Cteep release 3_q11

CTEEP – 3Q11Results

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CTEEP ANNOUNCES RESULTS FOR 3Q11

São Paulo, November 14 2011 – CTEEP ‐ Companhia de Transmissão de Energia Elétrica Paulista (“CTEEP” or “Company”) (Bovespa: TRPL3 and TRPL4), the principal private sector electricity transmission concessionaire in Brazil, announces its results for the 3rd quarter 2011. The following financial and operating information for the periods shown below is in accordance with generally accepted Brazilian accounting rules, except where otherwise stated.

Conference Call and Webcast of Results

Day: 11/16/2011 Hour: 15h00 (Brasília),

12h00pm (NY)

Connection numbers: Brasil: (+55 11) 4688 6361 USA: (+1 888) 700 0802 Other: (+1 786) 924 6977

Webcast: www.cteep.com.br/ri

Investor Relations

www.cteep.com.br/ri

Marcio Lopes Almeida Chief Financial and Investor

Relations Officer [email protected]

Thiago Lopes da Silva Investor Relations

[email protected] Phone: (+55 11) 3138‐7557

Press Relations

Mariana Bertolini – CDI Corporate Communications [email protected] Phone: (+55 11) 3817‐7913

HIGHLIGHTS

Net operating revenue totaled R$ 896.5 million in 3Q11, an increase of 29.8% against 2Q11 (R$ 690.7 million) and 44.4% in relation to 3Q10 (R$ 620.7 million);

EBITDA of R$ 509.4 million in 3Q11 posted growth of 52.8% in relation to 2Q11 (R$ 333.4 million) and 39.9% in comparison with 3Q10 (R$ 364.1 million);

Net Income was R$ 344.9 million in 3Q11, an increase from R$ 200.5 million of 72.0% against 2Q11 and 41.3% in relation to 3Q10 when net income was R$ 244.0 million;

Readjustment in Annual Allowed Revenue ‐ RAP: Pursuant to Ratifying Resolution 1171, the electric energy regulator – ANEEL has announced the new RAP for the 2011/2012 cycle. CTEEP’s RAP will now be R$ 2,008.3 million, equivalent to an increase of 14.1% in relation to the 2010/2011 cycle;

Dividends and interest on shareholders capital amounting to R$ 240.7 million, corresponding to R$ 1.56 per share for both vehicles for profit distribution were paid out in the third quarter 2011;

ANEEL Transmission Line Auction: On September 2 2011, at ANEEL public action 004/2011 held at the BM&FBOVESPA, CTEEP successfully bid for lot K on an independent basis and lot L through the intermediary of the Garanhuns partnership with CHESF.

APIMEC ‐ 2011: On October 14 2011, the Company held a public meeting for capital markets professionals and investment analysts. On this occasion, CTEEP was awarded the Gold Assiduity Seal for uninterrupted meetings over ten‐year period.


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Principal Results Indicators

(R$'000) 3Q11 2Q11 2Q10

Net Revenues 896,533 690,735 620,708

EBITDA 509,434 333,427 364,095

EBITDA Margin 56.8% 48.3% 58.7% 8.6 p.p ‐1.8 p.p

Net Income 344,863 200,505 244,010

Net Margin 38.5% 29.0% 39.3% 9.4 p.p ‐0.8 p.p

Earnings per Share 2.27 1.32 1.61

44.4%29.8%

Change %

3Q11/2Q10

Change %

3Q11/2Q11

Key Indicators

39.9%

41.3%

41.3%72.0%

72.0%

52.8%

About CTEEP

Transmitting electric energy with quality and efficiency: this is the business of CTEEP – Companhia de Transmissão de Energia Elétrica Paulista, the leading private sector concessionaire for electricity transmission in Brazil.

Some 30% of the electricity produced in Brazil and 60% consumed in the country’s Southeast is carried through its network – made up of 12,993 km of transmission lines, 18,782 km of circuits, 2,488 km of optic fiber cables and 105 substations with tension up to 550kV.

CTEEP has an installed capacity of 44,431 MVA (Mega Volt Ampere) and with its own assets or through subsidiaries and participations, has a footprint in 12 Brazilian states: Rio Grande do Sul, Santa Catarina, Paraná, São Paulo, Minas Gerais, Rondônia, Mato Grosso, Mato Grosso do Sul, Goiás, Tocantins, Maranhão and Piauí.

The Company has stakes in companies established to render an electric energy transmission public utility service: a 100% stake in the IEMG (Interligação Elétrica de Minas Gerais), Pinheiros (Interligação Elétrica Pinheiros) and in Serra do Japi (Interligação Elétrica Serra do Japi); 51% in IESul (Interligação Elétrica Sul), 51% in IEMadeira (Interligação Elétrica Madeira); and 25% in IENNE (Interligação Elétrica Norte e Nordeste).

Controlled by one of the largest energy transmission groups in Latin America, ISA which holds 89.40% of its common shares ‐, CTEEP also counts among its investors, Eletrobras ‐ the largest energy group in Brazil, the government of the state of São Paulo and 61 thousand personal and corporate shareholders.

CTEEP’s shares are listed on the BM&FBovespa and since 2002, the Company has adhered to Level 1 of BM&FBovespa’s Corporate Governance. Its preferred shares are a component of the Ibovespa stock index, the most important indicator of the average performance of share prices in the Brazilian stock market. In addition, the Company has an American Depositary Receipts – ADR Program under SEC Rule 144 A in the United States.

Common Shares ‐ TRPL3 (42% of the total)

Preferred Shares ‐ TRPL4 (58% of the total)

Total Capital Stock

ISA Capital do Brasil89.40%

Eletrobras9.85%Other

Shareholders0.75%

Eletrobras53.99%

State Government of São Paulo10.62%

Other Shareholders

35.39%

ISA Capital do Brasil37.60%

Eletrobra35.42%

State Governmeof São Pau

6.15%

Other Sahreholders

20.82%


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Operating Performance

Operating Excellence

CTEEP’s operating revenue is directly related to the uptime of its assets: transmission lines, reactors and transformers. Since any asset downtime is susceptible to a discount against its revenues, the Company operates a continuous program of investing in the upgrading of operational efficiency and the quality of the operation.

Below are some of the indicators which illustrate the Company’s operating efficiency between 2007 and 9M11:


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Effects of the adoption of IFRS and CPC pronouncements

Effect on the financial statements

Below we show the reconciliation between the quarterly information prepared in conformity with current and previous accounting practices, denominated “BR GAAP (pro‐forma)”:

BR GAAP IFRS BR GAAP IFRS

Assets (R$' 000)

CURRENT ASSETSCash and Banks 327,466 - 327,466 54,983 - 54,983 Trade Account Receivable 260,703 1,338,171 1,598,874 244,524 1,179,866 1,424,390 Inventory 48,181 - 48,181 44,791 - 44,791 Amounts Receivable from the State Finance Secretariat 20,798 - 20,798 22,938 - 22,938 Taxes and Contributions to be offset 13,434 - 13,434 11,230 - 11,230 Tax benefit - Goodwill 28,832 (28,832) - 28,832 (28,832) - Deferred income Tax and Social Contribution 28,997 (28,997) - 32,575 (32,575) - Prepaid Expenses 6,339 455 6,794 1,876 735 2,611 Financial Derivatives 5,881 - 5,881 Others 73,975 - 73,975 35,848 46- 35,802

814,606 1,280,797 2,095,403 477,597 1,119,148 1,596,745

NON-CURRENT ASSETSLong-Term Assets

Trade Account Receivable 316 4,986,841 4,987,157 978 4,224,331 4,225,309 Amounts Receivable from the State Finance Secretariat 771,118 - 771,118 681,129 - 681,129 Tax benefit - incorporated goodwill 97,455 28,832 126,287 119,079 28,832 147,911 Deferred income Tax and Social Contribution 75,690 75,690- - 62,171 34,121- 28,050 Pledges and Escrow 54,858 - 54,858 42,248 - 42,248 Inventory - 192,125 192,125 - 184,264 184,264 Financial Derivatives 26,770 - 26,770 Credits with Associates 7,925 - 7,925 6,624 - 6,624

1,034,132 5,132,108 6,166,240 912,229 4,403,306 5,315,535

Property, Plant and Equipment 5,895,774 (5,886,988) 8,786 5,254,978 (5,245,784) 9,194 Intangible Assets 74,246 (64,450) 9,796 70,066 (60,122) 9,944

5,970,020 (5,951,438) 18,582 5,325,044 (5,305,906) 19,138

Total Assets 7,818,758 461,467 8,280,225 6,714,870 216,548 6,931,418

Liabilities and Shareholders' Equity

CURRENT LIABILITIESLoans and Financing 948,296 - 948,296 332,413 - 332,413 Debentures 223,654 - 223,654 2,154 - 2,154 Suppliers 109,631 - 109,631 93,964 - 93,964 Taxes, Fees and Contributions 99,288 - 99,288 88,745 - 88,745 Taxes installments - Law 11,941 12,002 - 12,002 10,353 - 10,353 Regulatory Charges 55,414 - 55,414 49,559 - 49,559 Interest on Shareholders' Equity 240,447 0 240,447 193,822 0 193,822 Provisions 24,645 - 24,645 22,662 - 22,662 Amounts Payable - Fundação CESP 5,512 - 5,512 6,503 - 6,503 Deferred income Tax and Social Contribution 272 (272) - 207 (207) - Financial Derivatives 9,256 0 9,256 - 0 - Others 32,650 206- 32,444 13,874 - 13,874

1,761,067 (478) 1,760,589 814,256 (207) 814,049

NON-CURRENT LIABILITIESLong-Term Liabilities

Loans and Financing 768,654 - 768,654 540,032 - 540,032 Taxes installments - Law 11,941 145,026 - 145,026 144,964 - 144,964 PIS and COFINS - 207,388 207,388 - 117,632 117,632 Deferred income Tax and Social Contribution 19,386 24,247 43,633 19,539 10,187- 9,352 Regulatory Charges 2,174 - 2,174 2,174 - 2,174 Provisions for Contingencies 163,945 - 163,945 161,688 - 161,688 Debentures 553,498 0 553,498 553,639 0 553,639 Especial Liabilities - Reversal/Amortization 24,053 - 24,053 24,053 - 24,053 Negative Goodwill 16,060 (16,060) - - 0 - Others 38

1,692,796 215,575 1,908,371 1,446,089 107,445 1,553,534

SHAREHOLDERS' EQUITYPaid-up Capital 1,119,911 - 1,119,911 1,119,911 - 1,119,911 Capital Reserves 2,231,113 - 2,231,113 2,231,113 - 2,231,113 Revenue Reserves 903,139 109,298 1,012,437 904,824 109,300 1,014,124 Accumulated profits 145,163 (3,787) 141,376 145,163 (3,787) 141,376Proposal for distribution of a complementary dividend - - - 198,011 10 198,021 Advance for future capital increase 16,954 - 16,954 666 - 666

4,364,895 246,370 4,611,265 4,454,525 109,310 4,563,835

Total Liabilities and Shareholders' Equity 7,818,758 461,467 8,280,225 6,714,870 216,548 6,931,418

September 30, 2011 December 31, 2010

September 30, 2011 December 31, 2010

Effect of the transition to the

IFRS

Effect of the transition to

the IFRS


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The financial asset originates when the operator has the unconditional contractual right to receive cash or another financial asset from the conceding entity for construction services rendered; the conceding entity has little or no way of avoiding payment since normally the agreement is legally enforceable. The concessionaire has the unconditional right to receive cash if the conceding entity guarantees the payment in the agreement in the event (a) of pre‐established values or values that can be determined or (b) insufficiency, if any, of the values received from the users of the public utility services with respect to the pre‐established or determinable values even if the payment is conditional to a guarantee from the concessionaire that the infrastructure meets specific quality and efficiency requirements.

3Q11 RESULTS (in R$' 000)

BR GAAPEffect of the transition to

the IFRSIFRS BR GAAP


the IFRSIFRS

Net operating revenue 474,958 421,575 896,533 442,824 177,884 620,708 Costs of operating services (121,506) (236,408) (357,914) (110,233) (106,638) (216,871)

Gross Revenue 353,452 185,167 538,619 332,591 71,246 403,837

Operational Revenues (Expenses)General and administrative (27,062) (2,052) (29,114) (35,557) (3,980) (39,537) Management fees (1,347) (306) (1,653) (1,378) (316) (1,694) Financial expenses (78,937) (4,743) (83,680) (33,723) (4,360) (38,083) Financial income 33,247 9,911 43,158 11,389 970 12,359 Other expenses, net (7,433) 28,575 21,142 (2,418) (4,248) (6,666)

Operating profit 271,920 216,552 488,472 270,904 59,312 330,216

Income tax and social contribuitionCurrent (73,799) - (73,799) (41,729) - (41,729) Deferred 10,091 (79,901) (69,810) (25,262) (19,215) (44,477)

Profit before reversal of interest on own capital 208,212 136,651 344,863 203,913 40,097 244,010

Net income for the fiscal year 208,212 136,651 344,863 203,913 40,097 244,010

3Q103Q11

BR GAAPEffect of the transition to

the IFRST IFRS BR GAAP


the IFRSIFRS

333,180 (301,325) 31,855 311,231 (170,914) 140,317

(301,776) 301,325 (451) (171,210) 170,914 (296) -

78,866 - 78,866 (152,424) - (152,424)Cash flow of financing activities

9M11 CASH FLOW (in R$' 000)

Cash Flow of operating activities

Cash flow of investment activities

9M11 9M10


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Description of the adjustments Below we give a description of the main adjustments arising from the new accounting pronouncements which have impacted the Company’s financial statements:

Concession agreements (ICPC 01 and OCPC 05)

As from January 1 2010 (effected from the opening balance of January 1 2009 for comparison purposes) the Company has adopted and used the provisions of the ICPC 01 interpretation issued by CPC (“equivalent to IFRIC12 of the international accounting standards as issued by the IASB”) for the purposes of classification and measurement of the concession activities. This interpretation provides guidance to the concessionaires on the modus operandi for booking public utility concessions to private entities, when:

the conceding entity controls or regulates which services must be rendered, to whom the services must be rendered and the price which must be charged; and

the conceding entity controls – through ownership, usufruct or any other manner – any significant residual participation in the infrastructure on maturity of the concession.

For concession agreements which qualify for application of ICPC 01, the infrastructure which has been constructed, expanded, reinforced or improved by the operator is not recorded as a fixed asset pertaining to the operator because the concession agreement does not transfer controlling rights to the concessionaire (much less ownership) of the use of public utility service infrastructure. Only assignment of possession of these assets for the realization of public utility services is envisaged, such assets reverting to the conceding entity following the termination of the respective agreement. The concessionaire has the right to operate the infrastructure for rendering a public utility service in the name of the conceding entity under the conditions provided in the agreement.

Thus, under the terms of the concession agreements in the context of ICPC 01, the concessionaire acts as a service provider. The concessionaire builds, expands, upgrades or improves the infrastructure (construction services) used to render the public utility service as well as operating and maintaining this infrastructure (operation and maintenance services) during a given period. The concessionaire must register and measure the revenue from the services it renders in accordance with the Technical Pronouncements CPC 17 – Construction Contracts (equivalent to IAS 11, as issued by the IASB) and CPC 30 – Revenue Recognition (equivalent to IAS 18, as issued by the IASB). Should the concessionaire undertake more than one service (for example, the services of construction or improvement and operation services) governed by a single agreement, the remuneration received or receivable must be allocated on the basis of the fair values relative to the services rendered if the values are identifiable separately. Thus the compensating item for the construction services or improvements effected to the concession assets is classified as a financial asset, intangible asset or both.

The financial asset originates when the operator has the unconditional contractual right to receive cash or another financial asset from the conceding entity for construction services; the conceding entity has little or no way of avoiding payment since normally the agreement is enforceable in law. The concessionaire has the unconditional right to receive cash if the conceding entity guarantees the payment in the agreement (a) of pre‐established values or values that can be determined or (b) insufficiency, if any, of the values received from the users of the public utility services with respect to the pre‐established or determinable values even if the payment is conditional to a guarantee from the concessionaire that the infrastructure meets the specific quality and efficiency requirements. The remuneration received or receivable must initially be registered at its fair value received or receivable.

The criteria used for the adoption of the interpretation of the concessions held by the Company and the impact of their initial adoption are described below:

The interpretation of ICPC 01 was considered applicable to all the public‐private utility services agreements to which the Company is a party.

All the concessions were classified according to the financial asset model, the revenues and costs of the work related to the formation of the financial asset being recognized through the percentage of evolution method. The financial asset for indemnification is recognized when the construction is finalized and included as remuneration for construction services.

The provisions of ICPC 01 were applied retroactively for the concessions of the controlled companies IEMADEIRA, IESUL, IENNE, IEMG, Serra do Japi and Pinheiros, the effects that the


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adoption of IFRS had on the opening balance of January 1 2009 being recalculated (the opening period used for comparative purposes), the accumulated effects being attributed to the components of shareholders’ equity. Given the impossibility of reliably reconstructing historical data, the prospective application was adopted for the concession agreements signed by CTEEP.

As set forth in the agreements, the extinguishment of the concession will legally determine the reversion to the conceding entity of the assets connected to the service, their verification and evaluation, as well as the determination of the amount of the indemnification due to the concessionaire based on the values and the dates of their incorporation into the electricity system. The Company believes that the value of the indemnification to which it will have a right shall correspond to the New Replacement Value adjusted to the accumulated depreciation for each item. Considering the uncertainties that prevail in the energy market today, the Company has estimated the value of the indemnification of its assets based on their respective book values, this being the amount that Management understands as being the minimum guaranteed by the regulations in force. Given that Management constantly monitors sector regulations, in the event of changes in these regulations which might alter the estimated value of the indemnity for the assets, the accounting effects of these changes will be treated in a prospective manner in the Financial Statements. However, Management reiterates it commitment in continuing to defend shareholder interests in realizing these assets with a view to maximizing the return on capital invested in the concession in accordance with the legal parameters. This indemnification is part of the remuneration of the construction services and is recognized immediately upon the work being concluded.

The Company has determined the fair value of the construction services considering that the projects build in a sufficient margin to cover the costs of construction together with certain expenses during the construction phase. The effective rate of interest that remunerates the financial asset arising from the construction services was established considering the expected shareholders return on an asset with these characteristics.

The financial assets were classified as loans and receivables and the financial income recorded on a monthly basis and registered directly to results.

The revenues with construction and financial revenue calculated on the financial asset arising from construction are subject to deferral of the cumulative Social Integration Program ‐ PIS and Contribution for the Financing of Social Security – COFINS charges, registered in the “deferred taxes” account in the long‐term liabilities.

Fiscal Benefit – goodwill incorporated from the controlling company (CPC 04)

The fiscal benefit – goodwill incorporated from the controlling company previously shown in the current assets was reclassified to the long‐term assets.

Deferred income tax and social contribution (CPC 32)

Recognized on the temporary differences at the end of each fiscal year between the balances for assets and liabilities recognized in the financial accounts and the corresponding fiscal base used in the calculation of the taxable profit. Deferred tax assets and liabilities are measured at the applicable rates in the period when the liability is expected to be liquidated or the asset realized according to the prevailing rates in the current tax legislation.

Additionally and in line with CPC 26, the deferred taxes, originally shown in the current assets, were reclassified to the long‐term assets.

Booking of the proposal for dividend payment (ICPC 08)

This interpretation clarifies that the declaration of dividends exceeding the mandatory minimum following the accounting period to which the financial statements refer should not be recognized as a liability, not meeting the present obligation criteria on the date of the financial statements as set forth in CPC 25 – Provision, Contingent Liabilities and Contingent Assets.


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Employee benefits ‐ Fundação CESP (CPC 33)

This accounting pronouncement provides guidance on recognition, measurement and evidence of the benefits granted to the employees.

Since fiscal year 2008, the actuarial calculations for pension and retirement plans sponsored by the Company show a surplus, which, since the corridor approach is used in these calculations, generate unrecognized gains. However, the gain recorded does not exceed the restriction limit to the recognition of the asset (“asset ceiling”) established by CPC 33 (IAS 19).

Negative goodwill (ICPC 09)

Represented by negative goodwill recorded at the time of the acquisition of 49% of the common shares of EPTE ‐ Empresa Paulista de Transmissão de Energia Elétrica S.A. These shares pertained to the Secretaria de Estado dos Negócios da Fazenda de São Paulo and Companhia Paulista de Administração de Ativos ‐ CPA and were acquired on March 26 1999 by CESP ‐ Companhia Energética de São Paulo. At the time of CESP’s partial spin‐off, these shares and the negative goodwill were transferred to CTEEP. EPTE was incorporated by the Company on November 10 2001. In line with ICPC 09, the negative goodwill was recorded in the retained earnings as an advantageous acquisition.


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Economic and Financial Performance

Readjusted Annual Allowed Revenue

On June 28 2011, ANEEL published Ratifying Resolution 1171 setting CTEEP’s annual allowed revenue due to the transmission concessionaires for making the Basic Network and Other Transmission Facilities available for the 12‐month cycle encompassing the period from July 1 2011 to June 30 2012.

In accordance with the Resolution, CTEEP’s Annual Allowed Revenue ‐ RAP was R$ 1,760.82 million on July 1 2010 increasing to R$ 2,008.3 million on July 1 2011, corresponding to an increase of R$ 247.5 million and equivalent to 14.1%.

The RAP of the Company and its controlled companies to be calculated equally in twelve parts over the period from July 1 2011 to June 30 2012, is composed as follows:

Existing

Assets

New

InvestimentsBid

Share

Adjustment

Existing

Assets

New

Investiment

s

Share

AdjustmentTOTAL

59/2001 1,241,581 314,290 ‐ ‐17,795 360,076 106,099 ‐11,767 1,992,484

143/2001 ‐ ‐ 15,925 ‐132 ‐ ‐ ‐ 15,793

IEMG 004/2007 14,193 ‐ ‐ ‐ ‐ ‐ ‐ 14,193

012/2008 ‐ ‐ 7,386 ‐ ‐ ‐ ‐ 7,386

015/2008 12,491 ‐ ‐ ‐ ‐ ‐ ‐ 12,491

018/2008 ‐ ‐ 3,174 ‐ ‐ ‐ ‐ 3,174

SERRA DO

JAPI026/2009 ‐ ‐ 25,200 ‐ ‐ ‐ ‐ 25,200

IENNE 001/2008 36,435 ‐ ‐ ‐ ‐ ‐ ‐ 36,435

013/2008 4,447 ‐ ‐ ‐ ‐ ‐ ‐ 4,447

016/2008 8,006 ‐ ‐ ‐ ‐ ‐ ‐ 8,006

013/2009 ‐ ‐ 176,249 ‐ ‐ ‐ ‐ 176,249

15/2009 ‐ ‐ 151,788 ‐ ‐ ‐ ‐ 151,788

1,317,153 314,290 379,722 ‐17,927 360,076 106,099 ‐11,767 2,447,646

IEMADEIRA

(R$ million)

Network Basic Other Transmission Facilities

Concessionay /

Contract

CTEEP

PINHEIROS

IESUL

As at September 30 2011, CTEEP’s stake in its controlled companies was distributed as follows:

SubsidiaryCTEEP Participation in Share

Capital

IEMG 100%

PINHEIROS 100%

SERRA DO JAPI 100%

IEMADEIRA 51%

IESUL 51%

IENNE 25%


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Revenue Recognition according to IFRS

As set forth in ICPC 01, the concessionaires must register and measure the revenue from the services rendered in compliance with the CPC 17 technical pronouncements – Construction Agreements and CPC 30 – Revenue Recognition (operation and maintenance services).

Gross Operating Revenue

Gross Operating Revenue reported a quarter‐on‐quarter increase of 28.4% to R$ 1,002.2 million in 3Q11 and 43.2% when compared with 3Q10 due in large part to the increase of 104.1% in construction revenues, of 35.8% in revenues from operations and maintenance and 3.6% from financial revenues in the past 12 months.

146.1

298.7 298.2136.9

138.0 138.3

413.5

339.9

561.53.6

4.0

4.1

3Q10 2Q11 3Q11

Construction Operation and Maintenance Financial Other

+ 43.2%

700.1

1,002.2

Gross Operating Revenue(R$ million)

+ 28.4%

780.5

Revenue from Construction, and Operation and Maintenance services ‐ The revenue relating to construction services or improvements under the concession service agreement is recognized based on the stage at which work in progress has reached.

Construction Revenues totaled R$ 298.2 million in 3Q11, stable when compared to the R$ 298.7 million reported in 2Q11 but 104.1% higher when compared with the R$ 146.1 million in the same period in 2010 reflecting progress in work at Serra do Japi and IEMadeira, as well as upgrading and expansion work at CTEEP itself, compensated by the conclusion of work at IENNE, IESUL and Pinheiros and largely concluded during the course of fiscal year 2010.

Revenue from Operational and Maintenance Services – these are recognized in the period in which they were rendered by the Company. When the Company renders more than one service under a concession service contract, remuneration received is allocated by reference to the fair values of the services delivered.

Operational and Maintenance Revenue totaled R$ 138.3 million in 3Q11 compared with R$ 138.0 million in 2Q11 and R$ 136.8 million in 3Q10.


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Financial Revenue – Financial revenue is recognized when there is a probability that future economic benefits will accrue to the Company and revenue value can be reliably measured. Interest revenue is recognized by the linear method based on the time frame and effective interest rate applicable on the outstanding principal amount. The effective interest rate is the same as that used to discount future estimated cash receivables during the expected life of the financial asset in relation to the initial net book value for this same asset.

The impact of the readjustment in the Company’s RAP is related to Financial Revenue since future cash receivables must be readjusted in the light of the new value stipulated by the regulator (ANEEL). Consequently, future cash flow is similarly readjusted for the new RAP value up to the end of the concession period. The revised present value of this readjusted cash flow will serve as the basis for remuneration of the financial assets (accounts receivable) for the next cycle at the same effective interest rate.

In 3Q11, Financial Revenue amounted to R$ 561.5 million, a growth of 65.2% when compared with R$ 339.9 million for 2Q11 and 35.8% in relation to the R$ 413.5 million for 3Q10. This reflects the remuneration of the outstanding balance of accounts receivable, readjusted for the RAP.

Other Revenue – Other revenue relates to leasing income from a fixed line telephone company and services related the maintenance and technical analysis conducted for third parties.

Deductions from Operating Revenue

Deductions from Operating Revenue increased 17.8% in the quarter and 33.1% in the past 12 months, reaching R$ 105.7 million in 3Q11 against R$ 89.7 million in 2Q11 and R$ 79.4 million in 3Q10, due to the increase, verified in the last 12 months, of 53.2% in taxes on revenue ‐ reflecting growth in operating revenue.

Net Operating Revenue

In the light of the factors mentioned above, Net

Operating Revenue increased 29.8% in the

quarter to R$ 896.5 million against R$ 690.7

million in 2Q11. In the past 12 months, this item

registered growth of 44.4%, over the R$ 620.7

million recorded in 3Q10.

620.7 690.7

896.5

3Q10 2Q11 3Q11

+29.79%

+44.43%

Costs of the Operating Services and Operating Expenses

Construction together with operation and maintenance costs posted an increase of 11.8% relative to the second quarter of 2011 and 65.0% against the same period in 2010, totaling R$ 357.9 million in 3Q11 against R$ 320.1 million in 2Q11 and the R$ 216.9 million in 3Q10. This variation arises largely from the increase of 176.3% in expenditures with materials, reflecting the progress made in work at Serra do Japi and IEMadeira in addition to upgrading and expansion work at CTEEP in the past 12 months.


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(R$' 000) 3Q11 2Q11 3Q10 Change % 3Q11/2Q11

Change % 3Q11/3Q10

Personnel (45,661) (40,736) (45,299) 12.1% 0.8%

Material (210,077) (209,955) (76,031) 0.1% 176.3%

Leases and rentals (1,893) (2,346) (1,713) -19.3% 10.5%

Services (93,881) (63,449) (86,398) 48.0% 8.7%

Other (6,402) (3,633) (7,430) 76.2% -13.8%

Total (357,914) (320,119) (216,871) 11.8% 65.0%

Cost of Services

General and Administrative Expenses reported a reduction of 20.8% in relation to 2Q11 also declining by 25.4% compared with 3Q10, largely due to the reduction in contingencies offset by the increase in outstanding executory actions involving tied escrow accounts and deposits (see Explanatory Note 9 of ITR for September 30).

(R$' 000) 3Q11 2Q11 3Q10 Change % 3Q11/2Q11

Change % 3Q11/3Q10

Personnel (10,649) (10,630) (9,244) 0.2% 15.2%

Material (435) (399) (551) 9.0% -21.1%

Leases and rentals (1,638) (1,209) (1,024) 35.5% 60.0%

Services (11,767) (8,376) (8,706) 40.5% 35.2%

Depreciation (1,582) (1,639) (1,489) -3.5% 6.2%

Contingencies (1,035) (12,606) (16,114) -91.8% -93.6%

Other (3,661) (3,969) (4,103) -7.8% -10.8%

Total (30,767) (38,828) (41,231) -20.8% -25.4%

General and Administrative Expenses

EBITDA e Margem EBITDA

In 3Q11, EBITDA margin was 57%, amounting

to R$ 509.4 million, a growth of 52.8%

compared with 2Q11 (R$ 333.4 million) and

41.1% against the same period for 2010

when EBITDA totaled R$ 361.1 million.

364.1 333.4

509.4

58.7% 48.3% 56.8%

3Q10 2Q11 3Q11

Ebitda Ebitda Margin

+52.8%

+39.9%


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Financial Result

The financial result was an expense of R$ 40.5 million in 3Q11, corresponding to a reduction of 24.6% (R$ 53,7 million) in relation to 2Q11 and an increase of 57.5% (R$ 25.7 million) for the same period in 2010. The decline in financial expenses in the quarter is mainly due to the recognition of financial revenue in the form of Interest on Assets with respect to a legal ruling in favor of the Company (Note 9 (b) of the ITR), as well as an increase in the average outstanding balance of Interest on Assets and Liabilities of R$ 6.7 million, a result of the positive accumulated currency translation effect at the IEMadeira subsidiary of R$ 9.9 million offset against a negative accumulated currency translation effect of R$ 3.2 million.

The impact of interest on shareholders’ equity on financial expenses is already eliminated for the purposes of calculating the financial result.

Income Tax and Social Contribution

Income tax and social contribution expenses increased 66.6% in the past 12 months, amounting to R$ 143.6 million in 3Q11 against R$ 86.2 million in 3Q10. The effective rate of income tax and social contribution was 29.4% in 3Q11 compared with 26.1% in 3Q10.

Lucro Líquido

In the light of the factors already mentioned, net

income for 3Q11 was R$ 344.9 million,

representing a growth of 72% over the R$ 200.5

million reported in 2Q11 and 41.3% in relation the

R$ 244.0 million posted in 3Q10. Basic and diluted

earnings per share were R$ 2.27.

244.0 200.5

344.9

3Q10 2Q11 3Q11

+72.01%

+41.35%


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Capital Structure

Breakdown of Debt

Gross consolidated debt as at September 30 2011 amounted to R$ 2,494.1 million. Out of total consolidated gross debt, R$ 971.5 million (39%) represented loan agreements with the National Economic and Social Development Bank ‐ BNDES.

At the end of 3Q11, net debt was R$ 2,166.6 million.

The net debt to net equity ratio at the end of 3Q11 was 47.0%.

BNDESTJLP + 2.3% year 6/15/2015 351,410 421,146 TJLP + 1.8% year 6/15/2015 210,417 160,605

IEMG TJLP + 2.4% year 4/15/2023 58,889 37,630 IEMADEIRA TJLP + 2.8% year 1/15/2012 217,147 185,134 IESUL TJLP + 2.4% year 5/15/2025 9,671 - PINHEIROS TJLP + 2.6% year 5/15/2026 123,932 -

Comercial Papers5th Series - CTEEP CDI + 0.4% year 7/5/2012 308,237 - 4th Series - CTEEP CDI + 0.4% year 1/12/2012 216,998 -

Debentures1st Issuance CDI + 1.3% year 12/15/2014 507,100 490,405 2sd Issuance IPCA + 8.1% year 9/15/2012 64,911 65,388 Single Series CDI + 6.5% year 9/15/2012 205,141 -

BanksCTEEP USD + 4% year * 4/26/2013 119,754 -

CDI + 2.0% year - 2,969 1,396 10.0% year 5/19/2030 55,748 56,094

IESUL CDI + 1.5% year 3/11/2011 - 8,297 Serra do Japi CDI + 0.3% year 10/20/2011 40,645 -

Eletrobras - 11/15/2021 407 441 Leasing - - 726 1,702

TOTAL CONSOLIDATED 1,428,2382,494,102

12/31/2010

CTEEP

IENNE

FUNDING CHARGES MATURITY 3Q11

* With swap 103.5% of CDI.

** With performance bonus of 1.5% the cost of debt is 8.5% per annum.

c


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Capital Markets

CTEEP’s common and preferred shares (BM&FBovespa: TRPL3 and TRPL4) ended 3Q11 with prices at R$ 54.00 and R$ 47.98, respectively, corresponding to a decline of 4.42% and 4.40%, also respectively. During the period, Ibovespa reported a devaluation of 16.15% and the Electric Power Stock Index (IEE) depreciated 7.53%.

75

80

85

90

95

100

105

July‐11 August‐11 September‐11

TRPL4

IBOVESPA

IEE

Total Return

‐ 7.53%

‐ 16.15%

Quotation from July to September 2011 (base 100 = 06/30/2011 )

‐ 4.40%

‐ 1.58%

During the course of the period, CTEEP’s preferred shares (TRPL4) represented an average daily trading volume on the BM&FBovespa of R$ 7.1 million, an accumulated financial volume for the first nine months of 2011 of R$ 1,327 million.

0.002.004.006.008.00

10.0012.0014.0016.0018.0020.00

Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11

Trading Financial - 9M11(R$ million)

Total R$ 1.327 million Daily Avarege: R$ 7.1 million

The daily average number trades in the Company’s preferred shares was 722. The total number of trades executed in the first nine months of 2011 was 135,749 trades.

0200400600800

10001200140016001800

Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11

Trade Volume - 9M11(units)

Total of trades: 135.749 Daily Avarege: 722


17

CTEEP also participates in the sponsored Level 1 American Depositary Receipts (ADR) Program supported by underlying common and preferred shares of the Company in the ratio of 1 Depositary Receipt for each share of both types. At the close of 3Q11, CTEEP’s shareholder base was made up of 23,699 ADRs represented by underlying common shares and a further 2,097,818 ADRs, represented by preferred shares.

$63.00 $66.50 $63.69$68.59

$62.99 $64.52 $65.90 $67.25 $66.61 $68.71$62.98 $63.88

$54.16

$31.20$32.82

$31.25$33.19

$30.48 $31.15 $31.74 $32.28 $31.97 $32.93$30.14 $30.45

$25.82

0

0

0

0

0

0

0

0

0

0

0

Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11

DR's Market Capitalization (US$ millions)

DR's Month end Price (US$)

Shareholders’ Remuneration

In 3Q11, CTEEP paid out R$ 63.5 million in interest on shareholders’ capital corresponding to R$ 0.42 per share of both types and R$ 177.2 million in dividends ‐ equivalent to R$ 1.17 per share of both types.

EVENT DATE TOTAL P/SHARE

RCA 6/30/2011 JCP 2011 63,460,717.92 0.417975 7/28/2011

RCA 6/30/2011 Dividends 2011 160,524,955.66 1.057275 7/28/2011

RCA 4/29/2011 Dividends 2010 16,714,326.45 0.110087 7/28/2011

240,700,000.03 1.585337

AUTHORIZED AMOUNT R$ DATE OF PAYMENT

TOTAL OF PAYMENT - 3Q11

TYPE FISCAL YEAR


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Investments

ANEEL Transmission Line Auction 004/2011

On September 2 2011, at ANEEL public action 004/2011 held at the BM&FBOVESPA, CTEEP successfully bid for Lot K on an independent basis and Lot L through the intermediary of the Garanhuns consortium with CHESF.

Lot K is composed of SE Itapeti 345/88kV – a new 88kV substation yard. This project will be incorporated in the Pinheiros subsidiary (wholly owned by CTEEP) at an estimated investment of R$ 73.0 million and generating an Annual Allowed Revenue (RAP) of R$ 4.4 million, as of baseline month of September 2011. Operational startup is scheduled for September 2013.

Lot L is made up of TL 500kv Luiz Gonzaga – Garanhuns with 224km, TL 500kV Garanhuns Pau Ferro with 239km, TL 500kV Campina Grande – Garanhuns with 190km, TL 500kV Garanhuns – Angelim I with 13km, SE 500/230kv Garanhuns 200MVA and SE Pau Ferro – a new 500kV substation yard. Investment in this project is worth an estimated R$ 942.0 million, responsible for an Annual Allowed Revenue (RAP) of 68.9 Million as of September 2011. The Company’s stake in the project is 51%. Operational startup is scheduled for July 2014.

Subsequent Events

APIMEC ‐ 2011

On October 14 2011, the Company held a public meeting for capital markets professionals and investment analysts. On this occasion, CTEEP was awarded the Gold Assiduity Seal for 10 years of uninterrupted meetings.

Funding – Law 4.131

On October 17 2011, CTEEP signed a Long‐Term Direct External Loan with JPMorgan Chase (New York) of the Law 4131 type (issued September 3 1962) for USD 85.7 million at a cost of FX variation +2.15% p.a. Additionally, the Company entered into a swap agreement with JPMorgan S.A. at the notional value of R$ 150.0 million, switching FX variation + 2.15% for 98.35% of the annual CDI (Interbank Deposit Interest Rate). The Company is to adopt Hedge Accounting and will classify the contracted derivative as a Fair Value Hedge according to the parameters described in Brazilian accounting standard CPC 38 and IAS 39 of the International Accounting Standards.

Increase in Capital Stock

On October 28 2011, the Brazilian Securities and Exchange Commission ‐ CVM authorized the Registration of a Public Offering of Remnant Shares of the Company. The respective auction of remnant shares took place on November 4 2011 from 4:00 p.m. to 4:15 p.m. on the BM&FBovespa. The minimum prices were the same as those practiced for the preceding stages of the process for increasing the capital stock and the quantities offered correspond to the remnants of the unsubscribed shares. With remnant shares still unsubscribed at the end of the auction, the Company granted those shareholders that subscribed shares to the increased capital stock the right to revisit their decision in relation to the subscription of shares, totally or partially, up to November 11 2011. The


19

outcome of this initiative will be announced to the market by November 18 2011.


20

Attachments

Attachment I – Balance Sheet

Assets (R$' 000) 09/30/2011 12/31/2010

CURRENT ASSETSCash and Banks 327,466 54,983 Financial Investments - - Trade Account Receivable 1,619,672 1,447,328 Inventory 48,181 44,791 Amounts Receivable from the State Finance Secretariat - - Recoverable taxes and conbtributions 13,434 11,230 Prepaid Expenses 6,794 2,611 Others 79,856 35,802

2,095,403 1,596,745

NON-CURRENT ASSETSLong-Term Assets

Trade Account Receivable 5,758,275 4,906,438 Amounts Receivable from the State Finance Secretariat - - Tax benefit - incorporated goodwill - - Deferred income Tax and Social Contribution - - Pledges and Escrow - - Credits receivable from controlled companies - - Inventory 192,125 184,264 Deferred taxes - 28,050 Others 215,840 196,783

6,166,240 5,315,535

Property, Plant and Equipment 8,786 9,194 Intangible Assets 9,796 9,944

18,582 19,138

Total Assets 8,280,225 6,931,418


21

Liabilities and Shareholders' Equity 09/30/2011 12/31/2010

CURRENT LIABILITIESLoans and Financing 948,296 332,413 Bonds 223,654 2,154 Suppliers 109,631 93,964 Taxes, Fees and Contributions 99,288 88,745 Taxes installments - Law 11,941 12,002 10,353 Regulatory Charges 55,414 49,559 Interest on Shareholders' Equity 240,447 193,822 Provisions 24,645 22,662 Amounts Payable - Fundação CESP 5,512 6,503 Financial Derivatives 9,256 - Others 32,444 13,874

1,760,589 814,049

NON-CURRENT LIABILITIESLong-Term LiabilitiesLoans and Financing 768,654 540,032 Bonds 553,498 553,639 Taxes installments - Law 11,941 145,026 144,964 PIS and COFINS - - Deferred income Tax and Social Contribution 251,021 126,984 Regulatory Charges 2,174 2,174 Provisions for Contingencies 163,945 161,688 Especial Liabilities - Reversal/Amortization 24,053 24,053 Others - -

1,908,371 1,553,534

SHAREHOLDERS' EQUITYPaid-up Capital 1,119,911 1,119,911 Capital Reserves 2,248,067 2,231,779 Revenue Reserves 1,012,437 1,212,145 Profits / Losses 230,850 -

4,611,265 4,563,835

Total Liabilities and Shareholders' Equity 8,280,225 6,931,418


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Attachment II – Income Statement (R$ thousands) RESULTS 3Q11(R$' 000)

3Q11 2Q11 2Q10 Change % 2Q11x1Q11

Change % 2Q11x2Q10

Net operating revenue 896,533 690,735 620,708 29.8% 44.4%

Costs of operating services (357,914) (320,119) (216,871)

Gross Revenue 538,619 370,616 403,837

Operational Revenues (Expenses) (9,625) (73,029) (47,897) -86.8% -79.9%

Management fees (1,653) (1,558) (1,694)

Other General and Administrative Expenses (29,114) (37,270) (39,537)

Other Operating Expenses (7,208) (35,698) (7,208)

Other Operating Income 28,350 1,497 542

Previous to the Net Financial Income and Taxes 528,994 297,587 355,940

Financial Results (40,522) (53,749) (25,724) -24.6% 57.5%

Financial Income 43,158 8,004 12,359

Financial Expenses (83,680) (61,753) (38,083)

Income Before Income Taxes 488,472 243,838 330,216 100.3% 47.9%

Income tax and social contribuition (143,609) (43,333) (86,206) 231.4% 66.6%

Current (73,799) (54,638) (41,729)

Deferred (69,810) 11,305 (44,477)

Net Income from Continuing Operations 344,863 200,505 244,010 72.0% 41.3%

Profit / Loss of Consolidated Period 344,863 200,505 244,010 72.0% 41.3%

Awarded to Members of the Parent Company 344,863 200,505 244,010

Assigned to Non-Controlling Partners - - -

Earnings per Share - (R / share) 2.2714 1.3206 1.6071 72.0% 41.3%

Number of Shares (expressed in units) 151,828 151,828 151,828


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Attachment III – Cash Flow (R$ thousands)

2M11 2M10

67,979 566,764 - - 1,104,594 816,700

Net Income 751,224 641,575 Provision for adjustments inventories 4,733 4,423 Deferred income tax and social contribution 61,093 20,944 Provision for contingencies 2,295 (840)Residual value of permanent asset disposals and donations 16 110 Loss on Change in Participation Controlled 28,490 160 Reversal of the loss provision in a Controlled CompanyPIS and COFINS Deferred 82,300 33,934 Amortization of goodwill 21,624 21,624 Interest and foreign exchange variation on assets and liabilities 154,653 94,770

- - (1,036,615) (249,936)

Trade accounts receivable (918,394) (239,057)Inventories (11,275) (40,154)Amounts receivable - State Finance Department (87,849) (66,480)Taxes and contributions to offset (1,986) 202,520 Pledges and restricted deposits (12,610) 2,805 Prepaid expenses (4,183) (2,726)Other 11,472 (52,082)Suppliers 15,008 9,872 Taxes and social charges payable 10,494 (23,948)Regulatory charges payable 5,683 4,663 Provisions 1,932 (8,293)Amounts payable - Cesp (991) 378 Deferred income tax and social contribution 577 - Taxes installments - Law 11,941 (6,545) - Other (37,948) (37,434)

Purchase of property, plant and equipment (1,907) (1,902)

Increase in deferred charges (13,109) - - - (17,154) (1,902)

1,209,561 870,997 (330,742) (625,786) (673,449) (555,188)

Payment of capital 16,288 28,030 - - 221,658 (281,947)

272,483 282,915 54,983 43,234 - - 327,466 326,149

Net cash used in investiment activities

Cash flow of financing activities

Loan payments (including interest)

Closing Balance of Cash and Cash Equivalents

Dividends paid

Net cash provided by (used in) financing activities

Change in Cash

News loans

Increase (Decrease) in Cash Opening Balance of Cash and Cash Equivalents

CASH FLOW(in R$' 000)

Cash Flow of operating activities

Cash flow of investment activities

Changes in Assets and Liabilities

Net Cash by operating activities

Cash provided by operating

Cteep release 3_q11

Business

Transcript of Cteep release 3_q11