Equity Research - Brazil

Thursday, May 28, 2009

Update Fine Tuning 2009

Despite a harsh economic environment, discos resilient sales to residential and commercial customers should continue to cushion the downturn. Gencos should benefit from an upward trend in long-term prices and low impact on earnings due to take-or-pay contracts. Discos should have mixed results in 2009 as a result of a deteriorated economic environment. Those having low operating leverage on industrial consumption should post the best results in a peer comparison. Low leverage, falling interest rates and negligible exposure to FX should add to bottom lines. Gencos are almost fully contracted for 2009-2011, providing a fantastic opportunity to play ramping-up energy prices in the long term. We see diminished risks of oversupply down the road, and price dynamics point to long-term energy prices stabilizing only around 2013. Juicy dividend yields are one of the main pillars, with low risks ahead. Above all, utilities results should prove the gentle impact on earnings from adversities the Brazilian economy faces. Discos. Light (LIGT3; Outperform), having implemented a successful turnaround, features a resilient sales mix and negligible exposure to the USD, and should deliver steady results going forward. Light has the smallest exposure to industrial consumption in our coverage. Celesc (CLSC6; Underperform) should continue to face challenges as a result of its heavy cost structure and aboveaverage exposure to industrial consumption. Gencos. Tractebel (TBLE3; Outperform) has designed a suitable strategy to protect short-term cash flows and take advantage of supply bottlenecks expected for 2011-2012. Cesp (CESP6; Outperform) should be driven by a likely solution for concession renewal surfacing in 2H09. Holding cos. Copel (CPLE6; Outperform), thanks to its long-term EBITDA growth already secured by forward generation sales, is the valuation play for 2H09. Energias do Brasil (ENBR3; Outperform) is a nice bet for growth coupled with a huge medium-term dividend component, although impacted in the short term by slowing industrial consumption. CPFL (CPFE3; Market Perform) should continue delivering the industrys top returns and dividends. Cemig (CMIG4; Market Perform) should be leveraged by positive results and sentiment on the generation segment, but continue to face challenges in distribution due to above-average exposure to industrial consumption and concerns over its M&A spree.
P/E 2010
5.4 7.8 9.0 9.0 7.5 8.4 8.3 6.3

Electric Utilities

Company

Ticker
CLSC6 ENBR3 CPFE3 CMIG4 CPLE6 CESP6 TBLE3 LIGT3

Rating
Underperform Outperform Market Perform Market Perform Outperform Outperform Outperform Outperform

Price
32.90 27.40 31.80 26.05 27.40 17.21 18.50 24.65

Target
38.00 40.00 42.20 33.50 47.80 30.80 26.50 34.20

Upside
15.5% 46.0% 32.7% 28.6% 74.5% 79.0% 43.2% 38.7%

Research Analyst: Marcelo Britto

mbritto@bradescobbi.com.br 55 11 2178 5323

2009
8.9 9.3 9.3 9.5 7.6 10.8 9.9 7.3

EV/EBITDA 2009 2010

3.9 4.7 6.6 6.4 4.1 5.9 6.0 5.5 2.6 4.2 6.4 5.4 3.9 5.5 5.3 5.0

CELESC ENERGIAS DO BRASIL CPFL ENERGIA CEMIG COPEL CESP TRACTEBEL LIGHT

Bradesco Corretora Av. Paulista, 1450 7 andar So Paulo, Brazil 5511 3556 3001

Bradesco S.A. Corretora de Ttulos e Valores Mobilirios (Bradesco Corretora) does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that Bradesco Corretora and its affiliates may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

For full disclaimer and definitions, please refer to the end of this report.

Equity Research Brazil: Thursday, May 28, 2009

Contents
New target prices and ratings Light (LIGT3) Copel (CPLE6) Cesp (CESP6) Energias do Brasil (ENBR3) Tractebel (TBLE3) CPFL (CPFE3) Cemig (CMIG4) Celesc (CLSC6)

Page
3 8 11 15 17 21 24 26 31

Equity Research Brazil: Thursday, May 28, 2009

New target prices and ratings. We incorporated into our estimates 1Q09 results, adjusted volume growth for discos, long-term energy prices, and new inputs from our economic research team for macro indicators (inflation, FX, interest rates), generally resulting in a mild downward revision of YE09 target prices with few notable exceptions. We have attributed Outperform ratings for Light (LIGT3, TP R$34.20 YE09, 39% upside), Copel (CPLE6, TP R$47.80 YE09, 75% upside; ELP, TP US$20.00 YE09, 46% upside), Tractebel (TBLE3; TP R$26.50 YE09; 43% upside), Cesp (CESP6; TP R$30.80 YE09; 79% upside) and Energias do Brasil (ENBR3; TP R$40.00 YE09; 46% upside). For CPFL (CPFE3, TP R$42.20 YE09, 33% upside; CPL, TP US$52.70 YE09, 10% upside) and Cemig (CMIG4, TP R$33.50 YE09, 29% upside; CIG, TP US$14.00, 7.4% upside) we have attributed a Market Perform rating. Our rating for Celesc (CLSC6; TP R$38.00 YE09; 16% upside) remains Underperform. Changes to main valuation assumptions. We assume: (i) long-term sovereign risk of 300 bps; (ii) equity premium of 600bps; (iii) liquidity risk premium of 100bps for utilities; (iv) long-term regulatory risk of 147bps to reflect differences in Brazils regulatory framework compared to other countries, thus adjusting the cost of equity for local utilities operating under incentive and benchmark regulation; (v) long-term regulatory WACC for discos of 8.81% (as opposed to the current 9.95%); (vi) marginal cost of debt in USD of 10% for privately-controlled companies and 12% for state-owned companies. On average, our changes resulted in WACC ranging from 12.9% to 15.4% in nominal BRL, on average 200bps lower than our previous mean. Changes to macroeconomic assumptions. Data provided by our macroeconomic research team: (i) GDP growth of -2.0% in 2009, from a previous forecast of +2.2%, and (ii) FX rate of R$2.40/US$ for YE09 and R$2.50/US$ for YE10 (R$2.10/US$ and R$2.10/US$, respectively, in the previous forecasts).
Figure 1 Main Macro Assumptions
FX Rate Previous 2009E 2010E 2.10 2.10 New 2.40 2.50 GDP Growth Previous 2.2% 3.7% New -2.0% 3.0%

Source: Bradesco Research

Investment thesis: What is ahead for utilities in 2009? In spite of current economic conditions, the fundamentals for Brazilian utilities remain solid and practically unchanged since our main October 08 report in which we discussed the 2009 outlook. Utilities stand as the most reliable source of cash, revenues, dividends and returns in an environment of depressed economic activity. Despite the harsh environment and the uncertainties surrounding economic recovery, we maintain a positive view on utilities due to attractive valuations, high yields and resilience of earnings to economic weakening. The rationale for Brazilian utilities is based on: (i) sale of an item of first necessity, with superior resilience to GDP fluctuations; (ii) very low or no debt exposure to the USD, as a result of business revenues being linked to local fundamentals and a consistent process of reducing USD-denominated debt since the 2001-2002 rationing; (iii) domestically-driven cashflows; (iv) conservative, low and suboptimal

Equity Research Brazil: Thursday, May 28, 2009

leverage to deal with capital spending and dividends, which should result in no need for major cuts in payouts in coming years; (v) long-term debt profile, with strong cash generation and short-term cash holdings to match short-term debt service; (vi) access to earmarked funds at the Brazilian Development Bank (BNDES) for its capex commitments; (vii) high dividend yields and regular payouts due to stability in cash flows; (viii) predictable regulatory framework that has been constantly improved to provide for a stable business environment and capital attraction. (i) Consolidation. Since the crisis broke out in full force in 2H08, we have seen M&A activity regain momentum in the last months. Cemigs acquisition of Terna is the most compelling deal (R$3.3bn in total equity value). With the re-opening of debt capital markets, consolidators took a deep breath and went out on the street to find opportunities. However, most of the acquisitions are opportunistic and do not necessarily represent a consistent trend in the industry. We still believe the financial situation of most of the utilities listed on Bovespa is strong, with little willingness to dispose of assets at a time of depressed valuation. Except for Cemig, which continues to move ahead with acquisitions, other players appear to have put aside deals and wait for better days. In spite of the end of the tariff review process, we believe consolidation among distribution should recede for a while due to low visibility on an economic recovery process that could justify acquisitions. On the flip side, we understand another rationale applies for gencos. We expect the announcement of long-term energy sales in the free market to confirm our call of rising and resilient long-term prices, reflecting a tight but adjusted balance of supply and demand going forward. (ii) Expansion. We foresee no major concerns for greenfield projects in generation and ongoing capex for discos. The federal government continues to give ample support to the sector through BNDES. The only positive issue that should surface in 2009 is the governments efforts to auction more hydropower plants, in order to curb the long-term trend for prices. We expect the HPP Belo Monte (11 GW) auction to take place in November as scheduled, representing another landmark for capacity expansion. Given the size of this venture, players should gather in consortiums to bid on the asset. From the governments standpoint, risk lies in low competition given the capex commitment and environmental constraints that push players towards an association (Cemig and CPFL have declared their interest in taking part in the auction, but only in joint ventures). (iii) Prices. Gencos have a very tranquil situation for 2009, as most of its assured energy has already been sold in the regulated market and in take-or-pay contracts in the free market. The exercise of flexibility provisions in PPAs by free customers seen in 4Q08 and 1Q09 has given gencos an opportunity to resell this energy at higher prices in the regulated market (R$145/MWh on average), thus implying an improvement in earnings. We see pressure on prices in the free market in 2010-2012 on the back of low availability of assured energy to be sold and few hydropower plants starting up generation. The riskiest period is 2011-2012, as prices approach and even overshoot the long-term trend seen recently in contracts in the free market. 2012 prices are being negotiated at around R$150/MWh, as opposed to R$140/MWh for delivery in

Equity Research Brazil: Thursday, May 28, 2009

2013 and thereafter. With more hydropower plants starting up from 2013 onwards, long-term prices should recede, although not substantially, as Brazil should marginally continue to increase its thermal capacity over time. The country has not been constructing large-reservoir hydropower plants since last decade (3.1-GW HPP Xingo and 1.3-GW HPP Serra da Mesa were the latest examples, having started up in the late 90s), opting for run-of-river plants. As consequence, management of reservoirs have become more volatile, resulting in the need to marginally continue to build thermals and thus pressuring long-term energy prices, preventing them from being substantially curbed.
Figure 2 Energy Storage Capacity in Reservoirs

300 250

GW/Month

200 150 100 50 0 1950 1960 1970 1980 1990 2000

Source: Economia e Energia, ONS

As short-term catalysts, we expect the announcement of long-term supply deals in the free market to confirm the upward trend in energy prices, fueled by a structurally tight balance of supply and demand, addition of thermal plants, environmental constraints and transmission costs. Current long-term prices in the free market are reflecting the tight balance of supply and demand going forward and the pressure from escalating prices in the regulated market.
Figure 3 Forward Prices
190 170 170 150 150 130 130 110 90 70 88 2009 120 133 115 95 2010 98 2011 101 138 150 140 126 116 127 128 130 130 140 140 140 140 140 140

2012

2013

2014

2015

2016

2017

Regulated Market
Source: Bradesco Research

New Free Market

Previous Free Market

2018

Equity Research Brazil: Thursday, May 28, 2009

(iv) Concession renewal. In generation, the lack of a clear definition on the model used to renew concessions in Brazil is also behind the current price trend. Gencos with concessions expiring in the next 6 to 7 years cannot sign long-term contracts, adding further pressure to long-term prices in the free market. The current regulatory framework established that concessions have to be reauctioned upon expiry of contracts. In this scenario, the government could require payment for the concessions and/or lower prices. Retiring concessionaires have the legal right to receive the value of its non-depreciated assets, although the auction format could establish that the proceeds be used to reimburse the retiring concessionaire as the federal government clearly would not bear the load of paying back billions simply to have the concessions back. Therefore, we believe the current regulatory framework and the need to reimburse retiring concessionaires prevent any dramatic change in prices, as a consequence of the residual value of concessions to be repaid. Consequently, our bet is that the government should choose the price cap / fixed percentage charge model for concession renewal. The price cap model would imply a maximum fixed price for energy to be sold by hydroplants whose concession would be renewed. We understand that the price cap model should offer current concessionaires an opportunity to renew concessions under lower prices. In our view, the cap price should disregard the contribution of return of capital (depreciation), as most of those hydropower plants estimated useful lives (on the books) should have substantially lapsed. In other words, concessionaires should return to prices the benefit of holding depreciated plants (although not fully depreciated). On average, our calculations based on the current effects of depreciation yielded a decrease of 20%-25% in prices for greenfield assets. As long-term energy prices will be marginally and gradually reflecting the energy price delivered by newly-built assets, we assumed renewed-concession plants should offer a 20%-25% discount on the marginal-cost-of-expansion price target (i.e. a discount on long-term energy prices, currently standing at ~R$140/MWh). This model would provide for preservation of cash flows in the sector and ensure financial strength of gencos to compete for new greenfield assets in auctions, while maintaining energy at market prices and transferring the benefits of diminished depreciation to final consumers. We opted for this top-down approach in our financial models, pricing in energy sold by plants with concession renewed at R$105/MWh (Cesp is the most material case, with 67% of its capacity contingent upon renewal). We believe a solution for concession renewal has to surface soon, most likely in 2H09. We understand there is an economic reason behind it: the pool mechanism for discos to buy energy. Discos have to buy in 2010 energy to be delivered in 2013 onwards (A-3 auction) and 2015 onwards (A-5 auction). The largest chunks of energy sold in existing energy auctions were in 8-year contracts back in 2004/2005 (~17 GWa) and cannot be resold unless concessions maturing in 2015 are renewed. In that sense, discos could be forced to buy expensive energy in 2010 (A-3 auctions are meant for thermal plants due to the construction schedule) simply because they should have no visibility on concession renewal of gencos. Since penalties apply heavily to discos that are caught short on supply, their decision would likely be to disregard any concession renewal and buy energy in the A-3 and A-5 auctions.

Equity Research Brazil: Thursday, May 28, 2009

Although this the legal path to follow, this potential decision by discos lacks grounds from an economic standpoint. There are surely alternatives for this environment, as the government can waive the requirement to buy energy in the A-3 and A-5 auctions until a solution for renewal comes out. However, if the government targets lower prices and no uncertainty in the sector, it should encourage a solution for concession renewal in the short term.

Equity Research Brazil: Thursday, May 28, 2009

Light (LIGT3)
Outperform. We are upgrading LIGT3 to Outperform and raising our YE09 TP to R$34.20 for LIGT3 (which includes an estimated R$1.69 09 DPS). Total return expected for LIGT3 is 39%, composed of 32% in capital appreciation and 7% in dividends (2009). Main fundamentals. Light is a successful turnaround story, with impressive shortterm results. Since management took the helm in mid-2006, Light has been implementing cost cuts, cracking down on delinquency, reducing leverage, and had a realistic tariff review in late 2008. Growth is the next step, with capacity addition in its generation business. In our view Light features strong defensive fundamentals that outshine in the current scenario of falling industrial consumption. The distribution business has one of the smallest exposures to industrial consumption among listed stocks (8.7% in the captive market; 18.3% in total electricity distributed). Its tariffs do price in the potential loss of two large industrial customers migrating their connection points to the national grid, being thus neutral for Light for valuation purposes. Improving the distribution business profitability should be the main goal in this tariff review cycle. Aneel priced in a higher level of energy losses in Lights tariffs, allowing the company to get better cost coverage. In that sense, initiatives to reduce losses add value in this review cycle. The company plans to commit R$850mn in capex through 2013 to push the loss rate to at least 19.15% from the current 20.79%, leading to an additional estimated R$95mn in EBITDA per year. We conservatively assumed no additional gain from loss reduction in our estimates, leaving this as an upside to our target price. We see no risks for 2009 dividends, with upside in the company increasing its payout going forward (Light currently distributes 50% of its earnings as dividends). Regarding debt, Light is one of the largest beneficiaries of falling interest rates, as the company carries the largest portion of debt linked to the CDI (71%) among utilities in our coverage. Leverage stands slightly above peers (1.8x Net-Debt-toEBITDA, assuming pension fund obligations) and provides room for regular and steady dividends. As for corporate ownership, we expect the BNDES and EDF share blocks, worth R$2bn at market prices, to be put up for sale as soon as capital market conditions improve. This may be the main source of overhang on the stock, although the strong fundamentals that back our rating should prevail, in our view. Valuation and stock performance. Our valuation for Light entails a 13.6% WACC (vs. 15.1% previously), leading to implicit EV/EBITDA multiples of 6.9x for 2009 and 6.3x for 2010. Light is trading at 7.3x P/E 09 and 6.3x P/E 10. In terms of EV/EBITDA, LIGT3 stands at 5.5x for 09 and 5.0x for 10, vs. 5.0x 09 and 4.9x 10 for its main peer Eletropaulo. The stock underperformed the Ibovespa YTD (24.2% vs.

Equity Research Brazil: Thursday, May 28, 2009

41.3%) and its peers when compared to the IEE (Bovespas Electricity Energy Index), 24.2% vs. 28.3% for the IEE.
Figure 4: Lights Performance YTD vs. Ibovespa vs. IEE

140.00 130.00 120.00 110.00 100.00 90.00 Dec-08

Jan-09
IBOV Equity

Mar-09
LIGT3 Equity

Apr-09
IBOVIEE Index

May-09

Source: Bloomberg and Bradesco Corretora

Figure 5: New Estimates for Light

2009E Net Revenues EBITDA EBITDA Margin Net Earnings Shareholders' equity DPS Dividend Yield* Target Price Recommendation * May 28th closing price
Source: Bradesco Corretora estimates

New 2010E 5,848 1,499 26% 795 3,556 1.9 7.9% 34.20 Outperform

2011E 6,054 1,561 26% 819 3,965 2.0 8.1%

2009E 5,647 1,520 27% 768 3,158 1.9 7.6%

Previous 2010E 2011E 5,956 1,483 25% 747 3,532 1.8 7.4% 33.00 6,277 1,636 26% 840 3,952 2.1 8.4%

5,495 1,373 25% 689 3,158 1.7 6.9%

Market Perform

Equity Research Brazil: Thursday, May 28, 2009

Income Statement R$ million Net Revenues Cost of goods/services sold Gross Profit EBIT EBITDA Financial income/expense Equity Income Operating income Non-operating result Pretax income Income tax Interest on own capital Minority Interest Net earnings Operating Margins Gross Margin EBIT Margin EBITDA Margin Net margin 2009 30% 19% 25% 13% 2010 31% 20% 26% 14% 2011 31% 20% 26% 14% 2012 32% 21% 27% 15% 2013 35% 24% 30% 18% 2014 33% 22% 28% 17% 2015 33% 23% 29% 18% 2016 34% 24% 30% 19% 2017 35% 25% 31% 21% 2018 35% 25% 31% 20% 2009 5,495 (3,824) 1,671 1,065 1,373 (105) 0 960 5 966 (248) 0 (29) 689 2010 5,848 (4,053) 1,795 1,173 1,499 (91) 0 1,082 0 1,082 (257) 0 (30) 795 2011 6,054 (4,184) 1,870 1,205 1,561 (88) 0 1,117 0 1,117 (266) 0 (32) 819 2012 6,522 (4,453) 2,069 1,360 1,747 (67) 0 1,293 0 1,293 (308) 0 (34) 951 2013 7,238 (4,716) 2,522 1,769 2,186 (19) 0 1,750 0 1,750 (416) 0 (36) 1,298 2014 7,343 (4,954) 2,388 1,600 2,040 53 0 1,653 0 1,653 (393) 0 (37) 1,222 2015 7,848 (5,224) 2,623 1,801 2,262 120 0 1,921 0 1,921 (457) 0 (39) 1,424 2016 8,370 (5,509) 2,861 2,003 2,486 190 0 2,194 0 2,194 (522) 0 (42) 1,630 2017 8,940 (5,810) 3,130 2,236 2,741 257 0 2,493 0 2,493 (593) 0 (44) 1,856 2018 9,403 (6,119) 3,284 2,352 2,882 332 0 2,684 0 2,684 (792) 0 (46) 1,846 Company Description Light is the fourth-largest electric holding company in Brazil, operating in the distribution (Light Sesa), generation (Light Energia) and trading and services (Light Esco) businesses. Light Sesa is the electricity distribution concession holder for the Rio de Janeiro metropolitan area, serving 3.9mn customers which consumed 23,721GWh year-to-date. Light Energia generates energy at three different sites, holding assets comprising 855 MW (537 MWa). Gross Margin %
40% 35% 30% 25% 20% 15% 10% 5% 0%
20 12 20 13 20 13 20 13 20 13

Balance Sheet R$ million Current + long term assets Cash + short term investment Net receivables Inventories Other Permanent assets Total assets Check Current + long term liabilities Suppliers Accounts payable Dividends due Total debt ST + LT Other Deferred Income Shareholder's equity Total liabilities Cash flow R$ million EBIT Depreciation EBITDA Changes in working capital Income tax Capex Minority Interest Free cash flow to the firm Check Key Indicators EPS P/E Implied P/E P/BV P/Free cash flow Free cash flow yield Net earnings - CAGR (3 years) PEG EV/EBITDA Implied EV/EBITDA EBITDA - CAGR (3 years) EVG ROE (final) Dividends Dividend per share (BRL) Payout Dividend yield

2009 4,823 533 2,107 18 2,165 4,505 9,328 6,170 491 1,661 345 2,095 1,577 0 3,158 9,328

2010 4,935 596 2,175 19 2,145 4,838 9,774 6,218 518 1,663 397 2,055 1,584 0 3,556 9,774

2011 5,056 651 2,261 20 2,125 5,266 10,322 6,357 550 1,661 410 2,143 1,593 0 3,965 10,322

2012 4,851 347 2,378 21 2,105 5,646 10,497 6,056 582 1,657 476 1,737 1,604 0 4,441 10,497

2013 5,003 421 2,475 22 2,085 5,874 10,877 5,788 613 1,648 649 1,268 1,609 0 5,090 10,877

2014 5,015 372 2,555 23 2,065 5,949 10,963 5,262 644 1,632 611 760 1,615 0 5,701 10,963

2015 5,665 914 2,681 25 2,045 6,028 11,693 5,280 676 1,614 712 649 1,628 0 6,413 11,693

2016 6,414 1,549 2,814 26 2,025 6,114 12,528 5,300 710 1,593 815 541 1,641 0 7,228 12,528

2017 7,280 2,291 2,957 27 2,005 6,206 13,486 5,330 745 1,566 928 434 1,655 0 8,156 13,486

2018 8,004 3,017 2,973 29 1,985 6,303 14,307 5,228 782 1,536 923 330 1,657 0 9,079 14,307

EBITDA Margin %

35% 30% 25% 20% 15% 10% 5% 0%

20 09 20 14 20 14 20 14 20 11 20 12 20 10

2009 1,065 307 1,373 (38) 264 441 29 678

2010 1,173 326 1,499 23 288 660 30 498

2011 1,205 356 1,561 34 296 784 32 416

2012 1,360 387 1,747 62 330 767 34 554

2013 1,769 417 2,186 49 423 645 36 1,034

2014 1,600 440 2,040 32 375 514 37 1,082

2015 1,801 461 2,262 68 416 541 39 1,197

2016 2,003 483 2,486 74 457 569 42 1,345

2017 2,236 506 2,741 81 506 598 44 1,513

2018 2,352 530 2,882 (35) 679 627 46 1,565

EBITDA R$ million

2,500 2,000 1,500 1,000

2009 3.4 7.3 10.1 1.6 7.4 13% n.m. n.m. 5.5 6.9 23% 0.2 22% 345 1.7 50% 7%

2010 3.9 6.3 8.8 1.4 10.1 10% -10% -0.7 5.0 6.3 11% 0.5 22% 397 1.9 50% 8% 1,459 2,359 0.4 1.6 -0.1

2011 4.0 6.1 8.5 1.3 12.1 8% -6% -1.1 4.8 6.0 1% 6.2 21% 410 2.0 50% 8% 1,492 2,377 0.4 1.5 -0.1

2012 4.7 5.3 7.3 1.1 9.1 11% 11% 0.5 4.3 5.4 8% 0.5 21% 476 2.3 50% 9% 1,390 2,256 0.3 1.3 0.0

2013 6.4 3.9 5.4 1.0 4.9 21% 18% 0.2 3.4 4.3 13% 0.3 25% 649 3.2 50% 13% 847 1,690 0.2 0.8 0.0

2014 6.0 4.1 5.7 0.9 4.6 22% 14% 0.3 3.7 4.6 9% 0.4 21% 611 3.0 50% 12% 388 1,202 0.1 0.6 0.0

2015 7.0 3.5 4.9 0.8 4.2 24% 14% 0.2 3.3 4.2 9% 0.4 22% 712 3.5 50% 14% (265) 516 0.0 0.2 0.1

2016 8.0 3.1 4.3 0.7 3.7 27% 8% 0.4 3.0 3.8 4% 0.7 23% 815 4.0 50% 16% (1,008) (263) -0.1 -0.1 0.1

2017 9.1 2.7 3.8 0.6 3.3 30% 15% 0.2 2.7 3.4 10% 0.3 23% 928 4.5 50% 18% (1,856) (1,152) -0.2 -0.4 0.1

2018 9.1 2.7 3.8 0.6 3.2 31% 9% 0.3 2.6 3.3 8% 0.3 20% 923 4.5 50% 18% (2,688) (2,029) -0.3 -0.7 0.1

500 0
20 12 20 10 20 09 20 11

Net Income R$ million

1,400 1,200 1,000 800 600 400 200 0
20 10 20 09 20 11 20 12

1,562 Net debt (BRL million) Adj. Net debt (BRL million) - Braslight2,472 0.5 Net debt/Shareholder's equity 1.8 Net debt/EBITDA -0.1 Financial expenses/EBITDA

20 14

20 09

20 10

20 11

10

Equity Research Brazil: Thursday, May 28, 2009

Copel (CPLE6)
Outperform. We are maintaining our Outperform rating for Copel and cutting our
YE09 TP to R$47.80 for CPLE6 (which includes an estimated R$0.95 09 DPS) and US$20.00 for ELP (46% upside). Total return expected for CPLE6 is 74.5%, composed of 71.2% in capital appreciation and 3.3% in dividends (2009). Main fundamentals. Copels investment thesis is intrinsically based on generation, on the back of forward energy price dynamics and re-contracting of its assured energy in long-term contracts (from 2013 onwards). Copel has the most discounted NAV valuation among Brazilian utilities, despite the natural repricing of its generation contracts, which more than counterbalance the impacts of a higher WACC resulting from its low leverage and restrictive dividend distribution policy. In a peer comparison, assuming distribution and transmission assets are valued at an average of multiples (1.7x EV/RAB for pure discos and 4.8x EV/AAR for pure transcos), its generation assets are implicitly traded at a 66% discount.
Figure 6: Copel NAV
Generation EV Assured Energy (MWa) EV/Mwa Distribution EV RAB EV/RAB Transmission EV AAR EV/AAR Total* Market EV Implied Discount Generation Assets *Value does not consider other assets ** Prices as of May 28th
Source: Bradesco Corretora estimates

TBLE 14,802 3529 479

CESP 11,066 3,916 323

GETI 7,666 1,275 686

Mean

CPLE 10,906 2,511

496

ELPL 8,367 4,737 1.8

LIGT 7,500 4,701 1.6

COCE 2,512 1,552 1.6

Mean

CPLE 3,238 1,950

1.7

TRPL 8,188 1,707 4.8 EV EV

CPLE 679 142

14,823 7,648 66%

The generation business should give 3-year EBITDA a boost. Copel will have almost 100% of its assured energy to resell in the free market at higher prices (R$135/MWh vs. current R$81/MWh). The company has been selling forward most of this energy to be freed up, locking in 65% of the amount available from 2013 onwards. Natural repricing of generation contracts should progressively change the risk of the business, as the company should collect 60% of its EBITDA from the generation segment in the long run. Growth in greenfield projects (medium-sized and small hydros, co-generation) could also add to this view, although the company has to loosen constraints of state laws

11

Equity Research Brazil: Thursday, May 28, 2009

that force it to hold control of new ventures. Our target price assumes no additional value from this new frontier. We also expect Copel to maintain its capital discipline, as seen when the company walked away from the HPP Baixo Iguau auction. However, we understand the high level of cash could raise concerns about decretive or non-core investments. In spite of this risk, in our view the depressed valuation offers enough room even for unpleasant surprises. Copel renewed the TPP Araucaria tolling agreement with Petrobras for 2009, securing cost coverage while the company awaits better market conditions to sell the thermal plants assured energy in long-term regulated market auctions. Our conservative assumption is that gas-fired TPP Araucaria should deliver power in regulated market contracts by 2015, as Petrobras should have increased its gas production in the country from 2011 onwards. We continue not to see much upside in the distribution and transmission businesses. In Copels disco, we expect healthy volumes but aligned with Aneels estimates embedded in the X Factor (3.2% YoY). In transmission, we assume revenues growing in line with EPE estimates for capacity addition in the grid for 2008-2017, leading to an average R$200mn per year on the top line (3.2% of consolidated revenues). The company almost fully deleveraged in 1Q09 (0.06x Net-Debt-to-EBITDA; cash of R$1.6bn). Given growth in past years and a restrictive dividend policy, the overall outlook is negative for cost of capital, which should remain high. In a scenario of falling interest rates, EPS growth also is held back due to lower financial revenues. The main catalysts would comprise (i) solutions for the company to re-leverage, such as extraordinary dividends and/or higher payouts going forward (the company currently pays out the minimum 25% of its earnings) and/or acquisitions fully financed through equity, and (ii) higher-than-expected long-term energy prices. With all the upside on the operating side, mainly in generation, we view Copel as the top deep value choice for 2009, as we expect corporate governance risks to diminish over time with the proximity of the 2010 elections. Valuation and stock performance. Our valuation for Copel entails a 15.4% WACC (vs. 16.6% previously), leading to implicit EV/EBITDA multiples of 7.1x for 2009 and 6.7x for 2010. Copel trades at 7.6x P/E 09 and 7.5x P/E 10. On an EV/EBITDA basis, CPLE6 stands at 4.1x for 09 and 3.9x for 10. The stock has underperformed the Ibovespa YTD (18.0% vs. 41.3%), as well as its peers when compared to the IEE (Bovespas Electricity Energy Index), 18.0% vs. 28.3% for the IEE.

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Equity Research Brazil: Thursday, May 28, 2009 Figure 7: Copels Performance YTD vs. Ibovespa vs. IEE

140.00 130.00 120.00 110.00 100.00 90.00 80.00

Dec-08 Jan-09 Mar-09 Apr-09 May-09

IBOV Equity

CPLE6 Equity

IBOVIEE Index

Source: Bloomberg and Bradesco Corretora

Figure 8: New Estimates for Copel 2009E Net Revenues EBITDA EBITDA Margin Net Earnings Shareholders' equity DPS Dividend Yield* Target Price Recommendation * May 28th closing price
Source: Bradesco Corretora estimates

New 2010E 6,105 1,961 32% 994 9,542 1.0 3.5% 47.80 Outperform

2011E 6,709 2,176 32% 1,147 10,402 1.1 4.0%

2009E 5,501 1,682 31% 828 8,595 0.8 2.8%

Previous 2010E 2011E 5,824 1,804 31% 858 9,239 0.8 2.9% 50.00 Outperform 6,424 2,020 31% 973 9,969 0.9 3.2%

5,727 1,868 33% 991 8,796 1.0 3.5%

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Equity Research Brazil: Thursday, May 28, 2009

Income Statement R$ million Net Revenues Cost of goods/services sold Gross Profit EBIT EBITDA Financial income/expense Equity Income Operating income Non-operating result Pretax income Income tax Interest on own capital Minority Interest Net earnings Operating Margins Gross Margin EBIT Margin EBITDA Margin Net margin Balance Sheet R$ million Current + long term assets Cash + short term investment Net receivables Inventories Other Permanent assets Total assets Current + long term liabilities Suppliers Accounts payable Dividends due Total debt ST + LT Other Minority Interest Shareholders' equity Total liabilities Cash flow R$ million EBIT Depreciation EBITDA adj.EBITDA Changes in working capital Income tax Capex Free cash flow to the firm Key Indicators EPS P/E Implied P/E P/BV P/Free cash flow Free cash flow yield Net earnings - CAGR (3 years) PEG EV/EBITDA Implied EV/EBITDA EBITDA - CAGR (3 years) EVG ROE (final) Dividends Dividend per share (BRL) Payout Dividend yield Net debt (BRL million) Net debt/Shareholders' equity Net debt/EBITDA Financial expenses/EBITDA Net Debt 3t07 2009 33% 25% 33% 17% 2010 32% 25% 32% 16% 2011 32% 25% 32% 17% 2012 30% 22% 30% 16% 2013 39% 32% 39% 23% 2014 42% 35% 42% 25% 2015 43% 37% 43% 27% 2016 42% 36% 42% 27% 2017 42% 36% 42% 27% 2018 43% 36% 43% 28% Company Description 2009 5,727 (3,859) 1,868 1,452 1,868 57 11 1,520 0 1,520 (513) 0 (15) 991 2010 6,105 (4,145) 1,961 1,497 1,961 36 0 1,533 0 1,533 (521) 0 (18) 994 2011 6,709 (4,534) 2,176 1,669 2,176 98 0 1,767 0 1,767 (601) 0 (19) 1,147 2012 6,884 (4,832) 2,052 1,509 2,052 201 0 1,710 0 1,710 (581) 0 (21) 1,108 2013 8,395 (5,148) 3,247 2,665 3,247 242 0 2,907 0 2,907 (988) 0 (23) 1,895 2014 9,417 (5,464) 3,953 3,330 3,953 338 0 3,668 0 3,668 (1,247) 0 (29) 2,393 2015 10,527 (5,972) 4,555 3,889 4,555 468 0 4,358 0 4,358 (1,481) 0 (71) 2,806 2016 10,921 (6,315) 4,606 3,896 4,606 610 0 4,506 0 4,506 (1,532) 0 (72) 2,902 2017 11,595 (6,678) 4,918 4,160 4,918 705 0 4,866 0 4,866 (1,654) 0 (73) 3,138 2018 12,352 (7,062) 5,290 4,484 5,290 852 0 5,336 0 5,336 (1,814) 0 (76) 3,446 Companhia Paranaense de Energia Eltrica - Copel is a state-owned integrated electricity company that operates in the distribution, transportation and generation segments. Copel serves more than 3 million customers in Parana State, has 7,265 km in transmission lines and 5,170 MW installed capacity. Gross Margin %
45% 40% 35% 30% 25% 20% 15% 10% 5% 0%

20 09

20 13 20 13 20 13 20 13

2009 5,885 1,839 1,550 62 2,434 8,318 14,204 5,167 417 1,222 248 2,108 1,172 240 8,796 14,204

2010 6,160 2,062 1,598 66 2,434 9,228 15,388 5,606 446 1,243 249 2,484 1,184 240 9,542 15,388

2011 6,045 1,817 1,724 69 2,434 9,577 15,622 4,980 496 1,276 287 1,684 1,238 240 10,402 15,622

2012 6,349 2,144 1,698 73 2,434 9,932 16,281 4,808 530 1,292 277 1,504 1,206 240 11,233 16,281

2013 7,590 3,127 1,951 77 2,434 10,292 17,882 4,988 565 1,319 474 1,326 1,305 240 12,654 17,882

2014 8,770 4,149 2,106 82 2,434 10,654 19,425 4,736 599 1,345 598 822 1,371 240 14,449 19,425

2015 10,638 5,831 2,287 86 2,434 11,018 21,657 4,864 664 1,380 701 673 1,446 240 16,553 21,657

2016 12,392 7,578 2,289 90 2,434 11,384 23,776 4,807 704 1,397 725 555 1,426 240 18,729 23,776

2017 14,486 9,503 2,454 95 2,434 11,752 26,238 4,916 746 1,429 785 459 1,497 240 21,083 26,238

2018 16,825 11,703 2,589 100 2,434 12,121 28,946 5,039 791 1,462 861 364 1,561 240 23,667 28,946

EBITDA Margin %

45% 40% 35% 30% 25% 20% 15% 10% 5% 0%

20 12

20 10

20 11

EBITDA R$ million 2009 1,452 416 1,868 1,829 270 493 1,313 (248) (248) 2009 3.6 7.6 13.2 0.9 nm nm -7% -1.0 4.1 7.1 -2% -2.2 11% 248 1.0 25% 3.5% 150 0.02 0.08 0.03 2010 1,497 464 1,961 1,921 (8) 509 1,373 47 47 2010 3.6 7.5 13.1 0.8 nm nm -3% -2.2 3.9 6.7 -1% -3.4 10% 249 1.0 25% 3.5% 303 0.03 0.15 0.02 2011 1,669 507 2,176 2,134 0 567 856 711 711 2011 4.2 6.5 11.4 0.7 10.5 9% 2% 3.2 3.5 6.1 6% 0.6 11% 287 1.1 25% 4.0% (252) -0.02 -0.12 0.04 2012 1,509 544 2,052 2,009 (42) 513 898 640 640 2012 4.0 6.8 11.8 0.7 11.7 9% 4% 1.8 3.7 6.4 3% 1.2 10% 277 1.1 25% 3.9% (759) (0.07) (0.37) 0.10 2013 2,665 582 3,247 3,202 113 906 942 1,241 1,241 2013 6.9 4.0 6.9 0.6 6.0 17% 24% 0.2 2.4 4.1 18% 0.1 15% 474 1.8 25% 6.6% (1,921) (0.15) (0.59) 0.07 2014 3,330 623 3,953 3,906 41 1,132 986 1,747 1,747 2014 8.7 3.1 5.5 0.5 4.3 23% 28% 0.1 1.9 3.3 22% 0.1 17% 598 2.3 25% 8% (3,446) (0.24) (0.87) 0.09 2015 3,889 666 4,555 4,451 22 1,322 1,030 2,076 2,076 2015 10.3 2.7 4.7 0.5 3.6 28% 36% 0.1 1.7 2.9 30% 0.1 17% 701 2.7 25% 10% (5,277) (0.32) (1.16) 0.10 2016 3,896 710 4,606 4,497 (31) 1,324 1,076 2,127 2017 4,160 757 4,918 4,804 34 1,414 1,125 2,231 2018 4,484 806 5,290 5,172 5 1,525 1,175 2,468

4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000

2016 10.6 2.6 4.5 0.4 3.5 28% 15% 0.2 1.7 2.9 12% 0.1 15% 725 2.8 25% 10% (7,143) (0.38) (1.55) 0.13

2017 11.5 2.4 4.2 0.4 3.4 30% 9% 0.3 1.6 2.7 8% 0.2 15% 785 3.0 25% 11% (9,163) (0.43) (1.86) 0.14

2018 12.6 2.2 3.8 0.3 3.0 33% 7% 0.3 1.4 2.5 5% 0.3 15% 861 3.3 25% 12% (11,457) (0.48) (2.17) 0.16

500 0

20 09

20 10

20 11

20 12

Net Income R$ million

3,000 2,500 2,000 1,500 1,000 500 0

20 09

20 10

20 14

20 12

20 11

20 14

20 14

20 12

20 09

20 10

20 11

20 14

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Equity Research Brazil: Thursday, May 28, 2009

Cesp (CESP6)
Outperform. We are maintaining our Outperform rating for CESP6 and raising our YE09 TP to R$30.80 (which includes an estimated R$0.40 09 DPS). Total return expected for CESP6 is 79%, composed of 76.6% in capital appreciation and 2.4% in dividends (2009). Main fundamentals. We used a top-down approach to price in concession renewal. In our view, the model to be presented by the federal government should allow current concessionaires to renew concession contracts under the restriction of price caps for energy sold. Our estimates price in the price cap and/or fixed percentage charge model. In these models, hydroplants undergoing concession renewal should be charged a fixed percentage of their revenues to contribute to lower tariffs or be allowed to sell energy under a cap. In both scenarios, the economics for gencos should be equivalent. In order to price the cap, our top-down approach assumes the cap price disregarding the effect of return of capital on long-term energy prices. In other words, we assume the maximum price at which gencos should sell energy should reflect the fact that those plants are fully depreciated or have diminished residual value, i.e. entrepreneurs have already had a substantial portion of their capital returned. In that sense, we targeted the average contribution of depreciation to the formation of energy prices. For newly-built plants arising from the latest New Energy auctions, depreciation amounts to 20%-25% of the marginal cost of expansion in Brazil (~R$140/MWh). Consequently, our model factors in Cesps Jupi and Ilha Solteira concessions being renewed, but a price 25% below the current marginal cost of expansion, or ~R$105/MWh. In order to analyze the reasonability of this assumption, we looked into the most recent (i) Existing Energy auctions, and (ii) New Energy auctions. As for (i), our R$105/MWh assumption stands below the most recent price cap of R$120/MWh for A-1 (delivery next year) auctions in 2007 and 2008 (both adjusted for inflation) and the R$145/MWh outcome from the January auction. As for (ii), the average price of the Madeira plants (70% sold in the regulated market and 30% in the free market) stands between R$105/MWh and R$110/MWh. Given that our assumption is aligned with those energy prices and we think the concession renewal solution should also provide sound cash flows for state-owned companies, we estimated Cesp selling energy at R$105/MWh for plants with concessions expiring by 2015 (67% of Cesps capacity). We assume no gains from potential privatization after concession renewal. We understand the State of So Paulo would highly consider selling its controlling stake in the company (R$3.6bn at our target price) shortly after a solution for concession renewal, although this potential upside is linked to the terms and conditions of renewal to be unveiled by the federal government. Cesp is highly exposed to the USD due to its US$1.0bn long-term debt. Although most expenses are non-cash through 2011, potential financial losses may slash the bottom line should the BRL depreciate substantially like in 2H08. Despite having the

15

Equity Research Brazil: Thursday, May 28, 2009

highest leverage among utilities (3.6x Net-Debt-to-EBITDA), the debt amortization schedule is aligned with the current cash flow and leads to no refinancing needs in our estimates (which prices in mild USD behavior in the foreseeable future). Valuation and stock performance. Our valuation for Cesp entails a 14.3% WACC (vs. 15.9% previously), leading to implicit EV/EBITDA multiples of 8.2x for 2009 and 7.6x for 2010. Cesp is trading at 10.8x P/E 09 and 8.4x P/E 10. Looking at EV/EBITDA, CESP6 stands at 5.9x for 09 and 5.5x for 10. In both cases, Cesp is trading in line with its peers. The stock has underperformed the Ibovespa YTD (14.3% vs. 41.3%), as well as its peers when based on the IEE (Bovespas Electricity Energy Index), up 14.3% vs. 28.3% for the IEE.
Figure 9: Cesps Performance YTD vs. Ibovespa vs. IEE

145.00 135.00 125.00 115.00 105.00 95.00 85.00 75.00

Dec-08 Jan-09 Mar-09 Apr-09 May-09

IBOV Equity

CESP6 Equity

IBOVIEE Index

Source: Bloomberg and Bradesco Corretora

Figure 10: New Estimates for Cesp 2009E Net Revenues EBITDA EBITDA Margin Net Earnings Shareholders' equity DPS Dividend Yield* Target Price Recommendation * May 28th closing price
Source: Bradesco Corretora estimates

New 2010E 2,953 2,079 70% 689 8,810 0.5 3.1% 30.80 Outperform

2011E 3,086 2,159 70% 844 9,443 0.6 3.7%

2009E 2,790 1,768 63% 339 10,468 0.3 1.5%

Previous 2010E 2011E 2,997 1,911 64% 575 10,899 0.4 2.5% 25.00 Outperform 3,132 1,983 63% 722 11,441 0.6 3.2%

2,759 1,926 70% 538 8,293 0.4 2.4%

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Equity Research Brazil: Thursday, May 28, 2009

Income Statement R$ million Net Revenues Cost of goods/services sold Gross Profit EBIT EBITDA Financial income/expense Equity Income Operating income Non-operating result Pretax income Income tax Interest on own capital Minority Interest Net earnings Company Description 2009 2,719 (827) 1,891 1,404 1,891 (700) 0 704 (30) 674 (153) 0 0 521 2010 2,882 (857) 2,025 1,534 2,025 (648) 0 885 0 885 (211) 0 0 675 2011 3,009 (909) 2,100 1,606 2,100 (563) 0 1,043 0 1,043 (248) 0 0 794 2012 3,189 (964) 2,225 1,729 2,225 (387) 0 1,342 0 1,342 (319) 0 0 1,022 2013 3,829 (1,021) 2,807 2,309 2,807 (206) 0 2,103 0 2,103 (530) 0 0 1,573 2014 4,631 (1,079) 3,552 3,051 3,552 (9) 0 3,042 0 3,042 (934) 0 0 2,109 2015 4,544 (1,139) 3,406 2,902 3,406 167 0 3,069 0 3,069 (1,043) 0 0 2,026 2016 4,436 (1,202) 3,235 2,729 3,235 320 0 3,049 0 3,049 (1,037) 0 0 2,012 2017 4,633 (1,268) 3,365 2,856 3,365 448 0 3,304 0 3,304 (1,123) 0 0 2,181 2018 4,835 (1,337) 3,498 2,986 3,498 607 0 3,594 0 3,594 (1,222) 0 0 2,372 CESP Companhia Energtica de So Paulo is the largest power generation company in So Paulo state and the third largest in Brazil, according to ANEEL. The Company has 6 hydroelectric plants, 57 generating units, an installed capacity of 7,456 MW and assured power of 3,916 MW (average), representing 8% and 10% of the national total, respectively.

Gross Margin %

Operating Margins Gross Margin EBIT Margin EBITDA Margin Net margin 2009 70% 52% 70% 19% 2010 70% 53% 70% 23% 2011 70% 53% 70% 26% 2012 70% 54% 70% 32% 2013 73% 60% 73% 41% 2014 77% 66% 77% 46% 2015 75% 64% 75% 45% 2016 73% 62% 73% 45% 2017 73% 62% 73% 47% 2018 72% 62% 72% 49%

90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

20 09

20 12

20 13 20 13 20 13 20 13

Balance Sheet R$ million Current + long term assets Cash + short term investment Net receivables Inventories Other Permanent assets Total assets Current + long term liabilities Suppliers Accounts payable Dividends due Total debt ST + LT Other Shareholders' equity Total liabilities Cash flow R$ million EBIT Depreciation EBITDA Changes in working capital Income tax Capex Free cash flow to the firm Key Indicators EPS P/E Implied P/E P/BV P/Free cash flow Free cash flow yield Net earnings - CAGR (3 years) PEG EV/EBITDA Implied EV/EBITDA EBITDA - CAGR (3 years) EVG ROE (final) Dividends Dividend per share (BRL) Payout Dividend yield Net debt (BRL million) Net debt/Shareholders' equity Net debt/EBITDA Financial expenses/EBITDA

2009 2,732 690 401 24 1,616 14,287 17,019 8,738 104 699 125 6,141 1,668 8,281 17,019

2010 2,874 814 419 25 1,616 13,894 16,768 7,982 109 706 169 5,312 1,686 8,786 16,768

2011 3,056 980 434 27 1,616 13,504 16,560 7,178 114 717 199 4,452 1,696 9,382 16,560

2012 3,854 1,755 455 28 1,616 13,115 16,969 6,820 119 728 256 4,004 1,714 10,149 16,969

2013 4,763 2,573 546 29 1,616 12,729 17,492 6,164 124 743 393 3,103 1,801 11,329 17,492

2014 6,694 4,384 665 30 1,616 12,345 19,039 6,128 128 758 527 2,765 1,950 12,911 19,039

2015 8,162 5,909 607 31 1,616 11,962 20,124 5,695 133 765 506 2,383 1,907 14,430 20,124

2016 9,791 7,502 641 32 1,616 11,581 21,372 5,433 138 777 503 2,073 1,942 15,939 21,372

2017 11,658 9,341 668 33 1,616 11,202 22,860 5,285 143 788 545 1,839 1,970 17,575 22,860

2018 13,731 11,387 694 34 1,616 10,824 24,556 5,202 148 800 593 1,665 1,997 19,354 24,556

EBITDA Margin %

90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

20 09

EBITDA R$ million 2009 1,404 487 1,891 10 334 95 1,453 2010 1,534 491 2,025 (10) 365 99 1,571 2011 1,606 494 2,100 (8) 400 103 1,605 2012 1,729 496 2,225 (10) 465 108 1,662 2013 2,309 498 2,807 (10) 785 112 1,920 2014 3,051 501 3,552 (43) 1,037 116 2,441 2015 2,902 503 3,406 (29) 987 121 2,327 2016 2,729 506 3,235 (15) 928 125 2,197 2017 2,856 509 3,365 (14) 971 130 2,279 2018 2,986 512 3,498 (14) 1,015 134 2,363

4,000 3,500 3,000 2,500 2,000 1,500 1,000

2009 1.6 10.8 19.4 0.7 3.9 26% nm nm 5.9 8.2 13% 0.4 6% 130 0.4 25% 2% 5,451 0.7 2.9 (0.4)

2010 2.1 8.4 14.9 0.6 3.6 28% 56% 0.1 5.5 7.7 11% 0.5 8% 169 0.5 25% 3% 4,498 0.5 2.2 (0.3)

2011 2.4 7.1 12.7 0.6 3.5 28% nm nm 5.3 7.4 nm nm 8% 199 0.6 25% 4% 3,473 0.4 1.7 (0.3)

2012 3.1 5.5 9.9 0.6 3.4 29% 25% 0.2 5.0 7.0 6% 0.9 10% 256 0.8 25% 5% 2,249 0.2 1.0 (0.2)

2013 4.8 3.6 6.4 0.5 2.9 34% 33% 0.1 3.9 5.5 12% 0.3 14% 393 1.2 25% 7% 530 0.0 0.2 (0.1)

2014 6.4 2.7 4.8 0.4 2.3 43% 38% 0.1 3.1 4.4 19% 0.2 16% 527 1.6 25% 9% (1,619) (0.1) (0.5) (0.0)

2015 6.2 2.8 5.0 0.4 2.4 41% 26% 0.1 3.3 4.6 15% 0.2 14% 506 1.5 25% 9% (3,525) (0.2) (1.0) 0.0

2016 6.1 2.8 5.0 0.4 2.6 39% 9% 0.3 3.4 4.8 5% 0.7 13% 503 1.5 25% 9% (5,429) (0.3) (1.7) 0.1

2017 6.7 2.6 4.6 0.3 2.5 40% 1% 2.3 3.3 4.6 -2% -1.8 12% 545 1.7 25% 10% (7,502) (0.4) (2.2) 0.1

2018 7.2 2.4 4.3 0.3 2.4 42% 5% 0.4 3.2 4.4 1% 3.5 12% 593 1.8 25% 11% (9,722) (0.5) (2.8) 0.2

500 0

20 11

20 11

20 10

20 12

20 10

20 12

Net Income R$ million

2,500 2,000 1,500 1,000 500 0

20 09

20 10

20 11

20 12

20 14

20 14

20 09

20 14

20 14

20 10

20 11

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Equity Research Brazil: Thursday, May 28, 2009

Energias do Brasil (ENBR3)

Outperform. We are maintaining our rating as Outperform and cutting our YE09 TP to R$40.00 for ENBR3 (which prices in an estimated R$1.48 09 DPS). Total return expected for ENBR3 is 46%, composed of 40.6% in capital appreciation and 5.4% in dividends (2009). Main fundamentals. Our investment thesis for Energias do Brasil is based on growth in generation, mainly in greenfield projects. The company is adding 414 MW (+24%) to its generation installed capacity in the next five years, which should be responsible EDB posting one of the highest EBITDA growth rates in this time span (15% 3-year EBITDA growth). ENBR3 is also a deep value call, although stock liquidity is the main issue. The company should completely change the nature of its business over time, through greenfield assets in generation but also collecting a sound stream of cash flows from its distribution business. After an asset swap transaction with Grupo Rede in 2008 that resulted in the disposal of disco Enersul and consolidation of HPP Lajeado, the company increased the generation business total contribution to EBITDA (52% vs. 39% prior to the deal). In our view, the deal provided greater stability in cash flows and reduced recurring capital spending by R$100mn on average. As for capex plans, the company should have HPP Santa Fe (29MW) and revamping of HPP Mascarenhas and Suia (25MW) delivering power to the grid in 2009. The construction of 720-MW TPP Pecem I (EDBs stake: 50%) remains on schedule, with start-up slated for 2012. New investments in small hydro plants (601 MW in portfolio, of which we estimate 372 MW being constructed in the next three years) should consume R$697mn in 2009 and R$726mn in 2010, financed by BNDES. We understand the 9.9% of the companys shares (R$312mn) held in treasury causes overhang on the stock, although it could be seen as a means to manage cash dividends in times of higher-cost debt. The company could (i) cancel shares over time, while eliminating any threat of earnings dilution but with negative impacts on liquidity, (ii) implement a share bonus with existing shares in treasury, and (iii) resell shares in treasury in a block trade on Bovespa, like the procedure followed by Bradespar in disposing of a substantial portion of its CPFL shares in May 09. In terms of funding, we understand Energias do Brasil has secured all its needs for planned ongoing capex in distribution and revamping of SHPPs in the coming five years through the BNDES CALC stand-by credit line (R$900mn, 10-year tenor). The remaining hydro and thermal generation projects should be funded through project finance. SHPP Santa F recently received takeout loans from BNDES (R$76mn) and TPP Pecm secured financing with the IDB and BNDES for construction of the plant (~R$1.8bn). Although the company has 69% of its debt in debentures maturing by 2011 (R$548mn), we see little chance of it not being rolled over, as capital markets have reopened for local issues, not to mention the fact that cash generation can fully match obligations at maturity. We estimate dividends remaining at a 50% payout ratio as per the by-laws, although there is the possibility of the company starting to pay higher dividends after huge

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Equity Research Brazil: Thursday, May 28, 2009

capital commitments are over by 2011. In our view, ENBR3 is a nice bet for portfolios targeting growth with a strong medium-term yield component. Valuation and stock performance. Our valuation for Energias do Brasil entails a 13.6% WACC (vs. 15.1% previously), leading to implicit EV/adj.EBITDA multiples of 6.3x for 2009 and 5.7x for 2010. EDB is trading at 9.3x P/E 09 and 7.8x P/E 10. Looking at EV/adj.EBITDA, ENBR3 stands at 4.7x for 09 and 4.2x for 10. In both cases, ENBR is trading at the low end of its peers. The stock has underperformed the Ibovespa YTD (29.3% vs. 41.3%) and outperformed the IEE (Bovespas Electricity Energy Index), 29.3% vs. 28.3% for the IEE.
Figure 11: Energias do Brasils Performance YTD vs. Ibovespa vs. IEE

145.00 135.00 125.00 115.00 105.00 95.00 85.00

Dec-08 Jan-09 Mar-09 Apr-09 May-09

IBOV Equity
Source: Bloomberg and Bradesco Corretora

ENBR3 Equity

IBOVIEE Index

Figure 12: New Estimates for Energias do Brasil 2009E Net Revenues Adj. EBITDA EBITDA Margin Net Earnings Shareholders' equity DPS Dividend Yield* Target Price Recommendation * May 28th closing price
Source: Bradesco Corretora estimates

New 2010E 5,332 1,389 26% 556 3,994 1.8 6.4% 40.00 Outperform

2011E 5,842 1,590 27% 658 4,323 2.1 7.6%

2009E 5,267 1,422 27% 549 3,831 1.7 6.3%

Previous 2010E 2011E 5,595 1,498 27% 573 4,120 1.8 6.6% 42.00 Outperform 6,308 1,871 30% 810 4,528 2.6 9.3%

5,006 1,246 25% 470 3,715 1.5 5.4%

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Equity Research Brazil: Thursday, May 28, 2009

Income Statement R$ million Net Revenues Cost of goods/services sold Gross Profit EBIT EBITDA adj. EBITDA Financial income/expense Equity Income Operating income Non-operating result Pretax income Income tax Interest on own capital Minority Interest Net earnings Operating Margins Gross Margin EBIT Margin EBITDA Margin Adj. EBITDA Margin Net margin Balance Sheet R$ million Current + long term assets Cash + short term investment Net receivables Inventories Other Permanent assets Total assets Current + long term liabilities Suppliers Accounts payable Dividends due Total debt ST + LT Other Minority Interest Shareholders' equity Total liabilities Cash flow R$ million EBIT Depreciation EBITDA adj.EBITDA Changes in working capital Income tax Capex Free cash flow to the firm Key Indicators EPS P/E Implied P/E P/BV P/Free cash flow Free cash flow yield Net earnings - CAGR (3 years) PEG EV/EBITDA EV/adj. EBITDA Implied EV/adj. EBITDA Adj. EBITDA - CAGR (3 years) EVG ROE (final) Dividends Dividend per share (BRL) Payout Dividend yield Net debt (BRL million) Net debt/Shareholders' equity Net debt/ adj.EBITDA Financial expenses/ adj. EBITDA 2009 27% 21% 27% 25% 9% 2010 29% 22% 28% 26% 10% 2011 30% 23% 30% 27% 11% 2012 31% 25% 31% 29% 14% 2013 31% 25% 31% 29% 15% 2014 31% 24% 31% 29% 15% 2015 31% 24% 30% 29% 16% 2016 28% 22% 28% 26% 14% 2017 28% 22% 28% 26% 15% 2018 29% 23% 29% 27% 15% Company Description 2009 5,006 (3,632) 1,373 1,056 1,365 1,246 (178) 0 878 (4) 874 (296) 0 (108) 470 2010 5,332 (3,803) 1,529 1,155 1,519 1,389 (162) 0 993 0 993 (338) 0 (99) 556 2011 5,842 (4,096) 1,745 1,325 1,734 1,590 (161) 0 1,163 0 1,163 (395) 0 (110) 658 2012 6,505 (4,460) 2,045 1,599 2,033 1,904 (120) 0 1,479 0 1,479 (500) 0 (100) 879 2013 6,928 (4,770) 2,158 1,700 2,146 2,024 (53) 0 1,647 0 1,647 (555) 0 (80) 1,012 2014 7,286 (5,052) 2,234 1,764 2,222 2,097 (0) 0 1,764 0 1,764 (592) 0 (80) 1,092 2015 7,682 (5,333) 2,348 1,866 2,336 2,207 49 0 1,914 0 1,914 (641) 0 (83) 1,191 2016 7,838 (5,617) 2,220 1,724 2,208 2,074 85 0 1,809 0 1,809 (603) 0 (86) 1,121 2017 8,262 (5,925) 2,336 1,826 2,323 2,184 115 0 1,940 0 1,940 (645) 0 (89) 1,207 2018 8,782 (6,250) 2,532 2,006 2,519 2,375 159 0 2,165 0 2,165 (718) 0 (92) 1,355 Energias do Brasil is a holding company with investments in the electricity sector, consisting of electricity generation, distribution and dealing in four important states: So Paulo, Esprito Santo, Mato Grosso do Sul and Tocantins. Gross Margin %
35% 30% 25% 20% 15% 10% 5% 0%
20 10 20 11 20 13 20 13 20 13 20 13 20 14 20 14 20 14 20 14 20 09 20 12 20 12 20 12 20 12

2009 2,588 47 1,328 8 1,205 8,377 10,965 5,603 399 411 235 3,446 1,111 1,646 3,715 10,965

2010 2,573 9 1,350 9 1,206 9,646 12,219 6,579 400 416 278 4,358 1,127 1,646 3,994 12,219

2011 2,686 10 1,458 10 1,208 10,218 12,904 6,935 429 431 329 4,542 1,204 1,646 4,323 12,904

2012 2,795 12 1,563 10 1,210 10,116 12,911 6,503 459 447 439 3,876 1,281 1,646 4,762 12,911

2013 2,848 12 1,613 11 1,212 10,022 12,870 5,955 496 455 506 3,189 1,309 1,646 5,268 12,870

2014 3,205 292 1,689 12 1,213 9,935 13,140 5,680 529 468 546 2,769 1,367 1,646 5,814 13,140

2015 3,702 749 1,727 13 1,214 9,858 13,560 5,504 561 476 595 2,485 1,386 1,646 6,410 13,560

2016 4,191 1,191 1,772 13 1,215 9,778 13,969 5,353 596 483 560 2,306 1,407 1,646 6,970 13,969

2017 4,859 1,770 1,858 14 1,217 9,709 14,568 5,348 633 499 604 2,140 1,473 1,646 7,574 14,568

2018 5,621 2,439 1,949 15 1,218 9,650 15,271 5,373 671 515 677 1,965 1,545 1,646 8,251 15,271

EBITDA Margin %
35% 30% 25% 20% 15% 10% 5% 0%
20 09 20 11 20 11 20 11 20 10 20 10 20 10

EBITDA R$ million

2009 1,056 309 1,365 1,246 (328) 359 1,565 (350) (350) 2009 3.0 9.3 13.5 1.2 nm nm 30% 0.3 4.3 4.7 6.3 5% 0.9 13% 235 1.5 50% 5% 3,399 0.91 2.73 (0.14)

2010 1,155 363 1,519 1,389 2 393 1,632 (638) (638) 2010 3.5 7.8 11.4 1.1 nm nm 12% 0.6 3.9 4.2 5.7 9% 0.5 14% 278 1.8 50% 6% 4,154 1.04 2.99 (0.12)

2011 1,325 410 1,734 1,590 (8) 450 982 165 165 2011 4.1 6.6 9.6 1.0 26.3 4% 19% 0.3 3.4 3.7 4.9 7% 0.6 15% 329 2.1 50% 8% 4,176 0.97 2.63 (0.10)

2012 1,599 434 2,033 1,904 (14) 541 332 1,046 1,046 2012 5.5 5.0 7.2 0.9 4.2 24% 23% 0.2 2.9 3.1 4.1 15% 0.2 18% 439 2.8 50% 10% 3,573 0.75 1.88 (0.06)

2013 1,700 446 2,146 2,024 (20) 573 351 1,120 1,120 2013 6.4 4.3 6.3 0.8 3.9 26% 22% 0.2 2.7 2.9 3.9 13% 0.2 19% 506 3.2 50% 12% 3,150 0.60 1.56 (0.03)

2014 1,764 458 2,222 2,097 (25) 592 371 1,159 1,159 2014 6.9 4.0 5.8 0.7 3.8 27% 18% 0.2 2.6 2.8 3.5 10% 0.3 19% 546 3.4 50% 13% 2,478 0.43 1.18 (0.00)

2015 1,866 471 2,336 2,207 (19) 625 393 1,208

2016 1,724 484 2,208 2,074 (16) 574 405 1,111

2017 1,826 498 2,323 2,184 (28) 607 428 1,178

2018 2,006 512 2,519 2,375 (32) 666 453 1,288

2,500 2,000 1,500 1,000 500

2015 7.5 3.7 5.3 0.7 3.6 28% 11% 0.3 2.5 2.7 3.4 5% 0.5 19% 595 3.7 50% 14% 1,736 0.27 0.79 0.02

2016 7.1 3.9 5.7 0.6 3.9 26% 3% 1.1 2.7 2.8 3.6 1% 3.3 16% 560 3.5 50% 13% 1,115 0.16 0.54 0.04

2017 7.6 3.6 5.3 0.6 3.7 27% 3% 1.1 2.5 2.7 3.4 1% 1.9 16% 604 3.8 50% 14% 370 0.05 0.17 0.05

2018 8.5 3.2 4.7 0.5 3.4 30% 4% 0.7 2.3 2.5 3.1 2% 0.9 16% 677 4.3 50% 16% (474) -0.06 -0.20 0.07

0
20 09

Net Income R$ million

1,200 1,000 800 600 400 200 0

20 09

20

Equity Research Brazil: Thursday, May 28, 2009

Tractebel (TBLE3)
Outperform. We are maintaining our Outperform rating and cutting our YE09 TP to R$26.50 for TBLE3 (upside of 43.3%, which prices in an estimated R$0.54 2H09 DPS). Total return expected for TBLE3 is 45.9%, composed of 40.4% in capital appreciation and 5.5% in dividends (1H09 and 2H09). Main fundamentals. Tractebel has one of the highest EBITDA growth in our coverage (12.7%). The reasons behind this lie in solid fundamentals: (i) greenfield projects (33-MW biomass cogeneration plant 55% Tractebels and 1,087-MW HPP Estreito 40% Tractebels), (ii) consolidation of most recent acquisitions (3 small hydros, 2 wind farms, comprising 114 MW), (iii) start-up of 243-MW HPP So Salvador in 2009, (iv) escalating forward energy prices that provide for revenue growth in real terms, (v) wise energy allocation proven over time (2008 and 1Q09 are living proof), to protect short-term cash flows, and (vi) almost 100% of its assured energy sold for the next three years at enticing step-up prices (see graph on page 5). The company has been able to resell energy in the regulated market at higher prices (45 MWa; R$145/MWh) after some free customers adjusted their intake through flexibility provisions in PPAs, making money out of the harsh economic environment and falling industrial activity. For 2010 and subsequent years there has been no request by free customers to lower amounts in PPAs, as industrials also fear the tight balance of supply and demand ahead. Flexible contracts account for 35% of Tractebels total assured energy, with maximum flexibility of 20% in take-or-pay contracts. The amount of assured energy that the company is at risk to clear at the spot price is thus ~7%. For an average spot price expected to stay around R$80R$115/MWh in 2009 and average contract price of R$110/MWh, the risk for revenues is less than 3% of the top line. We understand the situation is quite comfortable due to the low impact on earnings. Tractebels leverage is increasing over time as a result of its heavy capex program, but still standing below the average for utilities (1.7x Net-Debt-to-EBITDA). However, the current level easily accommodates its high and regular dividend payouts, also thanks to growth. Leverage should show some inflection by 2011 with the start-up of the main greenfield projects (Estreito, Andrade), which should make total capacity also jump, by 13% between 2008 and 2010. Tractebel acquired five different brownfield assets in 2008. Despite the small size, it reinforces the companys consolidation mood. Should credit conditions in capital markets improve, we expect Tractebel to take part in other accretive deals. In our view, Tractebel offers the best combination of dividends and growth, with its strong defensive features coupled with steady growth (11% EBITDA CAGR 20092012). Dividends should remain at 55% payout in 2009, as the company should avoid higher financing costs to manage its cost of capital and keep capacity addition on track. Tractebel already has earmarked funding from BNDES for its greenfield projects, easing pressures on cash. We expect Tractebel to return to 95% payout in 2010, with expected low capital spending.

21

Equity Research Brazil: Thursday, May 28, 2009

Valuation and stock performance. Our valuation for Tractebel entails a 13.9% WACC (vs. 15.9% previously), leading to implicit EV/EBITDA multiples of 8.1x for 2009 and 7.1x for 2010. Tractebel is trading at 9.9x P/E 09 and 8.3x P/E 10. Looking at EV/EBITDA, TBLE3 stands at 6.0x for 09 and 5.3x for 10. In both cases, TBLE is trading in line with its peers as a result of a superior EBITDA CAGR (11% 2009-2012 vs. peers 4% for AES Tiet and 6% for Cesp). The stock has underperformed the Ibovespa YTD (-0.3% vs. 41.3%) and its peers when compared to the IEE (Bovespas Electricity Energy Index), -0.3% vs. 28.3% for the IEE.
Figure 13: Tractebels Performance YTD vs. Ibovespa vs. IEE

145.00 135.00 125.00 115.00 105.00 95.00 85.00

Dec-08
IBOV Equity

Jan-09
TBLE3 Equity

Mar-09
IBOVIEE Index

Apr-09

May-09

Source: Bloomberg and Bradesco Corretora

Figure 14: New Estimates for Tractebel 2009E Net Revenues EBITDA EBITDA Margin Net Earnings Shareholders' equity DPS Dividend Yield* Target Price Recommendation * May 28th closing price
Source: Bradesco Corretora estimates

New 2010E 4,573 2,813 62% 1,448 3,790 2.1 11.4% 26.50 Outperform

2011E 4,676 3,189 68% 1,722 3,876 2.5 13.5%

2009E 4,108 2,667 65% 1,553 4,621 1.3 7.1%

Previous 2010E 2011E 4,851 3,134 65% 1,863 4,714 2.7 14.7% 28.00 Outperform 5,211 3,802 73% 2,327 4,830 3.4 18.3%

3,806 2,457 65% 1,215 3,718 1.0 5.5%

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Equity Research Brazil: Thursday, May 28, 2009

Income Statement R$ million Net Revenues Cost of goods/services sold Gross Profit EBIT EBITDA Financial income/expense Equity Income Operating income Non-operating result Pretax income Income tax Net earnings Operating Margins Gross Margin EBIT Margin EBITDA Margin Net margin Balance Sheet R$ million Current + long term assets Cash + short term investment Net receivables Inventories Other Permanent assets Total assets Current + long term liabilities Suppliers Accounts payable Dividends due Total debt ST + LT Other Minority Interest Shareholders' equity Total liabilities Cash flow R$ million EBIT Depreciation EBITDA Changes in working capital Income tax Capex Free cash flow to the firm Key Indicators EPS P/E Implied P/E P/BV P/Free cash flow Free cash flow yield Net earnings - CAGR (3 years) PEG EV/EBITDA Implied EV/EBITDA EBITDA - CAGR (3 years) EVG ROE (final) Dividends Dividend per share (BRL) Payout Dividend yield Net debt (BRL million) Net debt/Shareholders' equity Net debt/EBITDA Financial expenses/EBITDA 2009 68% 56% 65% 32% 2010 65% 53% 62% 32% 2011 72% 59% 68% 37% 2012 74% 62% 70% 38% 2013 72% 60% 69% 38% 2014 72% 61% 69% 39% 2015 76% 64% 72% 42% 2016 76% 64% 72% 42% 2017 75% 64% 72% 43% 2018 75% 64% 72% 43% Company Description 2009 3,806 (1,205) 2,601 2,117 2,457 (302) 0 1,816 0 1,816 (601) 1,215 2010 4,573 (1,607) 2,965 2,428 2,813 (282) 0 2,146 0 2,146 (698) 1,448 2011 4,676 (1,322) 3,353 2,780 3,189 (253) 0 2,527 0 2,527 (805) 1,722 2012 4,826 (1,272) 3,554 2,971 3,383 (179) 0 2,792 0 2,792 (938) 1,854 2013 5,149 (1,444) 3,705 3,113 3,529 (130) 0 2,984 0 2,984 (1,004) 1,979 2014 5,295 (1,474) 3,821 3,222 3,641 (84) 0 3,138 0 3,138 (1,057) 2,082 2015 5,126 (1,239) 3,887 3,281 3,703 (49) 0 3,232 0 3,232 (1,089) 2,144 2016 5,318 (1,295) 4,023 3,408 3,834 (15) 0 3,393 0 3,393 (1,144) 2,250 2017 5,511 (1,353) 4,158 3,535 3,965 12 0 3,548 0 3,548 (1,196) 2,352 2018 5,706 (1,414) 4,292 3,661 4,095 51 0 3,712 0 3,712 (1,252) 2,460 Tractebel Energia is Brazil's largest private power generator. Through its generation assets in the States of Paran, Santa Catarina, Rio Grande do Sul, Mato Grosso do Sul and Gois, the company has an installed capacity of 5,860MW.Tractebel Energia is part of SUEZ Energy International, the business line of SUEZ which is responsible for the Group's energy activities outside Europe. Gross Margin %
80% 70% 60% 50% 40% 30% 20% 10% 0%
20 20 20 20 20 20 13 20 20 13 20 20 14 20 14 14

2009 2,268 1,111 471 58 628 7,817 10,085 6,368 239 989 354 3,837 947 0 3,718 10,085

2010 2,377 1,163 550 65 600 8,533 10,910 7,120 337 993 709 3,976 1,104 0 3,790 10,910

2011 2,465 1,286 560 71 548 8,218 10,683 6,807 233 996 855 3,511 1,212 0 3,876 10,683

2012 2,542 1,360 570 74 538 7,904 10,447 6,478 205 997 903 3,100 1,272 0 3,969 10,447

2013 2,736 1,527 603 77 529 7,591 10,327 6,260 249 998 964 2,706 1,343 0 4,068 10,327

2014 2,875 1,658 617 80 520 7,279 10,153 5,982 247 998 1,012 2,334 1,391 0 4,172 10,153

2015 2,884 1,691 599 83 511 6,967 9,851 5,572 162 998 1,041 1,972 1,399 0 4,279 9,851

2016 3,183 1,977 619 86 502 6,655 9,838 5,447 168 998 1,093 1,734 1,453 0 4,391 9,838

2017 3,480 2,260 638 89 493 6,343 9,823 5,314 174 998 1,142 1,496 1,504 0 4,509 9,823

2018 3,790 2,555 658 92 484 6,032 9,822 5,190 180 998 1,195 1,257 1,559 0 4,632 9,822

EBITDA Margin %
10 09

11

12

13 20 13

80% 70% 60% 50% 40% 30% 20% 10% 0%

09 10 11 20 20 20 20 12

EBITDA R$ million
4,000

2009 2,117 340 2,457 (276) 703 2,019 11 11 2009 1.9 9.9 14.2 3.2 nm 0% 7% 1.3 6.0 8.1 15% 0.4 33% 668 1.0 55% 6% 2,726 0.73 1.11 (0.12)

2010 2,428 385 2,813 (167) 794 1,101 1,085 1,085 2010 2.2 8.3 11.9 3.2 11.1 9% 11% 0.7 5.3 7.1 15% 0.4 38% 1,375 2.1 95% 11% 2,814 0.74 1.00 (0.10)

2011 2,780 409 3,189 11 891 94 2,192 2,192 2011 2.6 7.0 10.0 3.1 5.5 18% 16% 0.4 4.6 6.3 14% 0.3 44% 1,636 2.5 95% 14% 2,225 0.57 0.70 (0.08)

2012 2,971 412 3,383 (21) 999 98 2,306 2,306 2012 2.8 6.5 9.3 3.0 5.2 19% 15% 0.4 4.4 5.9 11% 0.4 47% 1,761 2.7 95% 15% 1,740 0.44 0.51 (0.05)

2013 3,113 415 3,529 (78) 1,048 102 2,456 2,456 2013 3.0 6.1 8.7 3.0 4.9 20% 11% 0.6 4.2 5.7 8% 0.5 49% 1,880 2.9 95% 16% 1,179 0.29 0.33 (0.04)

2014 3,222 419 3,641 (29) 1,085 106 2,478 2,478 2014 3.2 5.8 8.3 2.9 4.9 21% 7% 0.9 4.1 5.5 5% 0.9 50% 1,977 3.0 95% 16% 676 0.16 0.19 -0.02

2015 3,281 422 3,703 60 1,105 110 2,428 2,428 2015 3.3 5.6 8.1 2.8 5.0 20% 5% 1.1 4.0 5.4 3% 1.3 50% 2,036 3.1 95% 17% 281 0.07 0.08 -0.01

2016 3,408 426 3,834 (38) 1,149 114 2,609

2017 3,535 430 3,965 (35) 1,192 118 2,690

2018 3,661 434 4,095 (38) 1,235 122 2,776

3,500 3,000 2,500 2,000 1,500 1,000

2016 3.4 5.4 7.7 2.7 4.6 22% 4% 1.2 3.9 5.2 3% 1.4 51% 2,137 3.3 95% 18% (243) -0.06 -0.06 0.00

2017 3.6 5.1 7.3 2.7 4.5 22% 4% 1.2 3.7 5.0 3% 1.3 52% 2,234 3.4 95% 19% (764) -0.17 -0.19 0.00

2018 3.8 4.9 7.0 2.6 4.3 23% 5% 1.0 3.6 4.9 3% 1.1 53% 2,337 3.6 95% 19% (1,298) -0.28 -0.32 0.01

500 0
09 10 11 20 20 20 20 12

Net Income R$ million

2,500 2,000 1,500 1,000 500 0
20 10 20 09 20 11 20 12

14

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Equity Research Brazil: Thursday, May 28, 2009

CPFL (CPFE3)
Market Perform. We are maintaining our Market Perform rating for CPFL and cutting our YE09 TP to R$42.20 for CPFE3 (32.7% upside, which includes a R$1.76 2H09 DPS) and US$52.70 for CPL (10% upside, which includes a US$2.20 2H09 dividend per ADR). Total return expected for CPFE3 is 37.8%, composed of 25.6% in capital appreciation and 10.2% in dividends (1H09 and 2H09). Main fundamentals. We regard CPFL as one of the steadiest and most reliable companies in our coverage, with solid results popping up on a quarterly basis. Tariff reviews ended in 2008 (Paulista, RGE, Jaguarina, Santa Cruz) and should release companies to collect better returns going forward. Above all, the 2008 tariff reviews proved that companies deeply concerned about cost management can preserve gains in tariff resets despite the regulator Aneel raising the bar on target costs. Generation start-ups helped cushion the downward impact of tariff reviews in discos and should also add to growth in coming years (HPP Foz do Chapec, TPP Baldin, small hydropower plants). Superior performance in costs the cornerstone of our investment case for CPFL. The company should continue to beat its regulatory targets and capture additional returns due to integration of activities among its controlled companies. Controlling a corporate structure composed of several discos with tight geographical fit contributes to cashing in synergic gains from SG&A and operating costs resulting from downsizing. Scale plays an important role in cost performance and CPFL is the company featuring the largest array of discos under the same ownership structure (8 discos). The company posts cash operating costs (personnel, material, third-party services and others) of around R$140 per customer in its distribution business, at the very low end of the industry (Cemig R$228/customer, Eletropaulo R$163/customer) despite a larger concession area. Due to its diligent and synergic-focused consolidation strategy, we do not expect CPFL to venture into expensive transactions in the distribution business. The Santa Cruz and Jaguarina acquisitions in 2007 and 2008, respectively, are proof of one of the pillars of the investment case. Given the number of discos located in So Paulo state likely to undergo M&A processes in coming years, we expect CPFL to corner some of those potential transactions. Growth in greenfield generation (HPP Foz do Chapec, TPP Baldin, small hydros) should be the main driver for EBITDA growth in coming years. In the absence of accretive opportunities for acquisition of distribution companies, CPFL should continue developing efforts to increase the share of generation in its consolidated figures. HPP Foz do Chapec (51%; 220MWa) should add R$130mn to EBITDA by 2010 and TPP Baldin (24MWa), R$41mn and small hydropower plants (38 MWa), R$64mn by 2011. In three years, the generation business should account for 27% of consolidated EBITDA, adding resilience to earnings and lowering the intrinsic risks of the distribution activities. CPFL manages leverage to deliver regular dividends at high payouts. We see no risks for dividends going forward. The current net-debt-to-EBITDA ratio (1.98x) is

24

Equity Research Brazil: Thursday, May 28, 2009

polluted by non-EBITDA-generating debt from the project finance of its greenfield projects. With the start-up of these gencos, leverage should fall to 1.61x by 2011. In order to manage cost of capital, dividends are the best alternative in the absence of synergic acquisitions. It is worth noting that CPFL is the company whose debt-tototal-capitalization ratio is closest to Aneels target (57.2% D/D+E), which proves managements concern and efforts in targeting the regulatory cost of capital to achieve the best return possible. Valuation and stock performance. Our valuation for CPFL entails a 12.9% WACC (vs. 15.1% previously), leading to implicit EV/EBITDA multiples of 8.1x for 2009 and 7.8x for 2010. CPFL trades above its peers at 9.3x P/E 09 and 9.0x P/E 10. On an EV/EBITDA basis, CPFE3 stands at 6.6x for 09 and 6.4x for 10, above its peers. The company also posts the third-highest ROE in the sector (31% for 09 and 32% for 10), standing only below AES Tiet and Tractebel. Year to date, the stock has underperformed the Ibovespa (10% vs. 41.3%), and its peers when compared to the IEE (Bovespas Electricity Energy Index), 28.3% YTD.
Figure 15: CPFLs Performance YTD vs. Ibovespa vs. IEE
150.00 140.00 130.00 120.00 110.00 100.00 90.00 Dec-08

Jan-09
IBOV Equity CPFE3 Equity

Mar-09
IBOVIEE Index

Apr-09

May-09

Source: Bloomberg and Bradesco Corretora

Figure 16: New Estimates for CPFL

2009E Net Revenues EBITDA EBITDA Margin Net Earnings Shareholders' equity DPS Dividend Yield* Target Price Recommendation * May 28th closing price 10,200 3,291 32% 1,640 5,342 3.2 10.2% New 2010E 10,476 3,414 33% 1,689 5,311 3.3 10.5% 42.20 Market Perform 2011E 11,281 3,777 33% 1,869 5,567 3.7 11.6% 2009E 9,431 3,163 34% 1,416 5,034 2.8 8.8% Previous 2010E 2011E 10,293 3,664 36% 1,706 5,320 3.4 10.6% 44.00 Market Perform 11,445 4,364 38% 2,172 5,651 4.3 13.5%

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Equity Research Brazil: Thursday, May 28, 2009

Source: Bradesco Corretora estimates
Income Statement R$ million Net Revenues Cost of goods/services sold Gross Profit EBIT EBITDA Financial income/expense Equity Income Operating income Non-operating result Pretax income Income tax Minority Interest Net earnings Company Description 2009 10,200 (6,479) 3,721 2,900 3,291 (353) 0 2,546 0 2,546 (880) (26) 1,640 2010 10,476 (6,466) 4,010 2,998 3,414 (383) 0 2,614 0 2,614 (889) (36) 1,689 2011 11,281 (6,882) 4,399 3,337 3,777 (435) 0 2,902 0 2,902 (987) (47) 1,869 2012 12,274 (7,320) 4,955 3,845 4,305 (440) 0 3,405 0 3,405 (1,158) (57) 2,191 2013 12,989 (7,754) 5,235 4,076 4,559 (413) 0 3,663 0 3,663 (1,246) (64) 2,354 2014 14,001 (8,065) 5,935 4,727 5,233 (400) 0 4,328 0 4,328 (1,471) (75) 2,782 2015 15,045 (8,513) 6,532 5,273 5,804 (382) 0 4,891 0 4,891 (1,663) (81) 3,147 2016 15,688 (8,967) 6,721 5,409 5,966 (387) 0 5,022 0 5,022 (1,707) (65) 3,250 2017 16,869 (9,432) 7,437 6,070 6,655 (367) 0 5,703 0 5,703 (1,939) (77) 3,688 2018 16,536 (9,912) 6,625 5,200 5,815 (379) 0 4,821 0 4,821 (1,639) (74) 3,108 CPFL Energia is an integrated electricity company that operates in distribution, comercialization and generation. CPFL distribution subsidiaries currently provide energy for more than six million customers in Sao Paulo and Rio Grande do Sul states. Currently the company operates 5 hydro power plants with 1,588 MW installed capacity.

Gross Margin %

Operating Margins Gross Margin EBIT Margin EBITDA Margin Net margin 2009 36% 28% 32% 16% 2010 38% 29% 33% 16% 2011 39% 30% 33% 17% 2012 40% 31% 35% 18% 2013 40% 31% 35% 18% 2014 42% 34% 37% 20% 2015 43% 35% 39% 21% 2016 43% 34% 38% 21% 2017 44% 36% 39% 22% 2018 40% 31% 35% 19%

45% 40% 35% 30% 25% 20% 15% 10% 5% 0%

Balance Sheet R$ million Current + long term assets Cash + short term investment Net receivables Inventories Other Permanent assets Total assets Current + long term liabilities Suppliers Accounts payable Dividends due Total debt ST + LT Other Minority Interest Shareholders' equity Total liabilities

20 09

20 12

20 13 20 13 20 13 20 13

2009 6,153 14 3,075 15 3,049 10,030 16,183 10,756 982 925 676 6,675 1,497 85 5,342 16,183

2010 6,161 14 3,078 17 3,052 10,589 16,750 11,353 1,018 930 838 7,080 1,487 85 5,311 16,750

2011 6,342 15 3,255 18 3,054 10,955 17,297 11,645 1,086 939 847 7,232 1,542 85 5,567 17,297

2012 6,530 17 3,438 19 3,056 11,349 17,880 11,951 1,152 948 986 7,261 1,604 85 5,843 17,880

2013 6,641 18 3,546 20 3,058 11,772 18,414 12,326 1,221 954 1,099 7,419 1,634 85 6,002 18,414

2014 6,855 19 3,755 21 3,061 12,224 19,079 12,608 1,266 963 1,261 7,403 1,715 85 6,386 19,079

2015 6,985 20 3,880 22 3,063 12,703 19,688 12,917 1,335 973 1,466 7,394 1,750 85 6,686 19,688

2016 7,170 21 4,060 24 3,065 13,217 20,387 13,368 1,414 978 1,478 7,689 1,809 85 6,934 20,387

2017 7,385 23 4,270 25 3,068 13,766 21,151 13,740 1,487 987 1,685 7,698 1,882 85 7,327 21,151

2018 7,237 22 4,119 26 3,070 14,351 21,589 14,474 1,564 988 1,587 8,540 1,795 85 7,030 21,589

EBITDA Margin %

40% 35% 30% 25% 20% 15% 10% 5% 0%

20 09

20 10

20 11

20 12

Cash flow R$ million EBIT Depreciation EBITDA Changes in working capital Income tax Capex Free cash flow to the firm Key Indicators EPS P/E Implied P/E P/BV P/Free cash flow Free cash flow yield Net earnings - CAGR (3 years) PEG EV/EBITDA Implied EV/EBITDA EBITDA - CAGR (3 years) EVG ROE (final) Dividends Dividend per share (BRL) Payout Dividend yield Net debt (BRL million) Net debt/Shareholders' equity Net debt/EBITDA Financial expenses/EBITDA

EBITDA R$ million 2009 2,900 391 3,291 (510) 866 1,082 1,852 2010 2,998 416 3,414 (23) 889 975 1,573 2011 3,337 439 3,777 50 987 805 1,934 2012 3,845 460 4,305 51 1,158 854 2,242 2013 4,076 482 4,559 7 1,246 905 2,401 2014 4,727 506 5,233 79 1,471 957 2,726 2015 5,273 531 5,804 15 1,663 1,010 3,115 2016 5,409 557 5,966 42 1,707 1,071 3,145 2017 6,070 585 6,655 59 1,939 1,134 3,523 2018 5,200 614 5,815 (139) 1,639 1,200 3,115

6,000 5,000 4,000 3,000 2,000

2009 3.4 9.3 12.3 2.9 8.2 12% 5% 1.8 6.6 8.1 6% 1.0 31% 1,558 3.2 95% 10% 6,661 1.25 2.02 -0.11

2010 3.5 9.0 11.9 2.9 9.7 10% 1% 9.8 6.4 7.8 0% 32.0 32% 1,605 3.3 95% 11% 7,066 1.33 2.07 -0.11

2011 3.9 8.2 10.8 2.7 7.9 13% 14% 0.6 5.8 7.1 12% 0.5 34% 1,775 3.7 95% 12% 7,216 1.30 1.91 -0.12

2012 4.6 7.0 9.2 2.6 6.8 15% 10% 0.7 5.1 6.2 9% 0.5 37% 2,081 4.3 95% 14% 7,244 1.24 1.68 -0.10

2013 4.9 6.5 8.6 2.5 6.4 16% 12% 0.6 4.8 5.9 10% 0.5 39% 2,236 4.7 95% 15% 7,401 1.23 1.62 -0.09

2014 5.8 5.5 7.3 2.4 5.6 18% 14% 0.4 4.2 5.1 11% 0.4 44% 2,642 5.5 95% 17% 7,384 1.16 1.41 -0.08

2015 6.6 4.8 6.4 2.3 4.9 20% 13% 0.4 3.8 4.6 10% 0.4 47% 2,990 6.2 95% 20% 7,374 1.10 1.27 -0.07

2016 6.8 4.7 6.2 2.2 4.9 21% 11% 0.4 3.7 4.5 9% 0.4 47% 3,087 6.4 95% 20% 7,668 1.11 1.29 -0.06

2017 7.7 4.1 5.5 2.1 4.3 23% 10% 0.4 3.3 4.0 8% 0.4 50% 3,503 7.3 95% 23% 7,675 1.05 1.15 -0.06

2018 6.5 4.9 6.5 2.2 4.9 20% 0% -11.8 3.8 4.6 0% 58.8 44% 2,952 6.2 95% 19% 8,518 1.21 1.46 -0.07

1,000 0

20 09

20 11

Net Income R$ million

3,000 2,500 2,000 1,500 1,000 500 0

20 09

20 11

20 12

20 12

20 10

20 14

20 10

20 14

20 14

20 14

20 10

20 11

26

Equity Research Brazil: Thursday, May 28, 2009

Cemig (CMIG4)
Market Perform. We are upgrading our rating to Market Perform and cutting our YE09 TP to R$33.50 for CMIG4 (29% upside, which includes a R$2.22 09 DPS) and US$14.00 for CIG (7.4% upside, which includes a US$0.93 09 dividend per ADR). Total return expected for CMIG4 is composed of 20.5% in capital appreciation and 8.5% in expected 2009 dividends. Main fundamentals. The stock has significantly underperformed the Ibovespa since we downgraded it in October (4.9% vs. 58.9% for the Ibovespa), opening an interesting valuation gap. We still understand the challenges for Cemig are not negligible (exposure to industrial consumption, leverage) and have concerns about pricing of M&A transactions. However, current upside to our TP justifies increasing the weight of CMIG/CIG in portfolios. In our view Cemig is a fairly-priced option to play Brazilian utilities after the valuation gap widened due to recent stock performance. We consolidated Terna (TRNA11) in our estimates for Cemig, which adds to medium-term EBITDA given the stability in revenues of the transmission company acquired in May (full consolidation in 4Q09 in our estimates). With Terna, the transmission segments contribution to 10 EBITDA should reach 15.3% (R$658mn; contribution to 09 EBITDA should be R$161mn). We view the premium paid (35% in our estimates) as high, encouraging minority shareholders to tag along in the mandatory buyback offer to take place by year-end, which should increase total consideration involved in the acquisition of Terna from R$2.3bn to R$3.5bn. The transaction should be responsible for leveraging Cemig to 2.1x Net-Debt-to-EBITDA, on top of its peers and pressuring net financial expenses going forward. The main value driver for Cemig by far is its generation business. Long-term energy prices upward trend hugely benefits the company due to uncontracted capacity from 2012 onwards. The company has already signed highly-priced long-term contracts with free customers (Votorantim, Arcelor, Usiminas) and others should surface soon, although in line with our long-term estimates and the marginal cost of expansion of Brazilian generation. Through long-term sales in the free market, Cemig should secure a safe stream of revenues (contracts at ~R$140/MWh for 2013 onwards). Investment in Light adds to consolidated EBITDA given the Rio de Janeiro discos solid performance. As aforementioned, we see Light as one of the top choices in terms of security in the current environment. Light should contribute 8.7% of consolidated EBITDA in 2010 (currently 10.2%) after completion of the acquisition of Terna. We believe Cemig has plans to cut costs by R$200mn from year-end 2010 onwards. The main focus seems to be the distribution company, which left the April 08 tariff review underperforming its regulatory targets (R$237/customer vs. Aneels target of R$196/customer). We do not price in any benefit from cost cuts due to the natural hurdles for state-owned companies to downsize, leaving this as upside beyond our target price.

27

Equity Research Brazil: Thursday, May 28, 2009

With the re-opening of debt capital markets in 2009 for new debt issues, growth plans through acquisitions may gain momentum. Federal District disco CEB (Cia Energtica de Braslia) should likely be the next target, as both companies revealed that they are in preliminary talks. Although the price and premium are uncertain, we estimate CEBs EV at ~R$700mn (R$412mn in shareholder value) with a potential R$120mn contribution to Cemigs consolidated EBITDA (for 100% of total capital). Given the stage of negotiations and absence of more detailed data on CEB, we did not incorporate the Braslia disco in our estimates. The main threats for Cemig remain its distribution companys performance and above-average exposure to industrial consumption. In our estimates, the disco should contribute 38% of consolidated EBITDA 09 due to (i) a worse-than-expected tariff readjustment (6.2%) on the back of loss of past-period deferrals (22.1% EBITDA margin for Cemigs disco in 2009, vs. 26.1% in 2008) and (ii) slowing industrial consumption. We expect Cemigs total volume in the captive market to grow by 3.8% in 2009 (vs. 7.6% in 2008), in spite of the deceleration in industrial consumption. Valuation and stock performance. Our valuation for Cemig entails a 13.7% WACC (vs. 15.6% previously), leading to implicit EV/Adj EBITDA multiples of 8.7x for 2009 and 7.6x for 2010. Cemig trades at 9.5x P/E 09 and 9.0x P/E 10. On an EV/Adj EBITDA basis, CMIG4 stands at 6.4x for 09 and 5.4x for 10. In both cases, CMIG trades in the second quartile of its peers. Year to date, the stock has underperformed the Ibovespa (8.3% vs. 41.3%), as well as its peers when compared to the IEE (Bovespas Electricity Energy Index), 8.3% vs. 28.3% for the IEE.
Figure 17: Cemigs Performance YTD vs. Ibovespa vs. IEE

150.00 140.00 130.00 120.00 110.00 100.00 90.00 Dec-08

Jan-09
IBOV Equity CMIG4 Equity

Mar-09
IBOVIEE Index

Apr-09

May-09

Source: Bloomberg and Bradesco Corretora

28

Equity Research Brazil: Thursday, May 28, 2009

Figure 18: New Estimates for Cemig 2009E Net Revenues Adj. EBITDA EBITDA Margin Net Earnings Shareholders' equity DPS Dividend Yield* Target Price Recommendation * May 28th closing price
Source: Bradesco Corretora estimates

New 2010E 12,765 4,731 37% 1,793 10,665 1.8 6.8% 33.50

2011E 13,628 5,200 38% 2,047 11,689 3.7 14.2%

2009E 12,532 3,958 32% 1,803 10,132 2.0 7.8%

Previous 2010E 2011E 13,713 4,342 32% 2,114 10,210 1.9 7.1% 36.80 15,135 4,942 33% 2,529 11,475 4.2 16.1%

11,269 4,058 36% 1,695 10,641 2.2 8.5%

Market Perform

Underperform

29

Equity Research Brazil: Thursday, May 28, 2009

Income Statement R$ million Net Revenues Cost of goods/services sold Gross Profit EBIT EBITDA adj. EBITDA Financial income/expense Equity Income Operating income Non-operating result Pretax income Income tax Interest on own capital Minority Interest Net earnings Company Description 2009 11,269 (7,547) 3,721 2,917 3,649 4,058 (214) 0 2,703 0 2,703 (922) 0 (86) 1,695 2010 12,765 (8,367) 4,399 3,364 4,298 4,731 (494) 0 2,869 0 2,869 (975) 0 (100) 1,793 2011 13,628 (8,768) 4,860 3,765 4,755 5,200 (506) 0 3,259 0 3,259 (1,108) 0 (104) 2,047 2012 14,778 (9,429) 5,349 4,192 5,239 5,730 (513) 0 3,678 0 3,678 (1,250) 0 (120) 2,307 2013 16,587 (10,213) 6,374 5,151 6,260 6,839 (381) 0 4,770 0 4,770 (1,622) 0 (164) 2,984 2014 17,943 (10,979) 6,965 5,674 6,846 7,510 (263) 0 5,411 0 5,411 (1,840) 0 (155) 3,417 2015 19,426 (11,795) 7,631 6,275 7,509 8,230 (116) 0 6,158 0 6,158 (2,094) 0 (180) 3,884 2016 20,651 (12,618) 8,032 6,613 7,905 8,687 (28) 0 6,585 0 6,585 (2,239) 0 (206) 4,140 2017 21,931 (13,469) 8,462 6,977 8,330 9,176 115 0 7,092 0 7,092 (2,411) 0 (235) 4,446 2018 21,812 (14,250) 7,562 6,009 7,425 8,227 156 0 6,164 0 6,164 (2,096) 0 (234) 3,835 Companhia Energtica de Minas Gerais CEMIG is a state-owned integrated electric company operating mainly in Minas Gerais State. CEMIG operates 57 power plants, with 6,737 MW, 5400 km of transmission lines and distributes energy to 10 million customers

Gross Margin %

Operating Margins Gross Margin EBIT Margin EBITDA Margin Net margin 2009 33% 26% 32% 15% 2010 34% 26% 34% 14% 2011 36% 28% 35% 15% 2012 36% 28% 35% 16% 2013 38% 31% 38% 18% 2014 39% 32% 38% 19% 2015 39% 32% 39% 20% 2016 39% 32% 38% 20% 2017 39% 32% 38% 20% 2018 35% 28% 34% 18%

45% 40% 35% 30% 25% 20% 15% 10% 5% 0%

20 09

20 10

20 11

Balance Sheet R$ million Current + long term assets Cash + short term investment Net receivables Inventories Other Permanent assets Total assets Current + long term liabilities Suppliers Accounts payable Dividends due Total debt ST + LT Other Minority Interest Shareholders' equity Total liabilities Cash flow R$ million EBIT Depreciation EBITDA adj.EBITDA Changes in working capital Income tax Capex Free cash flow to the firm Key Indicators EPS P/E Implied P/E P/BV P/Free cash flow Free cash flow yield Net earnings - CAGR (3 years) PEG EV/adj. EBITDA Implied EV/adj. EBITDA EBITDA - CAGR (3 years) EVG ROE (final) Dividends Dividend per share (BRL) Payout Dividend yield Net debt (BRL million) Net debt/Shareholder's equity Net debt/EBITDA Financial expenses/EBITDA

2009 10,217 80 5,305 41 4,791 18,269 28,486 17,483 1,040 3,238 847 9,696 2,661 363 10,641 28,486

2010 10,335 83 5,417 44 4,791 18,738 29,073 18,045 1,125 3,283 1,769 9,190 2,679 363 10,665 29,073

2011 10,586 90 5,658 47 4,791 19,258 29,844 17,792 1,220 3,342 1,024 9,424 2,783 363 11,689 29,844

2012 10,866 98 5,926 50 4,791 19,791 30,657 18,540 1,314 3,400 2,242 8,699 2,885 363 11,754 30,657

2013 11,321 110 6,365 54 4,791 20,328 31,649 18,040 1,417 3,490 1,492 8,562 3,079 363 13,246 31,649

2014 11,658 118 6,691 58 4,791 20,860 32,518 18,801 1,518 3,578 3,309 7,172 3,225 363 13,354 32,518

2015 12,012 128 7,031 62 4,791 21,125 33,137 17,478 1,634 3,655 1,942 6,881 3,367 363 15,296 33,137

2016 12,293 134 7,302 66 4,791 21,405 33,699 17,976 1,754 3,723 4,076 4,939 3,483 363 15,360 33,699

2017 12,658 144 7,652 71 4,791 21,698 34,356 16,410 1,879 3,795 2,223 4,885 3,628 363 17,583 34,356

2018 12,479 140 7,473 75 4,791 22,006 34,484 16,691 2,013 3,805 3,988 3,403 3,482 363 17,430 34,484

EBITDA Margin %

45% 40% 35% 30% 25% 20% 15% 10% 5% 0%

20 09

20 10

20 12

20 13 20 13 20 13

EBITDA R$ million 2009 2,917 558 3,649 3,475 (23) 992 6,853 (4,347) 2010 3,364 616 4,298 3,979 (29) 1,144 1,404 1,461 2011 3,765 792 4,755 4,557 (6) 1,280 1,509 1,775 2012 4,192 827 5,239 5,018 25 1,425 1,581 1,987 2013 5,151 832 6,260 5,984 68 1,751 1,646 2,519 2014 5,674 710 6,846 6,384 2 1,929 1,704 2,748 2015 6,275 948 7,509 7,222 20 2,133 1,499 3,570 2016 6,613 977 7,905 7,590 (24) 2,248 1,572 3,794 2017 6,977 (3,259) 8,330 3,718 1 1,105 842 1,770 2018 6,009 696 7,425 6,705 (178) 2,043 1,724 3,116
8,000 7,000 6,000 5,000 4,000 3,000

2009 2.7 9.5 12.2 1.5 nm nm 3% 3.7 6.4 8.7 10% 0.7 16% 962 2.2 57% 9% 9,616 0.90 2.77 (0.06)

2010 2.9 9.0 11.6 1.5 11.1 9% 1% 8.2 5.4 7.6 5% 1.1 17% 897 1.8 50% 7% 9,107 0.85 2.29 (0.12)

2011 3.3 7.9 10.1 1.4 9.1 11% 3% 2.9 5.0 6.7 8% 0.6 18% 1,896 3.7 93% 14% 9,334 0.80 2.05 (0.11)

2012 3.7 7.0 9.0 1.4 8.1 12% 11% 0.6 4.5 6.0 12% 0.4 20% 1,154 2.1 50% 8% 8,601 0.73 1.71 (0.10)

2013 4.8 5.4 7.0 1.2 6.4 16% 18% 0.3 3.8 5.1 13% 0.3 23% 2,581 4.7 86% 18% 8,452 0.64 1.41 (0.06)

2014 5.5 4.7 6.1 1.2 5.9 17% 19% 0.3 3.4 4.8 13% 0.3 26% 1,708 3.1 50% 12% 7,053 0.53 1.10 (0.04)

2015 6.3 4.2 5.3 1.1 4.5 22% 19% 0.2 3.1 4.2 13% 0.2 25% 3,542 6.9 91% 27% 6,753 0.44 0.94 (0.02)

2016 6.7 3.9 5.0 1.1 4.3 23% 12% 0.3 3.0 4.0 8% 0.4 27% 2,070 4.1 50% 16% 4,805 0.31 0.63 (0.00)

2017 7.2 3.6 4.7 0.9 9.1 11% 9% 0.4 2.8 8.2 7% 0.4 25% 4,229 8.6 95% 33% 4,741 0.27 1.28 0.03

2018 6.2 4.2 5.4 0.9 5.2 19% 0% -9.9 3.1 4.5 0% nm 22% 1,918 4.7 50% 18% 3,264 0.19 0.49 0.02

2,000 1,000 0

20 10

20 11

20 09

20 12

Net Income R$ million

4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0

20 10

20 12

20 09

20 11

20 14

20 14

20 14

20 11

20 14

20 12

20 13

30

Equity Research Brazil: Thursday, May 28, 2009

Celesc (CLSC6)
Underperform. We are maintaining our Underperform rating for Celesc and cutting our YE09 TP to R$38.00 for CLSC6 (which includes an expected R$0.96 09 DPS). Total return expected for CLSC6 is 16%, composed of 12.6% in capital appreciation and 2.9% in dividends (2009). Main fundamentals. Given weak margins (16.4% EBITDA margin in 08 and 8.9% estimated for 09), Celesc is suffering additional pain from the 2008 tariff review. The regulator raised the bar for the company, pricing in manageable costs of R$116mn in its tariffs. However, the company posted R$160mn in 1Q09, 27% above its target for manageable costs. The company also maintains one of the highest levels of SG&A expenses in the industry (8% of Net Revenues). With challenges posed by the heavy cost structure, we understand margins should remain low, with little likelihood of substantial improvements in the near future. Additionally, above-average exposure to industrial consumption (33.3% of energy sales to captive customers; 41.3% of total energy distributed) is a major risk factor in the current environment. Its concession area has large exposure to agricultural GDP, and should our estimates for agricultural GDP materialize in 2009 (flat YoY), Celesc should face additional challenges. Full consolidation of SC Gs strengthened the P&L and its balance sheet, although growth is linked to local industry and uncertain expansion of gas pipelines. We estimate volume growth to be aligned with GDP, i.e. 4% in the long run. Despite rumors of potential cuts in personnel through a voluntary termination program, little changes in its cost structure have kicked in recently (first signs seen 1Q09). No leverage (the company has net cash of R$104mn) is the natural consequence of small margins. Consequently, the company lacks strength in its financial statements to cope with higher dividend payments. We note that low leverage combined with high capex (R$260mn for 2009 in Aneels target for the distribution business; total budget of R$306mn announced) add to the high cost of capital, thus being reflected in stock performance. In our view Celesc is clearly the company facing the toughest challenges in 2009 in our coverage, leading us to maintain our rating. Valuation and stock performance. Our valuation for Celesc entails a 14.8% WACC (vs. 17.2% previously), leading to implicit EV/EBITDA multiples of 4.4x for 2009 and 3.0x for 2010. Celesc trades above its peers at 8.9x P/E 09 and 5.4x P/E 10. On an EV/EBITDA basis, CLSC6 stands at 3.9x for 09 and 2.6x for 10, below its peers. The stock has underperformed the Ibovespa YTD (0.3% vs. 41.3%) and its peers when compared to the IEE (Bovespas Electricity Energy Index), 28.3% YTD for the IEE.

31

Equity Research Brazil: Thursday, May 28, 2009 Figure 19: Celescs Performance YTD vs. Ibovespa vs. IEE

145.00 135.00 125.00 115.00 105.00 95.00 85.00 Dec-08

Jan-09
IBOV Equity CLSC6 Equity

Mar-09
IBOVIEE Index

Apr-09

May-09

Source: Bloomberg and Bradesco Corretora

Figure 20: New Estimates for Celesc 2009E Net Revenues EBITDA EBITDA Margin Recurring Net Earnings Shareholders' equity DPS Dividend Yield* Target Price Recommendation * May 28th closing price
Source: Bradesco Corretora estimates

New 2010E 4,122 494 12% 235 1,921 1.58 4.80% 38.00

2011E 4,468 597 13% 299 2,145 0.14 0.42%

2009E 3,589 312 9% 208 1,876 1.35 4.11%

Previous 2010E 2011E 3,810 335 9% 213 2,036 1.38 4.20% 43.00 4,123 427 10% 269 2,239 1.75 5.31%

3,747 335 9% 142 1,745 0.96 2.91%

Underperform

Underperform

32

Equity Research Brazil: Thursday, May 28, 2009

Income Statement R$ million Net Revenues Cost of goods/services sold Gross Profit EBIT EBITDA Financial income/expense Equity Income Operating income Non-operating result Pretax income Income tax Interest on own capital Minority Interest Net earnings Company Description 2009 3,747 (3,100) 648 182 335 40 5 227 1 228 (61) 0 (25) 142 2010 4,122 (3,301) 821 330 494 51 5 386 0 386 (125) 0 (26) 235 2011 4,468 (3,530) 938 421 597 64 6 491 0 491 (165) 0 (27) 299 2012 4,814 (3,776) 1,039 494 683 80 6 580 0 580 (195) 0 (29) 357 2013 5,163 (4,022) 1,141 568 771 90 7 666 0 666 (224) 0 (30) 412 2014 5,587 (4,273) 1,313 712 929 105 7 825 0 825 (278) 0 (31) 516 2015 6,031 (4,534) 1,497 866 1,098 127 8 1,001 0 1,001 (338) 0 (32) 631 2016 6,291 (4,802) 1,490 828 1,077 155 9 992 0 992 (334) 0 (33) 624 2017 6,450 (5,080) 1,369 676 941 168 10 853 0 853 (287) 0 (35) 532 2018 6,961 (5,387) 1,574 847 1,131 187 10 1,044 0 1,044 (351) 0 (36) 657 Centrais Eltricas de Santa Catarina S.A. Celesc is a state-owned distribution company located in Santa Catarina state. It provides electrical energy distribution services to a portfolio formed by more than two million customers in 262 municipalities.

Gross Margin %

25% 20%

Operating Margins Gross Margin EBIT Margin EBITDA Margin Net margin 2009 17% 5% 9% 4% 2010 20% 8% 12% 6% 2011 21% 9% 13% 7% 2012 22% 10% 14% 7% 2013 22% 11% 15% 8% 2014 24% 13% 17% 9% 2015 25% 14% 18% 10% 2016 24% 13% 17% 10% 2017 21% 10% 15% 8% 2018 23% 12% 16% 9%

15% 10% 5% 0%
20 09 20 10 20 11 20 12 20 13 20 13 20 13 20 13 20 14 20 14 20 14 20 14

Balance Sheet R$ million Current + long term assets Cash + short term investment Net receivables Inventories Other Permanent assets Total assets Current + long term liabilities Suppliers Accounts payable Dividends due Total debt ST + LT Other Minority Interest Shareholders' equity Deferred Result Total liabilities Cash flow R$ million EBIT Depreciation EBITDA Changes in working capital Income tax Capex Free cash flow to the firm Key Indicators EPS P/E Implied P/E P/BV P/Free cash flow Free cash flow yield Net earnings - CAGR (3 years) PEG EV/EBITDA Implied EV/EBITDA EBITDA - CAGR (3 years) EVG ROE (final) Dividends Dividend per share (BRL) Payout Dividend yield Net debt (BRL million) Net debt/Shareholders' equity Net debt/EBITDA Financial expenses/EBITDA

2009 2,296 133 1,111 48 1,003 2,163 4,459 2,568 411 1,121 36 165 835 137 1,745 9 4,459

2010 2,384 164 1,167 50 1,003 2,290 4,674 2,607 438 1,131 59 133 847 137 1,921 9 4,674

2011 2,501 215 1,231 51 1,003 2,424 4,925 2,634 470 1,141 75 89 859 137 2,145 9 4,925

2012 2,648 310 1,283 52 1,003 2,566 5,214 2,655 501 1,152 89 45 867 137 2,412 9 5,214

2013 2,857 446 1,355 53 1,003 2,715 5,572 2,705 533 1,163 103 25 882 137 2,721 9 5,572

2014 3,168 683 1,428 54 1,003 2,871 6,039 2,785 564 1,174 129 21 897 137 3,108 9 6,039

2015 3,565 1,000 1,506 55 1,003 3,033 6,598 2,870 597 1,185 158 18 913 137 3,582 9 6,598

2016 3,892 1,337 1,496 56 1,003 3,204 7,096 2,900 633 1,194 156 14 902 137 4,050 9 7,096

2017 4,151 1,510 1,581 56 1,003 3,381 7,532 2,937 670 1,205 133 11 919 137 4,449 9 7,532

2018 4,556 1,825 1,671 57 1,003 3,566 8,122 3,035 709 1,217 164 7 937 137 4,942 9 8,122

EBITDA Margin %

18% 16% 14% 12% 10% 8% 6% 4% 2% 0%

20 09 20 10 20 11 20 11 20 11 20 12 20 12 20 12

EBITDA R$ million 2009 182 153 335 (181) 47 326 143 2010 330 164 494 10 108 291 86 2011 421 176 597 11 143 310 133 2012 494 189 683 3 168 331 182 2013 568 203 771 17 193 352 209 2014 712 217 929 18 242 373 297 2015 866 232 1,098 19 294 395 390 2016 828 248 1,077 (44) 282 418 420 2017 676 265 941 22 230 443 247 2018 847 284 1,131 21 288 469 353

2009 3.7 8.9 10.3 0.7 8.8 11% n.m. n.m. 3.9 4.4 3% 1.2 8% 36 1.0 25% 3% 32 0.0 0.1 0.1

2010 6.1 5.4 6.2 0.7 14.8 7% nm n.m. 2.6 3.0 1% 2.9 12% 59 1.6 25% 5% (31) (0.0) (0.1) 0.1

2011 7.7 4.2 4.9 0.6 9.5 10% 5.0% 0.9 2.2 2.5 1% 1.9 14% 75 2.0 25% 6% (126) (0.1) (0.2) 0.1

2012 9.2 3.6 4.1 0.5 7.0 14% 35.9% 0.1 1.9 2.1 27% 0.1 15% 89 2.4 25% 7% (264) (0.1) (0.4) 0.1

2013 10.7 3.1 3.6 0.5 6.1 16% 20.6% 0.1 1.7 1.9 16% 0.1 15% 103 2.8 25% 8% (422) (0.2) (0.5) 0.1

2014 13.4 2.5 2.8 0.4 4.3 23% 20% 0.1 1.4 1.6 16% 0.1 17% 129 3.5 25% 11% (661) -0.21 -0.71 0.11

2015 16.4 2.0 2.3 0.4 3.3 31% 21% 0.1 1.2 1.3 17% 0.1 18% 158 4.2 25% 13% (983) -0.27 -0.89 0.12

2016 16.2 2.0 2.3 0.3 3.0 33% 15% 0.1 1.2 1.4 12% 0.1 15% 156 4.2 25% 13% (1,323) -0.33 -1.23 0.14

2017 13.8 2.4 2.8 0.3 5.1 19% 1% 2.4 1.4 1.6 0% 3.3 12% 133 3.6 25% 11% (1,499) -0.34 -1.59 0.18

2018 17.0 1.9 2.2 0.3 3.6 28% 1% 1.4 1.2 1.3 1% 1.2 13% 164 4.4 25% 13% (1,818) -0.37 -1.61 0.17

1,000 900 800 700 600 500 400 300 200 100 0
20 09 20 10 20 10

Net Income R$ million

600 500 400 300 200 100 0

20 09

33

Equity Research Brazil: Thursday, May 28, 2009

Analyst Certification
Each analyst responsible for the preparation and content of this report hereby certifies, pursuant to SEC Regulation AC and applicable laws and regulations of other jurisdictions, that: (i) (ii) pursuant (i) (ii) (iii) (iv) the views expressed herein accurately and exclusively reflect his or her personal views and opinions about the subject company(ies) and its or their securities; that no part of their compensation was, is, or will be paid directly or indirectly, related to the specific recommendation or views expressed by that analyst in this report; and to Brazilian securities exchange commission (Comisso de Valores Mobilirios CVM) Instruction 388/03: the recommendations indicated in this report solely and exclusively reflect his or her personal opinions and were prepared independently and autonomously, including in relation to Bradesco Corretora; he or she has no relation with the persons acting within the company(ies) analyzed in this report; Bradesco Corretora, for which he or she works, may be involved in the acquisition, sale or dealing of securities of the company(ies) analyzed in this report; he or she does not receive compensation for services provided and does not have commercial relations with the company(ies) analyzed in this report, or with individuals, legal entities, funds, trusts or estates that act representing the same interest as the company(ies). However, Bradesco Corretora may receive compensation for services provided or have commercial relations with the company(ies) analyzed in this report, or with individuals, legal entities, funds, trusts or estates that act representing the same interest as the company(ies); and his or her compensation is not linked to the pricing of any securities issued by the company(ies) analyzed in this report, or the proceeds of trades or financial operations conducted by Bradesco Corretora.

(v)

Important Disclosures Company-specific regulatory disclosures

X 1 2 X 3 Bradesco Corretora and/or its affiliates beneficially own one percent or more of any class of common equity securities of the subject company(ies). This position reflects information available as of the business day prior to the date of this report; Bradesco Corretora and/or its affiliates have managed or co-managed a public or Rule 144A offering of the subject companys(ies) securities in the twelve months preceding the date of this report; Bradesco Corretora and/or its affiliates have received compensation for investment banking services from the subject company(ies) in the twelve months preceding the date of publication of the research report and/or expects to receive or intends to seek compensation for investment banking services from the subject company(ies) in the three months following the date of this report; Bradesco Corretora and/or its affiliates were making a market in the subject companys(ies) equity securities at the date of this report; Any other actual material conflict of interest of Bradesco Corretora and/or its affiliates known at the date of this report.

4 5

Bradesco Corretora research ratings distribution

Rating Outperform Market Perform Underperform Under Review Restricted (1) (2) Definition Expected to outperform the Ibovespa by more than 10%. Expected to perform in the range of 10% above or below the Ibovespa. Expected to underperform the Ibovespa more than 10%. This indicates that both the target price and the rating are currently being revised. The analyst cannot express his/her views on the company. 5/28/09 Coverage 50% 38% 10% 1% 1% Bradesco Corretora had 80 BR 85% 87% 88% 100% 0% companies

Percentage of companies under coverage globally within this rating category. As of under coverage globally.

Percentage of companies within this rating category for which [investment banking] services were provided within the past 12 months.

Bradesco Corretora ratings

Bradesco Corretora ratings are constantly revised and any temporary inconsistencies between the upside potential that gave rise to any such rating and the upside potential in connection with the target price are at all times deliberate. The official rating shall prevail. Any differences between the rating and the target price may occur especially due to the analysts expectations to the effect that any short/medium term factors that cannot be priced-in yet might lead to inconsistencies between Bradeco Corretora valuation and the stock behavior. The factors Bradeco Corretora considered include, but are not limited to: Any expectations in connection with quarterly results, market conditions, ownership issues and any expectations involving mergers and acquisitions. The ratings reflect only the analysts expectation on the future performance of the relevant stock. A Outperform rating does not necessarily represent that the analyst approves of the company and its management whilst a Underperform rating does not necessarily means that the analyst has a negative view on the company. Within Bradeco Corretora coverage universe there are sound companies, with good fundamentals as per the market consensus, and fair priced stock, and would not be Bradeco Corretora investment pick.

Price target and rating history

Price target, rating history chart(s), valuation/method used to determine price target, and our policy for managing conflicts of interest in connection with investment research are available upon request. You may obtain this information by contacting your representative or by sending an email to bradescocorretora@infobradesco.com.br.

34

Equity Research Brazil: Thursday, May 28, 2009

Additional Disclosures
Although CVM Instruction 388/03 permits that each analyst responsible for the preparation and content of this report may hold securities of the company(ies) analyzed in this report, provided that such securities not exceed 5% of the personal assets of each and such analyst, Bradesco Corretoras internal policy prohibits its analysts, professionals reporting to analysts and members of their households from owning securities in any company in the analysts area of coverage Analysts are paid in part based on the profitability of Bradesco Corretora and its affiliates, which includes investment banking revenues. Bradesco Corretora policy prohibits its analysts, persons reporting to its analysts or members of their households from serving as an officer or director, advisory board member or employee of any company in the analysts area of coverage. The following disclosures are required under or based on the laws of the jurisdiction indicated, except to the extent already made above with respect to United States laws and regulations. Brazil: This report is distributed in Brazil by Bradesco Corretora. Any investor in Brazil who receives this report and wishes to conduct transactions with stocks analyzed herein should contact and request execution of orders through Bradesco Corretora at (55 11) 3556-3001. United Kingdom and European Economic Area: In the United Kingdom and elsewhere in the European Economic Area, this report may be made or communicated by Bradesco Securities UK Limited ("Bradesco UK"). Bradesco UK is authorized and regulated by the Financial Services Authority and its registered office is at: 20-22 Bedford Row, London, WC1R 4JS. This report is for distribution only to persons who: (i) (ii) (iii) (iv) (v) are persons that are eligible counterparties and professional clients of Bradesco UK; have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the "Financial Promotion Order"); are persons falling within Article 49 (2) (a) to (d) ("high net worth companies, unincorporated associations etc") of the Financial Promotion Order; are outside the United Kingdom, or are persons to whom an invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000) in connection with the issue or sale of any securities to which this report relates may otherwise lawfully be communicated or caused to be communicated (all such persons together being referred to as "relevant persons").

This report is directed only at relevant persons and must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this report relates is available only to relevant persons and will be engaged in only with relevant persons. No public offer of any securities to which this report relates is being made by Bradesco UK or Bradesco Corretora in the United Kingdom or elsewhere in the European Economic Area. United States: This report is distributed in the United States by Bradesco Securities Inc. Bradesco Securities Inc., a U.S. registered broker-dealer and a whollyowned subsidiary of Banco Bradesco S.A., is a member of FINRA/SIPC. All U.S. recipients of this report wishing to effect transactions in securities discussed should contact and place orders through Bradesco Securities Inc. at (212) 888-9141. Other Countries: This report, and the securities discussed herein, may not be eligible for distribution or sale in all countries or to certain categories of investors. In general, this report may be distributed only to professional and institutional investors.

General Disclosures
1) This report has been prepared solely by Bradesco Corretora and is being provided exclusively for informational purposes. The information, opinions, estimates and projections constitute the judgment of the author as of the current date and are subject to modifications without prior notice. Bradesco Corretora has no obligation to update, modify or amend this report and inform the reader accordingly, except when terminating coverage of the issuer 2) 3) of the securities discussed in this report. This report, including the estimates and calculations of Bradesco Corretora, is based on publicly available information that it consider reliable, but it do not represent it is accurate or complete, and should not be relied upon as such. This report is not an offer or a solicitation for the purchase or sale of any financial instrument. It is not intended to provide personal investment advice and it does not take into account the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any securities, other investment or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Investors should note that income from securities or other investments, if any, referred to in this report may fluctuate and that price or value of such securities and investments may rise or fall. Accordingly, investors may receive back less than originally invested. Past performance is not necessarily a guide to future performance. Bradesco Corretora and its affiliates do not accept responsibility for any direct or indirect loss arising due to use of this report. Investors should consider whether any advice or recommendation in this research is suitable for their particular circumstances and, if appropriate, seek professional advice, including tax advice. Exchange rate movements could have adverse effects on the value or price of, or income 5) derived from, certain investments. Bradesco Corretoras and its affiliates salespeople, traders and other professionals may provide oral or written market commentary or trading strategies to their clients and their proprietary trading desks that reflect opinions that are contrary to the opinion expressed in this report. Such market commentary or trading strategies reflect the different time frames, assumptions, views and analytical methods of the persons who prepared them, and Bradesco Corretora and its affiliates are under no obligation to ensure that such market commentary or trading strategies are brought to the attention 6) 7) of any recipient of this report. From time to time, Bradesco Corretora or its affiliates and officers, directors and employees, not including its analysts may, to the extent permitted by law, hold long or short positions, or otherwise be interested in transactions in assets directly or indirectly related to this report. Non-US research analysts who have prepared this report are not registered or qualified as research analysts with FINRA but instead have satisfied the registration and qualification requirements or other research-related standards of a non-US jurisdiction.

4)

Any additional information may be obtained by contacting your representative or by sending an email to bradescocorretora@infobradesco.com.br No portion of this document may be (i) copied, photocopied or duplicated in any form, or by any means, or (ii) redistributed without prior consent from Bradesco Corretora.

35

Bradesco Corretora Research Team

Sectors
Economics

Analysts
Dalton Gardimam (Chief Economist) Denis Blum
55 11 2178 4275 dalton@bradescobbi.com.br

Associates

55 11 2178 4224 denis@bradescobbi.com.br

Strategy, Banking, Insurance and Financial Services

Carlos Firetti, CFA (Head of Research)

55 11 2178 5363 carlosfiretti@bradescobbi.com.br

Marcos Suzaki

55 11 2178 5317 marcos@bradescobbi.com.br

Rafael Frade

55 11 2178 4056 rafaelf@bradescobbi.com.br

Oil & Gas, Petrochemicals and Sugar & Ethanol Transportation, Logistics, Malls and Small Caps Consumer Goods and Retail

Auro R ozenbaum

55 11 2178 5315 auro@bradescobbi.com.br

Bruno Varella

55 11 2178 5310 bvarella@bradescobbi.com.br

Edigimar Maximiliano

55 11 2178 5327 maximiliano@bradescobbi.com.br

Luiz Peanha

55 11 2178 5324 pecanha@bradescobbi.com.br

Fabio Monteiro

55 11 2178 5318 fabio@bradescobbi.com.br

Ricardo Boiati

55 11 2178 5326 rboiati@bradescobbi.com.br

Telecom, Media and Technology

Luis Azevedo

55 11 2178 5321 luisazevedo@bradescobbi.com.br

Vitor Pini

55 11 2178 4274 vpini@bradescobbi.com.br

Electric Utilities, Water & Sewage

Marcelo Britto

55 11 2178 5323 mbritto@bradescobbi.com.br

Paola Pedrinola

55 11 2178 4273 paola@bradescobbi.com.br

Steel, Mining, Pulp & Paper

R aphael Biderman

55 11 2178 5313 rbiderman@bradescobbi.com.br

Gina Montone

55 11 2178 4272 gina@bradescobbi.com.br

Fixed Income

Altair Pereira

55 11 2178 4279 altair@bradescobbi.com.br

Nathalie Aron

55 11 2178 4225 nathalie@bradescobbi.com.br

Individual Investors

Jose Francisco Cataldo

55 11 2178 5319 cataldo@bradescobbi.com.br

Nathalie Aron

55 11 2178 4225 nathalie@bradescobbi.com.br

Institutional Sales Team

Bradesco Corretora CTVM S.A. So Paulo Sales 55 11 3556 3001
Joo Saldanha, CFA Jos Arvelos Juvenal Neves
saldanha@bradescobbi.com.br arvelos@bradescobbi.com.br juvenal@bradescobbi.com.br

Bradesco Securities, Inc. New York FINRA/SIPC Member Sales 01 212 888 9141
Marcelo Cabral Alison Kulach Vikram Kapur Jason Myers
mcabral@bradescosecurities.com akulach@bradescosecurities.com vic@bradescosecurities.com jason@bradescosecurities.com

Sales Trading 55 11 3556 3001

Adilson dos Santos
5900.adilson@bradesco.com.br

Sales - Fixed Income - So Paulo - 55 11 2178 6959

Ana Carolina Quadros Fernanda Weber Bratz
carolina.quadros@bradescobbi.com.br fernanda@bradescobbi.com.br

Sales Fixed Income 01 212 888 9141

Shinichiro Fukui
shin@bradescosecurities.com

Bradesco Securities UK, Ltd Sales 44 (0)203 178 4170

Jeffrey Noble
jnoble@bradescosecurities.com

Sales Trading 01 212 888 9141

Alec Cunningham Robert Vespa
alec@bradescosecurities.com robert@bradescosecurities.com

Av. Paulista, 1450 7 andar CEP: 01310-917 So Paulo SP Brazil