CESP - Companhia Energética de São Paulori.cesp.com.br/wp-content/uploads/2012/05/09302002-3Q02-ITR.pdf · CESP - Companhia Energética de São Paulo (“CESP” or the “Company”)

(Convenience Translation into English from the OriginalPreviously Issued in Portuguese)

CESP - Companhia Energéticade São PauloInterim Financial Information for theQuarter and Nine-Month Period EndedSeptember 30, 2002 and IndependentAccountants’ Review Report

Deloitte Touche Tohmatsu Auditores Independentes

(Convenience Translation into English from the Original Previously Issued in Portuguese)

INDEPENDENT ACCOUNTANTS’ REVIEW REPORT

To the Shareholders and Management ofCESP - Companhia Energética de São PauloSão Paulo - SP

1. We have made a special review of the accompanying quarterly information of CESP - CompanhiaEnergética de São Paulo (the “Company”) as of and for the quarter and nine--month period ended September 30, 2002, which is comprised of the balance sheet, statement ofincome and performance report. This quarterly information is the responsibility of the Company’smanagement, prepared in accordance with accounting practices emanating from Brazilian corporatelaw.

2. Our review was conducted in accordance with specific standards established by IBRACON -Brazilian Institute of Independent Auditors, together with the Federal Accounting Council, andconsisted principally of: (a) inquiries of and discussions with management personnel responsiblefor the accounting, financial, and operating areas as to the principal criteria adopted in thepreparation of the quarterly information, and (b) review of the information and subsequent eventsthat had or may have had significant effects on the financial position and operations of theCompany.

3. Based on our special review, we are not aware of any material modifications that should be madeto the quarterly information referred to in paragraph 1 above for it to be in conformity withaccounting practices emanating from Brazilian corporate law, applied on a basis consistent withstandards established by the Brazilian Securities Commission (CVM), specifically applicable to thepreparation of such mandatory quarterly information.

4. As mentioned in Notes 3 and 4 to the financial statements, as of September 30, 2002, the Companyhas recorded, in current assets, receivables in the amount of R$ 301,220,000 and, in currentliabilities, payables in the amount of R$ 177,012,000, related to the sale and purchase of energy inthe spot market, based on preliminary data provided by the Wholesale Energy Market (MAE) andestimates prepared by the Company. These amounts are subject to changes that may arise from thejudgment of the legal action filed by market participants regarding the interpretation of prevailingmarket rules. The payment of these amounts is scheduled for November 22, 2002 and is dependentupon the companies’ ability to pay their obligations.

5. Previously, we had reviewed the balance sheet as of June 30, 2002 and issued a qualified reviewreport, dated August 20, 2002, because of a scope limitation related to the fact that the Companyrecorded receivables and payables for sales and purchases in the MAE based on preliminary dataprovided by the MAE and estimates made by management. These amounts, for the period fromSeptember 1, 2000 to June 30, 2002, were subject to change due to changes in interpretation ofcertain provisions of the General Agreement for the Electric Energy Sector (Ruling No. 288 of theBrazilian Electric Energy Authority - ANEEL). Assets and liabilities were to be determined onlyafter the MAE provided the final figures. Due to such changes and the provisional nature of theamounts recorded, we were unable to satisfy ourselves as to the adequacy of the asset and liabilityamounts recorded as of June 30, 2002 and the related income for the quarter and six-month periodsthen ended. Additionally, we qualified our report because the Company did not account for theeffects of the change in the reduction factor in the energy supply agreements from 0.97659 to0.93638, as determined by ANEEL’s Notice of August 12, 2002. The effects of such change wererecorded in the third quarter of 2002 in the amount of R$ 39,353,000. The statements of income forthe quarter and nine-month periods ended September 30, 2001 were reviewed by other auditorswho issued a qualified report, dated November 12, 2001, on the recording of transactions in theMAE through April 30, 2001, based on preliminary data provided by MAE, without consideringthe effects for the period from May to September 2001, since the MAE, responsible fordetermining the amounts of such transactions, did not provide amounts receivable and/or payableby market participants through November 12, 2001.

São Paulo, November 11, 2002

DELOITTE TOUCHE TOHMATSU Maurício Pires de Andrade ResendeAuditores Independentes Partner Responsible


BALANCE SHEETS AS OF SEPTEMBER 30 AND JUNE 30, 2002(In thousands of Brazilian reais)(Unaudited)

ASSETSSeptember30, 2002

June 30,2002 LIABILITIES AND STOCKHOLDERS’ EQUITY

September30, 2002

June 30,2002

CURRENT ASSETS CURRENT LIABILITIESCash and cash equivalents 70,974 4,283 Suppliers 42,732 135,910 Accounts receivable - consumers 29,654 35,365 Electricity purchased 52,611 46,429 Accounts receivable - distributors 331,580 368,869 Payroll 1,027 923 Other receivables - electricity 461,247 477,328 Taxes payable 22,524 53,688 Related-party receivables 69,760 47,757 Taxes payable - REFIS (Tax Recovery Program) 24,187 23,318 Other credits 28,140 21,635 Accrued charges on debt 116,414 126,912 Allowance for doubtful accounts (93,712) (46,773) Loans and financing 1,049,530 1,330,255 Recoverable taxes 9,077 9,065 Accounts payable - electricity 717,028 922,914 Restricted deposits and guarantees 13,448 20,987 Accounts payable - related parties 35,323 29,270 Materials and supplies 10,519 9,503 Pension plan - Fundação CESP 80,595 103,475 Prepaid expenses 39,773 11,530 Accrued liabilities - payroll 11,687 11,655

Reserve for contingencies 333,439 338,374 970,460 959,549 Regulatory charges payable 54,322 75,186

Interest on capital and dividends 1,757 1,758 NONCURRENT ASSETS Other 38,780 52,149 Other receivables - electricity 320,054 348,873 Related-party receivables 508,439 488,657 2,581,956 3,252,216 Deferred tax credits 776,420 776,420 Recoverable taxes 8,515 8,699 Other credits 69,627 69,538 Prepaid expenses 11,522 9,537

1,694,577 1,701,724


BALANCE SHEETS AS OF SEPTEMBER 30 AND JUNE 30, 2002(In thousands of Brazilian reais)(Unaudited) (Continuation)

ASSETSSeptember30, 2002

June 30,2002 LIABILITIES AND STOCKHOLDERS’ EQUITY

September30, 2002

June 30,2002

PERMANENT ASSETS LONG-TERM LIABILITIESInvestments 47,908 48,647 Loans and financing 11,427,162 8,014,785

Accounts payable - electricity 15,790 14,908 Property, plant and equipment: Accounts payable - related parties 132,647 128,016

In service 16,250,748 16,333,601 Pension plan - Fundação CESP 543,241 532,233 Construction in progress 1,783,914 1,563,865 Taxes payable 11,318 11,318

Taxes payable - REFIS 250,923 254,084 18,034,662 17,897,466

12,381,081 8,955,344 18,082,570 17,946,113 Special liabilities 15,481 15,481

12,396,562 8,970,825

SHAREHOLDERS’ EQUITYCapital 2,655,433 2,655,433 Capital reserves 5,542,119 5,542,119 Income reserves 1,489,028 1,504,927 Accumulated deficit (3,917,491) (1,318,134)

5,769,089 8,384,345 TOTAL LIABILITIES AND SHAREHOLDERS’

TOTAL ASSETS 20,747,607 20,607,386 EQUITY 20,747,607 20,607,386

The notes are an integral part of the financial statements

.


STATEMENTS OF INCOMEFOR THE QUARTERS ENDED SEPTEMBER 30, 2002 AND 2001(In thousands of Brazilian reais)(Unaudited)

3rd quarter2002 2001

OPERATING REVENUESElectricity sales to final consumers 37,997 24,353 Extraordinary tariff recovery adjustments (12,448) - Electricity sales to distributors 455,907 354,459 Electricity - independent suppliers/reimbursement agreement (27,422) - Other revenues 53 111

454,087 378,923

TAXES AND REGULATORY CHARGESGlobal reserve for reversion quota (RGR quota) (14,602) (10,655)Emergency capacity charges (3,156) - ICMS on power supplied (State VAT) (6,648) (4,384)COFINS (tax on operating revenues) (13,623) (11,249)PIS (tax on operating revenues) (2,952) (2,437)

(40,981) (28,725)

NET OPERATING REVENUES 413,106 350,198

OPERATING EXPENSESPersonnel (22,962) (22,134)Materials and supplies (1,747) (2,205)Outside services (11,337) (9,128)Compensation for use of water resources (16,654) (10,839)Fuel usage quota (CCC quota) (4,154) (4,641)Electricity purchased for resale (12,218) (12,670)Spot market energy (62,044) (3,958)Electricity from independent suppliers/reimbursement agreement 8,318 - Electricity network usage charges (10,243) (8,197)Depreciation (107,985) (102,390)Other expenses (48,090) (10,099)

(289,116) (186,261)

INCOME FROM ELECTRIC UTILITY OPERATIONS 123,990 163,937


STATEMENTS OF INCOMEFOR THE QUARTERS ENDED SEPTEMBER 30, 2002 AND 2001(In thousands of Brazilian reais)(Unaudited) (Continuation)

3rd quarter2002 2001

NONRECURRING ITEMSSpot market energy - reversal 258,729 - Pension plan expenses and adjustment per CVM Resolution No. 371 (Note 13) (25,474) -

233,255 - INCOME FROM ELECTRIC UTILITY OPERATIONS AFTERNONRECURRING ITEMS 357,245 163,937

FINANCIAL INCOME (EXPENSES)Income 51,272 40,008 Debt charges (174,273) (152,281)Other (17,438) (23,690)Net monetary and exchange variations (2,785,052) (1,180,047)Financial expense, net (2,925,491) (1,316,010)

LOSS FROM OPERATIONS (2,568,246) (1,152,073)

NONOPERATING (EXPENSE) INCOME (47,010) 4,414

LOSS BEFORE INCOME AND SOCIAL CONTRIBUTION TAXES (2,615,256) (1,147,659)Income and social contribution taxes - 381,711

NET LOSS (2,615,256) (765,948)

LOSS PER THOUSAND SHARES - R$ (27.91) (8.17)

The notes are an integral part of the financial statements.


STATEMENTS OF INCOMEFOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2002 AND 2001(In thousands of Brazilian reais)(Unaudited)

Nine months2002 2001

OPERATING REVENUESElectricity sales to final consumers 105,641 78,821 Extraordinary tariff recovery adjustments (12,448) - Electricity sales to distributors 1,433,259 1,110,861 Electricity - independent suppliers/reimbursement agreement 21,149 - Other revenues 182 276

1,547,783 1,189,958

TAXES AND REGULATORY CHARGESGlobal reserve for reversion quota (RGR quota) (41,560) (31,941)Emergency capacity charges (7,014) - ICMS on power supplied (State VAT) (18,811) (14,188)COFINS (tax on operating revenues) (46,452) (35,580)PIS (tax on operating revenues) (10,065) (7,709)

(123,902) (89,418)

NET OPERATING REVENUES 1,423,881 1,100,540

OPERATING EXPENSESPersonnel (63,415) (61,423)Materials and supplies (6,580) (4,744)Outside services (30,716) (27,938)Compensation for use of water resources (55,174) (41,247)Fuel usage quota (CCC quota) (11,165) (12,857)Electricity purchased for resale (30,009) (72,752)Spot market energy (126,443) - Electricity from independent suppliers/reimbursement agreement (49,909) - Depreciation (324,272) (302,039)Electricity network usage charges (26,516) (22,855)Other expenses (83,346) (17,173)

(807,545) (563,028)

INCOME FROM ELECTRIC UTILITY OPERATIONS 616,336 537,512


STATEMENTS OF INCOMEFOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2002 AND 2001(In thousands of Brazilian reais)(Unaudited) (Continuation)

Nine months2002 2001

NONRECURRING ITEMSSpot market energy - reversal 258,387 4,808 Pension plan expenses and adjustment per CVM Resolution No. 371 (Note 13) (76,422) -

181,965 4,808 INCOME FROM ELECTRIC UTILITY OPERATIONSAFTER NONRECURRING ITEMS 798,301 542,320

FINANCIAL INCOME (EXPENSES)Income 135,503 122,805 Expenses:

Debt charges (482,975) (455,612)Other (133,326) (84,652)

Net monetary and exchange variations (4,402,970) (2,220,650)Financial expense, net (4,883,768) (2,638,109)

LOSS FROM OPERATIONS (4,085,467) (2,095,789)

NONOPERATING EXPENSE (41,817) (2,339)

LOSS BEFORE INCOME AND SOCIAL CONTRIBUTIONTAXES (4,127,284) (2,098,128)Deferred social contribution tax - 167,738 Deferred income tax - 533,518

NET LOSS (4,127,284) (1,396,872)

LOSS PER THOUSAND SHARES - R$ (44.05) (14.91)

The notes are an integral part of the financial statements.


CONDENSED NOTES TO THE INTERIM FINANCIAL STATEMENTSAS OF SEPTEMBER 30, 2002(Amounts in thousands of Brazilian reais, unless otherwise indicated)

1. OPERATIONS

CESP - Companhia Energética de São Paulo (“CESP” or the “Company”) is a mixed capitalcorporation, controlled by the São Paulo State Government. The Company’s principal activities arethe planning, construction and operation of electric energy generation and distribution systems.

After the partial spin-off on March 31, 1999, CESP retained the Ilha Solteira, Três Irmãos, Jupiá,Engenheiro Sérgio Motta (Porto Primavera), Jaguari and Paraibuna power plants which representsignificant installed generating capacity of 7,346 MW, equivalent to approximately 57% of theinstalled capacity in the State of São Paulo.

On October 30, 2002, the 13th generating unit of the Porto Primavera power plant was placed inoperation, adding 110 MW to the system and increasing that plant’s installed capacity to 1,430MW.

As a concessionaire of electric energy service, CESP’s activities are regulated and inspected by theNational Electric Energy Authority (ANEEL), part of the Ministry of Mines and Energy, andoperates its power plants on an integrated basis with the National Electric System Operator (ONS).

2. PRESENTATION OF INTERIM FINANCIAL STATEMENTS

These financial statements should be analyzed together with the Company’s financial statementsfor the year ended December 31, 2001, prepared in accordance with accounting practicesemanating from Brazilian corporate law, standards established by ANEEL, and instructions of theBrazilian Securities Commission (CVM).

The accounting practices adopted in the preparation of these interim statements are consistent withthose applied in the preparation of the financial statements as of December 31, 2001.

3. WHOLESALE ENERGY MARKET - MAE

The interim financial statements are presented including transactions involving the purchase andsale of electric power from September 2000 to September 2002, based on data provided by theMAE on November 11, 2002.

Spot market energy amounts (sales and purchases) provided by the MAE for the period fromSeptember 2000 to June 2002 are final; however, the amounts for the third quarter of 2002 are stillsubject to change.

4. OVERALL AGREEMENT FOR THE ELECTRIC ENERGY SECTOR

At the end of 2001, the generating utilities, distributors and the Federal Government reached anOverall Agreement for the Electric Energy Sector, with BNDES (National Bank for Economic andSocial Development) acting as the financing agent. The Agreement was implemented by ANEELwhich established, through resolutions, the accounting procedures required to reflect the terms ofthe Agreement and several other Federal Government decisions made by the Energy CrisisManagement Committee.

The following table sets forth the amounts recorded as of September 30, 2002 based on the newdata provided by the MAE:

September June 30,30, 2002 2002

Assets:Current:

Electricity to independent suppliers 152,132 161,714Reimbursement agreement 7,895 7,454Tariff recovery - 1,570Spot market energy - MAE closing for 2000/2001/2002 301,220 306,590

461,247 477,328

Noncurrent:Electricity to independent suppliers 304,264 323,427Reimbursement agreement 15,790 14,908Tariff recovery - 10,538

320,054 348,873

781,301 826,201

Liabilities:Current:

Electricity from independent suppliers (*) 532,121 541,763Reimbursement agreement 7,895 7,454Spot market energy - MAE closing for 2000/2001/2002 177,012 373,697

717,028 922,914

Long term:Reimbursement agreement 15,790 14,908

732,818 937,822

(*) After the loan from BNDES is approved, the majority of such amount will be transferred to long-term liabilities, which willextend the Company’s debt profile.

4.1. Spot Market Energy

Represents the monthly variations resulting from the amounts processed within the MAEenvironment, between the commitments assumed by the Company for its market and theother MAE agents, against the actual performance of each member of the system.

Based on the figures provided by the MAE as of September 30, 2002, positive variations(revenue) amounted to R$ 301,220 (receivable) and negative variations, treated as expenses,were R$ 177,012 (payable).

CESP is also requesting the recognition of credits arising from production gains at thegenerating units of the Porto Primavera hydroelectric power plant, in accordance withANEEL’s Official Circular No. 28/2000 which, from July through December 2001, based onCompany calculations, is estimated at R$ 70 million in its favor.

The liquidation of such amounts is scheduled for November 22, 2002.

5. RECEIVABLES FROM RELATED PARTIES

September 30, 2002June 30,

2002Debtor Description Current Noncurrent Total Total

Finance Department of theState of São Paulo Consolidated credits 57,506 508,439 565,945 522,024

Financing contract 12,254 - 12,254 14,390

69,760 508,439 578,199 536,414

5.1. Consolidated Credits

Includes R$ 553,727 related to the contract entered into November 17, 2000, arising frompayments made by the Company in 1997 as indemnities which were the responsibility of theState Government, and R$ 12,218 related to the contract entered into on December 1, 2000for costs incurred under the State Privatization Program (PED). The amounts under bothcontracts are restated based on the General Market Price Index (IGP-M), and are subject tointerest of 6% per year. These amounts will be repaid over 120 months, starting December1, 2000 for the first case, and 48 months, starting January 1, 2001, for the second.

5.2. Financing Contract

Amounts under the contract entered into on August 6, 1999, repassed monthly to FundaçãoCESP. This contract is being amortized in 48 monthly installments, restated based on theIGP-M, and subject to 6% interest per year (Note 11.2.).

6. RESTRICTED DEPOSITS AND GUARANTEES - CURRENT ASSETS

September30, 2002

June 30,2002

Civil lawsuits 1,736 9,654Labor lawsuits 6,754 8,182Tax lawsuits 4,958 3,151

13,448 20,987

7. DEFERRED TAX CREDITS

The Company, based on analyses related to multi-year operating projections, considering theelectric energy wholesale market, the start-up of new energy generating units, and the recovery ofthe construction cost incurred and to be incurred for the Engenheiro Sérgio Motta power plant,recognized tax credits related to tax loss carryforwards, as well as on temporary differences,through December 31, 2001.

Amounts are as follows:

September30, 2002

June 30,2002

Income tax:Tax loss carryforwards 543,850 543,850Temporary differences 72,638 72,638

616,488 616,488

Social contribution tax:Tax loss carryforwards 146,649 146,649Temporary differences 13,283 13,283

159,932 159,932

776,420 776,420

The recognition of deferred tax credits is supported by financial projections prepared bymanagement for the next ten years, as recommended by the Concession Authorities, aiming atdetermining the recoverability of tax loss carryforwards and temporary differences. Theseprojections include as basic assumptions the increase in revenue due to the quantity of energy to bemade available in the market and future tariff adjustments on energy supplied to distributors,together with the maintenance or reduction of the level of operating and financial expenses, withconsequent positive results, in compliance with CVM Resolution No. 273/98.

In accordance with tax legislation in force, tax loss carryforwards are available for offset againstfuture taxable income, up to a limit of 30% per year.

On June 27, 2002, the CVM issued Instruction No. 371, establishing new guidelines for theaccounting recognition of credits arising from tax losses and temporarily nondeductible expenses.In view of the provisions of this Instruction, the Company did not recognize any assets related tothese tax credits generated in the quarter and nine-month period ended September 30, 2002.

During the nine-month period ended September 30, 2002, the financial position of the Companywas severely impacted by the approximately 67.9% devaluation of the Brazilian real against theU.S. dollar, to which the majority of its debt is linked. The local currency devaluation resulted fromvarious political and economic uncertainties in the domestic and international environment.Moreover, many uncertainties exist at present with respect to the regulatory environment of theelectric energy sector in Brazil as well as for the domestic and international economy. Accordingly,Company management is reviewing the income projections for the future but, based on studiespresently underway, it believes that credits recorded will be realized within ten years as shownbelow.

Year

Estimatedrealizableamount

2002 -2003 -2004 47,3532005 61,4922006 80,5862007 to 2009 350,0802010 to 2012 236,909

776,420

8. PROPERTY, PLANT AND EQUIPMENT

Composed as follows:

June 30,September 30, 2002 2002

Restated Accumulatedcost depreciation Net Net

In service:Generation 19,463,091 (3,317,128) 16,145,963 16,227,298Administration 189,617 (84,832) 104,785 106,303

19,652,708 (3,401,960) 16,250,748 16,333,601

In progress:Generation 1,762,928 - 1,762,928 1,545,592Administration 20,986 - 20,986 18,273

1,783,914 - 1,783,914 1,563,86521,436,622 (3,401,960) 18,034,662 17,897,466

8.1. In service

These assets are comprised of:


Interestand financial

chargesRestated during Accumulated

cost construction depreciation Net Net

In service:Intangibles 130 7 (67) 70 70Land 609,864 81,552 - 691,416 670,571Reservoirs, dams and

watermains 7,487,088 5,579,186 (1,961,350) 11,104,924 11,171,306Buildings, civil

construction andimprovements 1,622,114 813,680 (771,199) 1,664,595 1,682,949

Machinery andequipment 2,339,068 1,098,895 (655,309) 2,782,654 2,801,309

Vehicles 9,583 - (9,039) 544 703Furniture and fixtures 11,541 - (4,996) 6,545 6,693

12,079,388 7,573,320 (3,401,960) 16,250,748 16,333,601

8.2. Construction in Progress

CESP is constructing the Engenheiro Sérgio Motta power plant in the Paraná river basin;relevant data are as follows:

Total estimated capacity - MW 1,540Number of generating units 14Beginning of construction 1980First unit in operation 1999Units in operation - September 30, 2002 12Amount transferred to “In service” through September 30, 2002 12,680,126

9. TAXES PAYABLE - REFIS (TAX RECOVERY PROGRAM)

The Company opted for the Government’s program on April 28, 2000, and declared its total taxdebts to the Federal Revenue Service and the National Social Security Institute on June 30, 2000.More favorable conditions for debt amortization, such as extending payment terms and changingthe index used (from SELIC, Central Bank overnight rate, to the long-term interest rate (TJLP)),were key factors leading to the Company’s option for REFIS.

Tax debts included in the program are as follows:

BalancesInterest Tax Restatement September June 30,

Principal and fines credits Total TJLP Amortization 30, 2002 2002

Social contribution tax 32,811 95,979 (65,639) 63,151 13,772 (11,789) 65,134 65,676FINSOCIAL 1,629 6,440 (4,404) 3,665 799 (684) 3,780 3,812Corporate income tax

contingency - 1998 5,389 4,099 (2,803) 6,685 1,458 (1,248) 6,895 6,953Social contribution tax

contingency - 1998 2,464 1,874 (1,281) 3,057 666 (570) 3,153 3,179PIS contingency 17,858 7,417 (5,072) 20,203 4,406 (3,771) 20,838 21,011INSS assessment 93,528 124,597 (85,210) 132,915 28,986 (24,812) 137,089 138,231Income tax on indemnities 27,203 31,175 (21,320) 37,058 8,081 (6,918) 38,221 38,540

180,882 271,581 (185,729) 266,734 58,168 (49,792) 275,110 277,402

Of the total balance as of September 30, 2002, R$ 250,923 is classified in long-term liabilities.

The Company used its own tax loss carryforwards amounting to R$ 180,550, and socialcontribution tax loss carryforward credits from third parties amounting to R$ 5,179, to amortizeinterest and fines.

For the aforementioned debts included in the program, the Company pledged real estate (not linkedto generation of electric energy) in guarantee.

In view of the fixed nature of the financial charges on monthly installments due, as of September30, 2002, the present value of these tax debts amounts to approximately R$ 199,631, calculatedbased on revenue projections, considering, among other factors, the beginning of operations of newgenerating units at the Engenheiro Sérgio Motta power plant, tariff adjustments and the electricenergy wholesale market. A restatement of the total debt based on the long-term interest rate(estimated at 10.0% per year) was also considered. As a result, the total debt is expected to berepaid over approximately 14 years. In compliance with CVM Instruction No. 346 of September29, 2000, the Company opted not to record the adjustment to present value.

For the period from April 2000 to September 2002, the Company paid R$ 49,792 on the REFISobligations, at 1.2% of its monthly revenues.

10. LOANS AND FINANCING

10.1. Composition

September 30, 2002 June 30, 2002Accrued Principal Accrued Principalinterest Current Long interest Current Long

and charges portion term and charges portion term

Foreign currency:Financial institutions 14,719 157,638 3,133,767 66,364 305,061 3,411,272Medium-term notes (1) 77,276 - 2,631,475 50,780 - 1,923,785Banco do Brasil S.A. 1,667 138,526 1,800,832 6,407 303,491 1,315,127BNDES (2) 18,007 - 2,152,519 - - -Eletrobrás 1,956 10,850 28,054 743 7,924 20,487Draft I Participações S.A. 235 39,880 259,218 395 29,123 203,866Other institutions 538 998 20,104 214 899 14,682

114,398 347,892 10,025,969 124,903 646,498 6,889,219

Local currency:Financial institutions (2) 2,016 67,373 288,513 2,009 79,960 295,583Eletrobrás - 206 3,184 - 205 3,237Debentures (3) - - 712,662 - - 289,996Electric energy term certificates (4) - 634,059 396,834 - 603,592 536,750

2,016 701,638 1,401,193 2,009 683,757 1,125,566

116,414 1,049,530 11,427,162 126,912 1,330,255 8,014,785

(1) Three operations in the international market are recorded under this caption: the first, with a remaining balance of R$ 108,052, refers tomedium-term notes, issued in June 1997, equivalent to US$ 300 million, subject to annual fixed interest of 9.125% for the first fiveyears and 9.625% for the following five years. Final maturity of these notes is in June 2007, although the holders are entitled to earlierredemption in June 2002. The Company fully settled the put option exercised by 90.7% of investors on June 26, 2002, in the amount ofR$ 759,906.

The balance of R$ 1,939,188 is related to the second placement under the Euro-medium term note program, equivalent to US$ 500million; placement in the international market was concluded in February 2001.

These notes were funded in two series:

a) The first, placed on February 12, 2001 in U.S. dollars, in the amount of US$ 300 million, subject to interest of 10.50% per yearpayable semiannually and maturity of the principal on March 5, 2004.

b) The second, placed in Euros, on February 20, 2001, in the amount of € 200 million, with annual interest of 9.75% and maturity ofthe principal on February 27, 2004.

The proceeds were fully used for redemption of the bonds placed in the German market on May 6, 1996.

The balance related to the third placement, in the amount of R$ 584,235, refers to a US$ 150 million funding, on May 9, 2002, withinthe Euro-medium term note program, unsecured, subject to annual interest of 9% for the first year and 11.5% for the following years,with final maturity in May 2005.

These notes are subject to certain restrictive clauses which among others include limitation of the placement of liens on the whole orany portion of the Company’s property to secure any of its indebtedness, or indebtedness of any other person, enter into sale andleaseback transactions, and compliance with certain financial ratios. In the event CESP does not meet those ratios for three consecutivequarters, it must redeem the notes within a 30-day period. These ratios have been complied with.

(2) The amount of R$ 2,152,519, equivalent to US$ 552,650,000, relates to an agreement made with BNDES on September 2, 2002, theprincipal of which will be amortized starting on April 15, 2005 in 88 installments payable every two months and adjusted by theUMBNDES index plus a spread of 1.91% per year and a mismatch rate of 0.95% per year, due beginning April 15, 2003.

This swap agreement is comprised of debt previously renegotiated under the Brady Plan, relating to par bonds and discount bonds in theamounts of US$ 325,516,000 and US$ 227,134,000, respectively, which were classified in the prior quarter under “Financial Institutions- Foreign Currency”.

(3) Relates to the 8 th and 9th issues of simple debentures, first traded on July 18, 2001 and July 1, 2002, respectively:

Issue Redemption Annual Interest BalanceNo. Date Series Starting Ending interest - % Remuneration payment 09.30.02

8th 04.01.01 18 11.2003 04.2005 2.00 CDI Monthly 304,1779th 02.01.02 18 09.2004 02.2006 2.00 CDI Monthly 408,485

712,662

CDI - Interbank deposit rates.

The proceeds were used exclusively to pay subcontractors and suppliers of equipment for the Engenheiro Sérgio Motta power plant(Porto Primavera).

(4) On June 24, 2002, the Company issued the 8th series of electric energy term certificates (CTEEs), with the sole objective of raisingfunds to finance construction and equipment for the Engenheiro Sérgio Motta power plant (Porto Primavera).

Of the 8th tranche, 1,205,031 CTEEs were issued, all outstanding, at a unit value of R$ 232.17 in 18 series, with a 30-month graceperiod. These securities are restated based on the higher index between the B3 electric energy tariff or the CDI rate plus 2.5% per year.These CTEEs were registered with CVM on June 21, 2002 and entitle the holders to redeem these securities (beginning October 1, 2004and ending March 1, 2006) in payment of electric energy bills issued by CPFL, in the amount of one megawatt-hour per certificate.

The conditions for other loans and financing existing on September 30, 2002 remain unchanged in relation to those set forth in theCompany’s financial statements as of December 31, 2001.

10.2. Composition of Foreign Currency Loans - Principal Amount (all Amounts in Thousands)

September 30, 2002 June 30, 2002US$ US$

Currency R$ (equivalent) % R$ (equivalent) %

US$ 9,148,594 2,348,865 88.19 6,566,671 2,308,631 87.14SwFr 49,728 12,767 0.48 37,705 13,256 0.50Euro 1,175,539 301,815 11.33 931,341 327,430 12.36

10,373,861 2,663,447 100.00 7,535,717 2,649,317 100.00

10.3. Maturities of Principal of Long-term Loans and Financing as of September 30, 2002

Foreign currency Local currency TotalUS$

(equivalent) R$ R$ R$

2003 (October - December) 75,733 294,974 119,520 414,4942004 (*) 705,873 2,749,306 419,296 3,168,7022005 363,689 1,416,533 552,686 1,969,2192006 206,104 802,756 118,268 921,0242007 205,669 801,058 26,252 827,310After 2007 1,017,059 3,961,342 165,071 4,126,413

2,574,127 10,025,969 1,401,193 11,427,162

(*) From 2004 onwards, relates to periods from January to December.

10.4. Increase in Principal Currencies and Indexes (in Relation to the Brazilian Real) (%)

For the quarters ended For the nine months endedSeptember 30,

2002September 30,

2001September 30,

2002September 30,

2001

US$ 36.93 15.90 67.85 36.61SwFr 37.39 28.21 89.69 36.12Euro 36.44 24.05 86.74 32.26TR 0.71 0.75 1.88 1.59IGP-M 6.82 3.20 10.54 7.67

11. PAYABLES TO RELATED PARTIES


Creditor Description Current Long term Total Total

Eletrobrás Energy supplied by Itaipu,transmission charges and self-generated energy

23,069 132,647 155,716 142,896

Fundação CESP Financing contract 12,254 - 12,254 14,390

35,323 132,647 167,970 157,286

11.1. Eletrobrás

Refers to the remaining balance (after the spin-off) of the contract for the financing ofpurchases of energy, payable in 168 monthly installments beginning June 15, 1999. Thebalance due is monetarily restated based on the IGP-M index and is subject to annualinterest of 10%, payable monthly.

11.2. Fundação CESP

Refers to the balance of the financing contract, entered into on August 6, 1999, referring topayments of benefits defined by Law No. 4,819/58, payable in 48 monthly installments,monetarily restated based on the IGP-M index, plus annual interest of 6% (Note 5.2.).

12. RESERVES FOR CONTINGENCIES

The Company is party to certain lawsuits in various courts involving tax, civil and labor matters.Management, based on the opinion of its legal counsel, recognized a reserve for the lawsuits theunfavorable outcome of which is considered probable.

Composition of reserves is as follows:

September30, 2002

June 30,2002

Labor:Various 27,158 27,333Hazard exposure 11,296 11,296

38,454 38,629

Civil:Consumers (DNAEE Ordinances No. 38/86 and No. 45/86) 13,239 13,239Various 7,547 14,695

20,786 27,934

Expropriation and indemnities:Various 148,377 151,958

Tax:COFINS (tax on revenue) (*) 120,864 114,895Various 4,958 4,958

125,822 119,853

Total 333,439 338,374

(*) CESP is challenging in court the constitutionality of including financial and other operatingincome in the COFINS calculation basis, and obtained an injunction authorizing the paymentof this tax without the inclusion of this income starting July 1999. As of September 30, 2002,the amount accrued was R$ 120,864 and the litigation is in the appeal phase. In 2001, CESP’sappeal was accepted, and the amendments of judgment filed by CESP are still pending.

13. PENSION PLAN - FUNDAÇÃO CESP - CVM RESOLUTION NO. 371/2000

September 30, 2002June 30,

2002

CurrentLongterm Total Total

Fundação CESP Supplementary proportionalsettled benefit:

CESP employees 31,679 448,786 480,465 464,216Fundação CESP employees 876 220 1,096 1,228

Debt agreement 43,494 94,235 137,729 151,778Adjustment - CVM Resolution No. 371/2000 4,546 - 4,546 18,486

80,595 543,241 623,836 635,708

13.1. Supplementary Proportional Settled Benefit

Refers to the remaining balance of the contract (after the spin-off) for coverage of theactuarial deficit of Fundação CESP through October 31, 1997, relating to the supplementaryproportional fixed benefit (BSPS). This balance is being amortized starting December 30,1997 in 240 monthly installments restated by the general price index (IGP-DI), plus interestof 6% per year.

13.2. Debt Agreement

Refers to the remaining part of a contract (after the spin-off) effective December 30, 1997,to be amortized in 96 monthly installments, restated by the reference rate index (TR), plusinterest of 8% per year. The Company makes adjustments related to the actuarial costvariation (IGP-DI plus interest of 6% per annum) at yearend.

13.3. Adjustment - CVM Resolution No. 371/2000

Refers to adjustment for proportionally recording the annual actuarial cost of the pensionplan sponsored by the Company, based on estimates prepared by an independent actuary, forpurposes of implementing the cost recognition methodology related to the pension plan,established by CVM Resolution No. 371/2000.

Additional information on amounts payable to Fundação CESP is included in Note 15.

14. REGULATORY CHARGES PAYABLE

September30, 2002

June 30,2002

Current:Global reserve for reversion quota (RGR):

Installments - 1997 and 1998 (1) 5,502 10,928Installments - 2000 (2) 334 668Monthly quota 4,148 8,073Quota difference - 2001 (3) 18,693 18,693Quota difference - 2002 (4) 5,059 5,239

Compensation for use of water resources 11,910 23,142Fuel usage quota (CCC) 8,067 7,834Inspection fee - ANEEL 609 609

54,322 75,186

(1) ANEEL Decision No. 43 of February 1, 2000 established the payment in 36 monthlyinstallments.

(2) ANEEL Decision No. 124 of March 7, 2002 established the payment in 11 monthlyinstallments.

(3) Differences in 2001 payments. The form of payment will be decided by ANEEL.

(4) Payment differences identified through September 30, 2002, for which the form of paymentwill be defined by ANEEL.

15. RELATED-PARTY TRANSACTIONS

The Company has a series of related-party transactions; the principal ones are as follows:

Secretaria da Fazenda(State of São Paulo) Eletrobrás Fundação CESP

09.30.02 06.30.02 09.30.02 06.30.02 09.30.02 06.30.02

Assets:Current assets:

Receivables from related parties (Note 5) 69,760 47,757 - - - -Noncurrent assets:

Receivables from related parties (Note 5) 508,439 488,657 - - - -

578,199 536,414 - - - -

Liabilities:Current liabilities:

Loans and financing (Note 10) - - 13,012 8,872 - -Payables to related parties (Note 11) - - 23,069 16,936 12,254 12,334Pension plan (Note 13) - - - - 80,595 103,475

Long-term liabilities:Loans and financing (Note 10) - - 31,238 23,724 - -Payables to related parties (Note 11) - - 132,647 125,960 - 2,056Pension plan (Note 13) - - - - 543,241 532,233

- - 199,966 175,492 636,090 650,098

The Company has entered into three agreements with Fundação CESP, for the recognition ofcontributions due by the Company to the Supplementary Pension and Retirement Plan (PSAP); afourth agreement refers to payment of special leave granted to employees after a certain period ofservice and family allowances to the Company’s employees, as follows:

Supplementary Pension and Retirement Plan (PSAP)

On November 28, 1997, CESP entered into a debt acknowledgment contract for settlement ofretention of reserves, comprising contributions not made to the supplementary pension andretirement plans of the Company’s current and former employees. This debt is payable in amaximum 96 consecutive monthly installments, with the first installment on December 30, 1997,restated monthly to the corresponding maturities based either (i) on the actuarial cost determinedby an independent actuary for Fundação CESP, or (ii) on the TR index plus annual interest of 8%,whichever reflects the best results at the end of each year for Fundação CESP. As of September 30,2002, the contract balance was R$ 137,729 (Note 13.2.).

On November 28, 1997, CESP entered into a second contract with Fundação CESP for adjustmentof mathematical reserves and debt acknowledgment of the Supplementary Pension and RetirementPlan (PSAP). This debt is payable in 240 consecutive monthly installments, with the firstinstallment on December 30, 1997, restated to the corresponding maturities either (i) on a daily prorata basis, using the IGP-DI/FGV index, or (ii) based on the actuarial cost determined by the annualvaluation prepared by independent actuaries, whichever is higher. An actuarial valuation isperformed annually and unpaid installments are restated accordingly. As of September 30, 2002,the balance amounted to R$ 480,465 (Note 13.1.).

The third contract was entered into on December 22, 1998, for adjustment of the mathematicalreserves of the Supplementary Pension and Retirement Plan (PSAP) of Fundação CESP employees,equivalent to 37.4% of the total technical deficit. CESP sponsors this plan. The debt is payable in60 equal and consecutive monthly installments, restated by the IGP-DI/FGV index, includingactuarial fixed interest of 6% per year. The unpaid installments may be subject to adjustments, incase actuarial costs, determined at the end of each year, are different than the expected restatementand interest rates. As of September 30, 2002, the balance amounted to R$ 1,096 (Note 13).

For all contracts described above, Banco Banespa is authorized to transfer funds from accountsheld by CESP, and possible delays will cause the amount to be restated on a daily pro rata basis,plus a 1% penalty as of the 30th day in arrears, on the past-due amount duly restated.

Special Leave Granted to Employees After a Certain Period of Service and Family Allowances

On January 2, 1984, CESP entered into a contract with Fundação CESP, for payment of specialleaves granted to employees after a certain period of service and family allowances to FundaçãoCESP’s current and former employees. Since the debt was not settled by CESP, on August 6, 1999,this contract was amended and is payable in 48 consecutive monthly installments, the first onSeptember 1, 1999, restated based on the IGP-M, plus 6% interest per year. The debt is the soleresponsibility of the Finance Department of the State of São Paulo and therefore is fully refundedto CESP, on the same contractual dates and amounts (Notes 5.2. and 11.2. - Financing Contract).

16. OPERATING REVENUES, ELECTRICITY PURCHASED AND USE OF ELECTRIC ENERGYNETWORK

16.1. Tariff Adjustments for Supply and Sale of Electric Energy

CESP, together with electric energy distribution concessionaires (Eletropaulo, Bandeirante,CPFL and ELEKTRO) and ANEEL, held negotiations to agree on specific dates for tariffadjustments. This process started in May 2000 and resulted in changing the tariff adjustmentdates for CESP’s supply of electric energy.

In 2001 and 2002, CESP’s tariff adjustments, resulting from this rescheduling, were madeon the following dates:

Adjustment ANEELDistributors supplied date Resolution No. Adjustment - %

CPFL (rescheduling) 04.08.01 119 of 04.05.01 8.88Eletropaulo 07.04.01 252 of 07.02.01 13.35ELEKTRO (rescheduling) 08.07.01 315 of 08.06.01 13.57Bandeirante 10.11.01 417 of 10.09.01 11.58CPFL (rescheduling) 04.08.02 190 of 04.05.02 8.48Eletropaulo 07.04.02 371 of 07.03.02 8.42Elektro 08.27.02 449 of 08.26.02 10.27

Supply tariffs were adjusted at the rate of 22.95%, effective December 15, 2001, based onANEEL Resolution No. 544 of December 12, 2001.

16.2. Energy Sales for the Quarters Ended September 30

Quantities MWh (*) Amounts2002 2001 2002 2001

Sales to final consumers:Industrial 457,010 422,691 37,997 24,353

Tariff recovery - adjustment - - (12,448) -

457,010 422,691 25,549 24,353Sales to distributors:

Own generation/other:Eletropaulo 3,034,226 2,445,885 179,738 137,880Bandeirante 783,015 1,210,103 44,018 63,595CPFL 1,746,739 1,397,092 99,408 75,999ELEKTRO 1,522,175 1,215,261 74,138 56,328Piratininga 763,607 - 43,113 -Other 407,135 310,862 20,861 16,871

8,256,897 6,579,203 461,276 350,673

Wholesale Energy Market - MAE:Spot market energy - 2000 - reversal - - (990) 245Spot market energy - 2001 - - 21,337 3,541Spot market energy - 2002 - reversal - - (25,716) -

- - (5,369) 3,786

Electricity from independent suppliers/2001 - reversal (part) - - (19,733) -Electricity from independent suppliers/2002 - reversal (part) - - (7,689) -

- - (27,422) -

Total sales 8,713,907 7,001,894 454,034 378,812

16.3. Energy Sales for the Nine-month Periods Ended September 30


Sales to final consumers:Industrial 1,399,962 1,437,126 105,641 78,821

Tariff recovery - adjustment - - (12,448) - 1,399,962 1,437,126 93,193 78,821

Sales to distributors:Own generation/other:

Eletropaulo 8,729,598 8,018,239 492,408 408,686 Bandeirante 2,302,386 4,095,111 129,437 209,958 CPFL 5,004,537 4,585,370 276,681 236,134 ELEKTRO 4,410,633 4,028,851 209,542 173,226 Piratininga 2,220,354 - 125,176 -

Other 1,086,376 967,939 60,445 50,973

23,753,884 21,695,510 1,293,689 1,078,977

Wholesale Energy Market - MAE:Spot market energy - 2000 - reversal - - (1,698) (2,747)Spot market energy - 2001 - - 21,555 34,631 Spot market energy - 2002 - - 119,713 -

- - 139,570 31,884

Electricity from independent suppliers/ 2001 - reversal (part) - - (19,733) - Electricity from independent suppliers/ 2002 - - 40,882 -

- - 21,149 -

Total sales 25,153,846 23,132,636 1,547,601 1,189,682

16.4. Energy Purchased and Use of Electric Energy Network for the QuartersEnded September 30


Resale:Itaipu (1):

Contracts 99,761 101,460 11,850 8,811 Transmission charges - - 358 322 Surplus energy 4,482 (4,611) 10 (6)

104,243 96,849 12,218 9,127

Spot market (2): Bilateral contracts - 6,500 - 1,365 Other - 8,510 - 2,178

- 15,010 - 3,543

Wholesale Energy Market - MAE:Spot market energy - 2001/2002 - - 62,044 3,958 Spot market energy - 2000/2001 reversal (part) - - (258,729) -

- - (196,685) 3,958

Use of electric energy network (3):Connection - - 4,288 3,917 Basic network - - 5,955 4,280

- - 10,243 8,197

Electricity from independent suppliers/ 2001 - reversal (part) - - (6,542) - Electricity from independent suppliers/ 2002 - reversal (part) - - (1,776) -

- - (8,318) -

16.5. Energy Purchased and Use of Electric Energy Network for the Nine-month PeriodsEnded September 30


Resale:Itaipu (1):

Contracts 295,834 298,165 28,825 23,677 Transmission charges - - 1,014 928 Surplus energy 19,379 20,649 39 22

315,213 318,814 29,878 24,627

Spot market (2):Bilateral contracts - 146,291 - 20,879 Other - 58,510 131 4,375

- 204,801 131 25,254

Wholesale Energy Market - MAE:Spot market energy - 2000/2001 - - - 22,871 Spot market energy reversal - 2000/2001 - - (258,387) (4,808)Spot market energy - 2002 - - 126,443 -

- - (131,944) 18,063

Use of electric energy network (3):Connection - - 12,121 10,949 Basic network - - 14,395 11,906

- - 26,516 22,855

Electricity from independent suppliers/2001 - reversal (part) - - (6,542) - Electricity from independent suppliers/2002 - - 56,451 -

- - 49,909 -

(*) Not reviewed by independent public accountants.

The amounts of energy sold and purchased are linked to:

(1) Itaipu:

a) Contract and transmission charges: energy from Itaipu equivalent to 57 MW, to meet the needs ofsmall distributors.

b) Surplus energy: determined based on quantities effectively measured and prorated as a function of

established quotas.

(2) Spot market:

a) Bilateral contracts: negotiated between CESP and others in the sector to reduce negative exposure.

(3) Use of electric energy network:

a) Charges for connection and basic network based on amounts established by ANEEL ResolutionsNo. 244/01 and No. 247/01.

17. FINANCIAL INCOME (EXPENSE) AND NET MONETARY AND EXCHANGEVARIATIONS

17.1. For the Quarters Ended September 30

2002 2001

Financial income:Income from temporary cash investments 1,183 10,036 Restatement - receivables from related parties (Note 5) 45,665 25,035 Restatement - restricted deposits and guarantees - 2,031 Restatement and additions to electricity bills 3,971 2,515 Interest on capital/dividends 174 222 Other 279 169

51,272 40,008

Financial expense:Debt charges:

In foreign currency (159,418) (139,678)In local currency (14,855) (12,603)

(174,273) (152,281)

Other:Charges on past-due taxes (7,513) (7,156)Eletrobrás agreement (3,672) (3,184)Fundação CESP agreement - (6,765)CPMF (tax on bank transactions) (3,740) (2,981)COFINS on financial income (1,578) (1,217)PIS on financial income (342) (264)Tax on financial transactions (1,716) (367)Other 1,123 (1,756)

(17,438) (23,690)

Net monetary and exchange variations:In foreign currency (2,736,993) (1,122,204)In local currency (48,059) (57,843)

(2,785,052) (1,180,047)

17.2. For the Nine-month Periods Ended September 30

2002 2001

Financial income:Income from temporary cash investments 1,205 37,857 Gain on foreign currency purchased - 6,705 Restatement - receivables from related parties (Note 5) 80,479 63,031 Restatement - restricted deposits and guarantees - 6,864 Restatement and additions to electricity bills 14,945 6,468 Restatement - energy from independent suppliers 36,224 - Interest on capital/dividends 1,242 933 Other 1,408 947

135,503 122,805

Financial expense:Debt charges:

In foreign currency (430,717) (421,315)In local currency (52,258) (34,297)

(482,975) (455,612)

Other:Charges on past-due taxes (49,579) (21,074)Eletrobrás agreement (10,312) (9,067)Fundação CESP agreement - (19,777)Restatement - spot market energy (40,350) - CPMF (tax on bank transactions) (10,019) (12,709)COFINS on financial income (13,197) (10,482)PIS on financial income (2,859) (2,271)Tax on financial transactions (3,642) (4,481)Other (3,368) (4,791)

(133,326) (84,652)

Net monetary and exchange variations:In foreign currency (4,277,345) (2,096,056)In local currency (125,625) (124,594)

(4,402,970) (2,220,650)

18. FINANCIAL INSTRUMENTS

In compliance with the provisions of CVM Instruction No. 235/95, the Company has evaluated thebook value of its assets and liabilities in relation to market values, based on available informationand appropriate valuation methodology. However, the interpretation of market information, as wellas the selection of methodologies, requires considerable judgment and reasonable estimates inorder to produce adequate realizable values. As a result, the estimates referred to do not necessarilyindicate the amounts which might be realized in the current market. The use of different marketapproaches and/or methodologies for the estimates may have a significant effect on the estimatedrealizable values.

18.1. Valuation of Financial Instruments

As of September 30, 2002, the Company’s principal financial instruments, as well as thecriteria adopted for their valuation, are as follows:

(a) Cash and Cash Equivalents - Comprise cash, banks, and temporary cash investments.The market value of these assets does not differ from the recorded amounts.

(b) Receivables and Payables - Electricity - These receivables and payables arise basicallyfrom transactions made within the context of the Electric Energy Wholesale Market (MAE),and were recorded and valued based on information available, based on the prices prevailingin the MAE for 2001 and 2002, as well as on estimates made by the Company (Note 3).There were no transactions in connection with such receivables or payables which mightaffect their classification and valuation at the end of the quarter.

(c) Investments - Investments related to shares of publicly-traded companies are stated atcost; in the event cost is higher than the market value of these shares on stock exchanges, anallowance for reduction to market value was recognized. The market value of otherinvestments approximates book values.

(d) Debentures - The Company has liquidated seven out of the nine debenture series issued.These securities are traded on the over-the-counter market, and are valued in accordancewith the criteria established upon their issuance, based on the characteristics set forth inNote 16.1. (8) of the annual financial statements for 2001 and in Note 10.1. (3) to theseinterim financial statements.

(e) Electric Energy Term Certificates - CTEEs - Securities issued by CESP, equivalent onthe issue date to a unit amount of one megawatt/hour at the energy rate B-3 for an electricenergy distributor. The energy rate B-3 is applicable to captive consumers and is regulatedby ANEEL for each electric energy distribution utility, subject to control and inspection byANEEL.

CTEEs are traded over-the-counter and offer two options for monetary redemption, at thehigher between: (1) remuneration based on defined financial indexes (Note 16.1. (9) of theannual financial statements for 2001 and Note 10.1. (4)), or (2) B-3 tariff increases. Thesesecurities can also be redeemed in payment of electric energy bills to the distributor which inturn utilizes them to pay its bills to CESP.

The Company has liquidated four out of the eight tranches issued; redemption for cash hasnot yet occurred.

(f) Exchange Rate Risk - The Company’s indebtedness has been significantly affected byexchange rate fluctuations (U.S. dollar rate). As of September 30, 2002, the balance ofloans, financing, debentures and term certificates amounted to R$ 12,593,106, of which R$10,488,259 relates to loans and financing in foreign currency.

As of September 30, 2002, the Company did not have transactions involving derivativeinstruments.


MANAGEMENT’S COMMENTS ON THE COMPANY’S PERFORMANCEFOR THE QUARTER

ANALYSIS OF RESULTS FOR THE QUARTER

The change in average tariffs, not considering the effects of surplus energy and spot market trading, wasas follows:

Quarters ended September 30Average price - R$/MWh

2002 2001 Increase (%)

Sales: Supply - own generation/other 55.87 53.30 4.82

• Energy supply and sales revenue (excluding electricity from independent suppliers and spot marketenergy - MAE) amounted to R$ 486,825 this quarter, reflecting tariff adjustments approved byANEEL and an increase in volume compared to the same period in 2001.

• The Company’s revenue recognized was 80% of billings in the third quarter of 2001 due to the

energy rationing imposed by the government in June 2001 through February 2002. Therefore, theamounts presented reflect this reduction which was adjusted only in December 2001 through asupplementary billing to distributors.

• Income from electric utility operations amounted to R$ 357,245, including electricity from

independent suppliers and spot market energy for the quarter, as well as adjustments arising fromthe new data provided by the MAE through September 30, 2002.

• Funds provided by operations (income from electric utility operations, excluding depreciation and

pension plan expenses) were R$ 490,704, higher than in the third quarter of 2001. • Net financial expense of R$ 2,925,491 was significantly affected by exchange rate variations on

loans and financing in the amount of R$ 2,736,993 (Note 17.1.), basically the U.S. dollar variation(36.9% this quarter).

• The Company reported a loss from operations of R$ 2,568,246 (after financial expenses), due

primarily to debt charges and monetary and exchange variations. • As a result of its operations and the foregoing factors, the Company reported a net loss of

R$ 2,615,256 for the quarter.

ECONOMIC AND FINANCIAL RATIOS

September30, 2002

June 30,2002

Asset indebtedness:

Total liabilities (-) liabilities linked to concession 0.72 0.59Total assets

Current ratio:

Current assets 0.38 0.30Current liabilities

Book value per thousand shares 61.57 89.48

Quarters endedSeptember 30

2002 2001

Overall average price - R$ per MWh (*):

Sales and supply revenue 55.87 53.56Energy sold (MWh)

Operating margin - %:

Income from operations 86.48 46.81Net operating revenue

Property, plant and equipment return rate - %:

Income from operations 2.20 1.05Property, plant and equipment in service, net

(*) Not including surplus energy and spot market trading.

Documents

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