FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of August 2002
ESPIRITO SANTO CENTRAIS ELETRICAS S.A. - ESCELSA
Rua Sete de Setembro, 362
Vitoria, Espirito Santo, Brazil 29015-000
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F. Form 20-F X Form 40-F
----- -----
Indicate by check mark whether the registrant by furnishing information
contained in this Form is also thereby furnishing information to the Commission
pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes No X
----- -----
If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b): 82-___________________.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this current report to be signed on its behalf by
the undersigned, thereunto duly authorized.
ESPIRITO SANTO CENTRAIS ELETRICAS S.A. - ESCELSA
(Registrant)
Date: August 22, 2002 By: /s/ Sergio Pereira Pires
--------------------------------
Name: Sergio Pereira Pires
Title: Chief Financial Officer
EXHIBIT INDEX
-------------
1. Condensed Consolidated Financial Information of the Company at June 30,
2002 and 2001 and Report of Independent Accountants, dated August 14,
2002.
EXHIBIT 1
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002
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(Convenience Translation into English from the Original Previously Issued in
Portuguese)
ACCOUNTANTS' REVIEW REPORT
To the board of Directors and Shareholders of
Espirito Santo Centrais Eletricas S.A. - ESCELSA
Vitoria - ES
1. We have performed a special review of the Quarterly Information (ITR)
of Espirito Santo Centrais Eletricas S.A. - ESCELSA and subsidiaries
(parent company and consolidated) for the quarter and the semester
ended June 30, 2002, prepared under the responsibility of the Company's
management, in accordance with accounting practices established by the
Brazilian Corporate Law, comprising the balance sheets, the related
statements of income and the reports on performance.
2. Our review was performed in accordance with standards established by
the Brazilian Institute of Independent Auditors - IBRACON, in
conjunction with the Federal Accounting Council, and consisted
principally of: (a) inquiries and discussions with the Company's
management responsible for the accounting, financial and operational
areas of the Company and its subsidiaries, as to the criteria adopted
in preparing Quarterly Information; and (b) a review of the information
and subsequent events that had or could have material effects on the
financial position and results of operations of the Company and its
subsidiaries.
3. Based on our review, we are not aware of any material modifications
that should be made to the Quarterly Information referred to in
paragraph 1 in order for it to be in accordance with the accounting
practices established by the Brazilian Corporate Law and the standards
issued by the Brazilian Securities and Exchange Commission specifically
applicable to the preparation of Quarterly Information.
4. Previously, we reviewed the balance sheets (parent company and
consolidated) related to March 31, 2002, and issued our accountants'
review report dated May 14, 2002, containing an emphasis paragraph
related to the matter mentioned in paragraph 5. The statements of
income (parent company and consolidated) for the quarter and the
semester ended June 30, 2001, presented for comparative purposes, were
reviewed by other independent auditors, who issued their accountants'
review report thereon dated July 27, 2001 containing an emphasis
paragraph related to the assets and liabilities relating to the sales
and purchases of electric power in the Electric Power Wholesale Market
(MAE), which amounts were recorded based on preliminary information
released by the Electric Power Wholesale Market Services Administrator
- ASMAE.
5. On December 21, 2000 Provisional Measure (Executive Order) no. 14 was
issued, and converted into Federal Law no. 10.438 on April 26, 2002,
providing, amongst other matters, for the reestablishment of the
financial-economic equilibrium of the electric power distribution
companies, as guaranteed in the concession agreements. The detailed
information and the effects of this Law on the financial position and
the results of the operations are disclosed in Notes 5 and 7 to the
quarterly information. The amounts of this recovery will be realized
through extraordinary tariff increases. These amounts are in process of
approval by the National Electric Energy Agency - ANEEL.
6. As mentioned in Notes 5 and 12 to the quarterly information, the
Company has recorded, as of June 30, 2002, in current assets, accounts
receivable in the amount of R$37,288 thousand (R$65,016 thousand
consolidated) and, in current liabilities, accounts payable in the
amount of R$22,794 thousand (R$35,073 thousand consolidated), relating
to electric power sales and purchases operations conducted in the
Electric Power Wholesale Market - MAE, based on preliminary information
released by MAE and/or based on management estimates. These amounts,
related to the period from September 1, 2000 to June 30, 2002, are
pending of approval from MAE and subsequent settlement.
August 14, 2002
/s/ Deloitte Touche Tohmatsu
DELOITTE TOUCHE TOHMATSU Celso de Almeida Moraes
Auditores Independentes Contador
CRC-SP 11.609-S/RJ CRC-SP 124.669-S/ES
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1
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002
- --------------------------------------------------------------------------------
(Convenience Translation into English from the Original Previously Issued in
Portuguese)
SECOND QUARTER 2002 HIGHLIGHTS
Electric energy sales in the first half of 2002 totalized 3,058,198 MWh, 11.5%
lower than the 3,460,819 MWh sold in the same period in 2001. This decrease
demonstrates that even with the end energy rationing in Brazil, consumption
levels are recovering slowly, mainly among residential customers that adopted
new usage habits that effectively reduced consumption
As per the General Agreement for the Electric Energy Sector as well as criteria
established in ANEEL Resolutions 031 and 078 of 01/24/2002 and 02/07/2002,
respectively, ESCELSA recognized revenue of R$ 209,640 thousand related to 2001
and R$ 25,921 thousand related to 2002 - a total of R$ 235,561 thousand - as
extraordinary tariff adjustments (Regulatory Asset). These amounts are subject
to approval by ANEEL, which is expected by August 31, 2002.
Based on newly available information, ESCELSA recalculated losses incurred
during rationing, resulting in a cross-entry to revert operating revenue of
R$33,218 thousand. The regulatory asset position on June 30, 2002 was follows:
- --------------------------------------------------------------------------------
Operating Financial PIS AND Current and
Revenue Revenue COFINS Non-current
TAXES asset
recognition
- --------------------------------------------------------------------------------
Losses recognized on 12/31/2001 209,640 2,980 212,620
Losses in January and February
2002 25,921 25,921
Indexation by SELIC 10,858 10,858
Adjustment to losses (33,218) (33,218)
Recovered by rate adjustments (22,470)
Pis and Cofins taxes 357 357
- --------------------------------------------------------------------------------
TOTAL 202,343 10,858 3,337 194,068
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2
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
ESCELSA' s NUMBERS
- ---------------------------------------------------------------------------------------------------------------------------
PARENT COMPANY CONSOLIDATED
---------------------------------------------------------------
First Half
---------------------------------------------------------------
2002 2001 2002 2001
- ---------------------------------------------------------------------------------------------------------------------------
FINANCIAL INFORMATION (thousands of reais)
Gross operating revenues 521,267 489,617 776,263 750,654
Net operating revenues 371,345 351,582 566,826 553,817
Operating income 24,900 10,764 28,294 31,714
Loss for the period (174,368) (92,225) (174,368) (92,225)
EBITDA 53,243 38,252 88,206 84,806
Adjusted EBITDA (2) 114,207 113,129 180,361 171,726
Total assets 2,633,001 2,513,403 3,561,715 2,941,420
Shareholders' equity 559,437 683,693
Number of shares 4,550,833 4,550,833
Book value per thousand shares (in Reais) 122.93 150,23
Common stock price per thousand shares
at half-year end (in Reais) 72.89 94.97
Market capitalization 331,710 432,193
INDICATORS
Operating margin (%) 6.71 3.06 4.99 5.73
EBITDA margin (%) 14.34 10.88 15.56 15.31
Energy losses (%) (1) 11.71 9.59
DEC - Equivalent outage duration per
customer (hours)(*) (1) 14.99 14.57
FEC - Equivalent outage frequency per
customer (times)(*) (1) 11.23 12.17
TMA - Average service response time
(minutes)(*) (1) 109 108
Number of customers per employee(*) 678 603 634 576
MARKET
Maximum demand - MWh/h(*) 1,077.5 1,138.1
Energy sales - MWh(*) 3,058,198 3,456,347 4,409,683 4,943,438
Number of customers(*) 939,961 878,574 1,528,457 1,429,093
Average tariff to final customers -
R$/MWh(*) (3) 132.97 108.41
Average cost of energy bought -
R$/MWh(*) (3) 78.25 66.79
HUMAN RESOURCES
Number of employees(*) 1,386 1,456 2,410 2,515
Number of trainees(*) 87 85 108 108
Personnel expenses (thousands of reais) 29,699 31,595 54,269 54,123
Notes:
(1) Period of 12 months
(2) Ebitda + Financial revenues + Non-operating income (losses)
(3) Period of 6 months
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(*) Non revised by Independent Accountants
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3
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002
- --------------------------------------------------------------------------------
MARKET PERFORMANCE
ENERGY REQUIREMENTS
Energy required for the first half of 2002 totalized 3,537,726 MWh, representing
a decrease of 7.0% when compared to 3,805,237 MWh in the same period last year.
In order to satisfy market demand, the Company generated 588,481 MWh and
purchased 1,954,134 MWh from Furnas and Rosal, 864,033 MWh from Itaipu and
51,640 from other companies. In addition, 79,438 MWh, generated by
self-producers was transported on ESCELSA's system.
The maximum demand during the first half of 2002 was 1,077.5 MWh/h, compared to
1,138.1 MWh/h in the same period last year
Sources (*) Uses(*)
- ------------------------------ ------------- -----------------------------
Self Generation Wholesale
16.6% 4.3%
588,481 MWh 151,091 MWh
- ------------------------------ -----------------------------
- ------------------------------ -----------------------------
Purchased from FURNAS Retail
and Rosal 55.2% 82.2%
1,954,134 MWh 2,907,107 MWh
- ------------------------------ -----------------------------
- ------------------------------ -----------------------------
Purchase from ITAIPU ENERGY Losses and differences
24.4% REQUIREMENTS 11.2%
864,033 MWh 3,537,726 MWh 400,090 MWh
- ------------------------------ -----------------------------
- ------------------------------ -----------------------------
Purchase from OTHER Transport of Energy
1.5% 2.3%
51,640 MWh 79,438 MWh
- ------------------------------ -----------------------------
- ------------------------------
Transport of Energy
2.3%
79,438 MWh
- ------------------------------ -------------
(*) Not reviewed by independent auditors
ENERGY SOLD
Energy sold totalized 3,058,198 MWh during the first half of 2002, representing
a decrease of 11.5% when compared 3,460,819 MWh in the same period last year.
The reduction in sales was a result of the Energy Rationing Plan, implemented on
June 4, 2001, which caused a reduction in sales in all consumer segments,
particularly in the residential segment.
Energy sales per consumer segment was as follows (not reviewed by independent
auditors):
- ----------------------------------------------------------------------------------------------------------------------------
MWh
- ----------------------------------------------------------------------------------------------------------------------------
PARENT COMPANY CONSOLIDATED
-----------------------------------------------------------------------------------------------
First Half First Half
---------------------------- % Change ----------------------------- % Change
2002 2001 2002 2001
- ----------------------------------------------------------------------------------------------------------------------------
Retail:
Residential 574,031 733,424 (21.7) 1,001,615 1,240,230 (19.2)
Industrial 1,533,620 1,651,913 (7.2) 1,857,634 1,967,589 (5.6)
Commercial 421,911 462,154 (8.7) 685,516 761,631 (10.0)
Rural 150,010 199,753 (24.9) 285,983 337,065 (15.2)
Other 227,535 253,865 (10.4) 415,183 469,322 (11.5)
- ----------------------------------------------------------------------------------------------------------------------------
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4
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002
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2,907,107 3,301,109 (11.9) 4,245,931 4,775,837 (11.1)
Wholesale 151,091 155,238 (2.7) 163,752 167,601 (2.3)
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL 3,058,198 3,456,347 (11.5) 4,409,683 4,943,438 (10.8)
- ----------------------------------------------------------------------------------------------------------------------------
CUSTOMER PROFILES
The customer breakdown in terms of sales volume and revenue changed
significantly among the residential and industrial segments, due mainly to the
effects of rationing.
In calculating the breakdown of energy sold, the impacts from the regulatory
asset and short-term sales were not considered.
- --------------------------------------------------------------------------------
PARENT COMPANY
---------------------------------------------------
First Half of 2002 First Half of 2001
---------------------------------------------------
As a % of As a % of As a % of As a % of
Sales Volume Revenues Sales Volume Revenues
- --------------------------------------------------------------------------------
Retail:
Residential 18.77 32.37 21.19 36.32
Industrial 50.15 36.01 47.73 33.45
Commercial 13.80 18.41 13.35 17.17
Rural 4.91 3.96 5.77 4.51
Other 7.44 7.05 7.34 6.67
- --------------------------------------------------------------------------------
95.06 97.81 95.39 98.12
Wholesale 4.94 2.19 4.61 1.88
- --------------------------------------------------------------------------------
Total 100.00 100.00 100.00 100.00
- --------------------------------------------------------------------------------
(*) Not reviewed by independent auditors
NUMBER OF CUSTOMERS
The number of customers on June 30, 2002 totaled 939,961, an increase of 7.0%
compared to the same period last year.(*)
During the first six months of 2002, 17,382 customers were connected.
- ----------------------------------------------------------------------------------------------------------------------------
PARENT COMPANY CONSOLIDATED
-----------------------------------------------------------------------------------------------
June 30, June 30,
---------------------------- % Change ----------------------------- % Change
2002 2001 2002 2001
- ----------------------------------------------------------------------------------------------------------------------------
Retail:
Residential 745,613 700,694 6.4 1,229,147 1,156,117 6.3
Industrial 11,035 10,581 4.3 15,727 15,214 3.4
Commercial 83,298 76,698 8.6 134,904 124,842 8.1
Rural 91,057 82,057 11.0 133,449 118,381 12.7
Other 8,956 8,542 4.8 15,225 14,534 4.8
- ----------------------------------------------------------------------------------------------------------------------------
939,959 878,572 7.0 1,528,452 1,429,088 7.0
Wholesale 2 2 - 5 5 -
- ----------------------------------------------------------------------------------------------------------------------------
Total (*) 939,961 878,574 7.0 1,528,457 1,429,093 7.0
- ----------------------------------------------------------------------------------------------------------------------------
(*) Not reviewed by independent auditors
AVERAGE TARIFF
The average tariff charged to retail customers in June 2002 was R$ 128.92/MWh,
while the wholesale rate to other distributors was R$ 69.24/MWh, resulting in an
overall average tariff of R$ 126.09/MWh, an increase of 14.9%, compared to the
same period last year.
The average tariffs per segment are as follows: (*)
- ---------------------------------------------------------------------------------------------------------------
R$/MWh
----------------------------------------------------------------------------------
PARENT COMPANY
----------------------------------------------------------------------------------
JUN-2002 JUN-2001 % Change 1H 2002 1H 2001 % Change
----------------------------------------------------------------------------------
Retail:
Residential 206.35 181.59 13.6 216.67 181.38 19.5
Industrial 91.87 78.10 17.6 91.97 72.89 26.5
- ---------------------------------------------------------------------------------------------------------------
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5
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Commercial 172.85 135.56 27.5 171.08 134.62 27.1
Rural 128.97 106.16 21.5 128.88 103.80 24.2
Other 129.74 103.44 25.4 129.69 102.05 27.1
- ---------------------------------------------------------------------------------------------------------------
128.92 110.55 16.6 132.97 108.41 22.7
Wholesale 69.24 60.99 13.5 67.47 62.45 8.0
- ---------------------------------------------------------------------------------------------------------------
Average Tariff (*) 126.09 109.75 14.9 129.73 108.03 20.1
- ---------------------------------------------------------------------------------------------------------------
(*) Not reviewed by independent auditors.
QUALITY OF SERVICE RENDERED
The main indicators used by the energy sector to measure the quality of service
rendered showed the following performance:
Average Service Response Time - TMA is an indicator that measures the
average time between a complaint of interruption in energy and the
re-establishment.
For the 12-month period ended June 30, 2002, TMA was 109 (*) minutes
compared to 108(*) minutes for the same period in the previous year, an
increase of 1.0%(*).
Equivalent Outage Duration per Customer - DEC measures the average
number of hours that each customer remains without the supply of energy.
For the 12-month period ended June 30, 2002, DEC was 14.99(*) hours,
compared to 14.57(*) hours in the previous year, an improvement of
2.9%(*).
Equivalent Outage Frequency per Customer - FEC indicates the average
number of interruptions in energy service per customer.
For the period ended June 30, 2002, FEC was 11.23(*) compared to
12.17(*) for the same period the previous year, an improvement of
7.7%(*).
(*) Not reviewed by independent auditors.
ENERGY LOSSES
Energy losses increased from 9,59% in the twelve-month period ended June 30,2002
to 11,71% in the same period this year. This increasing is due to the energy
rationing, as the reduction in sales was not necessarily followed by a reduction
in energy losses, especially commercial losses. Since the end of the rationing
(March, 2002) losses have been decreasing.
FINANCIAL PERFORMANCE
INCOME FROM OPERATIONS
Income from operations in the first half of 2002 totalized R$ 24,900 thousand,
compared of R$ 10,764 thousand in the same period last year and resulted in an
EBITDA of R$ 53,243 thousand, equal to an EBITDA margin of 14.34%. The items
that make up service income showed the following performance:
OPERATING REVENUES
Gross operating revenues in the first half of 2002 totaled R$ 521,267 thousand,
an increase of 6.5% when compared to the same period last year. The revenue from
the retail sector was R$ 480,787 thousand, an increase of 1.7% compared to the
same period in 2001.
The increase in the wholesale revenue in the first half of 2002, compared to the
same period last year was due to the short-term supply sales of excess energy.
The increase in other revenues is due to the new breakdown in revenues as per
the new sector model, as well as to the growth in the utilization of the
distribution system by customers.
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6
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002
- --------------------------------------------------------------------------------
Net operating revenues in the first quarter of 2002 totaled R$371,345 thousand,
5.6% higher than the same period in 2001.
- --------------------------------------------------------------------------------
thousands of reais
----------------------------------------------
PARENT COMPANY CONSOLIDATED
----------------------------------------------
First Half
----------------------------------------------
2002 2001 2002 2001
----------------------------------------------
Retail:
Residential 161,580 176,067 264,078 283,308
Industrial 179,755 162,128 221,748 197,163
Commercial 91,902 83,232 148,580 138,012
Rural 19,774 21,844 37,353 37,958
Other 35,201 32,319 62,631 59,418
Unbilled revenues (128) (3,089) 1,932 (3,810)
Regulatory assets (7,297) - 8,991 -
----------------------------------------------
480,787 472,501 745,313 712,049
==============================================
Wholesale:
Other distributors 10,951 9,128 12,835 12,065
Short-term 19,016 3,931 (1,236) 14,048
----------------------------------------------
29,967 13,059 11,599 26,113
----------------------------------------------
Other revenues 10,513 4,057 19,351 12,492
----------------------------------------------
Gross operating revenues 521,267 489,617 776,263 750,654
Operating revenues deductions (149,922) (138,035) (209,437) (196,837)
----------------------------------------------
Net operating revenues 371,345 351,582 566,826 553,817
- --------------------------------------------------------------------------------
OPERATING COSTS
Operating costs including operating expenses plus RGR quotas increased from R$
349,109 thousand to R$ 354.581 thousand, an increase of 1.6%.
Operating costs outside Company control such energy purchased, electric power
transport, CCC, and RGR quotas decreased 0.5%, compared to the same period in
2001, due to the transfer to prepaid expenses items in the amount of R$7,552
thousand.
Costs controlled by the Company such as personnel, material, third party
services and other expenses increased from R$ 59,169 thousand in the first half
of 2001 to R$ 65,060 thousand in the first half of 2002, or 10%. Depreciation
increased 3.1%. The increase in controlled costs was also impacted by the change
in criteria used to provision for doubtful accounts, energy conservation
programs and customer services.
- --------------------------------------------------------------------------------
thousands of reais
-----------------------------------
PARENT COMPANY
-----------------------------------
First Half
-----------------------------------
2002 2001 Change %
- --------------------------------------------------------------------------------
Company Controlled Costs
Personnel 29,699 31,595 (6.0)
Material 3,210 3,768 (14.8)
Third party services 15,103 14,050 7.5
Other 17,048 9,756 74.7
-----------------------------------
65,060 59,169 10.0
-----------------------------------
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7
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002
- --------------------------------------------------------------------------------
Depreciation 28,343 27,488 3.1
- --------------------------------------------------------------------------------
TOTAL COMPANY CONTROLLED COSTS 93,403 86,657 7.8
- --------------------------------------------------------------------------------
Outside Company Control
Energy purchased 224,563 225,943 (0.6)
CCC 26,464 26,587 (0.5)
Financial compensation 1,388 799 73.7
ANEEL fiscal fee 627 832 (24.6)
RGR 8,136 8,291 (1.9)
-----------------------------------
TOTAL COSTS OUTSIDE COMPANY CONTROL 261,178 262,452 (0.5)
- --------------------------------------------------------------------------------
GRAND TOTAL 354,581 349,109 1.6
- --------------------------------------------------------------------------------
ENERGY PURCHASED EXPENSES
Energy purchased expenses totalized R$ 224,563 thousand in the first half of
2002, 0,6% lower than the same period last year.
The following table details energy purchased expenses.
- -------------------------------------------------------------------------------------
PARENT COMPANY CONSOLIDATED
---------------------------------------------------
First Half
---------------------------------------------------
2002 2001 2002 2001
---------------------------------------------------
From FURNAS and TRACTEBEL
Expenses - thousands of reais 115,867 107,412 161,731 150,561
Volume - MWh(*) 1,777,692 2,317,266 2,807,770 3,375,589
Average cost - R$/MWh(*) 65.18 46.35 57.60 44.60
- -------------------------------------------------------------------------------------
WHEELING From ITAIPU
Expenses - thousands of reais 2,931 2,646 4,135 3,721
Average cost - R$/MWh(*) 3.39 3.07 3.40 3.08
- -------------------------------------------------------------------------------------
WHEELING-OTHER
Expenses - thousands of reais 27,535 34,608 45,320 54,807
Average cost - R$/MWh(*) 15.49 14.93 16.14 16.24
- -------------------------------------------------------------------------------------
From ITAIPU
Expenses - thousands of reais 74,768 66,299 106,000 93,163
Volume - MWh(*) 864,033 860,834 1,215,985 1,207,327
Average cost - R$/MWh(*) 86.53 77.02 87.17 77.16
- -------------------------------------------------------------------------------------
From OTHER
Expenses - thousands of reais 9,943 14,978 16,571 22,611
Volume - MWh(*) 228,082 204,639 287,453 265,510
Average cost - R$/MWh(*) 43.59 73.19 57.65 85.16
- -------------------------------------------------------------------------------------
SECTOR AGREEMENT AND PARCEL 'A'
Expenses - thousands of reais (6,481) - (12,281) -
- -------------------------------------------------------------------------------------
TOTAL
Expenses - thousands of reais 224,563 225,943 321,476 324,863
Volume - MWh(*) 2,869,807 3,382,739 4,311,208 4,848,426
Average cost - R$/MWh(*) 78.25 66.79 74.57 67.00
- -------------------------------------------------------------------------------------
(*) Not reviewed by independent auditors.
NET FINANCIAL INCOME (EXPENSE)
The net financial result in the first half of 2002 was negative R$ 259,087
thousand, while in the same period last year was negative R$ 139,109 thousand.
The difference in the second half is due mainly to the 22.6% devaluation of the
Brazilian real against the U.S. dollar, which caused a significant increase in
financial expenses on U.S. dollar denominated debt.
- --------------------------------------------------------------------------------
8
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002
- --------------------------------------------------------------------------------
LOSS FOR THE PERIOD
This factors mentioned above contributed to the loss of R$ 174,368 thousand in
the first half of 2002.
CASH AND EQUIVALENTS
ESCELSA has funds deposited in banks or invested in financial instruments in the
amount of R$ 221,869 thousand for the Company and R$ 222,955 thousand on a
consolidated basis as shown below:
PARENT COMPANY CONSOLIDATED
--------------------------------------------
June 30, 2002
--------------------------------------------
thousands US$ thousands US$
of reais thousand of reais thousand
--------------------------------------------
Investments in Reais:
Cash and bank 7,368 - 8,262 -
Banking Certificates of Deposits - - 13 -
Other 131 - 310 -
--------------------------------------------
Total real denominated investments 7,499 - 8,585 -
============================================
Investments in Dollars:
Currency Exchange Securities-NTN's and NBC's 214,370 75,366 214,370 75,366
--------------------------------------------
Total Dollar denominated investments 214,370 75,366 214,370 75,366
============================================
Total cash and equivalents 221,869 75,366 222,955 75,366
============================================
US dollar = 2,8444 Real
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9
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002
- --------------------------------------------------------------------------------
BALANCE SHEETS
(In thousands of Brazilian reais)
(Convenience Translation into English from the Original Previously
Issued in Portuguese)
PARENT COMPANY CONSOLIDATED
---------------------------------------------------------
Jun-02 Mar-02 Jun-02 Mar-02
---------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and banks 7,368 8,060 8,262 10,482
Marketable securities 214,501 207,672 214,693 207,931
Accounts receivable 240,925 233,685 380,363 384,981
Other accounts receivable 19,278 11,517 34,313 21,115
Tax credits 43,451 42,550 57,827 56,255
Allowance for doubtful accounts (19,998) (19,086) (30,124) (29,921)
Material and supplies 3,735 4,031 7,112 6,989
Escrow deposits 39,382 39,382 39,382 39,382
Other credits 17,515 8,531 29,993 14,365
Prepaid expenses - CVA 26,843 5,226 31,730 10,643
Prepaid expenses - other 242 1,186 460 1,197
---------------------------------------------------------
593,242 542,754 774,011 723,419
---------------------------------------------------------
LONG-TERM ASSETS
Accounts receivable 186,478 210,452 268,576 303,762
Special tariff situation 46,609 46,596 71,826 71,778
Affiliates and subsidiaries 1,362 901 57,561 55,479
Funding costs 3,043 3,235 3,043 3,235
Escrow deposits 66,441 63,651 90,006 84,361
Tax credits 170,130 97,356 286,930 197,630
Other 3,262 3,372 14,804 12,355
Prepaid expenses 50,200 58,606 91,412 94,592
- --------------------------------------------------------------------------------
10
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002
- --------------------------------------------------------------------------------
527,525 484,169 884,158 823,192
---------------------------------------------------------
PERMANENT ASSETS
Investments 749,836 724,639 379,688 382,230
Property, plant and equipment, net 762,398 767,420 1,523,779 1,508,481
Deferred charges - - 79 79
---------------------------------------------------------
1,512,234 1,492,059 1,903,546 1,890,790
---------------------------------------------------------
TOTAL ASSETS 2,633,001 2,518,982 3,561,715 3,437,401
=========================================================
See notes to financial statements.
BALANCE SHEETS
(In thousands of Brazilian reais)
(Convenience Translation into English from the Original Previously
Issued in Portuguese)
PARENT COMPANY CONSOLIDATED
---------------------------------------------------------
Jun-02 Mar-02 Jun-02 Mar-02
---------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Suppliers 111,164 119,824 157,126 165,268
Payroll 942 1,159 2,457 1,903
Accrued interest and fees 57,773 22,553 63,548 32,199
Consumers charges payable 5,938 6,818 9,621 10,609
Accrued taxes and social contributions 33,220 32,859 49,146 49,081
Dividends 21 21 105 4,048
Loans and financing 86,399 70,971 343,153 316,716
Post retirement benefits 2,420 2,420 2,420 2,420
Accrued obligations 9,163 6,549 17,638 13,138
Provision for contingencies 39,382 39,382 39,382 39,382
Variation of parcel A items 29,051 1,702 29,438 1,702
Other 12,360 11,035 14,736 12,462
---------------------------------------------------------
387,833 315,293 728,770 648,928
---------------------------------------------------------
LONG-TERM LIABILITIES
Suppliers 68,596 61,239 95,329 84,600
Deferred income tax 8,875 9,491 8,875 9,491
Special tariff situation 26,312 26,560 40,166 40,548
Accrued interest and fees - - 2,085 1,467
Loans and financing 1,392,854 1,171,032 1,715,917 1,488,642
- --------------------------------------------------------------------------------
11
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002
- --------------------------------------------------------------------------------
Post retirement benefits 28,032 28,032 28,032 28,032
Provision for contingencies 117,964 114,148 148,785 142,612
Variation of parcel A items 1,833 1,216 3,769 1,216
Other 41,265 45,190 45,246 48,613
---------------------------------------------------------
1,685,731 1,456,908 2,088,204 1,845,221
---------------------------------------------------------
1,685,731 1,456,908 2,088,204 1,845,221
---------------------------------------------------------
MINORITY INTEREST - - 185,304 196,471
---------------------------------------------------------
SHAREHOLDERS' EQUITY
Capital stock 153,947 153,947 153,947 153,947
Capital reserves 576,471 575,292 576,471 575,292
Income reserves (174,368) 14,155 (174,368) 14,155
---------------------------------------------------------
556,050 743,394 556,050 743,394
---------------------------------------------------------
Credits for capital increase 3,387 3,387 3,387 3,387
---------------------------------------------------------
559,437 746,781 559,437 746,781
---------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDER'S' EQUITY 2,633,001 2,518,982 3,561,715 3,437,401
=========================================================
See notes to financial statements
STATEMENTS OF INCOME
(In thousands of Brazilians reais, except income (loss) per share)
(Convenience Translation into English from the Original Previously
Issued in Portuguese)
PARENT COMPANY CONSOLIDATED
------------------------------------------------------
Six months ended June 30,
------------------------------------------------------
2002 2001 2002 2001
------------------------------------------------------
OPERATING REVENUES
Electric power sales to final customers 480,787 472,501 745,313 712,049
Electric power sales to distributors 29,967 13,059 11,599 26,113
Other revenues 10,513 4,057 19,351 12,492
------------------------------------------------------
521,267 489,617 776,263 750,654
------------------------------------------------------
Deductions from operating revenues
Global reserve for reversion quota (RGR) (8,136) (8,291) (13,842) (13,915)
State VAT (ICMS) (122,714) (111,871) (167,965) (155,301)
PIS and COFINS (19,033) (17,871) (27,328) (27,432)
Other (39) (2) (302) (189)
------------------------------------------------------
(149,922) (138,035) (209,437) (196,837)
------------------------------------------------------
NET OPERATING REVENUES 371,345 351,582 566,826 553,817
------------------------------------------------------
OPERATING EXPENSES
Personnel (29,699) (31,595) (54,269) (54,123)
Material (3,210) (3,768) (7,664) (7,974)
Services from third parties (15,103) (14,050) (29,341) (25,430)
Financial compensation for use of hydroelectric resources (1,388) (799) (1,543) (993)
Electric power purchased for resale (194,172) (188,689) (272,728) (266,335)
Transport of electricity capacity (30,391) (37,254) (48,748) (58,528)
Quota for fuel consumption - CCC (26,464) (26,587) (38,167) (38,018)
Depreciation and amortization (28,343) (27,488) (59,912) (53,092)
Provision for contingencies (1,256) - (2,029) 1,210
Other (16,419) (10,588) (24,131) (18,820)
------------------------------------------------------
(346,445) (340,818) (538,532) (522,103)
------------------------------------------------------
INCOME FROM OPERATIONS 24,900 10,764 28,294 31,714
------------------------------------------------------
EQUITY IN SUBSIDIARIES (14,452) (5,687) - -
------------------------------------------------------
FINANCIAL REVENUES
Income from temporary cash investments 33,653 68,199 39,822 68,322
- --------------------------------------------------------------------------------
12
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002
- --------------------------------------------------------------------------------
Increase in overdue collections 4,770 4,074 7,224 6,309
Hedge 7,335 - 17,970 745
Selic-regulatory assets 13,766 - 23,131 -
Other 4,496 2,964 9,544 14,108
------------------------------------------------------
64,020 75,237 97,691 89,484
------------------------------------------------------
FINANCIAL EXPENSES
Monetary variation - electricity purchase (3,874) (3,107) (5,002) (4,294)
Monetary and exchange variation on loans and financing (235,572) (152,444) (266,797) (169,777)
Interest on loans and financing (74,042) (52,589) (100,248) (70,250)
Other (9,619) (6,206) (12,863) (9,685)
------------------------------------------------------
(323,107) (214,346) (384,910) (254,006)
------------------------------------------------------
FINANCIAL RESULTS (259,087) (139,109) (287,219) (164,522)
------------------------------------------------------
OPERATING PROFIT (LOSS) (248,639) (134,032) (258,925) (132,808)
------------------------------------------------------
NON-OPERATING REVENUES 263 2,433 512 2,886
NON-OPERATING EXPENSES (3,319) (2,793) (5,303) (5,450)
------------------------------------------------------
NON-OPERATING INCOME (LOSS), NET (3,056) (360) (4,791) (2,564)
------------------------------------------------------
INCOME (LOSS) BEFORE TAXES AND MINORITY INTEREST (251,695) (134,392) (263,716) (135,372)
------------------------------------------------------
Social contribution and income tax 77,327 42,167 84,675 42,832
------------------------------------------------------
INCOME (LOSS) BEFORE MINORITY INTEREST (174,368) (92,225) (179,041) (92,540)
------------------------------------------------------
MINORITY INTEREST - - 4,673 315
------------------------------------------------------
NET INCOME (LOSS) FOR THE PERIOD (174,368) (92,225) (174,368) (92,225)
======================================================
Income (loss) per share - R$ (38.31) (20.26) - -
------------------------------------------------------
See notes to financial statements
STATEMENTS OF CASH FLOWS
(In thousands of Brazilian reais)
(Convenience Translation into English from the Original Previously
Issued in Portuguese)
PARENT COMPANY CONSOLIDATED
------------------------------------------------------
Six months ended June 30,
------------------------------------------------------
2002 2001 2002 2001
------------------------------------------------------
From operations
Net income (loss) for the period (174,368) (92,225) (174,368) (92,225)
Adjustments to reconcile net income (loss) to cash
provided by operating activities:
Long-term monetary and exchange variation 235,572 152,444 254,153 164,999
Equity in subsidiaries 14,452 5,687 - -
Depreciation and amortization 28,343 27,488 59,912 53,092
Disposal of property, plant and equipment 2,330 2,074 5,070 4,125
Provision for contingencies 5,764 14,698 6,797 13,488
Rationing program - regulatory assets (60) - (12,976) -
Minority share in profit - - (4,673) (315)
Obligations adjustments 4,541 - 4,541 -
Tax credits (75,712) (42,168) (83,130) (42,928)
Remuneration of construction work in progress and other - - (745) (382)
------------------------------------------------------
40,862 67,998 54,581 99,854
------------------------------------------------------
Changes in current assets and liabilities
Accounts receivable (36,339) 7,854 (35,199) (5,265)
Other accounts receivable 6,498 (3,056) (1,901) (7,616)
Prepaid expenses (20,960) (92) (23,580) (92)
Other credits (9,971) (238) (16,703) 1,422
Suppliers (25,123) 40,815 (21,762) 48,311
Accrued taxes and social contributions 4,670 2,056 972 900
Accrued obligations (3,194) (4,077) (2,938) (3,928)
Consumers charges payable (2,443) (1,229) (3,619) (1,810)
Variation of Parcel A itens 28,825 - 29,212 -
- --------------------------------------------------------------------------------
13
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002
- --------------------------------------------------------------------------------
Other 1,201 (4,782) 1,721 (5,778)
------------------------------------------------------
(56,836) 37,251 (73,797) 26,144
------------------------------------------------------
Change in non-current assets and liabilities
Accounts receivable 3,565 - 3,565 -
Escrow deposits (5,346) (7,263) (8,575) (10,102)
Special tariff situation 2,407 - 2,856 -
Affiliates and subsidiaries 891 (2,356) (41,502) (2,356)
Prepaid expenses 2,409 - (5,410) -
Suppliers 7,357 - 7,357 -
Other 5,929 8,436 7,313 5,602
------------------------------------------------------
17,212 1,183 (34,396) (6,856)
------------------------------------------------------
Net cash provided by (used in) operation activities 1,238 104,066 (53,612) 119,142
------------------------------------------------------
Investing activities
Additions to property, plant and equipment (22,828) (27,794) (87,240) (77,286)
Additions to investments (66,996) 3,113 (102) 1,685
Obligations related to the concession 1,868 2,856 1,950 3,820
------------------------------------------------------
Net cash used in investing activities (87,956) (21,825) (85,392) (71,781)
------------------------------------------------------
Financing activities
Loans and financing 39,767 (11,215) 60,367 30,541
Accrued interest and fees 11,055 7,180 11,939 8,143
Dividends - (13,239) (4,531) (14,597)
Affiliates and subsidiaries - - 34,687 (3,323)
------------------------------------------------------
Net cash provided by (used in) financing activities 50,822 (17,274) 102,462 20,764
------------------------------------------------------
Net increase (decrease) in cash and equivalents (35,896) 64,967 (36,542) 68,125
------------------------------------------------------
Cash and cash equivalents at the beginning of the year 257,765 272,770 259,497 277,791
Cash and cash equivalents at the end of the year 221,869 337,737 222,955 345,916
------------------------------------------------------
(35,896) 64,967 (36,542) 68,125
------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS
FOR THE QUARTER ENDED JUNE 30, 2002 AND 2001
(In thousands of Brazilian reais, unless otherwise indicated)
(Convenience Translation into English from the Original Previously
Issued in Portuguese)
1. OPERATIONAL CONTEXT
Espirito Santo Centrais Eletricas S.A. - ESCELSA - is a publicly-held
Brazilian corporation engaged, principally, in the generation,
transmission and distribution of electric energy in the State of
Espirito Santo, covering 70 of the 77 municipalities within 41,372
Km(2), which represent approximately 90% of the total area of the State
of Espirito Santo.
ESCELSA is the majority shareholder of MAGISTRA PARTICIPACOES S.A. which
is the controlling shareholder of EMPRESA Energetica de Mato Grosso do
Sul S.A. - ENERSUL - an electric energy distribution company in the
State of Mato Grosso do Sul, acquired in a public auction on November
19, 1997, and TV a Cabo Vitoria S.A. - TVIX, incorporated on July 4,
1997, which is a Pay TV company serving residential condominiums in the
municipalities of Vitoria and Vila Velha in the state of Espirito Santo.
In addition, ESCELSA is the majority shareholder of ESCELSA
Participacoes S.A. - ESCELSAPAR, which operates as an Internet Service
Provider (ISP), also providing several services in the area of
information technology.
The subsidiary ENERSUL has taken steps to raise funding through
long-term obligations with domestic and international banks in order to
restore its working capital position and to improve its overall debt
profile, specifically in terms of costs and maturity.
- --------------------------------------------------------------------------------
14
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002
- --------------------------------------------------------------------------------
2. presentation of FINANCIAL STATEMENTS
The financial statements were prepared in accordance with accounting
practices set forth by the Brazilian Corporate Law, specific legislation
applicable to electric utility concessionaires established by National
Electric Energy Agency - ANEEL and regulations of the Brazilian
Securities and Exchange Commission -CVM.
The financial statements for the period ended June 30, 2001 were
reclassified, when applicable, for comparison purposes and in order to
be in accordance with the new Electric Utility Accounting Plan,
applicable as from January 1, 2002.
3. PRINCIPAL ACCOUNTING PRACTICES
3.1. Parent company financial statements
a) Marketable securities - are recorded at cost plus interest
accrued up to the balance sheet date, with necessary
provisions for devaluation to reflect market values, when
applicable. Marketable securities are represented,
basically, by public treasury notes bearing interest and
exchange variation;
b) Accounts receivable - include the supply of electric power
both billed and unbilled to customers as of the balance
sheet date, accounted for on an accrual basis, also
including charges for late payments by customers as well as
accounts receivable related to the extraordinary tariff
recovery.
c) Allowance for doubtful accounts - recognized in accordance
with General Instruction n(Degree) 6.3.2 of the Accounting
Standards for Public Electric Utilities, reflecting a
conservative position in comparison with ESCELSA's
historical average of losses.
d) Materials and supplies - materials and supplies to be
applied in operations and maintenance are recorded as
current assets and those earmarked for construction are
included in property, plant and equipment, both based on the
average acquisition cost.
e) Investments - the investments in wholly-owned subsidiaries
are stated based on the equity adjustment method. The other
investments are stated at cost plus monetary restatement,
until December 31, 1995, net of provision for loss, when
applicable.
f) Property, plant and equipment - stated at the acquisition or
construction cost, monetarily restated until December 31,
1995, less the accumulated straight-line depreciation based
on account balances recorded in the respective Unit
Registries - UC, in accordance with DNAEE Rule 815 of
11/30/1994, at constant rates as per the schedule stipulated
in ANEEL Rule 44 of 03/17/1999. In accordance with the
General Instructions nos. 35 and 36 of the Accounting
Standards for Public Electric Utilities, interest and other
financing charges and inflationary effects related to third
party financing, which have been applied in the property,
plant and equipment under construction, are recorded within
this subgroup as costs. In accordance with specific Public
Electric Utilities Service regulations, interest on the
shareholder's own capital applied in financing projects
under construction is calculated according to Long-term
Interest Rates (TJLP) and is credited directly to capital
reserves in Shareholders' Equity.
g) Assets and liabilities denominated in foreign currencies
subject to indexation - such items are subject to
restatement because of exchange and monetary variations for
contractual or legal reasons and are updated through the
balance sheet date. Foreign currency liabilities are
converted into Reais according to the exchange rates
informed by the Brazilian Central Bank (US$ 1 = R$2.8444 on
June 30, 2002 and US$ 1 = R$ 2.3204 on December 31, 2001).
h) Income tax and social contribution - income tax recorded in
the results of the period is calculated based on taxable
income (adjusted net income) at a rate of 15% plus 10% on
taxable income exceeding R$240, according to the current tax
law. Social contribution recorded in the results of the
period is calculated based on taxable income prior to income
tax, at a rate of 8%, plus an additional of 1%, which is
applicable through 12/31/03. The deferred income tax and
social contribution were recorded as tax credits, based on
the tax losses, negative basis of the social contribution
and temporary differences, considering the rates of such
taxes that will be prevailing on the date of the
realization.
- --------------------------------------------------------------------------------
15
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002
- --------------------------------------------------------------------------------
i) Obligations related to the concession - are obligations that
are part of the concession agreement for electric utilities
representing, basically, contributions from the Federal
Government, donations without conditions set forth as to
returns to the contributors, subventions and contributions
received from consumers exclusively for the purpose of
investment in electric energy distribution. The expiration
of these obligations is determined by the Regulatory Agency,
and will be withdrawn at the end of the concession period.
As from January 1, 2002, this account is being classified as
property, plant and equipment.
j) Pension plans - the Company is the sponsor of Fundacao
Escelsa de Seguridade Social - ESCELSOS, which manages the
pension fund for its employees. The costs, contributions and
the actuarial obligation associated with pension plans are
calculated at the balance sheet date by independent
actuaries. As from December 31, 2001, such amounts are
calculated and recorded in accordance with Deliberation CVM
n(Degree)371. Employee profit sharing is recorded in the
statement of income of the corresponding fiscal period.
k) Earnings (loss) per share - these amounts are calculated
based on the number of shares outstanding at the balance
sheet date for the fiscal period.
l) Revenue recognition - revenues and expenses for all services
are recognized on an accrual basis of accounting, recognized
when incurred. Billing for all customers is made on a
monthly basis according to the meter reading calendar.
Unbilled revenues, corresponding to the period between the
date of the last reading and the end of the month, are
estimated and recognized as revenue in the month in which
the energy was consumed.
m) Estimates - financial statement preparation according to
corporate law accounting practices requires that the
Company's Management make estimates for the recognition of
certain transactions that impact assets and liabilities and
revenues and expenses of ESCELSA and its subsidiaries, which
are reflected in data disclosed in its financial statements.
The final figures that are recorded upon the realization of
such transactions in subsequent reporting periods may differ
from these estimates. Most of these estimates refer to the
recognition of impacts from the Emergency Program for
Reducing Electric Energy Consumption, the Compensation
Account for Cost Variations for Portion A - CVA, Provision
for Doubtful Accounts, Provision for Contingencies and
Pension and Retirement Plans.
3.2. Consolidated Financial Statements
The consolidated financial statements include the balance sheets
and the statements of income for the semester and quarter ended
June 30, 2002 and March 31, 2002 for ESCELSA, and its
subsidiaries MAGISTRA, TVIX and ESCELSAPAR.
The main consolidation procedures adopted were as follows:
a) elimination of ESCELSA's investments in controlled
subsidiaries;
b) elimination of account balances between ESCELSA and its
subsidiaries included in the consolidation, as well as the
accounts between such subsidiaries;
c) recognition of the minority shareholders' participation in
the balance sheet and statement of income;
d) disclosure of the goodwill recorded for the acquisition of
ENERSUL by MAGISTRA.
The profit and the shareholders' equity at ESCELSA are equal to
those of the consolidated group, as there was no unrealized
income in the intercompany operations.
4. MARKETABLE SECURITIES
PARENT COMPANY CONSOLIDATED
-------------------- --------------------
Jun-02 Mar-02 Jun-02 Mar-02
------- ------- ------- -------
Interbank Deposits - CDB - - 13 10
U.S. Dollar-linked Treasury Notes - NTN and NBC-E 214,370 204,051 214,370 204,051
Other 131 3,621 310 3,870
------- ------- ------- -------
- --------------------------------------------------------------------------------
16
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002
- --------------------------------------------------------------------------------
TOTAL 214,501 207,672 214,693 207,931
======= ======= ======= =======
5. ACCOUNTS RECEIVABLE
PARENT COMPANY
-------------------------------------------------------
Past-due Past-due Total
up to 90 Over 90 -------------------
Current days days Jun-02 Mar-02
------- ------- ------- ------- -------
CURRENT ASSETS
FINAL CUSTOMERS
Residential 13,890 18,276 1,304 33,470 33,661
Industrial 32,403 3,335 3,010 38,748 35,350
Commercial, services and other activities 10,205 5,718 1,133 17,056 17,899
Rural 3,856 1,333 182 5,371 4,450
Public authority:
Federal 438 658 637 1,733 1,239
State 656 1,619 7,657 9,932 9,473
Municipal 897 666 1,092 2,655 2,317
Public lighting 2,540 1,781 1,991 6,312 5,140
Public service 1,736 104 94 1,934 1,920
Unbilled revenue 17,507 - - 17,507 20,131
Regulatory asset - recoverable losses 44,941 - - 44,941 59,368
Other credits 17,516 - - 17,516 10,362
------- ------- ------- ------- -------
146,585 33,490 17,100 197,175 201,310
------- ------- ------- ------- -------
WHOLESALE
Distributors 4,332 - - 4,332 5,470
Spot market 39,245 - 174 39,418 26,906
------- ------- ------- ------- -------
43,577 - 174 43,750 32,375
------- ------- ------- ------- -------
TOTAL 190,162 33,490 17,274 240,925 233,685
======= ======= ======= ======= =======
LONG-TERM ASSETS
FINAL CUSTOMERS
Regulatory asset
Recoverable losses 77,193 - - 77,193 111,446
Free energy 71,934 - - 71,934 64,219
Other credits 22,182 - 15,169 37,351 34,787
------- ------- ------- ------- -------
171,309 - 15,169 186,478 210,452
======= ======= ======= ======= =======
CONSOLIDATED
-------------------------------------------------------
Past-due Past-due Total
Current up to 90 Over 90 days Jun-02 Mar-02
- ------------------------------------------------------------- ------- ------- ------- -------
- -------------------------------------------------------------------------------------------------------------
17
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002
- -------------------------------------------------------------------------------------------------------------------
------- ------- ------- -------
days
CURRENT ASSETS
FINAL CUSTOMERS
Residential 21,420 29,399 1,641 52,460 51,765
Industrial 38,931 5,543 3,165 47,639 42,722
Commercial, services and other activities 13,704 10,848 4,452 29,004 29,108
Rural 4,171 3,613 330 8,114 6,944
Public Authority:
Federal 897 1,241 770 2,908 2,378
State 1,600 2,593 7,706 11,899 10,743
Municipal 1,816 2,143 2,232 6,191 4,564
Public lighting 4,575 4,894 6,261 15,730 11,399
Public service 3,039 110 121 3,270 3,137
Unbilled revenue 33,495 - - 33,495 34,910
Regulatory asset- recoverable losses 65,462 - - 65,462 83,019
Other credits 31,339 721 147 32,207 21,958
------- ------- ------- ------- -------
220,449 61,105 26,825 308,379 302,647
======= ====== ====== ======= =======
WHOLESALE
Distributors 4,793 - - 4,793 5,783
Spot market 67,018 - 173 67,191 76,551
------- ------- ------- ------- -------
71,811 - 173 71,984 82,334
------- ------- ------- ------- -------
292,260 61,105 26,998 380,363 384,981
======= ======= ======= ======= =======
LONG-TERM ASSETS
FINAL CUSTOMERS
Regulatory asset
Recoverable losses 131,251 - - 131,251 180,253
Free energy 99,974 - - 99,974 88,722
Other credits 22,182 - 15,169 37,351 34,787
------- ------- ------- ------- -------
253,407 - 15,169 268,576 303,762
======= ======= ======= ======= =======
Regulatory Asset
According to clauses included in Provisional Measure n(Degree)14, in Resolution
n(Degree)91 from the Energy Crisis Management Chamber - CGE of December 21,
2001, Resolution n(Degree). 31 from the National Electric Energy Agency - ANEEL
of January 24, 2002 and ANEEL Resolution n(Degree) 72 of February 7, 2002, the
Company calculated the amount of the extraordinary tariff recovery to be applied
to all of the concession areas for electric energy distribution, to be
recognized as the basis for re-establishing the financial-economic balance of
the concession contracts, with the recovery of the consumption losses which were
incurred as a result of the Emergency Program for Reducing Electric Energy
Consumption - PRE from June 2001 through February 2002.
The increase in tariffs for final customers approved by ANEEL for ESCELSA and
ENERSUL for extraordinary tariff recovery were as follows:
- --------------------------------------------------------------------------------
18
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002
- --------------------------------------------------------------------------------
o 2.9% for residential and rural clients (except low-income customers);
o 7.9% for all other clients.
The regulatory asset, related to the extraordinary tariff recovery, had the
following movements during the quarter:
PARENT COMPANY CONSOLIDATED
-------------------------------------------------
CURRENT LONG TERM CURRENT LONG TERM
-------------------------------------------------
Balance as of 12/31/2001 54,928 157,692 76,485 226,171
Transfer to current assets 14,759 (14,759) 21,359 (21,359)
Recovery via extraordinary tariffs (10,319) - (14,825) -
Losses of margin - 32,732 64,163
------- ------- ------- -------
Balance as of 03/31/2002 59,368 175,665 83,019 268,975
======= ======= ======= =======
Transfer to current assets (2,276) 2,276 349 349
Recovery via extraordinary tariffs (12,151) - (17,906) -
Losses of margin - 36,359 (48,654)
- -Free Energy - 7,715 11,253
------- ------- ------- -------
Balance as of 06/31/2002 44,941 149,127 65,462 231,225
======= ======= ======= =======
The extraordinary tariff increase will be effective for the period deemed
necessary to recover the total amount calculated.
On March 8, 2002 and May 7, 2002, the Company sent to ANEEL its calculations
related to the tariff recovery amounts corresponding to the period up to
12/31/2001 and from January to February 2002, respectively, being both subject
to the Regulatory Agency approval. In order to obtain the right to such
compensation, the Company renounced the right to any judicial or extra judicial
claims related to the facts and rules concerning the Emergency Program for
Reduction of Electrical Energy Consumption and the extraordinary tariff
recovery, as well as entered into agreements signed between the electrical
sector agents, in accordance with the Provisional Measure n(Degree)14 and
Resolutions n(Degree) 91 edited by GCE and n(Degree) 31 edited by ANEEL.
Energy negotiated in the Spot Market
The balance of accounts receivable from consumers and distributors includes the
preliminary figures related to the energy negotiated in the Spot Market, in the
amount of R$37,288, of which R$18,075 relates to the period from September 2000
through December 2001, recorded based on the information published by MAE, and
R$19,213 related to the period from January to June 2002, which was recorded
based on management estimates. Such amounts will be settled when the final
amounts are known and approved by MAE.
- --------------------------------------------------------------------------------
19
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002
- --------------------------------------------------------------------------------
6. SPECIAL TARIFF SITUATION
According to Provisional Measure 2,147 of May 15, 2001 and subsequent
amendments, as well as regulations from the Energy Crisis Management
Chamber - CGE, ESCELSA has charged a surtax to customers who have
exceeded their consumption quotas up to February, and granted bonuses in
cases in which customers have reduced consumption to levels below their
quotas.
The financial accounting criteria for these events, defined as per ANEEL
Rule 299 of July 27, 2001, do not have an impact on the Company's
results, and on March 31, 2002, the corresponding amounts are classified
in the current assets as customers and wholesale, as shown below:
PARENT COMPANY CONSOLIDATED
----------------------------------------------
Jun-02 Mar-02 Jun-02 Mar-02
------- ------- ------- -------
ASSETS
Current assets (customers and wholesale):
Bonus balance (invoiced (-) received) (290) (5,553) (337) (7,794)
Surtax - accounts receivable 1,205 1,940 1,930 3,106
Surtax installment 607 582 1,003 943
------- ------- ------- -------
1,522 (3,031) 2,596 3,745
------- ------- ------- -------
Long term assets:
Invoiced bonus 40,270 40,247 61,453 61,399
Costs incurred by Company to be reimbursed 6,339 6,349 10,373 10,379
------- ------- ------- -------
46,609 46,596 71,826 71,778
------- ------- ------- -------
TOTAL 48,131 43,565 74,422 68,033
======= ======= ======= =======
LIABILITIES
Long term liabilities:
Surtaxes charged 12,047 12,369 19,535 20,034
(-) ICMS tax on surcharges (2,693) (2,763) (4,179) (4,290)
(-) 2% to cover costs (94) (98) (162) (168)
Resources received 17,052 17,052 24,972 24,972
------- ------- ------- -------
TOTAL 26,312 26,560 40,166 40,548
------- ------- ------- -------
BALANCE RECEIVABLE - Ministry of Mines and Energy 21,819 17,005 34,256 27,485
======= ======= ======= =======
From the total balance receivable from Ministry of Mines and Energy
above, except for the costs incurred by the Company, ANEEL has already
approved the following transfers:
PARENT
LEGAL ACT COMPANY CONSOLIDATED
--------------------------------------------- ---------- ------------
Order ANEEL n(Degree)128, of 03/13/02(*) 4,965 7,416
Order ANEEL n(Degree)167, of 03/25/02 4,087 6,492
Order ANEEL n(Degree)239, of 04/25/02 4,628 6,937
---------- ------------
Total 13,680 20,845
========== ============
(*) Received on 07/17/2002
Based on the Resolution GCE n.(0) 117, of 02/19/2002, the Emergency
Program for Reduction of Electrical Energy Consumption was extinguished,
being determined that, as from March 1, 2002, the surtax charged to
customers who have exceeded their consumption quotas no longer
applicable, however the bonus regulated by Article 4(Degree) of the
Resolution GCE n.(Degree) 4, of 05/22/2001, was maintained until March
31, 2002
- --------------------------------------------------------------------------------
20
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002
- --------------------------------------------------------------------------------
7. Prepaid EXPENSES
The distribution concession agreements establish, for a part of the
tariffs charged by the Electric Utilities, amounts related to exogenous
costs which are attributable to operating expenses, together with a
variable referred to as Portion "A" of the Tariff Adjustment Formula
(IRT), demonstrated below:
o Pass-through of tariff related to energy purchased from Itaipu
Binacional;
o Pass through of transport costs for electric energy from Itaipu
Binacional;
o Quota for the Fuel Consumption Account - CCC;
o Costs for transmission infrastructure usage on the basic grid;
o Compensation for usage of water resources;
o System Service Charges - ESS;
o Energy Purchased as established in the initial contracts;
o Quota for the Global Reversion Reserve - RGR;
o Electric energy service enforcement fee; and,
o Connection charges.
With the introduction of Provisional Measure n(Degree) 2,227 and
n(Degree) 14 of 09/04/2001 and 12/21/01, respectively, and ANEEL
Resolution n(Degree). 90 of 02/18/02, an account was established to
record the compensation of differences, positive or negative, between
the amount of each item since the date of the last tariff adjustment and
its effective date of payment. The balance will be monetarily adjusted
based on the SELIC rate variation.
The positive variations are presented in current and long-term assets in
the account of prepaid expenses. On the other hand, the negative
variation that corresponds to pass through of transport costs for
electric energy from Itaipu Binacional and quota for the fuel
consumption - CCC are presented in the current and long-term liabilities
in the account of other creditors, in accordance with the directive
release n(Degree)s.60 and 91/2002, of January 24, 2002 and February 14,
2002, respectively. The balances are as shown below:
PARENT COMPANY CONSOLIDATED
----------------------------------------------------
Jun-02 Mar-02 Jun-02 Mar-02
------ ------ ------- -------
ASSETS
Current 26,843 5,226 31.730 10.643
Long term assets 50,200 58,606 91.412 94.592
------ ------ ------- -------
77,043 63,832 123.142 105.235
------ ------ ------- -------
LIABILITIES
Current 29,051 1,702 29.438 1.702
Long term 1,833 1,216 3.769 1.216
------ ------ ------- -------
30,884 2,918 33.207 2.918
------ ------ ------- -------
The amount of R$41,392, which is included in the balance of the
long-term asset as shown above, refers to the period from January 1
through October 25, 2001, and will be recovered in connection with the
regulatory asset, through the extraordinary tariff recovery.
8. TAX CREDITS
Tax credits classified as current assets correspond to income tax
withheld for cash investments, which is being compensated with tax
debits authorized by the Internal Revenue Service.
- --------------------------------------------------------------------------------
21
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002
- --------------------------------------------------------------------------------
Tax credits classified as long-term assets, as listed below, generated
by fiscal losses, negative basis of social contribution and other
amounts that constitute temporary adjustments for reduction of future
taxation were recorded based on Companies' estimated future
profitability, considering that the realization period will not exceed
10 years.
According to the estimated future profitability, as mentioned above, the
Companies determined the following fiscal assets:
PARENT COMPANY CONSOLIDATED
----------------------------------------------------
Jun-02 Mar-02 Jun-02 Mar-02
-------- -------- -------- --------
ASSET
Tax loss 347,330 108,192 691,009 406,455
Temporary additions
CVM Rule 371 30,451 30,451 30,451 30,451
Other temporary additions 144,675 166,969 187,120 205,472
-------- -------- -------- --------
522,456 305,612 908,580 642,378
======== ======== ======== ========
Statutory rate 25% 25% 25% 25%
-------- -------- -------- --------
Income tax 130,614 76,403 227,145 160,595
======== ======== ======== ========
Negative basis of social contribution 404,346 149,023 642,181 340,263
Temporary additions:
CVM Rule 371 30,451 30,451 30,451 30,451
Other temporary additions 59,154 82,431 85,528 106,472
-------- -------- -------- --------
493,951 261,905 758,160 477,186
Statutory rate 8% 8% 8% 8%
-------- -------- -------- --------
Social contribution 39,516 20,953 60,653 38,175
======== ======== ======== ========
Adjustment between statutory rate(8%)
and realization(9%) (868) (1,140)
-------- -------- -------- --------
TOTAL 170,130 97,356 286,930 197,630
======== ======== ======== ========
9. AFFILIATES AND SUBSIDIARIES
PARENT COMPANY CONSOLIDATED
----------------- -----------------
COMPANIES TRANSACTION Jun-02 Mar-02 Mar-02 Jun-02
- ----------------- ------------------------------------------ ------ ------ ------ ------
MAGISTRA Pass-through of costs and mutual contracts 41 - 56,950 54,670
ENERSUL Pass-through of costs 710 - - -
ESCELSAPAR Pass-through of costs - 47 - -
CESA Pass-through of costs - 284 - -
OTHER AFFILIATED Pass-through of costs 611 570 611 809
------ ------ ------ ------
1,362 901 57,561 55,479
====== ====== ====== ======
The Company does not engage in transactions or agreements with related
companies under terms or conditions less favorable than would be
exercised with third parties. The transactions refer essentially to
services rendered/received to/from related companies.
The consolidated financial statements show primarily the balance of
inter-company loans between the parent company MAGISTRA and the
subsidiary ESC90, as detailed below, which were made at similar terms to
those practiced in the Brazilian financial market.
1) Interest rate: TJLP + 4% per annum;
Maturity: November 2004;
Balance: R$ 4,989.
2) Interest Rate: 100% of CDI;
Maturity: several dates through December 31, 2002;
- --------------------------------------------------------------------------------
22
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002
- --------------------------------------------------------------------------------
Balance: R$ 51,961.
MAGISTRA's financial income from subsidiary ESC90 totaling R$4,449
(R$2,764 on 06/30/2001) in the consolidated statement is recorded as
other financial income. The guarantees are promissory notes
corresponding to 125% of principal.
10. INVESTMENTS
PARENT COMPANY CONSOLIDATED
--------------------- ----------------------
Jun-02 Mar-02 Jun-02 Mar-02
-------- -------- -------- --------
Equity Investments:
Stated by the equity method:
MAGISTRA PARTICIPACOES S.A 744,805 719,918 - -
TV A CABO VITORIA - TVIX S.A 129 153 - -
ESCELSA PARTICIPACOES S.- - ESCELSAPAR 3,032 2,799
-------- -------- -------- --------
747,966 722,870 - -
-------- -------- -------- --------
Goodwill from investments:
Goodwill - - 408,770 408,770
Discount from new share acquisition - - (15,152) (15,152)
Goodwill amortization - - (15,907) (13,277)
-------- -------- -------- --------
- - 377,711 380,341
-------- -------- -------- --------
Stated at restated cost:
Others 37 37 37 37
-------- -------- -------- --------
37 37 37 37
-------- -------- -------- --------
Projects, studies and other investments 1,833 1,732 1,940 1,852
-------- -------- -------- --------
TOTAL 749,836 724,639 379,688 382,230
======== ======== ======== ========
The goodwill recorded by the subsidiary MAGISTRA, generated by the difference
between the amount paid and the book value of ENERSUL stocks, acquired in
11/25/1997, is based on the Company's future profitability and is being
amortized proportionally to the Company's projected results, during the term of
ENERSUL's concession, of thirty years beginning 01/01/1998.
Additional information about investments stated by the equity adjustment
method:
MAGISTRA TVIX ESCELSAPAR
----------------------------- --------------------------- ---------------------------
Jun-02 Mar-02 Jun-02 Mar-02 Jun-02 Mar-02
----------- ----------- ------------ --------- --------- ----------
Share Class Common Common Common Common Common Common
Total shares 473,203,348 473,203,348 1,540 1,540 1,000 1,000
Total shares of Escelsa 473,203,348 473,203,348 1,500 1,500 1,000 1,000
Stake (%) 100% 100% 97.40% 97.40% 100% 100%
Value of capital stock 668,483 668,483 1,540 1,540 2,203 2,203
Shareholders' equity 744,805 719,918 132 157 3,032 2,799
Net income (loss) (14,381) 8,544 (69) (44) (3) (235)
Investment value on June 30 744,805 719,918 129 153 3,032 2,799
Equity adjustment (14,381) 8,544 (68) (41) (3) (235)
11. PROPERTY, PLANT AND EQUIPMENT
PARENT COMPANY CONSOLIDATED
----------------------- Annual average rates --------------------------
Jun-02 Mar-02 of depreciation (%) Jun-02 Mar-02
--------- --------- -------------------- ---------- ----------
IN SERVICE:
Generation 104,507 104,468 2.22% 197,128 196,837
- --------------------------------------------------------------------------------
23
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002
- --------------------------------------------------------------------------------
Transmission 13,333 13,003 2.86% 13,333 13,003
Distribution 1,020,864 1,010,280 4.34% 1,937,064 1,885,005
Commercialization 4,301 4,301 9.26% 7,451 7,264
Administration 111,281 110,973 8.82% 230,595 224,480
--------- --------- ---------- ---------- ----------
1,254,286 1,243,025 4.54% 2,385,571 2,326,589
--------- --------- ---------- ---------- ----------
(-) Accumulated depreciation
Generation (61,438) (60,796) (102,276) (100,954)
Transmission (6,880) (6,785) (6,880) (6,785)
Distribution (368,222) (359,073) (691,874) (674,561)
Commercialization (2,363) (2,264) (2,690) (2,448)
Administration (51,119) (48,897) (94,233) (89,026)
--------- --------- ---------- ----------
(490,022) (477,815) (897,953) (873,774)
--------- --------- ---------- ----------
764,264 765,210 1,487,618 1,452,815
--------- --------- ---------- ----------
UNDER CONSTRUCTION:
Generation 4,328 4,243 88,777 66,347
Transmission 658 799 658 799
Distribution 76,161 80,032 116,933 154,106
Administration 11,255 10,120 14,440 17,743
--------- --------- ---------- ----------
92,402 95,194 220,808 238,995
--------- --------- ---------- ----------
856,666 860,404 1,708,426 1,691,810
--------- --------- ---------- ----------
(-)Obligations related to the concession (94,268) (92,984) (184,647) (183,329)
--------- --------- ---------- ----------
TOTAL 762,398 767,420 1,523,779 1,508,481
--------- --------- ---------- ----------
Obligations related to the concession is composed by the following balances:
PARENT COMPANY CONSOLIDATED
------------------- -------------------
Jun-02 Mar-02 Jun-02 Mar-02
------- ------- ------- -------
Consumer contributions 63,229 61,943 87,016 85,294
Donations and subsidies 25,794 25,794 90,237 90,639
Federal participation 5,245 5,247 7,394 7,396
------- ------- ------- -------
TOTAL 94,268 94,984 184,647 183,329
======= ======= ======= =======
In accordance with General Instruction n(Degree) 36 of the Accounting Standards
for Public Electric Utilities and CVM Instruction n(Degree) 193 of July 11,
1996, the following amounts were incorporated into Property, Plant and
Equipment:
PARENT COMPANY CONSOLIDATED
------------------------- --------------------------------------
Distribution Total Generation Distribution Total
------------ --------- ------------ -------------- ----------
Interest on loans and financing 75,075 75,075 6,542 102,329 108,871
(-) Transfer to property, plant
and equipment (1,033) (1,033) (5,313) (3,310) (8,623)
-------- -------- -------- -------- --------
Net 74,042 74,042 1,229 99,019 100,248
======== ======== ======== ======== ========
Monetary exchange variation.. 235,866 235,866 1,920 267,463 269,383
(-)Transfer to property, plant
and equipment (294) (294) (1,893) (693) (2,586)
-------- -------- -------- -------- --------
Net 235,572 235,572 27 266,770 266,797
======== ======== ======== ======== ========
12. SUPPLIERS
- --------------------------------------------------------------------------------
24
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002
- --------------------------------------------------------------------------------
PARENT COMPANY CONSOLIDATED
------------------ ------------------
CURRENT LIABILITIES: Jun-02 Mar-02 Jun-02 Mar-02
------- ------- ------- -------
Electricity suppliers:
FURNAS 29,734 37,677 29,734 37,677
ITAIPU 46,853 27,159 60,584 38,236
TRACTEBEL - - 9,600 9,906
ELETROSUL - - 1,486 1,169
MAE 22,794 41,909 35,073 56,120
Other 6,241 6,247 8,744 9,266
------- ------- ------- -------
105,622 112,992 145,221 152,374
Materials and service providers 5,542 6,832 11,905 12,894
------- ------- ------- -------
TOTAL 111,164 119,824 157,126 165,268
======= ======= ======= =======
LONG TERM LIABILITIES:
Electric Energy Supply:
Free energy 68,596 61,239 95,329 84,600
------- ------- ------- -------
TOTAL 68,596 61,239 95,329 84,600
======= ======= ======= =======
- --------------------------------------------------------------------------------
25
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002
- --------------------------------------------------------------------------------
13. LOANS AND FINANCING
PARENT COMPANY
- ------------------------------------------------------------------------------------------------------------------------------------
Maturity Jun-02 Mar-02
---------------------------- ----------------------------- --------------------------
Interest Interest
and and
Average Interest Other Other
DESCRIPTION Rate Period Charges Current Long-Term Charges Current Long-Term
- ------------------------------------------------------------------------------------------------------------------------------------
Local Currency:
ELETROBRAS 5,0% - 7,0% Monthly May/99 to Aug/07 - 1,932 4,324 - 1,777 4,775
BNDES TJLP plus 3.8% Monthly Nov/99 to Oct/10 1,590 27,150 162,713 1,691 60,894 164,883
BNDES-Rationing losses SELIC plus1,0% Monthly Feb/02 to Feb/03 - 28,763 - - - -
Bank Loan CDI Monthly Oct/01 to Aug/02 - 28,554 - - 8,300 -
----------------------------- --------------------------
1,590 86,399 167,037 1,691 70,971 169,658
----------------------------- --------------------------
Foreign Currency:
Senior Notes 10.0% Bullet Jul/07 56,183 - 1,225,817 20,862 - 1,001,374
----------------------------- --------------------------
TOTAL 57,773 86,399 1,392,854 22,553 70,971 1,171,032
============================= ==========================
CONSOLIDATED
- ------------------------------------------------------------------------------------------------------------------------------------
Maturity Jun-02 Mar-02
---------------------------- ----------------------------- --------------------------
Interest Interest
and and
Average Interest Other Other
DESCRIPTION Rate TIPO Period Charges Current Long-Term Charges Current Long-Term
- ------------------------------------------------------------------------------------------------------------------------------------
Local Currency:
ELETROBRAS - ESCELSA 5.0% to 7.0% Monthly May/99 to Nov/04 - 1,932 4,324 - 1,777 4,775
ELETROBRAS - ENERSUL 6.0% to 12.0% Monthly May/99 to Aug/07 480 16,954 43,669 384 19,444 45,703
BNDES - ESCELSA TJLP plus 3.8% Monthly Oct/99 a Oct/10 1,590 27,150 162,713 1,691 60,894 164,883
BNDES - MAGISTRA TJLP plus 4.0% Half-Year Nov/99 a Nov/04 1,179 38,485 57,727 4,167 38,169 76,339
BNDES - ENERSUL TJLP plus 3.85% Monthly Jul/99 a Feb/08 247 12,787 59,674 314 12,683 62,356
BNDES - ENERSUL TJLP plus 4.00% Monthly May/99 a Apr/04 6 916 763 8 908 985
BNDES-Rationing losses SELIC plus 1.0% Monthly Feb/02 a Feb/03 98 43,903 - 179 20,337 -
BCO BRASIL - FCO 11.20% Monthly Nov/02 a Nov/13 586 - 30,000 363 - 20,000
Bank Loan CDI Monthly Jul/02 a Mar/03 1,274 134,156 - 1,277 88,003 -
FUNDACAO ENERSUL 10% Monthly Nov/02 a Nov/13 109 1,591 16,781 109 1,453 16,958
Other 1.35% Monthly May/00 a Jun/09 162 1,015 1,537 29 15,073 3,665
============================= ==========================
TOTAL 5,731 278,889 377,188 8,521 258,741 395,664
============================= ==========================
Foreign Currency:
SENIOR NOTES 10,0% Bullet Jul/07 56,183 - 1,225,817 20,862 - 1,001,374
BRADESCO(*) 4,90% to 12,00% (**) May/01 a Nov/02 119 21,292 - 298 11,565 -
UNIBANCO(*) 10,85% to 11,40% (**) Mar/01 a Apr/04 - - 14,121 144 11,334 11,535
EUROPEAN INVEST BANK LIBOR plus 4,0% Half-Year Apr/00 a Mar/09 197 - 46,079 732 - 37,642
to 5,0%
STN-DMLP LIBOR plus 4,5% Half-Year Apr/94 a Apr/24 553 1,213 40,001 914 886 33,225
to 8,2%
BBA FMO(*) 8,90% Half-Year Oct/01 a Sep/07 495 3,852 12,711 508 4,328 9,202
Other 1,5% to 3,5% Bullet Nov/01 a Oct/02 270 37,907 - 220 29,862 -
============================= ==========================
57,817 64,264 1,338,729 23,678 57,975 1,092,978
============================= ==========================
63,548 343,153 1,715,917 32,199 316,716 1,488,642
============================= ==========================
Long Term Interest
Banco B.B.A FMO (*) - - - 89 - -
============================= ==========================
UNIBANCO (*) 2,085 - - 1,378 - -
2,085 - - 1,467 - -
============================= ==========================
(*) Financing are hedged against currency fluctuations by swap contracts
(**) Loans composed of several notes with the same maturity date
- --------------------------------------------------------------------------------
26
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002
- --------------------------------------------------------------------------------
a) The breakdown of loans and financing per currency is as follows:
PARENT COMPANY CONSOLIDATED
----------------------- -----------------------
Jun-02 Mar-02 Jun-02 Mar-02
--------- --------- --------- ---------
Local currency 253,436 240,629 656,077 654,405
Foreign currency 1,225,817 1,001,374 1,402,993 1,150,953
--------- --------- --------- ---------
TOTAL 1,479,253 1,242,003 2,059,070 1,805,358
========= ========= ========= =========
b) The percentage variation of the main indicators used for updating the loans
and financing are as follows:
Currency and Indexes Jun-02 Jun-01
- --------------------------------------------- ---------- ----------
US$ x R$ 22.58% 17.87%
IGP-M 3.48% 4.32%
INPC 3.43% 3.81%
TJLP 9.50% 9.25%
c) Maturity of short and long-term installments is as follows:
Maturity PARENT COMPANY CONSOLIDATED
----------- --------------------------------- ----------------------------------
Currency
------------------------------------------------------------------------
Current Local Foreign Total Local Foreign Total
------- --------- --------- -------- --------- ---------
2002 62,277 - 62,277 219,350 61,786 281,136
2003 24,122 - 24,122 59,539 2,478 62,017
------- --------- --------- -------- --------- ---------
86,399 - 86,399 278,889 64,264 343,153
------- --------- --------- -------- --------- ---------
Long term
2003 23,284 - 23,284 57,428 10,394 67,822
2004 47,247 - 47,247 108,742 29,519 138,261
2005 49,773 - 49,773 72,010 15,397 87,407
2006 30,169 - 30,169 53,126 12,672 65,798
2007 4,764 1,225,817 1,230,581 28,569 1,238,036 1,266,605
2008 4,274 - 4,274 16,010 6,837 22,847
2009 4,274 - 4,274 10,890 2,391 13,281
2010 3,252 - 3,252 9,868 1,825 11,693
2011 - - - 6,616 1,825 8,441
After 2011 - - - 13,929 19,833 33,762
------- --------- --------- -------- --------- ---------
167,037 1,225,817 1,392,854 377,188 1,338,729 1,715,917
======= ========= ========= ======== ========= =========
TOTAL 253,436 1,225,817 1,479,253 656,077 1,402,993 2,059,070
======= ========= ========= ======== ========= =========
14. PROVISION FOR CONTINGENCIES
PARENT COMPANY
----------------------------------------------------------------------------
Jun-02 Mar-02
------------------------------------ -----------------------------------
Provision Provision
- -------------------- ------------------------ -------- ----------------------- --------
Escrow In the Escrow
Contingency In the Year Accumulated Deposits quarter Accumulated Deposits
- -------------------- ----------- ----------- -------- ------- ----------- --------
Current liabilities:
Fiscal
COFINS - 39,382 39,382 - 39,382 39,382
------- ------- ------- ------- ------- -------
TOTAL - 39,382 39,382 - 39,382 39,382
======= ======= ======= ======= ======= =======
Long-term:
Labor claims 916 16,769 9,914 (207) 15,853 9,663
Civil litigation 659 27,601 6,894 228 26,942 6,539
Fiscal 2,241 73,594 49,633 1,927 71,353 47,449
------- ------- ------- ------- ------- -------
TOTAL 3,816 117,964 66,441 1,948 114,148 63,651
======= ======= ======= ======= ======= =======
- --------------------------------------------------------------------------------
27
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002
- --------------------------------------------------------------------------------
CONSOLIDATED
----------------------------------------------------------------------------
Jun-02 Mar-02
------------------------------------ -----------------------------------
Provision Provision
- -------------------- ------------------------ -------- ----------------------- --------
Escrow Escrow
Contingency In the Year Accumulated Deposits In the Year Accumulated Deposits
- -------------------- ----------- ----------- -------- ----------- ----------- --------
Current liabilities:
Fiscal
COFINS - 39,382 39,382 - 39,382 39,382
------- ------- ------- ------- ------- -------
TOTAL - 39,382 39,382 - 39,382 39,382
======= ======= ======= ======= ======= =======
Long-term:
Labor claims 1,026 20,543 11,845 (482) 19,517 11,428
Civil litigation 840 32,157 7,112 219 31,317 6,756
Fiscal 4,307 96,085 66,393 3,064 91,778 62,373
------- ------- ------- ------- ------- -------
TOTAL 6,173 148,785 85,350 2,801 142,612 80,557
======= ======= ======= ======= ======= =======
Management understands that the provisions recorded are sufficient to
cover eventual losses from the ongoing litigation. Based on the opinion
of the Company's legal counsel, all litigation for which the probability
of a favorable outcome was estimated as remote for the Company was
provided for. Furthermore, there are labor, civil and fiscal cases
pending in the total amount of R$28,827 , for which the probability of a
favorable outcome was estimated as likely and no provisions were
recorded on the financial statements.
COFINS:
Provided for based on the amounts deposited from May 1996 to July 1999,
based on a preliminary injunction obtained in May 1996 by way of a tax
immunity claim.
With the decision by the Supreme Court - STF in July 1999, upholding the
constitutionality of COFINS tax on electric energy transactions, the
Company converted the deposited amounts, normalizing the taxes payments
and reclassified the provision to the current asset. The Company awaits
the final judicial decision ruling for a reversion of the deposits and
subsequent payment of the amounts provided for.
Labor contingencies:
Refer to several labor claims against the Company, which claim payment
of overtime, hazards, reintegration, among other items.
Civil contingencies
The civil contingencies include suits in which the Company is a
defendant, being in most of cases related to moral and material damages
claims, among other challenging amounts paid by customers for tariff
increases based on DNAEE regulations 38 and 45 of January 27, 1986 and
March 4, 1986, respectively, during the Cruzado Plan.
Fiscal contingencies
The Company is also a party of a administrative process with the Federal
Reserve, pending final decision, for compensation of amounts overpaid
related to FINSOCIAL, due to the unconstitutionality of the Decrees -
Law n(Degree)s. 2,445 and 2,499.
There is also a preliminary decision in lower court which guarantees
restitution and/or compensation of amounts overpaid related to fines on
tax and contributions made spontaneously and untimely. The fines
exemption are being requested based on article 138 of the National Tax
Code - CTN. Based on its legal counsel, the Company compensated the
amounts related to past-due contributions (PIS, COFINS, IRPJ and CSLL),
as per Article 66 of Law no. 8,383/91. Conservatively, the Company
maintained provisions for amounts corresponding to the above mentioned
taxes and contributions.
15. CAPITAL STOCK AND RESERVES
In accordance with its by-laws, the Company is authorized to operate
with up to R$1,000,000 in capital of which R$153,947 are subscribed and
fully paid in. Capital stock as of June 30, 2002, is represented by
4,550,833 common shares, with no par value, with the following equity
structure:
- --------------------------------------------------------------------------------
28
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002
- --------------------------------------------------------------------------------
Quantity Shareholders' % of
Shareholder of shares quantity participation
- -------------------------------- ------------ -------------- ---------------
IVEN S.A 2,378,673 1 52.27
GTD PARTICIPACOES S.A 1,137,709 1 25.00
Fundacao Banco Central - CENTRUS 275,678 1 6.06
CINVES 66,363 1 1.46
Other 692,410 145 15.21
--------- --------- ---------
TOTAL 4,550,833 149 100.00
========= ========= =========
16. CHANGES IN SHAREHOLDERS' EQUITY - PARENT COMPANY
CREDITS
CAPITAL CAPITAL RETAINED FOR CAPITAL
STOCK RESERVES EARNINGS SUBTOTAL INCREASE TOTAL
----------------------------------------------------------------------------------
BALANCE AS OF DECEMBER 31, 2001 153,947 574,069 - 728,016 3,387 731,403
Remuneration on construction work in progress 2,402 2,402 2,402
Income for the period (174,368) (174,368) (174,368)
------- ------- -------- -------- -------- --------
BALANCE AS OF JUNE 30, 2002 153,947 576,471 (174,368) 556,050 3,387 559,437
======= ======= ======== ======== ======== ========
17. INCOME TAX AND SOCIAL CONTRIBUTION
PARENT COMPANY
------------------------------------------------------------
Jun-02 Jun-01
----------------------------- -----------------------------
Income tax Social Cont. Income tax Social Cont.
------------ --------------- ------------ --------------
Income (loss) before taxes (251,694) (251,694) (134,392) (134,392)
Statutory rate 25% 8% 25% 8%
============================================================
(62,924) (20,136) (33,598) (10,751)
Remuneration on construction work in progress 601 192 75 24
Equity in subsidiaries 3,613 1,156 1,422 455
Non-deductible provision 3,201 102 3,649 (207)
Adjustments - tax credits (DIPJ/2001) (3,302) (100) (3,457) 221
------------------------------------------------------------
(58,541) (18,786) (31,909) (10,258)
============================================================
Effective rate 25% 8% 25% 8%
============================================================
18. PENSION PLANS
a) The Company is the sponsor of FUNDACAO ESCELSA DE SEGURIDADE SOCIAL
- ESCELSOS, a nonprofit organization, whose main purpose is to
complement the benefits granted by the official social security to
the Company's employees through two benefit packages: A Defined
Benefit Plan (Plan I) and a Defined Contribution Plan (PLAN II).
These benefit plans are based on mathematical reserves calculated
actuarially according to the capitalization policy, which is revised
annually.
PARENT COMPANY
--------------------------
Jun-02 Mar-02
------- -------
TECHNICAL RESERVES
Mathematical reserves:
Benefits paid 75,012 73,862
Benefits 80,641 80,574
------- -------
155,653 154,436
------- -------
TECHNICAL SURPLUS
Contingency 21,378 23,061
------- -------
Total 177,031 177,497
======= =======
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[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002
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b) The table below shows the number of participants in each plan:
PLAN I PLAN II TOTAL
------ ------- -----
Contributing participants 36 1,446 1,482
----- ----- -----
Receiving participants
Retirees 642 106 748
Pension beneficiaries 103 4 107
----- ----- -----
745 110 855
----- ----- -----
Total 781 1,556 2,337
===== ===== =====
c) As a sponsor, the Company's monthly contributions are made at the
same proportion of the participants of ESCELSOS Foundation,
corresponding to the amount established in each plan, limited to 7%
of the total payroll. For the first half of 2002, ESCELSA
contributed R$1,222 (R$1,209 in the first half of 2001).
d) Based on the Article 84 of CVM Deliberation n.(Degree)371/2000, at
December/2001 the Company calculated the present value of the
actuarial obligations related with the unvested benefit,. As a
result, the balances as of June 30, 2002 can be shown as follows:
Obligations related to post-retirement benefits.
Current liabilities 2,420
Long term liabilities 28,032
e) The actuarial calculations showed that the fair value of the net
assets of the pension plan exceeds the present value of the vested
and unvested actuarial obligations. However, company's management
adopted a conservative position and decided do not record this
surplus as a deduction of the unvested actuarial obligations.
19. FINANCIAL INSTRUMENTS
As per CVM Instruction n(Degree) 235 of March 23, 1995, established a
mechanism for the disclosure of the market value of financial
instruments by way of "notes to the financial statements," regardless
their recognition or not in the financial statements.
The Company's business entails the distribution and sale of electric
energy for customers within its concession area - the State of Espirito
Santo - and therefore significant financial instruments are related to
the following transactions:
o Balances of long-term accounts receivable and accounts payable are
related to the extraordinary tariff recovery and therefore are not
subject to adjustments to market value;
o Investments in short term mutual funds and/or fixed income
investments are recorded at approximate market value as they are
recorded with accrued interest on a pro-rata basis;
o Equity stakes in other companies are in most cases through shares
that are not publicly traded;
o Loans due by the Company are mainly long-term and, in the most of
cases, are, from specific funding sources.
19.1 Exchange rate and interest rate risks
The book value of the main financial instruments held by
ESCELSA are:
PARENT COMPANY CONSOLIDATED
------------------------ ------------------------
Jun-02 Mar-02 Jun-02 Mar-02
--------- --------- --------- ---------
Marketable securities 214,501 207,672 214,693 207,931
Loans and financing - Long-term 1,392,854 1,171,032 1,715,917 1,488,642
A portion of the loans and financing in local currency is
comprised of financing from government entities ELETROBRAS and
BNDES
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[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002
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As the market interest rate (or opportunity cost of capital) is
established by these governmental entities, taking into
consideration the risk premium related with the electrical
sector's activities and that in the absence of other financing
sources or other market options and/or methodology to estimate
the market value of such options, in light of the Company's
business and specific circumstances of the sector, the market
value for this portion comprised of domestic loans shall
correspond to their book value, as shall other financial assets
and liabilities.
As mentioned in Note 14, foreign currency financing was obtained
(in U.S. dollars), being the indebtedness and earnings
significantly impacted by the risk of exchange rate variation of
foreign currency. Such risk may cause the Company to incur
losses due to unexpected foreign exchange fluctuations, which
may increase liabilities denominated in foreign currency.
Net exposure to the exchange variation of foreign currency risk
as of June 30, 2002 is as follows:
BOOK VALUE FAIR VALUE
---------------------------------------------------------
Jun-02 Mar-02 Jun-02 Mar-02
---------- ---------- ---------- ----------
Senior Notes 1,225,817 1,001,374 833,556 911,250
U.S. dollar assets (214,370) (207,551) (214,370) (207,551)
---------- ---------- ---------- ----------
Net Exposure 1,011,447 793,823 619,186 703,699
========== ========== ========== ==========
The method used to determine the fair value of the Senior Notes
obligation was their average market price as per the security's
trading activity at the end of each fiscal period (source:
Report edited in the USA by Morgan Stanley Team Witter, showing
the market price of transactions negotiated in New York.) and,
for U.S. dollar assets, the market price of the contracts at the
end of the fiscal period was utilized, which is equal to the
book value.
Additionally, the Company hedged part of its currency
fluctuations exposure by using swap contracts. The operations'
parameters and amounts are described above:
Date Parameters (rates %)
Financial ------------------------- --------------------
Institution Transaction Maturity Amount Banks ESCELSA Income
- ----------- ----------- -------- ------ ----- ------- ------
Banco Pactual 28/03/02 14/01/03 19.38 4,32 1,04 3.617
Banco do Brasil 28/03/02 12/07/02 19.03 4,32 1,04 3.718
-----
7.335
=====
On a consolidated basis, loans and obligations held by companies
within the ESCELSA Group were made at rates and terms generally
practiced in the domestic and international markets to fund
investments in the electric energy sector in its concession
areas as a public utility.
The subsidiaries MAGISTRA and ENERSUL maintain liabilities in
foreign currency (US$). To reduce foreign exchange related risk,
swap instruments are being used to hedge a portion of these
obligations, as mentioned in Note 13. Indexes used in these
instruments are the IGP-M plus interest rates of 11.70% to
12.01% per annum and CDI plus 0.95%- 2.33% per annum.
Considering the Real devaluation during the period, the hedging
instruments generated a gain of R$9,025, recorded monetary
variation in the financial statements, as follows:
AMOUNT
--------------------------
LIABILITY BOOK VALUE SWAP VALUE GAIN
----------------------- ---------- ---------- ----
Loans and Financing 93,645 84,520 9,025
For the remaining contracts, given the specific nature of these
transactions and the inability to determine the market value for
this type of financial instrument, Companies' management, taking
into consideration the risk to the company, the strategy and
debt management practices adopted, estimates that the market
values of the instruments are equal or approximates to their
book value.
19.2 Credit Risk
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[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002
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As to the credit risk, there is a possibility that the Company
will incur losses resulting from its customers default. To
mitigate against this risk, the Company has the right to
interrupt the supply of electric energy in the event that a
customer fails in paying bills within the time-periods defined
by legislation and specific regulations. A provision for
doubtful accounts is established in an amount deemed sufficient
by management to cover potential accounts receivable risks.
20. EXPLANATION ADDED FOR TRANSLATION INTO ENGLISH
These financial statements are presented on the basis of accounting
principles set forth by the Brazilian corporate law. Certain accounting
practices followed by the Company and its subsidiaries that conform to
generally accepted accounting principles in Brazil may not conform with
generally accepted accounting principles in other countries.
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32