Exhibit 1
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2002
- --------------------------------------------------------------------------------
BALANCE SHEETS
(In thousands of Brazilian reais)
(Convenience Translation into English
from the Original Previously Issued in Portuguese)
PARENT COMPANY CONSOLIDATED
----------------------------------- -----------------------------------
Sep-02 Jun-02 Sep-02 Jun-02
------------------ ---------------- ------------------ ----------------
ASSETS
CURRENT ASSETS
Cash and banks 3,912 7,368 6,299 8,262
Marketable securities 285,721 214,501 288,903 214,693
Accounts receivable 262,805 240,925 413,305 380,363
Other accounts receivable 14,102 19,278 29,915 34,313
Income tax paid in advance 40,766 43,451 57,316 57,827
Allowance for doubtful accounts (21,687) (19,998) (32,546) (30,124)
Material and supplies 2,704 3,735 5,652 7,112
Escrow deposits 39,382 39,382 39,382 39,382
Prepaid expenses - CVA 2,928 26,843 11,417 31,730
Prepaid expenses - other 1,062 242 1,176 460
Service in progress 7,263 7,957 10,261 9,977
Other credits 13,677 9,558 19,780 20,016
------------------ ---------------- ------------------ ----------------
652,635 593,242 850,860 774,011
------------------ ---------------- ------------------ ----------------
LONG-TERM ASSETS
Accounts receivable 183,552 171,309 278,301 253,407
Special tariff situation 46,611 46,609 71,828 71,826
Affiliates and subsidiaries 6,473 1,362 63,031 57,561
Funding costs 2,851 3,043 2,851 3,043
Escrow deposits 69,413 66,441 98,008 90,006
Deferred income tax 170,130 170,130 286,748 286,930
Prepaid expenses - CVA 83,278 50,200 133,670 91,412
Other 19,290 18,431 31,517 29,973
------------------ ---------------- ------------------ ----------------
581,598 527,525 965,954 884,158
------------------ ---------------- ------------------ ----------------
PERMANENT ASSETS
Investments 762,238 749,836 377,018 379,688
Property, plant and equipment, net 760,430 762,398 1,540,982 1,523,779
Deferred charges - - 79 79
------------------ ---------------- ------------------ ----------------
1,522,668 1,512,234 1,918,079 1,903,546
------------------ ---------------- ------------------ ----------------
TOTAL ASSETS 2,756,901 2,633,001 3,734,893 3,561,715
================== ================ ================== ================
See notes to financial statements
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1
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2002
- --------------------------------------------------------------------------------
BALANCE SHEETS
(In thousands of Brazilian reais)
(Convenience Translation into English from
the Original Previously Issued in Portuguese)
PARENT COMPANY CONSOLIDATED
------------------------------ -------------------------------
Sep-02 Jun-02 Sep-02 Jun-02
-------------- -------------- --------------- --------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Suppliers 116,034 111,164 164,747 157,126
Payroll 1,803 942 2,932 2,457
Accrued interest and fees 38,756 57,773 47,937 63,548
Consumers charges payable 5,593 5,938 10,022 9,621
Accrued taxes and social contributions 37,653 33,220 52,729 49,146
Dividends 21 21 30 105
Loans and financing 139,538 86,399 337,931 343,153
Post retirement benefits 2,420 2,420 2,420 2,420
Accrued obligations 12,369 9,163 23,467 17,638
Provision for contingencies 39,382 39,382 39,382 39,382
Variation of parcel A items 3,322 29,051 4,844 29,438
Other 16,420 12,360 22,330 14,736
-------------- -------------- --------------- --------------
413,311 387,833 708,771 728,770
-------------- -------------- --------------- --------------
LONG-TERM LIABILITIES
Suppliers 66,972 68,596 97,669 95,329
Deferred income tax 8,259 8,875 8,259 8,875
Special tariff situation 35,228 26,312 53,925 40,166
Accrued interest and fees - - 3,406 2,085
Loans and financing 1,939,173 1,392,854 2,351,527 1,715,917
Post retirement benefits 28,032 28,032 28,032 28,032
Provision for contingencies 121,353 117,964 156,437 148,785
Variation of parcel A items 22,502 1,833 25,746 3,769
Affiliates and subsidiaries 104 - - -
Other 45,484 41,265 49,379 45,246
-------------- -------------- --------------- --------------
2,267,107 1,685,731 2,774,380 2,088,204
-------------- -------------- --------------- --------------
MINORITY INTEREST - - 175,259 185,304
-------------- -------------- --------------- --------------
SHAREHOLDERS' EQUITY
Capital stock 153,947 153,947 153,947 153,947
Capital reserves 577,588 576,471 577,588 576,471
Accumulated losses (658,439) (174,368) (658,439) (174,368)
-------------- -------------- --------------- --------------
73,096 556,050 73,096 556,050
-------------- -------------- --------------- --------------
Credits for capital increase 3,387 3,387 3,387 3,387
-------------- -------------- --------------- --------------
76,483 559,437 76,483 559,437
-------------- -------------- --------------- --------------
TOTAL LIABILITIES AND SHAREHOLDER'S' EQUITY 2,756,901 2,633,001 3,734,893 3,561,715
============== ============== =============== ==============
See notes to financial statements
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2
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2002
- --------------------------------------------------------------------------------
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
------------------------------ -------------------------------
Nine months ended September 30,
---------------------------------------------------------------
2002 2001 2002 2001
-------------- -------------- --------------- --------------
OPERATING REVENUES
Electric power sales to final customers 759,635 662,815 1,164,964 999,537
Emergency charge 11,271 - 15,539 -
Electric power sales to distributors 42,078 23,467 28,357 40,131
Other revenues 17,827 6,837 31,563 22,510
-------------- -------------- --------------- --------------
830,811 693,119 1,240,423 1,062,178
-------------- -------------- --------------- --------------
Deductions from operating revenues
Global reserve for reversion quota (RGR) (11,519) (12,538) (20,083) (20,494)
State VAT (ICMS) (188,697) (156,551) (257,142) (216,812)
PIS and COFINS (29,645) (25,298) (44,525) (38,791)
Emergency charge (11,271) - (15,539) -
Other (47) (4) (447) (303)
-------------- -------------- --------------- --------------
(241,179) (194,391) (337,736) (276,400)
-------------- -------------- --------------- --------------
NET OPERATING REVENUES 589,632 498,728 902,687 785,778
-------------- -------------- --------------- --------------
OPERATING EXPENSES
Personnel (47,226) (46,402) (84,712) (79,855)
Material (5,147) (5,822) (10,503) (15,360)
Services from third parties (23,177) (21,184) (45,908) (38,964)
Electric power purchased for resale (308,379) (278,384) (432,520) (396,830)
Transport of electricity capacity (48,580) (52,331) (76,771) (83,289)
Quota for fuel consumption - CCC (38,095) (41,606) (56,696) (59,495)
Depreciation and amortization (42,621) (41,480) (91,211) (80,367)
Provision for contingencies (1,959) - (5,290) 539
Other (25,828) (20,305) (39,555) (36,656)
-------------- -------------- --------------- --------------
(541,012) (507,514) (843,166) (790,277)
-------------- -------------- --------------- --------------
INCOME FROM OPERATIONS 48,620 (8,786) 59,521 (4,499)
-------------- -------------- --------------- --------------
EQUITY IN SUBSIDIARIES (34,449) (24,000) - -
-------------- -------------- --------------- --------------
FINANCIAL REVENUES
Income from temporary cash investments 44,989 126,957 56,182 127,109
Increase in overdue collections 7,929 5,989 12,115 9,254
Hedge 15,326 - 15,326 -
Selic-regulatory assets 23,187 - 40,136 -
Other 7,141 5,722 16,583 29,565
-------------- -------------- --------------- --------------
98,572 138,668 140,342 165,928
-------------- -------------- --------------- --------------
FINANCIAL EXPENSES
Monetary variation - electricity purchase (4,068) (6,839) (6,058) (9,453)
Monetary and exchange variation on loans and
financing (701,782) (312,234) (757,555) (350,735)
Interest on loans and financing (124,498) (88,920) (166,798) (118,479)
Other (14,769) (10,756) (19,712) (15,369)
-------------- -------------- --------------- --------------
(845,117) (418,749) (950,123) (494,036)
-------------- -------------- --------------- --------------
FINANCIAL RESULTS (746,545) (280,081) (809,781) (328,108)
-------------- -------------- --------------- --------------
OPERATING PROFIT (LOSS) (732,374) (312,867) (750,260) (332,607)
-------------- -------------- --------------- --------------
NON-OPERATING REVENUES 400 2,570 747 3,330
NON-OPERATING EXPENSES (4,408) (3,684) (7,814) (7,193)
-------------- -------------- --------------- --------------
NON-OPERATING INCOME (LOSS), NET (4,008) (1,114) (7,067) (3,863)
-------------- -------------- --------------- --------------
LOSS BEFORE TAXES AND MINORITY INTEREST (736,382) (313,981) (757,327) (336,470)
-------------- -------------- --------------- --------------
Social contribution and income tax 77,943 95,096 84,367 108,586
-------------- -------------- --------------- --------------
LOSS BEFORE MINORITY INTEREST (658,439) (218,885) (672,960) (227,884)
-------------- -------------- --------------- --------------
MINORITY INTEREST - - 14,521 8,999
-------------- -------------- --------------- --------------
LOSS FOR THE PERIOD (658,439) (218,885) (658,439) (218,885)
============== ============== =============== ==============
Loss per share - R$ (144.68) (48.10) - -
-------------- -------------- --------------- --------------
See notes to financial statements
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3
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2002
-------------------------------------------------------
STATEMENTS OF CASH FLOWS
(In thousands of Brazilian reais)
(Convenience Translation into English
from the Original Previously Issued in Portuguese)
PARENT COMPANY CONSOLIDATED
---------------------------------------------------------------
Nine months ended September 30,
---------------------------------------------------------------
2002 2001 2002 2001
-------------- -------------- --------------- --------------
From operations
Loss for the period (658,439) (218,885) (658,439) (218,885)
Adjustments to reconcile loss to cash
provided by operating activities:
Long-term monetary and exchange variation 701,914 312,234 751,937 340,475
Equity in subsidiaries 34,449 24,000 - -
Depreciation and amortization 42,621 41,480 91,211 80,367
Disposal of property, plant and equipment 3,507 3,627 7,188 6,576
Provision for contingencies 9,153 20,793 12,880 20,254
Rationing program - regulatory assets 9,339 - (11,890) -
Minority share in profit - - (14,521) (8,999)
Obligations adjustments 5,829 - 5,829 -
Tax credits (76,328) (95,096) (83,564) (108,723)
Remuneration of construction work in
progress and other - (909) (862)
-------------- -------------- --------------- --------------
72,045 88,153 99,722 110,203
-------------- -------------- --------------- --------------
Changes in current assets and liabilities
Accounts receivable (65,869) 1,216 (75,421) (2,512)
Other accounts receivable 14,359 (43,481) 3,008 (49,457)
Prepaid expenses 2,135 (105) (3,983) (144)
Other credits (1,512) (3,977) (2,767) (15,654)
Suppliers (20,253) 60,066 (14,253) 74,281
Accrued taxes and social contributions 9,103 2,097 4,556 761
Accrued obligations 12 (980) 1,585 308
Consumers charges payable (2,788) (1,536) (3,218) (2,997)
Variation of Parcel A items 3,082 - 4,604 -
Other 7,167 (4,053) 10,542 (3,258)
-------------- -------------- --------------- --------------
(54,564) 9,247 (75,347) 1,328
-------------- -------------- --------------- --------------
Change in non-current assets and liabilities
Escrow deposits (8,318) (10,786) (13,798) (14,435)
Special tariff situation 11,321 - 16,613 -
Affiliates and subsidiaries (4,116) (1,668) (3,528) (151)
Prepaid expenses (8,621) - (25,620) -
Variation of parcel A items 4,896 7,940
Other (1,279) 4,453 (1,624) (4,578)
-------------- -------------- --------------- --------------
(6,117) (8,001) (20,017) (19,164)
-------------- -------------- --------------- --------------
Net cash provided by (used in) operation activities 11,364 89,399 4,358 92,367
-------------- -------------- --------------- --------------
Investing activities
Additions to property, plant and equipment (36,353) (43,449) (133,571) (121,665)
Additions to investments (99,395) (25,232) (105) 653
Obligations related to the concession 3,023 3,400 4,418 5,338
-------------- -------------- --------------- --------------
Net cash used in investing activities (132,725) (65,281) (129,258) (115,674)
-------------- -------------- --------------- --------------
Financing activities
Loans and financing 172,883 27,437 189,019 79,733
Accrued interest and fees (19,654) (14,247) (14,042) (6,855)
Dividends - (13,240) (4,053) (15,348)
Affiliates and subsidiaries - 1,810 (10,319) (9,951)
-------------- -------------- --------------- --------------
Net cash provided by (used in) financing activities 153,229 1,760 160,605 47,579
-------------- -------------- --------------- --------------
Net increase (decrease) in cash and equivalents 31,868 25,878 35,705 24,272
-------------- -------------- --------------- --------------
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 289,633 298,648 295,202 302,063
-------------- -------------- --------------- --------------
31,868 25,878 35,705 24,272
-------------- -------------- --------------- --------------
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4
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2002
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STATEMENTS OF INCOME BY QUARTER - UNCONSOLIDATED
(in thousands of Brazilian Reais)
PARENT COMPANY
- ------------------------------------------------------------------------------------------------------------------------------------
2 0 0 2
-----------------------------------------------------------------------
1st Quarter 2nd Quarter 3rd Quarter Total
-----------------------------------------------------------------------
NET OPERATING REVENUES 208,163 163,182 218,287 589,632
-----------------------------------------------------------------------
OPERATING EXPENSES (176,949) (169,496) (194,567) (541,012)
-----------------------------------------------------------------------
Electricity purchased for resale (108,323) (116,240) (132,396) (356,959)
Depreciation and amortization (14,131) (14,212) (14,278) (42,621)
Personnel (14,225) (15,474) (17,527) (47,226)
Material (1,557) (1,653) (1,937) (5,147)
Third party services (7,698) (7,405) (8,074) (23,177)
Fuel usage quota - CCC (12,907) (13,557) (11,631) (38,095)
Provision for contingencies - (1,256) 1,256 -
Other expenses (18,108) 301 (9,980) (27,787)
-----------------------------------------------------------------------
Income from operations 31,214 (6,314) 23,720 48,620
-----------------------------------------------------------------------
EQUITY IN SUBSIDIARIES 8,268 (22,720) (19,997) (34,449)
-----------------------------------------------------------------------
FINANCIAL REVENUES 19,215 44,805 34,552 98,572
-----------------------------------------------------------------------
FINANCIAL EXPENSES (37,757) (285,350) (522,010) (845,117)
-----------------------------------------------------------------------
Monetary variation-electricity purchased (305) (3,569) (194) (4,068)
Monetary and exchange variation on loans and
financing (2,821) (232,751) (466,210) (701,782)
Interest on loans and financing (32,037) (42,005) (50,456) (124,498)
Other (2,594) (7,025) (5,150) (14,769)
-----------------------------------------------------------------------
Financial results (18,542) (240,545) (487,458) (746,545)
-----------------------------------------------------------------------
NON-OPERATING REVENUES(EXPENSES), net (2,974) (82) (952) (4,008)
-----------------------------------------------------------------------
INCOME(LOSS) BEFORE TAXES 17,966 (269,661) (484,687) (736,382)
-----------------------------------------------------------------------
Social contribution and income tax (3,811) 81,138 616 77,943
-----------------------------------------------------------------------
NET INCOME(LOSS) FOR THE PERIOD 14,155 (188,523) (484,071) (658,439)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
2 0 0 1
-----------------------------------------------------------------------
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
-----------------------------------------------------------------------
NET OPERATING REVENUES 184,373 167,209 147,146 369,068
-----------------------------------------------------------------------
OPERATING EXPENSES (165,482) (175,336) (166,696) (238,514)
-----------------------------------------------------------------------
Electricity purchased for resale (108,695) (117,248) (104,772) (149,984)
Depreciation and amortization (13,564) (13,924) (13,992) (14,019)
Personnel (15,988) (15,607) (14,807) (15,922)
Material (1,786) (1,982) (2,054) (2,158)
Third party services (6,741) (7,309) (7,134) (8,046)
Fuel usage quota - CCC (12,151) (14,436) (15,019) (6,942)
Provision for contingencies - - - (29,924)
Other expenses (6,557) (4,830) (8,918) (11,519)
-----------------------------------------------------------------------
Income from operations 18,891 (8,127) (19,550) 130,554
-----------------------------------------------------------------------
EQUITY IN SUBSIDIARIES (942) (4,745) (18,313) 45,355
-----------------------------------------------------------------------
FINANCIAL REVENUES 41,079 49,484 48,105 (27,041)
-----------------------------------------------------------------------
FINANCIAL EXPENSES (118,945) (110,727) (189,077) 120,657
-----------------------------------------------------------------------
Monetary variation-electricity purchased (1,562) (1,545) (3,732) 2,748
Monetary and exchange variation on loans and
financing (89,789) (62,655) (159,790) 154,151
Interest on loans and financing (24,720) (27,869) (36,331) (26,476)
Other (2,874) (18,658) 10,776 (9,766)
-----------------------------------------------------------------------
Financial results (77,866) (61,243) (140,972) 93,616
-----------------------------------------------------------------------
NON-OPERATING REVENUES(EXPENSES), net (952) 592 (754) (2,930)
-----------------------------------------------------------------------
INCOME(LOSS) BEFORE TAXES (60,869) (73,523) (179,589) 266,595
-----------------------------------------------------------------------
Social contribution and income tax 19,581 22,586 52,929 (73,846)
-----------------------------------------------------------------------
NET INCOME(LOSS) FOR THE PERIOD (41,288) (50,937) (126,660) 192,749
- ------------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
-------------- LTM ended
Total September-02
--------------
NET OPERATING REVENUES 867,796 958,700
-----------------------------------
OPERATING EXPENSES (746,028) (779,526)
-----------------------------------
Electricity purchased for resale (480,699) (506,943)
Depreciation and amortization (55,499) (56,640)
Personnel (62,324) (63,148)
Material (7,980) (7,305)
Third party services (29,230) (31,223)
Fuel usage quota - CCC (48,548) (45,037)
Provision for contingencies (29,924) (29,924)
Other expenses (31,824) (39,306)
-----------------------------------
Income from operations 121,768 179,174
-----------------------------------
EQUITY IN SUBSIDIARIES 21,355 10,906
-----------------------------------
FINANCIAL REVENUES 111,627 71,531
-----------------------------------
FINANCIAL EXPENSES (298,092) (724,460)
-----------------------------------
Monetary variation-electricity purchased (4,091) (1,320)
Monetary and exchange variation on loans and
financing (158,083) (547,631)
Interest on loans and financing (115,396) (150,974)
Other (20,522) (24,535)
-----------------------------------
Financial results (186,465) (652,929)
-----------------------------------
NON-OPERATING REVENUES(EXPENSES), net (4,044) (6,938)
-----------------------------------
INCOME(LOSS) BEFORE TAXES (47,386) (469,787)
-----------------------------------
Social contribution and income tax 21,250 4,097
-----------------------------------
NET INCOME(LOSS) FOR THE PERIOD (26,136) (465,690)
- ------------------------------------------------------------------------------------------------
FINANCIAL RATIOS AND OTHER INFORMATION
- ------------------------------------------------------------------------------------------------------------------------------------
EBITDA 45,345 7,898 37,998 91,241
-----------------------------------------------------------------------
(+)Financial revenues 19,215 44,805 34,552 98,572
(+)Non-operating revenues(expenses), net (2,974) (82) (952) (4,008)
-----------------------------------------------------------------------
=Adjusted EBITDA 61,586 52,621 71,598 185,805
-----------------------------------------------------------------------
CAPEX 12,241 10,587 13,525 36,353
TOTAL DEBT 1,242,033 1,479,253 2,078,711 2,078,711
INTEREST ON LOANS AND FINANCING 32,037 42,005 50,456 124,498
EBITDA margin 21.8% 4.8% 17.4% 15.5%
EBITDA/Interest on loans and financing 1,4x 0,2x 0,8x 0,7x
Adjusted EBITDA margin 29.6% 32.2% 33.4% 31.7%
Adjusted EBITDA/Interest on loans and financing 1,9x 1,3x 1,4x 1,5x
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
EBITDA 32,455 5,797 (5,558) 144,573
-----------------------------------------------------------------------
(+)Financial revenues 41,079 49,484 48,105 (27,041)
(+)Non-operating revenues(expenses), net (952) 592 (754) (2,930)
-----------------------------------------------------------------------
=Adjusted EBITDA 72,582 55,873 41,793 114,602
-----------------------------------------------------------------------
CAPEX 12,568 15,226 15,655 22,081
TOTAL DEBT 1,070,065 1,115,652 1,314,094 1,203,914
INTEREST ON LOANS AND FINANCING 24,720 27,869 36,331 26,476
EBITDA margin 17.6% 3.5% -3.8% 39.2%
EBITDA/Interest on loans and financing 1,3x 0,2x -0,2x 5,5x
Adjusted EBITDA margin 39.4% 33.4% 28.4% 31.1%
Adjusted EBITDA/Interest on loans and financing 2,9x 2,0x 1,2x 4,3x
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
EBITDA 177,267 235,814
-----------------------------------
(+)Financial revenues 111,627 71,531
(+)Non-operating revenues(expenses), net (4,044) (6,938)
-----------------------------------
=Adjusted EBITDA 284,850 300,407
-----------------------------------
CAPEX 65,530 58,434
TOTAL DEBT 1,203,914 2,078,711
INTEREST ON LOANS AND FINANCING 115,396 150,974
EBITDA margin 20.4% 24.6%
EBITDA/Interest on loans and financing 1,5x 1,6x
Adjusted EBITDA margin 32.8% 31.5%
Adjusted EBITDA/Interest on loans and financing 2,5x 2,0x
- ------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2002
- --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS
FOR THE QUARTER ENDED SEPTEMBER 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 generation, transmission and
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.
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 September 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 and free energy recovery.
c) Allowance for doubtful accounts - recognized in accordance with
General Instruction no. 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 02 of 12/24/1997 and
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
- --------------------------------------------------------------------------------
6
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2002
- --------------------------------------------------------------------------------
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$3.8949 on
September 30, 2002 and US$ 1 = R$ 2.8444 on June 30, 2002).
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/year, or R$60/three months, 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.
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, the
balance of this account is being classified as a deduction to
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 no. 371.
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.
n) Taxation of transactions in the Electric Power Wholesale Market
(MAE) - According to article 32 of Provisional Measure 66, of
August 29, 2002, regulated by Normative Instruction 199, issued
on September 12, 2002, the Company opted for PIS/PASEP special
tax basis. This basis is related to revenues recorded according
MAE rules and the continuity of application at the rate of 0.65%.
3.2. Consolidated Financial Statements
The consolidated financial statements include the balance sheets and
the statements of income for the quarter ended September 30, 2002 and
June 30, 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.
- --------------------------------------------------------------------------------
7
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2002
- --------------------------------------------------------------------------------
4. MARKETABLE SECURITIES
PARENT COMPANY CONSOLIDATED
------------------------- ------------------------
Sep-02 Jun-02 Sep-02 Jun-02
------------ ------------ ----------- -----------
Interbank Deposits - CDB - - 34 13
U.S. Dollar-linked Treasury Notes - NTN and NBC 285,601 214,370 285,601 214,370
Other 120 131 3,268 310
------------ ------------ ----------- -----------
TOTAL 285,721 214,501 288,903 214,693
============ ============ =========== ===========
5. ACCOUNTS RECEIVABLE
PARENT COMPANY
-----------------------------------------------------------------------
Total
Past-due Past-due -------------------------
Current up to 90 Over 90 days Sep-02 Jun-02
days
------------- ------------- --------------- ------------ ------------
CURRENT ASSETS
FINAL CUSTOMERS
Residential 14,467 18,441 1,503 34,411 33,470
Industrial 36,520 3,306 2,987 42,813 38,748
Commercial, services and other activities 11,490 5,748 1,287 18,525 17,056
Rural 4,457 1,445 238 6,140 5,371
Public authority:
Federal 703 793 1,262 2,758 1,733
State 946 1,729 8,343 11,018 9,932
Municipal 587 782 1,414 2,783 2,655
Public lighting 2,844 2,059 2,192 7,095 6,312
Public service 2,051 78 92 2,221 1,934
Unbilled revenue 20,375 - - 20,375 17,507
Regulatory asset - recoverable losses 45,589 - - 45,589 44,941
Other credits 12,788 2,281 3,591 18,660 17,516
------------- ------------- --------------- ------------ ------------
152,817 36,662 22,909 212,388 197,175
------------- ------------- --------------- ------------ ------------
WHOLESALE
Distributors 5,243 - - 5,243 4,332
Spot market 45,135 - 39 45,174 39,418
------------- ------------- --------------- ------------ ------------
50,378 - 39 50,417 43,750
------------- ------------- --------------- ------------ ------------
TOTAL 203,195 36,662 22,948 262,805 240,925
============= ============= =============== ============ ============
LONG-TERM ASSETS
FINAL CUSTOMERS
Regulatory asset
Recoverable losses 88,297 - - 88,297 77,193
Free energy 70,231 - - 70,231 71,934
Other credits 25,024 - - 25,024 22,182
------------- ------------- --------------- ------------ ------------
183,552 - - 183,552 171,309
============= ============= =============== ============ ============
CONSOLIDATED
----------------------------------------------------------------------
CURRENT ASSETS
FINAL CUSTOMERS
Residential 23,048 27,935 1,735 52,718 52,460
Industrial 43,217 4,805 3,177 51,199 47,639
Commercial, services and other activities. 15.564 9,920 5,004 30,488 29,004
Rural 4,838 2,952 330 8,120 8,114
Public Authority:
Federal 1,270 1,142 1,477 3,889 2,908
State 1,956 3,913 9,269 15,138 11,899
Municipal 1,904 2,059 3,029 6,992 6,191
Public lighting 5,063 5,189 9,322 19,574 15,730
Public service 3,430 836 120 4,386 3,270
Unbilled revenue 37,841 - - 37,841 33,495
Regulatory asset- recoverable losses 65,923 - - 65,923 65,462
Other credits 26,435 3,952 6,488 36,875 32,207
------------- ------------ ---------------- ------------ ------------
230,489 62,703 39,951 333,143 308,379
============= ============ ================ ============ ============
WHOLESALE
Distributors 5,715 - - 5,715 4,793
Spot market 76,399 - 39 76,438 67,191
------------- ------------ ---------------- ------------ ------------
82,114 - 39 82,153 71,984
------------- ------------ ---------------- ------------ ------------
312,603 62,703 39,990 415,296 380,363
======================================================================
- --------------------------------------------------------------------------------
8
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2002
- --------------------------------------------------------------------------------
CONSOLIDATED
----------------------------------------------------------------------
Total
Past-due Past-due ------------------------
Current up to 90 Over 90 days Sep-02 Jun-02
days
------------- ------------- --------------- ------------ -----------
LONG-TERM ASSETS
FINAL CUSTOMERS
Regulatory asset
Recoverable losses 150,848 - 150,848 131,251
Free energy 102,429 - - 102,429 99,974
------------- ------------ ---------------- ------------ ------------
253,277 - - 253,277 231,225
------------- ------------ ---------------- ------------ ------------
Other credits 25,024 - - 25,024 22,182
------------- ------------ ---------------- ------------ ------------
278,301 - - 278,301 253,407
============= ============ ================ ============ ============
Regulatory Asset
Based on provisions included in Provisional Measure n(Degree)14 of December
21, 2001 (converted into Law no. 10,438 of April 26, 2002), Resolution CGE
no. 91, of December 21, 2001, ANEEL Resolution no. 31, of January 24, 2002
and ANEEL Resolution no. 72 of February 7, 2002, the Company made a
computation of 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, through 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.
ANEEL Resolutions 480 and 481, issued on August 29, 2002, approved the
amounts related to the recovery of losses during the Emergency Program for
Reducing Electric Consumption - PRE incurred from June, 2001 to February,
2002
According to ANEEL Resolution no. 484, of August 29, 2002, the
extraordinary tariff for the recovery will be in force for the maximum
period of 70 (seventy) months, starting December 2001.
The increase in tariffs for final customers approved by ANEEL for ESCELSA
and ENERSUL for the recovery of the rationing losses were as follows:
o 2.9% for residential and rural clients (except low-income customers)
and public lighting;
o 7.9% for all other clients.
The regulatory asset, related to the extraordinary tariff for the recovery
of the rationing losses, had the following movement during the period:
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 - (36,529) - (48,654)
-Free Energy - 7,715 - 11,253
----------------- ---------------- ---------------- --------------
Balance as of 06/30/2002 44,941 149,127 65,462 231,225
----------------- ---------------- ---------------- --------------
Transfer to current assets 12,369 (12,369) 17,812 (17,812)
Recovery via extraordinary tariffs (11,721) - (17,351) -
Losses of margin - 23,474 - 37,409
-Free Energy - (1,703) - 2,455
----------------- ---------------- ---------------- --------------
Balance as of 09/30/2002 45,589 158,529 65,923 253,277
================= ================ ================ ==============
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$42,959, of which R$14,130 relates to the period
from September 2000 through December 2001, recorded based on the
information published by MAE, and R$28,829 related to the period from
January to June 2002, recorded based on management estimates. Such amounts
will be settled when the final amounts are known and approved by MAE.
- --------------------------------------------------------------------------------
9
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF SEPTEMBER 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,
the corresponding amounts are classified in the current assets as customers
and wholesale. The amounts on September 30, 2002 and June 30, 2002 are
described below:
PARENT COMPANY CONSOLIDATED
--------------------------- ------------------------
Sep-02 Jun-02 Sep-02 Jun-02
------------- ------------ ----------- -----------
ASSETS
Current assets (customers and wholesale):
Bonus balance (invoiced (-) received) (97) (290) (102) (337)
Surtax - accounts receivable 932 1,205 1,586 1,930
Surtax installment 603 607 1,044 1,003
------------- ------------ ----------- -----------
1,438 1,522 2,528 2,596
------------- ------------ ----------- -----------
Long term assets:
Invoiced bonus 40,272 40,270 61,456 61,453
Costs incurred by Company to be reimbursed 6,339 6,339 10,372 10,373
------------- ------------ ----------- -----------
46,611 46,609 71,828 71,826
------------- ------------ ----------- -----------
TOTAL 48,049 48,131 74,356 74,422
============= ============ =========== ===========
LIABILITIES
Long term liabilities:
Surtaxes charged 11,866 12,047 19,336 19,535
(-) ICMS tax on surcharges (2,647) (2,693) (4,130) (4,179)
(-) 2% to cover costs (94) (94) (161) (162)
Resources received 26,103 17,052 38,880 24,972
------------- ------------ ----------- -----------
TOTAL 35,228 26,312 53,925 40,166
------------- ------------ ----------- -----------
BALANCE RECEIVABLE - Ministry of Mines and Energy 12,821 21,819 20,431 34,256
============= ============ =========== ===========
From the total balance receivable from Ministry of Mines and Energy above,
except for the costs incurred by the Company, which will be reimbursed
through the tariff, ANEEL has already approved the following transfers:
LEGAL ACT PARENT COMPANY CONSOLIDATED
--------------------------------------------------- --------------------------- ------------------------
Order ANEEL no. 239, of 04/25/02(*) 4,628 6,937
(*) Received on 10/03/2002
Based on the Resolution GCE no. 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 of the Resolution GCE no. 4, of 05/22/2001,
was maintained until March 31, 2002
7. Prepaid EXPENSES -CVA
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.
- --------------------------------------------------------------------------------
10
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2002
- --------------------------------------------------------------------------------
With the introduction of Provisional Measure no. 2,227 of 09/04/2001, the
Law no. 10.438 of 05/26/2002, and ANEEL Resolution no. 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 nos. 60 and 91/2002, of
January 24, 2002 and February 14, 2002, respectively. The balances are as
shown below:
PARENT COMPANY CONSOLIDATED
------------------------------- -------------------------------
Sep-02 Jun-02 Sep-02 Jun-02
--------------- -------------- --------------- --------------
ASSETS
Current 2,928 26,843 11,417 31,730
Long term assets 83,278 50,200 133,670 91,412
--------------- -------------- --------------- --------------
86,206 77,043 145,087 123,142
--------------- -------------- --------------- --------------
LIABILITIES
Current 3,322 29,051 4,844 29,438
Long term 22,502 1,833 25,746 3,769
--------------- -------------- --------------- --------------
25,824 30,884 30,590 33,207
--------------- -------------- --------------- --------------
The amount of R$44.893, (R$76.148, consolidated), was ratified on August
29, 2002 by Aneel Rule 482. The amount refers to period from January 1,
2001 to October 25, 2001 and will be recovered in connection with the
regulatory asset through extraordinary tariff increases (see note 5).
8. TAX CREDITS
Tax credits classified as current assets correspond to income tax withheld
on cash investments, which is being compensated with tax debits authorized
by the Internal Revenue Service.
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.
As a result of the rules laid down by CVM Instruction no. 371, of June 27,
2002, the Company did not record new tax credits in the amount of R$152,813
(consolidated - R$160,923).
According to the estimated future profitability, as mentioned above, the
Company determined the following fiscal assets:
PARENT COMPANY CONSOLIDATED
--------------------------- ---------------------------
ASSET Sep-02 Jun-02 Sep-02 Jun-02
--------------- ----------- -------------- -----------
Tax loss 347,330 347,330 690,412 691,009
Temporary additions CVM Rule 371 30,451 30,451 30,451 30,451
Other temporary additions 144,675 144,675 187,120 187,120
--------------- ----------- -------------- -----------
522,456 522,456 907,983 908,580
Statutory rate 25% 25% 25% 25%
--------------- ----------- -------------- -----------
=============== =========== ============== ===========
Income tax 130,614 130,614 226,996 227,145
=============== =========== ============== ===========
Negative basis of social contribution 404,346 404,346 641,773 642,181
Temporary additions: CVM Rule 371 30,451 30,451 30,451 30,451
Other temporary additions 59,154 59,154 85,528 85,528
--------------- ----------- -------------- -----------
493,951 493,951 757,752 758,160
Statutory rate 8% 8% 8% 8%
--------------- ----------- -------------- -----------
=============== =========== ============== ===========
Social contribution 39,516 39,516 60,620 60,653
=============== =========== ============== ===========
Adjustment between statutory rate(8%) and realization(9%) - - (868) (868)
--------------- ----------- -------------- -----------
=============== =========== ============== ===========
TOTAL 170,130 170,130 286,748 286,930
=============== =========== ============== ===========
Preliminary studies, to be appreciated by the Company's Senior
Administration, show that the total amount recorded will be recovered until
year 2012.
- --------------------------------------------------------------------------------
11
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2002
- --------------------------------------------------------------------------------
Amounts recorded:
PARENT COMPANY
- --------------------------------------------------------------------------------------------------------------------
REALIZATION 2010
EXPECTATION TO TOTAL
2003 2004 2005 2006 2007 2008 2009 2012
- ------------------------ -------- -------- -------- -------- -------- -------- --------- --------- ----------
Income tax - - 5.026 8.550 11.732 18.377 19.078 67.850 130.614
Social contribution - - 1.372 2.499 3.731 5.880 6.105 19.930 39.516
-------- -------- -------- -------- -------- -------- --------- --------- ----------
- - 6.398 11.049 15.463 24.257 25.183 87.780 170.130
======== ======== ======== ======== ======== ======== ========= ========= ==========
CONSOLIDATED
- --------------------------------------------------------------------------------------------------------------------
REALIZATION 2010
EXPECTATION TO TOTAL
2003 2004 2005 2006 2007 2008 2009 2012
- ------------------------ -------- -------- -------- -------- -------- -------- --------- --------- ----------
Income tax 5.206 27.223 18.172 21.346 27.198 36.527 23.474 67.850 226.996
Social contribution 1.884 4.157 4.781 6.594 8.680 7.622 6.105 19.929 59.752
-------- -------- -------- -------- -------- -------- --------- --------- ----------
7.048 31.380 22.953 27.940 35.878 42.150 29.579 87.779 286.748
======== ======== ======== ======== ======== ======== ========= ========= ==========
Amounts not recorded:
AFTER 2012
-----------------------------------------------
REALIZATION EXPECTATION PARENT COMPANY CONSOLIDATED
----------------------------------- ------------------------- ---------------------
Income tax 115.728 121.790
Social contribution 37.085 39.133
------------------------- ---------------------
152.813 160.923
========================= =====================
9. AFFILIATES AND SUBSIDIARIES
PARENT COMPANY CONSOLIDATED
---------------------------- --------------------------
COMPANIES TRANSACTION Sep-02 Jun-02 Sep-02 Jun-02
---------------------------- ------------------------ -------------- ------------ ------------ ------------
MAGISTRA Pass-through of costs 2 41 62,315 56,950
and mutual contracts
ENERSUL Pass-through of costs 1,470 71 - -
ESCELSAPAR Pass-through of costs - - - -
CESA Pass-through of costs 4,285 - - -
OTHER AFFILIATED Pass-through of costs 716 611 716 611
-------------- ------------ ------------ ------------
6,473 1,362 63,031 57,561
============== ============ ============ ============
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$ 5,160.
2) Interest Rate: 100% of CDI;
Maturity: several dates through December 31, 2002;
Balance: R$ 57,155.
MAGISTRA's financial income from subsidiary ESC90 totaling R$7,036 (R$4,433
on 09/30/2001) in the consolidated statement is recorded as other financial
income. The guarantees are promissory notes corresponding to 125% of
principal.
- --------------------------------------------------------------------------------
12
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2002
- --------------------------------------------------------------------------------
10. INVESTMENTS
PARENT COMPANY CONSOLIDATED
----------------------------- -------------------------
Sep-02 Jun-02 Sep-02 Jun-02
---------------- ------------ ------------ ------------
Equity Investments:
Stated by the equity method:
MAGISTRA PARTICIPACOES S.A 756,868 744,805 - -
TV A CABO VITORIA - TVIX S.A 91 129 - -
ESCELSA PARTICIPACOES S.- - ESCELSAPAR 3,409 3,032
---------------- ------------ ------------ ------------
760,368 747,966 - -
---------------- ------------ ------------ ------------
Goodwill from investments:
Goodwill - - 408,770 408,770
Discount from new share acquisition - - (15,152) (15,152)
Goodwill amortization - - (18,532) (15,907)
---------------- ------------ ------------ ------------
- - 375,086 377,711
---------------- ------------ ------------ ------------
Stated at restated cost:
Others 37 37 37 37
---------------- ------------ ------------ ------------
37 37 37 37
---------------- ------------ ------------ ------------
Projects, studies and other investments 1,833 1,833 1,895 1,940
---------------- ------------ ------------ ------------
TOTAL 762,238 749,836 377,018 379,688
================ ============ ============ ============
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
-------------------------------- ------------------------- -------------------------
Sep-02 Jun-02 Sep-02 Jun-02 Sep-02 Jun-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 756,868 744,805 96 132 3,410 3,032
Net income (loss) (34,720) (14,381) (105) (69) 376 (3)
---------------- --------------- ------------ ------------ ------------ ------------
Investment value 756,868 744,805 94 129 3,410 3,032
---------------- --------------- ------------ ------------ ------------ ------------
Equity adjustment (34,720) (14,381) (102) (68) 376 (3)
11. PROPERTY, PLANT AND EQUIPMENT
PARENT COMPANY CONSOLIDATED
------------------------- Annual average rates --------------------------
Sep-02 Jun-02 of depreciation (%) Sep-02 Jun-02
------------ ------------ ---------------------- ------------- -----------
IN SERVICE:
Generation 104,507 104,507 2.23% 196,997 197,128
Transmission 13,333 13,333 2.87% 13,333 13,333
Distribution 1,029,428 1,020,864 4.34% 1,961,093 1,937,064
Commercialization 4,301 4,301 9.27% 7,452 7,451
Administration 115,739 111,281 8.64% 236,264 230,595
------------ ------------ ------------------------------------- -----------
1,267,308 1,254,286 4.53% 2.415.139 2,385,571
------------ ------------ ------------------------------------- -----------
(-) Accumulated depreciation
Generation (62,080) (61,438) (103,149) (102,276)
Transmission (6,976) (6,880) (6,976) (6,880)
Distribution (376,773) (368,222) (709,800) (691,874)
Commercialization (2,462) (2,363) (2,865) (2,690)
Administration (53,372) (51,119) (99,406) (94,233)
------------ ------------ ------------- -----------
(501,663) (490,022) (922,196) (897,953)
------------ ------------ ------------- -----------
765,645 764,264 1,492,943 1,487,618
------------ ------------ ------------- -----------
- --------------------------------------------------------------------------------
13
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2002
- --------------------------------------------------------------------------------
UNDER CONSTRUCTION:
Generation 4,488 4,328 111,850 88,777
Transmission 914 658 914 658
Distribution 75,827 76,161 109,403 116,933
Administration 8,978 11,255 12,986 14,440
----------- ------------ ------------- -----------
90,207 92,402 235,153 220,808
----------- ------------ ------------- -----------
855,852 856,666 1,728,096 1,708,426
----------- ------------ ------------- -----------
(-)Obligations related to the (95,422) (94,268) (187,114) (184,647)
concession
----------- ------------ ------------- -----------
TOTAL 760,430 762,398 1,540,982 1,523,779
----------- ------------ ------------- -----------
Obligations related to the concession is composed by the following balances:
PARENT COMPANY CONSOLIDATED
------------------------- -------------------------
Sep-02 Jun-02 Sep-02 Jun-02
------------ ------------ ------------ ------------
Consumer contributions 64,370 63,229 88,654 87,016
Donations and subsidies 25,794 25,794 91,053 90,237
Federal participation 5,258 5,245 7,407 7,394
------------ ------------ ------------ ------------
TOTAL 94,422 94,268 187,114 184,647
============ ============ ============ ============
In accordance with General Instruction no. 6.3.10 of the Accounting Standards
for Public Electric Utilities and CVM Instruction no. 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 125,665 125,665 11,828 168,475 180,303
(-) Transfer to property, plant and equipment
in progress (1,167) (1,167) (9,538) (3,967) (13,505)
--------------- ------------ --------------- -------------- ------------
Net 124,498 124,498 2,290 164,508 166,798
=============== ============ =============== ============== ============
Monetary exchange variation 702,128 702,128 4,806 758,667 763,473
(-)Transfer to property, plant and equipment
in progress (346) (346) (4,713) (1,205) (5,918)
--------------- ------------ --------------- -------------- ------------
=============== ============ =============== ============== ============
Net 701,782 701,782 93 757,462 757,555
--------------- ------------ --------------- -------------- ------------
12. SUPPLIERS
PARENT COMPANY CONSOLIDATED
----------------------------- -----------------------------
CURRENT LIABILITIES: Sep-02 Jun-02 Sep-02 Jun-02
------------- -------------- ------------- --------------
Electricity suppliers:
FURNAS 34,529 29,734 34,529 29,734
ITAIPU 45,763 46,853 61,812 60,584
TRACTEBEL - - 12,042 9,600
ELETROSUL - - 1,340 1,486
MAE 16,606 17,089 28,261 29,368
Other 13,863 11,946 15,770 14,449
------------- -------------- ------------- --------------
110,761 105,622 153,754 145,221
Materials and service providers 5,273 5,542 10,993 11,905
------------- ---------------------------- --------------
TOTAL 116,034 111,164 164,747 157,126
============= ============== ============= ==============
LONG TERM LIABILITIES:
Electric Energy Supply:
Free energy 66,972 68,596 97,669 95,329
------------- -------------- ------------- --------------
TOTAL 66,972 68,596 97,669 95,329
============= ============== ============= ==============
- --------------------------------------------------------------------------------
14
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2002
- -----------------------------------------------------------------------------
13. LOANS AND FINANCING
PARENT COMPANY
- ------------------------------------------------------------------------------------------------------------------------------
Maturity Sep-02
DESCRIPTION Average Interest Rate ---------------------------- -------------------------------------
Type Period Interest and
Other Charges Current Long-Term
- ------------------------------------------------------------------------------------ -------------------------------------
Local Currency:
ELETROBRAS 5,0% - 7,0% Monthly May/99 to Jul/07 - 1,927 4,464
BNDES TJLP plus 3.8% Monthly Nov/99 to Oct/10 1,729 29,509 168,336
BNDES-Rationing losses SELIC plus1,0% Monthly Feb/02 to Feb/06 666 37,476 87,835
Bank Loan 7% CDI Monthly Oct/01 to Nov/02 - 21,780 -
-----------------------------------
2,395 90,692 260,635
-----------------------------------
Foreign Currency:
Senior Notes 10.0% Single Jul/07 34,969 - 1,678,538
BBA(*) 16,0% Single Jan/03 1,392 48,846 -
-----------------------------------
TOTAL 36,361 48,846 1,678,538
-----------------------------------
38,756 139,538 1,939,173
===================================
- -----------------------------------------------------------------------------
Jun-02
DESCRIPTION -------------------------------------------
Interest and
Other Charges Current Long-Term
- -------------------------------- -------------------------------------------
Local Currency:
ELETROBRAS - 1,932 4,324
BNDES 1,590 27,150 162,713
BNDES-Rationing losses - 28,763 -
Bank Loan - 28,554 -
-------------------------------------------
1,590 86,399 167,037
-------------------------------------------
Foreign Currency:
Senior Notes 56,183 - 1,225,817
BBA(*) - - -
-------------------------------------------
TOTAL 56,183 - 1,225,817
-------------------------------------------
57,773 86,399 1,392,854
===========================================
CONSOLIDATED
- ----------------------------------------------------------------------------------------------------------------------------
Maturity Sep-02
DESCRIPTION Average Interest Rate ---------------------------- -------------------------------------
Type Period Interest and
Other Charges Current Long-Term
- ------------------------------------------------------------------------------------ -------------------------------------
Local Currency:
ELETROBRAS - ESCELSA 5.0% to 7.0% Monthly May/99 to Jul/07 - 1,927 4,464
ELETROBRAS - ENERSUL 6.0% to 12.0% Monthly Dec/97 to May/22 184 14,266 41,547
BNDES - ESCELSA TJLP plus 3.8% Monthly Oct/99 to Oct/10 1,729 29,509 168,336
BNDES - MAGISTRA TJLP plus 4.0% Half-Year Nov/99 to Nov/04 3,614 38,850 58,275
BNDES - ENERSUL TJLP plus 3.85% Monthly Sep/01 to Feb/08 256 12,909 57,013
BNDES - ENERSUL TJLP plus 4.00% Monthly Feb/00 to Apr/04 5 925 540
BNDES-Rationing losses SELIC plus 1.0% Monthly Feb/02 to Jun/06 1,042 54,410 145,008
BNDES-CESA TJLP plus 4.50% Monthly Jul/04 to Jul/12 - - 13,753
BNDES-CESA UMBNDES PLUS 4.5% Monthly Jul/04 to Jul/12 - - 1,823
BCO BRASIL - FCO 11.20% Monthly Nov/04 to Nov/13 569 - 30,000
Citibank 104% 108% CDI Monthly Oct/02 to Nov/02 400 8,214 -
Bank Loan 103% - 111,1% - CDI Monthly Oct/02 to Mar/03 62 77,179 -
FUNDACAO ENERSUL 10% Monthly Jul/98 to Nov/13 109 1,760 16,771
Other 1.35% Monthly May/00 to Jun/09 30 - 881
-----------------------------------
TOTAL 8,000 239,949 538,411
-----------------------------------
Foreign Currency:
SENIOR NOTES 10,0% Single Jul/07 34,969 - 1,678,538
BRADESCO (*) 4,90% to 12,00% (**) Oct/01 to Nov/02 572 23,779 -
UNIBANCO (*) 10,85% to 11,40% (**) Mar/04 - - 10,998
EUROPEAN INVEST BANK LIBOR plus 4,0% to 5,0% Half-Year Dec/02 to Mar/09 1,241 5,311 57,786
STN-DMLP LIBOR plus 4,5% to 8,2% Half-Year Oct/96 to Apr/24 1,383 1,661 54,774
BBA FMO (*) 8,90% Half-Year Mar/02 to Sep/07 134 4,547 11,020
ITAU(*) 1.5% Single Oct/02 246 13,838 -
BBA(*) 16.0% Single Jan/03 1,392 48,846 -
DRESDNER(*) 3.5% Single Aug/02 - - -
-----------------------------------
39,937 97,982 1,813,116
-----------------------------------
Long Term Interest 47,937 337,931 2,351,527
-----------------------------------
UNIBANCO (*) 10,85% to 11,40% (**) Mar/01 to Apr/04 3,406 - -
------------------------------------
- ---------------------------------------------------------------------------
Jun-02
DESCRIPTION -------------------------------------------
Interest and
Other Charges Current Long-Term
- ---------------------------------------------------------------------------
Local Currency:
ELETROBRAS - ESCELSA - 1,932 4,324
ELETROBRAS - ENERSUL 480 16,954 43,669
BNDES - ESCELSA 1,590 27,150 162,713
BNDES - MAGISTRA 1,179 38,485 57,727
BNDES - ENERSUL 247 12,787 59,674
BNDES - ENERSUL 6 916 763
BNDES-Rationing losses 98 43,903 -
BNDES-CESA - - -
BNDES-CESA - - -
BCO BRASIL - FCO 586 - 30,000
Citibank 944 22,099 -
Bank Loan 330 112,057 -
FUNDACAO ENERSUL 109 1,591 16,781
Other 162 1,015 1,537
-------------------------------------------
TOTAL 5,731 278,889 377,188
-------------------------------------------
Foreign Currency:
SENIOR NOTES 56,183 - 1,225,817
BRADESCO (*) 119 21,292 -
UNIBANCO (*) - - 14,121
EUROPEAN INVEST BANK 197 - 46,079
STN-DMLP 553 1,213 40,001
BBA FMO (*) 495 3,852 12,711
ITAU(*) 130 13,730 -
BBA(*) - - -
DRESDNER(*) 140 24,177 -
-------------------------------------------
57,817 64,264 1,338,729
-------------------------------------------
Long Term Interest 63,548 343,153 1,715,917
-------------------------------------------
UNIBANCO (*) 2,085 - -
-------------------------------------------
(*) Financing are hedged against currency fluctuations by swap contracts
(**) Loans composed of several notes with the same maturity date
- --------------------------------------------------------------------------------
15
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2002
- --------------------------------------------------------------------------------
a) The breakdown of loans and financing per currency is as follows:
PARENT COMPANY CONSOLIDATED
------------------------ ------------------------
Sep-02 Jun-02 Sep-02 Jun-02
------------ ----------- ----------- ------------
Local currency 351,327 253,436 778,360 656,077
Foreign currency 1,727,384 1,225,817 1,911,098 1,402,993
------------ ----------- ----------- ------------
TOTAL 2,078,711 1,479,253 2,689,458 2,059,070
============ =========== =========== ============
b) The percentage variation of the main indicators used for updating the loans
and financing are as follows:
Currency and Indexes Sep-02 Sep-01
- --------------------------------------------------- ------------ ------------
US$ x R$ 67.85% 38.61%
IGP-M 10.54% 7.66%
INPC 6.39% 6.26%
TJLP 10.00% 9.50%
c) Maturity of short and long-term installments is as follows:
Maturity PARENT COMPANY CONSOLIDATED
-------------------------- ------------------------------------- ---------------------------------------------
Currency
-----------------------------------------------------------------------------------
Current Local Foreign Total Local Foreign Total
------------- ----------- ----------- ------------- ------------- -----------------
2002 37,326 - 37,326 133,991 38,359 172,350
2003 53,366 48,846 102,212 105,958 59,623 165,581
------------------------- ----------- ------------- ------------- -----------------
90,692 48,846 139,538 239,949 97,982 337,931
------------------------- ----------- ------------- ------------- -----------------
Long term
2003 27,074 - 27,074 58,223 6,230 64,453
2004 88,937 - 88,937 176,623 31,154 207,777
2005 92,008 - 92,008 133,782 20,156 153,938
2006 35,116 - 35,116 70,864 16,423 87,287
2007 5,058 1,678,538 1,683,596 31,106 1,694,357 1,725,463
2008 4,502 - 4,502 18,259 9,362 27,621
2009 4,502 - 4,502 13,103 3,275 16,378
2010 3,438 - 3,438 12,039 2,500 14,539
2011 - - - 8,601 2,500 11,101
After 2011 - - - 15,811 27,159 42,970
------------- ----------- ----------- ------------- ------------- -----------------
260,635 1,678,538 1,939,173 538,411 1,813,116 2,351,527
------------- ----------- ----------- ------------- ------------- -----------------
TOTAL 351,327 1,727,384 2,078,711 778,360 1,911,098 2,689.458
============= =========== =========== ============= ============= =================
14. PROVISION FOR CONTINGENCIES
PARENT COMPANY
---------------------------------------------------------------------------------------
Sep-02 Jun-02
------------------------------------------- -------------------------------------------
Provision Provision
------------------------------ ------------------------------
Period of Period of
three Escrow three Escrow
Contingency months Accumulated Deposits months 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 22 16,791 10,082 916 16,769 9,914
Civil litigation 524 28,125 7,374 659 27,601 6,894
Fiscal 2,843 76,437 51,957 2,241 73,594 49,633
-------------- -------------- ------------ -------------- -------------- ------------
TOTAL 3,389 121,353 69,413 3,816 117,964 66,441
============== ============== ============ ============== ============== ============
- --------------------------------------------------------------------------------
16
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2002
- --------------------------------------------------------------------------------
CONSOLIDATED
---------------------------------------------------------------------------------------
Sep-02 Jun-02
------------------------------------------- -------------------------------------------
Provision Provision
------------------------------ ------------------------------
Period of Period of
three Escrow three Escrow
Contingency months Accumulated Deposits months 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 1,149 21,692 12,199 1,026 20,543 11,845
Civil litigation 1,326 33,483 7,609 840 32,157 7,112
Fiscal 5,177 101,262 70,950 4,307 96,085 66,393
-------------- -------------- ------------ -------------- -------------- ------------
TOTAL 7,652 156,437 90,758 6,173 148,785 85,350
============== ============== ============ ============== ============== ============
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$34,674 , 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
nos. 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 September 30, 2002, is represented by
4,550,833 common shares, with no par value, with the following equity
structure:
- --------------------------------------------------------------------------------
17
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2002
- --------------------------------------------------------------------------------
Shareholder Quantity of Shareholders' % of participation
shares quantity
--------------------------------------------- -------------------- ----------------- -------------------------
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 ACCUMULATED FOR CAPITAL
STOCK RESERVES LOSSES SUBTOTAL INCREASE TOTAL
------------ ----------- ------------- ----------- ------------ -----------
BALANCE AS OF DECEMBER 31, 2001 153,947 574,069 - 728,016 3,387 731,403
Remuneration on construction work in - 3,519 - 3,519 - 3,519
progress
Income for the period - - (658,439) (658,439) - (658,439)
------------ ----------- ------------- ----------- ------------ ----------
BALANCE AS OF SEPTEMBER 30, 2002 153,947 577,588 (658,439) 73,096 3,387 76,483
============ =========== ============= =========== ============= ==========
17. INCOME TAX AND SOCIAL CONTRIBUTION
-------------------------------------------------------------
Sep-02 Sep-01
-------------------------------------------------------------
Income tax Social Cont. Income tax Social Cont.
-------------------------------------------------------------
Income (loss) before taxes (736,382) (736,382) (313,980) (313,980)
Statutory rate 25% 8% 25% 8%
-------------------------------------------------------------
(184,095) (58,910) (78,495) (25,118)
Remuneration on construction work in progress 880 281 292 94
Equity in subsidiaries 8,612 2,756 6,000 1,920
Non-deductible provision 4,286 159 5,637 (206)
Adjustments - tax credits (DIPJ/2001) (4,568) (157) (5,440) 220
Tax Credit not recorded (*) 115,728 37,085 - -
-------------------------------------------------------------
(59,157) (18,786) (72,006) (23,090)
-------------------------------------------------------------
Effective rate 25% 8% 25% 8%
-------------------------------------------------------------
(*) According to CVM Rule 371 of June 27, 2002. See note 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
------------------------------
Sep-02 Jun-02
-------------- --------------
TECHNICAL RESERVES
Mathematical reserves:
Benefits paid 77,365 75,012
Benefits 80,195 80,641
-------------- --------------
157,560 155,653
-------------- --------------
TECHNICAL SURPLUS
-------------- --------------
Contingency 18,534 21,378
-------------- --------------
Total 176,094 177,031
============== ==============
- --------------------------------------------------------------------------------
18
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2002
- --------------------------------------------------------------------------------
b) The table below shows the number of participants in each plan:
PLAN I PLAN II TOTAL
----------- ----------- -----------
Contributing 34 1,318 1,352
----------- ----------- -----------
Receiving participants 644 113 757
Pension 104 4 108
748 117 865
----------- ----------- -----------
Total 782 1,435 2,217
=========== =========== ===========
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 nine months of 2002, ESCELSA contributed
R$1,844 (R$1,903 in the first nine months of 2001).
d) Based on the Article 84 of CVM Deliberation no. 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 September 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 no. 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
---------------------------- --------------------------------
Sep-02 Jun-02 Sep-02 Jun-02
------------- ------------- -------------- ----------------
Marketable securities 285,601 214,501 288,903 214,693
Loans and financing - Long-term 1,939,173 1,392,854 2,351,528 1,715,917
A portion of the loans and financing in local currency is comprised of
financing from government entities ELETROBRAS and BNDES
- --------------------------------------------------------------------------------
19
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2002
- --------------------------------------------------------------------------------
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 13, 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 is as
follows:
BOOK VALUE FAIR VALUE
----------------------------- ----------------------------
Sep-02 Jun-02 Sep-02 Jun-02
-------------- ------------- ------------- -------------
Senior Notes 1,678,538 1,225,817 721,771 833,556
U.S. dollar assets (285,601) (214,370) (285,601) (214,370)
-------------- ------------- ------------- -------------
Net Exposure 1,392,937 1,011,447 436,170 619,186
============== ============= ============= =============
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:
Financial Date Parameters (rates %)
-------------------------- ------------------------------------
Institution Transaction Maturity Amount Banks ESCELSA Income
--------------- ------------ ------------ ----------- -------------- -------------------- ----------
Banco Pactual 03/28/02 01/14/03 19.381 100% of CDI Dollar +4.02% per year 11,884
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.
ESCELSA and its 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 103% CDI (parent Company) and IGP-M plus interest
rates of 11.70% to 12.01% per annum and CDI plus 0.95%- 2.33% per
annum (subsidiaries).
Considering the Real devaluation during the period, the hedging
instruments generated a gain of R$18,146 for ESCELSA and R$ 43,601
consolidated, recorded as monetary variation in the financial
statements, as follows:
AMOUNT
----------------------------------------------------------------------------
PARENT COMPANY CONSOLIDATED
--------------------------------------- ----------------------------------
LIABILITY BOOK VALUE SWAP VALUE GAIN BOOK VALUE SWAP VALUE GAIN
------------------------ ----------- ----------- ------------ ------------ ----------- ---------
Loans and Financing 48,846 30,700 18,146 142,840 99,239 43,601
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.
- --------------------------------------------------------------------------------
20
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2002
- --------------------------------------------------------------------------------
19.2 Credit Risk
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.
- --------------------------------------------------------------------------------
21
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2002
- --------------------------------------------------------------------------------
(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 period of nine months
ended September 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 special 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 Commission (CVM) specifically
applicable to the preparation of Quarterly Information.
4. As mentioned in Notes 5 and 12 to the Quarterly Information, the Company
has recorded, as of September 30, 2002, in current assets, accounts
receivable in the amount of R$42,959 thousand (R$74,223 thousand
consolidated) and, in current liabilities, accounts payable in the amount
of R$16,606 thousand (R$28,261 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 are subject to
modifications depending on the outcome of a current judicial process filed
by energy market participants, with respect to market regulations in
effect. The settlement of these amounts is expected for November 22, 2002
and will depend on the financial capacity of energy market participants to
settle their obligations.
5. We have previously reviewed the balance sheets (parent company and
consolidated) related to June 30, 2002, and issued our accountants' review
report dated August 14, 2002. Our accountants' review report contained an
emphasis paragraph related to accounts receivable and payable related to
electric power sales and purchases operations conducted in the Electric
Power Wholesale Market - MAE, in the period from September 1, 2000 to June
30, 2002. These receivables and payables were recorded based on
preliminary information released by MAE and/or based on management
estimates and were pending of approval from MAE and subsequent settlement.
The statements of income (parent company and consolidated) for the quarter
and the period of nine months ended September 30, 2001, presented for
comparative purposes, were reviewed by other independent auditors, who
issued their accountants' review report thereon dated October 26, 2001
containing emphasis paragraphs related to (a) tax credits generated by
fiscal losses, negative basis of social contribution and other amounts
that constitute temporary adjustments, which depend on generation of
future taxable income to be compensated, as disclosed in Note 8, and (b)
assets and liabilities relating to the sales and purchases of electric
power in the Electric Power Wholesale Market (MAE), whose amounts were
recorded based on management estimates.
6. On December 21, 2001 Provisional Measure (Executive Order) no. 14 was
issued, and converted into Federal Law no. 10.438 of April 26, 2002,
providing, among other things, 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 the rationing program on the financial
position and results of operations are disclosed in Notes 5 and 7 to the
quarterly information.
November 6, 2002
DELOITTE TOUCHE TOHMATSU Celso de Almeida Moraes
Auditores Independentes Contador
CRC-SP 11.609-S/RJ CRC-SP 124.669-S/ES
- --------------------------------------------------------------------------------
22
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2002
- --------------------------------------------------------------------------------
(Convenience Translation into English from the Original Previously Issued in
Portuguese)
THIRD QUARTER 2002 HIGHLIGHTS
o Electric energy Sales in the first nine months of 2002 totaled
4,661,858 MWh, 2.4% lower than the 4,777,614 MWh sold in the same
period in 2001. This decrease is attributed mainly to lower
residential consumption, which fell 12.2% due basically to the
effects of greater conservation, which is now a part of consumer
habits.
o On August 7, 2002, ANEEL (The Brazilian Electric Energy Regulatory
Agency) disclosed its annual tariff increase for ESCELSA's
customers, as per its concession agreement:
The total increase effective as of August 7, 2002 was 15.97%,
composed of the following:
14.27% is related to costs not managed by ESCELSA that are
passed through to customers, such as energy purchased from
FURNAS and ITAIPU, as well as transmission costs.
1.70% is related to costs managed by ESCELSA that are adjusted
to the IGP-M inflation index, net of the 0.51% discount
applied to account for the pass through of productivity gains
to clients (the "X" factor, which was established by ANEEL
last year upon ESCELSA's Periodic Tariff Revision).
o In an extraordinary meeting of ESCELSA's Board of Directors on
October 10, 2002, the following members of management were elected:
Armando Fernandes Bernardo
Distribution Officer, accumulating the positions of CEO and
Engineering and Construction Officer on an interim basis.
Sergio Pereira Pires
Chief Financial Officer, accumulating the positions of
Administrative Officer and Investor Relations Officer.
The Board members also approved the nomination of Antonio
Eduardo Silva Oliva as Chief Executive Officer and Manuel
Fernando das Neves Bento as Engineering and Construction
Officer, both of whom will assume their respective duties
immediately following the processing of their visas for
employment in Brazil, as both are Portuguese nationals.
o In September 2002 the BNDES (Brazilian Economic Development Bank)
released the second installment of the funding to offset the
reduction in revenue that occurred during the Emergency Electric
Energy Consumption Reduction Program, in the amount of R$105,463
thousand.
- --------------------------------------------------------------------------------
23
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2002
- --------------------------------------------------------------------------------
ESCELSA' s NUMBERS
PARENT COMPANY CONSOLIDATED
--------------------------- ---------------------------
Nine Months ended September 30
---------------------------------------------------------
2002 2001 2002 2001
------------ ------------ ------------ ------------
FINANCIAL INFORMATION (thousands of reais)
Net operating revenues 589,632 498,728 902,687 785,778
Operating income 48,620 (8,786) 59,521 (4,499)
Loss for the period (658,439) (218,885) (658,439) (218,885)
EBITDA (1) 91,241 32,694 150,732 75,868
Adjusted EBITDA (2) 185,805 170,248 284,007 237,933
Total assets 2,756,901 2,241,274 3,734,893 3,064,874
Shareholders' equity 76,483 557,903 76,483 557,903
Number of shares 4,550,833 4,550,833
Common stock price per share at year end (in Reais)(4) 64.00 91.99
Market capitalization 291,253 418,631
INDICATORS
Operating margin (%) 8.25 (1.76) 6.59 (0.57)
EBITDA margin (%) 15.47 6.56 16.70 9.66
Current ratio 1.58 1.68 1.20 1.12
Personnel expenses plus third party services/net oper.revenues(%) 11.94 13.55 14.47 15.12
Energy losses (%) 11.64 10.02
DEC - Equivalent outage duration per customer (hours)(*)(3) 14.73 14.24
FEC- Equivalent outage frequency per customer ( times)(*)(3) 11.34 11.87
TMA - Average service response time(minutes)(*)(3) 109 109
Number of customers per employee(*) 696 628 646 601
MARKET
Maximum demand - MWh/h(*) 1,077.6 1,138.1
Energy sales - MWh(*) 4,661,858 4,777,614 6,677,359 6,838,672
Number of customers(*) 945,132 902,748 1,534,006 1,463,182
Average tariff to final customers - R$/MWh(*) 134.81 111.66
Average cost of electricity purchased - R$/MWh 79.84 69.66
HUMAN RESOURCES
Number of employees(*) 1,357 1,438 2,375 2,433
Number of trainees(*) 91 84 131 108
Personnel expenses (thousands of reais) 47,226 46,402 84,712 79,855
Personnel expenses plus third party services (thousands of reais) 70,403 67,586 130,620 118,819
(*) Non revised by Independent Accountants
Notes:
(1) BITDA (Operating income plus depreciation and amortization)
(2) Ebitda + Financial revenues + Non-operating income (losses)
(3) Period of 12 months
(4) Stock price of the last day of each period of three months
- --------------------------------------------------------------------------------
24
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2002
- --------------------------------------------------------------------------------
MARKET PERFORMANCE
ENERGY REQUIREMENTS
Energy requirements during the first nine months of 2002 totaled 5,360,470 MWh
0.1% higher when compared to 5,354,839 MWh in the same period last year.
In order to satisfy market demand, the company generated 788,466 MWh and
purchased 3,073,369 MWh from Furnas, 1,303,753 MWh from Itaipu and 93,595 MWh
from other companies. In addition, 101,287 MWh, generated by self-producers was
transported on ESCELSA's system.
The maximum demand during the first nine months of 2002 was 1,077.6 MWh/h,
compared to 1,138.1 MWh/h in the same period last year
ENERGY SOLD
Electric energy Sales in the first nine months of 2002 totaled 4,661,858 MWh,
2.4% lower than the 4,777,614 MWh sold in the same period in 2001.
This decrease is attributed mainly to lower residential consumption, which fell
12.2% due basically to the effects of greater conservation, which is now a part
of consumer habits.
Energy sales per consumer segment was as follows (not reviewed by independent
auditors):
- ---------------------------------------------------------------------------------------------------------------
MWh
- ---------------------------------------------------------------------------------------------------------------
PARENT COMPANY CONSOLIDATED
--------------------------------------------------------------------------------------------
First Nine Months % Change First Nine Months % Change
--------------------------------------------------------------------------------------------
2002 2001 2002 2001
- ---------------------------------------------------------------------------------------------------------------
Retail:
Residential 840,271 956,822 (12.2) 1,468,239 1,636,359 (10.3)
Industrial 2,391,003 2,362,373 1.2 2,889,274 2,830,600 2.1
Commercial 616,728 602,839 2.3 1,003,335 1,007,810 (0.4)
Rural 233,824 272,645 (14.2) 433,525 462,659 (6.3)
Other 345,198 346,665 (0.4) 629,227 646,459 (2.7)
- ---------------------------------------------------------------------------------------------------------------
4,427,024 4,541,344 (2.5) 6,423,600 6,583,887 (2.4)
Wholesale 234,834 236,270 (0.6) 253,759 254,785 (0.4)
- ---------------------------------------------------------------------------------------------------------------
TOTAL 4,661,858 4,777,614 (2.4) 6,677,359 6,838,672 (2.4)
- ---------------------------------------------------------------------------------------------------------------
CUSTOMER PROFILES
- --------------------------------------------------------------------------------
25
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2002
- --------------------------------------------------------------------------------
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 Nine Months of 2002 First Nine Months of 2001
--------------------------------------------------------------------------
As a % of As a % of As a % of As a % of
Sales Volume Sales Volume Sales Volume Sales Volume
- ---------------------------------------------------------------------------------------------
Retail:
Residential 18.02 31.00 21.99 34.42
Industrial 51.29 37.49 43.27 35.97
Commercial 13.23 17.92 15.03 16.44
Rural 5.02 4.15 6.49 4.51
Other 7.40 7.19 9.42 6.72
- ---------------------------------------------------------------------------------------------
94.96 97.75 96.20 98.09
Wholesale 5.04 2.25 3.80 1.91
- ---------------------------------------------------------------------------------------------
TOTAL 100.00 100.00 100.00 100.00
- ---------------------------------------------------------------------------------------------
NUMBER OF CUSTOMERS
The number of customers on September 30, 2002 totaled 945,132, an increase of
4.7% compared to the same period last year.(*)
During the first nine months of 2002, 22,553 customers were connected.
- --------------------------------------------------------------------------------------------------------
PARENT COMPANY CONSOLIDATED
- ----------------------------------------------------------- ----------------------------------------
September 30, September 30,
----------------------- % Change ------------------------ % Change
2002 2001 2002 2001
- ----------------------------------------------------------- ----------------------------------------
Retail:
Residential 749,207 717,764 4.4 1,231,904 1,179,767 4.4
Industrial 11,035 10,901 1.2 15,716 15,574 0.9
Commercial 83,587 79,315 5.4 135,292 128,727 5.1
Rural 92,219 86,142 7.1 135,632 124,473 9.0
Other 9,082 8,624 5.3 15,457 14,636 5.6
- --------------------------------------------------------------------------------------------------------
945,130 902,746 4.7 1,534,001 1,463,177 4.8
Wholesale 2 2 - 5 5 -
- --------------------------------------------------------------------------------------------------------
Total (*) 945,132 902,748 4.7 1,534,006 1,463,182 4.8
- --------------------------------------------------------------------------------------------------------
(*) Not reviewed by independent auditors
AVERAGE TARIFF
The average tariff charged to retail customers in September 2002 was R$
149.13/MWh, while the wholesale rate to other distributors was R$ 66.33/MWh,
resulting in an overall average tariff of R$ 144.66/MWh, an increase of 19.8%,
compared to the same period last year. The average tariffs per segment are as
follows: (*)
- ----------------------------------------------------------------------------------------------
R$/MWh
--------------------------------------------------------------------------
PARENT COMPANY
- ----------------------------------------------------------------------------------------------
SEP-2002 SEP-2001 % Change 9M 2002 9M 2001 % Change
--------------------------------------------------------------------------
Retail:
Residential 237.76 215.51 10.3 221.15 184.76 19.7
Industrial 107.32 88.84 20.8 94.33 76.66 23.0
Commercial 200.11 171.10 17.0 175.36 138.81 26.3
Rural 150.29 125.59 19.7 132.51 106.80 24.1
Other 153.58 123.70 24.2 133.43 105.03 27.0
- ----------------------------------------------------------------------------------------------
149.13 123.83 20.4 134.81 111.66 20.7
Wholesale 66.33 70.37 (5.7) 66.92 63.65 5.1
- ----------------------------------------------------------------------------------------------
Average Tariff (*) 144.66 120.71 19.8 131.39 109.29 20.2
- -----------------------------------------------------------------------------------------------
(*) Not reviewed by independent auditors.
QUALITY OF SERVICE RENDERED
- --------------------------------------------------------------------------------
26
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2002
- --------------------------------------------------------------------------------
The main indicators used by the energy sector to measure the quality of service
rendered showed the following performance:
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 September 30, 2002, DEC was 14.73(*) hours,
compared to 14.24(*) hours in the previous year, an increase of 3.4%(*).
Equivalent Outage Frequency per Customer - FEC indicates the average number
of interruptions in energy service per customer. For the period ended
September 30, 2002, FEC was 11.34(*) compared to 11.87(*) for the same
period the previous year, an improvement of 4.5%(*).
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 September 30, 2002, TMA was
109 (*) minutes unchanged from same period last year.(*).
(*) Not reviewed by independent auditors.
ENERGY LOSSES
Energy losses increased from 10.02% in the twelve-month period ended September
30,2002 to 11,64% in the same period this year. This increasing is due to the
energy rationing. Since the end of the rationing (March, 2002) losses have been
decreasing.
FINANCIAL PERFORMANCE
INCOME FROM OPERATIONS
Income from operations in the nine months of 2002 totaled R$ 48,620 thousand,
compared to negative R$ 8,786 thousand in the same period last year, resulting
in an EBITDA of R$ 91,241 thousand, equal to an EBITDA margin of 15.5%. The main
items of income from operations were:
- -------------------------------------------------------------------------------------------------
thousands of reais
----------------------------------------------------------
First Nine Months
----------------------------------------------------------
PARENT COMPANY CONSOLIDATED
----------------------------------------------------------
2002 2001 2002 2001
- -------------------------------------------------------------------------------------------------
Gross operating revenues 830,811 693,119 1,240,423 1,062,178
Operating revenues deductions (241,179) (194,391) (337,736) (276,400)
Net operating revenues 589.632 498,728 902,687 785,778
Operating expenses (541,012) (507,514) (843,166) (790,277)
Income from operations 48,620 (8,786) 59,521 (4,499)
EBITDA 91,241 32,694 150,732 75,868
EBITDA margin % 15.5 6.6 16.7 9.7
- -------------------------------------------------------------------------------------------------
OPERATING REVENUES
- --------------------------------------------------------------------------------
27
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2002
- --------------------------------------------------------------------------------
Gross operating revenues in the first nine months of 2002 totaled R$ 830,811
thousand, 19.9% higher compared to 2001. The revenue from the retail sector was
R$ 770,906, 16.3% higher compared to the same period in 2001.
The increase in the wholesale revenue in the first nine months 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.
Net operating revenues in the first nine months of 2002 totaled R$589,632, 12.2%
higher than the same period in 2001.
- --------------------------------------------------------------------------------------------
thousands of reais
-----------------------------------------------------
PARENT COMPANY CONSOLIDATED
-----------------------------------------------------
First Nine Months
-----------------------------------------------------
2002 2001 2002 2001
-----------------------------------------------------
Retail:
Residential 237,914 233,889 390,360 380,659
Industrial 287,645 244,416 353,686 297,919
Commercial 137,509 111,688 222,668 187,981
Rural 31,825 30,598 58,541 53,229
Other 55,157 45,878 97,613 84,436
Unbilled revenues 2,740 (3,654) 6,687 (4,687)
Capacity charge 11,271 - 15,539 -
Regulatory assets 6,845 - 35,410 -
-----------------------------------------------------
770,906 662,815 1,180,503 999,537
=====================================================
Wholesale:
Other distributors 17,239 13,008 20,318 15,613
Short-term 24,839 10,459 8,039 24,518
-----------------------------------------------------
42,078 23,467 28,357 40,131
-----------------------------------------------------
Other revenues 17,827 6,837 31,563 22,510
-----------------------------------------------------
Gross operating revenues 830,811 693,119 1,240,423 1,062,178
Operating revenues deductions (241,179) (194,391) (337,736) (276,400)
-----------------------------------------------------
Net operating revenues 589,632 498,728 902,687 785,778
- --------------------------------------------------------------------------------------------
OPERATING COSTS
Operating costs including operating expenses plus RGR quotas increased from R$
520,052 to R$ 552.531, an increase of 6.2%.
Operating costs outside Company control such as energy purchased, electric power
transport, CCC, and RGR quotas increased 5.7% compared to the same period in
2001.
Costs controlled by the Company such as personnel, material, third party
services and other expenses increased from R$ 91,433 thousand in the first nine
months of 2001 to R$ 100,573 thousand in the first nine months of 2002, or 10%.
Depreciation increased 2.8%. The increase in controlled costs was due to energy
conservation programs, provisions for civil and labor contingencies and customer
services, for which matching entries are recorded in other operating revenues.
- --------------------------------------------------------------------------------
28
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2002
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
thousands of reais
----------------------------------------
PARENT COMPANY
----------------------------------------
First Nine Months
----------------------------------------
2002 2001 %Change
- --------------------------------------------------------------------------------
Company Controlled Costs:
Personnel 47,226 46,402 1.8
Material 5,147 5,822 (11.6)
Third party services 23,177 21,184 9.4
Other 25,023 18,025 38.8
----------------------------------------
100,573 91,433 10.0
----------------------------------------
Depreciation 42,621 41,480 2.8
- --------------------------------------------------------------------------------
TOTAL COMPANY CONTROLLED COSTS 143,194 132,913 7.7
- --------------------------------------------------------------------------------
Outside Company Control:
Energy purchased 356,959 330,715 7.9
CCC 38,095 41,606 (8.4)
Financial compensation 1,818 1,032 76.2
ANEEL fiscal fee 946 1,248 (24.2)
RGR 11,519 12,538 (8.1)
- --------------------------------------------------------------------------------
TOTAL COSTS OUTSIDE COMPANY CONTROL 409,337 387,139 5.7
- --------------------------------------------------------------------------------
GRAND TOTAL 552,531 520,052 6.2
- --------------------------------------------------------------------------------
ENERGY PURCHASED EXPENSES
The following table details energy purchased expenses.
- -----------------------------------------------------------------------------------------------------------
PARENT COMPANY CONSOLIDATED
------------------------------------------------------
First Nine Months
------------------------------------------------------
2002 2001 2002 2001
------------------------------------------------------
From FURNAS and TRACTEBEL
Expenses - thousands of reais 191,375 155,937 263,244 218,807
Volume - MWh(*) 3,073,369 3,135,483 4,646,792 4,584,828
Average cost - R$/MWh(*) 62.27 49.73 56.65 47.72
- -----------------------------------------------------------------------------------------------------------
WHEELING From ITAIPU
Expenses - thousands of reais 4,513 4,125 6,351 5,803
Average cost - R$/MWh(*) 3.46 3.15 3.46 3.15
- -----------------------------------------------------------------------------------------------------------
WHEELING-OTHER
Expenses - thousands of reais 44,067 48,206 72,842 77,484
Average cost - R$/MWh(*) 14.34 15.37 15.68 16.90
- -----------------------------------------------------------------------------------------------------------
From ITAIPU
Expenses - thousands of reais 127,018 105,258 178,821 147,993
Volume - MWh(*) 1,303,753 1,308,666 1,834,847 1,839,309
Average cost - R$/MWh(*) 97.42 80.43 97.46 80.46
- -----------------------------------------------------------------------------------------------------------
From OTHER
Expenses - thousands of reais 6,893 17,189 12,155 30,032
Volume - MWh(*) 93,595 304,863 197,831 400,988
Average cost - R$/MWh(*) 73.65 56.38 61.44 74.90
- -----------------------------------------------------------------------------------------------------------
SECTOR AGREEMENT AND PARCEL 'A'
Expenses - thousands of reais (16,907) - (24,122) -
- -----------------------------------------------------------------------------------------------------------
TOTAL
Expenses - thousands of reais 356,959 330,715 509,291 480,119
Volume - MWh(*) 4,470,717 4,749,012 6,679,470 6,825,125
Average cost - R$/MWh(*) 79.84 69.64 76.25 70.35
- -----------------------------------------------------------------------------------------------------------
(*) Not reviewed by independent auditors.
- --------------------------------------------------------------------------------
29
[ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 2002
- --------------------------------------------------------------------------------
NET FINANCIAL INCOME (EXPENSE)
The net financial result in the first nine months of 2002 was negative R$
746,545, while in the same period last year was negative R$ 280,081. The
difference in the first nine months of this year is due mainly to the 67.9%
devaluation of the Brazilian real against the U.S. dollar, which caused a
significant increase in financial expenses on U.S. dollar denominated debt.
CASH AND EQUIVALENTS
ESCELSA has funds deposited in banks or invested in financial instruments in the
amount of R$ 289,633 for the Company and R$ 295,202 on a consolidated basis as
shown below:
PARENT COMPANY CONSOLIDATED
-------------------------------------------------------
September 30, 2002
-------------------------------------------------------
thousands US$ thousands US$
of reais thousand of reais thousand
-------------------------------------------------------
Investments in Reais:
Cash and bank 3,912 - 6,299 -
Banking Certificates of Deposits - - 34 -
Other 120 - 3,268 -
-------------------------------------------------------
Total real denominated investments 4,032 - 9,601 -
=======================================================
Investments in Dollars:
Currency Exchange Securities-NTN's 285,601 73,327 285,601 73,327
-------------------------------------------------------
Total Dollar denominated investments 285,601 73,327 285,601 73,327
=======================================================
Total cash and equivalents 289,633 295,202
=======================================================
US dollar = 3.8949 Real
Cash investments in foreign exchange securities primarily to offset the
company's foreign currency liability exposure are recognized at marked-to-market
values.
Due to market volatility, the market values of such investments was R$128
million lower vis-a-vis their contractual values.
- --------------------------------------------------------------------------------
30