Quarterly Information (ITR) CTEEP-CIA Transm Energia …static.cteep.mediagroup.com.br/Arquivos/Download/1271-RDI303-2016... · Quarterly Information (ITR) CTEEP-CIA Transm Energia

Quarterly Information (ITR)

CTEEP-CIA Transm Energia Elétr. Paulista September 30, 2016

Quarterly Information (ITR) - 9/30/2016 - CTEEP-CIA TRANSM ENERGIA ELÉTR. PAULISTA Version: 1

Contents Company Information Capital ownership structure ............................................................................................................................. 1 Cash Dividends and Interest on Equity ........................................................................................................... 2 Individual financial statements Balance Sheet - Assets ................................................................................................................................... 3 Balance Sheet - Liabilities ............................................................................................................................... 4 Income Statement ........................................................................................................................................... 5 Statement of Comprehensive Income (Loss) .................................................................................................. 6 Cash Flow Statement - Indirect Method .......................................................................................................... 7 Statement of Changes in Equity SCE - 1/1/2016 to 9/30/2016 ........................................................................................................................... 8 SCE - 1/1/2015 to 9/30/2015 ........................................................................................................................... 9 Statement of Value Added............................................................................................................................ 10 Consolidated Financial Statements Balance Sheet - Assets ................................................................................................................................ 11 Balance Sheet - Liabilities ............................................................................................................................ 12 Income Statement ........................................................................................................................................ 13 Statement of Comprehensive Income (Loss) ............................................................................................... 14 Cash Flow Statement - Indirect Method ....................................................................................................... 15 Statement of Changes in Equity SCE - 1/1/2016 to 9/30/2016 ........................................................................................................................ 16 SCE - 1/1/2015 to 9/30/2015 ........................................................................................................................ 17 Statement of Value Added............................................................................................................................ 18 Comments on Performance.......................................................................................................................... 19 Notes to Quarterly Information ..................................................................................................................... 22 Other Information that the Company Considers to be Material .................................................................... 69 Reports and Representations Special Review Report - Qualified ................................................................................................................ 72 Opinion by the Supervisory Board or Equivalent Body ................................................................................ 75 Officers’ Representation on Financial Statements ....................................................................................... 76 Officers’ Representation on Independent Auditor’s Review Report ............................................................. 77


Page: 1 of 75

Company Information / Capital ownership structure Number of shares Current quarter (Units) 9/30/2016

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


Page: 2 of 75

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

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


Page: 3 of 75

Individual Financial Statements / Balance sheet - Assets

(In thousands of reais) Account Current quarter Prior year code Account description 9/30/2016 12/31/2015

1 Total Assets 14,558,744 6,847,228 1.01 Current Assets 1,099,949 583,659 1.01.01 Cash and Cash Equivalents 1,587 3,120 1.01.02 Short-Term Investments 347,994 230,855 1.01.03 Accounts Receivable 601,486 220,566 1.01.03.01 Trade Accounts Receivable 601,486 220,566 1.01.04 Inventories 35,540 38,787 1.01.06 Taxes Recoverable 57,080 4,928 1.01.06.01 Current Taxes Recoverable 57,080 4,928 1.01.07 Prepaid Expenses 9,592 6,037 1.01.08 Other Current Assets 46,670 79,366 1.01.08.03 Other 46,670 79,366 1.01.08.03.01 Receivables from Subsidiaries 4,472 29,500 1.01.08.03.04 Other 42,198 49,866 1.02 Noncurrent Assets 13,458,795 6,263,569 1.02.01 Long-Term Receivables 10,644,864 3,823,167 1.02.01.03 Accounts Receivable 10,535,374 3,535,323 1.02.01.03.01 Trade Accounts Receivable 9,444,300 2,569,403 1.02.01.03.02 Other Accounts Receivable 1,091,074 965,920 1.02.01.04 Inventories 25,891 27,948 1.02.01.06 Deferred Taxes - 183,809 1.02.01.06.01 Deferred Income and Social Contribution Taxes - 183,809 1.02.01.09 Other Noncurrent Assets 83,599 76,087 1.02.01.09.04 Pledges and Restricted Deposits 75,108 66,252 1.02.01.09.06 Other 8,491 9,835 1.02.02 Investments 2,773,596 2,394,590 1.02.02.01 Equity Interests 2,773,596 2,394,590 1.02.02.01.02 Interests Held in Subsidiaries 960,029 821,950 1.02.02.01.03 Interests Held in Jointly-Controlled Subsidiaries 1,813,567 1,572,640 1.02.03 Property, Plant and Equipment 24,759 23,163 1.02.03.01 Property, plant and equipment in use 24,759 23,163 1.02.04 Intangible assets 15,576 22,649 1.02.04.01 Intangible assets 15,576 22,649


Page: 4 of 75

Individual Financial Statements / Balance Sheet - Liabilities


2 Total Liabilities 14,558,744 6,847,228 2.01 Current liabilities 440,366 368,580 2.01.02 Trade accounts payable 31,696 31,824 2.01.02.01 Trade accounts payable - domestic 31,696 31,824 2.01.03 Tax Liabilities 95,507 43,025 2.01.03.01 Federal tax liabilities 95,507 43,025 2.01.03.01.02 Taxes and charges payable 78,291 26,825 2.01.03.01.03 Taxes in installments - Law No. 11941 17,216 16,200 2.01.04 Loans and financing 237,703 213,312 2.01.04.01 Loans and financing 32,535 32,530 2.01.04.01.01 In local currency 32,535 32,530 2.01.04.02 Debentures 205,168 180,782 2.01.05 Other liabilities 37,547 51,591 2.01.05.02 Other 37,547 51,591 2.01.05.02.01 Dividends and interest on equity payable 2,457 2,156 2.01.05.02.04 Payables - Funcesp 6,086 6,144 2.01.05.02.05 Regulatory charges payable 11,838 21,442 2.01.05.02.06 Other 17,166 21,849 2.01.06 Provisions 37,913 28,828

2.01.06.01 Provisions for tax, social security, labor and civil contingencies 37,913 28,828

2.01.06.01.03 Provisions for employee benefits 37,913 28,828 2.02 Noncurrent liabilities 4,064,364 1,142,443 2.02.01 Loans and financing 793,603 665,649 2.02.01.01 Loans and financing 285,506 306,076 2.02.01.01.01 In local currency 285,506 306,076 2.02.01.02 Debentures 508,097 359,573 2.02.02 Other liabilities 180,010 179,733 2.02.02.02 Other 180,010 179,733 2.02.02.02.04 Special obligations - reversal/amortization 24,053 24,053 2.02.02.02.05 Taxes in installments - Law No. 11941 121,947 126,897 2.02.02.02.06 Regulatory charges payable 34,010 28,783 2.02.03 Deferred Taxes 2,927,903 107,741 2.02.03.01 Deferred Income and Social Contribution Taxes 2,927,903 107,741 2.02.03.01.01 Deferred PIS and COFINS 921,025 107,741 2.02.03.01.02 Deferred Income and Social Contribution Taxes 2,006,878 - 2.02.04 Provisions 162,848 189,320

2.02.04.01 Provisions for tax, social security, labor and civil contingencies 162,848 189,320

2.02.04.01.01 Tax provisions 16,663 9,722 2.02.04.01.02 Provisions for social security and labor contingencies 134,701 165,368 2.02.04.01.04 Provisions for civil contingencies 11,484 14,230 2.03 Equity 10,054,014 5,336,205 2.03.01 Paid-in Capital 2,372,437 2,215,291 2.03.02 Capital reserves 1,218,249 1,278,022 2.03.02.02 Special goodwill reserve on merger 588 60,361 2.03.02.06 Future capital contribution 666 666 2.03.02.07 Investments grants - CRC 426,710 426,710 2.03.02.08 Revenue from construction in progress 633,053 633,053 2.03.02.09 Donations and investment grants 150,489 150,489 2.03.02.10 Tax incentives - FINAM 6,743 6,743 2.03.04 Income reserves 1,842,892 1,842,892 2.03.04.01 Legal reserve 278,254 278,254 2.03.04.02 Statutory reserve 221,529 221,529 2.03.04.05 Retained profits reserve 1,343,109 1,343,109 2.03.05 Retained earnings (accumulated losses) 4,620,436 -


Page: 5 of 75

Individual Financial Statements / Income Statement

(In thousands of reais) YTD Same Prior YTD

Current quarter

prior-year quarter

Account code Account description

7/1/2016 to 9/30/2016

1/1/2016 to 9/30/2016

7/1/2015 to 9/30/2015

1/1/2016 to 9/30/2015

3.01 Revenue from sales and/or services 6,627,212 7,118,171 359,786 828,700 3.01.01 Net operating revenue 6,627,212 7,118,171 359,786 828,700 3.02 Cost of sales and/or services (129,742) (334,552) (157,436) (389,245)

3.02.01 Costs of infrastructure implementation, operation and

maintenance services (129,742) (334,552) (157,436) (389,245) 3.03 Gross profit 6,497,470 6,783,619 202,350 439,455 3.04 Operating income (expenses) 250,619 275,993 136,138 97,687 3.04.02 General and administrative expenses (37,645) (100,535) (29,097) (112,449) 3.04.02.01 Management fees (1,472) (3,693) (1,143) (3,429) 3.04.02.02 Other general and administrative expenses (36,173) (96,842) (27,954) (109,020) 3.04.04 Other operating income 1,368 2,820 601 2,644 3.04.05 Other operating expenses (1,558) (3,888) (10,663) (28,716) 3.04.06 Equity pickup 288,454 377,596 175,297 236,208 3.05 Income before financial income (expense) and taxes 6,748,089 7,059,612 338,488 537,142 3.06 Financial income (expenses) (27,961) (84,215) (20,688) (20,315) 3.06.01 Financial income 14,697 44,038 25,396 95,619 3.06.02 Financial expenses (42,658) (128,253) (46,084) (115,934)

3.07 Income before income taxes 6,720,128 6,975,397 317,800 516,827 3.08 Income and social contribution taxes (2,188,342) (2,244,961) (45,823) (83,843) 3.08.01 Current (9,721) (54,274) (27,306) (65,163) 3.08.02 Deferred (2,178,621) (2,190,687) (18,517) (18,680) 3.09 Net income from continuing operations 4,531,786 4,730,436 271,977 432,984 3.11 Income/loss for the period 4,531,786 4,730,436 271,977 432,984 3.99 Earnings per share (reais / share) 3.99.01 Basic earnings per share 3.99.01.01 Registered common shares 27.84073 29.06113 1.68658 2.68502 3.99.01.02 Registered preferred shares 27.84073 29.06113 1.68658 2.68502 3.99.02 Diluted earnings per share 3.99.02.01 Registered common shares 27.83750 28.81042 1.65603 2.63599 3.99.02.02 Registered preferred shares 27.83750 28.81042 1.65603 2.63599


Page: 6 of 75

Individual Financial Statements / Statements of Comprehensive Income

(In thousands of reais) Same Current quarter Current YTD prior-year quarter Prior YTD Account code Account description 7/1/2016 to 9/30/2016 1/1/2016 to 9/30/2016 1/1/2015 to 9/30/2015

1/1/2015 to 9/30/2015

4.01 Net income for the period 4,531,786 4,730,436 271,977 432,984

4.03 Comprehensive income for the period 4,531,786 4,730,436 271,977 432,984


Page: 7 of 75

Individual Financial Statements / Cash Flow Statement - Indirect Method

(In thousands of reais) Prior Account Current YTD YTD code Account description 1/1/2016 to 9/30/2016 1/1/2015 to 9/30/2015

6.01 Net cash from operating activities 44,876 412,564 6.01.01 Cash from operations 322,804 387,820 6.01.01.01 Income (loss) for the period 4,730,436 432,984

6.01.01.02 Restatement of accounts receivable - Law No. 12783 - Existing Service (“SE”) (7,111,714) -

6.01.01.03 Depreciation and amortization 6,109 5,804 6.01.01.04 Deferred PIS and COFINS 813,284 22,447 6.01.01.05 Deferred income and social contribution taxes 2,190,687 18,680 6.01.01.06 Provision for contingencies (49,034) 9,769 6.01.01.07 Net book value of permanent assets written off 4,430 50 6.01.01.08 Tax benefit - merged goodwill 24 22,415

6.01.01.09 Interest and monetary and foreign exchange gains (losses) on assets and liabilities 116,024 111,771

6.01.01.10 Loss realized in subsidiary (1,714) (1,760) 6.01.01.11 Equity pickup (377,596) (236,208) 6.01.01.12 Amortization of concession asset in acquisition of 1,868 1,868 Subsidiary 6.01.02 Changes in assets and liabilities (277,928) 24,744 6.01.02.01 Accounts receivable (concession asset) (144,103) 101,769 6.01.02.02 Inventories 5,304 13,264 6.01.02.03 Receivables - State Finance Department (SEFAZ) (125,154) (104,709) 6.01.02.04 Taxes and contributions to be offset (52,152) (28,578) 6.01.02.05 Pledges and restricted deposits (80) 3,131 6.01.02.06 Prepaid expenses (3,555) (10,041) 6.01.02.07 Other assets 5,965 25,540 6.01.02.08 Trade accounts payable (128) (16,497) 6.01.02.09 Taxes and social charges payable 51,466 57,864 6.01.02.10 Taxes in installments - Law No. 11941 (12,568) (11,580) 6.01.02.11 Regulatory charges payable (7,268) (13,219) 6.01.02.12 Provisions 9,085 6,884 6.01.02.13 Payables - Funcesp (58) 318 6.01.02.14 Other liabilities (4,682) 598 6.02 Net cash from investing activities (95,715) (91,447) 6.02.01 Short-term investments (117,139) (9,496) 6.02.02 Acquisitions of property, plant and equipment (5,062) (1,097) 6.02.03 Intangible assets - (632) 6.02.04 Investments (1,564) (91,904) 6.02.05 Dividends received 28,050 11,682 6.03 Net cash from financing activities 49,306 (318,798) 6.03.01 Additions to loans and debentures 148,930 30,000 6.03.02 Payment of loans and debentures (principal) (23,684) (87,720) 6.03.03 Payment of loans and debentures (interest) (63,614) (119,650) 6.03.05 Dividends and interest on equity paid (109,699) (141,428) 6.03.06 Payment of capital 97,373 - 6.05 Increase (decrease) in cash and cash equivalents (1,533) 2,319 6.05.01 Cash and cash equivalents at beginning of period 3,120 1,390 6.05.02 Cash and cash equivalents at end of period 1,587 3,709


Page: 8 of 75

Individual Financial Statements / Statement of Changes in Equity / SCE - 1/1/2016 to 9/30/2016

(In thousands of reais)


Paid-in capital

Capital reserves, options

granted and treasury

shares Income reserve

Retained earnings

(accumulated losses)

Other comprehensive

income Equity

5.01 Opening balances 2,215,291 1,278,022 1,842,892 - 5,336,205 5.03 Adjusted Opening Balances 2,215,291 1,278,022 1,842,892 - 5,336,205

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

5.04.01 Capital increases 157,146 (59,773) - - 97,373 5.04.06 Dividends - - - (110,000) (110,000) 5.05 Total comprehensive income - - - 4,730,436 4,730,436 5.05.01 Net income for the period - - - 4,730,436 4,730,436 5.07 Closing balances 2,372,437 1,218,249 1,842,892 4,620,436 10,054,014


Page: 9 of 75

Individual Financial Statements / Statement of Changes in Equity / SCE - 1/1/2015 to 9/30/2015



Paid-in capital

Capital reserves, options

granted and treasury

shares Income reserve

Retained earnings


Other comprehens

ive income Equity

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

5.04 Capital transactions with shareholders - - - (109,171) - (109,171)

5.04.06 Dividends - - - (110,765) - (110,765) 5.04.08 Unclaimed dividends - - - 1,026 - 1,026 5.04.09 Unclaimed interest on equity - - - 568 - 568 5.05 Total comprehensive income - - - 432,984 - 432,984 5.05.01 Net income for the period - - - 432,984 - 432,984 5.07 Closing balances 2,215,291 1,278,022 1,671,732 323,813 - 5,488,858


Page: 10 of 75

Individual Financial Statements / Statement of Value Added

(In thousands of reais) Prior Account Current YTD YTD code Account description 1/1/2016 to 9/30/2016 1/1/2015 to 9/30/2015

7.01 Revenues 8,035,195 937,614 7.01.01 Sales of goods, products and services 8,032,375 934,970 7.01.02 Other revenues 2,820 2,644 7.02 Inputs acquired from third parties (193,612) (272,466) 7.02.01 Costs of sales and services (17,015) (11,502) 7.02.02 Materials, energy, third-party services and other expenses (176,597) (260,964) 7.03 Gross value added 7,841,583 665,148 7.04 Retentions (6,109) (5,804) 7.04.01 Depreciation, amortization and depletion (6,109) (5,804) 7.05 Net value added produced 7,835,474 659,344 7.06 Value added received in transfer 421,634 331,827 7.06.01 Equity pickup 377,596 236,208 7.06.02 Financial income 44,038 95,619 7.07 Total value added to be distributed 8,257,108 991,171 7.08 Distribution of value added 8,257,108 991,171 7.08.01 Personnel 174,114 193,695 7.08.01.01 Direct compensation 123,880 147,953 7.08.01.02 Benefits 38,113 34,988 7.08.01.03 Unemployment Compensation Fund (FGTS) 12,121 10,754 7.08.02 Taxes, charges and contributions 3,214,275 239,090 7.08.02.01 Federal 3,189,915 218,961 7.08.02.02 State 351 282 7.08.02.03 Municipal 24,009 19,847 7.08.03 Debt remuneration 138,283 125,402 7.08.03.01 Interest 128,182 115,487 7.08.03.02 Rent 10,101 9,915 7.08.04 Equity remuneration 4,730,436 432,984 7.08.04.02 Dividends 110,000 110,765 7.08.04.03 Retained Earnings (Accumulated Losses) 4,620,436 322,219


Page: 11 of 75

Consolidated Financial Statements - Balance Sheet - Assets

(In thousands of reais) Account Account description Current quarter Prior quarter code 9/30/2016 12/31/2015

1 Total Assets 15,010,254 7,338,703 1.01 Current assets 1,450,286 898,826 1.01.01 Cash and cash equivalents 4,503 6,135 1.01.02 Short-term investments 570,381 440,054 1.01.03 Accounts receivable 723,438 319,961 1.01.03.01 Trade accounts receivable 723,438 319,961 1.01.04 Inventories 37,205 40,476 1.01.06 Taxes recoverable 57,350 5,763 1.01.06.01 Current taxes recoverable 57,350 5,763 1.01.07 Prepaid expenses 9,631 6,057 1.01.08 Other current assets 47,778 80,380 1.01.08.03 Other 47,778 80,380 1.01.08.03.02 Receivables from jointly-controlled subsidiaries 4,174 29,200 1.01.08.03.03 Other 43,604 51,180 1.02 Noncurrent assets 13,559,968 6,439,877 1.02.01 Long-term receivables 11,681,597 4,794,534 1.02.01.01 Short-term investments measured at fair value 12,876 12,059 1.02.01.01.03 Restricted cash 12,876 12,059 1.02.01.03 Accounts receivable 11,553,191 4,492,888 1.02.01.03.01 Trade accounts receivable 10,462,117 3,526,968 1.02.01.03.02 Other accounts receivable 1,091,074 965,920 1.02.01.04 Inventories 31,922 29,675 1.02.01.06 Deferred taxes 0 183,809 1.02.01.06.01 Deferred income and social contribution taxes 0 183,809 1.02.01.09 Other noncurrent assets 83,608 76,103 1.02.01.09.04 Pledges and restricted deposits 75,117 66,268 1.02.01.09.06 Other 8,491 9,835 1.02.02 Investments 1,813,567 1,572,640 1.02.02.01 Equity interests 1,813,567 1,572,640 1.02.03 Property, Plant and Equipment - PPE 24,795 23,194 1.02.03.01 Property, plant and equipment in use 24,795 23,194 1.02.04 Intangible assets 40,009 49,509 1.02.04.01 Intangible assets 40,009 49,509


Page: 12 of 75

Consolidated Financial Statements / Balance Sheet - Liabilities


2 Total liabilities 15,010,254 7,338,703 2.01 Current liabilities 489,657 422,311 2.01.02 Trade accounts payable 34,385 34,950 2.01.02.01 Trade accounts payable - domestic 34,385 34,950 2.01.03 Tax liabilities 98,083 44,617 2.01.03.01 Federal tax liabilities 98,083 44,617 2.01.03.01.02 Taxes and social charges payable 80,867 28,417 2.01.03.01.03 Taxes in installments - Law No. 11941 17,216 16,200 2.01.04 Loans and financing 276,443 251,852 2.01.04.01 Loans and financing 71,275 71,070 2.01.04.01.01 In local currency 71,275 71,070 2.01.04.02 Debentures 205,168 180,782 2.01.05 Other obligations 41,580 61,135 2.01.05.02 Other 41,580 61,135 2.01.05.02.01 Dividends and interest on equity payable 2,457 2,156 2.01.05.02.04 Payables - Funcesp 6,086 6,144 2.01.05.02.05 Regulatory charges payable 11,908 21,821 2.01.05.02.07 Other 21,129 31,014 2.01.06 Provisions 39,166 29,757 2.01.06.01 Provisions for tax, social security, labor and civil contingencies 39,166 29,757 2.01.06.01.03 Provisions for employee benefits 39,166 29,757 2.02 Noncurrent liabilities 4,309,066 1,401,391 2.02.01 Loans and financing 952,981 844,812 2.02.01.01 Loans and financing 444,884 485,239 2.02.01.01.01 In local currency 444,884 485,239 2.02.01.02 Debentures 508,097 359,573 2.02.02 Other obligations 182,944 182,144 2.02.02.02 Other 182,944 182,144 2.02.02.02.03 Special obligations - reversal/amortization 24,053 24,053 2.02.02.02.04 Taxes in installments - Law No. 11941 121,947 126,897 2.02.02.02.05 Regulatory charges payable 36,944 31,194 2.02.03 Deferred taxes 3,010,293 184,823 2.02.03.01 Deferred income and social contribution taxes 3,010,293 184,823 2.02.03.01.01 Deferred income and social contribution taxes 2,045,108 35,801 2.02.03.01.02 Deferred PIS and COFINS 965,185 149,022 2.02.04 Provisions 162,848 189,612 2.02.04.01 Provisions for tax, social security, labor and civil contingencies 162,848 189,612 2.02.04.01.01 Provisions for tax contingencies 16,663 9,722 2.02.04.01.02 Provisions for social security and labor contingencies 134,701 165,588 2.02.04.01.04 Provisions for civil contingencies 11,484 14,302 2.03 Equity - Consolidated 10,211,531 5,515,001 2.03.01 Paid-in Capital 2,372,437 2,215,291 2.03.02 Capital reserves 1,218,249 1,278,022 2.03.02.02 Special goodwill reserve on merger 588 60,361 2.03.02.06 Future capital contribution 666 666 2.03.02.07 Investments grants - CRC 426,710 426,710 2.03.02.08 Revenue from construction in progress 633,053 633,053 2.03.02.09 Donations and investment grants 150,489 150,489 2.03.02.10 Tax incentives - FINAM 6,743 6,743 2.03.04 Income reserves 1,842,892 1,842,892 2.03.04.01 Legal reserve 278,254 278,254 2.03.04.02 Statutory reserve 221,529 221,529 2.03.04.05 Retained profits reserve 1,343,109 1,343,109 2.03.05 Retained earnings (accumulated losses) 4,620,436 - 2.03.09 Noncontrolling interests 157,517 178,796


Page: 13 of 75

Consolidated Financial Statements / Income Statement


Current YTD 1/1/2016 to

9/30/2016

Same

Prior YTD 1/1/2015 to

9/30/2015

Current prior-year quarter quarter Account code Account description

7/1/2016 to 9/30/2016

7/1/2015 to 9/30/2015

3.01 Revenue from sales and/or services 6,734,919 7,291,409 457,178 989,865 3.01.01 Net operating revenue 6,734,919 7,291,409 457,178 989,865 3.02 Cost of sales and/or services (134,585) (350,518) (173,917) (431,443)

3.02.01 Costs of infrastructure implementation, operation and

maintenance services (134,585) (350,518) (173,917) (431,443) 3.03 Gross profit 6,600,334 6,940,891 283,261 558,422 3.04 Operating income (expenses) 154,093 133,793 61,905 (5,671 3.04.02 General and administrative expenses (39,035) (104,502) (30,651) (116,269) 3.04.02.01 Management fees (1,590) (4,014) (1,237) (3,711) 3.04.02.02 Other general and administrative expenses (37,445) (100,488) (29,414) (112,558) 3.04.04 Other operating income 1,368 2,820 601 2,652 3.04.05 Other operating expenses (1,558) (3,888) (10,663) (29,651) 3.04.06 Equity pickup 193,318 239,363 102,618 137,597 3.05 Income before financial income (expense) and taxes 6,754,427 7,074,684 345,166 552,751 3.06 Financial income (expenses) (25,374) (79,429) (19,474) (20,637) 3.06.01 Financial income 21,598 62,001 30,988 108,946 3.06.02 Financial expenses (46,972) (141,430) (50,462) (129,583) 3.07 Income before income taxes 6,729,053) 6,995,255 325,692 532,114 3.08 Income and social contribution taxes (2,192,753) (2,252,857) (49,440) (89,372) 3.08.01 Current (11,744) (59,741) (28,747) (69,065) 3.08.02 Deferred (2,181,009) (2,193,116) (20,693) (20,307) 3.09 Net income from continuing operations 4,536,300 4,742,398 276,252 442,742 3.11 Consolidated Income (Loss) for the Period 4,536,300 4,742,398 276,252 442,742 3.11.01 Attributable to controlling interests 4,531,786 4,730,436 271,977 432,984 3.11.02 Attributable to noncontrolling interests 4,514 11,962 4,275 9,758 3.99 Earnings per share (reais / share) 3.99.01 Basic earnings per share 3.99.01.01 Registered common shares 27.84073 29.06113 1.68658 2.68502 3.99.01.02 Registered preferred shares 27.84073 29.06113 1.68658 2.68502 3.99.02 Diluted earnings per share 3.99.02.01 Registered common shares 27.83750 28.81042 1.65603 2.63599 3.99.02.02 Registered preferred shares 27.83750 28.81042 1.65603 2.63599


Page: 14 of 75

Consolidated Financial Statements/ Statement of Comprehensive Income


Current YTD 1/1/2016 to

9/30/2016

Same

Prior YTD 1/1/2015 to

9/30/2015

prior-year Current quarter quarter Account code Account description

7/1/2016 to 9/30/2016

7/1/2015 to 9/30/2015

4.01 Consolidated net Income for the period 4,536,300 4,742,398 276,252 442,742

4.03 Consolidated comprehensive income for the

period 4,536,300 4,742,398 276,252 442,742 4.03.01 Attributable to controlling interests 4,531,786 4,730,436 271,977 432,984 4.03.02 Attributable to noncontrolling interests 4,514 11,962 4,275 9,758


Page: 15 of 75

Consolidated Financial Statements / Cash Flow Statement - Indirect Method

(In thousands of reais) Current YTD Prior Account YTD code Account description 1/1/2016 to 9/30/2016 1/1/2015 to 9/30/2015

6.01 Net cash from operating activities 123,596 457,039 6.01.01 Cash from operations 491,509 514,108 6.01.01.01 Net income (loss) for the year 4,742,398 442,742 6.01.01.02 Restatement of accounts receivable - Law No. 12783 - SE (7,111,714) - 6.01.01.03 Depreciation and amortization 6,672 6,367 6.01.01.04 Deferred PIS and COFINS 816,163 25,353 6.01.01.05 Deferred income and social contribution taxes 2,193,116 20,307 6.01.01.06 Provision for contingencies (49,326) 9,732 6.01.01.07 Net book value of permanent assets written off 4,446 50 6.01.01.08 Tax benefit - merged goodwill 24 22,415

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

assets and liabilities 128,939 124,631 6.01.01.10 Losses realized in jointly-controlled subsidiary (1,714) (1,760) 6.01.01.11 Equity pickup (239,363) (137,597) 6.01.01.12 Amortization of concession asset in acquisition of 1,868 1,868 subsidiary 6.01.02 Changes in assets and liabilities (367,913) (57,069) 6.01.02.01 Restricted cash (817) (692) 6.01.02.02 Accounts receivable (concession asset) (225,198) 23,732 6.01.02.03 Inventories 1,024 12,845 6.01.02.04 Receivables - State Finance Department (SEFAZ) (125,154) (104,709) 6.01.02.05 Taxes and contributions to be offset (51,587) (28,578) 6.01.02.06 Pledges and restricted deposits (73) 3,131 6.01.02.07 Prepaid expenses (3,574) (9,952) 6.01.02.08 Other assets 5,870 35,828 6.01.02.09 Trade accounts payable (565) (30,696) 6.01.02.10 Taxes and social charges payable 52,450 58,215 6.01.02.11 Regulatory charges payable (7,187) (13,237) 6.01.02.12 Taxes in installments - Law No. 11941 (12,568) (11,580) 6.01.02.13 Provisions 9,409 7,636 6.01.02.14 Payables - Funcesp (58) 318 6.01.02.16 Other liabilities (9,885) 670 6.02 Net cash from investing activities (142,169) (103,207) 6.02.01 Short-term investments (130,327) (56,449) 6.02.02 Transactions with noncontrolling interests (33,241) 29,500 6.02.03 Property, Plant and Equipment (PPE) (5,084) (1,097) 6.02.04 Intangible assets (3) (857) 6.02.05 Investments (1,564) (74,304) 6.02.06 Dividends received 28,050 0 6.03 Net cash from financing activities 16,941 (352,100) 6.03.01 Additions to loans and debentures 148,930 30,000 6.03.02 Payment of loans and debentures (principal) (43,556) (107,592) 6.03.03 Payment of loans and debentures (interest) (76,107 (133,080) 6.03.05 Dividends and interest on equity paid (109,699) (141,428) 6.03.06 Payment of capital 97,373 0 6.05 Increase (decrease) in cash and cash equivalents (1,632) 1,732 6.05.01 Cash and cash equivalents at beginning of period 6,135 4,696 6.05.02 Cash and cash equivalents at end of period 4,503 6,428

Quarterly Information (ITR) – 9/30/2016 - CTEEP-CIA TRANSM ENERGIA ELÉTR. PAULISTA Version: 1

Page: 16 of 75

Consolidated Financial Statements / Statement of Changes in Equity - SCE - 1/1/2016 to 9/30/2016



Paid-in capital

Capital reserves,

options granted and

treasury shares

Income reserves

Retained earnings


Other comprehensive

income Equity Noncontrolling

interests Equity -

Consolidated

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

5.04 Capital transactions with shareholders 157,146 (59,773) - (110,000) - (12,627) (33,241) (45,868)

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

5.04.10 Acquisition of additional interests from - - - - - - (33,241) (33,241)

noncontrolling shareholders 5.05 Total comprehensive income - - - 4,730,436 - 4,730,436 11,962 4,742,398 5.05.01 Net income for the period - - - 4,730,436 - 4,730,436 11,962 4,742,398 5.07 Closing balances 2,372,437 1,218,249 1,842,892 4,620,436 - 10,054,014 157,517 10,211,531

Quarterly Information (ITR) – 9/30/2016 - CTEEP-CIA TRANSM ENERGIA ELÉTR. PAULISTA Version: 1

Page: 17 of 75

Consolidated Financial Statements / Statement of Changes in Equity - SCE - 1/1/2015 to 9/30/2015



Paid-in capital

Capital reserves,

options granted and

treasury shares

Income reserves

Retained earnings


Other comprehensive

income Equity

Non controlling

interests Equity -

Consolidated

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

5.04 Capital transactions with shareholders - - - (109,171) - (109,171) 29,500 (79,671)

5.04.06 Dividends - - - (110,765) - (110,765) - (110,765) 5.04.08 Unclaimed dividends - - - 1,026 - 1,026 - 1,026 5.04.09 Unclaimed interest on equity - - - 568 - 568 - 568

5.04.10 Acquisition of additional interests from - - - - - - 29,500 29,500

noncontrolling shareholders 5.05 Total comprehensive income - - - 432,984 - 432,984 9,758 442,742 5.05.01 Net income for the period - - - 432,984 - 432,984 9,758 442,742 5.07 Closing balances 2,215,291 1,278,022 1,671,732 323,813 - 5,488,858 102,825 5,591,683


Page: 18 of 75

Consolidated Financial Statements / Statement of Value Added

(In thousands of reais) Current Prior Account YTD YTD code Account description 1/1/2016 to 9/30/2016 1/1/2015 to 9/30/2015

7.01 Revenues 8,218,533 1,107,080 7.01.01 Sales of goods, products and services 8,215,713 1,104,428 7.01.02 Other revenues 2,820 2,652 7.02 Inputs acquired from third parties (203,268) (307,892) 7.02.01 Costs of sales and services (19,894) (14,660) 7.02.02 Materials, energy, third-party services and other expenses (183,374) (293,232) 7.03 Gross value added 8,015,265 799,188 7.04 Retentions (6,672) (6,367) 7.04.01 Depreciation, amortization and depletion (6,672) (6,367) 7.05 Net value added produced 8,008,593 792,821 7.06 Value added received in transfer 301,364 246,543 7.06.01 Equity pickup 239,363 137,597 7.06.02 Financial income 62,001 108,946 7.07 Total value added to be distributed 8,309,957 1,039,364 7.08 Distribution of value added 8,309,957 1,039,364 7.08.01 Personnel 181,573 202,445 7.08.01.01 Direct compensation 129,631 154,576 7.08.01.02 Benefits 39,502 36,644 7.08.01.03 Unemployment Compensation Fund (FGTS) 12,440 11,225 7.08.02 Taxes, charges and contributions 3,233,907 254,459 7.08.02.01 Federal 3,209,528 234,307 7.08.02.02 State 362 298 7.08.02.03 Municipal 24,017 19,854 7.08.03 Debt remuneration 152,079 139,718 7.08.03.01 Interest 141,285 129,055 7.08.03.02 Rent 10,794 10,663 7.08.04 Equity remuneration 4,742,398 442,742 7.08.04.02 Dividends 110,000 110,765 7.08.04.03 Retained earnings (accumulated losses) 4,620,436 322,219 7.08.04.04 Noncontrolling interests in retained profits 11,962 9,758


Comments on Performance

Page: 19 of 75

Analysis of the consolidated income for the quarter ended September 30, 2016 (unaudited): In thousands of reais Changes 2016/2015 2016 % 2015 % %

Net operating revenue Revenue from infrastructure 51,298 0.8 98,944 21.6 (48.2) Operation and maintenance 181,792 2.7 232,769 50.9 (21.9) Revenue from concession assets 7,342,426 109.0 167,247 36.6 4,290.2 Revenues from leases and rendering of services 6,026 0.1 5,672 1.2 6.2 Taxes on revenues (835,033) 12.4 (38,248) 8.4 2,083.2 Regulatory charges (11,590) 0.2 (9,206) 2.0 25.9

6,734,919 100.0 457,178 100.0 1,373.2 Cost of infrastructure implementation,

operation and maintenance services infrastructure implementation (46,666) 0.7 (89,584) 19.6 (47.9) Operation and maintenance (87,919) 1.3 (84,333) 18.4 4.3

(134,585) 2.0 (173,917) 38.0 (22.6) Gross profit 6,600,334 98.0 283,261 62.0 2,230.1 General and administrative expenses (39,035) 0.6 (30,651) 6.7 27.4 Other operating income (expenses),

net (190) 0.0 (10,062) 2.2 (98.1) Equity pickup 193,318 2.9 102,618 22.4 88.4 Financial income (expenses) (25,374) 0.4 (19,474) 4.3 30.3

Income before income and Social contribution taxes 6,729,053 99.9 325,692 71.2 1,966.1

Income and social contribution taxes (2,192,753) 32.6 (49,440) 10.8 4,335.2

Net income for the period 4,536,300 67.4 276,252 60.4 1,542.1

Attributable to controlling interests 4,531,786 67.3 271,977 59.5 1,566.2

Attributable to noncontrolling interests 4,514 1.1 4,275 0.9 5.6

Consolidated gross profit increased significantly in 3Q16 compared with 3Q15, as detailed below: The net operating revenue, which had a significant increase in 3Q16, includes the following changes: (i) Revenue from infrastructure totaled R$51,298 thousand in 3Q16, compared with R$98,944 thousand

in 3Q15, especially after the completion of projects involving reinforcement of infrastructure implementation in a substation and reconstruction of transmission lines at CTEEP. The subsidiaries posted decrease in revenue due to the implementation phase of an autotransformer bank at Pinheiros and Serra do Japi.

(ii) Revenue from operation and maintenance services totaled R$181,792 thousand in 3Q16 compared

with R$232,769 thousand in 3Q15, due to: (i) R$19,983 thousand increase in IGPM/IPCA on Annual Revenue Allowed (RAP) from 2015/2016 to 2016/2017; (ii) decrease due to the start-up of new projects, in the amount of R$11,431 thousand;

(iii) R$3,488 thousand decrease referring to prepayments; and (iv) R$56,001 decrease referring to adjusted

portion.



Page: 20 of 75

(iv) Revenue from concession assets, which refers to the restatement of financial assets calculated by reference to the individual effective interest rate of each project, totaled R$7,342,426 thousand in 3Q16, as compared with R$167,247 thousand in 3Q15. This balance changes due to recognition of amounts approved referring to Existing Services (“SE”) restated up to September 30, 2016, as per Note No. 330/2016 (see Note 7), and due to the financial flow expected for realization of infrastructure implementation and compensation amounts, whose average balance of financial asset for 3Q16 totals R$2,319,614 thousand (R$1,925,028 thousand for 3Q15), excluding the balance of accounts receivable - Law No. 12783, Existing Service (SE) , and O&M accounts receivable. The weighted average effective interest rate to remunerate the financial asset at September 30, 2016 is 12.4% (13.4% at September 30, 2015), excluding the balance of accounts receivable - Law No.12783. Highlights: • At September 30, 2016, the restatement of the amount referring to SE facilities resulted in an impact of

R$7,111,714 on revenue from concession assets; and • Inflationary effect of 2016/2017 cycle, according to Ratification Ruling No. 2098, in the amount of

R$163,249 in 3Q16 compared with R$115,613 in 3Q15. (v) Lease and service revenue totaled R$6,026 thousand in 3Q16, as compared with R$5,672 thousand in

3Q15, having no significant change. Deductions from operating revenue totaled R$846,623 thousand in 3Q16 and R$47,454 thousand in 3Q15, due to: (i) 2,083.2% increase in taxes on revenue, basically due to set up of deferred PIS and COFINS liability on restatement of the SE facilities amount, as described in Note 7; and (ii) 25.9% increase in regulatory charges, especially PROINFA, given the consumption of free consumers. The costs of infrastructure implementation and operation and maintenance services totaled R$134,585 thousand in 3Q16, and R$173,917 thousand in 3Q15. In 3Q16, these costs include 34.7% of infrastructure implementation costs (51.5% in 3Q15) and 65.3% of operation and maintenance costs (48.5% in 3Q15). The costs of infrastructure implementation services are in line with the change in revenue from infrastructure, used especially in services and materials. Costs of infrastructure implementation 3Q16 3Q15

Personnel (5,846) (7,007) Third-party services (14,397) (39,087) Materials (25,036) (43,430) Other (1,386) (60)

(46,665) (89,584)



Page: 21 of 75

The change in operation and maintenance costs refers to: (i) personnel, due mainly to the 9.3% salary increase, in July 2016, as a result of the bargaining agreement, and headcount restructuring costs in 3Q15; and (ii) services, mainly due to maintenance and repair of transmission lines and substations, such as replacing spacers, erosion containment and anticorrosive treatment. O&M costs

3Q16 3Q15

Personnel (56,461) (55,014) Third-party services (19,121) (15,987) Materials (1,975) (2,748) Lease and rental (2,048) (2,001) Other (8,315) (8,583)

(87,920) (84,333)

General and administrative expenses increased 27.4% totaling R$39,035 thousand in 3Q16 compared with R$30,651 thousand in 3Q15 due to: (i) personnel, due mainly to the 9.3% salary increase, in July 2016, as a result of the bargaining agreement; and (ii) services, due mainly to expenses with external advisory services in legal analyses and information technology. Other operating income (expenses), net, fell 98.1% totaling R$190 thousand in 3Q16 compared with R$10,062, due to reduced amortization of the goodwill tax benefit totaling R$7,472 in 3Q15. Financial income (expenses) had a 30.3% increase, totaling R$25,374 thousand of expenses in 3Q16 compared with R$19,474 in 3Q15, due to settlement of accounts receivable from returnable assets - Law No. 12783 of Base Grid - New Facilities (RBNI), and related monetary restatements. Income and social contribution taxes increased significantly, totaling R$2,192,753 in 3Q16 compared with R$49,440 in 3Q15, basically due to setting up of deferred income and social contribution tax liabilities on the restatement of the right relating to the SE facilities, as described in Note 7. The effective income and social contribution tax rate was 32.2% in 3Q16, compared with 15.2% in 3Q15. In view of the foregoing, net income for 3Q16 totaled R$4,536,300 thousand compared with R$276,252 thousand in 3Q15.


Notes

Page: 22 of 75

1. Operations

1.1. Business purpose

CTEEP - Companhia de Transmissão de Energia Elétrica Paulista (“CTEEP” or “Company”) is a publicly-traded company, authorized to operate as an electric public utility concession operator, and is primarily engaged in the transmission of electric power, which requires planning, implementing infrastructure and operation and maintenance of power transmission subordinated systems. Its activities also envisage investing funds in and managing research and development programs with respect to power transmission and other activities related to available technology. The Company’s activities are regulated and supervised by Brazil’s National Electric Power Agency (ANEEL).

The Company is the result of a split-off of Companhia Energética de São Paulo (“CESP”) and started up on April 1, 1999. On November 10, 2001, EPTE - Empresa Paulista de Transmissão de Energia Elétrica S.A. (“EPTE”), a company arising from the split-off of Eletropaulo - Eletricidade de São Paulo S.A. was merged into the Company.

In a privatization auction held at the São Paulo Stock Exchange (BOVESPA) on June 28, 2006 under Bid Notice SF/001/2006, the São Paulo State Government, until then majority shareholder, sold 31,341,890,064 of its common shares, corresponding to 50.10% of the common shares issued by CTEEP. The winner of the auction was Interconexión Eléctrica S.A. E.S.P.

The financial settlement of the transaction took place on July 26, 2006 with the resulting transfer of the ownership of the aforementioned shares to ISA Capital do Brasil S.A. (“ISA Capital”), a Brazilian company controlled by Interconexión Eléctrica S.A. E.S.P. (“ISA”), established to operate in Brazil, thus becoming CTEEP’s controlling shareholder. This transaction was approved by ANEEL on July 25, 2006, pursuant to Authorizing Resolution No. 642/06, published in the Federal Register on July 26, 2006.

The Company’s shares are traded at the Securities, Commodities and Futures Exchange (BM&FBovespa). In addition, CTEEP has a Rule 144 A American Depositary Receipts (ADRs) program in the United States. The ADRs depositary is JPMorgan Chase Bank and Banco Itaú S.A. is the custodian bank.

In September 2002, the Company adhered to the Level-1 Corporate Governance Practices of BM&FBovespa. The commitments assumed under these practices ensure greater transparency of the Company for the market, investors and shareholders, thus facilitating the follow-up of the management’s actions.

The Company’s shares are included in the following indexes: Índice de Governança Corporativa Trade - IGCT (Trade Corporate Governance); Índice de Energia Elétrica - IEE (Electric energy); Índice Brasil Amplo - IBrA (Broad Brazil); Índice Brasil 100 - IBrX 100 (Brazil 100); Índice de Ações com Governança Corporativa Diferenciada - IGCX (Shares with Differentiated Corporate Governance); Índice Mid Large Cap - MLCX; and Índice BM&FBOVESPA Utilidade Pública - UTIL (BM&FBOVESPA Public Utilities).


Notes

Page: 23 of 75

1.2. Concessions

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

Periodic Annual Revenue tariff review Allowed (RAP)

Adjustment

Equity

interest Term index Concession

operator Contract (%) (years) Maturity Term Next R$

thousand Base

month

CTEEP 059/2001 30 12/31/42 5 years 2018 IPCA 893,452 06/16 Subsidiaries Serra do Japi 026/2009 100 30 11/18/39 5 years 2020 IPCA 37,506 06/16 Pinheiros 015/2008 100 30 10/15/38 5 years 2019 IPCA 31,800 06/16 Serra do Japi (*) 143/2001 100 30 12/20/31 n/a n/a IGPM 20,384 06/16 IEMG 004/2007 100 30 04/23/37 5 years 2017 IPCA 16,861 06/16 Evrecy 020/2008 100 30 07/17/25 4 years 2017 IGPM 13,367 06/16 Pinheiros 012/2008 100 30 10/15/38 5 years 2019 IPCA 10,410 06/16 Pinheiros 021/2011 100 30 12/09/41 5 years 2017 IPCA 5,971 06/16 Pinheiros 018/2008 100 30 10/15/38 5 years 2019 IPCA 5,577 06/16 Jointly-controlled

subsidiaries IEMadeira 013/2009 51 30 02/25/39 5 years 2019 IPCA 235,847 06/16 IEMadeira (**) 015/2009 51 30 02/25/39 5 years 2019 IPCA 209,821 06/16 IEGaranhuns 022/2011 51 30 12/09/41 5 years 2017 IPCA 93,505 06/16 IENNE 001/2008 25 30 03/16/38 5 years 2018 IPCA 40,907 06/16 IESul 016/2008 50 30 10/15/38 5 years 2019 IPCA 11,306 06/16 IESul 013/2008 50 30 10/15/38 5 years 2019 IPCA 5,564 06/16

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

Serra do Japi through a capital increase, as approved by ANEEL Authorizing Resolution No. 5036 of January 20, 2015 (Note 11 (a) (i)). (**) In May 2014, the facilities related to the service concession arrangement No. 015/2009 of jointly-controlled subsidiary IEMadeira were

completed and delivered to Brazil's National Electric System Operator (ONS) for tests. In June 2014, due to the existence of restrictions in systems and related to third parties, ONS issued the Partial Release Term (TLP) for temporary commercial operation purposes. Due to the existence of own non-deterrent restrictions attributable to other agents (relating to failure to complete the joint studies of integrators on ONS electrical study simulator), a reduction factor equivalent to 10% of revenue associated with the contract has been applied.

All service concession arrangements above provide for the compensation right on concession-related assets upon expiration thereof. Periodic tariff review arrangements provide for the compensation right on investments in expansions, reinforcements and improvements.

Law No. 12783/2013

On September 12, 2012, Provisional Executive Order No. 579/2012 (MP No. 579) was published to regulate the extension of electric power generation, transmission and distribution concessions granted before enactment of Law No. 8987 of 1995, and addressed by Law No. 9074 of 1995. On September 14, 2012, Decree No. 7805 was published to regulate MP No. 579.

Under MP No. 579, electric power generation, transmission and distribution concessions, overdue or falling due 60 months after publication of such MP, could mature in December 2012, extendable, at the Granting Authority’s discretion, only once, for up to 30 years. However, for transmission activities, the extension would depend on express acceptance of the following main conditions, among others: i) revenue determined under ANEEL’s criteria; ii) amounts established for assets subject to compensation; and iii) adopting the service quality standard established by ANEEL.


Notes

Page: 24 of 75

On November 1, 2012, the Ministry of Mines and Energy (MME) published Interministerial Ruling No. 580, which determined the indemnification attributable to the Company for energized facilities as from June 1, 2000 - New Investment (NI), in the amount R$2,891,291 related to Service Concession Arrangement No. 059/2001 (single arrangement covered by such MP), and Interministerial Ruling No. 579, on which the RAP was defined from January 1, 2013 onwards.

On November 29, 2012, Provisional Executive Order No. 591 (MP No. 591) was published as an amendment to MP No. 579 to authorize the payment of amounts related to existing undepreciated assets on May 31, 2000 (Existing Service - SE) by the Granting Authority. In January 2013, MPs No. 579 and No. 591 were signed into Law No. 12783/2013.

At the Special General Meeting held on December 3, 2012, CTEEP’s shareholders unanimously approved the extension of service concession arrangement No. 059/2001.

On December 4, 2012, an amendment to Service Concession Arrangement No. 059/2001 was entered into by CTEEP, with an option to receive compensation in connection with the New Investment (NI), being 50% in cash and 50% payable in installments, which were settled in 2015, remaining the discussion regarding the rest The restatement method has not yet been defined (Note 7).

On August 13, 2014, the Company filed the independent appraisal report on the assets of the Existing Service (SE) that totaled R$5,186,018, which corresponds to investments at the New Replacement Cost (VNR) adjusted for accumulated depreciation through December 31, 2012. ANEEL Board’s 47th Annual Public Meeting held on December 15, 2015 approved the compensation amount totaling R$3,896,328, as defined in Order No. 4036/2015, published in the Federal Register on December 21, 2015. With a view to reversing the decision by ANEEL Board, CTEEP filed a request for reconsideration on December 30, 2015, which is pending judgement to date.

On April 20, 2016, Administrative Ruling No. 120 was issued by the Ministry of Mines and Energy (MME), which established that the amounts approved by ANEEL through Order No. 4036/2015 relating to SE facilities should be part of the Basis for Regulatory Remuneration of electric power transmission companies for an estimated term of eight years following the 2017 tariff review process.

On October 6, 2016, ANEEL Note No. 336/2016 was issued, which presents a proposal for regulation regarding the provisions in MME Administrative Ruling No. 120 and was submitted to the Public Hearing beginning on October 14, 2016. This Note regulates the calculation methodology for cost of capital and calculation of the RAP to be added referring to the SE facilities amount and determines payment terms and amounts by concession operators, as mentioned in Note 7 (d). Public Hearing No. 41/205 - Other Transmission Facilities (DIT)

ANEEL’s Board held an Annual Public Meeting on June 23, 2015 to approve the opening of public hearings from June 29 to August 31, 2015 to collect subsidies and additional information to consider the proposed transfer of the so-called Other Transmission Facilities (“Demais Instalações de Transmissão – DIT”) from electric power transmission companies to distribution companies under ANEEL Note No. 32/2015 (Administrative Proceeding No. 48500.004452/2014-60). DIT refer to facilities operating at 230 kV or less, and, paragraph 46 of ANEEL Note proposes the transfer of these facilities, which, in case it occurs, shall entail the payment of compensation to affected transmission companies.


Notes

Page: 25 of 75

In August 2015, the Company made its contributions to the Public Hearing, together with legal, technical and economic and financial opinions and reports. CTEEP challenged the foundations of ANEEL Note No. 32/2015, pointed out the consequences of a potential transfer of part of its DIT, and defined the criteria to be considered in order to keep the economic and financial balance of the concession, including a review of the compensation calculation criteria.

After contributions were made by agents, on December 7, 2015, Opinion No. 786/2015/PF-ANEEL/PGF/AGU was issued by the Deputy Attorney General of ANEEL to address aspects related to the compulsory transfer of DIT, and suggested further consideration by the technical areas of a possible impairment of the financial and economic balance that this could have on the revenue of the transmission companies.

In view of the contributions received as provided for in Opinion No. 786/2015/PF-ANEEL/PGF/AGU, on April 26, 2016 ANEEL Board determined the opening of the second phase of the Public Hearing, with contributions period from April 28 to July 27, 2016. In this second phase the transfer scope was limited only to DIT of exclusive use of distribution companies, however still compulsorily.

Within the term established by ANEEL, the Company presented its contributions together with legal, technical and economic and financial opinions and reports, which presented the following particular arguments: (i) required maintenance of the economic and financial balance of the service concession arrangement of the transmission company; (ii) possible transfer of these facilities should be consensual and not compulsory, through the establishment of “regulation by incentive”; (iii) preservation in the transmission companies of the assets that have systemic function, thus avoiding in the future a possible return to such issue, considering the possibility of transferring electro-energy optimization DIT.

Interest in consortium

(i) Extremoz Transmissora do Nordeste - ETN

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


Notes

Page: 26 of 75

2. Presentation of quarterly information

2.1. Basis of preparation and presentation

The individual quarterly information identified as “Company” and the consolidated quarterly information identified as “Consolidated” was prepared and is presented in accordance with accounting practices adopted in Brazil, which comprise the provisions contained in the Brazilian Corporation Law, pronouncements, interpretations and guidance issued by the Brazilian FASB (CPC) and approved by the Brazilian Securities and Exchange Commission (“CVM”), which are in compliance with the IFRS issued by the International Accounting Standards Board (IASB).

The individual and consolidated quarterly information is presented in accordance with CPC 21 (R1) - Interim Financial Reporting, as approved by the Brazilian Securities and Exchange Commission (“CVM”), and with IAS 34 (Interim Financial Reporting) issued by the IASB.

Both individual and consolidated quarterly information was prepared based on historical cost, unless otherwise stated, as described in the accounting practices of the annual financial statements for 2015. The historical cost is generally based on the fair value of the consideration paid in exchange for assets.

All amounts reported in this financial information are in thousands of Brazilian reais, unless otherwise stated.

Nonfinancial data included in this financial information, such as power volume, projections or estimates and insurance have not been audited by the independent auditors.

The quarterly information was approved and authorized for disclosure by the Board of Directors on October 27, 2016.

2.2. Functional and reporting currency

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

2.3. Significant accounting judgments, estimates and assumptions

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

2.4. Consolidation procedures

The consolidated quarterly information comprises the quarterly information of CTEEP and its subsidiaries.

Control is obtained when the Company has the power to control the financial and operating policies of an entity to derive benefits from its activities.

These subsidiaries are fully consolidated from the date on which control is obtained by the Company until such control ceases.


Notes

Page: 27 of 75

At September 30, 2016 and December 31, 2015, interest held in subsidiaries was as follows:

Interim

% - Interest held

reporting date 9/30/2016 12/31/2015

Subsidiaries Interligação Elétrica de Minas Gerais S.A. (IEMG) 9/30/2016 100 100 Interligação Elétrica Pinheiros S.A. (Pinheiros) 9/30/2016 100 100 Interligação Elétrica Serra do Japi S.A. (Serra do Japi) 9/30/2016 100 100 Evrecy Participações Ltda. (Evrecy) 9/30/2016 100 100 Fundo de Investimento Referenciado DI Bandeirantes 9/30/2016 78 (*) 59 Fundo de Investimento Xavantes Referenciado DI 9/30/2016 59 (*) 59

(*) Includes both direct and indirect interests.

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

Elimination of the subsidiaries’ equity;

Elimination of equity pickup; and

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

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

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

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

Interim

(*) Equity interest %

reporting date 9/30/2016 12/31/2015

Jointly-controlled subsidiaries Interligação Elétrica Norte e Nordeste S.A. (IENNE) 9/30/2016 25 25 Interligação Elétrica do Sul S.A. (IESul) 9/30/2016 50 50 Interligação Elétrica do Madeira S.A. (IEMadeira) 9/30/2016 51 51 Interligação Elétrica Garanhuns S.A. (IEGaranhuns) 9/30/2016 51 51

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

3. Summary of significant accounting practices

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


Notes

Page: 28 of 75

4. New and revised standards and interpretations not yet adopted

The Company and its subsidiaries have adopted all (new or revised) pronouncements and interpretations issued by the Brazilian FASB (CPC), as applicable, which were effective at December 31, 2015. No new pronouncements other than those mentioned in the financial statements for 2015 were issued. The Company will adopt, as applicable, these standards when they become effective, with any impacts therefrom being disclosed and recognized in the financial statements.

5. Cash and cash equivalents

Company Consolidated

% of CDI 9/30/2016 12/31/2015 9/30/2016 12/31/2015

Cash and banks 664 2,287 1,683 3,798 Cash equivalents

Bank Deposit 916 827

Certificates (CDB) 92.0% to 100.0% 922 1,137

Repurchase agreements (a) 93.0% to 97.0% - - 1,891 1,194 Short-term investment funds (b) 60.0% to 70.0% 7 6 7 6

1,587 3,120 4,503 6,135

Cash equivalents are measured at fair value through profit or loss and have daily liquidity.

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

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

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

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

6. Short-term investments


% of CDI 9/30/2016 12/31/2015 9/30/2016 12/31/2015

Investment funds (*) 101.57% 347,994 230,855 570,381 440,054 347,994 230,855 570,381 440,054

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

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

Investment funds are:

Fundo de Investimento Referenciado DI Bandeirantes (Bandeirantes Investment Fund by reference to Interbank Deposit - DI): fund established for exclusive investment by the Company, its subsidiaries and jointly-controlled subsidiaries, administered by Banco Bradesco, the portfolio of which is comprised of shares of Coral Investment Fund by reference to Interbank Deposit (DI). The Company’s and consolidated balances in September 2016 were respectively: R$278,224 and R$389,046 (R$97,490 and R$183,806 at December 31, 2015).


Notes

Page: 29 of 75

Fundo de Investimento Xavantes Referenciado DI (Xavantes Investment Fund by reference to Interbank Deposit - DI): fund established for exclusive investment by the Company, its subsidiaries and jointly-controlled subsidiaries, administered by Banco Itaú-Unibanco, the portfolio of which is comprised of shares of Special Investment Fund by reference to Interbank Deposit (DI) (Corp by reference to DI merged by Special DI). The Company’s and consolidated balances in September 2016 were respectively: R$69,770 and R$181,335 (R$133,365 and R$256,248 at December 31, 2015).

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

Coral - Special DI DI

Financial Treasury Bills (LFT) 15.8% 21.5% Government securities 54.5% 46.7% Financial bill 24.6% 23.0% Bank Deposit Certificate (CDB) 0.1% 5.9% Debentures 4.9% 2.4% Other 0.2% 0.6%

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

7. Accounts receivable (concession asset) Company Consolidated

9/30/2016 12/31/2015 9/30/2016 12/31/2015

O&M Accounts receivable - O&M services (a) 80,619 149,451 90,305 158,656

80,619 149,451 90,305 158,656

Financial asset Accounts receivable from infrastructure

implementation services (b) 1,336,325 1,137,185 2,397,995 2,111,192 Accounts receivable - compensation (c) 26,132 12,337 94,545 86,085 Accounts receivable - Law No. 12783 - SE (d) 8,602,710 1,490,996 8,602,710 1,490,996

9,965,167 2,640,518 11,095,250 3,688,273

10,045,786 2,789,969 11,185,555 3,846,929

Current 601,486 220,566 723,438 319,961

Noncurrent 9,444,300 2,569,403 10,462,117 3,526,968

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

maintenance services, receivable within 30 days, on average.

(b) Receivables from infrastructure implementation, extension, reinforcement and improvement services of electric power transmission facilities up to the termination of each service concession arrangement in force, of which the Company and its subsidiaries are signatories, adjusted to present value and remunerated by the effective interest rate.

(c) Accounts receivable for compensation - these refer to the estimated portion of investments made and not amortized up to the termination of the

service concession arrangements in force and for which the Company and its subsidiaries will be entitled to receive cash or other financial asset, upon termination of the service concession arrangements.

(d) Accounts receivable - Law No. 12783 - refer to the amount receivable in connection with investments of service concession arrangement No.

059/2001, which was extended under the terms of Law No. 12783 and whose right of receipt was subdivided into NI (New Investment) and ES (Existing Service):

• Return of facilities for NI corresponded to the original amount of R$2,949,121, as defined in Interministerial Ruling No. 580. Fifty per cent

(50%) of this amount was received on January 18, 2013 and the remaining 50% was split into 31 monthly installments that were settled over 2015. The restatement method has not yet been defined.


Notes

Page: 30 of 75

• At September 30, 2016, the amount referring to “SE” facilities was remeasured according to the provisions in MME Administrative Ruling No. 120/16 and amounts regulated by ANEEL Note No. 336/2016, as determined by CPC 38 - Financial Instruments: Recognition and Measurement and in light of CPC 23 - Accounting Policies, Changes in Accounting Estimates and Errors. The latter provides that various items in the financial statements cannot be reliably measured, they can only be estimated. An estimate involves judgment calls based on available information and may require revision if changes occur in the circumstances on which the estimate was based or as a result of new information. The effect of change in accounting estimate should be recognized in P&L for period prospectively.

Based on the amounts and terms disclosed in ANEEL Note No. 336/2016 and even considering that such Note may be modified during the Public Hearing process to be performed by ANEEL, Company management prepared its best estimate, considering the following assumptions:

ANEEL Note No. 336/2016 –

Base July 2017

Company Estimate –

Base September 2016

Base of Net Remuneration at 12/31/012 3,896,328 3,896,328 Incorporation to the Regulatory Base of Remuneration July 2017 July 2017 Payment prompt of the Revenue parcel from 1/1/2013 to 6/30/2017 8 Years 8 Years Payment prompt of the remaining parcel 6,3 years 6,3 years CAAE* + Cost of capital from 1/1/2013 to 6/30/2017 5,711,454 4.457,994 Remaining CAAE* 3,114,951 3.348,965 RAP relative to the period from 1/1/2013 to 6/30/2017 943,183 906,503 RAP relative to the remaining period 811,316 778,887 Addition of PIS and COFINS by 9,25% as current legislation - 9,25%

*CAAE – Annual Cost of Eletric Assets

From the estimate of the RAP values, base September 2016, the company reviewed the cash receipts flow and re-measured the financial asset referent to the SE installations, in 9/30/2016, that resulted in R$8,602,710, with an impact of R$7,111,714 on financial assets, R$6,315,963 on net operating revenue (R$795,751 refer to deferred PIS and COFINS), R$2,147,428 on provisions to deferred income and social contribution taxes and R$4,168,535 on net profit. The Company, based on the opinion of its legal advisors, understand that the revenue from this operation must be taxed, for the purpose of PIS, COFINS, IRPJ e CSLL, as the effective receipt.

The aging list of accounts receivable is as follows:


9/30/2016 12/31/2015 9/30/2016 12/31/2015

Falling due 10,034,764 2,778,636 11,173,984 3,834,981

Past due Within 30 days 753 127 781 167 From 31 to 60 days 261 140 296 147 From 61 to 360 days 1,165 2,319 1,344 2,610 For more than 361 days (i) 8,843 8,747 9,150 9,024

11,022 11,333 11,571 11.948

10,045,786 2,789,969 11,185,555 3,846,929

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

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

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


Notes

Page: 31 of 75

Changes in accounts receivable:


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

Revenue from infrastructure (Note 24.1) 103,774 111,022 Revenue from concession assets (Note 24.1) 7,308,128 7,467,843 Revenue from operation and maintenance services (Note 24.1) 600,380 619,474 Receipts (756,465) (859,713)

Balances at 9/30/2016 10,045,786 11,185,555

8. Receivables - State Finance Department - Company and consolidated Company and Consolidated

9/30/2016 12/31/2015

Payroll processing - Law No. 4819/58 (a) 1,358,996 1,245,622 Labor claims - Law No. 4819/58 (b) 248,333 236,553 Provision for losses on realization of receivables (c) (516,255) (516,255) Family allowance - Law No. 4819/58 (d) 2,218 2,218 Provision for losses on realization of receivables - family allowance (d) (2,218) (2,218)

1,091,074 965,920

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

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

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

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

and on the status of litigation. The Company monitors the progress of this issue and regularly reviews the provision, evaluating the need for supplementing or reversing the provision based on legal events that may change the opinion of its advisors. By September 30, 2016, there were no events that would indicate the need to change the provision.

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

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

9. Taxes and contributions to be offset Company Consolidated

9/30/2016 12/31/2015 9/30/2016 12/31/2015

Income tax recoverable 34,527 - 34,577 633 Social contribution tax recoverable 12,739 - 12,811 53 Withholding Income Tax (IRRF) 3,842 1,689 3,842 1,689 Withholding social contribution tax 235 53 235 53 COFINS 4,373 2,354 4,373 2,354 PIS 949 511 949 511 Other 415 321 563 470

57,080 4,928 57,350 5,763


Notes

Page: 32 of 75

10. Pledges and restricted deposits

Pledges and restricted deposits are recorded in noncurrent assets, given the uncertainties around the outcome of the related litigation. Deposits are recognized at nominal value and are adjusted for inflation. Breakdown of the balance is as follows:


9/30/2016 12/31/2015 9/30/2016 12/31/2015

Judicial deposits Labor (Note 20 (a) (i)) 58,943 54,695 58,952 54,711 Social security - INSS (Note 20 (a) (iv)) 3,909 3,261 3,909 3,261 PIS/COFINS (a) 4,764 2,049 4,764 2,049 Other 373 287 373 287

Notice for violation - ANEEL (b) 7,119 5,960 7,119 5,960

75,108 66,252 75,117 66,268

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

2015. The Company legally sought to avoid such taxation based on the fact that the levy could only be required by Law as defined in the Federal Constitution, article 150, item I, and that Decree No. 8426/15 also violates the principle of non-cumulative taxation established in article 194, paragraph 12. Judicial deposits made until September 2016 total R$4,764.

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

11. Investments

a) Information on investments in subsidiaries and jointly-controlled subsidiaries

Reporting date

Number of common

shares held

(%) Interest held in paid-in

capital Paid-in Capital Assets Liabilities Equity

Gross revenue (*)

Net income (*)

IEMG 9/30/2016 83,055,292 100.0 83,055 183,067 49,434 133,633 22,525 12,323 12/31/2015 83,055,292 100.0 83,055 173,433 52,123 121,310 17,393 12,230 Pinheiros 9/30/2016 300,910,000 100.0 300,910 636,081 146,995 489,086 79,726 64,132 12/31/2015 300,910,000 100.0 300,910 582,531 157,577 424,954 95,981 59,084 Serra do Japi 9/30/2016 130,857,000 100.0 130,857 379,478 93,491 285,987 68,975 51,369 12/31/2015 130,857,000 100.0 130,857 334,039 99,421 234,618 44,202 18,726 Evrecy 9/30/2016 21,512,367 100.0 21,512 67,400 4,333 63,067 14,001 10,409 12/31/2015 21,512,367 100.0 21,512 56,483 3,825 52,658 13,318 8,571 IENNE 9/30/2016 81,821,000 25.0 327,284 769,484 348,473 421,011 84,337 32,040 12/31/2015 81,821,000 25.0 327,284 719,556 330,585 388,971 76,892 30,865 IESul 9/30/2016 104,928,499 50.0 209,855 332,421 93,896 238,525 38,841 11,364 12/31/2015 104,128,499 50.0 208,257 307,089 81,526 225,563 21,742 5,216 IEMadeira 9/30/2016 717,060,000 51.0 1,406,000 5,739,377 3,373,515 2,365,862 804,580 362,601 12/31/2015 717,060,000 51.0 1,406,000 5,302,355 3,299,094 2,003,261 569,906 209,887 IEGaranhuns 9/30/2016 290,700,000 51.0 570,000 1,334,762 584,838 749,924 217,848 79,891 12/31/2015 289,935,000 51.0 568,500 1,178,434 509,901 668,533 247,151 39,661 (*) Comparative information refers to the nine-month period ended September 30, 2015.


Notes

Page: 33 of 75

i) Subsidiaries

Interligação Elétrica de Minas Gerais S.A. (IEMG)

IEMG was incorporated on December 13, 2006 for the purpose of exploring the utility concession for electric power transmission, particularly the 500 kV Neves 1 - Mesquita (Minas Gerais State) transmission line extending over 172 km (Service Concession Arrangement No. 004/2007 - Note 1.2). IEMG was authorized to operate commercially in 2009.

In 2011, CTEEP acquired from Cymi a 40% stake in IEMG’s capital, thus holding a 100% interest in its capital. The amount paid was R$15,283, reporting a loss of R$28,490. As a result of this transaction, the Company’s investment in IEMG on the transaction date was equivalent to its fair value, i.e. R$38,206, which is not the same as the carrying amount of IEMG’s net assets.

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

R$ thousand

IEMG net assets 133,633 Interest held by CTEEP 100%

Book value of investment 133,633

Loss on acquisition of control in IEMG (net) - fair value (33,742)

Total investment 99,891

Interligação Elétrica Pinheiros S.A. (Pinheiros)

Pinheiros was incorporated on July 22, 2008 for the purpose of exploring the utility concession for electric power transmission, particularly the transmission lines and substations purchased in Lots E, H and K of ANEEL Auction No. 004/2008, and Lot K of ANEEL Auction No. 004/2011.

Araras, Getulina, and Mirassol substations (Lot H - Service Concession Arrangement No. 015/2008) became operational on September 5, 2010, March 10, 2011, and April 17, 2011, respectively. Piratininga II substation (Lot E - Service Concession Arrangement No. 012/2008) became operational on December 26, 2011. Atibaia II substation (Lot K - Service Concession Arrangement No. 018/2008) became operational on January 8, 2013 Itapeti substation (Lot K - Service Concession Arrangement No. 021/2011) became operational on August 9, 2013. Interligação Elétrica Serra do Japi S.A. (Serra do Japi) Serra do Japi was incorporated on July 1, 2009 for the purpose of exploring the utility concession for electric power transmission, particularly Jandira and Salto substations purchased in Lot I of ANEEL Auction No. 001/2009 (Service Concession Arrangement No. 026/2009 - Note 1.2). Serra do Japi became operational in 2012 (Salto substation in January 2012, and Jandira substation in March 2012).


Notes

Page: 34 of 75

On April 30, 2015, CTEEP transferred the electric power transmission service concession arrangement No. 143/2001 to subsidiary Serra do Japi, through a capital increase, as approved by ANEEL Authorizing Resolution No. 5036 of January 20, 2015. The capital increase totaling R$44,109 refers to the financial asset (accounts receivable - concession assets) of Service Concession Arrangement No. 143/2001, on March 31, 2015, determined pursuant to an independent appraisal report. Evrecy Participações Ltda. (“Evrecy”) In 2012, CTEEP acquired from EDP Energias do Brasil S.A. (“EDP”) 100% of the capital of Evrecy Participações Ltda. (“Evrecy”) for R$63.2 million. Evrecy is a power transmission company that was formed after the spin-off of the power generation and transmission assets of Espírito Santo Centrais Elétricas - Escelsa in 2005; it owns 154 km of transmission lines and three substations in the states of Espírito Santo and Minas Gerais. The acquisition cost was allocated among the assets acquired and the liabilities assumed at fair value. The concession assets computed in the amount of R$31,337 refers to the right acquired to operate and maintain the assets related to the concession held by Evrecy, and will be amortized over the term of Evrecy’s concession. At September 30, 2016, the reconciliation between Evrecy’s net assets and the Company’s investment is as follows:

R$ thousand

Evrecy net assets 63,067 Interest held by CTEEP 100%

Book value of investment 63,067

Concession asset at September 30, 2016 (net) 21,998

Total investment 85,065

ii) Jointly-controlled subsidiaries

Interligação Elétrica Norte e Nordeste S.A. (IENNE) IENNE was incorporated on December 3, 2007 for the purpose of exploring the utility concession for electric power transmission, particularly Colinas (Tocantins) - Ribeiro Gonçalves (Piauí) and Ribeiro Gonçalves - São João do Piauí (Piauí) transmission lines, both operating at 500 kV, extending over 720 km (Service Concession Arrangement No. 001/2008 - Note 1.2). In 2011, IENNE obtained authorization and became operational. Interligação Elétrica Sul S.A. (IESul) IESul was incorporated on July 23, 2008 for the purpose of exploring the utility concession for electric power transmission, particularly the transmission lines and substations purchased in Lots F and I of ANEEL Auction No. 004/2008. Nova Santa Rita - Scharlau transmission line and Scharlau substation (Service Concession Arrangement No. 013/2008) became operational on December 6, 2010.


Notes

Page: 35 of 75

Forquilhinha substation, Jorge Lacerda B - Siderópolis transmission line and Joinville Norte - Curitiba transmission line (Service Concession Arrangement No. 016/2008) became operational on October 10, 2011, August 21, 2012, and August 10, 2015, respectively.

Interligação Elétrica do Madeira S.A. (IEMadeira)

IEMadeira was incorporated on December 18, 2008 for the purpose of exploring the utility concession for electric power transmission, particularly the transmission lines and substations purchased in Lots D and F of ANEEL Auction No. 007/2008. The Porto Velho - Araraquara transmission line (Service Concession Arrangement No. 013/2009) became operational on August 1, 2013. The Inverter and Rectifier stations (Service Concession Arrangement No. 015/2009) became operational on a provisional basis on May 12, 2014. The assets since the Concession Contract were declared free of own impediments in august 2014. Due to the existence of impeditive pendencies due to other agents (in relation to the non-conclusion from the joint studies of the integrators on ONS electric studies simulator), it have been applied the reduncing factor equivalent to 10% of the revenue associated to the contract. The commissioning tests on the Converting Stations of Araraquara and Porto Velho are in their final stage, that the full commercial operation and the emission of the Definitive Release Term by the ONS are planned to the first half of 2017. Interligação Elétrica Garanhuns S.A. (IEGaranhuns)

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

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

b) Changes in investments

Company

IEMG Pinheiros Serra do

Japi Evrecy IENNE IESul IEMadeira IEGaranhuns Total

Balances at 12/31/2015 85,854 424,954 234,618 76,524 97,243 112,782 1,021,663 340,952 2,394,590 Payment of capital - - - - 799 - 765 1,564 Equity pickup 12,323 64,132 51,369 10,409 8,010 5,681 184,927 40,745 377,596

Loss realized on acquisition of control 1,714 - - - - - - 1,714

Amortization of concession-related asset - - - (1,868) - - - (1,868)

Balances at 9/30/2016 99,891 489,086 285,987 85,065 105,253 119,262 1,206,590 382,462 2,773,596

Consolidated

IENNE IESul IEMadeira IEGaranhuns Total

Balances at 12/31/2015 97,243 112,782 1,021,663 340,952 1,572,640 Payment of capital - 799 - 765 1,564 Equity pickup 8,010 5,681 184,927 40,745 239,363

Balances at 9/30/2016 105,253 119,262 1,206,590 382,462 1,813,567


Notes

Page: 36 of 75

12. Property, Plant and Equipment (PPE)

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

Company

Annual average

depreciation 9/30/2016 12/31/2015 rates

Accumulated Cost depreciation Net -%

Land 2,060 - 2,060 2,060

Machinery and equipment 5,309 (1,599) 3,710 3,481 6.33% Furniture and fixtures 7,442 (5,361) 2,081 1,911 6.25%

IT equipment 14,825 (8,045) 6,780 3,533 24.1% Vehicles 10,395 (1,675) 8,720 9,838 31.5% (*) Other 2,345 (937) 1,408 2,340 4.0%

42,376 (17,617) 24,759 23,163

Consolidated

Annual average

depreciation 9/30/2016 12/31/2015 rates

Accumulated Cost depreciation Net -%

Land 2,060 - 2,060 2,060

Machinery and equipment 5,309 (1,599) 3,710 3,481 6.33% Furniture and fixtures 7,448 (5,364) 2,084 1,913 6.25%

IT equipment 14,850 (8,047) 6,803 3,544 24.1% Vehicles 10,395 (1,675) 8,720 9,838 31.5% (*) Other 2,354 (936) 1,418 2,358 4.0%

42,416 (17,621) 24,795 23,194

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

Changes in property, plant and equipment are as follows: Company

Balances at 12/31/2015 Additions Depreciation

Write-offs/transfers

Balances at 9/30/2016

Land 2,060 - - - 2,060

Machinery and equipment 3,481 441 (208) (4) 3,710 Furniture and fixtures 1,911 414 (229) (15) 2,081

IT equipment 3,533 4,190 (943) - 6,780 Vehicles 9,838 17 (1,135) - 8,720 Other 2,340 - (1) (931) 1,408

23,163 5,062 (2,516) (950) 24,759

Consolidated

Balances at 12/31/2015 Additions Depreciation

Write-offs/transfers

Balances at 9/30/2016

Land 2,060 - - - 2,060

Machinery and equipment 3,481 441 (208) (4) 3,710 Furniture and fixtures 1,913 416 (230) (15) 2,084

IT equipment 3,544 4,205 (943) (3) 6,803 Vehicles 9,838 17 (1,135) - 8,720 Other 2,358 5 (1) (944) 1,418

23,194 5,084 (2,517) (966) 24,795


Notes

Page: 37 of 75

13. Intangible assets

In the Company’s financial information, the balance of R$15,576 refers mostly to expenses with upgrading of ERP-SAP and software use right, amortizable on a straight-line basis over 5 years.

In the consolidated financial information, the amount of R$21,998 refers to concession-related assets determined according to the report issued by an independent consulting firm (Note 11) arising from acquisition of subsidiary Evrecy, based on expected profits to be generated over the concession period. The concession-related assets are amortized over the subsidiary’s service concession arrangement period, which expires on July 17, 2025, under the terms of item b, paragraph 2, article 14 of CVM Ruling No. 247 of March 27, 1996, as amended by CVM Ruling No. 285 of July 31, 1998.

Changes in intangible assets:


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

Additions - 3 Write-offs (3,480) (3,480) Amortization (3,593) (6,023)

Balance at 9/30/2016 15,576 40,009

14. Loans and financing

Loans and financing are broken down as follows:


Local currency Charges Final maturity 9/30/2016 12/31/2015 9/30/2016 12/31/2015

BNDES (a) (i) TJLP + 1.8% p.a. 03/15/2029 234,780 246,316 234,780 246,316 BNDES (a) (i) 3.5% p.a. 01/15/2024 74,807 82,538 74,807 82,538 BNDES (a) (i) TJLP 03/15/2029 644 - 644 - BNDES (a) (ii) TJLP + 2.1% p.a. 02/15/2028 - - 6,116 6,451 BNDES (a) (ii) 3.5% p.a. 04/15/2023 - - 11,923 13,282 BNDES (a) (iii) TJLP + 2.6% p.a. 05/15/2026 - - 34,757 37,132 BNDES (a) (iii) 5.5% p.a. 01/15/2021 - - 43,549 51,092 BNDES (a) (iv) TJLP + 1.9% p.a. 05/15/2026 - - 36,383 38,796 BNDES (a) (iv) TJLP + 1.5% p.a. 05/15/2026 - - 31,439 33,525 BNDES (a) (v) TJLP + 2.4% p.a. 04/15/2023 - - 33,951 37,425 BNDES / Finame PSI 4.0% p.a. 08/15/2018 147 204 147 204 BNDES / Finame PSI (b) 6.0% p.a. 11/18/2019 7,299 9,029 7,299 9,029 Eletrobras 8.0% p.a. 11/15/2021 165 196 165 196 Finance lease agreements 199 323 199 323

Total in local currency

318,041 338,606 516,159 556,309

Current 32,535 32,530 71,275 71,070

Noncurrent 285,506 306,076 444,884 485,239

(a) BNDES

(i) On December 23, 2013, CTEEP entered into a loan agreement with the National Bank for Economic and Social Development (BNDES), as amended on December 30, 2014, in the amount of R$391,307, where R$284,136 at the cost of TJLP + 1.80% p.a.; R$1,940 at the cost of TJLP; and R$105,231 at the cost of 3.50% p.a. This loan is intended for implementation of the Multiannual Investment Plan relating to the period 2012-2015, comprising construction works referring to the modernization of the electric power transmission system, system improvements, new project reinforcements and implementation, as well as implementation of social investments within the community. The amounts of R$124,124, R$26,900, R$89,000, R$30,000, R$73,877 and R$660 were released on January 29, June 26 and December 26, 2014, and on April 14 and December 18, 2015, and on June 21, 2016, respectively.

Interest will be charged on a quarterly basis and then monthly as of April 2015. The principal of this agreement will be amortized in 168 equal and consecutive monthly installments beginning April 2015. The Company offered bank surety to guarantee the loan. For 2016, this agreement has the following maximum financial ratios, calculated on an annual basis: Net debt/Adjusted EBITDA < 4.5 and Net Debt/(Net Debt + Equity) < 0.6.


Notes

Page: 38 of 75

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

(ii) On August 13, 2013, subsidiary Pinheiros entered into a loan agreement with BNDES in the amount of R$23,498. The amount is intended to

finance the construction of the transmission lines and substations specified in Service Concession Arrangement No. 021/2011. Repayment is in 168 monthly installments from March 15, 2014 onwards. Over repayment and after giving the bank sureties, the Debt Coverage Ratio (ICSD) determined annually must be at least 1.3%. Bank sureties were waived by BNDES on June 23, 2015.

(iii) On December 30, 2010, subsidiary Pinheiros entered into a loan agreement with BNDES in the amount of R$119,886. The amount is

intended to finance the construction of the transmission lines and substations specified in Service Concession Arrangements No. 012/2008, No. 015/2008 and 018/2008. Repayment is in 168 monthly installments from September 15, 2011 onwards. Over repayment and after giving the bank sureties, the Debt Coverage Ratio (ICSD) determined annually must be at least 1.3%. Bank sureties were waived by BNDES on June 23, 2015.

(iv) On October 28, 2011, subsidiary Serra do Japi entered into a loan agreement with BNDES in the amount of R$93,373. The amount is

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

(v) On January 14, 2009, subsidiary IEMG entered into a loan agreement with BNDES in the amount of R$70,578. This amount is aimed at

financing approximately 50% of the Transmission Line (LT) between Neves 1 and Mesquita substations. Repayment is in 168 monthly installments from May 15, 2009. Bank surety was waived by BNDES on March 15, 2011. Over repayment, the Debt Coverage Ratio (ICSD) determined annually must be at least 1.3%.

(b) BNDES / Finame PSI

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

The long-term portion matures as follows:


9/30/2016 12/31/2015 9/30/2016 12/31/2015

2017 7,859 31,258 14,455 57,637 2018 31,358 31,102 57,737 57,481 2019 31,080 30,829 57,460 57,209 2020 28,962 28,711 55,342 55,091 2021 28,962 28,695 47,061 46,794 From 2022 to 2026 115,053 113,796 170,002 168,745 From 2027 to 2029 42,232 41,685 42,827 42,282

285,506 306,076 444,884 485,239

Changes in loans and financing are as follows:


Balances at 12/31/2015 338,606 556,309

Additions 660 660 Payments of principal (23,684) (43,556) Payments of interest (20,796) (33,289) Interest and monetary and foreign exchange variations 23,255 36,035

Balances at 9/30/2016 318,041 516,159


Notes

Page: 39 of 75

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

Subsidiary Interest held in subsidiary Bank Type of debt

Debt balance at 9/30/2016 Guarantee

Balance guaranteed by CTEEP

Guarantee expires on

IEMG 100% BNDES FINEM 33,951 None 33,951 - Serra do Japi 100% BNDES FINEM 67,822 None 67,822 -

Pinheiros 100% BNDES FINEM and

PSI 78,306 None 78,306 -

Pinheiros 100% BNDES FINEM and

PSI 18,039 None 18,039 -

IESul 50% BNDES FINEM and

PSI 10,158 Bank surety 5,079 09/24/2018

IESul 50% BNDES FINEM and

PSI 18,079 Bank surety 9,039 7/31/2017

IENNE 25% Banco do Nordeste FNE 192,998 Bank surety 48,249 6/1/2017

IENNE 25% Banco do

Brasil Overdraft facilities 16,422 None 4,106 -

IEMadeira 51% Banco da Amazônia

Bank credit bill 313,522 Bank surety 159,896 6/30/2017

IEMadeira 51% BNDES FINEM and

PSI 1,541,680 Bank surety 786,257 6/30/2017

IEMadeira 51% Itaú/BES Infrastructure debentures 488,811

Overdraft facilities 249,294 6/30/2017

IEGaranhuns 51% BNDES FINEM and

PSI 321,055 Bank surety 163,738 9/20/2018

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

15. Debentures

Company and Consolidated

Maturity Number Charges 9/30/2016 12/31/2015

IPCA + 8.1%

2nd series (i) 12/15/2017 5,760 p.a. 47,472 41,608 Single series 116.0% of CDI

CTEEP (ii) 12/26/2018 50,000 p.a. 519,496 498,747 Single series

CTEEP (iii) 07/15/2021 148,270 IPCA + 6.04% 146,297 -

713,265 540,355

Current 205,168 180,782

Noncurrent 508,097 359,573

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

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


Notes

Page: 40 of 75

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

(ii) In December 2013, CTEEP issued 50,000 single series debentures amounting to R$500,000. Debentures will mature on an annual basis on

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

(iii) In August 2016, CTEEP issued 148,270 infrastructure debentures, in a single series, amounting to R$148,270, under the terms of Law No.

12431/2001, article 2, paragraph 1, in order to reimburse capital contributions and investments made in its jointly-controlled subsidiaries IEMadeira and IEGaranhuns. Debentures will mature on July 15, 2021 and remuneration will be paid on an annual basis in July each year, the first one falling due on July 15, 2017.

Financial ratios established in the indenture are as follows: Net Debt/Adjusted EBITDA < 3.5 and Adjusted EBITDA/Financial Income/Expenses > 1.5 until calculation performed at June 30, 2017, and ≤ 2.00 as from the calculation performed at September 30, 2017. All requirements and covenants established in the agreements have been duly observed and met by CTEEP and its subsidiaries to date.

The long-term portion matures as follows:

9/30/2016 12/31/2015

2017 195,926 193,621 2018 165,952 165,952 2019 - - 2020 - - 2021 146,219 -

508,097 359,573

Changes in debentures are as follows: Balances at 12/31/2015 540,355 Addition 148,270 Payments of interest (42,818) Interest and monetary and foreign exchange variations 67,458 Balances at 9/30/2016 713,265

16. Taxes and social charges payable Company Consolidated

9/30/2016 12/31/2015 9/30/2016 12/31/2015

Income tax 39,268 1,557 40,464 2,163 Social contribution tax 14,491 1,696 15,082 2,124 COFINS 10,208 8,213 10,548 8,500 PIS 1,976 1,639 2,050 1,702 INSS 4,983 5,032 5,194 5,107 Service Tax (ISS) 2,818 3,115 2,831 3,182 Unemployment Compensation Fund (FGTS) 858 1,536 899 1,536 Withholding Income Tax (IRRF) 1,971 3,071 2,044 3,084 Other 1,718 966 1,755 1,019

78,291 26,825 80,867 28,417


Notes

Page: 41 of 75

17. Taxes in installments - Law No. 11941 - Company and consolidated

In 2009 and 2010, the Company amended its Federal Tax Debt and Credit Returns (DCTFs) for years 2004 to 2007, determining a debt related to PIS and COFINS contributions. To settle such debt, the Company enrolled with the Special Tax Installment Payment Program introduced by Law No. 11941 of May 27, 2009, and opted for the 180-month payment schedule ending October 2024. The installments are restated by reference to Brazil’s Central Bank benchmark rate (SELIC). The installment at September 30, 2016 amounts to R$1,435. Changes for the nine-month period ended September 30, 2016 are as follows:

9/30/2016

Opening balance 143,097 Monetary restatement on debt 8,634 Payments made (12,568) 139,163 Current 17,216 Noncurrent 121,947

18. Deferred PIS and COFINS Company Consolidated

9/30/2016 12/31/2015 9/30/2016 12/31/2015

Deferred PIS 164,291 19,219 172,155 26,570 Deferred COFINS 756,734 88,522 793,030 122,452

921,025 107,741 965,185 149,022

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

19. Regulatory charges payable


9/30/2016 12/31/2015 9/30/2016 12/31/2015

Research and development - R&D (i) 36,899 40,875 38,851 42,356 Energy Development Account (CDE) 593 1,157 593 1,157 Global Reversal Reserve (RGR) (ii) 6,405 6,421 7,457 7,730 Alternative Electric Power

Source Incentive Program - PROINFA 1,951 1,772 1,951 1,772

45,848 50,225 48,852 53,015

Current 11,838 21,442 11,908 21,821

Noncurrent 34,010 28,783 36,944 31,194

(i) The Company and its subsidiaries recognize liabilities related to amounts billed through tariffs (1% of Net Operating Revenue), applied to the

Research and Development Program (R&D), which are restated on a monthly basis from the second month subsequent to their recognition up to the effective realization thereof, by reference to SELIC rate, according to ANEEL Resolutions No. 300/2008 and No. 316/2008. According to Circular Memorandum No. 0003/2015 of May 18, 2015, the amounts used in R&D are accounted for under assets and upon completion of projects, they are recognized as settlement of the obligation and then submitted to ANEELS’s final audit and evaluation. The total amount used in projects not completed by September 30, 2016 amounts to R$2,333 (R$11,075 at December 31, 2015).

(ii) According to article 21 of Law No. 12783, as of January 1, 2013, electric power transmission service concession operators with extended service

concession arrangements under such Law are not required to pay annual RGR portion. This applies to the Company only in connection with Service Concession Arrangement No. 059/2001. In the Company’s quarterly information at September 30, 2016, RGR balance payable refers to additional charge referring to year 2010, as provided for in ANEEL Order No. 2513/2012, which was revoked by Order No. 034/2013.


Notes

Page: 42 of 75

20. Provisions


9/30/2016 12/31/2015 9/30/2016 12/31/2015

Accrued vacation pay, 13th month salary and

social charges 33,218 22,709 34,296 23,365 Profit sharing (PLR) 4,695 6,119 4,870 6,392 Contingencies (a) 162,848 189,320 162,848 189,612

200,761 218,148 202,014 219,369

Current 37,913 28,828 39,166 29,757

Noncurrent 162,848 189,320 162,848 189,612

(a) Provision for contingencies

Contingencies are assessed from time to time and classified according to their likelihood of loss for the Company. Provisions are set up for all contingencies referring to legal proceedings the settlement of which is likely to result in an outflow of funds, and a reliable estimate can be made. Contingencies whose likelihood of loss is assessed as probable are as follows:


9/30/2016 12/31/2015 9/30/2016 12/31/2015

Labor (i) 133,469 164,308 133,469 164,528 Civil (ii) 11,484 14,230 11,484 14,302 Tax - Real Estate Tax (IPTU) (iii) 16,663 9,722 16,663 9,722 Social security - INSS (iv) 1,232 1,060 1,232 1,060

162,848 189,320 162,848 189,612

(i) Labor

The Company figures as defendant in certain lawsuits at different courts, mainly arising from labor claims for salary parity, overtime, and health exposure premiums among others. CTEEP has labor-related judicial deposits amounting to R$58,943 (R$54,695 at December 31, 2015), as described in Note 10.

(ii) Civil

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

(iii) Tax - IPTU

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

(iv) Social security - INSS

On August 10, 2001, the National Institute of Social Security (INSS) served the Company a notice of violation for nonpayment of social security tax on compensation paid to its employees from April 1999 to July 2001. Management began the defense procedures and the corresponding judicial deposit currently amounts to R$3,909 (R$3,261 at December 31, 2015), as described in Note 10.


Notes

Page: 43 of 75

(v) Changes in provisions for contingences:

Company

Labor Civil Tax - IPTU

Social security - INSS Total

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

Recognition 64,747 6,193 1 171 71,112 Reversal/payment (109,065) (10,380) (50) (651) (120,146) Restatement 13,479 1,441 6,990 652 22,562

Balances at 9/30/2016 133,469 11,484 16,663 1,232 162,848

Consolidated

Labor Civil Tax - IPTU Social security -

INSS Total

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

Recognition 64,747 6,198 1 171 71,117 Reversal/payment (109,285) (10,457) (50) (651) (120,443) Restatement 13,479 1,441 6,990 652 22,562

Balances at 9/30/2016 133,469 11,484 16,663 1,232 162,848

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

The Company and its subsidiaries are parties to tax, labor and civil proceedings assessed by management as involving risk of a possible loss based on the opinion of its legal advisors, for which a provision was not recorded. Company and consolidated contingencies amounts to R$662,688 and R$664,548 at September 30, 2016, respectively (R$483,801 and R$484,363 at December 31, 2015, respectively).


Classification Number Total Number Total

Labor 179 22,121 179 22,121 Civil 46 30,211 59 32,071 Social security 60 2,764 60 2,764 Civil - Merger of EPTE into CTEEP

1 155,425 1 155,425 declared null (i) Civil - Ace Seguradora (ii) 1 11,596 1 11,596 Tax - social contribution tax loss (iii) 1 22,575 1 22,575 Tax - goodwill amortization (iv) 4 358,458 4 358,458 Tax - IRPJ and CSLL (v) 1 9,739 1 9,739 Tax - other 140 49,799 140 49,799 Plan of Law No. 4819/58 (Note 32) 1 - 1 -

662,688 664,548

(i) Merger of EPTE into CTEEP declared null

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


Notes

Page: 44 of 75

(ii) Ace Seguradora

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

(iii) Tax - social contribution tax loss

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

(iv) Tax - goodwill amortization

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

(v) Tax - IRPJ and CSLL

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

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

(i) Collection lawsuit by Eletrobras against Eletropaulo and EPTE

In 1989, Centrais Elétricas Brasileiras S.A. - ELETROBRAS filed a collection lawsuit against Eletropaulo - Eletricidade de São Paulo S.A. (currently Eletropaulo Metropolitana Eletricidade de São Paulo S.A. - “Eletropaulo”) referring to the balance of a certain financing agreement. Eletropaulo did not agree with the criterion for monetary restatement of said financing agreement and made judicial deposits for the amounts it understood to be due to ELETROBRAS. In 1999, a decision was handed down on the aforementioned lawsuit, sentencing Eletropaulo to pay the balance determined by ELETROBRAS. Under the Eletropaulo’s split-off agreement carried out on December 31, 1997 that resulted in the establishment of EPTE and other companies, Eletropaulo is solely liable for obligations of any kind referring to acts until the spin-off date, except for contingent liabilities whose provisions had been allocated to the acquirers. In the case under concern, at the time of the split-off, there was no allocation to EPTE of any provision for such purpose, leaving it clear to CTEEP management and its legal advisors that Eletropaulo was solely liable for said contingency. At the time of the spin-off there was only the transfer to EPTE’s assets of a judicial deposit in the historical amount of R$ 4.00, made in 1988 by Eletropaulo, corresponding to the amount that it understood to be owed to ELETROBRAS regarding the balance of the aforementioned financing agreement, and allocation to EPTE’s liabilities of the same amount referring to this debt.


Notes

Page: 45 of 75

As a result of the Eletropaulo’s split-off agreement, EPTE would own the assets transferred and Eletropaulo would be responsible for contingent liability related to the amount under dispute by ELETROBRAS. In October 2001, ELETROBRAS promoted the execution of the decision related to such financing agreement, collecting R$429 million from Eletropaulo and R$49 million from EPTE, understanding that EPTE would pay its part with the restated funds of the judicial deposit. CTEEP merged EPTE on November 10, 2001, becoming the successor in its relevant rights and obligations.

On September 26, 2003, an appellate decision of the Court of Justice of the State of Rio de Janeiro was published excluding Eletropaulo from the execution of such decision. Due to these facts, ELETROBRAS filed a Special Appeal to the High Court of Justice (STJ) and an Extraordinary Appeal to the Federal Supreme Court of Brazil (STF), aiming at maintaining the aforementioned collection against Eletropaulo. Appeals similar to those of ELETROBRAS were filed by CTEEP.

On June 29, 2006, STJ granted CTEEP’s Appeal to review the decision of the Court of Justice of the State of Rio de Janeiro that had excluded Eletropaulo as a defendant in the execution action filed by ELETROBRAS.

As a result of said grant by STJ, on December 4, 2006, Eletropaulo filed a motion for clarification, which was denied according to appellate decision published on April 16, 2007, as well as the Special and Extraordinary Appeals to STJ and STF that maintained the decision of STJ, which became final on October 30, 2008. As such decisions understood that the challenges prior to procedures to determine grounds for execution filed by Eletropaulo were unreasonable, the execution action filed by ELETROBRAS follows its ordinary course as originally proposed.

In December 2012, a decision was published dismissing the provision of evidence required by the parties, closing the liquidated claim, determining that Eletropaulo is liable for such payment, and discounting the judicial deposit for payment into court.

Eletropaulo filed an appeal so that the lawsuit returned to the fact-finding phase for performance of expert evidence examination. The conclusion of the expert report presented in September 2015 is in line with CTEEP’s view. The Company, Eletropaulo and Eletrobrás expressed their views on such report, but they have not yet been considered. Eletropaulo also presented accounting and legal opinions defending its view.

This proceeding awaits a decision on views expressed and completion of examination.


Notes

Page: 46 of 75

(ii) PIS/ COFINS

CTEEP is a defendant in the proceedings arising from PIS and COFINS delinquency notices for the years 2003 to 2011, on the understanding that it would be subject to the cumulative taxation regime. The Company adopted the cumulative taxation regime until 2003. As the legislation changed, non-cumulative taxation became the general rule as of October 2003, except for revenues falling under these 4 requirements: i) from contracts executed before October 2003, ii) effective for more than a year, iii) with a predefined price, and iv) for the acquisition of goods or services. Given that the Existing Service (SE) revenue falls under these requirements, and also to comply with ANEEL’s guidance, CTEEP requested to offset the tax amounts overpaid in the period when it paid such taxes under the non-cumulative taxation regime, and started to subject the SE revenue to PIS and COFINS cumulative taxation. The proceedings are at administrative level and total R$1,819.0 million, whose collection has been suspended according to a decision handed down through a Writ of Mandamus, on which the Company intends that the report prepared by external consultants be analyzed at administrative level. In the opinion of the Company’s legal advisors, the likelihood of loss in these cases is remote, considering that Federal Supreme Court of Brazil (STJ) has already ruled favorably on this matter.

21. Payables - Funcesp - Company and consolidated

The Company sponsors supplementary retirement and death benefit plans maintained with FUNCESP, which, in addition to the fund’s administrative costs, amount to R$6,086 at September 30, 2016 (R$6,144 at December 31, 2015) referring to monthly installments payable as contributions to the fund.

a) Supplementary retirement plan (Plan “A”)

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

b) PSAP/CTEEP

PSAP/CTEEP includes the following subplans:

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

Defined Benefit (DB) - (Plan “B1”);

Variable contribution (VC) - (Plan “B1”).

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


Notes

Page: 47 of 75

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

c) Actuarial valuation

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

22. Special obligations - reversal/amortization

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


Notes

Page: 48 of 75

23. Equity

a) Capital

At September 30, 2016 and December 31, 2015, the Company’s authorized capital amounts to R$2,500,000 and R$2,300.000, including R$978,693 and R$971,523 in common shares and R$1,521,307 and R$1,328,477 in preferred shares, respectively, all book-entry registered shares with no par value. Subscribed and paid up capital at September 30, 2016 and December 31, 2015 totals R$2,372,437 e R$2,215,291, respectively, and is represented by common and preferred shares, as follows:

9/30/2016 R$ thousand 12/31/2015 R$ thousand

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

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

Holders of common shares are entitled to one vote per share at the general meetings. Preferred shares are nonvoting, but have priority upon capital reimbursement and payment of noncumulative dividends of 10% over the year, calculated on paid-in capital corresponding to this type of share.

The Board of Director’s meeting held on June 2, 2016 approved (i) capital increase of CTEEP, which had been approved at the Board of Director’s meeting held on April 5, 2016, in the amount of R$157,146, through issue of 3,461,371 preferred shares. Out of the capital increase, it was incumbent on the controlling shareholder to pay R$59,773 through partial amortization of the Special Goodwill Reserve on Merger; and (ii) to cancel 78,835 preferred shares, of which 5,063 were not subscribed and 73,772 were subscribed under the condition (“conditional actions”) of subscription of total capital increase, which did not take place.

b) Dividends and interest on equity

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

Interim dividends

BDM date Total Per share Payment

6/16/2016 110,000 0.667797 6/302016 110,000 0.667797

Dividends and interest on equity paid until September 30, 2016 total R$109,699.

The Company’s Articles of Incorporation defined the payment of mandatory minimum dividends corresponding to 10% of capital, equivalent to R$237,244, whenever there is a profit balance after the legal reserve is set up.


Notes

Page: 49 of 75

c) Capital reserves

9/30/2016 12/31/2015

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

1,217,583 1,277,356

(i) Investments grants - CRC

The Recoverable Rate Deficit (CRC) account was introduced by Decree No. 41019/1957 and by Law No. 5655/1971 to remunerate electricity utilities for certain investments made by them. Upon enactment of Law No. 8631/1993, the CRC ceased to exist, and later on, Law No. 8724/1993 set forth that CRC credits should be recorded in equity as an investment grant, under “Capital Reserve”.

As permitted by Accounting Pronouncement CPC 13, the Company elected to maintain the existing CRC balance at December 31, 2007 as well as other donations and investment grants recorded as capital reserve in equity, until these amounts are fully used as provided for in the Brazilian Corporation Law.

(ii) Revenue from construction in progress

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

d) Income reserves

9/30/2016 12/31/2015

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

1,842,892 1,842,892

(i) Legal reserve

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

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

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

e) Earnings per share

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


Notes

Page: 50 of 75

The shares thus issued will be considered as diluting shares for the calculation of the Company’s earnings (loss) per share, if all the conditions necessary for their issue have been met. At September 30, 2016 and 2015, the conditions for issue of capital shares related to the goodwill amortization had been met.

The table below shows P&L data and shares used to calculate basic and diluted earnings per share:

Quarter ended Six-month period ended

9/30/2016 9/30/2015 9/30/2016 9/30/2015

Basic and diluted earnings per share Net income - R$ thousand 4,531,786 271,977 4,730,436 432,984

Weighted average number of shares Common shares 64,484,433 64,484,433 64,484,433 64,484,433 Preferred shares 98,290,951 96,775,022 98,290,951 96,775,022

162,775,384 161,259,455 162,775,384 161,259,455

Adjusted weighted average number of shares Common shares 64,494,619 65,948,611 65,216,501 65,992,918 Preferred shares 98,299,665 98,285,677 98,975,378 98,266,101

162,794,284 164,234,288 164,191,879 164,259,019

Basic earnings per share 27.84073 1.68658 29.06113 2.68502

Diluted earnings per share 27.83750 1.65603 28.81042 2.63599

24. Net operating revenue

24.1. Breakdown of net operating revenue

Company

Quarter ended Nine-month

period ended

9/30/2016 9/30/2015 9/30/2016 9/30/2015

Gross revenue Infrastructure (a) (Note 7) 49,584 86,296 103,774 188,828 Operation and maintenance (a) (Note 7) 182,177 230,290 600,380 591,986 Revenue from concession assets

(b) (Note 7) 7,229,710 80,427 7,308,128 136,127 Rent 4,644 4,322 13,382 12,519 Services rendered 2,147 1,896 6,711 5,510

Total gross revenue 7,468,262 403,231 8,032,375 934,970

Taxes on revenues COFINS (682,525) (28,237) (725,159) (68,095) PIS (148,180) (6,131) (157,436) (14,784) Service Tax (ISS) (105) (90) (322) (265)

(830,810) (34,458) (882,917) (83,144)

Regulatory charges Energy Development Account

- CDE (3,025) (3,563) (11,424) (8,047) Global Reversal Reserve (RGR) - - (186) (243) Research and Development (R&D) (1,901) (2,239) (6,054) (5,794) Alternative Electric Power

Source Incentive Program - PROINFA (5,314) (3,185) (13,623) (9,042)

(10,240) (8,987) (31,287) (23,126)

6,627,212 359,786 7,118,171 828,700


Notes

Page: 51 of 75

Consolidated

Quarter ended Nine-month period ended

9/30/2016 9/30/2015 9/30/2016 9/30/2015

Gross revenue Infrastructure (a) (Note 7) 51,298 98,944 111,022 218,498 Operation and maintenance (a) (Note 7) 181,792 232,769 619,474 613,167 Revenue from concession assets

(b) (Note 7) 7,342,426 167,247 7,467,843 256,328 Rent 4,709 4,381 13,577 12,696 Services rendered 1,317 1,291 3,797 3,739

Total gross revenue 7,581,542 504,632 8,215,713 1,104,428

Taxes on revenue COFINS (685,995) (31,351) (730,704) (73,297) PIS (148,933) (6,807) (158,638) (15,912) Service Tax (ISS) (105) (90) (322) (265)

(835,033) (38,248) (889,664) (89,474)

Regulatory charges Energy Development Account

- CDE (3,025) (3,563) (11,424) (8,047) Global Reversal Reserve (RGR) (1,055) - (2,565) (1,425) Research and Development (R&D) (2,196) (2,458) (7,028) (6,575) Alternative Electric Power

Source Incentive Program PROINFA (5,314) (3,185) (13,623) (9,042)

(11,590) (9,206) (34,640) (25,089)

6,734,919 457,178 7,291,409 989,865

(a) Infrastructure implementation, operation and maintenance services

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

(b) Revenue from concession assets

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

24.2. Periodic review of Annual Revenue Allowed (RAP)

In accordance with service concession arrangements, every four and/or five years following their execution date, ANEEL will conduct a periodic review of the RAP for electric power transmission, so as to promote tariff efficiency at affordable rates.

In 2013, the Company started recognizing revenue and costs from infrastructure implementation to improve electric power facilities, which will be considered in the base of the next periodic tariff review, as defined in Decision No. 4413 issued by ANEEL on December 27, 2013 and Regulatory Instruction No. 443 of July 26, 2011, as amended by Regulatory Instruction No. 463 of December 16, 2014.

Revenue associated with Service Concession Arrangement No. 143/2001 of subsidiary Serra do Japi is not subject to the periodic tariff review.


Notes

Page: 52 of 75

The review includes the reallocation of revenue by determining:

(a) The basis for regulatory compensation to the Base Grid - New Facilities (RBNI);

(b) Efficient operating costs;

(c) The optimal capital structure and compensation to the transmission companies;

(d) The value to be considered as tariff reducer - Other Revenues.

The latest periodic tariff reviews are described below:

Ratification Ruling

Concession operator (REH) Date of REH Effectiveness

IEMG 1,299 6/19/2012 7/1/2012 IENNE 1,540 6/18/2013 7/1/2013 Evrecy 1,538 6/18/2013 7/1/2013 6/24 and Pinheiros 1,755 / 1,762 7/9/2014 7/1/2014 Serra do Japi 1,901 6/16/2015 7/1/2015 IESul 1,755 6/24/2014 7/1/2014 IEMadeira (i) 1,755 6/24/2014 7/1/2014

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

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

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

24.3. Variable Portion (PV), Additional Amount to RAP and Adjustment Portion (PA)

A Regulatory Decision No. 270 of July 9, 2007, regulates Variable Deduction (PV) and Additional Amount to RAP. The Variable Portion is a discount on the RAP of transmission companies due to unavailability or operating inefficiency of the facilities that integrate the Basic Grid. The Additional Amount to RAP corresponds to the value to be added to the RAP of transmission companies as an incentive to improve service availability of transmission facilities. These are recognized as revenue from operation and maintenance services, and/or as a reduction of such revenue, in the period in which they occur.

A Regulatory Decision (REN) No. 512 of October 30, 2012 amended REN No. 270/07, including paragraph 3, article 3, which eliminates the additional amount to RAP for transmission activities covered by Law No. 12783/2013.

A The Adjustment Portion (PA) is the portion of revenue that arises from applying a contractual mechanism used in the periodic annual adjustments. Said portion of revenue is added to or subtracted from the RAP, so as to offset collection excess or deficit in the period preceding the adjustment.


Notes

Page: 53 of 75

24.4. Annual revenue adjustment

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

According to Ratifying Resolution No. 2098, the RAP and the amounts corresponding to the Company’s adjustment (Service Concession Arrangement No. 059/2001), net of PIS and COFINS (named Regulatory Revenue), which amounted to R$836,611(*) on July 1, 2015, changed to R$893,452(*) on July 1, 2016, representing an increase of R$56,841 equivalent to 6.8%. Of this increase 9.2% (R$76,106)(**) refers to the IPCA/IGPM adjustment; 6.5% (-R$54,220) to the change in the adjustment portion; and 4.1% (R$34,955) to additional RAP for new investments that became operational and investments expected to become operational over the cycle.

The Company’s Annual Regulatory Revenue, net of PIS and COFINS, is broken down as follows:

Service concession

arrangement Basic Grid Other Transmission Facilities (DIT)

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

059/2001 499,508 113,271 (24,873) 211,436 102,436 (8,326) 893,452

499,508 113,271 (24,873) 211,436 102,436 (8,326) 893,452

The consolidated Annual Regulatory Revenue that was R$963,348(*) on July 1, 2015, changed to R$1,035,328(*) on July 1, 2016, representing an increase of R$71,980 or 7.5%. Of this increase, 9.3% (R$89,339) refers to the IPCA /IGPM adjustment; 5.5% (-R$53,141) to the change in the adjustment portion; and 3.7% (R$35,782) to additional RAP for new investments that became operational and investments expected to become operational over the cycle.

(*) These amounts comprise revenue from authorized investments that will become operational over the next cycles.

(**) This amount comprises revenue from Existing Assets (R$60,187 thousand) and change in revenue from New Investments energized before annual adjustments (R$29,151 thousand).

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

Service

concession arrangement Basic Grid Other Transmission Facilities (DIT)

Existing assets

New Investments Bid

Adjustment portion

Existing assets

New investments Bid

Adjustment portion Total

059/2001 499,508 113,271 - (24,873) 211,436 102,436 - (8,326) 893,452 143/2001 - - 21,994 (1,610) - - - - 20,384 004/2007 - - 18,121 (1,260) - - - - 16,861 012/2008 - 1 8,568 (340) - 889 1,292 - 10,410 015/2008 - 13,720 16,265 (2,964) - 4,031 398 350 31,800 018/2008 - 50 4,219 (302) - 1,540 51 19 5,577 021/2011 - - 4,509 (192) - - 1,654 - 5,971 026/2009 - 4,860 27,112 (632) - - 6,166 - 37,506 020/2008 - 11,373 - (498) - 2,490 - 2 13,367

499,508 143,275 100,788 (32,671) 211,436 111,386 9,561 (7,955) 1,035,328


Notes

Page: 54 of 75

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

a) Company

Quarter ended

9/30/2016 9/30/2015

Costs Expenses Total Total

Personnel (60,178) (16,695) (76,873) (74,483) Services (31,240) (14,106) (45,346) (61,251) Depreciation - (2,140) (2,140) (1,910) Materials (27,299) (222) (27,521) (36,656) Leases and rent (1,873) (1,058) (2,931) (3,291) Contingencies - (1,210) (1,210) (157) Other (9,152) (2,214) (11,366) (8,785)

(129,742) (37,645) (167,387) (186,533)

Nine-month period ended

9/30/2016 9/30/2015


Personnel (168,995) (42,565) (211,560) (199,094) Services (74,458) (31,434) (105,892) (133,279) Depreciation - (6,109) (6,109) (5,804) Materials (57,955) (615) (58,570) (91,760) Leases and rent (6,716) (3,385) (10,101) (9,915) Contingencies - (8,767) (8,767) (35,562) Other (26,428) (7,660) (34,088) (26,280)

(334,552) (100,535) (435,087) (501,694)

b) Consolidated

Quarter ended

9/30/2016 9/30/2015


Personnel (62,304) (17,226) (79,530) (77,885) Services (33,518) (14,621) (48,139) (64,473) Depreciation - (2,328) (2,328) (2,096) Materials (27,011) (225) (27,236) (46,354) Leases and rent (2,048) (1,097) (3,145) (3,588) Contingencies - (1,093) (1,093) (169) Other (9,704) (2,445) (12,149) (10,003)

(134,585) (39,035) (173,620) (204,568)

Nine-month period ended

9/30/2016 9/30/2015


Personnel (175,322) (43,981) (219,303) (208,828) Services (80,814) (32,589) (113,403) (149,428) Depreciation - (6,672) (6,672) (6,367) Materials (58,301) (622) (58,923) (108,337) Leases and rent (7,295) (3,499) (10,794) (10,663) Contingencies - (8,554) (8,554) (35,531) Other (28,786) (8,585) (37,371) (28,558)

(350,518) (104,502) (455,020) (547,712)


Notes

Page: 55 of 75

Out of the aforementioned costs, the Company’s costs of infrastructure implementation totaled R$94,133 at September 30, 2016 and R$171,286 at September 30, 2015. The consolidated costs of infrastructure implementation totaled R$101,146 at September 30, 2016 and R$198,974 at September 30, 2015. The calculation of the related revenue from infrastructure implementation, shown in Note 24.1, includes PIS, COFINS and other charges to the investment cost.

26. Financial income (expenses)

Company

Nine-month Quarter ended period ended

9/30/2016 9/30/2015 9/30/2016 9/30/2015

Revenues Short-term investment yield 10,678 12,193 31,357 34,418

Interest income 33 4,124 894 19,655 Monetary gains 3,894 5,354 9,947 37,216 Other 92 3,725 1,840 4,330 14,697 25,396 44,038 95,619 Expenses Interest on loans (6,829) (5,425) (20,478) (18,278) Interest expense (3,194) (3,683) (9,474) (9,800) Charges on debentures (22,533) (21,774) (64,199) (63,834) Monetary gains (9,300) (13,608) (31,514) (21,653) Other (802) (1,594) (2,588) (2,369) (42,658) (46,084) (128,253) (115,934) (27,961) (20,688) (84,215) (20,315)

Consolidated

Nine-month Quarter ended period ended

9/30/2016 9/30/2015 9/30/2016 9/30/2015

Revenues

Short-term investment yield 17,562 17,756 48,970 47,535 Interest income 35 4,136 925 19,685 Monetary gains 3,897 5,364 10,224 37,223 Other 104 3,732 1,882 4,503 21,598 30,988 62,001 108,946 Expenses Interest on loans (10,997) (9,717) (33,260) (31,658) Interest expense (3,224) (3,683) (9,509) (9,807) Charges on debentures (22,533) (21,774) (64,199) (63,834) Monetary gains (9,349) (13,639) (31,655) (21,730) Other (869) (1,649) (2,807) (2,554) (46,972) (50,462) (141,430) (129,583) (25,374) (19,474) (79,429) (20,637)

27. Income and social contribution taxes

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


Notes

Page: 56 of 75

a) Reconciliation of effective rate

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

Company

Nine-month period Quarter ended ended

9/30/2016 9/30/2015 9/30/2016 9/30/2015

Income before income and social contribution taxes 6,720,128 317,800 6,975,397 516,827 Current statutory rates 34% 34% 34% 34% Expected income and social contribution taxes (2,284,844) (108,052) (2,371,635) (175,721) Income and social contribution taxes on permanent

differences Loss realized (153) (778) (317) (2,442) Reversal of provision for

Maintenance of equity Equity - Provision for Maintenance of Equity Integrity (PMIPL)(*) 4 4,931 16 14,794

Equity pickup 98,074 59,600 128,383 80,311 Other (1,423) (1,524) (1,408) (785)

Effective income and social contribution taxes (2,188,342) (45,823) (2,244,961) (83,843) Income and social contribution taxes

Current (9,721) (27,306) (54,274) (65,163) Deferred (2,178,621) (18,517) (2,190,687) (18,680)

(2,188,342) (45,823) (2,244,961) (83,843) Effective rate 32.6% 14.4% 32.2% 16.2%

Consolidated

Nine-month period Quarter ended ended

9/30/2016 9/30/2015 9/30/2016 9/30/2015

Income before income and social contribution taxes 6,729,053 325,692 6,995,255 532,114

Current statutory rates 34% 34% 34% 34%

Expected income and social contribution taxes (2,287,878) (110,735) (2,378,387) (180,919)

Income and social taxes on permanent differences - -

Losses realized (153) (778) (317) (2,442) Reversal of Provision for Maintenance of Equity Integrity - PMIPL (*) 4 4,931 16 14,794

Equity pickup 65,728 34,890 81,383 46,783 Effect of adoption of taxable profit computed as a percentage of gross revenue - subsidiaries 30,969 23,776 45,855 33,197

Other (1,423) (1,524) (1,407) (785)

Effective income and social contribution taxes (2,192,753) (49,440) (2,252,857) (89,372)

Income and social contribution taxes Current (11,744) (28,747) (59,741) (69,065) Deferred (2,181,009) (20,693) (2,193,116) (20,307)

(2,192,753) (49,440) (2,252,857) (89,372)

Effective rate 32.6% 15.2% 32.2% 16.8%

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

amortized through December 2015 in monthly installments, as permitted by ANEEL Resolution No. 1164. In order to prevent the amortization of goodwill from adversely affecting the flow of dividends to shareholders, a Provision for Maintenance of Equity Integrity (PMIPL) of the merging company and a Special Goodwill Reserve on Merger were recognized, as set forth in CVM Ruling No. 349 of March 6, 2001. The remaining balance as at September 30, 2016 is R$562 (R$586 at December 31, 2015).


Notes

Page: 57 of 75

b) Breakdown of deferred income and social contribution taxes


Assets / (Liabilities) 9/30/2016 12/31/2015 9/30/2016 12/31/2015

Accounts receivable - Law No. 12783 -

Existing Service (i) (2,147,428) - (2,147,428) - Service Concession Arrangement

(ICPC 01) (ii) (80,757) (35,342) (118,987) (71,143) First-time adoption of Law No.

12973/14 (iii) (23,227) (23,890) (23,227) (23,890) Provision - São Paulo Finance

Department - SEFAZ-SP (iv) 175,527 175,527 175,527 175,527 Provision for contingencies 55,368 64,369 55,368 64,369 Other temporary differences 13,639 3,145 13,639 3,145

Net (2,006,878) 183,809 (2,045,108) 148,008

Assets - 183,809 - 183,809

Liabilities (*) 2,006,878 - 2,045,108 35,801

(*) At December 31, 2015, the consolidated balance of liabilities refers to the balance of subsidiaries; for this reason, it is not on a net

basis.

(i) As described in Note 7 (d).

(ii) This refers to income and social contribution taxes on revenue from infrastructure implementation for provision of electric energy transmission service and revenue from concession assets (ICPC 01) recognized on an accrual basis, which are taxed proportionally to actual revenue receipt, as defined in articles 83 and 84 of Revenue Procedure No. 1515/14.

(iii) Reflects amounts subject to taxation of income and social contribution taxes for the first-time adoption of Law No. 12973/14.

(iv) As described in Note 8 (c).

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

28. Transactions with related parties

Significant balances and transactions with related parties are as follows:

9/30/2016 12/31/2015 9/30/2016 9/30/2015

Nature of Related Revenue/ Revenue/ transaction party Assets Liabilities Assets Liabilities (expense) (expense)

Short-term benefits (*) Management - - - - (3,693) (3,429)

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

1,121 29,170 - - - Sublease ISA Capital 27 - 23 - 279 259

IEMG 4 - 7 - 52 76 Pinheiros 4 - 18 - 68 155 Serra do Japi 10 - 13 - 59 115 Evrecy 2 - 4 - 29 36 IENNE 5 - 18 - 68 84 IESul 7 - 12 - 44 48

59 - 95 - 599 773 Future capital contribution IESul 3,041 - - - - - Rendering of services ISA Capital 15 - 15 - 135 105

IEMG 12 - 11 - 106 98 Pinheiros 108 - 100 - 1,072 885 Serra do Japi 86 - 80 - 1,125 230 Evrecy 72 - 67 - 612 559 Internexa 1 7 - 13 124 -

294 7 273 13 3,174 1,877


Notes

Page: 58 of 75

(*) These refer to management compensation. In the Company’s income statement, this balance amounts to R$3,693, and in the consolidated income statement this amounts to R$4,014 (R$3,711 at September 30, 2015).

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

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

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

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

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

On June 27, 2016, the Company and Cymi Holding S.A. entered into a private instrument for advance of funds in the amount of R$6,082 to jointly-controlled subsidiary IESul, proportionally to its interest held. The conversion of the advance into capital should be performed until 120 days from the date of transfer of funds from shareholders to IESul and subject to approval by the Board of Directors.

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

29. Financial instruments

a) Identification of significant financial instruments


9/30/2016 12/31/2015 9/30/2016 12/31/2015

Financial assets Fair value through profit or loss

Cash and cash equivalents 1,587 3,120 4,503 6,135 Short-term investments 347,994 230,855 570,381 440,054 Restricted cash - - 12,876 12,059

Loans and receivables Accounts receivable

Current 601,486 220,566 723,438 319,961 Noncurrent 9,444,300 2,569,403 10,462,117 3,526,968

Receivables - State Finance Department (SEFAZ)

Noncurrent 1,091,074 965,920 1,091,074 965,920 Receivables from subsidiaries 4,472 29,500 4,174 29,200 Pledges and restricted deposits 75,108 66,252 75,117 66,268

Financial liabilities Amortized cost

Loans and financing Current 32,535 32,530 71,275 71,070 Noncurrent 285,506 306,076 444,884 485,239

Debentures Current 205,168 180,782 205,168 180,782 Noncurrent 508,097 359,573 508,097 359,573

Trade accounts payable 31,696 31,824 34,385 34,950 Interest on equity and

dividends payable 2,457 2,156 2,457 2,156


Notes

Page: 59 of 75

Book values of asset and liability financial instruments, when compared with amounts that could be obtained in their trading in an active market or, when there is no active market, with adjusted net present value based on market interest rate in force, substantially approximate their corresponding market values. The Company classifies financial instruments under Level 1 and Level 2, as required by the CPC pronouncement in force:

Level 1 - Quoted prices (unadjusted) in active, liquid and visible markets for identical assets or liabilities that are readily available at the measurement date; Level 2 - Quoted prices (which may be adjusted or not) for similar assets or liabilities in active markets, and other unobservable inputs under Level 1, directly or indirectly, under the terms of the asset or liability; and Level 3 - Assets and liabilities whose prices do not exist, or whose prices or valuation techniques are supported by a small market or by a non-existing, unobservable or illiquid market. Under this level fair value estimate is highly subjective.

b) Financing

The rates of book value of loans and financing and debentures are linked to the variation in the TJLP, CDI and IPCA and book value approximates market value.

Debt-to-equity ratio

Debt-to-equity ratio at the end of the year is as follows: Company Consolidated

9/30/2016 12/31/2015 9/30/2016 12/31/2015

Loans and financing Current 32,535 32,530 71,275 71,070 Noncurrent 285,506 306,076 444,884 485,239

Debentures Current 205,168 180,782 205,168 180,782 Noncurrent 508,097 359,573 508,097 359,573

Total debt 1,031,306 878,961 1,229,424 1,096,664 Cash and cash equivalents and short-term

investments 349,581 233,975 574,884 446,189

Net debt 681,725 644,986 654,540 650,475 Equity 10,054,014 5,336,205 10,211,531 5,515,001 Net debt-to-equity ratio 6.8% 12.1% 6.4% 11.8%

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

c) Risk management

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

i) Credit risk - The Company and its subsidiaries have agreements containing a bank guarantee

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


Notes

Page: 60 of 75

ii) Price risk - Under the terms of the service concession arrangements, the revenues of CTEEP and its subsidiaries are adjusted annually by ANEEL, by reference to the IPCA and IGP-M variation, while part of the revenues is subject to periodic tariff reviews (Note 24.2).

iii) Interest rate risk - Financing agreements are monetarily restated by reference to the TJLP,

IPCA and CDI variation (Notes 14 and 15).

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

v) Guarantee risk - Significant guarantee risks are:

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

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

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

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

The Company is compensated for the transmission system availability, and energy rationing, if any, will have no impact revenue or receipts. The Company manages liquidity risk by maintaining bank credit facilities and funding facilities to raise loans as it deems appropriate, through ongoing monitoring of projected and actual cash flows, and matching of the maturity profiles of financial assets and liabilities.

d) Sensitivity analysis

Pursuant to CVM Ruling No. 475 of December 17, 2008, the Company conducts interest rate and currency risk sensitivity analysis. Company management considers its exposure to the other risks previously described insignificant. In order to define a probable scenario for the sensitivity analysis of the interest rate risk and price index, the Company used the same assumptions established for its long-term finance and economic planning. These assumptions are based, among other aspects, on the Brazilian macroeconomic scenario and the opinion of market experts. As such, in order to assess the effects of the Company’s cash flow variation, the sensitivity analysis presented below for items pegged to variable indexes considers:

Probable scenario - the interest rates at December 31, 2016 (fixed DI interest rate curve determined at September 30, 2016), reported in the interest rate risk tables; and

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


Notes

Page: 61 of 75

Interest rate risk - effects on cash flow - Company

Risk of rate increase

Risk of rate decrease

Balance at Base Transaction Risk 9/30/2016 scenario Scenario I Scenario II Scenario I Scenario II

Financial assets Short-term 101.55%

investments CDI 348,917 11,236 13,887 16,481 8,525 5,751 Financial liabilities

IPCA+8.10 Debentures - 2nd series % 47,472 1,984 2,237 2,485 1,728 1,467 Debentures - single 116.0% of CDI

series (ii) p.a. 519,496 29,574 34,107 38,531 24,925 20,154 Debentures - single IPCA+6.04

series (iii) % 146,297 5,383 6,158 6,921 4,597 3,798 FINEM BNDES (i), TJLP+1.80%

(ii) and (iii) to 2.60% 235,423 5,364 6,407 7,437 4,307 3,236 Net effect of

variation (31,069) (35,022) (38,893) (27,032) (22,904)

Reference for financial assets and liabilities

100% CDI (December 13.31% 16.64% 19.97% 2016) p.a. p.a. p.a. 9.98% p.a. 6.66% p.a.

Interest rate risk - effects on cash flow - Consolidated

Risk of rate increase

Risk of rate decrease

Balance at Base Scenario Scenario Transaction Risk 9/30/2016 scenario Scenario I II Scenario I II

Financial assets Short-term 93.5% to investments 103.0% of CDI 495,988 15,952 19,716 23,399 12,103 8,165 Financial liabilities Debentures - 2nd series IPCA+8.10% 47,472 1,984 2,237 2,485 1,728 1,467 Debentures - single 116.0% of CDI

series (ii) p.a. 519,496 29,574 34,107 38,531 24,925 20,154 Debentures - single

series (iii) IPCA+6.04% 146,297 5,383 6,158 6,921 4,597 3,798

FINEM BNDES (i), TJLP+1.80%

to (ii) and (iii) 2.30% 235,423 5,364 6,407 7,437 4,307 3,236

BNDES TJLP + 1.55% (subsidiaries) to 2.62% p.a. 142,647 3,745 4,379 5,005 3,102 2,451 Net effect of

variation (30,098) (33,572) (36,980) (26,556) (22,941)

Reference for financial assets and liabilities

100% of CDI (December 16.64% 19.97% 9.98% 2016) 13.31% p.a. p.a. p.a. p.a. 6.66% p.a.


Notes

Page: 62 of 75

30. Commitments - operating lease agreements

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

9/30/2016 12/31/2015

Within 1 year 6,896 6,762 From 1 to 5 years 2,333 4,563

9,229 11,325

31. Insurance coverage

Breakdown of insurance lines and effective period is as follows: Company

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

Property (a) 9/1/16 to 12/1/16 2,448,262 842 General civil liability (b) 9/1/16 to 9/1/17 22,231 125 National transport (c) 9/30/16 to 9/30/17 348,847 32 Personal accidents - Group (d) 5/1/16 to 5/1/17 74,000 4 Automobile (e) 3/2/16 to 3/2/17 Market value 245 Court-ordered guarantee (f) 9/30/16 to 6/20/21 268,867 2,886

4,134

Consolidated

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

Property (a) 10/5/15 to 1/23/17 2,865,824 1,151 General civil liability (b) 9/1/16 to 9/1/17 25,000 140

National transport (c) 9/30/16 to 9/30/17 348,847 32 Personal accidents - Group (d) 5/1/16 to 5/1/17 74,000 4 Automobile (e) 3/2/16 to 3/2/17 Market value 245 Court-ordered guarantee (f) 9/30/16 to 6/20/21 268,867 2,886

4,458

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

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

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

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

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


Notes

Page: 63 of 75

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

The supplementary retirement plan governed by State Law No. 4819/58, which addressed the creation of the State Social Assistance Fund, is applicable to employees of government agencies, of corporations in which the State held the majority of shares, and of industrial services owned and managed by the state, hired until May 13, 1974, and provided for supplementary retirement and pension benefits, additional leave entitlement and family allowance. Funds required to cover liabilities assumed in this plan are the full responsibility of the applicable São Paulo State Government authorities, implemented under an agreement between SEFAZ-SP and CTEEP on December 10, 1999. This procedure was carried out regularly until December 2003 by Funcesp, with funds from SEFAZ-SP, transferred by CESP and later by CTEEP. From January 2004, SEFAZ-SP started to directly process those payments, without the intervention of CTEEP and Funcesp, at amounts historically lower than those paid until December 2013.

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

This event caused the filing of legal proceedings by retirees, with emphasis on the Civil Class Action whose decision was handed down by the 2nd Public Finance Court in June 2005, whereby the request was deemed unfounded, allowing the payroll processing and retirement and pension payouts according to Law No. 4819/58, by SEFAZ-SP. AAFC - Associação dos Aposentados da FUNCESP, which represents retirees and pensioners of Funcesp, filed an appeal and prior to its judgment protested against the jurisdiction of the Regular Legal Court, which was accepted by the São Paulo State Court of Justice (TJ/SP). Then, in August 2008, the Higher Court of Justice (STJ) recognized the jurisdiction of the Regular Legal Court, and AAFC filed another appeal taking the matter to the STF, which upheld the jurisdiction of the Regular Legal Court. The various appeals filed by AAFC were denied by the STF, and the last decision was handed down on October 7, 2015, becoming final on November 24, 2015, maintaining the jurisdiction of the Regular Legal Court. This proceeding was received by the 2nd Public Finance Court/SP on May 24, 2016 and taken to the Labor Prosecution Office so that it expresses its understanding, for subsequent submission to São Paulo State Court of Justice (TJ/SP) for judgement of the appeal filed by AAFC against the decision that deemed such proceeding unfounded. On June 27, 2016, a stay of decision was assigned to the Appeal filed by AAFC and after the parties expressed their understanding, on July 22, 2016, a new decision was handed down clarifying that the labor preliminary injunction should be upheld up to the appeal judgement. AAF’s Appeal is awaiting judgement since August 29, 2016.

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

the 49th Labor Court)

In contrast to the decision previously handed down, a decision issued by the 49th Labor Court of São Paulo State was communicated to CTEEP on July 11, 2005 granting interim relief for Funcesp to process again the payments of benefits arising from State Law No. 4819/58, according to respective rules, as performed until December 2003, with CTEEP figuring as an intermediary between SEFAZ-SP and Funcesp. In order to fulfill the aforementioned court decisions, CTEEP requests the necessary funds to SEFAZ-SP, on a monthly basis, to transfer them to Funcesp, which must process the respective payments to the beneficiaries. This class action resulted in an unfavorable decision against SEFAZ-SP, CESP, Funcesp and CTEEP.


Notes

Page: 64 of 75

Due to the existence of proceedings at Courts of different jurisdictions, the Conflict of Jurisdiction was raised before the STF to define the jurisdiction to judge the action. On March 12, 2015, the STF handed down a decision recognizing the jurisdiction of the Regular Legal Court and voiding all decisions of the Labor Court. AAFC filed an appeal against the decision, which was denied on October 14, 2015, and the jurisdiction of the Regular Legal Court was upheld. An unappealable decision was handed down on November 20, 2015. On March 21, 2016, the Supreme Labor Court (TST) ordered the case to be remanded to the 49th São Paulo Labor Court, which transmitted the records to the Regular Legal Court. The Class Action was received by the 2nd Public Finance Court/SP on May 20, 2016, and on May 30, 2016 a decision was handed down revoking the preliminary injunction that required CTEEP to pay the monthly installments, extinguishing the requests inherent to the payroll processing, and deeming unfounded the request for refund of any differences due to retirees and pensioners according to Law No. 4819/58. SEFAZ-SP resumed payroll processing from June 2016, however, after lodging of appeal, AAFC requested to the TJ/SP assignment of stay of decision to the appeal, which was granted on June 27, 2016. After the parties expressed their understanding, on July 22, 2016, a new decision was handed down clarifying that the labor preliminary injunction should be upheld up to the appeal judgement. CTEEP, Funcesp and CESP expressed their understanding on AAFC’s appeal, only pending SEFAZ-SP express its understanding so that the proceeding may be submitted to TJ/SP for judgment of the appeal.

c) Conflict of jurisdiction

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

On May 4, 2015, by means of a Notice, SEFAZ-SP assumed the responsibility for processing and payment of the retirees’ payroll. AAFC filed Precautionary Action No. 3882 before the STF, seeking that the decision handed down by the Labor Court would prevail until the competent Court had analyzed the preliminary injunction handed down by the Labor Court. The STF granted that application and by means of a Notice delivered on June 8, 2015 SEFAZ-SP ceased to process the payroll, which returned to the previous status (also through a SEFAZ-SP Notice). CTEEP, SEFAZ-SP and Funcesp filed an appeal. On October 14, 2015, the STF judged those appeals, upholding the decision of Conflict of Jurisdiction that recognized the jurisdiction of Regular Legal Court to process and judge the class action that is currently being examined at the 49th Labor Court of São Paulo State, as well as the precautionary action filed by AAFC, which maintains the preliminary injunction of the Labor Court until the Competent Court has considered the request. The Conflict of Jurisdiction decision became final on November 20, 2015.


Notes

Page: 65 of 75

d) Collection lawsuit

Since September 2005, SEFAZ-SP has been transferring to CTEEP an amount lower than that required for the faithful compliance with such decision of the 49th Labor Court mentioned in item “(b)” above. As a consequence of this decision, CTEEP transferred to Funcesp, from January 2005 to September 2016, R$3,786,998 for the payment of benefits under State Law No. 4819/58, having received from SEFAZ-SP R$2,428,002 for such purpose. The difference between the amounts transferred to Funcesp and refunded by SEFAZ-SP, totaling R$1,358,996 (Note 8 (a)), has been required by CTEEP for refund by SEFAZ-SP. In addition, there are amounts relating to labor claims settled by the Company which are the responsibility of State Government, amounting to R$248,333 (Note 8 (b)), thus totaling R$1,607,329. In December 2010, CTEEP filed a collection lawsuit against SEFAZ-SP to recover the amounts until then not received in regard to this matter. In May 2013, after the decision handed down that dismissed the collection lawsuit without analyzing the merits of the case, CTEEP filed an appeal, however, said decision was upheld by the Court (December 2014). CTEEP filed a new appeal and SEFAZ-SP and Funcesp expressed their understanding. On August 31, 2015, the TJ/SP accepted the appeal of CTEEP and ordered SEFAZ-SP to transfer the supplementary retirement and pension amounts under the terms of the adjustments executed with CTEEP and governing laws, except for amounts disallowed. With a view to including the amounts disallowed in such decision, CTEEP filed another appeal for clarification, which was accepted by the court on February 1, 2016, and upheld the decision of August 31, 2015, determining the verification, during the administrative procedure to adjust discrepancies in records, of the amounts not passed on by SEFAZ-SP. On March 7, 2016, SEFAZ-SP filed an appeal that was dismissed in the judgement occurred on July 4, 2016, upholding the decision unfavorable to SEFAZ-SP, which filed a new appeal.

e) Lawsuit from retirees’ association

In the second quarter of 2012, Associação dos Aposentados da Funcesp (AAFC) filed lawsuit No. 0022576-08.2012.8.26.0053 against SEFAZ-SP, seeking reimbursement of the supplementary retirement plan governed by Law No. 4819/58 so that said plan may honor retirement and pension payouts. This lawsuit was dismissed without judgment on the merits and AAFC filed an Appeal which was not accepted on July 26, 2016 by the São Paulo State Court of Justice, resulting in another appeal lodged by AAFC. The Company is not part of this lawsuit, and only follows-up on the process since it can benefit from the decisions.


Notes

Page: 66 of 75

f) Writ of mandamus - Campinas City Union

On April 19, 2013, by means of a Notice, SEFAZ-SP recognized the effective transfers to CTEEP of the amounts previously disallowed, relating to certain accounts that partially comprise the amount not transferred and required for due compliance with the decision awarded by the 49th Labor Court. SEFAZ-SP recognition was due to the unappealable decision handed down in the records of the Collective Petition for Writ of Mandamus filed by Sindicato dos Trabalhadores da Indústria de Energia Elétrica de Campinas, which determined that SEFAZ-SP shall maintain the payments of supplementary retirement and pension of retirees without eliminating such amounts. Corroborating the position mentioned above, the Union filed an application to extend the decision to retirees not included in the initial list, which was granted by the Labor Court. SEFAZ-SP filed a number of legal measures to reverse such decision, unsuccessfully to date. The Company is not part of this lawsuit, and only follows-up on the process since it can benefit from the decisions. CTEEP’s view CTEEP remains committed to voiding the decision of the TJ/SP Reporting Justice who through a preliminary injunction upheld the payroll processing as determined by the Labor Court until the judgement on merits of the appeal, in order to allow the return of the procedure of payment direct from payroll of benefits of State Law No. 4819/58 by SEFAZ-SP. CTEEP also confirms the understanding of its legal department and external legal advisors that the costs arising from State Law No. 4819/58 and its regulation are the full responsibility of SEFAZ-SP and continues adopting additional measures to protect its interests. In view of the new events occurred in 2013, especially those related to the legal progress of the lawsuit relating to the collection of amounts due by SEFAZ-SP as mentioned above, and considering the legal progress of other proceedings and lawsuits also aforementioned, CTEEP management reviewed its position, recognizing in 2013 a provision for losses on realization of part of receivables, whose realization term is expected to be extended, and it is yet not sure that these amounts are the sole responsibility of SEFAZ-SP. Management has been monitoring new events relating to the legal and business aspects underlying this matter, as well as any impact on the Company’s financial information.

33. Subsequent events

a) Accounts receivable (concession-related asset)

On October 14, 2016, according to the material new release disclosed to the market, ANEEL Note No. 336/2016 was issued, which presents a proposal for regulation concerning the calculation of Annual Revenue Allowed (RAP) of electric power transmission companies, under the terms of Law No. 12783/2013 in compliance with MME Administrative Ruling No. 120/2016. Such Note was submitted to Public Hearing from October 14, 2016 (Note 7).


Other Information that the Company Considers to be Material

Page: 67 of 75

1. Company’s shareholding structure

In compliance with Corporate Governance practices, the Company’s shareholding structure is shown below, as well as the direct or indirect holders of more than 5% of each type and class of shares of the Company’s capital, to the level of individual shareholders: Company’s main shareholders: 9/30/2016

Common shares Preferred shares Total

Shareholders Number % Number % Number %

Controlling shareholder ISA Capital do Brasil S.A. 57,714,208 89.50 3,173,332 3.16 60,887,540 36.96

Management Executive officers - - - - - -

Board of Directors - - - - - - Supervisory Board - - 2,000 - 2,000 -

- - 2,000 - 2,000 - Total Control Structure 57,714,208 89.50 3,175,332 3.16 60,889,540 36.96

Shares outstanding Federal Government

Centrais Elétricas Brasileiras S.

A - ELETROBRÁS (i) 6,289,661 9.75 52,005,758 51.88 58,295,419 35.39 Vinci Equities Gestora de

Recursos Ltda. - - 5,167,962 5.15 5,167,962 3.13 Other (ii) 480,564 0.75 39,887,341 39.81 40,367,905 24.52

Total shares outstanding 6,770,225 10.50 97,061,061 96.84 103,831,286 63.04

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

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

9/30/2015



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

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

1 - 1,800 - 1,801 -

Total Control Structure 57,714,209 89.50 2,259,200 2.33 59,973,409 37.19

Shares outstanding São Paulo State Government

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

Federal Government Centrais Elétricas Brasileiras S. A - ELETROBRÁS (ii) 6,289,661 9.75 50,753,466 52.44 57,043,127 35.37 Vinci Equities Gestora de Recursos Ltda. - - 6,458,921 6.69 6,458,921 4.01 Other (iii) 480,563 0.75 30,185,704 31.19 30,666,267 19.02

Total shares outstanding 6,770,224 10.50 94,515,822 97.67 101,286,046 62.81

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

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

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

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



Page: 68 of 75

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

9/30/2016



ISA Capital do Brasil S. A. ISA Interconéxion Elétrica S.A. E.S.P. (a) 840,625,000 100.00 - - 840,625,000 70.44 Banco HSBC - - 176,303,299 50.00 176,303,299 14.78 Banco Votorantim - - 176,303,299 50.00 176,303,299 14.78 Other shareholders - - - - - -

840,625,000 100.00 352,606,598 100.00 1,193,231,598 100.00

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

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

(b) Ministério de Hacienda Y Crédito Público

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

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

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

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

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

(d) Empresa Colombiana de de Petróleos - ECOPETROL

Ministério da Hacienda Y Crédito Público 36,384,788,817 88.49 - - 36,384,788,817 88.49 Other sharesholders 4,731,905,873 11.51 - - 4,731,905,873 11.51

41,116,694,690 100.00 - - 41,116,694,690 100.00

(e) Empresa de Energia de Bogotá - EEB

Bogotá, Distrito Capital 7,003,161,430 76.31 - - 7,003,161,430 76.31 ECOPETROL 278,225,586 3.00 - - 278,225,586 3.00

Other shareholders 1,899,790,001 20.69 - - 1,899,790,001 20.69

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



Page: 69 of 75

9/30/2015



ISA Capital do Brasil S. A.

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

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

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

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

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

(b) Ministério de Hacienda Y Crédito Público

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

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

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

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

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

(d) Empresa Colombiana de Petróleos - ECOPETROL

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

41,116,694,690 100.00 - - 41,116,694,690 100.00


Reports and Representations / Special Review Report - Qualified

Page: 70 of 75

Independent Auditor’s Review Qualified Report on Quarterly Information

The Shareholders, Board of Directors and Officers

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



Page: 71 of 75

Over the quarter ended June 30, 2016, the Company did not record any restatement on its Financial Asset. This event was subject to qualification in our review report on quarterly information for that quarter. For the quarter ended September 30, 2016, on account of clarifications presented by ANEEL through its Note No. 336/2016, the Company calculated and recognized in books the restatement of its Financial Asset in the amount of R$7,111,714 thousand, matched against “Gross Operating Revenue”, resulting in a positive impact on net income for the three- and nine-month periods ended September 30, 2016 of R$4,168,535, net of tax effects from PIS/COFINS (amounting to R$795,751 thousand) and income and social contribution taxes (amounting to R$2,147,428 thousand). Since all impacts from Financial Asset restatement were accounted for by the Company over the third quarter of 2016, instead of being recognized in the appropriate accounting period (i.e. in the second quarter of 2016), the net income for the quarter ended September 30, 2016 is overstated by approximately R$4,000,000 thousand (and consequently net income for the quarter ended June 30, 2016 is understated by this same amount). Qualified conclusion Based on our review, except for the fact that the Financial Asset was restated over the third quarter of 2016, i.e. in a period other than the appropriate accounting period, as described in our “Basis for qualified conclusion” paragraph, nothing has come to our attention that causes us to believe that the interim financial information included in the quarterly information referred to above was not prepared, in all material respects, in accordance with CPC 21 (R1) and IAS 34 applicable to preparation of Quarterly Information (ITR), and presented in accordance with the rules issued by the Brazilian Securities and Exchange Commission (CVM). Emphasis of matter Law No. 4819/58 As described in Notes 8 and 32, the Company records a net balance of accounts receivable from the São Paulo State totaling R$1,091,074 thousand relating to the impacts from Law No. 4819/1958, which offered the employees of that subsidiary, when controlled by the São Paulo State, the same benefits granted to the other civil servants. The Company’s management has been monitoring new events relating to the legal and business aspects of this matter, as well as evaluating, on a continuous basis, any impacts on its financial information. Our opinion is not modified in respect of this matter. Other matters Statements of value added We have also reviewed the individual and consolidated Statements of Value Added (SVA) for the nine-month period ended September 30, 2016, prepared under the responsibility of Company management, the presentation of which in the interim financial information is required by the rules issued by the Brazilian Securities and Exchange Commission (CVM) applicable to preparation of Quarterly Information (ITR), and as supplementary information under IFRS, whereby no SVA presentation is required. These statements have been submitted to the same review procedures previously described and, except for the possible effects of the matter described in our “Basis for qualified conclusion” paragraph, based on our review, nothing has come to our attention that causes us to believe that they were not prepared, in all material respects, in accordance with the overall interim financial information.



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Audit of prior-year corresponding figures The individual and consolidated figures relating to the balance sheet as at December 31, 2015 and interim financial information relating to the statements of income, of comprehensive income, of changes in equity, of cash flows and of value added (supplementary information) for the three-month period ended September 30, 2015, presented for comparison purposes, were previously audited and reviewed by other independent auditors who issued audit and review reports thereon dated February 26, 2016 and October 26, 2015, respectively, containing the same foregoing emphasis of matter. São Paulo, October 27, 2016. ERNST & YOUNG Auditores Independentes S.S. CRC-2SP015199/O-6 Marcos Antonio Quintanilha Accountant CRC-1SP132776/O-3


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

Page: 73 of 75

Supervisory Board’s Opinion The Supervisory Board of CTEEP - Companhia de Transmissão de Energia Elétrica Paulista, in the exercise of its legal and statutory responsibilities, and in compliance with the provisions of Law No. 6404/76, item vi of article 163, became aware of the Company’s Financial Statements for the quarter ended September 30, 2016 and of the Independent Auditor’s Review Qualified Report on Quarterly Information, issued by Ernst & Young Auditores Independentes S.S., prepared under the same basis of that for the quarter ended June 30, 2016, and expressed their agreement as to disclosure of both documents. São Paulo, October 27, 2016. Manuel Domingues de Jesus e Pinho Antonio Luiz de Campos Gurgel Flavio Cesar Maia Luz Rosangela da Silva Egídio Schoenberger


Reports and Representations / Officers’ Representation on Special Review Report – Qualified

Page: 74 of 75

Officers’ Representation on the Quarterly Information The Company’s Officers hereby state that they have reviewed, discussed and agreed with the information contained in the Quarterly Information Form for the quarter ended September 30, 2016, and agreed with the conclusion expressed in the Independent Auditor’s Review Report issued by Ernst & Young. Further, they state that all the significant information relating to the quarterly information, and only such information, is being evidenced and refers to the information used under their management. Accordingly, the Officers approve the issue of the Quarterly Information Form for the quarter ended September 30, 2016. São Paulo, October 27, 2016. Reynaldo Passanezi Filho CEO Rinaldo Pecchio Junior Chief Financial and Investor Relations Officer Celso Sebastião Cerchiari Chief Technical Officer Weberson Eduardo Guioto Abreu Chief Project Officer Carlos Ribeiro Chief Institutional Relations Officer


Reports and Representations / Officers’ Representation on Special Review Report - Qualified

Page: 75 of 75

Officers’ Representation on Independent Auditor’s Special Review Report The Company’s Officers hereby state that they have reviewed, discussed and become aware of the Independent Auditor’s Special Review Report. São Paulo, October 27, 2016. Reynaldo Passanezi FilhoCEO Rinaldo Pecchio Junior Chief Financial and Investor Relations Officer Celso Sebastião Cerchiari Chief Technical Officer Weberson Eduardo Guioto Abreu Chief Project Officer Carlos Ribeiro Chief Institutional Relations Officer

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Quarterly Information (ITR) CTEEP-CIA Transm Energia …static.cteep.mediagroup.com.br/Arquivos/Download/1271-RDI303-2016... · Quarterly Information (ITR) CTEEP-CIA Transm Energia