20-F

As filed with the Securities and Exchange Commission on June 30, 2008 

SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 20-F

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2007
Commission file number: 001-14668

COMPANHIA PARANAENSE DE ENERGIA – COPEL(Exact Name of Registrant as Specified in Its Charter)

Energy Company of Paraná	The Federative Republic of Brazil
(Translation of Registrant’s Name into English)	(Jurisdiction of Incorporation or Organization)

Rua Coronel Dulcídio, 800
80420-170 Curitiba, Paraná, Brazil
(Address of Principal Executive Offices)

Paulo Roberto Trompczynski
+55 41 3222 2027 - ri@copel.com
Rua Coronel Dulcídio, 800, 3th floor - 80420-170 Curitiba, Paraná, Brazil
(Name, telephone, e-email and/or facsimile number and address of company contact person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange On Which Registered
Class B Shares, without par value*	New York Stock Exchange
American Depositary Shares (as evidenced by American Depositary	New York Stock Exchange
Receipts), each representing 1 Class B Share

___________________

*      Not for trading, but only in connection with the listing of American Depositary Shares on the New York Stock Exchange.

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

     Indicate the number of outstanding shares of each of the Issuer’s classes of capital or common stock as of December 31, 2007:

145,031,080 Common Shares, without par value
398,342 Class A Preferred Shares, without par value
128,225,953 Class B Preferred Shares, without par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes x No o

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes o Nox

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer x Accelerated filer o Non - accelerated filer o

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP o IFRS o Other x

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow

Item 17 o .Item 18 x

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o Nox

Table of Contents

	Page
Presentation of Information	1
Forward-Looking Statements	2
Item 1. Identity of Directors, Senior Management and Advisers	3
Item 2. Offer Statistics and Expected Timetable	3
Item 3. Key Information	3
Exchange Rates	6
Risk Factors	7
Item 4. Information on the Company	16
The Company	16
The Brazilian Power Industry	35
Item 4A. Unresolved Staff Comments	50
Item 5. Operating and Financial Review and Prospects	50
Item 6. Directors, Senior Management and Employees	66
Item 7. Major Shareholders and Related Party Transactions	72
Related Party Transactions	73
Item 8. Financial Information.	74
Legal Proceedings	74
Dividend Payments	76
Item 9. The Offer and Listing	79
Item 10.   Additional Information	82
Memorandum and Articles of Association	82
Material Contracts	86
Exchange Controls	86
Taxation	87
Dividends and Paying Agents	93
Documents on Display	93
Item 11.   Quantitative and Qualitative Disclosures about Market Risk	93
Item 12.   Description of Securities Other than Equity Securities	94
Item 13.   Defaults, Dividend Arrearages and Delinquencies	94
Item 14.   Material Modifications to the Rights of Security Holders and Use of Proceeds	94
Item 15.   Controls and Procedures	94
Item 16A. Audit Committee Financial Expert	99
Item 16B. Code of Ethics	99
Item 16C. Principal Accountant Fees and Services	99
Item 16D. Exemption from the Listing Standards for Audit Committees	100
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers	100
Item 17.   Financial Statements	100
Item 18.   Financial Statements	100
Item 19.   Exhibits	101
Technical Glossary	102
Signatures	104

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PRESENTATION OF INFORMATION

     In this Annual Report, we refer to Companhia Paranaense de Energia – Copel, and, unless the context otherwise requires, its consolidated subsidiaries as “Copel,” the “Company,” “we” or “us”.

     References to (1) the “real,” “reais” or “R$” are to Brazilian reais (plural) and the Brazilian real (singular) and (2) “U.S. dollars,” “dollars” or “U.S.$” are to United States dollars.

     Our audited consolidated financial statements as of December 31, 2007 and 2006 and for each of the three years in the period ended December 31, 2007 included in this Annual Report (the “Consolidated Financial Statements”) have been prepared in accordance with the accounting practices adopted in Brazil (“Brazilian GAAP”), which are based on:

• Brazilian Law No. 6,404/76, as amended, which we refer to collectively as the Brazilian Corporation Law (“Brazilian Corporation Law”);
• the rules and regulations of the Brazilian Securities Commission, Comissão de Valores Mobiliários (“CVM”);
• the accounting manual of the Brazilian regulatory agency for the electric sector, Agência Nacional de Energia Elétrica — ANEEL (“ANEEL”); and
• the accounting standards issued by the Brazilian Institute of Independent Auditors (Instituto dos Auditores Independentes do Brasil).

     Brazilian GAAP differs in certain material respects from accounting principles generally accepted in the United States (“U.S. GAAP”). For more information about the differences between Brazilian GAAP and U.S. GAAP, and a reconciliation of our net income (loss) and shareholders’ equity from Brazilian GAAP to U.S. GAAP, see Note 35 to our Consolidated Financial Statements.

     Financial information in this Annual Report is presented in reais. On June 2, 2008, the selling exchange rate for reais was R$1.6320 per U.S.$1.00.

     References in this Annual Report to the “Common Shares,” “Class A Shares” and “Class B Shares” are to our common shares, class A preferred shares and class B preferred shares, respectively. References to “American Depositary Shares” or “ADSs” are to American Depositary Shares, each representing 1 Class B Shares. The ADSs are evidenced by American Depositary Receipts (“ADRs”).

     Certain terms are defined the first time they are used in this Annual Report. As used herein, all references to “GW” and “GWh” are to gigawatts and gigawatt hours, respectively, references to “kW” and “kWh” are to kilowatts and kilowatt hours, respectively, references to “MW” and “MWh” are to megawatts and megawatt hours, respectively, and references to “kV” are to kilovolts. These and other technical terms are defined in the “Technical Glossary” that begins on page 102.

FORWARD-LOOKING STATEMENTS

     This Annual Report contains forward-looking statements. We may also make written or oral forward-looking statements in our annual report to shareholders, in our proxy statements, in our offering circulars and prospectuses, in press releases and other written materials and in oral statements made by our officers, directors or employees to third parties. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. These statements are based on current plans, estimates and projections, and therefore you should not place undue reliance on them. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update publicly any of them in light of new information or future events.

     Forward-looking statements involve inherent risks and uncertainties. We caution you that a number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. Such factors include, but are not limited to:

• Brazilian political and economic conditions;
• economic conditions in the State of Paraná;
• developments in other emerging market countries;
• our ability to obtain financing;
• lawsuits;
• technical and operational difficulties related to the provision of electricity services;
• changes in, or failure to comply with, governmental regulations;
• competition;
• electricity shortages; and
• other factors discussed below under “Item 3. Key Information—Risk Factors.”

     All forward-looking statements are expressly qualified in their entirety by this cautionary statement, and you should not place reliance on any forward-looking statement contained in this Annual Report.

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Item 1. Identity of Directors, Senior Management and Advisers

     Not Applicable.

Item 2. Offer Statistics and Expected Timetable

     Not Applicable.

Item 3. Key Information

SELECTED FINANCIAL DATA

     You should read the selected financial information presented below in conjunction with the Consolidated Financial Statements and the notes thereto.

     The selected financial data as of December 31, 2007 and 2006 and for the years ended December 31, 2007, 2006 and 2005 have been derived from our Consolidated Financial Statements. The selected financial data as of December 31, 2005, 2004 and 2003 and for the years ended December 31, 2004 and 2003 have been derived from our audited financial statements that are not included in this Annual Report.

     As stated above, our Consolidated Financial Statements are prepared in accordance with Brazilian GAAP, which differs in certain material respects from U.S. GAAP. See Note 35 to our Consolidated Financial Statements for a summary of the differences between Brazilian GAAP and U.S. GAAP and a reconciliation to U.S. GAAP of shareholders’ equity as of December 31, 2007 and 2006 and net income for the years ended December 31, 2007, 2006 and 2005.

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	As of and for the year ended December 31,
	2007	2006(3)	2005	2004(2)	2003(1)
	(millions of reais)
Income Statement Data:
Brazilian GAAP
Operating Revenues	7,920	7,421	6,801	5,533	4,420
Net operating revenues(4)	5,422	4,889	4,440	3,620	2,927
Operating expenses(4)	(3,815)	(3,340)	(3,620)	(3,009)	(2,822)
Operating income	1,607	1,549	820	611	105
Financial income (expenses), net	20	295	(101)	(19)	160
Equity in results of Investees	2	(6)	9	2	17
Other income (expense), net	(31)	(23)	(11)	(7)	(21)
Income taxes	(460)	(558)	(198)	(196)	(89)
Income (loss) before non-controlling interest and extraordinary item	1,138	1,257	519	391	172
Non-controlling interest	(31)	(14)	(16)	(21)	(14)
Extraordinary item, net of tax effect	-	-	-	-	-
Net income (loss)	1,107	1,243	502	370	158
Dividends declared	268	281	123	96	43
U.S. GAAP
Operating Revenues	7,920	7,421	6,801	5,533	4,420
Net operating revenues	5,422	4,889	4,440	3,620	2,927
Operating income	1,383	1,185	884	279	(270)
Net income (loss)	981	1,019	556	124	(72)
Balance Sheet Data:
Brazilian GAAP
Current assets(5)	3,162	3,014	2,472	1,653	1,382
Recoverable rate deficit (CRC)(6)	1,250	1,194	1,182	1,197	1,036
Non-current assets(7)	1,991	1,839	2,047	2,222	2,165
Property, plant and equipment, net	6,832	6,712	5,991	5,731	5,406
Total assets	12,360	11,935	10,930	10,018	9,378
Loans and financing and debentures (current)	265	929	215	671	273
Current liabilities	1,815	2,581	2,352	2,337	1,305
Loans and financing and debentures (long-term)	1,838	1,733	1,829	1,160	1,736
Long-term liabilities	3,077	2,771	2,947	2,453	3,210
Shareholders’ equity	7,236	6,376	5,487	5,108	4,834
Capital stock	4,460	3,875	3,480	3,480	2,900
U.S. GAAP
Total assets(8)	12,065	12,592	11,122	10,589	10,058
Long-term liabilities(8)	2,206	2,669	2,803	2,837	2,913
Shareholders’ equity(8)	7,841	7,169	5,964	5,530	5,475

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	As of and for the year ended December 31,
	2007(10)	2006	2005	2004	2003
	(R$ except numbers of shares)
Share and per share data:
Brazilian GAAP
Net income per share at year end:	4.04	4.54	1.84	1.35	0.58
Dividends per share at year end: (9)
Common Shares	0.93	0.98	0.43	0.33	0.15
Preferred Shares—Class A	1.63	1.41	1.27	1.27	1.06
Preferred Shares—Class B	1.03	1.07	0.47	0.37	0.16
Number of shares outstanding at year end (in thousands):
Common shares	145,031	145,031	145,031	145,031	145,031
Preferred shares Class A	398	399	403	404	405
Preferred shares Class B	128,226	128,225	128,221	128,220	128,219
Total	273,655	273,655	273,655	273,655	273,655
U.S. GAAP
Basic and Diluted - Earnings per share:
Common Shares	3.42	3.56	1.94	0.43	(0.50)
Preferred Shares—Class A	4.37	4.24	1.27	1.27	1.06
Preferred Shares—Class B	3.77	3.91	2.14	0.48	-
Shares outstanding (weighted average – in thousands):
Common Shares	145,031	145,031	145,031	145,031	145,031
Preferred Shares—Class A	399	403	404	405	406
Preferred Shares—Class B	128,225	128,221	128,220	128,219	128,218
Total	273,655	273,655	273,655	273,655	273,655

_______________
(1)	The 2003 financial information includes the accounts of our subsidiary Companhia Paranense de Gás – Compagas. As authorized by the CVM, Compagas was not originally included in our consolidated financial statements for 2003, since it did not have a significant impact in our consolidated financial statements. Since 2004, we have consolidated Compagas and for comparative purposes, we have also consolidated Compagas for 2003.
(2)	The 2004 financial information includes the accounts of our subsidiary Centrais Eléctricas do Rio Jordão S.A.—ELEJOR. As authorized by the CVM, ELEJOR was not originally included in our consolidated financial statements for 2004, since it did not have a significant impact in our consolidated financial statements. Since 2005, we have consolidated ELEJOR and for comparative purposes, we also consolidated ELEJOR for 2004.
(3)	The 2006 financial information includes the accounts of our subsidiary UEG Araucária Ltda.
(4)	Fuel usage account (CCC), energy development account (CDE) and research and development (P&D and PEE) were classified in 2007 as deductions from gross operating revenues instead of operating costs as required by the ANEEL ordinance No. 3,073/2006. For comparative purposes, this reclassification was applied for 2006 and 2005. For more information, see note 2 to the Financial Statements.
(5)	Including the current balances of recoverable rate deficit (CRC) in the amount of R$41 million in 2007, R$ 35 million in 2006, R$32 million in 2005, R$29 million in 2004 and R$124 million in 2003.
(6)	Including both current and non-current CRC accounts receivable.
(7)	Including the non-current balances of recoverable rate deficit (CRC) in the amount of R$1,210 million in 2007, R$1,159 million in 2006, 1,150 million in 2005, R$1,168 million in 2004 and R$912 million in 2003. Also, pursuant to CVM Deliberation No. 489 (contingent assets and liabilities), we were required to present the reserve for contingencies, net of the related escrow deposit, for 2006 and 2005. This presentation did not affect the balance for periods prior to 2005.
(8)	We have adopted SFAS 158 as of December 31, 2006. See note 35 to the Financial Statements.
(9)	Amounts shown for 2005, 2004 and 2003 represent interest on equity, which we elected to pay in lieu of dividends. In 2007 we paid R$200 million in interest on equity and R$68 million in dividend, whereas in 2006 we paid R$158 million in dividends and R$123 million in interest on equity. For dividends per share in US$, see “Item 8. Financial Information.”
(10)	On July 2, 2007, the shareholders approved a reverse split of our shares 1,000-for-1. For comparative purposes, this chart reflects the reverse split retroactively for the years 2006, 2005, 2004, and 2003. For more information, see note 35.b(ii) to the Financial Statements.

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EXCHANGE RATES

     The Banco Central do Brasil (the “Central Bank”) allows the real/U.S. dollar exchange rate to float freely, and it has intervened occasionally to control unstable movements in foreign exchange rates. We cannot predict whether the Central Bank or the Brazilian government will continue to let the real float freely or will intervene in the exchange rate market through a currency band system or otherwise. The real may depreciate or appreciate against the U.S. dollar substantially in the future. For more information on these risks, see “Risk Factors—Risks Relating to Brazil.”

     The following table provides information on the selling exchange rate, expressed in reais per U.S. dollar (R$/U.S.$), for the periods indicated. Prior to March 14, 2005, under Brazilian regulations, foreign exchange transactions were carried out on either the commercial rate exchange market or the floating rate exchange market. Rates in the two markets were generally the same. The table uses the commercial selling rate prior to March 14, 2005.

	Exchange Rate of Brazilian Currency per U.S.$1.00
Year	Low	High	Average(1)	Year-End
2003	2.8219	3.6623	3.0600	2.8892
2004	2.6544	3.2051	2.9171	2.6544
2005	2.1633	2.7621	2.4125	2.3407
2006	2.0586	2.3711	2.1679	2.1380
2007	1.7325	2.1556	1.9300	1.7713

_______________
Source: Central Bank.
(1)	Represents the average of the exchange rates on the last day of each month during the relevant period.

Month
	Low	High
December 2007	1.7616	1.8233
January 2008	1.7414	1.8301
February 2008	1.6715	1.7681
March 2008	1,6700	1,7491
April 2008	1,6575	1,7534
May 2008	1,6434	1,6949

_______________

Source: Central Bank

     On June 2, 2008, the Central Bank selling rate was R$1,6320 per U.S.$1.00.

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RISK FACTORS

Risks Relating to Brazil

Brazilian political and economic conditions have a direct impact on our business and the market price of the Class B Shares and ADSs.

     All of our operations and customers are located in Brazil. Accordingly, our financial condition and results of operations are largely dependent on Brazil’s economy, which has been characterized by frequent and occasionally drastic intervention by the Brazilian government and volatile economic cycles in the past.

     In the past, the Brazilian government has often changed monetary, fiscal and other policies to influence the course of Brazil’s economy. The Brazilian government may take similar measures in the future, with adverse effects to our business, financial condition and results of operations. We have no control over, and cannot predict, how such intervention and government policies will affect the Brazilian economy and, both directly and indirectly, our operations and revenues. Our operations, financial condition, prospects and the market price of the Class B Shares and ADSs may be adversely affected by changes in policy involving exchange controls, tax and other matters, as well as factors such as:

• fluctuations in exchange rates;
• base interest rate fluctuations;
• inflation;
• liquidity of domestic capital and lending markets;
• structural and investment deficiencies in the energy sector;
• changes in tax laws, including charges applicable to specific industry sectors;
• exchange controls and restrictions on remittances abroad; and
• other political, diplomatic, social and economic developments in or affecting Brazil.

     Fluctuations in the value of the Brazilian real against foreign currencies may result in uncertainty in the Brazilian economy and the Brazilian securities market, and they could have a material adverse effect on our net income and cash flow.

     In recent years, the Brazilian real has appreciated against foreign currencies, but the value of the real may continue to fluctuate and may rise or decline substantially from current levels. For additional information about historical exchange rates, see “Item 3. Key Information—Exchange Rates.”

     Depreciation of the real would increase the cost of servicing our foreign currency-denominated debt and the cost of purchasing electricity from the Itaipu power plant, a hydroelectric facility that is one of our major suppliers and that adjusts electricity prices based in part on its U.S. dollar costs. Depreciation of the real would also create additional inflationary pressures in Brazil that may negatively affect us. Depreciation generally curtails access to international capital markets and may prompt government intervention, including recessionary governmental policies. It also reduces the U.S. dollar value of distributions and dividends on the ADSs and the U.S. dollar equivalent of the market price of our Class B Shares and, as a result, the ADSs.

7

If Brazil experiences substantial inflation in the future, our margins and the market price of the Class B Shares and ADSs may be reduced.

     Brazil has in the past experienced extremely high rates of inflation. More recently, Brazil’s annual rates of inflation, measured in accordance with the variation of the Índice Geral de Preços —Disponibilidade Interna (“IGP-DI”) index, were 1.2% in 2005, 3.8% in 2006, 7.9% in 2007 and 5.1% for the five months ended May 31, 2008. Inflation, certain governmental measures taken to combat inflation and public speculation about possible future government actions have in the past had significant negative effects on the Brazilian economy. If Brazil experiences substantial inflation in the future, our costs may increase, our operating and net margins may decrease and, if investor confidence lags, the price of the Class B Shares and ADSs may fall. Inflationary pressures may also curtail our ability to access foreign financial markets and may lead to further government intervention in the economy, including the introduction of government policies that may adversely affect the overall performance of the Brazilian economy.

The market value of securities issued by Brazilian companies is influenced by the perception of risk in Brazil and other emerging economies, which may have a negative effect on the market price of our Class B Shares and ADSs and may restrict our access to international capital markets.

     Economic and market conditions in other emerging market countries, especially those in Latin America, may influence the market for securities issued by Brazilian companies. Although economic conditions in such countries may differ significantly from economic conditions in Brazil, investors’ reactions to developments in these other countries may have an adverse effect on the market value of securities of Brazilian issuers. In the wake of economic problems in various emerging market countries in the last decade and in the beginning of this decade (such as the Asian financial crisis of 1997, the Russian financial crisis of 1998 and the Argentine financial crisis that began in 2001), investors viewed investments in emerging markets with heightened caution. These crises produced a significant outflow of U.S. dollars from Brazil, negatively affecting the price of securities issued by Brazilian companies and causing Brazilian companies to face higher costs for raising funds, both domestically and abroad, and impeding access to international capital markets. Crises in other emerging market countries could hamper investor enthusiasm for securities of Brazilian issuers, including ours, which could adversely affect the market price of our Class B Shares and ADSs.

Changes in Brazilian tax policies may have an adverse effect on us.

     The Brazilian government has changed its tax policies in ways that affect the electricity sector, and it may do so again in the future. These changes include amendments to the tax rates and, occasionally, collection of temporary taxes related to specific governmental purposes. Some of such measures may lead to an increase of taxes and we may be unable to adjust our tariffs accordingly, in which case we may be adversely affected.

Risks Relating to Our Operations

We are controlled by the State of Paraná, and government policy could have a material adverse effect on us and on our business.

     We are controlled by the State of Paraná, which holds 58.6% of our outstanding common voting shares as of the date of this Annual Report, and whose interests may differ from other shareholders. The State of Paraná has the power to control all our operations, including the power to:

• elect a majority of the members of our Board of Directors; and

8

• determine the outcome of any action requiring common shareholder approval, including transactions with related parties, corporate reorganizations and the timing and payment of any future dividends.

     Government policies undertaken by the State of Paraná could have a material adverse effect on us and our business, results of operations, financial condition or prospects.

We are largely dependent upon the economy of the State of Paraná.

     Our market for the majority of our sales of electricity is located in the State of Paraná. Although a more competitive market involving possible sales to customers outside Paraná might develop in the future, our business depends and is expected to continue to depend to a very large extent on the economic conditions of Paraná. We cannot assure you that economic conditions in Paraná will be favorable to us in the future. The GDP of the State of Paraná grew 6.0% in 2007, while Brazil’s GDP increased 5.4% during the same period.

We are involved in several lawsuits that could have a material adverse effect on our business if their outcome is unfavorable to us.

     We are the defendant in several legal actions, mainly relating to civil, administrative, labor and tax claims. The outcome of these proceedings is uncertain and, if determined against us, may result in obligations that could materially adversely affect our business and the value of the Class B Shares and ADSs. For additional information, see “Item 8. Financial Information—Legal Proceedings”.

The development of power generation projects is subject to substantial risks.

     In connection with the development of a generation project, we generally must obtain feasibility studies, governmental concessions or authorizations, permits and approvals, condemnation agreements, equipment supply agreements, engineering, procurement and construction contracts, sufficient equity and debt financing and site agreements, each of which involves third parties over which we have no control. In addition, project development is subject to environmental, engineering and construction risks that can lead to cost overruns, delays and other impediments to timely complete within a project’s budget. We cannot assure you that all required permits and approvals for our projects will be obtained, that we will be able to secure private sector partners for any of our projects, that we or any of our partners will be able to obtain adequate financing for our projects or that financing will be available on a non-recourse basis to us. If we are unable to complete a project, whether at the initial development phase or after construction has commenced, we may not be able to recover our investment in such a project, which may be substantial.

We must comply with rigorous minimum quality standards.

     According to our concession agreement, we must comply with the minimum quality standards determined by the Brazilian government for the distribution of electric energy, as well as meet minimum standards for the improvement of services. If our performance falls below these standards, we may be subject to penalties and fines. In extreme instances, the Brazilian government may force us to forfeit our concession.

9

Risks Relating to the Brazilian Electric Sector

The tariffs that we charge for sales of electricity to captive consumers are determined pursuant to a concession agreement with the Brazilian government through ANEEL, and our operating revenues could be adversely affected if ANEEL makes decisions relating to our tariffs that are unfavorable to us.

     ANEEL has substantial discretion to establish the tariff rates we charge our customers. Our tariffs are determined pursuant to a concession agreement with ANEEL and in accordance with ANEEL’s regulatory decision-making authority.

     Our concession agreement and Brazilian law establish a price cap mechanism that permits three types of tariff adjustments: (1) annual readjustment (reajuste anual), (2) periodic revision (revisão periódica) and (3) extraordinary revision (revisão extraordinária). We are entitled to apply each year for the annual readjustment, which is designed to offset some effects of inflation on tariffs and pass through to customers certain changes in our cost structure that are beyond our control, such as the cost of electricity we purchase from certain sources and certain other regulatory charges, including charges for the use of transmission facilities. In addition, ANEEL carries out a periodic revision every four years that is aimed at identifying variations in our costs as well as setting a factor based on our operational efficiency that will be applied against the index of our ongoing annual tariff readjustments, the effect of which is to ensure that we share the benefits of improved economies of scale with our customers. We are also entitled to request an extraordinary revision of our tariffs if unpredictable costs significantly alter our cost structure.

     We cannot assure you that ANEEL will establish tariffs at rates that are favorable to us. In addition, to the extent that any of these adjustments are not granted by ANEEL in a timely manner, our financial condition and results of operations may be adversely affected.

We may face increased competition that could adversely affect our market share and revenues.

     Within our concession area we do not currently face competition in the distribution of electric energy to residential, commercial and industrial customers of low voltage supply. However, as a result of legislation passed in 1995 and 1998, other suppliers are permitted to offer electricity to certain large electricity customers that meet the regulatory requirements to qualify as Free Customers. Free Customers are those customers with demand equal to or greater than 3MW that are supplied at a voltage level equal to or greater than 69kV or, in the case of customers that have entered the market since July 1995, customers with demand equal to or greater than 3MW that are supplied at any voltage level. Moreover, customers with demand greater than 500 kW that are supplied at any voltage level can choose their supplier if their energy is derived from: small hydroelectric plants, aeolian plants, biomass plants or systems of qualified cogeneration. These Free Customers may be offered electricity at lower prices than those we currently charge. Our distribution business is not able to compete with these suppliers since it has not been allowed to enter into agreements with Free Customers since December 2004, although our generation business has retained the right to compete with such suppliers for Free Customers. The increase in competition from other energy suppliers serving Free Customers located in our concession area, together with the issuance of additional regulations aimed at fostering competition in the energy sector, could adversely affect our market share and revenues.

Our customers may migrate from the distribution network to the transmission network.

     Certain customers may be entitled to connect directly to the transmission network, in which case our distribution business ceases to collect the distribution tariffs. The right that we have to recover part of this loss may not be sufficient to cover our investments in distribution and may adversely affect our revenues and results of operations.

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Electricity shortages might affect our operating income.

     Due to the dependence of the electric energy sector upon natural and seasonal variables such as rainfall and river flows, deterioration in these conditions could severally hamper the generation of electric energy.

     During 2001, Brazil experienced a severe shortage of capacity to generate electrical energy. The crisis was largely due to a lack of investment in power generation and to drought conditions throughout much of the country, which caused storage levels at hydroelectric plants (which, at the time, accounted for 88.3% of the country’s generating capacity) to fall to less than one-third of their capacity.

     In order to avoid the possibility of rolling blackouts, the Brazilian government announced measures in June 2001 aimed at the reduction of electricity consumption in the southeastern, central-western and northeastern regions of Brazil by an average of 20.0% . The Brazilian government also announced surcharges for those who did not meet their cutback quotas and incentives for those who did. The State of Paraná, as well as the other southern states in Brazil, were exempted from these measures because the southern region did not experience the drought conditions and the plants in the region were able to maintain their normal operating capacity. The restrictions remained in effect until February 28, 2002.

     In the future, if the generation capacity in Brazil does not increase to meet the growth in demand, or if there are water shortages, which affect the ability of hydroelectric facilities to operate, the Brazilian government may adopt further measures to reduce energy consumption in the country, including the State of Paraná. These measures, if adopted could have a material adverse effect on our financial conditions and results of operations.

We are subject to extensive governmental legislation and regulation and to major regulatory changes that are still being implemented by the Brazilian government, and we cannot be certain of their effect on our business and results of operations.

     We are a major Brazilian power company that generates, transports and distributes electricity to customers in the State of Paraná. In recent years, the Brazilian government has implemented policies that have had a far-reaching impact on the Brazilian power industry and, in particular, the electricity industry. Law Nº. 10,848, Lei do Novo Modelo do Setor Elétrico (the “New Industry Model Law”), which regulates the operations of companies in the power industry, was enacted on March 15, 2004. The constitutionality of the New Industry Model Law is currently being challenged in the Brazilian Supreme Court. On October 11, 2006, in a majority decision, the Brazilian Supreme Court upheld the constitutionality of the New Industry Model Law. Although this decision is not final, the New Industry Model Law remains in force. If all or a relevant portion of the New Industry Model Law is found unconstitutional by the Brazilian Supreme Court, the regulatory scheme introduced by the New Industry Model Law may change, thus generating uncertainty as to how and when the Brazilian government will introduce changes to the electricity industry.

     The impact on our business of the above-mentioned legal proceedings and possible future reforms in the power industry are difficult to predict, and could all adversely affect our business and results of operation. For more information, see “Item 4. Information on the Company—The Brazilian Power Industry—Reform of the Electric Energy Industry.”

We may be forced to purchase energy in the spot market to meet customer demand, and the price of spot market energy purchases may be substantially higher than the price of energy under our long-term energy purchase agreements.

     Under the New Industry Model Law, electric energy distributors, including us, must contract, through public bids conducted by ANEEL, 100.0% of the forecasted electric energy demand for their

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respective distribution concession areas, up to five years prior to the actual delivery of electric energy. If our forecasts fall significantly short of actual electricity demand, we may be forced to make up the shortfall with short-term electricity purchase agreements. We cannot guarantee that our forecasts for energy demand in our distribution concession area will be accurate, and if they are not, we may face significantly higher prices in the spot market to satisfy our electric energy distribution obligations, as well as penalties imposed by the Electric Energy Trading Chamber (Câmara de Comercialização de Energia Elétrica (“CCEE”)).

We generate a portion of our operating revenues from Free Customers who may seek other energy suppliers upon the expiration of their contracts with us.

     During 2007, we provided electricity to 17 Free Customers, representing approximately 4.8% of our gross operating revenues from energy sales and approximately 3.7% of the total quantity of electricity sold by us. Less than 1% of the megawatts sold under contract to such customers are set to expire in 2008. There can be no assurance that, upon the expiration of these contracts, the Free Customers will purchase energy from us.

     At December 31, 2007, we had 33 customers that were eligible to qualify as Free Customers. There can be no assurance that upon becoming Free Customers, such customers will continue to purchase energy from us. A loss of business to other energy suppliers serving Free Customers would lower our cash flow and could adversely affect our market share.

Our equipment, facilities and operations are subject to numerous environmental and health regulations which may become more stringent in the future and may result in increased liabilities and increased capital expenditures.

     Our distribution, transmission and generation activities are subject to comprehensive federal, state and local legislation as well as supervision by Brazilian governmental agencies that are responsible for the implementation of environmental and health laws and policies. These agencies could take enforcement action against us for our failure to comply with their regulations and with requirements established for the maintenance of our environmental licenses. These actions could include, among other things, the imposition of fines and revocation of licenses. It is possible that enhanced environmental and health regulations will force us to allocate capital expenditures towards compliance, and consequently, divert funds away from planned investments. Such a diversion could have a material adverse effect on our financial condition and results of operations.

Changes in the laws and regulations issued by ANEEL may adversely affect us and other companies that operate in the electricity sector.

     Our main commercial activities are subject to extensive regulation by various Brazilian regulatory authorities, including ANEEL. ANEEL has the authority to regulate and oversee various aspects of our business, including the power to require us to reduce our tariffs or to increase our investments. If we are obliged by ANEEL to make additional and unexpected capital investments and are not allowed to adjust our tariffs accordingly, or if ANEEL modifies the regulations related to such adjustment, we may be adversely affected.

     In addition, our main commercial activities, the implementation of our strategy for growth, as well as the ordinary carrying out of our business may be adversely affected by governmental actions such as:

• changes to current legislation applicable to our business;
• changes and/or the termination of federal and state concession programs;
• creation of more rigid criteria for qualification in future public energy auctions; and

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• delay in the revision and implementation of new annual tariffs.

     If we are required to conduct our business in a manner substantially different from our current operations, as a result of regulatory changes, our results of operations and financial results may be adversely affected.

ANEEL could penalize us for failing to comply with the terms of our concessions, and we may not recover the full value of our investment in the event that any of our concessions are terminated.

     We carry out our distribution, generation and transmission activities pursuant to concession agreements executed by our subsidiaries with the Federal government through ANEEL. Our concessions are for terms of 30 to 35 years and may be extended if certain conditions are met. In the event that we fail to comply with any term of our concessions or applicable laws, ANEEL may impose penalties on us, which may include the imposition of substantial fines (in some instances, up to two percent of a concessionaire’s revenues in the fiscal year immediately preceding the assessment) and restrictions on our operations. ANEEL may also terminate our concessions prior to the expiration of their terms if we fail to comply with their provisions, if we are declared bankrupt, if we are dissolved or if ANEEL determines, through an expropriation proceeding, that terminating our concession would be in the public interest. If ANEEL terminates any of our concessions before their expiration, we would not be able to operate the segment(s) of our business that had been authorized by the concession. Furthermore, any compensation that we may receive from the Federal Government for the unamortized portion of our investment may not be sufficient for us to recover the full value of our investment. In addition, concessions for new generation projects (such as Mauá, in our case) are non-extendable, meaning that upon expiration, the concessionaire must again complete a competitive bidding process. The early termination or non-renewal of any of our concessions or the imposition of severe fines or penalties by ANEEL could have a material adverse effect on our financial condition and results of operations. See “The Brazilian power industry—Concessions.”

Risks Relating to the Class B Shares and ADSs

As a holder of ADSs you will generally not have voting rights at our shareholders’ meetings.

     In accordance with the Brazilian Corporation Law and our by-laws, holders of the Class B Shares, and thus of the ADSs, are not entitled to vote at our shareholders’ meetings except in limited circumstances. This means, among other things, that you, as a holder of the ADSs, are not entitled to vote on corporate transactions, including any proposed merger with other companies.

     In addition, in the limited circumstances where the holders of Class B Shares are able to vote, holders may exercise voting rights with respect to the Class B Shares represented by ADSs only in accordance with the provisions of the deposit agreement relating to the ADSs. There are no provisions under Brazilian law or under our by-laws that limit ADS holders’ ability to exercise their voting rights through the depositary bank (“Depositary”) with respect to the underlying Class B Shares. However, there are practical limitations upon the ability of ADS holders to exercise their voting rights due to the additional procedural steps involved in communicating with such holders. For example, holders of our Class B Shares will be able to exercise their voting rights by either attending the meeting in person or voting by proxy. In accordance with the deposit agreement, we will provide the notice to the Depositary, which will in turn, as soon as practicable thereafter, mail to holders of ADSs the notice of such meeting and a statement as to the manner in which instructions may be given by holders. To exercise their voting rights, ADS holders must then instruct the Depositary how to vote their shares. Because of this extra procedural step involving the Depositary, the process for exercising voting rights will take longer for ADS holders than for holders of Class B Shares. ADSs for which the Depositary does not receive timely voting instructions will not be voted at any meeting.

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As a holder of ADSs you will have fewer and less well defined shareholders’ rights in Brazil than in the United States and certain other jurisdictions.

     Our corporate affairs are governed by our by-laws and the Brazilian Corporation Law, which may differ from the legal principles that would apply if we were incorporated in a jurisdiction in the United States or in certain other jurisdictions outside Brazil. Under the Brazilian Corporation Law you and the holders of the Class B Shares may have fewer and less well-defined rights to protect your interests relative to actions taken by our Board of Directors or the holders of Common Shares than under the laws of some jurisdictions outside Brazil.

     Although Brazilian law imposes restrictions on insider trading and price manipulation, the Brazilian securities markets are not as highly regulated and supervised as the U.S. securities markets or markets in certain other jurisdictions. In addition, rules and policies against self-dealing and regarding the preservation of minority shareholder interests may be less well developed and enforced in Brazil than in the United States, which could potentially disadvantage you as a holder of the preferred shares and ADSs. For example, when compared to Delaware general corporation law, Brazilian Corporation Law and practice has less detailed and well-established rules and judicial precedents relating to the review of management decisions against duty of care and duty of loyalty standards in the context of corporate restructurings, transactions with related parties, and sale-of-business transactions. In addition, shareholders in Brazilian companies must hold 5.0% of the outstanding share capital of a corporation to have standing to bring shareholders’ derivative suits, and shareholders in Brazilian companies ordinarily do not have standing to bring a class action.

You may be unable to exercise preemptive rights relating to the preferred shares.

     You will not be able to exercise the preemptive rights relating to the Class B Shares underlying your ADSs unless a registration statement under the United States Securities Act of 1933 as amended (“Securities Act”), is effective with respect to those rights or an exemption from the registration requirements of the Securities Act is available. The Depositary will not offer rights to you as a holder of the ADSs unless the rights are either registered under provisions of the Securities Act or are subject to an exemption from the registration requirements. We are not obligated to file a registration statement with respect to the shares or other securities relating to these rights, and we cannot assure you that we will file any such registration statement. Accordingly, you may receive only the net proceeds from the sale of your preemptive rights by the Depositary or, if the preemptive rights cannot be sold, they will be allowed to lapse. If you are unable to participate in rights offerings, your holdings may also be diluted.

If you exchange your ADSs for Class B Shares, you risk losing the ability to remit foreign currency abroad and Brazilian tax advantages.

     Brazilian law requires that parties obtain a certificate of registration from the Central Bank in order to be allowed to remit foreign currencies, including U.S. dollars, abroad. For the ADSs, the Brazilian custodian for the Class B Shares has obtained the necessary certificate from the Central Bank for the payment of dividends or other cash distributions relating to the preferred shares or upon the disposition of the preferred shares. If you exchange your ADSs for the underlying Class B Shares, however, you may only rely on the custodian’s certificate for five business days from the date of exchange. Thereafter, you must obtain your own certificate of registration or register in accordance with Central Bank and CVM rules, in order to obtain and remit U.S. dollars abroad upon the disposition of the Class B Shares or distributions relating to the preferred shares. If you do not obtain a certificate of registration, you may not be able to remit U.S. dollars or other currencies abroad and may be subject to less favorable tax treatment on gains with respect to the preferred shares.

     If you attempt to obtain your own certificate of registration, you may incur expenses or suffer delays in the application process, which could delay your ability to receive dividends or distributions relating to the preferred shares or the return of your capital in a timely manner. The custodian’s certificate

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of registration and any certificate of foreign capital registration you obtain may be affected by future legislative changes. Additional restrictions may be imposed in the future on the disposition of the underlying Class B Shares or the repatriation of the proceeds from disposition.

The Brazilian government may impose exchange controls and restrictions on remittances abroad which may adversely affect your ability to convert funds in reais into other currencies and to remit other currencies abroad.

     You may be adversely affected by the imposition of restrictions on the remittance to foreign investors of the proceeds of their investments in Brazil and the conversion of reais into foreign currencies. The Brazilian government last imposed remittance restrictions for a brief period in 1989 and early 1990. Re-imposition of these restrictions would hinder or prevent your ability to convert dividends, distributions or the proceeds from any sale of Class B Shares, as the case may be from reais, into U.S. dollars or other currencies and to remit those funds abroad. We cannot assure you that the Brazilian government will not take similar measures in the future.

The relative volatility and illiquidity of the Brazilian securities markets may impair your ability to sell the Class B Shares underlying the ADSs.

     The Brazilian securities markets are substantially smaller, less liquid, more concentrated and more volatile than major securities markets in the United States and elsewhere, and are not as highly regulated or supervised as some of those other markets. The illiquidity and relatively small market capitalization of the Brazilian equity markets may cause the market price of securities of Brazilian companies, including our ADSs and Class B Shares, to fluctuate in both the domestic and international markets, and may substantially limit your ability to sell the Class B Shares underlying your ADSs at a price and time at which you wish to do so.

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Item 4. Information on the Company

THE COMPANY

     We are a fully integrated electric power company engaged in the generation, transmission and distribution of electricity in the Brazilian State of Paraná, pursuant to concessions granted by the Brazilian regulatory agency for the electric sector, ANEEL. We also provide telecommunications and other services through various partnerships that we maintain.

     At December 31, 2007, we generated electricity at 17 hydroelectric plants and one thermoelectric plant, for a total installed capacity of 4,549.6 MW (approximately 99.6% of which is hydroelectric). Including the installed capacity of our partnerships in generation, our total installed capacity is 5,151.3 MW. Our electric power business is subject to comprehensive regulation by ANEEL.

     We hold concessions to distribute electricity in approximately 98.2% of the 399 municipalities in the State of Paraná and in the municipality of Porto União in the State of Santa Catarina. At December 31, 2007, we owned and operated 1,830 kilometers of transmission lines (which consist of a small portion of our 138 kV assets, our 230 kV assets and our 525 kV assets) and 177,046 kilometers of distribution lines (which consist of our assets of 138 kV and below), constituting the third-largest distribution network in Brazil. Of the electricity volume we supplied to our Final Customers during 2007:

• 38.7% was to industrial customers;
• 25.7% to residential customers;
• 18.6% to commercial customers; and
• 17.0% to rural and other customers.

     Industrial consumption, including Copel Geração’s Free Customers, accounted for 38.7% of our total sales in 2007, an increase of 7.5% as compared to 2006. This increase reflects the improved economic performance of the state of Paraná, led by positive results in the agricultural, industrial and service sectors. The state’s exports increased by 23.3%, led by greater sales of soy, corn, automobiles and poultry meat.

     In 2007, residential consumption, which accounts for 25.7% of our market sales to Final Customers, grew by 6.6%, as evidenced by the rate of consumption per residential customer, which reached 157.9 kWh/month in 2007, 3.6% higher than 2006 (152.5 kWh/month). This growth was largely due to increases in income, falling interest rates, greater access to credit and longer term credit, as well as the fact that average temperatures during 2007 were higher than average temperatures during 2006.

     Commercial consumption, which accounts for 18.6% of our market sales to Final Customers, recorded a 9.2% rate of growth, the highest rate of growth among our major customer categories. This increased consumption resulted from increased customer income and a larger number of customers with elevated levels of consumption, including supermarkets and shopping centers. Higher temperatures also led to increased commercial consumption.

     Rural consumption increased by 6.3% in 2007 and accounted for 7.6% of our total sales to Final Customers. This growth resulted from recovering agricultural activities, as evidenced by soy and corn production, for which Paraná has the largest production volume in Brazil. Average rural consumption increased by 4.7% in 2007 as compared to the previous year, reaching 380.2 kWh/month.

     Key elements of our business strategy include the following:

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• expanding our power generation, transmission, and distribution systems;
• expanding our generation business’ sales to Free Customers both inside and outside the state of Paraná;
• seeking productivity improvements in the short term and sustained growth in the long term;
• striving to keep customers satisfied and our workforce motivated and prepared;
• seeking cost efficiency and innovation;
• achieving excellence in data, image, and voice transmission; and
• researching new technologies in the power sector in order to expand power output with renewable and non-polluting sources.

Historical Background

     We were formed in 1954 by the State of Paraná to engage in the generation, transmission and distribution of electricity, as part of a plan to bring the electric power sector under state control. We acquired the principal private power companies located in the State of Paraná in the early 1970s. During the period from 1970 to 1977, we significantly expanded our transmission and distribution network and the connection of our network to networks in other Brazilian states. In 1979, a change in state law permitted us to extend our generating activities to include production from sources other than hydroelectric plants. We are currently the largest company in the State of Paraná in our segment (power and related industries). We are a corporation incorporated and existing under the laws of Brazil, under the legal name Companhia Paranaense de Energia – COPEL. Our head offices are located at Rua Coronel Dulcídio, 800, CEP 80420-170 Curitiba, Paraná, Brazil. Our telephone number at the head office is (55-41) 3322-3535.

Relationship with the State of Paraná

     The State of Paraná owns (directly and indirectly) 58.6% of our Common Shares and, consequently, has the ability to control the election of the majority of the members of our Board of Directors, the appointment of senior management and our direction, future operations and business strategy.

Corporate Structure

     Prior to 2001, we were a single corporation engaged in the generation, transmission and distribution of electricity and in certain related activities. In order to facilitate our proposed privatization and compliance with the changed regulatory regime, we transferred our operations to four wholly-owned subsidiaries—one each for generation, transmission, distribution and telecommunications—and our investments in other companies to a fifth wholly-owned subsidiary. This corporate restructuring was completed in July 2001.

     Recently, to comply with energy sector legislation, we transferred the assets of COPEL Transmissão to COPEL Distribuição (69 kV – 138 kV) and to COPEL Geração (a small portion of our assets of 138 kV and all our assets of 230 kV and above), changing the name of the latter to COPEL Geração e Transmissão S.A. (“COPEL Geração e Transmissão”).

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* share of voting capital

Business

     During 2007, we produced 42.8% of the total energy available in our systems. In addition to the energy we produce, we are required, like certain other Brazilian distribution companies, to purchase energy from Itaipu Binacional (“Itaipu”) in an amount determined by the Brazilian government based on our share in the Brazilian electricity market. Itaipu is the largest operating hydroelectric power plant in the world, with an installed capacity of 14,000 MW. Pursuant to a 1973 treaty between Brazil and Paraguay, Brazil purchases a substantial majority of the electricity generated by Itaipu. The following chart sets forth the sources and uses of electricity we delivered during 2007. Amounts other than percentages are in GWh. The classification of our energy sales is based on the regulatory structure discussed in “—The Brazilian Power Industry.”

     The following table sets forth the total electricity we generated, purchased from Itaipu and purchased from others during the 2003-2007 period.

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	Year ended December 31,
	2007	2006	2005	2004	2003
	(GWh)
Electricity we generated	18,134	10,358	18,436	19,121	16,598
Electricity we purchased from Itaipu	4,666	4,665	4,683	4,609	5,678
Auction—CCEAR – Subsidiaries	1,203	1,038	891	0	0
Auction—CCEAR – Other	11,850	10,294	7,338	0	0
Electricity we purchased from others(1)	6,472	12,877	7,787	5,805	7,286
Total.	42,325	39,232	39,135	29,535	29,562

_______________
(1)	Includes capacity made available but not fully delivered.

     The following table sets forth the total electricity we sold to Final Customers, distributors, and other utilities in the South of Brazil through a transmission network known as the Interconnected Power System—South/Southeast (“Interconnected Power System”) that links the states in the South and Southeast of Brazil.

	Year ended December 31,
	2007	2006	2005	2004	2003
	(GWh)
Electricity delivered to Final Customers (retail and unregulated) (2)	19,984	18,691	18,696	18,736	18,782
Electricity delivered to distributors in the State of Paraná	474	457	450	484	468
Electricity delivered to out of state distributors under Initial Supply Contracts	0	0	35	70	105
Bilateral Agreements	3,945	4,287	3,778	4,134	2,410
Auction—CCEAR – Subsidiaries	1,203	1,038	891	0	0
Auction—CCEAR – Other	10,737	10,136	7,597	0	0
Electricity delivered to the Wholesale Energy Market and the Interconnected Power System (1)	2,927	1,814	4,417	4,101	6,199
Subtotal	39,270	36,423	35,864	27,525	27,964
Losses	3,055	2,809	3,271	2,010	1,598
Total	42,325	39,232	39,135	29,535	29,562

_______________
(1)	Includes capacity made available but not fully delivered.
(2)	Includes Free Customers.

Generation and Purchases of Energy

Generation Facilities

     At December 31, 2007, we operated 17 hydroelectric plants and one thermoelectric plant, with a total installed capacity of 4,549.6 MW. As of December 31, 2007 we also owned 100% of Centrais Eólicas do Paraná Ltda. (70% through Copel Geração e Transmissão and 30% through Copel Participações), a wind power plant with a total installed capacity of 2.5 MW. We produce electricity almost exclusively through our hydroelectric plants. Our assured energy, which represents our minimum potential total output, totaled 17,175 GWh in 2007. Our actual generation in any year differs from our assured energy, as a result of hydrological conditions and other factors. We generated 18,134 GWh in 2007, 10,358 GWh in 2006, and 18,436 GWh in 2005. The generation of electrical energy at our hydroelectric plants is supervised and coordinated by our generation operation center in the city of Curitiba. This operation center is responsible for coordinating the operations related to approximately 99.2% of our total installed capacity.

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     The following table sets forth certain information relating to our main plants in operation at December 31, 2007.

		Installed	Assured	Placed In	Concession
Type	Plant	Capacity	Energy (1)	Service	Expires
		(MW)	(GWh/yr)
Hydroelectric	Gov. Bento Munhoz da Rocha Netto	1,676	5,059	1980	2023
Hydroelectric	Gov. Ney Aminthas de Barros Braga	1,260	5,297	1992	2009
Hydroelectric	Gov. Jose Richa	1,240	5,314	1999	2010
Hydroelectric	Gov. Pedro Viriato Parigot de Souza	260	957	1970	2015
Wind	Centrais Eólicas do Paraná	2.5	N/A	1999	2029
Hydroelectric	Guaricana	36	119	1957	2026
Hydroelectric	Chaminé	18	102	1930	2026
Thermoelectric	Figueira	20	123	1963	2019

_______________
(1)	Values used to determine volumes committed for sale.

     Governador Bento Munhoz da Rocha Netto (Foz do Areia). The Gov. Bento Munhoz de Rocha Netto hydroelectric plant is located on the Iguaçu River, approximately 350 kilometers southwest of the city of Curitiba. The plant began full operations in 1981.

     Governador Ney Aminthas de Barros Braga (Segredo). The Gov. Ney Aminthas de Barros Braga hydroelectric plant is located on the Iguaçu River, approximately 370 kilometers southwest of the city of Curitiba. The plant began full operations in 1993.

     Governador José Richa (Salto Caxias). The Gov. José Richa hydroelectric plant is located on the Iguaçu River, approximately 600 kilometers southwest of the city of Curitiba. We began constructing the plant in 1994 and placed the final generating unit in service in October 1999.

     Governador Pedro Viriato Parigot de Souza (Capivari Cachoeira). The Gov. Pedro Viriato Parigot de Souza hydroelectric plant is the largest underground hydroelectric plant in Brazil. The reservoir is located on the Capivari River, approximately 50 kilometers north of the city of Curitiba, and the power station is located on the Cachoeira River, approximately 110 kilometers northeast of the city of Curitiba. The plant began full operations in 1972.

     Centrais Eólicas do Paraná. Centrais Eólicas do Paraná Ltda., a company formed in December 1998 to install and operate the first wind power plant in southern Brazil, comprises five 500 KW wind power generators amounting to an installed capacity of 2.5 MW. The facility generates 4.84 GWh annually. The plant has been in operation since February 1999. We invested R$1.2 million in the construction of the plant, the total cost of which was R$4 million. On September 6, 2007, Wobben WindPower Indústria e Comércio Ltda. signed an agreement with COPEL Geração to transfer its 70% interest in Centrais Eólicas do Paraná Ltda. to COPEL Geração for R$2.1 million. We now own 100% of the total issued and outstanding share capital of Centrais Eólicas do Paraná Ltda.

     Guaricana, Chaminé and Figueira, together with our eleven other hydroelectric plants (Marumbi, Apucaraninha, Mourão, Derivação do Rio Jordão, São Jorge, Chopim I, Rio dos Patos, Cavernoso, Pitangui, Salto do Vau and Melissa) have a total installed capacity of 113.6 MW.

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     The following table sets forth information regarding certain generation plants in which we had an ownership interest as of December 31, 2007:

		Installed	Assured		Our Ownership	Concession
Type	Plant	Capacity	Energy	Placed in Service	Percentage	Expires
		(MW)	(GWh/yr)
Hydroelectric	Dona Francisca	125.0	700.8	February 2001	23.03%	2033
Hydroelectric	Foz do Chopim	29.1	188.0	October 2001	35.77%	2030
Hydroelectric	Elejor (Santa	246.3	1,229.0	July 2005	70.0%	2036
	Clara and
	Fundão)			June 2006
Thermal	Araucaria	484.5	N/A	September 2006	80.0%	2029

     Dona Francisca. We own 23.03% of the total issued and outstanding common shares of the Dona Francisca Energética S.A. hydroelectric power plant (“Dona Francisca”), which is located on the Jacuí River in the State of Rio Grande do Sul. The share capital is also shared among Gerdau S.A. with a 51.82% interest, Celesc S.A. with a 23.03% interest and Desenvix with a 2.12% interest. Construction of Dona Francisca began in August 1998 and commercial operations started in February 2001. Dona Francisca’s balance sheet as of December 31, 2007 reflects accounts payable in the total amount of R$220.4 million, R$139 million of which refers to loans extended to it by the Interamerican Development Bank and Banco Nacional de Desenvolvimento Econômico e Social (“BNDES”), a Brazilian development bank wholly owned by the Brazilian government. The loans are guaranteed by a pledge of shares of Dona Francisco. In 2004, Dona Francisca signed a power purchase agreement with Copel Geração, valued at R$51.5 million annually, which will terminate in March 2015 and which obligates Copel Geração to purchase 100.0% of the energy generated at Dona Francisca. This agreement was ratified by ANEEL on December 29, 2004.

     Foz do Chopim. The Foz do Chopim hydroelectric plant is located on the Chopim River in the State of Paraná and was built on the already existing structure of the Julio de Mesquita plant, which is no longer active. We own 35.77% of the total issued and outstanding share capital of the Foz do Chopim hydroelectric plant and the remaining 64.23% is owned by Silea Participações Ltda. The plant has an installed capacity of 29.07 MW. The investment necessary to construct the plant was R$51.4 million. The first generation unit started operating on October 25, 2001, and the second-generation unit started operating on December 8, 2001.

     Santa Clara and Fundão. The Santa Clara and Fundão hydroelectric plants consist of two hydroelectric power generation units on the Jordão River in the State of Paraná. The aggregate total installed capacity of the units is 240 MW. Two smaller hydroelectric generation units are installed in the same location, these units are expected to have an additional installed capacity of 6 MW. Centrais Elétricas Rio Jordão (“ELEJOR”) signed a concession agreement with a term of thirty-five years for the Santa Clara and Fundão plants in October 2001. The construction of the plants began in December 2002 and in April 2004, respectively. In September 2004, after obtaining all of the required governmental authorizations, we acquired 30.0% of the voting capital of ELEJOR, valued at approximately R$40 million. These shares had previously been held by Triunfo Participações. The Santa Clara plant began operations in July 2005 and added an additional 60MW to the total energy made available by us. In September 2005, the installed capacity of the Santa Clara plant increased by 60 MW. The Fundão plant began operations in July 2006 adding 120MW to the total energy available to us. As of December 31, 2007, we own 70.0% of the common shares of ELEJOR and PaineraPar owns the remaining 30.0% .

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     ELEJOR is required to pay the Federal Government for the use of hydroelectric resources, from the sixth through the end of the thirty-fifth year of its concession, with total annual payments of R$19 million, payable on a monthly basis, beginning on October 25, 2006. This amount is monetarily adjusted, on an annual basis, by the IGP-M. In 2007, the aggregate amount of concession payments paid by ELEJOR to the Federal Government was R$33.5 million.

     In September 2002, Centrais Elétricas Brasileiras S.A.—Eletrobrás (“Eletrobrás”), a company controlled by the Brazilian government, executed a shareholders’ agreement with ELEJOR, under which Eletrobrás has the obligation to subscribe for 59,900,000 preferred class B shares to be issued by ELEJOR. ELEJOR is required to acquire Eletrobrás’ preferred class B shares in thirty-two quarterly installments (adjusted by IGP-M plus interest of 12.0% per year), starting twenty-four months after the commercial start-up of the project.

     The total construction cost of the Santa Clara and Fundão plants was R$521.5 million, which was funded as follows (i) R$255.6 million was obtained through a loan agreement signed on April 28, 2005 with BNDES; (ii) R$72.9 million was funded by Eletrobrás through the acquisition of approximately 59,900,000 preferred class B shares of ELEJOR, as described above; (iii) R$49.08 million was funded by us; and (iv) R$21.05 million was funded by PaineraPar. The remaining amount is being financed by the cash flow generated by such facilities.

     We have entered into a power purchase agreement with ELEJOR that provides that we will purchase all of the energy produced by the Santa Clara and Fundão facilities at a set tariff, to be adjusted annually in accordance with the IGP-M.

     Araucária. Araucária was formed in April 1998 to construct the UEG Araucaria Thermoelectric Plant in the municipality of Araucária (located in the Curitiba metropolitan area). El Paso Empreendimentos e Participações Ltda (“El Paso”), managed by a subsidiary of El Paso Corporation owned 60% of the equity of Araucária, Petrobras owned 20% and we owned 20%. The plant was completed in September 2002, with a net capacity of 484.3 MW, but it started to operate in September, 2006. The plant is fueled by natural gas. ANEEL granted Araucária a license to operate as an independent power producer. On May 30, 2006, we entered into an agreement with Araucária to settle certain outstanding legal disputes among the shareholders relating to the UEG Araucaria Thermoelectric Plant. Pursuant to this settlement agreement, we agreed to acquire all of the interests held by El Paso in Araucária for U.S.$190 million.

     On December 28, 2006, the Araucária Thermal Power Plant Lease Agreement (the “Lease Agreement”) was signed by Araucária and Petrobras. It expires on June 30, 2008, but may be extended by joint agreement for up to 6 months. The Lease Agreement provides for a monthly lease, which is intended to cover all costs and taxes owed by Araucária and is composed of a monthly fixed portion and a monthly variable portion. The monthly fixed portion is R$14.16 per MWh multiplied by the reference power rating (428.35 MW) and by the number of hours of each month. The monthly variable portion, in the amount of R$35.85 per MWh, is calculated according to the actual power output.

     On the same date, the Araucária Thermal Power Plant Operation and Maintenance Service Agreement was also signed by Copel Geração and Petrobras. It will be in effect until December 31, 2008, or until the expiration of the Lease Agreement, whichever occurs first. The monthly fee paid to the service provider is R$6.31 per MWh multiplied by the reference power rating (428.35 MW) and by the number of hours of each month.

Expansion of Generating Capacity

     We expect to spend R$144.6 million in 2008 to expand our generation capacity at our wholly owned facilities and through generation partnerships.

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     We have participation interests in several generation projects, and the energy that these projects will generate will substantially enhance our generation capacity in the future. The following table sets forth information regarding our planned major generation projects for the period from 2008 to 2011.

	Estimated	Estimated	Budgeted	(Expected)
	Installed	Assured	Completion	Beginning of	Our Ownership
Facility	Capacity	Energy(1)	Cost	Operation	Percentage	Status
	(MW)	(GWh/year)	(R$ million)
						Concession
Mauá	362	1,732	991.3	January 2011	51.0%	Granted
						Concession
São Jerônimo	331	1,450	510.0(2)	Unknown	41.2%	Granted

_______________
(1)	Values used to determine volumes committed for sale.
(2)	As of October 2002.

     Mauá. In October 2006, a consortium that we established with Eletrosul (in which we hold a 51% stake and Eletrosul holds a 49% stake) was awarded a concession to construct and operate the Mauá hydroelectric power plant on the Tibagi River in the State of Paraná. The Mauá facility will have a minimum installed capacity of 350 MW. A small hydropower unit will also be built, adding an additional 12 MW of installed capacity to the project, amounting to a total installed capacity of 362 MW. The necessary environmental license was obtained on March 24, 2008, and construction is scheduled to begin in the first half of 2008. Commercial generation is scheduled to begin in January 2011. The facility’s total power output (192 average MW) is committed under a 30-year contract, at a price of R$112.96/MWh, with supply starting in January 2011.

     São Jerônimo. The São Jerônimo hydroelectric plant will be located between the municipalities of Tamarana and São Jerônimo da Serra on the Tibagi River in the State of Paraná. The plant, whose future structure will include a 105-meter dam, is projected to have two generation units with a total installed capacity of 331 MW. It is unclear when the construction of the facility will begin. There are a number of issues that must be resolved before construction can begin, the most significant being that we must obtain permission from the Brazilian Congress to start construction since the plant will be located in an indigenous area.

Proposed Projects

     We are involved in various private initiatives formed to study the technical, economic and environmental feasibility of certain generation projects. These proposed generation projects would have a total of 316 MW of installed capacity. The following table sets forth information regarding our proposed generation projects.

		Estimated
		Installed	Estimated Assured		Our Ownership
Type	Project	Capacity	Energy	Estimated Cost	Percentage
		(MW)	(GWh/yr)	(R$) in millions
Hydroelectric	Rio Cavernoso	19	92	77(1)	100%
Hydroelectric	Rio Areia	30	149	69(2)	30.0%
Hydroelectric	Rio Chopim	123	598	184(2)	15.0%
Thermal	UTE Figueira	144	1,060	470(3)	100.0%

_____________
(1)	Cost is estimated as of December 2006.
(2)	Cost is estimated as of April 2002.
(3)	Cost is estimated as of August 2007.

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Purchases

     Itaipu

     We purchased 4,666.4 GWh of electricity from Itaipu in 2007, which constituted 11% of our total available electricity in 2007. Our purchases represented approximately 8% of Itaipu’s supply to Brazil. Electric utilities operating under concessions in the midwest, south and southeast regions of Brazil are required by law to purchase Brazil’s portion of the energy generated by Itaipu in a proportion that correlates with the volume of electricity that they historically have provided to customers. The rates at which these companies are required to purchase Itaipu’s energy are fixed to cover Itaipu’s operating expenses and payments of principal and interest on Itaipu’s U.S. dollar-denominated borrowings, as well as the cost of transmitting the power to their concession areas. These rates are denominated in U.S. dollars.

     In 2007, we paid an average tariff of R$82.59 per MWh for energy from Itaipu, compared to R$71.88 per MWh during 2006. These figures do not include the transmission tariff that distribution companies must pay for the transmission of energy from Itaipu.

     Cien

     We entered into two agreements on December 13, 1999 to purchase firm capacity and associated energy from Cien (the “Cien Agreements”). Cien is controlled by the Spanish-based international energy company Endesa. It was established in 1999 to build two transmission lines between Argentina and Brazil, and it obtained financing from a bank syndicate. One transmission line began operating in May 2002 and the other in August of 2002. Beginning on those respective dates, the Cien Agreements originally required us to purchase an aggregate of 800 MW on a “take or pay” basis, but we renegotiated them in 2003 to reduce the aggregate capacity to be purchased by us to 400 MW through 2015 at prices determined on the basis of the reference price set forth in the contract with adjustments for inflation and exchange rate variations. Based on the price initially in effect, the aggregate annual amount payable before indexation would be R$332 million per year from 2003 through 2015.

     On January 2, 2007, we entered into amendments to the Cien Agreements, reducing the contracted volumes from an average of 400.0 MW to an average of 175 MW, for supply through December 31, 2007. This reduction was the result of an Argentine law limiting Argentina’s energy exports. The deficit in our distribution business caused by the reduction in the Cien contracts has not been completely offset, since COPEL Distribuição has had to purchase additional energy in the spot market. However, in order to compensate for this deficit, the Ministry of Mines and Energy, Ministério de Minas e Energia (“MME”) has allowed us to adjust the tariffs to offset the costs we incur by purchasing such additional volumes. During 2007, we recognized R$111.2 million for energy purchased from Cien.

     Specifically, to make up for the volumes no longer provided under the Cien Agreements, we acquired 159 MW, at a price of R$104.74/MWh, for the period from 2007 to 2014 at the A-1 Auction held on December 14, 2006. As a result of the amendments to the Cien Agreements, during the first quarter of 2007 we reverted R$100.9 million from a provision for payment of outstanding amounts under the amended agreements, which are now settled. In addition, we purchased 23.5 MW at the auction held in September 2007 to supplement our 2008 supply agreements.

     Other Suppliers

     In 2007, we purchased 13,053 GWh of electricity through auctions in the regulated market, of which 11,850 GWh we purchased from other concessionaires and 1,203 GWh we purchased from our own subsidiary. This energy represents 54% of the total electricity we purchased. For more information on the regulated market and the free market, see “—The Brazilian Power Industry—The New Industry Model Law.”

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     The following table contains information concerning volume, costs and average tariffs for the main sources of the electricity we purchased in the last three years. 

Source:		2007	2006	2005
	Volume (GWh)	4,666	4,665	4,683
Itaipu	Cost (R$ millions)	385.4	335.4	464.4
	Average Tariff (R$/MWh)	82.59	71.88	99.17
	Volume (GWh)	1,533	3,504	3,504
Cien	Cost (R$ millions)	111.2	227.4	309.3
	Average Tariff (R$/MWh)	72.53	64.89	88.28
	Volume (GWh)	11,850	10,293	7,338
(Regulated Auctions Market)(1)	Cost (R$ millions)	845.1	654.1	430.6
	Average Tariff (R$/MWh)	71.32	63.55	58.69

_______________
(1)	Energy traded between Copel’s subsidiaries not included.

Transmission and Distribution

     General

     Electricity is transferred from power plants to customers through transmission and distribution systems. Transmission is the bulk transfer of electricity from generating facilities to the distribution system by means of the main national transmission grid (the “Main Transmission Grid”). Distribution is the transfer of electricity from the transmission system to Final Customers.

     The following table sets forth certain information concerning our transmission and distribution systems at the dates presented.

	At December 31,
	2007(1)	2006	2005	2004	2003
Transmission and subtransmission lines
(km)
230 kV and 525 kV	1,822.0	1,739.8	1,737.0	1,736.9	1,736.9
l38 kV	7.8	7.8	7.8	7.8	7.8
Distribution lines (km):
l38 kV	4,290.7	4,238.5	4,056.3	4,056.1	4,036.9
88 kV	58.2	58.2	58.2	58.2	58.2
69 kV	1,173.2	1,166.1	1,137.2	1,137.2	1,137.2
23 kV to 44 kV	76,524.7	74,460.8	74,156.7	74,156.7	85,870.5
13.8 kV to 23 kV.	94,999.7	91,296.6	91,419.3	91,419.3	79,296.5
Transformer capacity (MVA)
Transmission substations	16,702.2(2)	16,043.9	15,168.9	15,085.6	15,043.9
Generation (step up) substations	5,004.1	5,004.1	5,004.1	5,004.1	5,004.1
Distribution substations	1,624	1,624	1,434	1,467.0	1,420.0
Distribution transformers (MVA)	8,216.4	6,651	6,651	6,65.0	6,629.0
Total energy losses	7.2%	7.2%	8.3%	6.8%	5.4%

______________
(1)	Recently, to comply with energy sector legislation, we transferred the assets of COPEL Transmissão to COPEL Distribuição (69 kV – 138 kV) and to COPEL Geração (a small portion of our assets of 138 kV and all our assets of 230 kV and above), changing the name of the latter to COPEL Geração e Transmissão.
(2)	This figure includes 69 kV and 138 kV substations, which were transferred to Copel Distribuição, as well as transformers with primary tensions of 69kV and 138kV which belong to Copel Distribuição but are implemented in 230kV and 525kV substations, which belong to Copel Geração e Transmissão.

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Transmission

     We operate transmission facilities (consisting of a small portion of our 138 kV assets and all our assets of 230 kV and above), which are used to transmit the electricity we generate and the energy we receive from other sources. In addition to using our transmission lines to provide energy to customers in the State of Paraná, we also transmit energy through the Interconnected Power System. Two federal companies, Centrais Elétricas do Sul do Brasil S.A. — Eletrosul (“Eletrosul”) and Furnas Centrais Elétricas S.A. – Furnas (“Furnas”), also maintain significant transmission systems in the State of Paraná. Furnas is responsible for the transmission of electricity from Itaipu, while Eletrosul’s transmission system links the states in the south of Brazil. Copel and the other utilities that own transmission facilities are required to allow other parties to access our respective transmission facilities by paying the appropriate fees. ANEEL sets the charges for the use of the Main Transmission Grid.

     The construction of new transmission facilities of 230 kV and higher will be auctioned or authorized by ANEEL. The winners of such auctions or those authorized by ANEEL must build, operate and maintain the new facilities, receiving an annual fee from users in accordance with regulations set by ANEEL. We are permitted by ANEEL to make minor improvements to some of the existing 230 kV and 525 kV facilities. In 2007, we reinforced our transmission system by building two new substations, each with a voltage of 230 kV.

Distribution

     Our distribution system consists of a widespread network of overhead lines and substations with voltages up to 138 kV. Electricity is supplied to smaller industrial customers at the higher end of the voltage range and is supplied to residential, commercial and other customers at the lower end of the range. At December 31, 2007, we provided electricity in a geographic area encompassing approximately 98% of the State of Paraná and served over 3.4 million customers.

     Residential customers, representing 25.7% of our market for electricity, used 5,143 GWh of electricity during 2007, an increase of 6.6% from residential use over 2006. Industrial customers, representing 38.7% of our market for electricity, used 7,740 GWh of electricity during 2007, an increase of 7.5% from industrial use during 2006.

     Our distribution network includes 171,524 kilometers of distribution lines (up to 44 kV), 322,115 distribution transformers and 236 distribution substations of 34.5 kV each. During 2007, 91,747 new customers were connected to our network, including customers connected through the rural and urban electrification programs. We are continuing to implement compact grid design distribution lines in urban areas where there is a large concentration of trees in the vicinity of the distribution grid.

     We have 34 customers who are directly supplied with energy at a high voltage (69 kV and above) through connections to our transmission lines. These customers accounted for approximately 6.3% of our total volume of electricity sold in 2007.

     We are responsible for expanding the 138 kV and 69 kV transmission grid within our concessionarea.

System Performance

     We determine the energy losses of our distribution system separately from those of our transmission system. The rate of distribution losses is generally greater than the rate of transmission losses for most Brazilian electricity companies. Some Brazilian utilities calculate losses as a percentage of electricity carried through both the transmission network and the distribution network, which has the effect of reducing a company’s stated rate of losses. We exclude the Interconnected Power System and transmission lines operated by affiliates of Eletrobrás in calculating the rate of losses. We believe that our approach to determining energy losses provides a more accurate measure of our system performance.

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     Our energy losses totaled 7.2% of our available energy in 2007. Of our energy losses in 2007, 64% occurred during the distribution of energy, and 36% occurred during its transmission.

     In 2007, the two indicators by which we measure the quality of our performance – the duration and frequency of outages per customer – remained stable when compared to the same indicators in 2006.

     Information regarding the duration and frequency of outages for our customers is set forth in the following chart for the years indicated.

	Year ended December 31,
Quality of Supply Indicator	2007	2006	2005	2004	2003
DEC - Duration of outages per customer per year (in hours)	14h 40 min	14h 48 min	13h 28 min	14h 02min	18h 53min
FEC - Frequency of outages per customer per year (number of outages)	13.27	13.65	13.51	14.18	16.54

Sales to Final Customers

     During 2007, we supplied approximately 97% of the energy distributed directly to captive customers in the State of Paraná. Our concession area includes over 3.4 million customers located in the State of Paraná and in one municipality in the State of Santa Catarina, to the south of the State of Paraná. We also sell energy to 17 Free Customers, three of which are located outside of our concession area. During 2007, the total power consumption throughout our concession area, including Free Customers, was 19,984 GWh as compared to 18,691 GWh during 2006. Residential customers, representing 25.7% of energy supplied to final customers, used 5,143 GWh during 2007 – an increase of 6.6% as compared to 2006. Industrial customers, representing 38.7% of energy supplied to final customers, used 7,740 GWh during 2007 – an increase of 7.5% over industrial use during 2006. The following table sets forth certain information regarding our volumes of energy sold to, and revenues (in millions of reais) from sales of energy to, different categories of purchasers for the periods indicated.

	Year ended December 31,
Categories of Purchaser	2007		2006		2005		2004		2003
		(R$ in		(R$ in		(R$ in		(R$ in		(R$ in
	(GWh)(3)	millions)	(GWh)(3)	millions)	(GWh)(3)	millions)	(GWh)(3)	millions)	(GWh)(3)	millions)
Industrial Customers	7,740	1,934.1	7,200	1,751.7	7,639	1,649.2	8,197	1,456.3	8,599	1,172.1
Residential	5,143	1,900.1	4,826	1,884.1	4,653	1,857.0	4,467	1,651.4	4,382	1,365.3
Commercial	3,722	1,242.6	3,407	1,172.1	3,231	1,092.9	3,024	912.2	2,864	724.7
Rural and others(1)	2,803	556.7	2,684	559.6	2,608	554.4	2,497	481.2	2,396	389.5
Public services	576	134.3	574	132.6	565	122.4	551	104.4	542	84.9
Auction—CCEAR	11,940	721.9	11,174	634.9	8,488	435.6	0	0	0	0
Wholesale Energy Market and Interconnected Power System(4)	2,927	69.2	1,813	158.0	4,417	85.1	4,101	38.6	6,199	88.7
Other distributors (2)	4,419	576.5	4,745	498.1	4,263	429.2	4,688	407.2	2,982	245.4
Total	39,270	7,135.4	36,423	6,791.1	35,864	6,225.8	27,525	5,051.3	27,964	4,070.6

______________
(1)	Includes street lighting, municipalities and government agencies.
(2)	Total GWh includes our own consumption but does not include our energy losses.
(3)	Includes capacity made available but not fully delivered.
(4)	Includes the CCEE commercial agreements (Electric Power Trade Chamber – Pool) and the Energy Reallocation Mechanism.

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     The following table sets forth the number of our Final Customers in each category at December 31, 2007.

	Number of Final
Category	Customers
Industrial	58,795
Residential	2,713,463
Commercial	286,451
Rural and others(1)	378,369
Total.	3,437,078

______________
(1)	Includes public services

     Industrial and commercial customers accounted for approximately 27.1% and 17.4%, respectively, of our total revenues from energy sales during 2007. In 2007, 26.6% of our total revenues from energy sales were from sales to residential customers, with an average tariff of R$369.46 per MWh.

Tariffs

     Retail tariffs. We classify our customers into two groups (“Group A Customers” and “Group B Customers”), based on the voltage level at which electricity is supplied to them and on whether they are considered as industrial, commercial, residential or rural customers. Each customer falls within a certain tariff level defined by law and based on the customer’s classification, although some flexibility is available according to the nature of each customer’s demand. Under Brazilian regulation, residential customers (other than Low Income Residential Customers, as defined below) pay the highest tariff rates, followed by commercial and industrial customers.

     Group A Customers receive electricity at 2.3 kV or higher and the tariffs applied to them are based on the actual voltage level at which energy is supplied and the time of year and the time of day energy is supplied. Tariffs are comprised of two components: a “capacity charge” and an “energy charge.” The capacity charge, expressed in reais per KW, is based on the higher of (1) contracted firm capacity and (2) power capacity actually used. The energy charge, expressed in reais per MWh, is based on the amount of electricity actually consumed and evidenced by our metering.

     Group B Customers receive electricity at less than 2.3 kV and the tariffs applied to them are comprised solely of an energy charge and are based on the classification of the customer.

     In June 2006, ANEEL authorized a 5.12% increase in our tariffs. Previously, we had effected a policy of tariff discounts to those of our Final Customers who paid their electricity bills when due. After that tariff increase, we discontinued our policy of providing a tariff discount.

     On June 24, 2007, ANEEL required us to decrease our tariffs by an average of 1.22% pursuant to the annual tariff readjustment. The primary reason that ANEEL decreased our tariffs was to account for the devaluation of the US dollar against the Real in 2006.

     Electrical energy tariffs have gone through a realignment process in order to reduce the subsidization of high-voltage customers by low-voltage customers. Consequently, the average readjustments applied were higher in high-voltage users (0.94%) and lower for low-voltage customers (-1.89%) . Nevertheless, comparing earlier tariffs with those currently in force, the average effect will be a -0.21% adjustment for high-voltage customers and a -2.04% adjustment for low-voltage customers.

     On June 23, 2008, ANEEL required us to decrease our tariffs by 3.35%, pursuant to the second periodic revision. This decrease consisted of a 7.17% decrease in our retail tariffs and a 3.82% increase for deferred regulatory asset recovery (CVA).

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     The following table sets forth the average tariffs (including value-added taxes) for each category of Final Customer in effect in 2007, 2006 and 2005.

	2007	2006	2005
	(R$/MWh)	(R$/MWh)	(R$/MWh)
Tariffs
Industrial.	249.88	243.30	215.91
Residential	369.46	390.40	399.12
Commercial	333.87	344.02	338.23
Rural and others.	198.61	208.51	214.31
Public services	233.18	231.07	216.61
All Final Customers	288.62	294.27	282.19

     Low Income Residential Customers. Under Brazilian law we are required to provide discounted rates to certain low income residential customers (“Low Income Residential Customers”). In 2007, we served 745,956 Low Income Residential Customers.

     The following table sets forth the current minimum discount rates approved by ANEEL for each category of Low Income Residential Customer.

	Discount From
Consumption	Base Tariff
Up to 30 kWh per month	65%
From 31 to 100 kWh per month.	40%
From 101 to 160 kWh per month	10%

     Non-retail Tariffs. In 2005, ANEEL established a new formula for tariffs applied to small distributors. According to this new rule, small distributors must pay both an energy tariff and a distribution tariff. In 2007, we were granted an increase of approximately 35.6% in the average tariffs for Supply Contracts with distributors in the State of Paraná. During 2007, the average tariff for sales of energy pursuant to these Supply Contracts was R$114.21 per MWh. The Initial Supply Contracts were terminated by the end of 2005. We also had bilateral supply energy contracts with an average tariff of R$130.71/MWh in 2007.

     The following table sets forth average tariffs in effect in 2007, 2006 and 2005.

	2007	2006	2005
	(R$/MWh)	(R$/MWh)	(R$/MWh)
Tariffs
Supply Contracts with distributors in the State of Paraná	114.21	84.23	82.44
Initial Supply Contracts with out-of-state distributors(1)	-	-	60.42
Bilateral Contracts	130.71	111.56	107.62

______________
(1)	The Initial Supply Contracts were terminated by the end of 2005.

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     Transmission Tariffs. Transmission concessionaires are entitled to annual revenues based on the transmission network they own and operate. These revenues are periodically readjusted according to criteria stipulated in the concession contract. Copel Geração e Transmissão is party to two concession contracts, each of which has a different structure for calculating this revenue value. In addition, we pay third parties for the use of their transmission networks, which are also part of the Main Transmission Grid. In 2007, we recognized as expenses R$514.5 million for the use of the Main Transmission Grid and recognized R$141.7 million in revenues for the use of our transmission network by third parties.

     One portion of our annual revenues, which amounted to 25.0% of our gross transmission revenues in 2007, is subject to periodic adjustment by Aneel. The periodic revision scheduled for 2005 was carried out in 2007, at which time Aneel applied an adjustment of –15.08% . This adjustment was applied retroactively to July 2005. The remainder of our annual revenues was subject to adjustment by IGP-M. As a result, the aggregate adjustment in our 2007 gross transmission revenues was –5.69% . For more information on our transmission tariffs, see Notes 29 and 31 of our consolidated financial statements.

     In June 2005, ANEEL also set R$3,456.90/MW as the tariff that we and the other distribution companies pay to Furnas for the transportation of high-voltage energy from Itaipu. In June 2006, ANEEL reduced this tariff to R$3,061.04/MW, and in June 2007 Aneel reduced it again, to R$3,012.28/MW.

Other Businesses

Telecommunications

     Copel Telecomunicações S.A. In March 1998, we became the first power company in Brazil to obtain an authorization from the Brazilian National Telecommunication Agency (ANATEL) to provide corporate telecommunication services within the State of Paraná and international long-distance services. We have been offering these services since August 1998 through the use of our fiber optics network (10.5 thousand Km by the end of 2007). The ownership of the network assets and our broad experience in the operation and maintenance of complex telecommunication networks have contributed to the success of this program. In 2002, we obtained an authorization from ANATEL to provide multimedia services. In 2007, we served 181 of the 399 municipalities in the State of Paraná, which represents 83% of the total population of the state. In addition to our commercial services, we have also been involved in an educational project aimed at providing lower and middle public school students in the State of Paraná with broadband Internet access in their schools.

     We also provide services to most of the major Brazilian telecommunication companies that operate in the State of Paraná. We have 504 clients, and our services are also provided to supermarkets, universities, banks, Internet Service Providers and television networks. Besides, a number of different telecommunication services are provided to the company’s subsidiaries for generation, transmission and distribution of electric power.

     Sercomtel. We own 45.0% of the voting stock of Sercomtel Telecomunicações S.A. (“Sercomtel Telecomunicações”) and 45.0% of Sercomtel Celular S.A. (individually, “Sercomtel Celular” and, jointly with Sercomtel Telecomunicações, “Sercomtel”). Sercomtel holds concessions to provide fixed and mobile telephone services in the municipalities of Londrina, Cambé, Ibipora, Arapongas and Tamarana in the State of Paraná and has obtained ANATEL’s authorization to make national and international telephone calls. Sercomtel has concessions from ANATEL to provide cable television in São José (State of Santa Catarina) and Osasco (State of São Paulo) and radio-wave television transmission in Maringá and Londrina (State of Paraná).

     As of December 31, 2007, Sercomtel Telecomunicações, in its concessions area for fixed telephone services, possessed a total of 177,739 telephone lines installed, of which 157,642 were in operation. As of December 31, 2007, Sercomtel Celular had an installed capacity of 75,785 terminals in its TDMA system, of which 6,975 were in operation, as well as an installed capacity of 97,848 terminals in its GSM system, of which 66,143 were in operation. Sercomtel’s 2007 gross revenues were R$257.8 million, with net profits of R$5.9 million.

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Water and Sewage

     On January 14, 2008, Copel bought the entirety of the 30% stake in Dominó Holdings S.A. (“Dominó Holding”) held by Sanedo Ltda., a wholly-owned subsidiary of Grupo Vivendi, for R$110.2 million. We now own 45% of the total outstanding share capital of Dominó Holdings, which in its turn owns 34.75% of the voting stock of Companhia de Saneamento do Paraná – Sanepar (“Sanepar”), a public utility company that services 344 urban and rural municipalities and approximately 8.5 million people in the State of Paraná with water distribution and 4.4 million with sewage services. The State of Paraná owns 60.0% of the outstanding voting capital of Sanepar. Dominó Holdings’ net income in 2007 was R$55.2 million. The total outstanding share capital of Dominó Holdings are as follows: (1) 45.0% is held by us; (2) 27.5% is held by Construtora Andrade Gutierrez S/A; and (3) 27.5% is held by Daleth Participações S.A.

     In February 2003, the Government of the State of Paraná issued a decree canceling the Sanepar shareholders’ agreement and dismissing the board members appointed by Dominó Holdings. Dominó Holdings is currently engaged in litigation proceeding with the Government of the State of the Paraná in connection with this issue.

Gas

     We are engaged in the distribution of natural gas through Compagas, the company that holds the exclusive rights to supply piped gas in the State of Paraná. Compagas’ customers include industries, thermoelectric plants, two cogeneration plants, businesses, gas stations, residences, and fuel cells. Compagas is focusing its marketing efforts on substituting gas for fuel oil and other fuels as a means of achieving greater energy efficiency.

     As of December 31, 2007, we owned 51% of the capital stock of Compagas and accounted for this interest using the equity method. The minority shareholders of Compagas are Petrobras and Mitsui Gas, each of which owns 24.5% of the capital stock of Compagas.

     Compagas distributes natural gas from Bolivia supplied through the Bolivia-Brazil gas pipeline. The volume contracted by Compagas is enough to safely meet demand in the next two years. For future supplies, Compagas has already started to negotiate with Petrobras in order to contract additional purchases of Brazilian natural gas. Petrobras has indicated through its Anticipated Gas Production Plan (Antecipação de Produção de Gás – Plangás), that the investments made by Petrobras and other Brazilian companies are expected to offer a significant increase in the availability of Brazilian natural gas in the market, which is expected to increase from 28 million cubic meters per day in 2007 to 64 million cubic meters per day in 2009. Additionally, two new re-gasification plants are expected to become operational at the end of 2008 or the beginning of 2009, with a total processing capacity of 27 million cubic meters per day of natural gas. Compagas owns a gas distribution network in the State of Paraná consisting of 459 kilometers of pipelines. During 2007, Compagas recorded a daily average sales volume of 1,828,772 cubic meters of natural gas to 2,928 customers. During 2007, Compagas’ gross revenues were R$273.1 million, and its net income was R$47.9 million.

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Natural Gas Sales in 2007 

	Number of	Consumption	Participation
Segment	Customers	(m3)	(%)
Industrial	95	455,521	24.9%
Cogeneration	2	179,543	9.8%
Vehicular (gas stations)	24	91,292	5.0%
Commercial	163	6,810	0.4%
Residential (building)	2,642	2,123	0.1%
Raw Material	1	115,571	6.3%
Thermoelectrial plant	1	977,912	53.5%
Total	2,928	1,828,772	100.00%

Services

     We own 40.0% of the share capital of ESCO Electric Ltda. (“ESCO”), a company that assists customers with their electricity needs through the provision of consulting services, planning and project implementation, automation services, operation, maintenance, training and technical assistance. ESCO also markets products and services aimed at obtaining greater energy efficiency and energy conservation. During 2007, ESCO’s net revenues were R$5.3 million, and it had a net income of R$0.2million.

     Copel-Agra S/C Ltda (“Copel-Agra”) was incorporated in November 2000 to provide engineering services, ranging from the preparation of feasibility studies and environmental reports, to full engineering, procurement and construction projects. We own 48.0% of the total issued and outstanding share capital of Copel-Agra, which started its operations in the first quarter of 2001. Our partners are Agra-Monenco, a Canadian company, and LACTEC, a Brazilian technology institute. In December 2001, as a result of the acquisition of Agra-Monenco by AMEC, an English company, the corporate name was changed to Copel-Amec S/C Ltda (“Copel-Amec”). The shareholders of Copel-Amec have decided to wind-up the company pursuant to a shareholder’s meeting dated as of August 2004. This process was approved by our Board of Directors in September 2005, and is still ongoing.

     In September 1999, we formed a partnership with Engevix Engenharia and Intertechne Consultores called Braspower International Engineering S/C Ltda. (“Braspower”) to offer technology services relating to energy and infrastructure projects in the international market. Braspower has entered into various agreements for the provision of consulting services for projects in China and Nepal. We own 49.0% of the total outstanding share capital of Braspower and Engevix Engenharia held the remaining 51.0% .

Concessions

     We operate under concessions granted by the Brazilian government for our generation, transmission and distribution businesses. Currently our distribution and our transmission concessions will expire in July 2015, but our concessions provide for possible extensions, which we will solicit from ANEEL 36 months prior to expiration.

     Since 1999, nine of our generation plants have had their concessions extended by Brazilian authorities for 20-year term in each case, as allowed by law. For those plants whose concessions have not yet expired, we will have the option to ask for a 20-year extension.

     We recently solicited renewals from ANEEL for the following plants, the concessions for which expire in 2009, 2010 and 2011: Gov. Ney Aminthas de Barros Braga (Segredo hydroelectric facility), Rio Jordão deviation project, Gov. José Richa (Salto Caxias hydroelectric facility) and Cavernoso. ANEEL has not yet initiated our renewal process. MME, the body eventually charged with deciding whether to renew a concession, has thus far granted all our other concession renewal requests.

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Seasonality

     We believe that seasonality does not affect our businesses.

Competition

     We have been granted concessions to distribute electricity in an area comprising substantially all of the area of the State of Paraná and do not face competition from the five utilities that have been granted concessions for the remainder of the state. As a result of legislation passed in 2004, however, other suppliers are able to offer electricity to our existing Free Customers at prices lower than those we currently charge. Furthermore, under certain circumstances, Free Customers may be entitled to connect directly to the transmission grid rather than the distribution grid. Unlike a Free Customer’s choice of another energy supplier, in which case that customer must still use our distribution network and thus pay us the appropriate tariff, our distribution business ceases to collect tariffs from a customer who migrates to the Main Transmission Grid. As such, the migration of customers from the distribution network to the transmission network results in the loss of revenues for our distribution business.

     Distribution and transmission companies are required to permit the use of their lines and ancillary facilities for the distribution and transmission of electricity by other parties upon payment of a tariff.

     Customers that may contract with other suppliers for electricity (“Free Customers”) are limited to:

• existing customers (those participating in the electric system before July 1995) with demand of at least 3 MW and supplied at voltage levels equal to or greater than 69 kV;
• new customers with demand of at least 3 MW at any voltage; and
• customers with demand of at least 500 kW and who opt to be supplied energy by means of alternative sources, such as wind power projects, small hydroelectric power plants or biomass projects.

     During 2007, we provided electricity to 17 Free Customers, representing approximately 4.8% of our gross operating revenues from energy sales and approximately 3.7% of the total quantity of electricity sold by us. Less than 1% of the megawatts sold under contract to such customers are set to expire in 2008. There can be no assurance that, upon the expiration of these contracts, the Free Customers will purchase energy from us.

     At December 31, 2007, we had 33 customers that were eligible to qualify as Free Customers. Such customers represented approximately 3.7% of our total volume of electricity sold in 2007, and approximately 4.7% of our total gross operating revenues from energy sales for that year.

     In the generation business, any producer may be granted a concession to build or manage generating facilities in the State of Paraná.

     In the transmission business, Brazilian law provides for competitive bidding for transmission concessions for facilities with voltage of 230 kV or greater that will form part of the Main Transmission Grid.

     Brazilian law requires that all of our concessions be subject to a competitive bidding process upon their expiration. We intend to apply for the extension of each concession 36 months prior to its expiration. We may face significant competition from third parties in bidding for renewal of such concessions or for any new concessions. The loss of certain concessions could adversely affect our results of operations.

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Environment

     Our construction and operation activities for the generation, transmission and distribution of electric energy, distribution of natural gas and our telecommunications operations are subject to federal, state and municipal environmental regulations. We have a consulting committee that is responsible for the implementation of our sustainability and good corporate citizen policies that take into account environmental and social impacts when evaluating our proposed projects.

     In 2002, we started to implement the Environmental Management System (“EMS”) in accordance with ISO 14000 rules, which manage the regulation of the environmental aspects of our generation activities.

     We are in compliance with all material environmental regulations and our most recent generation, transmission and distribution projects are in compliance with federal and state regulations. We are currently applying for the renewal of our environmental licenses for our respective generation and transmission activities. We must apply for these renewals from the Environment Institute of the State of Paraná every two years.

     Among the environmental and social programs we are involved with is the “Tribute to the Waters” (Tributo às Águas), program whose objective is to facilitate and promote sustainable social, economic and environmental development of the communities located on the Paraná River basins.

     To reinforce our commitment to environmental, social and economical aspects of sustainability, we are listed in the sustainability index of BOVESPA and we also report to the Global Reporting Initiative – GRI-G3.

The Condemnation Process

     Our principal properties consist of the generation, transmission and distribution facilities described in “—Business—Generation and Purchasers of Energy” and “—Business—Transmission and Distribution.” Of the net book value of our total property, plant and equipment at December 31, 2007 (including construction in progress), generation and transmission facilities represented 51.3%, distribution facilities represented 27.4%, telecommunications represented 2.7%, supply of gas represented 1.9%, ELEJOR represented 8.5% and UEG Araucaria Thermoelectric Plant represented 8.2% . We believe that our facilities generally are adequate for our present needs and suitable for their intended purposes.

     Although we receive concessions from the Brazilian government to construct hydroelectric projects, we do not receive title to the land on which the projects are located. Land required for the implementation of our projects may only be condemned pursuant to specific legislation. We generally negotiate with communities and individual owners occupying the land so as to resettle such communities in other areas and to compensate individual owners. Our policy of resettlement and compensation generally has resulted in the settlement of condemnation disputes. At December 31, 2007 we estimated our liability related to the settlement of such disputes to be approximately R$5.2 million. This amount does not include the projections for land condemnation included in the budgets for each of our projects.

Insurance

     We maintain insurance for, fire natural disasters, accidents involving third parties, certain other risks associated with the transportation and assembly of equipment, construction of plants, and multirisks. Our subsidiaries Compagas, Elejor and Araucária also have similar insurance coverage. We do not have insurance coverage for business interruption risk because we do not believe that the high premiums are justified by the low risk of major interruption, considering the energy available in the Interconnected Power System. We believe that we maintain insurance that is both customary in Brazil and adequate for the businesses in which we are engaged.

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THE BRAZILIAN POWER INDUSTRY

General

     In February 2008, the Ministry of Mines and Energy, Ministério de Minas e Energia (“MME”) approved a ten-year expansion plan under which Brazil’s installed power generation capacity is projected to increase to 144.8 GW by 2016, of which 75.3% is projected to be hydroelectric, 15.3% is projected to be thermoelectric, 2.3% is projected to be nuclear and 7.1% is projected to be from alternative energy sources such as wind, small hydro and biomass.

     Approximately 40.0% of the installed power generating capacity of Brazil is currently owned by Eletrobrás (including its wholly-owned subsidiary Eletronuclear and its 50.0% participation interest in Itaipu). Through its subsidiaries, Eletrobrás is also responsible for 65% of the installed transmission capacity equal or above 230 kV within Brazil. In addition, some Brazilian states control entities involved in the generation, transmission and distribution of electricity. They include Companhia Energética de São Paulo – CESP, Companhia Energética de Minas Gerais – CEMIG and us, among others. Under the New Model Industry Law, Eletrobrás and its subsidiaries were excluded from the National Privatization Program (Plano Nacional de Privatização), which the Brazilian government created in 1990 to promote the privatization of state-owned companies.

Principal Regulatory Authorities

Ministry of Mines and Energy – MME

     The MME is the Brazilian government’s primary regulator of the power industry, acting as the granting authority on behalf of the Brazilian government and empowered with policymaking, regulatory and supervisory capacity. Following the adoption of the New Industry Model Law, the Brazilian government, acting primarily through the MME, has undertaken certain duties that were previously the responsibility of ANEEL, including the drafting of the guidelines governing the granting of concessions and the issuance of directives governing the bidding process for concessions relating to public services and public assets.

National Energy Policy Council—CNPE

     The National Energy Policy Council, Conselho Nacional de Política Energética (“CNPE”), is a committee created in August 1997 to advise the Brazilian President with respect to the development of national energy policy. The CNPE is presided over by the Minister of Mines and Energy, and the majority of its members are ministers of the Brazilian government. The CNPE was created to optimize the use of Brazil’s energy resources and to ensure the supply of energy to the country.

Energy Research Company - EPE

     The Energy Research Company, Empresa de Pesquisa Energética (“EPE”), was created in 2004 as a state-owned company connected to the MME. The EPE develops studies and research in subjects such as electricity, oil and gas and its byproducts, coal, renewable energy sources and energy efficiency, among others subjects, in order to support energy sector planning.

National Electric Energy Agency—ANEEL

     The Brazilian power industry is regulated by ANEEL, an independent federal regulatory agency. After the enactment of the New Industry Model Law, ANEEL’s primary responsibility is to regulate and supervise the power industry in accordance with the policies set forth by the MME and to respond to matters which are delegated to it by the Brazilian government and the MME. ANEEL’s current responsibilities include, among others, (i) administering concessions for electric energy generation, transmission and distribution, including the approval of electricity tariffs, (ii) enacting regulations for the electric energy industry, (iii) implementing and regulating the exploitation of energy sources, including the use of hydroelectric power, (iv) promoting the public bidding process for new concessions, (v) settling administrative disputes among electricity sector entities and electricity purchasers and (vi) defining the criteria and methodology for the determination of transmission tariffs.

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National Electric System Operator—ONS

     The National Electric System Operator, Operador Nacional do Sistema Elétrico (“ONS”) was created in 1998. The ONS is a non-profit, private entity comprised of electric utilities engaged in the generation, transmission and distribution of electric energy, in addition to other private participants such as importers, exporters and Free Customers. The New Industry Model Law granted the Brazilian government the power to nominate three executive officers to ONS’ board of executive officers. The primary role of the ONS is to coordinate and control the generation and transmission operations in the Interconnected Power System, subject to the ANEEL’s regulation and supervision. The objectives and principal responsibilities of the ONS include, among others, operational planning for the generation industry, organizing the use of the domestic Interconnected Power System and international interconnections, guaranteeing that all parties in the industry have access to the transmission network in a non-discriminatory manner, assisting in the expansion of the electric energy system, proposing plans to the MME for extensions of the Basic Grid, and submitting rules for the operation of the transmission system for ANEEL’s approval.

Electric Energy Trading Chamber—CCEE

     The Electric Energy Trading Chamber, Câmara de Comercialização de Energia Elétrica (“CCEE”), is a not-for-profit organization subject to authorization, inspection and regulation by ANEEL. The CCEE replaced the Wholesale Energy Market pursuant to the new rules set forth under the New Industry Model Law.

     The CCEE is responsible, among other things, for (i) registering all the energy purchase agreements (Contratos de Comercialização de Energia no Ambiente Regulado) (“CCEAR”) in the Regulated Market, and registering the agreements resulting from market adjustments and the volume of electricity contracted in the Free Market, and (ii) the accounting for and clearing of short-term transactions. The CCEE is comprised of holders of concessions, permissions and authorizations in the electricity industry and Free Customers and its board of directors is comprised of four members appointed by these agents and one by the MME, which will be the Chairman of the board of directors.

Energy Sector Monitoring Committee—CMSE

     The Energy Sector Monitoring Committee, Comitê de Monitoramento do Setor Elétrico (“CMSE”) was created by the New Industry Model Law to monitor service conditions in the next five years and to recommend preventative measures to ensure energy supply adequacy, including demand-side action and contracting of energy reserves.

Eletrobrás

     The New Industry Model Law excluded Eletrobrás and its subsidiaries from the National Privatization Program, which the Brazilian government created in 1990 to promote the privatization of state-owned companies. Eletrobrás serves as a holding company for the following federally-owned energy companies: Companhia Hidro Elétrica do São Francisco, Furnas, Eletrosul, Centrais Elétricas do Norte do Brasil S.A., Companhia de Geração Térmica de Energia Elétrica and Eltrobrás Termonuclear S.A. Electrobrás manages funds generated by some of the regulatory charges, as well as the commercialization of energy from Itaipu and from alternative energy sources, under the Proinfa Program.

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Historical Background of the Industry Legislation

     The Brazilian constitution provides that the development, use and sale of electric energy may be undertaken directly by the Brazilian government or indirectly through the granting of concessions, permissions or authorizations. Historically, the Brazilian electric energy industry has been dominated by generation, transmission and distribution concessionaires controlled by the Federal or State governments. Since 1995, the Brazilian government has taken a number of measures to reform the Brazilian electric energy industry. In general, these measures were aimed at increasing the role of private investment and eliminating foreign investment restrictions, thus increasing overall competition in the industry.

     The following is a summary of the principal reform measures undertaken by the Brazilian government to date:

• The Brazilian constitution was amended in 1995 to authorize foreign investment in power generation. Prior to this amendment, all generation concessions were held either by a Brazilian individual or an entity controlled by Brazilian individuals or by the Brazilian government.
• The Brazilian government enacted Law No. 8,987 on February 13, 1995 (the “Concessions Law”) and Law No. 9,074 on July 7, 1995 (the “Power Concessions Law”), that together (i) required that all concessions for the provision of energy related services be granted through public bidding processes, (ii) provided for the creation of generation entities, known as Independent Power Producers (“IPPs”), which, by means of a concession, permission or authorization, may generate and sell the totality or part of their electricity to Free Customers, distribution concessionaires and trading agents, among others, (iii) gradually allowed certain electricity consumers with significant demand (demand equal to or greater than 3MW that are supplied at a voltage level equal to or greater than 69kV or, in the case of new customers that have entered the market since July 1995, customers with demand equal to or greater than 3MW that are supplied at any voltage level), known as Free Customers, to purchase electricity directly from suppliers holding a concession, permission or authorization, (iv) granted electricity suppliers and Free Customers open access to all distribution and transmission systems and (v) eliminated the need for a concession to construct and operate power projects with a capacity from 1 MW to 30 MW.
• Beginning in 1995, a portion of the controlling interests held by Eletrobrás and various states in generation and distribution companies were sold to private investors. At the same time, certain state governments also sold their stakes in major distribution companies.
• In 1998, the Brazilian government enacted Law No. 9,648 (the “Power Industry Law”), to overhaul the basic structure of the electricity industry. The Power Industry Law provides for the following:

     - the establishment of a self-regulated body responsible for the operation of the short-term electricity market, or the Wholesale Energy Market, which replaced the prior system of regulated generation prices and supply contracts;

     - a requirement that distribution and generation companies enter into initial energy supply agreements, known as Initial Supply Contracts, generally “take or pay” commitments, at prices and volumes approved by ANEEL. The main purpose of the Initial Supply Contracts is to ensure distribution companies have access to a stable electricity supply at prices that guarantee a fixed rate of return for the electricity generation companies during the transition period leading to the establishment of a free and competitive electricity market;

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     - the creation of the ONS, a non-profit private entity responsible for the operational management of the generation and transmission activities of the Interconnected Power System;

    - the establishment of public bidding processes for concessions for the construction and operation of power plants and transmission facilities;

     - separation of generation, transmission, distribution and commercialization activities;

     - the establishment of concentration restrictions for holding equity interests in distribution or generation; and

     - the appointment of BNDES as the financing agent of the power industry, especially to support new generation projects.

In 2001, Brazil faced a serious energy crisis that lasted until the end of February 2002. As a result, the Brazilian government implemented measures that included:

     - a program for the rationing of electric energy consumption in the most adversely affected regions, namely the southeast, central-west and northeast regions of Brazil; and

     - the creation of the Energy Crisis Management Chamber, Câmara de Gestão da Crise de Energia Elétrica (“CGE”), which passed a series of emergency measures that provided for reduced energy consumption targets for residential, commercial and industrial consumers in the affected regions by introducing special tariff regimes that encouraged the reduction of electricity consumption.

     - In March 2002, the CGE suspended the emergency measures and electricity rationing as a result of large increases in supply (due to a significant rise in reservoir levels) and a moderate reduction in demand, and, accordingly, the Brazilian government enacted new measures in April 2002 that, among other things, established an extraordinary tariff readjustment to compensate financial losses incurred by the electricity suppliers as a result of the mandatory electricity rationing.

     - On March 15, 2004, the Brazilian government enacted the New Industry Model Law, in an effort to further restructure the power industry with the ultimate goal of providing consumers with a secure electricity supply at a low tariff.

Concessions

     The companies or consortia that wish to build or operate facilities for generation, transmission or distribution of electricity in Brazil must apply to the MME or to ANEEL for a concession, permission or authorization, as the case may be. Concessions grant rights to generate, transmit or distribute electricity in the relevant concession area for a specified period, as opposed to permissions and authorizations, which are granted for an undetermined period of time by ANEEL, without a public bidding process. This period is usually thirty-five years for new generation concessions, and thirty years for new transmission or distribution concessions. An existing concession may be renewed at the granting authority’s discretion, except in some specific cases provided by law.

     The Concessions Law establishes, among other things, the conditions that the concessionaire must comply with when providing electricity services, consumers’ rights, and the obligations of the concessionaire and the granting authority. In addition to the Concession Law, the concessionaire must also comply with the general regulations, which govern the electricity sector. The main provisions of the Concessions Law and related ANEEL regulations are summarized as follows:

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     Adequate service. The concessionaire must render adequate service to all customers in its concession and must maintain certain standards with respect to regularity, continuity, efficiency, safety and accessibility.

     Use of land. The concessionaire may use public land or request that the granting authority expropriate necessary private land for the benefit of the concessionaire. In the latter case, the concessionaire must compensate the affected private landowners.

     Strict liability. The concessionaire is strictly liable for all damages arising from the provision of its services.

     Changes in controlling interest. The granting authority must approve any direct or indirect change in the concessionaire’s controlling interest.

     Intervention by the granting authority. The granting authority may intervene in the concession, by means of a presidential decree, to ensure the adequate performance of services, as well as the full compliance with applicable contractual and regulatory provisions. Within thirty days of such a decree, the granting authority’s representative must commence an administrative proceeding in which the concessionaire is entitled to contest the intervention. During the term of the administrative proceeding, the granting authority shall appoint an individual to manage the concession. If the administrative proceeding is not completed within 180 days of the issuance of the decree, the intervention will be stopped and the concession will be returned to the concessionaire. The concession is also returned to the concessionaire if the granting authority’s representative decides not to terminate the concession and the concession has not yet expired.

     Termination of the concession. The termination of the concession agreement may be anticipated by means of expropriation and/or forfeiture. Expropriation is the early termination of a concession for reasons related to the public interest, which has to be approved by law. Forfeiture must be declared by the granting authority after ANEEL or the MME has made a final administrative ruling that the concessionaire, among other things, (1) has failed to render adequate service or to comply with applicable law or regulation, (2) no longer has the technical, financial or economic capacity to provide adequate service, or (3) has not complied with penalties assessed by the granting authority. The concessionaire may contest any expropriation or forfeiture in the courts.

     A concession agreement may also be terminated (1) through the mutual agreement of the parties, (2) upon the bankruptcy or dissolution of the concessionaire, or (3) following a final, non-appealable judicial decision rendered in a proceeding filed by the concessionaire.

     When a concession agreement is terminated, all assets, rights and privileges that are materially related to the rendering of electricity services revert to the Brazilian government. Following termination, the concessionaire is entitled to indemnification for its investments in assets that have not been fully amortized or depreciated, after deduction of any amounts due by the concessionaire related to fines and damages.

     Expiration. When the concession expires, all assets, rights and privileges that are materially related to the rendering of the electricity services revert to the Brazilian government. Following the expiration, the concessionaire is entitled to indemnification for its investments in assets, which have not been fully amortized or depreciated as of the expiration.

     Penalties. ANEEL regulations govern the imposition of sanctions against agents in the electricity sector and classify the appropriate penalties based on the nature and importance of the breach (including warnings, fines, temporary suspension from the right to participate in bidding procedures for new concessions, licenses or authorizations and forfeiture). For each infraction, the fines can be up to 2.0% of the revenue (net of value-added tax and services tax) of the concessionaire in the 12-month period preceding any penalty notice. Some infractions that may result in fines relate to the failure of the agent to request ANEEL’s approval for certain actions, including the following: (1) execution of contracts between related parties in the cases provided by regulation; (2) sale or assignment of the assets related to services rendered as well as the imposition of any encumbrance (including any security, bond, guarantee, pledge and mortgage) on them or any other assets related to the concession or the revenues of the electricity services; (3) changes in controlling interest of the holder of the authorization or concession; and (4) changes to the by-laws. In the case of contracts executed between related parties that are submitted for ANEEL’s approval, ANEEL may seek to impose restrictions on the terms and conditions of these contracts and, in extreme circumstances, determine that the contract be rescinded.

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The New Industry Model Law

     The New Industry Model Law introduced material changes to the regulation of the power industry, in order to (i) provide incentives to private and public entities to build and maintain generation capacity and (ii) assure the supply of electricity in Brazil at low tariffs through competitive electricity public bidding processes. The key elements of the New Industry Model Law include:

• Creation of a parallel environment for the trading of electricity, including: (1) the regulated market, a more stable market in terms of supply of electricity; and (2) a market specifically addressed to certain participants (i.e., Free Customers and energy trading companies), called the free market, that will permit a certain degree of competition vis-à-vis the regulated market.
• Restrictions on certain activities of distributors, so as to require them to focus on their core business of distribution activities, to promote more efficient and reliable services to captive consumers.
• Elimination of self-dealing, in order to provide an incentive to distributors to purchase electricity at the lowest available prices rather then buying electricity from related parties.
• Respect for contracts executed prior to the New Industry Model Law, in order to provide regulatory stability for transactions carried out before its enactment.

     The New Industry Model Law excludes Eletrobrás and its subsidiaries from the National Privatization Program, which is a program originally created by the Brazilian government in 1990 to promote the privatization process of state-owned companies.

Parallel Environment for the Trading of Electric Energy

     Under the New Industry Model Law, electricity purchase and sale transactions are carried out in two different segments: (1) the Pool, which contemplates that distribution companies will purchase all the electricity they need to supply their customers through a public auction and (2) the free market, which provides for the purchase of electricity by non-regulated entities (such as the Free Customers and energy traders).

     The electricity arising from (1) low capacity generation projects located near consumption points (such as certain co-generation plants and the small hydroelectric power plants), (2) plants qualified under the Proinfa Program, an initiative established by the Brazilian government to create incentives for the development of alternative energy sources, such as wind power projects, small hydroelectric power plants and biomass projects and (3) Itaipu, will not be subject to the public bidding process for the supply of electricity to the Pool. The electricity generated by Itaipu will continue to be sold by Eletrobrás to the distribution concessionaires operating in the South, Southeast and Center-Western Interconnected Power System, although no specific contract was entered into by such concessionaires. The rates at which Itaipu-generated electricity is traded are denominated in U.S. dollars and established pursuant to a treaty between Brazil and Paraguay. As a consequence, Itaipu rates rise or fall in accordance with the variation of the U.S. dollar/real exchange rate. Changes in the price of Itaipu-generated electricity are, however, subject to the Parcel A cost recovery mechanism discussed below under “—Distribution Tariffs.”

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     The Regulated Market (the “Pool”)

     In the regulated market, distribution companies must purchase their expected electricity requirements for their captive customers in the Pool, through a public auction process. The auction is administered by ANEEL, either directly or through CCEE, under certain guidelines provided by the MME.

     Electricity purchases are made through two types of bilateral agreements: Energy Agreements (Contratos de Quantidade de Energia) and Capacity Agreements (Contratos de Disponibilidade de Energia). Under an Energy Agreement, a generator commits to supply a certain amount of electricity and assumes the risk that its electricity supply could be adversely affected by hydrological conditions and low reservoir levels, among other conditions, which could interrupt the supply of electricity. In such a case, the generator would be required to purchase electricity elsewhere in order to comply with its supply commitments. Under a Capacity Agreement, a generator commits to make a certain amount of capacity available to the Pool. In such a case, the generator’s revenue is guaranteed and the distributors must bear the risk of a supply shortage.

     Under the New Industry Model Law, the estimate of demand from distributors is the principal factor in determining how much electricity the system as a whole will contract. Under the new system, distributors are obligated to contract 100.0% of their projected electricity needs, as opposed to 95.0% under the previous regime. A deviation in actual demand from projected demand results in penalties to distributors. In the case of under-contracting, distributors are penalized directly in an amount that increases as the difference between projected demand and actual demand increases. Under-contracting distributors are also subject to indirect penalties, as they must pay additional amounts to meet their added demand by purchasing energy in the spot market.

     In the case of over-contracting, where the contracted volume falls between 100% and 103% of actual demand, the distributor is not penalized and the additional costs are compensated for through increases in its customers’ tariffs. Where the contracted volume is over 103% of actual demand, an indirect penalty is applied to the distributor by forcing the distributor to sell energy in the spot market. If the contract price proves lower than the current spot market price, the distributor sells its excess energy for a profit. On the other hand, if the contract price is higher than the spot market price, the distributor sells its extra energy at a loss.

     With respect to the granting of new concessions, the newly enacted regulations provide that bids for new hydroelectric generation facilities may include, among other things, the minimum percentage of electricity to be supplied to the Pool. Concessions for new generation projects, such as Mauá, in our case, are non-renewable, meaning that upon expiration, the concessionaire must again complete a competitive bidding process.

     The Free Market

     The free market covers transactions between generation concessionaires, IPPs, self-generators, energy traders, exporters and importers of electric energy and Free Customers. The free market will also include bilateral contracts between generators and distributors signed under the old model, until they expire. Upon expiration, such contracts must be executed under the New Industry Model Law guidelines.

     A consumer that is eligible to choose its supplier may only do so upon the expiration of its contract with the local distributor, with advance notice or, in the case of a contract with no expiration date, upon 15 days notice in advance of the date on which the distributor must provide MME with its estimated electricity demand for the year. In the latter case, the contract will only be terminated in the following year. Once a consumer has chosen the free market, it may only return to the regulated system once it has given the distributor of its region five years notice, provided that the distributor may reduce such term at its discretion. Such an extended period of notice seeks to assure that, if necessary, the distributor can buy additional energy in the Pool without imposing extra costs on the captive market.

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     State-owned generators may sell electricity to Free Customers, however, as opposed to private generators, they are obligated to do so through an auction process.

Regulation under the New Industry Model Law

     On July 30, 2004, the Brazilian government enacted a decree governing the purchase and sale of electricity in the Regulated Market and the Free Market, as well as the granting of authorizations and concessions for electricity generation projects. The regulations in this decree include, among other items, rules relating to auction procedures, the form of power purchase agreements and the mechanism for passing costs through to final consumers.

     Under these regulations, all electricity-purchasing agents must contract all of their electricity demand in accordance with established guidelines. Electricity-selling agents must provide evidentiary support linking the energy to be sold to existing or planned power generation facilities. Agents that do not comply with such requirements are subject to penalties imposed by ANEEL.

     These regulations also require for electricity distribution companies to fulfill their electricity supply obligations primarily through public auctions. In addition to these auctions, distribution companies can purchase electricity from: (1) generation companies that are connected directly to the distribution company (except for hydroelectric power plants with capacity higher than 30 MW and certain thermoelectric power plants), (2) electricity generation projects participating in the initial phase of the Proinfa Program, (3) power purchase agreements entered into before the New Industry Model Law was enacted and (4) the Itaipu power plant.

     The MME will from time to time establish the total amount of energy that will be contracted in the Regulated Market, and the list of generation projects that will be allowed to participate in the auctions in each year.

     Beginning in 2005, all electricity generation, distribution and trading companies, independent power producers and Free Customers are required to notify ANEEL, by August 1 of each year, of their estimated electricity demand or estimated electricity generation, as the case may be, for each of the subsequent five years. Each distribution company is also required to notify ANEEL, within the 60-day period preceding each electricity auction, of the amounts of electricity that it intends to contract in the auction. In addition, distribution companies will be required to specify the portion of the contracted amount they intend to use to supply potentially Free Customers.

Auctions on the Regulated Market

     Electricity auctions for new generation projects will be held (1) in the fifth year before the initial delivery date of electricity (referred to as “A-5” auctions), and (2) in the third year before the commencement of commercial operation (referred to as “A-3” auctions). Existing power generators will hold auctions (1) in the year before the initial delivery date (referred to as “A-1” auctions) and (2) up to four months before the delivery date (referred to as “market adjustments”). Auctions exclusively for electricity from eolian, small hydro and biomass power plants will be held between years “A-1” and “A-5”. Invitations to bid in the auctions will be prepared by ANEEL, in accordance with guidelines established by the MME, including the requirement that the lowest bid shall be the winner of the auction. Each generation company that participates in the auction will execute a contract for purchase and sale of electricity with each distribution company, in proportion to the distribution companies’ respective estimated demand for electricity. The only exception to these rules relate to the market adjustment auction, where the contracts will be between specific selling and distribution companies. The contracts for both A-5 and A-3 auctions will have a term of between fifteen and thirty years, and the contracts for A-1 auctions will have a term between five and fifteen years. The contracts for A-1 auctions, carried out in 2005, were allowed to have a three-year term with initial supply in 2006. Contracts arising from market adjustment auctions will be limited to a two-year term. The contracts for electricity from eolian, small hydro and biomass power plants will have a term between ten and thirty years.

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     In respect of contracts related to electricity generated by existing generation facilities, there are three reasons for the reduction of contracted electricity: (1) compensation for the exit of potentially Free Customers from the Regulated Market, (2) reduction, at the discretion of the distribution companies, of up to 4.0% per year of the annual contracted amount due to market deviations from the estimated market projections, beginning two years after the initial electricity demand was declared and (3) adjustments to the amount of electricity established in the energy acquisition contracts entered into before March 17, 2004.

     Since 2004, CCEE has conducted five auctions for new generation projects, six auctions for existing power generation facilities and one auction for alternate generation projects. No later than August 1^st of each year, the generators and distributors provide their estimated electricity generation or estimated electricity demand for the 5 subsequent years. Based on this information, MME establishes the total amount of electricity to be traded in the auction and sets the generation companies that would participate in the auction. The auction is carried out in two phases via an electronic system.

     After the completion of the auction, generators and distributors execute the CCEAR, in which the parties establish the price and amount of the energy contracted in the auction. The CCEAR sets forth that the price will be annually adjusted upon the variation of the IPCA (Índice Nacional de Preços ao Consumidor Amplo, calculated and published by Fundação Instituto Brasileiro de Geografia e Estatística – IBGE). The distributors grant financial guaranties to the generators (mainly receivables from the distribution service) to secure their payment obligations under the CCEAR.

The Annual Reference Value

     The July 30, 2004 decree also established a mechanism (the “Annual Reference Value”), which limits the costs that can be passed through to final consumers. The Annual Reference Value corresponds to the weighted average of the electricity prices in the A-5 and A-3 auctions, calculated for all distribution companies.

     The Annual Reference Value creates an incentive for distribution companies to contract their expected electricity needs in the A-5 auctions, where the prices are expected to be lower than in A-3 auctions. The Annual Reference Value will be applied during the first three years of the power purchase agreements for new power generation projects. Beginning in the fourth year, 100.0% of the electricity acquisition costs from these projects will be passed through to consumers. The decree establishes the following permanent limitations on the ability of distribution companies to pass-through costs to consumers: (1) No pass-through of costs for electricity purchases that exceed 103.0% of actual demand; (2) Limited pass-through of costs for electricity purchases made in an A-3 auction, if the volume of the acquired electricity exceeds 2.0% of the demand for electricity purchased in the A-5 auctions; (3) Limited pass-through of electricity acquisition costs from new electricity generation projects if the volume contracted under the new contracts related to existing generation facilities is lower than 96.0% of the volume of electricity provided for in the expiring contract; (4) From 2005-2008, electricity purchases from existing facilities in the A-1 auction are limited to 1.0% of a distribution company’s demand. If the acquired electricity in the A-1 auction exceeds 1.0%, pass-through of costs to final consumers is limited to 70.0% of the average value of such acquisition costs of electricity generated by existing generation facilities for delivery between 2005 and 2008. The MME will establish the maximum acquisition price for electricity generated by existing projects. If distributors do not comply with the obligation to fully contract their demand, the pass-through of the costs from energy acquired in the short-term market will be the lower of the spot price and the Annual Reference Value.

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Electric Energy Trading Convention

     On October 26, 2004, ANEEL enacted Resolution 109, which establishes the Electric Energy Trading Convention (Convenção de Comercialização de Energia Elétrica). The Electric Energy Trading Convention regulates the organization and functioning of the CCEE and defines, among other things, (1) the rights and obligations of the CCEE agents, (2) the penalties to be imposed on defaulting agents, (3) the means of dispute resolution, (4) trading rules in the Regulated and Free Markets and (5) the accounting and clearing process for short-term transactions.

Restricted Activities of Distributors

     Distributors in the Interconnected Power System are not permitted to (i) develop activities related to the generation or transmission of electric energy, (ii) sell electric energy to Free Customers, except for those in their concession area, and under the same conditions and tariffs maintained with respect to captive consumers, (iii) hold, directly or indirectly, any interest in any other company, corporation or partnership or (iv) develop activities that are unrelated to their respective concessions, except for those permitted by law or in the relevant concession agreement. Generators are not allowed to hold more than a 10.0% equity interest in any distributor.

Elimination of Self-Dealing

     Since the purchase of electricity for captive customers is now performed through the Pool, so-called “self-dealing” (under which distributors were permitted to purchase up to 30.0% of their energy needs through energy that was either self-produced or acquired from affiliated companies) is no longer permitted.

Contracts Executed prior to the New Industry Model Law

     The New Industry Model Law provides that contracts executed by electricity distribution companies and approved by ANEEL before the enactment of the New Industry Model Law may not be amended to reflect any extension or modification of their terms (other than reductions in volumes and prices).

Challenges to the Constitutionality of the New Industry Model Law

     The New Industry Model Law is currently being challenged on constitutional grounds before the Brazilian Supreme Court. The Brazilian government moved to dismiss the actions arguing that the constitutional challenges were moot because they related to a provisional measure that had already been converted into law. A final decision on this matter is subject to majority vote of the Justices. To date, the Supreme Court has not reached a final decision and we do not know when such a decision may be reached. While the Supreme Court is reviewing the law, its provisions have remained in effect. Regardless of the Supreme Court’s final decision, certain portions of the New Industry Model Law relating to restrictions on distributors performing activities unrelated to the distribution of electricity, including sales of energy by distributors to Free Customers and the elimination of self-dealing, are expected to remain in full force and effect. For more information, see “Item 3. Key Information – Risk Factors – Risks Relating to the Brazilian Electric Sector.”

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Tariffs for the Use of the Distribution and Transmission Systems

     ANEEL oversees tariff regulations that govern access to the distribution and transmission systems and establish tariffs for these systems. The tariffs are (i) network usage charges, which are charges for the use of the proprietary local grid of distribution companies (“TUSD”) and (ii) tariffs for the use of the transmission system, which is the Basic Grid and its ancillary facilities (“TUST”).

TUSD

     The TUSD is paid by generators and customers for the use of the distribution system of the distribution concessionaire to which the generator or Free Consumer is connected. The amount to be paid by the agent connected to the distribution system is calculated by multiplying the maximum contracted power with the distribution concessionaire for each connection point, in kW, by the tariff in R$/kW per month which is set by ANEEL.

TUST

     The TUST is paid by distribution companies, generators and Free Customers for the use of the Basic Transmission Grid (electrical transmission system with voltage equal or higher than 230 kV). This tariff is revised annually to contemplate (i) an inflation index and (ii) the permitted annual revenues included in the grid. According to criteria established by ANEEL, owners of the different parts of the transmission grid were required to transfer the coordination of their facilities to the ONS, in return for receiving regulated payments from the transmission system users. Network users, including generation companies, distribution companies and Free Customers have signed contracts with the ONS entitling them to the use of the transmission grid in return for the payment of the TUST. Other parts of the grid that are owned by transmission companies but which are not considered part of the Main Transmission Grid, are made directly available to the interested users for a specified fee.

Distribution Tariffs

     Distribution tariff rates (including the TUSD) are subject to review by ANEEL, which has the authority to adjust and review these tariffs in response to changes in energy purchase costs and market conditions. When adjusting distribution tariffs, ANEEL divides the costs of distribution companies between (i) costs that are beyond the control of the distributor, or Parcel A costs, and (ii) costs that are under control of distributors, or Parcel B costs. The readjustment of tariffs is based on a formula that takes into account the division of costs between the two categories.

     Parcel A costs include, among others, the following factors:

• costs of electricity purchased in ANEEL public auctions; 
• costs of electricity purchased from Itaipu; 
• costs of electricity purchased pursuant to bilateral agreements by small distribution companies; 
• certain other charges for connection to the transmission and distribution systems; and 
• regulatory charges. 

Parcel B costs include: 

• a component designed to compensate the distributor for the carrying cost of its assets; 

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• depreciation costs; and
• a component designed to compensate the distributor for its operating and maintenance costs.

     Each distribution company’s concession agreement provides for an annual readjustment (reajuste anual). In general, Parcel A costs are fully passed through to consumers. Parcel B costs, however, are restated for inflation in accordance with the IGP-M index.

     Electricity distribution concessionaires are also entitled to periodic revisions (revisão periódica) every four or five years. These revisions are aimed at (1) assuring necessary revenues to cover efficient Parcel B operational costs and adequate compensation for investments deemed essential for the services within the scope of each such company’s concession and (2) determining the “X factor”.

     The X factor for each distribution company is calculated based on two components:

• Xa, based on the application of the IPC-A to the personnel portion of the concessionaire’s operational costs; and
• Xe, based on the concessionaire’s increases in its economies of scale due to market growth, and which is measured at each periodic tariff adjustment.

     In addition, ANEEL recently enacted new regulations under which distribution companies will be required to comply under penalty of law with minimum pre-established targets measured by a new quality of service indicator related to customer satisfaction.

     In addition, electricity distribution concessionaires are entitled to an extraordinary tariff review (revisão extraordinária) on a case-by-case basis, to ensure their financial stability and compensate them for unpredictable costs, including taxes, which significantly change their cost structure. Extraordinary tariff adjustments were granted (1) in June 1999 to compensate for increased costs of electricity purchased from Itaipu as a result of the devaluation of the real against the dollar, (2) in 2000 to compensate for the increase in COFINS from 2% to 3%, and (3) in December 2001 to compensate for losses caused by the Rationing Program.

     Since October 2004, on the date of their subsequent tariff readjustment or tariff revision, whichever occurs earlier, distribution companies have been required to execute separate contracts for the connection and use of the distribution system and for the sale of electricity to their potentially Free Customers.

Incentives

     In 2000, a Federal decree created the Thermoelectric Priority Program, Programa Prioritário de Termeletricidade (“PPT”), for purposes of diversifying the Brazilian energy matrix and decreasing its strong dependency on hydroelectric plants. The prerogatives granted to the thermoelectric plants included in the PPT are: (i) guaranty of gas supply for twenty years, according to regulation from the MME, (ii) assurance of the costs related to the acquisition of the electric energy produced by thermoelectric plants will be transferred to tariffs up to the normative value established by ANEEL and (iii) guaranty of access to a BNDES special financing program for the electric energy industry.

     In 2002, the Brazilian government established the Proinfa Program to encourage the creation of alternative energy sources. Under the Proinfa Program, Eletrobrás shall purchase the energy generated by alternative sources for a period of twenty years. In its initial phase, the Proinfa Program is limited to a total contracted capacity of 3,300 MW. In its second phase, which will start after the 3,300MW cap has been reached, the Proinfa Program intends to purchase energy from alternative sources up 10.0% of the electric energy annual consumption of Brazil. The energy produced for sale to the Proinfa Program cannot be produced by generation concessionaires, like us, nor by IPPs; such production may only be done by autonomous independent producers, who may not be controlled by, or affiliated with, a generation concessionaire or an IPP, or affiliated with any of their controlling entities. The first phase of the Proinfa program commenced in 2004.

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Regulatory Charges

RGR Fund and UBP

     In certain circumstances, electric energy companies are compensated for certain assets used in connection with a concession if the concession is revoked or is not renewed. In 1971, the Brazilian Congress created a reserve fund designed to provide funds for such compensation (“RGR Fund”). In February 1999, ANEEL revised the assessment of a fee requiring public-industry electric companies to make monthly contributions to the RGR Fund at an annual rate equal to 2.5% of the company’s fixed assets in service, not to exceed 3.0% of total operating revenues in any year. In recent years, no concessions have been revoked or have failed to be renewed, and the RGR Fund has been used principally to finance generation and distribution projects. The RGR Fund is scheduled to be phased out by 2010 and ANEEL shall revise the applicable tariffs so that the consumer will receive some benefit from the termination of the RGR Fund.

     The Brazilian government has imposed a fee on IPPs similar to the fee levied on public-industry generation companies in connection with the RGR Fund. IPPs are required to make contributions for using a public good, Uso de Bem Público (“UBP”) according to the rules of the corresponding public bidding process for the granting of concessions. Eletrobrás receives the UBP payments in a specific account.

CCC

     Distribution companies (and also some transmission companies responsible for Free Customers) must contribute to the Conta de Consumo de Combustível (“CCC Account”). The CCC Account was created in 1973 to generate financial reserves to cover fossil fuel costs in order to reduce tariffs to be paid by consumers supplied by thermoelectric power plants. The annual CCC Account contributions are calculated on the basis of estimates of the cost of fuel needed by the thermoelectric power plants in the succeeding year. The CCC Account is administered by Eletrobrás. The CCC Account, in turn, reimburses electric companies for a substantial portion of the fuel costs of their thermoelectric power plants.

     In February 1998, the Brazilian government provided for the phasing out of the CCC Account. During the 2003-2005 period, subsidies from the CCC Account were phased out for thermal power plants constructed prior to February 1998 and belonging to the Interconnected Power System. Thermal power plants constructed after that date will not be entitled to subsidies from the CCC Account. In April 2002, the Brazilian government established that subsidies from the CCC Account would continue to be paid, for a period of twenty years, to thermoelectric plants located in isolated systems.

CDE

     In 2002, the Brazilian government instituted the Electric Energy Development Account, Conta de Desenvolvimento Energético (“CDE Account”), which is funded with monthly payments made by concessionaires for the use of public assets, penalties and fines imposed by ANEEL and the annual fees paid by agents offering electric energy to final consumers, by means of an additional charge added to the tariffs for the use of the transmission and distribution systems. These fees are adjusted annually. The CDE Account was created to support (i) the development of energy production throughout Brazil, (ii) the production of energy by alternative energy sources and (iii) the universalization of electric energy services throughout Brazil. The CDE will be in effect for twenty-five years and be regulated by the executive branch and managed by Eletrobrás.

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Itaipu Transportation Charge

     The Itaipu hydroelectric plant has an exclusive transmission grid and is not part of the Main Transmission Grid or the intermediary connection system. Companies that are entitled to receive electricity from Itaipu pay a transportation charge, in an amount equal to their proportional quota of Itaipu generated electricity for the use of the grid.

Charge for the Use of Water Resources

     The Power Industry Law requires that holders of concessions and authorizations, which allow for the exploitation of water resources, must pay a total charge of 6.75% of the value of the energy they generate. This charge is shared among the states and municipalities where the plant or the plant’s reservoir is located and certain federal agencies.

ANEEL Inspection Fee

     The ANEEL Inspection Fee is an annual fee due by the holders of concessions, permissions or authorizations equal to a proportion of their revenues. The ANEEL Inspection Fee requires affected parties to pay up to 0.5% of their annual revenues to ANEEL in twelve monthly installments.

Default on the Payment of Regulatory Charges

     The New Industry Model Law provides that the failure to pay required contributions to the RGR Fund, Proinfa Program, CDE Account, CCC Account, or certain payments, such as those due from the purchase of electric energy in the regulated market or from Itaipu, will prevent the defaulting party from receiving readjustments or reviews of their tariffs (except for an extraordinary review) and will also prevent the defaulting party from receiving funds from the RGR Fund, CDE Account or CCC Account.

CRC

     During the concession regime that existed prior to the enactment of the Concessions Law in 1995, the Brazilian government decided that electric concessionaires should maintain a guaranteed rate of return between 10.0% and 12.0% . In order to ensure this rate of return, a netting account was created in 1971, Conta de Resultados a Compensar (“CRC Account”), whereby the difference between (i) the rate of return defined by the Brazilian government and (ii) the actual rate of return of a concessionaire in any given year would be registered in the CRC Account of each concessionaire in order to compensate excesses and shortfalls.

     The guaranteed rate of return regime was discontinued in 1993. The balance of each CRC Account was used to offset certain debts of concessionaires relating, among other things, to the supply of energy by Itaipu and the supply of fossil fuel.

     In 1994, the Brazilian government recognized the remaining balance of the CRC Account as an asset belonging to the respective concessionaires. In the same year, the Brazilian government authorized the exchange of such assets for an equivalent amount of Elets, a Brazilian government bond.

     According to an agreement dated August 4, 1994, the State of Paraná agreed to reimburse us for the remaining balance in the CRC Account in 240 monthly installments, adjusted based upon the IGP-DI plus interest of 6.65% per year.

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     For developments after 1994 and the impact of the CRC Account on our financial condition, see “Item 5. Operating and Financial Review and Prospects—Overview—Impact of CRC Account.”

Energy Reallocation Mechanism

     The Energy Reallocation Mechanism (“MRE”) attempts to mitigate the risks borne by hydrogenerators due to the variation in time of river flows (hydrologic risk).

     Under Brazilian law, each hydroelectric plant is assigned a determined amount of “assured energy”, according to an energy supply risk criteria defined by MME, based on the historical river flow records available. The assured energy also represents the maximum energy that can be sold by the generator which is set forth in each concession agreement, irrespective of the volume of electricity generated by the facility.

     The MRE tries to guarantee that all participating plants receive the revenue related to their assured energy, irrespective of the volume of electricity generated by them. In other words, the MRE effectively reallocates the electricity, transferring the surplus from those who have produced in excess of their assured energy to those that have produced less than their assured energy. The relocation, which occurs in the Interconnected Power System, is determined by the ONS, considering the nationwide electricity demand and hydrological conditions, regardless of the power purchase agreement of each individual generator. The volume of electricity actually generated by the plant, whether more or less than their assigned assured energy quotient, is priced pursuant to a tariff known as the “Energy Optimization Tariff”, designed to cover only the variable operation and maintenance costs of the plant, so that generators are largely unaffected by the actual dispatch of their plants.

Research and Development

     The companies holding concessions and permissions for distribution of electricity must invest a minimum of 0.50% of their annual net operational revenues in research and development and 0.50% in energy efficiency programs. As of January 1, 2010, such percentages will be 0.75% and 0.25%, respectively.

     The companies holding concessions and authorizations for generation and transmission of electricity must invest a minimum of 1.0% of their annual net operational revenues in research and development. Companies that generate electricity exclusively from small hydroelectric power plants, cogeneration and alternative energy projects are not subject to this requirement.

     The amount to be invested in research and development must be distributed as follows:

• 40% to the company research and development projects, under the coordination of ANEEL;
• 40% to the Ministry of Sciences and Technology, to be invested in national research and development projects;
• 20% to the Ministry of Mines and Energy, to defray Energy Research Company - EPE.

     The investments in energy efficiency must be done accordingly to ANEEL regulations.

Environmental Regulations

     The Brazilian constitution gives both the Brazilian government and State governments the power to enact laws designed to protect the environment. A similar power is given to municipalities whose local interests may be affected. Municipal laws are considered a supplement to federal and state laws. A violator of applicable environmental laws may be subject to administrative and criminal sanctions, and they will have an obligation to repair or provide compensation for environmental damages. Administrative sanctions may include substantial fines and suspension of activities, while criminal sanctions may include fines and, for individuals, possible imprisonment. Criminal sanctions, including the imposition of fines or possible imprisonment, can be imposed against executive officers and employees of companies who commit environmental crimes.

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     Our energy generation, distribution and transmission facilities are subject to environmental licensing procedures, which include the preparation of environmental impact assessments before such facilities are constructed. Once the respective environmental licenses are obtained, their maintenance is still subject to the compliance with various specific requirements. We were one of the first energy concessionaires in Brazil to provide an environmental impact assessment and report (Segredo Power Plant, 1987) in connection with the construction of a power plant. More recently, the Salto Caxias Power Plant (1995-1999) was constructed in accordance with one of the most comprehensive environmental impact mitigation programs ever implemented in Brazil.

     In recent years, several important pieces of environmental regulation have been enacted. The Law of Environmental Crimes, which took effect in 1998, establishes a general framework of liability for environmental crimes. Recent federal laws and statutes have established the National System for Management of Hydro Resources and the National Council of Hydro Resources to address the major environmental issues facing the hydroelectric sector and users of water resources. In July 2000, the Brazilian government created an independent agency, the National Water Agency, to regulate and supervise the use of water resources.

     The Brazilian Forestry Code and related regulations deal with the maintenance and acquisition of areas affected by hydroelectric plant reservoirs. These regulations may result in increased maintenance, reforestation and condemnation costs to energy industry concessionaires. In addition, Paraná state law requires a mandatory environmental audit of all companies, like us, whose activities may impact the environment within the state. The environmental and maintenance departments of our Company are responsible for performing this audit.

     We are required to present a copy of our environmental audit process when we apply for the renewal of our environmental operation licenses for our power plants and electric energy transmission substations. Currently, we are soliciting bids for an external auditor to supply us with an independent evaluation of our environmental practices.

Item 4A. Unresolved Staff Comments

     None.

Item 5. Operating and Financial Review and Prospects

     The discussion in this Item 5 is based on our financial information, which has been prepared in accordance with Brazilian GAAP, unless otherwise noted. You should read this discussion in conjunction with our Consolidated Financial Statements, which have been prepared in accordance with Brazilian GAAP with reconciliation to U.S. GAAP, and the notes thereto and the other financial information included elsewhere in this Annual Report.

Overview

Brazilian Economic Conditions

     All of our operations are in Brazil, and we are affected by general Brazilian economic conditions. In particular, the general performance of the Brazilian economy affects demand for electricity, and inflation affects our costs and our margins. The Brazilian economic environment has been characterized by significant variations in economic growth rates, with very low growth from 2001 through 2003 and an economic recovery that has led to consistent growth since 2004.

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     The following table shows selected economic data for the periods indicated:

	Year ended December 31,
	2007	2006	2005
Inflation (IGP-DI)	7.9%	3.8%	1.2%
Appreciation of the real vs. U.S. dollar	20.7%	9.5%	13.4%
Period-end exchange rate – U.S.$1.00(1)	1.7713	2.1380	2.3407
Average exchange rate – U.S.$1.00(2)	1.9300	2.1679	2.4125
Change in real GDP(3)	5.4%	3.8%	3.2%
Average interbank interest rates(4)	11.9%	15.0%	19.0%

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(1)	The real/U.S. dollar exchange rate at June 2, 2008 was R$1,6320 per U.S.$1.00.
(2)	Average of the closing exchange rates on the last day of each month in the period.
(3)	In 2007, the Brazilian Geography and Statistics Institute (“IBGE”) adopted a new GDP calculation method, which affected the GDP figures of prior years.
(4)	Calculated in accordance with Central Clearing and Custody House (“CETIP”) methodology (based on nominal rates). Sources: FGV-Fundação Getúlio Vargas, the Central Bank, the Brazilian Geography and Statistics Institute (“IBGE”) and CETIP.

     The economy grew 5,8% during the first quarter of 2008 as compared to the same period during 2007. The value of the real appreciated to R$1.6294 per U.S. dollar at May 31, 2008, as compared with R$1.7713 at December 31, 2007. The Central Bank increased the base interest rate from 11.18% to 11.64% during the first five months of 2008. The GDP of the State of Paraná grew 6.0% in 2007, a better performance than that of the Brazilian economy during the same period.

Rates and Prices

     Our results of operations are significantly affected by changes in the prices and tariffs that we charge for electricity. Most of our revenues come from sales to captive customers at regulated rates defined by ANEEL. In addition, we also sell energy through auctions, bilateral agreements and to free customers at prices that are not directly regulated, but they are heavily influenced by energy regulatory policy. The price of electricity sold at auction is highly affected by the electricity balance in the Interconnected Power System. In the auctions held during 2004 and 2005, the electricity prices in the agreements with delivery dates beginning in 2005, 2006 and 2007 reflected the electricity surplus, resulting in a reduction of energy prices. Electricity prices for the agreements with delivery dates beginning in 2008 and 2009 were higher than prior years, reflecting the system expansion costs.

     Sales to Final Customers represented about 50.9% of the volume of electricity we delivered in 2007, and accounted for 77.6% of our gross energy sales revenues, and almost all of such sales were to captive customers. The rates we charge to our captive customers are set by ANEEL based on considerations established by law and regulations. For more information, see “Item 4. Information on the Company—The Brazilian Electric Power Industry—Distribution Tariffs.” In general, if our costs for energy increase, the tariff process permits us to recover these costs from our customers through higher rates in future periods. However, if we do not receive tariff increases to cover our costs, if the recovery is delayed, or if our Board of Directors elects to reduce the tariff increase awarded by ANEEL, our profits and cash flows may be adversely affected.

     In recent years, ANEEL has granted us a rate increase each June. We granted discounts from these ANEEL-approved tariffs to those of our customers who pay their bills on time, until we discontinued this policy in 2006.

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     On June 24, 2005, ANEEL granted us a total tariff increase of 7.8% . This increase consisted of a 1.25% decrease in our retail tariffs and a 9.05% increase for deferred regulatory asset recovery (CVA). In light of our discount policy, we only applied a 4.4% rate increase to the tariffs we charge such customers.

     In June 2006, ANEEL authorized us to increase our tariffs by an average of 5.12% pursuant to the annual tariff readjustment. We decided to apply the entire readjustment and did not grant discounts to our customers.

     On June 24, 2007, ANEEL required us to decrease our tariffs by an average of 1.22% pursuant to the annual tariff readjustment. The primary reason that ANEEL decreased our tariffs was to account for the devaluation of the US dollar in 2006.

     On June 23, 2008, ANEEL required us to decrease our tariffs by 3.35%, pursuant to the second periodic revision. This decrease consisted of a 7.17% decrease in our retail tariffs and a 3.82% increase for deferred regulatory asset recovery (CVA).

Long-Term Purchase Contracts

     Our distribution business purchases energy from generators (including our generation business) and resells it to customers at regulated rates. In 2007, we purchased 11.0% of our total available energy under long-term contracts from Itaipu. For more information, see “Item 4. Information on the Company—Business—Generation and Purchases of Energy.” Our major long-term contracts or purchase obligations are described below.

• We purchase energy from Itaipu at prices that are determined based on the Itaipu project’s costs, including servicing its U.S. dollar denominated debt. In 2007, our electricity purchases from Itaipu amounted to R$385.4 million.
• We purchased energy from Cien from 1999 through 2007. In 2007, we recognized R$111.2 million for electricity purchased from Cien. For more information, see “Item 4—Business— Generation and Purchases of Energy—Purchases.”
• Under the New Industry Model Law, our distribution business is required to purchase part of its energy needs from the Pool. For more information, see “Item 4. Information on the Company – The Company – Public Auction.”

     One of the principal components of our results is the profit we realize reselling energy purchased under long-term contracts. In general, we are entitled to pass on to customers increased costs for purchasing energy under long-term contracts.

Impact of the CRC Account

     In 1993, the Brazilian government eliminated the system of guaranteed rates of return for utilities. As a result, utilities were no longer permitted to add credits to the CRC Account. Amounts that had been accumulated in each utility’s CRC Account up to 1993 were recognized by the Brazilian government as credits. The Company used part of its CRC Account credit to settle outstanding debts with the Federal Government. In August 1994, we assigned the remainder of our CRC Account balance, equal to R$808.1 million, to the State of Paraná to settle debts with the Federal Government, pursuant to an assignment agreement (the “CRC Account Agreement”). Pursuant to the terms of the CRC Account Agreement, the State of Paraná now has an accounts payable to the Company, and if it fails to make payments on a timely basis, we may apply dividends payable by us to the State of Paraná against amounts due to us under the CRC Account Agreement.

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     On March 19, 2003, the State of Paraná filed a request with the Federal Ministry of Finance to convert our CRC receivables into an obligation of the Brazilian Government rather than an obligation of the State of Paraná. This request was sent to the National Treasury Secretariat for assessment and we are still awaiting a decision.

     The balance of these receivables as of December 31, 2004, which amounted to R$1,197 million, will be paid to us by the State of Paraná beginning on January 30, 2005 and adjusted at IGP-DI plus 6.65% per year. The State of Paraná has been complying with the payments of the renegotiated installments in accordance to the terms established in the fourth amendment. As of December 31, 2007, the total outstanding balance under the CRC Account Agreement was R$1,250.4 million. Payment of the installments is guaranteed by funds derived from dividends owed by us to the State of Paraná.

Special Obligations

     We record a liability for contributions received from the Federal Government and our customers exclusively for investment in the electric energy distribution network. We record the amount of these contributions on our balance sheet as a reduction of our fixed assets, under the caption “special obligations”, and, upon the conclusion or termination of the operating concession granted to us, the amount of these contributions will be offset against our fixed assets, including those purchased with the contributions received from the Federal Government and our customers.

     On October 31, 2006, ANEEL issued a new regulation, which changed the treatment of special obligations with respect to the tariff setting process. The regulation establishes, among other things, that beginning on the date of the next respective tariff revision, the special obligations would be amortized as a reduction of net allowable costs over future periods, thereby reducing tariffs. Consequently, in accordance with SFAS No. 71 “Accounting for the Effects of Certain Types of Regulation,” after the issuance of this regulation, the special obligations became a regulatory liability. According to the aforementioned regulation, the accounting treatment for Special Obligations under Brazilian GAAP changed and, as from 2006, they started to be amortized prospectively starting on the date future tariff reviews for each distribution concessionaire. The amount we recorded as special obligations as of December 31, 2007 was R$857.2 million.

Critical Accounting Policies

     In preparing our financial statements, we make estimates concerning a variety of matters. Some of these matters are highly uncertain, and our estimates involve judgments we make based on the information available to us. We have discussed in “—Overview” above certain accounting policies relating to regulatory matters. In the discussion below, we have identified several other matters for which our financial presentation would be materially affected if either (a) we used different estimates that we could reasonably have used or (b) in the future we change our estimates in response to changes that are reasonably likely to occur.

     The discussion addresses only those estimates that we consider most important based on the degree of uncertainty and the likelihood of a material impact if we used a different estimate. There are many other areas in which we use estimates about uncertain matters, but the reasonably likely effect of changed or different estimates is not material to our financial presentation. Please see the notes to our Consolidated Financial Statements included herein for a more detailed discussion of the application of these and other accounting policies.

Revenue Recognition

     We recognize our revenues on an accrual basis (i.e., when persuasive evidence of an arrangement exists, delivery of goods has occurred or services have been rendered, our price to the customer has been fixed or is determinable, and collectibility is reasonably assured, regardless of when the cash is received).

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     We bill our residential, industrial and commercial customers monthly. Unbilled revenues from the billing date to month-end are estimated based on the prior month’s billing and recognized as revenue at the end of the month in which the service was provided. We read our individual customers’ meters on a systematic basis throughout the month in order to determine how much energy we have sold to them. At the end of each month, the amount of energy delivered to each customer since their last meter reading date is estimated and the corresponding unbilled revenue is determined based upon a customer’s daily estimated usage by class and applicable customer rates reflecting significant historical trends and experience. Differences between estimated and actual unbilled revenues, which have historically been insignificant, are recognized in the following month.

Deferred Regulatory Assets

     In accordance with Brazilian GAAP, we have deferred and capitalized certain costs that we expect to recover through rate increases. This approach is similar to SFAS No. 71, “Accounting for the Effects of Certain Types of Regulation” (SFAS No. 71), which provides that rate-regulated entities account for their assets and liabilities in a manner consistent with the recovery of those costs in their rates, if the rates are designed to recover the costs of providing the regulated service and if the competitive environment makes it likely that such rates can be charged and collected. Certain expenses and revenues subject to utility regulation or rate determination normally reflected in income are deferred on the balance sheet and are recognized in income as the related amounts are included in service rates and recovered from or refunded to customers. We are entitled to recover these costs according to Brazilian regulations. ANEEL performs a rate readjustment on an annual basis. If ANEEL excludes all or part of a cost from recovery, that portion of the deferred regulatory asset is impaired and is accordingly reduced to the extent of the excluded cost. For more information, see Note 9 to the Consolidated Financial Statements. The deferred regulatory assets reflected in the consolidated balance sheet under Brazilian GAAP totaled R$93.1 million and the deferred regulatory liabilities totaled R$165.8 million at December 31, 2007.

Impairment of Long-lived Assets

     Long-lived assets, primarily property, plants and equipment, comprise a significant amount of our total assets. We evaluate our long-lived assets and make judgments and estimates concerning the carrying value of these assets, including amounts to be capitalized, depreciation and useful lives. The carrying values of these assets are reviewed for impairment periodically or whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. An impairment loss is recorded in the period in which it is determined that the carrying amount is not recoverable. This requires us to make long-term forecasts of future revenues and costs related to the assets subject to review. These forecasts require assumptions about demand for our products and services, future market conditions and regulatory developments. Significant and unanticipated changes to these assumptions could require a provision for impairment in a future period. No impairment provisions were necessary for 2005, 2006 and 2007. Although we believe the assumptions and estimates we have made in the past have been reasonable and appropriate, different assumptions and estimates could materially impact our reported financial results.

Electric Energy Trading Chamber - CCEE

     For accounting purposes, we recognize costs and revenues related to purchases and sales of energy in the spot market based on our internal estimates, which estimates are reviewed by the CCEE.

     We claimed a credit based on energy sales from Itaipu during the energy rationing period that occurred in 2001, when there was a significant difference in prices of spot market energy. There are legal challenges pending which could affect our accounting of these transactions in 2001 and 2002. As of December 31, 2007, the estimated amount of calculation differences is R$860.0 million, which we have not recognized as a contingency, based on the opinion of our legal counsel. For more information, see Note 21(b) to our Consolidated Financial Statements and “Item 8–Financial Information–Legal Proceedings.”

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Provision for Contingencies

     We and our subsidiaries are party to certain legal proceedings in Brazil arising in the normal course of business regarding tax, labor, civil and other issues.

     We account for contingencies in accordance with Brazilian GAAP, which are similar to SFAS No. 5, “Accounting for Contingencies.” Such accruals are estimated based on the determination that it is probable that a future event will confirm that an asset has been impaired or a liability has been incurred at the date of the financial statements, and the amount of loss can be reasonably estimated. By their nature, contingencies will only be resolved when a future event or events occur or fail to occur; typically such events will occur a number of years in the future. The evaluation of these contingencies is performed by our internal and external legal counsel. Accounting for contingencies requires significant judgment by management concerning the estimated probabilities and ranges of exposure to potential liability. Management’s assessment of our exposure to contingencies could change as new developments occur or more information becomes available. The outcome of the contingencies could vary significantly and could materially impact our consolidated results of operations, cash flows and financial position.

     In compliance with CVM Deliberation 489, of October 3, 2005, the legal proceedings considered of possible loss by us in December 31, 2007 totaled R$1,631 million, of which R$40.7 million was related to labor claims, R$861.5 million was related to regulatory proceedings, R$325.1 million was related to civil claims and R$403.6 million was related to tax proceedings.

Valuation of Derivative Instruments

     We used swap instruments to manage risks from changes in foreign exchange and interest rates in 2006 and 2005. We recorded these instruments at their estimated fair market value based on market quotations for similar instruments and assumptions as to future foreign exchange and interest rates. During the periods presented, we did not designate any derivative financial instruments as hedges and the fair value adjustments to our derivatives were thus recorded in our net income. We settled all outstanding cross-currency interest rate swap contracts in 2006 and we recorded gains in the amount of R$22.4 million and losses of R$42.0 million in 2006 and 2005, respectively. We did not use derivative instruments in 2007. For more information, see note 30 to the Financial Statements.

Employee Retirement Benefits

     We sponsor a defined-benefit pension plan and defined-contribution pension plan covering substantially all of our employees. We have also established retirement health care plans. We calculate our funding obligations based on calculations performed by independent actuaries using assumptions that we provide about interest rates, investment returns, rates of inflation, mortality rates and future employment levels. These assumptions directly affect our liability for accrued pensions costs and the amounts we record as pension costs.

     The estimated costs for 2008 and 2007, according to principles established at CVM Deliberation 371/2000, amount to R$14.7 million and R$69.7 million, respectively, relating to the welfare plan and the health care plan. In 2007, the Company recorded income in the amount of R$ 13.9 million in the statement of operations related to the pension and health care plans.

Deferred Taxes

     We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities using prevailing rates. We regularly review our deferred tax assets for recoverability and establish a valuation allowance based on historical taxable income, projected future taxable income, and the expected timing of the reversals of existing temporary differences. If we are unable to generate sufficient future taxable income, or if there is a material change in the actual effective tax rates or time period within which the underlying temporary differences become taxable or deductible, we could be required to establish a valuation allowance against all or a significant portion of our deferred tax assets resulting in a substantial increase in our effective tax rate and a material adverse impact on our operating results.

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Operating Segments

     Our most important operating segments correspond to Copel S.A. (Holding) and each of our wholly owned subsidiaries, namely, Copel Geração e Transmissão, which is engaged in electricity generation and transmission activities and Copel Distribuição, which is engaged in electricity distribution activities. On November 30, 2007, as a result of a spin-off, we transferred the assets of COPEL Transmissão to COPEL Distribuição and to COPEL Geração. For comparative purposes, the balances of COPEL Transmissão for December 31, 2006 and 2005 and the years then ended were reclassified into COPEL Geração e Transmissão and COPEL Distribuição. For more information, see Note 31 to our audited Consolidated Financial Statements.

     Our largest operating segment is distribution. Revenues from our distribution business represented 72.7%, 74.6% and 80.8% of our total net operating revenues in 2007, 2006 and 2005, respectively, before eliminations and adjustments. Revenues from our generation and transmission business represented 27.0%, 26.5% and 28.4% of our total net operating revenues in 2007, 2006 and 2005, respectively, before eliminations and adjustments.

     Copel Geração e Transmissão derives some of its revenues from sales to other segments of the Company, and during the period from 2003 - 2005, the vast majority of the energy generated by Copel Geração was sold to Copel Distribuição. Since January 2006, all of the energy generated by Copel Geração is either being sold directly to the Pool or to Free Customers. Our generation business has grown to represent an increased proportion of our revenues, as a result of increased production from new generation projects, particularly Elejor’s hydroelectric power plants (Santa Clara and Fundão), which started operations in 2005 and 2006, respectively. We expect this trend to continue as a result of additional generation projects, particularly Mauá and São Jerônimo, as well as increased sales to Free Customers and energy sales in the Pool. For more information, see “Item 4. Information on the Company – Generation and Purchases of Energy – Expansion of Generation Capacity.”

     The profitability of our segments differs. Although our distribution segment is the largest contributor to our net operating revenues, it has the lowest operating margin of our segments, because its profit margins are limited by tariff regulation.

Analysis of Electricity Sales and Cost of Electricity Purchased

     The following table sets forth the volume and average rate components of electricity sales and purchases for the years 2005 to 2007.

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	Year ended December 31,
	2007	2006	2005
Electricity Sales:
Sales to Final Customers:
Average price (R$/MWh):(1)
Industrial customers(5)	249.88	243.30	215.91

Residential customers	369.46	390.40	399.12
Commercial customers	333.87	344.02	338.23
Rural and other customers(2)	198.61	208.51	214.31
Public service customers	233.18	231.07	216.61
All customers(5)	288.62	294.27	282.19
Volume (GWh):
Industrial customers(5)	7,740	7,200	7,639
Residential customers	5,143	4,826	4,653
Commercial customers	3,722	3,407	3,231
Rural and other customers(2)	2,803	2,684	2,608
Public service customers	576	574	565
All customers(5)	19,984	18,691	18,696
Total revenues from sales to Final Customers (millions of R$)	5,768	5,500	5,276
Sales to distributors and others(7) :
Average price (R$/MWh)(1)	89.47	77.33	72.57
Volume (GWh) (6)	15,285	16,694	13,090
Total revenues (millions of R$)	1,368	1,291	950
Electricity Purchases:
Purchases from Itaipu:
Average cost (R$/MWh)(3)	82.51	71.83	99.08
Volume (GWh)	4,666	4,665	4,682
Percentage of total Itaipu production purchased	6.5	6.7	6.5
Total cost (millions of R$)(4)	385	335	464
Purchases from others (7) :
Average cost (R$/MWh)	63.03	66.35	73.67
Volume (GWh) (6)	16,565	16,646	13,193
Total cost (millions of R$)(4)	1,044	1,104	972

______________
(1)	Rates for electricity sales and purchases are stated in reais and have been computed by dividing (1) the corresponding sales or purchases without deduction of ICMS Tax by (2) MWh of electricity sold or purchased.
(2)	Includes rural customers, street lighting, government agencies and our own consumption.
(3)	Our purchases of electricity generated by Itaipu are stated in reais and paid for on the basis of a capacity charge expressed in U.S. dollars per kW plus a “wheeling” (or transportation) charge expressed in reais per kWh.
(4)	See “Item 4. Information on the Company—Business—Generation and Purchases of Energy” for an explanation of our expenses relating to electricity purchases.
(5)	Includes Free Customers from outside Paraná.
(6)	Energy Reallocation Mechanism not included.
(7)	Energy traded between Copel’s Subsidiaries not included.

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Results of Operations for the Years Ended December 31, 2007, 2006 and 2005

     The following table summarizes our results of operations for the years ended December 31, 2005, 2006 and 2007:

	Year ended December 31,
	2007	2006	2005
	(in millions of reais)
Net operating revenues:
Energy sales to final customers(1)	R$ 5,767.8	R$ 5,500.1	R$ 5,275.9
Electricity sales to distributors	1,367.6	1,291.0	949.9
Use of main transmission grid	296.8	283.8	268.0
Other revenues	487.9	346.4	307.5
Value-added taxes on sales and charges(2)	(2,498.0)	(2,532.7)	(2,361.7)
	5,422.1	4,888.6	4,439.6
Operating expenses:
Electricity purchased for resale	(1,429.4)	(1,439.7)	(1,436.3)
Use of main transmission grid	(514.5)	(534.8)	(530.8)
Other operating expenses	(1,870.9)	(1,365.4)	(1,652.9)
	(3,814.8)	(3,339.9)	(3,620.0)
Operating income	1,607.3	1,548.7	819.6
Equity in results of investees	1.6	(6.2)	9.0
Financial income (expenses), net	20.2	294.7	(101.0)
Non-operating expenses, net	(31.1)	(23.0)	(10.6)
Income before income taxes and non-controlling interest	1,598.0	1,814.2	717.0
Income taxes	(460.3)	(557.7)	(198.2)
Net income before non-controlling interest	1,137.7	1,256.5	518.8
Non-controlling interest	(31.1)	(13.8)	(16.4)
Net income	R$ 1,106.6	R$ 1,242.7	R$ 502.4

_______________
(1)	Energy sales to final customers include energy sales, as well as charges billed to final customers for the usage of distribution grid (TUSD).
(2)	Fuel usage account (CCC), energy development account (CDE) and research and development (P&D and PEE) were reclassified in 2007 as deductions from gross operating revenues instead of operating costs as required by the ANEEL under Brazilian Accounting Principles. For comparative purposes, this reclassification was applied for 2006 and 2005.

Results of Operations for 2007 compared with 2006

Net Operating Revenues

     Our net operating revenues increased by 10.9% in 2007, compared to 2006. Of the R$533.5 million increase in net operating revenues, R$267.7 million was due to sales to Final Customers, which increased mainly due to market growth, while R$76.6 million was due to increased sales to distributors.

     Sales to Final Customers. Our revenues from electricity sales to Final Customers (including energy sales to Final Customers and income for the use of the distribution grid) increased by 4.9% in 2007, mainly due to growth in the volume of electricity sold (6.9% in 2007). The average tariff for Final Customers decreased by 1.9% as compared to the 2006 average rate. The residential, commercial, rural and other classes of rates decreased by 5.4%, 3.0% and 4.7%, respectively. In contrast, the industrial rate increased by 2.7% . The variation in average price increases between different classes of customers reflects the fact that ANEEL’s tariff increases in June 2005, 2006 and 2007 varied depending upon the voltage level received and the gradual phasing out of the crossed subsidies between high and low voltage customers.

     The increase in the volume of energy sold to Final Customers in 2007 primarily reflected an increase in all main categories of Final Customers.

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     The 6.6% increase in the volume of electricity sold to residential customers in 2007 was mainly due to an increased number of customers, coupled with the 3.6% increase in average consumption per residential customer. Average temperatures in 2007 were higher than in the previous year, further contributing to increased sales volumes.

     The increased volume of electricity sold to our commercial customers was largely a result of favorable conditions in the service sector, particularly in the wholesale, retail, hotel and food segments. The corresponding increase in the number of customers in this category resulted in a 9.2% expansion in the volume sold to this category.

     The 7.5% increase in the volume of electricity sold to industrial customers in 2007 was mainly due to increased industrial activity in the following sectors: textiles, paper, cardboard, cellulose and food and beverages. Our base of industrial customers expanded by 3.7% in 2007.

     Electricity Sales to Distributors. Electricity sales to distributors include sales through CCEAR auctions (52.8%), sales under bilateral agreements (37.7% of the total supply revenues in 2007), sales to CCEE and the Interconnected Power System (5.1%) and sales to small distributors in the State of Paraná (4.4%) .

     Our revenues from electricity sales to distributors increased by 5.9% in 2007, primarily due to the commencement of sales resulting from new auction contracts settled for the 2007-2014 period. The tariff adjustments to the outstanding contracts applied in 2007 further contributed to our increase in revenues.

     Use of Main Transmission Grid. Revenues from third-party use of our Main Grid increased by 4.6% in 2007 as a consequence of (i) the tariff increases enacted by ANEEL in June 2007 and June 2006 and (ii) the expansion of our transmission grid.

     Other Revenues. This category includes revenues from the sale of natural gas, the use of our fiber optic network, our energy consulting services, lease income and the fuel cost subsidy we receive for our thermal plant.

     These revenues increased by 40.8% in 2007, largely as a result of (i) the increased revenues we received from the sale of natural gas, (ii) the lease of UEG Araucaria Thermoelectric Plant facilities, which we leased to Petrobras on July 7, 2007 for R$79.1 million, and (iii) the increase of R$33.1 million in the amount of services revenues received by Copel Geração and Transmissão S.A. and UEG Araucaria Thermoelectric Plant.

     Value-added Taxes and other Charges. In arriving at net operating revenues, we deduct value-added taxes imposed by the State of Paraná, generally assessed at 27.0%, and several other charges we pay on amounts billed to Final Customers. These charges generally increase with the amount of our gross revenues on sales to Final Customers. The value-added taxes and the other charges we pay fell as a percentage of our gross revenues, from 34.1% in 2006 to 31.5% in 2007, which was primarily due to a reduction in the rate of the regulatory charges for our CCC Account.

Operating Expenses

     Total operating expenses increased by 14.2% in 2007 compared to 2006. Factors and events that were significant to our operating expenses in 2007 included the following:

• Energy Purchased for Resale. Our expenses related to the energy we purchase for resale decreased by R$10.3 million, or 0.7%, in 2007. This variation was mainly due to the agreement established with CIEN, which reduced the volume of contracted energy from 400 average MW to 175 average MW in 2007. The main amounts booked in 2007 were: R$385.4 million from ITAIPU, R$111.2 million from CIEN, R$98.2 million from Itiquira and R$845.1 million from the energy auction.

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• Use of Main Transmission Grid. Expenses for use of the Main Transmission Grid decreased by R$20.3 million, or 3.8%, in 2007. This decrease was mainly due to a reduction in the tariffs established by ANEEL, affecting our CVA related to the use of the main transmission grid, which amounted to R$23.0 million in 2007 (2006 - R$80.1 million).
• Pension and Health Care Plans. Pension and Health Care represented a credit of R$13.9 million in 2007, as compared to expenses of R$127.7 million in 2006. This change is the result of an actuarial gain recorded in 2007.
• Raw material and supplies for electric power production. In 2006, this account reflected the reversal of R$298.1 million due to the agreement established in May 2006 between Copel, Petrobras and Compagas, related to natural gas for the UEG Araucaria Thermoelectric Plant.
  In 2007, this account reflected a reversal of Pasep and Cofins tax contingencies, in the amount of R$29.9 million, which resulted in a net credit of R$9 million.
• Natural Gas and Raw material for Natural Gas. The expenses related to natural gas purchases decreased by 25.3% as compared to 2006 due to a reduction in purchase volume of natural gas recorded by Compagas. The UEG Araucaria Thermoelectric Plant has been leased to Petrobras as of June 2007, and Compagas has not supplied natural gas to UEG Araucaria Thermoelectric Plant since then. In addition there was a decrease in the average price paid for natural gas, due to monetary and exchange rate variations, since natural gas prices are set in U.S. dollars.
• Depreciation and Amortization. The increase of R$49.7 million in this balance was due mainly to new assets capitalized in 2007, as well as partnership acquisitions made by Copel, which increased the consolidated fixed asset balances and, consequently, the depreciation charges. The capitalization of the Fundão Plant, which belongs to ELEJOR, resulted in an addition in depreciation expenses in the amount of R$6.2 million in 2007. The UEG Araucaria Thermoelectric Plant, which has been acquired and consolidated since June 2006 represented R$26.7 million in 2006 depreciation expenses. In 2007, depreciation expenses recorded by UEG Araucaria Thermoelectric Plant amounted to R$ 49.4 million, an increase of R$ 22.7 million when compared to 2006.
• Provisions and reversions. In 2007, R$242.4 million was recorded as provisions expenses, whereas in 2006 reversals of other provisions resulted in income in the amount of R$ 80.7 million. This charge resulted from new provisions expensed in 2007, mainly related to COFINS tax contingencies (R$171.6 million), other tax contingencies (R$36.6 million) and labor contingencies (R$14.4 million).
• Other Operating Expenses. Other operating expenses increased by 26.4% as compared to 2006 balance mainly due to the increase of financial compensation related to the use of water resources, which was R$73.9 million in 2007.

Financial Income (Expenses), Net

     We recognized R$20.2 million of net financial income in 2007, as compared with net financial income of R$294.7 million in 2006.

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     Our financial expenses decreased by 13.5% in 2007, mainly as a result of the reduction of R$25.8 million in monetary variations, due to the higher appreciation of the Brazilian real in 2007 and to the reduction in debentures charges, due to the settlements of the 2nd and 3rd series in February, 2007.

     Financial revenues decreased 45.7% in 2007, as compared to 2006, primarily due to the booking of R$283.2 million in 2006 related to the discounts obtained in the negotiations between Copel, Petrobras and Compagas on the gas purchase agreement for the UEG Araucaria Thermoelectric Plant. Other contributing factors include (i) absence of gains from derivative operations, which represented R$22.4 million in 2006 and (ii) reduction in income from fines and other penalties over sales invoices.

Income Taxes

     In 2007, we recognized income tax and social contribution expenses of R$460.3 million, reflecting an effective tax rate of 28.8% on our pretax income. This compared to an income tax and social contribution expense of R$557.7 million in 2006, reflecting an effective tax rate of 30.7% on our pretax income. The decrease in our effective tax rate was primarily due to the higher amount of interest on equity paid to shareholders in 2007 (R$ 200.0 million) when compared to the amount paid in 2006 (R$ 123.0 million).

Results of Operations for 2006 compared with 2005

Net Operating Revenues

     Our net operating revenues increased by 10.1% in 2006. Of this R$449.0 million increase in net operating revenues, R$224.2 million was due to sales to Final Customers, which increased mainly due to higher prices, and R$341.1 million was due to sales to distributors.

     Electricity Sales to Final Customers. Our revenues from electricity sales to Final Customers increased by 4.2% in 2006, due to a gradual increase in our effective tariffs, as we reduced the discounts we grant to customers who pay their utility bills on time and, as of June 20, 2006, finished granting the discounts. The average tariff increase for Final Customers was 4.3% as compared to the 2005. Revenues increased from all our main categories of customers in 2006.

     The rate of increase of the average price of energy was greatest for our industrial customers (12.7%) and the rate from residential and rural and other customers decreased (2.2% and 2.7% respectively). There was a variation in the average price increases among our different classes of customers because each class of customer receives their energy at a different voltage level and ANEEL’s tariff increases of June 2004, June 2005 and June 2006 varied depending upon voltage level.

     The increase in our average prices for electricity sold to Final Customers in 2006 was primarily due to the rate increases we received from ANEEL, 7.8% in June 2005 and 5.1% in June 2006. However, as discussed above, the actual tariff increases that we applied to our customers were less than the increases that were granted by ANEEL because we grant discounts from ANEEL-approved tariffs to those of our customers who pay their bills on time in order to minimize the impact of ANEEL rate increases on our customers, to prevent a decrease in energy consumption, to motivate our customers to pay their bills on time and to attract new customers. From June 2006 on, the discounts were discontinued.

     The slight decrease in the volume of energy sold to Final Customers in 2006 primarily reflected a 5.7% decrease in the volume sold to industrial customers, because (i) some of our industrial customers became Free Customers and decided to purchase their energy from one of our competitors; (ii) of lower industrial output due to a reduction in certain commodities’ international prices; and (iii) of the appreciation of the real. On the other hand, the volume of energy we sold to commercial, residential and rural and other customers increased by 5.4%, 3.7% and 3%, respectively in 2006.

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     The increase in the volume of electricity sold to our commercial customers is largely a result of the favorable conditions of the tertiary sector (particularly the wholesale, retail, hotel and food segments), coupled with the increase in the number of customers. In December 2006, we invoiced 278,963 commercial customers, 2.1% more than the 273,124 we invoiced in December 2005.

     The 3% rate of growth in the volume of electricity among our rural and other consumers was mainly due to the long drought, which demanded greater use of irrigation. Average rural consumption increased by 2.7% compared to the previous year, reaching 363.1 kWh/month. Residential consumption grew 3.7% as a result of an increase in the number of residential customers and a 0.7% increase in the rate of consumption per residential customer, compared to 2005.

     Electricity Sales to Distributors. Electricity sales to distributors include sales under bilateral agreements (35.5% of the total supply revenues in 2006), sales through CCEAR auctions (49.2%), sales to CCEE and the Interconnected Power System (12.2%), and sales to distributors in the State of Paraná (3.1%) .

     Our revenues from electricity sales to distributors increased by 35.9% in 2006, primarily due to the expiration of the Initial Supply Contract between Copel Geração and Copel Distribuição (excluded in the consolidated figures) and the consequent sale of 368 average MW at the first public auction from existing power plants for the 2006-2013 period. We also accounted on sales to distributors, the revenue from the UEG Araucaria Thermoelectric Plant’s emergency output order from September 2006 until December 2006, in the amount of R$87.1 million, and there was an increase in the revenue from bilateral contract to supply Celesc (from 380 average MW in 2005 to 480 average MW in 2006).

     Use of Main Transmission Grid. Revenues from third-party use of our Main Transmission increased by 5.9% in 2006 as a consequence of the tariff increases enacted by ANEEL in June 2005 and June 2006, the incorporation of new transmission lines which increased the size of our transmission grid and an increase of the TUSD distribution tariff.

     Other Revenues. This category includes revenues from the sale of natural gas, the use of our fiber optic network, our energy consulting services, rental income and the fuel cost subsidy we receive for our thermal plant. These revenues increased by 12.7% in 2006, largely as a result of the increased revenues we received from the sale of natural gas.

     Value-added Taxes and other Charges. In arriving at net operating revenues, we deduct value-added taxes imposed by the State of Paraná, generally assessed at 27.0%, and several other charges we pay on amounts billed to Final Customers. These charges generally increase with the amount of our gross revenues on sales to Final Customers. The value-added taxes and the other charges we pay were 34.1% of our gross revenue in 2006 and 34.7% of our gross revenue in 2005.

Operating Expenses

     Total operating expenses decreased by 7.7% in 2006, mainly by the reversion effects related to the gas contract amounts and Cofins provisions. The most important factors were as follows:

• Energy Purchased for Resale. Our expenses related to the energy we purchase for resale increased by R$3.4 million, or only 0.2% in 2006. The main amounts booked were: R$335.4 million from ITAIPU, R$227.4 million from CIEN, R$87.7 million from Itiquira and R$654.1 million from the energy auction. In addition, R$45.2 million was booked as passive CVA.
  
  
• Use of Main Transmission Grid. Expenses for use of the Main Transmission Grid increased by R$4.0 million, or 0.8%, in 2006. This increase was mainly due to the rate increases enacted by ANEEL in June 2005 and 2006.

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• Personnel Expenses. Our personnel expenses increased by R$75.4 million, or 13.3%, in 2006. This increase was mainly due to the (i) wage increases granted under the collective bargaining agreement in October 2005 (5.9%) and October 2006 (3.5%); (ii) an increase in the number of our employees; and (iii) our increased contribution to our employees’ profit sharing plan.
  
  
• Raw material and supply for electric power production. This account reflects the reversal of R$298.1 million due to the agreement established in May 2006 between Copel, Petrobras and Compagas, related to natural gas for the UEG Araucaria Thermoelectric Plant.
  
  
• Provisions and reversions. This account includes the reversal of the COFINS tax provisions, in the amount of R$197.6 million, in December 2006, partially offset by the bookings related to Energética Rio Pedrinho (R$25.0 million) and Consórcio Salto Natal Energética (R$23.8 million).

Financial Income (Expenses), Net

     We recognized R$294.7 million of net financial income in 2006, as compared with net financial expenses of R$101.0 million in 2005.

     Our financial expenses decreased by 12.6% in 2006, mainly as a result of the reversal of two non-recurring events in 2005: Compagas’ contractual penalties of R$190.9 million and charges regarding derivative operations, in the amount of R$42.0 million.

     Financial revenues increased 84.0% in 2006, as compared to 2005, primarily due to the booking of R$283.2 million in May 2006, related to the discounts obtained in the negotiations between Copel, Petrobras and Compagas on the gas purchase agreement for the UEG Araucaria Thermoelectric Plant. Other factors leading to this result include (i) higher revenue from financial investments, due to a higher cash position in the period, and (ii) gains from derivative operations (R$22.4 million).

Equity in Results of Investees

     Our proportionate share of the results of equity method affiliates resulted in loss of R$6.2 million in 2006 and income of R$9.0 million in 2005. The loss in 2006 was primarily a result of the accounting of equity loss from our investee Sercomtel Telecomunicações (R$11.7 million) and Sercomtel Celular (R$2.7 million).

Income Taxes

     In 2006, we recognized income tax expenses of R$557.7 million, reflecting an effective tax rate of 30.7% on our pretax income. This compared to an income tax expense of R$198.2 million in 2005, reflecting an effective tax rate of 27.6% on our pretax income. The increase in our effective tax rate was primarily due to the tax benefit reduction in relation to the pretax income, being 3.3% in 2006 against 6.4% in 2005.

Liquidity and Capital Resources

     Our principal capital requirements historically have been to finance the expansion and upgrading of our electricity distribution and transmission system and to finance the expansion of our generation business. Capital expenditures were R$530.4 million in 2007 (including the acquisition of Centrais Eolicas do Parana and investments in the UEG Araucaria Thermoelectric Plant, Compagas and Elejor), R$1,010.0 million in 2006 (including the acquisition of the UEG Araucaria Thermoelectric Plant and investments in Compagas and Elejor), and R$671.6 million in 2005. The following table sets forth a breakdown of our capital expenditures for the periods indicated.

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	Year ended December 31,
	2007	2006	2005
	(millions of reais)
Generation and Transmission	56.7	88.7	99.9
Distribution	423.8	383.8	311.0
Telecom	31.6	30.1	23.7
Interest in equity investees	3.1(2)	436.7(1)	2.7
UEG Araucaria Thermoelectric Plant	0.9	-	-
Compagas	13.8	10.9	9.2
Elejor	0.5	59.8	225.1
Total	530.4	1,010.0	671.6

_______________
(1)	Includes the acquisition of the UEG Araucaria Thermoelectric Plant.
(2)	Includes the acquisition of the Centrais Eolicas do Parana Power Plant in the amount of R$ 2.1 million.

     Our total budgeted capital expenditures for 2008 is R$839.9 million, of which:

• R$487.3 million is for distribution, including R$99.8 million allocated for investments in lower voltage transmission assets (69 kV and 138 kV) that were transferred to Copel Distribuição as a result of the spin-off of Copel Transmissão;
  
  
• R$263.0 million is for generation and transmission, including R$118.4 million allocated for investments in higher voltage transmission assets (230 kV or higher);
  
  
• R$42.1 million is for our telecommunication business, R$35.3 million is for piped gas distribution, R$6.3 million is for the UEG Araucaria Thermoelectric Plant, R$5.8 million is for Elejor and R$0.1 million is for investments in our affiliates.

     Historically, we have financed our liquidity and capital requirements primarily with cash provided by our operations and through external financing. Our principal source of funds in 2007 was our operating activities. In 2007, net cash provided by operating activities was R$1,357.3 million, an increase from R$911.5 million in 2006. Such increase is basically due to the adjustments to net income in 2006, mainly related to reversals of provisions for contingencies, which do not affect cash balances. We expect our operating cash flow to be sufficient to finance our capital expenditures in 2008.

     Our ability to generate cash sufficient to meet our planned expenditures is dependent upon a variety of factors, including our ability to maintain adequate tariff levels, to obtain regulatory and environmental authorizations, to access domestic and international capital markets, and a variety of operating and other contingencies. In addition, we may seek to invest in controlling interests in other existing electric utilities, in communications services or in other areas, each of which may require additional domestic and international financing.

     Like other state-owned companies, we are subject to restrictions under resolutions of the National Monetary Council, Conselho Monetário Nacional (“CMN”) on our ability to obtain financing from domestic and international sources. These restrictions could limit our ability to access external sources of funding if our internally generated funds are insufficient to meet our budgeted capital expenditures.

     Our total outstanding loans and financing at December 31, 2007 were R$2,102.5 million. Approximately R$78.1 million of the total debt outstanding at December 31, 2007 was denominated in U.S. dollars, R$8.0 million was denominated in Japanese yen and R$62.7 million was indexed to a basket of foreign currencies. For more information on the terms of these loans and financings, see Note 16 of our Consolidated Financial Statements. Our major loans and financing arrangements are:

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• Eletrobrás (including Elejor’s debt) - We have R$410.6 million in debt under government programs to finance expansion of the power industry.
  
  
• IDB - We have R$62.7 million in debt under a loan agreement to finance the development of the Segredo hydroelectric facility and the Rio Jordão deviation project. This loan is guaranteed by the Brazilian government and secured by liens on the financed assets.
  
  
• Banco do Brasil S.A. – We have R$351.2 million of outstanding debt with Banco do Brasil, which we contracted to pay debentures issued in 2002, 2005 and 2006.

     At December 31, 2007, we had a total of R$1,174.5 million in outstanding convertible debentures issued by Elejor and non-convertible debentures issued by Copel. The terms of these debentures are summarized in Note 17 of our Consolidated Financial Statements.

     We have several legal contingencies and proceedings that could have a material adverse impact on our liquidity. In addition, we are contesting a determination by ANEEL that would require us to pay additional amounts for energy we purchased for resale in the MAE during the electricity rationing period in 2001 and the first quarter of 2002. We are also involved in several lawsuits including challenges of the legality of certain federal taxes, which have been assessed against us, claims by industrial customers that certain increases in electricity tariffs from March through November 1986 were illegal and several labor related claims. These contingencies are described in “Item 8. Financial Information – Legal Proceedings”. If any of these claims are decided against us either individually or in the aggregate, they could have a material adverse affect on our liquidity and our financial condition.

Contractual Obligations

     In the table below, we set forth certain of our contractual obligations as of December 31, 2007, and the period in which such contractual obligations come due. The table below does not include pension liabilities or estimated interest payments on our loans and financing and debentures.

	Payments due by period
		Less than			More than
	Total	1 year	1-3 years	3-5 years	5 years
	(in millions of reais)
Contractual obligations:
Loans and financing	833.3	92.7	116.6	95.8	528.1
Debentures	1,174.5	171.8	198.3	692.1	112.3
Suppliers	556.9	366.5	38.1	76.2	76.2
Purchase obligations(1)	19,255.4	1,833.7	4,126.2	4,814.6	8,480.9
Concession payments - ELEJOR	996.0	34.3	68.6	68.6	824.5
Redeemable shares at ELEJOR(2)	94.7	-	16.5	33.0	45.2
Total	22,910.8	2,499.0	4,564.3	5,780.3	10,067.2

_______________
(1)	Consists of electric power purchase commitments pursuant to binding obligations which include all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions and delivery dates. Based upon the applicable purchase price at December 31, 2007.
(2)	Consists of redeemable shares of Eletrobrás at ELEJOR. Interest and monetary indexation of R$50.0 million is recorded in loans and financing. In August 2007, ELEJOR anticipated the redemption of shares in the amount of R$20.4 million and paid interest and monetary variations in the amount of R$18.7 million.

     We are also subject to contingencies with respect to tax, labor and civil claims and have provisioned R$514.3 million for accrued liability for legal proceedings related to these claims as of December 31, 2007. For more information, see “Item 8. Financial Information-Legal Proceedings” and Note 21 to our Consolidated Financial Statements.

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Off-balance Sheet Arrangements

     We have not engaged in any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

U.S. GAAP Reconciliation

     We prepare our consolidated financial statements in accordance with Brazilian GAAP, which differs in significant respects from U.S. GAAP. The differences are described in Note 35 to our Consolidated Financial Statements. Our net income in accordance with Brazilian GAAP was R$1,106.6 million in 2007, R$1,242.7 million in 2006 and R$502.4 million in 2005. Under U.S. GAAP, we would have reported net income of R$981.2 million in 2007, R$1,019.3 million in 2006 and R$556.5 million in 2005. Our shareholders’ equity in accordance with Brazilian GAAP was R$7,236.2 million at December 31, 2007 and R$6,376.3 million at December 31, 2006. Under U.S. GAAP, we would have reported shareholders’ equity of R$7,840.7 million at December 31, 2007 and R$7,169.4 million at December 31, 2006.

     For a discussion of the principal differences between Brazilian GAAP and U.S. GAAP as they relate to our Consolidated Financial Statements and a reconciliation of net income and shareholders’ equity, see Note 35 to our Consolidated Financial Statements.

Item 6. Directors, Senior Management and Employees

We are managed by:

• a Board of Directors, which may consist of seven to nine members and is currently composed of nine members; and
  
  
• a Board of Executive Officers, which consists of seven members.

Board of Directors

     The Board of Directors ordinarily meets once every three months and is responsible, among other things, for:

• establishing our corporate strategy;
  
  
• defining the general orientation of our business;
  
  
• defining the responsibilities of members or our Board of Executive Officers, and
  
  
• choosing and replacing members of our Board of Executive Officers.

     Meetings of the Board of Directors require a quorum of a majority of the directors and are taken by majority vote. The members of the Board of Directors are elected to serve for two-year terms and may be reelected. Among the current nine members of the Board of Directors:

• seven are elected by the holders of the Common Shares;

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• one is elected by minority shareholders, holders of both the Common Shares or preferred shares; and
  
  
• one is elected by our employees.

     The member of our Board of Directors who is elected by the non-controlling shareholders has the right to veto (provided it is duly justified) the choice made by the majority of the members of our Board of Directors of the independent accountant.

     The State of Paraná and BNDES Participações S.A. – BNDESPAR (“BNDESPAR”), with the intervention of the Company and Paraná Investimentos, S.A., are parties to a shareholders’ agreement dated December 22, 1998, as amended on March 29, 2001 (the “Shareholders’ Agreement”). BNDESPAR is a wholly owned subsidiary of BNDES. Under the Shareholders’ Agreement, the parties agree to exercise their voting rights so that:

• the State of Paraná appoints five members to the Board of Directors; and
  
  
• BNDESPAR appoints two members to the Board of Directors.

     According to the Brazilian Corporation Law, minority shareholders are entitled to appoint and remove a member of the Board of Directors, in a separate election, where such minority shareholders (i) hold at least fifteen percent of the company’s voting shares or (ii) hold at least ten percent of the company’s outstanding non-voting shares.

     The terms of the current members of the Board of Directors expire in 2009. The current members are as follows:

Name	Position	Since
João Bonifácio Cabral Júnior	Chairman	2003
Rubens Ghilardi	Director	2005
Jorge Michel Lepeltier	Director	2007
Munir Karam	Director	2008
Laurita Costa Rosa	Director	2004
Rogério de Paula Quadros	Director	2005
Nelson Fontes Siffert Filho	Director	2005
Luiz Antonio Rodrigues Elias	Director	2006
Nildo Rossato	Director	2007

     Following are brief biographies of the current members of our Board of Directors:

     João Bonifácio Cabral Júnior. Mr. Bonifácio is 62 years old. He received a law degree from Pontifícia Universidade Católica do Paraná. He also attended a specialization course in Public Law and a post-graduate course in International Law and International Business at the Universidade de Santa Catarina in 2001. Previously, Mr. Cabral Júnior served as the Solicitor General (Procurador Geral) of the Attorney General’s Office of the Tribunal de Contas of the State of Paraná and as the Chief Administrative Officer of Itaipu Binacional. He has been the Chief Legal Officer of Itaipu Binacional for the last ten years. Mr. Bonifácio was appointed by the State of Paraná.

     Rubens Ghilardi. Mr. Ghilardi is 68 years old. He received degrees in economics from the Economics College of Paraná and in business administration from the Economics and Business Administration College of Pontifícia Universidade Católica of Paraná. Previously, Mr. Ghilardi was the Chief Financial Officer of Itaipu Binacional, Escelsa and Copel. He is currently our Chief Executive Officer.

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     Jorge Michel Lepeltier. Mr. Lepeltier is 60 years old. He received a degree in economics and accountancy from the Pontifícia Universidade Cato ica de São Paulo and attended an environmental management course in the Escola Superior de Agricultura “Luiz de Queiroz” ESALQ-USP. Previously, Mr. Lepeltier was treasurer and then administrative – finance officer and market relations officer of Brasmotor SA and audit manager at PricewaterhouseCoopers. Mr. Lepeltier was appointed by the minority shareholders.

     Munir Karam. Mr. Karam is 70 years old. He received a law degree from Federal University of Paraná. Formerly, he served as a state judge and law professor. Currently, Mr. Karam is the chairman of the Board of Directors of ParanaPrevidência, the Paraná state pension fund, as well as a member of the law faculty at the Federal University of Paraná. Mr. Karam was appointed by the state of Paraná.

     Laurita Costa Rosa. Ms. Rosa is 49 years old. She received a degree as a certified public accountant from the Social Studies Foundation of the State of Paraná. Previously, Ms. Rosa was the general secretary of the Commercial Registrar of the State of Paraná. Ms. Rosa was appointed by the State of Paraná.

     Rogério de Paula Quadros. Mr. Quadros is 56 years old. He received a degree in Economic Sciences from the State University of Ponta Grossa. Previously, Mr. Quadros was the President of the Financial, Budget and Audit Committee of the Municipality of Ponta Grossa. He was appointed by the State of Paraná.

     Nelson Fontes Siffert Filho. Mr. Siffert is 47 years old. He graduated and received a master’s degree in Economics from the Federal University of Rio de Janeiro and a doctor’s degree in Economics from the University of São Paulo. Mr. Siffert is the manager of the energy department of BNDES. He was appointed by BNDESPAR.

     Luiz Antonio Rodrigues Elias. Mr. Elias is 55 years old. He received a degree in economics from University Benett-Centro Universitário Metodista de Brasilia. Previously, Mr. Elias was an officer of Rede Ferroviáia Federal by appointment of the Ministry of Planning and a researcher of the National Institute of Intellectual Property-INPI, where he was in charge of the transfer of technology departments. Mr. Elias is currently an officer of technological and innovation development of the Ministry of Sciences and Technology, chairman of the management committees of the electric power sectorial fund (CT -Energ) and mineral sectorial fund (CT-Mineral) and a member of the audit committee (Consellio Fiscal) of the Brazilian Nuclear Industries (Indústrias Nucleares Brasileiras-INB). Mr. Elias was appointed by the BNDESPAR.

     Nildo Rossato. Mr. Rossato is 42 years old. He is a technician in rural business administration from Faculdades Reunidas de Administracão, Ciências Contábeis e Ciências Económicas de Palmas-FACEPAL. Mr. Rossato joined Copel in 1986 and currently works as manager in the distribution office of the Company. He was appointed by our employees as member of the Board of Directors.

Board of Executive Officers

     Our Board of Executive Officers meets weekly and is responsible for the daily management of the Company. Each Executive Officer also has individual responsibilities established by our by-laws.

     According to our by-laws, our Board of Executive Officers consists of seven members. The Executive Officers are elected by the Board of Directors for three-year terms but may be removed by the Board of Directors at any time. Under the Shareholders’ Agreement, BNDESPAR has the right to appoint one member to the Board of Executive Officers. The terms of the current members of the Board of Executive Officers expire in December 2008. The current members are as follows:

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Name	Position	Since
Rubens Ghilardi	Chief Executive Officer	2005
Paulo Roberto Trompczynski	Chief Financial Officer, Investor Relations Officer and Investment Portfolio Manager	2005
Ronald Thadeu Ravedutti	Chief Distribution Officer	2005
Raul Munhoz Neto	Chief Power Generation & Transmission and Telecommunications Officer	2006
Luiz Antonio Rossafa	Chief Engineering Officer	2008
Antonio Rycheta Arten	Chief Management Officer	2008
Zuudi Sakakihara	Chief Legal Officer	2006

     The following are brief biographies of the current members of our Board of Executive Officers:

     Rubens Ghilardi. Mr. Ghilardi is 68 years old. He received degrees in economics from the Economics College of Paraná and in business administration from the Economics and Business Administration College of Pontifícia Universidade Católica of Paraná. Previously, Mr. Ghilardi was the Chief Financial Officer of Itaipu Binacional and the Chief Financial Officer of Copel.

     Paulo Roberto Trompczynski. Mr. Trompczynski is 63 years old. He received a degree in law from the Federal University of Paraná. Previously, Mr. Trompczynski was the head of the legal department of Fundepar, auditor at Curitiba Municipality and member of Copel’s Fiscal Council.

     Ronald Thadeu Ravedutti. Mr. Ravedutti is 58 years old. He received a degree in economics from the Social Studies Foundation of Paraná and completed post-graduate courses in utility finance, economics and finance, engineering economics, financial administration and systems analysis. He was the Chief Financial and Market Relations Officer of Copel from April to December 1994.

     Raul Munhoz Neto. Mr. Munhoz Neto is 65 years old. He received a degree in mechanical engineering from the Federal University of Paraná. Previously, Mr. Munhoz Neto was the Chief Financial and Administrative Officer of UEG Araucaria Thermoelectric Plant and Chief Construction and Engineering Officer of Copel.

     Luiz Antonio Rossafa. Mr. Rossafa is 53 years old. He received a degree in agronomical engineering from Luiz Meneghel Agronomy College in Paraná and a master’s degree in Agriculture from Paulista State University (Unesp). Mr. Rossafa was the Chairman of the Regional Engineering, Architecture and Agronomy Committee of the State of Paraná.

     Antonio Rycheta Arten. Mr. Arten is 55 years old. He received a degree in accounting from the FAE Economics and Business Administration School and a masters degree in economics and finance engineering from Sociedade Paranaense de Ensino - SPEI. He was CEO (2003-2008) and Administrative and Finance Officer (2003) of the Development Agency of the State of Paraná – AFPR. He was alternate and primary member of the Fiscal Council of Copel during 2003-2004 and 2004 –2005, respectively.

     Zuudi Sakakihara . Mr. Sakakihara is 70 years old. He received a law degree from the Faculdade de Direito da Universidade Federal do Paraná and attended specialization courses in civil procedure at Universidade de Brasilia and in tax law at the Pontifícia Universidade Católica de São Paulo. Mr. Sakakihara was, previously, a teacher of tax law at Escola da Magistratura Federal do Paraná and at Universidade Federal do Paraná, a teacher of tax law in a master course at Universidade Estadual de Londrina and at Pontifícia Universidade Católica do Paraná. He was also a federal judge in Londrina and Curitiba, legal officer (Diretor Jurídico) of Banco BHM de Investimentos, member of the taxpayer council of the State of Paraná and legal officer of financial institutions and of companies rendering services and commercial companies.

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Fiscal Council

     We have a permanent Fiscal Council, which generally meets every three months. The Fiscal Council consists of five members and five alternates elected for one-year terms by the shareholders at the annual meeting. The Fiscal Council, which is independent of our management and of our external auditors, is responsible for:

• reviewing our financial statements and reporting on them to the shareholders;
  
  
• issuing special reports on proposed changes in capitalization, corporate budgets and proposed dividend distributions and any corporate reorganization; and
  
  
• in general, supervising the activities of management and reporting on them to our shareholders.

     The following table lists the current and alternate members of the Fiscal Council, who were appointed at the 53^rd shareholders General Meeting held on April 17, 2008, and whose terms expire in 2009:

Name	Since
Osmar Alfredo Kohler – President	2008
Heron Arzua	2005
Beatriz Oliveira Fortunato	2008
Nelson Pessuti	2003
Márcio Luciano Mancini	2005
Alternates	Since
Moacir José Soares	2003
Maurílio Leopoldo Schmitt	2003
Frederico Djun Takahashi Saraiva	2008
Serafim Charneski	2004
Vacant	-

Audit Committee

     In June 2005, our shareholders amended our bylaws to establish an Audit Committee composed of at least three members of our Board of Directors, each of whom serves a term of two years, and may be reelected. Pursuant to the Audit Committee charter, the Audit Committee members are appointed by, and may be replaced by a resolution taken by our Board of Directors. The current members of the Audit committee with terms until 2009 are: Mr. Jorge Michel Lepeltier, Mr. Rogério de Paula Quadros and Ms. Laurita Costa Rosa. All of the members of the Audit Committee are members of our Board of Directors. The Audit Committee is responsible for our Financial Statements, ensuring that we are in compliance with all legal requirements related to our reporting obligations, monitoring the work of the independent auditors and our staff who are responsible for internal auditing of the Company and reviewing the efficacy of our internal control and risk management procedures and staff.

     Under Brazilian law, the function of hiring independent auditors is reserved for the board of directors of a company. As a result, our Board of Directors acts as our Audit Committee, as specified in Section 3(a)(58) of the Exchange Act, for purposes of approving, on a case-by-case basis, any engagement of our independent auditors for audit and non-audit services provided to our subsidiaries or to us. Except in these respects, our Audit Committee is comparable to and performs the functions of audit committees of U.S. companies.

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Compensation of Directors and Officers

     For the year ended December 31, 2007, the aggregate amount of compensation paid by us to the members of our Board of Directors, Board of Executive Officers and Fiscal Council was R$5.5 million, as approved by our 52^nd General Shareholders’ Meeting held on April 27, 2007.

Employees

     At December 31, 2007, we had 8,347 employees, compared to 8,119 employees at December 31, 2006 and 7,704 employees at December 31, 2005. Including employees at Compagas, Elejor and the UEG Araucaria Thermoelectric Plant (companies in which we have a majority stake) we had 8,441 employees by the end of 2007. In addition, during 2007 we had approximately 2,237 third-party employees performing services for us, including security and cleaning services. Including the controlled companies, the third-party employees were 2,244 by the end of 2007.

     The following table sets forth the number of our employees and a breakdown of employees by category of activity as of the dates indicated in each area of our operations.

	As of December 31,
Area	2007	2006	2005
Generation and Transmission*	1,394	979	1072
Distribution*	5,351	5,542	5,144
Telecommunications.	243	252	227
Corporation staff and research and development	1,342	1,323	1,228
Other employees	17	23	33
Total Employees Copel wholly owned subsidiaries	8,347	8,119	7,704
Compagas	85	76	67
Elejor	6	6	4
UEG Araucária	3	5	-
Total	8,441	8,206	7,775

* On December 1, 2007, all employees of Copel Transmissão were transferred to Copel Geração (renamed Copel Geração e Transmissão S.A.) and to Copel Distribuição. For comparative purposes, this table reflects this transfer retroactively in 2006 and 2005.

     All of our employees are covered by collective bargaining agreements that we renegotiate annually with the unions that represent the various employee groups. In 2007, we negotiated and signed labor agreements with the unions representing our employees. These new bargaining agreements became effective in October 2007 and will be in place for a one-year term. We agreed to increase salaries by 5.5% in 2007.

     We provide a number of benefits to our employees. The most significant is the sponsorship of Fundação Copel de Previdência e Assistência Social (“Fundação Copel”), which supplements the Brazilian government retirement and health benefits available to our employees. As of December 31, 2007, approximately 99% of our employees had elected to participate in a defined contribution plan.

     In accordance with federal law and our compensation policy, our employees participate in a profit-sharing plan. The Board of Directors and the shareholders must approve the amount of such compensation, which is determined in accordance with an agreement with an employee committee. Our employees are entitled to share in our profits during years in which our ratio of net profits to shareholders’ equity is at least 9.0% and certain performance criteria are met. In 2007, R$54.3 million was recorded as distributions to our employees as part of the profit-sharing plan. In 2006 and 2005, R$52.0 million and R$32.3 million, respectively, were recorded as profit sharing. The terms of the profit-sharing agreement are currently being revised and negotiated for future years.

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Share Ownership

     As of May 31, 2008, board members and executive officers held, collectively, directly or indirectly, less than 1.0% of any class of our shares.

Item 7. Major Shareholders and Related Party Transactions.

     Since 1954, the State of Paraná has owned the majority of our Common Shares and has exercised control over us. At December 31, 2007, the State of Paraná directly owned 58.6% of the Common Shares, and BNDESPAR owned directly and indirectly 26.4% of the Common Shares.

     The following table sets forth certain information regarding the ownership of our Common Shares at May 31, 2008.

	Common Shares
	(in millions)	(% of total)
Shareholder
State of Paraná	85,028	58.6
BNDESPAR	38,299	26.4
ELETROBRAS	1,531	1.1
ADR	5,273	3.0
Traded in Bovespa	14,340	10.5
Others	560	0.4
All directors and officers as a group	0(1)	0.0
Total	145,031	100.0

____________
(1) Our directors and officers hold an aggregate of 111 common shares.

     At May 31, 2008, 1.49% of the Common Shares and 15.33% of the Class B Shares were held by 170 holders who reside in the United States and have registered with the Companhia Brasileira de Liquidação e Custódia, known as “CBLC”. At the same date, the ADRs represented 3.6% of the Common Shares and the ADSs represented 22.0% of the Class B Shares, and together, approximately 12.2% of our total share capital. Until May 31, 2008, our shareholders approved the conversion of 873 Class A Shares into Class B shares.

Shareholders’ Agreement

     Under the Shareholders’ Agreement, the State of Paraná cannot approve, without BNDESPAR’s prior authorization, the following matters:

• amendments to our by-laws;
  
  
• reductions or increases of our capital stock;
  
  
• changes in our corporate purpose;
  
  
• creation of a new class of our preferred shares;
  
  
• issuances of securities convertible into our shares or call options for our shares;
  
  
• reverse splits or splits of issued shares;

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• incorporation of reserves, funds or accounting provisions that affect the rights and interests of minority shareholders;
  
  
• liquidations or voluntary corporate restructurings;
  
  
• mergers, spin-offs, transformations, transfers or acquisitions of interests in other companies;
  
  
• incorporation of wholly-owned subsidiaries;
  
  
• adoption of policy with respect to minority shareholders in the case of merger, amalgamation, split-off and transfer of control in Copel; and
  
  
• reduction in mandatory dividends.

RELATED PARTY TRANSACTIONS

     We engage in transactions, including the sale of electric energy, with our principal shareholders and with our affiliates. The tariffs we charge on electric energy sold to our related parties are approved by ANEEL, and the amounts are not material.

Transactions with Shareholders

     The following summarizes the most significant transactions with our principal shareholders:

Government of the State of Paraná

     The State of Paraná owns 58.6% of our Common Shares. We had accounts receivable from the government of the State of Paraná under the CRC Account Agreement in the amount of R$1,250.4 million at December 31, 2007. The outstanding balance bears interest of 6.65% per year and is adjusted in accordance with the IGP-DI inflation index. We also had ICMS payables in the amount of R$126.3 million as of December 31, 2007. ICMS expenses during 2007 amounted to R$1,507.9 billion. We recorded interest income and monetary variation receivable from the government of the State of Paraná under the CRC of R$167.5 million in 2007. For more information, see “Item 5. Operating and Financial Review and Prospects—Overview—Impact of CRC Account.”

BNDESPAR

     BNDESPAR owns 26.4% of our Common Shares. BNDESPAR is a wholly owned subsidiary of BNDES and has the right to appoint two members to our Board of Directors. We had loans from BNDES of R$25.4 million as of December 31, 2007, and recorded interest expenses of R$2.4 million in 2007. As of December 31, 2007, we had debentures issued from ELEJOR and payable to BNDESPAR of R$272.5 million.

Transactions with Affiliates

     We have a variety of transactions with our affiliates. The material transactions are:

Centrais Eólicas do Paraná Ltda.

     We have a power purchase agreement with Centrais Eólicas do Paraná. In 2006, our purchases from Centrais Eólicas do Paraná amounted R$1 million. Since August 2007, we own 100% of the share capital of Centrais Eólicas do Paraná and we fully consolidate Centrais Eólicas do Paraná into our financials statements.

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Dona Francisca Energética S.A.

     We own 23.03% of the total issued and outstanding share capital of Dona Francisca Energética S.A. We had accounts payable in the amount of R$51.5 million as of December 31, 2007. We provided guarantees to Dona Francisca in connection with loans obtained from the Interamerican Development Bank – IDB, and to BNDES, in an amount proportionate to our interest in Dona Francisca. The outstanding balance of the loans and financing was R$139 million as of December 31, 2007.

Dominó Holdings S.A.

     On January 14, 2008, COPEL acquired Sanedo’s interest in Dominó Holdings S.A., which corresponded to 30% of its capital stock, for R$ 110.2 million. COPEL now holds a 45% stake in Dominó Holdings, which, in turn, holds 34.7% of the voting stock of Sanepar (the Sanitation Company of Paraná).

Item 8. Financial Information.

     See Item 18. “Financial Statements” and pages F-1 through F-121.

LEGAL PROCEEDINGS

     We are currently subject to numerous proceedings relating to civil, administrative, labor and tax claims. Our Consolidated Financial Statements only include reserves for probable and reasonably estimable losses and expenses we may incur in connection with pending litigation. At December 31, 2007, our reserves for such contingencies were R$579.3 million, which we believe to be sufficient to meet probable and reasonably estimated losses in the event of unfavorable rulings relating to the legal proceedings in which we are a party. However, we cannot assure you that these reserves will be sufficient.

Aneel Determinations

     We are contesting a determination by ANEEL that would require us to recognize, in our current liabilities at December 31, 2007, R$860.0 million in costs for energy we purchased for resale in the MAE during the rationing period in 2001 and the first quarter of 2002. We believe that it is reasonably possible that we will prevail in the lawsuit against ANEEL and that we will not be required to pay the R$860.0 million. For more information see “Item 5. – Operating Review and Financial Prospects – Critical Accounting Policies – The Wholesale Energy Market (“MAE”).

Tax and Social Contribution Claims

     We are a party to certain lawsuits in which we are disputing the legality or constitutionality of certain federal taxes and social contributions assessed against us. We believe that none of these taxes and social contributions is due. In 1998, we won our lawsuit challenging our obligations to pay COFINS, a tax to finance social security. Based on a subsequent decision by the Brazilian Supreme Court, which ruled that electric utilities were subject to COFINS, the Brazilian government filed a new lawsuit in order to challenge the decision that released us from the obligation to pay COFINS. We had provisioned R$197.5 million to meet our purported COFINS obligations that were due from August 1998 through June 2001. This provision, however, was reverted in December 2006 following a ruling by the Supreme Court in favor of Copel.

     On September 4, 2007, however, the Superior Court of Justice overturned the decision it unanimously reached less than one year ago and ruled against Copel, rejecting Copel’s statute of limitation’s claim. Even though this ruling may be appealed, it is unlikely that the same justices will overturn their own decision once again. In addition, there are few legal ground for appealing this decision to the Federal Supreme Court. In light of this unforeseen ruling by the Superior Court of Justice, we reclassified the risk that we would be required to pay COFINS tax amounts from “remote” to “likely.” Thus, we set aside a provision in the amount of R$ 171.6 million, which corresponds to the COFINS tax restated principal amount plus charges.

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     We also challenged the payment of contributions to the PIS-PASEP program (Programs for Social Integration and for the Establishment of Public Employee’s Patrimony). The basis for calculation of PIS and PASEP have changed over time, resulting in significant differences in the final amounts due, and we believe that these changes have not been made in accordance with the Brazilian Constitution. In 1999, we benefited from a Legislative Act that allows companies to settle federal tax disputes without risking fines and charges related to the late payment.

     We are party to administrative and judicial proceedings pursuant to which we are challenging claims of the Brazilian Social Security authorities to pay additional security contributions for the period between 2000 and 2006. In these proceedings, we estimate the value of our probable loss to be R$27.8 million and the value of our possible loss to be R$316.2 million.

Labor Related Claims

     We are the defendant in several lawsuits filed by either current or past employees of ours, related to overtime claims, dangerous work conditions, relocation, and other matters. As of December 31, 2007, we have provisioned R$102.5 million to cover probable losses related to these lawsuits.

Cruzado Period Claims

     We are a defendant in several lawsuits brought by industrial customers alleging that increases in electricity tariffs during a price freeze imposed by the Brazilian government from March through November 1986 (the “Cruzado Period”) were illegal. The plaintiffs further allege that all of our tariff increases after the Cruzado Period were illegal, in part because they included the Cruzado Period increases in the amount that served as the basis for calculating the further increases. As of December 31, 2007, we have provisioned R$6.5 million to cover probable losses related to these lawsuits.

Additional Claims

     In July 2004, Rio Pedrinho Energética S.A. (“Rio Pedrinho”) and Consórcio Salto Natal Energética S.A. (“Salto Natal”) commenced arbitration proceedings against Copel Distribuição seeking approximately R$25.0 million each for outstanding amounts that had been billed to us under energy purchase agreements with them, and any associated penalties. In September 2005, the arbitration panel ordered Copel Distribuição to pay each company approximately R$27.5 million.

     We filed a lawsuit in November 2005 in the local courts in Curitiba seeking to annul the decision of the arbitration panel. In the meantime, Rio Pedrinho and Salto Natal have filed judicial execution proceedings seeking to require that we pay them the awards granted by the arbitration. As of December 31, 2007, we had provisioned R$50.0 in connection with these arbitrations.

     In a lawsuit filed in November 29, 2004 by Ivaí Engenharia de Obras S.A., COPEL was sentenced to the payment of R$180.9 million as compensation for a supposed economic-financial imbalance, related to the construction work of the Jordão River diversion project. COPEL appealed to this decision and was partially successful, avoiding the application of the SELIC interest rate on top of the penalty interest. COPEL will continue to dispute this claim in court, through all means legally available. As of December 31, 2007, the Company has recorded a provision of R$101.9 million for probable losses.

     We are a party to several lawsuits brought by landowners whose land has been affected by our transmission and distributions lines. As of December 31, 2007, we have provisioned R$16.1 million to cover a probable losses related to these lawsuits.

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     For more information on our contingencies, see Note 21 of the Financial Statements.

DIVIDEND PAYMENTS

     In accordance with our by-laws and the Brazilian Corporation Law, we regularly pay annual dividends for each fiscal year within sixty days after the declaration at the annual shareholders’ meeting. To the extent amounts are available for distribution, we are required to distribute as dividends an aggregate amount (the “Mandatory Dividend”) equal to at least 25.0% of Adjusted Net Profit (as hereinafter defined). Dividends are allocated pursuant to the formula described in “Dividend Priority of Class A Shares and Class B Shares” below. Under the Brazilian Corporation Law, we are not permitted to suspend the Mandatory Dividend payable with respect to the Common Shares, to the Class A Shares and to the Class B Shares for any year. Brazilian law permits, however, a company to suspend the payment of all dividends if the Board of Directors, with the approval of the Fiscal Council, reports to the shareholders’ meeting that the distribution would be incompatible with the financial circumstances of the company. In such a case, companies with publicly traded securities must submit a report to the CVM providing the reasons for the suspension of dividend payments. Notwithstanding the above, the Brazilian Corporation Law and our by-laws provide that Class A Shares and Class B Shares shall acquire voting rights if we suspend the Mandatory Dividend payments for more than three consecutive years. We are not subject to any contractual limitations on our ability to pay dividends.

Calculation of Adjusted Net Profit

     Dividends with respect to a fiscal year are payable from our adjusted net profit for such period. The Brazilian Corporation Law defines “net profit” for any fiscal year as the result of a fiscal year after the deduction of income and social contribution taxes for that fiscal year and any amounts allocated to employees’ and management’s participation in our results in such fiscal year. The “net profit” for a relevant fiscal year is subject to adjustment by the addition or subtraction of amounts allocated to legal and other reserves (as described below) (“Adjusted Net Profit”).

     In accordance with Brazilian Corporation Law, we must maintain a legal reserve, to which we must allocate a minimum 5.0% of our net profits for each fiscal year until such reserve reaches an amount equal to 20.0% of our capital stock (calculated in accordance with the Brazilian Corporation Law). However, we are not required to make any allocations to our legal reserve in a fiscal year in which the legal reserve, when added to our other established capital reserves, exceeds 30.0% of our total capital. The amounts to be allocated to such reserve must be approved by our shareholders in a shareholders´ meeting and may be used only for the increase of our capital stock or compensation of losses. At December 31, 2007, our legal reserve was R$323.7 million, or approximately 7.3% of our capital stock at that date.

     In addition to deducting amounts for the legal reserve, under the Brazilian Corporation Law net profit may also be adjusted by deducting amounts allocated to:

     (i) the contingency reserve: under the Brazilian Corporation Law, our shareholders’ meeting, upon a justified proposal of our Board of Directors or Board of Executive Officers, may decide to allocate a percentage of our net profits to a contingency reserve for anticipated losses that are deemed probable in future years, which amount may be estimated;

     (ii) the tax incentives reserve: under the Brazilian Corporation Law, our shareholders’ meeting, upon a justified proposal of our Board of Directors or Board of Executive Officers, may decide to allocate a percentage of our the net profits resulting from government donations or subventions for investment purposes.

     On the other hand, net profits may also be increased by:

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     (i) the reversal of any amounts previously allocated to a contingency reserve in the fiscal year in which the loss that had been anticipated does not occur as projected or in which the anticipated loss occurs; and

     (ii) any amounts included in the unrealized profits reserve that have been realized in the relevant fiscal year and have not been used to offset losses, as approved by our shareholders´ meeting, upon proposal of our Board of Directors or Board of Executive Officers.

     The amounts available for distribution are determined on the basis of the Statutory Financial Statements prepared using the method required by the Brazilian Corporation Law, which differ from financial statements, such as the Consolidated Financial Statements included herein.

Dividend Priority of Class A Shares and Class B Shares

     According to our by-laws, Class A Shares and Class B Shares are entitled to receive annual, non-cumulative minimum dividends, which dividend per share shall be at least 10.0% higher than the dividends per share paid to the Common Shares. Class A Shares have a dividend priority over the Class B Shares, and Class B Shares have a dividend priority over the Common Shares. To the extent funds are available therefore, dividends are to be paid in the following order:

• first, the holders of Class A Shares have the right to receive a minimum dividend equal to 10.0% of the total share capital represented by the Class A Shares outstanding as at the end of the fiscal year in respect of which the dividends have been declared;
  
  
• second, to the extent there are additional amounts to be distributed after all amounts allocated to the Class A Shares have been paid, the holders of Class B Shares have the right to receive a minimum dividend per share equal to (1) the Mandatory Dividend divided by (2) the total number represented by Class B Shares outstanding as at the end of the fiscal year in respect of which the dividends have been declared; and
  
  
• third, to the extent that there are additional amounts to be distributed after all amounts allocated to the Class A Shares and the Class B Shares have been paid, the holders of Common Shares have the right to receive an amount per share equal to (1) the Mandatory Dividend divided by (2) the total number of Common Shares outstanding as at the end of the fiscal year in respect of which dividends have been declared, provided that the Class A Shares and Class B Shares receive dividends per share at least 10.0% higher than the dividends per share paid to the Common Shares.

     To the extent that there are additional amounts to be distributed after all amounts described in the preceding items have been paid and in the form therein described, any such additional amount will be divided equally among all our shareholders.

Payment of Dividends

     We are required to hold an annual shareholders’ meeting by April 30^th of each year at which, among other things, an annual dividend may be declared by decision of the shareholders on the recommendation of the management, as approved by the Board of Directors. The payment of annual dividends is based on the financial statements prepared for the fiscal year ending December 31^st. Under Brazilian law, we must pay dividends within sixty days following the date of the shareholders meeting that declared the dividends to shareholders of record on such shareholders’ meeting. A shareholders’ resolution may set forth another date of payment, which must occur prior to the end of the fiscal year in which such dividend was declared. We are not required to adjust the amount of paid-in capital for inflation for the period from the end of the last fiscal year to the date of declaration or to adjust the amount of the dividend for inflation for the period from the end of the relevant fiscal year to the payment date. Consequently, the amount, in real terms, of dividends paid to holders of Class B Shares may be substantially reduced due to inflation.

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     According to our by-laws, our management may declare interim dividends to be paid from profits in our semi-annual financial statements approved by our shareholders. Any payment of interim dividends may be set off against the amount of mandatory distributions relating to the net profit earned in the year in which the interim dividends were paid.

     Pursuant to Brazilian law, we may pay interest on equity in lieu of dividends as an alternative form of making distributions to shareholders. We may treat a payment of interest on equity as a deductible expense for tax purposes, provided that it does not exceed the lesser of:

• the total amount resulting from (1) TJLP multiplied by (2) the total shareholders’ equity (determined in accordance with the Brazilian Corporation Law), less certain deductions prescribed by the Brazilian Corporation Law; and
  
  
• the greater of (1) 50.0% of current net income (after the deduction of social contribution on profits (CSLL) and before taking such distributions and any deductions for corporate income tax) for the year in respect of which the payment is made or (2) 50.0% of retained earnings and profit reserves for the year prior to the year in respect of which the payment is made.

     Shareholders who are not residents of Brazil must register with the Central Bank in order for dividends, sales proceeds or other amounts with respect to their shares to be eligible to be remitted in foreign currency outside of Brazil. The Class B Shares underlying the ADSs are held in Brazil by the Custodian, as agent for the Depositary, which is the registered owner of our shares.

     Payments of cash dividends and distributions, if any, will be made in Brazilian currency to the Custodian on behalf of the Depositary, which will then convert such proceeds into U.S. dollars and will cause such U.S. dollars to be delivered to the Depositary for distribution to holders of ADRs. In the event that the Custodian is unable to convert immediately the Brazilian currency received as dividends into U.S. dollars, the amount of U.S. dollars payable to holders of ADRs may be adversely affected by devaluations of the Brazilian currency that occur before such dividends are converted and remitted.

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     The table below sets forth the cash distributions we paid as interest on equity for the periods indicated.

		Distribution
Year	Payment Date	(in thousands of R$)	Payment per Thousand Shares (R$)
			Common	Preferred A	Preferred B	Average
2003	June 2004	42,584	0.14734	1.05973	0.16211	0.15561
2004	June 2005	96,061	0.33396	1.27167	0.36743	0.35103
2005	June 2006	122,995	0.42811	1.27167	0.47101	0.44945
2006	June 2007	280,951	0.98001	1.41617	1.07821	1.02666
2007	May 2008	267,750	0.93356	1.62979	1.02713	0.97842

     The table below sets forth the cash distributions we paid as interest on equity, translated into US$ based on the exchange rate at year-end, for the periods indicated.

		Distribution
Year	Payment Date	(in thousands of US$)	Payment per Thousand Shares (US$)
			Common	Preferred A	Preferred B	Average
2003	June 2004	14,739	0.05100	0.36679	0.05611	0.05386
2004	June 2005	36,189	0.12581	0.47908	0.13842	0.13224
2005	June 2006	52,546	0.18290	0.54329	0.20123	0.19202
2006	June 2007	131,408	0.45838	0.66238	0.50431	0.48020
2007	May 2008	151,160	0.52705	0.92011	0.57987	0.55237

Significant Changes

     On June 23, 2008, ANEEL required us to decrease our tariffs by 3.35%, pursuant to the second periodic revision. This decrease consisted of a 7.17% decrease in our retail tariffs and a 3.82% increase for deferred regulatory asset recovery (CVA).

Item 9. The Offer and Listing

     The principal trading market for the Class B Shares is the Bolsa de Valores de São Paulo (the “São Paulo Stock Exchange” or “BOVESPA”). At December 31, 2007, we had approximately 4,193 shareholders of our Class B Shares.

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     The following table sets forth the reported high and low closing sale prices for the Class B Shares on the São Paulo Stock Exchange for the periods indicated.

	Price per 1,000 Class B Shares
	High	Low
	(R$)
2003	14.05	7.31
2004	13.87	8.40
2005	19.20	10.50
2006	26.13	17.70
1st Quarter	24.19	18.70
2nd Quarter	23.77	17.70
3rd Quarter	24.51	19.90
4th Quarter	26.13	23.01
2007	35.20	23.40
1st Quarter	26.09	23.40
2nd Quarter	33.67	24.15
3rd Quarter	35.20	28.20
4th Quarter	31.40	26.00
December	29.74	26.00
2008	30.58	24.44
1st Quarter	29.60	24.44
January	27.21	24.44
February	28.80	29.60
March	29.60	26.85
2nd Quarter	30.58	27.29
April	30.43	27.29
May	30.58	27.29

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     On July 2, 2007, the shareholders approved a reverse split of our shares 1,000-for-1. In the United States, the Class B Shares trade in the form of ADSs, each representing 1 Class B Share (as a result of the reverse stock split), issued by The Bank of New York, as depositary (the “Depositary”) pursuant to a Deposit Agreement (the “Deposit Agreement”) among Copel, the Depositary and the registered holders and beneficial owners from time to time of the ADRs. The ADSs trade under the symbols ELP and ELPVY. The following table sets forth the reported high and low closing sales prices for ADSs on the NYSE for the period indicated.

	U.S. dollars per ADS
	High	Low
	(U.S.$)
2003	4.88	2.03
2004	4.94	2.64
2005	8.71	3.88
2006	12.22	7.64
1st Quarter	11.44	8.18
2nd Quarter	11.42	7.64
3rd Quarter	11.61	9.00
4th Quarter	12.22	10.66
2007	19.06	11.04
1st Quarter	12.52	11.04
2nd Quarter	17.46	11.83
3rd Quarter	19.06	13.56
4th Quarter	17.45	14.39
December	16.85	14.39
2008	18.52	13.86
1st Quarter	17.59	13.86
January	15.30	13.86
February	17.42	14.22
March	17.59	15.77
2nd Quarter	18.52	16.22
April	18.52	16.22
May	18.51	16.42

     On June 19, 2002, shares of the Company were listed through Latibex, which is part of the Madrid Stock Exchange (“Latibex”). Latibex is a Euro-based market for Latin American securities. The shares trade under the symbol XCOP.

Corporate Governance Practices

     In 2000, BOVESPA introduced three special listing segments, known as Level 1, Level 2 and the Novo Mercado, aiming at fostering a secondary market for securities issued by Brazilian companies with securities listed on BOVESPA, by prompting such companies to follow good practices of corporate governance. The listing segments were designed for the trading of shares issued by companies voluntarily undertaking to abide by corporate governance practices and disclosure requirements in addition to those already imposed by Brazilian law. These rules generally increase shareholders’ rights and enhance the quality of information provided to shareholders and stakeholders.

     On May 7, 2008, we signed an agreement with BOVESPA to list our securities on Level 1. The main corporate governance standards established by the Level 1 Regulation are: (i) maintenance of a free-float of at least twenty-five percent of the company’s capital stock; (ii) employment of mechanisms to enhance capital dispersion in the company’s public offerings; (iii) improvement of quarterly reports, including the disclosure of consolidated financial statements and special audit revisions; (iv) monthly disclosure of transactions entered into by controlling shareholders involving the company’s securities; and (v) disclosure of an annual calendar of corporate events.

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     In accordance with Section 303A.11 of the NYSE Listed Company Manual, we have posted a summary of significant differences between the NYSE corporate governance standards and our corporate governance practices on our website, at http://www.copel.com/ir.

Item 10. Additional Information

MEMORANDUM AND ARTICLES OF ASSOCIATION

Organization

     We are a publicly traded company duly registered with the CVM under No. 1431-1. According to Article One of our by-laws, our objectives and purposes are:

• researching and studying, technically and economically, any sources of energy;
  
  
• researching, studying, planning, constructing, and developing the production, transformation, transportation, storage, distribution, and trade of energy in any of its forms, chiefly electric power, as well as fuels and energy raw materials;
  
  
• studying, planning, designing, constructing, and operating dams and their reservoirs, as well as other undertakings for multiple uses of water resources;
  
  
• providing information and technical assistance services concerning the rational use of energy by business undertakings with the aim of implementing and developing economic activities deemed relevant for the development of the State of Paraná; and
  
  
• implementing electronic data transmission, electronic communications, cellular telephone systems, and other endeavors that may be deemed relevant to the Company and the State of Paraná.

     Except as described in this section, our by-laws do not contain provisions addressing the duties, authority, or liabilities of directors and management, which are instead established by Brazilian Corporation Law.

Qualification of Directors

     Brazilian Corporation Law provides that only shareholders of a company may be appointed to its board of directors, although there is no minimum share ownership requirement for qualification as a director. Our by-laws also require that each director be a Brazilian citizen and reside in Brazil.

Limitations on Directors’ Powers

     Under Brazilian Corporation Law, if a director or an executive officer has a conflict of interest with the company in connection with any proposed transaction, the director or executive officer may not vote in any decision of the Board of Directors, or of the board of executive officers, regarding such transaction, and must disclose the nature and extent of the conflicting interest for transcription in the minutes of the meeting. A director or an executive officer may not transact any business with a company, including accepting any loans, except on reasonable or fair terms and conditions that are identical to the terms and conditions prevailing in the market or offered by third parties. According to our bylaws, shareholders set the aggregate compensation payable to directors and executive officers. For more information, see “Item 6. Directors, Management and Employees.” Our bylaws do not establish any mandatory retirement age limits.

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Shareholders’ Meetings

     We convene shareholders’ meetings by publishing a notice in Diário Oficial do Estado – PR, O Estado do Paraná and the Diário de São Paulo. The convening of our shareholders’ meeting is made through publication of a notice to shareholders in three newspapers, as determined by the shareholders’ meeting. As provided by Brazilian law, publications have to be made in the official newspaper located in the state of our corporate headquarters, in a newspaper with wide circulation located in the same city as our corporate headquarters, and in a newspaper with wide circulation located in the same place as our stock exchange. The notice must be published no fewer than three times, beginning at least thirty calendar days prior to the scheduled meeting date.

Right of Withdrawal

     Brazilian Corporation Law provides that under certain circumstances a shareholder has the right to withdraw its equity interest from a company and to receive a payment for the portion of shareholder’s equity attributable to his or her equity interest. This right of withdrawal may be exercised:

• by a dissenting holder of the adversely affected class of shares (including any holder of Class B Shares) in the event that a majority of all outstanding Common Shares authorizes:

     – the creation of preferred shares or an increase in an existing class of preferred shares relative to the other class of shares, except if already set forth under or authorized by our by-laws;

     – the modification of a preference, privilege or condition of redemption or amortization conferred on one or more classes of preferred shares; or

     – the creation of a new class of preferred shares with greater privileges than the existing class of preferred shares;

• by a dissenting shareholder (including any holder of Class B Shares) in the event that a majority of all outstanding Common Shares authorizes:

     – a reduction in the mandatory distribution of dividends;

     – a change in our corporate purpose;

     – a split up, subject to the conditions set forth in the Brazilian Corporation Law; or

     – a transformation of us into another type of company;

• by a dissenting or non-voting holder of Common Shares or Class A Shares, in the event that a majority of all outstanding shares authorizes:

     – the acquisition of control of another company at a price which exceeds certain limits set forth in the Brazilian Corporation Law;

     – a transfer of all of our share capital to another company, making the Company a wholly-owned subsidiary of such company, known as an “incorporação de ações”;

     – a merger or consolidation (“incorporação”); or

     – our participation in a group of concerns (a “grupo de sociedades”) as defined under the Brazilian Corporation Law.

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     The dissenting shareholders, if any, also have a right of withdrawal in the event that the entity resulting from our merger, incorporação de ações, or spin-off fails to become a listed company within 120 days of the shareholders’ meeting at which the relevant decision was taken. The dissenting or non-voting shareholders only have a withdrawal right if they held the shares that have been adversely affected at the time of the first call for the shareholders’ meeting in which the relevant decision was made. If a public announcement of the action taken or to be taken was made prior to the call for the shareholders’ meeting, the shareholders’ ownership of shares is based on the date of announcement.

     The right of withdrawal lapses thirty days after publication of the minutes of the shareholders’ meeting at which the action is taken, except when the resolution is subject to confirmation by, or to prior approval of, the majority of the preferred shareholders of each class of affected shares (which must be made at a special meeting to be held within one year). In that case the thirty-day term is counted from the date the minutes of the special meeting are published. We are entitled to reconsider any action giving rise to redemption rights within ten days following the expiration of such rights if the redemption of shares of dissenting shareholders would jeopardize its financial stability.

     In addition, rights of withdrawal connected to our merger or consolidation (“incorporação”) into another company, to our participation in a group of concerns (a “grupo de sociedades”) and to the acquisition of control of another company at a price which exceeds certain limits set forth in the Brazilian Corporation Law may not be exercised by holders of shares if such shares (1) are liquid, defined as being part of the BOVESPA Index or other stock exchange index (as defined by the CVM), and (2) are widely held, such that the controlling shareholder or companies it controls have less than 50.0% of our shares. Our Class B Shares are included on the BOVESPA Index.

     Pursuant to our bylaws, in the situations described above and in the event of a delisting of our shares, our shareholders shall be entitled to redeem their shares at market value. The market value of the shares shall be determined by a specialized appraisal company or a group of experts selected by the shareholders.

     Pursuant to the Brazilian Corporation Law, each preferred share of a class that is admitted to trading on the Brazilian stock exchanges must have the following rights under the Company’s by-laws:

• one or both of the following priorities: priority in the receipt of fixed or minimum dividend; and/or priority in the reimbursement of capital, with or without premium; and
  
  
• one of the following rights: (A) right to participate in the distribution of the Mandatory Dividend of at least 25.0% of Adjusted Net Profit, pursuant to the following criteria: (i) priority in the receipt of dividends corresponding to at least 3.0% of the shares’ book value, and (ii) right to participate on the profit distribution with the Common Shares, in equal conditions, after the Common Shares have received dividends as set forth in (i) above; or (B) right to receive dividends in an amount per share at least 10.0% higher than the amount per share paid to holders of Common Shares; or (C) tag-along right at a price equal to at least 80.0% of the price paid to the controlling shareholder in case of transfer of control.

     Our by-laws comply with the directives of CVM as follows: (i) our Class A Shares shall have priority in the distribution of minimum dividends of 10.0% per year, pro rata, calculated as a percentage of the paid-in capital stock represented by such shares on December 31^st of the previous fiscal year; (ii) our Class B Shares shall have priority in the distribution of minimum dividends, pro rata, in the amount equivalent to 25.0% of our net profits, as adjusted in accordance with Section 202 and its paragraphs of Law 6,404/76, calculated as a proportion of the paid-in capital stock represented by such shares on December 31^st of the previous fiscal year; (iii) the dividends provided in item (ii) above to the Class B Shares shall be paid only from outstanding profits after the payment of priority dividends to Class A Shares; (iv) the dividends to be paid per preferred share, regardless of the class, shall be at least 10.0% higher than the dividends to be paid per Common Share, as provided by the Brazilian Corporation Law, as amended.

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Liquidation

     In the event of liquidation of the Company, after all creditors have been paid, all shareholders will participate equally and ratably in any remaining residual assets.

Liability of the Shareholders for Further Capital Calls

     Neither Brazilian law nor our by-laws provide for capital calls. The shareholders’ liability is limited to the payment of the issue price of the shares subscribed or acquired.

Conversion Rights

     Our by-laws provide that:

• Class A Shares may be converted into Class B Shares;
  
  
• Class B Shares cannot be converted into Class A Shares;
  
  
• Class A Shares and Class B Shares cannot be converted into Common Shares; and
  
  
• Common Shares cannot be converted into Class A Shares or Class B Shares.

Form and Transfer

     Our shares are maintained in book-entry form with a transfer agent (the “Transfer Agent”). To make the transfer the Transfer Agent makes an entry in the register, debit the share account of the transferor and credit the share account of the transferee.

     Transfers of shares by a foreign investor are made in the same way and executed by the investor’s local agent on the investor’s behalf. However, if the original investment was registered with the Central Bank pursuant to a foreign investment mechanism regulated by Resolution No. 2,689 of January 26, 2000 of the CMN (“Resolution 2,689”) as described under “—Exchange Controls” below, the foreign investor must declare the transfer in its electronic registration.

     The shareholders may choose, at their individual discretion, to hold their shares through CBLC. Shares are added to the CBLC system through Brazilian institutions that have clearing accounts with the CBLC. Our shareholder registry indicates which shares are listed on the CBLC system. Each participating shareholder is in turn registered in a register of beneficial shareholders maintained by the CBLC and is treated in the same manner as the other registered shareholders.

Regulation of and Restrictions on Foreign Investors

     Foreign investors face no legal restrictions barring them from holding Common Shares, Class A Shares, Class B Shares or ADSs.

     The ability to convert into foreign currency dividend payments and proceeds from the sale of Class B Shares or preemptive rights and to remit such amounts outside Brazil is subject to restrictions under foreign investment legislation which generally requires, among other things, the registration of the relevant investment with the Central Bank. Any foreign investor who registers with the CVM in accordance with Resolution 2,689 may buy and sell securities on Brazilian stock exchanges without obtaining a separate certificate of registration for each transaction.

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     Annex V to Resolution 1,289 of the CMN, known as the “Annex V Regulations,” allows Brazilian companies to issue depositary receipts in foreign exchange markets. Our ADR program is duly registered with the Central Bank and the CVM.

     Our by-laws do not impose any limitation on the rights of Brazilian residents or non-residents to hold our shares and exercise the rights in connection therewith.

Disclosure of Shareholder Ownership

     Brazilian regulations require that any person or group of persons representing the same interest that has directly or indirectly reached an interest corresponding to 5.0% or more of any class of shares, or any rights under such shares, of a publicly traded company must disclose its share ownership to the CVM and stock exchanges in which the shares are traded. In addition, a statement containing the required information must be published in the newspapers. Any subsequent increase of 5.0% or more in ownership of any class of shares must be similarly disclosed. Also, the same obligation applies if any person or group of persons representing the same interest and holding an interest corresponding to 5.0% or more of any class of shares of a publicly traded company for any reason ceases to hold this participation.

MATERIAL CONTRACTS

     For information concerning our material contracts, see “Item 4. Information on the Company and Item 5. Operating and Financial Review and Prospects.”

EXCHANGE CONTROLS

     The ownership of Class A Shares, Class B Shares or Common Shares of the Company by individuals or legal entities domiciled outside Brazil is subject to certain conditions established in the Brazilian Law, as described below.

     The right to convert dividend payments and proceeds from the sale of shares into foreign currency and to remit such amounts outside Brazil is subject to restrictions under foreign investment legislation which generally requires, among other things, that the relevant investments have been registered with the Central Bank. Such restrictions on the remittance of foreign capital abroad may hinder or prevent Banco Itaú S.A. (the “Custodian”), as custodian for the Class B Shares represented by ADSs, or holders who have exchanged ADRs for Class B Shares from converting dividends, distributions or the proceeds from any sale of such Class B Shares, as the case may be, into U.S. dollars and remitting such U.S. dollars abroad. Holders of ADSs could be adversely affected by delays in, or refusal to grant any, required government approval for conversions of Brazilian currency payments and remittances abroad of the Class B Shares underlying the ADSs.

     Under Resolution 2,689, foreign investors may invest in almost all financial assets and engage in almost all transactions available in the Brazilian financial and capital markets, provided that certain requirements are fulfilled. The definition of foreign investor includes individuals, legal entities, mutual funds and other collective investment entities, domiciled or headquartered abroad.

     To be eligible to invest in the Brazilian financial and capital markets, foreign investors must:

• appoint at least one representative in Brazil with powers to perform actions relating to foreign investments;
  
  
• complete the appropriate foreign investor registration form;
  
  
• register as a foreign investor with the CVM; and

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• register the foreign investment with the Central Bank.

     Securities and other financial assets held by foreign investors must be registered or maintained in deposit accounts or under the custody of an entity duly licensed by the Central Bank or the CVM. In addition, securities trading is restricted to transactions carried out in the stock exchanges or organized over-the-counter markets licensed by the CVM.

     The Annex V Regulations provide for the issuance of depositary receipts in foreign markets in respect of shares of Brazilian issuers. The ADS program had been approved under the Annex V Regulations by the Central Bank and the CVM prior to the issuance of the ADSs. Accordingly, the proceeds from the sale of ADSs by ADR holders outside Brazil are free of Brazilian foreign investment controls and holders of the ADSs who are not resident in a tax haven will be entitled to favorable tax treatment. For more information, see “—Taxation—Brazilian Tax Considerations—Taxation of Gains.”

     An electronic registration has been issued in the name of the Depositary with respect to the ADSs and is maintained by the Custodian on behalf of the Depositary. Pursuant to this electronic registration, the Custodian and the Depositary are able to convert dividends and other distributions with respect to the Class B Shares represented by ADSs into foreign currency and remit the proceeds outside Brazil. In the event that a holder of ADSs exchanges such ADSs for Class B Shares, such holder will be entitled to continue to rely on the Depositary’s electronic registration for five business days after such exchange, following which such holder must seek to obtain its own electronic registration with the Central Bank. Thereafter, any holder of Class B Shares may not be able to convert into foreign currency and remit outside Brazil the proceeds from the disposition of, or distributions with respect to, such Class B Shares, unless such holder obtains his own electronic registration. A holder that obtains an electronic registration may be subject to less favorable Brazilian tax treatment than a holder of ADSs. For more information, see “—Taxation—Brazilian Tax Considerations.”

     The Brazilian government may impose temporary restrictions on remittances of foreign capital abroad in the event of a serious imbalance or an anticipated serious imbalance of Brazil’s balance of payments. For approximately six months in 1989 and early 1990, the Brazilian government froze all dividend and capital repatriations held by the Central Bank that were owed to foreign equity investors, in order to conserve Brazil’s foreign currency reserves. These amounts were subsequently released in accordance with Brazilian government directives. The imbalance in Brazil’s balance of payments increased during 1998, and there can be no assurance that the Brazilian government will not impose similar restrictions on foreign repatriations in the future.

TAXATION

     The following summary contains a description of the principal Brazilian and U.S. federal income tax consequences of the acquisition, ownership and disposition of Class B Shares or ADSs, but it does not purport to be a comprehensive description of all of the tax considerations that may be relevant to a decision to purchase Class B Shares or ADSs. The summary is based upon the tax laws of Brazil and regulations thereunder and on the tax laws of the United States and regulations thereunder as in effect on the date hereof, which are subject to change. Prospective purchasers of Class B Shares or ADSs should consult their own tax advisors as to the tax consequences of the acquisition, ownership and disposition of Class B Shares or ADSs.

     Although there is at present no income tax treaty between Brazil and the United States, the tax authorities of the two countries have had discussions that may culminate in such a treaty. No assurance can be given, however, as to whether or when a treaty will enter into force or how it will affect the U.S. holders of Class B Shares or ADSs. Prospective holders of Class B Shares or ADSs should consult their own tax advisors as to the tax consequences of the acquisition, ownership and disposition of Class B Shares or ADSs in their particular circumstances.

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Brazilian Tax Considerations

     The following discussion summarizes the principal Brazilian tax consequences of the acquisition, ownership and disposition of Class B Shares or ADSs by an individual, entity, trust or organization resident or domiciled outside Brazil for purposes of Brazilian taxation (“Non-Brazilian Holder”). It is based on Brazilian law currently in effect, which is subject to differing interpretations and changes that may apply retroactively. This discussion does not address all the Brazilian tax considerations that may be applicable to any particular Non-Brazilian Holder, and each Non-Brazilian Holder should consult its own tax advisor about the Brazilian tax consequences of investing in Class B Shares or ADSs.

Taxation of Dividends

     Dividends paid by the Company in cash or in kind from profits of periods beginning on or after January 1, 1996 (i) to the Depositary in respect of Class B Shares underlying ADSs or (ii) to a Non-Brazilian Holder in respect of Class B Shares will not be subject to Brazilian withholding income tax. Dividends paid from profits generated before January 1, 1996 may be subject to Brazilian withholding income tax at varying rates depending upon the year in which the profits have been obtained.

Distributions of Interest on Equity

     In accordance with Law 9,249, dated December 26, 1995, as amended, Brazilian corporations may make payments to shareholders characterized as distributions of interest on the equity of the company as an alternative form of making dividend distributions. The rate of interest may not be higher than TJLP, as determined by the Central Bank from time to time. The total amount distributed as interest on equity may not exceed, for tax purposes, the greater of (i) 50.0% of net income (after the deduction of the social contribution on net profits and before taking into account the provision for corporate income tax and the amounts attributable to shareholders as net interest on equity) related to the period in respect of which the payment is made and (ii) 50.0% of the sum of retained profits and profit reserves as of the date of the beginning of the period in respect of which the payment is made.

     Distributions of interest on equity paid to Brazilian and Non-Brazilian Holders of Class B Shares, including payments to the Depositary in respect of Class B Shares underlying ADSs, are deductible by the Company for Brazilian corporate income tax and social contribution on net profits purposes as far as the limits above described are observed. Such payments are subject to Brazilian withholding income tax at the rate of 15.0%, except for payments to beneficiaries situated in tax haven jurisdictions (that is, a country or location that does not impose income tax or where the maximum income tax rate is lower than 20% or where the local legislation imposes restrictions on disclosing the shareholding composition or the ownership of the investment - “Tax Haven Holder”), which payments are subject to withholding income tax at a 25.0% rate. These payments may be included, at their net value, as part of any mandatory dividend. To the extent that payment of interest on net equity is so included, the corporation is required to distribute to shareholders an additional amount to ensure that the net amount received by them, after payment of the applicable withholding income tax, plus the amount of declared dividends, is at least equal to the mandatory dividend.

Taxation of Gains

     According to Law 10,833 of December 29, 2003, capital gains realized on the disposition of assets located in Brazil by a Non-Brazilian Holder, whether to another non-Brazilian residents or to Brazilian residents, are subject to taxation in Brazil. In this sense, if the Class B Shares are disposed of by a Non-Brazilian Holder, as they are defined as assets located in Brazil, such holder will be subject to income tax on the gains assessed, following the rules described below, whether the disposition is conducted in Brazil or abroad and with a Brazilian resident or not.

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     Regarding ADSs, although the matter is not free from doubt, the gains realized by a Non-Brazilian Holder on the disposition of ADSs to another Non-Brazilian Holder would not be taxed in Brazil, based on the theory that ADSs do not constitute assets located in Brazil for purposes of Law 10,833/03. However, we cannot assure you that Brazilian courts would adopt this theory. Thus, the gain on a disposition of ADSs by a Non-Brazilian Holder to a resident in Brazil (or possibly even to a Non-Brazilian Holder) may be subject to income tax in Brazil in the event that courts determine that ADSs would constitute assets located in Brazil, according to the rules described below for ADSs or the rules applicable to disposition of the Class B Shares, when applicable.

     For purposes of Brazilian taxation, the income tax rules on gains related to disposition of Class B Shares or ADSs vary depending on the domicile of the Non-Brazilian Holder, the form by which such Non-Brazilian Holder has registered its investment before the Brazilian Central Bank and/or how the disposition is carried out, as described below.

     Generally, gains are defined as the positive difference between the amount realized on the sale or exchange of a security and its acquisition cost. Gains assessed on the disposition of the Class B Shares carried out on the Brazilian stock exchange (which includes the transactions carried out on the organized over-the-counter market) are:

• exempt from income tax when assessed by a Non-Brazilian Holder registered under Resolution No. 2,689 of the National Monetary Council (“2,689 Holder”) that is not a Tax Haven Holder; or
  
  
• subject to income tax at a rate of 15.0% in any other case, including the gains assessed by a Non-Brazilian Holder that (i) is not a 2,689 Holder, or (ii) is a 2,689 Holder and a Tax Haven Holder. In these cases, a withholding income tax of 0.005% on the sale value shall be applicable and can be offset with the eventual income tax due on the capital gain.

     Any other gains assessed on a disposition of the Class B Shares that is not carried out on the Brazilian stock exchange is subject to an income tax rate of 15.0%, except for Tax Haven Holders who are subject to an income tax rate of 25.0% . In case these gains are related to transactions conducted on the Brazilian non-organized over-the-counter market, with intermediation, the withholding income tax of 0.005% on the sale value shall also be applicable and can be offset with the eventual income tax due on the capital gain.

     The deposit of Class B Shares in exchange for the ADSs may be subject to Brazilian income tax if the acquisition cost of the Class B Shares is lower than (i) the average price per Class B share on a Brazilian stock exchange on which the greatest number of such shares were sold on the day of the deposit; or (ii) if no Class B Shares were sold on that day, the average price on the Brazilian stock exchange on which the greatest number of Class B Shares were sold during the fifteen trading sessions immediately preceding such deposit. In this case, the difference between the acquisition cost and the average price of the Class B Shares, calculated as set forth above, shall be considered a capital gain subject to income tax at a rate of 15.0% or 25.0% in the case of investors that are Tax Haven Holders.

     The withdrawal of Class B Shares upon cancellation of ADSs is not subject to Brazilian income tax, as long as the regulatory rules are appropriately observed with respect to the registration of the investment before the Central Bank.

     In the case of redemption of the Class B Shares or ADSs or capital reduction by a Brazilian corporation, such as our company, the positive difference between the amount effectively received by the Non-Brazilian Holder and the acquisition cost of the securities redeemed is treated as capital gain derived from sale or exchange of shares not carried out on a Brazilian stock exchange market and is therefore subject to income tax at the rate of 15.0% or 25.0%, as the case may be.

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     Any exercise of preemptive rights relating to the Class B Shares or ADSs will not be subject to Brazilian taxation. Gains on the sale or assignment of preemptive rights will be subject to the same tax treatment applicable to disposition of Class B Shares.

     There can be no assurance that the current preferential treatment for 2,689 Holders will continue in the future.

Other Brazilian Taxes

     There are no Brazilian inheritance, gift or succession taxes applicable to the ownership, transfer or disposition of Class B Shares or ADSs by a Non-Brazilian Holder except for gift and inheritance taxes levied by some states in Brazil on gifts made or inheritances bestowed by individuals or entities not resident or domiciled in Brazil or in the relevant State to individuals or entities that are resident or domiciled within such State in Brazil. There are no Brazilian stamp, issue, registration, or similar taxes or duties payable by holders of Class B Shares or ADSs.

     Pursuant to Decree No. 6,306 of December 14, 2007, a tax on foreign exchange transactions (“IOF/Exchange”) may be imposed on the conversion of Brazilian currency into foreign currency (e.g., for purposes of paying dividends and interest) or vice-versa. Currently, for most exchange transactions, the rate of IOF/Exchange is 0.38% . However, exchange transactions carried out by 2,689 Holders are subject to a zero percent IOF/Exchange rate. Nonetheless, the Brazilian government may increase the rate to a maximum of 25.0% . Any such increase will be applicable only prospectively.

     Also under Decree No. 6,306/07, the Tax on Bonds and Securities Transactions (“IOF/Bonds”) may be levied on transactions involving bonds and securities, including those carried out on Brazilian stock, futures or commodities exchanges. As a general rule, the rate of this tax is currently zero. The Brazilian government may, however, increase the rate to a maximum of 1.5% per day, but only in respect to future transactions.

     As a general rule, until December 31, 2007, transactions carried out in Brazil that resulted in the transfer of funds from an account maintained with a Brazilian financial institution were subject to the Temporary Contribution on Financial Transactions (“CPMF Tax”), at the rate of 0.38% . However, as of January 1, 2008, the CPMF Tax is no longer in force, and should not be levied on any debit to bank accounts carried after that date. The Brazilian government may attempt to reestablish the CPMF Tax after February 2008, by submitting a new proposal to the Brazilian Congress. In the event CPMF is reestablished, it will only apply after a period of 90 days have elapsed after enactment of the respective introductory legislation, and only in regard to prospective triggering events.

U.S. Federal Income Tax Considerations

     The statements regarding U.S. tax law set forth below are based on U.S. law as in force on the date of this Annual Report, and changes to such law subsequent to the date of this Annual Report may affect the tax consequences described herein (possibly with retroactive effect). This summary describes the principal U.S. federal income tax consequences of the ownership and disposition of Class B Shares or ADSs, but it does not purport to be a comprehensive description of all of the U.S. tax consequences that may be relevant to a decision to hold or dispose of Class B Shares or ADSs. This summary applies only to purchasers of Class B Shares or ADSs who will hold the Class B Shares or ADSs as capital assets and does not apply to special classes of holders such as dealers in securities or currencies, holders whose functional currency is not the U.S. dollar, holders of 10.0% or more of our shares (taking into account shares held directly or through depositary arrangements), tax-exempt organizations, financial institutions, holders liable for the alternative minimum tax, securities traders who elect to account for their investment in Class B Shares or ADSs on a mark-to-market basis, partnerships or other pass-through entities, insurance companies, U.S. expatriates, and persons holding Class B Shares or ADSs in a hedging transaction or as part of a straddle, conversion or other integrated transaction for U.S. federal income tax purposes.

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     Each holder is encouraged to consult such holder’s tax advisor concerning the overall tax consequences to it, including the consequences under laws other than U.S. federal income tax laws, of an investment in Class B Shares or ADSs.

     In this discussion, references to a “U.S. holder” are to a beneficial holder of a Class B Share or an ADS (1) that is a citizen or resident of the United States of America, (2) that is a corporation, or any other entity taxable as a corporation, organized under the laws of the United States of America or any state thereof, including the District of Columbia, or (3) that is otherwise subject to U.S. federal income taxation on a net basis with respect to the Class B Share or ADS.

     For purposes of the U.S. Internal Revenue Code of 1986, as amended, which we call the “Code”, holders of ADSs will generally be treated as owners of the Class B Shares represented by such ADSs.

Taxation of Distributions

     A U.S. holder will recognize dividend income for U.S. federal income tax purposes in an amount equal to the amount of any cash and the value of any property distributed by us as a dividend to the extent that such distribution is paid out of our current or accumulated earnings and profits, as determined for U.S. federal income tax purposes, when such distribution is received by the custodian (or by the U.S. holder in the case of a holder of Class B Shares). The amount of any distribution will include the amount of Brazilian tax withheld on the amount distributed, and the amount of a distribution paid in reais will be measured by reference to the exchange rate for converting reais into U.S. dollars in effect on the date the distribution is received by the custodian (or by a U.S. holder in the case of a holder of Class B Shares). If the custodian (or U.S. holder in the case of a holder of Class B Shares) does not convert such reais into U.S. dollars on the date it receives them, it is possible that the U.S. holder will recognize foreign currency loss or gain, which would be ordinary loss or gain, when the reais are converted into U.S. dollars. Dividends paid by us will not be eligible for the dividends received deduction allowed to corporations under the Code.

     Subject to certain exceptions for short-term and hedged positions, the U.S. dollar amount of dividends received by an individual prior to January 1, 2011 with respect to the ADSs will be subject to taxation at a maximum rate of 15.0% if the dividends are “qualified dividends.” Dividends paid on the ADSs will be treated as qualified dividends if (i) the ADSs are readily tradable on an established securities market in the United States and (ii) we were not, in the year prior to the year in which the dividend was paid, and are not, in the year in which the dividend is paid, a passive foreign investment company (“PFIC”). The ADSs are listed on the New York Stock Exchange, and will qualify as readily tradable on an established securities market in the United States so long as they are so listed. Based on our audited financial statements and relevant market and shareholder data, we believe that we were not treated as a PFIC for U.S. federal income tax purposes with respect to our 2007 taxable year. In addition, based on our audited financial statements and our current expectations regarding the value and nature of our assets, the sources and nature of our income, and relevant market and shareholder data, we do not anticipate becoming a PFIC for the 2008 taxable year. Based on existing guidance, it is not clear whether dividends received with respect to the Class B Shares will be treated as qualified dividends, because the Class B Shares themselves are not listed on a U.S. exchange. In addition, the U.S. Treasury has announced its intention to promulgate rules pursuant to which holders of ADSs or Class B Shares and intermediaries through whom such securities are held will be permitted to rely on certifications from issuers to treat dividends as qualified for tax reporting purposes. Because such procedures have not yet been issued, it is not clear whether we will be able to comply with them. Holders of ADSs and Class B Shares should consult their own tax advisers regarding the availability of the reduced dividend tax rate in the light of the considerations discussed above and their own particular circumstances.

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     Distributions out of earnings and profits with respect to the Class B Shares or ADSs generally will be treated as dividend income from sources outside of the United States and generally will be treated separately along with other items of “passive” income for purposes of determining the credit for foreign income taxes allowed under the Code. Subject to certain limitations, Brazilian income tax withheld in connection with any distribution with respect to the Class B Shares or ADSs may be claimed as a credit against the U.S. federal income tax liability of a U.S. holder if such U.S. holder elects for that year to credit all foreign income taxes. Alternatively such Brazilian withholding tax may be taken as a deduction against taxable income. Foreign tax credits will not be allowed for withholding taxes imposed in respect of certain short-term or hedged positions and may not be allowed in respect of arrangements in which a U.S. holder’s expected economic profit, after non-U.S. taxes, is insubstantial. U.S. holders should consult their own tax advisors concerning the implications of these rules in light of their particular circumstances.

     Distributions of additional shares to holders with respect to their Class B Shares or ADSs that are made as part of a pro rata distribution to all our shareholders generally will not be subject to U.S. federal income tax.

     Holders of Class B Shares or ADSs that are foreign corporations or nonresident alien individuals, which we call “non-U.S. holders,” generally will not be subject to U.S. federal income tax or withholding tax on distributions with respect to Class B Shares or ADSs that are treated as dividend income for U.S. federal income tax purposes unless such dividends are effectively connected with the conduct by the holder of a trade or business in the United States.

Taxation of Capital Gains

     Upon the sale or other disposition of a Class B Share or ADS, a U.S. holder generally will recognize gain or loss for U.S. federal income tax purposes. The amount of the gain or loss will be equal to the difference between the amount realized in consideration for the disposition of the Class B Share or ADS (including the gross amount of the proceeds before the deduction of any Brazilian tax) and the U.S. holder’s tax basis in the Class B Share or ADS. Such gain or loss generally will be subject to U.S. federal income tax as capital gain or loss and will be long-term capital gain or loss if the Class B Share or ADS has been held for more than one year on the date of the disposition. The net amount of long-term capital gain recognized by an individual holder before January 1, 2011 generally is subject to taxation at a maximum rate of 15.0% . Capital losses may be deducted from taxable income, subject to certain limitations. Gain realized by a U.S. holder on a sale or disposition of Class B Shares or ADSs generally will be treated as U.S. source income. Consequently, if Brazilian tax is imposed on such gain, the U.S. holder will not be able to use the corresponding foreign tax credit, unless the holder has other foreign source income of the appropriate type in respect of which the credit may be used. Alternatively, such Brazilian tax may be taken as a deduction against taxable income if the U.S. holder does not take a credit for any foreign income tax during the taxable year.

     A non-U.S. holder will not be subject to U.S. federal income tax or withholding tax on gain realized on the sale or other disposition of a Class B Share or ADS unless (1) such gain is effectively connected with the conduct by the holder of a trade or business in the United States, or (2) such holder is an individual who is present in the United States of America for 183 days or more in the taxable year of the sale and certain other conditions are met.

Backup Withholding and Information Reporting

     Dividends paid on, and proceeds from the sale or other disposition of, the ADSs or Class B Shares to a U.S. holder generally may be subject to the information reporting requirements of the Code and may be subject to backup withholding unless the U.S. holder (i) is a corporation or other exempt recipient or (ii) provides an accurate taxpayer identification number and certifies that no loss of exemption from backup withholding has occurred. The amount of any backup withholding collected from a payment to a U.S. holder will be allowed as a credit against the U.S. holder’s U.S. federal income tax liability and may entitle the U.S. holder to a refund, provided that certain required information is furnished to the Internal Revenue Service.

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     A non-U.S. holder generally will be exempt from these information reporting requirements and backup withholding tax, but may be required to comply with certain certification and identification procedures in order to establish its eligibility for such exemption in connection with payments received within the United States or through certain U.S.-related intermediaries.

DIVIDENDS AND PAYING AGENTS

     Entitlement to dividends arises on the date of acquisition of our shares or ADS. For a description of restrictions related to payments of dividends to foreign investors, see “Item 10. Additional information —Memorandum and Articles of Incorporation—Regulation of and Restrictions on Foreign Investors” and “Item10. Additional Information—Exchange Controls.” The Depositary will distribute dividends and other distributions to the holders of our ADSs.

DOCUMENTS ON DISPLAY

     We file reports, including annual reports on Form 20-F, and other information with the SEC pursuant to the rules and regulations of the SEC that apply to foreign private issuers. You may read and copy any materials filed with the SEC at its Public Reference Room at 100 Fifth Street, N.W., Washington, D.C. 20459. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Since November 4, 2002, we are required to make filings with the SEC by electronic means. Any filings we make electronically will be available to the public over the Internet at the SEC’s web site at http://www.sec.gov.

Item 11. Quantitative and Qualitative Disclosures about Market Risk

     We are exposed to market risk arising from our normal business activities. These market risks principally involve the possibility of changes in both foreign currency exchange rates and interest rates that will adversely affect the value of our assets and liabilities, in addition to our future cash flow and earnings. Foreign exchange rate risk exists to the extent our costs are denominated in currencies other than those in which we earn revenues. Similarly, we are subject to market risk deriving from changes in interest rates, which may affect the cost of our financing. We entered into derivative financial instruments for purposes other than trading, in order to manage and reduce our exposures to market risk resulting from fluctuations in interest rates and foreign currency exchange rates.

     Beginning in 2003, we entered into cross-currency interest rate swaps to mitigate the risks caused by foreign exchange and interest rate fluctuations and to protect our foreign currency exposure. In April 2005, we paid U.S.$150.0 million in Eurobonds and settled our cross-currency interest rate swaps contracts.

Foreign Currency Exchange Rate Risk

     At December 31, 2007, we had R$78.1 million of outstanding indebtedness denominated in U.S. dollars, R$8.0 million of indebtedness denominated in Japanese yen and R$62.7 million of indebtedness indexed to a basket of foreign currencies comprised by U.S dollars, Euros, Swiss francs and Japanese yen. At December 31, 2006, we had R$102.1 million of outstanding indebtedness denominated in U.S. dollars, R$13.6 million of indebtedness denominated in Japanese yen and R$93.5 million of indebtedness indexed to a basket of foreign currencies comprised by U.S dollars, Euros, Swiss francs and Japanese yen. In addition, our energy purchases from Itaipu are denominated in U.S. dollars. We do not have revenues denominated in any of the above foreign currencies and, due to applicable regulations that require us to keep excess cash on deposit in real-denominated deposits with Brazilian banks, we do not have monetary assets denominated in such currencies. The potential loss to us that would result from a hypothetical 10%

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change in foreign currency exchange rates would be approximately R$10.2 million, primarily due to the increase in our real-denominated financial statements in the principal amount of the foreign currency indebtedness described above (which increase would be reflected as an expense in our income statement). A hypothetical and instantaneous change of 10.0% in foreign currency exchange rates would result in an additional cash outflow of approximately R$36.9 million per year, reflecting the increased cost in reais of servicing foreign-currency indebtedness and purchasing energy from Itaipu, which will be compensated in the next tariff adjustment.

Interest Rate Risk

     At December 31, 2007, we had outstanding R$2,102.5 million in loans and financing, of which R$52.0 million bore interest at fixed interest rates and R$2,050.5 million bore interest at floating rates of interest (primarily the TJLP, CDI and Libor). Pursuant to applicable regulations, we invest excess cash primarily in short-term instruments. A hypothetical, instantaneous and unfavorable change of 100 basis points in interest rates applicable to floating rate financial assets and liabilities held at December 31, 2007, would result in a net additional cash outflow of approximately R$7.0 million. The above sensitivity analyses are based on the assumption of an unfavorable 100 basis point movement of the interest rates applicable to each homogeneous category of financial assets and liabilities. A homogeneous category is defined according to the currency in which financial assets and liabilities are denominated and assumes the same interest rate movement within each homogeneous category (i.e. U.S. dollars; currencies in the currency basket). As a result, our interest rate risk sensitivity model may overstate the impact of interest rate fluctuations for such financial instruments, as consistently unfavorable movements of all interest rates are unlikely.

Item 12. Description of Securities Other than Equity Securities

     Not Applicable.

Item 13. Defaults, Dividend Arrearages and Delinquencies

     Not Applicable.

Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds

     None.

Item 15. Controls and Procedures

Financial Responsibility, Disclosure Controls and Procedures, and Report on Internal Control Over Financial Reporting

     (a) Disclosure Controls and Procedures

     We have carried out an evaluation under supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2007. There are inherent limitations to the effectiveness of any disclosure controls and procedures systems, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.

     Based on our evaluation, because of the material weakness in internal control over financial reporting that is described below, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures as of December 31, 2007 were not effective to provide reasonable assurance that information required to be disclosed in the reports we file and submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management as appropriate in order to allow timely decisions regarding required disclosure.

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     (b) Management’s Annual Report on Internal Control over Financial Reporting

     Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities and Exchange Act of 1934. Our internal controls were designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

     All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may decline.

     Our management assessed the effectiveness of our internal controls over financial reporting as of December 31, 2007. In making this assessment, it used the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on its evaluation and those criteria, our management has concluded that our internal control over financial reporting was not effective as of December 31, 2007 because of the material weakness in our internal control over financial reporting described below:

• The Company did not maintain effective controls to ensure the completeness and accuracy of the judicial lawsuits and related escrow accounts or performed periodic review/update of them, including the valuation and update of expected losses for accrual purposes. These control deficiencies resulted in adjustments recorded to three interim financial statements, which affected the provision of contingencies and related escrow accounts and operating expenses.

     Deloitte Touche Tohmatsu, an independent registered public accounting firm, has issued the attestation report below on our internal control over financial reporting as of December 31, 2007.

95

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM, ON INTERNAL CONTROL OVER FINANCIAL REPORTING

To the Board of Directors and Shareholders of
Companhia Paranaense de Energia - COPEL
Curitiba– PR, Brazil

We have audited the internal control over financial reporting of Companhia Paranaense de Energia - COPEL and subsidiaries (the "Company" or “Copel”) as of December 31, 2007, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on the effectiveness of the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. The following material weakness have been identified and included in the Company´s December 31, 2007 management's assessment:

• The Company did not maintain effective controls to ensure the completeness and accuracy of the judicial lawsuits and related escrow accounts or performed periodic review/update of them, including the valuation and the update of expected losses for accrual purposes. These control deficiencies resulted in adjustments recorded to three interim financial statements which affected the provision for contingencies and related escrow accounts and related operating expenses.

This material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the Company’s consolidated balance sheet as of December 31, 2007, and the related consolidated statements of operations, changes in shareholders’ equity and changes in financial positions as of and for the year ended December 31, 2007, of Companhia Paranaense de Energia – COPEL and subsidiaries and this report does not affect our report on such financial statements.

In our opinion, because of the effect of the material weakness described above on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2007, based on the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s balance sheets as of December 31, 2007 and 2006, and the related consolidated statements of operations, changes in shareholders’ equity and changes in financial positions for each of the two years in the period ended December 31, 2007, of Companhia Paranaense de Energia – COPEL and subsidiaries and our report dated June 24, 2008, expressed an unqualified opinion on those financial statements.

/s/ Deloitte Touche Tohmatsu Auditores Independentes

Curitiba, Paraná, Brazil

June 24, 2008

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     (c) Changes in Internal Control over Financial Reporting

     Remediation of material weaknesses

     During 2007, we developed and implemented action plans to address the following material weaknesses in internal control over financial reporting that we identified in our assessment as of December 31, 2006.

• The Company did not maintain effective controls to ensure the completeness/accuracy or the review/monitoring of the monthly accrual for received services and goods, as required by the accrual basis of accounting. These control deficiencies did not result in material audit adjustments to the 2007 financial statements. However, these control deficiencies could result in a misstatement of accrued liabilities and the related expense provisions that would result in material misstatements of annual or interim financial statements that would not be prevented or detected.

During 2007, we reviewed our options for improving our controls in order to address, on a timely basis, issues related to our received goods and services. Using our various information systems, our financial expert established formal rules to improve controls to remediate this deficiency. As a result, management has determined that there was no longer a material weakness in this area as of December 31, 2007. In 2008, we will nevertheless continue to address these issues in order to effectively monitor the effectiveness and timeless of these new controls and implement automated solutions in our monthly accounting for received goods and services.

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• The Company did not maintain effective controls to ensure the completeness/accuracy or the review/monitoring of the environmental litigation process. These control deficiencies did not result in material audit adjustments to the 2007 financial statements. However, these control deficiencies could result in a misstatement of accrued liabilities and the related operating expenses that would result in material misstatements of annual or interim financial statements that would not be prevented or detected.

In 2007, we established a working group to identify and evaluate our environmental risks and liabilities. The results of these efforts were presented to our board of directors, who in turn determined the potential actions to be undertaken in identifying, avoiding and mitigating these weaknesses. At the same time, our accounting specialists ran a similar assessment, determining that no additional accruals were necessary with respect to our environmental liabilities. As a result, management has determined that there was no longer a material weakness in this area as of December 31, 2007. In order to ensure a degree of continuity, however, these results were incorporated in the documentation of reviews that will be periodically monitored through efficiency tests. In 2008, we will also be reviewing options in order to establish formal management guidelines and continuously monitor potential environmental risks and liabilities.

• The Company did not maintain effective controls to ensure the completeness/accuracy or the review/monitoring of the postretirement benefits plans (pension and health-care plans) sponsored by us, including detailed review of the actuarial assumptions, reconciliation between actuarial valuation report and accounting records and also the cash flow for the contribution payments. These control deficiencies could result in material misstatements of the pension and health-care plans liabilities and the related pension and other benefits expenses.

According to Brazilian law, we are required engage specialists in preparing for actuarial valuation reports. Because we lacked personnel with the adequate experience and training necessary to review the 2006 actuarial valuation reports, we had to rely on specialists in order to account for arising deficiencies in reviewing and monitoring retirement plans sponsored by us. In 2007, our accountants ran studies on Brazilian legislation and participated in training in order to increase their knowledge of this subject. We have conducted discussions with actuarial specialists and accountants and, as a result, some accounting procedures have been revised. We have also documented procedures related to pension plans sponsored by us, which identify risks and controls and examine efficiency tests. We attribute these procedures to an expert of vast experience in this area. As a result, management has determined that there was no longer a material weakness in this area as of December 31, 2007.

• The Company did not maintain effective controls to ensure the appropriate review/ monitoring of the reconciliation items from BR GAAP to US GAAP financial statements. These control deficiencies did not result in material audit adjustments to the 2006 financial statements. However, these control deficiencies could result in material misstatements that would pervasively affect the annual and interim financial statements and would not be prevented or detected.
  
  In 2007, we contracted an external consultant to assist the Company in the process of reconciling our financial statements to US GAAP. At the same time, we have selected a group of professionals to be trained in the process of reconciling financial statements from BR GAAP to US GAAP. Our professionals are now proficient with respect to the procedures and conversion of financial reporting to US GAAP, which, in our final assessment, reduces possibilities of error or material misstatements in our financial statements. As a result, management has determined that there was no longer a material weakness in this area as of December 31, 2007.

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     We also developed an action plan to address the material weakness concerning monitoring of judicial lawsuits that we reported at December 31, 2006 and December 31, 2007.

     In 2007, we established new controls over judicial lawsuits and regulated the flow of information between our legal and accounting departments, allowing timely accounting of our judicial liabilities. A final assessment in December 2007, however, identified material weaknesses relating to the valuation and estimation of potential losses to be accrued, as well as to the approval and disclosure of accounting liabilities. In 2008, we will be readdressing, establishing and disclosing formal procedures to be adopted by our legal department and outside advisors in order to provide reasonable assurances in accounting related to our contigent liabilities.

     Other than as described above, there have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal year ended December 31, 2007 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

Item 16A. Audit Committee Financial Expert

     Our board of directors has reviewed the qualifications and backgrounds of the members of the audit committee and determined that Laurita Costa Rosa is an “audit committee financial expert” within the meaning of Item 16A and is independent. For more information regarding our audit committee, see “Item 6. Directors, Senior Management and Employees—Board Practices—Board Committees—Audit Committee.”

tem 16B. Code of Ethics

     In November 2003, we adopted a code of ethics that also applies to our Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer. We have posted copies of this code of ethics on our Internet website at the following address: www.copel.com/ir. Copies of our code of ethics may also be obtained without charge by writing to us at the address set forth on the front cover of this Form 20-F. In December 2006, we sent hard copies of our Code of Ethics to all of our employees. We have not granted any implicit or explicit waivers from any provision of our code of ethics to the officers described above since adoption of the code.

Item 16C. Principal Accountant Fees and Services

Audit and Non-Audit Fees

     Deloitte Touche Tohmatsu Auditores Independentes acted as our independent registered public accounting firm for the fiscal years ended December 31, 2007 and 2006. PricewaterhouseCoopers Auditores Independentes acted as our independent registered public accounting firm for the fiscal year ended December 31, 2005.

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     The chart below sets forth the total amount billed to us by Deloitte Touche Tohmatsu Auditores Independentes and PricewaterhouseCoopers Auditores Independentes for services performed in 2007, 2006 and 2005, and breaks down these amounts by category of service in millions of reais:

	Year Ended December 31,
	2007	2006	2005
		(millions of reais)
Audit Fees	1.4	1.2	0.7
Audit-Related Fees	–	–	–
Tax Fees	–	–	–
All Other Fees	–	–	–
Total	1.4	1.2	0.7

Audit Fees

     Audit fees are fees billed for the audit of our annual financial statements and for the reviews of our quarterly Brazilian GAAP financial information in connection with statutory and regulatory filings or engagements.

Audit Committee Pre-Approval Policies and Procedures

     Neither our board of directors nor our audit committee has established pre-approval policies and procedures for the engagement of our Registered Public Accounting Firm for services. Our board of directors expressly approves on a case-by-case basis any engagement of our Registered Public Accounting Firm for audit and non-audit services provided to our subsidiaries or to us. Our audit committee provides recommendations to our board of directors regarding such engagements. For more information regarding our board of directors and audit committee, see “Item 6. Directors, Senior Management and Employees—Board Practices”.

Item 16D. Exemption from the Listing Standards for Audit Committees

     None.

Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers

     None.

Item 17. Financial Statements

     Not applicable.

Item 18. Financial Statements

     Reference is made to pages F-1 through F-121.

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Item 19. Exhibits

1.1	Amended and Restated By-laws of the Company dated as of April 18, 2008 (English translation).
2.1	Deposit Agreement (common shares) dated as of March 21, 1996, as amended and restated as of November 21, 2007.
2.2	Deposit Agreement (preferred shares) dated as of March 21, 1996, as amended and restated as of November 21, 2007.
4.1	The Adjustment Agreement of August 4, 1994 between the State of Paraná and Companhia Paranaense de Energia-Copel (the “Adjustment Agreement”) (incorporated by reference to our Form F-1 333-7148, filed with the SEC on June 30, 1997) and the Deed of Amendment to the Adjustment Agreement (Quarto Termo Aditivo ao Termo de Ajuste celebrado em 21 de janeiro de 2005) (English translation).
8.1	List of Subsidiaries.
12.1	Certification of the Chief Executive Officer of Copel, pursuant to Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934.
12.2	Certification of the Chief Financial Officer of Copel, pursuant to Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934.
13.1	Certification of Chief Executive Officer of Copel, pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.
13.2	Certification of the Chief Financial Officer of Copel, pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.

     There are omitted from the exhibits filed with or incorporated by reference into this Annual Report certain promissory notes and other instruments and agreements with respect to our long-term debt none of which authorizes securities in a total amount that exceeds 10% of our total assets. We hereby agree to furnish to the Securities and Exchange Commission copies of any such omitted promissory notes or other instruments or agreements as the Commission requests.

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TECHNICAL GLOSSARY

     Average Tariff or Rate: Total sales revenue divided by total megawatt hours (MWh) sold for each relevant period, including in the case of the Company, unbilled electricity. Total sales revenue, for the purpose of computing average tariff or rate, includes both gross billings before deducting value-added tax and unbilled electricity sales upon which such taxes have not yet accrued.

     Capacity Charge: A charge for sales of energy that is based on the amount of firm capacity contracted by a customer and that is independent of the amount of energy actually consumed by that customer.

     Distribution: The transfer of electricity from the transmission lines at grid supply points and its delivery to customers through distribution lines at voltages between 13.8 kV and 44 kV.

     Distributor: An entity supplying electrical energy to a group of customers by means of a distribution network.

     Energy Charge: A charge for sales of energy to a customer that is dependent upon the amount of energy actually consumed by that customer.

     Final Customer: A party that uses electricity for its own needs.

     Firm Capacity: The level of electricity that we can deliver from a specified power plant with a 95.0% degree of certainty, determined in accordance with certain prescribed statistical models.

     Free Customers: (i) existing customers with demand of at least 10 MW and supplied at voltage level equal to or greater than 69 kV; (ii) new customers with demand of at least 3 MW at any voltage; (iii) groups of customers subject to agreement with the local distribution concessionaire; (iv) customers who do not receive supply for more than 180 days from a local distribution concessionaire; and (v) certain others.

     Generating Unit: An electric generator together with the turbine or other device that drives it.

     Gigawatt (GW): One billion watts.

     Gigawatt hour (GWh): One gigawatt of power supplied or demanded for one hour, or one billion watt hours.

     High Voltage: A class of nominal system voltages equal to or greater than 100,000 volts and less than 230,000 volts.

     Hydroelectric Plant: A generating unit that uses water power to drive the electric generator.

     Installed Capacity: The level of electricity that can be delivered from a particular generating unit on a full-load continuous basis under specified conditions as designated by the manufacturer.

     Interconnected Power System: Systems or networks for the transmission of energy, connected together by means of one or more links (lines and/or transformers).

     Interconnected Power System—South/Southeast: The Interconnected Power System that links the distribution and transmission lines of the South, Southeast and Midwest.

102

     IPP: Independent Power Producer, a legal entity or consortium holding a concession or authorization for power generation for sale for its own account to public utility concessionaires or Free Customers.

     Itaipu: Itaipu Binacional, a hydroelectric facility owned equally by Brazil and Paraguay.

     Kilovolt (kV): One thousand volts.

     Kilowatt (kW): One thousand watts.

     Kilowatt hour (kWh): One kilowatt of power supplied or demanded for one hour, or one thousand watt hours.

     Megawatt (MW): One million watts.

     Megawatt average (MWavg): An amount of energy (in MWh divided by the time (in hours) in which such energy is produced or consumed. Megawatt hour (MWh): One megawatt of power supplied or demanded for one hour, or one million watt hours.

     Megavolt Ampère (MVA): One thousand volt ampères.

     ONS: Operator Nacional do Sistema, an entity responsible for operational planning, administration of generation and transmission and planning of transmission investments in the electricity sector.

     Self-producer: An electric-intensive user that holds a concession or authorization to produce energy for its own consumption.

     South Region: The states of Paraná, Rio Grande do Sul and Santa Catarina.

     Southeast Region: The states of São Paulo, Rio de Janeiro, Minas Gerais and Espírito Santo.

     State of Paraná: The Brazilian state of Paraná.

     Substation: An assemblage of equipment, which switches and/or changes or regulates the voltage of electricity in a transmission and distribution system.

     Thermoelectric Plant: A generating unit which uses combustible fuel, such as coal, oil, diesel natural gas or other hydrocarbon as the source of energy to drive the electric generator.

     Transmission: The bulk transfer of electricity from generating facilities to the distribution system at load center station by means of the transmission grid (in lines with capacity between 69 kV and 525 kV).

     Unbilled electricity: Electricity which has been delivered to a customer, but for which the utility has yet to deliver a bill.

     Utility: An entity that is the holder of a concession or authorization to engage in the generation, transmission or distribution of electric energy in Brazil.

     Volt: The basic unit of electric force analogous to water pressure in pounds per square inch.

     Watt: The basic unit of electrical power.

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SIGNATURES

     The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

COMPANHIA PARANAENSE DE ENERGIA – COPEL
By:	/s/ Rubens Ghilardi
Name:	Rubens Ghilardi
Title:	Chief Executive Officer
By:	/s/ Paulo Roberto Trompczynski
Name:	Paulo Roberto Trompczynski
Title:	Chief Financial Officer

Date: June 30, 2008

104

Companhia Paranaense
de Energia - COPEL
Consolidated Financial Statements as of
December 31, 2007 and 2006 and for the
Three Years Ended December 31, 2007
and Report of Independent Registered
Public Accounting Firm

	Deloitte Touche Tohmatsu
	Rua Pasteur, 463 - 5º andar
	Curitiba – PR – 80250-080
	Brasil
	Tel: + 55 (41) 3312-1400
	Fax:+ 55 (41) 3312-1470
	www.deloitte.com.br

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of
Companhia Paranaense de Energia - COPEL
Curitiba - PR, Brazil

We have audited the accompanying consolidated balance sheets of Companhia Paranaense de Energia - COPEL (a Brazilian corporation) and subsidiaries (the "Company") as of December 31, 2007 and 2006, and the related consolidated statements of operations, changes in shareholders' equity and changes in financial position for each of the two years in the period ended December 31, 2007, all expressed in Brazilian reais. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Companhia Paranaense de Energia - COPEL and subsidiaries as of December 31, 2007 and 2006, and the results of their operations, changes in shareholders' equity and changes in their financial position for each of the two years in the period ended December 31, 2007, in conformity with accounting practices adopted in Brazil.

Our audit was performed for the purpose of issuing an opinion on the consolidated financial statements referred to in the first paragraph, prepared in conformity with accounting practices adopted in Brazil. The consolidated statement of cash flows which provides supplemental information about the Company and its subsidiaries is not a required component of the financial statements. We also applied the audit procedures described in the second paragraph to the consolidated statement of cash flow for each of the two years in the period ended December 31, 2007 and, in our opinion, it is fairly stated in all material respects in relation to the financial statements taken as a whole.

Accounting practices adopted in Brazil vary in certain significant respects from accounting principles generally accepted in the United States of America. Information relating to the nature and effect of such differences is presented in Note 35 to the consolidated financial statements.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's effectiveness of internal control over financial reporting as of December 31, 2007, based on the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated June 24, 2008 expressed an adverse opinion on the Company's internal control over financial reporting because of a material weakness identified in relation to ineffective controls over lawsuits and judicial deposits to ensure proper adjustments to the contingency reserve. This material weakness was considered in determining the nature, timing, and extent of our audit procedure and does not affect our report on the financial statements referred to in paragraph 1 above.

/s/ Deloitte Touche Tohmatsu Auditores Independentes

Curitiba, Paraná, Brazil

Date: June 24, 2008

PricewaterhouseCoopers

Al. Dr. Carlos de Carvalho, 417 10º 

80410-180 Curitiba, PR - Brasil 

Caixa Postal 699 

Telefone (41) 3322-7911 

Fax (41) 3222-6514 

www.pwc.com/br 

Report of Independent Registered Public Accounting Firm  

To the Board of Directors and Shareholders of
Companhia Paranaense de Energia – COPEL  

We have audited the accompanying consolidated statements of operations, of changes in shareholders' equity and of changes in financial position for the year ended December 31, 2005 of Companhia Paranaense de Energia – COPEL (the “Company”) and its subsidiaries. These statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the the results of their operations, the changes in its shareholders' equity and the changes in their financial position for the year ended December 31, 2005 of Companhia Paranaense de Energia – COPEL and its subsidiaries, in conformity with accounting practices adopted in Brazil.

Our audit was performed for the purpose of issuing an opinion on the statements referred to in the first paragraph, prepared in conformity with accounting practices adopted in Brazil. The statement of cash flows which provides supplemental information about the Company and its subsidiaries is not a required component of the financial statements. We also applied the audit procedures described in the second paragraph to the statements of cash flows for the years ended December 31, 2005, which in our opnion, is fairly stated in all material respects in relation to the financial statements taken as a whole.

Accounting practices adopted in Brazil vary in certain significant respects from accounting principles generally accepted in the United States of America. Information relating to the nature and effect of such differences is presented in Note 35 to the consolidated financial statements.

/s/ PricewaterhouseCoopers
PricewaterhouseCoopers
Auditores Independentes  

Curitiba, Brazil
June 27, 2006, except for
footnotes 2(b), 32 and 35a(v).8
which are as June 24, 2008

Companhia Paranaense de Energia - COPEL 

Consolidated Balance Sheets 

Expressed in thousands of Brazilian reais 

	December 31
Assets	2007	2006
Current assets
Cash and cash equivalents (note 5)	1,540,871	1,504,004
Accounts receivable, net (note 6)	1,078,195	986,978
Dividends receivable (note 7)	2,767	2,019
Materials and supplies	52,195	51,444
Recoverable rate deficit (CRC) (note 8)	40,509	35,205
Deferred regulatory asset – CVA (note 9 a)	67,614	90,048
Regulatory asset - PIS and Cofins (note 9 b)	-	3,408
Other regulatory assets (note 9 c)	17,186	-
Deferred income taxes (note 11)	116,855	106,145
Recoverable taxes (note 10)	38,744	128,939
Other assets, net	207,474	105,443
	3,162,410	3,013,633
Non-current assets
Accounts receivable (note 6)	134,907	108,157
Recoverable taxes (note 10)	61,835	44,874
Deferred income taxes (note 11)	400,592	337,654
Judicial deposits (note 21 a)	121,340	140,954
Recoverable rate deficit (CRC) (note 8)	1,209,853	1,158,898
Deferred regulatory asset – CVA (note 9 a)	25,478	12,273
Other regulatory assets - (note 9 c)	5,729	-
Other assets	30,873	36,539
	1,990,607	1,839,349
Permanent assets
Investments (note 12)	256,809	229,953
Property, plant and equipment, net (note 13)	6,832,379	6,711,686
Intangible assets (note 14)	112,585	116,798
Deferred charges, net	5,227	23,204
	7,207,000	7,081,641
Total assets	12,360,017	11,934,623

The accompanying notes are an integral part of these financial statements.

F - 4

Companhia Paranaense de Energia - COPEL
Consolidated Balance Sheets
Expressed in thousands of Brazilian reais	(continued)

	December 31
Liabilities and shareholders' equity	2007	2006
Current liabilities
Suppliers (note 15)	366,510	392,219
Loans and financing (note 16)	92,684	90,152
Debentures (note 17)	171,827	838,355
Deferred income taxes (note 11)	24,664	33,671
Taxes on sales and others (note 18)	224,796	277,414
Dividends and interest on equity	252,362	277,421
Accrued payroll costs	146,119	134,218
Pension and health-care plans (note 22)	42,286	133,635
Deferred regulatory liabilities (note 9 a)	143,436	110,498
Other regulatory liabilities (note 9 c)	46,476	-
Regulatory charges (note 19)	32,722	51,705
Research and Development and Energy Efficiency Programs (note 20)	185,280	174,316
Other accrued liabilities	85,465	67,766
	1,814,627	2,581,370
Non-current liabilities
Suppliers (note 15)	190,394	234,212
Loans and financing (note 16)	835,268	604,306
Debentures (note 17)	1,002,674	1,129,230
Deferred income taxes (note 11)	19,317	12,515
Pension and health-care plans (note 22)	454,411	488,771
Provision for contingencies (note 21 a)	514,270	222,473
Deferred regulatory liabilities (note 9 a)	22,330	52,053
Other regulatory liabilities (note 9 c)	18,935	-
Other long-term liabilities	19,495	27,517
	3,077,094	2,771,077
Negative goodwill	592	-
Non controlling shareholders’ interest	231,527	205,906
Shareholders' equity (note 23)
Capital stock (note 23 a)	4,460,000	3,875,000
Capital reserves (note 23 b)	838,340	817,293
Profit reserves (note 23 c)	1,937,837	1,683,977
	7,236,177	6,376,270
Total liabilities and shareholders' equity	12,360,017	11,934,623

The accompanying notes are an integral part of these financial statements.

F - 5

Companhia Paranaense de Energia - COPEL 

Consolidated Statements of Operations 

Expressed in thousands of Brazilian reais, except per share amount 

	Year ended December 31
	2007	2006	2005
Operating revenues (note 25 and 26)
Electricity sales to final customers	5,767,847	5,500,122	5,275,883
Electricity sales to distributors	1,367,595	1,290,976	949,937
Use of main transmission and distribution grid	296,796	283,773	267,996
Other revenues	487,856	346,455	307,482
Value-added taxes on sales	(1,507,882)	(1,428,729)	(1,373,494)
PIS on sales	(91,280)	(98,775)	(79,883)
Cofins on sales	(415,162)	(448,539)	(361,509)
Regulatory charges	(419,712)	(495,993)	(399,093)
Other charges and deductions on sales	(63,932)	(60,675)	(147,708)
Net operating revenues	5,422,126	4,888,615	4,439,611
Operating (expenses) income
Electricity purchased for resale (note 27 a)	(1,429,417)	(1,439,744)	(1,436,330)
Use of main transmission grid	(514,450)	(534,780)	(530,798)
Depreciation and amortization	(422,049)	(372,395)	(328,906)
Personnel expenses (note 27 b)	(649,717)	(641,885)	(566,455)
Third party services	(240,942)	(226,779)	(196,976)
Materials and supplies (note 27 c)	(186,990)	35,019	(266,829)
Pension and other benefits	13,851	(127,686)	(108,000)
Other expenses, net	(385,132)	(31,648)	(185,717)
Total operating expenses	(3,814,846)	(3,339,898)	(3,620,011)
Operating income before financial results and equity in results of
investees	1,607,280	1,548,717	819,600
Financial results (note 28)
Financial income	396,017	729,203	396,279
Financial expenses	(375,774)	(434,510)	(497,280)
	20,243	294,693	(101,001)
Equity in results of investees (note 12)	1,601	(6,187)	9,048
Operating income	1,629,124	1,837,223	727,647
Non-operating expenses, net (note 29)	(31,109)	(22,977)	(10,646)
Income before income taxes and Non controlling shareholders’
interest	1,598,015	1,814,246	717,001
Income taxes (note 11)	(460,315)	(557,678)	(198,200)
Income before Non controlling shareholders’ interest	1,137,700	1,256,568	518,801
Non controlling shareholders’ interest	(31,090)	(13,888)	(16,424)
Net income for the year	1,106,610	1,242,680	502,377
Net income per outstanding shares at year-end – in Reais	4.04	4.54	1.84

The accompanying notes are an integral part of these financial statements.

F - 6

Companhia Paranaense de Energia - COPEL 

Statements of Changes in Shareholders' Equity 

Expressed in thousands of Brazilian reais 

			Profit reserves
	Capital	Capital	Legal	Reserve for	Retained
	stock	reserves	reserve	Investments	earnings	Total
At December 31, 2005	3,480,000	817,293	209,821	980,069	-	5,487,183
Changes in Brazilian accounting
practices	-	-	-	-	(72,642)	(72,642)
Capital increase	395,000	-	-	(395,000)
Net income for the year	-	-	-	-	1,242,680	1,242,680
Appropriation of net income
Legal reserve	-	-	58,502	-	(58,502)	-
Interest on equity	-	-	-	-	(123,000)	(123,000)
Dividends	-	-	-	-	(157,951)	(157,951)
Transfer to profit reserve	-	-	-	830,585	(830,585)	-
At December 31, 2006	3,875,000	817,293	268,323	1,415,654	-	6,376,270
Capital increase	585,000	-	-	(585,000)	-	-
Tax incentive (Note 12(d))	-	21,047	-	-	-	21,047
Net income for the year					1,106,610	1,106,610
Appropriation of net income
Legal reserve	-	-	55,330	-	(55,330)	-
Interest on equity	-	-	-	-	(200,000)	(200,000)
Dividends	-	-	-	-	(67,750)	(67,750)
Transfer to profit reserve	-	-	-	783,530	(783,530)	-
At December 31, 2007	4,460,000	838,340	323,653	1,614,184	-	7,236,177

The accompanying notes are an integral part of these financial statements.

F - 7

Companhia Paranaense de Energia - COPEL 

Consolidated Statements of Changes in Financial Position 

Expressed in thousands of Brazilian reais 

	Year ended December 31
	2007	2006	2005
Sources of funds
Funds from operations
Net income for the year	1,106,610	1,242,680	502,377
Expenses (income) not affecting working capital
Depreciation and amortization	422,049	372,395	328,906
Loss on disposal of property, plant and equipment and other	29,878	14,721	24,336
Equity in results of investees	9,658	6,187	(9,048)
Write-off of non-current assets	9,472	51,399	85
Contract renegotiation – CIEN	(62,862)	-	-
Monetary and foreign currency exchange variations, net	(54,545)	(14,751)	(42,777)
Long-term liabilities provision	255,657	39,595	197,764
Deferred income taxes	(56,136)	123,079	(36,874)
Review adjustment share – transmission utilities’ rate review (Note 9 (c))	26,412	-	-
Non controlling shareholders’ interest	31,090	13,888	16,424
	1,717,283	1,849,193	981,193
Funds from third-parties
Long-term loans and financing	346,592	16,937	35,532
Suppliers - Petrobras renegotiation (Note 15 (a))	-	157,443	-
Issuance of long-term debentures	-	600,000	755,626
Customers' contribution - special obligations	48,580	43,489	39,675
Interest on equity and dividends receivable	10,545	13,730	4,576
Transfer from long-term to current assets	167,590	143,160	246,231
Non controlling shareholders’ interest	-	113,703	6,705
Changes in accounting policies impacting working capital	-	(72,642)	-
Disposal of fixed assets	6,652	-	-
Other accounts payable	-	8,960	-
	579,959	1,024,780	1,088,345
Total sources	2,297,242	2,873,973	2,069,538
Application of funds
Interest on equity and dividends	267,750	280,951	122,995
Property, plant and equipment	516,142	567,778	666,542
Intangible	4,406	5,747	2,324
Deferred charges	341	145	752
Investments	13,754	534,546	2,707
Non-current assets
Deferred regulatory asset	-	-	13,884
Regulatory asset - Pis and Cofins	-	9,432	48,597
Judicial deposits	9,900	30,778	19,826
Accounts receivable	112,271	25,109	11,255
Deferred income taxes and tax recoverable	17,057	8,893	2,232
Other non-current assets	1,405	2,140	1,647
Transfers from long-term to current liabilities
Suppliers	267	112,590	64,321
Long-term loans and financing	116,363	85,000	95,900
Debentures	138,858	720,087
Taxes and other payables	-	-	51,941
Pension plan	41,348	127,478	131,644
Provision for contingencies	59,846	6,355	693
Deferred regulatory liability	82,014	44,657	28,767
Total applications	1,381,722	2,561,686	1,266,027
Increase in working capital	915,520	312,287	803,511

F - 8

Companhia Paranaense de Energia - COPEL
Consolidated Statements of Changes in Financial Position
Expressed in thousands of Brazilian reais	(continued)

	Year ended December 31
	2007	2006	2005
Represented by
Current assets
Beginning of the year	3,013,633	2,472,323	1,653,172
End of the year	3,162,410	3,013,633	2,472,323
Increase in current assets	148,777	541,310	819,151
Current liabilities
Beginning of the year	2,581,370	2,352,347	2,336,707
End of the year	1,814,627	2,581,370	2,352,347
Decrease (increase) in current liabilities	766,743	(229,023)	(15,640)
Total increase in working capital	915,520	312,287	803,511

The accompanying notes are an integral part of these financial statements.

F - 9

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

1 The Company and its Operations (information related to installed capacity and other similar operational and technical aspects are unaudited)

Companhia Paranaense de Energia - COPEL ("COPEL" or the "Company") is a mixed-capital corporation (sociedade de economia mista), organized under the laws of the Federative Republic of Brazil and controlled by the Paraná State Government.

The Company is engaged, through its subsidiaries, in the research, study, planning, building, and exploitation, production, transformation, transportation, distribution, and sale of energy, in any of its forms, in particular electric energy. These activities are regulated by the National Agency of Electric Energy (ANEEL), which reports to the Brazilian Ministry of Mines and Energy. Additionally, COPEL is authorized to be a member, together with private companies, of consortiums or companies with the objective of engaging in operations in the energy, telecommunications and natural gas areas.

As a Brazilian publicly held company, COPEL is registered with Comissão de Valores Mobiliários - CVM (the "CVM"), the Brazilian Securities Commission, and its shares are traded on the Brazilian stock exchanges. The Company is registered with the US Securities and Exchange Commission - SEC and its shares are listed on the New York Stock Exchange ("NYSE"), through an American Depositary Shares (ADS) program. The Company is also listed at LATIBEX, which is part of the Madrid Stock Exchange in Spain.

The subsidiaries of COPEL and their main activities are as follows:

(a) Direct subsidiaries

(i) COPEL Geração e Transmissão S.A.: This is the new name of COPEL Geração S.A., which incorporated on November 30, 2007 part of COPEL Transmissão S.A., and it carries out the Company’s power generation and transmission business with 18 power plants in operation – of which 17 are hydroelectric and one is thermoelectric – featuring an overall installed capacity of 4,549.6 MW. It also relies on 30 substations at voltages equal to or greater than 230 kV, of which 10 are automated and remote operated, with installed step-up transformer capacity of 5,004.1 MVA. This subsidiary holds the following concessions granted by ANEEL:

F - 10

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

Power generation plants

		Installed	Date
		capacity	concession	Year of
Power plant	River	(MW)	was issued	expiration
Hydroelectric plants
Gov. Bento Munhoz da Rocha Neto (Foz do Areia)	Iguaçu	1,676.00	May 24, 73	2023
Gov. Ney Aminthas de Barros Braga (Segredo)	Iguaçu	1,260.00	Nov 14, 79	2009
Gov. José Richa (Caxias)	Iguaçu	1,240.00	May 02, 80	2010
Gov. Pedro Viriato Parigot de Souza	Capivari - Cachoeira	260.00	Apr 23, 65	2015
Guaricana	Arraial	36.00	Aug 13, 76	2026
Chaminé	São João	18.00	Aug 13, 76	2026
Apucaraninha	Apucaraninha	10.00	Oct 13, 75	2025
Mourão	Mourão	8.20	Jan 20, 64	2015
Derivação do Rio Jordão	Jordão	6.50	Nov 14, 79	2009
Marumbi	Ipiranga	4.80	(*)
São Jorge	Pitangui/Tibagi	2.30	Dec 04, 74	2024
Chopim I	Chopim	1.98	Mar 20, 64	2015
Rio dos Patos	Rio dos Patos/Ivaí	1.72	Feb 14, 84	2014
Cavernoso	Cavernoso/Iguaçu	1.30	Jan 07, 81	2011
Salto do Vau	Palmital	0.94	Jan 27, 54	(**)
Pitangui	Pitangui	0.87	Dec 05, 54	(**)
Melissa	Melissa	1.00	Oct 08, 93	(**)
Thermoelectric plant
Figueira		20.00	Mar 21, 69	2019

(*)	Under approval by ANEEL.
(**)	Power plants with capacity lower than 1 MW are only registered with ANEEL. ANEEL only regulates power generation plants above 1MW.

The extension of the concessions for the Governor Ney Aminthas de Barros Braga (Segredo), Governor José Richa (Caxias), and Jordão River Diversion Power Plants has already been requested to ANEEL.

COPEL Geração e Transmissão also holds interests in Centrais Eólicas do Paraná (note 1.(b)(v)) and Consórcio Energético Cruzeiro do Sul, an independent power producer, owned by COPEL Geração e Transmissão (51%), and by Eletrosul Centrais Elétricas S.A. (49%). On November 28, 2006, at the Auction of Power from New Projects, this company won the rights to the 35-year concession of the Mauá Hydroelectric Power Plant, which will feature 361 MW of installed capacity (Note 12 e).

(ii) COPEL Distribuição S.A.: COPEL Distribuição merged, on November 30, 2007, a part of COPEL Transmissão. The company is engaged in the distribution and sale of energy in any form, especially electric energy, fuels and energy raw materials. It distributes power to 392 out of the 399 municipalities in the State of Paraná, and also to the town of Porto União, in the State of Santa Catarina. The concessions held by COPEL Distribuição expire in 2015.

F - 11

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

(iii) COPEL Telecomunicações S.A.: Engaged in providing communications and telecommunications services and in conducting studies, projects, and planning in the field of telecommunications, as well as any related activities, as authorized by law, for an indeterminate period of time, on a non-exclusive basis, both nationally and internationally, with a service area comprising the State of Paraná and Region II of the General Grants Plan, pursuant to Act No. 31,337 by the National Telecommunications Agency - ANATEL, which reports to the Ministry of Communications.

(iv) COPEL Participações S.A.. Incorporated to hold investments in other companies or consortiums in several business areas. COPEL currently holds five partnerships in independent power producers, all of which are operational and constituted as special purpose companies (SPCs), with a total installed capacity of 887.4 MW. It also holds interests in the sanitation, gas, telecommunications, and service sectors. On August 4, 2006, the second generating unit of the Fundão Power Plant (Fundão – Santa Clara Power Complex) entered commercial operation, for a total of 120.1 MW of installed capacity. The Santa Clara Power Plant, the other facility in the complex, rated 120.2 MW, has been fully operational since September 2005.

(b) Indirect subsidiaries

(i) Companhia Paranaense de Gás - COMPAGAS: a mixed (state/private) capital company in which COPEL Participações holds a 51% voting interest, whose main activity is the supply of piped natural gas, through a 459-km long distribution network throughout Paraná in the municipalities of Araucária, Curitiba, Campo Largo, Balsa Nova, Palmeira, Ponta Grossa, and São José dos Pinhais. At the end of 2007, Compagas supplied a total of 2,928 customers, comprising 95 industrial customers, 24 vehicular gas stations, 163 commercial customers, 2,642 households, 2 co-generation plants, and one company which uses natural gas as a raw material, and the Araucária Thermal Power Plant.

(ii) Centrais Elétricas do Rio Jordão S.A. - ELEJOR: a special purpose company in which COPEL Participações holds a 70% voting interest. It was constituted to implement and run the Fundão – Santa Clara Power Complex, on the Jordão River, within the Iguaçu River sub-basin, in the State of Paraná, comprising the Santa Clara and Fundão Power Plants. These facilities feature 240.3 MW of installed capacity, in addition to two small hydropower units embedded in the Santa Clara and Fundão dams, with 3.6 MW and 2.4 MW of installed capacity, respectively. The concession for the project was granted on October 23, 2001 for a 35-year term, renewable upon request by the holder and at ANEEL’s discretion.

(iii) COPEL Empreendimentos Ltda. - This is a private limited company whose main objective is the rendering of corporate planning, coordination and organization services to companies aimed at the production of electric energy, transportation and selling of activities for the management, implementation, operation and maintenance of power plants, and the participation in other companies as stockholder or quotaholder. On May 31, 2006, COPEL Participações acquired the company El Paso Empreendimentos e Participações Ltda., controlling quotaholder of UEG Araucária Ltda., with 60% of its capital, and changed its name to COPEL Empreendimentos Ltda;

F - 12

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

(iv) UEG Araucária Ltda – This is a private limited company whose objective is the use of natural gas for the generation of electric energy and its trading. The thermoelectric plant has installed capacity of 484.5 MW. The authorization for the Company to establish itself as an independent electric energy producer was issued by ANEEL on December 22, 1999, for a 30-year period, which may be extended at the request of the interested party and at the discretion of ANEEL.

(v) Centrais Eólicas do Paraná Ltda. – This is a private limited company which has been controlled by COPEL Geração e Transmissão since September 6, 2007, and which has been set up to build, assemble, and operate a 2.5 MW wind power plant, in the region of Palmas, in the State of Paraná (Note 12).

2 Basis of Presentation

(a) Presentation of the financial statements

The financial statements have been prepared in accordance with accounting practices adopted in Brazil ("Brazilian GAAP") which are based on the Brazilian Corporation Law (Law No. 6404/76, as amended), in compliance with the standards and procedures determined by the Brazilian Securities Commission (CVM), the accounting standards issued by the Conselho Federal de Contabilidade - CFC (the Federal Accounting Council), the Instituto dos Auditores Independentes do Brasil - IBRACON (the Brazilian Institute of Independent Auditors) and also in compliance with the standards and procedures of ANEEL included in the "Accounting Manual for the Electric Energy Public Service".

These financial statements also incorporate changes introduced by the following accounting rules and regulations: (i) ANEEL Ordinance No. 2,409/2007, dated November 14, 2007; and (ii) ANEEL Ordinance No. 3,073/2006, dated December 28, 2006. Certain reclassifications were made to the financial statements as of December 31, 2006 and 2005, featured herein for purposes of comparison, in order to adjust them to the rulings above and to allow readers to properly compare them to the current statements. The main changes resulting from the application of these rulings are the following:

a) Reclassification of the revenue related to the use of the main distribution grid from “Electricity sales to final customers” to the group “Use of main transmission and distribution grid”.

b) Reclassification of regulatory charges, previously classified under operating expenses, as charges over sales, as a reduction of net operating revenues.

The accompanying financial statements are a translation and adaptation from those originally issued in Brazil, based on the Brazilian GAAP. Certain reclassifications and changes in terminology have been made and these notes have been expanded, in order to conform more closely to disclosure practices prevailing pursuant to accounting principles generally accepted in the United States of America ("U.S. GAAP").

F - 13

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

The consolidated financial statements prepared by the Company for statutory purposes, which include the stand-alone financial statements of the parent company, were filed with the CVM in March 2008. The financial statements presented herein do not include the parent company's stand-alone financial statements and are not intended to be used for statutory purposes.

Brazilian GAAP differs in significant respects from U.S. GAAP. A reconciliation of the net income and shareholders' equity from Brazilian GAAP to U.S. GAAP is provided herein (Note 35).

(b) Reclassifications

The financial statements at December 31, 2006 and 2005, presented for comparison purposes, present certain reclassifications to conform to the mentioned Resolutions and permit the comparison with the current year.

The main reclassifications made by the Company to the financial statements at December 31, 2006 are as follows:

From	To	Consolidated
		Value
Non-current assets	Non-current assets
Investments	Intangible	76,015
Non-current liabilities	Non-current liabilities
Non controlling shareholders’ interest	Loans and financing	65,116
Other operating expenses	Regulatory charges
Fuel Consumption Accounts (CCC)	Fuel Consumption Accounts (CCC) (i)	278,052
Energy Development Account (CDE)	Energy Development Account (CDE) (i)	165,676
Research and Development Programs	Research and Development Programs
(R&D) and Energy Efficiency Programs	(R&D) and Energy Efficiency Programs (EEP) (i)
(EEP)		52,265

The main reclassifications made by the Company to the financial statements at December 31, 2005 are as follows:

From	To	Consolidated
		Value
Other operating expenses	Regulatory charges
Fuel Consumption Accounts (CCC)	Fuel Consumption Accounts (CCC) (i)	199,615
Energy Development Account (CDE)	Energy Development Account (CDE) (i)	152,707
Research and Development Programs	Research and Development Programs
(R&D) and Energy Efficiency Programs	(R&D) and Energy Efficiency Programs (EEP) (i)
(EEP)		46,771

(i) According to ANEEL ordinance 3,073/2006, expenses related to Fuel Consumption Accounts (CCC), Energy Development Account (CDE) and Research and Development Programs (R&D) and Energy Efficiency Programs (EEP) should be accounted for in the account 'Charges over sales'.

The subsidiaries follow the same accounting practices adopted by COPEL.

F - 14

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

3 Consolidated Financial Statements 

The consolidated financial statements are presented in accordance with CVM Instruction 247/1996, subsequent and additional rules and include the accounts of the direct subsidiaries COPEL Geração e Transmissão S.A., COPEL Distribuição S.A., COPEL Telecomunicações S.A., COPEL Participações S.A., and indirect subsidiaries Companhia Paranaense de Gás – COMPAGAS, Centrais Elétricas do Rio Jordão S.A. – ELEJOR, COPEL Empreendimentos Ltda. (former El Paso Empreendimentos e Participações Ltda.), UEG Araucária Ltda and Centrais Eólicas do Paraná Ltda. 

The consolidation of corporate interests includes, as from June 1, 2006, the financial statements of COPEL Empreendimentos Ltda. and UEG Araucária Ltda and, as from September 1, 2007, the financial statements of Centrais Eólicas do Paraná Ltda. The financial statements of COPEL Transmissão were part of the consolidation until November 30, 2007, as this company was merged into COPEL Geração and Copel Distribuição on November 30, 2007. 

The Company’s investments in the shareholders’ equities of subsidiaries, as well as the assets, liabilities, revenues, and expenses arising from intercompany operations, have been eliminated upon consolidation, and the non controlling shareholders’ interest s are shown separately, so that the consolidated financial statements effectively represent the balances of transactions with third parties. 

4 Summary of Significant Accounting Policies 

The Company's accounting policies comply with Brazilian GAAP which include the accounting principles specifically applicable to electric utility companies as required by ANEEL. Certain accounting policies under Brazilian GAAP do not conform with U.S. GAAP. See Note 35 for further discussions of the differences and the reconciliation of shareholders' equity and net income to U.S. GAAP. 

(a)Regulated accounting policies 

a(i)Allowance for doubtful accounts 

The allowance for doubtful accounts is deemed sufficient by COPEL’s senior management to cover potential losses on the realization of customer receivables and others whose recovery is considered unlikely. 

This allowance is set up based on the amounts overdue by residential customers for over 90 days, the amounts overdue by commercial customers for over 180 days, and the amounts overdue by industrial and rural customers, public agencies, public lighting, and public services for over 360 days, pursuant to the Electric Utility Accounting Manual. It comprises receivables billed until the date of the balance sheets, accounted for on an accrual basis. 

F - 15

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

a(ii) Property, plant and equipment

Recorded at their purchase or construction cost. Depreciation is calculated under the straight-line method, based on accounting balances recorded in the respective Record Units, pursuant to DNAEE Ordinance No. 815, dated November 30, 1994, supplemented by ANEEL Resolution No. 15, dated December 24, 1997.

Annual depreciation rates are set in the tables annexed to ANEEL Resolution No. 240, dated December 5, 2006, and featured in Note 13.

a(iii) Construction work in progress

According to the Accounting Manual for Electric Energy Public Service, interest and other financial charges (foreign exchange and monetary variations), related to financings obtained from third parties, effectively applied in construction in progress, are recorded in this caption as part of cost.

General administrative expenses are allocated to property, plant and equipment and other construction in progress. The allocation of direct costs with personnel and outside services is based on criteria permitted by Aneel.

The total amount of interest, financial charges and general administrative expenses capitalized on construction work in progress totaled R$11,173, R$12,759, and R$49,757 in 2007, 2006 and 2005, respectively.

a(iv) Special obligations

A liability is recorded for contributions received from the Federal Government and customers exclusively for investment in the electric energy distribution network. This liability is recorded as a reduction in the property, plant and equipment and upon conclusion of the operating concession granted to the Company will be offset against the concessionaire assets, including those purchased with these contributions received from the Federal Government and customers. See Note 35 a(v).2.

a(v) Materials and supplies (including those classified in property, plant and equipment)

Those classified in current assets are stated at average acquisition cost. Materials and supplies to be used in construction are included in property, plant and equipment at acquisition cost (materials are stated at average cost). These amounts do not exceed their replacement or realizable values.

a(vi) Intangible assets

Recorded at their acquisition or development cost. Amortization, when applicable, is calculated under the straight-line method, based on accounting balances recorded in the respective Record Units, pursuant to DNAEE Ordinance No. 815, dated November 30, 1994, supplemented by ANEEL

F - 16

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

Resolution No. 15, dated December 24, 1997. Annual amortization rates are set in the tables annexed to ANEEL Resolution No. 240, dated December 5, 2006. 

a(vii)Unbilled revenues 

Unbilled revenues correspond to revenues from sales of power to final customers which have been delivered but not yet billed and to revenues from the use of the distribution grid not yet billed, both of which are calculated based on estimates covering the period from the meter reading day to the last day of the month. 

a(viii)Power purchase and sale transactions in the Electric Energy Trading Chamber (CCEE)

Power purchase and sale transactions in CCEE are recorded on the accrual basis according to the information disclosed by the Trading Chamber or to estimates prepared by COPEL’s senior management, when such information is not available in time. 

a(ix)Recoverable rate deficit - CRC account 

Until 1993, two important principles ruled the tariff setting process in Brazil: 

(i)That electric utilities should be guaranteed an annual real rate of return on service-related assets included in the tariff base; and 

(ii)That the tariffs charged to each class of customer for electric power should be uniform throughout Brazil, notwithstanding the high cost of distributing electricity to remote areas of the country. 

Under the previous tariff structure, the guaranteed rate of return was set by the regulatory agency at a level between 10% and 12% of service-related assets included in the tariff base depending on the particular circumstances of each concessionaire. 

In order to compensate concessionaire companies experiencing a rate of return below the national average of the sector, the Federal Government created the National Reserve for Compensation of Remuneration - RENCOR, through which profits from more profitable companies were to be reallocated to less profitable companies, so that the rate of return realized by all companies would be equal to the national average of the sector. 

The shortfall experienced by most concessionaire companies between the guaranteed return and the actual realized rate of return was accounted for by an increase in each company's recoverable rate deficit (CRC account), equal to such shortfall. This account was recorded, until 1992, in a compensation account, not as an asset in the balance sheet. 

Law No. 8,724 of October 28, 1993, and related regulations, introduced significant changes to the regulatory structure governing electricity tariffs in Brazil, as follows: 

F - 17

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

(a) The CRC account was abolished and concessionaires with positive CRC account balances were permitted to offset such balances against any liabilities such concessionaires had to the other concessionaires, to Federal financial institutions and to the Federal Government. Additionally, the Company was permitted to transfer CRC account balances to the State of Paraná.

(b) Under the new system, the guaranteed return concept was abolished. Rather, under the new system, each concessionaire is required to propose a tariff structure, based on its particular circumstances, for approval by the Federal regulatory authorities. Each concessionaire is required to submit a tariff proposal to the ANEEL for the period and for each subsequent three-year period, based on the individual company's cost structure.

The proposed tariff is to be calculated taking into account the concessionaire's desired level of remuneration as well as the following costs: operating expenditures, including personnel, materials and third party service costs; costs of Itaipu electricity and electricity purchased from other concessionaire companies; depreciation and amortization charges, Global Reversal Reserve (Reserva Global de Reversão, or RGR) fund contributions and other regulatory charges and taxes other than income taxes.

On June 30, 1994, the Federal Government enacted certain provisional regulations in connection with its economic stabilization plan. These regulations, among other measures, suspended the tariff-setting process established by Law No. 8,631, and provided that tariffs are to be fixed on an annual basis commencing July 1, 1995.

Under an agreement dated August 4, 1994, the remaining balance of the CRC account was negotiated to be reimbursed by the Paraná State Government in 240 monthly installments updated based on the IGP-DI (General market price - internal availability) and interest of 6.65% per year. On October 1, 1997, the balance of R$506,692 was renegotiated extending the term to 330 equal monthly installments, which include interest and principal amortization. The last monthly installment would be due on March 30, 2025. The remaining clauses of the original contract, including interest rates, were maintained. Interest earned is recorded as financial income in the statement of operations. The Company renegotiated on January 21, 2005 with the Paraná State Government, through the fourth amendment, the CRC receivables outstanding at December 31, 2004. The balance of R$1,197,404 will be reimbursed in 244 monthly installments, the first installment being due on January 30, 2005. The installment overdue in February 2003 and the installments overdue from March 2003 to December 2004 were not paid and were restated by the IGP-DI rate plus interest of 1% per month. These overdue installments were included in the renegotiated amount. The renegotiated amount is updated based on the IGP-DI plus interest of 6.65% per year. The other original clauses were maintained.

The State Government has been in compliance with the payments of the renegotiated installments according to the terms of the fourth amendment to the CRC agreement. Amortizations are secured by resources from dividends (see note 8)

F - 18

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

a(x) Regulation and deferred regulatory asset

Account for compensation of portion "A" variations - CVA

In accordance with Administrative Rule 25 of Brazilian Ministry of Finance and Ministry of Mines and Energy, of January 24, 2002, COPEL calculated the effects of the account for compensation of “Portion A" Variations (CVA), intended to record the changes in costs in the period between annual tariff adjustments, beginning in 2001, and related to the items described in the electric distribution concession contracts.

Administrative Rule 116, of Ministry of Finance and Ministry of Mines and Energy, of April 4, 2003, postponed for 12 months the recovery of the balance for compensation of “Portion A" Variations - CVA, for the annual tariff adjustments occurring between April 8, 2003 and April 7, 2004. The balance of CVA, as well the CVA balance calculated over the subsequent 12 months under the Administrative Rule 25 above, has been recovered over the 24 months subsequent to the annual tariff adjustment occurring between April 8, 2004 and April 7, 2005.

Later on, Joint Ministry Ordinances No. 116, dated April 4, 2003, and No. 361, dated November 26, 2004, added new eligible items, such as the Energy Development Account (CDE) quota, costs for purchase of power, and the power and cost-sharing quotas of the Program of Incentives for Alternative Energy Sources – Proinfa.

In accordance with ANEEL Technical Note 146 of June 21, 2004, the tariff adjustment in June 2004 included 50% of the balance of Recoverable CVA for the 2002/2003 and for the 2003/2004 periods. The remaining balances of these two periods were considered in the 2005 tariff adjustment.

In June 2005, ANEEL granted an average tariff increase of 7.8% to COPEL Distribuição. This increase consisted of 1.25% decrease in retail tariffs and a 9.05% increase to recover the Portion A Cost items.

Under ANEEL Resolution No. 345/2006, COPEL Distribuição was granted an average increase of 5.12% on its rates for sales to final customers, effective June 24, 2006. Out of this total, 4.91% correspond to the rate review index, and 0.21% to financial adjustments outside the range of the rate review. CVA is part of the latter group, amounting to R$21,978 or 0.58% of the granted increase, and is made up of three installments: CVA for the rate year 2005-2006, a liability of R$7,557; CVA balance liability from the previous year to be offset, in the amount of R$4,317; and deferred CVA asset balance from previous years, in the amount of R$33,852.

a(xi) Energy Efficiency Programs (EEPs), Research and Development (R&D), National Scientific and Technological Development Fund (FNDCT), and Energy Research Company (EPE)

These are research and development and energy efficiency programs required by ANEEL to which energy concessionaires are compelled to allocate 1% of their net operating revenues.

F - 19

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

The funds are applied to projects approved by ANEEL and to contributions to FNDCT and to the Ministry of Mines and Energy (MME). 

a(xii)Deferral of distribution costs 

The rate setting mechanism in Brazil guarantees the recovery of costs incurred by COPEL Distribuição in connection with the purchase of power and with regulatory charges through rate increases. Following ANEEL instructions, COPEL Distribuição records variations of these costs as deferred regulatory assets and liabilities, when there is a likely expectation that future revenues, equivalent to the incurred costs, will be billed and collected, as a direct result of the inclusion of such costs in an adjusted rate set according to the parametric formula established in the company’s concession agreement. Deferred regulatory assets and liabilities are realized upon authorization by the granting authority for their inclusion in COPEL Distribution’s rate basis, which is adjusted annually on the anniversary date of its concession agreement. 

(b)General accounting policies 

b(i)Cash and cash equivalents 

Cash and cash equivalents are stated at cost plus accrued interest. Cash equivalents consist principally of time deposits and certificates of deposits (short term, highly liquid, readily convertible and near maturity) denominated in Brazilian reais. 

b(ii)Accounts receivable 

This item comprises billed power sales to final customers and to distributors, estimated power supplied but unbilled as of the date of the financial statements, and supply of natural gas, accounted for on the accrual basis. 

b(iii)Materials and supplies (including those under property, plant and equipment)

Materials and supplies in inventory, classified under current assets, have been recorded at their average purchase cost, and those assigned for replacement of fixed asset, classified under property, plant and equipment, have been recorded at their actual purchase cost (goods in bulk, such as poles and cables, are recorded according to average cost). Recorded amounts do not exceed their replacement costs or realization figures. 

b(iv)Investments 

Permanent interests in subsidiaries and investees have been recorded under the equity method. Other investments have been recorded at their purchase cost, net of provision for losses, when applicable. 

F - 20 

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

b(v) Deferred charges

Deferred charges comprise pre-operational, financial, and feasibility study costs, less amortization, which is calculated under the straight-line method at rates that take into account the estimated useful lives of the respective assets.

b(vi) Loans, financing and debentures

Loans, financing and debentures are restated according to monetary and exchange rate variations up to the date of the financial statements, including interest and other contractual charges.

b(vii) Income taxes

Income and social contribution taxes are calculated based on the rates in effect at the balance sheet date. The Company recognized the effects of income and social contribution tax credits on tax loss carryforwards and temporary differences, supported by projections of future generation of taxable income, in a period not to exceed ten years.

b(viii) Pension plans and other payroll accruals

Fundação COPEL administers pension funds and other post-retirement benefit plans for its employees (see Note 22). Compensated absences and bonuses payable to employees were accrued as earned during the vesting periods. As from January 1, 2001, pension funds and other post-retirement benefits started being accounted for on the accrual basis, based on costs and obligations computed by independent actuaries in accordance with the rules established by CVM Statement 371/2000.

b(ix) Provision for contingencies

These are recorded until the date of the financial statements based on likely estimates of losses, in light of the nature of each contingency. The bases and the nature of each provision are described in note 21.

b(x) Revenues, costs and expenses

Revenues, costs and expenses are recognized on the accrual basis, i.e., when the delivery of goods has occurred or services have been rendered, regardless of when the cash is received or paid.

Revenues from the electricity sales to final customers are recognized when earned. Billings for these sales are made on a monthly basis throughout the month. Unbilled revenues from the billing cycle up to the end of each month are estimated based on the prior month's billing cycle. Differences between estimated and actual unbilled revenues, which have not been significant, are recognized in the following month. Electricity sales to distributors and to the interconnected power system (initial supply contracts, wholesale energy market and bilateral agreements) are recorded when earned and are billed monthly. Revenues from the supply of gas are recognized when the gas is delivered to final customers and are billed monthly.

F - 21

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

Taxes and charges on revenue are presented on a gross basis and consist of: (i) value-added tax (“ICMS”), which is a state tax due on the sales to final customers, and is billed to the consumers and recorded as part of gross revenue; (ii) COFINS revenue tax; (iii) PIS-PASEP social contribution tax on revenues; (iv) Regulatory charges; and (v) Other charges and deductions on sales. It is the Company’s policy to deduct these taxes from gross revenues.

b(xi) Other revenues and expenses

Other revenues and expenses are also recognized on the accrual basis.

b(xii) Assets and liabilities denominated in foreign currencies or subject to indexation

Assets and liabilities denominated in foreign currencies are translated into Reais at the exchange rate reported by the Central Bank of Brazil at each balance sheet date. Those denominated in Reais, and contractually or legally subject to indexation are restated to the balance sheet date applying the corresponding index.

Foreign currency exchange gains and losses and monetary variation gains and losses are recognized in income on a current basis, except those related to construction work in progress, which are capitalized in the respective property, plant and equipment accounts.

b(xiii) Net income per share

These amounts are calculated based on the number of shares outstanding at the balance sheet date.

b(xiv) Use of estimates

The preparation of financial statements in accordance with Brazilian GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the balance sheet date, and the reported amounts of revenues and expenses for the reporting periods. Actual results could differ from those estimates. The principal estimates related to the financial statements refer to the recording of effects arising from allowance for doubtful accounts, useful lives of property, plant and equipment, impairment of long-lived assets, provision for contingencies, income tax, pension plan assumptions, and transactions involving purchase and sale of energy in the Spot Market which are recorded on an estimated basis and final billing and settlement information are subject to review by participants in the CCEE.

b(xv) Derivative financial instruments

Unrealized losses, net related to cross-currency interest rate swap transactions calculated based on contractual rates, are recognized on the accrual basis, and are recorded in current liabilities under Unrealized losses from cross-currency interest rate swaps account, with a contra entry to financial expenses.

F - 22

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

The Company does not have any derivative instruments as of December 31, 2007 and 2006.

b(xvi) Regulated industry

Regulatory assets have been recorded for future recovery through tariff increases, to the extent that recovery is considered to be reasonably assured.

5 Cash and Cash Equivalents

		December 31
	Interest rates	2007	2006
Cash and banks		194,208	67,299
Cash equivalents	Average of 100% of CDI (*)	1,346,663	1,436,705
		1,540,871	1,504,004

The annual CDI rate was 11.77% as of December 31, 2007 (14.97% as of December 31, 2006)

(*) CDI - Certificado de Depósito Interbancário, an interbank variable interest rate.

F - 23

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

6 Accounts Receivable, Net

	December 31
	2007	2006
Customers
Residential	157,698	154,840
Industrial	170,828	150,038
Commercial	93,099	88,466
Rural	18,271	17,232
Public entities	27,161	50,658
Public lighting	12,174	13,031
Public services	12,568	11,976
Unbilled	143,921	156,649
Installment receivables - current portion	96,772	69,509
Installment receivables - non-current	118,032	79,456
Low income customers rate (a)	99,417	30,434
Other current assets	60,433	113,663
Other non-current assets	1,834	1,592
	1,012,208	937,544
Distributors
Short-term sale	126	138
Electricity sales to distributors - CCEE (Note 21(b))	7,158	29,521
Generating companies - current reimbursement (b)	1,492	10,854
Generating companies - non-current reimbursement (b)	12,004	27,109
Initial supply contracts	6,522	4,591
Energy auction	86,914	76,765
Bilateral agreements	49,186	52,146
	163,402	201,124
Transmission system	53,209	34,756
Telecommunications and other services	8,750	13,399
Telecommunications and other services – non-current	7,251	-
Services in progress	51,343	20,038
Allowance for doubtful accounts (c)	(71,592)	(111,726)
Allowance for doubtful accounts – non-current (c)	(11,469)
Accounts receivable, net	1,213,102	1,095,135
Current assets - accounts receivable, net	1,078,195	986,978
Non-current assets - accounts receivable	134,907	108,157

(a) Low income customers rate

The Federal Government, by means of Law No. 10,438, dated April 26, 2002, established an exemption from the charge for generation capacity costs to low income residential customers. This rate benefit had a significant impact on the Company's operating revenues.

F - 24

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

In September 2002, the Company started applying the low income rate to electricity bills based on the new criteria for eligibility as low income customers.

On December 17, 2002, Law No. 10,604 modified the means of compensation to utilities, authorizing the granting of an economic subsidy, in order to contribute to the low price of the low income rate. This subsidy is funded by the dividend surplus owed by Centrais Elétricas Brasileiras S.A. -Eletrobrás to the Federal Government, in connection with the sale of power by Federal Government-owned generation companies at power auctions, and by Global Reversal Reserve (RGR) funds.

ANEEL, through different resolutions, set forth a new methodology for the calculation of the economic subsidy to which utilities are entitled, in order to offset the effects of the rate policy applicable to low income customers. As of December 2007, the low income rate was applied to 710,898 customers, who account for 26.2% of the total of 2,713,452 residential customers supplied by COPEL.

Due to discrepancies between the amounts recorded by COPEL and those gathered by ANEEL inspection, COPEL recalculated these amounts, resulting in a balance of approximately R$89,000. Out of this total, approximately R$35,000 have already been approved by ANEEL, and the remaining R$54,000 shall be approved by April 2008.

The Company, on account of the recalculation above, recorded an allowance of R$10,412 in connection with the accounts receivable related to low income customers, in the amount of R$99,417.

(b) Generators' reimbursement right – free energy

Power generator reimbursements rights refer to free energy amounts sold within MAE Spot Market during the emergency power consumption program, from June 1, 2001 to February 28, 2002, and which were not covered by initial contracts or similar agreements and by bilateral contracts. The approval of the amounts of power to be sold was formalized under ANEEL Resolution No. 483, dated August 29, 2002.

To make up for part of the losses incurred by utilities due to the power rationing, ANEEL created the Extraordinary Rate Adjustment (RTE), under Resolution No. 36, dated January 29, 2003, later amended by Resolution No. 89, dated February 25, 2003. This resolution sets forth procedures for the recovery and transfer to generation companies, starting in February 2003, of free energy amounts, calculated as a percentage of RTE revenues.

ANEEL, through Letter No. 2,396/2006-SFF/ANEEL, dated December 28, 2006, ordered generation utilities to set up a provision for potential losses, supported by in-house studies. In 2006, the balance of allowance for doubtful accounts was increased by R$11,469, referring to amounts with a low chance of recovery from distribution utilities.

F - 25

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

Pursuant to ANEEL/SFF Letter No. 2218/2005, power generator reimbursement balances are as follows:

F - 26

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

	December 31
	2007	2006
Distribution companies
Companhia Energética de Minas Gerais – Cemig	4,981	6,571
Eletropaulo Metropolitana Eletricidade de São Paulo – Eletropaulo	-	4,595
LIGHT – Serviços de Eletricidade S.A.	3,244	4,735
Centrais Elétricas do Norte do Brasil S.A. – Eletronorte	-	4,639
Companhia Paulista de Força e Luz – CPFL	-	3,223
Companhia de Eletricidade do Estado da Bahia – Coelba	1,151	1,885
Empresa Bandeirante de Energia S.A. – EBE	-	1,616
Companhia de Eletricidade do Rio de Janeiro – Cerj	1,014	1,669
Companhia Energética de Pernambuco – Celpe	677	1,281
Espírito Santo Centrais Elétricas S.A. – Escelsa	-	1,292
Companhia Energética do Ceará – Coelce	865	1,203
Companhia Piratininga de Força e Luz	-	1,033
Elektro Eletricidade e Serviços – Elektro	-	344
Companhia Energética de Brasília – CEB	-	695
Companhia Energética do Rio Grande do Norte – Cosem	607	731
Centrias Elétricas do Pará S.A. – Celpa	-	415
Companhia Hidro Elétrica do São Francisco – Chesf	-	94
Other	957	1,942
	13,496	37,963
Current	1,492	10,854
Non-current	12,004	27,109

(c) Allowance for doubtful accounts

The allowance for doubtful accounts was recorded pursuant to ANEEL Accounting Manual for the Electric Energy Public Service and to the chart of accounts from the Brazilian National Petroleum Agency (ANP) for gas supply receivables, based on a detailed analysis of past-due receivables, and at an amount considered by management sufficient to cover probable losses on the realization of receivables.

	December 31
	2006	Additions (*)	Write-offs	2007
Residential	15,083	12,660	(11,475)	16,268
Industrial	39,720	8,945	(6,724)	41,941
Commercial	6,600	7,658	(5,804)	8,454
Public entities	37,722	(35,997)		1,725
Other	12,601	2,619	(547)	14,673
	111,726	(4,115)	(24,550)	83,061

F - 27

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

				December 31
	2005	Additions (*)	Write-offs	2006
Residential	15,254	13,946	(14,117)	15,083
Industrial	11,905	30,598	(2,783)	39,720
Commercial	28,284	(17,151)	(4,533)	6,600
Public entities	22,214	19,355	(3,847)	37,722
Other	1,416	11,713	(528)	12,601
	79,073	58,461	(25,808)	111,726
				December 31
	2004	Additions (*)	Write-offs	2005
Residential	32,061	52	(16,859)	15,254
Industrial	10,526	6,650	(5,271)	11,905
Commercial	26,298	8,483	(6,497)	28,284
Public entities	15,581	6,633	-	22,214
Other	861	1,107	(552)	1,416
	85,327	22,925	(29,179)	79,073

(*) Net of reversals and recoveries.

7 Dividends Receivable

		December 31
	2007	2006
Dominó Holdings S.A.	2,159	1,975
Foz do Chopim Energética Ltda.	608	-
Eletrosul	-	44
	2,767	2,019

F - 28

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

8 Recoverable Rate Deficit (CRC)

The Paraná State Government has paid the renegotiated installments as determined by the fourth amendment to the CRC Account Agreement. Amortizations are secured by dividends payable by the Company to the Paraná State Government.

Maturity of the CRC is as follows:

	December 31,
	2007
2008	40,509
2009	43,203
2010	46,077
2011	49,141
2012	52,409
Thereafter	1,019,023
Total	1,250,362
Current	40,509
Non-current	1,209,853

9 Deferred Regulatory Assets and Liabilities a) CVA

	December 31
	2007	2006	2007	2006
Assets		Current assets	Non-current assets
Recoverable CVA - tariff adjustment 2006
Electricity purchased for resale (Itaipu)	-	18,162	-	-
Transmission of electricity purchased from Itaipu	-	2,195	-	-
Use of transmission installations - basic network	-	10,699	-	-
Regulatory charges (CDE)	-	11,549	-	-
Charges on use of system services - ESS	-	3,741	-	-
Regulatory charges (CCC)	-	17,481	-	-
Program of Incentives for Alternative Energy Sources -	-		-	-
Proinfa		5,886
Electricity purchased for resale (CVA Energy)	-	8,061	-	-
	-	77,774	-	-
Recoverable CVA - tariff adjustment 2007
Electricity purchased for resale (Itaipu)	22,289	5,133		5,133
Regulatory charges (CDE)	6,125	2,199		2,199
Charges on use of system services - ESS	7,082	3,350		3,350

F - 29

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

	December 31
	2007	2006	2007	2006
Assets		Current assets	Non-current assets
Regulatory charges (CCC)	1,869	-	-	-
Transmission of electricity purchased from Itaipu	211	-	-	-
Program of Incentives for Alternative Energy Sources -			-
Proinfa	4,560	1,592		1,591
	42,136	12,274	-	12,273
Recoverable CVA - tariff adjustment 2008
Regulatory charges (CCC)	5,659	-	5,659	-
Use of transmission installations - basic network	4,074	-	4,074	-
Electricity purchased for resale (Itaipu)	12,309	-	12,309	-
Regulatory charges (CDE)	1,922	-	1,922	-
Charges on use of system services (ESS)	372	-	372	-
Electricity purchased for resale (Itaipu)	37	-	37	-
Program of Incentives for Alternative Energy Sources -		-		-
Proinfa	1,105		1,105
	25,478	-	25,478	-
Total	67,614	90,048	25,478	12,273
	December 31
	2007	2006	2007	2006
Liabilities	Current liabilities		Non-current liabilities
Recoverable CVA - tariff adjustment 2006
Electricity purchased for resale (CVA Energy)	-	58,445	-	-
	-	58,445	-	-
Recoverable CVA - tariff adjustment 2007
Electricity purchased for resale (CVA Energy)	54,155	37,877	-	37,877
Use of transmission installations - basic network	31,803	4,577	-	4,577
Regulatory charges (CCC)	34,146	9,197	-	9,197
Transmission of electricity purchased from Itaipu	1,002	402	-	402
	121,106	52,053	-	52,053
Recoverable CVA - tariff adjustment 2008
Electricity purchased for resale (CVA Energy)	16,511	-	16,511	-
Use of transmission installations - basic network	1,186	-	1,186	-
Charges on use of system services (ESS)	3,722	-	3,722	-
Regulatory charges (CCC)	855	-	855	-
Transmission of electricity purchased from Itaipu	56	-	56	-
	22,330	-	22,330	-
Total	143,436	110,498	22,330	52,053

F - 30

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

The changes in the deferred regulatory balances, monetarily indexed by SELIC rates, are presented as follows:

				Monetary
	2006	Additions	Amortization	indexation	Transfer	2007
Assets
Electricity purchased for resale (Itaipu)	28,428	55,854	(42,541)	5,166	-	46,907
Transmission of electricity purchased from Itaipu	2,195	497	(2,557)	150	-	285
Use of transmission installations - basic network	10,699	8,096	(11,009)	362	-	8,148
Regulatory charges (CDE)	15,947	11,150	(18,607)	1,479	-	9,969
Charges on use of system services - ESS	10,441	7,611	(11,309)	1,083	-	7,826
Regulatory charges (CCC)	17,481	15,166	(20,678)	1,218	-	13,187
Program of Incentives for Aternative Energy
Sources - Proinfa	9,069	7,860	(11,143)	984		6,770
Regulatory charges (CCC)	8,061	-	(8,061)	-	-	-
	102,321	106,234	(125,905)	10,442	-	93,092
Current	90,048	62,950	(125,905)	8,653	31,868	67,614
Non-current	12,273	43,284	-	1,789	(31,868)	25,478
Liabilities
Electricity purchased for resale	134,199	61,325	(118,608)	10,261	-	87,177
Charges on use of system services - ESS	-	7,193	-	251	-	7,444
Regulatory charges (CCC)	18,394	49,310	(36,119)	4,271	-	35,856
Use of transmission installations - basic network	9,154	50,413	(32,580)	7,188	-	34,175
Transmission of electricity purchased from Itaipu	804	1,251	(1,059)	118	-	1,114
	162,551	169,492	(188,366)	22,089	-	165,766
Current	110,498	119,422	(188,366)	19,868	82,014	143,436
Non-current	52,053	50,070	-	2,221	(82,014)	22,330

The deferred regulatory assets will be recovered up to June, 2009. The realization of deferred regulatory assets is broken down below.

	Amount to be
	recovered
2008	67,614
2009	25,478
	93,092

b) Regulatory Asset - PIS and Cofins

Brazilian Federal Laws No. 10,637 and No. 10,833 changed the calculation basis and increased the rates of PIS and Cofins. As a result, PIS expenses increased as from December 2002 and Cofins expenses as from February 2004.

ANEEL Circular Letter 302/2005 and additional resolutions, recognized the Company’s right to be reimbursed by the additional PIS and Cofins charges, requiring recognition of a regulatory asset or liability, depending on whether they increased or reduced costs, respectively. Based on ANEEL regulations, the Company recorded an asset of R$82,094 with a contra entry reducing PIS and Cofins expenses. As of December 31, 2007, the balance has been fully realized.

F - 31

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

Pursuant to the ANEEL authorization as of June 2005, COPEL began to include PIS/PASEP and COFINS taxes in the amounts billed to customers.

c) Review adjustment share - transmission utilities' rate review

The concession agreements signed by the transmission utilities contain a clause which sets the date of July 1, 2005 as the date of the first periodic review of annual allowed revenues. The rate review was concluded and its results were approved on July 1, 2007, applicable retroactively to July 1, 2005. Thus, it became necessary to calculate the retroactive discrepancy for the period from 2005 to 2007, which has been treated as a “review adjustment share”. This balance, which has been accrued by transmission utilities, is being offset over 24 months, starting July 2007.

As of December 31, 2007, COPEL Geração e Transmissão had a balance to be offset in the amount of R$36,391.

ANEEL has calculated the discrepancy corresponding to the “connection point review adjustments” for all distribution utilities, resulting in a balance of R$22,915 to be paid by COPEL Distribuição to COPEL Transmissão As regards the “basic network review adjustments", the application of COPEL Distribuição's participation percentage to the total adjustment share resulted in the amount of R$29,020 to be collected from the remaining transmission utilities which underwent the rate review process. These amounts, which shall be financially settled with the transmission utilities, will be taken into account in COPEL Distribuição’s next rate review. COPEL expects that the amounts classified as long-term on the date of its balance sheet will be recovered in up to two years from that date. Consolidated balances as of December 31, 2007 are shown below:

	Assets			Liabilities
	Current	Non-	Total	Current	Non-	Total
		current			current
COPEL Distribuição S.A.
Connection review adjustment	465	154	619	-	-	-
Basic Network review adjustment	16,721	5,575	22,296	21,765	7,255	29,020
	17,186	5,729	22,915	21,765	7,255	29,020
COPEL Geração e Transmissão S.A.
Basic Network review adjustment	-	-	-	24,711	11,680	36,391
	17,186	5,729	22,915	46,476	18,935	65,411

F - 32

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

10 Recoverable Taxes

		December 31
	2007	2006
Income and social contribution taxes recoverable	21,344	121,261
Value Added Tax (ICMS) recoverable	77,686	51,448
Other	1,549	1,104
	100,579	173,813
Recoverable taxes - current assets	38,744	128,939
Recoverable taxes - non-current assets	61,835	44,874

Amounts recorded as income and social contribution taxes recoverable refer mostly to amounts withheld and prepaid according to estimates during the period.

11 Deferred Income Taxes

Income taxes in Brazil include federal income tax and social contribution. The Brazilian statutory rate is 34.0%, comprised of income tax (25.0%) and social contribution tax (9.0%) .

The major components of the deferred tax accounts are as follows:

		December 31
	2007	2006
Current assets
Net operating loss carryforwards	7,778	8,269
Temporary differences	109,077	97,876
	116,855	106,145
Non-current assets
Temporary differences
Pension and health-care plans - CVM Resolution 371	138,990	153,682
Provisions for contingencies and other	241,278	166,203
Net operating loss carryforwards	20,324	17,769
	400,592	337,654
Total deferred income tax asset	517,447	443,799
Current liabilities
CVA deferral	(19,654)	(27,281)
Other	(5,010)	(6,390)
	(24,664)	(33,671)
Long-term liabilities
CVA deferral	(7,543)	(3,053)
Other	(11,774)	(9,462)
	(19,317)	(12,515)
Total deferred income tax liability	(43,981)	(46,186)

F - 33

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

		December 31
	2007	2006
Total deferred income tax, net	473,466	397,613

In compliance with CVM Ruling No. 371, dated June 27, 2002, the Company’s Board of Directors and Fiscal Council have approved the technical study prepared by the Chief Finance and Investor Relations Office on future profitability projections, which indicate the realization of deferred taxes. According to the estimates of future taxable income, the realization of deferred taxes is broken down below.

	Estimated	Actual realized	Estimated
	realizable amount	amount	realizable amount
2007	27,078	69,382
2008	-	-	92,191
2009	-	-	55,219
2010	-	-	33,749
2011	-	-	14,363
2012	-	-	14,772
After 2012	-	-	263,172
	27,078	69,382	473,466

Pursuant to income tax legislation, tax loss carryforwards are available for offset up to the limit of 30% of annual taxable income, without expiration period.

Reconciliation of income taxes

The reconciliation of the income taxes, calculated at the current rates, with the amounts shown in the statements of operations, is as follows:

	Year ended December 31
	2007	2006	2005
Income before income taxes and non controlling shareholders’
interest	1,598,015	1,814,246	717,001
Statutory income taxes rates - %	34	34	34
Income taxes expenses computed based on statutory rates	(543,325)	(616,844)	(243,780)
Income tax effects on
Benefit from interest on equity	68,000	41,820	41,818
Equity in results of investees	(595)	(10,075)	4,590
Non-deductible pension expenses	-	(2,066)	(4,274)
Changes in Brazilian accounting practices	-	9,937	-
Valuation allowance for recoverable taxes - COFINS	-	6,922	-
Dividends	3,088	1,140	121
Tax incentives	7,932	7,407	2,259
Other	4,585	4,081	1,066

Tax expense per statement of operations	(460,315)	(557,678)	(198,200)
Current income tax	(536,168)	(499,727)	(248,228)
Deferred income tax	75,853	(57,951)	50,028

F - 34

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

12 Investments

	December 31
					2007	2006
	Investee's	Investees'	Total	Equity in	Total	Total
	shareholders’	net income	ownership	results of	investment	investment
	equity	(loss )	- %	investees	balances	balances
				;
Investments accounted for under the equity method
Sercomtel S.A. - Telecomunicações	182,562	8,773	45.00	(1,310 )	82,153	83,463
Sercomtel Celular S.A.	19,464	(2,879 )	45.00	(3,610 )	8,759	12,369
Dominó Holdings S.A. (a)	601,035	55,221	15.00	(1,367 )	90,155	91,522
Interest on equity received				2,175
Escoelectric Ltda.	(3,374 )	214	40.00	(3,304 )	(1,390 )
Advance for future capital increase					1,025	2,500
COPEL Amec S/C Ltda.	293	44	48.00	23	140	468
Dona Francisca Energética S.A.	25,754	16,970	23.03	3,908	5,931	2,023
Carbocampel S.A.	(115 )	(589 )	49.00	(288 )	(56 )	232
Advance for future capital increase					1,059	198
Braspower International Engineering S/C Ltda.	(407 )	1	49.00
Advance for future capital increase					176	176
Centrais Eólicas do Paraná Ltda.		407	30.00	122		1,050
Foz do Chopim Energética Ltda. (b)	45,718	23,602	35.77	707	16,353	16,362
Dividends received				8,370
Goodwill on investments, net of amortization
Sercomtel S.A. - Telecomunicações (c)				-	1,568	5,796
Amortization for the year				(4,228 )
Sercomtel Celular S.A. (c)				-	223	803
Amortization for the year				(580 )	-	-
Goodwill on acquisition of Centrais Elétricas Rio
Jordão S.A. - ELEJOR - Amortization for the year				(754 )	-	-
Goodwill on acquisition of COPEL
Empreendimentos Ltda
Amortization for the year				(2,346 )	-	-
				(2,482 )	206,096	216,962
Other investments
Tax incentives (d)
FINAM				--	52,783	40,370
FINOR				-	9,870	9,870
Reserve for tax incentive losses				-	(26,801 )	(47,900)
Assets for future use				-	4,588	6,825
Consórcio Energético Cruzeiro do Sul (e)				-	6,450
Other				4,083	3,823	3,826
				4.083	50,713	12,991
				1,601	256,809	229,953

F - 35

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

(a) Dominó Holding S.A.

Dominó Holding S.A. is a company which owns 34.75% of the share capital of Companhia de Saneamento do Paraná – SANEPAR, a mixed (state/private) capital company whose business comprises basic sanitation services, including water supply and sewage collection and treatment. 

(b) Foz do Chopim Energética Ltda. 

The Foz do Chopim hydroelectric plant is located on the Chopim River in the State of Paraná and was built on the already existing structure of the Julio de Mesquita plant, which is no longer active. COPEL Participações S.A. owns 35.77% of the total issued and outstanding share capital of the Foz do Chopim hydroelectric plant and the remaining 64.23% is owned by DM Planejamento Administração e Participações Ltda. The plant has an installed capacity of 29.07 MW. The investment necessary to construct the plant was R$51.4 million, of which R$28.5 million was funded by COPEL Participações S.A The first generating unit started operating on October 25, 2001, and the second generating unit started operating on December 8, 2001. 

(c) Sercomtel S.A. - Telecomunicações and Sercomtel Celular S.A. 

On May 15, 1998, COPEL acquired 45% of Sercomtel S.A. - Telecomunicações total shares and 45% of Sercomtel Celular S.A. total shares, both public telecommunication companies for the municipalities of Londrina and Tamarana, in the State of Paraná. The total amount paid for both companies was R$186,000, resulting in a total goodwill of R$48,103. Goodwill paid on the investments in Sercomtel S.A. Telecomunicações and Sercomtel Celular S.A. was based on the expected future return to be generated by these investments and the amortization is over ten years, at the annual rate of 10 percent, resulting from the evaluation of the return on the investments based on discounted cash flows, in the annual amount of R$4,808. 

(d) Tax incentives 

Tax incentives are investments approved by the Federal Government in underdeveloped regions of Brazil or in specific projects, which are available to companies without additional cost upon the payment of taxes. 

(e) Consórcio Energético Cruzeiro do Sul (operational and technical information unaudited)

On November 28, 2006, at the Auction of Power from New Projects, Consórcio Energético Cruzeiro do Sul, an independent power producer owned by COPEL Geração e Transmissão (with a 51% interest)and by Eletrosul Centrais Elétricas S.A. (49%), won the rights to the 35-year concession of the Mauá Hydroelectric Power Plant. 

This project is included in the Federal Government’s Growth Acceleration Program (PAC) and will comprise a main power plant rated 350 MW and an additional small hydropower unit rated 11 MW, for a total of 361 MW of installed capacity, which is enough to supply approximately 892,400 people. The facility will take advantage of the hydroelectric potential in the middle section of the Tibagi River, between the towns of Telêmaco Borba and Ortigueira, in mideastern Paraná. 

F - 36 

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

The deadline for the commercial operation of the facility’s first generating unit is January 1, 2011. Total estimated expenditures amount to R$991,283, as of October 2006, of which 51% (R$505,554) will be invested by COPEL Geração e Transmissão, while the remaining 49% (R$485,729) will be invested by Eletrosul Centrais Elétricas S.A.

The power from the Mauá Power Plant was sold at an ANEEL auction at the rate of R$112.96/MWh, restated according to the IPCA inflation index starting on November 1, 2006. The company sold 192 average MW, for supply starting in January 2011. The assured power of the project, established in its concession agreement, is 197.7 average MW, after full motorization, and the maximum reference rate set in the auction notice was R$116.00/MWh.

Work began in May 2007 with the procurement of the basic project and the beginning of the executive project for the facility and its associated transmission system, the preparation of technical specifications, calculation records, designs, and other documents regarding the different structures within the facility, additional geological surveys, and topography services. The project has been concluded and submitted to ANEEL review. The project’s Environmental Impact Study and Environmental Impact Report have been disclosed at a public hearing and approved by the licensing authority, resulting in the issue of Preliminary License No. 9,589 by the Environmental Institute of Paraná (IAP) – an agency which reports to the State Environment and Water Resources Department, provided that around 70 environmental requirements covering the physical, biological, and socioeconomic aspects of the project are met prior to the issue of the Construction License.

In November 2007, the National Monetary Council (CMN) authorized an exception to Central Bank Resolution No. 2827/01, which limited credit to state-owned companies, in order to allow COPEL to obtain financing from the National Economic and Social Development Bank (BNDES), in the amount of R$340,000, for the Company’s share of construction expenditures in connection with the Mauá Hydroelectric Power Plant.

Expenditures in this project are recorded as investments, proportionally to COPEL’s share in the consortium, pursuant to the Accounting Manual for Electric Energy Utilities.

(f) Centrais Eólicas do Paraná

The Company, through COPEL Participações, held a 30% interest in Centrais Eólicas do Paraná (CEOPAR). On September 6, 2007, COPEL acquired the remaining 70% interest held by Wobben Windpower Indústria e Comércio Ltda., thus becoming the holder of 100% of the share capital of CEOPAR. This transaction resulted in negative goodwill of R$592, which was reclassified upon consolidation to negative goodwill.

13 Property, Plant and Equipment

F - 37

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

	December 31
2007	2006

		Accumulated			Accumulated
	Cost	depreciation	Net	Cost	depreciation	Net
In service
Generation and
Transmission	5,171,655	(1,937,690)	3,233,965	5,084,453	(1,839,827)	3,244,626
Distribution	4,462,250	(2,116,451)	2,345,799	4,101,492	(1,926,830)	2,174,662
Telecommunications	326,892	(179,894)	146,998	304,534	(154,505)	150,029
Holdings	341	(237)	104	342	(222)	120
Elejor	605,458	(30,333)	575,125	604,961	(14,023)	590,938
Compagas	144,355	(33,636)	110,719	139,853	(26,820)	113,033
UEG Araucaria	634,233	(76,315)	557,918	633,335	(44,856)	588,479
Centrais Eólicas	4,129	(2,215)	1,914	-	-	-
	11,349,313	(4,376,771)	6,972,542	10,868,970	(4,007,083)	6,861,887
Construction work in
progress	717,029	-	717,029	658,411	-	658,411
	12,066,342	(4,376,771)	7,689,571	11,527,381	(4,007,083)	7,520,298
Special obligations
Generation and
Transmission	(4,925)	-	(4,925)	(3,787)	-	(3,787)
Distribution	(852,267)	-	(852,267)	(804,825)	-	(804,825)
	(857,192)	-	(857,192)	(808,612)	-	(808,612)
Property, plant and
equipment, net	11,209,150	(4,376,771)	6,832,379	10,718,769	(4,007,083)	6,711,686

F - 38

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

The principal annual depreciation rates are as follows:

	Percentage
Generation
Equipment	10.0
Generator	3.3
Reservoirs, dams and water mains	2.0
Hydraulic turbine	2.5
Steam and gas turbines	5.0
Water treatment and cooling	5.0
Gas conditioner	5.0
Transmission
System structure and conductor (voltage lower than 69kV)	5.0
System structure and conductor (voltage higher than 69kV) and power transformer	2.5
Equipment	10.0
Re-ignition	4.3
Distribution
System structure and conductor (voltage lower than 69kV) and distribution
transformer	5.0
System structure and conductor (voltage higher than 69kV)	2.5
Capacitors and distribution switches (voltage lower than 69kV)	6.7
Capacitors and distribution switches (voltage higher than 69kV)	5.0
General equipments	10.0
Telecommunications
Energy and transmission equipment	10.0
Overhead and underground cables, wiring and private switching center	10.0
Holdings
Equipment	10.0
Furniture	10.0
Buildings	4.0
Vehicles	20.0
Gas
Gas pipeline	3.3
Gas pipeline operation equipment	10.0

ANEEL Regulatory Resolution No. 240, dated December 5, 2006, requires that power utilities calculate and account for new periodic depreciation quotas as of January 1, 2007. The adoption of the new quotas has no material effects for the year ended December 31, 2007, and will have material effects in future periods which should require additional disclosures.

(a) Expropriation

Certain properties required for the implementation of the Company's projects, specifically those necessary for the construction of dams and transmission lines, have been expropriated pursuant to specific legislation and are subject to compensation, negotiations and settlement with their prior owners. Because of the difficulty in arriving at precise cost estimates and the time required to obtain court decisions when out-of-court negotiations are unsuccessful, the cost of each asset is determined only at the end of the expropriation process and is then capitalized as part of property, plant and equipment.

F - 39

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

(b) Assets related to the concessions

In accordance with articles 63 and 64 of Decree 41,019 of February 26, 1957, assets and installations used in the generation, transmission and distribution of electric energy are linked to these services and cannot be retired, sold or pledged in guarantee without the prior written approval of ANEEL. ANEEL Resolution No. 20/99 determined that the proceeds from the sale of assets which are no longer useful to the concessions should be deposited in a restricted bank account to be invested in the concession.

(c) Special obligations

These are obligations linked to the Electric Energy Public Service Concession and represent funds provided by the Federal Government and customers, as well as certain unconditional donations and grants for investments in the electric energy public service in the distribution activity. The special obligations are established by the regulatory authorities for transmission and distribution concessions, and by the end of the concession the amount of special obligations will be offset against the net book value of related assets.

In accordance with ANEEL Resolution No.234, October 31, 2006, which establishes the principles for holding the second cycle of the periodic tariff review, in June 2008 for COPEL Distribuição, the special obligations will be amortized, based on this review, using the depreciation rates applied for depreciation of the Property, plant and equipment. See Note 35 a(ii).2.

(d) Electric Energy Universalization Plans

Under Resolution No. 223, dated April 29, 2003, later amended by Resolution No. 52, dated March 25, 2004, and Resolution No. 175, dated November 28, 2005, ANEEL set forth the overall conditions for the development of Electric Energy Universalization Plans aimed at supplying new customers or increasing the capacity of supply to existing customers. This Resolution regulates the provisions of Articles 14 and 15 of Law No. 10,438, dated April 26, 2002, and sets out the duties of the holders of electric energy distribution concessions and permits. These articles were later amended by Law No. 10.762, dated November 11, 2003, and by Law No. 10,848, dated March 15, 2004. The changes include a reorganization of the priority of service to municipalities, emphasizing municipalities with a lower rate of electrification and limiting service to new customers connected at low voltage (lower than 2.3 kV), with loads of up to 50 kW.

The “Luz para Todos” (“Light for Everyone”) program, launched by the Federal Government under Decree No. 4,783, dated November 11, 2003, is aimed at providing electric energy to 100% of Brazil by 2008, at no extra charge to consumers.

This program is coordinated by the Ministry of Mines and Energy and carried out with the participation of Centrais Elétricas Brasileiras S.A. – Eletrobrás. In Paraná, the Ministry is represented by Eletrosul, and the participants are the State Government and COPEL.

F - 40

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

Furthermore, the program is integrated with several social and rural development programs implemented by the Federal Government and by State Governments, to ensure that the rural electrification efforts result in increased agricultural output, in increased income and in social inclusion, providing better standards of living to the rural communities.

COPEL’s preliminary goal was to connect 36,000 (unaudited) rural customers by the end of the program, scheduled for 2006. Even though it was originally scheduled to begin in January, the Program only became operational in June 2004, due to a six-month delay in the signature of the agreement. The Ministry of Mines and Energy took into account, for purposes of fulfilment of the goal, the 6,000 (unaudited) connections COPEL had made from January to June 2004.

In order to implement the remaining 30,000 (unaudited) connections, the estimated investments for the program were broken down as follows:

Source	Share - %	2007
Federal Government – CDE subsidy	30.00	44,820
Paraná State Government	10.00	14,940
RGR Financing	40.00	59,760
Contractor - COPEL	20.00	29,880
	100.00	149,400

Another 7,150 (unaudited) connections were provided free of charge under the universalization program, for a total of 37,150 (unaudited) rural households supplied.

Due to the appearance of new households without power supply, COPEL is in the process of signing another agreement with Eletrobrás for another 30,000 (unaudited) connections, a figure which may vary due to the wide publicity about the deadline for enrollment in the program, on March 31, 2008.

F - 41

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

14 Intangible Assets

	December 31
	2007					2006
	Rights of
	use	Accumulated	Land rights
	of software	amortization	of way	Other	Net	Net
In service
COPEL Geração e
Transmissão	8,751	(8,064)	9,027	27	9,741	9,000
COPEL Distribuição	29,958	(23,425)	17,606	113	24,252	20,895
COPEL			-
Telecomunicações	4,094	(2,396)		-	1,698	1,748
COPEL Participações	-	-	-	1	1	1
Compagas	636	(389)		20	267	260
Elejor	-	-	101	-	101	101
UEG Araucária	70	(63)	-	-	7	9
	43,509	(34,337)	26,734	161	36,067	32,014
Work in progress
COPEL Geração e
Transmissão	425	-	449	-	874	869
COPEL Distribuição	705	-	1,997	-	2,702	7,873
Elejor	-	-	27	-	27	27
Other
Goodwill - Elejor (a)	-	-	-	21,306	21,306	22,060
Goodwill - COPEL			-
Empreendimentos (b)	-	-		51,609	51,609	53,955
	1,130	-	2,473	72,915	76,518	84,784
	44,639	(34,337)	29,207	73,076	112,585	116,798

Intangible assets, with the exception of goodwill balances, relate basically to rights of use of software and land rights of way, which are amortized at the annual amortization rate 20%.

The fully amortized amount of intangible assets in service as of December 31, 2007 and 2006 was R$23,674 and R$22,519, respectively.

(a) Goodwill - ELEJOR

On December 18, 2003, the Company entered into an agreement with Triunfo Participações e Investimentos S.A. to acquire 30% of the common shares of ELEJOR. This transaction was approved by ANEEL on July 27, 2004 and by the Administrative Council for Economic Defense (Conselho

F - 42

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

Administrativo de Defesa Econômica - CADE), the anti-trust regulator. Accordingly, the Company holds 70% of the shareholding control of ELEJOR as of December 31, 2007 and 35% of the total shares of ELEJOR.

The acquisition of the shares held by Triunfo Participações e Investimentos S.A., in December 2003, resulted in total goodwill of R$22,626. The amortization of goodwill was economically determined by the remaining time of the 30-year concession, which expires in October 2036, and it is amortized according to the straight-line method. The total amount of amortization expensed in 2007 was R$754 (R$565 in 2006).

(b) Goodwill - COPEL Empreendimentos Ltda.

The acquisition on May 31, 2006 of COPEL Empreendimentos Ltda., which was previously known as El Paso Empreendimentos e Participações Ltda. and which held a 60% interest in UEG Araucária Ltda., resulted in net final goodwill of R$53,955. The linear amortization of goodwill was economically determined by the expected income from the commercial operation of the concession, which expires in December 2029, and its effect on the statement of operations for 2007 was R$2,346.

15 Suppliers

	December 31
	2007	2006
Transmission network use charges
Connection	237	213
Basic network	50,291	45,383
Energy transmission	3,028	2,728
	53,556	48,324
Electricity suppliers
ANDE (Paraguay)	-	1,341
Eletrobrás (Itaipu)	74,090	71,874
CIEN - short-term (Note 21(c)(ii))	-	63,000
CIEN - long-term (Note 21(c)(ii))	-	62,862
Furnas Centrais Elétricas S.A.	30,849	28,730
Companhia Hidroelétrica do São Francisco - Chesf	28,430	16,721
Companhia Energética de São Paulo - Cesp	9,763	9,588
Itiquira Energética S.A.	8,468	7,386
Dona Francisca Energética S.A.	4,567	4,413
Other concessionaires	36,931	28,250
	193,098	294,165
Supplies and services
Petróleo Brasileiro S.A. - Petrobras (a)	21,031	37,871
Petróleo Brasileiro S.A. - Petrobras - long-term (a)		268
Petróleo Brasileiro S.A. - Renegotiation (a)	190,394	170,183
Other suppliers - current	98,825	74,721

F - 43

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

	December 31
	2007	2006
Other suppliers - non-current	-	899
	310,250	283,942
	556,904	626,431
Suppliers - current	366,510	392,219
Suppliers - non-current	190,394	234,212

(a) Petróleo Brasileiro S.A. - Petrobras

The amounts owed to Petrobras totaling R$21,031 as of December 31, 2007 (2006 - R$38,139), comprise gas purchases.

The renegotiation obligations with Petrobras, of R$190,394 (R$170,183 in 2006), refer to the accrual for the payment of the amount of gas guaranteed in the original contract signed between COPEL and Compagas, which provided for payment even if the related consumption did not actually take place (take–or-pay terms). The contract also provided for the recovery of gas referring to the amount paid for the seven-year period, which was linked to the equivalent consumption of gas. However, the actual recovery was subject to the normal compliance with the contract, and this was hindered due to the agreement signed between COPEL, Petrobras and Compagas.

On March 7, 2006, through a relevant event notice to the market, COPEL informed that, on the previous day, it signed with Petrobras an agreement to settle the pending issues referring to the gas contract for the Thermoelectric Plant of Araucária, the bases of which had been previously communicated to the market in the relevant event notice of February 24, 2006. The agreement comprised the signing of an Out-of-Court Transaction Contract through which COPEL Geração S.A., with COPEL as joint debtor, acknowledged a debt of R$150,000 with Petrobras, which is the assignee of the credits of Compagas with COPEL Geração, payable in 60 monthly installments as from January 2010, restated by the Special System for Settlement and Custody (SELIC) rate.

On May 30, 2006, COPEL Geração signed a Statement for the Ratification of Mutual Settlement with Compagas in which both parties recognized to each other full, general, irrevocable and irretractable mutual settlement of all obligations and rights arising from the Natural Gas Purchase and Sale Agreement which they had signed on May 30, 2000 and which was rescinded on May 31, 2005. As from the signature of the Out-of Court Transaction Agreement with Acknowledgment of Debt, which was agreed to with Petrobras with the participation of COPEL, nothing remains between the companies to be demanded, on any grounds. There remains the debt therein acknowledged by COPEL Geração in the principal amount of R$150,000 which will be paid by COPEL Geração or by COPEL directly to Petrobras, in the form therein established, with the sole and specific exception of the portion referring to the Distribution Margin of Compagas. Pursuant to the provisions of the Statement for the Ratification of the Mutual Settlement with Compagas, on May 31, 2006, the amount of R$355.929, referring to contract fines related to the gas purchase and transportation, is no longer required, i.e., is considered as fully settled.

F - 44

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

In view of the agreements mentioned above, on May 31, 2006, COPEL recorded in the statement of operations for the year 2006 the reduction in its liabilities, in the amount of R$654,044, of which R$298,115 were classified under Raw material and supplies for electric energy generation, R$283,198 under Discounts obtained and R$72,731 as reversal of Financial expenses relating to charges appropriated in 2006, with a total tax effect expense of R$232,706. In the year 2007, the Company recorded R$20,227 (2006 - R$20,183) under the financial expenses caption, referring to the contractual restatement of the remaining balance.

16 Loans and Financing

	December 31
	2007				2006
	Current portion		Long-term
		Accrued
	Principal	interest	Principal	Total	Total
Foreign currency
IDB (i)	17,623	1,185	43,898	62,706	93,464
National Treasury Department (ii)	6,441	1,161	70,432	78,034	102,030
Banco do Brasil S.A (iii)	3,918	165	3,919	8,002	13,607
Eletrobrás	5	-	33	38	52
	27,987	2,511	118,282	148,780	209,153
Local currency
Eletrobrás (iv)	41,405	1,691	272,798	315,894	337,647
Eletrobrás - ELEJOR (v)	-	-	94,709	94,709	114,469
BNDES (vi)	6,328	-	19,029	25,357	32,143
Banco do Brasil S.A. – credit notes (iii)	-	12,621	329,600	342,221	-
Banco do Brasil S.A. (iii)	137	4	850	991	1,046
	47,870	14,316	716,986	779,172	485,305
	75,857	16,827	835,268	927,952	694,458

(i) IDB (Inter-American Development Bank) - consists of a loan for the Segredo Hydroelectric Power Plant and for the Jordão River Diversion Project, received on January 15, 1991, in the amount of US$135,000 thousand. The principal amount, the first installment of which was paid on January 15, 1997, and interest are due semi-annually until 2011. Interest is calculated according to the IDB funding rate, which in the second half of 2007 was 4.16% p.a. The agreement provides for termination in the following cases:

1) Default by the debtor on any other obligation set forth in the agreement or agreements signed with the bank for financing of the project;

2) Withdrawal or suspension of the Federal Republic of Brazil as a member of the Bank;

3) Default by the guarantor, if any, of any obligation set forth in the guaranty agreement;

F - 45

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

4) Ratio between current assets and total short-term commercial and bank financing, except for the current portion of long-term indebtedness and dividends to be reinvested, equal to or greater than 1.2; and 

5) Ratio between long-term indebtedness and shareholders’ equity not exceeding 0.9. 

The Company has fully met the contractual conditions. 

Other requirements include: 

• the Company should take proper measures to obtain tariffs which should cover all operating costs; 

• the Company is prohibited from acquiring its own shares and distributing any part of its capital without the bank's prior authorization. 

The Company has met the contractual conditions. 

This agreement is guaranteed by the federal government of Brazil. 

(ii) National Treasury Department (NTD) - the debt classified as National Treasury Department refers to obligations for which terms and payment conditions were established as part of the Brazilian foreign debt restructuring, under Law 4,131/62, of May 20, 1998, in the context of the Brady Plan, is as follows: 

					December 31
	Maturity	Due	Grace period	Amortization
Bond type	(years)	date	(years)	(in installments)	2007	2006
Par bond (a)	30	2024	30	One payment at maturity	28,294	34,137
Capitalization bond (b)	20	2014	10	21 semi-annual	15,703	21,858
Debt conversion bond (c)	18	2012	10	17 semi-annual	12,133	17,886
Discount bond (d)	30	2024	30	One payment at maturity	19,755	23,829
New money bonds (f)	15	2009	7	17 semi-annual	1,067	2,144
FLIRB (g)	15	2009	9	13 semi-annual	1,082	2,176
					78,034	102,030

The annual interest rates and repayments are as follows:

a)    Par Bond - Interest of 6.0% per year to final maturity, with a single repayment at the end of the agreement.

b)    Capitalization Bond - Interest of 8.0% per year to final maturity, repayable in 21 semi-annual installments, starting April 2004.

c)    Debt Conversion Bond - Interest equivalent to semi-annual LIBOR + 7/8 of 1% per year, repayable in 17 semi-annual installments, starting April 2004.

d)    Discount Bond - Interest equivalent to semi-annual LIBOR + 13/16 of 1% per year, with a single repayment at the end of the agreement.

e)    New Money Bonds - Interest equivalent to semi-annual LIBOR + 7/8 of 1% per year, repayable in 17 semi-annual installments, starting April 2001.

F - 46

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

f)    FLIRB - Interest equivalent to from 4.0% to 5.0% per year in the first years and semi-annual LIBOR + 13/16 of 1% per year after the 6th year to the end of the agreement, repayable in 13 semi-annual installments, starting April 2003.

As collateral for this agreement, the Company assigned and transferred to the Federal Government, conditioned to the nonpayment of any financing installment, the account receivable from its own revenues, up to a limit sufficient to cover the payment of installments and other charges payable at each maturity. For Discount Bonds and Par Bonds, there are collateral deposits of R$9,246 and R$13,177 as of December 31, 2007 (2006 - R$10,159 and R$14,471), respectively, classified in other non-current assets.

(iii) Banco do Brasil S.A. – (a) consists of a loan in Japanese Yen for the gas thermoelectric substation of the Salto Caxias plant, with repayment in 20 semi-annual installments, beginning March 7, 2000, subject to interest of 6.6% per year. The debt is guaranteed by COPEL's accounts receivable, in case of default; (b) private Credit Assignment Agreement with the Federal Government, through Banco do Brasil S.A., signed on March 30, 1994, repayable in 240 monthly installments based on the Price amortization system starting on April 1, 1994, monthly restated monthly by the TJLP and IGP-M plus interest of 5.098% p.a.; and (c) Credit notes held by COPEL Holding, listed below:

	Issue	Due	Interest charges
Credit Notes	Date	date	paid semi-annually	2007
Commercial No. 330,600,129	2007	2014	106.5% of average CDI	29,000
Industrial No. 330,600,132	2007	2014	106.2% of average CDI	231,000
Industrial No. 330,600,151	2007	2014	106.5% of average CDI	18,000
Industrial No. 330,600,156	2007	2014	106.5% of average CDI	14,348
Industrial No. 330,600,157	2007	2014	106.5% of average CDI	37,252
				329,600

As a guarantee, Banco do Brasil was authorized to deduct any amounts credited, on any grounds, to the Company's deposit account to cover, in part or in full, the outstanding balance due under the line of credit. It was also irrevocably authorized, regardless of prior notice, to offset the bank’s receivable, which corresponds to the outstanding balance due under the line of credit, with any credits the Company has or accrues at Banco do Brasil.

(iv) Eletrobrás - consists of loans funded by Fundo de Financiamento da Eletrobrás - FINEL and the RGR for the expansion of the generation, transmission and distribution systems. Repayment of the outstanding balances started in February 1999 and the final maturity is in August 2021. Interest of 5.5% to 6.5% per year and principal are paid on a monthly basis indexed by the FINEL (Eletrobrás financing rate) index and UFIR. COPEL received the first installment to be applied in the Light for All Program, in the amount of R$12,744, referring to contract ECFS-142/06, signed on May 11, 2006 and totaling R$42,480. These resources are originated from the Global Reversion Reserve (RGR), and have a 24-month grace period and shall be repaid in 120 monthly installments with final maturity date on September 30, 2020. The Company’s revenue is pledged as collateral.

(v) Eletrobrás - ELEJOR - For purposes of presentation of the consolidated financial statements, the amount of the shares to be redeemed by ELEJOR, including interest and monetary indexation, has been reclassified from Non controlling shareholders’ interest to loans and financing, under long-term liabilities.

F - 47

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

This balance consists of 59,900 thousand paid in redeemable preferred shares in ELEJOR held by Eletrobrás, in the total amount of R$59,900, which shall be reacquired by the issuer (ELEJOR) in 32 quarterly installments of 1,871,875 shares, beginning in 24 months after the start-of ELEJOR, which took place on August 31, 2006. Thus, the first payment will be made in September 2008, restated according to the IGP-M plus interest of 12% per year. 15% of the Company’s revenue is pledged as collateral

In August 2007, nine installments of 1,871,875 shares were bought back in advance by ELEJOR, for R$20,385, and financial charges of R$18,725 were paid, in a total amount of R$39,110.

(vi) BNDES - consists of a loan obtained by Companhia Paranaense de Gás - COMPAGAS, signed on December 14, 2001, a line of credit repayable in 99 installments. Tranches A and C are subject to TJLP plus interest of 4% per year, and in the event of TJLP exceeds 6% per year, the surplus will be added to the principal. Tranches B and D are subject to UMBNDES rate plus interest of 4% per year. The Company’s revenue is pledged as collateral.

(a) Maturity of loans and financing

	December 31, 2007
	Foreign	Local
	currency	currency	Total
2008	30,498	62,186	92,684
2009	25,817	43,013	68,830
2010	22,498	41,758	64,256
2011	13,721	58,229	71,950
2012	4,940	51,946	56,886
Thereafter	51,306	522,040	573,346
	148,780	779,172	927,952

F - 48

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

17 Debentures

As of December 31, 2007 and 2006, the debentures balances were as follows:

	December 31
	2007			2006
	Short-term	Long-term	Total	Total
Local currency
Second Issue (a)	-	-	-	637,329
Third Issue (b)	147,072	133,360	280,432	425,465
Fourth Issue (c)	21,527	600,000	621,527	626,290
Elejor (c)	3,228	269,314	272,542	278,501
	171,827	1,002,674	1,174,501	1,967,585

a) Debentures - Second Issue

The issuance of simple debentures was approved at the 156th Extraordinary Shareholders' Meeting of February 19, 2002, and concluded on May 9, 2002, with full subscription in the amount of R$500,000, divided into 3 series (R$100,000, R$100,000 and R$300,000, respectively), with a 5-year validity term, due and settled on March 1, 2007.

b) Debentures - Third Issue

In March 2005, the Company filed with the CVM the request to issue a Debenture Program in the amount of R$1,000,000. The 1st series of this program totaled R$400,000 and the proceeds were used in May 2005 to repay the Eurobonds of US$ 150 million issued in 1997. The debentures are non-convertible into shares and remunerated at 115% of the average daily rate of the CDI, with repayment beginning in 2007 and final maturity in 2009. Interest is paid semi-annually, starting on August 1, 2005, to February 1, 2009.

The debentures of the third issue are secured by the bank account at Banco do Brasil S.A. of COPEL Geração S.A., where the resources from the energy sales agreements are deposited.

The Company is required to comply with certain covenants measured in accordance with Brazilian GAAP: (i) consolidated EBITDA/consolidated financial expenses for the twelve month period ending on the last day of the fiscal quarters March and September should be, at least, 1.8 through June 30, 2006 and 2.0 as from June 30, 2006; (ii) consolidated debt/consolidated EBITDA no greater than 4.0; and (iii) consolidated debt/(consolidated debt plus shareholders’ equity) no greater than 0.42.

The Company has fully met the contractual conditions.

F - 49

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

c) Debentures – Fourth Issue

The issuance of 60 thousand debentures constituted the fourth single issuance carried out by the Company on September 1, 2006, in the amount of R$600,000, completed on October, 6, 2006, with full subscription totaling R$607,899, valid for five years as from date of issuance and with final maturity, in sole series, on September 1, 2011. Debentures are single, non-convertible into shares, book-entry, nominative and without guarantee.

The interest on the nominal value of the debentures is 104% of the One-day Interbank Deposit (DI over) rate, "extra group", stated as a percentage per annum, on the basis of 252 business days, disclosed daily by the Clearing House for the Custody and Financial Settlement of Securities (CETIP) (at the DI rate) and calculated on the compound and cumulative interest method on a pro rata temporis basis for the business days elapsed. The remuneration corresponding to the capitalization period will be due and paid on a semi-annual basis, with the first due date on March 1, 2007 and the last on September 1, 2011. The debentures may not be renegotiated.

The funds obtained from the public distribution of debentures will be used to extend debt maturities through the payment of financial obligations, as well as to the injection of cash. The funds obtained from the Issuance shall be used for the financial settlement of 1/3 of the principal value of the debentures of the 3rd issuance of the Issuer, due on February 1, 2007 and settlement of the principal of the debentures of the 2nd issuance of the Issuer, due on March 1, 2007.

The Company is required to comply with certain covenants measured in accordance with Brazilian GAAP: (i) consolidated EBITDA/consolidated financial expenses equal or higher than 2.0. ; (ii) maximum consolidated net debt/consolidated EBITDA of 4.0; and (iii) maximum consolidated net debt/(consolidated net debt plus shareholders’ equity plus non controlling shareholders’ interest ) of 0.42.

The Company has fully met the contractual conditions.

d) Debentures - ELEJOR

In February 2005, ELEJOR issued 1,000 convertible debentures comprised by two series in the amount of R$255,626 indexed to TJLP, plus a spread of 4% per year. The repayment of 660 debentures from the first series starts in May 2009 with final maturity in February 2015, and the repayment of 340 debentures from the second series starts in May 2010 with final maturity is in February 2016. Interest on the first series will start on February 2006, and will be paid quarterly through February 2015. Interest on the second series will be paid annually through February 2007, and will be paid quarterly starting on May 2007 through May 2016.

The debentures issued by ELEJOR were acquired by BNDES Participações S.A. - BNDESPAR, and were guaranteed by COPEL Participações S.A. The proceeds will be used mainly for: (i) investments in the Fundão-Santa Clara Power Complex; (ii) investments in two small hydroelectric plants, PCH Santa Clara I and PCH Fundão; (iii) payment of 50% of the amount borrowed between July 1, 2004 and September 30, 2004 from COPEL Participações S.A.; (iv) payment of loans from COPEL Participações S.A., as from October 1, 2004; (v) payment of operating expenses inherent to the issuer's business, including the purchase of power to meet supply obligations; and (vi) financing of the social and environmental programs in connection with the investments in the Fundão-Santa Clara Power Complex.

F - 50

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

Maturity of debentures, as of December 31, 2007:

	Total
2008	171,827
2009	156,148
2010	42,123
2011	646,037
2012	46,037
Thereafter	112,329
	1,174,501

18 Taxes on Sales and Others

	December 31
	2007	2006
ICMS payable	126,322	116,032
PIS and COFINS payable	36,295	81,345
INSS included in REFIS, net of payments (i)	35,068	48,254
Other	27,111	31,783
	224,796	277,414

(i) Tax Recovery Program - REFIS

In 2000, the Company included in the Tax Recovery Program (REFIS), created by Law 9,964, of April 10, 2000, a total debt of R$82,540, arising from tax obligations to the National Institute of Social Security (INSS), and settled R$45,766 related to interest, using credits deriving from income tax and social contribution loss carryforwards purchased from third parties. Considering that the Federal Revenue Secretariat (SRF) has not yet completed the analysis of this transfer of tax credits, the Company set up the provision in September 2003. As of December 31, 2007, the provision recorded totaled R$35,068 including interest and monetary indexation (2006 - R$48,254).

F - 51

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

19 Regulatory Charges

	December 31
	2007	2006
Energy development account - CDE	14,677	13,258
Global reversal reserve – RGR	5,403	5,306
Fuel consumption account – CCC	12,642	33,141
	32,722	51,705

20 Research and Development Programs and Energy Efficiency Programs

ANEEL set forth criteria for the application of funds in Energy Efficiency Programs (EEPs) by power distribution concession and permission holders, pursuant to the regulations issued by the regulatory agency. Under the same resolution, the Manual for the Energy Efficiency Program was approved. ANEEL also approved the Manual for Technological Research and Development Programs in the Power Sector. In October 2006, ANEEL established the criteria and procedures for the calculation, application, and collection by concession, permission, and authorization holders of the funds to be assigned to Energy Efficiency and Research and Development projects, to the National Fund for Scientific and Technological Development (FNDCT), and to the Ministry of Mines and Energy (MME), pursuant to Law No. 9,991/2000.

The changes in these balances are shown below:

	December 31
				Execution of
				programs
			Monetary	and
	2006	Additions	restatement	payments	2007
Research and development – R&D
FNCT	22,058	15,994	-	(17,895)	20,157
MME	29,581	7,998	-	(27,292)	10,287
R&D - projects	59,881	15,994	6,126	(6,108)	75,893
	111,520	39,986	6,126	(51,295)	106,337
Energy efficiency program - EEP	62,796	16,361	5,139	(5,353)	78,943
	174,316	56,347	11,265	(56,648)	185,280

F - 52

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

	December 31
				Execution of
				programs
			Monetary	and
	2005	Additions	restatement	payments	2006
Research and development – R&D
FNCT	3,239	35,103	-	(16,284)	22,058
MME	61	29,498	22		29,581
R&D - projects	37,115	22,109	4,105	(3,529)	59,881
	40,415	86,710	4,127	(19,813)	111,520
Energy efficiency program - EEP	55,455	8,583	6,599	(7,841)	62,796
	95,870	95,293	10,726	(27,654)	174,316

21 Commitments and Contingencies

(a) Provision for contingencies and judicial deposits

The Company is a party to several labor claims, tax suits, and civil actions filed with different courts. Company management, based on the opinion of its legal counsel, maintains a provision for contingencies relating to litigation with a probable chance of an unfavorable outcome. The Company also made judicial deposits of equivalent or lesser amounts pending final legal decision.

(a).1 Judicial Deposits

	December 31
	Judicial deposits
	(non-current assets)
	2007	2006
Labor contingencies - a(i)	56,656	68,650
Civil
Easements, condemnation and property - a(iv)	10,515	7,149
Customers - tariff litigation - a(v)	2,508	1,640
Civil and environmental - a(vi)	15,269	13,982
	28,292	22,771
Taxes
INSS - a(ix)	25,476	47,934

Other judicial deposits	10,916	1,599
	121,340	140,954

F - 53

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

(a).2 Provision for Contingencies

	December 31
	Provision for contingencies (non-current liabilities)
	2007			2006
		Judicial	Net	Net
	Contingencies	Deposits	Provision	Provision
Labor contingencies - a(i)	102,474	(22,382)	80,092	77,321
Regulatory contingencies - a(ii)	2,169	-	2,169	2,083
Civil
Suppliers – a(iii)	49,954	-	49,954	49,074
Easements, condemnation and property - a(iv)	123,153	-	123,153	15,011
Customers - tariff litigation - a(v)	6,523	(96)	6,427	11,033
Civil and environmental - a(vi)	16,138	(1,263)	14,875	21,621
	195,768	(1,359)	194,409	96,739
Taxes
Cofins - a(vii)	171,613	-	171,613	-
PASEP - a(viii)	14,776	(14,558)	218	218
Other - a(ix)	92,488	(26,719)	65,769	46,112
	278,877	(41,277)	237,600	46,330
	579,288	(65,018)	514,270	222,473

Changes in consolidated provisions are as follows:

	Provision				Provision
	balance		Write-offs/		balance
Consolidated	2006	Additions	Reversals	Settlement	2007
Labor contingencies	88,027	57,281	(11,772)	(31,062)	102,474
Regulatory contingencies	2,083	86	-	-	2,169
Civil
Suppliers	49,074	983	(103)	-	49,954

F - 54

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

	Provision				Provision
	balance		Write-offs/		balance
Consolidated	2006	Additions	Reversals	Settlement	2007
Easements, condemnation and
property	15,011	112,930	(13,898)	(9)	114,034
Customers	11,065	772	(4,919)	(395)	6,523
Civil and environmental right	22,006	6,113	(1,127)	(1,735)	25,257
	97,156	120,798	(20,047)	(2,139)	195,768
Tax
Cofins	-	171,613	-	-	171,613
PASEP	14,562	214	-	-	14,776
Other	55,879	40,149	(3,540)	-	92,488
	70,441	211,976	(3,540)	-	278,877
	257,707	390,141	(35,359)	(33,201)	579,288

	Provision				Provision
	balance		Write-offs/		balance
Consolidated	2005	Additions	Reversals	Settlement	2006
Labor contingencies	82,667	18,260	(8,152)	(4,748)	88,027
Regulatory contingencies	-	2,083	-	-	2,083
Civil
Suppliers	-	49,074	-	-	49,074
Easements, condemnation and
property	13,384	5,655	(4,028)	-	15,011
Customers	20,205		(9,003)	(137)	11,065
Civil and environmental right	39,835	11,287	(27,644)	(1,472)	22,006
	73,424	66,016	(40,675)	(1,609)	97,156
Tax
COFINS	197,549	-	(197,549)	-	-
PASEP	14,263	299	-	-	14,562
INSS	25,625	-	(25,625)	-	-
Other	30,741	29,660	(4,522)	-	55,879
	268,178	29,959	(227,696)	-	70,441
	424,269	116,318	(276,523)	(6,357)	257,707

F - 55

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

In compliance with CVM Ruling No. 489, dated October 3, 2005, the amount tied to cases classified as reasonably possible losses, was estimated by the Company as of December 31, 2007 at R$1,631,096, of which R$40,774 correspond to labor claims, R$861,575 to regulatory claims, R$325,138 to civil claims, and R$403,609 to tax claims. It is important to point out that COPEL has a good chance of success in the lawsuit it filed to dispute the effects of ANEEL Ruling No. 288/2002, based on the opinion of its legal counsel, as discussed in item b of this note, “Electric Energy Trading Chamber (CCEE)”.

Judicial deposits comprise funds deposited by COPEL to secure the execution of rulings in labor and civil lawsuits. Once there is a ruling in a lawsuit, execution proceedings take place. After being summoned to pay the amounts ruled by the court, COPEL makes a judicial deposit and may then dispute their calculation. After a ruling on the miscalculation claims, the court authorizes the plaintiff to withdraw from said deposit the amounts he or she is entitled to and authorizes COPEL to withdraw any remaining amounts the Company is entitled to on account of miscalculation, as the case may be.

a(i) Labor contingencies

Refer to lawsuits filed by former employees against the Company involving the payment of overtime, risk premium, transfer, salary equalization/reclassification and others and, also, lawsuits filed by its contractors’ former employees (joint liability) and outsourced companies (secondary responsibility) involving indemnity and others. They also include labor claims by retired COPEL employees against the COPEL Foundation, which will reflect on the Company.

a(ii) Regulatory contingencies

In light of the regulation and supervision powers granted to the National Electric Energy Agency (ANEEL), under Law No. 9,427/1996, in the area of electricity services and facilities, all holders of concessions, permissions, or authorizations, such as the Company's subsidiaries, are subject to administrative proceedings before the Federal Government, pursuant to Law No. 9,784/1999, and must comply with the exploitation and legislation powers of the Federal Government under articles 20, VIII, 21, XII, (b) and 175 of the Federal Constitution. Once administrative proceedings have been concluded with an unfavorable ruling against such a party, the resulting lawsuit may begin. Both on the administrative and on the judicial level, regulatory claims usually deal with legal and regulatory aspects of concession agreements and authorizations, in light of the regulation and supervision powers/duties of the regulatory agency. For instance, there are currently, on both levels, claims disputing administrative actions taken by ANEEL, such as the impositions of penalties. All claims are disputed by the agency.

a(iii) Suppliers

The companies Rio Pedrinho Energética S.A. and Consórcio Salto Natal Energética S.A. required the filing of the arbitration proceedings with the Chamber of Arbitrage of the Getúlio Vargas Foundation, numbered 001 and 002/2004, through which they plead the payment of the overdue installment values, as well as the rescissory fines, related to the electric energy purchase and sale agreements signed with COPEL Distribuição. The arbitrage proceedings were judged to be valid and, consequently, COPEL Distribuição was sentenced to pay the claimed amounts plus the attorney’s fees. The Company has filed for a court order making the arbitration ruling void. 

F - 56

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

Distribuição was sentenced to pay the claimed amounts plus the attorney’s fees. The Company has filed for a court order making the arbitration ruling void.

Management, based on the opinion of its legal counsel that it is likely to lose this case, on the available information, and on the current stage of the lawsuits, decided to set aside a provision for contingencies in the original amount of the debt, restated according to the original contractual terms, which amounted to R$49,954 as of December 31, 2007. 

a(iv)Easements, condemnation, and property 

COPEL’s property claims comprise condemnation, easements, repossession, adverse possession, land area corrections, and others. Actual disbursements are made in the first two cases, as compensation, and are always mandatory pursuant to article 4, section XXIV, of the Federal Constitution, which requires that the Federal Government pay fair compensation, in cash, prior to condemnation of private property. 

These amounts are, however, classified as property, plant and equipment instead of expenses, since they are part of the costs of the related projects. 

These property claims are aimed at obtaining lawful access to the land where power generation, transmission, and distribution projects will be built, either by legal transfer of the title to such land, in the cases of condemnation, or by the legal imposition of restrictions on the private use of the safety zones surrounding transmission lines, in the cases of easements. 

The other claims involve the dispute of illegal claims to land that has already been expropriated or subject to easements, such as trespassing (repossession), changes to the physical dimensions of properties (land area corrections), and violation of the limits of COPEL's land (adverse possession). These claims only involve judicial expenses, without any sort of compensation. 

Ivaí Engenharia de Obras S.A. 

In a lawsuit filed by Ivaí Engenharia de Obras S.A., COPEL was sentenced to the payment of R$180,917 as compensation for a supposed economic-financial imbalance under Contract D-01, concerning construction work for the Jordão River diversion project. COPEL appealed this decision and was partially successful, avoiding the application of the SELIC interest rate on top of the penalty interest. COPEL will continue to dispute this claim in court, through all means legally available. The Company, in light of the evaluation conducted by its Chief Legal Office, has recorded a provision of R$101,904 for probable losses, under Provisions for Real Estate Contingencies. 

a(v)Customers - tariff litigation 

This refers, substantially, to lawsuits filed by consumers claiming: (a) the reimbursement of damages caused to household electric appliances; (b) indemnities for moral damages arising from the rendering of services (e.g., suspension of supply); and (c) challenging the constitutionality of the tariff increase based on DNAEE Ordinances 38 and 45, of January 27, 1986 and March 4, 1986, respectively, which  became effective during the Brazilian government's "Cruzado Plan", and claiming refunds of the amounts involved. It is not possible to anticipate the final outcome of these lawsuits, although several other companies have obtained partial success. The Company recognized an accrual as of December 31, 2007 of R$6,427 (2006 - R$11,033) to cover probable losses on these lawsuits, regarding the tariff difference charged to industrial customers in the period from March to November 1986, plus charges on late payments. The amount is considered sufficient to cover probable losses.

F - 57 

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

a(vi) Civil and environmental

Civil claims usually involve reparations for accidents involving power grids and vehicle accidents. Environmental claims involving COPEL and its subsidiaries usually comprise class actions whose goal is to stop the environmental licensing process for new projects or the recovery of permanent protection areas around power plant reservoirs which have been illegally used by individuals. COPEL estimates that unfavorable outcomes would result only in the cost of new environmental studies and recovery of Company-owned land.

a(vii) Cofins

COPEL did not pay Cofins tax on revenues from power sales based on a ruling by the 4th District Federal Court, dated August 18, 1998, which granted the Company immunity pursuant to the Federal Constitution. A special lawsuit requesting annulment of this ruling, filed in August 2000, was rejected on grounds that the right of the Federal Government to take legal action had lapsed. The Federal Government’s special appeal was rejected by the Superior Court of Justice. Thus, COPEL reversed the provision it had recorded, based on the opinion by its counsel that the possibility that the Company might be required to disburse any amounts in connection with the COFINS tax was remote. At the end of 2007, however, the Superior Court of Justice, against all expectations, ruled in favor of an appeal for clarification by the Federal Government, judging that the Government's right to take legal action had not lapsed, and sent the lawsuit back to the 4th District Federal Court for trial. Even though this ruling is not final yet, since COPEL has appealed it, the Company’s counsel believes the risk of loss is no longer remote, but rather probable. Thus, COPEL recorded a provision corresponding to the restated principal amount plus charges, which totals R$171,613, already having excluded tax credits which have already lapsed.

a(viii) PASEP

PIS/PASEP tax charges are being disputed on the administrative level and are secured by judicial deposits.

a(ix) Other contingencies

• INSS

COPEL is party to a wide range of administrative and judicial proceedings involving social security contributions owed to the National Social Security Institute (INSS).

F - 58

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

Most claims, however, involve COPEL’s joint liability for the collection of social security contributions levied on services rendered by third-parties.

• Services Tax (ISS)

The main discussions refer to the tax assessments filed against the Company due to a possible lack of payment of ISS upon the hiring of third-party services.

• Value-added Tax on Sales and Services (ICMS)

The majority of the discussions involve the filing of a judicial claim by the Group A consumers against the inclusion of the contracted demand in the calculation basis of ICMS. However, in almost all of these judicial claims, the judiciary has removed the Company from the defendant position of the demand and maintains the State of Paraná as legitimate defendant to respond for the possible incorrect collection of ICMS amounts on the contracted demand of electric energy.

• Urban Real Estate Tax (IPTU)

COPEL has started administrative proceedings to dispute IPTU charges on its concession-related properties. In fact, this claim has been widely accepted at courts in cases of tax executions filed by State municipalities against COPEL.

In addition, COPEL is party to certain tax executions filed by certain municipalities to collect IPTU and/or other municipal charges/taxes.

• Rural Land Tax (ITR)

The discussions on ITR involve, basically, the questioning of the incidence of this tax on the flooded areas resulting from the construction of hydroelectric plants, as well as on the areas currently in possession of people settled due to the Resettling Programs which are, also, due to the construction of hydroelectric plants.

• Economic Domain Intervention Contribution (CIDE)

The Company presented administrative oppositions to 5 Assessment Notifications filed by the National Telecommunications Agency (ANATEL) claiming the collection of a possible complementary debt related to the Fund for the Universalization of Telecommunication Services (FUST) from January 2006 to June 2006.

On that occasion, the Company (COPEL Telecomunicações) showed that the calculation basis used for the payment of FUST is correct, in accordance with the provisions of Art. 6, IV and 10, caput, of Law 9998/00 and there is no reason to claim a complementary debt.

(b) Electric Energy Trading Chamber - CCEE

F - 59

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

The Wholesale energy market - MAE was extinguished on November 11, 2004, and its activities, assets and liabilities were assumed by the Electric Energy Trading Chamber - CCEE (Câmara de Comercialização de Energia Elétrica).

Amounts related to the sale of electric energy by COPEL Distribuição in 2000, 2001 and the first quarter of 2002 were recognized by the Company based on estimates prepared by the Company and information provided by the former MAE. These amounts were calculated under criteria and data set forth in ANEEL Decision 288/2002 and ANEEL Resolution 395/2002, and the Company has already contested these decisions at the administrative and judicial levels.

The Company's claim involves the partial sale of energy from Itaipu in the Southern and Southeastern sub-markets to comply with the bilateral agreements of electricity sales to distributors and industrial customers during the rationing period in 2001, when there was a significant difference in the prices of spot market energy. As of December 31, 2007, the estimated amount of calculation differences is approximately R$860,000 (2006 - R$711,000), which has not been recognized as a liability by the Company on its books. Management, based on the opinion of its legal counsel, considers that the a loss in this lawsuit is possible but not probable; accordingly, no provision was recorded as of December 31, 2007 and 2006.

On August 27, 2002, the Company obtained a favorable injunction issued by the Federal Regional Court - 1st Section, in order not to consider the new accounting set forth in ANEEL Decision 288 and ANEEL Resolution 395.

Changes in spot-market energy amounts (CCEE) in 2007 were as follows:

	Amount to			Amount to
	be settled at			be settled at
	December 31,			December 31,
	2006	Settlement	Appropriation	2007
Current assets (Note 6)	29,521	(89,566)	67,203	7,158
Current liabilities	1,248	(53,423)	53,404	1,229
Net balance	28,273	(36,143)	13,799	5,929

The amounts above can be subject to changes depending on the decisions on the ongoing lawsuits filed by some industry companies and the interpretation of COPEL of the current market rules. The companies that were not included in the rationing area were granted an injunction that nullifies ANEEL Decision No. 288, of May 16, 2002, the purpose of which was to explain to industry companies the treatment and the application of some former MAE accounting rules included in the Overall Agreement for the Electric Energy Sector.

(c) CIEN Agreement (operational ant technical information unaudited)

In a prompt response to a request by the Ministry of Mines and Energy, COPEL undertook, in an agreement with the president of ANEEL, to release the 400 MW under contract with CIEN and to participate in the A-1 auction to make up for this released volume. Out of the total under contract, in 2007 a reduced volume of 175 MW will be supplied under the CIEN agreement.

F - 60

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

The offer of power at this auction was minimal, thus only 40% of COPEL’s reported power requirements were secured.

To fully make up for the Cien agreement and to adjust its level of power under contract from January through June 2007, COPEL participated in the Mechanism for the Offset of Surpluses and Deficits (Mecanismo de Compensação de Sobras e Déficits - MCSD), reporting a deficit and acquiring a total of 32.6 average MW.

To supplement contracts for 2008, COPEL participated in an adjustment auction held in September 2007, acquiring 23.5 average MW.

In 2007, the Company recognized R$111,193 (2006 - R$227,389 and 2005 - R$309,334) in operating expenses for electricity purchased for resale from CIEN.

22 Pension and Health-care plans

(a) Pension Plan

The Company and its subsidiaries sponsor retirement and pension plans (Pension Plans I, II, and III) and a medical and dental care plan (Health-care Plan) to both current and retired employees and their dependents.

Pension Plans I and II are defined benefit plans, while Plan III is a defined contribution plan. On the date of retirement, the defined contribution plan becomes a monthly income for life.

The cost shares borne by the plans’ sponsors are recorded according to an actuarial valuation prepared annually by independent actuaries pursuant to the rules of CVM Ruling No. 371/2000. The actuarial and financial assumptions, for purposes of actuarial valuation, are discussed with the independent actuaries and approved by the sponsors’ senior management.

The flow of payment of contributions under Plans I and II, as of July 2007, was guaranteed under an agreement called “Private Agreement for Adjustment of Mathematical Reserves for the Basic and Supplemental Pension Plans”, signed on January 20, 1999. This agreement provides for the extinction of liabilities under certain conditions. Based on legal opinions by external and internal legal experts, the Company notified the senior management of Fundação COPEL de Previdência e Assistência Social (COPEL Foundation), on July 27, 2007, that no contribution payments would be made under that agreement as of August 2007, since the obligations contained therein expired.

(b) Health-care Plan

F - 61

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

The Company and its subsidiaries allocate resources for the coverage of health-care expenses incurred by their employees and their dependents, within rules, limits, and conditions set in specific regulations. Coverage includes periodic medical exams and is extended to all retirees and pensioners for life.

(c) Balance sheet and statement of operations

The consolidated amounts recognized in the balance sheet, under Post-Employment Benefits, are summarized below:

	December 31
	2007			2006
	Pension	Health-care
	plan	plan	Total	Total
Benefit plans – Plans I and II (DB) - COPEL	126,856	361,151	488,007	618,587
Benefit plans – Compagas (DB)	241	1,287	1,528	1,193
	127,097	362,438	489,535	619,780
Benefit plan – Plan III (CV) – employees	7,162	-	7,162	2,626
	134,259	362,438	496,697	622,406
Pension and health-care plans - current liability	-	-	42,286	133,635
Pension and health-care plans - non-current liability	-	-	454,411	488,771

The funded status for both the pension plan and the health-care plan were as follows:

	December 31
	2007			2006
	Pension	Health-care
	splan	plan	Total	Total
Fully or partially covered obligations	2,518,605	476,830	2,995,435	2,702,481
Fair value of plan assets	(3,255,449)	(114,392)	(3,369,841)	(2,927,303)
Actuarial (gains) losses to be amortized	863,941	-	863,941	851,590
Total actuarial obligation balance	127,097	362,438	489,535	626,768

The actuarial assessment of defined benefit plans is calculated by the projected unit credit cost method (PUC). The net assets of the benefit plan are valued according to market values (mark to market).

F - 62

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

Since the year ended December 31, 2006, COPEL has chosen to not defer future actuarial gains and losses recorded in the health-care plan, rather recording them immediately in the statement of operations.

As of December 31, 2007, the balance of accumulated amounts in the defined contribution plan was R$1,044,835 (2006 - R$746,459).

In 2007, 2006 and 2005, expenses incurred with pension and health-care plans were as follows:

	Year ended December 31
	2007			2006	2005
	Pension	Health-care
	plan	plan	Total	Total	Total
Post employment expenses (income)	(110,345)	38,857	(71,488)	55,031	65,244
Active employee expenses	45,997	18,219	64,216	27,441	21,378
Subtotal	(64,348)	57,076	(7,272)	82,472	86,622
Other	(6,579)	-	(6,579)	45,214	21,378
Total	(70,927)	57,076	(13,851)	127,686	108,000

Actuarial assumptions applied in the calculation of obligations and costs for 2007 and 2006 were as follows (in percentage):

	2007		2006
	(i)	(ii)	(i)	(ii)
Discount rate	11.35	6.00	11.30	6.00
Salary increase rate	7.15	2.00	7.10	2.00
Expected return on plan assets	11.35	6.00	11.30	6.00
Inflation	5.05	-	5.00	-

(i) With inflation
(ii) Without inflation

Number of participants and beneficiaries (unaudited)

F - 63

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

	December 31, 2007
	Pension	Health-care
	plan	plan
Number of active participants	8,305	8,164
Number of inactive participants	6,458	6,429
Number of dependents	-	21,319
	14,763	35,912

Changes in actuarial liabilities – pension plan

	Year ended December 31
	2007	2006
Benefit obligation, beginning of year	2,239,135	2,051,510
Service cost	14,279	7,256
Interest cost	243,846	369,367
Employees’ contributions	327	233
Actuarial (gain) losses	207,330	(16,549)
Benefits paid	(186,312)	(172,682)
Benefit obligation, end of year	2,518,605	2,239,135

F - 64

Companhia Paranaense de Energia - COPEL

Notes to the Consolidated Financial Statements

All amounts expressed in thousands of Brazilian reais unless otherwise stated

Changes in actuarial assets – pension plan

	Year ended December 31
	2007	2006
Fair value of plan assets, beginning of year	2,906,979	2,408,686
Actual return on plan assets	324,401	320,678
Employees' contributions	327	233
Company contributions	46,312	76,288
Actuarial gain	163,742	273,776
Benefits paid	(186,312)	(172,682)
Fair value of plan assets, end of year	3,255,449	2,906,979

Estimated costs

The estimated net periodic plan costs for 2008 are as follows:

	2008
	Pension	Health-care
	plan	plan	Total
Cost of current service	15,989	1,492	17,481
Estimated interest cost	282,252	52,527	334,779
Estimated return on plan assets	(363,364)	(12,372)	(375,736)
Expected reductions / settlements	81,558	-	81,558
Estimated employee contributions	(326)	-	(326)
Amortization of gain and losses	(43,097)	-	(43,097)
Total estimated	(26,988)	41,647	14,659

23 Shareholders' Equity

(a) Capital stock

On May 3, 2006, the Company increased its capital by R$395,000 through amounts previously recorded as reserve for investments.

At December 31, 2007, the capital stock amounts to R$4,460,000 (2006 - R$3,875,000) held by the following main shareholders of record as follows:

F - 65

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

			Preferred shares
	Common
Shareholder	shares	%	Class A	%	Class B	%	Total	%
State of Paraná	85,028,598	58.6	-	-	13,639	0.0	85,042,237	31.1
BNDESPAR	38,298,775	26.4	-	-	27,282,006	21.3	65,580,781	24.0
Eletrobrás	1,530,774	1.1	-	-	-	-	1,530,774	0.6
Stock exchange (Brazil)	15,301,660	10.6	125,588	31.5	69,066,153	53.9	84,493,401	30.9
Stock exchange (ADRs)	4,311,133	2.9	-	--	31,657,854	24.6	35,968,987	13.0
Stock exchange (Latibex) (i)	-	-	-	-	87,738	0.1	87,738	0.0
Municipalities	184,292	0.1	14,711	3.7	-	-	199,003	0.1
Other	375,848	0.3	258,043	64.8	118,563	0.1	752,454	0.3
Total	145,031,080	100.0	398,342	100	128,225,953	100.0	273,655,375	100.0

(i) Latin American Securities Market in Euros, associated to Madrid Stock Exchange.

On August 6, 2007, the Company completed a reverse stock split, in the ratio of 1,000 to 1, with shares being traded in a standard lot of 100 and prices being quoted per share. Each share entitles its holder to one vote in the general shareholders’ meetings.

The preferred shares "A" do not have any voting rights, however, they have priority in the reimbursement of capital and the right to dividend payments of 10% per annum, calculated proportionally on the capital stock of this class of shares at the balance sheet date, or to receive a dividend 10% higher than dividends paid to common shares, non-cumulative.

The preferred shares "B" do not have any voting rights, however, they have priority to receive annual dividends per share, which are 10% higher than dividends paid to common shares, after the priority of payments to preferred shares "A". The minimum dividends to preferred shares "B" are computed based on 25% of net income adjusted as prescribed by Brazilian Corporate Law and the Company's by-laws.

Under Article 17 of Brazilian Corporate Law No. 6,404 (as amended), dividends paid to preferred shares must be at least 10 percent higher than those attributed to common shares.

During 2007 and 2006, respectively, the shareholders approved the conversion of 1,298 and 4,075 thousand preferred shares "A" into preferred shares "B".

(b) Capital reserves

	December 31
	2007	2006
Contributions and grants for investments	702	702
Recoverable rate deficit (CRC)	790,555	790,555
Other	47,083	26,036
	838,340	817,293

F - 66

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

(c) Profit reserves

The legal reserve is computed based on 5% of net income under Brazilian GAAP limited to 20% of capital stock. This reserve can only be used to increase capital stock or to offset accumulated deficits.

The reserve for investments arises from the retention of net income remaining after legal and statutory distributions, and is intended to retain funds for the Company's future investments program after the approval of the investment capital budget at the shareholders ordinary meeting.

(d) Dividends and interest on equity

In accordance with the Company's by-laws, dividends are distributable annually and computed based on net income for the year determined under Brazilian GAAP, after the adjustments required by the Brazilian Corporate Law.

Article 9 of Law 9,249 dated December 26, 1995, allowed the deductibility for income tax purposes of interest on equity paid to shareholders, provided that such interest is computed based on the TJLP rate, effective in the year the interest on equity is computed.

As allowed by the CVM, the Company elected to pay interest on equity in the amount of R$200,000 as of December 31, 2007 (2006 - R$123,000), instead of paying dividends, and retain the remaining net income as an investment reserve.

	Year ended December 31
	2007	2006	2005
Net income for the year	1,106,610	1,242,680	502,377
Changes in Brazilian accounting practices	-	(72,642)	-
Tax effects due to the option of paying interest on equity	(68,000)	(41,820)	(41,818)
Net income without tax effects of interest on equity	1,038,610	1,128,218	460,559
Legal reserve (5%) computed over net income above	(51,931)	(56,411)	(23,028)
Basis for dividend computation	986,679	1,071,807	437,531
Minimum dividends (25%)	246,670	267,952	109,383
Income tax withheld on interest on equity (*)	21,080	12,999	12,974
Minimum dividend computed considering the
effects of income tax	267,750	280,951	122,357
Excess over minimum dividend	-	-	638
Appropriated interest on equity	200,000	123,000	122,995
Distributed dividends	67,750	157,951	-

F - 67

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

	Year ended December 31
	2007	2006	2005
Distributed dividends allocated to:
Common shares	135,397	142,132	62,089
Preferred shares Class A	649	566	512
Preferred shares Class B	131,704	138,253	60,394

(*) On the portion of interest on equity distributed to exempt shareholders, income tax withholding is not applicable, resulting in an effective rate of 10.54% for 2007 (2006 10.57% - and 2005 - 10.55%).

24 Tariff Adjustments

(a) Annual tariff adjustment - June

ANEEL approved, through Resolution No. 284, of June 23, 2003, electric energy tariffs chargeable to the Company's final customers, established the annual revenue of the connection plant, set the annual amount of the electric energy inspection service fee, and the tariffs for the use of distribution plants.

Starting in January 2004, the Company decided to reduce to 8.2% the average discount offered to performing customers. This decision resulted in an average increase of 15% in the total amount of energy bills.

As from June 24, 2006, COPEL suspended the discounts on the tariff rates in effect due to the reduction in the low voltage tariff classes resulting from the tariff realignment process which absorbed the discounts granted by the Company to the performing consumers up to June 23, 2006.

On June 19, 2007 ANEEL approved, through Resolution No. 479, an average reduction of 1.22% in the Company’s rates for sales to final customers, effective June 24, 2007. Out of this total, 2.24% correspond to the Annual Rate Review, and -3.46% to financial components outside the range of the annual rate review. This result was due to the variation of the Fuel Consumption Account (CCC) between the previous rate cycle and the current cycle of negative 38.65% and to a corresponding CVA (Account for Compensation of Portion A Variations) of negative R$72.2 million.

(b) Periodic tariff review

Electric energy utility concession contracts establish that ANEEL can periodically review regulated tariffs to increase or decrease them because of changes in the cost structure and the market of the concessionaire, the tariffs charged by similar domestic and foreign companies, incentives to stimulate investments, efficiency, and the type of tariffs. COPEL Distribuição’s next periodic tariff review will occur in June 2008.

On June 24, 2004, ANEEL published in Resolution No. 146/04 the final result of the periodical tariff review of COPEL. Based on this resolution, the average readjustment was 14.43% on the tariffs approved by Resolution No. 284/2003. This adjustment comprises 9.17% relating to the tariff determined by the process of tariff review, and 5.26% relating to cost recoveries of deferred regulatory assets (CVA).

F - 68

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

In order to control the default levels and stimulate the electric energy consumption in the State of Paraná, the Company decided to continue granting discounts to those consumers who pay bills on time. Accordingly, on the amounts of Resolution No. 146/04 (which includes the adjustment of 14.43% for 2004), the Company granted an average discount of 12.5% .

As a result, the average increase transferred to customers who pay bills on time, as from June 24, 2004, was approximately 9%. To enable the discounts granted by COPEL Distribuição to its final customers, COPEL Geração also granted an average discount of 28% in 2004.

As from February 1, 2005, the average discount granted to customers who pay the bills on time was reduced to 8.2% on the tariffs allowed by ANEEL Resolution No. 146/04, resulting in an average adjustment of 5%.

In June 2005, ANEEL granted an average tariff increase of 7.8% . This increase consisted of a 1.25% decrease in retail tariffs and a 9.05% increase to recover the deferred regulatory asset. The Company continued the discounts policy and as from August 1, 2005, the average discount granted to customers who pay the bills on time is 6.8% .

in June 2006, ANEEL established new tariffs for the supply of electric energy by COPEL, to be applied as from June 24, 2006, taking into consideration the total readjustment of 5.12%, in average. This index considers the percentages of the Tariff Readjustment Index (IRT) of 4.91% and the external financial components of the annual readjustment, of 0.21% .

In 2007, power rates were subject to review and realignment, pursuant to Decree No. 4,667, dated April 4, 2003. In the June 2007 rate increase, ANEEL accomplished the last stage of the rate realignment, aimed at reducing cross-subsidies between customer groups. Thus, the average rate increases were higher for the high voltage rate categories (0.94%) than for the low voltage ones (-1.89%) . However, a comparison between the rates previously and currently in effect shows that the impact on customers’ bills will be negative, - 0.21% on average to high voltage customers and - 2.04% to low voltage customers.

The average rate for sales to final customers in 2007 reached R$207.48/MWh, representing a 3.77% drop compared to the rate effective in the previous year. This drop resulted mostly from the 1.22% reduction in the rates to final customers imposed under ANEEL Resolution No. 479/2007, in effect as of June 24, 2007, in addition to the CVA variation.

(c) Rate Review in the year 2008

Regulatory Resolution No. 234/2006, which addresses the rate review of power distribution utilities, is currently subjected to public review. By April 4, 2008, agents have submitted their contributions for the improvement of the technical notes published by the Regulatory Agency. According to ANEEL, the new rules will be in effect for the second cycle of COPEL’s rate review, which is currently underway, so that this review can be definitive.

F - 69

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

25 Operating Revenues

	Year ended December 31
	2007	2006	2005
Electricity sales to final customers
Residential	1,900,134	1,884,064	1,856,980
Industrial	1,934,060	1,751,728	1,649,222
Commercial	1,242,648	1,172,065	1,092,912
Rural	247,120	242,533	242,188
Public entities	177,950	175,709	168,008
Public lighting	137,730	141,386	144,214
Utility service	134,310	132,637	122,359
Network charge adjustment share	(6,105)	-	-
	5,767,847	5,500,122	5,275,883
Electric energy sales to distributors
Initial contracts	60,801	40,234	39,642
Bilateral agreements	515,656	457,843	389,605
Auction - CCEAR	721,899	634,884	435,588
Sales - CCEE	69,239	158,015	85,102
	1,367,595	1,290,976	949,937
Use of main transmission grid
Electric grid	173,035	135,021	132,463
Basic grid	141,663	148,570	135,361
Connection grid	764	182	172
Network charge adjustment share	(18,666)	-	-
	296,796	283,773	267,996
Other revenues	487,856	346,455	307,482
	7,920,094	7,421,326	6,801,298

F - 70

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

26 Value-added taxes on sales and charges

	Year ended December 31
	2007	2006	2005
Taxes on sales
ICMS (value-added taxes)	1,507,882	1,428,729	1,373,494
PIS (tax on revenue)	91,280	98,775	79,883
COFINS (tax on revenue)	415,162	448,539	361,509
Other taxes	2,571	1,651	1,351
	2,016,895	1,977,694	1,816,237
Regulatory charges
Fuel Consumption Accounts (CCC)	179,071	278,052	199,615
Energy Development Account (CDE)	184,294	165,676	152,707
Research and Development Programs
(R&D) and Energy Efficiency Programs (EEP)	56,347	52,265	46,771
	419,712	495,993	399,093
Other charges
RGR - Global reversal reserve	61,105	57,927	63,817
Emergency capacity charges	92	1,011	82,404
Other deductions	164	86	136
	61,361	59,024	146,357
	2,497,968	2,532,711	2,361,687

F - 71

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

27 Operating Expenses

(a) Electricity purchased for resale

	Year ended December 31
	2007	2006	2005
Eletrobrás (Itaipu)	385,359	335,351	464,423
Furnas Centrais Elétricas S.A. - Auction	280,608	262,389	174,447
CIEN	111,193	227,389	309,334
Renegotiation of contracts - CIEN	(100,862)	-	-
Companhia Hidro Elétrica do São Francisco - Auction	256,302	152,604	122,819
Other concessionaires - Auction	211,218	145,268	87,139
Companhia Energética de São Paulo - Auction	93,949	87,664	46,233
Itiquira Energética S.A.	98,175	87,658	80,684
Dona Francisca Energética S.A.	51,536	49,638	48,443
CVA	(52,250)	45,204	43,175
CCEE	45,100	19,293	28,055
Foz do Chopim Energética Ltda.	-	-	23,530
Other concessionaires	49,089	27,286	8,048
	1,429,417	1,439,744	1,436,330

(b) Personnel expenses

	Year ended December 31
	2007	2006	2005
Salaries and wages	451,156	441,791	415,419
Payroll charges	144,643	146,955	138,701
Food and education allowances	45,675	42,535	35,575
Labor and severance indemnities, net of reversals	8,293	8,063	2,669
Employee profit sharing	54,254	52,028	32,294
Transfers to construction in progress	(54,304)	(49,487)	(58,203)
	649,717	641,885	566,455

In 1996, the Company adopted a program of profit sharing for its employees, provided certain previously agreed upon financial and operating goals were met. In 2007, 2006 and 2005, the amount of profit sharing accrued was R$54,254, R$52,028 and R$32,294, respectively.

For the year ended December, 31, 2007 the aggregate amount of compensation paid to management amounts to R$8,778 (2006 - R$8,802)

F - 72

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

(c) Materials and supplies

	Year ended December 31
	2007	2006	2005
Purchase of gas for resale	132,726	177,459	142,129
Purchase of gas and fuel for electric energy production	(8,954)	17,536	62,070
Raw material and supplies for electric energy generation – renegotiation with Petrobras	-	(298,115)	-
Fuel and vehicle parts	24,663	24,525	21,531
Materials for use in the electricity system	12,892	21,870	18,723
Other	25,663	21,706	22,376
	186,990	(35,019)	266,829

As described in Note 15(a), due to the agreement established with Petrobras, the Company recorded in 2006 a discount of R$298,115 granted by Petrobras on the value originally invoiced related to gas purchases.

28 Financial Income (Expenses), Net

	Year ended December 31
	2007	2006	2005
Financial Income
Discounts obtained	-	283,198	-
Income on temporary cash investments	144,357	146,173	107,036
Charges on overdue receivables	46,477	71,485	68,897
Interest and commissions	76,062	75,680	113,142
Monetary adjustment	91,464	43,994	18,862
Other financial income	37,657	108,673	88,342
	396,017	729,203	396,279
Financial Expenses
Interest on loans and financing	(230,203)	(252,377)	(217,787)
Monetary and exchange variation, net	(8,431)	(33,608)	53,099
Losses from swap contracts	-	-	(41,952)
Contractual fines - Compagas	-	-	(190,940)
Other financial expenses	(137,140)	(148,525)	(99,700)
	(375,774)	(434,510)	(497,280)
	20,243	294,693	(101,001)

F - 73

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

29 Non-Operating Income

	Year ended December 31
	2007	2006	2005
Non operating income
Gains from the sale of property and rights	737	770	4,676
Gains from the disposal of property and rights	-	3,585	5,684
Other non-operating income	128	490	(394)
	865	4,845	9,966
Non operating expenses
Losses in studies and projects (a)	(29,878)	-	-
Losses in the disposal of property and rights	(13,972)	(10,083)	(16,476)
Equity in UEG Araucária Ltda.	-	(16,364)	-
Reversal of provision for impairment of tax incentives	12,789	-	-
Other non-operating expenses	(913)	(1,375)	(4,136)
	(31,974)	(27,822)	(20,612)
	(31,109)	(22,977)	(10,646)

a) Losses in studies and projects

The balance of R$ 29,878 refers to expenses with river inventory and power plant feasibility studies which have not been approved by ANEEL. Pursuant to the applicable legislation, only expenses with studies and projects which have been approved by an ANEEL technical audit are eligible for reimbursement.

F - 74

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

30 Related -Party Transactions

The Company had transactions with unconsolidated related parties, including the sale of electric energy. Tariffs charged for sale of electricity energy were approved by ANEEL and the amounts billed were not considered material for disclosure purposes.

	Balances as of December 31, 2007
	Current assets			Non-current assets			Current liabilities				Non- current liabilities
	Recoverable		Value-	Recoverable		Value-		Loans		Value-				Value-
	rate deficit	Other	added tax	rate deficit	Other	added tax		and		added tax		Loans and		added tax
	(CRC)	assets	receivable	(CRC)	assets)	receivable	Suppliers	financing	Debentures	payable	Suppliers	financing	Debentures	receivable
Shareholders
Government of State of Paraná	40,509	59,062	20,511	1,209,853	56,522	44,536	-	-	-	(126,322)	-	-	-	(12,640)
											-
BNDES	-	-	-	-	-	-	-	(6,328)	(3,228)			(19,029)	(269,314)	-
Eletrobrás	-	-	-	-	-	-	(74,090)	(43,101)	-	-	-	(367,540)	-	-
Affiliates and related parties
						-
Dona Francisca Energética S.A.	-	-	-	-	-		(4,567)	-	-	-	-	-	-	-
Petrobras Gás S.A.	-	19,550	-	-	-	-	(21,031)	-	-	-	(190,394)	-	-	-
	40,509	78,612	20,511	1,209,853	56,522	44,536	(99,688)	(49,429)	(3,228)	(126,322)	(190,394)	(386,569)	(269,314)	(12,640)

F - 75

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

	Balances as of December 31, 2006
	Current assets			Non-current assets		Current liabilities				Long-term liabilities
	Recoverable	Value-		Recoverable	Value-		Loans		Value-				Value-
	rate deficit	added tax	Other	rate deficit	added tax		and		added tax		Loans and		added tax
	(CRC)	receivable	assets	(CRC)	receivable	Suppliers	financing	Debentures	payable	Suppliers	financing	Debentures	payable
Shareholders
Government of State of Paraná	35,205	11,166	151,115	1,158,898	28,781	-	-	-	(116,032)	-	-	-	(11,501)
BNDES	-	-	-	-	-		(6,418)	(15,951)	-	-	(25,725)	(262,550)	-
Eletrobrás	-	-	-	-	-	(71,874)	(47,558)	-	-	-	(404,610)	-	-
Affiliates and related parties
Braspower International
Engineering S/C Ltda.	-	-	1,181	-	-		-	-	-	-	-	-	-
Centrais Eólicas do Paraná Ltda.	-	-	-	-	-	(4,138)	-	-	-	-	-	-	-
Dona Francisca Energética S.A.	-	-		-	-	(4,413)	-	-	-	-	-	-	-
Dutopar Participações Ltda.	-	-		-	-	(65)	-	-	-	-	-	-	-
Petrobras Gás S.A.	-	-	21,865	-	-	(37,871)	-	-	-	(170,451)	-	-	-
Domino Holding S.A.	-	-	1,975	-	-	-	-	-	-	-	-	-	-
	35,205	11,166	176,136	1,158,898	28,781	(118,361)	(53,976)	(15,951)	(116,032)	(170,451)	(430,335)	(262,550)	(11,501)

F - 76

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

	Transactions - Year ended December 31,
	2007					2006					2005
			Energy and	Financial				Energy and		Other			Energy and	Financial
		Value-	gas	income	Other		Value-	gas	Financial	income		Value-	gas	income	Other
	Operating	added	purchased	and	income and	Operating	added	purchased	income and	and	Operating	added	purchased	and	income and
	revenues	tax	for resale	(expenses)	(expenses)	revenues	tax	for resale	(expenses)	(expenses)	revenues	tax	for resale	(expenses)	(expenses
Shareholders
Government of State of Paraná	94,284	(1,507,882)	-	175,027	6,000	71,044	(1,428,729)	-	119,036	6130	-	(1,373,494)	-	90,765	367
BNDES	-	-	-	(2,398)	-	-	-	-	(3,645)	-	-	-	-	(4,532)	-
BNDESPAR	-	-	-	(27,378)	-	-	-	-	(24,686)	-	-	-	-	(5,754)	-
Eletrobrás	-	-	385,359	(45,741)	-	-	-	(335,351)	(44,640)	-	-	-	(464,423)	(32,163)	-
Affiliates and related
parties
Braspower International
Engineering S/C Ltda.	-	-	-	-	-	-	-	-	-	-	-	-	-	-	441
Dona Francisca Energética S.A.	-	-	51,536	-	-	-	-	(49,638)	-	-	-	-	(48,443)	-	-
Dutopar Participações Ltda.	-	-	-	-	-	-	-	-	-	(314)	-	-	-	-	(812)
Foz do Chopim Energética Ltda.	-	-	-	-	-	-	-	-	-	(1,568)	-	-	(23,530)	1,683	(836)
Petrobras Gas S.A.	79,144	-	(132,510)	-	-	21,865	-	(177,459)	-	(267)	-	-	(142,129)		(315)
Petrobras Gas S.A. - renegotiation	-	-	29,903	-	-	-	-	298,115	-	-	-	-	-	-	-
Sercomtel S.A. Telecomunicações	-	-	-	-	-	-	-	-	-	-	835	-	-	-	-
	173,428	(1,507,882)	334,288	99,510	6,000	92,909	(1,428,729)	(264,333)	46,065	3,981	835	(1,373,494)	(678,525)	49,999	(1,155)

F - 77

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

The following summarizes the most significant transactions with the shareholders:

Government of State of Paraná

The Company has an accounts receivable from the Government of State of Paraná, which owns 58.6% of the Company's common shares, under the CRC Account Agreement in the amount of R$1,250,362 and R$1,194,103 (including both current and non-current CRC accounts receivable) as of December 31, 2007 and 2006, respectively. The outstanding balance bears interest of 6.65% per annum and is adjusted in accordance with the IGP-DI inflation index. The Company recorded interest income and monetary indexation of R$167,526, R$119,036 and R$90,765 in 2007, 2006 and 2005, respectively.

BNDES Participações S.A. - BNDESPAR

BNDESPAR owns 26.4% of the Company's common shares. BNDESPAR is wholly-owned subsidiary of Banco Nacional de Desenvolvimento Econômico e Social - BNDES and has the right to appoint 2 members to the Board of Directors. The Company has loans with BNDES of R$25,357 and R$32,143 as of December 31, 2007 and 2006, respectively. The Company recorded interest expense of R$2,398, R$3,645 and R$4,532 in 2007, 2006 and 2005, respectively.

In February 2005, ELEJOR issued 1,000 convertible debentures comprised by two series in the amount of R$255,626 indexed to TJLP, plus a spread of 4% per year. The debentures issued by ELEJOR were acquired by BNDESPAR. The balance of these debentures amounted to R$272,542 and R$278,501 as of December 31, 2007 and 2006, respectively.

Eletrobrás

Eletrobrás owns 1.1% of the Company's common shares. The Company purchased electricity for resale from Eletrobrás (Itaipu) totaling R$385,359, R$335,351 and R$464,423, in 2007, 2006 and 2005, respectively. The Company has an accounts payable of R$74,090 and R$71,874 as of December 31, 2007 and 2006, respectively. Additionally, the Company has loans with Eletrobrás of R$410,641 and R$452,168 as of December 31, 2007 and 2006, respectively. The Company recorded interest expense of R$45,741, R$44,640 and R$32,163 in 2007, 2006 and 2005, respectively.

Eletrobrás holds redeemable preferred shares of ELEJOR, including monetary indexation adjusted by the IGP-M plus interest of 12% per year. The redemption will begin in 24 months after the start-up of ELEJOR and is payable in 32 quarterly installments.

The Company has a variety of transactions with its affiliates and other related parties. The most significant of these transactions are:

F - 78

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

Braspower International Engineering S/C Ltda.

The Company’s employees also render services to Braspower International Engineering S/C Ltda. and for which it received an expense recovery in the amount of R$441 in 2005. The Company had an accounts receivable recorded in other assets of R$1,181 as of December 31, 2006.

Dona Francisca Energética S.A.

The Company purchased power in 2007, 2006 and 2005 from Dona Francisca Energética S.A. totaling R$51,536, R$49,638 and R$48,443, respectively. The Company has an accounts payable of R$4,567 and R$4,413 as of December 31, 2007 and 2006, respectively. The Company provided guarantees to its affiliate Dona Francisca Energética S.A., for the loans obtained from Interamerican Development Bank - IDB (guaranteed by its shares of the affiliated company's capital) and to BNDES, proportional to the Company’s shares of Dona Francisca capital stock. As of December 31, 2007 and 2006, the outstanding balance of loans and financing was R$139,002 and R$158,891, respectively.

Dutopar Participações Ltda. - Dutopar

Dutopar is a shareholder of Compagas, and loaned staff to the Company, for which it received an expense recovery in the amount of R$314 and R$812 in 2006 and 2005, respectively. As of December 31, 2006, the Company had accounts payable of R$65.

Foz do Chopim Energética Ltda.

The Company had a loan to Foz do Chopim totaling R$35,357 as of December 31, 2005, for which it recorded interest income of R$2,519 in 2005. The Company terminated the electric energy purchase agreement with Foz do Chopim Energética through the statement of transaction and settlement signed on October 23, 2006. During 2005, the purchases of power from Foz do Chopim totaled R$23,530. The Company recorded financial expense in connection with fines on the purchase of power totaling R$1,568 and R$836 in 2006 and 2005, respectively.

Petrobras

Petrobras Gás S.A. is controlled by Petrobras S.A. and is a shareholder of Compagas. Compagas has a gas purchase agreement with Petrobras Gás S.A. During 2007, 2006 and 2005, the purchases of gas from Petrobras Gás S.A. totaled R$132,510, R$177,459 and R$142,129, respectively. The Company has an accounts payable of R$211,425 and R$208,322 as of December 31, 2007 and 2006, respectively. As described in Note 15(a), due to the agreement established with Petrobras, a discount of R$298,115 on the value originally invoiced was recognized as of December 31, 2006

Sercomtel S.A. - Telecomunicações

The Company leased optical fibers to Sercomtel S.A. Telecomunicações. The income recorded during 2005 was R$835.

F - 79

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

31 Financial Instruments

The Company’s management, through a derivatives policy, entered into a cross-currency interest rate swap contract against the effects of foreign exchange on US dollar-denominated liabilities. The swap contract was settled on May 29 and June 1, 2006, and the amount of R$22,423 was recorded as income in 2006 (2005 – expense of R$41,952). During 2007, the Company did not use any derivative instrument.

32 Subsidiaries

The Company’s business segments were represented by COPEL S.A. (Holding) and its wholly-owned subsidiaries: COPEL Geração e Transmissão S.A. (Generation and Transmission), COPEL Distribuição S.A. (Distribution), COPEL Participações S.A. ; COPEL Telecomunicações S.A. (Telecom), Companhia Paranaense de Gás – COMPAGAS, Centrais Elétricas do Rio Jordão S.A. – ELEJOR, COPEL Empreendimentos Ltda, UEG Araucária and Centrais Eólicas do Paraná Ltda.

The Company evaluates and manages segment performance based on information generated from its statutory accounting records maintained in accordance with Brazilian GAAP and reflected in its consolidated financial statements.

Information on total segment assets as at December 31, 2007 and 2006, under Brazilian GAAP, is as follows:

	December 31
	2007	2006
Holding (i)	9,061,992	8,897,302
Generation and Transmission (ii)	4,814,581	4,848,150
Distribution	5,170,031	4,664,685
Partnerships (iii)	1,245,778	1,182,314
Telecom	228,422	222,699
Compagás	249,065	237,442
Elejor	694,922	700,265
COPEL Empreendimentos Ltda. (iv)	439,378	392,607
UEG Araucária	678,960	675,381
Centrais Eólicas do Paraná Ltda.	4,123	-
Eliminations	(10,227,235)	(9,886,222)
Total assets	12,360,017	11,934,623

F - 80

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

(i)	Comprised by the investments in the wholly-owned subsidiaries: COPEL Geração e Transmissão S.A. (Generation and Transmission), COPEL Distribuição S.A. (Distribution), COPEL Telecomunicações S.A. and COPEL Participações S.A. These investments were eliminated in the amount of total assets.
(ii)	As mentioned in note 1.(a), on November 30, 2007 COPEL Transmissão S.A. was split and its assets were partly incorporated by COPEL Geração e Transmissão S.A. and partly by COPEL Distribuição. For comparative purposes, the balances of COPEL Transmissão S.A. for December 31, 2006 and 2005 and the years then ended were reclassified into COPEL Geração e Transmissão S.A. and COPEL Distribuição.
(iii)	Comprised by the investments in the subsidiaries: Sercomtel S.A. – Telecomunicações, Sercomtel Celular S.A., Dominó Holdings S.A., Escoelectric Ltda., COPEL Amec S/C Ltda., Dona Francisca Energética S.A., Carbocampel S.A., Braspower International Engineering S/C Ltda. and Foz do Chopim Energética Ltda Also comprised by the investments in the subsidiaries Compagas, Elejor, Centrais Eólicas do Paraná Ltda., UEG Araucária (20% interest) and the wholly-owned subsidiary COPEL Empreendimentos Ltda, whose investments were eliminated in the amount of total assets.
(iv)	Comprised by the investment in the subsidiary UEG Araucária Ltda (60% interest) whose investment was eliminated in the amount of total assets.

F - 81

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

Information on segment results for 2007, 2006 and 2005 is as follows:

	Year ended December 31, 2007
							Copel				Eliminations
		Generation and					Empreen-	UEG		Centrais	and	COPEL
	Holding	Transmission	Distribution	Partnerships	Telecom	Compagas	dimentos	Araucária	Elejor	Eólicas	adjustments	consolidated
Operating revenues
Revenues from external customers	-	1,460,077	5,972,013	-	63,893	251,245	-	164,913	7,953	-	-	7,920,094
Revenues from transactions with other subsidiaries	-	222,088	168,698	-	28,905	21,874	-	-	150,085	505	(592,155)	-
Value-added taxes on sales	-	(43,091)	(1,428,374)	-	(9,664)	(26,076)	-	-	(678)	-	-	(1,507,883)
PIS on sales	-	(21,195)	(62,688)	-	(604)	(4,333)	-	(1,721)	(1,067)	(4)	332	(91,280)
Cofins on sales	-	(97,631)	(283,628)	-	(2,789)	(19,955)	-	(7,926)	(4,747)	(15)	1,529	(415,162)
Regulatory Charges	-	(15,565)	(401,839)	-			-	(812)	(1,496)	-	-	(419,712)
Other charges and deductions on sales	-	(40,136)	(22,561)	-	(1,091)	(143)	-	-	-	-	-	(63,931)
Net Operating revenues	-	1,464,547	3,941,621	-	78,650	222,612	-	154,454	150,050	486	(590,294)	5,422,126
Operating expenses	(209,180)	(651,924)	(3,093,488)	(5,769)	(75,279)	(153,525)	(15)	(133,735)	(81,949)	(276)	590,294	(3,814,846)
Operating results before financial results and equity
in results of investees	(209,180)	812,623	848,133	(5,769)	3,371	69,087	(15)	20,719	68,101	210	-	1,607,280
Financial income	90,891	93,378	255,749	27,952	2,088	6,877	721	7,517	10,118	21	(99,295)	396,017
Financial expenses	(193,807)	(56,010)	(148,139)	(306)	(473)	(3,794)	(1,370)	(933)	(70,235)	(2)	99,295	(375,774)
Financial income (expenses), net	(102,916)	37,368	107,610	27,646	1,615	3,083	(649)	6,584	(60,117)	19		20,243
Equity in results of investees	1,346,837	148	-	43,690	-	-	12,527				(1,401,601)	1,601
Operating income (loss)	1,034,741	850,139	955,743	65,567	4,986	72,170	11,863	27,303	7,984	229	(1,401,601)	1,629,124
Non-operating results, net	12,909	(31,932)	(12,000)	376	(81)	-	-	1	-	-	(382)	(31,109)
Income before income taxes and non controlling
shareholders’ interest	1,047,650	818,207	943,743	65,943	4,905	72,170	11,863	27,304	7,984	229	(1,401,983)	1,598,015
Income taxes	58,960	(210,878)	(274,343)	165	(1,619)	(24,284)		(6,426)	(1,873)	(17)	-	(460,315)
Income (loss) before non controlling shareholders’
interest	1,106,610	607,329	669,400	66,108	3,286	47,886	11,863	20,878	6,111	212	(1,401,983)	1,137,700
Non controlling shareholders’ interest	-	-	-	-	-	-	-	-	-	-	(31,090)	(31,090)
Net income (loss)	1,106,610	607,329	669,400	66,108	3,286	47,886	11,863	20,878	6,111	212	(1,433,073)	1,106,610
Depreciation and amortization (i)	-	(128,951)	(191,704)	(34)	(26,938)	-	-	-	-	-	-	(347,627)
Capital expenditure	-	(71,839)	(379,186)	(22)	(30,647)	(13,364)	-	(915)	(457)	-	-	(496,430)

F - 82

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

As mentioned in note 1.(a), on November 30, 2007 COPEL Transmissão S.A. was split and its assets were partly incorporated by COPEL Geração e Transmissão S.A. and partly by COPEL Distribuição. For comparative purposes, the balances of COPEL Transmissão S.A. for December 31, 2006 and 2005 and the years then ended were reclassified into COPEL Geração e Transmissão S.A. and COPEL Distribuição.

	Year ended December 31, 2006
		Generation					COPEL			Eliminations
		and					Empreen-	UEG		and	COPEL
	Holding	Transmission	Distribution	Partnerships	Telecom	Compagas	dimentos	Araucária	Elejor	adjustments	consolidated
Operating revenues
Revenues from external customers	-	1,305,332	5,718,723	-	58,054	227,202	-	108,924	3,091	-	7,421,326
Revenues from transactions with other subsidiaries	-	197,075	170,271	-	30,745	79,238	-	-	108,831	(586,160)
Value-added taxes on sales	-	(30,539)	(1,357,445)	-	(7,746)	(32,847)	-	233	(385)	-	(1,428,729)
PIS on sales	-	(22,793)	(68,834)	-	(578)	(5,178)	-	(651)	(741)	-	(98,775)
Cofins on sales	-	(101,910)	(313,736)	-	(2,668)	(23,850)	-	(2,999)	(3,376)	-	(448,539)
Regulatory Charges	-	(13,843)	(480,088)	-			-	(988)	(1,074)	-	(495,993)
Other charges and deductions on sales	-	(37,805)	(21,674)	-	(1,193)	(3)	-	-	-	-	(60,675)
Net Operating revenues	-	1,295,517	3,647,217	-	76,614	244,562	-	104,519	106,346	(586,160)	4,888,615
Operating expenses	146,389	(395,245)	(3,251,522)	(6,398)	(70,997)	(196,170)	(34)	(88,665)	(63,501)	586,245	(3,339,898)
Operating results before financial results and equity in
results of investees	146,389	900,272	395,695	(6,398)	5,617	48,392	(34)	15,854	42,845	85	1,548,717
Financial income	45,221	404,066	292,328	16,723	923	5,859	-	877	6,066	(42,860)	729,203
Financial expenses	(174,457)	(60,017)	(178,725)	(2,075)	(612)	(5,683)	-	(384)	(55,332)	42,775	(434,510)
Financial income (expenses), net	(129,236)	344,049	113,603	14,648	311	176	-	493	(49,266)	(85)	294,693
Equity in results of investees	1,317,590	-	-	19,906	-	-	10,032	-	-	(1,353,715)	(6,187)
Operating income (loss)	1,334,743	1,244,321	509,298	28,156	5,928	48,568	9,998	16,347	(6,421)	(1,353,715)	1,837,223
Non-operating results, net	395	(954)	(6,360)	(16,365)	(64)	371	-	-	-	-	(22,977)
Income before income taxes and non controlling
shareholders’ interest	1,335,138	1,243,367	502,938	11,791	5,864	48,939	9,998	16,347	(6,421)	(1,353,715)	1,814,246
Income taxes	(92,458)	(330,161)	(113,747)	(1,633)	(1,134)	(18,918)	-	373	-	-	(557,678)
Income (loss) before non controlling shareholders’
interest	1,242,680	913,206	389,191	10,158	4,730	30,021	9,998	16,720	(6,421)	(1,353,715)	1,256,568
Non controlling shareholders’ interest	-	-	-	-	-	-	-	-	-	(13,888)	(13,888)
Net income (loss)	1,242,680	913,206	389,191	10,158	4,730	30,021	9,998	16,720	(6,421)	(1,367,603)	1,242,680
Depreciation and amortization (i)	-	(124,810)	(177,117)	(34)	(26,938)	(6,688)	-	(26,679)	(10,128)	-	(372,394)
Capital expenditure	-	(126,844)	(346,122)	(5)	(30,349)	(10,776)	-	-	(91,644)	-	(605,740)

F - 83

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

As mentioned in note 1.(a), on November 30, 2007 COPEL Transmissão S.A. was split and its assets were partly incorporated by COPEL Geração e Transmissão S.A. and partly by COPEL Distribuição. For comparative purposes, the balances of COPEL Transmissão S.A. for December 31, 2006 and 2005 and the years then ended were reclassified into COPEL Geração e Transmissão S.A. and COPEL Distribuição.

	Year ended December 31, 2005
		Generation						Eliminations
		and						and	COPEL
	Holding	Transmission	Distribution	Partnerships	Telecom	Compagas	Elejor	adjustments	consolidated
Operating revenues
Revenues from external customers	-	987,475	5,573,941	-	57,075	181,438	1,369	-	6,801,298
Revenues from transactions with other subsidiaries	-	450,909	142,717	-	26,491	72,127	30,483	(722,727)
Value-added taxes on sales	-	(17,252)	(1,323,790)	-	(7,271)	(25,181)	-		(1,373,494)
PIS on sales	-	(17,985)	(58,315)	-	(543)	(2,833)	(207)	-	(79,883)
Cofins on sales	-	(87,868)	(257,126)	-	(2,507)	(13,052)	(956)	-	(361,509)
Regulatory Charges	-	(11,103)	(387,683)	-			(307)	-	(399,093)
Other charges and deductions on sales	-	(43,710)	(102,863)	-	(998)	(1,326)	-	1,189	(147,708)
Net operating revenues	-	1,260,466	3,586,881	-	72,247	211,173	30,382	(721,538)	4,439,611
Operating expenses	(36,582)	(764,626)	(3,294,628)	(5,341)	(64,226)	(159,191)	(16,511)	721,094	(3,620,011)
Operating results before financial results and equity
in results of investees	(36,582)	495,840	292,253	(5,341)	8,021	51,982	13,871	(444)	819,600
Financial income	15,199	106,573	238,810	41,865	1,218	3,732	2,143	(13,261)	396,279
Financial expenses	(119,792)	(239,158)	(129,253)	(811)	(428)	(6,518)	(15,028)	13,708	(497,280)
Financial income (expenses), net	(104,593)	(132,585)	109,557	41,054	790	(2,786)	(12,885)	447	(101,001)
Equity in results of investees	635,163			25,559				(651,674)	9,048
Operating income	493,988	363,255	401,810	61,272	8,811	49,196	986	(651,671)	727,647
Non-operating results, net	187	(270)	(10,560)	106	(99)	(10)	-	-	(10,646)
Income before income taxes and non controlling
shareholders’ interest	494,175	362,985	391,250	61,378	8,712	49,186	986	(651,671)	717,001
Income taxes	8,202	(69,910)	(114,059)	(2,606)	(2,964)	(16,528)	(335)	-	(198,200)
Income before non controlling shareholders’ interest	502,377	293,075	277,191	58,772	5,748	32,658	651	(651,671)	518,801
Non controlling shareholders’ interest	-	-	-	-	-	-	-	(16,424)	(16,424)
Net income	502,377	293,075	277,191	58,772	5,748	32,658	651	(668,095)	502,377
Depreciation and amortization (i)	-	(123,093)	(170,426)	(39)	(26,495)	(5,119)	(3,734)	-	(328,906)
Capital expenditure	-	(107,917)	(311,999)	-	(23,450)	(9,916)	(191,958)	-	(645,240)

(i) The total amount of depreciation and amortization described above is classified as Operating expenses.

F - 84

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

33 Subsequent Events

(a) Changes to the Brazilian Corporate Legislation

On December 28, 2007, Law no. 11,638 was enacted, changing, revoking, and introducing new provisions in the Brazilian Corporate Law, particularly in the chapter covering the disclosure and preparation of financial statements. Some of these provisions have changed, among other aspects, the criteria for recognition and valuation of assets and liabilities. These changes are effective for periods ending on and after January 1, 2008.

The main goal of this new law is to update the Brazilian corporate legislation so as to bring the accounting practices adopted in Brazil closer to the International Financial Reporting Standards (IFRS) and to allow new accounting rules and procedures to be issued by the Brazilian Securities and Exchange Commission (CVM) in compliance with international accounting standards.
Even though this law is in effect, some of the changes introduced by it need to be regulated. During the transition period until these regulations are issued, CVM, through Instruction no. 469, has made the full application of these rules optional for quarterly financial information issued in 2008 and has determined that some provisions shall be mandatory (articles 3 to 14).

Based on that, COPEL’s management has assessed the potential impacts of the new law, in particular the impact of articles 3 to 14 of CVM Instruction no. 469, and has not identified any material adjustments to be made to the financial information for the quarter ended on March 31, 2008.

As for the remaining provisions of the new law, management has chosen to record the related impacts, if any, during fiscal year 2008, as soon as the new regulations are issued.

A summary of the preliminary assessment of the application of the provisions of the new law, conducted by COPEL's management, is shown below:

(i) Mandatory application of articles 3 to 14 of CVM Instruction no. 469/2008 as of January 1, 2008:

Changes introduced by Law no. 11,638/2007	Impact on the Company
The interests of debenture holders, of employees and managers, even in the form of financial instruments, and of employee pension or healthcare organizations or funds, which do not qualify as expenses, shall be classified in the Statement of Income for the respective period.	The Company already adopts this practice in its Consolidated Financial Statements as far as the interests of employees and their pension or healthcare organizations or funds.
All public companies shall disclose information about stock-based compensation in their quarterly reports and in their financial statements pursuant to the guidelines contained in item 25.10 of Letter CVM/SNC/SEP no. 01, dated February 14, 2007, until CVM issues specific regulation about this matter.	Not applicable to the Company.

F - 85

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

Introduction of the concept of present value adjustment for long-term asset and liability transactions and for material short-term transactions.	The Company has reviewed its accounts, taking into consideration the introduction of this concept, and has not identified any material amounts to be recorded in future periods.
Elimination of the possibility of recording: (i) premiums received in the issue of debentures; and (ii) donations and subsidies for investments (including tax breaks) directly as capital reserves under shareholders’ equity. That means donations and subsidies for investments will now be recorded to income. To avoid their distribution as dividends, the amount of donations and subsidies may be allocated, after being recorded to income, to a tax break reserve.	Not applicable to the Company.
Elimination of the revaluation reserve. Any existing balances in revaluation reserves shall be maintained until their actual realization or reverted by the end of the fiscal year in which the Law came into force.	Jointly-controlled subsidiary Dominó Holdings and subsidiaries Sercomtel Telecomunicações and Sercomtel Celular have revaluation reserve balances which have been excluded for purposes of equity and consolidation and to adjust the accounting practices of these subsidiaries to those of the parent company.
The reconciliation note referred to in article 5, paragraph 2, section III of CVM Instruction no. 331, dated April 4, 2000, shall not be required of companies which sponsor Brazilian Depositary Receipt (BDR) programs and whose financial statements, in the country of origin or which are disclosed in foreign markets for purposes of registration, are prepared in compliance with the international accounting rules issued by the International Accounting Standards Board (IASB).	Not applicable to the Company.
Requirement that the assets and liabilities of a company in the process of being incorporated as a result of transactions that involve incorporation, merger, or split between independent parties resulting in actual transfer of control be recorded at market value.	Not applicable to the Company.
Elimination of the materiality threshold for the adjustment of investments in subsidiaries and investees under the equity method and replacement of the parameter of 20% of the investee’s stock capital by the parameter of 20% of the investee’s voting stock.	Not applicable to the Company.

F - 86

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

Changes to article 5 of CVM Instruction no. 331, dated April 4, 2000, which addresses the registration of companies for the issue and trading of Brazilian Depositary Receipts - Level II and III BDR Programs tied to securities issued by public companies or similar entities headquartered abroad.  Not applicable to the Company. 

(ii) Application of the remaining provisions of the new law, which at the Company’s discretion shall be recorded in its financial statements, should they have any material impact, during fiscal year 2008:

Changes introduced by Law no. 11,638/2007	Impact on the Company
Replacement of the Statement of Changes in Financial Position by the Statement of Cash Flows.	The Company has already presented this statement in compliance with ANEEL requirements.
Addition of the Statement of Added Value, applicable to public companies, which features the value added by the Company and a breakdown of the sources and allocations of these amounts.	The Company has already presented this statement in compliance with ANEEL requirements.
Possibility of maintaining separate recording of transactions for purposes of tax legislation and then make any necessary adjustments to ensure their compliance with the accounting practices.	The Company is waiting for regulation of this issue and for a statement by the tax authorities.
Creation of a new subset of accounts for intangible items, including goodwill, for purposes of presentation as part of the balance sheet. This set of accounts shall record any rights to non-physical assets assigned to the operation of the Company or exercised with this purpose, including acquired stock in trade.	The Company will reclassify R$ 4,783 in goodwill recorded in the acquisition of interests in investees, which are currently recorded under Investments, to the Intangible Assets and Liabilities subset.
Mandatory recording under property, plant, and equipment of any rights to physical assets assigned to the operation of the Company, including those resulting from transactions which transfer to the Company the benefits, risks, and control of these assets (such as finance leases).	Not applicable to the Company.
Modification of the criteria for amounts recorded under deferred assets/liabilities. Only pre-operational expenses and restructuring expenses which effectively contribute to the increase in the income of more than one fiscal year and which do not characterize only a cost reduction or operational efficiency gain shall be recorded in this subset.	The Company is waiting for the issue of regulation concerning this matter so it can assess any potential impacts.

F - 87

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

Requirement that the Company periodically assess its ability to recover the amounts recorded under property, plant, and equipment, intangible assets, and deferred assets, in order to ensure that: (i) any losses due to non-recovery of these assets are recorded as the result of a decision to discontinue the activities related to these assets or when there is evidence that the results of operations will not be sufficient to ensure the realization of these assets; and (ii) the criteria used to determine the estimated remaining useful lives of these assets for purposes of recording their depreciation, amortization, and depletion are reviewed and adjusted.	The Company already adopts this practice. Most assets which make up the property, plant, and equipment of the Company and its subsidiaries are tied to the concession, and, according to the concession agreements signed by the Company as a public service concession holder, any residual value of these assets shall be refunded to it upon expiration of the concession. This fact significantly reduces the risk of any impact to the Company’s financial statements in connection with the recovery of assets.
Creation of a new subset of accounts, named equity evaluation adjustments, under shareholders’ equity, to allow the recording of certain market value evaluations, particularly those of financial instruments; the recording of exchange rate variations on equity investments abroad assessed under the equity method (until December 31, 2007, these variations were recorded to income); and market value adjustments to liabilities and assets, due to mergers and incorporations between unrelated parties resulting in actual transfer of control.	COPEL will wait for the issue of regulation covering this matter and will simultaneously engage a company specializing in financial valuations to help it assess any potential impacts on the 2008 financial statements. Given the fact that COPEL is subject to the Public Tender Law, as it is a mixed capital company, this process will be carried out during this year.
Requirement that all financial instruments, including derivatives, be recorded: (i) at market value or equivalent value, in the case of instruments assigned to trading or available for sale; and (ii) at acquisition cost or face value, restated in compliance with legal and contractual provisions and adjusted to the likely realization value, whenever the latter is lower than the former.	COPEL will wait for the issue of regulation covering this matter and will simultaneously engage a company specializing in financial valuations to help it assess any potential impacts on the 2008 financial statements. Given the fact that COPEL is subject to the Public Tender Law, as it is a mixed capital company, this process will be carried out during the next year.

(b) Acquisition of investment

On January 14, 2008, COPEL, through its wholly-owned subsidiary COPEL Participações, became the holder of 45% of the share capital of Dominó Holdings S.A., by acquiring a 30% interest held by Sanedo Participações Ltda. for R$110,226, with an approximate negative goodwill of R$71,350. The basis for this acquisition is the expectation of future losses of the investee.

F - 88

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

(c) Annual tariff adjustment – June 2008

On June 23, 2008, ANEEL required us to decrease our tariffs by an average of 3.35%, of which -7.17% as tariff repositioning and 3.83% as external financial components, pursuant to the second periodic revision.

34 Supplemental Information - Consolidated statements of cash flows

Brazilian GAAP does not require the presentation of a statement of cash flows. This statement in Brazilian GAAP is presented as supplementary information to the primary financial statements and are in line with International Accounting Standards No. 7, as mentioned in Note 35 (a) (iii). The presentation of the statement of cash flows describing cash flows from operating, financing and investing activities is presented as follows:

	Year ended December 31
	2007	2006	2005
Cash flows from operating activities
Net income for the year	1,106,610	1,242,680	502,377
Adjustments to reconcile net income to cash provided by
operating activities
Depreciation and amortization	422,049	372,395	328,906
Profit (loss) on disposal of property, plant and equipment and	31,381	14,721	24,336
other
Equity in results of investees and amortization of goodwill	9,658	6,187	(9,048)
Reserves and write-off of non-current assets	250,365	90,994	85
Unrealized monetary and foreign exchange variations, net	81,919	(14,751)	(12,492)
Deferred income taxes	(75,853)	123,079	(50,028)
Non controlling shareholders’ interest	31,090	13,888	16,424
Review adjustment share – transmission utilities’ rate review
(Note 9(c))	42,496	-	-
Renegotiation of CIEN contract	(62,862)	-	-
Decrease (increase) in assets
Accounts receivable, net	(118,420)	(99,007)	(164,286)
Dividends received	9,797	15,376	(779)
Materials and supplies	(751)	(14,854)	(5,958)
Recoverable rate deficit (CRC)	111,267	31,038	15,137
Deferred regulatory asset		63,259	171,662
Regulatory asset - Pis and Cofins	3,408	37,851	(7,058)
Recoverable taxes	74,441	(101,752)	(44,671)
Judicial deposits	(9,900)	(55,597)	1,479
Other assets	(21,860)	35,152	(32,167)
Increase (decrease) in liabilities
Suppliers	(25,976)	(725,037)	315,047
Interest and monetary variation on loans and long-term debt	(304,804)	(4,327)	13,737
Taxes on sales and others	(52,618)	(70,895)	68,702
Accrued payroll costs	11,901	25,892	23,858
Pension and health-care plans	(125,425)	(170,584)	(64,171)

F - 89

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

	Year ended December 31
	2007	2006	2005
Deferred regulatory liabilities	-	177	90,576
Provision for contingencies	-	(6,357)	(4,493)
Regulatory charges	(18,983)	18,908	(22,855)
Cross-currency interest rate swaps	-	-	(124,629)
Non controlling shareholders’ interest	(5,469)	113,703	6,204
Research and development and Energy Efficiency Program	10,964	35,339	29,988
Other accrued liabilities	(17,151)	(65,947)	29,220
Net cash provided by operating activities	1,357,274	911,531	1,095,103
Cash flows from investing activities
Business acquisitions of UEG Araucaria, less cash acquired	-	(426,306)	-
Business acquisitions of Centrais Eolicas do Parana, less cash
acquired	(1,393)	-	-
Disposals (additions) of other investments	(12,953)	5,463	(2,561)
Additions to property, plant and equipment	(516,142)	(567,778)	(668,866)
Collateral Deposits	(76,596)	-	-
Customers' contributions (special obligations)	48,580	43,489	39,675
Additions to intangible assets	(4,407)	(5,747)
Proceeds from sales of property, plant and equipment	6,653	-	-
Deferred charges	(341)	(145)	(752)
Net cash used in investing activities	(556,599)	(951.024)	(632,504)
Cash flows from financing activities
Short-term loans, net
Issuances of long-term debt	346,592	16,937	35,532
Repayments of long-term debt	(99,853)	(87,209)	(473,319)
Debentures – issuances		600,000	773,742
Repayments of debentures	(717,738)	-	(100,000)
Dividends paid (interest on equity)	(292,809)	(117,997)	(99,880)
Net cash provided by (used in) financing activities	(763,808)	411,731	136,075
Net increase in cash and cash equivalents	36,867	372,238	598,674
Cash and cash equivalents, beginning of the year	1,504,004	1,131,766	533,092
Cash and cash equivalents, end of the year	1,540,871	1,504,004	1,131,766
	36,867	372,238	598,674
Supplementary cash flow information
Income taxes paid	387,049	483,389	216,844
Interest paid, net of amount capitalized	307,239	246,039	148,338
Transactions not affecting cash
Business acquisitions
Assets acquired, including goodwill	2,164	478,985	-

F - 90

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

	Year ended December 31
	2007	2006	2005
Liabilities assumed	(21)	(42,422)	-
Purchase price paid	2,143	436,563	-
Cash acquired	(750)	(10,257)	-
Purchase price, net of cash acquired	1,393	426,306	-

35 Summary of Principal Differences between Brazilian GAAP and U.S. GAAP

(a) Description of the GAAP differences

COPEL's accounting policies comply with Brazilian GAAP and its consolidated financial statements are prepared in accordance with Brazilian GAAP. Notes 2, 3 and 4 to the consolidated financial statements summarize the accounting policies adopted by the Company. Accounting policies that differ significantly from accounting principles generally accepted in the United States of America ("U.S. GAAP") are summarized as follows:

a(i) Supplementary Accounting for Inflation in 1996 and 1997 for U.S. GAAP

Under Brazilian GAAP, accounting for inflation was discontinued effective January 1, 1996. Prior to that date, Brazilian GAAP statements included indexation adjustments which partially accounted for the effect of inflation on property, plant and equipment, investments (together denominated permanent assets), special obligations and shareholders' equity, and reported the net charge or credit in the statement of operations. However, under U.S. GAAP, Brazil ceased to be treated as a high inflationary economy only as from January 1, 1998. Accordingly the financial information for purposes of U.S. GAAP should include the effects of the variation in the inflation index, Index - Internal Availability (IGP-DI), on permanent assets. The IGP-DI index increased by 9.3% in 1996 and 7.5% in 1997.

For purposes of the U.S. GAAP reconciliation, shareholders' equity under U.S. GAAP was increased by R$514,240 and R$699,587 as of December 31, 2007 and 2006, respectively, due to the additional inflation restatement adjustments, net of depreciation. These amounts generated increases in depreciation and amortization charges of R$158,817, R$156,653 and R$147,485 in 2007, 2006 and 2005, respectively (2005 amount is net of amortization of remeasurement of special obligations).

a(ii) Concession arrangements

When concessions expire unrenewed, the property, plant and equipment reverts to the Brazilian government and under Brazilian legislation COPEL is required to be reimbursed by the Brazilian government for the amounts of Brazilian GAAP book value of such assets at that time. Under Brazilian

F - 91

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

GAAP, property, plant and equipment are recorded at construction cost or purchase price and are depreciated over their useful lives. All existing infrastructure assets were acquired by COPEL with none having been received as a result of the concession agreement.

Under US GAAP the individual property, plant and equipment accounting balances may be more or less than the Brazilian GAAP balances due to supplementary accounting for inflation in 1996 and 1997, the capitalization of interest costs related to construction in progress, special obligations, indemnification costs and fair value adjustments on acquisition as described in Note 35.a(iv) to the December 31, 2007 financial statements. Under US GAAP property, plant and equipment are depreciated over their useful lives to salvage or residual value at the end of the concession period. The residual value at the expiration of the concession agreement is the Brazilian GAAP book value of the property, plant and equipment, which is equal to the amount to be reimbursed by the Brazilian government at that time.

a(iii) Statement of cash flows

The cash flow statements presented in Note 34 are presented in accordance with Brazilian GAAP. The cash flow classification rules established by the Brazilian GAAP are in line with International Accounting Standard No. 7.

a(iv) Regulated accounting policies

a(iv).1 Capitalization of interest costs relating to construction in progress

Under Brazilian energy sector regulated accounting, through March 1999 COPEL imputed interest on shareholders' funds applied in construction in progress and such interest was capitalized. Additionally, as from December 31, 1995 COPEL started capitalizing interest costs and related monetary and exchange variations of borrowed funds to construction in progress.

Under U.S. GAAP, only capitalization of interest on borrowed funds is acceptable; therefore, for U.S. GAAP reconciliation purposes, the imputed interest on shareholders' funds, exchange variations and general administrative expenses, which were capitalized and included in construction in progress, were reversed. Only interest and monetary variation on borrowed funds remains capitalized and the depreciation is computed using the rates applicable to the corresponding class of property, plant and equipment.

a(iv).2 Special obligations

Special Obligations represent Brazilian Federal Government and consumers’ contributions to the cost of expanding the electric power supply system, which is presented as a reduction to property, plant and equipment under Brazilian GAAP. For regulatory purposes, the depreciation of these assets was included in the tariff rate setting process and the corresponding liability was recorded for the amount of the total contributions. Under U.S. GAAP, Special Obligations were considered a reimbursement of asset’s construction and/or acquisition costs and were amortized since their contribution to the Company.

F - 92

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

On October 31, 2006, ANEEL issued a new regulation which changed the treatment of special obligations with respect to the tariff setting process. The regulation establishes, among other items, that beginning on the date of the next respective tariff revision, the special obligations would be amortized as a reduction of net allowable costs over future periods, thereby reducing tariffs. Consequently, in accordance with SFAS No. 71 “Accounting for the Effects of Certain Types of Regulation”, after the issuance of this regulation, the special obligations became a regulatory liability. According to the aforementioned regulation, the accounting treatment for Special Obligations under Brazilian GAAP changed and, as from 2006, they started to amortize prospectively beginning on the date future tariff reviews for each distribution concessionaire.

As a consequence, in order to reflect the new regulatory rules, the amount related to Special Obligations that had been amortized up to 2005, including the respective deferred taxes recognized, were reversed as a charge to the 2006 income statement under U.S. GAAP.

The details of these adjustments are as follows:

Amounts adjusted to U.S. GAAP income statement	2006
Reversal of special obligations amortization (recognized through property, plant
and equipment)	(303,926)
Reversal of deferred taxes	103,335
Net amount	200,591

After such adjustments, the balance of Special Obligations presented under Brazilian GAAP equals such balance presented under U.S. GAAP, and the respective amortization, to be recognized by the Company as from future tariff reviews will be the same in both Brazilian GAAP and U.S. GAAP.

a(iv).3 Indemnification costs

Brazilian utility companies are allowed to capitalize excess costs incurred in the course of building new plants, such as contractual penalties on delays in construction or contractors' claims and provision for labor contingencies recorded after the construction is concluded and the plants are already operating. Under U.S. GAAP, such excess costs would not be capitalized.

a(iv).4 Deferred regulatory asset

Under Brazilian GAAP, COPEL has applied regulatory accounting for its distribution company for all years presented. Under U.S. GAAP, COPEL applies regulatory accounting. However, as from July 2003, COPEL has provided discounts on the full tariff approved by the regulator, ANEEL, for payments made by customers on the due date. With this discount COPEL is no longer reasonably assured of charging a tariff sufficient to recover all of its deferred costs. Accordingly, COPEL has written-off its deferred regulatory assets as of December 31, 2005 and for the year then ended for U.S. GAAP purposes.

For purposes of the U.S. GAAP reconciliation, shareholders' equity under U.S. GAAP was decreased by R$133,654 as of December 31, 2005. These adjustments increased net income under U.S. GAAP by R$133,654 in 2006 and R$255,180 in 2005. As of December 31, 2005, the following deferred regulatory assets and liabilities were written-off:

F - 93

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

	December 31, 2005
		Non-
	Current	current	Total
Deferred regulatory assets – CVA	128,187	8,559	136,746
Deferred regulatory liabilities – CVA	(65,664 )	(24,912 )	(90,576 )
Regulatory asset - PIS and Cofins	43,876	43,608	87,484
	106,399	27,255	133,654

In June 2006, the Company stopped granting discounts on the tariff approved by the regulatory body, ANEEL. Consequently, for U.S. GAAP reconciliation purposes, there are no adjustments of this nature to the shareholders equity as of December 31, 2007.

a(iv).5 Regulatory adjustment

Under Brazilian GAAP, ANEEL regulations and IBRACON, through Technical Notice 03/2006, required adjustments related to research and development programs (R&D) and energy efficiency programs (EEP) directly against shareholders’ equity in the amount of R$43.641 as of December 31, 2006.

Under U.S. GAAP, regulatory adjustments requiring increases in costs or reductions in revenues are recorded against income.

a(v) General accounting policies

a(v).1 Pension and other benefits

Under Brazilian GAAP, up to 2000, the pension and other retirement benefit costs were recognized when contributions were made to the plans. As from 2001, the Company recognized the pension and other post-retirement benefits costs in accordance with Deliberation CVM 371/2000, which is similar to the provisions of Statement of Financial Accounting Standards ("SFAS") No. 87 - "Employers' Accounting for Pensions" and SFAS No. 106 - "Employers' Accounting for Post-retirement Benefits Other than Pensions", however, differences arise on the determination and amortization of actuarial gains and losses and the net transitional obligation due to the different dates on which the respective standards were first applied.

Under U.S. GAAP, SFAS No. 87 “Employers’ Accounting for Pensions” and SFAS No. 106, “Employers’ Accounting for Post-retirement Benefits Other Than Pensions”, amended in 2006 by SFAS No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans" require recognition of costs on a more comprehensive accrual basis. Under SFAS No. 158, U.S. GAAP requires the recognition of either an asset or a liability, stated at fair value, for the difference between projected benefit obligations (as defined in SFAS No. 87 and SFAS No. 106) and plan assets, and all the changes in that funded status to be recognized through comprehensive income. SFAS No. 158 also establishes the measurement date of plan assets and obligations as the date of the employer's fiscal year end, and provides for additional annual disclosures. The disclosures required by SFAS No. 158 are presented in Note 35.c.(iii) below.

F - 94

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

a(v).2 Goodwill adjustment

Sercomtel S.A. - Telecomunicações and Sercomtel Celular S.A.

Under Brazilian GAAP the goodwill on the purchase of the 45% interest in Sercomtel S.A. - Telecomunicações and Sercomtel Celular S.A. is being amortized over ten years.

For U.S. GAAP reconciliation purpose, the Company, according to SFAS 142, stopped amortizing goodwill as from January 1, 2002 and reviewed it for impairment in accordance with paragraph 19(h) of APB18 "The Equity Method of Accounting for Investments in Common Stock". The reversal of the amortization for the years ended December 31, 2007, 2006 and 2005 was R$4,808, in each year.

For 2007, the company identified a need of recognition of provision for impairment on the goodwill related to Sercomtel Celular S.A., in the amount of R$3,687. No goodwill impairment was identified for the investment on Sercomtel S.A. – Telecomunicações.

Centrais Elétricas Rio Jordão - Elejor

In 2004, the Company acquired 30% of the common shares of Elejor and recorded R$22,626 of goodwill under Brazilian GAAP. Under U.S. GAAP, fair values are assigned to assets acquired and liabilities assumed and the residual of consideration paid over the fair value of assets and liabilities is recorded as goodwill. According to SFAS 142, goodwill is no longer amortized as from January 1, 2002, but instead assigned to an entity’s reporting units and tested for impairment at least annually. The difference between goodwill calculated under Brazilian GAAP and U.S. GAAP is represented by fair value adjustments at the date of acquisition:

	2004
Goodwill recorded under Brazilian GAAP - 30% of ELEJOR’s common shares	22,626
Fair value adjustments	5,251
Goodwill recorded under U.S. GAAP - 30% of ELEJOR’s common shares	27,877

The reversal of the amortization of goodwill in Elejor for the year ended December 31, 2007 was R$1,319 (2006 – R$565). No goodwill impairment was identified.

COPEL Empreendimentos Ltda.

F - 95

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

In 2006, the Company acquired the quotas of El Paso Empreendimentos Ltda, parent company of UEG Araucária, and changed its name to COPEL Empreendimentos Ltda, as described in Note 35 a(v)13. As a result of this acquisition, COPEL recorded R$53,954 of goodwill under Brazilian GAAP, which started to amortize in 2007. The reversal of the amortization recorded in 2007 amounted to R$2,346.

a(v).3 Equity in results of investees

Under Brazilian GAAP, the equity method of accounting is applied for investments where the investor has influence and/or at least 20% interest and also for investments considered significant, which includes interest between 10% and 19% that represent more than 10% individually or 15% in aggregate in relation to the investors’ shareholders' equity.

Under U.S. GAAP, the equity method is only required for investments with significant influence in investments with interest less than 20% and when interests exceed 20% as established in APB 18 - Equity Method of Accounting for Investments in Common Stocks.

Based on the above, Dominó Holdings S.A. (15% interest) would have been accounted for under the cost method because the Company does not have significant influence. Therefore, for U.S. GAAP reconciliation purposes, Dominó Holdings S.A. equity results are reversed. The Company received dividends from Dominó Holdings S.A. in the amount of R$2,175 in 2007 (2006 - R$2,010 and 2005 - R$2,175).

Under U.S. GAAP, deferred charges in affiliates are expensed as incurred and the adjustments are recorded in the equity results of investees.

In addition, under Brazilian energy regulated accounting, equity in results of investees is recognized in a special caption in the statement of operations before the caption other income (expenses). Under U.S. GAAP equity in results of investees is classified in the statement of operations in a caption after income tax expenses.

a(v).4 Deferred charges

Brazilian GAAP permits deferral of pre-operating expenses incurred in the construction or expansion of a facility before the facility begins operations, research and development expenditure and other items.

Under U.S. GAAP research and development and pre-operating costs are expensed as incurred and recorded in the statement of operations within general and administrative expense. For purposes of the U.S. GAAP reconciliation, shareholders’ equity under U.S. GAAP was decreased by R$5,172 as of December 31, 2007 (2006 - R$5,208).

a(v).5 Tax incentives recognition

Under Brazilian GAAP, tax incentives gains are recorded directly against shareholders’ equity. For 2007 the tax incentives gains amount to R$21,047.

Under U.S. GAAP, tax incentives gains are recorded against the statement of operations.

F - 96

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

a(v).6 Income taxes

Under Brazilian Accounting Principles, deferred income tax liabilities are recognized based on the amount of future expected taxes to be paid. Deferred income tax assets related to deductible temporary differences or tax loss carryforwards are recognized when there is a reasonable certainty that the Company will generate profits against which it can offset such an asset. In addition, there are no expiration dates for the tax loss carryforwards.

Under U.S. GAAP, deferred income tax assets related to deductible temporary differences or tax loss carryforwards are recognized and, if necessary, a valuation allowance is recorded if it is more likely than not that such assets will not be realized.

According to U.S. GAAP, the Company has recorded additional deferred tax assets and liabilities for income tax and social contribution tax, as presented below:

	As of December 31
	2007	2006
Deferred tax asset under U.S. GAAP	527,005	446,412
Deferred tax liability under U.S. GAAP	(356,195)	(458.032)
Net deferred tax asset under U.S. GAAP	170,810	(11,620)

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax-planning strategies in making this assessment. Based on the level of historical taxable income and projections for future taxable income over the periods for which deferred tax assets are deductible, management believes that it is more likely than not that the Company will realize the benefits of these deductible differences, net of existing valuation allowance at December 31, 2007. The amount of the deferred tax assets is considered realizable; however, could be reduced in the near term if estimates of future taxable income are reduced.

The Company adopted the provisions of FIN 48 on January 1, 2007 and recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. As a result of the implementation of FIN 48, the company did not record any further tax benefit or a liability related to uncertainty in income taxes, beyond those already recorded under Brazilian Accounting Principles (note 21).

F - 97

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

The Company and its subsidiaries file federal income tax returns only in Brazil. For years before 2002, the Company is no longer subject to Brazilian federal income tax examinations. All income before taxes, Non controlling shareholders’ interest and related income taxes are from Brazilian sources. The main lawsuits challenges by the Brazilian Revenue Service are described in note 21. Management, based on the opinion of the legal counsel, considers that there are no significant risks that are not covered by liabilities already recorded or that would result in a material change to its financial position or results of operations. The Company cannot predict that the total amounts of unrecognized tax benefits will significantly increase or decrease within the next 12 months.

The Company’s policy is to record penalties and interests related to unrecognized tax benefits as financial expenses in the consolidated statements of income. For the balances shown in note 21, the Company made escrow deposits waiting for the final decision by the Brazilian courts. Therefore the company is not subject to penalties and the interest expenses are offset by the monetary restatement applied to the judicial deposits.

For purposes of the U.S. GAAP reconciliation, the adjustment for deferred taxes relates to the U.S. GAAP adjustments.

a(v).7 Comprehensive income

Brazilian GAAP does not recognize the concept of comprehensive income.

Under U.S. GAAP, SFAS 130, "Reporting comprehensive income", requires the disclosure of comprehensive income. Comprehensive income is comprised of net income and other comprehensive income that include charges or credits directly to equity. For U.S. GAAP reconciliation purposes, the amounts related to the initial transistion obligation and unrecognized gains (losses) of the pension plan and the related deferred tax effect were recorded as adjustments directly to equity and have been considered as other comprehensive income.

The components of accumulated other comprehensive income are as follows:

	December 31
	2007	2006
Unrecognized gain and loss	643,918	707,712
Income tax	(218,932)	(240,622)
Total accumulated other comprehensive loss (loss)	424,986	467,090

a(v).8 Earnings (loss) per share 

Under Brazilian GAAP net income or loss per share is calculated based on the number of shares outstanding at the balance sheet date. Under U.S. GAAP, the earnings or loss per share calculation takes into account common stock equivalents and the weighted average number of shares outstanding during the reporting period. Also, U.S. GAAP requires the computation of diluted earnings per share, which is not a practice under Brazilian GAAP. The Company does not have any potential common stock equivalents that could have a dilutive effect.

 F - 98 

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

Since the preferred and common shareholders have different dividend, voting and liquidation rights, Basic and Diluted earnings per share have been calculated using the ''two-class'' method. The ''two-class'' method is an earnings allocation formula that determines earnings per share for preferred and common stock according to the dividends declared as required by the Company's by-laws and participation rights in undistributed earnings calculated in accordance with the rights to dividends of each class of shares as discussed on Note 23 (a). At the meeting held on March 31, 2004, the EITF came to a final consensus about EITF 03-6, "Participating Securities and the Two-Class Method under FASB Statement No. 128". Usually, participating securities entitle the holder to a portion of a company's income frequently through a formula related to dividends of the common shares of the company. This standard clarifies the term "participating securities", under FASB No. 128. When an instrument is considered as a "participating security", it has the potential of significantly reducing the basic earnings per common share and therefore the "two-class method" should be used to compute the effect of the instrument on earnings per share. The consensus also includes other instruments which terms include a specific participation, as well as allocation of loss. If undistributed gains should be allocated in "participating securities" using the "two-class method", losses should also be allocated. However, EITF 03-6 limits this allocation only to situations in which the securities have (1) the right to profit sharing in the company, and (2) an objective and determinable contractual obligation for participation in the company's losses. The consensus obtained with EITF 03-6 is effective for fiscal years starting after March 31, 2004. EPS in prior years should be retroactively adjusted to comply with EITF 03-6. The basic and dilutive earnings per share are presented on the table in Note 35 b(ii).

As mentioned in Note 23 (a), the shareholders approved during 2007 and 2006 the conversion of 1,298 and 4,075 preferred shares "A" into preferred shares "B", respectively.

As also mentioned in the related note, on August 6, 2007, the Company completed a reverse stock split, in the ratio of 1,000 to 1, with shares being traded in a standard lot of 100 and prices being quoted per share. Each share entitles its holder to one vote in the general shareholders’ meetings. For comparison purposes, Earnings per Share for the years ended December 31, 2006 and 2005 are presented considering the same ratio.

Earnings (loss) per share data is presented per shares. Such presentation is consistent with the practice in Brazil of trading and quoting shares in share lots.

a(v).9 Segment reporting

Under Brazilian GAAP, there is no requirement to present disaggregated information with respect to business segments of an enterprise.

F - 99

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

Under U.S. GAAP, SFAS 131, "Disclosures about Segments of an Enterprise and Related Information", requires that public enterprises disclose certain information about segments on the basis that top management uses to allocate resources among segments and evaluate their performance. The Company operates principally in the energy business and the Company’s business segments are represented by COPEL S.A. (Holding) and its wholly-owned subsidiaries: COPEL Geração and Transmissão S.A. (Generation and Transmission), COPEL Distribuição S.A. (Distribution), COPEL Participações S.A. (Partnerships); COPEL Telecomunicações S.A. (Telecom), Companhia Paranaense de Gás – COMPAGAS, Centrais Elétricas do Rio Jordão S.A. – ELEJOR, COPEL Empreendimentos Ltda., UEG Araucária Ltda. and Centrais Eólicas do Paraná Ltda, which are presented in Note 32.

As mentioned in note 1.(a), on November 30, 2007 COPEL Transmissão S.A. was split and its assets were partly incorporated by COPEL Geração e Transmissão S.A. and partly by COPEL Distribuição. As required by SFAS – 131 – “Disclosure about segments of an enterprises and related information”, as the Company has changed the structure of its internal organization for comparative purposes, the balances of COPEL Transmissão S.A. for December 31, 2006 and 2005 and the years then ended were reclassified into COPEL Geração e Transmissão S.A. and COPEL Distribuição.

a(v).10 Impairment of long-lived assets

Under Brazilian GAAP, companies are required to determine if operating income is sufficient to absorb the depreciation or amortization of long-lived assets in order to assess potential asset impairment. In the event when such operating income is insufficient to recover the depreciation, the assets, or groups of assets, are written down to recoverable values, preferably based on the projected discounted cash flows of future operations. In the event of a planned substitution of assets prior to the end of the original estimated useful life of the asset, depreciation of such asset is accelerated to ensure that the asset is depreciated according to the estimated net realizable values at the estimated date of substitution.

Under U.S. GAAP, SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", requires companies to evaluate the carrying value of long-lived assets to be held and used, and for long-lived assets to be disposed of, when events and circumstances require such a review. The carrying value of long-lived assets is considered impaired when the anticipated undiscounted cash flow from identified asset groups, representing the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets, is less than their carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair market value of the assets or discounted cash flows generated by the assets.

There were no differences relating to impairment provisions, between Brazilian GAAP and U.S. GAAP financial statements, and there were no circumstances or events to require the impairment tests to be performed for U.S. GAAP, for the years presented.

a(v).11 Disposal of assets

Under Brazilian GAAP, disposals of assets are recorded as a non-operating expense. Under U.S. GAAP, disposals of assets are classified as an operating expense. The amount of disposals of assets recorded as non-operating expense in 2007, 2006 and 2005 is R$13,568, R$5,772 and R$8,370, respectively.

a(v).12 Centrais Elétricas do Rio Jordão S.A. - Elejor

F - 100

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

Acquisition of Elejor

As of December 18, 2003, the Company acquired from Triunfo Participações e Investimentos S.A. 30% of the common shares of Elejor. Accordingly, the Company holds 70% of the shareholding control of Elejor and 35% of the total shares of Elejor.

Under U.S. GAAP, the Company has recorded such acquisition based on the fair value of the assets acquired and liabilities assumed in accordance with the purchase method of accounting pursuant to SFAS 141.

Purchase of the preferred shares subscribed by ELETROBRÁS

Under the shareholders’ agreement of ELEJOR, ELEJOR is required to purchase the preferred shares subscribed by ELETROBRÁS in 32 quarterly installments, adjusted by the IGP-M plus interest of 12% per year less dividends paid, beginning in 24 months after the start-up of ELEJOR. Under Brazilian GAAP, interest and monetary variation of R$49,352 is recorded in the long-term loans and financing as of December 31, 2006, and upon consolidation ELEJOR preferred shares held by ELETROBRÁS are recorded in the Non controlling shareholders’ interest totaling R$64,477 and R$65,134, as of December 31, 2006 and 2005, respectively. Under U.S. GAAP, as required by SFAS No. 150, "Accounting For Certain Financial Instruments with Characteristics of Both Liabilities and Equity", the redeemable shares of ELETROBRÁS in ELEJOR in the amount of R$98,511 should be recorded in the long-term liabilities, as of December 31, 2006.

As of December 31, 2007, for Brazilian GAAP purposes the Company has recorded the amount of R$94,709 in the long-term liabilities. Consequently, for U.S. GAAP purposes, there are no adjustments of this nature for 2007.

Payment of concession

ELEJOR signed the concession agreement on October 25, 2001 which has a term of 35 years for the Santa Clara and Fundão hydroelectric plants. ELEJOR will pay the Federal Government for the exploitation of hydro-electrical resources, from the sixth through the end of the 35^th year, with annual payments of R$19 million (original amount), payable in monthly installments, beginning on October 25, 2006. This amount is monetarily adjusted, on an annual basis, by the IGP-M. As of December 31, 2007, the contractual obligation, monetarily adjusted, for the payments through the end of the concession totaled R$996,019 (equivalent to R$297,093 at its present value).

Under Brazilian GAAP, the costs related to the contractual obligations for the payments through the end of the concession are recorded similar to rental agreements.

Under U.S. GAAP, the contractual obligations were recorded at present value as a liability, with an offsetting entry as intangible assets, at the date of the acquisition of the concession. As from that date, the reversal of the present value of the liability was recorded as an increase on the intangible assets until the related PP&E became operational and as a financial expense there from. The intangible asset recorded is realized through amortization considering the period from the beginning of operations of related PP&E and the remaining term of the concession.

F - 101

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

	2007
			Amounts	Amounts
			recorded in	recorded in
	Concession	Intangible	shareholders'	statements of
	liability	asset	equity	operations
Net present value at the date of the
acquisition of the concession	98,028	98,028	-	-
Increase of the liability as a result of
monetary adjustment and present value
adjustment reversal	199,065	165,892	(33,173)	(13,883)
Amortization of intangible concession
asset	-	(16,454)	(16,454)	(9,168)
Amounts recorded as of and for the year
ended December 31, 2007 under U.S.
GAAP	297,093	247,466	(49,627)	(23,051)
Liability recorded under Brazilian GAAP as
of December 31, 2007 under Brazilian
GAAP	27,084	-	27,084	(5,086)

				2006
			Amounts	Amounts
			recorded in	recorded in
	Concession	Intangible	shareholders'	statements of
	liability	asset	equity	operations
Net present value at the date of the
acquisition of the concession	98,028	98,028	-	-
Increase of the liability as a result of
monetary adjustment and present value
adjustment reversal	185,182	165,892	(19,290)	(19,290)
Amortization of intangible concession
asset		(7,286)	(7,286)	(7,286)
Amounts recorded as of and for the year
ended December 31, 2006 under U.S.
GAAP	283,210	256,634	(26,576)	(26,576)
Liability recorded under Brazilian GAAP as
of December 31, 2006 under Brazilian
GAAP	32,170	-	32,170	32,170

a(v).13 Acquisition of COPEL Empreendimentos Ltda. (former El Paso Empreendimentos e Participações Ltda.)

F - 102

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

On May 30, 2006, the Company acquired from Aquamarine Holding Power Holdings, all the quotas of El Paso Empreendimentos e Participações, which held 60% of capital quotas of UEG Araucária. The amount paid for this acquisition was R$436,563.

The results of operations of El Paso Empreendimentos e Participações (currently COPEL

Empreendimentos Ltda.) are included in the Company’s consolidated income statements as from June 1, 2006.

Under U.S. GAAP, the Company has recorded such acquisition based on the fair value of the assets acquired and liabilities assumed in accordance with the purchase method of accounting pursuant to SFAS 141.

The fair values of the assets acquired and liabilities assumed at the date of acquisition are summarized in the table below:

	2006
Current assets	13,288
Property, plant and equipment	602,995
Intangible asset (*)	182,026
Total assets acquired	798,309
Current liabilities	1,350
Other liabilities	7,465
Deferred income taxes	61,889
Total liabilities assumed	70,704
Net assets	727,605
Percentage acquired	60%
Net assets acquired	436,563
Total amount paid	436,563

(*) The purchase price allocation identified an intangible asset related to the right to explore UEG Araucária generation concession. The total amount assigned to the intangible asset will be amortized from October 2006 (beginning of UEG operations) to December 22, 2029 (date the concession expires), therefore resulting in an annual amortization rate of 4.3% . The amortization expense recorded under U.S. GAAP was R$7,914 and R$1,979 in the years ended 2007 and 2006, respectively.

F - 103

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

a(v).14 Acquisition of Centrais Eólicas do Paraná

Centrais Eólicas do Paraná Ltda. was created in 1998, whose quota holders were Copel Participações S/A and Wobben Windpower Ind. e Comercio Ltda. The company’s commercial activities started in February, 1999.

In September, 2007, Copel Geração S/A acquired Wobben Windpower’s 70% interest in Centrais Eólicas do Paraná. The amount paid for this acquisition was R$ 2.143. After this operation, Copel Participações S/A and Copel Geração e Transmissão S/A became the owners of Ceopar.

The results of operations of Centrais Eólicas do Paraná are included in the Company’s income statements as from September 1, 2007.

The fair values of the assets acquired and liabilities assumed at the date of acquisition are summarized in the table below:

	2007
Current Assets	1.954
Income tax (*)	436
Property, plant and equipment (*)	701
Total assets acquired	3.091
Current liabilities	30
Total liabilities assumed	30
Net assets	3.061
Percentage acquired	70%
Net assets acquired	2.143
Total amount paid	2.143

(*) The purchase price allocation identified a negative goodwill which was allocated as a pro rata reduction of the property, plant and equipment amounts. The total amount assigned to property, plant and equipment will be amortized from over the useful lives of the respective assets.

a(v).15 Financial statement note disclosures

Brazilian GAAP in general requires less information to be disclosed in the notes to the financial statements than U.S. GAAP. The additional disclosures required by U.S. GAAP, which are relevant to the accompanying financial statements, are included herein.

F - 104

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

a(v).16 Reclassifications

Provisions for contingencies

Under Brazilian GAAP, the provisions for contingencies are stated net of their corresponding judicial deposits in the financial statements.

Under U.S. GAAP, the balances of the provisions for contingencies and their corresponding judicial deposits are recorded gross. Accordingly, non-current assets and long-term liabilities under U.S. GAAP would be increased by R$65,018 and R$35,234 at December 31, 2007 and 2006, respectively. This difference has no net income or equity effect.

(b) Reconciliation of differences between Brazilian GAAP and U.S. GAAP

b(i) Shareholders' equity reconciliation of the differences
between Brazilian GAAP and U.S. GAAP

		December 31
	Ref. to
	Note 35	2007	2006
Shareholders’ equity under Brazilian GAAP		7,236,177	6,376,270
Increase (decrease) due to remeasurement up to December 31, 1997,
based on IGP-DI
Property, plant and equipment
Cost	a.(i)	5,090,269	5,116,799
Accumulated depreciation	a.(i)	(4,576,029)	(4,417,212)
		514,240	699,587
Different criteria for
Capitalization of interest during construction
Reversal of interest capitalized under Brazilian regulated accounting,
net of accumulated depreciation	a.(iv).1	(314,959)	(359,274)
Reversal of monetary and exchange variations and administrative
expenses capitalized under Brazilian regulated accounting, net of
accumulated depreciation	a.(iv).1	(279,519)	(287,616)
Capitalization of interest under U.S. GAAP	a.(iv).1	1,108,273	1,069,790
Depreciation of capitalized interest under U.S. GAAP	a.(iv).1	(791,309)	(755,846)
Reversal of indemnification costs, net of accumulated amortization	a.(iv).3	(202,610)	(108,172)
Pension Plan adjustment	a.(v).1	863,941	947,227
Goodwill adjustment	a.(v).2	37,765	30,046
Impairment of investment	a.(v).2	(3,687)	-
Reversal of equity in results of investees recognized under Brazilian
GAAP	a.(v).3	(52,783)	(52,220)
Deferred charges	a.(v).4	(5,172)	(5,208)
Reversal of concession agreement Elejor recognized under Brazilian
GAAP	a.(v).12	27,084	32,170
Monetary adjustment and present value adjustment reversal on
concession liability - Elejor	a.(v).12	(33,173)	(19,290)
Amortization of intangible concession asset - Elejor	a.(v).12	(16,454)	(7,286)
Reversal of amortization of deferred charges recognized under Brazilian
GAAP - UEGA	a.(v).13	30,112	-
Amortization of goodwill allocated to concession recognized under
U.S. GAAP - UEGA	a.(v).13	(9,893)	(1,979)

F - 105

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

		December 31
	Ref. to
	Note 35	2007	2006
Deferred income tax effects on the adjustments above	a.(v).6	(302,656)	(409,233)
Non controlling shareholders’ interest on the adjustments above		35,357	20,455
Shareholders' equity under U.S. GAAP		7,840,734	7,169,421

b(ii) Net income reconciliation of the differences
between Brazilian GAAP and U.S. GAAP

			Year ended December 31
	Ref. to
	Note 35	2007	2006	2005
Net income under Brazilian GAAP		1,106,610	1,242,680	502,377
Increase (decrease) due to remeasurement up to
December 31, 1997-based on IGP-DI
Property, plant and equipment:
Cost	a.(i)	(26,530)	(17,363)	(23,410)
Depreciation	a.(i)	(158,817)	(156,653)	(170,195)
Special obligations (amortization of remeasurement)	a.(i)			22,710
Reversal of special obligations (amortization of
remeasurement)	a.(v)	-	171,214	-
		(185,347)	(2,802)	(170,895)
Different criteria for
Capitalization of interest during construction
Reversal of interest capitalized under Brazilian
regulated accounting	a.(iv).1	44,315	34,286	36,661
Reversal of monetary and exchange variations and
administrative expenses capitalized under Brazilian
regulated accounting	a.(iv).1	8,097	(1,237)	(49,763)
Capitalization of interest under U.S. GAAP	a.(iv).1	38,483	33,362	(151)
Depreciation of capitalized interest under U.S. GAAP	a.(iv).1	(35,463)	(35,448)	(35,411)
Amortization of special obligations	a.(iv).2	-		26,607
Reversal of amortization of special obligations	a.(iv).2	-	(475,140)	-
Reversal of indemnification costs, net of amortization	a.(iv).3	(94,438)	1,552	19,091
Deferred regulatory asset	a.(iv).4		133,654	255,180
Pension - SFAS 87 adjustments	a.(v).1	(6,932)		(6,363)
Health-care - SFAS 106 adjustments	a.(v).1	(12,562)	(11,660)	(9,856)
Goodwill adjustment	a.(v).2	7,719	5,563	4,808
Impairment of investment	a.(v).2	(3,687)	-	-
Reversal of equity in results of investees recognized
under Brazilian GAAP	a.(v).3	(563)	3,088	(4,374)
Deferred charges	a.(v).4	36	167	(379)
Regulatory adjustment	a.(iv).5	-	(43,641)	-
Reversal of concession agreement Elejor recognized
under Brazilian GAAP	a.(v).12	(5,086)	32,170	-
Monetary adjustment and present value adjustment	a.(v).12	(13,883)	(19,290)	-

F - 106

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

			Year ended December 31
	Ref. to
	Note 35	2007	2006	2005
reversal on concession liability - Elejor
Amortization of intangible concession asset - Elejor	a.(v).12	(9,168)	(7,286)	-
Reversal of amortization of deferred charges recognized
under Brazilian GAAP - UEGA	a.(v).13	30,112	-	-
Amortization of goodwill allocated to concession
recognized under U.S. GAAP - UEGA	a.(v).13	(7,914)	(1,979)	-
Tax incentives	a.(v).5	21,047
Deferred income tax effects on the adjustments above	a.(v).6	84,889	120,821	(11,575)
Non controlling shareholders’ interest on the
adjustments above		14,902	10,437	530
Net income under U.S. GAAP		981,167	1,019,297	556,487
Other comprehensive income	a.(v).7	(42,104)	-	-
Comprehensive income under U.S. GAAP		939,063	1,019,297	556,487
Net income per share in accordance
with U.S. GAAP
Common shares - Basic and Diluted	a.(v).8	3.42	3.56	1.94
Weighted average (thousand) common shares outstanding		145,031	145,031	145,031
Preferred shares Class A - Basic and Diluted	a.(v).8	4.37	4.24	1.27
Weighted average (thousand) preferred shares		399	403	404
Preferred shares Class B - Basic and Diluted	a.(v).8	3.77	3.91	2.14
Weighted average (thousand) preferred shares		128,225	128,221	128,220
Net income allocated to:
Common shares		496,518	515,873	281,860
Preferred shares Class A		1,742	1,707	514
Preferred shares Class B		482,907	501,717	274,113
		981,167	1,019,297	556,487

F - 107

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

b(iii) Statements of changes in shareholders' equity
in accordance with U.S. GAAP

		Year ended December 31
	2007	2006	2005
Shareholders' equity under U.S. GAAP at beginning of the year	7,169,421	5,963,985	5,530,493
Adoption of SFAS 158 as of December 31, 2006, net of deferred
income taxes - recorded directly in accumulated other
comprehensive income	-	467,090	-
Comprehensive income
Net income for the year	981,167	1,019,297	556,487
Other comprehensive income	(42,104)	-	-
Dividends - interest on equity	(267,750)	(280,951)	(122,995)
Shareholders' equity under U.S. GAAP at end of the year	7,840,734	7,169,421	5,963,985

(c) Additional disclosures required by U.S. GAAP

Based on the report of the Company's independent actuaries, the funded status and related amounts under U.S. GAAP as at December 31, 2007 and 2006 for the Company's pension obligations to retirees in accordance with SFAS No. 132 (revised 2003), "Employer's Disclosures About Pensions and Other Post-Retirement Benefits", are as follows:

c(i) Retirement Pension Plan

c(i).1 Changes in Benefit Obligation

	Year ended December 31
	2007	2006
Benefit obligation, beginning of year	2,239,135	2,051,510
Service cost	14,279	7,256
Interest cost	243,846	369,367
Employees’ contributions	327	233
Actuarial (gain) losses	207,330	(16,549)
Benefits paid	(186,312)	(172,682)
Benefit obligation, end of year	2,518,605	2,239,135

F - 108

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

c(i).2 Changes in plan assets

	Year ended December 31
	2007	2006
Fair value of plan assets, beginning of year	2,906,979	2,408,686
Actual return on plan assets	324,401	320,678
Employees' contributions	327	233
Company contributions	46,312	76,288
Actuarial gain	163,742	273,776
Benefits paid	(186,312)	(172,682)
Fair value of plan assets, end of year	3,255,449	2,906,979

c(i).3 Funded status

		December 31
	2007	2006
Actuarial present value of:
Vested benefit obligation	1,799,270	1,564,993
Non-vested benefit obligation	703,763	662,517
Total accumulated benefit obligation	2,503,033	2,227,510
Projected benefit obligation	2,518,605	2,239,135
Fair value of plan assets	(3,255,449)	(2,906,979)
Total liabilities (assets) at December 31	(736,844)	(667,844)
Total (asset) liability accrual required at December 31	(736,844)	(667,844)
Total liabilities recognized by the Company under Brazilian
GAAP	127,097	279,383
Total adjustments to U.S. GAAP shareholders' equity	863,941	947,227

F - 109

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

c(i).4 Actuarial weighted average assumptions (percentage)

		2007		2006		2005
	(i)	(ii)	(i)	(ii)	(i)	(ii)
Discount rate	11.35	6.00	11,30	6.00	11,30	6.00
Salary increase rate	7.15	2.00	7.10	2.00	7.10	2.00
Expected return on plan assets	11.35	6.00	11.30	6.00	11.30	6.00
Inflation	5.05	-	5.00	-	5.00	-

(i)	With inflation
(ii)	Without inflation

c(i).5 Components of Net Periodic Pension Cost

		Year ended December 31
	2007	2006	2005
Service cost	14,279	7,390	6,045
Interest cost	243,846	369,414	331,611
Expected return on assets	(324,401)	(320,715)	(287,936)
Amortizations
Net actuarial gain	(36,810)	(24,434)	(7,567)
Employees' contributions	(327)	(233)	(588)
Net periodic pension cost (revenue) under U.S. GAAP	(103,413)	31,422	41,565
Pension revenue (costs) considered under Brazilian
GAAP	110,345	(31,422)	(35,202)
Adjustment to U.S. GAAP net income	(6,932)	-	(6,363)

The components of the projected net periodic pension credit for 2008 are as follows:

	2008
Service cost	15,989
Interest cost	282,252
Expected return on assets	(363,364)
Amortizations
Net actuarial (gain) loss	(34,836)
Employees’ contribution	(326)
Net periodic pension credit under U.S. GAAP	(100,285)

F - 110

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

c(ii) Post-retirement health-care plan

c(ii).1 Changes in benefit obligation

	Year ended December 31
	2007	2006
Benefit obligation, beginning of year	463,547	433,172
Service cost	2,056	7,325
Interest cost	50,277	52,886
Actuarial gain	(2,381)	-
Benefits paid (only inactive participants)	(36,669)	(30,036)
Benefit obligation, end of year	476,830	463,347

c(ii).2 Changes in plan assets

	Year ended December 31
	2007	2006
Fair value of plan assets, beginning of year	120,324	100,736
Actual return on plan assets	13,476	22,809
Company’s contributions	57,269	53,447
Actuarial losses	(3,837)	-
Benefits paid (only inactive participants)	(72,840)	(56,668)
Fair value of plan assets, end of year	114,392	120,324

c(ii).3 Funded status

		December 31
	2007	2006
Total accumulated benefit obligation	476,830	463,347
Fair value of plan assets	(114,392)	(120,324)
Unfunded position	362,438	343,023
Total liabilities at December 31,	362,438	343,023
Total liabilities recognized by the Company under Brazilian
GAAP	(362,438)	(343,023)
Total adjustments to U.S. GAAP shareholders' equity

F - 111

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

c(ii).4 Net periodic post-retirement costs

		Year ended December 31
	2007	2006	2005
Service cost	2,056	7,325	6,448
Interest cost	50,277	52,886	47,349
Expected return on plan assets	(13,476)	(9,161)	(2,377)
Amortizations
Net actuarial loss	3,512	2,610	806
Unrecognized net transition obligation	9,050	9,050	9,050
Net periodic post-retirement cost under U.S. GAAP	51,419	62,710	61,276
Post-retirement costs considered under Brazilian GAAP	(38,857)	(51,050)	(51,420)
Adjustment to U.S. GAAP net income	(12,562)	(11,660)	(9,856)

The components of the projected net periodic post-retirement cost for 2008 are as follows:

	2008
Service cost	1,492
Interest cost	52,527
Expected return on assets	(12,984)
Amortizations
Net actuarial (gain) loss	9,050
Initial transition obligation	3,656
Net periodic post-retirement cost under U.S. GAAP	53,741

F - 112

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

c (iii) Effect of initial recognition provision of SFAS 158

The FASB issued SFAS nº 158, "Employer's Accounting for Defined Benefit Pension and Other Postretirement Plans” in September 2006. As required, the Company adopted this statement effective on December 31, 2006. The following table illustrates the adjustments of the incremental effect of applying this statement in the consolidated balance sheet as of December 31, 2006:

		Incremental
	Before	effect of	After
	application of	applying	application of
	SFAS 158	SFAS 158	SFAS 158
Prepaid pension cost – non-current assets		842,848	842,848
Liability for pension benefits – non-current	(382,891)	(135,136)	(518,027)
Deferred Income taxes – non-current liabilities		(240,622)	(240,622)
Accumulated other comprehensive income		467,090	467,090

c(iv) Benefits to be paid

The benefits expected to be paid by the Company for the next ten years and in the aggregate for the five fiscal years thereafter are as follows:

		Other
Year	Pension Plan	Benefits	Total
2008	199,381	24,889	224,270
2009	202,474	25,503	227,976
2010	205,813	26,287	232,100
2011	208,936	27,141	236,078
2012	212,067	28,224	240,291
2013	215,264	29,405	244,669
2014	217,703	30,633	248,335
2015	219,367	31,911	251,278
2016	220,271	33,009	253,280
2017	220,658	34,227	254,885
2018 to 2022	1,097,744	185,339	1,283,083

F - 113

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

c(v) Asset allocation and investment strategy

The asset allocation for the Company's pension and health-care plans at the end of 2007 and 2006 and the target allocation for 2008, by asset category, is broken down below:

		Year ended December 31
	Target
	allocation
	for 2008	2007	2006
Equity securities (a)	26.0%	26.4%	27.2%
Real estate (b)	1.6%	1.7%	2.1%
Loans (c)	1.2%	1.2%	1.3%
Fixed income (d)	70.7%	70.2%	68.6%
Other	0.5%	0.5%	0.8%
	100.0%	100.0%	100.0%

	The plan assets are valued using the fair market value assumptions as follows:
(a)	Equities Securities – are valued at market prices based on quoted prices in the Bolsa de Valores de Sao Paulo – BOVESPA (Sao Paulo Stock Exchange).
(b)	Real Estate – the valuation is determined by periodic fair value valuation based on market prices using an independent appraisal report. These independent appraisers use the following valuation methodologies to value the assets: market values for similar assets or replacement cost.
(c)	Loans – are valued based on the present value of cash flows embedded in the loans discounted at an appropriate current market rate. We believe this value represents a fair estimate of their fair market rates.
(d)	Fixed Income – These are securities which generate interest income based on a percentage of the average daily Brazilian interbank interest rate and are thus considered market rates.
	The plan investment strategy is based on a long-term macroeconomic scenario. This scenario presents low Brazil risk, moderate economic growth, stable inflation and exchange rates, and moderate interest rates. The devised asset mix is composed by fixed income, equity securities, loans and real estate. The fixed income target allocation ranges from 37% to 100%, equity securities target allocation is up to 50%, real estate is up to 8% and loans, up to 5%.

F - 114

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

As of December 31, 2007 and 2006, the pension plan assets include securities issued by COPEL as follows:

	Defined benefit pension plan
	2007	2006
Debentures	4,058	11,127
Shares	4,113	3,768
	8,171	14,895

The Company expects to contribute R$45,103 to its pension plan and R$34,478 to its health-care plan in 2008.

Additional information

COPEL is also a sponsor of a defined contribution plan for all employees.

The contribution for the years ended December 31, 2007, 2006 and 2005 were, respectively, R$44,028, R$45,416 and R$41,647.

c(v) Concentration of credit risk

Credit risk with respect to customer accounts receivable is diversified. COPEL continually monitors its customer accounts receivable and limits its exposure to bad debts by curtailing service if any invoice is one month overdue. Exceptions comprise supply of electricity that must be maintained for reasons of safety or national security. The Company purchased electricity for resale from Eletrobrás (Itaipu) totaling R$385,359, R$335,351 and R$464,423, corresponding to 27.0%, 23.3% and 32.3% of the cost of electricity purchased for resale, in 2007, 2006 and 2005, respectively. Eletrobrás owns 1.1% of the Company's common shares.

c(vi) New accounting pronouncements

In June 2006, the FASB issued FASB Interpretation No. 48 (FIN 48), “Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109.” FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in tax returns. Specifically, the financial statement effects of a tax position may be recognized only when it is determined that it is “more likely than not” that, based on its technical merits, the tax position will be sustained upon examination by the relevant tax authority. The amount recognized shall be measured as the largest amount of tax benefits that exceed a 50% probability of being recognized. This interpretation also expands income tax disclosure requirements. The Company applied the provisions of this interpretation beginning in the first quarter of 2007. The adoption of these standards did not present a material impact on the Company’s consolidated financial statements.

F - 115

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

In September 2006, FASB issued SFAS No. 157, “Fair Value Measurements”. SFAS No. 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS No. 157 applies under other accounting pronouncements that require or permit fair value measurement. SFAS No. 157 does not require any new fair value measurements. This statement is initially effective for financial statements issued for fiscal years beginning after November 15, 2007 (calendar year 2008), and is to be applied prospectively as of the beginning of the year in which it is initially applied. For all nonrecurring fair value measurements of non-financial assets and liabilities, the statement is effective for fiscal years beginning after November 15, 2008 (calendar year 2009). The Company is currently evaluating the provisions of this statement, but, as of this date, does not expect the application of this standard to change its current practice. The Company will apply the requirements of SFAS No. 157 as transactions occur.

In February 2007, FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities”, a standard that provides companies with an option to report selected financial assets and liabilities at fair value. The Standard requires companies to provide additional information that shows the effect of the Company’s choice to use fair value on its earnings. It also requires entities to display the fair value of those assets and liabilities for which the Company has chosen to use fair value on the face of the balance sheet. The new Statement does not eliminate disclosure requirements included in other accounting standards, including requirements for disclosures about fair value measurements included in FASB Statements No. 157, “Fair Value Measurements”, and No. 107, “Disclosures about Fair Value of Financial Instruments”. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year beginning after November 15, 2007. The Company elected not to apply the fair value option to any of its financial assets or liabilities at January 1, 2008.

In December 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 141(R), “Business Combinations.” Statement 141(R) establishes principles and requirements for how an acquiring entity in a business combination recognizes and measures the assets acquired and liabilities assumed in the transaction; establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed; and requires the acquirer to disclose to investors and other users all of the information needed to evaluate and understand the nature and financial effect of the business combination. This statement will be effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008 (calendar year 2009).

In December, 2007, the FASB also issued SFAS No. 160, “Non controlling shareholders’ interest s in Consolidated Financial Statements, an amendment of ARB 51.” This statement clarifies that a non-controlling (minority) interest in a subsidiary is an ownership interest in the entity that should be reported as equity in the consolidated financial statements. It also requires consolidated net income to include the amounts attributable to both the parent and Non controlling shareholders’ interest , with disclosure on the face of the consolidated income statement of the amounts attributed to the parent and to the Non controlling shareholders’ interest . This statement will be effective prospectively for fiscal years beginning after December 15, 2008 (calendar year 2009), with presentation and disclosure requirements applied retrospectively to comparative financial statements. The Company is currently evaluating the provisions of this statement.

F - 116

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

In March 2008, the FASB issued SFAS 161, “Disclosures about Derivative Instruments and Hedging Activities”—an amendment of FASB Statement No. 133. This Statement requires enhanced disclosures about an entity’s derivative and hedging activities and thereby improves the transparency of financial reporting. This Statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. This Statement encourages, but does not require, comparative disclosures for earlier periods at initial adoption. Management is evaluating the potential impacts of this statement in company’s consolidated financial statements.

In May 2008, the FASB issued SFAS 162, “The Hierarchy of Generally Accepted Accounting Principles”. This Statement identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States. This Statement shall be effective 60 days following SEC’s approval of the Public Company Accounting Oversight Board (PCAOB) amendments to AU Section 411 “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles”. Management is evaluating the potential impacts of this statement in company’s consolidated financial statements.

36 Condensed unconsolidated financial information of Companhia Paranaense de Energia – COPEL

The condensed unconsolidated financial information of Companhia Paranaense de Energia - COPEL, as of December 31, 2007 and 2006 and for each of the three years in the period ending on December 31, 2007, under Brazilian GAAP is as follows:

(a) Balance sheets

	2007	2006
Assets
Current assets
Cash and cash equivalents	56,186	584,702
Dividends receivable	700,225	760,282
Recoverable taxes	79,328	72,298
Collateral deposits	2,806	-
Other assets, net	8	2
	838,553	1,417,284
Non-current assets
Related parties	795,933	739,359
Recoverable taxes	125,712	61,101
Judicial deposits	34,730	47,935
	956,375	848,395
Permanent assets
Investments	7,267,064	6,631,623
	9,061,992	8,897,302
Liabilities and shareholders’ equity
Current liabilities
Loans and financing	20,223	9,243

F - 117

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

	2007	2006
Debentures	168,599	822,404
Taxes and social contribution	51,818	67,719
Dividends and interest on equity	244,023	268,596
Other	1,343	699
	486,006	1,168,661
Non-current liabilities
Loans and financing	400,032	92,787
Debentures	733,360	866,680
Provision for contingencies	206,417	24,282
Related parties	-	368,622
	1,339,809	1,352,371
Shareholders' equity
Capital stock	4,460,000	3,875,000
Capital reserves	838,340	817,293
Profit reserves	1.937,837	1,683,977
	7,236,177	6,376,270
Total liabilities and shareholders' equity	9,061,992	8,897,302

(b) Statements of operations

	2007	2006	2005
Operating income (expenses)
Personnel expenses	(5,621)	(5,354)	(4,485)
Third party services	(5,249)	(8,042)	(6,449)
Taxes and social contribution	(35)	(1,761)	(22,424)
Provisions and reversals	(197,130)	165,548	(238)
Other expenses, net	(1,145)	(4,002)	(2,986)
	(209,180)	146,389	(36,582)
Operating profit (loss) before financial results and equity in
results of investees	(209,180)	146,389	(36,582)
Financial results
Financial income	90,891	45,221	15,199
Financial expenses	(193,806)	(174,457)	(119,792)
	(102,915 )	(129,236)	(104,593)
Equity in results of investees	1,346,836	1,317,590	635,163
Operating profit	1,034,741	1,334,743	493,988
Non-operating income (expenses), net	12,910	395	187
Income tax and social contribution	58,959	(92,458)	8,202
Net income for the year	1,106,610	1,242,680	502,377

F - 118

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

(c) Statements of cash flows

	2007	2006	2005
Net cash provided by operating activities	152,399	677,132	136,677
Investing activities
Interest in other companies:
COPEL Transmissão	-	(86,217 )	(3,400)
COPEL Participações	-	(518,526)	(40,597)
Others	(5,836)	-	-
Net cash provided by (used in) investing activities	(5,836)	(604,743)	43,997
Financing activities
Loans and financing obtained	334,982	(9,756)	(417,495)
Debentures	(717,738)	629,408	435,851
Dividends paid	(292,323)	(122,922)	(98,734)
Net cash provided by (used in) financing activities	(675,079)	496,730	(80,378)
Increase (decrease) in cash and cash equivalents	(528,516)	569,119	12,302
Cash and cash equivalents - beginning of year	584,702	15,583	3,281
Cash and cash equivalents - end of year	56,186	584,702	15,583
Increase (decrease) in cash and cash equivalents	(528,516)	569,119	12,302

Information relating to Companhia Paranaense de Energia - COPEL unconsolidated condensed financial statements presented above is as follows:

• Recoverable Taxes - As of December 31, 2007 and 2006 Companhia Paranaense de Energia - COPEL recorded part of the tax credits referring to tax loss carryforwards, based on expectations of future taxable income for income tax and social contribution up to a period of 10 years.
  
  
• Related Parties: The Company has the following balances outstanding with related parties:

	2007	2006
Non-current assets
COPEL Geração e Transmissão	-	21,344
COPEL Distribuição	761,086	718,015
COPEL Empreendimenos Ltda	34,847	-
Total	795,933	739,359

Non-current liabilities

F - 119

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

COPEL Geração e Transmissão	-	368,622
Total	-	368,622

• Investments - As of December 31, 2007 and 2006, investments in subsidiaries are comprised as follows:

	2007	2006
COPEL Geração e Transmissão	3,144,442	2,509,233
COPEL Transmissão	-	1,063,740
COPEL Distribuição	2,663,911	1,689,286
COPEL Telecomunicações	193,735	184,287
COPEL Participações	1,226,802	1,180,415
Other Investments	38,174	4,662
	7,267,064	6,631,623

• Debentures - The information related to the Company’s debentures is disclosed in note 17, items a, b and c.
• Provision for contingencies - Companhia Paranaense de Energia - COPEL recorded a reserves for contingencies mainly related to Cofins and PIS/PASEP. See note 21 for more information.

The provisions for contingencies are shown below:

	2007	2006
Civil	16	15
Tax:
Tax claims	34,570	24,049
PIS/PASEP	218	218
COFINS	171,613	-
	206,417	24,282

• Dividends receivable - The dividends receivable are comprised as follows:

	2007	2006
Investees and subsidiaries
COPEL Geração e Transmissão	504,688	644,418
COPEL Transmissão	-	60,014
COPEL Distribuição	178,300	52,913
COPEL Participações	17,237	2,893
	700,225	760,238
Other investments	-	44
	700,225	760,282

F - 120

Companhia Paranaense de Energia - COPEL 

Notes to the Consolidated Financial Statements 

All amounts expressed in thousands of Brazilian reais unless otherwise stated 

Restriction of transfer of funds from subsidiaries - The subsidiaries described below qualify as either concessionaires of public services or independent power producers. As such, any transfer of funds to the respective parent company, in the form of loans or advances, requires approval by ANEEL. This regulatory restriction does not apply to cash dividends determined in accordance with the Brazilian Corporate Law.

As of December 31, 2007, total restricted subsidiaries net assets amount to R$6,588,376 composed as follows:

	2007
COPEL Geração e Transmissão S.A.	3,144,442
COPEL Distribuição S.A.	2,663,911
UEG Araucária Ltda.	662,218
Centrais Elétricas Rio Jordão – Elejor	117,805
Total	6,588,376

* * *

F - 121

EX-1.1

   EXHIBIT 1.1

EX-2.1

Table of Contents

Exhibit 2.1

[EXECUTION COPY]

COMPANHIA PARANAENSE DE ENERGIA--COPEL

AND

THE BANK OF NEW YORK

                                As Depositary

AND

OWNERS AND BENEFICIAL OWNERS OF
AMERICAN DEPOSITARY SHARES

Deposit Agreement

Dated as of March 21, 1996

Amended and Restated as of November 21, 2007

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DEPOSIT AGREEMENT

     DEPOSIT AGREEMENT dated as of March 21, 1996, as amended and restated as of November 21, 2007 among COMPANHIA PARANAENSE DE ENERGIA-- COPEL, a sociedade de economia mista (a mixed-capital corporation with limited liability) organized under the laws of the Federative Republic of Brazil (herein called the Company), THE BANK OF NEW YORK, a New York banking corporation (herein called the Depositary), and all Owners and Beneficial Owners from time to time of American Depositary Receipts issued hereunder.

WITNESSETH:

     WHEREAS, the Company and the Depositary entered into a Deposit Agreement, dated March 21, 1996 relating to the Company' s common shares (the "COPEL Deposit Agreement");

     WHEREAS, the Company and the Depositary now wish to amend the COPEL Deposit Agreement to, among other things, provide for the creation of uncertificated American Depositary Shares;

     WHEREAS, the Company desires to provide, as hereinafter set forth in this Deposit Agreement for the deposit of Shares (as hereinafter defined) of the Company from time to time with the Depositary or with the Custodian (as hereinafter defined) as agent of the Depositary for the purposes set forth in the Deposit Agreement, for the creation of American Depositary Shares representing the Shares so deposited, in specified circumstances, and for the execution and delivery of American Depositary Receipts evidencing the American Depositary Shares; and

     WHEREAS, the American Depositary Receipts are to be substantially in the form of Exhibit A annexed hereto, with appropriate insertions, modifications and omissions, as hereinafter provided in this Amended and Restated Deposit Agreement.

     NOW, THEREFORE, in consideration of the premises, the parties hereto hereby agree that, pursuant to Section 6.01 of this Deposit Agreement, this Deposit Agreement shall be amended and restated as follows:

ARTICLE 1

DEFINITIONS

     The following definitions shall for all purposes, unless otherwise clearly indicated, apply to the respective terms used in this Deposit Agreement:

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Section 1.01 American Depositary Shares.

     The term "American Depositary Shares" shall mean the securities representing the interests in the Deposited Securities and evidenced by the Receipts issued hereunder. Each American Depositary Share shall represent the number of Shares specified in Exhibit A annexed hereto, until there shall occur a distribution upon Deposited Securities covered by Section 4.03 or a change in Deposited Securities covered by Section 4.08 or otherwise with respect to which additional Receipts are not executed and delivered, and thereafter American Depositary Shares shall evidence the amount of Shares or Deposited Securities specified in such Sections.

Section 1.02 Beneficial Owner.

     The term "Beneficial Owner" shall be any person who has a beneficial interest in any American Depositary Share.

Section 1.03 Business Day.

     The term "Business Day" shall mean any day on which banks in each of São Paulo, Brazil, Curitiba, Brazil and New York, New York are not required or authorized by law to close.

Section 1.04 Central Bank.

     The term "Central Bank" shall mean Banco Central do Brasil and its successors.

Section 1.05 Charter.

     The term "Charter" shall mean the Estatuto Social of the Company.

Section 1.06 Commission.

     The term "Commission" shall mean the Securities and Exchange Commission of the United States or any successor governmental agency in the United States.

Section 1.07 Company.

     The term "Company" shall mean Companhia Paranaense de Energia--COPEL, a sociedade de economia mista (a mixed-capital corporation with limited liability), organized under the laws of the Federative Republic of Brazil, and its successors.

Section 1.08 Custodian.

     The term "Custodian" shall mean the principal São Paulo, Brazil office of [Banco Itaú S/A], as agent of the Depositary for the purposes of this Deposit Agreement, and any other firm or corporation which may hereafter be appointed by the Depositary pursuant to

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the terms of Section 5.05, as substitute or additional custodian or custodians hereunder, as the context shall require and shall also mean all of them collectively.

Section 1.09 CVM.

     The term "CVM" shall mean the Comissão de Valores Mobiliários of Brazil.

Section 1.10 Deposit Agreement.

     The term "Deposit Agreement" shall mean this amended and restated Deposit Agreement, including Exhibit A hereto, as the same may be amended from time to time in accordance with the provisions hereof.

Section 1.11 Depositary; Corporate Trust Office.

     The term "Depositary" shall mean The Bank of New York, a New York banking corporation, and any successor as depositary hereunder. The term "Corporate Trust Office", when used with respect to the Depositary, shall mean the office of the Depositary which at the date of this Deposit Agreement is 101 Barclay Street, New York, New York 10286.

Section 1.12 Deposited Securities.

     The term "Deposited Securities" as of any time shall mean Shares at such time deposited or deemed to be deposited (including as contemplated under Section 2.09) under this Deposit Agreement and any and all other securities, property and cash received or deemed to be received by the Depositary or the Custodian in respect or in lieu of such deposited Shares and at such time held hereunder, subject as to cash to the provisions of Section 4.05.

Section 1.13 Dollars; Reais.

     The term "Dollars" shall mean United States dollars. The term "Reais" shall mean the lawful currency of Brazil.

Section 1.14 Foreign Currency.

     The term "Foreign Currency" shall mean currency other than Dollars.

Section 1.15 Foreign Registrar.

     The term "Foreign Registrar" shall mean the entity that presently carries out the duties of registrar for the Shares or any successor as registrar for the shares and any other appointed agent of the Company for the transfer and registration of Shares.

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Section 1.16 Owner.

     The term "Owner" shall mean the person in whose name a Receipt is registered on the books of the Depositary maintained for such purpose.

Section 1.17 Pre-Release.

     The term "Pre-Release" shall have the meaning set forth in Section 2.09.

Section 1.18 Receipts.

     The term "Receipts" shall mean the American Depositary Receipts issued hereunder evidencing American Depositary Shares, as the same may be amended from time to time in accordance with the provisions hereof.

Section 1.19 Registrar.

     The term "Registrar" shall mean any bank or trust company having an office in the Borough of Manhattan, The City of New York, which shall be appointed to register Receipts and transfers of Receipts as herein provided.

Section 1.20 Restricted Securities.

     The term "Restricted Securities" shall mean Shares, or American Depositary Shares which are acquired directly or indirectly from the Company or its affiliates (as defined in Rule 144), or which are held by an officer, director (or persons performing similar functions) or other affiliate of the Company, or which would require registration under the Securities Act in connection with the offer and sale thereof in the United states, or which are subject to other restrictions on sale or deposit under the laws of the United States or Brazil.

Section 1.21 Rule 144.

     The term "Rule 144" shall mean Rule 144, as from time to time amended, under the Securities Act of 1933.

Section 1.22 Securities Act.

     The term "Securities Act" shall mean the United States Securities Act of 1933, as from time to time amended.

Section 1.23 Securities Exchange Act.

     The "Securities Exchange Act" shall mean the United States Securities Exchange Act of 1934, as from time to time amended.

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Section 1.24 Shares.

     The term "Shares" shall mean shares of the Company' s ações ordinárias (common shares) heretofore validly issued and outstanding and fully paid; nonassessable and free of any pre-emptive rights of the holders of outstanding Shares or hereafter validly issued, subscribed and outstanding and fully paid, nonassessable and free of any pre-emptive rights of the holders of outstanding Shares or interim certificates representing such Shares.

ARTICLE 2

FORM OF RECEIPTS, DEPOSIT OF SHARES, EXECUTION AND DELIVERY, TRANSFER AND SURRENDER OF RECEIPTS

Section 2.01 Form and Transferability of Receipts.

     Definitive Receipts shall be substantially in the form set forth in Exhibit A annexed to this Deposit Agreement, with appropriate insertions, modifications and omissions, as hereinafter provided. No Receipt shall be entitled to any benefits under this Deposit Agreement or be valid or obligatory for any purpose, unless such Receipt shall have been executed by the Depositary by the manual signature of a duly authorized signatory of the Depositary; provided, however, that such signature may be a facsimile if a Registrar for the Receipts shall have been appointed and such Receipts are countersigned by the manual signature of a duly authorized officer of the Registrar. Receipts may be issued in denominations of any whole number of American Depositary Shares. The Depositary shall maintain books on which each Receipt so executed and delivered as hereinafter provided and the transfer of each such Receipt shall be registered. Receipts bearing the facsimile signature of a duly authorized signatory of the Depositary who was at any time a proper signatory of the Depositary shall bind the Depositary, notwithstanding that such signatory has ceased to hold such office prior to the execution and delivery of such Receipts by the Registrar or did not hold such office on the date of issuance of such Receipts.

     The Receipts may be endorsed with or have incorporated in the text thereof such legends or recitals or modifications not inconsistent with the provisions of this Deposit Agreement or with any provisions of the Charter or Brazilian law as may be reasonably required by the Depositary in order to comply with any applicable law or regulations thereunder or with the rules and regulations of any securities exchange upon which American Depositary Shares may be listed or to conform with any usage with respect thereto, or to indicate any special limitations or restrictions to which any particular Receipts are subject by reason of the date of issuance of the underlying Deposited securities or otherwise.

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     Title to a Receipt (and to the American Depositary Shares evidenced thereby), when properly endorsed or accompanied by proper instruments of transfer, shall be transferable by delivery with the same effect as in the case of a negotiable instrument; provided, however, that the Depositary and the Company, notwithstanding any notice to the contrary, may treat the Owner thereof as the absolute owner thereof for the purpose of determining the person entitled to distribution of dividends or other distributions or to any notice provided for in this Deposit Agreement and for all other purposes.

Section 2.02 Deposit of Shares.

     Subject to the terms and conditions of this Deposit Agreement, Shares, or evidence of rights to receive Shares to the extent permitted by Section 2.09, may be deposited by delivery thereof (including by book-entry credit) to any Custodian hereunder, accompanied by any appropriate instrument or instruments of transfer, or endorsement, in form satisfactory to the Custodian, together with all such certifications as may be required by the Depositary, the Custodian or the Company in accordance with the provisions of this Deposit Agreement, and, if the Depositary requires, together with a written order directing the Depositary to execute and deliver to, or upon the written order of, the person or persons stated in such order, a Receipt or Receipts for the number of American Depositary Shares representing such deposit. No Share shall be accepted for deposit unless accompanied by evidence reasonably satisfactory to the Depositary that any necessary approval has been granted by the governmental body or bodies in Brazil which is or are then regulating currency exchange.

     If required by the Depositary, Shares presented for deposit at any time, whether or not the transfer books of the Company or the Foreign Registrar, if applicable, are closed, shall also be accompanied by (i) an agreement or assignment, or other instrument satisfactory to the Depositary, which will provide for the prompt transfer to the Custodian of any dividend, or right to subscribe for additional Shares or to receive other property which any person in whose name the Shares are or have been recorded may thereafter receive upon or in respect of such deposited Shares, or in lieu thereof, such agreement of indemnity or other agreement as shall be satisfactory to the Depositary and (ii) if the Shares are registered in the name of the person on whose behalf they are presented for deposit, a proxy or proxies entitling the Custodian to vote such deposited Shares, insofar as permitted under Brazilian law and the Charter, for any and all purposes until the Shares are registered in the name of the Custodian or its nominees.

     At the request and risk and expense of any person proposing to deposit Shares, and for the account of such person, the Depositary may receive certificates for Shares to be deposited, together with the other documents herein specified, for the purpose of forwarding such share certificates to the Custodian for deposit hereunder.

     Upon each delivery to a Custodian of Shares to be deposited hereunder, together with the other documents above specified, such Custodian shall, as soon as transfer and recordation can be accomplished, present such evidence of ownership to the Company or

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the Foreign Registrar, if applicable, for transfer and recordation of the Shares being deposited in the name of the Depositary or its nominee or such Custodian or its nominee at the cost and expense of the person making such deposit (or for whose benefit such deposit is made) and shall obtain evidence satisfactory to it of such registration.

     Deposited Securities shall be held by the Depositary or by a Custodian for the account and to the order of the Depositary or at such other place or places as the Depositary shall determine.

Section 2.03 Execution and Delivery of Receipts.

     Upon receipt by any Custodian of any deposit pursuant to Section 2.02 hereunder (and in addition, if the transfer books of the company or the Foreign Registrar, if applicable, are open, the Depositary may in its sole discretion require a proper acknowledgment or other evidence from the Company or the Foreign Registrar, as the case may be, that any Deposited Securities have been recorded upon the books of the Company or the Foreign Registrar, if applicable, in the name of the Depositary or its nominee or such Custodian or its nominee), together with the other documents required as above specified, such Custodian shall notify the Depositary of such deposit and the person or persons to whom or upon whose written order a Receipt or Receipts are deliverable in respect thereof and the number of American Depositary shares to be evidenced thereby. Such notification shall be made by letter or, at the request, risk and expense of the person making the deposit, by cable, telex or facsimile transmission. Upon receiving such notice from such Custodian, or upon the receipt of Shares by the Depositary, the Depositary, subject to the terms and conditions of this Deposit Agreement, shall, as promptly as practicable, execute and deliver at its Corporate Trust Office, to or upon the order of the person or persons entitled thereto, a Receipt or Receipts, registered in the name or names and evidencing any authorized number of American Depositary Shares requested by such person or persons, but only upon payment to the Depositary of the fees of the Depositary for the execution and delivery of such Receipt or Receipts as provided in Section 5.09, and of all taxes and governmental charges and fees, if any, payable in connection with such deposit and the transfer of the Deposited Securities. The Depositary shall not issue Receipts except in accordance with this Section 2.03 and Sections 2.04, 2.07, 2.09, 4.03, 4.04 and 4.08.

Section 2.04 Transfer of Receipts; Combination and Split-up of Receipts.

     The Depositary, subject to the terms and conditions of this Deposit Agreement, shall register transfers of Receipts on its transfer books from time to time, upon any surrender of a Receipt, by the Owner in person or by a duly authorized attorney, properly endorsed or accompanied by proper instruments of transfer, and duly stamped as may be required by the laws of the State of New York and of the United States of America. Thereupon the Depositary shall execute a new Receipt or Receipts and deliver the same to or upon the order of the person entitled thereto.

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     The Depositary, subject to the terms and conditions of this Deposit Agreement, shall upon surrender of a Receipt or Receipts for the purpose of effecting a split-up or combination of such Receipt or Receipts, execute and deliver a new Receipt or Receipts for any authorized number of American Depositary Shares requested, evidencing the same aggregate number of American Depositary Shares as the Receipt or Receipts surrendered.

     The Depositary may appoint, upon at least 20 days' written notice to the Company, one or more co-transfer agents, reasonably acceptable to the Company, for the purpose of effecting transfers, combinations and split-ups of Receipts at designated transfer offices on behalf of the Depositary. In carrying out its functions, a co-transfer agent may require evidence of authority and compliance with applicable laws and other requirements by Owners or persons entitled to Receipts and will be entitled to protection and indemnity to the same extent as the Depositary.

Section 2.05 Surrender of Receipts and Withdrawal of Shares.

     Upon surrender at the Corporate Trust Office of the Depositary of a Receipt for the purpose of withdrawal of the Deposited Securities represented by the American Depositary Shares evidenced by such Receipt, and upon payment of the fee of the Depositary for the surrender of Receipts as provided in Section 5.09 and payment of all taxes and governmental charges, if any, payable in connection with such surrender and withdrawal of the Deposited Securities, and subject to the terms and conditions of this Deposit Agreement, the Charter, the provisions of or governing the Deposited Securities and applicable law, the Owner of such Receipt shall be entitled to delivery, to him or upon his order, of the amount of Deposited Securities at the time represented by the American Depositary Shares evidenced by such Receipt. Delivery of such Deposited Securities may be made by (a) (i) the delivery of certificates in the name of such Owner or as ordered by him or certificates properly endorsed or accompanied by proper instruments of transfer to such Owner or as ordered by him, or (ii) book-entry transfer of the Shares represented by such Receipt to an account in the name of such Owner or as ordered by him, and (b) delivery of any other securities, property and cash to which such Owner is then entitled in respect of such Receipts to such Owner or as ordered by him. Such delivery shall be made, as promptly as practicable, as hereinafter provided.

     A Receipt surrendered for such purposes may be required by the Depositary to be properly endorsed in blank or accompanied by proper instruments of transfer in blank, and if the Depositary so requires, the Owner thereof shall execute and deliver to the Depositary a written order directing the Depositary to cause the Deposited Securities being withdrawn to be delivered to or upon the written order of a person or persons designated in such order. Thereupon the Depositary shall, as promptly as practicable, direct the Custodian to deliver at the São Paulo, Brazil office of such Custodian, subject to Sections 2.06, 3.01 and 3.02 and to the other terms and conditions of this Deposit Agreement and the Charter, to or upon the written order of the person or persons

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designated in the order delivered to the Depositary as above provided, the amount of Deposited Securities represented by the American Depositary Shares evidenced by such Receipt, except that the Depositary may make delivery to such person or persons at the Corporate Trust Office of the Depositary of any dividends or distributions with respect to the Deposited Securities represented by the American Depositary Shares evidenced by such Receipt, or of any proceeds of sale of any dividends, distributions or rights, which may at the time be held by the Depositary.

     At the request, risk and expense of any Owner so surrendering a Receipt, and for the account of such Owner, the Depositary shall direct the Custodian to forward any cash or other property (other than rights) comprising, and forward a certificate or certificates and other proper documents of title for, the Deposited Securities represented by the American Depositary Shares evidenced by such Receipt to the Depositary for delivery at the Corporate Trust Office of the Depositary. Such direction shall be given by letter or, at the request, risk and expense of such Owner, by cable, telex or facsimile transmission.

     Neither the Depositary nor the Custodian shall deliver Shares, by physical delivery, book entry or otherwise (other than to the Company or its agent as contemplated by Section 4.08), or otherwise permit Shares to be withdrawn from the facility created hereby, except upon the receipt and cancellation of Receipts.

     Section 2.06 Limitations on Execution and Delivery, Transfer and Surrender of Receipts.

     As a condition precedent to the execution and delivery, registration of transfer, split-up, combination or surrender of any Receipt, the delivery of any distribution thereon, or withdrawal of any Deposited Securities, the Company, Depositary, Custodian or Registrar may require payment from the depositor of Shares or the presenter of the Receipt of a sum sufficient to reimburse it for any tax or other governmental charge and any stock transfer or registration fee with respect thereto (including any such tax, charge or fee with respect to Shares being deposited or withdrawn) and payment of any fees of the Depositary as provided in Section 5.09, may require the production of proof satisfactory to it as to the identity and genuineness of any signature and may also require compliance with such reasonable regulations as the Depositary and the Company may establish consistent with the provisions of this Deposit Agreement, including, without limitation, this Section 2.06 and any regulations deemed necessary or desirable by the Depositary or the Custodian to facilitate compliance with any applicable rules or regulations of the Central Bank or the (the CVM).

     The delivery of Receipts against deposits of Shares generally or against deposits of particular Shares may be suspended, or the transfer of Receipts in particular instances may be refused, or the registration of transfer of outstanding Receipts or the combination or split-up of Receipts generally may be suspended, during any period when the transfer books of the Depositary are closed, or if any such action is deemed necessary or advisable by the Depositary or the Company at any time or from time to time because of

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any requirement of law or of any government or governmental body or commission, or under any provision of this Deposit Agreement, or for any other reason, subject to the provisions of the following sentence. Notwithstanding anything to the contrary in this Deposit Agreement or the Receipts, the surrender of outstanding Receipts and withdrawal of Deposited securities may be suspended only for (i) temporary delays caused by closing the transfer books of the Depositary or the Company or the deposit of Shares in connection with voting at a shareholders' meeting, or the payment of dividends, (ii) the payment of fees, taxes and similar charges, (iii) compliance with any U.S. or foreign laws or governmental regulations relating to the Receipts or to the withdrawal of the Deposited Securities, or (iv) any other reason that may at any time be specified in paragraph I (A) (1) of the General Instructions to Form F-6, as from time to time in effect, or any successor provision thereto. Without limitation of the foregoing, the Depositary shall not knowingly accept for deposit under this Deposit Agreement any Shares required to be registered under the provisions of the Securities Act, unless a registration statement is in effect as to such shares. The Depositary will comply with written instructions of the Company that the Depositary shall not accept for deposit hereunder any Shares identified in such instructions at such times and under such circumstances as may reasonably be specified in such instructions in order to facilitate the Company's compliance with the securities laws in the United States.

Section 2.07 Lost Receipts, etc.

     In case any Receipt shall be mutilated, destroyed, lost or stolen, the Depositary shall execute and deliver a new Receipt of like tenor in exchange and substitution for such mutilated Receipt upon cancellation thereof, or in lieu of and in substitution for such destroyed, lost or stolen Receipt. Before the Depositary shall execute and deliver a new Receipt in substitution for a destroyed, lost or stolen Receipt, the Owner thereof shall have (a) filed with the Depositary (i) a request for such execution and delivery before the Depositary has notice that the Receipt has been acquired by a bona fide purchaser and (ü) a sufficient indemnity bond and (b) satisfied any other reasonable requirements imposed by the Depositary.

Section 2.08 Cancellation and Destruction of Surrendered Receipts.

     All Receipts surrendered to the Depositary shall be cancelled by the Depositary. The Depositary is authorized to destroy Receipts so cancelled, subject to Section 2.10.

Section 2.09 Pre-Release of Receipts.

     The Depositary may issue Receipts against rights to receive Shares from the Company (or any agent of the Company recording Share ownership). No such issue of Receipts will be deemed a "Pre-Release" subject to the restrictions of the following paragraph.

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     Unless requested in writing by the Company to cease doing so, the Depositary may, notwithstanding Section 2.03 hereof, execute and deliver Receipts prior to the receipt of Shares pursuant to Section 2.02 ("Pre-Release"). The Depositary may, pursuant to Section 2.05, deliver Shares upon the receipt and cancellation of Receipts which have been Pre-Released, whether or not such cancellation is prior to the termination of such Pre-Release or the Depositary knows that such Receipt has been Pre-Released. The Depositary may receive Receipts in lieu of Shares in satisfaction of a Pre-Release. Each Pre-Release will be (a) preceded or accompanied by a written representation and agreement from the person to whom Receipts are to be delivered (the "Pre-Releasee") that the Pre-Releasee, or its customer, (i) owns the Shares or Receipts to be remitted, as the case may be, (ii) assigns all beneficial right, title and interest in such Shares or Receipts, as the case may be, to the Depositary in its capacity as such and for the benefit of the Owners, and (iii) will not take any action with respect to such Shares or Receipts, as the case may be, that is inconsistent with the transfer of beneficial ownership (including, without the consent of the Depositary, disposing of such shares or Receipts, as the case may be, other than in satisfaction of such Pre-Release), (b) at all times fully collateralized with cash, U.S. government securities or such other collateral as the Depositary determines, in good faith, will provide substantially similar liquidity and security, (c) terminable by the Depositary on not more than five (5) Business Days notice, and (d) subject to such further indemnities and credit regulations as the Depositary deems appropriate. The number of Shares not deposited but represented by American Depositary Shares outstanding at any time as a result of Pre-Releases will not normally exceed thirty percent (30%) of the Shares deposited hereunder; provided, however, that the Depositary reserves the right to disregard such limit from time to time as it deems reasonably appropriate, and may, with the prior written consent of the Company, change such limit for purposes of general application. The Depositary will also set Dollar limits with respect to Pre-Release transactions to be entered into hereunder with any particular Pre-Releasee on a case-by-case basis as the Depositary deems appropriate. For purposes of enabling the Depositary to fulfill its obligations to the Owners under the Deposit Agreement, the collateral referred to in clause (b) above shall be held by the Depositary as security for the performance of the Pre-Releasee's obligations to the Depositary in connection with a Pre-Release transaction, including the Pre-Releasee's obligation to deliver Shares or Receipts upon termination of a Pre-Release transaction (and shall not, for the avoidance of doubt, constitute Deposited Securities hereunder).

     The Depositary may retain for its own account any compensation received by it in connection with the foregoing.

Section 2.10 Maintenance of Records.

     The Depositary agrees to maintain or cause its agents to maintain records of all Receipts surrendered and Deposited Securities withdrawn under Section 2.05, substitute Receipts delivered under Section 2.07, and of cancelled or destroyed Receipts under Section 2.08, in keeping with procedures ordinarily followed by stock transfer agents

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located in The City of New York or as required by the laws or regulations governing the Depositary. Prior to destroying any such records, the Depositary will notify the Company and will turn such records over to the Company upon its request.

Section 2.11 Uncertificated American Depositary Shares; DTC Direct Registration System.

     Notwithstanding anything to the contrary in this Deposit Agreement:

     (a) American Depositary Shares may be certificated securities evidenced by Receipts or uncertificated securities. The form of Receipt annexed as Exhibit A to this Deposit Agreement summarizes the terms and conditions of, and will be the prospectus required under the Securities Act of 1933 for, both certificated and uncertificated American Depositary Shares. Except for those provisions of this Deposit Agreement that by their nature do not apply to uncertificated American Depositary Shares, all the provisions of this Deposit Agreement shall apply, mutatis mutandis, to both certificated and uncertificated American Depositary Shares.

     (b) (i) The term "deliver", or its noun form, when used with respect to Receipts, shall mean (A) book-entry transfer of American Depositary Shares to an account at The Depository Trust Company, or its successor ("DTC"), designated by the person entitled to such delivery, evidencing American Depositary Shares registered in the name requested by that person, (B) registration of American Depositary Shares not evidenced by a Receipt on the books of the Depositary in the name requested by the person entitled to such delivery and mailing to that person of a statement confirming that registration or (C) if requested by the person entitled to such delivery, delivery at the Corporate Trust Office of the Depositary to the person entitled to such delivery of one or more Receipts.

     (ii) The term "surrender", when used with respect to Receipts, shall mean (A) one or more book-entry transfers of American Depositary Shares to the DTC account of the Depositary, (B) delivery to the Depositary at its Corporate Trust Office of an instruction to surrender American Depositary Shares not evidenced by a Receipt or (C) surrender to the Depositary at its Corporate Trust Office of one or more Receipts evidencing American Depositary Shares.

     (c) American Depositary Shares not evidenced by Receipts shall be transferable as uncertificated registered securities under the laws of New York.

     (d) The Depositary shall have a duty to register a transfer, in the case of uncertificated American Depositary Shares, upon receipt from the Owner of a proper instruction (including, for the avoidance of doubt, instructions through DRS and Profile as provided in subsection (f) below). The Depositary, upon surrender of a Receipt for the purpose of exchanging it for uncertificated American Depositary Shares, shall cancel that Receipt and send the Owner a statement confirming that the Owner is the owner of the

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same number of uncertificated American Depositary Shares that the surrendered Receipt evidenced. The Depositary, upon receipt of a proper instruction (including, for the avoidance of doubt, instructions through DRS and Profile as provided in subsection (f) below) from the Owner of uncertificated American Depositary Shares for the purpose of exchanging them for certificated American Depositary Shares, shall execute and deliver to the Owner a Receipt evidencing the same number of certificated American Depositary Shares.

     (e) Upon satisfaction of the conditions for replacement of a Receipt that is mutilated, lost, destroyed or stolen, the Depositary shall deliver to the Owner the American Depositary Shares evidenced by that Receipt in uncertificated form unless otherwise requested by the Owner.

     (f) (i) The parties acknowledge that the Direct Registration System ("DRS") and Profile Modification System ("Profile") shall apply to uncertificated American Depositary Shares upon acceptance thereof to DRS by DTC. DRS is the system administered by DTC pursuant to which the Depositary may register the ownership of uncertificated American Depositary Shares, which ownership shall be evidenced by periodic statements issued by the Depositary to the Owners entitled thereto. Profile is a required feature of DRS which allows a DTC participant, claiming to act on behalf of an Owner of American Depositary Shares, to direct the Depositary to register a transfer of those American Depositary Shares to DTC or its nominee and to deliver those American Depositary Shares to the DTC account of that DTC participant without receipt by the Depositary of prior authorization from the Owner to register such transfer.

     (ii) In connection with and in accordance with the arrangements and procedures relating to DRS/Profile, the parties understand that the Depositary will not verify, determine or otherwise ascertain that the DTC participant which is claiming to be acting on behalf of an Owner in requesting a registration of transfer and delivery as described in subsection (i) has the actual authority to act on behalf of the Owner (notwithstanding any requirements under the Uniform Commercial Code). For the avoidance of doubt, the provisions of Sections 5.03 and 5.08 shall apply to the matters arising from the use of the DRS. The parties agree that the Depositary's reliance on and compliance with instructions received by the Depositary through the DRS/Profile System and in accordance with this Deposit Agreement shall not constitute negligence or bad faith on the part of the Depositary.

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ARTICLE 3

CERTAIN OBLIGATIONS OF OWNERS OF RECEIPTS

Section 3.01 Filing Proofs, Certificates and Other Information.

     Any person presenting Shares for deposit or any Owner of a Receipt may be required from time to time to file with the Depositary or the Custodian such proof of citizenship or residence, exchange control approval, legal or beneficial ownership of Receipts, Deposited Securities or other securities, compliance with all applicable laws or regulations or terms of this Deposit Agreement or the Receipts, or such information relating to the registration on the books of the Company or the Foreign Registrar, if applicable, to execute such certificates and to make such representations and warranties, as the Depositary may reasonably deem necessary or proper or as the Company reasonably may require. The Depositary may withhold the delivery or registration of transfer of any Receipt or the distribution of any dividend or sale or distribution of rights or of the proceeds thereof or the delivery of any Deposited Securities until such proof or other information is filed or such certificates are executed or such representations and warranties made. The Depositary shall from time to time advise the Company of the availability of any such proofs, certificates or other information and shall provide copies thereof to the Company as promptly as practicable upon request by the Company, unless such disclosure is prohibited by law.

Section 3.02 Liability of owner for Taxes.

     If any tax or other governmental charge shall become payable with respect to any Receipt or any Deposited Securities represented by any Receipt, such tax or other governmental charge shall be payable by the Owner of such Receipt. The Depositary may refuse to effect any transfer of such Receipt or any combination or split-up thereof or any withdrawal of Deposited Securities represented by American Depositary Shares evidenced by such Receipt until such payment is made, and may withhold any dividends or other distributions, or may sell for the account of the Owner thereof any part or all of the Deposited Securities represented by the American Depositary Shares evidenced by such Receipt, and may apply such dividends or other distributions or the proceeds of any such sale in payment of such tax or other governmental charge (and any taxes or expenses arising out of such sale), and the Owner of such Receipt shall remain liable for any deficiency.

Section 3.03 Warranties on Deposit of Shares.

     Every person depositing shares under this Deposit Agreement shall be deemed thereby to represent and warrant that such Shares and each certificate therefor, if any, are validly issued, fully paid, nonassessable and free of any preemptive rights of the holders of outstanding Shares and that the person making such deposit is duly authorized so to do. Every such person shall also be deemed to represent and warrant that, except with

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respect to the initial deposit and any deposit permitted hereunder pursuant to Section 4.03, 4.04 or 4.09, such person is not and shall not become at any time while such person holds Receipts or any beneficial interest therein an affiliate of the Company. In addition, every person depositing Shares under this Deposit Agreement shall also be deemed thereby to represent and warrant that such Shares and the Receipts evidencing American Depositary Shares representing such Shares would not be Restricted Securities. Such representations and warranties shall survive the deposit of Shares and issuance of Receipts.

Section 3.04 Disclosure of Interests.

     To the extent that provisions of or governing any Deposited Securities (including the Charter or applicable law) may require the disclosure of beneficial or other ownership of Deposited Securities, other Shares and other securities to the company and may provide for blocking transfer and voting or other rights to enforce such disclosure or limit such ownership, the Depositary shall use its best efforts that are reasonable under the circumstances to comply with Company instructions as to Receipts in respect of any such enforcement or limitation, and Owners and Beneficial Owners shall comply with all such disclosure requirements and ownership limitations and shall cooperate with the Depositary's compliance with such Company instructions.

ARTICLE 4

THE DEPOSITED SECURITIES

Section 4.01 Cash Distributions.

     Whenever the Depositary, or on its behalf, its agent, shall receive any cash dividend or other cash distribution on any Deposited Securities, the Depositary shall, or shall cause its agent to, as promptly as practicable (and in any event within one (1) Business Day) alter its receipt of such dividend or distribution (unless otherwise prohibited or prevented by law), subject to the provisions of Section 4.05, convert such dividend or distribution into Dollars, transfer such Dollars to the United States and shall, as promptly as practicable, distribute the amount thus received (net of the expenses of the Depositary as provided in Section 5.09) to the Owners entitled thereto, in proportion to the number of American Depositary Shares representing such Deposited Securities held by each of them respectively; provided, however, that in the event that the Company, the Depositary or the Custodian shall be required to withhold and does withhold from such cash dividend or such other cash distribution an amount on account of taxes, the amount distributed to the Owner of the Receipts evidencing American Depositary Shares representing such Deposited Securities shall be reduced accordingly. The Depositary shall distribute only such amounts as can be distributed without distributing to any Owner a fraction of one cent and any balance that is not so distributed shall be held by the Depositary (without liability for the interest thereon) and shall be added to and be part of

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the next sum received by the Depositary for distribution to the owners of Receipts then outstanding.

Section 4.02 Distributions Other Than Cash, Shares or Rights.

     Subject to the provisions of Section 4.11 and 5.09, whenever the Depositary shall receive any distribution other than a distribution described in Sections 4.01, 4.03 or 4.04, the Depositary may, as promptly as practicable, cause the securities or property received by it to be distributed to the Owners entitled thereto, in proportion to the number of American Depositary Shares representing such Deposited Securities held by each of them respectively, in any manner that the Depositary may deem equitable and practicable for accomplishing such distribution; provided, further, that if in the opinion of the Depositary such distribution cannot be made proportionately among the Owners entitled thereto, or if for any other reason (including, but not limited to, any requirement that the Company, the Custodian or the Depositary withhold an amount on account of taxes or other governmental charges or that such securities must be registered under the Securities Act in order to be distributed to Owners) the Depositary deems such distribution not to be feasible, the Depositary may, alter consultation with the Company, adopt such method as it may deem equitable and practicable for the purpose of effecting such distribution, including, but not limited to, the public or private sale of the securities or property thus received, or any part thereof, and the net proceeds of any such sale (net of the fees of the Depositary as provided in Section 5.09 and any expenses in connection with such sale) shall be distributed by the Depositary to the Owners entitled thereto as in the case of a distribution received in cash pursuant to Section 4.01; provided, further, that no distribution to Owners pursuant to this Section 4.02 shall be unreasonably delayed by any action of the Depositary or any of its agents. To the extent such securities or property or the net proceeds thereof are not distributed to Owners as provided in this Section 4.02, the same shall constitute Deposited Securities and each American Depositary Share shall thereafter also represent its proportionate interest in such securities, property or net proceeds.

Section 4.03 Distributions in Shares.

     1f any distribution upon any Deposited Securities consists of a dividend in, or free distribution of, Shares, the Depositary may distribute, as promptly as practicable, to the Owners of outstanding Receipts entitled thereto, in proportion to the number of American Depositary Shares representing such Deposited Securities held by each of them respectively, additional Receipts evidencing an aggregate number of American Depositary Shares representing the amount of Shares received as such dividend or free distribution, subject to the terms and conditions of the Deposit Agreement with respect to the deposit of Shares and the issuance of American Depositary Shares evidenced by Receipts, including the withholding of any tax or other governmental charge as provided in Section 4.11 and the payment of the fees of the Depositary as provided in Section 5.09. In lieu of delivering Receipts for fractional American Depositary Shares in any such case,

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the Depositary shall sell the amount of Shares represented by the aggregate of such fractions and distribute the net proceeds, all in the manner and subject to the conditions described in Section 4.01; provided, however, that no distribution to Owners pursuant to this Section 4.03 shall be unreasonably delayed by any action of the Depositary or any of its agents. If additional Receipts are not so distributed, each American Depositary Share shall thenceforth also represent the additional Shares distributed upon the Deposited securities represented thereby. In addition, the Depositary may withhold any distribution of Receipts under this Section 4.03 if it has not received satisfactory assurances from the Company that such distribution does not require registration under the securities Act or is exempt from registration under the provisions of such Act; provided that, in any such event, the Depositary may sell the Shares distributed upon the Deposited Securities and distribute the net proceeds, all in the manner and subject to the conditions described in Section 4.01.

Section 4.04 Rights.

     In the event that the Company shall offer or cause to be offered to the holders of any Deposited Securities any rights to subscribe for additional Shares or any rights of any other nature, the Depositary, alter consultation with the Company, shall have discretion as to the procedure to be followed in making such rights available to any Owners or in disposing of such rights on behalf of any Owners and making the net proceeds available to such Owners or, if by the terms of such rights offering or for any other reason it would be unlawful for the Depositary either to make such rights available to any Owners or dispose of such rights and make the net proceeds available to such owners, then the Depositary shall allow the rights to lapse. If at the time of the offering of any rights the Depositary determines that it is lawful and feasible to make such rights available to all or certain Owners but not to other Owners, the Depositary shall distribute to any Owner to whom it determines the distribution to be lawful and feasible, in proportion to the number of American Depositary Shares held by such Owner, warrants or other instruments therefor in such form as it deems appropriate.

     In circumstances in which rights would otherwise not be distributed, if an Owner requests the distribution of warrants or other instruments in order to exercise the rights allocable to the American Depositary Shares of such Owner hereunder, the Depositary will promptly make such rights available to such Owner upon written notice from the Company to the Depositary that (a) the Company has elected in its sole discretion to permit such rights to be exercised and (b) such Owner has executed such documents as the Company has determined in its sole discretion are reasonably required under applicable law.

     If the Depositary has distributed warrants or other instruments for rights to all or certain Owners, then upon instruction from such an Owner pursuant to such warrants or other instruments to the Depositary to exercise such rights, upon payment by such Owner to the Depositary for the account of such owner of an amount equal to the purchase price

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of the Shares to be received upon the exercise of the rights, and upon payment of the fees of the Depositary and any other charges as set forth in such warrants or other instruments, the Depositary shall, on behalf of such Owner, exercise the rights and purchase the Shares, and the Company shall cause the Shares so purchased to be delivered to the Depositary on behalf of such owner. As agent for such Owner, the Depositary will cause the Shares so purchased to be deposited pursuant to Section 2.02 of this Deposit Agreement, and shall, pursuant to Section 2.03 of this Deposit Agreement, execute and deliver Receipts to such Owner. In the case of a distribution pursuant to this paragraph, such Receipts shall be legended in accordance with applicable U.S. laws, and shall be subject to the appropriate restrictions on sale, deposit, cancellation, and transfer under such laws.

     If the Depositary determines that it is not lawful or feasible to make such rights available to all or certain owners, it will use its best efforts that are reasonable under the circumstances to, sell the rights, warrants or other instruments in proportion to the number of American Depositary Shares held by the Owners to whom it has determined it may not lawfully or feasibly make such rights available, and allocate the net proceeds of such sales (net of the fees of the Depositary as provided in Section 5.09, any expenses in connection with such sale and all taxes and governmental charges payable in connection with such rights and subject to the terms and conditions of this Deposit Agreement) for the account of such owners otherwise entitled to such rights, warrants or other instruments, upon an averaged or other practical basis without regard to any distinctions among such Owners because of exchange restrictions or the date of delivery of any Receipt or otherwise. Such proceeds shall be distributed as promptly as practicable in accordance with Section 4.01 hereof.

     If a registration statement under the Securities Act is required with respect to the securities to which any rights relate in order for the company to offer such rights to Owners and sell the securities represented by such rights, the Depositary will not offer such rights to Owners unless and until such a registration statement is in effect, or unless the offering and sale of such securities and such rights to such Owners are exempt from, or not subject to, registration under the provisions of such Act; provided, however, that nothing in this Deposit Agreement shall create, or shall be construed as creating, any obligation on the part of the Company to file a registration statement under the Securities Act or to endeavor to have a registration statement declared effective.

     The Depositary shall not be responsible for any failure to determine that it may be lawful or feasible to make such rights available to Owners in general or any Owner in particular.

Section 4.05 Conversion of Foreign Currency.

     Whenever the Depositary or the custodian shall receive Foreign Currency, by way of dividends or other distributions or the net proceeds from the sale of securities, property or rights, and if at the time of the receipt thereof the Foreign Currency so received can,

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pursuant to applicable law, be converted on a reasonable basis into Dollars and the resulting Dollars transferred to the United States, the Depositary or the Custodian shall convert or cause to be converted as promptly as practicable (and in any event within one Business Day of its or its agent's receipt of such Foreign Currency), by sale or in any other manner that it may determine in accordance with applicable law, such Foreign Currency into Dollars. If, at the time of conversion of such Foreign Currency into Dollars, such Dollars can, pursuant to applicable law, be transferred outside of Brazil for distribution to owners entitled thereto, such Dollars shall be distributed as promptly as practicable to the Owners entitled thereto or, if the Depositary or the custodian shall have distributed any rights, warrants or other instruments which entitle the holders thereof to such Dollars, then to the holders of such rights, warrants and/or instruments upon surrender thereof for cancellation in each case pursuant to Section 4.01, Such distribution or conversion may be made upon an averaged or other practicable basis without regard to any distinctions among Owners on account of exchange restrictions, the date of delivery of any Receipt or otherwise and shall be net of any expenses of conversion into Dollars incurred by the Depositary or the Custodian as provided in Section 5.09.

     If such conversion, transfer or distribution can be effected only with the approval or license of any government or agency thereof, the Depositary or the Custodian shall file as promptly as practicable such application for approval or license; however, the Depositary or the Custodian shall be entitled to rely upon Brazilian local counsel in such matters, which counsel shall be instructed to act as promptly as possible.

     If at any time Foreign Currency received by the Depositary or the Custodian is not, pursuant to applicable law, convertible, in whole or in part, into Dollars transferable into the United States, or if any approval or license of any government or agency thereof which is required for such conversion is denied or in the opinion of the Depositary cannot be promptly obtained at a reasonable cost, the Depositary or the Custodian shall, (a) as to that portion of the Foreign Currency that is convertible into Dollars, make such conversion and, if permitted by applicable law, transfer such Dollars to the United States for distribution to Owners in accordance with the first paragraph of this Section 4.05 or, if such transfer is not so permitted, hold such Dollars uninvested and without liability for interest thereon for the respective accounts of the Owners entitled to receive the same, and (b) as to the nonconvertible balance, if any, (i) if requested in writing by an Owner, distribute or cause the Custodian to distribute the Foreign Currency (or an appropriate document evidencing the right to receive such Foreign Currency) received by the Depositary or Custodian in respect of the American Depositary Shares evidenced by Receipts held by such Owners (as the same may be adjusted as a consequence of subclause (ii) below) to such Owner (x) if such request is received before the 15th day of a calendar month, on such 15th day, or (y) if not, on the last day of such month (or, in either case, if such day is not a Business Day, on the next succeeding Business Day) and (ii) the Depositary shall cause the Custodian to hold any amounts of nonconvertible Foreign Currency not distributed pursuant to the immediately preceding subclause (i) for the respective accounts of the Owners entitled to receive the same, uninvested and

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without liability for interest thereon, on demand and, if and to the extent reasonably practicable and permitted by applicable law, in a manner designed to protect such Owners against the effects of inflation; provided that, at such time, at the reasonable request of the Depositary, the Company shall furnish the Depositary, at the Company's expense, with a written opinion from recognized United States counsel for the Company confirming that the manner in which the Depositary proposes to hold such amounts of non-convertible Foreign Currency will not violate the Investment Company Act of 1940.

Section 4.06 Fixing of Record Date.

     Whenever any cash dividend or other cash distribution shall become payable or any distribution other than cash shall be made, or whenever rights shall be issued with respect to the Deposited Securities, or whenever for any reason the Depositary causes a change in the number of Shares that are represented by each American Depositary Share, or whenever the Depositary shall receive notice of any meeting of holders of Shares or other Deposited Securities, the Depositary shall fix a record date, which date shall, (x) be the same date as the record date fixed by the Company, if any, to the extent practicable, or (y) if different from the record date fixed by the Company, be as near as practicable to the record date fixed by the Company or, if more than five (5) Business Days after such record date, be fixed after consultation with the Company (a) for the determination of the Owners who shall be (i) entitled to receive such dividend, distribution or rights or the net proceeds of the sale thereof or (ii) entitled to give instructions for the exercise of voting rights at any such meeting, (b) on or after which each American Depositary Share will represent the changed number of Shares, or (c) for any other reason. Subject to the provisions of Sections 4.01 through 4.05 and to the other terms and conditions of this Deposit Agreement, the Owners on such record date shall be entitled, as the case may be, to receive the amount distributable by the Depositary with respect to such dividend or other distribution or such rights or the net proceeds of sale thereof in proportion to the number of American Depositary Shares held by each of them respectively and to give voting instructions and to act in respect of any other such matter. The Company agrees to provide the Depositary with not less than 10 days' prior notice of any meeting of shareholders or of the Board of Directors of the Company, the agenda for which includes authorization for the declaration of a dividend; provided, however, that if the date for any such meeting is fixed less than 10 days prior to such meeting or the Company does not know, 10 days prior to such meeting, that a dividend may be declared at any such meeting, then the Company shall give such notice to the Depositary as promptly as practicable after such date is fixed or the Company learns that a dividend may be declared.

Section 4.07 Voting of Deposited Securities.

     Upon receipt of notice of any meeting or solicitation of proxies of holders of Shares or other Deposited securities, if requested in writing by the Company, the Depositary shall, as soon as practicable thereafter, mail to the Owners a notice, the form

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of which notice shall be in the sole discretion of the Depositary, which shall contain (a) such information as is contained in such notice of meeting (or if requested by the Company a summary in English of such information provided by the Company), (b) a statement that the Owners as of the close of business on a specified record date will be entitled, subject to any applicable provision of Brazilian law, the Charter and the provisions of the Deposited Securities, to instruct the Depositary as to the exercise of the voting rights, if any, pertaining to the amount of Shares or other Deposited Securities represented by their respective American Depositary Shares and (c) a statement as to the manner in which such instructions may be given, including an express indication that instructions may be given or deemed given in accordance with the last sentence of this paragraph if no instruction is received, to the Depositary to give a discretionary proxy to a person designated by the Company. Upon the written request of an Owner on such record date, received on or before the date established by the Depositary for such purpose, the Depositary shall endeavor, in so far as practicable and permitted under Brazilian law, the Charter and the Deposited Securities, to vote or cause to be voted the amount of Shares or other Deposited Securities represented by the American Depositary Shares evidenced by such Receipt in accordance with the instructions set forth in such request. The Depositary shall not itself exercise any voting discretion over any Deposited Securities. If no instructions are received by the Depositary from any Owner with respect to any of the Deposited Securities represented by the American Depositary Shares evidenced by such Owner' s Receipts on or before the date established by the Depositary for such purpose, the Depositary shall deem such owner to have instructed the Depositary to give a discretionary proxy to a person designated by the Company with respect to such Deposited Securities and the Depositary shall give a discretionary proxy to a person designated by the Company to vote such Deposited Securities, provided that no such instruction shall be deemed given and no such discretionary proxy shall be given with respect to any matter as to which the Company informs the Depositary (and the Company agrees to provide such information as promptly as practicable in writing) that (x) the Company does not wish such proxy given, (y) substantial opposition exists or (z) such matter materially or adversely affects the rights of holders of Shares.

     Subject to the rules of any securities exchange or automated inter-dealer quotation system on which American Depositary Shares or the Deposited Securities represented thereby are listed or quoted, the Depositary shall deliver, at least two Business Days prior to the date of such meeting, to the Company, to the attention of its Chief Financial Officer, copies of all instructions received from Owners in accordance with which the Depositary will vote, or cause to be voted, the Deposited Securities represented by the American Depositary Shares evidenced by such Receipts at such meeting. Delivery of instructions will be made at the expense of the Company (unless otherwise agreed in writing by the Company and the Depositary) provided that payment of such expense shall not be a condition precedent to the obligations of the Depositary under this Section.

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Section 4.08 Changes Affecting Deposited Securities.

     In circumstances where the provisions of Section 4.03 do not apply, upon any change in nominal value, change in par value, split-up, consolidation or any other reclassification of Deposited Securities, or upon any recapitalization, reorganization, merger or consolidation or sale of assets affecting the Company or to which it is a party, any securities which shall be received by the Depositary or a Custodian in exchange for or in conversion of or in respect of Deposited Securities shall be treated as new Deposited Securities under this Deposit Agreement, and American Depositary Shares shall thenceforth represent the new Deposited Securities so received in exchange or conversion, unless additional Receipts are delivered pursuant to the following sentence. In any such case the Depositary may, and shall if the Company shall so request, execute and deliver additional Receipts as in the case of a dividend in Shares, or call for the surrender of outstanding Receipts to be exchanged for new Receipts specifically describing such new Deposited securities.

Section 4.09 Reports.

     The Depositary shall make available for inspection by Owners at its Corporate Trust Office any reports, notices and communications, including any proxy soliciting material, received from the company which are both (a) received by the Depositary, the Custodian or a nominee of either as the holder of the Deposited Securities and (b) made generally available to the holders of such Deposited Securities by the Company. The Depositary shall also make available for inspection by Owners copies of such reports, notices and communications when furnished by the Company pursuant to Section 5.06. Any such reports, notices and communications, including any such proxy soliciting material, furnished to the Depositary by the Company shall be furnished in English to the extent such materials are required to be translated into English pursuant to any regulations of the Commission applicable to the Company. The Company agrees to provide to the Depositary, at the Company's expense (unless otherwise agreed in writing by the Company and the Depositary), all documents that it provides to the Custodian.

     The Company has delivered to the Depositary and the Custodian a copy of the provisions of or governing the Shares and any other Deposited Securities issued by the Company or any affiliate of the Company, and promptly upon any amendment thereto or change therein, the Company shall deliver to the Depositary and the Custodian a copy of such provisions as 80 amended or changed. The Depositary may rely upon such copy for all purposes of this Deposit Agreement. The Depositary will, at the expense of the Company (unless otherwise agreed in writing by the Company and the Depositary), make such copy and such notices, reports and other communications available for inspection by Owners at the Depositary's office, at the office of the Custodian and at any other designated transfer offices.

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Section 4.10 Lists of Owners.

     Promptly upon request by the Company, the Depositary shall, at the expense of the Company (unless otherwise agreed in writing by the Company and the Depositary), furnish to it a list, as of a recent date, of the names, addresses and holdings of American Depositary Shares by all persons in whose names Receipts are registered on the books of the Depositary.

Section 4.11 Withholding.

     In connection with any distribution to Owners, the Company or its agent will remit to the appropriate governmental authority or agency in Brazil all amounts (if any) required to be withheld by the Company and owing to such authority or agency by the Company; and the Depositary and the Custodian, respectively, will remit to the appropriate governmental authority or agency all amounts (if any) required to be withheld and owing to such authority or agency by the Depositary or the Custodian, respectively. The Depositary shall forward to the Company or its agent in a timely manner such information from its records as the Company may reasonably request to enable the Company or its agent to file necessary reports with governmental authorities or agencies. The Depositary shall use reasonable efforts to make and maintain arrangements enabling Owners to receive any tax credits or other benefits (pursuant to treaty or otherwise) relating to dividend payments in respect of the American Depositary Shares, and the Company, shall, to the extent reasonably practicable, provide the Depositary with such tax receipts or other similar documents as the Depositary may reasonably request to maintain such arrangements. In the event that the Depositary determines that any distribution in property other than cash (including Shares and rights to subscribe therefor) is subject to any tax or other governmental charge which the Depositary is obligated to withhold, the Depositary may by public or private sale dispose of all or a portion of such property (including shares and rights to subscribe therefor) in such amounts and in such manner as the Depositary deems reasonably necessary and practicable to pay any such taxes or charges, and the Depositary shall distribute the net proceeds of any such sale after deduction of such taxes or charges to the Owners entitled thereto in proportion to the number of American Depositary Shares held by each of them respectively, all in accordance with applicable provisions of this Deposit Agreement.

ARTICLE 5

THE DEPOSITARY, THE CUSTODIANS AND THE COMPANY

Section 5.01 Maintenance of Office and Transfer Books by the Depositary.

     Until termination of this Deposit Agreement in accordance with its terms, the Depositary shall maintain in the Borough of Manhattan, The City of New York, facilities for the delivery and surrender of Shares, withdrawal of Deposited Securities, execution

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and delivery, registration, registration of transfers, combinations and split-ups and surrender of Receipts, all in accordance with the provisions of this Deposit Agreement.

     The Depositary shall keep books for the registration of Receipts and transfers of Receipts which at all reasonable times shall be open for inspection by the Owners, provided that such inspection shall not be for the purpose of communicating with Owners for an object other than the business of the Company, including without limitation a matter related to this Deposit Agreement, the Receipts or the Deposited Securities. The Depositary may close the transfer books after consultation with the Company to the extent practicable, at any time or from time to time, when deemed expedient by it in connection with the performance of its duties hereunder.

     The Company shall have the right, upon reasonable request, to inspect the transfer and registration records of the Depositary relating to the Receipts, to take copies thereof and to require the Depositary and any co-registrars to supply copies of such portions of such records as the Company may request.

     Section 5.02 Prevention or Delay in Performance by the Depositary or the Company.

     Neither the Depositary nor the Company shall incur any liability to any Owner or Beneficial Owner, if by reason of any provision of any present or future law or regulation of the United States, Brazil or any other country, or of any governmental or regulatory authority or stock exchange, or by reason of any provision, present or future, of the Charter or the Deposited Securities, or by reason of any act of God or war or other circumstance beyond its control, the Depositary or the Company shall be prevented or forbidden from, or be subject to any civil or criminal penalty on account of, doing or performing any act or thing which by the terms of this Deposit Agreement it is provided shall be done or performed nor shall the Depositary or the Company incur any liability to any Owner or Beneficial Owner by reason of any nonperformance or delay, caused as aforesaid, in the performance of any act or thing which by the terms of this Deposit Agreement it is provided shall or may be done or performed, or by reason of any exercise of, or failure to exercise, any discretion provided for in this Deposit Agreement. Where, by the terms of a distribution pursuant to Sections 4.01, 4.02, or 4.03 of the Deposit Agreement, or an offering or distribution pursuant to Section 4.04 of the Deposit Agreement, or for any other reason, the Depositary is prevented or prohibited from making such distribution or offering available to Owners, and the Depositary is prevented or prohibited from disposing of such distribution or offering on behalf of such owners and making the net proceeds available to such owners, then the Depositary, after consultation with the Company, shall not make such distribution or offering, and shall allow any rights, if applicable, to lapse.

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Section 5.03 Obligations of the Depositary, the Custodian and the Company.

     The Company assumes no obligation nor shall it be subject to any liability under this Deposit Agreement to Owners or Beneficial Owners, except that it agrees to perform its obligations specifically set forth in this Deposit Agreement without negligence or bad faith.

     The Depositary assumes no obligation nor shall it be subject to any liability under this Deposit Agreement to any Owner or Beneficial Owner (including, without limitation, liability with respect to the validity or worth of the Deposited Securities), except that it agrees to per form its obligations specifically set forth in this Deposit Agreement without negligence or bad faith.

     Neither the Depositary nor the Company shall be under any obligation to appear in, prosecute or defend any action, suit or other proceeding in respect of any Deposited Securities or in respect of the Receipts, which in its opinion may involve it in expense or liability, unless indemnity satisfactory to it against all expense and liability shall be furnished as often as may be required, and the Custodian shall not be under any obligation whatsoever with respect to such proceedings, the responsibility of the Custodian being solely to the Depositary.

     Neither the Depositary nor the Company shall be liable for any action or nonaction by it in reliance upon the advice of or information from legal counsel, accountants, any person presenting Shares for deposit, any Owner or any other person believed by it in good faith to be competent to give such advice or information.

     The Depositary shall not be liable for any acts or omissions made by a successor depositary whether in connection with a previous act or omission of the Depositary or in connection with any matter arising wholly after the removal or resignation of the Depositary, provided that in connection with the issue out of which such potential liability arises the Depositary performed its obligations without negligence or bad faith while it acted as Depositary.

     The Depositary shall not be responsible for any failure to carry out any instructions to vote any of the Deposited Securities, or for the manner in which any such vote is cast or the effect of any such vote, provided that any such action or nonaction is in good faith.

     No disclaimer of liability under the Securities Act is intended by any provision of this Deposit Agreement.

     The Depositary, subject to Sections 2.05 and 2.09 hereof and as permitted by the Charter, may own and deal in any class of securities of the Company and its affiliates and in Receipts.

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Section 5.04 Resignation and Removal of the Depositary.

     The Depositary may at any time resign as Depositary hereunder by written notice of its election so to do delivered to the Company, such resignation to take effect upon the appointment of a Successor depositary and its acceptance of such appointment as hereinafter provided.

     The Depositary may at any time be removed by the Company by written notice of such removal effective upon the appointment of a Successor depositary and its acceptance of such appointment as hereinafter provided.

     In case at any time the Depositary acting here under shall resign or be removed, the Company shall use its best efforts that are reasonable under the circumstances to appoint a successor depositary, which shall be a bank or trust company having an office in the Borough of Manhattan, The City of New York. Every successor depositary shall execute and deliver to its predecessor and to the Company an instrument in writing accepting its appointment hereunder, and thereupon such successor depositary, without any further act or deed, shall become fully vested with all the rights, powers, duties and obligations of its predecessor; but such predecessor, nevertheless, upon payment of all sums due it and on the written request of the Company shall execute and deliver an instrument transferring to such successor all rights and powers of such predecessor hereunder, shall duly assign, transfer and deliver all right, title and interest in the Deposited securities to such successor, and shall deliver to such successor a list of the Owners of all outstanding Receipts. Any such successor depositary shall promptly mail notice of its appointment to the Owners.

     Any Corporation into or with which the Depositary may be merged or consolidated shall be the successor of the Depositary without the execution or filing of any document or any further act.

Section 5.05 The Custodian.

     The Custodian shall be subject at all times and in all respects to the directions of the Depositary and shall be responsible solely to it and the Depositary shall be responsible for the compliance by the Custodian with the applicable provisions of this Deposit Agreement. Any Custodian may resign from its duties hereunder by notice of such resignation delivered to the Depositary at least 30 days prior to the date on which such resignation is to become effective. If upon the effectiveness of such resignation there shall be no Custodian acting hereunder, the Depositary shall, promptly after receiving such notice, appoint a substitute custodian or custodians approved by the Company (such approval not to be unreasonably withheld), each of which shall thereafter be a Custodian hereunder. The Depositary may discharge any Custodian at any time upon notice to the Custodian being discharged with the approval of the Company (such approval not to be unreasonably withheld). Whenever the Depositary in its discretion determines that it is in the best interests of the Owners to do so, it may appoint substitute

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or additional custodian or custodians, each of which shall thereafter be one of the Custodians hereunder. The Depositary shall notify the Company of the appointment of a substitute or additional Custodian at least 30 days prior to the date on which such appointment is to become effective. Upon demand of the Depositary any Custodian shall deliver such of the Deposited Securities held by it as are requested of it to any other Custodian or such substitute or additional custodian or custodians. Each such substitute or additional custodian shall deliver to the Depositary, forthwith upon its appointment, an acceptance of such appointment satisfactory in form and substance to the Depositary. Promptly alter any such change, the Depositary shall give notice thereof in writing to all Owners.

     Upon the appointment of any successor depositary hereunder, each Custodian then acting hereunder shall forthwith become, without any further act or writing, the agent hereunder of such successor depositary and the appointment of such successor depositary shall in no way impair the authority of each Custodian hereunder; but the successor depositary so appointed shall, nevertheless, on the written request of any Custodian, execute and deliver to such Custodian all such instruments as may be proper to give to such Custodian full and complete power and authority as agent hereunder of such successor depositary.

Section 5.06 Notices and Reports.

     On or before the first date on which the Company gives notice, by publication or otherwise, of any meeting of holders of Shares or other Deposited Securities, or of any adjourned meeting of such holders, or of the taking of any action in respect of any cash or other distributions or the offering of any rights, the Company agrees to transmit to the Depositary and the Custodian a copy of the notice thereof in the form given or to be given to holders of Shares or other Deposited Securities.

     The Company will arrange for the translation into English, if not already in English, to the extent required pursuant to any regulations of the Commission applicable to the Company, and the prompt transmittal by the Company to the Depositary and the Custodian of such notices and any other reports and communications which are made generally available by the Company to holders of its Shares.

     The Depositary will promptly make such notices, reports and other communications available to all Owners on a basis similar to that for holders of Shares or other Deposited securities, or on such other basis as the Company may advise the Depositary may be required by any applicable law, regulation or stock exchange or automated inter-dealer quotation system requirement or, at the written request and expense of the Company, promptly arrange for the mailing of copies thereof (or if requested by the Company, a summary of any such notice provided by the Company) to all Owners. The Company will timely provide the Depositary with the quantity of such notices, reports, and communications, as requested by the Depositary from time to time, in order for the Depositary to effect any such mailings.

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Section 5.07 Distribution of Additional Shares, Rights, etc.

     The Company agrees that in the event of any issuance or distribution of (1) additional Shares or distributions, (2) rights to subscribe for Shares or distributions, (3) securities convertible into or exchangeable for Shares, or (4) rights to subscribe for such securities as a dividend or distribution with respect to the Shares or other Deposited Securities represented by the American Depositary Shares issued hereunder, the Company will (i) forward to the Depositary written instructions as to the manner in which the Depositary is to effect actual delivery, and (ii) take all steps reasonably necessary to ensure that no violation by the Company or the Depositary of the Securities Act will result from such issuance or distribution. The Company agrees with the Depositary that neither the Company nor any company controlled by the Company will at any time deposit any Shares, either originally issued or previously issued and reacquired by the Company or any such affiliate, unless a Registration Statement is in effect as to such Shares under the Securities Act or the company furnishes to the Depositary a written opinion from U.S. counsel for the company, which counsel shall be reasonably satisfactory to the Depositary, stating that the offer and sale of the Receipts evidencing the American Depositary Shares representing such Shares are exempt from registration under that Act. The Company will advise each person who, to the best knowledge of the Company, controls, or is under common control with, the Company that such person is subject to the same restrictions on the deposit of Shares as the Company and persons controlled by the Company.

Section 5.08 Indemnification.

     The Company agrees to indemnify the Depositary, its directors, employees, agents and affiliates and any Custodian against, and hold each of them harmless from, any liability or expense (including, but not limited to, the reasonable fees and expenses of counsel) which may arise out of acts performed or omitted, in accordance with the provisions of this Deposit Agreement and of the Receipts, as the same may be amended, modified or supplemented from time to time, (i) by either the Depositary or a Custodian or their respective directors, employees, agents and affiliates, except for any liability or expense arising out of the negligence or bad faith of either of them, and except to the extent that such liability or expense arises out of information relating to the Depositary or the Custodian, as applicable, furnished in writing to the Company by the Depositary or the Custodian, as applicable, expressly for use in any registration statement, proxy statement, prospectus (or placement memorandum) or preliminary prospectus (or preliminary placement memorandum) relating to the Shares, or omissions from such information; or (ii) by the Company or any of its directors, employees, agents and affiliates.

     The indemnities contained in the preceding paragraph shall not extend to any liability or expense which may arise out of any Pre-Release (as defined in Section 2.09) to the extent that any such liability or expense arises in connection with (a) any United

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States federal, state or local income tax laws or (b) the failure of the Depositary to deliver Deposited Securities when required under the terms of Section 2.05 hereof. However, for the avoidance of doubt, the indemnities contained in the preceding paragraph shall apply to any liability or expense which may arise out of any misstatement or alleged misstatement or omission or alleged omission in any registration statement, proxy statement, prospectus (or placement memorandum) or preliminary prospectus (or preliminary placement memorandum) relating to the offer or sale of Shares, except to the extent any such liability arises out of (1) information relating to the Depositary or any Custodian, as applicable, furnished in writing to the Company by the Depositary or any Custodian, as applicable, expressly for use in any of the foregoing documents, or, (ii) material omissions from such information furnished by the Depositary or any Custodian.

     The Depositary agrees to indemnify the Company, its directors, employees, agents and affiliatee and hold them harmless from any liability or expense (including, but not limited to, the reasonable fees and expenses of counsel) which may arise out of acts performed or omitted, in accordance with the provisions of this Deposit Agreement and of the Receipts, as the same may be amended, modified or supplemented from time to time, by the Depositary or its Custodian or their respective directors, employees, agents and affiliates due to their negligence or bad faith. The obligations set forth in this Section 5.08 shall survive the termination of this Deposit Agreement and the succession or substitution of any indemnified person. Any person seeking indemnification hereunder (an "Indemnified Person") shall notify the person from whom it is seeking indemnification (the "Indemnifying Person") of the commencement of any indemnifiable action or claim promptly alter such Indemnified Person becomes aware of such commencement and shall consult in good faith with the Indemnifying Person as to the conduct of the defense of such action or claim, which defense shall be reasonable under the circumstances. No Indemnified Person shall compromise or settle any such action or claim without the consent in writing of the Indemnifying Person.

Section 5.09 Charges of Depositary.

     The following charges shall be incurred by any party depositing or withdrawing Shares or by any party surrendering American Depositary Shares or to whom American Depositary Shares are issued (including, without limitation, issuance pursuant to a stock dividend or stock split declared by the Company or an exchange of stock regarding the American Depositary Shares or Deposited Securities or a delivery of American Depositary Shares pursuant to Section 4.03), or by Owners, as applicable: (1) taxes and other governmental charges, (2) such registration fees as may from time to time be in effect for the registration of transfers of Shares generally on the Share register of the Company or Foreign Registrar and applicable to transfers of Shares to or from the name of the Depositary or its nominee or the Custodian or its nominee on the making of deposits or withdrawals hereunder, (3) such cable, telex and facsimile transmission expenses as are expressly provided in this Deposit Agreement, (4) such expenses as are incurred by the Depositary in the conversion of foreign currency pursuant to Section

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4.05, (5) a fee of $5.00 or less per 100 American Depositary Shares (or portion thereof) for the delivery of American Depositary Shares pursuant to Section 2.03, 4.03 or 4.04 and the surrender of American Depositary Shares pursuant to Section 2.05 or 6.02, (6) a fee of up to $.02 per American Depositary Share (or portion thereof) for any cash distribution made pursuant to this Deposit Agreement, including, but not limited to Sections 4.01 through 4.04 hereof, (7) a fee for the distribution of securities pursuant to Section 4.02, such fee being in an amount equal to the fee for the execution and delivery of American Depositary Shares referred to above which would have been charged as a result of the deposit of such securities (for purposes of this clause 7 treating all such securities as if they were Shares) but which securities are instead distributed by the Depositary to Owners, (8) in addition to any fee charged under clause 6, a fee of up to $.02 per American Depositary Share (or portion thereof) per annum for depositary services, which will be payable as provided in clause 9 below, (9) any other charges payable by the Depositary, any of the Depositary's agents, including the Custodian, or the agents of the Depositary's agents in connection with the servicing of Shares or other Deposited Securities (which charge shall be assessed against Owners as of the date or dates set by the Depositary in accordance with Section 4.06 and shall be payable at the sole discretion of the Depositary by billing such Owners for such charge or by deducting such charge from one or more cash dividends or other cash distributions).

     The Depositary, subject to Section 2.09 hereof, may own and deal in any class of securities of the Company and its affiliates and in American Depositary Shares.

Section 5.10 Exclusivity.

     The Company agrees not to appoint any other depositary for issuance of American Depositary Receipts evidencing American Depositary Shares so long as The Bank of New York is acting as Depositary hereunder, subject, however, to the rights of the Company under Section 5.04.

Section 5.11 Available Information.

     If at any time prior to the termination of this Agreement the Company is neither a reporting company under Section 13 or 15 (d) of the Securities Exchange Act nor exempt from the reporting requirements of the Securities Exchange Act by reason of Rule 12g3-2(b) thereunder, the Company will provide, at its expense, to any Owner or Beneficial Owner or any holder of Shares, and to any prospective purchaser of American Depositary Shares or Shares, upon request of such Owner, Beneficial Owner, holder or prospective purchaser, the information required by Rule 144A(d) (4) (i) and otherwise comply with Rule 144A(d) (4). If at any time the Company is neither subject to Section 13 or 15(d) of the Securities Exchange Act nor exempt pursuant to Rule 12g3-2(b) under the Securities Exchange Act (as determined by the Office of International Corporate Finance of the Commission), the Company shall immediately so notify the Depositary, and the Depositary may so notify the Owners in writing at the Company's expense. The Company hereby authorizes the Depositary to deliver such information as furnished by

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the Company to the Depositary during any period in which the Company informs the Depositary it is subject to the information delivery requirements of Rule 144A(d) (4) to any such Owner, Beneficial Owner, holder of Shares or prospective purchaser at the request of such person. The Company agrees to reimburse the Depositary for its reasonable expenses in connection with such deliveries and to provide the Depositary with such information in such quantities as the Depositary may from time to time reasonably request.

ARTICLE 6

AMENDMENT AND TERMINATION

Section 6.01 Amendment.

     The form of the Receipts and any provisions of this Deposit Agreement may at any time and from time to time be amended by agreement between the Company and the Depositary in any respect which they may deem necessary or desirable. Any amendment which shall impose or increase any fees or charges (other than taxes and other governmental charges), or which shall otherwise prejudice any substantial existing right of Owners, shall, however, not become effective as to outstanding Receipts until the expiration of 30 days after notice of such amendment shall have been given to the Owners of outstanding Receipts. Every Owner at the time any amendment so becomes effective shall be deemed, by continuing to hold such Receipt, to consent and agree to such amendment and to be bound by the Deposit Agreement as amended thereby. In no event shall any amendment impair the right of the Owner of any Receipt to surrender such Receipt and receive therefor the Deposited Securities represented thereby, except in order to comply with mandatory provisions of applicable law.

Section 6.02 Termination.

     The Depositary shall at any time, at the direction of the Company, terminate this Deposit Agreement by mailing notice of such termination to the Owners of all Receipts then outstanding at least 30 days prior to the date fixed in such notice for such termination. The Depositary may likewise terminate this Deposit Agreement by mailing notice of such termination to the Company and the Owners of all Receipts then outstanding, such termination to be effective on a date specified in such notice not less than 30 days after the date thereof, if at any time 60 days shall have expired after the Depositary shall have delivered to the Company a written notice of its election to resign and a successor depositary shall not have been appointed and accepted its appointment as provided in Section 5.04. On and after the date of termination, the Owner of a Receipt will, upon (a) surrender of such Receipt at the Corporate Trust Office of the Depositary, (b) payment of the fee of the Depositary for the surrender of Receipts referred to in Section 2.05, and (c) payment of any applicable taxes or governmental charges, be entitled to delivery, to the Owner or upon the Owner' s order, of the amount of Deposited

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Securities represented by the American Depositary Shares evidenced by such Receipt. If any Receipts shall remain outstanding after the date of termination, the Depositary thereafter shall discontinue the registration of transfers of Receipts, shall suspend the distribution of dividends to the Owners thereof, and shall not give any further notices or perform any further acts under this Deposit Agreement, except that the Depositary shall continue to collect dividends and other distributions pertaining to Deposited Securities, shall sell rights as provided in this Deposit Agreement, and shall continue to deliver Deposited Securities, together with any dividends or other distributions received with respect thereto and the net proceeds of the sale of any rights or other property, in exchange for Receipts surrendered to the Depositary (after deducting, in each case, the fee of the Depositary for the surrender of a Receipt, any expenses for the account of the Owner of such Receipt in accordance with the terms and conditions of this Deposit Agreement, and any applicable taxes or governmental charges). At any time after the expiration of one year from the date of termination, the Depositary may sell the Deposited Securities then held hereunder and may thereafter hold uninvested the net proceeds of any such sale, together with any other cash then held by it hereunder, unsegregated and without liability for interest, for the pro rata benefit of the Owners of Receipts which have not theretofore been surrendered, such Owners thereupon becoming general creditors of the Depositary with respect to such net proceeds and such other cash. Alter making such sale, the Depositary shall be discharged from all obligations under this Deposit Agreement, except to account for such net proceeds and other cash (after deducting, in each case, the fee of the Depositary for the surrender of a Receipt, any expenses for the account of the Owner of such Receipt in accordance with the terms and conditions of this Deposit Agreement, and any applicable taxes or governmental charges) and except as provided in Section 5.08. Upon the termination of this Deposit Agreement, the Company shall be discharged from all obligations under this Deposit Agreement except for its obligations to the Depositary under Sections 5.08 and 5.09 hereof.

ARTICLE 7

MISCELLANEOUS

Section 7.01 Counterparts.

     This Deposit Agreement may he executed in any number of counterparts, each of which shall be deemed an original and all of such counterparts shall constitute one and the same instrument. Copies of this Deposit Agreement shall be filed with the Depositary and the Custodian and shall be open to inspection by any Owner during business hours.

Section 7.02 No Third Party Beneficiaries.

     This Deposit Agreement is for the exclusive benefit of the parties hereto and shall not be deemed to give any legal or equitable right, remedy or claim whatsoever to any other person.

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Section 7.03 Severability.

     In case anyone or more of the provisions contained in this Deposit Agreement or in the Receipts should be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein or therein shall in no way be affected, prejudiced or disturbed thereby.

Section 7.04 Regulatory Compliance.

     The Depositary and the Company hereby confirm to each other that, for as long as this Deposit Agreement is in effect, they shall comply with any requirements for registration of the amount of Deposited Securities with the Central Bank and furnish to the CVM and the Central Bank any information and documents related to the Deposited Securities, the Receipts and the Depositary's obligations hereunder whenever required pursuant to applicable law or regulation or as may be requested by such authorities from time to time, whether such information and documents are requested from the Depositary or the Company. In the event that the Depositary or the Custodian shall be advised (in writing) by reputable independent Brazilian counsel (the "Legal Warning") that the Depositary or Custodian reasonably could be subject to criminal or material, as reasonably determined by the Depositary, civil liabilities as a result of the Company having failed to provide to the CVM or the Central Bank such information or documents reasonably available only through the Company, the Depositary will immediately send a copy of the Legal Warning to the Company, shall have the right to immediately resign as Depositary by written notice to the Company and will not be subject to any liability hereunder for such resignation or such determination, except that (1) the Depositary shall promptly, but in no event later than three (3) business days, if permitted by applicable law, duly assign, transfer and deliver all right, title and interest in and to the Deposited Securities held on account or on behalf of Owners to the Company or its nominee and (ü) to the extent not prohibited by applicable law, the Depositary shall provide the Company or any successor depositary hereunder with access, during normal business hours, to such records as may be reasonably necessary to enable the Company or such successor depositary to fulfill the obligations that the Depositary would have had hereunder but for such resignation. Upon effectiveness of such resignation the Deposit shall otherwise be discharged from all of its obligations under this Deposit Agreement. In the event that the Depositary resigns pursuant to this paragraph either (i) the Company will appoint a new depositary, in which case the Company will assume the obligations stated as the obligations of the Depositary under Section 5.04 herein or (ii) if the Company fails to appoint a new depositary within 60 days of such resignation, this Deposit Agreement shall be terminated in accordance with Section 6.02 herein and the Company or its designated agent will assume the obligations stated as the obligations of the Depositary in such section.

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Section 7.05 Binding Effect on Owners and Beneficial Owners.

     The Owners and Beneficial Owners shall be bound by all of the terms and conditions of this Deposit Agreement and of the Receipts by acceptance thereof.

Section 7.06 Notices.

     Any and all notices to be given to the Company shall be deemed to have been duly given if personally delivered or sent by mail or cable, telex or facsimile transmission confirmed by letter, addressed to:

Mr. Ferdinando Schauenburg, Director Economico-Financeiro e de Relac5es com o Mercado, Companhia Paranaense de Energia--COPEL, Rua Coronel Dulcídio, 800-8. andar, CEP 80420-170 Curitiba, Paraná, Brazil, facsimile number 55-31-331-3136 or any other place to which the Company may have transferred its principal office.

     Any and all notices to be given to the Depositary shall be deemed to have been duly given if in English and personally delivered or sent by mail or cable, telex or facsimile transmission confirmed by letter, addressed to The Bank of New York, 101 Barclay Street, New York, New York 10286, facsimile number (212) 571-3050, Attention: American Depositary Receipt Administration, or any other place to which the Depositary may have transferred its Corporate Trust Office.

     Any and all notices to be given to any Owner shall be deemed to have been duly given if personally delivered or sent by mail or cable, telex or facsimile transmission confirmed by letter, addressed to such Owner at the address of such Owner as it appears on the transfer books for Receipts of the Depositary, or, if such Owner shall have filed with the Depositary a written request that notices intended for such Owner be mailed to some other address, at the address designated in such request.

     Delivery of a notice sent by mail or cable, telex or facsimile transmission shall be deemed to be effective at the time when a duly addressed letter containing the same (or a confirmation thereof in the case of a cable, telex or facsimile transmission) is deposited, postage prepaid, in a post-office letter box; provided, however, that delivery of a notice to the Company or the Depositary shall be deemed to be effective when actually received by the Company or the Depositary, as the case may be. The Depositary or the Company may, however, act upon any cable or telex received by it, notwithstanding that such cable or telex transmission shall not subsequently be confirmed by letter as aforesaid.

     Section 7.07 Submission to Jurisdiction; Appointment of Agent for Service of Process.

     The Company (i) irrevocably designates and appoints CT Corporation System, 111 Eighth Avenue, New York New York 10011, as the Company's authorized agent upon which process may be served in any suit or proceeding arising out of or based upon

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the Shares or Deposited Securities, the American Depositary Shares, the Receipts or this Agreement which may be instituted in any United States federal or New York State court sitting in the Borough of Manhattan, the City of New York, (ii) consents and submits to the non-exclusive jurisdiction of such court in the State of New York with respect to any such suit or proceeding, and (iii) agrees that service of process upon said authorized agent shall be deemed in every respect effective service of process upon the Company in any such suit or proceeding. The Company agrees to deliver, upon the execution and delivery of this Deposit Agreement, a written acceptance by such agent of its appointment as such agent. The Company further agrees to take any and all action, including the filing of any and all such documents and instruments, as may be necessary to continue such designation and appointment in full force and effect for so long as any American Depositary Shares or Receipts remain outstanding or this Agreement remains in force. If said authorized agent shall cease to act as the Company's agent for service of process, the Company shall appoint without delay another such agent and promptly notify the Depositary of such appointment.

Section 7.08 Governing Law.

     This Deposit Agreement and the Receipts shall be interpreted and all rights hereunder and thereunder and provisions hereof and thereof shall be governed by the law of the State of New York.

Section 7.09 Headings.

     Headings contained herein are included for convenience only and are not to be used in construing or interpreting any provision hereof.

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     IN WITNESS WHEREOF, COMPANHIA PARANAENSE DE ENERGIA-- COPEL and THE BANK OF NEW YORK have duly executed this agreement as of the day and year first set forth above and all Owners shall become parties hereto upon acceptance by them of Receipts issued in accordance with the terms hereof.

COMPANHIA PARANAENSE DE ENERGIA -- COPEL

By:     /s/ Rubens Ghilardi    

Name: Rubens Ghilardi

Title: Chief Executive Officer

By:     /s/ Paulo Roberto Trompczynski     

Name: Paulo Roberto Trompczynski

Title: Chief Financial Officer

THE BANK OF NEW YORK

as Depositary

By:

Name:

Title:

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IN WITNESS WHEREOF, COMPANHIA PARANAENSE DE ENERGIA-COPEL and THE BANK OF NEW YORK have duly executed this agreement as of the day and year first set forth above and all owners shall become parties hereto upon acceptance by them of Receipts issued in accordance with the terms hereof.

COMPANHIA PARANAENSE DE ENERGIA -- COPEL

By:

Name:

Title:

By:

Name:

Title:

THE BANK OF NEW YORK

as Depositary

By:     /s/ Keith G. Galfo    

Name: Keith G. Galfo

Title: Vice President

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EXHIBIT A

AMERICAN DEPOSITARY SHARES
(Each American Depositary
Share represents the right to receive
one (1) Deposited Share)

THE BANK OF NEW YORK
AMERICAN DEPOSITARY RECEIPT
     FOR COMMON SHARES
WITHOUT PAR VALUE OF
COMPANHIA PARANAENSE DE ENERGIA--COPEL
(ORGANIZED UNDER THE LAWS OF
THE FEDERATIVE REPUBLIC OF BRAZIL)

     The Bank of New York, as depositary (hereinafter called the "Depositary"), hereby certifies that _________________ or registered assigns IS THE OWNER OF ____________________

AMERICAN DEPOSITARY SHARES

representing ações ordinárias, without par value (herein called "Shares") of COMPANHIA PARANAENSE DE ENERGIA--COPEL, a mixed-capital corporation with limited liability organized under the laws of The Federative Republic of Brazil (herein called the "Company"). At the date hereof, each American Depositary Share represents one (1) Share deposited or subject to deposit under the Deposit Agreement (as such term is hereinafter defined) at the São Paulo office of [Banco Itaú S/A] (herein called the "Custodian").

     The Depositary's Corporate Trust Office is located at a different address than its principal executive office. The address of the Principal Corporate Trust Office of the Depositary is 101 Barclay Street, New York, New York 10286, and its principal executive office is located at 48 Wall Street, New York, N.Y. 10286.

THE DEPOSITARY'S CORPORATE TRUST OFFICE ADDRESS IS 101 BARCLAY STREET, NEW YORK, N.Y. 10286

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1. THE DEPOSIT AGREEMENT.

     This American Depositary Receipt is one of an issue (herein called "Receipts"), all issued and to be issued upon the terms and conditions set forth in the deposit agreement, dated as of March 21, 1996, as amended and restated as of November 21, 2007 (herein called the "Deposit Agreement"), by and among the Company, the Depositary, and all Owners and Beneficial Owners from time to time of Receipts issued thereunder, each of whom by accepting a Receipt agrees to become a party thereto and become bound by all the terms and conditions thereof. The Deposit Agreement sets forth the rights of Owners and Beneficial Owners of the Receipts and the rights and duties of the Depositary in respect of the Shares deposited thereunder and any and all other securities, property and cash from time to time received in respect of such Shares and held thereunder (such Shares, securities, property, and cash are herein called "Deposited Securities"). Copies of the Deposit Agreement are on file at the Depositary's Corporate Trust Office in New York City and at the office of the Custodian. The statements made on the face and reverse of this Receipt are summaries of certain provisions of the Deposit Agreement and are qualified by and subject to the detailed provisions of the Deposit Agreement, to which reference is hereby made. Capitalized terms defined in the Deposit Agreement and not defined herein shall have the meanings set forth in the Deposit Agreement.

2. SURRENDER OF RECEIPTS AND WITHDRAWAL OF SHARES.

     Upon surrender at the Corporate Trust Office of the Depositary of this Receipt for the purpose of withdrawal of the Deposited Securities represented by the American Depositary Shares evidenced hereby, and upon payment of the fee of the Depositary provided in this Receipt, and subject to the terms and conditions of the Deposit Agreement, the Charter, the provisions of or governing the Deposited Securities and applicable law, the Owner hereof is entitled to delivery, to him or upon his order, of the Deposited Securities at the time represented by the American Depositary Shares for which this Receipt is issued. Delivery of such Deposited Securities may be made by (a) (1) the delivery of certificates in the name of the Owner hereof or as ordered by him or certificates properly endorsed or accompanied by proper instruments of transfer to such Owner or as ordered by him, or (ii) book-entry transfer of the Shares represented by this Receipt to an account in the name of such Owner or as ordered by him, and (b) delivery of any other securities, property and cash to which such Owner is then entitled in respect of this Receipt to such Owner or as ordered by him. Such delivery will be made at the option of the Owner hereof, either at the office of the Custodian or at the Corporate Trust Office of the Depositary, as provided in the Deposit Agreement; provided that the forwarding of certificates for Shares or other Deposited Securities for such delivery at the Corporate Trust Office of the Depositary shall be at the risk and expense of the Owner hereof. Neither the Depositary nor the custodian shall deliver Shares, by physical delivery, book-entry or otherwise (other than to the Company or its agent as contemplated by Section 4.08 of the Deposit Agreement), or otherwise permit Shares to

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be withdrawn from the facility created by the Deposit Agreement, except upon the receipt and cancellation of Receipts.

3. TRANSFERS, SPLIT-UPS, AND COMBINATIONS OF RECEIPTS.

     The transfer of this Receipt is registrable on the books of the Depositary at its Corporate Trust Office by the Owner hereof in person or by a duly authorized attorney, upon surrender of this Receipt properly endorsed for transfer or accompanied by proper instruments of transfer and funds sufficient to pay any applicable transfer taxes and the expenses of the Depositary and upon compliance with such regulations, if any, as the Depositary may establish for such purpose. This Receipt may be split into other such Receipts, or may be combined with other such receipts into one Receipt, evidencing the same aggregate number of American Depositary Shares as the Receipt or Receipts surrendered. As a condition precedent to the execution and delivery, registration of transfer, split-up, combination, or surrender of any Receipt, the delivery of any distribution thereon, or withdrawal of any Deposited Securities, the Company, the Depositary, the Custodian, or Registrar may require payment from the depositor of the Shares or the presenter of the Receipt of a sum sufficient to reimburse it for any tax or other governmental charge and any stock transfer or registration fee with respect thereto (including any such tax or charge and fee with respect to Shares being deposited or withdrawn) and payment of any applicable fees as provided in this Receipt, may require the production of proof satisfactory to it as to the identity and genuineness of any signature and may also require compliance with such reasonable regulations as the Depositary and the Company may establish consistent with the provisions of the Deposit Agreement or this Receipt, including, without limitation, this Article 3 and any regulations deemed necessary or desirable by the Depositary or the Custodian to facilitate compliance with any applicable rules or regulations of the Central Bank or the CVM. The delivery of Receipts against deposits of Shares generally or against deposits of particular Shares may be suspended, or the transfer of Receipts in particular instances may be refused, or the registration of transfer of outstanding Receipts, or the combination or split-up of Receipts generally may be suspended, during any period when the transfer books of the Depositary are closed, or if any such action is deemed necessary or advisable by the Depositary or the Company at any time or from time to time because of any requirement of law or of any government or govern mental body or commission, or under any provision of the Deposit Agreement or this Receipt, or for any other reason, subject to the provisions of the following sentence. Notwithstanding anything to the contrary in this Deposit Agreement or the Receipts, the surrender of outstanding Receipts and withdrawal of Deposited Securities may be suspended only for (i) temporary delays caused by closing the transfer books of the Depositary or the Company or the deposit of Shares in connection with voting at a shareholders' meeting, or the payment of dividends, (ii) the payment of fees, taxes and similar charges, (iii) compliance with any U.S. or foreign laws or governmental regulations relating to the Receipts or to the withdrawal of the Deposited Securities, or (iv) any other reason that may at any time be specified in paragraph (A) (1) of the General Instructions to Form F-6, as from time to time in effect,

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or any successor provision thereto. Without limitation of the foregoing, the Depositary shall not knowingly accept for deposit under the Deposit Agreement any Shares required to be registered under the provisions of the Securities Act of 1933, unless a registration statement is in effect as to such Shares.

4. LIABILITY OF OWNER FOR TAXES.

     If any tax or other governmental charge shall become payable with respect to any Receipt or any Deposited Securities represented hereby, such tax or other govern mental charge shall be payable by the Owner hereof. The Depositary may refuse to effect any transfer of this Receipt or any combination or split-up hereof or any withdrawal of Deposited Securities represented by American Depositary Shares evidenced by such Receipt until such payment is made, and may withhold any dividends or other distributions, or may sell for the account of the Owner hereof any part or all of the Deposited Securities represented by the American Depositary Shares evidenced by this Receipt, and may apply such dividends or other distributions or the proceeds of any such sale in payment of such tax or other governmental charge (and any taxes or expenses arising out of such sale), and the Owner hereof shall remain liable for any deficiency.

5. WARRANTIES OF DEPOSITORS.

     Every person depositing Shares hereunder and under the Deposit Agreement shall be deemed thereby to represent and warrant that such Shares and each certificate therefor, if any, are validly issued, fully paid, non-assessable, and free of any preemptive rights of the holders of outstanding Shares and that the person making such deposit is duly authorized so to do. Every such person shall also be deemed to represent and warrant that, except with respect to the initial deposit and any deposit permitted pursuant to Section 4.03, 4.04 or 4.09 of the Deposit Agreement, such person is not and shall not become at any time while such person holds Receipts or any beneficial interest therein an affiliate of the Company. In addition, every person depositing Shares under this Deposit Agreement shall also be deemed thereby to represent and warrant that such Shares and the Receipts evidencing American Depositary Shares representing such Shares would not be Restricted Securities. Such representations and warranties shall survive the deposit of Shares and issuance of Receipts.

6. FILING PROOFS, CERTIFICATES, AND OTHER INFORMATION.

     Any person presenting Shares for deposit or any Owner of a Receipt may be required from time to time to file with the Depositary or the Custodian such proof of citizenship or residence, exchange control approval, legal or beneficial ownership of Receipts, Deposited Securities or other securities, compliance with all applicable laws or regulations or terms of the Deposit Agreement or such Receipt, or such information relating to the registration on the books of the Company or the Foreign Registrar, if applicable, to execute such certificates and to make such representations and warranties, as the Depositary may reasonably deem necessary or proper or as the company

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reasonably may require. The Depositary may withhold the delivery or registration of transfer of any Receipt or the distribution of any dividend or sale or distribution of rights or of the proceeds thereof or the delivery of any Deposited Securities until such proof or other information is filed or such certificates are executed or such representations and warranties made. The Depositary shall from time to time advise the Company of the availability of any such proofs, certificates or other information and shall provide copies thereof to the Company as promptly as practicable upon request by the Company, unless such disclosure is prohibited by law.

7. CHARGES OF DEPOSITARY.

     The Company agrees to pay the fees and reasonable out-of-pocket expenses of the Depositary and those of any Registrar only in accordance with agreements in writing entered into between the Depositary and the Company from time to time. The Depositary shall present detailed statement for such expenses to the Company at least once every three months. The charges and expenses of the Custodian are for the sole account of the Depositary.

     The following charges, to the extent permitted by applicable law and stock exchange regulations, shall be incurred by any party depositing or withdrawing Shares or by any party surrendering Receipts or to whom Receipts are issued (including, without limitation, issuance pursuant to a stock dividend or stock split declared by the Company or an exchange of stock regarding the American Depositary Shares or Deposited Securities or a delivery of American Depositary Shares pursuant to Section 4.03 of the Deposit Agreement), or by Owners, as applicable: (1) taxes and other governmental charges, (2) such registration fees as may from time to time be in effect for the registration of transfers of Shares generally on the Share register of the Company or Foreign Registrar and applicable to transfers of Shares to or from the name of the Depositary or its nominee or the Custodian or its nominee on the making of deposits or withdrawals under the terms of the Deposit Agreement, (3) such cable, telex and facsimile transmission expenses as are expressly provided in the Deposit Agreement, (4) such expenses as are incurred by the Depositary in the conversion of foreign currency pursuant to Section 4.05 of the Deposit Agreement, (5) a fee of $5.00 or less per 100 American Depositary Shares (or portion thereof) for the delivery of American Depositary Shares pursuant to Section 2.03, 4.03 or 4.04 of the Deposit Agreement and the surrender of American Depositary Shares pursuant to Section 2.05 or 6.02 of the Deposit Agreement, (6) a fee of up to $.02 per American Depositary Share (or portion thereof) for any cash distribution made pursuant to the Deposit Agreement, including, but not limited to Sections 4.01 through 4.04 of the Deposit Agreement, (7) a fee for the distribution of securities pursuant to Section 4.02 of the Deposit Agreement, such fee being in an amount equal to the fee for the execution and delivery of American Depositary Shares referred to above which would have been charged as a result of the deposit of such securities (for purposes of this clause 7 treating all such securities as if they were Shares) but which securities are instead distributed by the Depositary to Owners, (8) in addition

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to any fee charged under clause 6, a fee of up to $.02 per American Depositary Share (or portion thereof) per annum for depositary services, which will be payable as provided in clause 9 below, (9) any other charges payable by the Depositary, any of the Depositary's agents, including the Custodian, or the agents of the Depositary's agents in connection with the servicing of Shares or other Deposited Securities (which charge shall be assessed against Owners as of the date or dates set by the Depositary in accordance with Section 4.06 of the Deposit Agreement and shall be payable at the sole discretion of the Depositary by billing such Owners for such charge or by deducting such charge from one or more cash dividends or other cash distributions).

     The Depositary, subject to Articles 2 and 8 hereof and as permitted by the Charter, may own and deal in any class of securities of the Company and its affiliates and in American Depositary Shares.

8. PRE-RELEASE OF RECEIPTS.

     Neither the Depositary nor the Custodian shall deliver Shares, by physical delivery, book entry or otherwise (other than to the Company or its agent as contemplated by Section 4.08 of the Deposit Agreement), or otherwise permit Shares to be withdrawn from the facility created hereby, except upon the receipt and cancellation of Receipts.

     The Depositary may issue Receipts against rights to receive Shares from the Company (or any agent of the Company recording Share ownership). No such issue of Receipts will be deemed a "Pre-Release" subject to the restrictions of the following paragraph.

     In its capacity as Depositary, the Depositary will not deliver Shares held under the Deposit Agreement prior to the receipt and cancellation by the Depositary of Receipts. The Depositary may execute and deliver Receipts prior to the receipt of Shares pursuant to Section 2.02 of the Deposit Agreement ("Pre-Release"). The Depositary may, pursuant to Section 2.05 of the Deposit Agreement, deliver Shares upon the receipt and cancellation of Receipts which have been Pre-Released, whether or not such cancellation is prior to the termination of such Pre-Release or the Depositary knows that such Receipt has been Pre-Released. The Depositary may receive Receipts in lieu of Shares in satisfaction of a Pre-Release. Each Pre-Release will be (a) preceded or accompanied by a written representation and agreement from the person to whom Receipts or Shares are to be delivered (the "Pre-Releasee") that the Pre-Releasee, or its customer, (i) owns the Shares or Receipts to be remitted, as the case may be, (ii) assigns all beneficial right, title and interest in such Shares or Receipts, as the case may be, to the Depositary in its capacity as such and for the benefit of the Owners, and (iii) will not take any action with respect to such Shares or Receipts, as the case may be, that is inconsistent with the transfer of beneficial ownership (including, without the consent of the Depositary, disposing of such Shares or Receipts as the case may be, other than in satisfaction of such Pre-Release), (b) at all times fully collateralized with cash, U.S. government securities, or

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such other collateral as the Depositary determines, in good faith, will provide substantially similar liquidity and security, (c) terminable by the Depositary on not more than five (5) Business Days' notice, and (d) subject to such further indemnities and credit regulations as the Depositary deems appropriate. The number of Shares not deposited but represented by American Depositary Shares outstanding at any time as a result of Pre-Releases will not normally exceed thirty percent (30%) of the Shares deposited under the Deposit Agreement; provided, however, that the Depositary reserves the right to disregard such limit from time to time as it deems reasonably appropriate, and may, with the prior written consent of the Company, change such limit for purposes of general application. The Depositary will also set Dollar limits with respect to Pre-Release transactions to be entered into hereunder with any particular Pre-Releasee on a case-by-case basis as the Depositary deems appropriate. For purposes of enabling the Depositary to fulfill its obligations to the owners under the Deposit Agreement, the collateral referred to in clause (b) above shall be held by the Depositary as security for the performance of the Pre-Releasee's obligations to the Depositary in connection with a Pre-Releasee's obligation to deliver Shares or Receipts upon termination of a Pre-Release transaction (and shall not, for the avoidance of doubt, constitute Deposited Securities under the Deposit Agreement). The Depositary may retain for its own account any compensation received by it in connection with the foregoing.

9. TITLE TO RECEIPTS.

     It is a condition of this Receipt, and every successive holder and Owner of this Receipt by accepting or holding the same consents and agrees, that title to this Receipt when properly endorsed or accompanied by proper instruments of transfer, is transferable by delivery with the same effect as in the case of a negotiable instrument; provided, however, that the Depositary and the Company, notwithstanding any notice to the contrary, may treat the person in whose name this Receipt is registered on the books of the Depositary as the absolute owner hereof for the purpose of determining the person entitled to distribution of dividends or other distributions or to any notice provided for in the Deposit Agreement and for all other purposes and neither the Company nor the Depositary shall have any obligation or be subject to any liability under the Deposit Agreement to any Beneficial Owner of a Receipt unless such Beneficial Owner is the Owner thereof.

10. VALIDITY OF RECEIPT.

     This Receipt shall not be entitled to any benefits under the Deposit Agreement or be valid or obligatory for any purpose, unless this Receipt shall have been executed by the Depositary by the manual signature of a duly authorized signatory of the Depositary; provided, however, that such signature may be a facsimile if a Registrar for the Receipts shall have been appointed and such Receipts are countersigned by the manual signature of a duly authorized officer of the Registrar.

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11. REPORTS; INSPECTION OF TRANSFER BOOKS.

     The Company has agreed that, if at any time prior to the termination of the Deposit Agreement the Company is neither a reporting company under Section 13 or 15(d) of the Securities Exchange Act nor exempt from the reporting requirements of the Securities Exchange Act by reason of Rule 12g3-2(b) thereunder, the Company will provide, at its expense, to any Owner or Beneficial Owner or any holder of Shares, and to any prospective purchaser of American Depositary Shares or Shares, upon request of such Owner, Beneficial Owner, holder or prospective purchaser, the information required by Rule 144A(d) (4) (i) and otherwise comply with Rule 144A(d) (4). If at any time the Company is neither subject to Section 13 or 15 (d) of the Securities Exchange Act nor exempt pursuant to Rule 12g3-2(h) under the securities Exchange Act (as determined by the Office of International Corporate Finance of the Commission), the Company has agreed to immediately so notify the Depositary, and the Depositary may so notify the Owners in writing at the company's expense.

     The Company has authorized the Depositary to deliver such information as furnished by the Company to the Depositary during any period in which the Company informs the Depositary it is subject to the information delivery requirements of Rule 144A(d) (4) to any such Owner, Beneficial owner, holder of Shares or prospective purchaser at the request of such person. The Company has agreed to reimburse the Depositary for its reasonable expenses in connection with such deliveries and to provide the Depositary with such information in such quantities as the Depositary may from time to time reasonably request.

     The Depositary will make available for inspection by Owners of Receipts at its Corporate Trust Office any reports, notices and communications, including any proxy soliciting material, received from the Company which are both (a) received by the Depositary, the Custodian or a nominee of either as the holder of the Deposited securities and (b) made generally available to the holders of such Deposited Securities by the Company. The Depositary will also make available for inspection by Owners copies of such reports, notices and communications when furnished by the Company pursuant to the Deposit Agreement. Any such reports, notices and communications, including any such proxy soliciting material, furnished to the Depositary by the Company shall be furnished in English to the extent such materials are required to be translated into English pursuant to any regulations of the commission applicable to the company. The Company has agreed to provide to the Depositary, at the Company's expense (unless otherwise agreed in writing by the Company and the Depositary), all documents that it provides to the Custodian.

     The Company will promptly transmit to the Depositary and the Custodian any reports, notices and other communications that are made generally available by the Company to holders of its Shares. The Depositary will promptly make such notices, reports and other communications available to all Owners on a basis similar to that for

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holders of shares or other Deposited Securities, or on such other basis as the Company may advise the Depositary may be required by any applicable law, regulation or stock exchange or automated inter-dealer quotation system requirement or, at the written request and expense of the Company, promptly arrange for the mailing of copies thereof (or if requested by the Company, a summary of any such notice provided by the Company) to all Owners. The Company will timely provide the Depositary with the quantity of such notices, reports and other communications, as requested by the Depositary from time to time, in order for the Depositary to effect any such mailings. The Company has delivered to the Depositary and the Custodian a copy of the provisions of or governing the Shares and any other Deposited Securities issued by the Company or any affiliate of the Company, and promptly upon any amendment thereto or change therein, the Company shall deliver to the Depositary and the Custodian a copy of such provisions as so amended or changed. The Depositary may rely upon such copy for all purposes of the Deposit Agreement. The Depositary will, at the expense of the Company (unless otherwise agreed in writing by the Company and the Depositary), make such copy and such notices, reports and other communications available for inspection by Owners at the Depositary's office, at the office of the Custodian and at any other designated transfer offices.

     The Depositary will keep books for the registration of Receipts and transfers of Receipts which at all reasonable times shall be open for inspection by the Owners of Receipts, provided that such inspection shall not be for the purpose of communicating with Owners of Receipts for an object other than the business of the Company, including, without limitation, a matter related to the Deposit Agreement, the Receipts or the Deposited Securities.

     The Depositary may close the transfer books alter consultation with the Company to the extent practicable, at any time or from time to time, when deemed expedient by it in connection with the performance of its duties under the Deposit Agreement.

12. DIVIDENDS AND DISTRIBUTIONS.

     Whenever the Depositary or on its behalf, its agent, receives any cash dividend or other cash distribution on any Deposited Securities, the Depositary will, if at the time of receipt thereof any amounts received in a Foreign Currency can in the judgment of the Depositary be converted on a reasonable basis into United States dollars transferable to the United States, and subject to the Deposit Agreement, convert or will cause its agent to convert, as promptly as practicable (and in any event within one (1) Business Day) alter its receipt of such dividend or distribution (unless otherwise prohibited or prevented by law), such dividend or distribution into dollars, transfer such dollars to the United States and will, as promptly as practicable, distribute the amount thus received (net of the expenses of the Depositary as provided in Article 7 hereof and Section 5.09 of the Deposit Agreement) to the Owners of Receipts entitled thereto, provided, however, that in the event that the Company, the Depositary or the Custodian is required to withhold

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and does withhold from such cash dividend or other cash distribution in respect of any Deposited Securities an amount on account of taxes, the amount distributed to the Owners of the Receipts evidencing American Depositary Shares representing such Deposited Securities shall be reduced accordingly.

     Subject to the provisions of Section 4.11 and 5.09 of the Deposit Agreement, whenever the Depositary receives any distribution other than a distribution described in Sections 4.01, 4.03 or 4.04 of the Deposit Agreement, the Depositary may, as promptly as practicable, cause the securities or property received by it to be distributed to the Owners of Receipts entitled thereto, in proportion to the number of American Depositary Shares representing such Deposited securities held by each of them respectively, in any manner that the Depositary may deem equitable and practicable for accomplishing such distribution; provided, however, that if in the opinion of the Depositary such distribution cannot be made proportionately among the Owners of Receipts entitled thereto, or if for any other reason the Depositary deems such distribution not to be feasible, the Depositary may, alter consultation with the Company, adopt such method as it may deem equitable and practicable for the purpose of effecting such distribution, including, but not limited to, the public or private sale of the securities or property thus received, or any part thereof, and the net proceeds of any such sale (net of the fees of the Depositary as provided in Article 7 hereof and Section 5.09 of the Deposit Agreement and any expenses in connection with such sale) shall be distributed by the Depositary to the Owners of Receipts entitled thereto as in the case of a distribution received in cash, all in the manner and subject to the conditions set forth in the Deposit Agreement. To the extent such securities or property or the net proceeds thereof are not distributed to Owners as provided in Section 4.02 of the Deposit Agreement, the same shall constitute Deposited Securities and each American Depositary Share shall thereafter also represent its proportionate interest in such securities, property or net proceeds.

     If any distribution consists of a dividend in, or free distribution of, Shares, the Depositary may distribute, as promptly as practicable, to the Owners of outstanding Receipts entitled thereto, in proportion to the number of American Depositary Shares representing such Deposited Securities held by each of them respectively, additional Receipts evidencing an aggregate number of American Depositary Shares representing the amount of Shares received as such dividend or free distribution subject to the terms and conditions of the Deposit Agreement with respect to the deposit of Shares and the issuance of American Depositary Shares evidenced by Receipts, including the withholding of any tax or other governmental charge as provided in Section 4.11 of the Deposit Agreement and the payment of the fees of the Depositary as provided in Article 7 hereof and Section 5.09 of the Deposit Agreement. In lieu of delivering Receipts for fractional American Depositary Shares in any such caser the Depositary will sell the amount of Shares represented by the aggregate of such fractions and distribute the net proceeds, all in the manner and subject to the conditions set forth in the Deposit Agreement. If additional Receipts are not so distributed, each American Depositary Share shall thenceforth also represent the additional Shares distributed upon the

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Deposited Securities represented thereby. Each beneficial owner of Receipts or Shares so distributed shall be deemed to have acknowledged that the Shares have not been registered under the Securities Act and to have agreed to comply with the restrictions on transfer described in the legend set forth on the face hereof. In addition, the Depositary may withhold any distribution of Receipts under Section 4.03 of the Deposit Agreement if it has not received satisfactory assurances from the Company that such distribution does not require registration under the Securities Act or is exempt from registration under the provisions of such Act.

     In the event that the Depositary determines that any distribution in property other than cash (including Shares and rights to subscribe therefor) is subject to any tax or other governmental charge which the Depositary is obligated to withhold, the Depositary may by public or private sale dispose of all or a portion of such property (including Shares and rights to subscribe therefor) in such amounts and in such manner as the Depositary deems reasonably necessary and practicable to pay any such taxes or charges, and the Depositary shall distribute the net proceeds of any such sale after deduction of such taxes or charges to the Owners of Receipts entitled thereto.

13. RIGHTS.

     In the event that the Company shall offer or cause to be offered to the holders of any Deposited Securities any rights to subscribe for additional Shares or any rights of any other nature, the Depositary, after consultation with the Company, shall have discretion as to the procedure to be followed in making such rights available to any Owners or in disposing of such rights on behalf of any Owners and making the net proceeds available to such Owners or, if by the terms of such rights offering or for any other reason it would-be unlawful for the Depositary either to make such rights available to any Owners or to dispose of such rights and make the net proceeds available to such Owners, then the Depositary shall allow the rights to lapse. If at the time of the offering of any rights the Depositary determines that it is lawful and feasible to make such rights available to all or certain Owners but not to other Owners, the Depositary shall distribute to any Owner to whom it determines the distribution to be lawful and feasible, in proportion to the number of American Depositary Shares held by such Owner, warrants or other instruments therefor in such form as it deems appropriate.

     In circumstances in which rights would otherwise not be distributed, if an Owner requests the distribution of warrants or other instruments in order to exercise the rights allocable to the American Depositary Shares of such Owner hereunder, the Depositary will promptly make such rights available to such Owner upon written notice from the Company to the Depositary that (a) the Company has elected in its sale discretion to permit such rights to be exercised and (b) such Owner has executed such documents as the Company has determined in its role discretion are reasonably required under applicable law.

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     If the Depositary has distributed warrants or other instruments for rights to all or certain Owners, then upon instruction from such an Owner pursuant to such warrants or other instruments to the Depositary to exercise such rights, upon payment by such Owner to the Depositary for the account of such Owner of an amount equal to the purchase price of the Shares to be received upon the exercise of the rights, and upon payment of the fees of the Depositary and any other charges as set forth in such warrants or other instruments, the Depositary shall, on behalf of such Owner, exercise the rights and purchase the Shares, and the Company shall cause the Shares so purchased to be delivered to the Depositary on behalf of such Owner. As agent for such Owner, the Depositary will cause the Shares so purchased to be deposited pursuant to Section 2.02 of the Deposit Agreement, and shall, pursuant to Section 2.03 of the Deposit Agreement, execute and deliver Receipts to such Owner. In the case of a distribution pursuant to this paragraph, such Receipts shall be legended in accordance with applicable U.S. laws, and shall be subject to the appropriate restrictions on sale, deposit, cancellation, and transfer under such laws.

     If the Depositary determines that it is not lawful or feasible to make such rights available to all or certain Owners, it will use its best efforts that are reasonable under the circumstances to, sell the rights, warrants or other instruments in proportion to the number of American Depositary Shares held by the Owners to whom it has determined it may not lawfully or feasibly make such rights available, and allocate the net proceeds of such sales (net of the fees of the Depositary as provided in Section 5.09 of the Deposit Agreement, any expenses in connection with such sale and all taxes and governmental charges payable in connection with such rights and subject to the terms and conditions of the Deposit Agreement) for the account of such Owners otherwise entitled to such rights, warrants or other instruments, upon an averaged or other practical basis without regard to any distinctions among such Owners because of exchange restrictions or the date of delivery of any Receipt or otherwise. Such proceeds shall be distributed as promptly as practicable in accordance with Section 4.01 of the Deposit Agreement. If a registration statement under the Securities Act is required with respect to the securities to which any rights relate in order for the Company to offer such rights to owners and sell the securities represented by such rights, the Depositary will not offer such rights to Owners unless and until such a registration statement is in effect, or unless the offering and sale of such securities and such rights to such Owners are exempt from, or not subject to, registration under the provisions of such Act. The Depositary shall not be responsible for any failure to determine that it may be lawful or feasible to make such rights available to owners in general or any Owner in particular.

14. CONVERSION OF FOREIGN CURRENCY.

     Whenever the Depositary or the Custodian shall receive Foreign Currency, by way of dividends or other distributions or the net proceeds from the sale of securities, property or rights, and if at the time of the receipt thereof the Foreign Currency so received can, pursuant to applicable law, be converted on a reasonable basis into Dollars

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and the resulting Dollars transferred to the United States, the Depositary or the Custodian shall convert or cause to be converted as promptly as practicable (and in any event within one Business Day of its or its agent's receipt of such Foreign Currency), by sale or in any other manner that it may determine in accordance with applicable law, such Foreign Currency into Dollars. If, at the time of conversion of such Foreign Currency into Dollars, such Dollars can, pursuant to applicable law, be transferred outside of Brazil for distribution to Owners entitled thereto, such Dollars shall be distributed as promptly as practicable to the Owners entitled thereto or, if the Depositary or the Custodian shall have distributed any rights, warrants or other instruments which entitle the holders thereof to such Dollars, then to the holders of such rights, warrants and/or instruments upon surrender thereof for cancellation. Such distribution or conversion may be made upon an averaged or other practicable basis without regard to any distinctions among Owners on account of exchange restrictions, the date of delivery of any Receipt or otherwise and shall be net of any expenses of conversion into Dollars incurred by the Depositary or the Custodian as provided in Section 5.09 of the Deposit Agreement.

     If such conversion, transfer or distribution can be effected only with the approval or license of any government or agency thereof, the Depositary or the Custodian shall file as promptly as practicable such application for approval or license; however, the Depositary or the Custodian shall be entitled to rely upon Brazilian local counsel in such matters, which counsel shall be instructed to act as promptly as possible.

     If at any time Foreign Currency received by the Depositary or the Custodian is not, pursuant to applicable law, convertible, in whole or in part, into Dollars transferable into the United States, or if any approval or license of any government or agency thereof which is required for such conversion is denied or in the opinion of the Depositary cannot be promptly obtained at a reasonable cost, the Depositary or the Custodian shall, (a) as to that portion of the Foreign Currency that is convertible into Dollars, make such conversion and, if permitted by applicable law, transfer such Dollars to the United States for distribution to Owners in accordance with the first paragraph of this Article 13 or, if such transfer is not so permitted, hold such Dollars uninvested and without liability for interest thereon for the respective accounts of the Owners entitled to receive the same, and (b) as to the nonconvertible balance, if any, (i) if requested in writing by an Owner, distribute or cause the Custodian to distribute the Foreign Currency (or an appropriate document evidencing the right to receive such Foreign Currency) received by the Depositary or Custodian in respect of the American Depositary Shares evidenced by Receipts held by such Owner (as the same may be adjusted as a consequence of subclause (ii) below) to such owner (x) if such request is received before the 15th day of a calendar month, on such 15th day, or (y) if not, on the last day of such month (or, in either case, if such day is not a Business Day, on the next succeeding Business Day) and (ii) the Depositary shall cause the custodian to hold any amounts of nonconvertible Foreign Currency not distributed pursuant to the immediately preceding subclause (i) for the respective accounts of the Owners entitled to receive the same, uninvested and without liability for interest thereon, on demand and, if and to the extent reasonably

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practicable and permitted by applicable law, in a manner designed to protect such Owners against the effects of inflation; provided that, at such time, at the reasonable request of the Depositary, the Company shall furnish the Depositary, at the Company's expense, with a written opinion from recognized United States counsel for the Company confirming that the manner in which the Depositary proposes to hold such amounts of non-convertible Foreign Currency will not violate the Investment Company Act of 1940.

15. RECORD DATES.

     Whenever any cash dividend or other cash distribution shall become payable or any distribution other than cash shall be made, or whenever rights shall be issued with respect to the Deposited Securities, or whenever for any reason the Depositary causes a change in the number of Shares that are represented by each American Depositary Share, or whenever the Depositary shall receive notice of any meeting of holders of Shares or other Deposited Securities, the Depositary shall fix a record date, which date shall, (x) be the same date as the record date fixed by the Company, if any, to the extent practicable, or (y) if different from the record date fixed by the Company, be as near as practicable to the record date fixed by the Company or, if more than five (5) Business Days after such record date, be fixed after consultation with the Company (a) for the determination of the Owners of Receipts who shall be (i) entitled to receive such dividend, distribution or rights or the net proceeds of the sale thereof or (ii) entitled to give instructions for the exercise of voting rights at any such meeting, (b) on or after which each American Depositary Share will represent the changed number of Shares, or (c) for any other reason, subject to the provisions of the Deposit Agreement.

16. VOTING OF DEPOSITED SECURITIES.

     Upon receipt of notice of any meeting or solicitation of proxies of holders of Shares or other Deposited Securities, if requested in writing by the Company, the Depositary shall, as soon as practicable thereafter, mail to the Owners of Receipts a notice, the form of which notice shall be in the sole discretion of the Depositary, which shall contain (a) such information as is contained in such notice of meeting, (or, if requested by the Company a summary in English of such information provided by the Company), (b) a statement that the Owners of Receipts as of the close of business on a specified record date will be entitled, subject to any applicable provision of Brazilian law, the Charter and the provisions of the Deposited Securities, to instruct the Depositary as to the exercise of the voting rights, if any, pertaining to the amount of Shares or other Deposited Securities represented by their respective American Depositary Shares and (c) a statement as to the manner in which such instructions may be given, including an express indication that instructions may be given or deemed given in accordance with the last sentence of this paragraph if no instruction is received, to the Depositary to give a discretionary proxy to a person designated by the Company. Upon the written request of an Owner of a Receipt on such record date, received on or before the date established by the Depositary for such purpose, the Depositary shall endeavor insofar as practicable and

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permitted under Brazilian law, the Charter and the Deposited Securities, to vote or cause to be voted the amount of Shares or other Deposited Securities represented by such American Depositary Shares evidenced by such Receipt in accordance with the instructions set forth in such request. The Depositary shall not itself exercise any voting discretion over any Deposited Securities. If no instructions are received by the Depositary from any Owner with respect to any of the Deposited Securities represented by the American Depositary Shares evidenced by such Owner's Receipts on or before the date established by the Depositary for such purpose, the Depositary shall deem such Owner to have instructed the Depositary to give a discretionary proxy to a person designated by the Company with respect to such Deposited Securities and the Depositary shall give a discretionary proxy to a person designated by the Company to vote such Deposited Securities, provided that no such instruction shall be deemed given and no such discretionary proxy shall be given with respect to any matter as to which the Company informs the Depositary (and the Company agrees to provide such information as promptly as practicable in writing) that (x) the Company does not wish such proxy given, (y) substantial opposition exists or (z) such matter materially or adversely affects the rights of holders of Shares.

     Subject to the rules of any securities exchange or automated inter-dealer quotation system on which American Depositary Shares or the Deposited Securities represented thereby are listed or quoted, the Depositary shall deliver, at least two Business Days prior to the date of such meeting, to the Company, to the attention of its Chief Financial Officer, copies of all instructions received from Owners in accordance with which the Depositary will vote, or cause to be voted, the Deposited Securities represented by the American Depositary Shares evidenced by such Receipts at such meeting. Delivery of instructions will be made at the expense of the Company (unless otherwise agreed in writing by the Company and the Depositary), provided that payment of such expenses shall not be a condition precedent to the obligations of the Depositary under Section 4.07 of the Deposit Agreement.

17. CHANGES AFFECTING DEPOSITED SECURITIES.

     In circumstances where the provisions of Section 4.03 of the Deposit Agreement do not apply, upon any change in nominal value, change in par value, split-up, consolidation, or any other reclassification of Deposited securities, or upon any recapitalization, reorganization, merger or consolidation, or sale of assets affecting the Company or to which it is a party, any securities which shall be received by the Depositary or a Custodian in exchange for or in conversion of or in respect of Deposited Securities shall be treated as new Deposited Securities under the Deposit Agreement, and American Depositary Shares shall thenceforth represent the new Deposited Securities so received in exchange or conversion, unless additional Receipts are delivered pursuant to the following sentence. In any such case the Depositary may, and shall if the Company shall so request, execute and deliver additional Receipts as in the case of a dividend in

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Shares, or call for the surrender of outstanding Receipts to be exchanged for new Receipts specifically describing such new Deposited Securities.

18. LIABILITY OF THE COMPANY AND DEPOSITARY.

     Neither the Depositary nor the Company shall incur any liability to any Owner or Beneficial Owner, if by reason of any provision of any present or future law or regulation of the united States, Brazil or any other country, or of any other governmental or regulatory authority or stock exchange, or by reason of any provision, present or future, of the Charter or the Deposited Securities, or by reason of any act of God or war or other circumstances beyond its control, the Depositary or the Company shall be prevented or forbidden from or be subject to any civil or criminal penalty on account of doing or performing any act or thing which by the terms of the Deposit Agreement it is provided shall be done or performed; nor shall the Depositary or the Company incur any liability to any Owner or Beneficial owner of a Receipt by reason of any non-performance or delay, caused as aforesaid, in the performance of any act or thing which by the terms of the Deposit Agreement it is provided shall or may be done or performed, or by reason of any exercise of, or failure to exercise, any discretion provided for in the Deposit Agreement. Where, by the terms of a distribution pursuant to Sections 4.01, 4.02 or 4.03 of the Deposit Agreement, or an offering or distribution pursuant to Section 4.04 of the Deposit Agreement, or for any other reason, the Depositary is prevented or prohibited from making such distribution or offering available to Owners, and the Depositary is prevented or prohibited from disposing of such distribution or offering on behalf of such Owners and making the net proceeds available to such Owners, then the Depositary, after consultation with the company, shall not make such distribution or offering, and shall allow any rights, if applicable, to lapse. Neither the Company nor the Depositary assumes any obligation or shall be subject to any liability under the Deposit Agreement to Owners or Beneficial Owners of Receipts, except that they agree to perform their obligations specifically set forth in the Deposit Agreement without negligence or bad faith. The Depositary shall not be subject to any liability with respect to the validity or worth of the Deposited Securities. Neither the Depositary nor the Company shall be under any obligation to appear in, prosecute or defend any action, suit, or other proceeding in respect of any Deposited Securities or in respect of the Receipts, which in its opinion may involve it in expense or liability, unless indemnity satisfactory to it against all expenses and liability shall be furnished as often as may be required, and the Custodian shall not be under any obligation whatsoever with respect to such proceedings, the responsibility of the Custodian being solely to the Depositary. Neither the Depositary nor the Company shall be liable for any action or nonaction by it in reliance upon the advice of or information from legal counsel, accountants, any person presenting Shares for deposit, any Owner or Beneficial Owner of a Receipt, or any other person believed by it in good faith to be competent to give such advice or information. The Depositary shall not be responsible for any failure to carry out any instructions to vote any of the Deposited Securities, or for the manner in which any such vote is cast or the effect of any such vote, provided that any such action or nonaction is in good faith. The Depositary

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shall not be liable for any acts or omissions made by a successor depositary whether in connection with a previous act or omission of the Depositary or in connection with a matter arising wholly alter the removal or resignation of the Depositary, provided that in connection with the issue out of which such potential liability arises, the Depositary performed its obligations without negligence or bad faith while it acted as Depositary. The Company agrees to indemnify the Depositary, its directors, employees, agents and affiliates and any Custodian against, and hold each of them harmless from, any liability or expense (including, but not limited to, the reasonable fees and expenses of counsel) which may arise out of acts performed or omitted, in accordance with the provisions of the Deposit Agreement and of the Receipts, as the same may be amended, modified, or" supplemented from time to time, (i) by either the Depositary or a Custodian or their respective directors, employees, agents and affiliates, except for any liability or expense arising out of the negligence or bad faith of either of them, and except to the extent that such liability or expense arises out of information relating to the Depositary or the Custodian, as applicable, furnished in writing to the Company by the Depositary or the Custodian, as applicable, expressly for use in any registration statement, proxy statement, prospectus (or placement memorandum) or preliminary prospectus (or preliminary placement memorandum) relating to the Shares, or omissions from such information; or (ii) by the Company or any of its directors, employees, agents and affiliates. The indemnities contained in this paragraph shall not extend to any liability or expense which may arise out of any Pre-Release (as defined in Section 2.09) to the extent that any such liability or expense arises in connection with (a) any United States federal, state or local income tax laws or (b) the failure of the Depositary to deliver Deposited securities when required under the terms of Section 2.05 hereof. However, for the avoidance of doubt, the indemnities contained in the preceding paragraph shall apply to any liability or expense which may arise out of any misstatement or alleged misstatement or omission or alleged omission in any registration statement, proxy statement, prospectus (or placement memorandum) or preliminary prospectus (or preliminary placement memorandum) relating to the offer or sale of Shares, except to the extent any such liability arises out of (i) information relating to the Depositary or any Custodian, as applicable, furnished in writing to the Company by the Depositary or any Custodian, as applicable, expressly for use in any of the foregoing documents, or, (ii) material omissions from such information furnished by the Depositary or any Custodian.

     No disclaimer of liability under the Securities Act is intended by any provisions of the Deposit Agreement.

     The Depositary, subject to Sections 2.05 and 2.09 of the Deposit Agreement, may own and deal in any class of securities of the Company and its affiliates and in Receipts.

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     19 . RESIGNATION AND REMOVAL OF THE DEPO SITARY; APPOINTMENT OF SUCCESSOR CUSTODIAN.

     The Depositary may at any time resign as Depositary under the Deposit Agreement by written notice of its election so to do delivered to the Company, such resignation to take effect upon the appointment of a successor depositary and its acceptance of such appointment as provided in the Deposit Agreement. The Depositary may at any time be removed by the Company by written notice of such removal, effective upon the appointment of a successor depositary and its acceptance of such appointment as provided in the Deposit Agreement. Whenever the Depositary in its discretion determines that it is in the best interests of the Owners of Receipts to do so, it may appoint a substitute or additional custodian or custodians.

20. AMENDMENT.

     The form of the Receipts and any provisions of the Deposit Agreement may at any time and from time to time be amended by agreement between the Company and the Depositary in any respect which they may deem necessary or desirable. Any amendment which shall impose or increase any fees or charges (other than taxes and other governmental charges), or which shall otherwise prejudice any substantial existing right of Owners of Receipts, shall, however, not become effective as to outstanding Receipts until the expiration of 30 days after notice of such amendment shall have been given to the Owners of outstanding Receipts. Every Owner of a Receipt at the time any amendment so becomes effective shall be deemed, by continuing to hold such Receipt, to consent and agree to such amendment and to be bound by the Deposit Agreement as amended thereby. In no event shall any amendment impair the right of the Owner of any Receipt to surrender such Receipt and receive therefor the Deposited securities represented thereby, except in order to comply with mandatory provisions of applicable law.

21. TERMINATION OF DEPOSIT AGREEMENT.

     The Depositary at any time, at the direction of the Company, shall terminate the Deposit Agreement by mailing notice of such termination to the Owners of all Receipts then outstanding at least 30 days prior to the date fixed in such notice for such termination. The Depositary may likewise terminate the Deposit Agreement by mailing notice of such termination to the Company and the Owners of all Receipts then outstanding, such termination to be effective on a date specified in such notice not less than 30 days after the date thereof, if at any time 60 days shall have expired after the Depositary shall have delivered to the Company a written notice of its election to resign and a successor depositary shall not have been appointed and accepted its appointment as provided in the Deposit Agreement. On and after the date of termination, the Owner of a Receipt will, upon (a) surrender of such Receipt at the Corporate Trust Office of the Depositary, (b) payment of the fee of the Depositary for the surrender of Receipts referred to in Section 2.05 of the Deposit Agreement, and (c) payment of any applicable

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taxes or governmental charges, be entitled to delivery, to the Owner or upon the Owner's order, of the amount of Deposited Securities represented by the American Depositary Shares evidenced by such Receipt. If any Receipts shall remain outstanding after the date of termination, the Depositary thereafter shall discontinue the registration of transfers of Receipts, shall suspend the distribution of dividends to the Owners thereof, and shall not give any further notices or perform any further acts under the Deposit Agreement, except that the Depositary shall continue to collect dividends and other "distributions pertaining to Deposited Securities, shall sell rights as provided in the Deposit Agreement, and shall continue to deliver Deposited Securities, together with any dividends or other distributions received with respect thereto and the net proceeds of the sale of any rights or other property, in exchange for Receipts surrendered to the Depositary (after deducting, in each case, the fee of the Depositary for the surrender of a Receipt, any expenses for the account of the Owner of such Receipt in accordance with the terms and conditions of the Deposit Agreement, and any applicable taxes or governmental charges). At any time after the expiration of one year from the date of termination, the Depositary may sell the Deposited Securities then held under the Deposit Agreement and may thereafter hold uninvested the net proceeds of any such sale, together with any other cash then held by it thereunder, unsegregated and without liability for interest, for the pro rata benefit of the Owners of Receipts which have not theretofore been surrendered, such Owners thereupon becoming general creditors of the Depositary with respect to such net proceeds and such other cash. Alter making such sale, the Depositary shall be discharged from all obligations under the Deposit Agreement, except to account for such net proceeds and other cash (after deducting, in each case, the fee of the Depositary for the surrender of a Receipt, any expenses for the account of the Owner of such Receipt in accordance with the terms and conditions of the Deposit Agreement, and any applicable taxes or governmental charges) and except as provided in Section 5.08 of the Deposit Agreement. Upon the termination of the Deposit Agreement, the Company shall be discharged from all obligations under the Deposit Agreement except for its obligations to the Depositary with respect to indemnification, charges, and expenses.

     22. SUBMISSION TO JURISDICTION; APPOINTMENT OF AGENT FOR PROCES S.

     The Company (i) irrevocably designates and appoints CT Corporation System, 111 Eighth Avenue, New York New York 10011, as the Company's authorized agent upon which process may be served in any suit or proceeding arising out of or based upon the Shares or Deposited Securities, the American Depositary Shares, the Receipts or this Agreement which may be instituted in any United States federal or New York State court sitting in the Borough of Manhattan, the City of New York, (ii) consents and submits to the non-exclusive jurisdiction of such court in the State of New York with respect to any such suit or proceeding, and (iii) agrees that service of process upon said authorized agent shall be deemed in every respect effective service of process upon the Company in any such suit or proceeding. The Company agrees to deliver, upon the execution and delivery of this Deposit Agreement, a written acceptance by such agent of its appointment as such

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agent. The Company further agrees to take any and all action, including the filing of any and all such documents and instruments, as may be necessary to continue such designation and appointment in full force and effect for so long as any American Depositary Shares or Receipts remain outstanding or the Agreement remains in force. If said authorized agent shall cease to act as the Company's agent for service of process, the Company shall appoint without delay another such agent and promptly notify the Depositary of such appointment.

     23. UNCERTIFICATED AMERICAN DEPOSITARY SHARES; DTC DIRECT REGISTRATION SYSTEM.

     Notwithstanding anything to the contrary in the Deposit Agreement:

     (a) American Depositary Shares may be certificated securities evidenced by Receipts or uncertificated securities. The form of Receipt annexed as Exhibit A to the Deposit Agreement summarizes the terms and conditions of, and will be the prospectus required under the Securities Act of 1933 for, both certificated and uncertificated American Depositary Shares. Except for those provisions of the Deposit Agreement that by their nature do not apply to uncertificated American Depositary Shares, all the provisions of the Deposit Agreement shall apply, mutatis mutandis, to both certificated and uncertificated American Depositary Shares.

     (b) (i) The term "deliver", or its noun form, when used with respect to Receipts, shall mean (A) book-entry transfer of American Depositary Shares to an account at The Depository Trust Company, or its successor ("DTC"), designated by the person entitled to such delivery, evidencing American Depositary Shares registered in the name requested by that person, (B) registration of American Depositary Shares not evidenced by a Receipt on the books of the Depositary in the name requested by the person entitled to such delivery and mailing to that person of a statement confirming that registration or (C) if requested by the person entitled to such delivery, delivery at the Corporate Trust Office of the Depositary to the person entitled to such delivery of one or more Receipts.

     (ii) The term "surrender", when used with respect to Receipts, shall mean (A) one or more book-entry transfers of American Depositary Shares to the DTC account of the Depositary, (B) delivery to the Depositary at its Corporate Trust Office of an instruction to surrender American Depositary Shares not evidenced by a Receipt or (C) surrender to the Depositary at its Corporate Trust Office of one or more Receipts evidencing American Depositary Shares.

     (c) American Depositary Shares not evidenced by Receipts shall be transferable as uncertificated registered securities under the laws of New York.

     (d) The Depositary shall have a duty to register a transfer, in the case of uncertificated American Depositary Shares, upon receipt from the Owner of a proper

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instruction (including, for the avoidance of doubt, instructions through DRS and Profile as provided in subsection (f) below). The Depositary, upon surrender of a Receipt for the purpose of exchanging it for uncertificated American Depositary Shares, shall cancel that Receipt and send the Owner a statement confirming that the Owner is the owner of the same number of uncertificated American Depositary Shares that the surrendered Receipt evidenced. The Depositary, upon receipt of a proper instruction (including, for the avoidance of doubt, instructions through DRS and Profile as provided in subsection (0 below) from the Owner of uncertificated American Depositary Shares for the purpose of exchanging them for certificated American Depositary Shares, shall execute and deliver to the Owner a Receipt evidencing the same number of certificated American Depositary Shares.

     (e) Upon satisfaction of the conditions for replacement of a Receipt that is mutilated, lost, destroyed or stolen, the Depositary shall deliver to the Owner the American Depositary Shares evidenced by that Receipt in uncertificated form unless otherwise requested by the Owner.

     (f) (i) The parties acknowledge that the Direct Registration System ("DRS") and Profile Modification System ("Profile") shall apply to uncertificated American Depositary Shares upon acceptance thereof to DRS by DTC. DRS is the system administered by DTC pursuant to which the Depositary may register the ownership of uncertificated American Depositary Shares, which ownership shall be evidenced by periodic statements issued by the Depositary to the Owners entitled thereto. Profile is a required feature of DRS which allows a DTC participant, claiming to act on behalf of an Owner of American Depositary Shares, to direct the Depositary to register a transfer of those American Depositary Shares to DTC or its nominee and to deliver those American Depositary Shares to the DTC account of that DTC participant without receipt by the Depositary of prior authorization from the Owner to register such transfer.

     (ii) In connection with and in accordance with the arrangements and procedures relating to DRS/Profile, the parties understand that the Depositary will not verify, determine or otherwise ascertain that the DTC participant which is claiming to be acting on behalf of an Owner in requesting a registration of transfer and delivery as described in subsection (i) above has the actual authority to act on behalf of the Owner (notwithstanding any requirements under the Uniform Commercial Code). For the avoidance of doubt, the provisions of Sections 5.03 and 5.08 of the Deposit Agreement shall apply to the matters arising from the use of the DRS. The parties agree that the Depositary's reliance on and compliance with instructions received by the Depositary through the DRS/Profile System and in accordance with the Deposit Agreement shall not constitute negligence or bad faith on the part of the Depositary.

EX-2.2

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Exhibit 2.2

[EXECUTION COPY]

COMPANHIA PARANAENSE DE ENERGIA - COPEL

AND

THE BANK OF NEW YORK

                                As Depositary

AND

OWNERS AND BENEFICIAL OWNERS OF
AMERICAN DEPOSITARY SHARES

     Deposit Agreement

Dated as of March 21, 1996

Amended and Restated as of July 29, 1997

As Further Amended and Restated as of November 21, 2007

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DEPOSIT AGREEMENT

     DEPOSIT AGREEMENT dated as of March 21, 1996, as amended and restated as of July 29, 1997, as further amended and restated as of November 21, 2007 among COMPANHIA PARANAENSE DE ENERGIA-COPEL, a sociedade de economia mista (a mixed-capital corporation with limited liability) organized under the laws of the Federative Republic of Brazil (herein called the Company), THE BANK OF NEW YORK, a New York banking corporation (herein called the Depositary), and all Owners and Beneficial Owners from time to time of American Depositary Receipts issued hereunder.

W I T N E S S E T H :

     WHEREAS, the Company and the Depositary entered into a Deposit Agreement, dated March 21, 1996, amended and restated as of July 29, 1997 (the "COPEL Deposit Agreement");

     WHEREAS, the Company and the Depositary now wish to further amend the COPEL Deposit Agreement to, among other things, provide for the creation of uncertificated American Depositary Shares;

     WHEREAS, the Company desires to provide, as hereinafter set forth in this Deposit Agreement for the deposit of Shares (as hereinafter defined) of the Company from time to time with the Depositary or with the Custodian (as hereinafter defined) as agent of the Depositary for the purposes set forth in the Deposit Agreement, for the creation of American Depositary Shares representing the Shares so deposited, in specified circumstances, and for the execution and delivery of American Depositary Receipts evidencing the American Depositary Shares; and

     WHEREAS, the American Depositary Receipts are to be substantially in the form of Exhibit A annexed hereto, with appropriate insertions, modifications and omissions, as hereinafter provided in this Amended and Restated Deposit Agreement.

     NOW, THEREFORE, in consideration of the premises, the parties hereto hereby agree that, pursuant to Section 6.02 of this Deposit Agreement, this Deposit Agreement shall be amended and restated as follows:

ARTICLE 1. DEFINITIONS

     The following definitions shall for all purposes, unless otherwise clearly indicated, apply to the respective terms used in this Deposit Agreement:

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SECTION 1.01. American Depositary Shares.

     The term "American Depositary Shares" shall mean the securities representing the interests in the Deposited Securities and evidenced by the Receipts issued hereunder. Each American Depositary Share shall represent the number of Shares specified in Exhibit A annexed hereto, until there shall occur a distribution upon Deposited Securities covered by Section 4.03 or a change in Deposited Securities covered by Section 4.08 or otherwise with respect to which additional Receipts are not executed and delivered, and thereafter American Depositary Shares shall evidence the amount of Shares or Deposited Securities specified in such Sections.

SECTION 1.02. Beneficial Owner.

     The term "Beneficial owner" shall be any person who has a beneficial) interest in any American Depositary Share.

SECTION 1.03. Business Day.

     The term "Business Day" shall mean any day on which banks in each of São Paulo, Brazil, Curitiba, Brazil and New York, New York are not required or authorized by law to close.

SECTION 1.04. Central Bank.

     The term "Central Bank" shall mean Banco Central do Brasil and its successors.

SECTION 1.05. Charter.

     The term "Charter" shall mean the Estatuto Social of the Company.

SECTION 1.06. Commission.

     The term "Commission" shall mean the Securities and Exchange Commission of the United States or any successor governmental agency in the United States.

SECTION 1.07. Company.

     The term "Company" shall mean Companhia Paranaense de Energia--COPEL, a sociedade de economia mista (a mixed-capital corporation with limited liability), organized under the laws of the Federative Republic of Brazil, and its successors.

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SECTION 1.08. Custodian.

     The term "Custodian" shall mean the principal São Paulo, Brazil office of Banco Itaú S/A, as agent of the Depositary for the purposes of this Deposit Agreement, and any other firm or corporation which may hereafter be appointed by the Depositary pursuant to the terms of Section 5.05, as substitute or additional custodian or custodians hereunder, as the context shall require and shall also mean all of them collectively.

SECTION 1.09. CVM.

     The term "CVM" shall mean the Comissão de Valores Mobiliários of Brazil.

SECTION 1.10. Deposit Agreement.

     The term "Deposit Agreement" shall mean this amended and restated Deposit Agreement, including Exhibit A hereto, as the same may be amended from time to time in accordance with the provisions hereof.

SECTION 1.11. Depositary; Corporate Trust Office.

     The term "Depositary" shall mean The Bank of New York, a New York banking corporation, and any successor as depositary hereunder. The term "Corporate Trust Office", when used with respect to the Depositary, shall mean the office of the Depositary which at the date of this Deposit Agreement is located at 101 Barclay Street, New York, New York 10286.

SECTION 1.12. Deposited Securities.

     The term "Deposited Securities" as of any time shall mean Shares at such time deposited or deemed to be deposited (including as contemplated under Section 2.09) under this Deposit Agreement and any and all other securities, property and cash received or deemed to be received by the Depositary or the Custodian in respect or in lieu of such deposited Shares and at such time held hereunder, subject as to cash to the provisions of Section 4.05.

SECTION 1.13. Dollars; Reais.

     The term "Dollars" shall mean United States dollars. The term "Reais" shall mean the lawful currency of Brazil.

SECTION 1.14. Foreign Currency.

     The term "Foreign Currency" shall mean currency other than Dollars.

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SECTION 1.15. Foreign Registrar.

     The term "Foreign Registrar" shall mean the entity that presently carries out the duties of registrar for the Shares or any successor as registrar for the Shares and any other appointed agent of the Company for the transfer and registration of Shares.

SECTION 1.16. Offering.

     The term "Offering" shall mean the offer and sale of Shares, as described in the Prospectus, dated July 29, 1997, including in connection with an overallotment option granted to the U.S. Underwriters and the International Underwriters (each as defined therein).

SECTION 1.17. Owner.

     The term "Owner" shall mean the person in whose name a Receipt is registered on the books of the Depositary maintained for such purpose.

SECTION 1.18. Pre-Release.

     The term "Pre-Release" shall have the meaning set forth in Section 2.09.

SECTION 1.19. Receipts.

     The term "Receipts" shall mean the American Depositary Receipts issued hereunder evidencing American Depositary Shares, as the same may be amended from time to time in accordance with the provisions hereof.

SECTION 1.20. Registrar.

     The term "Registrar" shall mean any bank or trust company having an office in the Borough of Manhattan, the City of New York, which shall be appointed to register Receipts and transfers of Receipts as herein provided.

SECTION 1.21. Restricted Securities.

     The term "Restricted Securities" shall mean Shares, or American Depositary Shares which are acquired directly or indirectly from the Company or its affiliates (as defined in Rule 144), or which are held by an officer, director (or persons performing similar functions) or other affiliate of the Company, or which would require registration under the Securities Act in connection with the offer and sale thereof in the United States, or which are subject to other restrictions on sale or deposit under the laws of the United States or Brazil.

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SECTION 1.22. Rule 144.

     The term "Rule 144A" shall mean Rule 144, as from time to time amended, under the Securities Act of 1933.

SECTION 1.23. Securities Act.

     The term "Securities Act" shall mean the United States Securities Act of 1933, as from time to time amended.

SECTION 1.24. Securities Exchange Act.

     The term "Securities Exchange Act" shall mean the United States Securities Exchange Act of 1934, as from time to time amended.

SECTION 1.25. Shares.

     The term "Shares" shall mean shares of the Company's non-voting ações preferenciais Class B (Class B preferred shares) heretofore validly issued and outstanding and fully paid, nonassessable and free of any pre-emptive rights of the holders of outstanding Shares or hereafter validly issued, subscribed and outstanding and fully paid, nonassessable and free of any pre-emptive rights of the holders of outstanding Shares or interim certificates representing such Shares.

ARTICLE 2. FORM OF RECEIPTS, DEPOSIT OF SHARES, EXECUTION AND DELIVERY, TRANSFER AND SURRENDER OF RECEIPTS

SECTION 2.01. Form and Transferability of Receipts.

     Definitive Receipts shall be substantially in the form set forth in Exhibit A annexed to this Deposit Agreement, with appropriate insertions, modifications and omissions, as hereinafter provided. No Receipt shall be entitled to any benefits under this Deposit Agreement or be valid or obligatory for any purpose, unless such Receipt shall have been executed by the Depositary by the manual signature of a duly authorized signatory of the Depositary; provided, however, that such signature may be a facsimile if a Registrar for the Receipts shall have been appointed and such Receipts are countersigned by the manual signature of a duly authorized officer of the Registrar. Receipts may be issued in denominations of any whole number of American Depositary Shares. The Depositary shall maintain books on which each Receipt so executed and delivered as hereinafter provided and the transfer of each such Receipt shall be registered. Receipts bearing the facsimile signature of a duly authorized signatory of the Depositary who was at any time a proper signatory of the Depositary shall bind the Depositary, notwithstanding that such signatory has ceased to hold such office prior to the execution and delivery of such Receipts by the Registrar or did not hold such office on the date of issuance of such Receipts.

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     The Receipts may be endorsed with or have incorporated in the text thereof such legends or recitals or modifications not inconsistent with the provisions of this Deposit Agreement or with any provisions of the Charter or Brazilian law as may be reasonably required by the Depositary in order to comply with any applicable law or regulations thereunder or with the rules and regulations of any securities exchange upon which American Depositary Shares may be listed or to conform with any usage with respect thereto, or to indicate any special limitations or restrictions to which any particular Receipts are subject by reason of the date of issuance of the underlying Deposited Securities or otherwise.

     Title to a Receipt (and to the American Depositary Shares evidenced thereby), when properly endorsed or accompanied by proper instruments of transfer, shall be transferable by delivery with the same effect as in the case of a negotiable instrument; provided, however, that the Depositary and the Company, notwithstanding any notice to the contrary, may treat the Owner thereof as the absolute owner thereof for the purpose of determining the person entitled to distribution of dividends or other distributions or to any notice provided for in this Deposit Agreement and for all other purposes.

SECTION 2.02. Deposit of Shares.

     Subject to the terms and conditions of this Deposit Agreement, including, without limitation, the last paragraph of this Section 2.02. Shares, or evidence of rights to receive Shares to the extent permitted by Section 2.09, may be deposited by delivery thereof (including by book-entry credit) to any Custodian hereunder, accompanied by any appropriate instrument or instruments of transfer, or endorsement, in form satisfactory to the Custodian, together with all such certifications as may be required by the Depositary, the Custodian or the Company in accordance with the provisions of this Deposit Agreement, and, if the Depositary requires, together with a written order directing the Depositary to execute and deliver to, or upon the written order of, the person or persons stated in such order, a Receipt or Receipts for the number of American Depositary Shares representing such deposit. No Share shall be accepted for deposit unless accompanied by evidence reasonably satisfactory to the Depositary that any necessary approval has been granted by the governmental body or bodies in Brazil which is or are then regulating currency exchange.

     If required by the Depositary, Shares presented for deposit at any time, whether or not the transfer books of the Company or the Foreign Registrar, if applicable, are closed, shall also be accompanied by (i) an agreement or assignment, or other instrument satisfactory to the Depositary, which will provide for the prompt transfer to the Custodian of any dividend, or right to subscribe for additional Shares or to receive other property which any person in whose name the Shares are or have been recorded may thereafter receive upon or in respect of such deposited Shares, or in lieu thereof, such agreement of indemnity or other agreement as shall be satisfactory to the Depositary and (ii) if the Shares are registered in the name of the person on whose behalf they are

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presented for deposit, a proxy or proxies entitling the Custodian to vote such deposited Shares, insofar as permitted under Brazilian law and the Charter, for any and all purposes until the Shares are registered in the name of the Custodian or its nominees.

     At the request and risk and expense of any person proposing to deposit Shares, and for the account of such person, the Depositary may receive certificates for Shares to be deposited, together with the other documents herein specified, for the purpose of forwarding such Share certificates to the Custodian for deposit hereunder.

     Upon each delivery to a Custodian of Shares to be deposited hereunder, together with the other documents above specified, such Custodian shall, as soon as transfer and recordation can be accomplished, present such evidence of ownership to the Company or the Foreign Registrar, if applicable, for transfer and recordation of the Shares being deposited in the name of the Depositary or its nominee or such Custodian or its nominee at the cost and expense of the person making such deposit (or for whose benefit such deposit is made) and shall obtain evidence satisfactory to it of such registration.

     Deposited Securities shall be held by the Depositary or by a Custodian for the account and to the order of the Depositary or at such other place or places as the Depositary shall determine.

     Notwithstanding anything herein to the contrary, neither the Depositary nor any Custodian acting hereunder shall accept Shares for deposit hereunder, except in connection with the Offering, until September 14, 1997.

SECTION 2.03. Execution and Delivery of Receipts.

     Upon receipt by any Custodian of any deposit pursuant to Section 2.02 hereunder (and in addition, if the transfer books of the Company or the Foreign Registrar, if applicable, are open, the Depositary may in its sole discretion require a proper acknowledgment or other evidence from the Company or the Foreign Registrar, as the case may be, that any Deposited Securities have been recorded upon the books of the Company or the Foreign Registrar, if applicable, in the name of the Depositary or its nominee or such Custodian or its nominee), together with the other documents required as above specified, such Custodian shall notify the Depositary of such deposit and the person or persons to whom or upon whose written order a Receipt or Receipts are deliverable in respect thereof and the number of American Depositary Shares to be evidenced thereby. Such notification shall be made by letter or, at the request, risk and expense of the person making the deposit, by cable, telex or facsimile transmission. Upon receiving such notice from such Custodian, or upon the receipt of Shares by the Depositary, the Depositary, subject to the terms and conditions of this Deposit Agreement, shall, as promptly as practicable, execute and deliver at its Corporate Trust Office, to or upon the order of the person or persons entitled thereto, a Receipt or Receipts, registered in the name or names and evidencing any authorized number of

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American Depositary Shares requested by such person or persons, but only upon payment to the Depositary of the fees of the Depositary for the execution and delivery of such Receipt or Receipts as provided in Section 5.09, and of all taxes and governmental charges and fees, if any, payable in connection with such deposit and the transfer of the Deposited Securities. The Depositary shall not issue Receipts except in accordance with this Section 2.03 and Sections 2.04, 2.07, 2.09, 4.03, 4.04 and 4.08.

SECTION 2.04. Transfer of Receipts; Combination and Split-up of Receipts.

     The Depositary, subject to the terms and conditions of this Deposit Agreement, shall register transfers of Receipts on its transfer books from time to time, upon any surrender of a Receipt, by the Owner in person or by a duly authorized attorney, properly endorsed or accompanied by proper instruments of transfer, and duly stamped as may be required by the laws of the State of New York and of the United States of America. Thereupon the Depositary shall execute a new Receipt or Receipts and deliver the same to or upon the order of the person entitled thereto.

     The Depositary, subject to the terms and conditions of this Deposit Agreement, shall upon surrender of a Receipt or Receipts for the purpose of effecting a split-up or combination of such Receipt or Receipts, execute and deliver a new Receipt or Receipts for any authorized number of American Depositary Shares requested, evidencing the same aggregate number of American Depositary Shares as the Receipt or Receipts surrendered.

     The Depositary may appoint, upon at least 20 days' written notice to the Company, one or more co-transfer agents, reasonably acceptable to the Company, for the purpose of effecting transfers, combinations and split-ups of Receipts at designated transfer offices on behalf of the Depositary. In carrying out its functions, a co-transfer agent may require evidence of authority and compliance with applicable laws and other requirements by Owners or persons entitled to Receipts and will be entitled to protection and indemnity to the same extent as the Depositary.

SECTION 2.05. Surrender of Receipts and Withdrawal of Shares.

     Upon surrender at the Corporate Trust Office of the Depositary of a Receipt for the purpose of withdrawal of the Deposited Securities represented by the American Depositary Shares evidenced by such Receipt, and upon payment of the fee of the Depositary for the surrender of Receipts as provided in Section 5.09 and payment of all taxes and governmental charges, if any, payable in connection with such surrender and withdrawal of the Deposited Securities, and subject to the terms and conditions of this Deposit Agreement, the Charter, the provisions of or governing the Deposited Securities and applicable law, the Owner of such Receipt shall be entitled to delivery, to him or upon his order, of the amount of Deposited Securities at the time represented by the American Depositary Shares evidenced by such Receipt. Delivery of such Deposited Securities may be made by (a)(i) the delivery of certificates in the name of such Owner or

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as ordered by him or certificates properly endorsed or accompanied by proper instruments of transfer to such Owner or as ordered by him, or (ii) book-entry transfer of the Shares represented by such Receipt to an account in the name of such owner or as ordered by him, and (b) delivery of any other securities, property and cash to which such Owner is then entitled in respect of such Receipts to such Owner or as ordered by him. Such delivery shall be made, as promptly as practicable, as hereinafter provided.

     A Receipt surrendered for such purposes may be required by the Depositary to be properly endorsed in blank or accompanied by proper instruments of transfer in blank, and if the Depositary so requires, the owner thereof shall execute and deliver to the Depositary a written order directing the Depositary to cause the Deposited Securities being withdrawn to be delivered to or upon the written order of a person or persons designated in such order. Thereupon the Depositary shall, as promptly as practicable, direct the Custodian to deliver at the São Paulo, Brazil office of such Custodian, subject to Sections 2.06, 3.01 and 3.02 and to the other terms and conditions of this Deposit Agreement and the Charter, to or upon the written order of the person or persons designated in the order delivered to the Depositary as above provided, the amount of Deposited Securities represented by the American Depositary Shares evidenced by such Receipt, except that the Depositary may make delivery to such person or persons at the Corporate Trust Office of the Depositary of any dividends or distributions with respect to the Deposited Securities represented by the American Depositary Shares evidenced by such Receipt, or of any proceeds of sale of any dividends, distributions or rights, which may at the time be held by the Depositary.

     At the request, risk and expense of any Owner so surrendering a Receipt, and for the account of such Owner, the Depositary shall direct the Custodian to forward any cash or other property (other than rights) comprising, and forward a certificate or certificates and other proper documents of title for, the Deposited Securities represented by the American Depositary Shares evidenced by such Receipt to the Depositary for delivery at the Corporate Trust Office of the Depositary. Such direction shall be given by letter or, at the request, risk and expense of such owner, by cable, telex or facsimile transmission.

     Neither the Depositary nor the Custodian shall deliver Shares, by physical delivery, book entry or otherwise (other than to the Company or its agent as contemplated by Section 4.08), or otherwise permit Shares to be withdrawn from the facility created hereby, except upon the receipt and cancellation of Receipts.

SECTION 2.06. Limitations on Execution and Delivery, Transfer and Surrender of Receipts.

     As a condition precedent to the execution and delivery, registration of transfer, split-up, combination or surrender of any Receipt, the delivery of any distribution thereon, or withdrawal of any Deposited Securities, the Company, Depositary, Custodian or Registrar may require payment from the depositor of Shares or

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the presenter of the Receipt of a sum sufficient to reimburse it for any tax or other governmental charge and any stock transfer or registration fee with respect thereto (including any such tax, charge or fee with respect to Shares being deposited or withdrawn) and payment of any fees of the Depositary as provided in Section 5.09, may require the production of proof satisfactory to it as to the identity and genuineness of any signature and may also require compliance with such reasonable regulations as the Depositary and the Company may establish consistent with the provisions of this Deposit Agreement, including, without limitation, this Section 2.06 and any regulations deemed necessary or desirable by the Depositary or the Custodian to facilitate compliance with any applicable rules or regulations of the Central Bank or the CVM.

     The delivery of Receipts against deposits of Shares generally or against deposits of particular Shares may be suspended, or the transfer of Receipts in particular instances may be refused, or the registration of transfer of outstanding Receipts or the combination or split-up of Receipts generally may be suspended, during any period when the transfer books of the Depositary are closed, or if any such action is deemed necessary or advisable by the Depositary or the Company at any time or from time to time because of any requirement of law or of any government or governmental body or commission, or under any provision of this Deposit Agreement, or for any other reason, subject to the provisions of the following sentence. Notwithstanding anything to the contrary in this Deposit Agreement or the Receipts, the surrender of outstanding Receipts and withdrawal of Deposited Securities may be suspended only for (i) temporary delays caused by closing the transfer books of the Depositary or the Company or the deposit of Shares in connection with voting at a shareholders, meeting, or the payment of dividends, (ii) the payment of fees, taxes and similar charges, (iii) compliance with any U.S. or foreign laws or governmental regulations relating to the Receipts or to the withdrawal of the Deposited Securities, or (iv) any other reason that may at any time be specified in paragraph I(A)(1) of the General Instructions to Form F-6, as from time to time in effect, or any successor provision thereto. without limitation of the foregoing, the Depositary shall not knowingly accept for deposit under this Deposit Agreement any Shares required to be registered under the provisions of the Securities Act, unless a registration statement is in effect as to such Shares. The Depositary will comply with written instructions of the Company that the Depositary shall not accept for deposit hereunder any Shares identified in such instructions at such times and under such circumstances as may reasonably be specified in such instructions in order to facilitate the Company's compliance with the securities laws in the United States.

SECTION 2.07. Lost Receipts, etc.

     In case any Receipt shall be mutilated, destroyed, lost or stolen, the Depositary shall execute and deliver a new Receipt of like tenor in exchange and substitution for such mutilated Receipt upon cancellation thereof, or in lieu of and in substitution for such destroyed, lost or stolen Receipt. Before the Depositary shall execute and deliver a new Receipt in substitution for a destroyed, lost or stolen Receipt,

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the Owner thereof shall have (a) filed with the Depositary (i) a request for such execution and delivery before the Depositary has notice that the Receipt has been acquired by a bona fide purchaser and (ii) a sufficient indemnity bond and (b) satisfied any other reasonable requirements imposed by the Depositary.

SECTION 2.08. Cancellation and Destruction of Surrendered Receipts.

     All Receipts surrendered to the Depositary shall be cancelled by the Depositary. The Depositary is authorized to destroy Receipts so cancelled, subject to Section 2.10.

SECTION 2.09. Pre-Release of Receipts.

     The Depositary may issue Receipts against rights to receive Shares from the Company (or any agent of the Company recording Share ownership). No such issue of Receipts will be deemed a "Pre-Release" subject to the restrictions of the following paragraph.

     Unless requested in writing by the Company to cease doing so, the Depositary may, notwithstanding Section 2.03 hereof, execute and deliver Receipts prior to the receipt of Shares pursuant to Section 2.02 ("Pre-Release"). The Depositary may, pursuant to Section 2.05, deliver Shares upon the receipt and cancellation of Receipts which have been Pre-Released, whether or not such cancellation is prior to the termination of such Pre-Release or the Depositary knows that such Receipt has been Pre-Released. The Depositary may receive Receipts in lieu of Shares in satisfaction of a Pre-Release. Each Pre-Release will be (a) preceded or accompanied by a written representation and agreement from the person to whom Receipts are to be delivered (the "Pre-Releasee") that the Pre-Releasee, or its customer, (i) owns the Shares or Receipts to be remitted, as the case may be, (ii) assigns all beneficial right, title and interest in such Shares or Receipts, as the case may be, to the Depositary in its capacity as such and for the benefit of the owners, and (iii) will not take any action with respect to such Shares or Receipts, as the case may be, that is inconsistent with the transfer of beneficial ownership (including, without the consent of the Depositary, disposing of such Shares or Receipts, as the case may be, other than in satisfaction of such Pre-Release), (b) at all times fully collateralized with cash, U.S. government securities or such other collateral as the Depositary determines, in good faith, will provide substantially similar liquidity and security, (c) terminable by the Depositary on not more than five (5) Business Days notice, and (d) subject to such further indemnities and credit regulations as the Depositary deems appropriate. The number of Shares not deposited but represented by American Depositary Shares outstanding at any time as a result of Pre-Releases will not normally exceed thirty percent (30%) of the Shares deposited hereunder; provided, however, that the Depositary reserves the right to disregard such limit from time to time as it deems reasonably appropriate, and may, with the prior written consent of the Company, change such limit for purposes of general application. The Depositary will also set Dollar limits with respect to Pre-Release transactions to be entered into hereunder with any particular

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Pre-Releasee on a case-by-case basis as the Depositary deems appropriate. For purposes of enabling the Depositary to fulfill its obligations to the Owners under the Deposit Agreement, the collateral referred to in clause (b) above shall be held by the Depositary as security for the performance of the Pre-Releasee's obligations to the Depositary in connection with a Pre-Release transaction, including the Pre-Releasee's obligation to deliver Shares or Receipts upon termination of a Pre-Release transaction (and shall not, for the avoidance of doubt, constitute Deposited Securities hereunder).

     The Depositary may retain for its own account any compensation received by it in connection with the foregoing.

SECTION 2.10. Maintenance of Records.

     The Depositary agrees to maintain or cause its agents to maintain records of all Receipts surrendered and Deposited Securities withdrawn under Section 2.05, substitute Receipts delivered under Section 2.07, and of cancelled or destroyed Receipts under Section 2.08, in keeping with procedures ordinarily followed by stock transfer agents located in the City of New York or as required by the laws or regulations governing the Depositary. Prior to destroying any such records, the Depositary will notify the Company and will turn such records over to the Company upon its request.

SECTION 2.11. Uncertificated American Depositary Shares; DTC Direct Registration System.

     Notwithstanding anything to the contrary in this Deposit Agreement:

     (a) American Depositary Shares may be certificated securities evidenced by Receipts or uncertificated securities. The form of Receipt annexed as Exhibit A to this Deposit Agreement summarizes the terms and conditions of, and will be the prospectus required under the Securities Act of 1933 for, both certificated and uncertificated American Depositary Shares. Except for those provisions of this Deposit Agreement that by their nature do not apply to uncertificated American Depositary Shares, all the provisions of this Deposit Agreement shall apply, mutatis mutandis, to both certificated and uncertificated American Depositary Shares.

     (b) (i) The term "deliver", or its noun form, when used with respect to Receipts, shall mean (A) book-entry transfer of American Depositary Shares to an account at The Depository Trust Company, or its successor ("DTC"), designated by the person entitled to such delivery, evidencing American Depositary Shares registered in the name requested by that person, (B) registration of American Depositary Shares not evidenced by a Receipt on the books of the Depositary in the name requested by the person entitled to such delivery and mailing to that person of a statement confirming that registration or (C) if requested by the person entitled to such delivery, delivery at the Corporate Trust Office of the Depositary to the person entitled to such delivery of one or more Receipts.

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     (ii) The term "surrender", when used with respect to Receipts, shall mean (A) one or more book-entry transfers of American Depositary Shares to the DTC account of the Depositary, (B) delivery to the Depositary at its Corporate Trust Office of an instruction to surrender American Depositary Shares not evidenced by a Receipt or (C) surrender to the Depositary at its Corporate Trust Office of one or more Receipts evidencing American Depositary Shares.

     (c) American Depositary Shares not evidenced by Receipts shall be transferable as uncertificated registered securities under the laws of New York.

     (d) The Depositary shall have a duty to register a transfer, in the case of uncertificated American Depositary Shares, upon receipt from the Owner of a proper instruction (including, for the avoidance of doubt, instructions through DRS and Profile as provided in subsection (f) below). The Depositary, upon surrender of a Receipt for the purpose of exchanging it for uncertificated American Depositary Shares, shall cancel that Receipt and send the Owner a statement confirming that the Owner is the owner of the same number of uncertificated American Depositary Shares that the surrendered Receipt evidenced. The Depositary, upon receipt of a proper instruction (including, for the avoidance of doubt, instructions through DRS and Profile as provided in subsection (f) below) from the Owner of uncertificated American Depositary Shares for the purpose of exchanging them for certificated American Depositary Shares, shall execute and deliver to the Owner a Receipt evidencing the same number of certificated American Depositary Shares.

     (e) Upon satisfaction of the conditions for replacement of a Receipt that is mutilated, lost, destroyed or stolen, the Depositary shall deliver to the Owner the American Depositary Shares evidenced by that Receipt in uncertificated form unless otherwise requested by the Owner.

     (f) (i) The parties acknowledge that the Direct Registration System ("DRS") and Profile Modification System ("Profile") shall apply to uncertificated American Depositary Shares upon acceptance thereof to DRS by DTC. DRS is the system administered by DTC pursuant to which the Depositary may register the ownership of uncertificated American Depositary Shares, which ownership shall be evidenced by periodic statements issued by the Depositary to the Owners entitled thereto. Profile is a required feature of DRS which allows a DTC participant, claiming to act on behalf of an Owner of American Depositary Shares, to direct the Depositary to register a transfer of those American Depositary Shares to DTC or its nominee and to deliver those American Depositary Shares to the DTC account of that DTC participant without receipt by the Depositary of prior authorization from the Owner to register such transfer.

     (ii) In connection with and in accordance with the arrangements and procedures relating to DRS/Profile, the parties understand that the Depositary will not verify, determine or otherwise ascertain that the DTC participant which is claiming to be acting on behalf of an Owner in requesting a registration of transfer and delivery as

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described in subsection (i) has the actual authority to act on behalf of the Owner (notwithstanding any requirements under the Uniform Commercial Code). For the avoidance of doubt, the provisions of Sections 5.03 and 5.08 shall apply to the matters arising from the use of the DRS. The parties agree that the Depositary's reliance on and compliance with instructions received by the Depositary through the DRS/Profile System and in accordance with this Deposit Agreement shall not constitute negligence or bad faith on the part of the Depositary.

ARTICLE 3. CERTAIN OBLIGATIONS OF OWNERS OF RECEIPTS

SECTION 3.01. Filing Proofs, Certificates and Other Information.

     Any person presenting Shares for deposit or any Owner of a Receipt may be required from time to time to file with the Depositary or the Custodian such proof of citizenship or residence, exchange control approval, legal or beneficial ownership of Receipts, Deposited Securities or other securities, compliance with all applicable laws or regulations or terms of this Deposit Agreement or the Receipts, or such information relating to the registration on the books of the Company or the Foreign Registrar, if applicable, to execute such certificates and to make such representations and warranties, as the Depositary may reasonably deem necessary or proper or as the Company reasonably may require. The Depositary may withhold the delivery or registration of transfer of any Receipt or the distribution of any dividend or sale or distribution of rights or of the proceeds thereof or the delivery of any Deposited Securities until such proof or other information is filed or such certificates are executed or such representations and warranties made. The Depositary shall from time to time advise the Company of the availability of any such proofs, certificates or other information and shall provide copies thereof to the Company as promptly as practicable upon request by the Company, unless such disclosure is prohibited by law.

SECTION 3.02. Liability of Owner for Taxes.

     If any tax or other governmental charge shall become payable with respect to any Receipt or any Deposited Securities represented by any Receipt, such tax or other governmental charge shall be payable by the Owner of such Receipt. The Depositary may refuse to effect any transfer of such Receipt or any combination or split-up thereof or any withdrawal of Deposited Securities represented by American Depositary Shares evidenced by such Receipt until such payment is made, and may withhold any dividends or other distributions, or may sell for the account of the Owner thereof any part or all of the Deposited Securities represented by the American Depositary Shares evidenced by such Receipt, and may apply such dividends or other distributions or the proceeds of any such sale in payment of such tax or other governmental charge (and any taxes or expenses arising out of such sale), and the Owner of such Receipt shall remain liable for any deficiency.

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SECTION 3.03. Warranties on Deposit of Shares.

     Every person depositing Shares under this Deposit Agreement shall be deemed thereby to represent and warrant that such Shares and each certificate therefor, if any, are validly issued, fully paid, nonassessable and free of any preemptive rights of the holders of outstanding Shares and that the person making such deposit is duly authorized so to do. Every such person shall also be deemed to represent and warrant that, except with respect to the initial deposit and any deposit permitted hereunder pursuant to Section 4.03, 4.04 or 4.09, such person is not and shall not become at any time while such person holds Receipts or any beneficial interest therein an affiliate of the Company. In addition, every person depositing Shares under this Deposit Agreement shall also be deemed thereby to represent and warrant that such Shares and the Receipts evidencing American Depositary Shares representing such Shares would not be Restricted Securities. Such representations and warranties shall survive the deposit of Shares and issuance of Receipts.

SECTION 3.04. Disclosure of Interests.

     To the extent that provisions of or governing any Deposited Securities (including the Charter or applicable law) may require the disclosure of beneficial or other ownership of Deposited Securities, other Shares and other securities to the Company and may provide for blocking transfer and voting or other rights to enforce such disclosure or limit such ownership, the Depositary shall use its best efforts that are reasonable under the circumstances to comply with Company instructions as to Receipts in respect of any such enforcement or limitation, and owners and Beneficial owners shall comply with all such disclosure requirements and ownership limitations and shall cooperate with the Depositary's compliance with such Company instructions.

ARTICLE 4. THE DEPOSITED SECURITIES

SECTION 4.01. Cash Distributions.

     Whenever the Depositary, or on its behalf, its agent, shall receive any cash dividend or other cash distribution on any Deposited Securities, the Depositary shall, or shall cause its agent to, as promptly as practicable (and in any event within one (1) Business Day) alter its receipt of such dividend or distribution (unless otherwise prohibited or prevented by law), subject to the provisions of Section 4.05, convert such dividend or distribution into Dollars, transfer such Dollars to the United States and distribute the amount thus received (net of the expenses of the Depositary as provided in Section 5.09) to the Owners entitled thereto, in proportion to the number of American Depositary Shares representing such Deposited Securities held by each of them respectively; provided, however, that in the event that the Company, the Depositary or the Custodian shall be required to withhold and does withhold from such cash dividend or such other cash distribution an amount on account of taxes, the amount distributed to the Owner of the Receipts evidencing American Depositary Shares representing such

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Deposited Securities shall be reduced accordingly. The Depositary shall distribute only such amounts as can be distributed without distributing to any Owner a fraction of one cent and any balance that is not so distributed shall be held by the Depositary (without liability for the interest thereon) and shall be added to and be part of the next sum received by the Depositary for distribution to the Owners of Receipts then outstanding.

SECTION 4.02. Distributions Other Than Cash, Shares or Rights.

     Subject to the provisions of Section 4.11 and 5.09, whenever the Depositary shall receive any distribution other than a distribution described in Sections 4.01, 4.03 or 4.04, the Depositary may, as promptly as practicable, cause the securities or property received by it to be distributed to the Owners entitled thereto, in proportion to the number of American Depositary Shares representing such Deposited Securities held by each of them respectively, in any manner that the Depositary may deem equitable and practicable for accomplishing such distribution; provided, further, that if in the opinion of the Depositary such distribution cannot be made proportionately among the Owners entitled thereto, or if for any other reason (including, but not limited to, any requirement that the Company, the Custodian or the Depositary withhold an amount on account of taxes or other governmental charges or that such securities must be registered under the Securities Act in order to be distributed to Owners) the Depositary deems such distribution not to be feasible, the Depositary may, alter consultation with the Company, adopt such method as it may deem equitable and practicable for the purpose of effecting such distribution, including, but not limited to, the public or private sale of the securities or property thus received, or any part thereof, and the net proceeds of any such sale (net of the fees of the Depositary as provided in Section 5.09 and any expenses in connection with such sale) shall be distributed by the Depositary to the Owners entitled thereto as in the case of a distribution received in cash pursuant to Section 4.01; provided, further, that no distribution to Owners pursuant to this Section 4.02 shall be unreasonably delayed by any action of the Depositary or any of its agents. To the extent such securities or property or the net proceeds thereof are not distributed to Owners as provided in this Section 4.02, the same shall constitute Deposited Securities and each American Depositary Share shall thereafter also represent its proportionate interest in such securities, property or net proceeds.

SECTION 4.03. Distributions in Shares.

     If any distribution upon any Deposited Securities consists of a dividend in, or free distribution of, Shares, the Depositary may, and shall, if the Company so requests, distribute, as promptly as practicable, to the owners of outstanding Receipts entitled thereto, in proportion to the number of American Depositary Shares representing such Deposited Securities held by each of them respectively, additional Receipts evidencing an aggregate number of American Depositary Shares representing the amount of Shares received as such dividend or free distribution, subject to the terms and conditions of the Deposit Agreement with respect to the deposit of Shares and the issuance of American

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Depositary Shares evidenced by Receipts, including the withholding of any tax or other governmental charge as provided in Section 4.11 and the payment of the fees of the Depositary as provided in Section 5.09. In lieu of delivering Receipts for fractional American Depositary Shares in any such case, the Depositary shall sell the amount of Shares represented by the aggregate of such fractions and distribute the net proceeds, all in the manner and subject to the conditions described in Section 4.01; provided, however, that no distribution to Owners pursuant to this Section 4.03 shall be unreasonably delayed by any action of the Depositary or any of its agents. If additional Receipts are not so distributed, each American Depositary Share shall thenceforth also represent the additional Shares distributed upon the Deposited Securities represented thereby. In addition, the Depositary may withhold any distribution of Receipts under this Section 4.03 if it has not received satisfactory assurances from the Company that such distribution does not require registration under the Securities Act or is exempt from registration under the provisions of such Act; provided that, in any such event, the Depositary may sell the Shares distributed upon the Deposited Securities and distribute the net proceeds, all in the manner and subject to the conditions described in Section 4.01.

SECTION 4.04. Rights.

     In the event that the Company shall offer or cause to be offered to the holders of any Deposited Securities any rights to subscribe for additional Shares or any rights of any other nature, the Depositary, alter consultation with the Company, shall have discretion as to the procedure to be followed in making such rights available to any Owners or in disposing of such rights on behalf of any Owners and making the net proceeds available to such Owners or, if by the terms of such rights offering or for any other reason it would be unlawful for the Depositary either to make such rights available to any Owners or dispose of such rights and make the net proceeds available to such Owners, then the Depositary shall allow the rights to lapse. If at the time of the offering of any rights the Depositary determines that it is lawful and feasible to make such rights available to all or certain Owners but not to other Owners, the Depositary shall distribute to any owner to whom it determines the distribution to be lawful and feasible, in proportion to the number of American Depositary Shares held by such owner, warrants or other instruments therefor in such form as it deems appropriate.

     In circumstances in which rights would otherwise not be distributed, if an owner requests the distribution of warrants or other instruments in order to exercise the rights allocable to the American Depositary Shares of such Owner hereunder, the Depositary will promptly make such rights available to such Owner upon written notice from the Company to the Depositary that (a) the Company has elected in its sole discretion to permit such rights to be exercised and (b) such Owner has executed such documents as the Company has determined in its sole discretion are reasonably required under applicable law.

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     If the Depositary has distributed warrants or other instruments for rights to all or certain Owners, then upon instruction from such an owner pursuant to such warrants or other instruments to the Depositary to exercise such rights, upon payment by such Owner to the Depositary for the account of such Owner of an amount equal to the purchase price of the Shares to be received upon the exercise of the rights, and upon payment of the fees of the Depositary and any other charges as set forth in such warrants or other instruments, the Depositary shall, on behalf of such Owner, exercise the rights and purchase the Shares, and the Company shall cause the Shares so purchased to be delivered to the Depositary on behalf of such Owner. As agent for such Owner, the Depositary will cause the Shares so purchased to be deposited pursuant to Section 2.02 of this Deposit Agreement, and shall, pursuant to Section 2.03 of this Deposit Agreement, execute and deliver Receipts to such Owner. In the case of a distribution pursuant to this paragraph, such Receipts shall be legended in accordance with applicable U.S. laws, and shall be subject to the appropriate restrictions on sale, deposit, cancellation, and transfer under such laws.

     If the Depositary determines that it is not lawful or feasible to make such rights available to all or certain Owners, it will use its best efforts that are reasonable under the circumstances to sell the rights, warrants or other instruments in proportion to the number of American Depositary Shares held by the owners to whom it has determined it may not lawfully or feasibly make such rights available, and allocate the net proceeds of such sales (net of the fees of the Depositary as provided in Section 5.09, any expenses in connection with such sale and all taxes and governmental charges payable in connection with such rights and subject to the terms and conditions of this Deposit Agreement) for the account of such owners otherwise entitled to such rights, warrants or other instruments, upon an averaged or other practical basis without regard to any distinctions among such owners because of exchange restrictions or the date of delivery of any Receipt or otherwise. Such proceeds shall be distributed as promptly as practicable in accordance with Section 4.01 hereof.

     If a registration statement under the Securities Act is required with respect to the securities to which any rights relate in order for the Company to offer such rights to Owners and sell the securities represented by such rights, the Depositary will not offer such rights to Owners unless and until such a registration statement is in effect, or unless the offering and sale of such securities and such rights to such Owners are exempt from, or not subject to, registration under the provisions of such Act; provided, however, that nothing in this Deposit Agreement shall create, or shall be construed as creating, any obligation on the part of the Company to file a registration statement under the Securities Act or to endeavor to have a registration statement declared effective.

     The Depositary shall not be responsible for any failure to determine that it may be lawful or feasible to make such rights available to owners in general or any owner in particular.

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SECTION 4.05. Conversion of Foreign Currency.

     Whenever the Depositary or the Custodian shall receive Foreign Currency, by way of dividends or other distributions or the net proceeds from the sale of securities, property or rights, and if at the time of the receipt thereof the Foreign Currency so received can, pursuant to applicable law, be converted on a reasonable basis into Dollars and the resulting Dollars transferred to the United States, the Depositary or the Custodian shall convert or cause to be converted as promptly as practicable (and in any event within one Business Day of its or its agent's receipt of such Foreign Currency), by sale or in any other manner that it may determine in accordance with applicable law, such Foreign Currency into Dollars. If, at the time of conversion of such Foreign Currency into Dollars, such Dollars can, pursuant to applicable law, be transferred outside of Brazil for distribution to Owners entitled thereto, such Dollars shall be distributed as promptly as practicable to the Owners entitled thereto or, if the Depositary or the Custodian shall have distributed any rights, warrants or other instruments which entitle the holders thereof to such Dollars, then to the holders of such rights, warrants and/or instruments upon surrender thereof for cancellation in each case pursuant to Section 4.01. Such distribution or conversion may be made upon an averaged or other practicable basis without regard to any distinctions among Owners on account of exchange restrictions, the date of delivery of any Receipt or otherwise and shall be net of any expenses of conversion into Dollars incurred by the Depositary or the Custodian as provided in Section 5.09.

     If such conversion, transfer or distribution can be effected only with the approval or license of any government or agency thereof, the Depositary or the Custodian shall file as promptly as practicable such application for approval or license; however, the Depositary or the Custodian shall be entitled to rely upon Brazilian local counsel in such matters, which counsel shall be instructed to act as promptly as possible.

     If at any time Foreign Currency received by the Depositary or the Custodian is not, pursuant to applicable law, convertible, in whole or in part, into Dollars transferable into the United States, or if any approval or license of any government or agency thereof which is required for such conversion is denied or in the opinion of the Depositary cannot be promptly obtained at a reasonable cost, the Depositary or the Custodian shall, (a) as to that portion of the Foreign Currency that is convertible into Dollars, make such conversion and, if permitted by applicable law, transfer such Dollars to the United States for distribution to Owners in accordance with the first paragraph of this Section 4.05 or, if such transfer is not so permitted, hold such Dollars uninvested and without liability for interest thereon for the respective accounts of the Owners entitled to receive the same, and (b) as to the nonconvertible balance, if any, (i) if requested in writing by an Owner, distribute or cause the Custodian to distribute the Foreign Currency (or an appropriate document evidencing the right to receive such Foreign Currency) received by the Depositary or Custodian in respect of the American Depositary Shares evidenced by Receipts held by such Owners (as the same may be adjusted as a

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consequence of subclause (ii) below) to such Owner (x) if such request is received before the 15th day of a calendar month, on such 15th day, or (y) if not, on the last day of such month (or, in either case, if such day is not a Business Day, on the next succeeding Business Day) and (ii) the Depositary shall cause the Custodian to hold any amounts of nonconvertible Foreign Currency not distributed pursuant to the immediately preceding subclause (i) for the respective accounts of the Owners entitled to receive the same, uninvested and without liability for interest thereon, on demand and, if and to the extent reasonably practicable and permitted by applicable law, in a manner designed to protect such owners against the effects of inflation; provided that, at such time, at the reasonable request of the Depositary, the Company shall furnish the Depositary, at the Company's expense, with a written opinion from recognized United States counsel for the Company confirming that the manner in which the Depositary proposes to hold such amounts of non-convertible Foreign Currency will not violate the Investment Company Act of 1940.

SECTION 4.06. Fixing of Record Date.

     Whenever any cash dividend or other cash distribution shall become payable or any distribution other than cash shall be made, or whenever rights shall be issued with respect to the Deposited Securities, or whenever for any reason the Depositary causes a change in the number of Shares that are represented by each American Depositary Share, or whenever the Depositary shall receive notice of any meeting of holders of Shares or other Deposited Securities, the Depositary shall fix a record date, which date shall (x) be the same date as the record date fixed by the Company, if any, to the extent practicable, or (y) if different from the record date fixed by the Company, be as near as practicable to the record date fixed by the Company or, if more than five (5) Business Days after such record date, be fixed after consultation with the Company (a) for the determination of the Owners who shall be (i) entitled to receive such dividend, distribution or rights or the net proceeds of the sale thereof or (ii) entitled to give instructions for the exercise of voting rights at any such meeting, (b) on or after which each American Depositary Share will represent the changed number of Shares, or (c) for any other reason. Subject to the provisions of Sections 4.01 through 4.05 and to the other terms and conditions of this Deposit Agreement, the Owners on such record date shall be entitled, as the case may be, to receive the amount distributable by the Depositary with respect to such dividend or other distribution or such rights or the net proceeds of sale thereof in proportion to the number of American Depositary Shares held by each of them respectively and to give voting instructions and to act in respect of any other such matter. The Company agrees to provide the Depositary with not less than 10 days, prior notice of any meeting of shareholders or of the Board of Directors of the Company, the agenda for which includes authorization for the declaration of a dividend; provided, however, that if the date for any such meeting is fixed less than 10 days prior to such meeting or the Company does not know, 10 days' prior to such meeting, that a dividend may be declared at any such meeting, then the Company shall give such notice to the Depositary as promptly as practicable after such date is fixed or the Company learns that a dividend may be declared.

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SECTION 4.07. Voting of Deposited Securities.

     The Shares do not presently entitle the holders thereof to vote, except in certain limited circumstances. Only in those circumstances, or in the event that in the future the Shares entitle the holders thereof to voting rights in general, would the following provisions of this Section 4.07 apply.

     Upon receipt of notice of any meeting or solicitation of proxies of holders of Shares or other Deposited Securities, if requested in writing by the Company, the Depositary shall, as soon as practicable thereafter, mail to the Owners a notice, the form of which notice shall be in the sole discretion of the Depositary, which shall contain (a) such information as is contained in such notice of meeting (or if requested by the Company a summary in English of such information provided by the Company), (b) a statement that the Owners as of the close of business on a specified record date will be entitled, subject to any applicable provision of Brazilian law, the Charter and the provisions of the Deposited Securities, to instruct the Depositary as to the exercise of the voting rights, if any, pertaining to the amount of Shares or other Deposited Securities represented by their respective American Depositary Shares and (c) a statement as to the manner in which such instructions may be given, including an express indication that instructions may be given or deemed given in accordance with the last sentence of this paragraph if no instruction is received, to the Depositary to give a discretionary proxy to a person designated by the Company. Upon the written request of an Owner on such record date, received on or before the date established by the Depositary for such purpose, the Depositary shall endeavor, in so far as practicable and permitted under Brazilian law, the Charter and the Deposited Securities, to vote or cause to be voted the amount of Shares or other Deposited Securities represented by the American Depositary Shares evidenced by such Receipt in accordance with the instructions set forth in such request. The Depositary shall not itself exercise any voting discretion over any Deposited Securities. If no instructions are received by the Depositary from any owner with respect to any of the Deposited Securities represented by the American Depositary Shares evidenced by such Owner's Receipts on or before the date established by the Depositary for such purpose, the Depositary shall deem such Owner to have instructed the Depositary to give a discretionary proxy to a person designated by the Company with respect to such Deposited Securities, and the Depositary shall give a discretionary proxy to a person designated by the Company to vote such Deposited Securities; provided that no such instruction shall be deemed given and no such discretionary proxy shall be given with respect to any matter as to which the Company informs the Depositary (and the Company agrees to provide such information as promptly as practicable in writing) that (x) the Company does not wish such proxy given, (y) substantial opposition exists or (z) such matter materially or adversely affects the rights of holders of Shares.

     Subject to the rules of any securities exchange or automated inter-dealer quotation system on which American Depositary Shares or the Deposited Securities represented thereby are listed or quoted, the Depositary shall deliver, at least two

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Business Days prior to the date of such meeting, to the Company, to the attention of its Chief Financial Officer, copies of all instructions received from owners in accordance with which the Depositary will vote, or cause to be voted, the Deposited Securities represented by the American Depositary Shares evidenced by such Receipts at such meeting. Delivery of instructions will be made at the expense of the Company (unless otherwise agreed in writing by the Company and the Depositary) provided that payment of such expense shall not be a condition precedent to the obligations of the Depositary under this Section.

SECTION 4.08. Changes Affecting Deposited Securities.

     In circumstances where the provisions of Section 4.03 do not apply, upon any change in nominal value, change in par value, split-up, consolidation or any other reclassification of Deposited Securities, or upon any recapitalization, reorganization, merger or consolidation or sale of assets affecting the Company or to which it is a party, any securities which shall be received by the Depositary or a Custodian in exchange for or in conversion of or in respect of Deposited Securities shall be treated as new Deposited Securities under this Deposit Agreement, and American Depositary Shares shall thenceforth represent the new Deposited Securities so received in exchange or conversion, unless additional Receipts are delivered pursuant to the following sentence. In any such case the Depositary may, and shall if the Company shall so request, execute and deliver additional Receipts as in the case of a dividend in Shares, or call for the surrender of outstanding Receipts to be exchanged for new Receipts specifically describing such new Deposited Securities.

SECTION 4.09. Reports.

     The Depositary shall make available for inspection by Owners at its Corporate Trust office any reports, notices and communications, including any proxy soliciting material, received from the Company which are both (a) received by the Depositary, the Custodian or a nominee of either as the holder of the Deposited Securities and (b) made generally available to the holders of such Deposited Securities by the Company. The Depositary shall also make available for inspection by Owners copies of such reports, notices and communications when furnished by the Company pursuant to Section 5.06. Any such reports, notices and communications, including any such proxy soliciting material, furnished to the Depositary by the Company shall be furnished in English to the extent such materials are required to be translated into English pursuant to any regulations of the Commission applicable to the Company. The Company agrees to provide to the Depositary, at the Company's expense (unless otherwise agreed in writing by the Company and the Depositary), all documents that it provides to the Custodian.

     The Company has delivered to the Depositary and the Custodian a copy of the provisions of or governing the Shares and any other Deposited Securities issued by the Company or any affiliate of the Company, and promptly upon any amendment thereto or change therein, the Company shall deliver to the Depositary and the Custodian a copy

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of such provisions as so amended or changed. The Depositary may rely upon such copy for all purposes of this Deposit Agreement. The Depositary will, at the expense of the Company (unless otherwise agreed in writing by the Company and the Depositary), make such copy and such notices, reports and other communications available for inspection by Owners at the Depositary's office, at the office of the Custodian and at any other designated transfer offices.

SECTION 4.10. Lists of Owners.

     Promptly upon request by the Company, the Depositary shall, at the expense of the Company (unless otherwise agreed in writing by the Company and the Depositary), furnish to it a list, as of a recent date, of the names, addresses and holdings of American Depositary Shares by all persons in whose names Receipts are registered on the books of the Depositary.

SECTION 4.11. Withholding.

     In connection with any distribution to Owners, the Company or its agent will remit to the appropriate governmental authority or agency in Brazil all amounts (if any) required to be withheld by the Company and owing to such authority or agency by the Company; and the Depositary and the Custodian, respectively, will remit to the appropriate governmental authority or agency all amounts (if any) required to be withheld and owing to such authority or agency by the Depositary or the Custodian, respectively. The Depositary shall forward to the Company or its agent in a timely manner such information from its records as the Company may reasonably request to enable the Company or its agent to file necessary reports with governmental authorities or agencies. The Depositary shall use reasonable efforts to make and maintain arrangements enabling owners to receive any tax credits or other benefits (pursuant to treaty or otherwise) relating to dividend payments in respect of the American Depositary Shares, and the Company shall, to the extent reasonably practicable, provide the Depositary with such tax receipts or other similar documents as the Depositary may reasonably request to maintain such arrangements. In the event that the Depositary determines that any distribution in property other than cash (including Shares and rights to subscribe therefor) is subject to any tax or other governmental charge which the Depositary is obligated to withhold, the Depositary may by public or private sale dispose of all or a portion of such property (including Shares and rights to subscribe therefor) in such amounts and in such manner as the Depositary deems reasonably necessary and practicable to pay any such taxes or charges, and the Depositary shall distribute the net proceeds of any such sale after deduction of such taxes or charges to the Owners entitled thereto in proportion to the number of American Depositary Shares held by each of them respectively, all in accordance with applicable provisions of this Deposit Agreement.

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ARTICLE 5. THE DEPOSITARY, THE CUSTODIANS AND THE COMPANY

SECTION 5.01 Maintenance of Office and Transfer Books by the Depositary.

     Until termination of this Deposit Agreement in accordance with its terms, the Depositary shall maintain in the Borough of Manhattan, the City of New York, facilities for the delivery and surrender of Shares, withdrawal of Deposited Securities, execution and delivery, registration, registration of transfers, combinations and split-ups and surrender of Receipts, all in accordance with the provisions of this Deposit Agreement.

     The Depositary shall keep books for the registration of Receipts and transfers of Receipts which at all reasonable times shall be open for inspection by the owners, provided that such inspection shall not be for the purpose of communicating with Owners for an object other than the business of the Company, including without limitation a matter related to this Deposit Agreement, the Receipts or the Deposited Securities.

     The Depositary may close the transfer books after consultation with the Company to the extent practicable, at any time or from time to time, when deemed expedient by it in connection with the performance of its duties hereunder.

     The Company shall have the right, upon reasonable request, to inspect the transfer and registration records of the Depositary relating to the Receipts, to take copies thereof and to require the Depositary and any co-registrars to supply copies of such portions of such records as the Company may request.

SECTION 5.02. Prevention or Delay in Performance by the Depositary or the Company.

     Neither the Depositary nor the Company shall incur any liability to any owner or Beneficial Owner, if by reason of any provision of any present or future law or regulation of the United States, Brazil or any other country, or of any governmental or regulatory authority or stock exchange, or by reason of any provision, present or future, of the Charter or the Deposited Securities, or by reason of any act of God or war or other circumstance beyond its control, the Depositary or the Company shall be prevented or forbidden from, or be subject to any civil or criminal penalty on account of, doing or performing any act or thing which by the terms of this Deposit Agreement it is provided shall be done or performed; nor shall the Depositary or the Company incur any liability to any Owner or Beneficial Owner by reason of any nonperformance or delay, caused as aforesaid, in the performance of any act or thing which by the terms of this Deposit Agreement it is provided shall or may be done or performed, or by reason of any exercise of, or failure to exercise, any discretion provided for in this Deposit Agreement. Where, by the terms of a distribution pursuant to Sections 4.01, 4.02, or 4.03 of this Deposit Agreement, or an offering or distribution pursuant to Section 4.04 of this Deposit

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Agreement, or for any other reason, the Depositary is prevented or prohibited from making such distribution or offering available to Owners, and the Depositary is prevented or prohibited from disposing of such distribution or offering on behalf of such Owners and making the net proceeds available to such Owners, then the Depositary, alter consultation with the Company, shall not make such distribution or offering, and shall allow any rights, if applicable, to lapse.

SECTION 5.03. Obligations of the Depositary, the Custodian and the Company.

     The Company assumes no obligation nor shall it be subject to any liability under this Deposit Agreement to Owners or Beneficial owners, except that it agrees to perform its obligations specifically set forth in this Deposit Agreement without negligence or bad faith.

     The Depositary assumes no obligation nor shall it be subject to any liability under this Deposit Agreement to any owner or Beneficial Owner (including, without limitation, liability with respect to the validity or worth of the Deposited Securities), except that it agrees to perform its obligations specifically set forth in this Deposit Agreement without negligence or bad faith.

     Neither the Depositary nor the Company shall be under any obligation to appear in, prosecute or defend any action, suit or other proceeding in respect of any Deposited Securities or in respect of the Receipts, which in its opinion may involve it in expense or liability, unless indemnity satisfactory to it against all expense and liability shall be furnished as often as may be required, and the Custodian shall not be under any obligation whatsoever with respect to such proceedings, the responsibility of the Custodian being solely to the Depositary.

     Neither the Depositary nor the Company shall be liable for any action or nonaction by it in reliance upon the advice of or information from legal counsel, accountants, any person presenting Shares for deposit, any Owner or any other person believed by it in good faith to be competent to give such advice or information.

     The Depositary shall not be liable for any acts or omissions made by a successor depositary whether in connection with a previous act or omission of the Depositary or in connection with any matter arising wholly alter the removal or resignation of the Depositary, provided that in connection with the issue out of which such potential liability arises the Depositary performed its obligations without negligence or bad faith while it acted as Depositary.

     The Depositary shall not be responsible for any failure to carry out any instructions to vote any of the Deposited Securities, or for the manner in which any such vote is cast or the effect of any such vote, provided that any such action or nonaction is in good faith.

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     No disclaimer of liability under the Securities Act is intended by any provision of this Deposit Agreement.

     The Depositary, subject to Sections 2.05 and 2.09 hereof and as permitted by the Charter, may own and deal in any class of securities of the Company and its affiliates and in Receipts.

SECTION 5.04. Resignation and Removal of the Depositary.

     The Depositary may at any time resign as Depositary hereunder by written notice of its election so to do delivered to the Company, such resignation to take effect upon the appointment of a successor depositary and its acceptance of such appointment as hereinafter provided.

     The Depositary may at any time be removed by the Company by written notice of such removal effective upon the appointment of a successor depositary and its acceptance of such appointment as hereinafter provided.

     In case at any time the Depositary acting hereunder shall resign or be removed, the Company shall use its best efforts that are reasonable under the circumstances to appoint a successor depositary, which shall be a bank or trust company having an office in the Borough of Manhattan, the City of New York. Every successor depositary shall execute and deliver to its predecessor and to the Company an instrument in writing accepting its appointment hereunder, and thereupon such successor depositary, without any further act or deed, shall become fully vested with all the rights, powers, duties and obligations of its predecessor; but such predecessor, nevertheless, upon payment of all sums due it and on the written request of the Company shall execute and deliver an instrument transferring to such successor all rights and powers of such predecessor hereunder, shall duly assign, transfer and deliver all right, title and interest in the Deposited Securities to such successor, and shall deliver to such successor a list of the Owners of all outstanding Receipts. Any such successor depositary shall promptly mail notice of its appointment to the Owners.

     Any corporation into or with which the Depositary may be merged or consolidated shall be the successor of the Depositary without the execution or filing of any document or any further act.

SECTION 5.05. The Custodian.

     The Custodian shall be subject at all times and in all respects to the directions of the Depositary and shall be responsible solely to it, and the Depositary shall be responsible for the compliance by the Custodian with the applicable provisions of this Deposit Agreement. Any Custodian may resign from its duties hereunder by notice of such resignation delivered to the Depositary at least 30 days prior to the date on which such resignation is to become effective. If upon the effectiveness of such resignation

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there shall be no Custodian acting hereunder, the Depositary shall, promptly after receiving such notice, appoint a substitute custodian or custodians approved by the Company (such approval not to be unreasonably withheld), each of which shall thereafter be a Custodian hereunder. The Depositary may discharge any Custodian at any time upon notice to the Custodian being discharged with the approval of the Company (such approval not to be unreasonably withheld). Whenever the Depositary in its discretion determines that it is in the best interests of the Owners to do so, it may appoint substitute or additional custodian or custodians, each of which shall thereafter be one of the Custodians hereunder. The Depositary shall notify the Company of the appointment of a substitute or additional Custodian at least 30 days prior to the date on which such appointment is to become effective. Upon demand of the Depositary any Custodian shall deliver such of the Deposited Securities held by it as are requested of it to any other Custodian or such substitute or additional custodian or custodians. Each such substitute or additional custodian shall deliver to the Depositary, forthwith upon its appointment, an acceptance of such appointment satisfactory in form and substance to the Depositary. Promptly after any such change, the Depositary shall give notice thereof in writing to all Owners.

     Upon the appointment of any successor depositary hereunder, each Custodian then acting hereunder shall forthwith become, without any further act or writing, the agent hereunder of such successor depositary and the appointment of such successor depositary shall in no way impair the authority of each Custodian hereunder; but the successor depositary so appointed shall, nevertheless, on the written request of any Custodian, execute and deliver to such Custodian all such instruments as may be proper to give to such Custodian full and complete power and authority as agent hereunder of such successor depositary.

SECTION 5.06. Notices and Reports.

     On or before the first date on which the Company gives notice, by publication or otherwise, of any meeting of holders of Shares or other Deposited Securities, or of any adjourned meeting of such holders, or of the taking of any action in respect of any cash or other distributions or the offering of any rights, the Company agrees to transmit to the Depositary and the Custodian a copy of the notice thereof in the form given or to be given to holders of Shares or other Deposited Securities.

     The Company will arrange for the translation into English, if not already in English, to the extent required pursuant to any regulations of the Commission applicable to the Company, and the prompt transmittal by the Company to the Depositary and the Custodian of such notices and any other reports and communications which are made generally available by the Company to holders of its Shares.

     The Depositary will promptly make such notices, reports and other communications available to all Owners on a basis similar to that for holders of Shares or other Deposited Securities, or on such other basis as the Company may advise the

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Depositary may be required by any applicable law, regulation or stock exchange or automated inter-dealer quotation system requirement or, at the written request and expense of the Company, promptly arrange for the mailing of copies thereof (or if requested by the Company, a summary of any such notice provided by the Company) to all owners. The Company will timely provide the Depositary with the quantity of such notices, reports, and communications, as requested by the Depositary from time to time, in order for the Depositary to effect any such mailings.

SECTION 5.07. Distribution of Additional Shares, Rights, etc.

     The Company agrees that in the event of any issuance or distribution of (1) additional Shares, (2) rights to subscribe for Shares, (3) securities convertible into or exchangeable for Shares, or (4) rights to subscribe for such securities as a dividend or distribution with respect to the Shares or other Deposited Securities represented by the American Depositary Shares issued hereunder, the Company will (i) forward to the Depositary written instructions as to the manner in which the Depositary is to effect actual delivery, and (ii) take all steps reasonably necessary to ensure that no violation by the Company or the Depositary of the Securities Act will result from such issuance or distribution.

     The Company agrees with the Depositary that neither the Company nor any company controlled by the Company will at any time deposit any Shares, either originally issued or previously issued and reacquired by the Company or any such affiliate, unless a Registration Statement is in effect as to such Shares under the Securities Act or the Company furnishes to the Depositary a written opinion from U.S. counsel for the Company, which counsel shall be reasonably satisfactory to the Depositary, stating that the offer and sale of the Receipts evidencing the American Depositary Shares representing such Shares are exempt from registration under that Act. The Company will advise each person who, to the best knowledge of the Company, controls, or is under common control with, the Company that such person is subject to the same restrictions on the deposit of Shares as the Company and persons controlled by the Company.

SECTION 5.08. Indemnification.

     The Company agrees to indemnify the Depositary, its directors, employees, agents and affiliates and any Custodian against, and hold each of them harmless from, any liability or expense (including, but not limited to, the reasonable fees and expenses of counsel) which may arise out of acts performed or omitted, in accordance with the provisions of this Deposit Agreement and of the Receipts, as the same may be amended, modified or supplemented from time to time, (i) by either the Depositary or a Custodian or their respective directors, employees, agents and affiliates, except for any liability or expense arising out of the negligence or bad faith of either of them, and except to the extent that such liability or expense arises out of information relating to the Depositary or the Custodian, as applicable, furnished in writing to the Company by the Depositary or the Custodian, as applicable, expressly for use in any

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registration statement, proxy statement, prospectus (or placement memorandum) or preliminary prospectus (or preliminary placement memorandum) relating to the Shares, or omissions from such information; or (ii) by the Company or any of its directors, employees, agents and affiliates.

     The indemnities contained in the preceding paragraph shall not extend to any liability or expense which may arise out of any Pre-Release (as defined in Section 2.09) to the extent that any such liability or expense arises in connection with (a) any United States federal, state or local income tax laws or (b) the failure of the Depositary to deliver Deposited Securities when required under the terms of Section 2.05 hereof. However, for the avoidance of doubt, the indemnities contained in the preceding paragraph shall apply to any liability or expense which may arise out of any misstatement or alleged misstatement or omission or alleged omission in any registration statement, proxy statement, prospectus (or placement memorandum) or preliminary prospectus (or preliminary placement memorandum) relating to the offer or sale of Shares, except to the extent any such liability arises out of W information relating to the Depositary or any Custodian, as applicable, furnished in writing to the Company by the Depositary or any Custodian, as applicable, expressly for use in any of the foregoing documents, or, (ii) material omissions from such information furnished by the Depositary or any Custodian.

     The Depositary agrees to indemnify the Company, its directors, employees, agents and affiliates and hold them harmless from any liability or expense (including, but not limited to, the reasonable fees and expenses of counsel) which may arise out of acts performed or omitted by the Depositary or its Custodian or their respective directors, employees, agents and affiliates due to their negligence or bad faith.

     The obligations set forth in this Section 5.08 shall survive the termination of this Deposit Agreement and the succession or substitution of any indemnified person.

     Any person seeking indemnification hereunder (an "Indemnified Person") shall notify the person from whom it is seeking indemnification (the "Indemnifying Person") of the commencement of any indemnifiable action or claim promptly alter such Indemnified Person becomes aware of such commencement and shall consult in good faith with the Indemnifying Person as to the conduct of the defense of such action or claim, which defense shall be reasonable under the circumstances. No Indemnified Person shall compromise or settle any such action or claim without the consent in writing of the Indemnifying Person.

SECTION 5.09. Charges of Depositary.

     The Company agrees to pay the fees and reasonable out-of-pocket expenses of the Depositary and those of any Registrar only in accordance with agreements in writing entered into between the Depositary and the Company from time to time. The Depositary shall present detailed statements for such expenses to the Company

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at least once every three months. The charges and expenses of the Custodian are for the sole account of the Depositary.

     The following charges shall be incurred by any party depositing or withdrawing Shares or by any party surrendering American Depositary Shares or to whom American Depositary Shares are issued (including, without limitation, issuance pursuant to a stock dividend or stock split declared by the Company or an exchange of stock regarding the American Depositary Shares or Deposited Securities or a delivery of American Depositary Shares pursuant to Section 4.03), or by Owners, as applicable: (1) taxes and other governmental charges, (2) such registration fees as may from time to time be in effect for the registration of transfers of Shares generally on the Share register of the Company or Foreign Registrar and applicable to transfers of Shares to or from the name of the Depositary or its nominee or the Custodian or its nominee on the making of deposits or withdrawals hereunder, (3) such cable, telex and facsimile transmission expenses as are expressly provided in this Deposit Agreement, (4) such expenses as are incurred by the Depositary in the conversion of foreign currency pursuant to Section 4.05, (5) a fee of $5.00 or less per 100 American Depositary Shares (or portion thereof) for the delivery of American Depositary Shares pursuant to Section 2.03, 4.03 or 4.04 and the surrender of American Depositary Shares pursuant to Section 2.05 or 6.02, (6) a fee of up to $.02 per American Depositary Share (or portion thereof) for any cash distribution made pursuant to this Deposit Agreement, including, but not limited to Sections 4.01 through 4.04 hereof, (7) a fee for the distribution of securities pursuant to Section 4.02, such fee being in an amount equal to the fee for the execution and delivery of American Depositary Shares referred to above which would have been charged as a result of the deposit of such securities (for purposes of this clause 7 treating all such securities as if they were Shares) but which securities are instead distributed by the Depositary to Owners, (8) in addition to any fee charged under clause 6, a fee of up to $.02 per American Depositary Share (or portion thereof) per annum for depositary services, which will be payable as provided in clause 9 below, (9) any other charges payable by the Depositary, any of the Depositary's agents, including the Custodian, or the agents of the Depositary's agents in connection with the servicing of Shares or other Deposited Securities (which charge shall be assessed against Owners as of the date or dates set by the Depositary in accordance with Section 4.06 and shall be payable at the sole discretion of the Depositary by billing such Owners for such charge or by deducting such charge from one or more cash dividends or other cash distributions).

     The Depositary, subject to Section 2.09 hereof, may own and deal in any class of securities of the Company and its affiliates and in American Depositary Shares.

SECTION 5.10. Exclusivity.

     The Company agrees not to appoint any other depositary for issuance of American Depositary Receipts evidencing American Depositary Shares so long as The

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Bank of New York is acting as Depositary hereunder, subject, however, to the rights of the Company under Section 5.04.

ARTICLE 6. AMENDMENT AND TERMINATION

SECTION 6.01. Amendment.

     The form of the Receipts and any provisions of this Deposit Agreement may at any time and from time to time be amended by agreement between the Company and the Depositary in any respect which they may deem necessary or desirable. Any amendment which shall impose or increase any fees or charges (other than taxes and other governmental charges), or which shall otherwise prejudice any substantial existing right of owners, shall, however, not become effective as to outstanding Receipts until the expiration of 30 days after notice of such amendment shall have been given to the Owners of outstanding Receipts. Every Owner at the time any amendment so becomes effective shall be deemed, by continuing to hold such Receipt, to consent and agree to such amendment and to be bound by the Deposit Agreement as amended thereby. In no event shall any amendment impair the right of the Owner of any Receipt to surrender such Receipt and receive therefor the Deposited Securities represented thereby, except in order to comply with mandatory provisions of applicable law.

SECTION 6.02. Termination.

     The Depositary shall at any time, at the direction of the Company, terminate this Deposit Agreement by mailing notice of such termination to the Owners of all Receipts then outstanding at least 30 days prior to the date fixed in such notice for such termination. The Depositary may likewise terminate this Deposit Agreement by mailing notice of such termination to the Company and the Owners of all Receipts then outstanding, such termination to be effective on a date specified in such notice not less than 30 days after the date thereof, if at any time 60 days shall have expired after the Depositary shall have delivered to the Company a written notice of its election to resign and a successor depositary shall not have been appointed and accepted its appointment as provided in Section 5.04. On and after the date of termination, the Owner of a Receipt will, upon (a) surrender of such Receipt at the Corporate Trust Office of the Depositary, (b) payment of the fee of the Depositary for the surrender of Receipts referred to in Section 2.05, and (c) payment of any applicable taxes or governmental charges, be entitled to delivery, to the owner or upon the Owner's order, of the amount of Deposited Securities represented by the American Depositary Shares evidenced by such Receipt. If any Receipts shall remain outstanding after the date of termination, the Depositary thereafter shall discontinue the registration of transfers of Receipts, shall suspend the distribution of dividends to the Owners thereof, and shall not give any further notices or perform any further acts under this Deposit Agreement, except that the Depositary shall continue to collect dividends and other distributions pertaining to Deposited Securities, shall sell rights as provided in this Deposit Agreement, and shall continue to deliver Deposited Securities, together with any dividends or other distributions received with

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respect thereto and the net proceeds of the sale of any rights or other property, in exchange for Receipts surrendered to the Depositary (after deducting, in each case, the fee of the Depositary for the surrender of a Receipt, any expenses for the account of the Owner of such Receipt in accordance with the terms and conditions of this Deposit Agreement, and any applicable taxes or governmental charges). At any time after the expiration of one year from the date of termination, the Depositary may sell the Deposited Securities then held hereunder and may thereafter hold uninvested the net proceeds of any such sale, together with any other cash then held by it hereunder, unsegregated and without liability for interest, for the pro rata benefit of the Owners of Receipts which have not theretofore been surrendered, such Owners thereupon becoming general creditors of the Depositary with respect to such net proceeds and such other cash. After making such sale, the Depositary shall be discharged from all obligations under this Deposit Agreement, except to account for such net proceeds and other cash (after deducting, in each case, the fee of the Depositary for the surrender of a Receipt, any expenses for the account of the Owner of such Receipt in accordance with the terms and conditions of this Deposit Agreement, and any applicable taxes or governmental charges) and except as provided in Section 5.08. Upon the termination of this Deposit Agreement, the Company shall be discharged from all obligations under this Deposit Agreement except for its obligations to the Depositary under Sections 5.08 and 5.09 hereof.

ARTICLE 7. MISCELLANEOUS

SECTION 7.01. Counterparts.

     This Deposit Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of such counterparts shall constitute one and the same instrument. Copies of this Deposit Agreement shall be filed with the Depositary and the Custodian and shall be open to inspection by any Owner during business hours.

SECTION 7.02. No Third Party Beneficiaries.

     This Deposit Agreement is for the exclusive benefit of the parties hereto and shall not be deemed to give any legal or equitable right, remedy or claim whatsoever to any other person.

SECTION 7.03. Severability.

     In case any one or more of the provisions contained in this Deposit Agreement or in the Receipts should be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein or therein shall in no way be affected, prejudiced or disturbed thereby.

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SECTION 7.04. Regulatory Compliance.

     The Depositary and the Company hereby confirm to each other that, for as long as this Deposit Agreement is in effect, they shall comply with any requirements for registration of the amount of Deposited Securities with the Central Bank and furnish to the CVM and the Central Bank any information and documents related to the Deposited Securities, the Receipts and the Depositary's obligations hereunder whenever required pursuant to applicable law or regulation or as may be requested by such authorities from time to time, whether such information and documents are requested from the Depositary or the Company. In the event that the Depositary or the Custodian shall be advised (in writing) by reputable independent Brazilian counsel (the "Legal Warning") that the Depositary or Custodian reasonably could be subject to criminal or material, as reasonably determined by the Depositary, civil liabilities as a result of the Company having failed to provide to the CVM or the Central Bank such information or documents reasonably available only through the Company, the Depositary will immediately send a copy of the Legal Warning to the Company, shall have the right to immediately resign as Depositary by written notice to the Company and will not be subject to any liability hereunder for such resignation or such determination, except that W the Depositary shall promptly, but in no event later than three (3) business days, if permitted by applicable law, duly assign, transfer and deliver all right, title and interest in and to the Deposited Securities held on account or on behalf of Owners to the Company or its nominee and (ii) to the extent not prohibited by applicable law, the Depositary shall provide the Company or any successor depositary hereunder with access, during normal business hours, to such records as may be reasonably necessary to enable the Company or such successor depositary to fulfill the obligations that the Depositary would have had hereunder but for such resignation. Upon effectiveness of such resignation the Depositary shall otherwise be discharged from all of its obligations under this Deposit Agreement. In the event that the Depositary resigns pursuant to this paragraph either (i) the Company will appoint a new depositary, in which case the Company will assume the obligations stated as the obligations of the Depositary under Section 5.04 herein or (ii) if the Company fails to appoint a new depositary within 60 days of such resignation, this Deposit Agreement shall be terminated in accordance with Section 6.02 herein and the Company or its designated agent will assume the obligations stated as the obligations of the Depositary in such section.

SECTION 7.05. Binding Effect on Owners and Beneficial Owners.

     The Owners and Beneficial Owners shall be bound by all of the terms and conditions of this Deposit Agreement and of the Receipts by acceptance thereof.

SECTION 7.06. Notices.

     Any and all notices to be given to the Company shall be deemed to have been duly given if personally delivered or sent by mail or cable, telex or facsimile transmission confirmed by letter, addressed to: Mr. Ferdinando Schauenburg, Director

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Econômico-Financeiro e de Relações com o Mercado, Companhia Paranaense de Energia-COPEL, Rua Coronel Dulcídio, 800-8. andar, CEP 80420-170 Curitiba, Paraná, Brazil, facsimile number 55-31-331-3136 or any other place to which the Company may have transferred its principal office.

     Any and all notices to be given to the Depositary shall be deemed to have been duly given if in English and personally delivered or sent by mail or cable, telex or facsimile transmission confirmed by letter, addressed to The Bank of New York, 101 Barclay Street, New York, New York 10286, facsimile number (212) 571-3050, Attention: American Depositary Receipt Administration, or any other place to which the Depositary may have transferred its Corporate Trust Office.

     Any and all notices to be given to any Owner shall be deemed to have been duly given if personally delivered or sent by mail or cable, telex or facsimile transmission confirmed by letter, addressed to such Owner at the address of such Owner as it appears on the transfer books for Receipts of the Depositary, or, if such Owner shall have filed with the Depositary a written request that notices intended for such owner be mailed to some other address, at the address designated in such request.

     Delivery of a notice sent by mail or cable, telex or facsimile transmission shall be deemed to be effective at the time when a duly addressed letter containing the same (or a confirmation thereof in the case of a cable, telex or facsimile transmission) is deposited, postage prepaid, in a post-office letter box; provided, however, that delivery of a notice to the Company or the Depositary shall be deemed to be effective when actually received by the Company or the Depositary, as the case may be. The Depositary or the Company may, however, act upon any cable or telex received by it, notwithstanding that such cable or telex transmission shall not subsequently be confirmed by letter as aforesaid.

     SECTION 7.07. Submission to Jurisdiction; Appointment of Agent for Service of Process.

     The Company (i) irrevocably designates and appoints CT Corporation System, 111 Eighth Avenue, New York New York 10011, as the Company's authorized agent upon which process may be served in any suit or proceeding arising out of or based upon the Shares or Deposited Securities, the American Depositary Shares, the Receipts or this Agreement which may be instituted in any United States federal or New York State court sitting in the Borough of Manhattan, the City of New York, (ii) consents and submits to the non-exclusive jurisdiction of such court in the State of New York with respect to any such suit or proceeding, and (iii) agrees that service of process upon said authorized agent shall be deemed in every respect effective service of process upon the Company in any such suit or proceeding. The Company agrees to deliver, upon the execution and delivery of this Deposit Agreement, a written acceptance by such agent of its appointment as such agent. The Company further agrees to take any and all action, including the filing of any and all such documents and instruments, as may be necessary

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to continue such designation and appointment in full force and effect for so long as any American Depositary Shares or Receipts remain outstanding or this Agreement remains in force. If said authorized agent shall cease to act as the Company's agent for service of process, the Company shall appoint without delay another such agent and promptly notify the Depositary of such appointment.

SECTION 7.08. Governing Law.

     This Deposit Agreement and the Receipts shall be interpreted and all rights hereunder and thereunder and provisions hereof and thereof shall be governed by the law of the State of New York.

SECTION 7.09. Headings.

     Headings contained herein are included for convenience only and are not to be used in construing or interpreting any provision hereof.

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     IN WITNESS WHEREOF, COMPANHIA PARANAENSE DE ENERGIA-COPEL and THE BANK OF NEW YORK have duly executed this agreement as of the day and year first set forth above and all owners shall become parties hereto upon acceptance by them of Receipts issued in accordance with the terms hereof.

COMPANHIA PARANAENSE DE ENERGIA -- COPEL

By:     /s/ Rubens Ghilardi    

Name: Rubens Ghilardi

Title: Chief Executive Officer

By:     /s/ Paulo Roberto Trompczynski     

Name: Paulo Roberto Trompczynski

Title: Chief Financial Officer

THE BANK OF NEW YORK

as Depositary

By:

Name:

Title:

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     IN WITNESS WHEREOF, COMPANHIA PARANAENSE DE ENERGIA-- COPEL and THE BANK OF NEW YORK have duly executed this agreement as of the day and year first set forth above and all Owners shall become parties hereto upon acceptance by them of Receipts issued in accordance with the terms hereof.

COMPANHIA PARANAENSE DE ENERGIA -- COPEL

By:

Name:

Title:

By:

Name:

Title:

THE BANK OF NEW YORK

as Depositary

By:     /s/ Keith G. Galfo    

Name: Keith G. Galfo

Title: Vice President

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EXHIBIT A 

AMERICAN DEPOSITARY SHARES 
(Each American Depositary Share 
represents the right to receive one (1)
Deposited Share)

THE BANK OF NEW YORK
AMERICAN DEPOSITARY RECEIPT
FOR NON-VOTING CLASS B PREFERRED SHARES
WITHOUT PAR VALUE OF
COMPANHIA PARANAENSE DE ENERGIA--COPEL
(ORGANIZED UNDER THE LAWS OF THE FEDERATIVE REPUBLIC OF BRAZIL)

     The Bank of New York, as depositary (hereinafter called the "Depositary"), hereby certifies that _________________ or registered assigns IS THE OWNER OF _________________

AMERICAN DEPOSITARY SHARES

representing non-voting ações preferenciais Class B, without par value (herein called "Shares") of COMPANHIA PARANAENSE DE ENERGIA--COPEL, a mixed-capital corporation with limited liability organized under the laws of The Federative Republic of Brazil (herein called the "Company"). At the date hereof, each American Depositary Share represents one Share deposited or subject to deposit under the Deposit Agreement (as such term is hereinafter defined) at the São Paulo office of Banco Itaú S/A (herein called the "Custodian"). The Depositary's Corporate Trust Office is located at a different address than its principal executive office. The address of the Principal Corporate Trust Office of the Depositary is 101 Barclay Street, New York, New York 10286, and its principal executive office is located at One Wall Street, New York, New York 10286.

THE DEPOSITARY'S CORPORATE TRUST OFFICE ADDRESS IS 101 BARCLAY STREET, NEW YORK, N.Y. 10286

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1. THE DEPOSIT AGREEMENT.

     This American Depositary Receipt is one of an issue (herein called "Receipts"), all issued and to be issued upon the terms and conditions set forth in the deposit agreement, dated as of March 21, 1996, as amended and restated as of July 29, 1997, as further amended and restated as of November 21, 2007, as the same may be further amended from time to time in accordance with its terms (herein called the "Deposit Agreement"), by and among the Company, the Depositary, and all Owners and Beneficial Owners from time to time of Receipts issued thereunder, each of whom by accepting a Receipt agrees to become a party thereto and become bound by all the terms and conditions thereof. The Deposit Agreement sets forth the rights of owners and Beneficial owners of the Receipts and the rights and duties of the Depositary in respect of the Shares deposited thereunder and any and all other securities, property and cash from time to time received in respect of such Shares and held thereunder (such Shares, securities, property, and cash are herein called "Deposited Securities"). Copies of the Deposit Agreement are on file at the Depositary's Corporate Trust Office in New York City and at the office of the Custodian.

     The statements made on the face and reverse of this Receipt are summaries of certain provisions of the Deposit Agreement and are qualified by and subject to the detailed provisions of the Deposit Agreement, to which reference is hereby made. Capitalized terms defined in the Deposit Agreement and not defined herein shall have the meanings set forth in the Deposit Agreement.

2. SURRENDER OF RECEIPTS AND WITHDRAWAL OF SHARES.

     Upon surrender at the Corporate Trust Office of the Depositary of this Receipt for the purpose of withdrawal of the Deposited Securities represented by the American Depositary Shares evidenced hereby, and upon payment of the fee of the Depositary provided in this Receipt, and subject to the terms and conditions of the Deposit Agreement, the Charter, the provisions of or governing the Deposited Securities and applicable law, the Owner hereof is entitled to delivery, to him or upon his order, of the Deposited Securities at the time represented by the American Depositary Shares for which this Receipt is issued. Delivery of such Deposited Securities may be made by (a) W the delivery of certificates in the name of the Owner hereof or as ordered by him or certificates properly endorsed or accompanied by proper instruments of transfer to such owner or as ordered by him, or (ii) book-entry transfer of the Shares represented by this Receipt to an account in the name of such Owner or as ordered by him, and (b) delivery of any other securities, property and cash to which such owner is then entitled in respect of this Receipt to such Owner or as ordered by him. Such delivery will be made at the option of the owner hereof, either at the office of the Custodian or at the Corporate Trust Office of the Depositary, as provided in the Deposit Agreement; provided that the forwarding of certificates for Shares or other Deposited Securities for such delivery at the

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Corporate Trust Office of the Depositary shall be at the risk and expense of the Owner hereof.

     Neither the Depositary nor the Custodian shall deliver Shares, by physical delivery, book-entry or otherwise (other than to the Company or its agent as contemplated by Section 4.08 of the Deposit Agreement), or otherwise permit Shares to be withdrawn from the facility created by the Deposit Agreement, except upon the receipt and cancellation of Receipts.

3. TRANSFERS, SPLIT-UPS, AND COMBINATIONS OF RECEIPTS.

     The transfer of this Receipt is registrable on the books of the Depositary at its Corporate Trust Office by the Owner hereof in person or by a duly authorized attorney, upon surrender of this Receipt properly endorsed for transfer or accompanied by proper instruments of transfer and funds sufficient to pay any applicable transfer taxes and the expenses of the Depositary and upon compliance with such regulations, if any, as the Depositary may establish for such purpose. This Receipt may be split into other such Receipts, or may be combined with other such receipts into one Receipt, evidencing the same aggregate number of American Depositary Shares as the Receipt or Receipts surrendered. As a condition precedent to the execution and delivery, registration of transfer, split-up, combination, or surrender of any Receipt, the delivery of any distribution thereon, or withdrawal of any Deposited Securities, the Company, the Depositary, the Custodian, or Registrar may require payment from the depositor of the Shares or the presenter of the Receipt of a sum sufficient to reimburse it for any tax or other governmental charge and any stock transfer or registration fee with respect thereto (including any such tax or charge and fee with respect to Shares being deposited or withdrawn) and payment of any applicable fees as provided in this Receipt, may require the production of proof satisfactory to it as to the identity and genuineness of any signature and may also require compliance with such reasonable regulations as the Depositary and the Company may establish consistent with the provisions of the Deposit Agreement or this Receipt, including, without limitation, this Article 3 and any regulations deemed necessary or desirable by the Depositary or the Custodian to facilitate compliance with any applicable rules or regulations of the Central Bank or the CVM.

     The delivery of Receipts against deposits of Shares generally or against deposits of particular Shares may be suspended, or the transfer of Receipts in particular instances may be refused, or the registration of transfer of outstanding Receipts, or the combination or split-up of Receipts generally may be suspended, during any period when the transfer books of the Depositary are closed, or if any such action is deemed necessary or advisable by the Depositary or the Company at any time or from time to time because of any requirement of law or of any government or governmental body or commission, or under any provision of the Deposit Agreement or this Receipt, or for any other reason, subject to the provisions of the following sentence. Notwithstanding anything to the contrary in this Deposit Agreement or the Receipts, the surrender of outstanding Receipts

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and withdrawal of Deposited Securities may be suspended only for W temporary delays caused by closing the transfer books of the Depositary or the Company or the deposit of Shares in connection with voting at a shareholders' meeting, or the payment of dividends, (ii) the payment of fees, taxes and similar charges, (iii) compliance with any U.S. or foreign laws or governmental regulations relating to the Receipts or to the withdrawal of the Deposited Securities, or (iv) any other reason that may at any time be specified in paragraph I(A)(1) of the General Instructions to Form F-6, as from time to time in effect, or any successor provision thereto. Without limitation of the foregoing, the Depositary shall not knowingly accept for deposit under the Deposit Agreement any Shares required to be registered under the provisions of the Securities Act of 1933, unless a registration statement is in effect as to such Shares.

4. LIABILITY OF OWNER FOR TAXES.

     If any tax or other governmental charge shall become payable with respect to any Receipt or any Deposited Securities represented hereby, such tax or other governmental charge shall be payable by the Owner hereof. The Depositary may refuse to effect any transfer of this Receipt or any combination or split-up hereof or any withdrawal of Deposited Securities represented by American Depositary Shares evidenced by such Receipt until such payment is made, and may withhold any dividends or other distributions, or may sell for the account of the Owner hereof any part or all of the Deposited Securities represented by the American Depositary Shares evidenced by this Receipt, and may apply such dividends or other distributions or the proceeds of any such sale in payment of such tax or other governmental charge (and any taxes or expenses arising out of such sale), and the owner hereof shall remain liable for any deficiency.

5. WARRANTIES OF DEPOSITORS.

     Every person depositing Shares hereunder and under the Deposit Agreement shall be deemed thereby to represent and warrant that such Shares and each certificate therefor, if any, are validly issued, fully paid, non-assessable, and free of any preemptive rights of the holders of outstanding Shares and that the person making such deposit is duly authorized so to do. Every such person shall also be deemed to represent and warrant that, except with respect to the initial deposit and any deposit permitted pursuant to Section 4.03, 4.04 or 4.09 of the Deposit Agreement, such person is not and shall not become at any time while such person holds Receipts or any beneficial interest therein an affiliate of the Company. In addition, every person depositing Shares under this Deposit Agreement shall also be deemed thereby to represent and warrant that such Shares and the Receipts evidencing American Depositary Shares representing such Shares would not be Restricted Securities. Such representations and warranties shall survive the deposit of Shares and issuance of Receipts.

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6. FILING PROOFS, CERTIFICATES, AND OTHER INFORMATION.

     Any person presenting Shares for deposit or any Owner of a Receipt may be required from time to time to file with the Depositary or the Custodian such proof of citizenship or residence, exchange control approval, legal or beneficial ownership of Receipts, Deposited Securities or other securities, compliance with all applicable laws or regulations or terms of the Deposit Agreement or such Receipt, or such information relating to the registration on the books of the Company or the Foreign Registrar, if applicable, to execute such certificates and to make such representations and warranties, as the Depositary may reasonably deem necessary or proper or as the Company reasonably may require. The Depositary may withhold the delivery or registration of transfer of any Receipt or the distribution of any dividend or sale or distribution of rights or of the proceeds thereof or the delivery of any Deposited Securities until such proof or other information is filed or such certificates are executed or such representations and warranties made. The Depositary shall from time to time advise the Company of the availability of any such proofs, certificates or other information and shall provide copies thereof to the Company as promptly as practicable upon request by the Company, unless such disclosure is prohibited by law.

7. CHARGES OF DEPOSITARY.

     The Company agrees to pay the fees and reasonable out-of-pocket expenses of the Depositary and those of any Registrar only in accordance with agreements in writing entered into between the Depositary and the Company from time to time. The Depositary shall present detailed statement for such expenses to the Company at least once every three months. The charges and expenses of the Custodian are for the sole account of the Depositary.

     The following charges, to the extent permitted by applicable law and stock exchange regulations, shall be incurred by any party depositing or withdrawing Shares or by any party surrendering Receipts or to whom Receipts are issued (including, without limitation, issuance pursuant to a stock dividend or stock split declared by the Company or an exchange of stock regarding the American Depositary Shares or Deposited Securities or a delivery of American Depositary Shares pursuant to Section 4.03 of the Deposit Agreement), or by Owners, as applicable: (1) taxes and other governmental charges, (2) such registration fees as may from time to time be in effect for the registration of transfers of Shares generally on the Share register of the Company or Foreign Registrar and applicable to transfers of Shares to or from the name of the Depositary or its nominee or the Custodian or its nominee on the making of deposits or withdrawals under the terms of the Deposit Agreement, (3) such cable, telex and facsimile transmission expenses as are expressly provided in the Deposit Agreement, (4) such expenses as are incurred by the Depositary in the conversion of foreign currency pursuant to Section 4.05 of the Deposit Agreement, (5) a fee of $5.00 or less per 100 American Depositary Shares (or portion thereof) for the delivery of American Depositary

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Shares pursuant to Section 2.03, 4.03 or 4.04 of the Deposit Agreement and the surrender of American Depositary Shares pursuant to Section 2.05 or 6.02 of the Deposit Agreement, (6) a fee of up to $.02 per American Depositary Share (or portion thereof) for any cash distribution made pursuant to the Deposit Agreement, including, but not limited to Sections 4.01 through 4.04 of the Deposit Agreement, (7) a fee for the distribution of securities pursuant to Section 4.02 of the Deposit Agreement, such fee being in an amount equal to the fee for the execution and delivery of American Depositary Shares referred to above which would have been charged as a result of the deposit of such securities (for purposes of this clause 7 treating all such securities as if they were Shares) but which securities are instead distributed by the Depositary to Owners, (8) in addition to any fee charged under clause 6, a fee of up to $.02 per American Depositary Share (or portion thereof) per annum for depositary services, which will be payable as provided in clause 9 below, (9) any other charges payable by the Depositary, any of the Depositary's agents, including the Custodian, or the agents of the Depositary's agents in connection with the servicing of Shares or other Deposited Securities (which charge shall be assessed against Owners as of the date or dates set by the Depositary in accordance with Section 4.06 of the Deposit Agreement and shall be payable at the sole discretion of the Depositary by billing such Owners for such charge or by deducting such charge from one or more cash dividends or other cash distributions).

     The Depositary, subject to Articles 2 and 8 hereof and as permitted by the Charter, may own and deal in any class of securities of the Company and its affiliates and in American Depositary Shares.

8. PRE-RELEASE OF RECEIPTS.

     Neither the Depositary nor the Custodian shall deliver Shares, by physical delivery, book entry or otherwise (other than to the Company or its agent as contemplated by Section 4.08 of the Deposit Agreement), or otherwise permit Shares to be withdrawn from the facility created hereby, except upon the receipt and cancellation of Receipts.

     The Depositary may issue Receipts against rights to receive Shares from the Company (or any agent of the Company recording Share ownership). No such issue of Receipts will be deemed a "Pre-Release" subject to the restrictions of the following paragraph.

     In its capacity as Depositary, the Depositary will not deliver Shares held under the Deposit Agreement prior to the receipt and cancellation by the Depositary of Receipts. The Depositary may execute and deliver Receipts prior to the receipt of Shares pursuant to Section 2.02 of the Deposit Agreement ("Pre-Release"). The Depositary may, pursuant to Section 2.05 of the Deposit Agreement, deliver Shares upon the receipt and cancellation of Receipts which have been Pre-Released, whether or not such cancellation is prior to the termination of such Pre-Release or the Depositary knows that such Receipt has been Pre-Released. The Depositary may receive Receipts in lieu of Shares in satisfaction of a Pre-Release. Each Pre-Release will be (a) preceded or accompanied by a

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written representation and agreement from the person to whom Receipts or Shares are to be delivered (the "Pre-Releasee") that the Pre-Releasee, or its customer, (i) owns the Shares or Receipts to be remitted, as the case may be, (ii) assigns all beneficial right, title and interest in such Shares or Receipts, as the case may be, to the Depositary in its capacity as such and for the benefit of the Owners, and (iii) will not take any action with respect to such Shares or Receipts, as the case may be, that is inconsistent with the transfer of beneficial ownership (including, without the consent of the Depositary, disposing of such Shares or Receipts as the case may be, other than in satisfaction of such Pre-Release), (b) at all times fully collateralized with cash, U.S. government securities, or such other collateral as the Depositary determines, in good faith, will provide substantially similar liquidity and security, (c) terminable by the Depositary on not more than five (5) Business Days' notice, and (d) subject to such further indemnities and credit regulations as the Depositary deems appropriate. The number of Shares not deposited but represented by American Depositary Shares outstanding at any time as a result of Pre-Releases will not normally exceed thirty percent (30'-.) of the Shares deposited under the Deposit Agreement; provided, however, that the Depositary reserves the right to disregard such limit from time to time as it deems reasonably appropriate, and may, with the prior written consent of the Company, change such limit for purposes of general application. The Depositary will also set Dollar limits with respect to Pre-Release transactions to be entered into hereunder with any particular Pre-Releasee on a case-by-case basis as the Depositary deems appropriate. For purposes of enabling the Depositary to fulfill its obligations to the Owners under the Deposit Agreement, the collateral referred to in clause (b) above shall be held by the Depositary as security for the performance of the Pre-Releasee's obligations to the Depositary in connection with a Pre-Releasee's obligation to deliver Shares or Receipts upon termination of a Pre-Release transaction (and shall not, for the avoidance of doubt, constitute Deposited Securities under the Deposit Agreement).

     The Depositary may retain for its own account any compensation received by it in connection with the foregoing.

9. TITLE TO RECEIPTS.

     It is a condition of this Receipt, and every successive holder and Owner of this Receipt by accepting or holding the same consents and agrees, that title to this Receipt when properly endorsed or accompanied by proper instruments of transfer, is transferable by delivery with the same effect as in the case of a negotiable instrument; provided, however, that the Depositary and the Company, notwithstanding any notice to the contrary, may treat the person in whose name this Receipt is registered on the books of the Depositary as the absolute owner hereof for the purpose of determining the person entitled to distribution of dividends or other distributions or to any notice provided for in the Deposit Agreement and for all other purposes and neither the Company nor the Depositary shall have any obligation or be subject to any liability under the Deposit

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Agreement to any Beneficial Owner of a Receipt unless such Beneficial owner is the Owner thereof.

10. VALIDITY OF RECEIPT.

     This Receipt shall not be entitled to any benefits under the Deposit Agreement or be valid or obligatory for any purpose, unless this Receipt shall have been executed by the Depositary by the manual signature of a duly authorized signatory of the Depositary; provided, however, that such signature may be a facsimile if a Registrar for the Receipts shall have been appointed and such Receipts are countersigned by the manual signature of a duly authorized officer of the Registrar.

11. REPORTS; INSPECTION OF TRANSFER BOOKS.

     The Depositary will make available for inspection by Owners of Receipts at its Corporate Trust Office any reports, notices and communications, including any proxy soliciting material, received from the Company which are both (a) received by the Depositary, the Custodian or a nominee of either as the holder of the Deposited Securities and (b) made generally available to the holders of such Deposited Securities by the Company. The Depositary will also make available for inspection by Owners copies of such reports, notices and communications when furnished by the Company pursuant to the Deposit Agreement. Any such reports, notices and communications, including any such proxy soliciting material, furnished to the Depositary by the Company shall be furnished in English to the extent such materials are required to be translated into English pursuant to any regulations of the Commission applicable to the Company. The Company has agreed to provide to the Depositary, at the Company's expense (unless otherwise agreed in writing by the Company and the Depositary), all documents that it provides to the Custodian.

     The Company will promptly transmit to the Depositary and the Custodian any reports, notices and other communications that are made generally available by the Company to holders of its Shares. The Depositary will promptly make such notices, reports and other communications available to all Owners on a basis similar to that for holders of Shares or other Deposited Securities, or on such other basis as the Company may advise the Depositary may be required by any applicable law, regulation or stock exchange or automated inter-dealer quotation system requirement or, at the written request and expense of the Company, promptly arrange for the mailing of copies thereof (or if requested by the Company, a summary of any such notice provided by the Company) to all Owners. The Company will timely provide the Depositary with the quantity of such notices, reports and other communications, as requested by the Depositary from time to time, in order for the Depositary to effect any such mailings. The Company has delivered to the Depositary and the Custodian a copy of the provisions of or governing the Shares and any other Deposited Securities issued by the Company or any affiliate of the Company, and promptly upon any amendment thereto or change therein, the Company shall deliver to the Depositary and the Custodian a copy of such

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provisions as so amended or changed. The Depositary may rely upon such copy for all purposes of the Deposit Agreement. The Depositary will, at the expense of the Company (unless otherwise agreed in writing by the Company and the Depositary), make such copy and such notices, reports and other communications available for inspection by Owners at the Depositary's office, at the office of the Custodian and at any other designated transfer offices.

     The Depositary will keep books for the registration of Receipts and transfers of Receipts which at all reasonable times shall be open for inspection by the Owners of Receipts, provided that such inspection shall not be for the purpose of communicating with Owners of Receipts for an object other than the business of the Company, including, without limitation, a matter related to the Deposit Agreement, the Receipts or the Deposited Securities.

     The Depositary may close the transfer books alter consultation with the Company to the extent practicable, at any time or from time to time, when deemed expedient by it in connection with the performance of its duties under the Deposit Agreement.

12. DIVIDENDS AND DISTRIBUTIONS.

     Whenever the Depositary or on its behalf, its agent, receives any cash dividend or other cash distribution on any Deposited Securities, the Depositary will, if at the time of receipt thereof any amounts received in a Foreign Currency can in the judgment of the Depositary be converted on a reasonable basis into United States dollars transferable to the United States, and subject to the Deposit Agreement, convert or will cause its agent to convert, as promptly as practicable (and in any event within one (1) Business Day) alter its receipt of such dividend or distribution (unless otherwise prohibited or prevented by law), such dividend or distribution into dollars, transfer such dollars to the United States and distribute the amount thus received (net of the expenses of the Depositary as provided in Article 7 hereof and Section 5.09 of the Deposit Agreement) to the Owners of Receipts entitled thereto, provided, however, that in the event that the Company, the Depositary or the Custodian is required to withhold and does withhold from such cash dividend or other cash distribution in respect of any Deposited Securities an amount on account of taxes, the amount distributed to the owners of the Receipts evidencing American Depositary Shares representing such Deposited Securities shall be reduced accordingly.

     Subject to the provisions of Section 4.11 and 5.09 of the Deposit Agreement, whenever the Depositary receives any distribution other than a distribution described in Sections 4.01, 4.03 or 4.04 of the Deposit Agreement, the Depositary may, as promptly as practicable, cause the securities or property received by it to be distributed to the owners of Receipts entitled thereto, in proportion to the number of American Depositary Shares representing such Deposited Securities held by each of them respectively, in any manner that the Depositary may deem equitable and practicable for

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accomplishing such distribution; provided, however, that if in the opinion of the Depositary such distribution cannot be made proportionately among the owners of Receipts entitled thereto, or if for any other reason the Depositary deems such distribution not to be feasible, the Depositary may, alter consultation with the Company, adopt such method as it may deem equitable and practicable for the purpose of effecting such distribution, including, but not limited to, the public or private sale of the securities or property thus received, or any part thereof, and the net proceeds of any such sale (net of the fees of the Depositary as provided in Article 7 hereof and Section 5.09 of the Deposit Agreement and any expenses in connection with such sale) shall be distributed by the Depositary to the Owners of Receipts entitled thereto as in the case of a distribution received in cash, all in the manner and subject to the conditions set forth in the Deposit Agreement. To the extent such securities or property or the net proceeds thereof are not distributed to Owners as provided in Section 4.02 of the Deposit Agreement, the same shall constitute Deposited Securities and each American Depositary Share shall thereafter also represent its proportionate interest in such securities, property or net proceeds.

     If any distribution consists of a dividend in, or free distribution of, Shares, the Depositary may, and shall if the Company shall so request, distribute, as promptly as practicable, to the Owners of outstanding Receipts entitled thereto, in proportion to the number of American Depositary Shares representing such Deposited Securities held by each of them respectively, additional Receipts evidencing an aggregate number of American Depositary Shares representing the amount of Shares received as such dividend or free distribution subject to the terms and conditions of the Deposit Agreement with respect to the deposit of Shares and the issuance of American Depositary Shares evidenced by Receipts, including the withholding of any tax or other governmental charge as provided in Section 4.11 of the Deposit Agreement and the payment of the fees of the Depositary as provided in Article 7 hereof and Section 5.09 of the Deposit Agreement. In lieu of delivering Receipts for fractional American Depositary Shares in any such case, the Depositary will sell the amount of Shares represented by the aggregate of such fractions and distribute the net proceeds, all in the manner and subject to the conditions set forth in the Deposit Agreement. If additional Receipts are not so distributed, each American Depositary Share shall thenceforth also represent the additional Shares distributed upon the Deposited Securities represented thereby. Each beneficial owner of Receipts or Shares so distributed shall be deemed to have acknowledged that the Shares have not been registered under the Securities Act and to have agreed to comply with the restrictions on transfer described in the legend set forth on the face hereof. In addition, the Depositary may withhold any distribution of Receipts under Section 4.03 of the Deposit Agreement if it has not received satisfactory assurances from the Company that such distribution does not require registration under the Securities Act or is exempt from registration under the provisions of such Act.

     In the event that the Depositary determines that any distribution in property other than cash (including Shares and rights to subscribe therefor) is subject to

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any tax or other governmental charge which the Depositary is obligated to withhold, the Depositary may by public or private sale dispose of all or a portion of such property (including Shares and rights to subscribe therefor) in such amounts and in such manner as the Depositary deems reasonably necessary and practicable to pay any such taxes or charges, and the Depositary shall distribute the net proceeds of any such sale after deduction of such taxes or charges to the Owners of Receipts entitled thereto.

13. RIGHTS.

     In the event that the Company shall offer or cause to be offered to the holders of any Deposited Securities any rights to subscribe for additional Shares or any rights of any other nature, the Depositary, alter consultation with the Company, shall have discretion as to the procedure to be followed in making such rights available to any Owners or in disposing of such rights on behalf of any Owners and making the net proceeds available to such Owners or, if by the terms of such rights offering or for any other reason it would be unlawful for the Depositary either to make such rights available to any Owners or to dispose of such rights and make the net proceeds available to such Owners, then the Depositary shall allow the rights to lapse. If at the time of the offering of any rights the Depositary determines that it is lawful and feasible to make such rights available to all or certain owners but not to other Owners, the Depositary shall distribute to any Owner to whom it determines the distribution to be lawful and feasible, in proportion to the number of American Depositary Shares held by such Owner, warrants or other instruments therefor in such form as it deems appropriate.

     In circumstances in which rights would otherwise not be distributed, if an Owner requests the distribution of warrants or other instruments in order to exercise the rights allocable to the American Depositary Shares of such Owner hereunder, the Depositary will promptly make such rights available to such Owner upon written notice from the Company to the Depositary that (a) the Company has elected in its sole discretion to permit such rights to be exercised and (b) such owner has executed such documents as the Company has determined in its sole discretion are reasonably required under applicable law.

     If the Depositary has distributed warrants or other instruments for rights to all or certain Owners, then upon instruction from such an Owner pursuant to such warrants or other instruments to the Depositary to exercise such rights, upon payment by such Owner to the Depositary for the account of such Owner of an amount equal to the purchase price of the Shares to be received upon the exercise of the rights, and upon payment of the fees of the Depositary and any other charges as set forth in such warrants or other instruments, the Depositary shall, on behalf of such owner, exercise the rights and purchase the Shares, and the Company shall cause the Shares so purchased to be delivered to the Depositary on behalf of such Owner. As agent for such Owner, the Depositary will cause the Shares so purchased to be deposited pursuant to Section 2.02 of the Deposit Agreement, and shall, pursuant to Section 2.03 of the Deposit Agreement,

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execute and deliver Receipts to such Owner. In the case of a distribution pursuant to this paragraph, such Receipts shall be legended in accordance with applicable U.S. laws, and shall be subject to the appropriate restrictions on sale, deposit, cancellation, and transfer under such laws.

     If the Depositary determines that it is not lawful or feasible to make such rights available to all or certain owners, it will use its best efforts that are reasonable under the circumstances to, sell the rights, warrants or other instruments in proportion to the number of American Depositary Shares held by the Owners to whom it has determined it may not lawfully or feasibly make such rights available, and allocate the net proceeds of such sales (net of the fees of the Depositary as provided in Section 5.09 of the Deposit Agreement, any expenses in connection with such sale and all taxes and governmental charges payable in connection with such rights and subject to the terms and conditions of the Deposit Agreement) for the account of such Owners otherwise entitled to such rights, warrants or other instruments, upon an averaged or other practical basis without regard to any distinctions among such Owners because of exchange restrictions or the date of delivery of any Receipt or otherwise. Such proceeds shall be distributed as promptly as practicable in accordance with Section 4.01 of the Deposit Agreement.

     If a registration statement under the Securities Act is required with respect to the securities to which any rights relate in order for the Company to offer such rights to Owners and sell the securities represented by such rights, the Depositary will not offer such rights to Owners unless and until such a registration statement is in effect, or unless the offering and sale of such securities and such rights to such Owners are exempt from, or not subject to, registration under the provisions of such Act.

     The Depositary shall not be responsible for any failure to determine that it may be lawful or feasible to make such rights available to Owners in general or any Owner in particular.

14. CONVERSION OF FOREIGN CURRENCY.

     Whenever the Depositary or the Custodian shall receive Foreign Currency, by way of dividends or other distributions or the net proceeds from the sale of securities, property or rights, and if at the time of the receipt thereof the Foreign Currency so received can, pursuant to applicable law, be converted on a reasonable basis into Dollars and the resulting Dollars transferred to the United States, the Depositary or the Custodian shall convert or cause to be converted as promptly as practicable (and in any event within one Business Day of its or its agent's receipt of such Foreign Currency), by sale or in any other manner that it may determine in accordance with applicable law, such Foreign Currency into Dollars. If, at the time of conversion of such Foreign Currency into Dollars, such Dollars can, pursuant to applicable law, be transferred outside of Brazil for distribution to owners entitled thereto, such Dollars shall be distributed as promptly as practicable to the Owners entitled thereto or, if the Depositary or the Custodian shall have distributed any rights, warrants or other instruments which entitle the holders thereof to

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such Dollars, then to the holders of such rights, warrants and/or instruments upon surrender thereof for cancellation. Such distribution or conversion may be made upon an averaged or other practicable basis without regard to any distinctions among Owners on account of exchange restrictions, the date of delivery of any Receipt or otherwise and shall be net of any expenses of conversion into Dollars incurred by the Depositary or the Custodian as provided in Section 5.09 of the Deposit Agreement.

     If such conversion, transfer or distribution can be effected only with the approval or license of any government or agency thereof, the Depositary or the Custodian shall file as promptly as practicable such application for approval or license; however, the Depositary or the Custodian shall be entitled to rely upon Brazilian local counsel in such matters, which counsel shall be instructed to act as promptly as possible.

     If at any time Foreign Currency received by the Depositary or the Custodian is not, pursuant to applicable law, convertible, in whole or in part, into Dollars transferable into the United States, or if any approval or license of any government or agency thereof which is required for such conversion is denied or in the opinion of the Depositary cannot be promptly obtained at a reasonable cost, the Depositary or the Custodian shall, (a) as to that portion of the Foreign Currency that is convertible into Dollars, make such conversion and, if permitted by applicable law, transfer such Dollars to the United States for distribution to Owners in accordance with the first paragraph of this Article 13 or, if such transfer is not so permitted, hold such Dollars uninvested and without liability for interest thereon for the respective accounts of the Owners entitled to receive the same, and (b) as to the nonconvertible balance, if any, (i) if requested in writing by an Owner, distribute or cause the Custodian to distribute the Foreign Currency (or an appropriate document evidencing the right to receive such Foreign Currency) received by the Depositary or Custodian in respect of the American Depositary Shares evidenced by Receipts held by such owner (as the same may be adjusted as a consequence of subclause (ii) below) to such owner (x) if such request is received before the 15th day of a calendar month, on such 15th day, or (y) if not, on the last day of such month (or, in either case, if such day is not a Business Day, on the next succeeding Business Day) and (ii) the Depositary shall cause the Custodian to hold any amounts of nonconvertible Foreign Currency not distributed pursuant to the immediately preceding subclause (i) for the respective accounts of the Owners entitled to receive the same, uninvested and without liability for interest thereon, on demand and, if and to the extent reasonably practicable and permitted by applicable law, in a manner designed to protect such owners against the effects of inflation; provided that, at such time, at the reasonable request of the Depositary, the Company shall furnish the Depositary, at the Company's expense, with a written opinion from recognized United States counsel for the Company confirming that the manner in which the Depositary proposes to hold such amounts of non-convertible Foreign Currency will not violate the Investment Company Act of 1940.

15. RECORD DATES.

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     Whenever any cash dividend or other cash distribution shall become payable or any distribution other than cash shall be made, or whenever rights shall be issued with respect to the Deposited Securities, or whenever for any reason the Depositary causes a change in the number of Shares that are represented by each American Depositary Share, or whenever the Depositary shall receive notice of any meeting of holders of Shares or other Deposited Securities, the Depositary shall fix a record date, which date shall, (x) be the same date as the record date fixed by the Company, if any, to the extent practicable, or (y) if different from the record date fixed by the Company, be as near as practicable to the record date fixed by the Company or, if more than five (5) Business Days after such record date, be fixed after consultation with the Company (a) for the determination of the Owners of Receipts who shall be (i) entitled to receive such dividend, distribution or rights or the net proceeds of the sale thereof or (ii) entitled to give instructions for the exercise of voting rights at any such meeting, (b) on or after which each American Depositary Share will represent the changed number of Shares, or (c) for any other reason, subject to the provisions of the Deposit Agreement.

16. VOTING OF DEPOSITED SECURITIES.

     Upon receipt of notice of any meeting or solicitation of proxies of holders of Shares or other Deposited Securities, if requested in writing by the Company, the Depositary shall, as soon as practicable thereafter, mail to the Owners of Receipts a notice, the form of which notice shall be in the sole discretion of the Depositary, which shall contain (a) such information as is contained in such notice of meeting, (or, if requested by the Company a summary in English of such information provided by the Company), (b) a statement that the Owners of Receipts as of the close of business on a specified record date will be entitled, subject to any applicable provision of Brazilian law, the Charter and the provisions of the Deposited Securities, to instruct the Depositary as to the exercise of the voting rights, if any, pertaining to the amount of Shares or other Deposited Securities represented by their respective American Depositary Shares and (c) a statement as to the manner in which such instructions may be given, including an express indication that instructions may be given or deemed given in accordance with the last sentence of this paragraph if no instruction is received, to the Depositary to give a discretionary proxy to a person designated by the Company. Upon the written request of an Owner of a Receipt on such record date, received on or before the date established by the Depositary for such purpose, the Depositary shall endeavor insofar as practicable and permitted under Brazilian law, the Charter and the Deposited Securities, to vote or cause to be voted the amount of Shares or other Deposited Securities represented by such American Depositary Shares evidenced by such Receipt in accordance with the instructions set forth in such request. The Depositary shall not itself exercise any voting discretion over any Deposited Securities. If no instructions are received by the Depositary from any owner with respect to any of the Deposited Securities represented by the American Depositary Shares evidenced by such Owner's Receipts on or before the date established by the Depositary for such purpose, the Depositary shall deem such owner to have instructed the Depositary to give a discretionary proxy to a person designated by the

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Company with respect to such Deposited Securities and the Depositary shall give a discretionary proxy to a person designated by the Company to vote such Deposited Securities, provided that no such instruction shall be deemed given and no such discretionary proxy shall be given with respect to any matter as to which the Company informs the Depositary (and the Company agrees to provide such information as promptly as practicable in writing) that W the Company does not wish such proxy given, (y) substantial opposition exists or (z) such matter materially or adversely affects the rights of holders of Shares. 

     Subject to the rules of any securities exchange or automated inter-dealer quotation system on which American Depositary Shares or the Deposited Securities represented thereby are listed or quoted, the Depositary shall deliver, at least two Business Days prior to the date of such meeting, to the Company, to the attention of its Chief Financial Officer, copies of all instructions received from Owners in accordance with which the Depositary will vote, or cause to be voted, the Deposited Securities represented by the American Depositary Shares evidenced by such Receipts at such meeting. Delivery of instructions will be made at the expense of the Company (unless otherwise agreed in writing by the Company and the Depositary), provided that payment of such expenses shall not be a condition precedent to the obligations of the Depositary under Section 4.07 of the Deposit Agreement. 

17. CHANGES AFFECTING DEPOSITED SECURITIES. 

     In circumstances where the provisions of Section 4.03 of the Deposit Agreement do not apply, upon any change in nominal value, change in par value, split-up, consolidation, or any other reclassification of Deposited Securities, or upon any recapitalization, reorganization, merger or consolidation, or sale of assets affecting the Company or to which it is a party, any securities which shall be received by the Depositary or a Custodian in exchange for or in conversion of or in respect of Deposited Securities shall be treated as new Deposited Securities under the Deposit Agreement, and American Depositary Shares shall thenceforth represent the new Deposited Securities so received in exchange or conversion, unless additional Receipts are delivered pursuant to the following sentence. In any such case the Depositary may, and shall if the Company shall so request, execute and deliver additional Receipts as in the case of a dividend i n Shares, or call for the surrender of outstanding Receipts to be exchanged for new Receipts specifically describing such new Deposited Securities. 

18. LIABILITY OF THE COMPANY AND DEPOSITARY. 

     Neither the Depositary nor the Company shall incur any liability to any Owner or Beneficial Owner, if by reason of any provision of any present or future law or regulation of the United States, Brazil or any other country, or of any other governmental or regulatory authority or stock exchange, or by reason of any provision, present or future, of the Charter or the Deposited Securities, or by reason of any act of God or war or other circumstances beyond its control, the Depositary or the Company shall be 

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prevented or forbidden from or be subject to any civil or criminal penalty on account of doing or performing any act or thing which by the terms of the Deposit Agreement it is provided shall be done or performed; nor shall the Depositary or the Company incur any liability to any owner or Beneficial Owner of a Receipt by reason of any non-performance or delay, caused as aforesaid, in the performance of any act or thing which by the terms of the Deposit Agreement it is provided shall or may be done or performed, or by reason of any exercise of, or failure to exercise, any discretion provided for in the Deposit Agreement. Where, by the terms of a distribution pursuant to Sections 4.01, 4.02 or 4.03 of the Deposit Agreement, or an offering or distribution pursuant to Section 4.04 of the Deposit Agreement, or for any other reason, the Depositary is prevented or prohibited from making such distribution or offering available to Owners, and the Depositary is prevented or prohibited from disposing of such distribution or offering on behalf of such Owners and making the net proceeds available to such Owners, then the Depositary, after consultation with the Company, shall not make such distribution or offering, and shall allow any rights, if applicable, to lapse. Neither the Company nor the Depositary assumes any obligation or shall be subject to any liability under the Deposit Agreement to Owners or Beneficial Owners of Receipts, except that they agree to perform their obligations specifically set forth in the Deposit Agreement without negligence or bad faith. The Depositary shall not be subject to any liability with respect to the validity or worth of the Deposited Securities. Neither the Depositary nor the Company shall be under any obligation to appear in, prosecute or defend any action, suit, or other proceeding in respect of any Deposited Securities or in respect of the Receipts, which in its opinion may involve it in expense or liability, unless indemnity satisfactory to it against all expenses and liability shall be furnished as often as may be required, and the Custodian shall not be under any obligation whatsoever with respect to such proceedings, the responsibility of the Custodian being solely to the Depositary. Neither the Depositary nor the Company shall be liable for any action or nonaction by it in reliance upon the advice of or information from legal counsel, accountants, any person presenting Shares for deposit, any owner or Beneficial Owner of a Receipt, or any other person believed by it in good faith to be competent to give such advice or information. The Depositary shall not be responsible for any failure to carry out any instructions to vote any of the Deposited Securities, or for the manner in which any such vote is cast or the effect of any such vote, provided that any such action or nonaction is in good faith. The Depositary shall not be liable for any acts or omissions made by a successor depositary whether in connection with a previous act or omission of the Depositary or in connection with a matter arising wholly after the removal or resignation of the Depositary, provided that in connection with the issue out of which such potential liability arises, the Depositary performed its obligations without negligence or bad faith while it acted as Depositary. The Company agrees to indemnify the Depositary, its directors, employees, agents and affiliates and any Custodian against, and hold each of them harmless from, any liability or expense (including, but not limited to, the reasonable fees and expenses of counsel) which may arise out of acts performed or omitted, in accordance with the provisions of the Deposit Agreement and of the Receipts, as the same may be amended, modified, or supplemented from time to time, (i) by either the

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Depositary or a Custodian or their respective directors, employees, agents and affiliates, except for any liability or expense arising out of the negligence or bad faith of either of them, and except to the extent that such liability or expense arises out of information relating to the Depositary or the Custodian, as applicable, furnished in writing to the Company by the Depositary or the Custodian, as applicable, expressly for use in any registration statement, proxy statement, prospectus (or placement memorandum) or preliminary prospectus (or preliminary placement memorandum) relating to the Shares, or omissions from such information; or (ii) by the Company or any of its directors, employees, agents and affiliates.

     The indemnities contained in the preceding paragraph shall not extend to any liability or expense which may arise out of any Pre-Release (as defined in Section 2.09 of the Deposit Agreement) to the extent that any such liability or expense arises in connection with (a) any United States federal, state or local income tax laws or (b) the failure of the Depositary to deliver Deposited Securities when required under the terms of Section 2.05 of the Deposit Agreement. However, for the avoidance of doubt, the indemnities contained in the preceding paragraph shall apply to any liability or expense which may arise out of any misstatement or alleged misstatement or omission or alleged omission in any registration statement, proxy statement, prospectus (or placement memorandum) or preliminary prospectus (or preliminary placement memorandum) relating to the offer or sale of Shares, except to the extent any such liability arises out of (i) information relating to the Depositary or any Custodian, as applicable, furnished in writing to the Company by the Depositary or any Custodian, as applicable, expressly for use in any of the foregoing documents, or, (ii) material omissions from such information furnished by the Depositary or any Custodian.

     No disclaimer of liability under the Securities Act is intended by any provisions of the Deposit Agreement.

     The Depositary, subject to Sections 2.05 and 2.09 of the Deposit Agreement, may own and deal in any class of securities of the Company and its affiliates and in Receipts.

1 9 . RESIGNATION AND REMOVAL OF THE DE POSITARY; APPOINTMENT OF SUCCESSOR CUSTODIAN.

     The Depositary may at any time resign as Depositary under the Deposit Agreement by written notice of its election so to do delivered to the Company, such resignation to take effect upon the appointment of a successor depositary and its acceptance of such appointment as provided in the Deposit Agreement. The Depositary may at any time be removed by the Company by written notice of such removal, effective upon the appointment of a successor depositary and its acceptance of such appointment as provided in the Deposit Agreement. Whenever the Depositary in its discretion determines that it is in the best interests of the owners of Receipts to do so, it may appoint a substitute or additional custodian or custodians.

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20. AMENDMENT.

     The form of the Receipts and any provisions of the Deposit Agreement may at any time and from time to time be amended by agreement between the Company and the Depositary in any respect which they may deem necessary or desirable. Any amendment which shall impose or increase any fees or charges (other than taxes and other governmental charges), or which shall otherwise prejudice any substantial existing right of owners of Receipts, shall, however, not become effective as to outstanding Receipts until the expiration of 30 days after notice of such amendment shall have been given to the Owners of outstanding Receipts. Every Owner of a Receipt at the time any amendment so becomes effective shall be deemed, by continuing to hold such Receipt, to consent and agree to such amendment and to be bound by the Deposit Agreement as amended thereby. In no event shall any amendment impair the right of the Owner of any Receipt to surrender such Receipt and receive therefor the Deposited Securities represented thereby, except in order to comply with mandatory provisions of applicable law.

21. TERMINATION OF DEPOSIT AGREEMENT

     The Depositary at any time, at the direction of the Company, shall terminate the Deposit Agreement by mailing notice of such termination to the Owners of all Receipts then outstanding at least 30 days prior to the date fixed in such notice for such termination. The Depositary may likewise terminate the Deposit Agreement by mailing notice of such termination to the Company and the Owners of all Receipts then outstanding, such termination to be effective on a date specified in such notice not less than 30 days after the date thereof, if at any time 60 days shall have expired after the Depositary shall have delivered to the Company a written notice of its election to resign and a successor depositary shall not have been appointed and accepted its appointment as provided in the Deposit Agreement. on and after the date of termination, the Owner of a Receipt will, upon (a) surrender of such Receipt at the Corporate Trust Office of the Depositary, (b) payment of the fee of the Depositary for the surrender of Receipts referred to in Section 2.05 of the Deposit Agreement, and (c) payment of any applicable taxes or governmental charges, be entitled to delivery, to the Owner or upon the Owner's order, of the amount of Deposited Securities represented by the American Depositary Shares evidenced by such Receipt. If any Receipts shall remain outstanding after the date of termination, the Depositary thereafter shall discontinue the registration of transfers of Receipts, shall suspend the distribution of dividends to the Owners thereof, and shall not give any further notices or perform any further acts under the Deposit Agreement, except that the Depositary shall continue to collect dividends and other distributions pertaining to Deposited Securities, shall sell rights as provided in the Deposit Agreement, and shall continue to deliver Deposited Securities, together with any dividends or other distributions received with respect thereto and the net proceeds of the sale of any rights or other property, in exchange for Receipts surrendered to the Depositary (after deducting, in each case, the fee of the Depositary for the surrender of a Receipt, any expenses for the

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account of the Owner of such Receipt in accordance with the terms and conditions of the Deposit Agreement, and any applicable taxes or governmental charges). At any time after the expiration of one year from the date of termination, the Depositary may sell the Deposited Securities then held under the Deposit Agreement and may thereafter hold uninvested the net proceeds of any such sale, together with any other cash then held by it thereunder, unsegregated and without liability for interest, for the pro rata benefit of the Owners of Receipts which have not theretofore been surrendered, such owners thereupon becoming general creditors of the Depositary with respect to such net proceeds and such other cash. After making such sale, the Depositary shall be discharged from all obligations under the Deposit Agreement, except to account for such net proceeds and other cash (after deducting, in each case, the fee of the Depositary for the surrender of a Receipt, any expenses for the account of the Owner of such Receipt in accordance with the terms and conditions of the Deposit Agreement, and any applicable taxes or governmental charges) and except as provided in Section 5.08 of the Deposit Agreement. Upon the termination of the Deposit Agreement, the Company shall be discharged from all obligations under the Deposit Agreement except for its obligations to the Depositary with respect to indemnification, charges, and expenses.

22. SUBMISSION TO JURISDICTION; APPOINTMENT OF AGENT FOR PROCESS.

     The Company (i) irrevocably designates and appoints CT Corporation System, 111 Eighth Avenue, New York New York 10011, as the Company's authorized agent upon which process may be served in any suit or proceeding arising out of or based upon the Shares or Deposited Securities, the American Depositary Shares, the Receipts or this Agreement which may be instituted in any United States federal or New York State court sitting in the Borough of Manhattan, the City of New York, (ii) consents and submits to the non-exclusive jurisdiction of such court in the State of New York with respect to any such suit or proceeding, and (iii) agrees that service of process upon said authorized agent shall be deemed in every respect effective service of process upon the Company in any such suit or proceeding. The Company agrees to deliver, upon the execution and delivery of this Deposit Agreement, a written acceptance by such agent of its appointment as such agent. The Company further agrees to take any and all action, including the filing of any and all such documents and instruments, as may be necessary to continue such designation and appointment in full force and effect for so long as any American Depositary Shares or Receipts remain outstanding or the Agreement remains in force. If said authorized agent shall cease to act as the Company's agent for service of process, the Company shall appoint without delay another such agent and promptly notify the Depositary of such appointment.

23. UNCERTIFICATED AMERICAN DEPOSITARY SHARES; DTC DIRECT REGISTRATION SYSTEM.

     Notwithstanding anything to the contrary in the Deposit Agreement:

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     (a) American Depositary Shares may be certificated securities evidenced by Receipts or uncertificated securities. The form of Receipt annexed as Exhibit A to the Deposit Agreement summarizes the terms and conditions of, and will be the prospectus required under the Securities Act of 1933 for, both certificated and uncertificated American Depositary Shares. Except for those provisions of the Deposit Agreement that by their nature do not apply to uncertificated American Depositary Shares, all the provisions of the Deposit Agreement shall apply, mutatis mutandis, to both certificated and uncertificated American Depositary Shares.

     (b) (i) The term "deliver", or its noun form, when used with respect to Receipts, shall mean (A) book-entry transfer of American Depositary Shares to an account at The Depository Trust Company, or its successor ("DTC"), designated by the person entitled to such delivery, evidencing American Depositary Shares registered in the name requested by that person, (B) registration of American Depositary Shares not evidenced by a Receipt on the books of the Depositary in the name requested by the person entitled to such delivery and mailing to that person of a statement confirming that registration or (C) if requested by the person entitled to such delivery, delivery at the Corporate Trust Office of the Depositary to the person entitled to such delivery of one or more Receipts.

     (ii) The term "surrender", when used with respect to Receipts, shall mean (A) one or more book-entry transfers of American Depositary Shares to the DTC account of the Depositary, (B) delivery to the Depositary at its Corporate Trust Office of an instruction to surrender American Depositary Shares not evidenced by a Receipt or (C) surrender to the Depositary at its Corporate Trust Office of one or more Receipts evidencing American Depositary Shares.

     (c) American Depositary Shares not evidenced by Receipts shall be transferable as uncertificated registered securities under the laws of New York.

     (d) The Depositary shall have a duty to register a transfer, in the case of uncertificated American Depositary Shares, upon receipt from the Owner of a proper instruction (including, for the avoidance of doubt, instructions through DRS and Profile as provided in subsection (f) below). The Depositary, upon surrender of a Receipt for the purpose of exchanging it for uncertificated American Depositary Shares, shall cancel that Receipt and send the Owner a statement confirming that the Owner is the owner of the same number of uncertificated American Depositary Shares that the surrendered Receipt evidenced. The Depositary, upon receipt of a proper instruction (including, for the avoidance of doubt, instructions through DRS and Profile as provided in subsection (f) below) from the Owner of uncertificated American Depositary Shares for the purpose of exchanging them for certificated American Depositary Shares, shall execute and deliver to the Owner a Receipt evidencing the same number of certificated American Depositary Shares.

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     (e) Upon satisfaction of the conditions for replacement of a Receipt that is mutilated, lost, destroyed or stolen, the Depositary shall deliver to the Owner the American Depositary Shares evidenced by that Receipt in uncertificated form unless otherwise requested by the Owner.

     (f) (i) The parties acknowledge that the Direct Registration System ("DRS") and Profile Modification System ("Profile") shall apply to uncertificated American Depositary Shares upon acceptance thereof to DRS by DTC. DRS is the system administered by DTC pursuant to which the Depositary may register the ownership of uncertificated American Depositary Shares, which ownership shall be evidenced by periodic statements issued by the Depositary to the Owners entitled thereto. Profile is a required feature of DRS which allows a DTC participant, claiming to act on behalf of an Owner of American Depositary Shares, to direct the Depositary to register a transfer of those American Depositary Shares to DTC or its nominee and to deliver those American Depositary Shares to the DTC account of that DTC participant without receipt by the Depositary of prior authorization from the Owner to register such transfer.

     (ii) In connection with and in accordance with the arrangements and procedures relating to DRS/Profile, the parties understand that the Depositary will not verify, determine or otherwise ascertain that the DTC participant which is claiming to be acting on behalf of an Owner in requesting a registration of transfer and delivery as described in subsection (i) above has the actual authority to act on behalf of the Owner (notwithstanding any requirements under the Uniform Commercial Code). For the avoidance of doubt, the provisions of Sections 5.03 and 5.08 of the Deposit Agreement shall apply to the matters arising from the use of the DRS. The parties agree that the Depositary's reliance on and compliance with instructions received by the Depositary through the DRS/Profile System and in accordance with the Deposit Agreement shall not constitute negligence or bad faith on the part of the Depositary.

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Exhibit 8.1

Companhia Paranaense de Energia - COPEL - Subsidiaries as of December 31, 2007

	Subsidiary	Jursidiction of Incorporation	Names under which Business is
			Conducted
1	COPEL Geração e Transmissão S.A.	Brazil	Copel Geração
1.1	Centrais Eólicas do Paraná Ltda.	Brazil	CEOPAR
2	COPEL Distribuição S.A.	Brazil	Copel Distribuição
3	COPEL Telecomunicações S.A.	Brazil	Copel Telecomunicações
4	COPEL Participações S.A.	Brazil	COPEL Participações
4.1	Companhia Paranaense de Gás - COMPAGAS	Brazil	COMPAGAS
4.2	Centrais Elétricas do Rio Jordão S.A. - ELEJOR	Brazil	ELEJOR
4.3	UEG Araucária Ltda.	Brazil	UEGA

EX-12.1

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EXHIBIT 12.1

Certification

I, Rubens Ghilardi, certify that:

1. I have reviewed this annual report on Form 20-F of Companhia Paranaense de Energia - COPEL;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4. The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5. The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: June 30, 2008	/s/ Rubens Ghilardi
	Name: Rubens Ghilardi
	Title: Chief Executive Officer

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EXHIBIT 12.2

Certification

I, Paulo Roberto Trompczynski, certify that:

1. I have reviewed this annual report on Form 20-F of Companhia Paranaense de Energia - COPEL;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4. The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5. The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: June 30, 2008	/s/ Paulo Roberto Trompczynski
	Name: Paulo Roberto Trompczynski
	Title: Chief Financial Officer

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EXHIBIT 13.1

Certification
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of Companhia Paranaense de Energia - COPEL (the “Company”), does hereby certify, to such officer’s knowledge, that:

The Annual Report on Form 20-F for the year ended December 31, 2007 (the “Form 20-F”) of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form 20-F fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: June 30, 2008	/s/ Rubens Ghilardi
	Name: Rubens Ghilardi
	Title: Chief Executive Officer

EX-13.2

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EXHIBIT 13.2

Certification
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of Companhia Paranaense de Energia - COPEL (the “Company”), does hereby certify, to such officer’s knowledge, that:

The Annual Report on Form 20-F for the year ended December 31, 2007 (the “Form 20-F”) of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form 20-F fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: June 30, 2008	/s/ Paulo Roberto Trompczynski
	Name: Paulo Roberto Trompczynski
	Title: Chief Financial Officer