(Convenience Translation into English from the Original Previously Issued in Portuguese)
CNPJ/MF 83.878.892/0001-55
FINANCIAL STATEMENTS For The Years Ended December 31, 2008 and 2007
Sumary Annual Management Report ............................................................................................................................................................. 1 – Message of the Administration................................................................................................................................................... 2 – Institutional Profile .................................................................................................................................................................... 3 – Significant Events Corporate...................................................................................................................................................... 4 – Performance Operating............................................................................................................................................................. 5 – Performance Economic-Financial 6 - Investments .............................................................................................................................................................................. 7 – Perspective 8 - Performance of the capital markets and the investors ................................................................................................................... 9 – Corporate Management............................................................................................................................................................. 10– System of Management............................................................................................................................................................ 11 – Social-Economic Responsibility ................................................................................................................................................ Social Balance Sheet Generation of Value Added...................................................................................................................................................... 12. Independent auditor.................................................................... Financial Statements Company ........................................................................................................................................................ Financial Statements Consolidated .................................................................................................................................................. Notes to the Financial Statements .................................................................................................................................................... 1. Operations ................................................................................................................................................................................. 2. Regulatory Environment.............................................................................................................................................................. 3. Presentation of Financial Statements ........................................................................................................................................... 4. Significant Accounting Practices .................................................................................................................................................. 5. Cash and Cash Equivalents and Money Market Investments .......................................................................................................... 6. Consumers, Concessionaires and Permittees ............................................................................................................................... 7. Trade Accounts Receivable ......................................................................................................................................................... 8. Recoverable Taxes ..................................................................................................................................................................... 9. Inventories ................................................................................................................................................................................. 10. Deferred Income and Social Contribution Taxes .......................................................................................................................... 11. Regulatory Assets and Liabilities ................................................................................................................................................ 12. Other Receivables .................................................................................................................................................................... 13. Receivables from Santa Catarina State Government ................................................................................................................... 14. Temporary Investments ............................................................................................................................................................. 15. Permanent Investments ............................................................................................................................................................. 16. Property, Plant and Equipment .................................................................................................................................................. 17. Loans, Financing and Debt Charges ........................................................................................................................................... 18. Investments Fund in credit Rights – FIDC ................................................................................................................................... 19. Suppliers.................................................................................................................................................................................. 20. Regulatory Charges .................................................................................................................................................................. 21. Pension Fund ........................................................................................................................................................................... 22. Post-Employment Benefits......................................................................................................................................................... 23. Taxes Payable ......................................................................................................................................................................... 24. Tax Debt Refinancing Program (PAES)...................................................................................................................................... 25. Interest on Capital..................................................................................................................................................................... 26. Accrued Liabilities ..................................................................................................................................................................... 27. Other Payables ......................................................................................................................................................................... 28. Reserve for Contingencies......................................................................................................................................................... 29. Deferred Income and Social Contribution Taxes .......................................................................................................................... 30. Shareholders’ Equity ................................................................................................................................................................. 31. Electricity Sales to Final Consumers and Utilities ......................................................................................................................... 32. Other Operating Income ............................................................................................................................................................ 33. Service Costs and Operating Expenses ...................................................................................................................................... 34. Financial Income (Expenses) ..................................................................................................................................................... 35. Financial Instruments ................................................................................................................................................................ 36. Related-Party Transactions ....................................................................................................................................................... 37. Income and Social Contribution Taxes – Actual Rate................................................................................................................... 38. Nonoperating Income (Expenses) .............................................................................................................................................. 39. Insurance................................................................................................................................................................................. 40. Periodic Tariff Adjustment.......................................................................................................................................................... 41. Financial Statements - Segregation by Activity ............................................................................................................................ 42. Summary of the Differences between the Brazilian Accounting Practices and the U.S. GAAP......................................................... 43. Considerations Federal law nº 11.638......................................................................................................................................... Independent Auditors’ Report........................................................................................................................................................... Statement of the Board of Directors.................................................................................................................................................. Fiscal Council’s Report........................................................................................................................................................................
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ANNUAL REPORT OF ADMINISTRATION
The Stockholders, Introducing the Report of Directors and Financial Statements of the Power Plants of Santa Catarina SA - CELESC, for the fiscal year ended December 31, 2008, accompanied by the manifestation of the Board, the opinion of the Audit and the Independent Auditors' Report . The Financial Statements have been prepared and are presented in accordance with accounting practices adopted in Brazil, based on the provisions contained in the Companies Act by Actions and rules for concessionaires of public power, established by the National Electric Energy Agency - ANEEL. Message from the President
The year 2008 was a period in which external factors impact so decisive on the outcome of the last quarter CELESC eventually become challenging for the Company. The market, heated in the last five years, has since September, a setback of optimism, reflected in the decline in consumption, given the worsening of the financial crisis in the United States and its repercussions worldwide. In November, even more impressive, there were floods and landslides in the region of Vale do Itajaí, Santa Catarina second largest industrial park. The disaster eventually affect much of the productive chain of the state, due to the two main ports and the poor traffic conditions on roads, mainly in North and Greater Florianópolis, corridors flow of cargo throughout the country. Seven days after the peak of the disaster, the emergency rehabilitation of infrastructure had reached 95% and restoration of the network of low voltage (the measurement points themselves) was already in progress in a region which traditionally holds the first position in the ranking of consumption billed, which was repeated, despite the disaster in December last year. The CELESC not shy in front of difficult missions. Unlike. The competitive landscape of the Electricity Sector is to require new skills of business, must demonstrate that effective competition without being penalized by the regulatory agency when it comes to distribution of electricity, marketing and competition in the area of generation. The CELESC is, there are times, if the shaping these new rules. In October 2006, desverticalizamos the activities of generation and distribution. It was created when the CELESC Holding, with two subsidiaries integrals, the CELESC Generation SA (CELESC G) and CELESC Distribution SA (CELESC D).
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In 2008, while CELESC G, now more structured, drew investors interested in new ventures with the aim of increasing the stock of own generation and begin to grow in the Industry, the D CELESC going through the process of Tariff Revision. In the event, it was possible to know the real costs of the subsidiary and to compare it with the Company of Reference set by ANEEL. Because this is where the CELESC Distribution SA is facing a major challenge that must be overcome until 2012, when will the new revision of their costs. The question of order is adopted "prudent prioritizing investments." In the last year, according to work to modernize our technology park to facilitate the flow of corporate information, which results in better customer service in the commercial area. Invest in projects and actions that have improved, indeed, our indicators of quality of service, we have the comfort of electric power to reach more than 50 thousand families across the state and maintained our commitment to social and economic development of the population in our area of grant. In the area of Environment and Social Responsibility, the Company demonstrates its commitment to this and other generations. Conquered in 2008, the environmental licensing and correction of all our projects built before the license becomes a legal requirement. All our fleet of vehicles flex is now supplied with alcohol and we became signatories to the Supply Chain Leadership Collaboration. Our projects in the area of Social Responsibility pride our company and have the premise social inclusion and generation of income. Are developed specifically in low income communities, aimed at meeting the basic rights of every citizen. The successful history of CELESC reflected in surveys of customer satisfaction and performance of the Company to the financial market. The major international crisis of the last four decades did not spare even the companies considered the "noble lineage." However, some of the most traded roles have less impact, including the shares of GNP CELESC. The roles of CELESC remain among those who had higher liquidity in 2008 and who paid more dividends among the shareholders, and companies in the South of Brazil Debut in the ranking index of Prestige Corporate Brand - IPMC, by prestigious magazine sulina, the CELESC won the seventh position, aligning itself with other major private sector companies Catarina. The CELESC also appears among the top ten in four attributes evaluated: Admiration, Trust, Social and Environmental Responsibility, History and Development, and Innovation. The CELESC has turned its focus, always, to the sustainability business. With these prospects in early February 2009, the Board approved the plan of measures to be implemented in 2009 and 2010, which includes actions for the growth of the Holding and two subsidiaries integrals. The Plan was designed from extensive diagnosis, captained by outside consultants, with participation of managers and employees. Time for major changes for a time even better.
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Business Profile
The Power Plants of Santa Catarina SA - CELESC, newly structured as holding in mind the regulatory framework of the National Electrical Industry, integrated controls two subsidiaries: the CELESC Generation CELESC Distribution SA and SA holds the controlling shareholder of SCGÁS and has shares in Company Catarinense of Transmission of Electricity - ECTE in Dona Francisca Energética SA - DfES, Catarinense Company of Water and Sanitation - Casan, and the hydroelectric plant Cubatao SA, and other small holdings
The beginning of its role in the energy market date of 1955. Born as an agency of the Government of the State of Santa Catarina responsible for the planning of the electrical system and the transfer of public funds to companies working in the industry, exploring regional systems. The involvement of the government guarantee, at the time, the expansion of services in order to sustain the large developmental cycle that is established at the time. Over the years, the State Government was taking, gradually the controlling shareholder of companies and regional CELESC, and planning, began to operate the electrical system Catarina. Before a successful business history, built over the past five decades, the CELESC is now one of the most reputable companies in the National Electricity Sector. In the area of distribution of energy (electricity and natural gas), possesses the merit of work in an area of granting liberal market, with growth historically above the national average, and the segment to generate power concentrated promising plans, which include expansion and diversification of their stock rise with projects in various regions of the state. They live in the state, about six million people. The strong tourist Catarina, with landscapes of rare natural beauty and prime location for the Mercosur countries, annually attracts about four million visitors. The state of Santa Catarina occupies just over 1% of Brazilian territory (95.4 thousand km ²) and is responsible for 4% of GDP. Displays strong and diversified economy. The
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agriculture based on small small, divided space with the fo urth largest Brazilian industry, under the companies recognized worldwide. The efficiency of the Company has a solid and is worthy of recognition of their consumers based on the quality of services provided. The standards of care are considered as interna tional reference and the last six years, SA Distribution CELESC was the winner of the Gold Award category Ciera home of customer satisfaction, given by the Commission for Regional Energy Integration, which brings together distributors of electric energy of Latin America. The Subsidiary Integrals Celesc Distribuição S.A. The company responsible for provision of electric energy distribution because 91.8% of the Santa Catarina, with over 2.2 million consumer units. Its concession area extends to 262 districts of the State of Santa Catarina, and the municipality of Rio Negro, located in the State of Paraná. The subsidiary also operates in the supply of electric energy to the care of four dealerships and 11 permission, responsible for the care of the other 31 municipalities Catarinense. Celesc Geração S.A. A subsidiary of Holding for businesses to generate electricity has 12 plants, which total power of 82.62 MW. Currently, the Company is investing in his park repotencialização generator, in forming partnerships to facilitate projects aimed at building new plants and to diversify the energy matrix of the state. Ongoing studies in larger projected 94.5% of the park's own generation company. The investment projects include source water, wind and biomass. Enterprise Control Companhia de Gás de Santa Catarina – SCGÁS The CELESC entered the segment of distribution of natural gas in 2007, when he assumed control of SCGÁS from the acquisition of 51% of common shares, representing 17% of total capital. In fast growi ng market and with little explored, the end of 2008, the SCGÁS had 769 km of distribution networks, and the 5th largest distributor of gas passed through the country in extension of networks and the Santa Catarina state with the 8th highest volume of gas market. The Net Operating Revenue of SCGÁS in 2008 was 2% higher than in 2007, from R$ 401 million to R$ 409 million in 2008. The increase was mainly by expanding the volume of gas distributed, which was 574 million m3 in 2008 (561 million m3 in 2007). The Net Income of SCGÁS in 2008 was R$ 37.3 million, below the R$ 66.1 million from the year 2007, mainly because of the negative repercussions of exchange rate on the cost of gas and reduction of income due to the effects of flooding the end of year in Santa Catarina. 5
The number of customers of the Company increased 71.8%, from 422 at the end of 2007 to 725 in December 2008. Besides the expansion and diversification in the segments, is the expansion of the number of customers according to the calculation of residential customers be made now, the individual consumer unit. The evolution of the market for compressed natural gas - CNG had high 274.2% before 2007, also with a significant increase in the number of cities served from five in 2007 to 11 at the end of 2008, marking the debut performance of the SCGÁS in western Santa Catarina and Planalto Serrano. Other holdings Empresa Catarinense de Transmissão de Energia – ECTE Formed with the specific purpose of exploring routes of transmission of electric energy in the South, and Southeast coast of Santa Catarina, owns the transmission line SE Campos Novos - Blumenau SE, with 252.5 kilometers of extension, responsible for transporting some 20% of the energy needed to supply demand in the granting of CELESC Distribution SA. The CELESC is participation in investment and owns 20% of shares. In 2008, the Operating Income ECTE received of R$ 31.4 million (U.S. $ 27, 9 million in 2007) and a net income of R$ 22.9 million (U.S.$ 18.3 million in 2007), corresponding to R$ 544.36 (R$ 434.11 in 2007) per 1,000 shares of the capital. Dona Francisca Energética S.A – DFESA Company for production of electricity, the DFES is the owner of the Dona Francisca Hydro Power Plant, built in the river Jacuí in Rio Grande do Sul, with installed capacity of 125 MW. The CELESC holds 23.03% of Common Shares. The DFES in 2008, had operating profit of R$ 29 million (US$ 26 million in 2007) and Net Income of R$ 19 million (U.S.$ 17 million in 2007), corresponding to R$ 29.00 per 1,000 shares of capital (R$ 25.00 in 2007). Usina Hidrelétrica Cubatão S.A. A company formed for the specific purpose of implementing hydroelectric plant Cubatao. Enterprise located in Joinville (SC), with installed capacity of 50MW. After addressing environmental barriers, the project was fully revised in 2007 and new techniques of construction were adopted, allowing the resumption of the permitting process, which is under review by the competent organ. The CELESC participates with 40% of the shares. Companhia Catarinense de Água e Saneamento – Casan Company of mixed economy of capital open, controlled by the Government of the State of Santa Catarina. Its function is to plan, implement, operate and exploit the services of sewage and drinking water supplies, and perform works of sanitation in agreement with 6
the municipalities. Currently, Casan operates in 206 municipalities of Santa Catarina state and one in Parana. The CELESC is owner of 15.76% of the Capital. The Casan in 2008 was benefited by the entry of new partner: the SC Partners, which negotiated the purchase of shares of the Company through the payment of debt in the amount of R$ 176 million, which it maintained with CELESC and the CELESC Distribution SA. The appropriateness method, the equity of Casan the end of 2007 was $ 788 million and rose to U.S.$ 989 million at the end of 2008. In this evolution, is the net income of R$ 17 million, established in fiscal year 2008. The financial reengineering that has the good performance of the Company for the year was captained by the State Government and has positive economic and financial effects between the parties involved. In CELESC, reduction in the volume of bad debts and increasing the funds available, improving its net income by the reversal of provision for doubtful accounts - PCLD. In Casan, the degree of indebtedness in the short term was quite small but is the situation CAPITAL that at the end of 2008, was positive. The CELESC in 2008 Economic Environment The growth in wages, coupled with the strong release of real estate credit and performance of the productive sector, were the main factors that contributed to the expansion of the Brazilian economy in 2008. In Brazil, the first six months of the year, according to the National Federation of Commerce, the monthly retail sales showed growth of 6.5%. At Christmas, even with the strong influence of a worsening of the international crisis caused by sub primes Americans with restricted liquidity and lower supply of credit to consumers, the Serasa also showed growth of 2.8% in sales for 2007. In Santa Catarina, the market followed the trend. In the last quarter of the year, which was noticed a slowdown in some segments productive and emptying of the bubble of optimism for the planned economy in 2009. In the state, added to the repercussions of financial crisis, the effects of flooding in the region of Vale do Itajaí, the second largest industrial center Catarina, and hampered the movement of production in view of the conditions of the blockade of roads and ports. Despite the facts, the performance of the economy of the State in the year was very positive. Strong segmentation of industrial activity, characteristic of the concession area of CELESC, contributed directly to this result. In 2008, the consumption of class industry grew 11.2% compared to 2007. Regulatory Environment
In 2008, the National Electric Energy Agency - ANEEL promoted the revision of the tariff structure used by CELESC Distribution SA. The process occurs from extensive study of the profile of the load and responsibility of consumers for the cost of expanding the network for each level of tension. The new rates of increase were announced by ANEEL 7
and focused on a different for different classes of consumers, according to the policy of termination of cross-subsidies, established by the Federal Government. For consumers seen at low voltage, the average impact was negative at 7.27% and the related highvoltage charge was adjusted by 0.9%. On average, the tariffs charged by the Company were reduced by 3.36% from August 5, 2008. Economic-Financial Performance
Economic indices Sotockholders' Equity Profit for the year Net Operating Revenue Result of Service EBITDA - LAJIDA Margin of Service (RS/ROL) Net Operating Margin (LL/ROL) Return on equity (LL/(PL-LL)
2008 1.638.252 258.444 3.520.893 428.223 568.959 8,2% 7,3% 15,8%
2007 1.453.363 345.990 3.166.800 363.407 480.773 8,7% 10,9% 23,8%
In 2008, the gross operating revenue of CELESC reached R$ 5,365 million, exceeding 7.7% in the amount established in 2007 (U.S.$ 4,983 million). The volume of reve nue is influenced, mainly by the performance of the consumer market for electricity and the tariffs. During the period, the market for CELESC demanded a total of 14,528 GWh and grew 7% over the previous twelve months, when 13,575 GWh were required, included therein, the volume of energy sold by the subsidiary for the distribution and energy sold by CELESC G. Since August, the revenue from the energy distributed by the rate adjustment was hampered by the negative and loss of revenue as a result of the floods of November. In the end, R$ 4,550 million, registering variations of 0.6% on the performance of 2007 (R$ 4,521 million). The issue price, the climate and elevation of the operational cost with the purchase of energy from Itaipu, quoted in U.S. dollars, adversely affected the net income for the year of CELESC, 25% lower than that recorded in the previous year. At the end of 2008, the consolidated net income presented CELESC of R$ 258.4 million, mainly formed by the results of its wholly owned subsidiaries CELESC Distribution SA (R$ 132.8 million), CELESC Generation SA (U.S. $ 44.8 million) and results Holding on (R$ 70 million). In 2007, net income was U.S.$ 346 million and there was included the result of the divestiture of assets of MAES, held in March, in effect of R$ 57.4 million on the final results found. This year, the net income received increased reflexes reversal of the portion of PCLD (net of $ 63 million), built on the existing balances of power bills accrued on behalf of Casan, which began to be held financially from October 2008 in 24 monthly installments of R$ 5.9 million.
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Last year, despite the external difficulties which affect the branch of activity CELESC, its EBITDA in U.S. imported R$ 569 million, surpassing by 18% the R$ 481 million in 2007. Growth of R$ 87 million, is that in 2007 the effects of SCGÁS occurred only in the last quarter (R$ 28 million) in 2008 and are full (R$ 85 million). Operational Performance The year 2008 is marked as a year in which the CELESC prioritized the implementation of adjustments in its organizational and administrative structure in order to increase its operational performance, reduce costs and improve quality of services to its customers. This effort has resulted in the adoption of new management tools in the maintenance of prudent investments in the expansion of its generating fleet, the deployment of new technologies and increased training of its set of employees. Last year, the load of the system reached 19,344 GWh, registering growth of 5.6% compared to 2007. The positive performance exceeded the percentage increase in load of 3.3% registered in Brazil and from 4.1% in the South. During the period, the number of consumers served reached 2,206,598, up 3% compared to 2007 (2.140.988 consumers), while the consumption of electricity showed high of 7%. Further, the graphs show the performance of each class and participation in consumption. Important to note that the performance of the free market was lower in 2008 due to the return of 15 captive customers to the environment.
4,5%
Comparison of Power Consumption in GW
6,7%
16.974
17.735
14.717 13.791
11,2% 2,5% 4.863
5.406
4,7%
- 5,2% 5,8%
7,1%
3.710 3.801 2.347 2.457
Residential
Industrial
Commercial
3.183 3.018 1.641 1.736
1.230 1.317
Rural
Other
Free cons umers
Classes¹
2007
Market
2008
Source DCL / DPCM / DVMC
: Note: Other Classes ¹ = Public Power Public Lighting + Public + Reseller
Does no t consider their own
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Captive
Total Merket
Consumption composition for Class 2008
21,4%
Residencial Industrial
30,5% 100,0% 13,9%
Commercial
Rural 9,8% 7,4% 17,0% 83,0%
Other Classes¹ Free Consumrs
Captive Market Total Market
Note: Other Classes ¹ = Public Power Public Lighting + Public + Reseller Does not consideir own.
Quality of the Distributed Energy In 2008, Celesc Distribution S.A. commemorated the supervision and control system installation automated in all substations of your systems in 69 and 138kV. It also was given beginning to the processes data and poll collection certification jobs of the Indicators of Individual Continuity (DIC/FIC/DMIC) and Collective (DEC/FEC), with base in the rules ISO 9001:2000. The process is the first step for the implantation of a quality administration system in the operation areas. They advanced, in year, the studies on the Centers Distribution Operations centralization viability – CODs and of the Operation Centers of Area – COAs, with eficientizar goal the supervision and control process, by means of technological modernization and optimization of the existing resources, including equipament, physical and personal space. Measured as these have impactado positively in the performance of such Indicators that presented, in 2008, expressive improves before to the values registered in 2007 and resumed the curve of continuous improvement registered since 2001. In this year, the Equivalent Duration of Interruption for Unit Consumer – DEC, belonged to 14,39 hours against 16,49 hours in 2007. The Equivalent Frequency for Unit Consumer – FEC belonged to 10,54 hours against 12,56 hours in 2007. In the period, there was reduction of 12,7% in the average time that each consumer stayed without electric power and of 16% in the average number of times' that each consumer stayed without electric power, compared with the verified in 2007. Since 2001, DEC presents reduction of 31,3% and FEC of 38,3%.
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Technical and Commercial performance Losses The energy amount required by Celesc Distribution S.A. to attend his market (captivate, liberate, supply and losses) belonged to 19.344GWh in year of 2008. In the period, the global losses represented 8% of the energy injected in the carrier distribution system. From this total, 6,6% refer to the volume of technical losses and 1,4% to the commercial losses. The numbers keep the Company among the ones of best performance of the National Electric Sector. Performance in Energy Auctions In 2008, Celesc Distribution S.A. took part as buyer of the sixth auction of new energy, accomplished by the Electric power Commercialization Chamber – CCEE, when it bought at an auction the purchase of 42,22 MWmédios for the period 2.011 – 2.025. MWh was negotiated at R$ 128,42 average price, corresponding to the loss of the agio of about 14% regarding R$ 150,00 Price Roof established by the Minas Department and Energy – MME. The Company opted for not taking part of the too much auctions occurred in 2008 for already have guaranteed the assistance to your market. Costs management In May, with sights to the invigoration of the focused budgetary culture in results, Celesc Distribution S.A. initiated the Budget Base implantation Zero, as guidelines of your managerial strategic planning. The administration tool implementation should be concluded in the middle of 2009. Some actions of short term, developed starting from wide research on the improvements opportunities in the Company were already put in practice. Giving continuity for system optimization process of corporative telephony and of your Call Center, the Company also accomplished electronic cry for service company prestadora contract of discagem free direct, available for solicitations of commercial services and of emergency. The initiative enabled the service contract for more competitive and very smaller prices to the practiced by the Company previously. In year, the Company adopted more incisive politics before to the consumers in debit. The global financial crisis and the impact socioeconomic provoked by the floods that reached seriously it Itajaí's Valley, where is concentrate good part of the industrial park native of Santa Catarina, jeopardized the initial expectations of the Company, but, anyway allowed to avoid the insolvency aggravation. Investments Celesc invested, in 2008, R$ 379 million. From the resources total, the biggest volume gave under repair of expansion and improvement of the electric system, operational efficiency and modernization of the close to the subsidiary administration of Distribution R$342 million), responsible for your business main segment. System expansion – Among geared works to attend the demand growth, highlight for Company electric system new connections (138kV) to the basic net (500 and 230kV), that even provide quality and reliability to the rendered service. With that goal, they 11
were concluded the substations enlargements Vidal Ramos, in the Mountainous Plateau; Rio Southern, in the Valley; Hunter, In the middle West; Trinity and Island South, in the Great Florianópolis. In 2008, also were built 63 distribution lines km and another 100km were in execution in December month. Highlight for the Island system new connection of Santa Catarina to the transmission basic net system, by means of cables submarines, that removes events' possibility as apagão occurred in 2003, when the region stayed without electric power for more than 50 hours due to the lack of an option for load transfer. In year, also were built the substations Pinheiro (34,5KV), in the Great Florianópolis, and Sangão (69kV), in the Estado's South, was given beginning to the substations enlargement Pirabeiraba and Joinville IV, in the Estado's North, and to the new substation construction armoured for Capital assistance, with two lines of subterranean transmission in 138kV; Of the substation Chico de Paulo, in Jaraguá do Sul, of the Castilian, in Hunter, and of the Pomerode, in the same name municipal district. The investments in enlargement and improvements resulted in increase of 126MVA to the electric system. Universalizacion of the Assistance – In 2008, by means of Universalização's Assistance Program, another 8.991 families proceeded telling with the comforts provided by the electric power. From this total, 5.017 live in the rural area and of these, 3.973 benefited by the program Light For All, that relies on government's Federal subsidies, State Government and Carrier. Right from the start of the Program of Universalização, instituted in April 2003, Celesc Distribution S.A. accumulates the accomplishment of 44.066 new in the middle rural connections and of these 37.673 were effected by means of the Light For All. In the Distributer concession area, all the urban area is electrified and the coverage is of more than 99% in the rural area.
Distribution main Active Transmission substations
101
Distribution substations
28
Substations telecontrolled
106
Transmission capacity Transformation
5.372,79MVA
Implanted stakes
1.387.259
Transmission Chains extension
4.619,26km
Distribution Chains extension
128.335,66km
Distribution transformers
144.726 pçs
Distribution Transformation capacity (up to 34,5 kV) Demand Maxim
4.342,79MVA 19.344GWh
Load factor (MWmédio/demanda maxim)
71%
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Research & Development – Attending to the precepts established by ANEEL for the projects and researches development, the Subsidiary invested, in 2008, R$5,7's Volume million to attend to initials. About 50% of the resources defrayed studies in the electric power distribution area and in the strategic research. In year, 15 projects were in execution, being three of cycle 2004/2005 and 12 of cycle 2005/2006. Technology & Efficiency – In 2008, Celesc Distribution S.A. advanced in the implantation of a system integrated of managerial administration for the Finance areas, Accounting and Human resources. The investment main goal, based on technology SAP ERP, is the one of turn more efficient the decisive process and agiler the information flow. The investments in Information Technology in year summed R$ 41 milions. They also were implanted System projects-pilot Automated of Mensuration – BE, with technology Power Line Communications – PLC to send and to receive information, by means of the electric power distribution own chain in real time, and of process administration system of cut and laughs connection. Stimulus to the Conscious Use of the Electric power – In 2008, by means of the Program Celesc of Energetic Efficiency – pro Celeficiência, were invested R$ 9,3 million to the development of 34 projects. From this, 22 were concluded. Such projects contemplate the motors installation of high performance in industries and public hospitals, the installation of water and illumination systems substitution solar heating system and of refrigeration in hospitals, beneficent entities and public institutions, besides the development of educational actions at public schools and low purchasing power communities. With these projects, the Company expectation is the one of reducing the consumption in 12.445 MWh/year and of 2.195 kw of demand in the consumption peak schedule. One of the year highlights was the project new release Am Legal. Tô Linked returned to spread the conscious use of the electric power in low purchasing power communities. The Project allies actions of social inclusion and combat the irregular connections, providing larger safety to the consumer and quality of the supplied energy. By means of the Am Legal. I have been linking, it intends to regularize clandestine connections, with standard internal electric installation and normalization reform of entrance, promote installation of solar heaters and the donation of fluorescent lamps, besides several educational actions. They were selected, in the 16 Celesc's Regional Agencies Distribution S.A., 90 communities who will benefit by the Project, where it lives a population estimate in 35 thousand families. Electric power generation – The investment in the generation area summed R$ 8 million in 2008. The resources were applied in the adaptation of the operational infrastructure, in the modernization program guiding of plants and in the studies and elaboration contract of basic project for park enlargement of own generation. The studies aiming at the increase of the installed capacity were concluded in seven plants (Skulls, Cedars, Celso Ramos, Pery, Piraí, Jump and Rio of the Fish) and they indicate the possibility to increase in 94,5% the Company own generation capacity. In 13
December, the Administration Board approved the bidding process new release for enlargement services contract of Pery, the first to rely on basic project. Located in the Curitibanos' Municipal district, the plant has power installed of 4,4 MW and will proceed telling with generation capacity of 30 MW. The jobs will be still initiated in the first semester of 2009 and, as the rest basic projects are concluded, the processes will be initiated. In year, Celesc Generation S.A. commercialized 465,24GWh of electric power for 20 several segments and places companies, come in Free Consumers, Energy generators and Commercialization, carrying a growth of about 11% regarding 2007. The sales volume generated revenue of the R$65 million (R$41milhões in 2007.) Of 2008, it also fits point out slight elevation in the volume of generated energy, regarding the registered in 2007. Such growth gave on good terms hydraulicses function and by the plants modernization. In 2008, SCGÁS invested R$29,3 million, great part in the construction of 61,5 distribution new chains km, enlarging for 769 km the total extension of your system. Among works, highlight for the interlinking extension construction of the municipal districts of Joinville and Guaramirim, who allowed to attend new customers and to give more reliability to the service rendered to the Northern region native of Santa Catarina. Folks administration Celesc Distribution S.A. contained year with 3.852 employees (4.039 in 2007). From the total, 19,7% own complete superior level. More of the half (53,3%) have formation in average level and 18,7% own the Fundamental Teaching. Folks training – In 2008, they were accomplished 595 events of professional training in Celesc. The total of trained men-hour belonged to 111.389 and the hour-class' average for employee reached 28,91. Good part of the activities met demand generated by the system implantation SAP ERP. By means of the teaching method to the distance, via Internet, 115 employees concluded 1.928 courses and another 133 were in process. Among great promotions, the course in company about Public Bidding, with 40 hoursclass, gathered about 200 participants. Accomplished in the Company building-thirst, it was transmitted for all the decentralized areas, by means of videoconferência. The managers also took part in course about Civil and Criminal Responsibility, that gave continuity to the understanding work about the main relative responsibilities to the safety and health at work, with participation of 270 treinandos. In year, as well, another 61 employees took part in the Teaching Techniques course for Instructor Collaborator. In 2008, 36 collaborators entered in six postgraduation courses patronized by the Company, in the area of managerial administration, electric power generation, safety engineering of work, environmental administration, specialization in electric power system. Other 187 employees benefited with Help Student, conceded to the participation in courses of technical and superior level that, necessarily, aggregate value to the areas or constant careers in the Positions and Salaries Plan.
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Professional performance – In the Human resources area, still was concluded in 2008, the second evaluation process phase of professional performance, that included manager's evaluation of each sector by the employees and the pairs evaluation, accomplished among colleagues of the same sector. The new version attended to solicitations of the employees, incorporating transversal evaluations. By means of Collective Agreement of Work, the Company kept the concession of a series of benefits to their employees as Social Service closet, Rehabilitation and new Professional adaptation, Preparation Program for Retirement, Pecúlio and Health Plan. By means of actions in the social area, attending to the internal indicators, the Company gave continuity to the Prevention Program and Adicções' Treatment, it offered vaccination against the influenza, promoted educational actions with focus in life health and quality, with highlight for the combat to the tobacco. In the sense of enlarging the positive performance in the safety area at work, they were defined the ideal equipament of protection for the work in height; Implanted project pilot for administration tool study that establishes preventive actions and of monitoramento of the functional performance, and produced prontuário of electric facilities, with the goal of forming system organized of information about physical infrastructure of the Company, grouped according to Norma Regulate nº 10. Performance Socio environmental Celesc's corporative commitments extend increasingly to the spill social, by means of partnerships signed with employees, consuming, vendors and stockholders. This determination results in initiatives that incorporate the respect to the social and ecological diversity, in your business scope, preserving environmental and cultural resources for future generations. Nowadays, they are in process 16 projects of social inclusion, environmental education and environment. Environment – In 2008, Celesc Distribution S.A. conquered the preventive environmental and corrective licensing of all of your enterprises implanted before the licensing become a legal exigency, with cast of necessary actions for recovery of the caused damages. The licenses are result of Studies of Environmental Conformity accomplished by the Company since 2006 and contemplate 2.820 nets km and 115 substations of your electric system. The corrective environmental licensing is an administration important instrument that serves as foundation for geared actions to the neutralization of passive detected eventual after the wide study that precedes the licenses solicitation. The Company also became to supply part of its vehicles fleet with alcohol. The measure adopted since July embraced the 289 vehicles model flex. The initiative has the goal of contributing to decrease the emission impact of carbonic in the middle ambient gas. Still attentive to the big size companies paper in the combat matter to the global heating, Celesc became company anchor of Supply Chain Leadership Collaboration (Collaboration in the Production Jail Leadership – SCLC), work that integrates Carbon Disclosure Project (Carbon Divulging Project – CDP). CDP, with thirst in England, is 15
kept by philanthropical entities that are worried with the financial risk associate to the climatic changes. Celesc's Paper as anchor in SCLC is to become aware the production jail, in which is leader, about the risks and opportunities brought by the climatic alterations. In September, in one more tip action, Celesc Distribution S.A. and the Research Combined agriculture Company and Rural Extension of Santa Catarina – Epagri signed the Protocol with sights to the technical cooperation in the Support Program development and joint execution to Verde's Urban Administration in municipal districts attended by to carrier. With the Protocol, the Company intends to stimulate the planning practice with the goal of avoiding the conflict between vegetation and the aerial and subterranean nets of public services. In November, Celesc Distribution S.A. supported, by means of fiscal incentive, for Echo Power Conference 2008 – International Forum of Responsible Energy and Sustentavel, who gathered business men's hundreds, political, investors, environmentalists and too much people and institutions that act in the energy and environment sector, in Florianópolis, Capital of Santa Catarina. During the event, they were accomplished four great conferences administered by international guests, besides 14 technical panels – with companies representatives, governments, ONGs and universities – about innovations ambientalmente responsible in the energetic sector. Simultaneously to the event, the Echo Pólis happened, who boarded the cities theme and sustainable constructions. Responsibility Social – Celesc honor the commitments taken over with ONU's Global Pact, the Managerial Pact by the Integrity and Against the Corruption, the National Pact by Work Slave Eradication and the National Pact Against the Sexual Exploration Infanto Juvenile in the Highways, offering solid contribution for the citizenship construction. It also is affiliated to the Institute Ethos of Social Responsibility and to the Foundation Abrinq. To attend to the external social indicators, Celesc develops projects that contribute, indeed, for the construction of real opportunities of human and social development in low income communities, aiming assistance to basic rights as alimentation, dwelling, bottoms up, education, work, income, leisure and culture. The Company investments in the actions paid, in 2008, the invitation to take part in the Land Book, project captained by UNESCO to spread the ethics principles, social and environmental responsibility, transparency, peoples culture and auto denomination. Among actions developed by Celesc in year, highlight for the project “Am Linked in a New Time”, that offered free professional formation to 352 young for electrician's craft predial and of distribution chains, the great majority already hired by the service companies in every Estado, and of the technical formation of 113 young people beneficed by the Young Project Apprentice, of government's Federal initiative. In the of common use scope the Future project Energy, that makes possible the water solar heaters construction with recicláveis (boxes tetrapack and bottles pet), promotes the socioeconomic development, stimulates the co-operativism and the generation of family income, promotes the respect to the environment. The Project Am Legal. I have 16
been linking, already cited in the relative item to the Program Celesc of Energetic Efficiency, regarding the stimulus actions to the conscious use of the electric power, it is other highlight of the area of social responsibility, for promoting citizenship and social inclusion. In the strategic-administrative scope, it was Working formed Group with the goal of relating the necessary actions for Celesc reach certification by Norma internationalSOCIAL ACCOUNTABILITY – SA8000, who care for the requisites for the corporations implant policies of social and human rights, attending to Work International Organization conventions – OIT. It also was given beginning to the software implantation for indicators collection of managerial social responsibility, in conformity with the models established by ANEEL, by the Brazilian Institute of Social and Economic Analyses – IBASE, Institute Ethos and by the Global Reporting Initiative – GRI. Merit - Celesc came back to be highlight in the Research of Managerial Social Responsibility of the Southern Region, accomplished by the Press Expression and by Civitas Social Responsibility. In this 5th. Research edition, the Company highlight occurred in the Consuming theme and Customers with the Future project Energy. Performance in the Capitals and Relation Market with Investors Due to the crisis reflexes that was abated about the American economy in 2008, the purses in the global finance market presented fall accentuated regarding the previous year. In Brazil, on the other side of the expressive valorization of 43,6% registered in 2007, IBOVESPA, performance main indicator of the national active, closed 2008 with devaluation of 41,2%. In the same way, the Index of the Electric power Sector – IEE presented low of 11,6%, against valorization in the previous year of 23,7%. Ahead of this scenery, the preferential actions of Celesc – CLSC6, suffered devaluation of 17,9% and the ordinary actions – CLSC3, of 13,5% regarding the shutdown of 2007. In 31 of December 2008, each action ON was quoted the R$ 48,00 and the action PNB the R$ 34,90. In terms of liquidity, the preferential actions class “B” of Celesc kept the good performance, closing 2008 negotiated in 100% of the cries accomplished in the period. Joining all the actions classes, in year were accomplished 63.633 business with Celesc's Active in BMF & BOVESPA and registered rotate order financier of R$ 1,06 billion. The performance corresponded to 0,14% from the Purse negotiations total and to 0,08% of the total financial volume registered in year. 2008 was an atypical year for the actions performance of Celesc, who have been presenting very good performance regarding their reference indicators. The picture to follow shows the final and respective quotations percentile variations of the actions of Celesc and of the market main indicators in the last five years.
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Comparative picture Actions CELESC & Market Indices Performance
CELESC PNB CELESC ON IBOVESP A - Índice de Energia IEE Elétrica
12/31/2008
2004
2005
2006
R$ 34,90 R$ 48,00 37.55 0 15.29 1
39,50
29,20
30,00
18,27
17,85 5,65
Variation %
ACUMULATED
2007
2008
17,16
24,23
-17,88
43,09
57,67
-13,51
27,66
32,93
43,65
-41,22
42,86
40,84
23,74
-11,64
60 MONTHS
115,4 2 200,0 068,8 132,4 6 2Fonte: DPRI
Highlights in the year In 2008, Celesc conquered the third place among “Best Companies for the Stockholders” in the Ranking 2008 of the Magazine Open Capital, publication specialized for the Capitals Market. The prize was conceded based on liquidity criteria, value creation, financial return, governança companies corporative and support that own actions negotiated in SP's Stock exchange. The Company was highlight in the inquiry TSR (Total Acionária Return), who measures the financial return that the stockholder obtained in the period, with note 2,88 – in a scale from zero to ten – while the average of the participants was zero. Likely, in the item Eva, who represents companies' economic return, that is, the company capacity create value considering your opportunity cost, Celesc's Note was 3,04, against an average of 0,02. In January, during commemoration of the 40 years of IBOVESPA, Celesc also received homage for his 10 years of participation in the Index. In December, Celesc received the Professionals Capitals Market Association trophy Silver of São Paulo – Apimec for its assiduity in the presentation of the Accounting Demonstrations in the seven last years. In November, Celesc took part in the 10th Forum Latibex, accomplished between the 19th and 21, in the city of Madri, in Spain, stage for encounter with investors, analysts and European stockholders. During the Forum, the Company representatives accomplished contacts with 14 financial institutions, come in investments banks and companies. The five hundred larger stockholders Individual proceeded receiving, in 2008, fact sheet of the results quarterly of the Company. The initiative has the goal in offer one more information channel with that specific public, announcing the Company main results and events partners, at the same time that allows the divulging of the website of Relations with Investors. Event Partner In January, the Box of Social Service of the Bank Employees of Brazil – Foresaw, proceeded detaining 33,11% of the actions with right to vote (ON) of Celesc, event due to the actions transfer of Santa Catarina Participations and Investments – Invesc, for debêntures creditors emitted in 1996 and lastreadas in Celesc's Actions. 18
Governance Corporative Celesc looks after the commitment of maintaining transparency relation with all of his stakeholders investing, continually, in administration practices come back to largest efficiency and professionalism. In 2008, the Administration Board had decisive performance before strategic matters (as new investments in generation and transmission) and in the definition of referring procedures to the administration of the more important administrative processes (contract indicators Redefinition of Administration, adaptation of the operational budget and of investments to the parameters regulatórios, combat new actions definition to the insolvency). Maids in 2007, the four consulting committees to the Administration Board (Juridical and of Audit, Financier, Human resources and of Strategic and Commercial Subjects), formed by advisers, directors and employees, stood out before the greeting of her attributions and were fundamental in the information poll, in order to give subsidies to the decision outlet. Celesc's Implication with Governança's Corporative principles in the that tells respect to the stockholders rights protection, as well as the equalitarian treatment, also was confirmed in the substitution process celerity of advisers, in reason of the Foresaw conquer the right to designate four members for the Administration Board (exercise of the multiple vote) and one to the Fiscal Board, when enlarging your actions volume with right to vote. Administration Board composition on December 31st, 2008 Glauco José Corte (Presidente) Eduardo Pinho Moreira Alaor Francisco Tissot Içuriti Pereira da Silva Milton de Queiroz Garcia Lírio Albino Parisotto Pedro Bittencourt Neto Daniel Arduini Cavalcanti de Arruda Arlindo Magno de Oliveira Fabio Moser José Wilson da Silva Paulo Roberto Evangelista de Lima Arno Veiga Cugnier
Representative of the Majority Stockholder Representative of the Majority Stockholder Representative of the Majority Stockholder Representative of the Majority Stockholder Representative of the Majority Stockholder Representative of the Majority Stockholder - Independent Representative of the Majority Stockholder - Independent Stockholders representative Preferencialistas - Independent Representative of the Minority Stockholders Ordinaristas Representative of the Minority Stockholders Ordinaristas Representative of the Minority Stockholders Ordinaristas Representative of the Minority Stockholders Ordinaristas Employees representative
The Administration Board is the first-level of the administrative scale. The advisers have mandate of a year, allowed A re-election for equal period. The Director Presidente of the Company integrates the Board, but does not occupy president's position of the organ.
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Composition of the Fiscal Board on December 31st, 2008 Ronaldo Baumgarten Júnior (Presidente) Célio Goulart Gilberto Gadotti Hayton Jurema da Rocha Marcelo Ferrari Wolowski
Representative of the Majority Stockholder Representative of the Majority Stockholder Representative of the Majority Stockholder Representative of the Minority representative Preferencialistas
The Fiscal Board is composite for five members and respective substitutes. The majority stockholder indicates three integrant. The preferential stockholders and the minority ordinary stockholders choose, in separated scrutiny, their representatives and respective substitutes. Composition of the Executive Directory on December 31st, 2008 Presidente Director Economic-financier director and of Relations with Investors Technical director Director of Corporative Administration Commercial director Institutional Juridical director
Eduardo Pinho Moreira Arnaldo Venicio de Souza Eduardo Carvalho Sitonio José Affonso da Silva Jardim Carlos Alberto Martins Marcelo Gasparino da Silva
Prizes and Public Mentions Award CIER – Ouro Category Celesc Distribution S.A. received, by the consecutive Friday time, the trophy CIER Ouro Category. The prize results from your performance in the Satisfaction Research of the Residential Customer accomplished by Comissiòn de Integraciòn Regional Energetics – CIER, to choose Latin America electric power best distributers. Award Abradee – Better Country Distributer in the Customer and Better Distributer Evaluation of the Southern Region. Celesc Distribution received the Prize in view of his results in the research accomplished by Abradee with consumers of 45 electric power distributers all over the Brazil, where the Company owns historical excellent. In this last edition, the values of two attributes turned the Company benchmark in the Image area: Human company, that respects the customers (index of 90,5) and just, correct Company with the customers (index 91,2). Award IASC ANEEL – Better Distributer of the Southern Region The prize is conceded annually to the distributers with the best performances in the research that composes the Index ANEEL of Consumer Satisfaction, edition 2007, in which Celesc obtained final index of 72,25. The average rate conquered by Southern
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Region, that embodies other four carriers with more than 400 thousand consuming units, belonged to 71,19. Highlight in Latin America Celesc appeared as to 258the biggest Latin-American company in the research 500 Latin America – edition Larger Companies 2008, accomplished by the Magazine America Economy, publication specialized in business economy and administration. The group also illustration in the 30O. place in the ranking of the 35 Larger State owned companies of the Energy Sector. The research analyzed balanços accounting of the referring companies to 2007, also using information of ISI Emerging Markets and of the Institute Economática, of the following countries: Argentina, Bolivia, Brazil, Chile, Colombia, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Panama, Paraguay, Turkey, Dominican Republic, Uruguay and Venezuela. Highlight among country Big size companies Celesc is to tenth larger Southern company and to 84the biggest Country company, according to research Value 1000 Larger Companies – edition 2008, accomplished by the Magazine Value with base in balanços accounting of 2007. The research also organized the ranking of the 250 Larger Holdings Brazilian, in which the group Celesc appears on 76the Place. In this Research edition, Celesc Distribution S.A. appears as to 8the biggest company of the National Electric Sector in terms of Current Liquidity. The Company also appears on the 9O. place in the Turn criterion of the Active and in 10the place in the largest Revenues classification Líquidas of the Sector. Highlight among largest & Best Celesc is to 64the biggest Brazilian company in the ranking of the 500 Larger for Sales, published in the edition 2008 of Larger & Best, published by the magazine Exam, with base in the companies performance in 2007. Between the 50 Larger State owned companies for Sale, it occupies the tenth place. In the list of the 50 Larger of Services for Sales, that gathers public and private companies, the Company appears on 22 the place. In the specific ranking of the Energy area, Celesc Distribution stood out in the Market Leadership criteria (9the Place), that measures market conquered in the sales, Brute Operational Revenue (10O. place) and Current Liquidity (10the place) In the ranking 100 Larger of the Southern Region, Celesc Distribution S.A. occupies the 7the place. In the companies analysis of Santa Catarina, Celesc Distribution S.A. is in 3the place among largest for Sales. The Subsidiary also stands out in the criteria Wealth
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created by Employee (4the place), Profitability (5the place), Investment in the Immobilized (6the place) and Current Liquidity (8the place). Award Fritz Muller The trophy was conceded to Celesc Distribution S.A. by the Environment Foundation of Santa Catarina – FATMA, in recognition to the actions set developed by the Company in the programs improvement as the one of residues administration and, mostly, by the conquest of the corrective environmental licensing of their enterprises built before the licensing become legal exigency. Fritz Müller Award is conceded to the companies and institutions promoters of geared projects to the rational use of the natural resources and to the search of innovative solutions to minimize the impact of her in the middle ambient activities. Year trophy Business man Celesc of Itajaí's Regional Agency was homaged with Year Trophy Business man, category Service rendering, like recognition of the Managerial Association of Itajaí (SC) by the services rendered by the Company in the Municipal district. For the selection of the awarded, the Association evaluates data as job and income and involvement generation in social matters. Perspectives Santa Catarina's Main economic indicators show that the industry native of Santa Catarina performance, in ascending curve in the last years, conquered great results up to 2008 when, in the last quarter, finished for suffering the impact of the international financial crisis. In some sectors, as the textile, the ceramic and the exports, that also were hardly prejudiced by the floods occurred in the Valley region of Itajaí in November month, the prejudices were larger. However, the balancing of 2008 was positive. In the accumulated, the companies produced 0,7% less than in 2007, but the internal sales grew 7,06% and the exports 11,8%. The analysts' market projection belongs to that the industry native of Santa Catarina recovery, responsible for almost 40% of the energy consumption distributed by Celesc, should initiate itself already in 2009, depending on the rapidity with which the support measures from the government are implemented. In front of such scenery, still indefinite, Celesc prepares himself for important changes, with the main goal of adapt Celesc Distribution S.A. to the Company parameters of proposed Reference by ANEEL and to promote Celesc's Invigoration Generation S.A. and of Celesc Holding. The strategic actions to are implemented by Celesc in the nearby two years were theme of a wide study developed by the Company in 2008. In Celesc Distribution S.A., the efforts will be concentrated on largest operational efficiency, via investments costs and priority reduction. For Celesc Generation S.A., the challenge is to enlarge the installed
22
capacity, maximize its operational efficiency and to seek resources and partners for such work. In Celesc, the focus is to effect its structure, making accomplishes the effective paper in the companies administration supervision where has participation, guaranteing that the strategies and defined plans be implemented and accompanied. Moreover, the Company should enlarge, already in 2009, their business in the electric power transmission area. In Santa Catarina, besides arrefecimento of the expectations on the performance of the global economy, the foreseen investments in new enterprises and enlargements are kept and should contemplate almost all Estado's Regions. For 2009, Celesc Distribution S.A. exhibits budgetary proposal of investments in the order of R$306milhões. From the estimated to tal, about R$227 million are destined the system enlargement and improvement works. With such resources, the Company intends to give guiding to the great enterprises initiated in 2008 and plans to give beginning to the construction process of other four substations in the system of 138 kV. Four in the Estado's North (Itapoá, Garuva, Navigational and Paranaguá -small) and another in the Great Florianópolis (São José of the Back country), two regions with very heated market. For Celesc Generation, the budgetary proposal of investments arrives to R$70's House million. From this total, R$42 million are foreseen for plants enlargement works. Other R$8 million are destined the improvements and more R$18 million to make possible the Company participation in the ne w plants construction. The new enterprises will be made possible by means of partnerships formed with investors interested in explore Estado's energetic potential, attracted by call launched public by Celesc Generation S.A. in April. In December month, the Company analyzed the constitution of 17 On purpose Specific societies – SPEs. From these, seven were in process and one had been approved by the Administration Board. SCGÁS, our controlled newer, it keeps firm in the goal of enlarging your market and its projects wallet, that gathers, nowadays, 69 alternative of investments translated in more of R$1 billion investments. Such projects esteem make available to the market native of Santa Catarina about 580 thousand m³/dia in the several segments and applications, for an universe around 52.000 consuming, present in all Estado's Regions Native of Santa Catarina. Independent auditors As dispositions contained in the Instruction CVM nthe 381, of 14 of January 2003, and ratified by the Circular Craft CVM/SEP/SNC nthe 02, of 20 of March 2003, Celesc report that the Independent Auditor was no good any kind of service beyond of those strictly related the activity of external audit.
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Thanks Celesc thanks the effort and your collaborators' dedication and vendors, that had a fundamental paper in the Company success history. The increasing challenges were overcome with the support from the Administration Board members and of the Fiscal Board. The effort deserves the consumers and lever recognition the enlargement proposal of Celesc for her actions in behalf of the social and economic development of State of Santa Catarina.
Florianópolis, March 27, 2009 .
The Administration.
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2008 Amount (thousands of brazilian reais - R$) 3.520.893 419.998 406.248
2007 Amount (thousands of brazilian reais - R$) 3.166.800 299.020 381.111
2 - INTERNAL SOCIAL INDICATORS
Amount
Amount
- Meals - Compulsory payroll charges - Pension plan - Helathcare - Occupational safety and medicine - Education - Culture - Professional training & development - Daycare centers or alowance - Profit sharing - Other Total Internal Social Indicators 3 - EXTERNAL SOCIAL INDICATORS
19.510 4,80 93.605 23,04 22.127 5,45 8.369 2,06 3.473 0,85 117 0,03 6 1.736 0,43 938 0,23 14.802 3,64 498 0,12 165.181 40,66 Amount % of income from operation 2.555 0,61 5.380 1,28 13.210 3,15 10.601 2,52 350 0,08 73.757 17,56 105.853 25,20 1.691.276 402,69 1.797.129 427,89 Amount % of income from operation 86 0,02 73.719 17,55 73.805 17,57
1 - CALCULATION BASES - Net revenue - Income from operations - Gross payroll
- Education - Culture - Helathcare and sanitation - Sports - Anti-hunger efforts and food security - Other Total contribuitions to society - taxes (excluding payroll charges) Total external Social Indicators 4 - ENVIRONMENTAL INDICATORS - Investments related to company production/operations - Investments in external programs and/or projects Total Environmental investments
- As regards establishment of annual targets to minimize waste, general consuption in production/ operations and increase effectiveness is use of natural resources, the company 5 - EMPLOYEE INDICATORS - Number of employees at year-end - Number of employees hired during the year - Number of outsourced employees - Number os traninees - Number of employees over 45 - Number of women working in the Company - % of management positions held by women - Number of women blacks in the Company - % of management positions held by blacks - Number of employees with disabilities or special needs 6 - SIGNIFICANT INFORMATION REGARDING EXERCICE OF CORPORATE CITIZENSHIP - Ratio between highest and lowest salary at the company - Total number of job-related accidents - Social and environmental projects conducted by the company were defined by: - Safety and health standards in the work environment were defined by: - As regards freedom to organize into unions, right to collective bergaining and internal representation of workes, the company - Pension plan covers: - Profit sharing covers: - in selecting suppliers, the same ethical and social and environmental responsability standards adopted by the company - Regarding employee participacion in voluntary work programs, the company - total number of complaints and criticism received from consumers - % of complaints and criticism solved - Total value added for distribution (in thousand of brazilian) - Distribution of value added (DVA)
% of gross payroll
% of net revenue 0,55 2,66 0,63 0,24 0,10 0,05 0,03 0,42 0,01 4,69 % of net revenue 0,07 0,15 0,38 0,30 0,01 2,09 3,01 48,04 51,04 % of net revenue 2,09 2,09
% of gross payroll
% of net revenue
18.298 5 89.881 24 18.540 5 7.895 2 2.058 1 31 0 4 0 1.595 0 899 0 12.432 3 747 0 152.380 40 Amount % of income from operation 712 0 12.050 4 76.464 26 13.382 4 313 0 65.534 22 168.455 56 1.677.757 56 1.846.212 617 Amount % of income from operation 9 0 35.916 12 35.925 12
1 3 1 0 0 0 0 0 0 0 0 5 % of net revenue 0 0 2 0 0 2 5 53 58 % of net revenue 0 1 1
( ) does not have targets ( X ) meets 51 to 75%
( ) does not have targets ( X ) meets 51 to 75%
( ) meets 0 to 50%
( ) meets 0 to 50%
(
) meets 76 to 100%
(
) meets 76 to 100%
3.964 56 2.902 237 1.534 656 24,49 68 12,27 11 2.008
4.039 85 3.150 354 1.572 668 24 71 1 12 2.007
23,94 125 ( ) officers ( X ) officers and managers ( ) officers ( ) all and managers employees ( ) is not ( ) follows involved ILO standards ( ) officers ( ) officers and managers ( ) officers ( ) officers and managers ( ) are not ( ) are considered recommended
11,43 61 ( X ) officers and managers ( ) all employees ( ) follows ILO standards ( ) officers and managers ( ) officers and managers ( ) are recommended
( ) all employees ( X ) all CIPA ( X ) encourages and follows ILO standards (X ) all employees (X ) all employees ( X ) are required
( ) is not ( X ) provides ( ) organizes involved support and encourages at the company at Procon in court 553.159 574 701 at the company at Procon in court 99.95% 82.93% 3.0% in 2007 : 2.864.121 71.86% government 10.88% employees 3.84% shareholders 4.79% third part 8.64% retained
( ) officers ( ) officers and managers ( ) is not involved ( ) officers ( ) officers ( ) are not considered
( ) all employees ( X ) all CIPA ( X ) encourages and follows ILO standards (X ) all employees (X ) all employees ( X ) are required
( ) is not ( X ) provides ( ) organizes involved support and encourages at the company at Procon in court 553.159 574 701 at the company at Procon in court 99.95% 82.93% 3.0% in 2007 : 2.864.121 71.86% government 10.88% employees 3.84% shareholders 4.79% third part 8.64% retained
7 - OTHER INFORMATION CNPJ : 83.878.892/0001-55
State: SC
Economic Sector : Public Electric Power Utility Company
Coordination: - Viviani Bleyer Remor - Phone (48) 3231-5520 Coordination: - Viviani Bleyer Remor - Phone (48) 3231-5520 E mail:
[email protected] E mail:
[email protected] Accountant: Jose Braulino Stahelin - Phone (48) 3231-6030 Accountant: Jose Braulino Stahelin - Phone (48) 3231-6030 E mail:
[email protected] E mail:
[email protected] CRC/SC - 018.996/O-8 CRC/SC - 018.996/O-8
' THIS COMPANY DOES NOT USE CHILD OR SLAVE LABOR AND HAS NO INVOLVEMENT WITH PROSTITUTION
25
OR SEXUAL EXPLOITATION OR CHILDREN OR ADOLESCENTS AND IS NOT INVOLVED WITH CORRUPTION''
(Convenience Translation into English from the Original Previously Issued in Portuguese)
BALANCE SHEETS AS OF DECEMBER 31, 2008 AND 2007 (In thousands of Brazilian reais - R$) COMPANY 2008 Assets Current Assets Cash and cash equivalents Money market investments Consumers, concessionaires and permittees Titles to receive Allowance for doubtful accounts Recoverable taxes Dividends receivable Other receivables Noncurrent Assets Long-Term Assets Trade accounts receivable Receivables from Santa Catarina State Government Deferred income and social contribution taxes Colligated, controlled or controllers Temporary investments Other receivables Investments Intangible Total Assets
134.861 2.746 223 70.927 24.387 33.536 3.042
77.090 17.260 210 105.353 (95.579) 16.772 26.106 6.968
1.856.338
1.693.626
240.490 42.002 40.293 113.236 125 44.783 51
219.993 1.623 36.878 136.658 44.783 51
1.564.095 51.753
1.473.633 -
1.991.199
1.770.716
The accompanying notes are an integral part of these financial statements.
26
2007
(Convenience Translation into English from the Original Previously Issued in Portuguese)
BALANCE SHEETS AS OF DECEMBER 31, 2008 AND 2007 (In thousands of Brazilian reais - R$) 2008 Liabilities and Shareholders' Equity Current Liabilities Suppliers Payroll and related charges Post-employment benefits Taxes payable Taxes in installments - PAES Declared dividends and interest on capital Accrued liabilities Other payables
COMPANY 2007
90.254 1.446 112 14 12.442 1.443 74.133 288 376
76.077 3.211 185 11 34.939 1.221 28.978 117 7.415
262.693
241.276
262.693 252.244 8.504 1.894 51
241.276 222.239 16.398 2.639
Shareholders’ Equity Capital capital reserve Profit reserves
1.638.252 1.017.700 102 620.450
1.453.363 1.017.700 435.663
Total Liabilities and Shareholders' Equity
1.991.199
1.770.716
Noncurrent Liabilities Long-Term Liabilities Reserve for contingencies Taxes in installments - PAES Deferred income and social contribution taxes Other payables
The accompanying notes are an integral part of these financial statements.
27
(Convenience Translation into English from the Original Previously Issued in Portuguese) STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 (In thousands of Brazilian reais - R$) COMPANY 2008 Gross operating revenue Electricity sales to final consumers Spot market energy sales Other revenues
2007 -
4.415 1.914 2.494 7
(-) Deductions from operating revenue ICMS (state VAT) PIS (tax on revenue) COFINS (tax on revenue)
5.785 1.025 4.760
2.004 276 419 1.309
(=) Net operating revenue (-) Electric utility service costs Electricity costs Electricity purchased for resale Electricity network usage charges Operating costs Expenses recovery
(5.785) -
2.411 5.380 5.444 4.302 1.142 (64) (64)
(5.785) (87.941) (95.526) 7.109 476 82.156 23.532 188.592 294.280 (8) 294.272 (9.116) (3.290) (17.222) (6.200) 258.444 258.444 670,04
(2.969) 43.100 37.498 3.944 1.658 (46.069) (67.545) 315.116 201.502 85.028 (4) 286.526 (13.626) (4.914) 5.771 2.077 275.834 70.156 345.990 897,02
(=) Gross profit (-) Operating expenses Selling General and administrative Other (=) Income from electric utility service (+/-) Financial income (expenses) (+/-) Income of equity method (=) Income from operations (+) Nonoperating income (+) Nonoperating expenses (=) Income before income and social contribution taxes (-) Provision for income tax (-) Provision for social contribution tax (+/-) Deferred income tax (+/-) Deferred social contribution tax (=) Income before reversal of interest on capital (+) Reversal of interest on capital (=) Net income Earnings per one hundred shares – Brazilian reais (R$)
The accompanying notes are an integral part of these financial statements.
28
(Convenience Translation into English from the Original Previously Issued in Portuguese)
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 (In thousands of Brazilian reais - R$) Company Capital
Reserves
Profit
Retained
of capital
reserves
earnings
Balances as of December 31, 2006
696.200
-
Increase of capital
321.500
-
509.780 (321.500)
-
Total 1.205.980
-
321.500
-
(321.500)
Reserves accomplishment
-
-
Net income
-
-
Legal reserve
-
-
Interest on capital
-
-
-
(70.156)
(70.156)
Proposed dividends
-
-
-
(28.451)
(28.451)
Profit retention
-
-
230.084
-
435.663
-
345.990
345.990
Allocation of net income: 17.299
(17.299)
(230.084)
-
-
Balances as of December 31, 2007
1.017.700
Increase of capital
-
102
-
Net income
-
-
-
Legal reserve
-
-
Proposed dividends
-
-
Profit retention
-
-
171.865
102
620.450
-
258.444
1.453.363
102 258.444
Allocation of net income: 12.922 -
(12.922) (73.657) (171.865)
(73.657) -
Balances as of December 31, 2007
1.017.700
29
-
1.638.252
(Convenience Translation into English from the Original Previously Issued in Portuguese)
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 (In thousands of Brazilian reais - R$) COMPANY 2008 Net income Items not affecting cash: Net book value of permanent assets written off Equity method Allowance for doubtful accounts Tax contingencies – long-term Deferred income and social contribution taxes Labor, civil and tax contingencies Interest and monetary variations, net
2007
258.444
345.990
46.377 (188.592) (95.579) 23.422 27.667 (2.923) 68.816
104.362 (315.116) (132.099) (12.480) 4.631 (2.155) (6.867)
105.353 (111.306) (7.615) (125) 2.338 (7.430) 3.926 (14.859)
258.714 (1.623) (5.509) 238.353 51.738 17.501 27.312 586.486
(1.765) 3 (30.661) 1.894 98 45.155 (9.627) 5.097
(15.971) (41.325) 11 (8.993) (10.145) (60) 27.902 7.204 (41.377)
59.054
538.242
-
(434.127) (434.127)
Cash flows from financing activities Transfer of agreements Dividends and interest on capital Cash provided by (used in) investing activities
102 (73.657) (73.555)
(98.607) (98.607)
(Decrease) increase in cash
(14.501)
5.508
17.470 2.969
11.962 17.470
(14.501)
5.508
Changes in current and long-term assets Consumers, concessionaires and permittees Trade accounts receivable Recoverable taxes Subsidiaries Investments Escrow deposits Dividends Other receivables Changes in current and long-term liabilities Suppliers Regulatory charges Pension plan Taxes payable Subsidiaries Payroll and related charges Declared dividends and interest on capital Other
Cash provided by operating activities Cash flows from investing activities Investments Cash used in investing activities
Cash at beginning of year Cash at end of year (Decrease) increase in cash
The accompanying notes are an integral part of these financial statements.
30
(Convenience Translation into English from the Original Previously Issued in Portuguese)
ADDED VALUE STATEMENT AS OF DECEMBER 31, 2008 and 2007 (In thousands of Brazilian reais - R$) Company 2007
2008 Added value generation energy and services Provision revenues Sale for credits for doubtful sale Other results
95.579 (8) 95.571
4.415 (29.898) 85.024 59.541
brute added value
(3.792) (131) 1.240 (604) (3.287) 92.284
(5.444) (1.956) (7.024) (14.424) 45.117
liquid Added value
92.284
45.117
66.551 188.592 347.427
343.533 388.650
3.121 46 6 3.173
2.660 69 2.729
6.031 35.828 1.178 43.037
2.971 10.692 530 14.193
Materials acquired of third party net electric power and use third party services Materials Accruals and reversions Other acquired materials
transferred Added value financial revenues Result of participations Corporate Value added to distribute added value distribution People and curators social remunerations Responsibilities (bar INSS) Benefits assistenciais Government Federal PIS, COFINS e CPMF Income tax and social contribution INSS (s/ payroll) State ICMS
-
Responsibilities intra fuels consumption sectorial Account - CCC inspection Rate ANEEL
Backers Juros and monetary variations Other Stockholders Juros on the own capital proposed Dividends retained Profits Value added to distribute Added value (average) for employee
43.037
815 84 899 15.368
42.773 42.773
4.072 20.491 24.563
73.657 184.787 258.444 347.427
70.156 28.451 247.383 345.990 388.650
31.584
64.775
The accompanying notes are an integral part of these financial statements
31
276 276
FINANCIAL STATEMENTS CONSOLIDATED
32
(Convenience Translation into English from the Original Previously Issued in Portuguese)
BALANCE SHEETS AS OF DECEMBER 31, 2008 and 2007 (In thousands of Brazilian reais - R$)
CONSOLIDATED
2008 Assets Current Assets Cash and cash equivalents Money market investments Consumers, concessionaires and permittees Trade accounts receivable Allowance for doubtful accounts Dividends receivable Recoverable taxes Services in progress Inventories Recoverable cost variations - Portion A (CVA) Regulatory assets - COFINS and PIS Other regulatory assets Other receivables
2007
1.741.504 113.746 226.526 932.554 444.473 (292.346) 1.395 102.067 33.244 31.661 93.689 3.943 8.143 42.409
1.602.248 122.251 370.391 1.042.270 202.781 (362.452) 868 43.195 14.618 18.055 69.698 3.177 11.780 65.616
2.701.381
2.626.309
732.966 40.293 101.645 13.430 44.948 2.792 297.605 44.783 146.283 33.806 7.381
798.255 36.878 206.480 10.996 38.420 2.524 379.450 44.783 41.734 36.939 51
Investments Property Intangible Deferred
12.877 1.830.240 125.298 -
70.516 1.751.085 6.453
Total Assets
4.442.885
4.228.557
Noncurrent Assets Long-Term Assets Receivables from Santa Catarina State Government Trade accounts receivable investments fund in right creditórios - FIDC Recoverable taxes Linked accounts - financial applications Deferred income and social contribution taxes Temporary investments Recoverable cost variations - Portion A (CVA) Regulatory assets - COFINS and PIS Other receivables
The accompanying notes are an integral part of these financial statements.
33
(Convenience Translation into English from the Original Previously Issued in Portuguese)
BALANCE SHEETS AS OF DECEMBER 31, 2008 and 2007 (In thousands of Brazilian reais - R$)
CONSOLIDATED
2008
2007
Liabilities and Shareholders' equity Current Liabilities Suppliers Payroll and related charges Debt charges Loans and financing Investment Fund in Credit Rights - FIDC Regulatory charges Pension plan Post-employment benefits Taxes payable Taxes in installments - PAES Declared dividends and interest on capital Recoverable cost variations – Portion A (CVA) Other regulatory charges Estimated obligations Other payables
1.154.596 386.806 19.042 763 23.098 45.814 204.157 47.526 62.891 79.246 1.443 81.489 68.319 31.936 79.061 23.005
1.181.071 325.151 23.496 732 27.000 40.384 176.398 41.970 62.891 128.748 1.221 81.136 110.163 17.358 67.455 76.968
Long-Term Liabilities Loans and financing Investment Fund in Credit Rights - FIDC Pension plan Post-employment benefits Reserve for contingencies Taxes in installments – PAES Deferred income and social contribution taxes Recoverable cost variations – Portion A (CVA) Other payables Deferred revenue
1.518.605 170.057 137.444 465.947 153.201 448.586 8.504 64.223 57.886 3.259 9.498
1.473.142 140.478 161.538 434.946 222.863 416.139 16.398 34.918 42.807 3.055 -
131.432
120.981
Shareholders’ Equity Capital Capital reserve Profit reserves
1.638.252 1.017.700 102 620.450
1.453.363 1.017.700 435.663
Total Liabilities and Shareholders' Equity
4.442.885
4.228.557
Participation of minoritary
The accompanying notes are an integral part of these financial statements.
34
(Convenience Translation into English from the Original Previously Issued in Portuguese) STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 (In thousands of Brazilian reais - R$) CONSOLIDATED 2008 Gross operating revenue Electricity sales to final consumers Distribued og natural gas Electricity sales to distributors Use of electricity network Emergency capacity charges Spot market energy sales Lease and rents Other revenues (-) Deductions from operating revenue ICMS (state VAT) PIS (tax on revenue) COFINS (tax on revenue) ISS (service tax) Global reversion quota (RGR) Energy Development Account – CDE Fuel Usage Quota – CCC Efficiency and technological – P&D Energy Efficiency Program – PEE Emergency capacity charges Rebates about sales (=) Net operating revenue (-) Electric utility service costs Electricity costs Electricity purchased for resale System use responsibility of descent Electricity network usage charges Fuel natural gas Transport of natural gas Proinfa Operating costs Personnel and management Materials Outside services Depreciation Locacions Insurance Taxs Other expenses Other expenses Cost of services provided to third parties (=) Gross profit (-) Operating expenses Selling General and administrative Other (=) Income from electric utility service (+/-) Financial income (expenses) (+/-) Resultado de equivalência patrimonial (=) Income from operations (+) Nonoperating income (+) Nonoperating expenses (=) Income before income and social contribution taxes (-) Provision for income tax (-) Provision for social contribution tax (+) Deferred income tax (+) Deferred social contribution tax (=) Income before reversal of interest on capital (+) Reversal of interest on capital Participation of minoritary (=) Net income Earnings per one hundred shares – Brazilian reais (R$)
2007 5.365.275 4.555.166 510.816 44.022 174.234 (4) 21.834 32.042 27.165 1.844.382 1.033.178 91.057 415.222 117 23.276 142.378 108.827 15.158 15.158 (4) 15 3.520.893 2.691.689 2.269.647 1.660.129 249.961
242.028 58.665 58.864 417.179 220.323 30.364 39.612 123.307 290 153 224 (1.060) 3.966 4.863 829.204 400.981 49.031 301.772 50.178 428.223 (12.808) 4.583 419.998 10.360 1.825 428.533 20.360 7.585 (81.741) (29.427) 289.420 (30.976) 258.444 670
The accompanying notes are an integral part of these financial statements.
35
4.982.946 4.559.377 116.309 26.727 172.067 59.059 28.608 20.799 1.816.146 968.598 82.367 375.385 99 21.916 135.723 167.046 40.528 24.480 4 3.166.800 2.276.764 1.911.685 1.582.134 235.239 46.160 20.383 27.769 362.907 198.061 23.700 37.644 100.646 181 45 162 (2.700) 5.168 2.172 890.036 526.629 194.471 292.927 39.231 363.407 (68.041) 3.654 299.020 102.696 2.112 399.604 119.578 45.399 38.560 13.881 287.068 70.156 (11.234) 345.990 897
(Convenience Translation into English from the Original Previously Issued in Portuguese)
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 (In thousands of Brazilian reais - R$) Reserves of capital
Capital
Profit reserves
Retained earnings
Balances as of December 31, 2006
696.200
-
509.780
Increase of capital Reserves accomplishment Net income Allocation of net income: Legal reserve Interest on capital Proposed dividends Profit retention
321.500 -
-
(321.500) -
345.990
321.500 (321.500) 345.990
-
17.299 230.084
(17.299) (70.156) (28.451) (230.084)
-
435.663
(70.156) (28.451) 1.453.363
-
Balances as of December 31, 2007 Increase of capital Net income Allocation of net income: Legal reserve Proposed dividends Profit retention Balances as of December 31, 2008
1.017.700 -
102 -
-
-
12.922 171.865
102
620.450
1.017.700
-
The accompanying notes are an integral part of these financial statements.
36
-
Total
-
1.205.980
258.444
102 258.444
(12.922) (73.657) (171.865)
(73.657) 1.638.252
-
(Convenience Translation into English from the Original Previously Issued in Portuguese).
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 (In thousands of Brazilian reais - R$) 2008 Net income Participation of minority in the result Items not affecting cash: Depreciation and amortization Adjustment of the Stockholders' Equity of the controlled Net book value of permanent assets written off Allowance for doubtful accounts
Equity method
Tax contingencies – long-term Deferred income and social contribution taxes Labor, civil and tax contingencies Participation of minority in the equity Interest and monetary variations, net Changes in current and long-term assets Consumers, concessionaires and permittees Trade accounts receivable Recoverable taxes Services in progress Inventories Recoverable cost variations – Portion A (CVA) Regulatory assets Investments Dividends Escrow deposits Other receivables Changes in current and long-term liabilities Suppliers Regulatory charges Pension plan Post-employment benefits Taxes payable Regulatory liabilities Accrued compensation and related charges Deferred income Result of future exercises Declared dividends and interest on capital Other Increase of long term assets Money market investiments Total of the operational activities investments activities Investments Property, plant and equipment Diferred charges Special liabilities Total in investing activities Financing activities Loans and financing – net
Investment Fund in Credit Rights - FIDC Transfer of agreements Advancement for capital future increase Dividends and interest on capital Total in investing activities Cash effects total Cash at beginning of year Cash at end of year Variation in the cash
CONSOLIDATED 345.990 11.234
140.736 (2.884) 93.641 (70.106) (4.583) 29.305 81.845 50.432 63.962 671.768
117.366 111.018 85.868 (3.654) (26.284) (26.248) 12.051 109.747 25.465 762.553
109.716 (136.857) (65.400) (18.626) (13.606) (115.714) (527) (17.985) 15.877 (243.122)
(73.175) (50.391) 15.431 12.150 7.249 (10.996) 72.549 51.738 (868) 489 (16.520) 7.656
61.655 27.759 (16.361) (69.662) (57.666) (14.260) 7.152 9.498 353 (53.759) (105.291) 18 18 323.373
25.570 8.175 (12.556) (72.510) (13.416) 30.853 13.758 (6.386) 80.060 39.566 93.114 (2.431) (2.431) 860.892
(426.037) (1.587) 42.986 (384.638)
(113.019) (507.529) (7.621) 7.204 (620.965)
25.707 (40.099) 14.483 102 (91.298) (91.105) (152.370) 492.642 340.272 (152.370)
6.286 200.000 15.583 (98.607) 123.262 363.189 129.453 492.642 363.189
The accompanying notes are an integral part of these financial statements. 37
2007
258.444 30.976
Convenience Translation into English from the Original Previously Issued in Portuguese)
ADDED VALUE STATEMENT FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 (In thousands of Brazilian reais - R$) 2008 Added value generation Energy and Services energy and services sale gas sale Provision for credits for doubtful sale Other results
2007
5.365.275 70.208 8.535 5.444.018
4.866.637 116.309 (85.692) 100.584 4.997.838
Brute added value Reintegration quotas
(1.910.090) (300.693) (198.753) (49.581) (22.015) (14.103) (2.495.235) 2.948.783 (140.736)
(1.817.373) (66.543) (188.592) (41.377) (12.058) (55.085) (2.181.028) 2.816.810 (117.366)
Liquid Added value
2.808.047
2.699.444
Transferred Added value Financial revenues Result of participations Value added to distribute
234.822 4.583 3.047.452
164.677 2.864.121
248.069 21.358 14.784 31.463 8.499 31.804 355.977
171.938 37.490 12.432 29.350 11.753 48.733 311.696
507.383 139.113 72.398 718.894
479.532 112.536 69.415 661.483
27.439 1.033.178 539 1.061.156
968.598 470 969.068
117 1.071 1.188
99 839 938
Materials acquired of third party Net electric power and use Natural gas and carry of gas Third party services Materials Accruals and reversions Other acquired materials
Added Value Distribution People and curators Social Remunerations Responsibilities (bar INSS) Participation in the Profits and Results Benefits assistenciais Labor Litigation Other Government Federal PIS, COFINS e CPMF Income tax and social contribution INSS (s/ payroll) State Deinfra ICMS IPVA Municipal ISS IPTU Responsibilities intra fuels consumption sectorial Reserva Global de Reversão - RGR Account - CCC Account of Energetic Development - CDE Inspection Rate ANEEL AGESC Research and Development and Energetic Efficiency Incentive program the Alternative Sources - PROINFA Financial Compensation for the of water resourses Capacity responsibilities Emergencial
23.276 108.827 142.378 7.598 2.004 30.316 58.864 1.032 (4) 374.291 2.154.341
Backers
The accompanying notes are an integral part of these financial statements
38
21.916 167.046 135.723 7.064 497 65.008 27.769 1.557 4 426.584 2.057.135
(Convenience Translation into English from the Original Previously Issued in Portuguese) NOTES TO THE FINANCIAL STATEMENTS (Amounts in thousands of Brazilian reais – R$) 1. General Information Centrais Elétricas de Santa Catarina S.A. – Celesc is a publicly-traded holding company, which has shareholder controller as the Santa Catarina State (50.18% of its common share), is controller, since October 2, 2006 the parent company of the wholly-owned subsidiaries Celesc Geração S.A. and Celesc Distribuição S.A. Celesc is engaged, through its subsidiaries, in implementing the electric power policy established by Santa Catarina State; conducting socioeconomic studies, researches and surveys for power distribution purposes, together with government agencies or private entities; planning, designing, building and operating systems for generation, transmission, storage, transformation, distribution and sale of power, mainly electric power, and related services; operating the systems directly, by means of subsidiaries, affiliates or in cooperation; charging tariffs and fees for supply of power, particularly electric power; developing, by itself or in partnership with public or private companies, projects related to power generation, distribution and sale, telecommunications and utility infrastructure; conducting scientific and technological researches on alternative power generation systems, telecommunications, and utility infrastructure. These statements Accounting are presented in Real that is A main coin dasoperações and environment in which A company acts, and they represent A patrimonial position and company financier, in 31 of December 2008, the result of their operations accomplished input 01 of January 2008 and December 31st, 2008, the mutations of your equity, of the cash flows and of the referring added value to the exercise finish in that date. 2. Regulatory Environment The generation and distribution activities unbundling process complies with the provisions of Federal Law No. 10848, of March 15, 2004, was authorized by State Law No. 13570, of November 23, 2005, and was approved by the National Electric Power Agency (ANEEL) through Resolution No. 712, of October 3, 2006. The version of assets and liabilities corresponding to each segment and main balances of the assets and liabilities transferred to the whole owned subsidiaries responsible for the Generation and Distribution are demonstrated in the Explanatory Note No. 43. 2.1 Of the Concessions The concessions terms will have the next validities: Celesc Distribuição S.A. Like defined in the concession covenant in the 56/99 – ANEEL in its clause third the term for electric power distribution concession will be in force up to July 07th, 2015. Celesc Geração S.A. Like defined in the concession covenant in the 55/99 – ANEEL the concessions expiration terms of the hydroelectric (PCHs) will be in force as below:
39
3. Accounting Statements Preparation bases The Statements exercise Accounting finish on December 31st, 2008 were elaborated according to the new practices accounting adopted in Brazil, with integral assistance of the Federal Law in the 11.638/07 and Temporary Measure in the 449/08, and pronouncements emitted by the pronouncements' Committee Accounting – CPC and approved by the Federal Board of Accounting – CFC and by the Values Furnitures Commission – CVM, and the applicable the Electric power Public Service carriers. According to the Pronouncement Technician CPC 13 – Initial Arrogation of the Federal Law nº 11.638/07 and of the Temporary Measure n the 449/08 A Company chose as transition date the day January 01st, 2008, therefore the relative comparative information to the closed exercise on December 31st, 2007 are presented according to A legislation and valid rules until that date. The initial balance sheet and the effects of the initial arrogation of the Federal Law n the 11.638/07 about the equity and result of company are presented in the Explanatory Note nº 05. 4. Significant Accounting Practices 4.1 General Practices Accounting a) Changes Introduced by the Federal Law nº 11.638/07 and Temporary Measure nº 449/08 In December, 28 2007, it was promulgated A Federal Law nº 11.638/07, that changes A Societies Law for Lawsuits regarding the practices accounting adopted in Brazil, from the social exercise that will be ined on December 31st, 2008. According to this Law, A normative accounting emission by CVM and too much organs regulators, should be made in consonance with the international standards. Afterwards, A Temporary Measure nº 449, of 03 of December 2008 modified items of the Federal Law nº 11.638/07 and of the Societies Law for Lawsuits. The main alterations that had effect about the Statements Accounting of the Company are:
40
· Applications evaluation in financial instruments classified in the working asset or in the long term achievable by your just value, when whether treat applications destined to the negotiation or kept until the expiration. · Adjustment concept introduction A present value for the operations enable and long -term liability and for the important of short run. · Creation again accounts subgroup, Intangible, for presentation ends in the patrimonial balancing. This account registers the rights that have for incorporeal object goods destined to the company operations maintenance. · Elimination of the subgroup of Deferred Assets. The existing balance at December 31, 2008 in deferred assets, which by their nature, can not be allocated to another group of accounts, can remain active in this classification until a complete recovery, subject to review on its recovery. . · Mandatory of recovery capacity periodic evaluation of the values registered in the enable immobilized, intangible and differed, with the goal of assuring that: (i) A loss for not-recovery of these active, be registered as a result of decisions to discontinue the relative activities An active referred or when there is evidence that the operations results, will not be enough to assure A referred active accomplishment and (iI) the criterion used to determine An estimate of remaining useful life, of such active with the goal of registering A depreciation, amortization and exhaustion is revised and fitting. · The government subventions d evem be recognized as revenue along the benefit period, confronted with the expenses that intends to compensate, in systematic base, since the terms to her bound have been accomplished. . Replacing the statement of sources and uses of resources by the cash flows statement and include the value added statement. . The alterations introduced by the Federal Law nº 11.638/07 and by the goods 36 and 37 of the Temporary Measure nº 449 that modify the revenues recognition criterion, costs and expenses computed in the exercise net profit poll will not have effects for poll ends artificial person's subject real profit to the Tributary Regime of Transition – RTT. They owe seronsiderados, for tributary ends, the methods and valid criteria accounting on December 31st, 2007. b) Classification of current and noncurrent In the Balance Sheet, assets and maturing obligations or expectation of completion within the next 12 months are classified as certificates circulating items and those with salary or with expectation of completion exceeding 12 months are classified as noncurrent items. c) Compensation input Accounts As a general rule, the Financial Statements, or assets and liabilities, or revenues and expenses are offset one another, except when offsetting is required or permitted by a statement or Standard Brazilian accounting and compensation that reflects the essence of the transaction.
41
d) Recoverable value of Assets (“Impairment”) The property and other non-current assets are subject to recoverability testing to identify losses due to "impairment" annually or when events or changes in circumstances indicate that the carrying value may not be recoverable. The loss of "impairment" is recognized by the amount by which the carrying value of assets exceeds the recoverable amount, which is the greater of net selling price and value in use of an asset. e) Cash and Equivalent of Cash Are classified as cash and cas h equivalents, cash and bank deposits in kind and financial applications available for the short term, highly liquid, which are readily convertible to a known amount of cash and are subject to an insignificant risk of change in value. f) Financial Instruments Os ativos financeiros adquiridos principalmente com a finalidade de utilização no curto prazo, gerenciados em conjunto e para os quais existe evidência de padrão recente de realização de lucros a curto prazo, são mensuradas ao valor justo lançado em conta de resultado. Os investimentos mantidos até o vencimento são ativos financeiros não derivativos com pagamentos fixos ou determináveis com vencimentos definidos e para os quais a entidade tem intenção positiva e capacidade de manter até o vencime nto. São mensurados pelo custo de aquisição ou valor de emissão, atualizado conforme disposições legais ou contratuais, ajustado ao valor provável de realização, lançado em conta de resultado. g) Consumers, concessionaires and permittees In Celesc Distribuição S.A., refer to measured and billed services not yet paid by consumers as of December 31, 2008. Include also revenues from unbilled electric power sales recognized based on estimated consumption between the last reading date and the end of each month. h) Trade accounts receivable Recorded in subsidiary Celesc Distribuição S.A., refer to receivables from power sales negotiated for payment in installments, plus fines calculated through the negotiation date, as determined by ANEEL, and interest calculated through December 31, 2008. Os valores vincendos estão ajustados a valor presente com base em taxas de desconto que refletem as melhores avaliações do mercado quanto ao valor do dinheiro no tempo e os riscos específicos destes ativos, e os valores vencidos deduzidos por provisão para perdas conhecidas ou estimadas. i) Inventories Refer to materials for maintenance of operations and recorded at average acquisition cost. Materials for use in construction are classified as property, plant and equipment in progress and stated at historical cost. j) Receivables from Santa Catarina State Government Refer to debts owed by Santa Catarina State to Celesc, plus, when applicable, interest and monetary adjustment calculated monthly according to the terms of the agreements, as shown in note 15. 42
k) Temporary investments Represented by equity interests in other companies and stated at cost, less a valuation allowance, when applicable. These investments are available for sale. l) Investments Os investimentos avaliados pelo método de custo estão avaliados ao custo de aquisição, reduzidos ao seu valor recuperável quando aplicável. Os investimentos em empresas controladas são ajustados pelo método da equivalência patrimonial. m) Property, plant and equipment Recorded in Celesc Distribuição S.A.and in Celesc Geração S.A., stated at acquisition or construction cost, less accumulated depreciation based on the balances recorded in the respective Registration Units (UC) as determined by Administrative Rule No. 815, dated November 30, 1994, issued by the DNAEE (National Department of Water and Electric Power) and updated by ANEEL resolutions No. 15, dated December 24, 1997 and No. 240, dated December 05, 2006. In accordance with Accounting Instruction No. 6.3.10 of the Accounting Manual for Electric Power Utilities, interest, financial charges, and monetary and exchange variations related to financing from third parties, used in property, plant and equipment in progress, are stated in this subgroup as “Cost”, as shown in note 18. Under Accounting Instruction No. 6.3.23 of the Accounting Manual for Electric Power Utilities, concession obligations are recorded as property, plant and equipment offsetting accounts and refer mainly to cash received from consumers for use in projects necessary to fulfill electric power supply orders. These obligations are directly related to the Electric Power Concession and will be settled as determined by ANEEL. n) Intangible The intangible active with indefinite useful life starting from January 01st, 2009 are not more amortized and are submitted annually to recuperabilidade test. The intangible active with defined useful life are amortized of systematic form along its estimate useful life and are submitted to recuperabilidade test when there are internal or external clues that they can be devalued. o) Suppliers Include the Company’s debts to power, natural gas, charges for using the power network, material and service suppliers, as shown in note 22. p) Income and social contribution taxes Registred by the controller and subsidiary Celesc Distribuição S.A., calculated according to rules established for companies that use the taxable income basis. 43
Deferred income and social contribution taxes, recorded in Noncurrent assets and Noncurrent liabilities, arise from temporary differences considered at the time of their calculation and tax loss carryforwards. These amounts were calculated at statutory rate, in conformity with CVM Resolution No. 73, of August 20, 1998, and CVM Instruction No. 371, of June 27, 2002, as shown in notes 12 and 31. q) Post-employment benefits In compliance with CVM Resolution No. 371, of December 13, 2000, costs related to pension plans and other post-employment benefits are recognized as liabilities, based on actuarial calculations, using the Projected Credit Unit Method to determine the present value of the obligations, as shown in note 25. r) Current Liabilities and Noncurrent The passive are registered by your estimate value of accomplishment, fit A present value when applicable, with base in discount rates that reflect the market best evaluations regarding the money value in time and the specific risks of these passive, and added, when applicable, of the correspondents responsibilities and incurred monetary variations, in base “pro -failure day”. s) Other assets and liabilities Assets and liabilities legally or contractually subject to monetary variation are adjusted based on indexes established in the respective law or contract, in order to reflect the amounts adjusted through December 31, 2008. Other assets and liabilities are stated at amounts incurred on inception date, and assets are reduced by an allowance for losses, when applicable. t) Estimate Accounting trial and Use A preparation of Statements Accounting according to the practices accounting adopted in Brazil requires that A Company administration bases on estimate for the record of some transactions that affect the active and passive, revenues and expenses, as well as An information divulging about data of her Statements Accounting. The final results of these transactions and information, when of its effective accomplishment in subsequent periods, can differ of these estimate. The political accounting and areas that require a larger degree of estimate trial and use, in the preparation of the Statements Accounting are: · Credits for doubtful sale that are recognized directly in the result of exercise, as A losses expectation; · Contingent liability that are provisionados according to A success expectation, obtained and altogether A juridical office of the company. u) Poll of the Result The result is select by the exercises competence regime for revenues appropriation, costs and the corresponding expenses. v) Profit for Share Calculated with base in the quantity of existing lawsuits in the closing date of the Statements Accounting.
44
4.2. Specific Accounting Practices for the Electric Power Industry a) Accounting Manual for Electric Power Utilities Celesc and its subsidiaries adopt the chart of accounts included in the Accounting Manual for Electric ower Utilities established by ANEEL Resolution No. 444, of October 26, 2001, and amended by ANEEL Resolution No. 668, of December 26, 2001, ANEEL Resolution No. 473, of March 6, 2006, ANEEL Regulatory Resolution No. 219, of April 11, 2006, ANEEL Rulings No. 3033 and 3034, of December 21, 2006, and ANEEL Ruling No. 3073, of December 28, 2006, ANEEL Ruling No. 294, of February 1, 2008 and ANEEL Ruling No. 4815, of December 26, 2008. b) Indirect costs of property, plant and equipment in progress Part of central administration expenses is allocated to property, plant and equipment in progress. This allocation is made monthly and corresponds to expenses on Company personnel and contractors used in investment projects. c) Recoverable cost variations - Portion A (CVA) This account records nonmanageable costs defined by ANEEL and included in the Recoverable Cost Variations – Portion A account, which have not yet been transferred to the electric power tariffs. Such costs are part of the tariff adjustment basis and are recorded in the statement of income as the related revenues are invoiced to consumers, as determined by Interministerial Rules No. 25 and 116, of January 24, 2002 and April 4, 2003, respectively, and supplementary provisions of the ANEEL. The balance of this account is monetarily adjusted based on Selic (Central Bank overnight rate). d) PIS and COFINS (taxes on revenue) As a result of the change in the method for calculation of PIS and COFINS (taxes on revenue) by Law No. 10,637 of December 30, 2002 and Law No. 10,833 of December 29, 2003, ANEEL excluded these taxes from the calculation of electric power tariffs. As of the tariff adjustment on August 7, 2005 by ANEEL Resolution No. 161, of August 1, 2005, Celesc was authorized to charge PIS and COFINS separately from consumers. Since then, these taxes are stated separately in the electric power bills. e) Special liabilities linked to electric power concession Refer to payments made by consumers in order to contribute to expansion projects necessary to fulfill electric power supply orders, recorded at the original amount of the contributions allocated to projects. Assets acquired with the corresponding funds are recorded in the property, plant and equipment of the subsidiary Celesc Distribuição S.A., according to provisions of the Accounting Manual for Electric Power Utilities. Due to their nature, these contributions do not represent actual financial liabilities since they will not be refunded to consumers. f) Provision for Credits for Doubtful Sale – PCLD It is recognized in enough considered value by the administration to cover the probable losses in the accomplishment of the consumers and titles accounts receivable A receive whose recovery is considered unlikely. 45
It is constituted with base in the values A receive from consumers of the residential class won more than 90 days ago, of the commercial class won more than 180 days ago and of the industrial, rural classes, public powers, I luminação public and public services won more than 360 days ago, like defined in the Manual of Electric power Public Service Accounting. g) not made money revenue It corresponds to the electric power fornecimento revenue, deliver and not made money to the consumer and to the chain utilization revenue of not made money distribution, calculated in estimate base, regarding the period after A monthly mensuration and even month last day. 5. Arrogation effects of the Federal Law nº 11.638/07 A company chose as transition date the day January 01st, 2008, therefore the relative comparative information to the closed exercise on December 31st, 2007 are presented according to A legislation and valid rules until that date. The initial patrimonial balancing in the transition date for the new practices accounting adopted in Brazil, like required by the Pronouncement Technician CPC 13 – Initial Arrogation of the Law nº 11.638/07 and of the Temporary Measure nº 449/08, is presented to follow: ASSETS Parent Company 2008 Adjustment 2007 Current Assets Noncurrent Assets Long-Term Asset Deferred income and social contribution taxes Others Investments
-
77.090
77.090
2008
2007
1.602.248
-
1.602.248
1.692.981
(645)
1.693.626
2.622.513
(3.796)
2.626.309
219.993 136.658 83.335
-
219.993 136.658 83.335
800.044 381.239 418.805
1.789 -
798.255 379.450 418.805
1.472.988
(645)
1.473.633
70.516
-
70.516
-
1.751.085
Fixed assets
-
-
-
1.751.085
Intangible
-
-
-
868
Deferred charges
-
-
-
-
Total assets
Consolidated Adjustment
1.770.071
(645)
46
1.770.716
4.224.761
868
-
(6.453)
6.453
(3.796)
4.228.557
LIABILITIES Parent Company Adjustment
2008 Current Liabilities Empréstimos e financiamentos Outras contas Noncurrent Assets Long-Term Asset Deferred income and social contribution taxes Others Investments
-
645
Consolidated Adjustment
2008
2007
76.077 76.077
1.179.954 25.883 1.154.071
(1.117) (1.117) -
1.181.071 27.000 1.154.071
1.693.626
2.622.513
(3.796)
2.626.309
-
76.077 76.077 1.692.981
2007
219.993 136.658 83.335
-
219.993 136.658 83.335
800.044 381.239 418.805
1.789 -
798.255 379.450 418.805
1.472.988
(645)
1.473.633
70.516
-
70.516
-
1.751.085
Fixed assets
-
-
-
1.751.085
Intangible
-
-
-
868
868
-
Deferred charges
-
-
-
-
(6.453)
6.453
(3.796)
4.228.557
Total assets
1.770.071
(645)
1.770.716
4.224.761
2008 Parent Company Consolidated Patrimônio líquido antes dos efeitos da adoção da Lei nº 11.638 e da Medida Provisória nº 449 CPC 13 - Baixa do ativo diferido em lucros acumulados CPC 13 - Baixa do ativo diferido - Efeito da equivalência patrimonial CPC 13 - Baixa do ativo diferido - Participação dos minoritários CPC 07 - Ajuste a valor presente - Títulos a receber Patrimônio líquido após os efeitos da adoção da Lei nº 11.638 e da Medida Provisória nº 449
1.658.472 -
1.658.472 -
-
-
(20.220)
(20.220)
1.638.252
1.638.252
2007 Parent Copany Consolidated
1.453.363 -
1.453.363 (3.796)
(645)
-
1.452.718
3.151 1.452.718
6. Statements Consolidated Accounting They were consolidated the Statements Accounting da Celesc com como subsidiarias integrais Celesc Geração S.A., Celesc Distribuição S.A., and of the Controlled SCGÁS. The criteria adopted in the consolidation are those foreseen in the Federal Law n the 6.404 of December 15th, 1976's, updated by the Federal Law nº 11.638, of 28 of December 2007, Temporary Measure nº 449, of 03 of December 2008, and Judicial inquiry CVM in the 247/96 of which we highlight the next: · accounts balances elimination enable and transactions current passive among societies included in the consolidation; · investments elimination in the socie ties controlled in the proportion of their respective patrimonies; · revenues elimination and of the current expenses of business with the societies included in the consolidation; · participation highlight of the minority in the equity and in the result. 47
7. Cash and Cash Equivalents and Money Market Investments Cash and cash equivalents of Celesc Holding and its subsidiaries Celesc Geração S.A. and Celesc Distribuição S.A. and the controlled SCGÁS are invested in Federal and private banks, bank accounts and investment funds. The balance of the fund/cash presented is R$7 of SCGÁS. COMPANY Cash and Cash equivalents 2008 Federal Banks Private Banks
2007
2,531 215 2,746
CONSOLIDATED Cash and Cash equivalents 2008 Federal Banks Private Banks Funds Cash
Financial institution Banco Bradesco S.A. BESC S.A.
Financial institution Banco do Brasil S.A. Caixa Econômica Federal Banco Bradesco S.A. BESC S.A.
Financial institution Caixa Econômica Federal (1)
2007
105,547 8,192 7 113,746
COMPANY Type of investment Maturity CDB/RDB Prime fund
Sundry Sundry
CONSOLIDATED Type of investment Maturity CDB Investment Funds CDB/RDB Prime fund
Sundry Sundry Sundry Sundry
17,044 216 17,260
106,561 15,671 19 122,251
Rates 98,70% CDI 99,17% CDI
Rates 99,50% 99,50% 98,70% 99,17%
CDI CDI CDI CDI
CONSOLIDATED - Long term Type of investment Maturity Rates FAQ Prefixed
Sundry
(1) The money market investments refer to controlled SCGÁS
48
99,50% CDI
2008 206 17 223
2007 194 16 210
2008
2007
175,356 28,570 13,932 8,669 226,527
282,651 78,360 194 9,186 370,391
2008
2007
2,792 2,792
2,524 2,524
8. Consumers, Concessionaires and Permittees CONSOLIDATED Past - due Consumer, concessionaires and permittees
Residential Industrial Com., Services and other activities Rural
Falling due
Past - due
up to
over
90 days
90 days
Allowance for doubtful accounts (c)
Total
2008
Balance
2007
2008
2007
77,900
41,597
35,509
155,006
(35,308)
(28,263)
119,698
134,830
108,054
31,257
146,613
285,924
(117,593)
(105,876)
168,331
154,970
41,954
15,276
36,352
93,582
(32,890)
(28,002)
60,692
66,869
(3,605)
30,378
31,731
23,085
4,391
6,030
33,506
(3,128)
Government
8,043
7,720
19,882
35,645
(16,180)
(15,729)
19,465
25,921
Public Lightning
8,457
4,767
15,053
28,277
(13,856)
(12,322)
14,421
16,295
Public Service
4,997
3,380
4,132
12,509
(754)
(100,741)
11,755
38,600
145,662
-
-
145,662
-
-
145,662
150,168
41,057
-
-
41,057
(5)
41,052
26,026
7,663
-
-
7,663
-
Unbilled supply Distribution of canalized gas Values Responsibilities a Rec. in the Tariff Subtotal – Consumers
466,872
108,388
263,571
838,831
Free energy (a)
38,206
-
-
concessionaires and permittees (b)
29,301
1,753
2,014
Energy auction
5,966
-
-
Other receivables
3,121
3,948
9,414
543,466
114,089
274,999
(219,714)
(294,597)
7,663 619,117
645,410
-
38,206
35,878
(1,401)
(1,401)
31,667
42,228
-
-
5,966
4,030
-
-
16,483
18,726
5,966 16,483 932,554
-
-
38,206 33,068
(59)
(221,115)
(295,998)
711,439
746,272
a) Free energy The receivable recognized by Celesc refers to electric power provided through the CCEE (Electric Power Trade Chamber), during the Emergency Power Rationing Program (PERCEE). In 2001, the “Overall Agreement for the Electric Power Sector” was signed by generation and distribution concessionaires and the Federal Government. This agreement was deployed by ANEEL, which established criteria for the recovery of revenues and extraordinary losses related to the period in which the Emergency Power Rationing Program was in effect. ANEEL Resolution No. 36, of January 29, 2003, amended by Resolution No. 89, of February 25, 2003, established the procedures for recovery of free energy amounts and their transfer to generation and distribution companies, starting February 2003. The free energy amount was approved by ANEEL Resolution No. 001, of January 12, 2004, and Resolution No. 45, of March 3, 2004, which granted Celesc the right to refund of free energy in the proportion of 1.6540% of the total amount approved, which corresponds to R$46,945 (historical amount), realizable over 72 months, starting January 2003. Celesc’s receivables, after the conclusion of the settlement process in July 2003, are as follows: CONSOLIDATED
2008 Opening balance Payment in cash Amount Received
35,878 4,887 (2,559) 38,206
49
2007 40,023 4,663 (8,808) 35,878
b) Concessionaires and Permittees The credit kept by Celesc refers to electric power sale transactions for carriers and permissionárias of electric power distribution, located in the Santa Catarina's State. b) Allowance for doubtful accounts Based on a careful analysis of the collectibility of receivables, combined with collection efforts implemented by Celesc for recovering past-due amounts, and according to ANEEL’s requirements, the Company recognized an allowance for losses on the following receivables: • • •
residential bills - over 90 days past due; commercial bills - over 180 days past due; industrial, rural, public sector, public lighting, public service and other bills - over 360 days past due.
Changes in the allowance for doubtful accounts in the period were as follows: CONSOLIDATED Balance as of December 31, 2007 Allowances recognized for the period Reversion Balance as of December 31, 2008 Consumer, concessionaires and permittees Titlos to Receive
362,452 61,359 (131,465) 292,346 221,115 71,231
9. Trade Accounts Receivable Refer to receivables from sale of electric power and others, arising from past-due bills negotiated for payment in installments, and include late payment charges through the date of debt consolidation. COMPANY Description Total (-) Allowance for doubtful accounts Amount Negotiated (adjusted) * Current Long term
2008 133.149 (20.22) 112,929 70,927 42,002
* In the up- to-date amount, R$ 11.064 refers to negocioação accomplished with A Cansan on April 30th, 2008 that will be received in 24 bits, and the amortizations initiated on October 31st, 2008.
For the Adjustment a Present value – AVP was used the pro method -failure day. A Company chose the index CDI + 1,00% as discount rate A present value of her operations enable in the short run and in the long term accomplished with A Casan, for considering that this index reflects juros compatible with An invoice slowdown nature of energy, the term and the risks related to transactions, carrying itself in consideration, yet, the market rates practiced in the initial date of the transactions. In April 2008 A mensuração accounting A present value was applied in the initial recognition of this enable, in other words, A date of effective transaction considering A valid rate A transaction date, by the remaining term until A values due date. 50
Description 2008 Transaction R$ 143.219 Discount rate 1,64% Amortization value in Year (R$11.935) Adjustment A Present value in the Adjustment Transaction (R$ 35.257) Value Date A Present value Accomplished in 2008 R$ 15.037 Balance in 12.31.2008 R$ 111.064 Working asset 70.430 Assets Not Circulating 40.634 The adjustment amount A present value had as compensation An account of financial expenses (explanatory note in the 36) is the accomplished in year had as compensation An accounts of corresponding financial revenues in the result. CONSOLIDATED Description 2008 Total (-)PCLD Amount Negotiated (adjusted) Current Long term
2007
546,118 71,231 474,887
409,261 66,454 342,807
444,473 101,645
202,781 206,480
A Celesc Distribuição S.A. it comes adopting administrative and judicial measures with the goal of decreasing the credits value above demonstrated. The responsibilities A receive for slowdown are calculated according to the contractual terms established with the consumers. 10. Recoverable Taxes Celesc registered taxes to compensate only the IRPJ and CSLL Negative Balance calculated in the fiscal year of 2007 and 2008, which shall be compensated with taxes payable in subsequent periods and also gathered values in the quality of Irpj's Estimate and CSLL of the exercise of 2008. A Celesc Geração S.A. it owns registered in your I enable referring values To PIS and COFINS paid A greater than will be compensated in subsequent periods. Celesc recorded withholdings, recoveries and prepayments for future offset against taxes payable, where the most relevant values are originated from the Value added tax on sales and services – ICMS credited in the purchase of the fixed assets of the company. The Taxes to be recovered of SCGÁS presented as long term realizable correspond to ICMS credits resulting from the acquisition of materials and equipments for the construction of the works and distribution of natural gas, registered based on the understanding of legal advisers regarding the success in recovering such credits. In 2000, the Permanent Commission of Tax Matters of the Treasury State Department – COPAT, of the State Secretariat of the Farm of Santa Catarina if manisfested unfavorable opinion regarding the use of such credits. In February 2005, SCGÁS filed a declaratory action to recognize the right to use the ICMS credit on a fixed asset, before the Treasury Department of Santa Catarina, which was granted by the Trial Court and is in course in the Justice Court of Santa Catarina. It is possible to appeal to the Federal Supreme Court - STF. 51
In the event it is not possible to recover said credits, the involved values shall be incorporated to the fixed assets. We demonstrate, as follows, the values related to the taxes to be compensated:
Description Negative - IRPJ Negative - CSLL IRPJ Carryforwads CSLL Carryforwads
2008
2007
Current
Current
7,409 4,572 9,116 3,290 24,387
12,394 4,378 16,772
2008 Description
Long Term
Current
Income tax on cash investments ICMS carryforwads ICMS a Recuperar CIAP PIS (tax on revenue) – tax credit COFINS (tax on revenue) – tax credit Negative - IRPJ Negative - CSLL IRPJ carryforwads CSLL carryforwads Others
2007
268 152 23,018 3 14 44,561 17,455 9,157 6,451 987 102,066
Current
43,159 1,789 44,948
338 4,740 19,837 13,727 4,430 123 43,195
Long Term 38,420 38,420
11. Inventories
In Celesc Geração S.A., Celesc Distribuição S.A. and SCGÁS, refer to materials necessary for the maintenance of the electric power generation and distribution system and natural gas distribution are stated at average acquisition cost. The balances as of December 31, 2008 are as follows: CONSOLIDATED
Description Supplies Advances to suppliers Inventories for sale Rented/borrowed
52
2008
2007
23,394 58 8,153 56 31,661
17,495 58 458 44 18,055
12. Deferred
Income and Social Contribution Taxes
Deferred income and social contribution taxes recoded for the Company and Celesc Distribuição S.A. are calculated on temporarily nondeductible provisions and tax loss carryforwards, controlled in “Part B” of the Taxable Income Computation Book (Lalur). The realization of these amounts will occur as accrued expenses are incurred or provisions are reversed, regarding the losses with equity interest, it shall be by means of the sale of such interests. Deferred income and social contribution taxes, considering estimated realization periods, were calculated as follows: COMPANY Estimated Realization Periods 2009
2010
2011
2012
2013 a 2015
Civil contingencies Income tax Social contribution tax
37,059 9,265
33,731 8,433
20,119 5,030
28,307 7,077
50,457 12,614
50,442 12,610
220,115 55,029
3,335
3,036
1,811
2,547
4,541
4,540
19,810
Valuation allowance Income tax Social contribution tax
84,624 21,156
-
-
-
-
-
84,624 21,156
7,616
-
-
-
-
-
7,616
Other accruals Income tax Social contribution tax
7,147 1,787
13,074 3,268
-
-
-
-
20,221 5,055
643
1,177
-
-
-
-
1,820
997 249
1,124 281
1,248 312
1,364 342
1,545 386
1,808 452
8,086 2,022
90
101
112
123
139
163
728
129,827
47,929
21,367
29,671
52,002
52,250
333,046
32,457
11,982
5,342
7,419
13,000
13,062
83,262
11,684
4,314
1,923
2,670
4,680
4,703
29,974
Description
Income tax Social contribution tax Tax basis Income tax Social contribution tax
53
2016 a 2018
Total
CONSOLIDATED Estimated Realization Periods
Description
2009
2010
2011
2013 a 2015
2012
2016 a 2018
Total -
Labor contingencies Income tax Social contribution tax
13421 3355
17948 4487
19223 4806
25518 6380
32083 8021
37322 9331
145,515 36,379
1208
1615
1730
2297
2887
3359
13,096
Civil contingencies Income tax Social contribution tax
49693 12424
49327 12332
37767 9442
46729 11683
77495 19374
82476 20618
343,489 85,872
4472
4440
3399
4206
6975
7423
30,915
Postretirement benefits Income tax Social contribution tax
75659 18915
65921 16480
20414 5103
29214 7304
24886 6222
-
216,093 54,023
6809
5933
1837
2629
2240
-
19,448
Valuation allowance Income tax Social contribution tax
84624 21156
-
-
-
-
-
84,624 21,156
7616
-
-
-
-
-
7,616
Valuation allowance Income tax Social contribution tax
14086 3522
21673 5419
9482 2371
10543 2636
21716 5429
-
77,500 19,376
1268
1951
853
949
1954
-
6,975
Losses investments Income tax Social contribution tax
997 249
1124 281
1248 312
1364 341
1545 386
1808 452
8,086 2,021
90
101
112
123
139
163
728
Tax basis Income tax Social contribution tax
238,480
155,993
88,134
113,368
157,725
121,606
875,307
59,620
38,999
22,034
28,342
39,431
30,400
218,826
21,463
14,040
7,932
10,204
14,195
10,945
78,778
13. Regulatory Assets and Liabilities a) Recoverable cost variations - Portion A (CVA)
Interministerial Rule No. 25, of January 24, 2002, issued by the Ministry of Finance and the Ministry of Mines and Energy, established the CVA account designed to record changes in nonmanageable costs occurred between tariff adjustment periods.
54
The balances and respective calculation periods are shown below:
CONSOLIDATED Saldo
Description
CVA CVA CVA CVA
2005 - Period Aug 8, 2004 2006 - Period Aug 8, 2005 2007 - Period Aug 8, 2006 2008 - Period Aug 8, 2007
2008
2007
1,153
-Aug 7, 2006 - Aug 7, 2007 - Aug 7, 2008 - Aug 7, 2009
2,559
2,174
(43,025)
23,196
(1,073)
88,398 114,921
(41,539)
On August, 07, 2008 entered into force the new tariff adjustment that had its application under Technical Note ANEEL nº 225 July 29, 2008. With all that, Celesc Distribuição S.A. Started the return of the values found in CVA in the period between August 2007 to August 2008, entitled “CVA 2008”. On the same technique note has been granted to Celesc the right to recover the remaining balance of CVA reviewed by ANEEL, for the period August 2006 to August 007, entitled “CVA 2007”. The values that are being received through the CVA 2007 and CVA 2008 by Celesc Distribuição S.A., as previous description up show, in percentage of 0.11% and 1.36%, respectively, will be added to the tariff of power energy supply in period between August 2008 to August 2009. CONSOLIDATED CVA Descrição
2007
Adição
Atualiz.
Transf.
2008
Amortiz.
Assets Fuel usage quota (CCC)
4,664
25,269
4,791
-
(10,168)
Energy Development Account (CDE)
8,885
7,894
2,560
-
(15,324)
4,015
82,280
200,491
55,165
-
(160,684)
177,252
6,894
17,728
968
-
(7,162)
18,428
609
9,906
2,301
-
(5,212)
7,604
Electricity purchased for resale System service charge Use of basic network Itaipu power transmission
17
380
15
-
(23)
389
-
4,910
174
-
(2,046)
3,038
Itaipu power transfer Alternative Sources Incent. Prog. (Proinfa)
24,556
8,083
8,343
7,025
-
(18,762)
4,689
Total assets Current
111,432 69,698
274,921 132,557
73,000 69,081
41,734
(219,381) (219,381)
239,972 93,689
Long-term
41,734
142,364
3,919
(41,734)
-
146,283
Liabilities Fuel usage quota (CCC)
35,965
-
1,397
-
(37,362)
-
-
616
22
-
(257)
381
Itaipu power transfer
87,652
94,128
48,648
-
(141,730)
88,698
Use of basic network
9,770
-
378
-
(10,147)
1
Charges of service system - CSS
3,720
13,544
5,087
-
(21,755)
596
Electricity purchased for resale
15,663
85,968
3,623
-
(69,052)
36,202
-
14,628
2,191
-
(16,509)
310
200
-
26
-
(209)
17
152,970 110,163
208,884 140,588
61,372 59,299
42,806
(297,021) (284,537)
126,205 68,319
42,807
68,296
2,073
(42,806)
(12,484)
57,886
(41,538)
66,037
134,372
-
77,640
113,767
Energy Development Account (CDE)
Alternative Sources Incent. Prog. (Proinfa) Itaipu power transfer Total liabilities Current Long- term
CVA Balance
55
The monetary adjustment of the amounts recorded in this caption has been based on the SELIC (Central Bank overnight rate) . b) PIS and COFINS Federal Laws No. 10637 of December 30, 2002, No. 10833 of December 29, 2003, and No. 10865 of April 30, 2004, changed the tax bases of PIS and COFINS. Because of these changes, electric power distribution concessionaires had increased PIS and COFINS expenses. In August period 2004 A July 2005 A Celesc Distribution S.A. had recognized in her tariffs just A contribution for PIS and COFINS without additional same financiers being Base an of contributions calculation the company revenue. ANEEL recognized Celesc’s right to be refunded additional PIS expenses incurred in the period from December 2002 to July 2005 and COFINS expenses incurred from February 2004 to July 2005. According to the procedures defined by ANEEL, through Official Circular No. 190, of February 1, 2005, approved by Official Circular No. 302, of February 25, 2005, Celesc recognized credits of R$56.379 million related to additional costs incurred during these periods, recorded in assets. A Celesc Distribuição S.A. it recovered part of the costs differed with PIS and COFINS, by means of a supplement of 0,331%, 0,335% and 0,127%, in the tariff readjusts occurred in August 2005, 2006 and 2007, respectively. This procedure is based in the Notes Techniques ANEEL in the 225, of 25 of July 2005; nº 205 of 20 of July 2006 and nº 217 of July 16th, 2007's. A ANEEL, by means of the Technical Note In the 225 of July 29th, 2008's, it conceded the percentile of 0,22% (zero comma twenty-two percent), that represents the value of R$7.450 A be recovered by Celesc Distribution S.A. in August period 2008 An August 2009. A monetary update of the registered values in this account has been select with base in the General Index of Prices – Market (IGP -M). It follows Active composition demonstrative frame Regulatórios do PIS and of COFINS: CONSOLIDATED Description PIS
2007
Adjustment
Amortization
Transfers
2008
7,001
637
(1,851)
-
5,787
33,115
3,132
(4,286)
-
31,961
Total Current
40,116 3,177 #
3,769 867
(6,137) (6,137)
6,036
37,748 3,943
Long-term
36,939
2,902
-
(6,036)
33,805
COFINS
56
c) Other regulatory assets CONSOLIDATED Other regulatory assets Description
2007
Adition
Amortization
Reg. Assets - Other Financial Items IRT 2007 (1)
11,780
-
(2)
-
13,960
11,780 11,780
13,960 13,960
Reg. Assets - Other Financial Items IRT 2008 Total
Current
2008
(11,780) (5,817)
8,143
(17,597) (17,597)
8,143 8,143
(1) The Enable Regulatório originating of the tariff readjust occurred in August 2007, that conceded the right to recover, by means of a tariff supplement, the items denominated of Active Regulatórios Other Financial Items - IRT 2007, it was totally recovered until August 2008. (2) In the tariff readjust occurred in August 2008, A Celesc Distribution S.A. obtained the right to recover, by means of a tariff supplement, the percentile of 0,35% to A Program Light account for and 0,03% to An account Transmissora STC.
The items presented were previously registered in the caption Active Regulatórios Other Financial Items IRT 2008. d) Outros Passivos Regulatórios CONSOLIDATED Descrição
2007
Current Liabilities - Devolution TUSD Iguaçu (i) Current liabilities - Other Financial Items IRT 2007 Current Liabilities - Others Financial items (iii) Long-term
Adição
4,589 12,769
-
Amortiz.
2008
(2,628)
1,961
(12,769)
-
-
51,386
(21,411)
29,975
17,358 17,358
51,386 51,386
(36,808) (36,808)
31,936 31,936
i) Current Liabilities - Devolution TUSD Iguaçu By the Publication of the Normative Resolution in the 243, of 19 of December 2006, it perfected differences input payment made by Iguaçu to the Celesc Distribuição S.A. of january by January of 2006, once starting from August of 2006 was already used A methodology of the Normative Resolution in the 243 of December 19th, 2006's. The value was up-to-date monetarily, resulting in passive of R$5.506, that A Celesc Distribution S.A. should pay by the Iguaçu, due to collecting A made larger in this period, in 24 equal monthly bits, from month on subsequente to the readjust month, according to the article 8o of the Resolution 529 of August 6th, 2007's. In the tariff revision of August 2008, An ANEEL updated the remaining balance of the devolution in R$3.170 by means of the Resolution Homologatória nº 688 of August 5th, 2008's. ii) Current liabilities - Other Financial Items IRT 2008 The Annual Tariff readjust of the Celesc Distribuição S.A. normatizado by the Technical Note n the 225 of July 29th, 2008's, it presented some differences where Celesc Distribuição S.A. it will have to return such values by means of tariff reduction in the percentile next: for A bit adjustment PIS, COFINS and Tariff Revision of the Connection 0,06%, for the energy sobrecontratação advance 1,03%, for An adjustment bit of the Basic Net (Border) 0,19% and for IRT's Recálculo previous year (Proinfa) 0,22%. The items presented were previously registered in the caption Other Passive Regulatórios – IRT 2008. These financial components do not suffer monetary update. 57
14. Other Credits Refer to other receivables, including the tariff for low-income consumers, as shown below:
COMPANY 2008 Description Income receivable NSF checks Other
Current 974 1,731 337 3,042
2007 Long Term
Current
51 51
4,844 977 1,147 6,968
Long Term 51 51
CONSOLIDATED 2008 Description
Current
2007 Long
Current
Term Tariff for low income consumers (a) Income receivable (b) Reluz program (c) NSF checks Available personnel Services provided to third parties Advances to employees Expenses Paid In advance Operational Credit Gas Acquisition Suppliers AMAFI Casan Pis /Cofins credit Others
13,286 8,703 9,609 1,187 1,009 263 389 1,882 269 280 2,018 1,731 1,783 42,409
Long Term
7,259 122 7,381
30,638 10,006 11,420 1,220 810 717 722 6,838 3,245 65,616
51 51
a) Social tariff – low-income consumers The Federal Government determined, through Law No. 10438, of April 26, 2002, that electrict power utilities must charge a social tariff for low-income consumers under the new consumer classification criteria. In May 2002, Celesc started to bill electric power sales in accordance with the provisions set forth by ANEEL Resolutions No. 246, of April 30, 2002, and No. 485, of August 29, 2002. Presidential Decree No. 4538, of December 23, 2002, also established that the service to low-income residential consumers would be funded by economic subsidies (Law No. 10604, of February 17, 2002). ANEEL, through Circular No. 155, of January 24, 2003, disclosed the procedures for calculation and recording of the asset arising from the application of the new social tariff as regards the decrease in billed amounts, presented as follows:
58
CONSOLIDATED Balance as of December 31, 2007 Revenues from service to low-income consumers Amortization Balance as of December 31, 2008
30,638 40,188 (57,540) 13,286
b) Income receivable Refers to receivables of the Celesc Distribuição S.A. from rent of utility poles. c) National Efficient Public Lighting Program - RELUZ Refers to the Reluz program, whose goal is to modernize and improve energy efficiency of the public lighting system in the municipalities by replacing current equipment by more efficient technologies to reduce the waste of electric power. 15. Receivables from Santa Catarina State Government
COMPANY/CONSOLIDATED 2007 Interest 2008
Description Long-term assets Loans to State Treasury (a) Underground Network Program (b)
32,616 4,262 36,878
3,415 3,415
36,031 4,262 40,293
a) Loans to state treasury The amounts recorded refer to loans granted by Celesc to the State Treasury between 1985 and 1986, adjusted through December 31, 2008 at an interest rate of 10% per year compounded on a monthly basis, under the agreement entered into with the State of Santa Catarina in April 1998. b) Underground network program Refers to Agreement No. 007/95, of June 1995, entered into by Celesc, the State of Santa Catarina and the Municipality of Florianópolis, aiming the financial cooperation for implementing the Underground Network Program, whose purpose is to replace the overhead electric energy distribution and public lighting network by an underground network in Florianópolis city center. The funds required for this program, originally estimated at R$ 3.908, would be shared by the State of Santa Catarina (47.4%), Municipality of Florianópolis (47.4%) and Celesc (5.2%). In addition, two addenda to the Agreement where signed to confirm the amounts agreed, totaling R$ 6.915, to be provided by the parties according to the percentages above. The program was settled with the Municipality of Florianópolis through an offset of the public lighting fee. The State of Santa Catarina’s share remains recorded and includes the adjustments established in the agreement.
59
16. Temporary Investments COMPANY/CONSOLIDATED
Description
2008
Dona Francisca Energética S.A. – Dfesa (a) Companhia Catarinense de Águas e Saneamento – Casan (b) (-) Valuation allowance
15,338 110,716 (81,271) 44,783
2007 15,338 110,716 (81,271) 44,783
a) Dona Francisca Energética S.A. – DFESA The balance of R$15,338 million refers to the investment made in Dona Francisca S.A. Consortium. Celesc’s interest in the Consortium is 23.03%. The power plant’s installed capacity is 125MW. Companhia Estadual de Energia Elétrica – CEEE, which is responsible for operating the power plant, has the exploitation rights and receives from the other consortium members a refund for costs defrayed, proportional to each member’s interest in the consortium. Celesc, after showing its intention to sell this investment, transferred the amount from Permanent assets to Long-term assets. b) Companhia Catarinense de Águas e Saneamento – CASAN The Company’s equity interest in Casan is derived from the negotiation of the debt as of December 1999, in the amount of R$90.7 million. Celesc further invested R$10 million in cash and R$10 million in debt negotiation, increasing its investment to R$110.7 million. The investment corresponds to 55,364,810 registered common shares and 55,363,250 registered preferred shares, all subscribed and paid up, with a par value of R$1.00 each, representing 15.76% of Casan’s capital on December 31, 2008. Because Casan’s shares are not traded on a Stock Exchange and considering the difficulties in calculating the fair value of the shares, and in order to better reflect the realizable value of the investment, Celesc decided to establish, on a consistent and accepted basis, a new valuation criterion for its temporary investments, adopting the Discounted Cash Flow method. Accordingly, Celesc supplemented the valuation allowance for the investment in Casan by R$81,3 million, based on economic and financial information of the investee. There is a great possibility that Casan is contemplated by the benefits resulting from the Growth Acceleration Program - PAC, in 2009. After the definition of this new scenario, a new evaluation of the investiment shall be made. In June 2006, Celesc sold 6,010 common shares and 6,050 preferred shares, totaling 12,060. Celesc’s equity interest in Casan as of December 31, 2008 is represented by 55,358,800 common shares and 55,357,200 preferred shares. 17. Permanent Investments Represented by investments in other companies and equity interests accounted for under the equity method. 60
COMPANY 2008 2007
Description Book value Celesc Geração S.A. Celesc Distribuição S.A. Empresa Catarinense de Transmissão de Energia – ECTE (a) Companhia de Gás de Santa Catarina - SCGÁS (c) Premium in the acquisition/subscription - SCGÁS (c ) Stated at acquisition cost Usina Hidrelétrica de Cubatão S.A. (b) Other investments (-) Valuation allowance – Usina Hidrelétrica de Cubatão S.A.
Total
92,348 1,432,057 12,553 26,920 1,563,878
60,285 1,318,161 11,969 24,779 58,222 1,473,416
3,353 217 (3,353) 217
3,353 217 (3,353) 217
1,564,095
1,473,633
CONSOLIDATED 2008 2007
Description Book value Empresa Catarinense de Transmissão de Energia – ECTE (a) Premium in the acquis ition/subscription - SCGÁS Stated at acquisition cost Usina Hidrelétrica de Cubatão S.A. (b) Other investments (-) Valuation allowance – Usina Hidrelétrica de Cubatão S.A.
Total
12,553 12,553
11,969 58,222 70,191
3,353 325 (3,353) 325
3,353 325 (3,353) 325
12,878
70,516
a) Empresa Catarinense de Transmissão de Energia – ECTE Celesc holds a 20.0% interest in this company. Because of the Unbundling process, as of December 31, 2006, Celesc accounted for this investment under the equity method and changed its equity interest in this company. b) Usina Hidrelétrica de Cubatão S.A. Celesc holds a 40.0% interest in this company. The Company recognized in October 2006 a valuation allowance for this investment because of the Brazilian Institute of Environment - IBAMA’s refusal to grant an environmental permit for the power plant.
61
c) Companhia de Gás de Santa Catarina – SCGÁS On December 18, 2006, the State of Santa Catarina offered Celesc the shareholding control over Companhia de Gás de Santa Catarina – SCGÁS for R$93 million. The State of Santa Catarina holds 1,827,415 common shares or 51% of the voting shares of this company. On September, 19, 2007 was the transfer of shares. The premiun value registered in the exercise of 2007 was transferred for the Intangible. 18. Property, plant and equipment In accordance with articles 63 and 64 of Decree No. 41019, of February 26, 1957, assets and installations used in the generation and distribution of electric power are linked to these services and cannot be retired, sold or pledged as mortgage guarantees without the prior and express authorization of the ANEEL. ANEEL Resolution No. 20, of February 3, 1999, regulates the electric power utility concession assets, giving prior authorization for not restricting assets not tied to the concession, when intended for sale, and determining that the proceeds from the sale be deposited in a restricted bank account, and invested in the concession. The main annual depreciation rates, according to ANEEL Resolution No. 240, of December 5, 2006, are as follows: Annual depreciation rates by macroactivity and major equipment Generation (%) Distribution Buildings Hydraulic Turbine Generator
2.0 2.5 3.3
Capacitor bank Distribution switch System conductor System structure Tension regulator Distribution transformer
(%)
Administration
(%)
6.7 6.7 5.0 5.0 4.8 5.0
Buildings General equipment Vehicles
4.0 10.0 20.0
Annually or when there is indication that a loss was suffered, A company accomplishes recuperabilidade test of the accounting balances of the not circulating active, to determine if these active suffered losses for “impairment”. With base in the Pronouncement Technician CPC 01 – Reduction to the Recoverable Value of Active A company concluded that there are no devaluation clues of the enable for evaluating the internal and external sources of information.
62
For activity, the Property, plant and equipment net of the Accumulated Depreciation and of the Special Bonds is constituted of the following form: CONSOLIDATED
Description
In service Generation Land Reservoirs, dams and mains Buildings, works and improvements Machinery and equipment Vehicles Furniture and fixtures Distribution Intangibles Land Buildings, works and improvements Machinery and equipment (-) Concession obligations
Administration Intangibles Land Buildings, works and improvements Machinery and equipment Vehicles Furniture and fixtures (-) Concession obligations
Companhia de Gás de SC-SCGÁS Land Tubulacion Machinery and equipment System Informatics Equipments administration Equipment of transport Benfeitorias em imovéis de terceiros Intangibles
Total
Annual Depreciation rates %
Cost
Net
Net
(9,452) (6,066) (13,452) (51) (37)
-
289 8,174 1,683 15,137 439 15
289 8,499 1,793 15,396 2
54,795
(29,058)
-
25,737
25,979
13,012 51,342 2,623,025 -
(30,029) (1,019,222) -
(369,522)
13,012 21,313 1,603,803 (369,522)
3,585 9,852 21,330 1,483,222 (335,142)
2,687,379
(1,049,251)
(369,522)
1,268,606
1,182,847
4,080 27,064 70,220 38,814 7,139
(9,359) (45,235) (29,415) (5,197) -
(41)
4,080 17,705 24,985 9,399 1,942 (41)
17,677 4,092 18,787 27,540 9,008 1,649 (42)
147,317
(89,206)
(41)
58,070
78,711
364 164,434 78,220 3,589 1,099 470 328 -
(81,339) (38,521) (2,165) (479) (321) (97) -
-
364 83,095 39,699 1,424 620 149 231 -
364 78,749 45,591 1,097 511 243 158 1
248,504
(122,922)
-
125,582
126,714
3,137,995
(1,290,437)
(369,563)
1,477,995
1,414,251
8,188 360,236 24,490
-
(40,668) -
8,188 360,236 (40,668) 24,490
809 316,731 (17,578) 14,782 22,089
392,914
-
(40,668)
352,246
336,833
3,530,909
(1,290,437)
(410,231)
1,830,241
1,751,084
20.0% 4.0% 4,5% a 10,0% 20.0% 10.0%
10.0% 10.0% 20.0% 10.0% 10.0% 4.0%
In progress Generation Distribution (-) Concession obligations Administration Companhia de Gás de SC-SCGÁS Total in progress Total
2007
289 17,626 7,749 28,589 490 52
2.0% 2,0% a 4,0% 2,5% a 5,9% 20.0% 10.0%
4.0% 2,0% a 7,7%
2008 Accumulated (-) Depreciation Concession and obligations Amortization
63
Property, plant and equipment in progress refer basically to electricity distribution system expansion projects. 18.1. Obligations related to the electric power concession The obligations related to the electric power utility concession represent the amounts from federal, state and municipal governments and consumers, as well as incentive grants not subject to any return in favor of the grantor and subsidies for investments in electric power utility services. These obligations’ maturities are those established by ANEEL for generation and distribution utilities and will be settled at the end of the concession period. These obligations are as follows: CONSOLIDATED Description
2008
2007
Federal government State of Santa Catarina Municipal government Consumers Other
41,694 74,363 24,257 269,876 41 410,231
39,211 64,500 52 248,957 42 352,762
Property, plant and equipment in service Property, plant and equipment in progress
369,563 40,668 410,231
335,184 17,578 352,762
19. Intangible By nature, the intangible is constituted of the following form: COMPANY 2008 Description
Annual Depreciation rates %
Cost
Accumulated Depreciation and Amortization NET
In service Celesc S.A Premium in the acquisition/subscription SCGÁS (c )
Total
64
59,836
(8,086)
51,750
59,836
(8,086)
51,750
59,836
(8,086)
51,750
CONSOLIDATED 2008
Description
Annual Depreciation rates %
Accumulated Depreciation and Amortization
Cost
NET
In service Celesc Distribuição S.A. Servitudes band Software Use right
3,585 20.0%
Companhia de Gás de SC - SCGÁS Mark Record cost Administration system
Total
3,585
(21,202)
11,224
36,011
(21,202)
14,809
1 10.0%
-
32,426
-
1
1,001
(133)
868
1,002
(133)
869
37,013
(21,335)
15,678
59,836
(8,086)
51,750
59,836
(8,086)
51,750
Em Curso Celesc S.A Premium in the acquisition/subscription SCGÁS (c )
Celesc Geração S.A Software
Celesc Distribuição S.A. Faixa de Servidões Direito de Uso de Software
10.0%
Total
3
-
3
3
-
3
12,057
-
12,057
45,807
-
45,807
57,864
-
57,864
117,703
(8,086)
109,617
154,716
(29,421)
125,295
Annually or when there is indication that a loss was suffered, A company accomplishes recuperabilidade test of the accounting balances of the not circulating active, to determine if these active suffered Pe rdas for “impairment”. These tests are accomplished, according to the Pronouncement Technician CPC 01 – Reduction to the Recoverable Value of Active. On December 31st, 2008 A company accomplished recuperabilidade test for the intangible active, with regard to the agio, and were not identified losses for “impairment”.
65
a) Servitudes bands They are rights of ways for descent associates lines to the distribution in the Company concession area, and in urban and particular rural areas, constituted by compensation in owner's tenement favor. As they are permanent, there is no amortization. b) Software Use right They are licenses of intellectual right of property, constituted by expenses accomplished with A licenses and too much expenses acquisition with complementary services to the productive utilization of softwares. c) Premium in the aquisição/subscrição – SCGÁS The premium has as economic foundation An expectation of future profitability and was amortized up to December 31st, 2008. 20. Loans, Indebtednesses Financings and Responsibilities The loans balances, indebtednesses financings and responsibilities present A following composition: CONSOLIDATED Principal Description
Debt charges
Long term
Current
Total 2007
2006
Local currency Eletrobrás (a) BNDES (b) Banco do Brasil (c) AVP Eletrobrás
763 763
8,201
78,276
86,477
34,562
15,798 (901) 23,098
32,751 67,628 (8,598) 170,057
48,549 68,391 (9,499) 193,918
65,430 68,218 168,210
The long-term portion matures as follows: Year 2010 2011
Amount 52,488 43,563
2012
40,527
2013 AVP Eletrobrás
17,516 24,560
AVP Eletrobrás
(8,597) 170,057
In the Controlled Celesc Distribuição S.A, it was obtained financings with concession of economic subvention by ELETROBRAS in which A Company chose the index 106% of CDI as discount rate A present value of these passive operations in the circulating and in the not circulating, for considering that this index
66
reflect juros compatible with A nature, the term and the risks related to transactions, carrying itself in consideration, yet, the market rates practiced in the initial date of the transactions. CONSOLIDATED Description Balance 12.31.2007 34.562 Initial fittings Law 11.638/07 – (AVP em 2007) (4.111) Balance 12.31.2008 30.451 Ingressos 61.414 Amortization (9.500) Adjustment A Present value in 2008 (6.051) Accomplishment by the bits amortization 664 Balance 12.31.2008 76.978
The accounting record of this adjustment A present value regarding government subvention this registered in Loans and Financings account debtor – Eletrobrás against A caption of Differed Revenues (passive not circulating) in which this composed of these values: CONSOLIDATED Description Balance 12.31.2007 Initial fittings Law 11.638/07 – (AVP em 2007) 4.111 Adjustment A Present value in 2008 6.051 Accomplishment by the bits amortization (664) Balance in 31.12.2008 9.498
In the exercise of 2008 was accomplished R$664, by the amortization of the p arcelas vincendas in which are registered in the accounts of financial revenues with compensation of the differed revenue (passive not circulating) and in financial expenses with adjustment redutora compensation A financing present value with An Eletrobrás. a) Eletrobrás Contracted loans and financing are intended for the rural electrification programs and the funds come from the Global reversion quota (RGR) and the Eletrobrás Financing Fund. In the event of default, the guarantee is collateralized by the borrower’s receivables. b) BNDES The loan hired by the Controlled SCGÁS, with balance on December 31st, 2008 in R$48.549's Amount it destined for A chain enlargement of natural gas. c) Banco do Brasil Loan taken to liquidate the Celos Agreements No. 09 and 10, with Celesc foundation of social security, entered into between Celesc and Celos, on April 11, 2000 and April 12, 2000, respectively.
67
20.1 Loan agreements’ terms and conditions as of December 31, 2008:
Signature Agreements Currency date BNDES R$ 04/10/2001
Purpose Extension of the network of natural gas
BNDES
R$
05/14/2007
Extension of the network of natural gas
ECF 2141 ECF 2124 ECF 2270
R$ R$ R$
07/03/2002 07/22/2002 04/28/2003
EFS 007 EFS 0096 ECF 2538
R$ R$ R$
07/27/2004 09/09/2005 06/26/2006
ECFS 219 ECF 2603
R$ R$
02/12/2008 07/23/2007
Banco do Brasil
R$
12/03/2007
ECF 2721
R$
12/03/2008
“Luz no Campo” (Rural Electrification) “Luz no Campo” (Rural Electrification) Reluz (National Efficient Public Lighting Program) “Luz para Todos” (Light for All) “Luz para Todos” (Light for All) Improvement of the Energy Efficiency of the Public Lighting System of the municipality of Itajaí “Luz para Todos” (Light for All) Reluz (National Efficient Public Lighting Program It is destined to the liquidation of Agreements No. 9 and 10 enterd into with Celos Foundation. refer to the recovery of the electrical system
Interest 4%p.a + TJLP 4%p.a. + TJLP 5% p.a. 5% p.a. 5% p.a.
Expiry date Mar/2011 Nov/2013 Feb/2010 Dec/2008 Dec/2009
5% p.a. 5% p.a. 5% p.a.
Nov/2016 Nov/2016 Oct/2012
5% p.a 5% p.a
May/2020 Mar/2013
106% CDI
Dec/2012
5% p.a.
Dec/2014
Loans and financing by currency and index are as follows: 2008 Currency (R$ equivalent)/index UFIR/IGP-M SELIC (Central Bank overnight rate) TJLP CDI Principal Charges
2007
R$
%
76,978 48,549 68,391
39.70 25.04 35.27
193,918
100.00
193,155 763
99.61 0.39
R$
%
34,561
20.55
2,167 63,264
1.29
68,218 168,210 167,478 732
Changes in loans and financing foreign currencies and index are as follows: Accumulated rate in the year (%) 2008 2007
Currency/index IGP -M
9.81
7.75
SELIC
12.48
11.88
TJLP
6.25
6.37
CDI
12.38
11.82
68
37.61 40.56 100.00 99.56 0.44
Changes in consolidated loans and financing are as follows: CONSOLIDATED Local currency
Description
Current
As of December 31, 2007
Long-term
27,000
Inflows
-
Charges
615
Transfers Amortization
140,478 61,414 -
23,237 (26,853) (901) 23,098
AVPL Eletrobrás As of December 31, 2008
(23,237) (8,598) 170,057
21. Investment Fund in Credit Rights - FIDC Celesc Distribuição S.A. captured R$200.000 in the capital market. The operation, resulting from the assignment of futures receivables, has the purpose to bear the costs of part of the investments in 2008 and was characterized by the great interest demonstrated by the investors in the operation. FIDC or “Receivable Funds”, is a modality of investment fund whose assets are comprised of credit rights. Celesc Distribuição S.A. offered as receivables the credit rights related to the future consumption of electric power of the pre-selected consumer units, all with good standing profile. The greater buyers of the quotas offered by Celesc Distribuição S.A. were investment funds, which acquired 179 quotas, summing up R$179.000. The other investors were private social security companies, with R$11,000; and one financial institution with R$10,000. Each quota was commercialized at R$1,000, in the bookbuilding system, coordinated by BB Investimentos, together with ABC Banking Corporation. CONSOLIDATED Local currency
Description As of December 31, 2007
Current
40,384
Long-term
161,538
Charges
2,994
21,435
Tranfers
45,529
(45,529)
Inflows
(43,093) 45,814
As of December 31, 2007
69
137,444
22. Suppliers A Suppliers account presents A following composition: COMPANY Description
2008
Dona Francisca Energética Fafen Energia AES Sul Others Subtotal Material and service suppliers Total
2007 -
247 379 291 145 1,062 2,149 3,211
1,446 1,446
CONSOLIDATED 2008 2007
Description Electricity and Natural Gas suppliers Eletrobrás S.A. Tractebel S.A. Petrobrás S.A. Copel Geração S.A. Câmara de Comercialização de Energia Elétrica – CCEE Companhia Hidro Elétrica de São Francisco – Chesf Lages Bioenergética Ltda. Furnas Centrais Elétricas S.A. Companhia Energética de São Paulo – Cesp Duke Energy Brasil Companhia Energética de Minas Gerais – CEMIG Centrais Elétricas do Norte do Brasil S.A. – ELETRONORTE Enguia Gen Ltda. Usina Xavantes S.A. Others Subtotal Electric network usage charges Material and service suppliers Total
88,665 74,640 68,219 59,522 6,116 4,048 769 3,071 2,108 2,025 1,472 272 1,119 6,317 318,363 35,072 33,371 386,806
50,922 80,240 57,627 48,370 3,516 2,881 8,338 251,894 29,266 43,991 325,151
23. Regulatory charges Refer to specific charges imposed on the Electric Sector concessionaires and permittees. The table below shows obligations arising from electric power consumer charges established by Law and compensation for use of water resources.
70
CONSOLIDATED 2008 2007 84,548 69,539 37,025 39,993 438 485 17,367 9,514 50,031 43,306 11,676 11,092 2,212 1,789 662 603 198 77 204,157 176,398
Description Energy Efficiency (EE) Emergency Capacity Charge (ECE) Emergency energy purchase charge (EAEE) Fuel Usage Quota (CCC) Research & development (P&D) Programa de Incentivo às Fontes Alternativas de Energia Elétrica – Proinfa Energy Development Account (CDE) Global reversion quota (RGR) ANEEL Inspection Fee Financial Compensation for Use of Water Resources
24. Pension plan Celesc sponsors Fundação Celesc de Seguridade Social – Celos, a private nonprofit pension entity engaged in providing supplementary retirement benefits to the participants consisting mostly of the Celesc’s employees. The Company’s obligations to Celos are as follows:
COMPANY 2008 Curto Prazo
Description
Curent amounts to be transfered (c)
Description
Total
Total
14
14
11
14
14
11
Current
Unamortized mathematical reserve (a) Acquisition of Central Administration Building (b) Current amounts to be transferred (c)
2007
CONSOLIDATED 2008 Long Total term
2007 Total
34,694 4,006 8,826
454,381 11,566 -
489,075 15,572 8,826
451,615 17,726 7,575
47,526
465,947
513,473
476,916
a) Unamortized mathematical reserve On January 1, 1997, Celesc adopted the new Celos benefit plan called “Mixed Plan” to transfer the participants from the transition plan to this new plan. Transfer rules from one plan to the other were defined by Celesc on December 31, 1998 and approved by the Secretariat for Supplementary Pension Plans (SPC) 71
on January 14, 1999 to become effective on January 1, 1999. The main change in relation to the prior plan was the change from defined benefit to defined contribution in relation to scheduled benefits, generating a retirement fund. A voluntary migration process was started on April 1, 1999 and ended on March 31, 2000, retroactive to January 1, 1999, with the migration of 98% of the participants. Due to this process, on November 30, 2001, Celesc entered into an agreement to pay 277 monthly, consecutive installments, subject to 6% annual interest rate and IGP-M variation. b) Purchase of the Central Administration Building In October 2004 CELESC acquired the property in which is situated its headquarters, by the amount of R$ 24.3 million, payable in 8 (eight) annual and successive installments of R$ 3.918 million. The falling due installments will be restated in November of each based on the variation of the “Índice Geral de Preços ao Mercado – IGP-M” (General Price Index-Market). c) Current amounts to be transferred Refer to the reserve for monthly contributions to private pension plans, health and dental care plans, loans and other benefits deducted from payroll, as well as Celesc’s share of the contributions, not yet 6been transferred to Celos. 25. Post-Employment Benefits With respect to the Pension Plan, Health Care, and the Voluntary Termination Plan (PDVI), and in accordance with Accounting Standard and Procedure (NPC) No. 26, issued by the Brazilian Institute of Independent Auditors (IBRACON) together with the Federal Accounting Council (CFC), and approved by CVM Resolution No. 371 of December 13, 2000. Celesc presents below the liabilities related to the pension plan and the health care plan as of December 31, 2008:
Description
CONSOLIDATED Health care Pension plan plan
Balance as of December 31, 2007 Amortization Balance as of December 31, 2008 Current liabilities Long-term liabilities
72
Total
215,353 (43,275) 172,078
70,401 (26,387) 44,014
285,754 (69,662) 216,092
54,389 117,689
8,502 35,512
62,891 153,201
The premises used in the actuarial evaluation were: Economical Hypothesis Discount Fee for Actuarial Obligation Rate of Expected Yield on Assets Salary Increase rate Long Term inflation Annual Rate Increase of Medical Costs Capacity of Salaries and Benefits ¹
6% a.a. 9,75% a.a. 0% a.a. 4,5% a.a. 3% a.a. 98%
The capacity factor has the purpose to reflect the understatement of the monetary values observed on the evaluation date, considering the frequency and the indexes used to recover the inflationary losses. 1
Biometric Hypothesis General Mortality Table Disabled Mortality Table Mortality Table of Persons Retired for Permanent Disability Annual Turnover Rate
AT 83 IAPB 55 Light Midia 0%
Other Hypothesis Retirement Age Age difference between spouses Probability of being married during retirement
100% 4 years 95%
Next, We present a summary of the data used for the actuarial evaluation of the benefit plans offered by Celesc to its employees: Description Active employees Frequency Age Time of serviçe Salaries of participacion (R$) Active and retired employees Frequency Age Benefit Mensal (R$) Active and retired employees (invalidos) Frequency Age Benefit (R$) Pension Frequency Age Benefit (R$)
Plans of retiremet Transitório Misto 8 54,13 27,25 6005,16
4.439 43,86 17,92 5.064,79
1.482 68,21 2.427,40
1.172 58,59 2.742,20
141 62,81 1.575,14
179 52,58 1.282,34
788 71,43 791,45
115 54,56 1.311,58
Celesc, based on Resolution No. 243, of December 9, 2002, approved the Voluntary Termination Program (PDVI), which was approved by the State of Santa Catarina to reduce operating costs. This program was deployed in 2003, had the adhesion of 1,089 employees, and by the end of Ddecember 31, 2008, Celesc settled the debit with 332 employees. The PDVI’s balance as of December 31, 2007, already included in the present value of obligations, is R$ 172.078 (R$215.353 in December 31, 2007).
73
Celesc, upon liabilities demonstrated in the Accounting Statements analyzed all provided assessments of the actuarial calculus of 2008, maintaining in a conservative way the balance of its obligations before Celos related to the Social Security Plan. Of form Curator, it opted for not doing any accounting adjustment of reversion until there is an evaluation atuarial specific like determines A Resolution CGPC nº 26. 26. Taxes Payable Taxes payable under current legislation are as follows:
Description IRPJ CSLL COFINS PIS Withholding INSS (social security contribution) ISS IRRF (withholding income tax) on outside services Others
COMPANY 2008 2007 9,116 6,388 3,290 1,691 14,908 5,919 2 347 1 12 21 5,686 12,442 34,939
Description ICMS IRPJ CSLL COFINS PIS Withholding INSS (social security contribution) ISS IRRF (withholding income tax) on outside services IRRF on leases and rentals Others
CONSOLIDATED 2008 2007 38,749 38,693 13,753 29,153 3,588 6,190 16,022 34,240 3,466 10,105 1,112 873 379 539 487 347 27 24 1,663 8,584 79,246 128,748
27. Tax Debt Refinancing Program (PAES) The determining factors for the Company’s adhesion to this Program, on August 29, 2003, were the plan’s advantageous terms and conditions, such as extension of liability settlement and change in the adjustment index (from Selic to TJLP – Long-Term Interest Rate). Consolidated debt under PAES is being paid since August 2003, in 120 monthly installments. According to program rules, regular payment of federal taxes is required for eligibility for the plan.
74
COMPANY / CONSOLIDATED Balance as of December 31, 2007 (+) Balance adjustment – TJLP (-) Homologated Tax Credits (-) Amortization in the period Balance as of December 31, 2008 Current liabilities Long-term liabilities
17,619 398 1,827 6,243 9,947 1,443 8,504
28. Special Obligations The accruals and charges related to vacation and bonuses due to employees are as follows: COMPANY
Accrued
2008
2007
Vacation Constitutional vacation bonus
237
101
51
16
288
117
CONSOLIDATED
Accrued
2008
Bonus leave Vacation Constitutional vacation bonus Vacation bonus Profit sharing
2007
28,757
25,095
27,138
22,139
13,044
10,935
7,879
6,364
2,243
2,922
79,061
67,455
29. Other Payables COMPANY 2008 Description
Current
State of Santa Catarina Appeal bonds and Warranties controlled Others
226 150 376
75
2007 Long term
Current
51 51
7,440 (25) 7,415
Long term 2,639 2,639
CONSOLIDATED 2008 Description
Current
Cosip (a) Agreements (b) Rejected invoices (c) Interest on compulsory loans (d) Term conduct adjustment Devolucion of participation consumers Credits of Consumer - Transfer ICMS Appeal bonds and Warranties Directors, Advisers and Stockholders Itaipu bonus Variation Exchange Transport SCGÁS Eletrobrás (Cemid) Others
8,205 6,013 2,239 921 1,941 631 184 226 142 2,503 23,005
2007 Long term 732 2,476 51 3,259
Current
26,222 4,963 7,092 1,514 8,621 5,667 1,670 7,440 6,838 6,941 76,968
Long term 3,055 3,055
a) Contribution to Service of Public Lighting Cost - COSIP Amounts due to municipal governments related to the Contribution to Fund Public Lighting Service Costs (Cosip) charged to consumers on the electricity bills. b) Services Collecting covenant of Third party They are values owed A third party regarding Covenants, charged from the consumers in the electric power invoices. c) Rejected invoices Obligations to consumers related to twice-paid bills, invoice adjustments and others. d) Interest on compulsory loans They are the transfers made by Eletrobrás for Celesc make the settlement of the interest on the compulsory loan. 30. Reserve for Contingencies Celesc is a party to various labor, civil and tax lawsuits. In the opinion of the Legal Department, there is a possibility of loss in several of these lawsuits and a reserve for contingencies has been recognized for probable and possible losses. Part of these lawsuits is guaranteed by escrow deposits.
76
Reserves for contingencies are summarized below: COMPANY 2008 Contingencies Civil (b) Regulatory (c) Tax (d)
Escrow deposits
Reserve 220,115 23,295 28,906 272,316
104 19,851 117
2007 Net
Net
220,011 3,444 28,789
220,115 884 1,240
20,072 # 252,244
CONSOLIDATED 2008 Contingencies Labor (a) Civil (b) Regulatory (c) Tax (d)
Reserve 365,630 146,669 29,061 12,561 553,921
Escrow deposits 57,982 47,157 196 105,335
222,239
2007 Net
Net
307,648 99,512 28,865 12,561
81,616 332,244 1,039 1,240
448,586
416,139
a) Labor Refer to claims filed by employees and former employees of Celesc and contractors, involving severance pay, salaries, employee classification, and other issues. After the completion of the unbundling process, the balances arising from labor claims filed against the Company were assigned to Celesc Distribuição S.A. b) Civil Refer to lawsuits filed by industrial consumers claiming reimbursement of amounts paid because of tariff increases based on DNAEE Rules No. 038, of February 27, 1986 and No. 045, of March 4, 1986, which were in effect during the “Cruzado” economic plan. Celesc recorded a reserve considered sufficient to cover potential losses on these lawsuits. As for the so-called “cascading effect” on subsequent years, at present it is not possible to predict possible court decisions or to measure their possible effects. Reserves have also been recognized for various civil lawsuits filed by individuals and legal entities against the Company, which seek compensation for power supply failures, expropriation and other. c) Regulatory Celesc was fined by ANEEL as a result of certain administrative proceedings filed because of noncompliance with some customer service quality requirements and other issues. Celesc appealed against the penalties at the administrative level. The R$23.4 million reserve represents the estimated losses on these proceedings.
77
d) tributary A Celesc accomplished during the exercise of 2006 tributary indemnities administratively via system PER/DCOMP close to Secretariat of the Federal Revenue of Brazil in R$28.906's Amount. The credits refer to PIS and Cofins paid as A Federal Law n the 9.718, of 27 of November 1998, that instituted the calculation base enlargement of the referred tributes. Although A Celesc has made An indemnity, these credits were not homologated by the Secretariat of the Federal Revenue of Brazil. Being this way, A company constituted balance provision above cited by the historical value. 31. Deferred Income and Social Contribution Taxes Refer to income and social contribution taxes payable by Celesc, calculated on Regulatory Assets, Free Energy and income not received from Government Agencies and CVA, whose payment was deferred. The financial effects of these tax liabilities will occur upon the realization of the amounts. Changes for the period are as follows: CONSOLIDATED 2007 Additions write-offs 2,628 (7,520) 9,431 (16,672) 11,386 13,303 (865) 1,667 12,184 (9,077) 47,758
Description Income & social cont. taxes - government agencies Income & social cont.taxes on regulatory assets Income & social cont. taxes on free energy Income & social cont. taxes on CVA
34,918
(23,987)
53,291
2008 4,539 8,017 12,986 38,681 64,223
32. Shareholders’ Equity a) Capital Subscribed and paid-up capital is R$1,017,700 (R$ 696,200 as of December, 31 2006). Class A preferred shares have priority in the payment of non-cumulative dividends, at the rate of 25%, followed by Class B preferred shares. Capital, in number of shares, is represented as follows: CELESC S/A - capital social compositionl - Stockholders with more than 5% of the lawsuits of each species or class base shareholder of 12/31/2008 Share
Share
Common Stockholders
Quantity
Share
Preferred Class A %
Quantity
%
Preferred Class B Quantity
Total %
-
Quantity
Estado de Santa Catarina
7.791.010
50,18
191
0,38
-
7.791.201
Caixa de Previdência do Banco do Brasil - PREVI
5.140.864
33,11
-
-
437.807
1,90
5.578.671
Fundação CELESC de Seg. Social - CELOS
910.161
5,86
-
-
267.950
1,17
1.178.111
Geração Futuro (Fundos Administrados)
480.700
3,10
-
-
3.517.729
15,30
3.998.429
Centrais Elétricas Brasileiras - Eletrobrás
4.233
0,03
-
-
4.142.774
18,02
4.147.007
Tarpon Investimentos (Fundos Administrados)
-
-
-
-
4.871.423
21,19
4.871.423
Poland Investments fund in Assets
-
-
-
-
3.925.000
17,07
3.925.000
50.590 50.781
99,62 0,13
5.830.990 22.993.673
25,36 59,61
7.081.749 38.571.591
Outros Totais
1.200.169 15.527.137
7,73 40,26
78
b) Stocks of the Controller, Administrators and Members of the Fiscal Council CELESC - Shares of the driver, curators and members of the Fiscal Board in 31/12/2008 Share Stockholders Controller Administration board Executive directory Fiscal board Lawsuits in Treasury Other stockholders Totais
Common Quantity
Share %
8.799.347
Share
Preferred Class A(*) Quantity %
56,67
Preferred Class B Quantity %
191
0,38
-
-
-
-
-
-
-
-
43,33 100,00
50.590 50.781
99,62 100,00
5
6.727.785 15.527.137
271.264
1,18
4.206 1
0,02 -
1
-
22.718.201 22.993.673
98,8 100,00
(*) Consider A conversion of preferential lawsuits class An in preferential lawsuits class along the period. The Company is bound to the Arbitration in Camara of Market Arbitration, as clause compromissória constant of your social statute. CELESC - Shares of the controller, administrators and members of the Supervisory Board on 12/31/2007 Share Common Stockholders Controller Administration board
Quantity
%
8.716.328 2
Executive directory Fiscal board Lawsuits in Treasury Other stockholders Totais
Share Preferred Class A(*)
6.810.807 15.527.137
Quantity
56,14 -
Share Preferred Class B
%
Quantity
191 -
0,37 -
-
-
-
43,86 100,00
51.709 51.900
99,63 100,00
887.134 1.009 22.104.411 22.992.554
% 3,86 96,13 99,99
(*) The Company is bound to the Arbitration in Camara of Market Arbitration, as clause compromissória constant of your social statute.
c) Profit Reserve Corresponds to the Profit Retention Legal Reserve (articles 193 and 196, of the Federal Law No. 6.404 respectively) constituted on December 31, 2008, as demonstrated below:
Balance Legal reserve (-) Reversion Profit retention Actual balance
Description
2008 435,663 12,922 171,865 620,450
2007 509,780 17,300 (321,500) 230,083 435,663
Net income (=) Net income ajustment (-) Legal reserve (5%) (-) Proposed dividends (-) Interest on capital Profit retention
258,444 258,444 12,922 73,657 171,865
345,990 345,990 17,299 28,451 70,156 230,084
79
33. Fornecimento and Electric power Supply Gross sales, by consumer category, are as follows: CONSOLIDATED Number of consumers
Description
2008
2007
Residential Industrial Commercial Rural Public sector Public lighting Public service Tarif Adjustment - IRT
1,717,734 70,155 175,726 222,663 17,903 387 2,030 -
1,666,907 64,578 170,341 220,000 16,836 360 1,966 -
Total sales
2,206,598 6
Sales to distributors
MWh 2008
Gross sales 2007
2008
2007
3,801,333 5,405,802 2,456,507 1,736,370 309,935 447,305 252,198 -
3,709,949 4,863,121 2,347,301 1,640,772 321,231 435,943 256,458 -
1,454,223 1,637,859 889,650 316,044 110,740 90,967 68,863 (13,180)
1,498,405 1,538,176 900,051 323,227 114,636 92,751 70,042 22,089
2,140,988
14,409,450
13,574,775
4,555,166
4,559,377
4
307,511
215,970
44,022
26,727
34. Other Operating Income This accounts consists of the following: CONSOLIDATED 2008 2007
Description Revenue from services provided (a) Service fees (b) Other revenues
14,669 7,342 5,154 27,165
13,152 6,544 1,103 20,799
a) Income from services provided Income from services provided at third parties’ request, excluding service fees, based on the cost calculated based on Service Orders - ODS. b) Service fees Revenue from services provided to consumers, such as: inspections, consumer connection and reconnection, meter reading, reissue of a bill, voltage check, and that may be established by ANEEL.
80
35. Electric Utility Service Costs and Operating Expenses These costs and expenses are broken down by type, as follows: COMPANY – 2008 Operating Expenses Description
Selling
Management (a) Material Outside Services Reversal of provisions Other expenses (c)
General and administrativ e
Other
Total
4,351 131 3,792 (95,579) 53 (95,526)
(1,240) 1,716 476
(1,165) 7,109
4,351 131 3,792 (96,819) 604 (87,941)
CONSOLIDATED – 2008 Cost of Power and Gas service Natural Description
Operating Expenses Cost of
General
Electricity
Gas
Operating
services
Costs
Costs
Costs
provided to
Personnel (a)
-
-
Management (a)
-
-
-
-
-
5,664
-
5,664
Pension plan
-
-
-
-
-
22,127
-
22,127
Material
-
-
-
2,784
1,179
15,254
-
19,217
Outside Services
-
-
39,612
128
59,658
99,355
-
198,753
Electricity purchased for resale (b)
1,660,129
-
-
-
-
-
-
1,660,129
Electricity network usage charges
249,961
-
249,961
Selling
and
Others
Total
Administ.
third parties 220,323
1,912
47,297
122,553
8,499
400,584
-
-
-
-
-
ANEEL inspection fee
-
-
-
-
-
-
7,598
7,598
AGESC
-
-
-
-
-
-
2,004
2,004
Compensation for use of water r.
-
-
-
-
-
-
1,032
1,032
Depreciation
-
-
Amortization
-
-
Fuel Natural Gas Natural gas transport
123,307
-
-
10,971
-
-
-
-
6,458
-
134,278 6,458
-
242,028
-
-
-
-
-
242,028
-
58,665
-
-
-
-
-
58,665
Altern. Sources Incent. (Proinfra)
58,864
-
-
-
-
-
-
58,864
Use of rights of way (Deinfra)
-
-
-
-
-
Provisions
-
-
-
-
Reversal of provisions
-
-
-
-
Other expenses (c)
-
-
3,573
1,968,954
300,693
386,815
(131,518) 39
4,863
81
61,257
11,158 49,031
27,439
-
27,439
-
48,231
109,488
-
(26,163)
(157,681)
(8,049) 301,772
8,977 50,178
15,698 3,062,306
DISTRIBUTION – 2008 Cost of Electric Power service Cost of Description
Electricity Costs
Operating costs
services
Operating Expenses
Selling
provided to
General and administrative
Others
Total
third parties Personnel (a)
218,813
1,912
44,977
116,083 38 22,127
22,127
29,370
2,784
1,167
14,892
48,213
34,293
128
58,841
93,792
Management (a) Pension plan Material Outside Services
8,499
390,284 38
187,054
Electricity purchased for resale (b)
1,659,607
1,659,607
Electricity network usage charges
249,961
249,961 7,425
ANEEL inspection fee
99,430
Depreciation Amortization Altern. Sources Incent. (Proin fra)
110,401
6,453
6,453
58,864
58,864 24,461
Use of rights of way (Deinfra)
61,257
Provisions
1,968,432
2,692
39
10,738
384,598
4,863
141,094
COMPANY - 2007 Electric utility service costs Electricity Costs
Management (a) Outside Services Electricity purchased for resale (b) Electricity network usage charges ANEEL inspection fee Compensation for use of water resources Provisions Reversal of provisions Other expenses (c)
Operating Costs
4,302 1,142 5,444
(64) (64)
82
24,461 47,689
(35,886)
Reversal of provisions Other expenses (c)
7,425
10,971
(24,923) (8,947) 279,870
108,946 (60,809)
7,075
11,597
45,765
2,824,622
Operating expenses Selling
(25) 35,134 (5,236) 7,625 37,498
General and administrative 3,259 1,981 (1,296) 3,944
Other Total
3,259 1,956 4,302 1,142 84 84 815 815 - 35,134 - (5,236) 759 7,024 1,658 48,480
CONSOLIDATED - 2007 Cost of power utility service
Operating Expenses Cost of
Electricity
Natural Gas Costs
Costs
Operating costs
services
General and administrative
Selling
provided to
Other
Total
third parties 359,079
Personnel (a)
-
-
198,061
194
41,113
108,040
11,671
Management (a)
-
-
-
-
-
3,492
-
3,492
Pension plan
-
-
-
-
-
18,540
-
18,540
Material
-
-
23,700
1,444
1,358
14,875
-
41,377
Outside Services
-
-
37,644
463
53,008
97,477
-
188,592
Electricity purchased for resale (b)
1,582,134
-
-
-
-
-
-
1,582,134
Electricity network usage charges
235,239
-
-
-
-
-
-
235,239
-
-
-
-
-
-
7,064
7,064
-
-
-
-
497
497
ANEEL inspection fee AGESC Compensation for use of water r.
-
-
-
-
-
-
1,557
1,557
Depreciation
-
-
100,646
-
-
10,566
-
111,212
Amortization
-
-
-
-
-
6,154
-
6,154
-
46,160
-
-
-
-
-
46,160
Fuel Natural Gas
-
20,383
-
-
-
-
-
20,383
27,769
-
-
-
-
-
-
27,769
Use of rights of way (Deinfra)
-
-
-
-
-
36,829
-
36,829
Provisions
-
-
-
-
101,277
-
62,474
163,751
Reversal of provisions
-
-
-
-
(15,581)
-
(50,420)
Other expenses (c)
-
-
2,856
71
13,296
Natural gas transport Altern. Sources Incent. (Proinfra)
1,845,142
66,543
362,907
2,172
194,471
(3,046) 292,927
(66,001) 19,565
6,388 39,231
2,803,393
DISTRIBUTION – 2007 Service Costs Cost of Description
Electricity Operating services costs Costs provided to
Operating Expenses
Selling
General and administrative
Others
Total
third parties Personnel (a) Management (a) Pension plan Material Outside Services Electricity purchased for resale (b) Electricity network usage charges ANEEL inspection fee Depreciation Amortization Altern. Sources Incent. (Proinfra) Use of rights of way (Deinfra) Provisions Reversal of provisions Other expenses (c)
197,558
194
40,350
23,136 35,194
1,444 463
1,355 53,014
106,170 59 18,540 14,814 95,305
11,671
1,577,832 233,957 6,912 93,561
10,566 6,154
27,769 36,197
1,839,558
2,764 352,213
71 2,172
83
66,139 (10,345) 5,583 156,096
(2,158) 285,647
62,474 (50,420) 5,623 36,260
355,943 59 18,540 40,749 183,976 1,577,832 233,957 6,912 104,127 6,154 27,769 36,197 128,613 (60,765) 11,883 2,671,946
a) Personnel (employees and management) COMPANY 2008 2007 3,036 1,899 1,225 599 90 761 4,351 3,259
Description Compensation Payroll charges Assistance benefits Others
CONSOLIDATED 2008 2007 225,299 195,865 93,727 87,802 14,766 11,770 31,547 29,099 8,499 11,753 32,410 26,282 406,248 362,571
Description Compensation Payroll charges Profit sharing Assistance benefits Labor claims Others
b) Electricity purchased for resale
Description
CONSOLIDATED 2008 R$ GWh
Tractebel S.A. Eletrobrás S.A. Copel Lages Bioenergética Ltda. Cenaeel Santa Maria Parque Eólico SC Usina Roncador CCEAR Account Indemnity Var. Costs "Tranche A" - CVA PIS and Cofins credits Regulatory assets under artº 5.163/04 Petrobrás Maesa Others
581,578 417,794 445,298 33,369 2,106 1,073 198 570 371,512
2007 R$
4,309 4,851 3,538 193 10 16 1 7 3,219 -
704,500 280,147 427,814 30,600 1,920 2,175 197 647 83,460 48,720
GWh 6,219 3,202 3,786 193 8 35 1 8 1,192 -
(101,746) (169,208) 77,585 1,660,129
84
16,144
(161,258) 27,846 125,185 4,732 5,449 1,582,134
1,139 106 15,889
c) Other operating expenses
Description
2008
Lease and rental Insurance Taxes Recovery of expenses Losses on receivables Civil indemnities Advertising and publicity Other
COMPANY 2007
294 46 345 (1,941) 46 145 6 1,663 604
308 (1,809) 7,625 95 (6) 811 7,024
CONSOLIDATED 2008 2007
Description Lease and rental Insurance Taxes Donations, contributions and subsidies Recovery of expenses Inden dano oper. manut.sist Losses on receivables Retirement benefits Civil indemnities Own consumption of electricity Advertising and publicity Program of social responsibility Remuneração Estagiários Others
85
6,941 1,197 5,044 826 (30,253) 1,607 4,105 10 5,803 4,592 5,714
11,872 1,149 5,027 2,792 (29,699) 9,681 4 3,237 6,781 2,467
2,864 1,396 5,852 15,698
6,254 19,565
36. Financial Income (Expenses)
Financial income Income from cash investments Interest on receivables from the State of Santa Catarina Monetary variation and late payment charges for electricity sold Monetary variation
Subsidiaries Interest on receivables from customers Dividends Monetary adjustment of regulatory assets Other financial income
Financial expenses Debt charges Amortization of SCGÁS Premium
Interest on equity reserve Monetary adjustment – Paes CPMF (tax on bank transactions)
Monetary adjustment of regulatory assets Other financial income
Financial income (expenses), net
86
COMPANY 2008 2007 755 4,733 3,415 3,092 847 45,530 2 2,304 40 257 1,264 15,037 1,557 894 66,551 13,176
6,469 378 246 35,257 669 43,019
699 70,156 3,373 1,243 5,250 80,721
23,532
(67,545)
Financial income Income from cash investments Interest on receivables from the State of Santa Catarina Moratory Interest and addition from consumers
Monetary variation Devaluation exchange on purchased energy Subsidiaries Monetary adjustment - regulatory assets Premium in the transfer of ICMS credits - SC Participações S/A Dividends Financial interest social found Diccount Suppliers Monetary adjustment - regulatory assets Other financial income Financial expenses Debt charges Monetary variation on loans and financing Monetary variation and late payment charges for electricity purchased Monetary variation Amortization of SCGÁS Premium
Monetary adjustment – Paes Monetary adjustment - regulatory assets CPMF (tax on bank transactions) Term of adjustment conduct - ANEEL Monetary adjustment - regulatory assets Interest on equity reserve Other financial expenses
Financial income (expenses), net
CONSOLIDATED 2008 2007 36,558 14,267 3,415 3,092 47,526 59,735 102,584 43,141 5,477 8,048 2,304 11,559 6,890 2,087 1,404 257 1,264 4,067 4,704 567 4,683 15,037 5,688 8,699 234,822 158,231 70,166 28,934 76,539 6,469 378 8,629 1,104 35,921 19,490 247,630
45,084 3,835 1,420 50,270 3,373 3,806 21,780 8,621 70,156 17,927 226,272
(12,808)
(68,041)
37. Financial Instruments In assistance To Deliberation CVM n the 566, of 17 of November 2008, that approved the Pronouncement Technician CPC n the 14, and A Judicial inquiry CVM in the 475, of 17 of December 2008, A Celesc and her controlled revised the main active financial and passive instruments on December 31st, 2008, as well as the criteria for its valorization, evaluation, classification and the risks to them related, the which ones are described to follow: a) Recebíveis: They are classified as receivable the box values and equivalent of box, accounts receivable and another active, whose registered values approach, in the balancing date, to the of accomplishment. b) Aplicações Financeiras: The Certificates of Bank Deposits are classified as kept until the expiration, and registered contabilmente by the up-to-date cost according to the contractual bases and is reflected in the values registered in the statement of the result.
87
c) Other financial liabilities: They are classified in this group the loans and financings, the balances kept with vendors and another circulating passive. The loans and financings s ão classified as passive financiers not measured to the just value, and they are counted by their contractual values. d) Fair Values: The fair values of financial instruments are equal to the value accounting . e) Risks management of financial instruments: A Celesc's Administration accomplishes the management An exhibition to the interest rates risks, exchange rate, credit and liquidity in her operations with financial instruments inside a global politics of your business. f) Financial Risks: · Interest rates risks This risk is derived of the possibility of the controlled to come to incur in losses due to drifts in the interest rates or other indebtedness indexes, that increase the relative financial expenses A loans and financings captivated in the market, or decrease A relative financial revenue to Celesc's financial applications and her controlled. The controlled and A controller do not have been make a pacting covenants of derivative to do “swap” against this risk. · Rates of exchange risks A Celesc and her subsidiary and a controlled SCGÁS, do not own loans or financings in foreign currencies. g) Operational Risks: · Credit Risk The risk arises from the possibility of CELESC and its subsidiaries will incur losses due to the difficulty in receiving amounts billed to its customers, concessionaires and permission. To reduce such risk and to assist in managing the risk of default, the company monitors the accounts receivable from consumers making many of recovery actions, including the interruption of supply if the consumer ceases to carry out their payments. In the case of consumer credit risk is low because of the large spray of the portfolio. · Risk regarding energy shortage The Brazilian Electric System is supplied predominantly pel A hydroelectric generation. A period prolonged of rainy shortage, during A humid station, will reduce the water volume in the reservoirs of these plants, bringing as consequencia the increase in the cost in the energy acquisition in the short run market and in the Responsibilities values elevation of System due to the plants termelétricas dispatch. In an extreme situation will be able to be adopted, a rationing program, that would imply in revenue reduction. However, considering the current levels of the reservoirs and the last made simulations, the National operator of Electric System – ONS it does not foresee for the nearby years a rationing new program. 38. Related-Party Transactions Transactions with related parties carried out under usual market conditions are shown below. 88
COMPANY Related Parties
Curent
Type of transaction
2008
2007
2008
Long Term 2007
Receivables State of Santa Catarina
Loan Underground network
-
-
Casan
Equity interest
-
-
29,445
29,445
Dona Francisca Energética S.A.
Equity interest
-
-
15,338
15,338
ECTE
Dividends
1,395
868
-
-
SCGÁS
Dividends
1,507
10,683
-
-
Celesc Distribuição S.A.
Dividends Other credits
22,854
13,287
125
-
Celesc Geração S.A.
Dividends
7,780
1,268
-
-
33,536
26,106
14
11
36,031 4,262
32,616 4,262
85,201
81,661
Payables Fundação Celos
Transfer of agreements
Celesc Distribuição S.A.
Other Credits
-
14
Related Parties
Type of transaction
1,894
11
CONSOLIDATED Current 31.12.2008 31.12.2007
-
1,894
-
Long Term 31.12.2008 31.12.2007
Receivables State of Santa Catarina
Loan Underground network
-
-
Casan
Equity interest
-
-
29,445
29,445
Dona Francisca EnergéticaEquity interest S.A.
-
-
15,338
15,338
1,395
868
-
-
1,395
868
84,190
81,661
34,694 4,006 8,826
29,831 4,564 7,575
454,381 11,566 -
421,784 13,162 -
ECTE
Dividends
35,145 4,262
32,616 4,262
Payables Celos
Mathematical reserve Building acquisition Transfer of agreements
47,526
89
41,970
465,947
434,946
39. Income and Social Contribution Taxes – Effective Rate In compliance with IBRACON Accounting Standard and Procedure No. 25, of May 1998, and CVM Resolution No. 273, of August 20, 1998, Celesc is disclosing the reconciliation of income and social contribution taxes calculated at their statutory rates with the amounts stated in the statement of income. The table below discloses the information of the Company, Celesc Geração S.A., Celesc Distribuição S.A. and Consolidated, according to their taxation system and tax basis. COMPANY Income tax Social contribution tax 2008 2007 2008 2007 294,272 286,525 294,272 286,525 (257) (5,038) (257) (5,038)
Description Income before income and social contribution taxes Received Dividends Reversal of Provisions
(1,240) (188,002) 675 105,448 25 26,362 (24) 26,338
Equity in subsidiaries Others Tax basis Tax rate % Total for the year Other Total in the Statement of income
(311,343) 3,671 (26,185) 25 (6,546) 14,400 7,855
(1,240) (188,002) 675 105,448 9 9,490 9,490
(311,343) 3,671 (26,185) 9 (2,357) 5,194 2,837
Celesc Geração S.A. Income tax Social contribution tax 2008 2007 2008 2007 8,756 4,456 11,316 6,095 25 25 9 9 2,189 1,114 1,018 549
Description Deemed income tax basis (8% IRPJ and 12% CSLL) Tax rate % Tax Others Decrease in surtax in the quarter Tax rate % Tax Tax payable Effect on income
(240) 10 (24) 2,165 2,165
90
(240) 10 (24) 1,090 1,090
1,018 1,018
549 549
Celesc Distribuição S.A. Income tax Social contribution tax 31.12.2008 31.12.2007 31.12.2008 31.12.2007 220,550 374,629 220,550 374,629 25 25 9 9 55,138 93,657 19,850 33,717
Description Income before income and social contribution taxes
Tax Rate % Tax Permanent additions and deductions
826
Donations/tax incentives – Rounet Law and FIA Adjustment based on IPC/BTNF Fines Reversion of Reserves Others Tax basis Tax rate % Tax
219 1,045 25 261
2,686 1,175 (18,975) 1,664 (13,450) 25 (3,363)
826 8,238 219 9,283 9 835
2,056 9,206 1,175 (18,975) 1,664 (4,874) 9 (439)
Temporary additions and deductions
Accrued civil and labor contingencies, R&D and PCLD PDVI Regulatory assets and liabilities – CVA Others (RTE and Órgãos sectors) Total Transfer results of the deferred balance in holding Tax Rate % Tax Taxable Income
Fiscal Loss Compensation Taxable income after offsets
Tax Rate% Tax Other deductions Effect on income
Description Income before income and social contribution taxes Permanent additions and deductions Reserves non-deductible Brindes Reversion of reserves Other Tax basis Rate % Tax Others
(65,833) (64,496) (139,722) 12,028 (258,023) -
25 (64,506) (36,428) (36,428) 25 64,506
46,121 (77,675) 96,915 (10,371) 54,990 76,431 25 32,855 416,169 (7,924) 408,245 25 102,061 (3,268) 65,938
(65,833) (64,496) (139,722) 12,028 (258,023) 9 (23,222) (28,190) (28,190) 9 23,222
46,121 (77,675) 96,915 (10,371) 54,990 76,431 9 11,828 424,745 (5,314) 419,431 9 37,750 25,922
SCGÁS Income tax Social contribution tax 31.12.2008 31.12.2007 31.12.2008 31.12.2007 49,694 21,881 49,694 21,881 1,190 (14,472) 36,412 25 9,103 (11) 9,092
Total
91
2,605 35 (220) 24,301 25 6,075 60 6,135
1,190 (14,472) 36,412 9 3,277 5 3,282
2,605 35 (220) 24,301 9 2,187 23 2,210
Description
CONSOLIDATED Income tax Social contribution tax 31.12.2008 31.12.2007 31.12.2008 31.12.2007
Results Tax Company Celesc Distribuição S.A. Celesc Geração S.A. SCGÁS Total
26,338 64,506 2,165 9,092 102,101
7,855 65,938 1,090 6,135 81,018
9,490 23,222 1,018 3,282 37,012
2,837 25,922 549 2,210 31,518
40. Nonoperating Income (Expenses) COMPANY 2008 2007 85,028 85,028
Nonoperating income Gains on sale of assets/rights Alienacion of investments - MAESA
Nonoperating expenses Other expenses
Nonoperating (expenses) income
8 8
4 4
(8)
85,024
CONSOLIDATED 2008 2007 598 88,322 87 7,098 2,664 14,287 10,360 102,696
Nonoperating income Gains on sale of assets/rights Gains (storeroom) Agreement collection service Other income Nonoperating expenses Losses on disposal of assets Losses on alienation of assets Other expenses
1,825 1,825 8,535
Nonoperating (expenses) income
21 22 2,069 2,112 100,584
41. Insurance Insurance coverage is in accordance with Celesc’s policy on asset coverage, taking into consideration the nature and degree of risk, in amounts considered sufficient by Management to cover any material losses.
92
Risks
Effective Date
Maximum indemnity or liability limit
Premium
Air and ground transportation (a) International
01.12.2008 a 01.12.2009
US$2.000
Variável
Domestic
01.12.2008 a 01.12.2009
US$2.000
Variável
Headquarters’ building (b)
04.08.2008 a 04.08.2009
R$38.358
R$11
Substations
14.01.2008 a 14.01.2009
R$10.000
R$795
Power plants (c)
14.01.2008 a 14.01.2009
R$19.673
R$57
Personnel
31.12.2007 a 31.12.2008
R$184
R$1
Assets
01.02.2008 a 01.02.2009
R$3.950
R$44
Aircraft (d)
a) Air and ground transportation Insure for damages to goods transported by any adequate means in the domestic market and during import or export of goods in the foreign market. The premium varies according to transported volumes. Maximum coverage limits are contracted in US dollars. b) Headquarters’ building Insure the damages to Celesc’s headquarters. c) Substations and power plants The contracted policy includes substations and power plants, detailing the main equipment and the related insured amounts and the maximum indemnities. They are covered by basic insurance, such as fire, lightning and any type of explosion, and additional coverage against electric damages, sundry risks, risks to electronic and IT equipment. d) Aircraft Visa garantir a seguridade dos passageiros, tripulantes, população, bens no solo e da própria aeronave. 42. Accounting Statements – Segregation per Activity With the approval of ANEEL by Authorization Resolution No. 712, as of October of 2006, which allowed the segregation of the activities of Generation and Distribution of Power, Celesc constituted whole owned subsidiaries of which it became the controller; Celesc Geração S.A. and Celesc Distribuição S.A., which initiated their operations totally a side from others as of October 02, 2006. We present the main information on the controlled companies of Celesc, represented by the Balance Sheet, Income Statement, Statement of Changes in the Shareholders’ Equity and Statement of Changes in Financial Position of Celesc Geração S.A. and Celesc Distribuição S.A.
93
Celesc Geração S.A. CNPJ – 08.336.804/0001-78 Balance Sheet As Of December 31, (In thousands of Brazilian reais – R$) Assets Current assets Cash and cash equivalents Money market investments Consumers, concessionaires and permittees Sundry debtors Noncurrents assets Long-term assets Parent company Recoverable taxes Property, plant and equipment, net Intangible
2008 57.411 3.257 47.840
2007 27.297 1.226 22.215
6.091 223
3.686 170
45.096 11.171
37.845 11.057
11.057 114 33.925
11.057 26.788
3
Total assets
102.507
94
65.142
Celesc Geração S.A. CNPJ – 08.336.804/0001-78 Balance Sheet As Of December 31, (In thousands of Brazilian reais – R$) Liabilities and Shareholders’ Equity Current liabilities Suppliers Loans and Financings
2008 10.162 555 -
2007 6.067 89 2.166
Payroll and Social Responsibilities Regulatory charges Taxes nd Social Contributions
5 221 1.601
1 1.345 1.198
Stated dividend
7.780
1.268
Shareholders’ equity Capital
92.348 35.000
60.285 35.000
57.348
25.285
102.510
66.352
Profit reserves Total liabilities and shareholders’ equity
95
Celesc Geração S.A. CNPJ – 08.336.804/0001-78 Statement of Income For the Exercise end December, 31 (In thousands of Brazilian reais - R$) 2008 64.839 64.839 7.561 5.145 412 1.901 103
2007 40.951 40.951 6.709 4.598 265 1.224 622
(=) Net operating revenue
57.278
34.242
(-) Electric utility service costs Electric costs Electricity purchase for resale Electricity network usage charges Operating costs Material Outside services Depreciation Other (=) Gross profit (-) Operating expenses General and administrative Others
8.456 2.613 522 2.091 5.843 547 4.104 1.177 15 48.822 3.996 2.791 1.205
4.883 1.618 1.618 3.265 439 1.583 1.187 56 29.359 1.451 641 810
(=) Income for service (+/-) Operations Income (Expenses) (=) Income from operations (+) Nonooperating income (=) Income before income and social contribution taxes (-) Provision for income tax (-) Provision for social contribution tax (=) Net income
44.826 3.200 48.026 48.026 2.165 1.018 44.843
27.908 119 28.027 4 28.031 1.090 549 26.392
Gross operating revenue Electricity sales to final consumers (-) Deductions from operating revenues ICMS (state VAT) COFINS (tax on revenue) PIS (tax on revenue) Global Reserve for Reversion (RGR)
96
Celesc Geração S.A. CNPJ – 08.336.804/0001-78 Statement of Changes in Shareholders’ Equity For the Year Ended December 31 (In thousands of Brazilian reais – R$) Capital
Profit
Retained
reserves 5.162 -
earnings
Balances as of December 31, 2006 Capital contribution Net income Allocation of net income: Legal reserve Proposed dividends Profit retention
32.443 2.557 -
1.319 18.804
(1.320) (6.268) (18.804)
Balances as of December 31, 2007 Capital contribution Net income Allocation of net income: Legal reserve Proposed dividends Profit retention
35.000
25.285
-
2.242 29.821
(2.242) (12.780) (29.821)
60.285 (12.780) -
Balances as of December 31, 2007
35.000
57.348
(44.843)
47.505
97
26.392
Total 37.605 2.557 26.392 (1) (6.268) -
Celesc Geração S.A CNPJ - 08.336.804/0001-78 STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 (In thousands of Brazilian reais - R$) 2008 Net income Items not affecting cash: Depreciation and Amortization
2007
44.843
26.392
1.177
1.187
46.020
27.579
(2.405) (53) (114) (2.572)
436 (53) (8.776) 14.252 5.859
466 (2.166) 4 86 403 6.512 5.305
(195) (12.086) 1 96 354 (339) (78) (12.247)
Cash provided by operating activities
48.753
21.191
Cash flows from Financing activities Payment of Dividends Dividends Payment for the controller Payment in full capital Cash used in financing activities
(5.000) (7.780) (12.780)
(5.000) (1.268) (2.085) 2.556 (5.797)
Cash flows from investing activities purchases of fixed assets Cash provided by (used in) investing activities
(8.317) (8.317)
(193) (193)
(Decrease) increase in cash
27.656
15.201
Cash at beginning of year Cash at end of year
23.441 51.097
8.240 23.441
(Decrease) increase in cash
27.656
15.201
Changes in current and long-term Assets Consumers, concessionaires and permittees sundry debtors Subsidiaries Loans and Lending Changes in current and long-term liabilities Suppliers Loans and Financing Payroll and social charges Regulatory charges Taxes and Social Contributions Stated dividend Other
98
Celesc Geração S.A CNPJ - 08.336.804/0001-78 ADDED VALUE STATEMENT AS OF DECEMBER 31, 2008 and 2007 (In thousands of Brazilian reais - R$) 2008 Added value generation energy and services Sale for credits for doubtful sale Other results
2007
64.839 64.839
40.951 4 40.955
(2.091) (4.615) (612) (2.928) (10.246) 54.593
(1.618) (2.063) (440) (148) (4.269) 36.686
(1.177)
(1.187)
Liquid Added value
53.416
35.499
Transferred Added value financial revenues Value added to distribute
3.639 57.055
1.139 36.638
Added Value Distribution People and curators Remunerations
2.065
68
2.065
68
2.438 3.183 5.621
1.696 1.639 3.335
5.145 5.145
4.598 4.598
103 173 1.032 1.308
622 68 742 1.432
12.074
9.365
295 20
808 5
315
813
12.780 29.821 42.601 57.055
6.268 20.124 26.392 36.638
Materials acquired of third party net electric power and use third party services Materials Other acquired materials Brute added value Shares of reintegration
Government Federal PIS, COFINS e CPMF Income tax and social contribution State ICMS Responsibilities intra fuels consumption sectorial Global Reversion Reserve - RGR Inspection Rate ANEEL Financial compensation for the use of water resources
Backers Juros and monetary variations Other Stockholders Proposed Dividends Retained Profits Minority Participation Value added to distribute
99
Celesc Distribuição S.A CNPJ – 08.336.804/0001-78 Balance Sheet As Of December 31, (In thousands of Brazilian reais – R$) 2008
2007
Assets Current Assets Cash Available Money market investments Consumers, concessionaires and permittees Titles to receive Allowance for doubtful accounts Recoverable taxes Ongoing Services Stocks Regulatory Assets - "Tranche A" - CVA Regulatory Assets - Pis and Cofins Regulatory Assets - Others Other receivables Noncurrent Assets
1.460.551 99.269 112.986 885.632 373.546 (292.341) 73.568 33.244 30.986 93.689 3.943 8.143 37.886 2.190.475
1.319.608 102.461 180.813 907.146 202.781 (266.814) 25.695 14.618 17.613 69.698 3.177 11.780 50.640 2.141.162
Long-Term Assets Titles to receive Investment Fund in Rights Credits - FIDC Recoverable taxes Income Tax and Social Contribution Deferred Controller
471.453 59.643 13.430 32.028 184.369 1.894
565.562 204.857 10.996 28.244 242.792 -
146.283 33.806
41.734 36.939
106 1.646.243 72.673 3.651.026
106 1.575.494 3.460.770
Regulatory Assets - "Tranche A" - CVA Regulatory Assets - Pis and Cofins Investments Property Intangible Total Assets
100
Celesc Distribuição S.A. CNPJ – 08.336.804/0001-90 Balance Sheet As Of December 31, (In thousands of Brazilian reais – R$) 2008 Liabilities and Shareholders' equity Current Liabilities Suppliers
2007
983.463 313.429
947.862 260.130
17.775 763 7.300
21.650 732 9.352
45.814 203.936
40.384 176.263
Pension plan Post-employment benefits Taxes payable
47.512 62.891 60.352
41.959 62.891 64.624
Declared dividends and interest on capital Recoverable cost variations – Portion A (CVA) Recoverable cost variations – Others
22.854 68.319 31.936
13.287 110.163 17.358
Estimated Obligations Other payables
78.773 21.809
66.547 62.522
Noncurrent Liabilities Loans and financing Investment Fund in Credit Rights - FIDC Pension plan Post-employment benefits Reserve for contingencies Deferred income and social contribution taxes Recoverable cost variations – Portion A (CVA) Companies Other payables Deferred revenue
1.235.505 137.306 137.444 465.947 153.201 196.342 64.223 57.886 11.182 2.476 9.498
1.194.747 92.696 161.538 434.946 222.863 193.900 34.918 42.807 11.057 22 -
Shareholders’ Equity Capital Profit reserves
1.432.058 1.013.500 418.558
1.318.161 994.571 323.590
3.651.026
3.460.770
Payroll and related charges Debt charges Loans and financing Investment Fund in Credit Rights - FIDC Regulatory charges
Total Liabilities and Shareholders' Equity
101
Celesc Distribuição S.A. CNPJ – 08.336.804/0001-90 Statement of Income For the Period end December 31 (In thousands of Brazilian reais - R$) 2008 Gross operating revenue Electricity sales to final consumers Electricity sales to distributors
2007
4.792.909 4.506.396
4.823.528 4.494.423
44.022 (13.180)
26.727 22.089
176.325 20.897 32.053
173.545 56.565 28.617
15.285 11.111
13.915 7.647
1.729.238 973.499 81.192
1.792.087 951.926 81050
369.740
369.937
117 23.173
99 21.294
Energy Development Account (CDE) Fuel usage quota (CCC)
142.378 108.827
135.723 167.046
Efficiency and technological – P&D Energy Efficiency Program - PEE
15.158 15.158
40.528 24.480
Adjustments - IRT 2005 Use of electricity network Short-term power Lease and rents Income for services Other Deductions from operating revenues ICMS (state VAT) PIS/PASEP (tax on revenue) COFINS (tax on revenue) ISS (service tax) Global reversion quota (RGR)
Emergency capacity charges
(4)
4
Net operating revenues
3.063.671
3.031.441
Electric utility service costs Cost of electricity
2.357.893
2.193.853
1.968.432 1.659.607
1.839.558 1.577.832
249.961 58.864
233.957 27.769
384.598 218.813
352.123 197.558
29.370 34.293 99.430
23.136 35.194 93.561
2.692 4.863 562116 705.778
2.764 2.172 608688 837.588
Operating expenses Selling General and administrative Others expenses
466.729 141.094
478.003 156.096
279.870 45.765
285.647 36.260
Income from electric utility service
239.049
359.585
Financial income
(27.053)
(422)
Income from operations
211.996
359.163
10.359 1805
17.664 2.108
220.550
374.719
64.506
65.938
23.222
25.922
132.822
282.859
Electricity purchased for resale Electricity network usage charges PROINFA Operating costs Personnel and management Materials Outside services Depreciation Others expenses Cost of services provided to third parties Gross profit
Other income Other expense Income before income and social contribution taxes Provision for income tax Provision for social contribution tax Net income for the period
102
Celesc Distribuição S.A. CNPJ – 08.336.783/0001-90 Statement of Changes in Shareholders’ Equity For the Year Ended December 31 (In thousands of Brazilian reais – R$) Capital Balances as of December 31, 2006 Capital contribution Payment in full Net income Allocation of net income: Legal reserve Proposed dividends Profit retention
621.179 364.571 8.821 -
Balances as of December 31, 2007 Capital contribution Payment in full Net income Allocation of net income: Legal reserve Proposed dividends Profit retention
994.571 18.929
Balances as of December 31, 2008
1.013.500
-
103
Profit
Retained
reserves 134.841 -
earnings 282.769
Total 756.020 364.571 8.821 282.769 (94.020) -
14.139 174.610
(14.139) (94.020) (174.610)
323.590 -
132.822
6.641 88.327
(6.641) (37.854) (88.327)
1.318.161 18.929 132.822 (37.854) -
418.558
-
1.432.058
Celesc Distribuição S.A. CNPJ – 08.336.783/0001-90 STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 (In thousands of Brazilian reais - R$) 2008 132.822
Net income Items not affecting cash: Depreciation and Amortization Low Cost of Investment / Assets / Intangible Allowance for doubtful accounts Tax contingencies – long-term Deferred income and social contribution taxes Labor, civil and tax contingencies Interest and monetary variations, net Changes in current and long-term assets Consumers, concessionaires and permittees Trade accounts receivable Recoverable taxes Ongoing service Stocks FIDC Regulatory Assets Subsidiaries Judicial Deposits Other receivables Changes in current and long-term liabilities Suppliers Regulatory charges Pension plan Post employment benefits Taxes and social contributions - PAES Subsidiaries Regulatory Liabilities "Tranche A" - CVA Estimated obligations, salaries and social charges Participation of non-controlling shareholders Result of future exercises Deferred revenue Declared dividends and interest on capital Other Cash provided by operating activities Cash flows from investing activities Investments Property Special Duties Cash used in investing activities Cash flows from financing activities Loans and Financing - Net FIDC Transfer of agreements Advance for Future Capital Increase Payment in full of Capital Dividends and Interest on Own Capital Cash provided by (used in) investing activities (Decrease) increase in cash Cash at beginning of year Cash at end of year (Decrease) increase in cash
104
2007 282.769
116.854 16.443 25.527 29.305 58.423 22.765 67.171 469.310
110.281 18.813 217.909 (13.804) (30.879) 12.051 27.709 624.849
21.514 (25.551) (51.657) (18.626) (13.373) (115.714) (1.894) (20.323) 12.754 (212.870)
(306.240) (48.767) 31.727 12.150 7.691 (10.996) 72.549 9.949 489 (35.684) (267.132)
53.299 27.673 (16.364) (69.662) (4.272) 125 (14.260) 8.351 9.498 9.567 (38.259) (34.304)
(19.985) 49.398 (12.568) (72.509) (32.764) (227.296) 30.853 11.366 (6.386) (28.713) 24.879 (283.725)
222.136
73.992
(334.188) 42.986 (291.202)
(106) (342.883) 7.204 (335.785)
42.588 (40.099) 14.483 18.929 (37.854) (1.953) (71.019) 283.274 212.255 (71.019)
(59.140) 200.000 15.583 373.392 (94.020) 435.815 174.022 109.252 283.274 174.022
Celesc Distribuição S.A. CNPJ – 08.336.804/0001-90 Balance Sheet As Of December 31, (In thousands of Brazilian reais – R$) 2008 Added Value Generation Energy and Services energy and services sale Provision for credits for doubtful sale Other results Materials acquired of third party net electric power and use third party services Materials Accruals and reversions Other acquired materials Brute added value Reintegration quotas Liquid Added value Transferred Added value financial revenues Value added to distribute Added Value Distribution People and curators Social Remunerations Responsibilities (bar INSS) Participation in the Profits and Results Benefits assistenciais Labor Litigation Other Government Federal PIS, COFINS e CPMF Income tax and social contribution INSS (s/ payroll) State Deinfra ICMS IPVA Municipal ISS IPTU Responsibilities intra fuels consumption sectorial Reserva Global de Reversão - RGR Account - CCC Account of Energetic Development - CDE Inspection Rate ANEEL Research and Development and Energetic Efficiency Incentive program the Alternative Sources - PROINFA Capacity responsibilities Emergencial
Backers Interest and monetary variations Other Stockholders Proposed Dividends Retained Profits Value added to distribute
105
2007
4.792.909 (61.257) 8.554 4.740.206
4.823.528 (66.139) 15.556 4.772.945
(1.909.568) (187.054) (48.213) 13.126 (10.017) (2.141.726) 2.598.480 (116.854) 2.481.626
(1.811.789) (183.976) (40.749) (1.709) (10.593) (2.048.816) 2.724.129 (110.811) 2.613.318
149.641 2.631.267
138.314 2.751.632
2.780.908
2.889.946
236.422 20.882 14.766 30.428 8.499 31.804 342.801
185.978 18.327 11.769 29.097 11.753 48.736 305.660
451.721 87.728 69.648 609.097
470.842 91.860 68.883 631.585
24.461 973.499 514
36.197 951.926 470
117 1.066 1.183
99 819 918
23.173 108.827 142.378 7.425 30.316 58.864 (4) 370.979 1.979.733
21.294 167.046 135.723 6.912 65.008 27.769 4 423.756 2.044.852
148.467 27.438 175.905
96.545 22.336 118.881
37.854 94.968 132.822
94.021 188.748 282.769
2.631.261
2.752.162
43. Summary of the Differences between the BR GAAP and the US GAAP Our interim financial statements have prepared in accordance with Brazilian accounting practices (BR GAAP), which differ in certain respects from the United States generally accepted accounting principles (US GAAP). The table below shows the reconciliation between BR GAAP shareholders’ equity and US GAAP shareholders’ equity, as of December 31, 2008 and December 31, 2007. The values of the statements related to the actuarial liability of Celos, were adjusted on December 31, 2008, upon the application of the FAS-158, which complements the FAS-87, 88, 106 and 132, with the purpose to increase the transparence of the information and compliance with the international rules. 2008
2007
BR GAAP shareholders' equity
1.453.363
1.453.363
Investments 1996 and 1997 monetary adjustment based on IGP-M Allowance for losses on tax incentives Reversal of interest on investments Property, plant and equipment 1996 and 1997 monetary adjustment based on IGP-M Cost, net of write-offs Depreciation, net of write-offs Software amortization since the asset is placed in service Own interest and charges Reversal of cost, net of write-offs Reversal of depreciation, net of write-offs Administrative expenses Reversal of cost, net of write-offs Reversal of depreciation, net of write-offs Capitalization of financial charges Reversal of criterion adopted in Brazil Cost, net of write-offs Depreciation, net of write-offs Recognition of US GAAP criterion Cost, net of write-offs Depreciation, net of write-offs Special obligations 1996 and 1997 monetary adjustment based on IGP-M Cost, net of write-offs Depreciation, net of write-offs Cost Accumulated depreciation Write-offs Pension and health care plan Addition to pension plan Addition to health care plan Adjustment of permanent - SCGÁS Other - not subject to tax impacts Proposed dividends Subtotal of US GAAP adjustments Income and social contribution taxes on US GAAP adjustments Subtotal of US GAAP adjustments, net of taxes on income US GAAP shareholders' equity
282 690 (408) 106.271 18.994 144.147 (125.153) (3.772) (18.442) (98.077) 79.635 (76.140) (107.640) 31.500 185.631 (24.706) (35.939) 11.233 210.337 282.993 (72.656) 139.312 (7.808) (12.911) 5.103 167.733 121.737 45.996 (101.480) 7.802 (109.282) (1.125) 73.657 73.657 237.530 (55.717) 181.813 1.820.065
282 690 (408) 86.090 29.644 149.342 (119.698) (7.210) (25.834) (102.046) 76.212 (68.889) (96.339) 27.450 158.379 (25.921) (36.299) 10.378 184.300 246.038 (61.738) 139.312 (8.183) (13.132) 4.949 147.495 109.058 38.437 (101.480) 7.802 (109.282) (1.922) 28.451 28.451 150.733 (41.575) 109.158 1.562.521
106
The table below shows the reconciliation between the statement of income under Brazilian accounting practices and under US GAAP, for the period ended December 2008 and year ended December 2007: 2008
2007
Net income under Brazilian accounting principles
258.444
345.990
Investments 1996 and 1997 monetary adjustment based on IGP-M Property, plant and equipment 1996 and 1997 monetary adjustment based on IGP-M Cost, net of write-offs Depreciation, net of write-offs Software amortization not recognized in local books Own interest and charges Reversal of cost, net of write-offs Reversal of depreciation, net of write-offs Administrative expenses Reversal of cost, net of write-offs Reversal of depreciation, net of write-offs Capitalization of financial charges Reversal of criterion adopted in Brazil Cost, net of write-offs Depreciation, net of write-offs Recognition of US GAAP criterion Cost, net of write-offs Depreciation, net of write-offs Special obligations 1996 and 1997 monetary adjustment based on IGP-M Cost, net of write-offs Depreciation, net of write-offs Cost Accumulated depreciation Write-offs Pension and health care plan Addition to pension plan Addition to health care plan
20.181 (10.650) (5.195) (5.455) 3.438 7.392 3.969 3.423 (7.251) (11.301) 4.050 27.252 1.215 360 855 26.037 36.955 (10.918) 20.613 375 221 154 20.238 12.679 7.559 -
3.059 25.594 (9.499) (2.969) (6.530) 2.302 7.406 1.954 5.452 823 (3.937) 4.760 24.562 1.568 420 1.148 22.994 33.800 (10.806) 15.893 1.063 266 797 14.830 16.064 (1.234) (52.003) (54.053) 2.050
Adjustment of permanent - SCGÁS Subtotal of US GAAP adjustments Income and social contribution taxes on US GAAP adjustments Subtotal of US GAAP adjustments, net of taxes on income
797 41.591 (14.143) 27.448
(1.922) (9.379) 3.189 (6.190)
US GAAP net income
285.892
339.800
7.412
8.810
Earnings per one hundred shares – Brazilian reais (R$)
107
Changes in shareholders' equity under US GAAP are as follows: US GAAP shareholders' equity – December 31, 2007 Net income (-) Paid Dividends
1.562.521 285.892 (28.348)
US GAAP shareholders' equity – December 31, 2008
1.820.065
Summary of the main differences between the BR GAAP and the US GAAP: a) Monetary adjustment in 1996 and 1997 Under Brazilian accounting practices, Celesc stopped to calculate the monetary adjustment for inflation on December 31, 1995. Starting January 1, 1996, the carrying amounts of all nonmonetary items are stated at their historical cost. Under US GAAP, Brazil was considered a hyperinflationary economy up to 1997 and therefore Celesc continued to recognize the inflation effects on such items based on the IGP-M (general market price index) through 1997. US GAAP reconciliation adjustments represent an amortization of the monetary adjustment of property, plant and equipment, investments and special obligations arising from the monetary adjustment made in 1996 and 1997. For US GAAP reconciliation purposes, shareholders' equity was increased by R$ 11.876and R$ 22.151, as of December 31, 2008 and December 31, 2007, respectively, because of the 1996 and 1997 monetary adjustments, net of depreciation and write-offs, as shown below:
108
Property, plant and Investments
equipment
Special obligations
Total
Effects of monetary adjustment based on the IGP-M through December 31, 1999 As of December 31, 2006 Write-offs Depreciation and amortization
684 -
39.143 796 1.524
(9.246) 71 129
As of March 31, 2007 Write-offs Depreciation and amortization
684 60 -
36.823 540 2.725
(9.446) 49 237
30.581 725 1.395 28.461 551 2.488
As of June 30, 2007 Write-offs Depreciation and amortization
624 -
33.558 718 1.287
(8.760) 64 108
25.422 654 1.179
As of September 30, 2007 Write-offs Depreciation and amortization
624 (66) -
31.553 915 994
(8.588) 92 313
As of December 31, 2007 Write-offs Depreciation and amortization
690 -
29.644 1.500 1.529
(8.183) (112)
23.589 757 681 22.151 1.500 1.641
As of March 31, 2008 Write-offs Depreciation and amortization
690 -
26.615 868 340
(8.295) 75 100
19.010 793 240
As of June 30, 2008 Write-offs Depreciation and amortization
690 -
25.407 1.480 2.082
(8.120) 202 (58)
17.977 1.278 2.140
As of September 30, 2008 Write-offs Depreciation and amortization
624 -
21.845 1.393 1.458
(8.588) (43) (125)
14.559 1.350 1.333
As of December 31, 2008
690
18.994
(7.808)
11.876
b) Investment grants These investments are approved by the Brazilian government for underdeveloped regions in Brazil or specific projects and are not subject to additional taxes. Under Brazilian accounting practices, investment grants are recognized as assets, with a corresponding credit to a reserve in shareholders' equity. For US GAAP reconciliation purposes, this credit is reversed against the related investments. c) Software amortization Celesc was not calculating software amortization in local books because it depended on ANEEL’s approval to recognize this amortization expense on consumer’s power tariff.
109
Starting in the three-month period ended June 30, 2005, Celesc was granted ANEEL’s approval to recognize this amortization expense on consumer’s power tariff. Amortization was recognized to state the useful life of software at an annual rate of 20%, retroactively to January 1, 2005. For US GAAP purposes, amortization was recognized to state the useful life of software at an annual rate of 20% since it was originally added. d) Capitalization of own interest and charges Under Brazilian accounting practices, Celesc capitalized the cost of interest on loans, exchange variations on foreign currency-denominated loans and interest on shareholders’ funds used in construction in progress through December 31, 2001. Under US GAAP, according to the Statement of Financial Accounting Standards 34 (SFAS 34), Capitalization of Interest Cost, interest incurred on loans is capitalized provided that loans do not exceed construction in progress. Interest on shareholders’ funds and exchange variations on foreign currency-denominated loans are not capitalized. e) Capitalization of administrative expenses Under Brazilian accounting practices, Celesc capitalized indirect administrative expenses up to the limit of 10% of direct personnel and outside service, attributable to property, plant and equipment in progress. This practice is not accepted under US GAAP and therefore its effects were reversed for US GAAP reconciliation purposes. f) Special obligations Under Brazilian accounting practices, Celesc states special obligations, which represent consuemrs’ contributions to the expansion of the distribution systems, as a reduction of property, plant and equipment. These obligations are not subject to depreciation based on the useful lives applicable to the related assets and write-offs. Under US GAAP, contributions received from consumers are considered a reimbursement of construction costs and are credited against the cost of the related asset. For US GAAP reconciliation purposes, depreciation is adjusted for the effects of the write-off of special obligations tied to the concession, calculated at the depreciation rates applicable to the respective type of property, plant and equipment purchased with such contributions from consumers. g) Income and social contribution taxes Under Brazilian accounting practices, income and social contribution tax liabilities are recognized based on the estimated amount of future taxes payable. Deferred income and social contribution tax assets related to deductible temporary differences (accrued expenses that are nondeductible until their realization in subsequent periods) or tax loss carryforwards, are recognized when it is reasonably certain that Celesc will generate taxable income to be offset against these assets. Under US GAAP, deferred income and social contribution taxes on temporary differences or tax loss carryforwards are always recognized and if necessary, a provision is recognized if the nonrealization of these assets is probable. Under Brazilian accounting practices, the effects of deferred income tax on the indexation of permanent assets applied for accounting purposes but not for tax purposes are recorded in shareholders' equity. Under US GAAP, these deferred income tax liabilities must be allocated to the statement of income. 110
h) Earnings per share Under Brazilian accounting practices, earnings per share are calculated based on the number of shares outstanding at the balance sheet date. Under US GAAP, pursuant to SFAS 128, Earnings per Share, earnings per share are calculated by dividing net income available for shares by the average number of shares available in the period. For all periods reported, Celesc had no potential share dilution and therefore diluted earnings per share are equal to basic earnings per share. i) Recognition of regulatory effects Under US GAAP, because of the results of several actions taken by the Federal Government and ANEEL in 2001, Celesc is subject to the effects of SFAS 71, Accounting for the Effects of Certain Types of Regulation. The structure of the tariff adjustment in Brazil provides for the recovery of authorized costs, including those resulting from Federal Government regulations related to power rationing actions imposed in 2001. Accordingly, Celesc capitalizes authorized costs incurred as deferred regulatory assets when it is reasonably predictable that future revenues equal to the costs incurred will be billed by embedding such costs in a tariff increase annually defined by ANEEL. Deferred regulatory assets are eliminated when Celesc receives the related costs through consumer billings. Should ANEEL exclude all or part of the revision costs, a provision for loss must be recorded for deferred regulatory assets, which must be reduced in the proportion of costs excluded. The Agreement also includes the costs of the Recoverable cost variations - Portion A (CVA) that each electricity distribution company is authorized to transfer to its consumers through future tariff adjustments. Portion A (CVA) costs are defined by concession agreements as the cost of energy purchased and other costs and fees. ANEEL has guaranteed tariff adjustments to recover part of the costs previously deferred as Portion A (CVA) costs. However, because of uncertainties related to the Brazilian economy, ANEEL has been postponing the approval of certain tariff adjustments of the Portion A (CVA). The agreement defined an accounting offsetting mechanism, created in October 2001, to record the Portion A (CVA) costs and calculate tariff adjustments. For US GAAP purposes, no adjustment was required with respect to the recognition of regulatory effects. Regulatory assets and liabilities are stated in note 13. j) Recognition of an allowance for losses on noncurrent items Under Brazilian accounting practices, an amount recorded in noncurrent assets is reduced to realization amount when it is considered that such assets are impaired when compared to the result of future discounted cash flow projections. US GAAP require, through SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets, that an allowance must be recognized when specific events or changes in circumstances indicate that, based on an analysis of the estimated discounted cash flow to be generated by operating assets, the carrying amount of noncurrent assets may not be recovered. For US GAAP adjustment purposes, it was not necessary to recognize this allowance for any of the periods reported. As described in note 16 – Temporary Investments, Celesc maintains the investment in Casan – Companhia Catarinense de Águas e Saneamento, which results from a negotiation of receivables in 1999. This investment amounts to R$110,716 (R$ 110,716 as of December 31, 2006), before provision for losses,
111
which is recognized by Celesc and amounts to R$81,271 on December 31, 2006 and preserving the same provision on December 31, 2008. Under US GAAP, transactions to settle debts are usually recognized at the fair value of the assets received or exchanged, if promptly available. Additionally, as the investment corresponds to less than 20% equity interest and Celesc does not have a significant influence on Casan, the investment must be classified as available for sale, as set forth by SFAS 115, Accounting for Certain Investments in Debt and Equity Securities, should Casan shares have a determinable fair value. As Casan’s shares are not traded in a stock or over-the-counter market, this investment must be stated at fair value on acquisition date measured by a method other than the allowance for temporary investments. Accordingly, Celesc decided to use the discounted cash flow method to calculate the fair value of the temporary investment, prepared by engaged consultants. The Brazilian Federal Government introduced in the beginning of 2007 the Growth Acceleration Plan – PAC, a set of economical policies planned to accelerate the economical growth of Brazil, providing relevant investments in the infrastructure, divided into several blocks, including the sanitation activity. This PAC shall provide to Casan financial resources, which shall allow additional investments to its operational asset, with positive variation to the Casan short terms results. Thus, conservatively, Celesc did not make adjustments in 2008 to Casan investment devaluation, maintaining the provision for losses in the amount of R$81.2 million, according to the report prepared based on the economic financial information gathered upon analysis of the present scenario and acknowledging the provision for losses also for the purposes of BR GAAP. k) Pension plan and other benefits As shown in notes 24 and 25, under Brazilian accounting practices, up to December 31, 2000, the effects of a pension plan and other benefits were recognized when the plan was created. Celesc’s pension plan was changed from a defined benefit plan to a defined contribution plan in 1998. Because of this change, in 1999 Celesc recognized a provision for the entire amount. CVM Resolution No. 371, of December 13, 2000, determined that as from the year ended December 31, 2001, companies must account for their pension plans and the effects of postretirement benefits on the accrual basis. Under US GAAP, the provisions of SFAS 87, Employers Accounting for Pensions, and SFAS 106, Employers’ Accounting for Postretirement Benefits other than Pensions, require the recognition of costs on a more comprehensive accrual basis. Additionally, US GAAP require the recognition both of assets and liabilities, as appropriate, related to the difference between the projected future benefit obligations (as set forth by SFAS 87 and SFAS 106) and the plan’s assets. These assets must be stated at fair value and adjusted by some reconciliation items. Regarding the benefits social welfares plans the bonds atuariais present value overcomes the Value Justo of the Active generating deficit, and that when being confronted with the passive provisionado results in a superavit. In the benefits assistenciais, the bonds atuariais Present value when being confronted with the Value Justo of the Active results a deficit. For this deficit be smaller than the select superavit in the plan of social welfare benefits A Celesc, conservadoramente, opted for not doing any accounting adjustment of reversion until there is an evaluation atuarial specific like determines A Resolution CGPC n the 26.
112
44. Periodic Tariff revision of the Celesc Distribuição S.A. August on the 07th 2008 went into effect the new tariff readjust that had its foreseen application in the Note Technique ANEEL in the 225, of 29 of July 2008 and Resolution Homologatória in the 689, of 05 of August 2008. The replacement rate will have an economic decline 8.65% and is the basis for calculating the rates of supply of the previous year, with the financial components. . The average effect realized among groups of Captive and Free consumers attended in High Tension – ATTN and Drops Tension – BT da Celesc Distribution S.A. will be negative in 3,36%. Eduardo Pinho Moreira Managing Director
Arnaldo Venicio de Souza Finance and Investor Relations Officer
Eduardo Carvalho Sitonio Technical Officer
Marcelo Gasparino da Silva General Counsel
Carlos Alberto Martins Sales Officer
José Affonso da Silva Jardim Corporate Management Officer
José Braulino Stähelin Accountant CRC – SC 018996/O-8
Florianópolis (SC), March 20, 2008.
113
INDEPENDENT AUDIT REPORT
To Stock Holders and Managers of CENTRAIS ELÉTRICAS DE SANTA CATARINA S.A. - CELESC Florianópolis - SC
(1)
We have audited the balance sheet of CENTRAIS ELÉTRICAS DE SANTA CATARINA S.A. – CELESC, and consolidated balance sheet of this company and its controlled companies, determined on December 31, 2008 and corresponding statements of income, of net equity changes, of cash flow, and of the value added corresponding to the period ended on that date, elaborated under the responsibility of your administration. Our duty is to express an opinion on those financial statements. The accounting statements of the direct controlled Companhia de Gás de Santa Catarina - SCGÁS, corresponding to the period ended on December 31 of 2008, were audited by other independent auditors. Therefore, our opinion, in relation to the amounts of the investment and agio in the acquisition of this company, in the amount of R$ 26,920 thousand and R$ 51,753 thousand, respectively, is only based on the report of those independent auditors.
(2)
Our examination was effected according to the audit standards applicable in Brazil and comprised: (a) planning of the work, considering the relevance of the balances, the volume of transactions and the accounting and internal control system of the company (b) the confirmation, based on tests, of the evidences and of the records that support the amounts and accounting data informed; and (c) the evaluation of the accountancy practices and estimates most representative adopted by the administration of the company, as well as the presentation of the accounting statements considered as a whole.
(3)
In our opinion, and based on the opinion of other independent auditors, the accounting statements mentioned in the first paragraph, represent properly, in all relevant aspects, the equity and financial position of CENTRAIS ELÉTRICAS DE SANTA CATARINA S.A. – CELESC, and its controlled companies on December 31, 2008, the result of its operations, the net equity changes, its cash flow and the values added in operations pertaining to the period ended on that date, according to the accountancy practices adopted in Brazil.
(4)
As mentioned in the explanatory note # 43, in accordance with the requirements established by Bolsa de Valores de São Paulo (São Paulo Stock Market) (BOVESPA) for Level II of Corporate Governance, the Company prepared reconciliation that presents the effects arising out of the adaptation of the financial statements pertaining to the period ended on December 31 of 2008 to the accounting principles generally accepted in the United States (United States Generally Accepted Accounting Principles - U.S. GAAP). Based on our audits, we are not aware of any relevant modification that should be made in the items of the reconciliation mentioned in the explanatory note in order to
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make it properly represent the differences between the accounting practices adopted in Brazil and the accounting principles generally accepted in The United States of America. (5)
As mentioned in the explanatory note #13, item (b), the Controlled Celesc Distribuição S.A. keeps registered in the non-current assets, credits of R$ 33,806 thousand related to the regulatory assets of contribution payments (PIS and COFINS) resulting from the additional costs due to the raise in the rate of the contributions mentioned above, not observed in the tax raises. The National Electric Energy Agency - ANEEL, in view of the process of reviewing the criteria used in the determination of the mentioned credits, consigned in the memo # 467/2005 - SFF/ANEEL and homologated according to the Technical Note # 225/05 - SRE/ANEEL, of July 25 of 2005, granted the Company, preliminarily, the amount of R$ 9,870 thousand. Due to the differences verified arising out of the criteria used in the determination of the credits, the Company requested ANEEL to review the procedures adopted, and any adjustments will only be recognized after the end of the review process and compensated from the next rate adjustments on.
(6)
As per the explanatory note #15, item (a), on December 31, 2008, the Holding Company has credits receivable from the State of Santa Catarina in the amount of R$ 36,031 thousand, from loans in the years of 1985 and 1986. These credits can only be realized if alternatives can be found to allow their realization.
(7)
As mentioned in the explanatory note #16, on December 31 of 2008, the Holding Company keeps registered in the Long Term Receivable the corporate participation in the following companies maintained for sale: (a)
Companhia Catarinense de Águas e Saneamento – Casan registered to the net value of R$29,445 thousand (R$110,716 thousand minus R$ 81,271 of Provision for Losses).
(b)
Dona Francisca Energética S.A registered to the accounting value of R$ 15,338 thousand.
Based on the Technical Pronouncement CPC-01 – Reduction of Recoverable Values of Assets and based on item 10 of the Orientation OCPC 02 – Explanations about the Accounting Statements of 2008, approved by the Memo CVM/SNC/SEP # 01/2009, the assets maintained for sale must be tested in relation to their recoverability. The company has not applied the recoverability (impairment) to these assets. (8)
Before, we audited the financial statements of CENTRAIS ELÉTRICAS DE SANTA CATARINA S.A. – CELESC pertaining to the period ended on December 31 of 2007, comprising the balance sheet, the statements of income, the net equity changes and of origins and investment of resources of this period, besides the supplementary information encompassing the statements of cash flow and of the added value, on which we have issued a report containing paragraphs of emphasis on the same subjects described in the fourth, fifth, sixth and seventh (item a) paragraphs, of March 20 of 2008. As mentioned in the explanatory note # 04, the accountancy practices adopted in Brazil were modified from January 1st, 2008 on. The financial statements pertaining to the period ended on December 31, 2007, presented as a whole with the financial statements of 2008, were elaborated in accordance with the accountancy practices adopted in Brazil in force until December 31, 2007 and, as allowed by the Technical Pronouncement CPC 115
13 – Adoption of Law nº 11.638/07 and of the Provisional Measure nº 449/08, and they are not being presented a second time with the adjustments for the purpose of comparison between periods. (9)
The social balance sheet pertaining to the periods ended on December 31 of 2008 and 2007, elaborated in connection to the financial statements, were also audited by the same methods described in the second paragraph and, in our opinion, those statements are properly presented, in all the relevant aspects, in relation to the financial statements mentioned in the first paragraph, taken as a whole. Florianópolis (SC), March 23, 2009.
ALFREDO HIRATA Accountant CRC (SC) nº 0018.835/O-T-SP
MARTINELLI AUDITORES CRC (SC) nº 001.132/O-9
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Statement of the Board of Directors The Board of Directors of Centrais Elétricas de Santa Catarina S.A. - Celesc, in compliance with the provisions of article 142, item V, of Federal Law 6404, of December 15, l976, updated by the Federal Law No 11.638, on December 28, 2007 and by the temporary measure 449, on December 03, 2008, has examined: the Management’s Annual Report and the Financial Statements, together with the related Notes, for the year end December 31, 2008. Based on our examination, the clarifications provided by our Management, the Report of the Independent Auditors (Martinelli Auditores), and the clarifications provid ed by them, we hereby recommend the approval of these Financial Statements and declare that they are suitable to be submitted to our shareholders.
Florianópolis, March 23, 2009. .
Glauco José Côrte
Eduardo Pinho Moreira
Arlindo Magno de Oliveira
Daniel A Cavalcanti de Arruda
Fabio de Oliveira Moser
Alaor Francisco Tissot
Içuriti Pereira da Silva
José Wilson da Silva
Lírio Albino Parisotto
Milton de Queiroz Garcia
Paulo Roberto Evagelista de Lima
Arno Veiga Cugnier Pedro Bittencourt Neto
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Fiscal Council’s Report The Fiscal Council of Centrais Elétricas de Santa Catarina S.A. – Celesc, in compliance with the provisions of article 163, items II, III, and VII, of Federal Law 6404, of December 15, 1976, updated by the Federal Law No 11.638, on December 28, 2007 and by the temporary measure 449, on December 03, 2008, has examined: the Management’s Annual Report and the Financial Statements, together with the related Notes, for the year end December 31, 2008. Based on our examination and the Independent Auditors’ Report (Martinelli Auditores) and the clarifications provided by them, also considering the aspects addressed and registered in the minutes of the meeting specifically held to appreciate the Financial Statements, on March 26, 2009, the Fiscal Council is of the opinion that the aforementioned financial statements present fairly the financial position of the Company and the results of its operations, with such documents being suitable for appreciation and approval by the Board of Directors and the Shareholders.
Florianópolis, March 26, 2009. .
Ronaldo Baumgarten Júnior
Gilberto Antônio Gadoti
Célio Goulart
Hayton Jurema da Rocha
Marcelo Ferrari Wolowski
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