SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



FORM 6-K

Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of the
Securities Exchange Act of 1934

For the month of November, 2016

Commission File Number 1-34129



CENTRAIS ELÉTRICAS BRASILEIRAS S.A. - ELETROBRÁS
(Exact name of registrant as specified in its charter)



BRAZILIAN ELECTRIC POWER COMPANY
(Translation of Registrant's name into English)



Avenida Presidente Vargas, 409 - 13th floor,
Edifício Herm. Stoltz - Centro, CEP 20071-003,
Rio de Janeiro, RJ, Brazil
(Address of principal executive office)

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____


 
 

 

 


 
 

Marketletter 3Q16

 

Summary

 

Page

 

Conference Call in Portuguese

November 11, 2016

2PM (GMT)

11AM (New York)

4PM (London)

Phone: 55 11 3137-8031 

Password: 9532

Conference Call in English

November 11, 2016

2PM (GMT)

11AM (New York)

4PM (London)

Phone: 55 11 3137-8031 

Password: 9532

Contact IR:

[email protected]

www.eletrobras.com.br/elb/ri

Tel: 55 21 2514-6333

Preparation of the Marketletter:

Assistant to the CFO

Arlindo Soares Castanheira

Investor Relations Department

Paula Prado Rodrigues Couto

Market Reports Division

Bruna Reis Arantes

Fernando D'Angelo Machado

José Paulo de Araújo

Introduction

02

I. Consolidated Results Analysis

04

II. Parent Company Results Analysis

18

III. General Information

22

IV. Appendix: Information on Subsidiaries

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


1

Disclaimer:

This material contains calculations that may not yield an accurate sum or result due to rounding performed.


 
 

 

Marketletter 3Q16

 

Rio de Janeiro, November 9th 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 electricity sector in Latin America, operating in generation, transmission and distribution, the parent company of 14 subsidiaries, a participation company - Eletropar - a research center - Cepel and accounting for 50% of the social capital Itaipu Binacional, announces its results for the year.

Eletrobras presented in the accumulated result for the nine months 2016 (9M16), a net profit assigned to controlling shareholders of R$9,687 million, compared to a net loss of R$ 4,115 million recorded in the nine months of 2015 (9M15).

In the third quarter of 2016 (3Q16), the company presented a net profit of R$ 863 million, compared to a net loss attributable to controlling shareholders of R$ 4,012 million in the third quarter of 2015 (3Q15).

HIGHLIGHTS OF CONSOLIDATED RESULTS FOR THE 3Q16:

 

»Filing of the Form 20-F 2014 and 2015 with the SEC;

»Approval by ANEEL of the final value of R$ 2,579 million, base date of December 31, 2012, the RBSE of the subsidiary Eletronorte in the amount of R$;

»Approval of the privatization of CELG-D in the amount of R$ 913 million at the 166th EGM;

»Physical Aggregation of an average 1,518 MW of installed capacity in Power Generation;

»Physical Aggregation of 2,064 Km in Transmission;

»Net Operating Revenue of R$ 8,608 million;

»Negative Itaipu transfer in the amount of R$ 47 million;

»Accounting acknowledgment of the balance of approval of the subsidiary Eletronorte and monetary restatement relative to the RBSE in the Transmission Income in the amount of R$ 1,499 million;

»Negative CVA in the amount of R$ 197 million;

»Provisions for contingency in the amount of R$ 434 million;

»Impairment in the amount of R$ 263 million;

»Reversal of provision for onerous contracts in the amount of R$ 388 million;

»Investigation Findings in the net amount of R$ 159 million;

»Equity Interest in the amount of R$ 1,931 million, impacted by the RBSE in the  associated company CTEEP in the amount of R$ 1,651 million;

»Net financial income negative in the amount of R$ 1,489 million, impacted by monetary restatement relative to the compulsory loan claims in the amount of R$ 770 million;

»Provision for Income Tax/Social Contribution relative to the acknowledgment of RBSE in the amount of R$ 510 million.

 

 

2

Disclaimer:

This material contains calculations that may not yield an accurate sum or result due to rounding performed.


 
 

 

Marketletter 3Q16

 

amounts in R$ million

 

3Q16

3Q15

%

2016

2015

%

Energy Sold - Generation GWh(1)

60.9

61.6

-1.1%

183,9

183.6

0.2%

Energy Sold - Distribution GWh(2)

4,364 

4,425 

-1.4%

12,883

12,898

-0.1%

Gross Revenue

10,345

10,746

-4%

53,451

31,937

67%

Gross Revenue Management (2)

8,376

8,009

5%

24,509

24,237

1%

Net Operating Revenue

8,608

7,902

9%

48,455

24,728

96%

Management Net Operating Revenue (3)

6,639

6,156

8%

19,512

19,655

-0.7%

EBITDA

3,237

-3,149

-203%

24,580

-2,233

1201%

Management EBITDA (4)

654

640

2%

2,415

2,513

-4%

Net income attrib. to contr. shareholders

863

-4,012

-122%

9,687

-4,115

335%

Management Net Income (5)

-1,559

64

-2520%

-427

-116

268%

Investments

2,194

2,720

-19%

6,770

6,381

6%

   (1)    Takes into account quota energy;

(2)    Excluding CELG-D;

(3)    Excluding CELG-D and Construction Revenue and Transmission Revenue from RBSE

(4)    Excluding (2), Impairment, onerous contracts, provisions for contingencies and investigation findings.

(5)    Excluding (3) and provision for Income Tax. 

 

3

Disclaimer:

This material contains calculations that may not yield an accurate sum or result due to rounding performed.


 
 

 

Marketletter 3Q16

 

 

I.             CONSOLIDATED INCOME ANALYSIS (R$ million)

 

9M16

9M15

CONSOLIDADO

3T16

2T16

3T15

9,866

9,344

Generation - Sale

3,486

3,325

3,221

2,157

2,701

Generation - Supply

783

733

838

927

2,020

Generation - CCEE (short term)

307

364

376

1,595

1,396

Generation - Income from Operation and Maintenance

572

513

479

103

190

Generation - Construction Income

98

23

37

-183

64

Generation – Itaipu Transfer (see II.3.a)

-47

11

-41

2,231

1,981

Transmission - Income from Operation and Maintenance

763

748

669

936

1,167

Transmission - Construction Income

150

474

516

27,889

603

Transmission - Return Rate Updates

1,718

25,993

195

6,465

10,258

Distribution - Sale and Supply

2,124

2,054

3,813

594

621

Distribution - Construction Income

222

215

263

-37

663

Distribution - CVA and other Financial Components

-197

91

103

909

927

Other Income

367

288

279

53,451

31,937

Gross Income

10,345

34,831

10,746

-4,996

-7,208

Income Deductions

-1,737

-1,746

-2,843

48,455

24,728

Net Operating Revenue

8,608

33,085

7,902

-6,960

-8,973

Energy purchased for resale

-2.362

-2,317

-2,719

-1,232

-1,306

Charges for the use of the electric network

-425

-401

-434

-795

-1,263

Fuel for electricity production

-315

43

-328

-1,633

-1,978

Construction

-470

-711

-815

37,835

11,208

 Gross Revenue

5,036

29,698

3,607

-8,125

-8,096

Personnel, Supplies, Services

-2,891

-3,021

-2,810

-271

-282

Remuneration and Reimbursement

-79

-95

-76

-1,328

-1,349

Depreciation and Amortization reversal

-443

-451

-423

-211

0

Investigation Findings

-211

0

0

-7,137

-5,248

Operating Provision/Reversal

-549

-3,574

-4,019

20,763

-3,767

Results before Shareholders’ Equity

863

22,558

-3,722

2,489

185

Shareholders’ Equity

1,931

376

149

23,252

-3,582

Result before Financial Result

2,794

22,934

-3,573

1,515

1,466

Revenue from Interest and Financial Investments

622

391

454

48

811

Net Monetary Update

45

124

525

-339

120

Net Currency Rate Variation

24

-178

-122

-4,838

-3,533

Debt charges

-1,847

-1,484

-1,283

-109

-30

Shareholders Debt Charges

-56

-42

-11

0

996

Remuneration of Indemnities - Law 12,783/13

0

0

131

-343

157

Outros resultados financeiros

-277

-43

-36

19,186

-3,595

Result before Income Tax and Social Contribution

1,305

21,702

-3,915

-9,415

-921

Income Tax and Social Contribution

-430

-8,911

-310

9,771

-4,516

Net Profit/Loss for the Year

875

12,791

-4,225

84

-401

Equity attributable to Non-Controlling shareholders

12

69

-213

9,687

-4,115

Net Profit/Loss Attrib. to Controlling Shareholders

863

12,722

-4,012

 

 

 

4

Disclaimer:

This material contains calculations that may not yield an accurate sum or result due to rounding performed.


 
 

 

Marketletter 3Q16

 

 

 

9M16

9M15

Management Statement of Income*

3Q16

3Q15

14,362

15,525

Generation Income

5,101

4,873

2,810

2,585

Transmission Income

982

863

6,428

5,402

Distribution Income

1,926

2,074

909

725

Other Income

367

199

24,509

24,237

Gross Management Income

8,376

8,009

-4,996

-4,582

Deductions from Income

-1,737

-1,853

19,512

19,655

Net Operating Revenue

6,639

6,156

-8,987

-9,226

Operating Costs

-3,102

-2,780

-8,125

-7,362

Personnel, Material and Services

-2,891

-2,558

-1,328

-1,261

Depreciation and Amortization

-443

-394

-600

-457

Operating Provisions

-240

-252

-271

-282

Other Operating Costs and Expenses

-79

-76

201

1,066

 

-116

96

886

185

Shareholders’ Equitys

328

149

1,087

1,251

 

212

246

-2,007

-266

Financial Result**

-719

-52

-919

985

Management Income Before Tax

-508

194

-640

-921

Income Tax and Social Contribution

80

-310

-1,559

64

Net Management Profit/Loss

-427

-116

* Excluding income and expenses with construction, Transmission revenue with RBSE, Investigation Findings, Impairment, onerous contracts, provisions for contingencies and provision for Income Tax.

** Excluding the shareholding equity from CTEEP that were impacted by the RBSE.

 

I.1 Main variations in the Income Statement

Variations in the Income Statement (9M16 x 9M15)

 

The Result for the 9M16 recorded an increase by 335% relative to the 9M15, with a  net profit attributable to controlling shareholders in the amount of R$ 9,687 million in the 9M16 compared to a net loss attributable to controlling shareholders in the amount of R$ 4,115 million in the 9M15.

Management result in the 9M16 went from a managerial net income of R$ 64 million in the 9M15 to a managerial net loss of R$ 1,559 million in the 9M16.

 

Operating Income:

The Net Operating Income in the amount of R$ 48,458 million represented, in the 9M16, an increase by 96% compared to the 9M15, when it was recorded in the amount of R$ 24,728 million.

The Management Net Operating Income in the amount of R$ 19,512 million represented, in the 9M16, a decrease by 0.57% compared to the 9M15, when it was recorded in the amount of R$ 19,655 million. In the analysis by segments, we present the following highlights:

»     The Generation Income decreased by 8.0%, from R$ 15,715 million in the 9M15 to 14,464 million in the 9M16. The sale of energy in the spot market increased from R$ 2,020 million in the 9M15 to R$ 927 million in the 9M16, mainly due to the reduction of the Settlement of Differences Price (PLD) in 2016. The supply income also presented a reduction, by 20%, from R$ 2,701 million in the 9M15 to R$ 2,157 million in the 9M16, reflecting the deverticalization of Amazonas Energia, as the electricity sold by the generation assets, which was previously classified as supply began to be recorded in the Sales Account of Amazonas GT, with no effect in the consolidated revenue but with an inter-quota effect; and (ii) reflecting the changes in the contractual conditions for the sale to northeastern industries by Chesf, as established pursuant to Law 13,182/1515. Income from sales increased from R$ 9,344 million to R$ 9,866 million, influenced by the growth in revenue from subsidiary Electronuclear, as a result of the increase in income contracted in 2016 (according to ANEEL RH 2006) for Angra 1 and 2 and the positive balance relative to the variable portion of these plants. The total volume of energy sold by the Eletrobras companies increased from 183.6 TWh in the 9M15 to 183.9 TWh in the 9M16. Income from Operation and Maintenance of Power Plants renewed pursuant to Law 12,783/2013 increased from R$ 1,396 million to R$ 1,595 million, mainly influenced by RAG's annual adjustment in July 2016. Income from construction increased from R$ 190 million in 9M15 to R$ 103 million in 9M16, but no effect since it has an equivalent amount recorded at cost of construction.

 

5

Disclaimer:

This material contains calculations that may not yield an accurate sum or result due to rounding performed.


 
 

 

Marketletter 3Q16

 

»     Transmission Income increased by 728%, from R$ 3,752 million in the 9M15 to R$ 31,055 million in the 9M16, influenced mainly by the effect of MME Ordinance 120, dated April 20th, 2016, which established the conditions for payment and remuneration relative to the Basic Grid, Existing Services (RBSE), with impact on transmission income, on the transmission rates update account, in the amount of R$ 27,310 million. Thus, Transmission Income, excluding the effects of RBSE accounting and construction income, would have increased by 9%. Operation and Maintenance Income from Transmission Lines not yet renewed and renewed pursuant to Law 12,783/2013) went from R$ 1,981 million in the 9M15 to R$ 2,231 million in the 9M16, mainly influenced by revision of the RAP ( Allowed Annual Revenue). Construction Income decreased from R$ 1,167 million in the 9M15 to R$ 936 million in the 9M16, without effect on the result, since it has an equivalent amount recorded as cost of construction.

»     Distribution Income decreased by 39%, from R$ 11,542 million in the 9M15 to R$ 7,022 million in the 9M16, strongly influenced by the deconsolidation of CELG-D, due to the decision in favor of the privatization this distribution company, that is expected to occur by the end of 2016. Excluding CELG-D’s income in the 9M15, income from the distribution segment would increase by 26.9%, from R$ 5,165 million in the 9M15 to R$ 7,022 million in the 9M16. Income increase was largely due to Sales Income, which increased from R$ 5,165 million in the 9M15 (excluding CELG-D) to R$ 6,465 million in the 9M16, negatively offset by the reduction in income from CVA which changed from R$ 237 (excluding CELG-D) to R$ 37 million, due to the difference in the average price of the energy purchase contracts (R$ 200.27/MWh) and the transfer price of the average ACR in the tariffs (R$ 295.10/MWh). The amount of energy sold increased from 12.90 TWh in the 9M15 (excluding CELG-D) to 12.88 TWh in the 9M16. Income from construction changed from R$ 621 million in the 9M15 to R$ 594 million in the 9M16, but without effect on the result since it has an equivalent amount recorded at cost of construction.

6

Disclaimer:

This material contains calculations that may not yield an accurate sum or result due to rounding performed.


 
 

 

Marketletter 3Q16

 

 

 

Operating Costs

The Operating Costs and Expenses decreased by 21%, from R$ 13,520 million in the 9M15 to R$ 10,620 million in the 9M16.

Operating costs, in the managerial view, decreased by 3%, from R$ 9,226 million in the 9M15 to R$ 8,987 million in the 9M16. In the analysis, we present the following highlights:

- Electricity Purchased for Resale decreased by 22.4%, from R$ 8,973 million in the 9M15 to R$ 6,960 million in the 9M16. Excluding CELG-D in the 9M15, Electricity Purchased for Resale would increase by 2.7%, from R$ 6,778 million in the 9M15 to R$ 6,960 million in the 9M16. Relative to Energy Purchased for Resale, R$ 3,147 million correspond to the purchase by generation companies, excluding purchases among Eletrobras' subsidiaries, and R$ 3,813 million in energy purchased by the Distribution Companies.

- In the Electricity Network Use account a reduction by 5.7% was recorded. In the 9M15 a net expense in the amount of R$1,306 million was recorded; in the 9M16 a net expense in the amount of R$ 1,232 million was recorded.

- The Fuel for Electricity Production account recorded a reduction by 37%. In the 9M15, an expense in the amount of R$ 1,263 million was recorded, compared, in the 9M16, to an expense in the amount of R$ 795 million, due mainly to the deactivation of some of Amazonas Energia's plants which operated with fuel, reclassification of fuel costs to other operating expenses, specifically rental costs with lessors of generation units of the isolated system, pursuant to MME Ordinance 015/2016, and to the reduction of generation in Eletrobras companies' thermal power plants in 2016, especially Santa Cruz, Roberto Silveira, Aparecida and Mauá TPP's.

 

Costs and Expenses

Operating Costs and Expenses increased by 14%, from R$ 14,975 million in the 9M15 to R$ 17,072 million in the 9M16. In the analysis, we present the following highlights:

 

- In the 9M16 the sum of Personnel, Material, Services and Other (PMSO) accounts increased by 0.4%, from R$ 8,096 million in the 9M15 to R$ 8,125 million in the 9M16. The Personnel, material Services and Others accounts presented, respectively, an increase by 1.1%, a decrease by 5.5% and 4.1% and increase of 5.3%. Excluding CELG-D’s expenses in the 9M15, the sum of the Personnel, material, service and others accounts present an increase by 10.4%, from R$ 7,362 million in the 9M15 to R$ 8,125 million in the 9M16. Excluding CELG-D, the Personnel account increased by 7.0%, from R$ 4,114 million in the 9M15 to R$ 4,402 million in the 9M16, influenced by the 2015 collective bargaining agreement, and positively offset by the dismissal of contracted personnel who held positions in committee, demonstrating the Company's resolve to reduce expenses. The Services account, excluding CELG-D, increased by 16.3%, from R$ 1,713 million in the 9M15 to R$ 1,992 million in the 9M16, mainly due to the hiring of internal investigation expenses. The Supplies account decreased by 0.1%, from R$ 219.0 million in the 9M15 to R$ 218.9 million in the 9M16.

 

7

Disclaimer:

This material contains calculations that may not yield an accurate sum or result due to rounding performed.


 
 

 

Marketletter 3Q16

 

The Other Operating Expenses account, excluding CELG D expenses, increased by 14.9% from R$ 1,316 million in 9M15 to R$ 1,513 million in 9M16, mainly due to (i) the growth of expenses in the subsidiary Amazonas GT in due to the appropriation of fuel expenses of PIEs (rented units) was allocated to "rent costs" under "other operating expenses" and no longer in the fuel account, pursuant to MME Ordinance No. 015/2016, in the amount of Approximately R$ 400 million; (ii) the write-off of invoices for losses on receivables from CEPISA, which were previously in the PCLD, especially for AGESPISA. In addition, 9M15 was positively affected by the recognition in favor of Eletronorte of the amount of R $ 170 million relating to the advantageous purchase in the acquisition of equity interest in the companies NBTE and CI.

 

9M16

9M15

Variation

(%) including CELG D

(%) excluding CELG D

Personnel

-4,402

-4,352

-4,114

1.1%

7.0%

Material

-219

-232

-219

-5.5%

-0.1%

Services

-1,992

-2,076

-1,713

-4.1%

16.3%

Others

-1,513

-1,436

-1,316

5.3%

14.9%

Donation and Contribution

-8,125

-8,096

-7,362

0.36%

10.37%

Other Operating Expenses

-1,992

-2,076

-1,713

-4.1%

16.3%

TOTAL PMSO

-8,125

-8,096

-7,362

0.36%

10.37%

 

Operating Expenses were also influenced by the results of the independent investigation conducted by Hogan Lovells, in the gross amount of R$ 300 million and in the net amount of R$ 211 million, considering that there was a reversal of impairment previously recorded in certain projects, which were written off under Expenses as shown in the following table. It is important to note that, in the Forms 20F for 2014 and 2015, these findings were recorded in various periods (i.e., R$ 4 million on the Form 20F 2014 and R$ 154 million on the Form 20F 2015), considering that the records resulting from the independent investigation were recorded each in the respective financial statement that was open. For purposes of filing of the financial statements with the CVM, the records were fully made in the 3Q16.

 

Adjustments 3Q 16

09/30/2016

Investigation Findings

-303

Angra 3

-141

Simplicio

-3

Maua 3

-67

SPEs

-91

 

 

Reversal of Impairment

144

Angra 3

142

Simplicio

3

 

 

Total Adjustments

-159

 

8

Disclaimer:

This material contains calculations that may not yield an accurate sum or result due to rounding performed.


 
 

 

Marketletter 3Q16

 

- The operating provisions increased from R$ 5,248 million in the 9M15 to R$ 7,137 million in 9M16. In the 9M16, Operating provisions were influenced mainly by the impairment in the amount of R$ 2,611 million and the provision for onerous contract in the amount of R$ 1,133 million relative to the development of the Angra 3 nuclear power plant. The amount of the impairment is net of the  reversal of impairment in the amount of R$ 144 million relative to the write-off of the investigation findings that were recorded under operating expenses. Another significant impact is the Provision for Contingencies in the amount R$ 2,786 million, caused mainly by the provision relative to court proceedings involving the compulsory loan in the amount of R$ 2,060 million.

The provision for contingencies also had an impact on the distribution company Amazonas Energia, due to the reclassification of risk in the amount of R$ 130 million referring to eight tax assessments issued by SEFAZ / AM due to the absence of reversal of ICMS credits over losses Of electricity.

 

R$ million

Consolidated 

9M16

9M15

Guarantees

29

17

Contingencies

2,786

1,545

PCLD - Consumers and Resellers

355

324

PCLD - Loans and Financing

13

12

Unsecured Liabilities in Subsidiaries

0

0

Onerous Contracts (Item I.3)

1,133

-237

Losses on Investments

0

70

Impairment (Item I.3)

2,611

3,386

Adjustment to Market Value

0

61

Other

209

71

Total Operating Provisions

7,137

5,248

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

 

 

Shareholders’ Equitys

- Shareholders’ Equity recorded an increase by 1,246%, resulting from a recording of a positive amount of R$ 185 million in the 9M15 to a positive amount of R$ 2,489 million in the 9M16, especially due to the acknowledgment of RBSE by the associated CTEEP, with an impact on the equity of Eletrobras in the amount of R$ 1,651 million.

 

Financial Income

- The Net Financial Income increased from a net expense of R$ 13 million in the 9M15 to a net expense of R$ 4,066 million in the 9M16. This variation is mainly due to the full receipt of the interest and monetary restatements relative to the 1st tranche of the credits referring to the non-depreciated and non-amortized assets of the concessions renewed pursuant to Law 12,783/2013, reflected in the indemnity remuneration account due to the full payment of the tranche. In addition, the Monetary Restatement account decreased by 94%, from an income of R$ 811 million in 9M15 to an income of R$ 48 million in 9M16, mainly due to the accounting of non-current monetary restatement, relative to compulsory loan claims, in the amount of R$ 1,998 million. The Financial Result was also significantly affected by the exchange variation, which went from a net income of R$ 120 million in the 9M15 to a net expense of R$ 339 million in 9M16, due to the variation of the dollar in the year.

9

Disclaimer:

This material contains calculations that may not yield an accurate sum or result due to rounding performed.


 
 

 

Marketletter 3Q16

 

Income tax and social contribution

The provision for Income Tax and Social Contribution (CSLL) increased from an expense of R$ 921 million in 9Q15 to an expense of R$ 9,415 million in 9Q16, influenced by the increase in deferred taxes mainly due to the effect of accounting for the Basic Grid, Existing Services (RBSE).

Consolidated 

9M16

9M15

Current Income Tax and Social Contribution

-604

505

Deferred Income Tax and Social Contribution

-8,811

416

 

Variations in the Income Statement (3Q16 x 3Q15)

 

In the 3Q16, Eletrobras recorded a net profit attributable to controlling shareholders in the amount of R$ 863 million, compared to a net loss attributable to controlling shareholders in the amount of R$ 4,012 million in the 3Q15.

The Management Result in the 3Q16 recorded a decrease by 268% relative to the 3Q15, with a net management loss in the amount of R$ 427 million in the 3Q16 compared to a net management loss in the amount of R$ 116 million in the 3Q15.

 

Operating Revenue

The Net Operating Revenue in the amount of R$ 8,608 million in the 3Q16, represented an increase by 9% relative to the 3Q15, when it was recorded in the amount of R$ 7,902 million.

The Net Management Operating Revenue in the amount of R$ 6,639 million in the 3Q16, represented an increase by 8% relative to the 3Q15, when it was recorded in the amount of R$ 6,156 million. In the analysis by segments, we present the following highlights:

»     The Generation Revenues increased by 5.9%, from R$ 4,909 million in the 3Q15 to R$ 5,199 million in the 3Q16. This increase was influenced by the increase in Supply revenue, from R$ 3,221 million in the 3Q15 to R$ 3,486 million in the 3Q16, due mainly to extra revenue in the 1st auction, obtained in the 3Q16, with the revaluation of physical guarantee of the Candiota IIII - Phase C Thermal Plant to an average of 221 MW. The Sales revenue also decreased by 6.6%, from R$ 838 million in the 3Q15 to R$ 783 million in the 3Q16, influenced by (i) the deverticalization of Amazonas Energia, since the electricity sold by the aforementioned generation company, which was previously classified as supply started to be accounted for in the Sales account of Amazonas GT, without effect in the consolidated result due to the consolidation of Eletrobras’ Companies, and (ii) the changes in the contractual conditions for the sale to northeastern industries by Chesf, as established pursuant to Law 13,182/1515. Revenues from Operation and Maintenance of Power Plants renewed pursuant to Law 12,783/2013 increased from R$ 479 million in the 3Q15 to R$ 572 million in the 3Q16, mainly influenced by RAG's annual adjustment in July 2016. Revenues from energy sales in the short term (CCEE) increased from R$ 376 million in the 3Q15 to R$ 307 million in the 3Q16, strongly influenced by the decrease in the Price of Settlement of Differences (PLD). There was also an increase in Construction Revenues, from R$ 23 million in the 3Q15 to R$ 98 million in the 3Q16, but with no effect on the result of the 3Q16, since it has equivalent amount recorded at construction cost. The Itaipu Transfer decreased from a negative amount of R$ 41 million in the 3Q15 to a  negative amount of R$ 47 million in the 3Q16, influenced by the effects of the dollar's variation on the monetary adjustment based on the American price indices Commercial Price and Industrial Goods. The total volume of energy sold by the Eletrobras companies decreased from 62.0 TWh in the 3Q15 to 61.20 TWh in the 3Q16.

10

Disclaimer:

This material contains calculations that may not yield an accurate sum or result due to rounding performed.


 
 

 

Marketletter 3Q16

 

»     The Transmission Revenues increased by 90.8%, from R$ 1,379 million in the 3Q15 to R$ 2,631 million in the 3Q16, influenced mainly by the effect of MME Ordinance Number 120, of April 20th, 2016, which established the terms of payment and remuneration on the Basic Grid, Existing Services (RBSE), with an impact on the transmission revenue, in the return rates update account, in the amount of R$ 1,499 million. Transmission Revenues, excluding the effect of RBSE accounting, would have increased by 14%.  The construction revenue decreased from R$ 516 million in the 3Q15 to R$ 150 million in the 3Q16, with no effect on the result because it has equivalent amount recorded at construction cost. Excluding the RBSE, revenue from the return rates update would increase by 13%, from R$ 1,195 million in the 3Q15 to R$ 1,219 million in the 3Q16. Operating and Maintenance Revenue increased by 14.2%, from R$ 669 million in 3Q15 to R$ 763 million in the 3Q16.

»     The Distribution Revenue decreased by 48.6%, from R$ 4,178 million in the 3Q15 to R$ 2,148 million in the 3Q16, influenced by the deconsolidation of CELG-D in view of the decision favoring its privatization. Excluding CELG-D's revenue in the 3Q16, the distribution segment revenues would show a decrease by 3.6%, from R$ 2,229 million in the 3Q15 to R$ 2,148 million in the 3Q16. This decrease was mainly influenced by the decrease by 335% in net CVA and other financial components, from R$ 84 million (excluding CELG-D) in the 3Q15 to a net expense of R$ 197 million in the 3Q16. The Sales and Supply Revenue increased from R$ 1,990 million in the 3Q15 to R$ 2,124 million in the 3Q16, excluding Celg-D in the 3Q15. The Construction revenue decreased from R$ 263 million in the 3Q15 to R$ 222 million in the 3Q16, but with no effect on the result since it has equivalent amount recorded at construction cost. The amount of energy sold decreased from 4.42 TWh in the 3Q15 to 4.36 TWh in the 3Q16, excluding CELG-D in the 3Q15.

 

Operating Costs

Operating costs decreased by 17%, from R$ 4,296 million in the 3Q15 to R$ 3,572 million in the 3Q16.

Management Operating Costs, in the amount of R$ 3,102 million, dereased by 11.6% in the 3Q16 compared to the 3Q15, when the amount of R$ 2,780 million was recorded. In the analysis, we present the following highlights:

 

- The Electricity purchased for resale decreased by 13%, from R$ 2,719 million in the 3Q15 to R$ 2,362 million in the 3Q16. Excluding CELG-D's expenditures with the purchase of electricity for resale, the company would present an increase by 15% and the amount of R$ 2,053 million in the 3Q15. This result was mainly influenced by the adjustment recorded in the 3Q15 arising from injunctions against surplus payments regarding the GSF due to the 2015 hydrological crisis, especially by the subsidiary Eletronorte, which positively impacted the result of the 3Q15

 

11

Disclaimer:

This material contains calculations that may not yield an accurate sum or result due to rounding performed.


 
 

 

Marketletter 3Q16

 

- In the Fuel for electricity production account, in the 3Q15, an expense in the amount of R$ 328 million was recorded, while in the 3Q16 a net expense in the amount of R$ 315 million was recorded. The result of the 3Q16 was impacted by ANEEL's      Resolution 679/2015, of September 1st, 2015, which modified the criteria for receiving fuel reimbursement, in order to reduce the deadline for receipt of these funds by the supplier. In the 3Q16, the result was impacted by the decrease in generation in the Eletrobras Companies’ thermal power plants.

 

Operating Expenses

Operating expenses decreased by 43%, from R$ 7,329 million in the 3Q15 to R$ 4,173 million in the 3Q16.

The operating expenses, in managerial view, in the amount of R$ 3,653 million, increased by 11% relative to the 3Q15, when an amount of R$ 3,279 million was recorded. In the analysis, we present the following highlights:

- In the 3Q16, the sum of the Personnel, Material, Services and Other (PMSO) accounts increased by 2.9%, from R$ 2,810 million in the 3Q15 to R$ 2,891 million in the 3Q16. The Personnel, material, services and others accounts presented, respectively, a decrease by 9.2%, an increase by 8.5% and a decrease by 5.1% and increase of 119%. Excluding CELG-D's expenses in the 3Q15, the PMSO sum increased by 13% at R$ 2,558 million in the 3Q15. Excluding CELG-D, the Personnel account decreased by 4.5%, from R$ 1,631 million in the 3Q15 to R$ 1,557 million in the 3Q16, even with the impact of the 2016 collective bargaining agreement. The Material account increased by 14.2%, from R$ 76 million in the 3Q15 to R$ 87 million in the 3Q16 influenced by the annual readjustment in the contracts. The Services account, excluding CELG-D, increased by 13.8%, from R$ 657 million in the 3Q15 to R$ 747 million in the 3Q16, mainly due to the internal investigation expenses.

Other operating expenses, excluding Celg D, increased by 158%, from R$ 94 million in 3Q15 to R$ 500 million in 3Q16, mainly due to the following factors affecting the subsidiary Amazonas GT: (i) loss of R $ 67 million referring to the results of the research conducted by Hogan Lovells for UTE Mauá 3; Ii) effect of Ordinance MME nº 015/2016 that reduces the fuel bill, affecting the other expenses account, increasing the expense in rents.

 

3Q16

3Q15

3Q15*

(%) including CELG D

(%) excluding CELG D

Personnel

1,557

1,715

1,631

-9.2%

-4.5%

Supplies

87

80

76

8.5%

14.2%

Services

747

788

657

-5.1%

13.8%

Other

500

228

194

119.2%

158.0%

     Donations and Contributions

51

41

41

22.2%

22.2%

     Other Operating Expenses

450

187

221

140.7%

103.4%

TOTAL PMSO

2,891

2,810

2,558

2.9%

13.0%

 

- The Operating Provisions increased from a provision of R$ 4,019 million in the 3Q15 to a provision of R$ 549 million in the 3Q16. In the 3Q16, the Operating Provisions were influenced mainly by the Provision for Legal Contingencies, amounting to R$ 434 million, influenced by (i) provision for compulsory loans in the net amount of R$ 175 million; (ii) the risk reclassification of the distribution subsidiary Amazonas Energia, in the amount of R$ 130 million, relative to eight infringement notices issued by SEFAZ/AM due to the lack of ICMS reversal credits for electricity losses. The Operating Provisions were also influenced by the impairment, in the amount of R$ 263 million, partially offset by the reversal of a provision for onerous contract in the amount of R$ 388 million.

12

Disclaimer:

This material contains calculations that may not yield an accurate sum or result due to rounding performed.


 
 

 

Marketletter 3Q16

 

Consolidated 

3Q16

2Q16

Guarantees

13

5

Contingencies

434

445

PCLD - Consumers and Resellers

195

71

PCLD - Loans and Financing

4

4

Unsecured Liabilities in Subsidiaries

0

0

Onerous Contracts (Item I.3)

-388

-82

Losses on Investments

0

22

Impairment (Item I.3)

263

3.386

Adjustment to Market Value

0

61

Other

27

108

Total Provisions

549

4,019

 

- The Operating Expenses were also influenced by the results of the independent investigation conducted by Hogan Lovells, in the gross amount of approximately R$ 300 million and in the net amount of R$ 211 million, considering that there was reversal of impairment previously recorded in certain projects, which were written-down in the 3Q16 as expenses.

 

 

Equity Interest

- Equity Interest presented a positive result of R$ 149 million in the 3Q15 and a positive result of R$ 1,931 million in the 3Q16, and we highlight the acknowledgment of the RBSE by the associated company CTEEP, which led Eletrobras to an equity interest in the amount of R$ 1,603 million.

 

Financial Revenue

- The Financial Result went from a net expense of R$ 343 million in the 3Q15 to a net expense of R$ 1,489 million in the 3Q16. This variation is mainly due to the full receipt of the interest and monetary restatements relative to the 1st tranche of the credits referring to the non-depreciated and non-amortized assets of the concessions renewed pursuant to Law 12,783/2013, reflected in the indemnification account due to the full payment of the tranche in 2015. In addition, the monetary restatement account decreased from R$ 525 million in the 3Q15 to R$ 45 million in the 3Q16, mainly due to the accounting of monetary restatement relative to compulsory loan claims.

13

Disclaimer:

This material contains calculations that may not yield an accurate sum or result due to rounding performed.


 
 

 

Marketletter 3Q16

 

I.2 Energy Sales

 

I.2.1 Energy sold in the 9M16 - Generation Companies - TWh

 

In terms of evolution of the energy market, the Eletrobras Companies sold, in the 9M16, 132.8 TWh compared to 133.2 TWh traded in the same period last year, representing a reduction by 0.3%.

 

 

I.2.2 Energy Sold in the 9M16 - Distribution Companies - TWh

 

In terms of evolution of the energy market, the Eletrobras Distribution Companies sold, in the 9M16, sold 12.88 TWh, compared to 12.90 TWh traded in the same period last year, representing a reduction by 0.1%.

 

14

Disclaimer:

This material contains calculations that may not yield an accurate sum or result due to rounding performed.


 
 

 

Marketletter 3Q16

 

I.3 Impairments and Onerous Contracts

 

 

 

Accumulated

     

Impairment

2016

2015

9M16

3Q16*

2Q16

1Q16

Generation

11,511

8,804

2,707

300

2,414

-7

Angra 3

8,636

6,064

2,572

158

2,414

0

Samuel

418

418

0

0

0

0

Simplicio

381

383

-2

-2

0

0

Batalha

559

559

0

0

0

0

Other

1,518

1,381

137

144

0

-7

Transmission

1,204

1,307

-103

-37

-66

0

Distribution

518

518

0

0

0

0

Total

13,233

10,629

2,604

263

2,348

-7

* The reversal of impairments that occurred in the 3Q16 relative to Angra 3 and Simplício were reclassified as operating expenses, due to the results of the independent investigation.

 

 

 

 

R$ million

Onerous Contracts 

Consolidated Balance

 

Change in 2016 *

2016

2015

3Q16

2Q16

1Q16

Transmission

 

 

 

 

 

Contract 062/2001

557

729

-58

-57

-58

Camaçari IV - Sapeaçu TL

94

99

-1

-6

2

Other

42

67

-7

-24

6

 

693

896

-66

-87

-50

Generation

 

 

 

 

 

Camaçari

68

80

-13

-4

4

Funil

77

84

-2

-2

-2

Coaracy Nunes

228

228

0

0

0

Marimbondo

67

80

-4

-4

-4

Angra 3

1,378

0

-299

0

1,677

Other

121

130

-3

-3

-3

 

1,938

602

-321

-13

1,672

Distribution

 

 

 

 

 

Intangible

0

0

0

0

0

 

 

 

 

 

 

TOTAL

2,631

1,498

-387

-101

1,622

           

* The table takes into account an increase by R$ 50 million from the onerous contract of Amazonas Energia intangible assets, which does not transit in the result.

 

 

 

 

 

 

 

15

Disclaimer:

This material contains calculations that may not yield an accurate sum or result due to rounding performed.


 
 

 

Marketletter 3Q16

 

I.4 Consolidated EBITDA 

 

 

EBITDA

9M16

9M15

(%)

Result for the year

9,771

-4,516

316%

+ Provision Income Tax and Social Contribution

9,415

921

922%

+ Financial Result

4,066

13

31033%

+ Amortization e Depreciation

1,328

1,349

-2%

= EBITDA

24,580

-2,233

1201%

ADJUSMENTS

 

 

 

Celg D

0

52

-100% 

Effects Basic Grid, Existing Services(RBSE)

-27,310

0

-100%

Contingencies

2,788

1,545

80%

Onerous contracts

1,274

-237

637%

Investigation Findings

211

0

100%

Impairment

2,474

3,386

-27%

Shareholdings CTEEP

-1,603

0

-100%

= MANAGEMENT EBITDA

2,415

2,513

-4%

 

 

I.4.1 EBITDA of Subsidiaries *

 

In the 3Q16 the sum of Eletrobras subsidiaries' EBITDA was positive in the amount of R$ 2,154 million, which represents an increase by 181%, compared to the positive EBITDA of R$ 2,671 million in the 3Q15.

In the 9M16 the Eletrobras subsidiaries' EBITDA was positive the amount of R$ 25,605 million.

 

EBITDA R$ million

Company

9M16

9M15

%

3Q16

3Q15

(%)

Eletronorte

4,977

1,500

232%

1,042

759

37%

Chesf

9,046

131

6803%

349

32

984%

Furnas

14,573

1,211

1104%

1,164

617

89%

Eletronuclear

-3,277

-3,058

7%

235

-3,355

-107%

Eletrosul

1,857

42

4316%

180

63

186%

CGTEE

-25

-58

-57%

37

31

20%

Amazonas G&T

-172

0

-

-123

0

-

Subtotal

26,979

-232

-11711%

2,885

-1,853

-256%

Distribution Companies

-1,374

-711

93%

-731

-818

-11%

Total

25,605

-943

-2816%

2,154

-2,671

-181%

 

 

 

EBITDA MARGIN

Company

9M16

9M15

p.p.

3Q16

3Q15 *

p.p.

Eletronorte

69.9%

33.6%

36.3

14.6%

61.8%

-47.2

Chesf

78.2%

4.7%

73.5

3.0%

3.7%

-0.7

Furnas

83.2%

24.9%

58.2

6.6%

48.0%

-41.4

Eletronuclear

-171.0%

-209.8%

38.8

12.3%

-528.1%

540.4

Eletrosul

67.8%

3.6%

64.2

6.6%

16.9%

-10.3

CGTEE

-5.2%

-19.3%

14.1

7.7%

226.1%

-218.3

Amazonas G&T

-69.0%

-

-

-49.1%

0.0%

-49.1

Subtotal

64.9%

-1.5%

66.4

6.9%

-41.5%

48.5

Distribution Companies

-24.5%

-8.0%

-16.5

-13.0%

-42.5%

29.5

Total

54.3%

-3.9%

58.2

4.6%

-41.8%

46.4

EBITDA = Net profit for the year plus income taxes, net financial expenses, interest income and depreciation, amortization and depletion, as determined by CVM Instruction 527/12.

 

16

Disclaimer:

This material contains calculations that may not yield an accurate sum or result due to rounding performed.


 
 

 

Marketletter 3Q16

 

p.p. = percentage points

Source: Financial Statements presented in the Appendix to this document.

* The result of the 1S15 was adjusted to not consider CELG-D so as to maintain comparability between the periods.

 

I.6 Net Debt

 

 

R$ million

Net Debt

9M16

2015

Financing payable without RGR 

39,120

40,521

(-) (Cash and Cash Equivalent + Marketable Securities)

6,758

8,432

(-) Financing Receivables without RGR

11,679

15,353

(-) Itaipu Financial Assets Net Balance*

1,552

2,621

Net Debt

19,130

14,116

* See item II.2 "a.1".

 

 

 

17

Disclaimer:

This material contains calculations that may not yield an accurate sum or result due to rounding performed.


 
 

 

Marketletter 3Q16

 

II.          Analysis of the Parent Company's Results

 

Eletrobras presented, in the result of the 9M16, a net profit in the amount of R$ 9,687 million, compared to a net loss of R$ 4,115 million recorded in the 9M15.

Eletrobras presented, in the result of the 3Q16, a net profit in the amount of R$ 863 million compared to a loss of R$ 4,012 million in the 3Q15.

This result of the 3Q16 was decisively influenced by: (i) Equity Earnings in the amount of R$ 21,502 million, mainly influenced by the effect of MME Ordinance Number 120, of April 20th, 2016, which established the terms of payment and remuneration on the Basic Grid, Existing Services (RBSE); (ii) Unsecured liabilities in subsidiaries in the amount of R$ 1,661 million especially in the distribution companies of Eletrobras; (iii) Provisions for legal contingencies in the amount of R$ 175 million, mainly due to the provisions relating to the compulsory loan judicial proceedings (see Explanatory Note 30 in the 3Q16 Financial Statements); and (iv) net negative foreign exchange rate variation in the amount of R$ 555 million, strongly influenced by the monetary restatement of the provision for the compulsory loan. The following chart shows a comparison of the results of Eletrobras in the nine months of 2016 and 2015.

Result Evolution - R$ million

                     

 

 

 

18

Disclaimer:

This material contains calculations that may not yield an accurate sum or result due to rounding performed.


 
 

 

Marketletter 3Q16

 

II.1 Eletrobras Equity

 

In the 9M16 the equity result positively impacted the Company's results by R$ 21,499 million, resulting from the valuation of equity investments, mainly due to the result of the equity of subsidiaries, mainly influenced by the effect of MME Ordinance 120, of April 20th, 2016, which established the conditions for payment and remuneration on the Basic Grid, Existing Services (RBSE).

In the 3Q16 the result of Shareholders’ Equitys positively impacted the Company's results by R$ 3,249 million, higher than the negative result in the amount of R$ 2,843 million recorded in the 3Q15, as follows:

 

 

R$ million

 

Parent Company

 

 

3Q16

3Q15

9M16

9M15

Investments in subsidiaries

 

 

 

 

Equity

1,556

-2,999

19,278

-2,598

 

 

 

 

 

Investments in associates

 

 

 

 

Interest on capital

0

0

0

0

Equity

1,663

138

2,052

248

 

 

 

 

 

 

 

 

 

 

Other investments

 

 

 

 

Interest on capital

0

0

1

2

Dividends

25

15

86

50

Return on investments in partnerships

0

0

0

10

Capital Income - ITAIPU

5

3

80

70

 

30

18

166

132

 

 

 

 

 

Total

3,249

-2,843

21,499

2,218

 

 

II.2. Parent Company Energy Trading

 

a. Itaipu Binacional

FINANCIAL RESULT OF ITAIPU

 

 

 

R$ million

 

 

3Q16

2Q16

1Q16

9M16

Energy Sales Itaipu Contract + CCEE

 

2,514

2,683

2,916

8,113

Revenue Resulting from the Right to Indemnity

 

-194

-298

-434

-926

Other

 

30

-33

64

60

Total Revenue

 

2,350

2,352

2,546

7,247

 

 

 

 

 

 

Energy Purchase Itaipu Contract + CCEE

 

-2,542

- 2,733

-3,230

-8,506

Expenses Resulting from Indemnity Liab.

 

128

196

286

610

Itaipu Transfer

 

-49

366

384

701

Other

 

66

-170

-133

-237

Total Expenses

 

-2,396

-2,341

-2,692

-7,431

 

 

 

 

 

 

NOI - Itaipu Transfer

 

-47

11

-148

-183

 

 

 

 

 

 

 

 

 

RESULT OF ITAIPU (price indices)

 

 

 

 

R$ million

 

 

3Q16

2Q16

1Q16

9M16

Revenue Resulting from the Right to Indemnity

 

-194

-298

-434

-926

+ Foreign Currency Exchange Rate Result

 

48

-492

-529

-973

Resulting from the Right to Indemnity (RD)

 

-146

-790

-963

-1,899

- Expense Resulting from the Indemnity Liab.

 

-128

-196

-286

-610

+ Foreign Exchange Rate Result

 

32

-324

-349

-641

Result from the Indemnity Liab.(RO)

 

-96

-520

-635

-1,251

Balance: RD - RO

 

-50

-269

-328

-647

           

 

19

Disclaimer:

This material contains calculations that may not yield an accurate sum or result due to rounding performed.


 
 

 

Marketletter 3Q16

 

 

 

a.1 Itaipu Binacional Financial Asset

(see Explanatory Note 17.1.1 in the 2Q16 Financial Statements)

 

Pursuant to Law 11,480/2007, as of 2007, the adjustment factor for financing contracts between Eletrobras and Itaipu Binacional and for credit assignment contracts with the National Treasury, based on the American price indices Commercial Price and Industrial goods, was removed, being therefore guaranteed to the Company the full maintenance of its receipts flow.

As a result, Decree 6,265, of November 22nd 2007 was issued, regulating the sale of electricity from Itaipu Binacional, setting the differential to be applied to the transfer tariff, creating an asset relative to the part of the calculated annual differential, equivalent to the annual adjustment factor taken from the financing, included each year, as of 2008, in the energy transfer rate, applied by the Company, maintaining the flow of receivables resources originally established in the financing agreements.

The values for the annual adjustment factor are set annually by ministerial decree of the Ministries of Finance and of Mines and Energy and shall be paid-up by the inclusion in the transfer tariff to be practiced until 2023.

The balance resulting from the Itaipu Binacional adjustment factor, included under Financial Assets, presented under Non-Current Assets, amounts to R$ 4,077 million on September 30th, 2016, equivalent to US$ 1,257 million (R$ 5,976 million on December 31st, 2015, equivalent to US$ 1,530 million), of which R$ 2,689 million, equivalent to US$ 829 million, will be transferred to the National Treasury until 2023, as a result of the credit assignment transaction between the Company and the National Treasury in 1999.

Such amounts will be paid-up through their inclusion in the sale tariff to be practiced until 2023.

Thus, since the Itaipu Financial Asset is a compensation due to the financing contract granted by Eletrobras to Itaipu, the amount of the Financial Asset to be received by Eletrobras is being considered, as a discount, in the calculation of the Net Debt.

 

 

20

Disclaimer:

This material contains calculations that may not yield an accurate sum or result due to rounding performed.


 
 

 

Marketletter 3Q16

 

II.3 Financial Result

 

In the 9M16, the Financial Result negatively impacted the result of the Company by R$ 501 million, worse than the positive Financial Result of the 9M15 - R$ 3,116 million. This variation is mainly explained by the lower result of the exchange rate variation applicable, in dollars, to the financing receivable from Itaipu.

In the 3Q16 the Financial Result negatively impacted the result of the Company by R$ 170 million, as follows:

 

FINANCIAL RESULT R$ million

 

3Q16

3Q15

9M16

9M15

Financial Revenues

 

 

 

 

Revenue from interest, commissions and fees

839

766

2.558

2,173

Revenue from financial investments

213

211

553

429

Moratorium on electric energy

9

120

28

247

Restatement

-555

333

-1.170

917

Foreign currency exchange rate variations

60

764

-481

1,287

Other financial income

0

21

87

85

 

 

 

 

 

Financial expenses

 

 

 

 

Debt charges

-589

-650

-1.760

-1,780

Lease charges

0

0

0

0

Charges on shareholders' resources

-52

-7

-97

-20

Other financial expenses

-127

-120

-250

-220

 

-201

1,438

-532

3,116

The main indexes of financial and transfer contracts presented the following variations in the periods:

 

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

 

 

1Q16

2Q16

3Q16

9M16

Dollar

-8.86%

-9.81%

1.13%

-17.80%

IGPM

2.97%

2.86%

0.53%

6.48%

 

 

1Q15

2Q15

3Q15

9M15

Dollar

20.77%

-3.29%

28.05%

49.57%

IGPM

2.02%

2.27%

1.93%

8.36%

 

II.4 Operating Provisions

 

In the 9M16 the Operating Provisions negatively impacted the result of the Company by R$ 10,320 million, compared to R$ 3,478 million in the 9M15. This variation is mainly explained, by the increase in Unsecured Liabilities in subsidiaries in the amount of R$ 8,181 million.

In the 3Q16 the Operating Provisions negatively impacted the result of the Company by R$ 1,993 million, also influenced, mainly, by Unsecured Liabilities in subsidiaries, as follows:

 

 

 

 

21

Disclaimer:

This material contains calculations that may not yield an accurate sum or result due to rounding performed.


 
 

 

Marketletter 3Q16

 

 

R$ million

 Operating Provisions

Parent Company

 

 

 

9M16

9M15

3Q16

2Q16

Guarantees

 

29

17

13

5

Contingencies

 

2,077

655

175

58

PCLD - Consumers and Resellers

 

0

0

0

0

PCLD - Loans and Financing

 

13

12

4

4

Unfunded liabilities in Subsidiaries

 

8,040

2,834

1,802

1,580

Onerous Contracts

 

0

0

0

0

Losses on Investments

 

0

70

0

22

Impairment

 

-1

0

-1

0

Adjustment to Market Value

 

0

61

0

61

Other

 

22

-171

0

14

 

 

10,179

3,478

1,993

1,744

           

 

III. General Information

 

Portfolio of Financing Receivable and Payable

 

a.    Financing and Loans Granted

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

All financing and loans granted are supported by formal agreements with the borrowers. The proceeds of these values, in most cases, are provided in monthly installments, repayable in an average term of 10 years and the average interest rate, weighted by the portfolio balance, corresponds to 8.27% per annum.

Financing and loans granted in the parent company, with currency adjustment clause, account for about 35% of the total portfolio (42% on December 31st, 2015). Those that providing for adjustment based on indexes that represent the level of domestic prices in Brazil, however, reach 65% of the loan portfolio (58% on December 31st, 2015).

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

The reduction in the balance of loans receivable in the 3Q16 is due mainly to the foreign currency exchange rate variations calculated on the loans granted to Itaipu, due to the devaluation of the dollar compared to the real when the closing prices of September 2016 and December 2015 are compared. The dollar rate varied negatively by about 17%.

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

 

R$ million

 

2017

2018

2019

2020

2021

After 2021

Total

Parent Company

2,502

4,452

4,317

4,219

4,100

8,262

27,852

Consolidated

1,551

1,852

1,892

1,887

1,975

1,485

10,642

22

Disclaimer:

This material contains calculations that may not yield an accurate sum or result due to rounding performed.


 
 

 

Marketletter 3Q16

 

b.    Financing and Loans Payable

The debts are guaranteed by the Federal Government and/or by Eletrobras and are subject to charges, the average rate of which in 2016 is 9.81% p.a. (9.40% p.a. in 2015), and have the following profile:

 

Parent Company

 

 

Consolidated

 

09.30.2016

 

12.31.2015

 

09.30.2016

12.31.2015

Balance in R$ million

%

 

Balance in R$ million

%

 

Balance in R$ million

%

Balance in R$ million

%

Foreign Currency

                   

USD

9,256

36%

 

11,109

37%

 

9,267

21%

 

11,122

24%

USD with Libor

2,420

9%

 

3,257

11%

 

2,802

6%

 

3,729

8%

EURO

218

1%

 

252

1%

 

218

0%

 

252

1%

YEN

142

1%

 

179

1%

 

142

0%

 

179

0%

Other

0

0%

 

0

0%

 

1

0%

 

2

0%

Subtotal

12,036

47%

 

14,797

49%

 

12,430

28%

 

15,283

33%

 

 

 

 

 

 

 

 

 

 

 

 

National Currency

 

 

 

 

 

 

 

 

 

 

 

CDI

6,451

25%

 

6,516

22%

 

12,423

28%

 

11,411

25%

IPCA

0

0%

 

0

0%

 

576

0%

 

533

1%

TJLP

0

0%

 

0

0%

 

9,946

22%

 

6,594

14%

SELIC

1,623

6%

 

2,284

8%

 

1,785

4%

 

2,636

6%

Other

0

0%

 

0

0%

 

1,146

3%

 

3,288

7%

Subtotal

8,073

31%

 

8,800

29%

 

25,876

58%

 

24,462

53%

 

 

 

 

 

 

 

 

 

 

 

 

Unindexed

5,774

22%

 

6,439

21%

 

6,382

14%

 

6,653

14%

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL

25,883

100%

 

30,036

100%

 

44,687*

100%

 

46,398

100%

                       

*In this amount is included the debt of other companies not int the Eletrobras System, with RGR in the amount of R$ 1,936 million, once Eletrobras acts as manager of RGR and has a counterpart in assets.

 

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

   

 

       

R$ million

 

2017

2018

2019

2020

2021

After 2021

Total

P. Company

682

2,030

3,695

1,566

6,730

7,924

22,626

Consolidated

1,041

4,921

5,610

2,818

7,732

16,936

39,057

 

 

 

c.   Consolidated Gross Debt

 

 

23

Disclaimer:

This material contains calculations that may not yield an accurate sum or result due to rounding performed.


 
 

 

Marketletter 3Q16

 

 

Ratings

 

Agency

National Classification / Outlook

Latest Report

Moody's Issuer Rating

Ba3 (Negative)

02/25/2016

S&P LT Local Currency

BB (Negative)

05/19/2016

S&P LT Foreign Currency

 

BB (Negative)

05/19/2016

Fitch LT Local Currency Issuer

BB- (Negative)

05/10/2016

Fitch LT Foreign Currency Issuer

BB- (Negative)

05/10/2016

 

 

 

 

Eletrobras' Organization Chart

 

 

 

 

24

Disclaimer:

This material contains calculations that may not yield an accurate sum or result due to rounding performed.


 
 

 

Marketletter 3Q16

 

Investments

 

   

 

 

R$ million

NATURE OF INVESTMENTS

 

Budgeted*

Accomplished

2016

 

9M16

(%)

Generation

 

6,327

 

3,865

61.1

Corporate Expansion

 

2,158

 

888

41.2

SPE's Expansion

 

3,871

 

2,847

73.5

Maintenance

 

297

 

129

43.6

Transmission

 

2,325

 

1,908

82.1

Corporate Expansion

 

683

 

879

128.7

SPE's Expansion

 

767

 

823

107.4

Maintenance

 

875

 

205

23.5

Distribution

 

1,398

 

664

47.5

Corporate Expansion

 

737

 

472

64.1

Maintenance

 

661

 

191

29.0

Other (Research, Infrastructure and Environmental Quality)

 

301

 

330

109.6

Total

 

10,354

 

6,768

65.4

           

* Budget for 2016 was reviewed according to Business Plan of the Company.

 

 

 

Social Capital

 

Social Capital Structure

 

On September 30th, 2016 the capital of Eletrobras was as follows:

 

Shareholders

Common

Pref. Class A"

Pref. Class "B"

Total

Amount

%

Amount

%

Amount

%

Amount

%

Federal Gov.

554,395,652

51.00%

 

 

1,544

0.00%

554,397,196

40.99%

BNDESpar

141,757,951

13.04%

 

 

18,691,102

7.04%

160,449,053

11.86%

BNDES

74,545,264

6.86%

 

 

18,262,671

6.88%

92,807,935

6.86%

FND

45,621,589

4.20%

 

 

 

 

45,621,589

3.37%

CEF

8,701,564

0.80%

 

 

 

 

8,701,564

0.64%

FGHAB

1,000,000

0.09%

 

 

 

 

1,000,000

0.07%

OTHER

261,028,277

24.01%

146,920

100.00%

228,481,566

86.08%

489,656,763

36.20%

Total

1,087,050,297

100.00%

146,920

100.00%

265,436,883

100.00%

1,352,634,100

100.00%

 

 


 

25

Disclaimer:

This material contains calculations that may not yield an accurate sum or result due to rounding performed.


 
 

 

Marketletter 3Q16

 

Analysis of the Stock Market

 

 

Shares

 

ELET3 - Eletrobras' Common Shares

 

In the third quarter 2016, Eletrobras' common shares (ELET3) appreciated by 50%, closing at R$ 19.26. The highest price was R$ 24.07, recorded on September 8th, and the lowest R$ 12.79 recorded on July 1st, considering ex-dividend values. The volume of average daily trading in the period was 2.16 million shares and the average daily trading volume was R$ 39.3 million.

 

 

ELET6 - Eletrobras Preferred Shares

 

In the third quarter 2016, Eletrobras' preferred shares (ELET6) appreciated by 35.55%, closing at R$ 23.87. The highest price was R$ 29.70, recorded on September 8th, and the lowest R$ 17.42 recorded on July 1st, considering ex-dividend values. The volume of average daily trading in the period was 1.66 million shares and the average daily trading volume was R$ 39.48 million.

 

 

Evolution of Shares traded on the BM&FBOVESPA

                                                                                                  

 

 

 

 

ADR programs - OTC (Over the Counter)

 

26

Disclaimer:

This material contains calculations that may not yield an accurate sum or result due to rounding performed.


 
 

 

Marketletter 3Q16

 

 

EBRY - Eletrobras' Common Shares

 

In the third quarter 2016, Eletrobras' common shares ADR's appreciated by 49.24%, closing at U$ 5.88. The highest price was U$ 7.44, recorded on September 8th, and the lowest U$ 3.82 recorded on July 1st, considering ex-dividend values. The volume of average daily trading in the period was 0.32 million shares. The balance of corresponding ADR's to these shares in end of the quarter was 34.1 million.

 

EBRBY - Eletrobras Preferred Shares

 

In the third quarter 2016, Eletrobras' preferred shares ADR's appreciated by 37.41%, closing at U$ 7.37. The highest price was U$ 9.26, recorded on September 2nd, and the lowest U$ 5.24 recorded on July 1st, considering ex-dividend values. The volume of average daily trading in the period was 0.10 million shares. The balance of corresponding ADR's to these shares in end of the quarter was 16.2 million.

 

 

Evolution of ADR Traded Shares

                                                                                                  

 

 

 

 

27

Disclaimer:

This material contains calculations that may not yield an accurate sum or result due to rounding performed.


 
 

 

Marketletter 3Q16

 

Latibex - Madrid Stock Exchange

           

XELTO - Eletrobras' Common Shares

 

In the third quarter 2016, the common shares of the Latibex program appreciated by 63.51%, closing at € 5.45. The highest price was € 6.50, recorded on September 8th, and the lowest € 2.95, recorded on July 6th, considering ex-dividend values. The volume of average daily trading in the period was 22.2 thousand shares.

 

XELTB - Eletrobras Preferred Shares

 

In the third quarter 2016, the preferred shares of the Latibex program appreciated by 42.92%, closing at € 6.56. The highest price was € 7.78, recorded on September 1st, and the lowest € 4.59, recorded on July 1st, considering ex-dividend values. The volume of average daily trading in the period was 4.4 billion shares.

 

 

 

 

 

Evolution of Foreign Currencies

 

 

 

 

 

 

28

Disclaimer:

This material contains calculations that may not yield an accurate sum or result due to rounding performed.


 
 

 

Marketletter 3Q16

 

Number of employees

 

Parent Company

 

By time

 

Working time in the company (years)

 

3Q16

2Q16

1Q16

2015

Up to 5

 

100

 

133

172

194

6 to 10

 

477

 

455

391

368

11 to 15

 

199

 

196

204

202

16 to 20

 

28

 

25

31

31

21 to 25

 

6

 

6

16

16

Over 25

 

198

 

199

205

205

Total

 

1,008

 

1,014

1,019

1,016

 

 

By region

 

Federation State

 

3Q16

2Q16

1Q16

 

Rio de Janeiro

952

959

962

 

Sao Paulo

0

0

0

 

Paraná

0

0

0

 

Rio Grande do Sul

0

0

0

 

Brasilia

56

55

57

 

Total

1,008

1,014

1,019

 

 

Labor Contracted / Outsourced

 

1Q16

2Q16

3Q16

0

0

0

Turnover Index (Holding)

 

3Q16

0.4%

 

 

29

Disclaimer:

This material contains calculations that may not yield an accurate sum or result due to rounding performed.


 
 

 

Marketletter 3Q16

 

Direct partnerships SPEs - Parent

 

Generation

SPE

Plant

Total Investment

R$ million

Installed

Capacity

MW

Assured

Energy

Average MW

Energy

Generated MWh

 

1Q16

2Q16

3Q16

Norte Energia SA

Hydro

 

11,233.1

4,571.0

0

1,100,654.40

2,615,448.00

Eólica Mangue Seco 2

Wind Farm

119.4

26

12.06

14,579

17,699

28,012,495

Rouar S.A.

Wind Farm

US$ 101.7 MM

65.1

65.1

37,911.92

36,945.44

43,299.48

               

 

 

 

Plant

Share (%)

Location

(State)

Start of

Construction

Start of

Operation

End of

Operation

Norte Energia S.A

15.0

PA

Jun/11

Apr/16

Aug/45

Eólica Mangue Seco 2

49

RN

May/10

Sep/11

Jun/11

Rouar SA

50

Uruguay - Departmento de Colonia

Sep/13

Dec/14

20 years*

 

 

30

Disclaimer:

This material contains calculations that may not yield an accurate sum or result due to rounding performed.


 
 

 

Marketletter 3Q16

 

Notes:

 

1. Risks Related to Compliance with Laws and Regulations

 

      In 2009, the Brazilian federal authorities initially focused the Lava Jato investigation at criminal organizations engaged in money laundering. The Lava Jato operation involves numerous investigations into several criminal practices focusing on crimes committed by individuals and organizations in Brazil. Since 2014, the Brazilian Federal Prosecutor’s focused part of the investigation on irregularities involving state owned companies’ contractors and suppliers.

Although no criminal charges have been brought against the Company as part of Lava Jato, the Brazilian Federal Prosecutor’s Office has made investigations on irregularities involving certain of the employees of the Company, contractors and suppliers, as well as certain contractors and suppliers of special purpose entities ("SPEs") in which Eletrobras holds minority interests, involved in the construction of power generation plants.

As a response to allegations of potential illegal activities appearing in the media in 2015 relating to companies that provide services to the Company’s subsidiary, Eletrobras Termonuclear S.A. – Eletronuclear (“Eletronuclear”) (specifically, “NTU Angra 3” nuclear power plant), and to certain SPEs that Eletrobras  holds a minority stake, Eletrobras’ Board of Directors,  hired the law firm Hogan Lovells US LLP to undertake an independent internal investigation for the purpose of assessing the eventual existence of irregularities, including violations of the U.S. Foreign Corruption Practice Act (FCPA), the Brazilian Anticorruption Law and the Eletrobras’ code of ethics (the “Independent Investigation”).

The Independent Investigation is subject to oversight by a commission that was created by the Board of Directors of Eletrobras on July 31, 2015. This commission is composed of Ms. Ellen Gracie Northfleet, a former Federal Supreme Court judge, Mr. Durval José Soledade Santos, former director of the Comissão de Valores Mobiliários (Brazilian Securities Exchange Comission), and Mr. Manoel Jeremias Leite Caldas, (the “Independent Commission”).

The Company, Hogan Lovells and the Independent Commission have been closely monitoring the official investigations and cooperating with Brazilian and United States authorities, including the Federal Courts (Justiça Federal); the Federal Prosecutors’ Office (Ministério Público Federal or “MPF); the Brazilian Securities Commission (Comissão de Valores Mobiliários or “CVM”); the Council for Economic Defense (Conselho Administrativo de Defesa Economica or “CADE”), United States Department of Justice (“DOJ”) and United States Securities & Exchange Commission (“SEC”), among others, and have responded to requests for information and documents from these authorities.

On April 29, 2015, the Federal Police commenced the “Radioactivity Operation” under the 16th phase of Operation “Lava Jato”, which resulted in the imprisonment of a former officer of our subsidiary Eletrobras Termonuclear S.A – Eletronuclear. This former officer was sentenced to 43 years of prison, by the judge of the 7th Federal Criminal Court, for passive bribery, money laundering, obstruction of justice, tax evasion and participation in a criminal organization.

On July 6, 2016, the Federal Police commenced “Operation Pripyat”, in which the Federal Police served arrest warrants issued by the judge of the 7th Federal Court of the District of Rio de Janeiro against former officers, officers who had already been suspended by Eletrobras’ Board of Directors as well as other parties. Formal charges of corruption, money laundering and obstruction of justice were filed against such former officers by Federal Prosecutors on July 27th, 2016.

 

31

Disclaimer:

This material contains calculations that may not yield an accurate sum or result due to rounding performed.


 
 

 

Marketletter 3Q16

 

Eletrobras is assisting the prosecution in these criminal proceedings. Eletrobras intends, in the future, to pursue civil remedies against these defendants.

Since the start of the investigation, the Company replaced its entire Board of Directors, hired a new CEO and a Compliance Officer, and created an independent Compliance Department to help coordinate compliance across subsidiaries. The Risk Management and Compliance Officer and her team oversee implementation of the new compliance program and liaise on a weekly basis with compliance managers at each subsidiary.

The Compliance Officer, which is also responsible for risk management, is responsible for supervising the implementation of the new Compliance Program

We also note that the Company has a new Board of Directors and a new Chairman, Mr. Wilson Ferreira Junior, as properly informed to the market.

In instances where the Independent Committee identified contracts where irregularities may have occurred, Eletrobras evaluated those contracts and internal investigations and, when applicable, suspended those contracts. Eletrobras also took applicable administrative measures in relation to employees and officers involved in the irregularities identified by the investigation, including, when applicable, the suspension or termination of employees.

 The Independent Investigation team has completed the investigation designed to identify  misstatements to the Company’s consolidated financial statements. The Independent Investigation team is still in the process of performing some procedures, focusing on internal compliance matters. The Company will continue to implement compliance procedures following the conclusion of the investigation. Based on our current knowledge, the Company does not expect these additional procedures provide any additional relevant information that would materially impact its consolidated financial statements in future periods.

The investigations under Lava Jato are also still ongoing, however, and the Brazilian Federal Prosecutors Office may take a considerable amount of time to conclude its procedures. Therefore, new relevant information may be disclosed in the future, which could cause Eletrobras to recognize additional adjustments in its consolidated financial statements.

The final reports from the Independent Investigation include certain findings with their related qualitative and estimated quantitative financial statements impacts (disclosure and/or accounting) in some but not all of the power generation projects included in the scope of the investigation. The Independent Investigation reports determined overpricing related to bribery and bid-rigging (a form of fraud in which a commercial contract is promised to one party even though for the sake of appearance several other parties also present a bid. This practice is illegal in most countries) activities deemed to be of an illicit nature in some contracts, since 2008, with certain contractors and suppliers of the affected projects. 

The impacts of Independent Investigation on the financial statements are presented in Note 4.1.1 to the Consolidated Financial Information, related to 3Q16.

 

32

Disclaimer:

This material contains calculations that may not yield an accurate sum or result due to rounding performed.


 
 

 

Marketletter 3Q16

 

The Independent Investigation also includes recommendations for corrective actions that the Company should consider.

To determine the impacts to be recognized or disclosed in the Company's financial statements, management took into consideration the conclusions reached and findings identified by the Independent Investigation, as included on each one of the final investigation reports issued for the purpose of the financial statements which were approved by the Independent Commission and those in charge of the Company's governance, namely, the Board of Directors, the Audit Committee (Fiscal Council) and the Board of Executive Officer.

Considering that there is insufficient information to enable the Company to determine the specific periods prior to 2014 in which overbilling may have occurred and, consequently, the periods of the financial statements that have been affected, and applying the International Accounting Standard - IAS 8 - Accounting Policies , Changes in Accounting Estimates and Errors, due to the impracticability of identifying the adjustments for each previous period affected, the Company adjusted the estimated amounts of illegal payments in the open period in Brazil, 3Q16.

These amounts had already been adjusted in the Form 20F of 2014 and 2015, filed on October 11, 2016, as widely disclosed to the market.

 

2. Filing of Form 20-F

Following the completion of the investigation conducted by Hogan Lovells for the purpose of the Financial Statements, on October 11, 2016, the filing of Form 20-F related to the fiscal years ended 31 December 2014 and December 31, 2015, with the appropriate accounting adjustments related to the investigation of the "Lava Jato" operation.

 

With the filing, the Company obtained authorization from the NYSE to return, as of October 13, 2016, to negotiate its ADS - American Depositary Share with that Stock Exchange. In addition, the NYSE confirmed that the Company's delisting process was canceled.

 

3. Basic Grid, Existing Services (RBSE) Effect

 

Through Normative Resolutions 589/2013, the National Electric Energy Agency -ANEEL, defined the criteria for calculating the New Replacement Value (NRV) for transmission assets existing on May 31st, 2000 not yet depreciated (RBSE).

 

According to Normative Resolution 589, of December 10th, 2013, the subsidiaries listed below presented to ANEEL their valuation reports of electricity transmission assets existing on May 31st, 2000 ("Valuation Report") for the purpose of compensation of the Basic Grid, Existing Services - RBSE pursuant to Article 15, paragraph 2 of Law 12,783/13.

Valuation Report

Company

Date

R$ thousand

Eletrosul

07/14/2015

1,060,632

Chesf

03/06/2015

5,627,200

Furnas

05/21/2015

10,699,000

Eletronorte*

09/03/2015

2,926,000

* Aneel, in a preliminary report, recognized the amount of R$ 2,484 million, as of December 31, 2012, following the preliminary inspection report of Aneel.

 

 

33

 

Disclaimer:

This material contains calculations that may not yield an accurate sum or result due to rounding performed.


 
 

 

Marketletter 3Q16

 

 

ANEEL, up to 3Q16, approved the credits of Eletrosul, Chesf, Furnas and Eletronorte, pursuant to the rules of Normative Resolution 589/2013, as of December 31, 2012, as follows:

 

Ratification ANEEL

Company

Date

R$ thousand

Eletrosul

07/14/2015

1,007,043

Furnas

12/15/2015

8,999,520

Chesf

08/03/2016

5,092,384

Eletronorte

10/18/2016

2,579,312

 

Em 30 de setembro de 2016, a estimativa da RBSE, conforme demonstrado a seguir:

 

Transmission

09/30/2016 - R$ thousand

 

Chesf

Eletronorte

Eletrosul

Furnas

Total

Basic grid - RBSE – historical balance

1,187,029

1,732,910

513,455

4,530,060

7,963,454

Adjustment - IPCA and remuneration

9,000,488

3,407,142

1,525,349

13,376,708

27,309,687

Financial Asset adjusted

10,187,517

5,140,052

2,038,804

17,906,768

35,273,141

           

Result effect - 01/01/2016 to 09/30/2016

 

 

 

 

 

Operating Revenue

9,000,488

3,407,142

1,525,349

13,376,708

27,309,687

Provision for Income tax and Social Contribution

(3,060,166)

(1,158,428)

(518,619)

(4,548,081)

(9,285,294)

Net Effect

5,940,322

2,248,714

1,006,730

8,828,627

18,024,393

           

Result effect - 01/07/2016 to 09/30/2016

 

 

 

 

 

Operating Revenue

382,473

372,580

77,999

666,413

1,499,465

Provision for Income tax and Social Contribution

(130,041)

(126,677)

(26,520)

(226,580)

(509,818)

Net Effect

252,432

245,903

51,479

439,833

989,647

 

The aforementioned accounting was based on the assumptions set out above, considering the interpretation with regard to MME Ordinance 120/2016, aiming to reflect on these interim financial statements the most suitable financial position and results. However, Eletrobras informs to the market that the Company's understanding of the matter may be reviewed as a result of any regulation or act, in a different sense, that may be practiced by Aneel, including within the scope of the public hearing in progress.

 

34

Disclaimer:

This material contains calculations that may not yield an accurate sum or result due to rounding performed.


 
 

 

Marketletter 3Q16

 

 

 

 

 

35

Disclaimer:

This material contains calculations that may not yield an accurate sum or result due to rounding performed.


 
 

 

Marketletter 3Q16

 

Balance Sheet

 

R$ thousand

Asset

Parent Company

Consolidated

09.30.16

12.31.15

09.30.16

12.31.15

Current

       

Cash and cash equivalents

302,986

691,719

783,758

1,393,973

Restricted cash

1,856,626

647,433

1,856,626

647,433

Marketable securities

4,367,086

3,454,526

5,770,537

6,842,774

Customers

392,583

379,214

4,477,922

4,137,501

Financial assets - Concessions and Itaipu

0

371,007

357,034

965,212

Financing and loans

6,320,516

6,820,948

2,972,656

3,187,226

Fuel Consumption Account - CCC

193,790

195,966

193,790

195,966

Equity payment

286,315

255,468

176,284

309,360

Taxes to recover

407,957

373,962

734,693

716,651

Income Tax and Social Contribution

678,021

928,743

898,654

1,475,598

Reimbursement rights

0

0

1,340,843

2,265,242

Storeroom

270

360

564,802

631,669

Nuclear fuel stock

0

0

419,731

402,453

Indemnities - Law 12,783/2013

0

0

0

0

Derivative financial instruments

0

0

66,029

21,307

Hydrological Risk

0

0

146,278

195,830

Assets held for sale

0

0

4,324,907

4,623,785

Other

742,700

239,811

1,612,044

1,425,416

TOTAL CURRENT ASSETS

15,548,850

14,359,157

26,696,588

29,437,396

 

 

 

 

 

NON-CURRENT

 

 

 

 

NON-CURRENT RECEIVABLES

 

 

 

 

Reimbursement rights

0

0

10,387,138

8,238,140

Financing and loans

27,852,431

30,277,797

10,642,372

14,400,394

Customers

88,676

125,383

1,922,266

1,833,457

Marketable securities

202,232

191,763

204,155

194,990

Nuclear fuel stock

0

0

715,368

578,425

Taxes to recover

0

0

2,804,025

2,623,186

Income Tax and Social Contribution

1,645,382

1,645,382

1,891,887

3,067,591

Escrow deposits

2,732,707

2,204,685

5,963,947

5,079,707

Fuel Consumption Account - CCC

10,774

13,331

10,774

13,331

Financial assets - Concessions and Itaipu

2,774,145

3,078,559

55,377,572

28,416,433

Derivative financial instruments

0

0

56,594

25,004

Advance concession for future capital increase

825,444

189,493

1,700,895

1,215,532

Hydrological Risk

0

0

465,647

598,161

FUNAC refund

0

0

0

0

Other

2,065,663

2,116,312

891,687

1,487,335

 

38,197,454

39,842,705

93,034,327

67,771,686

INVESTMENTS

62,484,714

40,813,087

27,320,602

21,954,530

PROPERTY

194,961

148,246

27,112,974

29,546,645

INTANGIBLE

0

0

958,767

935,151

TOTAL NON-CURRENT ASSETS

100,877,129

80,804,038

148,426,670

120,208,012

TOTAL ASSETS

116,425,979

95,163,195

175,123,258

149,645,408

 

36

Disclaimer:

This material contains calculations that may not yield an accurate sum or result due to rounding performed.


 
 

 

Marketletter 3Q16

 

 R$ thousand

Liabilities and Shareholders' Equity

Parent Company

Consolidated

09.30.16

12.31.15

09.30.16

12.31.15

CURRENT

       

Financing and loans

3,256,940

2,572,745

5,630,395

4,224,448

Debentures

0

0

14,554

357,226

Financial liabilities

0

0

0

0

Compulsory loan

48,885

57,630

48,885

57,630

Suppliers

405,559

416,126

11,825,064

10,128,507

Advances from customers

611,622

593,404

706,681

648,236

Taxes to collect

88,027

280,637

1,389,086

1,556,578

Income Tax and Social Contribution

373,982

196,000

605,727

581,344

Remuneration to shareholders

24,551

42,478

25,666

84,076

Financial liabilities - Concessions and Itaipu

1,676,019

0

0

0

Estimated liabilities

119,254

109,497

1,373,153

1,018,788

Reimbursement Obligations

1,125,240

299,632

1,386,787

396,208

Post-employment benefits

29,755

22,557

106,561

114,861

Provisions for contingencies

666,621

543,345

699,213

590,725

Sectorial Charges

0

0

774,676

695,400

Lease

0

0

136,898

132,972

Concessions payable - Use of public assets

0

0

0

0

Derivative financial instruments

12,462

18,860

12,465

20,608

Liabilities associated with assets held for sale

312,667

412,225

5,080,651

5,575,009

Other

49,669

123,133

1,563,144

1,917,027

TOTAL CURRENT LIABILITIES

8,801,253

5,688,269

31,379,606

28,099,643

 

 

 

 

 

NON-CURRENT

 

 

 

 

Financing and loans

22,626,240

27,463,707

39,057,021

42,173,812

National Treasury Credits

0

0

0

0

Suppliers

0

0

9,713,595

9,449,421

Debentures

0

0

192,150

205,248

Advances from customers

0

0

607,957

659,082

Compulsory loan

463,905

466,005

463,905

466,005

Obligation for asset retirement

0

0

1,263,712

1,201,186

Operating provisions

0

0

0

0

Fuel Consumption Account - CCC

488,944

452,948

488,944

452,948

Provisions for contingencies

12,573,251

8,901,900

17,550,972

13,556,129

Post-employment benefits

225,501

252,966

1,981,577

1,858,824

Provision for unsecured liabilities

15,824,019

7,793,798

578,374

257,907

Onerous contracts

0

0

2,622,298

1,489,292

Reimbursement Obligations

0

0

2,598,530

2,483,378

Lease

0

0

1,054,078

1,119,183

Concessions payable - Use of public assets

0

0

61,776

59,644

Advance concession for future capital increase

2,286,577

219,294

2,286,577

219,294

Derivative financial instruments

0

0

49,909

78,521

Sectorial Charges

0

0

550,742

462,195

Taxes to collect

15,384

181,991

955,567

900,309

Income Tax and Social Contribution

386,992

733,289

8,673,976

1,003,796

Other

929,937

917,014

1,673,172

1,710,369

TOTAL NON-CURRENT LIABILITIES

55,820,750

47,382,912

92,424,832

79,806,543

 

 

 

 

 

SHAREHOLDERS’ EQUITY

 

 

 

 

Social Capital

31,305,331

31,305,331

31,305,331

31,305,331

Capital reserves

13,867,170

26,048,342

13,867,170

26,048,342

Revenue reserves

0

0

0

0

Equity valuation adjustments

33,261

39,452

33,261

39,452

Accumulated profits (losses)

9,712,572

-12,181,172

9,712,572

-12,181,172

Other accumulated comprehensive income

-3,207,458

-3,113,481

-3,207,458

-3,113,481

Amounts recognized in OCI classified as held for sale

93,100

-6,458

93,100

-6,458

Equity of non-controlling shareholders shareholders

0

0

-485,156

-352,792

TOTAL SHAREHOLDERS' EQUITY

51,803,976

42,092,014

51,318,820

41,739,222

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

116,425,979

95,163,195

175,123,258

149,645,408

                                                                                                                            

 

 

37

Disclaimer:

This material contains calculations that may not yield an accurate sum or result due to rounding performed.


 
 

 

Marketletter 3Q16

 

Income Statement

 R$ thousand

 

Parent Company

Consolidated

 

09.30.16

09.30.16

09.30.16

09.30.16

NET OPERATING INCOME

2,602,655

2,006,057

48,454,603

24,728,132

Operating Costs

 

 

 

 

Energy purchased for resale

-2,830,279

-2,091,522

-6,959,817

-8,972,804

Charges on use of electric network

0

0

-1,232,035

-1,306,258

Construction

0

0

-1,632,508

-1,977,745

Fuel for electricity production

0

0

-795,459

-1,263,350

 

-2,830,279

-2,091,522

-10,619,819

-13,520,157

GROSS INCOME

-227,624

-85,465

37,834,784

11,207,975

Operating Expenses

 

 

 

 

Personnel, Material and Services

-623,568

-374,916

-6,612,550

-6,659,335

Remuneration and reimbursement

0

0

-270,931

-282,154

Depreciation

-3,870

-4,007

-1,142,380

-1,048,187

Amortization

0

0

-185,797

-300,935

Donations and contributions

-117,645

-113,181

-166,356

-144,126

Operating Provisions/Reversals

-10,178,850

-3,477,602

-7,136,554

-5,247,669

Investigation Findings

0

0

-211,123

0

Other

-172,119

-460,954

-1,346,234

-1,292,248

 

-11,096,052

-4,430,660

-17,071,925

-14,974,654

OPERATING INCOME BEFORE FINANCIAL RESULT

-11,323,676

-4,516,125

20,762,859

-3,766,679

Financial Result

 

 

 

 

Financial Revenues

 

 

 

 

Revenue from interest, commissions and fees

2,557,569

2,172,547

679,652

680,696

Revenue from financial investments

553,015

429,117

835,304

785,637

Moratorium on electric energy

28,435

246,576

354,099

454,491

Current restatement

848,274

929,066

2,728,757

1,658,253

Current foreign currency exchange rate variations

4,242,388

10,003,726

4,325,619

10,169,222

Indemnitys Compensation - Law 12,783/13

0

0

0

995,652

Regulatory asset update

0

0

23,772

179,573

Gains on derivatives

0

0

106,669

13,263

Other financial income

86,702

84,741

347,745

801,015

Financial expenses

 

 

 

 

Debt charges

-1,759,606

-1,780,254

-4,838,022

-3,533,298

Lease charges

0

0

-228,347

-205,773

Charges on shareholders' resources

-97,283

-20,113

-109,135

-29,696

Non-current restatement

-2,017,895

-12,153

-2,680,972

-847,078

Non-current foreign currency exchange rate variations

-4,723,670

-8,716,421

-4,664,261

-10,049,088

Regulatory liability update

0

0

-24,756

-106,156

Losses on derivatives

0

0

0

-124,573

Other financial expenses

-249,707

-220,427

-922,343

-855,201

 

-531,778

3,116,405

-4,066,219

-13,061

RESULTS BEFORE EQUITY

-11,855,454

-1,399,720

16,696,640

-3,779,740

EQUITY RESULTS

21,499,310

-2,218,089

2,489,231

184,926

OPERATING INCOME BEFORE TAXES

9,643,856

-3,617,809

19,185,871

-3,594,814

Current Income Tax and Social Contribution

-373,982

-74,084

-603,837

-504,793

Deferred Income Tax and Social Contribution

416,810

-422,759

-8,810,740

-415,970

NET LOSS FOR THE YEAR

9,686,684

-4,114,652

9,771,294

-4,515,577

SHARE ATTRIBUTABLE TO CONTROLLING SHAREHOLDERS

9,686,684

-4,114,652

9,686,684

-4,114,652

SHARE ATTRIBUTABLE TO NON-CONTROLLING SHAREHOLDERS

0

0

84,610

-400,925

NET LOSS PER SHARE

7.16

-3.04

7.16

-3.04

 

 

 

38

Disclaimer:

This material contains calculations that may not yield an accurate sum or result due to rounding performed.


 
 

 

Marketletter 3Q16

 

Cash Flow Statement 

 

R$ thousand

 

Parent Company

Consolidated

09.30.16

09.30.16

09.30.16

09.30.16

Operating activities

 

 

 

 

Income before income tax and social contribution

9,643,856

-3,617,809

19,185,871

-3,594,814

Adjustments to reconcile income to cash provided by operations:

 

 

 

 

Depreciation and Amortization

3,870

4,007

1,328,177

1,349,122

Net monetary variations

1,169,621

-916,913

1,045,557

-335,504

Net foreign currency exchange rate variations

481,282

-350,651

576,860

-128,305

Financial charges

-955,226

-586,755

1,091,059

455,781

Financial asset revenue

0

0

-27,888,601

-603,450

Equity income

-21,499,310

2,218,089

-2,489,231

-184,926

Provision (reversal) for capital deficiency

8,039,785

2,833,608

0

0

Provision (reversal) for doubtful accounts

12,876

11,743

367,811

335,286

Provision (reversal) for contingencies

2,076,669

655,339

2,786,243

1,586,061

Provision (reversal) for the impairment of assets

-1,389

0

2,611,273

3,385,556

Provision (reversal) Onerous Contract

0

0

1,133,006

-237,382

Provision (reversal) for losses on investments

0

69,862

474

69,862

Charges of the global reversion reserve

157,264

194,461

157,264

194,461

Adjustment to present value / market value

-13,604

45,552

48,305

106,749

Minority interest in income

0

0

-128,197

607,462

Charges on shareholders' resources

97,283

20,113

109,135

29,696

Financial instruments - derivatives

0

0

-106,669

111,310

Other

375,867

380,744

606,262

322,307

 

-10,055,012

4,579,199

-18,751,272

7,064,086

(Increase)/decrease in operating assets

 

 

 

 

Customers

-20

4

-429,230

-727,171

Marketable securities

-912,561

-2,244,588

1,073,540

-2,966,060

Reimbursement rights

0

0

-1,224,599

-1,115,188

Storeroom

90

323

365,463

-94,812

Nuclear fuel stock

0

0

-154,221

62,510

Financial assets - Itaipu and public service concessions

675,421

975,473

675,421

975,473

Hydrological Risk

0

0

182,066

0

Other

-65,146

334,004

1,254,419

627,044

 

-302,216

-934,784

1,742,859

-3,238,204

Increase/(decrease) in operating liabilities

 

 

 

 

Suppliers

89,609

-1,767

2,713,669

3,328,370

Advances from customers

0

0

-10,899

-42,558

Lease

0

0

-61,179

-55,149

Estimated liabilities

9,757

12,984

282,487

254,900

Reimbursement Obligations

0

0

280,123

261,729

Sectorial Charges

0

0

167,823

352,358

Other

-83,622

94,856

-342,284

-466,774

 

15,744

106,073

3,029,740

3,632,876

 

 

 

 

 

Cash from operating activities

-697,628

132,679

5,207,198

3,863,944

 

 

 

 

 

Payment of financial charges

-1,595,678

-1,286,980

-2,698,895

-2,099,327

Payment of charges to the global reversion reserve

-107,560

-684,577

-107,560

-684,577

Receipt of annual allowed revenue (financial asset)

0

0

837,799

699,786

Receipt of financial asset indemnities

0

0

0

3,325,109

Receipt of financial charges

1,404,420

1,470,999

884,247

860,009

Payment of Income Tax and Social Contribution

-265,947

-204,795

-651,797

-491,216

Receipt of compensation from investment in Shareholders’ Equitys

189,900

59,561

413,240

150,155

Payment of pension funding contributions

-32,520

-9,023

-127,108

-153,399

Payment of legal contingencies

-292,849

-573,315

-489,205

-686,254

Judicial deposits

-21,600

-98,250

-391,627

-332,304

 

 

 

 

 

Net cash from operating activities

-1,419,462

-1,193,701

2,876,292

4,451,926

 

 

 

 

 

Financing activities

 

 

 

 

 

 

 

 

 

Loans and financing obtained

169,670

2,179,372

2,727,484

6,783,762

Payment of loans and financing - Main

-1,975,222

-1,648,166

-3,573,180

-4,237,837

Payment of compensation to shareholders

-1,583

-19,859

-4,956

-22,602

Tax refinancing and contributions payments - main

0

0

-100,220

-73,188

Advance receipt for future capital increase

1,970,000

0

1,970,000

0

Other

0

0

127

2,290

Net cash from financing activities

162,865

511,347

1,019,255

2,452,425

Investment activities

 

 

 

 

Lending and financing granted

-937,936

-627,957

-83,651

-139,626

Receipt of loans and financing

2,847,036

2,689,556

1,933,467

1,877,213

Fixed assets acquisition

-49,185

-14,014

-1,386,271

-3,058,859

Intangible assets acquisition

0

0

-54,928

-238,230

Acquisition of concession assets

0

0

-1,702,875

-2,562,742

Acquisition/capital investment in equity

-465,044

-259,703

-2,762,049

-1,925,560

Advance concession for future capital increase

-527,007

-13,520

-500,050

-127,871

Other

0

0

50,595

3,190

Net cash from investment activities

867,864

1,774,362

-4,505,762

-6,172,485

 

 

 

 

 

Increase (decrease) in cash and cash equivalents

-388,733

1,092,008

-610,215

731,866

 

 

 

 

 

Cash and cash equivalents at beginning of year

691,719

88,194

1,393,973

1,407,078

Cash and cash equivalents at end of year

302,986

1,180,202

783,758

2,138,944

 

-388,733

1,092,008

-610,215

731,866

 

 

39

Disclaimer:

This material contains calculations that may not yield an accurate sum or result due to rounding performed.

 

 

SIGNATURE
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: November 10, 2016
CENTRAIS ELÉTRICAS BRASILEIRAS S.A. - ELETROBRÁS
By:
/SArmando Casado de Araujo
 
Armando Casado de Araujo
Chief Financial and Investor Relation Officer
 
 

 

 
FORWARD-LOOKING STATEMENTS

This press release may contain forward-looking statements. These statements are statements that are not historical facts, and are based on management's current view and estimates offuture economic circumstances, industry conditions, company performance and financial results. The words "anticipates", "believes", "estimates", "expects", "plans" and similar expressions, as they relate to the company, are intended to identify forward-looking statements. Statements regarding the declaration or payment of dividends, the implementation of principal operating and financing strategies and capital expenditure plans, the direction of future operations and the factors or trends affecting financial condition, liquidity or results of operations are examples of forward-looking statements. Such statements reflect the current views of management and are subject to a number of risks and uncertainties. There is no guarantee that the expected events, trends or results will actually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations.