light s.a. and subsidiaries consolited financial statement december 31, 2008...
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FEDERAL PUBLIC SERVICE
BRAZILIAN SECURITIES AND EXCHANGE COMMISSION (CVM)
STANDARDIZED FINANCIAL STATEMENTS (DFP)
COMMERCIAL, INDUSTRY AND OTHER TYPES OF COMPANIES
December 31, 2008 Brazilian Corporation Law
01987-9 LIGHT S.A. 03.378.521/0001-75
11.01 – NOTES TO THE FINANCIAL STATEMENTS
1
LIGHT S.A. and subsidiaries
Consolited financial statement
December 31, 2008 and 2007
FEDERAL PUBLIC SERVICE
BRAZILIAN SECURITIES AND EXCHANGE COMMISSION (CVM)
STANDARDIZED FINANCIAL STATEMENTS (DFP)
COMMERCIAL, INDUSTRY AND OTHER TYPES OF COMPANIES
December 31, 2008 Brazilian Corporation Law
01987-9 LIGHT S.A. 03.378.521/0001-75
11.01 – NOTES TO THE FINANCIAL STATEMENTS
2
Message from the Management
In this beginning of 2009, I would like to address the customers, employees,
shareholders, authorities, the financial market and other public of interest, to
reaffirm my belief in the domestic economic development and in our Company’s
development.
In the future, 2009 will be marked as an important economic transition year, with
the capitalism reinventing itself in a more natural, sustainable basis, closer to the
real economy’s operation.
Recent years were marked by a large and global economic development;
innovation in technology and communication brought people, countries and market
closer into a real globalization. For the first time, the impacts of men’s actions on
climate changes were discussed together with the scientific community and the
world’s leaders. Wars gained a regional conflict tone, but not less hideous. Above
all, it was possible to observe a greater convergence of humanity’s common
interests that tend to prevail on any other country or region, even after some
disturbances, such as the Kyoto Protocol.
Post-war economic system showed its incapacity to deal with the challenges of an
economy where future anticipation became the most precious contribution to
forming value. Theories on natural resources shortage, scientific discoveries and
their consequences on trivial activities were incorporated into assets valuation and
people’s development. Expectation generalization (some of them in long-term) and
their financial flows reached a rough term in September 2008, when the large
entities of the international financial system collapsed and provoked a systemic
drop in the value of the assets.
Scale measures never seen before and agreements among the Central Banks of
countries representing the world’s largest economies were not enough to make
people trust in basic institutions that regulate our economic life: currency, credit,
respect to contracts and legal-financial order.
It might sound strange, within this context, to reaffirm our optimism towards the
future. Essentially, this comes from understanding what the opportunities raised by
strongly integrated economies in this scenario can provide.
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Brazil, in particular, has favorable conditions to an immediate economic recovery:
energetic resources, agriculture, fossil and renewable resources, in addition to an
inventive people who, despite requiring better qualification, live a democratic
regime. To summarize, Brazil is surely one of the countries that can maintain the
recent years’ path and continue growing.
Therefore, we should be aware that 2009 will have a slower growth compared to
the past years. We are members of a global system and we cannot be opposed to
the economy as a whole. However, we believe in the appropriate policies that have
been put into practice, such as investments in infrastructure, better access to
credit and actions to achieve more competitiveness.
The Brazilian electricity sector was under a lot of pressure: the challenge to
making electricity available at competitive prices for the 2011-2012 period that
precedes the beginning of the great Amazon hydroelectric utilization operation.
This apprehension regarding future energy supply comes from a historic situation:
the huge delay preparing projects and invitations for bids for new hydroelectric
utilization combined with environmental licensing difficulties. However, the effect
of the crisis upon the electricity market adjusts this expectation; supply is
guaranteed since the work continues progressing normally and the effects of the
crisis upon industrial development in electricity-intensive sectors – iron industry,
mining etc. – are incorporated to demand projections. It is important to highlight
the supplementary feature among the different forms of energy generation. Fossil-
origin energy resources, such as gas and combustible oil, that recently played an
important role in the hydroelectric system offer decrease, will be reduced and,
consequently, will reduce energy costs in the wholesale.
A successful transmission lines bidding program, with the privatization of this
system’s extension, allowed the segment’s agents to be calmer regarding the
performance of the system’s components that assure better use of hydrologic
diversity throughout the Brazilian regions.
With regard to distribution – Light’s main business, responsible for 85% of our
EBITDA – some factors that pointed at a growth dynamics smaller than in the
other regions of Brazil in the concession area, were reverted by the crisis
perspective. Since it is a predominantly urban and concentrated area, without
large industries, it is less affected by the crisis and it does not lose services
dynamics, the main feature of its social economical profile aimed at finances,
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insurance, tourism and culture. In addition, urbanization programs developed by
the federal government - such as the road arch, ports and urbanization of needy
areas, positively affect the growth at the concession area. The advanced
implementation of Companhia Siderúrgica do Atlântico – CSA, the largest ongoing
private investment in Brazil, and of COMPERJ petrochemical center will provide, in
a near future, more efficiency to the domestic industrial scenario.
Rio de Janeiro’s tendency to become a large services, leisure and tourism center
with the 2014 World Cup and the possibility to host the 2016 Olympics has direct,
relevant and positive impacts upon distribution systems and can speed up the
implementation of electrified urban transportation systems.
Within a broad vision, Light is now prepared to use all its capacity to succeed in
this economic segment in order to supply demands and intensify energy sale
activities.
The last two years’ accomplishments reinforce our belief in our capacity to face
challenges.
The first challenge is to stand out, once again, in energy generation, which will
happen due to Light’s large investments to expand its capacity. Regarding PCH
Paracambi, great part of its area has already been expropriated; the acquisition of
other lands in the vicinity is being concluded. The selection phase of suppliers for
construction and equipment acquisition is already in course. UHE Lajes’
construction work, a small hydroelectric exploitation at Lajes Complex, is expected
to begin in the second semester of 2009; we are waiting for the approval of the
basic project that is being analyzed by ANEEL. For their part, UHE Itaocara
environmental licensing is on time; the Provisory License should be granted by the
end of 2009.
Altogether, the contribution of these three investments will represent a 15% in
generation increase – in addition to being significant, it emphasizes Light’s return
to investing in generation and which will surpass R$ 500 million in five years.
The second challenge is the Energy Recovery and Commercial Losses Reduction
Program that is in full progress. It is important to remember that this challenge is
not simply technical, since we are talking about a concession area that
encompasses 20% of the country’s slums. We have made an endless effort to
reduce urban informality together with the state and the city halls of the most
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affected municipalities. Programs developed for this purpose include the
regularization of property ownership, physical infrastructure provisioning (sewage,
water and electricity supply), social infrastructure (schools, health unit centers,
communitarian offices) and economic support (institutions aimed at qualifying
employees and supporting micro-, small- and medium-sized businesses).
Rio de Janeiro is the largest domestic scenario for activities in this area. We
highlight the pilot project that is being carried out and implemented at Morro Santa
Marta, in Botafogo, with Light performing important activities with the community,
and PAC’s projects at Rocinha, Complexo do Alemão, Pavão/Pavãozinho and Maré.
The third challenge is our obsessive search for more efficiency when rendering
services and improving commercial services to our customers.
We acknowledged that our network was demanding urgent structural changes, in
order to be less affected by weather conditions and protected against improper,
intentional and non-intentional human actions. We have an ongoing program that
expects significant changes of part of primary and secondary grids, which will
reduce operational expenses and the duration and frequency of energy
unavailability situations. The program includes the stations’ automation and the
replacement of older installations (transmission lines and substations) by newer,
more compact ones. As a result, part of the land occupied will be made available to
other ends; due to that, we expect important urban interventions, such as
Madureira Park, a Copacabana substation, among others, which will increase the
concession’s income.
With regard to the employees, works focused on dissemination of culture of
results, merit and the construction of a work environment that contributes to a
more meaningful life to employees are being carried out. For Light, this is the
biggest challenge – which necessarily has been going through an alignment
process of values of all employees. In this sense, several actions have been carried
out by Academia Light, such as courses, seminars and trainings.
Two and a half years after being under RME’s control (Rio-Minas Energia), its
major shareholder, Light is now consolidated - a result of a strategy focused on
valuing people and converging into the model that can be found in its Mission.
The employees, who are organized in several activities within the Company – from
long-term activities up to daily and more specific ones, are associated by means of
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management commitments to the accomplishment of goals that are reflected in
the profit sharing.
With this set of relationships and commitments, Light had one of the most
meaningful turnarounds in its history, which is currently in a consolidation phase.
Such effort generated an income increase of 8% in the year. Our EBITDA grew by
32.2% compared to the previous year; EBITDA margin had a 28% growth, placing
Light among the companies with the best segment performance.
Net income grew by 148.9%, not considering non-recurring effects. In total, the
earnings reached R$ 974 million, an extremely meaningful result in our history.
Light’s carried out its quinquennial tariff revision process with extreme devotion,
being acknowledged by several of its pleadings regarding the specificity of its
concession area, especially the ones related to the flagrant economic informality,
currently being attacked by the State and the City Hall of Rio de Janeiro.
In 2008 we paid the equivalent to two dividends referring to 2007, one in March
and the other in November, totaling R$ 554 million. We are also proposing
dividend distribution in the amount of R$ 500 million referring to 2008. The
Company has been recognized by the capital markets by its proposal to accomplish
a dividend policy - established in 50% of the net income, as an action that brings
sustainable results, based upon its operational management efficacy. Manageable
costs were reduced by 13% within the year.
Light’s shares were valued by 78%, from August 2006 to December 2008, while
IEE reached 36% and Bovespa only 1%. This scenario shows the result of our
management strategy efforts, in a favorable context in terms of Brazil, but still
very difficult in terms of Rio de Janeiro, a state that, for many decades, was kept
aside from the country’s growth flows.
The close connection between Light’s and the city’s fates, once again formalized by
our institutional signature - Rio is Light in our communication, is the reason why
Light is solidary to public administrations in municipal, state and federal levels, to
promote as much as possible, the quality of life, the safety and the development of
the population. Due to the success of several initiatives that express such
commitment, Light has received several awards and was publicly recognized,
becoming one of the most dynamic players in Rio de Janeiro’s social development
scenario and also in the State’s countryside.
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By accepting the invitation from the Governor Sérgio Cabral, I took over the
presidency of Rio’s Development Agency Council – AD-Rio, an entity that supports
nearly 15 strategic projects for the development of our state and that will result in
economic growth, job generation and higher consumption of energetics.
These actions are based on the commitment to sustainability, which is expressed
in our Mission and based on environmental, economic and social dimensions.
Among internal activities that make this commitment possible, we can highlight the
approval of a new communication policy and the diversity policy, in addition to the
implementation of the Safe Work Management System, from the Mais Valor
Program and the certifications in the Environmental Management System – SGA.
Externally, we went after the vision of renowned experts who discussed our
management model and the Company’s commitments to sustainability, in a
session organized by the Brazilian Foundation for Sustainable Development –
FBDS.
We incorporated the fair statements and suggestions presented – in cases where
they were not yet part of our practices, since we understand that the Company
should provide for the society’s demands – expressed by this group of people and
by other, more dispersed groups, captured by the several forms of interaction, in
different social and political forums.
On behalf of Light, I would like to thank the Rio de Janeiro Legislative Assembly,
the City Councils, the Judiciary and mainly, the unconditional support of all
jurisdictions of the Executive, the mayors and especially to the Governor of the
State of Rio de Janeiro, the vice-governor and his secretaries. I reaffirm our
willingness to work for the common progress, social justice and quality of life
objectives we share with them.
On behalf of the Board of Executive Officers, I would like to thank the Board of
Directors for the clear guidance, encouragement, responsibilities and the
recognition that helped us to achieve most of our goals set in the beginning of last
year.
I would like to thank the employees, service providers, suppliers and the
community that is totally connected to our destiny, for the devotion that made this
partnership extremely successful.
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11.01 – NOTES TO THE FINANCIAL STATEMENTS
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José Luiz Alquéres CEO
Corporate Profile
Light S.A. (Light) is a holding whose businesses are in the electric power
distribution, generation and trading segments. It is a centennial company present
in the southeastern Brazil with energy distribution activities in the state of Rio de
Janeiro and energy generation activities in the states of Rio de Janeiro and São
Paulo.
Light Serviços de Eletricidade S.A. is the 4th largest energy distributor in the
country, with a concession area encompassing 31 municipalities in the state of Rio
de Janeiro, with a total area of 10,970 Km², serving around 10 million people. In
2008, the Company distributed 23,698 GWh in energy to both captive and free
customers. Energy distribution concession is valid until June, 2026.
Light Energia S.A., the 6th largest private hydraulic-generation company in the
country (in terms of generation capacity) that produces electric power from the
utilization of the hydraulic power coming from Paraíba do Sul and Ribeirão das
Lajes rivers and has power plants in the states of Rio de Janeiro and São Paulo.
The installed capacity of the generating park, comprising five generating plants
and two pumping plants, is 855 MW.
Light Esco – Prestação de Serviços Ltda, is a company that integrates energetic
solutions, together with the customers, to find the best alternatives to acquire and
optimize the use of energy. Its activities include the direct acquisition and sale of
energy (trader), energy acquisition and sale trading intermediation (broker) and
representation and consulting services for free customers. Throughout 2008, the
Company traded 1,759 GWh (trader and broker activities), inclusive to companies
that are not in its concession area.
Light S.A.
(Holding)
Light
Energia S.A. OutrasLight S.E.S.A. Light
Esco Ltda
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Operational Context
Business Environment
Light is involved with sustainable and pro-active activities, is socially responsible
and aimed at the development, through partnerships with public entities in many
cases. The region serviced by the Company comprises 5.6% of the Brazilian
population and 7.9% of the GPD. Despite the concession area represents an
important intangible asset, there is strong, external pressure due to social risks
and great population concentration. To soften these factors, Light works with
agencies and companies – the federal government, class entities, commercial
associations, and other public state service concessionaires – to develop projects
to improve public security and urban and social order in the State of Rio de
Janeiro.
Within the economic scenario, the international credit crisis that emerged as of
September 2008 devaluated the real in relation to the dollar by 17.15% within the
year.
Operating Performance
Energy Distribution
Light SESA is the company that renders energy distribution services, comprising
energy supply to the captive market and energy distribution to free customers and
concessionaires, with network use (TUSD) revenue.
Tariff Revision
The main results of the tariff revision process are: tariff repositioning, that
establishes tariffs compatible with the efficient operating costs coverage and the
compensation on prudent investments and; Factor X, which establishes
productivity goals for the subsequent tariff period.
For the tariff repositioning, ANEEL (Brazilian Electricity Regulatory Agency)
calculates: (i) the efficient operational costs, using the Reference Company (ER)
methodology, (ii) prudent investments, using the Regulatory Compensation Base,
(iii) the level of regulatory losses to be transferred to customers and (iv) non-
manageable costs, which compose Installment A.
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In a public meeting held on November 4, 2008, ANEEL approved, temporarily,
Light SESA’s structural tariff repositioning of 1.96% for the period as of November
7, 2008, comprising all consumption classes (residential, industrial, commercial,
rural and others).
ANEEL established new regulatory levels for losses and delinquencies. In the losses
item, the index was 19.15% over the wire load, while the previous index was
15.97%. In the delinquency item, the level to be considered in this revision is
0.90% of the distribution gross income, while the previous index was 0.50% of the
distribution net income (without ICMS). It was also established the Factor Xe of
0.0%, to be used as of the 2009 tariff adjustment, pursuant to the new
methodology proposed by the Public Hearing 052.
Considering the financial tariff components that are not part of the tariff base, but
with amounts referring to the 12-month period after the revision, the tariff
repositioning index was 4.26%.
It is important to emphasize that Light’s final consumers observed, in average, a
4.70% increase in their electric power bills as of November 7. This was due to the
financial additional included in the tariff, referring to the period between November
7, 2007 and November 6, 2008, associated to the recovery of tariff differences
from previous periods that had a 0.41% negative effect in the tariff of that period.
Remunerable Investment
The Remunerable Investment, also called Compensation Base, is formed by the
Assets under Service (AIS) and Operations Supply, deducting the balance of
Obligations Bounded to the Public Electric Power Service (Special Obligation), on
which the compensation was calculated, as well as the AIS (Assets under Service)
that generated the depreciation quota, that is part of Installment “B” of the
Concessionaire’s Required Income – RR, confirmed by ANEEL’s Homologatory
Resolution 734, of November 04, 2008, if updated by the IGPM in the Annual Tariff
Adjustments, would be:
R$ thousand
Remunerable Investment Components
Nov/08
revision
a) Gross Assets under Service 9,893,473
b) (-) Accumulated Depreciation 4,832,831
c) (-) Obligation Bonded to SPEE 400,433
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d) Net Assets under Service 4,660,209
e) (+) Supplies 12,755
f) Remunerable Investment (Compensation Base) 4,672,964
g) Assets 100% depreciated 1,230,148
h) IGPM variation (Aneel HR/Tariff Adjustment number) -
i) Depreciation Quota – Annual Average Rate 4.25%
Market Growth
Total electric power consumed in Light’s concession area (captive + free
customers) in 2008 was 23,698 GWh, in line with 2007, which resulted from the
stability of both captive and free markets.
Captive Market
In 2008, captive market billed consumption totaled 18,292 GWh, in line with
2007’s billed consumption. The temperature effect (La Niña) reduced consumption,
incurring in atypical temperatures, reducing the year average temperature to
23.8º, compared to the historic average (20 years) of 24.5º. Another important
factor was the end of Energia Plus1 billing, bringing billed volume for this product
down by 177 GWh compared to 2007. Excluding Energia Plus1 billing in 2007 and
2008, we observe a 0.9% growth in the captive market consumption in 2008.
1 Energia Plus is an energy package offered to larger clients and has its own
generation capacity for peak hours.
Electric Power Consumption (GWh) Year
7,344
2,011
5,756
3,197
18,307 7,388
1,875
5,852
3,177
18,292
Residential Industrial Commercial Others Total
2007 2008
0.6%
-6.8%
1.7%
-0.6%
-0.1%
Electric Power Consumption (GWh) Total Market (Captive + Free measured)
18,307 18,292
5,380 5,406
23,687 23,698
2007 2008 Captive Free¹
-0.1%
0.5%
0.0%
¹ Energy measured
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Network Use
In 2008, the measured network use totaled 8,025 GWh, in line with the total
energy transported in 2007. Industrial class that responds for approximately 90%
of free customers’ consumption reduced 0.7% in the year, resulting from the 7.2%
reduction in the consumption of this segment in 4Q08. The consumption of free
customers in the commercial segment had 18.5% increase compared to 2007,
highlighting the retail commerce.
Energy Losses
In 2008, Light’s total losses over the wire load totaled 20.23%, representing a
decline of 0.45 p.p. compared to 2007. Non-technical losses, where the Company’s
efforts are focused, presented a reduction even lower, falling 0.53 p.p. over the
wire load, continuing the decrease presented in the previous quarters.
In order to achieve the regulatory loss level of 19.15% over the wire load (as set
by the November 2008 tariff revision), the Company has been investing in its loss-
reduction measures, both by means of conventional strategies and the use of new
technologies.
Light’s Losses Growth 12 months
6.666 6.795 6.791 6.819 6.856
14.74% 14.68% 14.57% 14.44% 14.21%
20.23% 20.68% 20.64% 20.56% 20.47%
Dec/07 Mar/08 Jun/08 Sep/08 Dec/08
Losses (GWh) Losses % Wire L. Non-technical losses % Wire Load
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In 2008, the number of normalized clients
(withdrawal of frauds by means of
regularization of meters) and replacement of
meters increased 64% year-on-year. In
addition, our intelligence was enhanced, mainly
resulting from the utilization of the identification
software and inspections control. As a result,
negotiation of amounts owed by corroborated
fraudulent clients caused energy recovered
(difference between billed energy and
consumption estimate for the fraud period) to
rise 80%.
To complement the conventional process to
reduce losses, the Company has been investing
in new metering and distribution network
protection technologies to combat losses. An
example of this is the installation of centralized
individual electronic meters in direct
communication with the Metering Control Center
(CCM), which amounted to over 62,000 in 2008,
with the installation of more than 120 km of
network with multiplex cables. CCM began its
operation in June 2008 and is responsible for
the automated management of reading
processes, cut, re-connection and identification
of irregularities or frauds in metering.
At the end of 2008, Light began to implement initiatives aimed at reducing energy
theft in regions of high loss ratios and where, historically, conventional initiatives
have not been effective. The installation of individual electronic meters in high-
income condominiums in the regions of Barra and São Conrado was completed, a
step that prioritizes loss reduction in areas with high consumption clients and that
enables fast return on the investment. In terms of concentrated efforts, several
inspection and normalization teams have been sent to the region, where they work
together to fight fraud and constantly monitor repeated offenses. The evaluation of
the initiative’s results helps define the areas for the implementation of new
technologies and network protection programs.
Light intends to invest even more in loss-prevention initiatives in 2009, based on
the excellent results of the initiatives implemented in 2008. Installation of new
electronic meters is expected to surpass 100,000 units in 2009, raising that total
to 160,000, and increasing the protected network to 1,000 km.
Normalized Clients
88,084
144,611
2007 2008
+ 64%
Energy Recovery GWh
72.2
130.0
2007 2008
+ 80%
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Delinquency
In 2008 the collection rate was 98.2% of commercial billing, 1.2 p.p. lower the
2007 level. Retail market collection was the main cause of this reduction in the
overall collection rate, due to intensified loss reduction efforts and to the effect of
the reduction in available credit to retail clients at the of the year. Major clients
and public authorities’ classes continued to provide high collection rates of 100.0%
and 110.2%, respectively, due to the collection of outstanding balances from
previous years. Despite the year-on-year decrease, the rate remained higher than
in 2006, reflecting the success of the Company’s efforts to reduce delinquency, as
well as its initiatives with major clients, public authorities and the retail market.
Service Quality
In 2008, Light intensified its investment program to improve the quality and to
increase its distribution network capacity, totaling R$ 85 million, compared to
the R$ 54 million invested in 2007.
As a result of high investments in the network and the subsequent increase in
the number of scheduled shutdowns, Light’s supply quality indicators showed a
decrease in 2008 when compared to 2007. Moreover, meteorological
conditions in 2008 also had an impact in the indicators decrease.
Collection Rate Variable average 12 months
94.1%
99.4%
98.2%
Dec/06 Dec/07 Dec/08
DEC / FEC - 12 Months
6.30
7.99
11.06
6.74 6.39
9.08
FEC
DEC
2008 2007 2006
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11.01 – NOTES TO THE FINANCIAL STATEMENTS
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Client Satisfaction
Client satisfaction is one of Light’s most important objectives. The Company
invests on services modernization, on the sales team qualification and on service
channels, always aligned with the clients’ needs and market changes.
In 2008, Light centralized its services structure to meet clients’ needs in a single
contact, whenever possible, by implementing enhancements and standardizing its
sales processes.
A key factor for the success of this strategy is to provide efficient communication
channels that facilitate the access to information, products and services, claim
records and solution for the requests.
Generation
Electric Power sold in 2008 totaled 4,900.3 GWh, slightly below the volume of
2007, a reflex of hydrological conditions in the year, which impacted electric power
sale in the spot market, with a reduction of 28.2% in this market.
Generation Projects
Throughout 2008, Light put into action its generation segment growth strategy,
resulting in the following noteworthy achievements:
• Was granted Installation License for construction of the PCH Paracambi,
issued by FEEMA (Rio de Janeiro Foundation for Environmental Engineering) at the
end of December 2008. The license authorizes the start of PCH construction. Works
will begin in the next few months, and the project is expected to last 24 months.
The Company has already sold part of its energy take through Light Esco. The PCH
Paracambi, located on Ribeirão das Lajes, downstream from the Lajes Complex,
will have 25 MW of installed capacity and 20.4 average-MW of assured energy;
• The Board of Executive Officers approved the start of the contracting
process for the Executive Project of PCH Lajes, which will begin with the
contracting of civil construction for its adductor system (Tunnel 2) and the supply
of the necessary hydro mechanical equipment. The required environmental
licenses have been granted, and the plant’s Basic engineering Project is subject to
ANEEL’s approval. The PCH will have 17 MW of installed capacity and is located in
the Lajes Complex and the operational start-up is scheduled for 2011;
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• The company filed for UHE Itaocara hydropower plant environmental license
with IBAMA and has already received the Terms of Reference to prepare the
Environmental Impact Studies (EIA/RIMA). The Basic engineering Project, which
seeks to comply with the environmental demands of the affected region, is being
prepared. UHE Itaocara will have 195 MW of installed capacity and 110 MW of
assured energy, located on the Paraíba do Sul river, in Itaocara, in the state of Rio
de Janeiro. Operational start-up is estimated for 2013 following a construction
period of 36 months;
• Creation of a consortium with Cemig for the construction and exploitation of
PCH Paracambi and UHE Itaocara hydroelectric projects; and
• Execution of an agreement of intent with Cemig for a joint participation in
bids related to hydroelectric power plants to generate energy or third party
ventures already in progress, until attaining at least 300 MW in addition to the
installed capacity.
Trading
In 2008, Light Esco recorded direct sales of 434.3 GWh to a portfolio of 55
customers, 148.1% above 2007. From this energy sold, 178.7 GWh result from the
energy sale from Light Energia’s hydrological hedge, adding value at the energy
surplus allocation.
In addition to direct sales, Light Esco also operated as a consultant and as a broker
for free customers with the CCEE. These operations involved about 1,325.0 GWh, a
volume 8.4% higher compared to 2007.
In addition to the revenue obtained in 2008, Light Esco executed important
contracts aimed at increasing the value created through the sale of its energy. The
Company closed on successful negotiations resulting in long-term contracts to free
customers that will provide average future delivery of 220 MW. It is important to
highlight that 100 average MW of this amount were sold to the Votorantim Group.
To maximize shareholder return on equity, the Company will continue its efforts to
sell energy from Light whose auction contracts expire in 2012 and 2013.
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11.01 – NOTES TO THE FINANCIAL STATEMENTS
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Investments
In 2008, the Company invested R$ 546.7 million in investment projects, with
highlight to the development of distribution networks, primarily involving new
connections, capacity increases and corrective maintenance, totaling R$ 165.4
million; quality improvements (structural optimization and preventive
maintenance), which absorbed R$ 64.8 million; and loss-prevention initiatives
totaling R$ 156.0 million. In the generation segment, about R$ 24.8 million went
to maintenance and R$ 23.0 million to three new generation projects.
CAPEX (R$ MM)
286.7
455.4
55.8
361.8
546.7
42.6
19.3
47.8
0.0
0.8
2007 2008
Distribution Administration Generation Trade
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Financial and Capital Markets Comment
Financial Performance
Revenues
In 2008, the 7.9% growth in consolidated net revenues of R$5,386.6 million
compared to 2007, was mainly associated with the recognition of additional
financial charges from the tariff review, as well as with changes in the consumption
mix, with larger growth in the residential and commercial classes, which increased
net distribution revenue by 7.3%. Additionally, it emphasizes the revenue growth
in the generation and selling segments, which grew by 12.2% and 154.7%
respectively.
Costs and expenses
In 2008, operating costs and expenses, in the amount of R$ 4,195.0 million were
in line with 2007. This result is mainly due to a 0.4% reduction on the distribution
segment costs and expenses, totaling R$ 4,074.5 million, highlighting the 13.1%
decrease on manageable costs and expenses. Costs and expenses in the
generation segment were also reduced by 2.3%.
EBITDA
Net Revenue
4,951 4,992
5,387
2006 2007 2008
Costs and Expenses (R$ million)
4,534 4,183 4,195
2006 2007 2008
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EBITDA rose 32.2% to R$ 1,504.1 million in the year, with an EBITDA margin of
27.9%. Excluding the non-recurring effects of R$ 107.5 million, generated by the
recognition of additional financial charges from previous years and of R$133.8
million referring to the reversal of Braslight provision, growth was 11.0%, in which
the 3.2% drop in PMSO consolidated costs stands out. The generation and trading
segments represented 13.5% and 0.7%, respectively, of EBITDA, versus 14.9%
and 0.4% in 2007.
Net Income
Net income in 2008 came to R$ 974.5 million, 9.3% lower, than the R$ 1,074.3
million income in 2007. Net income would have been up 148.9% from R$ 223.1
million in 2007 to R$ 555.3 million in 2008 if the following non-recurring effects
were excluded from both years: (i) recognition of tax credits totaling R$ 851.3
million in 2007 and (ii) reversals of the PIS/COFINS provisions and the Braslight’s
actuarial loss in 2008, which had impacts of 285.4 million and R$ 133.8 million,
respectively.
Income Allocation Proposal
EBITDA (R$ million)
738
1,138
1,504
2006 2007 2008
Net Income (R$ million)
(151)
974 1,074
2006 2007 2008
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At the Board of Directors’ meeting held on February 13, 2009, a dividend
distribution proposal, in the amount of R$ 499,637,756.10 or R$ 2.45 per share
over the 2008 income was approved, subject to approval at the Annual General
Meeting.
Financial Situation
The Company ended 2008 with a net debt of R$ 1,580.3 million, 8.1% higher
compared to 2007, without affecting the net debt/EBITDA ratio, which remained at
1.1x, evidence of the Company’s strong cash generation during the year.
The average maturity of the debt is 4.9 years and the average cost is 14.0% p.a.
for debt denominated in local currency and U$ + 5.3% p.a. for debt denominated
in foreign currency. Both costs kept steady if compared to September 2008.
Foreign-currency exposure represented 7.9% of total indebtedness on December
31, 2008. The company carries out hedge operations for cash flows with maturity
in the next 24 months through non cash swap instruments with first class financial
institutions. Including the effective swap operations, foreign currency debt
accounted for 5.4% of the total.
Corporate Governance and Capital Markets
The capital stock of Light S.A. comprises 203,933,778 common shares, with no par
value. The controlling group, Rio Minas Energia (RME), holds 52.1% of the capital
stock.
The Company's shares have been listed on Bovespa's Novo Mercado since July
2005, granting special rights to minority shareholders based on the best corporate
Net Debt (R$ million)
2,540
1,462 1,580
2006 2007 2008
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governance practices and on the principles of transparency and equity, essential
for ensuring mutually beneficial relations with the capital market. According to the
segment’s rules and pursuant to its Bylaws, the Company is bounded to arbitrage
in the Market’s Arbitrage Chamber. Light is listed on the Ibovespa, IBrX Itag, IGC,
IEE, MLCX and ISE indexes.
Light’s Board of Directors is formed by 11 members, 2 of which are elected
independently. The following 5 committees support the Board of Directors:
Finance, Management, Audit, Human Resources, and Governance and
Sustainability.
The Company has an indicative dividend policy, where it establishes an objective to
pay a minimum dividend of 50% of the adjusted net income, semi-annually or
annually, as long as the precedent conditions, such as the Company’s financial
condition, macroeconomic conditions and investment plans, among other relevant
factors, are fulfilled.
As of November 17, 2008 Light began its Sponsored Level 1 Depositary Receipts
Program, for the trading in the American over-the-counter securities market.
Citibank is the depositary institution of ADRs in the United States of America. As of
October 27, 2008, the Company contracted Credit Suisse to act as a market maker
of its shares in Bovespa, with the objective to provide more liquidity to the
financial instruments, avoiding liquidity gaps and providing reference price to the
shares.
In 2008, the value of Light’s shares fell by 13.6%, compared to decreases of
41.2% and 11.6% on the Ibovespa and IEE, respectively.
Light x Ibovespa x IEE10/08/06 = 100 até 30/12/08
80
100
120
140
160
180
200
220
240
ago/
06
set/0
6
out/0
6
nov/06
dez/06
jan/
07
fev/07
mar
/07
abr/0
7
mai/0
7
jun/
07
jul/0
7
ago/
07
set/0
7
out/0
7
nov/07
dez/07
jan/
08
fev/08
mar
/08
abr/0
8
mai/0
8
jun/
08
jul/0
8
ago/
08
set/0
8
out/0
8
nov/08
dez/08
70% Light
1% Ibovespa
28% IEE
R$/ação
08/10/06 12,88
12/30/08 21,86
Light x Ibovespa x IEE
Base jan/07 = 100 até 30/12/08
60
80
100
120
140
160
180
dez/06
jan/
07
fev/07
mar
/07
abr/0
7
mai/0
7
jun/
07
jul/0
7
ago/
07
set/0
7
out/0
7
nov/07
dez/07
jan/
08
fev/08
mar
/08
abr/0
8
mai/0
8
jun/
08
jul/0
8
ago/
08
set/0
8
out/0
8
nov/08
dez/08
2008
LIGT3 -14%
IEE -12%
IBOV -41%
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For the second consecutive time, the Company was included in Bovespa’s ISE
(Corporate Sustainability Index), this time for the period from December 2008 to
November 2009.
Committed to the Future
People Management
Light believes that constructing value to the Company only happens if its
employees grow and develop personal and professionally throughout the process.
That is why Light’s recipe is based on "people with values – since they are the
foundation of our management model” -, intensely living the Company’s mission –
that reflects upon its statement by the way we want to be identified and seen by
our stakeholders -, working according to a planned action based on business
knowledge -, and committed to common objectives agreed with instruments
named management commitments – that establish goals and which are the base
for people’s participation in the Company’s result.
Based on policies that define and support the best corporate practices, in order to
provide an equal treatment to all employees and to encourage happiness at work
(one of its main values), Light develops a set of initiatives to have its employees
improve in the professional environment.
By the end of 2008, Light had 3,732 employees with an average time of 14.9 years
in the company and an average age of 40.4 years. Since the Company believes the
education of its employees is essential to its success, 86.6% of the employees
have high school education.
Light is a founder sponsor of the Social Security Foundation – Braslight, a closed
supplementary private pension company that guarantees retirement income to the
Company’s employees that are linked to the Foundation and alimony to their
dependents.
Work Safety
The best practices to assure the efficient management of Occupational Health and
Safety are explained in the totality of tools that compose the Safe Work
Management System and reflect Light’s permanent concern with the physical
integrity of its employees.
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Specially developed for the electrical segment concessionaires, meeting the
requirements of the main norms in effect, the Safe Work Management System was
implemented in September 2008. Based on five important themes - Leadership,
Risk Management, Education, Control and Monitoring – the objective of the system
is to control and reduce risk levels associated to the Company’s activities.
Research and Development (R&D)
The annual Research and Development (R&D) programs encourage creative and
innovative thinking within the Company. In accordance with the regulation, since
1999 with the investment of 0.5% of the Net Operating Income in R&D projects,
the programs are mandatory.
Light invested R$78 million in its R&D programs between 2000 and 2008, of which
R$ 28 million were in the years 2006-2008. In the last year, Light SESA alone
invested over R$ 9 million in 61 projects, while Light Energia invested R$ 440
thousand in five projects. The alignment of technical themes to technological roots
outlined by the Company’s top management results in a larger commitment with
the results reached, generating products with higher applicability and gains to the
Company.
Environment
Having a history marked by important social and environmental actions and a
responsible performance with the society and the regions it is present, with its
Environmental Policy, Light consolidates a clear and concrete global performance
strategy before the increasing challenges imposed to energy companies regarding
environmental preservation.
This policy, which arouse from the implementation of the Environmental
Management System (SGA), has been guiding the Company’s environmental
practices guaranteeing the continuous improvement of its environmental
performance. Light’s SGA was granted its first conformity certification with NBR
ISO 14001 in 2002; nowadays, 182 units of the Company are already certified –
substations, transmission lines, power plants and commercial agencies and self-
service stations. The certification of the generating plants complex includes, in
addition to SGA, OHSAS 18001 norms (safety and health) and the ISO-9001 series
(continuous improvement of processes quality).
Social Action
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Light has been working in the society since 2002 through the Efficient Community
Project, which is standing on the sustainability basis: income generation, energy
economy and social inclusion. The Company counts on six years of coordinated
actions in three basic fronts – education, efficient equipment donation and
technical and commercial regularization. 266 thousand homes in 229 localities
have been served within this time.
The Company also acts through Instituto Light, whose mission is to contribute to
the improvement of economic and social conditions of Light’s concession area. The
Institute is also the Company’s interface with the consumers and society, to seek
for the solutions for the urban problems that interfere in the services rendering.
Other Information
External Audit
Pursuant to CVM Instruction 381/03, we inform that KPMG Auditores
Independentes only renders services related to external audit at Light S.A.
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CONSOLIDATED SOCIAL BALANCE SHEET (not audited)
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Independent auditors’ report
To the Board of Directors and Shareholders
of Light S.A.
Rio de Janeiro - RJ
1. We have examined the accompanying balance sheet of Light S.A. (“Company”) and
the consolidated balance sheet of the Company and its subsidiaries as of December 31,
2008, and the related statements of income, changes in shareholders’ equity, cash flows
and added value for the year then ended, which are the responsibility of its
Management. Our responsibility is to express an opinion on these financial statements.
2. Our examination was conducted in accordance with auditing standards generally
accepted in Brazil and included: (a) planning of the audit work, considering the
materiality of the balances, the volume of transactions and the accounting systems and
internal accounting control of the Company and its subsidiaries; (b) verification, on a
test basis, of the evidence and records which support the amounts and accounting
information disclosed; and (c) evaluation of the most significant accounting policies
and estimates adopted by Company management and its subsidiaries, as well as the
presentation of the financial statements taken as a whole.
3. In our opinion, the aforementioned financial statements present fairly, in all material
aspects, the financial position of Light S.A. and the consolidated financial position of
the Company and its subsidiaries as of December 31, 2008, the result of its operations,
the changes in its shareholders’ equity, its cash flows and the added value on
operations for the year then ended, in conformity with accounting practices adopted in
Brazil.
4. The financial statements of Fundação de Seguridade Social Braslight for the year ended
December 31, 2008 were examined by other independent auditors whose opinion,
dated January 29, 2009, includes an emphasis paragraph regarding the balance of
R$130,941 related to tax credits arising from the Entity’s tax court case which was
successful in obtaining a final and non-appeasable decision, which, according to the
Management’s forecast, will allow them to utilize these credits to offset taxes payable
in future years. The future realization of the credits is subject to the completion of the
offset process with the Federal Tax Authority (Secretaria da Receita Federal), which
the Entity suspended in September 2005. If the Entity does not complete the offset
process, they may eventually record a provision for this asset. This asset, which
guarantees the Entity’s actuarial reserves, was deducted from calculation of the
subsidiaries’ actuarial deficit, as required by Resolution n° 371/00 of the Brazilian
Securities and Exchange Commission - CVM . Consequently, in the event that a
provision is recorded for this amount, Company’s liability may be proportionally
adjusted.
5. As mentioned in Note 37, due to the second periodical review of the tariffs of the
subsidiary Light Serviços de Eletricidade S.A. as set forth in the concession agreement,
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the National Regulatory Electricity Agency- ANEEL temporarily ratified the
subsidiary’s tariff repositioning on 1.96%, to be applied during the period beginning
November 7, 2008. Considering the 2.30% interest on sales, the tariff’s impact reaches
4.27%. Additional changes that may result from the final review, if any, will be
reflected in the equity and financial position of the Company and its subsidiaries in the
following periods.
6. The Company’s financial statements and the consolidated financial statements of the
Company and its subsidiaries for the year ended December 31, 2007, including the
balance sheet and the statements of income, changes in shareholders’ equity and
changes in financial position for that year, and the supplementary information
including the statement of cash flows, were examined by other independent auditors,
on which a unqualified opinion was issued dated February 13, 2008. As mentioned in
Note 3, the accounting practices adopted in Brazil underwent changes as from January
1, 2008. The financial statements for the year ended December 31, 2007, presented
together with those for 2008, were prepared in accordance with the accounting
practices adopted in Brazil in effect until December 31, 2007, and, as permitted by the
Technical Pronouncement CPC 13 – Preliminary Adoption of Law 11,638/07 and
Provisional Measure 449/08, are not presented with the necessary adjustments to make
them comparable with the financial statements of 2008..
7. Accounting practices adopted in Brazil vary in certain significant respects from
International Reporting Standards – IFRS as issued by IASB. Except for the non-
adoption of IFRIC 12 (Service Concession Arrangements) considering the exemption
provided by BM&F BOVESPA for whose effects were not determined by the
Company’s management, and for the non recognition of the fair value of fixed assets at
initial adoption as required by IFRS or the revision of the historical cost in compliance
with IFRS, the information relating to the nature and effect of such differences were
presented in Note 39 to the consolidated financial statements.
February 13, 2009
KPMG Auditores Independentes
CRC-SP-14.428/O-6-F-RJ
Vânia Andrade de Souza
Accountant CRC-RJ-057.497/O-2
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Notes 12/31/2008 12/31/2007 12/31/2008 12/31/2007
CURRENT
Cash and Cash Equivalents 6 40,256 2,536 590,126 490,211
Consumers, concessionaires and permissionaires 7 - - 1,350,832 1,345,109
Recoverable Taxes 8 284 209 836,504 697,848
Inventories - - 18,603 13,256
Receivables from swap transactions 33 - - 6,671
Dividends Receivable 24 499,638 203,463 - -
Services - - 57,500 60,217
Prepaid Expenses 9 135 171 383,291 275,618
Other receivables 10 167 166 107,879 36,081
540,480 206,545 3,351,406 2,918,340
NON-CURRENT ASSETS 2,764,479 2,666,497 6,110,559 6,111,740
LONG-TERM ASSETS
Consumers, concessionaires and permissionaires 7 - - 292,594 326,066
Recoverable Taxes 8 - - 1,109,566 1,253,753
Receivables from swap transactions 33 4,413 -
Escrow deposits 121 103 194,200 166,132
Prepaid expenses 9 - - 129,435 159,030
Other receivables 10 - - 26,420 97,188
121 103 1,756,628 2,002,169
Investments 11 2,764,358 2,666,394 13,615 13,157
Property, Plant and Equipment 12 - - 4,059,358 3,772,054
Intangible assets 13 - - 280,958 271,090
Deferred charges - - - 53,270
3,304,959 2,873,042 9,461,965 9,030,080
ASSETS
Parent Company Consolidated
LIGHT S.A.
BALANCE SHEETS ON DECEMBER 31
(In thousands of reais)
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Notes 12/31/2008 12/31/2007 12/31/2008 12/31/2007
CURRENT
Suppliers 14 283 380 486,204 488,441
Payroll 7 8 2,791 2,058
Taxes 8 10 7 230,461 305,568
Loans, Financing and Financial Charges 15 - - 116,799 50,501
Debentures and Financial Charges 16 - - 61,523 89,921
Dividends Payable 24 499,638 203,463 499,638 203,463
Estimated Liabilities 31 26 55,052 51,768
Sector charges – Consumer Contributions 17 - - 126,733 115,510
Provision for contingencies 18 - - 2,237 2,237
Pension plan and other employee benefits 20 - - 87,744 73,585
Other Liabilities 19 1,286 810 519,757 354,064
501,255 204,694 2,188,939 1,737,116
NON-CURRENT LIABILITIES - - 4,469,322 4,601,165
LONG-TERM LIABILITIES
Suppliers 14 - - - -
Loans, Financing and Financial Charges 15 - - 1,046,550 832,946
Debentures and Financial Charges 16 - - 945,549 978,567
Taxes 8 - - 324,743 276,872
Provision for contingencies 18 - - 998,460 1,361,740
Pension plan and other employee benefits 20 - - 944,417 818,330
Other Liabilities 19 - - 209,603 329,532
- - 4,469,322 4,597,987
DEFERRED INCOME - - - 3,178
SHAREHOLDERS' EQUITY
Capital stock 23 2,225,819 2,220,355 2,225,819 2,220,355
Profits Reserve 23 555,426 447,993 555,426 471,444
Recognized granted options 38 22,459 - 22,459 -
Retained earnings (accrued losses) - - - -
2,803,704 2,668,348 2,803,704 2,691,799
3,304,959 2,873,042 9,461,965 9,030,080
Parent Company Consolidated
BALANCE SHEETS ON DECEMBER 31
LIGHT S.A.
(In thousands of reais)
LIABILITIES
FEDERAL PUBLIC SERVICE
BRAZILIAN SECURITIES AND EXCHANGE COMMISSION (CVM)
STANDARDIZED FINANCIAL STATEMENTS (DFP)
COMMERCIAL, INDUSTRY AND OTHER TYPES OF COMPANIES
December 31, 2008 Brazilian Corporation Law
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11.01 – NOTES TO THE FINANCIAL STATEMENTS
31
Parent Company Parent Company Consolidated Consolidated
Notes 01/01/2008 to 12/31/2008 01/01/2007 to 12/31/2007 01/01/2008 to 12/31/2008 01/01/2007 to 12/31/2007
OPERATING REVENUE
Electric Power Supply 26 - - 7,214,341 7,093,519
Electric Power Supply 26 - - 360,009 405,536
Other Revenues 27 - 8 664,298 639,310
- 8 8,238,648 8,138,365
Deductions from operating revenue
ICMS - - (1,949,018) (1,927,228)
Consumer Charges 28 - - (416,411) (644,584)
PIS/COFINS - - (484,004) (571,883)
Other - (1) (2,571) (2,292)
- (1) (2,852,004) (3,145,987)
NET OPERATING REVENUE - 7 5,386,644 4,992,378
ELECTRIC POWER COST
Electric Power Purchased for Resale 31 - - (3,063,177) (2,927,353)
- - (3,063,177) (2,927,353)
OPERATING COST
Personnel 30 - - (141,964) (160,039)
Material 30 - - (13,987) (12,791)
Outsourced services 30 - - (120,526) (118,984)
Allowances 30 - - - -
Depreciation and amortization 30 - - (275,887) (289,645)
Other 30 - - (16,364) (16,059)
- - (568,728) (597,518)
GROSS OPERATING PROFIT - 7 1,754,739 1,467,507
OPERATING EXPENSES
Selling 30 - - (315,476) (280,270)
General and Administrative 30 (26,446) (5,389) (247,581) (377,385)
(26,446) (5,389) (563,057) (657,655)
EQUITY IN THE EARNINGS OF SUBSIDIARIES 1,023,996 1,084,533 - -
FINANCIAL REVENUES (EXPENSES)
Revenues 32 763 368 270,149 247,633
Expenses 32 (384) (2,284) (175,757) (563,601)
379 (1,916) 94,392 (315,968)
OTHER OPERATING REVENUES (EXPENSES)
Revenues - - 30,188 -
Expenses - - (8,751) -
- - 21,437 -
OPERATING RESULT 997,929 1,077,235 1,307,511 493,884
Non-operating income - 6 - 17,890
Non-operating expenses - - - (6,576)
NON-OPERATING RESULT - 6 - 11,314
INCOME BEFORE TAXES
AND INTEREST 997,929 1,077,241 1,307,511 505,198
Income tax and social contribution 8 - - (301,531) 601,975
NET INCOME/(LOSS) BEFORE INTEREST 997,929 1,077,241 1,005,980 1,107,173
Interest (25) (31,527) (32,843)
NET INCOME/(LOSS) FOR THE YEAR 997,904 1,077,241 974,453 1,074,330
Net Income/(Loss) per share – R$ 4.89327 5.29454 4.77828 5.28023
No. of shares 203,933,778 203,462,739 203,933,778 203,462,739
(In thousands of reais)
LIGHT S.A.
STATEMENT OF INCOME FOR THE YEARS ENDED DECEMBER 31
FEDERAL PUBLIC SERVICE
BRAZILIAN SECURITIES AND EXCHANGE COMMISSION (CVM)
STANDARDIZED FINANCIAL STATEMENTS (DFP)
COMMERCIAL, INDUSTRY AND OTHER TYPES OF COMPANIES
December 31, 2008 Brazilian Corporation Law
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11.01 – NOTES TO THE FINANCIAL STATEMENTS
32
RETAINED EARNINGS
CAPITAL CAPITAL LEGAL PROFIT / (ACCRUED TOTAL
STOCK RESERVE RESERVE RETENTION LOSSES)
BALANCE ON DECEMBER 31, 2006 1,704,618 - - - (196,108) 1,508,510
Capital Increase 804,060 - - - - 804,060
Capital decrease for loss absorption (288,323) - - - 288,323 -
Retained earnings reserve - - - 55,093 (55,093) -
Dividends related to 2006 - - - - (37,122) (37,122)
Net income for the year - - - - 1,077,241 1,077,241
Allocation of net income for the year:
Legal reserve - - 53,862 - (53,862) -
Proposed dividends – 1st half of 2007 - - - - (480,878) (480,878)
Proposed dividends - - - - (203,463) (203,463)
Profits reserve - - - 339,038 (339,038) -
BALANCE ON DECEMBER 31, 2007 2,220,355 - 53,862 394,131 - 2,668,348
Capital Increase 5,464 - - - - 5,464
Dividends paid – profits reserve - - - (350,766) - (350,766)
Adjustment to preliminary adoption of Law 11,638/07 - - - - (40,067) (40,067)
Granted options - 22,459 - - - 22,459
Net income for the year - - - - 997,904 997,904
Allocation of net income for the year:
Legal reserve - - 49,895 - (49,895) -
Proposed dividends - - - - (499,638) (499,638)
Profits reserve - - - 408,304 (408,304) -
BALANCE ON DECEMBER 31, 2008 2,225,819 22,459 103,757 451,669 - 2,803,704
PROFITS RESERVE
LIGHT - S.A.
STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY – PARENT COMPANY
(In thousands of reais)
FEDERAL PUBLIC SERVICE
BRAZILIAN SECURITIES AND EXCHANGE COMMISSION (CVM)
STANDARDIZED FINANCIAL STATEMENTS (DFP)
COMMERCIAL, INDUSTRY AND OTHER TYPES OF COMPANIES
December 31, 2008 Brazilian Corporation Law
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11.01 – NOTES TO THE FINANCIAL STATEMENTS
33
RETAINED EARNINGS
TOTAL CAPITAL LEGAL PROFIT / (ACCRUED TOTAL
CAPITAL RESERVE RESERVE RETENTION LOSSES)
BALANCE ON DECEMBER 31, 2006 1,704,618 - - - (196,108) 1,508,510
Previous years adjustments - - - - 26,362 26,362
Capital increase 804,060 - - - - 804,060
Capital decrease for loss absorption (288,323) - - - 288,323 -
Profits reserve - - - 81,455 (81,455) -
Dividends related to 2006 - - - - (37,122) (37,122)
Net income for the year - - - - 1,074,330 1,074,330
Allocation of net income for the year:
Legal reserve - - 53,862 - (53,862) -
Proposed dividends - 1st half of 2007 - - - - (480,878) (480,878)
Proposed dividends - - - - (203,463) (203,463)
Profits reserve - - - 336,127 (336,127) -
BALANCE ON DECEMBER 31, 2007 2,220,355 - 53,862 417,582 - 2,691,799
Capital increase 5,464 - - - - 5,464
Dividends paid - profits reserve - - - (350,766) - (350,766)
Adjustment to preliminary adoption of Law 11,638/07 - - - - (40,067) (40,067)
Granted options - 22,459 - - - 22,459
Net income for the year - - - - 974,453 974,453
Allocation of net income for the year: -
Legal reserve - - 49,895 - (49,895) -
Proposed dividends - - - - (499,638) (499,638)
Profits reserve - - - 384,853 (384,853) -
BALANCE ON DECEMBER 31, 2008 2,225,819 22,459 103,757 451,669 - 2,803,704
LIGHT - S.A.
STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY – CONSOLIDATED
(In thousands of reais)
PROFITS RESERVE
FEDERAL PUBLIC SERVICE
BRAZILIAN SECURITIES AND EXCHANGE COMMISSION (CVM)
STANDARDIZED FINANCIAL STATEMENTS (DFP)
COMMERCIAL, INDUSTRY AND OTHER TYPES OF COMPANIES
December 31, 2008 Brazilian Corporation Law
01987-9 LIGHT S.A. 03.378.521/0001-75
11.01 – NOTES TO THE FINANCIAL STATEMENTS
34
01/01/2008 to
12/31/2008
01/01/2007 to
12/31/2007
01/01/2008 to
12/31/2008
01/01/2007 to
12/31/2007
Cash flows from operations
Net income (loss) for the period 997,904 1,077,241 974,453 1,074,330
Expenses (revenues) not affecting cash:
Allowance for doubtful accounts - - 233,398 171,479
Provision for (reversal of) losses in the recovery of amounts in the Long-term RTE - - 2,980 (4,389)
Allowance for doubtful accounts - Free Energy - - (595) 32,434
Restatement of regulatory assets and liabilities - - 43,845 (28,270)
Adjustment of receivables to present value - - (10,830) (11,168)
Depreciation and amortization - - 312,443 327,960
Interest and monetary variations, net - - 273,699 254,222
Equity in the earnings of subsidiaries (1,023,996) (1,084,533) - -
Write-off of property, plant and equipment - - (12,974) (10,495)
Deferred income and social contribution taxes - - 140,121 (852,221)
Charges and monetary variation on post-employment liability - - 115,428 106,824
PIS/COFINS reversal - Increase in calculation basis - - (432,359) -
Provision for contingencies - liabilities - - 72,053 110,367
Granted Options 22,459 - 22,459 -
Other - - - (819)
(3,633) (7,292) 1,734,121 1,170,254
(Increase) decrease in assets
Consumers and distributors - - (205,021) 176,210
Recoverable taxes - - (150,222) (85,745)
Services provided - - 2,717 (29,923)
Inventories - - (5,347) (1,847)
Prepaid expenses (CVA and other) - - 16,990 -
Regulatory assets (CVA and Financial Bubbles) - - (64,401) 176,932
Dividends 595,616 528,000 - -
Escrow deposits - - (28,068) (32,344)
Other (61) (200) (7,015) 28,067
595,555 527,800 (440,367) 231,350
Increase (Decrease) in liabilities
Suppliers (97) 151 (11,520) 64,386
Energy suppliers - - 4,528 (42,688)
Payroll and social contributions 4 (7) 4,017 16,417
Taxes and social contributions 3 (27) (45,341) 30,672
Memorandum accounts - CVA - - 8,899 125,421
Regulatory charges - - (8,460) 6,725
Contingencies - - (62,867) (42,948)
Post-employment liabilities - - (85,125) (75,855)
Other 117 (295) 210,132 46,744
27 (178) 14,263 128,874
Cash provided by (used in) operations 591,949 520,330 1,308,017 1,530,478
Cash flows from investing activities:
Sale of income property - - 21,649 28,000
Property, plant and equipment - - (615,127) (488,087)
Consumer contributions - - 2,570 14,026
Deferred charges - - - (17,597)
Cash used in investing activities - - (590,908) (463,658)
Cash flows from financing activities:
Capital increase - - 5,464 -
Dividends paid (554,229) (518,000) (554,229) (518,000)
Loans and financing - 3,490 264,507 1,693,627
Amortization of loans and financing - (3,490) (332,936) (2,447,344)
Cash provided by (used in) financing activities (554,229) (518,000) (617,194) (1,271,717)
Cash net variation 37,720 2,330 99,915 (204,897)
Statement of cash net variation
At the beginning of the period 2,536 206 490,211 695,108
At the end of the period 40,256 2,536 590,126 490,211
Cash variation 37,720 2,330 99,915 (204,897)
Parent Company Consolidated
LIGHT - S.A.
STATEMENT OF CASH FLOWS
(In thousands of reais)
FEDERAL PUBLIC SERVICE
BRAZILIAN SECURITIES AND EXCHANGE COMMISSION (CVM)
STANDARDIZED FINANCIAL STATEMENTS (DFP)
COMMERCIAL, INDUSTRY AND OTHER TYPES OF COMPANIES
December 31, 2008 Brazilian Corporation Law
01987-9 LIGHT S.A. 03.378.521/0001-75
11.01 – NOTES TO THE FINANCIAL STATEMENTS
35
Consolidated Parent Company
Description 1/1/2008 to 12/31/2008 1/1/2008 to 12/31/2008
Revenues 8,024,304 -
Goods, products and services sold 8,238,648 0
Other Revenues 21,437 0
Revenues related to Constr. Own Assets - 0
Provision/Rev. of allowance for doubtful accounts (235,781) 0
Raw material acquired from third-parties (3,360,469) (1,683)
Cost of goods, products and services sold (3,063,176) 0
Material-electric power-third-party services-other (297,293) (1,683)
Loss/Recovery of Assets - 0
Other - 0
Gross Value-Added 4,663,835 (1,683)
Retentions (312,443) -
Depreciation, Amortization and Depletion (312,443) -
Net value-added 4,351,392 (1,683)
Value-added received in transfer 270,149 1,024,759
Equity in the earnigns of subsidiaries - 1,023,996
Financial revenues 270,149 763
Total Value-Added to Distribute 4,621,541 1,023,076
Value-Added Distribution 4,621,541 1,023,076
Personnel 226,552 24,747
Direct remuneration 160,955 24,635
Benefits 39,881 102
FGTS (Government Severance Indemnity Fund for Employees) 22,653 10
Other 3,063 0
Taxes, Fees and Contributions 3,220,169 123
Federal 1,249,177 123
State 1,949,018 -
Municipal 21,974 -
Third-party capital remuneration 200,367 302
Interest rates 152,582 295
Rental 29,923 7
Other 17,862 -
Remuneration of own capital 974,453 997,904
Dividends 499,638 499,638
Retained earnings / accrued losses in the year 474,815 498,266
STATEMENT OF VALUE-ADDED
LIGHT S.A.
(In thousands of reais)
FEDERAL PUBLIC SERVICE
BRAZILIAN SECURITIES AND EXCHANGE COMMISSION (CVM)
STANDARDIZED FINANCIAL STATEMENTS (DFP)
COMMERCIAL, INDUSTRY AND OTHER TYPES OF COMPANIES
December 31, 2008 Brazilian Corporation Law
01987-9 LIGHT S.A. 03.378.521/0001-75
11.01 – NOTES TO THE FINANCIAL STATEMENTS
36
NOTES TO THE FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2008 and 2007
(Amounts in thousands of Brazilian reais)
1. OPERATIONS
Light S.A. was established as a subsidiary of LIGHT – Serviços de Eletricidade S.A. (“Light
SESA”), on July 27, 1999, and remained as a subsidiary until September 12, 2005, when its
shares were sold to LIDIL Comercial Ltda.
Light S.A.’s corporate purpose is to hold equity interests in other companies, as partner or
shareholder, and the direct or indirect exploitation, as applicable, of electric power services,
including electric power generation, transmission, sale and distribution systems, as well as
other related services.
On September 5, 2005, in accordance with Law 10,848/2004, Brazilian Eletricity Regulatory
Agency - ANEEL, through Authorizing Resolution nr. 307/2005, approved the corporate
restructuring project was approved at the Extraordinary General Meeting held on January 13,
2006. As of January 14, 2006, Light S.A. became the parent company of all the Grupo Light’s
operational and non-operational companies shown below:
Light Serviços de Eletricidade S.A. (Light SESA) - Publicly-held Company engaged in the
distribution of electric power;
Light Energia S.A. - (Light Energia) – Closely-held Company whose main activity is study,
plan, construct, operate and exploit electric power generation, transmission and sales systems,
and related services;
Light Esco Prestação de Serviços Ltda. - (Light Esco) – Company whose main activity is to
provide services related to co-generation, projects, management and solutions, such as
improving efficiency and defining energy matrixes and sale of energy on the free market;
Itaocara Energia Ltda. - (Itaocara Energia) – Pre-operating Company, primarily engaged in the
exploitation and production of electric power;
Lightger Ltda. (Light Ger) and Lighthidro Ltda. (Light Hidro) – Pre-operating companies both
to participate in auctions for concession, authorization and permission for new plants. On
December 24, 2008, Light Ger obtained the installation license that authorizes the start of
implementation works of Paracambi small hydroelectric power plant (PCH); and
Instituto Light para o Desenvolvimento Urbano e Social (Light Institute) – It is engaged in
participating in social and cultural projects, interest in the cities’ economic and social
development, affirming the Company’s ability to be socially responsible.
Grupo Light’s concessions and authorizations:
FEDERAL PUBLIC SERVICE
BRAZILIAN SECURITIES AND EXCHANGE COMMISSION (CVM)
STANDARDIZED FINANCIAL STATEMENTS (DFP)
COMMERCIAL, INDUSTRY AND OTHER TYPES OF COMPANIES
December 31, 2008 Brazilian Corporation Law
01987-9 LIGHT S.A. 03.378.521/0001-75
11.01 – NOTES TO THE FINANCIAL STATEMENTS
37
Concessions / authorizations
Date of concession /
authorization Maturity Date
Generation, Transmission and Distribution (direct) July 1996 June 2026
Paracambi small hydroelectric power plant (PCH)
(indirect)
February 2001 February 2031
Itaocara hydroelectric power plant (indirect) March 2001 March 2036
2. PRESENTATION OF THE FINANCIAL STATEMENTS
The individual and consolidated financial statements including the notes thereto, are presented
in thousands of reais and other currencies, except when otherwise indicated and were prepared
in accordance with the accounting practices adopted in Brazil, which comprises the Brazilian
Corporation Law, Pronouncements, Guidances and Interpretations issued by the Brazilian
Committee on Accounting Pronouncements – CPC, rules issued by the Brazilian Securities and
Exchange Commission (“CVM”), and standards applicable to electric power public utility
concessionaires established by Brazilian Eletricity Regulatory Agency - ANEEL.
The Company and its subsidiaries adopt the chart of accounts and accounting instructions
contained in the Accounting Manual for the Electric Power Public Utility, enacted by ANEEL
Resolution nr. 444 of October 26, 2001 and further Amendments, Resolutions and Orders
issued by ANEEL.
When preparing the individual and consolidated financial statements of December 31, 2008,
the Company adopted for the first time the amendments to the Brazilian Corporation Law
introduced by Law nr. 11,638 approved on December 28, 2007 and respective modifications
introduced by Provisional Measure 449 of December 3, 2008. The adjustments related to these
modifications are detailed in the Note 3.
Given that the Company is comprised primarily of interests in other corporations, the notes to
the financial statements primarily reflect the accounting practices and breakdown of its
subsidiaries’ accounts.
The Board of Directors authorized the conclusion of these financial statements on February 13,
2009.
The financial statements as of December 31, 2007 were reclassified, where applicable, for
comparison purposes, as described below:
FEDERAL PUBLIC SERVICE
BRAZILIAN SECURITIES AND EXCHANGE COMMISSION (CVM)
STANDARDIZED FINANCIAL STATEMENTS (DFP)
COMMERCIAL, INDUSTRY AND OTHER TYPES OF COMPANIES
December 31, 2008 Brazilian Corporation Law
01987-9 LIGHT S.A. 03.378.521/0001-75
11.01 – NOTES TO THE FINANCIAL STATEMENTS
38
Reclassification of reversal reserve (a)
Published Reclassification Adjusted
Fixed Assets
Property, Plant and Equipment
Special Obligations Linked to Concession (240,040) 69,933 (170,107)
Non-current Liabilities
Other Debts
Reversal Reserve - (69,933) (69,933)
Reclassification of employees profit sharing (b)
Cost of Goods and/or Services Sold
Personnel Expenses (180,740) 20,701 (160,039)
Selling Expenses (282,451) 2,181 (280,270)
General and Administrative Expenses (387,346) 9,961 (377,385)
Interest/Statutory Contributions
Interest - (32,843) (32,843)
(a) Special Obligations Linked to Concession included the amount of R$69,933 on December 31, 2007, referring to reversal reserve. This reserve derives from RGR (Global Reversal Reserve) funds, incurring financial charges that are yearly paid to Eletrobras. Thus, this liability is not classified as special obligations linked to concession and therefore, not reduced from property, plant and equipment account.
(b) For most appropriate presentation, management and employees profit sharing should be classified as profit sharing result under income tax. Thus, the Company reclassified the amounts related to employees profit sharing, under income tax, in the Statement of Income for 2007.
The Company made previous years adjustments which are reported retrospectively, as per chart
below:
P r e vi o us Y e a r
P ub l ish e d A d j u s tm e nt A d j us t e d
12 / 3 1/ 2 00 7 1 2/ 3 1 /2 0 0 7
R e c o v er a b le ta x e s ( no n -c u rr e nt ) 1 , 23 0 ,3 0 2 2 3 , 45 1 1 , 25 3 ,7 5 3
D e fe r re d I nc o m e T a x (i n c om e ) 85 5 ,1 3 2 ( 2 , 91 1 ) 85 2 ,2 2 1
N e t I nc o m e 1, 07 7 ,2 4 1 ( 2 , 91 1 ) 1 , 07 4 ,3 3 0
S ha r e ho l d e rs ' E q ui t y 2 , 66 8 ,3 4 8 2 3 , 45 1 2 , 69 1 ,7 9 9
C o nso l id a t e d
As detailed in Note 23(c), two prior years adjustments, were recognized both affecting
Deferred Income Tax Asset:
a) R$26,362 debiting Deferred Income Tax Asset and crediting Shareholders’ Equity,
with adjustments at the opening balances of 2007.
FEDERAL PUBLIC SERVICE
BRAZILIAN SECURITIES AND EXCHANGE COMMISSION (CVM)
STANDARDIZED FINANCIAL STATEMENTS (DFP)
COMMERCIAL, INDUSTRY AND OTHER TYPES OF COMPANIES
December 31, 2008 Brazilian Corporation Law
01987-9 LIGHT S.A. 03.378.521/0001-75
11.01 – NOTES TO THE FINANCIAL STATEMENTS
39
b) R$2,911crediting Deferred Income Tax Asset and debiting 2007 expense-year
Deferred Income Tax.
Pursuant to CVM Resolution 506/06, the 2007 financial statements have been restated to
include these adjustments.
3. SUMMARY OF ACCOUNTING PRACTICES
3.1) Initial adoption of Law 11,638/07
The Company and its subsidiaries opted for preparing the transitional balance sheet on January
1, 2008, which is the basis for the accounting pursuant to the Brazilian Corporation Law
modified by Law 11,638/07 and Provisional Measure 449/08. Modifications introduced by this
law are characterized as changes in accounting practices. Nevertheless, as authorized by
Technical Pronouncement CPC 13 – Initial Adoption of Law 11,638/07, approved by CVM
Resolution 565 of December 17, 2008 and Provisional Measure 449/08, all the adjustments
affecting results both of parent company and subsidiaries, have been made against retained
earnings/(losses) on the transition date, pursuant to Article 186 of Law 6,404/76, without
retrospective effects on the financial statements.
a) Summary of main accounting practices modified by preliminary adoption of Law
11,638/07 and Provisional Measure 449/08:
Derivative financial instruments:
The Company and its subsidiaries contracted derivative financial instruments to minimize their
exposure to market risks related to currency fluctuations. These financial instruments are
classified at fair value through income.
Gains or losses resulting from fair value variation of derivative financial instruments are
recognized in the net income for the year.
Derivative financial instruments operations in 2007 were recorded in the balance sheet
including the accrued interest until the balance sheet date.
Transaction costs in the issue of securities:
Transaction costs related to funding when contracting debt instruments (debentures) were
recorded under liabilities as write-down account of Debentures and amortized based on same
debt amortization curve.
Until December 31, 2007, these costs were recorded as prepaid expenses and amortized on a
straight-line basis for the loan term.
Financial lease:
Financial lease agreements are recognized as fixed assets by its fair value, or if lower amount,
by present value of balance of minimum payments provided for in financial lease agreements
and depreciated by depreciation rates practiced by Company and its subsidiaries, according to
FEDERAL PUBLIC SERVICE
BRAZILIAN SECURITIES AND EXCHANGE COMMISSION (CVM)
STANDARDIZED FINANCIAL STATEMENTS (DFP)
COMMERCIAL, INDUSTRY AND OTHER TYPES OF COMPANIES
December 31, 2008 Brazilian Corporation Law
01987-9 LIGHT S.A. 03.378.521/0001-75
11.01 – NOTES TO THE FINANCIAL STATEMENTS
40
the nature of each asset.
Respective balances payable of financial lease agreements are recognized in current and non-
current liabilities based on the present value of installments payable on the transition date. The
difference between the present value and the total amount of installments falling due is
appropriated to the statement of income as financial expense for the remaining duration of the
agreement by means of amortized cost method and based on effective interest rate.
This accounting practice had already been adopted in 2007 by the Company and its
subsidiaries.
Deferred assets:
The balance of deferred assets on the transition date was partially written-off against retained
earnings and partially reclassified to the group of fixed assets - construction in progress.
Present value adjustments:
The balance of accounts receivable deriving from renegotiation of consumers´ debts was
adjusted at present value, by using interest rates that reflect the nature of these assets in terms
of validity, risk, currency, receipt or payment conditions pre or post fixed.
The effects of present value adjustment deriving from the preliminary adoption of Law
11,638/07 and Provisional Measure 449/08 were recorded against retained earnings/(losses) on
the transition date.
Share-based remuneration plan:
The Company granted stock options to part of its employees, which may only be exercised
after specific grace periods. These options are valued based on the fair value and recognized as
expenses in conterpart to a specific account of Shareholders’ Equity to the extent that the
service period has been complied with.
No previous year adjustment has been recognized related to the adoption of Law 11,638/07,
since the plan has been granted in March 2008.
b) Effects of initial adoption of Law 11,638/07 and Provisional Measure 449/08:
The reconciliation of 2008 results and shareholders’ equity on December 31, 2008 considering
the effects of initial adoption of Law 11,638/07, including results that would be obtained if
changes in accounting practices related to said legislation have not been adopted, is presented
below.
Statement of effects on consolidated results and Shareholders’ Equity as of December 31, 2008
deriving from the InitialAdoption of Law 11,638/07 and Provisional Measure 449/08:
FEDERAL PUBLIC SERVICE
BRAZILIAN SECURITIES AND EXCHANGE COMMISSION (CVM)
STANDARDIZED FINANCIAL STATEMENTS (DFP)
COMMERCIAL, INDUSTRY AND OTHER TYPES OF COMPANIES
December 31, 2008 Brazilian Corporation Law
01987-9 LIGHT S.A. 03.378.521/0001-75
11.01 – NOTES TO THE FINANCIAL STATEMENTS
41
Net Income
Shareholders'
Equity
Book balances according to the Law 11,638/07: 974,453 2,803,704
Adjustments resulting from initial adoption of Law 11,638/07 and Provisional Measure 449/08:
Financial instruments measured at fair value through income 60 60
Present value adjustment- Accounts receivable 6,181 23,802
Deferred assets (8,231) 34,863
Share-based payment expenses - 22,459
Temporary differences of Income and Social Contribution Taxes 677 (19,967)
Book balances excluding the effects of Law 11,638/07: 973,140 2,864,921
12/31/2008
Consolidated
Tax effects of adjustments deriving from the initial adoption of Law 11,638/07 and Provisional
Measure 449/08, where applicable, were recorded in the shareholders’ equity accounts on
which the refered adjustments were recorded in counterpart to the deferred tax assets or
liabilities equity accounts.
The equity adjustment deriving from the adoption of new law, recognized in subsidiaries under
shareholders’ equity, were also directly recorded in the parent company shareholders’ equity.
3.2) Summary of main accounting practices:
Determination of income
Income is determined pursuant to the accrual basis of accounting.
Revenues from all services rendered are recognized when earned. Electricity bills to all
consumers are issued monthly according to the reading calendar of meters. Unbilled
revenue, corresponding to the period between the date of last consumption reading and the
end of the month, is estimated and recognized as revenue in the month that energy was
consumed. Revenue is not recognized if its realization is uncertain.
Accounting Estimates
The preparation of the financial statements requires Management to be based on estimates
and its judgment when recording certain transactions that affect assets and liabilities,
revenues and expenses, as well as the disclosure of information in the financial statements.
Final results of these transactions and information upon their effective realization in
subsequent periods may differ from Management’s estimates and judgment. The Company
and its subsidiaries review estimates and assumptions, at least, yearly.
Main estimates related to the financial statements refer to the recording of effects deriving
from:
- provision for extraordinary tariff recovery credit within term established by ANEEL
(fully written-off until June 2008);
- allowance for doubtful accounts;
- provision for contingencies and supplementary private pension plans;
- recovery of deferred income and social contribution taxes; and
- market value of financial instruments.
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Financial revenues and expenses
Include interest, monetary and exchange rates variations incurring on rights and obligations
subject to monetary restatement until the balance sheet date and the hedge operations results,
which are appropriated to income according to the duration of agreements. Foreign currency
assets and liabilities are translated into Reais at the exchange rate reported by Brazilian
Central Bank on the balance sheet date. The net effect of these variations is reflected in the
net income for the year.
Net income (loss) per share
Determined taking into account the number of outstanding shares on the balance sheet date.
Non-derivative financial instruments
Include temporary cash investments, cash and cash equivalents, loans, financing and
debentures.
Non-derivative financial instruments are preliminarily recognized by fair value accrued of
transaction costs directly attributable.
Derivative Financial Instruments
The Company and its subsidiaries maintain derivative financial instruments to hedge against
foreign currency and interest rates risks.
Derivatives are preliminarily recognized by their fair value; attributable transaction costs are
recognized in income when they are incurred. Subsequently to the initial recognition,
derivatives are measured by fair value and changes are recorded in income.
Current and non-current assets
Consumers, concessionaires and permissionaires (Clients) – Include the supply of
electricity billed and to be billed (estimate), default surcharges, interest deriving from
payment in arrears and renegotiation of consumers debts, adjusted to present value when
applicable and energy sold to other concessionaires due to electric power supply according
to amounts made available within the scope of Electric Power Commercialization Chamber
(“CCEE”) and credits related to varied nature of regulatory assets.
Present value is calculated for each renegotiation transaction of consumers debt (payment by
installments), based on interest rates that reflect the term and the risk of each transaction, on
average, 1% per month. The conterpart of accounts receivable present value adjustment is
the financial result.
The allowance for doubtful accounts was established in amount considered sufficient by
Management to cover eventual losses in the realization of credits.
Inventories (including property, plant and equipment) – Inventories classified in Current
Assets (maintenance and administrative storehouse) and those allocated to investments,
classified in Non-Current Assets – Property, Plant and Equipment (works warehouse), are
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recorded at the average acquisition cost and do not exceed their replacement costs or
realization values, deducted from provision for losses, when applicable.
Investments – permanent equity interest in subsidiaries and associated companies are
valued by the equity accounting method. Other investments are valued at the acquisition cost
monetarily restated until December 31, 1995, deducted from provision for devaluation, when
applicable.
Property, plant and equipment – Recorded at the acquisition, formation or construction
cost, monetarily restated until December 31, 1995, deducted from accumulated depreciation.
Other expenditures are capitalized only when there is an increase in economic benefits of
this item. Any other type of expenditure is recognized in income as expense when incurred.
o Property, plant and equipment under Service – (“AIS”) – Include assets and facilities in
view of service granted, registered and controlled by means of the Registration Unit –
(“UC”) and Unit of Addition and Withdrawal – (“UAR”), by Assets Order – (“ODI”),
book account and date of transfer (capitalization) for Property, plant and equipment
under Service, as required by ANEEL.
o Depreciation – The depreciation is calculated by the straight-line method, based on
book balances recorded at the respective Registration Units – (“UC”). Annual rates
are determined in the chart attached to ANEEL Resolution nr. 240 of December 5,
2006, as disclosed in the Note 12.
o Construction in progress – (“AIC”) – Refers to fixed assets and facilities under
construction.
o General Management Apportionment (“RAG”) – Part of administrative and general
expenses, deriving from staff expenses, services rendered, leasing, rentals and other
are monthly appropriated to construction and other orders in progress, according to
the Accounting Manual published by ANEEL.
o Financial Charges – In view of provision in Accounting Instruction 6.3.10 of the
Accounting Manual for the Electric Power Public Utility, enacted by ANEEL
Resolution 444 of October 26, 2001 and CVM Resolution 193 of July 11, 1996,
interest rates, monetary variations and financial charges related to financing obtained
from third parties, effectively applied to construction in progress were appropriated to
the orders in progress as cost. Starting in 2008, Grupo Light capitalized financial
charges, in the amount of R$34,738.
Financial lease – Certain leasing agreements substantially transfer risks and benefits
inherent of an asset ownership to the Company and its subsidiaries. These agreements are
characterized as financial lease agreements and assets are recognized by fair value or present
value of minimum payments provided for in the agreement. Items recognized as assets are
depreciated considering depreciation rates applicable to each group of assets as described in
Note 12. Financial charges related to the financial lease agreements are appropriated to
income over the term of the agreement, based on the amortized cost method and effective
interest rate.
Intangible asset – Intangible assets of the Company and its subsidiaries comprise assets
acquired from third parties and are measured by total acquisition cost, deducted from
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accumulated amortization. Intangible assets with defined useful life are amortized on a
straight-line basis by the annual rate of 20%.
Impairment – Property, plant and equipment and intangible assets have their recoverable
value tested, at least, yearly, should exist signs of impairment.
Deferred Assets - Until 2007, these referred to pre-operating expenses, project
development expenses and environmental management systems. After Law 11,638/07,
R$10,176 were reclassified from balance existing on January 1,2008 to fixed assets and
R$43,094 were written-off against retained earnings.
Current and non-current liabilities – Recorded by their known or calculable values,
accrued, when applicable, of corresponding charges, monetary and exchange variations
incurred up to the balance sheet date. A provision is recognized in the balance sheet when
the Company and its subsidiaries have a real or legal obligation established as a result of
past event and it is likely that an economic resource will be required to settle the obligation.
Provisions are recorded based on the best estimates of risk involved.
Pension plan and post-employment benefits to employees – Costs subsidizing pension
plans and eventual plan deficits are recognized by the accrual basis and pursuant to CVM
Resolution nr. 371/00 and NPC 26 of IBRACON based on actuarial calculation prepared by
independent actuary.
When plan benefits are improved, the increase portion of benefit related to employees
services rendered in the past is recognized in income on a straight-line basis during the
average period until benefits are acquired. If criteria to obtain these benefits are immediately
met, expenses are immediately recognized in income.
The Company and its subsidiaries recognize all gains and losses deriving from defined
benefit plans directly defined in income.
Share-based remuneration plan – the effects of share-based remuneration plan are
calculated based on the fair value of equity instruments granted and recognized in the
balance sheet and in the statement of income as the contractual conditions are met.
Current and deferred income and social contribution taxes – Deferred and current income
and social contribution taxes are calculated based on the 15% rate, accrued of 10% surcharge
over excess taxable income of R$240 for income tax and 9% over taxable income for social
contribution on net income and take into account social contribution negative basis and tax
loss carryforward limited to 30% of book taxable income.
Deferred tax assets deriving from tax losses carryforward, negative social contribution basis
and temporary differences were established pursuant to CVM Instruction nr. 371 of June 27,
2002, and consider the profitability track record and the expectation of generating future
taxable income, based on feasibility technical study approved by Management bodies.
As provided for in Provisional Measure 449/08, the Company and its subsidiaries opted for
adopting the Transitory Tax Regime (RTT) when determining the book taxable income, so
that changes in the criterion to recognize revenues, costs and expenses considered in the
determination of net income for the year will not have effects for the purposes of
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determining book taxable income of company subject to RTT, and should consider for tax
effects the accounting methods and criteria effective on December 31, 2007.
Provision for contingencies – Recorded taking into account the evaluation and
quantification of lawsuits which the probability of loss is deemed as probable according to
Management’s and legal counsels’ opinion.
Correction of error – Pursuant to CVM Resolution nr. 506/06, the correction of error
amount should be stated retrospectively:
a. Adjusting the comparative amounts of previous year(s) on which the error has been
made; or
b. If the error occurred prior to the oldest reported period, considering the adjustment
to opening balance of assets, liabilities, retained earnings/(losses) of the oldest
reported period, so that other financial statements are reported as if the error had
not been made;
c. Detailing in the retained earnings/(losses) in the changes in shareholders’ equity,
the effects of correcting the error and the income originally determined.
As disclosed in Note 2, the Company is presenting the Financial Statements for 2007 which
were restated as consequence of adjustments and reclassifications of previous years.
Recording of electric power purchase and sale transactions through Electric Power
Commercialization Chamber (“CCEE”)– The cost of energy purchased and supply
revenues are recognized by accrual basis based on information published by Electric
Power Commercialization Chamber (“CCEE”), which is in charge of determining the
amount and quantities of purchases and sales made within a regulated environment, or by
Management’s estimate, when this information is not available.
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4. CONSOLIDATION PROCEDURES
Consolidated financial statements include Light S.A. and its direct and indirect subsidiaries,
listed below:
Interest
%
2008 (%) 2007 (%)
Light SESA 100 100
Light Energia 100 100
Light Esco 100 100
Light Ger 100 100
Light Hidro 100 100
Light Institute 100 100
Itaocara Energia 100 100
Accounting practices were consistently applied in all consolidated companies and compatible
with those employed in the previous year, except for the effects of Law 11,638/07.
These financial statements were prepared pursuant to consolidation rules of Law nr. 6,404/76,
amended by Law nr. 11,638/07 and Provisional Measure 449/08 and CVM Instruction nr.
247/96. Thus, interest between consolidated companies, balances of accounts receivable and
payable, intercompany revenues and expenses were eliminated.
Below, the income reconciliation of parent company and consolidated on December 31, 2008:
Consolidated net income on December 31, 2008 974,453
Previous year adjustment (1) 23,451
Parent company’s net income on December 31, 2008 997,904
(1) It refers to previous year adjustments with retrospective effects on its subsidiaries, due to
correction of errors, as disclosed in the Note 2.
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5. REGULATORY ASSETS AND LIABILITIES
12/31/2008 12/31/2007 12/31/2008 12/31/2007
Assets
Consumers, Concessionaries and Permissionaires (note 7) 67,977 95,114 - -
Extraordinary Tariff Recovery, net - 37,866 - -
Free energy, net - 16,354 - -
Tariff Readjustment - TUSD 67,977 40,894 - -
Prepaid Expenses (Note 9) 381,624 273,640 125,071 137,988
CVA - (b) 222,245 45,909 125,071 1,898
PIS and COFINS - (c)1 - 6,079 - -
Other Regulatories - (c)2 27,469 18,373 - -
Portion "A" - (a) 131,910 203,279 - 136,090
TOTAL ASSETS 449,601 368,754 125,071 137,988
Liabilities
Suppliers (note 14) - (16,053) - -
Free energy, net - (16,053) - -
Other Debts (note 19) (160,661) (131,567) (1,719) (21,502)
CVA - (b) (143,947) (76,686) (1,719) (21,502)
Other Regulatories (c)2 (16,714) (54,881) - -
TOTAL LIABILITIES (160,661) (147,620) (1,719) (21,502)
288,940 221,134 123,352 116,486
Consolidated
Current Non-current
a) Rationing:
The Emergency Power Rationing Program (“PERCEE”) was created on August 24, 2001 by
Provisional Measure 2,198 to align electricity demand and supply and avoid unplanned
interruption in power supply, and was effective from June 2001 through February 2002, at
which time the government considered reservoir levels to be back to normal.
In December 2001, the Brazilian government and the electric utilities executed the Electricity
Overall Agreement with electric power distribution and generation concessionaires to restore
the economic and financial breakeven of existing agreements and recover lost revenues relating
to the period in which the PERCEE was in effect.
This agreement addressed the following items related to the period the aforementioned
Emergency Program was in force: (i) margin losses incurred by distribution companies; (ii)
additional costs of “Portion A” for the period from January 1 to October 25, 2001; (iii) costs of
energy purchased through the Electric Power Commercialization Chamber (“CCEE”) owed to
generation companies not committed to energy “Initial Agreements” (called “free energy”),
carried out until December 2001; and (iv) replacement of the contractual right set forth in
Exhibit V of the Initial Agreements (energy purchase and sale) related to the rationing period.
For the post-rationing period, March to December 2002, the Electricity Overall Agreement set
the rate for trading excess energy from the Initial Agreements at R$73.39 per MWh.
The electric power distribution and generation companies revenues (“free energy”) for the
rationing period is being recovered through the “Extraordinary Tariff Recovery - RTE”, which
agreement only allowed for the billing related to revenue lost of the subsidiary Light SESA
through February 2008. In June 2008, Light SESA wrote off the items related to the
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extraordinary tariff recovery, free energy and its respective provisions, without affecting the
income.
Due to the maturity of term for the RTE billing (Loss of Revenue), the Variation in “Portion
A” items (from 01/01/2001 to 10/25/2001) started to be recovered from March 2008 until the
time necessary for the amount approved by ANEEL has been fully recovered pursuant to
Directive Release nr. 267/04:
R e c o g n i ti o n : T o t a l A m o rt iz e d
R e so l u ti o n s N o . A c c u m u la t e d A c c u m u la t e d V a lu e B a la n c e t o
A S S E T S 4 8 2 /0 2 a n d 0 0 1 /0 4 R e m u n e ra t io n 2 0 0 8 2 0 0 8 A m o rti z e
(1 ) (2 ) ( 3 ) = (1 + 2 ) (4 ) (5 ) = (3 -4 )
P o rt io n A (fr o m 0 1 / 0 1 to 1 0 / 2 5 /2 0 0 1 ) 1 2 5 ,6 9 5 2 4 4 ,1 7 6 3 6 9 ,8 7 1 2 3 7 ,9 6 1 1 3 1 ,9 1 0
b) Memorandum account for Portion “A” Variations (“CVA”)
Records the variations during the period and the annual tariff adjustment based on the Central
Bank overnight rate (“SELIC”) for: purchase of energy; the tariff for transportation of electric
power from Itaipu; the Fuel Usage Quota (“CCC”); the Economic Development Account
(“CDE”); System service charges (“ESS”); the tariff for the use of transmission facilities of the
basic electric network; and compensation for the use of water resources (“CFURH”).
Breakdown of CVA
1 2 /3 1 / 2 0 0 8 1 2 / 3 1 /2 0 0 7 1 2 / 3 1 /2 0 0 8 1 2 /3 1 / 2 0 0 7
B re a k d o w n - C V A
F u e l U sa g e Q u o t a - C C C 1 4 1 ,6 5 0 - 3 1 ,8 7 1 -
T ra n sp o rt a ti o n o f e l e c tr ic p o w e r t o b a s ic e l e c t ric n e t w o r k 4 ,8 3 0 - 2 ,7 5 6 -
E n e rg y D e v e lo p m e n t A c c o u n t - C D E - 1 7 ,4 9 0 - 1 ,8 9 8
A c q u i s i ti o n c o s t o f e le c t ri c it y - 2 8 ,1 0 9 7 5 ,4 1 9 -
S ys te m S e rv ic e C h a r ge s - E S S 7 3 ,1 4 5 3 1 0 1 4 ,2 0 0 -
T ra n sp o rt a ti o n o f e l e c tr ic p o w e r fr o m It a ip u 2 ,6 2 0 - 8 2 5 -
T O T A L - C V A 2 2 2 ,2 4 5 4 5 ,9 0 9 1 2 5 ,0 7 1 1 ,8 9 8
1 2 /3 1 / 2 0 0 8 1 2 / 3 1 /2 0 0 7 1 2 / 3 1 /2 0 0 8 1 2 /3 1 / 2 0 0 7
B re a k d o w n - C V A
F u e l U sa g e Q u o t a - C C C - ( 7 0 ,8 3 6 ) - (5 ,8 7 1 )
E n e rg y D e v e lo p m e n t A c c o u n t - C D E (3 0 ,8 6 3 ) - (1 ,6 6 4 ) -
S ys te m S e rv ic e C h a r ge s - E S S - - - (4 ,0 0 5 )
P R O IN FA (3 ,1 5 0 ) ( 1 6 ) (5 5 ) (1 5 8 )
A c q u i s i ti o n c o s t o f e le c t ri c it y (1 0 9 ,9 3 4 ) - - (5 ,2 3 1 )
T ra n sp o rt a ti o n o f e l e c tr ic p o w e r fr o m It a ip u - ( 1 ,1 4 0 ) - (1 4 5 )
T ra n sp o rt a ti o n o f e l e c tr ic p o w e r t h ro u g h b a s i c e le c t ric n e tw o rk - ( 4 ,6 9 4 ) - (6 ,0 9 2 )
T O T A L - C V A (1 4 3 ,9 4 7 ) ( 7 6 ,6 8 6 ) (1 ,7 1 9 ) (2 1 ,5 0 2 )
C u rr e n t N o n -c u r re n t
C o n so li d a te d
A sse t s
N o n -c u r re n t
C o n so li d a te d
C u rr e n t
L i a b il it ie s
c) Periodic Tariff Review
In 2008, Light SESA undergone its second periodic tariff review, as per Technical Note
339/2008-SRE / ANEEL (see Note 37).
The periodic tariff review is required by law and electric power distribution public utility
concession agreements. Therefore, this is a legal and contractual liability, and ANEEL is liable
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for its implementation, as provided for in paragraph 2 of Article 9 of Law 8,987 of February
13, 1995.
The second periodic tariff review was approved through Normative Resolution nr. 734 of
November 4, 2008, which established temporarily that electricity bills of Light SESA are
adjusted by 4.27%, being 1.96% related to tariff repositioning and 2.30% related to financial
components external to periodic tariff review.
(c1) -PIS and COFINS
Refers to the increase in the respective rates and the effect of changing the calculation of
PIS and COFINS to a noncumulative basis, as prescribed by Laws nr. 10,637/02 and nr.
10,833/03, as amended by Law nr. 10,865/04, that is reflected in the 2007 annual tariff
adjustment of the subsidiary Light SESA in accordance with Normative Resolution 563 of
November 6, 2007, amortized through October 2008.
(c2) - Other regulatory assets/liabilities
Finance costs transferred in the second tariff review of subsidiary Light SESA in
accordance with Normative Resolution nr. 734 of November 4, 2008, as per chart below:
Consolidated Approved Values
12/31/2008 10/31/2008
Other Regulatory Assets
Financial Adjustment TUSD Generating Companies 27,033 32,680
Guarantees at Auction (CCEAR) 113 136
Furnas Connection 174 210
"Luz para Todos" Program 149 181
TOTAL 27,469 33,207
Consolidated Approved Values
12/31/2008 10/31/2008
Other Regulatory Liabilities
Onlending of energy overcontracting, art.38 of Decree 5,163/04) (15,737) (18,956)
Boundary Adjustment (977) (1,182)
TOTAL (16,714) (20,138)
6. CASH AND CASH EQUIVALENTS
1 2 /3 1 / 2 0 0 8 1 2 / 3 1 /2 0 0 7 1 2 /3 1 / 2 0 0 8 1 2 /3 1 / 2 0 0 7
C a sh a v a i la b l e 5 0 1 2 9 4 1 ,0 2 9 8 8 ,8 6 5
T e m p o r a ry c a sh in v e s tm e n ts 4 0 ,2 0 6 2 ,4 0 7 5 4 9 ,0 9 7 4 0 1 ,3 4 6
T o t a l 4 0 ,2 5 6 2 ,5 3 6 5 9 0 ,1 2 6 4 9 0 ,2 1 1
1 2 /3 1 / 2 0 0 8 1 2 / 3 1 /2 0 0 7 1 2 /3 1 / 2 0 0 8 1 2 /3 1 / 2 0 0 7
F i n a n c ia l In v e s t m e n t s : Fe e M a t u ri ty D a t e
O v e r n ig h t (su b s id i a rie s L IR a n d L O I) - D a il y - - 9 9 2 2 9 9
C D B C D I D a il y 4 0 ,2 0 6 2 ,4 0 7 5 4 7 ,9 1 9 3 9 3 ,7 6 9
O t h e r C D I D a il y - - 1 8 6 7 ,2 7 8
T o t a l 4 0 ,2 0 6 2 ,4 0 7 5 4 9 ,0 9 7 4 0 1 ,3 4 6
P a r e n t C o m p a n y C o n so li d a t e d
P a r e n t C o m p a n y C o n so li d a t e d
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7. RECEIVABLES FROM CONSUMERS, CONCESSIONAIRES AND
PERMISSIONAIRIES (CLIENTS)
1 2 / 3 1 /2 0 0 8 1 2 / 3 1 /2 0 0 7
C U R R E N T
B i ll e d S a l e s 1 ,7 2 9 ,8 8 5 1 ,4 4 2 ,6 3 9
U n b i ll e d S a l e s 2 6 0 ,3 6 1 2 7 3 ,1 1 1
D e b t s p a y m e n t b y in s t a ll m e n ts ( a ) 1 4 0 ,8 7 4 1 4 9 ,5 6 0
2 ,1 3 1 ,1 2 0 1 ,8 6 5 ,3 1 0
S a le s w i th i n th e s c o p e o f C C E E ( N o t e 2 9 ) 6 1 3 1 6 ,6 9 1
S u p p ly a n d c h a r ge s re l a te d t o th e u s e o f e l e c tr ic n e t w o r k 5 2 ,4 1 2 4 7 ,1 6 0
T a rif f re c o v e ra b l e c re d i ts ( N o t e 5 ) 6 7 ,9 7 7 4 0 ,8 9 4
F re e E n e rg y - i n d e m n i ty to g e n e r a ti o n c o m p a n i e s ( N o t e 5 ) - 1 6 ,3 5 4
E x tr a o rd i n a ry T a r iff R e c o v e ry -R T E (N o t e 5 ) - 3 7 ,8 6 6
1 2 1 ,0 0 2 1 5 8 ,9 6 5
2 ,2 5 2 ,1 2 2 2 ,0 2 4 ,2 7 5
(-) A l lo w a n c e fo r d o u b tf u l a c c o u n t s (b ) ( 9 0 1 ,2 9 0 ) ( 6 6 7 ,8 9 5 )
(-) A l lo w a n c e fo r d o u b tf u l a c c o u n t s - R T E - (1 1 ,2 7 1 )
1 ,3 5 0 ,8 3 2 1 ,3 4 5 ,1 0 9
N O N -C U R R E N T
D e b t p a y m e n t b y i n s t a ll m e n t s (a ) 2 9 2 ,5 9 4 3 2 6 ,0 6 6
F re e E n e rg y c h a rg e s - P IS /C O F IN S - 2 8 ,3 1 0
(-) P ro v i s io n f o r fr e e e n e rg y - P IS /C O F IN S - (2 8 ,3 1 0 )
F re e E n e rg y - i n d e m n i ty to g e n e r a ti o n c o m p a n i e s - 1 4 6 ,2 0 6
(-) P ro v i s io n f o r fr e e e n e rg y - (1 4 6 ,2 0 6 )
E x tr a o rd i n a ry T a r iff R e c o v e ry - R T E - 2 8 1 ,6 3 4
(-) P ro v i s io n f o r l o sse s i n e x t ra o rd i n a ry ta r iff re c o v e r y -R T E - (2 8 1 ,6 3 4 )
2 9 2 ,5 9 4 3 2 6 ,0 6 6
C o n so li d a te d
a) Debt installments are adjusted to present value, when applicable, pursuant to Law
nr.11,638/07.
b) The allowance for doubtful accounts was set up in amounts deemed sufficient to cover
eventual losses in the realization of credits and it is in accordance with ANEEL’s instructions
summarized below:
Clients with significant debts (large clients):
- Individual analysis of balance receivable from consumers, by consumption class, deemed
unlikely to be received.
In other cases:
- Residential consumers – past due for more than 90 days;
- Commercial consumers – past due for more than 180 days;
- Industrial and rural consumers, public sector, public lighting, public utilities and other – past
due for more than 360 days
Overdue and falling due balances related to electric power billed and renegotiated debts are
distributed as follows:
FEDERAL PUBLIC SERVICE
BRAZILIAN SECURITIES AND EXCHANGE COMMISSION (CVM)
STANDARDIZED FINANCIAL STATEMENTS (DFP)
COMMERCIAL, INDUSTRY AND OTHER TYPES OF COMPANIES
December 31, 2008 Brazilian Corporation Law
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11.01 – NOTES TO THE FINANCIAL STATEMENTS
51
Maturing Overdue Overdue over
date up to 90 days 90 days Total
Residencial 187,010 135,907 758,851 1,081,768
Industrial 27,127 17,671 196,919 241,717
Commercial 130,691 38,719 177,802 347,212
Rural 584 272 531 1,387
Public Sector 27,355 19,330 95,172 141,857
Public Lighting 12,239 2,822 35,967 51,028
Public Utility 274,160 2,544 21,680 298,384
Billed Sales and renegotiated debts (Current and non-current) 659,166 217,265 1,286,922 2,163,353
Maturing Overdue Overdue over
date up to 90 days 90 days Total
Residencial 191,186 130,186 522,208 843,580
Industrial 25,071 18,647 176,576 220,294
Commercial 129,225 38,820 143,758 311,803
Rural 579 315 338 1,232
Public Sector 53,047 33,742 92,861 179,650
Public Lighting 12,517 4,340 31,361 48,218
Public Utility 302,770 10,718 - 313,488
Billed Sales and renegotiated debts (Current and non-current) 714,395 236,768 967,102 1,918,265
12/31/2007
12/31/2008
8. TAXES
FEDERAL PUBLIC SERVICE
BRAZILIAN SECURITIES AND EXCHANGE COMMISSION (CVM)
STANDARDIZED FINANCIAL STATEMENTS (DFP)
COMMERCIAL, INDUSTRY AND OTHER TYPES OF COMPANIES
December 31, 2008 Brazilian Corporation Law
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11.01 – NOTES TO THE FINANCIAL STATEMENTS
52
Reconciliation of effective and nominal income and social contribution taxes rates:
1 2 / 3 1 /2 0 0 8 1 2 /3 1 / 2 0 0 7
E a rn in g s b e fo re i n c o m e a n d s o c ia l c o n tr ib u ti o n s t a x e s ( L A IR ) 1 ,3 0 7 ,5 1 1 5 0 5 ,1 9 8
P ro fi t s h a rin g (3 1 ,5 2 7 ) (3 2 ,8 4 3 )
A d j u s t e d in c o m e b a s i s fo r t a x a t io n 1 ,2 7 5 ,9 8 4 4 7 2 ,3 5 5
C o m b i n e d in c o m e a n d so c i a l c o n t rib u t io n t a x ra t e 3 4 % 3 4 %
In c o m e a n d so c i a l c o n t ri b u ti o n ta x e s a t s t a tu t o ry ra t e s (4 3 3 ,8 3 5 ) (1 6 0 ,6 0 1 )
In c o m e a n d s o c ia l c o n tr ib u t io n t a x e ffe c t o n p e rm a n e n t a d d iti o n s a n d e x c lu s i o n s 2 9 ,0 3 7 (7 ,3 6 0 )
In c o m e a n d s o c ia l c o n tr ib u t io n t a x e ffe c t o n e q u i ty in t h e e a rn in g s o f su b s i d ia r ie s 1 8 2 ,9 6 1 (3 9 ,9 8 6 )
D i ffe r e n c e b e tw e e n b a s i s o f c a l c u l a ti o n - in c o m e a n d so c i a l c o n t ri b u ti o n ta x e s 5 9 (2 ,4 1 2 )
In c o m e f ro m o f fsh o r e c o m p a n i e s - 2 0 0 8 (8 1 ,1 5 8 ) (6 1 ,4 5 7 )
T a x lo s s c a rry fo r w a rd – 3 0 % - n o t re c o g n iz e d in i n c o m e (4 9 0 ) 3 5 3
B a d d e b t lo s se s - 2 3 ,8 0 0
R e c o gn iti o n o f d e f e rre d a s se ts - 8 5 1 ,2 5 0
P ro v i s io n f o r in c o m e ta x lo ss - a d d i tio n a l p a y m e n t o f s t a te i n c o m e t a x - (4 ,1 6 2 )
T a x In c e n ti v e s 1 ,8 9 5 2 ,5 5 0
In c o m e a n d so c i a l c o n t ri b u ti o n ta x e s in i n c o m e (3 0 1 ,5 3 1 ) 6 0 1 ,9 7 5
C u rre n t IR P J a n d C S L L i n in c o m e (1 6 1 ,4 1 0 ) (2 5 0 ,2 4 6 )
D e f e rre d IR P J a n d C S L L i n in c o m e (1 4 0 ,1 2 1 ) 8 5 2 ,2 2 1
(3 0 1 ,5 3 1 ) 6 0 1 ,9 7 5
C o n so l id a t e d
a) Refers to tax credits arising from refunds from temporary cash investments and government
agencies. The variation of the amounts results of the monthly adjustment based on the
SELIC rate in the amount of R$14,064, new credits in the amount of R$69,100 and
compensations in the amount of R$33,686.
b) From 2007, having met all conditions set forth by the CVM Instruction 371/02, Light SESA
began to recognize deferred tax assets over temporary differences, and also reversed portion
of the provision for recovery of tax credits.
Identifying these deferred tax credits, Light SESA restated, already taking into account
realizations up to December 2008, technical feasibility studies approved by the Board of
Directors and evaluated by the Fiscal Council, based on the projections prepared in
December 2008, which indicated recovery within 11 years. The deferred tax assets include
amounts expected to be recoverable within 10 years, as set forth in refered CVM Instruction
and in the assumption of not being barred by law according to Income Tax Regulation. This
study was based on future taxable income expectations. The table below presents the
deferred tax assets installments by year of realization:
2 0 0 9 2 7 0 ,4 9 3
2 0 1 0 2 7 2 ,3 1 0
2 0 1 1 2 5 4 ,0 7 1
2 0 1 2 1 7 4 ,2 1 4
2 0 1 3 1 7 8 ,6 8 8
2 0 1 4 t o 2 0 1 6 1 0 1 ,6 8 0
2 0 1 7 t o 2 0 1 9 1 7 4 ,2 5 8
1 ,4 2 5 ,7 1 4
(-) P ro v is io n fo r n o n -re c o v e ry (1 1 8 ,4 6 2 )
T o t a l – L ig h t S A 1 ,3 0 7 ,2 5 2
FEDERAL PUBLIC SERVICE
BRAZILIAN SECURITIES AND EXCHANGE COMMISSION (CVM)
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53
Deferred taxes have been established based on the assumption of future realization, taking
into account:
i. Income tax loss carryforward and negative social contribution basis– these shall be
carried forward indefinitely, but realization is limited to 30% of net income for each future
fiscal year.
ii. Temporary differences – these will be realized upon the payment or reversal of the
provisions and/or the actual loss of doubtful accounts (PCLD).
Income tax and social contribution deferred tax assets result from income tax loss carryforward
and negative social Contribution basis and revenues/expenses (temporarily non-deductible
provisions) recognized in income, which will be added to/deducted from taxable income and
the social contribution tax basis in subsequent periods. Deferred tax assets are as follows:
12/31/2008 12/31/2007
ASSETS AND LIABILITIES - CURRENT AND NON-CURRENT
Tax loss carryforward and social contribution negative basis 770,681 808,588
Allowance for doubtful accounts 300,922 301,359
Provision for profit sharing 11,288 9,897
Provision for labor contingencies 56,007 55,148
Provision for tax contingencies 136,060 261,419
Provision for civil contingencies 94,932 89,732
Impacts resulting from the adoption of Law No 11, 638/07 19,967 -
Other provisions 31,592 35,385
1,421,449 1,561,528
(-) Provision for non-recovery (118,462) (118,462)
Total - Light SESA 1,302,987 1,443,066
Tax loss carryforward and social contribution negative basis - Light Energia and Light Esco 4,265 839
Total - Consolidated 1,307,252 1,443,905
Consolidated
c) Tax Debt Refinancing Program – PAES (REFIS II) – Law nr. 10,684 of May 31, 2003
introduced the Tax Debt Refinancing Program (PAES), designed to settle debts owed by
legal entities to the Federal Government related to taxes administered by the Internal
Revenue Service, National Treasury Attorney General, and National Institute of Social
Security (“INSS”). The deadline for opting for the installment plan was July 31, 2003 but
was subsequently extended to August 29, 2003.
The balance related to PIS and COFINS as of December 31, 2008 is R$12,156 (R$18,745
on December 31, 2007).
Light SESA filed its application for PAES (60.213.452-8) with the INSS on July 31, 2003.
The debt included in PAES was R$59,975 (net of a 50% fine reduction), which was under
judicial dispute while the subsidiary was seeking recovery of the amounts paid for
occupational accident insurance. The consolidated debt amount has already been ratified by
the INSS and payment is to be made in 120 monthly installments. As of December 31,
2008, the subsidiary has paid 66 installments. The installments were calculated based on the
total debt divided by the number of installments, subject to the “TJLP” (long-term interest
rate). The balance as of December 31, 2008 is R$37,223 (R$43,531 on December 31, 2007).
FEDERAL PUBLIC SERVICE
BRAZILIAN SECURITIES AND EXCHANGE COMMISSION (CVM)
STANDARDIZED FINANCIAL STATEMENTS (DFP)
COMMERCIAL, INDUSTRY AND OTHER TYPES OF COMPANIES
December 31, 2008 Brazilian Corporation Law
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54
d) On February 20, 2003, Light SESA filed Writ of Mandamus 2003.51.01.005514-8
requesting an injunction that would release it from the payment of levied income and social
contribution taxes on:
(i) Profits earned by the companies LIR Energy Limited (LIR) and Light Overseas
Investment Limited (LOI) before they are effectively available, in which case sole
paragraph, Article 74 of Provisional Measure 2,158-35, of August 24, 2001 (MP 2,158-
35), for the periods from 1996 to 2001, shall not apply;
(ii) Profits earned by the companies LIR and LOI before they are effectively available, in
which case Article 74, caput, of Provisional Measure 2,158-35/01, for calendar year
2002 and following years shall not apply;
The injunction was granted to Light SESA but was subsequently dismissed in the decision.
The appeal resulted in the suspension of the tax levies and allowed the case to be remanded.
The Federal Government filed an interlocutory appeal against this decision, which was
accepted. Light filed an internal interlocutory appeal, which had a favorable decision in
March 2007, re-establishing the suspension of the tax levies. The Federal Government filed
a special appeal against such decision, which is pending judgment.
Subject to the decision on writ of mandamus 2003.51.01.005514-8, which suspended the
collection of income and social contribution taxes, the Company is currently awaiting
decision by the Regional Federal Court - 2nd
Region on the appeal filed by the Ministry of
Finance.
Based on this court decision, Light SESA suspended the payment of income and social
contribution taxes on taxable income related to the profits earned by companies located
abroad for the years 2004, 2005, 2006, 2007 and 2008.The provision as of December 31,
2008 is R$286,337 (R$256,742 on December 31, 2007).
As part of the dissolution process of LOI, concluded in 2008, as per ANEEL’s resolution,
the investee settled all its Assets and Liabilities and distributed dividends in the total
amount of U$105,976, corresponding to R$176,400, R$130,836 of which in March 2008
and R$45,564 in April 2008. The distribution of dividends is characterized as profits
available for the purposes of income tax and social contribution taxation in Light SESA,
whose amount calculated and paid accounted for R$31,139 in March 2008 and R$10,844 in
April 2008.
e) The amount of the state VAT (“ICMS”) recovery on December 31, 2008 includes R$72,011
(R$109,283 on December 31, 2007) of credits deriving from the renegotiations of the
CEDAE debt in July and December 2006.
f) Refers to the tax credits to offset derived from the adjustment of PIS and COFINS
calculation bases in the period from February 2004 through April 2008, due to the use of
some segment charges, such as calculation basis deduction from these taxes. In relation to
the period from November 2005 through April 2008, the amount related to credits assessed
is being transferred to consumers. Thus, the amount of R$46,893 is recorded in other debits
(see Note 19).
FEDERAL PUBLIC SERVICE
BRAZILIAN SECURITIES AND EXCHANGE COMMISSION (CVM)
STANDARDIZED FINANCIAL STATEMENTS (DFP)
COMMERCIAL, INDUSTRY AND OTHER TYPES OF COMPANIES
December 31, 2008 Brazilian Corporation Law
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11.01 – NOTES TO THE FINANCIAL STATEMENTS
55
9. PREPAID EXPENSES
1 2 /3 1 / 2 0 0 8 1 2 /3 1 / 2 0 0 7 1 2 / 3 1 /2 0 0 8 1 2 / 3 1 /2 0 0 7
C U R R E N T
C V A (N o t e 5 ) - - 2 2 2 ,2 4 5 4 5 ,9 0 9
P IS a n d C O F IN S ( ta x e s o n re v e n u e s) – IR T (N o te 5 ) - - - 6 ,0 7 9
F in a n c i a l C o m p o n e n ts – IR T (N o te 5 ) - - 2 7 ,4 6 9 1 8 ,3 7 3
O v e r a ll A g re e m e n t f o r E le c t ri c P o w e r S e c to r – P o r ti o n "A " (N o te 5 ) - - 1 3 1 ,9 1 0 2 0 3 ,2 7 9
S w a p p r e m i u m - - - 5 4 4
O t h e r 1 3 5 1 7 1 1 ,6 6 7 1 ,4 3 4
T o t a l 1 3 5 1 7 1 3 8 3 ,2 9 1 2 7 5 ,6 1 8
N O N -C U R R E N T
C V A - (N o te 5 ) - - 1 2 5 ,0 7 1 1 ,8 9 8
O v e r a ll A g re e m e n t f o r E le c t ri c P o w e r S e c to r – P o r ti o n "A " (N o te 5 ) - - - 1 3 6 ,0 9 0
E x p e n se s r e la t e d to t h e is su e o f d e b e n t u re s ( a ) - - - 1 3 ,2 9 2
O t h e r - - 4 ,3 6 4 7 ,7 5 0
T o t a l - - 1 2 9 ,4 3 5 1 5 9 ,0 3 0
P a re n t C o m p a n y C o n s o li d a te d
(a) Pursuant to CPC 08 – Transactions costs and premium on the issue of securities, approved
on November 12, 2008 by CVM Resolution nr. 556/08, costs of these transactions should be
reclassified to a specific account, according to the nature of operation. Thus, the Company
reclassified this balance to the write-down account of debentures.
10. OTHER RECEIVABLES
1 2 / 3 1 /2 0 0 8 1 2 / 3 1 /2 0 0 7 1 2 /3 1 / 2 0 0 8 1 2 /3 1 / 2 0 0 7
C U R R E N T
L o w -i n c o m e c o n su m e rs - - 1 ,0 4 5 1 ,1 2 8
A d v a n c e s to s u p p lie rs a n d e m p lo y e e s 3 0 1 5 1 1 ,8 3 5 7 ,6 7 7
E m p l o ye e s t e m p o r a ri ly tra n s fe rr e d to o t h e r c o m p a n ie s - - - 1 ,3 2 4
P u b li c li g h ti n g f e e - - 2 5 ,7 4 0 2 0 ,1 7 7
P ro p e rt y r e n ta l - - 1 1 3 2 ,1 3 9
S u b s i d y t o lo w -in c o m e se g m e n t (c ) - - 4 9 ,9 2 6 -
E x p e n d it u re s t o re fu n d - - 1 3 ,3 6 0 -
O t h e r 1 3 7 1 5 1 5 ,8 6 0 3 ,6 3 6
T o ta l 1 6 7 1 6 6 1 0 7 ,8 7 9 3 6 ,0 8 1
N O N -C U R R E N T
P IS a n d C O F IN S r e c o v e ra b l e (a ) - - - 8 4 ,2 7 1
P ro v i s io n f o r C V A (b ) - - 1 3 ,3 2 9 6 2 5
A s se ts a n d rig h t s fo r d isp o s a l - - 1 1 ,5 9 7 1 1 ,5 9 7
O t h e r - - 1 ,4 9 4 6 9 5
T o ta l - - 2 6 ,4 2 0 9 7 ,1 8 8
P a r e n t C o m p a n y C o n so l id a te d
a) Refers to tax credits reviewing the determination of PIS/COFINS over sector charges,
which were transferred in the second quarter of 2008 to “recoverable taxes” (see Note 8-f).
b) Refers to amounts determined in current month which will be transferred to the Regulatory
Asset upon effective cash outlay.
c) Refers to credits from low-income subsidies which have not yet been authorized by
ANEEL.
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December 31, 2008 Brazilian Corporation Law
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56
11. INVESTMENTS
1 2 /3 1 / 2 0 0 8 1 2 / 3 1 /2 0 0 7 1 2 / 3 1 /2 0 0 8 1 2 /3 1 / 2 0 0 7
A c c o u n t e d fo r u n d e r th e e q u it y m e th o d :
L i g h t S E S A 2 ,5 9 8 ,5 4 1 2 ,5 2 2 ,6 1 2 - -
L i g h t E n e rg i a S .A . 1 4 3 ,0 5 4 1 2 7 ,0 8 0 - -
L i g h t E sc o P re s ta ç ã o d e S e r v iç o s L td a 1 7 ,0 4 2 1 1 ,3 4 7 - -
L i g h tg e r L td a ( a ) 3 ,2 8 9 3 ,2 8 9 - -
L i g h th i d ro L t d a (a ) 5 0 5 0 - -
Ita o c a r a E n e rg ia ( a ) 8 4 9 8 4 9 - -
S u b t o ta l 2 ,7 6 2 ,8 2 5 2 ,6 6 5 ,2 2 7 - -
A c c o u n t e d fo r a t c o s t (a d j u s te d u p to D e c e m b e r 3 1 , 1 9 9 5 , w h e n a p p l ic a b l e ) - - 3 ,7 9 6 3 ,7 9 6
L e a s e d A ss e ts - - 7 ,0 9 7 8 ,0 9 9
O t h e r 1 ,5 3 3 1 ,1 6 7 2 ,7 2 2 1 ,2 6 2
S u b - T o t a l 1 ,5 3 3 1 ,1 6 7 1 3 ,6 1 5 1 3 ,1 5 7
T o t a l 2 ,7 6 4 ,3 5 8 2 ,6 6 6 ,3 9 4 1 3 ,6 1 5 1 3 ,1 5 7
Pa re n t C o m p a n y C o n so l id a t e d
(a) Pre-operating companies
INFORMATION ON SUBSIDIARIES
CHANGES IN INVESTMENTS IN SUBSIDIARIES AND ASSOCIATED COMPANIES
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11.01 – NOTES TO THE FINANCIAL STATEMENTS
57
12. PROPERTY, PLANT AND EQUIPMENT
1 2 /3 1 / 2 0 0 7
P r o p e rty , P la n t a n d E q u ip m e n t
A c ti v ity H is t o ri c a l C o s t
A c c u m u la t e d
D e p re c i a ti o n N e t V a l u e
N e t V a l u e
(R e c la ss ifi e d )
G e n e ra t io n 9 4 9 ,1 0 7 ( 4 2 8 ,4 0 6 ) 5 2 0 ,7 0 1 5 3 6 ,3 6 5
T ra n s m i ss i o n 1 7 ,2 9 9 ( 7 ,9 3 6 ) 9 ,3 6 3 9 ,6 9 9
D is tri b u ti o n 6 ,0 2 4 ,5 2 0 ( 2 ,8 9 5 ,6 2 9 ) 3 ,1 2 8 ,8 9 1 2 ,8 7 6 ,4 4 2
A d m i n is tra t io n 2 5 6 ,4 1 6 ( 1 5 3 ,0 5 8 ) 1 0 3 ,3 5 8 1 4 0 ,3 4 5
S a l e s 3 6 ,1 3 5 ( 2 1 ,2 1 5 ) 1 4 ,9 2 0 6 3 ,3 0 4
In S e r v ic e 7 ,2 8 3 ,4 7 7 ( 3 ,5 0 6 ,2 4 4 ) 3 ,7 7 7 ,2 3 3 3 ,6 2 6 ,1 5 5
G e n e ra t io n 6 4 ,5 6 1 - 6 4 ,5 6 1 3 1 ,1 2 0
D is tri b u ti o n 3 2 8 ,7 8 4 - 3 2 8 ,7 8 4 2 4 9 ,6 8 9
A d m i n is tra t io n 4 4 ,4 5 1 - 4 4 ,4 5 1 3 0 ,0 2 7
S a l e s 1 ,6 3 1 - 1 ,6 3 1 5 ,1 7 0
In P r o gr e ss 4 3 9 ,4 2 7 - 4 3 9 ,4 2 7 3 1 6 ,0 0 6
T o t a l P ro p e r ty , P la n t a n d E q u ip m e n t 7 ,7 2 2 ,9 0 4 ( 3 ,5 0 6 ,2 4 4 ) 4 ,2 1 6 ,6 6 0 3 ,9 4 2 ,1 6 1
S p e c i a l o b l ig a t io n s li n k e d to c o n c e s s io n ( a ) (1 5 8 ,3 3 6 ) 1 ,0 3 4 (1 5 7 ,3 0 2 ) (1 7 0 ,1 0 7 )
T o t a l P ro p e r ty , P la n t a n d E q u ip m e n t, n e t 7 ,5 6 4 ,5 6 8 ( 3 ,5 0 5 ,2 1 0 ) 4 ,0 5 9 ,3 5 8 3 ,7 7 2 ,0 5 4
C o n so li d a te d
1 2 / 3 1 /2 0 0 8
a) The balance of special obligations derives from the consumer’s financial income,
appropriation of the Federal Government and federal, state and municipal funds to finance
the work necessary to meet the electric power demand.
C o n so li d a te d
1 2 / 3 1 /2 0 0 8 1 2 /3 1 / 2 0 0 7
C o n su m e r c o n tri b u ti o n 1 0 9 ,0 3 5 1 2 3 ,4 8 4
C o n su m e r c o n tri b u ti o n d e p re c i a ti o n (7 0 2 ) -
D o n a t io n s /su b s id i e s fo r i n v e s t m e n t s 3 7 ,6 3 9 3 7 ,4 7 8
D e p r e c ia t io n o f d o n a ti o n s /s u b s id i e s fo r in v e s tm e n ts (2 5 3 ) -
R e se a rc h a n d D e v e lo p m e n t 1 1 ,6 6 2 9 ,1 4 5
D e p r e c ia t io n o f re se a r c h a n d d e v e lo p m e n t (7 9 ) -
T o t a l 1 5 7 ,3 0 2 1 7 0 ,1 0 7
The maturity of these special obligations is established by the Regulatory Agency, ANEEL,
and will occur at the end of the concession period, through a reduction in the residual value of
property, plant and equipment for the purposes of determining the indemnity to be paid by the
Granting Power to the concessionaire.
In accordance with Articles 63 and 64 of Decree 41,019 of February 26, 1957, assets and
facilities used in the generation, transmission, distribution and sale of electric power are linked
to these services and cannot be removed, sold, assigned or pledged as mortgage guarantees
without the prior and express authorization of the regulatory agency. ANEEL Resolution
nr.20/99 regulates the removal of restrictions of electric power public utility concession assets,
requiring previous approval to selling an asset tied to the concession, and requires that the
proceeds from the sale be deposited in a restricted bank account, and invested in the
concession.
ANEEL Regulatory Resolution nr.234 of October 31, 2006, established the general concepts,
methodologies and initial procedures to carry out the second cycle of periodic tariff review, the
subsidiary Light SESA has undergone in November 2008 and determines that special
FEDERAL PUBLIC SERVICE
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December 31, 2008 Brazilian Corporation Law
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11.01 – NOTES TO THE FINANCIAL STATEMENTS
58
obligations shall be amortized at same depreciation rates, using an average rate from tariff
review. Thus, amortization average rate of special obligations is 3.5% and was determined
taking into account distribution registration units.
Change in property, plant and equipment:
B a la n c e s o n B a l a n c e s o n
1 2 / 3 1 /2 0 0 7 A d d it io n s W r it e -o ff s S e rv i c e O t h e r 1 2 /3 1 / 2 0 0 8
A S S E T S U N D E R S E R V IC E
C o st
G e n e ra t io n 9 4 2 ,0 4 4 8 ,6 6 3 (1 ,6 0 0 ) - - 9 4 9 ,1 0 7
T ra n s m i ss i o n 1 7 ,2 9 9 - - - - 1 7 ,2 9 9
D is tri b u ti o n 5 ,4 2 6 ,4 5 8 4 3 6 ,0 5 4 (7 4 ,7 7 4 ) - 2 3 6 ,7 8 2 6 ,0 2 4 ,5 2 0
S a l e s 2 3 0 ,0 3 1 7 6 1 (2 ,1 8 1 ) - (1 9 2 ,4 7 6 ) 3 6 ,1 3 5
A d m i n is tra t io n 2 9 9 ,5 3 4 6 ,0 1 4 (3 ,8 9 2 ) - (4 5 ,2 4 0 ) 2 5 6 ,4 1 6
T o t a l a ss e ts u n d e r se rv i c e 6 ,9 1 5 ,3 6 6 4 5 1 ,4 9 2 (8 2 ,4 4 7 ) - (9 3 4 ) 7 ,2 8 3 ,4 7 7
( -) D e p re c i a ti o n
G e n e ra t io n (4 0 5 ,6 7 9 ) ( 1 7 ,8 6 4 ) 1 ,1 2 5 - (5 ,9 8 8 ) (4 2 8 ,4 0 6 )
T ra n s m i ss i o n (7 ,6 0 0 ) ( 3 3 5 ) - - - (7 ,9 3 5 )
D is tri b u ti o n (2 ,5 5 0 ,0 1 6 ) ( 2 3 2 ,4 1 2 ) 4 8 ,3 2 1 - (1 6 1 ,5 2 2 ) (2 ,8 9 5 ,6 2 9 )
S a l e s (1 6 6 ,7 2 7 ) ( 7 ,7 0 1 ) 2 ,1 5 1 - 1 5 1 ,0 6 3 (2 1 ,2 1 4 )
A d m i n is tra t io n (1 5 9 ,1 8 9 ) ( 1 2 ,9 5 7 ) 2 ,2 4 6 - 1 6 ,8 4 0 (1 5 3 ,0 6 0 )
T o t a l a ss e ts u n d e r se rv i c e - d e p r e c ia t io n (3 ,2 8 9 ,2 1 1 ) ( 2 7 1 ,2 6 9 ) 5 3 ,8 4 3 - 3 9 3 (3 ,5 0 6 ,2 4 4 )
C O N S T R U C T IO N IN P R O G R E S S
G e n e ra t io n 3 1 ,1 2 0 4 2 ,2 6 2 - (7 ,8 3 7 ) (9 8 4 ) 6 4 ,5 6 1
T ra n s m i ss i o n - - - - - -
D is tri b u ti o n 2 4 9 ,6 8 9 6 5 8 ,1 9 6 (1 ,9 2 4 ) (4 2 6 ,1 4 8 ) (1 5 1 ,0 2 9 ) 3 2 8 ,7 8 4
S a l e s 5 ,1 7 0 1 ,1 4 6 - (4 ,6 8 5 ) - 1 ,6 3 1
A d m i n is tra t io n 3 0 ,0 2 7 2 7 ,5 9 6 - (1 3 ,1 7 2 ) - 4 4 ,4 5 1
T o t a l c o n s t ru c t io n i n p ro g re s s 3 1 6 ,0 0 6 7 2 9 ,2 0 0 (1 ,9 2 4 ) (4 5 1 ,8 4 2 ) (1 5 2 ,0 1 3 ) 4 3 9 ,4 2 7
T O T A L P R O P E R T Y , P L A N T A N D E Q U IP M E N T 3 ,9 4 2 ,1 6 1 9 0 9 ,4 2 3 (3 0 ,5 2 8 ) (4 5 1 ,8 4 2 ) (1 5 2 ,5 5 4 ) 4 ,2 1 6 ,6 6 0
C o n so li d a te d
T ra n sfe r b e t w e e n a c c o u n ts
i) There are no assets or rights belonging to the Federal Government in use at the subsidiary
Light SESA.
ii) Construction in progress includes inventories of materials for projects totaling R$53,463 as
of December 31, 2008 (R$35,200 on December 31, 2007) and a provision for inventory loss of
R$1,488 (R$2,710 on December 31, 2007).
iii) Annual depreciation rates
Main depreciation rates, according to ANEEL Resolution nr.240 of December 5, 2006 are
the following:
G e n e ra t i on ( % ) D i s t ri b u t i on (% ) S a le s ( % ) A d m i n i s t ra t io n ( % ) T ra n sm i s s io n ( % )
B u s 2 . 5 C a p a c i to rs b a nk 6 .7 B u il d in gs 4 . 0 B u i l d i n gs 4 .0 S y s t e m c o nd u ct o r 2 .5
D isc o n ne c t o r 3 . 0 D i s t ri b u t i on k e ys 6 .7 G e ne r al eq u ip m e n t 1 0 . 0 G e n e ra l e q u i p m e nt 1 0 .0 G e ne r al eq u ip m e n t 1 0 .0
B u il d in gs 4 . 0 S ys te m co n d uc t or 5 .0 V e h i c le s 2 0 . 0 V e h ic l e s 2 0 .0 S y s t e m s t ru c tu r e 2 .5
I n t a ke eq u ip m e n t 3 . 7 D i sc o nn e c to r 3 .0 C o nn e c to rs 4 .3
I n t a ke s tr uc t u re 4 . 0 B u i l d i ng s 4 .0
G e ne r at o r 3 . 3 S ys te m s tr uc t u re 5 .0
E n gi n e g r o up – g e ne r a to r 5 . 9 M e t e r 4 .0
R e se rv o ir s , da m s a nd w a te r m a i ns 2 . 0 V o l ta g e r e gu la t o r 4 .8
L o c a l c om m un ic a t i on sy s t em 6. 7 C o n ne c t o r 4 .3
H yd ra u li c t u rb i ne 2 . 5 T ra n s fo r m e r 5 .0
A v e ra g e d e p re c i a ti o n ra t e A v e ra g e d ep r e c ia t i on r a te A v e ra g e d e p re c i a ti o n ra t e A v e ra g e d e pr e c ia t i on r a te A ve ra g e d e p re c i a ti o n ra t e
G e ne r at i o n 3 . 8 D i s t ri b u t i on 4 .9 S a l e s 1 1 . 3 A d m i n i s t ra t io n 1 1 .3 T r a nsm is s io n 4 .8
FEDERAL PUBLIC SERVICE
BRAZILIAN SECURITIES AND EXCHANGE COMMISSION (CVM)
STANDARDIZED FINANCIAL STATEMENTS (DFP)
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01987-9 LIGHT S.A. 03.378.521/0001-75
11.01 – NOTES TO THE FINANCIAL STATEMENTS
59
iv) Universalization of electric power public utility.
Pursuant to Decree nr.4,873 of November 11, 2003, the National Program for Universalization
of Electric Power Access and Use of Electric Power was created with a view to providing
electricity in rural areas – the Program called “Luz para Todos” (Light for All), free of charge
to clients. This decree defined the allocation of sector funds (CDE and RGR) and States to
finance the universalization in rural areas and until 2008 provide electricity to the Brazilian
rural population which still does not have access to this type of public utility.
New 1,001(*)
consumers were connected with total cost estimated at R$10.380. In September
2007, Light SESA concluded all the installations expected for this program. Even after the
achievement of universalization targets submitted to ANEEL, Light SESA continued
connecting households, whose characteristics fit into the Universalization Program.
To execute this program, Eletrobras authorized R$1,200 and Light SESA participated with the
amount of R$8,836.
(*) Unaudited information
13. INTANGIBLE ASSETS
1 2 /3 1 / 2 0 0 7
IN T A N G IB L E A S S E T S
A C T IV IT Y H i sto r i c a l C o st
A c c u m u la t e d
A m o r tiz a t io n N e t V a lu e N e t V a l u e
I n ta n g ib l e A s se ts
D i s t rib u t io n 1 8 2 ,5 6 5 (1 5 6 ,6 1 2 ) 2 5 ,9 5 3 3 1 ,4 4 0
G e n e r a ti o n 5 ,7 9 9 (5 ,6 3 6 ) 1 6 3 5 7 3
A d m in i s t ra ti o n 6 3 ,7 5 0 (5 1 ,1 7 1 ) 1 2 ,5 7 9 1 4 ,3 6 8
S a le s 1 6 3 ,4 9 6 (8 7 ,5 5 6 ) 7 5 ,9 4 0 8 8 ,2 8 6
I n S e r v ic e 4 1 5 ,6 1 0 (3 0 0 ,9 7 5 ) 1 1 4 ,6 3 5 1 3 4 ,6 6 7
D i s t rib u t io n 1 3 ,0 9 1 - 1 3 ,0 9 1 8 ,9 3 2
G e n e r a ti o n 1 1 7 ,6 5 8 - 1 1 7 ,6 5 8 1 0 2 ,8 1 3
A d m in i s t ra ti o n 3 5 ,1 4 6 - 3 5 ,1 4 6 2 4 ,6 7 8
S a le s 4 2 8 - 4 2 8 -
I n P r o g r e s s 1 6 6 ,3 2 3 - 1 6 6 ,3 2 3 1 3 6 ,4 2 3
T o ta l In ta n g i b le A sse t s , n e t 5 8 1 ,9 3 3 (3 0 0 ,9 7 5 ) 2 8 0 ,9 5 8 2 7 1 ,0 9 0
1 2 /3 1 / 2 0 0 8
C o n s o li d a te d
Grupo Light classifies Softwares as intangible assets, which are amortized at a rate of 20% p.a.,
and Right-of-Ways, which are not amortized, as represent the right to use certain areas of land,
usually associated with a Transmission and Distribution Line.
FEDERAL PUBLIC SERVICE
BRAZILIAN SECURITIES AND EXCHANGE COMMISSION (CVM)
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COMMERCIAL, INDUSTRY AND OTHER TYPES OF COMPANIES
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01987-9 LIGHT S.A. 03.378.521/0001-75
11.01 – NOTES TO THE FINANCIAL STATEMENTS
60
14. SUPPLIERS
15. LOANS, FINANCING AND FINANCIAL CHARGES
Date of
Financing Entity Signature Current Non-current Current Non-current PRPayment
Beginning End
TN - Par Bond 4/29/1996 - 90,955 1,175 - US$ 6.0000% 1 Sole 2024 2024
TN - Collateral - Par Bond 4/29/1996 - (43,507) - - US$ U$ Treasury 1 Sole 2024 2024
TN - Discount Bond 4/29/1996 - 63,465 511 - US$ Libor + 13/16 1 Sole 2024 2024
TN - Collateral - Discount Bond 4/29/1996 - (30,519) - - US$ U$ Treasury 1 Sole 2024 2024
TN - Flirb 4/29/1996 1,159 - 9 - US$ Libor + 13/16 5 Semiannually 2003 2009
TN - C. Bond 4/29/1996 7,731 34,790 726 - US$ 8.0000% 15 Semiannually 2004 2014
TN - Debit. Conv. 4/29/1996 8,660 21,650 248 - US$ Libor + 7/8 11 Semiannually 2004 2012
TN - New Money 4/29/1996 1,142 - 9 - US$ Libor + 7/8 5 Semiannually 2001 2009
TN - Bib 4/26/1996 281 1,124 26 - US$ 6.0000% 13 Semiannually 1999 2013
BNDES - Imports 3/27/1998 1,791 597 9 - Umbndes BNDES Basket + 4% 37 Monthly 2000 2010
Societe Generale II 7/20/2000 4,399 - 10 - US$ Libor + 0.65% 6 Semiannually 2003 2009
KFW III , IV and V - Tranche A/B/C 11/3/2000 2,048 1,932 1 - US$ Libor + 0.65% 8 Semiannually 2003 2010
Foreign Currency 27,211 140,487 2,724 -
Eletrobrás Several 7,698 3,105 249 - Ufir 5.0000% from 2 to 120Monthly and
Quarterly
2013 to
2017
CCB Bradesco 10/18/2007 - 450,000 14,014 - Cdi CDI + 0.85% 10 Annual 2012 2017
BNDES - FINEM 11/5/2007 58,797 372,382 1,883 - Tjlp TJLP + 4.3% 66 Monthly 2009 2014
Working Capital - ABN Amro 8/27/2008 - 80,000 3,919 - Cdi CDI + 0.95% 4 Semiannually 2009 2010
BNDES - PROESCO 12/12/2008 20 576 - - Tjlp TJLP + 2.5% 60 Monthly 2009 2014
Sundry banking warranties - - 284 -
Domestic Currency 66,515 906,063 20,349 -
Overall Total 93,726 1,046,550 23,073 -
Consolidated
Interest Rate p.a.
Reference Date 12/31/2008
Principal Charges
12/31/2008
Currency/ Index
Date of
Financing Entity Signature Current Non-current Current Non-current PR Payment Beginning End
TN - Par Bond 4/29/1996 - 68,938 890 - US$ 6.0000% 1 Sole 2024 2024
TN - Collateral - Par Bond 4/29/1996 - (28,854) - - US$ U$ Treasury 1 Sole 2024 2024
TN - Discount Bond 4/29/1996 - 48,103 657 - US$ Libor + 13/16 1 Sole 2024 2024
TN - Collateral - Discount Bond 4/29/1996 - (20,269) - - US$ U$ Treasury 1 Sole 2024 2024
TN - Flirb 4/29/1996 1,757 878 36 - US$ Libor + 13/16 5 Semiannually 2003 2009
TN - C. Bond 4/29/1996 5,609 29,845 606 - US$ 8.0000% 15 Semiannually 2004 2014
TN - Debit. Conv. 4/29/1996 6,563 22,972 407 - US$ Libor + 7/8 11 Semiannually 2004 2012
TN - New Money 4/29/1996 1,731 865 36 - US$ Libor + 7/8 5 Semiannually 2001 2009
TN - Bib 4/26/1996 213 1,065 24 - US$ 6.0000% 13 Semiannually 1999 2013
BNDES - Imports 3/27/1998 1,338 1,784 13 - Umbndes Cesta BNDES + 4% 37 Monthly 2000 2010
KFW 1 - Tranche A 8/12/1999 295 - 7 - US$ Libor + 0.6% 2 Semiannually 2000 2008
Societe Generale II 7/20/2000 3,334 3,335 23 - US$ Libor + 0.65% 6 Semiannually 2003 2009
KFW III , IV and V - Tranche A/B/C 11/3/2000 1,552 3,018 2 - US$ Libor + 0.65% 8 Semiannually 2003 2010
Foreign Currency 22,392 131,680 2,701 -
Eletrobrás Several 4,972 7,135 295 - Ufir 5.0000%from 2 to 120
Monthly and
Quarterly
2013 to
2017
CCB Bradesco 10/18/2007 - 450,000 10,649 - Cdi CDI + 0.85% 10 Annual 2012 2017
BNDES - FINEM 11/5/2007 - 242,567 926 - Tjlp TJLP + 4.3% 66 Monthly 2009 2014
Domestic Currency 4,972 699,702 11,870 -
SWAP - - 8,566 1,564
Overall Total 27,364 831,382 23,137 1,564
Consolidated
12/31/2007
Currency/ Index Interest Rate p.a.
Reference Date 12/31/2007
Principal Charges
Loans are guaranteed by collateral in the amount of R$30,940, guarantee of Light S.A. and
receivables in the approximate amount of R$57,988.
FEDERAL PUBLIC SERVICE
BRAZILIAN SECURITIES AND EXCHANGE COMMISSION (CVM)
STANDARDIZED FINANCIAL STATEMENTS (DFP)
COMMERCIAL, INDUSTRY AND OTHER TYPES OF COMPANIES
December 31, 2008 Brazilian Corporation Law
01987-9 LIGHT S.A. 03.378.521/0001-75
11.01 – NOTES TO THE FINANCIAL STATEMENTS
61
The principal of long-term loans and financing matures as follows (excluding financial
charges):
Local Currency Foreign Currency Total Local Currency Foreign Currency Total
2008 - - - 4,972 22,392 27,364
2009 66,515 27,211 93,726 - - -
Total (current) 66,515 27,211 93,726 4,972 22,392 27,364
2009 - - - 37,174 20,354 57,528
2010 159,635 19,201 178,836 45,208 14,170 59,378
2011 78,987 16,672 95,659 44,559 12,134 56,693
2012 153,987 12,342 166,329 119,559 8,853 128,412
2013 153,973 8,012 161,985 119,546 5,571 125,117
2014 134,139 3,866 138,005 108,314 2,679 110,993
2014 onwards 225,342 80,394 305,736 225,342 67,919 293,261
Total (non-current) 906,063 140,487 1,046,550 699,702 131,680 831,382
Total (current and non-current) 972,578 167,698 1,140,276 704,674 154,072 858,746
Consolidated
12/31/2008 12/31/2007
In percentage terms, the variation of major foreign currencies and economic ratios in the
period, which are used to adjust loans, financing and debentures, was as follows in the years:
U S D 2 0 0 8 - % 2 0 0 7 - %
E U R 3 1 .9 4 ( 1 7 .2 0 )
U M B N D E S 2 4 .1 3 ( 7 .5 0 )
IG P - M 3 3 .8 6 ( 1 6 .5 7 )
C D I 9 .8 1 7 .7 5
S E L IC 1 2 .3 7 1 1 .8 2
1 2 .4 8 1 1 .8 8
Covenants
The 5th issue of Debentures, the funding of CCB Bradesco, the loan with ABN Amro and
BNDES FINEM, classified as current and non-current, requires that the Company maintain
certain debt ratios and interest coverage. In the year ended December 31, 2008, the Company
and its subsidiaries are in compliance with all required debt covenants.
16. DEBENTURES AND FINANCIAL CHARGES
Date of PR
Financing EntitySignature
Current Non-current Current Non-currentPayment
Beginning End
BNDES - Debentures 1st Issue 2/16/1998 15,257 7,666 1,143 - Tjlp TJLP + 4% p.a. 6 Semiannually 2000 2010
Debentures 4th Issue 6/30/2005 8 110 - - Tjlp TJLP + 4% p.a. 72 Monthly 2009 2015
Debentures 5th Issue 1/22/2007 18,311 937,773 26,804 - Cdi CDI + 1.50% 25 Quarterly 2008 2014
Local Currency 33,576 945,549 27,947 -
Consolidated
12/31/2008
Currency/
IndexInterest Rate
12/31/2008
Principal (1) Charges
(1) Pursuant to CVM Resolution nr.556/08, the principal amount is reduced by funding costs
incurred, as outlined in the Note 9 and financial charges are calculated by the amortized cost
method.
FEDERAL PUBLIC SERVICE
BRAZILIAN SECURITIES AND EXCHANGE COMMISSION (CVM)
STANDARDIZED FINANCIAL STATEMENTS (DFP)
COMMERCIAL, INDUSTRY AND OTHER TYPES OF COMPANIES
December 31, 2008 Brazilian Corporation Law
01987-9 LIGHT S.A. 03.378.521/0001-75
11.01 – NOTES TO THE FINANCIAL STATEMENTS
62
Financing Entity Signature Current Non-current Current Non-current Payment Beginning End
BNDES - Debentures 1st Issue 2/16/1998 15,311 22,967 1,889 - Tjlp TJLP + 4% p.a. 6 Semiannually 2000 2010
Debentures 4th Issue 6/30/2005 - 5,600 41 - Tjlp TJLP + 4% p.a. 72 Monthly 2009 2015
Debentures 5th Issue 1/22/2007 50,000 950,000 22,680 - Cdi CDI + 1.50% 25 Quarterly 2008 2014
Local Currency 65,311 978,567 24,610 -
Consolidated
12/31/2007 Currency/
IndexInterest Rate
12/31/2007
The portions related to the principal of debentures have the following maturities (excluding
financial charges):
12/31/2008 12/31/2007
2008 - 65,311
2009 33,576 -
Total (Current) 33,576 65,311
2009 - 65,778
2010 75,915 108,589
2011 68,234 100,933
2012 198,241 200,933
2013 268,241 250,933
2014 334,916 250,933
2014 onwards 2 468
Total (Non-current) 945,549 978,567
Total 979,125 1,043,878
Consolidated
Local Currency
Addendum to the 5th
Issue of Debentures
In 2008, the following deed amendments were negotiated with the banks coordinating the 5th
issue of debentures, ratified at the General Debenture Holders Meeting held on May 14, 2008:
I. Change in the amortization flow of debenture principal amount is presented below:
D a te O r ig in a l F lo w N e w F lo w
Ja n 22 ,2 0 0 8 1 .2 5 % 1 .2 5 %
A p r 2 2 , 20 0 8 1 .2 5 % 1 .2 5 %
Ju ly 2 2 , 2 0 08 1 .2 5 % 0 .5 0 %
O c to b e r 22 , 2 00 8 1 .2 5 % 0 .5 0 %
Ja n u ar y 22 , 2 00 9 1 .2 5 % 0 .5 0 %
A p ri l 2 2 , 2 0 0 9 1 .2 5 % 0 .5 0 %
Ju ly 2 2 , 2 0 09 1 .2 5 % 0 .5 0 %
O c to b e r 22 , 2 00 9 1 .2 5 % 0 .5 0 %
Ja n u ar y 22 , 2 01 0 2 .5 0 % 1 .7 5 %
ap r il 2 2 , 20 1 0 2 .5 0 % 1 .7 5 %
Ju ly 2 2 , 2 0 10 2 .5 0 % 1 .7 5 %
O c to b e r 22 , 2 01 0 2 .5 0 % 1 .7 5 %
Ja n u ar y 22 , 2 01 1 2 .5 0 % 1 .7 5 %
A p ri l 2 2 , 2 0 1 1 2 .5 0 % 1 .7 5 %
Ju ly 2 2 , 2 0 11 2 .5 0 % 1 .7 5 %
O c to b e r 22 , 2 01 1 2 .5 0 % 1 .7 5 %
Ja n u ar y 22 , 2 01 2 5 .0 0 % 5 .0 0 %
A p ri l 2 2 , 2 0 1 2 5 .0 0 % 5 .0 0 %
Ju ly 2 2 , 2 0 12 5 .0 0 % 5 .0 0 %
O c to b e r 22 , 2 01 2 5 .0 0 % 5 .0 0 %
Ja n u ar y 22 , 2 01 3 6 .2 5 % 6 .7 5 %
A p ri l 2 2 , 2 0 1 3 6 .2 5 % 6 .7 5 %
Ju l y 2 2 , 20 1 3 6 .2 5 % 6 .7 5 %
O c to b e r 22 , 2 01 3 6 .2 5 % 6 .7 5 %
Ja n u ar y 22 , 2 01 4 2 5 .0 0 % 3 3 .5 0 %
1 0 0 % 1 0 0 %
FEDERAL PUBLIC SERVICE
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STANDARDIZED FINANCIAL STATEMENTS (DFP)
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01987-9 LIGHT S.A. 03.378.521/0001-75
11.01 – NOTES TO THE FINANCIAL STATEMENTS
63
II – Maintenance of Amortization Premium at 0.25% until January 2009 and establishment of
an Amortization Premium of 0.20% valid from February 2009 to July 2009, in the event of debt
prepayment.
Covenants
As mentioned in the Note 15, the 5th Issue of Debentures requires the maintenance of
indebtedness indicators and coverage of interest rates, which were fully achieved on December
31,2008.
17. REGULATORY CHARGES – CONSUMER CONTRIBUTIONS
1 2 / 3 1 /2 0 0 8 1 2 /3 1 / 2 0 0 7
C U R R E N T
F u e l U sa g e Q u o t a – C C C 2 4 ,8 9 5 1 4 ,6 2 0
E n e rg y D e v e lo p m e n t A c c o u n t Q u o t a – C D E 1 6 ,6 3 8 1 7 ,0 4 4
R e v e rsa l G l o b a l R e se r v e Q u o t a – R G R 6 ,4 2 8 6 ,2 5 3
C h a rg e s fo r c a p a c it y a n d e m e rg e n c y a c q u is it io n 7 8 ,7 7 2 7 7 ,5 9 3
1 2 6 ,7 3 3 1 1 5 ,5 1 0
C o n so l id a t e d
Global Reversal Reserve (“RGR”) – This is a charge of Brazilian electricity sector paid
monthly by electric power concessionaires, aiming at providing funds for reversal, expansion
and improvement of electric power public utility. Its annual amount corresponds to 2.5% of
concessionaire investments in electricity-related assets, limited to 3.0% of its annual revenue.
Fuel Usage Quota (“CCC”) – This is a portion of tariff revenue paid by distribution companies
in interconnected systems with two applications: pay expenses with fuel used at thermal plants
that are activated to guarantee water uncertainties and; subsidize part of expenses with fuel at
isolated systems in order to allow that electricity tariffs at these locations have levels similar to
those practiced in interconnected systems.
Economic Development Account (“CDE”) – It aims at promoting the energy development of
States and competitiveness of energy produced, from alternative sources, in the areas served by
interconnected systems, allowing the universalization of electric power service. The amounts to
be paid are also defined by ANEEL.
Emergency Energy Charges (“ECE” and “EAE”) – These are operating, tax and administrative
costs, incurred by the Emergency Power Brazilian Trader – “CBEE” when contracting the
generation or power capacity, which have been transferred to final electric power consumers
served by the National Interconnected Electric System proportionally to individual
consumption verified.
18. PROVISION FOR CONTINGENCIES
Light S.A. and its subsidiaries are party in tax, labor and civil lawsuits and regulatory
proceedings in several courts. Management periodically assesses the risks of contingencies
related to these proceedings, and based on the legal counsel’s opinion it records a provision
FEDERAL PUBLIC SERVICE
BRAZILIAN SECURITIES AND EXCHANGE COMMISSION (CVM)
STANDARDIZED FINANCIAL STATEMENTS (DFP)
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December 31, 2008 Brazilian Corporation Law
01987-9 LIGHT S.A. 03.378.521/0001-75
11.01 – NOTES TO THE FINANCIAL STATEMENTS
64
when unfavorable decisions are probable. In addition, the Company does not record assets
related to lawsuits with a less-than-probable chance of success, as they are considered
uncertain.
18.1 Contingencies
Provisions for contingencies are as follows:
1 2 / 3 1 /2 0 0 8 1 2 /3 1 / 2 0 0 7 1 2 /3 1 / 2 0 0 8 1 2 / 3 1 /2 0 0 7
L a b o r 5 9 7 5 9 7 1 6 4 ,1 2 8 1 6 1 ,6 0 4
C iv i l - - 2 5 7 ,5 0 7 2 4 3 ,2 6 6
T a x - - 4 9 3 ,8 2 3 8 9 5 ,9 7 9
O t h e r 1 ,6 4 0 1 ,6 4 0 8 3 ,0 0 2 6 0 ,8 9 1
T o t a l 2 ,2 3 7 2 ,2 3 7 9 9 8 ,4 6 0 1 ,3 6 1 ,7 4 0
A s se ts
B a l a n c e o n
1 2 /3 1 / 2 0 0 7 A d d it io n s
B a la n c e o n
1 2 / 3 1 /2 0 0 8 J u d ic i a l D e p o s i ts
R e s t a te m e n t P a y m e n t s R e v e r sa ls
L a b o r 1 6 1 ,6 0 4 2 6 ,4 0 7 (1 5 ,7 3 6 ) ( 8 ,1 4 7 ) 1 6 4 ,1 2 8 3 7 ,1 0 2
C iv i l 2 4 3 ,2 6 6 7 2 ,7 7 1 (4 7 ,8 6 0 ) ( 1 0 ,6 7 0 ) 2 5 7 ,5 0 7 2 3 ,1 9 9
T a x 8 9 5 ,9 7 9 4 0 ,9 7 5 - ( 4 4 3 ,1 3 1 ) 4 9 3 ,8 2 3 9 ,7 1 6
O t h e r 6 0 ,8 9 1 2 4 ,9 9 1 (2 ,5 7 8 ) (3 0 2 ) 8 3 ,0 0 2 -
T o t a l 1 ,3 6 1 ,7 4 0 1 6 5 ,1 4 4 (6 6 ,1 7 4 ) ( 4 6 2 ,2 5 0 ) 9 9 8 ,4 6 0 7 0 ,0 1 7
W ri te - o ffs
C o n so l id a t e d
C u rre n t N o n -c u r re n t
L ia b i li ti e s
18.1.1 Labor Contingencies
There are 4,088 labor-related legal proceedings in progress (4,228 on December 31, 2007) in
which the Company and subsidiaries are the defendants. These labor proceedings mainly
involve the following matters: overtime; hazardous work wage premium; equal pay; pain and
suffering; subsidiary/joint liability of employees from outsourced companies; difference of
40% fine of FGTS (Government Severance Indemnity Fund for Employees) derived from the
adjustment due to understated inflation.
We point out that in December’2007, the subsidiary Light SESA was notified to reply to a
public civil action filed by the Public Prosecution Office of Labor of the 1st
Region, contesting
on court the fact that the Company engages other companies to provide services related to its
main and ancillary activities. Rafered lawsuit was granted relief on April 4, 2008. A suspensive
effect was granted to the Ordinary Appeal lodged by Light SESA. Light SESA’s legal counsels
believe in a favorable decision in these actions.
18.1.2 Civil Contingencies
The Company and its subsidiaries are defendants in approximately 38,593 civil legal
proceedings (33,132 on December 31, 2007), of which 11,763 are in the state and federal
courts (Civil Proceedings), among which those claims that can be accurately assessed
amounting to R$629,734 (R$482,629 on December 31, 2007) and 26,830 are in Special Civil
Courts, with total claims amounting to R$370,563 (R$241,420 on December 31, 2007).
FEDERAL PUBLIC SERVICE
BRAZILIAN SECURITIES AND EXCHANGE COMMISSION (CVM)
STANDARDIZED FINANCIAL STATEMENTS (DFP)
COMMERCIAL, INDUSTRY AND OTHER TYPES OF COMPANIES
December 31, 2008 Brazilian Corporation Law
01987-9 LIGHT S.A. 03.378.521/0001-75
11.01 – NOTES TO THE FINANCIAL STATEMENTS
65
C i v il C o n t in g e n c i e s A c c ru e d V a lu e ( p ro b a b le l o ss )
1 2 /3 1 / 2 0 0 8 1 2 /3 1 /2 0 0 7
a ) C i v il p ro c e e d i n g s 1 1 7 ,8 8 0 1 1 6 ,6 6 3
b ) S p e c ia l c iv i l c o u r t 3 3 ,7 8 3 3 3 ,3 8 3
c ) "C ru z a d o " P la n 1 0 5 ,8 4 4 9 3 ,2 2 0
T o t a l 2 5 7 ,5 0 7 2 4 3 ,2 6 6
a) The Provision for civil proceedings comprises lawsuits in which Light SESA is the
defendant and it is probable the claim will result in a loss in the opinion of the respective
attorneys. The claims mainly involve alleged moral and property damage as well as
consumers challenging the amounts paid.
The Company is also party to civil proceedings that Management believes that risk of loss
are less than probable, based on the opinion of its legal counsels. Therefore, no provision
was established. The amount, currently assessed, represented by these claims is R$358,383
(R$274,999 on December 31, 2007).
Light SESA is also involved in Public and Class Civil Actions, contesting in court fees,
rates and charges, contracts, equipment, “cruzado” plan, interest, among others. Up to
December 31, 2008, the Management could not assess the amount involved in each one of
these actions due to their nature, comprehensiveness and need of settlement of these claims.
On November 18, 2008, the Company, managers and shareholders took cognizance of a
class civil action filed by an individual at the Court of Belo Horizonte State, in the state of
Minas Gerais, alleging among others, irregularities in the acquisition of share control of
Light S.A.. The attorneys defending this action deem as remote the chances of an
unfavorable decision.
b) Lawsuits in the Special Civil Court are mostly related to matters regarding consumer
relations, such as improper collection, undue power cut, power cut due to delinquency,
network problems, various irregularities, bill complaints, meter complaints and problems
with ownership transfer. There is a limit of 40 minimum monthly wages for claims under
procedural progress at the Special Civil Court. Accruals are based on the moving average of
the last 12 months of condemnation amount.
c) There are civil actions in which some industrial consumers have challenged, in court, the
increases in electric power tariff rates approved in 1986 by the National Department of
Water and Electric Power (“Cruzado Plan”).
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18.1.3 Tax Contingencies
The provisions established for tax contingencies are as follows:
1 2 / 31 / 20 0 8 1 2 /3 1 /2 0 0 7
a ) P IS /C O F I N S 2 14 ,2 3 7 6 2 3 , 77 3
b ) P IS / C O F IN S – R G R a n d C C C 17 ,7 0 9 1 7 , 29 4
c ) I N S S - A C T A ll o w a nc e - 9 , 92 9
d ) I N S S – t a x d e fi ci e n c y n o ti c e 37 ,7 5 6 3 5 , 66 9
e ) I N S S – qu a rt e rl y 92 ,6 7 7 8 5 , 96 1
f ) L a w 8 ,2 0 0 20 ,0 6 3 1 9 , 01 2
g ) IC M S 76 ,6 1 0 7 1 , 00 7
h ) S o c i a l C o n tr i bu t io n 27 ,0 7 6 2 6 , 08 4
i ) C ID E 4 ,5 9 3 4 , 34 5
j ) O th e r 3 ,1 0 2 2 , 90 5
T o t a l 4 93 ,8 2 3 8 9 5 , 97 9
T a x C o nt i ng e nc i e s A m o u nt A c cr u ed (P ro ba b l e L o ss )
a) PIS/COFINS: Light SESA was party of two lawsuits contesting on court the charge of these
contributions, pursuant to Law 9,718/98, as follows:
In the first one, Light SESA challenged in court the changes introduced by said Law
concerning (i) the increase in their calculation basis and (ii) increase in COFINS rate from 2%
to 3%. In the appeal filed by Light SESA in Supreme Federal Court it was rendered a final and
unappealable decision regarding the increase of calculation basis, considering an
unconstitutionality action of Article 3, paragraph 1, of Law 9,718/98.
In the second one, Light SESA has been challenging the lapse of enforceability of part of the
amounts claimed in the January 31, 2007 Collection Letter issued by the Internal Revenue
Service, as the federal tax authorities did not request payment within the legal term. A
temporary injunction was granted and maintained by the Regional Federal Court to suspend the
charge, and currently the appeals to Higher Courts are pending judgment. In relation to the
merits, the judgment in low court is awaited, and, according to the Company’s legal counsels,
the decision is estimated as a possible loss.
Regarding the increase in PIS and COFINS calculation basis, in view of the Supreme Federal
Court’s decision, the Company reversed the amounts provisioned in the amount of R$432,358,
in conterpart to the item “financial expenses” in the second quarter 2008 result.
On December 31, 2008, the amount of R$214,237 (R$203,097 on December 31, 2007) related
to the increase in the COFINS rate from 2% to 3% remains provisioned.
b) PIS/COFINS – RGR and CCC: The contingency amount corresponds to the portion not
included in PAES payment in installments regarding the application of the ex-officio fine, in
which the Light SESA was not successful in the regulatory cases but had a favorable court
decision, in which the Company awaits the appeal decision of the Federal Government. This
amount also includes the portion corresponding to the increase in the COFINS rate related to
the period of April 1999 to December 2000, which is being argued in court.
c) INSS – ACT Allowance: In August 2006, Light SESA based on its attorney’s assessment,
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established a provision in the amount of R$14,715, related to the allowance eventually paid by
the Company to its employees as a result of provisions set forth in Collective Bargaining
Agreements for the period between 2001 and 2005. In December 2007, based on a new
assessment, a reversal was recorded in the amount of R$6,355, due to the expiration of the
statute of limitation of the tax authority’s right to collect the related taxes. In September 2008,
the full reversal of remaining balance of R$10,773 was recognized, taking in consideration
such issue based on former court decisions of Higher Courts and the lack of credit constitution.
d) INSS – Tax Infringement Notices: In December 1999, the INSS issued tax infringement
notices to the Company on the grounds of joint liability, withholdings on services rendered by
contractors, and levy of the social security contribution on employee profit sharing. Light S.A.
and its subsidiaries’ Management believes, based on legal counsels’ opinion, understands that
only a part of these amounts represent a probable risk for recording a provision. The variation
in the amount between December 31, 2008 and December 31, 2007 is due to the adjustment
based on the SELIC rate.
e) INSS – Quarterly: Light SESA challenges the constitutionality of Law 7,787/89, which
increased the rate of social security contribution taxes assessed on payroll, noting that there
was a consequent increase in the calculation basis in the period from July to September 1989.
Light SESA was able to offset the social security contribution amounts payable according to
advance protections that was previously granted. Management recorded provision, for the total
amount of the tax infringement notices issued by the INSS based on the legal counsel’s
opinion. The variation in the amount between December 31, 2008 and December 31, 2007 is
due to the adjustment based on the SELIC rate.
f) Law 8,200: The provision recorded is due to the fully use of the 1991 and 1992 depreciation
expenses, and no longer apply the provisions of Law 8,200/91, Article 3, item I. The lawsuit
was accepted by the lower and higher courts, and the appeal filed by the Federal Government
in Supreme Federal Court is pending judgment. Light SESA’s Management, based on the
opinion of its legal counsels and the amounts of the tax infringement notices, believes that only
part of these amounts represents a probable risk that requires recognition of a provision. The
variation in the amount between December 31, 2008 and December 31, 2007 is due to the
adjustment based on the SELIC rate.
g) ICMS: The provision recorded is mainly related to litigation on the application of State Law
3,188/99, which limited the manner of receiving credits from ICMS levied in the acquisitions
of assets allocated to property, plant and equipment, requiring the receipt in installments, while
this limitation was not provided for in the Complementary Law 87/96. There are other tax
infringement notices which have been challenged at the regulatory and judicial levels. Based on
the opinion of its legal counsels and the amounts of the tax infringement notices, Light SESA’s
Management believes that only part of these amounts represents a probable risk, for which a
reserve has been recorded. The variation of amount between December 31, 2008 and December
31, 2007 refers to the adjustment by UFIR (Fiscal Reference Unit).
h) Social Contribution: The provision recorded is related to (i) deductibility of interest on
capital paid to shareholders in calendar year 1996 from the CSLL (Social Contribution on
Profit) tax basis, in which the preliminary injunction was granted and a guarantee was partially
granted, and the appeal filed by the Federal Government is pending judgment; and (ii) lack of
addition of the amounts related to the PIS/COFINS provision to the social contribution
calculation basis, the payment of which was suspended. With the completion of administrative
level, a tax foreclosure has been filed and the Company made a full deposit of litigated amount,
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as well as it filed a motion to stay execution. The variation of amount between December 31,
2008 and December 31, 2007 refers to the adjustment by SELIC.
i) Economic Intervention Contribution Credit (“CIDE”): It is the provision related to CIDE
levied on service payments remitted abroad. The low court decision was unfavorable, so Light
SESA awaits the appeal judgment. Since December 2003, the subsidiary has been paying the
amounts due.
The Company and its subsidiaries are also parties to tax, regulatory and legal proceedings in
which Management, based on the opinion of its legal counsels, believes the risks of loss are
possible, and based on that no provision was recorded. The amount of these proceedings is
R$752,700 (R$518,286 on December 31, 2007).
The Company describes below the main tax proceedings deemed as possible loss or that had
effects in 2008:
Possible Losses
(i) IN 86. Light SESA was subjected to a fine by the Internal Revenue Service due to the fact
that the Company did not comply with service of process for the delivery of electronic files
between 2003 through 2005. The challenge was deemed groundless. Currently, the voluntary
appeal lodged by Light is pending judgment. The restated amount of the fine up to December
31, 2008 is R$222,200 (R$199,810 on December 31, 2007).
(ii) ICMS (Aluvale). These are tax foreclosures related to the ICMS deferral in the supply of
electric power for the consumer ALUVALE, an electro-intensive industrial consumer. A
motion to stay was filed and is currently pending judgment at the lower court. The amount of
these tax foreclosures at December 31, 2008 is R$155,700 (R$206,200 on December 31, 2007).
(iii) IRRF – Disallowance of tax offset. Light was given a decision informing about the non-
ratification to offset IRRF credits over financial investments and IRRF of electricity bills paid
by public authorities, which were offset due to negative balance of IRPJ in 2002. As a result,
Light filed a Motion to Disagree, which is pending judgment. The amount involved on
December 31, 2008 is R$171,500.
(iv) Others. In addition to the cases mentioned above, there are other judicial and
administrative litigations, deemed as probable losses by the legal counsels, mainly (a) ICMS on
low-income subsidy; (b) transfer of ICMS credit (RHEEM company); (c) PIS, COFINS, IRPJ
and CSLL Voluntary Disclosure; (d) ISS on regulated services. The amount involved in these
litigations was R$140,900 on December 31, 2008 (R$133,300 on December 31, 2007).
(v) On December 16, 2008, Light SESA received a lawsuit filed by a business client
challenging PIS and COFINS transferred to electricity bill, pleading to refund all amounts
unduly paid. According to the opinion of its attorneys, the chances of loss is deemed as
possible, and no provision was recorded.
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Remote Losses
Proceedings deemed as remote losses by the Company’s and subsidiaries’ legal counsels were
not provisioned.
18.1.4 Administrative Regulatory Contingencies
The subsidiary Light SESA has regulatory contingencies derived from administrative
challenges against ANEEL:
a) Low Income – The Monitoring Report RF-LIGHT-04/2007-SFE of August 2007 was
prepared by ANEEL, between July 2, 2007 and July 13, 2007, challenged the granting of the
social tariff to some consumers in the period and deemed as undue part of the subsidies ratified
and received by Light SESA from Eletrobras in the amount of R$266,379. Light SESA
recorded a provision in the amount of R$53,381 (R$36,175 on December 31, 2007), to cover
the probable risk of having to refund part of the subsidy already received.
b) ANEEL’s Infringement Notice 009/2005 – the notice was issued on March 15, 2005 under
the argument that Light SESA had: (i) incorporated the subsidiaries LIR Energy Limited and
Light Overseas Investments without prior consent of ANEEL (R$1,144); (ii) performed
operations with these companies without prior consent of ANEEL – (total amount of R$2,287);
and (iii) not complied with ANEEL’s order of cancelling operations and closing companies’
activities (total amount of R$3,431). After appeals had been filed, the fine related to item (iii)
was excluded, and fines associated with items (i) and (ii) were maintained. The penalty
associated to item (ii) was paid, while a writ of mandamus was filed regarding the fine related
to item (i), with court deposit in the amount of R$1,655 (original amount restated by the
SELIC, rate up to the deposit date). After decision rendered on November 23, 2007 of refusing
MS security, the Requests of Clarification were filed, and consequently rejected by decision
rendered on December 17, 2007. Against the judgment, Light SESA filed an appeal on January
25, 2008, requiring a supersedeas to that appeal. On September 10, 2008, a decision was
rendered to which an appeal was filed for remanding purposes only. Finally, on September 17,
2008, Bill of Review 2008.0.00.046455-8 was filed, in order to obtain the supersedeas to the
appeal, avoiding the fact that the amounts expended in the lawsuit were verified. The Bill of
Review was distributed to the Federal Superior Court Judge, who still did not issue an opinion
on the request of advance protection. The amount as of December 31, 2008 is R$1,944
(R$1,712 on December 31, 2007).
c) ANEEL´s Infringement Notice 055/2008 – SFE. The notice was issued on October 28, 2008,
with fine in the amount of R$2,782 under the allegation that Light SESA has infringed DEC
and FEC indicators of 14 groups of consumers who filed 18 supposed infringements in
2007. Light SESA, in disagreement with ANEEL’s allegation, lodged an appeal via Letter D-
058/2008, filed on November 12,2008. Light SESA recorded provision in the total contingency
amount. On December 31, 2008, the amount accrued is R$2,847.
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19. OTHER PAYABLES
1 2 /3 1 / 2 0 0 8 1 2 /3 1 / 2 0 0 7 1 2 /3 1 / 2 0 0 8 1 2 /3 1 / 2 0 0 7
C U R R E N T
P u b li c li g h ti n g f e e - - 4 0 ,9 1 7 4 3 ,7 0 1
E n e rg y E ff ic i e n c y P r o gr a m - PE E - - 1 1 8 ,7 4 5 8 1 ,4 1 3
R e se a rc h a n d D e v e lo p m e n t Pr o g ra m – P & D - - 6 0 ,3 2 0 5 0 ,2 6 8
E n e rg y R e se a r c h C o m p a n y – E P E - - 7 ,4 0 4 7 ,8 4 0
N a t io n a l S c ie n t if ic a n d T e c h n o l o g ic a l D e v e l o p m e n t F u n d – FN D C T - - 1 4 ,8 0 8 1 6 ,0 5 3
C o m p e n sa t io n f o r u se o f w a t e r re s o u rc e s - - 3 ,2 7 4 2 ,3 0 5
C V A (N o t e 5 ) - - 1 4 3 ,9 4 7 7 6 ,6 8 6
O t h e r t a rif f c h a rg e s (N o t e 5 ) - - 1 6 ,7 1 4 5 4 ,8 8 1
O t h e r d e b t s - r e im b u rse m e n t t o c o n su m e rs - - 4 6 ,8 9 3 -
O t h e r 1 ,2 8 6 8 1 0 6 6 ,7 3 5 2 0 ,9 1 7
T o t a l 1 ,2 8 6 8 1 0 5 1 9 ,7 5 7 3 5 4 ,0 6 4
N O N -C U R R E N T
D e f ic i t B ra s l ig h t – C V M P ro v i s i o n 3 7 1 /2 0 0 0 C V M 3 7 1 /2 0 0 0 ( c ) - - - 1 0 9 ,1 3 3
U s e o f p u b li c a ss e t - U B P ( a ) - - 1 1 7 ,5 8 3 1 0 7 ,1 5 9
P ro v i s io n f o r C V A - C C C - - - 8 0 0
C V A (N o t e 5 ) - - 1 ,7 1 9 2 1 ,5 0 2
P ro v i s io n f o r re g u l a to ry li a b il it ie s - o v e rc o n t ra c t in g o f e n e r g y - - 7 ,6 8 4 1 6 ,9 8 6
R e v e rsa l re se r v e (b ) 6 9 ,9 3 3 6 9 ,9 3 3
O t h e r - - 1 2 ,6 8 4 4 ,0 1 9
T o t a l - - 2 0 9 ,6 0 3 3 2 9 ,5 3 2
P a re n t C o m p a n y C o n so l id a t e d
a) According to the concession agreement 12/2001, as of March 15, 2001, that regulates the
use of the hydroelectric power plant of the Paraíba do Sul river, in the municipalities of
Itaocara and Aperibé, the subsidiary Itaocara Energia Ltda. shall pay the Federal
Government, for using the public asset, as of the date of its startup (expected for 2013) up to
the end of the concession, or while it uses the hydroelectric resources. Payments shall be
made in monthly installments equivalent to 1/12 of the proposed annual payment of
R$2,017, subject to the IGP-M variation or to any other index that may substitute it, should
such index be abolished (see Note 12).
b) The amount corresponding to reserve for reversal, classified as special obligations linked to
concession, was reclassified from property, plant and equipment to other debits item (see
Note 02).
c) In 2008, Light SESA reversed a provision recorded for actuarial loss in view of actuary’s
opinion pursuant to CVM Resolution nr.371/00.
20. PENSION PLAN AND OTHER EMPLOYEE BENEFITS
Light SESA sponsors Fundação de Seguridade Social – BRASLIGHT, a nonprofit closed
pension entity, whose purpose is to provide retirement benefits to the Company’s employees
and pension benefits to their dependents.
BRASLIGHT was incorporated in April 1974 and has three plans - A, B and C – established in
1975, 1984 and 1998, respectively, with about 96% of the active participants of the other plans
having migrated to Plan C.
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Plans A and B are of the Defined Benefit type and Plan C provides mixed benefit. All are
currently in effect.
On October 2, 2001, the Secretariat for Pension Plans (“SPC”) approved an agreement for
resolving the technical deficit and refinancing unamortized reserves, which are being amortized
in 300 monthly installments beginning July 2001, adjusted based on the IGP-DI (general price
index – domestic supply) variation (with one-month lag) and actuarial interest of 6% per
annum.
Transactions occurred this year in net actuarial liabilities were the following:
T o ta l
C o n so l i d a te d
P e n s io n P l an o n 12 / 31 / 2 00 6 86 0 ,9 4 7 7 4 ,0 8 4 7 8 6 ,8 63
A m o rt i z at i o ns in t he ye a r (7 5 ,8 5 5) (7 5 ,8 5 5) -
R e s t a t e m e nt s i n t he y e a r 10 6 ,8 2 3 9 ,1 9 2 9 7 ,6 31
T ra n s fe r fr o m n on -c u rr e n t t o c ur re n t - 6 6 ,1 6 4 (6 6 ,1 64 )
T o ta l P e n s i o n P la n o n 1 2 /3 1 / 20 0 7 89 1 ,9 1 5 7 3 ,5 8 5 8 1 8 ,3 30
A m o rt i z at i o ns in t he ye a r (8 5 ,1 2 6) (8 5 ,1 2 6) -
R e s t a t e m e nt s i n t he y e a r 15 3 ,5 4 8 1 3 ,7 6 7 1 3 9 ,7 81
D e fi c i t e qu a l iz a t io n a d j us t m e n ts (a ) 7 1 ,8 2 4 - 7 1 ,8 24
T ra n s fe r s fr o m n on -c u rr e n t t o c u rr en t - 8 5 ,5 1 8 (8 5 ,5 18 )
T o ta l P e n s i o n P la n o n 1 2 /3 1 / 20 0 8 1 , 03 2 ,1 6 1 8 7 ,7 4 4 9 4 4 ,4 17
C u r r e n t N on -c u r r e n t
(a) According to actuarial appraisal report issued on January 19, 2009, in 4Q08, Braslight
changed its mortality general table and now adopts the table AT-83. This change was made to
comply with Resolution CGPC 18 of March 28, 2006. The actuarial result of the year and the
change of table resulted in an increase of R$71,824 in the deficit equalization agreement.
The breakdown of provision on December 31, 2008 for defined benefit retirement plans and also additional commitments of retirement and/or pension for decease deriving from court settlements or decisions related to injured employees, considered at present value of actuarial liability and other information required by CVM Resolution 371/00, is presented below:
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2 0 0 8 2 0 0 7
R e c o n c il ia t io n o f a c tu a r i a l a ss e ts a n d l ia b il it ie s
F a i r v a l u e o f p la n a s se t s 1 ,1 6 9 ,5 3 5 1 ,0 5 3 ,6 8 9
P r e se n t v a lu e o f a c t u a ri a l l ia b i li ti e s w it h o v e rd u e ri g h ts ( 1 ,5 8 0 ,7 3 4 ) ( 1 ,6 4 7 ,9 6 7 )
P r e se n t v a lu e o f a c t u a ri a l l ia b i li ti e s w it h rig h t s fa l li n g d u e ( 3 6 0 ,5 5 8 ) ( 4 0 6 ,7 7 0 )
N e t a s se ts (u n se c u r e d li a b il it ie s ) ( 7 7 1 ,7 5 7 ) ( 1 ,0 0 1 ,0 4 8 )
N e t l ia b i li ti e s , C V M 3 7 1 /2 0 0 0 ( 7 7 1 ,7 5 7 ) ( 1 ,0 0 1 ,0 4 8 )
B a la n c e o f th e a d ju s t e d a n d re c o r d e d a gr e e m e n t , a s p e r d e fic i t e q u a liz a ti o n a g re e m e n t ( 1 ,0 3 2 ,1 6 1 ) ( 8 9 1 ,9 1 5 )
P r o v is i o n C V M 3 7 1 - a c tu a r ia l ga in s a n d l o sse s - ( 1 0 9 ,1 3 3 )
2 0 0 8 2 0 0 7
B r e a k d o w n o f a c t u a r ia l li a b il iti e s
N e t l ia b i li ti e s , C V M 3 7 1 /2 0 0 0 - o p e n in g ( 1 ,0 0 1 ,0 4 8 ) ( 9 7 9 ,0 8 5 )
S p o n s o r's c o n tr ib u t io n s 9 1 ,0 5 4 7 8 ,4 6 7
G a in s a n d lo ss e s re l a te d t o a c t u a ria l d e fi c it 2 2 8 ,7 5 0 ( 1 5 ,1 8 7 )
E x p e c t e d c o s t ( 9 0 ,5 1 3 ) ( 8 5 ,2 4 3 )
N e t l ia b i li tie s , C V M 3 7 1 /2 0 0 0 - c lo s i n g ( 7 7 1 ,7 5 7 ) (1 ,0 0 1 ,0 4 8 )
2 0 0 9 2 0 0 8
E x p e c te d c o sts
C o st o f t h e c u rre n t se rv i c e 1 ,6 5 0 1 ,6 8 0
C o s t o f i n te re s t 2 1 0 ,6 8 0 1 9 4 ,1 0 0
R e t u rn o n in v e s tm e n ts ( 1 2 1 ,7 3 2 ) ( 1 1 0 ,4 4 2 )
E x p e c t e d c o n tr ib u t io n f ro m e m p lo y e e s (8 5 ) ( 9 5 )
E st im a t e d e x p e c te d c o st 9 0 ,5 1 3 8 5 ,2 4 3
2 0 0 8 2 0 0 7
A c tu a r i a l a ss u m p ti o n s
N o m i n a l i n te r e s t ra te ( d isc o u n t ) a t p re se n t v a lu e o f th e a c t u ri a l l ia b i li ti e s 1 2 .3 6 % 1 0 .5 9 %
E x p e c t e d yi e ld r a te o v e r n o m i n a l p l a n a sse t s 1 2 .4 4 % 1 2 .6 8 %
S a l a ry g ro w t h ra t e 4 .3 3 % 4 .3 3 %
A d ju s tm e n t i n d e x o f c o n t in u e d b e n e f it s 4 .9 6 % 4 .9 6 %
C a p a c i ty fa c t o r 4 .3 3 % 4 .3 3 %
R e v o l v in g ra t e 9 8 .0 0 % 9 8 .0 0 %
G e n e ra l m o r ta l it y t a b le (a ) A g e -b a se d A g e -b a se d
D is a b il it y t a b le ( p la n s A /B ) A T - 8 3 ( 1 ) A T - 8 3 (1 )
D is a b il it y t a b le ( p la n C se t tl e d ) L IG H T - S t ro n g L IG H T - S t ro n g
M o rta l it y t a b le o f d is a b le d p e o p l e L IG H T - S t ro n g L IG H T - S t ro n g
A c ti v e p a rt ic i p a n ts IA P B -5 7 IA P B - 5 7
R e t ire e s a n d p e n s i o n e rs p a r ti c ip a n t s 3 ,6 9 0 3 ,9 2 5
5 ,6 8 6 5 ,6 5 8
(1 ) T a b l e w i th o u t a gg r a v a ti o n
C o n so li d a te d
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21. RELATED-PARTY TRANSACTIONS
The Company’s main shareholders are:
Controlling Group - Rio Minas Energia Participações S.A – RME, jointly-owned
subsidiary of Companhia Energética de Minas Gerais – CEMIG, Andrade Gutierrez
Concessões, Luce do Brasil Fundo de Investimento em Participações and Equatorial
Energia.
BNDESPAR
Direct and indirect interest in operating subsidiaries are outlined in the Note 1.
A summary of related-party transactions occurred in 2008 and 2007 is presented below:
C on tra c ts w it h th e sa m e gro u p
R e la t io n sh ip w it h L i gh t S /A C o n s ol id a te d
A s s e ts L i ab il it i e s R e v e n u e E x p e n s e s
(O b je c ti ve s a nd c h a ra c t e r is t ic s o f t he a g re e m e n t) (1) 12 / 31 /2 0 08 12 / 31 /2 0 07 12 / 31 / 20 0 8 12 /3 1 /2 0 07 1 2 /3 1 /2 00 8 12 / 31 / 20 07 12 / 31 /2 0 08 12 / 31 /2 0 07
1
S tr a te g ic C on tr a c t
P u rc ha s e a gre e m e nt o f e l e c t r ic i ty b e t w e e n L i gh t S E S A a nd C E M IG
C E M IG (p a r t y of th e c on tro ll in g
gr ou p)- - 2 ,5 96 6 , 7 19 - - 8 8 , 41 6 5 5 , 53 7
2
S tr a te g ic C on tr a c t
S a l e a g re e m e n t o f e le c tr i c it y be tw e e n L ig ht S E S A a n d C E M IG
C E M IG (p a r t y of th e c on tro ll in g
gr ou p) 2 , 45 4 2 , 35 6 - - 2 1 , 4 58 2 0 , 52 8 - -
3
S tr a te g ic C on tr a c t
C o ll e c t iio n o f d is tr i bu ti on s y st e m u sa ge c ha rge s b e t w e e n L i gh t
S E S A a n d C E M IG
C E M IG (p a r t y of th e c on tro ll in g
gr ou p) 14 8 15 5 - - 2 , 0 12 1 , 79 4 - -
4
S tr a te g ic C on tr a c t
C o m m it m e nt t o e le c tr i c b a s ic ne tw or k us a ge c h a rge s be tw e e n L igh t
S E S A a n d C E M IG
C E M IG (p a r t y of th e c on tro ll in g
gr ou p) - - 3 79 1 , 3 87 - - 1 2 , 98 5 1 2 , 23 8
5
S tr a te g ic C on tr a c t
E le c t r ic it y s a l e c o m m it m e nt b e t w e e n L i gh t E n e rgi a a nd C E M A R
E qu a t or i a l (pa r ty o f t he
c o nt rol li ng g rou p)
1 , 10 5 1 , 00 2 - - 8 , 7 58 8 , 37 7 - -
6
L o an s
F IN E M
B N D E S (pa r ty o f t he c on tr ol lin g
gr ou p)
- - 4 3 3 ,0 62 2 4 3 , 4 93 - - 3 4 , 72 9 5 , 38 5
7
L o an s
L i ne o f c re d it
B N D E S (pa r ty o f t he c on tr ol lin g
gr ou p)
- - 2 ,3 97 3 , 1 35 - - 89 8 ( 33 6 )
8
L o an s
D e b e nt ure s 1s t is s ue - N o n-c o nv e r t ib le
B N D E S (pa r ty o f t he c on tr ol lin g
gr ou p)
- - 2 4 ,0 66 4 0 , 1 67 - - 2 , 76 7 4 , 37 9
9
L o an s
P ró E s c o a nd E n e rgy E f f ic i e nt P ro j e c t o f C o nd o m íni o E di fí c io
S a n to s D um o nt
B N D E S (pa r ty o f t he c on tr ol lin g
gr ou p)
- - 5 96 - - - - -
1 0
P e n s io n P la n
F un d a ç ã o d e S e gu r id a d e S o c i a l (S oc ia l S e c u r it y F o und a t io n) -
B R A S L I G H T
B R A S L IG H T (p a r t y of th e
c o nt rol li ng g rou p)
- - 1 ,0 3 2 ,1 61 8 9 1 , 9 15 - - 2 2 5 , 37 1 1 0 6 , 82 3
I te m
A summary of agreements executed with related parties is presented below:
FEDERAL PUBLIC SERVICE
BRAZILIAN SECURITIES AND EXCHANGE COMMISSION (CVM)
STANDARDIZED FINANCIAL STATEMENTS (DFP)
COMMERCIAL, INDUSTRY AND OTHER TYPES OF COMPANIES
December 31, 2008 Brazilian Corporation Law
01987-9 LIGHT S.A. 03.378.521/0001-75
11.01 – NOTES TO THE FINANCIAL STATEMENTS
74
C o nt ra c t s w i th t he s a m e g rou p
R e l a ti on s hip w i th L ig ht S / A O ri gin a l V a lu e D a te o f m a tu r it y
o r t e rm
T e rm in a ti o n
c on di ti on s R e ma in ing B a la n c e
1 2/ 31 / 20 0 8
(O b j e c t ive s a nd c ha ra c te r i s ti c s of th e a gre e m e nt ) (1 ) T ho us a n d D a te T ho us a n d
1
S t r ate gi c A g r e e m e n t
P u rc h a s e a g re e m e n t of e le c tr i c it y be tw e e n L igh t S E S A a nd C E M IG
C E M IG (p a r ty o f t he c o nt rol li ng
g ro up ) 4 3 9 ,6 9 1
0 1 /0 1 /2 00 6 1 2 /3 1 /2 0 15 3 0 % o f re m a i ni ng
b a l a nc e 3 3 1 ,2 7 7
2
S t r ate gi c A g r e e m e n t
S a le a gre e m e nt o f e l e c t r ic i ty b e t w e e n L ig ht E n e rgi a a n d C E M IG
C E M IG (p a r ty o f t he c o nt rol li ng
g ro up ) 1 5 6 ,2 3 9 Ja n/ 20 0 5 D e c /2 01 3
9 7 ,5 0 8
3
S t r ate gi c A g r e e m e n t
C ol le c t io n o f d is tr i bu ti on s y st e m u sa ge c ha rge s b e t w e e n L i gh t
S E S A a n d C E M IG
C E M IG (p a r ty o f t he c o nt rol li ng
g ro up ) - N ov /2 0 03 In de te rm i na t e
1 4 8
4
S t r ate gi c A g r e e m e n t
C om m it m e n t to t he b a si c e le c t r ic ne tw o rk us a ge c h a rge s be tw e e n
L ig ht S E S A a n d C E M IG
C E M IG (p a r ty o f t he c o nt rol li ng
g ro up ) - D e c / 2 00 2 In de te rm i na t e
1 ,4 7 9
5
S t r ate gi c A g r e e m e n t
E le c tr i c it y sa le c om m i tm e n t be tw e e n L ig ht E ne rg ia a nd C E M A R
E q ua t o r ia l (p a r t y o f t he
c o n tro ll in g g ro up )
6 1 ,2 1 4
Ja n/ 20 0 5 D e c /2 01 3
3 8 ,7 4 3
6
L oa n s
F IN E M
B N D E S (p a r ty o f t he c o nt ro lli ng
g ro up )
5 4 9 ,3 3 1
N ov /2 0 07 S e p / 20 14
4 3 3 ,0 6 2
7
L oa n s
L in e o f C r e di tB N D E S (p a r ty o f t he c o nt ro lli ng
g ro up ) 1 4 ,1 4 7 M a r/1 99 9 A p r / 20 1 0
2 ,3 9 7
8
L oa n s
D e b e n tu re s 1 st i ss u e - N o n- c on ve r ti bl e
B N D E S (p a r ty o f t he c o nt ro lli ng
g ro up )
1 0 5 ,0 0 0
Ja n/ 19 9 8 Ja n/ 20 1 0
2 4 ,0 6 6
9
L oa n s
P r ó E s c o a n d E ne rgy E f fi c ie nc y P ro j e c t o f C o nd o mí ni o E d if í c io
S a nt os D u m on t
B N D E S (p a r ty o f t he c o nt ro lli ng
g ro up )
5 9 6
D e c / 2 00 8 O c t /2 0 14
5 9 6
10
P e n s i on P l an
F u nd a ç ã o de S e g ur i da d e S oc ia l (S o c ia l S e c ur i ty F o un d a ti on ) -
B R A S L IG H T
B R A S L IG H T (pa r ty o f t he
c o n tro ll in g g ro up )
5 3 5 ,0 5 2
J u n/ 20 0 1 Ju n/ 2 02 6 U nt il e n d o f
a g re e m e n t 1 ,0 3 2 ,1 6 1
I t e m
Related-party transactions have been executed under usual market conditions.
Additional information – agreements in progress
Light, in order to potentialize its capacity of developing and implementing new generation
projects and taking into account the recognized capacity in this area of its shareholder
Companhia Energética de Minas Gerais – CEMIG (“Cemig”), Light entered into Heads of
Agreement (“Agreement”) which, among other provisions, establishes that the parties will
jointly prepare business plans for the development and implementation of energy generation
projects (“Generation Projects”). The Agreement also determines that the parties will execute
specific instruments for each of the Generation Projects to be implemented and the Company’s
interest directly or by means of its subsidiaries in each one of these consortia will be fifty-one
percent (51%) and CEMIG’s interest, directly or by means of its subsidiaries will be forty-nine
percent (49%).
Light, which already has in its portfolio projects under development, formalized by means of
its subsidiaries, Lightger Ltda., Itaocara Energia Ltda. and Light Energia S.A., three
Consortium Agreements with Cemig Geração e Transmissão S.A. (“Cemig GT”), wholly-
owned subsidiary of Cemig, aiming the exploration of hydroelectric projects in the regions of
Paracambi, Itaocara and Lajes, respectively.
All private instruments mentioned above were executed by the parties under suspensive
conditions, therefore, their effectiveness relies on obtaining authorizations or endorsements
required by regulatory authorities, including but not limited to ANEEL.
FEDERAL PUBLIC SERVICE
BRAZILIAN SECURITIES AND EXCHANGE COMMISSION (CVM)
STANDARDIZED FINANCIAL STATEMENTS (DFP)
COMMERCIAL, INDUSTRY AND OTHER TYPES OF COMPANIES
December 31, 2008 Brazilian Corporation Law
01987-9 LIGHT S.A. 03.378.521/0001-75
11.01 – NOTES TO THE FINANCIAL STATEMENTS
75
22. MANAGEMENT COMPENSATION
Annual global compensation of Company’s Board of Directors and Board of Executive
Officers was determined at R$1,479 (not including charges and other benefits) at the Annual
General Meeting held on March 17, 2008. Payroll charges and other benefits paid amounted to
R$177.
23. SHAREHOLDERS’ EQUITY
a) Capital Stock
The capital of Light S.A. is represented by are 203,933,778 common shares, without par value
outstanding as of December 31, 2008 recorded as Capital Stock in the total amount of
R$2,225,819 as follows:
N u m b e r o f S h a r e s % In t e r e st N u m b e r o f S h a r e s % In te r e st
C o n tr o l li n g G r o u p
R M E R i o M i n a s E n e rg i a P a rt ic i p a ç õ e s S .A . (* ) 1 0 0 ,7 1 9 ,9 1 2 4 9 .3 9 % 1 0 0 ,7 1 9 ,9 1 2 4 9 .5 0 %
L i d il C o m e rc ia l L t d a 5 ,5 8 4 ,6 8 5 2 .7 4 % 5 ,5 8 4 ,6 8 5 2 .7 4 %
O th e r
B N D E S P a r ti c ip a ç õ e s S .A . - B N D E S P A R 6 8 ,5 5 5 ,9 1 8 3 3 .6 2 % 6 8 ,5 5 5 ,9 1 8 3 3 .7 0 %
P u b li c a n d o t h e rs 2 9 ,0 7 3 ,2 6 3 1 4 .2 5 % 2 8 ,6 0 2 ,2 2 4 1 4 .0 6 %
2 0 3 ,9 3 3 ,7 7 8 1 0 0 .0 0 % 2 0 3 ,4 6 2 ,7 3 9 1 0 0 .0 0 %
S H A R E H O L D E R S
1 2 /3 1 / 2 0 0 8 1 2 / 3 1 /2 0 0 7
(*) On February 12, 2008, the Extraordinary General Meeting of Equatorial Energia S.A
approved the merger of PCP Energia, a company that held 13.06% of Light shares through
RME. Equatorial now integrates Light’s controlling group (RME). This merger did not
represent a change of control, given that both PCP and Equatorial have the same controlling
group.
Light S.A. is authorized to increase its capital up to the limit of R$203,965,072 through
resolution of the Board of Directors, regardless of amendments to the bylaws. However, this
increase is to occur exclusively upon the exercise of the warrants issued, strictly pursuant to the
conditions of the warrants (Bylaws, Article 5, paragraph 2).
b) Paid-in Capital
According to the minutes of the Board of Directors dated October 3, 2008 and November 7,
2008, Company’s capital stock increases were approved in the amount of R$4,919 and R$545,
respectively, amounting to R$5,464, as a result of exercising the warrants rights. The increase
occurred by means of issue of 471,039 shares, and capital stock was increased to R$2,225,819
represented by 203,933,778 book-entry common shares. These amendments were approved at
the Extraordinary General Meeting held on December 23, 2008.
c) Retained Earnings/ (Losses)
Pursuant to Regulatory Resolution nr.176 issued by ANEEL as of November 28, 2005, and
approvals of Manuals of Electricity Efficiency and Research and Development Programs,
which changed the criteria of accounting recognition of refered programs in 2005 and 2006,
Light SESA recorded in Shareholders’ Equity the amounts related to Research and
FEDERAL PUBLIC SERVICE
BRAZILIAN SECURITIES AND EXCHANGE COMMISSION (CVM)
STANDARDIZED FINANCIAL STATEMENTS (DFP)
COMMERCIAL, INDUSTRY AND OTHER TYPES OF COMPANIES
December 31, 2008 Brazilian Corporation Law
01987-9 LIGHT S.A. 03.378.521/0001-75
11.01 – NOTES TO THE FINANCIAL STATEMENTS
76
Development – R&D and Energy Efficiency Program - PEE related to 2003, 2004 and 2005.
For tax purposes, these amounts were not used as deductible expenses for income tax and
social contribution calculation basis. However, after analysis, we concluded that these amounts
can be deducted from corresponding calculation basis. Taking into consideration that the
original amounts were directly recorded in shareholders’ equity, the taxes currently calculated
in the amount of R$26,362 were also directly recorded in shareholders’ equity – under retained
earnings or accrued losses.
In addition, Light SESA recorded in 2007 a provision for PIS/COFINS over the deductibility of
CCC and RGR expenses. When this fine is recorded, the subsidiary considered the total amount
deductible for income tax and social contribution. After analysis, it was concluded that if it
refers to fine, there is no deductibility. Thus, the expense in the amount of R$2,911 was
adjusted in the statement of income for 2007, in conterpart to deferred taxes of that same year.
See chart of adjustments in the Note 2.
d) Profit Reserve
- Legal Reserve– Recorded at 5% of net income for the year, pursuant to prevailing laws.
- Profit Retention Reserve – Recorded with the remaining Net Income of the year after
allocations, based on capital budget approved by the Board of Directors.
24. DIVIDENDS
a) Dividends paid
The declaration of supplementary dividends of R$203,463 was approved at the Annual General
Meeting held on March 17, 2008, based on the balance sheet related to the year ended
December 31, 2007, representing R$1.00 per share and available to shareholders from March
31, 2008 on.
The payment of dividends in the amount of R$350,766 was approved on November 7, 2008,
based on the profit reserve existing at December 31, 2007, representing R$1.72 per share and
available to shareholders from November 21, 2008 on. Overall dividends in the amount of
R$554,229 were paid in 2008, related to 2007 results.
b) Proposed dividends
At a meeting held on February 13, 2009, the Board of Directors of Light S.A. proposed the
dividends of R$499,638 (R$2.45 per share) based on the balance sheet as of December 31,
2008 to be approved at the General Meeting:
FEDERAL PUBLIC SERVICE
BRAZILIAN SECURITIES AND EXCHANGE COMMISSION (CVM)
STANDARDIZED FINANCIAL STATEMENTS (DFP)
COMMERCIAL, INDUSTRY AND OTHER TYPES OF COMPANIES
December 31, 2008 Brazilian Corporation Law
01987-9 LIGHT S.A. 03.378.521/0001-75
11.01 – NOTES TO THE FINANCIAL STATEMENTS
77
Light S.A 2008
Income for the year 997,904
Legal Reserve (49,895)
Adjusted Income for the year 948,009
Minimum compulsory dividends 237,002
Proposed Dividends 499,638
25. PROFIT SHARING
The Profit Sharing Program, implemented in 1997 is mainly connected with net income and
consolidated EBITDA of the Company. Payment is composed of two parts: one fixed and other
variable. The Program has been improving over the years so that to enable greater employees’
commitment to improving operating results of the Company and its subsidiaries.
On December 31, 2008 the profit sharing accrued balance for Grupo Light amounted to
R$31,527, with payment estimated for April 2009.
26. ELECTRIC POWER SUPPLY
0 1 / 0 1 to 1 2 / 3 1 2 0 0 8 2 0 0 7 2 0 0 8 2 0 0 7 2 0 0 8 2 0 0 7
R e sid e n c i a l 3 ,6 2 4 ,4 2 5 3 ,5 7 5 ,5 5 3 7 ,3 8 8 7 ,3 4 4 2 ,3 9 9 ,5 2 1 2 ,3 9 7 ,8 3 2
In d u s t ria l 1 2 ,1 6 4 1 2 ,7 9 4 1 ,8 7 5 2 ,0 1 1 4 0 5 ,6 9 2 3 6 8 ,0 8 3
C o m m e rc e , se r v ic e s a n d o t h e r 2 6 9 ,0 8 8 2 6 9 ,9 0 5 5 ,8 5 2 5 ,7 5 6 1 ,8 0 3 ,7 9 3 1 ,7 9 4 ,4 5 5
R u ra l 1 0 ,9 0 4 1 0 ,9 0 0 4 9 4 9 9 ,4 4 0 9 ,9 7 2
P u b li c se c t o r 9 ,9 8 1 9 ,5 0 2 1 ,3 1 4 1 ,3 1 1 3 5 7 ,2 6 8 2 9 3 ,6 9 3
P u b li c li g h ti n g 4 1 7 1 9 5 6 7 8 6 9 8 1 0 1 ,1 5 7 8 4 ,8 6 4
P u b li c u ti li ty 1 ,3 8 2 1 ,2 5 1 1 ,0 6 8 1 ,0 6 2 2 1 4 ,9 5 6 2 0 3 ,1 6 5
O w n c o m s u p ti o n 3 2 8 4 2 7 6 8 7 6 - -
B i ll e d S a le s 3 ,9 2 8 ,6 8 9 3 ,8 8 0 ,5 2 7 1 8 ,2 9 2 1 8 ,3 0 7 5 ,2 9 1 ,8 2 7 5 ,1 5 2 ,0 6 4
IC M S (s t a te V A T ) - - - - 1 ,9 3 5 ,2 6 4 1 ,9 1 7 ,7 5 1
U n b i ll e d S a le s - - - - (1 2 ,7 5 0 ) 2 3 ,7 0 4
T O T A L S U P P L Y 3 ,9 2 8 ,6 8 9 3 ,8 8 0 ,5 2 7 1 8 ,2 9 2 1 8 ,3 0 7 7 ,2 1 4 ,3 4 1 7 ,0 9 3 ,5 1 9
E le c t ric P o w e r A u c ti o n - - 4 ,0 5 3 4 ,6 9 3 3 3 3 ,0 6 8 2 8 6 ,0 2 7
S h o rt -te r m e n e r gy - - 5 9 1 1 ,5 0 5 2 6 ,9 4 1 1 1 9 ,5 0 9
T O T A L S U P P L Y - - 4 ,6 4 4 6 ,1 9 8 3 6 0 ,0 0 9 4 0 5 ,5 3 6
O V E R A L L T O T A L 3 ,9 2 8 ,6 8 9 3 ,8 8 0 ,5 2 7 2 2 ,9 3 6 2 4 ,5 0 5 7 ,5 7 4 ,3 5 0 7 ,4 9 9 ,0 5 5
( 1 ) u n a u d it e d
C o n so li d a te d
N u m b e r o f B i ll e d S a le s ( 1)
G W h (1)
R $
27. OTHER OPERATING INCOME
0 1 / 0 1 to 1 2 / 3 1 2 0 0 8 2 0 0 7
T a x e d se rv i c e 1 8 ,5 1 5 8 ,4 3 4
In c o m e f ro m s e rv i c e s re n d e r e d 3 5 ,8 6 0 2 6 ,4 6 0
L e a s e s , re n t a ls a n d o th e r 2 9 ,3 7 1 4 4 ,1 0 8
In c o m e f ro m n e tw o rk u sa g e 5 8 0 ,5 5 2 5 6 0 ,3 0 8
6 6 4 ,2 9 8 6 3 9 ,3 1 0
C o n so l id a t e d
FEDERAL PUBLIC SERVICE
BRAZILIAN SECURITIES AND EXCHANGE COMMISSION (CVM)
STANDARDIZED FINANCIAL STATEMENTS (DFP)
COMMERCIAL, INDUSTRY AND OTHER TYPES OF COMPANIES
December 31, 2008 Brazilian Corporation Law
01987-9 LIGHT S.A. 03.378.521/0001-75
11.01 – NOTES TO THE FINANCIAL STATEMENTS
78
28. CONSUMER CHARGES (Operating Revenue Deductions)
0 1 / 0 1 to 1 2 / 3 1 2 0 0 8 2 0 0 7
T a x e s C h a rg e d fr o m C o n su m e rs - R G R (7 2 ,7 9 2 ) (6 3 ,5 0 1 )
C D E - C a sh (1 9 9 ,6 5 6 ) (2 0 4 ,5 2 8 )
C D E - C V A (4 0 ,8 4 5 ) 1 5 ,9 2 2
C D E - C V A A m o rt iz a t io n (1 1 ,0 2 0 ) (2 7 ,5 1 5 )
C C C - C a sh (2 3 5 ,9 7 3 ) (1 8 5 ,0 3 7 )
C C C - C V A 2 0 9 ,1 0 7 (1 0 0 ,5 5 4 )
C C C - C V A A m o rt iz a ti o n (1 1 ,9 6 9 ) (2 3 ,5 8 8 )
P E E - E n e r g y E ffi c ie n c y (2 5 ,3 6 7 ) (2 0 ,3 1 8 )
R & D - R e s e a rc h a n d D e v e lo p m e n t (1 1 ,2 2 8 ) (1 7 ,8 9 7 )
F N D C T - N a t io n a l D e v e l o p m e n t F u n d (1 0 ,9 8 5 ) (1 1 ,7 1 1 )
E P E - E n e r g y R e se a r c h C o m p a n y (5 ,6 8 3 ) (5 ,8 5 7 )
(4 1 6 ,4 1 1 ) (6 4 4 ,5 8 4 )
C o n so l id a t e d
29. ELECTRIC POWER PURCHASE AND SALE TRANSACTIONS THROUGH CCEE
The balances of electricity spot market sale and purchase transactions carried out through the
CCEE (former MAE) are as follows:
2 0 0 8
S h o r t -te r m s a le o f e n e r g y :
B a l a n c e re c e i v a b l e o n 1 2 /3 1 / 2 0 0 7 (N o t e 7 ) 1 6 ,6 9 1
B a l a n c e re c e i v a b l e o n 1 2 /3 1 / 2 0 0 8 (N o t e 7 ) 6 1 3
2 0 0 8
S h o r t -te r m p u r c h a s e o f e n e r g y :
B a l a n c e p a y a b le o n 1 2 / 3 1 /2 0 0 7 ( N o t e 1 4 ) (1 5 2 )
B a l a n c e p a y a b le o n 1 2 / 3 1 /2 0 0 8 ( N o t e 1 4 ) (1 3 ,1 1 7 )
30. OPERATING COSTS AND EXPENSES
0 1 / 0 1 to 1 2 /3 1 E l e c tr ic P o w e r O p e ra t io n S e l li n g G e n e ra l a n d A d m 2 0 0 8 2 0 0 7
N a t u re o f th e E x p e n s e
E le c t ri c it y P u rc h a se d fo r R e s a le ( N o t e 3 1 ) (3 ,0 6 3 ,1 7 7 ) - - - ( 3 ,0 6 3 ,1 7 7 ) ( 2 ,9 2 7 ,3 5 3 )
P e rso n n e l a n d M a n a g e m e n t - ( 1 4 1 ,9 6 4 ) (1 4 ,9 5 6 ) (8 0 ,0 2 2 ) ( 2 3 6 ,9 4 2 ) ( 2 5 3 ,9 0 9 )
M a t e ri a ls - ( 1 3 ,9 8 7 ) (1 ,1 1 4 ) (1 ,9 6 2 ) ( 1 7 ,0 6 3 ) ( 1 5 ,6 0 6 )
O u t so u r c e d S e rv i c e s - ( 1 2 0 ,5 2 6 ) (6 1 ,6 3 3 ) (9 4 ,5 9 4 ) ( 2 7 6 ,7 5 3 ) ( 2 7 3 ,2 1 2 )
A l lo w a n c e fo r D o u b t fu l A c c o u n ts - - (2 3 5 ,7 8 1 ) - ( 2 3 5 ,7 8 1 ) ( 1 9 9 ,5 2 4 )
P ro v i s io n f o r C o n ti n g e n c ie s - - - 3 4 ,6 2 8 3 4 ,6 2 8 ( 9 9 ,2 6 7 )
O t h e r - ( 1 6 ,3 6 4 ) (9 6 1 ) (4 8 ,6 6 9 ) ( 6 5 ,9 9 4 ) ( 8 5 ,6 9 5 )
(3 ,0 6 3 ,1 7 7 ) ( 2 9 2 ,8 4 1 ) (3 1 4 ,4 4 5 ) (1 9 0 ,6 1 9 ) ( 3 ,8 6 1 ,0 8 2 ) ( 3 ,8 5 4 ,5 6 6 )
D e p r e c ia t io n a n d A m o rt iz a t io n - ( 2 7 5 ,8 8 7 ) (1 ,0 3 1 ) (3 5 ,5 2 5 ) ( 3 1 2 ,4 4 3 ) ( 3 2 7 ,9 6 0 )
T o t a l (3 ,0 6 3 ,1 7 7 ) ( 5 6 8 ,7 2 8 ) (3 1 5 ,4 7 6 ) (2 2 6 ,1 4 4 ) ( 4 ,1 7 3 ,5 2 5 ) ( 4 ,1 8 2 ,5 2 6 )
C o n so l id a t e d
C o st o f S e rv i c e O p e r a ti n g E x p e n se s
FEDERAL PUBLIC SERVICE
BRAZILIAN SECURITIES AND EXCHANGE COMMISSION (CVM)
STANDARDIZED FINANCIAL STATEMENTS (DFP)
COMMERCIAL, INDUSTRY AND OTHER TYPES OF COMPANIES
December 31, 2008 Brazilian Corporation Law
01987-9 LIGHT S.A. 03.378.521/0001-75
11.01 – NOTES TO THE FINANCIAL STATEMENTS
79
31. ELECTRIC POWER PURCHASED FOR RESALE
0 1 / 0 1 to 1 2 / 3 1
2 0 0 8 2 0 0 7 2 0 0 8 2 0 0 7
Ita i p u 5 ,7 3 1 8 ,3 0 7 5 4 3 ,1 0 8 7 9 2 ,4 1 4
U T E N o r te F l u m i n e n se 6 ,3 6 8 6 ,3 5 1 7 9 3 ,1 0 5 8 0 1 ,5 8 4
O t h e r C o n tr a c ts a n d E l e c tr ic P o w e r A u c ti o n s 1 2 ,5 9 3 1 2 ,0 5 8 1 ,0 0 7 ,0 6 5 8 6 8 ,2 5 3
C V A (R e c o v e ra b l e C o s t V a ria tio n ) - - 1 1 8 ,2 0 0 9 8 ,4 6 2
S p o t M a rk e t E n e r gy 8 0 0 - 2 1 0 ,3 1 0 -
N e t w o r k U sa ge C h a r ge s - - 3 6 4 ,0 1 5 3 4 1 ,5 7 2
C o n n e c ti o n C h a r g e s - - 1 6 ,3 4 5 1 3 ,9 5 8
N a t io n a l E le c t ri c S ys t e m O p e ra t o r (O .N .S .) - - 1 1 ,0 2 9 1 1 ,1 1 0
2 5 ,4 9 2 2 6 ,7 1 6 3 ,0 6 3 ,1 7 7 2 ,9 2 7 ,3 5 3
C o n so l id a t e d
G W h(1 )
R $
(1) Unaudited
32.FINANCIAL INCOME
01/01 to 12/31 2008 2007 2008 2007
REVENUES
Income from temporary cash investments 704 289 69,902 43,370
Swap operations - - 12,909 15,481
Interest and variation in debts paid by installments - - 24,744 7,128
Arrears interest on electricity bills and debt paid by installments - - 68,751 43,358
Charges on CVA accounts and Portion A - - 30,667 40,638
Charges on tariff margin recovery - - 6,254 56,168
Charges on free energy transactions - - 3,154 31,962
Restatement of tax credits - - 44,965 6,382
Other 59 79 8,803 3,146
763 368 270,149 247,633
EXPENSES
Interest on loans and financing – local currency - - (201,035) (210,800)
Interest on loans and financing – foreign currency - - (17,319) (58,055)
Monetary variation – local currency - - (65) (1,702)
Exchange variation – foreign currency - - (36,450) 96,739
Swap Operations - - 1,610 (95,887)
Charges and monetary variations on actuarial liability of Braslight - - (225,371) (106,823)
Banking expenses (90) (2,035) (5,314) (49,220)
Restatement of provision for contingencies - - (59,893) (60,510)
Charges on free energy transactions - - (4,756) (33,039)
Charges on regulatory liabilities - - (19,271) (18,302)
Reversal of PIS/COFINS provision on financial revenue - - 432,358 -
Adjustment to present value - Accounts Receivable - - 10,830 11,168
Restatement of tax liabilities - - (45,018) (29,969)
Other (294) (249) (6,063) (7,201)
(384) (2,284) (175,757) (563,601)
NET FINANCIAL INCOME 379 (1,916) 94,392 (315,968)
Parent Company Consolidated
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80
33. FINANCIAL INSTRUMENTS
Below, we compared book and market values of Companies’ assets and liabilities:
B o o k V a l u e M a rk e t V a l u e B o o k V a l u e M a rk e t V a l u e
A S S E T S
T e m p o ra r y c a s h in v e s t m e n t s (N o t e 6 ) 5 4 9 ,0 9 7 5 4 9 ,0 9 7 4 0 1 ,3 4 6 4 0 1 ,3 4 6
S w a p s 1 1 ,0 8 3 1 1 ,0 8 3 - -
5 6 0 ,1 8 0 5 6 0 ,1 8 0 4 0 1 ,3 4 6 4 0 1 ,3 4 6
L IA B IL IT IE S
L o a n s a n d fin a n c in g (N o te 1 5 ) 1 ,1 4 0 ,2 7 6 1 ,1 5 2 ,7 6 1 8 5 8 ,7 4 6 8 7 7 ,1 1 9
D e b e n t u re s (N o t e 1 6 ) 9 7 9 ,1 2 5 9 7 9 ,1 2 5 1 ,0 4 3 ,8 7 8 1 ,0 4 3 ,8 7 8
S w a p s - - 1 0 ,1 3 0 1 0 ,1 7 7
2 ,1 1 9 ,4 0 1 2 ,1 3 1 ,8 8 6 1 ,9 1 2 ,7 5 4 1 ,9 3 1 ,1 7 4
C o n so li d a te dC o n so li d a te d
1 2 /3 1 / 2 0 0 8 1 2 /3 1 / 2 0 0 7
a) Policy for utilization of derivatives
The policy for utilization of derivative instruments approved by the Board of Directors
determines the debt service protection (principal plus interest and commissions) denominated
in foreign currency to mature within 24 months, forbidding any utilization for speculative
purposes, whether in derivatives or any other risk assets.
In line with provisions of this policy, the Company and its subsidiaries do not have futures
contracts, options, swaptions, swaps with regret option, flexible options, derivatives embedded
in other products, structure operations with derivatives and “exotic derivatives”. In addition, it
is evidenced through the chart above that the single derivative instrument used by the Company
and its subsidiaries is the non-cash currency swap (US$ versus CDI), whose Contractual
Notional Value corresponds to the amount of foreign currency-denominated debt service to
expire within 24 months, in line with the policy for the utilization of aforementioned
derivatives.
b) Risk management and objectives achieved
The management of derivative instruments is conducted by means of operating strategies,
aiming liquidity, profitability and safety. The control policy consists of permanently inspecting
the policy compliance in the utilization of derivatives, as well as to monitor the rates contracted
against those used in the market.
A strong currency devaluation verified in the last quarter did not impact on the Company’s
consolidated cash position and solvency, considering the exposure of the Company and its
subsidiaries to this currency compared to total indebtedness, associated with the fact that the
policy for utilization of derivatives has been fully complied with.
c) Classification and measurement of financial instruments:
Concerning the calculation of market value, below the following considerations:
Loans and receivables - consumers, concessionaires and permissionaires (clients) deriving
from subsidiaries operations, are classified as held to maturity and are recorded by their
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original values, subject to provision for losses and present value adjustment, where
applicable.
Suppliers are measured by the amortized cost method and therefore, recognized by their
original value.
Loans and financing: market values were calculated at interest rates applicable to
instruments with similar nature, maturities and risks, or based on market quotations of
these securities. The market values for BNDES financing are identical to accounting
balances, since there are no similar instruments, with comparable maturities and interest
rates. In case of debentures, book and market values are identical, as there is no liquid
trading market for these debentures as an accurate benchmark in the market calculation.
Swap operations: the determination of market value used available information in the
market and usual pricing methodology: the face value (notional) evaluation for long
position (in U.S. dollars) until maturity date and discounted at present value of clean
coupon rates, published in bulletins of Future and Commodities Exchange – BM&F.
It is worth mentioning that estimated market values of financial assets and liabilities were
determined considering information available on the market and appropriate valuation
methodologies. Nevertheless, meaningful judgment was required when interpreting market
data to produce the most appropriate market value estimate. As a result, estimates do not
necessarily indicate the amounts that may be realized in current exchange market.
d) Risk Factors
During the normal course of its businesses, the Company and its subsidiaries are exposed to the
market risks related to currency variations and interest rates, as evidenced in the chart below:
Debt breakdown (excluding financial charges):
R$ % R$ %
USD 165,310 7.8% 150,950 7.9%
Currency Basket BNDES 2,388 0.1% 3,122 0.2%
Foreign Currency (current and non-current) 167,698 7.9% 154,072 8.1%
CDI (Interbank Deposit Certificate) 1,486,084 70.1% 1,450,000 76.2%
TJLP (Long-Term Interest Rate) 454,816 21.5% 286,445 15.1%
Other 10,803 0.5% 12,107 0.6%
Local Currency (current and non-current) 1,951,703 92.1% 1,748,552 91.9%
Overall Total (current and non-current) 2,119,401 100.0% 1,902,624 100.0%
Consolidated
12/31/2008 12/31/2007
On December 31, 2008, according to the chart above, the foreign currency-denominated debt is
R$167,698, or 7.9% of total debt. Nevertheless, if we include financial charges, this amount
increases to R$170,421 (US$72,923, according to U.S. dollar quote of December 31,2008).
Financial derivative instruments were contracted for the amount of foreign currency-
denominated debt service to expire within 24 months, in the swap modality, whose notional
value on December 31, 2008 stood at US$22,995, according to the policy for utilization of
derivative instruments approved by the Board of Directors. Thus, if we deduct this amount
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from total foreign currency-denominated debt, the foreign exchange exposure represents 5.4%
of total debt.
Therefore, we provide a few considerations and analyses on risk factors impacting on business
of Grupo Light companies:
Currency risk
Considering that a portion of Light SESA’s loans and financing is denominated in foreign
currency, the Company uses derivative financial instruments (swap operations) to hedge
service associated with these debts (principal plus interest and commissions) to expire within
24 months. Derivative operations resulted in a R$12,228 gain in the fourth quarter of 2008
(R$9,253 loss in the fourth quarter of 2007) and in a gain of R$11,144 in 2008 (loss of
R$80,405 in 2007). The net amount of swap operations as of December 31, 2008 is positive in
R$11,084 (negative R$10,130 in 2007), as shown below:
In s titu t i o nL i g h t
R e c ei va b leL ig h t P a y ab l e S ta rt i n g Da te Ma tu r ity Da te
N o tio n a l V a lu e
C o n tra c te d
( U S $ th o us a n d )
Fa i r V a l u e
D e c/0 8
(R $ th o u sa n d )
A ss e ts
Fa i r V a lu e
D e c/0 8
(R $ th o u sa n d )
L ia b i li t ie s
Ita u US $ + 6 .2 % 1 0 0 % CD I 0 6/1 9 /0 7 0 1 /1 5 /0 9 4 2 1 3 -
I ta u US $ + 6 .1 % 1 0 0 % CD I 0 6/1 9 /0 7 0 2 /1 6 /0 9 4 1 1 3 -
U n ib a n co US $ + 6 .06 % 1 0 0 % CD I 0 6/1 9 /0 7 0 3 /1 1 /0 9 1 1 1 3 5 -
U n ib a n co US $ + 6 .07 % 1 0 0 % CD I 0 6/1 9 /0 7 0 4 /0 9 /0 9 6 ,9 3 5 2 ,2 1 7 -
B N P US $ + 6 .05 % 1 0 0 % CD I 0 6/1 9 /0 7 0 5 /1 5 /0 9 4 0 1 3 -
I ta u US $ + 6 .06 % 1 0 0 % CD I 0 6/1 9 /0 7 0 6 /0 5 /0 9 9 4 0 3 0 5 -
I ta u US $ + 6 .05 % 1 0 0 % CD I 0 6/1 9 /0 7 0 6 /2 6 /0 9 4 4 4 1 4 9 -
U n ib a n co US $ + 3 .3 % 1 0 0 % CD I 0 4/0 4 /0 8 0 7 /1 5 /0 9 3 6 1 9 -
U n ib a n co US $ + 3 .3 % 1 0 0 % CD I 0 4/0 4 /0 8 0 8 /1 7 /0 9 3 6 1 8 -
C it i b a nk US $ + 3 .32 % 1 0 0 % CD I 0 4/0 4 /0 8 0 9 /1 0 /0 9 7 3 3 7 -
U n ib a n co US $ + 3 .31 % 1 0 0 % CD I 0 4/0 4 /0 8 0 9 /1 5 /0 9 3 6 1 8 -
C it i b a nk US $ + 3 .4 % 1 0 0 % CD I 0 4/0 4 /0 8 1 0 /0 9 /0 9 6 ,2 7 5 3 ,1 6 4 -
U n ib a n co US $ + 3 .3 % 1 0 0 % CD I 0 4/0 4 /0 8 1 0 /1 5 /0 9 3 5 1 8 -
U n ib a n co US $ + 3 .35 % 1 0 0 % CD I 0 4/0 4 /0 8 1 1 /1 6 /0 9 3 5 1 7 -
C it i b a nk US $ + 3 .41 % 1 0 0 % CD I 0 4/0 4 /0 8 1 2 /0 8 /0 9 9 2 2 4 5 6 -
U n ib a n co US $ + 3 .4 % 1 0 0 % CD I 0 4/0 4 /0 8 1 2 /1 5 /0 9 3 4 1 7 -
C it i b a nk US $ + 3 .48 % 1 0 0 % CD I 0 4/0 4 /0 8 1 2 /2 8 /0 9 4 4 9 2 2 2 -
U n ib a n co US $ + 4 .42 % 1 0 0 % CD I 0 8/2 5 /0 8 0 1 /1 5 /1 0 3 2 2 1 -
U n ib a n co US $ + 4 .32 % 1 0 0 % CD I 0 8/2 5 /0 8 0 2 /1 7 /1 0 3 2 2 1 -
U n ib a n co US $ + 4 .32 % 1 0 0 % CD I 0 8/2 5 /0 8 0 3 /1 0 /1 0 7 0 4 7 -
U n ib a n co US $ + 4 .32 % 1 0 0 % CD I 0 8/2 5 /0 8 0 3 /1 5 /1 0 3 1 2 1 -
U n ib a n co US $ + 4 .53 % 1 0 0 % CD I 0 8/2 5 /0 8 0 4 /1 2 /1 0 5 ,8 8 9 3 ,9 4 0 -
U n ib a n co US $ + 4 .32 % 1 0 0 % CD I 0 8/2 5 /0 8 0 4 /1 5 /1 0 3 1 2 0 -
U n ib a n co US $ + 4 .45 % 1 0 0 % CD I 0 8/2 5 /0 8 0 6 /1 5 /1 0 4 2 6 2 8 3 -
To ta l 2 2 ,9 9 5 1 1 ,0 8 4 -
The amount recorded is already measured by its fair value on December 31, 2008. All
operations with derivative financial instruments are registered in clearing houses for the
custody and financial settlement of securities and there is no margin deposited in guarantee,
operations have no initial cost.
The sensitivity analysis for foreign exchange and interest rates fluctuations, showing eventual
impacts on financial result of the Company and its subsidiaries are presented below.
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The methodology used in the “Probable Scenario” was to consider the same behavior of foreign
exchange and interest rates verified in 2008, maintaining steady liabilities, derivatives and
financial investments on December 31, 2008. It is worth mentioning that the behavior of debt
and derivatives balances will observe their respective contracts, and the balance of temporary
cash investments will fluctuate according to the need or available funds of the Company and its
subsidiaries.
Exchange Rate Devaluation Risk (in local currency)
Operation Risk Probable
Scenario (I):
Scenario (II) Scenario (III)
FINANCIAL LIABILITIES
Par Bond USD (6,428) (19,598) (32,767)
Discount Bond USD (3,297) (12,199) (21,100)
Flirb USD (131) (724) (1,317)
C. Bond USD (4,432) (16,004) (27,577)
Debit. Conv. USD (1,866) (10,745) (19,624)
New Money USD (131) (716) (1,300)
Bib USD (101) (495) (890)
Bndes - Financ. Import Basket (220) (1,050) (1,880)
Societe Generale USD (391) (2,274) (4,156)
KfW USD (292) (1,674) (3,055)
DERIVATIVES
Swaps USD 14,521 28,542 42,629
Reference for financial assets and liabilities +25% +50%
2.3370 2.9213 3.5055
Exchange Rate Appreciation Risk (in local currency)
Operation Risk Probable
Scenario: (I)
Scenario (IV) Scenario (V)
FINANCIAL LIABILITIES
Par Bond USD (6,428) 6,741 19,911
Discount Bond USD (3,297) 5,604 14,506
Flirb USD (131) 462 1,055
C. Bond USD (4,432) 7,141 18,714
Debit. Conv. USD (1,866) 7,013 15,893
New Money USD (131) 453 1,038
Bib USD (101) 294 688
Bndes - Financ. Import Basket (220) 609 1,439
Societe Generale USD (391) 1,491 3,373
KfW USD (292) 1,089 2,470
DERIVATIVES
Swaps USD 14,521 367 (13,719)
Reference for financial assets and liabilities -25% -50%
R$/US$ Exchange Rate (End of the year) 2.3370 1.7528 1.1685
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Considering the chart above, it is possible to identify that despite partial hedge against foreign
currency-denominated debt (only limited to debt service to expire within 24 months), as
R$/US$ exchange rate increases, liabilities financial expense also increases but financial
revenues of derivatives also partially offset this negative impact and vice-versa. Thus, cash is
hedged due to the derivatives policy of the Company and its subsidiaries.
Interest rate risk
This risk derives from impact of interest rates fluctuation not only over financial expense
associated with loans and financing of subsidiaries, but also over financial revenues deriving
from financial investments. The policy for utilization of derivatives approved by the Board of
Directors does not comprise the contracting of instruments against such risk. Nevertheless, the
Company and its subsidiaries continuously monitor interest rates so that to evaluate eventual
need of contracting derivatives to hedge against interest rates volatility risk.
See below the sensitivity analysis of interest rate risk, evidencing the effects on variation
results in the scenarios:
Risk of Interest Rates Rise
Operation Risk Probable
Scenario: (I)
Scenario (II) Scenario (III)
FINANCIAL ASSETS
Temporary cash investments CDI 69,902 87,378 104,853
FINANCIAL LIABILITIES
Debentures 5th
Issue CDI (130,548) (157,967) (184,827)
CCB Bradesco CDI (60,864) (75,768) (90,962)
CCB Bco ABN Amro Banking S/A CDI (3,919) (4,751) (5,585)
Debentures 1st Issue TJLP (2,734) (3,171) (3,612)
Debentures 4th
Issue TJLP (377) (437) (498)
FINEM BNDES TJLP (33,984) (39,406) (44,893)
DERIVATIVES
Swaps CDI 14,521 13,591 12,653
Reference for FINANCIAL ASSETS +25% +50%
CDI (% accumulated in the year) 12.3% 15.4% 18.4%
Reference for FINANCIAL LIABILITIES +25% +50%
CDI (% accumulated in the year) 12.3% 15.4% 18.4%
TJLP (% accumulated in the year) 6.25% 7.81% 9.38%
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Risk of Interest Rate Drop
Operation Risk Probable
Scenario: (I)
Scenario (IV) Scenario (V)
FINANCIAL ASSETS
Temporary cash investments CDI 69,902 52,427 34,951
FINANCIAL LIABILITIES
Debentures 5th
Issue CDI (130,548) (101,992) (73,524)
CCB Bradesco CDI (60,864) (44,466) (30,672)
CCB Bco ABN Amro Banking S/A CDI (3,919) (3,036) (2,153)
Debentures 1st Issue TJLP (2,734) (2,357) (1,940)
Debentures 4th
Issue TJLP (377) (325) (267)
FINEM BNDES TJLP (33,984) (29,295) (24,108)
DERIVATIVES
Swaps CDI 14,521 15,479 16,429
Reference for FINANCIAL ASSETS -25% -50%
CDI (% accumulated in the year) 12.3% 9.2% 6.1%
Reference for FINANCIAL LIABILITIES -25% -50%
CDI (% accumulated in the year) 12.3% 9.2% 6.1%
TJLP (% accumulated in the year) 6.3% 4.7% 3.1%
Credit risk
It derives from the Company and its subsidiaries eventually suffering losses deriving from
default of counterparties or financial institutions depositary of funds or financial investments.
To mitigate these risks, the Company and its subsidiaries adopt the analysis of financial and
equity position of its counterparties as practice, as well as the definition of credit limits and
permanent monitoring of outstanding positions. Concerning financial institutions, the Company
and its subsidiaries only carry out operations with low-risk financial institutions classified by
rating agencies.
34. INSURANCE
On December 31, 2008, the Company and its subsidiaries had insurance covering its main
assets as follows:
Operational Risk Insurance – Covers property damages caused to buildings, machinery,
equipment, furniture and fixture as a result of fire, explosion, rubbish, flooding, earthquake,
loss of machinery and electric damages. All assets of Grupo Light are insured for operational
risks with all-risks coverage, except for transmission and distribution lines.
D&O Civil Liability Insurance – Protects executives from losses and damages resulting from
activities as Board members, Officers and managers of the Company.
Civil Liability and Blanket Insurance – Covers the payment of indemnity should the Company
be liable on a civil basis by means of an unappealable decision or an agreement authorized by
an insurance company related to indemnity for involuntary damages, physical damages to
individuals and/or property damages caused to third parties and related to pollution,
contamination or sudden leakage.
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International Transportation Insurance – Covers shipments of cargo/equipment, Financial
Guarantee Insurance – Sale of Energy (8 insurance policies) and Insurance against Fire on
Leased Properties.
The assumptions of risks adopted, given their nature, are not included in the scope of an audit,
accordingly, they were not audited by independent auditors.
Insurance coverage as of December 31, 2008 is considered sufficient by Management, as
summarized below:
A m o u n t
R IS K S F r o m T o In su r e d P r e m iu m
D i re c t o rs & O ff ic e r s (D & O ) 8 / 1 0 /2 0 0 8 8 / 1 0 /2 0 0 9 U S $ 3 0 .0 0 0 U S $ 8 4
C iv i l a n d G e n e ra l L ia b ili ti e s 9 / 2 5 /2 0 0 8 9 / 2 5 /2 0 0 9 R $ 1 8 ,2 7 7 R $ 5 0 4
O p e r a ti n g R i sk s 1 0 / 3 1 /2 0 0 8 1 0 / 3 1 /2 0 0 9 * R $ 2 .2 5 9 .1 7 6 R $ 1 ,1 0 8
* T h e m a x im u m l im it o f i n d e m n i fic a tio n (M L I) is R $ 3 4 8 ,8 9 2
E ff e c tiv e T e r m
The amounts mentioned (Insured Amount and Premium) of Civil Liability, Blanket and
Operating Risks Insurance were contracted as of this year in Reais in compliance with
provisions of CNPS Resolution nr.165/2007, which does not allow another foreign currency-
denominated contracting for these types of insurances.
35. ENVIRONMENTAL ISSUES
In view of commitment to sustainability declared in the Organization’s mission, Grupo Light
has been developed several initiatives and projects focused on environment. Among most
relevant actions, we point out:
- Reduction of Greenhouse Gas (GHG) Emissions (1): Light started a survey of greenhouse
gases related to its activities from 2006 to 2008. The results obtained will allow to study new
ways of reducing its emissions, in addition to those already practiced, such as reforestation of
degraded areas (1,180 ha until 2008) and generation of energy by renewable sources.
- Waste Management (1): Two waste centrals were implemented at units Rua Larga and Frei
Caneca to manage solid waste and set them aside for recycling, which has been improving the
efficiency of selective collection and decreasing generation of garbage.
- Environmental Management System (SGA) (1): SGA aims at managing environmental
aspects and impacts, as well as the compliance with the Environmental Policy, employees
awareness and training, among others. By the end of 2008, Light had already 182 certified
facilities, and has undergone three re-certification processes, from the implementation of SGA
in 2001.
- Reutilization of consumption materials (1): Concerned with reducing the purchase of
materials, in order to preserve the global resources basis, Light has been using materials
deriving from recycling, pointing out a great advance in the amount of recycled paper used that
reached 97% of total amount consumed. Equipment, such as transformers and meters are also
sent for repair, achieving a total of 77% and 65% of amount consumed, respectively.
- Energy Efficiency (1): Since 1999, when Energy Efficiency Programs have started, the
Company and its subsidiaries invested in the development of 139 projects that provided energy
savings of 478.4 GWh/year, approximately 3% of Light’s captive market consumption in 2008.
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This result derives from the implementation of projects that use most modern and efficient
technologies, such as the improvement or modernization in production processes and
replacement of obsolete equipment. Accumulated energy savings until 2008 corresponds to the
average consumption of approximately 250 thousand households during one-year period,
which corresponds to residential consumption of a city with 1 million inhabitants.
In addition to these initiatives, 550km of conventional networks were replaced with protected
networks in 2008 aiming at decreasing conflict between network and trees, as well as the
excessive consumption of timber.
These initiatives contributed to Light continuing being included in the ISE Bovespa portfolio
since 2007.
In 2008, amounts invested in the projects mentioned above amounted to R$16,770, being
R$6,010 earmarked for investment projects and R$10,760 for operating expenses.
(1) Unaudited information.
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36. STATEMENT OF INCOME BY COMPANY
01/01 to 12/31 Light SESA Light Energia Light SA Light ESCO Removals
Consolidated
2008
Consolidated
2007
OPERATING REVENUE 7,893,652 346,728 - 95,650 (97,382) 8,238,648 8,138,365
Billed sales 7,227,091 - - - - 7,227,091 7,093,519
Unbilled sales (12,750) - - - - (12,750) -
Supply – Electric Power 10,742 341,299 - 77,596 (69,628) 360,009 405,536
Other 668,569 5,429 - 18,054 (27,754) 664,298 639,310
REVENUES DEDUCTION (2,792,564) (42,225) - (17,215) - (2,852,004) (3,145,987)
Billed sales - ICMS (state VAT) (1,935,264) (307) - (13,447) - (1,949,018) (1,927,228)
Consumer charges (405,122) (11,289) - - - (416,411) (644,584)
PIS (tax on revenues) (78,020) (5,460) - (556) - (84,036) (89,219)
COFINS (tax on revenues) (377,432) (25,158) - (2,570) - (405,160) (410,955)
COFINS - CVA - Amortization 5,192 - - - - 5,192 (71,709)
Other (1,918) (11) - (642) - (2,571) (2,292)
NET OPERATING REVENUE 5,101,088 304,503 - 78,435 (97,382) 5,386,644 4,992,378
OPERATING EXPENSES (4,053,064) (122,879) (26,446) (68,518) 97,382 (4,173,525) (4,182,524)
Personnel (191,354) (18,987) (24,756) (1,845) - (236,942) (253,909)
Materials (14,216) (790) (71) (1,986) - (17,063) (15,606)
Outsourced services (256,993) (12,259) (1,208) (6,293) - (276,753) (273,211)
Energy purchased (3,060,020) (42,887) - (57,333) 97,063 (3,063,177) (2,927,353)
Depreciation (287,057) (24,772) - (614) - (312,443) (327,960)
Provisions (201,131) (22) - - - (201,153) (298,791)
Other (42,293) (23,162) (411) (447) 319 (65,994) (85,694)
Equity Method - - 1,023,996 - (1,023,996) - -
FINANCIAL INCOME 159,186 (65,989) 379 816 - 94,392 (315,968)
Financial Revenues 334,533 8,163 763 1,179 - 344,638 247,633
Financial Expenses (175,347) (74,152) (384) (363) - (250,246) (563,601)
OPERATING INCOME 1,207,210 115,635 997,929 10,733 (1,023,996) 1,307,511 493,886
NON-OPERATING INCOME - - - - - - 11,312
Non-operating Revenues - - - - - - 17,888
Non-operating Expenses - - - - - - (6,576)
INCOME BEFORE TAXES 1,207,210 115,635 997,929 10,733 (1,023,996) 1,307,511 505,198
Social Contribution (65,656) (10,285) - (1,801) - (77,742) 174,171
Income Tax (194,135) (27,516) - (2,138) - (223,789) 427,804
INCOME AFTER TAXES 947,419 77,834 997,929 6,794 (1,023,996) 1,005,980 1,107,173
Employees profit sharing (29,255) (1,733) (25) (514) - (31,527) (32,843)
NET RESULT 918,164 76,101 997,904 6,280 (1,023,996) 974,453 1,074,330
FEDERAL PUBLIC SERVICE
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STANDARDIZED FINANCIAL STATEMENTS (DFP)
COMMERCIAL, INDUSTRY AND OTHER TYPES OF COMPANIES
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37. TARIFF REVIEW
Result of second periodic tariff review of Light SESA:
At a public meeting held on November 4, 2008, ANEEL established, temporarily, the structural
tariff repositioning of Light Serviços de Eletricidade S/A at 1.96%, which took effect on
November 7, 2008. Considering the 2.30% financial additions, the tariff’s impact was 4.27%.
In view of the tariff basis withdraw of a -0.41% financial component that had been added to the
2007 annual readjustment, the average effect on the tariff to be acknowledged by the
consumers corresponded to 4.70%.
Regarding the financial additions, it is worth pointing out that ANEEL granted the
administrative appeal filed by Light concerning its 2007 readjustment. Through such appeal the
Company requested the recalculation of energy tariff costs for the periods of 2005 and 2006.
The impact of this decision was R$76.8 million (additional tariff of 1.48%, effective for 12
months), distributed according to ANEEL methodology that used the CVA participation in the
2007 adjustment as basis to prorate the amounts receivable and payable related to CVA. This
resulted in an increase of amounts recorded in CVA-CCC assets and amounts recorded in
CVA-Energy liabilities and CVA-CDE (see chart in the Note 5-b).
The tariff review process showed the following main results: the tariff repositioning that
established tariffs compatible with the coverage of efficient operating costs and the
remuneration over prudent investments and; the X Factor that established productivity goals
for the subsequent tariff period.
Concerning the calculation of tariff repositioning, ANEEL determines: (i) efficient operating
costs, using the Benchmark Company methodology – ER, (ii) prudent investments, using the
Regulatory Remuneration Basis, (iii) level of regulatory losses to be transferred to consumers
and (iv) non-manageable costs, which represent the Portion A.
The table below presents the results for Light’s tariff repositioning.
2008 Tariff Review Amount (R$ thousand)
1.Verified Revenue 5,102,841
2.Required Revenue (Portion A + Portion B) 5,222,228
Portion A 3,531,847
Purchase of Energy 2,455,572
Sector Charges 643,772
Transportation of Electric Power 432,503
Portion B 1,690,381
Benchmark Company 575,868
Delinquency 66,737
Capital Remuneration 704,485
Reinstatement Quota 343,291
3.Other Revenues 19,221
4.Required Net Revenue (2-3) 5,203,007
5.Tariff Repositioning [(4-1)/1] 1.96%
6.Financial Components 119,817
7.Tariff Repositioning with financial effects (5+6/4) 4.27%
It is worth mentioning that the level of regulatory losses and the calculation of efficient
operating costs (Benchmark Company and Default) are provisional.
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ANEEL temporarily established a component Xe of X Factor, to be applied as reducer, in real
terms, of Portion B in the subsequent tariff readjustments, from 2009 to 2012, at 0%.
With the conclusion of methodology improvements for the second cycle of tariff reviews on
November 25,2008, definite amounts will be established after resolution of the Public Enquiry
process, expected for April 2009.
38. LONG-TERM INCENTIVE PLAN
The Company’s Long-Term Incentive Plan was approved at the Extraordinary General Meeting
as of March 3, 2008, under the mode of Stock Option Plan and the mode “Phantom Options”,
in order to: (i) attract and retain executives; (ii) align the executives’ interests with objectives
and interests of shareholders; (iii) share the success and creating value with executives; and (iv)
develop sustainability and long-term vision.
a) Stock Incentive Plan
The eligible beneficiaries of the Stock Option Plan mode are the Company’s current executive
officers, since they had not been appointed by the Board of Directors to be part of the Long-
Term Incentive Plan in the mode “Phantom Options”. Options granted up to December 31,
2008 totaled 6,917,733, equivalent to 3.4% of total shares issued by the Company, and the
exercise price to be paid by the holders is R$21.49 per Option, deducted from eventual
amounts paid per share to shareholders as dividends, interest on capital or capital reduction.
These options can be fully exercised, in a sole opportunity, between August 10, 2010 and
August 10, 2011.
The Company’s Long-Term Incentive Plan, under the mode of Stock Option will be settled
with the delivery of equity instruments, which were measured by fair value on the granting
date, based on respective market price of these instruments (R$9.54 on March 3, 2008). The
pricing model used to measure the market price was Black & Scholes. For this calculation,
assumptions were used the Management deemed as appropriate, considering the volatility of a
previous year to the granting date, the exercise price provided for in the plan, as reported above
and the market price on the granting date.
Light S.A., pursuant to CVM Resolution nr.562 issued on December 17, 2008, recorded an
increase of R$22,459 in its shareholders’ equity, under capital reserves, corresponding to the
vesting period already incurred until December 31, 2008.
b) “Phantom Options” Incentive Plan
The “Phantom Options” mode will be offered to eligible officers appointed by the Board of
Directors and is directly related to the creation of Light value, calculated by means of Light
Unit Value (LUV) variation. The calculation of LUV results from the weighting of the
following factors:
1. Market value of Light S.A. shares;
2. Economic value (EBITDA multiple);
3. Amount of distributed dividends.
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The difference between LUV provided for in the Program for the granting year and the LUV
verified in the year of exercise multiplied by the amount of options exercised by participant
will amount total long-term bonus to be paid to each participant.
The Plan will be offered in three consecutive programs in 2008, 2009 and 2010 and the total
amount of Options shall not exceed the total gross amount of R$18,150.
The program approved for 2008 includes 1,540,146 “Phantom Options”, accounting for,
approximately, R$16,000. The participant cannot exercise any Option up to December 31,
2010, and as of this date the participant may exercise up to 50% of their Options in the first
following year (2011), plus 25% of their Options in the second following year (2012) and in
the following third year (2013) the participant can exercise all their remaining Options.
The Company accrued the amount of R$4,346 on December 31,2008 related to the 2008
program, in conterpart to the item of personnel expenses.
39. SUMMARY OF THE DIFFERENCES BETWEEN BRAZILIAN GAAP AND IFRS
39.1 Basis of preparation
Light’s consolidated annual accounts as of and for the year ended December 31, 2008 were
prepared in accordance with Generally Accepted Accounting Practices in Brazil (hereon,
“Brazilian GAAP”), which differ in certain significant aspects from International Financial
Reporting Standards.
Light prepared the accompanying consolidated annual accounts for 2008 in accordance with
IFRS and In accordance with a waiver received from the BM&FBovespa, dated December 19,
2008, Light is not obliged to disclose (a) comparative information for the year ended December
31, 2007 and (b) additional disclosures that might be required under IFRS, on top of Brazilian
GAAP disclosures included in these consolidated financial statements.
Reconciliations and descriptions of the effect of the transition from Brazilian GAAP to IFRS
on Light’s equity and net income are provided in Note 4.3.
The consolidated financial statements present a true and fair view of the consolidated equity
and consolidated financial position of Light at December 31, 2008, as well as the consolidated
results of its operations, the variations in the statements of consolidated net equity and
consolidated cash flows, which have occurred in Light in the year ended on said date.
The consolidated annual accounts for 2008 of Light have been prepared on the basis of the
accounting records of Light and its subsidiaries forming part of the Group Light. Each
company prepares its annual accounts following the general accounting practices and
accordingly, the adjustments and reclassifications necessary to homogenize said practices and
criteria in order to adapt them to IFRS have been introduced. The accounting practices of the
consolidated companies have been modified where necessary in order to assure that they are
consistent with the accounting policies adopted by Light.
.
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39.2 Accounting policies applied
The first IFRS reconciliation of LIGHT are prepared using accounting policies that comply
with the standards in force at December 31, 2008, the reporting date. Standards in force are
those that are published by IASB and are mandatory for accounting periods beginning on or
after January 1, 2008.
The described accounting policies have been consistently applied by Group companies and are
consistent with those used in the opening balance sheet prepared at the transition date.
39.3 New accounting standards and IFRIC interpretations effective for future accounting
periods as detailed below
Certain new accounting standards and IFRIC interpretations have been published that are
mandatory for accounting periods beginning on or after January 1, 2009. Light’s assessment of
the impact of these new standards and interpretations is set out below.
IAS 23 (Amendment), ‘Borrowing costs’ (effective from 1 January 2009)
The amendment requires an entity to capitalize borrowing costs directly attributable to the
acquisition, construction or production of a qualifying asset (one that takes a substantial period
of time to get ready for use or sale) as part of the cost of that asset. The option of immediately
expensing those borrowing costs will be removed. The Group will apply IAS 23 (Amendment)
prospectively from 1 January 2009.
IAS 23 (Amendment), ‘Borrowing costs’ (effective from 1 January 2009)
The amendment is part of the IASB’s annual improvements project published in May 2008.
The definition of borrowing costs has been amended so that interest expense is calculated using
the effective interest method defined in IAS 39 ‘Financial instruments: Recognition and
measurement’. This eliminates the inconsistency of terms between IAS 39 and IAS 23.
The Group will apply the IAS 23 (Amendment) prospectively to the capitalization of
borrowing costs on qualifying assets from 1 January 2009.
IAS 1 (Revised), ‘Presentation of financial statements’ (effective from 1 January 2009)
The revised standard will prohibit the presentation of items of income and expenses (that is,
‘non-owner changes in equity’) in the statement of changes in equity, requiring ‘non-owner
changes in equity’ to be presented separately from owner changes in equity. All non-owner
changes in equity will be required to be shown in a performance statement, but entities can
choose whether to present one performance statement (the statement of comprehensive income)
or two statements (the income statement and statement of comprehensive income). Where
entities restate or reclassify comparative information, they will be required to present a restated
balance sheet as at the beginning comparative period in addition to the current requirement to
present balance sheets at the end of the current period and comparative period.
The Group will apply IAS 1 (Revised) from 1 January 2009. It is not expected to have a
material impact on the group’s financial statements.
IAS 1 (Amendment), ‘Presentation of financial statements’ (effective from 1 January 2009)
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The amendment is part of the IASB’s annual improvements project published in May 2008.
The amendment clarifies that some rather than all financial assets and liabilities classified as
held for trading in accordance with IAS 39, ‘Financial instruments: Recognition and
measurement’ are examples of current assets and liabilities respectively.
The Group will apply the IAS 1 (Amendment) from 1 January 2009. It is not expected to have
an impact on the group’s financial statements.
IFRS 2 (Amendment), ‘Share-based payment’ (effective from 1 January 2009)
The amended standard deals with vesting conditions and cancellations. It clarifies that vesting
conditions are service conditions and performance conditions only. Other features of a share-
based payment are not vesting conditions. These features would need to be included in the
grant date fair value for transactions with employees and others providing similar services; they
would not impact the number of awards expected to vest or valuation thereof subsequent to
grant date. All cancellations, whether by the entity or by other parties, should receive the same
accounting treatment.
The Group will apply IFRS 2 (Amendment) from 1 January 2009. It is not expected to have a
material impact on the group’s financial statements.
IAS 32 (Amendment), ‘Financial instruments: Presentation’, and IAS 1 (Amendment),
‘Presentation of financial statements’ – ‘Puttable financial instruments and obligations arising
on liquidation’ (effective from 1 January 2009)
The amended standards require entities to classify puttable financial instruments and
instruments, or components of instruments that impose on the entity an obligation to deliver to
another party a pro-rata share of the net assets of the entity only on liquidation as equity,
provided the financial instruments have particular features and meet specific conditions.
The Group will apply the IAS 32 and IAS 1(Amendment) from 1 January 2009. It is not
expected to have any impact on the group’s financial statements.
IFRS 1 (Amendment) ‘First time adoption of IFRS’, and IAS 27 ‘Consolidated and
separate financial statements’(effective from 1 January 2009)
The amended standard allows first-time adopters to use a deemed cost of either fair value or the
carrying amount under previous accounting practice to measure the initial cost of investments
in subsidiaries, jointly controlled entities and associates in the separate financial statements.
The amendment also removes the definition of the cost method from IAS 27 and replaces it
with a requirement to present dividends as income in the separate financial statements of the
investor.
The amendment will not have any impact on the Group’s financial statements.
IAS 27 (Revised), ‘Consolidated and separate financial statements’, (effective from 1 July
2009)
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The revised standard requires the effects of all transactions with noncontrolling interests to be
recorded in equity if there is no change in control and these transactions will no longer result in
goodwill or gains and losses. The standard also specifies the accounting when control is lost.
Any remaining interest in the entity is re-measured to fair value, and a gain or loss is
recognised in profit or loss.
The Group will apply IAS 27 (Revised) prospectively to transactions with non-controlling
interests from 1 January 2010.
IAS 27 (Amendment), ‘Consolidated and separate financial statements’ (effective from 1
January 2009)
The amendment is part of the IASB’s annual improvements project published in May 2008.
Where an investment in a subsidiary that is accounted for under IAS 39, ‘Financial
instruments: recognition and measurement’, is classified as held for sale under IFRS 5, ‘Non-
current assets held-for-sale and discontinued operations’, IAS 39 would continue to be applied.
The amendment will not have an impact on the Group’s operations because it is the group’s
policy for an investment in subsidiary to accounted for using the equity method, in the
standalone accounts of each entity, as permitted in Brazilian GAAP.
IFRS 3 (Revised), ‘Business combinations’ (effective from 1 July 2009)
The revised standard continues to apply the acquisition method to business combinations, with
some significant changes. For example, all payments to purchase a business are to be recorded
at fair value at the acquisition date, with contingent payments classified as debt subsequently
re-measured through the income statement. There is a choice on an acquisition-by-acquisition
basis to measure the non-controlling interest in the acquiree either at fair vale or at the non-
controlling interest’s proportionate share of the acquiree’s net assets. All acquisition-related
costs should be expensed.
The Ggroup will apply IFRS 3 (Revised) prospectively to all business combinations from 1
January 2010.
IFRS 5 (Amendment), ‘Non-current assets held-for-sale and discontinued operations’ (and
consequential amendment to IFRS 1, ‘First-time adoption’) (effective from 1 July 2009)
The amendment is part of the IASB’s annual improvements project published in May 2008.
The amendment clarifies that all of a subsidiary’s assets and liabilities are classified as held for
sale if a partial disposal sale plan results in loss of control. Relevant disclosure should be made
for this subsidiary if the definition of a discontinued operation is met. A consequential
amendment to IFRS 1 states that these amendments are applied prospectively from the date of
transition to IFRS.
The Group will apply the IFRS 5 (Amendment) prospectively to all partial disposals of
subsidiaries from 1 January 2010.
IAS 28 (Amendment), ‘Investments in associates’ (and consequential amendments to IAS 32,
‘Financial Instruments: Presentation’, and IFRS 7, ‘Financial instruments:
Disclosures’) (effective from 1 January 2009)
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The amendment is part of the IASB’s annual improvements project published in May 2008. An
investment in associate is treated as a single asset for the purposes of impairment testing. Any
impairment loss is not allocated to specific assets included within the investment, for example,
goodwill. Reversals of impairment are recorded as an adjustment to the investment balance to
the extent that the recoverable amount of the associate increases.
The Group will apply the IAS 28 (Amendment) to impairment tests related to investments in
subsidiaries and any related impairment losses when applicable from 1 January 2009.
IAS 36 (Amendment), ‘Impairment of assets’ (effective from 1 January 2009)
The amendment is part of the IASB’s annual improvements project published in May 2008.
Where fair value less costs to sell is calculated on the basis of discounted cash flows,
disclosures equivalent to those for value-in-use calculation should be made.
The Group will apply the IAS 36 (Amendment) and provide the required disclosure where
applicable for impairment tests from 1 January 2009.
IAS 38 (Amendment), ‘Intangible assets’(effective from 1 January 2009)
The amendment is part of the IASB’s annual improvements project published in May 2008. A
prepayment may only be recognized in the event that payment has been made in advance of
obtaining right of access to goods or receipt of services.
The Group will apply the IAS 38 (Amendment) from 1 January 2009. The amendment will not
have any impact on the group’s financial statements.
IAS 19 (Amendment), ‘Employee benefits’ (effective from 1 January 2009)
The amendment is part of the IASB’s annual improvements project published in May 2008.
The amendment clarifies that a plan amendment that results in a change in the extent to which
benefit promises are affected by future salary increases is a curtailment, while an amendment
that changes benefits attributable to past service gives rise to a negative past service cost if it
results in a reduction in the present value of the defined benefit obligation.
The definition of return on plan assets has been amended to state that plan administration costs
are deducted in the calculation of return on plan assets only to the extent that such costs have
been excluded from measurement of the defined benefit obligation.
The distinction between short term and long term employee benefits will be based on whether
benefits are due to be settled within or after 12 months of employee service being rendered.
IAS 37, ‘Provisions, contingent liabilities and contingent assets, requires contingent liabilities
to be disclosed, not recognized. IAS 19 has been amended to be consistent.
The Group will apply the IAS 19 (Amendment) from 1 January 2009.
IAS 39 (Amendment), ‘Financial instruments: Recognition and measurement’ (effective from 1
January 2009).
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The amendment is part of the IASB’s annual improvements project published in May 2008.
This amendment clarifies that it is possible for there to be movements into and out of the fair
value through profit or loss category where a derivative commences or ceases to qualify as a
hedging instrument in cash flow or net investment hedge.
The definition of financial asset or financial liability at fair value through profit or loss as it
relates to items that are held for trading is also amended. This clarifies that a financial asset or
liability that is part of a portfolio of financial instruments managed together with evidence of
an actual recent pattern of short-term profit-taking is included in such a portfolio on initial
recognition.
The current guidance on designating and documenting hedges states that a hedging instrument
needs to involve a party external to the reporting entity and cites a segment as an example of a
reporting entity. This means that in order for hedge accounting to be applied at segment level,
the requirements for hedge accounting are currently required to be met by the applicable
segment. The amendment removes the example of a segment so that the guidance is consistent
with IFRS 8, ‘Operating segments’, which requires disclosure for segments to be based on
information reported to the chief operating decision-maker. Currently, for segment reporting
purposes, each subsidiary designates contracts with group treasury as fair value or cash flow
hedges so that the hedges are reported in the segment to which the hedged items relate. This is
consistent with the information viewed by the chief operating decision-maker. See note 3.1 for
further details. After the amendment is effective, the hedge will continue to be reflected in the
segment to which the hedged items relate (and information provided to the chief operating
decision-maker).
When re-measuring the carrying amount of a debt instrument on cessation of fair value hedge
accounting, the amendment clarifies that a revised effective interest rate (calculated at the date
fair value hedge accounting ceases) are used.
The group will apply the IAS 39 (Amendment) from 1 January 2009. It is not expected to have
an impact on the group’s income statement.
IAS 16 (Amendment), ‘Property, plant and equipment’ (and consequential amendment to IAS
7, ‘Statement of cash flows’) (effective from 1 January 2009)
The amendment is part of the IASB’s annual improvements project published in May 2008.
Entities whose ordinary activities comprise renting and subsequently selling assets present
proceeds from the sale of those assets as revenue and should transfer the carrying amount of the
asset to inventories when the asset becomes held for sale. A consequential amendment to IAS 7
states that cash flows arising from purchase, rental and sale of those assets are classified as
cash flows from operating activities.
The amendment will not have an impact on the group’s operations because none of the group’s
companies ordinary activities comprise renting and subsequently selling assets.
IAS 28 (Amendment), ‘Investments in associates’ (and consequential amendments to IAS 32,
‘Financial Instruments: Presentation’ and IFRS 7, ‘Financial instruments: Disclosures’)
(effective from 1 January 2009)
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The amendment is part of the IASB’s annual improvements project published in May 2008.
Where an investment in associate is accounted for in accordance with IAS 39 ‘Financial
instruments: recognition and measurement’, only certain rather than all disclosure requirements
in IAS 28 need to be made in addition to disclosures required by IAS 32, ‘Financial
Instruments: Presentation’ and IFRS 7 ‘Financial Instruments: Disclosures’.
The amendment will not have an impact on the group’s operations because it is the group’s
policy for an investment in an associate to be equity accounted in the group’s consolidated
accounts.
IAS 29 (Amendment), ‘Financial reporting in hyperinflationary economies’ (effective from 1
January 2009)
The amendment is part of the IASB’s annual improvements project published in May 2008.
The guidance has been amended to reflect the fact that a number of assets and liabilities are
measured at fair value rather than historical cost.
The amendment will not have an impact on the Group’s operations, as none of the group’s
subsidiaries or associates operate in hyperinflationary economies.
IAS 31 (Amendment), ‘Interests in joint ventures’ (and consequential amendments to IAS 32
and IFRS 7) (effective from 1 January 2009)
The amendment is part of the IASB’s annual improvements project published in May 2008.
Where an investment in joint venture is accounted for in accordance with IAS 39, only certain
rather than all disclosure requirements in IAS 31 need to be made in addition to disclosures
required by IAS 32, ‘Financial instruments: Presentation’, and IFRS 7 ‘Financial instruments:
Disclosures’.
The Group will apply the amendment where applicable for special purpose entities and
consortiums from 1 January 2009.
IAS 38 (Amendment), ‘Intangible assets’ (effective from 1 January 2009)
The amendment is part of the IASB’s annual improvements project published in May 2008.
The amendment deletes the wording that states that there is ‘rarely, if ever’ support for use of a
method that results in a lower rate of amortization than the straight-line method.
The amendment will not have an impact on the group’s operations, as all intangible assets are
amortized using the straight-line method.
IAS 40 (Amendment), ‘Investment property’ (and consequential amendments to IAS 16)
(effective from 1 January 2009)
The amendment is part of the IASB’s annual improvements project published in May 2008.
Property that is under construction or development for future use as investment property is
within the scope of IAS 40. Where the fair value model is applied, such property is, therefore,
measured at fair value. However, where fair value of investment property under construction is
not reliably measurable, the property is measured at cost until the earlier of the date
construction is completed and the date at which fair value becomes reliably measurable.
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The amendment will not have an impact on the group’s operations, as there are no investment
properties are held by the Group.
IAS 41 (Amendment), ‘Agriculture’ (effective from 1 January 2009)
The amendment is part of the IASB’s annual improvements project published in May 2008. It
requires the use of a market-based discount rate where fair value calculations are based on
discounted cash flows and the removal of the prohibition on taking into account biological
transformation when calculating fair value.
The amendment will not have an impact on the Group’s operations as no agricultural activities
are undertaken.
IAS 20 (Amendment), ‘Accounting for government grants and disclosure of
government assistance’ (effective from 1 January 2009)
The benefit of a belowmarket rate government loan is measured as the difference between the
carrying amount in accordance with IAS 39, ‘Financial instruments: Recognition and
measurement’, and the proceeds received with the benefit accounted for in accordance with
IAS 20.
The Group will apply the IAS 39 (Amendment) from 1 January 2009. It is not expected to have
an impact on the group’s financial statements.
IFRIC 15, ‘Agreements for construction of real estates’ (effective from 1 January 2009)
The interpretation clarifies whether IAS 18, ‘Revenue’, or IAS 11, ‘Construction contracts’,
should be applied to particular transactions. It is likely to result in IAS 18 being applied to a
wider range of transactions.
IFRIC 15 is not relevant to the group’s operations as all revenue transactions are accounted for
under IAS 18 and not IAS 11.
Other amendments
There are a number of minor amendments to IFRS 7, ‘Financial instruments: Disclosures’, IAS
8, ‘Accounting policies, changes in accounting estimates and errors’, IAS 10, ‘Events after the
reporting period’, IAS 18, ‘Revenue’ and IAS 34, ‘Interim financial reporting’, which are part
of the IASB’s annual improvements project published in May 2008 (not addressed above).
Further minor amendments to IAS 20 ‘Accounting for government grants and disclosure of
government assistance’, and IAS 29, ‘Financial reporting in hyperinflationary economies’, IAS
40, ‘Investment property’, and IAS 41, ‘Agriculture’, which are part of the IASB’s annual
improvements project published in May 2008 (not addressed above).
These amendments are unlikely to have an impact on the group’s accounts and have therefore
not been analyzed in detail.
39.4 Transition to IFRS
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STANDARDIZED FINANCIAL STATEMENTS (DFP)
COMMERCIAL, INDUSTRY AND OTHER TYPES OF COMPANIES
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The BM&FBOVESPA S.A. - Bolsa de Valores, Mercadorias e Futuros(hereon
“BM&FBOVESPA”) in its Regulamento de Listagem de Novo Mercado sets down that all the
listed companies shall, starting two reporting periods after listing on Novo Mercado, present
their consolidated financial statements (a) according to International Financial Reporting
Standards – IFRS, as issued by the International Accounting Standards Board – IASB, or
alternatively (b) according to United States Generally Accepted Accounting Principles (US
GAAP) as issued by Financial Accounting Standards Board (FASB) or alternatively (c)
according to Brazilian GAAP with a reconciliation note to IFRS or US GAAP.
On February 16, 2006 the common shares of Light became listed on Novo Mercado and
therefore for the reporting period ending December 31, 2008, Light opted for (c) presenting
Brazilian GAAP consolidated financial statements with a reconciliation of P&L and
shareholders’ equity to IFRS.
The consolidated financial statements for 2007 were prepared in accordance with the Brazilian
GAAP. The accounting principles included in these financial statements have been taken into
consideration as the “Former Generally Accepted Accounting Principles”, as defined in IFRS
1, for the preparation of the opening consolidated balance sheet as at January 1, 2007 (date of
transition).
These consolidated annual accounts have been prepared as described in note 4.3. Light has
applied IFRS 1 in order to prepare these consolidated annual accounts, applying all the
obligatory exceptions and some of the optional exemptions from retroactive application of
IFRS.
The Company prepared the opening balance sheet at transition date, January 1, 2007 and
adopted IFRS on January 1, 2008. The financial statements as at and for the year ended
December 31, 2008 are the first reconciliation between Brazilian GAAP with IFRS.
In the process of first time adoption of IFRS the Company prepared an opening balance sheet at
January 1, 2007, being the date of transition to IFRS, Selected accounting policies that comply
with IFRS; applied those policies retrospectively to all of the periods presented in the first
IFRS financial statements; Considered whether to apply any of the 15 optional exemptions
from retrospective application; Applied the five mandatory exceptions from retrospective
application; and prepared extensive disclosures to explain the transition to IFRS.
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39.4.1 IFRIC 12 Service Concession Arrangements (Issued 30 November 2006)
This interpretation addresses how service concession operators should apply existing IFRS to
account for the obligations they undertake and rights they receive in service concession
arrangements. It does not address accounting for the government side of service concession
arrangements. IFRIC 12 is effective for annual periods beginning on or after 1 January 2008.
The interpretation was endorsed by EFRAG on March 25, 2009. It is applicable to Light as is
involved in service concession arrangements.
In accordance with IFRIC 12, infrastructure within the scope of this Interpretation shall not be
recognized as property, plant and equipment of the operator because the contractual service
arrangement does not convey the right to control the use of the public service infrastructure to
the operator. The operator has access to operate the infrastructure to provide the public service
on behalf of the grantor in accordance with the terms specified in the contract. IFRIC 12 sets
out general principles on recognizing and measuring the obligations and related rights in
service concession arrangements. Application of IFRIC 12 should result into material
reclassifications and certain adjustments to the Company´s financial statements in accordance
with IFRS, mainly due to the reclassification of property, plant and equipment to intangible and
financial assets, revenue recognition, capitalization of additions to the intangible and
amortization. The Company is evaluating the impacts of the aforementioned standard and has
not yet determined the changes in its financial position and results of the operation that would
result from the application of IFRIC 12.
39.4.2 Exemptions from full retrospective application – elected by Light
The Company applied all mandatory exceptions and certain voluntary exemptions as detailed
below:
a) Business combinations
LIGHT has applied the business combinations exemption in IFRS 1 for business combinations.
Therefore, it has not restated business combinations that took place prior to the January 1, 2004
transition date.
b) Employee benefits
LIGHT has elected to recognize all cumulative actuarial gains and losses as of January 1, 2007.
c) Cumulative translation differences
This exemption is not applicable.
d) Compound financial instruments
LIGHT has applied the exemption and it only identifies separately the two elements of the
equity component (original equity component and the interest on the liability component that is
part of the retained earnings) where the liability component is outstanding at the date of
transition.
e) Assets and liabilities of subsidiaries, associates and joint ventures
This exemption is not applicable.
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f) Exemption from restatement of comparatives for IAS 32 and IAS 39
LIGHT has not used the exemption and has applied IAS 32 and IAS 39 since the transition date
(January 1, 2007).
g) Designation of previously recognized financial instruments
This exemption is not applicable.
h) Decommissioning liabilities included in the cost of property, plant and equipment exemption
LIGHT has not detected at January 1, 2007 any asset that could incur dismantling costs or the
like, and, accordingly, this exemption is not applicable.
i) Share-based payment transaction
LIGHT has not taken the exemption and has not applied IFRS 2 to liabilities that were settled
before January 1, 2005.
j) Insurance contracts
This exemption is not applicable in Light.
k) Exploration and evaluation assets
This exemption is not applicable.
l) Fair value measurement of no-active market financial instruments
LIGHT has not applied the exemption offered by the revision of IAS 39 on the initial
recognition of the financial instruments measured at fair value through profit and loss where
there is no active market. This exemption is therefore not applicable.
m) Presenting comparative accounting and risk disclosures
This exemption is not applicable.
39.4.3 Reconciliations between IFRS and Brazilian GAAP
The following reconciliations provide a quantification of the effect of the transition to IFRS in
LIGHT. The reconciliation provides details of the impact of the transition on the following
details:
– Summary of stockholder’s equity (Note 39.4.3.1)
– Reconciliation of net result for 12 months ended December 31, 2007 (Note 39.4.3.2)
39.4.3.1 Summary of stockholder’s equity
The following reconciliations provide a quantification of the effect of the transition to IFRS
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Dec 31, 2007 Dec 31, 2008
Total equity under Brazil GAAP 2,691,799 2,803,704
i) Maintenance expenses (137) (3)
ii) Deferred charges (43,094) -
iii) Compound fin. Inst. - conversion (*) (268,039) (269,556)
iii) Compound fin. Inst. - effective interest rate (46,236) (46,363)
iii) Compound fin. Inst. - segregation of equity component (*) 315,958 315,958
iv) Recognition of deferred tax asset 118,462 118,462
v) Net deferred tax effect on GAAP differences 92,037 93,956
vi) Reversal of dividends proposed 203,463 262,636
vii) Regulatory assets and liabilities (337,620) (412,292)
viii) Special obligations 127,776 135,954
ix) Debt payment in installments (17,621) -
Total equity under IFRS 2,836,748 3,002,456
Explanation of effects of transition to IFRS
We set out below explanations and quantifications of the adjustments in the reconciliation
included in the point above.
i. Maintenance expenses
Under Brazilian GAAP those administration expenses that are related to maintenances are held
as Services in course in balance sheet, whereas under IFRS these are expensed as incurred.
ii. Deferred charges
Under Brazilian GAAP(until December 31, 2007), the Group capitalized start-up costs.
However, under IFRS, following IAS 16 Property, Plant and Equipment definitions, start-up
costs are expensed in the period they are incurred, except if it is probable that the expected
future economic benefits will flow to the Companies and if those benefits can be reliably
measured. Therefore, Start-up costs were reversed for IFRS purposes.
iii. Compound financial instrument
Under Brazilian GAAP the compound financial instruments are recognized and measured
according to its legal form and no equity component separation is required. The debentures
issued in June 2005 are fully convertible to common shares at any moment as requested by the
bearer of the debenture. The maturity date of debentures issue is in June 2015. Under IFRS the
Company determined the fair value of debenture and separated the equity component. Items
marked (*) are posted against capital reserves.
The segregation of equity component represent the amount of equity component at the initial
recognition of financial instrument, that was reclassified to equity. The effective interest rate
adjustment represents the increased interest expense over the period of debt, using effective
interest rate rather than nominal rate that will increase the liability to its nominal value at the
end of period of instrument. The amount included as conversion represents amounts converted
to shares.
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iv. Recognition of deferred tax asset
Under Brazilian GAAP, Light is not allowed to recognize a deferred tax asset that is expected
to be recovered after more than 10 years from the balance sheet date. No such limit exists in
IFRS and Light recognized additional deferred tax assets.
v. Net deferred tax effect on GAAP adjustments
In accordance with the accounting policy of Light, the income tax charge is determined
considering the taxable income in accordance with the applicable legal framework and the tax
rate approved or substantially approved in Brazil. Deferred taxes are determined according to
the liability method based on the balance sheet, considering temporary differences between the
accounting and fiscal amounts of assets and liabilities, by the use of the tax rate approved or
substantially approved as at the balance sheet date in Brazil, and that are expected to be
applicable when the above mentioned differences are reversed. Therefore, the deferred tax
adjustments performed under IFRS are related to the impact of the adjustments mentioned
above, whenever in accordance with IAS 12 Income Taxes, there are temporary differences
between accounting practices and tax regulations that result in deferred taxes asset or liability.
vi. Reversal of dividends proposed
Under Brazilian GAAP, at each balance sheet date, the board of directors is required to propose
a dividend distribution from earnings and accrue for this in the financial statements of the
Company. Since this proposal needs to be approved and might be modified at the annual
shareholders’ meeting, for IFRS reconciliation purposes, the excess of the minimum dividends
required by Brazilian Corporate Law of 25% of adjusted net income was not considered as
declared at the balance sheet date as they were not approved as of that date and were reversed.
vii. Regulatory assets and liabilities
Under Brazilian GAAP, when the regulator establishes a criteria of allocating income or
expense to future years, a regulatory asset or liability is booked in the financial statements,
which otherwise would be recognized as profit or loss of the year. In accordance with IFRS,
regulatory assets and liabilities, which do not attend the criteria established in conceptual
framework, are not recognized.
viii. Special obligations
Under Brazilian GAAP, the Company presents special obligations, representing consumers’
contributions to the cost of expanding power electric supply systems, as a non-current liability.
These obligations were not subject to amortization over the applicable useful lives of the
underlying assets. The special obligations are now subject to amortization after the second
periodic tariff reset published by ANEEL.
Under new regulation the special obligations (Both existing and newly incurred) are amortized
over average remaining useful life of network assets. In some cases this is longer than the
remaining concession period. At the end of concession the net amount of special obligation will
be deducted from the compensation that Light shall receive for the network assets.
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Under IFRS, contributions received from consumers are considered reimbursement of
construction costs and are credited against the cost of the related fixed assets. For IFRS
reconciliation purposes, the depreciation is adjusted for the effects of the amortization of
special obligations using the average depreciation rates applicable to the fixed assets. The non-
amortizable portion represent a financial liability as it will either decrease the cash inflow or
cause cash outflow at the end of concession period and hence it is carried at amortized cost.
For asset contributions received after the second periodic tariff reset there will be no difference
between Brazilian GAAP and IFRS.
Before the determination that special obligations should be amortized for Brazilian GAAP
purposes, this reconciled item was considered a permanent difference, and therefore there was
no deferred tax impact. Since the determination of special obligations’ amortization for
Brazilian GAAP purposes, this reconciled item became a temporary difference and, therefore,
subjected to deferred taxes calculation. The ANEEL Regulatory Resolution, which established
the amortization of special obligations, confirmed the tax impacts related to the amortization of
special obligations.
ix. Debt payments in installments
Under Brazilian GAAP until December 31, 2007. the Company recognizes the interest for
payments divided in various installments in last payment, whereas in IFRS this financial asset
is carried at amortized cost using effective interest rate to recognize interest income at constant
rate. In 2008 Light modified its local accounting policies in line with new Brazilian GAAP
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39.4.3.2 - Reconciliation of net result for 12 months ended December 31, 2008
Item
Brazilian
GAAP
31/12/2008
Effect of
transition to
IFRS IFRS
Net Sales 1 5,386,644 (131,853) 5,254,791
Cost of Sales:
Personnel cost 2 (141,964) (31,527) (173,491)
Material cost (13,987) - (13,987)
Procurement (120,526) - (120,526)
Energy for resale 3 (3,063,177) 51,531 (3,011,646)
Depreciation 4 (275,887) 2,056 (273,831)
Other expenses 5 (16,364) 5,650 (10,714)
Sales expenses (315,476) - (315,476)
General and administrative expenses 6 (247,581) 134 (247,447)
Net finance cost 7 94,392 5,995 100,387
Other operating income 30,188 - 30,188
Other operating expenses (8,751) - (8,751)
Income before income taxes 1,307,511 (98,014) 1,209,497
Income tax expense - Current (161,410) - (161,410)
Income tax expense - Deferred 8 (140,121) 22,562 (117,559)
Staff statutory contributions 9 (31,527) 31,527 -
Net income for the year 974,453 (43,925) 930,528
Explanation of effects of transition to IFRS
We set out below explanations and quantifications of the reclassifications and adjustments
included in the reconciliation above.
1. Net Sales
a) Regulatory assets and liabilities (see item vii above) (131,853)
2. Staff costs
a) Reclassification of statutory contribution to staff as personnel expenses (31,527)
3. Energy for resale
a) Regulatory assets and liabilities (see item vii above) 51,531
4. Depreciation
a) Amortization of special obligations (see item viii above) 2,056
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5. Other expenses
a) Regulatory assets and liabilities (see item vii above) 5,650
6. General and administrative expenses
a) Maintenance expenses (see item i above) 134
7. Net finance revenue /(cost)
a) Special obligations (see item viii above) 6,122
b) Adjustment to effective tax rate on debentures (see item iii above) (127) 5,995
8. Deferred income tax credit
9. Statutory contribution to staff
a) Reclassification of statutory contribution to staff as
personnel expenses 31,527
39.5 Additional disclosures required under IFRS
Earnings per share
Under Brazilian GAAP, net income per share is calculated on the number of shares outstanding
at the balance sheet date. Under IFRS, the Company presents basic and diluted earnings per
share (EPS) data for its ordinary shares. Basic and diluted EPS are calculated by dividing the
profit or loss attributable to ordinary shareholders of the Company by the weighted average
number of ordinary shares outstanding during the period.
2008
Earnings per thousand of shares under Brazilian GAAP R$ 4.77828
(a) Basic
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the
company by the weighted average number of ordinary shares in issue during the year.
excluding ordinary shares purchased by the company and held as treasury shares.
2008
Profit attributed to equity holders of the company 930,528
Weighted average number of ordinary shares in issue (thousands) 203,573
Basic earning per share 4.57098
a) Net effect of deferred taxes on GAAP differences (see item
v above) 22,562
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(b) Diluted
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary
shares outstanding to assume conversion of all dilutive potential ordinary shares. The company
has one categories of dilutive potential ordinary shares, that is convertible debt.
The convertible debt is assumed to have been converted into ordinary shares, and the net profit
is adjusted to eliminate the interest expense less the tax effect.
2008
Earnings
Profit attributed to equity holders of the company 930,528
Add back of interest expense on convertible debt (net of tax) 680
Profit used determine diluted earnings per share 931,208
Weighted average number of ordinary shares in issue (thousands) 203,573
Adjustments for:
- Assumed conversion of convertible debt (thousands) 373
Weighted average number of ordinary shares for diluted earnings per sahre (thousands) 203,946
Diluted earnings per share (in R$) 4.56595
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BOARD OF DIRECTORS
MEMBERS ALTERNATES
Wilson Nélio Brumer Luiz Fernando Rolla
Djalma Bastos de Morais João Batista Zolini Carneiro
Eduardo Borges de Andrade João Pedro Amado Andrade
Ricardo Coutinho de Sena Paulo Roberto Reckziegel Guedes
Carlos Augusto Leone Piani Ana Marta Horta Veloso
Firmino Ferreira Sampaio Neto Paulo Jerônimo Bandeira de Mello Pedrosa
Ricardo Simonsen Carlos Roberto Teixeira Junger
Aldo Floris Lauro Alberto de Luca
Elvio Lima Gaspar Joaquim Dias de Castro
Jose Luiz Silva Carmen Lúcia Claussen Kanter
Ruy Flaks Schneider Almir José dos Santos
FISCAL COUNCIL
MEMBERS ALTERNATES
Ari Barcelos da Silva Eduardo Gomes Santos
Isabel da Silva Ramos Kemmelmeier Leonardo George de Magalhães
Eduardo Grande Bittencourt Ricardo Genton Peixoto
Maurício Wanderley Estanislau da Costa Márcio Cunha Cavour Pereira de Almeida
Aristóteles Luiz Menezes Vasconcellos
Drummond João Procópio Campos Loures Vale
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BOARD OF EXECUTIVE OFFICERS
José Luiz Alquéres
Chief Executive Officer
Ronnie Vaz Moreira
Vice Chief Executive Officer and Investor Relations Officer
Roberto Manoel Guedes Alcoforado
Vice Chief Operations Officer
Paulo Henrique Siqueira Born
Officer
Ana Silvia Corso Matte
Officer
Luiz Fernando de Almeida Guimarães
Officer
Paulo Roberto Ribeiro Pinto
Officer
CONTROLLERSHIP AND PLANNING SUPERINTENDENCE
Elvira Madruga B Cavalcanti Luciana Maximino Maia
Controllership and Planning Superintendence ACCOUNTANT – Accounting Manager
CPF 590.604.504-00 CPF 114.021.098-50
CRC-RJ 091476/O-0