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Apimec

2017

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Apimec 2017

Apimec

2017

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APIMEC 16 year-seal

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Apimec

2017

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Progress and Transformation

Apimec

2017

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Recognized as one of the best companies to work for by GPTW 2017

Strategic assets located nationwide with a focus on

the state of São Paulo, regional interconnections and

the Madeira Complex

Responsible for the transmission of about 25% of all

energy consumed in Brazil and more than 90% of

energy consumed in the state of São Paulo

18,642 km of transmission lines, 25.795 km of circuits

and 64.480 MVA of transformation capacity

Active role in the expansion of the transmission system

with investments higher than R$ 12 billion since 2007

FITCH rating with Long Term National Scale AAA (bra)

classification and Stable outlook

Recognized as the best company in the energy sector by Exame magazine’s Biggest and Best survey 2017

4 4

Profile

Apimec

2017

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Success in April’s

auction with 5 lots

Privatization. ISA

aquires control

Rollover of

Concession

Agreement

(059/2001) for 30

years

Incorporation of

EPTE assets

Expansion to 17 Brazilian states

with participation in auctions

and acquisitions

1999 2013

Partial spin off of assets

from CESP and

constitution of CTEEP

Transmission lines

in Kms

2001 2012 2006 2007 2017 2016

Publication of MME Ordinance

120 with settlement criteria for

RBSE indemnification

Success in October’s auction

with 3 lots

Timeline ISA CTEEP

*9M17

11,548 12,317 15,388 17,688 18,642

Regulatory

EBITDA Combined

in R$ millions

133.8 705.6 1,128.8 1,575.8 194 738.1 1,106.9

Apimec

2017

6

36.2%

7.3%

9.2%

14.6%

32.7%

39.5%

10.0%

8.8%

8.2%

33.5%

44.2%

14.5%

5.6%

10.6%

25.1%

Pre-PM 579

2012/2013 cycle Total RAP: R$ 24.317 million

Post-PM 579


Current*


Market Share of Transmission in Brazil

Others Eletrobras

ISA CTEEP Taesa State Grid

* Includes Oct/16Apr/17 auctions

Apimec

2017

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Common Shares

TRPL 3 Preferred Shares

TRPL 4

Total Capital

89.5%

9.8%

0.7%

1.4%

51.9%

46.7%

28.7%

35.9%

35.4%

Others Eletrobras

ISA

Shareholding Breakdown as at 09/30/2017

64484.433

39.1%

Quantity of shares

Total Capital

164.720.826

100%

100.236.393

60.9%

Apimec

2017

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ISA

Colombia

Ecuador

Peru

Chile

Central America

Bolivia

Argentina

Brazil

Electricity Transmission

Telecoms


Telecoms


Telecoms


Telecomuns

Highway Concessions


Telecoms


8 countries 4 sectors 33 companies


Telecoms

Highway Concession

Management of Real-Time Systems

Apimec

2017

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Management Focus

Apimec

2017

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Efficiency

Quality.

Safety

Profitability

Corporate

Governance

Fair Value

Reduction of

Contingencies

Profitability

Prudent, Responsible, Agile, Simple, Cooperative and Integrated

PEOPLE

GROWTH OPERATION AND

MAINTENANCE PROJECTS SUBSIDIARIES LEGAL REGULATION

Management Focus

Apimec

2017

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Management focus on numbers

Last 12 months* ISA CTEEP SUBSIDIARIES TOTAL

R$ million O&M Projects RBSE* Wholly-Owned Jointly-Owned

Revenue 720 157 326 135 265 1.603

Costs and Expenses** -430 -14 0 -23 -35 -502

EBITDA 290 143 326 112 230 1,101

Net Debt 1,005 128 1,213 2,346

*period from Oct/2016 and Sep/2017

** includes contingencies

Apimec

2017

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Improvement

Service quality indicators with increase in productivity

Management Focus: O&M

889

552 449

21

52

889

573 501

2006 2012 2016

PMTO Ex-Cont ingencies R$ mi l l ion – amounts 2016

ISA CTEEP Subsidiaries

-36%

-13%

1285

623

740

466

864

2012 2013 2014 2015 2016

ISA CTEEP – Energy not Supplied MWh

Subsidiaries include wholly- and jointly-owned, weighted proportional to ISA

CTEEP’S stake in them

Apimec

2017

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Management Focus: Profitability

Opportunity for expansion and renovation of ISA CTEEP’s assets

Selectivity in the choice of projects and improvements in execution with prospects for increased profitability

Recognition of investments in improvements by ANEEL

Organic growth increases RAP

Investment of R$ 1,127 million in the period from May 2012 to

September 2017

Reinforcement and Improvements Projects

RAP (with gross up of PIS/COFINS) R$ million

37

62

93

145

185

Apimec

2017

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Operating subsidiaries: governance, control and financial discipline

8 operating subsidiaries with

14 concession agreements

4.5 thousand kms of

transmission lines and 17

substations (16 thousand MVA)

Focus on corporate

governance: integration of

systems and practices

Operating subsidiaries R$ million – Adjusted according to shareholding stake

Subsidiaries

RAP

Investment Paid in Subscribed

Capital Cycle 2017/2018

IEMG 1 17 278 83

IE Pinheiros 56 833 301

Serra do Japi 56 328 131

Evrecy 2 13 121 21

IENNE 43 978 327

Wholly-owned 185 2,538 863

IESUL (50%) 9 212 108

IE Madeira (51%) 263 3,019 717

IE Garanhuns (51%) 42 606 291

Jointly-owned 314 3,837 1,116

Total 498 6,375 1,979

Management Focus: Subsidiaries

Apimec

2017

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IEMG (100%)

TL: 173 km (500 kV) SS: none

IE Garanhuns (51%)

TL: 621 km (500 kV) 12 km (230 kV) SS: 2.100 MVA

IENNE (100%)

TL: 720 km (500 kV)

SS: none

IE Madeira (51%)

TL: 2.385 km (±600 kVCC)

SS: 6,100 MVA

EVRECY (100%)

TL: 154 km (230 kV) SS: 450 MVA

IE SUL (50%)

TL: 173 km (230 kV)

SS: 900 MVA

IE Pinheiros (100%)

Tl: 1 km (345 kV) SS: 4,200 MVA

IE Serra do Japi

(100%)

Tl: 137 km (230 kV) SS: 2,000 MVA

Substation

Transmission Line

Line Entrance

Types of installation

Management Focus: Subsidiaries

Apimec

2017

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RAP for the 2017/2018 cycle of R$ 1.552 billion*

with respect to RBSE according to MME Ordinance 120/2016 ratified by ANEEL

Ratified Amount

(*) Excludes Cost of Own Capital (Ke) of the financial component.

of R$ 240 million, suspended by a preliminary injunction

Legal Suit

A preliminary injunction was issued in April 2017 by

a 1ST instance court - with respect to a law suit

taken out by ABRACE, ABIVIDRO and ABRAFE -

determining provisionally the exclusion of Ke pursuant to Law 12.783/13

ANEEL recalculated 2017/2018 RAP cycle to

exclude the value of Ke (TN 170/17)

Action is pending a ruling by a 2nd instance court

expected in November 2017

RBSE settlement: RBSE Fair Value

Management Focus: Regulatory

Trends in RBSE R$ million - baseline Dec/12

* COM and CA; reconciliation; insulator;

tunnel

Impact of R$ 489 million

1,400

3,605 3,896 4,094

291 198

Book Value ANEEL

Inspection

Report

(dec/14)

Adjustments

(*)

ANEEL Order

4036 (dec/15)

Adjustments

(*)

ANEEL Order

1484 (may 17)

Apimec

2017

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819 770 722 673 624 575 453

712 712 712 712 712 712 712

712

240 240 240 240 240 240 240

240

1.771 1.722 1.673 1.624 1.575 1.527 1.404

951

2017/2018 2018/2019 2019/2020 2020/2021 2021/2022 2022/2023 2023/2024 2024/2025

Fin

an

cia

l Co

mp

on

en

t

Financial and Monetary Restatement

Ke: cost of own capital for

compensation of the

financial component until

June 2017

Gross-up of PIS and

COFINS charges

Regulatory WACC of

6.64%

RBSE Payment

Assumptions pursuant to NORM. RES. ANEEL 762/2017 IPCA (Dec/12-Jun/17): 34.45%

WACC: 6.64%

Cost of own Capital (Ke): 10.74% (1H13) and 10.44% (Jul/13 to Jun/17)

Estimated amounts. WACC will be established as part of the tariff revision and the asset

base is subject to write-offs

Economic Component

RBSE Settlement: R$ 12 billion between 2017 and 2025

Financial Component ex-Ke Ke

R$ million net of PIS/COFINS. June 2017


Apimec

2017

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Management Focuses: Regulatory Public Hearing 041/2017 – Tariff Revision

The transmission concession agreements renewed in 2013 provide for a periodic tariff revision(PTR) in 2018

ANEEL held Public Audience Number 41 and published the following technical notes covering criteria and procedure for the PTR:

TN 118/2017 – Revision of the Regulatory Remuneration Base (RRB)

TN 160/2017 and 164/2017 – Regulatory Operational Costs

TN 161/2017 – Cost of Capital (WACC)

18 18

Proposed Regulatory Operational Costs vs. Current Regulatory Operational Costs

(Source: ANEEL TN 164/2017) R$ million

Company (principal

concession

agreement)

Scores Adjusted Scores Operational Costs

notified 2016

Current Regulatory

Operational Costs

Proposed

Regulatory

Operational Costs

Variation in

Regulatory

Operational Cost

CEMIG-GT 91.3% 106.3% 178.3 215.8 189.5 -12.2%

CTEEP 89.5% 104.1% 527.1 719.1 548.9 -23.7%

CEEE-GT 85.4% 99.4% 244.4 246.3 243.1 -1.4%

CELG G&T 72.4% 84.2% 43.1 24.3 36.3 49.4%

FURNAS 55.5% 64.6% 1.340.6 862.1 865.9 0.4%

COPEL-GT 48.5% 56.4% 179.2 164.2 101.1 -38.4%

CHESF 38.1% 44.3% 1.122.1 716.2 497.6 -30.5%

ELETROSUL 37.4% 43.6% 528.2 560.2 230.1 -58.9%

ELETRONORTE 28.3% 33.0% 929.8 388.1 306.4 -21.1%

Total 5,092.8 3,896.3 3,018.9 -22.5%

% recognized operational costs 77% 59%

Apimec

2017

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Management Focus: Regulatory Public Hearing 041/2017 – Tariff Revision

Refinement of the proposal for regulation of the transmission companies’ periodic tariff revision with respect to:

Regulatory operational revenue

Efficiency score: 104.14% (2nd in the ranking among the revised concessions)

Proposed RAP of R$ 549 million (decrease of 23.66% compared with current RAP)

WACC

Enhancement forward for calculation of auctions’ WACC were not considered

Coherence in restatement of the time series

Proposed WACC 6.27% (currently 6.64%)

19 19

Period for contributions:

1st stage: ends on 11/09/17 with contributions from the agents on the published Technical Notes

2nd stage: ends on 11/27/17 with opinions exclusively with respect to contributions received during the 1st stage of the Public Hearing

Apimec

2017

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Custo Operacional REGULATORY NT 160 e 164/2017

Mudanças de critério resultam em redução de receita.

o que não reflete patamar justo no reconhecimento de

eficiência

Assumptions of comparability: existing concessions and tendered concessions

Impact of the insertion of “forced” holdings in

comparison with existing concessions

Normalization of the sample by the 3rd quartile (efficiency score)

Arbitrated weightings for the DEA variables

Amount relative to 10% profitability, which Ministry

of Mines and Energy (MME) attributes when

extending the concessions, not considered

Adoption of US-Treasury Bond (10 years) as a risk free rate in place of NTN- B

Discrepancy between the time frame for calculating the

risk free rate and the country risk premium

Cost of debt (Kd) does not consider the all-in cost

Participation of Third Party Capital for PTR of 44.33% vs. 2.57% and 24.41% for the last auction

Inconsistent methodology in relation to segments (G. T

and D)

Tariff Revision: Critical Aspects

Regulatory Operational Cost TN160 and 164/2017

Changes in criteria result in a reduction in revenue,

which does not reflect the fair recognition of efficiency

Custo Operacional REGULATORY NT 160 e 164/2017

Mudanças de critério resultam em redução de receita.

o que não reflete patamar justo no reconhecimento de

eficiência

WACC – TN 161/2017

Non-isonomic treatment in relation to the auctions

negatively impacts the economic-financial equilibrium

of the concessions

Apimec

2017

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Management Focus: Legal Developments in the Supplementary Retirement Law 4819 and Eletrobras Case

Caso Eletrobras

On October 19, 2017, a MoU was signed between AES Eletropaulo and Eletrobras for the purpose of negotiating the parameters of an eventual agreement for concluding the legal dispute as to the responsibility for settling the balance of the loan granted by Eletrobras to AES Eletropaulo . An application was made to suspend legal proceedings for 60 days allowing the parties involved to establish the necessary procedures for negotiations pursuant to Article 16 of Law 13.140/2016.

Class Action/Public Civil Action

On August 2, 2017, a 2nd instance court handed down a unanimous ruling favorable to ISA CTEEP (3 x 0)

The preliminary injunction obliging ISA CTEEP to settle the payroll portion of the supplementary retirement plan for about 5 thousand retirees was overturned

AAFC lodged an appeal with the STJ and the STF relative to both actions (Class Action/Public Civil Action), requesting the reinstatement of the preliminary injunction obliging ISA CTEEP to process the payroll

On October 18, Public Law Court Chairman reiterated the decisions already announced, rejecting the reinstatement of the injunction. The appeals await results of an analysis of admissibility

Since August, ISA CTEEP has ceased to make payments with respect to these actions

Collection Action

On June 05, 2017, the 2nd instance

court upheld a decision favorable to

ISA CTEEP which requires the state of

São Paulo (SEFAZ) to reimburse the

amounts paid by the Company. SEFAZ

has lodged an appeal with the STJ

The total amount involved in the

action as of September 30, 2017 is R$

1,530 million (nominal value, excluding

provisions for losses of R$ 516 million

established in 2013)

Apimec

2017

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8 concessions offered in the auctions of October 2016 and April 2017, of which 5 are individual projects (100%

ISA CTEEP) and 3 are in consortium with TAESA (50%)

Construction of 10 transmission lines (1,352 km long), 9 substations (6,585 MVA) and 5 compensators

Individual projects involving ISA CTEEP alone with assets having a close geographical relationship and

potential for synergies

Projects have a high degree of contracting based on a “full turnkey” (>90%)system – agreements include

incentive and penalty fee clauses (anticipated and delayed delivery)

Challenging delivery schedule with a 12 month reduction in average term

CAPEX based on an average reduction of 15% from that stipulated in the auctions for October 2016 and April

2017

Management Focus: Growth Subsidiaries under construction

Apimec

2017

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IE Aguapeí (100%)

TL: 109 km (440 kV)

SS: 1,400 MVA

CapEx ANEEL: R$ 601,9 million

ANEEL Term : Aug/22

IE Tibagi (100%)

TL: 18 km (230 kV)

SS: 500 MVA

ANEEL Capex : R$ 134.6

million

ANEEL Term : Aug/22

ERB I (50%)

TL: 515 km (500 kV)

85 km (230 kV)

SS: 2.988 MVA

ANEEL Capex : R$ 1,936.5

million

ANEEL Term : Aug/22

IE Paraguaçu (50%)

TL: 338 km (500 kV)

SS: N/A

ANEEL Capex: R$ 341.1

million

ANEEL Term : Feb/22

IE Itaúnas (100%)

TL: 79 km (345 kV)

SS: 1.197 MVA

CE: 1


million

ANEEL Term : Fev/22

IE Itaquerê (100%)

3 Sychron. Comp

(SS Araraquara)

ANEEL Capex : R$ 397.7 million

ANEEL Term : Aug/22

IE Itapura (100%)

1 Static Comp.

(SS Bauru)

ANEEL Capex: R$ 125.8

million

ANEEL Term : Feb/22

IE Aimorés (50%)

TL: 208 km (500 kV)

SS: N/A


million

ANEEL Term : Feb/22

Substation

Transmission Lines

Line Entrance

Compensator (Static/Synchronous)

Installation Types

Shareholding Breakdown

Controlled (100% ISA CTEEP)

Jointly Controlled (in consortium with

TAESA)

Subsidiaries under construction: location Management Focus: Growth

Apimec

2017

24

498

399 897

ISA CTEEP’s success

in the last two

transmission line

auctions has been

instrumental in

capturing projects

which represent

growth of

30% to 40% in the

asset base,

with expansion of

80% in current RAP

of the operating

subsidiaries

Capacity MVA

Investment R$ million

RAP R$ million

8,883

+39%

2,508

6,375

22,335

+42% 15,750

6,585

Oct/16

Apri/17

Auctions Operational

+80%

Total

Management Focus: Growth

Subsidiaries

Length of Lines KM

1,352

+30%

5,856

4,504

Oct/16

Apr/17

Auctions Operational Total

Oct/16

Apr/17


Oct/16

Apr/17


Apimec

2017

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Auction 02/2017 Management Focus: Growth

ANEEL will hold a transmission line auction 002/2017 on December 15 with the following characteristics:

11 lots offered

4,919 km of transmission lines and switchgear

10,416 MVA of transformation capacity

ANEEL investment estimated at R$ 8.7 billion with maximum RAP at R$ 1.5 billion

(RAP/Capex ANEEL de 17.5%)

Time frame for entry into operation varies between 36 and 60 months

Locations: North, Northeast and Southeast (PR and MG)

Signature of agreement on March 09, 2018

On October 9, 2017, the Board of Directors approved the ISA CTEEP’s participation on an individual and/or

consortium basis

Apimec

2017

26

Market Opportunities

Participation in auctions on an individual or consortium basis.

Investment in reinforcements and improvements to the existing network

Consolidation

Investment in organic and inorganic

projects

Participation in possible asset sale 24

18

26

26

7

42

9

13/14 12/13

19%

Total

36%

+45%

Next Bidding

Rounds

17/18

35

16/17

Mapped Future Projects Revenue Indemnification

Development of the Transmission Market Total Annual Revenue. R$ billion for Sep/17

Next bidding rounds: 2017-2022 Source: Ministry of Mines and Energy(PET/PELP Mar/17)

Line Extension

Substations (new and expansions)

21,503 km

54 SS´s (~20,000 MVA)

R$ 25.9 billion

R$ 13.0 billion

R$ 38.9 billion

Management Focus: Growth

Apimec

2017

27

ISA CTEEP 4.0

Apimec

2017

28

ISA CTEEP 4.0: beyond the present Innovation

Apimec

2017

28 28

Modernization

of the network

Real Estate

Equity

New Business

Models

Energy Storage Distributed

Generation

Apimec

2017

29

Beyond the present, sustainability and proposition Jaguar Connection

Forestry Projects which reduce the

greenhouse gas effect

Mitigate climate changes

Conservation of the biodiversity of the

corridors for the jaguar

Issue of carbon credit certificates

The jaguar has a key ecological role in the

equilibrium of the ecosystem – its extinction

would impact biodiversity and water sources

By 2020, ISA CTEEP will be carbon neutral

29 29

Apimec

2017

30

Beyond the presente, sustainability and propostion Tax break proiects*

30 30

Hospital de Câncer de Barretos

Institución beneficia 192 niños y

adolescentes con 2.400 sesiones

de radioterapia en el periodo de

un año

Asistencia pública de 6 mil

atendimientos por día. El

patrocinio aporta a millares de

personas con el tratamiento

humanizado Graacc – Grupo de Apoio ao

Adolescente e a Criança com Câncer

Public assistance for 6 thousand consultations per day. Sponsorship provides thousands of people with humanized treatment

Graacc – Support Group for the

Adolescent and the Child with Cancer

Barretos Cancer Hospital

The institution benefits 192 childredn and adolescents with 2,400 sessions of radiotherapy annually

Guri Santa Marcelina

Support for the Guri Santa Marcelina project which promotes socio-cultural inclusion through the teaching of music to children and adolescents from low income communities with the donation of 445 musical instruments and equipment used in 32 teaching centers and three Guri Project groups *Rouanet Law, Audiovisual Law, Senior

Citizens Law, FUNCAD and BNDES

Apimec

2017

31

Beyond the presente, sustainability and proposition Tax break projects*

31 31

Hospital de Câncer de Barretos

Institución beneficia 192 niños y

adolescentes con 2.400 sesiones

de radioterapia en el periodo de

un año

Asistencia pública de 6 mil

atendimientos por día. El

patrocinio aporta a millares de

personas con el tratamiento

humanizado Graacc – Grupo de Apoio ao

Adolescente e a Criança com Câncer Production of content on the electrical sector

32nd São Paulo Biennial of Art

Sponsorship of the 32nd São Paulo Biennial of Art with itinerant activities

in 12 Brazilian and three overseas

cities, among them, Colombia, with

an exhibition in the Modern Art

Museum of Bogota

Sponsorship of documentary films, the National Space Research Institute’s “Threats from the Sky” and the Acende Brazil Institute’s “On the Trail of Energy II”

*Rouanet Law,Audiovisual Law, Senior Citizens

Law, Funcad and BNDES

Apimec

2017

32

Financial Inform

Apimec

2017

33

Full recognition of the impacts of the RAP 2017/2018 cycle in 3Q17

Highlights of 3Q17

33 33

RAP 2017/2018

Cycle

IENNE

Debt

Initiation of the RBSE RAP receivables cycle, excluding the cost of capital

parcel (Ke), with an impact of R$ 365.2 million in 3T17 RBSE

4819 As from August, ISA CTEEP ceased payroll processing of the supplementary

retirement benefits for AAFC retirees, SEFAZ assuming this function in full

Funding of R$ 160 million under Law 4131/1962 parameters at 101.4% of CDI, maturing in July 2018

Conclusion of the acquisition of 100% of the shares of the capital stock of IENNE and consolidation in the balance sheet as from September

Financial

Result Agreement to the PERT – Special Tax Regularization Program, impacting financial revenue by R$ 50.9 million due to the reduction in fines and interest (REFIS)

Apimec

2017

34

Regulatory vs IFRS Income Statement

Revenue: IFRS includes revenue from infrastructure and concession assets. Regulatory takes into account RAP income

Deductions: in line with revenue

Costs: IFRS includes costs of infrastructure

Depreciation: IFRS shows no PPE. Regulatory includes the start of depreciation of the RBSE assets

Equity Income: booking of infrastructure revenue and concession assets

Other revenues (expenses): recognition of 75% stake in IENNE

IT/CSLL: proportional to earnings

34 34

IS Consolidated IFRS vs. Regulatory

Regulatory IFRS Adjustment

s

3Q2017 3Q2017 R$ million

Gross Operating Revenue 622.2 829.4 -207.2

Infrastructure Revenue - 58.7 -58.7

O&M Revenue 251.1 167.4 83.7

Concession Asset Revenue - 179.6 -179.6

RBSE Revenue 365.2 417.8 -52.6

Other revenue 5.9 5.9 0.0

Deductions -70.9 -85.3 14.4

Net Operating Revenue 551.3 744.1 -192.8

Cost of Infrastructure - -53.6 53.6

Cost of O&M and General Expenses

-114.1 -114.5 0.4

Gross Profit 437.2 576.0 -138.8

Depreciation -148.0 -2.5 -145.5

Equity Income 4.4 45.9 -41.5

Other operating income (expenses) 32.5 -1.7 34.2

Result pre-Financial Result and Tax

326.1 617.7 -291.6

Financial Result 21.9 21.9 0.0

Earnings before IT & CSLL 347.9 639.5 -291.6

IT & CSLL -117.0 -185.3 68.3

Net Income 230.9 454.2 -223.3

Apimec

2017

35

710.9

1,552.4

ReforçosMelhorias

41.3

Inflação

30.0

RAP 16/17

833.8

122.9

RAP 17/18Ciclos Futuros

RAP 17/18

735.9

168.9

1,552.4

RBSE

-29.5

735.9

168.9

1,552.4

RAP 17/18Ciclos Futuros

2,536.6

PA Expansão

108.9

1,552.4 1,552.4

RAP Cycle 2017/2018 R$ million

35 35

23.0 1.7 12.7

0,0 615.3

--35.6 650.9

638.9

6,2 1.3

0.0

RAP 17/18 Future Cycles

184.8

Adjust. Parcel

Expansion Periodical tariff reset

-13.2 198.0

Upgrades Improvements

Inflation RAP 16/17

193.1

IPCA: 3.6% IGPM: 1.6%

RAP NI

RAP O&M

RAP RBSE

2.457,2

ISA

CT

EE

P

Su

bsid

iari

es

Jo

intl

y C

on

tro

lle

d

Su

bsid

iari

es

Incl

udes

IEN

NE

1.552,4 1.552,4

RAP 17/18

RBSE

RAP RBSE

RAP NI

RAP O&M


Adjust. Parcel

Expansion Periodical tariff reset

Upgrades Improvements

Inflation RAP 16/17 RAP 17/18


Adjust. Parcel

Expansion Upgrades Improvements

Inflation RAP 16/17 RAP 17/18

Apimec

2017

36

Consolidated Gross Revenue R$ million

36 36

REGULATORY

Impact on revenue of R$ 365.2 million from RBSE RAP

Adjustments to 2017/2018 RAP cycle

Monetary restatement

Negative Adjustment Portion (PA) of R$ 42.7 million, recognized in full in Jul/17

132 Projects with an investment of R$ 107.5 million and RAP of R$ 30.5 million, energized since Jan/17

Initial RBSE RAP

receivables

31.4 .101.7 107.2 6.8

6.9

365.2

365.2

53.6

104.7

138.7

176.1

168.8 582.9

607.8

27.7

622.2

809.3

3Q17

20.0 22.0

9M16

+53%

+144%

1,240.9

9M17 3Q16

255.2

40.9

Others Subsidiaries RBSE NI RAP O&M RAP

Apimec

2017

37

Net Revenue R$ million

37 37

REGULATORY

Impact on net revenue of R$ 326.1 million from RBSE RAP

PIS/COFINS and sectoral charges of R$ 39.1 million resulting from initial payments of RBSE RAP receivables

Initial RBSE RAP

receivables

70.9

365.2 326.1

189.2

229.3

200.6

24.6

Net

Revenue

3Q17

28.5

Net

Revenue

3Q17

622.2

27.7

Deductions Gross

Revenue

3Q17

Subsidiaries RBSE Controlling C

551.3

+153

217.7

Apimec

2017

38

O&M Costs and General Expenses ex- Depreciation R$ million

38 38

REGULATORY

Collective bargaining agreement in August/17 of 3.6%

Changes to organizational structure

Readjustments in Board compensation

Reversal of provisions for civil actions following favorable legal rulings with a reduction in amounts and revision of amounts relative to expected outcome for pending processes

Reversal of contingency

expenses

-8.7 -20.4

1.2 5.9 22.6

41.7 42.0 31.5 30.1

80.8 78.4

3.1

71.1 72.3

214.8 196.4

-2%

-9%

9M17

339.9

5.3 8.7

9.1

9M16

347.8

8.3

3Q17

114.1

10.9

3.6

3Q16

125.5

5.1 13.5

Subsidiaries Contingencies Others Services Material Personnel

Apimec

2017

39

Financial Result R$ million

39 39

REGULATORY

Initial RBSE receivables

Interruption of payroll processing under Law 4819 as from August

Reduction of interest and charges on debentures

Signing up to PERT with positive impact on interest of R$ 50.9 million

-5.4 -6.1 -21.6 -22.4

-32.6 -25.7

7.8 10.7

56.7

32.3

63.4

57% 186%

9M17

-33.9

0.7

-78.8

-4.6

9M16

-79.4

4.8

-0.7

-94.2

3Q17

21.9

0.6 1.0

-4.6

3Q16

-25.4

2.6

-0.7

Subsidiaries Interest/Charges on debt

SWAP operation

Net monetary restatement

Income from Investments/interest Others

Apimec

2017

40

Equity Income R$ million

40 40

REGULATORY

Periodic Tariff Revision

IE Garanhuns

Adjustment of the 2017/2018

RAP cycle with monetary restatement of R$ 23 million

Positive impact on the financial result of IE Madeira due to reduction in debt servicing

Tariff Revision Garanhuns (WACC from 6.61% to 4.62%). With a negative impact on RAP of R$ 12.7 million

-1.0 -2.7

-1.0 -0.9

4.6

1.4

9.2

12.1 4.0

4.7

10.8 6.6

-3%

-45%

9M17

16.8

9M16

17.3

3Q17

4.4

-0.7

3Q16

8.0

-0.6

Aimorés/Paraguaçú/ ERB1 IENNE/IESUL Garanhuns Madeira

Apimec

2017

41

Net Income R$ million

41 41

REGULATORY

Growth of profit from RBSE

Increase in net income with settlement of initial RBSE receivables (R$ 132.7 million)

Adjustment of the 2017/2018 RAP cycle

Reversal of contingency expenses (R$ 8.2 million)

Recognition of result following acquisition of 75% of IENNE (R$ 38.4 million)

Company signs up to PERT (R$ 50.9 million)

19.8 38.4

38.4

50.9 50.9

132.7 132.7

46.4

185.6

157.2

+115%

+398%

399.0

230.9 0.8

8.1

Contingencies RBSE PERT IENNE Current

3Q16 3Q17 9M16 9M17

Apimec

2017

42

Cash Flow

RAP receivables: Consider RBSE RAP of R$ 228.6 million for August and September 2017

Others: Rendering of services and sharing of infrastructure

PMTO: payroll expenditures, MSO, legal executions and escrow deposits

Charges: RGR, CCC, CDE, Proinfa, R&D and inspection fees

Taxes: IT/CSLL, PIS and COFINS and others, being R$ 91.6 million for the receipt of the RBSE

Investments: CAPEX

Financing: debt servicing and issue of debentures

Dividends: payment of dividends for fiscal years 2016 and 2017

SEFAZ – Law 4819: difference not reimbursed by SEFAZ

42 42

Company Consolidated

9M17 9M17

Opening Cash Balance Dec-16 1.6 4.5

Operating Activities

RAP receivables 952.4 1065.6Others 33.4 36.9PMSO -366.7 -387.7

Charges -33.5 -37.8Taxes and fees -250.1 -257.5

Cash generation from operating activities 335.4 419.5

Investment Activities

Dividends received 45.7 0.0Investments in infrastructure -157.6 -159.2

-68.4 -68.4Movement in financial investments -269.5 -275.1Others 0.0 0.5

Cash generation from investment activities -449.8 -502.1

Financing activities

New Loans 594.5 594.5Loan payments (principal and interest) -77.0 -108.1Dividends paid -271.7 -271.7

Payment State Law 4819/58 -125.9 -125.9

Closing Cash Balance (Sep/2017) 119.9 88.7

Final cash balance (Sep-17) 7.1 10.7

Cash Flow

R$ million

Apimec

2017

43

Consolidated EBITDA ICVM 527/2012

43 43

EBITDA (R$ million) 9M16 9M17 9M16 9M17

EBITDA ex-RBSE 368.9 462.8 767.2 630.8

EBITDA Margin ex-RBSE 52.8% 61.2% 78.9% 62.5%

EBITDA (R$ million) REGULATORY IFRS

3Q16 3Q17 3Q16 3Q17

Net Profit (loss) 46.4 230.9 4,536.3 454.3

Income taxes (IT/CSLL) 13.0 117.0 2,192.8 185.3

Net financial result 25.4 (21.9) 25.4 (21.9)

Depreciation and amortization 16.0 148.0 2.9 3.1

EBITDA ICVM 527/12 100.7 474.1 6,757.3 620.9

EBITDA Margin ICVM 527/12 46.3% 86.0% 100.3% 83.4%

RBSE - 326.1 6,316.0 379.1

EBITDA ex-RBSE 100.7 148.0 441.3 241.7

EBITDA Margin ex-RBSE 46.3% 65.7% 105.6% 66.2%

Apimec

2017

44

Financial Covenants R$ million

Net Debt/Adjusted Ebitda 3.5 Adjusted Ebitda/Financial Result 1.5

*excludes prinicipally the effects of IFRS but

considers invoicing (RAP) and consolidates

jointly-owned subsidiaries weighted

according to percentage stake

*includes equity income and other operating revenues

(expenses)

** includes debt servicing charges and excludes income

from financial investments

* Excludes principally the effects of IFRS but

considers sales of services (RAP)

**financial revenue/financial expense

Net Debt 09/30/2017 (consolidated with jointly-owned subsidiaries)

2,414

Adjusted Ebitda* last 12 months 1,101

Net Debt/Adjusted Ebitda 09/30/2017

2.2


3.1

09/30/2017 11,291

Net Debt / Net Debt + SE 09/30/2017

0.18

Net Debt / Net Debt +SE 09/30/2016

0.17

Net Debt 09/30/2017 1,131

Adjusted Ebitda* last 12 months 1,989


0.57


0.09

Financial Result** 09/30/2017 75

Adjusted Ebitda /Financial Result 26.70


Net Debt 09/30/2017 1,771

Adjusted Ebitda* last 12 months 874


2.03


1.59

Financial Result** 09/30/2017 64



BNDES 2017 (annual verification)

Net Debt/Adjusted EBITDA ≤ 3.5

Net Debt + Net Debt/SE ≤ 0.6

Simple Debentures

(quarterly verification)

Debêntures Infraestrutura

(quarterly verification)

Net Debt/Adjusted Ebitda ≤ 3.5

Adjusted Ebitda/Financial Result ≥ 3.0

Net Debt/Adjusted Ebitda < 3.5

Adjusted Ebitda/Financial Result > 1.5

Apimec

2017

45

Consolidated Debt

45 45

Loans and Financing 3Q17 2016

Gross Debt 1,771.2 1,010.4 75.3%

Short Term 468.9 264.0 77.6%

Long Term 1,302.3 746.4 74.5%

Cash & Cash Equivalents ISA CTEEP and Wholly-Owned Subsidiaries

443.1 161.9 173.7%%

Net Debt ISA CTEEP and Wholly-Owned Subsidiaries

1,328.0 848.4 56.5%

Cash & Cash Equivalents Jointly-Owned Subsidiaries

196.6 178.7 10.0%

Consolidated Net Debt 1,131.5 669.8 68.9%

Funding of R$ 300 million in Infrastructure Debentures at a cost of IPCA + 5.0373%

Funding of R$ 134.0 million with BNDES

Funding of R$ 160 million under Law 4131/1962

Settlement of R$ 101 million for the acquisition of IENNE

Settlement of R$ 273 million in dividend Payments to the shareholders

R$ million

Apimec

2017

46

Aquisition of IENNE: Impact on IFRS R$ million

46 46

Settlement of R$ 68.5 million made on September 15 for the acquisition of the 50% stake (Isolux)

Conclusion of the acquisition on October 5 with payment of R$ 32.7 million (CYMI)

Impact of R$ 4.2 million for the recognition of the acquisition of 75% of the capital stock of IENNE

Acquisition of IENNE

75% stake acquired 159.2

Amount paid (101.2)

Negative Goodwill 58.0

Loss on acquisition of the control of

IENNE (53.8)

Final Result 4.2

Apimec

2017

47

Capital Markets Performance

ISA CTEEP’s Market Capitalization on 09/30/2017 was R$ 10.7 billion

Average daily trading volume in 2017 was R$ 24.7 million

Daily average of 2,052 transactions in 2017 with trading on every day the stock

market was open for business

15 institutions provide coverage of TRPL4, with 53% recommending a BUY

Closing price of TRPL 4 in

3Q17 was R$ 68.32

-20%

-10%

0%

10%

20%

30%

Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17

TRPL3 TRPL4 IBOVESPA IEEX

14.4%

23.4%

5.3%

1.7%

Apimec

2017

48

Consensus

Hold Buy

66,00

68,00

70,00

72,00

74,00

76,00

78,00

80,00

82,00

84,00

Itaú BBA

Bradesco

Credit Suisse

Br Plural

Eleven

Targ

et

Pri

ce

R$

BofA

BB

HSBC

Santander

BTG Pactual

UBS

Safra

J.P. Morgan

Citi

G. Sachs

Sell

Coverage Target Price

(12 m) Rating

Most recente

updating

UBS R$ 77.00 Buy 09/28/2017

Brasil Plural R$ 81.00 Buy 09/22/2017

Eleven Financial R$ 84.00 Buy 09/19/2017

JP Morgan R$ 80.00 Hold 08/31/2017

Goldman Sachs R$ 80.00 Buy 08/18/2017

Itaú R$ 68.00 Hold 08/02/2017

BTG Pactual R$ 75.00 Buy 08/02/2017

Banco do Brasil R$ 69.50 Buy 08/02/2017

BofA-Merrill Lynch R$ 75.00 Hold 08/02/2017

HSBC R$ 78.00 Buy 08/02/2017

Citibank R$ 76.40 Buy 08/01/2017

Safra R$ 72.60 Hold 08/012017

Santander R$ 68.94 Hold 08/01/2017

Bradesco R$ 82.00 Hold 07/16/2017

Credit Suisse R$ 77.00 Hold 04/11/2017

48 48

Apimec

2017

49

Disclaimer

The statements in this report with respect to the businesses of the Company, the

forecasts and results and its growth potential, constitute mere predictions and

were based on expectations on the part of management in relation to the

Company’s future.

These expectations are highly dependent on alterations in the market, the

overall general economic performance of the Country, of the sector and

international markets, these being subject to changes.

Apimec

2017

50

www.isacteep.com.br/ri

Thank you

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