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Rio de Janeiro, November 12, 2015 - Eletrobras (Centrais Elétricas Brasileiras S.A.) (BM&FBOVESPA: ELET3 e ELET6 – NYSE: EBR and EBR-B – LATIBEX: XELTO and XELTB), the largest company in the Latin American power sector, active in the generation, transmission and distribution segments, with 13 subsidiaries, a participations company – Eletropar – and 50% of the Social Capital of Itaipu Binational, announces its results for the period.

 

Eletrobras recorded, in nine months of 2015 (9M15), an overall consolidated net loss of R$ 4,115 million attributed to controlling, compared to a net loss of R$1,835 million in nine months of 2014 (9M14).

 

In the third quarter of 2015 (3Q15), the company recorded a net loss of R$ 4,012 million attributed to controlling, compared to a net loss of R$ 1,358 million in the second quarter of 2015 (2Q15). The results of the quarter, still reflecting the new rates of generation and transmission assets whose concessions were renovated under Law 12,783/13, were decisively influenced by several variables, among which we highlight the following:

 

i) Compared to the 2Q15, in the 3Q15 there was a  growth of 14.6% in the revenue of distribution supply (please refer to item I.1.2); (ii) Reversal of provisions for onerous contracts of R$ 82 million in the 3Q15 (please refer to item I.4); (iii) Recognition of the values of the CVA (Account for Compensation of Portion A Items) and other financial components amounting to R$ 103 million (please refer to item I.1.2); iv) Recognition of Impairment on the investment in Angra 3 in the amount of R$ 3,386 million ; (v) Provision for Contingencies in the amount of R$ 445 million (see item I.3); (vi) Provision for credit losses to consumers and resellers in the amount of R$ 71 million (see item I.3);  (vii) 65% drop in the financial result of the variation in the payment of Compensation.

HIGHLIGHTS of CONSOLIDATED RESULTS of 3Q15:

 

»Net Operating Income in the amount of R$ 7,902 million;

»Energy purchased for resale in the amount of R$ 2,719 million;

»Net operational provisions in the amount of R$ 4,019 million;

»EBITDAs of subsidiaries with a negative result in the amount of R$ 925 million.

 

 

 

 

I. ANALYSIS OF CONSOLIDATED RESULTS

 

 

I. 1 Main variations of Income Statements

 

Variations of the Income Statements (9M15 x 9M14)

 

The results of the 9M15 present a variation of 124.3% compared to the 9M14; a net loss in the amount of R$ 4,115 million in the 9M15 is attributed to controlling, compared to a net loss in the amount of R$ 1,835 million in the 9M14 attributed to controlling. Excluding the result of CELG D, a company whose consolidated results have been registered in Eletrobras' Financial Accounting Reports since September 26, 2014, date of the Extraordinary General Meeting at which Eletrobras' shareholders approved the acquisition of stock control of CELG Distribuição S.A, the result of the 9M15 would register a variation of 76.2% in relation to the 9M14 with a consolidated net loss of R$ 3,232 million in the 9M15. For better comparison, Income Statements variations were also treated with and without the effect of the consolidation of CELG D.

»     The Net Operating Income, amounting to R$ 24,728 million in the 9M15, increased by 20.8% compared to the amount of R$ 20,464 million recorded in the 9M14. Excluding the revenue of CELG D, the increase would be of 4.6% in the 3Q15, corresponding to a net operating revenue of R$ 21,406 million in the 9M15. In the analysis by segment, we present the following highlights:

 

»     Generating revenues showed a decrease by 1.0%, from R$ 15,877 million in the 9M14 to R$ 15,715 million in the 9M15. This decrease is explained by the fall in sales revenue in the spot market (CCEE), from R$ 3,061 million to R$ 2,020 million, due mostly to the sale of energy by subsidiaries Furnas and Eletronorte in the A-1 auction in 2014 and the decrease of the Price of Settlement of Differences PLD in 2015. The decrease of sales in the Electric Energy Trading Chamber (CCEE) was partially offset by a 5.9% increase in the supply revenue, which rose from R$ 8,821 million to   R$ 9,344 million and by a 7.9% increase in supply revenues, which rose from R$ 2,503 million to   R$ 2,701 million. The total energy sold by Eletrobras companies decreased from 184 TWh in the 9M14 to 176 TWh in the 9M15. Construction Revenue has equivalent amount recorded as cost of construction.

»     Transmission Revenues increased by 18.1%, from R$ 3,176  million in the 9M14 to R$ 3,752 million in the 9M15, influenced mainly by a 22% increase in  operation and maintenance revenues and a  36% increase from the return rate update. This variation is explained mainly by the currency updates in Annual Allowed Revenue (RAP), due to the entry of new investments. Construction Revenue has equivalent amount recorded as cost of construction.

»     Distribution Revenue recorded an increase by 178.2%, from R$ 4,148 million in the 9M14 to R$ 11,542 million in the 9M15. Two aspects influenced Distribution Revenue in the 9M15. The first of these refers to the impact relative to the Account for Compensation of "Portion A" Items - CVA, amounting to R$ 663 million in the 9M15. The second concerns the increase of supply revenue in the amount of R$ 5,903 million by CELG D, which began to be consolidated only after the 4th quarter of 2014. Energy supply has presented a 184% increase from R$ 3,610 million in the 9M14 to R$ 10,258 million in the 9M15.  Excluding the revenue of CELG D, supply revenue would amount to R$ 5,165 million and would present an increase by 43.1%, influenced mainly by the application of tariff flags, with proportional impact on deductions from operating revenue through increased charges. The amount of energy sold increased from 12.5 TWh in the 9M14 to 21.8 TWh in the 9M15. Excluding CELG D, that amount, in the 9M15, would reach 12.9 TWh. Construction Revenue has equivalent amount recorded as cost of construction.

- Electricity purchased for resale increased by 38%, from R$ 6,828 million in the 9M14 to R$ 8,973 million in the 9M15. Excluding the expenditure of CELG D with the purchase of energy for resale, there is a small decrease by 0.7% and a sum of R$ 6,778 million in the 9M15.

- Fuel for electric power production has registered a 22% increase. In the 9M14, there was a net expense of R$ 1,040 million, while in the 9M15 a net expense of R$ 1,263 million was recorded, mainly due to lower reimbursement of the CCC, as provided under Law 12,111/99, in the subsidiaries Eletronorte and Amazonas Energia.

The full amount of the Personnel, Materials and Services (PMS) line increased by 13%, from R$ 5,891 million in the 9M14 to R$ 6,659 million in the 9M15. Personnel, Materials and Services presented, respectively, increase by 9.6%, decrease by 1.6% and increase by 23.0%. Excluding the expenses related to CELG D, the Personnel line increased by 3.6%, from R$ 3,969 million in the 9M14 to R$ 4,114 million in the 9M15. The Services line increased by 1.5% from R$ 1,688 million in the 9M14 to R$ 1,713 million in the 9M15, and the Materials line decreased by 6.6%, from R$ 235 million in the 9M14 to R$ 219 million in the 9M15 (see item I.7).

 

- Operational provisions increased from R$ 826 million in the 9M14 to R$ 5,248 million in the 9M15 (see item I.3). In the 9M15, Operational Provisions were influenced mainly by the recognition of Impairment on the investment in Angra 3, amounting to R$ 3,386 million and by the provision for contingencies in the amount of R$ 1,545 million. Regarding the first, the additional impairment recorded in 3Q15 is based essentially on the variation of the discount rate used to perform the impairment test of assets, mainly due to changes in Brazilian macroeconomic conditions ^[1]. Regarding the provisions for contingencies we highlight the provisions concerning the compulsory loan and adjustments in lawsuit values of Furnas and Chesf. Increase was also recorded in the provision for loan losses to consumers and resellers, which amounted to R$ 323 million, influenced mainly by the review of the criterion of PCLD in the distribution companies and by the consolidation of CELG D. The provisions were partially offset by the reversal of onerous contracts in the amount of R$ 237 million (please refer to item I.4). Excluding the provisions of CELG D, the amount of operational provisions would reach R$ 5,151 million in the 9M15.

-Shareholdings recorded a variation of 128% resulting from the accounting of a negative amount of R$ 661 million in the 9M14 and of a positive amount of R$ 185 million in the 9M15.

-The net financial result went from a net revenue in the amount of R$ 78 million in the 9M14 to a net expense in the amount of R$ 13 million in the 9M15, which represents a decrease of 117%. This variation was due mainly to the growth of the burdens of debt, which rose from R$ 2,164 million in the 9M14 to R$ 3,533 million in the 9M15. This increase in financial expenses was partially offset by the highest remuneration for damages relating to the generation and transmission leases renewed under Law 12,783/13 (for 1st tranche) from R$ 632 million in the 9M14 to R$ 996 million in the 9M15 due to monetary restatement on the amounts not yet received, in addition to the inflation index that corrects the debit balance (IPCA). Excluding the Financial Result of CELG D, financial results would be positive in the amount of R$ 730 million in the 9M15.

 

Main Variations in Results (3Q15 x 2Q15)

 

The result of the 3Q15 recorded a variation of 195.4% compared to the 2Q15, with a net loss attributed to controlling in the amount of R$ 4,012 million in the 3Q15, against a net loss attributed to controlling in the amount of R$ 1,358 million in the 2Q15.

The Net Operating Income, amounting to R$ 7,902 million in the 3Q15, reduced by 3.9% in relation to the 2Q15, when it was recorded in the amount of R$ 8,277 million. Excluding the revenue from energy sales in the spot market (CCEE) and the revenue from construction, the Net Operating Income would reduce by 2.3%, from R$ 6,870 million in the 2Q15 to R$ 6,711 million in the 3Q15. In the analysis by segment, we present the following highlights:

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»     Generating revenues reduced by 5.8%, from R$ 5,210 million in the 2Q15 to R$  4,909 million in the 3Q15. This decrease was mostly caused by: (i) the drop in supply revenue, which went from R$ 941 million to R$ 838 million; (ii) a lower sales revenue in the spot market (CCEE), which went from R$ 757 million to R$ 376 million mainly due to the reduction in the Settlement Price of Differences (PLD)(iii) and the reduction in the transfer from Itaipu, which went from a net expenditure in the amount of R$ 16 million to a net expenditure in the amount of R$ 41 million, influenced by the calculation of monetary adjustment based on American price indices Commercial Price and Industrial Goods. The total amount of energy sold by Eletrobras companies decreased from 61.7 TWh in the 2T15 to 54.1 TWh in the 3Q15. Construction Revenue has equivalent amount recorded as cost of construction.

»     Transmission revenues increased by 9.9%, from R$ 1,254 million in the 2Q15 to R$ 1,379 million in the 3Q15, influenced mainly by the increased revenue from construction, which has equivalent amount recorded as cost of construction.

»     Revenues from the distribution segment increased by 10.3%, from R$ 3,789 million in the 2Q15 to R$ 4,178 million in the 3Q15. Energy supply increased by 14.6%, from R$ 3,328 million in the 2Q15 to R$ 3,813  million in the 3Q15, influenced mainly by the application of tariff flags with proportional impact on operating revenue deductions. The recognition of the values of the CVA and other financial components decreased from R$ 278 million in the 2Q15 to R$ 103 million in the 3Q15. The amount of energy sold went from 7.2 TWh in the 2Q15 to 7.5 TWh in the 3Q15. Construction Revenue has equivalent amount recorded as cost of construction.

- Energy purchased for resale reduced by 18.4%, from R$ 3,332 million in the 2Q15 to R$ 2,719 million in the 3Q15. This result was influenced mainly by the elevation of expenditure in the 2Q15 due to the increased exposure of Furnas caused by the low levels of the reservoirs, by the GSF and the exposure of Amazonas Energia on account of the delay in the interconnection of transmission lines, raising the value in the 2Q15 as well.

- On the fuel for electric power production line a decrease by 48.4% was recorded. In the 2Q15, a net expense in the amount of R$ 636 million was recorded, against a net expense in the amount of R$ 328 million in the 3Q15, due primarily to changes in the criteria for recognition of the CCC as a function of the application of the crop factor and regulatory loss as established by the ANEEL dispatch 1583/2015 of 5/18/2015, retroactive to January 2015 in the distribution companies, the most significant impact being on Amazonas Energia in the 2Q15.

- In the 3Q15, the Personnel, Materials and Services (PMS) lines increased by 24.6 percent, from R$ 2,073 million in the 2Q15 to R$ 2,582 million in the 3Q15. The Personnel line increased by 31%, from R$ 1,312 million in the 2Q15 to R$ 1,715 million in the 3Q15. The Services line increased by 17%, from R$ 670 million in the 2Q15 to R$ 788 million in the 3Q15 and the Materials line decreased by 12%, from R$ 90 million in the 2Q15 to R$ 80 million in the 3Q15 (please refer to item I.7). Payment of labor claims and, on account of services, hired labor in Furnas contributed to the increase.

 

- Operational provisions went from R$ 901 million in the 2Q15 to R$ 4,019 million in the 3Q15 (please refer to item I.3). In the 3Q15, operational provisions were influenced mainly by the recognition of Impairment on the investment in Angra 3, amounting to R$ 3,386, the provision for contingencies in the amount of R$ 445 million, with emphasis on the provisions concerning the compulsory loan at the Parent Company and civil cases at Eletronorte; and the allowance for loan losses to consumers and resellers in the amount of R$ 71 million. The provisions were partially offset by the reversal of onerous contracts in the amount of R$ 82 million (please refer to item I.4).

- Shareholdings recorded a negative amount of R$ 5 million in the 2Q15 and a positive amount of R$ 149 million in the 3Q15 mainly due to the results of the SPE Norte Brasil Transmissora de Energia, which Eletronorte has participation, and the SPE, Goiás Transmissão, Interligação Elétrica do Madeira and Serra do Facão, which Furnas has participation.

- The net financial result went from a net expenditure of R$ 264 million in the 2Q15 to a net expenditure of R$ 343 million in the 3Q15, which represents a decrease of 30%. This variation was due, mainly, to the variation on the financial results of indemnities remuneration related to 1st tranche of Law 12.783/13, referring to Law 12,783/13, due to payment.

 

I.1.2    Net Operating Income (NOI)

In the 9M15, the NOI increased by 20.8%, compared to the 9M14, from R$ 20,464 million in the 9M14 to R$ 24,728 million in the 9M15.

 

In the 3Q15, the NOI recorded a 3.9% decrease compared to the 2T15, going from R$ 8,227 million to R$ 7,902 million in the 3Q15. Compared to the 3Q14, when the net operating revenue recorded amounted to R$ 6,589 million, this quarter recorded an increase by 19.9%.

 

 

 

 

 

Participation of business in relation to Gross Revenues 2015

 

 

 

 

 

I.2 Energy Sold

 

I.2.1 Energy Sold in the 9M15 – Generation Companies - TWh

 

In terms of energy market developments, Eletrobras companies sold 176 TWh of energy in the 9M15, against 184 TWh traded in the same period of the previous year, which represents a decrease by 4.3%.

 

 

 

* does not take into account the energy sold in the spot market.

 

 

I.2.2 Energy Sold in the 9M15 - Distribution Companies - TWh

 

In terms of energy market developments, Eletrobras' Distribution Companies sold 21.8 TWh of energy in the 9M15, against 12.5 TWh traded in the same period last year, representing an increase by 73.8%.

 

 

* Celg D became consolidated in Eletrobras' results after September 2014.               

** Considers only the regulated market.

 

 

 

 

 

I.3 Operational Provisions

 

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

 

Provisions for legal obligations linked to lawsuits

 

 

 

I.4 Onerous Contracts

 

* The table considers an increase of R$ 50 million from the onerous contract of Amazonas Energia intangibles that are not recorded in the company's results.

 

I. 5 Consolidated EBITDA

 

 

I.5.1 EBITDA from Subsidiaries*

 

In the 3Q15, the sum of EBITDAs of Eletrobras' subsidiaries was negative in the amount of R$ 2,754 million, representing an increase of 3,456% against a negative EBITDA in the amount of R$ 77 million in the 2Q15.

 

In the 9M15, the EBITDA of Eletrobras' subsidiaries negative in the amount of R$ 1,025 million, representing a 153 % decrease against an EBITDA in the amount of R$ 1,934 million in the 9M14.

 

 

 

 

 

 

EBITDA = Net income of the period plus income taxes, net financial expenses of financial revenues and depreciation and amortization, as enacted by CVM Instruction 527/12.

p.p. = percentage points

* Source: Financial Statements presented in Annex.

 

 

 

I.6 Net debt

 

 

 

I.7. Personnel, Material and Services

 

                   Notes: CELG D became consolidated as of September 2014. For comparison purposes, CELG D's costs with personnel, materials and services were excluded.

 

II. Analysis of the Result of the Parent Company

 

Evolution of the result - R$ million

 

 

Note: The analysis of the result of our subsidiaries can be found in the attachment.

 

II.1 Eletrobras Shareholdings

 

In the 9M15, the equity income negatively impacted the company's results in the amount of R$ 2,218 million, while in the same period in 2014 the equity income positively impacted the results in the amount of R$ 896 million. 

 

The result of the equity of subsidiaries was primarily responsible for the results of 3Q15.  The equity of Eletronuclear in the 3Q15 was negative in the amount of R$ 2,843 million, being the main reason for the magnitude of the negative result recorded by the company in this quarter. This loss in Eletronuclear resulted from the impairment conducted in the 3Q15, referring to investment in Angra 3.

 

 

 

II.2 Financial result

 

In the 9M15, the Financial Result impacted positively the overall results of the Parent Company by R$ 3,116 million as compared to the amount of R$ 1,545 million in the 9M14. This variation is explained mainly by the currency exchange variation.

 

In the 3Q15, the Financial Result impacted positively the result of the Parent Company by R$ 1,438 million, as shown below:

 

 

 

 

The main indexes of financing contracts and transfers varied as follows in the periods:

 

 

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

 

 

II.3.  Energy commercialization by the parent company

 

a. Itaipu Binational

 

 

a. 1 Financial Asset Itaipu Binational

The balance resulting from the adjustment factor of Itaipu Binational, inserted under the heading Financial Assets in Non-Current Assets, amounts to R$ 7,218 million on September 30, 2015, which is equivalent to US$ 1,817 million (December 31, 2014 - R$ 5,469  million, equivalent to US$ 2,059 million), of which R$ 5,008 million equivalent to US$ 1,261 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 amounts will be carried out through their inclusion in the transfer tariff to be practiced until 2023.

 

 

a.2 Commercialization of Electric Energy – PROINFA

 

 

The electric energy trading operations under the Incentive Program for Alternative Sources of Energy - PROINFA recorded a negative net balance in the amount of R$ 126 million in the six-month period ended September 30, 2015 (September 30, 2014 - R$ 179 million positive), producing no effect on the Company's net income. This amount is recorded under the heading of Compensation Obligations. The balance of reselling consumers recorded the amount of R$ 417 million from PROINFA concerning the Parent Company (December 31, 2014- R$ 573 million).

 

III. General Information

 

Portfolio of Receivable and Payable Financing

 

a.    Financing and Loans Granted

 

Financing and loans granted are made with the Company's own resources, as well as with sectorial resources and external resources obtained through international development agencies, and financial institutions arising from the issuance of bonds in the international financial market.

 

All financings and loans 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 an average term of 10 years by an average interest rate, weighted by the balance of the portfolio, of 8.34% per year.

 

Financing and loans granted by the Parent Company, with a foreign currency exchange rate update clause, account for about 45% of the total portfolio (38% in December 31, 2014). Those which predict update based on indexes that represent the level of internal prices in Brazil reach 55% of the balance of the portfolio (62% in December 31, 2014).

 

The market values of these assets are close to their book values, because they are industry-specific operations and formed, in part, through Sectorial Funds and resources which do not find matching conditions as valuation parameters at market value.

 

The increase in the balance of receivables from loans in the quarter is mainly due to the exchange rate variation on loans granted to Itaipu, resulting from the appreciation of the dollar against the real when the closing quotes of September 2015 are compared to those of December 2014.

 

The long-term portions of financing and loans granted, based on contractually predicted cash flows, shall mature in variable amounts, as shown below:

 

 

Financing and loans

 

The debts are guaranteed by the Federal Government and/or by Eletrobras, are subject to charges, whose average rate in 2015 is 5.36% per year. (5.20% per year in 2014), and have the following profile:

 

 

The portion of long-term loans and financing has its maturity programmed as follows:

 

 

Ratings

 

 

 

Eletrobras Organization Chart

 

 

 

 

Investments

 

 

Share Capital

 

Share Capital Structure

 

As of September 30, 2015 Eletrobras' share capital had the following composition: