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10. BASIS OF CONSOLIDATION AND INVESTMENTS IN SUBSIDIARIES AND AFFILIATES
 12 Months Ended
Dec. 31, 2020
Basis Of Consolidation And Investments In Subsidiaries And Affiliates  
BASIS OF CONSOLIDATION AND INVESTMENTS IN SUBSIDIARIES AND AFFILIATES
10. BASIS OF CONSOLIDATION AND INVESTMENTS IN SUBSIDIARIES AND AFFILIATES

 

The accounting policies have been consistently applied to all consolidated companies. The consolidated financial statements for the years ended December 31, 2020 and 2019 include the following direct and indirect subsidiaries, joint ventures and joint operations, as well as the exclusive funds, as follows:

 

  Number of shares held by CSN in units Equity interests (%)        
Companies   12/31/2020   12/31/2019   Core business
             
Direct interest in subsidiaries: full consolidation            
CSN Islands VII Corp. 20,001,000 100.00   100.00    Financial transactions 
CSN Inova Ventures (1) 50,000 100.00   100.00    Financial transactions 
CSN Islands XII Corp. 1,540 100.00   100.00    Financial transactions 
CSN Steel S.L.U. 22,042,688 100.00   100.00    Equity interests and Financial transactions
TdBB S.A (*) - 100.00   100.00    Equity interests 
Sepetiba Tecon S.A.  254,015,052  99.99   99.99    Port services 
Minérios NacionalS.A.  141,719,295  99.99   99.99    Mining and Equity interests 
Companhia Florestal do Brasil 66,354,391  99.99   99.99    Reforestation 
Estanho de Rondônia S.A.  195,454,162  99.99   99.99    Tin Mining
Companhia Metalúrgica Prada  555,142,354  99.99   99.99    Manufacture of containers and distribution of steel products 
CSN Mineração S.A.   158,419,480  87.52   87.52    Mining
CSN Energia S.A.  43,149  99.99   99.99    Sale of electric power 
FTL - Ferrovia Transnordestina Logística S.A.   486,592,830  92.38   92.38    Railroad logistics 
Nordeste Logística S.A. 99,999  99.99   99.99    Port services 
CSN Inova Ltd.  - 100.00   100.00    Advisory and implementation of new development projec 
CSN Equipamentos S.A (2) - -   99.99    Rental of commercial and industrial machinery and equipment 
CBSI - Companhia Brasileira de Serviços de Infraestrutura 4,669,986  99.99   100.00    Equity interests and product sales and iron ore 
CSN Cimentos S.A.(3)  90  90.00   -    Manufacturing and sale of cement
             
Indirect interest in subsidiaries: full consolidation            
Lusosider Projectos Siderúrgicos S.A.   100.00   100.00    Equity interests and product sales 
Lusosider Aços Planos, S. A.    99.99    99.99    Steel and Equity interests 
CSN Resources S.A.   100.00   100.00    Financial transactions and Equity interests 
Companhia Brasileira de Latas     99.99    99.99    Sale of cans and containers in general and Equity interests 
Companhia de Embalagens Metálicas MMSA     99.67    99.67    Production and sale of cans and related activities 
Companhia de Embalagens Metálicas - MTM     99.67    99.67    Production and sale of cans and related activities 
CSN Steel Holdings 1, S.L.U.    100.00   100.00    Financial transactions, product sales and Equity interests 
CSN Productos Siderúrgicos S.L.    100.00   100.00    Financial transactions, product sales and Equity interests 
Stalhwerk Thüringen GmbH    100.00   100.00    Production and sale of long steel and related activities 
CSN Steel Sections UK Limited (4)       100.00    Sale of long steel 
CSN Steel Sections Polska Sp.Z.o.o    100.00   100.00    Financial transactions, product sales and Equity interests 
CSN Mining Holding, S.L    87.52    87.52    Financial transactions, product sales and Equity interests 
CSN Mining GmbH    87.52    87.52    Financial transactions, product sales and Equity interests 
CSN Mining Asia Limited     87.52    87.52    Commercial representation 
Lusosider Ibérica S.A.    100.00   100.00    Steel, commercial and industrial activities and equity interests 
CSN Mining Portugal, Unipessoal Lda.     87.52    87.52    Commercial and representation of products 
Companhia Siderúrgica Nacional, LLC   100.00   100.00    Import and distribution/resale of products 
CSN Cimentos S.A.(3)  10  10.00        Manufacturing and sale of cement
Direct interest in joint operations: proportionate consolidation            
Itá Energética S.A.  253,606,846  48.75    48.75    Electric power generation 
Consórcio da Usina Hidrelétrica de Igarapava    17.92    17.92    Electric power consortium 
             
Direct interest in joint ventures: equity method            
MRS Logística S.A. (5) 63,377,198  18.64    18.64    Railroad transportation 
Aceros Del Orinoco S.A.     31.82    31.82    Dormant company 
Transnordestina Logística S.A. (6) 24,670,093  47.26    47.26    Railroad logistics 
Equimac S.A (2) 1,117  50.00   -    Rental of commercial and industrial machinery and equipment 
             
Indirect interest in joint ventures: equity method            
MRS Logística S.A. (5)    16.30    16.30    Railroad transportation 
             
Direct interest in associates: equity method            
Arvedi Metalfer do Brasil S.A.  49,074,882  20.00    20.00    Metallurgy and Equity interests 
             
Exclusive funds: full consolidation            
Diplic II- Fundo de investimento multimercado crédito privado   100.00   100.00    Investment fund 
Caixa Vértice - Fundo de investimento multimercado crédito privado 100.00   100.00    Investment fund 
VR1 - Fundo de investimento multimercado crédito privado    100.00   100.00    Investment fund 

(*) Dormant companies.

 

  1. On June 29, 2020, CSN Islands XI Corp. changed its corporate name to CSN Inova Ventures.

 

  2. On June 26, 2020, CSN Equipamentos SA had its corporate name changed to Equimac SA and its capital increased by Unidas Guindastes Eireli. With this capital increase, CSN’s stake in Equimac’s share capital increased to 50% and was classified as joint venture.

 

  3. Company acquired on October 2, 2020.

 

  4. Company liquidated on March 11, 2020.

 

  5. As of December 31, 2020, the Company directly held 63,377,198 shares, of which 26,611,282 were common and 36,765,916 were preferred, and indirectly 63,338,872 shares, of which 25,802,872 were common and 37,536,000 were preferred

 

  6. As of December 31, 2020, the Company had 24,168,304 common shares and 501,789 Class B preferred shares.

 

10.a) Investments in joint ventures, joint operations, associates and other investments

 

The number of shares, the balances of assets and liabilities, shareholders’ equity and the profit / (loss) amounts for the period in those investees are as follows:

 

                12/31/2020               12/31/2019
Companies   Participation in         Participation in
  Assets   Liabilities   Shareholders’ equity   Profit /(Loss) for the period   Assets   Liabilities   Shareholders’ equity   Profit /(Loss) for the period
               
               
               
Joint-venture and Joint-operation                                
MRS Logística S.A.    4,175,249   2,567,882    1,607,367   160,371   4,145,205   2,616,218   1,528,987    187,597
Fair Value - MRS Logística S.A.           421,888    (11,747)            433,635   (11,747)
CSBI - Companhia Brasileira de Serviços de Infraestrutura  -               -    -       6,665
Transnordestina Logística S.A. (*)    4,657,691   3,497,587   1,160,104   (28,952)   4,398,434   3,209,378   1,189,056   (17,100)
Fair Value (*) - Transnordestina    -        271,116       -    -    271,116   -
Equimac S.A   7,536    301   7,235   (329)   -    -   -   -
     8,840,476    6,065,770    3,467,710   119,343    8,543,639    5,825,596    3,422,794   165,415
Associates                                
Arvedi Metalfer do Brasil S.A.   40,528   32,490   8,038    (6,765)   44,435   31,712   12,723    (1,682)
    40,528   32,490    8,038    (6,765)   44,435    31,712   12,723   (1,682)
Classified at fair value through profit or loss (note 12 I)                
Panatlântica           59,879                47,300    
            59,879               47,300    
                                 
Eliminations               (30,856)               (38,219)
                                 
Other investments                                
Others           279    (9,967)           157    171
             279    (9,967)           157    171
Total investments in affillated companies         3,535,906                3,484,974    
Total Equity in results of affillated companies        71,755             125,715
Investments properties            159,874               101,195    
Total investments           3,695,780                3,584,169    

(*) As of December 31, 2020 and December 31, 2019, the net balance of R$271,116 refers to the Fair Value generated by the loss of control of Transnordestina Logística SA in the amount of R$659,105 and impairment of R$387,989.

 

The number of shares, the balances of assets and liabilities, shareholders’ equity and the profit / (loss) values for the year refer to the interest held by CSN in these companies.

 

10.b) Changes in investments in subsidiaries, jointly controlled companies, joint operations, associates and other investments

 

      Consolidated
  12/31/2020   12/31/2019
   
Opening balance of investments 3,482,974   5,630,613
Capital increase/acquisition of shares   3,400     27,909
Dividends (1) (82,642)   (94,603)
Comprehensive income (2)  6,895     (2,592)
Equity in results of affiliated companies(3) 124,324   175,524
Update of shares measured at fair value through profit or loss (Note 14 II)   12,579    (118,780)
Reclassification of Usiminas’ shares       (2,114,620)
Consolidation of CBSI        (8,775)
Amortization of fair value - investment MRS (11,747)   (11,747)
Others  123   45
Closing balance of investments 3,535,906   3,482,974
  1. In 2020, it mainly refers to dividends of the subsidiary CSN Mineração SA in the amount of R$2,437,482 (R$4,060,816 on December 31, 2019).

 

  2. Refers to translation to the reporting currency of the foreign investments of which functional currency is not the Brazilian Reais, actuarial gain/loss and gain/loss on investment hedge from investments accounted for under the equity method.

 

  3. The table below shows the reconciliation of the equity in results of affiliated companies classified as joint venture and associates and the amount disclosed in the income statement and it is due to the elimination of the results of the CSN´s transactions with these companies.

 

      Consolidated
  12/31/2020   12/31/2019
   
Equity in results of affiliated companies      
MRS Logística S.A. 160,370   187,597
CBSI - Companhia Brasileira de Serviços de Infraestrutura (1)      6,695
Transnordestina Logística S.A. (28,952)   (17,100)
Arvedi Metalfer do Brasil S.A. (6,765)   (1,682)
Equimac S.A. (329)    
Others     14
  124,324   175,524
Eliminations      
To cost of sales  (46,751)   (57,908)
To taxes 15,895   19,689
Others      
Amortizated at fair value - Investment in MRS (11,747)   (11,747)
Others (9,966)   157
Equity in results  71,755   125,715

(1) Refers to equity income until November 30, 2019, as of this date, the joint venture started to be controlled and consolidated, according to note 10 c.

 

10.c)Additional information on operating controlled companies

 

With the primary objective of reducing the Company’s financial leverage, Management is committed to a plan to dispose of a set of assets, however, it is not possible to confirm that the sale within a period of 12 months is highly probable for any of the assets contemplated in the plan. The Company considers several sales scenarios that vary according to different macroeconomic and operational assumptions. In this context, the Company did not segregate and did not reclassify such assets in the financial statements as discontinued operations in accordance with IFRS 5.

 

•       SEPETIBA TECON SA (“Tecon”)

 

It aims to explore Container Terminal No. 1 at the Port of Itaguaí, located in Itaguaí, in the State of Rio de Janeiro. The terminal is connected to the UPV by the Southeastern railway network, which is granted to MRS Logística SA The services provided are handling operations and storage of containers, steel products and cargo in general, among other products and services for washing, maintenance and hygiene of containers.

 

Tecon won a bidding procedure and entered into the lease agreement in October 23, 1998 for operation of the port terminal for a period of 25 years, extendable for an equal period.

 

Upon termination of the lease, all rights and benefits transferred to Tecon will return to the Federal Government, together with the assets owned by Tecon and those resulting from investments made by it in leased assets, declared reversible by the Federal Government as they are necessary for the continuity of the provision. of the service granted. The assets declared reversible will be indemnified by the Federal Government at the residual value of their cost, determined by Tecon’s accounting records after deducting depreciation.

 

•       ESTANHO DE RONDÔNIA SA (“ERSA”)

 

Headquartered in the state of Rondônia, the subsidiary operates two units, one in the city of Itapuã do Oeste / RO and the other in Ariquemes / RO. Mining is located in Itapuã do Oeste, where cassiterite (tin ore) is extracted, and in Ariquemes, the foundry where metallic tin is obtained, which is the raw material used at UPV for the manufacture of metal sheets.

 

•       COMPANHIA METALÚRGICA PRADA (“Prada”)

 

Prada operates in two segments: metal steel packaging and flat steel processing and distribution.

 

Packaging

 

In the steel metallic packaging segment, Prada produces the best and safest in cans, buckets and aerosols. It serves the chemical and food segments, providing packaging and lithography services to the main companies in the market.

 

Distribution

 

Prada also operates in the flat steel processing and distribution area, with a diversified product line. Supplies coils, rolls, plates, strips, blanks, metal sheets, profiles, tubes and tiles, among other products, for the most different segments of the industry - from automotive to civil construction. It is also specialized in providing steel processing services, meeting the demand of companies from all over the country.

 

•       CSN ENERGIA S.A.

 

Its main objective is the distribution of the excess electric power generated by CSN and Companies, consortiums or other entities in which CSN holds an interest.

 

•       FTL - FERROVIA TRANSNORDESTINA LOGÍSTICA SA (“FTL”)

 

Company created for the purpose of incorporating the spun-off portion of Transnordestina Logística SA It operates public cargo transportation services in the northeast of Brazil, in the stretches between the cities of São Luís and Altos, Altos and Fortaleza, Fortaleza and Sousa, Sousa and Recife / Jorge Lins, Recife / Jorge Lins and Salgueiro, Jorge Lins and Propriá, Paula Cavalcante and Cabedelo (Branch of Cabedelo) and Itabaiana and Macau (Branch of Macau) (“Malha I”)

 

On November 13, 2019, CSN subscribed FTL shares through the capitalization of credits arising from Advances for Future Capital Increase (AFAC) in the amount of R$27,670, passing its interest in FTL’s capital from 91.69% to 92.38%. As a result of the operations described above, which caused a change in shareholder participation, the Company recorded a loss in the amount of R$293, recorded in shareholders’ equity under “Other comprehensive income” There was no change in the corporate structure in 2020.

 

•       CSN MINERAÇÃO S/A (“CSN Mineração”)

 

Headquartered in Congonhas, in the State of Minas Gerais, CSN Mineração SA has as its main objective the production, purchase and sale of iron ore, and has the foreign market as its main focus in the commercialization of its products. As of November 30, 2015, CSN Mineração SA started to centralize CSN’s mining operations, including the establishments of the Casa de Pedra mine, the TECAR port and an 18.63% stake in MRS. CSN’s interest in this subsidiary is 87.52% as of December 31, 2020.

 

• MINÉRIOS NACIONAL SA (“Minérios Nacional”)

 

Headquartered in Congonhas, in the State of Minas Gerais, Minérios Nacional has as main objective the production and sale of iron ore. The subsidiary concentrates the mining rights assets related to the Fernandinho, Cayman and Pedras Pretas mines, all in Minas Gerais transferred to Minérios Nacional SA in the business combination operation that took place in 2015.

 

•       CBSI - COMPANHIA BRASILEIRA DE INFRASTRUCTURE SERVICES (“CBSI”)

 

Previously located in the city of Araucária-PR, CBSI is currently headquartered in the city of Volta Redonda and its main purpose is to render services to CSN, CSN’s subsidiaries and third parties related to the recovery and maintenance of industrial machinery and equipment, civil maintenance, industrial cleaning, preparation product logistics, among others.

 

The investment is the result of a joint venture between CSN and CKTR Brasil Serviços Ltda. in 2011 which previously held a 50% stake. On November 29, 2019, the Company completed the acquisition of the remaining 50% of CBSI’s shares for R$24,000. The goodwill for expected future profitability generated on the acquisition was R$15,225 and is separately classified within Investments in non-current assets.

 

10.d) Joint ventures and joint operations financial information

 

The balance sheet and income statement balances of the companies whose control is shared are shown below and refer to 100% of the companies’ results:

 

                12/31/2020           12/31/2019
    Joint-Venture    Joint-Operation    Joint-Venture   Joint-Operation
Equity interest (%)   MRS Logística   Transnordestina Logística   Equimac S.A.   Itá Energética   MRS Logística   Transnordestina Logística   Itá Energética
  34.94%   47.26%   50.00%   48.75%   34.94%   47.26%   48.75%
Balance sheet                            
 Current Assets                             
Cash and cash equivalents   1,206,484   1,390    1,351   48,919    670,296    17,166   65,793
Advances to suppliers    27,312   1,948       742   20,100   3,240    363
Other current assets   823,204    51,793   2,356   89,521    1,326,281    59,405   15,955
Total current assets   2,057,000    55,131    3,707    139,182    2,016,677    79,811   82,111
 Noncurrent Assets                             
Other non-current assets   608,878   225,492   -   20,807    789,562   258,391   24,361
Investments, PP&E and intangible assets   8,537,009   9,574,588   11,365    390,672    8,316,033   8,968,447   426,403
Total non-current assets   9,145,887   9,800,080   11,365    411,479    9,105,595   9,226,838   450,764
Total Assets   11,202,887   9,855,211   15,072    550,661   11,122,272   9,306,649   532,875
                             
 Current Liabilities                             
Borrowings and financing    828,439   241,029            653,784   103,877    
Lease liabilities   317,526                256,034        
Other current liabilities   1,117,975   125,794    602   19,721    1,561,684   171,821   16,793
Total current liabilities   2,263,940   366,823    602   19,721    2,471,502   275,698   16,793
 Noncurrent Liabilities                             
Borrowings and financing    2,162,657   6,368,070            2,369,615   6,084,424    
Lease liabilities   1,674,594                1,650,758        
Other non-current liabilities   788,862   665,653       15,900    527,871   430,603   16,550
Total non-current liabilities   4,626,113   7,033,723       15,900    4,548,244   6,515,027   16,550
Shareholders’ equity   4,312,834   2,454,665   14,470    515,040    4,102,526   2,515,924   499,532
Total liabilities and shareholders’
equity		   11,202,887   9,855,211   15,072    550,661   11,122,272   9,306,649   532,875

 

                01/01/2020 to 12/31/2020   01/01/2019 to 11/30/2019           01/01/2019 to 12/31/2019
    Joint-Venture   Joint-Operation       Joint-Venture       Joint-Operation
Equity interest (%)   MRS Logística   Transnordestina Logística   Equimac S.A.   Itá Energética   CBSI   MRS Logística   Transnordestina Logística   Itá Energética
  34.94%   47.26%   50.00%   48.75%   50.00%   34.94%   46.30%   48.75%
Statements of Income                                
Net revenue     3,604,965    35     2,308    173,426   267,436   3,200,809        163,048
Cost of sales and services   (2,521,991)        (2,386)    (74,048)    (233,830)    (2,382,828)        (83,129)
Gross profit     1,082,974    35   (78)   99,378     33,606   817,981       79,919
Operating (expenses) income    (105,267)     (42,108)    (576)    (67,885)   (12,328)   207,840   (18,077)    (62,660)
Financial income (expenses), net   (330,756)     (19,186)     (4)   (764)     (1,460)    (268,089)   (18,386)     1,183
Income before income tax and social
contribution		     646,951     (61,259)    (658)   30,729     19,818   757,732   (36,463)   18,442
Current and deferred income tax
and social contribution		 (216,649)         -    (10,391)     (6,428)    (254,378)       (6,147)
Profit / (loss) for the period     430,302     (61,259)    (658)   20,338     13,390   503,354   (36,463)   12,295

 

•       ITÁ ENERGÉTICA SA - (“ITASA”)

 

ITASA is a corporation established in July 1996 that was engaged to operate under a concession, the Itá Hydropower Plant (“UHE Itá”), with 1,450 MW of installed power, located on the Uruguay River, on the Santa Catarina and Rio Grande do Sul state border. The UHE Itá concession is shared with ENGIE Brasil Energia S.A., with CSN holding 48.75%.

 

•       MRS LOGISTICA S.A.

 

Located in the city of Rio de Janeiro-RJ, the company aims to exploit, for an onerous concession, the public service of railway cargo transportation in the areas of the Southeast Network, located on the Rio de Janeiro, São Paulo and Minas Gerais axis, previously held by the extinct Rede Ferroviária Federal SA - RFFSA. The concession has a term of 30 years from December 1, 1996, extendable for an equal period by exclusive decision of the grantor.

 

MRS can also explore modal transport services related to rail transport and participate in projects aimed at expanding the rail services granted.

 

For the provision of services, MRS leased from RFFSA, for the same period of the concession, the assets necessary for the operation and maintenance of rail freight transport activities. At the end of the concession, all leased assets will be transferred to the possession of the railway transport operator designated in that same act.

 

The Company directly holds an 18.64% interest in the capital of MRS and indirectly, through its subsidiary CSN Mineração SA, a 16.30% interest in the capital of MRS, totaling a 34.94% interest.

 

•       CONSÓRCIO DA USINA HIDRELÉTRICA DE IGARAPAVA

 

The Igarapava Hydroelectric Plant is located in Rio Grande, in the city of Conquista - MG, and has an installed capacity of 210 MW, formed by 5 Bulb-type generating units.

 

CSN holds 17.92% of the investment in the consortium, whose object is the distribution of electricity, which is distributed according to the percentage of participation of each company.

 

The balance of property, plant and equipment, net of depreciation on December 31, 2020 is R$21,287 (R$22,441 on December 31, 2019) and the expense amount in 2020 was R$6,611 (R$6,497 in 2019).

 

•       TRANSNORDESTINA LOGÍSTICA SA (“TLSA”)

 

Its main objective is the exploration and development of the public rail freight transport service in the Northeast network of Brazil, comprising the stretches of Eliseu Martins-Trindade, Trindade-Salgueiro, Salgueiro-Porto Suape, Salgueiro - Missão Velha and Missão Velha - Pecém (Malha II).

 

It is in the pre-operational phase and should remain so until the completion of Mesh II. The approved schedule, which provided for the completion of the work for January 2017, is currently under discussion with the responsible bodies, as described in note 31.b. Its Management understands that new deadlines for the completion of the project will not substantially negatively imply the expected return on investment.

 

In May 2019, the Northeast Investment Fund - FINOR transferred to CSN, BNDES and BNDESPAR, 1,677,816 (one million six hundred and seventy-seven thousand, eight hundred and sixteen) class “B preferred shares, of which 501,789 (five hundred and one thousand, seven hundred and eighty-nine) shares were transferred specifically to CSN. As of December 31, 2020 and 2019, the Company’s interest in the capital of TLSA is 47.26% of the total capital and 92.60% of the voting capital.

 

Management relies on resources from its shareholders and third parties to complete the work, as described in item 31.b, which it expects to be available, based on previously concluded agreements and recent discussions between the parties involved. After evaluating this matter, Management concluded that the use of the project’s business continuity accounting basis in the preparation of the financial statements for the year ended December 31, 2020 was considered appropriate.

 

In this sense, TLSA performed a recoverability test of its own long-lived assets using the discounted cash flow method. To carry out the test, TLSA adopted the following main premises:

 

Measurement of recoverable value

 

Cash Flow Projection By 2057
Gross margin Estimated based on market study to capture cargo and operating costs according to market trend studies
Cost estimate Study-based costs and market trends
Perpetuity growth rate Growth rate was not considered as a result of the projection model until the end of the concession.
Discount rate Range from 5.83% to 7.41% in real terms

 

Additionally, CSN, as an investor, carried out its impairment test of its interest in TLSA through the ability to distribute dividends by TLSA, a methodology known as the Dividend Discount Model, or DDM, to remunerate the capital invested by its shareholders. For the performance of this test, some factors were taken into account, such as:

 

  • The dividend flow was extracted from TLSA’s nominal cash flow;
  • The dividend flow was calculated considering the percentages of annual participation, considering the dilutions of CSN’s participation resulting from the amortization of debts;
  • This dividend flow was then discounted to present value using the cost of equity (Ke) embedded in TLSA’s WACC rate; and
  • This extracted Ke was the one calculated in “rolling WACC” From TLSA.

 

Due to the sharing of investors’ risks and the fact that the asset being tested represents the cash-generating unit itself, which in turn equals the legal entity, the risk determined by CSN’s Management is the same as that applied by TLSA when evaluation of the investment of its own assets, with no additional risk factor to the model.

 

As a result of the test carried out, it was not necessary to record losses due to impairment of this investment for the year ended December 31, 2020.

 

•       EQUIMAC SA

 

In August 2019, CSN Equipamentos SA was incorporated, which had its corporate name changed to Equimac SA (“Equimac”) on June 26, 2020. The joint venture Equimac was created through a partnership between Unidas Guindastes Eireli and CSN, each with a 50% stake in its share capital. Equimac is located in the city of São Paulo and its main objective is to rent commercial and industrial machinery and equipment.

 

10.e) Additional information on indirect participation in abroad operations

 

•STAHLWERK THÜRINGEN GMBH (“SWT”)

 

SWT was formed from the defunct Maxhütte steel industrial complex in the city of Unterwellenborn in Germany. SWT produces steel profiles used for civil construction in accordance with international quality standards. Its main raw material is steel scrap, and its installed production capacity is 1.1 million tons of steel / year. SWT is a wholly and indirectly controlled company through CSN Steel SLU, a CSN subsidiary.

 

•COMPANHIA SIDERURGICA NACIONAL - LLC (“CSN LLC”)

 

Incorporated in 2001 with the assets and liabilities of the defunct Heartland Steel Inc., CSN LLC, an industrial plant in Terre Haute, State of Indiana - USA, where is the complex composed of cold rolling, hot coil stripping line and line of galvanizing, its installed production capacity is 800 thousand tons / year. CSN LLC is wholly and indirectly controlled through CSN Steel SLU after the merger, formerly CSN Americas SLU, a subsidiary of CSN.

 

On June 5, 2018, CSN LLC had its corporate name changed to “Heartland Steel Processing, LLC”. On the same date, a new company was created under the name “Companhia Siderúrgica Nacional, LLC”, a wholly owned subsidiary of Heartland Steel Processing, LLC. On June 28, 2018, Companhia Siderúrgica Nacional, LLC., Became a wholly-owned subsidiary of CSN Steel, and, on June 29, 2018, Heartland Steel Processing, LLC. was sold to Steel Dynamics, Inc. (“SDI”) for the base transaction price of US$400 million.

 

The new “Companhia Siderúrgica Nacional, LLC” is an importer and trader of steel products and maintains its activities in the United States.

 

•LUSOSIDER AÇOS PLANOS, SA (“Lusosider”)

 

Founded in 1996, in continuity with Siderurgia Nacional - a company privatized by the Portuguese government that year, Lusosider is the only Portuguese industry in the steel sector to produce cold-rolled flat steel with an anti-corrosion coating. Lusosider has an installed capacity of around 550 thousand tons / year to produce four major groups of steel products: galvanized sheet, cold rolled sheet, pickled sheet and oiled sheet. The products manufactured by Lusosider can be applied in the packaging industry, civil construction (tubes and metallic structures) and in home appliance components.

 

10.f) Other investments

 

•       PANATLÂNTICA SA (“Panatlântica”)

 

Publicly-held corporation headquartered in Gravataí-RS, whose purpose is the industrialization, trade, import, export and processing of steel and metals, ferrous or non-ferrous, coated or not. This investment is classified at fair value through profit or loss.

 

The Company currently holds 11.31% on December 31, 2020 and 2019) of Panatlântica’s total share capital.

 

•       USINAS SIDERÚRGICAS DE MINAS GERAIS SA - USIMINAS (“USIMINAS”)

 

USIMINAS is headquartered in Belo Horizonte, State of Minas Gerais, with the objective of exploring the steel industry and related companies. USIMINAS produces flat-rolled steel at the Intendente Câmara and José Bonifácio de Andrada e Silva plants, located in Ipatinga / MG and Cubatão / SP, respectively, for the domestic and export markets. It also owns and operates iron ore mines located in the city of Itaúna / MG, which aims to meet the strategies of verticalization and optimization of production costs. USIMINAS maintains service and distribution centers located in various regions of the country, in addition to the ports of Cubatão in São Paulo and Praia Mole in Espírito Santo, as strategic points for the flow of its production.

 

On April 9, 2014, CADE issued a decision regarding the Usiminas shares held by CSN, and CSN signed a Performance Commitment Term (“TCD”), with CADE in this regard. Pursuant to the decision of CADE and TCD, CSN must reduce its participation in USIMINAS, within a specified period. The term and percentage of reduction are confidential. In addition, political rights at Usiminas will remain suspended until the Company reaches the limits established in the TCD.

 

In December 2019, the Company opted to reclassify the investment measured at fair value through profit or loss to current assets through a new decision by Management regarding the maintenance of shares in line with its asset sale strategy.

 

USIMINAS is listed on the São Paulo Stock Exchange (“B3 SA”: USIM3 and USIM5).

 

As of December 31, 2020 and December 31, 2019, the Company’s stake in USIMINAS ‘capital was 15.19% in common shares and 20.29% in preferred shares.

 

•       ARVEDI METALFER DO BRASIL SA (“Arvedi”)

 

Arvedi, headquartered in Salto, State of São Paulo, is engaged in pipe production. As of December 31, 2020 and 2019, CSN had a 20.00% interest in Arvedi’s share capital.

 

Accounting Policy

 

Equity method of accounting

 

The equity method of accounting for subsidiaries, jointly controlled and affiliated companies is applied. Other investments are held at fair value or cost.

 

Subsidiaries: They are entities in which the Company has significant influence over its financial and operating policies and / or potential exercisable or convertible voting rights. Subsidiaries are fully consolidated from the date on which control is transferred to the Company and cease to be consolidated on the date on which control ceases.

 

Jointly Controlled: are all entities in which the Company has jointly contractually controlled control with one or more parties and can be classified as follows:

 

Joint operations: are accounted for in the financial statements to represent the Company’s contractual rights and obligations.

 

Jointly controlled entities: are accounted for using the equity method and are not consolidated.

 

Affiliates: are all entities in which the Company has significant influence, but not control. Usually, 20% to 50% voting interest investments in associates are initially recognized at cost and subsequently measured using the equity method.

 

Exclusive funds

 

The exclusive funds are private investment funds in which CSN’s resources are allocated according to the Company’s intention. They are managed by BNY Mellon Serviços Financeiros DTVM SA and Caixa Econômica Federal (CEF).

 

Transactions between subsidiaries, affiliates, joint ventures and joint operations

 

Unrealized balances and gains on transactions with subsidiaries, joint ventures and associates are eliminated proportionally to CSN’s interest in the entity in question in the consolidation process. Unrealized losses are eliminated in the same way as unrealized gains, but only insofar as there is no evidence of impairment. The effects on the results of transactions with jointly controlled subsidiaries are also eliminated, where part of the equity in results of jointly controlled entities is reclassified to financial expenses, cost of products sold and income and social contribution taxes.

 

The subsidiaries and jointly controlled entities have the same reporting date and accounting policies as those adopted by the Company.

 

Foreign currency transactions and balances

 

The transactions in foreign currencies are translated into the functional currency using the exchange rates in effect at the dates of the transactions or valuations when their values are remeasured. Foreign exchange gains and losses resulting from the settlement of those transactions and from the translation at exchange rates in effect as of December 31, 2019 related to monetary assets and liabilities denominated in foreign currencies are recognized in the income statement as financial result, except when they are recognized in shareholders' equity as a result of foreign operation characterized as foreign investment.

 

According to IAS 21 and IFRIC 22 – foreign currency transactions and advance consideration, the transactions in which the Company recognizes a non-monetary asset or non-monetary liability involving prepayments or receipts in foreign currency are recorded at the exchange rate of the date the entity initially recognized (transaction date) the non-monetary asset or non-current liability monetary.

 

Impairment testing

 

Investments are reviewed for verification of impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset's carrying amount exceeds its recoverable amount.

 

  10.g) Investment property

 

The balance of investment properties as of December 31, 2020 is shown below:

 

            Consolidated
    Land   Buildings    Total
Balance at December 31, 2019     68,877     32,318    101,195
Cost     68,877     53,816    122,693
Accumulated depreciation          (21,498)     (21,498)
Balance at December 31, 2019     68,877     32,318    101,195
Acquisitions     28,733     32,864   61,597
Depreciation         (2,786)   (2,786)
Write-off        (132)   (132)
Balance at December 31, 2020     97,610     62,264    159,874
Cost     97,610     86,548    184,158
Accumulated depreciation         (24,284)    (24,284)
Balance at December 31, 2020     97,610     62,264    159,874

 

The Company’s estimate of the fair value of investment properties was of R$1,863,563 at December 31, 2020 (R$1,781,019 at December 31, 2019).

 

The average estimated useful lives for the years are as follows (in years):

 

      Consolidated
  12/31/2020   12/31/2019
Buildings 27   21

 

Accounting Policy

 

The Company’s investment properties consist of land and buildings maintained to earn rental income and capital appreciation. The measurement method used is that of the acquisition or construction cost less accumulated depreciation and reduction to its recoverable value, when applicable. The accumulated depreciation of buildings is calculated using the straight-line method based on the estimated useful life of the properties subject to depreciation. Land is not depreciated because it has an indefinite useful life.