quarterly information (itr) cteep - companhia de...

Quarterly Information (ITR)

CTEEP - Companhia de Transmissão de Energia Elétrica Paulista June 30, 2016

ITR - Quarterly Information - 6/30/2016 - CTEEP - COMPANHIA DE TRANSMISSÃO DE ENERGIA ELÉTRICA PAULISTA Version: 1

Contents Company Information Capital Ownership Structure.............................................................................................................................. 1 Cash Dividends and Interest on Equity ............................................................................................................. 2 Individual Financial Statements Balance Sheet - Assets ..................................................................................................................................... 3 Balance Sheet - Liabilities ................................................................................................................................. 4 Income Statement ............................................................................................................................................. 5 Statement of Comprehensive Income ............................................................................................................... 6 Cash Flow Statement - Indirect Method ............................................................................................................ 7 Statement of Changes in Equity SCE - 1/1/2016 to 6/30/2016 ............................................................................................................................. 8 SCE - 1/1/2015 to 6/30/2015 ............................................................................................................................. 9 Statement of Value Added............................................................................................................................... 10 Consolidated Financial Statements Balance Sheet - Assets ................................................................................................................................... 11 Balance Sheet - Liabilities ............................................................................................................................... 12 Income Statement ........................................................................................................................................... 13 Statement of Comprehensive Income ............................................................................................................. 14 Cash Flow Statement - Indirect Method .......................................................................................................... 15 Statement of Changes in Equity SCE - 1/1/2016 to 6/30/2016 ........................................................................................................................... 16 SCE - 1/1/2015 to 6/30/2015 ........................................................................................................................... 17 Statement of Value Added............................................................................................................................... 18 Comments on Performance............................................................................................................................. 19 Notes to Quarterly Information ........................................................................................................................ 22 Other Information that the Company Considers to be Material ....................................................................... 67 Reports and Representations Special Review Report - Qualified ................................................................................................................... 70 Opinion by the Supervisory Board or Equivalent Body .................................................................................. 73 Officers’ Representation on the Quarterly Information .................................................................................... 74 Officers’ Representation on Independent Auditor’s Review Report ................................................................ 75


Page: 1 of 76

Company Data/Capital Ownership Structure Number of shares Current quarter (Units) 6/30/2016

Paid-in Capital Common Shares 64,484,433 Preferred Shares 100,236,393 Total 164,720,826 Treasury Shares Common Shares - Preferred Shares - Total -


Page: 2 of 76

Company Data/Cash Dividends and Interest on Equity Earnings per share Event Approval Proceeds First payment Type of share Class of share (Reais/Share)

Board of Directors’ 6/16/2016 Dividend 6/30/2016 Common shares 0.66779 Meeting Board of Directors’ 6/16/2016 Dividend 6/30/2016 Preferred shares 0.66779 Meeting


Page: 3 of 76

Individual Financial Statements/Balance Sheet - Assets

(In thousands of reais) Account Current quarter Prior year code Account description 6/30/2016 12/31/2015

1 Total assets 7,072,387 6,847,228 1.01 Current assets 586,443 583,659 1.01.01 Cash and cash equivalents 1,795 3,120 1.01.02 Short-term investments 250,201 230,855 1.01.03 Accounts receivable 188,033 220,566 1.01.03.01 Trade accounts receivable 188,033 220,566 1.01.04 Inventories 36,619 38,787 1.01.06 Taxes recoverable 43,908 4,928 1.01.06.01 Current taxes recoverable 43,908 4,928 1.01.07 Prepaid expenses 20,146 6,037 1.01.08 Other current assets 45,741 79,366 1.01.08.03 Other 45,741 79,366 1.01.08.03.01 Receivables from subsidiaries 1,663 29,500 1.01.08.03.04 Other 44,078 49,866 1.02 Noncurrent assets 6,485,944 6,263,569 1.02.01 Long-term receivables 3,958,620 3,823,167 1.02.01.03 Accounts receivable 3,680,910 3,535,323 1.02.01.03.01 Trade accounts receivable 2,641,761 2,569,403 1.02.01.03.02 Other accounts receivable 1,039,149 965,920 1.02.01.04 Inventories 26,301 27,948 1.02.01.06 Deferred taxes 171,743 183,809 1.02.01.06.01 Deferred income and social contribution taxes 171,743 183,809 1.02.01.09 Other noncurrent assets 79,666 76,087 1.02.01.09.04 Pledges and restricted deposits 71,169 66,252 1.02.01.09.06 Other 8,497 9,835 1.02.02 Investments 2,485,198 2,394,590 1.02.02.01 Equity interests 2,485,198 2,394,590 1.02.02.01.02 Interests held in subsidiaries 864,949 821,950 1.02.02.01.03 Interests held in jointly-controlled subsidiaries 1,620,249 1,572,640 1.02.03 Property, plant and equipment 25,639 23,163 1.02.03.01 Property, plant and equipment in use 25,639 23,163 1.02.04 Intangible assets 16,487 22,649 1.02.04.01 Intangible assets 16,487 22,649


Page: 4 of 76

Individual Financial Statements/Balance Sheet - Liabilities


2 Total liabilities 7,072,387 6,847,228 2.01 Current liabilities 402,982 368,580 2.01.02 Trade accounts payable 28,271 31,824 2.01.02.01 Trade accounts payable - domestic 28,271 31,824 2.01.03 Tax liabilities 83,094 43,025 2.01.03.01 Federal tax liabilities 83,094 43,025 2.01.03.01.02 Taxes and charges payable 66,231 26,825 2.01.03.01.03 Taxes in installments - Law No. 11941 16,863 16,200 2.01.04 Loans and financing 216,011 213,312 2.01.04.01 Loans and financing 32,400 32,530 2.01.04.01.01 In local currency 32,400 32,530 2.01.04.02 Debentures 183,611 180,782 2.01.05 Other liabilities 42,799 51,591 2.01.05.02 Other 42,799 51,591 2.01.05.02.01 Dividends and interest on equity payable 2,459 2,156 2.01.05.02.04 Payables - Fundação CESP 5,114 6,144 2.01.05.02.05 Regulatory charges payable 14,665 21,442 2.01.05.02.06 Other 20,561 21,849 2.01.06 Provisions 32,807 28,828

2.01.06.01 Provisions for tax, social security, labor and civil contingencies 32,807 28,828

2.01.06.01.03 Provisions for employee benefits 32,807 28,828 2.02 Noncurrent liabilities 1,147,176 1,142,443 2.02.01 Loans and financing 653,869 665,649 2.02.01.01 Loans and financing 292,601 306,076 2.02.01.01.01 In local currency 292,601 306,076 2.02.01.02 Debentures 361,268 359,573 2.02.02 Other liabilities 179,837 179,733 2.02.02.02 Other 179,837 179,733 2.02.02.02.04 Special obligations - reversal/amortization 24,053 24,053 2.02.02.02.05 Taxes in installments - Law No. 11941 123,660 126,897 2.02.02.02.06 Regulatory charges payable 32,124 28,783 2.02.03 Deferred taxes 113,723 107,741 2.02.03.01 Deferred income and social contribution taxes 113,723 107,741 2.02.03.01.01 Deferred PIS and COFINS 113,723 107,741 2.02.04 Provisions 199,747 189,320

2.02.04.01 Provisions for tax, social security, labor and civil contingencies 199,747 189,320

2.02.04.01.01 Tax provisions 16,128 9,722 2.02.04.01.02 Provisions for social security and labor contingencies 166,812 165,368 2.02.04.01.04 Provisions for civil contingencies 16,807 14,230 2.03 Equity 5,522,229 5,336,205 2.03.01 Paid-in Capital 2,372,437 2,215,291 2.03.02 Capital reserves 1,218,249 1,278,022 2.03.02.02 Special goodwill reserve on merger 588 60,361 2.03.02.06 Future capital contribution 666 666 2.03.02.07 Investments grants - CRC 426,710 426,710 2.03.02.08 Revenue from construction in progress 633,053 633,053 2.03.02.09 Donations and investment grants 150,489 150,489 2.03.02.10 Tax incentives - FINAM 6,743 6,743 2.03.04 Income reserves 1,842,892 1,842,892 2.03.04.01 Legal reserve 278,254 278,254 2.03.04.02 Statutory reserve 221,529 221,529 2.03.04.05 Retained profits reserve 1,343,109 1,343,109 2.03.05 Retained earnings (accumulated losses) 88,651 -


Page: 5 of 76

Individual Financial Statements/Income Statement

(In thousands of reais) Same Prior Account Current quarter YTD prior-year quarter YTD code Account description 4/1/2016 to 6/30/2016 1/1/2016 to 6/30/2016 4/1/2015 to 6/30/2015 1/1/2015 to 6/30/2015

3.01 Revenue from sales and/or services 254,824 490,959 247,479 468,914 3.01.01 Net operating revenue 254,824 490,959 247,479 468,914 3.02 Cost of sales and/or services (107,361) (204,810) (130,854) (231,809)

3.02.01 Costs of infrastructure implementation, operation and

maintenance services (107,361) (204,810) (130,854) (231,809) 3.03 Gross profit 147,463 286,149 116,625 237,105 3.04 Operating income (expenses) 19,896 25,374 (16,419) (38,451) 3.04.02 General and administrative expenses (28,088) (62,890) (41,663) (83,352) 3.04.02.01 Management fees (1,171) (2,221) (1,193) (2,286) 3.04.02.02 Other general and administrative expenses (26,917) (60,669) (40,470) (81,066) 3.04.04 Other operating income 857 1,452 1,446 2,043 3.04.05 Other operating expenses (1,609) (2,330) (9,630) (18,053) 3.04.06 Equity pickup 48,736 89,142 33,428 60,911 3.05 Income before financial income (expense) and taxes 167,359 311,523 100,206 198,654 3.06 Financial income (expenses) (30,035) (56,254) (5,989) 373 3.06.01 Financial income 16,427 29,341 29,985 70,223 3.06.02 Financial expenses (46,462) (85,595) (35,974) (69,850) 3.07 Income before income taxes 137,324 255,269 94,217 199,027 3.08 Income and social contribution taxes (33,084) (56,618) (17,602) (38,020) 3.08.01 Current (27,256) (44,552) (20,498) (37,857) 3.08.02 Deferred (5,828) (12,066) 2,896 (163) 3.09 Net income (loss) from continuing operations 104,240 198,651 76,615 161,007 3.11 Income/loss for the period 104,240 198,651 76,615 161,007 3.99 Earnings per share (reais/share) - - - - 3.99.01 Basic earnings per share - - - - 3.99.01.01 Registered common shares 0.64429 1.22782 0.47511 0.99843 3.99.01.02 Registered preferred shares 0.64429 1.22782 0.47511 0.99843 3.99.02 Diluted earnings per share - - - - 3.99.02.01 Registered common shares 0.63828 1.21197 0.46670 0.98013 3.99.02.02 Registered preferred shares 0.63828 1.21197 0.46670 0.98013


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Individual Financial Statements/Statements of Comprehensive Income


4.01 Net income for the period 104,240 198,651 76,615 161,007 4.03 Comprehensive income for the period 104,240 198,651 76,615 161,007


Page: 7 of 76

Individual Financial Statements/Cash Flow Statement - Indirect Method

(In thousands of reais) Prior Account YTD YTD code Account description 1/1/2016 to 6/30/2016 1/1/2015 to 6/30/2015

6.01 Net cash from operating activities 77,102 205,287 6.01.01 Cash from operations 208,577 215,183 6.01.01.01 Income for the period 198,651 161,007 6.01.01.02 Depreciation and amortization 3,969 3,894 6.01.01.03 Deferred PIS and COFINS 5,982 10,007 6.01.01.04 Deferred income and social contribution taxes 12,066 163 6.01.01.05 Provision for contingencies (6,054) 17,679 6.01.01.06 Net book value of permanent assets written off 4,702 43 6.01.01.07 Tax benefit - merged goodwill 18 14,943

6.01.01.08 Interest and monetary and foreign exchange gains (losses) on assets and liabilities 78,287 68,290

6.01.01.09 Amortization of concession asset in acquisition of 1,245 1,245 subsidiary 6.01.01.10 Loss realized in subsidiary (1,147) (1,177) 6.01.01.11 Equity pickup (89,142) (60,911) 6.01.02 Changes in assets and liabilities (131,475) (9,896) 6.01.02.01 Accounts receivable (concession asset) (39,825) 80,313 6.01.02.02 Inventories 3,815 8,860 6.01.02.03 Receivables - State Finance Department (SEFAZ) (73,229) (72,761) 6.01.02.04 Taxes and contributions to be offset (38,980) (1,630) 6.01.02.05 Pledges and restricted deposits 14 3,457 6.01.02.06 Prepaid expenses (14,109) (17,720) 6.01.02.07 Other 6,894 (1,367) 6.01.02.08 Trade accounts payable (3,553) (14,699) 6.01.02.09 Taxes and social charges payable 39,406 29,453 6.01.02.10 Taxes in installments - Law No. 11941 (8,294) (7,642) 6.01.02.11 Regulatory charges payable (5,276) (17,238) 6.01.02.12 Provisions 3,979 2,918 6.01.02.13 Payables - Fundação CESP (1,030) 857 6.01.02.14 Other (1,287) (2,697) 6.02 Net cash from investing activities 2,155 104,956 6.02.01 Short-term investments (19,346) 137,880 6.02.02 Acquisitions of property, plant and equipment (4,985) (585) 6.02.03 Intangible assets - (459) 6.02.04 Investments (1,564) (31,880) 6.02.05 Dividends received 28,050 - 6.03 Net cash from financing activities (80,582) (306,944) 6.03.01 Additions to loans 660 30,000 6.03.02 Payment of loans (principal) (15,654) (81,106) 6.03.03 Payment of loans (interest) (53,264) (114,441) 6.03.05 Dividends and interest on equity paid (109,697) (141,397) 6.03.06 Payment of capital 97,373 - 6.05 Increase (decrease) in cash and cash equivalents (1,325) 3,299 6.05.01 Cash and cash equivalents at beginning of period 3,120 1,390 6.05.02 Cash and cash equivalents at end of period 1,795 4,689


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Individual Financial Statements/Statement of Changes in Equity/SCE - 1/1/2016 to 6/30/2016

(In thousands of reais) Capital reserves, Retained earnings Other Account Paid-in options granted and (accumulated comprehensive code Account description capital treasury shares Income reserves losses) income Equity

5.01 Opening balances 2,215,291 1,278,022 1,842,892 - - 5,336,205 5.03 Adjusted opening balances 2,215,291 1,278,022 1,842,892 - - 5,336,205 5.04 Capital transactions with shareholders 157,146 (59,773) - (110,000) - (12,627) 5.04.01 Capital increases 157,146 (59,773) - - - 97,373 5.04.06 Dividends - - - (110,000) - (110,000) 5.05 Total comprehensive income - - - 198,651 - 198,651 5.05.01 Net income for the period - - - 198,651 - 198,651 5.07 Closing balances 2,372,437 1,218,249 1,842,892 88,651 - 5,522,229


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Individual Financial Statements/Statement of Changes in Equity/SCE - 1/1/2015 to 6/30/2015

(In thousands of reais) Capital reserves, Retained earnings Other Account Paid-in options granted and (accumulated comprehensive code Account description capital treasury shares Income reserves losses) income Equity

5.01 Opening balances 2,215,291 1,278,022 1,671,732 - - 5,165,045 5.03 Adjusted Opening Balances 2,215,291 1,278,022 1,671,732 - - 5,165,045 5.04 Capital transactions with shareholders - - - (109,641) - (109,641) 5.04.06 Dividends - - - (110,765) - (110,765) 5.04.09 Unclaimed dividends - - - 743 - 743 5.04.10 Unclaimed interest on equity - - - 381 - 381 5.05 Total comprehensive income - - - 161,007 - 161,007 5.05.01 Net income for the period - - - 161,007 - 161,007 5.07 Closing balances 2,215,291 1,278,022 1,671,732 51,366 - 5,216,411


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Individual Financial Statements/Statement of Value Added


7.01 Revenues 565,565 533,782 7.01.01 Sales of goods, products and services 564,113 531,739 7.01.02 Other revenues 1,452 2,043 7.02 Inputs acquired from third parties (106,656) (169,111) 7.02.01 Costs of sales and services (10,343) (6,407) 7.02.02 Materials, energy, third-party services and other expenses (96,313) (162,704) 7.03 Gross value added 458,909 364,671 7.04 Retentions (3,969) (3,894) 7.04.01 Depreciation, amortization and depletion (3,969) (3,894) 7.05 Net value added produced 454,940 360,777 7.06 Value added received in transfer 118,483 131,134 7.06.01 Equity pickup 89,142 60,911 7.06.02 Financial income 29,341 70,223 7.07 Total value added to be distributed 573,423 491,911 7.08 Distribution of value added 573,423 491,911 7.08.01 Personnel 116,280 125,550 7.08.01.01 Direct compensation 84,402 97,673 7.08.01.02 Benefits 23,980 21,409 7.08.01.03 Unemployment Compensation Fund (FGTS) 7,898 6,468 7.08.02 Taxes, charges and contributions 165,767 132,882 7.08.02.01 Federal 149,644 119,766 7.08.02.02 State 316 244 7.08.02.03 Municipal 15,807 12,872 7.08.03 Debt remuneration 92,725 72,472 7.08.03.01 Interest 85,555 65,848 7.08.03.02 Rent 7,170 6,624 7.08.04 Equity remuneration 198,651 161,007 7.08.04.02 Dividends 110,000 110,765 7.08.04.03 Retained earnings (accumulated losses) for the period 88,651 50,242


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Consolidated Financial Statements - Balance Sheet - Assets


1 Total assets 7,488,522 7,338,703 1.01 Current assets 867,812 898,826 1.01.01 Cash and cash equivalents 3,635 6,135 1.01.02 Short-term investments 422,084 440,054 1.01.03 Accounts receivable 292,485 319,961 1.01.03.01 Trade accounts receivable 292,485 319,961 1.01.04 Inventories 38,307 40,476 1.01.06 Taxes recoverable 44,176 5,763 1.01.06.01 Current taxes recoverable 44,176 5,763 1.01.07 Prepaid expenses 20,262 6,057 1.01.08 Other current assets 46,863 80,380 1.01.08.03 Other 46,863 80,380 1.01.08.03.02 Receivables from jointly-controlled subsidiaries 1,370 29,200 1.01.08.03.03 Other 45,493 51,180 1.02 Noncurrent assets 6,620,710 6,439,877 1.02.01 Long-term receivables 4,933,061 4,794,534 1.02.01.01 Short-term investments measured at fair value 12,640 12,059 1.02.01.01.03 Restricted cash 12,640 12,059 1.02.01.03 Accounts receivable 4,639,231 4,492,888 1.02.01.03.01 Trade accounts receivable 3,600,082 3,526,968 1.02.01.03.02 Other accounts receivable 1,039,149 965,920 1.02.01.04 Inventories 29,781 29,675 1.02.01.06 Deferred taxes 171,743 183,809 1.02.01.06.01 Deferred income and social contribution taxes 171,743 183,809 1.02.01.09 Other noncurrent assets 79,666 76,103 1.02.01.09.04 Pledges and restricted deposits 71,169 66,268 1.02.01.09.06 Other 8,497 9,835 1.02.02 Investments 1,620,249 1,572,640 1.02.02.01 Equity interests 1,620,249 1,572,640 1.02.03 Property, plant and equipment 25,669 23,194 1.02.03.01 Property, plant and equipment in use 25,669 23,194 1.02.04 Intangible assets 41,731 49,509 1.02.04.01 Intangible assets 41,731 49,509


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Consolidated Financial Statements/Balance Sheet - Liabilities


2 Total liabilities 7,488,522 7,338,703 2.01 Current liabilities 450,151 422,311 2.01.02 Trade accounts payable 29,577 34,950 2.01.02.01 Trade accounts payable - domestic 29,577 34,950 2.01.03 Tax Liabilities 85,021 44,617 2.01.03.01 Federal tax liabilities 85,021 44,617 2.01.03.01.02 Taxes and social charges payable 68,158 28,417 2.01.03.01.03 Taxes in installments - Law No. 11941 16,863 16,200 2.01.04 Loans and financing 254,695 251,852 2.01.04.01 Loans and financing 71,084 71,070 2.01.04.01.01 In local currency 71,084 71,070 2.01.04.02 Debentures 183,611 180,782 2.01.05 Other liabilities 46,966 61,135 2.01.05.02 Other 46,966 61,135 2.01.05.02.01 Dividends and interest on equity payable 2,459 2,156 2.01.05.02.04 Payables - Fundação CESP 5,114 6,144 2.01.05.02.05 Regulatory charges payable 14,795 21,821 2.01.05.02.07 Other 24,598 31,014 2.01.06 Provisions 33,892 29,757

2.01.06.01 Provisions for tax, social security, labor and civil

contingencies 33,892 29,757 2.01.06.01.03 Provisions for employee benefits 33,892 29,757 2.02 Noncurrent liabilities 1,393,087 1,401,391 2.02.01 Loans and financing 819,842 844,812 2.02.01.01 Loans and financing 458,574 485,239 2.02.01.01.01 In local currency 458,574 485,239 2.02.01.02 Debentures 361,268 359,573 2.02.02 Other liabilities 182,603 182,144 2.02.02.02 Other 182,603 182,144 2.02.02.02.03 Special obligations - reversal/amortization 24,053 24,053 2.02.02.02.04 Taxes in installments - Law No. 11941 123,660 126,897 2.02.02.02.05 Regulatory charges payable 34,890 31,194 2.02.03 Deferred taxes 190,895 184,823 2.02.03.01 Deferred income and social contribution taxes 190,895 184,823 2.02.03.01.01 Deferred income and social contribution taxes 35,842 35,801 2.02.03.01.02 Deferred PIS and COFINS 155,053 149,022 2.02.04 Provisions 199,747 189,612

2.02.04.01 Provisions for tax, social security, labor and civil

contingencies 199,747 189,612 2.02.04.01.01 Tax provisions 16,128 9,722 2.02.04.01.02 Provisions for social security and labor contingencies 166,812 165,588 2.02.04.01.04 Provisions for civil contingencies 16,807 14,302 2.03 Equity - Consolidated 5,645,284 5,515,001 2.03.01 Paid-in Capital 2,372,437 2,215,291 2.03.02 Capital reserves 1,218,249 1,278,022 2.03.02.02 Special goodwill reserve on merger 588 60,361 2.03.02.06 Future capital contribution 666 666 2.03.02.07 Investments grants - CRC 426,710 426,710 2.03.02.08 Revenue from construction in progress 633,053 633,053 2.03.02.09 Donations and investment grants 150,489 150,489 2.03.02.10 Tax incentives - FINAM 6,743 6,743 2.03.04 Income reserves 1,842,892 1,842,892 2.03.04.01 Legal reserve 278,254 278,254 2.03.04.02 Statutory reserve 221,529 221,529 2.03.04.05 Retained profits reserve 1,343,109 1,343,109 2.03.05 Retained earnings (accumulated losses) 88,651 - 2.03.09 Noncontrolling interests 123,055 178,796


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Consolidated Financial Statements/Income Statement


3.01 Revenue from sales and/or services 286,978 556,490 279,041 532,687 3.01.01 Net operating revenue 286,978 556,490 279,041 532,687 3.02 Cost of sales and/or services (112,255) (215,933) (141,311) (257,526)

3.02.01 Costs of infrastructure implementation, operation and

maintenance services (112,255) (215,933) (141,311) (257,526) 3.03 Gross profit 174,723 340,557 137,730 275,161 3.04 Operating income (expenses) (3,212) (20,300) (32,897) (67,576) 3.04.02 General and administrative expenses (29,484) (65,467) (42,597) (85,618) 3.04.02.01 Management fees (1,274) (2,427) (1,287) (2,474) 3.04.02.02 Other general and administrative expenses (28,210) (63,040) (41,310) (83,144) 3.04.04 Other operating income 857 1,452 1,447 2,051 3.04.05 Other operating expenses (1,609) (2,330) (10,565) (18,988) 3.04.06 Equity pickup 27,024 46,045 18,818 34,979 3.05 Income before financial income (expense) and taxes 171,511 320,257 104,833 207,585 3.06 Financial income (expenses) (28,898) (54,055) (5,966) (1,163) 3.06.01 Financial income 21,920 40,403 34,516 77,958 3.06.02 Financial expenses (50,818) (94,458) (40,482) (79,121) 3.07 Income before income taxes 142,613 266,202 98,867 206,422 3.08 Income and social contribution taxes (34,753) (60,103) (18,971) (39,932) 3.08.01 Current (28,941) (47,996) (21,829) (40,318) 3.08.02 Deferred (5,812) (12,107) 2,858 386 3.09 Net income (loss) from continuing operations 107,860 206,099 79,896 166,490 3.11 Consolidated Income (loss) for the Period 107,860 206,099 79,896 166,490 3.11.01 Attributable to controlling interests 104,240 198,651 76,615 161,007 3.11.02 Attributable to noncontrolling interests 3,620 7,448 3,281 5,483 3.99 Earnings per share (reais/share) 3.99.01 Basic earnings per share 3.99.01.01 Registered common shares 0.64429 1.22782 0.47511 0.99843 3.99.01.02 Registered preferred shares 0.64429 1.22782 0.47511 0.99843 3.99.02 Diluted earnings per share 3.99.02.01 Registered common shares 0.63828 1.21197 0.46670 0.98013 3.99.02.02 Registered preferred shares 0.63828 1.21197 0.46670 0.98013


Page: 14 of 76

Consolidated Financial Statements/Statement of Comprehensive Income


4.01 Consolidated net Income for the period 107,860 206,099 79,896 166,490 4.03 Consolidated comprehensive income for the period 107,860 206,099 79,896 166,490 4.03.01 Attributable to controlling interests 104,240 198,651 76,615 161,007 4.03.02 Attributable to noncontrolling interests 3,620 7,448 3,281 5,483


Page: 15 of 76

Consolidated Financial Statements/Cash Flow Statement - Indirect Method


6.01 Net cash from operating activities 116,031 220,578 6.01.01 Cash from operations 260,562 249,706 6.01.01.01 Net income for the year 206,099 166,490 6.01.01.02 Depreciation and amortization 4,344 4,272 6.01.01.03 Deferred PIS and COFINS 6,031 10,336 6.01.01.04 Deferred income and social contribution taxes 12,107 (386) 6.01.01.05 Provision for contingencies (6,346) 17,642 6.01.01.06 Net book value of permanent assets written off 4,719 43 6.01.01.07 Tax benefit - merged goodwill 18 14,943

6.01.01.08 Interest and monetary and foreign exchange gains (losses) on

assets and liabilities 79,537 71,277 6.01.01.09 Amortization of concession asset in acquisition of 1,245 1,245 Subsidiary 6.01.01.10 Loss realized in subsidiary (1,147) (1,177) 6.01.01.11 Equity pickup (46,045) (34,979) 6.01.02 Changes in assets and liabilities (144,531) (29,128) 6.01.02.01 Restricted cash (581) (276) 6.01.02.02 Accounts receivable (concession asset) (44,491) 70,594 6.01.02.03 Inventories 2,063 8,860 6.01.02.04 Receivables - State Finance Department (SEFAZ) (73,229) (72,761) 6.01.02.05 Taxes and contributions to be offset (38,413) (1,630) 6.01.02.06 Pledges and restricted deposits 30 3,457 6.01.02.07 Prepaid expenses (14,205) (17,706) 6.01.02.08 Other 6,787 5,879 6.01.02.09 Trade accounts payable (5,373) (32,036) 6.01.02.10 Taxes and social charges payable 39,741 29,926 6.01.02.11 Regulatory charges payable (5,255) (17,210) 6.01.02.12 Taxes in installments - Law No. 11941 (8,294) (7,642) 6.01.02.13 Provisions 4,135 3,231 6.01.02.14 Payables - Fundação CESP (1,030) 857 6.01.02.15 Other (6,416) (2,671) 6.02 Net cash from investing activities (16,290) 111,240 6.02.01 Short-term investments 17,970 90,301 6.02.02 Transactions with noncontrolling interests (55,741) 36,489 6.02.03 Property, plant and equipment (5,002) (585) 6.02.04 Intangible assets (3) (685) 6.02.05 Investments (1,564) (14,280) 6.02.06 Dividends received 28,050 - 6.03 Net cash from financing activities (102,241) (329,142) 6.03.01 Additions to loans 660 30,000 6.03.02 Payment of loans (principal) (28,902) (94,354) 6.03.03 Payment of loans (interest) (61,675) (123,391) 6.03.04 Dividends and interest on equity paid (109,697) (141,397) 6.03.05 Payment of capital/Future capital contribution 97,373 - 6.05 Increase (decrease) in cash and cash equivalents (2,500) 2,676 6.05.01 Cash and cash equivalents at beginning of period 6,135 4,696 6.05.02 Cash and cash equivalents at end of period 3,635 7,372


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Consolidated Financial Statements/Statement of Changes in Equity - SCE - 1/1/2016 to 6/30/2016

(In thousands of reais)

Capital reserves, Retained earnings Other

Account Paid-in options granted and Income (accumulated comprehensive Noncontrolling Consolidated code Account description capital treasury shares reserves losses) income Equity interests equity

5.01 Opening balances 2,215,291 1,278,022 1,842,892 - - 5,336,205 178,796 5,515,001 5.03 Adjusted opening balances 2,215,291 1,278,022 1,842,892 - - 5,336,205 178,796 5,515,001

5.04 Capital transactions with shareholders 157,146 (59,773) - (110,000) - (12,627) (63,189) (75,816)

5.04.01 Capital increases 157,146 (59,773) - - - 97,373 - 97,373 5.04.06 Dividends - - - (110,000) - (110,000) - (110,000)

5.04.12 Acquisition of additional interests - - - - - - (63,189) (63,189)

from noncontrolling shareholders

5.05 Total comprehensive income - - - 198,651 - 198,651 7,448 206,099

5.05.01 Net income for the period - - - 198,651 - 198,651 7,448 206,099 5.07 Closing balances 2,372,437 1,218,249 1,842,892 88,651 - 5,522,229 123,055 5,645,284


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Consolidated Financial Statements/Statement of Changes in Equity - SCE - 1/1/2015 to 6/30/2015

(In thousands of reais)

Capital reserves, Retained earnings Other

Account Paid-in options granted and Income (accumulated comprehensive Noncontrolling Consolidated code Account description capital treasury shares reserves losses) income Equity interests equity

5.01 Opening balances 2,215,291 1,278,022 1,671,732 - - 5,165,045 63,567 5,228,612 5.03 Adjusted Opening Balances 2,215,291 1,278,022 1,671,732 - - 5,165,045 63,567 5,228,612

5.04 Capital transactions with shareholders - - - (109,641) - (109,641) 31,006 (78,635)

5.04.06 Dividends - - - (110,765) - (110,765) - (110,765) 5.04.09 Unclaimed dividends - - - 743 - 743 - 743 5.04.10 Unclaimed interest on equity - - - 381 - 381 - 381

5.04.12 Acquisition of additional equity interests - - - - - - 31,006 31,006

from noncontrolling shareholders

5.05 Total comprehensive income - - - 161,007 - 161,007 5,483 166,490 5.05.01 Net income for the period - - - 161,007 - 161,007 5,483 166,490 5.07 Closing balances 2,215,291 1,278,022 1,671,732 51,366 - 5,216,411 100,056 5,316,467


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Consolidated Financial Statements/Statement of Value Added


7.01 Revenues 635,623 601,845 7.01.01 Sales of goods, products and services 634,171 599,794 7.01.02 Other revenues 1,452 2,051 7.02 Inputs acquired from third parties (113,659) (190,672) 7.02.01 Costs of sales and services (12,023) (9,219) 7.02.02 Materials, energy, third-party services and other expenses (101,636) (181,453) 7.03 Gross value added 521,964 411,173 7.04 Retentions (4,344) (4,272) 7.04.01 Depreciation, amortization and depletion (4,344) (4,272) 7.05 Net value added produced 517,620 406,901 7.06 Value added received in transfer 86,448 112,937 7.06.01 Equity pickup 46,045 34,979 7.06.02 Financial income 40,403 77,958 7.07 Total value added to be distributed 604,068 519,838 7.08 Distribution of value added 604,068 519,838 7.08.01 Personnel 121,060 131,061 7.08.01.01 Direct compensation 88,080 101,810 7.08.01.02 Benefits 24,873 22,525 7.08.01.03 Unemployment Compensation Fund (FGTS) 8,107 6,726 7.08.02 Taxes, charges and contributions 174,899 140,154 7.08.02.01 Federal 158,767 127,019 7.08.02.02 State 323 257 7.08.02.03 Municipal 15,809 12,878 7.08.03 Debt remuneration 102,010 82,133 7.08.03.01 Interest 94,361 75,058 7.08.03.02 Rent 7,649 7,075 7.08.04 Equity remuneration 206,099 166,490 7.08.04.02 Dividends 110,000 110,765 7.08.04.03 Retained earnings (accumulated losses) for the period 88,651 50,242 7.08.04.04 Noncontrolling interests in retained profits 7,448 5,483


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Comments on Performance Analysis of the consolidated income for the quarter ended June 30, 2016 (unaudited): In thousands of reais % Change 2016 % 2015 % 2016/2015

Net operating revenue Revenue from infrastructure 35,390 12.3 70,809 25.4 (50.0) Operation and maintenance 218,525 76.1 192,136 68.9 13.7 Revenue from concession assets 67,424 23.5 45,786 16.4 47.3 Revenues from leases and rendering

of services 5,848 2.0 5,352 1.9 9.3 Taxes on revenues (28,292) 9.9 (27,094) 9.7 4.4 Regulatory charges (11,917) 4.2 (7,948) 2.8 49.9

286,978 100.0 279,041 100.00 2.8 Cost of infrastructure implementation,

operation and maintenance services infrastructure implementation (32,172) 11.2 (64,556) 23.1 (50.2) Operation and maintenance (80,083) 27.9 (76,755) 27.5 4.3

(112,255) 39.1 (141,311) 50.6 (20.6) Gross profit 174,723 60.9 137,730 49.4 26.9 General and administrative expenses (29,484) 10.3 (42,597) 15.3 (30.8) Other operating income (expenses),

net (752) 0.3 (9,118) 3.3 (91.8) Equity pickup 27,024 9.4 18,818 6.7 43.6 Financial income (expenses) (28,898) 10.1 (5,966) 2.1 384.1

Income before income and social contribution taxes 142,613 49.7 98,867 35.4 44.2

Income and social contribution taxes (34,753) 12.1 (18,971) 6.8 83.2

Net income for the period 107,860 37.6 79,896 28.6 35.0

Attributable to controlling interests 104,240 76,615

Attributable to noncontrolling interests 3,620 3,281

Consolidated gross profit was up 26.9% in 2Q16 from 2Q15, as detailed below: The net operating revenue, which had a 2.8% increase in 2Q16, includes the following changes: (i) Revenue from infrastructure totaled R$35,390 thousand in 2Q16, compared with

R$70,809 thousand in 2Q15, especially after the completion of projects involving reinforcement of infrastructure implementation in a substation and reconstruction of transmission lines at CTEEP. The subsidiaries posted decrease in revenue due to the implementation phase of an autotransformer bank at Pinheiros.

(ii) Revenue from operation and maintenance totaled R$218,525 thousand in 2Q16 from

R$192,136 thousand in 2Q15, due to: (i) R$13,264 thousand increase in IGPM/IPCA on Annual Revenue Allowed (RAP) for 2014/2015 over 2015/2016; (ii) R$8,111 thousand increase due to introduction of CAIMI as of July 2015; (iii) change due to the start-up of new projects, in the amount of R$2,170 thousand; and (iv) R$3,855 thousand increase in regulatory charges as a result of the hike in transfers of CDE and Proinfa.


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Comments on Performance (iii) Revenue from concession assets, which refers to the restatement of financial assets

calculated by reference to the individual effective interest rate of each project, totaled R$67,424 thousand in 2Q16, as compared to R$45,786 thousand in 2Q15. This balance reflects the change in the financial flow for the realization of construction and compensation amounts (average balance of financial assets in 2Q16: R$2,241,196 thousand and in 2Q15: R$1,843,628 thousand, excluding the balance of returnable assets - Law No.12783, and O&M accounts receivable). The weighted average effective interest rate to remunerate the financial asset at June 30, 2016 is 13.1% (13.9% at June 30, 2015).

(iv) Lease and service revenue totaled R$5,848 thousand in 2Q16, as compared to R$5,352

thousand in 2Q15, having no significant change. Deductions from operating revenue totaled R$40,209 thousand in 2Q16 and R$35,042 thousand in 2Q15, due to: (i) 4.4% increase in taxes on revenue, in line with the change in construction, operation and maintenance, and finance revenue; and (ii) 49.9% increase in regulatory charges, especially CDE and PROINFA, given the consumption of free consumers.

The costs of infrastructure implementation and operation and maintenance services totaled R$112,255 thousand in 2Q16, and R$141,311 thousand in 2Q15. In 2Q16, these costs include 28.7% of infrastructure implementation costs (45.7% in 2Q15) and 71.3% of operation and maintenance costs (54.3% in 2Q15). The costs of infrastructure implementation services are in line with the change in revenue from infrastructure, used especially in services and materials.

Costs of infrastructure implementation

2Q16 2Q15

Personnel (3,918) (3,767) Third-party services (6,088) (19,060) Materials (21,792) (41,683) Other (374) (46)

(32,172) (64,556)

The change in operation and maintenance costs refers to: (i) personnel, due mainly to the 8.2% salary increase, in July 2015, as a result of the bargaining agreement, and headcount restructuring costs, after a decrease in technical staff; (ii) services, mainly due to maintenance and repair of transmission lines and substations, such as replacing spacers, erosion containment and anticorrosive treatment; and (iii) annual adjustment to the real estate tax (IPTU) value. O&M costs

2Q16 2Q15

Personnel (49,679) (48,573) Third-party services (16,549) (15,344) Materials (2,027) (2,941) Lease and rental (2,601) (2,094) Other (9,227) (7,803)

(80,083) (76,755)


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Comments on Performance General and administrative expenses decreased 30.8% to R$29,484 thousand in 2QT16 compared to R$42,597 thousand in 2QT15 mainly referring to the cost of litigation, due to: (i) change of R$10,683 in labor claims: concentration in 2Q15 of the provision for losses on labor claims for which CTEEP is jointly liable with staff outsourcing companies that are in default and insolvent; and (ii) change of R$6,225 in tax proceedings due to IPTU tax collection claim. Other operating income (expenses), net, fell 91.8% to R$752 thousand in 2Q16 from R$9,118 in 2Q15, due to reduced amortization of the goodwill tax benefit totaling R$7,471 in the 2Q15. Financial income (expenses) showed a significant change, totaling R$28,898 thousand of expenses in 2Q16 compared to financial income (expenses) of R$5,966 in 2Q15, due to: (i) settlement of accounts receivable from returnable assets - Law No. 12783 of Base Grid - New Facilities (RBNI); and (ii) increase in monetary adjustment expenses on updating the provisions for litigation. Income and social contribution taxes increased 83.2%, totaling R$34,753 in 2Q16 compared to R$18,971 in 2Q15, in line with changes in P&L. The effective income and social contribution tax rate was 24.4% in 2Q16, compared with 19.2% in 2Q15. The effective rate increased due to the reduction in the goodwill tax benefit. In view of the foregoing, net income for 2Q16 totaled R$107,860 thousand, over R$79,896 thousand in 2Q15.


Notes to Quarterly Information

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1. Operations

1.1. Business purpose CTEEP - Companhia de Transmissão de Energia Elétrica Paulista (“CTEEP” or “Company”) is a publicly-traded company, authorized to operate as an electric public utility concession operator, and is primarily engaged in the transmission of electric power, which requires planning, implementing infrastructure and operation and maintenance of power transmission subordinated systems. Its activities also envisage investing funds in and managing research and development programs with respect to power transmission and other activities related to available technology. The Company’s activities are regulated and supervised by Brazil’s National Electric Power Agency (ANEEL). The Company is the result of a split-off of Companhia Energética de São Paulo (“CESP”) and started up on April 1, 1999. On November 10, 2001, EPTE - Empresa Paulista de Transmissão de Energia Elétrica S.A. (“EPTE”), a company arising from the split-off of Eletropaulo - Eletricidade de São Paulo S.A. was merged into the Company.

In a privatization auction held at the São Paulo Stock Exchange (BOVESPA) on June 28, 2006 under Bid Notice SF/001/2006, the São Paulo State Government, until then majority shareholder, sold 31,341,890,064 of its common shares, corresponding to 50.10% of the common shares issued by CTEEP. The winner of the auction was Interconexión Eléctrica S.A. E.S.P. The financial settlement of the transaction took place on July 26, 2006 with the resulting transfer of the ownership of the aforementioned shares to ISA Capital do Brasil S.A. (“ISA Capital”), a Brazilian company controlled by Interconexión Eléctrica S.A. E.S.P. (“ISA”), established to operate in Brazil, thus becoming CTEEP’s controlling shareholder. This transaction was approved by ANEEL on July 25, 2006, pursuant to Authorizing Resolution No. 642/06, published in the Federal Register on July 26, 2006. The Company's shares are traded at the Securities, Commodities and Futures Exchange (BM&FBovespa). In addition, CTEEP has a Rule 144 A American Depositary Receipts (ADRs) program in the United States. The ADRs depositary is JPMorgan Chase Bank, and Banco Itaú S.A. is the custodian bank. In September 2002, the Company adhered to the Level-1 Corporate Governance Practices of BM&FBovespa. The commitments assumed under these practices ensure greater transparency of the Company for the market, investors and shareholders, thus facilitating the follow-up of the management’s actions. The Company’s shares are included in the following indexes: Índice de Governança Corporativa Trade - IGCT (Trade Corporate Governance); Índice de Energia Elétrica - IEE (Electric energy); Índice Brasil Amplo - IBrA (Broad Brazil); Índice Brasil 100 - IBrX 100 (Brazil 100); Índice de Ações com Governança Corporativa Diferenciada - IGCX (Shares with Differentiated Corporate Governance); Índice Mid Large Cap - MLCX; and Índice BM&FBOVESPA Utilidade Pública - UTIL (BM&FBOVESPA Public Utilities).



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1.2. Concessions

The Company and its subsidiaries are entitled to explore, either directly or indirectly, the following Public Service Concession Arrangements for Electric Power Transmission:

Periodic Annual Revenue tariff review Allowed (RAP)

Concession operator Arrangement

Interest (%)

Term (years)

Maturity Term Next Adjustment

index R$

thousand Base month

CTEEP 059/2001 30 12/31/2042 5 years 2018 IPCA 893,452 06/16 Subsidiaries Serra do Japi 026/2009 100 30 11/18/2039 5 years 2020 IPCA 37,506 06/16 Pinheiros 015/2008 100 30 10/15/2038 5 years 2019 IPCA 31,800 06/16 Serra do Japi (*) 143/2001 100 30 12/20/2031 n/a n/a IGPM 20,384 06/16 IEMG 004/2007 100 30 04/23/2037 5 years 2017 IPCA 16,861 06/16 Evrecy 020/2008 100 30 07/17/2025 4 years 2017 IGPM 13,367 06/16 Pinheiros 012/2008 100 30 10/15/2038 5 years 2019 IPCA 10,409 06/16 Pinheiros 021/2011 100 30 12/09/2041 5 years 2017 IPCA 5,971 06/16 Pinheiros 018/2008 100 30 10/15/2038 5 years 2019 IPCA 5,577 06/16 Jointly-controlled subsidiaries IEMadeira 013/2009 51 30 02/25/2039 5 years 2019 IPCA 235,847 06/16 IEMadeira (**) 015/2009 51 30 02/25/2039 5 years 2019 IPCA 209,821 06/16 IEGaranhuns 022/2011 51 30 12/09/2041 5 years 2017 IPCA 93,505 06/16 IENNE 001/2008 25 30 03/16/2038 5 years 2018 IPCA 40,907 06/16 IESul 016/2008 50 30 10/15/2038 5 years 2019 IPCA 11,306 06/16 IESul 013/2008 50 30 10/15/2038 5 years 2019 IPCA 5,564 06/16

(*) On April 30, 2015, the Company assigned Electric Power Transmission Service Service Concession Arrangement No. 143/2001 to

subsidiary Serra do Japi through a capital increase, as approved by ANEEL Authorizing Resolution No. 5036 of January 20, 2015 (Note 11 (a) (i)).

(**) In May 2014, the facilities related to the service concession arrangement No. 015/2009 of jointly-controlled subsidiary IEMadeira were

completed and delivered to Brazil's National Electric System Operator (ONS) for tests. In June 2014, due to the existence of restrictions in systems and related to third parties, ONS issued the Partial Release Term (TLP) for temporary commercial operation purposes. Due to the existence of own non-deterrent restrictions, the RAP was released with a 10% reduction that has been maintained by ONS due to non-completion of joint studies of the integrators of bipoles 1 and 2 onto ONS digital real-time simulator.

All service concession arrangements above provide for the compensation right on concession-related assets upon expiration thereof. Periodic tariff review arrangements provide for the compensation right on investments in expansions, reinforcements and improvements. Law No. 12783/2013 On September 12, 2012, Provisional Executive Order No. 579/2012 (MP No. 579) was published to regulate the extension of electric power generation, transmission and distribution concessions granted before enactment of Law No. 8987 of 1995, and addressed by Law No. 9074 of 1995. On September 14, 2012, Decree No. 7805 was published to regulate MP No. 579. Under MP No. 579, electric power generation, transmission and distribution concessions, overdue or falling due 60 months after publication of such MP, could mature in December 2012, extendable, at the Granting Authority’s discretion, only once, for up to 30 years. However, for transmission activities, the extension would depend on express acceptance of the following main conditions, among others:

i) Revenue determined under ANEEL’s criteria; ii) amounts established for assets subject to compensation; and iii) adopting the service quality standard established by ANEEL.



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On November 1, 2012, the Ministry of Mines and Energy (MME) published Interministerial Ruling No. 580, which determined the indemnification attributable to the Company for energized facilities as from June 1, 2000 - New Investment (NI), in the amount R$2,891,291 related to Service Concession Arrangement No. 059/2001 (single arrangement covered by such MP), and Interministerial Ruling No. 579, on which the RAP was defined from January 1, 2013 onwards. On November 29, 2012, Provisional Executive Order No. 591 (MP No. 591) was published as an amendment to MP No. 579 to authorize the payment of amounts related to existing undepreciated assets on May 31, 2000 (Existing Service - SE) by the Granting Authority. In January 2013, MPs No. 579 and No. 591 were signed into Law No. 12783/2013. At the Special General Meeting held on December 3, 2012, CTEEP’s shareholders unanimously approved the extension of service concession arrangement No. 059/2001. On December 4, 2012, an amendment to Service Concession Arrangement No. 059/2001 was entered into by CTEEP, with an option to receive compensation in connection with the New Investment (NI), being 50% in cash and 50% payable in installments, which were settled in 2015. The restatement method has not yet been defined. On August 13, 2014, the Company filed the independent appraisal report on the assets of the Existing Service (SE) that totaled R$5,186,018, which corresponds to investments at the New Replacement Cost (VNR) adjusted for accumulated depreciation through December 31, 2012. ANEEL Board’s 47th Annual Public Meeting held on December 15, 2015 approved the compensation amount totaling R$3,896,328, as defined in Order No. 4036/2015, published in the Federal Register on December 21, 2015. With a view to reversing the decision by ANEEL Board, CTEEP filed a request for reconsideration on December 30, 2015, which is pending judgement to date. On April 20, 2016, Administrative Ruling No. 120 was issued by the Ministry of Mines and Energy (MME), which established that the amounts approved by ANEEL through Order No. 4036/2015 relating to the facilities of the Existing Service (SE) should be part of the Basis for Regulatory Remuneration of electric power transmission companies for an estimated eight years following the 2017 tariff review process. The Administrative Ruling addresses aspects relating to the restatement, remuneration and taxation of amounts involved and also mentions certain issues that have not yet been regulated by ANEEL, as mentioned in Note 7 (d). Public Hearing No. 41/205 - Other Transmission Facilities (DIT) ANEEL’s Board held an Annual Public Meeting on June 23, 2015 to approve the opening of public hearings from June 29 to August 31, 2015 to collect data and additional information to consider the proposed transfer of the so-called Other Transmission Facilities (Demais Instalações de Transmissão - DIT) from electric power transmission companies to distribution companies under ANEEL Note No. 32/2015 (Administrative Proceeding No. 48500.004452/2014-60). DIT refer to facilities operating at 230 kV or less, and, paragraph 46 of ANEEL Note proposes the transfer of these facilities, which, in case it occurs, shall entail the payment of compensation to affected transmission companies.



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In August 2015, the Company made its contributions to the Public Hearing, together with legal, technical and economic and financial opinions and reports. CTEEP challenged the foundations of ANEEL Note No. 32/2015, pointed out the consequences of a potential transfer of part of its DIT, and defined the criteria to be considered in order to keep the economic and financial balance of the concession, including a review of the compensation calculation criteria. After contributions were made by agents, on December 7, 2015, Opinion No. 786/2015/PF-ANEEL/PGF/AGU was issued by the Deputy Attorney General of ANEEL to address aspects related to the compulsory transfer of DIT, and suggested further consideration by the technical areas of a possible impairment of the financial and economic balance that this could have on the revenue of the transmission companies. In view of the contributions received as provided for in Opinion No. 786/2015/PF-ANEEL/PGF/AGU, on April 26, 2016 ANEEL Board determined the opening of the second phase of the Public Hearing, with contributions period from April 28 to July 27, 2016. In this second phase the transfer scope was limited only to DIT of exclusive use of distribution companies, however still compulsorily. Within the term established by ANEEL, the Company presented its contributions together with legal, technical and economic and financial opinions and reports, which presented the following particular arguments: (i) required maintenance of the economic and financial balance of the service concession arrangement of the transmission company; (ii) possible transfer of these facilities should be consensual and not compulsory, through the establishment of “regulation by incentive”; (iii) preservation in the transmission companies of the assets that have systemic function, thus avoiding in the future a possible return to such issue, considering the possibility of transferring electro-energy optimization DIT. Interest in consortium i) Extremoz Transmissora do Nordeste - ETN

On June 10, 2011, through ANEEL auction No. 001/2011, in a public session held at BM&FBOVESPA, Extremoz consortium, made up by CTEEP (51%) and Companhia Hidro Elétrica do São Francisco - Chesf (49%), bought Lot A, comprising Ceará-Mirim - João Câmara II transmission line, of 500 kV with 64 km; Ceará-Mirim - Campina Grande III transmission line, of 500 kV with 201 km; Ceará-Mirim - Extremoz II transmission line, of 230 kV with 26 km; Campina Grande III - Campina Grande II transmission line, with 8.5 km; João Câmara II substation, of 500 kV, Campina Grande III substation, of 500/230 kV, and Ceará-Mirim substation, of 500/230 kV. On July 7, 2011, Extremoz Transmissora do Nordeste - ETN S.A. was organized, considering the same equity interest, in order to explore the service conceded. This project involves estimated investment of R$622.0 million and RAP of R$31.9 million, as of June 2011. On March 20, 2015, Extremoz formally expressed to ANEEL CTEEP’s intention to withdraw from the consortium. ANEEL Authorizing Resolution No. 5218 of May 20, 2015, approved the transfer of equity control and established that the transaction should be completed within 120 days from the date of publication of the resolution. On December 10, 2015, approval was obtained from the Brazilian Antitrust Enforcement Agency (CADE). This proceeding was resent to ANEEL and is in progress.



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2. Presentation of quarterly information

2.1. Basis of preparation and presentation The individual quarterly information identified as “Company” and the consolidated quarterly information identified as “Consolidated” were prepared and are presented in accordance with accounting practices adopted in Brazil, which comprise the provisions contained in the Brazilian Corporation Law, pronouncements, interpretations and guidance issued by the Brazilian FASB (CPC) and approved by the Brazilian Securities and Exchange Commission ("CVM"), which are in compliance with the IFRS issued by the International Accounting Standards Board (IASB). The individual and consolidated quarterly information is presented in accordance with CPC 21 (R1) - Interim Financial Information, as approved by the Brazilian Securities and Exchange Commission (“CVM”), and with IAS 34 (Interim Financial Reporting) issued by the IASB. Both individual and consolidated quarterly information was prepared based on historical cost, unless otherwise stated, as described in the accounting practices of the annual financial statements for 2015. The historical cost is generally based on the fair value of the consideration paid in exchange for assets. All amounts reported in this financial information are in thousands of Brazilian reais, unless otherwise stated. Nonfinancial data included in this financial information, such as power volume, projections or estimates and insurance have not been audited by the independent auditors. The quarterly information was approved and authorized for disclosure by the Board of Directors on August 15, 2016.

2.2. Functional and reporting currency The quarterly information of the parent company and each subsidiary, included in the consolidated quarterly information, is stated in Brazilian reais, which is the currency of the main economic environment in which the these companies operate (“functional currency”).

2.3. Significant accounting judgments, estimates and assumptions According to CVM/SNC/SEP Circular Memorandum No. 03/2011, the Company declares that the significant accounting judgments, estimates and assumptions, as well as significant accounting practices are the same as those disclosed in the annual financial statements for 2015. Therefore, the corresponding information must be read jointly with Notes 2.4 and 3 to those financial statements.

2.4. Consolidation procedures The consolidated quarterly information comprises the quarterly information of CTEEP and its subsidiaries. Control is obtained when the Company has the power to control the financial and operating policies of an entity to derive benefits from its activities.



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These subsidiaries are fully consolidated from the date on which control is obtained by the Company until such control ceases. At June 30, 2016 and December 31, 2015, interest held in subsidiaries was as follows:

Subsidiaries Interim

reporting date

% - Interest held

6/30/2016 12/31/2015

Interligação Elétrica de Minas Gerais S.A. (IEMG) 6/30/2016 100 100 Interligação Elétrica Pinheiros S.A. (Pinheiros) 6/30/2016 100 100 Interligação Elétrica Serra do Japi S.A. (Serra do Japi) 6/30/2016 100 100 Evrecy Participações Ltda. (Evrecy) 6/30/2016 100 100 Fundo de Investimento Referenciado DI Bandeirantes 6/30/2016 73 (*) 59 Fundo de Investimento Xavantes Referenciado DI 6/30/2016 65 (*) 59

(*) Includes both direct and indirect interests.

The following procedures were adopted in preparing the consolidated quarterly information:

elimination of the subsidiaries’ equity;

elimination of equity pickup; and

elimination of asset and liability balances, revenues and expenses among the consolidated companies.

The accounting practices were consistently applied in all the consolidated subsidiaries and the fiscal year of these subsidiaries is the same as that of the Company.

Noncontrolling interests are shown as part of equity and net income, and are separately stated in the consolidated quarterly information.

At June 30, 2016 and December 31, 2015, investments in jointly-controlled subsidiaries carried under the equity method were as follows:

Interim reporting date

(*) Ownership %

6/30/2016 12/31/2015 Jointly-controlled entities

Interligação Elétrica Norte e Nordeste S.A. (IENNE) 6/30/2016 25 25 Interligação Elétrica do Sul S.A. (IESul) 6/30/2016 50 50 Interligação Elétrica do Madeira S.A. (IEMadeira) 6/30/2016 51 51 Interligação Elétrica Garanhuns S.A. (IEGaranhuns) 6/30/2016 51 51

(*) The Company has a shareholders’ agreement determining that decisions must be made together.

3. Summary of significant accounting practices

The Company declares that information on significant accounting practices remains valid for this Quarterly Information (ITR) and the content of this information can be found in Note 3 to the financial statements for 2015.



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4. New and revised standards and interpretations not yet adopted The Company and its subsidiaries have adopted all (new or revised) pronouncements and interpretations issued by the Brazilian FASB (CPC), as applicable, which were effective at December 31, 2015. No new pronouncements other than those mentioned in the financial statements for 2015 were issued. The Company will adopt, as applicable, these standards when they become effective, with any impacts therefrom being disclosed and recognized in the financial statements.

5. Cash and cash equivalents

Company Consolidated

% of CDI 6/30/2016 12/31/2015 6/30/2016 12/31/2015

Cash and banks 664 2,287 1,672 3,798 Cash equivalents

Bank Deposit 893 827

Certificates (CDB) 92.0% to 100.0% 898 1,137

Repurchase agreements (a) 93.0% to 97.0% - - 827 1,194 Short-term investment funds (b) 60.0% to 70.0% 238 6 238 6

1,795 3,120 3,635 6,135

Cash equivalents are measured at fair value through profit or loss and have daily liquidity. Company management’s analysis of the exposure of these assets to interest rate risks, among others, is disclosed in Note 29 (c).

(a) Repurchase agreements are notes issued by banks, provided that the issuing bank repurchases such note and the customer sells it at

predefined rates and periods, backed by government securities or corporate bonds registered with the Brazil’s OTC Clearing House (CETIP). (b) Provision CP FICFI Federal Investment Fund: administered by Banco Itaú-Unibanco, the portfolio of which is comprised of shares of Short-Term

FI Federal Investment Fund, with daily liquidity and portfolio linked to government securities.

6. Short-term investments


% of CDI 6/30/2016 12/31/2015 6/30/2016 12/31/2015

Investment funds (*) 103.00% 250,201 230,855 422,084 440,054

250,201 230,855 422,084 440,054

(*) Investments funds are consolidated as described in Note 2.4.

The Company, its subsidiaries and its jointly-controlled subsidiaries concentrate their financial investments in investment funds, which refer to highly liquid investment fund shares, readily convertible into a known cash amount, irrespective of the maturity of the assets.



Page: 29 of 76

Investment funds are:

Fundo de Investimento Referenciado DI Bandeirantes (Bandeirantes Investment Fund by reference to Interbank Deposit - DI): fund established for exclusive investment by the Company, its subsidiaries and jointly-controlled subsidiaries, administered by Banco Bradesco, the portfolio of which is comprised of shares of Coral Investment Fund by reference to Interbank Deposit (DI). The Company’s and consolidated balances in June 2016 were respectively: R$199,941 and R$301,228 (R$97,490 and R$183,806 at December 31, 2015).

Fundo de Investimento Xavantes Referenciado DI (Xavantes Investment Fund by reference to Interbank Deposit - DI): fund established for exclusive investment by the Company, its subsidiaries and jointly-controlled subsidiaries, administered by Banco Itaú-Unibanco, the portfolio of which is comprised of shares of Special Investment Fund by reference to Interbank Deposit (DI) (Corp by reference to DI merged by Special DI). The Company’s and consolidated balances in June 2016 were respectively: R$50,260 and R$120,856 (R$133,365 and R$256,248 at December 31, 2015).

Coral and Special Investment Funds by reference to Interbank Deposit (DI) have daily liquidity, irrespective of assets, as established in the regulations of Bandeirantes and Xavantes Funds. The portfolio mainly comprises investments in demand deposits, floating CDB, government securities, debentures, financial bills and repurchase agreements in government securities, as follows:

Coral - Special DI DI

Financial Treasury Bills (LFT) 14.0% 19.1% Government securities 45.7% 49.0% Financial bill 32.1% 25.4% Bank Deposit Certificate (CDB) 2.5% 3.8% Debentures 5.5% 2.2% Other 0.2% 0.5%

Company management’s analysis of the exposure of these assets to interest rate risks, among others, is disclosed in Note 29 (c).

7. Accounts receivable (concession asset)


6/30/2016 12/31/2015 6/30/2016 12/31/2015

O&M Accounts receivable - O&M services (a) 109,099 149,451 123,202 158,656

109,099 149,451 123,202 158,656

Financial asset Accounts receivable from infrastructure implementation (b) 1,207,009 1,137,185 2,180,521 2,111,192 Accounts receivable - compensation (c) 22,690 12,337 97,848 86,085

1,229,699 1,149,522 2,278,369 2,197,277

Asset - Law No. 12783 Accounts receivable - Law No. 12783 (d) 1,490,996 1,490,996 1,490,996 1,490,996

1,490,996 1,490,996 1,490,996 1,490,996

2,829,794 2,789,969 3,892,567 3,846,929

Current 188,033 220,566 292,485 319,961

Noncurrent 2,641,761 2,569,403 3,600,082 3,526,968

(a) O&M - Operation and Maintenance refers to the portion of monthly billing reported by ONS allocated to compensation for operation and

maintenance services, receivable within 30 days, on average.



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(b) Receivables from infrastructure implementation, extension, reinforcement and improvement services of electric power transmission facilities up

to the termination of each service concession arrangement in force, of which the Company and its subsidiaries are signatories, adjusted to present value and remunerated by the effective interest rate.

(c) Accounts receivable for compensation - these refer to the estimated portion of investments made and not amortized up to the termination of the service concession arrangements in force and for which the Company and its subsidiaries will be entitled to receive cash or other financial asset, upon termination of the service concession arrangements.

(d) Accounts receivable - Law No. 12783 - these refer to the amount receivable for compensation for investments made and not amortized at

December 31, 2012, relating to service concession arrangement No. 059/2001 subdivided into NI (New Investment) and ES (Existing Service): • Return of facilities for NI corresponds to R$2,949,121, including R$2,891,291 of New Replacement Cost (VNR) determined and

R$57,830 for remuneration by IPCA + WACC of 5.59% p.a., as defined in Interministerial Ruling No. 580. Fifty per cent (50%) of this amount was received on January 18, 2013 and the remaining 50% was split into 31 monthly installments that were settled over 2015. The restatement method has not yet been defined.

• The right referring to “SE” facilities, recorded at June 30, 2016, corresponds to the infrastructure implementation cost, which is

equivalent to the net book value of these assets in the regulatory financial statements on the extension date (December 31, 2012), considering ANEEL Order No. 155 of January 23, 2013, which suggests recording this item at cost until approval by the Granting Authority. Even though the basic amounts referring to “SE” facilities are available and approved by ANEEL Board (Note 1.2), Company management understands that it is not possible to reliably estimate the restated amount of this right, in view of: (i) the request for reconsideration filed with ANEEL on December 30, 2015, referring to SE amounts, which is still pending judgment by such agency; and (ii) matters that are subject to regulation and definitions by ANEEL as to the issues addressed in MME Administrative Ruling No. 120/16, such as: (a) restatement index and methodology and remuneration applicable in determining the amount; (b) clarifications as to the payment terms for past due and remaining installments; and (c) definition of taxation applicable to amounts receivable. Therefore, the Company will keep recorded the historical balance until it receives a formal guidance by Regulators to reliably measure the asset. As a reference of the range of possible amounts, the Company estimates a variation of approximately 70% between the highest and lowest amount, depending on the conditions prevailing after the completion of the public hearing to be performed by ANEEL for discussion of these matters, scheduled to begin in October 2016. The evaluation of the most likely scenario of materialization is not possible, therefore, the reliability of estimates at this moment is jeopardized. The Company intends to recognize the amount receivable after the completion of this public hearing.

The aging list of accounts receivable is as follows:


6/30/2016 12/31/2015 6/30/2016 12/31/2015

Falling due 2,819,390 2,778,636 3,881,662 3,834,981

Past due Within 30 days 649 127 714 167 From 31 to 60 days 135 140 156 147 From 61 to 360 days 785 2,319 906 2,610 For more than 361 days (i) 8,835 8,747 9,129 9,024

10,404 11,333 10,905 11,948

2,829,794 2,789,969 3,892,567 3,846,929

(i) Certain system members challenged balances billed in connection with the Basic Electric Power Grid. By virtue of this challenge, judicial

deposits were made of amounts owed by such members. The Company understands that the amounts billed are in line with regulators’ authorizations. Therefore, it does not record any provision for losses related to such challenges.

The Company has no history of losses on accounts receivable, which are secured by structures of guarantees and/or access to current accounts operated by the Brazil’s National Electric System Operator (ONS) or directly by the Company. Therefore, it did not recognize any allowance for doubtful accounts. Changes in accounts receivable Company Consolidated

Balances at 12/31/2015 2,789,969 3,846,929

Revenue from infrastructure (Note 24.1) 54,190 59,724 Revenue from concession assets (Note 24.1) 78,418 125,417 Revenue from operation and maintenance (Note 24.1) 418,203 437,682 Receipts (510,986) (577,185)

Balances at 6/30/2016 2,829,794 3,892,567



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8. Receivables - State Finance Department - Company and Consolidated

Company and Consolidated

6/30/2016 12/31/2015

Payroll processing - Law No. 4819/58 (a) 1,311,490 1,245,622 Labor claims - Law No. 4819/58 (b) 243,914 236,553 Provision for losses on realization of receivables (c) (516,255) (516,255) Family allowance - Law No. 4819/58 (d) 2,218 2,218 Provision for losses on realization of receivables - family allowance (d) (2,218) (2,218)

1,039,149 965,920

(a) These refer to receivables to settle the payroll portion of the supplementary retirement plan governed by State Law No. 4819/58, from

January 2005 to March 2016 (Note 32). The increase over the previous year is related to compliance with the decision handed down by the 49th Labor Court, on which CTEEP, in the capacity of the party served, monthly pass on the amounts to Funcesp for retirees payroll processing.

(b) These refer to certain labor claims settled by CTEEP, relating to retired employees supported by State Law No. 4819/58, which are the responsibility of the São Paulo State Government.

(c) The provision was based on the extension of the period of expected realization of part of accounts receivable from the State of São Paulo

and on the status of litigation. The Company monitors the progress of this issue and regularly reviews the provision, evaluating the need for supplementing or reversing the provision based on legal events that may change the opinion of its advisors. In the first half of 2016, there were no events that would indicate the need to change the provision.

(d) CESP made advances for payment of monthly expenses relating to family allowance, arising from State Law No. 4819/58 benefits, which

were transferred to CTEEP upon CESP split-off. Considering the expected loss, the related provision amounts to R$2,218.

9. Taxes and contributions to be offset


6/30/2016 12/31/2015 6/30/2016 12/31/2015

Income tax recoverable 26,841 - 26,891 633 Social contribution tax recoverable 9,903 - 9,973 53 Withholding Income Tax 3,168 1,689 3,168 1,689 Withholding social contribution tax 146 53 146 53 Contribution Tax on Gross Revenue for Social Security

Financing (COFINS) 2,717 2,354 2,717 2,354 Contribution Tax on Gross Revenue for Social

Integration Program (PIS) 589 511 589 511 Other 544 321 692 470

43,908 4,928 44,176 5,763

10. Pledges and restricted deposits

Pledges and restricted deposits are recorded in noncurrent assets, given the uncertainties around the outcome of the related litigation.

Deposits are recognized at nominal value and are adjusted for inflation. Breakdown of the balance is as follows:


6/30/2016 12/31/2015 6/30/2016 12/31/2015

Judicial deposits Labor (Note 20 (a) (i)) 56,415 54,695 56,415 54,711 Social security - INSS (Note 20 (a) (iv)) 3,630 3,261 3,630 3,261 PIS/COFINS (a) 4,169 2,049 4,169 2,049 Other 345 287 345 287

Notice for violation - ANEEL (b) 6,610 5,960 6,610 5,960

71,169 66,252 71,169 66,268

(a) In March 2015, through Decree No. 8426/15, the PIS/COFINS rate applicable on financial income was reinstated at 4.65% effective from July 1,

2015. The Company legally sought to avoid such taxation based on the fact that the levy could only be required by Law as defined in the Federal Constitution, article 150, item I, and that Decree No. 8426/15 also violates the principle of non-cumulative taxation established in article 194, paragraph 12. Judicial deposits made until June 2016 total R$4,169.

(b) These refer to deposits aiming at voiding ANEEL notices which the Company has been challenging.



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11. Investments

a) Investments in subsidiaries and jointly-controlled entities Number of Interest common in paid-in Net shares capital Paid-in Gross income Reporting date held % capital Assets Liabilities Equity revenue (*) (loss) (*)

IEMG 6/30/2016 83,055,292 100.0 83,055 172,176 49,678 122,498 7,510 1,188 12/31/2015 83,055,292 100.0 83,055 173,433 52,123 121,310 4,431 2,768 Pinheiros 6/30/2016 300,910,000 100.0 300,910 590,893 147,629 443,264 27,985 18,310 12/31/2015 300,910,000 100.0 300,910 582,531 157,577 424,954 36,594 10,456 Serra do Japi 6/30/2016 130,857,000 100.0 130,857 344,771 92,173 252,598 28,906 17,980 12/31/2015 130,857,000 100.0 130,857 334,039 99,421 234,618 20,170 8,421 Evrecy 6/30/2016 21,512,367 100.0 21,512 62,147 3,870 58,277 7,741 5,619 12/31/2015 21,512,367 100.0 21,512 56,483 3,825 52,658 6,015 4,287 IENNE 6/30/2016 81,821,000 25.0 327,284 709,137 325,463 383,674 12,957 (5,297) 12/31/2015 81,821,000 25.0 327,284 719,556 330,585 388,971 15,347 (145) IESul 6/30/2016 104,928,499 50.0 209,855 305,879 80,288 225,591 7,929 (1,570) 12/31/2015 104,128,499 50.0 208,257 307,089 81,526 225,563 11,422 1,457 IEMadeira 6/30/2016 717,060,000 51.0 1,406,000 5,283,103 3,219,389 2,063,714 253,147 60,453 12/31/2015 717,060,000 51.0 1,406,000 5,302,355 3,299,094 2,003,261 238,623 41,953 IEGaranhuns 6/30/2016 290,700,000 51.0 570,000 1,218,729 514,729 704,000 82,700 33,967 12/31/2015 289,935,000 51.0 568,500 1,178,434 509,901 668,533 160,125 25,275

(*) Comparative information refers to the six-month period ended June 30, 2015.

i) Subsidiaries

Interligação Elétrica de Minas Gerais S.A. (IEMG) IEMG was incorporated on December 13, 2006 for the purpose of exploring the utility concession for electric power transmission, particularly the 500 kV Neves 1 - Mesquita (Minas Gerais State) transmission line extending over 172 km (Service Concession Arrangement No. 004/2007 - Note 1.2). IEMG was authorized to operate commercially in 2009. In 2011, CTEEP acquired from Cymi a 40% stake in IEMG’s capital, thus holding a 100% interest in its capital. The amount paid was R$15,283, reporting a loss of R$28,490. As a result of this transaction, the Company’s investment in IEMG on the transaction date was equivalent to its fair value, i.e. R$38,206, which is not the same as the carrying amount of IEMG’s net assets. At June 30, 2016, the reconciliation between IEMG’s net assets and the Company’s investment is as follows:

R$ thousand

IEMG net assets 122,498 Interest held by CTEEP 100%

Book value of investment 122,498

Loss on acquisition of control in IEMG (net) - fair value (34,309)

Total investment 88,189



Page: 33 of 76

Interligação Elétrica Pinheiros S.A. (Pinheiros) Pinheiros was incorporated on July 22, 2008 for the purpose of exploring the utility concession for electric power transmission, particularly the transmission lines and substations purchased in Lots E, H and K of ANEEL Auction No. 004/2008, and Lot K of ANEEL Auction No. 004/2011. Araras, Getulina, and Mirassol substations (Lot H - Service Concession Arrangement No. 015/2008) became operational on September 5, 2010, March 10, 2011, and April 17, 2011, respectively. Piratininga II substation (Lot E - Service Concession Arrangement No. 012/2008) became operational on December 26, 2011. Atibaia II substation (Lot K - Service Concession Arrangement No. 018/2008) became operational on January 8, 2013. Itapeti substation (Lot K - Service Concession Arrangement No. 021/2011) became operational on August 9, 2013. Interligação Elétrica Serra do Japi S.A. (Serra do Japi) Serra do Japi was incorporated on July 1, 2009 for the purpose of exploring the utility concession for electric power transmission, particularly Jandira and Salto substations purchased in Lot I of ANEEL Auction No. 001/2009 (Service Concession Arrangement No. 026/2009 - Note 1.2). Serra do Japi became operational in 2012 (Salto substation in January 2012, and Jandira substation in March 2012). On April 30, 2015, CTEEP transferred the electric power transmission service concession arrangement No. 143/2001 to subsidiary Serra do Japi, through a capital increase, as approved by ANEEL Authorizing Resolution No. 5036 of January 20, 2015. The capital increase totaling R$44,109 refers to the financial asset (accounts receivable - concession assets) of Service Concession Arrangement No. 143/2001, on March 31, 2015, determined pursuant to an independent appraisal report. Evrecy Participações Ltda. (“Evrecy”) In 2012, CTEEP acquired from EDP Energias do Brasil S.A. (“EDP”) 100% of the capital of Evrecy Participações Ltda. (“Evrecy”) for R$63.2 million. Evrecy is a power transmission company that was formed after the spin-off of the power generation and transmission assets of Espírito Santo Centrais Elétricas - Escelsa in 2005; it owns 154 km of transmission lines and three substations in the states of Espírito Santo and Minas Gerais. The acquisition cost was allocated among the assets acquired and the liabilities assumed at fair value. The concession assets computed in the amount of R$31,337 refers to the right acquired to operate and maintain the assets related to the concession held by Evrecy, and has been amortized over the life of Evrecy’s concession.



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At June 30, 2016, the reconciliation between Evrecy’s net assets and the Company’s investment is as follows:

R$ thousand

Evrecy net assets 58,277 Interest held by CTEEP 100%

Book value of investment 58,277

Concession asset at June 30, 2016 (net) 22,621

Total investment 80,898

ii) Jointly-controlled subsidiaries

Interligação Elétrica Norte e Nordeste S.A. (IENNE) IENNE was incorporated on December 3, 2007 for the purpose of exploring the utility concession for electric power transmission, particularly Colinas (Tocantins) - Ribeiro Gonçalves (Piauí) and Ribeiro Gonçalves - São João do Piauí (Piauí) transmission lines, both operating at 500 kV, extending over 720 km (Service Concession Arrangement No. 001/2008 - Note 1.2). In 2011, IENNE obtained authorization and became operational. Interligação Elétrica Sul S.A. (IESul) IESul was incorporated on July 23, 2008 for the purpose of exploring the utility concession for electric power transmission, particularly the transmission lines and substations purchased in Lots F and I of ANEEL Auction No. 004/2008. Nova Santa Rita - Scharlau transmission line and Scharlau substation (Service Concession Arrangement No. 013/2008) became operational on December 6, 2010. Forquilhinha substation, Jorge Lacerda B - Siderópolis transmission line and Joinville Norte - Curitiba transmission line (Service Concession Arrangement No. 016/2008) became operational on October 10, 2011, August 21, 2012, and August 10, 2015, respectively. Interligação Elétrica do Madeira S.A. (IEMadeira) IEMadeira was incorporated on December 18, 2008 for the purpose of exploring the utility concession for electric power transmission, particularly the transmission lines and substations purchased in Lots D and F of ANEEL Auction No. 007/2008. The Porto Velho - Araraquara transmission line (Service Concession Arrangement No. 013/2009) became operational on August 1, 2013. The Inverter and Rectifier stations (Service Concession Arrangement No. 015/2009) became operational on a provisional basis on May 12, 2014. Due to the existence of own non-deterrent restrictions, the RAP was released with a 10% reduction that has been maintained by ONS due to non-completion of joint studies of the integrators of bipoles 1 and 2 onto ONS digital real-time simulator. At June 30, 2016, a failure was identified in the Pipe Duct Bushing, which caused the temporary interruption of tests on the inverter station, with return of operations scheduled for August 2016. The current forecast is that the inverter stations will be fully commissioned by the end of 2016.



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Interligação Elétrica Garanhuns S.A. (IEGaranhuns)

IEGaranhuns was incorporated on October 7, 2011 for the purpose of exploring the utility concession for electric power transmission, particularly the transmission lines and substations purchased in Lot L of ANEEL Auction No. 004/2011.

Luiz Gonzaga-Garanhuns (AL-PE), Garanhuns-Pau Ferro (PE), Garanhuns-Campina Grande III (PE-PB) and Garanhuns-Angelim I (PE) transmission lines, as well as Garanhuns (PE) and Pau Ferro (PE) substations, became operational substantially in December 2015 and are complete since March 2016.

b) Changes in investments

Company

IEMG Pinheiros Serra do

Japi Evrecy IENNE IESul IEMadeira IE

Garanhuns Total

Balances at 12/31/2015 85,854 424,954 234,618 76,524 97,243 112,782 1,021,663 340,952 2,394,590 Payment of capital - - - - - 799 - 765 1,564 Equity pickup 1,188 18,310 17,980 5,619 (1,324) (785) 30,831 17,323 89,142 Loss realized on

acquisition of control 1,147 - - - - - - - 1,147 Amortization of

concession-related goodwill - - - (1,245) - - - - (1,245)

Balances at 6/30/2016 88,189 443,264 252,598 80,898 95,919 112,796 1,052,494 359,040 2,485,198

Consolidated

IE NNE IE Sul IE Madeira IE Garanhuns Total

Balances at 12/31/2015 97,243 112,782 1,021,663 340,952 1,572,640 Payment of capital - 799 - 765 1,564 Equity pickup (1,324) (785) 30,831 17,323 46,045

Balances at 6/30/2016 95,919 112,796 1,052,494 359,040 1,620,249

12. Property, plant and equipment

These substantially refer to chattels used by the Company not related to the service concession arrangement.

Company

Annual average depreciation 6/30/2016 12/31/2015 rates

Accumulated Cost Depreciation Net %

Land 2,060 - 2,060 2,060 - Machinery and equipment 5,319 (1,549) 3,770 3,481 6.33%

Furniture and fixtures

7,433 (5,334) 2,099 1,911 6.25%

IT equipment 14,835 (7,657) 7,178 3,533 24.1% Vehicles 10,395 (1,310) 9,085 9,838 31.5% (*) Other 2,383 (936) 1,447 2,340 4.0%

42,425 (16,786) 25,639 23,163



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Consolidated

Annual average depreciation 6/30/2016 12/31/2015 rate

Accumulated Cost depreciation Net %

Land 2,060 - 2,060 2,060 - Machinery and equipment 5,319 (1,549) 3,770 3,481 6.33% Furniture and fixtures 7,439 (5,337) 2,102 1,913 6.25% IT equipment 14,860 (7,658) 7,202 3,544 24.1% Vehicles 10,395 (1,310) 9,085 9,838 31.5% (*) Other 2,387 (937) 1,450 2,358 4.0%

42,460 (16,791) 25,669 23,194

(*) This includes leased vehicles at 33.3% and 25.0%.

Changes in property, plant and equipment are as follows:

Company

Balances at 12/31/2015 Additions Depreciation

Write-offs/transfers

Balances at 6/30/2016

Land 2,060 - - - 2,060 Machinery and

equipment 3,481 429 (137) (3) 3,770 Furniture and fixtures 1,911 349 (153) (8) 2,099 IT equipment 3,533 4,190 (545) - 7,178 Vehicles 9,838 17 (770) - 9,085 Other 2,340 - (1) (892) 1,447

23,163 4,985 (1,606) (903) 25,639

Consolidated

Balances at 12/31/2015 Additions Depreciation

Write-offs/transfers

Balances at 6/30/2016

Land 2,060 - - - 2,060 Machinery and

equipment 3,481 429 (137) (3) 3,770 Furniture and fixtures 1,913 351 (154) (8) 2,102 IT equipment 3,544 4,205 (545) (2) 7,202 Vehicles 9,838 17 (770) - 9,085 Other 2,358 - (1) (907) 1,450

23,194 5,002 (1,607) (920) 25,669



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13. Intangible assets In the Company’s financial information, the balance of R$16,487 refers mostly to expenses with upgrading of ERP-SAP and software use right, amortizable on a straight-line basis over 5 years. In the consolidated financial information, the amount of R$22,621 refers to concession assets determined according to the report issued by an independent consulting firm (Note 11) arising from acquisition of subsidiary Evrecy, based on expected profits to be generated over the concession period. The concession assets are amortized over the subsidiary’s service concession arrangement period, which expires on July 17, 2025, under the terms of item b, paragraph 2, article 14 of CVM Ruling No. 247 of March 27, 1996, as amended by CVM Ruling No. 285 of July 31, 1998. Changes in intangible assets: Company Consolidated

Balance at 12/31/2015 22,649 49,509

Additions - 3 Write-offs (3,799) (3,799) Amortization (2,363) (3,982)

Balance at 6/30/2016 16,487 41,731

14. Loans and financing Loans and financing are broken down as follows: Company Consolidated

Local currency Charges Final maturity 6/30/2016 12/31/2015 6/30/2016 12/31/2015

BNDES (a) (i) TJLP + 1.8% p.a. 03/15/2029 238,555 246,316 238,555 246,316 BNDES (a) (i) 3.5% p.a. 01/15/2024 77,327 82,538 77,327 82,538 BNDES (a) (i) TJLP 03/15/2029 661 - 661 - BNDES (a) (ii) TJLP + 2.1% p.a. 02/15/2028 - - 6,229 6,451 BNDES (a) (ii) 3.5% p.a. 04/15/2023 - - 12,376 13,282 BNDES (a) (iii) TJLP + 2.6% p.a. 05/15/2026 - - 35,551 37,132 BNDES (a) (iii) 5.5% p.a. 01/15/2021 - - 46,061 51,092 BNDES (a) (iv) TJLP + 1.9% p.a. 05/15/2026 - - 37,189 38,796 BNDES (a) (iv) TJLP + 1.5% p.a. 05/15/2026 - - 32,137 33,525 BNDES (a) (v) TJLP + 2.4% p.a. 04/15/2023 - - 35,114 37,425 BNDES/Finame PSI 4.0% p.a. 08/15/2018 166 204 166 204 BNDES/Finame PSI (b) 6.0% p.a. 11/18/2019 7,875 9,029 7,875 9,029 Eletrobras 8.0% p.a. 11/15/2021 175 196 175 196 Finance lease agreements 242 323 242 323

Total in local currency

325,001 338,606 529,658 556,309

Current 32,400 32,530 71,084 71,070

Noncurrent 292,601 306,076 458,574 485,239

(a) BNDES

(i) On December 23, 2013, CTEEP entered into a loan agreement with the National Bank for Economic and Social Development (BNDES), as

amended on December 30, 2014, to borrow R$391,307, where R$284,136 at the cost of TJLP + 1.80% p.a., R$1,940 at the cost of TJLP, and R$ 105,231 at the cost of 3.50% p.a. This loan is intended for implementation of the Multiannual Investment Plan relating to the period 2012-2015, comprising construction works referring to the modernization of the electric power transmission system, system improvements, new project reinforcements and implementation, as well as implementation of social investments within the community. The amounts of R$124,124, R$26,900, R$89,000, R$30,000, R$73,877 and R$660 were released on January 29, June 26 and December 26, 2014, and on April 14 and December 18, 2015, and on June 21, 2016, respectively. Interest will be charged on a quarterly basis and then monthly as of April 2015. The principal of this agreement will be amortized in 168 equal and consecutive monthly installments beginning April 2015. The Company offered bank surety to guarantee the loan.



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For 2016, this agreement has the following maximum financial ratios, calculated on an annual basis: Net debt/Adjusted EBITDA < 3.5 and Net Debt//Net Debt + Equity < 0.6.

For the purposes of calculation and documentation of said ratios, the Company shall consolidate all subsidiaries and jointly-controlled entities (proportionately to the interest held), provided that the interest held is equal to or greater than 10%. On November 18, 2008, CTEEP entered into a R$329,137 loan agreement with BNDES. Repayment is in 54 monthly installments as of January 2011. Until the beginning of repayment, charges were paid on a quarterly basis. This agreement was settled on June 15, 2015. On September 17, 2007, CTEEP entered into a loan agreement with BNDES amounting to R$764,215, reduced to R$601,789 in December 2008. This amount accounts for 70% of total investment, which includes system improvements, reinforcements, modernization of the current transmission system and new projects, and is part of the 2006/2008 Multiannual Investment Plan. Repayment is in 78 monthly installments beginning January 2009. This agreement was settled on June 15, 2015.

(ii) On August 13, 2013, subsidiary Pinheiros entered into a loan agreement with BNDES in the amount of R$23,498. The amount is intended to finance the construction of the transmission lines and substations specified in Service Concession Arrangement No. 021/2011. Repayment is in 168 monthly installments from March 15, 2014 onwards. Over repayment and after giving the bank sureties, the Debt Coverage Ratio (ICSD) determined annually must be at least 1.3%. Bank sureties were waived by BNDES on June 23, 2015.

(iii) On December 30, 2010, subsidiary Pinheiros entered into a loan agreement with BNDES in the amount of R$119,886. The amount is intended to finance the construction of the transmission lines and substations specified in Service Concession Arrangements No. 012/2008, No. 015/2008 and 018/2008. Repayment is in 168 monthly installments from September 15, 2011 onwards. Over repayment and after giving the bank sureties, the Debt Coverage Ratio (ICSD) determined annually must be at least 1.3%. Bank sureties were waived by BNDES on June 23, 2015.

(iv) On October 28, 2011, subsidiary Serra do Japi entered into a loan agreement with BNDES in the amount of R$93,373. The amount is intended to finance the transmission lines and substations specified in the service concession arrangement. Repayment is in 168 monthly installments from June 15, 2012. Serra do Japi shall maintain, over repayment, a Debt Coverage Ratio (ICSD) of at least 1.2%, determined annually, and over the entire financing period, the Equity Ratio defined by the Equity-to Total Assets, equal to or higher than 20% of the project’s total investment. Bank sureties were waived by BNDES on September 5, 2014.

(v) On January 14, 2009, subsidiary IEMG entered into a loan agreement with BNDES in the amount of R$70,578. This amount is aimed at financing approximately 50% of the Transmission Line (LT) between Neves 1 and Mesquita substations. Repayment is in 168 monthly installments from May 15, 2009. Bank sureties were waived by BNDES on March 15, 2011. Over repayment, the Debt Coverage Ratio (ICSD) determined annually must be at least 1.3%.

(b) BNDES/Finame PSI. On November 4, 2014, CTEEP executed 18 loan contracts with Banco Santander, amounting to R$10,346, at the cost of 6.0% p.a. for the credit line BNDES Finame PSI (Programa BNDES de Sustentação do Investimento). The credit is allocated to financing machinery and equipment. Santander’s first payment to suppliers, amounting to R$10,096 was made on December 30, 2014. The second payment was made on January 21, 2015 and the last one on January 26, 2015.

The long-term portion matures as follows: Company Consolidated

6/30/2016 12/31/2015 6/30/2016 12/31/2015

2017 15,711 31,258 28,901 57,637 2018 31,287 31,102 57,666 57,481 2019 31,014 30,829 57,394 57,209 2020 28,895 28,711 55,275 55,091 2021 28,895 28,695 46,994 46,794 2022 to 2026 114,716 113,796 169,665 168,745 2027 to 2029 42,083 41,685 42,679 42,282

292,601 306,076 458,574 485,239

Changes in loans and financing are as follows: Company Consolidated

Balances at 12/31/2015 338,606 556,309 Additions 660 660 Payments of principal (15,654) (28,902) Payments of interest (14,083) (22,494) Interest and monetary and foreign exchange variations 15,472 24,085

Balances at 6/30/2016 325,001 529,658



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The Company is a party to the loan agreements of its subsidiaries as a guarantor, as shown below:

Subsidiary

Interest held in

subsidiary Bank Type of

debt

Debt balance

at 6/30/2016

Type of guarantees

Balance guaranteed

by CTEEP

Guarantee expires

on

IEMG 100% BNDES FINEM 35,114 None 35,114 - Serra do Japi 100% BNDES FINEM 69,326 None 69,326 - FINEM and Pinheiros 100% BNDES PSI 81,612 None 81,612 - FINEM and Pinheiros 100% BNDES PSI 18,605 None 18,605 - FINEM and Bank IESul 50% BNDES PSI 11,758 surety 5,879 10/04/2016 FINEM and Bank IESul 50% BNDES PSI 17,442 surety 8,721 07/31/2017 Banco do Bank IENNE 25% Nordeste FNE 195,177 surety 48,794 06/01/2017 Banco do Overdraft IENNE 25% Brasil facilities 16,012 None 4,003 - Bank Banco da credit Bank IEMadeira 51% Amazônia bill 316,072 surety 161,197 06/30/2017 FINEM and Bank IEMadeira 51% BNDES PSI 1,573,589 surety 802,530 06/30/2017 Infrastructure Overdraft IEMadeira 51% Itaú/BES debentures 477,162 facilities 243,353 06/30/2017 FINEM and Bank IEGaranhuns 51% BNDES PSI 328,345 surety 167,456 12/05/2016

Financing agreements between subsidiaries and BNDES require recognition and maintenance of a reserve for debt services in an amount corresponding to, at least, three to six times the last financing installment fallen due, including principal and interest thereon, classified under “Restricted cash” in the consolidated balance sheet. BNDES agreements and debentures of subsidiaries and jointly-controlled subsidiaries have covenants that require compliance with financial indicators similarly to those mentioned in item (a) (i), as well as cross default clauses, which establish the accelerated maturity of debts in the event of noncompliance with indicators. At June 30, 2016, there is no accelerated maturity of the debt relating to covenants.

15. Debentures Company and Consolidated

Maturity Number Charges 6/30/2016 12/31/2015

IPCA + 8.1% 2nd series (i) 12/15/2017 5,760 p.a. 45,771 41,608 Single series 116.0% of CDI CTEEP (ii) 12/26/2018 50,000 p.a. 499,108 498,747

544,879 540,355

Current 183,611 180,782

Noncurrent 361,268 359,573

In December 2009, CTEEP issued 54,860 debentures in two series amounting to R$548,600. The first series was settled in December 2014. As for

the second series, the first maturity of debentures was on June 15, 2014, and the other maturities will be as follows: December 15, 2016 and 2017; and remuneration was paid on the following dates: June 15, 2011, 2012, 2013, 2014 and 2015, and next payments will be made on December 15, 2016 and 2017.



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Financial indicators established in the agreement are as follows: Net Debt/Adjusted EBITDA < 3.5 and Adjusted EBITDA/Financial Income/Expenses > 3.0 determined quarterly.

All requirements and covenants established in the agreements have been duly observed and met by CTEEP and its subsidiaries to date. (ii) In December 2013, CTEEP issued 50,000 single series debentures amounting to R$500,000. Debentures will mature on an annual basis on

December 26, 2016, 2017 and 2018; and remuneration is paid on a semiannual basis in June and December each year, the first one was paid on June 26, 2015 and the last one on December 26, 2018.

At the Board of Director’s meeting held on June 29, 2016, the issue of 148,270 infrastructure debentures, in a single series, amounting to R$148,270, was approved under the terms of Law No. 12431/2001, article 2, paragraph 1, in order to reimburse contributions and investments made in its jointly-controlled subsidiaries IEMadeira and IEGaranhuns. These debentures will mature on July 15, 2021 and remuneration will be paid on an annual basis in July each year, the first one maturing on July 15, 2017. These debentures were settled on August 12, 2016. The long-term portion matures as follows: 6/30/2016 12/31/2015

2017 195,142 193,621 2018 166,126 165,952

361,268 359,573

Changes in debentures are as follows: Balances at 12/31/2015 540,355 Payments of interest (39,181) Interest and monetary and foreign exchange variations 43,705 Balances at 6/30/2016 544,879

16. Taxes and social charges payable Company Consolidated

6/30/2016 12/31/2015 6/30/2016 12/31/2015

Income tax 32,386 1,557 33,090 2,163 Social contribution tax 11,951 1,696 12,458 2,124 COFINS 9,385 8,213 9,685 8,500 PIS 1,829 1,639 1,895 1,702 Social Security Tax (INSS) 4,520 5,032 4,710 5,107 Service Tax (ISS) 2,758 3,115 2,764 3,182 Unemployment Compensation

Fund (FGTS) 900 1,536 937 1,536 Withholding Income Tax (IRRF) 1,489 3,071 1,556 3,084 Other 1,013 966 1,063 1,019

66,231 26,825 68,158 28,417



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17. Taxes in installments - Law No. 11941 - Company and Consolidated In 2009 and 2010, CTEEP amended its Federal Tax Debt and Credit Returns (DCTFs) for the years 2004-2007, determining tax debts related to PIS and COFINS. In order to settle its tax debt, the Company enrolled with the Special Tax Installment Payment Program introduced by Law No. 11941 of May 27, 2009, and opted for the 180-month payment schedule ending in October 2024. The installment amounts to R$1,405 at June 30, 2016 and is subject to monetary restatement based on the SELIC rate. Changes in the six-month period ended June 30, 2016 are as follows: 6/30/2016

Opening balance 143,097 Monetary restatement on debt 5,720 Payments made (8,294)

140,523

Current 16,863

Noncurrent 123,660

18. Deferred PIS and COFINS Company Consolidated

6/30/2016 12/31/2015 6/30/2016 12/31/2015

Deferred PIS 20,286 19,219 27,646 26,570 Deferred COFINS 93,437 88,522 127,407 122,452

113,723 107,741 155,053 149,022

Deferred PIS and COFINS refer to revenue from infrastructure implementation and remuneration of concession-related assets computed on financial assets and recorded on an accrual basis. Taxes are paid based on monthly billings, as defined in Law No. 12973/14.

19. Regulatory charges payable


6/30/2016 12/31/2015 6/30/2016 12/31/2015

Research and development - R&D (i) 37,631 40,875 39,476 42,356 Energy Development Account (CDE) 1,476 1,157 1,476 1,157 Global Reversal Reserve (RGR) (ii) 6,405 6,421 7,456 7,730 Alternative Electric Power

Source Incentive Program (PROINFA) 1,277 1,772 1,277 1,772

46,789 50,225 49,685 53,015

Current 14,665 21,442 14,795 21,821

Noncurrent 32,124 28,783 34,890 31,194

(i) The Company and its subsidiaries recognized liabilities related to amounts billed through tariffs (1% of Operating income, net), applied to the

Research and Development Program (R&D), which are restated on a monthly basis from the second month subsequent to their recognition up to the effective realization thereof, based on SELIC rate, according to ANEEL Resolutions No. 300/2008 and No. 316/2008. According to Circular Memorandum No. 0003/2015 of May 18, 2015, the amounts used in R&D are accounted for under assets and upon completion of projects, they are recognized as settlement of the obligation and then submitted to ANEELS’s final audit and evaluation. The total amount used in projects not completed by June 30, 2016 amounts to R$4,584 (R$11,075 at December 31, 2015).

(ii) According to article 21 of Law No. 12783, as of January 1, 2013, electric power transmission service concession operators with extended service concession arrangements under such Law are not required to pay annual RGR portion. This applies to the Company only in connection with service concession arrangemen No. 059/2001. In the Company’s quarterly information at June 30, 2016, RGR balance payable refers to additional charge referring to year 2010, as provided for in ANEEL Order No. 2513/2012, which was revoked by Order No. 034/2013.



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20. Provisions Company Consolidated

6/30/2016 12/31/2015 6/30/2016 12/31/2015

Accrued vacation pay, 13th month salary and social charges 26,534 22,709 27,363 23,365

Profit sharing (PLR) 6,273 6,119 6,529 6,392 Contingencies (a), (b), (c) 199,747 189,320 199,747 189,612

232,554 218,148 233,639 219,369

Current 32,807 28,828 33,892 29,757

Noncurrent 199,747 189,320 199,747 189,612

(a) Provision for contingencies

Contingencies are assessed and classified periodically as regards the likelihood of an unfavorable outcome to the Company. Provisions are set up for all contingencies referring to judicial proceedings the settlement of which is likely to result in an outflow of economic benefits, and a reliable estimate can be made. Contingencies whose likelihood of loss is assessed as probable are as follows: Company Consolidated

6/30/2016 12/31/2015 6/30/2016 12/31/2015

Labor (i) 165,087 164,308 165,087 164,528 Civil (ii) 16,807 14,230 16,807 14,302 Tax - Real Estate Tax (IPTU) (iii) 16,128 9,722 16,128 9,722 Social security - INSS (iv) 1,725 1,060 1,725 1,060

199,747 189,320 199,747 189,612

(i) Labor

The Company figures as a defendant in certain lawsuits at different courts, mainly arising from labor claims for salary parity, overtime, and health exposure premiums among others. CTEEP has labor-related judicial deposits amounting to R$56,415 (R$54,695 at December 31, 2015), according to Note 10.

(ii) Civil The Company is involved in civil proceedings relating to real estate issues, indemnities, collections, annulment issues and class actions, arising from its ordinary business, i.e., operate and maintain its transmission lines, substations and equipment under the terms of the electric power transmission public service concession arrangements.

(iii) Tax - IPTU CTEEP recognizes a provision to cover debts with various City Administrations in the State of São Paulo, related to lawsuits for regularization of areas.



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(iv) Social security - INSS

On August 10, 2001, the National Institute of Social Security (INSS) served the Company a notice of violation for nonpayment of social security tax on compensation paid to its employees from April 1999 to July 2001. Management began the defense procedures and the corresponding judicial deposit currently amounts to R$3,630 (Note 10).

(v) Changes in provisions for contingences Company

Labor Civil

Tax - IPTU

Social security - INSS Total

Balances at 12/31/2015 164,308 14,230 9,722 1,060 189,320

Recognition 32,036 4,043 - 117 36,196 Reversal/payment (39,686) (2,443) (50) (71) (42,250) Adjustment 8,429 977 6,456 619 16,481

Balances at 6/30/2016 165,087 16,807 16,128 1,725 199,747

Consolidated

Labor Civil

Tax - IPTU

Social security - INSS Total

Balances at 12/31/2015 164,528 14,302 9,722 1,060 189,612

Recognition 32,036 4,048 - 117 36,201 Reversal/payment (39,906) (2,520) (50) (71) (42,547) Restatement 8,429 977 6,456 619 16,481

Balances at 6/30/2016 165,087 16,807 16,128 1,725 199,747

(b) Proceedings whose likelihood of loss was assessed as possible

The Company and its subsidiaries are parties to tax, labor and civil proceedings assessed by management as involving risk of a possible loss based on the opinion of its legal advisors, for which a provision was not recorded. Company and consolidated contingencies amounts of R$639,559 and R$639,803 at June 30, 2016, respectively (R$483,801 and R$484,363 at December 31, 2015).


Classification Number Total Number Total

Labor 220 26,568 220 26,568 Civil 108 29,161 115 29,405 Civil - Merger of EPTE into CTEEP

1 149,408 1 149,408

declared null (i) Civil - Ace Seguradora (ii) 1 10,817 1 10,817 Tax - social contribution tax loss (iii) 1 22,229 1 22,229 Tax - goodwill amortization (iv) 4 349,799 4 349,799 Tax - IRPJ and CSLL (v) 1 14,656 1 14,656 Tax - other 54 36,921 54 36,921 Plan of Law No. 4819/58 (Note 32) 1 - 1 -

639,559 639,803



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(i) Merger of EPTE into CTEEP declared null

Ordinary lawsuit filed by noncontrolling shareholders seeking to declare the merger of Empresa Paulista de Transmissão de Energia Elétrica (EPTE) into Companhia de Transmissão de Energia Elétrica Paulista (CTEEP) null and void, or alternatively, to exercise their right of withdrawal and determine the payment of share refund amounts. Currently, this lawsuit is at the execution stage, and the challenge filed to determine the grounds for its execution is pending final appreciation. CTEEP filed a motion to set aside judgment and obtained a preliminary injunction subjecting the amounts to be determined by the plaintiffs to the production of adequate guarantees.

(ii) Ace Seguradora

Collection lawsuit filed by insurance companies of CESP - Companhia Energética de São Paulo, in view of the alleged responsibility of CTEEP in the claim occurred in the Generation Unit No. 5 - “UG-05” of Hydro Power Plant (HPP) Três Irmãos, on which the generator and transformer were seriously damaged on June 21, 2013. The amount challenged refers to the amount received by CESP from its insurance companies, totaling R$8.8 million on July, 27, 2015 for repair of the generator and transformer allegedly damaged in the event.

(iii) Tax - social contribution tax loss

Proceeding arising from tax deficiency notice drawn in 2007 referring to the composition of CSLL tax loss, arising from the balance sheet of CESP’s split-off. This proceeding is pending judgment by the Administrative Board of Tax Appeals (CARF).

(iv) Tax - goodwill amortization

Proceedings arising from delinquency notices drawn from 2013 to 2016 by the Brazilian IRS, referring to the period from 2008-2013, in connection with goodwill paid by ISA on the acquisition of the ownership control of CTEEP (Note 27). This proceeding is pending judgment by CARF. The Company was handed down a favorable decision by the CARF’s Lower House, being 6 votes favorable and 1 vote against it, upon judgement of the first appeal referring to year 2009. This decision is subject to appeal.

(v) Tax - IRPJ and CSLL

This refers to the offset request submitted by CTEEP in May 2003 relating to the negative balance of income and social contribution taxes (year 2002) offset against income and social contribution tax debts, calculated from January to March 2003, which was partially deferred. This proceeding is pending judgment by CARF.

(c) Proceedings whose likelihood of loss was assessed as remote - Company and Consolidated

(i) Collection lawsuit by Eletrobras against Eletropaulo and EPTE

In 1989, Centrais Elétricas Brasileiras S.A. - ELETROBRAS filed a collection lawsuit against Eletropaulo - Eletricidade de São Paulo S.A. (currently Eletropaulo Metropolitana Eletricidade de São Paulo S.A. - “Eletropaulo”) referring to the balance of a certain financing agreement. Eletropaulo did not agree with the criterion for monetary restatement of said financing agreement and made judicial deposits for the amounts it understood to be due to ELETROBRAS. In 1999, a decision was handed down on the aforementioned lawsuit, sentencing Eletropaulo to pay the balance determined by ELETROBRAS.



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Under the Eletropaulo’s split-off agreement carried out on December 31, 1997 that resulted in the establishment of EPTE and other companies, Eletropaulo is solely liable for obligations of any kind referring to acts until the spin-off date, except for contingent liabilities whose provisions had been allocated to the acquirers. In the case under concern, at the time of the split-off, there was no allocation to EPTE of any provision for such purpose, leaving it clear to CTEEP management and its legal advisors that Eletropaulo was solely liable for said contingency. At the time of the spin-off there was only the transfer to EPTE’s assets of a judicial deposit in the historical amount of R$ 4.00, made in 1988 by Eletropaulo, corresponding to the amount that it understood to be owed to ELETROBRAS regarding the balance of the aforementioned financing agreement, and allocation to EPTE’s liabilities of the same amount referring to this debt. As a result of the Eletropaulo’s split-off agreement, EPTE would own the assets transferred and Eletropaulo would be responsible for contingent liability related to the amount under dispute by ELETROBRAS. In October 2001, ELETROBRAS promoted the execution of the decision related to such financing agreement, collecting R$429 million from Eletropaulo and R$49 million from EPTE, understanding that EPTE would pay its part with the restated funds of the judicial deposit. CTEEP merged EPTE on November 10, 2001, becoming the successor in its relevant rights and obligations. On September 26, 2003, an appellate decision of the Court of Justice of the State of Rio de Janeiro was published excluding Eletropaulo from the execution of such decision. Due to these facts, on December 16, 2003, ELETROBRAS filed a Special Appeal to the High Court of Justice (STJ) and an Extraordinary Appeal to the Federal Supreme Court of Brazil (STF), aiming at maintaining the aforementioned collection against Eletropaulo. Appeals similar to those of ELETROBRAS were filed by CTEEP. On June 29, 2006, STJ granted CTEEP’s Appeal to review the decision of the Court of Justice of the State of Rio de Janeiro that had excluded Eletropaulo as a defendant in the execution action filed by ELETROBRAS. As a result of said grant by STJ, on December 4, 2006, Eletropaulo filed a motion for clarification, which was denied according to appellate decision published on April 16, 2007, as well as the Special and Extraordinary Appeals to STJ and STF that maintained the decision of STJ, which became final on October 30, 2008. As such decisions understood that the challenges prior to procedures to determine grounds for execution filed by Eletropaulo were unreasonable, the execution action filed by ELETROBRAS follows its ordinary course as originally proposed. In December 2012, a decision was published dismissing the provision of evidence required by the parties, closing the liquidated claim, determining that Eletropaulo is liable for such payment, and discounting the judicial deposit for payment into court. Eletropaulo filed an appeal so that the lawsuit returned to the fact-finding phase for performance of expert evidence examination. The conclusion of the expert report presented in September 2015 is in line with CTEEP’s view. The Company and Eletropaulo expressed their views on such report on September 30, 2015, but they have not yet been considered.



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(ii) PIS/COFINS CTEEP is a defendant in the proceedings arising from PIS and COFINS delinquency notices for the years 2003 to 2011, on the understanding that it would be subject to the cumulative taxation regime. The Company adopted the cumulative taxation regime until 2003. As the legislation changed, non-cumulative taxation became the general rule as of October 2003, except for revenues falling under these 4 requirements: i) from contracts executed before October 2003, ii) effective for more than a year, iii) with a predefined price, and iv) for the acquisition of goods or services. Given that the Existing Service (SE) revenue falls under these requirements, and also to comply with ANEEL’s guidance, CTEEP requested to offset the tax amounts overpaid in the period when it paid such taxes under the non-cumulative taxation regime, and started to subject the SE revenue to PIS and COFINS cumulative taxation. The proceedings are at administrative level and total R$1,780.0 million. In the opinion of the Company’s legal advisors, the likelihood of loss in these cases is remote, considering that Federal Supreme Court of Brazil (STJ) has already ruled favorably on this matter.

21. Payables - Funcesp - Company and Consolidated The Company sponsors supplementary retirement and death benefit plans maintained with FUNCESP, which, in addition to the fund’s administrative costs, amount to R$5,114 at June 30, 2016 (R$6,144 at December 31, 2015) referring to monthly installments payable as contributions to the fund. a) Supplementary retirement plan (Plan “A”)

Governed by State Law No. 4819/58, applied to employees hired up to May 13, 1974, it establishes supplementary retirement plan benefits, additional leave entitlements and family allowance. Funds required to cover liabilities assumed in this plan are the full responsibility of the applicable São Paulo State Government authorities (Note 32).

b) PSAP/CTEEP PSAP/CTEEP includes the following subplans:

Vested Supplementary Benefit Payout (BSPS) - (Plan “B”);

Defined Benefit (DB) - (Plan “B1”);

Variable contribution (VC) - (Plan “B1”). PSAP/CTEEP Plan, governed by Supplementary Law No. 109/2001 and administered by FUNCESP, is sponsored by the Company itself and provides supplementary retirement and death benefits, with the related reserves being computed using the fully-funded system. PSAP/CTEEP was created after the split of PSAP/CESP B1 on September 1, 1999 and covers all Participants transferred to the Company. On January 1, 2004, PSAP/EPTE was merged into PSAP/Transmissão, and the plan name changed to PSAP/Transmissão Paulista on that date, and to PSAP/CTEEP on December 1, 2014.



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Subplan “BSPS” refers to the Vested Supplementary Benefit Payout and derives from the Supplementary Retirement and Pension Plan PSAP/CESP B, transferred to this plan on September 1, 1999 and from PSAP/Eletropaulo Alternativo, transferred to this plan after the merger of PSAP/EPTE on January 1, 2004, calculated on December 31, 1997 (CTEEP) and March 31, 1998 (EPTE), based on effective regulations, with the actuarial asset-liability balance being obtained at the time. The Defined Benefit (“DB”) subplan defines contributions and related matching responsibilities between the Company and Participants on 70% of employees’ Actual Contribution Salary in order to obtain the plan’s actuarial asset-liability balance. This subplan ensures annuity post-retirement and death benefits to employees, former employees and beneficiaries in order to supplement the benefits provided by the official Social Security system. The Variable Contribution (“VC”) subplan defines voluntary contributions by Participants, with limited matching contributions by the Company on 30% of employees’ Actual Contribution Salary for purposes of additional supplementary benefits in case or retirement or death. On the vesting date, the Variable Contribution (VC) Subplan may turn into a Defined Benefit (DB) plan, in case the Participant elects to receive the related supplementary benefit in the form of annuity payments.

c) Actuarial valuation The projected unit credit method was adopted for the independent actuarial valuation of PSAP/CTEEP plan. At December 31, 2015, PSAP/CTEEP posted actuarial surplus totaling R$795,703, which was not accounted for because the National Supplementary Pension Agency (PREVIC), through CGPC Ruling No. 26/2008, as amended by CNPC Ruling No. 22/2015, establishes that an asset may only be recognized, among other criteria, when the contingency reserve is recognized at its ceiling, which, at December 31, 2015, is equivalent to 21% of total mathematical reserves, in order to ensure the plan’s asset-liability balance considering the volatile nature of these obligations. Only the surplus amount in excess of that ceiling would represent an economic benefit to the Company. The actuarial report at December 31, 2015 does not show any actuarial asset or liability. For the six-month period ended June 30, 2016, there were no significant changes in the rules of the aforementioned plans. Moreover, there were no fluctuations that would require adjusting the assumptions used in the actuarial calculations performed on December 31, 2015 or significant impairment of plan assets that would require the recognition of any accounting effect during the period.

22. Special obligations - reversal/amortization At June 30, 2016, the balance of R$24,053 refers to funds arising from the reversal reserve, amortization and portion held at CTEEP of the monthly shares of the Global Reversion Reserve (RGR), related to investments of funds for expansion of the public electric power service and amortization of loans obtained for the same purpose, up to December 31, 1971. Every year, according to a resolution issued by ANEEL, a 5% interest is levied on the RGR and must be settled on a monthly basis. The settlement method for these obligations has not been defined by the Granting Authority.



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23. Equity

a) Capital At June 30, 2016 and December 31, 2015, the Company’s authorized capital amounts to R$2,500,000 and R$2,300.000, including R$978,693 and R$971,523 in common shares and R$1,521,307 and R$1,328,477 in preferred shares, respectively, all book-entry registered shares with no par value. Subscribed and paid-up capital at June 30, 2016 and December 31, 2015 totals R$2,372,437 and is represented by common and preferred shares, as follows: 6/30/2016 R$ thousand 12/31/2015 R$ thousand

Registered common shares 64,484,433 885,851 64,484,433 885,851 Registered preferred shares 100,236,393 1,486,586 96,775,022 1,329,440

164,720,826 2,372,437 161,259,455 2,215,291

Holders of common shares are entitled to one vote per share at the general meetings. Preferred shares are nonvoting, but have priority upon capital reimbursement and payment of noncumulative dividends of 10% over the year, calculated on paid-in capital corresponding to this type of share. The Board of Director’s meeting held on June 2, 2016 approved (i) capital increase of CTEEP, which had been approved at the Board of Director’s meeting held on April 5, 2016, in the amount of R$157,146, through issue of 3,461,371 preferred shares. Out of the capital increase, it was incumbent on the controlling shareholder to pay R$59,773 through partial amortization of the Special Goodwill Reserve on Merger; and (ii) to cancel 78,835 preferred shares, of which 5,063 were not subscribed and 73,772 were subscribed under the condition (“conditional actions”) of subscription of total capital increase, which did not take place.

b) Dividends and interest on equity In 2016, the Board of Directors decided on the distribution of interest on equity and interim dividends, as follows:

Interim dividends

BSM date Total Per share Pagamento

6/16/2016 110,000 0.667797 6/30/2016

110,000 0.667797

Dividends and interest on equity paid until June 30, 2016 total R$109,697. The Company’s articles of incorporation defined the payment of mandatory minimum dividends corresponding to 10% of capital, equivalent to R$237,244, whenever there is a profit balance after the legal reserve is set up.



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c) Capital reserves 6/30/2016 12/31/2015

Investments grants - CRC (i) 426,710 426,710 Revenue from construction in progress (ii) 633,053 633,053 Donations and investment grants 150,489 150,489 Tax incentives - FINAM 6,743 6,743 Special goodwill reserve on merger (Note 27) 588 60,361

1,217,583 1,277,356

(i) Investments grants - CRC

The Recoverable Rate Deficit (CRC) account was introduced by Decree No. 41019/1957 and by Law No. 5655/1971 to remunerate electricity utilities for certain investments made by them. Upon enactment of Law No. 8631/1993, the CRC ceased to exist, and later on, Law No. 8724/1993 set forth that CRC credits should be recorded in equity as an investment grant, under “Capital Reserve”. As permitted by Accounting Pronouncement CPC 13, the Company elected to maintain the existing CRC balance at December 31, 2007 as well as other donations and investment grants recorded as capital reserve in equity, until these amounts are fully used as provided for in the Brazilian Corporation Law.

(ii) Revenue from construction in progress These are credits resulting from the capitalization of the revenue calculated on equity capital funds used during the construction of fixed assets, applied to the construction in progress and that can only be used for capital increase. From 1999 on, the Company abandoned this practice, as permitted by the Accounting Manual of the Electric Power Public Utility.

d) Income reserves

6/30/2016 12/31/2015

Legal reserve (i) 278,254 278,254 Statutory reserve (ii) 221,529 221,529 Retained profits reserve (iii) 1,343,109 1,343,109

1,842,892 1,842,892

(i) Legal reserve

The legal reserve is set up at 5% of net income for the year, limited to 20% of capital, before any allocation.

(ii) Statutory reserve The Company’s Articles of Incorporation provide for the recognition of an investment reserve for the expansion of operations up to 20% of annual net income, less legal reserve and mandatory minimum dividends, limited to 10% of total capital.

(iii) Retained profits reserve Management proposes to keep in this reserve the prior years’ retained earnings in order to meet the capital budget for the next three fiscal years, as approved in the General Shareholders’ Meeting held in 2014.

e) Earnings per share

Basic earnings (or loss) per share are calculated by reference to the Company’s net income (loss), based on the weighted average number of outstanding common and preferred shares for the corresponding period. Diluted earnings (loss) per share are calculated using the average number of outstanding shares adjusted by instruments potentially convertible into shares. In this case, the Company considered shares that could be issued through capitalization of the special goodwill reserve on behalf of the controlling shareholder. As provided for in CVM Ruling No. 319, to the extent that the tax benefit from the special goodwill reserve on merger is realized, included in the Company’s equity, this benefit may be capitalized on behalf of its parent company, and the other shareholders are entitled to interest in this capital increase in order to maintain their equity interest in the Company.



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The shares thus issued will be considered as diluting shares for the calculation of the Company’s earnings (loss) per share, if all the conditions necessary for their issue have been satisfied. At June 30, 2016 and 2015, the conditions for issue of capital shares related to the goodwill amortization had been met. The table below shows P&L data and shares used to calculate basic and diluted earnings per share: Quarter ended Six-month period ended

6/30/2016 6/30/2015 6/30/2016 6/30/2015

Basic and diluted earnings per share Net income - R$ thousand 104,240 76,615 198,651 161,007

Weighted average number of shares Common shares 64,484 64,484 64,484 64,484 Preferred shares 97,308 96,775 97,308 96,775

161,792 161,259 161,792 161,259

Adjusted weighted average number of shares Common shares 65,250 65,923 65,577 66,015 Preferred shares 98,064 98,242 98,330 98,256

163,314 164,165 163,907 164,271

Basic earnings per share 0.64429 0.47511 1.22782 0.99844

Diluted earnings per share 0.63828 0.46670 1.21197 0.98013

24 Net operating revenue 24.1. Breakdown of net operating revenue

Company

Quarter ended Six-month period ended

6/30/2016 6/30/2015 6/30/2016 6/30/2015

Gross revenue Infrastructure (a) (Note 7) 34,033 64,924 54,190 102,532 Operation and maintenance (a) (Note 7) 210,123 181,953 418,203 361,696 Revenue from concession assets (b) (Note 7) 41,652 27,628 78,418 55,700 Rent 4,408 4,101 8,738 8,197 Services rendered 2,549 1,782 4,564 3,614

Total gross revenue 292,765 280,388 564,113 531,739

Taxes on revenues COFINS (22,125) (21,150) (42,634) (39,858) PIS (4,803) (4,591) (9,256) (8,653) Service Tax (ISS) (118) (87) (217) (175)

(27,046) (25,828) (52,107) (48,686)

Regulatory charges Energy Development Account (CDE) (4,427) (2,247) (8,399) (4,484) Global Reversal Reserve (RGR) (98) (122) (186) (243) Research and Development (R&D) (2,114) (1,777) (4,153) (3,555) Alternative Electric Power

Source Incentive Program PROINFA (4,256) (2,935) (8,309) (5,857)

(10,895) (7,081) (21,047) (14,139)

254,824 247,479 490,959 468,914



Page: 51 of 76

Consolidated


6/30/2016 6/30/2015 6/30/2016 6/30/2015

Gross revenue Infrastructure (a) (Note 7) 35,390 70,809 59,724 119,554 Operation and maintenance (a) (Note 7) 218,525 192,136 437,682 380,398 Revenue from concession assets (b) (Note 7) 67,424 45,786 125,417 89,079 Rent 4,473 4,160 8,868 8,315 Services rendered 1,375 1,192 2,480 2,448

Total gross revenue 327,187 314,083 634,171 599,794

Taxes on revenues COFINS (23,150) (22,191) (44,709) (41,946) PIS (5,024) (4,816) (9,705) (9,105) Service Tax (ISS) (118) (87) (217) (175)

(28,292) (27,094) (54,631) (51,226)

Regulatory charges Energy Development Account (CDE) (4,427) (2,247) (8,399) (4,484) Global Reversal Reserve (RGR) (759) (712) (1,510) (1,424) Research and Development (R&D) (2,475) (2,054) (4,832) (4,116) Alternative Electric Power

Source Incentive Program PROINFA (4,256) (2,935) (8,309) (5,857)

(11,917) (7,948) (23,050) (15,881)

286,978 279,041 556,490 532,687

(a) Infrastructure implementation, operation and maintenance services

Revenue from infrastructure implementation for the provision of electric power transmission services under a service concession arrangement is recognized as costs are incurred. Revenues from operation and maintenance services are recognized in the period in which the services are provided by the Company, as well as the adjustment portion (24.3). When the Company provides more than one service under a service concession agreement, the consideration received is allocated by reference to the fair value of the services delivered.

(b) Revenue from concession assets Interest income is recognized at the effective interest rate on the outstanding principal amount, and the effective interest rate is the one that exactly discounts the estimated future cash receipts over the estimated life of the financial assets in relation to the initial net book value of such assets.

24.2. Periodic review of Annual Revenue Allowed (RAP)

In accordance with concession agreements, every four and/or five years following their execution date, ANEEL will conduct a periodic review of the RAP for electric power transmission, so as to promote tariff efficiency at affordable rates. In 2013, the Company started recognizing revenue and costs from infrastructure implementation to improve electric power facilities, which will be considered in the base of the next periodic tariff review, as defined in Decision No. 4413 issued by ANEEL on December 27, 2013 and Regulatory Instruction No. 443 of July 26, 2011, as amended by Regulatory Instruction No. 463 of December 16, 2014. Revenue associated with Service Concession Arrangement No. 143/2001 of subsidiary Serra do Japi is not subject to the periodic tariff review. The review includes the reallocation of revenue by determining: (a) The basis for regulatory compensation to the Base Grid - New Facilities (RBNI); (b) Efficient operating costs;



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(c) The optimal capital structure and compensation to the transmission companies; (d) The value to be considered as tariff reducer - Other Revenues. The latest periodic tariff reviews are described below:

Concession operator

Ratification Rulling (REH) Date of REH

Effective period

IEMG 1,299 06/19/2012 07/01/2012 IENNE 1,540 06/18/2013 07/01/2013 Evrecy 1,538 06/18/2013 07/01/2013 06/24 and Pinheiros 1,755/1,762 07/09/2014 07/01/2014 Serra do Japi 1,901 06/16/2015 07/01/2015 IESul 1,755 06/24/2014 07/01/2014 IEMadeira (i) 1,755 06/24/2014 07/01/2014

(i) The first periodic tariff review of IEMadeira was defined by REH No. 1755, thus reducing RAP by 4.5% for Service Concession

Arrangement No. 013/2009, and by 3.81% for Service Concession Arrangement No. 015/2009. IEMadeira filed an application with ANEEL seeking to restore the economic and financial balance of the RAP under Service Concession Arrangement No. 013/2009. In support of this application, IEMadeira presented additional costs and the amount of lost revenue incurred during the Transmission Line implementation under its concession, due to factors such as: (i) delay in obtaining Environmental Licensing; (ii) land embargoes; and (iii) design changes required by the licensing authority. IEMadeira originally claimed an effective increase by 26.8% in RAP. However, IEMadeira reviewed its position, suggesting alternatives of (i) effective increase by 29.7% in RAP as from July 1, 2016; (ii) increase in the concession term of 238 months, without effective increase in RAP; or (iii) effective increase by 19.4% in RAP as from July 1, 2016 plus increase of 54 months in the concession term. IEMadeira is awaiting the final position of MME and ANEEL on the conclusion of this proceeding.

The next periodic tariff reviews of RAP for CTEEP, its subsidiaries and jointly-controlled entities are described in Note 1.2.

24.3. Variable Portion (PV), Additional Amount to RAP and Adjustment Portion (PA) Regulatory Decision No. 270 of July 9, 2007, regulates Variable Deduction (PV) and Additional Amount to RAP. The Variable Portion is a discount on the RAP of transmission companies due to unavailability or operating inefficiency of the facilities that integrate the Basic Grid. The Additional Amount to RAP corresponds to the value to be added to the RAP of transmission companies as an incentive to improve service availability of transmission facilities. These are recognized as revenue from operation and maintenance services, and/or as a reduction of such revenue, in the period in which they occur. Regulatory Decision (REN) No. 512 of October 30, 2012 amended REN No. 270/07, including paragraph 3, article 3, which eliminates the additional amount to RAP for transmission activities covered by Law No. 12783/2013. The Adjustment Portion (PA) is the portion of revenue that arises from applying a contractual mechanism used in the periodic annual adjustments. Said portion of revenue is added to or subtracted from the RAP, so as to offset collection excess or deficit in the period preceding the adjustment.

24.4. Annual revenue adjustment On June 28, 2016, Ratification Ruling No. 2098 was published to establish the Annual Revenue Allowed (RAP) the Company and its subsidiaries, for making available the transmission facilities that integrate both the Basic Grid and the Other Transmission Facilities, for the 12-month cycle, comprising the period from July 1, 2016 to June 30, 2017.



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According to Ratifying Resolution No. 2098, the RAP and the amounts corresponding to the Company’s adjustment (Service Concession Arrangement No. 059/2001), net of PIS and COFINS (named Regulatory Revenue), which amounted to R$836,611(*) on July 1, 2015, changed to R$893,452(*) on July 1, 2016, representing an increase of R$56,841 equivalent to 6.7%. Of this increase 9.1% (R$76,106) refers to the IPCA/IGPM adjustment; 6.5% (-R$54,220) to the change in the adjustment portion; and 4.1% (R$34,954) to additional RAP for new investments that became operational and investments expected to become operational over the cycle. The Company’s Annual Regulatory Revenue, net of PIS and COFINS, is broken down as follows:

Service concession arangement Basic Grid Other Transmission Facilities (DIT) Total

Existing New Adjustment Existing New Adjustment assets investments portion assets investments portion

059/2001 499,508 108,574 (20,176) 211,436 102,436 (8,326) 893,452

499,508 108,574 (20,176) 211,436 102,436 (8,326) 893,452

The Annual Regulatory Revenue of the Company and its subsidiaries, which was R$963,348(*) on July 1, 2015, changed to R$1,035,327(*) on July 1, 2016, representing an increase of R$71,979 or 7.5%. Of this increase, 9.3% (R$89,338) refers to the IPCA /IGPM adjustment; 5.5% (-R$53,142) to the change in the adjustment portion; and 3.7% (R$35,781) to additional RAP for new investments that became operational and investments expected to become operational over the cycle. (*) These amounts comprise revenue from authorized investments that will become operational

over the next cycles. The Regulatory Revenue of the Company and its subsidiaries, net of PIS and COFINS, is broken down as follows:

Service concession

arrangement Basic Grid Other Transmission Facilities (DIT) Total

Existing New Adjustment Existing New Adjustment assets investments Bid portion assets investments Bid portion

059/2001 499,508 108,574 - (20,176) 211,436 102,436 - (8,326) 893,452 143/2001 - - 21,994 (1,610) - - - - 20,384 004/2007 - - 18,121 (1,260) - - - - 16,861 012/2008 - - 8,568 (340) - 889 1,292 - 10,409 015/2008 - 13,720 16,265 (2,964) - 4,031 398 350 31,800 018/2008 - 50 4,219 (302) - 1,540 51 19 5,577 021/2011 - - 4,509 (192) - - 1,654 - 5,971 026/2009 - 4,860 27,112 (632) - - 6,166 - 37,506 020/2008 - 11,301 - (426) - 2,490 - 2 13,367

499,508 138,505 100,788 (27,902) 211,436 111,386 9,561 (7,955) 1,035,327



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25. Costs of infrastructure implementation, operation and maintenance services and general and administrative expenses a) Company

Quarter ended

6/30/2016 6/30/2015

Costs Expenses Total Total

Personnel (51,235) (12,526) (63,761) (59,510) Services (21,105) (8,953) (30,058) (36,856) Depreciation - (2,033) (2,033) (2,045) Materials (23,459) (177) (23,636) (42,771) Leases and rent (2,361) (1,096) (3,457) (3,395) Contingencies - (1,324) (1,324) (19,889) Other (9,201) (1,979) (11,180) (8,051)

(107,361) (28,088) (135,449) (172,517)

Six-month period ended

6/30/2016 6/30/2015



(204,810) (62,890) (267,700) (315,161)

b) Consolidated

Quarter ended

6/30/2016 6/30/2015



(112,255) (29,484) (141,739) (183,908)

Six-month period ended

6/30/2016 6/30/2015



(215,933) (65,467) (281,400) (343,144)

Out of the aforementioned costs, the Company’s costs of infrastructure implementation totaled R$49,155 in 1Q16 and R$93,007 in 1Q15. The consolidated costs of infrastructure implementation totaled R$54,481 in 1Q16 and R$109,389 in 1Q15. The calculation of the related revenue from infrastructure implementation, shown in Note 24.1, includes PIS, COFINS and other charges to the investment cost.



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26. Financial income (expenses) Company


6/30/2016 6/30/2015 6/30/2016 6/30/2015

Revenues Short-term investment

yield 11,715 11,830 20,679 22,225 Interest income 205 6,031 861 15,531 Monetary gains 4,399 11,698 6,053 31,860 Other 108 426 1,748 607

16,427 29,985 29,341 70,223

Expenses Interest on loans (6,734) (6,482) (13,649) (12,853) Interest expense (3,145) (3,145) (6,280) (6,117) Charges on debentures (21,509) (22,041) (41,666) (42,060) Monetary gains (13,952) (3,809) (22,214) (8,044) Other (1,122) (497) (1,786) (776)

(46,462) (35,974) (85,595) (69,850)

(30,035) (5,989) (56,254) 373

Consolidated


6/30/2016 6/30/2015 6/30/2016 6/30/2015

Revenues Short-term investment

yield 17,151 16,227 31,408 29,779 Interest income 227 6,034 890 15,549 Monetary gains 4,420 11,697 6,327 31,859 Other 122 558 1,778 771

21,920 34,516 40,403 77,958

Expenses Interest on loans (10,983) (10,895) (22,263) (21,941) Interest expense (3,146) (3,151) (6,285) (6,124) Charges on debentures (21,509) (22,041) (41,666) (42,060) Monetary gains (14,000) (3,833) (22,306) (8,089) Other (1,180) (562) (1,938) (907)

(50,818) (40,482) (94,458) (79,121)

(28,898) (5,966) (54,055) (1,163)

27. Income and social contribution taxes Corporate Income Tax (IRPJ) and Social Contribution Tax on Net Profit (CSLL) are monthly provisioned on an accrual basis, and the results are taxed according to Law No. 12973/14. The Company computes taxable profit based on monthly accounting records (“lucro real”) and the subsidiaries compute taxable profit based on a percentage of quarterly gross revenue (“lucro presumido”).



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a) Reconciliation of effective rate

Income and social contribution tax expenses for the year can be reconciled with accounting profit as follows: Company


6/30/2016 6/30/2015 6/30/2016 6/30/2015

Income before income and social contribution tax 137,324 94,217 255,269 199,027

Current statutory rates 34% 34% 34% 34%

Expected income and social contribution taxes (46,690) (32,034) (86,791) (67,669)

Income and social contribution taxes on permanent differences

Loss realized (154) (451) (164) (1,664) Reversal of provision for

Maintenance of equity integrity (*) 6 4,932 12 9,863

Equity pickup 16,570 11,366 30,308 20,710 Other (2,816) (1,415) 17 740

Effective income and social

contribution taxes (33,084) (17,602) (56,618) (38,020)

Income and social contribution taxes Current (27,256) (20,498) (44,552) (37,857) Deferred (5,828) 2,896 (12,066) (163)

(33,084) (17,602) (56,618) (38,020)

Effective rate 24.1% 18.7% 22.2% 19.1%

Consolidated


6/30/2016 6/30/2015 6/30/2016 6/30/2015

Income before income and social contribution tax 142,613 98,867 266,202 206,422

Current statutory rates 34% 34% 34% 34%

Expected income and social contribution taxes (48,488) (33,615) (90,509) (70,183)

Income and social contribution taxes on permanent differences

Loss realized (154) (451) (164) (1,664) Reversal of provision for

maintenance of equity integrity (*) 6 4,932 12 9,863

Equity pickup 9,188 6,398 15,655 11,893 Effect of adoption of taxable profit computed as a percentage

of gross sales - subsidiaries 7,511 5,180 14,886 9,419 Other (2,816) (1,415) 17 740

Effective income and social contribution taxes (34,753) (18,971) (60,103) (39,932)

Income and social contribution taxes Current (28,941) (21,829) (47,996) (40,318)

Deferred (5,812) 2,858 (12,107) 386

Effective rate

(34,753) (18,971) (60,103) (39,932)

24.4% 19.2% 22.6% 19.3%

(*) The acquisition of the Company’s control by ISA generated goodwill totaling R$689,435 at December 31, 2007, which has been

substantially amortized through December 2015 in monthly installments, as permitted by ANEEL Resolution No. 1164. In order to prevent the amortization of goodwill from adversely affecting the flow of dividends to shareholders, a Provision for Maintenance of Equity Integrity (PMIPL) of the merging company and a Special Goodwill Reserve on Merger were recognized, as set forth in CVM Ruling No. 349 of March 6, 2001. The remaining balance as at June 30, 2016 is R$568 (R$586 at December 31, 2015).



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b) Breakdown of deferred income and social contribution taxes Company Consolidated

Assets/(Liabilities) 6/30/2016 12/31/2015 6/30/2016 12/31/2015

Provision - São Paulo Finance Department - SEFAZ-SP (i) 175,527 175,527 175,527 175,527

Provision for contingencies 67,914 64,369 67,914 64,369 First-time adoption of Law

No. 12973/14 (ii) (23,448) (23,890) (23,448) (23,890) Service Concession Arrangement

(ICPC 01) (iii) (iii) (50,568) (35,342) (86,410) (71,143) Other temporary differences 2,318 3,145 2,318 3,145

Income 171,743 183,809 135,901 148,008

Assets 171,743 183,809 171,743 183,809

Liabilities (*) - - 35,842 35,801

(*) At June 30, 2016 and December 31, 2015, the consolidated balance of liabilities refers to the balance of subsidiaries; for this reason, it

is not on a net basis. (i) As described in Note 8. (ii) Reflects amounts subject to taxation of income and social contribution taxes for the first-time adoption of Law No. 12973/14. (iii) This refers to income and social contribution taxes on revenue from infrastructure implementation for provision of electric energy

transmission service and revenue from concession assets (ICPC 01) recognized on an accrual basis, which are taxed proportionally to actual revenue receipt, as defined in articles 83 and 84 of Revenue Procedure No. 1515/14.

The Company’s management considers that deferred income and social contribution tax assets arising from temporary differences should be realized by reference to legal proceedings, accounts receivable and the materialization of events giving rise to the allowance for losses.

28. Transactions with related parties Significant balances and transactions with related parties are as follows:

6/30/2016 12/31/2015 6/30/2016 6/30/2015

Nature of transaction

Related party Assets Liabilities Assets Liabilities

Revenue/ (expense)

Revenue/ (expense)

Short-term benefits (*) Management - - - - (2,221) (2,286)

- - - - Dividends IEMadeira 1,121 - 29,170 - - -

1,121 - 29,170 - - - Sublease ISA Capital 37 - 23 - 182 161

IEMG 5 - 7 - 38 46 Pinheiros 7 - 18 - 51 67 Serra do Japi 5 - 13 - 26 54 Evrecy 3 - 4 - 21 25 IENNE 7 - 18 - 49 57 IESul 4 - 12 - 28 32

68 - 95 - 395 442 Future capital contribution IESul 238 - - - - -

Rendering of services ISA Capital 15 - 15 - 90 70

IEMG 12 - 11 - 69 63 Pinheiros 108 - 100 - 749 585 Serra do Japi 86 - 80 - 250 152 Evrecy 67 - 67 - 400 365 Internexa - 20 - 13 168 -

288 20 273 13 1,726 1,235



Page: 58 of 76

(*) These refer to management compensation. In the Company’s income statement, this balance amounts to R$2,221, and in the consolidated income statement this amounts to R$2,427 (R$2,474 at June 30, 2015).

The Company’s compensation policy does not include post-employment benefits, other long-term benefits, employment termination benefits or share-based payments.

The sublease agreement encompasses the area occupied by the Company’s head office, as well as the apportionment of condominium-related and maintenance expenses, among others.

The Company has a service rendering agreement with ISA Capital including, among others, delivery of bookkeeping, tax calculation and payroll processing services.

The Company provides operation and maintenance services in connection with the facilities of IEMG, Pinheiros, Serra do Japi and Evrecy.

Internexa Brasil Operadora de Telecomunicações S.A - Internexa is a subsidiary of ISA Group, with which CTEEP has entered into a service agreement whereby, for valuable consideration, CTEEP assigns to Internexa the right to use the support infrastructure necessary for fiber optic cable installation, provision of ancillary services and related improvements. In addition, the Company has hired 100Mbps internet link services from Internexa.

On June 27, 2016, the Company and Cymi Holding S.A. entered into a private instrument for advance of funds in the amount of R$950 to jointly-controlled subsidiary IESul, proportionally to its interest held, which was transferred as per the schedule determined. The conversion of the advance into capital should be performed until 120 days from the date of transfer of funds from shareholders to IESul and subject to approval by the Board of Directors.

These transactions are carried out under specific conditions agreed upon by the parties.

29. Financial instruments

a) Identification of significant financial instruments Company Consolidated

6/30/2016 12/31/2015 6/30/2016 12/31/2015

Financial assets Fair value through profit or loss

Cash and cash equivalents 1,795 3,120 3,635 6,135 Short-term investments 250,201 230,855 422,084 440,054 Restricted cash - - 12,640 12,059

Loans and receivables Accounts receivable

Current 188,033 220,566 292,485 319,961 Noncurrent 2,641,761 2,569,403 3,600,082 3,526,968

Receivables - State Finance Department (SEFAZ)

Noncurrent 1,039,149 965,920 1,039,149 965,920 Receivables from subsidiaries 1,663 29,500 1,370 29,200 Pledges and restricted deposits 71,169 66,252 71,169 66,268

Financial liabilities Amortized cost

Loans and financing Current 32,400 32,530 71,084 71,070 Noncurrent 292,601 306,076 458,574 485,239

Debentures Current 183,611 180,782 183,611 180,782 Noncurrent 361,268 359,573 361,268 359,573

Trade accounts payable 28,271 31,824 29,577 34,950 Interest on equity and

dividends payable 2,459 2,156 2,459 2,156



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Book values of asset and liability financial instruments, when compared with amounts that could be obtained in their trading in an active market or, when there is no active market, with adjusted net present value based on market interest rate in force, substantially approximate their corresponding market values. The Company classifies financial instruments under Level 1 and Level 2, as required by the CPC pronouncement in force: Level 1 - Quoted prices (unadjusted) in active, liquid and visible markets for identical assets or liabilities that are readily available at the measurement date; Level 2 - Quoted prices (which may be adjusted or not) for similar assets or liabilities in active markets, and other unobservable inputs under Level 1, directly or indirectly, under the terms of the asset or liability; and Level 3 - Assets and liabilities whose prices do not exist, or whose prices or valuation techniques are supported by a small market or by a non-existing, unobservable or illiquid market. Under this level fair value estimate is highly subjective.

b) Financing The rates of book value of loans and financing and debentures are linked to the variation in the TJLP, CDI and IPCA and book value approximates market value. Debt-to-equity ratio Debt-to-equity ratio at the end of the year is as follows: Company Consolidated

6/30/2016 12/31/2015 6/30/2016 12/31/2015

Loans and financing Current 32,400 32,530 71,084 71,070 Noncurrent 292,601 306,076 458,574 485,239

Debentures Current 183,611 180,782 183,611 180,782 Noncurrent 361,268 359,573 361,268 359,573

Total debt 869,880 878,961 1,074,537 1,096,664 Cash and cash equivalents and

short-term investments 251,996 233,975 425,719 446,189

Net debt 617,884 644,986 648,818 650,475 Equity 5,522,229 5,336,205 5,645,284 5,515,001 Net debt-to-equity ratio 11.2% 12.1% 11.5% 11.8%

CTEEP and its subsidiaries have loan and financing agreements with covenants based on debt-to-equity ratios (Notes 14 and 15). The Company complies with the covenant requirements.

c) Risk management

The main risk factors inherent in CTEEP and its subsidiaries’ transactions may be identified as follows:

(i) Credit risk - The Company and its subsidiaries have agreements containing a bank guarantee clause with Brazil’s National Electric System Operator (ONS), concession operators and other agents, governing the provision of services to users of the basic grid. Also, the Company and its subsidiaries have agreements containing a bank guarantee clause, which minimizes the risk of default, with concession operators and other agents, governing the provision of their services to Other Transmission Facilities (DIT).



Page: 60 of 76

(ii) Price risk - Under the terms of the service concession arrangements, the revenues of CTEEP

and its subsidiaries are adjusted annually by ANEEL, based on IPCA and IGP-M variation, while part of the revenue is subject to periodic tariff reviews (Note 24.2).

(iii) Interest rate risk - Financing agreements are monetarily restated based on TJLP, IPCA and CDI variation (Notes 14 and 15).

(iv) Funding risk - CTEEP and its subsidiaries may face difficulties in the future regarding fundraising with repayment periods and costs adjusted to their cash generating profile and/or their debt repayment obligations.

(v) Guarantee risk - Significant guarantee risks are:

Management of risks associated with carrying retirement and healthcare benefits via Funcesp (a closed supplementary pension entity), through representation before administration agencies.

Participation as a guarantor, to the extent of its interest held in subsidiaries and jointly-controlled subsidiaries, in their financing agreements (Note 14).

(vi) Liquidity risk - The primary cash sources of the Company and its subsidiaries arise from:

Their operating activities, notably the use of their electric power transmission system by other concession operators and agents of the sector. Under current legislation, the annual revenue amount, represented by the RAP related to Basic Grid facilities and Other Transmission Facilities (DIT) is defined by ANEEL; and

Rights on receivables for the term extension of the Service Concession Arrangement No. 059/2001 governed by Law No. 12783/2013, whose determination of part of value and the payment method are pending definition by the Granting Authority (Note 1.2).

The Company is compensated for the transmission system availability, and energy rationing, if any, will have no impact revenue or receipts. The Company manages liquidity risk by maintaining bank credit facilities and funding facilities to raise loans as it deems appropriate, through ongoing monitoring of projected and actual cash flows, and matching of the maturity profiles of financial assets and liabilities. The right referring to SE related facilities represents an important source of cash generation so that the Company successfully fulfills its financial planning from 2017.

d) Sensitivity analysis Pursuant to CVM Ruling No. 475 of December 17, 2008, the Company conducts interest rate and currency risk sensitivity analysis. Company management considers its exposure to the other risks previously described insignificant. In order to define a probable scenario for the sensitivity analysis of the interest rate risk and price index, the Company used the same assumptions established for its long-term finance and economic planning. These assumptions are based, among other aspects, on the Brazilian macroeconomic scenario and the opinion of market experts.



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As such, in order to assess the effects of the Company’s cash flow variation, the sensitivity analysis presented below for items pegged to variable indexes considers:

Probable scenario - the interest rates at September 30, 2016 (fixed DI interest rate curve determined at June 30, 2016), reported in the interest rate risk tables; and

Such rates were appreciated and depreciated by 25% (scenario I) and 50% (scenario II).

Interest rate risk - effects on cash flow - Company

Risk of rate increase

Risk of rate decrease

Balance at Base Transaction Risk 6/30/2016 scenario Scenario I Scenario II Scenario I Scenario II

Financial assets

Short-term 103.00% investments CDI 251,332 8,672 10,710 12,702 6,585 4,446

Financial liabilities

IPCA+8.10 Debentures - 2nd

series % 45,771 1,951 2,204 2,452 1,695 1,434 Debentures - single 116.0% of CDI

series p.a. 499,108 29,470 34,056 38,528 24,761 19,921 FINEM BNDES (i), TJLP+1.80

(ii) and (iii) % to 2.60% 239,216 5,450 6,510 7,557 4,376 3,288 Net effect of

variation (28,199) (32,060) (35,835) (24,247) (20,197)

Reference for financial assets and liabilities

100% of CDI (September 2016) 14.11% 17.64% 21.17% 10.58% 7.06%

Interest rate risk - effects on cash flow -

Consolidated

Risk of rate increase

Risk of rate decrease

Balance at Base Transaction Risk 6/30/2016 scenario Scenario I Scenario II Scenario I Scenario II

Financial assets

Short-term 93.5% to investments 103.0% of CDI 424,047 12,394 15,306 18,153 9,411 6,354 Financial liabilities Debentures - 2nd series IPCA+8.10% 45,771 1,951 2,204 2,452 1,695 1,434

Debentures - single 116.0% of CDI series p.a. 499,108 29,470 34,056 38,528 24,761 19,921 FINEM BNDES (i), TJLP+1.80% to

(ii) and (iii) 2.30% 239,216 5,450 6,510 7,557 4,376 3,288 BNDES TJLP + 1.55% (subsidiaries) to 2.62% p.a. 146,220 3,838 4,488 5,130 3,179 2,512 Net effect of

variation (28,315) (31,952) (35,514) (24,600) (20,801)

Reference for financial assets and liabilities

100% of CDI (September 2016) 14.11% 17.64% 21.17% 10.58% 7.06%



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30. Commitments - operating lease agreements The significant commitments assumed by the Company and its subsidiaries refer to operating leases of vehicles, and have the following minimum future payments, in total and for each period: Company and Consolidated

6/30/2016 12/31/2015

Within 1 year 7,281 6,762 From 1 to 5 years 3,774 4,563

11,055 11,325

31. Insurance coverage Breakdown of insurance lines and effective period is as follows:

Company

Amount Premium - R$ Type Effectiveness insured - R$ thousand thousand

Property (a) 03/01/15 to 09/01/16 2,557,467 5,399 General civil liability (b) 09/01/15 to 09/01/16 22,231 144 National transport (c) 09/30/15 to 09/30/16 288,920 26 Personal accidents - Group (d) 05/01/16 to 05/01/17 49,924 3 Automobile (e) 03/02/16 to 03/02/17 Market value 222 Court-ordered guarantee (f) 11/29/13 to 06/20/21 217,925 2,424

8,218

Consolidated

Amount Premium - R$ Type Effectiveness insured - R$ thousand thousand

Property (a) 03/01/15 to 09/01/16 2,981,044 5,519 General civil liability (b) 09/01/15 to 09/01/16 25,000 144 National transport (c) 09/30/15 to 09/30/16 288,920 26 Personal accidents - Group (d) 05/01/16 to 05/01/17 49,924 3 Automobile (e) 03/02/16 to 03/02/17 Market value 222 Court-ordered guarantee (f) 11/29/13 to 06/20/21 217,925 2,424

8,338

(a) Property - Coverage against risks of fire and electrical damage to the main equipment installed in transmission substations, buildings and

respective contents, storerooms and facilities, according to Service Concession Arrangements, whereby the transmission companies shall retain insurance policies to ensure adequate coverage of the most important equipment of the transmission system facilities, in addition to defining the items and facilities to be insured.

(b) General civil liability - Coverage to repair unintentional damage, personal and/or property damage caused to third parties as a result of the

Company’s operations.

(c) National transport - Coverage against damage caused to the Company’s items and equipment transported throughout the Brazilian territory. (d) Personal accidents - Group - Coverage against personal accidents to officers and trainees. (e) Automobile - Coverage against collision, fire, theft and third parties. (f) Court-ordered guarantee - Replacement of collaterals and/or judicial deposits made to the Granting Authority.

There is no coverage for any damage in transmission lines against fire, lightening, explosions, short-circuits and power outages. Given their nature, the assumptions adopted for the retention of insurance are not part of the scope of an audit; accordingly, they were not audited by our independent auditors.



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32. Supplementary retirement plan governed by Law No. 4819/58

The supplementary retirement plan governed by State Law No. 4819/58, which addressed the creation of the State Social Assistance Fund, is applicable to employees of government agencies, of corporations in which the State held the majority of shares, and of industrial services owned and managed by the state, hired until May 13, 1974, and provided for supplementary retirement and pension benefits, additional leave entitlement and family allowance. Funds required to cover liabilities assumed in this plan are the full responsibility of the applicable São Paulo State Government authorities, implemented under an agreement between SEFAZ-SP and CTEEP on December 10, 1999.

This procedure was carried out regularly until December 2003 by Funcesp, with funds from SEFAZ-SP, transferred by CESP and later by CTEEP. From January 2004, SEFAZ-SP started to directly process those payments, without the intervention of CTEEP and Funcesp, at amounts historically lower than those paid until December 2013.

a) Civil Class Action in progress at the 2nd Public Finance Court

This event caused the filing of legal proceedings by retirees, with emphasis on the Civil Class Action whose decision was handed down by the 2nd Public Finance Court in June 2005, whereby the request was deemed unfounded, allowing the payroll processing and retirement and pension payouts according to Law No. 4819/58, by SEFAZ-SP. AAFC - Associação dos Aposentados da FUNCESP, which represents retirees and pensioners of Funcesp, filed an appeal and prior to its judgment protested against the jurisdiction of the Regular Legal Court, which was accepted by the São Paulo Court of Justice (TJ/SP). Then, in August 2008, the Higher Court of Justice (STJ) recognized the jurisdiction of the Regular Legal Court, and AAFC filed another appeal taking the matter to the STF, which upheld the jurisdiction of the Regular Legal Court. The various appeals filed by AAFC were denied by the STF, and the last decision was handed down on October 7, 2015, becoming final on November 24, 2015, maintaining the jurisdiction of the Regular Legal Court. This proceeding was received by the 2nd Public Finance Court/SP on May 24, 2016 and taken to the Labor Prosecution Office so that it expresses its understanding, for subsequent submission to São Paulo State Court of Justice (TJ/SP) for judgement of the appeal filed by AAFC against the decision that deemed such proceeding unfounded.

On June 27, 2016, a stay of decision was assigned to the Appeal filed by AAFC and after the parties expressed their understanding, on July 22, 2016, a new decision was handed down clarifying that the labor preliminary injunction should be maintained up to the appeal judgement.

b) Class Action in progress at the 2nd Public Finance Court (former Labor Claim that was evaluated by the 49th Labor Court)

In contrast to the decision previously handed down, a decision issued by the 49 th Labor Court of São Paulo State was communicated to CTEEP on July 11, 2005 granting interim relief for Funcesp to process again the payments of benefits arising from State Law No. 4819/58, according to respective rules, as performed until December 2003, with CTEEP figuring as an intermediary between SEFAZ-SP and Funcesp.

In order to fulfill the aforementioned court decisions, CTEEP requests the necessary funds to SEFAZ-SP, on a monthly basis, to transfer them to Funcesp, which must process the respective payments to the beneficiaries. This class action resulted in an unfavorable decision against SEFAZ-SP, CESP, Funcesp and CTEEP.

Due to the existence of proceedings at Courts of different jurisdictions, the Conflict of Jurisdiction was raised before the STF to define the jurisdiction to judge the action. On March 12, 2015, the



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STF handed down a decision recognizing the jurisdiction of the Regular Legal Court and voiding all decisions of the Labor Court. AAFC filed an appeal against the decision, which was denied on October 14, 2015, and the jurisdiction of the Regular Legal Court was upheld. An unappealable decision was handed down on November 20, 2015. On March 21, 2016, the Supreme Labor Court (TST) ordered the case to be remanded to the 49th São Paulo Labor Court, which transmitted the records to the Regular Legal Court.

The Class Action was received by the 2nd Public Finance Court/SP on May 20, 2016, and on May 30, 2016 a decision was handed down revoking the preliminary injunction that required CTEEP to pay the monthly installments, extinguishing the requests inherent to the payroll processing, and deeming unfounded the request for refund of any differences due to retirees and pensioners according to Law No. 4819/58.

SEFAZ-SP resumed payroll processing from June 2016, however, after lodging of appeal, AAFC requested to the TJ/SP assignment of stay of decision to the appeal, which was granted on June 27, 2016.

After the parties expressed their understanding, on July 22, 2016, a new decision was handed down clarifying that the labor preliminary injunction should be maintained up to the appeal judgement.

c) Conflict of jurisdiction

Upon judging the Conflict of Jurisdiction that involves the lawsuits informed in letters “a” and “b” above, the STF recognized the jurisdiction of the Regular Legal Court to process the lawsuits, voiding the decisions handed down by the Labor Court (decision published in April 2015). AAFC filed an appeal.

On May 4, 2015, by means of a Notice, SEFAZ-SP assumed the responsibility for processing and payment of the retirees’ payroll.

AAFC filed Precautionary Action No. 3882 before the STF, seeking that the decision handed down by the Labor Court would prevail until the competent Court had analyzed the preliminary injunction handed down by the Labor Court.

The STF granted that application and by means of a Notice delivered on June 8, 2015 SEFAZ-SP ceased to process the payroll, which returned to the previous status (also through a SEFAZ-SP Notice). CTEEP, SEFAZ-SP and Funcesp filed an appeal.

On October 14, 2015, the STF judged those appeals, upholding the decision of Conflict of Jurisdiction that recognized the jurisdiction of Regular Legal Court to process and judge the class action that is currently being examined at the 49th Labor Court of São Paulo State, as well as the precautionary action filed by AAFC, which maintains the preliminary injunction of the Labor Court until the Competent Court has considered the request. The Conflict of Jurisdiction decision became final on November 20, 2015.

d) Collection lawsuit

Since September 2005, SEFAZ-SP has been transferring to CTEEP an amount lower than that required for the faithful compliance with such decision of the 49th Labor Court mentioned in item “(b)” above.

As a consequence of this decision, CTEEP transferred to Funcesp, from January 2005 to June 2016, R$3,676,983 for the payment of benefits under State Law No. 4819/58, having received from SEFAZ-SP R$2,365,493 for such purpose. The difference between the amounts transferred to



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Funcesp and refunded by SEFAZ-SP, totaling R$1,311,490 (Note 8(a)), has been required by CTEEP for refund by SEFAZ-SP. In addition, there are amounts relating to labor claims settled by the Company which are the responsibility of State Government, amounting to R$243,914 (Note 8(b)), thus totaling R$1,555,404. In December 2010, CTEEP filed a collection lawsuit against SEFAZ-SP to recover the amounts until then not received in regard to this matter. In May 2013, after the decision handed down that dismissed the collection lawsuit without analyzing the merits of the case, CTEEP filed an appeal, however, said decision was upheld by the Court (December 2014). CTEEP filed a new appeal and SEFAZ-SP and Funcesp expressed their understanding. On August 31, 2015, the TJ/SP accepted the appeal of CTEEP and ordered SEFAZ-SP to transfer the supplementary retirement and pension amounts under the terms of the adjustments executed with CTEEP and governing laws, except for amounts disallowed. With a view to including the amounts disallowed in such decision, CTEEP filed another appeal for clarification, which was accepted by the court on February 1, 2016, and upheld the decision of August 31, 2015, determining the verification, during the administrative procedure to adjust discrepancies in records, of the amounts not passed on by SEFAZ-SP. On March 7, 2016, SEFAZ-SP filed an appeal that was dismissed in the judgement occurred on July 4, 2016, upholding the decision unfavorable to SEFAZ-SP.

e) Lawsuit from retirees’ association In the second quarter of 2012, Associação dos Aposentados da Funcesp (AAFC) filed lawsuit No. 0022576-08.2012.8.26.0053 against SEFAZ-SP, seeking reimbursement of the supplementary retirement plan governed by Law No. 4819/58 so that said plan may honor retirement and pension payouts. This lawsuit was dismissed without judgment on the merits, and AAFC filed an Appeal, which is pending referral to the São Paulo Court of Justice for later judgment. The Company is not part of this lawsuit, and only follows-up on the process since it can benefit from the decisions.

f) Writ of mandamus - Campinas City Union On April 19, 2013, by means of a Notice, SEFAZ-SP recognized the effective transfers to CTEEP of the amounts previously disallowed, relating to certain accounts that partially comprise the amount not transferred and required for due compliance with the decision awarded by the 49th Labor Court. SEFAZ-SP recognition was due to the unappealable decision handed down in the records of the Collective Petition for Writ of Mandamus filed by Sindicato dos Trabalhadores da Indústria de Energia Elétrica de Campinas, which determined that SEFAZ-SP shall maintain the payments of supplementary retirement and pension of retirees without eliminating such amounts. Corroborating the position mentioned above, the Union filed an application to extend the decision to retirees not included in the initial list, which was granted by the Labor Court. SEFAZ-SP filed a number of legal measures to reverse such decision, unsuccessfully to date. The Company is not part of this lawsuit, and only follows-up on the process since it can benefit from the decisions.



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CTEEP’s view CTEEP remains committed to voiding the decision of the TJ/SP Reporting Justice who through a preliminary injunction upheld the payroll processing as determined by the Labor Court until the judgement on merits of the appeal, in order to allow the return of the procedure of payment direct from payroll of benefits of State Law No. 4819/58 by SEFAZ-SP. CTEEP also confirms the understanding of its legal department and external legal advisors that the costs arising from State Law No. 4819/58 and its regulation are the full responsibility of SEFAZ-SP and continues adopting additional measures to protect its interests. In view of the new events occurred in 2013, especially those related to the legal progress of the lawsuit relating to the collection of amounts due by SEFAZ-SP as mentioned above, and considering the legal progress of other proceedings and lawsuits also aforementioned, CTEEP management reviewed its position, recognizing in 2013 a provision for losses on realization of part of receivables, whose realization term is expected to be extended, and it is yet not sure that these amounts are the sole responsibility of SEFAZ-SP. Management has been monitoring new events relating to the legal and business aspects underlying this matter, as well as any impact on the Company’s financial information.

33. Subsequent events a) Debentures

On August 12, 2016, the Company completed the process for issue of 148,270 infrastructure debentures, in a single series, totaling R$148,270. The maturity of these debentures will take place on July 15, 2021, and remuneration will be paid annually in July of each year, with the first installment maturing on July 15, 2017 (Note 15).


Other Information that the Company Considers to be Material

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1. Company’s shareholding structure

In compliance with Corporate Governance practices, the Company’s shareholding structure is shown below, as well as the direct or indirect holders of more than 5% of each type and class of shares of the Company’s capital, to the level of individual shareholders:

Company’s main shareholders: 6/30/2016

Common shares Preferred shares Total

Shareholders Number % Number % Number %

Controlling shareholder ISA Capital do Brasil S.A 57,714,208 89.50 3,647,355 3.64 61,361,563 37.25

Management Executive officers - - - - - - Board of Directors - - - - - - Supervisory Board - - - - - -

- - - - - -

Total Control Structure 57,714,208 89.50 3,647,355 3.64 61,361,563 37.25

Shares outstanding Federal Government

Centrais Elétricas Brasileiras S. A - ELETROBRÁS (i) 6,289,661 9.75 52,005,758 51.88 58,295,419 35.39

Vinci Equities Gestora de 6.14

3.74 Recursos Ltda - - 6,157,462 6,157,462

Other (ii) 480,564 0.75 38,425,818 38.34 38,906,382 23.62

Total shares outstanding 6,770,225 10.50 96,589,038 96.36 103,359,263 62.75

Total capital 64,484,433 100.00 100,236,393 100.00 164,720,826 100.00

(i) Centrais Elétricas Brasileiras S.A. - Eletrobrás is a publicly-held entity with CVM Register No. 2437. (ii) These include shareholders which individually hold less than 5% of the voting capital.

6/30/2015



Controlling shareholder ISA Capital do Brasil S.A. 57,714,208 89.50 2,257,400 2.33 59,971,608 37.19

Management Executive officers - - - - - - Board of Directors 1 - 1,100 - 1,101 - Supervisory Board - - 1,800 - 1,800 -

1 - 2,900 - 2,901 -

Total Control Structure 57,714,209 89.50 2,260,300 2.33 59,974,509 37.19

Shares outstanding São Paulo State Government

São Paulo State Finance Office (i) - - 7,117,731 7.35 7,117,731 4.41

Federal Government Centrais Elétricas Brasileiras S. A - ELETROBRAS (ii) 6,289,661 9.75 50,753,466 52.44 57,043,127 35.37

Vinci Equities Gestora de

Recursos Ltda. - - 6,828,798 6.93 6,706,287 4.16 Other (iii) 480,563 0.75 29,814,727 30.93 30,417,801 18.86

Total shares outstanding 6,770,224 10.50 94,514,722 97.66 101,284,946 62.81

Total capital 64,484,433 100.00 96,775,022 100.00 161,259,455 100.00

(i) The shareholder "São Paulo State Government” has its tax, financial and credit administration, internal control of the Executive Power and

budgetary execution functions attributed by state decree. The responsibilities of shareholder “São Paulo State Government” are regulated in Decree No. 49900 of July 2, 1968, which determines its political and administrative responsibilities in the tax, finance and internal control areas of the São Paulo State Government.

(ii) Centrais Elétricas Brasileiras S.A. - Eletrobrás is a publicly-held entity with CVM Register No. 2437. (iii) These include shareholders which individually hold less than 5% of the voting capital.



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2. Direct or indirect holders of more than 5% of each type and class of shares of the Company’s capital, to the level of individual shareholders

6/30/2016



ISA Capital do Brasil S.A. ISA Interconéxion Elétrica S.A. E.S.P. (a) 840,625,000 100.00 - - 840,625,000 68.22 HSBC Bank - - 195,892,554 50.00 195,892,554 15.89 Votorantim Bank - - 195,892,554 50.00 195,892,554 15.89 Other shareholders - - - - - -

840,625,000 100.00 391,785,108 100.00 1,232,410,108 100.00

(a) ISA Interconéxion Elétrica S.A. E.S.P.

Ministério de Hacienda Y Crédito Público (b) 569,472,561 51.41 - - 569,472,561 51.41 Empresa Pública de Medellín E.S.P. (c) 112,605,547 10.17 - - 112,605,547 10.17 Empresa Colombiana de Petróleos - ECOPETROL (d) 13,630,446 1.23 - - 13,630,446 1.23 Empresa de Energía de Bogotá -EEB (e) 18,448,050 1.67 18,448,050 1.67 Other shareholders 393,521,290 35.52 - - 393,521,290 35.52

1,107,677,894 100.00 - - 1,107,677,894 100.00

(b) Ministério de Hacienda Y Crédito Público

Public (National Government of Colombia) 3,008,720 100.00 - - 3,008,720 100.00

3,008,720 100.00 - - 3,008,720 100.00

(c) Empresa Pública de Medellín E.S.P.

City of Medellin 4,223,308 100.00 - - 4,223,308 100.00

4,223,308 100.00 - - 4,223,308 100.00

(d) Empresa Colombiana de de Petróleos - ECOPETROL

Ministério da Hacienda Y Crédito Público 36,384,788,817 88.50 - - 36,384,788,817 88.50 Other shareholders 4,731,905,873 11.50 - - 4,731,905,873 11.50

41,116,694,690 100.00 - - 41,116,694,690 100.00 (e) Empresa de Energia de Bogotá - EEB Bogotá, Distrito Capital 7,003,161,430 76.28 - - 7,003,161,430 76.28 ECOPETROL 631,098,000 6.87 - - 631,098,000 6.87 Other shareholders 1,546,917,587 16.85 - - 1,546,917,587 16.85

9,181,177,017 100.00 - - 9,181,177,017 100.00



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6/30/2015



ISA Capital do Brasil S.A. ISA Interconéxion Elétrica S.A. E.S.P. (a) 840,625,000 100.00 - - 840,625,000 66.86 HSBC Bank - - 208,264,314 50.00 208,264,314 16.57 Votorantim Bank - - 208,264,314 50.00 208,264,314 16.57 Other shareholders - - - - - -

840,625,000 100.00 416,528,628 100.00 1,257,153,628 100.00

(a) ISA Interconéxion Elétrica S.A. E.S.P.

Ministério de Hacienda Y Crédito Público (b) 569,472,561 51.41 - - 569,472,561 51.41 Empresa Pública de Medellín E.S.P. (c) 112,605,547 10.17 - - 112,605,547 10.17 Empresa Colombiana de Petróleos - ECOPETROL (d) 58,925,480 5.32 - - 58,925,480 5.32 Other shareholders 366,674,306 33.10 - - 366,674,306 33.10

1,107,677,894 100.00 - - 1,107,677,894 100.00

(b) Ministério de Hacienda Y Crédito Public sector

(National Government of Colombia) 3,008,720 100.00 - - 3,008,720 100.00

3,008,720 100.00 - - 3,008,720 100.00

(c) Empresa Pública Medellín E.S.P.

City of Medellin 4,223,308 100.00 - - 4,223,308 100.00

4,223,308 100.00 - - 4,223,308 100.00

(d) Empresa Colombiana de de Petróleos - ECOPETROL

Ministério da Hacienda Y Crédito Público 36,384,788,817 88.50 - - 36,384,788,817 88.50 Other shareholders 4,731,909,639 11.50 - - 4,731,909,639 11.50

41,116,698,456 100.00 - - 41,116,698,456 100.00


Reports and Representations/Special Review Report - Qualified

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Independent Auditor’s Qualified Review Report on Quarterly Information The Shareholders, Board of Directors and Officers

CTEEP - Companhia de Transmissão de Energia Elétrica Paulista São Paulo - SP Introduction We have reviewed the accompanying individual and consolidated interim financial information of CTEEP - Companhia de Transmissão de Energia Elétrica Paulista (“CTEEP” or “Company”), contained in the Quarterly Information Form (ITR) for the quarter ended June 30, 2016, comprising the balance sheet as at June 30, 2016 and the related statements of income and of comprehensive income for the three and six-month periods then ended, and statements of changes in equity and of cash flows for the six-month period then ended, including explanatory information. Management is responsible for the preparation of the individual and consolidated interim financial information in accordance with Accounting Pronouncement CPC 21 (R1) - Interim Financial Reporting, and IAS 34 - Interim Financial Reporting, issued by the International Accounting Standards Board (IASB), as well as for the fair presentation of this information in conformity with the rules issued by the Brazilian Securities and Exchange Commission (CVM) applicable to the preparation of Quarterly Information (ITR). Our responsibility is to express a conclusion on this interim financial information based on our review. Scope of review We conducted our review in accordance with Brazilian and International Standards on Review Engagements (NBC TR 2410 and ISRE 2410 - Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively). A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Basis for qualified conclusion As described in Note 7, based on the provisions of Law No. 12783/2013 and ANEEL Note No. 402/2013, a valuation report was prepared amounting to R$5,186,018 thousand, which corresponds to estimated investments at the New Replacement Cost (VNR) adjusted for accumulated depreciation through December 31, 2012. In addition, as described in Note 1.2, ANEEL published Order No. 4036/2015 with new understanding of the amount of “SE” facilities the Company would be entitled to receive totaling R$3,896,328 thousand. Moreover, Administrative Ruling No. 120 was issued by the Ministry of Mines and Energy on April 20, 2016 to establish that the amounts authorized by ANEEL relating to these assets should be part of the Basic Regulatory Compensation of electric power transmission companies for an estimated eight years following the 2017 tariff review process. After the issue of Administrative Ruling No. 120/2016, new information was defined by the Granting Authority that provides for certain conditions so that the Company could determine its best estimate of the amounts of these financial assets related to the Existing Service Basic Grid (RBSE).



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Although the base amounts relating to the RBSE facilities are available and approved by the ANEEL Board, Company management understands that uncertainties described in Note 7 (d) still remain, therefore, it is not possible to estimate reliably the restated amount of this right and, thus, the historical balance of these assets will be recorded until more detailed guidance is obtained from Regulatory Agencies to measure this asset reliably. In accordance with “CPC 38 - Financial Instruments - Recognition and Measurement”, had the Company restated the Financial Asset related to the RBSE facilities at June 30, 2016, certain elements of the individual and consolidated interim financial information could have been significantly affected. Qualified conclusion Based on our review, except for the effects of the matter described in our “Basis for qualified conclusion” paragraph, nothing has come to our attention that causes us to believe that the interim financial information included in the quarterly information referred to above was not prepared, in all material respects, in accordance with CPC 21 (R1) and IAS 34 applicable to the preparation of Quarterly Information (ITR), and presented in accordance with the rules issued by the Brazilian Securities and Exchange Commission (CVM). Emphasis of matter Law No. 4819/58 As described in Notes 8 and 32, the Company records a net balance of accounts receivable from the São Paulo State Government totaling R$1,039,149 thousand relating to the impacts from Law No. 4819/1958, which offered the employees of that subsidiary, when controlled by the São Paulo State Government, the same benefits granted to the other civil servants. Company management has been monitoring new events relating to the legal and business aspects of this matter, as well as evaluating, on a continuous basis, any impacts on its financial information. Our opinion is not modified in respect of this matter. Other matters Statements of value added We have also reviewed the individual and consolidated statements of value added (SVA) for the six-month period ended June 30, 2016, prepared under the responsibility of Company management, the presentation of which in the interim financial information is required by the rules issued by the Brazilian Securities and Exchange Commission (CVM) applicable to preparation of Quarterly Information (ITR), and as supplementary information under IFRS, whereby no SVA presentation is required. These statements have been submitted to the same review procedures previously described and, except for the possible effects of the matter described in our “Basis for qualified conclusion” paragraph, based on our review, nothing has come to our attention that causes us to believe that they were not prepared, in all material respects, in accordance with the overall interim financial information.



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Audit of prior-year corresponding figures The individual and consolidated financial information contained in the quarterly information relating to the balance sheet as at December 31, 2015 and the statements of income, of comprehensive income, of changes in equity, of cash flows and of value added for the quarter ended June 30, 2015, presented for comparison purposes, were previously audited and reviewed by other independent auditors who issued audit and review reports thereon dated February 26, 2016 and July 28, 2015, respectively, containing the same foregoing emphasis of matter. São Paulo, August 15, 2016. ERNST & YOUNG Auditores Independentes S.S. CRC-2SP015199/O-6 Marcos Antonio Quintanilha Accountant CRC-1SP132776/O-3


Reports and Representations/Opinion by the Supervisory Board or Equivalent Body

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Supervisory Board’s Opinion The Supervisory Board of CTEEP - Companhia de Transmissão de Energia Elétrica Paulista (“Company”), in the exercise of its legal and statutory responsibilities, and grounded on the reasons presented below by the Company’s Executive Board, expresses its position in favor of maintaining the RBSE Amount recorded at its historical balance until sufficient additional rules become effective so that such amount can be reliably measured, which is currently recorded at R$1.49 billion. The Supervisory Board is aware that this fact can be understood by Independent Auditors as a basis for qualified opinion under Resolution No. 1232/09 issued by the Brazil's National Association of State Boards of Accountancy. The Executive Board informed the Members of the Supervisory Board that, due to the issue of MME Administrative Ruling No. 120 on April 20, 2016, the Company’s independent auditors, Ernst & Young Auditores Independentes (“Independent Auditors”) expressed their understanding that the Company’s Quarterly Information (ITR) for the quarter ended June 30, 2016 should recognize the restated amount of RBSE Amount. The Supervisory Board was also informed that the Executive Board understands that it is not possible to identify the restated RBSE Amount with reasonable assurance, since there are significant aspects for the definition of such amount yet to be discussed by ANEEL under the Public Hearing expected to begin in October 2016 and to be completed in February 2017, according to ANEEL’s regulatory calendar for the biennium 2016-2018 approved by ANEEL Decree No. 4036 of June 21, 2016. In this regard, the independent accounting opinion (“Opinion”) prepared by PhD Professors Natan Szuster and Ricardo Lopes Cardoso was presented to the members of the Supervisory Board for analysis and discussion, noting the significant uncertainty in the measurement of the RBSE Amount. Among the issues pending definition, the following are highlighted: (a) restatement index and methodology, and remuneration applicable in determining the RBSE Amount; (b) clarifications as to the payment terms for past due and remaining installments of the RBSE Amount; and (c) definition of taxation applicable to amounts receivable. Accordingly, the Executive Board informed the Directors that understands that Administrative Ruling No. 120 is not sufficiently clear as to the aspects mentioned above, among others, and therefore it is not possible to prepare a reliable estimate of the amount receivable at June 30, 2016, generating significant uncertainty in the measurement of this amount. Considering the aforementioned circumstances, the Officers understand there is significant uncertainty for measurement of the RBSE Amount, so that the recognition of a preliminary amount based on their best estimates could result in a future material (positive or negative) adjustment in the RBSE Amount upon definition of additional rules applicable. The Company’s Supervisory Board, in the exercise of its legal and statutory responsibilities and in compliance with item VI, article 163 of Law No. 6404/76, analyzed and agreed with the Executive Board’s evaluation that it is not possible to identify the restated RBSE Amount with reasonable assurance, since there are significant aspects for the definition of such amount, which gives rise to significant uncertainty in the measurement on a continuous basis. The Supervisory Board is also aware of the Company’s Financial Statements for the quarter ended June, 2016, and of the qualified opinion issued by Ernst & Young Auditores Independentes S.S. and approves its disclosure.

São Paulo, August 15, 2016.

Manuel Domingues de Jesus e Pinho

Antonio Luiz de Campos Gurgel

José Henrique de Souza Brum

Egídio Schoenberger

Rosangela da Silva


Reports and Representations/Opinion by the Supervisory Board or Equivalent Body

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Officers’ Representation on the Quarterly Information The Company’s Officers hereby state that they have reviewed, discussed and agreed with the information contained in the Quarterly Information Form for the quarter ended June 30, 2016, and agreed with the conclusion expressed in the Independent Auditor’s Review Report issued by Ernst & Young. Further, they state that all the significant information relating to the quarterly information, and only such information, is being evidenced and refer to the information used under their management. Accordingly, the Officers approve the issue of the Quarterly Information Form for the quarter ended June 30, 2016. São Paulo, August 15, 2016. Reynaldo Passanezi Filho CEO Rinaldo Pecchio Junior Chief Financial and Investor Relations Officer Celso Sebastião Cerchiari Chief Technical Officer Weberson Eduardo Guioto Abreu Chief Project Officer Carlos Ribeiro Chief Institutional Relations Officer


Reports and Representations/Officers’ Representation on Independent Auditor’s Special Review Report

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Officers’ Representation on Independent Auditor’s Special Review Report The Company’s Officers hereby state that they have reviewed, discussed and become aware of the Independent Auditor’s Special Review Report. São Paulo, August 15, 2016. Reynaldo Passanezi Filho CEO Rinaldo Pecchio Junior Chief Financial and Investor Relations Officer Celso Sebastião Cerchiari Chief Technical Officer Weberson Eduardo Guioto Abreu Chief Project Officer Carlos Ribeiro Chief Institutional Relations Officer


Reports and Representations/Officers’ Representation on Independent Auditor’s Special Review Report

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Restatement reasons Version Description

2 Restatement as required by Ernst & Young, to correct a mistake in the wording of “Qualified conclusion” paragraph and “Statements of added value” of the special review qualified report that had the format of “opinion” instead of “quarterly information review”, as filed on August 15, 2016.

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