EBR Centrais Eletricas Brasileiras SA Eletrobras

Annex 1. PPI - Resolution Numer 07 of September 13, 2016 - Low Price

(free translation of the original text in Portuguese)

RESOLUTION No. 7 OF 13 OF 2016 SEPTEMBER

THE BOARD OF THE PROGRAM OF INVESTMENT PARTNERSHIPS OF THE BRAZILIAN

REPUBLIC’s PRESIDENCY ., using the powers conferred by arts. 4, 5 and 7 of Provisional Measure No. 727, of May 12, 2016 and:

Whereas that CELG Distribution S.A - CELG D was included in the National Privatization Program - PND on May 13, 2015, through Decree No. 8,449, of May 13, 2015, which designated the Ministry of Mines and Energy in charge for the implementation and the monitoring of CELG D privatization process in accordance with art. 6, § 1, of Law 9,491 of September 9, 1997 and the Banco Nacional do Desenvolvimento Econômico e Social - BNDES responsible for hiring the services and provide the necessary technical support for the implementation of the CELG D privatization;

Whereas that the shareholding control of CELG D is owned by Centrais Elétricas Brasileiras S.A - Eletrobras, which holds approximately 50.93% (fifty point ninety-three percent) of the total share capital and voting of CELG D, and 49.00% (forty nine percent) of the CELG D shares are held by the Companhia Celg de Participações - Celgpar, whose control is held by the State of Goiás, and that the amendment to the concession contract signed on December 30, 2015 extended the concession contract of CELG D until July 7, 2045;

Whereas that the previous bidding procedure to sell the shareholding control of CELG D, referred to in the Auction Notice PND No. 01.12016/CELG-D, it was considered desert on August 16, 2016; and

Whereas that the Ministry of Mines and Energy requested for this Board, through Notice No. 170 of September 1, 2016, and BNDES, through Official Letter No. 414/2016-GM-MME, the continuation of the privatization process of CELG D, including the determination of the conditions of privatization and approval of the minimum price of sale of shares issued relating to the shareholding control owned by Eletrobras, decides:

Art. 1 The Resolution No. 11 of November 18, 2015, of the National Privatization Council, becomes effective with the following amendments:

"Art. 1 ...............................................................................

Sole Paragraph - The minimum sale value of 76.761.267 (seventy-six million, seven hundred and sixty-one thousand, two hundred sixty-seven) common shares belonging to Eletrobras will be R$ 912,678,375.87 (nine hundred and twelve million, six hundred seventy-eight thousand, three hundred seventy-five reais and eighty-seven cents) including the amount related to the offer to employees and retirees of CELG D "(NR)

"Art. 4...............................................................................

§ 1 The shares belonging to CelgPar, deposited at FND may only be withdrawn in the following cases:

I - if the auction of CELG D shares not take place until March 31, 2017;

II - if the auction take place until March 31, 2017, but there is the sale of shares; and

III - by motivated decision by the Board of Investment Partnerships Program of the Brazilian Republic’s Presidency at any time

........................................................................................ "(NR)

" Art. 5 The minimum price of each share of CELG D for selling shares purposes by Eletrobras in the auction pursuant to art. 1 will be approximately R$ 11.91 (eleven reais and ninety-one cents) in case of sale of CELG D shares held only by Eletrobras, in which case should be offered 75,355,789 (seventy five million, three hundred and fifty-five thousand, seven hundred and eighty-nine) common shares of CELG D owned by Eletrobras, totalizing R$ 897,611,651.71 (eight hundred ninety-seven million, six hundred and eleven thousand, six hundred fifty-one reais and seventy one cents).

§ 1 In order to permit the transfer of the shareholding control of CELG D, in the occurrence of the event provided for in the caput, will be offered to employees and retirees of CELG D 1,405,478 (one million, four hundred and five thousand, four hundred seventy-eight) common shares issued by CELG D, corresponding to approximately 093% (ninety three percent) of the shares representing the total share capital and voting of CELG D owned by Eletrobras, priced at RS 10.72 (ten reais and seventy two cents) per share, which amounts to the value of R$ 15,066,724.16 (fifteen million, sixty-six thousand, seven hundred and twenty-four reais and sixteen centavos), already included the discount of approximately 10% (ten percent) compared to the minimum price referred to in the heading of this article.

" Art. 6 In the event that Celgpar decide to sell all the shares held jointly with Eletrobras, the minimum price for each CELG D share held by Eletrobras and the Celgpar for auction sale purposes, will to be approximately R$ 11.95 (eleven reais and ninety-five cents), totalizing R$ 1,708,131,367.30 (one billion, seven hundred and eight million, one hundred thirty-one thousand, three hundred and sixty-seven reais and thirty cents).

§ 1 As provide in the caput of this article, the price of each share of CELG D, under the offer to employees and retirees of CELG D, will be R$ 10.76 (ten reais and seventy-six cents), which totalize R$ 82,595,126.52 (eighty-two million five hundred ninety-five thousand, one hundred twenty-six reais and fifty-two cents)., already included the discount of approximately 10% (ten percent) compared to the minimum price referred to in the caput of this article.

................................................................................................. "(NR)

"Art. 7 ...............................................................................

§ 3 The remains of the second offer to employees and retirees of CELG D should be acquired by the (s) winner (s) of the auction for the price equivalent to the value offering to employees and retirees of CELG D within a maximum thirty days from the date of disclosure of these leftovers.

§ 5. In the privatization tender, should be an obligation to repurchase the winner(s) of the event all shares that shareholders who have acquired under the offer to employees and retirees of Celg D, wish divested, pelo. the minimum price of the sale of control, duly updated by the positive variation of the National Index of Consumer Price Index - IPCA, published by the Brazilian Institute. of Geography and Statistics - IBGE, with additional compensation of 8% (eight percent) per year, in the event does not occur the opening of capital of CELG D and the listing of its shares within three years from the signing date of the agreement of purchase and sale of shares.

§ 7 The right to sell as provided for in § 5 is the exclusive prerogative of the originating acquirer of the offer to employees and retirees of CELG D, provided in the Offer Manual for the Employee, not being extended to subsequent purchasers. "(NR )

Art. 2 New public hearing should be held to differ more transparency to the CELG D privatization process in accordance with art. 39 of Law No. 8,666 of June 21, 1993.

Art. 3 This Resolution shall enter into force on the date of its publication.

Art. 4 is repealed the § 4 of art. 7 of Resolution No. 11, of November 2015, of the National Privatization Council.

WELLINGTON MOREIRA FRANCO

Executive Secretary of the Council

Annex 2. BNDES - Share Deposit Receipt No.

01/2015, of May 19, 2015

BNDES

Classification: Controlled Document – Corporate and Industrial Confidential Information

Access Restriction : Companies from the BNDES System / Recipient

SHARE DEPOSIT RECEIPT No. 1 /2015

      Pursuant to Article 9 of Law No. 9491, of September 9, 1997, and Decree No. 8449, of May 13, 2015, aligned with Resolution No. 5 of the National Privatization Council (CND), of May 5, 2015, we received from Centrais Elétricas Brasileiras S.A. (Eletrobras) , as a deposit, linked to the National Privatization Fund (FND), a receipt corresponding to the blockage of 76,761,268 common shares, representative of the social capital of Celg Distribuição S.A. (CELG D) ,

      This receipt will be automatically cancelled, for all legal purposes and effects, pursuant to Article 9, § 3, of the same Law, at the time of completion of the privatization process.

Annex 3. Decree No. 8,449 of May 13, 2015 -Inclusion in the PND

      OFFICIAL FEDERAL GAZETTE

Federative Republic of Brazil – National Press

In circulation since October 1, 1862

Year CLII No. 90

Brasilia - DF, Wednesday, May 14, 2015

Executive Acts

DECREE NO. 8449, OF MAY 13, 2015

Rules on the inclusion of CELG Distribuição S.A. in the National Privatization Program (PND), among other provisions.

      THE PRESIDENT OF THE REPUBLIC , exercising the powers conferred by Article 84, heading , Sections IV and V, heading , su bparagraph “a” of the Constitution, and in view of the provisions set forth in Law No. 9491, of September 9, 1997,

DECREES:

      Article 1: CELG Distribuição S.A. is included in the National Privatization Program (PND), for the purposes of Law No. 9491, of September 9 1997.

      Article 2: The Ministry of Mines and Energy is designated as the party responsible for the implementation and monitoring of the privatization process of CELG Distribuição S.A., pursuant to Article 6 § 1, of Law No. 9491, of 1997.

      Article 3: The Brazilian Development Bank is designated as the party responsible for contracting the services and providing the technical support needed to implement the privatization of CELG Distribuição S.A.

Article 4: This Decree will go into effect on the date of its publication.

Brasilia – May 13, 2015; 194 ^th year of Independence and 127 ^th year of the Republic

DILMA ROUSSEFF

Armando Monteiro

Eduardo Braga

      Annex 4. CND - Resolution No. 7 of July 9, 2015 - IFC Hiring and Resolution CND No. 11 of November 18, 2015 – Minimum Price

RESOLUTION No. 7, OF JULY 9, 2015

The CHAIRMAN OF THE NATIONAL PRIVATIZATION COUNCIL

(CND), in exercise of the prerogative established in § 4 of Article 5 of Law No. 9491, of September 9, 1997, and based on Article 12, of Decree No. 2594, of May 15, 1998, resolves, ad referendum of the collegiate:

      Article 1: Authorizes the Brazilian Development Bank (BNDES), as the party responsible for contacting the services needed to privatize CELG Distribuição S.A. (CELG D), in accordance with Article 3 of Decree No. 8449, of May 13, 2015, to carry out a tender process in the form of an electronic auction to hire independent external auditing services for the privatization process of CELG D, as well as directly hire the International Finance Corporation (IFC), through a waiver of the tender process, to provide services for the structuring and privatization of CELG D.

      Article 2: Given the provisions set forth in § 3 of Article 22 of Decree No. 2594, of May 15, 1998, independent external auditing services may be contracted to accompany the privatization process of CELG D from the data room.

      Article 3: Expenditures on third-party services, referred to in Article, 26 of Decree No. 2594, of May 15, 1998, incurred by BNDES through the contracting of services needed to privatize CELG D, will be reimbursed by

the selling party or parties at the time of financial settlement of the sale of the shares.

      Article 4: The holder(s) of CELG D shares deposited in the National Privatization Fund (FND) will reimburse BNDES within up to 24 (twenty four) months of the date of the last expenditure incurred by BNDES, if the sale of the shares has not occurred.

      Article 5: If the funds raised through the sale of the CELG D shares are not sufficient to reimburse the expenditures referred to in Article 3, the selling party or parties whose shares are deposited in the FND will reimburse BNDES within 60 days of the auction sale.

      Article 6: For the purposes of complying with Articles 4 and 5 above, an agreement may be signed between the holder(s) of shares deposited in the FND and BNDES, in order to define the reimbursement of expenditures incurred through the contracting of third party services to privatize CELG D.

      Article 7: This Resolution will go into effect on the date of its publication.

      Armando Monteiro Chairman of the Council

Warning No 259/ 2015 / GM-MME

Brasilia, November 18, 2015.

His Excellency

ARMANDO QUEIROZ MONTEIRO NETO

Minister of Development, Industry and Foreign Trade and President of the National Privatization Council CND-Brasilia-DF

Subject: setting the minimum selling price for CELG Distribuição S.A. CELG D

Minister,

      1. I please request your Excellence for the editing proposal of the resolution of The National Privatization Council-CND to be examined, providing for CELG Distribuição S.A the approval of the privatization conditions, and approval of the minimum price for the issuing of its shares, aiming to alienate the representative share of its shares control through auction, as required by art. 4º, § 3º, of Law Nº 9.491, from September 9, 1997.

      2. Therefore, I forward herewith the AEP/SUP letter No. 26, of November 13, 2015 of Banco Nacional de Desenvolvimento Econômico e Social – BNDES (National Economic and Social Development Bank) together with the Privatization Modeling Report of CELG Distribuição S.A. - CELG D, prepared by the International Finance Corporation IFC, dated of November 5, 2015; CND resolution draft; and Note AEP/JUREP No 10, of November 13 of 2015.

      3. In addition, Mr. Minister, the Technical Notes No. 121 and No 122, of the Economic Consulting, dated of November 16 and 18, 2015, and Note No 254, of the Legal Consulting, November 17, 2015, are being sent to justify the urgency of the adoption of the proposed resolution, ad referendum of the Board.

Yours faithfully,

EDUARDO BRAGA

Ministry of Mines and Energy

National Privatization Council - CND

RESOLUTION No 11, OF NOVEMBER 18, 2015

      THE PRESIDENT OF THE NATIONAL PRIVATIZATION COUNCIL - CND , using the prerogative established in the art. 5º,§ 4º, of Law No. 9491, of September 9, 1997, and to focus on art. 12 of Decree No. 2594 of May 15, 1998,

Whereas:

CELG Distribuição S.A.-CELG D was included in the National Privatization Program – PND on May 13, 2015, by Decree 8449 of May 13, 2015;

Referred decree appointed the Ministry of Mines and Energy as responsible for the implementation and monitoring of CELG D privatization process in accordance with art. 6º,§ 1º of Law 9491 of September 9, 1997, and designated the Banco Nacional de Desenvolvimento Econômico e Social - BNDES as responsible for hiring the services and provide technical support needed for the implementation of the privatization CELG D;

A shares control in CELG D is owned by Centrais Elétricas Brasileiras S.A. -Eletrobras, which owns approximately 50.93% (fifty point ninety-three percent) of the total and voting capital of CELG D;

49.00% (forty-nine percent) of the shares of CELG D are owned by Companhia Celg de Participações - CELGPar, whose control is held by the State of Goiás;

The Law 12783, of January 11, 2013, on its art. 7º, authorized that the electricity distribution concessions achieved by art. 22 of Law No. 9074, of July 7, 1995, can be extended, under the granting authority's criteria, only once, for a period of thirty (30) years, in order to ensure continuity, efficiency of service delivery, low tariff and meeting the operational and economic rationality criteria;

Decree No. 8461 of June 2, 2015, authorized the Ministry of Mines and Energy to extend the electricity distribution concessions under the scope of art. 7º of Law 12783, of January 11, 2013, for thirty (30) years, since there is expressed acceptance by the concessionaire conditions set out in concession contract or its amendment agreement;

Resolution CNDne 11, of November 18, 2015 Fls. 2

      Agência Nacional de Energia Elétrica – ANEEL (National Agency of Electric Energy) promoted in July 2015, the first phase of the Public Hearing 38/2015, and in September 2015, its second phase, aiming to receive contributions to elaborate the concession agreement draft to distributors;

ANEEL published on October 26, 2015, in the Official Gazette (Diário Oficial da União), the Order No. 3540, which approved the draft Amendment to the Concession Agreement, to be signed by CELG D, and recommended to the Ministry of Mines and Energy the grant extension under Decree No. 8461 of June 2, 2015; and

The Ministry of Mines and Energy, on November 5, 2015, through the Circular letter No. 03/2015-SE-MME, provided to the electricity distributors the Amendment draft to the Concession Agreement for approval of their deliberative bodies and subsequent signing;

Decides, ad referendum of the collegiate, to approve the following conditions for the CELG D privatization:

Art. 1º The privatization of CELG D will be given in the form provided on art. 4º, section l, Law No. 9491, of September 9, 1997, upon the disposition of 76,761,267 (seventy-six million, seven hundred sixty-one thousand two hundred sixty-seven) common shares owned by Eletrobras, which represent approximately 50.93% (fifty point ninety-three percent) of the total and voting capital of CELG D.

      Sole paragraph: The minimum sale value of 76,761,267 (seventy-six million, seven hundred sixty-one thousand two hundred sixty-seven) common shares owned by Eletrobras will be 1,427,474,200.79 (one billion, four hundred twenty-seven million, four hundred seventy-four thousand, two hundred reais and seventy-nine cents), including the corresponding amount of the offer to employees and retirees.

      Art. 2º As part of the privatization of CELG D, can also be sold pari passu with Eletrobras, in whole or in part, shares owned by CELGPar representing the capital of CELG D, since so authorized by CELGPar and that such shares of its ownership in CELG D that are of sale under the privatization of CELG D are free and clear of any liens, encumbrances or restrictions, also observed procedures applicable along with its controlling shareholder.

      Art. 3 The privatization public notice of CELG D will define the lots of shares to be offered, and in the case of more than one lot the purchase must be fully made by the same purchaser.

      Art. 4 Is hereby authorized deposit in the National Privatization Fund - FND of shares owned by Celgpar in the share capital of CELG D, in case Celgpar decide to divest all or part of their shares on CELG D.

Resolution CNDne 11, of 18 November 2015 Fls. 3

Once deposited in the FND, Celgpar's shares may only be removed from the FND in the following cases: I - non-occurrence of CELG D shares auction until November 30, 2016; II - occurring the auctions until November 30, 2016, but with no alienation of the shares, and Ill - by reasoned decision of the CND at any time, or whichever comes first.

§ 2 to under the heading of this article, Celgpar should grant to BNDES powers to sell their shares in CELG D.

§ 3 BNDES will receive payment of 0.2% referred to in art. 21 of Law No. 9,491, of September 9, 1997, also levied on the shareholding of Celgpar.

§ 4 the resources from the sale of Celgpar shares ownership will be passed on, in domestic currency, by BNDES directly to Celgpar following art. 42 of Decree No. 2,594, of May 15, 1998, after deduction of the payment provided for in paragraph 3 of this article. as well as the expenses incurred by hiring third parties by the BNDES, in proportion to the percentage sold by Celgpar.

Art. 5º the minimum price of each CELG D share aiming to dispose the respective shares by Eletrobras within the auction referred to in art. 1º will be approximately R$ 18.63 in case of sale of CELG D shares owned only by Eletrobras, in which case should be offered 75,355,789 common shares of CELG D owned by Eletrobras, which reaches the total amount of R$ 1,403,904,334.73 for the lot.

§ 1 In order to allow the transfer of share control of CELG D, in case of the hypothesis provided in this Article caput, will be offered to employees and retirees of CELG D 1,405,478 common shares issued by CELG D, corresponding to approximately 0.93% of the total capital share and voting of CELG D owned by Eletrobras, at the price of R$ 16.77 per share, which reaches the value of R$ 23,569,866.06.

§ 2 the price of each share mentioned in 1 was calculated after applying the discount of approximately 10% compared to the respective minimum price referred in the caput of this article.

Resolution CND ng 11, of November 18, 2015-Fls. 4

Art. 6º In case that Celgpar decides to sell all the shares held jointly with Eletrobras, the minimum price of each CELG D share held by Eletrobras and Celgpar, for disposal purposes, will be approximately of R$ 18.69, totaling a lot of R$ 2,671,672,506.21.

§ 1 in case of what´s in the caput, the price of each share of CELG D in the scope of the offer to employees and retirees of CELG D will be R$ 16.82, which total the amount of R$ 129,112,456.14 already included the discount of approximately 10% compared to the minimum price referred in this article.

§ 2 if it is not offered in the auction all of CELG shares ownership of Celgpar the values specified in the caput of art. 6º, and its §1, should be revised in proportion to the shares actually offered in CELG D privatization notice to ensure Eletrobras full price defined in the sole paragraph of art. 1

§ 3 The review provided for in §2 should ensure the control of CELG D sale, seek to maximize the number of actions offered to employees and retirees and keep the full price of the company, observing the actual percentage of shares offered by Celgpar in the public notice of privatization and the discount of approximately 10% over the revised minimum price.

Art. 7 The enabling conditions for employees and retirees will be defined in the privatization public notice.

§ 1 The total amount of shares of CELG D to be offered to employees and retirees will be divided pro rata and equally among all those considered eligible for the purposes of this article.

§ 2 The remains of the offer to employees and retirees of CELGD could be acquired by employees and retirees of CELG D who have expressly made the reservation in the first offer, limited to twice the amount gained in the first offer.

3 The remains of the second offer to employees and retirees of CELG D should be acquired by the winner of the event, by the price equal to the offering value done to employees and retirees of CELG D and in no later than sixty (60) days counted from the settlement date of the second offer to employees and retirees of CELG D

§4 observing the provisions of §5, the employee or retired of CELG D may only dispose the shares acquired after a period of three (3) years, starting on the signature date of Shares Purchase and Sale Agreement.

Resolution CND ne 11, of November 18, 2015-Fls. 5

§ 5 In the privatization bid should be an obligation to repurchase, by the winners of the event, all CELG D shares acquired by employees and/or retirees CELG D that wish to sell such shares at the minimum price for the sale of control, duly updated by the positive variation of the National Index of Consumer Price (IPCA), published by the Brazilian Institute of Geography and Statistics (IBGE), with additional remuneration of 8% per year, in case of not occurring the opening of CELG D capital and the listing of its shares within three years counting from the signature date of the Agreement for Shares Purchase.

§ 6 The financial settlement of the shares acquired by employees and retirees of CELG D will be in cash and in local currency.

Art. 8 In the privatization bid of CELG D should be set if and in what volume of shares, Celgpar participate in the privatization auction of CELG D.

Art. 9 should be made public hearing pursuant to art. 39 of Law 8666 of June 21, 1993 in order to give greater transparency to the privatization process of CELG D.

Art. 10, payment of CELG D shares offered in auction will be cash and in domestic currency.

Art. 11. The financial settlement of the CELG D sale of shares and the share transfer of ownership to CELG D to winner buyers will be subject to approval by the National Electric Energy Agency ANEEL and the Administrative Council for Economic Defense CADE, in the form of the respective legislation and applicable standards.

Art. 12. The National Bank for Economic and Social Development BNDES, responsible for hiring the services needed for the privatization of CELG D, in accordance with art. 3º of Decree 8449 of May 13, 2015, is authorized to hire specialized services of technical advice and operational support, related to the procedures needed to carry out the auction of share sale issued by CELG D, including by waiver of bidding, observed in the Law No. 8666, of 1993.

Art. 13. It is authorized the opening of information room – data room - before public notice, which shall contain the information and documents of CELG D so that concerned parties can perform acts.

§ 1 opening of information room - data room, does not depend of the participation definition of Celgpar.

§ 2 should be prepared a manual of diligence procedure, which can define, among others, the following matters:

I - opening and closing schedule of the information room; ll - form of visits scheduling; Resolution CND ne 11, of November 18, 2015-Fls. 6

III - payment and/or collateral for access to information room; and

IV - only limited access to qualified groups, according to art. 28, § 3º, of Decree 2594 of May 15, 1998.

§ 3º the diligence procedure by stakeholders in the privatization comprise the following main activities:

I - documents evaluation, II - technical visits, and

III - meetings with managers, which are accompanied by the external auditor, according to powers under the procedure manual.

§ 4º the operating procedure of stakeholders in the CELG D privatization should be disclosed through the Official Gazette, in notorious national newspaper, as well as in electronic sites of the Ministry of Mines and Energy, CELGDe National Bank for Economic and Social Development -BNDES.

§ 5º The diligence activities by the parties do not rule out the future possibility of holding events of details concerning the privatization notice of CELG D, whose conditions will be provided.

Art. 14 the term between the publication of the notice and the date of sale of CELG D shares shall comply with the minimum interval of 15 days.

Art. 15, the legal, technical and financial qualification requirements, will be established in the privatization bid of CELG D.

Art. 16. This Resolution shall enter into force the date of its publication, and the publication of the privatization notice of CELG D conditioned to the extension of the concession agreement of CELG D.

ARMANDO MONTEIRO

Council President

Annex 5. Accounting and Tax Due Diligence of CELG D

Annex 6. Operational Projections Report CELG D

Glossary

ANEEL: National Agency of Electric Energy

Test Year: defined as the period of twelve months immediately previously to the month of the Periodic Tax Review.

BAR: Regulatory Annuity Base BRR: Regulatory Remuneration Base Celg D or CELG D: Celg Distribuição SA

COLS: Corrected Ordinary Least Squares CRTP: Periodic Tax Review Cycle DEA: Date Envelopment Analysis

DIC: Duration of Individual Interruption per Consumer Unit

DMIC: Maximum duration of Continuous Interruption per Consumer Unit

FIC: Frequency of individual interruption per Consumer Unit

OPEX: Operational Costs

PDD: Distribution Development Program

PLpT: Program Luz para Todos

PMSO: Personnel, Material, Services from Third Parties and Others

RT: Tax review

Ses: Electric Substations

SPARTA: System for Yearly Tax Automated Review/adjustment Processes, developed by ANEEL

TAC: Conduct Adjustment Term

UC: Consumer Units VPB: Value of Part B

This report presents details of the projections of Operational Due Diligence of Celg Distribuição S.A. –CELG D describing the information sources, methodologies, premises and analyses used for preparing the following projections:

• Market

• Investments

• BRR and depreciations

• Losses

• Operational costs

• Quality

• Irretrievable revenues

• Other Revenues

Three projection scenarios were defined which difference resides in the growth projection for the market and future investments. The prepared scenarios are:

(I) Base Scenario, growth of the market projected using Goiás' GDP until 2019 and the Brazil's GDP the following years. In this scenario, the new grantee does the necessary investments to improve the service indicators in five years;

(II) Three Year Scenario , market growth identical to the Base Scenario and anticipation of investments to meet the quality limits throughout the three first years, decreasing the fines and capturing part of these investments in the tax review of 2017 and

(III) Goiás' GDP Scenario , considering Goiás' GDP to project the market growth and on account of a larger market has higher investments in the long term.

The operational income of the company will be stipulated to the recognition by the regulating agency (Aneel) of effective costs necessary for the installment of the service of distribution of electric energy; these costs, which consider effective levels of operational costs, costs of capital, technical losses and not technical and breach of contract and costs of purchase of the energy, responsibilities and transport integrate what is called with Required Income of the distributor, who will have to be rehabilitated through the application of the tax structure to the consumer market.

The Required Income is composed by two parts:

· Part A: considering the “non manageable” costs for the company such as purchase of energy, transport and partial responsibilities and it will have to be neuter for the management of the distributor (go over again of the real costs for the consumer – Passthrough) being that it considers effective levels of technical losses and not technical.

· Part B: considering the "manageable" costs for the company such as costs of capital (remuneration and depreciation) and the effective operational costs (including effective levels of breach of contract).

So, considering the methodology regulatory of recognition of effective costs, there were modeled each one of the concepts that compose the Required Income, when the object of the study is always the calculation of the Value of the Piece B (VPB), so it represents the principal vector of generation of value for the company.

For end, being that the purpose of this work will be to determine the value of the company, the calculation of the taxes of distribution for class lacks for sense, since they will only represent the form of recovering the costs recognized through the market.

In the items following in this document the methodologies will be detailed and turned out to be from the modeling of the principal variables used for the economical evaluation of the company.

The goal of this chapter will be to describe the studies carried out to appreciate the projections of demand of electric energy of the distributor CELG D for the period understood between the 2016 years to 2045; there were carried out two projections that consider the GDP of Brazil and the GDP of the State of Goiás respectively.

· (2001 - 2014): The series in current prices were obtained of the IBGE, Brazilian Institute of Geography and Statistic (www.ibge.gov.br) and were converted at constant prices of the 2012 year, with ends of performing the projections of market.

· (2015 - 2019): There were used the growth rates of the GDP informed by the publication Focus of the Central Bank of Brazil.

· (2020 - 2045): There was maintained constantly the fee informed for the year of 2019 of the publication Focus.

II. GDP Goiás

· (2001 - 2014): Institute Mauro Borges of Statistics and Socio - economical Studies

(www.imb.go.gov.br ).

III. Demographic data: The data were obtained of the IBGE, Brazilian Institute of Geography and Statistic (www.ibge.gov.br).

· The projection of the residential and rural consumers was based on analytical method using the data of population and residences of Goiás, obtained of the population censuses of 2000 and 2010.

· The information of electric covering was obtained of different sources. For the case of the home electric covering, for the 2001 year the least value was used for the region of Goiás of the publication of the Aneel “Atlas of Electric Energy - 2nd Publication” 2 . To define the value of the level of rural electric covering of the 2001 year, present information were used in the article “Evaluation of the Regional Diversity of the Country for implementation of the Program of Rural Electrification “Shines in the Field”” 3 , of the CEPEL (Center of Researches of Electric Energy). For the 2010 year, the electric coverings were calculated in function of the data of the censuses of quantity of residences with electric energy regarding the total residences.

· The projections of the population from 2010 to 2030 were obtained of the IBGE. For the period 2030 - 2045 was projected the population maintaining constantly to fee of the 2030 year of the IBGE.

The econometric method of esteem used was it of Least Ordinary Squares and the software the E - Views version 7.

The selection of the most appropriate model was carried out considering: · The kindness of the agreement of the model (R ² adjusted),

· The individual and joint signification of the coefficients through the values of statistical t and F respectively, · The presence of correct signs in the value of the coefficients, · That the wastes were not showing autocorrelation (statistical D - W or Breusch - Godfrey Test), not even heteroskedascity (White Test) or seasonality (Increased Dickey Fuller - Test of Unit Root).

For the cases in which autocorrelation signs were observed or seasonality in the wastes, there were used techniques of Dynamic Econometrics (including late variables). The presence of heteroskedascity in the wastes was corrected using the favorite method of White.

Finally, in the cases where was not it possible the models use econometrics was used models of tendency (linear or logarithmic),or well, models with specific criteria that will be described in the near items.

² http://www.aneel.gov.br/aplicacoes/atlas/aspectos_socioeconomicos/11_2_1.htm ³ http://www.ecoeco.org.br/conteudo/publicacoes/encontros/v_en/Mesa5/7.pdf

The second projection of demand of electric energy was carried out considering the GDP of Goiás as macroeconomical variable in the development of the models.

The series of GDP of Goiás were prepared in the following form:

· (2001 - 2014): The series in current prices were obtained of the Institute Mauro Borges, (www.imb.go.gov.br ) and were converted at constant prices of the 2012 year.

· (2015 - 2019): There were calculated growth rates as result of a regression between the GDP of Brazil and the history GDP of Goiás. The model used for the regression was an ARIMA (1,0,1).

· THE GDP per capita of Goiás was calculated as the quotient between the GDP Goiás at constant prices of 2012 and the population of Goiás. Already, the population of Goiás was obtained of the IBGE up to the 2030 year and then projected maintaining constantly the growth rate of the last available year.

The other demographic data used for the projection were same that the considered ones in the previous projection.

The projections of quantity of clients maintain the same results when variable GDP of Brazil was obtained with.

For another part, for the energy projections there were maintained the criteria detailed in the previous projection, however, with some agreements in the econometric models. Following, the changes are detailed as to the projections when Brazil is using the GDP:

· Commercial energy: It was projected by means of a econometric model by Least Ordinary Squares, finding the history values from 2005 to 2015. The difference of the model used for the projection with GDP Brazil, was not necessary to use as independent variable “Commercial Clients” delayed in a period. Simply, a regression was done between “Commercial Clients” and GDP Goiás.

· Industrial energy: It was projected by means of a econometric model by Least Ordinary Squares finding the history values from 2008 to 2015. The difference of the model used for the projection with the GDP of Brazil, was used the GDP Goiás and besides the model was corrected by means of the incorporation of an AIR (1) and an AIR (2).

Following, the results are presented for each class:

This report presents the information, premises and analyses adopted for the preparation of the programs of investments of Celg D in the period of 2015 - 2045.

The programs of investments open to question were developed from information supplied by Celg D and there are a relevant part of Due Diligence performed by the Quantum in that dealership.

Celg D made available in the work environment an assembly of documents with information as to the investments for her predicted for the period 2015 - 2024, there found the investments relative to the expansion and improvement in the electric system, which will be going to compose the Base of Remuneration Regulatory, as well as investments in real - estate facilities and vehicles, which will be going to compose the Base of Annuity Regulatory – BAR. The principal documents made available in the environment of work were the Plan of Results handed by Celg D to the ANEEL in April of 2015, the Plan of Development of the Distribution – PDD 2015 - 2024 and a relation of necessary additional investments.

Also documents were made available with general information on the current conditions of the electric system, starting point for the analyses of the Quantum. These analyses looked to value the correspondence between the proposed investments and the projections of market and number of consumers, as well as the conditions of the electric system reflected by the levels of load and voltage and obsolescence of substations, lines and nets.

There were countless meetings with the technical team of Celg D in Goiânia to treat the appeared doubts, as well as several solicitations of additional information subsequently put in the environment of work.

In elapsing of the work they were visited to significant samples of the electric system, understanding substations and lines of High voltage and lines and nets of Middle and Low Voltage, storerooms and workshops.

The foresight of investment relative to the solution of detected environmental liabilities was prepared by the Quantum from diagnosis done by expert of this consultancy and discussions and alignments with the team of Environmental Management of the dealership.

For service of the determinations of the ANEEL and commitments of adjustment of conduct secured by the dealership, a Plan of Results was developed by CELG, including a period of four years, containing the actions and related resources associated with the improvement of the rates of service quality, among others.

These programs are inserted and are contained in the Plan of Development of the Distribution (PDD), demanded of the distributors in the Procedures of Distribution - PRODIST, covering a horizon of ten years to the front.

Complementarily to these resources, the dealership relates additional programs, understanding obligations of universalization of service and necessary resources of automation of nets and for maintenance of substations (CATHEDRAL) – acquisition of movable SEs.

The investments quoted above integrate the Base of Remuneration Regulatory (BRR).

Also investments were informed in facilities and fleet of vehicles / equipments, which compose the Base of Annuity Regulatory (BAR), but investments were not informed in computer science resources.

(2015 to 2024) constantly of the PDD, the additional investments and the investments in facilities and fleet of vehicles - BAR proposed by Celg D.

To the investments proposed by Celg D the investments appreciated by the Quantum were added to remove liabilities associated to the environmental and estimative questions of investments in computer science.

The premises and criteria adopted in the Base Scenario for preparation of the projections of investment were:

§ Period 2015 - 2020:

ü When the values proposed by Celg D in the PDD for expansion were adopted, improvements and works predicted in the Terms of Adjustment of Conduct – TAC, added to the data of the document Necessary Investments that contemplate the Program It Shines for All and Rural universalization, besides some investments of improvement related to the acquisition of re starters and movable substations. The values relative to Rural universalization and Light for All tell to commitments assumed by Celg D with the ANEEL in the context of the public audience 045/2015 to themselves, what spreads the deadline out for universalization up to 2020.

ü There were adopted the investments predicted by Celg D for facilities and fleet of vehicles up to 2019 and from then on a value defined by the consultancy up to the end of the concession.

There is no foresight of Celg D for computer science and it was adopted by the Quantum a value R$ 4 million per year up to the end of the concession, on basis of values usually practiced in the market.

ü The necessary investment values were added from 2016 to the regularization of the environmental liabilities predicted in the evaluation prepared by the consultancy.

ü The initial foresight of investment of Celg D for 2015 will not be carried out in the totality. The most recent expectation of realization informed by the dealership is of R$280,000,000.00. The difference between the initial foresight and the realization expectation was deferred then for four following years, from 2016 to 2019, of uniform way, thinking that there are investments in fact necessary and that they will be carried out.

§ Period 2021 - 2045

ü A deferment of the Investments was done in Expansion AT and Improvement AT of the 2021 years to 2024 in five years, from 2021 to 2025. The reason is that the values informed by CELG

D if they were maintaining in the same level of the period 2016 - 2020, which seems unjustifiable thinking that the principal limitations of the electric system would be already resolved up to 2020 according to commitments assumed in the Plan of Results.

ü From 2025 (end of the period of deferment) the investments in Expansion and Improvement AT (except Movable SEs) grow for equal fee to 66,6 % of the growth of the market. The reason is which part of the growth of market is attended for densification, without necessity of expansion of the electric system. She is usual practice in the sector to use the growth of the market as driver of investments projection.

ü Growth of the investments from 2020 in Expansion MT and BT and Improvement MT (except Movable SEs and Automation of Nets) and BT for equal fee to 66,6 % of the growth of the market, the same criterion established adapts previous item.

ü In the period of 2025 in before projection of the Celg was adopted for Rural universalization and My House My Life constant in the document Necessary Investments, overstepped up to 2045.

d) Goods capitalized after the third cycle up to June of 2015 (50.867 registers) updated by the rates defined by ANEEL (IPA - 34, INCC, IPCA, IGP - M).

e) Goods capitalized in July, August and September (12.508 registers) corrected by the rates established by ANEEL (IPA - 34, INCC, IPCA and IGPM) and when the works susceptible to capitalization were added up to December of 2015 in the value of R$ 76.900.454,00.

In this way, the BRR was calculated up to the 30th of June of 2015 and tie on 31st of December of 2015. Leaving from there, the BRR was added of the values of the yearly investments predicted for the years from 2016 to 2045 and when the depreciations were calculated in the period in accordance with the fees established by ANEEL.

According to the standards contained in the sub - module 2.3 of the PRORET, the assets and administrative constructions, the software, the general equipments and the vehicles were withdrawn of the calculation of the BRR, since they are recognized as Regulatory Yearly Installment Basis - BAR, in the capital cost.

The investments done with capital input from third parties were registered as Special Obligations and the rates of Use of Substations and Lands and the totally devalued goods were knocked down of the value of the Base of Gross Remuneration, according to the standards of the ANEEL.

As relevant considerations we can still quote:

· BRB (Base of Gross Remuneration - year n) = BRB (Base of Gross Remuneration - year n - 1) + Electric Investments (year n) – You Go down (year n)

· BRL (Base of Net Remuneration) = BRB (year n) – Accrued Depreciation (year n)

· QRR (Quota of Reintegration Regulatory - year n) = BRB (year n) x Fee of Middle Depreciation The fee of middle depreciation is calculated and approved by ANEEL in the Periodic Tax Reviews when each company is taking into account the not totally devalued electric assets of.

The considered values are demonstrated in the spreadsheets down.

Following, there will be presented the principal results of the projections of the base of remuneration of the CELG D: Base of Gross Remuneration, accrued Depreciation, Fee of depreciation, Quota of Reintegration Regulatory and finally the Base of Net Remuneration.

Besides, for each one of the scenarios the investments values will be presented in electric assets.

The values are expressed in Rated R$ of each year.

that it defined the level of efficacy of the current costs of the distributor and its potential of decrease of same. For that, we apply the score of efficacy obtained by ANEEL in the models of the AP 23/2014. In case of the CELG, the efficacy range was the following thing:

Table 10: Range of operational costs 4C - Source: ANEEL – AP23/2014.

These results will have to be corrected by the medium one of the companies with upper efficacy to 50 %, turning in factor of agreement of 76 %. The finally applicable scores on the real costs of the CELG are those who follow:

Table 11: Range of operational costs 4C, corrected - Source: ANEEL – AP23/2014.

So, in 4CRTP there was defined the new landing of effective costs to be recognized by the regulator, being the range between 85 % and 97,6 % of the real costs of the distributor (taking as reference the average of real costs between 2011 and 2013).

It is important to notice that the efficacy landing regulatory of the CELG presents an improvement between the third thing and the fourth cycle of tax review, passing of 63,24 % for 68,9 % of efficacy and, in the short term, it is waited what the operational costs of the distributor get regulatory reaches the effective landing.

In the analysis period, the tax reviews will be carried out to each five years from the 2017 year, when the 4th RTP of the CELG will happen.

First of all, it is necessary to explain that the definition and calculation of the operational costs were performed in the different form for the recognized operational costs defined with criteria regulatory, and the real operational costs defined in base the criteria that there has to see with the management and evolution of the distributors. The behavior of both groups of costs is of certainty independent form, however, the methodology regulatory is based on the real costs observed in the companies.

By another part, due to the exvoltage of the period in analysis, some premises must be adopted to supply the landmark of modeling necessary for the esteem of the operational costs.

For end, the treatment of the operational costs be detailed in the following items.

The real operational costs were modeled to appreciate the performance waited from the distributor in the period in analysis. For that, the following premises were adopted:

1. For the history years, there were thought the information of the REPORTS OF QUARTERLY INFORMATION – RIT (that are of public access), sent by the Distributor for Aneel. a. The information of the RIT were adjusted to pass of calendar year for years regulatory (September / August).

b. The Personnel concepts were segregated, Materials, Services of Third and Other (PMSO), of the total of the real costs, for comparison with the recognized costs, and, too many real costs were considered in a specific line as “COSTS NOT RECOGNIZED”.

2. NOT RECOGNIZED” they consider the “COSTS: a. Costs associated to the difference between losses real and recognized, which produces a deficit in the energy purchase. b. Operational costs associated to the program of improvement of the Quality, which were modeled for each scenario, being which less terms for improvement require efforts more maximum of cost. c. Assets annuities not electric what regulatory are recognized by the Base of Annuity Regulatory (BAR) and what compose part of the real operational costs of the company, such as rents. These costs evolve with the variation of the market and X are updated also by the inflation and by the component Productivity of the Factor.

3. The treatment of the real PMSO is what it follows: a. Initially, the real PMSO were divided in two pieces, one that represents the "effective" costs (calculated in function of the result that the CELG obtained in the benchmarking for it 4CRTP), and a complementary piece of inefficient costs, which the company might decrease or to remove. They were modeled this excess of costs to be removed up to the 2018 year. Being that from the 2019 year the company always carries out bottom effective costs to the regulatory.

      For another part, the effective costs are modeled in function of the growth of the market and decreased by the productivity. b. Finally, for the separation of the costs in the principal counts of operational costs (Personnel, Materials, Services of Third and Different), there was maintained the proportion observed in the real costs in the 2013's.

Already for the case of the definition of the costs regulatory, the modeling is somewhat more complex, since it involves methodologies of benchmarking established by the regulator that they observe, in its definition, the behavior of the real costs of the distributors, besides other considerations regulatory what were put by ANEEL for its determination.

Following there are described shortly the principal premises considered in the modeling of same:

1. For the history years, there were thought the constant values in the reviews and tax adjustments of the CELG for each year.

2. In the years of tax review, the modeling was performed considering the methodology of 4CRTP, what will be detailed better in the near items of this report.

3. In the years between the reviews, when the yearly tax adjustments (IRT) happen, the PMSO are calculated considering the value of PMSO of the previous year when X updated by the growth of the market and the application of the Factor.

The calculation regulatory of the operational costs to be recognized in the taxes of the distributors is performed following the traces of the Technical Note N ° 66/2015 - SRM/SGT/ANEEL, and of its respective Procedure of Tax Regulation, PRORET, submodule 2.2.

In these documents, the agency defines, in general lines:

For the RTP of 2017, the efficacy score for the 4th RTP of the CELG (68,9 %), corrected by the average of the sector 14 (68,9 % / 76 % = 90,65 %), it is applied on the real costs used in the benchmarking, corrected by the evolution of the products (nets, consumers, market, etc.) to define the real scores of efficacy of the distributor in the year of the review, defining the target of effective costs.

It is considered in the following tax reviews that the companies will have you distinguish us scores of performance obtained in the benchmarking, in function to the performance that each one of them have shown up., the scores of performance of the CELG for the near tax reviews were still modeled considering an improvement that is proportional to the improvement shown up in the unit costs (R$/MWh) of the distributor.

The average efficacy of the sector presents a modeling of improvement, in the understanding of which the methodologies of incentives of the type of Benchmarking favor the improvement of the performance of the distributors of the whole sector, lifting up the middle landing of the performance and, in consequence, reducing the correction of the original scores of performance of the companies (prizes and punishments).

As well as the CELG manages to capture the opportunities of this approach, others so many companies also will respond to these incentives, doing that the complete sector improves its efficacy.

The methodologies of 4CRTP define the most maximum value of absolute variation of the operational costs in the years between the tax reviews, what it is defined in 5 % of the PMSO per year. This restriction was considered, even that its variations should never exceed this limit.

So, the difference between the target values regulatory and the income of operational costs of each year will be that it was deducting or added to the taxes of gradual form along the cycle of review of the dealership.

However, the variation determined in the difference between the PMSO meddles and of the Test Year, defines the value of the component one T what soon is considered in the Factor X. As the factor X is applied on the total of the Piece B, this value must be adjusted to represent the participation of the PMSO in same (the limit of 5 % per year of variation in PMSO is equal to 2,36 % of variation in the VPB, for the average of the Brazilian electric sector).

The value of the operational costs regulatory to be considered in the tax review and Component T of the Factor X be calculated then according to the following expressions.

¹⁴ Technical note N ° 66/2015-SRM/SGT/ANEEL, of 22/4/2015 and Clause 25 of the Submodule 2.2 of the PRORET, second review, of 06/05/2015, Aneel

The service of the quality limits of service is one of the subjects of more maximum importance in the context of management of the CELG D due to the economical impact of the payment of the compensations for not service of the limits, to the necessities of investments and to the consequences predicted in the agreement of renovation of the concession of the distributor.

So, the modeling considered premises based on the necessary years to attend the quality indicators:

1- Three Year Scenario: to develop actions of management and necessary investments to reach the quality level regulatory in 3 years (2018).

2- Base Scenario (5 years) : to develop actions of management and necessary investments to reach the quality level regulatory in 5 years (2020).

So, the modeling of the scenarios above impact the evolution of the quality, which has right influence in the following costs:

1- Compensations

2- Costs for the quick improvement of the Quality (3 years)

Following, there show up the criteria used in the projection of these costs, according to each scenario.

The compensations that the distributor will have to carry out for the clients for the violation of the limit of individual continuity of the indicators DIC, FIC and DMIC they are defined for the ANEEL, being that the CELG has been paying elevated compensations in the last years.

For modeling aims, one considered, through methodology of benchmarking, the existent relation between the value of the compensations and the income of supply for series of companies, including the CELG, in the 2014 year. The result was that the CELG occupies the last positions, being one of the companies with more maximum level of paid compensations.

For such a reason, as premise to model, it was considered the assumption that the CELG must be inside the first percentile of the companies with better indicators.

It is important to point out that, even that he should present values less than its levels regulatory of DEC and FEC, the company has to pay compensations to its clients. This because the fines are paid on violations in the individual indicators, meanwhile that the DEC and FEC are indicative of assembly continuity.

On basis of this criterion, the modeling was done for each scenario of the following way:

- Three Year Scenario:

1- One considered the valuable relation of compensations and income of supply of the Celg for the 2014 year

2- One proposes that for the 2018 year the CELG has a relation (compensations / income) as of the best companies.

3- A function was created exponential to define the value of the relation in the intermediary years.

4- One projected the values of the compensations from the relation obtained in the previous point and the value of the compensations in 2014. So, the compensations level is going to decrease up to 2018, when the company reaches quality values in acceptable parameters.

5- For the subsequent years, the compensations are going to grow with the market increase percentage .

- Base Scenario:

1- One considered the valuable relation of compensations and income of supply of the Celg for the 2014 year

2- One proposes that for the 2020 year the CELG has a relation (compensations / income) as of the best companies.

3- A function was created exponential to define the value of the relation in the intermediary years.

4- One projected the values of the compensations from the relation obtained in the previous point and the value of the compensations in 2014. So, the compensations level is going to decrease up to 2020, when the company reaches quality values in acceptable parameters.

5- For the subsequent years, the compensations are going to grow with the market increase percentage.

Since the scenarios depend of the necessary years to reach the quality level established by Aneel, then there must be considered the “costs for quick improvement of the quality”.

By a side, in case of the Base Scenario, it was assumed that the levels of operational costs are sufficient to reach to the quality in this period. Therefore, it was thought an additional cost.

But, for the Three Year Scenario, it was assumed that it is necessary to carry out more maximum efforts to be able to reach with more maximum speed the wanted quality, which drifts in more maximum costs.

On basis of the attachment of the Plan of Result of the CELG D, where were the actions of management detailed for improvement of the quality indicators DEC – FEC calculated the yearly cost adapted to be necessary with this premise.

These values are reflected in the lines “I cost MILLSTONE (Labor) for quick improvement of the Quality” and “I cost (MAT) Materials for quick improvement of the Quality”. Both lines compose part of the operational costs not recognized of the company.

For end, the values of RI jut out in too many years (that are not RT) indexing the value calculated from the growth of the Piece B.

Inside the methodologies established for the 4th CRTP, Aneel establishes mechanisms for sharing Other Receipts of the distributors, which, in general form, there establishes a value of 60 % of these receipts to be reverted for the tax moderateness.

For the calculation of other receipts there was used the value of Other Receipts in the last tax review of the company (file SPARTA 17 2013) and the qualitative composition of these receipts (sharing of infrastructure, taxed services, etc.). These values were projected for other years considering the growth of market and when it was finally adjusted by a factor that represents the percentage of Other Receipts of the 2013 year that grow with the market.

Finally, in the years of tax review, there was applied the value of 60 % of Other Receipts of the test year to compose the decrease of the Piece B (tax moderateness), which will be applied in the years of the following tax cycle.

¹⁷ System for Yearly Tax Automated Review/adjustment Processes (ANEEL)

Annex 6.A. Update of Projections Due Diligence Operational CELG D

This addendum to the “CELG D OPERATING DUE DILIGENCE PROJECTIONS – Projections Report” Report, delivered on 11/13/2015, updates CELG D’s operating projections.

The scope of this work basically involved the incorporation of current data obtained by CELG D in its statements and reports until 6/30/2016.

The same economic – Brazil’s GDP, Goiás’ GDP, market projections, etc. – and efficiency – operating and investment projections – assumptions – used in the final projection and diligence reports – were maintained.

Therefore, the full understanding of this Addendum depends on prior reading of the final “CELG D OPERATING DUE DILIGENCE PROJECTIONS – Projections Report” and “CELG DISTRIBUIÇÃO OPERATING

DUE DILIGENCE – TECHNICAL CONSULTANCY” reports.

Finally, the same limitations of the final reports apply.

The market projections initially made were maintained observing the projected quantity of energy, and the only information, which was updated, was the market values until June 2016.

The detailed projection of quantity of energy per category and year are in Exhibit I of this document.

The criteria to project the investments have not changed, and the general rule for the update and adjustment of the projected investments was to delay for one year the investments initially set forth in the model; thus, the investments set forth for 2016 were allocated to 2017 and so forth.

In addition, the investments were subject to the following adjustments:

· Incorporation of amounts for 2016 set forth for CELG in the 2016 Distribution Development Program (PDD).

· Update of amounts of the Universalization Program, Housing Program ( Minha Casa, Minha Vida ), and Energy Program ( Programa Luz Para Todos ) – PLPT, considering the amounts set forth in the PDD presented by CELG-D.

The projections of the investment amount for each year are in Exhibit I of this document, together with the projection of the Regulatory Asset Base (1 ^st line of the table).

The Regulatory Asset Base (RAB) of CELG D was calculated until June 30, 2016, considering the files of the Shielded Bases (RABs) of the 1 ^st , 2 ^nd and 3 ^rd Tariff Cycle and the Incremental RAB of the 4 ^th Cycle and Write-Offs informed until June 30, 2016.

The model used to calculate the Gross and Net RAB took into account the criteria and methodologies defined by ANEEL for the Periodical Tariff Review process of the electric energy distributors.

Thus, the RAB was calculated until June 30, 2016 and projected until 2045, and the projection criteria were maintained.

Index

Index

Index

Index

Index

Index

General Considerations

Purpose and objective

We understand that the IFC will use our work only for the purpose described in this Report. In addition, our fair value estimate should not be considered as an advice or investment advice, fairness opinions or used for fundraising, as well as any other purpose except as described above.

Value Standard

According to generally accepted practices of economic financial valuation, our understanding is that the concept of fair value, used in this study, is in line with its objective.

In addition, IFRS 13/CPC 46 specify that fair value should reflect market expectations about the probability that the future economic benefits associated with the asset will flow to an acquirer. Therefore, any analysis should generally reflect assumptions which would be common to any market participant if it were to buy or sell each identified asset on an individual basis.

Definition of fair value

IFRS 13/CPC 46: The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (Paragraph 9).

Thus, the fair value should be estimated with reference to ‘market participants’ in general but exclude synergistic values that are unique to a particular buyer. In this context, market participants would include potential buyers that have an ability to acquire and would take an active part in managing the acquired company or assets. Such ability would be evaluated in the context of financial ability as well as a plausible post- combination operating strategy.

In accordance with this definition of fair value, all projected financial information used in our valuation excluded acquirer - specific synergies but included those common to market participants

The estimated fair value of the company was calculated following the assumption of closing activities by the end of the concession agreement amendment.

Methodology

For this business valuation, the Income Approach was adopted, through the Discounted Cash Flow (DCF) method. According to the DCF method, the value of a business is equal to the present value of the expected cash flows that it will generate.

The DCF analysis here presented refers to operating cash flow, also known as Free Cash Flow for the Firm (FCFF). The projections of FCFF are considered cash flows from operating and investment activities of the evaluated company. The FCFF is discounted by a rate that reflects the cost of all the company's capital structure, called WACC - Weighted Average Cost of Capital. The Present Value of FCLF is the Enterprise Value, which is adjusted based on the balances of non- operating assets and liabilities of the company, to calculate the Equity Value.

General Considerations

As requested by the IFC , EY has performed a valuation analysis of Celg D on reference date of June 30, 2015.

The results of our analysis will be used only for the purposes of supporting the estimated Fair Value of

Celg D .

In order to calculate the estimated Fair Value of the Company we considered the following procedures:

„ Obtaining Market information;

„ Obtaining the operating projections from Quantum company, technical consultant hired by IFC , considering three scenarios;

„ Discussions and meetings with executives and employees of Celg D during the work;

„ Obtaining historical accounting, operating and managerial data of Celg D ; „ Analysis of the market in which Celg D operates;

„ Projection of financial statements of Celg D (Income Statements, Balance Sheet and Cash Flows) based on financial information provided by Managament and in market analysis;

„ Business valuation of Celg D performed by applying the Discounted Cash Flow methodology (DCF); and

„ Calculation of the discount rate that best represents Celg D and its market sector, used to estimate the present value of cash flows and its residual value.

The results on this report depend on the assumptions that serve as basis for the projections. The Discounted Cash Flow methodology does not anticipate changes in the external and internal environments in which Celg D is involved, except for those mentioned in this Report.

General Considerations

General assumptions

„ Value Standard: Fair value;

„ Reference date: June 30 ^th , 2015;

„ Methodology: Income Approach – Discounted Free Cash Flow to the Firm;

„ Projected period: from July 1 ^st , 2015 to July 7 ^th , 2045;

„ Currency: Free Cash Flows were projected in Brazilian Reais (BRL) in nominal terms (considering the impact of inflation);

„ Discount rate: WACC 10,79% p.a. in nominal terms, details on page 65 and Appendix 8.3;

„ Adjustments: Non- operating Assests and Liabilities were not considered in the cash flow projections. When observed, it was treated separately and added or subtracted from the present value of cash flows, impacting the Enterprise Value; and

„ Specific assumptions: Assumptions were based on financial statements provided by Company , managerial data provided by Management and information provided by Quantum, transaction technical consultant hired by IFC .

Valuation results

It is important to highlight that we did not independently investigate or otherwise verify the data provided by Celg D or any other consultants hired by IFC , and do not express an opinion or offer any form of assurance regarding its accuracy or completeness. Additionally, our recommendations and calculations, presented in this report, are based on industry market expectations as well as on the existing macroeconomic conditions on the reference date of our work, which may be different in the future and hence impact the operations of the evaluated company.

We assume that Management consistently analysed the factors that may affect the presented forecasts, as well as not omitted any relevant information that can significantly impact the result of our analysis.

Macroeconomic Analysis

Macroeconomic overview

In undertaking the valuation of a business and its assets, it is important to understand the economic trends prevalent in the country in which the business operates. Given that Celg D operates in Brazil, a brief overview of the country economy is presented in the following sections.

The analysis below refers to the information as of 14th August, 2015, and has been prepared passed on information from the Central Bank of Brazil (BACEN), Focus Report, Getúlio Vargas Foundation (FGV), Global Insight and JP Morgan .

Brazilian economy 3

Economic Activity

In 2014, economic activity reported a 0.1% growth, reflecting the weak performance of the industry segment, which dropped 1.2% in year-over-year terms. Both agricultural and services sectors posted positive growth in the period, of 0.4% and 0.7%, respectively. For 2015, main financial indicators anticipate a decrease in GDP growth of 1.99% in 2015 and of 0.10% in 2016.

Inflation

The Brazilian official inflation index, the IPCA ⁴ , was reported at 6.4% in 2014. According to market expectations, the IPCA is projected at 9.34% in 2015 and 5.50% in 2016. On the other hand, the IGP-M index posted a 3.75% increase in 2014. For 2015, market expectations point to IGP-M ⁵ variation of 7.74%, decelerating to 5.62% in 2016.

³ Market expectations refer to projections of expectation systems, as of August 14 ^th , 2015, provided by the Brazilian Central Bank. ⁴ Índice de preços ao consumidor amplo (IPCA) - Extended National Consumer Price Index.

⁵ Índice Geral de Preços do Mercado (IGP-M) - Market General Price Index. Calculated by Getúlio Vargas Foundation (FGV).

Strictly confidential 19

Macroeconomic Analysis

Monetary Policy

In the meetings of July 28 and 29, the COPOM ⁶ took into account the macroeconomic situation and the Brazilian inflation perspectives, and decided to raise the Selic rate by 0.5 b.p., to 14.25% p.a. To determine this decision, the COPOM considered the persistent high inflation levels.

Country specific risk ⁷

The EMBI +, better known as Brazil Country Risk, is calculated by JP Morgan, bank of relevance in dealing with securities in emerging market countries. The index explains the difference in daily performance of the U.S and emerging countries debt securities and it is an indicator of the financial health of the relevant country. The index ended May at 294 basis points, which indicates a difference of 2.94% between the performance of Brazilian bonds and the U.S. securities. The monthly average was 281 basis points and the average for the last twelve months was 258 basis points.

The macroeconomic assumptions used as the basis for the transaction are presented in the table below. After 2020 values remain constant, except for the exchange that is adjusted for inflation differential (IPCA x CPI).

Energy market overview

„ CMSE

The CMSE was created ¹⁰ to monitor and permanently measure the continuity and security of energy supply throughout the national territory, proposing preventive measures to restore the proper service conditions, including actions involving demand, hiring contingent reserve for supply and other.

According to the Decree nº 5,175/ 2004, the CMSE is chaired by MME and is composed as follows:

• Four representatives of MME; and

• Members of the following organs: I. ANEEL; II. ANP – National Petroleum Agency; III. CCEE; IV. EPE; e V. ONS.

„ CNPE

The CNPE is an agency that advice the president. It establishes a national energy policy, and its main responsibility structurally secures the supply in the country. It was created in order to promote the rational use of energy resources in Brazil and ensure the supply of energy throughout the country, including in remote areas and difficult to access.

„ EPE

The EPE was created by Law. 10,847 / 2004 and regulated by Decree. 5,184 / 2004.

Linked to the MME, EPE is responsible for conducting strategic research in the energy sector, including electricity, oil, gas, coal and renewable energy sources. In other words, it is responsible for the design of the expansion of generation and transmission systems. The research conducted by EPE will be used to support the MME's actions.

Energy market overview

The energy produced by Itaipu is sold in the CCEE by Eletrobrás, through contracts registered with the Accounting and Settlement System (SCL

„ Free Market

In the Free Market, electricity is traded between generation concessionaires, independent power producers, self- producers, marketing agents, importers of energy and free consumers, essentially in line with the current institutional model before the enactment of the Law of New Electricity Sector Model. Potentially free consumers, with agreements that do not stat the supply period, can only opt for Free Market.

Once the consumer has chosen the Free Market, it can only return to the Regulated Market by notice to the local distributor five years in advance or within a shorter period, at the discretion of the distributor.

The purpose of this advance notice is to prevent opportunistic behavior on the part of potentially free consumers by ensuring that the distributor can buy additional energy in the Regulated Market without the fact that it does not constitute additional costs to their captive market.

In order to minimize the effects of losses arising from consumers who choose to act as free consumers, distributors can reduce the amount of energy purchased from generators according to the amount of energy that will not be distributed for free consumers. State-owned generators may sell electricity to free consumers, but unlike generating private sector, they should do so through public processes that will ensure transparency and equal access for interested parts.

The new rules establish that energy distributors must comply its energy contracting obligations, primarily, through public auctions.

Existing Energy Auction, New Enterprises and Adjustments

The energy auctions are extremely important for the sustainability of the Brazilian electric sector, and through these that the granting of new plants and the closure of contracts is carried out to meet the future demand of energy distribution. The notices of the auctions are prepared by ANEEL, in accordance with the guidelines established by the MME.

• New Energy Auction: are intended for energy ’s procurement provided by power plants in the design phase or under construction. For new generation projects, auctions are held (i) five years from the date of hire (called A-5 auctions), and (ii) three years from the contract date (called A-3 auction) .

• Existing energy auction: designed to serve the distributors in the year after the agreement, the energy will be provided by enterprises that are already in operation. These auctions are conducted a year before the initial delivery date (referred to as A-1).

Energy market overview

Purchase Transfer Limits

The rules also set limits for the transfer of power purchase costs to the final consumers. The current reference value (RV) corresponds to the average energy prices between A-5 and A-3, calculated for all distribution companies. Thus, it establishes an incentive for distribution companies to contract their energy demands in the A-5 auction which will have lower prices than the A-3 auction.

Supply – Itaipu Energy

The energy generated by Itaipu is traded by Eletrobrás through contracts recorded in the SCL. The volumes that must be purchased individually by the distribution utilities are set by quotas set by ANEEL, in proportion to the consumer market for each distributor. The energy generated by Itaipu is traded in US dollars, and the rate determined according to the Brazil- Paraguay treaty. As a result, Itaipu rate suffers an increase or decrease according to the exchange rate of the dollar.

Energy market overview

Restricted Activities

Distribution companies linked to the SIN are prohibited: (i) to develop activities related to power generation and transmission, (ii) to sell electricity to free consumers, (iii) to hold, directly or indirectly, any interest in any other company, or (iv) to develop activities that are unrelated to their respective concessions, except those permitted by applicable law or stated in the concession agreement.

Draft of New Concession Contracts for Public Service Provision of Power distribution

Technical Note – ANEEL

On September 4, 2015, was published by ANEEL Technical Note No. 033 512 015-SCT-SFE-SFF-SRD-SRM / ANEE which presents the results of the public hearing No. 038/2015, established in order to improve the new concession agreements for provision of public electric power distribution, pursuant to Decree n ° 8461/2015 and Law 12783 of January 11, 2013. According to the Decree number 8,461, the concessionaire operations should follow standards and pre- defined criteria such as:

„ Efficiency in terms of service ’s quality : the distributors will be evaluated by continuity of service, characterized by the frequency and duration of power outages (FEC and DEC). For the five years of the valuation period the distributors must meet the continuity limits to be set by ANEEL, through a continuous improvement path;

„ Efficiency in terms of economic - financial management: the distributors must commit to preserving, throughout the concession, the condition of economic - financial sustainability in managing their costs and expenses, the level and structure of its debt, the replacement investments, improvement and expansion, beyond the payment of taxes and distribution of dividends;

„ Operational and economic rationality and reasonable tariffs: the distributors do not have full autonomy to set the rates charged to users, since the Brazilian power distribution segment has a number of features that create market power for companies that hold concessions, for example, the monopoly conferred by the public concession service.

These criteria should be achieved through continues improved metrics, as established by the Union. The technical note points out that in the case of noncompliance of the goals set out in the concession extension criteria for two consecutive years, or any of the goals at the end of the period five years, the process of concession ’s termination will start. The operator may, however, submit a transfer of corporate control plan as an alternative to such extinction.

Tariff Adjustment

Concession agreements for energy distribution rely on the definition of review mechanisms and tariff adjustments. These mechanisms determine the amount of fees to be used by companies for the supply of electricity.

Tariff Adjustment are determined in order to ensure economic - financial balance for the electricity distributors. In order to achieve the necessary balance and consequently meet the costs, expenses and

Energy market overview

II. VPB0: The remaining value of the concessionaire's revenue minus the "Component A"; calculated based on the difference between the annual distribution of revenues in the previous 12 months and the value of "Component A" referring to the previous 12 months, ie, based on prevailing conditions at the time of the previous adjustment;

III. RA0: Revenue calculated considering the rates approved in the previous reference date and the reference market, not including the PIS / PASEP, COFINS and ICMS;

IV. IVI: the index number obtained by dividing the contents of the IGP-M (Brazilian Index) or index to succeed him, the month prior to the adjustment processing and the month prior to the "Previous Reference Date". In the event there is no a substitute index, ANEEL will establish new index to be adopted;

V. X Factor: index for passing on to customers the gains made by the concessionaire in future periods (between tariff adjustments) .

The concession agreement of each distributor provides for an Annual Tariff Adjustment. The adjustment can be done with a maturity of less than one (1) year if the legislation will thus allow.

Energy market overview

Periodic Tariff Adjustment

The Periodic Tariff Adjustment aims to analyze after a predetermined period in the contract, the economic - financial balance of the concession. So, it is calculated a new value of revenue for the distribution service, that is, for "Component B" of the annual adjustment.

It is an ordinary review, provided in the concession agreements, to be performed considering the changes in the cost structure and the distribution market, tariff levels observed in similar companies in the domestic and international context, and incentives for efficiency and low tariffs. The return on capital of a distributor depends fundamentally on the regulatory asset base and the cost of regulatory capital (regulatory WACC) . The regulatory asset base is calculated according to the procedure set by ANEEL and includes the assets of concessionaires linked to the concession of the public service of power distribution. The regulatory WACC defined as tariff regulation procedures effective from March 2015 to December 2017 is 8.09% p.a. in real terms and net of taxes. During the review process are also defined regulatory percentage of non- technical losses and the X ¹⁴ Factor, both metrics will be used in subsequent tariff readjustment process review.

Extraordinary Tariff Adjustment

The Extraordinary Tariff Adjustment may occur at the request of the distributor, whenever there is any significant event that generates significant economic - financial imbalance for the concession. It also can be ordered in the case of creation, modification or termination of legal taxes or charges, if it is shown that it can impact the company’s activities.