6-K 1 elpitr2q10_6k.htm QUARTERLY INFORMATION 2Q10 elpitr2q10_6k.htm - Provided by MZ Technologies
 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

 
FORM 6-K
 
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of the
Securities Exchange Act of 1934
 
For the month of September, 2010

Commission File Number 1-14668
 

 
COMPANHIA PARANAENSE DE ENERGIA
(Exact name of registrant as specified in its charter)
 
Energy Company of Paraná
(Translation of Registrant's name into English)
 
Rua Coronel Dulcídio, 800
80420-170 Curitiba, Paraná
Federative Republic of Brazil
(5541) 3222-2027
(Address of principal executive offices)
 
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. 

Form 20-F ___X___ Form 40-F _______

 Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.  

Yes _______ No ___X____
 

 

 

 

Companhia Paranaense de Energia - Copel

CNPJ/MF 76.483.817/0001-20

State Taxpayer Number 10146326-50

Public Company - CVM 1431-1

www.copel.com       copel@copel.com

Rua Coronel Dulcídio, 800, Batel - Curitiba - PR

CEP 80420-170

 

 

 

 

QUARTERLY INFORMATION

ITR

 

 

 

 

 

 

 

 

 

June 2010

 

 


 

 

TABLE OF CONTENTS
ITR JUNE 2010  1 
FINANCIAL STATEMENTS  4 
FINANCIAL STATEMENTS  4 
   Balance Sheets  4 
BALANCE SHEETS  4 
   Statement of Operations  7 
STATEMENT OF OPERATIONS  7 
   Statement of Operations Second Quarter Variations  9 
STATEMENT OF OPERATIONS SECOND QUARTER VARIATIONS  9 
   Statement of Changes in Shareholders Equity  10 
STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY  10 
   Statement of Cash Flows  11 
STATEMENT OF CASH FLOWS  11 
NOTES TO THE QUARTERLY INFORMATION  13 
NOTES TO THE QUARTERLY INFORMATION  13 

1.1 Operations 

13 

1.1 Operations 

13 

1.2 Presentation of the Quarterly Information 

14 

1.2 Presentation of the Quarterly Information 

14 

1.3 Changes in the Brazilian Accounting Practices 

15 

1.3 Changes in the Brazilian Accounting Practices 

15 

1.4 Cash and Cash Equivalents 

16 

1.4 Cash and Cash Equivalents 

16 

1.5 Customers and Distributors 

17 

1.5 Customers and Distributors 

17 

1.6 Recoverable Rate Deficit (CRC) Transferred to the Government of the State of Paraná 

18 

1.6 Recoverable Rate Deficit (CRC) Transferred to the Government of the State of Paraná 

18 

1.7 Taxes and Social Contribution 

20 

1.7 Taxes and Social Contribution 

20 

1.8 Deferred Regulatory Assets - CVA 

25 

1.8 Deferred Regulatory Assets - CVA 

25 

1.9 Bonds and Securities 

28 

1.9 Bonds and Securities 

28 

1.10 Collaterals and Escrow Accounts 

28 

1.10 Collaterals and Escrow Accounts 

28 

1.11 Other Receivables 

29 

1.11 Other Receivables 

29 

1.12 Inventories

 29 

1.12 Inventories  

 29 

1.13 Judicial Deposits 

30 

1.13 Judicial Deposits 

30 

1.14 Receivables from Related Parties 

31 

1.14 Receivables from Related Parties 

31 

1.15 Investments 

32 

1.15 Investments 

32 

1.16 Property, Plant, and Equipment 

38 

1.16 Property, Plant, and Equipment 

38 

1.17 Intangible assets 

44 

1.17 Intangible assets 

44 

1.18 Loans and Financing 

47 

1.18 Loans and Financing 

47 

1.19 Debentures

54 

1.19 Debentures  

54 

1.20 Suppliers 

55 

1.20 Suppliers 

55 

1.21 Payroll, Social Charges, and Labor Accruals 

57 

1.21 Payroll, Social Charges, and Labor Accruals 

57 

1.22 Post-Employment Benefits 

57 

1.22 Post-Employment Benefits 

57 

1.23 Regulatory Charges 

59 

1.23 Regulatory Charges 

59 

1.24 Research and Development and Energy Efficiency 

59 

1.24 Research and Development and Energy Efficiency 

59 

1.25 Other Accounts Payable 

60 

1.25 Other Accounts Payable 

60 

1.26 Contingencies and Reserves for Litigation 

60 

1.26 Contingencies and Reserves for Litigation 

60 

1.27 Non-Controlling Shareholding Interests 

63 

1.27 Non-Controlling Shareholding Interests 

63 

1.28 Stock Capital 

63 

1.28 Stock Capital 

63 

1.29 Gross Revenues from Sales and/or Services 

65 

 

 

 

1.29 Gross Revenues from Sales and/or Services  65 
1.30 Deductions from Gross Revenues  66 
1.30 Deductions from Gross Revenues  66 
1.31 Operating Costs and Expenses  66 
1.31 Operating Costs and Expenses  66 
1.32 Interest Income (Expenses), Net  72 
1.32 Interest Income (Expenses), Net  72 
1.33 Spot Market (CCEE)  72 
1.33 Spot Market (CCEE)  72 
1.34 Financial Instruments  73 
1.34 Financial Instruments  73 
1.35 Related-Party Transactions  79 
1.35 Related-Party Transactions  79 
1.36 Financial Statements by Wholly-Owned Subsidiaries  83 
1.36 Financial Statements by Wholly-Owned Subsidiaries  83 
1.37 Statement of Operations Broken Down by Company  86 
1.37 Statement of Operations Broken Down by Company  86 
1.38 Statement of Added Value  87 
1.38 Statement of Added Value  87 
1.39 Subsequent Event  89 
1.39 Subsequent Event  89 
COMMENTS ON THE PERFORMANCE OF THE COMPANY IN THE QUARTER  90 
COMMENTS ON THE PERFORMANCE OF THE COMPANY IN THE QUARTER  90 
1 Distribution  90 
1 Distribution   90 
1.1 Management 93 
1.1 Management93  93 
1.2 Investor Relations  94 
1.2 Investor Relations  94 
1.3 Rates   95 
1.3 Rates   95 
1.4 Economic and Financial Performance  96 
1.4 Economic and Financial Performance  96 
OTHER INFORMATION DEEMED MATERIAL BY THE COMPANY (1)  99 
OTHER INFORMATION DEEMED MATERIAL BY THE COMPANY (1)  99 
COMPOSITION OF THE GROUPS IN CHARGE OF CORPORATE GOVERNANCE  101 
COMPOSITION OF THE GROUPS IN CHARGE OF CORPORATE GOVERNANCE  101 
INDEPENDENT AUDITOR REPORT ON THE REVIEW OF THE QUARTERLY INFORMATION  102 
INDEPENDENT AUDITOR REPORT ON THE REVIEW OF THE QUARTERLY INFORMATION  102 

 


 

 


FINANCIAL STATEMENTS

 

Balance Sheets

as of June 30 and March 31, 2010

(In thousands of reais)

 

 

CODE  DESCRIPTION   N.
no.
Parent Company    Consolidated 
      30/06/2010  31/03/2010  30/06/2010  31/03/2010 
 
1  TOTAL ASSETS    10,397,717  10,331,199  14,063,158  13,854,965 
1.01  CURRENT ASSETS    926,854  1,190,650  3,516,167  3,700,425 
1.01.01  Cash and Cash Equivalents  4  121,078  383,657  1,476,519  1,695,486 
1.01.02  Receivables    805,776  806,993  1,941,715  1,899,824 
1.01.02.01  Customers    -  -  1,113,049  1,108,549 
1.01.02.01.01  Customers and distributors, net  5  -  -  1,074,102  1,075,595 
1.01.02.01.02  Telecommunications services, net    -  -  16,856  12,043 
1.01.02.01.03  Distribution of piped gas    -  -  22,091  20,911 
1.01.02.02  Other Receivables    805,776  806,993  828,666  791,275 
1.01.02.02.01  Dividends receivable  14  688,693  699,274  3,712  7,452 
1.01.02.02.02  Service in progress    -  -  95,718  95,012 
1.01.02.02.03  CRC transferred to State Government  6  -  -  52,595  50,709 
1.01.02.02.04  Taxes and social contribution  7.a  112,096  102,320  231,659  221,520 
1.01.02.02.05  Deferred income tax and social contribution  7.b  4,816  5,232  85,453  46,110 
1.01.02.02.06  Deferred regulatory assets - CVA  8  -  -  182,372  183,355 
1.01.02.02.07  Other regulatory assets    -  -  -  8,763 
1.01.02.02.08  Bonds and securities  9  1  1  5,490  3,448 
1.01.02.02.09  Collaterals and escrow accounts  10  167  164  116,109  120,364 
1.01.02.02.10  Other receivables  11  3  2  55,558  54,542 
1.01.03  Inventories  12  -  -  97,933  105,115 
1.02  NONCURRENT ASSETS    9,470,863  9,140,549  10,546,991  10,154,540 
1.02.01  Long-Term Receivables    1,297,162  1,100,145  2,172,885  1,944,594 
1.02.01.01  Sundry Receivables    266,731  91,557  2,172,885  1,944,594 
1.02.01.01.01  Customers and distributors, net  5  -  -  50,387  58,035 
1.02.01.01.02  Telecommunications services    -  -  -  1,011 
1.02.01.01.03  CRC transferred to State Government  6  -  -  1,243,643  1,225,025 
1.02.01.01.04  Taxes and social contribution  7.a  -  -  86,872  87,033 
1.02.01.01.05  Deferred income tax and social contribution  7.b  66,668  64,879  389,739  363,336 
1.02.01.01.06  Deferred regulatory assets - CVA  8  -  -  26,110  41,195 
1.02.01.01.07  Bonds and securities  9  -  -  41,858  40,937 
1.02.01.01.08  Collaterals and escrow accounts  10  -  -  28,940  24,748 
1.02.01.01.09  Judicial deposits  13  198,305  24,920  285,792  86,219 
1.02.01.01.10  Other Receivables  11  1,758  1,758  19,544  17,055 
1.02.01.02  Receivables from Related Parties  14  1,030,431  1,008,588  -  - 
1.02.01.02.01  From subsidiaries    1,030,431  1,008,588  -  - 
1.02.02  Permanent Assets    8,173,701  8,040,404  8,374,106  8,209,946 
1.02.02.01  Investments  15  8,154,280  8,020,795  439,522  431,982 
1.02.02.01.01  Equity in investees    107,590  105,224  419,116  411,576 
1.02.02.01.03  Equity in subsidiaries    8,033,067  7,901,948  -  - 
1.02.02.01.05  Other investments    13,623  13,623  20,406  20,406 
1.02.02.02  Property, Plant, and Equipment  16  -  -  7,752,832  7,619,855 
1.02.02.03  Intangible Assets  17  19,421  19,609  181,752  158,109 
The accompanying notes are an integral part of these quarterly financial statements.   

 

 

 

 

4


 

 


 

Balance Sheets

as of June 30 and March 31, 2010

 (In thousands of reais)

 

   

CODE  DESCRIPTION  N.
no. 
Parent Company    Consolidated 
      30/06/2010  31/03/2010  30/06/2010  31/03/2010 
 
2  TOTAL LIABILITIES    10,397,717  10,331,199  14,063,158  13,854,965 
2.01  CURRENT LIABILITIES    98,989  168,868  1,706,597  1,672,557 
2.01.01  Loans and financing  18  16,509  9,294  88,446  77,760 
2.01.02  Debentures  19  18,699  4,518  18,699  4,518 
2.01.03  Suppliers  20  679  664  545,305  557,410 
2.01.04  Taxes, fees, and contributions  7.a  55,996  69,570  363,873  330,830 
2.01.05  Deferred income tax and social contribution  7.b  -  -  62,006  65,583 
2.01.06  Dividends payable    5,469  84,630  7,665  91,233 
2.01.07  Payroll, social charges, and labor accruals  21  174  158  154,718  173,305 
2.01.08  Other    1,463  34  465,885  371,918 
2.01.08.01  Post-employment benefits  22  63  29  23,807  20,930 
2.01.08.02  Deferred regulatory liabilities - CVA  8  -  -  121,745  71,001 
2.01.08.03  Other regulatory liabilities    -  -  41,402  4,189 
2.01.08.04  Regulatory charges  23  -  -  49,978  46,826 
2.01.08.05  R & D and Energy Efficiency  24  -  -  114,633  112,779 
2.01.08.06  Other accounts payable  25  1,400  5  114,320  116,193 
2.02  NONCURRENT LIABILITIES    1,109,013  1,108,289  2,844,836  2,815,409 
2.02.01  Noncurrent liabilities    1,109,013  1,108,289  2,844,836  2,815,409 
2.02.01.01  Loans and financing  18  387,728  389,595  829,980  844,026 
2.02.01.02  Debentures  19  600,000  600,000  600,000  600,000 
2.02.01.03  Contingencies and Reserve for Litigation  26  35,598  34,437  491,171  486,360 
2.02.01.06  Other    85,687  84,257  923,685  885,023 
2.02.01.06.01  Suppliers  20  -  -  160,477  168,103 
2.02.01.06.02  Taxes and social contributions  7.a  85,687  84,257  136,547  133,883 
2.02.01.06.03  Deferred income tax and social contribution  7.b  -  -  17,127  22,594 
2.02.01.06.04  Post-employment benefits  22  -  -  357,370  356,442 
2.02.01.06.05  Deferred regulatory liabilities - CVA  8  -  -  59,784  23,667 
2.02.01.06.06  Other regulatory liabilities    -  -  -  15 
2.02.01.06.07  R & D and Energy Efficiency  24  -  -  114,343  102,309 
2.02.01.06.08  Deferred revenues    -  -  74,994  74,994 
2.02.01.06.09  Other payables  25  -  -  3,043  3,016 
2.04  NON-CONTROLLING SHAREHOLDERS' INTERESTS 27  -  -  322,010  312,957 
2.05  SHAREHOLDERS' EQUITY    9,189,715  9,054,042  9,189,715  9,054,042 
2.05.01  Paid-in stock capital  28  6,910,000  4,460,000  6,910,000  4,460,000 
2.05.02  Capital Reserves    -  838,340  -  838,340 
2.05.04  Profit Reserves    1,920,061  3,531,721  1,920,061  3,531,721 
2.05.04.01  Legal reserves    428,912  428,912  428,912  428,912 
2.05.04.02  Retained earnings    1,491,149  3,102,809  1,491,149  3,102,809 
2.05.06  Accrued Earnings    359,654  223,981  359,654  223,981 
The accompanying notes are an integral part of these quarterly financial statements.
(In thousands of reais)

 

 

5


 

 


 

Statement of Operations

as of June 30, 2010 and June 30, 2009

(In thousands of reais, except net income per share)

 

   

CODE  DESCRIPTION  N.
no. 
Parent Company    Consolidated 
      30/06/2010  30/06/2009  30/06/2010  30/06/2009 
3  STATEMENT OF OPERATIONS           
3.01  GROSS REVENUES FROM SALES AND/OR SERVICES  29  -  -  4,629,457  4,217,412 
3.01.01  Electricity sales to final customers    -  -  1,758,756  1,525,931 
3.01.02  Electricity sales to distributors    -  -  745,080  653,724 
3.01.03  Use of the power grid    -  -  1,859,279  1,770,443 
3.01.04  Telecommunications revenues    -  -  60,934  49,211 
3.01.05  Distribution of piped gas    -  -  148,456  128,958 
3.01.06  Other operating revenues    -  -  56,952  89,145 
3.02  DEDUCTIONS FROM GROSS REVENUES  30  -  -  (1,690,406)  (1,503,922) 
3.03  NET REVENUES FROM SALES AND/OR SERVICES    -  -  2,939,051  2,713,490 
3.04  COST OF SALES AND/OR SERVICES  31  -  -  (2,277,230)  (1,704,875) 
3.04.01  Energy purchased for resale    -  -  (1,168,648)  (764,182) 
3.04.02  Charges for the use of the power grid    -  -  (348,873)  (264,664) 
3.04.03  Personnel and management    -  -  (294,507)  (279,233) 
3.04.04  Pension and healthcare plans    -  -  (40,677)  7,338 
3.04.05  Materials and supplies    -  -  (32,674)  (26,515) 
3.04.06  Raw materials and supplies for electricity generation    -  -  (10,882)  (13,412) 
3.04.07  Natural gas and supplies for the gas business    -  -  (69,306)  (69,085) 
3.04.08  Third-party services    -  -  (109,973)  (103,540) 
3.04.09  Depreciation and amortization    -  -  (185,958)  (181,980) 
3.04.10  Other costs    -  -  (15,732)  (9,602) 
3.05  GROSS OPERATING INCOME    -  -  661,821  1,008,615 
3.06  OTHER INCOME (EXPENSES)    358,299  564,764  (112,450)  (147,237) 
3.06.01  Sales expenses  31  -  -  (25,441)  (24,424) 
3.06.02  General and administrative expenses  31  (6,853)  (7,371)  (157,740)  (157,281) 
3.06.03  Interest income (expenses)  32  14,753  7,971  139,830  94,161 
3.06.03.01  Interest income    62,119  62,580  240,253  188,316 
3.06.03.02  Interest expenses    (47,366)  (54,609)  (100,423)  (94,155) 
3.06.05  Other Operating Expenses  31  (15,407)  4,063  (124,852)  (81,174) 
3.06.05.01  Other revenues (expenses), net    (15,407)  4,063  (124,852)  (81,174) 
3.06.06  Equity in results of investees  15  365,806  560,101  55,753  21,481 
3.07  OPERATING INCOME (LOSSES)    358,299  564,764  549,371  861,378 
3.09  INCOME (LOSSES) BEFORE TAXES/EQ. INVESTMENTS    358,299  564,764  549,371  861,378 
3.10  PROVISION FOR INCOME TAX AND SOCIAL CONT.  7.c  (1,983)  (1,233)  (296,497)  (228,427) 
3.11  DEFERRED INCOME TAX  7.c  3,338  (1,467)  122,106  (57,875) 
3.14  NON-CONTROLLING SHAREHOLDERS' INTERESTS  27  -  -  (15,326)  (13,012) 
3.15  NET INCOME FOR THE PERIOD    359,654  562,064  359,654  562,064 
 
  NET INCOME PER SHARE - in reais    1.3143  2.0539     
The accompanying notes are an integral part of these quarterly financial statements.
(In thousands of reais, except net income per share)

 

6


 


 

Statement of Operations – Second Quarter Variations

For the quarters ended on June 30, 2010 and 2009

(In thousands of reais)

 

   

CODE  DESCRIPTION        Consolidated 
    01/04/2010  01/01/2010  01/04/2009  01/01/2009 
    to 30/06/2010  to 30/06/2010  to 30/06/2009  to 30/06/2009 
3  STATEMENT OF OPERATIONS         
3.01  GROSS REVENUES FROM SALES AND/OR SERVICES  2,284,901  4,629,457  2,139,871  4,217,412 
3.01.01  Electricity sales to final customers  876,350  1,758,756  773,252  1,525,931 
3.01.02  Electricity sales to distributors  364,594  745,080  319,141  653,724 
3.01.03  Use of the power grid  906,871  1,859,279  900,842  1,770,443 
3.01.04  Telecommunications revenues  30,936  60,934  25,596  49,211 
3.01.05  Distribution of piped gas  77,600  148,456  66,665  128,958 
3.01.06  Other operating revenues  28,550  56,952  54,375  89,145 
3.02  DEDUCTIONS FROM GROSS REVENUES  (846,760)  (1,690,406)  (783,010)  (1,503,922) 
3.03  NET REVENUES FROM SALES AND/OR SERVICES  1,438,141  2,939,051  1,356,861  2,713,490 
3.04  COST OF SALES AND/OR SERVICES  (1,138,608)  (2,277,230)  (824,576)  (1,704,875) 
3.04.01  Energy purchased for resale  (581,739)  (1,168,648)  (334,842)  (764,182) 
3.04.02  Charges for the use of the power grid  (164,307)  (348,873)  (141,963)  (264,664) 
3.04.03  Personnel and management  (154,045)  (294,507)  (149,365)  (279,233) 
3.04.04  Pension and healthcare plans  (20,097)  (40,677)  3,776  7,338 
3.04.05  Materials and supplies  (18,666)  (32,674)  (14,705)  (26,515) 
3.04.06  Raw materials and supplies for electricity generation  (5,323)  (10,882)  (7,719)  (13,412) 
3.04.07  Natural gas and supplies for the gas business  (35,155)  (69,306)  (31,419)  (69,085) 
3.04.08  Third-party services  (57,752)  (109,973)  (55,330)  (103,540) 
3.04.09  Depreciation and amortization  (93,162)  (185,958)  (90,276)  (181,980) 
3.04.10  Other costs  (8,362)  (15,732)  (2,733)  (9,602) 
3.05  GROSS OPERATING INCOME  299,533  661,821  532,285  1,008,615 
3.06  OTHER INCOME (EXPENSES)  (82,278)  (112,450)  (84,152)  (147,237) 
3.06.01  Sales expenses  (12,576)  (25,441)  (13,451)  (24,424) 
3.06.02  General and administrative expenses  (86,563)  (157,740)  (92,326)  (157,281) 
3.06.03  Interest income (expenses)  73,347  139,830  61,623  94,161 
3.06.03.01  Interest income  120,289  240,253  100,545  188,316 
3.06.03.02  Interest expenses  (46,942)  (100,423)  (38,922)  (94,155) 
3.06.05  Other Operating Expenses  (70,725)  (124,852)  (50,305)  (81,174) 
3.06.05.01  Other revenues (expenses), net  (70,725)  (124,852)  (50,305)  (81,174) 
3.06.06  Equity in results of investees  14,239  55,753  10,307  21,481 
3.07  OPERATING INCOME (LOSSES)  217,255  549,371  448,133  861,378 
3.09  INCOME (LOSSES) BEFORE TAXES/EQ. INVESTMENTS  217,255  549,371  448,133  861,378 
3.10  PROVISION FOR INCOME TAX AND SOCIAL CONT.  (146,447)  (296,497)  (122,129)  (228,427) 
3.11  DEFERRED INCOME TAX  74,345  122,106  (26,794)  (57,875) 
3.14  NON-CONTROLLING SHAREHOLDERS' INTERESTS  (9,480)  (15,326)  (9,217)  (13,012) 
3.15  NET INCOME FOR THE PERIOD  135,673  359,654  289,993  562,064 
The accompanying notes are an integral part of these quarterly financial statements.
(In thousands of reais)

 

 

7


 


 

Statement of Changes in Shareholders’ Equity

as of June 30, 2010

(In thousands of reais)

  Stock  Capital  Legal  Retained  Accrued   
  capital  reserves  reserve  earnings  earnings  Total 
Balance as of March 31, 2010  4,460,000  838,340  428,912  3,102,809  223,981  9,054,042 
Net income for the quarter  -  -  -  -  135,673  135,673 
Stock capital increase  2,450,000  (838,340)  -  (1,611,660)  -  - 
Balance as of June 30, 2010  6,910,000  -  428,912  1,491,149  359,654  9,189,715 
 
 
 
  Stock  Capital  Legal  Retained  Accrued   
  capital  reserves  reserve  earnings  earnings  Total 
Balance as of December 31, 2009  4,460,000  838,340  428,912  3,102,809  -  8,830,061 
Net income for the quarter  -  -  -  -  359,654  359,654 
Stock capital increase  2,450,000  (838,340)  -  (1,611,660)  -  - 
Balance as of June 30, 2010  6,910,000  -  428,912  1,491,149  359,654  9,189,715 
 
The accompanying notes are an integral part of these quarterly financial statements.

 

8


 

 

Statement of Cash Flows

for the periods ended on June 30, 2010 and 2009

(In thousands of reais)

 

  Note  Parent Company    Consolidated 
    2010  2009  2010  2009 
 
Cash flows from operating activities           

Net income for the period 

  359,654  562,064  359,654  562,064 
 
Adjustments for the reconciliation of net income with the generation           
of cash by operating activities:           

Allowance for doubtful accounts 

31.f  -  -  10,942  10,579 

Depreciation 

16  -  -  198,070  193,049 

Amortization of intangible assets - concession 

17  377  377  1,915  1,914 

Amortization of intangible assets - other 

17  -  -  1,493  1,716 

Unrealized monetary and exchange variations, net 

  3,596  11,749  (31,379)  21,881 

Result of equity in subsidiaries and investees 

15  (365,806)  (560,101)  (55,753)  (21,481) 

Deferred income tax and social contribution 

  (3,338)  1,467  (122,106)  57,875 

Variations in regulatory assets and liabilities (CVA), net 

8  -  -  247,862  (168,156) 

Variations in other regulatory assets and liabilities, net 

  -  -  50,506  (9,057) 

Reserve for litigation 

26  15,195  (4,003)  40,314  40,144 

Provision (reversal) for post-employment benefits 

22  -  -  13,912  (47,994) 

Provision for R&D and energy efficiency 

24  -  -  17,370  10,872 

Write-off of investments 

15  6  -  6  - 

Write-off of property, plant, and equipment, net 

16  -  -  11,785  9,703 

Write-off of intangible assets, net 

17  -  -  10  233 

Noncontrolling shareholders' interests 

  -  -  15,326  13,012 
 
Decrease (increase) in assets           

Customers and distributors 

  -  -  (33,580)  18,220 

Telecommunications services 

  -  -  (7,276)  (3,502) 

Distribution of piped gas 

  -  -  (7,365)  2,692 

Interest on shareholders' equity and dividends received from investees 

  19,965  635,966  13,346  10,561 

Construction in progress 

  -  -  (3,246)  (11,250) 

CRC transferred to State Government 

6  -  -  64,547  65,484 

Recoverable taxes 

  3,820  10,425  81,827  (9,022) 

Inventories 

  -  -  (3,743)  (13,631) 

Judicial deposits 

  (176,566)  542  (229,192)  27,936 

Other receivables 

  -  1,359  (21,434)  (28,903) 
 
Increase (decrease) in liabilities           

Loans and financing - interest paid 

18  (14,587)  (22,984)  (48,156)  (58,523) 

Debentures - interest paid 

19  (25,577)  (50,519)  (41,258)  (62,017) 

Reserve for litigation 

26  (2,316)  -  (8,477)  (14,336) 

Suppliers 

  100  515  (22,467)  16,821 

Taxes and social contribution 

  (47,446)  (21,732)  (94,822)  (56,666) 

Payroll and labor accruals 

  (97)  (75)  (52,239)  (7,752) 

Post-employment benefits 

  18  (15)  (8,216)  (6,823) 

Regulatory charges 

  -  -  20,455  (5,981) 

Research and development and energy efficiency 

  -  -  (6,874)  (22,401) 

Other accounts payable 

  1,385  3  (5,983)  (6,727) 

Noncontrolling shareholders' interests 

  -  -  (853)  (3,511) 
Net cash provided (used) by operating activities    (231,617)  565,038  344,921  507,023 
(next page)           

 

9


 

 

Statement of Cash Flows

for the periods ended on June 30, 2010 and 2009

(In thousands of reais)

 

(continued)           
  Note  Parent Company    Consolidated 
    2010  2009  2010  2009 
 
Cash flows from investing activities           

Bonds and securities 

  78,958  -  73,618  - 

Collaterals and escrow accounts 

  -  (14)  952  3,736 

Additions to investments 

15  (126,146)  (21)  (148)  (21) 

Additions to property, plant, and equipment 

16  -  -  (470,064)  (439,288) 

Additions to intangible assets 

17  -  -  (53,563)  (16,245) 

Customer contributions 

16  -  -  32,131  34,747 

Proceeds from sale of property, plant, and equipment 

16  -  -  203  1,691 
Net cash used by investing activities    (47,188)  (35)  (416,871)  (415,380) 
 
Cash flows from financing activities           

Paid-in stock capital in subsidiaries by non controlling shareholders 

27  -  -  54,000  - 

Loans and financing from third parties 

18  -  -  80,059  30,315 

Payment of the principal amount of loans and financing 

18  -  -  (19,840)  (25,134) 

Payment of the principal amount of debentures 

19  -  (133,360)  (177,908)  (140,570) 

Dividends and interest on capital paid 

  (79,161)  (224,709)  (83,994)  (238,248) 
Net cash used by financing activities    (79,161)  (358,069)  (147,683)  (373,637) 
 
Increase (decrease) in cash and cash equivalents    (357,966)  206,934  (219,633)  (281,994) 
 

Cash and cash equivalents at the beginning of the period 

4  479,044  318,455  1,696,152  1,813,576 

Cash and cash equivalents at the end of the period 

4  121,078  525,389  1,476,519  1,531,582 
Variation in cash and cash equivalents    (357,966)  206,934  (219,633)  (281,994) 
 
The accompanying notes are an integral part of these financial statements
 
 
Supplemental cash flow information           
 

Income tax and social contribution paid on net income 

  -  5,422  270,412  240,756 

 

 

10


 

 

NOTES TO THE QUARTERLY INFORMATION

as of June 30, 2010

(in thousands of reais, except where otherwise indicated)

 

1.    Operations

Companhia Paranaense de Energia - COPEL (COPEL, the Company or the Parent Company) is a public company with shares traded on Corporate Governance Level 1 of the Special Listings of the São Paulo Stock Exchange (BOVESPA) and on stock exchanges in the United States of America and Spain. Copel is a mixed capital company, controlled by the Government of the State of Paraná, engaged, through its subsidiaries, in researching, studying, planning, building, and exploiting the production, transformation, transportation, distribution, and sale of energy, in any form, but particularly electric energy. These activities are regulated by the National Electric Energy Agency - ANEEL, which reports to the Ministry of Mines and Energy - MME. Additionally, COPEL takes part in consortiums, private enterprises, or mixed capital companies in order to operate mostly in the areas of energy, telecommunications, natural gas, and water supply and sanitation.

COPEL’s wholly-owned subsidiaries are: Copel Geração e Transmissão S.A., Copel Distribuição S.A., and Copel Telecomunicações S.A.

COPEL Geração e Transmissão has a 51% stake in Consórcio Energético Cruzeiro do Sul, an independent power producer which won the concession for the Mauá Hydroelectric Power Plant.

The other companies controlled by COPEL are:  Companhia Paranaense de Gás – Compagas (51%), Elejor – Centrais Elétricas do Rio Jordão S.A. (70%), UEG Araucária Ltda. (20% owned by COPEL and 60% owned by COPEL Geração e Transmissão), Centrais Eólicas do Paraná Ltda. (30% owned by COPEL and 70% owned by COPEL Geração e Transmissão), Dominó Holdings S.A. (45%, controlled jointly with the other shareholders).

UEG Araucária, on December 28, 2006, signed a lease agreement with Petróleo Brasileiro S.A. - Petrobras, a minority shareholder, leasing the Araucária Thermal Power Plant for periods which have been extended several times until December 31, 2011, subject to early termination should UEG Araucária successfully participate at ANEEL-sponsored power auctions. The lease provides for the use of the Araucária Power Plant for power generation by Petrobras, at its own expense; UEG Araucária is entitled to lease payments comprising a fixed and a variable portion, pursuant to the lease agreement.

 

11


 

2.           Presentation of the Quarterly Information

Authorization for the publication of this quarterly report was granted at Meeting of the Board of Officers held on August 9, 2010.

The present quarterly information report is in accordance with the accounting practices adopted in Brazil, with the provisions of the Brazilian Corporate Law, as amended by Law no. 11,638/2007 and Law no. 11,941/2009, with the specific legislation enacted by ANEEL, and with the regulations of the Brazilian Securities and Exchange Commission (CVM).

Consolidation

COPEL has consolidated the financial statements of its wholly-owned subsidiaries and of the subsidiaries listed in Note 1.

The financial statements of jointly-controlled subsidiary Dominó Holdings have been adjusted to comply with COPEL’s accounting practices and have been proportionally consolidated, applying COPEL’s ownership percentage to each item of these statements.

All other subsidiaries observe the same accounting practices adopted by COPEL. The accounting practices adopted in the preparation of this quarterly report are consistent with those adopted in the financial statements as of December 31, 2009.

The dates of the financial statements of investees, which have been used for the calculation of the results of equity in these companies and for consolidation purposes, coincide with those of the Parent Company.

The Parent Company’s investments in its subsidiaries, their shareholders’ equities, as well as the balances of assets, liabilities, revenues, costs, and expenses arising from intercompany operations, have been eliminated upon consolidation, and the non controlling interests are shown separately in the balance sheets and in the statement of operations.

Expenditures in connection with Consórcio Energético Cruzeiro do Sul are recorded as property, plant, and equipment in progress, proportionally to COPEL’s share in the consortium (Note 16.d).

The balance sheets and the statements of operations of the wholly-owned subsidiaries and other subsidiaries are featured in Note 36, and their statements of operations are featured in Note 37, reclassified for the purpose of ensuring consistency with the account classification adopted by COPEL.

 

12


 

We have not identified any adjustments which could have an impact on the Company’s income and on its shareholders’ equity as of June 30, 2009.

3.           Changes in the Brazilian Accounting Practices

With the enactment of Law no. 11,638/2007, which has updated the Brazilian corporate legislation so as to bring the accounting practices adopted in Brazil closer to the International Financial Reporting Standards (IFRS), new technical accounting rules and pronouncements have been published, in compliance with the IFRS, by the Accounting Pronouncements Committee (CPC).

COPEL, pursuant to CVM Ruling no. 603/09, has chosen to present its quarterly information reports during 2010 in accordance with the accounting practices in effect until December 31, 2009 and to adjust the 2009 data according to these practices, for purposes of comparison, at least until the 2010 financial statements are presented.

The technical pronouncements issued by CPC and approved by CVM rulings, for mandatory application as of 2010, and the technical interpretations (ICPCs) applicable to COPEL, in light of its operations, are:

 

13


 

 

CPC / ICPC  Title 
CPC 15  Business combinations 
CPC 16  Inventories 
CPC 18  Investments in subsidiaries and investees 
CPC 19  Investments in Joint Ventures 
CPC 20  Cost of loans 
CPC 21  Interim statements 
CPC 22  Information by segments 
CPC 23  Accounting policies, changes in estimates, and error correction 
CPC 24  Subsequent event 
CPC 25  Provisions, contingent liabilities, and contingent assets 
CPC 26  Presentation of financial statements 
CPC 27  Property, Plant, and Equipment 
CPC 30  Revenues 
CPC 31  Noncurrent assets maintained for sale and discontinued operations 
CPC 32  Taxes on income 
CPC 33  Employee benefits 
CPC 36  Consolidated statements 
CPC 37  Initial adoption of international accounting standards (IFRS 1) 
CPC 38  Financial instruments: recognition and measurement 
CPC 39  Financial instruments: presentation 
CPC 40  Financial instruments: evidence 
CPC 43  Initial adoption of CPC Pronouncements 15 to 40 
ICPC 01  Concession agreements (IFRIC 12) 
ICPC 03  Complementary aspects of leasing operations (IFRIC 4, SIC 15, and SIC 27) 
ICPC 08  Accounting for proposed dividend payments 
ICPC 09  Individual financial statements, separate financial statements, consolidated financial statements, and application of the equity method
ICPC 10  Interpretation of the initial application to p., p.,& e. and investment assets of technical pronouncements CPCs 27,28,37, and 43

The Company is currently reviewing and quantifying the impacts of the changes introduced by these new pronouncements, given their complexity and scope. In the case of identification of adjustments resulting from the adoption of the new accounting practices as of January 1, 2010, COPEL will assess the effects these changes would have had on its 2009 financial statements, for purposes of comparison, as if they had been in effect since the beginning of the fiscal year ended of December 31, 2009.

4.           Cash and Cash Equivalents

.         
    Parent Company    Consolidated 
  30.06.2010  31.03.2010  30.06.2010  31.03.2010 
Cash and banks  1,819  387  64,287  64,863 
Short term investments         

Federal banks 

119,259  383,270  1,408,863  1,628,227 

Private banks 

-  -  3,369  2,396 
  119,259  383,270  1,412,232  1,630,623 
  121,078  383,657  1,476,519  1,695,486 

 

14


 

Short-term investments are readily convertible to known amounts of cash and are subject to an insignificant risk of change in value. These short-term investments comprise Certificates of Deposit (CDs) issued by official banks; transactions with buyback commitments - the issuer (Bank) is committed to buying a security back, and the buyer is committed to selling it; and quotas in investment funds which hold government issued securities (managed by official banks). These investments have yielded on average 100% of the variation of the Interbank Deposit Certificate rate as of June 30, 2010 and March 31, 2010.

5.           Customers and Distributors

    Not yet  Overdue for  Overdue for    Consolidated 
    due  up to 90 days  over 90 days    Total 
          30.06.2010  31.03.2010 
Consumers             

Residential 

  112,994  76,450  7,856  197,300  192,035 

Industrial 

  115,745  16,659  36,790  169,194  164,027 

Commercial 

  70,328  22,854  4,988  98,170  107,716 

Rural 

  13,566  5,986  255  19,807  23,627 

Government agencies 

  25,151  1,596  2,489  29,236  29,756 

Public lighting 

  13,952  62  185  14,199  13,551 

Public services 

  12,174  77  10  12,261  12,140 

Unbilled supply 

  163,618  -  -  163,618  166,785 

Installment receivables - current 

  88,055  4,191  12,965  105,211  97,213 

Installment receivables - noncurrent 

40,459  -  -  40,459  55,165 

Low income customer rates 

  29,069  -  -  29,069  17,387 

Penalties on overdue bills 

  3,290  4,196  3,368  10,854  10,411 

State Government-"Luz Fraterna" Program 

4,025  -  -  4,025  10,318 

Other receivables 

  9,941  11,731  22,792  44,464  40,447 

Other receivables - noncurrent 

  9,928  -  -  9,928  2,870 
    712,295  143,802  91,698  947,795  943,448 
Distributors             

Electricity sales 

           

CCEAR - auction 

  116,478  -  -  116,478  126,071 

Bilateral contracts 

  29,976  -  123  30,099  28,230 

Electricity sales - CCEE (Note 33) 

  55,555  -  105  55,660  57,333 

Reimbursement to generation companies 

79  -  21  100  223 
    202,088  -  249  202,337  211,857 

Charges for use of the power grid 

         

Power grid 

  15,271  -  2,378  17,649  16,414 

Basic Network and connection grid 

  21,037  285  216  21,538  21,593 
    36,308  285  2,594  39,187  38,007 
Allowance for doubtful accounts (a)  -  -  (64,830)  (64,830)  (59,682) 
    950,691  144,087  29,711  1,124,489  1,133,630 
30.06.2010  Current  900,304  144,087  29,711  1,074,102   
  Noncurrent  50,387  -  -  50,387   
31.03.2010  Current  883,255  165,292  27,048    1,075,595 
  Noncurrent  58,035  -  -    58,035 

 

15


 
 

a)     Allowance for doubtful accounts

COPEL’s senior management has considered the following amounts as sufficient to cover potential losses on the realization of receivables: 

    Additions/     
  Consolidated  (reversals)    Consolidated 
  31.12.2009    30.06.2010  31.03.2010 
Consumers and distributors         

Residential 

6,245  6,819  13,064  9,905 

Industrial 

40,101  2,597  42,698  41,534 

Commercial 

5,863  1,364  7,227  6,459 

Rural 

185  (111)  74  63 

Government agencies 

1,272  116  1,388  1,367 

Public lighting 

149  4  153  149 

Public services 

-  2  2  2 

Concession and permission holders 

203  21  224  203 
  54,018  10,812  64,830  59,682 

The applied criteria, in addition to taking into account management’s experience as far as the record of actual losses, also comply with the parameters recommended by ANEEL.

6.           Recoverable Rate Deficit (CRC) Transferred to the Government of the State of Paraná

By means of a fourth amendment dated January 21, 2005, the Company again renegotiated with the Government of Paraná the outstanding CRC (Account for Compensation of Income and Losses) balance as of December 31, 2004, in the amount of R$ 1,197,404, to be paid in 244 installments under the Price amortization system, restated according to the IGP-DI inflation index plus interest of 6.65% p.a., with the first installment due on January 30, 2005 and the others due in subsequent and consecutive months.

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.

 

16


 

Maturity of long-term installments 

   
    Consolidated 
  30.06.2010  31.03.2010 
2011  28,319  41,053 
2012  59,448  57,914 
2013  63,401  61,766 
2014  67,618  65,873 
2015  72,115  70,254 
2016  76,911  74,927 
2017  82,026  79,910 
2018  87,481  85,224 
2019  93,299  90,892 
2020  99,503  96,937 
2021  106,121  103,383 
2022  113,178  110,259 
2023  120,705  117,592 
After 2023  173,518  169,041 
  1,243,643  1,225,025 

Changes in CRC balances

  Current  Noncurrent  Consolidated 
Balances  assets  assets  Total 
As of December 31, 2009  49,549  1,205,025  1,254,574 

Interest 

40,172    40,172 

Monetary variation 

555  65,484  66,039 

Transfers 

26,866  (26,866)  - 

Amortization 

(64,547)    (64,547) 
As of June 30, 2010  52,595  1,243,643  1,296,238 
 
 
 
 
  Current  Noncurrent  Consolidated 
Balances  assets  assets  Total 
As of December 31, 2008  47,133  1,272,770  1,319,903 

Interest 

42,297  -  42,297 

Monetary variation 

(104)  (13,182)  (13,286) 

Transfers 

24,575  (24,575)  - 

Amortization 

(65,484)  -  (65,484) 
As of June 30, 2009  48,417  1,235,013  1,283,430 

 

17


 

7.           Taxes and Social Contribution

a)     Taxes and social contribution paid in advance

         
    Parent Company    Consolidated 
  30.06.2010  31.03.2010  30.06.2010  31.03.2010 
Current assets         

IRPJ/CSLL paid in advance (1) 

112,096  102,320  198,233  188,053 

ICMS (VAT) paid in advance (2) 

-  -  30,902  31,105 

PIS/Pasep and Cofins taxes paid in advance 

-  -  1,342  1,195 

Other taxes paid in advance 

-  -  1,182  1,167 
  112,096  102,320  231,659  221,520 
Noncurrent assets         

ICMS (VAT) paid in advance (2) 

-  -  86,872  87,033 
  -  -  86,872  87,033 
Current liabilities         

IRPJ/CSLL payable 

-  -  122,569  66,377 

ICMS (VAT) payable 

-  -  152,023  152,618 

PIS/Pasep and Cofins payable 

339  -  15,090  16,835 

Tax Recovery Programs (3) 

54,780  68,100  66,275  87,367 

Other taxes 

877  1,470  7,916  7,633 
  55,996  69,570  363,873  330,830 
Noncurrent liabilities         

ICMS (VAT) payable 

-  -  859  460 

Tax Recovery Programs (3) 

85,687  84,257  135,688  133,423 
  85,687  84,257  136,547  133,883 
IRPJ = Corporate Income Tax         
CSLL = Social Contribution on Net Income         

1)     Income tax and social contribution paid in advance

Amounts recorded as corporate income tax (IRPJ) and social contribution on net income (CSLL) paid in advance refer to corporate tax return credits and amounts paid in advance.

2)     Recoverable ICMS (VAT)

The amounts recorded as recoverable ICMS (VAT) refer to credits from the acquisition of property, plant, and equipment under Supplemental Law no. 87/96, which shall be recovered monthly at the rate 1/48 pursuant to Supplemental Law no. 102, dated July 11, 2000.  

 

18


 

3)     Tax recovery programs

.            Parent Company 
  Debt  Benefits -    Updated debt  Advance  Updated debt 
  amount  Law 11.941 SELIC Interest  amount  payment  amount 
Refis Program - INSS  35,068  -  -  35,068  -  35,068 
           
Law no. 11.941/09             
COFINS tax - lawsuit  196,839  (60,174)  6,147  142,812  (37,413)  105,399 
  196,839  (60,174)  6,147  142,812  (37,413)  105,399 
  231,907  (60,174)  6,147  177,880  (37,413)  140,467 
 
 
.            Consolidated 
  Debt  Benefits -    Updated debt  Advance  Updated debt 
  amount  Law 11.941 SELIC Interest  amount  payment  amount 
Refis Program - INSS  35,068  -  -  35,068  -  35,068 
Law no. 11.941/09             
IRPJ  42,538  (8,762)  1,522  35,298  (9,111)  26,187 
CSLL  5,925  (1,460)  200  4,665  (1,269)  3,396 
COFINS tax  43,956  (9,853)  1,532  35,635  (9,415)  26,220 
PIS/Pasep  9,543  (2,139)  333  7,737  (2,044)  5,693 
COFINS tax - lawsuit  196,839  (60,174)  6,147  142,812  (37,413)  105,399 
  298,801  (82,388)  9,734  226,147  (59,252)  166,895 
  333,869  (82,388)  9,734  261,215  (59,252)  201,963 

The effects on the 2010 statement of operations, recorded as financial expenses, were R$ 4,826 under the Parent Company and R$ 7,642 under Consolidated (Note 32).

Social Security Tax Recovery Plan (REFIS INSS)

On December 16, 2000, COPEL signed up for the Tax Recovery Program (REFIS), established by Law no. 9,964, dated April 10, 2000, in order to pay in 60 monthly installments an outstanding debt to the National Social Security Institute (INSS) in the consolidated amount (net of interest and fines) of R$ 82,540, retroactive to March 1, 2000. At the end of this period, a balance remained, pending a ruling by the fiscal authority regarding the right by COPEL to use certain tax credits, which were later rejected.

On September 14, 2006, COPEL signed up for a new tax recovery program, called Special Installment Plan or PAEX, created under Provisional Measure no. 303/06, to pay off the remaining balance under REFIS taking advantage of the benefits of this plan (80% discount off the penalties imposed and 30% off interest due), resulting, according to Social Security's initial calculation, in the amount of R$ 37,782 to be paid in six installments, adjusted according to the SELIC interest rate.   These installments have already been paid.

 

19


 

Nevertheless, the INSS has already indicated it plans to “restore” the interest charges that were waived under REFIS I, in the amount of R$ 38,600 (as of September 2006). For purposes of provisioning, this amount has been restated and lowered 30%, pursuant to the benefit afforded under article 9 of Provisional Measure 303/96. COPEL, however, has disputed this claim, requesting that the calculations that supposedly justify this charge be presented. As of the date of these statements, INSS has not yet made a final decision on how it will calculate the grand total of this debt, thus it has suspended the collection of the respective credits.

Accordingly, in light of these circumstances, the Company maintained the provision in the amount of R$ 35,068 to cover the new INSS claim under PAEX.

Installment Plan – Law no. 11,941/09

Pursuant to a ruling by the 4th District Federal Court, which became final on August 18, 1998, COPEL was granted immunity from the levy of COFINS tax on power sales from 1995 until June 2001. Even though this ruling was final, the Federal Revenue Service (RFB) issued COPEL two notices for failure to collect COFINS tax:  on February 19, 2002, notice no. 10980.000932/2002-90, for fiscal year 1997, and on August 22, 2003, notice no. 10980.007831/2003-21, for the first three quarters of 1998. Simultaneously, it filed a lawsuit requesting the cancellation of the immunity ruling, which, after a long legal battle regarding the lapse of RFB's right to dispute the ruling, has been submitted to 4th District Federal Court for judgment on the merits. COPEL has thus reclassified the corresponding risk of loss as probable, since there’s consolidated legal precedent in favor of the federal government. 

As this lawsuit was reclassified as probable loss, in November 2009 COPEL chose to apply for the installment plan created under Law no. 11,941, dated May 27, 2009, to pay off the COFINS-related debt in connection with the two notices mentioned above. Since there has been a provision in connection with this lawsuit in the amount of R$ 184,037, and in light of the reduced penalties afforded under Law no. 11,941/09, the original amount of this debt became R$ 136,665, which, restated according to the SELIC interest rate as of June 30, 2010 (pursuant to article 3, paragraph 3, of that law), totals R$ 142,812.

 

20


 

The Company also included in this installment plan fiscal debts owed by COPEL Distribuição in connection with income tax and social contribution in February 2004, and income tax in December 2007, March 2008, and April 2008, which amount to R$ 48,463. These taxes were paid through compensation statements, which have not been approved by RFB. Taking into account reduced penalties and restatement by the SELIC interest rate (pursuant to Law no. 11,941/09), the amount of this debt as of June 30, 2010 was R$ 39,963. COPEL further included debts resulting from revised bases for calculation of PIS/PASEP and COFINS taxes for 2005 to 2008, in the amount of R$ 53,499, which, taking into account reduced penalties and restatement by the SELIC interest rate (pursuant to article 3, paragraph 3, of Law no. 11,941/09), amounted to R$ 43,372 as of June 30, 2010.

With the payment of installments and the accrual of SELIC interest as of June 30, 2010, pursuant to article 3, paragraph 3, of Law no. 11,941, the total outstanding debt is R$ 261,214.

As of the date of these statements, there has been no consolidation of installments by RFB.

COPEL has rigorously fulfilled its obligations in connection with these installment plans.

b)     Deferred income and social contribution taxes

The Company records deferred income tax, calculated at the rate of 15%, plus an additional rate of 10%, and deferred social contribution, at the rate of 9%.

Taxes levied on the healthcare plan are being realized according to the actuarial assessment conducted annually by an independent actuary, pursuant to the rules set forth in CVM Instruction no. 371/2000. Deferred taxes on all other provisions will be realized as judicial rulings are issued and regulatory assets are realized.

Under current tax legislation, tax losses and negative bases for social contributions may be offset against future income, up to the limit of 30% of the taxable income for each year, and do not lapse.

 

21


 

Deferred income and social contribution tax credits have been recorded as follows:

       
    Parent Company    Consolidated 
  30.06.2010  31.03.2010  30.06.2010  31.03.2010 
Current assets         

Tax loss carryforwards 

4,690  5,111  4,690  5,111 

Pension and healthcare plans 

-  -  5,151  4,281 

Passive CVA 

-  -  41,393  24,140 

Other temporary additions 

126  121  34,219  12,578 
  4,816  5,232  85,453  46,110 
Noncurrent assets         

Tax loss carryforwards and negative tax basis 

8,006  8,010  17,802  17,806 

Pension and healthcare plans 

-  -  121,164  120,848 

Other temporary additions 

-  -  -  - 

Reserve for litigation 

33,304  34,720  161,965  149,920 

Reserve for doubtful accounts 

1,478  1,478  25,723  23,933 

FINAN provision 

3,291  3,291  3,291  3,291 

Passive CVA 

-  -  20,326  8,046 

Provisions for regulatory liabilities 

3,145  -  12,311  12,598 

Provision for effects of network charges 

-  -  6,922  6,922 

Amortization of goodwill 

17,444  17,380  20,235  19,972 
  66,668  64,879  389,739  363,336 
(-) Current liabilities         

Active CVA 

-  -  62,006  62,341 

Surplus power 

-  -  -  263 

Other temporary exclusions 

-  -  -  2,979 
  -  -  62,006  65,583 
(-) Noncurrent liabilities         

Temporary exclusions 

       

Active CVA 

-  -  8,878  14,007 

TUSD, aquiculture, and irrigation rates 

-  -  191  81 

Gas supply 

-  -  8,058  8,506 
  -  -  17,127  22,594 
  71,484  70,111  396,059  321,269 

The Company’s Fiscal Council has reviewed and the Board of Directors has approved the technical study prepared by the Chief Finance, Investor Relations, and Corporate Partnerships Office on future profitability projections, discounted at present value, which points out to the realization of deferred taxes.  The consolidated estimated realizable amount for 2010 is negative on account of the realization of deferred income tax and social contribution liabilities. According to the estimate of future taxable income, the realization of deferred taxes is broken down below:

 

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      Parent Company      Consolidated 
  Estimated  Actual  Estimated  Estimated  Actual  Estimated 
  realizable  realized  realizable  realizable  realized  realizable 
  amount  amount  amount  amount  amount  amount 
2010  5,624  2,241  -  (39,205)  (11,478)  - 
2011  -  -  4,816  -  -  23,447 
2012  -  -  18,207  -  -  88,725 
2013  -  -  4,207  -  -  43,797 
2014  -  -  4,160  -  -  43,611 
2015  -  -  4,148  -  -  65,454 
2016 to 2018  -  -  1,478  -  -  41,864 
Until 2020  -  -  34,468  -  -  89,161 
  5,624  2,241  71,484  (39,205)  (11,478)  396,059 

c)     Reconciliation of the provision for income tax and social contribution

The reconciliation of the provision for income tax (IRPJ) and social contribution (CSLL), calculated at the applicable rates, with the amounts recorded in the statement of income is shown below:

       
    Parent Company    Consolidated 
  30.06.2010  30.06.2009  30.06.2010  30.06.2009 
Income before IRPJ and CSLL  358,299  564,764  549,371  861,378 

IRPJ and CSLL (34%) 

(121,822)  (192,020)  (186,786)  (292,869) 
Tax effects on:         

Interest on capital 

-  -  1,474  - 

Dividends 

10  1,622  10  1,654 

Equity in results of investees 

123,154  187,687  17,473  5,710 

Nondeductible expenses 

-  -  (1,218)  (638) 

Tax incentives 

-  -  1,320  1,218 

Other 

13  11  (6,664)  (1,377) 

Current IRPJ and CSLL 

(1,983)  (1,233)  (296,497)  (228,427) 

Deferred IRPJ and CSLL 

3,338  (1,467)  122,106  (57,875) 

Actual rate - % 

-0.4%  0.5%  31.7%  33.2% 
IRPJ = Corporate income tax         
CSLL = Social contribution on net income         

8.           Deferred Regulatory Assets - CVA

The regulatory assets and liabilities accounts (CVA) record variations of the following Portion A cost items, as approved at the time of the annual rate reviews and as actually disbursed by companies during the year: Purchase of Power (Bilateral Contracts, Itaipu, and Auctions), Power Transport Costs (Transport of Power from Itaipu and Basic Network Charges), and Power Sector Charges – Fuel Consumption Account (CCC) quota; Energy Development Account (CDE) quota; System Service Charges (ESS); and Program of Incentives for Alternative Energy Sources (Proinfa) quotas.

 

23


 

Under Resolution no. 1.015, dated June 22, 2010, ANEEL authorized COPEL Distribuição to apply, as of June 24, 2010, an average rate increase of 9.74% to its rates for sales to final customers, of which 6.88% correspond to the annual rate review and 2.86% correspond to financial components, including the CVA regulatory asset, which amounts to R$ 49,490, composed of two installments: CVA being processed for rate year 2009-2010, in the amount of R$ 32,938, and CVA balance from previous years to be offset, in the amount of R$ 16,552.

COPEL expects that the amounts classified as long-term assets will be recovered by June 2012.

Breakdown of CVA balances

    Current    Noncurrent 
Consolidated    assets    assets 
  30.06.2010  31.03.2010  30.06.2010  31.03.2010 
Recoverable CVA variations, 2009 tariff adjustment         

Fuel Consumption Account - CCC 

-  3,741  -  - 

Use of transmission installations (Basic Network) 

-  10,526  -  - 

Electricity purchased for resale (Itaipu) 

-  24,518  -  - 

Charges for system services - ESS 

-  8,519  -  - 

Energy Development Account - CDE 

-  3,069  -  - 

Incentives to Alternative Energy Sources - PROINFA 

-  5,493  -  - 

Electricity purchased for resale (CVA Energy) 

-  3,096  -  - 

Transmission of electricity purchased from Itaipu 

-  807  -  - 
  -  59,769  -  - 
Recoverable CVA variations, 2010 tariff adjustment         

Fuel Consumption Account - CCC 

63,516  41,958  -  13,986 

Use of transmission installations (Basic Network) 

41,742  39,292  -  13,097 

Electricity purchased for resale (Itaipu) 

41,724  31,827  -  10,609 

Energy Development Account - CDE 

10,440  6,146  -  2,049 

Incentives to Alternative Energy Sources - PROINFA 

9,948  2,895  -  965 

Electricity purchased for resale (CVA Energy) 

12,690  -  -  - 

Transmission of electricity purchased from Itaipu 

2,312  1,468  -  489 
  182,372  123,586  -  41,195 
Recoverable CVA variations, 2011 tariff adjustment         

Fuel Consumption Account - CCC 

-  -  10,723  - 

Use of transmission installations (Basic Network) 

-  -  10,021  - 

Electricity purchased for resale (Itaipu) 

-  -  3,312  - 

Energy Development Account - CDE 

-  -  1,752  - 

Transmission of electricity purchased from Itaipu 

-  -  302  - 
  -  -  26,110  - 
  182,372  183,355  26,110  41,195 

 

 

24


 

 

    Current    Noncurrent 
Consolidated    liabilities    liabilities 
30.06.2010  31.03.2010  30.06.2010  31.03.2010 
CVA variations subject to offsetting, 2010 tariff adjustment         

Charges for system services - ESS 

80,868  65,979  -  21,993 

Electricity purchased for resale (CVA Energy) 

40,877  5,022  -  1,674 
  121,745  71,001  -  23,667 
CVA variations subject to offsetting, 2011 tariff adjustment         

Charges for system services - ESS 

-  -  10,250  - 

Electricity purchased for resale (CVA Energy) 

-  -  49,534  - 
  -  -  59,784  - 
  121,745  71,001  59,784  23,667 

Changes in the CVA

  Balance as of          Balance as of 
  31.12.2009  Deferral  Amortization  Restatement Transfers  30.06.2010 
Assets             

Fuel Consumption Account - CCC 

41,814  37,980  (7,940)  2,385  -  74,239 

Use of transmission installations (Basic Network) 

57,606  14,111  (22,259)  2,305  -  51,763 

Electricity purchased for resale (Itaipu) 

95,120  (2,063)  (51,784)  3,763  -  45,036 

Charges for system services - ESS 

17,038  -  (18,005)  967  -  - 

Energy Development Account - CDE 

11,799  6,236  (6,480)  637  -  12,192 

Incentives to Alternative Sources - PROINFA 

11,490  9,253  (11,602)  807  -  9,948 

Electricity purchased for resale (CVA Energy) 

79,285  (59,552)  (6,704)  (339)  -  12,690 

Transmission of electricity purchased from Itaipu 

3,311  845  (1,702)  160  -  2,614 
  317,463  6,810  (126,476)  10,685  -  208,482 
Current  218,500  (8,719)  (126,476)  10,223  88,844  182,372 
Noncurrent  98,963  15,529  -  462  (88,844)  26,110 
Liabilities             

Charges for system services - ESS 

50,040  38,468  -  2,610  -  91,118 

Electricity purchased for resale (CVA Energy) 

-  89,728  -  683  -  90,411 
  50,040  128,196  -  3,293  -  181,529 
Current  25,020  58,075  -  2,291  36,359  121,745 
Noncurrent  25,020  70,121  -  1,002  (36,359)  59,784 

9.           Bonds and Securities

The balances below refer to bonds held until maturity.

Financial agent  Type of investment  Maturity  Index    Consolidated 
        30.06.2010  31.03.2010 
Bradesco (1)  Buyback operation  02.01 and 01.02.2012  CDI  488  478 
Banco do Brasil  LFT  07.03.2012  SELIC  5,043  4,934 
Banco do Brasil  LFT  16.03.2011  SELIC  21,530  21,066 
Banco do Brasil  LTN  01.01.2011  10.42%  5,838  5,697 
Bradesco (2)  LFT  15.06.2011  CDI  9,447  9,240 
Bradesco (1)  Buyback operation  Jan. to April/2012  SELIC  4,115  2,102 
Caixa Econômica Federal (3)  CDB  16.01.2015  CDI  887  868 
.        47,348  44,385 
      Current  5,490  3,448 
      Noncurrent  41,858  40,937 
LFT - Financial Treasury Bonds  
LTN - National Treasury Bonds  

 

25


 
 

1)     Collaterals for the settlement of transactions at the Electric Energy Trading Chamber (CCEE).

2)     Collaterals for COPEL Geração e Transmissão’s participation at ANEEL auctions.

3)     Collaterals for Agreements for Energy Trade on the Regulated Power Market (“Contratos de Comercialização de Energia no Ambiente Regulado” or CCEARs) at CCEE.

10.        Collaterals and Escrow Accounts

    Parent Company    Consolidated 
  30.06.2010  31.03.2010  30.06.2010  31.03.2010 
Current assets         

Escrow accounts 

167  164  116,109  120,364 
  167  164  116,109  120,364 
 
Noncurrent assets         

Collateral under STN agreement (Note 18.b) 

-  -  28,940  24,748 
  -  -  28,940  24,748 

There is a sum of R$ 23,270 invested in Unibanco S.A., restated as of June 30, 2010 (R$ 22,861 as of March 31, 2010), yielding 102% of the variation of the DI rate on average, in a reserve account set up to secure a debt to BNDESPAR, in connection with the issue of ELEJOR debentures, pursuant to a Private Agreement on Revenue Attachment and Other Covenants.

As of the end of June 2010, there remains a balance in this investment on hold, on account of the legal and bureaucratic steps of the settlement process with BNDESPAR which are currently under way; it might take some time before these credits are fully released and available.

There are R$ 62,347, restated as of June 30, 2010 (R$ 60,995 as of March 31, 2010),  invested in Banco do Brasil, yielding 100% of the variation of the DI rate, in a reserve account set up to secure to ANEEL the construction of the Mauá Power Plant by COPEL Geração e Transmissão.

The remaining deposits meet the requirements of the Electric Energy Trading Chamber (CCEE) and are tied to the operations conducted at power auctions, CCEE settlements, and ANEEL auctions.

 

26


 

11.        Other Receivables

    Consolidated 
  30.06.2010  31.03.2010 
Current assets     

Advance payments to employees 

20,583  21,775 

Advance payments 

15,245  15,698 

Decommissioning in progress 

5,444  5,576 

Installment plan for Onda Provedor de Serviços 

4,348  4,348 

Services to third-parties 

3,664  3,824 

Recoverable salaries of transferred employees 

3,811  3,768 

Advance payments to suppliers 

1,876  2,497 

Sale of property and rights 

3,624  1,606 

Compulsory loans 

958  941 

Purchase of fuel with CCC funds 

531  772 

Lease of the Araucária Thermal Power Plant 

2,169  546 

Reserve for doubtful accounts 

(9,817)  (9,803) 

Other receivables 

3,122  2,994 
  55,558  54,542 
Noncurrent assets     

Advance payments to suppliers 

10,800  8,290 

Sale of property and rights 

4,263  4,350 

Compulsory loans 

3,942  3,876 

Other receivables 

539  539 
  19,544  17,055 

The allowance for doubtful accounts refers to the balance of installments owed by Onda Provedor de Serviços, whose realization is unlikely, and to an unrealizable amount mostly comprising wages of loaned employees.

12.        Inventories

Consolidated        Construction in 
  Operation/Maintenance  progress - inventories 
  30.06.2010  31.03.2010  30.06.2010  31.03.2010 
Copel Geração e Transmissão  8,685  9,738  15,856  17,848 
Copel Distribuição  78,544  85,285  202,629  185,996 
Copel Telecomunicações  9,487  8,851  14,751  15,599 
Compagás  1,217  1,241  9,178  8,094 
Elejor  -  -  1,860  1,373 
  97,933  105,115  244,274  228,910 

 

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13.        Judicial Deposits

Consolidated  Total  Deposits tied to  Noncurrent  Noncurrent 
  judicial deposits  litigation  assets  assets 
      30.06.2010  31.03.2010 
Labor claims  65,541  (25,847)  39,694  39,549 
Civil claims         

Suppliers 

34,655  (34,655)  -  - 

Civil claims 

53,510  (9,436)  44,074  18,248 

Easements 

2,386  -  2,386  2,391 

Customers' tariff litigation 

1,450  (1,225)  225  14 
  92,001  (45,316)  46,685  20,653 
Tax claims  230,296  (31,240)  199,056  25,949 
Other  357  -  357  68 
  388,195  (102,403)  285,792  86,219 
 
 
 
 
Parent Company  Total  Deposits tied to  Noncurrent  Noncurrent 
  judicial deposits  litigation  assets  assets 
      30.06.2010  31.03.2010 
Tax claims  229,230  (31,214)  198,016  24,920 
Civil claims  -  -  -  - 
Other  289  -  289  - 
  229,519  (31,214)  198,305  24,920 

 

Escrow deposits have been classified under Reserve for Litigation and are detailed in Note 26.

 

28


 

14.        Receivables from Related Parties

    Parent Company    Consolidated 
  30.06.2010  31.03.2010  30.06.2010  31.03.2010 
Investees         

Dividends and/or interest on capital 

       

Dona Francisca Energética 

28  2,317  28  2,317 

Sanepar 

-  -  3,684  5,135 
28  2,317  3,712  7,452 
Subsidiaries         

Copel Geração e Transmissão 

       

Dividends and/or interest on capital 

473,108  473,108  -  - 
  473,108  473,108  -  - 

Copel Distribuição 

       

Dividends and/or interest on capital 

206,481  206,481  -  - 

Transferred financing - STN (a) 

63,832  66,453  -  - 

Loan agreement (b) 

686,736  669,650  -  - 
  957,049  942,584  -  - 

Copel Telecomunicações 

       

Dividends and/or interest on capital 

1,156  1,156  -  - 
  1,156  1,156  -  - 

Compagas 

       

Dividends and/or interest on capital 

2,285  4,640  -  - 
  2,285  4,640  -  - 

Elejor 

       

Loan agreement (c) 

279,863  272,485  -  - 

Dividends and/or interest on capital 

-  5,005  -  - 
  279,863  277,490  -  - 

Centrais Eólicas do Paraná 

       

Dividends and/or interest on capital 

1,920  1,920  -  - 
  1,920  1,920  -  - 

Dominó Holdings 

       

Dividends and/or interest on capital 

3,715  4,647  -  - 
  3,715  4,647  -  - 
  1,719,096  1,705,545  -  - 
  1,719,124  1,707,862  3,712  7,452 
Current assets - Dividends receivable  688,693  699,274  3,712  7,452 
Noncurrent assets - investees and subsidiaries  1,030,431  1,008,588  -  - 

a)Transferred financing - STN

The Company transferred existing loans and financing to its wholly-owned subsidiaries at the time of their constitution in 2001. Nevertheless, since the agreements for transfer to the respective subsidiaries have not been formalized before the financial institutions, these amounts are also recorded under the Parent Company.

These loans and financing are transferred with the same interest and charges agreed by the Parent Company and are shown separately as receivables from the wholly-owned subsidiaries, and as loans and financing liabilities owed by the subsidiaries. (Note 18.b).

 

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b)Loan Agreement – COPEL Distribuição

On February 27, 2007, ANEEL approved the loan agreement signed by COPEL (lender) and COPEL Distribution (borrower), in the amount of R$ 1,100,000. This loan has a five-year term, bearing interest corresponding to 104% of the DI rate, and its funds were used in the expenditure program for the concession and in the payment of debentures transferred to COPEL Distribution, which were due on March 1, 2007.

c)ELEJOR Loan Agreement

On April 7, 2004, COPEL signed a loan agreement with Elejor, to ensure the continuity of the construction of the power plants that make up the Fundão-Santa Clara Power Complex; the agreement provides for payment in 120 monthly and consecutive payments, plus prorated interest corresponding to 3.198% a year and a spread equivalent to the variation of the Interbank Deposit Certificate Rate (CDI), as from the date of each transfer. The loan’s grace period was extended to February 2016, in the second amendment to the ELEJOR Shareholders’ Agreement, on April 18, 2005.

15.        Investments

Main information about COPEL’s investees and subsidiaries

  Shares or quotas COPEL's  Paid-in    Net 
  held by COPEL stake  stock  Shareholders'  income 
  Common  Preferred  Quotas  %  capital  equity (2)  (losses) (2) 
              30.06.2010 
Investees               
Sanepar  51,797,823  12,949,456  -  34.75  374,268  896,544  50,956 
Sercomtel - Telecom.  9,018,088  4,661,913  -  45.00  246,896  93,962  5,378 
Foz do Chopim  -  -  8,227,542  35.77  23,000  45,633  13,881 
Dona Francisca (1)  153,381,798  -  -  23.03  66,600  206,182  131,131 
Sercomtel Celular  9,018,029  4,661,972  -  45.00  36,540  -  (1,952) 
Dois Saltos Empreend. (1)  -  -  300,000  30.00  1,000  1,000  - 
Copel Amec (1)  -  -  48,000  48.00  100  327  6 
Carbocampel (1)  1,336,742  -  -  49.00  2,728  2,351  (26) 
Escoelectric Ltda. (1)  -  -  3,220,000  40.00  7,217  (3,422)  - 
 
Subsidiaries               
Copel Geração e Transm.  3,400,378,051  -  -  100.00  3,505,994  3,937,924  276,224 
Copel Distribuição  2,171,927,626  -  -  100.00  2,624,841  3,170,739  (4,928) 
Copel Telecomunicações  194,754,542  -  -  100.00  194,755  234,434  14,978 
Compagas  5,712,000  11,424,000  -  51.00  135,943  211,729  24,035 
Elejor  42,209,920  -  -  70.00  69,450  303,639  22,103 
UEG Araucária  -  -  565,951,934  80.00  707,440  635,855  (15,410) 
Centrais Eólicas (1)  -  -  3,061,000  100.00  3,061  3,597  536 
Dominó Holdings (1)  113,367,832  -  -  45.00  251,929  701,320  37,059 
(1) Unaudited by independent auditors
(2) Shareholders' equity and net income adjusted to COPEL's accounting practices

 

30


 

Changes to the investments in investees and subsidiaries

Parent Company      Additions Proposed     
  Balance as of  Equity  and  dividends    Balance as of 
  31.12.2009  pick-up  AFCI  and IOC  Write-offs  30.06.2010 
Investees             

Sercomtel S.A. - Telecomunicações 

75,790  2,420  -  -  -  78,210 

Sercomtel Telecom. - Impairment (a) 

(35,927)  -  -  -  -  (35,927) 

Foz do Chopim Energética Ltda. 

16,616  4,965  -  (5,258)  -  16,323 

Dona Francisca Energética S.A. 

19,616  30,199  -  (2,331)  -  47,484 

Dois Saltos Empreend. Geração Ener. Eletr. Ltda. 

300  -  -  -  -  300 

Copel Amec S/C Ltda. 

154  3  -  -  -  157 

Escoelectric Ltda. 

(1,704)  424  -  -  -  (1,280) 

Escoelectric Ltda. - AFCI 

1,025  -  63  -  -  1,088 

Carbocampel S.A. 

1,117  35  -  -  -  1,152 

Carbocampel - AFCI 

-  -  83  -    83 

Sercomtel Celular S.A. 

6,195  -  -  -  -  6,195 

Sercomtel Celular - Impairment (a) 

(6,195)  -  -  -  -  (6,195) 
  76,987  38,046  146  (7,589)  -  107,590 
Subsidiaries             

Copel Geração e Transmissão S.A. 

3,661,700  276,224  -  -  -  3,937,924 

Copel Distribuição S.A. 

3,175,667  (4,928)  -  -  -  3,170,739 

Copel Telecomunicações S.A. 

219,456  14,978  -  -  -  234,434 

Dominó Holdings S.A. (b) 

302,584  16,677  -  (3,668)  -  315,593 

(-) Negative goodwill - Dominó Holdings (b) 

(74,402)  -  -  -  -  (74,402) 

UEG Araucária Ltda. 

130,253  (3,082)  -  -  -  127,171 

Cia. Paranaense de Gás - Compagas 

96,611  12,258  -  (887)  -  107,982 

Elejor - Centrais Elétricas do Rio Jordão S.A. 

71,075  15,472  126,000  -  -  212,547 

Centrais Eólicas do Paraná Ltda. 

1,153  161  -  (235)  -  1,079 
  7,584,097  327,760  126,000  (4,790)  -  8,033,067 
Other investments             

Amazon Investment Fund - FINAM 

30,012  -  -  -  -  30,012 

Finam - Investco 

7,903  -  -  -  -  7,903 

Northeast Investment Fund - FINOR 

9,870  -  -  -  -  9,870 

Provision for losses - FINAM/FINOR 

(36,568)  -  -  -  -  (36,568) 

FINAM - Nova Holanda 

14,868  -  -  -  -  14,868 

Provision for losses - Nova Holanda 

(14,868)  -  -  -  -  (14,868) 

Other tax incentives 

2,315  -  -  -  -  2,315 

Other investments 

97  -  -  -  (6)  91 
  13,629  -  -  -  (6)  13,623 
  7,674,713  365,806  126,146  (12,379)  (6)  8,154,280 
AFCI - advance for future capital increase             

 

 

31


 

Parent Company        Proposed   
  Balance as of  Equity    dividends  Balance as of 
  31.12.2008  pick-up  AFCI  and IOC  30.06.2009 
Investees           

Sercomtel - Telecomunicações 

84,886  (1,970)  -  -  82,916 

Sercomtel Telecom. - Impairment 

(18,301)  -  -  -  (18,301) 

Foz do Chopim 

16,519  4,795  -  (4,686)  16,628 

Dona Francisca 

10,332  2,999  -  -  13,331 

Dois Saltos Empreend. 

300  -  -  -  300 

Copel Amec 

149  3  -  -  152 

Escoelectric 

(1,027)  (157)  -  -  (1,184) 

Escoelectric - AFCI 

1,025  -  -  -  1,025 

Carbocampel 

(69)  (12)  -  -  (81) 

Carbocampel - AFCI 

1,059  -  21  -  1,080 

Sercomtel Celular 

6,195  -  -  -  6,195 

Sercomtel Celular - Impairment 

(6,195)  -  -  -  (6,195) 
  94,873  5,658  21  (4,686)  95,866 
Subsidiaries           

Copel Geração e Transmissão 

3,628,961  284,498  -  -  3,913,459 

Copel Distribuição 

3,042,285  225,134  -  -  3,267,419 

Copel Telecomunicações 

203,924  11,212  -  -  215,136 

Dominó Holdings 

286,745  14,606  -  (3,397)  297,954 

(-) Negative goodwill - Dominó Holdings 

(74,402)  -  -  -  (74,402) 

UEG Araucária 

132,225  1,163  -  -  133,388 

Compagas 

86,803  9,133  -  (3,665)  92,271 

Elejor 

54,450  8,623  -  (9)  63,064 

Centrais Eólicas do Paraná 

2,603  74  -  -  2,677 
  7,363,594  554,443  -  (7,071)  7,910,966 
Other investments           

Amazon Investment Fund - FINAM 

30,012  -  -  -  30,012 

Finam - Investco 

7,903  -  -  -  7,903 

Northeast Investment Fund - FINOR 

9,870  -  -  -  9,870 

Provision for losses - FINAM/FINOR 

(35,835)  -  -  -  (35,835) 

FINAM - Nova Holanda 

14,868  -  -  -  14,868 

Provision for losses - Nova Holanda 

(14,868)  -  -  -  (14,868) 

Other tax incentives 

2,315  -  -  -  2,315 

Other investments 

97  -  -  -  97 
  14,362  -  -  -  14,362 
  7,472,829  560,101  21  (11,757)  8,021,194 

 

32


 

Consolidated      Additions  Proposed       
  Balance as of  Equity  and  dividends      Balance as of 
  31.12.2009  pick-up  AFCI  and IOC  Other    30.06.2010 
Investees               

Sercomtel - Telecomunicações 

75,790  2,420  -  -  -    78,210 

Sercomtel Telecom. - Impairment (a) 

(35,927)  -  -  -  -    (35,927) 

Foz do Chopim 

16,616  4,965  -  (5,258)  -    16,323 

Dona Francisca 

19,616  30,199  -  (2,331)  -    47,484 

Dois Saltos Empreend. 

300  -  -  -  -    300 

Copel Amec 

154  3  -  -  -    157 

Escoelectric 

(1,704)  424  -  -  -    (1,280) 

Escoelectric - AFCI 

1,025  -  63  -  -    1,088 

Carbocampel 

1,117  35  -  -  -    1,152 

Carbocampel - AFCI 

-  -  83  -  -    83 

Sercomtel Celular 

6,195  -  -  -  -    6,195 

Sercomtel Celular - Impairment (a) 

(6,195)  -  -  -  -    (6,195) 

Sanepar 

298,153  17,707  -  (4,334)  -    311,526 
  375,140  55,753  146  (11,923)  -    419,116 
Other investments               

Amazon Investment Fund - FINAM 

30,012  -  -  -  -    30,012 

Finam - Investco 

7,903  -  -  -  -    7,903 

Northeast Investment Fund - FINOR 

9,870  -  -  -  -    9,870 

Provision for losses - FINAM/FINOR 

(36,568)  -  -  -  -    (36,568) 

FINAM - Nova Holanda 

14,868  -  -  -  -    14,868 

Provision for losses - Nova Holanda 

(14,868)  -  -  -  -    (14,868) 

Other tax incentives 

2,315  -  -  -  -    2,315 

Assets assigned for future use 

5,597  -  -  -  (15)  (1)  5,582 

Other investments 

1,296  -  2  -  (6)  (2)  1,292 
  20,425  -  2  -  (21)    20,406 
  395,565  55,753  148  (11,923)  (21)    439,522 
(1) Transfer to intangible assets in progress
(2) Write-off of stake in ASMAE

 

33


 
 

Consolidated        Proposed  Transfers   
  Balance as of  Equity    dividends  to/from p., p., &e.  Balance as of 
  31.12.2008  pick-up  AFCI  and IOC  in progress  30.06.2009 
Investees             

Sercomtel - Telecomunicações 

84,886  (1,970)  -  -  -  82,916 

Sercomtel Telecom. - Impairment 

(18,301)  -  -  -  -  (18,301) 

Foz do Chopim 

16,519  4,795  -  (4,686)  -  16,628 

Dona Francisca 

10,332  2,999  -  -  -  13,331 

Dois Saltos Empreend. 

300  -  -  -  -  300 

Copel Amec 

149  3  -  -  -  152 

Escoelectric 

(1,027)  (157)  -  -  -  (1,184) 

Escoelectric - AFCI 

1,025  -  -  -  -  1,025 

Carbocampel 

(69)  (12)  -  -  -  (81) 

Carbocampel - AFCI 

1,059  -  21  -  -  1,080 

Sercomtel Celular 

6,195  -  -  -  -  6,195 

Sercomtel Celular - Impairment 

(6,195)  -  -  -  -  (6,195) 

Sanepar 

281,524  15,823  -  (4,188)  -  293,159 
  376,397  21,481  21  (8,874)  -  389,025 
Other investments             

Amazon Investment Fund - FINAM 

30,012  -  -  -  -  30,012 

Finam - Investco 

7,903  -  -  -  -  7,903 

Northeast Investment Fund - FINOR 

9,870  -  -  -  -  9,870 

Provision for losses - FINAM/FINOR 

(35,835)  -  -  -  -  (35,835) 

FINAM - Nova Holanda 

14,868  -  -  -  -  14,868 

Provision for losses - Nova Holanda 

(14,868)  -  -  -  -  (14,868) 

Other tax incentives 

2,315  -  -  -  -  2,315 

Assets assigned for future use 

3,821  -  -  -  (13)  3,808 

Other investments 

1,455  -  -  -  (160)  1,295 
  19,541  -  -  -  (173)  19,368 
  395,938  21,481  21  (8,874)  (173)  408,393 

a)Asset impairment

The conclusion in December 2009 of impairment tests on COPEL’s assets, based, when applicable, on the same assumptions mentioned in the Property, Plant, and Equipment note (Note 16.c),  indicated, with an adequate level of certainty, that a part of the assets in Sercomtel Telecomunicações S/A (R$ 35,927) and Sercomtel Celular S/A (R$ 6,195) were valued above their recoverable amount, thus requiring the accrual of corresponding losses due to impossibility of recovering these amounts through future profits by these companies.

No need to record provisions for devaluation of investments was identified for the remaining assets of the Company.

b)Dominó Holdings

On January 14, 2008, COPEL 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 discount of R$ 74,402, based on the expected future profitability of the company. Upon consolidation of the balance sheets, this discount was reclassified to Deferred Revenues, under Long-Term Liabilities.

 

34


 

With this acquisition, COPEL acquired control of the company in cooperation with the remaining shareholders. Dominó Holdings has been consolidated into COPEL’s balance sheets proportionally to the Company’s interest in it.

The main items of assets, liabilities, and the statement of operations of Dominó Holdings, as well as the corresponding consolidated shares, are shown below:

Dominó Holdings S.A.        Balances as of 30.06.2010 
    Revaluation Equity evaluation  Adjusted  COPEL's stake 
  Full amounts reserve (1)  adjustment (1)  balance  (45%) 
 
ASSETS  769,420  (43,725)  (13,975)  711,720  320,272 
Current assets  13,563  -  -  13,563  6,102 
Noncurrent assets  755,857  (43,725)  (13,975)  698,157  314,170 
         
LIABILITIES  769,420  (43,725)  (13,975)  711,720  320,272 
Current liabilities  10,393  -  -  10,393  4,675 
Noncurrent liabilities  7  -  -  7  4 
Shareholders' equity  759,020  (43,725)  (13,975)  701,320  315,593 
 
STATEMENT OF OPERATIONS           
Operating expenses  (1,475)  -  -  (1,475)  (663) 
Interest income (expenses)  (810)  -  -  (810)  (365) 
Equity in results of investees  36,355  1,031  1,962  39,348  17,707 
Provision for IR and CSLL  (4)  -  -  (4)  (2) 
Net income for the period  34,066  1,031  1,962  37,059  16,677 
(1) Balances have been adjusted due to accounting practices not adopted by the Parent Company

c)Centrais Eólicas and Copel Empreendimentos

The Company held a 30% interest in Centrais Eólicas do Paraná (Ceopar). On September 6, 2007, COPEL acquired, through COPEL Generation and Transmission, 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 a discount of R$ 592, which was reclassified upon consolidation to Deferred Revenues, under Long-Term Liabilities.

As part of the ongoing restructuring of COPEL, the incorporation of Centrais Eólicas do Paraná, with transfer of its assets and liabilities to COPEL Geração e Transmissão, has been submitted to ANEEL for authorization.

The book value of COPEL Empreendimentos’ net assets was incorporated into COPEL Geração e Transmissão, as shown below:

 

35


 

  Copel Empreendimentos 
  as of 30.06.2010 
 
ASSETS  390,110 
Current Assets  8,597 
Noncurrent Assets  381,513 
 
LIABILITIES  390,110 
Shareholders' Equity  390,110 

16.        Property, Plant, and Equipment

    Accumulated  Consolidated    Accumulated  Consolidated 
  Cost  depreciation  net value  Cost  depreciation  net value 
      30.06.2010      31.03.2010 
In service (a)             

Copel Geração e Transmissão 

5,349,037  (2,266,488)  3,082,549  5,329,502  (2,233,962)  3,095,540 

Copel Distribuição 

5,584,672  (2,556,772)  3,027,900  5,425,577  (2,510,482)  2,915,095 

Copel Telecomunicações 

398,998  (246,746)  152,252  395,114  (238,844)  156,270 

Compagas 

197,582  (55,508)  142,074  192,535  (53,173)  139,362 

Elejor 

606,822  (71,272)  535,550  606,817  (67,174)  539,643 

UEG Araucária 

661,978  (155,482)  506,496  645,657  (147,529)  498,128 

Centrais Eólicas do Paraná 

4,129  (2,736)  1,393  4,129  (2,684)  1,445 

Dominó Holdings 

-  -  -  1  -  1 
  12,803,218  (5,355,004)  7,448,214  12,599,332  (5,253,848)  7,345,484 
Construction in progress             

Copel Geração e Transmissão 

617,879  -  617,879  547,764  -  547,764 

Copel Distribuição 

532,928  -  532,928  574,085  -  574,085 

Copel Telecomunicações 

47,003  -  47,003  36,919  -  36,919 

Compagas 

34,962  -  34,962  32,381  -  32,381 

Elejor 

9,204  -  9,204  8,614  -  8,614 

UEG Araucária 

1,104  -  1,104  8,036  -  8,036 
  1,243,080  -  1,243,080  1,207,799  -  1,207,799 
  14,046,298  (5,355,004)  8,691,294  13,807,131  (5,253,848)  8,553,283 
Special liabilities (b)             

Copel Geração e Transmissão 

(187)  -  (187)  (187)  -  (187) 

Copel Distribuição 

(1,026,230)  87,955  (938,275)  (1,009,168)  75,927  (933,241) 
  (1,026,417)  87,955  (938,462)  (1,009,355)  75,927  (933,428) 
  13,019,881  (5,267,049)  7,752,832  12,797,776  (5,177,921)  7,619,855 

Under Articles 63 and 64 of Decree no. 41,019, dated February 26, 1957, the assets and facilities used mostly in the generation, transmission, distribution, and sale of power are attached to these services and cannot be withdrawn, sold, assigned, or mortgaged without the prior written consent of the regulatory agency. ANEEL Resolution no. 20/99, however, regulates the release of assets from the concessions of the public Electric energy utilities, granting prior authorization to the release of assets that are deemed useless to the concession, when intended for sale, provided that the proceeds from such transaction be deposited in a special bank account assigned to investment in the concession.

 

36


 

Financial charges and interest on loans from third-parties for investments in construction in progress have been recorded through transfers to Property, Plant, and Equipment in Progress, for a total of R$ 6,632 as of June 30, 2010 (R$ 1.645 as of June 30, 2009).

Changes in property, plant, and equipment

  Property, plant, and equipment  Special  Consolidated 
Balances  in service  in progress  liabilities  Total 
As of December 31, 2009  7,259,224  1,199,255  (930,047)  7,528,432 

Expenditure program 

-  470,064  -  470,064 

Transfer to P.,P.,&E. in service 

426,284  (426,284)  -  - 

Depreciation quotas in the statement of operations 

(221,786)  -  23,716  (198,070) 

Depreciation quotas - Pasep/Cofins tax credits 

(5,157)  -  -  (5,157) 

Write-offs 

(10,204)  (1,581)  -  (11,785) 

Sale of P.,P.,&E. 

(203)  -  -  (203) 

Customer contributions 

-  -  (32,131)  (32,131) 

Transfers between P.,P.,&E. and intangible assets 

56  -  -  56 

Supplemental provisions for contingencies 

-  1,626  -  1,626 
As of June 30, 2010  7,448,214  1,243,080  (938,462)  7,752,832 
 
 
 
 
  Property, plant, and equipment  Special  Consolidated 
Balances  in service  in progress  liabilities  Total 
As of December 31, 2008  7,071,350  894,082  (916,757)  7,048,675 

Reclass. of additions to Cons. Cruzeiro do Sul 

-  160  -  160 

Expenditure program 

-  439,288  -  439,288 

Transfer to P.,P.,&E. in service 

270,467  (270,467)  -  - 

Depreciation quotas in the statement of operations 

(214,443)  -  21,394  (193,049) 

Depreciation quotas transf. to P.,P.,&E. in progress 

(4,254)  4,254  -  - 

Write-offs 

(6,203)  (3,500)  -  (9,703) 

Sale of P.,P.,&E. 

(1,691)  -  -  (1,691) 

Customer contributions 

-  -  (34,747)  (34,747) 

Transfers of assets assigned for future use 

18  (5)  -  13 

Transfers between P.,P.,&E. and intangible assets 

(7)  -  -  (7) 

Supplemental provisions for contingencies 

-  6,285  -  6,285 
As of June 30, 2009  7,115,237  1,070,097  (930,110)  7,255,224 

 

37


 

Depreciation rates

 
  % 
Generation   

General equipment 

10.00 

Generators 

3.30 

Reservoirs, dams, and headrace channels 

2.00 

Hydraulic turbines 

2.50 

Gas and steam turbines 

5.00 

Water cooling and treatment facilities 

5.00 

Gas conditioning equipment 

5.00 
Transmission   

System structure and conductors < 69 kV 

5.00 

System structure and conductors => 69 kV and power transformers 

2.50 

General equipment 

10.00 

Reconnectors 

4.30 
Distribution   

System structure and conductors => 69 kV 

2.50 

System structure and conductors < 69 kV and distribution transformers 

5.00 

Capacitor boards < 69 kV 

6.70 

Capacitor boards => 69 kV 

5.00 

General equipment 

10.00 
Central administration   

Facilities 

4.00 

Office machinery and equipment 

10.00 

Furniture and implements 

10.00 

Vehicles 

20.00 
Telecommunications   

Power and transmission equipment (telecommunications) 

10.00 

Overhead and underground cabling, wiring, and private switching center 

10.00 
Natural gas supply   

Gas pipelines 

3.30 

Gas pipeline operating equipment 

10.00 

a)Property, plant, and equipment in service by nature of asset

    Accumulated  Consolidated    Accumulated  Consolidated 
  Cost  Depreciation  net value  Cost  Depreciation  net value 
      30.06.2010      31.03.2010 
Machinery and equipment  8,733,856  (3,690,059)  5,043,797  8,549,204  (3,615,393)  4,933,811 
Reservoirs, dams, and headrace channels  2,877,535  (1,165,501)  1,712,034  2,877,432  (1,149,813)  1,727,619 
Buildings  746,419  (350,703)  395,716  737,358  (345,627)  391,731 
Land  124,436  -  124,436  123,216  -  123,216 
Gas pipelines  154,285  (36,648)  117,637  150,221  (35,333)  114,888 
Vehicles  146,854  (99,176)  47,678  142,052  (94,743)  47,309 
Furniture and implements  19,833  (12,917)  6,916  19,849  (12,939)  6,910 
  12,803,218  (5,355,004)  7,448,214  12,599,332  (5,253,848)  7,345,484 

b)Special obligations

Special obligations comprise customers’ contributions, Federal Government budget grants, federal, State, and municipal funds, and special credits assigned to the investments in facilities tied to a concession. Special obligations are not onerous liabilities and are not credits owned by shareholders.

 

38


 

The scheduled date for settlement of these liabilities was the concession expiration date. ANEEL, by means of Regulatory Resolution no. 234/2006, dated October 31, 2006, as amended by Resolution no. 338, dated November 25, 2008, established the guidelines, the applicable methodologies, and the initial procedures for the conduction of the second cycle of the periodic rate review involving the Brazilian power distribution utilities, changing the characteristics of these liabilities. Both the outstanding balance and new additions have been amortized as of July 1, 2008, pursuant to ANEEL Ruling no. 3,073/06 and Circular Letter no. 1,314/07. Amortization is calculated based on the same average depreciation rate of the corresponding assets.

For purposes of calculating the compensation for the assets linked to the concession and transferable to the Federal Government, on the concession expiration date the remaining balance of special obligations, if any, will be deducted from the residual value of the assets, both assessed according to criteria set by ANEEL.

The change in the characteristics of these liabilities results from the new rate-setting mechanism introduced by this new Regulatory Resolution, which establishes that the depreciation of assets acquired with funds from Special Obligations will no longer be included in the B Portion of the companies’ revenues.

c)Asset impairment

The Company has a policy of periodically evaluating and monitoring the projected future performance of its assets. Accordingly, and in light of Technical Ruling CPC 01 – Writing Assets down to their Recoverable Value, whenever there is clear evidence that the Company has assets recorded at unrecoverable values or whenever events or changes in circumstances indicate that the book value of an asset may not be recoverable in the future the Company must immediately account for such discrepancies by means of a provision for losses.

The main principles underpinning the conclusions of COPEL’s impairment tests are listed below:

1)     lowest level of cash generating unit: held concessions are analyzed individually;

2)     recoverable value: use value, or an amount equivalent to the discounted cash flows (before taxes) resulting from the continuous use of an asset until the end of its useful life; and

3)     assessment of use value: based on future cash flows in constant currency, converted to current value according to a real discount rate, before income taxes.

The respective cash flows are estimated based on actual operational results, on the Company's annual corporate budget, as approved by the Board of Directors, on the resulting multi-year budget, and on future trends in the power sector.

 

39


 

As for the time frame for the analysis, the Company takes into account the expiration date of each concession.

As for market growth, COPEL’s projections are consistent with historical data and the Brazilian economy's growth prospects.

The respective cash flows are discounted at average discount rates, obtained through a methodology commonly employed on the market and supported by the regulatory agency, taking into account the weighed average cost of capital (WACC).

Management believes it has a contractually guaranteed right to compensation for the assets tied to concessions upon their expiration, and it accepts, for the time being and until further regulation is issued on this matter, that such compensation be valued according to the book value of the respective assets.  Thus, the principle of valuation of residual assets upon expiration of concessions has been established as the book value of these assets.

In light of the principles discussed above, COPEL has not identified the need to set aside a provision for impairment of its assets.

d)Consórcio Energético Cruzeiro do Sul (1)

Consórcio Energético Cruzeiro do Sul, an independent power producer owned by COPEL Geração e Transmissão (with a 51% interest) and Eletrosul Centrais Elétricas S.A. (49%), won, on October 10, 2006, at the ANEEL Auction of Power from New Projects 004/06, the rights to build and run the Mauá Hydroelectric Power Plant for 35 years.

This project is included in the Federal Government’s Growth Acceleration Program (PAC) and will comprise a main powerhouse rated 350 MW and a secondary powerhouse rated 11 MW, for a total of 361 MW of installed capacity, which is enough to supply approximately one million people. The facility will take advantage of the hydroelectric potential discovered in the middle section of the Tibagi River, between the towns of Telêmaco Borba and Ortigueira, in mideastern Paraná.

Total estimated expenditures amount to approximately R$ 1,069,000 as of October 2008, of which 51% (R$ 545.190) will be invested by COPEL Geração e Transmissão, while the remaining 49% (R$ 523.810) will be invested by Eletrosul.

On November 17, 2008, the board of Banco Nacional de Desenvolvimento Econômico e Social – BNDES approved the financing for the Mauá Hydroelectric Power Plant. The financed amount corresponds to approximately 70% of COPEL's total expenditures in connection with that facility.

 

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The Mauá Hydroelectric Power Plant’s total power output was sold at an ANEEL auction at a price of R$ 112.96/MWh, as of November 1, 2006, restated annually according to the variation of the IPCA inflation index.  The company sold 192 average MW, for supply starting in January 2011. The assured power of the project, established in its concession agreement, was 197.7 average MW, after full motorization, and the maximum reference rate set in the auction notice was R$ 116.00/MWh.

Pursuant to the contract, the consortium in charge of construction will only be entitled to a bonus if each generating unit becomes operational ahead of schedule.  This bonus equals 50% of the net revenues earned during the period ahead of schedule. The intended commercial operation of the facility ahead of schedule shall be informed to the other party by the consortium with minimum advance notice of 390 days from the new dates and formally ratified with minimum advance notice of 150 days.

Given the current stage of the construction, Company management believes that the consortium will not request authorization for commercial operation of the facility ahead of schedule.

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, which comprises 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 basic project has been concluded and approved by ANEEL. The project has an Environmental Impact Study and an Environmental Impact Report, which have been discussed at public hearings and meetings and approved by the licensing authority, resulting in the issue of Installation License no. 6,496/08. The service order for the beginning of the construction of the Mauá Hydroelectric Power Plant was signed on July 21, 2008, and commercial generation is scheduled for 2011.

As of June 2010, the following activities were concluded: excavation for the dam shoulders in the left bank and in the riverbed, excavation of the half-section intake tunnel, excavation around the secondary powerhouse, laying of concrete in the shafts of the penstocks, and setup of the pre-distributors for the three generating units in the shaft of the main powerhouse. 

In March 2010, the laying of roller compacted concrete began in the dam structure on the riverbed, and in May 2010, the laying of concrete in the secondary powerhouse began, in addition to the conduction of pressure tests in the spiral cases of units 1 and 2 in the main powerhouse.

 

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The following tasks are currently being carried out: construction of the roller-compacted concrete dam on the river bed and on the left bank of the river; excavation of underground rock in the full section of the intake tunnel; laying of concrete on the low and high pressure water intakes, penstocks, and main and secondary powerhouses; insulation of penstocks; design and manufacture of electromechanical equipment, with 90% progress in the design and 78% in the manufacture of turbines and 75 % progress in the manufacture of generators.

Expenditures in this project have been recorded under Property, Plant, and Equipment, proportionally to the Company’s stake in the consortium. As of June 30, 2010, COPEL Geração e Transmissão’s balance under Property, Plant, and Equipment related to this project was R$ 342,739.

(1) Technical information unaudited by the independent auditors.

17.        Intangible assets

  Concession  Accumulated    Parent Company 
  and goodwill  amortization    Net value 
      30.06.2010  31.03.2010 
In service         

Assets with estimated useful lives 

       

Concession - Elejor (a) 

22,626  (3,205)  19,421  19,609 

Goodwill - Sercomtel Telecom. 

42,289  (42,289)  -  - 

Goodwill - Sercomtel Celular 

5,814  (5,814)  -  - 
  70,729  (51,308)  19,421  19,609 
      19,421  19,609 

 

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  Rights of use of software Concession and goodwill Accumulated amortization   Easements R & D  Other  Consolidated
Net value
 
                30.06.2010 31.03.2010 
In service                   

Assets with estimated useful lives 

                 

Copel Geração e Transmissão 

12,192  -  (9,963)  (1)  15,551  -  -  17,780  17,749 

Copel Distribuição 

30,233  -  (25,793)  (1)  22,581  -  -  27,021  26,263 

Copel Telecomunicações 

3,793  -  (3,613)  (1)  -  -  -  180  204 

Compagas 

3,468  -  (1,992)  (1)  -  -  20  1,496  1,580 

Elejor 

-  -  -    101  -  -  101  101 

UEG Araucária 

90  -  (77)  (1)  -  -  -  13  16 

Dominó Holdings 

1  -  -    -  -  -  1  1 

Concession - Elejor (a) 

-  22,626  (3,205)    -  -  -  19,421  19,609 

Concession - Copel Empreend. (b) 

-  53,954  (8,210)    -  -  -  45,744  46,331 

Concession - Sanepar (c) 

-  10,942  (8,390)    -  -  -  2,552  2,734 

Goodwill - Sercomtel Telecomunicações 

-  42,289  (42,289)    -  -  -  -  - 

Goodwill - Sercomtel Celular 

-  5,814  (5,814)    -  -  -  -  - 
  49,777  135,625  (109,346)    38,233  -  20  114,309  114,588 

Assets with no estimated useful lives 

                 

Copel Geração e Transmissão 

-  -  -    -  -  30  30  30 

Copel Distribuição 

-  -  -    -  -  97  97  97 
  -  -  -    -  -  127  127  127 
  49,777  135,625  (109,346)    38,233  -  147  114,436  114,715 
In progress                   

Copel Geração e Transmissão (d) 

8,846  -  -    1,056  1,013  -  10,915  9,082 

Copel Distribuição (d) 

30,530  -  -    1,068  13,010  -  44,608  29,921 

Copel Telecomunicações 

8,706  -  -    -  -  297  9,003  4,364 

Elejor 

-  -  -    2,790  -  -  2,790  27 
  48,082  -  -    4,914  14,023  297  67,316  43,394 
                181,752  158,109 
(1) Annual amortization rate: 20%

Changes in intangible assets

    Intangible assets  Consolidated 
Balances  in service  in progress  Total 
As of December 31, 2009  114,529  17,188  131,717 

Expenditure program 

-  53,563  53,563 

Capitalizations 

3,450  (3,450)  - 

Amortization quotas - concession 

(1,915)  -  (1,915) 

Amortization quotas - other intangible assets 

(1,493)  -  (1,493) 

Amortization quotas - Pasep/Cofins tax credits 

(69)  -  (69) 

Write-offs 

(10)  -  (10) 

Transfer between int. assets & assets assigned for future use 

-  15  15 

Transfer between intangible assets and P.,P.,&E. 

(56)  -  (56) 
As of June 30, 2010  114,436  67,316  181,752 
 
 
    Intangible assets  Consolidated 
Balances  in service  in progress  Total 
As of December 31, 2008  115,944  2,175  118,119 

Expenditure program 

-  16,245  16,245 

Capitalizations 

4,070  (4,070)  - 

Amortization quotas - concession 

(1,914)  -  (1,914) 

Amortization quotas - other intangible assets 

(1,716)  -  (1,716) 

Amortization quotas transf. to int. assets in progress 

(88)  88  - 

Write-offs 

(233)  -  (233) 

Transfer between intangible assets and P.,P.,&E. 

7  -  7 
As of June 30, 2009  116,070  14,438  130,508 

 

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a)Concession - ELEJOR

The acquisition of the shares held by Triunfo Participações S.A., in December 2003, resulted in total goodwill of R$ 22,626, which corresponded to a balance of R$ 19,421 as of June 30, 2010, under the Parent Company. The linear amortization of goodwill was economically determined by the expected income from the commercial operation of the concession, which expires in October 2036, and its effect on the statement of operations as of June 30, 2010 was R$ 377 (R$ 377 as of June 30, 2009).

b)Concession - COPEL Empreendimentos

The acquisition on May 31, 2006 of quotas in COPEL Empreendimentos, which was incorporated into COPEL Geração e Transmissão as of June 30, 2010, resulted in goodwill of R$ 53,954, with a balance of R$ 45,744 as of June 30, 2010. 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 as of June 30, 2010 was R$ 1,173 (R$ 1,173 as of June 30, 2009).

c)Concession - SANEPAR

In 1998, the acquisition by Dominó Holdings S.A. of an interest in SANEPAR resulted in goodwill of R$ 24,316, with a balance of R$ 5,674 as of June 30, 2010. This balance, proportionally to COPEL's stake (45%), corresponds to R$ 2,552, and has been amortized over 15 years as of 1999, at the rate of R$ 61 a month, with a charge to income of R$ 365 as of June 30, 2010 (R$ 365 as of June 30, 2009).

d)Rights of use of software

Out of the amounts recorded as rights of use of software, under intangible assets in progress, R$ 38,753 (R$ 24,475 as of March 31, 2010) correspond to expenses with the implementation of the new integrated corporate management system (ERP), of which R$ 8,846 are from COPEL Geração e Transmissão (R$ 7,762 as of March 31, 2010) and R$ 29,907 are from COPEL Distribuição (R$ 16,713 as of March 31, 2010).

 

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18.        Loans and Financing

     
Consolidated        Current    Noncurrent 
        liabilities    liabilities 
      30.06.2010  31.03.2010  30.06.2010  31.03.2010 
Principal amount  Interest  Total       
Foreign currency             

IDB (a) 

18,874  351  19,225  18,811  -  - 

National Treasury (b) 

5,115  589  5,704  6,458  58,128  59,995 

Eletrobrás 

5  -  5  6  19  22 
  23,994  940  24,934  25,275  58,147  60,017 
Local currency (reais )             

Banco do Brasil (c) 

162  10,808  10,970  3,008  330,140  330,156 

Eletrobrás (d) 

42,403  12  42,415  40,344  262,509  272,649 

BNDES - Compagas (e) 

6,367  -  6,367  6,361  3,229  4,816 

Finep (f) 

1,012  15  1,027  595  6,073  6,506 

BNDES (g) 

-  1,329  1,329  1,058  84,941  84,941 

Banco do Brasil - BNDES transfer (h) 

-  1,404  1,404  1,119  84,941  84,941 
  49,944  13,568  63,512  52,485  771,833  784,009 
  73,938  14,508  88,446  77,760  829,980  844,026 

     
Parent Company       Current    Noncurrent 
        liabilities    liabilities 
      30.06.2010  31.03.2010  30.06.2010  31.03.2010 
Principal amount  Interest  Total       
Foreign currency             

National Treasury (b) 

5,115  589  5,704  6,458  58,128  59,995 
Local currency (reais )             

Banco do Brasil (c) 

-  10,805  10,805  2,836  329,600  329,600 
  5,115  11,394  16,509  9,294  387,728  389,595 

Maturity of noncurrent installments

  Foreign  Local     
  currency  currency    Consolidated 
      30.06.2010  31.03.2010 
2011  2,560  26,326  28,886  39,742 
2012  3,769  56,081  59,850  60,222 
2013  2,418  56,932  59,350  59,781 
2014  1,211  386,360  387,571  388,036 
2015  -  54,986  54,986  55,460 
2016  -  38,603  38,603  39,125 
2017  -  22,044  22,044  22,583 
2018  -  21,135  21,135  21,609 
2019  -  18,387  18,387  18,666 
2020  -  15,769  15,769  15,955 
2021  -  10,621  10,621  10,621 
2022  -  10,618  10,618  10,618 
After 2022  48,189  53,971  102,160  101,608 
  58,147  771,833  829,980  844,026 

 

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Changes in loans and financing

    Foreign currency    Local currency  Consolidated 
Balances  Current  Noncurrent  Current  Noncurrent  Total 
As of December 31, 2009  24,778  67,865  56,920  716,279  865,842 

Funds raised 

-  -  -  80,059  80,059 

Interest 

1,854    33,290  567  35,711 

Monetary and exchange variation 

35  2,630  263  1,882  4,810 

Transfers 

12,348  (12,348)  26,954  (26,954)  - 

Amortization - principal amounts 

(6,387)  -  (13,453)  -  (19,840) 

Amortization - charges on principal amount 

(5,556)  -  (7,984)  -  (13,540) 

Amortization - interest 

(2,138)  -  (32,478)  -  (34,616) 
As of June 30, 2010  24,934  58,147  63,512  771,833  918,426 
 
 
 
 
    Foreign currency    Local currency  Consolidated 
Balances  Current  Noncurrent  Current  Noncurrent  Total 
As of December 31, 2008  41,109  121,947  57,352  647,109  867,517 

Funds raised 

-  -  -  30,315  30,315 

Capitalized interest 

-  -  -  1,512  1,512 

Interest 

3,923  -  31,990  534  36,447 

Monetary and exchange variation 

(5,664)  (19,122)  (57)  (859)  (25,702) 

Transfers 

14,732  (14,732)  28,940  (28,940)  - 

Amortization - principal amounts 

(8,831)  -  (16,303)  -  (25,134) 

Amortization - charges on principal amount 

(10,824)  -  (6,343)  -  (17,167) 

Amortization - interest 

(4,365)  -  (36,991)  -  (41,356) 
As of June 30, 2009  30,080  88,093  58,588  649,671  826,432 

 

a)Inter-American Development Bank - IDB

Loan for the Segredo Hydroelectric Power Plant and for the Jordão River Diversion Project, received on 15 January 1991, in the amount of US$ 135,000. This debt is amortized semi-annually, with final maturity in January 2011. Interest is calculated according to the IDB funding rate, which in the second quarter of 2010 was 4.13% p.a. The agreement features provisions providing 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 IDB;

3)   default by the guarantor, if any, of any obligation set forth in the guaranty agreement;

4)   ratio between current assets and total short-term commercial and bank financing, except for the current share of long-term indebtedness and dividends to be reinvested, lower than 1.2; and

5)   ratio between long-term indebtedness and shareholders’ equity exceeding 0.9.

 

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This agreement is guaranteed by the Federal Government and by mortgage and fiduciary guarantees.

b)National Treasury Department (Secretaria do Tesouro Nacional or STN)

The restructuring of medium and long-term debt, signed on May 20, 1998, in connection with the financing received under Law no. 4,131/62, is shown below:

  Term  Final  Grace period     
Bond type  (years)  maturity  (years)    Consolidated 
        30.06.2010  31.03.2010 
Par Bond  30  15.04.2024  30  28,750  28,857 
Capitalization Bond  20  15.04.2014  10  9,815  11,137 
Debt Conversion Bond  18  15.04.2012  10  5,417  6,731 
Discount Bond  30  15.04.2024  30  19,850  19,728 
        63,832  66,453 

The annual interest rates and repayments are as follows:

   
Bond type  Annual interest rates (%)  Payments 
Par Bond  6.0  single 
Capitalization Bond  8.0  semi-annual 
Debt Conversion Bond  Six-month LIBOR + 0.8750  semi-annual 
Discount Bond  Six-month LIBOR + 0.8125  single 

As collateral for this agreement, the Company has assigned and transferred to the Federal Government, conditioned to the non-payment of any financing installment, the credits that are made to the Company’s centralized revenues account, up to a limit sufficient to cover the payment of installments and other charges payable upon each maturity. For the Discount and Par Bonds, there are collateral deposits of R$ 11,938 and R$ 17,002 as of June 30, 2010 (R$ 10,219 and R$ 14,529 as of March 31, 2010), respectively, recorded under guarantees and escrow deposits, in long-term receivables (Note 10).

c)Banco do Brasil S.A.

The Company has the following contracts with Banco do Brasil:

1)     Private Credit Assignment Agreement with the Federal Government, through Banco do Brasil, signed on March 30, 1994, repayable in 240 monthly installments based on the Price amortization system starting on April 1, 1994, monthly restated by the TJLP and IGP-M plus interest of 5.098% p.a. and secured by COPEL’s revenues.; and

 

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2)     The following Parent Company credit notes:

  Issue    Interest due  Principal     
Credit notes  date  Maturity  semi-annually  amount  Interest  Total 
Commercial no. 330.600.129  31.01.2007  31.01.2014  106.5% of average CDI rate  29,000  1,114  30,114 
Industrial no. 330.600.132  28.02.2007  28.02.2014  106.2% of average CDI rate  231,000  7,347  238,347 
Industrial no. 330.600.151  31.07.2007  31.07.2014  106.5% of average CDI rate  18,000  699  18,699 
Industrial no. 330.600.156  28.08.2007  28.08.2014  106.5% of average CDI rate  14,348  457  14,805 
Industrial no. 330.600.157  31.08.2007  31.08.2014  106.5% of average CDI rate  37,252  1,188  38,440 
        329,600  10,805  340,405 

As a guarantee, Banco do Brasil has been 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 has also been 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.

d)Eletrobrás – Centrais Elétricas Brasileiras S.A.

Loans originated from the Eletrobrás Financing Fund (FINEL) and from the Global Reversal Reserve (RGR) for the expansion of the generation, transmission, and distribution systems. Repayments started in February 1999, and the last payment is due in August 2021. Interest of 5.0% to 8.0% p.a. and principal are repaid monthly, adjusted by the FINEL and Federal Reference Unit (UFIR) rates.

Contract ECFS – 142/2006, was signed on May 11, 2006 by COPEL Distribuição and Eletrobrás, in the amount of R$ 74,340, for use in the “Luz para Todos” rural electrification program. Out of the total amount, R$ 42,480 came from RGR funds, and R$ 31,860 were economic subsidies from CDE (Energy Development Account) funds. This loan has a grace period of 24 months and bears interest of 5% p.a. plus a commission of 1% p.a. It is repayable in 120 equal monthly installments, with final maturity on September 30, 2018. 

The total funds received under this contract amount to R$ 63,104, of which R$ 36,056 came from RGR funds and R$ 27,048 from CDE funds. There will be no further disbursements under this agreement.

 

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Contract ECFS – 206/2007, was signed on March 3, 2008 by COPEL Distribuição and Eletrobrás, in the amount of R$ 126,430, for use in the “Luz para Todos” rural electrification program. Out of the total amount, R$ 108,369 came from RGR funds, and R$ 18,061 were economic subsidies from CDE (Energy Development Account) funds. This loan has a grace period of 24 months and bears interest of 5% p.a. plus a commission of 1% p.a. It is repayable in 120 equal monthly installments, with final maturity on August 30, 2020. In August 2008, COPEL withdrew R$ 37,929, of which R$ 32,511 came from RGR funds and R$ 5,418 from CDE funds. In June 2009, the Company received R$ 25,286, of which R$ 21,674 came from RGR funds and R$ 3,612 from CDE funds. In March 2010, the Company received R$ 25,286, of which R$ 21,674 came from RGR funds and R$ 3,612 from CDE funds.

These loans are secured by COPEL’s own revenues, pursuant to a mandate issued by public act, and by the issue of promissory notes in the same number of outstanding installments.

e)BNDES - Compagas

Financing from BNDES to raise funds for the expansion of the Company’s gas distribution network. This financing agreement is divided into subcredits, a part of which is restated by an interest rate of 4% p.a. plus the TJLP long-term interest rate, and the remainder by the variation of the BNDES Monetary Unit (UMBND). This agreement does not contain restrictive provisions.

It is secured by Compagas’ gas supply receivables and by one or two financing installments which shall be deposited exclusively and kept in a checking account at Banco Itaú S.A.

f)Financiadora de Estudos e Projetos - FINEP

1)     Loan agreement no. 02070791-00, signed on November 28, 2007 to partially cover expenses incurred in the preparation of the "Generation Research and Development Project for 2007".

The total credit amounts to R$ 5,078. The first installment, in the amount of R$ 1,464, was released in April 2008, the second one, in the amount of R$ 2,321, was released in May 2009, and the remaining ones will be deposited to the extent there is financial and budget availability. A share of 1% of the funds will be allocated to cover inspection and supervision expenses. The principal amount of this debt will be subject to interest of 6.37% p.a., due on the 15th day of each month, including the months of the grace period. The outstanding balance will be paid to FINEP in 49 monthly and successive installments, the first one due on December 15, 2010, and the last one on December 15, 2014.

To secure the contract, COPEL Geração e Transmissão has authorized Banco do Brasil to withhold the amounts due to FINEP from the checking account in which its monthly revenues are deposited.

 

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2)     Loan agreement no. 02070790-00, signed on November 28, 2007 to partially cover expenses incurred in the preparation of the "Transmission Research and Development Project for 2007".

The total credit amounts to R$ 3,535. The first installment, in the amount of R$ 844, was released in October 2008, the second one, in the amount of R$ 2,451, was released in December 2009, and the remaining ones will be deposited to the extent there is financial and budget availability. A share of 1% of the funds will be allocated to cover inspection and supervision expenses. The principal amount of this debt will be subject to interest of 6.13 % p.a., due on the 15th day of each month, including the months of the grace period. The outstanding balance will be paid to FINEP in 49 monthly and successive installments, the first one due on December 15, 2010, and the last one on December 15, 2014.

To secure the contract, COPEL Geração e Transmissão has authorized Banco do Brasil to withhold the amounts due to FINEP from the checking account in which its monthly revenues are deposited.

g)BNDES - COPEL Geração e Transmissão

On March 17, 2009, COPEL Geração e Transmissão signed with BNDES Loan Agreement no. 08.2.0989.1, with COPEL as a intervening agent, to fund the construction of the Mauá Hydroelectric Power Plant and its transmission system, in consortium with Eletrosul. The loan amounts to R$ 169,500, which will be released in installments as funds are required and pursuant to BNDES' financial scheduling.

This loan will be paid off in 192 monthly installments, starting on February 15, 2012 and ending on January 15, 2028, bearing interest of 1.63% above the Long-Term Interest Rate (TJLP), which will be paid quarterly during the grace period and monthly after the first payment of the principal amount.

As a guarantee for the payment of all amounts due under this agreement, COPEL Geração e Transmissão has pledged in favor of BNDES a lien on all the revenues from the sale of energy under Agreements for Energy Trade on the Regulated Power Market (“Contratos de Compra de Energia no Ambiente Regulado” or CCEARs) in connection with this project, which shall be collected in a special main account for this purpose. The Company shall also set up two "reserve accounts" to cover any shortfalls in the main account. This guarantee will be operated under an Agreement on Revenue Transfer and Attachment, Account Management, and Other Covenants signed by COPEL Geração e Transmissão, BNDES, and Banco do Brasil.

The first release of funds took place in July 2009, in the amount of R$ 55,748, and the second one, in February 2010, in the amount of R$ 29,193.

 

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The contract contains provisions on accelerated maturity in certain conditions.

h)Banco do Brasil – Transfer of BNDES funds

On April 16, 2009, COPEL Geração e Transmissão signed with Banco do Brasil Loan Agreement no. 21/02000-0, with COPEL as an intervening agent, to fund the construction of the Mauá Hydroelectric Power Plant and its transmission system, in consortium with Eletrosul. The loan amounts to R$ 169,500, which will be released in installments pursuant to the Uses and Sources Schedule attached to the agreement.

This loan will be paid off in 192 monthly installments, starting on February 15, 2012 and ending on January 15, 2028, bearing interest of 2.13% above the Long-Term Interest Rate (TJLP), which will be paid quarterly during the grace period and monthly after the first payment of the principal amount. As a guarantee for the payment of all amounts due under this agreement, COPEL Geração e Transmissão has pledged in favor of Banco do Brasil a lien on all the revenues from the sale of energy under Agreements for Energy Trade on the Regulated Power Market (“Contratos de Comercialização de Energia no Ambiente Regulado” or CCEARs) in connection with this project, which shall be collected in a special main account for this purpose. The Company shall also set up two "reserve accounts" to cover any shortfalls in the main account. This guarantee will be operated under an Agreement on Revenue Transfer and Attachment, Account Management, and Other Covenants signed by COPEL Geração e Transmissão, BNDES, and Banco do Brasil.

The first release of funds took place in August 2009, in the amount of R$ 55,748, and the second one, in March 2010, in the amount of R$ 29,193.

The contract contains provisions on accelerated maturity in certain conditions.

19.        Debentures

    Current    Noncurrent 
    liabilities    liabilities 
  30.06.2010  31.03.2010  30.06.2010  31.03.2010 
  Total  Total     
Debentures - Parent Company  18,699  4,518  600,000  600,000 
  18,699  4,518  600,000  600,000 

 

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Changes in the balances of debentures

  Current  Noncurrent  Consolidated 
Balances  liabilities  liabilities  total 
As of December 31, 2009  54,195  753,384  807,579 

Interest 

30,286  -  30,286 

Transfers 

153,384  (153,384)  - 

Amortization - principal amounts 

(177,908)  -  (177,908) 

Amortization - charges on principal amounts 

(10,140)  -  (10,140) 

Amortization - interest 

(31,118)  -  (31,118) 
As of June 30, 2010  18,699  600,000  618,699 
 
 
 
 
  Current  Noncurrent  Consolidated 
Balances  liabilities  liabilities  total 
As of December 31, 2008  195,000  802,116  997,116 

Interest 

46,246  -  46,246 

Monetary variation 

23  243  266 

Transfers 

15,947  (15,947)  - 

Amortization - principal amounts 

(140,570)  -  (140,570) 

Amortization - charges on principal amounts 

(411)  -  (411) 

Amortization - interest 

(61,606)  -  (61,606) 
As of June 30, 2009  54,629  786,412  841,041 

A single series of 60,000 debentures makes up the fourth issue of simple debentures conducted by the Parent Company on September 1, 2006, in the amount of R$ 600,000, and concluded on October 6, 2006, with full subscription in the total amount of R$ 607,899, with a five-year term from issue date and final maturity on September 1, 2011. These are simple, nominative debentures, non-convertible into stock, issued in book-entry form, and unsecured.

These securities yield interest on their face value of 104% of the average one-day Interfinance Deposit (DI - over) rates, extra-group, expressed in an annual percentage rate based on 252 business days, calculated and published daily by CETIP (the “DI rate”) in exponential and cumulative “pro rata tempore” manner according to the number of business days elapsed. Interest corresponding to the capitalization period is due and paid semi-annually, with the first due date on March 1, 2007 and the last on September 1, 2011.  There will be no renegotiation of these debentures.

The resources obtained with the issue of these debentures were used to optimize the Company’s debt profile, by means of payment of its financial obligations, and to reinforce its cash flow. The resources from this issue were used to settle 1/3 of the principal amount of the Company's 3rd issue of debentures, due on February 1, 2007, and the principal amount of the Company’s 2nd issue of debentures, due on March 1, 2007.

 

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The debentures feature provisions setting forth accelerated maturity in the cases described in COPEL’s financial statements as of December 31, 2009.

ELEJOR, in compliance with the changes and conditions contained in the first amendment to its debenture contract, paid off in advance, on March 5, 2010, all the remaining debentures held by BNDESPAR, in the amount of R$ 181,239. The full outstanding debt to BNDESPAR has been paid.

20.        Suppliers

     
      Consolidated 
    30.06.2010  31.03.2010 
Charges for the use of the power grid       

Use of the Basic Network 

  64,902  64,774 

Energy transmission 

  4,266  4,235 

Use of connections 

  274  274 
    69,442  69,283 
Electricity suppliers       

Eletrobrás (Itaipu) 

  80,263  79,263 

Companhia Hidro Elétrica do São Francisco - Chesf 

  32,247  35,292 

Furnas Centrais Elétricas S.A. 

  35,836  34,918 

Mechanism for the Offsetting of Surpluses and Deficits - MCSD 

  12,356  13,340 

Companhia Energética de São Paulo - Cesp 

  13,175  12,361 

Rio Pedrinho Energética S.A. and Consórcio Salto Natal Energética S.A. 

  12,691  11,986 

Centrais Elétricas do Norte do Brasil S.A. - Eletronorte 

  10,458  11,346 

Itiquira Energética S.A. 

  9,457  10,475 

Companhia Energética de Minas Gerais - Cemig 

  4,973  5,170 

Dona Francisca Energética S.A. 

  4,936  5,100 

Cia. Estadual de Geração e Transmissão de Energia Elétrica S.A. - CEEE 

  3,682  4,030 

Utilities - CCEE (Note 33) 

  11,570  3,899 

Light S.A. 

  2,747  3,006 

Other suppliers 

  20,470  24,728 
    254,861  254,914 
Materials and services       

Petróleo Brasileiro S.A. - Petrobras - gas purchase by Compagas 

  27,549  26,259 

Petróleo Brasileiro S.A. - Petrobras - renegotiation (a) 

  45,851  44,827 

Petróleo Brasileiro S.A. - Petrobras - renegotiation - noncurrent (a) 

  160,477  168,103 

Other suppliers 

  147,602  162,127 
    381,479  401,316 
    705,782  725,513 
  Current  545,305  557,410 
  Noncurrent  160,477  168,103 

 

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a)Petróleo Brasileiro S.A. – Petrobras - renegotiation

On March 6, 2006, COPEL signed an agreement with Petrobras to settle the pending issues regarding the gas purchase agreement for the Araucária Thermal Power Plant. This settlement comprised the signature of an Out-of-Court Agreement, under which COPEL Generation, with COPEL as guarantor, acknowledged a R$ 150,000 debt to Petrobras, as grantor of Compagas’ credits to COPEL Generation, which shall be paid in 60 monthly installments restated by the Selic rate, starting in January 2010.

On May 30, 2006, COPEL Generation signed a Mutual Release Agreement with Compagas under which both companies fully and irrevocably release each other from all obligations and rights under the Natural Gas Purchase and Sale Agreement signed by them on May 30, 2000 and terminated on May 31, 2005, renouncing any claims against each other, on any grounds, as of the date of the Out of Court Settlement and Confession of Indebtedness signed by them and by Petrobras, with the participation of COPEL. The debt acknowledged by COPEL Generation remains.

b)Main power purchase agreements

The table below features the main power purchase agreements signed in the regulated power trading environment. These contracts are shown at original value and are restated annually according to the IPCA inflation index.

  Period of  Purchased power  Date of  Average purchase 
  supply  (annual avg. MW)  auction  price (R$/MWh) 
Auction of power from existing facilities         

1st Auction - 2005 Product 

2005 to 2012  942.92  07.12.2004  57.51 

1st Auction - 2006 Product 

2006 to 2013  450.88  07.12.2004  67.33 

1st Auction - 2007 Product 

2007 to 2014  9.79  07.12.2004  75.46 

2nd Auction - 2008 Product 

2008 to 2015  67.65  02.04.2005  83.13 

4th Auction - 2009 Product 

2009 to 2016  43.25  11.10.2005  94.91 

5th Auction - 2007 Product 

2007 to 2014  160.04  14.12.2006  104.74 
    1,674.53     
Auction of power from new facilities         

1st Auction - 2008 Hydro Product 

2008 to 2037  3.61  16.12.2005  106.95 

1st Auction - 2008 Thermal Product 

2008 to 2022  28.56  16.12.2005  132.26 

1st Auction - 2009 Hydro Product 

2009 to 2038  3.26  16.12.2005  114.28 

1st Auction - 2009 Thermal Product 

2009 to 2023  41.59  16.12.2005  129.26 

1st Auction - 2010 Hydro Product 

2010 to 2039  66.32  16.12.2005  114.57 

1st Auction - 2010 Thermal Product 

2010 to 2024  64.30  16.12.2005  121.81 

3rd Auction - 2011 Hydro Product 

2011 to 2040  57.66  10.10.2006  120.86 

3rd Auction - 2011 Thermal Product 

2011 to 2025  54.22  10.10.2006  137.44 

4th Auction - 2010 Thermal Product 

2010 to 2024  18.32  26.07.2007  134.64 

5th Auction - 2012 Hydro Product 

2012 to 2041  52.50  16.10.2007  129.14 

5th Auction - 2012 Thermal Product 

2012 to 2026  117.27  16.10.2007  128.37 

6th Auction - 2011 Thermal Product 

2011 to 2025  51.07  17.09.2008  128.42 

7th Auction - 2013 Hydro Product 

2013 to 2042  12.24  30.09.2008  98.98 

7th Auction - 2013 Thermal Product 

2013 to 2027  303.99  30.09.2008  145.23 

Santo Antonio 

2012 to 2041  106.00  10.12.2007  78.87 

Jirau 

2013 to 2042  141.51  19.05.2008  71.37 
    1,122.42     

 

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21.        Payroll, Social Charges, and Labor Accruals

   
    Consolidated 
  30.06.2010  31.03.2010 
Payroll     

Profit sharing 

-  64,995 

Taxes and social contributions 

19,911  19,489 

Payroll, net 

2,196  1,133 

Assignments to third-parties 

2  28 
  22,109  85,645 
Labor accruals     

Paid vacation and annual bonus ("13th salary") 

70,202  55,155 

Social charges on paid vacation and annual bonus ("13th salary") 

22,036  17,199 

Profit sharing 

30,539  15,306 

Voluntary redundancy program 

9,832  - 
  132,609  87,660 
  154,718  173,305 

22.        Post-Employment Benefits

The consolidated and recognized amounts in liabilities, under Post-Employment Benefits, are summarized below:

 

      Consolidated 
      Total 
    30.06.2010  31.03.2010 
Pension Plan (a)       
Benefits Plan - Plan III (DB)    8,656  8,340 
    8,656  8,340 
Healthcare Plan (b)    372,521  369,032 
    381,177  377,372 
  Current  23,807  20,930 
  Noncurrent  357,370  356,442 

The consolidated amounts recognized in the statement of operations are shown below:

 

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The annual estimated cost of pension plans I and II for 2010, calculated by an independent actuary, resulted in income due to the actuarial gains which are being amortized and whose amounts exceed the regular periodic cost of the plans.

Changes in the post-employment benefits balance

    Consolidated 
  30.06.2010  30.06.2009 
Pension plan - periodic post-employment cost  -  (61,332) 
Pension plan (DB)  26,659  25,924 
Pension plan (DB) - management  176  95 
Healthcare plan - post-employment  13,912  13,338 
Healthcare plan contributions  14,514  13,668 
Healthcare plan contributions - management  4  2 
  55,265  (8,305) 
(-) Transfers to construction in progress  (3,586)  (3,522) 
  51,679  (11,827) 

 

  Current  Noncurrent  Consolidated 
Balances  liabilities  liabilities  Total 
As of December 31, 2009  22,505  352,976  375,481 

Appropriation of actuarial calculation 

-  13,912  13,912 

Pension and healthcare contributions 

41,353  -  41,353 

Transfers 

9,518  (9,518)  - 

Amortizations 

(49,569)  -  (49,569) 
As of June 30, 2010  23,807  357,370  381,177 

  Current  Noncurrent  Consolidated 
Balances  liabilities  liabilities  Total 
As of December 31, 2008  22,066  425,879  447,945 

Appropriation of actuarial calculation 

-  (47,994)  (47,994) 

Pension and healthcare contributions 

39,689  -  39,689 

Transfers 

5,951  (5,951)  - 

Amortizations 

(46,512)  -  (46,512) 
As of June 30, 2009  21,194  371,934  393,128 

a)Pension Plan

The Company and its subsidiaries sponsor retirement and pension plans (Pension Plans I, II, and III).

Pension Plans I and II are defined benefit plans, while Plan III is a defined contribution plan.

The cost shares borne by the plans’ sponsors are recorded according to an actuarial assessment prepared annually by independent actuaries pursuant to the rules of CVM Ruling no. 371/00. The actuarial and financial assumptions for purposes of actuarial assessment are discussed with the independent actuaries and approved by the sponsors’ senior management.

 

56


 
 

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. Based on legal opinions by external and internal legal experts who reviewed specific clauses of this agreement and concluded that the corresponding liabilities had expired, the Company notified the senior management of Fundação COPEL de Previdência e Assistência Social, on July 27, 2007, that no contribution payments would be made under that agreement as of August 2007.

In September 2007, Fundação COPEL disputed COPEL's interpretation, which led to a joint request for review and ruling by the State Department of Supplemental Pension Plans (SPC). After the submission of requested clarifications and the conduction of an actuarial audit recommended by the SPC in November 2007, in October 2008 the SPC requested further clarifications about the report and the opinion of the consulting company in charge of the audit, which had been submitted by the COPEL Foundation in July 2008. On May 20, 2010, The National Supplemental Pension Plan Supervision Office (PREVIC, formerly SPC) issued a letter in response to COPEL’s request, stating that the debt in question is of actuarial nature rather than financial nature, so that it must be annually reviewed by an actuary.

b)Healthcare Plan

The Company and its subsidiaries allocate resources for the coverage of healthcare 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.

23.        Regulatory Charges

    Consolidated 
  30.06.2010  31.03.2010 
Fuel Consumption Account - CCC  18,807  18,807 
Energy Development Account - CDE  16,998  20,942 
Global Reversal Reserve - RGR  14,173  7,077 
  49,978  46,826 

 

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24.        Research and Development and Energy Efficiency

COPEL’s balances allocated to Research and Development and Energy Efficiency are broken down below:

  Applied and used -  Payable  Balance to be  Balance as of  Balance as of 
  projects in progress  amount  used in projects  30.06.2010  31.03.2010 
Research and Development - R&D           

FNDCT 

-  2,470  -  2,470  1,391 

MME 

-  1,236  -  1,236  696 

R&D 

21,394  -  85,785  107,179  101,566 
  21,394  3,706  85,785  110,885  103,653 
Energy Efficiency Program - EEP  28,613  -  89,478  118,091  111,435 
  50,007  3,706  175,263  228,976  215,088 
      Current  114,633  112,779 
      Noncurrent  114,343  102,309 

Changes in the balances of R&D and EEP

  FNDCT  MME    R&D    EEP  Consolidated 
Balances  current  current  current  noncurrent  current  noncurrent  Total 
As of December 31, 2009  1,325  682  49,653  54,908  69,345  35,585  211,498 

Additions 

7,822  3,891  750  7,356  -  10,014  29,833 

SELIC interest rate 

-  -  502  3,324  -  3,156  6,982 

Payments 

(6,677)  (3,337)  -  -  -  -  (10,014) 

Concluded projects 

    (9,314)  -  (9)  -  (9,323) 
As of June 30, 2010  2,470  1,236  41,591  65,588  69,336  48,755  228,976 
 
 
 
 
  FNDCT  MME    R&D    EEP  Consolidated 
Balances  current  current  current  noncurrent  current  noncurrent  Total 
As of December 31, 2008  18,649  9,345  48,087  37,509  50,403  34,570  198,563 

Additions 

7,096  3,548  2,540  4,556  3,023  6,316  27,079 

SELIC interest rate 

-  -  1,353  2,328  1,236  2,233  7,150 

Transfers 

-  -  (3,509)  3,509  (4,263)  4,263  - 

Payments 

(23,534)  (11,770)  -  -    -  (35,304) 

Concluded projects 

-  -  (2,140)  -  (2,108)  -  (4,248) 
As of June 30, 2009  2,211  1,123  46,331  47,902  48,291  47,382  193,240 

 

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25.        Other Accounts Payable

    Consolidated 
  30.06.2010  31.03.2010 
Current liabilities     

Concession charge - ANEEL grant 

36,610  36,272 

Compensation for use of water resources 

19,408  20,573 

Collected public lighting charge 

18,015  21,082 

Reimbursement of customer contributions 

9,334  9,451 

Participation in consortia 

6,753  6,753 

Customers 

3,947  3,980 

Pledged collaterals 

3,245  2,840 

Reparations to the Apucaraninha Indian community 

2,686  2,659 

ANEEL inspection fee 

1,638  1,613 

Advance payments from customers 

1,401  3,591 

Other liabilities 

11,283  7,379 
  114,320  116,193 
Noncurrent liabilities     

Reparations to the Apucaraninha Indian community 

2,686  2,659 

Other liabilities 

357  357 
  3,043  3,016 

26.        Contingencies and Reserves for Litigation

The Company is a party to several lawsuits filed before different courts. COPEL’s senior management, based on the opinion of its legal counsel, has kept a reserve for litigation in connection with lawsuits which are likely to result in losses.

Consolidated  Balance as of Additions/  Additions to    Balance as of  Judicial  Net  Net 
  31.12.2009  (reversals)  P.,P.,&E.  Payments  30.06.2010  deposits  provision provision 
              30.06.2010 31.03.2010 
Labor  158,431  31,199  1  (4,970)  184,661  (25,847)  158,814  151,905 
Regulatory  37,010  (7)  -  -  37,003  -  37,003  37,055 
Civil:                 

Suppliers (a) 

84,024  2,123  -  -  86,147  (34,655)  51,492  62,203 

Civil and administrative claims 

57,213  (6,571)  -  (3,422)  47,220  (9,436)  37,784  33,315 

Easements (b) 

14,902  -  (5,040)  -  9,862  -  9,862  14,185 

Condemnation and property (b) 

125,339  -  6,665  (70)  131,934  -  131,934  129,260 

Customers 

5,324  181  -  (15)  5,490  (1,225)  4,265  3,962 

Environmental claims 

10  -  -  -  10  -  10  11 
  286,812  (4,267)  1,625  (3,507)  280,663  (45,316)  235,347  242,936 
Tax  77,858  13,389  -  -  91,247  (31,240)  60,007  54,464 
  560,111  40,314  1,626  (8,477)  593,574  (102,403)  491,171  486,360 

 

Parent Company  Balance as of      Balance as of  Judicial  Net  Net 
  31.12.2009  Additions  Payments  30.06.2010  deposits  provision  provision 
            30.06.2010  31.03.2010 
Regulatory claims  9,249  -  -  9,249  -  9,249  9,249 
Civil claims  328  6,265  (2,317)  4,276  -  4,276  4,198 
Tax claims  44,357  8,930  -  53,287  (31,214)  22,073  20,990 
  53,934  15,195  (2,317)  66,812  (31,214)  35,598  34,437 

 

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The amount tied to cases classified as possible losses, estimated by the Company and its subsidiaries as of June 30, 2010, reached R$ 2,068,656, of which R$ 108,208 correspond to labor claims; R$ 1,337,240 to regulatory claims; R$ 142,235 to civil claims; and R$ 480,973 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. 288/02, based on the opinion of its legal counsel, as discussed in Note 33 herein, under the title “Electric Energy Trading Chamber (CCEE)”.

For one of the tax claims included in the amount of R$ 480,993 described above, a court-ordered attachment of R$ 181,014 took place in April 2010.  Company management is making its best efforts to revert it. Its classification remains as possible loss.

The breakdown of the types of lawsuits in which COPEL is involved as of June 30, 2010 is consistent with the one featured in the Company's financial statements as of December 31, 2009.

a)Rio Pedrinho Energética S.A. and Consórcio Salto Natal Energética S.A.

COPEL Distribuição is disputing in court the validity of the terms and conditions of the power purchase and sale agreements signed with Rio Pedrinho Energética S.A. and Consórcio Salto Natal Energética S.A., based on the argument that they grant benefits to the selling companies that hurt the public interest. At the same time, both companies, after having rescinded the agreements, filed for arbitration before the Arbitration Chamber of Fundação Getúlio Vargas, which sentenced COPEL to the payment of contractual penalties for having caused the rescission of the agreement. COPEL 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 and on the current stage of the lawsuits, decided to set aside a reserve for litigation in the original amount of the debt, restated according to the original contractual terms, which amounted to R$ 98,838 as of June 30, 2010.

b)Easements, condemnation, and real estate

COPEL’s real estate claims comprise mostly cases of condemnation and easements, in which compensation is always mandatory pursuant to the Federal Constitution, which requires that the Federal Government pay just compensation, in cash, prior to condemnation of private property or to the imposition of restrictions on the use of property without transfer of title. Lawsuits are usually filed when parties fail to agree on the amount of compensation due.

 

60


 

Ivaí Engenharia de Obras S.A.

In a lawsuit filed by Ivaí Engenharia de Obras S.A., COPEL Geração e Transmissão 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.

In 2007, in light of the evaluation conducted by its Chief Legal Office, which estimates that a loss is probable, the Company set aside a reserve for litigation recorded against property, plant, and equipment, in the amount of R$ 118,058 as of June 30, 2010.

27.        Non-Controlling Shareholding Interests

Changes in non-controlling interests

        Consolidated 
Balances  Compagas  Elejor  UEG Araucária  Total 
As of December 31, 2009  92,823  30,461  130,253  253,537 

Funds for capital increase 

-  54,000  -  54,000 

Proposed dividends 

(853)  -  -  (853) 

Income for the quarter 

11,777  6,631  (3,082)  15,326 
As of June 30, 2010  103,747  91,092  127,171  322,010 
 
 
 
 
        Consolidated 
Balances  Compagas  Elejor  UEG Araucária  Total 
As of December 31, 2008  83,399  23,943  132,225  239,567 

Proposed dividends 

(3,520)  9  -  (3,511) 

Income for the quarter 

8,774  3,075  1,163  13,012 
As of June 30, 2009  88,653  27,027  133,388  249,068 

 

 

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28.        Stock Capital

As of June 30, 2010, Copel’s paid in share capital, represented by shares with no par value, was R$ 6,910,000. The different classes of shares and main shareholders are detailed below:

              In number of shares 
Shareholders  Common    Class A preferred  Class B preferred  Total   
    %    %    %    % 
State of Paraná  85,028,598  58.63  -  -  13,639  0.01  85,042,237  31.08 
BNDESPAR  38,298,775  26.41  -  -  27,282,006  21.28  65,580,781  23.96 
Eletrobrás  1,530,774  1.06  -  -  -  -  1,530,774  0.56 
Free float:                 

BM&FBOVESPA (1) 

19,470,777  13.42  127,327  32.31  60,667,059  47.31  80,265,163  29.33 

NYSE (2) 

148,036  0.10  -  -  40,037,162  31.22  40,185,198  14.69 

Latibex (3) 

-  -  -  -  193,171  0.15  193,171  0.07 
Municipalities  178,393  0.12  12,797  3.25  -  -  191,190  0.07 
Other shareholders  375,727  0.26  253,897  64.44  37,237  0.03  666,861  0.24 
  145,031,080  100.00  394,021  100.00  128,230,274  100.00  273,655,375  100.00 
(1) São Paulo Stock Exchange                 
(2) New York Stock Exchange                 
(3) The Market for Latin-American Securities in Euros, linked to the Madrid Stock Exchange

Each share entitles its holder to one vote in the general shareholders’ meetings. Preferred shares, which do not carry voting rights, are divided into classes A and B.

Class “A” preferred shares enjoy priority in the reimbursement of capital and in the right to non-cumulative annual dividends of 10%, calculated proportionately to the capital represented by the shares of this class.

Class “B” preferred shares enjoy priority in the reimbursement of capital and the right to the distribution of minimum dividends, calculated as 25% of adjusted net income, pursuant to the corporate legislation and to the Company’s by-laws, calculated proportionately to the capital represented by the shares of this class. Class “B” shareholders have priority only over the common shareholders in the distribution of mandatory dividends, which shall only be paid out of the remaining net income after the payment of priority dividends to class “A” shareholders.

According to Article 17 and following paragraphs of Federal Law 6,404/76, dividends paid to preferred shares must be at least 10% higher than those paid to common shares.

 

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29.        Gross Revenues from Sales and/or Services

   
    Consolidated 
  30.06.2010  30.06.2009 
Electricity sales to final customers     

Residential 

590,983  501,488 

Industrial 

582,011  509,859 

Commercial, services, and other activities 

382,069  332,417 

Rural 

76,643  67,720 

Government agencies 

50,904  44,379 

Public lighting 

39,009  35,662 

Public services 

35,970  32,520 

Installment for Adjustment of Network Charges 

1,167  1,886 
  1,758,756  1,525,931 
Electricity sales to distributors     

Agreements for Power Trade on the Regulated Market - CCEAR (auction) 

558,135  530,252 

Bilateral contracts 

109,784  93,372 

Electric Energy Trading Chamber - CCEE 

77,161  30,100 
  745,080  653,724 
Availability of the power grid     

Rate for the use of the distribution system (TUSD) 

   

Residential 

601,447  560,987 

Industrial 

523,570  492,188 

Commercial, services, and other activities 

391,438  369,101 

Rural 

77,984  75,728 

Government agencies 

51,839  49,644 

Public lighting 

39,750  39,893 

Public services 

36,637  36,378 

Free customers 

79,357  65,360 

Basic Network and basic interface network 

95,893  73,933 

Connection grid 

1,455  1,280 

Installment for Adjustment of Basic Network charges (a) 

(40,091)  5,951 
  1,859,279  1,770,443 
   
Telecommunications revenues  60,934  49,211 
     
Piped gas distribution  148,456  128,958 
Other operating revenues     

Leases and rents 

34,742  63,456 

Revenues from services 

17,062  20,366 

Charged services 

3,993  4,722 

Other revenues 

1,155  601 
  56,952  89,145 
  4,629,457  4,217,412 

a)Network charge adjustment share

In June 2010, COPEL Geração e Transmissão recorded R$ 40,091 as a network charge adjustment share resulting from revenue discrepancies between July 1, 2009 and June 30, 2010, pursuant to ANEEL Ratification Resolution no. 1008/10.

 

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30.        Deductions from Gross Revenues

   
    Consolidated 
  30.06.2010  30.06.2009 
Taxes and social contributions on revenues     

VAT (ICMS) 

974,040  847,565 

COFINS 

357,279  327,314 

PIS/PASEP 

77,564  71,059 

ISSQN 

902  903 
  1,409,785  1,246,841 
Regulatory charges     

Energy Development Account - CDE 

113,773  90,605 

Fuel Consumption Account - CCC 

84,824  99,886 

Global Reversal Reserve - RGR 

46,025  39,368 

Research and development and energy efficiency - R&D and EEP 

29,649  27,079 

Other 

6,350  143 
  280,621  257,081 
  1,690,406  1,503,922 

 

  Costs of    General and  Other revenues   
Nature of costs and expenses  goods and/or  Sales  administ.  (expenses),  Consolidated 
  services  expenses  expenses  net  Total 
          30.06.2010 
Energy purchased for resale (a)  (1,168,648)  -  -  -  (1,168,648) 
Charges for use of power grid (b)  (348,873)  -  -  -  (348,873) 
Personnel and management (c)  (294,507)  (2,470)  (76,865)  -  (373,842) 
Pension and healthcare plans (Note 22)  (40,677)  (278)  (10,724)  -  (51,679) 
Materials and supplies (d)  (32,674)  (725)  (4,100)  -  (37,499) 
Raw materials and supplies           

for power generation 

(10,882)  -  -  -  (10,882) 
Natural gas and supplies for gas business  (69,306)  -  -  -  (69,306) 
Third-party services (e)  (109,973)  (13,432)  (30,995)  -  (154,400) 
Depreciation and amortization  (185,958)  (4)  (13,601)  (1,915)  (201,478) 
Provisions and reversals (f)  -  (10,942)  -  (40,314)  (51,256) 
Other costs and expenses (g)  (15,732)  2,410  (21,455)  (82,623)  (117,400) 
  (2,277,230)  (25,441)  (157,740)  (124,852)  (2,585,263) 

31.        Operating Costs and Expenses

Consolidated operating costs and expenses are broken down below:

 

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Parent Company operating costs and expenses are broken down below:

  Costs of    General and  Other revenues   
Nature of costs and expenses  goods and/or  Sales  administ.  (expenses),  Consolidated 
  services  expenses  expenses  net  Total 
          30.06.2009 
Energy purchased for resale (a)  (764,182)  -  -  -  (764,182) 
Charges for use of power grid (b)  (264,664)  -  -  -  (264,664) 
Personnel and management (c)  (279,233)  (2,163)  (70,865)  -  (352,261) 
Pension and healthcare plans (Note 22)  7,338  (109)  4,598  -  11,827 
Materials and supplies (d)  (26,515)  (1,428)  (4,015)  -  (31,958) 
Raw materials and supplies           

for power generation 

(13,412)  -  -  -  (13,412) 
Natural gas and supplies for gas business  (69,085)  -  -  -  (69,085) 
Third-party services (e)  (103,540)  (12,207)  (27,259)  -  (143,006) 
Depreciation and amortization  (181,980)  (6)  (12,778)  (1,915)  (196,679) 
Provisions and reversals (f)  -  (10,579)  -  (40,144)  (50,723) 
Other costs and expenses (g)  (9,602)  2,068  (46,962)  (39,115)  (93,611) 
  (1,704,875)  (24,424)  (157,281)  (81,174)  (1,967,754) 

 

  General and  Other revenues  Parent 
Nature of costs and expenses  administrative  (expenses),  Company 
  expenses  net  Total 
      30.06.2010 
Management (c)  (3,638)  -  (3,638) 
Healthcare plan  (166)  -  (166) 
Materials and supplies  (7)  -  (7) 
Third-party services (e)  (2,491)  -  (2,491) 
Depreciation and amortization  -  (377)  (377) 
Provisions and reversals (f)  -  (15,195)  (15,195) 
Other expenses  (551)  165  (386) 
  (6,853)  (15,407)  (22,260) 
 
 
 
 
  General and  Other revenues  Parent 
Nature of costs and expenses  administrative  (expenses),  Company 
  expenses  net  Total 
      30.06.2009 
Management (c)  (3,610)  -  (3,610) 
Healthcare plan  (97)  -  (97) 
Materials and supplies  (8)  -  (8) 
Third-party services (e)  (2,500)  -  (2,500) 
Depreciation and amortization  -  (377)  (377) 
Provisions and reversals (f)  -  4,003  4,003 
Other expenses  (1,156)  437  (719) 
  (7,371)  4,063  (3,308) 

 

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a.     Energy purchased for resale

   
    Consolidated 
  30.06.2010  30.06.2009 

Eletrobrás - Centrais Elétricas Brasileiras S.A. (Itaipu) 

297,357  197,927 

Furnas Centrais Elétricas S.A. - auction 

172,205  152,101 

Companhia Hidro Elétrica do São Francisco - Chesf - auction 

161,077  144,900 

Electricity purchased for resale - CVA (1) 

155,983  (72,585) 

Companhia Energética de São Paulo - Cesp - auction 

62,122  54,476 

Itiquira Energética S.A. 

58,228  56,762 

Program for incentive to alternative energy sources - PROINFA 

55,025  26,403 

Centrais Elétricas do Norte do Brasil S. A. - Eletronorte - auction 

53,168  47,430 

Electric Energy Trading Chamber - CCEE 

40,249  72,221 

Dona Francisca Energética S.A. 

29,786  29,949 

Companhia Energética de Minas Gerais - Cemig - auction 

25,298  26,831 

Cia. Estadual de Geração e Transmissão de Energia Elétrica S.A. - CEEE - auction 

18,251  16,660 

Light S.A. - auction 

13,821  12,557 

Tractbel Energia S.A. - auction 

10,103  5,530 

(-) Pasep/Cofins tax on electricity purchased for resale 

(100,316)  (100,505) 

Other utilities - auction 

116,291  93,525 
  1,168,648  764,182 

1)     The variation in the balance, compared to the previous year, is due to actual prices under power agreements, particularly those for energy from thermal facilities, and to the realization of amounts recognized in the June 2009 rate review.

 

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b.    Charges for the use of the power grid

   
    Consolidated 
  30.06.2010  30.06.2009 

Furnas Centrais Elétricas S.A. 

65,232  57,708 

System service charges - ESS 

59,632  27,426 

Cia Transmissora de Energia Elétrica Paulista - Cteep 

34,430  31,156 

Companhia Hidro Elétrica do São Francisco - Chesf 

31,299  28,447 

Eletrosul Centrais Elétricas S.A. 

23,762  21,293 

Centrais Elétricas do Norte do Brasil S. A. - Eletronorte 

23,231  20,704 

Companhia Energética de Minas Gerais - Cemig 

14,759  10,328 

National System Operator - ONS 

10,529  10,198 

Novatrans Energia S.A. 

10,247  9,564 

TSN Transmissora Nordeste Sudeste de Energia S.A. 

10,230  9,536 

Cia Estadual de Geração e Transmissão de Energia Elétrica S.A. - CEEE 

9,211  8,342 

CVA - charges 

9,003  (9,131) 

Empresa Amazonense de Transmissão de Energia - Eate 

8,560  7,978 

ATE II Transmissora de Energia S.A. 

4,383  4,047 

Empresa Norte de Transmissão de Energia S.A. - Ente 

4,349  4,061 

Itumbiara Transmissora de Energia Ltda 

4,138  3,864 

Expansion Transmissora de Energia Elétrica S.A. 

3,964  3,699 

Empresa Transmissora de Energia Oeste Ltda - Eteo 

3,554  3,267 

STN Sistema de Transmissão Nordeste S.A 

3,490  3,260 

NTE Nordeste Transmissora de Energia S.A 

3,069  2,865 

ATE Transmissora Energia S.A 

2,730  2,688 

Integração Transmissão Energia-INTESA 

2,708  2,198 

ATE III Transmissora Energia S.A 

2,241  2,123 

Arthemis Transmissora de Energia S.A 

1,844  1,745 

Pasep/Cofins taxes on charges for the use of the power grid 

(31,757)  (29,527) 

Other utilities 

34,035  26,825 
  348,873  264,664 

c.     Personnel and management

       
  Parent Company    Consolidated 
  30.06.2010  30.06.2009  30.06.2010  30.06.2009 
Personnel         

Wages and salaries 

-  -  240,882  232,955 

Social charges on payroll 

-  -  88,134  81,764 
  -  -  329,016  314,719 

Provision for profit sharing 

-  -  32,545  32,986 

Meal assistance and education allowance 

-  -  29,642  26,978 

Compensation - voluntary redundancy/retirement 

-  -  13,706  14,994 
  -  -  404,909  389,677 

(-) Transfers to construction in progress 

-  -  (36,423)  (42,597) 
  -  -  368,486  347,080 
Management         

Wages and salaries 

2,881  2,885  4,495  4,378 

Social charges on payroll 

757  725  936  882 
  3,638  3,610  5,431  5,260 

(-) Transfers to construction in progress 

-  -  (75)  (79) 
  3,638  3,610  5,356  5,181 
  3,638  3,610  373,842  352,261 

 

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d.    Materials and Supplies

   
    Consolidated 
  30.06.2010  30.06.2009 

Materials for use in the electric system 

13,485  7,834 

Fuel and vehicle parts 

11,603  10,353 

Cafeteria supplies 

3,582  2,854 

Materials for use in civil construction 

2,212  1,260 

Office supplies 

2,188  2,916 

Service tools 

799  1,197 

Safety supplies 

945  1,055 

Lodging 

633  474 

Information technology equipment and supplies 

415  1,060 

Other materials and supplies 

1,637  2,955 
  37,499  31,958 

e.     Services from third-parties

       
    Parent Company    Consolidated 
  30.06.2010  30.06.2009  30.06.2010  30.06.2009 

Power grid maintenance 

-  -  42,324  36,618 

Meter reading and bill delivery 

-  -  14,658  15,350 

Authorized and registered agents 

-  -  11,715  10,396 

Technical, scientific, and administrative consulting 

851  689  9,465  13,383 

Data processing and transmission 

-  -  9,031  7,584 

Administrative support services 

-  -  8,394  7,704 

Security 

-  -  8,155  7,122 

Travel 

72  38  6,218  5,656 

Telephone services 

-  -  5,709  5,431 

Civil maintenance services 

-  -  5,192  2,968 

Maintenance of easement areas 

-  -  4,839  3,319 

Personnel training 

1  -  4,109  2,689 

Customer service 

-  -  3,601  2,189 

Services in "green areas" 

-  -  3,342  2,622 

Satellite communication services 

-  -  2,502  1,716 

Vehicle maintenance and repairs 

-  -  2,429  2,036 

Freight services 

-  -  2,057  1,883 

Telephone operator services 

-  -  1,731  1,499 

Postal services 

-  -  1,673  1,517 

Auditing 

1,094  1,115  1,615  1,629 

Advertising 

305    982  1,113 

Other services 

168  658  4,659  8,582 
  2,491  2,500  154,400  143,006 

 

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f.      Provisions and reversals

       
  Parent Company    Consolidated 
  30.06.2010  30.06.2009  30.06.2010  30.06.2009 
Allowance for doubtful accounts (ADA)         

ADA - customers and distributors (Note 5) 

-  -  10,812  10,000 

ADA - third-party services and other receivables 

-  -  130  579 
  -  -  10,942  10,579 
Reserve (reversal) for litigation (Note 26)         

Labor 

-  -  31,199  19,595 

Regulatory 

-  -  (7)  144 

Suppliers 

-  -  2,123  1,146 

Civil and administrative law 

6,265  (132)  (6,571)  22,310 

Customers 

-  -  181  282 

Environmental 

-  -  -  11 

Tax 

8,930  (3,871)  13,389  (3,344) 
  15,195  (4,003)  40,314  40,144 
  15,195  (4,003)  51,256  50,723 

g.    Other operating costs and expenses

   
    Consolidated 
  30.06.2010  30.06.2009 

Compensation for the use of water resources 

60,315  23,351 

Concession charge - ANEEL grant 

18,962  18,891 

Losses in the disposal and sale of assets 

10,162  4,990 

ANEEL Inspection Fee 

9,977  7,660 

Taxes 

7,766  6,193 

Leases and rents 

7,400  6,712 

Reparations 

6,952  33,715 

Insurance 

3,573  3,088 

Own power consumption 

3,096  3,015 

Advertising 

1,923  1,608 

Donations - Rouanet Law and children's and teenagers' rights fund - FIA 

1,850  1,342 

Cost and expense recovery 

(23,197)  (23,455) 

Other costs and expenses (revenues), net 

8,621  6,501 
  117,400  93,611 

 

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32.        Interest Income (Expenses), Net

       
    Parent Company    Consolidated 
  30.06.2010  30.06.2009  30.06.2010  30.06.2009 
Interest income         

Income from financial investments 

15,272  20,456  71,935  91,980 

Monetary variation of CRC transfer (Note 6) 

-  -  66,039  (13,286) 

Income from CRC transferred to State Gov. (Note 6) 

-  -  40,172  42,297 

Penalties on overdue bills 

-  -  35,227  39,177 

Interest on deferred regulatory assets (CVA) 

-  -  10,685  11,222 

Interest on taxes paid in advance 

3,107  1,488  4,220  3,601 

Fines 

-  -  4,884  5,681 

Interest and commissions on loan agreements 

39,236  40,294  -  - 

Other interest income 

4,504  342  7,091  7,644 
  62,119  62,580  240,253  188,316 
(-) Interest expenses         

Interest on loans and financing 

42,186  54,258  59,116  82,597 

PIS/PASEP and COFINS taxes on IOC 

345  347  745  734 

Monetary and exchange variations 

-  3  13,516  (3,300) 

Interest on tax installments 

4,826  -  7,642  - 

IOF tax 

9  -  6,882  4,606 

Interest on R&D and EEP 

-  -  6,982  7,150 

Interest on deferred regulatory liabilities (CVA) 

-  -  3,293  1,239 

Other interest expenses 

-  1  2,247  1,129 
  47,366  54,609  100,423  94,155 
  14,753  7,971  139,830  94,161 

33.        Spot Market (CCEE)

The Wholesale Energy Market or MAE has ceased its operations, and as a consequence its activities, assets, and liabilities were absorbed on November 12, 2004 by the Electric Energy Trading Chamber (CCEE or Spot Market), a private corporate entity subject to ANEEL regulation and inspection.

COPEL has not recognized as actual and final the data concerning the sale of electric energy by COPEL Distribuição on the Wholesale Energy Market (MAE or Spot Market), currently CCEE, in 2000, 2001, and the first quarter of 2002. These figures were calculated according to criteria and amounts that take into account decisions by the Regulatory Agency which have been challenged by the Company both administratively and judicially.

The Company's claim is substantially based on the fact that it conducted power sale transactions, which should not serve as basis for calculations made by the regulatory agency, only to fulfill contractual obligations to customers on the southeastern market. The estimated amount of discrepancies in calculation was approximately R$ 1,317,000 (restated as of June 30, 2010), which has not been recognized by the Company as a supplier liability.

 

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Based on the opinion of its legal counsel, management considers it possible that the final rulings in these lawsuits will be favorable to the Company.

Current transactions at CCEE(1)

  Copel           
  Geração e  Copel    UEG     
  Transmissão  Distribuição  Elejor  Araucária    Consolidated 
          30.06.2010  31.03.2010 
Current assets (Note 5)             

Until December 2009 

-  901  -  105  1,006  28,761 

From January through March 2010 

27,117  -  1,455  -  28,572  28,572 

From April through June 2010 

25,871  -  211  -  26,082  - 
  52,988  901  1,666  105  55,660  57,333 
Current liabilities (Note 20)             

From January through March 2010 

-  3,899  -  -  3,899  3,899 

From April through June 2010 

-  7,671  -  -  7,671  - 
  -  11,570  -  -  11,570  3,899 

Changes in the CCEE balances (1)

  Balances  Payments  Additions  Balances 
  31.03.2010      30.06.2010 
Current assets         

Until December 2009 

28,761  (27,755)  -  1,006 

From January through March 2010 

28,572  -  -  28,572 

From April through June 2010 

-  (7,580)  33,662  26,082 
  57,333  (35,335)  33,662  55,660 
(-) Current liabilities         

From January through March 2010 

3,899  -  -  3,899 

From April through June 2010 

-  (7,201)  14,872  7,671 
  3,899  (7,201)  14,872  11,570 
Net total  53,434  (28,134)  18,790  44,090 
 
 
(1) Unaudited information.         

34.        Financial Instruments

The use of financial instruments by the Company is restricted to Cash and Cash Equivalents, Customers and Distributors, Accounts Receivable from Government Agencies, Recoverable Rate Deficit (CRC) Transferred to the Government of the State of Paraná, Bonds and Securities, Collaterals and Escrow Accounts, Loans and Financing, Debentures, and Suppliers.

 

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a)     Market Value of Financial Instruments

The market values of the Company’s main financial instruments as of June 30, 2010, which were close to their carrying values, are shown below:

Financial instruments       
Consolidated  Market value    Book value 
  30.06.2010  30.06.2010  31.03.2010 

Cash and cash equivalents 

1,476,519  1,476,519  1,695,486 

Customers and distributors (1) 

1,023,129  1,023,129  1,029,922 

Accounts receivable from government agencies (1) 

140,307  140,307  137,673 

CRC transferred to State Government (2) 

1,296,238  1,296,238  1,275,734 

Bonds and securities (3) 

47,316  47,348  44,385 

Collaterals and escrow accounts - bonds (3) 

115,660  115,666  119,968 

Loans and financing (4) 

918,426  918,426  921,786 

Debentures (5) 

612,446  618,699  604,518 

Suppliers - Eletrobrás (Itaipu) (1) 

80,263  80,263  79,263 

Suppliers - Petrobras (Compagas) (1) 

27,549  27,549  26,259 

Other suppliers (1) 

597,970  597,970  619,991 

1)     Amounts recognized at nominal realization value and similar to market values.

2)     This amount represents the transfer to the Government of the State of Paraná of credits owed by the Federal Government, under a specific agreement, similar to a loan, yielding interest of 6.65% p.a., plus restatement according to the variation of the IGP-DI inflation index.  Thus, the value of this asset is determined by rates set by the market, and it is shown at present value.

3)     The market values of quotas in investment funds have been calculated according to criteria established by the respective by-laws and ratified by the managing banks.

4)     All loan agreements signed by the Company provide for restatement of balances according to market indicators. Thus, the balance of loans and financing is shown at present value.

5)     The market value of the Company’s debentures was calculated according to the Unit Price quote on June 30, 2010, obtained from the National Association of the Financial Market Institutions (ANDIMA).

 

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b)Risk Factors

1)     Credit risk

The Company’s credit risk comprises the possibility of losses due to difficulties in collecting payment of bills issued to customers, concession holders, and permission holders. This risk is closely tied to factors that are either internal or external to COPEL. To minimize this risk, the Company focuses on the management of receivables, detecting customer segments which are most likely not to pay their bills, suspending power supply, and implementing specific collection policies, tied to real estate or personal securities whenever possible.

Doubtful accounts are properly covered by provisions to offset potential losses in their realization.

2)     Foreign currency risk

This risk comprises the possibility of losses due to fluctuations in exchange rates, which may reduce assets or increase liabilities denominated in foreign currencies.

The Company’s foreign currency indebtedness is not significant and it is not exposed to foreign exchange derivatives. The Company monitors all relevant exchange rates.

The effect of the exchange rate variation resulting from the power purchase agreement with Eletrobrás (Itaipu) is recorded under the account for compensation of Portion A as invoices are paid and it is passed on to customers in COPEL Distribuição's annual rate reviews.

The exchange rate variation resulting from the purchase of gas from Petrobras by Compagas has a direct impact on the Company's results. Compagas continually negotiates with its customers, trying whenever possible to pass these costs on to them.

The Company’s exposure to foreign currency risk is shown below:

      Net 
  Assets  Liabilities  exposure 
      30.06.2010 

Collaterals and escrow accounts 

28,940  -  28,940 

Loans and financing 

-  (83,081)  (83,081) 

Suppliers 

     

Eletrobrás (Itaipu) 

-  (80,263)  (80,263) 

Petrobras (purchase of gas by Compagas) 

-  (27,549)  (27,549) 
  28,940  (190,893)  (161,953) 

 

73


 

Sensitivity analysis

The Company has developed a sensitivity analysis in order to measure the impact of the devaluation of the U.S. dollar on its loans and financing subject to exchange risk.

The baseline takes into account the existing balances in each account as of June 30, 2010, with the exchange rate of R$/US$ 1.80, and the likely scenario also takes into account an exchange rate (end of period) of R$/US$ 1.80, which is a market average projection for 2010 according to the Focus Report issued by the Brazilian Central Bank on July 2, 2010. The adverse and remote scenarios, take into account deterioration of 25% and 50%, respectively, compared to the likely scenario in the main risk factor for each financial instrument.

    Baseline  Likely  Adverse  Remote 
  Risk  30.06.2010  Scenario  Scenario  Scenario 
         
Financial Assets           

Collaterals and escrow accounts 

USD appreciation  28,940  28,940  36,175  43,410 
         
Financial Liabilities           

Loans and financing 

         

IDB (1) 

USD appreciation  19,225  19,225  24,030  28,836 

STN 

USD appreciation  63,832  63,832  79,789  95,747 

Eletrobrás 

USD appreciation  24  24  31  37 
    83,081  83,081  103,850  124,620 
(1) Calculation does not take into account the influence of fluctuations in the IDB currency basket       

3)     Interest rate and monetary variation risk

This risk comprises the possibility of losses due to fluctuations in interest rates or other indicators, which may reduce revenues or increase financial expenses in connection with assets and liabilities on the market.

The Company has not engaged in transactions with derivatives to cover this risk, but it has continued to monitor interest rates and market indicators, in order to assess the potential need for such transactions as a way of protecting against such risks.

The Company’s exposure to interest rate and monetary variation risks is shown below:

      Net 
  Assets  Liabilities  exposure 
      30.06.2010 

Financial investments 

1,412,232  -  1,412,232 

CRC transferred to State Government 

1,296,238  -  1,296,238 

Loans and financing 

-  (835,345)  (835,345) 

Debentures 

-  (618,699)  (618,699) 
  2,708,470  (1,454,044)  1,254,426 

 

74


 

Sensitivity analysis

The Company has developed a sensitivity analysis in order to measure the impact of variable interest rates and monetary variations on its financial assets and liabilities subject to these risks.

The baseline takes into account the existing balances in each account as of June 30, 2010, and the likely scenario takes into account the indicators (CDI/SELIC, IGP-DI, IGP-M, and TJLP) estimated as market average projections for 2010 according to the Focus Report issued by the Brazilian Central Bank on July 2, 2010. The adverse and remote scenarios, take into account deterioration of 25% and 50%, respectively, compared to the likely scenario in the main risk factor for each financial instrument.

    Baseline  Likely  Adverse  Remote 
Operation  Risk  30.06.2010  Scenario  Scenario  Scenario 
         
Financial assets           

Financial investments 

Lower CDI/SELIC  1,412,232  1,560,092  1,523,121  1,486,173 
 

CRC transferred to State Government 

Lower IGP-DI  1,296,238  1,339,864  1,312,122  1,284,379 
 
Financial liabilities           

Loans and financing 

         

Banco do Brasil 

Higher CDI  341,110  361,207  366,059  370,847 

Eletrobrás - Finel 

Higher IGP-M  192,344  193,603  194,459  195,315 

Eletrobrás - RGR 

No Risk (1)</