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Summary

 

                                       

 

 

 

 

 

 

 

 

 

 

 

Rio de Janeiro, May 11th 2016 - Eletrobras (Centrais Elétricas Brasileiras S.A.) (BM&FBOVESPA: ELET3 and ELET6 – NYSE: EBR and EBR-B – LATIBEX: XELTO and XELTB), the largest company in the sector of electrical energy of Latin America, active in generation, transmission and distribution, holding of 15 subsidiaries, a participations company – Eletropar – and 50% participation of the Capital Stock of Itaipu Binacional, announces its results for the quarter.

 

Eletrobras presented, in the 1Q16, a net loss attributable to controllers of R$ 3,898 million, compared with a net loss of R$ 10,327 million in the 4Q15. In the 1Q15, the company presented net profit attributable to controllers of R$ 1,255 million.

 

The results of the quarter were decisively influenced by several variables, among which the following stand out: (i) Provision for Legal Contingencies (operating provisions) in the amount of R$ 2,949 million, with emphasis on the provision concerning legal proceedings involving compulsory loan in the amount of R$ 2,814 million; (ii) loss in the distribution subsidiaries, which totaled R$ 1,167 million in 2016; and (iii) reduction in revenues from supply and in revenue from short-term power sale in the Chamber of Electric Energy Commercialization (CCEE) in generation. The result of the 1Q16 was also impacted by the following variables:

 

Ø  Positively: (i) reversal of onerous contracts in the amount of R$ 101 million; (ii) reduction of expenses with Personnel, Materials and Services by 29.9% compared to the 4Q15

 

Ø  Negatively: (i) Allowance for Doubtful Accounts (ADA) in the amount of R$ 142 million, influenced mainly by the tariff adjustment in some distribution companies; and (ii) negative net foreign exchange variation in the amount of R$ 185 million in the 1Q16; (iii) negative Itaipu transfer amounting to R$ 148 million in the 1Q16, influenced by the effects of the dollar variation on monetary adjustment based on the American prices indices Commercial Price and Industrial Goods.

 

HIGHLIGHTS IN THE CONSOLIDATED RESULTS OF THE 1Q16:

 

»Net operating revenue of R$ 6,761 million;

»Net operating provisions amounting to R$ 3,013 million;

»Sum of EBITDA’s of subsidiaries of R$ 766 million.

»Net financial income of R$ 1,345 million;

 

 

I.             ANALYSIS OF CONSOLIDATED RESULT (R$ MILLION)

 

 

 

I.1 Main variations in Results

Variations of Results (1Q16 x 1Q15)

 

The result of the 1Q16 shows a variation by 411% compared to the 1Q15, with a net loss attributed to the controller of R$ 3,898 million in the 1Q16, compared to a net profit attributed to the controller of R$ 1,255 million in the 1Q15.

The net operating revenues, amounting to R$ 6,761 million, presented, in the 1Q16, a decrease by 21.4% compared to the 1Q15, when the recorded amount was R$ 8,599 million. This change was strongly influenced by the deconsolidation of CELG D in the 1Q16. In the segment analysis, we present the following highlights:

»     Generation revenues decreased by 23.2%, from R$ 5,596 million in the 1Q15 to R$ 4,297 million in the 1Q16. This reduction was influenced by the fall in sales revenue in the short-term market in electric energy trading Chamber (CCEE), as well as by reducing the supply of revenue. The sale of energy in the short-term market decreased from R$ 887 million in the 1Q15 to R$ 256 million in the 1Q16, mainly due to the reduction in the price of settlement of differences (PLD, for the acronym in Portuguese) in 2016.  The Itaipu transfer decreased, from a positive amount of R$ 121 million in the 1Q15 to a negative amount of R$ 148 million in the 1Q16, influenced by the effects of the dollar's variation on monetary adjustment based on American price indices Commercial Price and Industrial Goods. Supply revenue decreased by 30.4%, from R$ 922 million in the 1Q15 to R$ 641 million in the 1Q16, due to the deverticalization of Amazonas Energia, and the energy sold classified before as supply was recorded into Amazonas GT’s Supply Account. The total volume of energy sold by the Eletrobras companies increased from 56 TWh in the 1Q15 to 57 TWh in the 1Q16. Construction revenue decreased from R$ 94 million in the 1Q15, to R$ 18 million in the 1Q16, but without effect on the result since it has equal value accounted for the cost of construction.

»     Transmission revenues increased by 8.1%, from R$ 1,119 million in the 1Q15 to R$ 1,209 million in the 1Q16, influenced mainly by the increase by 15.8% of the operating and maintenance revenue. This variation is explained mainly by the new revenues from investments in improvements and reinforcements in the system and the entry into operation of new investments. Construction revenue increased from R$ 294 million in the 1Q15, to R$ 312 million in the 1Q16, but without effect on the result since it has equal value accounted for the cost of construction.

»     Distribution revenues decreased by 29.7%, from R$ 3,575 million in the 1Q15 to R$ 2,514 million in the 1Q16. Celg-D’s deconsolidation. If Celg-D’s revenues for the 1Q15 were disregarded, the revenue in the distribution segment would present an increase by 39.9%, from R$ 1,797 million to R$ 2,514 million in the 1Q16. The increase in the supply revenue is mainly due to the annual adjustment and the implementation of tariff flags, which is offset by an increase in sectorial charges. The amount of energy sold increased from 4.2 TWh in the 1Q15 to 4.3 TWh in the 1Q16. Construction revenue decreased from R$ 176 million in the 1Q15, to R$ 157 million in the 1Q16, but without effect on the result since it has equal value accounted for the cost of construction.

                                              

 

- The electricity purchased for resale decreased by 25.8%, from R$ 2,922 million in the 1Q15 to R$ 2,169 million in the 1Q16. Excluding the expenses of Celg-D with the purchase of energy for resale in the 1Q15, an amount of R$ 2,144 million was recorded in the 1Q15, which would amount to an increase by 1.2% in the 1Q16.

- A decrease by 12.7% was recorded in the Use of Grid account. In the 1Q15, a net expense of R$ 465 million was recorded, and, in the 1Q16, the net expense of R$ 405 million. Excluding the expenses of Celg-D on the Use of Grid account, a decreased by 3.9% would be recorded, compared to an amount of R$ 422 million in the 1Q15.

- An increase by 40.1% was recorded in the Fuel for Power Production account. In the 1Q15, a net expense of R$ 299 million was recorded, compared to a net expense of R$ 419 million in the 1Q16, due, mostly, to a reduction of the reimbursement from the Fuel Consumption Account (CCC, for the acronym in Portuguese), pursuant to Law 12,111/2009, particularly in the subsidiary Amazonas Energia, due to the application of the loss criteria for the grant of fuel in the 1Q16.

- In the 1Q16, the sum of the Personnel, Materials and Services (PMS) account decreased by 0.8%, from R$ 2,004 million in the 1Q15 to R$ 1,988 million in the 1Q16. The Personnel, Materials and Services accounts increased by 6.9%, decreased by 2.5% and decreased by 17.2%, respectively. The increase in the Personnel account is explained by the fact that the resulting adjustment of the collective bargaining agreement in 2015 is recorded in the 1Q16. Excluding the expenses of Celg-D, due to its deconsolidation, the Personnel account increased by 13.5%, from R$ 1,249 million in the 1Q15 to R$ 1,417 million in the 1Q16. The Services account, excluding Celg-D, increased by 2.3%, from R$ 500 million in the 1Q15 to R$ 511 million in the 1Q16 and the Materials account, excluding Celg-D, increased by 3.1%, from R$ 58 million in the 1Q15 to R$ 60 million in the 1Q16.

- Operating provisions increased from R$ 327 million in the 1Q15 to R$ 3,013 million in the 1Q16. In the 1Q16, operating provisions were mainly influenced by: (i) the provision for legal contingencies in the amount of R$ 2,949 million, especially due to the cases relative to the compulsory loan, in the amount of R$ 2,814 million (see Explanatory Note 30 in the 1Q16 Financial Statement); and (ii) the increase in the provision for doubtful accounts, which amounted to R$ 142 million, influenced mainly by the review in the criterion in Eletrobras' distribution companies. The provisions were partially offset by the reversal of onerous contracts in the amount of R$ 101 million in the 1Q16. Excluding the provisions for Celg-D, the amount of operating provisions would be R$ 1,072 million in the 1Q15.

 

 

 

Note: Negative values in the table above indicate reversals of provisions.

 

 

-Shareholdings recorded a variation of 344% resulting from the accounting of a positive amount of R$ 41 million in the 1Q15 to a positive amount of R$ 182 million in the 1Q16.

- The net financial result decreased from a net revenue of R$ 593 million in the 1Q15 to a net expense of R$ 1,345 million in the 1Q16. Excluding the Financial Result of Celg-D, the financial results in the 1Q15 would be positive in the amount of R$ 864 million and the variation in the 1Q16 would correspond to 184%. This variation is due mainly to the increase in debt burden, which decreased from a positive amount of R$ 341 million in the 1Q15 to a negative amount of R$ 185 million in the 1M16. The increase in the debt burden, from R$ 1,009 million in the 1Q15 to R$ 1,507 million in the 1Q16, influenced mainly by the increase of debt and interest rates.

 

Main Variation in Results (1Q16 x 4Q15)

 

 

In the 1Q16, Eletrobras recorded a net loss attributed to the controllers of R$ 3,898 million, compared to a net loss of R$ 10,327 in the 4Q15.

The Net Operating Income, amounting to R$ 6,761 million, recorded a decrease by 14% in the 1Q16 compared to 4Q15 when it was registered an amount of R$ 7,861 million. This variation was heavily influenced by the deconsolidation of Celg-D in the 4Q15 and also by lower generation Supply Revenue. In the analysis by segment, we present the following highlights:

»     Generation revenues increased by 1.2%, from R$ 4,244 million in the 4Q15 to R$ 4,297 million in the 1Q16. This reduction was influenced by the decrease by 26% in the supply revenue and by the decrease in the Itaipu transfer, which dropped from a positive amount of R$ 170 million in the 4Q15 to a negative amount of R$ 148 million in the 1Q16, influenced by the effects of the dollar variation on the monetary adjustment based on the American price indices Commercial Price and Industrial goods. The total amount of energy sold by Eletrobras companies decreased from 60 TWh in the 4Q15 to 57 TWh in the 1Q16. The decline in supply revenue was influenced primarily by adjustments resulting from the extension of contracts with Chesf’s industrial consumers. Construction revenues decreased from R$ 42 million in the 4Q15 to R$ 18 million negative in the 1Q16, but with no effect on the result of the 1Q16 since it has equivalent value at the cost of construction.

 

»     Transmission revenues decreased by 35%, from R$ 1,859 million in the 4Q15 to R$ 1,209 million in the 1Q16, influenced mainly by the decrease in the construction revenue (from R$ 911 million in the 4Q15 to R$ 312 million in the 1Q16). Construction Revenue has equivalent amount recorded as cost of construction.

»     Revenues from the distribution segment decreased by 45.7%, from R$ 4,629 million in the 4Q15 to R$ 2,514million in the 1Q16. Excluding Celg-D's revenues, in the 4Q15, distribution revenues would present a decrease by 2.4%, from R$ 2,576 million in the 4Q15 to R$ 2,514 million in the 1Q16. This decrease was influenced by the 9% decrease in the supply revenue, from R$ 2,524 million in the 4Q15 to R$ 2,287 million in the 1Q16, and by the decrease in the construction revenue. The decrease in supply revenue was influenced by the change of the tariff flag and the falling demand for electricity. Construction revenue decreased from R$ 290 million in the 4Q15 to R$ 157 million in the 1Q16, but with no effect on the result since it has equivalent value at the cost of construction. The amount of energy sold decreased from 4.6 TWh in the 4Q15 to 4.3 TWh in the 1Q16, excluding Celg-D in the 4Q15.

- Energy purchased for resale increased by 20.9%, from R$ 1,793 million in the 4Q15 to R$ 2,169 million in the 1Q16. This result was influenced mainly by recording the effects of the Risk Adjustment of the Factor Hydrological (GSF), the 4Q15, pursuant to Law 13,203/15 in the amount of R$ 742 million, as a rectification of the electricity cost purchased for resale.

- On the fuel for electric power production account, a net revenue of R$ 14 million was recorded in the 4Q15, while a net expense of R$ 419 million was recorded in the 1Q16. The 4Q15 result was impacted by ANEEL resolution 679/2015, issued on September, 1^st 2015, which amended the criteria for refund of fuel, to reduce the period of receipt of these resources by the supplier.

- In the 1Q16, the sum of the Personnel, Materials and Services (PMS) account decreased by 29.9%, from R$ 2,836 million in the 4Q15 to R$ 1,988 million in the 1Q16. The Personnel, Materials and Services accounts decreased by 14.3%, 31.1% and 53.3%, respectively. Excluding Celg-D's expenses in the 4Q15, the sum of the Personnel, Materials and Services accounts presents a decrease by 23.8%, from R$ 2,609 million in the 4Q15 to R$ 1,988 million in the 1Q16. Excluding Celg-D, the Personnel account decreased by 8.8%, from R$ 1,554 million in the 4Q15 to R$ 1,417 million in the 1Q16. The Services account, excluding Celg-D, decreased by 47.5%, from R$ 975 million in the 4Q15 to R$ 511 million in the 1Q16, and the Materials account decreased by 26.4%, from R$ 81 million in the 4Q15 to R$ 60 million in the 1Q16. The programmed shutdown of Angra II Nuclear Power Plant in October 2015 contributed to the increase in the Services account.

 

 

 

- Operating provisions decreased from R$ 9,391 million in the 4Q15 to R$ 3,013 million in the 1Q16. In the 1Q16, operating provisions were mainly influenced by: (i) the provision for legal contingencies in the amount of R$ 2,949 million, especially due to the cases relative to the compulsory loan, in the amount of R$ 2,814 (see Explanatory Note 30 in the 1Q16 Financial Statement). The provisions were partially offset by the reversal of onerous contracts in the amount of R$ 101 million in the 1Q16. Excluding the provisions for Celg-D, the amount of operating provisions would reach R$ 9,404 million in the 4Q15.

                                                         

- Shareholdings recorded a positive amount of R$ 347 million in the 4Q15 and a positive amount of R$ 182 million in the 1Q16, a 47.5% reduction, therefore.

- Net financial result decreased from a net expense of R$ 1,686 million in the 4Q15 to a net expense of R$ 1,345 million in the 1Q16. That change occurred, mainly, by reversing interest and updates related to claims for compensation, pursuant to the first tranche of Law nº 12,783/2013, reflected on the indemnification remunerations account, which recorded a negative amount of R$ 880 million in the 4Q15.

 

 

I.2 Energy Sales

 

 

I.2.1 Energy sold in 2016 - Generation Companies - TWh

 

 

In terms of energy market developments, Eletrobras companies sold, in 2016, 57 TWh of energy, compared to 56 TWh in the same period of the previous year, which represents an increase by 0.8%.

 

 

 

 

I.2.2 Energy sold in 2016 - Distribution Companies - TWh

 

In terms of energy market developments, Eletrobras distribution companies sold, in 2016, 4.3 TWh of energy, compared to 4.2 TWh in the same period of the previous year, which represents an increase by 1.2%.

 

* Celg D became consolidated in Eletrobras'  result of Eletrobras as of September 2014 and from January 2016 is no longer being consolidated. This values do not consider, therefore, the electric power related CELG D.

** It takes into account only the captive market.

 

 

 

 

I.3 Onerous Contracts

 

* The table considers an increase of R$ 50 million in the onerous contract of Amazonas Energia's intangibles, with no effect in the Company's result.

 

 

I.4 Consolidated EBITDA

 

 

* Excluding Celg-D due to its deconsolidation.

 

I.4.1 EBITDA of Subsidiaries *

 

In the 1Q16, the sum of the subsidiaries' EBITDA was positive in the amount of R$ 766 million, representing an increase by 119% compared to the negative EBITDA of R$ 4,081 million in the 4Q15.

 

In the 1Q15, the EBITDA of Eletrobras’ subsidiaries was positive in the amount of R$ 1,806 million.

 

 

EBITDA = Net result for the period, plus the taxes on the profit, the net financial expenses, the financial income and depreciation, amortization and depletion, pursuant to CVM Instruction Nº 527/12.

p.p. = percentage points

Source: Financial statements presented in the Addendum to this document.

* The 1Q16 result does not include Celg-D.

 

I.6 Net Debt

 

 

 

II.          Analysis of the Result of the Parent Company

 

Eletrobras presented, in the 1Q16, a net loss of R$ 3,898 million, compared to a net profit of R$ 1,255 million recorded in the 1Q15.

 

This result was decisively influenced by: (i) provisions for legal contingencies, amounting to R$ 2,898 million, mainly due to the provisions relating to judicial proceedings of compulsory loan (see Explanatory Note number 30 to the Financial Statements for the 1Q16); (ii) unsecured liabilities in subsidiaries in the amount of R$ 1,418, especially in Eletrobras’ distribution companies; and (iii) positive shareholdings results amounting to R$ 861 million.

 

The following chart compares the company’s results in the 1Q15 and 1Q16.

 

 

 

 

 

 

II.1 Eletrobras' Shareholdings

 

 

In the 1Q16, the result of shareholdings positively impacted the Company's results in R$ 861 million, less than the amount of R$ 972 million recorded in the 1Q15.

In the 4Q15, the result of shareholdings impacted negatively the Company's results in R$ 5,879 million, while the result of shareholdings positively impacted in R$ 861 million in the 1Q16.

 

 

 

 

II.2.  Sale of Energy by the Holding Company

 

 

a. Itaipu Binacional

 

 

 

 

 

a.1 Financial Asset Itaipu Binational

 

The balance resulting from the adjustment factor of Itaipu Binacional, recorded under the heading Financial Assets in Non-current Assets, amounts to R$ 5,012 million on March 31st 2016, equivalent to US$ 1,408 million (December 31st 2015 - R$ 5,976 million, equivalent to US$ 1,530 million), of which R$ 3.964 million, equivalent to US$ 1,114 million, will be transferred to the National Treasury until 2023 as a result of the credit transfer operation carried out between the Company and the National Treasury in 1999. Such values will be carried out through their inclusion in the rate of transfer to be practiced until 2023.

 

 

 

II.2 Financial Result

 

In the 1Q16, the financial result impacted positively the result of the Parent Company in R$ 465 million, although lower than the amount of R$ 1,243 million recorded in the 1Q15. This variation is explained mainly by the lower outcome of the exchange variation.

 

In the 4Q15, the financial result impacted positively the result of the Parent Company in 808 million, influenced mainly by the outcome of the exchange variation as shown below:

 

 

The main indexes of financing contracts and transfers presented the following variations in the periods:

 

 

Evolution of the variation of the IGP-M and the dollar (%)

 

 

 

II.4 Operating Provisions

 

In the 1Q16, Operating Provisions impacted negatively the result of the parent company in R$ 4,327 million, compared to R$ 554 million in the 1Q15. This variation is explained mainly by the provisions for legal contingencies, in the amount of R$ 2,898, due, mainly, to the provisions concerning the compulsory loan and unsecured liabilities in subsidiaries in the amount of R$ 1,418, particularly in Amazonas Energia and CGTEE.

 

In the 4Q15 Operating Provisions impacted negatively the result of the parent company in R$ 6,759 million, also influenced mainly by provisions for contingencies and for unsecured liabilities in subsidiaries, as shown below:

 

 

 

 

 

 

III. General Information

 

 

Portfolio of Financing Receivables and Payable

 

a.    Financing and Loans Granted

 

Financing and loans are made with the company's own resources, industry resources and external resources obtained through international development agencies, financial institutions and by issuing bonds in the international financial market.

All financing and loans granted are supported by formal contracts signed with borrowers. The receivables of these values, for the most part, are set out in monthly installments, repayable within 10 years average, and the average interest rate, weighted by the portfolio balance, is 9.09% per year.

Financing and loans granted by the Parent Company, with currency update clause, account for about 40% of the total portfolio (42% on March 31^st 2015). Those which predict update based on indexes that represent the level of internal prices in Brazil, on the other hand, reach 60% of the balance of the portfolio (58% on December 31^st 2015).

The market values of these assets are close to their book values, because they are industry-specific operations and formed, in part, through sector funds resources which do not find similar conditions as parameter of evaluation at market value.

The increase in the balance of loan receivables in the quarter is mainly due to the exchange rate calculated on the loans granted to Itaipu, due to the appreciation of the dollar against the Brazilian real when closing prices of March 2016 and December 2015 are compared. The dollar varied negatively by about 9%.

The long-term portion of financing and loans granted, based on expected cash flows, is contractually due in variable installments, as follows:

 

 

 

b.    Financing and Loans Payable

The debts are guaranteed by the Federal Government and/or by Eletrobras, and are subject to charges whose average rate in 2016 is 9.60% p.a. (9.40% in 2015) and have the following profile:

 

 

The portion of long-term loans and financing have their maturity programmed as follows:

 

 

Ratings

 

 

 

 

 

Eletrobras' Organization Chart

 

 

 

 

Investments

 

 

 

Social Capital

 

Capital Stock Structure

 

On March 31st 2016. the capital stock of Eletrobras was structured as follows:

 

 

 

 

 

 

Behavior Analysis of Assets

 

Shares

 

ELET3 -Eletrobras' Common Shares

 

In the 1Q16 Eletrobras' common shares (ELET3) presented an appreciation of 15.1% closing at R$ 6.63. The highest price was R$ 7.31 recorded on March 11th and the lowest R$ 4.88 recorded on January 26th considering ex-dividend values. The average daily trading volume in the period was 1.53 million shares and the average daily financial volume was R$ 9.30 million.

 

ELET6- Eletrobras' Preferred Shares

 

In the 1Q16 Eletrobras' preferred shares (ELET6) presented an appreciation of 0.57% closing at R$ 10.50. The highest price was R$ 11.21 recorded on March 22nd and the lowest R$ 8.16 recorded on January 26^th considering ex-dividend values. The average daily trading volume in the period was 1.80 million shares and the average daily financial volume was R$ 18.3 million.

 

Evolution of the Shares Traded on BMF&BOVESPA

                                                                                                  

 

 

 

 

 

ADR Programs

 

ELET3 - Eletrobras' Common Shares

 

In the 1Q16 Eletrobras' common shares ADRs presented an appreciation of 30.88% closing at U$ 1.78. The highest price was U$ 1.99 recorded on March 11th and the lowest U$ 1.14 recorded on January 26th considering ex-dividend values. The average daily trading volume in the period was 0.41 million shares. The ADR balance corresponding to these shares at the end of the quarter was 79.3 million.

 

EBR-B - Eletrobras' Preferred Shares

 

In the fourth quarter of 2015 Eletrobras' preferred shares ADRs presented an appreciation of 12.8% closing at U$ 2.91. The highest price was U$ 3.08 recorded on March 10th and the lowest U$ 1.99 recorded on January 26th considering ex-dividend values. The average daily trading volume in the period was 0.93 million shares. The ADR balance corresponding to these shares at the end of the quarter was 20.8 million.

 

Latibex (Latin American Stock Traded on the Madrid Stock Exchange)

           

XELTO - Eletrobras' Common Shares

 

In the 1Q16 Eletrobras' common shares in the Latibex program presented an appreciation of 26.74% closing at € 1.64. The highest price was € 1.79 recorded on March 14th and the lowest € 1.09 recorded on January 20^th considering ex-dividend values. The average daily trading volume in the period was 20.3 thousand shares.

 

XELTB - Eletrobras' Preferred Shares

 

In the 1Q16 Eletrobras' preferred shares in the Latibex program presented an appreciation of 10.29% closing at € 2.63. The highest price was € 2.82 recorded on March 14th and the lowest € 1.89 recorded on January 26th considering ex-dividend values. The average daily trading volume in the period was 6.6 thousand shares.

 

 

 

 

Evolution of Foreign Currencies

 

 

 

 

 

Number of employees

 

Parent Company

 

Time in the Company

 

 

 

By region

 

 

Contracted/Outsourced Manpower

 

Turnover Rate (Holding)

 

 

 

 

Direct partnerships in SPEs – Parent Company

 

Generation

 

 

 

 

 

Transmission

 

 

 

* Substation associated with the TL.