Evento IFRS: adaptation of international accounting standards in EDP Energias do Brasil Group

IFRS: adaptation of international accounting IFRS: adaptation of international accounting standards in EDP Energias do Brasil Group

São Paulo, January 17, 2011

Rio de Janeiro, January 18, 2011

This presentation may include statements that represent expectations regarding future events or resultsaccording to the Brazilian and international regulations on securities. These statements are based oncertain presumptions and analyses made by the Company according to its experience and theeconomic environment as well as market conditions and expected future events, many of which arebeyond the Company’s control. Important factors that may lead to significant differences betweenactual results and the statements of expectations regarding future events or results include theCompany’s business strategy, Brazilian and international economic conditions, technology, financialstrategy, developments of the public services industry, hydrological conditions, conditions of the financial

Disclaimer

strategy, developments of the public services industry, hydrological conditions, conditions of the financialmarket, uncertainty regarding the results of its future operations, plans, goals, expectations andintentions, among others. Due to these factors, the Company’s actual results may differ significantly fromthose indicated or implicit in the statements of expectations regarding future events or results.

The information and opinions contained here should not be understood as a recommendation forpotential investors and no investment decision should be based on the veracity, up to date orcompleteness of these opinions or information. None of the Company’s advisors or parties relatedthereto or their representatives will have any responsibility for any losses that may arise from the use orfrom the content of this presentation.

This material includes statements on future events subject to risks and uncertainties, which are based onThis material includes statements on future events subject to risks and uncertainties, which are based onthe current expectations and forecasts involving future events and trends that may affect Companybusiness. These statements include projections of economic growth and demand and the supply ofpower, besides information on competitive position, regulatory environment, potential growthopportunities and other subjects. Numerous factors may adversely affect the estimates andpresumptions on which these statements are based.

• IFRS is the world standard for accounting pratices, with full application in the adherent countries

since 2005

• Based on na approach on essence over form and judgmental nature of the accounting criteria

• In Brazil it begins in 2005 through Comitê de Pronunciamentos Contábeis, whose objective is the

Overview

• In Brazil it begins in 2005 through Comitê de Pronunciamentos Contábeis, whose objective is the

issuance of technical pronouncements that lead to the convergence of local accounting into

international standards

• 15 Pronouncements and 2 Guidelines applicable in 2008, were published in 2007/2008

• 27 Pronouncements, 10 Interpretations and 1 Guideline were published in 2009 for application in

2010, with retroactive effect to January 1, 2009

• EDP Energias do Brasil has reported in IFRS basis to its controlling shareholder since 2005

2

Nota: o gráfico ilustra o desempenho do risco-país - EMBI (JP Morgan)

The International Standards CPCs/IFRS does not affect:

Important Messages

� The relationship with clients;

� The Companies’ strategy;

� The Companies’ operational management;

� The Companies’ financial management;

� The ability to generate cash flow;

Energias do Brasil Group

Generation Transmission DistributionCommercializatio

Others

Impact of the CPCs by business area

Generation Transmission DistributionCommercializatio

nOthers

CPC 27 CPC 27

ICPC 01 / CPC 20 / CPC 17

CPC 04

CPC 06 / CPC 25 / CPC 26/ CPC 32 / CPC 33 / ICPC 03 / ICPC 08 / ICPC 09

CPC 38/39/40/ OCPC 03

CPC 38/39/40/ OCPC 03

CPCs with an impact on

the financial statements

and notes to the

statements

4

OCPC 03 OCPC 03

CPC 15CPCs with an impact on

the financial statements

and notes to the

CPC 15 and ICPC 09 Business Combination (IFRS 3)

CPC 20 Borrowing Costs (IAS 23)

CPCs issued in 2009 for application until Dec 2010General Contents

CPC 25 Provisions, Contingent Liabilities and Contingent Assets

CPC 27 and ICPC 10 Property, Plant and Equipment (IAS 16)

CPC 28 Investment Property

CPC 33 Employee Benefits (IAS 19)

ICPC 01 and CPC 17 Service Concession Arrangement (IFRIC12) and Construction Contracts (IAS11)ICPC 01 and CPC 17 Service Concession Arrangement (IFRIC12) and Construction Contracts (IAS11)

ICPC 03 Leasing Operations (IFRIC 4, SIC 15 and SIC 27)

A Business Combination is an operation involving the acquisition of companies or other event in whichthe acquirer obtains control of one or more businesses.

CPC 15 – Business Combination (IFRS 3) and ICPC 09

New acquisition

Parent Company

Subsidiary Subsidiary

Parent Company

Subsidiary Subsidiary Subsidiary

Spin-offs Mergers/Takeovers

6

This pronouncement applies to all the Business Combinations occurring as of January 1, 2009. Theinterpretation allows it to be applied to operations prior to this date if this expresses its business better.

CPC 15 – Business Combination (IFRS 3) and ICPC 09

Effects on the subsidiary

Effects on the parent company / Consolidated balance sheet

Absorption of the

Recording of assets and Appraisal

Recording of the initial

PPA* with appraisal reports of Appraisal

The recognized goodwill will be amortized over the concession period, since, according to ICPC 09, if it ispossible to obtain, in an objective and reliable manner, the part of the amount of the price paid that isnot allocable to the other assets and liabilities or to the concession right, it can also be amortized over theremaining period of the concession right, on an individual basis. However, it cannot be amortized on a

of the individual accounts of

the acquired company

+assets and liabilities at fair value previously

not considered

+Appraisal proforma of property, plant and equipment

of the initial acquisition cost andgoodwill / negative goodwill

+reports of property, plant and equipment and

intangible assets (*)

+Appraisal proforma of property, plant and equipment

remaining period of the concession right, on an individual basis. However, it cannot be amortized on aconsolidated basis.

Negative goodwill should be recognized immediately through income.








ICPC 01 and CPC 17 Service Concession Arrangement (IFRIC12) and Construction Contracts (IAS11)


CPC 20 – Borrowing Costs (IAS 23)

Before CPC20 After CPC20

Interest Capitalization Allowed MandatoryInterest Capitalization Allowed Mandatory

Stamped Loans

Unstamped Loans

Impact on the companies from the Group

GenerationDistributionTransmissionOthers

All*

Others

* When the conditions for interest capitalization are fulfilled (having an eligible asset and borrowing costs incurred concomitantly)

N.B. : before the application of CPC 20, in Distribution and Transmission it was not possible to apply the capitalization of financial charges due to the delay in the reception of the stamped loans.










CPC 25 - Provisions, Contingent Liabilities and Contingent Assets

Present Obligation

Uncertain as to term

It will probably generate

Obligation resulting from past events

as to term and

amount

generate future

economic benefits

PROVISION

Type of obligation Recording Publication

Present obligation that probably requires payments

Possible obligation or present obligation that might require, but will probably Possible obligation or present obligation that might require, but will probably

not require future payments

There is a possible obligation or present obligation where the likelihood of

payments is remote









ICPC 03 Leasing Operations l (IFRIC 4, SIC 15 and SIC 27)

CPC 27 and ICPC 10 Property, Plant& Equipment (IAS 16)

Objective: to establish the accounting treatment for property, plant and equipment, so that the users offinancial statements can discern information on the entity’s investment in its property, plant andequipment, as well as its changes.

Main points to be considered in accounting: the recognition of assets; the determination of their bookvalues; rates, depreciation values and losses due to devaluation to be recognized in relation to theseassets.

Adjustments of Property, Plant and

Equipment

AdministrationCosts

ForeignExchange Debt

Deemed Cost

The deemed cost should be used if it is verified that the value of the asset is unadjusted, i.e. either much higher, or

Initial Adoption

13

Costs Exchange DebtVariation

value of the asset is unadjusted, i.e. either much higher, or visibly lower.

This pronouncement applies to all the property, plant and equipment recorded at the companies included in the scope of the pronouncement, as from January 1, 2009, although the effect is always with a basis on retroaction to the origin of the creation or acquisition of the asset.


Effects on the Companies included in the Scope Effects on the parent company/Consolidated Balance Sheet

Write-off of the Sums Added to Property, Plant

Companies Impacted

Write-off in Property, Plant

and Write-off in Property, Plant and Property, Plant and Equipment

as Administrative Apportionment in the years 2008 and 2009

= CESA EnergestInvestcoPantanal

=

and Equipment

and Reduction of

Shareholders’ Equity

Write-off in Property, Plant and Equipment

and Reduction of Shareholders’ Equity

�Depreciation rates: As established by Aneel (Brazilian Electricity Regulatory Agency).

� Companies that are entitled to compensation at the end of the concession: all the public utility providers or independent producers, of hydropower.

14

� Companies that are not entitled to compensation at the end of the concession: wind farms and thermal power plants (Cenaeel, Elebrás and Pecém).

� Assets that are reversible or subject to compensation: all those that are included in accounts 132, with the exception of account 13206 (not associated with the concession), which in the case of generation has immaterial values.










15

CPC 28 – Investment property

Investment property is the real estate (land, building or part of a building) maintained by the owner toobtain income or capital appreciationl, and that is not available for use in the production or supply ofgoods or services, for administrative purposes or for sale in the ordinary course of business.

Do I have a lease on a property of mine?

Isn’t the property used in my operating activity/business?

Do I receive income under this lease?

NoX

Yes

NoX

Subtract the value of property, plant and equipment and classify as Investment

Property Income

16

CPC 15 and ICPC 09 Business Combinations (IFRS 3)









17

CPC 33 – Employee Benefits (IAS 19)

CPC 33 Employee Benefits covers all the forms of remuneration granted by a sponsoring entity/employer inexchange for the services rendered by the employees, with the exception of share-based payments.

Pay for work provided

SHORT-TERM BENEFITS

- Salary

- Overtime

- Vacations and 13th month salary

- Profit sharing and gainsharing paid in the following year

Vacations and 13th month salary

These should be presented net

OTHER LONG-TERM BENEFITS

- Paid leave

- Length of service additional

POST-EMPLOYMENT BENEFITS

- Private pension

- Post-employment medical care

- Length of service bonus paid in the post-employment period

Defined contribution

Without responsibility for

Defined benefit

With responsibility for actuarial

SEVERERANCE BENEFITS

- Severance pay

- FGTS – Government severance indemnity fund for employees

- Notice period

- Voluntary Redundancy Program (PDV) Benefits

These should be presented net of provisions in liabilities. Without responsibility for

actuarial and investment risks.With responsibility for actuarial

and investment risks.

Recognition will begin to be performed in Other income/expenses in shareholders’ equity, instead of recording it in net income for the year

Inside the scope of CPC 33

Outside the scope of CPC 33

Examples of the application of this CPC at the EDP Brasil Group

CPC 33 – Employee Benefits (IAS 19)

Previous Application

2009 2010

Assets

Changes in the presentation of vacations and

13th month salary in the Balance Sheet

Previous Application

2009 2010

Liabilities

Recognition of actuarial gains and losses as

Other Compreensive Income

Assets

Current Assets

Advances to employees (other) 3,000 5,000

Liabilities

Current Liabilities


Application CPC 33

2009 2010

Assets

Current Assets

Advances to employees (other) - -

Liabilities

Current Liabilities

Post-employment Benefits 27,000 27,000

Non-current Liabilities


Application CPC 33

2009 2010

Liabilities

Current Liabilities


19

Vacation pay and 13th month salary advances should be presented net of provisions in liabilities

Advances to employees (other) - -

Liabilities

Current Liabilities



Non-current Liabilities


Shareholders’ equity

Other Comprehensive Income (30,000) (30,000)










20

ICPC 01 – Service Concession Arrangement (IFRIC 12)

BeforeBefore the application of ICPC 01

Infrastructure associated with the concession

AfterAfter the application of ICPC 01*

Infrastructure associated with the concession acquired / built

with the concession acquired / built

Fixed Assets

Useful life of the item

Item 1Item 2...Item X

Concession date

21

Intangible Assets

(depreciated during the concession)

Financial Assets

(right to compensation)

* The standard will be applied prospectively as from 01/01/2009. Bifurcated Template only applicable to Distribution. The template of Transmission is of Financial Assets, yet this template has not yet been designed in the market.

ICPC 01 – Service Concession Arrangement (IFRIC 12)

Before After

ASSETS

Current Assets

Non-current Assets 1,300,000 1,100,000

Example of the effect by disco

Receivable from the Granting Authority 0 150,000

Property, Plant and Equipment 1,250,000 5,000

Intangible Assetsl 50,000 945,000

LIABILITIES

Current Liabilities

Non-current Liabilities (200,000) 0

Special Obligations (200,000) 0

22

INCOME/EXPENSES

Expenses 95,000 95,000

Depreciation 85,000 500

Amortization 10,000 94,500

CPC 17 – Construction Contracts (IAS 11)

� Only applicable to the DistributionDistribution and TransmissionTransmission companies of the EDP Energias do BrasilGroup, due to the application of ICPC 01;

� There are no adjustments to be made in the Financial Statements;� There are no adjustments to be made in the Financial Statements;

� Requires some items of additional disclosure in the Financial Statements of the companies thathave the application of this CPC, such as Revenue and Cost of Construction.

23










24

ICPC 03 – Leasing Operations(IFRIC 4, SIC 15 and SIC 27)

Signing of the Contract

Legally, is it a Lease?

Process for definition of inclusion for ICP03:

Yes – CPC06

Financial

We should record the asset

No

Is there an implicit lease?

- It is a Specific Asset;

- Right of use;

- Ability to operate and control;

- Transfers the risks and benefits of the asset.

Yes

We should record the asset in our property, plant and equipment

No

We should record the amount in the

company’s operating income/expenses

There are no leases in the EDP Brasil Group.

CPC 18 – Investment in Associated Companies and Subsidiaries (IAS 28)

Write off any negative goodwill recognized upon the acquisition of the investments;Impact on the EDP Brasil Group: write-off of negative goodwill with a positive impact on net income in the amount of R$ 3MM

Other CPCs that are applicable, yet less relevant(with less or no impact)

Summary

CPC 31 – Non-Current Assets Held for Sale (IFRS 5)

The greatest impact of this reclassification is with the disclosure requirements, as the accounting adjustment is only a reclassification between lines, unless it is necessary to perform a measurement at fair value of the items classified in this account.

CPC 38, 39, 40 and OCPC 03 – Financial Instruments (IAS 32 and 39 and IFRS 7)

Requires new information disclosure needs, not having an impact on the Financial Statements.

ICPC 08 – Accounting for the Payment of Proposed Dividends

26

ICPC 08 – Accounting for the Payment of Proposed Dividends

The recognition of dividends should be performed through recording of the compulsory minimum dividends (25% of net income) as a liability, whereas the rest should be kept in a specific account of shareholders’ equity, until the final decision to be made by the partners;

Regulatory Assets and Liabilities

Regulatory Assets and Liabilities are no longer registered, as they would not

Important point for the electric power sectorIt is not established by the CPCs

Regulatory Assets and Liabilities are no longer registered, as they would not fulfill the concepts established by the Conceptual Framework for preparation and presentation of the Financial Statements.

27

Effects on the Financial Statements of the application of the IFRS to the Controlling Shareholder

September 30, 2010 September 30, 2010

IFRS BRGAAP Variation IFRS BRGAAP Variation

Current Assets 2,356 2,581 (225) Business volume 3,676 3,688 (13)

Other Non-current Assets 1,258 1,008 249 Cost of sales 1,973 2,061 (88)

Non-current Tax 798 530 268 Gross Margin 1,703 1,627 76

Balance Sheet (R$ MM)Statement of Income (R$ MM)

�There will be differences between the IFRS for the controlling shareholder and the local IFRS, due to the

Non-current Tax 798 530 268 Gross Margin 1,703 1,627 76

Intangible Fixed Assets 3,043 1,122 1,921 Opex 473 485 (12)

Tangible Fixed Assets 5,081 6,751 (1,670) Other costs/income 71 76 (4)

Total Assets 12,536 11,992 544 Total Opex 544 561 (17)

Current Liabilities 2,205 2,312 (107) EBITDA 1,159 1,067 92

Other Non-current Liabilities 646 370 277 Amortization and Provisions 268 245 23

Loans MLP 2,747 2,786 (39) EBIT 891 821 70

Deferred Tax 472 174 298 Financial 175 163 12

Total Liabilities 6,070 5,642 428 RAI 716 658 58

Shareholders’ Equity 4,595 4,612 (18) Taxes 238 218 20

Minority Interest 1,871 1,738 133 Minoritary Shareholders 94 97 (3)

Total Liabilities +SE+MI 12,536 11,992 544 Net Income 384 343 41

28

�There will be differences between the IFRS for the controlling shareholder and the local IFRS, due to the

adoption timing;

�The greatest impacts caused by adjustment of assets/liabilities or harmonization of concepts are verified

on the initial adoption date;

Evento IFRS: adaptation of international accounting standards in EDP Energias do Brasil Group

Documents

13th month salary

edp brasil group

edp energias

future events

negative goodwill

financial statements

employment benefits 27

net income