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Summary

 

 

 

 

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)    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. 

 

 

 

I.             CONSOLIDATED INCOME ANALYSIS (R$ million)

 

 

 

 

 

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

 

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.

 

»     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.

 

 

 

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.

 

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.

 

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.

 

 

 

- 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.

 

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.

 

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).

 

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.

 

»     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

 

- 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.

 

- 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.

 

 

- 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.

 

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%.

 

I.3 Impairments and Onerous Contracts

 

 

* 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.

 

 

* 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.

 

 

 

 

 

 

 

 

I.4 Consolidated EBITDA 

 

 

 

 

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 = 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.

 

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

 

 

 

 

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

                     

 

 

 

 

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:

 

 

 

II.2. Parent Company Energy Trading

 

a. Itaipu Binacional

 

 

 

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.

 

 

 

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:

 

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

 

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

 

 

 

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:

 

 

 

 

 

 

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:

 

 

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:

*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:

 

 

 

c.   Consolidated Gross Debt