and (iii) that the provision for any potential loss connected to the Administrative Proceedings with ANEEL, regarding the inspection of the transfer of CCC resources, is premature, and (iv) the CCC debt claims in the balance sheets of the distribution companies are good, the impact on Eletrobras is R$ 11.24 billion

On the other hand, considering the amounts in Table 27 and the definition of CPPI Resolution 20/2017 of adjustment in Ceal amounting to R$ 50,000.00, it may be noted that, if the administrative appeals filed are dismissed and still to be filed before ANEEL, Eletrobras will have to reimburse the CDE CCC Fund at an amount which may amount to R$ 4.0 billion, in addition to having to reverse the CCC's debt claim values included in the distribution companies’ balance sheets, at R$ 8.47 billion, with the impact on Eletrobras in this scenario possibly reaching 23.7 billion.

Notwithstanding the foregoing, as already mentioned in the previous item, it should be noted that CPPI Resolution 20/2017, as amended by CPPI Resolution No. 28/2017, in its Article 3, paragraph 1, provides that, in addition to adjustments of R$ 11.24 billion, "Eletrobras may, at the discretion of the General Meeting, undertake the rights and obligations of the distribution companies, referring to the Fuel Consumption Account - CCC and the Energy Development Account - CDE, recognized in the Financial Statements of the Distribution companies at the base date of the studies considering the adjustments up to

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June 30, 2017, including the rights connected to Item IX of Article 13 of Law 10.438, dated April 26, 2002, with the new wording given by Law 13.299, dated June 21, 2016, and Eletrobras shall, on the other hand, undertake the rights and/or obligations in an equivalent amount.” (emphasis added)

Thus, assuming the prerogative above, of not assuming the CCC debt claims included in the distribution companies’ balance sheets, which amount to R$ 8.47 billion, the impact on Eletrobras will be R$ 11.24 billion, referring to the adjustments to achieve the set price of R$ 50,000.00, in each distribution company.

The table below shows the breakdown of the capitalization by Eletrobras in the distribution companies, based on the source of the appeals, in order to achieve the set price. It should be noted that, in this scenario, preference was given to the conversion of RO’s debts and to the World Bank in capital, although common resources had a higher cost (12.00%), since debts with Petrobras were partially connected to CCC debt claims, which will not be transferred to Eletrobras in this case.

Table 28. Conversion of debts in capital, per distribution company – R$ million

In the hypothetical event that the General Meeting of Eletrobras decides to assume the debt claims of CCC and CDE recorded in the distribution companies’ balance sheets, the table below establishes the amounts of debt, per source of funds, to be capitalized to reach the set price, per distribution company, as well as the assumption of debts in the same amount of CCC and CDE debt claims. In this context, the debts with Petrobras are

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prioritized, since most of these debts are already backed up by receivables of CCC, substantiated in Contracts of Admission of Debt, wherein Eletrobras stands as a guarantor.