20-F

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

¨ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2011

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

¨ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-34129

CENTRAIS ELÉTRICAS BRASILEIRAS S.A. – ELETROBRAS

(exact name of registrant as specified in its charter)

BRAZILIAN ELECTRIC POWER COMPANY

(translation of registrant’s name into English)

Federative Republic of Brazil

(jurisdiction of incorporation or organization)

Avenida Presidente Vargas, 409 – 9^th floor, Edifício Herm. Stoltz – Centro, CEP 20071-003, Rio de Janeiro, RJ, Brazil

(address of principal executive offices)

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

Title of each class	Name of each exchange on which registered
American Depositary Shares, evidenced by American Depositary Receipts, each representing one Common Share	New York Stock Exchange
Common Shares, no par value*	New York Stock Exchange
American Depositary Shares, evidenced by American Depositary Receipts, each representing one Class B Preferred Share	New York Stock Exchange
Preferred Shares, no par value*	New York Stock Exchange

* Not for trading but only in connection with the registration of the American Depositary Shares pursuant to the requirements of the SEC.

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

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

The number of outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 2011 was:

1,087,050,297	Common Shares
146,920	Class A Preferred Shares
265,436,883	Class B Preferred Shares

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    ¨  Yes    x  No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    ¨  Yes    x  No

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  Yes    ¨  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ¨    No  x

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

Large accelerated filer  x    Accelerated filer  ¨    Non accelerated filer  ¨

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

U.S. GAAP  ¨    IFRS  x    Other  ¨

Indicate by check mark which financial statement item the registrant has elected to follow.    ¨  Item 17    x  Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.).    ¨  Yes    x  No

CONTENTS

	Page
ITEM 1. Identity of Directors, Senior Management and Advisers		7
ITEM 2. Offer Statistics and Expected Timetable		7
ITEM 3. Key Information		7
ITEM 4. Information on the Company		22
ITEM 4A. Unresolved Staff Comments		66
ITEM 5. Operating and Financial Review and Prospects		66
ITEM 6. Directors, Senior Management and Employees		88
ITEM 7. Major Shareholders and Related Party Transactions		93
ITEM 8. Financial Information		94
ITEM 9. The Offer and Listing		99
ITEM 10. Additional Information		108
ITEM 11. Quantitative and Qualitative Disclosures About Market risk		123
ITEM 12. Description of Securities Other than Equity Securities		123
ITEM 12.D. American Depositary Shares		123
ITEM 13. Defaults, Dividend arrearages and Delinquencies		124
ITEM 14. Material Modifications to the Rights of Security Holders and Use of Proceeds		124
ITEM 15. Controls and Procedures		124
ITEM 15T. Controls and Procedures		127
ITEM 16A. Audit Committee Financial Expert		127
ITEM 16B. Code of Ethics		127
ITEM 16C. Principal Accountant Fees and Services		127
ITEM 16D. Exemption from the Listing Standards for Audit Committees		128
ITEM 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers		128
ITEM 16F. Change in registrant’s certifying accountant		128
ITEM 16G. Corporate Governance		128
ITEM 17. Financial Statements		128
ITEM 18. Financial Statements		128
ITEM 19. Exhibits		129

- i -

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

In this annual report, unless otherwise indicated or the context otherwise requires, all references to “we,” “our,” “ours,” “us” or similar terms refer to Centrais Elétricas Brasileiras S.A. – Eletrobras and its consolidated subsidiaries.

We prepare our consolidated annual financial statements in compliance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

These consolidated financial statements are the second Eletrobras financial statements to be prepared in compliance with IFRS. Until December 31, 2009, our consolidated financial statements were prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). U.S. GAAP differs in certain respects from IFRS. When preparing our 2010 consolidated IFRS financial statements, management has amended certain accounting, valuation and consolidation methods in the U.S. GAAP financial statements to comply with IFRS. Reconciliations and descriptions of the effect of the transition from U.S. GAAP to IFRS are set out in Note 43 to the consolidated financial statements. We have also included a reconciliation of previous Brazilian GAAP to IFRS in Note 43 to our financial statements.

The last consolidated financial statements available under U.S. GAAP which were filed with the United States Securities and Exchange Commission were those for the year ended December 31, 2009.

Beginning in 2011, we adopted certain changes to the presentation of our financial statements in an effort to make the presentation of the financial statements of each company within our group more consistent. Accordingly, we added and deleted a limited number of line items in our balance sheet, income of statement and cash flow statement as of and for the years ended December 31, 2011 and 2010.

As a result of this change in presentation, for the year ended December 31, 2010, R$236 million of current assets were improperly classified as non-current assets. With respect to the income statement, for the year ended December 31, 2010, the subsidy of fuel account (“CCC”) was presented as an other operating expense, but it is now presented as other operating revenue, which resulted in a R$82 million decrease in operating expenses and a corresponding R$82 million increase in operating revenues. In our cash flow statement for the year ended December 31, 2010 and 2009, dividends received were originally classified as investing activities, and, due to the fact that we are a holding company, we now present them as operating activities. This resulted in a R$601 million decrease in investing activities in 2010 and a corresponding R$731 million increase in operating activities in 2009 as permitted by paragraph 14 of IAS 7. No conforming changes to our balance sheet or income statement as of and for the year ended December 31, 2009 were necessary with respect to this change in presentation.

In this annual report, the term “Brazil” refers to the Federative Republic of Brazil and the phrase “Brazilian Government” refers to the federal government of Brazil. The term “Central Bank” refers to the Central Bank. The terms “real” and “reais” and the symbol “R$” refer to the legal currency of Brazil. The terms “U.S. dollar” and “U.S. dollars” and the symbol “U.S.$” refer to the legal currency of the United States of America.

Certain figures in this document have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.

Terms contained within this annual report have the following meanings:

• Eletrobras Amazonas Energia, or Amazonas Energia: Amazonas Energia S.A., a distribution company wholly owned by Eletrobras and operating in the State of Amazonas. Amazonas Energia was formed in 2008 as a result of the merger between Ceam and Manaus Energia S.A.;

• ANDE: Administración Nacional de Electricidad;

• ANEEL: Agência Nacional de Energia Elétrica, the Brazilian Electric Power Agency;

• Average tariff or rate: total sales revenue divided by total MWh sold for each relevant period, including unbilled electricity. Total sales revenue, for the purpose of computing average tariff or rate, includes both gross billings before deducting VAT and other taxes and unbilled electricity sales upon which such taxes have not yet accrued;

• Basic Network: interconnected transmission lines, dams, energy transformers and equipment with voltage equal to or higher than 230 kV, or installations with lower voltage as determined by ANEEL;

1

• BNDES: Banco Nacional de Desenvolvimento Econômico e Social, the Brazilian Development Bank;

• Brazilian Corporate Law: Collectively, Law No. 6,404 of December 15, 1976, Law No. 9,457 of May 5, 1997 and Law No. 10,303 of October 31, 2001;

• Capacity charge: the charge for purchases or sales based on contracted firm capacity whether or not consumed;

• CCC Account: Conta de Consumo de Combustivel, or Fuel Consumption Account;

• CCEAR: Contratos de Comercialização de Energia no Ambiente Regulado, contracts for the commercialization of energy in the Regulated Market;

• CDE Account: Conta de Desenvolvimento Energetico, the energy development account;

• Ceam: Eletrobras Amazonas Energia, a distribution company that used to operate in the State of Amazonas. In March 2008, Ceam merged with Manaus Energia S.A. The resulting entity is Amazonas Energia S.A.;

• CGE: Câmara de Gestão da Crise de Energia Elétrica, the Brazilian Energy Crisis Management Committee;

• Eletrobras CGTEE, or CGTEE: Companhia de Geração Térmica de Energia Elétrica, a generation subsidiary of Eletrobras;

• CMN: Conselho Monetario Nacional, the highest authority responsible for Brazilian monetary and financial policy;

• CNEN: Comissão Nacional de Energia Nuclear S.A., the Brazilian national commission for nuclear energy;

• CNPE: Conselho Nacional de Política Energética, the advisory agency to the President of the Republic of Brazil for the formulation of policies and guidelines in the Energy sector;

• Concessionaires or concessionaire companies: companies to which the Brazilian Government transfers rights to supply electrical energy services (generation, transmission, distribution) to a particular region in accordance with agreements entered into between the companies and the Brazilian Government pursuant to Law No. 8,987 (dated February 1995) and Law No. 9,074 (the Power Sector Law, dated July 7, 1995) (together, the “Concessions Laws”);

• Distribution: the transfer of electricity from the transmission lines at grid supply points and its delivery to consumers through a distribution system. Electricity reaches consumers such as residential consumers, small industries, commercial properties and public utilities at a voltage of 220/127 volts;

• Distributor: an entity supplying electrical energy to a group of customers by means of a distribution network;

• DNAEE: Departamento National de Águas e Energia Elétrica, the Brazilian national department of water and electrical energy;

• Electricity Regulatory Law: Law No. 10,848 (Lei do Novo Modelo do Setor Elétrico), enacted on March 15, 2004, and which regulates the operations of companies in the electricity industry;

• Eletrobras Distribuição Alagoas, or Distribuição Alagoas: Companhia Energética de Alagoas, a distribution company operating in the State of Alagoas (Ceal);

• Cepel: Centro de Pesquisas de Energia Elétrica, a research center of the Brazilian electric sector;

• Eletrobras: Centrais Elétricas Brasileiras S.A. – Eletrobras;

2

• Eletrobras Chesf, or Chesf: Companhia Hidro Elétrica do São Francisco, a generation and transmission subsidiary of Eletrobras;

• Eletrobras Distribuição Acre, or Distribuição Acre: Companhia de Eletricidade de Acre, a distribution company operating in the State of Acre (Eletroacre);

• Eletrobras Distribuição Piauí, or Distribuição Piauí: Companhia Energética de Piauí, a distribution company operating in the State of Piauí (Cepisa);

• Eletrobras Distribuição Rondônia, or Distribuição Rondônia: Centrais Elétricas de Rondônia, a distribution company operating in the State of Rondônia (Ceron);

• Eletrobras Distribuição Roraima, or Distribuição Roraima, formally known as Boa Vista Energia S.A., a distribution company operating in the city of Boa Vista, in the State of Roraima;

• Eletrobras Eletronorte, or Eletronorte: Centrais Elétricas do Norte do Brasil S.A., a generation and transmission subsidiary of Eletrobras;

• Eletrobras Eletronuclear, or Eletronuclear: Eletrobras Termonuclear S.A., a generation subsidiary of Eletrobras;

• Eletrobras Eletropar, or Eletropar: Eletrobras Participações S.A., a holding company subsidiary created to hold equity investments (formerly, Light Participações S.A. – LightPar);

• Eletrobras Eletrosul, or Eletrosul: Eletrosul Centrais Elétricas S.A., a generation and transmission subsidiary of Eletrobras;

• Eletrobras Furnas, or Furnas: Furnas Centrais Elétricas S.A., a generation and transmission subsidiary of Eletrobras;

• Energy charge: the variable charge for purchases or sales based on actual electricity consumed;

• Environmental Crimes Act: Law No. 9,605, dated February 12, 1998;

• Final consumer (end user): a party who uses electricity for its own needs;

• FND: Fundo National do Desestatização, the national privatization fund;

• Free consumers: customers that were connected to the system after July 8, 1995 and have a contracted demand above 3 MW at any voltage level; or customers that were connected to the system prior to July 8, 1995 and have a contracted demand above 3 MW at voltage level higher than or equal to 69 kV;

• Gigawatt ( GW): one billion watts;

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

• High voltage: a class of nominal system voltages equal to or greater than 100,000 volts (100 kVs) and less than 230,000 volts (230 kVs);

• Hydroelectric plant or hydroelectric facility or hydroelectric power unity (HPU): a generating unit that uses water power to drive the electric generator;

• IGP-M: Indice Geral de Precos-Mercado, the Brazilian general market price index, similar to the retail price index;

• INB: Indústrias Nucleares Brasileiras, a Brazilian Government-owned company responsible for processing uranium used as power to provide electricity at Angra I and Angra II Nuclear Plants;

• Installed capacity: the level of electricity which can be delivered from a particular generating unit on a full-load continuous basis under specified conditions as designated by the manufacturer;

3

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

• Isolated system: generation facilities in the North of Brazil not connected to the national transmission grid;

• Itaipu: Itaipu Binacional, the hydroelectric generation facility owned equally by Brazil and Paraguay;

• Kilowatt (kW): 1,000 watts;

• Kilowatt Hour (kWh): one kilowatt of power supplied or demanded for one hour;

• Kilovolt (kV): one thousand volts;

• Megawatt (MW): one million watts;

• Megawatt hour (MWh): one megawatt of power supplied or demanded for one hour, or one million watt hours;

• Mixed capital company: pursuant to Brazilian Law No. 6,404 of December 15, 1976, a company with public and private sector shareholders, but controlled by the public sector;

• MME: Ministério de Minas e Energia, the Brazilian Ministry of Mines and Energy;

• MRE: Mercado Regulado de Energia, the Brazilian Energy Regulated Market;

• National Environmental Policy Act: Law No. 6,938, dated August 31, 1981;

• Northeast region: the States of Alagoas, Bahia, Ceará, Maranhão, Paraíba, Pernambuco, Piauí, Rio Grande do Norte and Sergipe;

• ONS: Operador Nacional do Sistema, the national system operator;

• Power Sector Law: Law No. 9,074 of July 7, 1997;

• Procel: Programa Nacional de Combate ao Desperdício de Energia Elétrica, the national electrical energy conservation program;

• Proinfa: Programa de Incentivo as Fontes Alternativas de Energia, the program for incentives to develop alternative energy sources;

• RGR Fund: Reserva Global de Reversão, a fund we administer, funded by consumers and providing compensation to all concessionaires for non-renewal or expropriation of their concessions used as source of funds for the expansion and improvement of the electrical energy sector;

• Selic rate: an official overnight government rate applied to funds traded through the purchase and sale of public debt securities established by the special system for custody and settlement;

• Small Hydroelectric Power Plants: power plants with capacity from 1 MW to 30 MW;

• Substation: an assemblage of equipment which switches and/or changes or regulates the voltage of electricity in a transmission and distribution system;

• TFSEE: Taxa de Fiscalização de Serviços de Energia Elétrica, the fee for the supervision of electricity energy services;

• Thermoelectric plant or thermoelectric power unity (TPU): a generating unit which uses combustible fuel, such as coal, oil, diesel natural gas or other hydrocarbon as the source of energy to drive the electric generator;

4

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

• TWh: Terawatt hour (1,000 Gigawatt hours);

• UBP Fund: Fundo de Uso de Bem Publico, the public asset use fund;

• U.S. GAAP: generally accepted accounting principles in the United States;

• Volt (V): the basic unit of electric force analogous to water pressure in pounds per square inch; and

• Watt: the basic unit of electrical power.

5

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This annual report includes certain forward-looking statements, including statements regarding our intent, belief or current expectations or those of our officers with respect to, among other things, our financing plans, trends affecting our financial condition or results of operations and the impact of future plans and strategies. These forward-looking statements are subject to risks, uncertainties and contingencies including, but not limited to, the following:

• general economic, regulatory, political and business conditions in Brazil and abroad;

• interest rate fluctuations, inflation and the value of the real in relation to the U.S. dollar;

• changes in volumes and patterns of customer electricity usage;

• competitive conditions in Brazil’s electricity generation, transmission and distribution markets;

• the effects of competition;

• our level of debt;

• the likelihood that we will receive payment in connection with account receivables;

• changes in rainfall and the water levels in the reservoirs used to run our hydroelectric power generation facilities;

• our financing and capital expenditure plans;

• our ability to serve our customers on a satisfactory basis;

• existing and future governmental regulation as to electricity rates, electricity usage, competition in our concession area and other matters;

• our ability to execute our business strategy, including our growth strategy;

• adoption of measures by the granting authorities in connection with our concession agreements;

• changes in other laws and regulations, including, among others, those affecting tax and environmental matters;

• future actions that may be taken by the Brazilian Government, our controlling shareholder;

• the outcome of our tax, civil and other legal proceedings; and

• other risk factors as set forth under “Item 3.D, Risk Factors.”

The forward-looking statements referred to above also include information with respect to our capacity expansion projects that are in the planning and development stages. In addition to the above risks and uncertainties, our potential expansion projects involve engineering, construction, regulatory and other significant risks, which may:

• delay or prevent successful completion of one or more projects;

• increase the costs of projects; and

• result in the failure of facilities to operate or generate income in accordance with our expectations.

The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect” and similar words are intended to identify forward-looking statements. We undertake no obligation to update publicly or revise any forward-looking statements as a result of new information, future events or otherwise. In light of these risks and uncertainties, the forward-looking information, events and circumstances discussed in this annual report might not occur. Our actual results and performance could differ substantially from those anticipated in our forward-looking statements.

6

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

Background

The selected financial information presented herein should be read in conjunction with our financial statements and related notes, which appear elsewhere in this annual report.

The following paragraphs discuss some important features of the presentation of the selected financial information and our financial statements. These features should be considered when evaluating the selected financial information.

A. Selected Financial Data

Consolidated Balance Sheet Information

	As of December 31,
	2011		2010		2009
	(R$ thousands)
Assets
Current
Cash and cash equivalents		4,959,787		9,220,169		8,617,294
Restricted cash		3,034,638		2,058,218		1,341,719
Marketable securities		11,252,504		6,774,073		7,662,640
Accounts Receivable		4,352,024		3,779,930		3,102,079
Financial asset of concession agreements		2,017,949		1,723,522		1,570,376
Loans and financings		2,082,054		1,359,269		1,926,193
Fuel consumption account – CCC		1,184,936		1,428,256		877,833
Investment remuneration		197,863		178,604		78,726
Taxes recoverable		1,947,344		1,825,905		1,326,933
Reimbursement rights		3,083,157		1,704,239		221,519
Warehouse (storeroom)		358,724		378,637		350,470
Stock of nuclear fuel		388,663		297,972		324,634
Prepaid expenses		46,322		40,418		58,765
Financial instruments		195,536		283,220		227,540
Other		1,561,171		1,517,439		1,114,505
Total current assets		36,662,672		32,569,871		28,801,226
Non-current
Long term assets
Reimbursement rights		500,333		371,599		99,178
Loans and financings		7,651,336		8,300,171		9,839,828
Accounts receivable		1,478,994		1,706,292		1,431,080
Marketable securities		398,358		769,905		687,188
Stock of nuclear fuel		435,633		523,957		755,434
Deferred tax assets		5,774,286		4,338,682		4,493,223
Judicial deposit		2,316,324		1,750,678		1,521,317
Fuel consumption account – CCC		727,136		785,327		1,173,580
Financial asset of concession of agreements		46,149,379		40,643,712
Financial instruments		185,031		297,020		228,020
Advances for future capital increase		4,000		7,141
Other		701,763		1,165,529		666,967
		66,322,573		60,660,013		59,996,755
Investments		4,570,959		4,724,647		5,288,107
Property, plant and equipment		53,214,861		46,682,498		41,597,605
Intangible assets		2,371,367		2,263,972		2,024,683
Total non-current assets		126,479,760		53,671,117		48,910,395
Total assets		163,142,432		146,901,001		137,708,376

7

	As of December 31,
	2011			2010			2009
				(R$ thousands)
Liabilities and shareholders’ equity
Current
Borrowings		4,005,326			1,868,465			1,115,274
Debentures		739,237			—			—
Compulsory loan		16,331			16,925			13,675
Suppliers		6,338,102			5,165,765			3,079,614
Advances from clients		413,041			341,462			63,400
Taxes and social contributions		1,032,521			1,102,672			963,365
Fuel consumption account – CCC		3,079,796			2,579,546			923,535
Shareholders’ remuneration		4,373,773			3,424,520			3,214,450
National Treasury Credits		109,050			92,770			76,036
Estimated liabilities		802,864			772,071			672,214
Reimbursement Obligations		1,955,966			759,214			857,001
Complementary pension plans		451,801			330,828			351,149
Provision for contingencies		240,190			257,580			252,708
Regulatory fees		901,692			584,240			589,433
Leasing		142,997			120,485			108,827
Concessions payable		35,233			25,098			—
Derivative financial instruments		269,718			237,209			40,050
Personnel voluntary dismissal		93,137			—			—
Research and development		274,722			219,538			240,684
Profit sharing		296,547			227,563			194,752
Other		552,765			243,560			513,680
Total current liabilities		26,124,809			18,369,511			13,269,847
Non-current
Borrowings		38,408,352			31,269,971			28,392,542
National Treasury credits		155,676			250,485			311,306
Debentures		279,410			710,536			—
Advances from clients		879,452			928,653			978,980
Compulsory loan		211,554			141,425			127,358
Decommission obligations		408,712			375,968			323,326
Fuel consumption account – CCC		954,013			785,327			1,344,380
Provision for contingencies		4,652,176			3,901,289			3,528,917
Complementary pension plans		2,256,132			2,066,702			1,992,012
Reimbursement obligations		1,475,262			1,091,271			435,548
Leasing		1,775,544			1,694,547			1,639,448
Shareholders’ remuneration		3,143,222			5,601,077			7,697,579
Concessions payable		1,234,426			1,089,726			761,131
Advances for future capital increase		148,695			5,173,856			4,712,825
Derivative financial instruments		197,965			303,331			228,020
Personnel voluntary dismissal		726,291			273,671			259,220
Research and development		370,714			284,820			261,909
Taxes and social contributions		1,902,522			1,217,649			1,273,890
Other		635,184			840,776			791,091
Total non-current liabilities		59,815,302			58,001,080			55,059,480
Shareholders’ equity
Share capital		31,305,331			26,156,567			26,156,567
Capital reserves		26,048,342			26,048,342			26,048,342
Profit reserves		18,571,011			17,329,661			15,663,924
Asset valuation adjustment		220,915			163,335			179,427
Additional Proposed Dividend		706,018			753,201			370,755
Other comprehensive income		(8,108	)		(146,992	)		827,491
Non-controlling shareholders’ interest		358,812			226,296			132,543
Total shareholders’ equity		77,202,321			70,530,410			69,379,050
Total liabilities and shareholders’ equity		163,142,432			146,901,001			137,708,376

8

Consolidated Income Statement

	For the year ended December 31,
	2011			2010			2009
				(R$ thousands)
Net operating revenue		29,532,744			26,832,085			23,140,905
Operating expenses
Personnel, supplies and services		7,670,716			7,370,713			6,486,218
Profit sharing for employees and management		317,035			296,270			284,534
Electricity purchased for reselling		3,386,289			4,315,084			3,581,396
Fuel for electricity production		162,673			252,502			756,285
Use of the grid		1,420,934			1,353,839			1,263,408
Remuneration and reimbursement		1,328,994			1,087,341			1,188,032
Depreciation and amortization		1,723,885			1,592,476			1,624,246
Construction		4,279,608			2,953,484			1,723,960
Operating provisions		2,848,749			2,497,262			2,140,406
Itaipu’s income to offset		655,290			441,057			669,675
Donations and contributions		289,964			261,006			237,978
Other		1,305,765			669,434			704,449
		25,389,902			23,090,468			20,660,585
Operating result before financial result		4,142,842			3,741,617			2,480,320
Financial result
Financial revenue
Revenue from interest, commissions and fees		757,450			781,872			1,035,487
Revenue from financial investments		1,664,517			1,537,435			1,464,782
Arrears surcharge on electricity		359,208			393,987			228,145
Monetary restatement		652,949			616,141			356,023
Exchange rate variation gain		669,731			—			—
Other financial revenues		158,471			394,890			736,766
Financial expenses
Debt charges		(1,708,670	)		(1,675,821	)		(1,758,473	)
Leasing charges		(350,861	)		(332,449	)		(213,470	)
Charges on shareholders’ resources		(1,178,989	)		(1,298,647	)		(1,468,713	)
Exchange rate variation loss		—			(431,497	)		(4,018,643	)
Other financial expenses		(789,353	)		(350,033	)		—
		234,453			(364,122	)		(3,638,097	)
Result/loss before participation in associates and other investments		4,377,295			3,377,495			(1,157,777	)
Result of participation in associates and other investments		482,785			669,755			1,571,032
Income before income tax and social contribution		4,860,080			4,047,250			413,255
Income tax		(796,252	)		(1,074,606	)		635,875
Social contribution on net income		(301,809	)		(419,659	)		201,010
Net income for the year		3,762,019			2,552,985			1,250,140
Attributable to controlling shareholders		3,732,565			2,247,913			911,467
Attributable to non-controlling shareholders		29,454			305,072			338,673
Net earning per share	R$	2.78		R$	2.25		R$	1.10

Brazilian Corporate Law and our by-laws provide that we must pay our shareholders mandatory dividends equal to at least 25% of our adjusted net income for the preceding fiscal year. In addition, our by-laws require us to give: (i) class “A” preferred shares a priority in the distribution of dividends, at 8% each year over the capital linked to those shares; and (ii) class “B” preferred shares that were issued on or after June 23, 1969 a priority in the distribution of dividends, at 6% each year over the capital linked to those shares. In addition, preferred shares must receive a dividend 10% over the dividend paid to the common shares.

9

The following table sets out our declared dividends for the periods indicated:

	Year
	2011(1)		2010(1)		2009(1)
	(R$)
Common Shares		1.23		0.83		0.41
Class A Preferred Shares		2.17		2.17		2.17
Class B Preferred Shares		1.63		1.63		1.63

(1) Interest on own capital.

The following table sets forth a summary of dividends/interest on own capital declared per share for the periods presented, both at the time declared and as adjusted for our 500:1 reverse stock split effected in 2007.

Dividend per Share

	Declared								Paid(2)
	On 12/31/2007				Equivalent on 08/20/2007(1)				On 06/15/2008				Equivalent on 08/20/2007(1)
	R$		U.S.$		R$		U.S.$		R$		U.S.$		R$		U.S.$
Common		0.40155520020		0.22670084130		0.40155520020		0.22670084130		0.41587767968		0.24648985282		0.41587767968		0.24648985282
Preferred A		2.01949731106		1.14012155539		2.01949731106		1.14012155539		2.09152777855		1.23964424997		2.09152777855		1.23964424997
Preferred B		1.51462298231		0.85509116599		1.51462298231		0.85509116599		1.56864583289		0.92973318687		1.56864583289		0.92973318687

	Declared								Paid(2)
	On 12/31/2008				Equivalent on 08/20/2007(1)				On 04/30/2009(3)				Equivalent on 08/20/2007(1)
	R$		U.S.$		R$		U.S.$		R$		U.S.$		R$		U.S.$
Common		1.484883733		0.635380288		1.484883733		0.635380288		1.548692924		0.662684178		1.548692924		0.662684178
Preferred A		2.174044374		0.930271448		2.174044374		0.930271448		2.267468532		0.970247553		2.267468532		0.970247553
Preferred B		1.630533280		0.697703586		1.630533280		0.697703586		1.703562217		0.728952596		1.703562217		0.728952596

	Declared				Paid				Declared				Paid
	On 12/31/2009				On 05/18/2010				On 12/31/2010				On 06/29/2011
	R$		U.S.$		R$		U.S.$		R$		U.S.$		R$		U.S.$
Common		0.4096631540		0.713305484		1.548692924		0.662684178		0.832245170		1.386686902		0.877358220		1.380084480
Preferred A		2.1740443750		3.785446066		2.267468532		0.970247553		2.174043683		3.622391585		2.291890859		3.605144321
Preferred B		1.6305332814		2.839084549		1.703562217		0.728952596		1.630533280		2.716794551		1.718918690		2.703859099

	Declared(4)
	On 12/31/2011
	R$		U.S.$
Common		1.231779162		2.310571353
Preferred A		2.178256581		4.085973695
Preferred B		1.633692440		3.064480279

(1) Adjusted to reflect the reverse stock split.

(2) Adjusted by Selic rate variation.

(3) General Stockholders Meeting.

(4) Expected to be paid in June 2012, pursuant to the Management Proposal filed with the CVM.

Exchange Controls and Foreign Exchange Rates

The Brazilian foreign exchange system allows the purchase and sale of foreign currency and the international transfer of reais by any person or legal entity, regardless of the amount, subject to certain regulatory procedures.

Since 1999, the Central Bank has allowed the real/U.S. dollar exchange rate to float freely, and since then, the real/U.S. dollar exchange rate has fluctuated considerably. Until early 2003, the value of the real declined relative to the U.S. dollar and then began to stabilize. The real appreciated against the U.S. dollar in 2004-2007. In 2008, as a result of the worsening of the global financial and economic crisis the real depreciated 31.9% against the U.S. dollar, and on December 31, 2008 the exchange rate of the real in relation to the U.S. dollar was R$2.34 per U.S.$1.00. In 2009, the real appreciated 25.5% against the U.S. dollar, due to improved economic conditions in Brazil. In 2010, the real appreciated 4.3% against the U.S. dollar. In 2011, the real depreciated 13.62% against the U.S. dollar. In the past, the Central Bank has intervened occasionally to control instability

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in foreign exchange rates. We cannot predict whether the Central Bank or the Brazilian Government will continue to allow the real to float freely or will intervene in the exchange rate market through a currency band system or otherwise. We cannot assure that the real will not depreciate substantially or continue to appreciate against the U.S. dollar in the near future.

The following table sets forth the period end, average, high and low selling rates published by the Central Bank expressed in reais per U.S.$ for the periods and dates indicated.

	Reais per U.S. Dollar
Year Ended	Period-end		Average(1)		Low		High
December 31, 2007		1.7713		1.9483		1.7325		2.1556
December 31, 2008		2.3370		1.8374		1.5593		2.5004
December 31, 2009		1.7412		1.9905		1.7024		2.4218
December 31, 2010		1.6662		1.7593		1.6554		1.8811
December 31, 2011		1.8758		1.6746		1.5345		1.9016

(1) Represents the average of month-end rates beginning with December of the previous period through last month of period indicated.

The following table sets forth the period end, high and low commercial market/foreign exchange market selling rates published by the Central Bank expressed in reais per U.S.$ for the periods and dates indicated.

	Reais per U.S. Dollar
Month	Period-end		Average		Low		High
November 2011		1.8109		1.7905		1.7270		1.8937
December 2011		1.8758		1.8369		1.7830		1.8758
January 2012		1.7391		1.7897		1.7389		1.8683
February 2012		1.7092		1.7184		1.7024		1.7376
March 2012		1.8221		1.7953		1.7152		1.8267
April 2012		1.8918		1.8548		1.8256		1.8918
May 2012 (through May 10, 2012)		1.9581		1.9347		1.9149		1.9581

Brazilian law provides that, whenever there is a serious imbalance in Brazil’s balance of payments or there are serious reasons to foresee a serious imbalance, temporary restrictions may be imposed on remittances of foreign capital abroad. We cannot assure you that such measures will not be taken by the Brazilian Government in the future. See “Item 3.D, Risk Factors – Risks Relating to Brazil.”

We currently maintain our financial books and records in reais. For ease of presentation, however, certain consolidated financial information contained in this annual report has been presented in U.S. dollars. See “Item 8, Financial Information.”

B. Capitalization and Indebtedness

Not applicable.

C. Reasons for the Offer and Use of Proceeds

Not applicable.

D. Risk Factors

Risks Relating to our Company

Some of our concessions are due to expire in 2015 and renewal of these concessions is not guaranteed; if we are unable to renew those concessions our results of operations would be materially adversely affected.

We carry out our generation, transmission and distribution activities pursuant to concession agreements entered into with the Brazilian Government through ANEEL. These concessions range in duration from 20 to 35 years. Our concession agreements with the earliest expiration dates are due to expire in 2015 and have already been renewed once (see “Item 4.B, Business Overview – Generation – Concessions”), with the exception of our concession agreement for Corumbá I, which expires in November 2014 and has not been previously renewed. Our concession agreement for Itumbiara, which expires in February 2020, and Corumbá I have contractual provisions allowing renewal of the concession since they have not been previously renewed. On May 10, 2011, ANEEL dismissed our request for extension of the concession period for our Xingó plant, and as of December 31, 2011 there has been no update as to this request. Eletrobras Furnas requested the renewal for a period of twenty-nine years of Serra da Mesa three years ago in accordance with the

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timeframe established by law. ANEEL has completed its review of this process and has issued a recommendation to the MME in favor of the renewal of the Serra da Mesa concession. As of the date of this report, we were awaiting approval from the MME. In our generation business, concessions expiring in 2015 or before represent approximately 31% of our total installed capacity as of December 31, 2011, and 87% and 38% of the installed capacity of our subsidiaries Eletrobras Chesf and Eletrobras Furnas, respectively. For a further discussion of Eletrobras Chesf and Eletrobras Furnas, see “Item 4.C, Organizational Structure.” Presently, Law No. 10.848 of 2004 only permits concessions to be renewed once. However, we formed working groups in 2010, which are currently examining proposals to amend this law. If the law is not amended, we would be unable to renew certain concessions and would have to take part in auctions for these concessions again. If we are unable to renew any of our concessions and were unable to successfully bid for the concessions in any of the auctions for these concessions, we would lose the business derived from these concessions, which would adversely affect our financial condition and results of operations.

We are controlled by the Brazilian Government, the current policies and priorities of which directly affect our operations and may conflict with interests of our investors.

The Brazilian Government, as our controlling shareholder, has pursued (and may continue to pursue) some of its macroeconomic and social objectives through us using principally Brazilian Government funds, which we administer. These funds are the RGR Fund, the CCC Account and the CDE Account.

The Brazilian Government also has the power to appoint eight out of the 10 members of our Conselho de Administração (or Board of Directors) and, through them, a majority of the executive officers responsible for our day-to-day management. Additionally, the Brazilian Government currently holds the majority of our voting shares. Consequently, the Brazilian Government has the majority of votes at our shareholders’ meetings, which empowers it to approve most matters prescribed by law, including the following: (i) the partial or total sale of the shares of our subsidiaries; (ii) increase of our capital stock through a subscription of new shares; (iii) our dividend distribution policy, as long as it complies with the minimum dividend distribution regulated by law; (iv) issuances of securities in the domestic market and internationally; (v) corporate spin-offs and mergers; (vi) swaps of our shares or other securities; and (vii) the redemption of different classes of our shares, independent from approval by holders of the shares and classes that are subject to redemption. Our operations impact the commercial, industrial and social development promoted by the Brazilian Government. The Brazilian Government has in the past and may in the future require us to make investments, incur costs or engage in transactions (which may include, for example, requiring us to make acquisitions) that may not be consistent with our objective of maximizing our profits.

We are subject to rules limiting borrowing by public sector companies and may not be able to obtain sufficient funds to complete our proposed capital expenditure programs.

Our current budget anticipates capital expenditures of approximately R$13.3 billion in 2012. We cannot assure you that we will be able to finance our proposed capital expenditure programs from either our cash flow or external resources. Moreover, as a state controlled company, we are subject to certain rules limiting our indebtedness and investments and must submit our proposed annual budgets, including estimates of the amounts of our financing requirements and sources of our financing, to the Ministry of Planning, Budget and Management and the Brazilian Congress for approval. Thus, if our operations do not fall within the parameters and conditions established by such rules and the Brazilian Government, we may have difficulty in obtaining the necessary financing authorizations, which could create difficulties in raising funds. If we are unable to obtain such funds, our ability to invest in capital expenditures for expansion and maintenance may be adversely impacted, which would materially adversely affect the execution of our growth strategy, particularly large scale projects such as the construction of the new nuclear plant, Angra III, the development of the Belo Monte hydroelectric complex and the continuing construction of the Jirau and Santo Antônio hydroelectric plants.

We own a number of subsidiaries whose performance significantly influences our results.

We conduct our business mainly through our operating subsidiaries, including Eletrobras Eletronorte, Eletrobras CGTEE, Eletrobras Eletronuclear, Eletrobras Chesf, Eletrobras Furnas and Eletrobras Eletrosul and through Itaipu. Our ability to meet our financial obligations is therefore related in part to the cash flow and earnings of those subsidiaries and the distribution or other transfer of those earnings to us in the form of dividends, loans or other advances and payment. Some of our subsidiaries are, or may in the future be, subject to loan agreements that require that any indebtedness of these subsidiaries to us be subordinate to the indebtedness under those loan agreements. Our subsidiaries are separate legal entities. Any right we may have to receive assets of any subsidiary or other payments upon its liquidation or reorganization will be effectively subordinated to the claims

12

of that subsidiary’s creditors (including tax authorities, trade creditors and lenders to such subsidiaries), except to the extent that we are a creditor of that subsidiary, in which case our claims would still be subordinated to any security interest in the assets of that subsidiary and indebtedness of that subsidiary senior to that held by us.

The amounts we receive from the Fuel Consumption Account may decrease.

The Brazilian Government introduced the Fuel Consumption Account, or CCC Account, in 1973. The purpose of the CCC Account is to generate financial reserves payable to distribution companies and some generation companies (all of which must make annual contributions to the CCC Account) to cover some of the costs of the operation of thermoelectric plants in the event of adverse hydrological conditions. Although the Brazilian Government has announced that the CCC Account is to be gradually phased out, we (together with other companies in our industry) continue to receive reimbursements from that account. In recent periods, the amounts we have received as reimbursements from the CCC Account have exceeded our contributions to that account. However, we cannot assure you that we will continue to receive reimbursements from the CCC Account (in amounts that exceed our contributions or at all), and any decrease in the amounts we receive may materially adversely affect our financial condition and results of operations.

If any of our assets were deemed assets dedicated to providing an essential public service, they would not be available for liquidation in the event of our bankruptcy and could not be subject to attachment to secure a judgment.

On February 9, 2005, the Brazilian Government enacted Law No. 11,101, or the New Bankruptcy Law. The New Bankruptcy Law, which came into effect on June 9, 2005, governs judicial recovery, extrajudicial recovery and liquidation proceedings and replaces the debt reorganization judicial proceeding known as concordata (reorganization) for judicial recovery and extrajudicial recovery. The New Bankruptcy Law provides that its provisions do not apply to government owned and mixed capital companies (such as Eletrobras). However, the Brazilian Federal Constitution establishes that mixed capital companies, such as Eletrobras, which operate a commercial business, will be subject to the legal regime applicable to private corporations in respect of civil, commercial, labor and tax matters. Accordingly it is unclear whether or not the provisions relating to judicial and extrajudicial recovery and liquidation proceedings of the New Bankruptcy Law would apply to us. For a further description about the New Bankruptcy Law, please see “Item 4.B, Business Overview – The Effects of the New Bankruptcy Law on Us.”

We believe that a substantial portion of our assets, including our generation assets, our transmission network and our limited distribution network, would be deemed by Brazilian courts to be related to providing an essential public service. Accordingly, these assets would not be available for liquidation in the event of our bankruptcy or available for attachment to secure a judgment. In either case, these assets would revert to the Brazilian Government pursuant to Brazilian law and the terms of our concession agreements. Although the Brazilian Government would in such circumstances be under an obligation to compensate us in respect of the reversion of these assets, we cannot assure you that the level of compensation received would be equal to the market value of the assets and, accordingly, our financial condition and results of operations may be affected.

We may be liable for damages, subject to further regulation and have difficulty obtaining financing if there is a nuclear accident involving our subsidiary Eletrobras Eletronuclear.

Our subsidiary Eletrobras Eletronuclear, as an operator of two nuclear power plants, is subject to strict liability under Brazilian law for damages in the event of a nuclear accident. The Vienna Convention on Civil Liability for Nuclear Accidents (or the Vienna Convention) became binding in Brazil in 1993. The Vienna Convention provides that an operator of a nuclear installation, such as Eletrobras Eletronuclear, in a jurisdiction which has adopted legislation implementing the Vienna Convention, will be strictly liable for damages in the event of a nuclear accident (except as covered by insurance). Eletrobras Eletronuclear is regulated by several federal and state agencies. As of December 31, 2011, Eletrobras Eletronuclear’s Angra I and Angra II plants were insured for an aggregate amount of U.S.$307 million in the event of a nuclear accident (see “Item 4.B, Business Overview – Generation – Nuclear Plants”). In addition to the liability for damages in the event of a nuclear accident, Eletrobras Eletronuclear has acquired insurance to cover operational risks due to potential equipment failure, in the amount of U.S.$426 million for each unit. We cannot assure that this coverage will be sufficient in the event of a nuclear accident. Accordingly, any nuclear accident may have a material adverse effect on our financial condition and results of operations.

The incident at the Fukushima Dai-ichi Nuclear Power Plant in Japan in March 2011 and Germany’s subsequent announcement in May 2011 that it will no longer rely on nuclear power by the year 2022 could lead to more

13

stringent safety regulations of nuclear power plants and a trend toward reliance on non-nuclear power. If global public sentiment continues to favor tougher regulations for nuclear power or a trend towards non-nuclear power, our ability to finance and profitably expand our nuclear power operations could be materially adversely affected.

We do not have alternative supply sources for the key raw materials that our thermal and nuclear plants use.

Our thermal plants operate on coal and/or oil and our nuclear plants operate on processed uranium. In each case, we are entirely dependent on third parties for the provision of these raw materials. In the event that supplies of these raw materials become unavailable for any reason, we do not have alternative supply sources and, therefore, the ability of our thermal and/or nuclear plants, as applicable, to generate electricity would be materially adversely affected, which may materially adversely affect our financial condition and results of operations.

Our distribution companies operate under challenging market conditions and historically, in the aggregate, have incurred losses.

Our distribution activities are carried out in the northern and northeastern regions of Brazil, representing 8.36% of our consolidated net revenue as of December 31, 2011. The northern and northeastern regions of Brazil are the poorest regions in the country, and our distribution subsidiaries incur significant commercial losses due to illegal connections, as well as relatively high levels of default by consumers in those regions. Historically, in the aggregate, our distribution subsidiaries have incurred losses which have adversely affected our consolidated results of operations. In May 2008, we implemented a new management structure for our distribution activities. As a result, several measures have been taken in order to reduce commercial losses and to renegotiate debts due by consumers in default with our distribution subsidiaries. However, we cannot be certain that such measures will succeed, and that the losses suffered by our distribution subsidiaries will be substantially reduced. We also cannot be certain that the conditions in the market where theses subsidiaries operate will not deteriorate.

In addition, the tariffs we charge for sales of electricity to customers are determined by ANEEL pursuant to concession agreements and to Brazilian law, which establish mechanisms that permit adjustment periodically. ANEEL determines the level of any adjustment by analyzing the costs of each distribution company and their weighted average cost of capital, or WACC. The third tariff review cycle for energy distribution companies resulted in a WACC of 7.5%. Given that the macroeconomic indicators of Brazil have improved in the recent past, the new WACC could lead to lower energy costs while other costs remain stable. Therefore, our electrical power distribution subsidiaries may incur losses, and may continue to adversely affect our financial condition and results of our operations.

We may incur losses and spend time and money defending pending litigation and administrative proceedings.

We are currently a party to numerous legal proceedings relating to civil, administrative, environmental, labor and tax claims filed against us. These claims involve substantial amounts of money and other remedies. Several individual disputes account for a significant part of the total amount of claims against us. We have established provisions for all amounts in dispute that represent a probable loss in the view of our legal advisors and in relation to those disputes that are covered by laws, administrative decrees, decrees or court rulings that have proven to be unfavorable. As of December 31, 2011, we provisioned a total aggregate amount of approximately R$4,892 million in respect of our legal proceedings, of which R$374 million were related to tax claims, R$3,360 million were related to civil claims and R$854 million were related to labor claims. (See “Item 8.A, Consolidated Financial Statements and Other Information – Litigation”).

In the event that claims involving a material amount and for which we have no provisions were to be decided against us, or in the event that the losses estimated turn out to be significantly higher that the provisions made, the aggregate cost of unfavorable decisions could have a material adverse effect on our financial condition and results of operations. In addition, our management may be required to direct its time and attention to defending these claims, which could preclude them from focusing on our core business. Depending on the outcome, certain litigation could result in restrictions in our operations and have a material adverse effect on certain of our businesses.

Our insurance coverage may be insufficient to cover potential losses.

Our business is generally subject to a number of risks and hazards, including industrial accidents, labor disputes, unexpected geological conditions, changes in the regulatory environment, environmental hazards and weather and other natural phenomena. Additionally, we and our subsidiaries are liable to third parties for losses and damages caused by any failure to provide generation, transmission and distribution services.

14

Our insurance covers only part of the losses that we may incur. We maintain insurance in amounts that we believe to be adequate to cover damages to our plants caused by fire, general third-party liability for accidents and operational risks. If we are unable to renew our insurance policies from time to time or losses or other liabilities occur that are not covered by insurance or that exceed our insurance limits, we could be subject to significant unexpected additional losses.

Judgment may not be enforceable against our directors or officers.

All of our directors and officers named in this annual report reside in Brazil. We, our directors and officers and our Fiscal Council members, have not agreed to accept service of process in the United States. Substantially all of our assets, as well as the assets of these persons, are located in Brazil. As a result, it may not be possible to effect service of process within the United States or other jurisdictions outside Brazil upon these persons, attach their assets, or enforce against them or us in United States courts, or the courts of other jurisdictions outside Brazil, judgments predicated upon the civil liability provisions of the securities laws of the United States or the laws of other jurisdictions.

We do not have an established history of preparing IFRS financial statements and we lack in-depth internal expertise on IFRS.

Historically, our financial statements have been prepared in accordance with accounting practices adopted in Brazil and in accordance with U.S. GAAP for the purposes of our Form 20-F filing, the accounting standards issued by the Instituto dos Auditores Independentes do Brasil (or Brazilian Institute of Independent Accountants) and the standards and procedures of the CVM. We do not have IFRS financial data for any period prior to the year ended December 31, 2009.

As a result, we currently lack in-depth internal expertise with IFRS. As of the date of this annual report, we use a third party consultancy firm to assist us in preparing IFRS financial statements. If we are unable to develop this expertise internally or through external hires, we may face challenges in certain areas such as making the assessments required by IFRS in consolidating the results of our operating subsidiaries. If we are unable to train, hire and retain the appropriate personnel, our ability to prepare IFRS financial statements in a consistent and timely manner might be jeopardized.

If we are unable to remedy the material weaknesses in our internal controls, the reliability of our financial reporting and the preparation of our financial statements may be materially adversely affected.

Pursuant to SEC regulations, our management, including our Chief Executive Officer and Chief Financial Officer, evaluate the effectiveness of our disclosure controls and procedures, including the effectiveness of our internal control over financial reporting. Our internal controls over financial reporting are designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. As a result of our management’s evaluation of the effectiveness of our disclosure, controls and procedures in 2011, our management determined that these controls and procedures were not effective due to material weaknesses in our internal controls over financial reporting. These material weaknesses included our lack of design and maintenance of effective operating controls over:

• financial reporting based criteria established by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO, including: internal control deficiencies not remedied in a timely manner; lack of adequately defined responsibility with respect to our internal controls over financial reporting and the necessary lines of communication; lack of adequate performance of an assessment to ensure effectively defined and implemented controls to prevent and detect material misstatements to our financial statements; lack of adequate design and maintenance of effective information technology policies, including those related to segregation of duties, security and access (grant and monitor) to our financial application programs and data;

• completeness and accuracy of period-end financial reporting, specifically relating to the recording of recurring and non-recurring journal entries;

15

• the completeness and accuracy of information regarding judicial deposits and lawsuits, including periodic reviews and updates of this information, including updates of expected losses for accrual purposes;

• the completeness and accuracy and the review and monitoring of post-retirement benefit plans (pension plans) sponsored by us, including the failure to perform a detailed review of the actuarial assumptions, reconciliation between actuarial valuation reports and accounting records, as well as cash flows from contribution payments;

• our accounting for property, plant and equipment, specifically, to ensure the completeness, accuracy and validation of these acquisitions;

• the completeness, accuracy, validity and valuation of the purchase of and payments for goods and services due to changes related to the implementation of new software;

• the completeness and accuracy of changes in transmission services accounts receivable associated with the adjustment factor related to the availability of the transmission lines not included in the fixed transmission revenue fee (Receita Annual Permitida);

• the appropriate review and monitoring related to the preparation of our IFRS financial statements and disclosures, including lack of internal accounting staff with adequate knowledge of IFRS to supervise and review the accounting process; and

• the accuracy over the identification of the amounts of repayments for subsidy related to the Fuel Consumption Account (CCC).

In response to these findings by our management, we have begun to implement steps to remedy each of these material weaknesses. In the event we are unable to remedy these material weaknesses, the reliability of our financial reporting and the preparation of our financial statements may be materially adversely affected, which may materially adversely affect our company and our reputation.

Risks Relating to Brazil

The Brazilian Government has exercised, and continues to exercise, significant influence over the Brazilian economy. Brazilian economic and political conditions have a direct impact on our business, financial condition, results of operations and prospects.

The Brazilian economy has been characterized by the significant involvement of the Brazilian Government, which often changes monetary, credit and other policies to influence Brazil’s economy. The Brazilian Government’s actions to control inflation and effect other policies have often involved wage and price controls, depreciation of the real, controls over remittances of funds abroad, intervention by the Central Bank to affect base interest rates and other measures. We have no control over, and cannot predict, what measures or policies the Brazilian Government may take in the future. Our business, financial condition, results of operations and prospects may be adversely affected by changes in Brazilian Government policies, as well as general factors including, without limitation:

• Brazilian economic growth;

• inflation;

• interest rates;

• variations in exchange rates;

• exchange control policies;

• liquidity of the domestic capital and lending markets;

• fiscal policy and changes in tax laws; and

• other political, diplomatic, social and economic policies or developments in or affecting Brazil.

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Changes in, or uncertainties regarding the implementation of, the policies listed above could contribute to economic uncertainty in Brazil, thereby increasing the volatility of the Brazilian securities market and the value of Brazilian securities traded abroad.

The stability of the Brazilian real is affected by its relationship with the U.S. dollar, inflation and Brazilian Government policy regarding exchange rates. Our business could be adversely affected by any recurrence of volatility affecting our foreign currency-linked receivables and obligations.

The Brazilian currency has experienced high degrees of volatility in the past. The Brazilian Government has implemented several economic plans, and has used a wide range of foreign currency control mechanisms, including sudden devaluation, small periodic devaluation during which the occurrence of the changes varied from daily to monthly, floating exchange market systems, exchange controls and parallel exchange market. From time to time, there was a significant degree of fluctuation between the U.S. dollar and the Brazilian real and other currencies. On December 31, 2011, the exchange rate between the real and the dollar was R$1.8758 to U.S.$1.00.

The real may not maintain its current value or the Brazilian Government may implement foreign currency control mechanisms. Any governmental interference with the exchange rate, or the implementation of exchange control mechanisms, could lead to a depreciation of the real, which could reduce the value of our receivables and make our foreign currency-linked obligations more expensive. Other than in respect of our revenues and receivables denominated in U.S. dollars, such devaluation could materially adversely affect our business, operations or prospects.

On December 31, 2011, approximately 44.3% of our consolidated indebtedness, which equals R$18,390 million as of such date, was denominated in foreign currencies, of which R$17,963 million (or approximately 42.4%) was denominated in U.S. dollars, and approximately R$9 billion (or approximately 48.9%) of such foreign indebtedness related to Itaipu indebtedness.

Inflation, and the Brazilian Government’s measures to curb inflation, may contribute significantly to economic uncertainty in Brazil and materially adversely impact our operating results.

Brazil has historically experienced high rates of inflation. Inflation and some of the Brazilian Government’s measures taken in an attempt to curb inflation have had significant negative effects on the Brazilian economy generally. Since the introduction of the real in 1994, Brazil’s rate of inflation has been substantially lower than in previous periods. However, inflationary pressures persist, and policies adopted to contain inflationary pressures and uncertainties regarding possible future governmental intervention have contributed to economic uncertainty.

Brazil may experience high levels of inflation in the future. Inflationary cost pressures may lead to further government intervention, including the introduction of policies that could adversely affect our business, financial condition, results of operations and prospects.

The market value of securities issued by Brazilian companies is influenced by the perception of risk in Brazil and by the risk of other emerging economies.

Adverse events in the Brazilian economy and in market conditions of other emerging markets, especially in Latin America, may adversely affect the market prices of securities issued by Brazilian companies. Even if economic conditions in these countries differ considerably from economic conditions prevailing in Brazil, investors’ reactions to events in those countries may have a negative effect on the market prices of securities of Brazilian issuers. Crisis in other emerging countries may reduce investor demand for securities of Brazilian issuers, including securities issued by us. This may negatively affect the market price of our shares. In addition, it may make it more difficult for us to access the international capital markets and to obtain financing on acceptable terms in the future.

The Brazilian economy is also affected by general global economic conditions, particularly those in the United States. For instance, the stock prices on BM&FBOVESPA have historically been vulnerable to interest rate fluctuations in the United States, as well as to fluctuation in the main U.S. stock indices.

These factors could affect the trading price of our common and preferred shares and ADSs and could make it more difficult for us to access capital markets and finance future operations.

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Risks Relating to the Brazilian Power Industry

We cannot predict whether the constitutionality of the Electricity Regulatory Law will be upheld; if it is not, we may face both uncertainty and costs in re-aligning our business.

In 2004, the Brazilian Government enacted the Electricity Regulatory Law, a far reaching piece of legislation that provides the framework for regulation of the electricity sector in Brazil. Among other changes, the new legislation (i) modifies the rules regarding the purchase and sale of electric power between generation companies and distribution companies; (ii) established new rules for the auction of generation companies; (iii) created the Electric Power Commercialization Chamber (“CCEE”) and new divisional bodies; and (iv) modified the responsibilities of the Energy and Mining Ministry and ANEEL. We have aligned our business within this framework. However, the constitutionality of the Electricity Regulatory Law is being challenged in the Brazilian Supreme Court. The Supreme Court has not yet issued a final ruling in this case although it recently agreed to deny a request to suspend the effectiveness of the Electricity Regulatory Law while the challenge is pending. If the Supreme Court were to hold that the Electricity Regulatory Law is unconstitutional, this would result in significant uncertainty in Brazil as to the appropriate regulatory framework for the electricity sector, which could materially adversely affect the operation of our business. Moreover, we have no way of predicting the terms of any alternative framework for the regulation of electricity in Brazil. We would likely face costs in re-aligning our business to meet the requirements of any such framework, which would materially adversely affect our financial condition and results of operations.

We could be penalized by ANEEL for failing to comply with the terms of our concession agreements and we may not recover the full value of our investment in the event that any of our concession agreements are terminated.

We carry out our generation, transmission and distribution activities in accordance with concession agreements we execute with the Brazilian Government through ANEEL. The length of such concessions varies from 20 to 35 years. ANEEL may impose penalties on us in the event that we fail to comply with any provision of our concession agreements. Depending on the extent of the non-compliance, these penalties could include substantial fines (in some cases up to two percent of our gross revenues in the fiscal year immediately preceding the assessment), restrictions on our operations, intervention or termination of the concession. For example, on May 22, 2010, our subsidiary Eletrobras Furnas received a R$53,700 fine from ANEEL, as a result of ANEEL determining that there were two malfunctions in the protection system of the Itaberá and Ivaiporã substations that led to power outages and disruption in generation on November 10, 2009. ANEEL may also terminate our concessions prior to their due date in the event that we fail to comply with their provisions, are declared bankrupt or are dissolved, or in the event that ANEEL determines that such termination would serve the public interest (see “Item 4.B, Business Overview – Generation – Concessions”).

As of December 31, 2011, we believe we were in compliance with all material terms of our concession agreements. However, we cannot assure you that we will not be penalized by ANEEL for a future breach of our concession agreements or that our concessions will not be terminated in the future. In the event that ANEEL were to terminate any of our concessions before their expiration date, the compensation we recover for the unamortized portion of our investment may not be sufficient for us to recover the full value of our investment and, accordingly, could have a material adverse affect on our financial condition and results of operations.

Our generation, transmission and distribution activities are regulated and supervised by the Brazilian Government. Our business could be adversely affected by any regulatory changes or by termination of the concessions prior to their expiration dates, and any indemnity payments for the early terminations may be less than the full amount of our investments.

According to Brazilian law, ANEEL has the authority to regulate and supervise the generation, transmission and distribution activities of electrical energy concessionaries, such as us and our subsidiaries, including in relation to investments, additional expenses, tariffs and the passing of costs to customers, among other matters. Regulatory changes in the electrical energy sector are hard to predict and may have a material adverse impact on our financial condition and results of operations.

Concessions may be terminated early through expropriation and/or forfeiture. Granting authorities may expropriate concessions in the interest of the public as expressly provided for by law, in which case granting authorities carry out the service during the concession period. A granting authority may declare the forfeiture of concessions after ANEEL or MME conduct an administrative procedure and declare that the concessionaire (a) did not provide proper service for more than 30 consecutive days and did not present any acceptable alternative

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to ANEEL or to ONS, or failed to comply with the applicable law or regulation; (b) lost the technical, financial or economic conditions necessary to provide the service properly; and/or (c) did not comply with the fines charged by the granting authority.

Penalties are set forth in ANEEL Resolution No. 63, of May 12, 2004, and include warnings, substantial fines (in certain cases up to 2.0% of the revenue for the fiscal year immediately preceding the evaluation), restrictions on the concessionaire’s operations, intervention or termination of the concession.

We may contest any expropriation or forfeiture and will be entitled to receive compensation for our investments in expropriated assets that have not been fully amortized or depreciated. However, the indemnity payments may not be sufficient to fully recover our investments, which could materially adversely affect our financial condition and results of operations.

We are subject to strict safety, health and environmental laws and regulations that may become more stringent in the future and may result in increased liabilities and increased capital expenditures.

Our operations are subject to comprehensive federal, state and local safety, health and environmental legislation as well as supervision by agencies of the Brazilian Government that are responsible for the implementation of such laws. Among other things, these laws require us to obtain environmental licenses for the construction of new facilities or the installation and operation of new equipment required for our business. The rules are complex and may change over time, making our ability to comply with the applicable requirements more difficult or even impossible, thereby precluding our continuing or future generation, transmission and distribution operations. For example, the Ministry of Environment required us to fulfill 33 steps related to health and safety and the environment in order to receive a permit for operation of our Madeira river project. We see increasing health and safety requirements as a trend in our industry. Moreover, private individuals, non-governmental organizations and the public have certain rights to commence legal proceedings to obtain injunctions to suspend or cancel the licensing process. In addition, Brazilian Government agencies could take enforcement action against us for any failure to comply with applicable laws. Such enforcement action could include, among other things, the imposition of fines, revocation of licenses and suspension of operations. Such failures may also result in criminal liability, irrespective of our strict liability to perform environmental remediation and to indemnify third parties for environmental damage. We cannot accurately predict the effect that compliance with enhanced environmental, health or safety regulations may have on our business. If we do not secure the appropriate permits, our growth strategy will be significantly adversely affected, which may materially adversely affect our results of operations and our financial condition.

Environmental regulations require us to perform environmental impact studies on future projects and obtain regulatory permits.

We must conduct environmental impact studies and obtain regulatory permits for our current and future projects. We cannot assure you that these environmental impact studies will be approved by the Brazilian Government, that public opposition will not result in delays or modifications to any proposed project or that laws or regulations will not change or be interpreted in a manner that could materially adversely affect our operations or plans for the projects in which we have an investment. We believe that concern for environmental protection is an increasing trend in our industry. Changes in environmental regulations, or changes in the policy of enforcement of existing environmental regulations, could materially adversely affect our results of operations and our financial condition by delaying the implementation of electricity projects, increasing the costs of expansion, or subjecting us to regulatory fines for non-compliance with environmental regulations.

We are affected by hydrological conditions and our results of operations could be affected.

Hydrological conditions could adversely affect our operations. For example, hydrological conditions that result in a low supply of electricity in Brazil could cause, among other things, the implementation of broad electricity conservation programs, including mandatory reductions in electricity generation or consumption. The most recent period of extremely low rainfall in a large portion of Brazil was in the years immediately prior to 2001, and as a result, the Brazilian Government instituted a program to reduce electricity consumption from June 1, 2001 to February 28, 2002. A recurrence of unfavorable hydrological conditions that result in a reduced supply of electricity to the Brazilian market could cause, among other things, the implementation of broad electricity conservation programs, including mandatory reductions in electricity consumption. It is possible that prolonged periods of rain scarcity could adversely affect our financial condition and the results of operations in the future. Our generation capacity could also be affected by events such as floods which might damage our installations. This may in turn materially adversely affect our financial condition and results of operations.

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Construction, expansion and operation of our electricity generation, transmission and distribution facilities and equipment involve significant risks that could lead to lost revenues or increased expenses.

The construction, expansion and operation of facilities and equipment for the generation, transmission and distribution of electricity involve many risks, including:

• the inability to obtain required governmental permits and approvals;

• the unavailability of equipment;

• supply interruptions;

• work stoppages;

• labor unrest;

• social unrest;

• interruptions by weather and hydrological conditions;

• unforeseen engineering and environmental problems;

• increases in electricity losses, including technical and commercial losses;

• construction and operational delays, or unanticipated cost overruns; and

• the unavailability of adequate funding.

For example, we experienced work stoppages during the construction of our Jirau, Santo Antônio and Belo Monte hydroelectric plants. We do not have insurance coverage for some of these risks, particularly for those related to weather conditions. If we experience any of these or other unforeseen risks, we may not be able to generate, transmit and distribute electricity in amounts consistent with our projections, which may have a material adverse effect on our financial condition and results of operations.

We are strictly liable for any damages resulting from inadequate supply of electricity to distribution companies, and our contracted insurance policies may not fully cover such damages.

Under Brazilian law, we are strictly liable for direct and indirect damages resulting from the inadequate supply of electricity to distribution companies, such as abrupt interruptions or disturbances arising from the generation, distribution or transmission systems. Accordingly, we may be held liable for such damages even if we were not at fault. As a result of the inherent uncertainty involved in these matters, we do not maintain any provisions in relation to potential damage, and these interruptions or disturbances may not covered by our insurance policies or may exceed the coverage limits of such policies. Accordingly, if we are found liable to pay damages in a material amount, our financial condition and results of operations would be materially adversely affected to a greater degree than those claims where we have recorded provisions.

Risks Relating to our Shares and ADSs

If you hold our preferred shares, you will have extremely limited voting rights.

In accordance with the Brazilian Corporate Law and our by-laws, holders of the preferred shares, and, by extension, holders of the ADSs representing them, are not entitled to vote at our shareholders’ meetings, except in very limited circumstances. This means, among other things, that a preferred shareholder is not entitled to vote on corporate transactions, including mergers or consolidations with other companies. Our principal shareholder, who holds the majority of common shares with voting rights and controls us, is therefore able to approve corporate measures without the approval of holders of our preferred shares. Accordingly, an investment in our preferred shares is not suitable for you if voting rights are an important consideration in your investment decision.

Exercise of voting rights with respect to common and preferred shares involves additional procedural steps.

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

If we issue new shares or our shareholders sell shares in the future, the market price of your ADSs may be reduced.

Sales of a substantial number of shares, or the belief that this may occur, could decrease the prevailing market price of our common and preferred shares and ADSs by diluting the shares’ value. If we issue new shares or our existing shareholders sell shares they hold, the market price of our common and preferred shares, and of the ADSs, may decrease significantly. Such issuances and sales also might make it more difficult for us to issue shares or ADSs in the future at a time and a price that we deem appropriate and for you to sell your securities at or above the price you paid for them.

Exchange controls and restrictions on remittances abroad may adversely affect holders of ADSs.

You may be adversely affected by the imposition of restrictions on the remittance to foreign investors of the proceeds of their investments in Brazil and the conversion of reais into foreign currencies. The Brazilian Government imposed remittance restrictions for approximately three months in late 1989 and early 1990. Restrictions like these would hinder or prevent the conversion of dividends, distributions or the proceeds from any sale of our shares, as the case may be, from reais into U.S. dollars and the remittance of the U.S. dollars abroad. We cannot assure you that the Brazilian Government will not take similar measures in the future.

Exchanging ADSs for the underlying shares may have unfavorable consequences.

As an ADS holder, you benefit from the electronic certificate of foreign capital registration obtained by the custodian for our preferred shares underlying the ADSs in Brazil, which permits the custodian to convert dividends and other distributions with respect to the preferred shares into non-Brazilian currency and remit the proceeds abroad. If you surrender your ADSs and withdraw preferred shares, you will be entitled to continue to rely on the custodian’s electronic certificate of foreign capital registration for only five business days from the date of withdrawal. Thereafter, upon the disposition of or distributions relating to the preferred shares unless you obtain your own electronic certificate of foreign capital registration or you qualify under Brazilian foreign investment regulations that entitle some foreign investors to buy and sell shares on Brazilian stock exchanges without obtaining separate electronic certificates of foreign capital registration you would not be able to remit abroad non-Brazilian currency. In addition, if you do not qualify under the foreign investment regulations you will generally be subject to less favorable tax treatment of dividends and distributions on, and the proceeds from any sale of, our preferred shares.

If you attempt to obtain your own electronic certificate of foreign capital registration, you may incur expenses or suffer delays in the application process, which could delay your ability to receive dividends or distributions relating to our preferred shares or the return of your capital in a timely manner. The depositary’s electronic certificate of foreign capital registration may also be adversely affected by future legislative changes.

You may receive reduced dividend payments if our net income does not reach certain levels.

Under Brazilian Corporate Law and our by-laws, we must pay our shareholders a mandatory distribution equal to at least 25% of our adjusted net income for the preceding fiscal year, with holders of preferred shares having priority of payment. Our by-laws require us to pay holders of our preferred shares annual dividends equal to the greater of 8% (in the case of our class “A” preferred shares (subscribed on June 23, 1969) and 6% (in the case of

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our class “B” preferred shares (subscribed on June 24, 1969), calculated by reference to the capital stock portion of each type and class of stock. The priority minimum dividend payable to holders of our preferred shares must be paid whenever there is a net profit or, in the event of losses in that year, whenever a reserve of profits is available. If our net income is negative or insufficient in a fiscal year, our management may recommend at the annual shareholders’ meeting in respect of that year that the payment of the mandatory dividend should not be made.

You may not be able to exercise preemptive rights with respect to the preferred or common shares.

You may not be able to exercise the preemptive rights relating to the preferred or common shares underlying your ADSs unless a registration statement under the United States Securities Act of 1933, as amended, (the “Securities Act”), is effective with respect to those rights or an exemption from the registration requirements of the Securities Act is available. We are not obligated to file a registration statement with respect to the shares relating to these preemptive rights, and we cannot assure you that we will file any such registration statement. Unless we file a registration statement or an exemption from registration applies, you may receive only the net proceeds from the sale of your preemptive rights by the depositary or, if the preemptive rights cannot be sold, they will be allowed to lapse and accordingly your ownership position relating to the preferred or common shares will be diluted.

Changes in Brazilian tax laws may have an adverse impact on the taxes applicable to a disposition of our shares or ADSs.

Law No. 10,833 of December 29, 2003 provides that the disposition of assets located in Brazil by a non-resident to either a Brazilian resident or a non-resident is subject to taxation in Brazil, regardless of whether the disposition occurs outside or within Brazil. This provision results in the imposition of income tax on the gains arising from a disposition of our common or preferred shares by a non-resident of Brazil to another non-resident of Brazil. There is no judicial guidance as to the application of Law No. 10,833 of December 29, 2003 and, accordingly, we are unable to predict whether Brazilian courts may decide that it applies to dispositions of our ADSs between non-residents of Brazil. However, in the event that the disposition of assets is interpreted to include a disposition of our ADSs, this tax law would accordingly result in the imposition of withholding taxes on the disposition of our ADSs by a non-resident of Brazil to another non-resident of Brazil.

Because any gain or loss recognized by a U.S. Holder (as defined in “Item 10.E, Taxation – Material United States Federal Income Tax Consequences”) will generally be treated as a U.S. source gain or loss unless such credit can be applied (subject to applicable limitations) against tax due on the other income treated as derived from foreign sources, such U.S. Holder would not be able to use the foreign tax credit arising from any Brazilian tax imposed on the disposition of our common or preferred shares or our ADSs.

ITEM 4. INFORMATION ON THE COMPANY

Overview

Directly and through our subsidiaries, we are involved in the generation, transmission and distribution of electricity in Brazil. As of December 31, 2011, we controlled approximately 35.6% of the installed power generating capacity within Brazil. Through our subsidiaries, we are also responsible for approximately 53.1% of the installed transmission capacity above 230 kV in Brazil. Our revenues derive mainly from:

• the generation of electricity and its sale to electricity distribution companies and free consumers;

• the transmission of electricity on behalf of other electricity concessionaires; and

• the distribution of electricity to end consumers.

For the year ended December 31, 2011, we derived 64.7%, 26.3% and 8.4% of our net revenue from our electricity generation, transmission and distribution businesses, respectively. For the year ended December 31, 2011, our net revenues were R$29,533 million, compared to R$26,832 million for the year ended December 31, 2010.

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A. History and Development

General

We were established on June 11, 1962 as a mixed capital company with limited liability and unlimited duration. We are subject to Brazilian Corporate Law. Our executive offices are located at Avenida Presidente Vargas, 409, 13th Floor, Edifício Herm. Stolz, CEP 20071 003 Rio de Janeiro, RJ, Brazil. Our telephone number is +55 21 2514 6331. Our legal name is Centrais Elétricas Brasileiras S.A. – Eletrobras and our commercial name is Eletrobras.

Capital Expenditures

In the last five years, we have invested an average of R$4.8 billion per year in capital projects. Approximately 49% was invested in our generation segment, 33% in our transmission segment and the balance in our distribution segment and other investments.

Our core business is the generation, transmission and distribution of energy and we intend to invest heavily in these segments in the upcoming years.

Companies are now selected to construct new generation units and transmission lines by a tender process. It is, therefore, difficult to predict the precise amounts that we will invest in these segments going forward. We are, however, working to secure a significant number of new contracts either alone or as part of a consortium including the private sector.

According to the EPE 10 Year Plan, it is estimated that Brazil will have 142,202 km of transmission lines and 171,138 MW of installed generation capacity by 2020. These investments will represent approximately R$220 billion. As the current largest player in the market, we expect to participate in the majority of these new investments. In accordance with the EPE 10 Year Plan, we believe that over the next ten years we will invest an average of approximately R$22 billion per year. For these investments, we expect to use the funding derived from our net cash flow as well as from accessing national and international capital markets and through bank financing.

Our capital expenditures in 2011, 2010 and 2009 were R$6,775.2 million, R$5,279.4 million and R$5,190.3 million, respectively.

B. Business Overview

Strategy

Our main strategic objectives are to achieve sustained growth and profitability, while maintaining our position as a leader in the Brazilian electricity sector. In order to achieve these objectives, our main strategies are as follows:

• Expand and improve efficiency in our generation, transmission and distribution businesses. Our business has historically been focused on both our core operations in the Brazilian generation, transmission and distribution markets and on our former role as lender to third parties, including historically to our subsidiaries. Since the advent of privatization in our industry, the opportunities to consolidate our role as lender have diminished because many of our former subsidiaries were privatized and we are no longer permitted to act as lender to those companies or any other third party. Accordingly, we have adopted a strategy of focusing on our core operations of generation, transmission and distribution. This strategy involves a particular focus on maximizing opportunities arising from the auction process, set out in the Electricity Regulatory Law, for the sale of electricity to distribution companies. By focusing on generation, transmission and distribution, we believe that we will be able to maximize profits by improving efficiency in our existing infrastructure and capitalizing on opportunities arising from new infrastructure such as new power units and transmission lines. Our Programa de Ações Estratégicas do Sistema Eletrobras (the “Strategic Action Program” or “PAE”) for 2009-2012 includes the strategic target of increasing generation capacity by 6,459 MW and increasing transmission lines to the Interconnected Power System by 10,386 km by 2012. In addition, we plan to invest R$7 billion in our transmission segment from 2011 until 2013.

• Renewed strategy for distribution business. With respect to our distribution business, as part of the PAE, we adopted a renewed strategy in 2008 for the management of our distribution companies and are

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seeking to continue to improve their operational efficiency. In 2008, we reorganized the governance and management of our distribution companies (except Eletrobras Amazonas Energia) so that each company would have the same members in their respective boards of directors and the same CEO. Initially, the new administration focused on improving each company’s quality of service and increasing its total income. We standardized our processes and policies in order to make our distribution business more efficient and to centralize the purchase of material and services and negotiations with debtors. Although we have already made substantial progress in terms of efficiency, we intend to continue to improve our policies to further reduce any commercial and technical losses with a view to improving the financial position of these subsidiaries. We believe that we will be able to achieve our operational efficiency goals by 2014. For further information about our distribution companies, please see “Item 4.B, Business Overview – Distribution – Distribution Companies.”

• We seek to maintain high corporate governance standards and to promote sustainability in order to enhance the value of our brand. Our shares are listed on the BM&FBOVESPA’s Level 1 segment and on the NYSE. As a result of these listings, we are required to comply with numerous regulations, and we believe that by complying with these regulations we will maintain high corporate governance standards. Our current corporate governance standards are included in the PAE, the audit and administration manuals, the internal regulations of the Board of Directors and Audit Committee and our by-laws. We believe that improving our corporate governance standards will help us to achieve growth, profitability and increased market share as a result of the positive effect these standards have for our brand, both domestically and internationally. As part of this strategy, we established controls and procedures required by the Sarbanes Oxley Act of 2002. For further discussion of our internal controls please see “Item 15—Controls and Procedures.” In addition, we are a signatory to the United Nations Global Compact, the world’s largest corporate responsibility initiative, and are a member of the BM&FBOVESPA’s ISE Corporate Sustainability Index. We are also aiming to obtain membership in the Dow Jones Sustainability Index. We believe that membership in both of these initiatives, and registration with organizations that are known to have governance standards that are among the most stringent in the world will enable us to significantly raise our global profile. In order to manage and promote all of these initiatives we have developed a ten-year Strategic Corporate Plan (Plano Corporativo Estratégico). We strive to continue to be a competitive company that emphasizes social and environmental responsibility and sustainability together with the development and quality of life for our employees. Our goal is to be the world leader in clean energy by 2020, while maintaining our competitive rates of return. In order to maintain our present market share, we are continuously focused on improving the performance of our investments, including the diversification of our portfolio of our equity investment portfolio, the restructuring of our subsidiaries and the expansion into international markets.

• Selectively identify growth opportunities in certain international markets. In accordance with our PAE, we are conducting feasibility studies for investments in neighboring countries, including, Argentina, Colombia, Peru and Uruguay. Our strategic goal is to generate new energy that can be added to the Interconnected Power System and to integrate certain electrical power systems in the Americas. In order to achieve sustained growth, we believe that certain international electricity markets offer opportunities and we plan to selectively identify opportunities in these markets in the future. We may also identify and pursue growth opportunities outside of South America, including renewable energy projects.

Generation

Our principal activity is the generation of electricity. Net revenues (including financial revenues at the holding company level) from generation represented 64.7%, 68.6% and 69.2% of our total net revenues in the years ended December 31, 2011, 2010 and 2009 respectively. Including Itaipu, our power plants generated 35.5%, 44.7% and 51.6% of the total electricity generated in Brazil in 2011, 2010 and 2009, respectively.

Pursuant to Law No. 5,899, of July 5, 1973, and Decree 4,550, of December 27, 2002, Eletrobras must sell all energy produced by Itaipu to distribution companies in the Southern, Southeastern and Midwestern regions in Brazil (see “Item 5, Operating and Financial Review and Prospects – Electric Power Market – Itaipu”).

We had an installed capacity of 41,621 MW as of December 31, 2011, 41,360 MW as of December 31, 2010 (including the 350 MW capacity of Candiota III, which is in operation since January 3, 2011) and 39,453 MW as of December 31, 2009. The increase in capacity over these periods reflects continuous growth. Additionally, we have approximately 11,573 MW in planned projects throughout Brazil until 2015, which are currently under construction, and we have begun feasibility studies for an additional approximately 20,000 MW.

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The map below shows the geographic location of our generation assets as of December 31, 2011:

Concessions

As of December 31, 2011, we operated under the following concessions/authorizations granted by ANEEL for our generation businesses:

Concessions/Authorizations	State	Type of Plant	Installed Capacity (MW)		End of Concession/ Authorization	Began Service or expect to begin
Eletrobras CGTEE
São Jerônimo	Rio Grande do Sul	Thermal		20.00	July 7, 2015	April 1953
Presidente Médici	Rio Grande do Sul	Thermal		446.00	July 7, 2015	January 1974
Nutepa	Rio Grande do Sul	Thermal		24.00	July 7, 2015	February 1968
Candiota III	Rio Grande do Sul	Thermal		350.00	January 2024	January 2011

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Concessions/Authorizations	State	Type of Plant	Installed Capacity (MW)		End of Concession/ Authorization	Began Service or expect to begin
Eletrobras Chesf
Funil(1)	Bahia	Hydroelectric		30.00	July 7, 2015		March 1962
Pedra(1)	Bahia	Hydroelectric		20.00	July 7, 2015		April 1978
Araras	Ceará	Hydroelectric		4.00	July 7, 2015		February 1967
Curemas	Bahia	Hydroelectric		3.52	November 25, 2024		January 1957
Paulo Afonso Complex and Moxotó (Apolônio Sales)	Bahia	Hydroelectric		4,280.00	October 2, 2015		January 1955
Sobradinho	Bahia	Hydroelectric		1,050.30	February 9, 2022		April 1979
Luiz Gonzaga	Pernambuco	Hydroelectric		1,479.60	October 3, 2015		February 1988
Boa Esperança	Piauí/Maranhão	Hydroelectric		237.30	October 10, 2015		January 1970
Xingó	Sergipe/Alagoas	Hydroelectric		3,162.00	October 2, 2015		April 1994
Piloto	Bahia	Hydroelectric		2.00	July 7, 2015		February 1949
Camaçari	Bahia	Thermal		360.00	August 10, 2027		February 1979
Dardanelos (9)	Mato Grosso	Hydroelectric		261.00	July 2042		August 2011
Eletrobras Eletronorte
Rio Acre	Acre	Thermal		45.49	Indefinite		April 1994
Rio Branco II	Acre	Thermal		32.75	Indefinite		April 1981
Rio Branco I	Acre	Thermal		18.65	Indefinite		February 1998
Electron (TG)	Amazonas	Thermal		60.00	Indefinite		June 2005
Santana	Amapá	Thermal		178.00	Indefinite		January 1993
Rio Madeira	Rondônia	Thermal		119.35	Indefinite		April 1968
Coaracy Nunes	Amapá	Hydroelectric		76.95	July 8, 2015		October 1975
Tucurui	Pará	Hydroelectric		8,370.00	July 11, 2024		November 1984
Samuel	Rondônia	Hydroelectric		216.75	September 14, 2029		July 1989
Curuá-Una(2)	Pará	Hydroelectric		30.30	July 27, 2028		July 1977
Senador Arnon Afonso Farias	Roraima	Thermal		85.92	Indefinite		December 1990
Serra do Navio(6)	Amapá	Thermal		23.30	May 20, 2037		November 2008
Dardanelos (9)	Mato Grosso	Hydroelectric		261.00	July 2042		August 2011
Eletrobras Eletronuclear(3)
Angra I	Rio de Janeiro	Nuclear		640.00	Indefinite		January 1985
Angra II	Rio de Janeiro	Nuclear		1,350.00	Indefinite		September 2000
Eletrobras Eletrosul
Cerro Chato I (10)	Rio Grande do Sul	Wind		30.00	August 2045		November 2011
Cerro Chato II (10)	Rio Grande do Sul	Wind		30.00	August 2045		September 2011
Cerro Chato III (10)	Rio Grande do Sul	Wind		30.00	August 2045		May 2011
Eletrobras Holding
Mangue Seco 2	Rio Grande do Norte	Wind		26.00	July 2045		September 2011
Eletrobras Furnas
Corumbá I	Goiás	Hydroelectric		375.00	November 29, 2014		April 1997
Serra da Mesa(4)	Goiás	Hydroelectric		1,275.00	May 7, 2011		April 1998
Eletrobras Furnas	Minas Gerais	Hydroelectric		1,216.00	July 7, 2015		March 1963
Itumbiara	Minas Gerais/Goiás	Hydroelectric		2,082.00	February 26, 2020		February 1980
Marimbondo	São Paulo/Minas Gerais	Hydroelectric		1,440.00	March 7, 2017		April 1975
Peixoto (Mascarenhas de Moraes)	Minas Gerais	Hydroelectric		476.00	October 31, 2023		April 1973
Porto Colômbia	Minas Gerais	Hydroelectric		320.00	March 16, 2017		March 1956
Manso	Mato Grosso	Hydroelectric		212.00	February 9, 2035		October 2000
Funil(1)	Minas Gerais	Hydroelectric		216.00	July 7, 2015		April 1969
Estreito	São Paulo	Hydroelectric		1,050.00	July 7, 2015		January 1969
Campos(5)	Rio de Janeiro	Thermal		30.00	July 27, 2007		April 1968
Santa Cruz	Rio de Janeiro	Thermal		932.00	July 7, 2015		March 1967
Peixe Angical(6)	Tocantins	Hydroelectric		452.00	November 6, 2036		June 2006
Baguari(6)	Minas Gerais	Hydroelectric		140.00	August 2041		November 2009
Retiro Baixo(6)	Minas Gerais	Hydroelectric		82.00	August 2041		March 2010
Foz do Chapecó(6)	Rio Grande do Sul	Hydroelectric		855.00	November 2036		August 2010
Serra do Facão(6)	Goiás	Hydroelectric		212.60	November 2036		October 2010
Itaipu(7)
Itaipu Binacional	Paraná	Hydroelectric		14,000.00	Not applicable		—

26

Concessions/Authorizations	State	Type of Plant	Installed Capacity (MW)		End of Concession/ Authorization	Began Service or expect to begin
Eletrobras Amazonas Energia
Aparecida	Amazonas	Thermal		251.50	Indefinite		February 1984
Mauá	Amazonas	Thermal		738.10	Indefinite		April 1973
Balbina	Amazonas	Hydroelectric		277.50	March 1, 2027		January 1989
UT CO Cidade Nova	Amazonas	Thermal		29.70	Indefinite		August 2008
UT AS São José	Amazonas	Thermal		73.40	Indefinite		February 2008
UT FO Flores	Amazonas	Thermal		124.70	Indefinite		August 2008
UTE Iranduba	Amazonas	Thermal		66.30	Indefinite		November 2010
UTE Distrito	Amazonas	Thermal		51.30	Indefinite		October 2010
Electron (TG)	Amazonas	Thermal		121.10	Indefinite		June 2005
Others	Amazonas	Thermal		439.00	Indefinite		—
Under Construction Suitable Plants
Simplício	Rio de Janeiro/Minas Gerais	Hydroelectric		333.70	August 2041		August 2011
Batalha	Minas Gerais/Goiás	Hydroelectric		52.50	August 2041		May 2012
Passo São João	Rio Grande do Sul	Hydroelectric		77.00	August 2041		January 2012
São Domingos	Mato Grosso do Sul	Hydroelectric		48.00	December 2037		February 2012
Barra do Rio Chapéu	Santa Catarina	Small Hydroelectric Central		15.00	December 2035		March 2012
João Borges	Santa Catarina	Small Hydroelectric Central		19.00	December 2035		March 2012
Angra III	Rio de Janeiro	Nuclear		1,405.00	Indefinite		December 2015
Casa Nova	Bahia	Wind		180.00	January 2045		January 2013
Special Purpose Vehicle
Jirau	Rondônia	Hydroelectric		3,750.00	August 2043		January 2013
Santo Antônio	Rondônia	Hydroelectric		3,150.00	June 2043		December 2011
Mauá(8)	Paraná	Hydroelectric		361.00	July 2042		January 2012
Belo Monte	Pará	Hydroelectric		11,233.00	August 2044		February 2015
São Pedro do Lago	Bahia	Wind		28.80	February 2046		January 2013
Pedra Branca	Bahia	Wind		28.80	February 2046		January 2013
Sete Gameleiras	Bahia	Wind		28.80	February 2046		January 2013
Miassaba 3	Rio Grande do Norte	Wind		50.40	August 2045		March 2012
Teles Pires	Mato Grosso/Pará	Hydroelectric		1,820.00	March 2045		January 2015
Rei dos Ventos 1	Rio Grande do Norte	Wind		48.6	December 2045		May 2011
Rei dos Ventos 3	Rio Grande do Norte	Wind		48.60	December 2045		November 2011
Livramento Complex	Rio Grande do Sul	Wind		78.00	April 2047		March 2013

(1) Approval for the renovation of the environmental licences of both Funil and Pedra has been requested but the licences have not yet been granted. However, this does not affect the operations at either plant.

(2) This plant was transferred from Celpa to Eletrobras Eletronorte in December 2005 as payment for outstanding debts owed by Celpa to Eletrobras Eletronorte relating to sales of energy.

(3) The nuclear plants are authorized to operate for 40 years from the date on which they commenced operations. A few years prior to this due expiration date, each applicable nuclear energy company may request an extension of its respective permit from CNEN. In order to obtain an extension, CNEN may request the replacement of certain equipment. For example, in the case of Angra I, CNEN requested the replacement of a steam generator following our request to extend the permit by 20 years.

(4) Pending MME’s approval.

(5) This plant is not operational.

(6) Serra do Navio, Peixe Angical, Baguari, Retiro Baixo, Foz do Chapecó and Serra do Facão are special purpose entities in which we hold an ownership interest of 49.0%, 40.0%, 15.0%, 49.0%, 49.5% and 40.0%, respectively. Figures in this table refer to the total capacity of each plant.

(7) Itaipu does not operate pursuant to a concession but rather the Itaipu Treaty that expires in 2023. We own 50.0% of Itaipu Binacional.

(8) This plant is owned by the Cruzeiro do Sul Energetic Consortium, in which Eletrobras Eletrosul holds a 49.0% ownership interest.

(9) Our subsidiaries Eletrobras Eletronorte and Eletrobras Chesf both owned 24.0% of this unit. Figure in this table refers to the total capacity of the plant.

(10) Eletrosul has 90.0% of each plant.

Source: internal sources.

Types of Plants

Hydroelectric power plants accounted for 90.7% of our total power generated in 2011, compared to 91.0% in 2010 and 93.1% in 2009.

We also generate electricity through our thermal and nuclear plants. Thermal plants accounted for 2.9% of our total power generated in 2011, compared to 2.8% in 2010 and 1.6% in 2009. Nuclear plants accounted for 6.4% of our total power generated in 2011, compared to 6.3% in 2010 and 5.4% in 2009.

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The following table sets out the total amount of electricity generated in the periods indicated, measured in megawatt hours, broken down by type of plant:

	Year Ended December 31,
	2011		2010(2)		2009
	(MWh)
Type of plant:
Hydroelectric(1)		221.787.327		209,030,648		224,511,387
Thermal		7,013,394		6,369,683		3,809,229
Nuclear		15,644,251		14,543,807		12,975,088
Total		244.444.973		229,944,139		241,295,704

(1) Including Itaipu.

(2) Does not consider energy generated by SPEs in which we hold equity interests.

Hydroelectric Plants

Hydroelectric plants are our most cost-efficient source of electricity, although efficiency is significantly dependent on meteorological factors, such as the level of rainfall. Based on our experience with both types of plants, we believe construction costs for hydroelectric plants are higher than for thermal plants; however, the average useful life of hydroelectric plants is longer. We use our hydro-powered plants to provide the bulk of our primary and back-up electricity generated during peak periods of high demand. During periods of rapid change in supply and demand, hydroelectric plants also provide greater production flexibility than our other forms of electric generation because we are able to instantly increase (or decrease) output from these sources, in contrast to thermal or nuclear facilities where there is a time lag while output is adjusted.

As of December 31, 2011, we owned and operated 27 hydroelectric plants; in addition, we hold a 50.0% interest in Itaipu, the other 50.0% of which is owned by a Paraguayan governmental entity and participations in the Peixe Angical (40.0%), Serra do Facão (49.5%), Retiro Baixo (49.0%), Foz do Chapecó (40.0%), Baguari (15.0%) and Dardanelos (49%) plants. Also, we have participation in the Serra Mesa (48.5%) and Manso (70.0%). The ONS is solely responsible for determining, in any year, how much electricity each of our plants should generate. As of December 31, 2011, the total installed capacity of our hydroelectric plants was 41.6MW (including 50.0% of Itaipu and our participations in the SPEs referred to above). The following tables set out information with respect to hydroelectric plants owned by us as of December 31, 2011 and for the year then ended:

	Installed(1) Capacity		Assured  Energy(2)		Began Service
	(MW)
Hydroelectric plants:
Curuá-Una(3)		30.0		24.00		1977
Peixoto (Mascarenhas de Morais)		476.0		295.00		1973
Curemas		35.2		1.90		1957
Paulo Afonso complex and Moxotó		4,280.0		2,225.00		1957
Funil (Eletrobras Chesf)		30.0		14.73		1962
Eletrobras Furnas		1,216.0		598.00		1963
Araras		4.0		—		1967
Funil (Eletrobras Furnas)		216.0		121.00		1969
Estreito		1,050.0		495.00		1969
Boa Esperança		257.3		143.00		1970
Porto Colômbia		320.0		185.00		1973
Coaracy Nunes(3)		77.0		—		1975
Marimbondo		1,440.0		726.00		1975
Pedra		20.0		6.84		1978
Sobradinho		1,050.0		531.00		1979
Luiz Gonzaga		1,479.0		959.00		1979
Itumbiara		2,082.0		1,015.00		1980
Tucurui complex		8,370.0		4,238.00		1984
Samuel(3)		216.8		73.54		1989
Balbina(3)		277.5		—		1989
Xingó		3,162.0		2,139.00		1994
Corumbá I		375.0		209.00		1997
Serra da Mesa(4)		1,275.0		671.00		1998
Manso(4)		212.0		92.00		2000
Peixe Angical(5)		452.0		271.00		2006
Piloto		2.0		—		1949

28

	Installed(1) Capacity		Assured  Energy(2)		Began Service
	(MW)
Baguari(7)		140.0		80.00		2009
Retiro Baixo (8)		82.0		38.50		2010
Serra do Facão (9)		212.6		182.40		2010
Foz do Chapecó (10)		855.0		432.00		2010
Itaipu(6)		14,000.0		8,577.00		1985
Dardanelos(11)		261.0		154.90		2011

(1) The installed capacity of Itaipu is 14,000 MW. Itaipu is equally owned by Brazil and Paraguay.

(2) Assured energy is the maximum amount per year that each plant is permitted to sell in auctions/supply to the Interconnected Power System, an amount determined by ONS. Any energy produced in excess of assured energy is sold in the Free Market.

(3) The Balbina, Curuá-Una, Samuel and Coaracy Nunes plants are part of the isolated system and do not have an assured energy restriction.

(4) We own 48.46% of the Serra Mesa plant and 70.0% of the Manso plant. Figures in this table refer to the entire capacity/utilization of each plant.

(5) We own 40.0% of the Peixe Angical plant. Figures in this table refer to the entire capacity/utilization of the plant.

(6) We own 50.0% of the Itaipú plant. Figures in this table refer to the entire capacity/utilization of the plant.

(7) We own 15.0% of the Baguari plant. Figures in this table refer to the entire capacity/utilization of the plant.

(8) We own 49.0% of the Retiro Baixo plant. Figures in this table refer to the entire capacity/utilization of the plant.

(9) We own 49.5% of the Serra do Facão plant. Figures in this table refer to the entire capacity/utilization of the plant.

(10) We own 40.0% of the Foz do Chapecó plant. Figures in this table refer to the entire capacity/utilization of the plant.

(11) We own 49.0% of the Dardanelos plant.

The following table describes the energy generated by the hydroelectric plants owned by us, the assured energy and the actual operational utilization. We have converted the measurement of the assured energy to MWh so that we can compare it against the energy generated.

	Assured Energy		Generated Energy(1)		Actual Operational Utilization
	( MWh)				(%)
Hydroelectric plants:
Funil (Eletrobras Chesf)		129,035		57,128		44.27
Pedra		59,918		10,638		17.75
Araras		0		0		0.00
Curemas		16,644		10,575		63.54
Paulo Afonso complex and Moxotó		19,491,000		16,785,017		86.12
Sobradinho		4,651,560		4,042,104		86.90
Luiz Gonzaga		8,400,840		7,744,147		92.18
Boa Esperança		1,252,680		1,325,618		105.82
Xingó		18,737,640		18,675,443		99.67
Coaracy Nunes(2)		—		557,801		0.00
Tucurui complex		37,254,090		41,022,761		110.12
Samuel		796,634		636,384		79.88
Corumbá I		1,830,840		2,001,827		109.34
Curuá-Una(2)		217,686		224,302		103.04
Serra da Mesa(3)		2,848,459		1,346,807		47.28
Furnas		5,238,480		5,861,889		111.90
Itumbiara		8,891,400		7,670,879		86.27
Marimbondo		6,359,760		7,631,117		119.99
Peixoto (Mascarenhas de Morais)		2,584,200		3,055,386		118.23
Porto Colômbia		1,620,600		2,005,059		123.72
Manso(3)		564,144		340,784		60.41
Funil (Eletrobras Furnas)		1,059,960		1,152,060		108.69
Estreito		4,336,200		4,443,108		102.47
Balbina(2)		—		1,362,488		—
Total		126,613,048		129,541,788		101.28	(4)

(1) Excluding (i) Itaipu, which is owned equally by Brazil and Paraguay; and (ii) any energy generated through our participation in SPEs.

(2) The Balbina, and Coaracy Nunes plants are part of the isolated system and do not have an assured energy restriction.

(3) We own 48.46% of the Serra Mesa plant and 70.0% of the Manso plant. Figures in this table refer to the entire capacity/utilization of each plant.

(4) This percentage is based on the average operational utilization.

See “ – Concessions” for information on the hydroelectric power plants operated by Eletrobras Chesf, Eletrobras Eletronorte and Eletrobras Furnas.

29

Hydroelectric utilities in Brazil are required to pay royalty fees to the Brazilian states and municipalities in which a plant is located or in which land may have been flooded by a plant’s reservoir for the use of hydrological resources. Fees are established independently by each state and/or municipality as applicable and are based on the amount of energy generated by each utility and are paid directly to the states and municipalities. Fees for the states and municipalities in which we operate were R$1,329 million in 2011, compared to R$1,087 million in 2010 and R$1,888 million in 2009. These fees are recorded as operating costs in our financial statements.

Our subsidiaries have acquired concessions for the construction of 10 new hydroelectric power plants. Information regarding these new plants is set out in the table below:

	Installed Capacity		Construction began	Service begins(1)
	(MW)
New plants:
Barra do Rio Chapéu		15.0	October 2008	July 2012
Mauá		361.0	July 2008	July 2012
Batalha		52.5	June 2008	May 2013
Simplício		337.7	March 2007	May 2012
São Domingos		48.0	August 2009	September 2012
Santo Antônio		3,150.0	September 2008	May 2012
Jirau		3,750.0	February 2009	January 2013
Belo Monte		11,233.0	May 2011	February 2015
João Borges		19.0	June 2010	December 2012
Teles Pires		1,820.0	August 2011	April 2015
Passo São João		77.1	November 2007	January 2012

(1) Estimated dates based on current timetable.

Simplício and Paulistas (Batalha) will be operated only by Eletrobras Furnas. Dardanelos will be operated by our subsidiaries Eletrobras Chesf and Eletrobras Eletronorte in association with partners (see “ – Lending and Financing Activities – Equity Participation”).

The other new plants will be operated solely by our subsidiary Eletrobras Eletrosul other than the Mauá plant, which will be jointly operated by our subsidiary Eletrobras Eletrosul and by Companhia Paranaense de Energia S.A. – Copel, a third party. We intend to finance these plants from cash flow from operations, and, if necessary, from financing obtained in the international capital markets and/or multilateral agencies.

On August 19, 2011, IBAMA granted Companhia Hidrelétrica Teles Pires an installation license for the construction of UHE Teles Pires on the Teles Pires River. The plant’s dam will be located between the States of Mato Grosso and Pará. Companhia Hidrelétrica Teles Pires is a SPE whose main shareholders are Neoenergia (50.1%), holding company of Grupo Neoenergia, Eletrobras Eletrosul (24.5%), Eletrobras Furnas (24.5%) and Odebrecht Participações e Investimentos (0.9%). These companies form the Teles Pires Energia Eficiente consortium.

Thermal Plants

As of December 31, 2011, we owned and operated 119 thermal plants. In addition, we hold a 49.0% interest in the Serra do Navio plant. Thermal plants include coal and oil power generation units. The total installed capacity of our thermal plants was 4,535 MW as of December 31, 2011, compared to 4,535 MW as of December 31, 2010 and 3,069 MW as of December 31, 2009.

The following table sets out information regarding our thermal plants as of December 31, 2011 and for the year ended:

	Installed Capacity		Generated Energy(2)		Assured Energy(1)
	(MW)		(MWh)		(MWh)
Thermal plants:
P. Médici (Candiota)		446.00		478,731.0		2,203,140
S. Jerônimo (Candiota)		20.00		44,274.0		110,376
Candiota III		350.00		1,379,630.0		2,557,920
Nutepa (Candiota)		24.00		0.0		53,436
Santa Cruz		932.00		180,686.0		6,421,080
Campos		30.00		0.0		183,960

30

	Installed Capacity		Generated Energy(2)		Assured Energy(1)
	(MW)		(MWh)		(MWh)
Camaçari		346.80		11,790.0		2,013,048
Electron		60.00		4,303.0		—
Rio Madeira		119.40		0.0		—
Santana		178.10		719,411.0		—
RioBranco I		18.60		0.0		—
RioBranco II		31.80		0.0		—
Rio Acre		45.49		34,464.0		—
Mauá		711.40		1,402,712.0		—
Senador Arnon Farias de Mello		85.92		0.0		—
Aparecida		251.50		536,331.0		—
Cidade Nova		20.00		106,840.0		—
São José		50.00		272,653.0		—
Flores		80.00		392,481.0		—
Distrito		40.00		169,040.0		—
Iranduba		50.00		138,651.0		—
Others in the Isolated System		597.10		1,141,398.0		—
Total		4,488.11		7,013,395.0		13,542,960

(1) Assured Energy is only determined in respect of plants from the Interconnected Power System, but not the Isolated system. Most of our thermal plants are part of the Isolated system.

(2) Generated Energy does not include energy generated through our participations in SPEs.

In December 2005, our subsidiary Eletrobras CGTEE was granted authorization to begin construction on an extension of the Candiota thermal plant. This extension has increased the installed capacity of the Candiota thermal plant by 350 MW and will require an investment of approximately R$939 million. Construction on this extension began in July 2006 and commercial operation commenced in January 2011.

Each of our thermal plants operates on coal and/or oil. The fuel for the thermal plants is delivered by road, rail, pipeline or waterway, depending on the plant’s location.

Although we do not have alternatives if our sources of these raw materials become unavailable or uneconomical, we have spare capacity in our hydroelectric plants and we are increasing our investment in transmission lines, which when completed, will allow us to partially compensate for any disruption in supplies. We are not subject to price volatility with respect to these raw materials because the Brazilian Government and entities that the Brazilian Government controls regulate prices, which they set annually.

We seek to operate our thermal plants at a consistent, optimal level in order to provide a constant source of electricity production. Our thermal plants are significantly less efficient and have significantly shorter useful lives, than our hydroelectric plants. We incurred gross expenditure for fuel purchased for energy production of R$163 million for 2011, compared to R$253 million for 2010 and R$756 million for 2009, which are reimbursed to us from the CCC Account in accordance with Law No. 12,111. The amounts in 2009 are not comparable to the amounts in 2011 and 2010 due to the change in the presentation of certain line items as further described in “Presentation of Financial and Other Information.”

We have recovered a substantial portion of the thermal plants’ excess operating costs, which correspond to the difference between the cost of a thermal plant and the cost of a hydroelectric plant, through reimbursements pursuant to the CCC Account. The Brazilian Government created the CCC Account in 1973 for the purpose of building financial reserves to cover the costs of using fossil fuel thermal power plants, which are more expensive to operate than hydroelectric plants, in the Basic Network and the Interconnected Power System should a power shortage create a need for increased production of thermal power plants. Consumers through electricity distributors in Brazil are required to contribute annually to the CCC Account, which in effect serves as an insurance fund against an extraordinary situation, such as a rainfall shortage, which would require increased use of thermal plants. The aggregate amount of the annual required contribution is calculated on the basis of the current year’s cost of fuel estimates for all thermal plants. Each utility is then allocated a proportional contribution towards the aggregate amount based on such utility’s total electricity sales during the previous year. In 1993, the scope of the CCC Account was extended to include a portion of the costs of thermal electricity generation in isolated, non-integrated grids in remote areas of Brazil’s northern region.

Each of Eletrobras Furnas, Eletrobras Chesf, CGTEE and Eletrobras Eletronorte receives CCC Account reimbursement for its thermal plant fuel costs, thereby reducing the operating costs of each of their plants. We administer the CCC Account. Reimbursements from the CCC Account for the fuel costs of thermal plants

31

connected to the Basic Network are being phased out in conjunction with the development of a competitive wholesale market. In the event of a complete phase out of the CCC Account, we will have to bear the entire operating costs of our thermal plants.

The following tables set forth information relating to the price paid and amount of fuel purchased for use in our thermal plants in the periods indicated:

	Year Ended December 31,
	2011		2010		2009
	(R$ thousands)
Type of fuel
Coal		95,719		68,435		68,445
Light oil		3,872,179		2,346,923		2,658,571
Crude Oil		30,529		38,329		21,434
Gas		30,549		2,160		3,483
Uranium		294,800		270,842		241,471
Total		4,323,776		2,726,689		2,993,405

	Year Ended December 31,
	2011		2010		2009
Type of fuel
Coal (tons)		1,957,566		1,142,228		1,227,931
Light oil (litres)		681,019,419		611,848,980		606,616,506
Crude Oil (tons)		25,879,055		28,865,267		24,512
Gas (m3)		46,446,077		2,155		4,134,612
Uranium (Kg)		263,345		293,669		286,073

Nuclear Plants

Nuclear power plants represent a relatively costly source of electricity for us. The Brazilian Government, however, has a special interest in the continuing existence of nuclear power plants in Brazil and is required by law to maintain ownership and control over these plants. Accordingly, we expect to continue to own 99.8% of Eletrobras Eletronuclear.

Through Eletrobras Eletronuclear, we operate two nuclear power plants, Angra I, with an installed capacity of 640 MW, representing approximately 0.51% of our total installed capacity and Angra II, with 1,350 MW, representing approximately 1.08% of our total installed capacity (not considering Itaipu). In addition, Eletrobras Eletronuclear started the construction of a new nuclear plant, called Angra III, during the second half of 2009. The construction is estimated to take between 3 and 5.5 years. On March 5, 2009, IBAMA issued an installation license to Eletrobras Eletronuclear with a validity of 6 years and on March 9, 2009, CNEN issued a partial construction license to Eletrobras Eletronuclear. Once constructed, we estimate that Angra III will have an installed capacity of 1,405 MW and that the cost of its construction will be approximately R$10.5 billion.

The following table sets out information regarding our nuclear plants as of December 31, 2011 and for the year then ended:

	Installed Capacity		Generated Energy		Assured Energy(1)		Began Service(2)
	(MW)		(MWh)		(MWh)
Nuclear plant:
Angra I		640		4,263,041		3,215,000	January 1, 1985
Angra II		1,350		10,280,767		9,706,000	September 1, 2000
Total		1,990		14,543,808		12,921,000

(1) For our nuclear plants, assured energy is not limited by ONS or any other regulatory body.

(2) Commercial operation in: Angra I – January 1985 and Angra II – September 2000.

The installed capacity of Angra I is 640 MW. We estimate that Angra I will be operating at 96.2% capacity in 2012 in line with industry standards. Accordingly, the assured energy of Angra I in 2012 will be 3,223,728 MWh/yr.

With respect to Angra II, its installed capacity is 1,350 MW (nominal power). We also estimate that Angra II will be operating at 85.7% capacity in 2012 in line with industry standards. Accordingly, the assured energy of Angra II will be 9,732,672 MWh/yr in 2012.

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Both Angra I and Angra II utilize uranium obtained pursuant to a contract with Indústrias Nucleares Brasileiras – INB, a Brazilian Government-owned company responsible for processing uranium used in nuclear plants. The fuel elements are shipped by truck to the nuclear plant and under the terms of the contract; Eletrobras Eletronuclear bears responsibility for the safe delivery of that fuel. To date, Eletrobras Eletronuclear (and the previous owner of Angra I – Eletrobras Furnas) has experienced no material difficulty in the transportation of fuel to Angra I and Angra II. In addition, low-level nuclear waste (such as filters and certain resins) is stored in specially designed containers in an interim storage site on the grounds of the plants. As is the case with many other countries, Brazil has not yet devised a permanent storage solution for nuclear waste. High-level nuclear waste (spent nuclear fuel) is stored in the fuel cells (compact storage racks in the fuel pool) of the plants. The liability relating to the decommissioning of nuclear power plants Angra I and Angra II commenced at the same time as the operations began at these two units in 1985 and 2000, respectively. The amount of this provision is supported by a technical report of a work group by Eletrobras Eletronuclear created in 2001. In relation to Angra I, the estimated decommissioning cost is U.S.$293 million and in relation to Angra II, the estimated decommissioning cost is U.S.$406 million. The economic useful life of the plants was estimated to be 40 years. Eletrobras Eletronuclear makes provisions for the estimated present value of the decommissioning costs related to Angra I and Angra II.

The electricity generated by Eletrobras Eletronuclear is sold to our subsidiary Eletrobras Furnas at a regulated price determined by ANEEL (Law No. 12,111 of December 9, 2009). This regulated price reflects Eletrobras Eletronuclear’s nuclear fuel acquisition and financial index correction (IPCA). However, in on-selling this electricity to distribution companies, Eletrobras Furnas is required to participate in the public auction process, in which other generation companies in a pool provide bids that reflect the maximum cost of electricity each is willing to supply and the distribution companies pay a price equal to an average of all these bids. As a result of this auction process, the price that Eletrobras Furnas sells in the auction is higher than that it paid to Eletrobras Eletronuclear for the corresponding electricity. Historically, however, the reverse has been true and we recorded consolidated losses in respect of electricity generated by Eletrobras Eletronuclear. We analyzed different measures to reduce these losses if this situation re-occurs, including replacing Eletrobras Furnas in the supply chain described above with Eletrobras itself, which is not required to sell electricity only pursuant to the auction process.

Sales of Electricity Generated

We sold approximately R$14,616 million of electricity generated (net of electricity purchased for resale and VAT and other taxes) in 2011, compared to R$14,573 million in 2010 and R$13,410 million in 2009. These sales are made only to distribution companies (which constitute the main sources of sales of electricity generated) or free consumers. We own certain distribution companies that operate in the northern and northeastern regions of Brazil and we sell a relatively small portion of the electricity we generate to these distribution companies, which does not give rise to revenues in our generation segment as discussed in “ – Distribution.”

We sell the electricity generated pursuant to both supply contracts with industrial end-users and to an auction process for sales to distribution companies. The following table sets forth, by type of sale, sales of electricity generated in the regions we served in the periods presented:

	Year Ended December 31,
	2011				2010				2009
	(R$ thousands)		(MWh)		(R$ thousands)		(MWh)		(R$ thousands)		(MWh)
Type of sale:
Through auctions and initial contracts (energy charge)		11,089,516		121,534,206		7,028,630		117,050,494		7,764,867		103,134,869
Through free market agreements or bilateral contracts (energy charge)		3,748,996		54,777 ,952		4,398,180		65,792,556		3,540,545		62,965,388
Itaipu		5,769,310		91,522,813		8,203,198		85,302,628		6,710,772		91,239,063
Total		20,607,822		267,834,971		19,588,008		254,784,279		18,016,184		257,339,320

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The table below shows a summary of the amount of electricity that we have sold through auction sales:

	Year Ended December 31,
	2011		2010		2009
Capacity Average (MW):
1st Auction		11,003		11,003		11,003
2nd Auction		644		644		644
3rd Auction		—		—		—
4th Auction		396		396		396
5th Auction		180		180		180
Total		12,223		12,223		12,223
Energy (MWh) per year		107,073,480		107,073,480		107,073,480
Average tariff (R$/MWh)		64.77		64.77		64.77
Estimated revenues (R$ thousands)		6,935,149		6,935,149		6,935,149

With respect to supply contracts, the amount that we receive from each sale is determined on the basis of a “capacity charge,” an “energy charge” (or, in some cases, both). A capacity charge is based on a guaranteed capacity amount specified in MW and is charged without regard to the amount of electricity actually delivered. The charge is for a fixed amount (and so is not dependent on the amount of electricity that is actually supplied). In contrast, an energy charge is based on the amount of electricity actually used by the recipient (and is expressed in MWh). Our purchases of Itaipu electricity, and our sales of Itaipu electricity to distributors, are paid for on the basis of a capacity charge (including a charge for transmission paid to Eletrobras Furnas). Our sales of electricity (through our subsidiaries Eletrobras Chesf and Eletrobras Eletronorte) to final consumers, especially to industrial customers, are billed on the basis of both a capacity charge and an energy charge. With respect to auction sales, as discussed in “The Brazilian Power Industry – Regulation under the Electricity Regulatory Law,” invitations to participate in auctions are prepared by ANEEL and, in the event that we are successful, we enter into sale and purchase contracts with the relevant distribution company for an amount of electricity that is proportionate to such company’s estimated demand over the contract period.

Transmission

Transmission of Electricity

Billings in our transmission segment are fixed by ANEEL, which sets a fixed billing each year. Net revenues (including financial revenues at the holding company level) from transmission represented 26.3% of our total net revenues in 2011, compared to 22.0% in 2010 and 19.9% in 2009. The electricity that we generate is transported through Brazil’s tension transmission network, with 53,923 km of transmission lines belonging to us above 230 kV as of December 31, 2011, compared to 53,790 km in 2010 and 53,148 km as of December 31, 2009. Including our partnerships with private companies in SPCs/Consortia we have approximately 59,336 km above 138 KV in operation as of December 31, 2011. For further information, see “ – Lending and Financing Activities – Equity Participation.” In Brazil, the majority of hydroelectric plants are located a considerable distance from the major load centers and therefore, in order to reach consumers, an extensive transmission system has been developed. Transmission is the bulk transfer of electricity, at very high voltages (from 230 kV to 750 kV), from the generation facilities to the distribution systems at the load centers by means of the transmission grid. There is one Interconnected Power System in Brazil that links the northern and northeastern regions to the south and southeast regions. Coordinating the transmission systems is necessary to optimize the investments and operating costs and to ensure reliability and adequate load supply conditions throughout the Interconnected Power System.

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The map below shows the geographic location of our transmission assets as of December 31, 2011:

Transmission Concessions

As of December 31, 2011, our transmission operations were carried out pursuant to the following concessions granted by ANEEL (excluding transmission operations carried out through any SPEs):

	Total length		Voltage Levels		Average years remaining of concession
	(km)		(kV)
Eletrobras Furnas		19,419.0		69 – 750		4.15
Eletrobras Chesf		18,644.6		69 – 500		4.01
Eletrobras Eletrosul		10,006.1		69 – 500		4.76
Eletrobras Eletronorte		9,883.1		69 – 500		3.53
Eletrobras Amazonas Energia		600.8		69 – 230		Not applicable

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Due to the development of the hydroelectric resources of the Amazon region, which requires the transmission of large amounts of energy, Brazil has developed the Interconnected Power System. A national transmission grid provides generators with access to customers in all regions. Eletrobras Furnas and Eletrobras Eletronorte built the first north-south transmission system linking the northern and southern regions of Brazil, which consists of approximately 1,250 km of 500 kV transmission lines and which began operation in 1998. A second north-south transmission system, the construction of which was funded by the private sector, began operation in 2004. The following table sets forth the length of transmission lines (in km) by subsidiary and by voltage as of December 31, 2011:

	750 kV		600 kV (DC)(1)		525/500 kV		345 kV		230 kV		138 kV		132/ 13.8kV		Total
Company:
Eletrobras Chesf		—		—		5,118.4		—		12,805.6		384.0		336.6		18,644.6
Eletrobras Eletronorte(2)		—		—		3,243.3		—		5,577.8		959.1		202.8		9,983.1
Eletrobras Eletrosul		—		—		2,945.5		—		5,150.6		1,841.3		68.7		10,006.1
Eletrobras Furnas		2,698.0		1,612.0		4,570.5		6,220.5		1,949.0		2,204.0		165		19,419.0
Eletrobras Amazonas Energia		—		—		—		—		364.9		—		235.9		600.8
Total		2,698.0		1,612.0		15,877.2		6,220.5		25,847.9		5,388.4		1,009.0		58,653.6

(1) DC means direct current.

(2) This table does not include transmission lines owned by SPEs in which we participate. Had such transmission lines been included, the total would be 60,345 km.

The following table sets forth, on a consolidated basis, the percentage of the total transmission grid above 230 kV in Brazil that we were responsible for as of December 31, 2011, considering our participations in SPEs:

	750 kV		600 kV (DC)(1)		525/500 kV		400 kV		345 kV		230 kV		Total
Entity:
Eletrobras		100.00		100.00		48.93		—		62.82		57.61		53.16
Others		0.00		0.00		51.07		100.00		37.18		42.39		46.84
Total		100.00		100.00		100.00		100.00		100.00		100.00		100.00

(1) DC means direct current.

Except in relation to a small portion of transmission lines of Eletrobras Eletronorte located in the isolated system, the transmission lines in the Interconnected Power System are totally integrated.

As of December 31, 2011, we owned approximately 53.2% of all transmission lines in Brazil (230 kV and above) and, as a result, received fees from companies that transmit electricity on these lines. Net operating revenues from transmission were R$7,779 million in 2011, compared to R$5,895 million in 2010 and R$4,607 million in 2009. As a generation company, we must also pay a tariff in respect of our transmission of electricity over those transmissions that we do not own. Taking into account all transmission lines in Brazil (230 kV and above), this means we pay a tariff in respect of 46.8% of all transmission lines in Brazil.

Losses of electricity in the transmission system of Eletrobras were, in 2011, approximately 2.23% of all electricity transmitted in the system.

We operate as part of an integrated and coordinated national electricity system for Brazil. The Concessions Law authorizes us to begin to charge fees for the use of our transmission system by other electricity companies.

Through Eletrobras Furnas, we charge a tariff (approximately R$4,003.45 per MW/month as of June 28, 2011) for the transmission of electricity generated by Itaipu and purchased for resale. The transmission charge for the power Itaipu generates is used to compensate Eletrobras Furnas, which owns the applicable transmission line, for making its transmission system available for the exclusive use of plant-connection installations. This system comprises the 750 kV Itaipu / Ivaiporã and the 600 kV DC Itaipu / Ibiúna transmission lines that are not part of the Basic Network.

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Expansion of Transmission Activities

Our main transmission companies took part in a planning initiative related to the expansion of the PAE 2009/2012 transmission network through the Regional Transmission Study Group (GET), which is responsible for such transmission expansion initiatives at a regional level. In addition, our transmission companies took part in the regional networks and plant integration studies.

PAE initiatives included, among others, studies on the integration of the Belo Monte hydroelectric plant, focusing on alternative means of transmission to allow for the distribution of electric power from the Belo Monte plant to the northern, northeastern and southeastern regions of Brazil.

Additionally, the government has recently announced a new project to install broadband throughout Brazil using existing transmission lines.

Distribution

Distribution of Electricity

Our distribution activities constitute a relatively small proportion of our overall operations. Net revenues (including financial revenues at holding company level), from distribution represented 8.3% of our total net revenues in 2011, compared to 10.9% in 2010 and 10.8% in 2009.

Distribution Companies

The following companies in our group undertake distribution activities pursuant to distribution concessions granted by ANEEL:

• Eletrobras Eletronorte, which distributes power directly to industrial consumers through its wholly owned subsidiary known as Eletrobras Distribuição Roraima. Eletrobras Eletronorte’s distribution concession ends on July 7, 2015;

• Eletrobras Amazonas Energia, which distributes electricity to the city of Manaus, in the State of Amazonas, pursuant to a concession that ends on July 7, 2015;

• Eletrobras Distribuição Alagoas, which distributes electricity in the State of Alagoas pursuant to a concession that ends on July 12, 2015;

• Eletrobras Distribuição Piauí, which distributes electricity in the State of Piauí pursuant to a concession that ends on July 12, 2015;

• Eletrobras Distribuição Rondônia, which distributes electricity in the State of Rondônia pursuant to a concession that ends on July 12, 2015;

• Eletrobras Distribuição Acre, which distributes electricity in the State of Acre pursuant to a concession that ends on July 12, 2015; and

• Eletrobras Distribuição Roraima (formally known as Boa Vista Energia S.A.), which distributes electricity in the city of Boa Vista, the capital of the State of Roraima, pursuant to a concession that ends on July 7, 2015.

The table below indicates relevant operational numbers of our distribution companies as of December 31, 2011:

Company	Number of Consumers		Number of Municipalities		Distribution Lines (km)		Substations
Eletrobras Amazonas Energia		750,727		62		18,967		49
Eletrobras Distribuição Alagoas		914,843		102		35,815		37
Eletrobras Distribuição Piauí		1,010,066		224		64,220		76
Eletrobras Distribuição Rondônia		512,949		52		46,000		50
Eletrobras Distribuição Acre		213,094		22		16,382		14
Eletrobras Distribuição Roraima		88,057		1		5,872		3

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Each of Eletrobras Distribuição Alagoas, Eletrobras Distribuição Piauí, Eletrobras Distribuição Rondônia and Eletrobras Distribuição Acre was previously owned by the individual Brazilian state in which each respective company operated. Companhia Energética de Roraima, which is owned by the State of Roraima, transferred the assets and liabilities pertaining to the city of Boa Vista to a newly formed company to be controlled by Eletrobras Eletronorte, Eletrobras Distribuição Roraima. We first made equity investments in these companies in 1996 with the objective of improving their financial condition and preparing them for privatization. Eletrobras Amazonas Energia was created in 2008 as a result of the merger between Ceam and Manaus Energia S.A.; Ceam was also previously owned by the Brazilian state in which it operated and we also made an investment in Ceamin 1996 with the objective of improving its financial condition and preparing it for privatization.

Eletrobras Amazonas Energia, Eletrobras Distribuição Alagoas, Eletrobras Distribuição Piauí, Eletrobras Distribuição Rondônia, Eletrobras Distribuição Roraima and Eletrobras Distribuição Acre operate in particularly challenging market conditions – the North and Northeastern regions of Brazil are among the very poorest regions in the country. One of our principal continuing challenges in respect of these companies is reducing the amount of commercial losses (principally being the theft of electricity) and customer defaults that these companies suffer from. We are attempting to address these problems by developing mechanisms that make theft of electricity more difficult and by renegotiating debts that customers of these companies currently owe.

Management Structure for our Distribution Activities

In May of 2008 we introduced a new management structure for our distribution activities. Until May 2008, we managed our investment in Eletrobras Amazonas Energia, Eletrobras Distribuição Alagoas, Eletrobras Amazonas Energia, Eletrobras Distribuição Piauí, Eletrobras Distribuição Rondônia, Eletrobras Distribuição Roraima and Eletrobras Distribuição Acre through the Comitê Gestor das Empresas Federais de Distribuição (a management committee) which focused on, among other matters, proposing financial strategies and targets to improve the financial condition of these companies.

Pursuant to the new structure, this management committee no longer exists. The new structure involves one executive officer at the Eletrobras level, currently Mr. Marcos Aurélio Madureira da Silva, acting as chief executive officer of each of the companies involved in distribution. Each of the companies involved in distribution will then have the same chief financial officer, engineering director, commercial director and regulatory director, in each case appointed by the chief executive officer of these distribution companies.

Transmission and Distribution System

Our transmission and distribution network consists of overhead transmission lines and sub-stations with varying voltage ranges. The clients we serve through our distribution network are classified by voltage level. With respect to our distribution to state utilities and industrial companies, we distribute electricity at higher voltage levels (up to 750 kV), while we distribute to residential and certain commercial companies at lower voltage levels (either at 230 kV, 138 kV or 69 kV).

System Performance

The following table sets forth information concerning our electricity losses for our distribution companies, and the frequency and duration of electricity outages per customer per year for the periods indicated:

	Year Ended December 31,
	2011			2010			2009
Technical losses		9.1	%		8.4	%		9.1	%
Commercial losses		19.5	%		22.3	%		21.6	%
Total electricity losses		28.6	%		31.1	%		30.7	%
Outages:
Frequency of outages per customer per year (number of outages)		32.0			33.7			35.0
Duration of outages per customer per year (in hours)		36.5			37.8			37.2
Average response time (in minutes)		220.2			204.8			146.7

Electricity Losses

We experience two types of electricity losses: technical losses and commercial losses. Technical losses are those that occur in the ordinary course of our distribution of electricity. Commercial losses are those that result from illegal connections, fraud or billing errors. Total electricity losses for our distribution business were 34.3%

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of energy generated and bought in the year ended December 31, 2011 compared to 31.1% of energy generated and bought in the year ended December 31, 2010 and 30.7% of energy generated and bought in the year ended December 31, 2009.

Reducing the level of commercial losses in the distribution companies presents a continuing challenge to us. Commercial losses at these companies have averaged approximately 30% of electricity generated and sold over recent periods. We are attempting to address these problems by developing mechanisms that make theft of electricity more difficult and by renegotiating debts that customers of these companies currently owe.

For example, we have invested in system that monitors the energy consumption by large clients through remote reading equipment. As a result, Eletrobras Amazonas Energia was able to recover R$3 million in 2011 after fining 16,500 properties, of which 3,000 had illegal connections. In 2011, we managed to recover R$455 million from defaulting customers of our distribution companies.

In 2011, our distribution companies experienced a reduction in losses. Particularly, Eletrobras Distribuição Alagoas and Eletrobras Distribuição Rondônia, reduced its losses by 1.5% and 11.3%, respectively. In February 2011, we entered into a loan agreement with the World Bank in the amount of U.S.$495 million. This money will be used in the “Eletrobras Distribution Rehabilitation Project” (the name given by the World Bank to our project “Projeto Energia +”), with the main objective of improving the quality of our services and improving the economic and financial condition of our distribution companies. This project is intended to reduce our losses and consequently to strengthen the operational revenues of our distribution companies.

The following table sets out information regarding total losses in our distribution segment recorded by each distribution company set forth below:

	Year Ended December 31,
	2011		2010		2009
	(percentages)
Company:
Eletrobras Distribuição Alagoas		29.95		31.45		31.34
Eletrobras Distribuição Piauí		33.03		33.51		35.47
Eletrobras Distribuição Rondônia		27.78		39.08		31.54
Eletrobras Distribuição Acre		23.42		24.08		26.20
Eletrobras Amazonas Energia		41.84		42.40		42.70
Eletrobras Distribuição Roraima		15.78		16.13		17.09

Power Outages

With respect to the Interconnected Power System, we aim to respond to repair requests within one and a half to two and a half hours, depending on the scale and nature of the problem. Our average response time in the Interconnected Power System in 2011 was 3.91 hours. The following table sets forth our average response time, in hours, to repair requests in the Interconnected Power System:

	Year Ended December 31,
	2011		2010
Company:
Eletrobras Distribuição Alagoas		2.22		2.18
Eletrobras Distribuição Piauí		5.60		3.97
Average		3.91		3.10

With respect to distribution operations in the Isolated system, we aim to respond to repair requests within half an hour to two hours, depending on the scale and nature of the problem. Our average response time in the Isolated system in 2011 was 3.55 hours. The following table sets forth our average response time, in hours, to repair requests in the Isolated system:

	Year Ended December 31,
	2011		2010
Company:
Eletrobras Distribuição Acre		4.91		6.84
Eletrobras Distribuição Rondônia		5.43		3.40
Eletrobras Amazonas Energia		2.41		2.71
Eletrobras BoaVista Energia		1.46		1.38
Average		3.55		3.58

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Customers

The following table sets forth our total distribution of electricity in terms of MWh and gross revenues, by type of user, for the periods indicated:

	Year Ended December 31,
	2011		2010		2009
	(MWh)
Distribution to:
State utilities		1,872,815		1,358,030		1,337,877
Industrial		2,978,936		2,814,782		2,433,128
Residential		4,907,094		4,574,356		4,030,471
Commercial		2,871,517		2,662,126		2,387,589
Other(1)		949,814		1,373,239		1,236,566
Total		13,580,176		12,781,533		11,425,631

(1) This figure includes distribution to rural customers and the government.

Tariffs

We classify our customers into two different groups, Group A and Group B, based on the voltage level at which we supply the electricity to our customers. Each customer is placed in a certain tariff level defined by law and based on its respective classification, although some volume-based discounts are available. Group B customers pay higher tariffs, compensating the aggregated costs in all sub-systems in which electricity flows to supply them. There are differentiated tariffs in Group B by types of customer (such as residential, commercial, rural and industrial). Customers in Group A pay lower tariffs, decreasing from A4 to Al, because they demand electricity at higher voltages, which requires a lower level of use of the energy distribution system. Tariffs we charge for sales of electricity to final customers are determined pursuant to our concession agreements and regulations established by ANEEL. These concession agreements and related regulations establish a cap on tariffs that provides for annual, periodic and extraordinary adjustments. For a discussion of the regulatory regime applicable to our tariffs and their adjustment, see “ – The Brazilian Power Industry.”

Group A customers receive electricity at 2.3 kV or higher. Tariffs for Group A customers are based on the voltage level at which electricity is supplied, and the time of year and the time of day electricity is supplied, although customers may opt for a differentiated tariff in peak periods. Tariffs for Group A customers are composed of two components: a “capacity charge” and an “energy charge.”

The capacity charge, expressed in reais per MW, is based on the higher of: (i) contracted firm capacity; or (ii) power capacity actually used. The energy charge, expressed in reais per MWh, is based on the amount of electricity actually consumed. Tariffs charged to Group A customers are lower than those for Group B customers because Group A customers consume electricity at higher voltage ranges, and therefore avoid the costs associated with lowering the electricity voltage as is required for consumption by our Group B customers.

Group B customers receive electricity at less than 2.3 kV (220V and 127V). Tariffs for Group B customers consist solely of an energy consumption charge and are based on the classification of the customer.

Billing Procedures

The procedure we use for billing and payment for electricity supplied to our customers is determined by customer category. Meter readings and invoicing take place on a monthly basis for low voltage consumers, with the exception of rural consumers whose meters are read in intervals varying from one to three months, as authorized by relevant regulation. Bills are prepared from meter readings or on the basis of estimated usage. Low voltage customers are billed within five business days after the invoice date. In case of nonpayment, a notification of nonpayment accompanied by the next month’s invoice is sent to the customer and a period of 15 days is provided to satisfy the amount owed to us. If payment is not received within three business days after the 15-day period, the customer’s electricity supply is suspended. High voltage customers are billed on a monthly basis with payment required within five business days after the invoice date. In the event of non-payment, a notice is sent to the customer two business days after the due date, giving a deadline of 15 days to make payment. If payment is not made within three business days after the notice, the customer is subject to discontinuation of service.

As of December 31, 2011, 2010 and 2009, customers in default represented an average of 18.5%, 15.7% and 13.6% (not including Eletrobras Distribuição Acre) of annual revenues, respectively. These default rates have generally remained stable over recent years and we do not expect to see material changes in these default rates in the foreseeable future.

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Purchase of Electricity for Distribution

We purchased 15,576 GWh of electricity for distribution in 2011, compared to 14,285 GWh in 2010 and 12,942 GWh in 2009. Our distribution companies purchase electricity in the public auction process from a pool of generation companies that provide bids setting out the maximum price at which they will supply electricity. After all bids are received, the average price of all bids is calculated and this is the price that we pay for the electricity. The purchase is made from all generation companies that provided bids.

Lending and Financing Activities

Loans Made by Us

Brazilian law allows us to only lend to our subsidiaries. Historically, Brazilian law allowed us to act as lender to our subsidiaries and to public energy utilities under our control. While certain of those subsidiaries are no longer in our group, the majority of our loans are to related parties. Prior to the privatization of the Brazilian electricity industry that began in 1996, this was a particularly widespread part of our operations because most companies in the industry were state-owned, allowing us to engage in lending activities to them. However, as the result of privatization, the number of companies to whom we may lend has diminished and lending is no longer a significant aspect of our business. The total amounts we recorded on our balance sheet: R$9.7 billion as of December 31, 2011, R$9.7 billion as of December 31, 2010 and R$11.8 billion as of December 31, 2009. Of this total amount, loans to Itaipu accounted for R$5.8 billion as of December 31, 2011, R$5.7 billion as of December 31, 2010 and R$6.5 billion as of December 31, 2009. The loans related to our distribution companies are as follows: R$3.8 billion as of December 31, 2011, R$4.0 billion as of December 31, 2010 and R$5.3 billion as of December 31, 2009.

Sources of Funds

We obtain funding for our lending activities from loans from financial institutions and offerings in the international capital markets. As of December 31, 2011, our consolidated long-term debt was R$38,408 million, compared to R$31,270 million as of December 31, 2010 and R$28,393 million as of December 31, 2009, with the majority of our foreign currency debt (approximately 40% over the three-year period) denominated in U.S. dollars. Further details of our borrowings are set out in “ – Liquidity and Capital Resources – Cash Flows.”

In addition, we utilize borrowings from the RGR Fund, which we administer, to on-lend to our subsidiaries and other electricity companies. As of December 31, 2011, December 31, 2110 and December 31, 2009, we incurred interest at 5.0% in respect of borrowings from the RGR Fund and charge an average administrative fee of up to 2.0% on funds which we on-lend to subsidiaries and other entities.

Equity Participation

We act as a minority participant in private sector generation and transmission companies and joint ventures. We are also authorized to issue guarantees for those companies in which we participate as an equity investor. We are constantly considering investments in a number of such companies, focusing primarily on those in line with our strategy of building on our core businesses of generation and transmission (see “Item 7.B, Related Party Transactions”).

The current participations that we have are in private sector generation and transmission companies and joint ventures. Participation is determined primarily on merit and profitability criteria based on our managerial controls.

The table below shows an estimate of the total percentage of our participation in transmission and generation companies as of December 31, 2011:

Special Purpose Company/Consortium	Object of investment	Eletrobras Participation
Transmission
Interligação Elétrica do Madeira S.A.	600 kV transmission line of 2,375 km	Eletrobras Chesf (24.5%)

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Special Purpose Company/Consortium	Object of investment	Eletrobras Participation
		Eletrobras Furnas (24.5%)
	Plus Rectifier and Inverter Station
Norte Brasil Transmissora de Energia S.A.	600kV Transmission Line of 2,375 km:	Eletrobras Eletronorte (24.5%) Eletrobras Eletrosul (24.5%)
	SE Coletora – Araraquara 2, Porto Velho
Estação Transmissora de Energia S.A.	500/±600 kV Conversion and Inversion Station 01	Eletrobras Eletronorte (100.0%)
Manaus Transmissora de Energia S.A.	500 kV Transmission Line of 587 km:	Eletrobras Chesf (19.5%) Eletrobras Eletronorte (30.0%)
	Oriximiná – Silves; 500 kV Transmission Line of 224 km and Subestations Itacoatiara e Cariri: Silves –Lechuga
STN – Sistema de Transmissão Nordeste S.A.(2)	500 kV Transmission Line of 546 km:	Eletrobras Chesf (49.0%)
	Teresina-Sobral-Fortaleza
Intesa – Integração de Energia S.A.(2)	500 kV Transmission Line of 695 km: Colinas-Miracema-Gurupí-Peixe Nova-Serra da Mesa 2	Eletrobras Chesf (12.0%), Eletrobras Eletronorte (37.0%)
Porto Velho Transmissora de Energia S.A.	230 kV transmission lines of 17 km: 500/230 kV SE Coletora Porto Velho	Eletrobras Eletrosul (100.0%)
Ártemis – Transmissora de Energia S.A.(2)	525 kV Transmission Line of 476 km: S. Santiago-Ivaporã-Cascavel	Eletrobras Eletrosul (100.0%)
Transenergia Renovável	230/138 kV Transmission Line of 635 km: Connects biomass plants and small hydroelectric plants to the Sistema Interligado Nacional (SIN)	Eletrobras Furnas (49.0%)
Brasnorte Transmissora de Energia S.A.(2)	230kV Transmission Lines of 402 km: Jauru-Juba-C2; LT Maggi-Nova Mutum	Eletrobras Eletronorte (49.7%)
RS Energia – Empresa de Transmissão de Energia do Rio Grande do Sul S.A.(2)	525 kV Transmission Line of 260 km: Campos Novos-Nova Santa Rita and 230 kV transmission line of 33 km SE Monte Claro – SE Garibaldi	Eletrobras Eletrosul (100.0%)
Companhia Transleste de Transmissão S.A.(2)	345 kV Transmission Line of 139 km: Montes Claros-Irapé	Eletrobras Furnas (24.0%)
Amazônia Eletronorte Transmissora de Energia S.A. – Aete(2)	230 kV Transmission Line of 193 km: Coxipó-Cuiabá-Rondonópolis and SE Seccionadora Cuiabá	Eletrobras Eletronorte (49.0%)
Etau – Empresa de Transmissão do Alto Uruguai(2) S.A.	240 kV Transmission Line of 187 km: Campos Novos-Barra Grande-Lagoa Vermelha-Santa Marta	Eletrobras Eletrosul (27.4%)
Uirapuru Transmissora de Energia S.A.(2)	525 kV Transmission Line of 122 km: Ivaiporã-Londrina	Eletrobras Eletrosul (100.0%)
Companhia Transudeste de Transmissão S.A.(2)	345 kV Transmission Line of 144 km: Itutinga-Juiz de Fora	Eletrobras Furnas (25.0%)
Companhia Transirapé de Transmissão S.A.(2)	345 kV Transmission Line of 61 km: Irapé-Araçuaí	Eletrobras Furnas (25.0%)
Companhia Centroeste de Minas S.A.	345 kV Transmission Line of 63 km: Eletrobras Furnas-Pimenta II	Eletrobras Furnas (49.0%)
Linha Verde Transmissora de Energia S.A.	230 kV Transmission Line of 987 km: Porto Velho -Jauru	Eletrobras Eletronorte (49.0%)
Rio Branco Transmissora de Energia S.A.	230 kV Transmission Line of 487 km: Porto Velho-Abunã-Rio Branco	Eletrobras Eletronorte (100.0%)
Transmissora Matogrossens de Energia S.A.	500 kV Transmission Line of 348 km: Jauru – Cuiabá and SE Jauru	Eletrobras Eletronorte (49.0%)
Transenergia São Paulo S.A.	Itatiba Substation, 500 kV	Eletrobras Furnas (49.0%)

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Special Purpose Company/Consortium	Object of investment	Eletrobras Participation
Transenergia Goiás S.A	230 kV Transmission Line of 188 km: Serra da Mesa-Niquelândia-Barro Alto	Eletrobras Furnas (49.0%)
Consórcio Goiás Transmissão	500 kV Transmission Line of 193 km: Rio Verde Norte –Trindade. and 230 kV Transmission Line of 66 km: Xavantes-Trindade-Carajás and SE Trindade	Eletrobras Furnas (49.0%)
Consórcio MGE Transmissão	500 kV Transmission Line of 248 km: Mesquita-Viana 2. and 345 kV transmission line of 10 km: Viana – Viana 2 and SE Viana 2	Eletrobras Furnas (49.0%)
TDG Transmissora Delmiro Gouveia SA	230 kV Transmission Line of 96 km: São Luiz II – São Luiz III and SE Pecém and SE Aquiraz II	Eletrobras Chesf (49.0%)
Interligação Elétrica Garanhus SA	500 kV Transmission Line of 653 km: Luiz Gonzaga – Garanhus, Garanhus – Campina Grande III and Garanhus – Pau Ferro and 230 kV transmission line of 13 km: Garanhus – Angelim I	Eletrobras Chesf (49.0%)
Transnorte Energia SA	500 kV Transmission Line of 715 km: Engenheiro Lechuga – Equador (RR) – Boa Vista e SEs	Eletrobras Eletronorte (49.0%)
Costa Oeste Transmissora de Energia SA	230 kV Transmission Line of 143 km Cascavel Oeste –Umuarama	Eletrobras Eletrosul (49.0%)
Marumbi Transmissora de Energia SA	525 kV Transmission Line of 28 km: Curitia – Curitia Leste	Eletrobras Eletrosul (20.0%)
Transmissora Sul Brasileira de Energia SA	525 kV Transmission Line of 495 km: Salto Santiago –Itá –Nova Santa Rita and 230 kV transmission line of 303 km: Nova Santa Rita –Camaquã –Quinta	Eletrobras Eletrosul (80.0%)
Consórcio Caldas Novas	SE Corumbá 345/138 kV – 2 x 75 MVA	Eletrobras Furnas (49.9%)
Generation
Madeira Energia SA	HPU Santo Antonio with 3,150 MW	Eletrobras Furnas (39.0%)
Energia Sustentável do Brasil	HPU Jirau with 3300 MW	Eletrobras Chesf (20.0%) Eletrobras Eletrosul (20.0%)
Foz do Chapecó Energia S.A.	HPU Foz do Chapecó with 855 MW	Eletrobras Furnas (40.0%)
Enerpeixe S.A.(2)	HPU Peixe Angical with 452 MW	Eletrobras Furnas (40.0%)
Consórcio Energético Cruzeiro do Sul S.A.	HPU Mauá with 361 MW	Eletrobras Eletrosul (49.0%)
Serra de Facão S.A.	HPU Serra do Facão with 213 MW	Eletrobras Furnas (49.5%)
Energetica Águas da Pedra S.A.–EAPSA (Aripuanã; Água Das Pedras)	HPU Dardanelos with 261 MW	Eletrobras Chesf (24.5%), Eletrobras Eletronorte (24.5%)
Baguari I Geração de Energia Elétrica S.A.(2)	HPU Baguari with 140 MW	Eletrobras Furnas (15.0%)
Retiro Baixo Energética S.A.	HPU Retiro Baixo with 82 MW	Eletrobras Furnas (49.0%)
AMAPARI Energia S.A.(2)	TPU Serra do Navio and Small HPU Capivara with 53 MW	Eletrobras Eletronorte (49.0%)
Norte Energia S.A.	HPU Belo Monte with 11,233 MW	Eletrobras Eletronorte (19.9%) Eletrobras Chesf (15.0%) Eletrobras Holding (15.0%)
Brasventos Eolo Geradora de Energia S.A.	Parque Eólico Rei doVentos I with 49 MW	Eletrobras Furnas (24.5%) Eletrobras Eletronorte (24.5%)
Rei dos Ventos 3 Geradora de Energia S.A.	Parque Eólico Rei dos Ventos 3 with 49 MW	Eletrobras Furnas (24.5%) Eletrobras Eletronorte (24.5%)

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Special Purpose Company/Consortium	Object of investment	Eletrobras Participation
Brasventos Miassaba 3 Geradora de Energia S.A.	Parque Eólico Miassaba 3 with 50 MW	Eletrobras Furnas (24.5%) Eletrobras Eletronorte (24.5%)
Companhia Hidrelétrica Teles Pires	HPU Teles Pires with 1,820 MW	Eletrobras Eletrosul (24.5%) Eletrobras Furnas (24.5%)
Cerro Chato I S.A.	Parque Eólico Coxilha Negra V with 30 MW	Eletrobras Eletrosul (90.0%)
Cerro Chato II S.A.	Parque Eólico Coxilha Negra VI with 30 MW	Eletrobras Eletrosul (90.0%)
Cerro Chato III S.A.	Parque Eólico Coxilha Negra VII with 30 MW	Eletrobras Eletrosul (90.0%)
Eólica Mangue Seco 2 Geradora e Comercializadora de Energia Elétrica	Eólica Mangue Seco 2 with 26 MW	Eletrobras Holding (49.0%)
Inambari Geração de Energia S.A.	UHE Inambari with 2,000 MW	Eletrobras Furnas (19.6%) Eletrobras Holding (29.4%)
Chuí Holding S.A.	Eólicas Chuí I a V with 98 MW and Eólicas Minuano I and II with 46 MW	Eletrobras Eletrosul (49.0%)
Livramento Holding S.A.	Eólicas Cerro Chato IV, V and VI, Ibirapuitã e Trindade with 78 MW	Eletrobras Eletrosul (49.0%)
Santa Vitória do Palmar Holding S.A.	Eólicas Verace I to X with 258 MW	Eletrobras Eletrosul (49.0%)
São Pedro do Lago S.A.	Eólica São Pedro do Lago with 30 MW	Eletrobras Chesf (49.0%)
Pedra Branca S.A.	Eólica Pedra Branca with 30 MW	Eletrobras Chesf (49.0%)
Sete Gameleiras S.A.	Eólica Sete Gameleiras with 30 MW	Eletrobras Chesf (49.0%)
Central Geradora Eólica Famosa I S.A.	Eólica Famosa I with 23 MW	Eletrobras Furnas (49.0%)
Central Geradora Eólica Pau –Brasil S.A.	Eólica Pau – Brasil with 15 MW	Eletrobras Furnas (49.0%)
Central Geradora Eólica Rosada S.A.	Eólica Rosada with 30 MW	Eletrobras Furnas (49.0%)
Central Geradora Eólica São Paulo	Eólica São Paulo with 18 MW	Eletrobras Furnas (49.0%)
Energia dos Ventos I	Eólica Goiabeira with 19 MW	Eletrobras Furnas (49.0%)
Energia dos Ventos II	Eólica Ubatuba with 13 MW	Eletrobras Furnas (49.0%)
Energia dos Ventos III	Eólica Santa Catarina with 16 MW	Eletrobras Furnas (49.0%)
Energia dos Ventos IV	Eólica Pitombeira with 27 MW	Eletrobras Furnas (49.0%)
Energia dos Ventos V	Eólica São Januário with 19 MW	Eletrobras Furnas (49.0%)
Energia dos Ventos VI	Eólica Nossa Senhora de Fátima with 29 MW	Eletrobras Furnas (49.0%)
Energia dos Ventos VII	Eólica Jandaia with 29 MW	Eletrobras Furnas (49.0%)
Energia dos Ventos VIII	Eólica São Clemente with 19 MW	Eletrobras Furnas (49.0%)
Enegia dos Ventos IX	Eólica Jandaia I with 19 MW	Eletrobras Furnas (49.0%)
Energia dos Ventos X	Eólica Horizonte with 14 MW	Eletrobras Furnas (49.0%)

Brazilian Government Programs

In addition to the Proinfa program created by the Brazilian Government in 2002 to create certain incentives for the development of alternative sources of energy (discussed more fully in “The Brazilian Power Industry – Proinfa”), we also participate in four additional Brazilian Government programs:

• the Programa Reluz (Relighting Program), a program introduced in order to bring basic lighting to the main public areas of certain municipalities in Brazil;

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• the Programa Procel (Conservation Program), a program that aims to promote energy conservation and efficiency;

• Luz Para Todos (Light for All), a program that aims to bring electricity to an additional 12 million people in Brazil; and

• Programa de Desenvolvimento Tecnológico e Industrial (Program of Technological and Industrial Development), a program to coordinate research and development activities in the Brazilian electricity sector and promote the development and manufacture of equipment required to ensure the development of the sector.

Any funds used by us in respect of these programs come from the Brazilian Government itself, in the form of funds allocated for the sector, and accordingly we do not use our own funds for these programs.

We also participate in other initiatives using our own funds, one of which is the Projeto Ribeirinhas, or Riverbank Communities Project. Through this initiative, we aim to evaluate the applicability and sustainability of technologies based on renewable resources of energy in certain small communities living in the Amazon region.

Research and Development

See “Item 5.C, Research and Development, Patents and Licenses”

International Activities

As of December 31, 2011, we did not operate internationally. However, as part of our strategy we continue to explore certain opportunities in international electricity markets and selectively identify profitable opportunities in these markets for the future, mainly related to the integration of the electrical power systems in the Americas. As part of our internationalization plan, we have established a representative office in Lima, Peru; Panama City, Panama and Montevideo, Uruguay in order to comply with local rules, which provide that concessions may only be granted to companies that maintain a local representative office. These offices will also provide a connection between us and partners in Latin America. We are actively seeking to invest in generation projects in other Latin America countries and we have also already begun to commercialize power with some of these countries. We also hold equity interests in two specific purpose entities (SPEs), in Peru and in Nicaragua, which are currently undertaking feasibility studies for hydro generation projects. Furthermore, we are in the process of obtaining the necessary licenses for the construction in Brazil of an interconnection line between Brazil and Uruguay, which is scheduled to begin still in 2012. As part of the expansion strategy, we may also identify and pursue selected growth opportunities, including renewable energy and transmission lines, outside of South America.

Profit Sharing and Pension Plans

Our collective bargaining agreement establishes a profit-sharing plan based on the achievement of targets. Such targets are established annually in May of each year following negotiation with the labor unions and the approval of the Brazilian Government. For the years ended December 31, 2011, 2010 and 2009, we paid R$317 million, R$296 million and R$285 million, respectively, to our employees by way of profit-sharing (at the holding company level only, we paid R$38 million in 2011, compared to R$35 million in 2010 and R$27 million in 2009).

Environmental

General

Environmental issues can significantly impact our operations. For example, large hydroelectric plants can cause the flooding of large areas of land and the relocation of large numbers of people. The Brazilian Constitution gives both the Brazilian Government and state and local governments power to enact laws designed to protect the environment and to issue regulations under such laws. While the Brazilian Government has the power to promulgate general environmental regulations, state and local governments have the power to enact more stringent environmental regulations. Accordingly, most of the environmental regulations in Brazil are state and local rather than federal.

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Any failure to comply with environmental laws and regulations may result in criminal liability, irrespective of the strict liability to perform environmental remediation and to indemnify third parties for environmental damages. These failures may also subject us to administrative penalties such as fines, suspension of public agency subsidies or injunctions requiring us to discontinue, temporarily or permanently, the prohibited activities.

In order to build a hydroelectric plant, Brazilian electricity companies must comply with a number of environmental safeguards. For projects for which the environment impact is considered significant, such as generation projects with an output above 10 MW, as well as transmission lines above 230 kV, together with certain other environmentally sensitive projects, first, a basic environmental impact study must be prepared by outside experts who make recommendations as to how to minimize the impact of the plant on the environment. The study, together with a special environmental report on the project prepared by the company, is then submitted to federal, state or local governmental authorities, depending on the projected impact, for analysis and approval. Once approved, the project goes through a three stage licensing process, which comprises a license to attest the viability of the project, a license to begin work, and a license to operate the project. In addition, the company is required by law to devote 0.5% of the total cost of any investment in new projects with a significant environmental impact to environmental preservation. Since the early 1980’s, the Brazilian electricity sector has endeavored to improve its treatment of the social and environmental aspects of power project planning, implementation and operation. In general, our generation subsidiaries are in compliance with applicable environmental regulations in Brazil, and the environmental policies and guidelines of the electricity sector. Our generation and transmission facilities benefit from certain exemptions to licensing requirements because their operations commenced before the applicable environmental legislation, some environmental authorities have issued notices of infringement alleging the absence of environmental licenses. See “Item 8.A, Consolidated Financial Statements and Other Information – Litigation – Environmental Proceedings.”

As of December 31, 2011, our subsidiary Eletrobras Eletronuclear operated two nuclear power plants in the State of Rio de Janeiro, Angra I and Angra II. Because Eletrobras Eletronuclear initiated its activities before the enactment of an environmental legislation, Angra I was licensed by CNEN under the nuclear and environmental regulations in effect at that time. A study group formed by the Federal Public Attorney’s Office, CNEN, the Instituto Brasileiro do Meio Ambiente e Recursos Naturais Renováveis (or IBAMA), the Fundação Estadual de Engenharia do Meio Ambiente (or FEEMA), Eletrobras Eletronuclear and Eletrobras was established to prepare a Termo de Ajustamento de Conduta (a Term of Adjustment or TAC) according to which the guidelines for the environmental licensing update procedure should be established. Angra II has obtained all the environmental licenses necessary for its operations, but the Federal Public Attorney’s Office challenged its renewal, which it conditioned upon the compliance with a TAC and according to which Eletrobras Eletronuclear should implement a program in order to improve emergency plans, environmental monitoring programs and effluents treatment systems. Until these obligations are accomplished IBAMA, ANEEL and CNEN should abstain from issuing any definitive licenses or authorizations for the operation of Angra II. An assessment comprising the accomplishments of the TAC was issued by IBAMA to the Public Attorney in June 2006. Eletrobras Eletronuclear is strictly liable for nuclear accidents as an operator of nuclear plants in Brazil. See “Item 3.D, Risk Factors – Risks Relating to Our Company – We may be liable for damages, subject to further regulation and have difficulty obtaining financing if there is a nuclear accident involving our subsidiary Eletrobras Eletronuclear.”

Energy Conservation

Over the past 20 years, the Brazilian Government has implemented a number of actions directed to energy conservation on the electricity sector. The Brazilian Government normally finances these actions and we administer them. The most important project in this area is the Procel.

The Programa de Conservação de Energia Elétrica – Procel (the national electric conservation program) was created in 1985 to improve energy efficiency and rationalization of the use of natural resources throughout Brazil. MME coordinates the program and we are responsible for its execution. The main objective of Procel is to encourage cooperation among various sectors of Brazilian society to improve energy conservation both on the production and consumer sides.

Alternative Electricity Sources

In 2002 the Brazilian Government created the Programa de Incentivo às Fontes Alternativas de Energia Elétrica – Proinfa (the program for the development of alternative electricity sources), with the objective of diversifying the Brazilian energy matrix by searching for regional solutions with the use of renewable energy sources.

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The Brazilian Power Industry

General

According to Regulation No. 937, dated November 24, 2010, MME approved a ten-year expansion plan (Plano Decenal de Expansão de Energia Elétrica or PDE 2010-2019), which provides guidance to the Brazilian government and to all agents in the Brazilian energy industry in order to ensure that there is a sustainable supply of energy in Brazil, including electricity, taking into consideration environmental needs, the Brazilian economy and a business’ technical capabilities.

The studies carried out in the PDE include a plan for the next ten years and are subject to annual reviews which take into account, among other aspects, changes in the forecast for the growth of electricity consumption and the re-evaluations of the economical and operational feasibility of the generation projects, as well as the estimations regarding the expansion of transmission lines.

According to ANEEL, in December 2011, when taking into account the SIN generating units, the power generators installed in the isolated systems and in the generators owned by individuals, Brazil had a total installed capacity of 116,796 MW.

Currently, the SIN is divided into four electric sub-systems: South-East/Center-West, South, North-East and North. One of the goals of the PDE is to complete the integration of the isolated systems of Manaus-Macapá, into the North sub-systems by November 2012.

In addition to the SIN, there are also the isolated systems, i.e., those systems that do not make part of the SIN, are generally located in the Northern and North-Eastern regions of Brazil, have as sole source of energy the electricity generated by coal-fired and oil-fuelled thermal plants which are extremely pollutants and have a generation cost three to four times higher than, for instance, a hydro-electric power station. The CCC account was introduced by article 13, III of Law No. 5899, of July 5, 1973, as amended, with the purpose of generating financial reserves payable to distribution companies and to some generation companies (all of which must make annual contributions to the CCC Account) in order to cover some of the costs of the operation of thermoelectric plants in the event of adverse hydrological conditions, and also of subsidizing the electricity generated by the “isolated systems” in order to allow consumers of the isolated systems to bear charges for electricity equivalent to the charges borne by consumers served by hydraulic generation. There is currently a significant discrepancy between charges paid by consumers in the Northern and Northeastern regions when compared to what is charged from the Southern/South-Eastern Region consumers. Therefore, interconnecting the isolated systems to the SIN would enable consumers from these regions to have access to hydroelectric energy sources, which results in reduced production costs and a convergence of prices in these regions to other regions of the country.

With the purpose of promoting a significant reduction of the CCC account of the isolated systems, the PDE further intends to integrate the isolated systems to the SIN. Such integration would be carried out through the construction of the transmission lines of Jauru/Vilhena (230kV), Tucuruí/Manaus (Cariri) (500kV) and Jurapari/Macapá (230kV), within the shortest term possible, given that the preliminary analysis for implementing the integration project has already been concluded.

In addition to the integration of the isolated systems, the PDE also provides for the expansion of electricity generation through the improvement of the generation capacity, defined by the PDE as the execution of a set of works aimed at enhancing the capacity and efficiency while modernizing the already existing power plants, which should not represent a lot in terms of ensured power but would contribute to meet the increase in the highest level expected of electricity demand.

According to ANEEL, the total installed electricity generation capacity in Brazil in 2011 was 116,795,837 KW with 2,575 operating ventures. Currently, there are 172 ventures currently under construction and another 505 with permits granted. An additional generation capacity of 49,555,018 KW is expected in the coming years.

Pursuant to the EPE 10 Year Plan, Brazil’s total installed power generation capacity is projected to increase to 171.1 GW by 2020, of which 115.1 GW (67.27%) is projected to be hydroelectric and 56.0 GW (32.7%) to be thermoelectric and from other sources.

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We currently control approximately 36% of the installed power generating capacity within Brazil and are responsible for approximately 56% of the installed transmission capacity above 230 kV. In addition, some Brazilian states control entities involved in the generation, transmission and distribution of electricity. The remainder of the market is held by several companies including Cemig, Copel, Tractebel, CPFL, Duke and Brasil Energia. Certain of these companies have entered into joint venture arrangements in the past.

In net revenue terms, we believe we are the largest generation and transmission company in Brazil. We principally compete for generation and transmission businesses through a competitive auction process.

In 2011, according to the Empresa de Pesquisa Energética (the Energetic Research Company or EPE), the electricity consumption in Brazil reached 455,660 GWh, which represented an increase compared to total consumption in 2010 by 7.2%. The electricity consumption in Brazil in 2010 was 422,848 GWh according to EPE, which represented a 1.26% decrease compared to the total consumption of 428,250 GWh in 2009.

Historical Background

The Brazilian Constitution provides that the development, use and sale of energy may be undertaken directly by the Brazilian Government or indirectly through the granting of concessions, permissions or authorizations. Historically, the Brazilian power industry has been dominated by generation, transmission and distribution concessionaires controlled by the Brazilian Government. This changed during Fernando Henrique Cardoso’s administration (1995-2002), during which many state controlled companies were privatized in an effort to increase efficiency and competition. In recent years, the Brazilian Government has taken a number of measures to remodel the power industry. In general, these measures were aimed at increasing the role of private investment and eliminating foreign investment restrictions, thus increasing overall competition in the power industry.

In particular, the Brazilian Government has taken the following measures:

• The Brazilian Constitution was amended in 1995 by Constitutional Amendment No. 6 to allow foreign companies to invest in Brazilian companies that hold power generation concessions. Prior to this amendment, all generation concessions were held either by a Brazilian individual or an entity controlled by Brazilian individuals or by the Brazilian Government;

• The Brazilian Government enacted Law No. 8,987 on February 13, 1995 as amended by Law No. 11,196 of November 21, 2005 and Law No. 11,445 of January 5, 2007 (or the Concessions Law) and Law No. 9,074 on July 7, 1995, as amended (or the Power Concessions Law), that together: (i) required that all concessions for the provision of energy related services be granted through public bidding processes; (ii) gradually allowed certain electricity consumers with significant demand, designated “free consumers,” to purchase electricity directly from suppliers holding a concession, permission or authorization; (iii) provided for the creation of generation entities (or Independent Power Producers) which, by means of a concession, permission or authorization, may generate and sell, for their own account and at their own risk, all or part of their electricity to free consumers, distribution concessionaires and trading agents, among others; (iv) granted free consumers and electricity suppliers open access to all distribution and transmission systems; and (v) eliminated the need for a concession to construct and operate power projects with capacity from 1 MW to 30 MW (the so called Pequenas Centrais Hidrelétricas – PCHs) although an authorization or permission from ANEEL or MME is required, as the case may be;

• Beginning in 1995, a portion of the controlling interests held by us and various states in certain generation and distribution companies were sold to private investors. At the same time, certain state governments also sold their stakes in major distribution companies;

• In 1998, the Brazilian Government enacted Law No. 9,648 (or the Power Industry Law) to overhaul the basic structure of the electricity industry. The Power Industry Law provided for the following:

• the establishment of a self-regulated body responsible for coordinating the purchase and sale of electric energy available in the Interconnected System (Mercado Atacadista de Energia Elétrica – MAE), or the Wholesale Energy Market – MAE, an entity which replaced the prior system of regulated generation prices and supply contracts. The Wholesale Energy Market – MAE was later replaced by the CCEE;

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

• the creation of the National Electricity System Operator (Operador Nacional do Sistema Elétrico), or ONS, a non-profit, private entity responsible for the operational management of the generation and transmission activities of the Interconnected Power System; and

• the establishment of public bidding processes for concessions for the construction and operation of power plants and transmission facilities.

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

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

• the creation of the CGE, which passed a series of emergency measures that provided for reduced electricity consumption targets for residential, commercial and industrial consumers in the affected regions by introducing special tariff regimes that encouraged the reduction of electricity consumption.

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

• On March 15, 2004, the Brazilian Government enacted the Law No. 10,848 and on July 30, 2004, the Decree No. 5.163, or the Electricity Regulatory Law, in an effort to further restructure the power industry with the ultimate goal of providing consumers with secure electricity supplies combined with low tariffs, which law was regulated by a number of decrees enacted by the Brazilian Government in July and August of 2004, and is still subject to further regulation to be issued in the future. See “ – Challenges to the Constitutionality of the Electricity Regulatory Law.”

Concessions

The companies or consortia that wish to build or operate facilities for generation, transmission or distribution of electricity in Brazil must apply to MME or to ANEEL, as representatives of the Brazilian Government, for a concession, permission or authorization, as the case may be. Concessions grant rights to generate, transmit or distribute electricity in the relevant concession area for a specified period, though a concession may be revoked at any time at the discretion of the MME, following consultation with ANEEL. This period is usually 35 years for new generation concessions, and 30 years for new transmission or distribution concessions. An existing concession may be renewed at the granting authority’s discretion. Accordingly, we cannot provide any assurances that the concessions will be extended.

The Concession Law establishes, among other things, the conditions that the concessionaire must comply with when providing electricity services, the rights of the consumers, and the obligations of the concessionaire and the granting authority. Furthermore, the concessionaire must comply with regulations governing the electricity sector. The main provisions of the Concession Law are as follows:

• Adequate service. The concessionaire must render adequate service equally with respect to regularity, continuity, efficiency, safety, and accessibility.

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

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

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

• Intervention by the granting authority. The granting authority may intervene in the concession, by means of an administrative proceeding, to ensure the adequate performance of services, as well as full compliance with applicable contractual and regulatory provisions.

• Termination of the concession. The termination of the concession agreement may be accelerated by means of expropriation and/or forfeiture. Expropriation is the early termination of a concession for reasons related to the public interest that must be expressly declared by law. Forfeiture must be declared by the granting authority after a final administrative ruling that the concessionaire, among other things: (i) has failed to render adequate service or to comply with applicable law or regulation; (ii) no longer has the technical, financial or economic capacity to provide adequate service; or (iii) has not complied with penalties assessed by the granting authority. The concessionaire may contest any expropriation or forfeiture in the courts. The concessionaire is entitled to indemnification for its investments in expropriated assets that have not been fully amortized or depreciated, after deduction of any amounts for fines and damages due by the concessionaire.

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

Penalties

Law No. 9,427 of December 26, 1996, as amended, enacted by the Brazilian Government and supplemented by ANEEL’s regulation govern the imposition of sanctions against the agents of the electricity sector and classify the appropriate penalties based on the nature and importance of the breach (including warnings, fines, temporary suspension from the right to participate in bidding procedures for new concessions, licenses or authorizations and forfeiture). For each breach, the fines can be up to 2.0% of the revenue of the concessionaire in the 12-month period preceding any assessment notice or, for independent producers or self producers, the estimated amount of energy produced in the same period. Some infractions that may result in fines relate to the failure of the agent to request ANEEL’s approval, including the following (pursuant to ANEEL Resolution No. 63/2004, as amended from time to time):

• entering into certain related party transactions;

• sale or assignment of the assets related to services rendered as well as the imposition of any encumbrance (including any security, bond, guarantee, pledge and mortgage) on them or any other assets related to the concession or the revenues of the electricity services;

• changes in controlling interest of the holder of the authorization or concession; and

• non-compliance with the schedule for the beginning of the commercial operation of the power plant, as previously approved by the ANEEL through the relevant contract.

With respect to contracts executed between related parties that are submitted for ANEEL’s approval, ANEEL may seek to impose restrictions on the terms and conditions of these contracts and, in extreme circumstances, determine that the contract be terminated early.

Furthermore, ANEEL has the institutional role of controlling the transactions of the energy industry, requiring that such transactions (change of control of the agents of the electric energy sector) be submitted to its prior approval before its implementation.

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Principal Authorities

Ministry of Mines and Energy

The MME is the Brazilian Government’s primary regulator of the power industry acting as the granting authority on behalf of the Brazilian Government, and empowered with policy-making, regulatory and supervising capacities. The Brazilian Government, acting primarily through the MME, will undertake certain duties that were previously under the responsibility of ANEEL, including drafting guidelines governing the granting of concessions and the issuance of directives governing the bidding process for concessions relating to public services and public assets.

ANEEL

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

National Energy Policy Council

On August 6, 1997, pursuant to Article 2 of Law No. 9,478, the Conselho Nacional de Politica Energética (the National Energy Policy Council or CNPE) was created to advise the Brazilian president with respect to the development and creation of national energy policy. The CNPE is presided over by the Minister of Mines and Energy, and the majority of its members are ministers of the Brazilian Government. The CNPE was created to optimize the use of Brazil’s energy resources, to assure the supply of electricity to the country and to periodically review the use of regular and alternative energy to determine whether the nation is properly using a variety of sources of energy and is not heavily dependent on a particular source.

National Electricity System Operator

The ONS was created in 1998 by Law No. 9.648 dated May 27, 1998. The ONS is a non-profit private entity comprised of concessionaires, other legal entities holding permissions or authorizations in the electrical energy market, and consumers connected to the interconnected system. The Electricity Regulatory Law granted the Brazilian Government the power to nominate three executive officers to ONS’s board of executive officers. The primary role of the ONS is to coordinate and control the generation and transmission operations in the Interconnected Power System, subject to ANEEL’s regulation and supervision. The objectives and principal responsibilities of the ONS include: operational planning for the generation industry, organizing the use of the domestic Interconnected Power System and international interconnections, guaranteeing that all parties in the industry have access to the transmission network in a non-discriminatory manner, assisting in the expansion of the energy system, proposing plans to the MME for extensions of the Basic Network (which proposals must be taken into account in planning expansion of the transmission system) and submitting rules for the operation of the transmission system for ANEEL’s approval. Generators must declare their availability to ONS, which then attempts to establish an optimal electricity dispatch program.

Energy Trading Chamber

On August 12, 2004, the Brazilian Government enacted a decree setting forth the regulations applicable to the new Câmara de Comercialização de Energia Elétrica (Energy Trading Chamber or CCEE). On November 10, 2004 the CCEE succeeded the Wholesale Energy Market – MAE, the market in which all large electricity generation companies, energy traders and importers and exporters of electricity had participated and on which the spot price of electricity was determined. The CCEE assumed all of the assets and operations of the Wholesale Energy Market (which had previously been regulated by ANEEL).

One of the principal roles of the CCEE is to conduct public auctions on the Regulated Market, see “ – The Electricity Regulatory Law; the Free Market and the Regulated Market – The Regulated Market.” In addition, the CCEE is responsible, among other things, for: (i) registering all the energy purchase agreements in the Contratos de Comercialização de Energia no Ambiente Regulado (Regulated Market or CCEAR), and the

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agreements resulting from market adjustments and the volume of electricity contracted in the Free Market, see “ – The Electricity Regulatory Law; the Free Market and the Regulated Market – The Free Market;” and (ii) accounting and clearing of short-term transactions.

The CCEE’s members include generation, distribution and trading companies, as well as free consumers. Its board of directors is composed of four directors appointed by its members and one director, who serves as chairman of the board of directors, appointed by the MME.

The MME determines the maximum price of the energy sold in the regulated market through auctions, as specified under Decree No. 5,163 of 2004

Energy Research Company

On August 16, 2004 the Brazilian Government enacted a decree creating the Empresa de Pesquisa Energética (Energy Research Company or EPE) a state-owned company which is responsible for conducting strategic research on the energy industry, including with respect to electrical energy, oil, gas, coal and renewable energy sources. The research carried out by EPE is subsidized by the MME as part of its policymaking role in the energy industry. Furthermore, EPE is the entity in charge of the technical qualification of the projects participating in the bids promoted by ANEEL for sale of energy.

Energy Industry Monitoring Committee

The Electricity Regulatory Law authorized the creation, under Federal Decree No. 5,175 of August 9, 2004, of the Comitê de Monitoramento do Setor Elétrico (Energy Industry Monitoring Committee or CMSE), which acts under the direction of the MME. The CMSE is responsible for monitoring the supply conditions of the system and for proposing preventive action (including demand-related action and contracting for a supply-side reserve) to restore service conditions where applicable.

Electric Power Transmission in Brazil

Transportation of large volumes of electricity over long distances is made by way of a grid of transmissions lines and substations with high voltages (from 230 kV to 750 kV), known as the Basic Network. Any electric power market agent that produces or consumes power is entitled to use the Basic Network.

Transmission lines in Brazil are usually very long, since most hydroelectric plants are usually located away from the large centers of power consumption. Today, the country’s system is almost entirely interconnected. Only the states of Amazonas, Roraima, Amapá, Rondônia and a part of Pará are still not linked up to the Interconnected Power System. In these states, supply is made by small thermal plants or hydroelectric plants located close to their respective capital cities.

The Interconnected Power System provides for the exchange of power among the different regions when any one region faces problems generating hydroelectric power due to a drop in their reservoir levels. As the rainy seasons are different in the south, southeast, north and northeast of Brazil, the higher voltage transmission lines (500 kV or 750 kV) make it possible for locations with insufficient power output to be supplied by generating centers that are in a more favorable location.

We operated approximately 56% of the high-voltage transmission networks in Brazil, as of December 31, 2011.

The operation and management of the Basic Network is the responsibility of ONS, which is also responsible for managing power dispatching from plants on optimized conditions, involving use of the Interconnected Power System hydroelectric reservoirs and fuel thermal plants.

Our transmission system, which consists of a set of transmission lines interconnected to substations, is comprised of approximately 54,104.94 kilometers of transmission lines, corresponding to approximately 56% of the total lines in Brazil with a voltage higher or equal to 230 KV.

Besides operating and maintaining this system in accordance with the standards of performance and quality required by ANEEL, we have actively participated in the expansion of transmission lines through concessions in auctions conducted by ANEEL, alone or through consortiums, as well as through permits for reinforcements of the current system.

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The major transmission projects under development are: (i) LT 230 kV Ji-Paraná – Pimenta Bueno – Vilhena C1 (RO); (ii) LT 230 kV Funil – Itapebi C3 (BA); (iii) LT 230 kV Ibicoara – Brumado II (BA); (iv) LT 230 kV Picos – Tauá II (PI/CE); (v) LT 345 kV Tijuco Preto – Itapeti – Nordeste (SP); (vi) LT 500 kV Oriximiná – Itacoatiara – Cariri (PA/AM); (vii) LT 600 kV Porto Velho – Araraquara (RO/SP); (viii) LT 230 kV Eunapólis – Teixeira de Freitas II C2 (BA); and (ix) LT 500 kV Bom Despacho 3 – Ouro Preto 2 (MG).

• Brazil has a total of six medium and large interconnections with other countries in South America, four of them operated by us, as set forth below:

• with Paraguay, through four 500 kV transmission lines connecting Usina de Itaipu to Margem Direita (Paraguay) substation and the Foz do Iguaçu in Brazil substation. Itaipu’s 50 Hz energy sector is then transported to the Ibiúna substation in São Paulo through a direct current transmission system with a capacity of 6,300 MW;

• with Uruguay, through Rivera’s frequency converter station in Uruguay, with a capacity of 70 MW and a 230 kV transmission line connecting it to the Livramento substation in Brazil;

• with Argentina, through Uruguaiana’s frequency converter station in Brazil, with a capacity of 50 MW and a 132 kV transmission line connecting it to Paso de los Libres in Argentina; and

• with Venezuela, through a 230 kV transmission line with a capacity of 200 MW, which connects the city of Boa Vista, in the State of Roraima, to the city of Santa Elena in Venezuela.

In the transitional environment (2002-2005), there was a gradual decline in the amounts of power contracted under Initial Supply Contracts, the generating companies paid for the use of the transmission line grid, whereas distributors were required to pay two types of transmission tariffs: (i) nodal tariffs, associated with each connection point from where these distributors demand voltage; and (ii) the transmission tariff, associated with the Initial Supply Contracts, which was applied to part of the demand contracted in that environment. Once the amounts under the Initial Supply Contracts dropped to zero, the power generating, distributing and selling companies and free consumers had free access agreements governing their use of transmission lines on equivalent terms with those of agents that entered the market after free access became compulsory. In this free market environment, transmission tariffs are determined based on the effective use that each party that accesses the Basic Network makes of it.

The Electricity Regulatory Law; the Free Market and the Regulated Market

The Electricity Regulatory Law introduced material changes to the regulation of the power industry with a view to: (i) remedying the deficiencies in the Brazilian electric system and (ii) creating incentives to ensure growth in the electrical energy sector to support Brazilian economic and social development. Through this law, legislators attempted to protect the distribution concessionaires’ captive consumers and to make low cost electrical energy continuity, which has a minimal environmental impact, available. The key features of the Electricity Regulatory Law included:

• Creation of: (i) the Regulated Market, in which the purchase and sale of electrical energy must follow rules imposed by the ANEEL and must occur through the CCEE; and (ii) a market specifically addressed to certain participants (e.g., free consumers and commercialization companies), that will permit a certain degree of competition with respect to the Regulated Market, called the Ambiente de Contratação Livre, or the Free Market, in which parties are free to negotiate the terms and conditions of their purchase and sale agreements;

• Restrictions on certain activities of distributors, so as to ensure that they focus only on their core business to guarantee more efficient and reliable services to captive consumers;

• Elimination of self-dealing, to provide an incentive to distributors to purchase electricity at the lowest available prices rather than buying electricity from related parties; and

• Respect for contracts executed prior to the Electricity Regulatory Law, in order to provide stability to transactions carried out before its enactment.

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The Electricity Regulatory Law also excludes us and our subsidiaries from the National Privatization Program, which is a program created by the Brazilian Government in 1990 with a view to promote the privatization process of state-owned companies.

Challenges to the Constitutionality of the Electricity Regulatory Law

Some aspects of the Provisional Measure No. 144, as of December 10 2003, which originated the Electricity Regulatory Law, are being challenged in the Brazilian Supreme Court in Lawsuits No. 3090 and 3100. The provisional requests of both lawsuits were denied by the Brazilian Supreme Court in a decision published on October 26, 2007. A final decision on this matter is subject to majority vote of the 11 judges, provided that a quorum of at least eight justices must be present. To date, the Brazilian Supreme Court has not reached a final decision and we do not know when such a decision may be reached. The Brazilian Supreme Court ruled by six votes to four to deny the provisional measure requested to suspend the effects of the Electricity Regulatory Law until the final decision on the case has been made; however, a final decision remains pending. Therefore, the Electricity Regulatory Law is in force as of March 15, 2004 to present date. Regardless of the Supreme Court’s final decision, certain portions of the Electricity Regulatory Law relating to restrictions on distribution companies performing activities unrelated to the distribution of electricity, including sales of energy by distribution companies to free consumers and the elimination of self-dealing are expected to remain in full force and effect.

If all or a relevant portion of the Electricity Regulatory Law is determined unconstitutional by the Brazilian Supreme Court, the regulatory scheme introduced by the Electricity Regulatory Law may lose its effectiveness, generating uncertainty as to how the Brazilian Government will define the rules for the electrical energy sector. Considering that we have already purchased virtually all of our electricity needs through our subsidiaries both in the ACR and ACL and that the pass through to tariffs of such electricity is expected to continue to be regulated by the regime predating the Electricity Regulatory Law, irrespective of the outcome of the Supreme Court’s decision, we believe that in the short term, the effects of any such decision on our activities should be relatively limited. The exact effect of an unfavorable outcome of the legal proceedings on us and the electricity industry as a whole is difficult to predict, but it could have an adverse impact on our business and results of operations even in the short term (see “Risk Factors – Risks Relating to the Brazilian Power Industry”).

Markets for the Trading of Electricity

Under the Electricity Regulatory Law, electricity purchase and sale transactions may be carried out in two different market segments: (i) the Regulated Market, which contemplates the purchase by distribution companies through public bids of all electricity necessary to supply their captive consumers; and (ii) the Free Market, which encompasses purchase of electricity by non-regulated entities (such as free consumers and energy traders).

Nevertheless, electricity generated by plants qualified under the Proinfa, nuclear power plants and Itaipu are governed by a special regimen for commercialization and, therefore, are not subject to either the Regulated or the Free Market. The electricity generated by Itaipu, the most relevant among energy sources governed by separate regimes including Decree 4,550 of December 27, 2002, is sold to us and sold to distribution concessionaires in the south and center-south-eastern power markets in proportion to their market share in those markets. The rates at which Itaipu-generated electricity is traded are denominated in U.S. dollars and established pursuant to a treaty between Brazil and Paraguay. As a consequence, Itaipu rates rise or fall in accordance with the variation of the U.S. dollar/real exchange rate. Changes in the price of Itaipu-generated electricity are, however, subject to full pass-through to distribution tariffs.

The Regulated Market

Distribution companies must meet market demand by supplying electricity primarily purchased in public auctions in the Regulated Market. Distribution companies, however, may purchase electricity from: (i) generation companies that are connected directly to such distribution company, except for hydro generation companies with capacity higher than 30 MW and certain thermo generation companies; (ii) electricity generation projects participating in the initial phase of the Proinfa; and certain power distribution companies in the south and center-south-eastern power markets, and (iii) the Itaipu hydroelectric plant.

Electricity public auctions for new generation projects in process are held: (i) five years before the initial delivery date (referred to as “A-5” auctions); and (ii) three years before the estimated initial delivery date (referred to as “A-3” auctions). Electricity auctions from existing power generation facilities are held one year

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before the estimated initial delivery date (referred to as “A-1” auctions). Electricity public auctions for electrical energy from alternative sources are held between A-1 and A-5 auctions. Additionally, the Brazilian Government, directly or indirectly through ANEEL, carries out public auctions for the sale of electrical energy to energy distributors to allow distributors to adjust their volume of electrical energy as necessary to meet their customers’ demands, or Market Adjustments.

The public auctions are prepared by ANEEL in compliance with guidelines established by the MME, including the requirement to use the lowest bid as the criteria to determine the winner of the auction.

Each generation company that participates in the auction must execute a contract for purchase and sale of electricity with each distribution company in proportion to the distribution companies’ respective estimated demand for electricity. The CCEARs for both “A-5” and “A-3” auctions have a term of between 15 and 30 years, and the CCEARs for “A-1” auctions have a term between three and 15 years. The CCEARS for alternative energy sources are between 10 and 30 years. The only exception to these rules relates to the market adjustment auction, in which the generation and the distribution companies will enter into two-year bilateral agreements that must be registered with the ANEEL and the CCEE.

The regulations also establish a pass-through tariff mechanism called Annual Reference Value, which limits the amounts of electric energy acquisition costs that can be passed through to final consumers. The Annual Reference Value corresponds to the weighted average of the electricity prices in the “A-5” and “A-3” auctions, calculated for all distribution companies.

The Annual Reference Value creates an incentive for distribution companies to contract for their expected electricity demand in the “A-5” auctions, where the prices are expected to be lower than in “A-3” auctions. ANEEL allows companies to pass on their electrical energy acquisition costs to final consumers pursuant to the following criteria: (i) in the A-5 auctions, companies are permitted to pass on all costs to consumers, subject to the limitations referred to below; (ii) in the A-3 auctions companies are permitted to: (a) pass all acquisition costs for energy acquired in A-5 auctions up to 2% of the difference between the energy acquired in A-3 auctions during the year and the distributor’s energy requirements; and (b) pass on whichever of the following is less – the A-5 auctions and in the A-3 auctions; (iii) in the A-1 auctions, companies are permitted to pass on all costs to consumer; (iv) in the Market Adjustments auctions and in the acquisitions of energy directly from a generation plant connected to the distributors’ electric system (except as set forth in law), companies are permitted to pass on all costs up to the Annual Reference Value to consumer; and (v) in the alternative energy source auctions and others determined by the Brazilian government, companies are permitted to pass on all costs to consumer.

ANEEL maintains the economic value of the Annual Reference Value by adjusting the Annual Reference Value pursuant to the monetary adjustment index agreed upon in the CCEARs.

The Electricity Regulatory Law establishes the following limitations on the ability of distribution companies to pass through costs to consumers:

• No pass-through of costs for electricity purchases that exceed 103.0% of actual demand;

• The pass-through of electricity acquisition costs from new electricity generation projects equal to the difference between the minimum purchase threshold (96% of repossessed energy contracted pursuant to the Electricity Regulatory Law) and the energy purchased in the A-1 auctions will be limited to the weighted average amount (in reais/MWh) of the acquisition prices in the A-1 auctions, except that this limit is applicable solely: (i) in the first three years following A-1 auctions in which the minimum purchase threshold was not reached; (ii) to the CCEARs relating to portion of energy acquired in A-3 and A-5 auctions with the highest price;

• The MME will establish the maximum acquisition price for electricity generated by existing projects; and

• If distribution companies do not comply with the obligation to fully contract their demand, the pass-through of the costs from energy acquired in the CCEE short-term market will be the lower of the Price of Liquidation of Differences (PLD) and the Annual Reference Value.

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Auctions in the Regulated Market, subject to the conditions set forth in the respective requests for proposals, may originate two types of CCEARs: (i) Contratos de Quantidade de Energia (Energy Agreements); and (ii) Contratos de Disponibilidade de Energia (Capacity Agreements).

Under an Energy Agreement, a generator commits to supply a certain amount of electricity and assumes the risk that the electricity supply could be adversely affected by hydrological conditions and low reservoir levels, among other conditions, that could interrupt the supply of electricity, in which case the generator will be required to purchase the electricity elsewhere in order to comply with its supply commitments. Under a Capacity Agreement, a generator commits to make a specified amount of capacity available to the Regulated Market. In this case, the revenue of the generator is guaranteed and the distribution companies face the risk of a supply shortage. However, the increased prices of electricity due to a supply shortage are passed on by the distribution companies to consumers. Together, these agreements comprise the energy purchase agreements in the Contratos de Comercialização de Energia no Ambiente Regulado (CCEAR).

The Electricity Regulatory Law sets forth that all electricity generation, distribution and trading companies, independent power producers and free consumers must inform MME, by the first of August of each year, of their estimated electricity demand or estimated electricity generation, as the case may be, for each of the subsequent five years. To encourage power distribution companies to make accurate estimations and to enter into power purchase agreements accordingly, pass-through tariffs, as mentioned above, are permitted provided that the purchased power stays within 103.0% of the distribution company’s actual power demand. Surpluses and shortages of power distribution companies concerning power acquisitions in the Regulated Market may be offset against each other by means of an offsetting mechanism managed by CCEE. According to the Electricity Regulatory Law, electricity distribution entities are entitled to pass on to their customers the costs related to electricity purchased through public auctions as well as any taxes and industry charges related to public bids, subject to certain limitations related to the inability of distribution companies to accurately forecast demand.

Electrical Energy Trading Convention

ANEEL Resolutions No. 109, of October 26, 2004 and No. 210, of February 24, 2006, govern the Convenção de Comercialização de Energia Elétrica (the Electrical Energy Trading Convention) which regulates the organization and functioning of the CCEE and the electrical energy trading conditions and defines, among others: (i) the rights and obligations of CCEE Agents; (ii) the penalties to be imposed on defaulting agents; (iii) the means of dispute resolution; (iv) trading rules in the Regulated and Free Markets; and (v) the accounting and clearing process for short-term transactions.

CCEE is a non-profit organization whose members are all agents of the Brazilian power sector (certain agents are not mandatory members of CCEE and may be represented by other members) and subject to ANEEL’s authorization, supervision and regulation. CCEE is responsible for (i) registering the conditions concerning power amounts and terms set forth in all power purchase agreements, whether entered into in the Regulated Market or the Free Market; and (ii) the accounting and liquidation of the power market, including the power surpluses and shortages spot market, among other attributions. CCEE is governed by a board of directors comprised of five members, four being nominated by the referred agents while its president is nominated by the MME.

The Free Market

The Free Market covers freely negotiated electricity sales between generation concessionaires, Independent Power Producers, self-generators, energy traders, importers of energy and free consumers. The Free Market also includes bilateral contracts between generators and distribution companies executed before the enactment of the Electricity Regulatory Law, until they expire. Upon expiration, new contracts must be entered into in accordance with the Electricity Regulatory Law guidelines.

Such an extended period of notice seeks to assure that, if necessary, the construction of cost-efficient new generation could be finalized in order to supply the re-entry of free consumers into the Regulated Market. State-owned generators may sell electricity to free consumers, but as opposed to private generators, they are obligated to do so through a public process that guarantees transparency and equal access for all interested parties.

Free Consumers

According to the Electricity Regulatory Law, a free consumer may elect to: (i) continue to procure power from a local distribution company; (ii) buy power directly from an independent producer or from self-producers with surplus power; or (iii) buy power from a power trade agent.

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The Electricity Regulatory Law does not permit distribution concessionaires to sell power to free consumers directly (except under certain regulatory conditions).

The Electricity Regulatory Law further establishes that the option to become a free consumer is subject to the prior expiration or termination of its power purchase agreement with the power distribution company. In the event that the power purchase agreement has an indefinite term, the migration to the Free Market is permitted only in the year following receipt of a migration notice by the power distribution company, provided that this notice is presented by July 15 of such year. Once a consumer has migrated to the Free Market, it may only return to the Regulated Market once it has given the relevant distribution company five years’ notice, although the distribution company may reduce that term at its discretion.

The Electricity Regulatory Law has, in principle, established some conditions and power and consumption thresholds that define which consumers could qualify as “free consumers.” These thresholds may be gradually reduced over the years by ANEEL so as to allow an increasing number of consumers to make this election, until such time as all consumers from all the different classes can choose which supplier they want to procure power from.

The law assures suppliers and their respective consumers free access to the grid subject to the payment of tariffs for the use of the electric power grids and connection costs. All regulatory charges to which captive consumers are subject are added to these tariffs in order to assure fair and equal treatment between captive and free consumers.

The regulations above are intended (1) to avoid arbitrage between captive and free markets by Free Consumers, prohibiting opportunistic migrations, as well as (2) to protect power distribution companies by making the captive market more predictable. Further, ANEEL must regulate the migration to the Free Market without increasing captive market tariffs.

Restricted Activities of Distributors

Distribution companies are not permitted to, except as otherwise provided by Law 9,074/1995: (i) develop activities related to the generation or transmission of electricity; (ii) sell electricity to free consumers, except for those in their concession area and under the same conditions and tariffs maintained with respect to captive customers in the Regulated Market; (iii) hold, directly or indirectly, any interest in any other company, corporation or partnership; or (iv) develop commercial activities that are unrelated to their respective concessions, except for those permitted by law or in the relevant concession agreement. Generators are not allowed to hold equity interests in excess of 10.0% in distribution companies or to hold a controlling shareholding interest in distribution companies.

Elimination of Self-Dealing

Since the purchase of electricity for captive consumers will be performed through the Regulated Market, so-called self-dealing is no longer permitted, except in the context of agreements that were duly approved by ANEEL before the enactment of the Electricity Regulatory Law. Distribution companies may, however, enter into power purchase agreements with related parties, provided that such agreements are the result of power auctions conducted in the Regulated Market. Before the Electricity Regulatory Law, such companies were permitted to meet up to 30.0% of their electricity needs through electricity that was acquired from affiliated companies.

Ownership Limitations

In 2000, ANEEL established limits on the concentration of certain services and activities within the power industry. Under such limits, with the exception of companies participating in the National Privatization Program (which needed only comply with such limits once their final corporate restructuring is accomplished) no power company (including both its controlling and controlled companies) could: (i) own more than 20.0% of Brazil’s installed capacity, 25.0% of the installed capacity of the southern/southeastern/mid-western region of Brazil or 35.0% of the installed capacity of the northern/northeastern region of Brazil, except if such percentage corresponded to the installed capacity of a single generation plant; (ii) own more than 20.0% of Brazil’s distribution market, 25.0% of the southern/southeastern/mid-western distribution market or 35.0% of the northern/northeastern distribution market, except in the event of an increase in the distribution of electricity exceeding the national or regional growth rates; or (iii) own more than 20.0% of Brazil’s trading market with final consumers, 20.0% of Brazil’s trading market with non-final consumers or 25.0% of the sum of the above percentages.

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In accordance with paragraph one, Article 31 of the Electricity Regulatory Law, we and our subsidiaries Eletrobras Furnas, Eletrobras Chesf, Eletrobras Eletronorte, Eletrobras Eletrosul and Eletrobras CGTEE were excluded from the National Privatization Program. Accordingly, we were subject to the limits and conditions imposed on the participation of agents in the activities of the electricity sector, in accordance with ANEEL Resolution No. 278/2000, which is aimed at achieving effective competition between agents and preventing a concentration in the services and activities undertaken by agents within the electricity sector.

On November 10, 2009, ANEEL issued Resolution No. 378, which revoked and replaced Resolution No. 278/2000 and established that ANEEL, upon identifying an act that may result in unfair competition or in significant control of the generation, transmission and distribution markets, must notify the Secretary of Economic Law (Secretaria de Direito Econômico, or SDE) of the Ministry of Justice, pursuant to art. 54 of Law No. 8,884 of June 11, 1994. After notification, the SDE must inform the antitrust authority, the Administrative Counsel of Economic Defense (Conselho Administrativo de Defesa Econômica), or CADE. If necessary, the SDE will require ANEEL to analyze potential infractions under Resolution No. 378, while CADE must determine any applicable punishment, which may vary from pecuniary penalties to the dissolution of the company, pursuant to articles 23 and 24 of the abovementioned law.

Tariffs for the Use of the Distribution and Transmission Systems

ANEEL oversees tariff regulations that govern access to the distribution and transmission systems and establish tariffs for the use of and access to said systems. The tariffs are: (i) network usage charges, which are charges for the use of the proprietary local grid of distribution companies (or TUSD); and (ii) a tariff for the use of the transmission system, which is the Basic Network and its ancillary facilities (or TUST). Additionally, distribution companies in the Southern/Southeastern Interconnected Power System pay specific charges for the transmission of electricity generated at Itaipu and for access to the transmission system.

TUSD

The TUSD is paid by generators, free consumers and special consumers for the use of the distribution system of the distribution company to which the relevant generator or free consumer is connected and are revised annually according to an inflation index. The amount to be paid is based on a formula set forth and consolidated by ANEEL Resolution No. 166/2005, as amended, by ANEEL Resolution No. 399/2010, and may vary pursuant to a number of different factors, including, for instance, costs of the network, operating costs and energy losses, among others. Our distribution companies receive the TUSD paid by free consumers in their concession areas and by some other distribution companies which are connected to our distribution system.

TUST

The TUST is paid by distribution companies and uses, including generators, free consumers and special consumers, for the use of the Basic Network. The amount to be paid is based on a formula ser by ANEEL Resolution No. 67/2004, as amended by ANEEL Resolution No. 442/2011, and it may vary pursuant to a number of different factors. According to criteria established by ANEEL, owners of the different parts of the transmission grid have transferred the coordination of their facilities to the ONS in return for receiving regulated payments from users of the transmission system. Network users, including generation companies, distribution companies and free consumers, have signed contracts with the ONS entitling them to use the transmission grid in return for the payment of published tariffs. Other parts of the grid that are owned by transmission companies but which are not considered part of the transmission grid are made available directly to the interested users who pay a specified fee to the relevant transmission company.

Contract for Access to the Intermediary Connection System – Access Charge

Some distribution companies, especially in the State of São Paulo, access the Basic Network through an intermediary connection system located between their respective distribution lines and the Basic Network. This connection is formalized by means of a Contract for the Access to the Intermediary Connection System entered into with transmission concessionaires that own such facilities. Compensation for the transmission companies is regulated by ANEEL and is defined in accordance with the cost of the assets used, whether they are their exclusive property or shared among the electricity industry agents. The correspondent compensation incidental to the use of the intermediary connection system is revised annually by ANEEL according to an inflation index and to the costs relating to the assets.

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Itaipu Transportation Charge

The Itaipu plant has an exclusive transmission grid operated in alternating and continuous current, which is not considered to be part of the Basic Network or of the intermediary connection system. The use of such system is compensated by a specific charge, denominated the Itaipu transportation charge, paid by those companies entitled to quotas of the electricity from Itaipu, in proportion to their quotas.

Distribution Tariffs

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

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

• costs of electricity purchased for resale pursuant to Initial Supply Contracts;

• costs of electricity purchased from Itaipu;

• costs of electricity purchased pursuant to bilateral agreements that are freely negotiated between parties; and

• certain other connection and usage charges for the transmission and distribution systems.

Parcel B costs are determined by subtracting all the Parcel A costs from the distribution company’s revenues.

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

Electricity distribution companies are also entitled to revisão periódica (revisions) every four or five years. These revisions are aimed at: (i) assuring revenues are sufficient to cover Parcel B operating costs and that adequate compensation for essential investments for the services within the scope of each such company’s concession; and (ii) determining the “X factor,” which is based on three components: (a) expected gains of productivity from increase in scale; (b) evaluations by consumers (verified by ANEEL); and (c) labor costs.

The X factor is used to adjust the proportion of the change in the IGP-M index that is used in the annual adjustments. Accordingly, upon the completion of each periodic revision, application of the X factor requires distribution companies to share their productivity gains with final consumers.

The pass-through of electricity purchase costs under supply agreements negotiated before the enactment of the Electricity Regulatory Law is subject to a ceiling based on a value established by ANEEL for each different source of energy (such as hydroelectric, thermoelectric and alternative sources of energy). This ceiling is adjusted annually in order to reflect increases in costs incurred by generators. That adjustment takes into account: (i) inflation; (ii) costs incurred in hard currency; and (iii) fuel related costs (such supply of natural gas). Costs incurred correspond to at least 25.0% of all costs incurred by generators.

Recently, ANEEL’s calculation methods used for the annual adjustment of distribution tariffs was questioned. In 2008, the Federal Budget Oversight Board convened to discuss the tariff adjustment of certain companies, and it concluded that consumers paid more than necessary to the distribution companies in moments of high energy demands. The oversight board concluded that since 2002 these payments exceeded those estimated for the tariffs, which unduly increased the distribution companies’ revenues. This additional gain was incorporated in Parcel B of the distribution tariff, which is how the distribution companies are remunerated. The analysis uncovered an irregular gain by the distribution companies of about R$7 billion from 2002 to 2008, which on average resulted in a gain of R$1 billion per year. This excess gain should have been passed on to consumers, leading to a decrease in the tariff. Because the distribution companies did not pass on these gains, São Paulo’s Foundation for the Protection of the Consumers (Procon-SP) filed a lawsuit demanding restitution for those consumers. The distribution companies did not agree with the demands for restitution. As a result, a Parliamentary Investigation Commission was established (CPI das Contas de Luz) to discuss potential solutions.

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The issue arose due to the methodology used to calculate the tariff adjustments. ANEEL used the total revenue of the previous twelve months without taking into consideration the future demand for energy. Therefore, the concessionaries did not consider the estimated growth of 5% per year in energy demand when making their calculation, resulting in excessive gains by these distribution companies.

ANEEL admitted that the calculation method was flawed and proposed to fix it by changing Ministerial Order No. 25/2002. There is no consensus as to whether or not the ministerial order could be amended. Moreover, the distribution companies claim that any amendment would constitute a breach under the concession agreements.

Accordingly, the regulators decided to amend all the concession agreements in order to establish the new calculation method for the annual tariff adjustment. With respect to amounts that were incorrectly charged, the regulators decided to make the concession agreement amendments effective as of 2009.

In addition, concessionaires of electricity distribution are entitled to revisão extraordinária (extraordinary review) of tariffs, on a case by case basis, to ensure their financial equilibrium and compensate them for unpredictable costs, including taxes, that significantly change their cost structure.

Incentive Programs for Alternative Sources of Electricity

Thermoelectric Priority Program

In 2000, a federal decree created the Programa Prioritário de Termeletricidade (the Thermoelectric Priority Program or PPT), for purposes of diversifying the Brazilian energy matrix and decreasing its strong dependency on hydroelectric plants. The benefits granted to thermoelectric plants under the PPT include: (i) guaranteed gas supply for 20 years; (ii) assurance that costs related to the acquisition of the electricity produced by thermoelectric plants will be transferred to tariffs up to a normative value determined by ANEEL; and (iii) guaranteed access to a BNDES special financing program for the power industry.

Proinfa

In 2002, the Proinfa program was established by the Brazilian Government to create certain incentives for the development of alternative sources of energy, such as wind energy projects, Small Hydroelectric Power Plants and biomass projects. As with some other social programs, we are involved in the administration of the Proinfa program.

Under the Proinfa program, we purchase electricity generated by these alternative sources for a period of up to 20 years and transfer it to free consumers and certain electricity distribution companies (which are responsible for including the costs of the program in the tariffs for all final consumers in their respective concession area, except for low-income consumers). In its initial phase, the Proinfa program is limited to a total contracted capacity of 3,300 MW (1,100 MW for each of the three alternative energy sources).

In its second phase, which will start after the 3,300 MW limit is reached, the Proinfa program is intended, in a period of up to 20 years, to have contracted capacity equivalent to 10.0% of the annual domestic consumption of electricity. The energy production that will be commercialized under the Proinfa program will not be provided by generation concessionaires nor by independent power producers. Such production may only be provided by an autonomous independent producer, which may not be controlled by or affiliated with a generation concessionaire or an independent power producer or controlled by or affiliated with their controlling entities.

Research and Development – R & D

Concessionaires and companies authorized to engage in public power distribution, generation and transmission businesses are required to invest annually at least 1.0% of their net operating income in electric power research and development. Companies that only generate power from wind, biomass and Small Hydroelectric Power Plants are not subject to this requirement.

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Regulatory Charges

Global Reversion Reserve Fund

In certain circumstances, power companies are compensated for assets used in connection with a concession if the concession is eventually revoked or is not renewed. In 1971, the Brazilian Congress created a Reserva Global de Reversão (a Global Reversion Reserve Fund or RGR Fund) designed to provide funds for such compensation. In February 1999, ANEEL revised the assessment of a fee requiring all distributors and certain generators operating under public service regimes to make monthly contributions to the RGR Fund at an annual rate equal to 2.5% of the company’s fixed assets in service, but not to exceed 3.0% of total operating revenues in any year. In recent years, no concessions have been revoked or have failed to be renewed, and in recent years the RGR Fund has been used principally to finance generation and distribution projects. With the introduction of MP No. 517/2010, the RGR Fund is scheduled to be phased out by 2035, and ANEEL is required to revise the tariff so that the consumer will receive some benefit from the termination of the RGR Fund.

Public Use Fund

The Brazilian Government has imposed a fee on Independent Power Producers reliant on hydrological resources, except for Small Hydroelectric Power Plants, similar to the fee levied on public industry companies in connection with the RGR Fund. Independent Power Producers are required to make contributions to the Fundo de Uso de Bem Público (the Public Use Fund or UBP Fund) according to the rules of the corresponding public bidding process for the granting of concessions. We received the UBP Fund payments until December 31, 2002. All payments to the UBP Fund since December 31, 2002 are paid directly to the Brazilian Government.

Fuel Consumption Account

Distribution companies, and generation companies that sell directly to final consumers, must contribute to the Conta de Consumo de Combustível (the Fuel Consumption Account or CCC Account). The CCC Account was created in 1973 to generate financial reserves to cover elevated costs associated with the increased use of thermoelectric energy plants, in the event of a rainfall shortage, given the higher marginal operating costs of thermoelectric energy plants compared to hydroelectric energy plants. In February 1998, the Brazilian Government provided for the phasing out of the CCC Account. Subsidies from the CCC Account have been phased out over a three-year period beginning in 2003 for thermoelectric energy plants constructed prior to February 1998 and belonging to the Interconnected Power System. Thermoelectric plants constructed after that date will not be entitled to subsidies from the CCC Account. In April 2002, the Brazilian Government established that subsidies from the CCC Account would continue to be paid to those thermoelectric plants located in isolated regions for a period of 20 years in order to promote generation of electricity in those regions.

Law No. 12,111 amended the formula for calculation of the CCC Account relating to the Isolated System. The amount of the reimbursement through the CCC Account is equal to the total cost of generation minus the total amount of energy utilized by the agent at the average unitary energy price determined at auctions of the Interconnected system. The total cost of generation includes the cost of fuel, the cost of energy purchased and associated power, operation and maintenance costs for distribution, asset depreciation, return on investment, energy sector fees, goods circulation tax (provided it is not compensated by the distribution company) and other costs associated with the rendering of services in remote regions. Our subsidiaries which produce energy in the North of Brazil are being reimbursed for their production costs through the CCC Account. The CCC Account’s regulatory agency established thresholds for costs associated with the generation of energy, and costs above these thresholds are not reimbursed.

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Energy Development Account

In 2002, the Brazilian Government instituted the Conta de Desenvolvimento Energético (Energy Development Account or CDE Account), which is funded through annual payments made by concessionaires for the use of public assets, penalties and fines imposed by ANEEL and, since 2003, the annual fees to be paid by agents offering electricity to final consumers, by means of a charge to be added to the tariffs for the use of the transmission and distribution systems. These fees are adjusted annually. The CDE Account was created to support the: (i) development of electricity production throughout the country; (ii) production of electricity by alternative energy sources; and (iii) universalization of energy services throughout Brazil. The CDE Account will be in effect for 25 years and is regulated by ANEEL and managed by us.

The Electricity Regulatory Law establishes that the failure to pay the contribution to the RGR Fund, Proinfa program, the CDE Account, the CCC Account, or payments due by virtue of purchase of electricity in the Regulated Market or from Itaipu prevents the non-paying party from receiving a tariff readjustment (except for an extraordinary review) or receiving resources arising from the RGR Fund, CDE Account or CCC Accounts.

Electricity Reallocation Mechanism

The Mecanismo de Realocação de Energia (energy reallocation mechanism) provides financial protection against hydrological risks for hydro-generators according to energy commercialization rules in effect, to mitigate the shared hydrological risks that affect the generators and assure the optimal use of the hydroelectric resources of the Interconnected Power System.

The mechanism guarantees that all the generators that participate in it will be able to sell the amount of electricity which they have contracted to sell under long-term contracts as determined by ANEEL, which we refer to as “assured electricity,” irrespective of their actual electricity production, provided that the power plants participating in the mechanism, as a whole, have generated sufficient electricity. In other words, the mechanism reallocates electricity, transferring surplus electricity from those generators whose generation was in excess of their assured electricity, to those whose generation was less than assured electricity. The effective generation dispatch is determined by the National Electricity System Operator, which takes into account nationwide electricity demand, the hydrological conditions of the Interconnected Power System and transmission limitations.

Reimbursement of the generation costs of the relocated electricity is provided to compensate generators that relocate electricity to the system in excess of their assured electricity. Generators are reimbursed for their variable operational costs (except fuel) and costs for the use of water. The total costs of the relocated electricity (from all generators that provided electricity to the energy reallocation mechanism) are then combined and paid by the generators that receive electricity from the mechanism.

The mechanism includes all hydroelectric power plants subject to the centralized dispatching of the National Electricity System Operator, small hydroelectric stations that opt to participate in the mechanism and thermal power plants with centralized dispatching, included in the Initial Supply Contracts and whose fuel costs are subsidized by the Fuel Consumption Account. Since 2003, the Fuel Consumption Account power plants only partially participated in the mechanism, due to the gradual reduction of the subsidy.

Electric Power Services Supervision Fee – TFSEE

ANEEL also charges a supervision fee from electric power services agents and concessionaires. This fee is called the Electric Power Services Supervision Fee (or TFSEE) and was created under Law No. 9,427 of December 26, 1996, as amended by Law No. 12,111 of December 9, 2009, and is charged at the rate of 0.5% of the annual economic benefit posted by the agent or concessionaire. The economic benefit is determined based on the installed capacity of authorized generating and transmitting concessionaires or on annual sales income posted by distribution concessionaires. This fee is collected by ANEEL in twelve monthly installments.

Financial Compensation For Use Of Water Resources (CFURH)

The states, the Federal District, and municipalities, as well as direct public federal administration bodies all receive financial compensation from generating companies for use of water resources and loss of productive land due to the flooding of the area for the construction and generation of electric power. CFURH is based on power output and paid to the states and municipalities in which the plant or reservoir is situated. ANEEL is responsible for the collection and management of such fee. This charge is not assessed on Small Hydroelectric Power Plants, as they are exempt from this requirement.

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Emergency Capacity Charge (ECE)

ECE was created as provided for in Article 1 of Law No. 10,438 of April 26, 2002, as amended by Law No. 12,212 of January 20, 2010. It is assessed proportionally to the final individual total consumption of all consumers served by the Interconnected Power System and classified as a specific tariff charge. ANEEL ruled that its basis would be the cost of contracting generating capacity or voltage estimated by Comercializadora Brasileira de Energia Emergencial (or CBEE) in any given year.

Rationing

The Electricity Regulatory Law establishes that, in a situation where the Brazilian Government decrees a compulsory reduction in the consumption of electricity in a certain region, all energy amount agreements in the Regulated Market, registered within the CCEE in which the buyer is located, must have their volumes adjusted in the same proportion to the consumption reduction.

The Effects of the New Bankruptcy Law on Us

On February 9, 2005, the Brazilian Government enacted Law No. 11,101, or the New Bankruptcy Law. The New Bankruptcy Law, which came into effect on June 9, 2005, governs judicial recovery, extrajudicial recovery and liquidation proceedings and replaces the debt reorganization judicial proceeding known as concordata (reorganization) for judicial recovery and extrajudicial recovery. The New Bankruptcy Law provides that its provisions do not apply to government owned and mixed capital companies. However, the Brazilian Federal Constitution establishes that mixed capital companies, such as Eletrobras, which operate a commercial business, will be subject to the legal regime applicable to private corporations in respect of civil, commercial, labor and tax matters. Therefore it is unclear whether or not the provisions in connection with judicial and extrajudicial recovery and liquidation proceedings of the New Bankruptcy Law would apply to us.

Judicial Recovery

In order to request judicial recovery, a debtor must fulfill the following requirements: (i) conduct its business in a regular manner for more than two years; (ii) not be bankrupt (or, in the event that the debtor was bankrupt in the past, then all obligations arising therefrom must have been declared extinguished by a judgment not subject to appeal); (iii) not have been granted a judicial recovery or special judicial recovery in the five or eight years prior to its request, respectively; and (iv) not have been convicted of (or not have a controlling partner or manager who has been convicted of) a bankruptcy crime. All claims in existence at the time of the request for judicial recovery are subject to such procedure (including potential claims), except for claims of tax authorities, creditors acting as fiduciary owners of real or personal properties, lessors, owners or committed sellers of real estate, including for real estate developments, or owners under sale agreements with a title retention clause (paragraph 3 of Article 49 of the New Bankruptcy Law). The judicial recovery can be implemented by means of one or more of the following transactions, amongst others (i) the granting of special terms and conditions for the payment of the debtor’s obligations; (ii) spin-off, merger, transformation of the company, incorporation of a wholly-owned subsidiary or the assignment of quotas or shares; (iii) transfer of corporate control; (iv) partial or total replacement of the debtor’s management, as well as the granting to its creditors the right to independently appoint management and the power of veto; (v) capital increase; (vi) leasing of its premises; (vii) reduction in wages, compensation of hours and reduction of the workday, by means of collective bargaining; (viii) payment in kind or the renewal of the debtor’s debts; (ix) creation of a company composed of creditors; (x) partial sale of assets; (xi) equalization of the debtor’s financial charges; (xii) constitution of an usufruct on the company; (xiii) shared management of the company; (xiv) issuance of securities; and (xv) creation of a special purpose company for purposes of receiving the debtor’s assets.

Extrajudicial Recovery

The New Bankruptcy Law also created the extrajudicial recovery mechanism, by means of which a debtor who meets the requirements for the judicial recovery (as outlined above) may propose and negotiate with its creditors an extrajudicial recovery plan, which must be submitted to the court for approval. Once approved, such a plan will constitute a valid means of enforcement. The extrajudicial recovery is not applicable, however, to any claims relating to labor- or workplace related accidents, as well as to any claims excluded from judicial recovery. In addition, the request for court approval of an extrajudicial recovery plan will does not impose a moratorium on the rights, suits and enforcement proceedings of creditors not subject to such plan, and those creditors will still be able to request the debtor’s bankruptcy.

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Liquidation

The New Bankruptcy Law changed the order in which claims are classified in the context of liquidation proceedings to the following order, which is set out in order of priority: (i) labor claims in general (limited to a maximum amount of 150 times the minimum monthly Brazilian wage per creditor) and labor claims related to indemnification for workplace accidents; (ii) claims of secured creditors (limited to the amount of the guarantee); (iii) tax claims (except for tax fines); (iv) personal claims enjoying special privileges (as defined in other statutes); (v) personal claims enjoying general privileges (among others, unsecured creditors who have provided goods or services to the debtor during its judicial recovery and creditors who are so defined in other statutes); (vi) unsecured debts (creditors not provided for in the preceding items, labor creditors whose claims exceed the 150-minimum monthly wages limitation, and creditors whose claims exceed the amount of their respective guarantees); (vii) contractual fines and monetary fines arising from the disobedience of statutes; and (viii) subordinated debts (as provided for by law or in an agreement, and creditors who are partners or managers of the debtor company but not in the context of a labor relationship). The New Bankruptcy Law establishes that only a creditor claiming for an amount in excess of 40 times the minimum monthly Brazilian wage can commence liquidation proceedings. However, it is permitted for creditors to commence a class action in order to comply with the minimum amount mentioned above. The New Bankruptcy Law also extended (i) the time period in which a debtor must present its defense in connection with a request for its bankruptcy from 24 hours to ten days, and (ii) the suspension period during which no assets may be sold or liquidated from 60 to 90 days (from either the date of filing the bankruptcy petition, the request for judicial recovery or from the date of the first protest of a note due to its non-payment by the company).

C. Organizational Structure

We operate generation, transmission and distribution activities in Brazil through the following twelve regional subsidiaries:

• Itaipu, a plant in which we and a Paraguayan governmental entity (ANDE) each hold a 50.0% interest and which we believe is one of the world’s largest hydroelectric plants by volume of energy generated;

• Eletrobras Furnas, which engages in generation and transmission activities in the southeast and part of the midwest regions of Brazil;

• Eletrobras Chesf, which engages in generation and transmission in the northeast region of Brazil;

• Eletrobras Eletronorte, which engages in generation, transmission and limited distribution activities in the north and part of the midwest regions of Brazil and is the holding company of Eletrobras Distribuição Roraima;

• Eletrobras Eletronuclear, which owns and operates two nuclear plants, Angra I and Angra II, and is planning to construct a third, Angra III;

• Eletrobras Amazonas Energia, which engages in generation and distribution in the State of Amazonas. Eletrobras Amazonas Energia operates in the interior of the State of Amazonas, an area that, until March, 2008, was operated by Ceam, which was previously directly held by Eletrobras but no longer exists as a standalone operating company;

• Eletrobras Eletrosul, which engages in transmission activities in the State of Santa Catarina, Rio Grande do Sul, Mato Grosso do Sul and Paraná;

• Eletrobras Distribuição Piauí, which engages in distribution activities in the State of Piauí;

• Eletrobras Distribuição Alagoas, which engages in distribution activities in the State of Alagoas;

• Eletrobras Distribuição Rondônia, which engages in distribution activities in the State of Rondônia;

• Eletrobras CGTEE, which owns and operates thermal plants in the south region of Brazil; and

• Eletrobras Distribuição Acre, which engages in distribution activities in the state of Acre.

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We are also the main sponsor of Cepel, the largest technological research and development center in the electricity industry in Latin America.

We also hold a majority interest in Eletrobras Eletropar, a holding company that holds minority interests in the following five Brazilian distribution companies: (i) AES Eletropaulo Metropolitana de Eletricidade de São Paulo S.A – AES Eletropaulo; (ii) Energias do Brasil S.A. – Energias do Brasil; (iii) Companhia de Transmissão de Energia Elétrica Paulista – CTEEP; (iv) Empresa Metropolitana de Águas e Energia S.A. – EMAE; and (v) Companhia Piratininga de Força e Luz – CPFL.

The following organizational chart shows our summarized shareholder structure and subsidiaries as of the date of this annual report (we also have minority shareholdings in 30 state utility companies throughout Brazil, not indicated in this chart):

Note: IC stands for installed capacity and TL stands for transmission line.

On February 22, 2008, the Board of Directors of our subsidiary Eletrobras Eletrosul resolved to purchase 69,352,857 shares, or 51% of the total shares, of Empresa de Transmissão de Energia de Santa Catarina S.A. – SC Energia and 72,537 shares, or 51% of the total shares, of Empresa de Transmissão de Energia do Rio Grande do Sul S.A. – RS Energia, each of which focuses on the transmission of electricity. The acquisitions were approved by ANEEL in Authoritative Resolution No. 1,665 on November 18, 2008, and the acquisition was completed on February 11, 2009. This acquisition improved our transmission capacity in the southern region of Brazil by providing us with an additional 620 km of transmission lines (360 km from Energia de Santa Catarina S.A. – SC Energia, and 260km from Empresa de Transmissão de Energia do Rio Grande do Sul S.A. – RS Energia).

On January 31, 2011, the Board of Directors of our subsidiary Eletrobras Eletrosul approved the purchase of 71,264,300 shares, or 51% of the total shares, in Artemis Transmissora de Energia S.A. and 5,100,000 shares, or 26% of the total shares, in Uirapuru Transmissora de Energia S.A., each of which focuses on the transmission of electricity. The acquisitions were approved by ANEEL in Authoritative Resolution No. 2.840 on March 29, 2011.

D. Property, Plant and Equipment

Our principal properties consist of hydroelectric generation plants and transmission networks which are located all over Brazil. The book value of our total property, plant and equipment as of December 31, 2011, December 31, 2010 and December 31, 2009 was R$53,215 million, R$46,682 million and R$41,598 million, respectively. As a result of the existing large hydroelectric power capacity still available in Brazil, we believe hydroelectric energy will continue to have a prominent role in providing for the growth in consumption of electrical energy.

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ITEM 4A. UNRESOLVED STAFF COMMENTS

On December 30, 2011, we received a comment letter from the staff of the SEC relating to our 2010 Form 20-F. We responded to the staff’s comment letter on January 31, 2012. The staff responded to our response letter, and we filed a response to the staff’s further comments on April 13, 2012. The staff has yet to resond to our April 13, 2012 letter. The SEC has raised a number of questions with respect to our audited financial statements. Some of the information the staff requested is reflected in the notes to the financial statements included in this Form 20-F.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion should be read in conjunction with our audited consolidated financial statements included elsewhere in this annual report.

Overview

Directly and through our subsidiaries, we are involved in the generation, transmission and distribution of electricity in Brazil. Our revenues derive mainly from:

• the generation of electricity through our subsidiaries and its sale to electricity distribution companies and free consumers, which in 2011, 2010 and 2009 accounted for R$19,093 million or 64.7%, R$18,398 million, or 68.6% and R$16,007 million, or 69.0% of our total net revenues, respectively;

• the transmission of electricity, which in 2011, 2010 and 2009 accounted for R$7,778 million or 26.3%, R$5,894 million or 21.9% and R$4,607 million or 19.9% of our total net revenues, respectively; and

• the distribution of electricity to end consumers, which in 2011, 2010 and 2009 accounted for R$2,467 million or 8.4%, R$2,413 million or 8.9% and R$2,498 million or 10.8% of our total net revenues, respectively.

The primary drivers of our financial performance are demand for electricity (which in turn is impacted by macroeconomic conditions and external events such as electricity rationing, which occurred in 2001 and 2002) and the pricing of electricity (which is determined as set out in “Item 4.B, The Brazilian Power Industry”). Although levels of electricity consumption now exceed those that existed before the energy crisis that occurred in 2001 and 2002, that energy crisis continues to impact our recognition of revenues and, accordingly, our results of operations.

Principal Factors Affecting our Financial Performance

Brazilian Macroeconomic Conditions

We are affected by conditions in the Brazilian economy. The macroeconomic scenario in Brazil has been characterized by increased economic activity and a consistent trajectory of the inflation indices. The exchange rate, however, has been volatile.

Except for 2009, which was significantly affected by the global financial crisis, Brazilian GDP has increased over the past several years. In 2007, Brazilian GDP grew 5.4% according to the Instituto Brasileiro de Geografia e Estatística (IBGE), as compared to 3.7% in 2006. In 2007, the inflation rate, as measured by the Brazilian Extended Consumer Price Index (Índice Nacional de Preços ao Consumidor Amplo), or IPCA, was 4.5%, which allowed for a reduction of the Selic rate to 11.25%.

The year 2008 was characterized by the negative effects of the global financial crisis. The main impact of this crisis on the Brazilian economy was reduced expectations for economic activity in 2009 and 2010. Reduced expectations for the year of 2009 triggered an increase in capital costs to third parties, a devaluation of the real, a decrease of prices in the stock market, and a reduction of industrial production.

Nevertheless, the crisis did not significantly affect the growth rate of the Brazilian economy, with GDP increasing 5.1% in 2008. Inflation, as measured by IPCA, was 5.9% for the year ended on December 31, 2008, which was within the target established by the Central Bank. The inflation rate remained within this range primarily as a result of the Central Bank increasing the base interest rate in 2008 from 11.25% to 13.75%.

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In 2009, the Brazilian economy showed certain resistance to the effects of the crisis. Even so, the Brazilian economy ended the year at a level of economic growth close to zero, influenced by the weak performance of the industrial sector. Additionally, macroeconomic conditions and a stable economy allowed the Central Bank to again focus on reducing interest rates. The Selic rate reached 8.7%, its lowest level, in July 2009. Similarly, the real appreciated 34.2% against the U.S. dollar throughout 2009. According to the Central Bank, international reserves were above U.S.$200.0 billion (U.S.$239.1 billion as of December 31, 2009), demonstrating a significant increase as compared to 2008.

Following a 0.2% decrease in GDP in 2009, the Brazilian economy improved in 2010 with a growth of approximately 7.5%. This economic recovery was due in part to a strong domestic market expansion. Income transfer policies, a continuous increase in the minimum wage and growth in employment levels and credit also contributed to this recovery. Household consumption was estimated to have increased by 7.9% which, together with long-term investment, were the main factors for strong aggregate demand performance in 2010. Gross fixed capital grew 25.59% in 2010, reaching an investment rate of 18.4%.

In 2011, GDP increased 3.3% due to continued growth in domestic demand. This reduction in the rate of growth, compared to 2010, can be explained by the reduction of global growth.

The official inflation rate, measured by IPCA, reached 6.5%, as a result of internal and external factors. Internally, increased demand and increased services, housing and transportation prices put pressure on the inflation index. External pressures associated with commodities prices also impacted the inflation index.

As for monetary policy, the Central Bank, in response to the worsening of the international financial crisis, sought to stimulate domestic growth, launch the strategy of gradual cuts in the Selic rate target in the final months of 2011, which ended the year at a level of 11% per year (4.2% in real terms). Additionally, the monetary authority reversed, in part, the containment of consumer credit introduced in December 2010. For example, on April 18, 2012, the Central Bank reduced the Selic rate by 75 basis points to 9.0%.

With regard to the Brazilian balance of trade in 2011, Brazil posted a surplus of U.S.$29.8 billion, with exports totaling U.S.$256.0 billion (26.8% higher than in 2010), mainly due to the recovery of the world economy and an increase in commodity prices. Imports amounted to U.S.$226.2 billion in 2011 compared to U.S.$181.6 billion in 2010, an increase of 24.5%. This growth was driven by the appreciation of the real and the growth of domestic demand.

The balance of payments reached a surplus of U.S.$49.1 billion in 2010 and a surplus of U.S.$58,6 billion in 2011. The current account presented a deficit of U.S.$47.4 billion in 2010 and a surplus U.S.$52.5 billion in 2011 (which equates to 2.2% and 2.1% of GDP, respectively), compared to the deficit of U.S.$24.3 billion, or 1.52% of GDP, recorded in 2009. Net inflows of foreign direct investment reached a record value of U.S.$48.5 billion in 2010, an increase of 86.8% compared to the previous year’s outcome and U.S.$66.6 billion in 2011 37.4% higher. Foreign portfolio investment showed net inflows of U.S.$18.4 billion in 2011, 72.8% lower than in 2010 and showed net inflows of U.S.$35.3 billion in 2011, 44.0% lower than in 2010.

The exchange rate in 2011 experienced high volatility. However, the heavy influx of capital did not cause the real to appreciate. As a result, the real/U.S. dollar exchange rate increased in 2011 from R$1.67 to R$1.88/1.00.

The Central Bank’s policies with respect to both the spot and futures markets have caused international reserves to grow 22.0%, totaling U.S.$352.0 billion in December 2011.

The following table shows data relating to Brazilian GDP growth, inflation and the real/U.S. dollar exchange rate for the periods indicated:

	Year Ended December 31,
	2011			2010			2009
GDP growth rate		3.3	%		7.49	%		(0.20	)%
Inflation (IGP-M)		5.1	%		11.32	%		(1.71	)%
Inflation (IPCA)		6.5	%		5.72	%		4.31	%
Appreciation (depreciation) of the real vs. the U.S. dollar		12.6	%		4.31	%		25.50	%
Period-end exchange rate – U.S.$1.00	R$	1.8758		R$	1.660		R$	1.741
Average exchange rate – U.S.$1.00	R$	1.6746		R$	1.756		R$	1.997

Sources: Fundação Getúlio Vargas, Ipeadata Instituto Brasileiro de Geografia e Estatística and the Central Bank.

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Electric Power Market

Electricity consumption in Brazil registered an increase of 3.6% in 2011, higher than the GDP growth rate for the same period of 3.3. All consumer classes showed growth in electricity consumption, particularly residential and commercial consumers, which increased by 4.6% and 6.3%, respectively.

After the economic downturn in 2009, 2010 showed a strong recovery in industrial production, which positively impacted industrial consumption of electricity. In 2011, industrial consumption increase 2.3% mainly due to higher consumption of mineral extraction and mining industries. The Center-West region of Brazil showed the largest growth in industrial consumption, with growth rates of 16.6%.

The electric power consumption in Brazil by geographic region is presented below:

Energy Consumption in the Network (GWh):

Consumption Class									2011		2010		Variation
Region	Residential		Industrial		Commercial		Others		Total		Total		%
North		6,192		14,188		3,714		3,547		27,641		25,914		5.4
Northeast		20,143		28,735		10,758		12,149		71.785		70,993		0.8
Southeast		59,349		102,419		40,420		27.496		229,684		25,108		3.5
South		17,804		30,636		12,656		11,394		72,490		70,803		4.2
Center-West		8,610		7,632		5,987		6,278		28,506		26,149		8.3

Source: Permanent Committee of Analysis and Monitoring of Electric Power Market – Copam/EPE.

Itaipu

Itaipu, the world’s largest hydroelectric plant, is jointly owned by Brazil and Paraguay and was established and is operated pursuant to a treaty between those countries. The treaty also establishes how Itaipu’s results of operation will be recorded, both by Itaipu Binacional, the company that operates Itaipu, and by us when we consolidate Itaipu Binacional’s results of operations. In compliance with the requirements of IFRS, we consolidate the results of Itaipu.

Pursuant to the Itaipu treaty, we are required to sell not only the 50.0% of electricity produced by Itaipu that, through us, Brazil owns, but also that part of Paraguay’s share of electricity not used by Paraguay. As a result we sell approximately 95.0% of the electricity produced by Itaipu. Articles 7 and 8 of Law No. 5,899 of July 5, 1973 set out the framework which distribution companies use to calculate the total amount of energy purchased from Itaipu.

While Itaipu produces a large amount of electricity, the Itaipu treaty requires that sales of Itaipu electricity be made on a no-profit basis, with no net effect on our results of operations.

In order to effect the “no profit” requirement, profits from the sale of Itaipu electricity are credited in subsequent periods to residential and rural consumers of electricity through the Interconnected Power System through their electricity bills (thus reducing our revenues from electricity sales) and losses are taken into account by ANEEL in calculating tariffs for electricity in subsequent periods (thus increasing our revenues from electricity sales).

Although the operations of Itaipu do not affect our net operating result, they significantly impact several line items in our financial statements. In particular, Itaipu’s operating results affect the “electricity purchased for resale” line item, as most of the amounts in that line item represent energy produced by Itaipu. This amount, which after consolidation represents only the Paraguayan portion of the Itaipu energy, would be much higher if we did not consolidate the Brazilian portion of the energy produced by Itaipu. Additionally, because the financial statements of Itaipu Binacional are prepared in U.S. dollars and translated to reais at the exchange rate published by the Central Bank at period end, any movement in the exchange rate between the real and the U.S. dollar can have a major impact on the “Foreign exchange and monetary gain” component of the line item “Financial income (expense), net.” Royalties paid by Itaipu account for a large proportion of the line item “Financial income (expense), net” and debt related to Itaipu accounts for a significant portion of the “Financial expense” component of “Financial income (expense), net.”

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Pursuant to Law No. 11,480/2007, we were able to apply an “adjustment factor” to any financial contracts entered into between us and Itaipu and any credit assignments entered into between us and the Brazilian Federal Treasury prior to December 31, 2007. The aim of this “adjustment factor” was to offset the impact of the rate of inflation in the United States on the U.S. dollar payments. Accordingly, this “adjustment factor” measures the rate of inflation by reference to the consumer price index (CPI) and another index which tracks changes in industry prices. This law was repealed and Decree No. 6,265 of November 22, 2007 came into force which determines that a rate equivalent to the previous “adjustment factor” is to be passed on to consumers on an annual basis. We apply the adjustment factor to the entire Itaipu loan even though we are only responsible for 30% of the total amount. We account for the remaining amount of the loan as offsetting “Reimbursement rights” in our income statement.

Beginning in 2010, we began to account for Itaipu as a financial asset on our balance sheet and record its income under other operating revenues. We applied these changes retroactively to our financial statements as of and for the year ended December 31, 2009. For a further discussion of these changes in accounting treatment of Itaipu, see Notes 3.11 subsections II and IV.

Exchange Rate Variations

Fluctuations in the value of the real against the U.S. dollar, particularly devaluations and/or depreciations of the real, have had and will continue to have an effect on the results of our operations. In particular, pursuant to the Itaipu treaty, all revenues from Itaipu are denominated in U.S. dollars. Because the financial statements of Itaipu Binacional are prepared in U.S. dollars and translated to reais at the exchange rate published by the Central Bank at the period end, any movement in the exchange rate between the real and the U.S. dollar can have a major impact on our results, in particular the “Foreign exchange and monetary gain” component of the line item “Financial income (expense), net.”

However, because pursuant to the Itaipu treaty the operation of Itaipu is not permitted to have any net effect on our operating results, any loss or gain incurred as a result of any appreciation or depreciation of the U.S. dollar against the real, among other things, will subsequently be compensated for by the tariffs we charge to our residential and rural consumers. In our income statement, the effects of Itaipu on the line items described above are netted out and recorded in the line item “Deferred loss from Itaipu.” Until that compensation takes place, the accumulated results of profits or losses from Itaipu operations, net of compensation through tariff adjustments, is carried on our balance sheet as a current asset under “Reimbursement rights.”

Eletrobras Eletronorte

For many years our subsidiary Eletrobras Eletronorte was used as a vehicle for the development of Brazil’s northern region, functioning in some ways as a development agency. In particular, it has supplied electricity pursuant to supply contracts at prices which did not cover its costs. We began to re-negotiate these supply contracts, which are mainly with companies in the aluminium smelting industry, in 2004 with the aim of revising the tariffs to cover Eletrobras Eletronorte’s operating costs and gradually pay off its debts. Eletrobras Eletronorte entered into a contract on May 11, 2004 to sell electricity to ALBRAS to provide electrical energy for ALBRAS’ industrial operations, priced on the basis of the international aluminium price. This contract came into effect on June 1, 2004. ALBRAS may terminate the contract with two years’ notice if they elect to discontinue production or start using their own resources for power generation. ALBRAS is not required to pay any amounts related to termination. The total term of this contract is 20 years and the contract includes an energy prepayment of R$1.2 million. See Note 42 of the Financial Statements.

One of the main sources of income of Eletrobras Eletronorte derives from the hydroelectric plant of Samuel, whose initial concession expired in September 2009. On July 18, 2006, Eletrobras Eletronorte requested from ANEEL an extension of such concession, which was granted on March 11, 2010 for an additional 20 years.

For 2011 the net gains attributable to Eletrobras Eletronorte amounted to R$67.5 million, compared to gains of R$139.8 million in 2010 and gains of R$584.5 million in 2009.

Regulated Distribution Tariffs

For 2011, 8.4% of our net revenues were derived from the distribution of electricity. The distribution companies generally produce losses, which are likely to continue as the tariffs that may be charged by distribution companies are regulated and adjusted by ANEEL only in accordance with the process set out in “Item 4.B Business Overview – The Brazilian Power Industry – Distribution Tariffs.”

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Fixed Transmission Revenues

Unlike revenues from our distribution and generation segments, revenues from our transmission segment are fixed by the Brazilian Government. This applies to all electricity companies with transmission operations in Brazil. As a result of the fact that the transmission revenue fee is fixed, revenues from our transmission segment do not increase or decrease based on the amount of electricity we transmit. The Brazilian Government sets a fixed transmission revenue fee each year that end consumers must pay and this is passed on to us and recorded as revenues from our transmission segment. Thus, our net income may be affected by the fact that our costs in this sector cannot easily be passed on to our customers.

Critical Accounting Policies

In preparing the financial statements included in this annual report, we made estimates and assumptions that we consider reasonable based on our historical experience and other factors. The presentation of our financial condition and results of operations requires that our management make estimates about inherently uncertain matters, such as the book value of our assets, our liabilities and, consequently, our results of operations. Our financial presentation would be materially affected if we were to use different estimates or if we were to change our estimates in response to future events. To provide an understanding of how our management forms its judgments about future events, including the factors and assumptions underlying those estimates, we have identified the following critical accounting policies.

Investments in Associates

When necessary, the financial statements of our associates are adjusted so as to conform their accounting policies to our accounting policies and assumptions, which apply the equity method of accounting in compliance with IAS 27 and 28.

Impairment

In compliance with IAS 36 “Impairment of Assets,” we analyze the recoverability of the book value of our assets annually, and as and when required. If we find evidence that an asset might not be recoverable, we estimate the chances of its recoverability. When the residual accounting value of the asset exceeds the recoverable value of such asset, we revaluate the asset downwards, with such resulting amount being known as an impairment. This impairment is then recognized as a provision for the period. If it is not possible to estimate the recoverable amount of an individual asset, we estimate the probability of recovery of the cash generating unit to which such asset belongs. When using this technique, we discount the estimated future cash flows to present value based on a discounted rate before tax which reflects the market conditions, current money value and specific risks related to such asset group. The recoverable value of an asset or such cash generating unit is reviewed periodically. Such reversal will have an impact on our income statement and as well as the book value of the relevant asset or cash generating unit.

Reserves for Contingencies

We are party to certain legal proceedings. Apart from the compulsory loans, we record provisions in compliance with IAS 37 “Provisions, Contingent Liabilities and Contingent Assets,” which provides that an estimated loss should be recorded when the information available before publication of our applicable financial statements indicates a probability that a future event may give rise to the devaluation of any asset or upon identification of a liability incurred and such liability can be estimated. In compliance with IAS 37, we do not record a provision if the chance of loss in a claim is “remote” or “reasonably possible.” In addition, we do not record provisions for administrative proceedings when those provisions have reached court. We account for the costs which may arise from resolving legal proceedings as discussed under “Risk Factors relating to the Company.” In calculating these accruals, we consult outside and internal counsel that represent us in these proceedings, and our estimates are based on an analysis of possible results, taking into account the applicable litigation and settlement strategies. We request quarterly an inventory of the proceedings being handled by our outside legal counsel that identifies the cases where we have potential losses. Accounting for contingencies requires significant judgment by our management concerning the estimated probabilities and ranges of exposure to potential liability. This is particularly true in the context of the impact of Brazilian tax legislation on us because such legislation has historically proved uncertain in scope and application.

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Employee Benefits

We sponsor a defined benefit pension plan that covers almost all of our employees. The actuarial liabilities related to this plan are accounted for in compliance with IAS 19, “Employee Benefits” and are valued by an independent actuary. In addition, we and some of our subsidiaries have also established post retirement health care plans and subsidize whole life insurance premiums for “Post retirement Benefits other than Pensions.” Estimates of the evolution of medical attendance costs, and biometrical and economical hypotheses, as well as historical information on incurred expenses and employees’ contributions are also taken into consideration.

Recovery Costs for Environmental Damage

We incur certain costs to reduce the impact that our operational activities have on the environment. These costs includes those for decommissioning, which involves a series of measures to safely discontinue the operations of our nuclear facilities (Angra I and Angra II) with the objective of reducing residual radioactivity levels. We apply IAS 37 and IFRIC Interpretation 1 “Changes in Existing Decommissioning Restoration and Similar Liabilities,” in accounting for these costs. IAS 37 requires entities to record the fair value of a legal obligation for an asset retirement obligation in the period in which it is incurred. When a new legal obligation is incurred, the entity is required to capitalize the costs of the obligation by increasing the carrying amount of the related long lived asset. The obligation is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement, an entity settles the obligation for its recorded amount or incurs a gain or loss upon settlement. For example, in the case of nuclear decommissioning, IAS 37 requires us to record the full fair value of the decommissioning obligation and a corresponding asset, which will then be depreciated over the remaining expected service lives of each plant’s generating units. Our management must exercise considerable judgment in exercising this policy and the following factors are relevant in such decision making: (i) our estimates must cover costs that are incurred over a long period of time and so our management must consider inherent uncertainties such as changes in laws and the level of nature of our operations; and (ii) IAS 37 requires that we assume the probabilities of projected cash flows and long term positions in relation to inflation and then determine the credit adjusted to interest rate without risk and premiums on market risks not applicable to operations. In addition, possible changes in estimates may give rise to a significant impact on net income because these costs are discounted to present value over a long period of time.

Calculation basis for indemnification by the grantor of public utility concessions

Our financial statements are prepared under the assumption that our concessions are subject to forfeiture at the end of the concession contract period, while we are granted the right to receive full indemnification from the grantor for investments not yet recovered. We have recently evaluated the various legal and regulatory interpretations of the calculation basis for indemnifiable amounts for forfeited concessions. Based on the contractual provisions of our concessions and on legal and regulatory interpretations, we, supported by the opinion of an independent legal advisor, prepared our financial statements under the assumption that we would be indemnified for each concession at the residual book value of the concession upon its termination. This decision affected the calculation basis for assets used in our generation segment which have contractual indemnification clauses as well as any assets within our electricity transmission and distribution segments that fall within the scope of IFRIC-12.

Taxes on Income

We account for income taxes in compliance with IAS 12, “Income Taxes.” IAS 12 provides that we recognize the effects of deferred tax losses and temporary differences in our consolidated financial statements. We recognize a valuation allowance when we believe there is a higher probability that we will not fully recover tax credits in the future. This requires us to carry out estimates on our current tax exposure and assess the

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temporary differences resulting from the different treatment given to certain items for tax and accounting purposes. These differences give rise to deferred asset and liability taxes, which are presented in our consolidated balance sheet. Accordingly, we assess the probability that our deferred tax credits will be recovered from future taxable income. In the event that we believe that such recovery will not be probable, we recognize a valuation allowance and also recognize a tax expense in our income statement. Any reduction of the valuation allowance leads to recognition of a tax benefit in our income statement. The determination of our provision for income tax or deferred asset and liability income taxes requires significant estimates and judgments by our management. For each future tax credit, we assess the probability that the related tax asset will not be recovered in whole or in part.

Description of Principal Line Items

Operating Revenues

Electrical Energy Sales

We derive our revenues from the generation, transmission and distribution of electricity, as set out below:

• revenues in our generation segment derive from the commercialization and sale to distribution companies and free consumers of electricity that we have generated (including the electricity generated by our share of the Itaipu project) and the resale of electricity from Paraguay’s share of the Itaipu project not used in Paraguay. Revenues from our electricity generation segment are recorded based on the output delivered at rates specified under contract terms or prevailing regulatory rates;

• revenues from our transmission segment derive from the construction, operation and maintenance of transmission networks for other electricity concessionaires and certain revenues arising from applying inflation and other indexes to the value of our investments. Revenues received from other concessionaires using our basic transmission network are recognized in the month that the services are provided to the other concessionaires. These revenues are fixed each year by the Brazilian Government. These revenues also include as financial revenue the value calculated over receivables registered as financial assets (formerly recorded as “Property, Plant and Equipment”), based on fees calculated from the receipt of annual permitted revenues (Receita Anual Permitida), or RAP (which is based on gross RAP minus the amount allocated for operations and maintenance revenue) until the concession agreements for energy transmission services terminate; and

• revenues in our distribution segment derive from the sale to end consumers of electricity that we purchase from generation companies and also some electricity that we generate in thermal plants in certain isolated areas in the north region of Brazil for distribution, as well as certain revenues from the construction, operation and maintenance of distribution networks. Electricity distribution sales to final customers are recognized when power is provided. Invoices for these sales are rendered on a monthly basis. Unbilled revenues from the billing cycle up to the end of each month are estimated based on the prior month’s billing and are accrued at the end of the month. Differences between estimated and actual unbilled revenues, if any, are recognized in the following month.

A very large proportion of our revenues, in any given year, derives from the sale or resale of electricity from Itaipu. However, the Brazil and Paraguay treaty pursuant to which Itaipu operates provides that these activities must have no effect on our net income.

Other Operating Revenues

Other operating revenues derive from charges imposed on end consumers for late payments in respect of electricity sold in our distribution segment and, to a lesser extent on other operating revenues that are not attributable to our distribution, generation or transmission segments, which we record under our “corporate” segment. These mainly include fees for the administration of the RGR Fund and other governmental funds. We also derive other operating revenues from telecommunication companies using certain parts of our infrastructure to install telecommunication lines.

Taxes on Revenues

Taxes on revenues consist of Imposto sobre a Circulação de Mercadorias e Serviços – ICMS (or VAT), a sales tax charged on gross revenues. We are subject to different VAT rates in the different states in which we operate, with the VAT rates ranging from 7.0% to 27.0%. Pursuant to applicable regulations, we are not liable for any taxes or revenues in our transmission segment.

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Additionally, we are subject to two federal taxes imposed on the gross revenues of corporate entities: the Program of Social Integration (Programa de Integração Social) – PIS/PASEP and Contribution for the Financing of Social Security (Contribuição para o Financiamento da Seguridade Social) – COFINS.

Regulatory Charges on Revenues

These deductions from gross revenues comprise payments made to the CCC Account, the RGR Fund, the CDE Account, PROINFA and similar charges levied on electricity sector participants. Regulatory charges are calculated in accordance with formulas established by ANEEL, which differ according to the type of sector charges, and thus there is no direct correlation between revenues and sector charges.

Operating Costs and Expenses

Personnel, Supplies and Services

Our operating costs and expenses related to personnel, supplies and services primarily consist of daily administrative expenses for employees, equipment and infrastructure, as well as expenses related to outsourcing security, maintenance and external consultants and advisors. Due to the diverse nature of these expenses, we apply certain subjective criteria to allocate such expenses to our operational activities. These expenses do not account for raw materials used to generate power.

Electricity Purchased for Resale

Our distribution and generation segments both purchase electricity for resale. Electricity purchased in the distribution segment is purchased from other generators. Electricity purchased in the generation segment represents the Paraguayan portion of the energy from Itaipu that is not used in Paraguay and that we resell to distribution companies and free consumers.

Fuel for Electricity Production

The cost of fuel is a significant component of our operating expenses. These costs, however, are subsequently reimbursed from the CCC Account, pursuant to Law No. 12,111.

Use of the Grid

These costs represent charges for transmission of energy over the power lines of third parties.

Interest Payments and Penalties

These costs represent interest payments in respect of our financing with third parties as well as potential penalties for late payments.

Depreciation and Amortization

This represents depreciation and amortization for our property, plant and equipment. We record property, plant and equipment as construction or acquisition costs, as applicable, less accumulated depreciation calculated based on the straight-line method, at rates that take into consideration the estimated useful lives of the assets. Repair and maintenance costs that extend the useful lives of the related assets are capitalized, while other routine costs are charged to our result of operations. Interest relating to debt obtained from third parties incurred during the construction period is capitalized.

Operating Provisions

This reflects provisions we make in respect of: (i) legal proceedings to which we are party; (ii) allowances for doubtful accounts and impairments; and (iii) decommissioning costs, which are the costs associated with decommissioning of nuclear facilities (i.e. the safe retirement of nuclear facilities).

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Deferred Loss from Itaipu

As discussed above in “ – Principal Factors affecting our Financial Performance – Itaipu,” the net effect of the results of operations of Itaipu is recorded in this line item and the accumulated effects of Itaipu operations, net of compensation through tariff adjustments, is carried on our balance sheet as a current and noncurrent asset under “Financial asset – Itaipu.”

Donations and Contributions

This reflects expenses relating to investments in new information technology and research and development, as well as investments in cultural programs and sponsorships.

Other Operating Costs

Our other operating costs comprise a number of miscellaneous costs that we incur as part of our day-to-day operations. The most significant components are: (i) costs of leasing goods such as generation units for the Isolated System; (ii) costs of operations and maintenance of our facilities that provide for electricity services; (iii) telecommunication costs comprising primarily costs incurred for telephone and internet services; (iv) insurance costs, including insurance for our facilities and property; and (v) costs of disposal of assets, primarily transformers.

Results of Equity Interests

Results arising from the equity adjustment for our interests in other companies.

Financial Income (Expenses), Net

Financial Income

This reflects interest income and commissions we receive from loans we made in accordance with the provisions of Brazilian law that permitted us to act as a lender to certain public utility companies (see “Item 4.B, Business Overview – Lending and Financing Activities” for a description of our outstanding loans to other Brazilian utility companies).

Financial Expenses

This principally reflects payments of dividends to our shareholders, as well as debt and leasing expenses. This also reflects the U.S. dollar/real exchange rate variation relating to Itaipu.

Foreign Exchange and Monetary Gain (Loss)

Foreign exchange gain (losses) mainly relate to Itaipu, as the financial statements of Itaipu Binacional are presented in U.S. dollars, and this represents our largest exposure to foreign currency risk. A devaluation or depreciation of the real against the U.S. dollar increases our revenues, as it increases the value of the contribution from Itaipu, although the effect of this contribution is netted out, as discussed above. An appreciation of the real decreases our revenues because it decreases the value of the contribution from Itaipu, although the effect of this contribution is similarly netted out as a depreciation of the cost of construction of Itaipu.

A. Operating Results

The following table shows our revenues and operating expenses as a percentage of net operating revenues:

	Year Ended December 31,
	2011			2010			2009
Revenues
Electricity sales:
Distribution		18.4	%		13.9	%		14.3	%
Generation		65.2	%		74.0	%		75.5	%
Transmission		28.3	%		23.5	%		21.9	%
Other operating revenues		4.1	%		4.5	%		5.2	%
Taxes on revenues		(10.2	)%		(10.3	)%		(11.1	)%
Regulatory charges on revenues		(5.8	)%		(5.7	)%		(5.7	)%
Net operating revenues		100.0	%		100.0	%		100.0	%

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	Year Ended December 31,
	2011			2010			2009
Expenses
Operating expenses		(86.0	)%		(86.1	)%		(89.3	)%
Financial expenses, net		0.8	%		(1.4	)%		(15.7	)%
Gains on results of affiliated companies		1.6	%		2.5	%		6.8	%
Income before income tax and social contribution		16.5	%		15.1	%		1.8	%
Income taxes		(3.7	)%		(5.6	)%		3.6	%
Minority interests		(0.1	)%		(1.1	)%		(1.5	)%
Net income		12.6	%		8.4	%		3.9	%

Consolidated Results

This section is an overview of our consolidated results of operations, which are discussed in greater detail with respect to each segment below.

Net Operating Revenues

Net operating revenues for 2011 increased R$2,701 million, or 10.1%, to R$29,533 million from R$26,832 million in 2010. This increase was due to:

• An increase of R$1,199 million, or 38.3%, from R$3,133 million in 2010 to R$4,332 million in 2011 in construction revenues, due to an increase in investments in concession assets, which include investments in our distribution and transmission infrastructure. The construction revenues were partially offset by the corresponding construction costs;

• An increase of R$760 million, or 19.0%, from R$3,993 million in 2010 to R$4,753 million in 2011 in our transmission operating revenues, due to an increase in the transmission capacity in the national system and an increase in the financial revenue from financial transmission assets;

• An increase of R$937 million, or 5.1%, in our generation operating revenues, due to: (i) an increase in the tariff for the electricity from Paraguay’s share of Itaipu that we sold, (ii) an increase in volume of energy sales and (iii) an increase in the prices under power purchase agreements; and

• An increase of R$351 million, or 8.0%, from R$18,326 million in 2010 to R$19,263 million in 2011 in our distribution operating revenues, due to a 6.3% increase in sales recorded by our distribution companies in 2011 as compared to 2010. Additionally, we had an increase in the average tariff for final customers. Consumption in the industrial, residential and commercial segments increased by approximately 6.7%, principally as a result of increased consumer demand in northern Brazil.

These increases were partially offset by an increase of R$573 million, or 13.8%, from R$4,362 million in 2010 to R$4,713 million in 2011 in our deductions from operating revenues, due to an increase in the regulatory charges related to the extension of the RGR and the increase in the costs of reimbursements for CCC.

Net operating revenues for 2010 increased R$3,608 million, or 15.6%, to R$26,832 million from R$23,140 million in 2009. This increase was due to:

• an increase of R$1,908 million, or 11.9%, in revenues from our generation segment resulting from an increase in tariffs and the fact that new generation plants, including Serra do Facão, Retiro Baixo and Foz do Chapecó, which began operations in 2010;

• an increase of R$1,272 million, or 27.6%, in revenues from our transmission segment, primarily due to an increase in revenues from our SPE subsidiaries as a result of the construction on new transmission lines by our SPEs; and

• an increase of R$415 million, or 16.6%, in revenues from our distribution segment, as a result of an increase in construction revenues as a result of new assets, principally transmission lines and substations, commencing operation in our transmission and distribution segment.

Operating Costs and Expenses

Operating costs and expenses for 2011 increased by R$2,299 million, or 10.0%, to R$25,390 million in 2011 from R$23,090 million in 2010. As a percentage of net operating revenues, operating costs and expenses increased to 86.1% in 2011, from 86.0% in 2010. The primary drivers of the increase in operating costs and expenses were:

• a R$1,326 million, or 44.9%, increase in construction expenses to R$4,280 million in 2011 from R$2,953 million in 2010, mainly due to an increase in capital expenditures relating to transmission infrastructure projects, including the Rio Madeira and Tucuruí – Manaus transmission lines;

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• a R$637 million, or 95.1%, increase in other operating costs and expenses to R$1,306 million in 2011 from R$669 million in 2010, mainly due to the lease of equipment for our distribution facilities as a result of the expansion of our distribution network;

• a R$352 million, or 14.1%, increase in operating provisions to R$2,849 million in 2011 from R$2,497 million in 2010, mainly due (i) operating provisions made by Furnas and Eletronorte in 2011, in the amount of R$498 million, for payments to certain employees as an inducement for early retirement, (ii) further provisions for contingencies, more specifically a legal provision for the Balbina hydro plant of R$131 million – for further information refer to “Litigation – Expropriation of Lands”;

• a R$242 million, or 22.3%, increase in remuneration and reimbursements to R$1,329 million in 2011 from R$1,087 million in 2010, as a result of increased royalty charges due to the higher volumes of energy produced in 2011;

• a R$214 million, or 32.7%, increase in the results to offset from Itaipu to R$655 million in 2011 from R$441 million in 2010, as a result of the increase in net revenues of Itaipu;

• a R$132 million, or 8.3%, increase in depreciation and amortization to R$1,724 million in 2011 from R$1,592 million in 2010, mainly due to the fact that new generation plants, such as Candiota III, Dardanelos, Cerro Chato and Mangue Seco, began operations in 2011;

• a R$67 million, or 5.0%, increase in grid utilization expenses to R$1,421 million in 2011 from R$1,354 million in 2010, mainly due to the fact that we used more third party transmission lines;

• a R$21 million, or 6.6%, increase in the participation of employees and executive officers in our results to R$317 million in 2011 from R$296 million in 2010, mainly due to an increase in salaries, which increased in line with inflation; and

• a R$0.3 million, or 4.1%, increase in personnel, supplies and services costs to R$7,671 million in 2011 from R$7,371 million in 2010, mainly due to an increase in average salaries in line with inflation.

Increases in these costs and expenses were partially offset by:

• a R$929 million, or 21.5%, decrease in electricity purchased for resale to R$3,386 million in 2011 from R$4,315 million in 2010, principally due to (i) the fact that Eletrobras Amazonas Energia changed the way it records costs for electricity purchased for resale as it had previously aggregated fuel costs, which no longer apply as it now mainly uses natural gas, the cost of which is invoiced to it directly; and (ii) the delay of commencement of operations of the Candiota III generation plant from early 2010 to January 2011, which led to the purchase of energy by CGTEE during 2010 to fulfill the sales contracts entered into by Candiota III; and

• a R$90 million, or 35.7%, decrease in fuel for the production of energy to R$163 million in 2011 from R$253 million in 2010, principally due to the fact that since 2011 we largely use natural gas for the production of energy as opposed to fuel.

Operating costs and expenses for 2010 increased by R$2,347 million, or 11.4%, to R$23,090 million in 2010 from R$20,661 million in 2009. As a percentage of net operating revenues, operating costs and expenses decreased to 86.0% in 2010, from 89.3% in 2009. The primary drivers of the increase in operating costs and expenses were:

• a R$1,230 million, or 71.3%, increase in construction expenses to R$2,953 million in 2010 from R$1,724 million in 2009, mainly due to an increase in capital expenditures relating to transmission infrastructure projects, including the Rio Madeira and the Tucuri – Manaus transmission lines.

• a R$884 million, or 13.6%, increase in personnel, supplies and services costs to R$7,371 million in 2010 from R$6,486 million in 2009, mainly due to an increase in the number of employees, an increase in incentive payments to certain employees as an inducement for early retirement, as well as an increase in average salaries, due to a new collective bargaining agreement; and

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• a R$734 million, or 20.5%, increase in electricity purchased for resale to R$4,315 million in 2010 from R$3,581 million in 2009, principally due to the fact that the operations of a number of our new generation plants, which were scheduled to begin in 2010, were delayed to 2011, resulting in the need to purchase electricity on the spot market.

Increases in these costs and expenses were partially offset by a R$611 million, or 28.5%, decrease in operating provisions to R$1,529 million in 2010 from R$2,140 million in 2009, mainly due to the reversal of a provision of R$576 million, which we made at the holding company level in 2009, by Eletrobras Amazonas Energia following a favorable court ruling, which remains subject to appeal.

Financial Income (Expenses), Net

Financial income (expenses), net was an income of R$234 million in 2011 compared to an expense of R$364 million in 2010. This increase was mainly due to the appreciation of the real against the U.S. dollar. On December 31, 2011, the exchange rate between the real and the U.S. dollar was R$1.8758, which is a 12.6% increase as compared to 2010.

Financial income (expenses), net was an expense of R$364 million in 2010 compared to an expense of R$3,638 million in 2009. This decrease was mainly due to a R$3,274 million, or 90.0%, decrease in expenses as a result of the appreciation of the value of the real against the U.S. dollar, which decreased Itaipu’s dollar-denominated financial expenses when measured in reais.

Equity Investments

Equity investments decreased R$187.0 million, or 27.9%, from R$670 million in 2010 to R$483 million in 2011 reflecting adjustments made by us to the results of certain affiliated companies.

Equity investments decreased R$902 million, or 57.4%, from R$1,571 in 2009 to R$670 in 2010 reflecting a decrease in revenues of our affiliated companies in 2010.

Income Taxes and Social Contribution

Income taxes and social contribution decreased by R$396 million, or 26.5%, to an expense of R$1,098 million in 2011 from an expense of R$1,494 million in 2010. The decrease was primarily due to the fact that we used certain tax credits in 2011, which we were able to claim as a result of payments of interest made on capital as shareholders’ compensation.

Income taxes and social contribution increased by R$2,331 million, or 278.6%, to an expense of R$1,494 million in 2010 from a credit of R$837 million in 2009. The increase was primarily a result of the appreciation of the value of the real against the U.S. dollar which increased the interest payments received from Itaipu as our loans to Itaipu are denominated in U.S. dollars. This increase in interest payments increased income, which in turn increased the amount of income tax and social contribution owed.

Minority Interest

Minority interest decreased R$275,5 million, or 84,65 %, to an expense of R$29,5 million in 2011 from an expense of R$305,1 million in 2010, due to the fact that Eletrobras Eletrosul increased its equity participations in certain special purpose companies, which decreased our minority interest expense. For a further description of our equity participations in special purpose companies, see “Item 4.B, Business Overview – Lending and Financing Activities – Equity Participation.”

Minority interest decreased R$34 million, or 9.9%, to an expense of R$305 million in 2010 from an expense of R$339 million in 2009, due to the fact that Eletrobras Eletrosul and Eletrobras Eletronorte increased their equity participations in certain special purpose companies, which decreased our minority interest expense. For a further description of our equity participations in special purpose companies, see “Item 4.B, Business Overview – Lending and Financing Activities – Equity Participation.”

Net Income

As a result of the factors discussed above, our net income for 2011 increased R$1,209 million or 47.4% to a profit of R$3,762 million from a profit of R$2,553 million in 2010.

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As a result of the factors discussed above, our net income for 2010 increased R$1,303 million or 104.2 % to a profit of R$2,553 million from a loss of R$1,250 million in 2009.

Results of Generation Segment

Net Operating Revenues

Net operating revenues for the generation segment increased R$437 million, or 5.1%, to R$19,093 million in 2011 from R$18,398 million in 2010 due to the factors set forth below.

Net operating revenues for the generation segment increased R$2,391 million, or 14.9%, to R$18,398 million in 2010 from R$16,007 million in 2009 due to the factors set forth below.

Electricity Sales

Electricity sales increased R$310 million in 2011, or 1.7%, to R$18,413 million in 2011 from R$18,103 million in 2010, primarily due to an increase of 5% in the volume of electricity sold in our generation segment as a result of an increase in tariffs and the fact that new generation plants commenced operations during 2011.

Electricity sales increased R$1,643 million in 2010, or 10.0%, to R$18,103 million in 2010 from R$16,460 million in 2009, primarily due to an increase in tariffs and the fact that new generation plants commenced operations during 2010.

Other Operating Revenues

Other operating revenues for the generation segment decreased R$74 million, or 11%, to R$672 million in 2011 from R$746 million in 2010 principally due to fewer generation equipment rentals to third parties during the year compared with the prior years.

Other operating revenues for the generation segment decreased R$221 million, or 22.9%, to R$746 million in 2010 from R$967 million in 2009 principally due to fewer generation equipment rentals to third parties during the year compared with the prior years.

Taxes on Revenues

Taxes on revenues increased R$193.9 million, or 10.7%, to R$2,012.7 million in 2011 from R$1,818.8 million in 2010 primarily as a result of increased revenues. For a description of the calculation of taxes on revenues please see “ – Description of Principal Line Items – Operating Revenues – Taxes on Revenues” above.

Taxes on revenues increased R$133 million, or 8.6%, to R$1,818.8 million in 2010 from R$1,545 million in 2009 primarily as a result of increased revenues. For a description of the calculation of taxes on revenues please see “ – Description of Principal Line Items – Operating Revenues – Taxes on Revenues” above.

Regulatory Charges on Revenues

Regulatory charges on revenues increased R$111.0 million, or 11.0%, to R$1,118.8 million in 2011 from R$1,007.8 million in 2010 primarily as a result of increased revenues. For a description of the calculation of taxes on revenues please see “ – Description of Principal Line Items – Operating Revenues – Regulatory Charges on Revenues” above.

Regulatory charges on revenues increased R$124 million, or 14.0%, to R$1,008 million in 2010 from R$884 million in 2009 primarily as a result of increased revenues. For a description of the calculation of taxes on revenues please see “ – Description of Principal Line Items – Operating Revenues – Regulatory Charges on Revenues” above.

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Operating Costs and Expenses

Operating costs and expenses for the generation segment increased R$421 million, or 3.2% to R$13,691 million in 2011 from R$13,270 million in 2010. The primary components of this increase were:

• a R$545 million, or 144.4%, increase in other operating expenses to R$768 million in 2011 from R$223 million in 2010. This increase was due to an increase in the average price of power generation equipment from third parties in the Isolated System and a decrease in the amount recovered from CCC reimbursement from excess operating costs;

• a R$242 million, or 22.3%, increase in remuneration and reimbursements to R$1,329 million in 2011 from R$1,087 million in 2010. This increase was due to an increase in the volume of power generated and an increase in the amount paid to the states and municipalities where the plant’s reservoir is located;

• a R$214 million, or 48.5%, increase in the results to offset from Itaipu to R$655 million in 2011 from R$441 million in 2010. This increase was due to an increase in the volume of power generated in Itaipu and the respective operating costs and expenses;

• a R$211 million, or 15.1%, increase in depreciation and amortization to R$1,598 million in 2011 from R$1,387 million in 2010. This increase was mainly due to the commencement of new generation plant operations in 2011;

• a R$154 million, or 11.8%, increase in operating provisions to R$1,460 million in 2011 from R$1,306 million in 2010. This increase was due to a R$132 million legal provision for the Balbina plant. For further information see “Litigation—Expropriation of Lands”; and

• a R$76 million, or 6.0%, increase in grid utilization expenses to R$1,346 million in 2011 from R$1,270 million in 2010. This increase was due to increased use of the third party electricity grid as the result of the increase in the volume of power generated.

These increases were partially offset by:

• a R$914 million, or 24.2%, decrease in electricity purchased for resale to R$2,867 million in 2011 from R$1,953 million in 2010. This decrease was due to the increase in the volume of energy purchased in 2010 as compared to 2011 as a result of the delay in the commencement of our Candiota III and Dardanelos power plant operations; and

• a R$80 million, 32.9%, decrease in fuel for power generation to R$163 million in 2011 from R$243 million in 2010. This decrease was mainly due to the conversion from fuel to natural gas in our Amazonas Energia thermal plants.

Operating costs and expenses for the generation segment increased R$1,653 million, or 15.3% to R$13,270.3 million in 2010 from R$10,827 million in 2009. The primary components of this increase were:

• a R$744 million, or 28.6%, increase in electricity purchased for sale to R$3,340 million in 2010 from R$2,597 million in 2009, mainly due to fact that operation of our Candiota III thermal plant was delayed resulting in the need to purchase electricity on the spot market;

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• a R$321 million, or 35.2%, increase in grid utilization expenses to R$1,234 million in 2010 from R$913 million in 2009, due to an increased use of third party transmission lines and an increase in costs associated with this use; and

• a R$470 million, or 17.2%, increase in personnel, supplies and services expenses to R$3,202 million in 2010 from R$2,732 million in 2009. This increase was mainly due to an increase in the number of employees, an increase in incentive payments to certain employees as an inducement for early retirement, as well as an increase in average salaries, due to a new collective bargaining agreement.

Increases in these costs and expenses were partially offset by:

• a R$101 million, or 8.5%, decrease in remuneration and reimbursements expenses from R$1.9 million in 2009 to R$1.1 million in 2010, due to a decrease in the total volume of energy generated to 229,944,139 MW in 2010 from 241,295,704 MW in 2009 and a decrease in royalty payments.

Results of Transmission Segment

Net Operating Revenues

Net operating revenues for the transmission segment increased R$1,884.1 million, or 32.0%, to R$7,778.7 million in 2011 from R$5,894.6 million in 2010 due to the factors set forth below.

Net operating revenues for the transmission segment increased R$1,272 million, or 27.6%, to R$5,894.6 million in 2010 from R$4,607 million in 2009 due to the factors set forth below.

Transmission of Electricity

Transmission of Electricity increased R$773.6 million in 2011, or 19.5%, to R$4,742.9 million in 2011 from R$3,969.3 million in 2010 as a result of an inflation adjustment to the fixed transmission tariff set by the Brazilian Government and the operation and construction of new transmission lines in 2011.

Transmission of Electricity increased R$293.5 million in 2010, or 8.0%, to R$3,969.3 million in 2010 from R$3,675.8 million in 2009 as a result of an inflation adjustment to the fixed transmission tariff set by the Brazilian Government and the operation and construction of new transmission lines in 2010, including the Rio Madeira and Tucuruí – Manaus transmission lines.

Other Operating Revenues

Other operating revenues for the transmission segment decreased R$55.0 million, or 38.0%, to R$156 million in 2011 from R$251 million in 2010 principally as a result of a decrease in leases of fixed assets, including poles used to transmit broadband.

Other operating revenues for the transmission segment increased R$121 million, or 117.5%, to R$251 million in 2010 from R$103 million in 2009 principally as a result of an increase in leases of fixed assets, including poles used to transmit broadband.

Taxes on Revenues

Taxes on revenues increased R$43.7 million, or 17.9%, to R$288.3 million in 2011 from R$244.6 million in 2010 primarily as a result of increased revenues. For a description of the calculation of taxes on revenues please see “ – Description of Principal Line Items – Operating Revenues – Taxes on Revenues” above.

Taxes on revenues increased R$24.6 million, or 11.2%, to R$244.6 million in 2010 from R$220 million in 2009 primarily as a result of increased revenues. For a description of the calculation of taxes on revenues please see “ – Description of Principal Line Items – Operating Revenues – Taxes on Revenues.”

Regulatory Charges on Revenues

Regulatory charges on revenues increased R$31.3 million, or 7.7%, to R$435.5 million in 2011 from R$404.2 million in 2010 primarily as a result of increased revenues. For a description of the calculation of taxes on revenues please see “ – Description of Principal Line Items – Operating Revenues – Regulatory Charges on Revenues” above.

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Regulatory charges on revenues increased R$63 million, or 18.4%, to R$404.2 million in 2010 from R$341 million in 2009 primarily as a result of increased revenues. For a description of the calculation of taxes on revenues please see “ – Description of Principal Line Items – Operating Revenues – Regulatory Charges on Revenues” above.

Operating Costs and Expenses

Operating costs and expenses for the transmission segment increased R$1,513.3 million, or 27.2%, to R$7,071.4 million in 2011 from R$5,558.1 million in 2010. The primary components of this increase were:

• a R$1,424.9 million, or 66.5%, increase in construction expenses to R$3,567.9 million in 2011 from R$2,143.0 million in 2010. This increase was due to the start of construction on a number of new transmission lines and the ongoing construction on the Rio Madeira and the Tucuruí – Manaus transmission lines;

• a R$212.4 million, or 66.8%, increase in operating provisions to R$530.5 million in 2011 from R$318.2 million in 2010. This increase was due to operating provisions made by Furnas and Eletronorte in 2011, for payments to certain employees as an inducement for early retirement;

• a R$154.6 million, or 5.9%, increase in personnel, supplies and services expenses to R$2,766.2 million in 2011 from R$2,611.5 million in 2010. This increase was mainly due to an increase in average salaries in line with inflation; and

• a R$10.7 million, or 6.6%, increase in the participation of employees and executive officers in our results to R$173.5 million in 2011 from R$162.8 million in 2010 as the participation of employees and executive officers in our results is determined by reference to salaries, which increased in line with inflation.

These increases were partially offset by a R$168.6 million, or 74.6%, decrease in other operating expenses to R$57.3 million in 2011 from R$225.9 million in 2010. This decrease was due to decreases in corporate costs and the payment of rent and equipment.

Operating costs and expenses for the transmission segment increased R$1,109 million, or 24.6%, to R$5,558.1 million in 2010 from R$4,504 million in 2009. The primary components of this increase were:

• a R$781 million, or 57.3%, increase in construction expenses to R$2,143 million in 2010 from R$1,362 million in 2009, mainly due to an increase in costs relating to the construction of the Rio Madeira and the Tucuruí – Manaus transmission lines;

• a R$157 million, or 6.4%, increase in personnel, supplies and services costs to R$2,612 million in 2010 from R$2,455 million in 2009, mainly due to an increase in the number of employees, an increase in incentive payments to certain employees as an inducement for early retirement, as well as an increase in average salaries; and

• a R$90 million, or 85.1%, increase in profit sharing to R$196 million in 2010 from R$106 million in 2009 as the participation of employees and executive officers in our results is determined by reference to salaries, which increased during 2010.

Increases in these costs and expenses were partially offset by:

• a R$233 million, or 50.8%, decrease in other operating costs to R$225.9 million in 2010 from R$459 million in 2009 related to decreases in corporate costs and the payment of rent and equipment.

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Results of Distribution Segment

Net Operating Revenues

Net operating revenues for the distribution segment increased R$54.8 million, or 2.3%, to R$2,468 million in 2011 from R$2,413 million in 2010 due to the factors set forth below.

Net operating revenues for the distribution segment increased R$415 million, or 16.6%, to R$2,413 million in 2010 from R$2,498 million in 2009 due to the factors set forth below.

Electricity Sales

Electricity sales increased R$219 million, or 5.6%, to R$4,148 million in 2011 from R$3,929.7 million in 2010. This increase was due to an increase of 6.3% in the volume of electricity sold as well as an increase in the average tariff for final customers.

Electricity sales decreased R$586.7 million, or 19.7%, to R$2,397.7 million in 2010 from R$2,984.4 million in 2009. The reduction was a result of changes in the prices for various classes of consumers.

Other Operating Revenues

Other operating revenues increased R$9.1 million, or 5.8%, to R$166.5 million in 2011 from R$157.4 million in 2010 principally due to fact that our distribution companies received a slight increase in rental payments from renting out its telecommunications lines to third parties.

Other operating revenues increased R$82 million, or 76.1%, to R$157.4 million in 2010 from R$108 million in 2009 principally due to the fact that our distribution companies received increased rental payments from renting out its telecommunications lines to third parties.

Taxes on Revenues

Taxes on revenues decreased R$2.0 million, or 0.3%, to R$702.0 million in 2011 from R$704.0 million in 2010 primarily due to the fact that we were able to use ICMS tax credits. For a description of the calculation of taxes on revenues please see “ – Description of Principal Line Items – Operating Revenues – Taxes on Revenues” above.

Taxes on revenues increased R$23 million, or 2.9%, to R$704.0 million in 2010 from R$815 million in 2009 primarily as a result of our increased gross revenues. For a description of the calculation of taxes on revenues please see “ – Description of Principal Line Items – Operating Revenues – Taxes on Revenues” above.

Regulatory Charges on Revenues

Regulatory charges on revenues increased R$55.9 million, or 54.5%, to R$158.5 million in 2011 from R$102.6 million in 2010 primarily as a result of our increased gross revenues. For a description of the calculation of taxes on revenues please see “ – Description of Principal Line Items – Operating Revenues – Regulatory Charges on Revenues” above.

Regulatory charges on revenues increased R$60 million, or 64.4%, to R$102.6 million in 2010 from R$92 million in 2009 primarily as a result of our increased gross revenues. For a description of the calculation of taxes on revenues please see “ – Description of Principal Line Items – Operating Revenues – Regulatory Charges on Revenues” above.

Operating Costs and Expenses

Operating costs and expenses for the distribution segment decreased R$229 million, or 8.3%, to R$2,533 million in 2011 from R$2,762 million in 2010. The primary components of this decrease were:

• a R$175 million, or 40.2%, decrease in operating provisions to R$260 million in 2011 from R$435 million in 2010. This decrease was mainly due to a reduction in our operating provisions for our distribution segment as we renegotiated a large number of contracts with defaulting customers;

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• a R$81 million, or 10.0%, decrease in construction expenses to R$729 million in 2011 from R$810 million in 2010, as a result of investments in our distribution infrastructure. The construction expenses were partially offset by the corresponding construction revenues; and

• a R$10 million, or 11.9%, decrease in grid utilization expenses to R$74 million in 2011 from R$84 million in 2010, due to a decrease in the use of third party electricity grids.

These decreases were partially offset by:

• a R$50 million, or 6.1%, increase in personnel, supplies and services expenses to R$924 million in 2011 from R$874 million in 2010. This increase was mainly due to an increase in average salaries in line with inflation; and

• a R$43 million, or 122.8%, increase in other operating expenses to R$78 million in 2011 from R$35 million in 2010. This increase was mainly due to an increase in rental expenses for equipment used for power generation in the Isolated System.

Operating costs and expenses for the distribution segment increased R$547 million, or 19.7%, to R$2,762.1 million in 2010 from R$2,770 million in 2009. The primary components of this increase were:

• a R$352 million, or 112.3%, increase in construction expenses to R$665 million in 2010 from R$313 million in 2009. This increase was due to an increase in our capital expenditures relating to the improvement of our distribution network;

• a R$171 million, or 22.8%, increase in personnel, supplies and services expenses to R$922 million in 2010 from R$751 million in 2009. This increase was mainly due to an increase in the number of employees, an increase in incentive payments to certain employees as an inducement for early retirement, as well as an increase in average salaries, due to a new collective bargaining agreement; and

• a R$49 million, or 68.2%, increase in grid utilization expenses to R$121 million in 2010 from R$72 million in 2009. This increase was due to an increased use of third party transmission lines and an increase in costs associated with this use.

These increases were partially offset by a R$31 million, or 9.9%, decrease in other operating expenses.

B. Liquidity and Capital Resources

Our principal sources of liquidity derive from the cash generated by our operations and from loans received from various sources, including the RGR Fund (established to compensate electricity concessionaires for uncompensated expenses when the concessions ended), loans from third parties, including certain international agencies, and realizations of various investments we have made with Banco do Brasil S.A., with whom we are required by law to deposit any surplus cash assets. In addition, on October 20, 2011 we issued U.S.$1.75 billion 5.75% notes due in 2021.

We require funding principally in order to finance the upgrade and expansion of our generation and transmission facilities and in order to repay our maturing debt obligations. In addition, through our subsidiaries, we are bidding in auctions for new transmission lines and new generation contracts. In the event that we are successful in any of these auctions, we will need additional cash to fund investments necessary to expand the applicable operations.

From time to time, we consider potential new investment opportunities and we may finance such investments with cash generated by our operations, loans, issuances of debt and equity securities, capital increases or other sources of funding that may be available at the relevant time. At present we have the ability to fund up to R$5 billion of capital expenditure out of existing resources without the need to access the capital markets. Those funds represent a portion of the revenues we have generated from our sales of electricity and the interest we have received from our lending activities.

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Cash Flows

The following table summarizes our net cash flows for the periods presented:

	For the Year Ended December 31,
	2011			2010			2009
				(in R$ thousands)
Net Cash Flows:
Provided by operating activities		3,782,930			8,244,780			9,540,244
Provided by (used in) investing activities		(10,904,111	)		(7,735,792	)		4,069,482
Provided by (used in) financing activities		2,356,861			93,887			(1,480,936	)
Total		(4,260,382	)		602,875			3,089,826

Cash Flow from Operating Activities

Our cash flows from operating activities primarily result from:

• the sale and transmission of electricity to a stable and diverse base of retail and wholesale customers at fixed prices; and

• restricted deposits for legal proceedings in cases where we are a plaintiff in a proceeding and are ordered to pay a deposit to the relevant court. Cash flows from operating activities have been sufficient to meet operating and capital expenditures requirements during the periods under discussion.

In 2011, our cash flows from operating activities decreased R$4.4 billion, from R$8.2 billion in 2010 to R$3.8 billion in 2011. This variation was due to property acquisitions for our generation, transmission and distribution lines and an increase in capital in the SPEs.

Cash Flows from Investing Activities

Our cash flows from investing activities primarily reflect:

• restricted investments, being the surplus cash we are required to either deposit with Banco do Brasil S.A. (or in certain other investments issued by the Brazilian Government);

• investment acquisitions, being partnerships we enter into with third parties in the private sector in relation to the operation of new plants;

• acquisitions of fixed assets, being primarily investments in equipment necessary for operational activities; and

• Income derived from the following:

(i) CFT-E1 bonds issued by the Brazilian Government: these bonds are indexed to the IGP-M, bear no interest and are due in August 2012.

(ii) NTN-P bonds issued by the Brazilian Government: these bonds are indexed by the TR, a monthly reference index published by the Central Bank, bear annual interest of 6.0% and mature on varying dates beginning in February 2012.

(iii) Equity participation in the following companies: (i) Rede Lajeado Energia S.A., (ii) EDP Lajeado Energia S.A., (iii) CEB Lajeado S.A., and (iv) Paulista Lajeado Energia S.A. We receive dividends from these equity interests based on the annual profits earned by each company.

In 2011, our cash flows from investing activities decreased R$3.1 billion, or 41.0%, from an outflow of R$7.7 billion in 2010 to and outflow of 10.9 billion in 2011. This variation was due to the acquisition of fixed and concession assets.

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Cash Flows from Financing Activities

Our cash flows used in financing activities primarily reflect interest income we receive from short-term and long-term loans made to non-affiliated companies that operate in the Brazilian electricity sector.

In 2011, our cash flows from financing activities increased R$2.2 billion, from an inflow of R$93,887 million in 2010 to an inflow of R$2.3 billion in 2011. This variation was mainly due to an inflow of long-term loans.

Relationship between Appropriated Retained Earnings and Cash Flows

As of December 31, 2011, our balance sheet reflected retained reserves of R$44.6 billion, which consisted of our statutory reserves but do not include unpaid shareholders’ remuneration (see “Item 8.A, Consolidated Financial Statements and Other Information – Policy on dividend distribution”).

Capital Expenditure

In the last five years, we have invested an average of R$4.8 billion per year in capital projects. Approximately 49% was invested in our generation segment, 33% in our transmission segment and the balance in our distribution segment and other investments.

Our core business is the generation, transmission and distribution of energy and we intend to invest heavily in these segments in the next years.

Companies are now selected to construct new generation units and transmission lines by a tender process. It is, therefore, difficult to predict the precise amounts that we will invest in these segments going forward. We are, however, working to secure a significant number of new contracts either alone or as part of a consortium including the private sector.

According to the EPE 10 Year Plan, it is estimated that Brazil will have 142,202 km of transmission lines and 171,138 MW of installed generation capacity by 2020. These investments will represent approximately R$220 billion. As the current largest player in the market, we expect to participate in the majority of these new investments. In accordance with the EPE 10 Year Plan, we believe that over the next ten years we will invest an average of approximately R$22 billion per year. For these investments, we expect to use the funding derived from our net cash flow as well as from accessing national and international capital markets and through bank financing.

Our capital expenditures in 2009, 2010 and 2011 were R$6.8 billion, R$5.3 billion and R$5.2 billion, respectively.

C. Research and Development, Patents and Licenses

Research and Development

Our research and planning activities are carried out by Cepel, a non-profit entity created in 1974 with the objective of supporting the technological development of the Brazilian electricity sector. We are the primary sponsor of Cepel and participate in coordinating environmental planning and energy conservation programs. Cepel’s clients are our operating subsidiaries (including Itaipu and Eletrobras Eletronuclear) and other Brazilian and foreign electric utilities. Cepel’s activities aim to achieve high quality standards and productivity in the electricity sector through technological research and development. Cepel has a network of laboratories to undertake its activities, and maintains technical co-operation agreements with several international electrical energy research and development institutions. Cepel prioritizes strategic and structuring projects, with its activities concentrated in five departments:

• Systems Automation Department: this department focuses on the development of tools to obtain data, real time operation of electric systems and analysis of disturbances;

• Electric Systems Department: this department focuses on the development of methodologies and computer programs that provide conditions for expansion, supervision, control and operation of core systems;

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• Special Technologies Department: this department surveys the application of technologies relating to the use of materials for electric installations, energy efficiency and renewable sources, including the analysis of sustainability and economic viability;

• Installation and Equipment Department: this department focuses on the development of technologies to refine equipment used in generation, transmission and distribution of electrical energy (computer models, testing and measuring techniques, monitoring and diagnosis systems); and

• Energy Optimization and Environment Department: this department focuses on the development of methodologies and computer programs for the planning of expansion and operation of interconnected hydrothermal systems and on integrated evaluation of environmental issues.

We have a central group survey center that performs scientific studies, measurements, specialist analyses and other tests and analyses that are relevant to our core operations. This center has a certification from the Instituto Nacional de Metrologia (the Brazilian National Metrology Institute) that allows it to certify electrical equipment. Cepel also focuses on the development of energy efficiency projects including those relating to the generation of electricity from renewable sources such as solar and wind power. As part of this focus, Cepel’s structure includes the following projects: (i) the Centro de Referência para Energia Solar e Eólica Sérgio de Salvo Brito (National Reference Center for Solar and Wind Powered Energy of Salvo Brito); (ii) the Casa Solar Eficiente (Solar Efficient House); and (iii) the Centro de Aplicação de Tecnologias Eficientes (Center for the Application of Efficient Technologies).

Patents and Licenses

Among others, we have registered “Eletrobras” as a trademark with the Instituto Nacional de Propriedade Industrial – INPI. Further, Cepel has twenty-seven patents, Eletrobras Eletronorte thirty-seven patents, Eletrobras Eletrosul has two patents and Eletrobras Furnas has nine patents registered with the INPI relating to equipment and manufacturing processes.

Insurance

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

D. Trend Information

Our management has identified the following key trends, which contain certain forward-looking information and should be read in conjunction with “Cautionary Statement Regarding Forward-Looking Information” and “Item 3.A, Risk Factors.” Fundamentally, we believe these trends will allow us to continue to grow our business and improve our corporate image:

• electricity is in constant demand: unlike certain industries which are particularly vulnerable to cyclical conditions in the market and/or seasonality, the demand for electricity is constant. We believe we will continue to have the ability to set tariffs in accordance with market conditions, particularly in the generation segment. Although tariffs in the transmission segment are set by the Brazilian Government each year, we believe that these tariffs will continue to increase;

• participation in future auctions will allow us to grow: we expect to participate in an increasing number of future new energy auctions, as well as new transmission auctions, and will, accordingly need to invest in new power generation plants (hydroelectric, wind, biomass and thermal) and new transmission lines in order to expand the existing grid and keep our current market share. We also believe that by focusing on generation and transmission, we will be able to maximize profits by improving efficiency in our existing infrastructure and capitalizing on opportunities arising from new infrastructure;

• a decrease in regulatory charges once infrastructure investments have been completed: in recent periods, our financial results have been impacted by regulatory charges regulated by ANEEL. The

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proceeds of these charges have been used by the Brazilian Government to invest in infrastructure such as the CCC and RGR. As this infrastructure is completed, we believe ANEEL will decrease the levels of regulatory charges, which will have a positive effect on our financial results. However, we do not believe there will be any changes in the short term. Moreover, we believe that the completion of these infrastructure projects will have a beneficial effect on our ability to grow our business;

• revenues from third parties for maintenance of facilities: although the core of our business will remain the generation and transmission segments, we have successfully increased our revenues in recent periods by using our expertise to provide maintenance services for other companies in our industry. Our subsidiary Eletrobras Eletronorte has been the key conduit for this. We expect this trend to continue, thereby improving our financial position; and

• an increasing focus on environmental, health and safety concerns: there is a trend in Brazil and globally towards increasing concerns for the protection of the environment. This impacts us in various ways, including dealing with social and political issues that may arise when we seek to construct new facilities (particularly in remote areas of Brazil) and reduced carbon emission targets from facilities that rely on fossil fuel. One of the key challenges for us will be to balance these environmental concerns against the growth of our business, as these concerns naturally can increase cost pressures. There is also an increasing trend in Brazil towards more stringent health and safety requirements with respect to operating permits for our facilities, which similarly imposes cost pressure challenges on our business.

E. Off-Balance Sheet Arrangements

None of our off-balance sheet arrangements are of the type with respect to which we are required to provide disclosure pursuant to item 5.E of Form 20-F.

F. Contractual Obligations

We set out below, on a segment basis, our long-term debt, long-term purchase obligations and long-term sale obligations for the periods presented:

	Payments due by period as of December 31, 2011
	(in U.S.$ millions)
	2012		2013		2014		2015		2016 and after
Long-term purchase obligations:
Generation		2,789		2,709		2,370		2,239		2,249
Transmission		—		—		—		—		—
Distribution		3,455		3,817		3,936		4,736		—
Total		6,244		6,526		6,306		6,975		2,249

Our leasing obligations are set as follows, as of December 31, 2011:

	As of December 31, 2011
	(in R$ millions)
Leasing obligations:
More than one year		142,997
More than one year and less than five years		714,984
More than five years		1,060,560
Present value of payments		1,918,541

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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. Board of Directors and Senior Management

We are managed by our Conselho de Administração (or Board of Directors), composed of up to ten members, and by our Diretoria (or Board of Executive Officers), which currently consists of six members. Our by-laws also provide for a permanent Conselho Fiscal (or Fiscal Council), which is made up of six members. Pursuant to our by-laws, all members of our Board of Directors, Board of Executive Officers and Fiscal Council must be Brazilian citizens.

Board of Directors

The members of our Board of Directors are elected at the general shareholders meeting for a renewable term of three years. However, on April 28, 2005, our shareholders approved an amendment to our by-laws pursuant to which the term of office of each member of our Board of Directors will decrease from three years to one year. In accordance with Law No. 3,890 – A of April 25, 1961, this amendment is subject to approval in the form of a Presidential decree, which is pending as of the date of this annual report. Pursuant to Brazilian corporate law, the members of our Board of Directors must be shareholders of the company. As our majority shareholder, the Brazilian Government has the right to appoint eight members of our Board of Directors, of which seven are appointed by the MME and one by the Ministério do Estado do Planejamento, Orçamento e Gestão (the Planning, Budget and Management Ministry). The minority shareholders have the right to elect one member, and the holders of preferred shares without voting rights representing at least ten percent of our total capital have the right to elect one member. Currently, our Board of Directors is composed of nine members. We elected Beto Ferreira Martins Vasconcelos as a Director on August 1, 2011, but he will not join the Board until April 30, 2012. One of the members of the Board of Directors is appointed as Chairman. The address of our Board of Directors is Av. Presidente Vargas, 409 13º andar – Rio de Janeiro.

Our Board of Directors ordinarily meets once a month and when called by a majority of the directors or the Chairman. Among other duties, our Board of Directors is responsible for: (i) establishing our business guidelines; (ii) determining the corporate organization of our subsidiaries or any equity participation by us in other legal entities; (iii) approving our entering into any loan agreement and determining our financing policy; and (iv) approving any guarantee in favor of any of our subsidiaries in connection with any financial agreement.

The table below sets out the current members of our Board of Directors and their respective positions. The mandate of each member of our Board of Directors expires at the next Ordinary Shareholders’ Meeting. Each member was elected by the Brazilian Government except for Arlindo Magno de Oliveira who was elected by our minority shareholders.

Name	Position
Márcio Pereira Zimmermann	Chairman
Maurício Muniz Barreto de Carvalho	Director
Virginia Parente de Barros	Director
Lindemberg de Lima Bezerra	Director
Wagner Bittencourt de Oliveira	Director
José Antonio Corrêa Coimbra	Director
Arlindo Magno de Oliveira	Director
José de Costa Carvalho Neto	Director
Beto Ferreira Martins Vasconcelos	Director

Márcio Pereira Zimmermann – Chairman and Board Member: Mr. Zimmermann joined our Board of Directors and was immediately appointed as Chairman on April 30, 2010 , He was appointed as Chairman for a second term on June 16, 2011. He was also the Minister of Brazil’s Ministry of Mines and Energy from April through December 2010, and since December 2010, he has served as the Executive Secretary of the same ministry. Mr. Zimmermann was previously the Engineering Director of Eletrobras from October 2001 through January 2003, and he was Research and Development Director of Eletrobras Cepel from 2003 to 2004. Mr. Zimmermann has a degree in Electrical Engineering from the Universidade Católica of the State of Rio Grande do Sul, a post graduate degree in Electrical Systems Engineering from Escola Federal de Engenharia de Itajubá and a masters degree in Electrical Engineering from the Pontifícia Universidade Católica of Rio de Janeiro.

Maurício Muniz Barreto de Carvalho – Board Member: Mr. Carvalho joined our Board of Directors on June 16, 2011. He currently holds the position of Brazil’s Secretary of the Growth Acceleration Program (Programa de Aceleração do Crescimento – PAC) having been appointed to that office in May 2011. Mr. Carvalho previously served as Principal of the Escola Nacional de Administração Pública (ENAP) in the areas of (1) Administration

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and Finance and (2) Managers and Servers Development from 1999 to 2002. In 2003, he was appointed as head of the Monitoring, Evaluation, Audit and Capacity Board of the Ministry of Education, and afterwards of the Educational Inclusion Programs Board. Mr. Carvalho served as Special Advisor for the Presidency from 2003 to 2004, when he was nominated Deputy Assistant Chief of Articulation and Monitoring of the Civil House of the Presidency, responsible for articulating government action and monitoring strategic projects, particularly the PAC. Mr. Carvalho has a Masters degree in Public Administration and Urban Planning and a Bachelors degree in Public Administration, both from Fundação Getúlio Vargas (FGV).

Virginia Parente de Barros – Board Member: Ms. Barros joined our Board of Directors on June 16, 2011. She has over 12 years of experience as an executive working for investment banks, both foreign and domestic, such as Chemical Bank (the predecessor of J.P. Morgan Chase), BankBoston, Unibanco and Banco Votorantim, among others. As a Professor at USP, she has been involved in lecturing, researching and continued education, including consulting in the areas of finance, economics, public administration, and regulation in energy, environment, and security. Ms. Barros is the President of the Strategic Energy Committee of the Brazil-United States Chamber of Commerce (Comite Estratégico de Energia da Câmara de Comércio Brasil-Estados Unidos) (AMCHAM) and a Member of the Executive Board of the Brazilian Society for Energy Planning (Sociedade Brasileira de Planejamento Energético) (SBPE), which consists of several universities and energy research centers. Ms. Barros holds a Post-PhD in Energy with a focus on regulation from the Universidade de São Paulo – USP; a PhD in Finance and Economics from Fundação Getúlio Vargas de São Paulo, a masters degree in Business Administration from Universidade Federal da Bahia; and a bachelors degree in Economics from Universidade de Brasília.

Lindemberg de Lima Bezerra – Board Member: Mr. Bezerra joined our Board of Directors on June 16, 2011. Mr. Bezerra has held the position of Chief of Staff of the Secretary of the Brazilian National Treasury since July 2007. From 1997 to June 2007, Mr. Bezerra was a tax and economics assistant at the National Treasury. Mr. Bezerra holds a degree in economics from Universidade Federal do Rio Grande do Sul with a masters degree in economics from Universidade de São Paulo.

Wagner Bittencourt de Oliveira – Board Member: Mr. Oliveira has been a member of our Board of Directors since April 2007. In 1975, he undertook a public contest and was admitted to the Banco Nacional de Desenvolvimento Social – BNDES (National Bank of Social and Economical Development). Throughout his career at BNDES he has acted in many positions: Head of Division, Head of Department, Superintendent and, since December 2004, he has been Superintendent of Basic Supplies, which includes mining, metallurgy, cement, paper and cellulose, chemicals, petrochemicals and fertilizers. Mr. Oliveira has accumulated 20 years of executive experience having been the Secretary of the Ministry of National Integration (2001), Superintendent of SUDENE (2000 to 2001), CEO of Companhia Ferroviária do Nordeste (1998 to 2000) and Superintendent of the Industrial Area (1996 to 1998). Mr. Oliveira is a member of the Board of several companies, such as Usiminas Mecânica and CADAM. Mr. Oliveira is a metallurgical engineer with a degree from PUC-RJ, and has completed a specialized coursework in finance and capital markets.

José Antonio Corrêa Coimbra – Board Member: Mr. Coimbra has been a member of our Board of Directors since April 2009. Mr. Coimbra is currently Head of Office of the Brazil Ministry of Mines and Energy and has published several papers in Brazil and abroad. Within Eletrobras, Mr. Coimbra was previously Director of Engineering of Eletrobras Eletronorte, having worked at that company from 1977 until 2005. Mr. Coimbra is also a member of the Board of Directors of Eletrobras Eletronorte and holds the same position in Eletrobras Cepel. Mr. Coimbra holds a degree in Civil Engineering from Universidade Federal do Pará with a Master Degree in Production Engineering from Universidade Federal de Santa Catarina.

Arlindo Magno de Oliveira – Board Member: Mr. Oliveira joined our Board of Directors on June 16, 2011. Mr. Oliveira began his professional career as a manager at Banco do Brasil. He also worked as Director of the Pension Fund of Banco do Brasil – Previ. Mr. Oliveira is presently retired but has extensive experience as a member of the board of directors in several important Brazilian companies such as Companhia Vale do Rio Doce and Valepar S.A., as well as companies in the Brazilian electricity sector – Coelba, Cosern and CPFL. Mr. Oliveira holds a degree in economics from Universidade Federal Fluminense and has completed several specialized courses in finance and capital markets.

José da Costa Carvalho Neto – Board Member: Mr. Neto joined our Board of Directors on June 16, 2011. He was previously a Power Plants Professor at Pontifical Catholic University-MG, from 1970 to 1977. Subsequently he was the Deputy Secretary of Mines and Energy of Minas Gerais, appointed in 1987. Mr. Neto held the position of Chief Distribution Officer at Cemig from 1991 to 1997, and held the offices of Superintendent, Department and Division Manager as well as the role of Chairman of Cemig between July 1998

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and January 1999. He has also held the offices of CEO of Arcadis Logos Energia, Member of the Board of Directors of Logos Engenharia and Enerconsult and Director of Orteng Equipamentos e Sistemas. Mr. Neto holds a degree in Electrical Engineering with a Masters Degree in Electrical Engineering from Universidade Federal de Minas Gerais.

Beto Ferreira Martins Vasconcelos – Board Member: Elected to our Board of Directors on August 11, 2011, Mr. Vasconcelos will not be seated until April 30, 2012. Mr. Vasconcelos holds a bachelor’s degree in law from the University of São Paulo and postgraduate degrees in environmental law from the University of São Paulo and Biosafety from the Federal University of Santa Catarina. He practiced private law in São Paulo from 2000 to 2003, before entering the federal government, where he held positions as Deputy Secretary for Technology Policy (2003-2004), Advisor to the Minister of Justice (2004-2005), Deputy Chief Advisor for Legal Affairs of the Presidency of the Republic (2005-2006), Executive Secretary of the National Biosafety Council (2006-July 2010) and Chief Advisor for Legal Affairs of the Presidency and President of the Center for Legal Studies of the Presidency (2007-December 2010). Since January 2011, he has served as the Deputy Chief of Staff of the Presidency.

Board of Executive Officers

Our Board of Executive Officers is currently made up of six members appointed by our Board of Directors for an indefinite term. Our Board of Executive Officers ordinarily meets every week, or when called by a majority of the officers or by the President. Our Board of Executive Officers determines our general business policy, is responsible for all matters related to our day-to-day management and operations and is the highest controlling body with regards to the execution of our guidelines. We have no control over appointments of our chief executive and chief financial officers because all such appointments are made by our controlling shareholder, which is the Brazilian Government. Our chief administrative officer is responsible for coordinating the general management of our business including supplies, employment-related issues, training insurance policies and management of our assets. The address of our Board of Executive Officers is Av. Presidente Vargas, 409 13º andar – Rio de Janeiro.

The members of our current Board of Executive Officers were appointed by our Board of Directors and their names and titles are set out below:

Name	Position
José da Costa Carvalho Neto	Chief Executive Officer
Armando Casado de Araújo	Chief Financial and Investor Relations Officer
Valter Luiz Cardeal de Souza	Chief Generation Officer
Miguel Colasuonno	Chief Administrative Officer
Marcos Aurélio Madureira da Silva	Chief Distribution Officer
José Antonio Muniz Lopes	Chief Transmission Officer

Mr. José da Costa Carvalho Neto – Chief Executive Officer: See “ – Board of Directors.”

Mr. Armando Casado de Araújo – Chief Financial Officer and Investor Relations Officer: Mr Araújo has over 30 years of experience in the domestic electric power sector. He worked for Eletrobras Eletronorte as Budget Superintendent from 1977. He was then appointed President of the Integração Transmissão de Energia S.A. He has worked at Eletrobras since June 2008 when he became the assistant to and substitute of the Chief Financial Officer. He was appointed as Chief Financial Officer and Investor Relations Officer on March 30, 2010. Mr. Araújo holds a degree in Business Administration from Faculdade de Ciências Exatas, Administrativas e Sociais de Brasília, and has completed several post-graduate courses in Finance.

Mr. Valter Luiz Cardeal de Souza – Generation Officer: Mr. Souza has been Engineering Director of Eletrobras since January 14, 2003. He has been active in the electricity sector for over thirty-two years as an employee of Companhia Estadual de Energia Elétrica S.A. (CEEE) where, since 1971, he has undertaken important technical and management functions as director in the areas of generation, transmission and distribution. At the Departamento Nacional de Águas e Energia Elétrica (DNAEE), he was Assistant Executive to the General Manager, Coordinator for the Department of Construction and Application of Electrical Energy and Coordinator and Substitute Director for the Department of Finance and Economics. Mr. Souza also holds the position of President of the board of directors of Eletrobras Eletronorte and Eletrobras CGTEE. Mr. Souza is an electrical and electronic engineer, with a degree from the Pontifícia Universidade Católica of Rio Grande do Sul, specializing in energy engineering as well as in production engineering.

Mr. Miguel Colasuonno – Chief Administrative Officer: Mr. Colasuonno was appointed as Administrative Officer on March 6, 2008 and became Chief Administrative Officer on April 26, 2009. Mr. Colasuonno was

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mayor of São Paulo from 1973 to 1975, president of the Empresa Brasileira de Turismo – Embratur from 1980 to 1985, and president of the Sindicato dos Economistas do Estado de São Paulo from 1986 to 1995. He also acted as a São Paulo councilman from 1992 to 2001, where he was appointed council president. Mr. Colasuonno has been a professor at the University of São Paulo for the past seven years. Mr. Colasuonno has a PhD in International Relations from Vanderbilt University and has a post-graduate degree in economics, specializing in International Trade and Exchange, from the Universidade de São Paulo.

Mr. Marcos Aurélio Madureira da Silva – Distribution Officer: Mr. da Silva was appointed as Distribution Officer on May 12, 2011. He was previously an employee of Companhia Energética de Minas Gerais S.A. – CEMIG, where he was a Distribution Officer from 1998 to 2010. He has also acted as an Operations and Commercial Officer of Energisa Soluções and as a Director of the Operador Nacional do Sistema Electrico (ONS). Mr. da Silva holds a degree in electrical engineering and has completed post-graduate courses in business administration and economics engineering.

Mr. José Antonio Muniz Lopes – Transmission Officer: Mr. Lopes was appointed Chief Executive Officer of Eletrobras on March 6, 2008. On March 4, 2008 at the Extraordinary General Stockholders Meeting he was elected a member of our Board of Directors. Mr. Lopes has held several executive positions in companies in the Eletrobras group, such as Chief Executive Officer and Director of Planning and Engineering at Eletrobras Eletronorte from 1996 to 2003, Chief Executive Officer, Managing Director and Chief Financial Officer at Eletrobras Chesf from 1992 to 1993 and Chief Executive Officer at Eletrobras from March 2008 to February 2011. Mr. Lopes was also Deputy Director of the National Department of Energy Development – DNDE of the Ministry of Mines and Energy, where he also served as the Executive Secretary. Mr. Lopes holds a degree in Electrical Engineering from the Universidade Federal de Pernambuco. He is an expert in the Brazilian electricity sector in which he has worked for more than 30 years.

B. Compensation

The compensation of our Board of Directors, Board of Executive Officers and Fiscal Council is determined by our shareholders at the Ordinary Shareholders’ Meeting held within the first four months of the financial year. That compensation may also include a profit sharing amount at the discretion of our shareholders.

For 2011, 2010 and 2009 the aggregate compensation paid to our Directors, Officers and members of the Fiscal Council (including that paid by our subsidiaries and Itaipu, except for the distribution companies) was R$19,815,743.05, R$18,417,084.63 and R$18,045,473.42, respectively. The total aggregate amount of profit-sharing paid to our officers (including that paid by our subsidiaries and Itaipu) was R$2,395,432.75 for 2011, R$2,647,443.82 for 2010 and R$2,146,930.79 for 2009. The Board of Executive Officers is responsible for apportioning the compensation among its members, the members of the Board of Directors and the Fiscal Council. We have not set aside or accrued any amounts to provide pension, retirement or similar benefits.

C. Board Practices

Service Contracts

We do not have service contracts with any member of our Board of Directors, Board of Executive Officers or Fiscal Council.

Fiscal Council

Our Fiscal Council is established on a permanent basis and consists of five members and five alternates elected at the annual shareholders meeting for renewable one-year terms. The Brazilian Government has the right to appoint three of the members of our Fiscal Council, and both the minority shareholders and the holders of our preferred shares without voting rights, representing at least ten percent of our total capital, have the right to appoint one member each.

The current members of our Fiscal Council, set out in the table below, and respective alternates were elected during the general shareholders meeting held during June 16, 2011 and in which we only elected four members to the Fiscal Council. Their terms of office are due to end at the ordinary shareholder meeting scheduled for April 2012.

Member	Alternate
Jarbas Raimundo de Aldano Matos	Jairez Elói de Souza Paulista
Danilo de Jesus Vieira Furtado	Ricardo de Paula Monteiro
Charles Carvalho Guedes	Leila Przytyk
Ana Lucia de Paiva Lorena Freitas	Rodrigo Magela Pereira

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D. Employees

As of December 31, 2011, we had a total of 28,370 salaried employees compared to 28,310 and 27,610 employees as of December 31, 2010 and 2009, respectively. Eletrobras itself, excluding Itaipu and other subsidiaries, had 1,108 employees as of December 31, 2011. For the past five years we have not experienced any strikes or other form of work stoppage that have affected our operations or had a significant impact on our results.

As a mixed capital company, we cannot hire employees without a public contest. A public contest involves us placing advertisements in the Brazilian press for open positions and inviting applicants to sit an examination. The last public contest took place in 2010, as a result of which we hired approximately 35 new employees. The average tenure of our employees is 28.8 years.

The following table sets out the number of employees by tenure:

Composition of Employees by Tenure

As of	Up to 5		6 to 10		11 to 15		16 to 20		21 to 25		Over 25		Total
December 31, 2011		7,867		4,165		1,416		609		5,510		8,802		28,370
December 31, 2010		7,886		3,408		1,408		629		6,453		8,526		28,310

The following table sets out the number of employees, by department:

Department	Number of Salaried Employees as of December 31,
	2011		2010
Field		17,247		17,422
Administrative		11,122		10,888
Total		28,370		28,310

Although we are not allowed to hire outsourced employees, our subsidiaries Eletrobras Eletronorte and Eletrobras Furnas employ 2,048 outsourced employees in order to comply with the rules established by the Brazilian Government during the national privatization plan.

The following table sets out the number of outsourced employees at Eletrobras Eletronorte and Eletrobras Furnas:

Subsidiary	Number of Outsourced Employees as of December 31,
	2011		2010
Eletrobras Eletronorte		507		548
Eletrobras Furnas		1,541		1,591
Total		2,048		2,139

The majority of our employees are members of unions. The main unions that represent our employees are Federação Nacional dos Urbanitários, Federação Nacional dos Engenheiros, Federação Interestadual de Sindicatos de Engenheiros, Federação Nacional de Secretárias e Secretários, Federação Brasileira dos Administradores, Sindicato dos Trabalhadores nas Indústrias de Energia Elétrica de São Paulo, Sindicato dos Eletricitários de Furnas e DME and Sindicato dos Eletricitários do Norte e Noroeste Fluminense. Our relationship with our employees is regulated by collective bargaining agreements executed with these unions and the Associação dos Empregados da Eletrobras and renegotiated in May each year. This agreement is applicable only to employees of Eletrobras itself. Each of our subsidiaries negotiates its own collective bargaining agreement, on an annual basis, with their respective unions. We generally have a one-day strike each year regarding these collective bargaining agreements.

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E. Share Ownership

No member of our Fiscal Council holds any of our shares. The following tables show current ownership of our shares by members of our Board of Directors and Board of Executive officers:

Board of Directors

Name:	Number of Common Shares held
Maurício Muniz Barreto de Carvalho		2
Virginia Parente de Barros		300
Lindemberg de Lima Bezerra		1
Wagner Bittencourt de Oliveira		3
Marcio Pereira Zimmermann		10
José Antonio Corrêa Coimbra		1
Arlindo Magno de Oliveira		100
José da Costa Carvalho Neto		100

Board of Executive Officers

Name:	Number of Common Shares held
José da Costa Carvalho Neto		100
José Antonio Muniz Lopes		1
Marcos Aurélio Madureira da Silva		—
Valter Luiz Cardeal de Souza		—
Miguel Colasuono		—
Armando Casado de Araújo		—

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. Major Shareholders

As of December 31, 2011, the aggregate amount of our outstanding capital stock was R$31,305,331, consisting of 1,087,050,297 outstanding common shares, together with 146,920 outstanding class “A” preferred shares and 265,436.883 outstanding class “B” preferred shares. This represented 80.4%, 0.01% and 19.6% of our aggregate outstanding capital stock respectively.

As of December 31, 2011, we had 65,365 beneficial and 6 registered holders of ADSs representing common shares and 23,120 beneficial and 6 registered holders of ADSs representing preferred shares.

The following tables show information relating to beneficial ownership in our common and preferred shares as of December 31, 2011 and December 31, 2010:

As of December 31, 2011

Shareholder	Common Shares					Class A Preferred Shares					Class B Preferred Shares					Total
	(number)		%			(number)		%			(number)		%			(number)		%
Brazilian Government		552,968,382		50.87	%							2,252		0.00	%		552,970,634		40.88	%
BNDES Participações S.A.		180,757,951		16.63	%							18,691,102		7.04	%		199,449,053		14.75	%
BNDES		76,338,832		7.02	%							18,262,671		6.88	%		94,601,503		6.99	%
FND		45,621,589		4.20	%												45,621,589		3.37	%
FGHAB		1,000,000		0.09	%												1,000,000		0.07	%
CEF		8,701,564		0.80	%												8,701,564		0.64	%
FGI												8,750,000		3.30	%		8,750,000		0.65	%
FGO												468,600		0.18	%		468,600		0.03	%
Others		221,661,979		20.39	%		146,920		100.00	%		219,262,258		82.60	%		441,071,157		32.61	%
Under BM&FBOVESPA Custody		221,439,414		20.37	%		84,997		57.85	%		194,510,561		73.28	%		416,034,972		30.76	%
Resident		56,490,457		5.20	%		84,996		57.85	%		49,816,612		18.77	%		106,392,658		7.87	%
Non Resident		88,700,063		8.16	%		1		0.00	%		107,309,594		40.43	%		196,009,658		14.49	%
J.P. Morgan Chase Bank		76,248,894		7.01	%							37,384,355		14.08	%		113,633,249		8.40	%
Others		222,565		0.02	%		61,923		42.15	%		24,751,697		9.32	%		25,036,185		1.85	%
Resident		194,836		0.02	%		61,896		42.13	%		24,747,695		9.32	%		25,004,427		1.85	%
Non Resident		27,729		0.00	%		27		0.02	%		4,002		0.00	%		31,758		0.00	%
Total		1,087,050,297					146,920					265,436,883					1,352,634,100

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As of December 31, 2010

Shareholder	Common Shares					Class A Preferred Shares					Class B Preferred Shares					Total
	(number)		%			(number)		%			(number)		%			(number)		%
Brazilian Government		470,656,241		52.00	%							712		0.00	%		470,656,953		41.56	%
BNDES Participações S.A.		190,757,950		21.08	%							18,691,102		8.23	%		209,449,052		18.50	%
FND		45,621,589		5.04	%												45,621,589		4.03	%
FGHAB		1,000,000		0.11	%												1,000,000		0.09	%
FGI												8,750,000		3.85	%		8,750,000		0.77	%
FGO												1,008,500		0.44	%		1,008,500		0.09	%
Treasury shares		196,987,747		21.77	%		146,920		100.00	%		198,736,329		87.48	%		395,870,996		34.96	%
Others		470,656,241		52.00	%							712		0.00	%		470,656,953		41.56	%
Cleared through BM&FBOVESPA		195,809,462		21.64	%		84,870		57.77	%		160,511,450		70.65	%		356,405,782		31.47	%
Resident		61,461,579		6.79	%		84,869		57.77	%		38,969,201		17.15	%		100,515,649		8.88	%
Non Resident		62,385,693		6.89	%		1		0.00	%		88,568,342		38.98	%		150,954,036		13.33	%
J.P. Morgan Chase Bank		71,962,190		7.95	%							32,973,907		14.51	%		104,936,097		9.27	%
Others		1,178,285		0.13	%		62,050		42.23	%		38,224,879		16.82	%		39,465,214		3.49	%
Resident		1,150,556		0.13	%		62,023		42.22	%		38,220,877		16.82	%		39,433,456		3.48	%
Non Resident		27,729		0.00	%		27		0.01	%		4,002		0.00	%		31,758		0.01	%
Total		905,023,527					146,920					227,186,643					1,132,357,090

B. Related Party Transactions

We administer certain funds, including the RGR fund, CCC Account and CDE Account, on behalf of the Brazilian Government, our controlling shareholder.

We sometimes act together with other Brazilian state owned companies or governmental entities. These activities are mainly in the areas of technical cooperation and research and development. In 2000, our Board of Directors approved the execution of a Technical and Financial Cooperation Agreement between ourselves and the MME, for us to perform feasibility studies in relation to the Brazilian hydrographic base, with the purpose of identifying potential sites for the future construction of hydroelectric plants. The estimate value of this contract is R$25 million, to be paid to us by the MME.

We have entered into a joint venture agreement with Petrobrás Energia S.A., which is also partly owned by the Brazilian Government, for the construction of a thermoelectric plant in Manaus. We have also entered into a framework agreement to establish the basis and the conditions for the development of energy commercialization contracts to be executed between ourselves and Petrobrás in the future.

In addition, we have also made a number of loans to our subsidiaries. For further details please see the description in “Item 4. B, Information on the Company – Business Overview – Lending and Financing Activities – Loans Made by Us.”

There are also certain contractual arrangements in place between Eletrobras Eletronuclear and Eletrobras Furnas for the sale and purchase of energy produced by Eletrobras Eletronuclear, which are more closely described in “Item 4.B, Information on the Company – Business Overview Nuclear Plants.”

We believe our transactions with related parties are conducted on market terms.

For further information see Note 45 of the Financial Statements.

C. Interests of Experts and Counsel

Not applicable.

ITEM 8. FINANCIAL INFORMATION

A. Consolidated Financial Statements and Other Information

See “Item 3.A, Selected Financial Data” and “Item 18, Financial Statements.”

Litigation

As of December 31, 2011, we were a party to numerous legal proceedings relating to civil, administrative, environmental, labor and tax claims filed against us. These claims involve substantial amounts of money and other remedies. Several individual disputes account for a significant part of the total amount of claims against

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us. We have established provisions for all amounts in dispute that represent a probable loss in the view of our legal advisors and in relation to those disputes that are covered by laws, administrative decrees, decrees or our court rulings that have proven to be unfavorable. As of December 31, 2011, we provisioned a total aggregate amount of approximately R$4,892 million in respect of our legal proceedings, of which R$374 million were related to tax claims, R$3,360 million were related to civil claims and R$854 million were related to labor claims.

Environmental Proceedings

We are required to comply with strict environmental laws and regulations that subject us to numerous environmental legal and administrative proceedings filed against us. In 2002 and 2003, two associations of the community of Cabeço brought independent class actions regarding environmental damages caused by Eletrobras Chesf. The Cabeço community is located in a river island in the estuary of the São Francisco River. Both associations alleged that the hydroelectric plants disturbed the normal flow of the river and resulted in a decline in fishing activity and the gradual disappearance of the river island. The court held that any motion filed for an interlocutory appeal must be postponed until a final judgment is delivered. On August 9, 2010, we lodged a motion requesting the clarification of this decision. This motion was rejected in September 2010. We subsequently filed a request for reconsideration of the decision that the interlocutory appeal be postponed, which was also rejected by the judge on October 18, 2010. The monetary compensation requested is R$100 million in each case. We have not made any provision in respect of this litigation as we consider the risk of an unfavorable decision on this lawsuit to be possible.

Labor Proceedings

As of December 31, 2011, we were party to a number of labor proceedings brought by our employees, former employees and employees of some of our service providers against us, involving a total amount of R$153 million. Most of those proceedings relate to overtime compensation and its indirect effects, salary equalization, pension payments and payment of rescisory amounts. Although we are a party to a significant number of labor proceedings, we believe that none of those proceedings, when considered individually, could materially adversely affect our results of operations or financial condition.

In connection with successive attempts by the Brazilian Government to curb Brazil’s high inflation rates, Brazilian companies have in the past been required by law to disregard in each year part of the inflation for that year when calculating wage increases for its employees. Like most other Brazilian companies, we have been defendants in lawsuits brought before labor courts by labor unions or individual employees seeking compensation for lost wages resulting from the implementation of the Brazilian Government’s anti-inflationary plans, in particular: (i) the plan implemented in 1987 by the then Minister of Finance, Luiz Carlos Bresser Pereira (the Bresser Plan); (ii) the plan implemented in early 1989 (the Summer Plan); and (iii) the plan implemented in 1990 by the then President, Fernando Collor de Melo (the Collor Plan). Some of the collective lawsuits brought against us in respect to such plans have been definitively decided by the Federal Supreme Court in our favor. As of December 31, 2011, there were still individual lawsuits in process pending judgment,

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which, however, we do not view as material. As of December 31, 2011, there were few material labor contingencies, and the probability of loss with respect to most of lawsuits is considered possible by our legal advisors. For further information, see Note 30, item 1.2 of our financial statements as of and for the year ended December 31, 2011.

Compulsory Loans

Pursuant to Law No. 4,156 of November 28, 1962 certain end-users of electricity were required to make “compulsory loans” to us (through collections by distributors) in order to provide funds for the development of the electricity sector. Industrial customers consuming over 2,000 kWh of electricity per month were required to pay an amount equivalent to 32.5% of each electricity invoice to us in the form of a compulsory loan, which was repayable by us within 20 years of draw-down. Interest on the compulsory loans accrues at IPCA – E plus 6.0% per annum. Law No. 7,181 of December 20, 1983, extended the compulsory loan program until December 31, 1993 and provided that such loans may, subject to shareholder approval, be repaid by us in the form of an issue of preferred shares at book value, in lieu of cash.

We made available to eligible customers upon the first and second conversion of credits from the compulsory loan approximately 42.5 billion class “B” preferred shares and upon the third conversion of credits from the compulsory loan, about 27.2 billion class “B” preferred shares. In addition, our shareholders approved on April 30, 2008 the issuance of additional preferred shares to eligible customers at book value in repayment of our remaining compulsory loans. If additional shares are issued in the future and the book value of such shares is less than their market value, the value of existing shareholders’ shares may be subject to dilution. On December 31, 2008, we recorded approximately R$215 million for debts for compulsory loans that had not yet been converted, which, at any time, by decision of our shareholders, may be refunded to industrial consumers, through issuing class “B” preferred shares, in accordance with the proceedings described above.

As of December 31, 2011, consumers have filed 8,297 lawsuits against us questioning the monetary adjustments, understated inflation and interest calculations related to the repayment of the compulsory loans. Of those lawsuits, 515 have been decided against us and are currently at the execution phase. The total amount involved in these lawsuits is unadjusted for monetary correction and required expert assessment to be estimated with accuracy. The lawsuits already decided against us amount to approximately R$119.1 million. In the course of execution proceedings, we have been required to pledge some of our assets, consisting mainly of preferred shares held by us in other electricity sector companies. We have provisioned R$1.4 billion to cover losses arising from unfavorable decisions on these lawsuits as of December 31, 2011.

We are also involved in approximately 2,511 lawsuits related to the repayment of the compulsory loans, in which consumers seek to exercise the option to convert their credits presented by bonds payable to the bearer. These bonds are called “obrigações da Eletrobras.” However, we believe we have no further liability in respect of these bonds because they have an expiration date for presentation and this date has now passed.

Tax Proceedings

Eletrobras Furnas/COFINS – PASEP – FINSOCIAL

In 2001, we received notifications of infringement related to FINSOCIAL, COFINS and PASEP taxes as a result of the exclusion from the calculation basis of certain onlendings and transport of energy from Itaipu, over a period of ten years. The amount of the claims was R$1,099 million (adjusted for inflation from an original figure of R$792 million). On June 12, 2008, with the issuance of precedent No. 8 by the Federal Supreme Court, the period to challenge the payment of such taxes were reduced from ten to five years and, consequently, the amount of the claims decreased to R$202.2 million.

We have made a provision of R$84.9 million as of December 31, 2011, following the recommendations of our legal advisors. The remaining balance was not provisioned because we consider the chances of a decision favorable to us possible.

Eletrobras Chesf / PIS/PASEP – COFINS

The Federal Supreme Court – STF declared the unconstitutionality of paragraph 1 of Article 3 of Law No. 9718/98, which increased the calculation basis of PIS/PASEP and COFINS taxes and created, at that time, a new concept of invoicing, which covers the total revenues earned by the legal entity, regardless the type of activity and the accounting classification adopted. This provision lacked constitutional grounds, and it was later added to the Constitution. This declaration by the Federal Supreme Court – STF only benefits companies that are parties to previously judged extraordinary appeals.

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Based on the Brazilian Tax Code, we are seeking recognition of our tax credits and the refund of any overpaid amounts as a result of the unconstitutional increase of the calculation basis in these contributions. As of December 31, 2011 no final decision was reached on this issue. We have a R$177.5 million COFINS tax credit and a potential R$25.7 million PASEP tax credit, depending of the final judgment in relation to this proceeding.

Civil Proceedings

Expropriation of Lands

Our subsidiaries are normally involved in a number of legal proceedings related to the expropriation of land used for the construction of hydroelectric plants, particularly in the northern and northeastern regions. Most of those proceedings are related to the indemnification paid to the populations affected by the construction of the reservoirs and environmental or economic damages inflicted on the affected populations and neighboring cities. The main lawsuits related to expropriation involving our subsidiaries are described below.

In northern Brazil, Eletrobras Eletronorte is involved in several proceedings related to the expropriation of lands for the construction of the hydroelectric plants of Balbina, in the State of Amazonas, and Tucuruí, in the State of Pará. The lawsuits related to the Balbina expropriation involve the value to be paid for the expropriated land and the legality of the ownership of the affected land claimed by alleged landowners. The total amount involved, which is provisioned, was approximately R$321 million. Recently, the Ministério Público Federal presented new evidence that the lands belonged to the Federal Republic, not to the State of Amazonas. The Brazilian Government has joined Eletrobras Eletronorte in the proceedings involving the Balbina hydroelectric plant.

From the 232 original lawsuits related to the Tucuruí expropriation, only 2 were still active as of December 31, 2011. Eletrobras Eletronorte has been awarded the other 8 lawsuits and expects the same result to the proceedings still in course.

Mendes Jr.

As of December 31, 2011, Eletrobras Chesf was involved in significant litigation proceedings with Mendes Jr., a Brazilian construction contractor. Eletrobras Chesf and Mendes Jr. entered into an agreement in 1981 providing for certain construction work to be performed by Mendes Jr. The agreement, as amended, provided that, in the event of delays in payments due by Eletrobras Chesf to Mendes Jr., Mendes Jr. would be entitled to default interest at the rate of 1.0% per month, plus indexation to take account of inflation. During the performance of the work, payments by Eletrobras Chesf were delayed and Eletrobras Chesf subsequently paid default interest at the rate of 1.0%, plus indexation, on such delayed payments. Mendes Jr. alleged that as it had been required to fund itself in the market in order not to interrupt the construction work, it was entitled to be reimbursed in respect of such funding at market interest rates, which were much higher than the contractual default interest rate.

The lower court judge dismissed Mendes Jr.’s claims and Mendes Jr. appealed to the Appellate Court of the State of Pernambuco (or the Appellate Court). The Appellate Court reinstated Mendes Jr.’s claims and ultimately declared Eletrobras Chesf liable to reimburse Mendes Jr.’s funding costs in respect of the delayed payments at market rates, plus legal fees of 20.0% of the amount of the dispute, with the total being indexed at market rates until the actual payment date. Eletrobras Chesf’s appeal from the Appellate Court’s order to the Federal Superior Court (or STJ) was dismissed on jurisdictional grounds. Mendes Jr. then filed a second lawsuit in a State court in Pernambuco to order Eletrobras Chesf to pay for the actual losses incurred by Mendes Jr., and

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to determine the amount payable. In the enforcement proceedings, the lower court ruled in favor of Mendes Jr., but the Appellate Court ruled in favor of Eletrobras Chesf, annulling the lower court’s judgment in the enforcement proceedings. Mendes Jr. appealed this ruling of the Appellate Court to the STJ and to the Federal Supreme Court, which were rejected. At the same time, the Brazilian government also requested the STJ to permit the government to participate in the proceedings as Eletrobras Chesf’s assistant. In December 1997, the STJ decided that: (i) the second proceedings should be recommenced from the trial court phase; (ii) the Brazilian government should participate in the proceedings as Eletrobras Chesf’s assistant; and (iii) the second proceedings should be heard before Brazilian federal courts instead of the state courts to which it was originally submitted. The second proceedings recommenced in the Brazilian federal courts to determine the final amount to be paid by Eletrobras Chesf to Mendes Jr. An expert was called to determine the amount of the claim, and had his finding challenged by Eletrobras Chesf. As a consequence, the court decided to reject the expert’s opinion but fixed the criteria which should be applied to determine the amount due. Mendes Jr. has appealed, requesting that the court require Eletrobras Chesf to pay the amount determined by the expert. Eletrobras Chesf and the Brazilian government have also appealed, requesting that the lawsuit should be terminated since there is no evidence Mendes Jr. obtained loans to conclude the construction. On October 25, 2010, the Regional Federal Court of the 5^th Region held the appeals filed by Eletrobras Chesf and the Brazilian government and ruled the lawsuit had no merit. As of December 2010 Mendes Jr. had not appealed this decision. The initial amount pleaded by the plaintiffs was of approximately R$7 billion (not considering inflation). As of December 31, 2011, we had no provisions related to this matter. Considering the decision of the Regional Federal Court of the 5^th Region, the risk of loss of such litigation has been assessed as remote. See Note 31 of the Financial Statements.

Xingó Plant “K Factor” Litigation

As of December 31, 2011, Eletrobras Chesf was also involved in litigation with the consortium responsible for building the Xingó plant (or the Xingó Consortium). In connection with building the Xingó plant, Eletrobras Chesf and the Xingó Consortium entered into a construction agreement that was amended in 1988 to provide that an additional inflation adjustment (referred to as the “K factor”) be added to certain monetary correction payments required to be made by Eletrobras Chesf to the Xingó Consortium under the agreement. This amendment resulted in payments by Eletrobras Chesf to the Xingó Consortium that were higher than the payments that the original Request For Proposal (or RFP) for this project indicated would be paid to the successful bidder.

In 1994, Eletrobras Chesf unilaterally ceased applying the K factor to its payments to the Xingó Consortium (and consequently reduced its payments to the Xingó Consortium to the amount that Eletrobras Chesf would have had to pay if the K factor had not been applied to such payments) and filed a lawsuit against the Xingó Consortium seeking reimbursement for the additional amounts paid pursuant to the K factor adjustment, claiming that the use of an indexation system more favorable to the Xingó Consortium than the one originally provided for by the RFP was illegal under public bidding rules. The Xingó Consortium also filed a lawsuit against Eletrobras Chesf requiring full payment of the amounts due applying the K factor. Eletrobras Chesf’s lawsuit was rejected and Xingó Consortium’s lawsuit was decided favorably to the plaintiff, ordering Eletrobras Chesf to pay the amounts corresponding to the application of the K factor. Eletrobras Chesf and the Brazilian government, which is acting as the first’s assistant on the lawsuit, have appealed to the STJ. In August 2010, the STJ upheld Eletrobras Chesf’s appeal to reduce the amount of the claim. STJ also denied the other special appeals presented by Eletrobras Chesf and upheld the decision of the TJPE which dismissed the declaratory action filed by Eletrobras Chesf and upheld the counterclaim filed by the defendants. On December 31, 2011, the parties had not been notified of this STJ decision, which is still subject to appeal. If the final ruling is against Eletrobras Chesf, it will be subject to the final execution of the judgment. In March 2012, TJPE ruled in favor of the Consortium with respect to the payment by Chesf of certain of the Consortium’s legal fees and against Chesf with respect to the payment of all legal proceeding costs. The TJPE has also accepted a motion for clarification from Chesf and the Brazilian Government to exclude the incidence of “statutory interest on arrears” added to the “contractual interest on arrears,” in order to maintain in the liquidation calculation only the “contractual interest on arrears.” Chesf has also filed a motion for clarification with respect to a few points of the TJPE decision. As of December 31, 2011, Eletrobras Chesf had provisioned R$461 million in relation to this proceeding, as it considers the risk of an unfavorable decision probable.

Eletrobras Chesf filed a lawsuit against Companhia Brasilieira de Projetos e Obras (CBPO) and Construções e Comércio and Mended Júnior Engenharia S.A. (CONSTRAN), claiming the partial invalidity of a turn-key agreement entered into between the parties regarding Xingó, a hydroelectric power plant, and seeking the return of amounts paid thereunder, of approximately R$350 million.

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The Federal Regional Court ruled that the Pernambuco State Court was the proper forum to hear this claim. The court found that Eletrobras Chesf’s claim did not have any legal basis. Subsequently, the defendants filed a counterclaim and obtained a favorable judgment in the Civil Court of Recife which has been upheld on appeal by the 2^nd Civil Chamber of the Pernambuco Court of Justice.

Eletrobras Chesf – Fazenda Aldeia Litigation

The trustees of the estate of Aderson Moura de Souza and his wife commenced a suit for damages against Eletrobras Chesf with respect to 14,400 hectares of land. A lower court determined that there were grounds for the claim and ordered Eletrobras Chesf to pay R$50 million, corresponding to the principal amount plus interest and monetary restatement. In December 2008, Eletrobras Chesf filed an appeal with Court of Justice of the State of Bahia. On March 2009, this lawsuit was transferred to the federal courts, which nullified the order for damages. The 1^st Region Federal Court partially affirmed the original order, but its decision has been suspended as one of the judges has requested more time to rule on the case. As of December 31, 2011, we had not yet received the judgment of the appeal. Eletrobras Chesf has provisioned R$100 million in relation to this proceeding as the risk of an unfavorable decision is considered to be probable. For a further discussion of this suit, see Note 31 of the financial statements as of and for the year ended December 31, 2011.

For a further discussion of our pending litigation and administrative proceedings, see Note 30 to our financial statements as of and for the year ended December 31, 2011.

Policy on Dividend Distribution

Brazilian Corporate Law and our by-laws provide that we must pay our shareholders a mandatory distribution equal to at least 25.0% of our adjusted net income for the preceding fiscal year. In addition, our by-laws require us to give: (i) class “A” preferred shares a priority in the distribution of dividends, at 8% each year over the capital linked to those shares; and (ii) class “B” preferred shares that were issued on or after June 23, 1969 a priority in the distribution of dividends, at 6% each year over the capital linked to those shares. In addition, preferred shares must receive a dividend 10% over the dividend paid to the common shares.

The following table sets out our dividends for the periods indicated:

	Year
	2011		2010		2009
Common Shares		1.23		0.83		0.41
Class A Preferred Shares		2.17		2.17		2.17
Class B Preferred Shares		1.63		1.63		1.63

As of December 31, 2011, our balance sheet carried retained dividends from previous years of R$6.3 billion, as well as R$1.8 million of accumulated dividends we have declared but not yet paid to our shareholders as permitted under Brazilian corporate law. Our Board of Directors has discretion as regards when such dividends may be paid to our shareholders. Accordingly, our management believes that any decision to pay the related dividends would only be made when our Board of Directors believes that such payment would not cause a material liquidity event. For further information, see Note 27 to our financial statements as of and for the year ended December 31, 2011.

B. Significant Changes

None.

ITEM 9. THE OFFER AND LISTING

A. Offer and Listing Details

Offer and Listing Details – Common Shares

Our common shares commenced trading on the Brazilian stock exchanges on September 7, 1971. The following table sets forth the reported high and low closing sale prices for our common shares on the BM&FBOVESPA and the approximate average daily trading volume for the annual periods indicated.

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	Nominal reais per Common Share				Average Daily Trading Volume
	High		Low
					(millions of shares)
2007 (*)		29.08		21.00		1.180
2008 (*)		31.25		19.64		1.338
2009 (*)		38.75		24.07		1.102
2010 (*)		42.00		21.00		1.141
2011 (*)		25.40		15.35		1.087

(*) Prices and trading volume adjusted to reflect the reverse stock split of August 20, 2007.

Source: São Paulo Stock Exchange.

The following table sets forth the reported high and low closing sale prices for our common shares on the BM&FBOVESPA and the approximate average daily trading volume for the quarterly periods indicated.

	Nominal reais per Common Share				Average Daily Trading Volume
	High		Low
					(millions of shares)
First Quarter 2009		28.06		24.07		0.949
Second Quarter 2009		29.69		25.25		1.211
Third Quarter 2009		30.80		26.64		0.985
Fourth Quarter 2009		38.75		24.75		1.273
First Quarter 2010		42.00		23.25		1.610
Second Quarter 2010		26.57		21.86		1.136
Third Quarter 2010		23.25		21.00		0.810
Fourth Quarter 2010		26.05		21.08		1.033
First Quarter 2011		24.68		22.13		1.229
Second Quarter 2011		25.40		20.34		1.141
Third Quarter 2011		20.86		15.75		1.068
Fourth Quarter 2011		18.32		15.35		0.935

(*) Prices and trading volume adjusted to reflect the reverse stock split of August 20, 2007.

Source: São Paulo Stock Exchange.

The following table sets forth the reported high and low closing sale prices for our common shares on the BM&FBOVESPA and the approximate average daily trading volume for the periods indicated:

	Nominal reais per Common Share				Average Daily Trading Volume
	High		Low
					(millions of shares)
June 2011		22.31		20.34		1.166
July 2011		20.86		18.2		0.874
August 2011		18.35		15.75		1.285
September 2011		17.64		15.95		1.023
October 2011		17.65		15.35		0.991
November 2011		18.32		15.84		0.908
December 2011		18.26		16.86		0.914
January 2012		18.69		17.13		0.860
February 2012		19.36		17.47		0.893
March 2012		18.99		17.14		0.808
April 2012		17.38		15.65		0.580
May 2012 (through May 10, 2012)		16.38		16.00		1.190

Source: São Paulo Stock Exchange.

In the United States, our common shares trade in the form of ADSs. The following table sets forth the reported high and low closing sale prices for our ADSs representing common shares on the NYSE and the approximate average daily trading volume for the periods indicated:

	U.S.$ per ADS (common shares)				Average Daily Trading Volume
	High		Low
					(millions of shares)
June 2011		14.46		12.80		1.760
July 2011		13.63		11.74		0.965
August 2011		11.98		9.88		1.259
September 2011		10.49		8.77		1.286
October 2011		10.41		8.46		1.263

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	U.S.$ per ADS (common shares)				Average Daily Trading Volume
	High		Low
					(millions of shares)
November 2011		10.55		8.42		0.630
December 2011		9.80		9.22		0.633
January 2012		10.21		9.71		0.798
February 2012		11.30		10.25		0.637
March 2012		10.91		9.36		0.889
April 2012		9.51		8.36		1.102
May 2012 (through May 10, 2012)		8.42		8.12		1.296

Source: New York Stock Exchange.

Offer and Listing Details – Preferred Shares

The following table sets forth the reported high and low closing sale prices for our Class B preferred shares on the BM&FBOVESPA and the approximate average daily trading volume for the annual periods indicated.

	Nominal reais per Preferred Share				Average Daily Trading Volume
	High		Low
					(millions of shares)
2007 (*)		28.95		20.60		1.266
2008 (*)		27.60		18.61		1.338
2009 (*)		33.90		22.30		1.000
2010 (*)		35.19		24.67		0.790
2011 (*)		31.46		20.34		0.749

(*) Prices and trading volume adjusted to reflect the reverse stock split of August 20, 2007.

Source: São Paulo Stock Exchange.

The following table sets forth the reported high and low closing sale prices for our Class B preferred shares on the BM&FBOVESPA and the approximate average daily trading volume for the quarterly periods indicated.

	Nominal reais per Preferred Share				Average Daily Trading Volume
	High		Low
					(millions of shares)
First Quarter 2009		26.26		22.75		0.938
Second Quarter 2009		28.80		24.29		1.088
Third Quarter 2009		27.00		24.06		0.878
Fourth Quarter 2009		33.90		22.30		1.102
First Quarter 2010		35.19		28.30		0.978
Second Quarter 2010		32.56		25.91		0.751
Third Quarter 2010		27.71		24.67		0.714
Fourth Quarter 2010		30.72		24.70		0.723
First Quarter 2011		30.62		26.73		0.943
Second Quarter 2011		31.46		25.97		0.627
Third Quarter 2011		26.16		20.34		0.702
Fourth Quarter 2011		26.98		20.82		0.685

(*) Prices and trading volume adjusted to reflect the reverse stock split of August 20, 2007.

Source: São Paulo Stock Exchange.

The following table sets forth the reported high and low closing sale prices for our Class B preferred shares on the BM&FBOVESPA and the approximate average daily trading volume for the periods indicated:

	Nominal reais per Preferred Share				Average Daily Trading Volume
	High		Low
					(millions of shares)
June 2011		28.62		25.97		0.659
July 2011		26.16		22.85		0.466
August 2011		23.05		20.34		0.762
September 2011		23.06		20.60		0.874
October 2011		24.10		20.82		0.735
November 2011		25.1		22.65		0.620
December 2011		26.98		24.22		0.666
January 2012		27.49		24.71		0.650
February 2012		27.4		25.13		0.594
March 2012		26.53		23.31		0.843
April 2012		24.09		21.81		1.080
May 2012 (through May 10, 2012)		23.02		21.80		0.997

Source: São Paulo Stock Exchange.

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In the United States, our Class B preferred shares trade in the form of ADSs. The following table sets forth the reported high and low closing sale prices for our ADSs representing Class B preferred shares on the NYSE and the approximate average daily trading volume for the periods indicated:

	U.S.$ per ADS (Class B preferred shares)				Average Daily Trading Volume
	High		Low
					(millions of shares)
January 2011		17.32		16.20		1.301
June 2011		18.54		16.44		0.474
July 2011		17.18		14.84		0.258
August 2011		15.15		12.96		0.244
September 2011		13.71		11.69		0.481
October 2011		14.43		11.50		0.334
November 2011		14.75		12.19		0.229
December 2011		14.66		13.49		0.213
January 2012		15.08		14.26		0.287
February 2012		18.83		14.67		0.145
March 2012		15.37		12.86		0.460
April 2012		13.25		11.63		0.864
May 2012 (through May 10, 2012)		11.90		11.14		0.543

Source: New York Stock Exchange.

We have an insignificant number of Class A preferred shares, with no material effect on the trading volume on the BM&FBOVESPA.

As a result, as of December 31, 2011, our capital stock was comprised of a total of 1,352,634,100 shares, of which 1,087,050,297 are common shares, 146,920 are class “A” preferred shares and 265,436,883 are class “B” preferred shares.

There are no restrictions on ownership of our preferred shares or common shares by individuals or legal entities domiciled outside Brazil.

The right to convert dividend payments and proceeds from the sale of shares into foreign currency and to remit such amounts outside Brazil is subject to restrictions under foreign investment regulations which generally require, among other things, that the relevant investments have been registered with the Central Bank. Banco Itaú S.A., as custodian for our common and class “B” preferred shares represented by the ADSs, has registered with the Central Bank on behalf of the Depositary the common and class “B” preferred shares that it will hold. This enables holders of ADSs to convert dividends, distributions or the proceeds from any sale of such common and class “B” preferred shares, as the case may be, into U.S. dollars and to remit such U.S. dollars abroad. However, holders of ADSs could be adversely affected by delays in, or a refusal to grant any, required government approval for conversions of Brazilian currency payments and remittances abroad of the common and preferred “B” shares underlying our ADSs.

In Brazil, there are a number of mechanisms available to foreign investors interested in trading directly on the Brazilian stock exchanges or on organized over-the-counter markets.

Under the regulations issued by the Resolution No. 2,689 issued by the National Monetary Council, foreign investors seeking to trade directly on a Brazilian stock exchange or on an organized over-the-counter market, must meet the following requirements:

• investments must be registered with a custody, clearing or depositary system authorized by CVM or the Central Bank;

• trades of securities are restricted to transactions performed on the stock exchanges or organized over-the-counter markets authorized by the CVM;

• they must establish a representative in Brazil;

• they must complete a form annexed to the Resolution No. 2,689; and

• they must register with the CVM and register the inflow of funds with the Central Bank.

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If these requirements are met, foreign investors will be eligible to trade directly on the Brazilian stock exchanges or on organized over-the-counter markets. These rules extend favorable tax treatment to all foreign investors investing pursuant to these rules. See “Item 10.E, Taxation.” These regulations contain certain restrictions on the offshore transfer of the title of the securities, except in the case of corporate reorganizations effected abroad by a foreign investor.

A certificate of foreign capital registration has been issued in the name of the Depositary with respect to the ADSs and is maintained by Banco Itaú S.A., as custodian for our common and class “B” preferred shares represented by the ADSs, on behalf of the Depositary. Pursuant to such certificate of foreign capital registration, we expect that Depositary will be able to convert dividends and other distributions with respect to the common and class “B” preferred shares represented by ADSs into foreign currency and remit the proceeds outside of Brazil.

In the event that a holder of ADSs exchanges such ADSs for common or class “B” preferred shares, such holder will be entitled to continue to rely on the Depositary’s certificate of foreign capital registration for five business days after such exchange, following which such holder must seek to obtain its own certificate of foreign capital registration with the Central Bank. Thereafter, any holder of common or class “B” preferred shares may not be able to convert into foreign currency and remit outside Brazil the proceeds from the disposition of, or distributions with respect to, such common and class “B” preferred shares, unless such holder qualifies under Resolution No. 2,689 or obtains its own certificate of foreign capital registration. A holder that obtains a certificate of foreign capital registration will be subject to less favorable Brazilian tax treatment than a holder of ADSs. See “Item 10.E, Taxation – Material Brazilian Tax Considerations.”

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

B. Plan of Distribution

Not applicable.

C. Markets

Our common shares are traded under the symbol “ELET3” and our class “B” preferred shares are traded under the symbol “ELET6” on the Bolsa de Valores Mercadorias e Futuros de São Paulo (the São Paulo Stock Exchange or BM&FBOVESPA). The Rio de Janeiro Stock Exchange trades only Brazilian federal, state and municipal public debt or carries out privatization auctions. Stocks and bonds are traded exclusively on the BM&FBOVESPA. As of December 31, 2011, we had approximately 24,364 record holders.

Our ADRs are listed on the NYSE. As of December 31, 2011, we had 65,365 beneficial and six registered holders of ADSs representing common shares and 23,120 beneficial and six registered holders of ADSs representing preferred shares.

Trading, Settlement and Clearance

Regulation of the Brazilian Securities Market

The Brazilian securities markets are regulated by the Comissão de Valores Mobiliários (the “CVM”), which was granted regulatory authority over the stock exchanges and securities markets by Brazilian Law No. 6,385, enacted on December 7, 1976 (“Brazilian Securities Law”) and Brazilian Law No. 6,404, enacted on December 15, 1976 (“Brazilian Corporate Law”), and also by Conselho Monetário Nacional (the “CMN”) and the Central Bank which possesses, among other powers, licensing authority over brokerage firms and regulates foreign investment and foreign exchange transactions.

The Brazilian securities markets are governed by the Brazilian Securities Law and the Brazilian Corporate Law, as well as regulations issued by the CVM, the Central Bank and the CMN. These laws and regulations provide for, among other things, disclosure requirements applicable to issuers of traded securities, restrictions on insider trading and price manipulation and protection of minority shareholders. On January 3, 2002, the CVM issued

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Instruction No. 358 which amended the rules applicable to the disclosure of relevant facts, which became effective on April 18, 2002. The CVM has also issued several instructions regarding disclosure requirements, namely, Instructions No. 361 and No. 400 for the regulation of public offerings, Instruction No. 380 for the regulation of internet offerings and Instruction No. 381 for the regulation of independent auditors. Instruction No. 480 for the regulation of the registration of security issuers admitted to negotiation in regulated markets in Brazil, and Instruction No. 481 for the regulation of information and the public request of proxy for shareholders meetings. Instruction No. 480 also requests that publicly held companies disclose a reference form (Formulário de Referência) which maintains a permanently updated record containing relevant information on the issuer, and supplementary offer notes will be added to it at each new public offer. We believe we are currently in accordance with all applicable Brazilian corporate governance standards.

Under the Brazilian Corporate Law, a company is either public, a companhia aberta, or private, a companhia fechada. All public companies are registered with the CVM and are subject to reporting and regulatory requirements. A company registered with the CVM may have its securities traded either on the Brazilian stock exchange markets, including the BM&FBOVESPA, or in the Brazilian over-the-counter market. The shares of a public company may also be traded privately, subject to certain limitations. To be listed on the BM&FBOVESPA, a company must apply for registration with the BM&FBOVESPA and the CVM and is subject to regulatory requirements and disclosure requirements.

The trading of securities on the BM&FBOVESPA may be suspended at the request of a company in anticipation of material announcement. Trading may also be suspended on the initiative of the BM&FBOVESPA or the CVM based on or due to, among other reasons, a belief that a company has provided inadequate information regarding a significant event or has provided inadequate responses to inquiries by the CVM or the BM&FBOVESPA.

Trading on the BM&FBOVESPA

In 2000, the trading activities of shares in Brazil were reorganized through the execution of memoranda of understanding by the Brazilian regional stock exchanges. Under the memoranda, all Brazilian shares are publicly traded exclusively on the São Paulo Stock Exchange – BOVESPA (Bolsa de Valores de São Paulo – BOVESPA).

BOVESPA was a not-for-profit entity owned by its member brokerage firms. In 2008, BOVESPA was converted into a Brazilian publicly-held company and renamed BM&FBOVESPA, as a result of a merger between BOVESPA and the Brazilian Mercantile & Futures Exchange (Bolsa de Mercadorias e Futuros – BM&F). BM&FBOVESPA is currently the most important Brazilian institution to intermediate equity market transactions and it is the only securities, commodities and futures exchange in the country. Trading on such exchange is carried out by member brokerage firms.

The CVM and the BM&FBOVESPA have discretionary authority to suspend trading in shares of a particular issuer under certain circumstances, based on or due to indications that a company could have provided improper information regarding a material fact or improper answers to inquiries made by the CVM or the BM&FBOVESPA.

Trading in securities listed on the BM&FBOVESPA, including the Novo Mercado and Levels 1 and 2 Segments of Differentiated Corporate Governance Practices, may be carried out off the exchanges in the unorganized over-the-counter market in certain specific circumstances.

Although the Brazilian securities market is the largest in Latin America in terms of capitalization, it is smaller and less liquid than the major U.S. and European securities markets. Moreover, the BM&FBOVESPA is significantly less liquid than the NYSE, or other major exchanges in the world.

Although all of the outstanding shares of a listed company may be traded on the BM&FBOVESPA, fewer than half of the listed shares are actually available for trading by the public, the remainder being held by small groups of controlling persons, by government entities or by one main shareholder. The relative volatility and illiquidity of the Brazilian securities markets may substantially limit your ability to sell the preferred shares at the time and price you desire and, as a result, could negatively impact the market price of these securities.

In order to reduce volatility, the BM&FBOVESPA has adopted a “circuit breaker” system pursuant to which trading sessions may be suspended for a period of 30 minutes, one hour or a longer period whenever specified indices of the BM&FBOVESPA fall below the limits of 10%, 15% and 20% respectively, in relation to the index levels for the previous trading session.

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When shareholders trade in shares on the BM&FBOVESPA, the trade is settled in three business days after the trade date. The delivery of and payment for shares are made through BM&FBOVESPA, which handles the multilateral settlement of both financial obligations and transactions involving securities. According to applicable regulations, financial settlement is carried out through a Central Bank system and the transactions involving the sale and purchase of shares are settled through BM&FBOVESPA. All deliveries against final payment are irrevocable.

Trading on the Brazilian stock exchanges by non-residents of Brazil is subject to registration procedures.

Corporate Governance Practices

In 2000, the BM&FBOVESPA introduced three special listing segments, known as Levels 1 and 2 of Differentiated Corporate Governance Practices and Novo Mercado, aimed at fostering a secondary market for securities issued by Brazilian companies listed on the BM&FBOVESPA, by prompting these companies to follow good practices of corporate governance. The listing segments were designed for the trading of shares issued by companies voluntarily undertaking to abide by corporate governance practices and disclosure requirements in addition to those already imposed by Brazilian law. These rules generally increase shareholders’ rights and enhance the quality of information provided to shareholders. Recently, the BM&FBOVESPA has revised the Levels 1 and 2 of Differentiated Corporate Governance Practices and Novo Mercado rules in two occasions. The first round of amendments to the Novo Mercado rules became effective on February 6, 2006, and the first round of amendments to Levels 1 and 2 of Differentiated Corporate Governance Practices became effective on February 10, 2006. The second and most recent round of amendments to the Novo Mercado rules and the Levels 1 and 2 of Differentiated Corporate Governance Practices became effective on May 10, 2011.

As of the effective date, in order to become a Nivel 1 (Level 1) company, in addition to the obligations imposed by applicable law, an issuer must agree to: (i) ensure that shares representing at least 25% of its total capital are effectively available for trading; (ii) adopt offering procedures that favor widespread ownership of shares whenever making a public offering; (iii) comply with minimum quarterly disclosure standards; (iv) follow stricter disclosure policies with respect to transactions made by its controlling shareholders, members of its board of directors and its officers involving securities issued by the issuer; (v) submit any existing shareholders’ agreements and stock option plans to the BM&FBOVESPA; (vi) make a schedule of corporate events available to its shareholders; (vii) elaborate and disclose a securities trading policy applicable to the company, its controlling shareholders, board members and management, as well as the members of other statutory bodies of the company with technical and consultancy functions; (viii) elaborate and disclose a code of conduct establishing the values and principles that shall serve as a guidelines for the company’s activities and relationship with the management, staff, service providers and other entities and individuals affected by the company; and (ix) prohibit holding dual positions as Chairman and Chief Executive Officer (or primary executive officer) of the company.

To become a Nivel 2 (Level 2) company, in addition to the obligations imposed by applicable law, an issuer must agree, among other things, to: (i) comply with all of the listing requirements for Level 1 companies; (ii) grant tag-along rights for all of its shareholders in connection with a transfer of control of the company, offering the same price paid per share for controlling block common shares; (iii) grant voting rights to holders of preferred shares in connection with certain corporate restructurings and related party transactions, such as: (a) any change of the company into another corporate entity; (b) any merger, consolidation or spin-off of the company; (c) approval of any transactions between the company and its controlling shareholder, including parties related to the controlling shareholder; (d) approval of any valuation of assets to be delivered to the company in payment for shares issued in a capital increase; (e) appointment of an expert to ascertain the fair value of the company’s shares in connection with any deregistration and delisting tender offer from Level 2; and (f) any changes to these voting rights, which will prevail as long as the agreement for adhesion to the Level 2 segment with the BM&FBOVESPA is in effect; (iv) have a board of directors comprised of at least five members, out of which a minimum of 20% of the directors must be independent, with a term limited to two years; (v) prepare annual financial statements in English, including cash flow statements, in accordance with international accounting standards, such as U.S. GAAP or International Financial Reporting Standards, or IFRS; (vi) effect a tender offer by the company’s controlling shareholder (the minimum price of the shares to be offered will be determined by an appraisal process), if it elects to delist from the Level 2 segment; (vii) adhere exclusively to the rules of the BM&FBOVESPA Arbitration Chamber for resolution of disputes between the company and its investors; (viii) cause the Board of Directors to elaborate and disclose a previous and justified opinion in relation to any and all public offers for the acquisition of shares issued by the company analyzing,

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among other aspects, the impacts of the offer on the company’s and shareholders’ interests, as well as on the liquidity of the shares issued by the company, and containing a final and justified recommendation for the acceptance or rejection of the offer by the shareholders; and (ix) not to include in the company’s by-laws provisions that (a) restrict the number of votes of a shareholder or of a group of shareholders to percentages below 5% (five percent) of the voting shares, except for the cases of denationalization or of limits imposed by the laws and regulations applicable to the company; and, except as otherwise provided by the law or regulations (b) require a qualified quorum for matters that shall be submitted to the general shareholders’ meeting, or (c) restrict the exercise of a favorable vote by shareholders or burden shareholders that vote in favor of a suppression or change of by-laws provisions.

To be listed in the Novo Mercado segment of the BM&FBOVESPA, an issuer must meet all of the requirements described above under Level 1 and Level 2, in addition to issuing only common (voting) shares.

On September 26, 2006 we entered into an agreement with the BM&FBOVESPA to list our preferred shares on the Level 1 segment, effective on the date immediately after the date of publication of the announcement in Brazil of the listing, pursuant to which we agreed to comply, and continue to be compliant with all of the requirements of a Level 1 listing.

Investment in our Preferred Shares by Non-Residents of Brazil

Investors residing outside Brazil, including institutional investors, are authorized to purchase equity instruments, including our preferred shares, on the Brazilian stock exchange provided that they comply with the registration requirements set forth in Resolution No. 2,689 of the CMN and CVM Instruction No. 325, from January 27, 2000, as amended. With certain limited exceptions, under Resolution No. 2,689 investors are permitted to carry out any type of transaction in the Brazilian financial capital markets involving a security traded on a stock, future or organized over-the-counter market. Investments and remittances outside Brazil of gains, dividends, profits or other payments under our preferred shares are made through the exchange market.

In order to become a Resolution No. 2,689 investor, an investor residing outside Brazil must:

• appoint at least one representative in Brazil that will be responsible for complying with registration and reporting requirements and procedures with the Central Bank and the CVM. If the representative is an individual or a non-financial company, the investor must also appoint an institution duly authorized by the Central Bank that will be jointly and severally liable for the representative’s obligations;

• complete the appropriate foreign investor registration form;

• through its representative, register itself as a foreign investor with the CVM and register the investment with the Central Bank;

• appoint a representative in Brazil for taxation purposes;

• obtain a taxpayer identification number from the Brazilian federal tax authorities – Receita Federal (the Brazilian Internal Revenue); and

• securities and other financial assets held by foreign investors pursuant to Resolution No. 2,689 must be registered or maintained in deposit accounts or under the custody of an entity duly licensed by the Central Bank or the CVM. In addition, securities trading by foreign investors are generally restricted to transactions involving securities listed on the Brazilian stock exchanges or traded in organized over-the-counter markets licensed by the CVM.

Significant Differences between our Corporate Governance Practices and NYSE Corporate Governance Standards

We are subject to the NYSE corporate governance listing standards. As a foreign private issuer, the standards applicable to us are considerably different to the standards applied to U.S. listed companies. Under the NYSE rules, we must comply with the following corporate governance rules: (i) we must satisfy the requirements of Rule 10A-3 of the Exchange Act, including having an audit committee or audit board, pursuant to an applicable exemption available to foreign private issuers, that meets certain requirements, as discussed below; (ii) we must provide the NYSE with annual and interim written affirmations as required under the NYSE corporate governance rules; (iii) we must provide prompt certification by our chief executive officer of any material non-compliance with any corporate governance rules; and (iv) we must provide a brief description of the

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significant differences between our corporate governance practices and the NYSE corporate governance practices required to be followed by U.S. listed companies. The discussion of the significant differences between our corporate governance practices and those required of U.S. listed companies follows below.

Majority of Independent Directors

The NYSE rules require that a majority of the board must consist of independent directors. Independence is defined by various criteria, including the absence of a material relationship between the director and the listed company. Although Brazilian law does not have a similar requirement, Novo Mercado and Level 2 rules require that listed companies have a board of directors comprised of at least five members, out of which a minimum of 20% of the directors must be independent pursuant to the different criteria defined in the regulations (such as absence of material relationship between a director and the listed company or the controlling shareholder). The Level 1 segment of BM&FBOVESPA in which we are listed only requires the board to be comprised of a minimum of three members and does not require any participation by independent directors and, therefore, under Brazilian law and the rules of the Level 1, neither our Board of Directors nor our management is required to test the independence of directors before their election to the board. Nevertheless, both Brazilian Corporate Law and the CVM have established rules that require directors to meet certain qualification requirements and that address the compensation and duties and responsibilities of, as well as the restrictions applicable to, a company’s executive officers and directors. While our directors meet the qualification requirements of Brazilian Corporate Law and the CVM, as well as the Level 1 segment of BM&FBOVESPA, we do not believe that a majority of our directors would be considered independent under the NYSE test for director independence. Brazilian Corporate Law and our by-laws require that our directors be elected by our shareholders at a general shareholders’ meeting.

Executive Sessions

NYSE rules require that the non-management directors must meet at regularly scheduled executive sessions without management present. Brazilian Corporate Law does not have a similar provision. According to Brazilian Corporate Law, up to one-third of the members of the Board of Directors can be elected to management. The remaining non-management directors are not expressly empowered to serve as a check on management, and there is no requirement that those directors meet regularly without management. As a result, the non-management directors on our board do not typically meet in executive session.

Nominating/Corporate Governance Committee

NYSE rules require that listed companies have a nominating/corporate governance committee composed entirely of independent directors and governed by a written charter addressing the committee’s required purpose and detailing its required responsibilities, which include, among other things, identifying and selecting qualified board member nominees and developing a set of corporate governance principles applicable to the company. Brazilian law does not have a similar requirement.

Compensation Committee

NYSE rules require that listed companies have a compensation committee composed entirely of independent directors and governed by a written charter addressing the committee’s required purpose and detailing its required responsibilities, which include, among other things, reviewing corporate goals relevant to the chief executive officer’s compensation, evaluating the chief executive officer’s performance, approving the chief executive officer’s compensation levels and recommending to the board non-chief executive officer compensation, incentive-compensation and equity-based plans. We are not required under applicable Brazilian law to have a compensation committee. Under Brazilian Corporate Law, the total amount available for compensation of our directors and executive officers and for profit-sharing payments to our executive officers is established by our shareholders at the annual general meeting. The Board of Directors is then responsible for determining the individual compensation and profit-sharing of each executive officer, as well as the compensation of our board and committee members. In making such determinations, the board reviews the performance of the executive officers, including the performance of our chief executive officer, who typically excuses himself from discussions regarding his performance and compensation.

Audit Committee

NYSE rules require that listed companies have an audit committee that: (i) is composed of a minimum of three independent directors who are all financially literate; (ii) meets the SEC rules regarding audit committees for listed companies; (iii) has at least one member who has accounting or financial management expertise; and (iv)

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is governed by a written charter addressing the committee’s required purpose and detailing its required responsibilities. However, as a foreign private issuer, we need only to comply with the requirement that the audit committee meet the SEC rules regarding audit committees for listed companies. Brazilian Corporate Law requires companies to have a non-permanent Fiscal Council composed of three to five members who are elected at the general shareholders’ meeting.

Shareholder Approval of Equity Compensation Plans

NYSE rules require that shareholders be given the opportunity to vote on all equity compensation plans and material revisions thereto, with limited exceptions. Under Brazilian Corporate Law, shareholders must approve all stock option plans. In addition, any issuance of new shares that exceeds our authorized share capital is subject to shareholder approval.

NYSE rules require that listed companies adopt and disclose corporate governance guidelines. Although applicable Brazilian law does not have a similar requirement, we have adopted corporate governance guidelines which are set forth in the Code of Corporate Governance Practices of Eletrobras (“Código das Práticas de Governança Corporativa da Eletrobras”). Additionally, we have also adopted and observe a disclosure policy, which requires the public disclosure of all relevant information pursuant to guidelines set forth by the CVM, as well as an insider trading policy, which, among other things, establishes black-out periods and requires insiders to inform management of all transactions involving our securities.

Code of Business Conduct and Ethics

NYSE rules require that listed companies adopt and disclose a code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for directors or executive officers. Applicable Brazilian law does not have a similar requirement but in 2010 we have introduced the Ethics Code of Eletrobras Companies (“Código de Ética Único das Empresas Eletrobras”) which provides for the ethical principles to be observed by all the members of the board of directors, executive officers, employees, outsourced staff, service providers, trainees and young apprentices.

Internal Audit Function

NYSE rules require that listed companies maintain an internal audit function to provide management and the audit committee with ongoing assessments of the company’s risk management processes and system of internal control. Brazilian law does not have a similar requirement.

D. Selling Shareholders

Not applicable.

E. Dilution

Not applicable.

F. Expenses of the Issue

Not applicable.

ITEM 10. ADDITIONAL INFORMATION

A. Share Capital

Not applicable.

B. Memorandum and Articles of Association

Corporate Purpose

Our by-laws provide that our corporate purposes are:

(1) to construct and operate power plants and transmission lines to generate and distribute electric energy and to enter into related business transactions, such as the trade of electric energy;

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(2) to cooperate with the government to establish national energy policy;

(3) to give financial support to our subsidiaries;

(4) to promote and support research of interest to the energy sector, connected with the generation, transmission and distribution of electric energy, as well as studies regarding the utilization of reservoirs for various purposes;

(5) to contribute to the training of the technical personnel required by the Brazilian electric energy sector by means of specialized courses; we may also grant assistance to educational entities in Brazil or abroad; and

(6) to cooperate technically and administratively with our subsidiaries and the government.

Our Board of Directors do not have the power to vote on compensation to themselves or to exercise borrowing powers. Only our stockholders may approve such matters. There are no prescribed age limits for retirement of members of our Board of Directors.

Description of our Capital Stock

General

We are a mixed capital company, authorized by and constituted in accordance with Brazilian Law No. 3,890-A of April 25, 1961. We are registered with the Brazilian tax authorities with CNPJ no. 00.001.180/0001-26.

Our share capital is divided into three types of shares: common shares, class “A” preferred shares (which were issued before June 23, 1969) and class “B” preferred shares (which have been issued since June 23, 1969).

In September 2006, we entered into an agreement with the BM&FBOVESPA to list our shares on the Level 1 segment of BM&FBOVESPA’s corporate governance, the effectiveness of which began on September 29, 2006. Trading in our shares on the Level 1 began on September 29, 2006.

History of our Capital Stock

In 2011, our share capital was of R$31,305 million, compared to R$26,157 million in 2010.

Treasury Shares

We hold no treasury shares and we do not have a program for repurchasing our shares.

Rights Attaching to Our Shares

Common Shares

Each of our common shares entitles its holder to one vote on all matters submitted to a vote of shareholders at an annual or special shareholders’ general meeting. In addition, upon our liquidation, holders of our shares are entitled to share all of our remaining assets, after payment of all of our liabilities, ratably in accordance with their respective participation in the total amount of the issued and outstanding common shares. Holders of our common shares are entitled to participate on all future capital increases by us.

Preferred Shares

Our preferred shares have different attributes to our common shares as the holders of our preferred shares are not entitled to vote at annual or special shareholders’ general meetings but have preferential a right to reimbursement of capital, distribution of dividends and priority on insolvency. Our preferred shares cannot be converted into common shares.

Class “A” preferred shares, and bonus shares related to such shares, are entitled to a dividend of 8% per annum, in priority to the distribution of other dividends, to be divided equally between them. Class “B” preferred shares, and bonus shares related to such shares, are entitled to a divided of 6% per annum, in priority to the distribution of other dividends, to be divided equally between them. An unpaid dividend is not payable in future years. The Class “A” preferred shares and the class “B” preferred shares rank equally on a liquidation.

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In addition, the preferred shares are entitled to receive a dividend at least ten percent above the dividend paid to each common share.

Transfer of Our Shares

Our shares are not subject to any share transfer restrictions. Whenever a transfer of ownership of shares occurs, the finance company with which such shares are deposited may collect from the transferring shareholder the cost of any services in connection with the Brazilian transfer thereof, subject to maximum rates established by the CVM.

Pre-emption Rights

No pre-emption rights apply on the issuance or transfer of our shares.

Redemption

We cannot redeem our shares.

Registration

Our shares are held in book-entry form with J.P. Morgan Chase Bank N.A., which will act as the custodian agent for our shares. Transfer of our shares will be carried out by means of book entry by J.P. Morgan Chase Bank N.A. in its accounting system, debiting the share account of the seller and crediting the share account of the buyer, upon a written order of the transferor or a judicial authorization or order to affect such transfers.

Notification of Interests in Our Shares

Any shareholder that acquires 5% or more of our capital stock of any class is obliged to notify the CVM through us of this fact by the beginning of the following month. Such a shareholder must submit further notifications for further shares of our capital stock that they acquire. We are obliged to notify the CVM within 10 days of the start of the month.

Shareholders’ General Meetings

Brazilian corporation law does not allow shareholders to approve matters by written consent obtained as a response to a consent solicitation procedure. All matters subject to approval by the shareholders must be approved in a duly convened general meeting. There are two types of shareholders’ meetings: ordinary and extraordinary. Ordinary meetings take place once a year within 120 days of our fiscal year end and extraordinary meetings can be called whenever necessary.

Shareholders’ meetings are called by our board of directors. Notice of such meetings is posted to shareholders and, in addition, notices are placed in a newspaper of general circulation in our principal place of business and on our website at least 15 days before the meeting.

Shareholders’ meetings take place at our headquarters in Brasília. Shareholders may be represented at a shareholders’ meeting by attorneys-in-fact who are: (i) shareholders of the company; (ii) a Brazilian lawyer; (iii) a member of our management; or (iv) a financial institution.

At duly convened meetings, our shareholders are able to take any action regarding our business. The following actions can only be taken by our shareholders in general meeting:

• approving our annual accounts;

• electing and dismissing the members of our board of directors and our fiscal council;

• amending our by-laws;

• approving our merger, consolidation or spin-off;

• approving our dissolution or liquidation as well as the election and dismissal of liquidators and the approval of their accounts;

• granting stock awards and approving stock splits or reverse stock splits;

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• approving stock option plans for our management and employees; and

• approving the payment of dividends.

Board of Directors, Board of Executive Officers and Fiscal Council

Our by-laws provide for a Board of Directors, composed of up to ten members, a Board of Executive Officers, of unlimited membership, and a permanent Fiscal Council, composed of five members.

Qualifications

All members of our Board of Directors, Board of Executive Officers and Fiscal Council must be Brazilian citizens. Our by-laws provide that only shareholders of the company may be appointed to the Board of Directors; there is no share ownership requirement for appointment to our Board of Executive Officers or Fiscal Council. Our by-laws also provide that the certain people may not be appointed to the management of the company, including those who: are disqualified by the CVM, have been declared bankrupt or have been convicted of certain offenses such as bribery and crimes against the economy.

The minutes of the shareholders’ or directors’ meeting that appoints a member of the Board of Directors or the Board of Executive Officers, respectively, must detail the qualifications of such person and specify the period of their mandate.

Appointment

The members of our Board of Directors are elected at the general shareholders meeting for a renewable term of three years. However, on April 28, 2005, our shareholders approved an amendment to our by-laws pursuant to which the term of office of each member of our Board of Directors will decrease from three years to one year. In accordance with Law No. 3,890 – A of April 25, 1961, this amendment is subject to approval in the form of a Presidential decree, which is pending at the date of this annual report.

As our majority shareholder, the Brazilian Government has the right to appoint eight members of our Board of Directors, of which seven are appointed by the MME and one by the Planning, Budget and Management Ministry. The other common shareholders have the right to elect one member, and the holders of preferred shares without voting rights representing at least ten percent of our total capital have the right to elect one member. One of the members of the Board of Directors is appointed President of the company.

The members of our Board of Executive Officers are appointed by our Board of Directors for an indefinite term.

The Brazilian Government has the right to appoint three of the members of our Fiscal Council, and both the minority shareholders and the holders of our preferred shares have the right to appoint one member each.

Meetings

Our Board of Directors ordinarily meets once a month and when called by a majority of the directors or the Chairman. Among other duties, our Board of Directors is responsible for: (i) establishing our business guidelines; (ii) determining the corporate organization of our subsidiaries or any equity participation by us in other legal entities; (iii) determining our loans and financing policy; and (iv) approving any guarantee in favor of any of our subsidiaries on any financial agreement. Directors cannot participate in discussions or vote in relation to matters in which they are otherwise interested.

Our Board of Executive Officers ordinarily meets every week, or when called by a majority of the officers or by the President. Our Board of Executive Officers determines our general business policy, is responsible for all matters related to our day-to-day management and operations, and is the highest controlling body with regards to the execution of our guidelines. Members of our Board of Executive Officers cannot participate in discussions or vote in relation to matters in which they are otherwise interested.

The Fiscal Council meets once a month.

Disclosure Obligations

Our disclosure obligations are determined by the Manual de Divulgação e Uso de Informações Relevantes e Política de Negociação de Valores Mobiliários de Emissão da Eletrobras (Guide to Disclosure and Use of

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Relevant Information and Policy for the Negotiation of Securities issued by Eletrobras), a copy of which is available on our website. Information found at this website is not incorporated by reference into this annual report.

C. Material Contracts

Our Itaipu operations are made pursuant to a treaty entered into on April 26, 1973 between the Brazilian Government and the government of Paraguay. A translation of this treaty is included as an exhibit to this annual report. The material terms of this treaty are described in “Item 5. Operating and Financial Review and Prospects.”

D. Exchange Controls

The right to convert dividend or interest payments and proceeds from the sale of shares into foreign currency and to remit such amounts outside Brazil is subject to restrictions under foreign investment legislation which generally requires, among other things, that the relevant investments have been registered with the Central Bank and the CVM. Such restrictions on the remittance of foreign capital abroad may hinder or prevent the custodian for our preferred shares represented by our ADSs or the holders of our preferred shares from converting dividends, distributions or the proceeds from any sale of these preferred shares into U.S. dollars and remitting the U.S. dollars abroad. Holders of our ADSs could be adversely affected by delays in, or refusal to grant any, required government approval to convert Brazilian currency payments on the preferred shares underlying our ADS and to remit the proceeds abroad.

Resolution No. 1,927 of the National Monetary Council provides for the issuance of depositary receipts in foreign markets in respect of shares of Brazilian issuers. It restates and amends Annex V to Resolution No. 1,289 of the National Monetary Council, known as the Annex V Regulations. The ADS program was approved under the Annex V Regulations by the Central Bank and the CVM prior to the issuance of the ADSs. Accordingly, the proceeds from the sale of ADSs by ADR holders outside Brazil are free of Brazilian foreign investment controls, and holders of the ADSs are entitled to favorable tax treatment. See “Item 10.E, Taxation – Material Brazilian Tax Considerations.”

Under Resolution No. 2,689 of the CMN, foreign investors registered with the CVM may buy and sell Brazilian securities, including our preferred shares, on Brazilian stock exchanges without obtaining separate certificates of registration for each transaction. Registration is available to qualified foreign investors, which principally include foreign financial institutions, insurance companies, pension and investment funds, charitable foreign institutions and other institutions that meet certain minimum capital and other requirements. Resolution No. 2,689 also extends favorable tax treatment to registered investors. See “Item 10.E, Taxation – Material Brazilian Tax Considerations.”

Pursuant to the Resolution No. 2,689 foreign investors must: (i) appoint at least one representative in Brazil with the ability to perform actions regarding the foreign investment; (ii) complete the appropriate foreign investor registration form; (iii) obtain registration as a foreign investor with CVM; and (iv) register the foreign investment with the Central Bank.

The securities and other financial assets held by a foreign investor pursuant to Resolution No. 2,689 must be registered or maintained in deposit accounts or under the custody of an entity duly licensed by the Central Bank or by the CVM or be registered in register, clearing and custody systems authorized by the Central Bank or by the CVM. In addition, the trading of securities is restricted to transactions carried out on the stock exchanges or over-the-counter markets licensed by the CVM.

Registered Capital

Amounts invested in our shares by a non-Brazilian holder who qualifies under Resolution No. 2,689 and obtains registration with the CVM, or by the depositary representing an ADS holder, are eligible for registration with the Central Bank. This registration (the amount so registered is referred to as registered capital) allows the remittance outside Brazil of foreign currency, converted at the commercial market rate, acquired with the proceeds of distributions on, and amounts realized through, dispositions of our shares. The registered capital per share purchased in the form of an ADS, or purchased in Brazil and deposited with the depositary in exchange for an ADS, will be equal to its purchase price (stated in U.S. dollars). The registered capital per share withdrawn upon cancellation of an ADS will be the U.S. dollar equivalent of: (i) the average price of a share on the Brazilian stock exchange on which the most shares were traded on the day of withdrawal or; (ii) if no shares were traded on that day, the average price on the Brazilian stock exchange on which the most shares were traded in the fifteen trading sessions immediately preceding such withdrawal. The U.S. dollar equivalent will be determined on the basis of the average commercial market rates quoted by the Central Bank on these dates.

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A non-Brazilian holder of shares may experience delays in effecting Central Bank registration, which may delay remittances abroad. This delay may adversely affect the amount in U.S. dollars, received by the non-Brazilian holder.

A certificate of registration has been issued in the name of the depositary with respect to the ADSs and is maintained by the custodian on behalf of the depositary. Pursuant to the certificate of registration, the custodian and the depositary are able to convert dividends and other distributions with respect to the shares represented by our ADSs into foreign currency and remit the proceeds outside Brazil. In the event that a holder of ADSs exchanges such ADSs for shares, such holder will be entitled to continue to rely on the depositary’s certificate of registration for five business days after such exchange, following which such holder must seek to obtain its own certificate of registration with the Central Bank. Thereafter, any holder of shares may not be able to convert into foreign currency and remit outside Brazil the proceeds from the disposition of, or distributions with respect to, such shares, unless the holder is a duly qualified investor under Resolution No. 2,689 or obtains its own certificate of registration. A holder that obtains a certificate of registration will be subject to less favorable Brazilian tax treatment than a holder of ADSs. See “Item 10.E, Taxation – Material Brazilian Tax Considerations.”

If the holder does not qualify under Resolution No. 2,689 by registering with the CVM and the Central Bank and appointing a representative in Brazil, the holder will be subject to less favorable Brazilian tax treatment than a holder of ADSs. Regardless of qualification under Resolution No. 2,689, residents in tax havens are subject to less favorable tax treatment than other foreign investors. See “Item 10.E, Taxation – Material Brazilian Tax Considerations.”

Under current Brazilian legislation, the Brazilian Government may impose temporary restrictions on remittances of foreign capital abroad in the event of a serious imbalance or an anticipated serious imbalance of Brazil’s balance of payments. For approximately six months in 1989 and early 1990, the Brazilian Government froze all dividend and capital repatriations held by the Central Bank that were owed to foreign equity investors, in order to conserve Brazil’s foreign currency reserves. These amounts were subsequently released in accordance with Brazilian Government directives. There can be no assurance that the Brazilian Government will not impose similar restrictions on foreign repatriations in the future. See “Item 3.D, Risk Factors – Risks Relating to Brazil.”

E. Taxation

The following discussion addresses the material Brazilian and United States federal income tax consequences of acquiring, holding and disposing of our shares or ADSs.

This discussion is not a comprehensive discussion of all the tax considerations that may be relevant to a decision to purchase our shares or ADSs and is not applicable to all categories of investors, some of which may be subject to special rules, and does not specifically address all of the Brazilian and United States federal income tax considerations applicable to any particular holder. It is based upon the tax laws of Brazil and the United States as in effect on the date of this annual report, which are subject to change, possibly with retroactive effect, and to differing interpretations. Any change in such law may have an impact on the consequences described below. Each prospective purchaser is urged to consult its own tax advisor about the particular Brazilian and United States federal income tax consequences to it of an investment in our shares or ADSs. This discussion is also based upon the representations of the depositary and on the assumption that each obligation in the deposit agreement among us, J.P. Morgan Chase Bank, N.A., as depositary, and the registered holders and beneficial owners of our ADSs, and any related documents, will be performed in accordance with its terms.

Although there presently is no income tax treaty between Brazil and the United States, the tax authorities of the two countries have had discussions that may culminate in such a treaty. We cannot assure you, however, as to whether or when a treaty will enter into force or how it will affect holders of our shares or ADSs.

Material Brazilian Tax Considerations

The following discussion is a summary of the material Brazilian tax considerations regarding the acquisition, ownership and disposition of our shares or ADSs by a holder that is not domiciled in Brazil for purposes of Brazilian taxation and which has registered its investment in such securities with the Central Bank as a U.S. dollar investment (in each case, a Non-Resident Holder). The tax consequences described below do not take

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into account the effects of any tax treaties or reciprocity of tax treatment entered into by Brazil and other countries. The discussion also does not address any tax consequences under the tax laws of any state or municipality of Brazil.

Introduction

Pursuant to Brazilian law, foreign investors may invest in the shares under Central Bank Resolution No. 2,689.

Resolution No. 2,689 allows foreign investors to invest in Brazilian financial and capital markets, provided that some requirements therein described are fulfilled. In accordance with Resolution No. 2,689, the definition of foreign investor includes individuals, legal entities, mutual funds and other collective investment entities, domiciled or headquartered abroad.

Pursuant to Resolution No. 2,689, foreign investors must: (i) appoint at least one representative in Brazil with powers to perform actions relating to the foreign investment; (ii) complete the appropriate foreign investor registration form; (iii) register as a foreign investor with the CVM and register the foreign investment with the Central Bank; (iv) appoint a representative in Brazil for Taxation purposes; and (v) obtain a taxpayer identification number from the Brazilian Federal Tax Authorities (which will be requested by CVM). For more details about the requirements to be met in order to qualify as foreign investor under Resolution No. 2,689, see “Item 9.C, Markets – Investment in our Preferred Shares by Non-Residents of Brazil.”

Securities and other financial assets held by foreign investors pursuant to Resolution No. 2,689 must be registered or maintained in deposit accounts or under the custody of an entity duly licensed by the Central Bank or the CVM. In addition, securities trading is restricted to transactions carried out in the stock exchanges or organized over-the-counter markets licensed by the CVM, except for transfers resulting from a corporate reorganization, occurring upon the death of an investor by operation of law or will or as a consequence of the delisting of the relevant shares from a stock exchange and the cancellation of the registration with the CVM.

Income tax

For purposes of Brazilian taxation, there are two types of Non-Resident Holders of our shares or ADSs: (i) Non-Resident Holders that are not resident or domiciled in a “Tax Haven” jurisdiction (i.e., a country or location that does not impose income tax or where the maximum income tax rate is lower than 20% or where the internal legislation imposes restrictions to disclosure of shareholding composition or the ownership of the investment), and that, in the case of holders of our shares, are registered before the Central Bank and the CVM being able to invest in Brazil in accordance with Resolution No. 2,689 (“Registered Holder”); and (ii) other Non-Resident Holders, which include any and all non-residents of Brazil who invest in equity securities of Brazilian companies through any other means and all types of investor that are located in Tax Haven. The investors mentioned in item (i) above which are registered with the Central Bank and the CVM being able to invest in Brazil in accordance with Resolution No. 2,689, are subject to a favorable tax regime in Brazil, as described below. Nonetheless, there can be no assurance that the current preferential treatment for holders of ADSs and Non-Resident Holders of preferred or common shares under Resolution No. 2,689 will continue or will not be changed in the future.

Dividends. Dividends paid by us to the depository in respect of the shares underlying the ADSs or to a Non-Resident Holder in respect of our shares currently are not be subject to Brazilian income withholding tax, to the extent that such amounts are related to profits generated as of January 1, 1996. Dividends relating to profits generated prior to December 31, 1995 may be subject to Brazilian withholding tax at variable rates, depending on the year the profits were generated.

Capital Gains. As a general rule, capital gains realized as a result of a disposition transaction are the positive difference between the amount received on the disposition of the units and the respective acquisition cost. Under Brazilian law, income tax on such gains can vary depending on the domicile of the Non-Resident Holder, the type of registration of the investment by the Non-Resident Holder with the Central Bank and how the disposition is carried out, as described below.

(a) sale of ADS

Gains realized outside Brazil by a Non-Resident Holder on the disposition of ADSs to another Non-Resident Holder are not subject to Brazilian tax. However, according to Law No. 10,833, enacted on December 29, 2003, or Law No. 10,833, the gains recognized on the disposition of assets located in Brazil by a Non-Resident Holder, whether to other Non-Resident Holders or Brazilian holders, are subject to taxation in Brazil. This rule

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is applicable regardless of whether the disposition is conducted in Brazil or abroad. Although we believe that the ADSs do not fall within the definition of assets located in Brazil for purposes of Law No. 10,833 because they represent securities issued and renegotiated in an offshore exchange market, considering the general and unclear scope of such provisions as well as the lack of a judicial court ruling in respect thereto, we are unable to predict whether such understanding will ultimately prevail in the courts of Brazil. It is important to note, however, that even if ADSs were considered assets located in Brazil, investors which are resident in non-Tax Haven locations could apply for exemption of capital gain tax according to article 81 of Law No. 8,981/95.

If such argument does not prevail, it is important to mention that with respect to the cost of acquisition to be adopted for calculating such gains, Brazilian law has conflicting provisions regarding the currency in which such amount must be determined. Our view is that the capital gains should be based on the positive difference between the cost of acquisition of the preferred shares or common shares registered with the Brazilian Central Bank in foreign currency and the value of disposal of those preferred shares or common shares in the same foreign currency. However, considering that tax authorities are not bound by such precedent, assessments have been issued adopting the cost of acquisition in Brazilian currency.

(b) Conversion of shares into ADS

The deposit of our shares in exchange for ADSs may be subject to Brazilian tax on capital gains at the rate of 15%, or 25%, in the case of investors domiciled in a Tax Haven, if the acquisition cost of the shares, in the case of other market investors under Resolution No.2,689, or the amount otherwise previously registered with the Central Bank as a foreign investment in the preferred or common shares is lower than:

(i) the average price per preferred or common share on a Brazilian stock exchange on which the greatest number of such shares were sold on the day of deposit; or

(ii) if no preferred or common shares were sold on that day, the average price on the Brazilian stock exchange on which the greatest number of preferred or common shares were sold in the 15 trading sessions immediately preceding such deposit.

In such case, the difference between the amount previously registered, or the acquisition cost, as the case may be, and the average price of the shares calculated as set forth above will be considered to be a capital gain. Although there is no clear regulatory guidance, such taxation should not apply to the case of Non-Resident Holders registered under Resolution No. 2,689 which are not located in a Tax Haven.

(c) Conversion of ADS into shares

Although there is no clear regulatory guidance, the exchange of ADSs for shares should not be subject to Brazilian tax. Non-Resident Holders may exchange ADSs for the underlying shares, sell the shares on a Brazilian stock exchange and remit abroad the proceeds of the sale within five business days from the date of exchange (in reliance on the depositary’s electronic registration), with no tax consequences.

Upon receipt of the underlying shares in exchange for ADSs, Non-Resident Holders may also elect to register with the Central Bank the U.S. dollar value of such shares as a foreign portfolio investment under Resolution No. 2,689, which will entitle them to the tax treatment referred above.

Alternatively, the Non-Resident Holder is also entitled to register with the Central Bank the U.S. dollar value of such shares as a foreign direct investment under Law 4,131/62, in which case the respective sale would be subject to the tax treatment applicable to transactions carried out of by a Non-Resident Holder that is not a registered holder.

(d) Common and Preferred shares negotiated in Brazil

Capital gains realized by Non-Resident Holder on the disposition of shares sold on the Brazilian stock exchange (which includes the transactions carried out on the organized over-the-counter market):

• are subject to the withholding income tax at a zero percent rate, when realized by a Non-Resident Holder that (a) has registered its investment in Brazil before the Central Bank. A Registered Holder under the regulations of Resolution 2,689 and (b) is not resident in a Tax Haven; and

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• are subject to income tax at a rate of 15% with respect to gains realized by a Non-Resident Holder that is not a Registered Holder (including a Non-Resident Holder who qualifies under Law 4,131/62) and gains earned by Tax Haven residents that are Registered Holders. In this case, a withholding income tax of 0.005% over the sale price shall be applicable and withheld by the intermediary institution (i.e., a broker) that receives the order directly from the Non-Resident Holder, which and can be later offset against any income tax due on the capital gain and which will be collected by the Non-Resident Holder’s tax representative in Brazil.

Any other gains realized on the disposition of units that are not carried out on the Brazilian stock exchange:

• are subject to income tax at a rate of 15% when realized by any Non-Resident Holder that is not a Tax Haven resident, no matter if a Registered Holder or not; and

• are subject to income tax at a rate of 25% when realized by a Tax Haven resident, no matter if a Registered Holder or not.

In the cases above, if the gains are related to transactions conducted on the Brazilian non-organized over-the-counter market with intermediation, the withholding income tax of 0.005% shall also be applicable and withheld by the intermediary institution (i.e., a broker) that receives the order directly from the Non-Resident Holder, which can be later offset against any income tax due on the capital gain and which will be collected by the Non-Resident Holder’s tax representative in Brazil. The Non-Resident Holder will not need to file a Brazilian tax return with the Brazilian tax authorities.

Any exercise of preemptive rights relating to the preferred or common shares or ADSs will not be subject to Brazilian withholding income tax. Any gain on the sale or assignment of preemptive rights relating to shares by the depositary on behalf of holders of ADSs will be subject to Brazilian income taxation according to the same rules applicable to the sale or disposal of shares.

Payments of Interest Attributable to Shareholders’ Equity. In accordance with Law No. 9,249, dated December 26, 1995, as amended, Brazilian corporations may make payments to shareholders characterized as distributions of interest on own capital and treat those payments as a deductible expense for the purposes of calculating Brazilian corporate income tax and, as from 1997, social contribution on net profits, as far as certain limits are observed. Such interest is limited to the daily pro rata variation of the TJLP as determined by the Central Bank from time to time and the amount of deduction cannot exceed the greater of:

• 50% of the net income (after the social contribution on net profits and before the provision for corporate income tax, and the amounts attributable to shareholders as interest on net equity) for the period in respect of which the payment is made; or

• 50% of the sum of retained profits and profits reserves as of the date of the beginning of the period in respect of which the payment is made.

Payments of interest on own capital in respect of the preferred or common shares paid to shareholders who are either Brazilian residents or Non-Resident Residents, including holders of ADSs, are subject to Brazilian income withholding tax at the rate of 15%, or 25% in case of shareholders domiciled in a Tax Haven and shall be deductible by us as long as the payment of a distribution of interest is approved by our shareholders. These distributions may be included, at their net value, as part of any mandatory dividend. To the extent payment of interest on shareholders’ equity is so included, the corporation is required to distribute to shareholders an additional amount to ensure that the net amount received by them, after payment of the applicable Brazilian withholding income tax, plus the amount of declared dividends, is at least equal to the mandatory dividend. If we pay interest attributable to shareholders’ equity in any year, and the payment is not recorded as part of the mandatory distribution, no additional amounts would be required to be paid by the Company, with respect to the mandatory dividend amount. The payment of interest on owner capital may be determined by our board of directors. We cannot assure you that our board of directors will not determine that future distributions of profits may be made by means of interest on owner capital instead of by means of dividends. Payments of interest on shareholder’s equity to Non-Resident Holders may be converted into U.S. dollars and remitted outside Brazil, subject to applicable exchange controls, to the extent that the investment is registered with the Central Bank.

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Discussion on Low or Nil Tax Jurisdictions

On June 24, 2008, Law 11,727 was enacted establishing the concept of a “privileged tax regime.” Under this new law, a “privileged tax regime” is considered to apply to a jurisdiction that meets any of the following requirements: (1) it does not tax income or taxes income at a maximum rate lower than 20%; (2) it grants tax advantages to a non-resident entity or individual (a) without requiring substantial economic activity in the jurisdiction of such non-resident entity or individual or (b) to the extent such non-resident entity or individual does not conduct substantial economic activity in the jurisdiction of such non-resident entity or individual; (3) it does not tax income generated abroad, or imposes tax on income generated abroad at a maximum rate lower than 20%; or (4) restricts the ownership disclosure of assets and ownership rights or restricts disclosure about the execution of economic transactions.

Although the interpretation of the current Brazilian tax legislation could lead to the conclusion that the above-mentioned concept of “privileged tax regime” should apply only for the purposes of Brazilian transfer pricing and thin capitalization rules, it is unclear whether such concept would also apply to investments carried out in the Brazilian financial and capital markets for purposes of this law. There is no judicial guidance as to the application of Law No. 11,727 of June 24, 2008 and, accordingly, we are unable to predict whether the Brazilian Internal Revenue Service or the Brazilian courts may decide that the “privileged tax regime” concept shall be applicable to deem a Non-Resident Holder as a Tax Haven resident when carrying out investments in the Brazilian financial and capital markets. In the event that the “privileged tax regime” concept is interpreted to be applicable to transactions carried out in the Brazilian financial and capital markets, this tax law would accordingly result in the imposition of taxation on a Non-Resident Holder that meets the privileged tax regime requirements in the same manner and to the same extent applicable to a Tax Haven resident.

Moreover, Law No. 12,249 of June 11, 2010, applied the privileged tax regime concept to other income remitted abroad. Although the concept of privileged tax regime should not affect the tax treatment of a Non-Resident Holder described above, it is not certain whether subsequent legislation or interpretations by the Brazilian tax authorities regarding the definition of “privileged tax regime” will extend such a concept to the tax treatment of a Non-Resident Holder described above.

Tax on Foreign Exchange and Financial Transactions

Foreign Exchange Transactions (IOF/Exchange)

Brazilian law imposes a Tax on Foreign Exchange Transactions, or “IOF/Exchange,” triggered by the conversion of reais into foreign currency and on the conversion of foreign currency into reais.

Pursuant to Decree No. 6,306/07, as amended, IOF/Exchange may be levied on foreign exchange transactions, affecting either or both the inflow or outflow of investments. The IOF rates are set by the Brazilian executive branch, and the highest applicable rate is 25%. Currently, for most exchange transactions, the rate of IOF/Exchange is 0.38%.

The rate of IOF/Exchange tax imposed on foreign exchange transactions carried out by a foreign investor for the purpose of investing in the financial and capital markets may vary from time to time as defined by the government and the rates may be different based on the type of investment as well as the time in which such investment is maintained in Brazil.

The inflow of foreign funds for the purchase of shares under Resolution No. 2,689 is subject to 0% IOF/Exchange rate and the same 0% rate levies on the remittance of dividends and payments of interest on shareholder’s equity. Although it is not clearly regulated, the conversion of reais into dollars for payment of dividends to holders of ADSs should also benefit from the 0% IOF/Exchange rate. The inflow of funds derived from the ADS cancelation for purposes of investing in shares is also subject to a 0% rate of IOF/Exchange.

Tax on Transactions involving Bonds and Securities (IOF/Bonds Tax)

Brazilian law imposes a Tax on Transactions Involving Bonds and Securities, known as “IOF/Bonds Tax.” Currently, the rate of IOF/Bonds Tax applicable to transactions involving common or preferred shares is zero, although the Brazilian government may increase such rate at any time, up to 1.5% per day, but only in respect to future transactions.

The conversion of shares into ADRs or units into ADSs was not taxable before November 17, 2009. Following the enactment of Decree No. 7,011 of November 18, 2009, these transactions started to be taxed by the

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IOF/Bonds Tax at the rate of 1.5% over the transaction value (obtained by multiplying the number of shares/units converted by its closing price at the day before the conversion, or, in the case no negotiation was made on that day, by the last closing price available).

Other Relevant Brazilian Taxes

Some Brazilian states impose gift and inheritance tax on gifts or bequests made by individuals or entities not domiciled or residing in Brazil to individuals or entities domiciled or residing within such states. There are no Brazilian stamp, issue, registration or similar taxes or duties payable by holders of our shares or ADSs.

Registered Capital. The amount of an investment in shares held by a Non-Brazilian Holder who qualifies under Resolution No. 2,689 and obtains registration with the CVM, or by the depositary, as the depositary representing such holder, is eligible for registration with the Central Bank. Such registration allows the remittance outside of Brazil of any proceeds of distributions on the shares, and amounts realized with respect to disposition of such shares. The amounts received in Brazilian currency are converted into foreign currency through the use of the commercial market rate. The registered capital for preferred or common shares purchased in the form of ADSs or purchased in Brazil, and deposited with the depositary in exchange for ADSs will be equal to their purchase price (in U.S. dollars) to the purchaser. The registered capital for shares that are withdrawn upon surrender of ADSs, as applicable, will be the U.S. dollar equivalent of the average price of preferred or common shares, as applicable, on a Brazilian stock exchange on which the greatest number of such shares, as applicable, was sold on the day of withdrawal. If no preferred or common shares, as applicable, were sold on such day, the registered capital will refer to the average price on the Brazilian stock exchange on which the greatest number of such shares, as applicable, were sold in the 15 trading sessions immediately preceding such withdrawal. The U.S. dollar value of the preferred or common shares, as applicable, is determined on the basis of the average commercial market rate quoted by the Central Bank on such date or, if the average price of such shares is determined under the last preceding sentence, the average of such average quoted rates on the same 15 dates used to determine the average price of the shares.

A Non-Resident Holder of our shares may experience delays in effecting such action, which may delay remittances abroad. Such a delay may adversely affect the amount, in U.S. dollars, received by the Non-Resident Holder.

Tax on Foreign Exchange and Financial Transactions

Foreign Exchange Transactions (IOF/Exchange Tax)

Brazilian law imposes a Tax on Foreign Exchange Transactions, or “IOF/Exchange,” triggered by the conversion of reais into foreign currency and on the conversion of foreign currency into reais. Currently, for most exchange transactions, the rate of IOF/Exchange is 0.38%.

Pursuant to Decree No. 6,306/07, amended by Decrees No. 6,339/08, 6,445/08, 6,391/08, 6,453/08, 6,566/08, 6,613/08, 6,655/08, 6,691/08, 6,983/09, 7,011/09, 7,323/10, 7,330/10, 7,412/10, 7,454/11, 7,456/11, 7,457/11, 7458/11 and 7,487/11, IOF/Exchange may be levied on foreign exchange transactions, affecting either or both the inflow or outflow of investments. The IOF rates are set by the Brazilian executive branch, and the highest applicable rate is 25%.

The rate of IOF/Exchange tax imposed on foreign exchange transactions carried out by a foreign investor for the purpose of investing in the financial and capital markets may vary from time to time as defined by the government and the rates may be different based on the type of investment as well as the time in which such investment is maintained in Brazil. The inflow of foreign funds for the purchase of shares under Resolution No. 2,689 is subject to 2% IOF/Exchange. The acquisition of ADS is not subject to IOF/Exchange. IOF/Exchange rate is zero in the outflow of foreign investment. However, the inflow of funds derived from the ADS cancelation for purposes of investing in shares is subject to a 2% rate of IOF/Exchange.

Tax on Transactions involving Bonds and Securities (IOF/Bonds Tax)

Brazilian law imposes a Tax on Transactions Involving Bonds and Securities, known as “IOF/Bonds Tax.” Currently, the rate of IOF/Bonds Tax applicable to transactions involving common or preferred shares is zero, although the Brazilian government may increase such rate at any time, up to 1.5% per day, but only in respect to future transactions.

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The conversion of shares into ADRs or units into ADSs was not taxable before November 17, 2009. Following the enactment of Decree No. 7,011 of November 18, 2009, these transactions started to be taxed by the IOF/Bonds Tax at the rate of 1.5% over the transaction value (obtained by multiplying the number of shares/units converted by its closing price at the day before the conversion, or, in the case no negotiation was made on that day, by the last closing price available).

Other Relevant Brazilian Taxes

There are no Brazilian inheritance, gift or succession taxes applicable to the ownership, transfer or disposition of preferred or common shares or ADSs by a Non-Resident Holder except for gift and inheritance taxes which are levied by some states of Brazil on gifts made or inheritances bestowed by individuals or entities not resident or domiciled in Brazil or domiciled within the state to individuals or entities resident or domiciled within such state in Brazil. There are no Brazilian stamp, issue, registration or similar taxes or duties payable by holders of our shares or ADSs.

Registered Capital. The amount of an investment in shares held by a Non-Brazilian Holder who qualifies under Resolution No. 2,689 and obtains registration with the CVM, or by the depositary, as the depositary representing such holder, is eligible for registration with the Central Bank. Such registration allows the remittance outside of Brazil of any proceeds of distributions on the shares, and amounts realized with respect to disposition of such shares. The amounts received in Brazilian currency are converted into foreign currency through the use of the commercial market rate. The registered capital for preferred or common shares purchased in the form of ADSs or purchased in Brazil, and deposited with the depositary in exchange for ADSs will be equal to their purchase price (in U.S. dollars) to the purchaser. The registered capital for shares that are withdrawn upon surrender of ADSs, as applicable, will be the U.S. dollar equivalent of the average price of preferred or common shares, as applicable, on a Brazilian stock exchange on which the greatest number of such shares, as applicable, was sold on the day of withdrawal. If no preferred or common shares, as applicable, were sold on such day, the registered capital will refer to the average price on the Brazilian stock exchange on which the greatest number of such shares, as applicable, were sold in the 15 trading sessions immediately preceding such withdrawal. The U.S. dollar value of the preferred or common shares, as applicable, is determined on the basis of the average commercial market rate quoted by the Central Bank on such date or, if the average price of such shares is determined under the last preceding sentence, the average of such average quoted rates on the same 15 dates used to determine the average price of the shares.

A Non-Resident Holder of our shares may experience delays in effecting such action, which may delay remittances abroad. Such a delay may adversely affect the amount, in U.S. dollars, received by the Non-Resident Holder.

Material United States Federal Income Tax Consequences

The following discussion describes the material United States federal income tax consequences of purchasing, holding and disposing of our shares or ADSs. This discussion applies only to beneficial owners of our ADSs or shares that are “U.S. Holders,” as defined below. This discussion is based on the U.S. Internal Revenue Code of 1986, as amended, or the Code, its legislative history, existing final, temporary and proposed Treasury Regulations, administrative pronouncements by the United States Internal Revenue Service, or IRS, and judicial decisions, all as currently in effect and all of which are subject to change (possibly on a retroactive basis) and to different interpretations. This discussion is also based upon the representations of the depositary and on the assumption that each obligation in the deposit agreement among us, J.P. Morgan Chase Bank, N.A., as depositary, and the registered holders and beneficial owners of our ADSs, and any related documents, will be performed in accordance with its terms.

This discussion does not purport to address all United States federal income tax consequences that may be relevant to a particular holder and you are urged to consult your own tax advisor regarding your specific tax situation. The discussion applies only to U.S. Holders who hold our shares or ADSs as “capital assets” (generally, property held for investment) under the Code and does not address the tax consequences that may be relevant to U.S. Holders in special tax situations including, for example:

• financial institutions or insurance companies;

• tax-exempt organizations;

• broker-dealers;

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• traders in securities that elect to mark to market;

• real estate, investments trusts, regulated investment companies, partnership or grantor trusts;

• investors whose functional currency is not the United States dollar;

• United States expatriates;

• holders that hold our shares or ADSs as part of a hedge, straddle or conversion transaction; or

• holders that own, directly, indirectly, or constructively, 10% or more of the total combined voting power, if any, of our shares or ADSs.

Except where specifically described below, this discussion assumes that we are not a passive foreign investment company, or PFIC, for United States federal income tax purposes. Please see the discussion in “Item 10. E, Taxation – Material United States Federal Income Tax Consequences – Passive Foreign Investment Company Rules” below. Further, this discussion does not address the alternative minimum tax consequences of holding our shares or ADSs or the indirect consequences to holders of equity interests in partnerships or other entities that own our shares or ADSs. In addition, this discussion does not address the state, local and non-U.S. tax consequences of holding our shares or ADSs.

You should consult your own tax advisor regarding the United States federal, state, local and non-U.S. income and other tax consequences of purchasing, owning, and disposing of our shares or ADSs in your particular circumstances.

You are a “U.S. Holder” if you are a beneficial owner of shares or ADSs and you are for United States federal income tax purposes:

• an individual who is a citizen or resident of the United States;

• a corporation, or any other entity taxable as a corporation, created or organized in or under the laws of the United States, any state thereof, or the District of Columbia;

• an estate the income of which is subject to United States federal income tax regardless of its source; or

• a trust if a court within the United States is able to exercise primary supervision over its administration and one or more United States persons have the authority to control all substantial decisions of the trust.

If a partnership holds shares or ADSs, the tax treatment of a partner will generally depend upon the status of the partner and upon the activities of the partnership. A prospective investor who is a partner of a partnership holding our shares or ADSs should consult its own tax advisor.

Ownership of ADSs in General

For United States federal income tax purposes, if you are a holder of ADSs, you generally will be treated as the owner of the shares represented by such ADSs. Deposits and withdrawals of shares by a U.S. Holder in exchange for ADSs generally will not result in the realization of gain or loss for United States federal income tax purposes.

The U.S. Treasury has expressed concerns that parties to whom receipts similar to the ADSs are released may be taking actions that are inconsistent with the claiming of foreign tax credits by U.S. Holders of ADSs and that would also be inconsistent with the claiming of the reduced tax rate described below applicable to dividends received by certain non-corporate U.S. Holders. Accordingly, the analysis of the creditability of Brazilian taxes and the availability of the reduced rate for dividends received by certain non-corporate holders could be affected by actions taken by parties to whom the ADSs are released.

Distributions on Shares or ADSs

The gross amount of distributions made to you of cash or property with respect to your shares or ADSs, before reduction for any Brazilian taxes withheld therefrom, will be includible in your income as dividend income to the extent such distributions are paid out of our current or accumulated earnings and profits as determined under

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U.S. federal income tax principles. Such dividends will not be eligible for the dividends received deduction generally allowed to corporate U.S. Holders. Subject to applicable limitations, including holding period limitations, and the discussion above regarding concerns expressed by the U.S. Treasury, dividends paid to non-corporate U.S. Holders of ADSs in taxable years beginning before January 1, 2013, will be taxable at a maximum rate of 15.0%. U.S. Holders, in particular U.S. Holders of shares, should consult their own tax advisors regarding the implications of this legislation in their particular circumstances.

If you are a U.S. Holder, and we pay a dividend in Brazilian reais, any such dividend will be included in your gross income in an amount equal to the U.S. dollar value of Brazilian reais on the date of receipt by you or, in the case of ADSs, the depositary, regardless of whether or when the payment is in fact converted into U.S. dollars. If the dividend is converted into U.S. dollars on the date of receipt, a U.S. Holder generally should not be required to recognize foreign currency gain or loss in respect of the dividend income.

If you are a U.S. Holder, dividends paid to you with respect to your shares or ADSs will be treated as foreign source income, which may be relevant in calculating your foreign tax credit limitation. Subject to certain conditions and limitations, Brazilian tax withheld on dividends may be credited against your U.S. federal income tax liability. Instead of claiming a credit, you may, at your election, deduct such otherwise creditable Brazilian taxes in computing your taxable income, subject to generally applicable limitations under U.S. law. The rules governing foreign tax credits and deductions for non-U.S. taxes are complex and, therefore, you should consult your own tax advisor regarding the applicability of these rules in your particular circumstances.

Sale or Exchange or other Taxable Disposition of Shares or ADSs

A U.S. Holder generally will recognize capital gain or loss upon the sale, exchange or other taxable disposition of our shares or ADSs measured by the difference between the U.S. dollar value of the amount realized and the U.S. Holder’s adjusted tax basis in the shares or ADSs. Any gain or loss will be long-term capital gain or loss if the shares or ADSs have been held for more than one year. Long-term capital gains of certain U.S. holders (including individuals) are eligible for reduced rates of United States federal income taxation. The deductibility of capital losses is subject to certain limitations under the Code.

If a Brazilian tax is withheld on the sale or other disposition of a share or ADS, the amount realized by a U.S. Holder will include the gross amount of the proceeds of that sale or other disposition before deduction of the Brazilian tax. Capital gain or loss, if any, realized by a U.S. Holder on the sale, exchange or other taxable disposition of a share or ADS generally will be treated as United States source income or loss for United States foreign tax credit purposes. Consequently, in the case of a disposition of a share that is subject to Brazilian tax imposed on the gain (or, in the case of a deposit, in exchange for an ADS or share, as the case may be, that is not registered pursuant to Resolution No. 2,689, on which a Brazilian capital gains tax is imposed, the U.S. Holder may not be able to benefit from the foreign tax credit for that Brazilian tax unless the U.S. Holder can apply the credit against United States federal income tax payable on other income from non-U.S. sources in the appropriate income category. Alternatively, the U.S. Holder may take a deduction for the Brazilian tax if it does not elect to claim a foreign tax credit for any non-U.S. taxes paid during the taxable year.

Passive Foreign Investment Company Rules

In general, a non-U.S. corporation is a PFIC with respect to a U.S. Holder if, for any taxable year in which the U.S. Holder holds stock in the non-U.S. corporation, at least 75% of its gross income is passive income or at least 50% of the value of its assets (determined on the basis of a quarterly average) produce passive income or are held for the production of passive income. For this purpose, passive income generally includes, among other things, dividends, interest, rents, royalties and gains from the disposition of investment assets (subject to various exceptions). Based upon the nature of our current and projected income, assets and activities, we do not believe the shares or ADSs were for the preceding taxable year nor do we expect them to be, shares of a PFIC for United States federal income tax purposes. However, the determination of whether the shares or ADSs constitute shares of a PFIC is a factual determination made annually and thus may be subject to change. Because these determinations are based on the nature of our income and assets from time to time, and involve the application of complex tax rules, no assurances can be provided that we will not be considered a PFIC for the current or any past or future tax year.

If we are treated as a PFIC for any taxable year during which you are a U.S. Holder, various adverse consequences could apply to you. Neither gains nor dividends would be subject to the reduced tax rates discussed above that are applicable in certain situations. Rather, gain recognized by you on a sale or other disposition of the common shares or ADSs would be allocated ratably over your period for the common shares

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or ADSs. The amounts allocated to the taxable year of the sale or disposition and to any year before we became a PFIC would be taxed as ordinary income. The amount allocated to each other taxable year would be subject to tax at the highest rate in effect for individuals or corporations, as appropriate, and an interest charge would be imposed on such tax as if it had not been paid from the original due date for your tax return for such year. Further, any distribution in respect of common shares or ADSs in excess of 125 percent of the average of the annual distributions on common shares or ADSs received by you during the preceding three years or, if shorter, your holding period would be subject to taxation as described above. Certain elections may be available (including a mark to market election) to U.S. persons that may mitigate the adverse consequences resulting from PFIC status. In any case, you would be subject to additional U.S. tax form filing requirements.

Backup Withholding and Information Reporting

In general, dividends on our shares or ADSs, and payments of the proceeds of a sale, exchange or other disposition of shares or ADSs, paid within the United States or through certain United States-related financial intermediaries to a U.S. Holder are subject to information reporting and may be subject to backup withholding at a current maximum rate of 28% unless the holder: (i) establishes, if required to do so, that it is an exempt recipient; or (ii) in the case of backup withholding, provides an accurate taxpayer identification number and certifies that it is a U.S. person and has not lost its exemption from backup withholding has occurred.

You can credit amounts withheld under these rules against your United States Federal income tax liability, or obtain a refund of such amounts that exceed your United States Federal income tax liability, provided that the required information is furnished to the IRS.

Recent legislation has introduced new reporting requirements for certain U.S. Holders. The penalty for failing to comply with these, or existing, reporting requirements can be significant. You should consult their own tax advisors concerning any U.S. reporting requirements that may arise out of their ownership or disposition of ADSs or preferred shares in light of your particular circumstances.

F. Dividends and Paying Agents

Not applicable.

G. Statement by Experts

Not applicable.

H. Documents on Display

Statements contained in this annual report regarding the contents of any contract or other document are complete in all material respects, however, where the contract or other document is an exhibit to this annual report, each of these statements is qualified in all respects by the provisions of the actual contract or other documents.

We are subject to the informational requirements of the Exchange Act applicable to a foreign private issuer. Accordingly, we will be required to file reports and other information with the SEC, including annual reports on Form 20-F and reports on Form 6-K. You may inspect reports and copy reports and other information filed with or furnished to the SEC at the SEC’s Public Reference Room located at 100 F Street, N.E., Washington, D.C. 20549. For further information, call the SEC at 1-800-SEC-0330. In addition, the SEC maintains an internet website that contains filings, reports and other information regarding issuers who, like us, file electronically with the SEC. The address of that website is http://www.sec.gov.

As a foreign private issuer, we are exempt under the Exchange Act from, among other things, the rules prescribing the furnishing and content of proxy statements, and members of our Board of Directors and Board of Executive Officers and our principal shareholders are exempt from reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, as a foreign private issuer, we will not be required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act.

We also file periodic reports and financial statements with the CVM, located at Rua Sete de Setembro, 111, Rio de Janeiro, Rio de Janeiro 20159-900, Brazil.

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I. Subsidiary Information

Not applicable.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The risks inherent in our market sensitive instruments are potential losses that may arise from adverse changes to interest rates and/or foreign exchange rates. We are subject to market risk resulting from changes in interest rates because such changes may affect the cost at which we obtain financing. We are subject to exchange rate risk with respect to our debt denominated in foreign currencies.

Interest Rate Risks

Apart from loans in the total amount of R$18,390 million linked to the LIBOR rate, we do not have any debt that is directly linked to variable interest rates. As of December 31, 2011, we had R$24,023 million of indebtedness that was indexed to the IGP-M. Variations in interest rates may impact inflation and, accordingly, we are indirectly subject to changes in interest rates that may increase the cost of financing.

As of December 31, 2011, 56.64% of our total indebtedness of R$24,023 million denominated in reais was indexed to the IGP-M or other inflation indices. As a result, our exposure to Brazilian inflation risk was R$24,023 million as of December 31, 2011. Each 1.0% variation in the IGP-M rate or any other inflation index would have an impact of R$240 million on our net income.

Exchange Rate Risks

As of December 31, 2011, approximately 43.36% of our total consolidated indebtedness of R$18.3 billion was denominated in foreign currencies. Of our 2011 foreign currency denominated indebtedness, R$17.9 billion, or approximately 97.81% was denominated in U.S. dollars.

We have a foreign currency exposure affecting our assets and liabilities due to the loans we provide to Itaipu, whose financial statements are prepared in U.S. dollars. In order to protect ourselves against fluctuations in the U.S. dollar/real exchange rate, our Board of Executive Officers approved the implementation of a hedging policy in July 2007, which was designed to reduce the exposure to these foreign currency variations through the use of derivative contracts.

In 2008, we entered into short term derivative contracts, which expired in December 2008. Since January 1, 2009, we do not have any derivative contracts outstanding and we are not proposing to enter into derivative contracts providing leverage or credit protection. Our general strategy is to focus on protection from currency fluctuations. However, we were considering broadening our hedging policy to cover others market risks, such as interest rates and indices, as well as embedded derivatives.

As a result, our actual exposure to U.S. dollar exchange rate risk was R$17.9 billion as of December 31, 2011. Each 1.0% variation in the U.S. dollar/Brazilian real exchange rate would have a negative impact of R$179 million on our net income.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

12.D.    American Depositary Shares

Fees payable by the holders of our ADSs

J.P. Morgan Chase Bank, N.A. serves as the depositary for both of our common and preferred ADSs. ADR holders are required to pay various fees to the depositary, and the depositary may refuse to provide any service for which a fee is assessed until the applicable fee has been paid.

ADR holders are required to pay the depositary: (i) an annual fee of U.S.$0.02 per ADS for administering the ADR program and (ii) amounts in respect of expenses incurred by the depositary or its agents on behalf of ADR holders, including expenses arising from compliance with applicable law, taxes or other governmental charges, facsimile transmission, or conversion of foreign currency into U.S. dollars. In both cases, the depositary may decide in its sole discretion to seek payment by either billing holders or by deducting the fee from one or more cash dividends or other cash distributions.

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ADR holders are also required to pay additional fees for certain services provided by the depositary, as set forth in the table below: Depositary Action	Associated fee
Issuance, delivery, reduction, cancellation or surrender of ADSs	U.S.$5.00 per 100 ADSs
Any cash distribution to registered ADS holders	U.S.$0.02 (or less) per ADSs
Transfer rates (to the extent not prohibited by the rules of the primary stock exchange upon which the ADSs are listed)	U.S.$1.50 per ADR or ADRs

Depositary reimbursements

In accordance with the deposit agreement entered between the depositary and us, the depositary reimburses us for certain expenses we incur in connection with the ADR program. From January 1 to December 31, 2011, our depositary bank reimbursed us the amount of U.S.$2,707,629.86 million.

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

Not applicable.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

Not applicable.

ITEM 15. CONTROLS AND PROCEDURES

(a) Disclosure Controls and Procedures

We carried out an evaluation under the supervision of, and with participation of, our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, including those defined in United States Exchange Act Rule 13a-15e, as of the year ended December 31, 2011. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective controls and procedures can only provide reasonable assurance of achieving their control objectives.

As a result of this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of December 31, 2011, and that the design and operation of our disclosure controls and procedures were not effective to provide reasonable assurance that all material information relating to our company was reported as required because material weaknesses in the current operation of our internal control over financial reporting were identified as described below.

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

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities and Exchange Act of 1934. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that (a) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (b) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (c) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of the effectiveness of internal control to future periods are subject to the risk that controls may become inadequate because of changes in conditions, and that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal controls over financial reporting as of December 31, 2011. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in “Internal Control – Integrated Framework.” Based on this assessment, our management concluded that, as of December 31, 2011, our internal control over financial reporting was not effective because material weaknesses existed. A material weakness is a control deficiency, or combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the annual financial statements will not be prevented or detected on a timely basis. The material weaknesses identified were:

1. We did not maintain effective internal controls over financial reporting based on the COSO criteria. The following material weaknesses related to our controls over financial reporting were identified: 1) we did not maintain an effective control environment, specifically: (i) internal control deficiencies were not remediated in a timely manner; and (ii) we did not adequately define responsibility with respect to our internal controls over financial reporting and the necessary lines of communication throughout the organization; 2) we did not adequately perform a risk assessment to identify risks so as to ensure that effective controls were adequately designed and implemented that would prevent and detect material misstatements to our financial statements; 3) we did not adequately design and maintain effective information technology policies, including those related to segregation of duties, security and access (grant and monitor) to our financial application programs and data.

2. We did not maintain effective design and operating controls over the completeness and accuracy of period-end financial reporting. Specifically, we did not maintain effective review and monitoring processes and documentation relating to the recording of recurring and non-recurring journal entries.

3. We did not maintain effective design and operating controls to ensure the completeness/accuracy of the judicial deposits and legal lawsuits or performed periodic review/update of them, including the update of expected losses for accrual purposes.

4. We did not maintain effective design and operating controls to ensure the completeness and accuracy or review/monitoring of the post-retirement benefit plans (pension plans) sponsored by us, including detailed review of the actuarial assumptions, reconciliation between actuarial valuation reports and accounting records, as well as cash flows from contribution payments.

5. We did not adequately design and maintain effective design and operating controls with respect to accounting for property, plant and equipment, specifically, to ensure the completeness, accuracy and validation of these acquisitions.

6. We did not maintain effective controls to ensure the completeness, accuracy, validity and valuation over the purchase and payments of goods and services due to changes related to the implementation of Enterprise Resource Planning (ERP) software.

7. We did not design and maintain effective controls to ensure the completeness and accuracy of changes in transmission services accounts receivable associated with the adjustment factor related to the availability of the transmission lines not included in the fixed transmission revenue fee (Receita Annual Permitida). The information related to those revenue is provided by the ONS on a monthly basis and we do not maintain controls to confirm the information supplied.

8. We did not maintain effective design and operating controls to ensure the appropriate review/monitoring related to the preparation of our IFRS financial statements and disclosures. In addition, we did not have internal accounting staff with adequate IFRS knowledge to supervise and review the accounting process and did not maintain effective controls over the financial reporting process due to insufficient internal personnel with sufficient accounting knowledge, experience and training in the application of IFRS and did not implement an adequate supervisory review of the accounting process to ensure the financial statements and disclosures were prepared in compliance with IFRS.

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9. We did not maintain effective controls to ensure the accuracy over the identification of the amounts of repayments for subsidy related to the Fuel Consumption Account (CCC).

Notwithstanding management’s assessment that our disclosure controls and procedures were not effective and that there were material weaknesses as identified above, we believe that our financial statements contained in this annual report fairly present our financial position, results of operations and cash flows for the years covered thereby in all material respects.

The effectiveness of the internal control over financial reporting, as of December 31, 2011, has been audited by PricewaterhouseCoopers Auditores Independentes, an independent registered public accounting firm, as stated in their report beginning on page F-1 of the financial statements to this Form 20-F.

Remediation of Material Weakness

In order to remedy the material weakness related to our internal controls over financial reporting, we have created leaders of internal controls in our business areas, and have established targets for the managers of such areas. We have also provided courses on risks and internal controls to certain employees at the Universidade Corporativa and organized seminars at similar seminars at our subsidiaries. In addition, we are currently implementing governance, risk and compliance software aimed at further reducing the deficiencies.

In order to remedy the material weakness related to the control over completeness and accuracy of period-end financial reporting and period-end close, we have adopted a process of review and approval of reports of the entries performed by every business area. We have also redesigned our user profiles to use SAP as we implemented this system. In addition, we are implementing enterprise resource planning, or ERP, software to further reduce the amount of manual entries in relation to period-end financial reporting.

Regarding the remediation of the material weakness related to completeness and accuracy of the judicial proceedings, as of December 31, 2011, our accounting department and the accounting departments of our subsidiaries have included all judicial proceedings in their reports on lawsuits. Further, we and Eletrobras Furnas are currently restructuring our respective legal departments with a view to curing this material weakness.

In respect of the material weakness related to the control of the post-retirement benefit plans (pension plans) sponsored by us and administered by a third-party plan administrator, we have decided to change the third-party plan administrator in order to cure this material weakness.

With respect to Itaipu, we began to implement certain systems as a result of discussions with outside consultants. Thus far, the implementation of these systems has shown some improvement but has not remediated all the weaknesses.

With respect to the material weakness on the purchase and payments of goods and services by Eletrobras Furnas, Eletrobras Furnas has implemented SAP as its ERP system in order to improve its processes related to the purchase and payments of goods. The company will continue to test this system in 2012 with a view towards curing this material weakness.

With respect to transmission lines revenues, we are continuing to have regular meetings with the ONS in order to ensure the completeness and accuracy of changes in transmission revenue services associated with the adjustment factor related to the availability of the transmission lines not included in the fixed transmission revenue fee (Receita Anual Permitida) and are currently designing internal models to allow us to perform the calculation of the adjustment factor more accurately.

With respect to the CCC account, we are currently working on a plan in conjunction with ANEEL to remedy this material weakness.

In order to remedy the material weakness regarding the preparation of our IFRS financial statements and disclosures, we are re-assessing the need to hire further accounting staff with specialized knowledge of IFRS and to potentially re-organize our accounting department.

(c) Changes in Internal Control over Financial Reporting

Other than as set forth above, there have been no changes in our internal control over financial reporting that occurred during the year ended December 31, 2011 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting as of December 31, 2011.

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(d) Attestation Report of the Independent Registered Public Accounting Firm

For the report of PricewaterhouseCoopers Auditores Independentes, our independent registered public accounting firm, dated May 15, 2012, on the effectiveness of the internal control over financial reporting as of December 31, 2011, see “Item 18, Financial Statements.”

ITEM 15T. CONTROLS AND PROCEDURES

Not applicable.

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

Our board of directors has determined that Charles Carvalho Guedes, a member of our Fiscal Council, is an “audit committee financial expert” as defined by current SEC rules and meets the independence requirements of the SEC and the NYSE listing standards. For a discussion of the role of our Fiscal Council, see “Item 6.C, Board Practices – Fiscal Council.”

ITEM 16B. CODE OF ETHICS

We have adopted a code of ethics that applies to all our employees, including our chief executive officer, chief financial officer, principal accounting officer and persons performing similar functions, as well as to directors and other officers. We have posted this code of ethics on our website at: http://www.eletrobras.com/elb/data/Pages/ LUMISB877EC49ENIE.htm. Copies of our code of ethics may be obtained by writing to us at the address set forth on the front cover of this Form 20-F. We have not granted any implicit or explicit waivers from any provision of our code of ethics since its adoption.

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table sets forth by category of service the total fees for services provided to Eletrobras by PricewaterhouseCoopers Auditores Independentes, during the fiscal years ended December 31, 2011, 2010 and 2009.

	2011		2010		2009
	(R$)
Audit Fees		7,860,000.00		5,100,000.00		5,000,000.00
Audit-Related Fees		230,000.00		—		—
Tax Fees		—		—		—
All Other Fees		—		—		—
Total		8,090,000.00		5,100,000.00		5,000,000.00

Audit Fees

Audit fees consist of the aggregate fees billed by PricewaterhouseCoopers Auditores Independentes, in connection with the audit of our annual financial statements and internal controls, interim reviews of our quarterly financial information comfort letters, procedures related to the audit of income tax provisions in connection with the audit and the review of our financial statements.

Audit-Related Fees

Audit-related fees were paid to PricewaterhouseCoopers Auditores Independentes for the fiscal year ended December 31, 2011 which related to a report in connection with a certification of sustainability.

Tax Fees

No tax fees were paid to PricewaterhouseCoopers Auditores Independentes for the fiscal years ended December 31, 2011, 2010 and 2009.

All Other Fees

No other fees were paid to PricewaterhouseCoopers Auditores Independentes for the fiscal years ended December 31, 2011, 2010 and 2009.

127

Pre-Approval Policies and Procedures

On April 27, 2005, we adopted a code of ethics that applies to all our employees, including our chief executive officer, chief financial officer, principal accounting officer and persons performing similar functions, as well as to directors and other officers. The objective of this code is: (i) to reduce the possibility of the misinterpretation of ethical principles as a result of subjective, personal interpretation; (ii) to be a formal and institutional benchmark for the professional conduct of our employees, including the ethical handling of actual or apparent conflicts of interests; (iii) to provide a standard for our internal and external relationships with our shareholders, investors, clients, employees, partners, suppliers, service providers, labor unions, competitors and society, the government and the communities in which we operate; and (iv) to ensure that daily concerns with efficiency, competitiveness and profitability do not override ethical behavior. Our code of ethics is available free of charge by requesting a copy from our Investor Relations Department at the following address: Avenida Presidente Vargas, 409, 9th Floor, Edifício Herm. Stolz, CEP 20071-003 Rio de Janeiro, RJ, Brazil; telephone: +55 21 2514 6331 or +55 21 2514 6333; fax: +55 21 2514 5964; and e-mail: invest@eletrobras.com.

We also created, in 2008, a “whistleblower channel” in order to receive “complaints,” by any person (provided such complaint is first reported to the Fiscal Council), regarding any “dishonest or unethical conduct,” “accounting, internal accounting controls, or auditing matters” and any equally confidential and anonymous submissions of “concerns” of the same type by our employees and associates. The “whistleblower channel” can be accessed through our website or by letter sent to our headquarters marked for the attention of our Fiscal Council. Since its establishment, 8 issues were reported to our “whistleblower channel,” all of which related to personal conduct and therefore did not have a financial impact on our results of operations.

ITEM 16D. EXEMPTION FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

We have designated and empowered our Fiscal Council to perform the role of an audit committee pursuant to Rule 10A-3 of the Exchange Act. We are required by both the SEC and the NYSE listed company audit committee rules to comply with Rule 10A-3 of the Exchange Act, which requires that we either establish an audit committee, composed of members of our Board of Directors, that meets specified requirements or designate and empower our Fiscal Council to perform the role of the audit committee in reliance on the exemption set forth in Rule 10A-3(c)(3) of the Exchange Act. We believe that our Fiscal Council satisfies the independence and other requirements of Rule 10A-3 of the Exchange Act, which would apply in the absence of our reliance on the exemption.

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

Not applicable.

ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

There was no change in Certifying Accountant.

ITEM 16G. CORPORATE GOVERNANCE

See “Item 9.C, Markets – Significant Differences between our Corporate Governance Practices and NYSE Corporate Governance Standards.

PART III

ITEM 17. FINANCIAL STATEMENTS

See “Item 18, Financial Statements.”

ITEM 18. FINANCIAL STATEMENTS

Please see our consolidated financial statements beginning on page F-1. Companhia Energética do Maranhão S/A (or CEMAR), Companhia Estadual de Distribuição de Energia Elétrica (or CEEE D), Companhia Estadual de Geração e Transmissão de Energia Elétrica (or CEEE-GT), Companhia de Transmissão de Energia Elétrica Paulista (or CTEEP) constituted significant subsidiaries in 2009 under IFRS. In accordance with Rule 3-09 of Regulation S-X, comparative unaudited financial statements for 2011, 2010 and 2009 of CEMAR, CEEE-D, CEEE-GT and CTEEP will be filed subsequently as an amendment to this annual report.

128

ITEM 19. EXHIBITS

2.1	Amended and Restated Deposit Agreement dated August 13, 2007 between Centrais Elétricas Brasileiras S.A. – Eletrobras and J.P. Morgan Chase Bank, N.A., incorporated herein by reference from our Registration Statement on Form 20-F, filed July 21, 2008, File No. 001-34129.
2.2	The total amount of long-term debt securities of our company and its subsidiaries under any one instrument does not exceed 10% of the total assets of our company and our subsidiaries on a consolidated basis. We agree to furnish copies of any or all such instruments to the SEC upon request.
3.2	By-Laws of Centrais Elétricas Brasileiras S.A. – Eletrobras (English translation), dated December 23, 2011.
4.1	Itaipu treaty signed by Brazil and Paraguay – Law No. 5,899 of July 5, 1973, incorporated herein by reference from our Registration Statement on Form 20-F, filed July 21, 2008, File No. 001-34129.
8.1	List of subsidiaries.
12.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer of Centrais Elétricas Brasileiras S.A. – Eletrobras.
12.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer of Centrais Elétricas Brasileiras S.A. – Eletrobras.
13.1	Section 906 Certification of Chief Executive Officer of Centrais Elétricas Brasileiras S.A. – Eletrobras.
13.2	Section 906 Certification of Chief Financial Officer of Centrais Elétricas Brasileiras S.A. – Eletrobras.

129

Signatures

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

CENTRAIS ELÉTRICAS BRASILEIRAS S.A. – ELETROBRAS
By:	/s/ José da Costa Carvalho Neto
	Name: José da Costa Carvalho Neto
	Title: Chief Executive Officer
By:	/s/ Armando Casado de Araújo
	Name: Armando Casado de Araújo
	Title: Chief Financial Officer

130

Centrais Elétricas Brasileiras

S.A. - Eletrobras

IFRS consolidated financial statements and

report of independent registered public

accounting firm for the year

ended December 31, 2011

CENTRAIS ELÉTRICAS BRASILEIRAS S.A. – ELETROBRAS

AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

As of and for the year ended December 31, 2011, 2010 and 2009.

Contents

Report of Independent Registered Public Accounting Firm	F-1
Audited Financial Statements
Consolidated Balance Sheets	F-2
Consolidated Income Statements	F-4
Consolidated Statements of Changes in Shareholders’ Equity	F-5
Consolidated Statements of Cash Flow	F-7
Notes to the Consolidated Financial Statements	F-8

Report of Independent Registered

Public Accounting Firm

To the Board of Directors and Stockholders of

Centrais Elétricas Brasileiras S.A. - Eletrobras

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of comprehensive income and of cash flows present fairly, in all material respects, the financial position of Centrais Elétricas Brasileiras S.A. - Eletrobras and its subsidiaries at December 31, 2011 and 2010, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2011, in conformity with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. Also, in our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), because material weaknesses in internal control over financial reporting existed as of that date, related to the following: (i) lack of an effective internal control environment, considering that internal control deficiencies were not remediated in a timely manner, the Company did not adequately define responsibility with respect to its internal controls over financial reporting and the necessary lines of communication throughout the organization, the Company did not adequately perform a risk assessment to identify risks so as to ensure that effective controls were adequately designed and implemented that would prevent and detect material misstatements to its financial statements, and the Company did not adequately design and maintain effective information technology policies, including those related to segregation of duties, security and granting and monitoring access to its financial application programs and data; (ii) lack of effective review and monitoring processes and documentation relating to the recording of recurring and non-recurring journal entries; (iii) lack of effective controls to ensure the completeness/accuracy of the judicial deposits and legal lawsuits, including periodic reviews/updates of them and the expected losses for accrual purposes; (iv) lack of effective controls to ensure the completeness/accuracy or the review/monitoring of the postretirement benefits plans (pension plans) sponsored by the Company, including detailed review of the actuarial assumptions, reconciliation between actuarial valuation reports and accounting records, as well as the cash flow for the contribution payments; (v) lack of effective controls and design with respect to the acquisitions of property, plant and equipment, specifically, to ensure the completeness, accuracy and validation of such acquisitions; (vi) lack of effective controls to ensure completeness, accuracy, validity and valuation of purchases and payments of goods and services; (vii) lack of effective controls to ensure the completeness and accuracy of adjustments in transmission services account receivable related to the availability of the transmission lines not included in the fixed transmission revenue fee (RAP); (viii) lack of effective controls to ensure the accuracy of the amounts of repayments for subsidy related to the Fuel Consumption Account – CCC; (ix) lack of effective controls to ensure the appropriate review/monitoring related to the preparation of financial statements in compliance with International Financial Reporting Standards (IFRS) and related disclosures, and insufficient headcount of internal personnel with a sufficient level of accounting knowledge in IFRS and lack of an adequate supervisory review of the accounting process to ensure the financial statements and disclosures were prepared in compliance with IFRS. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses referred to above are described in the accompanying “Management’s Annual Report on Internal Control over Financial Reporting”. We considered these material weaknesses in determining the nature, timing, and extent of audit tests applied in our audit of the 2011 consolidated financial statements, and our opinion regarding the effectiveness of the Company’s internal control over financial reporting does not affect our opinion on those consolidated financial statements. The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in management’s report referred to above. Our responsibility is to express opinions on these financial statements and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall consolidated financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

As disclosed in Note 14 to the financial statements, the subsidiaries in the distribution segment have suffered recurring losses from operations and have a net capital deficiency in the amount of R$ 1,245,367 thousand at December 31, 2011.

As disclosed in Note 14 to the financial statements, the associated company Centrais Elétricas do Pará S.A. - CELPA has a net capital deficiency in the amount of R$ 1,191,873 thousand at December 31, 2011 and the associated company Centrais Elétricas Matogressenses S.A - CEMAT, belonging to the same economic group as CELPA, presented a net capital deficiency in the amount of R$ 82,136 thousand.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We do not express an opinion or any other form of assurance on management’s statement referring to remediation of the material weaknesses included under Management´s Annual Report on Internal Control Over Financial Reporting.

Rio de Janeiro, May 21, 2012

PricewaterhouseCoopers

Auditores Independentes

F-1

CENTRAIS ELÉTRICAS BRASILEIRAS S.A - ELETROBRAS

BALANCE SHEETS FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

(in thousands of Reais)

			CONSOLIDATED
	NOTE		12/31/2011		12/31/2010
ASSETS
CURRENT
Cash and Cash Equivalents				4,959,787		9,220,169
Restricted Cash				3,034,638		2,058,218
Marketable Securities				11,252,504		6,774,073
Accounts Receivable		7		4,352,024		3,779,930
Financial Asset of Concessions Agreements		16		2,017,949		1,723,522
Financings and Loans		8		2,082,054		1,359,269
Fuel Consumption Account (CCC)				1,184,936		1,428,256
Investments Remuneration		9		197,863		178,604
Taxes Recoverable		10		1,947,344		1,825,905
Reimbursement Rights		11		3,083,157		1,704,239
Warehouse (Storeroom)				358,724		378,637
Stock of Nuclear Fuel		12		388,663		297,972
Prepaid Expenses				46,322		40,418
Financial Instruments				195,536		283,220
Other				1,561,171		1,517,440
TOTAL CURRENT ASSETS				36,662,672		32,569,872
NON-CURRENT
LONG-TERM ASSETS
Reimbursement Rights		11		500,333		371,599
Financings and Loans		8		7,651,336		8,300,171
Accounts Receivable		7		1,478,994		1,706,292
Marketable Securities		6		398,358		769,905
Stock of Nuclear Fuel		12		435,633		523,957
Warehouse (storeroom)				80,909		275,599
Deferred Tax Assets		10		5,774,286		4,338,682
Judicial Deposit				2,316,324		1,750,678
Fuel Consumption Account - CCC				727,136		785,327
Financial Asset of Concession Agreements		16		46,149,379		40,643,712
Financial Instruments				185,031		297,020
Advances for Future Capital Increase		13		4,000		7,141
Other				620,854		889,930
				66,322,573		60,660,013
INVESTMENTS		14		4,570,959		4,724,647
FIXED ASSETS		15		53,214,861		46,682,498
INTANGIBLE		17		2,371,367		2,263,972
TOTAL NON-CURRENT ASSETS				126,479,760		114,331,130
TOTAL ASSETS				163,142,432		146,901,000

F-2

CENTRAIS ELÉTRICAS BRASILEIRAS S.A - ELETROBRAS

BALANCE SHEETS FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

(in thousands of Reais)

			CONSOLIDATED
	NOTE		12/31/2011			12/31/2010
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT
Borrowings		21		4,005,326			1,868,465
Debentures		22		739,237			—
Compulsory Loan		23		16,331			16,925
Suppliers		19		6,338,102			5,165,765
Advance from Clients		20		413,041			341,462
Taxes and social Contributions		25		1,032,521			1,102,672
Fuel Consumption Account (CCC)		24		3,079,796			2,579,546
Shareholders’ Remuneration		27		4,373,773			3,424,520
National Treasury Credits		28		109,050			92,770
Estimated Liabilities				802,864			772,071
Reimbursement Obligations				1,955,966			759,214
Complementary Pension Plans		29		451,801			330,828
Provision for Contingencies		30		240,190			257,580
Regulatory Fees		26		901,692			584,240
Leasing				142,997			120,485
Concessions Payable		32		35,233			25,098
Financial Instruments				269,718			237,209
Personnel voluntary dismissal				93,137			—
Research and development				274,722			219,538
Profit sharing				296,547			227,563
Other				552,765			243,560
TOTAL CURRENT LIABILITIES				26,124,809			18,369,511
NON-CURRENT
Borrowings		21		38,408,352			31,269,971
National Treasury Credits		28		155,676			250,485
Debentures		22		279,410			710,536
Advance from Clients		20		879,452			928,653
Compulsory Loan		23		211,554			141,425
Decommission Obligation		31		408,712			375,968
Fuel Consumption Account - CCC				954,013			785,327
Provisions for Contingencies		30		4,652,176			3,901,289
Complementary Pension Plans		29		2,256,132			2,066,702
Reimbursement Obligations				1,475,262			1,091,271
Leasing				1,775,544			1,694,547
Shareholders remuneration		27		3,143,222			5,601,077
Concessions Payable		32		1,234,426			1,089,726
Advances for Future Capital Increase		33		148,695			5,173,856
Financial Instruments				197,965			303,331
Personnel voluntary dismissal				726,291			273,671
Research and development				370,714			284,820
Taxes and Social Contributions		25		1,902,522			1,217,649
Other				635,184			840,776
TOTAL NON-CURRENT LIABILITIES				59,815,302			58,001,080
SHAREHOLDERS’ EQUITY		35
Capital Stock				31,305,331			26,156,567
Capital Reserves				26,048,342			26,048,342
Profit Reserves				18,571,011			17,329,661
Asset Valuation Adjustments				220,915			163,335
Additional Proposed Dividend				706,018			753,201
Other Comprehensive Income				(8,108	)		(146,992	)
Non-controlling Shareholders Interest				358,812			226,296
TOTAL SHAREHOLDERS’ EQUITY				77,202,321			70,530,410
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY				163,142,432			146,901,000

F-3

CENTRAIS ELÉTRICAS BRASILEIRAS S.A. - ELETROBRAS

CONSOLIDATED STATEMENT OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(in thousands of Reais)

	NOTE		12/31/2011			12/31/2010			12/31/2009
NET OPERATING REVENUE		37		29,532,744			26,832,085			23,140,906
OPERATING EXPENSES
Personnel, Supplies and Services		39		7,670,716			7,370,713			6,486,218
Profit Sharing for Employee and Management				317,035			296,270			284,534
Electricity Purchased for Reselling		40		3,386,289			4,315,084			3,581,396
Fuel for Electricity Production				162,673			252,502			756,285
Use of the Grid		40		1,420,934			1,353,839			1,263,408
Remuneration and Reinbursement				1,328,994			1,087,341			1,188,032
Depreciation and Amortization				1,723,885			1,592,476			1,624,246
Construction				4,279,608			2,953,484			1,723,960
Operating Provisions		41		2,848,749			2,497,262			2,140,406
Itaipu’s Income to Offset				655,290			441,057			669,675
Donations and Contributions				289,964			261,006			237,978
Other				1,305,765			669,434			704,448
				25,389,902			23,090,468			20,660,586
OPERATING RESULT BEFORE FINANCIAL RESULT				4,142,842			3,741,617			2,480,320
FINANCIAL RESULT
Financial Revenue
Revenue from Interest, Commissions and Fees				757,450			781,872			1,035,487
Revenue from Financial Investments				1,664,517			1,537,435			1,464,782
Arrears Surcharge on Electricity				359,208			393,987			228,145
Monetary Restatement				652,949			616,141			356,023
Exchange Rate Variations Gain				669,731			—			—
Other Financial Revenues				158,471			394,890			882,618
Financial expenses
Debt Charges				(1,708,670	)		(1,675,821	)		(1,758,473	)
Leasing Charges				(350,861	)		(332,449	)		(213,470	)
Charges on Shareholders’ Resources				(1,178,989	)		(1,298,647	)		(1,468,713	)
Exchange Rate Variations Loss				—			(431,497	)		(4,018,643	)
Other financial expenses				(789,353	)		(350,033	)		(145,853	)
				234,453			(364,122	)		(3,638,097	)
Result/Loss before participation in Associates and Other Investments				4,377,295			3,377,495			(1,157,777	)
Result of Participation in Associates and Other Investments		38		482,785			669,755			1,571,032
INCOME BEFORE INCOME TAX AND SOCIAL CONTRIBUTION				4,860,080			4,047,250			413,255
Income Tax				(796,252	)		(1,074,606	)		635,875
Social Contribution on the Net Income				(301,809	)		(419,659	)		201,010
NET INCOME OF THE YEAR				3,762,019			2,552,985			1,250,140
ATTRIBUTABLE TO CONTROLLING SHAREHOLDERS				3,732,565			2,247,913			911,467
ATTRIBUTABLE TO NON-CONTROLLING SHAREHOLDERS				29,454			305,072			338,673
NET INCOME PER SHARE		36	R$	2.78		R$	2.25		R$	1.10

F-4

CENTRAIS ELÉTRICAS BRASILEIRAS S.A - ELETROBRAS

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(in thousands of Reais)

											PROFIT RESERVES
	SHARE CAPITAL		TREASURY SHARES			CAPITAL RESERVES		REVALUATION RESERVES			LEGAL		STATUTORY			UNDISTRIBUTED DIVIDENDS			PROFIT RETENTION
Balance on 01/01/2009 before adoption the new practices		26,156,567		—			26,048,342		196,906			2,037,862		17,038,712			9,336,858			487,476
Effects of adoption the new practices									(196,906	)
Additional dividends
On January 1st, 2009		26,156,567		—			26,048,342		—			2,037,862		17,038,712			9,336,858			487,476
Additional dividends
Treasury shares				(879	)
Translation accumulated adjustments
Post-employment benefit adjustment
Fair value of available-for-sale financial instruments
Deferred income tax and social contribution over other comprehensive income
Other comprehensive income effects
Financial charges— Decree 2,673/98																	926,581
Reversal for payment																	(10,263,439	)
Realization of the Revaluation Reserve
Equity valuation adjustments
Realization of reserves
Reversal of reserves														(74,554	)					(487,476	)
Reserves												8,526
Net income for the year
Shareholders remuneration
Approval of additional dividend by Annual General Meeting
on December 31, 2009		26,156,567		(879	)		26,048,342		—			2,046,388		16,964,158			—			—
Additional dividends
Treasury shares				879
Translation accumulated adjustments
Post-employment benefit adjustment
Fair value of available-for-sale financial instruments
Deferred income tax and social contribution over other comprehensive income
Other comprehensive income effects
Equity valuation adjustments
Realization of reserves
Reversal of reserves														(2,205,694	)
Net income for the year
Shareholders remuneration
Approval of additional dividend by Annual General Meeting
on December 31, 2010		26,156,567		—			26,048,342		—			2,046,388		14,758,464			—			—
Payment of capital		5,148,764
Additional dividends														(213,862	)
Translation accumulated adjustments
Post-employment benefit adjustment
Fair value of available-for-sale financial instruments
Deferred income tax and social contribution over other comprehensive income
Adjustment of subsidiaries / associates
Equity valuation adjustments
Realization of reserves
Net income for the year
Reserves												186,629		1,793,393
Shareholders remuneration
Approval of additional dividend by Annual General Meeting
on December 31, 2011		31,305,331		—			26,048,342		—			2,233,017		16,337,995			—			—

	ADDITIONAL DIVIDENDS			EQUITY VALUATION ADJUSTMENTS EFFECTS			RETAINED EARNINGS/ ACCUMULATED LOSSES			AFAC			OTHER COMPREHENSIVE INCOME			STOCKHOLDERS’ EQUITY PARENT COMPANY			STOCKHOLDERS’ EQUITY NON-CONTROLLING INTEREST			CONSOLIDATED STOCKHOLDERS’ EQUITY
Balance on 01/01/2009 before adoption the new practices		—			28,285			—			4,287,353			—			85,618,361			—			85,618,361
Effects of adoption the new practices					168,621			(4,086,684	)		(4,287,353	)		(285,485	)		(8,687,807	)		121,516			(8,566,291	)
Additional dividends		257,836															257,836						257,836
On January 1st, 2009		257,836			196,906			(4,086,684	)		—			(285,485	)		77,188,390			121,516			77,309,906
Additional dividends		(257,836	)														(257,836	)					(257,836	)
Treasury shares																	(879	)					(879	)
Translation accumulated adjustments														(29,790	)		(29,790	)					(29,790	)
Post-employment benefit adjustment														5,914			5,914						5,914
Fair value of available-for-sale financial instruments														206,662			206,662						206,662
Deferred income tax and social contribution over other comprehensive income														(72,276	)		(72,276	)					(72,276	)
Other comprehensive income effects														1,002,466			1,002,466						1,002,466
Financial charges— Decree 2,673/98																	926,581						926,581
Reversal for payment																	(10,263,439	)					(10,263,439	)
Realization of the Revaluation Reserve					(17,479	)		17,479									—						—
Equity valuation adjustments																	—						—
Realization of reserves																	—						—
Reversal of reserves								562,030									—						—
Reserves								(8,526	)								—						—
Net income for the year								911,467									911,467			338,673			1,250,140
Shareholders remuneration								(741,509	)								(741,509	)		(327,646	)		(1,069,155	)
Approval of additional dividend by Annual General Meeting		370,755															370,755						370,755
on December 31, 2009		370,755			179,427			(3,345,743	)		—			827,491			69,246,506			132,543			69,379,049
Additional dividends		(370,755	)														(370,755	)					(370,755	)
Treasury shares																	879						879
Translation accumulated adjustments														(6,747	)		(6,747	)					(6,747	)
Post-employment benefit adjustment														55,300			55,300						55,300
Fair value of available-for-sale financial instruments														158,697			158,697						158,697
Deferred income tax and social contribution over other comprehensive income														231,650			231,650						231,650
Other comprehensive income effects														(888,574	)		(888,574	)					(888,574	)
Equity valuation adjustments					(16,092	)											(16,092	)					(16,092	)
Realization of reserves								16,092									16,092						16,092
Reversal of reserves								2,205,694									—						—
Net income for the year								2,247,913									2,247,913			305,072			2,552,985
Shareholders remuneration								(370,755	)								(370,755	)		(211,319	)		(582,074	)
Approval of additional dividend by Annual General Meeting		753,201						(753,201	)								—						—
on December 31, 2010		753,201			163,335			—			—			377,817			70,304,114			226,296			70,530,410
Payment of capital																	5,148,764			103,062			5,251,826
Additional dividends		(753,200	)														(967,061	)					(967,061	)
Translation accumulated adjustments														15,878			15,878						15,878
Post-employment benefit adjustment														(280,256	)		(280,256	)					(280,256	)
Fair value of available-for-sale financial instruments														152,385			152,385						152,385
Deferred income tax and social contribution over other comprehensive income														198,813			198,815						198,815
Adjustment of subsidiaries / associates					78,004									(472,745	)		(394,741	)					(394,741	)
Equity valuation adjustments					(20,424	)											(20,423	)					(20,423	)
Realization of reserves								20,424									20,425						20,425
Net income for the year								3,732,565									3,732,566			29,453			3,762,020
Reserves								(1,980,021	)								—						—
Shareholders remuneration								(1,066,950	)								(1,066,955	)					(1,066,955	)
Approval of additional dividend by Annual General Meeting		706,018						(706,018	)								—						—
on December 31, 2011		706,018			220,915			—			—			(8,109	)		76,843,509			358,811			77,202,321

F-5

CENTRAIS ELÉTRICAS BRASILEIRAS S.A.—ELETROBRAS

CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

( in thousands of Reais )

	2011			2010			2009
Net Income of The Year		3,762,018			2,552,985			1,250,140
Other Comprehensive Income Components
Accumulated Translation Adjustments		15,878			(6,747	)		(29,790	)
Actuarial Gains and Losses Adjustments		(280,256	)		55,300			5,914
Deferred Income Tax and Social Contribution		95,287			(18,802	)		(2,011	)
Fair Value of Financial Instruments Available for Sale		152,385			158,697			206,662
Deferred Income Tax and Social Contribution		(51,811	)		(53,957	)		(70,265	)
Cash Flow Hedge Adjustment		—			12,862			(20,515	)
Deferred Income Tax and Social Contribution		—			(4,373	)		6,975
Comprehensive Income of Associated Companies and Jointly Controlled Entities		(472,745	)		(888,574	)		1,515,942
Deferred Income Tax and Social Contribution		155,336			295,920			(499,936	)
Other Components of the Comprehensive Income of the Year		(385,926	)		(449,674	)		1,112,976
Total Comprehensive Income of the Year		3,376,091			2,103,311			2,363,116
Attributable
Shareholders of the Company		3,346,639			1,798,239			2,024,445
Interest of Non-controlling		29,453			305,072			338,672
		3,376,092			2,103,311			2,363,117

F-6

CENTRAIS ELÉTRICAS BRASILEIRAS S.A - ELETROBRÁS

CONSOLIDATED STATEMENT OF CASH FLOW FOR YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(in thousands of Reais)

	12/31/2011			12/31/2010			12/31/2009
OPERATIONAL ACTIVITIES
Income before Income Tax and Social Contribution		4,860,080			4,047,250			413,255
Adjustments to Reconcile Income to the Cash Generated by Operations:
Depreciation and Amortization		1,723,959			1,592,476			1,624,246
Net Monetary/Exchange Rate Variations		(1,029,290	)		(387,617	)		3,662,620
Financial Charges		774,140			2,008,270			1,971,943
Revenue from Financial Assets		(2,774,166	)		(2,525,754	)		(535,842	)
Result of Participation in Associates and Other Investments		(482,785	)		(669,755	)		(1,571,031	)
Provision for Doubtful Accounts		808,487			600,251			558,777
Provision for Contingencies		677,998			287,821			117,847
Provision for Impairment		434,538			379,048			(412,956	)
Provision for Post-Employment Plan		172,246			280,965			942,772
Provision for losses on investments		91,989			421,629			842,830
Charges of Global Reversion Reserve		403,903			395,756			380,439
Present Value Adjustment (Actuarial Evaluation and Leasing)		7,954			314,518			244,955
Non-Controlling Interest		(44,627	)		(462,230	)		(338,673	)
Charges on Shareholders Resources		1,178,989			1,298,647			1,468,710
Gain/Loss in the Sale of Assets		223			(49,286	)		203,918
Financial Instruments - Derivatives		124,770			(55,200	)		(430,984	)
Other		(149,992	)		(741,403	)		(417,426	)
		1,918,336			2,688,137			8,312,145
Increase/Decrease in Operatinal Assets
Accounts Receivable		(219,230	)		(569,962	)		(82,067	)
Marketable Securities		(4,106,884	)		805,850			(291,846	)
Reimbursement Rights		(1,507,652	)		(1,213,885	)		(219,084	)
Warehouse (storeroom)		214,603			(36,463	)		(79,193	)
Nuclear Fuel Inventory		(2,367	)		(9,164	)		(64,781	)
Prepaid Expenses		(5,904	)		18,347			(13,487	)
Financial Asset of Public Utility Concessions		(946,673	)		(67,145	)		1,253,611
Other		257,407			(268,034	)		12,145
		(6,316,700	)		(1,340,455	)		515,298
Increase/Decrease in Operational Liabilities
Suppliers		1,172,337			2,086,151			575,321
Advance from Clients		(44,465	)		70			1,514
Leasing		103,509			66,757			108,827
Estimated Liabilities		30,793			99,857			71,553
Reimbursement Liabilities		1,629,649			655,723			36,432
Regulatory Fees		317,452			(5,193	)		589,433
Other		111,938			(481,282	)		(110,796	)
		3,321,213			2,422,083			1,272,284
		3,782,929			7,817,015			10,512,982
Payment of Financial Charges		(1,368,245	)		(1,453,344	)		(1,104,469	)
Payment of Charges on Global Reversion Reserve		(465,318	)		(864,871	)		(788,445	)
Amounts Received from Fixed Transmission Revenue Fees (RAP)		2,315,642			2,712,474			875,275
Accounts Received of Financial Charges		739,709			468,975			574,508
Payment of Income Tax and Social Contribution		(1,132,758	)		(890,205	)		(906,786	)
Receipt of Investment Remuneration on Equity Investment		689,371			600,869			731,216
Judicial deposits		(274,462	)		(146,131	)		(354,036	)
Cash from Operational Activities		4,286,867			8,244,782			9,540,245
FINANCING ACTIVITIES
Long-term Loans and Financings		7,273,908			3,829,260			1,672,331
Payment of Loans and Financings - Principal		(2,258,040	)		(1,202,294	)		(1,145,379	)
Payment of Shareholders Remuneration		(4,062,839	)		(3,143,565	)		(1,390,796	)
Payment of Refinancing of Taxes and Contributions - Principal		(92,375	)		(92,115	)		(97,480	)
Compulsory Loan and Global Reversion Reserve		1,376,452			1,049,035			896,445
Other		119,755			(346,434	)		(1,416,058	)
Net Cash from Financing Activities		2,356,861			93,887			(1,480,937	)
INVESTMENT ACTIVITIES
Granting of Loans and Financings		(347,796	)		(641,078	)		(216,056	)
Receipt of loans and financing		1,123,886			2,871,385			1,064,842
Renegotiated Electricity Credits Received		277,728			342,745			563,460
Acquisition of Property, Plant and Equipment		(8,017,774	)		(6,256,197	)		(4,651,316	)
Acquisition of intangible assets		(139,612	)		(359,219	)		(290,736	)
Acquisition of concession assets		(3,411,497	)		(3,105,522	)		(1,723,960	)
Other		(389,046	)		(587,906	)		284,284
Net Cash from Investing Activities		(10,904,112	)		(7,735,791	)		(4,969,482	)
Increase (Decrease) in Cash and Cash Equivalents		(4,260,384	)		602,878			3,089,826
Cash and Cash Equivalents on the Beginning of the Year		9,220,169			8,617,294			5,527,468
Cash and Cash Equivalents on the End of the Year		4,959,787			9,220,169			8,617,294
		(4,260,382	)		602,875			3,089,826

F-7

CENTRAIS ELÉTRICAS BRASILEIRAS S.A.

Eletrobras

(PUBLICLY-HELD COMPANY)

CORPORATE TAXPAYER ID (CNPJ) 00.001.180/0001-26

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED

December 31, 2011 and 2010

(In thousands of Reais)

NOTE 1 – GENERAL INFORMATION

Centrais Elétricas Brasileiras S.A. (Eletrobras or Company) is a corporation headquartered in Brasília - DF - Setor Comercial Norte, Quadra 4, Bloco B, 100, sala 203 - Asa Norte, registered at the Brazilian Securities and Exchange Commission (Comissão de Valores Mobiliários - CVM) and at the Securities and Exchange Commission - SEC, with shares traded in the stock exchanges in São Paulo (BOVESPA) - Brazil, Madrid (LATIBEX) - Spain and New York (NYSE) - United States of America. Its business purpose is studying, projecting, building and operating generating power plants, electric power transmission and distribution lines, as well as operating trading transactions arising from these activities. Its purpose is also granting funding, providing guarantees, in the country and abroad, to electricity public utility companies under its controlling interest and on behalf of technical-scientific research entities; promoting and supporting research in the electricity sector, especially the ones linked to generation, transmission and distribution activities, as well as performing studies of exploration of watersheds for multiple purposes; contributing to the education of technical personnel required by Brazilian electricity sector, as well as preparing qualified workers, through specialized courses, it may also provide assistance to schools in the country or scholarships abroad and signing contracts with entities contributing to the training of specialized technical personnel; collaborate, technically and administratively, with companies in which it has a shareholding interest and with the Ministry of Mines and Energy.

The Company operates as a holding company, managing investments in equity interests, holding direct control in six electric energy generation and/or transmission companies (Furnas Centrais Elétricas S.A. - FURNAS, Centrais Elétricas do Norte do Brasil S.A .- ELETRONORTE, Companhia Hidro Elétrica do São Francisco - CHESF, Centrais Elétricas S.A. - ELETROSUL, Eletrobras Termonuclear S.A. - ELETRONUCLEAR, and Companhia de Geração Térmica de Energia Elétrica – CGTEE) and in four electricity distribution companies Companhia de Eletricidade do Acre - Eletroacre, Centrais Elétricas de Rondônia - Ceron, Companhia Energética de Alagoas - Ceal and Companhia Energética do Piauí – Cepisa, in addition to Amazonas Energia – AME, vertically integrated, operating in electricity generation and distribution.

The Company is also the parent company of Eletrobras Participações S.A. – Eletropar and, jointly controls Itaipu Binacional – Itaipu, in the terms of the International Treaty signed by the governments of Brazil and Paraguay, Inambari Geração de Energia S.A. and Centrales Hidroelectricas de Centroamerica S.A. – CHC.

The Company indirectly controls the company Boa Vista Energia, a wholly-owned subsidiary of Eletronorte, which operates in electricity generation and distribution in the city of Boa Vista, in the state of Roraima, and also controls a number of Special Purpose Entities: RS Energia, Artemis, Uirapuru e Porto Velho Transmissora, wholly-owned subsidiaries of Eletrosul; and Estação Transmissora de Energia and Rio Branco Transmissora de Energia, wholly-owned subsidiaries of Eletronorte.

F-8

The Company also has a minority interest in several companies in the segments of electricity generation, transmission and distribution, directly and/or indirectly through its subsidiaries (Note 14).

Eletrobras is authorized, directly or through its subsidiaries or controlled companies, to establish, with or without payment, business consortiums and to hold interest in companies that are outside of Brazil and whose purpose is to produce, transmit and distribute electric power.

The Company is also responsible for the management of sector resources, which it achieves through a number of entities: Global Reversion Reserve – RGR, Energy Development Account – CDE, Use of Public Property – UBP and Fuel Consumption Account – CCC. These entities fund federal government programs that aim to provide nationwide access to electricity, efficient lighting, alternative sources of electric energy and electricity conservation and acquisition of fossil fuels used in isolated electricity generation systems. The financial results of these entities do not impact the financial results of the Company (except certain administration fees relating to a number of these entities).

The Company also acts as a trading agent in electric energy for Itaipu Binacional and participating agents of Proinfa.

The issuance of these consolidated financial statements of the Group was authorized by the Board of Directors on April 16, 2012.

NOTE 2 – CONCESSIONS OF ELECTRIC POWER AS A PUBLIC UTILITY

The Company, through its subsidiaries, holds several public utility concessions of electric power, whose details, installed capacity and maturity dates are listed below:

I - Electric Power Generation

Concessions/Permissions	Location	Installed Capacity (MW) (Unaudited)		Maturity Year
UHE (Hydroelectric Power Plant) Paulo Afonso I	BA		180	2015
UHE Paulo Afonso II	BA		443	2015
UHE Paulo Afonso III	BA		794.2	2015
UHE Paulo Afonso IV	BA		2,462.4	2015
UHE Apolônio Sales	BA		400	2015
UHE Luiz Gonzaga	BA		1,479.60	2015
UHE Xingó	AL/SE		3,162.00	2015
UHE Piloto	PE		2	2015
UHE Araras	CE		4	2015
UHE Funil	BA		30	2015
UHE Pedra	BA		20.01	2015
UHE Boa Esperança (Castelo Branco)	PI		237.3	2015
UHE Sobradinho	BA/PE		1,050.30	2022
UHE Curemas	PA		3.52	2024
UTE (Thermoelectric Power Plant) Camaçari	BA		346.8	2027
UHE Belo Monte	PA		11,233.10	2045
EOL São Pedro do Lago	BA		28.8	2046
EOL Pedra Branca	BA		28.8	2046

F-9

EOL Sete Gameleiras	BA	28.8	2046
UHE – Tucuruí	PA	8,370.00	2024
UHE – Curuá-Uma	PA	30.3	2028
UHE – Samuel	RO	216.75	2029
UHE – Coaracy Nunes	AP	76.95	2015
UTE – Rio Madeira	RO	119.35	Undetermined
UTE – Rio Acre	AC	45.49	Undetermined
UTE – Rio Branco I	AC	18.65	Undetermined
UTE – Rio Branco II	AC	31.80	Undetermined
UTE – Santana	AP	60	Undetermined
UTE – Electron	AM	120	Undetermined
UTE – Senador Arnon Afonso Farias	RR	85.99	Undetermined
UHE Dardanelos	MT	261	2042
UTE Serra do Navio	SE	23.3	2037
UTE PCH Capivara	SE	29.8	2037
Parque Eólico Miassaba 3	RN	50.4	2045
Parque Eólico Rei dos Ventos 3	RN	48.6	2045
UHE Passo São João	RS	77	2041
UHE Mauá	PR	361	2042
UHE São Domingos	MS	48	2037
PCH (Small Hydroelectric Power Plant) Barra do Rio Chapéu	SC	15	2035
PCH João Borges	SC	19	2035
EOI Coxilha Negra V	RS	30	2045
EOI Coxilha Negra VI	RS	30	2045
EOI Coxilha Negra VII	RS	30	2045
UHE Jirau	RO	3,300.00	2043
UTE Presidente Médici - Candiota I y II	RS	446	2015
UTE Candiota III	RS	350	2041
UTE São Jerônimo	RS	20.	2015
UTE Nutepa	RS	24	2015
UHE Balbina	AM	277.5	2027
UHE Aparecida	AM	251.5	2015
UHE Aparecida	AM	251.5	2015
UTE Mauá	AM	711.4	2015
UTE Mauá	AM	711.4	2015
UTE Mauá	AM	711.4	2015
UTE Mauá	AM	711.4	2015
Other	AM	597.1	2015
UTE FLORES	AM	80	2015
UTE Cidade Nova	AM	20	2015
UTE Iranduba	AM	50	2015
UTE Distrito	AM	40	2015
UTE Santa Cruz	RJ	932	2015
UTE São Jorge	AM	50	2015
UHE Furnas	MG	1,216.00	2015
UHE Luiz Carlos Barreto de Carvalho	SP/MG	1,050.00	2015
UHE Marimbondo	SP/MG	1,440.00	2017

F-10

UHE Porto Colômbia	SP/MG	320	2017
UHE Mascarenhas de Moraes	MG	476	2023
UHE Funil	MG	216	2015
UHE Itumbiara	MG/GO	2,082.00	2020
UHE Corumbá I	GO	375	2014
UHE Manso	MG	212	2035
UHE Serra da Mesa	GO	1,275.00	2011
UTE Roberto Silveira	RJ	30	Extension granted
UHE Batalha	MG/GO	52.5	2041
UHE Simplício/Anta	RJ/MG	333.7	2041
UHE Peixe Angical	TO	452	2036
UHE Baguari	MG	140	2041
UHE Foz do Chapecó	RS	855	2036
UHE Serra do Facão	GO	212.58	2036
UHE Retiro Baixo	MG	82	2041
UTN (Thermonuclear Power Plant) Angra I	RJ	640	Undetermined
UTN Angra II	RJ	1,350.00	Undetermined
UTN Angra III	RJ	1,405.00	Undetermined
UHE Santo Antônio	RO	3,150.10	2043

Electric power generation considers the following assumptions:

a) existence of periods, either throughout the day or annually, in which there is higher or lower demand for electric power in the system for which the power plant, or generation system, was scaled;

b) existence, as well, of periods in which machines are removed from operation for maintenance, either to prevent or repair, and

c) water availability in the river where it is located.

The Planning and Programming of Electric Energy Operations is responsible for the production of electric power at the power plants by detailing and monitoring production at daily and annual rates through schedules prepared by the National Operator of Electric Systems - ONS, which establishes the volumes and sources of electric power generation required to meet the country’s demand in an optimized manner, based on the availability of water basins and machinery currently in operation, as well as generation costs and feasibility of transmission of power through the interconnected electric power system.

F-11

II – Electric Power Transmission

	Location	Extension (km) (Unaudited)		Maturity Year
LT 230 kV – SE Ribeiro Gonçalves/SE Balsas	MA/TO/PI		95		2039
LT Coxipó-Cuiabá-Rondonópolis (MT), 230 Kv	MT		193		2034
LT Colinas, Miracema, Gurupi, Peixe Nova da Serra 2 (TO/GO) in 500 kV	TO/GO		695		2036
LT Jauru-Juba-C2 (MT) and Maggi - Nova Mutun (MT), 230 kV, 30/138 kV	MT		402		2008
LT Oriximiná - Itacoatiara - Cariri (PA/AM), in 500kV	PA/AM		586		2038
LT Colectora Porto Velho (RO) - Araracuara (SP), 600kv	RO/SP		2,375		2039
LT Porto Velho - Samuel Ariquemes - Ji-Paraná -Pimenta Bueno - Vilhena (RO), Jaurú (MT), with 230 kV	RO/MT		987		2039
LT Porto Velho - Abunã (RO) - Rio Branco (AC), 230 kV	RO/AC		487		2039
LT Jaurú - Cuiabá (MT) and SE Jaurú, with 500 kV	MT/SE		348		2039
LT 525 kV Campos Novos/Biguaçu/Blumenau	SC		359		2035
LT 525 kV Itá/Nova Santa Rita	SC/RS		314.8		2015
LT 525 kV Caxias/Itá	RS/SC		256		2015
LT 525 kV Areia/Curitiba I	PR		235.2		2015
LT 525 kV Areia/Bateias	PR		220.3		2015
LT 525 kV Campos Novos/Caxias	SC/RS		203.3		2015
LT 525 kV Itá/Salto Santiago	SC/PR		186.8		2015
LT 525 kV Areia/Campos Novos	PR/SC		176.3		2015
LT 525 kV Areia/Ivaiporã	PR		173.2		2015
LT 525 kV Ivaiporã/Salto Santiago	PR		167		2015
LT 525 kV Blumenau/Curitiba	SC/PR		136.3		2015
LT 525 kV Ivaiporã/Londrina	PR		121.9		2015
Other LT 525 kV	—		395.4		2015
LT 230 kV Presidente Médice/Santa Cruz 1	RS		237.4		2038
LT 230 kV Dourados/Guaíra	MS/PR		226.5		2015
LT 230 kV Monte Claro/Paso Fundo	RS		211.5		2015
LT 230 kV Anastácio/Dourados	MS		210.9		2015
LT 230 kV Passo Fundo/Nova Prata 2	RS		199.1		2015
LT 230 kV Areia/Ponta Grossa	PR		181.6		2015
LT 230 kV Campo Mourão/Salto Osorio 2	PR		181.3		2015
LT 230 kV Campo Mourão/Salto Osorio 1	PR		181.2		2015
LT 230 kV Salto Osorio/Xanxerê	PR/SC		162		2015
LT 230 kV Areia/Salto Osorio 1	PR		160.5		2015
LT 230 kV Areia/Salto Osorio 2	PR		160.3		2015
LT 230 kV Londrina/Assis 1	PR/SP		156.6		2015
LT 230 kV Blumenau/Palhoça	SC		133.9		2015
LT 230 kV Biguaçu/Blumenau 2	SC		129.5		2015
LT 230 kV Areia/São Mateus do Sul	PR		129		2015
LT 230 kV Cascavel/Guaíra	PR		126.2		2015
LT 230 kV Lageado Grande/Siderópolis	RS/SC		121.9		2015
LT 230 kV Jorge Lacerda “B”/Palhoça	SC		121.3		2015
LT 230 kV Curitiba/São Mateus do Sul	PR		116.7		2015
LT 230 kV Blumenau/Jorge Lacerda “B”	SC		116.4		2015
LT 230 kV Campo Mourão/Apucarana	PR		114.5		2015
LT 230 kV Assis/Londrina	SP/PR		114.3		2015
LT 230 kV Atlântida 2/Gravataí 3	RS		102		2015
Other LT 230 kV	—		1,556		2015

F-12

LT 138 kV Jupiá/Mimoso 1	SP/MS	218.7	2015
LT 138 kV Jupiá/Mimoso 3	SP/MS	218.7	2015
LT 138 kV Jupiá/Mimoso 4	SP/MS	218.7	2015
LT 138 kV Jorge Lacerda “A”/Palhoça 1	SC	108.6	2015
LT 138 kV Campo Grande/Mimoso 1	MS	108.3	2015
LT 138 kV Campo Grande/Mimoso 3	MS	108.3	2015
LT 138 kV Campo Grande/Mimoso 4	MS	108.3	2015
LT 138 kV Dourados das Nações/Ivinhema	MS	94.7	2015
Other LT de 138 kV	—	657	2015
LT 132 kV Frequency Converter Uruguayana/Paso de Los Libres	RS	12.5	2015
LT 69 kV Salto Osório/Salto Santiago	PR	56.2	2015
LT 345 kV Furnas - Pimenta II	MG	66	2035
LT 500 kV Rio Verde Norte – Trindade; LT 500/230 kV – 1200 MVA Trindade Substation	GO	193	2040
LT 230 kV Trindade – Xavantes	GO	37	2040
LT 230 kV Trindade – Carajás	GO	29	2040
LT Collector Porto Velho - Araraquara 2; LT 500/± 600 kV - 3.150 MW, Rectifier Station - Substation 2 CA/CC y LT ± 600/500 kV – 2.950 MW, Inverter Station - Substation 02 CC/CA	RO	2375	2038
LT 500 kV Mesquita - Viana 2; LT 500/345kV 900 MVA – Viana 2	MG/ES	248	2040
LT 345 kV Viana 2 - Viana	MG/ES	10	2040
2 LT 138 kV Generation Unit – National Interconnected System; LT 138 kV, Pumping Substation		33	2035
LT 230 kV Serra da Mesa - Niquelândia; LT 230 kV, Serra da Mesa Substation	TO	105	2015
LT 230 kV Niquelândia - Barro Alto; LT 230 kV, Niquelândia Substation and LT 230 kV, Barro Alto Substation	TO	88	2015
LT 230 kV CS Barra dos Coqueiros – Quirinópolis	MS/GO/MT	NA	2039
LT 230 kV CD Chapadão - Jataí Taquari	MS/GO/MT	NA	2039
LT 230 kV CS Palmeiras – Edéia	MS/GO/MT	NA	2039
2 LT 500 kV in the division of LT Campinas – Ibiúna and SE Itatiba 500/138 kV; LT 500/138 kV, Itatiba Substation and LT 500 kV, Campinas Substation and SE Ibiúna	SP	1	2039
LT 345 kV Montes Claros – Irapé	MG	138	2034
LT 345 kV Itutinga - Juiz de Fora	MG	144	2035
LT 230 kV Milagres/Tauá (CE); LT 230 kV Tauá Substation (CE)	CE	208	2035
LT 230 kV Milagres/Coremas (CE/PB)	CE/PB	120	2035
LT 230 kV Paraíso/Açu II (RN)	RN	135	2037
LT 230 kV Funi/Itapebi (BA)	BA	197.80	2015
LT 230 kV Ibicoara/Brumado (BA); LT 500/230 kV Ibicoara Substation (PE)	BA/PE	95	2037
LT 230 kV Eunápolis/Teixeira de Freitas II (BA); LT 230/138 kV Teixeira de Freitas II Substation (BA)	BA	152	2038
LT 230 kV Picos/Tauá (PI/CE)	PI/CE	183.2	2037
LT 230 kV Jardim/Penedo (SE/AL)	SE/AL	110	2038
LT 500/230 kV Substations Suape II(PE); LT 230/69 kV Suape III (PE)	PE	24	2039
LT 230 kV Pau Ferro/Santa Rita II (PE/PB)	PE/PB	96.7	2039
LT 230 kV Paulo Afonso III/Zebu (AL); LT 230/69 kV Substations Santa Rita II; LT 230/69 kV Zebu (AL); LT 230/69 kV Natal III (RN)	AL/PB/RN	6	2039

F-13

LT 230 kV Eunápolis/Teixeira de Freitas II (BA)	BA	152	2038
LT 500/230 kV Substation Camaçari IV	BA	80.84	2040
LT 230/69 kV Substation Arapiraca III; LT 230kV Double Circuit Rio LargoII/Penedo	AL	45	2040
LT 230 kV Paraíso/Açu (RN), circuit 3	RN	123	2040
LT 230 kV Açu/Mossoró II (RN), circuit 2	RN	69	2040
LT 230 kV João Câmara/Extremoz II; LT 230 kV João Câmara Substation (RN); LT 230 kV Extremoz II Substation (RN)	RN	82	2040
LT 230 kV Igaporã/Bon Jesus da Lapa II (BA); LT 230 kV Igaporã Substation (BA)	BA	115	2040
LT 230 kV Sobral III/Acaraú II (CE); LT 230 kV Acaraú Substation (CE)	CE	97	2040
83 Transmission Substations; 15 Pumping Substations		18,260	2015
LT 500 kV Teresina(PI)/Sobral/Fortaleza(CE)	PI/CE	546	2034
LT 500 kV Colinas/Miracema/ Urupi/ Peixe 2/Serra da Mesa (TO/GO)	TO/GO	695	2036
LT 500 kV Oriximiná/Itacoatiara CD		375	2038
LT 500 kV Itacoatiara/Cariri (PA/AM); LT 500/138 kV Substations Itacoatiara and LT 500/230 kV Cariri	PA/AM	212	2038
LT +/- 600 kV Collector Porto Velho (RO)/ Araracuara 2 (SP), 1 in CC; LT 500 kV/+/- 600kV – 3.150 MW Rectifier Station 2 CA/CC; LT, +/- 600 kV/500kV – 2.950 MW Inverter Station 2 CC/CA	RO/SP	2,375	2039
LT 230 kV São Luiz II/ São Luiz III (MA); LT 500 kV Pecém II Substation (CE) and LT 230 kV Aquiraz II (CE)	MA/CE	96	2040
SE – Campos Novos	SC	2.466.00	2015
SE – Caxias	RS	2.016.00	2015
SE – Gravataí	RS	2.016.00	2015
SE – Nova Santa Rita	RS	2.016.00	2015
SE – Blumenau	SC	1.962.00	2015
SE – Curitiba	PR	1.344.00	2015
SE – Londrina	PR	1.344.00	2015
SE – Santo Ângelo	RS	1.344.00	2015
SE – Biguaçu	SC	300.00	2015
SE – Biguaçu	SC	672.00	2035
SE – Joinville	SC	691.00	2015
SE – Areia	PR	672.00	2015
SE – Itajaí	SC	525.00	2015
SE – Xanxerê	SC	450.00	2015
SE – Jorge Lacerda “A”	SC	399.80	2015
SE – Palhoça	SC	384.00	2015
SE – Siderópolis	SC	364.00	2015
SE – Assis	SP	336.00	2015
SE – Joinville Norte	SC	300.00	2015
SE – Atlântida 2	RS	249.00	2015
SE – Canoinhas	SC	225.00	2015
SE – Dourados	MS	225.00	2015
SE – Caxias 5	RS	215.00	2015
SE – Passo Fundo	RS	168.00	2015
SE – Tapera 2	RS	166.00	2015
SE – Gravataí 3	RS	165.00	2015
SE – Desterro	SC	150.00	2015
SE – Missões	RS	150.00	2039
SE – Anastácio	MS	150.00	2015
SE – Ilhota	SC	100.00	2015
Other substations	—	404.50	2015

F-14

III – Electric Power Distribution

Company	Geographic Region	Municipalities  Served (Unaudited)		Maturity year of the Concession
Distribuição Acre	State of Acre		25		2015
Distribuição Rondônia	State of Rondônia		52		2015
Distribuição Alagoas	State of Alagoas		102		2015
Distribuição Piauí	State of Piauí		224		2015
Amazonas Energia	State of Amazonas		62		2015
Distribuição Roraima	State of Roraima		1		2015

The term of the concessions in the tables above represent the average maturity date of the concessions acquired for each company.

If the Company’s subsidiaries’ concessions are not renewed or are renewed at an additional cost for the Company, the current levels of profitability and activity may change.

NOTE 3 – SUMMARY OF MAIN ACCOUNTING POLICIES

The main accounting policies adopted in the preparation of these financial statements are defined below. These policies have been applied consistently in all reported years, unless otherwise stated.

3.1. Basis of preparation

The preparation of the financial statements requires the use of certain critical accounting estimates and also the Company’s Management judgment on the process to apply the Group’s accounting policies. Those areas which require a higher level of judgment and which are more complex, as well as areas in which the assumptions and estimates are relevant for the consolidated financial statements, are disclosed in Note 4.

The financial statements were prepared based on the historical cost, except for certain financial instruments measured by their fair values, as described in the following accounting practices. Generally, the historical cost is based on the fair value of considerations paid in exchange of assets.

(a) consolidated financial statements

The consolidated financial statements were prepared and are being presented in compliance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB).

F-15

(b) changes in the accounting policies and disclosures

The following amendments and interpretations were disclosed and are mandatory for the accounting periods starting as of January 1, 2012, and there was no early adoption of these standards by the Company.

Rule	Key requirements	Effective date
Amendment to IAS 12 - “Income Tax” on deferred taxes	Currently, IAS 12 - “Income Taxes” require that deferred taxes are measured based on the expected recovery of asset’s carrying amount by its use or sale. Nevertheless, for “Investment Properties” measured by fair value under IAS 40, it may be difficult and subjective to assess if recovery will occur through use or sale. Therefore, this amendment introduces an exception to current principle to measure deferred tax assets or liabilities over property investment measured at fair value. The amendment to IAS 12 resulted in the incorporation of SIC 21 - “Income Taxes – Recovery of revalued non-depreciable assets” no longer applicable to investment properties carried at fair value. The amendments to IAS 12 also include previous guidance contained in SIC 21, which was removed.	January 1, 2012
Amendment to IAS 1 - “Presentation of Financial Statements” regarding other comprehensive income	The main change resulting from these addenda was the requirement that entities must group the items reported in other comprehensive income based on the possibility of becoming or not potentially re-classifiable into profit or losses, subsequently (reclassification adjustments). The amendments do not establish which items must be reported in other comprehensive income.	July 1, 2012
Amendment to IAS 19 - “Employee Benefits”	These amendments remove the “corridor” method and require that financial costs are calculated based on net funding.	January 1, 2013
IFRS 9 - “Financial Instruments”	IFRS 9 is the first standard issued as part of a larger project to replace IAS 39. IFRS 9 maintains, but simplifies the combined measurement model and establishes two main measurement categories for financial assets: amortized cost and fair value. The basis of classification depends on the entity’s business model and the characteristics of financial asset’s contractual cash flows. IAS 39 guidance on impairment of financial assets and hedge accounting remains applicable.	January 1, 2013

F-16

Rule	Key requirements	Effective date
IFRS 10 - “Consolidated Financial Statements”	The objective of IFRS 10 is to establish principles to present and prepare consolidated financial statements, when there is at least, subsidiary-parent company relation. It defines the principles and establishes the concept of control as basis of consolidation. It defines how to apply the principle of control to identify if an investee must be considered subsidiary, therefore, consolidated. It defines the requirements to prepare the consolidated financial statements.	January 1, 2013
IFRS 11 - “Joint Arrangements”	IFRS 11 provides a more realistic approach for joint arrangements, focused on the rights and obligations of the agreement, instead of its legal form. Joint arrangements are classified into two types: joint arrangements and joint ventures. Joint arrangements are those in which joint operators have rights over assets and liabilities related to this arrangement, therefore, account for amount of assets, liabilities, revenues and expenses. Joint ventures exist when joint operators have rights over the net assets of the arrangement, therefore, account for their interest according to the equity method. The proportional consolidation of joint ventures is no longer allowed.	January 1, 2013
IFRS 12 - “Disclosures of Interests in Other Entities”	IFRS 12 deals with reporting requirements for all forms of interest in other entities, including joint arrangements, partnerships, interest with specific purposes and other interest not accounted for.	January 1, 2013
IFRS 13 - “Fair Value Measurement “	The objective of IFRS 13 is to improve the consistency and reduce the complexity of fair value measurement, providing more accurate definition and a single source of fair value measurement and its reporting requirements under the IFRS. The requirements, which are highly in line between IFRS and U.S. GAAP , do not increase the use of accounting at fair value, but provide guidance on how to apply it when its use is already required or allowed by other IFRS or U.S. GAAP standards.	January 1, 2013
IAS 27 (revised in 2011) -”Separate Financial Statements”	IAS 27 (revised in 2011) includes other considerations on separate financial statements, besides control provisions of IAS 27 included in the new IFRS 10.	January 1, 2013
IAS 28 (revised in 2011) - “Associates and joint ventures”	IAS 28 (revised in 2011) requires that joint ventures and associates are measured by the equity method as of the issue of IFRS 11.	January 1, 2013

F-17

The Company is assessing the impact over its financial statements and corresponding standards in Brazil have not yet been issued yet.

There are no other IFRS standards or IFRIC interpretations not effective yet that could adversely affect the Group.

3.2. Basis of consolidation and investments in subsidiaries

The following accounting policies apply to the preparation of consolidated financial statements.

(a) Subsidiaries

The consolidated financial statements include the financial statements of the Company and its subsidiaries, including specific purpose entities. Control is obtained when the Company has the power to control financial and operational policies of an entity in order to receive benefits from its activities. The financial statements of jointly controlled subsidiaries are consolidated proportionally to their shareholding.

In the financial statements of the Company, the financial information of the subsidiaries and of jointly controlled enterprises is accounted for by the equity method.

In the individual financial statements, the Company applies the requirements of Technical Interpretation IAS 27 (Consolidated and Separate Financial Statement), which requires that any amount exceeding the acquisition cost over the interest of the Company in the net fair value of identifiable assets, liabilities and contingent liabilities of the acquired company in the acquisition date is accounted for as goodwill. Goodwill is added to the accounting value of the investment. Any amount of interest of the Company in the fair value of identifiable assets, liabilities and contingent liabilities exceeding the acquisition cost, after revaluation, is immediately recognized in the results of operations. The considerations transferred as well as the net value of assets and liabilities are measured using the same criteria applicable to the consolidated financial statements previously described.

The results of operations of subsidiaries acquired or sold during the year are included in the consolidated statements of operations and comprehensive income from the date of effective acquisition until the date of effective sale, as applicable.

All transactions, balances, revenues and expenses between subsidiaries of the Company are fully eliminated in the consolidated financial statements.

The consolidated financial statements reflect the balances of assets and liabilities as of December 31, 2011 and 2010, and of operations for the years ended on December 31, 2011 and 2010 of the parent company, its directly and indirectly controlled subsidiaries and jointly controlled subsidiaries. The financial statements prepared in a functional currency different from the one used by the parent company are converted to the presentation currency used in Brazil, for equity and consolidation purposes, and the exchange differences are accounted for as accumulated conversion adjustments.

The Company adopts the following main consolidation practices:

a) Elimination of investments of the investing company in investees, in consideration of its interest in their respective shareholders’ equity;

F-18

b) Elimination of intercompany accounts receivable and payable;

c) Elimination of intercompany revenues and expenses;

d) Highlighting other non-controlling interest in the Shareholders’ Equity and in the Income Statement of consolidated investees; and

The Company uses full and proportional consolidation criteria, as described in the table below. Interest is stated on total capital of the subsidiary:

	12/31/2011						12/31/2010
	Interest						Interest
Subsidiaries (Full Consolidation)	Direct			Indirect			Direct			Indirect
Amazonas Energia		100	%		—			100	%		—
Ceal		100	%		—			75	%		—
Cepisa		100	%		—			99	%		—
Ceron		100	%		—			100	%		—
CGTEE		100	%		—			100	%		—
Chesf		100	%		—			99	%		—
Eletroacre		93	%		—			93	%		—
Eletronorte		99	%		—			99	%		—
Eletronuclear		100	%		—			100	%		—
Eletropar		84	%		—			82	%		—
Eletrosul		100	%		—			100	%		—
Furnas		100	%		—			100	%		—
RS Energia		—			100	%		—			100	%
Porto Velho Transmissora		—			100	%		—			49	%
Boa Vista Energia		—			100	%		—			100	%
Estação Transmissora		—			100	%		—			49	%
Artemis		—			100	%		—			49	%
Rio Branco Transmissora		—			100	%		—			49	%
Uirapuru		—			75	%		—			75	%

F-19

	Interest						Interest
Jointly-Controlled Subsidiaries (Proportional Consolidation)	Direct			Indirect			Direct			Indirect
Itaipu		50	%		—			50	%		—
Inambari		29	%		49	%		29	%		49	%
Norte Energia		15	%		49	%		—			—
CHC		50	%		—			50	%		—
Amazônia Eletronorte		—			49	%		—			49	%
Baguari		—			31	%		—			31	%
Brasnorte		—			50	%		—			50	%
Bransventos Eolo Geradora de Energia		—			25	%		—			25	%
Brasventos Miassaba 3		—			25	%		—			25	%
Caldas Novas Transmissão		—			50	%		—			50	%
Centro Oeste de Minas		—			49	%		—			49	%
Chapecoense		—			40	%		—			40	%
Cia de Transm. Centroeste de Minas		—			49	%		—			49	%
Construtora Integração		—			49	%		—			49	%
Costa Oeste		—			49	%		—			49	%
Cerro dos Trindades		—			49	%		—			49	%
Chui		—			49	%		—			49	%
Chui I		—			49	%		—			49	%
Chui II		—			49	%		—			49	%
Chui IV		—			49	%		—			49	%
Chui V		—			49	%		—			49	%
Enerpeixe		—			40	%		—			40	%
Cerro Chato I		—			90	%		—			—
Cerro Chato II		—			90	%		—			—
Cerro Chato III		—			90	%		—			—
Cerro Chato IV		—			49	%		—			49	%
Cerro Chato V		—			49	%		—			49	%
Cerro Chato VI		—			49	%		—			49	%
Ibirapuitã		—			49	%		—			49	%
Integração Transmissora		—			49	%		—			49	%
Interligação Elétrica Garanhuns		—			49	%		—			49	%
Energia Sustentável do Brasil		—			40	%		—			40	%
Interligação Elétrica do Madeira		—			49	%		—			49	%
Empresa de Transm. do Alto Uruguai		—			27	%		—			27	%
Goiás Transmissão		—			49	%		—			49	%
Linha Verde Transmissora		—			49	%		—			49	%
Livramento Holding					49	%		—			49	%
Madeira Energia		—			39	%		—			39	%
Manaus Construtora		—			20	%		—			20	%
Manaus Transmissora		—			50	%		—			50	%
Marumbi		—			20	%					20	%
MGE Transmissão		—			49	%		—			—
Minuano I		—			49	%		—			49	%
Minuano II		—			49	%		—			49	%
Norte Brasil Transmissora		—			49	%		—			49	%
Pedra Branca		—			49	%		—			—
Rei dos Ventos 3 Geradora		—			25	%		—			25	%
Retiro Baixo		—			49	%		—			49	%
São Pedro do Lago		—			49	%		—			—

F-20

Serra do Facão	—	50	%	—	50	%
Santa Vitória do Palmar Holding	—	49	%	—	49	%
Sete Gameleiras	—	49	%	—	—
Sistema de Transmissão Nordeste	—	49	%	—	49	%
Sul Brasileira	—	80	%	—	80	%
Teles Pires	—	49	%	—	49	%
Transleste de Transmissão	—	24	%	—	24	%
Transmissão Delmiro Gouveia	—	49	%	—	49	%
Transenergia Goiás	—	49	%	—	49	%
Transenergia Renovável	—	49	%	—	49	%
Transenergia São Paulo	—	49	%	—	49	%
Transirapé de Transmissão	—	25	%	—	25	%
Transudeste	—	25	%	—	25	%
Verace I	—	49	%	—	49	%
Verace II	—	49	%	—	49	%
Verace III	—	49	%	—	49	%
Verace IV	—	49	%	—	49	%
Verace V	—	49	%	—	49	%
Verace VI	—	49	%	—	49	%
Verace VII	—	49	%	—	49	%
Verace VIII	—	49	%	—	49	%
Verace IX	—	49	%	—	49	%
Verace X	—	49	%	—	49	%

The consolidated financial statements include balances and transactions of the exclusive funds which the only shareholders are the Company and its subsidiaries, comprised by public and private securities and debentures of companies rated as low risk and high bond liquidity.

The exclusive funds, whose financial statements are regularly reviewed/audited, are subject to liabilities restricted to payment for asset management services, attributed to the operation of investments, and there are no material financial liabilities.

(b) Investments in associates

Associates are those entities over which the Group has significant influence but not the control, usually through an interest of 20% to 50% of voting rights. Jointly-controlled subsidiaries are those entities over which the Group has shared control with one or more parties. Significant influence is the power to participate in decisions on financial and operational policies of the investee, without exercising individual or joint control over these policies.

Whenever necessary, the financial statements of associates are adjusted to adequate their accounting policies to those adopted by the Company. Investments in associates and jointly-controlled subsidiaries are stated by the equity method and are, initially, recognized by their fair value. Investment in associates and jointly-controlled subsidiaries includes goodwill on the acquisition, net of any accumulated impairment losses.

Investments in associates are proportionally adjusted to the Company’s share in profits or losses and other comprehensive income of the associate. When the Company’s share in the losses of an associate exceeds the Company’s interest in that associate (including any long-term interest that, essentially, is included in the Company’s net investment in the associate), the Company no longer recognizes its share in additional losses. Additional losses are recognized solely if the Company has incurred in legal or constructive obligations or have made payments on behalf of the associate.

F-21

(c) Interest in joint ventures

A joint venture is a contractual agreement through which the Company and other parties exercise an economic activity subject to joint control, a situation in which the decisions on financial and operational strategic policies related to the activities of the joint venture require the approval of all parties sharing control.

Whenever a subsidiary of the Company directly performs its activities through a joint venture, interest of the Company in jointly controlled assets and any liabilities jointly incurred with the other controlling shareholders is accounted for in the financial statements of the respective subsidiary and classified according to their nature. Incurred liabilities and expenditures directly related to interest in jointly controlled assets are accounted for on an accrual basis. Any gains from the sale or use of the interest of the Company in yields from jointly controlled assets and its participation in any expenses incurred by the joint venture are recognized when it is probable that the economic benefits associated to the transactions will be transferred to/from the Company and its value can be reliably measured.

The Company discloses its interest in jointly-controlled subsidiaries, in its consolidated financial statements, using the proportional consolidation method. The Company’s share in assets, liabilities and results of jointly-controlled subsidiaries are added up to corresponding items in the consolidated financial statements of the Company, line by line.

3.3 Group’s companies with different functional currency

(a) Proportional consolidation procedures of jointly-controlled subsidiary Itaipu Binacional

The financial statements of the jointly-controlled subsidiary Itaipu Binacional were originally prepared in U.S. dollars (functional currency). Assets and liabilities were converted into reais at the exchange rate of December 31, 2011 of US$1.00 to R$1.8758, published by the Brazilian Central Bank (December 31, 2010 – US$1.00 – R$1.6662), and income statements were converted into reais at the monthly average exchange rate;

The results to offset from Itaipu Binacional were stated as a financial asset.

Return on capital (dividends as established by the bilateral treaty Brazil – Paraguay) paid by Itaipu Binacional, accounted for as a revenue in the parent company was eliminated in the consolidation; and

All results generated by Itaipu Binacional in the consolidated statements, proportional to the shareholding interest of the Company (50%), is eliminated in the consolidation as a corresponding entry of Result to Offset from Itaipu Binacional.

(b) Foreign currency translation

(b.1) Functional and reporting currency

The items included in the financial statements of the Group’s companies are measured using the currency of primary economic environment in which the company operates (“functional currency”).

The functional currency of the jointly-controlled subsidiary Itaipu Binacional between Brazil and Paraguay is the U.S. dollar.

The functional currency of the Special Purpose Entity, which operates in the international economic environment, is generally the currency of the country where such SPE operates.

The statements of income and cash flows of investees that operate with functional currency different from the parent company, are translated into reais according to the monthly average exchange rate, the assets and liabilities are converted according to the final rate and other items of shareholders’ equity are translated according to the historical rate.

F-22

Exchange variations on investments with functional currency different from the parent company are recorded in the shareholders’ equity as translation accumulated adjustment, which is transferred to the income for the year when investments are made.

(b.2) Transactions and balances

When preparing the financial statements of each company, transactions in foreign currency, i.e., any currency different from the functional currency of each company, are accounted for according to the exchange rates at the date of each transaction. At the end of each fiscal year, monetary items in foreign currency are reconverted by exchange rates in force at the year-end. Non-monetary items measured at historical cost in a foreign currency must be translated using the exchange rate at the date of each transaction.

Exchange gains and losses on monetary items are accounted for in the income statement of the year when they are incurred, except for exchange rate changes arising from loans and financing in foreign currency related to assets in construction for future productive use, which are included in the cost of these assets whenever they are considered to be adjustments to interest costs of the referred loans.

For reporting purposes, in the consolidated financial statements, assets and liabilities of the Company’s overseas operations are translated into reais, using the applicable exchange rates at the year-end. The income statement accounts are converted at the average exchange rate for the year, unless the exchange rates have floated significantly during the year; in this case, the exchange rates on the date of transaction shall be used. Exchange rates changes resulting from these conversions, if any, are classified as comprehensive income and accumulated in the shareholders’ equity, being assigned to non-controlling interest when appropriate.

3.4. Cash and cash equivalent

Cash and cash equivalents include cash, bank deposits, other highly liquid short-term investments with original maturities of up to three months and with insignificant risk of change in value.

3.5. Clients and allowance for doubtful accounts

The accounts receivable from clients (consumers and resellers) are comprised of credits from electricity provisions and supplies, including those related to energy traded at the Electric Power Trading Chamber – CCEE, and these credits are initially recognized at the amount billed. The Company makes an assessment of our uncollectible debts on an ongoing basis and it records an allowance for doubtful accounts, if necessary.

The accounts receivable are normally settled within a period of up to 45 days, which is why the carrying amounts substantially represent the fair values on the fiscal year closing dates.

They also include power supply not yet invoiced, arising substantially from distribution activities measured by estimates based on historical MW/h consumption.

If receipt term corresponds to one year or less, accounts receivable are classified in current assets. Otherwise, they are stated as non-current assets (Note 7).

3.6. Fuel Consumption Account - CCC

Under Law No. 8.631, of March 4, 1993, the Company manages the amounts related to the tax payments made by the electricity public utility concessionaires, for credit in the Fuel Consumption Account – CCC, corresponding to annual quotas allocated to expenses with fuel for electric power generation. The amounts registered in current assets, in compensation for the current liability, correspond to the availability of resources maintained in a linked bank account, and to quotas not paid by the concessionaires. The amounts registered in current assets are updated by the profitability of the investment and represent restricted cash, not available for use in other purposes.

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CCC operations do not affect the Company’s income for the year.

3.7. Guarantees and Restricted Deposits

The recorded amounts cover legal and/or contractual compliance obligations. They are measured at acquisition cost plus interest and monetary restatement based on legal provisions and adjusted for impairment where applicable. These assets are considered loans and receivables, and their redemption is conditioned on the conclusion of legal proceedings to which these deposits are connected.

3.8. Warehouse (storeroom)

Warehouse materials, classified under current assets, are registered at average acquisition cost, which does not exceed their replacement costs or net realization value.

3.9. Nuclear fuel inventory

Nuclear fuel inventory is composed of uranium concentrate, related services and other elements of nuclear fuel used at the thermonuclear power plants of Angra I and Angra II and are recorded based on their acquisition costs.

In its initial phase of formation, uranium ore and services necessary to its manufacturing are acquired and accounted for as non-current assets - long-term assets, stated under Nuclear Fuel Inventories. After concluding the manufacturing process, the portion related to the consumption forecast for the next 12 months is classified as a current asset.

Consumption of nuclear fuel elements is included in the income statement in a proportional manner, considering electric power effectively generated per month in relation to total electric power forecasted for each fuel element. The Company periodically monitors and evaluates the inventory of nuclear fuel elements that underwent electric power generation and are subsequently stored in the used fuel warehouse.

3.10. Fixed Assets

The Company concluded that generation assets, including nuclear generation and certain assets of corporate use do not qualify as being within the scope of IFRIC 12 – Concession Arrangements (Note 3.13). Accordingly, the generation assets are stated at cost, less accumulated depreciation and impairment losses. In the case of qualifying assets, capitalized borrowing costs are registered according to the accounting policy of the Company. These fixed assets are classified under their respective categories of fixed assets when they are finalized and ready for their intended use. Depreciation of these assets starts when they are ready for the intended use on the same basis as other fixed assets.

Depreciation is calculated based on the estimated useful life of each asset, by the linear method, so that the cost value less its residual value and after its useful life, is fully written off (except for land and construction in progress). The Company believes that the estimated useful life of each asset is similar to depreciation rates established by ANEEL, which are deemed to be acceptable by the market as they appropriately express assets’ useful lives. Additionally, in connection with the Company’s understanding of the current concession legislation and based on an opinion of an independent legal advisor, the indemnification at the end of the concession based on the residual carrying amount was taken into account when measuring fixed assets (see details in Note 15).

Assets held through financial leasing are depreciated by the expected useful life, similar to assets owned by the Company, or for a shorter period, where applicable, under the terms of the respective lease contract.

A fixed asset item is written off after sale or when there are no future economic benefits resulting from continuous use of the asset. Any gains and losses in sales or write-offs of fixed asset items are determined by the difference between the amounts received from the sale and the carrying amount and are included in the income statement.

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3.10.1. Borrowing costs

The acquisition cost of fixed assets in progress is added every month by interest and, if applicable, the exchange variation incurred on loans and financing considers the following criteria for capitalization:

a) The capitalization period occurs when the qualifying asset is under construction, and the interest capitalization ceases when the item is available for use;

b) Interest is capitalized based on the weighted average rate of the loans and financing outstanding on the capitalization date or rates of specific loans;

c) Interest capitalized monthly does not exceed the amount of interest expenses incurred in the capitalization period;

d) Capitalized interest is depreciated under the same criteria and estimated useful life established for the item to which they were incorporated.

Gains on investments arising from temporary application of resources from specific loans and financing not yet used for the qualifying asset are deducted from borrowing costs and financing eligible for capitalization, whenever the effect is material.

All other borrowing costs and financing are recognized in the income statement of the year they are incurred.

3.11. Concession contracts

The Company has concession contracts in the segments of generation, transmission and distribution of electric power, signed with the grantor on behalf of the federal government, for periods ranging from 20 years to 35 years. All of these contracts by segments are very similar in terms of rights and obligations of the concessionaire and the grantor. The terms of the main concessions are described in Note 2.

I - Tariff System

a) The electricity distribution tariff system is controlled by the National Electricity Regulatory Agency – ANEEL, and such tariffs are annually adjusted and reviewed at each four year period, aimed at maintaining the economical-financial balance of the Company, considering conservative investments made and the cost and expense structure of the reference company. The services are charged directly to the users, based on the volume of the consumed electricity and the authorized tariff.

b) The electricity transmission tariff system of the old contracts is regulated by ANEEL and there are periodic tariff reviews, and for new transmission contracts there is a Fixed Allowed Annual Revenue – RAP, which is valid for the entire concession term, being updated annually by an inflation rate and subject to periodic reviews to cover new investments and occasional issues of economic-financial balance of the concession contracts.

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c) The electricity generation tariff system was, in general, based on regulated tariff until 2004, and after this date, in connection with the changes in regulations for this sector, it changed from tariff basis to a price system, and the electricity generation companies are free to participate in electricity auctions for regulated market, with, in this case, a basic price, and the final price is established in a competition between the participants in the auction. Additionally, electricity generation companies may sign bilateral sale agreements with consumers qualifying in the free consumers category (definition based in demanded power in MW).

II - Transmission and Distribution Concessions

Concession contracts regulate the exploration of electricity distribution and transmission public utilities by the Company, where:

1) Electricity distribution

a) The contract establishes which services the operator shall render and to whom (consumer class) the services shall be rendered;

b) The contract establishes performance standards for public utility, related to maintaining and improving service quality to the consumers, and the concessionaire is requited, in the end of the concession, to return the infrastructure in the same conditions it has received it when signing these contracts. To comply with this obligation, constant investments are made during the term of the concession. Thus, assets linked to the concession might be replaced, sometimes, until the end of the concession;

c) At the end of the concession, assets linked to infrastructure must revert to the grantor through an indemnification;

2) Electricity transmission

a) The price (tariff) is regulated and is denominated Allowed Annual Revenue (RAP). The electricity transmission company cannot negotiate prices with users. For some contracts, RAP is fixed and monetarily updated by price indexes once a year. For the remaining contracts, RAP is monetarily updated by a price index once a year, and is reviewed each five years. Generally, RAP for any electricity transmission company is subject to annual review due to increasing assets and operational expenses arising from changes, improvements and enlargement of facilities;

b) Assets are reversible in the end of the concession, entitled to indemnification (cash) from the grantor on investments not yet amortized.

II.1 Adoption of IFRIC 12 (Services Concession Arrangements), applicable to public-private concession contracts in which the public entity:

a) Controls or regulate the type of services that may be rendered, with resources to underlying infrastructures;

b) Controls or regulates the price for services rendered;

c) Controls/holds significant interest in the infrastructure in the end of the concession.

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A public-private concession presents, typically, the following characteristics:

a) An underlying infrastructure to the concession, which is used to render services;

b) An agreement/contract between grantor and operator;

c) The operator renders a set of services during the concession;

d) The operator receives a compensation throughout the term of the concession contract, either directly from the grantor, or from users of the infrastructure, or from both;

e) Infrastructures are transferred to the grantor at the end of the concession, usually free of charge or also by payment.

According to IFRIC 12 (Services Concession Arrangements), concession infrastructures qualifying in the rule are not recognized by the concessionaire as fixed assets, since the operator is deemed not to be in control of such assets, being then recognized according to one of the accounting models, depending on the type of compensation commitment assumed by the grantor within the scope of the contract:

1) Financial asset model

This model is applicable when the concessionaire has an unconditional right to receive certain monetary amounts regardless of the level of use of the infrastructures under the concession and results in registering a financial asset, which is classified as loans and receivables.

2) Intangible asset model

This model is applicable when the concessionaire, within the scope of the concession, is compensated based on the degree of usage of infrastructures (credit risk and demand) related to the concession and results in registering an intangible asset.

3) Mixed model

This model is applied when the concession includes simultaneously compensation obligations guaranteed by the grantor and compensation obligations depending on usage level of the concession infrastructure.

Based on the characteristics established in the electricity distribution concession contracts of the Company and its subsidiaries and in the requirements of the rule, the following assets are recognized on the electricity distribution business:

a) Estimated part of the investments made and not amortized or depreciated until the end of the concession is classified as a financial asset, for being an unconditional right to receive cash or other financial asset directly from the grantor; and

b) Remaining portion of the financial asset (residual value) shall be classified as an intangible asset due to its recovery being subject to the use of the public utility, in this case, electricity consumption by consumers.

The infrastructure received or built for the distribution activity is recovered through two cash flows:

a) Partly through electricity consumption by consumers (monthly invoicing based on the measure of electricity and power consumed/sold) during the term of concession; and

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b) Partly as an indemnification of the reversible assets in the end of the concession, to be received directly from the grantor or from whom it delegates this task.

This indemnification shall be paid based on parts of investments linked to reversible assets, not yet amortized or depreciated, which have been made aiming at assuring continuity and updating of the services.

The electricity distribution concessions of the Company and its subsidiaries are not costly. Therefore, there are no fixed financial obligations and payments to be made to the grantor.

For electricity transmission activities, the Fixed Allowed Annual Revenue – RAP is received from companies using its infrastructure, through tariff for transmission system use (TUST). This tariff results from dividing some specific values amongst transmission users; (i) the RAP of all transmission companies; (II) the services rendered by the National Electric System Operator - ONS; and (III) regulatory charges.

The grantor delegated to generation companies, distribution companies, free consumers, export and import companies the monthly payment of RAP, which can be guaranteed by the transmission regulatory framework, constituting an unconditional contractual right to receive cash or other financial asset, thus the credit risk is low.

Considering the Company is not exposed to risk credits and the demand and revenue is earned based in the availability of transmission lines, the whole infrastructure was registered as financial assets.

The financial asset includes the indemnification that shall be paid based on parts of investments linked to reversible assets, not yet amortized or depreciated, which have been made aiming at assuring continuity and updating of the services.

In the electricity generation business, except for Itaipu and Amazonas Energia, IFRIC 12 (Services Concession Arrangements) is not applicable, and the infrastructure remains classified as fixed assets. However, the rule is applicable to electricity distribution and transmission, and these businesses qualify in the mixed model (divided) and in the financial model, respectively.

III. Generation concessions

a) Hydraulic and thermal generation – not applicable due to price characteristics instead of regulated tariff. The only exception refers to generation at Amazonas Energia, which is destined exclusively to the distribution operation and which has a specific tariff mechanism;

b) Nuclear generation – It has a defined tariff system, however, it differs from other generation contracts for being a permission instead of a concession, without an established term for the end of the permission as well as the characteristics of significant control of the assets by the grantor in the end of the permission period.

c) Itaipu Binacional- the infrastructure was classified as being in the scope of IFRIC 12 (Services Concession Arrangements), due to the following specific facts.

IV. Itaipu Binacional

a) Itaipu Binacional is ruled by a Bilateral Treaty signed in 1973 in which were established tariff conditions, the basis of tariff formation being determined exclusively to cover expenses and the debt service of this Company;

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b) Tariff basis and trading terms are in force until 2023, which corresponds to a significant part of the useful life of the power plant.

The infrastructure was classified as a financial asset taking into consideration the following aspects:

a) The financial flow was established mainly to enable payment of the debt service, with final maturity in 2023;

b) The trading of electricity from Itaipu was subrogated to the Company, however it was arising from contracts previously signed with distribution companies, under previously defined payment conditions;

c) Under the Law 10,438, of April 26th, 2002, the commitments of acquisition and transfer to distribution concessionaires of electricity services from Itaipu Binacional signed so far by Furnas and Eletrosul, subsidiaries of Eletrobras, with electricity distribution concessionaires were transferred to the Company. Debt arising from trading electricity from Itaipu Binacional was renegotiated with the Company, originating financing contracts. These contracts were initially accounted for at fair value, and subsequently measured at amortized cost using the effective interest method.

d) The terms of the treaty guarantee reimbursement of the Company even in events of lack of generating capacity or operational problems with the power plant.

V. Financial asset – Public Utility Concessions

The Company recognizes a receivable credit from the grantor (or from whom the grantor has granted) when it has an unconditional right to receive cash in the end of the concession as an indemnification for investments made by electricity distribution and transmission companies and not recovered through services related to the concession. These financial assets are accounted for at fair value of the rights and are calculated based on the estimated part of investments made and not amortized or depreciated until the end of the concession. Assets related to electricity distribution are compensated based on the WACC regulatory remuneration, being this factor included in the tariff basis and assets related to electricity transmission are compensated based on the internal rate of return of the enterprise.

These accounts receivable are classified as current and non-current considering the receiving expectation of these amounts, based on the termination date of the concessions.

Construction revenue is recognized when a concession asset is acquired, but because it generates additional revenue, it is classified as a financial asset. As the construction services are generally provided by third parties, the Company does not calculate margins on construction, and recognizes construction costs in the same amount as revenue. Margins are calculated by some of the special purpose entities of the Company.

3.12. Intangible Assets

The Company recognizes as an intangible asset the right to charge users for providing electricity distribution services (for the generation, the infrastructure of Amazonas Energia, which has exclusive relation with distribution activity of this sane company, is also classified as intangible asset). The intangible asset is determined as the residual value of the construction revenue earned for the construction or acquisition of infrastructure made by the Company and the amount of the financial asset related to the unconditional right to receive cash in the end of the concession as an indemnification.

The asset is presented net of accumulated amortization and impairment losses, where applicable.

The amortization of the intangible asset reflects the pattern in which the future economic benefits of the asset are expected to be consumed by the Company, or the final term of the concession, whatever occurs first. The consumption pattern of the assets is related to its economic useful life in which the assets built by the Company comprise the calculation basis for measuring the tariff for rendering the services of the concession.

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The amortization of the intangible asset starts when it is available for use, in its location and under the conditions necessary to be capable of operating in the expected manner by the Company. Amortization ceases when the asset has been fully consumed or written off, no longer comprising the calculation basis of the tariff for rendering the services of the concession, whichever occurs first.

The Company performs annually the recoverability test on their assets, using the method of present value of future cash flows generated by the assets (see Note 18).

Intangible assets are basically comprised by usage rights of the concession, but also include goodwill on the acquisition of investments and specific expenditures associated to the acquisition of rights, plus the respective implementation costs, where applicable.

Intangible assets with defined useful lives acquired separately are registered at cost, deduced of accumulated amortization and impairment losses. Amortization is accounted for by the linear method based on the estimated useful life of the assets. The estimated useful life and the amortization method are reviewed in the end of each fiscal year and the effects of any changes are timely accounted for.

Intangible assets with undefined useful lives acquired separately are registered at cost, deduced of accumulated amortization and impairment losses.

3.12.1. Costly Concessions

The company and some subsidiaries have costly concession contracts with the Union for usage of public property for electricity generation in certain power plants.

The amounts identified in the contracts are presented at future prices and, therefore, the Company and these subsidiaries have adjusted to present value these contracts based on the discount rate calculated for the maturity date.

The liability updating due to the discount rate and monetary restatement is being capitalized in the assets during the construction of the power plants and will be, from the date of startup, recognized directly in the income statement.

These assets are recorded in intangible assets as corresponding entry of non-current liability.

3.12.2. Expenditures with Studies and Projects

The amounts spent on studies and projects, including feasibility and hydroelectric utilization and transmission lines inventories, are recognized as operating expenses when incurred, until the economic feasibility of their exploration or the bestowal of concession or authorization are effectively proved. From the concession and/or authorization for the exploration of the electricity public utility, or the confirmation of the project’s economic feasibility, the expenses incurred are capitalized as project development cost. Currently, the Company does not have capitalized amounts referring to expenses with studies and projects.

3.13. Impairment of non-financial assets, excluding goodwill

At the end of each fiscal year, the Company evaluates if there is any evidence that its non-financial assets have suffered any impairment losses. In case there is such evidence, the recoverable amount of the asset is estimated, in order to measure the amount of this loss, if any. When it is not possible to individually estimate the recoverable amount of an asset, the Company calculates the recoverable amount of the cash generating unit to which the asset belongs.

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When a reasonable and consistent allocation basis can be identified, corporate assets are also allocated to individual cash generating units or to the smallest group of cash generating units to which a reasonable and consistent allocation basis can be identified.

The recoverable amount is the highest between fair value less sale costs or the value in use. In the evaluation of the value in use, future estimated cash flows are discounted at present value at a discount rate which reflects an updated appraisal of the money value in time and specific risks related to the asset for which the estimated future cash flows was not adjusted.

If the calculated recoverable amount of an asset (or cash-generating unit) is lower than its carrying amount, the book equity value of the asset (or cash-generating unit) is reduced to its recoverable amount. The loss corresponding to the reduction to the recoverable value is immediately recognized in the income statement.

When the impairment loss is subsequently reversed, there is an increase in the carrying amount of the asset (or cash-generating unit) to the reviewed estimate of its recoverable amount, given that it does not exceed the carrying amount that would have been determined if no impairment loss was accounted for the asset (or cash-generating unit) in previous fiscal years. The reversal of the impairment loss is immediately recognized in the income statement.

Due to historical operating losses on distribution companies of Eletrobras, the Company annually performs the recoverability test using the method of the present value of future cash flows generated by the assets, resulting in an amount lower than the amount recorded in distribution companies (see Note 18). Additionally, considering that the company’s equity value is higher than the market value, the impairment test is also annually conducted for other business units through the discounted cash flow.

3.14. Goodwill

Goodwill resulting from a business combination is presented at cost on the date of the business combination, net of the accumulated impairment loss, where applicable.

For impairment test purposes, goodwill is allocated to each of the cash-generating units of the Company (or groups of cash-generating units) that will benefit from the synergies arising from the combination.

Given that the investing operations of the Company are linked to operations under concession contracts, goodwill arising from the acquisition of such entities represents the concession right with defined useful life, being recognized as an intangible asset of the concession, and amortization is calculated according to the term of the concession.

3.15. Business combinations

Business combinations occurred until December 31, 2008 were accounted and the goodwill and negative goodwill from acquisitions of interest from non-controlling shareholders after January 1, 2009 are fully allocated to the concession contract and recognized as intangible assets.

3.16. Taxation

Expenses with income tax and social contribution represent the sum of current and deferred taxes. Calculating taxes based on the Company’s results is done through the taxable income method.

3.16.1. Current taxes

Provision for income tax and social contribution (IRPJ and CSLL) is based on the taxable income of the year. Taxable income differs from the net income presented in the income statement, since it excludes taxable or deductible revenues or expenses in other years, additionally to excluding non-taxable or non-deductible items permanently. Provision for income tax and social contribution is individually calculated to each subsidiary of the Company based on the rates in force in the end of the fiscal year.

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3.16.2. Deferred Taxes

Deferred income tax and social contribution are recognized based on temporary differences in the end of each reporting period between the balances of assets and liabilities recognized in the financial statements and the corresponding tax basis used in the calculation of the taxable income, including the balance of tax losses, where applicable. Deferred tax liabilities are generally recognized on all taxable temporary differences and deferred tax assets are recognized on all deductible temporary differences, when it is probable that the company will present future taxable income in a sufficient amount to use such deductible temporary differences.

The recovery of deferred tax assets is reviewed in the end of each reporting period and, when it is no longer probable that future taxable income will be available to allow the recovery of the full asset, or part of it, the balance of the asset is adjusted by the amount expected to be recovered.

Deferred tax assets and liabilities are measured by applicable tax rates in the period in which it is expected that the liability is settled or the asset is realized, based on tax rates established by tax legislation in force in the end of each reporting period, or when a new legislation have been substantially approved. Measurement of deferred tax assets and liabilities reflects tax consequences resulting from the manner in which the Company expects, in the end of each reporting period, to recover or settle the carrying amount of these assets and liabilities.

Current and deferred taxes are recognized in the income statement, except when they correspond to items registered in Other Comprehensive Income, or directly in shareholders’ equity, a case in which current and deferred taxes are also recognized in Other Comprehensive Income or directly in shareholders’ equity, respectively.

3.17. Financial instruments

Financial assets and liabilities are recognized whenever an entity of the Company is part of the contractual provisions of the instrument.

Financial assets and liabilities are initially measured at fair value. Transaction costs directly attributable to the acquisition or issuance of financial assets and liabilities (except for financial assets and liabilities accounted for at fair value in the income statement) are added by or deduced of the fair value of financial assets or liabilities, if applicable, after initial recognition. Transaction costs directly attributable to acquisition of financial assets or liabilities at fair value through profit or loss are immediately recognized in the income statement.

3.17.1. Financial assets

Financial assets are classified in the following specific categories: financial assets at fair value through profit or loss, investments held until maturity, financial assets available for sale and loans and receivables. Classification depends on the nature and purpose of the financial assets and is determined in the date of the initial recognition.

a) Financial assets at fair value through profit or loss

The financial assets are classified at fair value through profit or loss when they are held for trading with the purpose of sale in the short term or designated at fair value through profit or loss.

The financial assets at fair value through profit or loss are stated at fair value, and any resulting gains or losses are recognized in the income statement. Net gains and losses recognized in the income statement accrue dividends or interest earned by the financial asset, being included under other financial revenues and expenses, in the income statement.

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b) Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity date, which the Company has the intention and ability to maintain until maturity. After initial recognition, investments held to maturity are measured at amortized cost using the effective interest method, less any impairment losses.

c) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments and that are not quoted in an active market. Loans and receivables (including accounts receivable from clients and others, cash and cash equivalents, and others) are measured at amortized cost using the effective interest method, deduced of any impairment losses.

Interest revenue is recognized through application of the effective interest rate.

d) Available-for-sale financial assets

Available-for-sale financial assets correspond to non-derivative financial assets designated as available for sale, or not, classified as:

1) financial assets at fair value through profit or loss,

2) investments held to maturity, or

3) loans and receivables, which are initially recorded by their acquisition, which is the fair value of the price paid, including transaction expenses. After initial recognition, they are reappraised at fair value by reference to their market value, without any deductions related to transaction costs that might be incurred until its sale.

3.17.2. Impairment of financial assets

Financial assets, except those designated at fair value through profit or loss, are evaluated by impairment indexes in the end of each reporting period. Impairment losses are recognized if, and only if, there is objective evidence of impairment of the financial asset resulting from one or more events that have occurred after its initial recognition, with impact on the estimated future cash flows of this asset.

In the case of capital investments classified as available for sale, a significant or long fall in the fair value of a security below its cost is also evidence that the assets are deteriorated. If there is any evidence of this type for financial assets available for sale, the cumulative loss (measured as the difference between the acquisition cost and current fair value, less any impairment loss on the financial asset previously recognized in the income statement) shall be removed from the balance sheet and recognized in the consolidated income statement. Impairment losses recognized in the income statement in equity instruments are not reversed in the scope of the consolidated income statement. If, in a subsequent period, the fair value of a debt instrument classified as available for sale increases, and this increase can be objectively related to an event occurred after the impairment loss have been recognized in the result, the impairment loss is reverted through the income statement.

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3.17.3. Derecognition of financial assets

The Company derecognizes a financial asset only when the contractual rights to the cash flows from this asset expire or are transferred together with all the risks and benefits of ownership. If the Company does not transfer or does not hold substantially all risks and benefits of ownership of the financial asset, but remains controlling the transferred financial asset, the Company recognizes the interest held and the respective liability in the amounts it shall pay. If it holds substantially all risks and benefits of ownership of the transferred financial asset, the Company remains recognizing this asset, as well as a guaranteed loan for the revenue earned.

In the derecognition of a financial asset, the difference between the carrying amount of the asset and the sum of the consideration received and receivable and the accumulated gain or loss recognized in Other Comprehensive Income and accumulated in equity, is recognized in the income statement.

3.17.4. Financial liabilities

Financial liabilities are classified as financial liabilities at fair value through profit or loss or loans and financing.

a) Financial liabilities at fair value through profit or loss

The financial liabilities are classified at fair value through profit or loss when they are held for trading in the short term or designated at fair value through profit or loss. The financial liabilities at fair value through profit or loss are stated at fair value, and the respective gains or losses are recognized in the income statement.

b) Loans and financing

Loans and financing are measured at amortized fair value using the effective interest method.

The effective interest method is used to calculate the amortized cost of a financial liability and to allocate its interest expense throughout the respective period. The effective interest rate is the rate discounting exactly the estimated future cash flows (including fees and points paid or received, constituting a part of the effective interest rate, transaction costs and other premiums or discounts) throughout the estimated life of the financial liability or, when appropriate, for a shorter period, for initial recognition of the net carrying amount.

3.17.5. Financial guarantee agreements

Financial guarantee agreements consist of contracts that require the issuing company to make specified payments, in order to reimburse the holder for losses arising from the circumstance when the specified debtor does not pay in the maturity date, according to the initial or amended conditions of the debt instrument.

Financial guarantees are initially recognized in the financial statements at fair value in the date of issuance of the guarantee. Subsequently, liabilities related to guarantees are measured by the highest initial value less amortization of the recognized rates and the best estimate of the amount required settling the guarantee.

These estimates are established based on the experience with similar transactions and on the history of past losses together with judgment by the company’s management. The rates received are recognized based on the linear method throughout the life of the guarantee. Any increase in liabilities related to guarantees is stated when incurred, in operating expenses. (See Note 21).

3.17.6 Derivative financial instruments

The Company does not have derivative financial instruments to hedge its exposure to interest rate and exchange rate risks, including exchange contracts, interest rate and currency swaps. Note 42 includes detailed information regarding derivative financial instruments. Certain jointly controlled companies entered into derivative agreements, and in some cases the hedge accounting policy was applied.

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Initially, the derivatives are recognized at fair value on the date a derivatives agreement is entered into and, subsequently, are re-measured to their fair value in the end of the fiscal year. Occasional gains or losses are immediately recognized in the result, except when the derivative has been designated as, and effectively is a cash flow hedge instrument; in this case, the moment of recognition in the income statement depends on the nature of the hedge relationship.

3.17.7. Embedded derivatives

Embedded derivatives in non-derivative contracts are treated as a separate derivative when their risks and characteristics are not strictly related to the respective contracts and these are not measured at fair value through profit or loss.

3.17.8. Hedge accounting

The Company has a hedge accounting policy, however, except for operations of certain SPEs, it does not have transactions classified as such. Derivative financial instruments designated in hedge operations are initially recognized at fair value on the date the derivative agreement is signed, being subsequently restated, also at fair value. Derivatives are presented as financial assets when the fair value of the instrument is positive and as financial liabilities when the fair value is negative.

In the beginning of the hedge relation, the Company documents the relation between the hedge instrument and the object item of the hedge with its risk management objectives and its strategy to assume various hedge operations. Additionally, in the beginning of the hedge and continuously, the Company records if the hedge instrument used in a hedge operation is highly effective at offsetting changes in the fair value or in the cash flows of the object item being hedged, attributable to risks inherent to the hedge.

For hedge accounting purposes, the Company uses the following classifications:

a) fair value hedges

Changes in the fair value of derivatives designated and qualified as fair value hedge are accounted for in the income statement, with any changes in the fair value of the object items being hedged attributed to protected risk. Changes in the fair value of hedge instruments and in the object item being hedged attributable to hedge risk are recognized in the income statement.

b) cash flow hedges

The effective part of the changes in the fair value of derivatives that is designated and qualified as cash flow hedge is recognized in other comprehensive income. Gains or losses related to the ineffective part are immediately recognized in the income statement.

The amounts previously recognized in other comprehensive income and accumulated in the balance sheet are reclassified to the income statement in the year when the object item being hedged is recognized in the income statement.

3.18. Post-employment benefits

3.18.1 Retirement liabilities

The Company and its subsidiaries sponsor a number of pension plans, which are generally funded by contributions to insurance companies or trust funds determined by periodic actuarial calculations. The Company sponsors defined benefit and contribution plans. A defined contribution plan is a pension plan under which the Company pays defined contributions to a separate entity and does not have any legal or

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constructive obligation to pay contributions if the fund does not possess sufficient assets to pay, to all employees, benefits related to the services rendered by the employees in current and previous years linked to this type of plan. A defined benefit plan is different from a defined contribution plan, given that such defined benefit plans establish the value of a post-employment benefit an employee will receive upon retirement, usually depending on one or more factors, such as age, service time and remuneration.

The liability recognized in the Balance Sheet related to defined benefit plans is the fair value of the defined benefit liability on the date of the balance sheet, less the fair value of the plan assets, with unrecognized adjustments of past service costs. The defined benefit liability is calculated annually by independent actuaries, using the projected credit unit method. The present value of the defined benefit liability is determined by discounting the estimated future cash outflow, using interest rates consistent with market yields, which are denominated in the currency in which the benefits will be paid and that have maturities close to those of the respective pension plan liability.

Actuarial gains and losses arising from adjustments based on experience and changes in actuarial assumptions are accounted for in other comprehensive income.

Past service costs are immediately recognized in the income statement, unless the changes to the pension plan are conditioned to the employee’s continuity in the job, for a specific period of time (the period in which the right is earned). In this case, past service costs are amortized by the linear method during the period in which the right was earned.

Regarding defined contribution plans, the Company pays contribution to public or private pension plans on compulsory, contractual or voluntary basis. As soon as the contributions have been made, the company has no additional payment-related obligations. The contributions are recognized as pension plan expenses, when incurred. Pre-paid contributions are recognized as assets as a cash reimbursement or a reduction of future payments is available. The Company adopts the practice of fully accounting for actuarial gains and losses in other comprehensive income.

3.18.2 Other post-employment liabilities

Some subsidiaries of the Company offer post-retirement medical assistance benefits to its employees, as well as life insurance for active and inactive employees. The right to these benefits is, usually, conditioned to the employee’s continuity in the job until retirement age and conclusion of a minimum service time. The expected costs of these benefits are accumulated during the employment period, under the same accounting methodology used for defined benefit pension plans. Actuarial gains and losses arising from adjustments based on experience and in changes to actuarial assumptions are accounted for in other comprehensive income in the remaining expected service period of the employees. These liabilities are measured, annually, by qualified independent actuaries.

3.18.3 Profit sharing

The Company recognizes a liability and expense based on employees and management profit sharing based on income attributable to the shareholders of the Company after certain adjustments. The Company recognizes a provision when it is contractually bound or when there is a past practice that created a non-formalized liability (constructive liability).

3.19. Provisions

Provisions are recognized for present liabilities (legal or presumed) resulting from past events, in which is possible to reasonably estimate the amounts and which settlement is probable. The amount recognized as a provision is the best estimate of the requirements to settle a liability in the end of each reporting period, considering the risks and uncertainties related to the liability. When the provision is measured based on the estimated cash flows to settle the liability, its carrying amount corresponds to the present value of these cash flows (where the effect of time value of money is relevant).

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3.19.1. Provision for decommission

As provided for in the pronouncement IAS 37 (Provisions, Contingent Liabilities and Contingent Assets), a provision is recorded throughout the economic useful life of thermonuclear power plants, aiming at allocating to the respective operating period, the costs to be incurred with their technical-operational deactivation, at the end of their useful life, estimated in 40 years.

The values are charged to the income statement of the fiscal year at present value, based on yearly quotas fixed in U.S. dollars, at the ratio of 1/40 of the estimated expenses, immediately registered and converted at the exchange rate at the end of each competence period (see Note 31).

3.19.2. Provision for legal liabilities linked to legal proceedings

Provisions for legal contingencies are recorded when the loss is considered to be probable, causing a probable outflow of resources to settle the liability and when the amounts involved are safely measurable, taking into account the opinion of legal counsel, nature of proceedings, similarity with previous proceedings, complexity and the court opinion.

3.19.3. Costly contracts

Current liabilities resulting from costly contracts are recognized and measured as provisions. A costly contract exists when the unavoidable costs incurred to comply with the provisions of the contract exceed the economic benefits expected to be earned throughout the same contract.

3.20. Advances for future capital increase

Advances of proceeds received from the controlling shareholder and intended for capital investment, are irrevocably granted. They are classified as non-current liabilities and initially recognized at fair value and subsequently restated by the SELIC interest rate.

3.21. Capital stock

Common and preferred shares are classified in shareholders’ equity.

Incremental costs attributable to the issue of new shares are presented in shareholders’ equity as a deduction of the amount received, net of taxes.

When the Company buys its own shares (treasury stock), the amount paid, including any additional costs directly attributable (net of income tax), is deduced of the capital attributable to the shareholders of the Company until these shares are cancelled or reissued. When these shares are subsequently reissued, any amount received, net of any additional transaction costs directly attributable, and of the respective effects of income tax and social contribution, is included in the capital attributable to the shareholders of the Company.

3.22. Interest on capital and dividends

The interest on capital is imputed to dividends of the fiscal year, calculated having a percentage on the shareholders’ equity as a limit, using the Long-Term Interest Rate – TJLP, established by the Brazilian Government, as per legal requirement, limited to 50% of the net profit of the fiscal year or 50% of the profit reserves, before including the profit of the fiscal year itself, whichever is higher.

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The amount of dividends above the minimum mandatory dividend established by Law or other legal instrument, not yet approved by the General Meeting are stated in Shareholders’ Equity, in a specific account referred to as additional proposed dividends.

3.23. Other comprehensive income

Other comprehensive income is comprised by revenue and expense items not recognized in the income statement. Components of other comprehensive income include:

• Actuarial gains and losses on defined benefit pension plans;

• Gains and losses from conversion of financial statements of operations abroad;

• Equity valuation adjustments related to gains and losses in the restatement of financial assets available for sale; and

• Equity valuation adjustment related to the effective part of gains and losses from hedge instruments on cash flow hedge.

3.24. Revenue recognition

Revenue is measured at fair value of consideration received or receivable, less any estimates of returns granted to the buyer and other similar deductions.

3.24.1. Sale of electricity and services

a) Generation and Distribution

Revenue is measured at fair value of the consideration received or receivable, less taxes and occasional discounts on it. Revenues from sales of electricity and services is recognized when it is probable that the economic benefits associated to the transactions will flow to the Company; the value of the revenue can be reasonably measured; the risks and benefits related to the sale were transferred to the purchaser; the costs incurred or to be incurred related to the transaction can be reasonably measured; and the Company no longer has control and responsibility over the electricity sold. It also includes revenue from construction linked to the segment of electricity distribution and part of generation within the scope of IFRIC 12 (Service Concession Arrangement).

b) Transmission

1) Financial revenue arising from remuneration of the financial asset until the end of the period of concession earned proportionally and that takes into account the average return rate of the investments.

2) Revenue to cover operating and maintenance expenses based on incurred costs.

3) Revenue from construction for expansions which generate additional revenue. Considering that these services are rendered by third parties, the Company does not calculate margins on constructions.

3.24.2. Dividend and interest revenues

Dividend revenue from investments in subsidiaries is recognized when the shareholder’s right to receive such dividends is established and given that it is probable that the future economic benefits shall flow to the Company and the value of the revenue can be measured with reliability. Revenue from interest financial assets is recognized when it is probable that the future economic benefits shall flow to the Company and the value of the revenue can be measured with reliability. Interest revenue is recognized by the linear method based on the time and effective interest rate over the outstanding principal amount, the effective interest rate being that which discounts exactly the estimated future cash receiving during the estimated life of the financial asset related to the initial net carrying amount of this asset.

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3.25. Leasing

Leasing is classified as financial whenever the terms of the leasing agreement transfer substantially all ownership risks and benefits to the tenant. All other leasing agreements are classified as operational.

Payments related to operational leasing are recognized as expenses by the linear method throughout the period the agreement is in force, except when another basis is more representative to reflect the moment when the economic benefits of the leased asset are consumed. Contingent payments arising from operational leasing agreements are recognized as expenses in the year they are incurred.

Assets acquired through financial leasing agreements are depreciated based on the useful life of assets.

3.26. Governmental subsidy

Governmental subsidies are recognized systematically in the income statement during the fiscal years in which the Company recognizes as expenses the related costs that the subsidy are intended to compensate. Governmental subsidy receivable as a compensation for already incurred expenses with the purpose of offering immediate financial support to the Company, without corresponding future costs, are recognized in the income statement of the period they are received and lately allocated to profit reserves and are not destined to dividend distribution.

3.27. Scheduled downtimes

The costs incurred before and during scheduled downtimes of power plants and transmission lines are accounted for in the income statement for the period they are incurred.

3.28. Calculation of the income for the fiscal year

The result is calculated by the accrual basis.

3.29. Basic earnings and diluted earnings

Basic earnings per share are calculated by dividing the income attributable to the shareholders of the Company by the weighted average number of outstanding shares (total shares less treasury stock). Diluted earnings per share are calculated adjusting the weighted average number of outstanding shares, to presume the conversion of all shares potentially diluted, according to IAS 33.

3.30. Presentation of business segment reports

Operational segments are defined as business activities where it is possible to earn revenues and incur expenses, which operating reports are provided to the main operational decision maker. The main operational decision maker responsible for allocating resources and for appraising the performance of operational segments is the Board of Directors, which is also responsible for the Company’s strategic decision making in the following business segments:

(I) Generation;

(II) Transmission;

(III) Distribution; and

(IV) Management.

The results from trading activities are stated together with the generation segment.

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3.31. Reclassification

Beginning in 2011, the Company adopted certain changes in the presentation of the financial statements in an effort to make the presentation of the financial statements of each company within our group more consistent. Accordingly, the Company added and deleted a limited number of line items in the balance sheet, income of statement and cash flow statement as of and for the years ended December 31, 2011 and 2010.

With respect to the income statement, the subsidy of fuel account (“CCC”) was previously presented as an other operating expense, but is now presented as other operating revenue, which resulted in an R$82,683 million decrease in operating expenses and a corresponding increase in operating revenues. In the cash flow statement, for the year ended December 31, 2010 and 2009 the dividends received were originally classified as investing activities. For 2011, as a result of the Company’s activity as a investing company in the energy sector, dividends of R$600,869 in 2010 and R$731,216 in 2009 were classified as operating activity in accordance with paragraph 14 of IAS 7, which permits classification as investing or operating activity. As part of this process, we determined that R$236,076 that was historically presented as a long term liability should have been presented as a short term liability. While the impact on the prior year is immaterial, we changed the presentation to be consistent with the current period.

NOTE 4 – ACCOUNTING ESTIMATES AND JUDGMENT

Accounting estimates are those arising from the application of subjective and complex judgments by the Company’s Management and its subsidiaries, frequently arising from the need to recognize significant impacts in order to properly state the equity position and results of the entities. The accounting estimates become critical as the number of variables and assumptions affecting the future condition of these uncertainties increases, making judgments even more subjective and complex.

When preparing these financial statements of the Company and its subsidiaries, Management adopted estimates and assumptions based on the historical experience and other factors that it understands to be reasonable and relevant to proper presentation of financial information. Although these estimates and assumptions are continuously monitored and revised by the Company’s Management, the materialization on the carrying amount of assets and liabilities and the result of operations are inherently uncertain, as they derive from judgment.

As far as the most critical accounting estimates are concerned, the Management of the Company and its subsidiaries base their judgments on future events, variables and assumptions, as follows:

I) Deferred Tax Assets - The calculation and accounting method of income tax (IRPJ) and social contribution (CSLL) liabilities is applied for determining the deferred IRPJ and CSLL generated by temporary differences between the carrying amount of assets and liabilities and their respective tax values and for accumulated income and social contribution tax losses carryforwards liabilities. Deferred tax assets and liabilities are calculated and recognized by using the tax rates applicable to the taxable profit in the years in which these temporary differences should be realized. The future taxable profit may be higher or lower than the estimates considered by the Management when the need to register or not the deferred tax asset amount was defined (see Note 10).

II) Provision for impairment of long-lived assets - The Management of the Company and its subsidiaries adopt variables and assumptions in a long-lived assets recovery test, so as to determine the recoverable value of assets and the recognition of impairment, when necessary. In this procedure, judgments based on historical experience with asset management, groups of assets or cash-generating units, which may occasionally not be verified in the future, are applied, even concerning the estimated economic useful life of its long duration assets, which represents the practices determined by ANEEL (Brazilian Electricity Regulatory Agency) applicable to the assets linked to the concession of the electricity public utility, which may vary due to the periodic analysis of economic useful life of assets, in force. Many inherently uncertain events also impact the determination of variables and assumptions used by the Management to determine the discounted future cash flow, for the purposes of recognition of the recoverable value of long-lived assets. Among these events, it

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is worth emphasizing the maintenance of the electricity consumption levels, national economic activity growth rate, availability of water resources, in addition to those inherent to the expiration of the electricity public utility concession terms held by the Company’s subsidiaries, especially regarding the value of its reversion at the end of the concession term. Hereupon, the Management adopted the contractually forecasted indemnification assumption, where applicable, by the residual carrying amount at the end of the electricity generation, transmission and distribution concession term (see Note 18).

III) Provision for decommission assets - The Company recognizes provisions for decommissioning liabilities for the assets related to their thermonuclear power plants. In order to calculate the amount of the provision, assumptions and estimates are made regarding the discount rates, the expected decommissioning cost and removal of the entire power plant from the location and the expected period of the referred costs (see Note 31).

IV) Calculation basis of indemnification by the grantor on public utility concessions - The Company adopts the assumption that the assets are reversible at the end of the concession contracts, entitled to receive full indemnification from the granting authority over the investments not yet amortized. There is a discussion on legal and regulatory interpretation on the calculation basis of the Indemnifiable value, with different interpretations. Based on contractual provisions and in legal and regulatory interpretations, the Company, supported by the opinion of independent legal counsel, adopted the assumption that it will indemnified by the residual carrying amount at the end of the concession. This decision affected the basis of generating assets that have indemnification clauses provided for in their contracts and the electricity transmission and distribution operations classified within the scope of IFRIC-12 (Service Concession Arrangements) (vide Note 16).

V) Actuarial liabilities - Actuarial liabilities are determined by actuarial calculations prepared by independent actuaries and actual future results of the accounting estimates used in this financial information may be different, according to variables, assumptions and conditions different from those existing and used at the time of judgment made to establish assumptions (see Note 29).

VI) Useful life of property, plant and equipment – The Company’s Management and its subsidiaries adopt the criteria defined in ANEEL Resolution 367 of June 2, 2009, when calculating the estimated useful life of property, plant and equipment, as they fairly represent said useful life (see Note 15).

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NOTE 5 – CASH, CASH EQUIVALENTS AND RESTRICTED CASH

	12/31/2011		12/31/2010
I - Cash and Cash Equivalents:
Cash and Banks		389,191		762,332
Financial Investments		4,570,596		8,457,837
		4,959,787		9,220,169
II - Restricted Cash:
CCC Resources (Fuel Consumption Account)		2,194,946		1,287,255
Trading - Itaipu		176,940		13,175
Trading - PROINFA		662,752		757,788
		3,034,638		2,058,218
		7,994,425		11,278,387

Cash and cash equivalents are held with Banco do Brasil S.A., according to applicable laws for mixed capital corporations under federal government control, enacted by Decree-law No. 1.290, of December 3, 1973. Resolution 2.917 of December 19, 2001 of the Brazilian Central Bank, which amended Decree Law No. 1.290, set forth new mechanisms for companies under indirect federal administration.

The financial investments with immediate liquidity are extra-market investment funds, whose yield is based on the average SELIC interest rate.

NOTE 6 – MARKETABLE SECURITIES

The Company and its subsidiaries classify the long-term securities as held to maturity, and despite long-term maturities, the Company has short-term investment programs indicating the need to adopt these resources before maturity, classifying the assets as current.

The Company and its subsidiaries classify long term securities as held to maturity. The investments that have been classified as current are considered trading and are measured according to their respective fair values.

An adjustment to the present value is made regarding the founders’ shares.

CFT-E1 securities and investment certificates arising from tax incentives issued by FINOR (Northeast Investment Fund) and FINAM (Amazon Investment Fund) are adjusted by provisions for losses upon their realization, therefore presented at net amounts.

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Set forth below is the breakdown of marketable securities:

CURRENT
Securities	Custodian Agent		Maturity	Index	12/31/2011		12/31/2010
LFT		Banco do Brasil	Up to 90 days	Pre-Fixed		9,751,563		6,281,655
LTN		Banco do Brasil	Up to 90 days	Pre-Fixed		563,120		426,077
NTN- B		Banco do Brasil	Up to 90 days	Pre-Fixed		69,762		51,616
NTN- F		Banco do Brasil	Up to 90 days	Pre-Fixed		19,751		14,912
CFT-E1		Banco do Brasil	08/01/12	IGP-M		263,450		—
NTN-P: 741536		Banco do Brasil	03/01/12	TR		86,583		—
NTN-P: 741566		Banco do Brasil	06/01/12	TR		62,708		—
NTN-P: 741806		Banco do Brasil	02/26/12	TR		17,032		—
OTHER						418,535		(187	)
						11,252,504		6,774,073
NON-CURRENT
Securities	Custodian Agent		Maturity	Index	12/31/2011		12/31/2010
CFT-E1		Banco do Brasil	08/01/12	IGP-M		—		248,950
NTN- P		Banco do Brasil	12/28/15	TR		332		318
NTN- P		Banco do Brasil	07/09/14	TR		178		170
NTN- P		Banco do Brasil	07/09/12	TR		—		358
NTN-P: 741806		Banco do Brasil	07/09/12	TR		—		744
NTN-P: 741806		Banco do Brasil	07/09/12	TR		—		610
NTN-P: 740100		Banco do Brasil	01/01/25	TR		41		38
NTN-P: 740100		Banco do Brasil	01/01/24	TR		7		7
NTN-P: 740100		Banco do Brasil	01/01/21	TR		—		1
NTN-P: 740100		Banco do Brasil	01/01/20	TR		—		1
NTN-P: 740100		Banco do Brasil	12/28/15	TR		—		772
NTN-P: 741536		Banco do Brasil	03/21/18	TR		2		2
NTN-P: 741536		Banco do Brasil	03/01/12	TR		—		80,733
NTN-P: 741566		Banco do Brasil	12/28/15	TR		92		126
NTN-P: 741566		Banco do Brasil	06/01/12	TR		—		58,471
NTN-P: 741806		Banco do Brasil	06/16/15	TR		—		27
NTN-P: 741806		Banco do Brasil	07/22/13	TR		—		3
NTN-P: 741806		Banco do Brasil	07/09/12	TR		—		28
NTN-P: 741806		Banco do Brasil	02/26/12	TR		—		15,865
NTN-P: 741806		Banco do Brasil	12/28/04	TR		3		3
NTN-P: 760199		Banco do Brasil	05/15/17	TR		127		116
FINOR/FINAM						3,064		3,565
FOUNDERS’ SHARES						163,740		158,884
PARTNERSHIP INCOME						212,419		194,761
OTHER						18,353		5,352
						398,358		769,905

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a) CFT- E1 – Government bonds with remuneration equivalent to the IGP-M variation, interest-free, with redemption date fixed in August 2012. The parent company maintains a provision for market value adjustment on the reference date of December 31, 2011, in the amount of R$ 99,129 (December 31, 2010 – R$ 93,673), calculated based on negative goodwill practiced in the capital markets, stated as respective asset reduction.

b) NTN-P – Government bonds received as payment for transfer of equity investments within the scope of the Privatization National Program – PND. These bonds have a remuneration equivalent to the Referential Rate–TR variation, disclosed by the Brazilian Central Bank, with 6% annual interest on the updated value with a redemption date fixed as of February 2012.

c) PARTNERSHIP INCOME - Refer to income earned from partnership investments, corresponding to an average yield equivalent to the IGP-M (General Market Price Index) variation plus annual interests of 12% and 13% on the capital transferred, as shown below:

	12/31/2011		12/31/2010
EATE		—		23,214
Tangará		117,770		96,782
Guascor		45,970		38,187
Other		—		701
		163,740		158,884

d) FOUNDERS’ SHARES – Securities acquired due to restructuring of Eletrobras’ investment in INVESTCO S.A. These assets ensure annual yields equivalent to 10% of the profit of the companies mentioned below, paid along with the dividends, and will be redeemed at maturity estimated for October 2032, by means of its conversion into preferred shares of the aforementioned companies’ capital stock, as shown below:

	12/31/2011			12/31/2010
Lajeado Energia		451,375			451,375
Paulista Lajeado		49,975			49,975
Ceb Lajeado		151,225			151,225
Face value		652,575			657,575
Present value adjustment		(440,156	)		(457,815	)
Fair value		212,419			194,760

e) Finor/Finan - Substantially refers to investment certificates arising from tax incentives destined to projects in the operating area of the subsidiaries Chesf and Eletronorte. The Company maintains a provision for losses in its realization, established based on market value, in the amount of R$ 292,456 (December 31, 2010 - R$ 291,772), and stated as respective asset reduction.

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NOTE 7 – RECEIVABLES

	31/12/2011												31/12/2010
	Maturing			Past Due Untill 90 days			More than 90 days			Total			Total
CURRENT
AES ELETROPAULO		104,400			—			—			104,400			117,182
AES SUL		12,974			—			37			13,011			28,064
AMPLA		41,908			—			—			41,908			42,731
ANDE		52,115			—			—			52,115			42,224
EBE		25,574			—			46			25,620			15,147
CEA		16,383			33,541			1,043,717			1,093,641			926,366
CEB		14,913			—			12			14,925			11,650
CEEE-D		37,325			—			41			37,366			37,890
CELESC		37,422			—			—			37,422			50,436
CELG		43,575			—			55,393			98,968			95,964
CELPA		46,032			24,887			9,845			80,764			47,125
CELPE		39,465			438			—			39,903			44,451
CEMAR		32,021			—			—			32,021			32,427
CEMIG		78,205			17,401			17,475			113,081			85,137
CESP		3,524			—			—			3,524			2,799
COELCE		34,437			—			—			34,437			31,451
COELBA		72,858			—			—			72,858			77,398
COPEL		102,247			—			—			102,247			101,704
CPFL		64,826			—			—			64,826			19,400
ELEKTRO		52,614			—			—			52,614			55,185
ENERSUL		20,534			—			—			20,534			14,587
ESCELSA		26,395			—			—			26,395			27,298
LIGHT		89,994			—			—			89,994			84,798
PIRATININGA		8,538			—			—			8,538			3,379
RGE		7,698			—			—			7,698			3,907
Electricity Chamber		136,433			1,577			295,430			433,440			568,950
Use of Electric Grid		508,667			4,993			94,755			608,415			468,639
PROINFA		405,305			21,760			152,363			579,428			428,629
Consumers		450,660			247,182			474,632			1,172,474			1,027,149
Public Authorities		82,923			50,281			332,131			465,335			454,334
States Debt Rollover		—			—			187,625			187,625			128,635
(-) Allowance for Doubtful Accounts (PCLD)		(16,383	)		(33,541	)		(2,373,095	)		(2,423,019	)		(2,130,896	)
Others		511,772			2,871			544,803			1,059,516			835,790
		3,145,354			371,390			835,210			4,352,024			3,779,930

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	31/12/2011								31/12/2010
	Maturing		Past Due Untill 90 days		More than 90 days		Total		Total
NON CURRENT
Celg		66,368		—		—		66,368		141,037
Foreign Debt Restructuring Agreement – Guarantee		—		—		—		—		—
States debt rollover		1,005,383		—		—		1,005,383		1,096,291
National Treasury		—		—		—		—		—
Others		—		—		407,243		407,243		468,964
		1,071,751		—		407,243		1,478,994		1,706,292
- (PCLD)		—		—		—		—		—
		4,217,105		371,390		1,242,452		5,831,018		5,486,221

I – Electricity trading - PROINFA

The electricity trading within the scope of PROINFA (Brazilian Renewable Energy Incentive Program) generated a negative net result in 2011 of R$128,681 (December 31, 2010 – positive R$97,787), not causing any effect on the net result of Eletrobras’ fiscal year. This amount was included under the item “Reimbursement Obligations”. The amount of R$579,428 of Proinfa, referring to the Parent Company, is recorded in the balance of reseller consumer.

II - Operations at the Electricity Trading Chamber – CCEE

The amounts related to the operations practiced within the scope of CCEE are recorded based on information made available by the Chamber.

The subsidiary Furnas maintains accounts receivable in the amount of R$ 293,560, related to electricity trading within the scope of the extinguished MAE (former Electricity Trading Chamber), referring to the period from September 2000 to September 2002, whose financial settlement is suspended due to restraining orders granted in lawsuits filed by electricity distribution concessionaires against ANEEL and MAE, currently known as CCEE. Given the uncertainty of its realization, the subsidiary Furnas maintains Allowances for Doubtful Accounts, in an amount equivalent to the total accounts receivable, established in 2007.

According to the rules established in the Electricity Sector General Agreement, the resolution of these disputes would imply a new calculation, which would be purpose of settlement between the parties without CCEE’s intervention. In this regard, Management plans to maintain negotiations with ANEEL’s and CCEE’s participation, aiming at solving the accounts receivable so as to enable a negotiated solution for its settlement.

III - Renegotiated Credits

Renegotiated credits are formalized by means of contracts for installments of debts accumulated by the debtors, subject to interest and monetary restatement and fixed terms to amortize principal and charges, and they are considered recoverable by the Company’s Management, highlighting the balances deriving from operations with CELG, in the amount of R$165,336 (R$237,001 on December 31, 2010) and the debt rollover with states, in the amount of R$1,193,008 (R$672,678 on December 31, 2010).

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IV – State Debt Rollover

Celg recognized a debt referring to the billing of its energy by means of the Private Instrument of Acknowledgment of Indebtedness and Other Covenants, entered into on December 12, 2003 between the subsidiary FURNAS and Celg in the amount of R$378,938 thousand, and Banco do Brasil S.A. as intervening and consenting party. The following financial clauses were established to settle the commitments:

(i) The estimated payment term is 216 months and the outstanding balance is restated every month by General Market Price Index (IGP-M), published by Fundação Getúlio Vargas, plus pro rata die interest rate of 1% monthly.

(ii) Monthly payments are settled by collecting an electricity distribution tariff in the amount corresponding to 2.56% of monthly gross revenues made available by Celg. In order to ensure these payments, a restricted account was created at the intervening bank for transactions exclusively related to this agreement, where Celg irrevocably and irreversibly authorizes the transfer of these monthly amounts to the subsidiary FURNAS.

The subsidiary Eletrosul holds credits with the federal government, indexed by IGP-M, with annual interest rates of 12.68%, in the amount of R$607,391 on December 31, 2011 (December 31, 2010 - R$672,678), of which R$479,752 in non-current assets (December 31, 2010 – R$544,043), as a result of the assumption of rights the Company held in state electricity concessionaries. Under the protection of Law nº 8.727/93, the federal government assumed, refinanced and re-scheduled the debt in 240 installments, beginning in April 1994. Once the 20-year term elapses and outstanding balance remains, as the federal government only transfers the funds received from state governments, which are restricted by laws in levels of revenues commitments, the installment payment will be extended for another 120 months.

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V - Allowance for doubtful accounts

The subsidiaries record and maintain provisions, adopting the criteria of ANEEL rules, based on the analysis of the amounts of past due accounts receivable and losses track record, the amount of which is deemed by Management as sufficient to cover eventual losses on the realization of these assets. The balance is composed as follows:

	12/31/2011		12/31/2010
CLIENTS
Consumers and Resellers		1,093,641		912,041
Renegotiated Credits		130,347		20,356
Other Receivables		135,914		188,859
Other Consumers and Resellers		769,557		716,080
CCEE – Electricity Trading Chamber		293,560		293,560
		2,423,019		2,130,896

Changes in the allowance for doubtful accounts of electricity clients’ accounts in the consolidated are as follows:

Balance on December 31, 2010	2,130,896
(+) Complement	511,356
(-) Reversal	(219,233	)
Balance on December 31, 2011	2,423,019

Complement and reversal of the allowance for doubtful accounts were stated for in the income statement as Operating Provisions (Note 41). The amounts recognized as allowance for doubtful accounts are registered as definite loss when there is no expectation to recover these funds. The reversal occurred in the year basically refers to the installment payment program with municipalities and public authorities by distribution companies.

For tax purposes, the surplus provision established in relation to the provisions of Law No. 9.430/1996 has been added to the taxable income for the purposes of Income Tax - IRPJ and also the calculation basis for the Social Contribution on the Net Income - CSLL.

F-48

NOTE 8 – LOANS AND FINANCING

	12/31/2011
	CURRENT CHARGES					PRINCIPAL
	Average Rate		Amount			CURRENT			NON-CURRENT
Entities
ITAIPU		7.45		—			540,249			5,342,343
				—			540,249			5,342,343
CEMIG		7.12		2,352			78,124			373,241
COPEL		8.39		1,616			49,164			215,900
CEEE		6.57		865			21,990			127,568
AES ELETROPAULO		10.39		311,636			108,851			2,329
CELPE		6.13		292			11,035			43,676
CEMAT		6.27		1,875			358,578			—
CELTINS		6.26		617			100,918			—
ENERSUL		6.17		461			13,413			71,360
CELPA		6.68		11,279			408,629			—
CEMAR		5.89		1,995			62,289			414,612
CESP		9.36		233			41,190			149,636
OTHER		6.36		138,708			341,303			910,672
(-) Allowance for Doubtful Accounts				(130,475	)		(395,133	)		—
				341,454			1,200,351			2,308,993
				341,454			1,740,600			7,651,336

	12/31/2010
	CURRENT CHARGES					PRINCIPAL
	Average Rate		Amount			CURRENT			NON-CURRENT
Entities
ITAIPU		7.09		—			448,544			5,223,083
				—			448,544			5,223,083
CEMIG		6.44		2,140			74,962			340,569
COPEL		7.40		1,882			47,497			258,771
CEEE		6.44		736			8,130			99,471
AES ELETROPAULO		10.38		299,218			108,840			2,639
CELPE		6.10		1,070			16,976			53,350
CELPA		6.15		1,771			33,647			297,046
CEMAR		5.85		1,654			48,214			367,187
CESP		9.38		958			33,406			185,709
OTHER		6.36		119,110			338,991			1,472,346
(-) Allowance for Doubtful Accounts				(101,124	)		(127,353	)		—
				327,415			583,310			3,077,088
				327,415			1,031,854			8,300,171

F-49

The financing and loans granted are made with the Company’s own funds, in addition to sector funds, as well as foreign funds raised by means of international development agencies, financial institutions, as well as those arising from the offering of securities on the international financial market.

All the financing and loans are supported by formal contracts executed with borrowers. The amounts receivable are mostly repayable in monthly installments, within a ten-(10) year average term, and the average interest rate weighed by the portfolio balance is 6.21% p.a.

The financing and loans granted with a currency adjustment clause, account for nearly 48.27% of the total portfolio. Those providing for adjustment based on indexes that represent domestic price-levels account for 51.73% of the portfolio balance.

The market values of these assets are equivalent to their carrying amount, since these are specific operations of the sector and are partly funded with resources from Sector Funds, and which do not find similar conditions as valuation parameter.

The long-term amount of loans and financing granted with ordinary and sector resources, including onlending, mature in variable amounts, as shown below:

	2013		2014		2015		2016		2017		After 2017		Total
Consolidated		1,025,480		996,563		896,506		789,028		783,236		3,160,524		7,651,336

I - AES-Eletropaulo/CTEEP - Lawsuit

In November 1986, Eletropaulo Eletricidade de São Paulo S.A., obtained a loan from the Company under Credit Facility Agreement ECF 1.046/1986.

During the preparation of this agreement, Eletropaulo raised concerns regarding the frequency of monetary restatement incurred on loan and filed a payment into court suit against the Company, in December 1988.

After filing the claim mentioned above, Eletropaulo made a judicial deposit of the amount that represented the outstanding balance, i.e., one composed of principal plus annual monetary restatement.

After presenting its defense in the payment into court suit, in April 1989, the Company filed a collection suit against Eletropaulo in the 5^th Civil District Court of Rio de Janeiro, grounding its collection request on the allegation that the amounts deposited in the payment into court suit are inconsistent with the terms of the Credit Facility Agreement ECF 1.046/1986, as the agreement provided for monthly monetary restatement of principal and not annual restatement as set forth by Eletropaulo.

During the course of the proceedings of both lawsuits, the Protocol of Spin-Off was signed on December 22, 1997, where Eletropaulo was spun-off into four companies, namely: Eletropaulo Metropolitana - Eletricidade de São Paulo S.A. – AES Eletropaulo, Bandeirante Energia S.A., Empresa Metropolitana de Águas e Energia S.A. - EMAE and Empresa Paulista de Transmissão de Energia S.A., currently referred to as Companhia de Transmissão de Energia Elétrica Paulista - CTEEP.

In April 1999, the first instance of 5^th Civil Court ruled in favor of the Company in connection with the collection suit and the payment-into-court suit, recognizing in the first lawsuit that the monetary restatement of Credit Facility Agreement ECF 1.046/1986 is monthly and in the second lawsuit, the amount deposited by Eletropaulo was inconsistent with the terms of the agreement. Ultimately, the court recognized that Eletropaulo was in default under the Credit Facility Agreement ECF 1.046/1986.

F-50

In September 2001, Eletrobrás also filed an Enforcement Action in the 5^th Civil Court based on its understanding of the terms included in the Protocol of Spin-Off of Eletropaulo, which it believed made it proportional to current AES Eletropaulo (90.11%) and CTEEP (9.89%).

In September 2003, the court accepted the arguments raised by AES Eletropaulo, recognizing that based on Protocol of Spin-Off of Eletropaulo, AES Eletropaulo would not be responsible for the settlement of the Credit Facility Agreement ECF 1.046/1986, since the liability represented by it would have been transferred to EPTE, currently CTEEP.

In light of the unfavorable outcome, Eletrobrás in December 2003 and CTEEP in March 2004, filed appeals to the Superior Court of Justice and Federal Supreme Court seeking to reverse the TJRJ court decision.

In June 2006, the Superior Court of Justice reversed the decision that held AES Eletropaulo harmless from any responsibility for the debts set forth in the pending lawsuit and excluding it from litigation.

A motion for clarification of judgment was filed against this decision in the Superior Court of Justice in December 2006, and subsequently, in April 2007, an appeal against the diverging decision and an extraordinary appeal were filed. Each of these appeals affirmed the first instance’s decisions against AES Eletropaulo.

In February 2008, CTEEP filed a lawsuit against AES Eletropaulo and the Company in the 5^th Civil Court, which sought to aim a decision recognizing CTEEP as not liable for the payment of any amount that has been requested by the Company.

In April 2009, the Company requested the liquidation of the arbitration award in the 5^th Civil Court. This lawsuit sought to obtain the disputed amount through work to be conducted by a court expert.

In February 2010, the 5^th Civil Court accepted the motion for liquidation of the arbitration award, and following the court decision, AES Eletropaulo filed a motion for clarification of the judgment pleading in accordance with the Articles. Additionally, AES Eletropaulo filed a motion to deny the expert’s appointment. Both motions were rejected by the 5^th Civil Court in March 2010.

AES Eletropaulo filed an interlocutory appeal in the Court of Justice of Rio de Janeiro against the rejection of its appeal, which was accepted in April 2010, to determine the taking of evidence of the facts behind the responsibility for the paying debt. The court decided that the award liquidation was required to be processed in accordance with the Articles.

In December 2010, the Company requested to initiate the liquidation process and the proceeding was submitted to review to the 5^th Civil Court. In July 2011, the 5^th Civil Court required AES Eletropaulo and CTEEP to reply to the motion for liquidation in accordance with the Articles. Both parties replied accordingly. The 5^th Civil Court shall determine whether the Company must submit its considerations on said material.

Therefore, due to the current state of the proceedings and the reasons set forth above, the Company estimates that expert works will commence during the second quarter of 2012 and that the legal proceeding for award liquidation in accordance with the Articles will not finalize earlier than 6 months following the start of the expert works. The Company also estimates that, at the end of the works, the expert will indicate the amount of debt owed and those who must bear the payment.

Once the legal proceeding of award liquidation ends and following the verification of the amounts to be paid by AES Eletropaulo and CTEEP, the Company will resume the enforcement action against such companies.

Also, according to the provisions of the Brazilian Civil Procedure, the Company is entitled to request to the court the closing of the guarantee pledged by the Company prior to the court’s final decision.

F-51

In the event of an unfavorable final decision against AES Eletropaulo and/or CTEEP, the Company will have the right to receive R$1,735,861, adjusted until December 31, 2011. The Company already recognized R$419,171 (R$410,017, on December 31, 2010) in its assets, under loans and financing, and the Company considers this amount to be undisputed.

II - Allowance for doubtful accounts

The Company recognizes allowances for doubtful accounts in the amount of R$525,608 (December 31, 2010 - R$228,477) corresponding to the principal and the servicing of the debt of defaulting debtors.

The amount of the provisions is deemed as sufficient by the Company’s Management to cover losses based on the portfolio trend analysis.

Eletrobras recognized an allowance for credits with Celpa, Rede Energia’s subsidiary, in the amount of R$ 120,199. This allowance was necessary considering the reorganization procedure which involves the significant uncertainty as to Celpa’s ability to continue as a going concern. Therefore, this entity may not be able to realize its assets and settle its liabilities during the regular course of business (Note 14.2, item IV).

In addition, the Company recognized in 2011 an allowance for credits with Cemat and Celtins, both Rede Energia’s subsidiaries, in the amount of R$94,821 and 24,756. These allowances were necessary considering the fact that both entities have been going through significant economic and financial hardship to settle their short-term debts. As a possible breakeven relies on future events beyond the Company’s Management control, the Company believes it is uncertain whether it will have operational capacity to settle its liabilities during the regular course of its businesses (Note 14.1, item IV).

Changes in the allowance for doubtful accounts on financing and loans granted by the Company are as follows:

Balance on December 31, 2009	192,232
(+) Complement	50,409
(-) Reversals	-14,164
Balance on December 31, 2010	228,477
(+) Complement	358,984
(-) Reversals	-61,853
Balance on December 31, 2011	525,608

The recording and write-off of the allowance of doubtful accounts were accounted for in the income statement as Operating Provisions (Note 41). The amounts recognized as allowance for doubtful accounts are those which raise doubts as to their realization. When there is no expectation to recover the funds, they are considered definite losses.

NOTE 9 – SHAREHOLDING REMUNERATION

The amounts below refer to dividends and interest on capital receivable, net of withholding tax, where applicable, resulting from permanent investments held by Eletrobras.

F-52

	31/12/2011		31/12/2010
CTEEP		79,644		114,061
CEEE-GT		13,562		—
CELPA		27,513		30,336
CEMAR		15,706		14,974
CEMAT		14,275		1,328
OTHER		47,162		17,906
		197,863		178,604

NOTE 10 – TAXES AND SOCIAL CONTRIBUTIONS - ASSETS

The following table sets forth taxes paid by the Company, which are recoverable, and the net value of deferred tax assets, which could be used to offset future tax liabilities, as of December 31, 2011 and 2010:

	12/31/2011		12/31/2010
CURRENT ASSETS
Withholding tax		893,706		815,873
Prepaid income tax and social contribution		843,022		644,740
PIS/PASEP/COFINS to offset		80,433		236,835
State VAT (ICMS) recoverable		17,150		21,683
Other		113,033		106,774
		1,947,344		1,825,905
NON-CURRENT ASSETS
State VAT (ICMS) recoverable		1,655,413		1,124,202
PIS/COFINS recoverable		775,348		401,439
Deferred tax assets, net		3,343,525		2,813,041
		5,774,286		4,338,682
		7,721,630		6,164,587

F-53

	12/31/2011		12/31/2010
Income tax and social contribution temporary differences
Exchange loss		530,647		805,859
Provision for interest on capital		331,290		126,057
Provision for contingencies		782,587		752,841
Allowance for doubtful accounts		191,824		200,616
Provision for market value adjustment		187,617		131,114
Restatement of Law 11.638/2007 - RTT		840,372		245,070
Other		479,188		551,484
		3,343,525		2,813,041

I – Deferred Tax Assets

Deferred Tax Assets are used in connection with the realization of the events that gave rise thereto. Considering the Company’s track record of profitability, as well the expectation of generating taxable income over the coming years, the recognition of these assets is based on the realization capacity of the assets, which is identified with future trend analysis and supported by a technical study prepared on the basis of macroeconomic, business and tax assumptions that may change in the future.

II - Recoverable ICMS, PIS/PASEP AND COFINS on Fuel Purchases

Through Normative Resolution 303/2008, ANEEL established methodologies and procedures to calculate, state and validate the ICMS (State VAT) amount recognized as a cost arising from the purchase of fuel. ANEEL has also established methodologies and procedures to calculate, state, inspect, monitor and pay the liabilities to be reimbursed to CCC-ISOL by the beneficiary agents who received ICMS reimbursement in an amount higher than the effective cost incurred as a result of this tax.

The Directive Release 2775/2008 - SFF/ANEEL now regulates the refund to the Fuel Consumption Account – CCC of amounts corresponding to the PIS/PASEP and COFINS credits taken on the fuel acquired for electric power generation under the non-cumulative mechanism between 2004 and 2008. Until 2007, management of the subsidiary Amazonas Energia understood that the fuel acquired for the purpose of generating electric power and subsidized by CCC was not entitled to PIS/PASEP and COFINS credits. In 2008, in light of the new facts, the subsidiary’s management, supported by its legal counsel’s opinion, recorded the tax credit in respect of all of the fuel acquisitions during the period determined by ANEEL, verifying the amount to be R$498,171.

The utilization of the recognized tax credits is subject to future operations that produce tax liabilities, which according to the opinion of the subsidiary’s management, will occur even if fuel oil is replaced with natural gas as the input in the electric power generation process and Manaus joins the National Interconnected System – SIN.

Law no. 12.111/09 establishes mechanisms that avoid the accumulation of recoverable tax on fuel purchased in distribution operations. However, in 2010, the amount of R$269,046, corresponding to credits verified in 2006, 2007 and 2008, could not be utilized due to the limitation on the period in which such credits can be used. Thus, such credits became subject to impairment, which was recognized in compliance with IAS 36 (Impairment of Assets).

F-54

The table below sets forth the impairments described in the previous paragraph as of December 31, 2011 and 2010:

DESCRIPTION	12/31/2011		12/31/2010
PIS/PASEP paid by CCC (a)		43,041		40,954
COFINS paid by CCC (a)		198,251		188,635
CCC Refund - ISOL - Law 12,111/09 (b)		1,159,875		790,663
Total		1,401,167		1,020,252

The balances of taxes and social contributions are monetarily restated as of December 31, 2011.

a) Refund of PIS/PASEP and COFINS levied on the fuel acquisition under Fuel Consumption Account (CCC)

In 2009, ANEEL, through Order nº. 4.722/2009 – SFF/ANEEL, item nº 30, ordered the Company to recognize the PIS/PASEP and COFINS credits to be refunded to the Fuel Consumption Account – CCC for the period between January 2004 and December 2008.

On August 11, 2008, ANEEL issued Technical Note nº. 359-SFF, which explains in detail the changes in the laws on accounting for PIS/PASEP and COFINS as a non-cumulative assessment and recommended the adoption of the following procedures:

• Assessment of liability to be refunded to the CCC-ISOL fund – The agents must calculate, on a monthly and annual basis, the amount reimbursed by CCC-ISOL as fuel and PIS/PASEP and COFINS credits, which shall be imputed as Regulatory Liability.

• Adjustment and refund – The liability shall be duly adjusted until the date of this consolidation, and its refund to the CCC-ISOL fund may be paid in up to 36 monthly installments subject to interest at the Selic interest rate.

b) CCC – ISOL Refund – Law nº 12,111/09

The balance of R$1,159,875 refers to recoverable taxes (ICMS) to be refunded to CCC when realized, according to Paragraph 8 of Law nº. 12.111/2009. For this reason, the subsidiary also maintains liability in the same amount as recorded in assets for these recoverable taxes.

III - PIS/PASEP and COFINS Unconstitutionality

The Federal Supreme Court - STF declared the unconstitutionality of Paragraph 1 of Article 3 of Law No. 9.718/98, which expanded the PIS/PASEP and COFINS calculation basis to include the total revenues earned by the legal entity, regardless the type of activity and the accounting classification adopted. Such provision did not have any constitutional basis and was later the subject of a of constitutional amendment.

Under the Brazilian National Tax Code - CTN, Eletrobras System companies are seeking recognition of their credit rights and the refund of the amount overpaid as a result of the unconstitutional increase in the calculation basis. As of the date of these Financial Statements, a final decision had not been reached on this issue.

Therefore, Eletrobras System companies have potential tax credits for PIS/PASEP and COFINS, which are still being determined. These tax credits have not been recognized in these Financial Statements, as the declaration of unconstitutionality only benefits those companies that are parties to the adjudicated appeals.

F-55

NOTE 11 – REIMBURSEMENT RIGHTS

I - CCC-ISOL Reimbursement

The Law No. 12.111/2009 and the Decree No. 7.246/2010 have changed the system of subsidizing electric power generation for Isolated Systems. The CCC subsidy, which previously only subsidized fuel costs, now reimburses the difference between the total cost of electric power generation and the valuation of the corresponding amount of electric power at the average cost of power and energy traded in the Regulated Contracting Environment – ACR, of the National Interconnected System – SIN.

CCC - Conta de Consumo de Combustível: Reimbursement on fuel acquisition by thermo power plants in the Isolated Systems granted by the federal government.

The following related costs are included in the total cost of electric power generation for Isolated Systems:

a) energy and related power;

b) generation to supply the electric power distribution;

c) charges and taxes; and

d) investments.

Other costs related to electric power services rendered in the Isolated Systems’ remote regions are also included in the total cost of electric power generation. These regions are characterized by a highly dispersed group of consumers and a lack of economies of scale.

	12/31/2011			12/31/2010
1 - Previous balance		2,075,838			576,370
2 - Cost of own generation		4,027,649			3,427,636
3 - Cost of energy purchased (including ICMS)		904,812			1,129,981
4 - Total cost		4,932,461			4,557,617
5 - (-) ACR Cost*		(1,413,309	)		(1,223,585	)
6 - Amount receivable re Law 12,111/09 ( 4 + 5)		3,519,152			3,334,032
7 - (-) Amount received from CCC - ISOL		(2,090,085	)		(1,934,903	)
8 - Difference receivable from CCC - ISOL ( 1 + 6 + 7)		3,504,905			1,975,499
9 - Monetary restatement		78,585			100,339
Current balance		3,583,490			2,075,838

* ACR – Regulated Contracting Environment

II - Law nº 12.111 for Nuclear Power

After consultations among the Company, ANEEL and the Ministry of Mines and Energy, Law nº 12.111 was enacted on December 9, 2009, establishing that as of 2010, a rule would be adopted to reduce the financial impact resulting from Furnas’s trading of energy produced by Eletronuclear. According to the law, between 2013 and 2015, Eletronuclear is authorized to transfer to Furnas the verified difference between the tariff charged by Eletronuclear and the benchmark tariff for the period from 2010 to 2012.

The 2010 benchmark tariff will correspond to Eletronuclear’s tariff ratified by ANEEL in December 2004, as adjusted by the Extended Consumer Price Index (IPCA) for December 2009, which will be further adjusted by IPCA in December 2010 and 2011.

F-56

The amount to be transferred to Furnas will be funded proportionally by the distribution concessionaires served by the Auction for Purchase of Energy Deriving from Current Projects as of December 7, 2004. Each distribution concessionaire will provide an amount proportional to the amount of power to be supplied to such distribution concessionaire under its contract with Furnas commencing in 2005.

As of January 1, 2013, the payment to Eletronuclear for the revenue from power generation at the Angra 1 and 2 power plants will be funded proportionally by all concessionaires, licensees or distribution concessionaires at the National Interconnected System (SIN).

Therefore, the financial impact of Eletronuclear’s energy trading will be significantly reduced beginning in 2013, when the verified differences between prices assessed on energy sale contracts in the regulated environment and those established by ANEEL for Eletronuclear for the period between 2010 and 2012 will be financially realized.

On November 16, 2011, ANEEL issued Technical Note nº 308/2011, which established, among other things, the form of distribution and the estimated amounts to be refunded by Eletronuclear to Furnas and by the distribution concessionaires (which acquired energy at the 1^st Auction of Current Energy (Product 2005/2008) to Eletronuclear.

ANEEL’s proposal requires that energy trading rules for Eletronuclear must be established for electric power produced at the Angra I and II power plants as of 2013 when all distribution agents will become “quotaholders” of said energy. Such energy trading rules are to be established in 2012 by means of a Public Hearing. In addition to the methodology to calculate trade tariffs among said agents and Eletronuclear, the criterion for apportioning the difference between tariffs assessed and the benchmark tariff will also be submitted for public consultation between 2010 and 2012.

According to ANEEL’s estimate, the amounts to be refunded to FURNAS would be represented as follows:

Description	2010		2011		2012
1 - Benchmark Tariff (R$/MWh)		115.68		121.79		130.29
2 - Tariff Practiced (R$/MWh)		137.66		145.48		148.79
3 - Tariff Difference (R$/MWH)(2-1)		21.98		23.69		18.5
4 - Annual Assured Energy (GWh)		12,921		12,921		12,921
5 -Difference Verified (R$ Thousand) (3x4)		284,004		306,098		239,039
6 - Accumulated Difference (R$ Thousand)		284,004		590,102		829,141

As the confirmation of these amounts is subject to public hearing and subsequent ratification by ANEEL, subsidiary Furnas did not record in its financial statements the refund related to the difference between benchmark tariffs and the one assessed for the years of 2010 and 2011, in the amount of R$590,102 thousand (R$353,442 thousand, net of tax effects).

NOTE 12 – NUCLEAR FUEL INVENTORY

The chart below sets forth a breakdown of the long-term nuclear fuel inventory destined for the operations of UTN Angra I and UTN Angra II thermonuclear power plants as of December 31, 2011 and 2010:

	12/31/2011		12/31/2010
CURRENT
Ready elements		388,663		297,972
		388,663		297,972
NON-CURRENT
Ready elements		133,894		392,133
Uranium concentrate		130,575		65,179
In progress – nuclear fuel		171,164		66,645
		435,633		523,957
		824,296		821,929

Inventories are stated at cost or net realization amount, whichever is the shortest, and are recorded as follows:

Uranium concentrate and works in progress (to transform uranium concentrate into nuclear fuel elements) are recognized at their acquisition costs; and Nuclear fuel elements (available in the reactor core and inventories of Spent Fuel Pool – SFP) are appropriated to income for the year of their utilization in the electric power generation process.

F-57

NOTE 13 - ADVANCES FOR FUTURE CAPITAL INCREASE

The following chart sets forth advances for future capital increases amounting to R$ 4,000 (R$ 7,141 in 2010):

	12/31/2011		12/31/2010
Other investments		4,000		7,141
		4,000		7,141

NOTE 14 - INVESTMENTS

The following chart sets forth the Company’s investments in subsidiaries and affiliates as of December 31, 2011 and 2010:

	12/31/2011		12/31/2010
Stated at the equity method
Celpa		171,370		240,112
CEEE-GT		701,628		627,300
Cemat		436,150		431,732
Emae		312,150		328,656
CTEEP		653,280		895,126
Cemar		323,433		302,263
Lajeado Energia		532,459		539,588
Ceb Lajeado		76,155		72,907
Paulista Lajeado		27,654		26,900
CEEE-D		391,988		377,518
Brasventos Eolo		—		2,232
Rei Dos Ventos 3		—		2,196
Brasventos Miassaba 3		—		3,335
Baguari		—		82,172
Águas da Pedra		157,112		125,089
Chapecoense		—		57
Amapari		34,105		27,997
Other		—		25
		3,817,484		4,085,206
SUBTOTAL		3,817,484		4,085,206
Measured at Fair Value
Celesc		150,432		165,711
Cesp		203,580		161,439

F-58

	12/31/2011			12/31/2010
Coelce		182,640			153,430
AES Tietê		812,853			725,821
CGEEP		22,607			17,657
Energisa		77,215			68,966
CELGPAR		322			322
CELPE		54,854			51,321
COPEL		50,546			58,169
CEB		6,485			3,528
AES Eletropaulo		76,491			67,291
Energias do Brasil		20,552			19,170
CPFL Energia		44,327			35,094
Guascor		3,300			3,300
EATE		—			5,344
Tangara		21,738			21,738
CDSA		11,802			11,800
CEA		20			20
CER		102			102
Other		124,214			114,556
		1,864,078			1,684,779
SUBTOTAL		5,681,562			5,769,984
Provision for investments losses		(1,110,603	)		(1,045,337	)
TOTAL		4,570,959			4,724,647

In view of the reorganization process of investee Celpa and the resulting uncertainty about its ability to continue as a going concern (as reported in its financial statements as of December 31, 2011), the Company recognized an allowance for losses equal to the total amount invested in Celpa (R$170,370) and losses from dividends declared and unpaid through December 31, 2011 (R$27,513), but only to the extent of the Company’s 34.24% interest in the share capital of Celpa.

F-59

14.1 – Provisions for Investment Losses

	12/31/2011		12/31/2010
Amazonas		843,029		802,138
Eletronorte		—		93,499
CERON		96,204		149,700
CELPA		171,370		—
		1,110,603		1,045,337

14.2 – Accounting Policy Adjustments in respect of Affiliates

	12/31/2011		12/31/2010
CEMAT		86,464		48,918
CTEEP		956,630		737,480
CEEE-GT		4,961		128,300
CEEE-D		7,539		191,775
		1,055,594		1,106,473

The Company made certain adjustments to the results of entities which it invests in order to conform the accounting policies of these entities with the accounting policies of the Company. The majority of these adjustments were to the accounting policies for the provision of doubtful accounts , pension plan and estimates of the present value of long-term assets.

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14.3 - Information About Market Value and Investees’ Revenue

PUBLICLY-HELD COMPANIES

		Market Value				Net Operating Revenue
COMPANIES	Valuation Method	2011		2010		2011		2010
CEEE D	Equity Accounting		315,468		354,761		2,028,501		1,821,539
CEEE-GT	Equity Accounting		329,138		402,572		762,484		738,519
CELPA	Equity Accounting		177,667		196,757		2,433,800		2,110,961
CEMAR	Equity Accounting		140,094		495,916		1,912,105		1,756,353
CEMAT	Equity Accounting		290,582		267,014		2,009,768		1,956,588
CTEEP	Equity Accounting		3,093,881		3,001,277		2,900,805		2,256,286
EMAE	Equity Accounting		99,040		112,159		164,093		142,781
CELESC	Market value		150,431		165,711		4,191,414		4,036,765
CESP	Market value		203,581		161,439		2,957,525		2,905,327
COELCE	Market value		182,639		153,430		2,627,212		2,849,706
AES Tiete	Market value		812,853		725,821		1,878,997		1,747,032
CGEEP - DUKE	Market value		22,607		17,658		958,003		862,303
ENERGISA S.A.	Market value		77,215		68,966		2,426,600		2,154,300
CELGPAR	Market value		322		322		Not Disclosed		2,210,362
CELPE	Market value		54,853		51,322		2,914,113		2,860,067
COPEL	Market value		50,546		58,169		7,776,165		6,901,113
CEB	Market value		6,485		3,528		1,377,619		1,284,394
AES Eletropaulo	Market value		76,491		67,291		9,835,578		9,697,157
CPFL Energia	Market value		44,327		70,188		12,764,028		12,023,079
Energias do Brasil	Market value		20,552		19,170		5,401,662		5,034,316

CLOSELY - HELD COMPANIES

		Market Value				Net Operating Revenue
COMPANIES	Valuation Method	2011		2010		2011		2010
Guascor	Market value		3,300		3,300		Not Available		Not Available
EATE	Market value		—		5,344		378,373		422,894
TANGARÁ	Market value		21,738		21,738		Not Disclosed		Not Disclosed
CDSA	Market value		11,802		11,800		Not Disclosed		Not Disclosed
CEA	Market value		20		20		Not Disclosed		Not Disclosed
CERR	Market value		102		102		Not Disclosed		Not Disclosed
Ceb Lajeado	Equity Accounting		58,364		58,364		97,114		90,860
Lajeado Energia	Equity Accounting		303,276		303,276		485,622		442,740
Paulista Lajeado	Equity Accounting		22,532		22,532		42,207		38,013
Brasventos Eolo	Equity Accounting		2,232		—		—		Not Disclosed
Rei Dos Ventos 3	Equity Accounting		2,196		—		—		Not Disclosed
Brasventos Miassaba 3	Equity Accounting		3,335		—		—		Not Disclosed
Baguari	Equity Accounting		82,172		—		12,308		Not Disclosed
Águas da Pedra	Equity Accounting		125,089		—		171,012		Not Disclosed
Chapecoense	Equity Accounting		57		—		453,825		87,892
Amapari	Equity Accounting		27,997		—		37,924		Not Disclosed

I – Distribution Companies:

Distribuição Alagoas – holds the concession for electric power distribution in all municipalities of the state of Alagoas through Concession Agreement 07/2001-ANEEL, dated May 15, 2005, and the first amendment thereto, dated June 8, 2010. This concession matures on July 7, 2015. Its main purpose is to develop a public utility that distributes electric power to end users. The investee reports negative net working capital of R$71,195 and accumulated losses of R$287,084 and relies on the financial support of the Company.

Distribuição Rondônia – holds the concession for electric power distribution in all municipalities of the state of Rondônia through Concession Agreement 05/2001-ANEEL, dated February 12, 2001, and the first amendment thereto, dated November 11, 2005. This concession matures on July 7, 2015. Its main purpose is to develop a public utility that distributes electric power to end users. The investee reports net working capital of R$112,650 and accumulated losses of R$982,742 and relies on the financial support of the Company.

Distribuição Piauí – holds the concession for electric power distribution in all the municipalities of the state of Piauí, through the Concession Agreement 04/2011-ANEEL, dated February 12, 2001. This concession matures on July 7, 2015. Its main activity is the distribution of electric power. The investee reports net working capital of R$8,322 and accumulated losses of R$962,683 and relies on the financial support of the Company.

Amazonas Energia – its main activities are electric power generation, distribution and trading in the state of Amazonas. Amazonas Energia has its own generation facility (1,600.60 MW) but also buys electric from independent producers to augment its generation capacity. The investee reports negative net working capital of R$1,000,238 and accumulated losses of R$4,616,265 and relies on the financial support of the Company.

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Distribuição Roraima – subsidiary wholly owned by Eletronorte, operating in the city of Boa Vista. Its main activity is distributing electric power. Distribution Roraima holds the concession for electric power distribution in the municipality of Boa Vista through Concession Agreement 21/2001-ANEEL, dated March 21, 2001, and the first amendment thereto, dated October 14, 2005. This concession matures in 2015. The investee reports negative net working capital of R$294,906 and accumulated losses of R$589,782, and relies on the financial support of the Company.

Distribuição Acre – it owns the concession for distribution and trading in the state of Acre through Concession Agreement 06/2001-ANEEL, which is dated February 12, 2001 and matures on July 7, 2015. The electric power supply of the capital city, Rio Branco, and six locations interconnected to the Rio Branco System is provided by Eletronorte. The inland part of the state is supplied by Guascor do Brasil Ltda, as Energy Independent Producer – PIE, through Generation Isolated Systems. The Company notes that the electric power supply in the entire state is provided by Diesel Thermoelectric Power Plants (100%) and that Distribuição Acre relies on the Company’s financial support.

II – Generation and Transmission Companies:

Eletrobras Termonuclear S.A. – a wholly owned subsidiary of the Company formed for the purposes of building and operating nuclear power plants and rendering engineering similar services under the supervision of ANEEL. Eletrobras Termonuclear operates the Angra 1 and Angra 2 power plants, with nominal power of 1,990 MW, as well as the Angra 3 power plant. The electric power produced at these plants is sold to Furnas pursuant to an electric power purchase and sale agreement.

Eletrosul Centrais Elétricas S.A. – its main purpose is electric power transmission and generation, directly or through its interests in SPEs. Eletrosul conducts studies, projects, construction, operation and maintenance of electric power generation and transmission systems subject to ANEEL’s regulations. Eletrosul owns 100% of Artemis, RS Energia and Porto Velho Transmissora and exercises control over Uirapuru.

Itaipu Binacional – a binational entity created by and subject to the International Treaty signed on April 26, 1973, between the Federal Republic of Brazil and the Republic of Paraguay. The Company and ANDE each hold a 50% equity stake in Itaipu Binacional. It was formed to exploit the water resources of the Paraná River from Salto de Guaíra to the outfall of Iguaçu River, by building and operating a Hydroelectric Central, with a total available capacity of 12.6 million KW that will be controlled jointly by Brazil and Paraguay.

Companhia Hidro Elétrica do São Francisco – an electric power utility concessionaire formed for the purposes of generating, transmitting and trading electric power. Its generating system is hydrothermal, with hydroelectric power plants responsible for more than 97% of its total production. Chesf’s transmission system is comprised of 18,723 km of operating transmission lines, of which 5,122 km are 500 kV transmission circuits, 12,792 km are 230 kV transmission circuits and 809 km are low tension transmission circuits. Chesf’s system has 100 substations with voltages higher than 69 kV, 762 transformers effectively operating at all voltage levels with a transformation capacity of 44,181 MVA and a total of 5,683 km of optic fiber cables.

Centrais Elétricas do Norte do Brasil S.A. – an electric power public utility concessionaire controlled by the Company and mainly operating in the states of Acre, Amapá, Amazonas, Maranhão, Mato Grosso, Pará, Rondônia, Roraima and Tocantins. Centrais’s electric power generation system consists of 4 hydroelectric power plants, with an installed capacity of 8,694.00 MW, and 7 thermoelectric power plants, with an installed capacity of 600.33 MW. The total installed capacity of the system is thus 9,294.33 MW. Centrais’s transmission system consists of by 9,192.13 km of transmission lines, 43 substations in the National Interconnected System – SIN, 695.89 km of transmission lines and 10 substations in the isolated system for a total of 9,888.02 km of transmission lines and 53 substations. The Company owns 100% of Boa Vista Energia S.A., Estação Transmissora de Energia S.A. and Rio Branco Transmissora, as well as an equity interest in several electric power generation and transmission SPEs.

Furnas Centrais Elétricas S.A. – a subsidiary of the Company focused on generating, transmitting and trading electric power in the region consisting of the Federal District and the states of São Paulo, Minas Gerais, Rio de Janeiro, Paraná, Espírito Santo, Goiás, Mato Grosso and Tocantins. Furnas acts as the electric power trading agent for the electric power generated by the Angra I and Angra II power plants. Furnas’s electric power generation system is comprised of 8 exclusively owned hydroelectric power plants and 2 power plants in partnerships with private companies, with a combined installed power capacity of 8,662 MW, and 2 thermoelectric power plants with 796 MW of capacity for a total of 9,458 MW. Furnas also holds interests in a number of SPEs.

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III – Other Companies

Companhia Energética do Maranhão – an electric power public utility concessionaire focused on projecting, building and exploring systems of electric power sub-transmission, transformation, distribution and trading. The company holds the concession for electric power distribution in 217 municipalities in the state of Maranhão, pursuant to Concession Agreement 060-ANEEL, dated August 28, 2000. This concession matures in August 2030 but Companhia Energética has the option of extending it for another 30-year period.

Eletrobras Participações S.A. – a subsidiary of the Company that was formed to hold the equity interests in the capital stock of other companies.

Companhia Estadual de Geração e Transmissão de Energia Elétrica – a publicly-held corporation formed for the purpose of developing electric power production and transmission systems. The state of Rio Grande do Sul is the controlling shareholder through Companhia Estadual de Energia Elétrica – CEEE-Par, which holds 65.92% of the total capital stock of this concessionaire.

Companhia Transmissão de Energia Elétrica Paulista – a publicly-held corporation, authorized to operate as an electric power public utility concessionaire with a focus on planning, building and operating electric power transmission systems.

Centrais Elétricas do Pará S.A. (under reorganization process) – a publicly-held corporation, under control of QMRA Participações S.A., that operates an electric power generation and distribution platform in the state of Pará where it serves consumers in 143 municipalities pursuant to Concession Agreement 182/1998-ANEEL, dated July 28, 1998. The term of the concession is 30 years, maturing on July 28, 2028 and renewable for an additional 30 year period. In addition to the distribution agreement, the Company signed a Generation Concession Contract 181/98 covering 34 Thermoelectric Power Plants, 11 owned and 23 from third parties, for a term of 30 years. This Generation Concession Contract matures on July 28, 2028 and is renewable for an additional 30 year period. The investee reports negative net working capital of R$1,191,873.

As announced to the Market in Material Fact of February 28, 2012, the investee, pursuant to CVM Rule 358/2002, informed the market that it filed for reorganization before the District Court of Capital City of state of Pará, pursuant to Article 47 and Articles of Law nº 11.101/2005. Centrais is focused on using the reorganization process to overcome its economic and financial crisis, maintain its status as a producer of electric power, and protect its workers’ employment and its creditors’ interests.

All claims against the investee through the date the motion for reorganization was filed, even if not overdue, are subject to reorganization pursuant to Article 49 of Law nº 11.101/2005 and shall be paid pursuant to the reorganization plan. However, it should be noted that there are certain exceptions to this rule.

During the reorganization procedure, the investee continues conducting its activities, pursuant to Article 64 of Law nº 11.101/2005. The impact of reorganization on the investee’s financial statements is only known after the approval of the reorganization plan provided for by law.

The situation described above creates significant uncertainty about the investee’s ability to continue as a going concern; therefore, according to its independent auditor’s opinion, it may not be able to realize its assets and settle its liabilities in the ordinary course of business (see Note 14).

Empresa Metropolitana de Águas e Energia S.A. – a concessionaire of a hydroelectric complex located on the Alto Tietê river at the Hydroelectric Power Plant Henry Borden. EMAE also owns and operates UHE Rasgão and UHE Porto Góes, both of which are also on the Tietê River, and UHE Isabel, which is located in the Paraíba Valley in the municipality of Pindamonhangaba. UHE Isabel is not currently operational.

Lajeado Energia S.A. – a privately-held corporation controlled by EDP Energias do Brasil S.A. was formed for the purposes of generating and trading electric power. Lajeado Energia holds 73% of the capital stock of Investco S.A. Investco operates the Luís Eduardo Magalhães Hydroelectric Power Plant and the Associated

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Transmission System, in the state of Tocantins under the terms of the Concession Contract for Use of Public Asset 05/97 – ANEEL, which is in force until 2033.

h) Centrais Elétricas Matogrossenses S.A. – a publicly-held company under share control of Rede Energia S.A. Centrais generates electric power through thermoelectric power plants and operates an electric power distribution system for serving isolated systems in its concession area, which is comprised of the state of Mato Grosso and includes consumers in 141 municipalities. According to the Concession Contract 03/1997, signed on December 11, 1997, the term of the concession is 30 years and matures on December 11, 2027 but is renewable for an additional 30 year period. The Company has also entered into a Generation Concession Agreement 04/1997 covering 7 Thermoelectric Power Plants and their respective associated substations. This agreement matures on December 10, 2027 (see Note 2). The investee reports negative net working capital of R$82,136.

As reported by independent auditors, investee has been experiencing difficulties in raising funds and refinancing its loans, resulting in difficulties in meeting its debt service obligations and other short-term operational commitments. The investee is a subsidiary of Rede Energia S.A. which has investment in its subsidiary Centrais Elétricas do Pará S.A. – CELPA. As noted above, CELPA is currently in the reorganization process under a motion that was accepted on February 29, 2012. Investee’s management is currently negotiating with its creditors with the goal of lengthening the profile of its indebtedness.

IV – Specific Purpose Entities (SPE)

Throughout the last several years, the companies of the Eletrobras System have invested in project partnerships with private companies in which the Company is a non-controlling shareholder, holding preferred shares. These shares are classified as Assets—Investments. These enterprises operate in the electric power generation and transmission segments.

In keeping with the Company’s desire to expand investments in the electric power segment, companies in the Eletrobras System also participate as minority shareholders, holding common shares in companies with public utility service concessions. Such common equity interests are classified as Assets – Investments:

- Sistema de Transmissão Nordeste - STN

Partners – 1 – Chesf 49%; 2 - Alusa 51%

Purpose – LT 500 Hv, 546 vKm – Teresina Fortaleza – operational

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2 – Artemis Transmissora de Energia

Partner – Eletrosul 100%

Purpose–LT 525 Km – Salto Santiago /Cascavel – operational

3 – Empresa Transmissora do Alto Uruguai – ETAU

Partners – 1 – Eletrosul 24.4%; 2 – Terna Participações 52.6%; 3 – DME Energética 10%; 4 – CEEE-GT 10%

Purpose – LT 230 Kv, 187 Km – Campos Novos /Santa Marte – operational

4 – Enerpeixe S.A.

Partners – 1 – Furnas 40%; 2 – EDP 60%

Purpose – UHE Peixe Angical 452 MW – operational

5–Manaus Construtora Ltda.

Partners – 1 – Eletronorte 30,0%; 2 – Chesf 19.5%; 3–Abengoa Holding 50.5%

Purpose – LT 500KV Oriximá/Cariri, SE Itacoatiara 500/138KV and SE 500/230KV – operational

6–Uirapuru Transmissora de Energia

Partners – 1 – Eletrosul 75%; 2 – Elos 25%

Purpose – LT 525KV, Ivaiorã/Londrina

7–Energia Sustentável do Brasil

Partners – 1 – Chesf 20%; 2 – Eletrosul 20%; 3 – Energy South Ameria Participações LTDA 10.1%; 4 – Camargo Correa Investimentos em Infraestrutura S.A. 9.9%

Purpose – UHE Jirau, with 3,300 MW – startup estimated for 2013

8–Norte Brasil Transmissora de Energia

Partners – 1 – Eletrosul – 24.5%; 2 – Eletronorte 24.5%; 3 – Andrade Gutierrez Participações 25.5%; Abengoa Concessões Brasil Holding S.A. – 25.5%

Purpose – LT Porto Velho/Araraquara, stretch 02, 600KV

9 – Estação Transmissora de Energia

Partner – Eletronorte 100%

Purpose–Rectifier Station–alternating current/direct current and Inverter Station–direct current/alternating current, 600/500 KV – 2950 MW,

10–Porto Velho Transmissora de Energia

Partner – Eletrosul 100%

Purpose – LT Porto Velho (RO), Collector Substation Porto Velho (RO), at 500/230 KV, and two Converter AC/DC/AC Back-to-Back, at 400 MW

11–Amazônia Eletronorte Transmissora de Energia

Partners – 1 – Eletronorte 49%; 2 – Bimetal 24.50%; 3 – Alubar 13.25%; 4 – Linear 13.25%

Purpose–2 transmission lines 230 KV, Coxipó / Cuiabá, with extension of 25 km and Cuiabá / Rondonópolis, with extension of 168 km – under construction

12–Intesa–Integração Transmissora de Energia

Partners – 1 – Chesf 12%; 2 – Eletronorte 37%; 3 – FIP 51%

Purpose–LT 500kV, in the stretch Colinas/ Serra da Mesa 2, 3º circuit – under construction

13 – Energética Águas da Pedra

Partners – 1 – Chesf 24.5%; 2 – Eletronorte 24.5%; 3 – Neoenergia S.A. 51%

Purpose – UHE Rio Aripuanã 261KW – operational

14 – Amapari Energia

Partners – 1 – Eletronorte 49%; 2 – MPX Energia 51%

Purpose – UTE Serra do Navio 23.33MW

15–Brasnorte Transmissora de Energia

Partners–1 – Eletronorte 49.71%; 2 – Terna Participações 38.70%; 3 – Bimetal Ind e Com. de Produtos

Metalúrgicos LTDA 11.62%

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Purpose – LT Juba/Jauru 230 KV, with extension of 129 Km; LT Maggi/Nova Mutum 230 KV, with extension of 273 Km; SE Juba, 230/130 KV and SE Maggi, 230/138 KV

16–Manaus Transmissora de Energia

Partners – 1 – Eletronrote 30%; 2 – Chesf 19.50%; 3- Abengoa Concessões Brasil Holding 50.50%

Purpose - LT Oriximiná/Itacoatiara, double circuit, 500KV, with extension of 374 KM, LT Itacoatiara/Cariri, double circuit 500KV, with extension of 212 Km, Itacoatiara Substation in 500/230 KV, 1,800MVA.

17 – Transleste

Partners – 1–Furnas 24%; 2 – Alusa 41%; 3 – Cemig 25%; 4 – Orteng 10%

Purpose - LT Montes Claros/Irapé , 345 kV – operational

18–Transudeste

Partners – 1 – Furnas 25%; 2 – Alusa 41%; 3 – Cemig 24%; 4 – Orteng 10%

Purpose–LT Itutinga/ Juiz de Fora, 345 kV – operational

19 – Transirapé

Partners – 1 – Furnas 24,50%; 2 – Alusa 41%; 3 – Cemig 24.50%; 4 – Orteng 10%

Purpose - LT Irapé / Araçuaí, 230 kV – operational

20 – Chapecoense

Partners – 1 – Furnas 49%; 2–CPFL 51% (Consócio Chapecoense 40% and CEEE-GT 9%)

Purpose - UHE Foz do Chapecó, Rio Uruguai, 855MW – operational

21–Serra do Facão Energia

Partners –1 – Furnas 49.47%; 2–Alcoa Alumínio S.A. 34.97%, 3–DME Energética S.A 10.09% and 4- Camargo Corrêa Energia S.A. 5.46%.

Purpose - UHE Serra do Facão, 212.58 MW – operational

22–Retiro Baixo

Partners – 1–Furnas 49%; 2 – Orteng 25.5%; 3 – Logos 15.5%; 3 – Arcadis Logos 10%

Purpose - UHE Retiro Baixo, 82 MW – operational

23–Baguari Energia

Partners – 1 – Furnas 30.61%; 2- Cemig 69.39%

Purposet - UHE Baguari, 140 MW – operational

24–Centroeste de Minas

Partners – 1 – Furnas 49%; 2 – Cemig 51%

Purpose - T Furnas/Pimenta (MG), 345 kV – operational

25 – Santo Antonio Energia

Partners – 1–Furnas 39%; 2–Odebrecht Investimentos 17.6%; 3–Andrade Gutierrez Participações 12.4%; 4 – Cemig 10%; 5–Fundos de Investimentos e Participações da Amazônia 20%; 6–Construtora Norberto Odebrecht (1%).

Purpose- UHE Santo Antônio

26–IE Madeira

Partners – 1 – Furnas 24.50%; 2 – Chesf 24.50%; 3 – CTEEP 31%

Purpose- LT Collector Porto Velho/Araraquara, stretch 01, with 2,950 Km

27–Inambari

Partners – 1 – Furnas 19.60%; 2 – Eletrobras 29.40%; 3 – OAS 51%

Purpose – Construction of UHE Inambari (Peru) and of the Exclusive Use Transmission System, connecting Peru to Brazil, as well as the import and export of goods and services – in pre-operational stage.

28 – Transenergia

Partners – 1 – Furnas 49%; 2 – Delta 25.5%; 3 – J.Malucelli 25.5%

Purpose–constructing, implementing, operating, and maintaining the electric power transmission line of the Brazilian Interconnected Electric System Basic Network, lot C.

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29 – Norte Energia S.A.

Partners – 1 – Eletrobras 15.00%; 2 – Chesf 15%; 3 - Eletronorte 19.98%; 4 - Petros 10%; 5 - Bolzano 10%; 6 – Other 30.02%

Purpose - UHE Belo Monte, Xingu river

14.4 Business Combinations

Subsidiary Eletrosul on August 11, 2011, after obtaining the required authorizations (CADE, ANEEL and BNDES), acquired a controlling interest in Artemis Transmissora de Energia S/A and Uirapuru Transmissora de Energia S/A. The Company adopted an accounting method to account for identifiable assets acquired, liabilities assumed and its non-controlling interest.

As provided for in Paragraph No. 42 of technical pronouncement IFRS 3 (Business Combination), the Company revalued its 49% previous interest in Artemis and 49% interest in Uirapuru at fair value as of the acquisition date and recognized a gain in the income for the period, as stated below.

(a) Artemis Transmissora de Energia S/A

The total amount of funds transferred in connection with the acquisition amounted to R$145,692. This figure corresponds to the difference between the cash consideration offered for the shares of Artemis (R$154,362) and the right to dividends unpaid to Cymi Holding (R$8,670) pursuant to Eletrosul’s preemptive right.

The acquisition of shareholding enabled Eletrosul, through the exercise of its preemptive right, to gain control of Artemis. As a result of the merger, Eletrosul will benefit from increased cash flow from the dividends to be paid on the shares acquired, synergies to be achieved through centralizing management and reductions in transaction costs.

Consideration
On August 11, 2011
Consideration effectively transferred (cash)	154,362
Credits referring to dividends of Cymi Holding (seller)	(8,670	)
Fair value of equity interest in Artemis held prior to business combination	139,978
	285,670
Amounts recognized of identifiable assets acquired and liabilities assumed
Cash and cash equivalents	14,031
Concessionaires and licensees	8,422
Financial asset amortizable by RAP	166,109
Indemnifiable financial asset	85,636
Assets at fair value through profit or loss	8,161
Other accounts receivable	2,851
Loans and financing	(99,138	)
Taxes payable and regulatory fees	(7,226	)
Dividends payable	(17,000	)
Other accounts payable	(4,772	)
Total identifiable net assets	157,074
Goodwill	65,584
Gain on previous equity interest in Artemis at fair value	63,012
	285,670

The reduction of consideration in the amount of R$8,670 was provided for in the stock purchase agreement, pursuant to which the seller waived its right to receipt of this amount from the buyer.

The goodwill of R$65,584 is attributed to expectations of future profitability and the right to operate a concession granted by ANEEL to develop an electric power public utility. This goodwill has a definite useful life and has been amortized over the concession period.

The goodwill paid for in the acquisition of shareholding in the amount of R$65,584 will be used for tax purposes as authorized by income tax laws.

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(b) Uirapuru Transmissora de Energia S/A

The total amount of funds transferred in connection with the acquisition amounted to R$19,429, corresponding to the difference between cash consideration offered for the shares of Uirapuru (R$20,859) and the right to dividends unpaid to Cymi Holding (R$1,430) pursuant to Eletrosul’s preemptive right.

The acquisition of shareholding enabled Eletrosul, through the exercise of its preemptive right, to gain control of Uirapuru. As a result of the merger, Eletrosul will benefit from increased cash flow from the dividends to be paid on the shares acquired, synergies to be achieved through centralizing management and reductions in transaction costs.

Consideration

On August 11, 2011

Consideration effectively transferred (cash)	20,859
Credits referring to dividends of Cymi Holding (seller)	(1,430	)
Fair value of equity interest in Uirapuru held prior to business combination	36,616
	56,045
Amounts recognized of identifiable assets acquired and liabilities assumed
Cash and cash equivalents	6,963
Concessionaires and licensees	2,689
Financial asset amortizable by RAP	63,395
Indemnifiable financial asset	28,145
Assets at fair value through profit or loss	3,167
Other accounts receivable	95
Loans and financing	(41,946	)
Taxes payable and regulatory fees	(642	)
Dividends payable	(5,500	)
Other accounts payable	(4,402	)
Total identifiable net assets	51,964
Non-controlling interest	(12,991	)
Goodwill	5,918
Gain on previous equity interest in Uirapuru at fair value	11,154
	56,045

The reduction in consideration in the amount of R$1,430 was provided for in the stock purchase agreement, pursuant to which the seller waived its right to receipt of this amount from the buyer.

The goodwill of R$5,918 is attributed to expectations of future profitability and the right to operate a concession granted by ANEEL to develop an electric power public utility. This goodwill has a definite useful life and has been amortized over the concession period.

Currently, Eletrosul has no intention of using goodwill for tax purposes.

(c) Fair value of identifiable assets acquired and liabilities assumed

Eletrosul recorded the identifiable assets acquired and liabilities assumed at fair value, since:

Cash and cash equivalents acquired are bank deposits and short-term investments measured by acquisition cost plus income earned up to the balance sheet date. Their values thus approximate the fair value.

Concessionaires and licensees hold accounts receivable for billed energy transmissions, plus monetary variations, when contracted.

Financial assets amortizable by RAP recognize the rights to charge users for the availability of electric power transmission system facilities in line with interpretation IFRIC 12(Service Concession Arrangements), which represents the fair value of such financial assets.

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Assets at fair value through profit or loss on investment funds restated by CDI (interbank deposit rate), subject to the BNDES loan, as part of the guarantee granted to the financial institution.

Loans and financing are subject to usual market interest rates for operations with the same characteristics.

Loan market values approximate recorded amounts, considering the values, terms and specific lines of credit.

NOTE 15 - FIXED ASSETS

The fixed asset items presented below refer to the property, plant and equipment used to generate electric power. The fixed assets used in the distribution and transmission segments are treated according to the IFRIC 12 (Service Concession Arrangements).

	12/31/2011
	Cost		Accumulated depreciation			(-) Special Obligation			Net Value
In service
Generation		59,688,026		(24,385,487	)		(349,052	)		34,953,487
Management		2,272,380		(1,353,630	)		(32,712	)		886,038
		61,960,406		(25,739,117	)		(381,764	)		35,839,525
In progress
Generation		16,906,190		—			—			16,906,190
Management		469,146		—			—			469,146
		17,375,336		—			—			17,375,336
		79,335,742		(25,739,117	)		(381,764	)		53,214,861

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	12/31/2010
	Cost		Accumulated depreciation			(-)Special Obligation			Net Value
In service
Generation		57,188,232		(22,998,388	)		(327,977	)		33,861,867
Management		2,210,771		(1,248,170	)		(35,591	)		927,010
		59,399,003		(24,246,558	)		(363,568	)		34,788,877
In progress
Generation		11,538,959		—			—			11,538,959
Management		354,662		—			—			354,662
		11,893,621		—			—			11,893,621
		71,292,624		(24,246,558	)		(363,568	)		46,682,498

Fixed assets classified as “public utility concession assets” cannot be sold or pledged as guarantee to third parties and therefore are not reflected in these tables.

The Special Obligation items presented below reflect nonrefundable contributions that are (i) paid by consumers to fund expansion projects required to fulfill electric power supply requests by such consumers and (ii) allocated to the corresponding projects pursuant to the regulations set forth by ANEEL. Assets funded with contributions paid by consumers are recorded as fixed assets.

The following table sets forth changes in fixed assets in 2011:

	Balance on 12/31/2010			Additions			Transfer in progress/ service			Depreciation			Balance on 12/31/2011
Generation/Trading
In service		55,976,229			3,136,868			(590,458	)		—			58,522,639
Accumulated depreciation		(22,998,388	)		—			—			(1,387,099	)		(24,385,487	)
In progress		11,538,959			4,776,939			590,458			(166	)		16,906,190
Leasing		1,212,003			—			—			(46,616	)		1,165,387
		45,728,803			7,913,807			—			(1,433,881	)		52,208,729
Management
In service		2,210,771			55,939			37,068			(31,398	)		2,272,380
Accumulated depreciation		(1,248,170	)		—			—			(105,460	)		(1,353,630	)
In progress		354,662			151,552			(37,068	)		—			469,146
		1,317,263			207,491			—			(136,858	)		1,387,897
Special Obligation
Accumulated reintegration		14,053			—			—			—			14,053
Consumer contribution		(147,894	)		—			—			—			(147,894	)
Federal government share		(47,584	)		—			—			—			(47,584	)
Other		(182,143	)		(18,196	)		—			—			(200,339	)
		(363,568	)		(18,196	)		—			—			(381,764	)
TOTAL		46,682,498			8,103,102			—			(1,570,739	)		53,214,861

F-70

	Balance on 12/31/2009			Additions		Transfer in progress/ service			Depreciation			Balance on 12/31/2010
Generation/Trading
In service		52,801,218			116,947		3,079,929			(21,165	)		55,976,229
Accumulated depreciation		(21,685,079	)		—		—			(1,313,309	)		(22,998,388	)
In progress		8,342,934			6,269,048		(3,079,229	)		6,206			11,538,959
Leasing		1,258,619			—		—			(46,616	)		1,212,003
		40,717,692			6,385,995		—			(1,374,884	)		45,728,803
Management
In service		1,865,281			299,702		45,788			—			2,210,771
Accumulated depreciation		(1,008,374	)		—		—			(239,796	)		(1,248,170	)
In progress		400,450			—		(45,788	)		—			354,662
		1,257,357			299,702		—			(239,796	)		1,317,263
Special Obligation
Accumulated reintegration		14,053			—		—			—			14,053
Consumer contributions		(147,894	)		—		—			—			(147,894	)
Federal government share		(47,584	)		—		—			—			(47,584	)
Other		(196,019	)		13,876		—			—			(182,143	)
		(377,444	)		13,876		—			—			(363,568	)
TOTAL		41,597,605			6,699,573		—			(1,614,680	)		46,682,498

Trading assets are assets used for commercial and marketing purposes.

The following table sets forth the average depreciation rate and accumulated depreciation on fixed assets as of December 31, 2011 and 2010:

	CONSOLIDATED
	12/31/2011					12/31/2010
	Average depreciation rate			Accumulated depreciation		Average depreciation rate			Accumulated depreciation
Generation
Hydraulic		2.44	%		19,856,370		2.46	%		18,646,869
Nuclear		3.30	%		2,501,816		3.30	%		2,264,774
Thermal		5.77	%		2,027,301		5.64	%		2,086,745
					24,385,487					22,998,388
Management		7.46	%		1,353,630		7.45	%		1,248,170
					1,353,630					1,248,170
Total					25,739,117					24,246,558

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NOTE 16 – FINANCIAL ASSETS

I – Itaipu Binacional

The Company classified the Itaipu Binacional project as a financial asset because the primary benefit to the Company in respect of this investment is the cash flow generated from the project. The overall financial impact of the Itaipu Binacional project as of December 31, 2011 and 2010 is set forth in the following table:

	CONSOLIDATED
	12/31/2011			12/31/2010
Accounts receivable		2,278,404			1,891,564
Indemnity right		611,508			290,704
Energy Suppliers - Itaipu		(586,994	)		(588,983	)
Indemnity liabilities		(1,404,965	)		(596,270	)
Other		—			—
Total current assets		897,953			997,015
Accounts receivable		139,563			35,715
Indemnity right		3,936,511			1,910,996
Indemnity liabilities		(2,352,065	)		(1,122,137	)
		1,724,009			824,574
Itaipu fixed assets
Generation
In service		14,931,693			13,916,577
In progress		50,557			42,762
		14,982,250			13,959,339
Management
In service		797,093			718,508
In progress		190,847			145,665
		987,940			864,173
Total non-current assets		17,694,199			15,648,086
Total financial asset of Itaipu - consolidated		18,592,152			16,645,101

Cash flows attributable to the Itaipu Binacional project are described below:

a – Cash Flow Attributable to Electric Power Trading

According to Brazilian Law No. 11,480/2007, the readjustment factor in the loan agreements signed with Itaipu Binacional, and the credit assignment agreements signed with the National Treasury, was removed in 2007, assuring that the Company receives its full share of receivables without reduction.

Consequently, the Decree No. 6,265 of November 22, 2007 was issued. This decree stipulates that the amount representing the annual readjustment factor is to be included in the transfer tariff charged by the Company as of 2008, thus creating a financial asset in the amount of the annual readjustment factor removed.

F-72

Therefore, since 2008, the difference arising from the removal of the annual readjustment factor, the value of which is determined annually by a joint ministerial ordinance from the Ministries of Treasury and Mines and Energy, has been included in the tariff on the transfer of power from Itaipu Binacional. The difference arising from the removal of the readjustment factor was equivalent to US$214,989 in 2011, which the Company earned through charges to consumers pursuant to MME/MF 398/2008.

The balance of the cash flow attributable to the trading of electric power generated by Itaipu Binacional, amounted to R$3,936,511 on December 31, 2011, which is equivalent to US$2,098,577 (December 31, 2010—R$1,910,996, which is equivalent to US$1,146,919). Such cash flows are reflected in the line item “Reimbursement rights” under “Current Assets”. R$2,352,065 thousand, which is equivalent to US$1,253,900 thousand, of these cash flows will be paid to the National Treasury through 2023 pursuant to the credit assignment agreements executed between the Company and the National Treasury in 1999. Such reimbursement obligations are reflected in the line item “Reimbursement obligations” under “Current Liabilities”.

These amounts will be realized through their inclusion in the transfer tariff to be charged through 2023.

b – Electric Power Trading – Itaipu Binacional

The Law No. 10,438 of April 26, 2002, requires the Company to (i) acquire all electric power generated by Itaipu Binacional and to be consumed in Brazil and (ii) trade this electric power.

In 2011, the equivalent of 83,847 GWh was sold. The energy supply tariff charged by Itaipu Binacional on purchases of electric power was US$22.60/kW and the transfer tariff charged by the Company on sales of electric power was US$24.88/kW.

The cash flow resulting from the trading of Itaipu Binacional’s electric power, in accordance with Decree No. 4,550 of December 27, 2002 as amended by Decree No. 6,265 of November 22, 2007, is to be allocated as follows:

1) if positive, it will be allocated to individual consumers pro rata, through a bonus credit in the consumers’ electric power invoices from the Brazilian Interconnected Electric System, for the residential and rural classes with monthly consumption lower than 350 kWh.

2) if negative, it is incorporated by ANEEL in the calculation of the transfer tariff on the electric power sold in the year subsequent to the occurrence of the negative result.

This trading operation does not affect the Company’s results, and under the current regulations, negative results represent an unconditional receivable right and positive results represent an obligation.

In 2011, the activity generated a surplus of R$639,977 (R$225,128 on December 31, 2010) and the resulting obligation is included in the line item “Reimbursement obligations” under “Current Assets”.

II – Financial Asset – Electric Power public utility concession

The line item “Financial asset – public utility concession,” in the amount of R$29,575,176 refers to the unrealized financial assets owned by the companies in the Eletrobras System. The distribution concessions were verified using a mixed model and the transmission concessions were verified using a financial model, both provided for in IFRIC 12.

F-73

Total financial assets as of December 31, 2011 and 2010, as stated in the consolidated balance sheet, are set forth in the chart below:

	CONSOLIDATED
	12/31/2011		12/31/2010
Transmission Concessions
Financial Asset - Allowed Annual Revenue		9,276,285		7,444,868
Financial Asset - Indemnifiable Concessions		17,273,525		15,935,225
		26,549,810		23,380,093
Distribution Concessions
Financial Asset - Indemnifiable Concessions		3,025,366		2,342,039
		3,025,366		2,342,039
Itaipu Financial Asset		18,592,152		16,645,101
		18,592,152		16,645,101
Total financial asset		48,167,328		42,367,234
Financial Asset – Current		2,017,949		1,723,522
Financial Asset – Non-current		46,149,379		40,643,712
Total financial asset		48,167,328		42,367,234

NOTE 17 – INTANGIBLE ASSETS

	CONSOLIDATED
	12/31/2010			Additions			Amortizations			Transfers			12/31/2011
Linked to the Concession
Generation
Service
Balance		909,952									60,604			970,556
Accumulated Amortization (-)		(19,791	)					(19,998	)					(39,789	)
Progress
Balance		156,026			16,007						(60,604	)		111,429
		1,046,187			16,007			(19,998	)		—			1,042,196
Distribution
Service
Balance		1,995,293			22,244			—			58,538			2,076,075
Accumulated Amortization (-)		(814,659	)		(50,315	)		(67,269	)		584			(931,659	)
Special Liabilities		(364,863	)		(62,766	)		7,800			(35,218	)		(455,047	)
Progress
Balance		180,093			85,854			—			(56,471	)		209,476
Special Liabilities		(99,223	)		(37,569	)		(472	)		32,567			(104,697	)
		896,641			(42,552	)		(59,941	)		—			794,148
Transmission
Progress
Balance		35,868			22,548			—			—			58,416
		35,868			22,548			—			—			58,416
Not linked to the Concession
In service		366,948			189,229			—			15,327			571,504
Accumulated Amortization (-)		(144,834	)		(10,693	)		(39,686	)		1,283			(193,930	)
In progress		63,162			52,481			—			(16,610	)		99,033
Total		285,276			231,017			(39,686	)		—			476,607
Total		2,263,972			227,020			(119,625	)		—			2,371,367

F-74

	CONSOLIDATED
	12/31/2009			Additions			Amortizations			Transfers			12/31/2010
Linked to the Concession
Generation
Service
Balance		645,678			264,274									909,952
Accumulated Amortization (-)								(19,791	)					(19,791	)
Progress
Balance		107,030			48,996									156,026
Impairment														—
		752,708			313,270			(19,791	)		—			1,046,187
Distribution
Service
Balance		1,923,390			10,647			—			61,256			1,995,293
Accumulated Amortization (-)		(682,095	)		(57,232	)		(75,332	)		—			(814,659	)
Special Liabilities		(322,852	)		(16,289	)		4,999			(30,721	)		(364,863	)
Progress
Balance		118,486			122,861			—			(61,254	)		180,093
Special Liabilities		(79,530	)		(50,412	)		—			30,719			(99,223	)
		957,399			9,575			(70,333	)		—			896,641
Transmission
Progress
Balance		30,644			5,224			—			—			35,868
		30,644			5,224			—			—			35,868
Not linked to the Concession
In service		332,517			24,133			—			10,298			366,948
Accumulated Amortization (-)		(101,306	)		(7,414	)		(37,037	)		923			(144,834	)
In progress		52,721			22,032			—			(11,591	)		63,162
		283,932			38,751			(37,037	)		(370	)		285,276
Total		2,024,683			366,820			(127,161	)		(370	)		2,263,972

Intangible assets are amortized over the concession term.

NOTE 18 – RECOVERABLE VALUE OF LONG-LIVED ASSETS

The Company determined the recoverable value of its long-lived assets based on their “value in use”, as there is no active market for the sale of the fixed assets linked to the concession. The “value in use” was calculated on the basis of the present value of the estimated future cash flow from the concession. Cash flow was projected on the basis of the Company’s operating results and the following assumptions, which represent management’s appraisal of future trends in the electric power sector:

a) Organic growth in line with historical data and the Brazilian economy’s growth prospects;

b) Average discount rate (5.49% for generation, 5.28% for transmission and 5.45% for distribution in 2011, 5.65% for generation, 5.18% for transmission and 5.88% for distribution in 2010 and 6.37% for generation, 5.99% for transmission and 6.34% for distribution in 2009) is calculated using a methodology that is usually applied by the market, which takes into account the weighted average cost of capital net of inflation rate;

c) The growth rate does not include inflation.

The analysis established the need to set aside provisions for losses for the following subsidiaries in the year 2011:

a) Eletrosul – Due to a delay in the start of operations at UHE Passo São João, future cash flows will be insufficient to cover this project’s costs. Therefore, the Company recognized an impairment of R$107,664 (R$142,870 in 2010).

b) Amazonas Energia (distribution segment) – In the year 2010, ANEEL established a new tariff adjustment methodology that includes, among other factors, the reduction in asset remuneration (regulatory weighted average cost of capital), resulting in the need to recognize an impairment of distribution assets in the amount of R$573,731 and R$69,546 in 2011.

c) Furnas – The Company recognized impairments of UHE Batalha and UHE Simplício in the amounts of R$693,339 and R$349,444, respectively, in 2011 in light of the cost increases resulting from the delay in the construction of the hydroelectric power plants at these facilities.

F-75

	CONSOLIDATED
Balance on December 31, 2009		886,305
(+) Provisions		388,666
(-) Reversions		(285,446	)
Balance on December 31, 2010		989,525
(+) Provision		438,484
(-) Reversion		(27,474	)
Balance on December 31, 2011		1,400,535
Property, plant and equipment		830,370
Intangible asset		558,488
Other		11,677
		1,400,535

NOTE 19 – SUPPLIERS

	12/31/2011		12/31/2010
CURRENT
Goods, Supplies and Services		1,972,176		1,314,871
Energy Purchased for Reselling		4,312,692		3,850,379
CCEE – Electricity Trading Chamber		53,234		515
		6,338,102		5,165,765

F-76

NOTE 20 – ADVANCES FROM CLIENTS

	12/31/2011		12/31/2010
ADVANCES FROM CUSTOMERS
CURRENT
Advanced electricity sale - ALBRAS		44,098		39,362
Advances from clients - PROINFA		368,943		302,100
		413,041		341,462
NON-CURRENT
Advanced electricity sale - ALBRAS		879,452		928,653
		879,452		928,653
TOTAL		1,292,493		1,270,115

I - ALBRÁS

The subsidiary Eletronorte executed an agreement for the sale of electric power to ALBRÁS, in 2004, for a 20-year supply period, at an average of 750 MW/month through December 2006 and 800 MW/month from January 2007 through December 2024 for a price equal to the UHE Tucuruí break-even tariff plus a premium calculated on the basis of the aluminum price on the London Metal Exchange (LME) – England. This price setting constitutes an embedded derivative (see Note 42).

Based on these terms, ALBRÁS made an energy pre-purchase and furnished payment for the same. ALBRÁS will receive energy credits from the Company, which will be amortized over the supply period in fixed monthly installments in average MW, according to the tariff effective in the billing month, as detailed below:

Client	Date of Agreement		Volume in Average Megawatts (MW)
Albrás	7/1/2004	12/31/2024	750 until 12/31/2006 and 800 as of 1/1/2007
Alcoa	7/1/2004	1/1/2024	from 304 to 328
BHP	7/1/2004	1/2/2024	from 353.08 to 492

II - PROINFA

PROINFA, enacted by Law No. 10.438/2002 as amended, was established to diversify the Brazilian energy supply through the utilization of renewable energy sources and applicable technologies.

In 2006, the Company agreed to purchase the electric power produced by PROINFA for a period of 20 years and transfer this electric power to transmission and distribution concessionaires, which in turn transfer the electric power to free consumers and self-producers, excluding low-income consumers proportionally to consumption.

Each transmission and distribution concessionaire pays the Company for the annual cost of the electric power supplied to the captive customers, free consumers and self-producers connected to its facilities, in twelve monthly installments, each in advance of the month in which the electric power is to be consumed.

The operations related to PROINFA’s sale and purchase of electric power do not affect the Company’s results.

F-77

NOTE 21 – FINANCING AND LOANS

I – The Company’s Agreements – Loans and Bonds

a) The Company has executed loan agreements with multilateral agencies, such as CAF, IDB, IRDB, KFW and EXIMBANK/JBIC, which are guaranteed by the federal government of Brazil. These agreements include standard covenants applicable to loan agreements with multilateral agencies. In 2011, the Company executed an agreement with IRDB for a loan in the amount of US$495,000,000 to fund investments in the distribution companies in the Eletrobras System. Of this amount, US$1,237,500 has been drawn to cover loan fees; the remaining balance is available to fund investments.

The loan agreement for the syndicated A/B loan between CAF and a syndicate of commercial banks, as lenders, and the Company, as borrower, contains covenants that are standard in the market for such loans, including the existence of corporate guarantees, change of corporate control, compliance with licenses and authorizations and restrictions on significant disposals of assets. In addition, the Company has entered into loan agreements with BNP and CDB, both of which are consistent with market practices.

In addition to the bond issuances underwritten by the former Dresdner Bank AG in 2005 and Credit Suisse in 2009, the Company issued US$1,750,000,000 in bonds underwritten by Santander and Credit Suisse in October 2011. The proceeds from the bond sales have been set aside in the Partnership Investment Program.

II – The Company’s Agreements - Global Reversion Reserve (RGR)

Global Reversion Reserve (RGR) is a fund created by the federal government of Brazil to cover the costs related to electric public utility concession reversions. The Company is authorized to withdraw RGR resources to fund (i) projects that expand the Brazilian electric power sector, (ii) service improvements and (iii) the implementation of programs of the federal government of Brazil.

Thus, the Company borrows funds from RGR and invests in specific investment projects with the purpose of:

a) expanding electric power distribution services;

b) incentivizing the development of alternative sources of electric power;

c) preparing inventory and feasibility studies for the development of hydroelectric projects;

d) building power generation units of up to 5,000 kW, exclusively for public utilities in communities supplied by an isolated electric system;

e) installing efficient public lighting;

f) conserving electric power by means of improved quality of products and services; and

g) achieving the goal of universal access to electric power.

The Company pays interest at a rate of 5% per annum on the balance of the loans drawn from RGR to fund the investments described above. As of December 31, 2011, the balance drawn by the Company from RGR amounted to R$8,931,891 (December 31, 2010 – R$8,159,038) and is reflected in the line item “Borrowings” under “Liabilities”.

The Company notes that RGR is an independent entity from the Company and the funds constituting RGR are not included in the Company’s financial statements.

F-78

	12/31/2011
	CURRENT CHARGES					PRINCIPAL
	Average Rate			Amount		CURRENT		NON-CURRENT
Foreign Currency
Financial Institutions
Interamerican Development Bank - IDB
Foreign Currency		4.40	%		2,400		34,901		191,957
Corporación Andino de Fomento - CAF		2.40	%		11,763		165,997		2,012,817
Kreditanstalt fur Wiederaufbau - KFW		3.87	%		39		23,116		32,631
Dresdner Bank		6.25	%		41		23,386		—
Eximbank		2.15	%		1,635		53,362		293,487
BNP Paribas		1.82	%		269		64,962		611,709
Other					1,244		12,088		17,367
					17,391		377,812		3,159,968
Bonds
Dresdner Bank		7.75	%		4,292		—		562,740
Santander		5.75	%		36,845		—		3,282,650
Credit Suisse		6.87	%		63,050		—		1,875,800
					104,187		—		5,721,190
Other
National Treasury - ITAIPU					3,922		416,325		8,561,657
CAJUBI - Fundação Prev ITAIPU PY					389		566		26,860
					4,311		416,891		8,588,517
					125,889		794,703		17,469,675
Domestic Currency
Global Reversion Reserve					—		—		8,946,901
Other financial institutions					79,291		1,728,195		3,654,832
BNDES					49,126		1,228,122		8,336,944
					128,417		2,956,317		20,938,677
					254,306		3,751,020		38,408,352

F-79

	12/31/2010
	CURRENT CHARGES					PRINCIPAL
	Average Rate			Amount		CURRENT		NON-CURRENT
Foreign Currency
Financial Institutions
Interamerican Development Bank - IDB
Foreign Currency		4.16	%		2,202		31,001		201,509
Corporación Andino de Fomento - CAF		2.29	%		9,886		25,634		1,935,355
Kreditanstalt fur Wiederaufbau - KFW		3.86	%		70		21,158		43,556
Dresdner Bank		6.25	%		88		21,405		21,406
Eximbank		2.15	%		1,591		44,999		292,490
BNP Paribas		1.48	%		338		57,703		601,060
Other					721		11,784		12,477
					14,896		213,684		3,107,853
Bonds
Dresdner Bank		7.75	%		3,812		—		499,860
CREDIT SUISSE		6.87	%		54,162		—		1,666,200
					57,974		—		2,166,060
Other
National Treasury - ITAIPU					2,412		349,744		7,978,640
					2,412		349,744		7,978,640
					75,282		563,428		13,252,553
Domestic Currency
Global Reversion Reserve					—		—		8,159,038
BNDES					10,786		330,338		2,703,781
Other financial institutions					54,252		834,379		7,154,599
					65,038		1,164,717		18,017,418
					140,320		1,728,145		31,269,971

a) Debts are guaranteed by the federal government of Brazil and/or the Company.

b) Total debt of the parent company in foreign currency, including charges, equals R$9,362,387 thousand, which is equivalent to US$4,991,144 thousand and the total debt of the Company on a consolidated basis equals R$18,390,267 thousand, which is equivalent to US$9,803,959 thousand.

c.) The percentage distribution by type of currency is as follows:

US$	EURO			YEN
97.67%		0.43	%		1.89	%

d) The average interest rate paid on loans and other forms of financing was 4.97% in 2011 and 4.19% in 2010.

e) The Company must repay principal on loans and other forms of financing in the following amounts in the years set forth below:

2013	2014		2015		2016		2017		After 2017		Total
577,571		643,521		1,064,687		585,172		577,618		17,027,149		20,475,718

II – Financial lease operation:

Leases entered into by Amazonas Energia are classified as finances leases when the terms of such leases transfer all the risks and benefits of ownership of the leased asset to the leaseholder. All other leases are classified as operating leases.

The assets acquired through finance leases are depreciated on the basis of the assets’ useful lives rather than over the life of the lease.

The present value of the finance leases is the quotient of the face value of the lease divided by the product of (a) the term of the lease and (b) the installed capacity (60 to 65 MW).

The reconciliation between the minimum future payments of the Company and their present value as of December 31, 2011 and 2010 is presented in the table below:

	12/31/2011			12/31/2010
Less than one year		283,831			244,098
More than one year and less than five years		1,419,154			1,220,493
More than five years		2,105,079			2,213,161
Charges of future financing over financial leasing		202,636			416,322
Gross liabilities of financial leasing – leasing minimum payments		4,010,700			4,094,074
Adjustment to present value		(2,092,159	)		(2,279,042	)
Total minimum payments of financial leasing		1,918,541			1,815,032
Less than one year		142,997			120,485
More than one year and less than five years		714,984			602,315
More than five years		1,060,560			1,092,232
Present value of payments		1,918,541			1,815,032

F-80

III - GUARANTEES

The Company participates in a number of projects as a guarantor for which the guaranteed amounts, forecasts and paid amounts are presented in the tables below.

Subsidiary	Year	Year2	Project	Lending Bank	Type (corporate/SPE)	Subsidiary Interest			Financing Amount (Subsidiary’s Quota)		Oustanding Balance on 12/31/2011
Chesf	2009	2009	UHE Jirau	BNDES 09.2.0097.1 and Banco do Brasil/Caixa Econômica Federal/Bradesco/Itaú BBA and Banco do Nordeste 21.00398-X	Energia Sustentável do Brasil S.A. - ESBR		20.0	%		1,444,000		1,329,848
Chesf	2010	2010	Implementation of Transmission Line and Converter Stations referring to Lots “D and F” of ANEEL auction nº 007/2008	BNDES	Interligação Elétrica do Madeira S.A. – IE Madeira		24.5	%		98,336		108,203
Chesf	2011	2011	Lot C – Auction 004/2008 – LT Oriximiná – Silves – Eng. Lechuga and SEs Itacoatiara and Silves (former Itacoatiara and Cariri)	BASA (FNO)	Manaus Transmissora de Energia S A		19.5	%		48,750		49,230
Chesf	2011	2011	Lot C - Auction 004/2008 – LT Oriximiná – Silves – Eng. Lechuga and SEs Itacoatiara and Silves (former Itacoatiara and Cariri)	BNDES	Manaus Transmissora de Energia S A		19.5	%		74,100		74,930
Eletrosul	2009	2009	UHE Jirau	BNDES 09.2.0097.1 and BNDES/BB/CEF/Bradesco/Itaú BBA and Banco do Nordeste 21.00398-X	Energia Sustentável do Brasil S.A.		20.00	%		1,444,000		1,329,848
Eletrosul	2010	2010	Usina Eólica Cerro Chato I	Banco do Brasil 40/00508-9	Eólica Cerro Chato I S.A.		90.00	%		67,026		57,428
Eletrosul	2010	2010	Usina Eólica Cerro Chato II	Banco do Brasil 40/00509-7	Eólica Cerro Chato II S.A.		90.00	%		67,026		57,474
Eletrosul	2010	2010	Usina Eólica Cerro Chato III	Banco do Brasil 40/00510-0	Eólica Cerro Chato III S.A.		90.00	%		67,026		67,026
Eletrosul	2008	2008	LT in 525 kV, with extension of 260 km, between SE of Campos Novos and SE Nova Santa Rita	BNDES 07.2.0663.1	Empresa de Transmissão de Energia do Rio Grande do Sul S.A.		100.00	%		126,221		112,422
Eletrosul	2010	2010	LT Collector Porto Velho – Araraquara 2, nº 2, in CC, +/- 600 kV	BNDES 10.2.0453.1	Norte Brasil Transmissora de Energia S.A.		24.50	%		295,000		75,208
Eletrosul	2011	2011	SE Collector Porto Velho in 500/230	BNDES 10.2.2072.1	Porto Velho Transmissora de Energia S.A.		100.00	%		283,411		274,982
Eletrosul	2009	2009	UHE Mauá – Direct	BNDES 08.2.0988.1	Cruzeiro do Sul Consortium		49.00	%		182,417		89,732
Eletrosul	2009	2009	UHE Mauá – Indirect	BNDES/Banco do Brasil 21/00406-4	Cruzeiro do Sul Consortium		49.00	%		182,417		89,764
Eletrosul	2008	2008	UHE Passo São João	BNDES 07.2.1061.1	Corporate project		100.00	%		183,330		186,856
Eletrosul	2006	2006	LT, second circuit, between SE’s of Campos Novos and Blumenau, extension 359 km, 525 kV	BNDES/Banco do Brasil 20/00039-1	Corporate project		100.00	%		50,000		31,547
Eletrosul	2006	2006	LT, second circuit, between SE’s of Campos Novos and Blumenau, extension 359 km, 525 kV	BNDES/BRDE 20/00039-1	Corporate project		100.00	%		50,000		31,497
Eletrosul	2006	2006	LT 525 kV, extension 359 km, Campos Novos - Blumenau	BNDES 06.2.0057.1	Corporate project		100.00	%		103,180		63,867
Eletrosul	2008	2008	Reinforcement (expansion) of LT Campos Novos – Blumenau (Circuit 2), through construction of SE Biguaçu of 525 kV	BNDES 08.2.1026.1	Corporate project		100.00	%		67,017		52,572
Eletrosul	2011	2011	UHE São Domingos	BNDES 10.2.1860.1	Corporate project		100.00	%		207,000		102,003
Furnas	2010	2010	Santo Antônio Energia S.A	BNDES	SPE		39.0	%		2,392,717		2,746,723
Furnas	2009	2009	Santo Antônio Energia S.A	Banco da Amazônia S.A. – FNO	SPE		39.0	%		196,334		213,746
Furnas	2010	2010	Foz do Chapecó Energia S.A.	BNDES	SPE		40.0	%		662,335		819,068
Furnas	2011	2011	Cia. De Transmissão Centroeste de Minas	BNDES	SPE		49.0	%		13,827		13,347
Furnas	(*)	??	Serra do Facão Energia S.A.	BNDES	SPE		49.5	%		257,357		293,998
Furnas	2010(**)	2010	Interligação do Madeira S.A.	BNDES	SPE		24.5	%		98,336		108,203
Furnas	2011(**)	2011	Interligação do Madeira S.A.	BNDES	SPE		24.5	%		68,600		34,535
Furnas	2011	2011	Interligação do Madeira S.A.	DEBÊNTURES - ITAÚ	SPE		24.5	%		102,900		106,459
Furnas	2011(***)	2011	Goiás Transmissão S.A.	BANCO DO BRASIL – CP	SPE		49.0	%		25,480		15,680
Furnas	2011(***)	2011	Goiás Transmissão S.A.	BANCO DO BRASIL – FCO	SPE		49.0	%		49,000		9,800
Furnas	2011(***)	2011	MGE Transmissão S.A.	BANCO DO BRASIL – CP	SPE		49.0	%		13,720		10,801
Furnas	2011	2011	Transenergia São Paulo S.A.	BNDES	SPE		49.0	%		18,963		12,390
Furnas	2010(***)	2010	Transenergia Renovável S.A.	BES	SPE		49.0	%		60,270		60,612
Furnas	2011(***)	2011	Brasventos Eolo Geradora de Energia S.A.	Banco Votorantim	SPE		24.5	%		12,936		12,936
Furnas	2011(***)	2011	Brasventos Miassaba Geradora de Energia S.A.	Banco Votorantim	SPE		24.5	%		13,713		13,713
Furnas	2011(***)	2011	Rei dos Ventos 3 Geradora de Energia S.A.	Banco Votorantim	SPE		24.5	%		5,691		5,691
Eletronuclear	2011	2011	Angra 3	BNDES	—		—			6,146,256		552,440
Eletronorte	2004	2004	UHE Tucuruí	BNDES	Corporate		100	%		931,000		485,281
Eletronorte	2009	2009	SE Miranda II	BNDES	Corporate		100	%		47,531		38,773
Eletronorte	2010	2010	LT and SE São Luis II/São Luis III	BNDES	Corporate		100	%		13,653		12,644
Eletronorte	2011	2011	LT Ribeiro Gonçalves/Balsas	BNB (FNE)	Corporate		100	%		70,000		69,534
Eletronorte	2011	2011	LT Lechuga/Jorge Teixeira	BASA(FNO)	Corporate		100	%		25,720		—
Eletronorte	2010	2010	Norte Brasil Transm. Energ. S.A.	BNDES	SPE		24.50	%		72,275		295,000
Eletronorte	2011	2011	Estação Transm Energia S A	BNDES	SPE		100	%		505,477		365,000
Eletronorte	2011	2011	Estação Transm Energia S A	BASA (FNO)	SPE		100	%		221,789		145,405
Eletronorte	2011	2011	Estação Transm Energia S A	BASA (FDA)	SPE		100	%		221,789		—
Eletronorte	2011	2011	Brasventos Eolo – Eólica	Votorantin	SPE		24.5	%		12,936		52,800
Eletronorte	2011	2011	Rei dos Ventos 3 – Eólica	Votorantin	SPE		24.5	%		5,691		23,230
Eletronorte	2011	2011	Brasventos Miassaba 3 – Eólica	Votorantin	SPE		24.5	%		13,713		55,970
Eletronorte	2012	2012	UHE Belo Monte	BNDES	SPE		19.98	%		225		1,127,742
Eletronorte	2012	2012	UHE Belo Monte	Promissory Notes	SPE		19.98	%		150		752,010
Eletronorte	2012	2012	Manaus Transm. Energia S A	BASA (FNO)	SPE		30	%		250,000		252,462
Eletronorte	2012	2012	Manaus Transm. Energia S A	BNDES	SPE		30	%		400,000		384,258
Eletronorte	2011	2011	Integração Transmissão Energ. S.A.	BNDES	SPE		37	%		100		271,283
Eletronorte	2011	2011	Integração Transmissão Energ. S.A.	ITAÚ	SPE		37	%		9		25,212
Eletronorte	2011	2011	Rio Branco Transmissora Energ. S.A.	BASA	SPE		100	%		100,000		—
Eletronorte	2011	2011	Rio Branco Transmissora Energ. S.A.	BNDES	SPE		100	%		138		—
Eletronorte	2011	2011	Linha Verde Transmissora S.A.	BTG Pactual	SPE		49	%		147		300,000
Eletronorte	2011	2011	Transmissora Matogrossense Energ. S.A.	Banco do Brasil	SPE		49	%		17		35,000
Eletronorte	2011	2011	Transmissora Matogrossense Energ. S.A.	BASA (FCO)	SPE		49	%		39		80,000
Eletrobras	2011	2011	Mangue Seco 2	BNB	SPE		49	%		40,951		—
Eletrobras	2011	2011	Belo Monte Fiel Cumplrimento	ANEEL	SPE		15	%		156,915		156,915
Eletrobras	2011	2011	Norte Brasil Transm. Energ. S.A.	BNDES	SPE		15	%		169		1,127,742
Eletrobras	2011	2011	Norte Brasil Transm. Energ. S.A.	Promissory Notes	SPE		15	%		113		752,010
Total										18,269,237		16,022,854

Subsidiary	Year	Year2	Project	Guarantee Balance Eletrobras		Outstanding Balance Projection - End of the Year						To released		End of Guarantee
						2012		2013		2014		After 2014
Chesf	2009	2009	UHE Jirau		13,298		1,664,995		1,606,545		1,524,168		—		1/15/2034
Chesf	2010	2010	Implementation of Transmission Line and Converter Stations referring to Lots “D and F” of ANEEL auction nº 007/2008		1,082		—		—		—		—		9/17/2012
Chesf	2011	2011	Lot C – Auction 004/2008 – LT Oriximiná – Silves – Eng. Lechuga and SEs Itacoatiara and Silves (former Itacoatiara and Cariri)		492		54,225		59,726		65,786		—		12/31/2031
Chesf	2011	2011	Lot C – Auction 004/2008 – LT Oriximiná – Silves – Eng. Lechuga and SEs Itacoatiara and Silves (former Itacoatiara and Cariri)		749		81,847		89,402		97,654		—		12/31/2026
Eletrosul	2009	2009	UHE Jirau		13,298		1,664,995		1,606,545		1,524,168		—		1/15/2034
Eletrosul	2010	2010	Usina Eólica Cerro Chato I		574		63,644		55,258		46,870		—		7/15/2020
Eletrosul	2010	2010	Usina Eólica Cerro Chato II		575		63,644		55,258		46,870		—		7/15/2020
Eletrosul	2010	2010	Usina Eólica Cerro Chato III		670		63,644		55,258		46,870		—		7/15/2020
Eletrosul	2008	2008	LT in 525 kV, with extension of 260 km, between SE of Campos Novos and SE Nova Santa Rita		1,124		100,337		88,408		76,536		—		6/15/2021
Eletrosul	2010	2010	LT Collector Porto Velho – Araraquara 2, nº 2, in CC, +/- 600 kV		752		—		—		—		—		4/15/2012
Eletrosul	2011	2011	SE Collector Porto Velho in 500/230		2,750		273,058		255,614		238,177		—		8/15/2028
Eletrosul	2009	2009	UHE Mauá – Direct		897		84,552		78,963		73,372		—		1/15/2028
Eletrosul	2009	2009	UHE Mauá – Indirect		898		84,581		78,990		73,397		—		1/15/2028
Eletrosul	2008	2008	UHE Passo São João		1,869		177,913		164,850		151,781		—		7/15/2026
Eletrosul	2006	2006	LT, second circuit, between SE’s of Campos Novos and Blumenau, extension 359 km, 525 kV		315		27,048		22,860		18,666		—		5/15/2019
Eletrosul	2006	2006	LT, second circuit, between SE’s of Campos Novos and Blumenau, extension 359 km, 525 kV		315		27,007		22,804		18,599		—		5/15/2019
Eletrosul	2006	2006	LT 525 kV, extension 359 km, Campos Novos – Blumenau		639		54,798		46,270		37,738		—		5/15/2019
Eletrosul	2008	2008	Reinforcement (expansion) of LT Campos Novos – Blumenau (Circuit 2), through construction of SE Biguaçu of 525 kV		526		46,868		41,196		35,522		—		3/15/2021
Eletrosul	2011	2011	UHE São Domingos		1,020		207		193		180		—		6/15/2028
Furnas	2010	2010	Santo Antônio Energia S.A		27,467		3,006,832		3,268,608		3,297,985		8,221		3/15/2034
Furnas	2009	2009	Santo Antônio Energia S.A		2,137		223,279		234,199		244,057		—		3/10/2034
Furnas	2010	2010	Foz do Chapecó Energia S.A.		8,191		737,854		686,967		636,081		—		9/15/2027
Furnas	2011	2011	Cia. De Transmissão Centroeste de Minas		133		11,856		10,539		9,221		—		4/15/2023
Furnas	(*)	??	Serra do Facão Energia S.A.		2,940		268,950		250,294		231,639		—		6/15/2027
Furnas	2010(**)	2010	Interligação do Madeira S.A.		1,082		—		—		—		—		9/17/2012
Furnas	2011(**)	2011	Interligação do Madeira S.A.		345		—		—		—		—		9/17/2012
Furnas	2011	2011	Interligação do Madeira S.A.		1,065		—		—		—		—		9/15/2012
Furnas	2011(***)	2011	Goiás Transmissão S.A.		157		—		—		—		—		2/27/2012
Furnas	2011(***)	2011	Goiás Transmissão S.A.		98		—		—		—		—		12/1/2031
Furnas	2011(***)	2011	MGE Transmissão S.A.		108		—		—		—		—		2/27/2012
Furnas	2011	2011	Transenergia São Paulo S.A.		124		19,420		17,999		16,578		—		8/15/2026
Furnas	2010(***)	2010	Transenergia Renovável S.A.		606		—		—		—		—		6/15/2012
Furnas	2011(***)	2011	Brasventos Eolo Geradora de Energia S.A.		129		—		—		—		—		5/30/2012
Furnas	2011(***)	2011	Brasventos Miassaba Geradora de Energia S.A.		137		—		—		—		—		5/30/2012
Furnas	2011(***)	2011	Rei dos Ventos 3 Geradora de Energia S.A.		57		—		—		—		—		5/30/2012
Eletronuclear	2011	2011	Angra 3		5,524		3,561,738		5,516,695		6,728,887		344,766		6/15/2036
Eletronorte	2004	2004	UHE Tucuruí		4,853		383,542		281,803		180,064		—		9/15/2016
Eletronorte	2009	2009	SE Miranda II		388		34,994		31,215		27,436		—		11/15/2024
Eletronorte	2010	2010	LT and SE São Luis II/São Luis III		126		11,741		10,837		9,934		—		11/15/2024
Eletronorte	2011	2011	LT Ribeiro Gonçalves/Balsas		695		69,534		67,610		67,876		—		6/3/2031
Eletronorte	2011	2011	LT Lechuga/Jorge Teixeira		—		25,720		24,246		22,639		—		1/10/2029
Eletronorte	2010	2010	Norte Brasil Transm. Energ. S.A.		2,950		—		—		—		—		4/15/2012
Eletronorte	2011	2011	Estação Transm Energia S A		3,650		505,477		—		—		—		11/30/2028
Eletronorte	2011	2011	Estação Transm Energia S A		1,454		221,789		—		—		—		7/30/2031
Eletronorte	2011	2011	Estação Transm Energia S A		—		221,789		—		—		—		5/30/2031
Eletronorte	2011	2011	Brasventos Eolo – Eólica		528		52,800		—		—		—		5/28/2012
Eletronorte	2011	2011	Rei dos Ventos 3 – Eólica		232		23,230		—		—		—		5/28/2012
Eletronorte	2011	2011	Brasventos Miassaba 3 – Eólica		560		55,970		—		—		—		5/28/2012
Eletronorte	2012	2012	UHE Belo Monte		11,277		—		—		—		—		5/15/2012
Eletronorte	2012	2012	UHE Belo Monte		7,520		—		—		—		—		6/9/2012
Eletronorte	2012	2012	Manaus Transm. Energia S A		2,525		278,077		306,289		337,365		320,591		12/31/2031
Eletronorte	2012	2012	Manaus Transm. Energia S A		3,843		439,062		407,700		376,339		344,977		12/31/2026
Eletronorte	2011	2011	Integração Transmissão Energ. S.A.		2,713		240,688		210,093		179,498		148,903		10/31/2020
Eletronorte	2011	2011	Integração Transmissão Energ. S.A.		252		10,000		—		—		—		7/5/1905
Eletronorte	2011	2011	Rio Branco Transmissora Energ. S.A.		—		—		—		—		—		7/18/2012
Eletronorte	2011	2011	Rio Branco Transmissora Energ. S.A.		—		138,000		—		—		—		12/31/2026
Eletronorte	2011	2011	Linha Verde Transmissora S.A.		3,000		—		—		—		—		6/27/2012
Eletronorte	2011	2011	Transmissora Matogrossense Energ. S.A.		350		35,000		35,000		—		—		5/22/2012
Eletronorte	2011	2011	Transmissora Matogrossense Energ. S.A.		800		80,000		—		—		—		2/1/2025
Eletrobras	2011	2011	Mangue Seco 2		—		41		40,951		0		—
Eletrobras	2011	2011	Belo Monte Fiel Cumplrimento		1,569		109,841		109,841		109,841		109,841		4/30/2019
Eletrobras	2011	2011	Norte Brasil Transm. Energ. S.A.		11,277		—		—		—		—		5/15/2012
Eletrobras	2011	2011	Norte Brasil Transm. Energ. S.A.		7,520		—		—		—		—		6/9/2012
Total					160,229		15,300,583		15,839,026		16,551,791		1,277,298

The Company includes the fair value of the Company’s guarantees, to the extent that funds under the loans guaranteed by the Company have been released by the funding banks, under “Non-Current Liabilities” as shown below:

	Accrued Amount
Guarantee Owed on 12/31/2010		79,776
Charges		80,452
Guarantee Owed on 12/31/2011		160,228

F-81

a) UHE Simplício – This electric power generation facility will have an installed generation capacity of 337.7 MW. Furnas holds 100% of the interests in the project and the Company’s guarantee covers 100% of the financing.

b) UHE Mauá – This electric power generation facility, with an installed capacity of 361MW, is to be built and operated by a partnership between Eletrosul (49%) and Copel (51%). BNDES has approved two loans for this hydroelectric power plant (UHE) – one direct and one indirect. The Company’s guarantee covers 49% of the loans.

c) UHE Jirau – SPE Energia Sustentável do Brasil was established by Eletrosul, CHESF, GDF Suez Energy and Camargo Corrêa to build and operate this electric power generation facility with an installed capacity of 3,450MW. BNDES approved two loans for this project – one direct and one indirect – via on-lending banks and payable in 240 months. The Company guarantees the interest of each of its subsidiaries – Eletrosul (20%) and CHESF (20%).

d) UHE Santo Antônio - SPE Santo Antônio Energia was established by Furnas, CEMIG, Fundo de Investimentos em Participação Amazônica Energia – FIP, Construtora Norberto Odebrecht S/A, Odebrecht Investimentos em Infraestrutura Ltda and Andrade Gutierrez Participações S/A to build and operate this electric power generation facility with an installed capacity of 3,150 MW. The Company is the intervening consenting party in the loans from BNDES and Banco da Amazônia, but its guarantee is limited to Furnas’s interest in the project (39%).

e) UHE Foz do Chapecó – SPE Foz do Chapecó Energia was established by Furnas to build and operate this electric power generation facility with an installed capacity of 855MW. The Company is the guarantor of contractual instruments with BNDES to the extent of Furnas’s interest in the SPE (40%).

f) UHE Baguari – This electric power generation facility is a corporate project of Furnas with 140MW of installed capacity. The Company is the guarantor of 15% of a loan from BNDES.

g) UHE Serra do Facão – SPE Serra do Facão was established by Furnas (49.5%), Alcoa Alumínio S.A. (30.5%), DME Energética (10%) and Camargo Corrêa Energia S.A (10%) to build and operate this electric power generation facility with an installed capacity of 210MW. The guarantee provided by the Company on the loan with BNDES covers Furnas’s interest in the project.

h) Eólicas Cerro Chato I, II and III – SPE’s Eólicas Cerro Chato I, II and III were established by Eletrosul (90%) and Wobben (10%) to build and operate these electric power generation facilities with an installed capacity of 30MW each. Eólicas Cerro Chato provided 80% of the financing, which is payable over 10 years following a 2 year grace period. The Company’s guarantee covers 90% of the loan on this project.

i) Norte Brasil Transmissora de Energia – An SPE was established by Eletronorte (24.5%) and Eletrosul (24.5%) for the purpose of building, operating and maintaining the transmission line from Porto Velho to Araraquara with a length of 2,375 km.

j) Manaus Transmissora de Energia – An SPE was established by Eletronorte (30%) and Chesf (19.5%) to build and operate four substations and one transmission line of 586 km (LT Oriximiná/Itacoatiara/Cariri). The Company is the guarantor of two loans on this project (BASA and BNDES).

k) Mangue Seco 2 – An SPE was established by the Company (49%) and Petrobras (51%) to build and operate three wind power plants in the city of Guararé, state of Rio Grande do Norte. In this project, the guarantee provided by the Company is proportional to its interest in the project.

l) UHE Batalha – This electric power generation facility is a corporate project of Furnas with a generating capacity of 52.5MW. The Company is the guarantor of the BNDES loan on this project.

m) RS Energia – Guarantee to Eletrosul in the loan with BNDES and on-lending Banks upon purchase of equity interest from the companies Schahin Engenharia S/A and Engevix Engenharia S/A in the transmission companies. Eletrosul holds 100% interest in RS.]

n) IE Madeira - SPE Interligação Elétrica do Madeira was established by Furnas (24.5%) and Chesf (24.5%). In this project, the Company is counter-guaranteeing the bank guarantee contracts to collateralize the short-term loan from BNDES in proportion to the equity interest of its subsidiaries in the project. The Company is also guaranteeing a separate short-term loan from BNDES in proportion to the equity interest of its subsidiaries in the project.

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o) UHE Belo Monte - SPE Norte Energia was established by Chesf (15%), Eletronorte (19.98%) and the Company (15%), in addition to other partners, to build and operate this electric power generation facility with an installed capacity of 11,233 MW The Company is guaranteeing the liabilities of the SPE to the insurance company JMALUCELLI under the insurance contract between the SPE and JMALUCELLI. The Company is also guaranteeing a short-term loan from BNDES.

p) Angra III – The Company is the guarantor of the loan from BNDES to Electronuclear for the construction of UTN Angra III.

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NOTE 22 – DEBENTURES

The following table sets forth the Company’s balance of debentures payable as of December 31, 2011:

Interest Rate	Maturity		12/31/2011		12/31/2010
106.5% CDI		09/15/2012		210,984		—
IPCA +6.5% pa		09/30/2012		279,387		245,802
IPCA +6.5% pa		12/30/2012		248,866		218,932
IPCA +6.5% pa		09/30/2013		279,410		245,802
				1,018,647		710,536

The amount of R$210,984 includes (1) the issue of 420 debentures, single series, to mature on September 15, 2012, with 106.5% CDI interest rate and unit value of R$1,000 each, conducted by SPE Interligação Elétrica do Madeira S.A.; (2) the issue of 400 debentures on September 15, 2011; and (3) the issue of 20 debentures on October 3, 2011. The Company expects to repay these debentures in full with proceeds from the Company’s long-term loan with BNDES.

The amount of R$807,663 refers to the issue of 1,500,000,000 non-convertible debentures between investee SPE Madeira Energia; the Investment Fund of Government Severance Indemnity Fund for Employees (FI-FGTS) as debenture holder; OPI, CNO, Andrade Gutierrez Participações S.A., Fundo de Investimento em Participações Amazônia Energia, FURNAS and Cemig Geração e Transmissão S.A. as intervening parties; and Pentágono S.A. Distribuidora de Títulos e Valores Mobiliários, as fiduciary agent and debenture holder agent. The proceeds from this debenture will partly fund the construction of UHE Santo Antônio and its related transmission system.

NOTE 23 – COMPULSORY LOAN

The Compulsory Loan relating to consumption of electric power was enacted by Law No. 4.156/1962 with the objective of generating funds for the expansion of the Brazilian energy sector, and was subsequently superseded by Law No. 7.181 of December 20, 1983, which provided December 31, 1993 as the deadline for collection.

During the first phase of this Compulsory Loan, which ended with the enactment of Decree-Law No. 1.512/1976, the tax collection included a number of classes of energy consumers and contributors’ funds were represented by bearer bonds issued by Eletrobras.

During the second phase, which began with provisions contained under Decree-Law No. 1.512/1976, the Compulsory Loan was imposed only on industries with monthly energy consumption exceeding 2,000 kWh, and contributors’ funds were no longer represented by bonds, but only recorded in book-entry form by Eletrobras.

The remaining Compulsory Loan balance, after the 4th conversion into shares on April 30, 2008, related to the 1988-2004 credits, and is currently recorded under current and non-current liabilities, maturing as of 2008, and accruing annual interest of 6%, including monetary adjustment based on the IPCA-E variation and corresponding to R$227,174 (December 31, 2010 - R$157,616), of which R$211,554 is non-current (December 31, 2010 – R$141,425).

I - Bearer bonds issued by Eletrobras

The bearer bonds issued pursuant to the Compulsory Loan are not marketable securities, not traded on stock exchanges, not quoted and unenforceable. As such, Eletrobras’ Management does not consider the Company to have outstanding debentures in relation to these bearer bonds.

Law No. 4.156/1962 required Eletrobras to issue these bearer bonds. Accordingly, it was neither a decision made by Eletrobras or its bondholders to issue the bonds. The Brazilian Securities Commission (CVM)

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Board’s decision rendered in the administrative proceeding CVM RJ 2005/7230, filed by holders of these bonds, held that “the bonds issued by Eletrobras as a result of Law No. 4.156/1962 may not be deemed as securities.”

CVM also found that there was no irregularity in the procedures adopted by Eletrobras concerning its financial statements referring to these bonds nor in the reporting of any related lawsuits. The CVM further held that bearer bonds issued during the first phase of the Compulsory Loan cannot be considered debentures.

The unenforceability of these bearer bonds was further established by decisions of the Superior Court of Justice, which reiterated the understanding that the bearer bonds are time-barred and cannot be used as guarantee for tax foreclosures. In addition, Article 4, Paragraph 11 of Law No. 4.156/1962 and Article 1 of Decree No. 20.910/1932 provides that the bearer bonds are unenforceable, which was later confirmed by the Superior Court of Justice in their newsletter 344, stating that these bonds cannot be used as a guarantee for tax foreclosures because they are illiquid and not debentures.

NOTE 24 – FUEL CONSUMPTION ACCOUNT - CCC

The Fuel Consumption Account (CCC), created pursuant to Decree 73,102, of November 7, 1973, is a government sponsored program aimed at subsidizing thermoelectric generation in isolated systems located primarily in the northern region of Brazil.

Under Law No. 8.631 of March 4, 1993, the Company collects the required tax payments made by the electricity public utility concessionaires for credit in the CCC, which correspond to annual quotas of fuel expenses required in generating electricity. The amounts presented in current assets against current liabilities correspond to available funds maintained in a restricted bank account and to quotas not paid by the concessionaires.

Law No. 12.111 of December 9, 2009 changes the assumptions to contract electricity and receiving subsidies, including for isolated locations, to be interconnected in a close future. Therefore, provisions contained therein are effective as of June 30, 2009, as per ANEEL Resolution 427 dated February 22, 2011, in order to allow the Concessionaires, during the period of transition to the National Interconnected System – (SIN), to maintain the same subsidies. With this measure, these companies will receive equal treatment given to SIN concessionaires when the current model was created.

The purpose of Law No. 12.111/2009 is reimbursing the electricity generation costs in Isolated Systems, including costs related to contracting electricity and power associated to own generation to supply the electricity distribution public utility, charges of the electricity sector and taxes and also investments made, which shall occur through the Fossil Fuel Consumption Account – CCC.

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NOTE 25 – TAXES AND SOCIAL CONTRIBUTIONS – LIABILITIES

	12/31/2011		12/31/2010
Income Tax		329,024		400,167
Social Contribution		187,928		252,752
Deferred Income Tax and Social Contribution		1,161,598		513,327
PASEP and COFINS		219,257		153,256
ICMS		124,662		70,267
PAES / REFIS		833,469		930,552
INSS		79,105		—
Total		2,935,043		2,320,321
Current liabilities		1,032,521		1,102,672
Non-current liabilities		1,902,522		1,217,649

	12/31/2011						12/31/2010
	Income Tax			Social Contribution			Income Tax			Social Contribution
Income (loss) before income tax and social contribution		4,860,080			4,860,080			4,047,250			4,047,250
Losses on subsidiaries that do not record deferred tax assets		891,499			891,499			1,411,911			1,411,911
Adjusted basis		5,751,579			5,751,579			5,459,161			5,459,161
Total income tax and social contribution calculated at the rates of 25% and 9%, respectively		1,437,895			517,642			1,364,790			491,324
Effects of additions and (exclusions):
Dividend revenue		(172,341	)		(62,043	)		(150,217	)		(54,078	)
Equity accounting		(120,696	)		(43,450	)		(167,439	)		(60,277	)
Provision for interest on capital		(485,361	)		(174,729	)		(92,689	)		(33,368	)
Investment losses		—			—			—			—
Provision for reduction to market value		67,964			24,467			165,410			59,548
Other additions (exclusions)		386,603			39,921			340,561			16,510
Fiscal incentive		(317,812	)		—			(385,809	)		—
Total income tax and social contribution expense (Revenue)		796,252			301,809			1,074,606			419,659

a) Tax Incentives – SUDENE

Provisional Measure 2.199-14 of August 24, 2001, amended by Law No. 11.196 of November 21, 2005, authorizes companies in the northeast region of Brazil with infrastructure projects considered by the government as a priority for regional development, to reduce their income tax obligations in relation to investments in installation, expansion, modernization, or diversification projects.

In 2008, the subsidiary Chesf was entitled to reduce by 75% its income tax, calculated based on the exploration profit. Such incentive was granted until 2017.

In 2011, tax incentives mentioned above amounted to R$317,812 (R$385,809 on December 31, 2010), which the Company recorded in the income statement for the year as a reduction of income tax, in compliance with the Technical Pronouncement IAS 20.

b) Special Installment Program - PAES

The subsidiaries Furnas, Eletrosul, Eletronorte, Amazonas Energia, and Distribuição Alagoas opted for refinancing their tax debts. The financing term is limited to 180 months and the outstanding balance is adjusted by the long-term interest rate – TJLP and SELIC.

NOTE 26 – REGULATORY FEES

	CONSOLIDATED
CURRENT	12/31/2011		12/31/2010
a) Global Reversion Reserve - RGR		181,868		113,103
b) CCC/CDE		63,249		53,896
c) Financial Compensation - Water Resources		584,816		390,792
d) ANEEL Inspection Fee		11,116		5,547
e) PROINFA		60,643		20,902
		901,692		584,240

a) Global Reversion Reserve – RGR

The financial contributions required to fund the RGR is a responsibility of the electric power public utility concessionaires, which are required to contribute a quota, the Reversion and Appropriation of Electricity Services quota, of up to 2.5% of the concessionaires’ and licensees’ investments, which is limited to 3% of annual revenues. The quota value is calculated as a service cost of the concessionaries.

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The concessionaires pay their RGR annual quotas to the Fund, which is not controlled by Eletrobras, by means of a restricted bank account managed by Eletrobras as set out Law No. 5.655/1971. As previously noted in Note 21, the funds in the restricted bank account are not reflected in the Company’s financial statements because RGR is an independent entity from Eletrobras.

b) Fuel Consumption Account - CCC

As previously described in Note 24, Law No. 12.111 of December 9, 2009, aims to subsidize part of the electricity generation costs in isolated systems, including costs related to electric power generation and distribution, through the collection of taxes and investments for the Fuel Consumption Account – CCC in the interconnected system of electric power distribution. The total cost of electric power generation to meet the isolated systems includes: the costs of energy and related power; distribution costs, including machinery rental, energy imports and electric power transmission; investments made in electric power generation; the price of electricity services rendered in remote regions, including installation, operation and maintenance of decentralized generation system with associated networks; and the contracting of capacity reserve to ensure supply of electricity. Unrecovered charges and taxes are also included.

The financial contributions required to fund the CCC derive from the collection of quotas by distribution companies, licensees and transmission companies throughout the country, at the proportion and amounts determined by ANEEL. As of the enactment of Law nº 12.111/2009, the date for the end of activities of this sector fund is no longer estimated and its management does not affect the Company’s results.

c) Energy Development Account - CDE

The Energy Development Account (CDE) aims to promote the development of projects to provide nationwide electricity services in Brazil. It is a subsidy program for low-income consumers that seeks to expand the natural gas network in order to serve states without a pipe network.

Created on April 26, 2002, CDE has a 25-year duration period and is managed by Eletrobras, in compliance with a schedule prepared by the Ministry of Mines and Energy. The CDE also does not affect the Company’s results.

CDE is also used to ensure the competitiveness of energy produced from alternative sources (wind power, small hydroelectric power plants and biomass-based power plants) and domestic mineral coal.

d) PROINFA

The federal government Program for the development of projects to diversify Brazil’s energy matrix and promotion of electric power alternative sources enacted by Law 10.438 of April 2002 (PROINFA) is managed by the Company and seeks regional solutions for the use of energy renewable sources.

PROINFA estimates the operation of 144 power plants, summing up 3,299.40 MW of installed capacity. The program’s power plants account for the generation of approximately 12,000 GWh/year – an amount capable of supplying 6.9 million households and corresponding to 3.2% of Brazil’s total annual consumption. The 3,299.40 MW contracted are divided into 1,191.24 MW deriving from 63 small hydroelectric power plants (PCHs), 1,422.92 MW from 54 wind power plants and 685.24 MW from 27 biomass-based power plants. Eletrobras has contractually committed to providing this level of electric energy for 20 years. The operations within the scope of PROINFA do not affect the Company’s results.

PROINFA also aims to reduce the emission of greenhouse gases to 2.8 million tonnes of CO2/year by including clean sources in the production of the country’s electricity.

e) Financial Compensation through the Utilization of Water Resources

The Financial Compensation through the Utilization of Water Resources for the purposes of electric power generation was enacted by the Federal Constitution of 1988 and refers to a required percentage that hydroelectric power concessionaires must pay for the utilization of water resources. ANEEL manages the collection and distribution of resources among the beneficiaries: states, municipalities and entities directly managed by the federal government.

As set forth by Law 8,001/90, amended by Laws 9,433/97, 9.984/00 and 9,993/00, 45% of funds are allocated to municipalities encompassed by UHE’s reservoirs, while the states are entitled to another 45%. The federal government retains the remaining 10%. Companies that generate electric power and are characterized as small hydroelectric power plants (PCHs), are exempt from paying financial compensation.

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The concessionaires pay 6.75% of energy produced as Financial Compensation.

f) Inspection Fee and Electricity Services

Electricity Services Inspection Fee was created by Law nº. 9.427 of December 26, 1996 and regulated by Decree nº. 2.410 of November 28, 1997, with the purpose of creating revenue from the Electricity Regulatory Agency to cover administrative and operating expenses.

TFSEE corresponds to 0.5% of economic value added by each concessionaire, licensee or authorized company, for independent production or self-production, in the exploration of electricity services and facilities.

TFSEE has applied since January 1, 1997, and is annually determined by ANEEL and paid in 12 monthly quotas.

NOTE 27 – SHAREHOLDERS’ REMUNERATION

Current	12/31/2011		12/31/2010
Interest on capital for the year		1,066,951		370,755
Dividends not claimed		109,398		167,211
Retained dividends from previous years		3,147,364		2,802,058
		4,323,713		3,340,024
Non-current
Retained dividends from previous years		3,143,222		5,601,077
Total		7,466,935		8,941,101

I – Related to the Year

The Company’s Bylaws set forth a mandatory minimum dividend of 25% of the net income, adjusted in accordance with the Brazilian Corporation Law, observing the minimum remuneration for Classes A and B preferred shares of 8% and 6%, respectively, of the share capital related to these types and classes of shares, providing for the possibility to pay interest on capital – JCP.

The table below presents the adjusted net income and the amount of the mandatory minimum remuneration, in the form of JCP imputed in the minimum dividend, pursuant to applicable law, as well as the total remuneration offered to the shareholders, to be approved at the Annual General Meeting:

	12/31/2011
Net income for the year		3,732,565
(-) Legal Reserve		(186,628	)
= Calculation basis		3,545,936
Statutory minimum dividend (25%)		886,484
(+) Realization of Revaluation Reserve		20,423
= Minimum dividends		906,907
Remuneration offered to shareholders
Interest on capital (imputed to dividends)		906,907
Withholding income tax offset		160,044
		1,066,951
Additional dividends		706,017
Total remuneration to shareholders		1,772,968

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In 2011, Eletrobras recorded interest on capital – JCP, amounting to R$1,066,951 (R$370,755 in 2010) as full remuneration to shareholders, attributed to the dividends for that year, according to the statutory provisions, whose remuneration per share was as follows:

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Remuneration per share – (in R$)		12/31/2011		12/31/2010
Common shares	2.5160% of capital (2010 -3.60%)		0.58		0.83
Preferred shares – class A	9.4118 % of capital (2010 - 9.41%)		2.17		2.17
Preferred shares – class B	7.0588% of capital (2010 -7.06%)		1.63		1.63

According to the prevailing tax laws, withholding income tax is levied on the remuneration proposed for shareholders as interest on capital.

The adjustment covers the period from January 1, 2012 until the date of the actual commencement of the remuneration payment, this date to be determined at the Annual General Meeting, at which time the financial statements and the proposed allocation of this year’s results are examined. The part related to monetary restatement, calculated by the SELIC rate according to the effective legislation, is subject to withholding income tax.

In accordance with the resolutions of the 51st Annual General Meeting held on April 30, 2011, payment of shareholders’ remuneration for the year 2010 began on May 18, 2010.

II – Dividends Retained from Previous Years

The Board of Directors of the Company resolved in January 2010, that the payment of the Undistributed Dividends Special Reserve balance would be distributed in four annual installments starting in 2010.

Individuals and companies holding shares of Eletrobras as of January 29, 2010, are entitled to receive the referred payment. The remaining amounts to be settled include those in June 2012 and June 2013, amounting to R$6,290,586 (R$8,403,135 at December 31, 2010).

Credits are yielded by SELIC rate variation until the date of effective payment of each installment and withholding tax is levied over this yield in compliance with applicable law.

III – Lapsed Dividends

The balance of shareholders’ remuneration, stated under current liabilities, includes the amount of R$109,398 (R$167,211 at December 31, 2010) related to remunerations not claimed for 2008, 2009 and 2010. The remuneration related to 2007 and previous years became time-barred, according to the Company’s Bylaws.

NOTE 28 – ACCOUNTS PAYABLE TO BRAZIL’S FEDERAL TREASURY

	CURRENT				NON-CURRENT
	12/31/2011		12/31/2010		12/31/2011		12/31/2010
Acquisition of CEEE-GT and CEEE-D shares		101,448		85,904		144,753		234,313
Other		7,602		6,866		10,923		16,172
		109,050		92,770		155,676		250,485

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NOTE 29 – POST- EMPLOYMENT BENEFITS

The companies in the Eletrobras System sponsor pension plans and health plans for their employees, as well as post-employment life insurance in certain instances. These benefits are classified as defined benefits (DB) and defined contribution (DC).

Due to the decentralized structure of the Eletrobras System, each segment sponsors its own package of employee benefits. In general, the Group offers its current and future retirees and their dependents benefits, such as pension, health care and post-employment life insurance, as set forth in the table below:

Types of post-employment benefits sponsored by Eletrobras System companies

	Pension Plans			Other post-employment benefits
Company	Defined Benefit Plan	Settled Plan	Defined Contribution Plan	Life Insurance	Health Plan
Eletrobras	X		X	X
Amazonas	X		X
Boa Vista	X		X		X
Ceal	X		X		X
Cepisa	X
Ceron			X
CGTEE	X
Chesf	X	X	X	X
Eletroacre			X
Eletronorte	X		X	X	X
Eletronuclear	X			X	X
Eletrosul	X		X		X
Furnas	X		X	X	X
Itaipu BR	X			X	X
Itaipu PY	X			X	X

With the adoption of the standards set forth by IAS 19 (Employee Benefits), the Company’s Management decided to change the accounting policy for recognition of actuarial gains and losses, by adopting, since January 1, 2009, the policy of immediate recognition in the period when actuarial gains and losses are incurred, directly in Other Comprehensive Income, as allowed by item 93A of IAS 19 (Employee Benefits).

The tables included below present the reconciliation of the present value of the defined benefit obligations and the fair value of the assets with amounts registered in the balance sheet for pension benefits and for other post-employment benefits. The consolidated results of the Eletrobras Group are presented as follows. The valuation date for each year is December 31.

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a) Conciliation of pension plan liabilities and other benefits

Table 1a - Pension benefit plans - Amounts recognized in the balance sheet and in the income statement of the year	2011			2010
Present value of the actuarial obligations partially or fully covered		21,094,165			18,435,641
Fair value of the plan assets (-)		(22,091,512	)		(20,382,068	)
Compensation of quotas – DC Plan (*)		283,863			362,950
Present value of the obligations exceeding the fair value of the assets		(713,484	)		(1,583,477	)
Maximum amount of actuarial asset subject to recognition in the end of the year (-)		—			—
Actuarial debt between sponsor and plan		815,598			1,172,135
Financial debt between sponsor and plan		111,006			119,833
Liability/(asset) of post-employment benefits		1,838,409			1,656,415
Current service cost		235,694			313,682
Interest cost on actuarial liabilities		1,788,036			1,436,169
Expected participant’s contributions (-)		(317,876	)		(234,853	)
Expected return of the assets (-)		(2,116,135	)		(1,494,994	)
Actuarial expense/(Revenue) recognized in the year		(410,281	)		20,004
Adjustment of financial debt outstanding balance in the year		10,431			25,563
Amortization of financial debt in the year		(21,172	)		(22,135	)
Expense/(Revenue) recognized in the year		(10,741	)		3,428

(*) In the transition from DB to DC plan, incentives were considered as compensation of quotas.

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Table 1.b – Other post-employment benefits – Amounts recognized in the balance sheet and in the income statement of the year	2011			2010
Present value of unfunded actuarial liabilities		869,525			741,116
Fair value of the plan assets (-)		—			—
Present value of the obligations exceeding the fair value of the assets		869,525			741,116
Maximum amount of actuarial asset subject to recognition in the end of the year (-)		—			—
Actuarial debt between sponsor and plan		—			—
Financial debt between sponsor and plan		—			—
Value of the liability/(asset) of post-employment benefits		869,525			741,116
Current service cost		235,694			313,682
Interest cost on actuarial liabilities		1,788,036			1,436,169
Expected participant’s contributions (-)		(317,876	)		(234,853	)
Expected return of the assets (-)		(2,116,135	)		(1,494,994	)
Expense/(Revenue) recognized in the year		(410,281	)		20,004
Adjustment of financial debt outstanding balance in the year		—			—
Amortization of financial debt in the year		—			—
Financial expense/(revenue) recognized in the year		—			—

b) Disclosure of Pension Benefits

Consolidated results of pension benefits – reconciliation of the present value of the defined benefit liabilities:

Table 2.a – Pension benefit plans – Changes in the present value of actuarial liabilities	2011			2010
Value of actuarial liabilities at the beginning of the year		18,435,641			15,673,398
Current service cost		235,694			313,682
Interest on actuarial liabilities		1,788,036			1,436,169
Benefits paid in the year (-)		(1,025,614	)		(898,467	)
Compensation of quotas – DC Plan		602,934			1,407,574
(Gain)/Loss from actuarial liabilities		1,057,474			503,284
Present value of actuarial liabilities at the end of the year		21,094,165			18,435,641

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Consolidated results from pension benefits – reconciliation of the fair value of the assets of the plans:

Table 2.b – Pension benefit plans – Changes and details of the fair value of the assets	2011			2010
Fair value of the assets in the beginning of the year		20,382,068			16,134,950
Benefits paid during the year (-)		(1,025,614	)		(898,467	)
Participant’s contributions paid during the year		303,565			234,853
Employer’s contributions paid during the year		360,790			263,841
Compensation of quotas – DC Plan		230,205			1,775,258
Expected return on assets in the year		2,114,589			1,494,994
(Gain)/Loss from the assets of the plan		274,092			(1,376,639	)
Fair value of the assets at the end of the year		22,091,512			20,382,068
Effective return of the assets in the year		1,842,043			2,871,634

Consolidated results from pension benefits – Amounts recognized in Other Comprehensive Income:

Table 2.c – Pension benefit plans – Changes in Other Comprehensive Income - OCI	2011			2010
Accumulated amount in OCI at the end of the year		671,839			529,992
Total actuarial (gain)/loss of the year		1,351,712			(873,355	)
Changes in the effect of the limit for asset recognition in the period		(56,112	)		1,283,174
Net variation of actuarial debt in the year		(585,418	)		(118.575	)
Adjustments due to recognition of debts		(8,161	)		18,849
Accumulated amount in OCI at the end of the year		1,373,860			840,085

c) Disclosure of Other Post-Employment Benefits

Consolidated results of other post-employment benefits – reconciliation of the present value of the defined benefit liabilities:

Table 3.a – Other post-employment benefits – Changes in the present value of actuarial liabilities	2011			2010
Value of actuarial liabilities in the beginning of the year		741,116			828,777
Current service cost		64,433			13,273
Interest on actuarial liabilities		65,865			44,474
Benefits paid in the year		(58,226	)		(8,414	)
(Gain)/Loss from actuarial liabilities		56,337			(148,573	)
Present value of actuarial liabilities at the end of the year		869,525			741,116

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Consolidated results of other post-employment benefits – reconciliation of the fair value of the defined benefit liabilities:

Table 3.b - Other post-employment benefits – Changes in Other Comprehensive Income - OCI	2011		2010
Accumulated value in OCI at the end of the year		615,840		752,834
Total actuarial (gain)/loss calculated in the year		56,337		(148,573	)
Changes in the effect of the limit for asset recognition in the period		—		—
Net variation of actuarial debt in the year		—		—
Effect of the adoption of IAS 19 registered in OCI		—		11,579
Adjustments due to recognition of debts		—		—
Accumulated amount in OCI at the end of the year		672,177		615,840

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Table 4.a - Pension benefit plans – Track record of plans result	2011			2010
Present value of the actuarial obligations partially or fully covered		21,094,165			18,435,641
Fair value of the plan assets (-)		(22,091,512	)		(20,382,068	)
Quotas to offset – DC Plan		283,863			362,950
Plans result		(713,484	)		(1,583,477	)
(Gain)/Loss from actuarial liabilities		1,057,474			503,284
(Gain)/Loss in % of obligation		5.0	%		2.7	%
(Gain)/Loss from the Plan assets		274,092			(1,376,639	)
(Gain)/Loss in % of equity		-1.2	%		6.8	%
Table 4.b - Other post-employment benefits – Track record of plans result	2011			2010
Present value of the actuarial obligations partially or fully covered		869,525			741,116
Fair value of the plan assets (-)		—			—
Plans result		869,525			741,116
(Gain)/Loss from actuarial liabilities
(Gain)/Loss in % of obligation		0.0	%		0.0	%

d) Actuarial Assumptions

The actuarial assumptions presented below were used in the calculation of the defined benefit liability and expense for the year.

Assumptions	12/31/2011	12/31/2010
Actuarial annual actual discount rate net of inflation	5.38% to 5.61%	5% to 6%
Projected annual actual inflation rate	4.50%	4.50%
Annual actual rate of return on assets (1)	10.1% to 10.4%	9.73% to 10.77%
Annual actual rate of salary increase	2.00%	2.00%
Annual actual rate of benefits increase	0.00%	0.00%
Capacity factor	100%	100%
Turnover	0.00%	0.00%
General mortality	AT-2000	AT-83
Mortality of disabled people	AT-83	AT-83
Inclusion in disability	LIGHT weak	LIGHT weak
Percentage of married people	95%	95%
Age difference M-F	4 years	4 years

(1) it represents the maximum and minimum rates of return on plan assets.

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e) Effects of a one percentage point variation in the trend rates of health costs

The following table presents the effects in the present value of the defined benefit liability and in current service costs and interest costs arising from the increase and decrease of one percentage point in the trend rate of health costs.

Changes in trend rates of health costs as of December 31, 2011:

Changes in health costs fees	BOA VISTA		CEAL		Eletronorte		Eletronuclear		Eletrosul		Furnas
Effect on Cost of Service and Interest Rate – 1% Increase (2.0%)		165		226		2,928		773		53		2,730
Effect on Cost of Service and Interest Rate Costs – 1% Decrease (0%)		111		258		2,060		1,120		65		3,889
Effect on defined benefit liability – 1% Increase (2.0%)		793		2,234		19,603		5,236		727		25,977
Effect on defined benefit liability – 1% Decrease (0%)		535		2,553		13,793		7,584		888		36,998

Changes in trend rates of health costs as of December 31, 2010:

Changes in health costs fees	CHESF		Eletronorte		Eletronuclear		Eletrosul		Furnas
Effect on Cost of Service and Interest Rate – 1% Increase (2.0%)		2		6,010		2,916		623		23,985
Effect on Cost of Service and Interest Rate – 1% Decrease (0%)		1		4,526		5,569		577		17,366
Effect on defined benefit liability – 1% Increase (2.0%)		8		40,192		19,439		4,277		163,103
Effect on defined benefit liability – 1% Decrease (0%)		6		29,723		38,386		4,020		117,283

f) Amounts included in the fair value of the assets of the plans

f.1) As of December 31, 2011

Table 7.a - Asset Category 2011
Immediate Available Amounts	9,543
Pension Realizable	1,437,941
(-) Contracted Debts	(1,027,366	)
Investments in Public Securities	5,124,937
Investments in Shares	1,772,567
Investments in Funds	12,474,124
Investments in Real Estate	805,028
Loans and Financing	822,764
Other	1,332,197
Pension Payable (-)	(551,532	)
Investment Payables (-)	(108,690	)
Total guarantee assets	22,091,511

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f.2) As of December 31, 2010

Table 7.b - Asset Category 2010
Immediate Available Amounts	4,362
Pension Realizable	760,603
Investments in Public Securities	3,902,287
Investments in Shares	898,740
Investments in Funds	12,503,304
Investments in Real Estate	428,675
Loans and Financing	760,406
Private Credits and Deposits	662,945
Other	287,140
Pension Payable (-)	(870,313	)
Investment Payables (-)	(137,705	)
Total guarantee assets	19,200,445

NOTE 30 – PROVISIONS FOR CONTINGENCIES

Eletrobras and its subsidiaries are parties involved in several lawsuits, mainly labor and civil, which are under various stages of judgment.

As of the date of these financial statements, the Company recorded the following provisions for contingent liabilities, by type:

	12/31/2011		12/31/2010
CURRENT
Labor		67,544		80,355
Tax		76,477		105,013
Civil		95,169		63,368
Other		1,000		8,844
		240,190		257,580
NON-CURRENT
Labor		786,040		814,248
Tax		297,721		177,294
Civil		3,265,014		2,672,024
Other		303,401		237,723
		4,652,176		3,901,289
		4,892,366		4,158,869

The Company’s Management adopts the procedure of classifying the lawsuits filed against the Company by risk of loss based on the opinion of its legal advisors, as follows:

provisions are recorded for the lawsuits with a probable unfavorable outcome for the Company;

for the lawsuits with a possible unfavorable outcome for the Company, the corresponding information is disclosed in the notes to the financial statements, if such information relevant; and

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for the lawsuits with a remote unfavorable outcome for the Company, only the information that in the discretion of Management is deemed as significant for the full understanding of the financial statements is disclosed in the notes.

Therefore, in order to cover losses, provisions for contingencies are made, deemed by the Management of the Company and subsidiaries, and by their legal advisors, to be sufficient to cover losses in lawsuits, in this fiscal year, as set forth below:

Balance on 12/31/2010	4,158,869
Complement	1,117,846
Reversal	(233,757	)
Payments	(150,592	)
Balance on 12/31/2011	4,892,366

1 - Main lawsuits filed against the Company, its subsidiaries and SPEs, with chances of probable loss:

1.1 – Civil Actions

1.1.1 – In Eletrobras

The provision for civil contingencies in the parent company, amounting to R$1,446,397 (December 31, 2010 - R$1,290,567), corresponds to lawsuits claiming application of monetary adjustment criteria different from those set forth by the legislation relating to the book-entry credits of the Compulsory Loan established in 1978.

These lawsuits are different from those seeking the redemption of the bearer bonds, currently unenforceable, issued as a result of the Compulsory Loan.

The claims that relate to provisions challenge the system used to calculate the monetary adjustment determined under the Compulsory Loan, which update credits established as of 1978. These credits were fully settled by Eletrobras by means of conversions into shares at the 72nd, 82nd and 142nd Extraordinary Shareholders Meetings of Eletrobras.

Currently, there are approximately 2,278 lawsuits at various court levels and the Company’s Management, supported by its legal advisors, estimates between six and eight years as the average term to resolve definitely the lawsuits in progress.

In a decision issued on August 12, 2009 regarding the Compulsory Loan credits, Brazil’s Supreme Court (STJ) partially granted the appeals filed by Eletrobras, after finding that the credits of 1st and 2nd conversions were time-barred. The Selic rate was also considered not applicable to the principal, bearing interest only as of the date of summons. The conversion of these credits was maintained at the equity value of shares.

As a result of this decision, the calculation assumptions taken into consideration when evaluating the provision takes into account the impact on legal and methodological aspects resulting from the court decision.

Therefore, the Company’s Management maintains a provision of R$1,446,397, corresponding to 100% of the expected losses.

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1.1.2 – In Subsidiaries

1.1.2.1 – In the Subsidiary Chesf:

a) Chesf is a plaintiff in a lawsuit pleading (i) the declaration of partial invalidity of an addendum to the turn-key agreement (price analytic adjustment K-factor) in respect of the Xingó hydroelectric power plant, executed with a consortium consisting of Companhia Brasileira de Projetos e Obras – CBPO, CONSTRAN S.A. – Construções e Comércio and Mendes Júnior Engenharia S.A. and (ii) the return of amounts paid, as K-factor, in the approximate amount of R$350,000 in double.

The lawsuit was filed at the federal court but by decision of the Federal Regional Court – 5th Region the lawsuit is to be heard at the Pernambuco State Court. The lawsuit filed by Chesf was deemed groundless. The counterclaim filed by defendants resulted in a favorable decision from the judge of the 12th Civil Court of the Recife District court, which was upheld by the 2nd Civil Chamber of the Pernambuco Court of Justice.

Chesf and the federal government, Chesf’s co-plaintiff in this lawsuit, lodged special and extraordinary appeals, challenging the decision rendered in the main proceeding and the counterclaim filed by the defendants, which may annul it. In August 2010, the Superior Court of Justice granted relief to a special appeal filed by Chesf, reducing the amount in controversy. The Superior Court of Justice rejected the other special appeals lodged by Chesf and the federal government, thus upholding the decision of the Pernambuco Court of Justice, which deemed as groundless the declaratory judgment action filed by Chesf and granted relief to the counterclaim filed by the defendants. The parties can still appeal these decisions.

The award amount was determined at R$842,469 and. Chesf lodged a motion for clarification of judgment because it did not express an opinion about several of the challenges lodged by Chesf concerning the expert report submitted by the court’s expert.

The judge of the 12th Civil Court dismissed the proceeding for the calculation of the award, since the matter was still sub judice at the Superior Court of Justice. Against such decision, the Xingó consortium lodged an interlocutory appeal to Pernambuco Court of Justice. On May 26, 2011, the 6th Civil Chamber of Pernambuco Court of Justice converted the interlocutory appeal to an appeal and granted relief. Against this decision, Chesf filed motions for clarification of judgment, still sub judice. As of December 31, 2011 motions for clarification of judgment filed by Consórcio Xingó were still pending at the Superior Court of Justice in respect of that court’s decision about the amount in dispute and the expenses to be paid by the losing party, including fees of counsel and court costs. An appellee’s brief was filed by Chesf.

On March 22, 2012, the 6th Civil Chamber of Pernambuco Court of Justice adjudicated the motions for clarification of judgment that Chesf, the federal government and the builders filed against the original court decision on the proceeding for provisional liquidation, which is proceeding concurrently with the main lawsuit over “K-factor”. In its decision, the Pernambuco Court of Justice accepted builders’ motions for clarification of judgment to remove the partial adverse judgment requiring these builders to pay attorney’s fees and Chesf to pay legal costs. The Pernambuco Court also accepted the motions for clarification of judgment filed by Chesf and the federal government to exclude the levy of “default interest” added to “contractual default interest” in the calculation of the award. Nevertheless, Chesf filed new motions for clarification of judgment in respect of certain issues in the Pernambuco Court’s most recent decision.

Based on the opinion of Chesf’s legal counsel and calculations that include the suspension of payment of K-factor installments and respective monetary adjustments, Chesf’s management maintains a provision recorded under non-current liabilities in the amount of R$460,887 as of December 31, 2011 in order to cover losses resulting from this litigation. This provision corresponds to the partial disallowance of K-factor between July 1990 and December 1993 in compliance with Law No. 8030/1990 and the full suspension of payment of K-factor between January 1994 and January 1996. There is no deadline for the conclusion of this dispute.

b) An action for damages related to 14,400 hectares of land at Fazenda Aldeia was filed with the district of Sento Sé (BA) by the estate of Aderson Moura de Souza and his wife. A lower court decision granted relief in the form of a motion requiring Chesf to pay R$50,000, which corresponds to the principal amount sought by the estate, plus interest and monetary restatement. On March 31, 2009, the lawsuit was transferred to the Federal Court upon the intervention of the federal government. On June 30, 2011, Chesf’s appeal was granted partial relief by Federal Regional Court – 1st Region. According to a decision published on June 24, 2011, the court rejected the plaintiff’s appeal. On September 30, 2011, an action for relief from judgment was filed at the Federal Regional Court – 1st Region. On December 31, 2011, an injunction was granted, staying the main lawsuit. The Company has set aside provisions to cover any loss in this lawsuit in the amount of R$100,000 under non-current liabilities.

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c) A public civil action was filed by the Public Prosecution Office of Pernambuco (MPPE) concerning the right to resettlement of the rural workers affected by construction of UHE Itaparica. The plaintiff pleads for the difference in provisional maintenance amounts paid in the period totaling approximately R$87,000. The plaintiff appears to be non-existent due to the illegitimacy of the agreement signed by the Rural Workers Union on December 6, 1986. Chesf filed an appeal, alleging MPPE’s illegitimacy in the procedure, which was accepted by Pernambuco Court of Justice - TJPE. However, the Superior Court of Justice, in a decision following the special appeal filed by the plaintiff recognized the legitimacy of MPPE and ordered the remittance of records to the Pernambuco Court of Justice (TJPE). On April 19, 2010, judging the merit of Chesf’s appeal, the TJPE unanimously rejected the appeal. Chesf jointly filed a special appeal and an extraordinary appeal and corresponding interlocutory appeal. On December 31, 2011, the Superior Court of Justice granted relief to Chesf’s interlocutory appeal ordering the special appeal to be sent to the higher court where it is being held by the judge under advisement. The Company has set aside provisions to cover any loss in this lawsuit in the amount of R$87,000 under non-current liabilities.

d) An action for damages was filed for failure to contract with Companhia Brasileira de Petróleo Ipiranga following the bidding process for the acquisition of fuel for the Camaçari thermoelectric power plant (BA). Plaintiff specifically claims a loss of profits. Subsequently, Chesf filed a special appeal according to specific court regulations on interlocutory appeal but this appeal was unsuccessful. As of December 31, 2011, the lawsuit was in the execution phase at the 5th Civil District Court of Recife - Pernambuco, pending examination of a challenge for compliance with the court decision. The Company has set aside provisions to cover any probable loss in this lawsuit in the amount of R$23,292 under non-current liabilities.

1.1.2.2 – In the Subsidiary Eletronorte:

There are several civil actions against Eletronorte in which claimants seek compensation for financial losses as a result of payments in arrears to suppliers and expropriation of areas flooded by hydroelectric power plants reservoirs. The estimated amount of probable loss is R$703,988.

1.1.2.3. – In the Subsidiary Furnas:

1) Collection suit filed by AES Tietê in the estimated amount of R$ 51,104 thousand. Furnas made a deposit of the same amount. The court released R$46,458 to be withdrawn by AES. The remaining balance, R$4,304 thousand, is still being discussed and the chances of losses are probable.

2) Lawsuit filed by Tractebel in the estimated amount of R$82,637 thousand. Tractebel seeks the monetary restatement of initial contracts for which invoices were paid after maturity. Chances of losses are probable.

3) ANEEL claims the amount of R$105,407 thousand in respect of deficiency notices. These notices have been contested by Furnas but the Company believes that losses are probable in respect of this litigation. Therefore, judicial deposits were made to guarantee these appeals. The Company calls your attention to the following judicial deposits:

3.1 – R$47,414 thousand deposited in May 2011 for the deficiency notice issued as a result of the blackout of November 10, 2009;

3.2 – R$35,542 thousand deposited in November 2011 for deficiency notice nº 003/2011 – SFE ANEEL; and

3.3 – R$20,593 thousand deposited in December 2011 for another deficiency notice issued by ANEEL.

1.2 – Labor Claims

1.2.1 – In Subsidiaries

1.2.1.1 – In the Subsidiary Furnas:

a) Engineer’s Reference Date

The Union of Engineers of Rio de Janeiro filed labor claims in order to recover wage differences on change of date base of engineers and is currently undergoing the process of settlement. The estimated probable loss is R$ 42,325.

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b) Hazardous Work Premium

Several lawsuits were filed demanding the hazardous work premium, arguing that the full percentage and not the proportional percentage should be granted to all employees working under electric power risk;

c) Retirement Supplement

This refers to the amount payable to maintain pay parity between retirees and active employees.

1.2.1.2 – In the Subsidiary Eletronorte:

Eletronorte faces several labor lawsuits, most of them arising from actions related to the hazardous work premium, the “Bresser Plan” (Decree-Law no. 2,335/87), overtime pay, the FGTS fine calculation and wage curve alignment. The estimated probable loss is R$177,329.

1.2.1.3 – In the Subsidiary Eletrosul:

The amount of R$13,362 stated as labor liability was reclassified by legal counsel from probable loss to possible loss due to the amendment to Precedent nº 331, V of the Superior Labor Court.

1.2.1.4 – In the Subsidiary Ceal:

The Union of Workers in Urban Industries of the state of Alagoas, in the capacity of procedural substitute, brought a labor claim on behalf of employees of Ceal who are seeking supposed salary differences in light of the implementation of the “Bresser Plan”.

The claim was supported by the Distinguished Second Board of Conciliation and Judgment of Maceió-AL, the decision of which was upheld by the Regional Labor Court – 19th region as a final and unappealable decision.

Upon the execution of the judgment, the judge of the 2nd labor court of Maceió understood at that time that it should not be limited to the reference date of the category, which would extraordinarily increase the execution.

Ceal and the federal government filed an objection to pre-execution which was rejected by trial court.

Ceal and the federal government filed an interlocutory appeal with the Regional Labor Court against the decision that rejected the objection to pre-execution. Concurrently, Ceal filed a writ of prevention to suspend execution at the Regional Labor Court. This writ is pending judgment.

The interlocutory appeal argues that the award should be restricted to the reference date of the category, as provided for by Decrees 2284 (Articles 20 and 21), 2334/87 (Articles 8 and 9). 2336/87 and Article 789, Paragraph 1 of Brazilian Labor Code (CLT) and Precedent 322 of the Superior Labor Court.

AGU argues in its interlocutory appeal that the award is unenforceable, considering that the appealed decision does not accompany the reaffirmed and settled guidance of Federal Supreme Court, supported by Articles 884, Paragraph 5 of CLT.

The lawsuit is currently in the execution process to ratify the trial court’s calculations in the amount of R$722,000. The amounts were contested by Ceal by submitting two arguments: one restricted to the reference date and another contesting the amounts presented by the Union without restriction to the reference date.

Restriction to the reference date was accepted, calculations will be reduced to R$3,569 and the amount accrued by Ceal and assessed by legal counsels as the probable loss is restricted to the reference date.

1.3 – Tax Lawsuits

1.3.1 – In the Specific Purpose Entities (SPE)

1.3.1.1 ESBR Participações

a) State VAT (ICMS)

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It refers to ICMS Arrangement nº 47/2011, which authorizes the state of Rondônia to exempt from the ICMS imports of machinery, devices, industrial equipment and parts that are unique in the country.

The effects of ICMS Arrangement nº 47/2011 and Law RO nº 2.538/11 were suspended by force of an injunction granted by the Chief Justice of the state of Rondônia following a Direct Action of Unconstitutionality filed by the State Attorney General of Rondônia. Thus, the matter remains under the assessment of the subsidiary’s management. In the financial statements for the year ended December 31, 2011, the Company accrued R$86,884 for the tax rate difference and R$14,870 for ICMS not paid on imports generated between April 27, 2011 and the date when decree nº 15.858 was enacted in the state of Rondônia, which annulled the benefit.

1.3.2 – In Subsidiaries

1.3.2.1 – In the Subsidiary Furnas:

Tax Deficiency Notices - FINSOCIAL, COFINS and PASEP

The main lawsuit filed in this group refers to the challenge of tax deficiency notices issued against Furnas on May 3, 2001, related to FINSOCIAL, COFINS and PASEP, in the updated amount of R$1,098,900 (R$791,796 historical). These deficiency notices arose as a result of exclusions in the calculation bases for these taxes. Such exclusions mainly concern energy transfer and transport from Itaipu over a 10-year period. These tax deficiency notices overlapped with other notices issued in 1999 for a 5-year inspection period, amounting to R$615,089. These deficiencies were included in the Tax Recovery Program - Refis on March 1, 2000 and were transferred on July 31, 2003 to the Special Installment Program - Paes.

On June 12, 2008, the Federal Supreme Court (STF) issued binding precedent No. 8, which reduced the inspection period covered by the tax deficiency notices to five years. The restated amount of R$1,098,900 is now R$202,208.

The Company, based on the latest decisions of the Internal Revenue Service, maintains a provision for tax risks of R$84,890 related to PASEP/COFINS on the exclusions from the calculation basis of the Global Reversion Reserve (RGR) for the periods between June 1996 and September 2000 and October 2005 and March 2007. The difference of R$117,318 refers to other exclusions from these calculation bases, still in judgment phase, in respect of which Furnas’s legal department has deemed the likelihood of success to be possible.

1.3.2.2 – In the Subsidiary Chesf:

a) The subsidiary is involved in actions for the annulment of tax deficiency notices and claims for credit refunds (PIS/PASEP - COFINS) and other special taxes. The company has a provision amounting to R$10,853 (as of December 31, 2010 - R$ 10,631) for these matters.

1.3.2.3 – In the Subsidiary Cepisa:

Lawsuits in respect of ICMS and ISS related matters, in the total amount of R$17,152, have been classified as probable losses.

1.3.2.4 – In Subsidiary Ceron:

a) The ICMS rate difference in the period between 2001 and 2002 is the subject-matter of deficiency notices nº. 01.037.884-4 and 01.037.885-2 for the amount of R$12,083 as of December 31, 2011.

b) Deficiency Notices – ANEEL

In December 2011, after an opinion rendered by the Company’s legal counsel changed the probability of loss on the ANEEL deficiency notices from possible success to probable success, the Company recorded a liability provision for these notices. These notices were issued by ANEEL as a result of non-conformity with certain procedures and failure to comply with resolutions in force in the electric power sector.

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The chart below sets forth the breakdown of deficiency notices:

DN	Origin		Amount R$
		Period	Principal		Restatement		Total
004/2008	DEC and FEC	2003, 2004 and 2006		15,702		2,985		18,687
038/2010-SFE	DEC and FEC	2008		1,899		376		2,275
043/2010-SFE	INS, ICO and IAB Indexes			109		21		130
054/2010-SFE	Information on Technical Losses			889		165		1,054
078/2010-SFE	No compliance in technical and commercial areas			1,171		204		1,375
089/2010-SFE	DEC and FEC	2009		4,301		710		5,011
090/2010-SFE	DRP and DRC Indexes	2008 to 2009		1,472		240		1,712
128/2010-SFE	DIC, FIC and DM IC			1,689		188		1,877
039/201-SFG	No consideration of replacement of diesel oil to CCC			8,585		1,052		9,637
066/2011-SFE	Non-compliance with item 5.4 section 8.2 - Prodist			1,038		13		1,051
	Total Notes			36,855		5,954		42,809

DEC – Equivalent Duration of Interruption per Consumer Unit

FEC – Equivalent Frequency of Interruption per Consumer Unit

INS – Service Level Index

ICO – Busy Calls Index

IAB – A bandonment Index

DRP – Relative Duration of Precarious Tension Transgression

DRC – Relative Duration of Critical Voltage Transgression

DIC – Individual Interruption Duration per Consumer Unit

FIC – Individual Interruption Frequency per Consumer Unit

DMIC – Maximum Duration of Continued Interruption per Consumer Unit

PRODIST – Electricity Distribution Proceedures at the National Electric System

For all deficiency notices mentioned above, the Company filed appeals; however, the penalties were maintained by the regulator and the appeals were dismissed at the administrative level.

For deficiency notices 004/2008, 038/2010, 043/2010, 054/2010, 078/2010, 089/2010 and 090/2010, the Company filed lawsuits and made the required deposits in respect of each. As to the other deficiency notices, the Company is analyzing the feasibility of filing lawsuits.

2 - Lawsuits Filed Against the Company and its Subsidiaries with the Probability of a Possible Loss:

2.1 – Civil Actions

2.1.1 – In Subsidiaries

2.1.1.1 – In the Subsidiary Chesf:

a) Chesf faces an action for damages filed by a consortium composed of the companies CBPO/CONSTRAN/Mendes Júnior, arguing that the Company should be required to pay additional financial compensation for payments in arrear on invoices related to the agreement of the Xingó hydroelectric power plant. The action was filed on June 8, 1999 for invoices issued after April 30, 1990. In this action, the plaintiffs submitted general pleadings, restricting themselves to arguing the existence of a right to financial compensation and that the amounts should be determined in the calculation of the award.

Chesf was ordered to pay R$23,766 to the plaintiffs at September 2004 prices (R$51,568, according to Chesf’s calculation on March 31, 2010). Against such decision, Chesf lodged an appeal to be judged by the Pernambuco Court of Justice. The Reporting Justice of the Pernambuco Court of Justice deemed the decision null and void, accepted the federal government’s intervention in the case and ordered the records to be remitted to the federal court (where they are now).

b) A civil public action was filed against the Company at the 2nd Federal Court of Sergipe by the Community Association of the Village of Cabeço in the state of Sergipe, amounting to R$100,000, demanding financial compensation for alleged environmental damages caused by construction that harmed the fishermen downstream from the Xingó hydroelectric power plant. The action was filed at the Federal Court on June 27, 2002. On August 31, 2005, IMA-AL, CRA-BA, federal government and Adema-SE were named defendants in the action.

In the district of Brejo Grande/SE, a civil action amounting to R$100,000 thousand was filed against Chesf by the Association of Cabeço and Saramém Communities on the same grounds as the claim previously mentioned.

On February 19, 2009 this lawsuit was considered related to another similar lawsuit pending at the federal court, and both then were pending as of that date.

F-104

On March 29, 2011, the lower court judge appointed a team of experts to prepare a report. On April 8, 2011, a list of its technical assistants and expert questions was filed at the court. At a hearing on November 30, 2011, the judge ordered Chesf to make a deposit of R$50 available to that court to cover the court’s expert-related expenses.

Supported in the appraisal of attorneys defending the cases, management’s expectation about the chances of losing these lawsuits is deemed as possible and its expectation as to award amounts is deemed remote.

c) Lawsuit filed by AES – Sul Distribuidora Gaúcha de Energia in the 15th Federal Court of the Federal District, seeking the recording and settlement by ANEEL of market transactions related to the profit verified in light of a non-option for insurance made in December 2000. An interlocutory decision on the appeal of AES SUL lodged against ANEEL resulted in a debt of approximately R$110,000 with payment scheduled for November 7, 2008.

To suspend the enforceability of the debt, the following legal measures were adopted in November 2008: 1) the filing of a request to suspend the injunction at the Superior Court of Justice; 2) the filing of a writ of mandamus at the Court of Justice of the Federal District (TJDF); 3) a motion requesting the inclusion of Chesf in the lawsuit as an indispensable defendant. Proceedings 2 and 3 were accepted, resulting in the reversal of the injunction and suspension of debt. Chesf was included in the dispute as an indispensable defendant and challenged the lawsuit. On December 31, 2011, the Regional Federal Court – 1st Region granted relief to the writ of mandamus filed by Chesf (measure 2), and AES filed a special appeal, which is being held by the Reporting Judge under advisement at the Superior Court of Justice.

d) A declaratory judgment action was filed by Carbomil Química S.A., pleading for compensation due to the installation of an electric power transmission line in a mine area called Lajedo do Mel that is located in the municipalities of Jaguaruana and Quixeré, no Ceará and Baraúna in the state of Rio Grande do Norte. The expert’s examination was conducted and subsequently, the Company prepared and filed a jurisdictional defense, which was rejected. Possible losses in the amount of R$70,000 could result from this lawsuit.

2.1.1.2 – In the Subsidiary Eletrosul:

The amount of R$56,106 thousand, stated as civil liability and classified by legal counsel as a possible loss, concerns lawsuits for indemnification in the amount of R$3,597, invalidity of the bidding process in the amount of R$5,888, contract review in the amount of R$7,092 and contract annulment in the amount of R$27,146.

2.2 – Tax lawsuits

2.2.1 – In Subsidiaries

2.2.1.1 – In the Subsidiary Cepisa:

Cepisa was audited by the Treasury Department of the state of Piauí – SEFAZ for tax procedures adopted in recording and calculating the value-added tax (ICMS) during the period between January 2001 and December 2007. Fourteen tax deficiency notices have been filed against Cepisa for a total amount of R$79,782. Based on the appraisal of Cepisa’s legal advisors, this amount was not accounted for in the provision because it is deemed a possible loss.

2.2.1.2 – In the Subsidiary Eletronuclear:

Among the lawsuits deemed as a possible loss, it is worth mentioning the tax execution proceeding filed by the state of Rio de Janeiro in 2009 regarding the value-added tax (ICMS) credit for the amount of R$47,504. In this execution, Eletronuclear pledged R$44,601 as a guarantee for the judicial deposit.

2.2.1.3 – In the Subsidiary Ceron:

Ceron was inspected by the State Revenue Office Coordinator of the State Finance Department of Rondônia in respect of procedures adopted to record and assess state VAT – ICMS during the period between January 1998 and December 2002. In December 2003, twenty-six (26) tax deficiency notices were issued against the Ceron for a total of R$263,129. Out of these 26 tax deficiency notices, five (5) of them have already been amended. The overall amount owed is now R$362,266.

In December 2008, Ceron was inspected again by the State Revenue Office Coordinator of the State Finance Department of the state of Rondônia in respect of the 2003 deficiency notices, and two (2) tax deficiency notices were issued in the total amount of R$13,433.

F-105

In December 2009, Ceron was inspected in respect of the reversal of diesel oil ICMS credits, related to the period between January 2004 and December 2008, and five (5) tax deficiency notices were issued in the total amount of R$458,395.

The chart below sets for the breakdown of all tax deficiency notices issued between 1998 and 2009:

		Period from 1998 to 2009
Amount	Origin	Notification		Tax		Fine		Interest		Restatement		Total
2	Rate Difference		Dec/03		1,304		4,326		2,320		1,886		9,836
4	Credits of Oil Acquisition		Dec/03		25,762		83,055		48,173		47,202		204,192
5	Billing Cancellations		Dec/03		6,156		17,321		17,582		10,728		51,787
3	Electricity Deferral -PIE/Eletronorte		Dec/03		11,746		41,283		24,193		19,229		96,451
1	Billing Cancellation		Dec/08		900		2,492		1,092		625		5,109
1	Reversal of credits in GIAMs-2003		Dec/08		1,471		4,073		1,758		1,022		8,324
5	Reversal of diesel oil from 2004 to 2008		Dec/09		111,306		267,152		55,318		24,619		458,395
21	Total Deficiency Notices				158,645		419,702		150,436		105,311		834,094

Ceron’s management believes that tax deficiency notices are groundless and unenforceable on the basis of the the subject matter thereof, the justifications for the same submitted by the taxing authorities and the nature of the debts involved.

In light of this understanding, the Ceron hired the law firm Ulhôa Canto, Rezende e Guerra – Advogados, to defend against the 26 tax deficiency notices issued in 2003. Ceron’s in house legal counsel is responsible the two tax deficiency notices issued in 2008. For the five tax deficiency notices issued in 2009, Ceron hired the law firm of Décio Freire & Advogados Associados for the specific purpose of defending it before the State Finance Department of Rondônia.

Considering the stage of lawsuits and appeals filed the status of the judgments as of December 31, 2012 is as follows:

a) 9 proceedings amounting to R$481,664, pending appeal court decision;

b) 2 proceedings, amounting to R$67,834, pending lower court decision; and

c) 10 proceedings, amounting to R$284,596, with the final administrative decision unfavorable to the Ceron. Ceron filed a lawsuit against the State Finance Department of the state of Rondônia because it considers these decisions to be groundless.

Considering the number of appeals, the procedures to be observed, and Ceron’s favorable expectation as to their conclusion, the Ceron, supported by its legal counsel’s opinion and the precepts of CVM Resolution nº. 489/2005, understands that it is not necessary to record a provision against these contingencies.

2.3 – Labor Claims

2.3.1 – In Subsidiaries

2.3.1.1 – In the Subsidiary Cepisa:

The proceedings concern various lawsuits filed by former and current employees, involving claims in respect of overtime, the hazardous work premium, the painfulness premium, equivalence/wage reframing, unhealthy work conditions, FGTS differences, compensation for damages arising from occupational accidents and the reintegration of fired workers. The provisioned amount is R$26,103 as of December 31, 2011.

NOTE 31 – DECOMMISSIONING OBLIGATION

The Company recognizes liabilities for decommissioning of the thermonuclear power plants, which comprise a program of activities required by the Brazilian Commission of Nuclear Energy - CNEN, to safely dismantle these nuclear facilities with minimum impact on the environment, at the end of their operating cycle.

Given the specific characteristics of the operations and maintenance of thermonuclear power plants, whenever changes in the estimated decommissioning cost occur as a result of new studies and technological advances, the decommissioning quotas must be altered so as to adjust the liability amount to the new reality.

The liability balance recorded at present value as of December 31, 2011 is R$408,712 (December 31, 2010 - R$375,968).

Liability Balance at Present Value on 12/31/2010	375,968
Adjustment to Present Value/ Foreign Exchange Variation in the period	32,744
Liability Balance at Present Value on 12/31/2011	408,712

F-106

NOTE 32 –CONCESSIONS PAYABLE – USE OF PUBLIC ASSETS

The Company has entered into onerous concession contracts with the federal government for the use of public property for electricity generation, primarily through projects with Special Purpose Entities – SPEs. The characteristics of the business and contracts indicate the conditions and intentions of the parties to execute them in full.

In order to adequately reflect in the balance sheet the onerous concession granted and the respective liability with the federal government, the concessions were accounted for in intangible assets against liabilities.

The amounts established in the concession contracts are at future prices and, therefore, the Company adjusted these liabilities at the present value.

The liability adjustment due to the discount rate and monetary restatement was capitalized in the assets during the construction of the power plants and, as of the project startup date, are directly recognized in the income statement.

The Company adopts the accounting policy of recognizing the liability on the date when the environmental license for installation is granted.

UBP payments are made in monthly installments as of the project startup date until the end of the concession term, and are composed as follows:

	CONSOLIDATED
		Current
Subsidiary		12/31/2011		12/31/2010
Furnas	UHE Foz do Chapecó		19,498		18,257
Furnas	UHE Peixe Angical		6,627		6,428
Furnas	UHE Retiro Baixo		123		114
Furnas	UHE Serra do Facão		3,856		299
Furnas	UHE Santo Antonio		5,129		—
	Total		35,233		25,098

		Non-current
		12/31/2011		12/31/2010
Chesf/Eletrosul	UHE Jirau		39,776		35,616
Chesf/Eletronorte/Norte Energia	UHE Belo Monte		72,593		—
Eletrosul	UHE Passo São João		4,069		3,515
Eletrosul	UHE Mauá		12,357		10,498
Eletrosul	UHE São Domingos		4,774		4,047
Eletrosul/Furnas	UHE Teles Pires		34,928		—
Furnas	UHE Batalha e Simplicio		42,230		40,336
Furnas	UHE Foz do Chapecó		236,560		228,002
Furnas	UHE Peixe Angical		77,029		73,044
Furnas	UHE Retiro Baixo		3,563		3,389
Furnas	UHE Serra do Facão		635,722		612,183
Furnas	UHE Santo Antonio		70,825		51,587
					—
	Total		1,234,426		1,062,217

F-107

			Original face value				Updated amounts
Hydroelectric Power Plant(UHE)	Years		Annual Payment		Total Payment		Annual Payment		Total Payment
Passo São João		29		200		5,944		270		7,988
Mauá		30		618		18,855		810		24,705
São Domingos		25		260		6,717		340		8,755
Jirau		35		3,150		96,840		3,826		117,306
Teles Pires		35		2,702		84,438		2,774		86,688
Batalha		35		298		8,725		392		7,784
Simplício		35		1,134		34,036		1,519		34,446
Foz do Chapecó		35		19,261		504,000		42,128		638,839
Peixe Angical		35		6,800		197,200		14,878		205,704
Retiro Baixo		35		238		7,117		252		7,524
Serra do Facão		35		40,618		1,073,000		81,859		1,284,286
Santo Antônio		35		11,852		379,267		14,727		471,264
Belo Monte		35		8,305		99,662		6,071		72,856
				95,436		2,515,801		169,846		2,968,145

NOTE 33 – ADVANCES FOR FUTURE CAPITAL INCREASE

The amounts included in the table below are related to the use of advances:

	12/31/2011		12/31/2010
Acquisition of equity interest in CEEE/ CGTEE		133,270		4,637,116
Banabuí transmission line - Fortaleza		2,250		78,280
Xingó hydroelectric power plant		6,321		219,942
Transmission line in the State of Bahia		989		34,429
Federal Fund for Electricity – Law No. 5.073/66		5,865		204,089
		148,695		5,173,856

The Company classifies a contract or obligation that uses a variable number of the Company’s shares to settle the obligation as a financial liability. The contract or obligation is classified as equity only if settlement is based on a fixed amount of cash for a fixed amount of shares. In 2011, R$5,148,764 of these advances were capitalized.

NOTE 34 – LONG-TERM OPERATING COMMITMENTS

The long-term commitments of the Company, mainly related to electric power and fuel purchase agreements, are as follows:

Companies	2012		2013		2014		2015		After 2015 (annual payment)
Amazonas		2,415,188		2,508,607		2,454,581		2,387,563		—
Distribuidora Alagoas		424,591		562,485		566,332		1,217,816		—
Distribuidora Piauí		747		763		697		15,812		—
Distribuidora Rondônia		614,471		745,591		914,260		1,115,228		—
Eletrobras		1,850,000		1,850,000		1,850,000		1,850,000		1,850,000
Eletronorte		92,763		92,763		98,792		105,214		112,052
Eletronuclear		454,927		375,519		321,884		280,353		286,582
Furnas		391,575		390,515		99,122		3,699		—
Total		6,244,262		6,526,243		6,305,669		6,975,686		2,248,634

F-108

Nuclear Fuel (Eletronuclear)

These agreements were entered into with Indústrias Nucleares Brasileiras – INB for the acquisition of Nuclear Fuel for electricity production, destined to recharge the thermonuclear power plants of UTN Angra I and UTN Angra II.

Social and environmental commitments

Angra III

These agreements were entered into with the Cities of Angra dos Reis, Rio Claro and Paraty, under which ELETRONUCLEAR commits to enter into specific socio- and environmental contracts connected to UTN Angra III, with an aim at putting in place programs and projects according to the conditions established by IBAMA.

Acquisition of equipment

These agreements were entered into with various suppliers for the acquisition of equipment to replace fixed assets in the thermonuclear power plants of Angra I and Angra II. These new acquisitions were necessary for the operational maintenance of these assets.

Electricity Purchase from Independent Producer – Proinfa

The Company supports the development of projects to diversify the Brazilian energy matrix through a program that promotes alternative sources of electricity established by Law 10,438 of April 2002. This program seeks to find regional solutions for the use of renewable energy sources thereby stimulating the growth of the domestic industry.

Proinfa estimates that the operation of 144 power plants amounts to 3,299.40 MW of installed capacity. The program’s power plants account for the generation of approximately 12,000 GWh/year, corresponding to 3.2% of Brazil’s total annual consumption. The 3,299.40 MW contracted are divided into 1,191.24 MW deriving from 63 small hydroelectric power plants (PCHs), 1,422.92 MW from 54 wind power plants and 685.24 MW from 27 biomass-based power plants. The company has committed to a 20-year supply of this type of energy.

NOTE 35 – SHAREHOLDERS’ EQUITY

I – Share Capital

The Company’s share capital at December 31, 2011 is R$31,305,331 (December 31, 2010 - R$ 26,156,567) in shares with no par value. The preferred shares are not entitled to vote and are not convertible into common shares, however, they have priority on capital reimbursement and dividend distribution at annual rates of 8% for class “A” shares (subscribed until June 23, 1969) and 6% for class “B” shares (subscribed as of June 24, 1969), calculated over capital corresponding to each class of share.

The share capital is represented by 1,352,634,100 book-entry shares and is distributed by main shareholders and by classes of share, as follows:

	COMMON				PREFERRED						TOTAL CAPITAL
SHAREHOLDER	AMOUNT		%		A Series		B Series		%		AMOUNT		%
Federal Government		552,968,382		50.87		—		2,252		0.00		552,970,634		40.88
BNDESPAR		180,757,951		16.63		—		18,691,102		7.04		199,449,053		14.75
BNDES		76,338,832		7.02				18,262,671		6.88		94,601,503		6.99
FND		45,621,589		4.20		—		—		—		45,621,589		3.37
FGHAB		1,000,000		0.11		—		—		—		1,000,000		0.09
FGI		—		—		—		8,750,000		3.30		8,750,000		0.65
FGO		—		—		—		468,600		0.18		468,600		0,03
Other		230,363,543		21.17		146,920		219,262,258		82.60		449,772,721		33.24
		1,087,050,297		100.0		146,920		265,436,883		100.00		1,352,634,10		100.00

F-109

Out of the total of 449,772,721 shares held by non-controlling shareholders, 311,960,738 shares, i.e., 69.36%, are owned by non-resident investors, 165,001,868 are common shares and 146,958,870 are Class B preferred shares.

Out of total participation of shareholders domiciled abroad, 75,072,329 common shares and 40,326,860 Class B preferred shares are held in custody, backing the American Depository Receipts Program – ADRs. On December 31, 2011, the share book value is R$56.81 (December 31, 2010 - R$62.29).

II – Capital Reserves

	12/31/2011		12/31/2010
Offset of insufficient remuneration - CRC		18,961,102		18,961,102
Premium on issue of shares		3,384,310		3,384,310
Special - Decree-law No. 54.936/1964		387,419		387,419
Monetary adjustment to the 1978 opening balance sheet		309,655		309,655
Monetary adjustment of the compulsory loan- 1987		2,708,432		2,708,432
Donations and subsidies - FINOR, FINAM and other		297,424		297,424
		26,048,342		26,048,342

III – Revenue Reserves

The Company’s Bylaws provide for the allocation of 50% of net income for the year to create an investments reserve and 1% for the Studies and Projects Reserve, limited to 75% and 2% of the capital.

	12/31/2011		12/31/2010
Legal (Article 193 - Law No. 6.404/1976)		2,233,016		2,046,388
Statutory (Article 194 - Law No. 6.404/1976)		16,337,997		14,758,463
		18,571,013		16,804,851

NOTE 36 – EARNINGS PER SHARE

(a) Basic

Basic earnings per share are calculated by dividing the net income attributable to the shareholders of the Company, by the weighted average quantity of common shares issued during the year, excluding common shares acquired by the Company and held as treasury shares.

F-110

12/31/2011
Numerator	Common			Preferred A			Preferred B			Total
Net income attributable to each class of shares		2,831,333			383			691,358			3,523,073
Preferred dividends					116			209,375			209,491
		2,831,333			499			900,733			3,732,565
Denominator	Common			Preferred A			Preferred B			Total
Weighted average amount of shares		1,087,050			147			265,437			1,352,634
% of shares in relation to the total		80	%		0.01	%		20	%		100	%
Basic earnings per share (R$)		2.60			3.39			3.39

12/31/2010
Numerator	Common			Preferred A			Preferred B			Total
Net income attributable to each class of shares		1,544,746			251			387,775			1,932,771
Preferred dividends					272			314,870			315,142
		1,544,746			522			702,645			2,247,913
Denominator	Common			Preferred A			Preferred B			Total
Weighted average amount of shares		905,024			147			227,187			1,132,357
% of shares in relation to the total		80	%		0.01	%		20	%		100	%
Basic earnings per share (R$)		1.71			3.55			3.09

(b) Diluted

Diluted earnings per share are calculated by adjusting the weighted average quantity of outstanding common shares to presume conversion of all potentially diluted common shares. The Company has only one category of potentially diluted common shares: convertible debt (compulsory loan). It is assumed that the convertible debt was converted into common shares and that net income is adjusted to eliminate the financial expense net of the tax effect.

F-111

12/31/2011
Numerator	Common			Preferred A			Preferred B			Total
Net income attributable to each class of shares		2,831,333			383			691,358			3,523,073
Preferred dividends					116			209,375			209,491
		2,831,333			499			900,733			3,732,565
Denominator	Common			Preferred A			Preferred B			Total
Weighted average quantity of shares		1,087,050			147			265,437			1,352,634
% of shares in relation to the total		80	%		0.01	%		20	%		100	%
Diluted earnings per share (R$)		2.60			3.39			3.39

12/31/2010
Numerator	Common			Preferred A			Preferred B			Total
Net income attributable to each class of shares		1,544,625			251			391,308			1,936,183
Preferred dividends					272			314,870			315,142
		1,544,625			522			706,178			2,251,325
Denominator	Common			Preferred A			Preferred B			Total
Weighted average quantity of shares		905,024			147			227,187			1,132,357
Compulsory loan		—			—			2,088			2,088
		905,024			147			229,274			1,134,445
% of shares in relation to the total		80	%		0	%		20	%		100	%
Diluted earnings per share (R$)		1.71			3.55			3.08

F-112

NOTE 37 – NET OPERATING REVENUE

	12/31/2011			12/31/2010			12/31/2009
OPERATING REVENUE
Generation
Trading		15,976,884			17,358,002			16.460.849
Energy Supply		2,449,928			752,037			775.272
Itaipu Resale		836,488			215,989			-548,554
		19,263,300			18,326,028			16.687,567
Transmission
Rates of return adjustment - Transmission		2,774,166			2,525,754			1.704.929
Operation and maintenance revenue		1,978,618			1,466,929			1.981.838
Construction revenue		3,603,492			2,322,937			1.389.752
		8,356,276			6,315,620			5,076,519
Distribution
Supply		4,147,768			3,929,481			3.675.270
Operation and maintenance revenue		564,948			433,048			30.118
Construction revenue		729,064			810,475			361.709
		5,441,780			5,173,004			4.067,097
Other revenues		1,187,135			1,299,817			1,206,391
		34,248,491			31,114,469			27.037,574
(-) Deductions to Operating Revenues
(-) Regulatory Fees		(1,712,669	)		(1,514,504	)		(1.317.463	)
(-) ICMS		(1,086,209	)		(1,040,163	)		(1.047.664	)
(-) PASEP and COFINS		(1,901,838	)		(1,711,238	)		(1.531.542	)
(-) Other deductions		-15,031			-16,479			0
		(4,715,747	)		(4,282,384	)		(3,896,669	)
Net operating revenue		29,532,744			26,832,085			23,140,906

F-113

NOTE 38 – RESULT OF PARTICIPATION IN ASSOCIATES AND OTHER INVESTMENTS

	12/31/2011		12/31/2010		12/31/2009
Investments in associates
Equity accounting		290,693		467,647		1,378,663
Return on capital - ITAIPU		36,637		38,735		47,839
Interest on capital		19,243		16,038		13,592
Dividends		139,728		101,847		103,868
Return on partnership investments		-3,516		45,488		27,069
Other investments		155,455		163,373		144,529
		482,785		669,755		1,571,031

NOTE 39 – PERSONNEL, SUPPLIES AND SERVICES

	12/31/2011		12/31/2010		12/31/2009
Personnel		5,233,826		4,845,246		4,465,866
Supplies		303,347		399,299		294,257
Services		2,133,543		2,126,168		1,726,095
		7,670,716		7,370,713		6,486,218

NOTE 40 – ENERGY PURCHASED FOR RESALE AND USE OF ELECTRICITY GRID

	12/31/2011		12/31/2010		12/31/2009
Supply		1,281,766		1,736,667		1,555,617
Use of network		1,420,934		1,353,839		1,263,408
CCEE (Electricity Trading Chamber)		128,979		706,852		862,040
Proinfa		1,955,328		1,844,835		1,120,348
Other		20,217		26,730		43,391
		4,807,223		5,668,923		4,844,804

F-114

NOTE 41 – OPERATING PROVISIONS

	12/31/2011			12/31/2010		12/31/2009
Guarantees		70,596			-653		0
Contingencies		691,042			287,821		117,847
PCLD - Consumers and Resellers		511,356			564,006		484,221
PCLD - Loans and Financing		297,131			36,245		74,556
Investment losses		105,387			421,629		842,830
Voluntary Resignation Program		498,114			—		0
Actuarial Liability		(410,281	)		20,004		512,382
Impairment		434,538			379,048		(673,232	)
Other		650,866			789,162		781,803
		2,848,749			2,497,262		1,604,478

NOTE 42 – FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

1 – Resource Management

1.1 – Capital Management

The Company’s objectives when managing its capital are to safeguard the Company’s ability to offer returns to its shareholders and benefits to other stakeholders, in addition to pursuing an ideal capital structure to mitigate this cost. Acquisitions and sales of financial assets are recognized on the trade date.

In order to maintain or adjust the capital structure, the Company may review its dividend payment policy, return capital to shareholders as well as issue new shares or sell assets to reduce, for example, its level of indebtedness.

Consistent with other companies in the sector, the Company monitors capital based on the financial leverage ratio. This ratio corresponds to net debt divided by total capital. Net debt corresponds to total loans (including short and long-term loans, as shown in the consolidated balance sheet), less the amount of cash and cash equivalents. Total capital is calculated through a sum of shareholders’ equity, as shown in the consolidated balance sheet, with net debt.

	12/31/2011			12/31/2010
Total loans		42,413,678			33,138,436
(-) Cash and cash equivalents		4,959,787			9,220,169
Net Debt		37,453,891			23,918,267
(+) Total shareholders’ equity		77,202,321			70,530,410
Total Capital		114,656,212			94,448,677
Financial Leverage Index		33	%		25	%

2 – Financial Instruments

The Company’s financial instruments are classified in categories of financial assets and liabilities, which also include derivative instruments.

F-115

2.1 – Financial Assets – classified in the following classes:

Cash and cash equivalents: held for trading in the short-term and measured at fair value with their effects being directly accounted for in the income statement.

Marketable securities: those with defined maturities and for which the Company has the intention to hold to maturity. They are registered at acquisition cost plus interest and monetary restatement, impacting the income statement. These instruments are adjusted to the probable realization value, where applicable. Long-term financial investments are held in exclusive investment funds, according to regulations in force.

Consumers and resellers: are registered at nominal value, similar to fair value and probable realization value.

Renegotiated receivables: these assets are registered under the assumption that they are intended to be held to maturity, at their fair value and probable realizable value.

Financing and loans granted: financial assets with fixed or determinable receivables, measured at amortized cost, using the effective interest rate method.

Financial assets of the concession: financial assets representing the unconditional right to receive certain amount at the end of the term of concession. They are classified as loans and receivables.

Financing is restricted to public electricity utility concessionaires, thus, the market rate (or the Company’s opportunity cost of capital) is defined by it, taking into account the risk premium compatible with sector activities. If it is not possible to seek alternatives other than the electricity sector itself, the present value of these loans corresponds to their book value.

At the closing of the fiscal year, Eletrobras had a portfolio of loans and financing agreements amounting to R$9,737,390 (R$9,659,440 on December 31, 2010) as set forth below, by currency:

Currency	US$		%		R$
U.S. Dollar		3,211,422		61.89		6,023,985
Real		1,977,506		38.11		3,709,405
Total		5,188,927		100.00		9,733,390

g) Derivative instruments are measured at fair value and their effects are accounted for directly in the income statement or Shareholders’ Equity, according to the efficacy test – IAS 39 (Financial Instruments: Recognition and Measurement).

3 – Financial hedge policy

The Company is exposed to financial risks that can cause volatility in its financial statements and cash flows. The Company presents a relevant mismatch between assets and liabilities indexed to foreign currency, especially to the U.S. dollar, arising mainly from loan agreements with Itaipu Binacional. Additionally, there are exposures to Libor interest rate, related to foreign funding contracts.

In this context, the Company’s Financial Hedge Policy was approved. The objective of the current policy is to mitigate the exposure to the market variables that may impact the assets and liabilities of the Company and its subsidiaries, thus reducing the undesirable fluctuation effects of these variables in the financial statements.

This said, the aforementioned policy aims at having the Company’s results faithfully reflect its actual operational performance and having its projected cash flow present less volatility.

Along with the policy, the creation of a Financial Hedge Committee, within the scope of the Financial Management, was approved. It’s main purpose is to define the hedge strategies and instruments to be presented to the Company’s Board of Executive Officers.

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Taking into account the different ways of realizing the hedge of mismatches presented by the Company, the policy lists a scale of priorities. Primarily there would be the structural solution, and, in residual cases, operations with derivative financial instruments would be adopted.

The operations with derivative financial instruments will only be carried out complementarily and aiming exclusively at protecting the hedging indexed assets and liabilities of the Company and its subsidiaries that present any mismatch, and may not be characterized as financial leverage or operation of loan granting to third parties.

The Company has been conducting studies and discussing with the Financial Hedge Committee, the execution of hedge operations. In 2011, the Derivative Instruments Operations Program was expanded, to comprise currency mismatches and exposures to interest rates until December 2012.

Thus, as set forth in the table below, the company carried out Libor interest rate locked-in deals, with an aim to neutralize the volatility of the funding agreements executed at the 6-month Libor rate. Besides the Libor swap operation, exchange hedge strategies were analyzed in 2011 and are currently being implemented, prioritizing structural solutions in line with the Company’s Financial Hedge Policy. In light of this strategy, the structuring of new funding considers not only the total amount of mismatch but also its disposition over time, aiming the hedge of the Company’s balance sheet and its cash flows.

The company is analyzing whether or not to classify these operations in the hedge accounting policy according to the Technical Pronouncement.

Standard Bank

Standard Bank

Citibank

Santander

BAML

BAML

HSBC

Santander

MTM reference date: 12/30/2011

Operation 1 2011

Operation 2 2011

Operation 3 2011

Operation 4 2011

Operation 5 2011

Operation 6 2011

Operation 7 2011

Operation 8 2011

Start date of operation

05/22/2012

05/22/2012

02/08/2012

02/08/2012

02/08/2012

02/08/2012

02/08/2012

02/08/2012

Maturity date of operation

11/25/2015

11/25/2015

08/10/2020

08/10/2020

08/10/2015

08/10/2015

08/10/2015

08/10/2015

Fixed Rate

2.44%

2.49%

3.28%

3.32%

2.15%

2.27%

2.18%

2.15%

Long position

USD + Libor

USD + Libor

USD + Libor

USD + Libor

USD + Libor

USD + Libor

USD + Libor

USD + Libor

Short position

USD + Fixed Rate

USD + Fixed Rate

USD + Fixed Rate

USD + Fixed Rate

USD + Fixed Rate

USD + Fixed Rate

USD + Fixed Rate

USD + Fixed Rate

Notional value

$20,192,307.69

$20,192,307.69

$50,000,000.00

$100,000,000.00

$50,000,000.00

$100,000,000.00

$100,000,000.00

$100,000,000.00

Fair value

-R$1,022,768.50

-R$987,282,46

-R$6,989,650.88

-R$13,897,718.06

-R$2,125,362.76

-R$4,689,777.60

-R$4,513,351.59

-R$4,282,699.24

SWAP Libor Float x Fixed

Operations with over-the-counter derivative instruments present counterparty risks that, in view of the problems presented by financial institutions in 2008 and 2009, have become relevant. With the intention of mitigating this risk, the Company established a rule regarding the accreditation of financial institutions for the purposes of executing transactions with derivative instruments. This rule defines criteria regarding size, rating and expertise in the derivatives market, allowing the Company to select institutions best suited for these operations. Based on this criteria, the Company bi-annually selects the top 20 financial institutions to carry out derivative operations with the Company. Further, the Company has developed an exposure control methodology for the accredited companies, which defines the limits to the volume of operations to be carried out with each one of them.

The Company shall make efforts to ensure that all derivative operations it carries out are framed in a “protective hedge”, thereby confirming the exclusive intention of hedging these positions. This measure counters the risk of mismatch liquidation of hedge positions with their respective objects, given that financial flows of both will always be matched.

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4 – Embedded derivatives

a) Eletronorte

In 2004, the subsidiary Eletronorte entered into long-term electricity supply contracts with three of its major customers. These long-term contracts are associated to the international aluminum price, quoted on the London Metal Exchange (LME), as a basic asset for purposes of defining the monthly value of the contracts.

Details of the contracts are as follows:

	Dates of contract
Customer	Initial	Maturity	Average volume -megawatt
Albrás	7/1/2004	12/31/2024	750 MW - until 12/31/2006 800 MW – as of 1/1/2007
Alcoa	7/1/2004	12/31/2024	From 304.92 MW to 328 MW
BHP	7/1/2004	12/31/2024	From 353.08 MW to 492 MW

These contracts include the concept of “cap and floor band” related to the aluminum price quoted on the LME. The maximum and minimum price limit on the LME is limited to US$2,773.21/tonne and US$1,450/tonne, respectively.

The impact of the derivatives embedded in the result was negative in 2011 at R$124,770 and positive in 2010 at R$55,200, and the equity position is active at R$376,950 in 2011 and R$580,240 in 2010.

5- Cash flow hedge

a) Energia Sustentável do Brasil Participações S.A. -

In 2009, in order to reduce currency exposure of certain contracts with the Chinese company Dong Fang, ESBR Participações S.A. entered into currency forward contracts without physical delivery (NDF) with a number of financial institutions. The value of these agreements was US$41,000 and US$16,400, maturing on September 17, 2009 and December 18, 2009, and contracted rates of R$ 2.29 and R$ 2.18, respectively. These operations were classified as cash flow hedges. As set forth in Brazilian accounting standards, foreign exchange variations of NDF were recorded under other comprehensive income and transferred to fixed assets as of the effective settlement of the liability with the supplier.

On September 17, 2009, the subsidiary liquidated the NDF transaction in the amount of US$41,000 with losses of R$20,360. With respect to the NDF contract in the amount of US$16,400, its settlement occurred on the due date, with a negative result of R$6,599, and with a failed fulfillment of contractual obligations by the supplier. The exchange rate changes of the NDF were recorded in the shareholders’ equity and remained so until Dong Fang complied with these obligations, which occurred after the first half of 2010.

From the end of fiscal year 2009, the subsidiary has changed its hedging strategy and since then has made investments in U.S. dollars, with the purpose of stabilizing guarantees of letters of credit issued by Banco do Brasil and Banco Itaú on behalf of Chinese suppliers Dong Fang and Hyosung. These investments are also classified as cash flow hedges.

The changes in the account of valuation adjustments, during the years ended on December 31, 2011 and 2010, considering the Company’s indirect interest, are described below:

	12/31/2011			12/31/2010
Balance at the beginning of the year		(5,111	)		(2,640	)
Foreign exchange variation on restricted deposits principal value		(5,704	)		(4,738	)
Effect of payments to suppliers – balances of the current year		2,183			2,266
Balance at the end of the year		2,775			(5,111	)

b) Madeira Energia

Madeira Energia carries out financial instruments operations with an aim at hedging market risks mainly deriving from IGP-M variations and Euro exchange variation. The main risks investee plans to reduce are over cash flows, regulating the main exposures of financial risks deriving from mismatch of uses and sources, such as: commodities price, price indexes in the composition of assets and liabilities, selection of mitigation instruments and credit.

F-118

The risk management activities are governed by the Risk Management Policy approved by the Board of Directors and under the responsibility of the Financial Executive Board. The Policy defines all the characteristics of risk management activities, such as reports and control systems to monitor risks, methodologies to calculate exposure and limits and criteria for counterparty’s risk and liquidity.

The purpose of the risk management policies is to protect the investee’s cash flows by reducing derivative instruments’ volatility and regulating main exposures of investment and financial risks deriving from the operation. Thus, derivative instruments are only used in positions contrary to the investee’s exposure.

Madeira Energia’s strategy is based on the use of financial derivative instruments to mitigate relevant market risks. The utilization of these instruments is subject to detailed analysis relating to pricing, competitive quotes, accounting impact and other monitoring techniques, such as mathematical models established to continuously monitor exposures.

Madeira Energia periodically monitors and assesses its derivative contracts and adjusts its strategy according to the market conditions. The use of financial derivative instruments is made by aiming at hedging assets and shareholders’ equity, therefore, leveraged positions or speculative derivatives are not maintained.

Currently, the Madeira Energia is exposed to the risk that a variation of General Market Price Index (IGP-M) may increase its future investments through restatement by indexes in the payment of a contract executed with Santo Antônio Hydroelectric Power Plant.

In order to hedge amounts affecting the cash flow of investments, Madeira Energia’s Management concluded that it is possible to partially mitigate the interest risks included over the payment flows through a swap made with a first-tier financial institution in Brazil. Through statistical models, the company verified that derivatives contracted is highly correlated with the IGP-M variation. The IGP-M swap was made in the amount of R$1,200,000, against a fixed rate of 5.86% p.a., comprising 36 monthly flows, started in January 2010 and with a maturity date of December 2012.

Madeira Energia classifies this derivative as “cash flow hedge” for accounting purposes, stating the fair value in asset or liability and recognizing fair value variations of effective hedges in shareholders’ equity under “Equity evaluation adjustments”. On the accrual date of each hedged flow, respective balances of this account are written-off with a corresponding entry in adjustment to the initial recognition value of a non-financial asset or liability, whose recognition is caused by a transaction (basis adjustment).

On December 31, 2011, the fair value of the outstanding agreement reports a gain of R$2,410 (December 31, 2010 – R$8,718), an amount consolidated in FURNAS and recorded as debt under “derivative financial instruments” in current assets and in its corresponding entry as “equity valuation adjustments” account in shareholders’ equity and tax effects recorded under “Deferred income tax and social contribution”.

Contracts not designated for hedge accounting totaled R$923 with its financial result as a corresponding entry.

Retrospective and prospective effectiveness calculations were made by adopting the shock scenarios in DI x IGP-M rates in prospective tests. Set below is the financial impact foreseen according to disbursement expectations:

Description	Total
Fair Value		2,410
Face Value		187,926

Part of the equipment to be used in building the Santo Antônio Hydroelectric Power Plant will be acquired based on the Euro quote. Thus, the Euro’s fluctuation against the Real, may expose Madeira Energia to a cash flow risk.

F-119

In order to hedge the amounts impacting the cash flow of investments, Madeira Energia’s Management decided to use Euro call options, i.e., it disbursed an initial premium to buy Euros in the following months at a previously determined price. The call option strategy comprises 16 monthly flows, beginning in November 2010 and falling due in February 2012.

Madeira Energia classifies these derivatives as “cash flow hedges” for accounting purposes, reporting the fair value in asset or liability and recognizing fair value variations of intrinsic value of effective hedges in shareholders’ equity, under “equity valuation adjustments”.

As of December 31, 2011, the fair value of the options portfolio is R$11 (December 31, 2010 – R$171), a consolidated amount in the subsidiary FURNAS, and none of the options in the portfolio had any intrinsic value. Thus, it was not necessary to tests the portfolio’s effectiveness. The table below sets forth the fair value of outstanding option by maturity:

Description	Maturity 2012
Fair Value		11
Face Value		1,319

c) Norte Brasil Transmissora de Energia

The financial derivative instruments contracted by the jointly controlled subsidiary SPE Norte Brasil Transmissora de Energia S.A. are classified as cash flow hedge. The instrument aims at hedging SPE operations against risks of exchange rates fluctuation and aluminum price variations on the international market, with significant weight in investments plan. They are not applied for speculative purposes and were contracted with first-tier financial institutions in Brazil and abroad.

Norte Energia’s hedges were measured as effective in the year ended December 31, 2010 and 2011.

a) On March 25, 2010, Norte Energia entered into a futures contract to purchase aluminum (LME) with Citibank to reduce the company’s exposure to the risk of exchange rate variations in investment plans. The contract matures in 2012.

b) On July 19, 2010, Norte Energia entered into a non-deliverable forward (NDF) currency put contract with Banco Societé Générale – Paris and Barclays Bank PLC, to hedge against the raw material price variation on the international market, in order to purchase cables to build a transmission line. The contract matures in 2012.

The effective amount of appreciation or devaluation of financial instruments classified as cash flow hedges was recorded in 2010, net of tax effects, in a separate account from the shareholders’ equity, under “equity valuation adjustments”, until the acquisition of the related asset occurred, at which time this amount would adjust the cost of the asset. The effective amount represents the variation in the hedge instrument directly related to its corresponding risk, is offset by a financial instrument variation applied as a hedge, considering the operation’s accumulated effect. Other variations seen in these instruments are directly recognized in the statement of income. In 2011, the balances of hedge accounting were recognized by fair value under shareholders’ equity, amounting to R$10,862 in 2011 and R$11,826 in 2010.

6 – Financial Liabilities – classified in the following categories:

Suppliers: these are measured at market fair value and amortized by the amortized cost method.

Loans and financing are measured at amortized cost, using the effective interest rate method. Under this classification of financial liability, it is worth noting that loans and financing are obtained through financial institutions, especially those outside of Brazil, and sector funds, especially the Global Reversion Reserve - RGR. The market values of loans and financing obtained are equivalent to their carrying amounts.

Funds raised are comprised of loans with multilateral international agencies (IDB, IRDB, CAF), which cannot be cashed at a rate different from that established in the Brazilian debt contract. Other loans are raised at market rates, enabling the carrying amount to approximate its present value.

F-120

The Company ended 2011 with liabilities, including loans, financing and bonds, in the total amount of R$42,413,680 (R$33,138,437 on December 31, 2010), as set forth below:

Loans Currency		U$ (equivalents)		%			R$
U.S. Dollar	U$		9,575,952		42.35			17,962,570
REAL	REAL		12,807,023		56.64			24,023,413
YEN	Y		185,779		0.82			348,484
EURO	EURO		42,229		0.19			79,213
			22,610,983		100	%		42,413,680

The Compulsory Loan was extinguished by Law No. 7.181 of December 20, 1993, and had to be repaid before December 31, 1993. Currently, the Company manages the residual balance of the Compulsory Loan, adjusting it based on the IPCA-E and yielded at the annual interest rate of 6%, with a defined redemption period.

7 – Financial Risk Management:

In carrying out its activities, the Company is impacted by events of risk that may negatively impact its strategic objectives. The main objective of risk management is to anticipate and mitigate the adverse effects of these events in the business, economic and financial results of the Company.

For financial risk management, the Company defined operational and financial policies and strategies approved by internal committees and by Management, aimed at providing liquidity, safety and profitability to its assets and maintaining the indebtedness levels and debt profile defined for its economic and financial flows.

The main financial risks identified during the risk management process are as follows:

7.1 – Exchange rate risk

The Company is exposed to the risk of having its economic-financial statements impacted by fluctuations in exchange rates.

The Company shows a relevant mismatch between assets and liabilities indexed to the foreign currency, especially the U.S. dollar, deriving from the relation between loans and financing, obtained and granted, which causes volatility in its results and cash flows proportionally to the U.S. dollar floating exchange rate.

SPEs with exchange rate risk and that contracted hedge operations are Madeira Energia, Norte Brasil Transmissora and Energia Sustentável, as mentioned in item 5.

7.2 – Interest rate risk

The Company is exposed to the risk that its accounts for losses due to changes in the market interest rates, impacting its statements by increasing financial expenses related to foreign funding agreements, mainly referred to Libor.

7.3 – Commodity Risk

In 2004, the subsidiary Eletronorte entered into long-term electricity supply contracts with three of its major customers. These long-term contracts are linked to the international aluminum price quoted on the London Metal Exchange (LME), as a basic asset for purposes of defining the monthly value of the contracts.

F-121

Until 2004, the prices for electricity supply relating to electricity generation were established by ANEEL. Since the auction 001/2004, conducted by the Regulatory Agency, generators started to trade their electricity with a larger number of customers at prices defined by the market. The electricity transmission activity has its remuneration defined by ANEEL, by establishing the Annual Allowed Revenue - RAP, deemed to be sufficient to cover the operating costs and to maintain the economic-financial balance of the concession.

7.4 – Credit Risk

The Company and its subsidiaries are exposed to the risk that they incur losses resulting from difficulties to obtain their receivables from customers, as well as from potential defaults by financial institutions acting as counterparties.

The Company, through its subsidiaries, operates in markets of electric power generation and transmission, supported by agreements executed in a regulated framework. The Company seeks to minimize its credit risks by means of sureties mechanisms involving receivables from their customers and bank guarantees, when applicable. In the distribution segment, the Company, through its subsidiaries, follows the default levels by analyzing the details of its customers. Additionally, there are negotiations to enable the receipt of past due receivables.

Cash surpluses are applied in an exclusive extra-market fund, according to a specific rule of the Central Bank of Brazil. This fund is fully comprised of public securities indexed by Selic, without exposure to counterparty risk.

In relations with financial institutions, the Company’s policy is to operate with low-risk institutions evaluated by rating agencies, in compliance with equity requirements previously defined and formalized. Additionally, the defined credit limits are periodically reviewed.

7.5 – Liquidity Risk

The liquidity needs of the Company are a responsibility of the areas of treasury and funding, which are aligned in their operations and continuously monitor the short, medium and long-term cash flows, both forecasted and realized, seeking to avoid possible mismatches and financial losses and ensuring that the liquidity requirements are sufficient for its operational needs.

The table below presents non-derivative financial liabilities of the Group by maturity, corresponding to the remaining period in the balance sheet until the contractual maturity date. The amounts disclosed in the table are the contracted undiscounted cash flows.

12/31/2011	Less than 1 year		Between 1 and 2 years		Between 2 and 5 years		More than 5 years
Loans and financing		4,047,972		2,416,820		6,484,413		32,196,189
Financial lease liabilities		142,997		259,034		388,551		1,127,959
Debentures		210,984		—		—		—
Suppliers		3,882,948		875		—		—
Advance for future capital increase		1,064,164		—		—		—
Concessions payable – UBP		1,427		3,472		14,246		296,508
12/31/2010	Less than 1 year		Between 1 and 2 years		Between 2 and 5 years		More than 5 years
Loans and financing		1,868,466		455,637		2,865,163		27,949,170
Financial lease liabilities		120,485		240,933		361,400		1,092,214
Suppliers		5,563,938		2,081,548		2,061,540		—
Advance for future capital increase		639,278		—		—		—
Concessions payable – UBP		—		1,313		10,118		150,133

F-122

8 - Sensitivity Analysis

The following tables present scenarios for indexes and rates with their respective impacts on the Company’s results. For the sensitivity analysis, forecasts and/or estimates based on macroeconomic assumptions obtained from the Focus Report, disclosed by the Central Bank and Economic Outlook 86 and published by OECD were used as a likely scenario for the end of 2012.

Sensitivity analyses of the loans and financing agreements were carried out in four different scenarios: two of them with an increase in the outstanding balance indexing currencies and two with a decrease in these indexing currencies. The analyses were limited to the agreements that presented exposure to the exchange rate and prices’ index.

Depreciation of the indexes - Loans granted (in centavos and %)

Currency (Risk)	Balance US$		Balance R$		Probable 2012			Scenario I (-25%)			Scenario II (-50%)			Scenario I     (-25%)		Scenario II     (-50%)
U.S. Dollar		3,211,422		6,023,985		1.77			1.33			0.89			4,263,163		2,842,108
Real		1,977,506		3,709,405		5.07	%		3.80	%		2.54	%		3,850,455		3,803,438
TOTAL		3,211,422		9,733,390											8,113,618		6,645,546

Appreciation of the indexes - Loans granted (in centavos and %)

Currency (Risk)	Balance US$		Balance R$		Probable 2012			Scenario I (+25%)			Scenario II (+50%)			Scenario I (+25%)		Scenario II (+50%)
U.S. Dollar		3,211,422		6,023,985		1.77			2.21			2.66			7,105,271		8,526,325
Real		1,977,506		3,709,405		5.07	%		6.34	%		7.61	%		3,944,489		3,991,505
TOTAL		3,211,422		9,733,390											11,049,760		12,517,830

Sensitivity analyses of loans and financing agreements granted were carried out in four different scenarios: two of them with increase in the outstanding balance indexing currencies and two with decrease in these indexing currencies. The analyses were limited to the agreements granted that presented exposure to the exchange rate and prices index.

Depreciation of the indexes - Loans granted (in centavos and %)

Agreements Obtained – Negative Variation – 4Q11					Index						Balance R$ thousand
Currency (Risk)	Balance US$ thousand		Balance R$ thousand		Probable 2012		Scenario I (-25%)		Scenario II (-50%)		Scenario I (-25%)		Scenario II (-50%)
Dollar (R$/US$)		9,575,952		17,962,570		1.77		1.3275		0.8850		12,712,076		8,474,717
EURO(R$/€)		42,229		79,213		2.4147		1.8111		1.2074		56,059		37,373
Yen(R$/¥)		185,779		348,484		0.0230		0.0172		0.0115		246,621		164,414
TOTAL		9,803,959		18,390,267								13,014,756		8,676,504

F-123

Appreciation of the indexes - Loans granted (in centavos and %)

Agreements Obtained – Positive Variation – 4Q11					Index						Balance R$ thousand
Currency (Risk)	Balance US$ thousand		Balance R$ thousand		Probable 2012		Scenario I (+25%)		Scenario II (+50%)		Scenario I (+25%)		Scenario II (+50%)
Dollar (R$/US$)		9,575,952		17,962,570		1.77		2.21255		2.6550		21,186,793		25,424,151
EURO(R$/€)		42,229		79,213		2.4147		3.0184		3.6221		93,431		112,118
Yen(R$/¥)		185,779		348,484		0.0230		0.0287		0.0345		411,036		493,243
TOTAL		9,803,959		18,390,267								21,691,260		26,029,512

Sensitivity analyses of the regulatory assets arising from the trading of Itaipu Binacional’s electricity were carried out. The analyses were limited to the variation in the real – dollar exchange rate, including two scenarios where there was currency appreciation of 25% and 50% and two scenarios where there was currency depreciation of 25% and 50%.

Depreciation of Indexes of Itaipu Financial Asset:

ITAIPU Financial Asset

Index

Balance R$ thousand

Currency (Risk)

Balance US$ thousand

Balance R$ thousand

Probable 2011

Scenario I (-25%)

Scenario II (-50%)

Scenario I (-25%)

Scenario II (-50%)

Dollar (R$/US$)

9,911,586

18,592,152

1.77

1.3275

0.8850

13,157,630

8,771,753

Appreciation of Indexes of Itaipu Financial Asset:

ITAIPU Financial Asset

Index

Balance R$ thousand

Currency (Risk)

Balance US$ thousand

Balance R$ thousand

Probable 2011

Scenario I (+25%)

Scenario II (+50%)

Scenario I (+25%)

Scenario II (+50%)

Dollar (R$/US$)

9,911,586

18,592,152

1.77

2.2125

2.6550

21,929,383

26,315,260

Sensitivity analyses were conducted for electricity supply agreements of electric-intensive consumers Albras and Alumar, subdivided into Alcoa and BHP, with a provision referring to premium due to aluminum price variation premium on the international market.

Therefore, in these hybrid agreements, the sensitivity analysis considered a variation over price of premium earned as seen in Table 1. The volatility components of premium basically are: the price of primary aluminum at LME, foreign exchange and CDI. Below, it is possible to see the impact of each scenario on the company’s results.

Derivative in 12/31/2011	Scenario I (-25%) Indexes and prices		Scenario II (-50%) Indexes and prices		Scenario I (+25%) Indexes and prices		Scenario II (+50%) Indexes and prices
376,950		42,796		—		853,126		1,189,289

The sensitivity analyses were elaborated as established by CVM Rule No. 475/2008, to measure the impact of the changes in the market variables for each of the Company’s financial instruments. Therefore, there are projections based on evaluation of macroeconomic scenarios and not meaning that the transactions will have the values presented in the period of the analysis being considered.

F-124

9 – Fair Value Estimate

It is assumed that the balances of accounts receivable from customers and accounts payable to suppliers at carrying amount, less PCLD, are close to their fair values. The fair value of financial liabilities, for disclosure purposes, is estimated by discounting the future contractual cash flows by the market interest rate, available for the Company for similar financial instruments.

The Company uses the following hierarchy to determine and disclose the fair value of financial instruments by the valuation technique:

	CONSOLIDATED 12/31/2011
	Level 1			Level 2		Level 3		Total
Marketable Securities		—			11,438,443		—		11,438,443
Derivatives designated as hedge		—			380,567		—		380,567
Founder’s shares		—			—		212,419		212,419
Equity Instruments		—			629,707		—		629,707
Financial Assets Available for Sale		1,561,533			—		45,902		1,607,435
Financial Investments		331,452			524,294				855,746
Sureties and deposits		—			161,942		—		161,942
Total assets		1,892,985			13,134,953		258,321		15,286,259
	CONSOLIDATED 12/31/2010
	Level 1			Level 2		Level 3		Total
Marketable Securities		—			7,543,978		—		7,543,978
Derivatives		(2,038	)		—		540,072		538,034
Derivatives designated as hedge		—			582,404		—		582,404
Founder’s shares		—			—		194,761		194,761
Equity Instruments		1,548			—		—		1,548
Financial Assets Available for Sale		1,610,908			—		52,410		1,663,318
Total assets		1,610,418			8,126,382		767,243		10,524,043
Derivatives destined to hedge		—			540,540		—		540,540
Total liabilities		—			540,540		—		540.540

Financial assets and liabilities registered at fair value were classified and disclosed according to the following levels:

Level 1 – quoted prices (unadjusted) in active markets, liquid and visible for identical assets and liabilities accessible on the measurement date;

Level 2 – quoted prices (may be adjusted or not) for similar assets or liabilities in active markets, other entries not observable in level 1, directly or indirectly, in the terms of the asset or liability, and

Level 3 – assets and liabilities whose prices do not exist or that these prices or valuation techniques are supported by a small or non-existing market, not observable or liquid. At this level, the fair value estimate becomes highly subjective. The fair value of financial instruments traded in active markets (such as securities held for trading and available for sale) is based on market prices quoted on the balance sheet date. A market is seen as active if the quoted prices are readily and regularly available from a Stock Exchange, a distribution company, a broker, an industry group, a pricing service or regulatory agency, and those prices represent real market transactions occurring regularly in basis purely commercial.

The market price quoted used for financial assets held by the Company is the current competing price. These instruments are included in Level 1. Instruments included in Level 1 comprise, mainly, equity investments of FTSE 100 classified as negotiable securities or available for sale.

The fair value of financial instruments not negotiated in active markets (for example, OTC derivatives) is determined using valuation techniques. These valuation techniques maximize the use of data adopted by the market where it is available and trust as least as possible in the entity’s specific estimates. If all relevant information required for the fair value of an instrument is adopted by the market, the instrument will be included in Level 2.

If one or more relevant information is not based on data adopted by the market, the instrument will be included in level 3.

F-125

Specific valuation techniques used to value financial instruments include:

Market prices quoted or quotations from financial institutions or brokers for similar instruments.

The fair value of interest rate swaps is calculated by the present value of the estimated future cash flows based on the yield curves adopted by the market.

The fair value of future exchange contracts is determined based on future exchange rates on the balance sheet date, with the resulting value discounted at present value.

Other techniques, such as analysis of discounted cash flows, are used to determine the fair value for the remaining financial instruments.

NOTE 43 – MAIN CONSOLIDATED FINANCIAL STATEMENT IMPACTS RESULTING FROM THE FIRST-TIME ADOPTION OF IFRS AS COMPARED TO U.S. GAAP AND PREVIOUS BRAZILIAN GAAP

1. Reconciliation of US GAAP to IFRS

Presented below are the reconciliations between the shareholders’ equity under U.S. GAAP presented in the consolidated financial statements included in the December 31, 2009 Form 20-F filed with the SEC, as of December 31, 2008 (equivalent to the date of transition to IFRS, January 1, 2009) and as of December 31, 2009 and the comprehensive income (loss) under U.S. GAAP for the year ended as of December 31, 2009 and the corresponding balances as adjusted to IFRS.

Presented below are the explanations regarding relevant adjustments impacting the shareholders’ equity and the comprehensive income (loss):

	As of the transition date January 1, 2009			As of December 31, 2009
Shareholders’ equity as originally presented under U.S. GAAP		69,730,480			69,797,754
Post employment obligations (h)		238,410			107
IFRIC 12 (c)		561,991			1,119,964
Reversal of Impairment (f)		—			673,232
Fair Value of Investments (b)		(2,326,343	)		(3,610,178	)
Equity (b)		446,727			1,673,157
Shareholders’ Remuneration (g)		9,336,958			—
Regulatory Assets and Liabilities (e)		(232,896	)		(283,815	)
Itaipu Binacional Consolidation adjustments (a)		(116,490	)		(87,060	)
Consolidation adjustments (d)		(50,915	)		32,140
Others		(278,016	)		63,749
Shareholders’ equity as presented under IFRS		77,309,906			69,379,050

Presented below are the explanations regarding relevant adjustments in the balance sheets and in the income statement:

Comprehensive income (loss) as originally presented under U.S. GAAP

	Net Income			Other Comprehensive Income			Total Comprehensive Income
As originally presented under U.S. GAAP		(1,633,485	)		2,522,195			888,710
Impairment Reversal		673,232			—			673,232
Pension Plan		454,373			(1,045,555	)		(591,182	)
Consolidation		597,566			472,416			1,069,982
Income tax		(137,304	)		—			(137,304	)
IFRIC 12		(74,456	)		—			(74,456	)
Equity		1,346,502			(807,523	)		538,979
Others		23,712			(28,556	)		(4,844	)
As presented under IFRS		1,250,140			1,112,977			2,363,117

F-126

a) Itaipu Binacional Consolidation

Itaipu Binacional is a joint venture owned equally by ELETROBRAS and ANDE - Administración Nacional de Eletricidad (a company owned by the Government of Paraguay). It was created by an international treaty entered into by the governments of Brazil and Paraguay, which establishes the overall terms and conditions that apply to Itaipu Binacional, ELETROBRAS is responsible for acquiring and reselling its share (50%) of the electric power generated by Itaipu Binacional and all the relevant decisions are taken unanimously. For IFRS purposes, Itaipu Binacional is classified as a joint venture, which the Company accounts for by a proportional consolidation (50%).

However, Itaipu Binacional shareholders’ equity is not sufficient to allow it to fund its activities, consequently, it needs financial support from ELETROBRAS and the Brazilian federal government (ELETROBRAS’ majority shareholder). Of ITAIPU’s BINACIONAL debt, 42% is financed by ELETROBRAS and 56% by the Brazilian Treasury. In addition, even though ELETROBRAS is responsible for commercializing its share (50%) of the electric power generated by Itaipu Binacional, historically the Company has been responsible for the consumption of about 96% of all the electric power generated by Itaipu Binacional.

Based on the reasons discussed above, Itaipu Binacional has been fully included in the U.S. GAAP consolidated financial statements of ELETROBRAS, in accordance with ASC-810 Consolidation. The adjustments noted in the “Itaipu” column relate to the additional 50% consolidated for U.S. GAAP purposes.

b) Investments

Under U.S. GAAP, ASC 320, “Investments in Debt and Equity Securities”, an entity, at acquisition, shall classify equity securities into trading securities available for sale securities or held-to-maturity. It is also permitted for entities to measure investments in debt and equity securities at fair value when there is readily determinable fair value information. Investments in associates were not accounted using equity method under U.S. GAAP due to the inability of obtaining financial information from such associates, therefore it was concluded that there was no significant influence under U.S. GAAP (ASC \323 “Investments: Equity method and Joint ventures”). Accordingly, investments in associates were classified as available for sale securities. These investments are recognized at their publicly quoted market price, when available and under cost basis as per ASC 325 “Cost method investments” when readily determinable fair value information is not available.

Under IFRS, these investments in associates have been accounted for using the equity method, and as a result, the fair value adjustment under U.S. GAAP was reversed and the respective equity method adjustment has been recorded, including dividends received.

c) IFRIC 12

According to IFRIC 12, when an operator is remunerated by the users of public service, arising from obtaining the right to charge them a given price and for a period agreed with the grantor, the amount extended by the operator in the acquisition of this right is recognized as an intangible asset.

On the other hand, when the remuneration of the investment made by the operator is the responsibility of the grantor, and the agreement establishes that there is an unconditional right to receive cash or other financial asset, whether or not the infrastructure (demand) is actually used over the period of the concession, a financial asset must be recognized. This was applied for the Company’s transmissions concessions, and thus, resulted in the recognition of a financial asset.

In the electricity generation business, except for Itaipu and Amazonas Energia, IFRIC 12 is not applicable, and the infrastructure remains classified as fixed assets. However, the interpretation is applicable to electricity distribution and transmission, and these businesses qualify in the mixed model (a split between intangible and financial assets) and in the financial model, respectively.

With respect to Itaipu, all of the infrastructure was classified as being in the scope of IFRIC 12 due to the following specific facts:

• Itaipu Binacional is governed by a Bilateral Treaty signed in 1973, which established tariff conditions; the basis of tariff formation being determined exclusively to cover expenses and the debt service of this Company.

• Tariff basis and trading terms are in force until 2023, which correspond to a significant part of the useful life of the power plant.

F-127

The infrastructure was classified as a financial asset under IFRS, which was treated as fixed assets under U.S. GAAP. This resulted in the reclassification of accounts receivable, reimbursement rights, fixed assets, reimbursement obligations, and suppliers as a financial asset. There was also an impact on income statement mainly due to differences between amortization rates based on consession terms for IFRS and regulatory depreciation rates for U.S. GAAP purposes.

d) Consolidation of SPE’s

Special purpose entities (“SPE”), which were previously not consolidated, started to be consolidated in compliance with IFRS. The Company started to take into effect the proportional consolidation of the investments qualifying as joint venture from January 1, 2009. These entities were not consolidated for U.S. GAAP purposes due to the inabity of obtaining financial information from such entities.

e) Regulatory Assets and Liabilities

Under U.S. GAAP, the recoverable costs to be deferred under ASC 980 – Regulated Operations, are classified as Deferred Regulatory Assets since this amount will be recovered through future tariffs. However, for IFRS purposes, regulatory assets and liabilities subject to tariff adjustment in subsequent periods are not provided for in the current accounting framework of IFRS and, as such, were reverted in all presented periods.

f) Reversal of Impairment

In prior years, the Company recorded an impairment in the amount of approximately R$ 673 million for certain electricity generation fixed assets. In 2009, a new analysis was performed by the Company, based mainly in a new fact which is related to the renewal of a concession for an additional period of 20 year of impaired assets. This fact resulted in the reversal of impairment under IFRS. However, impairment reversals are not allowed under U.S. GAAP.

g) Shareholders remuneration

The Company declared dividends in prior years that, based on statutory law, were not paid due to the shortage of cash, and such dividends were recorded in a reserve in the equity accounts as allowed by applicable law. Under U.S. GAAP, these dividends have always been recorded as a liability. Payment of these dividends was determined in 2009. For IFRS purposes, these dividends were treated as a liability from December 31, 2009, thus reverting the liability under U.S. GAAP against equity as of January 1, 2009.

h) Post employment obligations

Although there are no significant differences in the actuarial calculation of post-employment obligations for IFRS compared to U.S. GAAP, it is required that the accumulated unrecognized actuarial gains and losses can be recognized at the first-time adoption of IFRS, in the opening balance as of January 1, 2009. Additionally, the Company is no longer applying the “corridor” approach for IFRS. Instead the Company recognizes all actuarial gain or losses through other comprehensive income, whereas the “Corridor” method was still applicable for U.S. GAAP in 2009. Under IFRS, the Company adopted the limit criteria for recognition of the actuarial asset as provided for in IFRIC 14, and the minimum funding requirements also provided for in the referred standard. These adjustments were taken into effect substantially in the opening balance.

i) Deferred Income and Contribution Taxes

In compliance with IAS 12, a number of adjustments result in a deferred income tax adjustment as they do not have an immediate impact for tax purposes.

F-128

2. Reconciliation of Brazilian GAAP to IFRS

BALANCE SHEET

(in millions of Reais)

	CONSOLIDATED
ASSET	12/31/2008										01/01/2009
			Itaipu Effect			IFRIC 12		Others
	BR GAAP										IFRS
CURRENT							—
Cash and Equivalents		12,832,000		—			—		(7,304,532	)		5,527,468
Restricted Cash		734,386		—			—		—			734,386
Accounts Receivable		4,341,459		(907,647	)		—		(315,418	)		3,118,394
Financial Asset of Concession Agreements		—		—			522,851		—			522,851
Financial Asset - Itaipu		—		1,100,155			—		—			1,100,155
Financings and Loans		1,493,271		—			—		6,149			1,499,420
Fuel Consumption Account		554,748		—			—		(3,854	)		550,894
Investment Remuneration		261,093		—			—		(199,142	)		61,951
Marketable Securities		—		—			—		7,439,509			7,439,509
Renegotiated Credits		619,871		—			—		(619,871	)		—
Deferred Tax Assets		2,081,850		—			—		(1,571,967	)		509,883
Reimbursement Rights		516,766		—			11,043		—			527,809
Other Debtors		377,879		—			—		(4,809	)		373,070
Warehouse		759,963		—			—		(164,053	)		595,911
Prepaid expenses		76,874		—			—		(31,596	)		45,278
Financial Instruments		—		—			—		52,640			52,640
Others		947,497		—			—		(584,553	)		362,944
		25,597,657		192,507			533,894		(3,301,496	)		23,022,563
NON CURRENT
LONG TERM ASSETS
Financings and Loans		13,467,643		—			—		(62,465	)		13,405,178
Renegotiated Credits		2,070,302		—			—		(2,070,302	)		—
Accounts Receivable		—		—			—		1,874,062			1,874,062
Marketable Securities		617,889		—			—		584			618,473
Stock of Nuclear Fuel		725,142		—			—		(4,848	)		720,294
Financial Asset of Concession Agreements		—		—			20,821,244		—			20,821,244
Financial Asset - Itaipu		—		24,119,962			—		—			24,119,962
Deferred Tax Assets		2,786,948		—			—		663,769			3,450,717
Escrow Deposits				—			—		991,957			991,957
Fuel Consumption Account		572,279		—			—		—			572,279
Reimbursement Rights		4,312,809		(4,312,809	)		—		—			—
Financial Instruments		—		—			—		40,050			40,050
Others		1,363,886		—			—		(351,644	)		1,012,242
		25,916,898		19,807,153			20,821,244		1,081,163			67,626,458

F-129

	CONSOLIDATED
ASSET	12/31/2008										01/01/2009
			Itaipu Effect		IFRIC 12			Others
	BR GAAP										IFRS
Advances for corporate shares		4,027										4,028
		25,920,925										67,630,486
INVESTMENTS		5,896,865		—		—			(853,721	)		5,043,144
FIXED ASSETS		80,262,674		—		(22,149,299	)		(21,617,717	)		36,495,658
INTANGIBLES
Concession Agreements		—		—		1,328,055			—			1,328,055
Others		375,811							410,728			786,539
		86,535,350		—		(20,821,244	)		(22,060,710	)		43,653,396
TOTAL ASSETS		138,053,932		19,999,660		533,894			(24,281,042	)		134,306,444

BALANCE SHEET

(in millions of Reais)

		(443,476)	(443,476)		(443,476)	(443,476)			(443,476)
	Consolidated
LIABILITIES AND SHAREHOLDERS’ EQUITY	12/31/2008 BR GAAP							01/01/2009 Opening Balance - IFRS
CURRENT
Financing and Loans		1,714,611	—		—	(579,115	)		1,135,497
Compulsory Loans		85,205	—		—	741			85,946
Suppliers		2,594,567	—		—	(90,274	)		2,504,293
Advances from Clients		53,159	—		—	—			53,159
Taxes and Social Contributions		2,075,726	—		—	(1,265,190	)		810,536
Fuel Consumption Account		670,482	—		—	(2,856	)		667,626
Shareholders’ Remuneration		1,948,109	—		—	(260,661	)		1,687,448
National Treasury Credit		72,236	—		—	—			72,236
Estimated Liabilities		550,573	—		—	50,088			600,661
Reimbursement Obligations		923,344	(443,476	)	—	—			479,868
Complementary Pension Plan		502,699	—		—	7,498			510,197
Provisions for Contingencies		1,481,709	—		—	(1,178,257	)		303,452
Regulatory Fees		708,285	—		—	(13,038	)		695,247
Leasing		—	—		—	106,435			106,435
Concessions Payable		—	—		—	—			—
Financial Instruments		—	—		—	296,134			296,134
Others		906,311	—		—	(253,895	)		652,417
		14,287,017	(443,476	)	—	(3,182,390	)		10,661,151

F-130

	Consolidated
LIABILITIES AND SHAREHOLDERS’ EQUITY	12/31/2008 BR GAAP							01/01/2009 Opening Balance - IFRS
NON CURRENT
Financing and Loans		18,297,562	—		—	8,612,669			26,910,231
National Treasury Credit		2,854,201	(2,450,772	)	—	—			403,429
Suppliers		—	—		—	—			—
Global Reversion Reserve - RGR		7,193,770	—		—	(7,193,770	)		—
Compulsory Loans		129,866	—		—	—			129,866
Taxes and Social Contributions		2,713,664	—		—	(241,492	)		2,472,172
Shareholders’ Remuneration		—	—		—	—			—
Decommission Obligations		266,168	—		—	—			266,168
Advances from Clients		1,018,488	—		—	—			1,018,488
Fuel Consumption Account		1,432,982	—		—	(19,943	)		1,413,039
Provisions for Contingencies		1,695,556	—		—	2,074,109			3,769,666
Complementary Pension Plan		1,567,002	—		—	612,842			2,179,845
Provision for Unfunded Liabilities in Subsidiaries		—	—		—	—			(1	)
Reimbursement Obligations		—	—		—	—			—
Leasing		—	—		—	1,685,071			1,685,071
Concessions Payable		—	—		656,249	—			656,249
Advances for Future Capital Increase		—	—		—	4,287,353			4,287,353
Financial Instruments		—	—		—	40,050			40,050
Others		746,628	—		—	357,133			1,103,761
		37,915,887	(2,450,772	)	656,249	10,214,022			46,335,386
MINORITY INTEREST		232,668	—		—	(232,668	)		—
		—	—		—	—			—
SHAREHOLDERS’ EQUITY		—	—		—	—			—
Capital Stock		26,156,567	—		—	—			26,156,567
Treasury Stock		—	—		—	—			—
Capital Reserves		26,048,342	—		—	—			26,048,342
Revaluation Reserves		196,906	—		—	(196,906	)		—
Profit Retention		28,900,908	—		—	—			28,900,908
Retained Earnings		—	—		—	(4,086,684	)		(4,086,684	)
Asset Valuation Adjustments		28,285	—		—	168,621			196,906
Proposed Additional Dividend		—	—		—	257,836			257,836
Other Comprehensive Income		—	—		—	(285,485	)		(285,485	)
Minority Interest		—	—		—	121,516			121,516
		81,331,008	—		—	—			77,309,906
Advances for Future Capital Increase		4,287,351	—		—	(4,287,353	)

F-131

		000000000	000000000		000000000	000000000			000000000
	Consolidated
LIABILITIES AND SHAREHOLDERS’ EQUITY	12/31/2008 BR GAAP							01/01/2009 Opening Balance - IFRS
		85,618,359	—		—	(8,308,455	)		77,309,906
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		138,053,932	(2,894,248	)	656,249	(1,509,485	)		134,306,443

	Consolidated
Assets	12/31/2009										12/31/2009
	BR GAAP		Itaipu Effect			IFRIC 12		Others			IFRS
CURRENT
Cash and Equivalents		15,398,093		—			—		(6,780,799	)		8,617,294
Restricted Cash		1,341,719		—			—		—			1,341,719
Accounts Receivable		4,260,617		—			—		(4,260,617	)		—
Accounts Receivable		—		(915,393	)		—		4,017,443			3,102,079
Financial Asset of Concession Agreements		—		—			715,720		—			715,720
Financial Asset - Itaipu		—		854,656			—		—			854,656
Financings and Loans		1,922,866		—			—		3,327			1,926,193
Fuel Consumption Account		375,558		—			—		502,275			877,833
Investment Remuneration		340,607		—			—		(261,881	)		78,726
Marketable Securities		—		—			—		7,662,640			7,662,640
Renegotiated Credits		421,922		—			—		(421,922	)		—
Deferred Tax Assets		1,120,239		—			—		206,694			1,326,933
Reimbursement Rights		946,212		(724,693	)		—		—			221,519
Other Debtors		582,749		—			—		19,982			602,731
Warehouse		859,285		—			—		(184,181	)		675,104
Prepaid Expenses		88,176		—			—		(29,411	)		58,765
Financial Instruments		—		—			—		227,540			227,540
Others		536,922							(25,120	)		511,773
		28,194,966		(785,430	)		715,720		675,970			28,801,225
NON CURRENT
Financings and Loans		9,836,412		—			—		3,416			9,839,828
Renegotiated Credits		1,523,630		—			—		(1,523,630	)		—
Accounts Receivable				—			—		1,431,080			1,431,080
Marketable Securities		687,291		—			—		(103	)		687,188
Stock of Nuclear Fuel		755,434		—			—		—			755,434
Financial Asset of Concession Agreements		—		—			22,352,102		—			22,352,102
Financial Asset – Itaipu		—		16,744,837			—		—			16,744,837
Deferred Tax Assets		4,581,036		—			—		(87,813	)		4,493,223
Escrow Deposits		—		—			—		1,521,317			1,521,317
Fuel Consumption Account		1,074,402		—			—		99,178			1,173,580
Reimbursement Rights		1,842,309		(1,842,309	)		—		—			—
Financial Instruments		—					—		228,020			228,020

F-132

Assets	12/31/2009										12/31/2009
	BR GAAP		Itaipu Effect		IFRIC 12			Others			IFRS
Others		712,452		—		—			53,694			766,145
		21,012,966		14,902,528		22,352,102			1,725,159			59,992,755
Advances for corporate shares		4,000		—		—			—			4,000
		21,016,966		—		—						59,996,755
INVESTMENTS		6,816,146		—		—			(1,528,039	)		5,288,107
FIXED ASSETS		77,261,818		—		(34,373,372	)		(1,290,841	)		41,597,605
INTANGIBLES		—		—
Concession Agreements		—		—		991,879			—			991,879
Others		526,764		—		506,040			—			1,032,804
		84,604,728		—		(32,875,453	)		(2,818,880	)		48,910,395
TOTAL ASSETS		133,816,660		14,117,098		(9,807,631	)		(417,751	)		137,708,376

BALANCE SHEET

(in millions of Reais)

	Consolidated
LIABILITIES AND SHAREHOLDERS’ EQUITY	12/31/2009 BR GAAP							12/31/2009 IFRS
CURRENT
Financing and Loans		998,626	—		—	116,559			1,115,275
Compulsory Loans		12,941	—		—	734			13,675
Suppliers		3,471,735	—		—	(392,121	)		3,079,614
Advances from Clients		63,400	—		—	—			63,400
Taxes and Social Contributions		1,144,100	—		—	(180,735	)		963,365
Fuel Consumption Account		923,535	—		—	—			923,535
Shareholders’ Remuneration		3,553,545	—		—	(339,095	)		3,214,450
National Treasury Credit		76,036	—		—	—			76,036
Estimated Liabilities		832,535	—		—	(160,321	)		672,214
Reimbursement Obligations		1,264,046	(407,045	)	—	—			857,001
Complementary Pension Plan		423,087	—		—	(71,938	)		351,149
Provisions for Contingencies		121,526	—		—	131,182			252,708
Regulatory Fees		596,468	—		—	(7,035	)		589,433
Leasing		—	—		—	108,827			108,827
Concessions Payable		—	—		—	—			—
Financial Instruments			—		—	40,050			40,050
Others		681,843	—		—	267,360			949,113
		14,163,424	(407,045	)	—	(486,534	)		13,269,844
NON CURRENT
Financing and Loans		16,791,118	—		—	11,601,424			28,392,542
National Treasury Credit		1,344,571	(1,033,265	)	—	—			311,306
Suppliers					—	—			—
Global Reversion Reserve – RGR		7,656,946	—		—	(7,656,946	)		—
Compulsory Loans		127,358	—		—	—			127,358
Taxes and Social Contributions		1,155,410	—		—	118,480			1,273,890
Shareholders’ Remuneration		7,697,579	—		—	—			7,697,579

F-133

	Consolidated
LIABILITIES AND SHAREHOLDERS’ EQUITY	12/31/2009 BR GAAP								12/31/2009 IFRS
Decommission Obligations		215,306		—		—	108,020			323,326
Advances from Clients		978,980		—		—	—			978,980
Fuel Consumption Account		908,832		—		—	435,548			1,344,380
Provisions for Contingencies		2,302,017		—		—	1,226,900			3,528,917
Complementary Pension Plan		2,000,398		—		—	(8,387	)		1,992,012
Provision for Unfunded Liabilities in Subsidiaries		—		—		—	—			—
Reimbursement Obligations		—		—		—	—			—
Leasing		—		—		—	1,639,448			1,639,448
Concessions Payable		—		—		761,131	—			761,131
Advances for Future Capital Increase		—		—		—	4,712,825			4,712,825
Financial Instruments		—		—		—	228,020			228,020
Others		2,177,792		—		—	(430,024	)		1,747,768
		43,356,307		(1,033,265	)	761,131	11,975,308			55,059,482
MINORITY INTEREST		205,144					(205,144	)		—
SHAREHOLDERS’ EQUITY
Capital Stock		26,156,567		—		—	—			26,156,567
Treasury Stock		—		—		—	—			—
Capital Reserves		26,048,342		—		—	—			26,048,342
Revaluation Reserves		179,427		—		—	(179,427	)		—
Profit Retention		19,009,667		—		—	—			19,009,668
Retained Earnings		—		—		—	(3,345,744	)		(3,345,744	)
Asset Valuation Adjustments		(15,043	)	—		—	194,470			179,427
Proposed Additional Dividend		—		—		—	370,755			370,755
Other Comprehensive Income		—		—		—	827,491			827,491
Minority Interest		—		—		—	132,543			132,543
		71,378,960		—		—	(1,999,912	)		69,379,050
Advances for Future Capital Increases		4,712,825		—		—	(4,712,825	)		—
		76,091,785		—		—	(6,712,737	)		69,379,050
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		133,816,660		(1,440,310	)	761,131	4,570,893			137,708,376

CONSOLIDATED INCOME STATEMENT

(in millions of Reais)

	12/31/2009								12/31/2009
	BR GAAP		Itaipu Effect	IFRIC 12			Others		IFRS
NET OPERATING REVENUES		27,652,513			(4,445,242	)		1,504,665		24,711,937
								—

F-134

	12/31/2009												12/31/2009
	BR GAAP			Itaipu Effect			IFRIC 12			Others			IFRS
OPERATING EXPENSES											—
Personnel Supplies and Services		6,453,314									32,904			6,486,218
Profit sharing for employees and management		207,482									77,052			284,534
Electricity purchased for reselling		6,122,533			(2,541,137	)					—			3,581,396
Fuel for electricity production		742,372									13,913			756,285
PASEP and COFINS		1,504,665									(1,504,665	)		—
Use of the grid		1,270,463									(7,055	)		1,263,408
Remuneration and indemnification		1,184,482			3,550						—			1,188,032
Depreciation and amortization		2,397,874						(773,628	)		—			1,624,246
Amortization - Assets linked to distribution		—									—			—
Operation and maintenance - Distribution		—									—			—
Construction		—						1,723,960			—			1,723,960
Operation and maintenance - Transmision		—									—			—
Construction - Transmission		—									—			—
Depreciation and amortization - Fixed Assets and Intangibles		—									—			—
Operating provisions		1,516,796									623,610			2,140,406
Itaipu’s income to offset		669,675									—			669,675
Donations and contributions		237,872									106			237,978
Others		904,351									(199,903	)		704,449
		23,211,880			(2,537,587	)		950,332			(964,038	)		20,660,585
OPERATING INCOME BEFORE THE FINANCIAL RESULT		4,440,634									(389,283	)		4,051,351
FINANCIAL RESULT
Financial Revenues
Revenues from interest, commissions and taxes		1,037,626									(2,139	)		1,035,487
Revenue from financial investments		1,416,513									48,269			1,464,782
Arrears surcharge on electricity		200,148									27,997			228,145
Monetary restatement		334,699									21,323			356,023
Other financial revenues		—									736,766			736,766
		—												—
Financial Expenses		—												—
Debt charges		(1,686,761	)								(71,712	)		(1,758,473	)
Leasing charges		0									(213,470	)		(213,470	)
Charges on stakeholders’ resources		(1,467,632	)								(1,081	)		(1,468,713	)
Exchange rate variations		(3,979,338	)								(39,304			(4,018,643	)
Other financial expenses		(1,129,157	)								1,129,157			—
		(5,273,903	)		—			—			1,635,806			(3,638,097	)
OTHER (EXPENSES) AND REVENUES		(97,697	)								97,697

F-135

	12/31/2009											12/31/2009
	BR GAAP			Itaipu Effect			IFRIC 12		Others			IFRS
INCOME BEFORE INCOME TAX AND SOCIAL CONTRIBUTIONS		(930,966	)		—			—		1,344,220			413,254
Income tax		887,304								(251,429	)		635,875
Social contribution on net income		309,115								(108,105	)		201,010
NET INCOME OF THE YEAR		265,453			(2,537,587	)		950,332		984,686			1,250,139

NOTE 44 – RELATED PARTIES TRANSACTIONS

The controller of Eletrobras is the federal government that holds 40.88% of the capital of the company (see Note 35).

The transactions of Eletrobras with its subsidiaries and special-purpose entities are carried out at prices and under conditions compatible with those practiced in the market. Among the main operations that took place with related parties, highlighted are the loans and financing granted which were established under market conditions and/or according to specific laws. Other operations were also made under normal market conditions.

F-136

FEDERAL GOVERNMENT ENTITIES	ASSET		LIABILITY			RESULT
Consumers and resellers		9,901		—			—
Electric Energy supply		14,801		—			—
Other revenues		—		—			55,011
		24,702		—			55,011
BNDES
Financing and loan payable		—		8,173,793			—
		—		8,173,793			—
REAL GRANDEZA
Account receivable		1,927		—			—
Pension Fund Contributions		—		4,740			—
Account payable		—		(438,949	)		—
Agreement of actuarial debt		—		56,762			—
Others liabilities		—		24,261			—
Pension Fund Contributions		—		—			(15,011	)
Other expenses		—		—			(62,048	)
Actuarial provision		—		—			40,134
Contribution for administrative expense		—		—			(2,517	)
		1,927		(353,186	)		(39,442	)
NUCLEOS
Pension Fund Contributions		—		1,788			—
Actuarial provision/ Post-retirement cost		—		—			(15,734	)
Pension Fund Contributions		—		—			-11,704
		—		1,788			(27,438	)
RS ENERGIA
Account receivable		3,503		—			—
Interest on capital/dividends receivable		773		—			—
Permanent shareholding		142,046		—			—
Equity result		—		—			3,253
Accumulated equity		4,158		—			—
Revenue from services rendered		—		—			1,957
Other revenues		—		—			13
		150,480		—			5,223
UIRAPURU
Account receivable		17		—			—
Interest on capital/dividends receivable		1,382		—			—
Permanent shareholding		33,011		—			—
Accumulated equity		6,238		—			—
Equity result		—		—			3,680
Use of electric grid revenue		—		—			55
Revenue from services rendered		—		—			2,091
Other revenues		—		—			13
		40,648		—			5,839
ARTEMIS
Account receivable		501		—			—
Interest on capital/dividends receivable		4,863		—			—
Permanent shareholding		148,578		—			—
Accumulated equity		10,402		—			—
Equity result		—		—			11,983
Use of electric grid revenue		—		—			5,984
Other revenues		—		—			84
		164,344		—			18,051

F-137

FEDERAL GOVERNMENT ENTITIES	ASSET			LIABILITY		RESULT
PORTO VELHO
Account receivable		5			—		—
Permanent shareholding		190,293			—		—
Accumulated equity		1,904			—		—
Equity expenses		—			—		(1,330	)
Other revenues		—			—		58
		192,202			—		(1,272	)
NORTE BRASIL
Permanent shareholding		23,530			—		—
Interest on capital/dividends receivable		250			—		—
Accumulated equity		(7,411	)		—		—
Equity result		—			—		1,164
		16,369			—		1,164
ETAU
Account receivable		55			—		—
Interest on capital/dividends receivable		2,055			—		—
Permanent shareholding		9,567			—		—
Accumulated equity		10,732			—		—
Equity result		—			—		5,413
Revenue from services rendered		—			—		664
Other revenues		—			—		7
		22,409			—		6,084
ESBR
Permanent shareholding		562,342			—		—
Accumulated equity		(7,934	)		—		—
Equity expenses		—			—		(3,646	)
		554,408			—		(3,646	)
CERRO CHATO I
Account receivable		5			—		—
Permanent shareholding		180			—		—
Accumulated equity		2,095			—		—
Use of electric grid revenue		—			—		15
Other revenues		—			—		7
		2,280			—		22
CERRO CHATO II
Account receivable		5			—		—
Permanent shareholding		180			—		—
Accumulated equity		(180	)		—		—
Use of electric grid revenue		—			—		23
Other revenues		—			—		7
		5			—		30
CERRO CHATO III
Account receivable		5			—		—
Interest on capital/dividends receivable		652			—		—
Permanent shareholding		180			—		—
Accumulated equity		(180	)		—		—
Equity result		—			—		2,927
Use of electric grid revenue		—			—		30
Other revenues		—			—		7
		657			—		2,964

F-138

FEDERAL GOVERNMENT ENTITIES	ASSET			LIABILITY			RESULT
TELES PIRES
Advance for future capital increase		—			—			—
Permanent shareholding		187,928			—			—
Accumulated equity		(828	)		-			-
Equity expenses		—			—			(828	)
		187,100			—			(828	)
INTEGRAÇÃO
Interest on capital/dividends receivable		2,060			—			—
Accumulated equity		8,898			—			—
Equity result		—			—			8,646
		10,958			—			8,646
AMAPARI ENERGIA
Permanent shareholding		34,105			—			—
Equity result		—			—			6,109
		34,105			—			6,109
ENERGÉTICA ÁGUAS
Permanent shareholding		81,474			—			—
Equity result		—			—			20,188
		81,474			—			20,188
FACHESF
Suppliers		—			7,181			—
Pension Fund Contributions		—			9,317			—
Actuarial debt agreements		—			381,560			—
Actuarial expenses		—			—			44,101
Operating expenses		—			—			(16,381	)
		—			398,058			27,720
NORTE ENERGIA
Permanent shareholding		217,672			—			—
Equity expenses		—			—			(997	)
		217,672			—			(997	)
TDG
Permanent shareholding		15,235			—			—
Equity result		—			—			2,217
		15,235			—			2,217
MANAUS TRANSMISSÃO
Permanent shareholding		122,268			—			—
Account payable		—			112			—
Comprehensive other results		—			(467	)		—
Revenue from services rendered		—			—			1,722
Equity expenses		—			—			(8,041	)
		122,268			(355	)		(6,319	)
IEMADEIRA
Permanent shareholding		359,756			—			—
Revenue from services rendered		—			—			5,028
Others Créditos		—			—			260
Equity result		—			—			10,872
		359,756			—			16,160
MANAUS CONSTRUÇÃO
Interest on capital/dividends receivable		8,432			—			—
Permanent shareholding		6,392			—			—
Equity result		—			—			8,874
		14,824			—			8,874

F-139

FEDERAL GOVERNMENT ENTITIES	ASSET			LIABILITY			RESULT
STN
Account receivable		174			—			—
Permanent shareholding		195,267			—			—
Suppliers		—			1,271			—
Equity result		—			—			28,314
Revenue from services rendered		—			—			2,055
Financing revenues (IOC)		—			—			5,872
Use of electric grid charges		—			—			(10,869	)
		195,441			1,271			25,372
INTESA
Interest on capital/dividends receivable		609			—			—
Permanent shareholding		31,692			—			—
Suppliers		—			929			—
Equity result		—			—			3,095
Use of electric grid charges		—			—			(8,429	)
		32,301			929			(5,334	)
EAPS
Consumers and resellers		244			—			—
Interest on capital/dividends receivable		4,252			—			—
Permanent shareholding		75,638			—			—
Equity result		—			—			18,604
		80,134			—			18,604
ESBR Part.
Permanent shareholding		554,408			—			—
Comprehensive other results		—			(3,253	)		—
Equity expenses		—			—			(3,646	)
		554,408			(3,253	)		(3,646	)
SETE GAMELEIRAS
Permanent shareholding		1,850			—			—
Equity expenses		—			—			(157	)
		1,850			—			(157	)
S. PEDRO DO LAGO
Permanent shareholding		1,803			—			—
Equity expenses		—			—			(143	)
		1,803			—			(143	)
PEDRA BRANCA
Permanent shareholding		1,737			—			—
Equity expenses		—			—			(179	)
		1,737			—			(179	)
BRASVENTO MIASSABA
Advance for future capital increase		10,685			—			—
Permanent shareholding		(352	)		—			—
		10,333			—			—
BRASVENTO EOLO
Advance for future capital increase		8,112			—			—
Permanent shareholding		(550	)		—			—
		7,562			—			—

F-140

FEDERAL GOVERNMENT ENTITIES	ASSET		LIABILITY			RESULT
ANDE
Consumers and resellers		52,115		—			—
Others Assets		18,102		—			—
Other obligations		—		(33,582	)		—
Revenue from services rendered		-		-			195,336
Financing revenues		—		—			2,371
Financial expenses		—		—			508
Other expenses		—		—			(35,296	)
		70,218		(33,582	)		162,919
FIBRA
Account payable		—		(43,031	)		—
Pension Fund Contributions		—		(2,811	)		—
Financial expenses		—		—			(4,253	)
Pension Fund Contributions		—		—			(17,336	)
		—		(45,842	)		(21,589	)
CAJUBI
Account payable		—		(26,421	)		—
Pension Fund Contributions		—		(4,534	)		—
Others liabilities		—		(686,480	)		—
Financial expenses		—		—			(508	)
Actuarial expenses		—		—			(144,970	)
Pension Fund Contributions		—		—			(19,284	)
		—		(717,434	)		(164,762	)
ENERPEIXE
Consumers and resellers		545		—			—
Permanent shareholding		536,651		—			—
Others Assets		87		—			—
Revenue from services rendered		—		—			6,909
Use of electric grid revenue		—		—			4,448
		537,283		—			11,357
TRANSLESTE
Permanent shareholding		23,630		—			—
Others Assets		375		—			—
Suppliers		—		(132	)		—
Revenue from services rendered		—		—			2
Use of electric grid charges		—		—			(1,146	)
		24,005		(132	)		(1,144	)
TRANSUDESTE
Account receivable		11		—			—
Permanent shareholding		13,894		—			—
Others Assets		2,830		—			—
Suppliers		—		(81	)		—
Revenue from services rendered		—		—			123
Use of electric grid charges		—		—			(709	)
		16,735		(81	)		(586	)
TRANSIRAPÉ
Permanent shareholding		10,713		—			—
Others Assets		2,432		—			—
Suppliers		—		(56	)		—
Use of electric grid charges		—		—			(492	)
		13,145		(56	)		(492	)
CENTROESTE
Advance for future capital increase		3,527		—			—
Account receivable		6
Permanent shareholding		17,191		—			—
Others Assets		44		—			—
Suppliers		—		(55	)		—
Revenue from services rendered		—		—			511
Use of electric grid charges		—		—			(482	)
		20,768		(55	)		29

F-141

FEDERAL GOVERNMENT ENTITIES	ASSET		LIABILITY			RESULT
BAGUARI
Consumers and resellers		84		—			—
Advance for future capital increase		82,632		—			—
Permanent shareholding		7,713		—			—
Others Assets		9		—			—
Use of electric grid revenue		—		—			1,418
		90,438		—			1,418
RETIRO BAIXO
Advance for future capital increase		58		—			—
Permanent shareholding		106,010		—			—
Others Assets		2,605		—			—
		108,673		—			—
CHAPECOENSE
Permanent shareholding		276,365		—			—
Financial expenses		—		—			(828	)
		276,365		—			(828	)
MADEIRA ENERGIA
Permanent shareholding		645,738		—			—
Suppliers		—		(420	)		—
		645,738		(420	)		—
INAMBARI
Others Assets		252		—			—
Permanent shareholding		6,937
		7,189		—			—
TRANSENERGIA RENOVÁVEL
Advance for future capital increase		31,360		—			—
Account receivable		13		—			—
Permanent shareholding		39,461		—			—
Account payable		—		(9	)		—
Revenue from services rendered		—		—			1,550
Use of electric grid charges		—		—			(78	)
		70,834		(9	)		1,472
MGE TRANSMISSÃO
Permanent shareholding		10,696		—			—
Advance for future capital increase		23,520		—			—
Account receivable		110		—			—
Others Assets		176		—			—
Revenue from services rendered		—		—			1,001
		34,502		—			1,001
GOIÁS TRANSMISSÃO
Permanent shareholding		16,040		—			—
Advance for future capital increase		24,500
Revenue from services rendered		—		—			1,848
		40,540		—			1,848

F-142

FEDERAL GOVERNMENT ENTITIES	ASSET			LIABILITY		RESULT
REI DOS VENTOS
Advance for future capital increase		10,036			-		-
Permanent shareholding		(348	)		—		—
		9,688			—		—
SEFAC ENERGIA
Permanent shareholding		145,464			—		—
Account receivable		(841	)		—		—
Others Assets		987			—		—
Revenue from services rendered		—			—		433
Purchase of energy		—			—		(129,207	)
		145,610			—		(128,774	)
TRANS SÃO PAULO
Advance for future capital increase		7,987			—		—
Permanent shareholding		16,615			—		—
Others Assets		179			—		—
Revenue from services rendered		—			—		604
		24,781			—		604
TRANS GOIÁS
Permanent shareholding		2,786			—		—
Revenue from services rendered		—			—		5
		2,786			—		5
CALDAS NOVAS
Permanent shareholding		50			—		—
		50			—		—
IE GARANHUS
Permanent shareholding		980			—		—
		980			—		—

Key Personnel Compensation

	12/31/2011		12/31/2010
Executive officers and board members compensation		30,457		24,545
Salaries and payroll charges		6,371		4,821
Other		4,146		3,051
		40,975		32,417

The estimate of amount to be appropriated referring to 2011 Profit Sharing to be paid to employees in 2012 is R$37,800.

F-143

NOTE 45 – BUSINESS SEGMENT INFORMATION

Operational segments are defined as business activities from which it is possible to obtain revenues and incur expenses, on which operational decisions are made. The main operational decision maker, responsible for allocating resources and for appraising the performance of operational segments is the Board of Directors, which is also responsible for the Company’s strategic decision making.

The Board of Directors assesses the performance of operational segments based on net income measurement.

Business segment information, corresponding to the fiscal year ended on December 31, 2011 and December 31, 2010, are as follows:

12/31/2011

	Management			Generation			Transmission			Distribution			Total
Net Operating Revenue		192,963			19,093,367			7,778,698			2,467,716			29,532,744
Operating Expenses		(2,094,716	)		(13,690,743	)		(7,071,445	)		(2,532,998	)		(25,389,902	)
Operating Result Before Financial Result		(1,901,753	)		5,402,624			707,253			(65,282	)		4,142,842
Financial Result		1,909,379			(1,218,314	)		(436,152	)		(20,460	)		234,453
Income From Investments in Subsidiaries		464,181			11,680			6,924			—			482,785
Income Tax/Social Contribution		(189,200	)		(696,752	)		(198,294	)		(13,815	)		(1,098,061	)
Non-Controlling Interest		(29,454	)		—			—			—			(29,454	)
Net Income for the Year		253,153			3,499,238			79,731			(99,557	)		3,732,565

12/31/2010

	Management			Generation			Transmission			Distribution			Total
Net Operating Revenue		126,478			18,398,128			5,894,556			2,412,923			26,832,085
Operating Expenses		(1,500,234	)		(13,270,258	)		(5,558,101	)		(2,761,874	)		(23,090,467	)
Operating Result Before Financial Result		(1,373,756	)		5,127,870			336,455			(348,951	)		3,741,618
Financial Result		732,722			(937,998	)		(109,589	)		(49,258	)		(364,123	)
Income From Investments in Subsidiaries		641,740			520			27,495			—			669,755
Income Tax/Social Contribution		(215,596	)		(1,096,289	)		(171,673	)		(10,707	)		(1,494,265	)
Non-controlling Interest		(305,072	)		—			—			—			(305,075	)
Net Income for the Year		(519,962	)		3,094,103			82,688			(408,916	)		2,247,913

F-144

31/12/2009

	Management			Generation			Transmission			Distribution			Total
Net Operating Revenue		29,281			16,006,550			4,607,074			2,498,000			23,140,905
Operating Expenses		(2,560,632	)		(10,826,693	)		(4,503,602	)		(2,769,658	)		20,660,585
Operating Result Before Financial Result		(2,531,351	)		5,179,857			103,472			(271,658	)		2,480,320
Financial Result		(3,981,327	)		(6,811	)		487,745			(137,704	)		(3,638,097	)
Income From Investments in Subsidiaries		1,554,588			34,827			(18,383	)		—			1,571,032
Income Tax (IRPJ)/Social Contribution (CSLL)		1,266,418			(217,767	)		(207,921	)		(3,845	)		836,885
Non-controlling Interest		(338,673	)		—			—			—			-338,673
Net Income for the Year		(4,030,345	)		4.990.106			364,913			(413,207	)		911,467

Sales between segments were presented as sales between independent parties. Revenues from external parties were measured consistently with revenues presented in the income statement.

Operating segments have not been aggregated in presenting reportable segments. The determination of the segment presentation is based on the information provided to the Chief Operating Decision Maker (CODM).

F-145

The Company provides to the CODM relevant income statement information according to the segments, but it does not provide segment-based asset and liability information to the CODM. Therefore, according to IFRS 8 paragraph 23, the report of the assets and liabilities according to each segment is not necessary given that it is not provided to the CODM. The Company will provide, in future filings, a reference in the financial statements which will include the business segment information.

NOTE 46 – SUBSEQUENT EVENTS

1. Management Agreement – Celg Distribution

The Company and the State Government of Goiás entered into a Management Agreement on April 24, 2012 to foster economic and financial recovery of Celg Distribuição S/A (Celg D) and, subsequent to the implementation of all the Agreement’s terms, to purchase by the Company of 51% of the ordinary shares with voting rights, which is supported by the Provisional Measure 559/12. In light of this fact, the Company assumed, as of January 2012, the executive management of Celg D by means of its majority representation on the Board of Executive Officers, appointing four executive officers including the chief executive officer.

The State Government of Goiás announced its intention to close the capital of Celg de Participações - Celgpar, in order to promote the corporate restructuring of Celg D pursuant to Law no. 6.404/76. The Company will acquire the controlling interest of Celg D after registering the change in Celgpar’s status at the Brazilian Securities Commission (CVM), currently declared as a publicly-held company, and will execute the Management Agreement. The Shareholders’ Agreement will also be executed according to Celgpar and a Shareholders’ Agreement referring to Celg D, setting forth the parties’ governance commitments.

2. Review of Useful Life of Assets – new depreciation rates

On February 16, 2012, Aneel published Normative Rule nº 474/2012, which establishes new annual depreciation rates for assets in services granted from the Electricity Sector, the rates of which were adopted by the Company with corporate purposes given that they property represent assets’ useful lives.

These amendments will be effective as of January 1, 2012, and introduce changes in relation to the last estimates of useful life and depreciation rates adopted as of December 31, 2011 for the fixed assets in service.

The table below sets forth the main reviews of annual depreciation rates:

REGISTER UNITS	ANNUAL DEPRECIATION RATE						INCREASE/(REDUCTION)
	Up to 12/31/2011			As of 12/31/2011
Boiler		5.00	%		4.00	%		-1.00	%
Conductor with tension equal or superior to 69kv		2.50	%		2.70	%		0.20	%
Frequency converter		4.00	%		6.67	%		2.67	%
General equipment		10.00	%		6.25	%		-3.75	%
General IT equipment		10.00	%		16.67	%		6.67	%
Structure (tower) equal or superior to 69kv		2.50	%		2.70	%		0.20	%
Water intake structure		4.00	%		2.86	%		-1.14	%
Equipment and busbar support structure		2.50	%		3.13	%		0.63	%
Panel, swithcboard and cubicle		3.00	%		3.57	%		0.57	%
Ground system		2.50	%		3.03	%		0.53	%
Protection, mensuration and automation systems		3.00	%		6.67	%		3.67	%
Ground transformer		2.00	%		3.33	%		1.33	%
Power transformer		2.50	%		2.86	%		0.36	%
Gas turbine		5.00	%		4.00	%		-1.00	%
Vehicles		20.00	%		14.29	%		-5.71	%
Boiler		5.00	%		4.00	%		-1.00	%

We estimate that new depreciation rates will not cause no significant effects on the Company’s results.

F-146

3. Reorganization of Celpa

On February 28, 2012, Celpa filed for reorganization pursuant to Law no. 11.101/05, which was accepted by the judge of the 6th Civil Court of Belém, state of Pará, on February 29, 2012. Celpa’s Judicial Recuperation Plan was presented on May 4, 2012 in Court but is pending the approval of its creditors. The Plan was also presented to the Brazilian Securities and Exchange Commission (Comissão de Valores Mobiliários - CVM).

Currently, this reorganization raises several uncertainties, which will decrease to the extent formalities and arrangements with creditors solify, which may occur within 180 days.

Celpa is an electric power distribution concessionaire owned by QMRA, which holds a controlling interest of 51.26% of the company’s total capital and by Eletrobras, which holds a non-controlling interest of 34.24%.

The petition for reorganization filed by Celpa raises uncertainties as to the Company’s future results and its ability to settle liabilities. Therefore, Celpa recognized on December 31, 2011 allowances for doubtful accounts over loans and financing granted, based on a discount rate compatible with Celpa’s situation and its related risk. Thus, Celpa recognized as provisions for investments losses corresponding to all assets, as set forth below:

	12/31/2011			12/31/2010
Loans and Financing		419,908			328,351
(-) Allowance for doubtful accounts		(120,199	)		—
		299,709			328,351
Dividends receivable		27,513			27,513
Investments		171,370			305,304
		198,883			332,817
(-) Provision for investment losses		(198,883	)		—
		299,709			661,168

José da Costa Carvalho Neto	Armando Casado de Araújo
Chief Executive Officer	Chief Financial and Investor Relations Officer
Valter Luiz Cardeal de Souza	Miguel Colasuonno
Engineering Officer	Administrative Officer

	José Antônio Muniz Lopes
Marcos Aurélio Madureira da Silva
Distribution Officer
João Vicente Amato Torres	Transmission Officer
Accountant
CRC-RJ-057.991/O-S-DF

F-147

EX-3.2

Exhibit 3.2

CENTRAIS ELÉTRICAS BRASILEIRAS S.A. – ELETROBRAS BY-LAWS

Chapter I

Name, Organization, Headquarters, Duration and Object

Art. 1^oCentrais Elétricas Brasileiras S.A. – Eletrobras is a mixed capital corporation, whose constitution was made in accordance with the authorization provided by Federal Law 3.890-A, dated April 25, 1961 and whose organization was fixed according to the present By-laws.

Art. 2^oEletrobras, being an organization from the indirect public federal administration, will be ruled by Law 3.890-A, of 1961, by the specific legislation of the corporate companies, and by special dispositions of federal laws, when applicable, and by the present By-laws.

Sole Paragraph. The Company, its shareholders, managers and members of the Fiscal Council are subject to the provisions of the Listing Rules of Corporate Governance Level 1 of BM&FBOVESPA (“Regulation of Level 1”).

Art. 3^oEletrobras has its head offices in the Federal Capital and central office in the City of Rio de Janeiro, and will operate directly or through its subsidiaries or companies to which it may become associated, and aiming at its social objective, the Company may also create offices, in Brazil and abroad.

§ 1^oEletrobras, directly or through its subsidiaries, or controlled companies, may join, with or without allocation of funds, for the formation of consortia or participation in companies, with or without major participation in Brazil or abroad, which intended directly or indirectly to the operation of the production or transmission of electricity under a concession or authorization.

§ 2^o The validity of any and all instruments executed by Eletrobras directly or through its subsidiaries or controlled companies, in order to achieve the possibilities provided in paragraph one of this article, is subject to the approval of at least 2/3 of all members of the Board of Directors .

§ 3^oFor purposes of the association mentioned in the first paragraph, Eletrobras will be responsible for fundraising operations that are necessary necessary for the performance of its social object as well as those of its subsidiaries or controlled companies, may delegate such activity to these, will be subject to the authorization by at least 2/3 of the Board of Eletrobras.

§ 4^oIn the subsidiary companies which Eletrobras might constitute, subject to previous legal authorization, the general principles of Law 3890-A, of 1961, will be applicable, except regarding the administrative structure, which could be adapted to the specific patterns and to the importance of the services of each company, as well as to the participation conditions of the other partners.

§ 5^oThe subsidiary companies will follow the administrative, financial, technical and accountant rules, as uniform as possible, established by Eletrobras.

§ 6^oThe representatives from Eletrobras in the administration of the companies, subsidiaries or not, in which Eletrobras participates, will be chosen by the Board of Directors.

§ 7^oThe company is constituted without fixed established time.

Art. 4^oThe corporate purpose of Eletrobras is:

I—to carry out studies, projects, construction and the operation and building of power units and transmission lines and distribution of electric energy, as well as to enter into business transactions in connection with these activities, such as the trade of electric energy;

II—to cooperate with the Ministry to which it is subject, in order to establish the country energy policy;

III—to grant loans to electric energy public utilities under its control, and to provide guaranties, in Brazil or abroad, in favor of electric power utilities, as well as to purchase bonds issued by Eletrobras;

IV—to give guaranties, in Brazil or abroad, in favor of electric energy public utilities under its control;

V—to promote and support researches of interest to the energy sector, connected with the generation, transmission and distribution of electric energy, as well as studies regarding the utilization of reservoirs for various purposes;

VI—to contribute to the training of the technical personnel required by the Brazilian electric energy sector, as well as to the preparation of qualified labor, by means of specialized courses, whereto it may also grant assistance to educational entities in Brazil or scholarships abroad and may sign agreements with entities which cooperate in the formation of specialized technical personnel;

VII—to cooperate technically and administratively with the companies in which it is a shareholder and with the divisions of the Ministry to which it is subject.

CHAPTER II

Operations and Obligations

Art. 5^oEletrobras shall, as the technical, administrative and financial coordinating entity of the electric energy sector, as well as, through delegation of public power, in accordance with legal provisions in force, among other things:

I—promote, through its regional subsidiaries, the construction and the respective operation of power centers of interest beyond the state and, high and extra-high tension transmission systems, aiming at an inter-state integration of electric systems and transmission systems destined to transport electric energy produced in bi-national enterprises for the utilization of energy;

II—promote studies of power plants based upon non-conventional primary sources of electricity;

III—give its opinion on electric energy concessions requested to the Electric Energy National Agency (ANEEL), inclusively on the technical, economic and financial adequacy of the electric-nuclear plant projects to the electric energy utility systems;

IV—develop rural power supply programs;

V – participate in associations or organizations of technical, scientific and entrepreneurial nature, of regional, national or international scope, which may interest the electric energy sector;

VI—promote the preparation, follow-up and control of the multi-annual budget of the electric energy sector;

VII—act as an executive body of the statistic information system of the electric energy sector;

VIII – contribute to the conservation of the environment given the principles of sustainable development;

IX—coordinate activities connected with the promotion and incentive of the national industry of materials and equipment intended for the electric energy sector;

X—develop programs of technical regulation, standardization and quality control connected with equipment and materials designed for the electric energy sector;

XI—develop programs, projects and activities to stimulate and guide the consumers, in order to balance electric energy supply and demand;

XII—participate, according to on-going legislation, of programs for increasing the usage of alternative sources of electric power generation.

Chapter III

Capital and Shares

Art. 6^oThe share capital of the Company amounts to R$ 31,305,331,463.74 (thirty- one billion three hundred and five million three hundred and thirty-one thousand four hundred and sixty-three reais and seventy- four cents), divided into 1,087,050,297 common shares, 146,920 Class “A” preferred shares and 265,436,883 Class “B” preferred shares, all of them without par value.

Art. 7^oEletrobras` shares shall be:

I – common, under nominative form, entitled to vote;

II—preferred, under nominative form, non- entitled to vote at general meetings;

§ 1^oBoth kinds of shares may be kept in deposit accounts in the names of their respective holders, in the form of book shares, without the issue of any stock certificates, in a financial institution appointed by the Board of Directors of Eletrobras.

§ 2^oWhenever a transfer of ownership of shares occurs, the finance company in which they are deposited may collect from the assigning shareholder the cost of any services in connection with the Brazilian transfer thereof, subject to maximum rates established by the Securities and Exchange Commission (CVM).

Art. 8^oPreferred shares cannot be converted into common shares and shall have preferential right to reimbursement of capital and distribution of dividends.

§ 1^oPreferred Class “A” shares, which are those subscribed until June 23, 1969, and bonus shares resulting from said shares, shall be entitled to priority in the distribution of dividends, of eight per cent p.a. over the capital linked to that type and class of shares, to be equally divided between them.

§ 2^oPreferred class “B” shares, which are those subscribed by June 23, 1969, shall be entitled to priority in the distribution of dividends, at six per cent p.a over the capital linked to that type and class of shares, to be equally divided between them.

§ 3^oPreferred shares shall participate, in equal terms, with common shares, in the distribution of dividends, after the former have been assured the minimum dividend provided for in 1st and 2nd paragraphs, in light of the following paragraph.

§ 4^oPreferred shares shall be entitled to the receiving of dividends, by each share, at least ten per cent above the dividend linked to each common share.

Art. 9^oEletrobras¨ capital increases shall be implemented by means of public or private subscription and incorporation of reserves, resources thus obtained being capitalized in accordance with the laws in force.

§ 1^o When capital increases take place, legal entities governed by public domestic law shall be assured preemptive rights to Eletrobras¨ shares, provided however, that the Federal Government subscribes for a number of common shares, in order to ensure it a minimum of 50% plus one share of the voting capital.

§ 2^o Eletrobras shall make effective a capital increase, by means of subscription of shares or conversion of bonds or share credits, until the limit of 2/3 of preferred shares, in relation to the total of issued shares.

Art. 10. The paying up of shares shall comply with terms and regulations stipulated by the Board of Directors of Eletrobras.

Sole Paragraph. The shareholder who does not make payment in compliance with the terms and regulations set forth in this Article shall be legally liable for the payment of price index, with 12% (twelve per cent) interest p.a. and a fine of 10% (ten per cent) calculated over the overdue installment.

Art. 11. Eletrobras may issue multiple share certificates.

§ 1^oAny reverse split or split of shares may be made upon the shareholder’s request, provided that the expenses incurred with the substitution of certificates, which can never be above the real cost, shall run to the shareholder’s account.

§ 2^oThe services of conversion, transfer and split of shares may be temporarily suspended, in accordance with the principles and limitations of the laws in force

Art. 12. Eletrobras may issue non- convertible bonds and debentures, the latter with or without the guarantee of the National Treasury.

Art. 13. Eletrobras, after deliberation by the Board of Directors, may purchase its own shares for cancellation, maintenance in Treasury or further sale, up to the value of revenues and reserves, except for the legal reserve, in accordance with legal and regulatory measures.

Art. 14. The ransom of shares of one or more classes may be effected according to deliberation taken at the Extraordinary Shareholders Meeting, not dependent upon approval by the shareholders special meeting, according to the types and classes into consideration.

Chapter IV

The Management

Art. 15. The Management of Eletrobras, in the form of the present By-laws and based on on-going legislation, is the responsibility of the Board of Directors and to the Board of Executive Officers.

Art. 16. It is private of Brazilian individuals, the exercise of the functions of the Administration of Eletrobras members, whose members of the Executive Board be resident in the country, may be required for any position of manager, the security management provided by current law.

§ 1^oThe minutes from the general stockholders meeting, or meeting of the Board of Directors, which had elected, respectively, administration Members of the Board of Directors and Company`s Officers, should explicit the qualifications of each of the chosen and their mandate period, and when the law demands certain requirements for taking charge in Eletrobras administration, only the person who has shown evidence of such requirements, which will be filed at the social office.

§ 2^oPersons who are declared to be disabled by act of CVM are not entitled to take administration charges, or those subject to special law, or condemned for bankruptcy, deviated from rectitude, or bribery, against people`s economy, public faith or property or criminal offense, which prevent access to public appointments.

§ 3^oThe main controller shall not discuss subjects with their conflicting interests or relative to others under its influence, in terms of Article 156 of Law 6.404 of 1976. In this case, must register with the divergence minutes and refrain from discussing the subject.

Art. 17. The Board of Directors shall consist of ten members, with unblemished reputation and moral standing, elected by the General Shareholders Meeting, and who will designate the Chairman from among them, with a unified term of (01) one year, subject to re-election, as follows:

I—six members chosen from among Brazilians of outstanding knowledge and experience appointed by the Minister of Mines and Energy;

II—a member appointed by the Minister of Planning and Budget, according to the law;

III—one Member elected by minority shareholders, natural persons and private law companies.

IV – one member elected by a separate vote, during the General Shareholders Meeting, by holders of preferred shares issued by Eletrobras, representing at least ten percent of the capital. The controlling shareholder shall be excluded.

V – A member elected representing the employees, chosen by direct vote of his peers among the employees in an election organized by the company in conjunction with the unions that represent them under the law.

§ 1^oMay only exercise the right predicted in section IV above, the preferred shareholders who prove that held their shares during the period of three months at least, immediately preceding the General Meeting.

§ 2^oThe member representative of employees, provided for in item V, will not participate in discussions and deliberations on subjects involving labor relations, compensation, benefits and advantages, including subjects of pension and health care, cases in which the set is conflict of interest.

§ 3^oIn subjects on which it is configured conflict of interest member representative of the employees referred to in item V, the resolution of the Board of Directors will take place at a special meeting convened for that purpose only, which does not participate in such a counselor.

Art. 18. The Board of Executive Officers shall consist of the President and the Officers.

Sole Paragraph. The Chief Executive Officer – CEO of Eletrobras will be chosen from among the members of the Board. The same person cannot occupy the position of CEO of the company and Chairman of the Board of Directors.

Art. 19. Each member of the Administration bodies shall, prior to his entrance and on leaving office, submit a statement of assets, which shall be entered in the adequate book.

Art. 20. Members of the Board of Directors and Officers will enter their charges after signing their investiture, undersigned by the President and by the Board Member or Officer that took office, at the minute book from Board of Directors of Eletrobras, or the Board of Executive Officers, as the case may be.

§ 1^oIn the event that the President of Eletrobras is taking office, the Minister of State to which Eletrobras is subordinated, will also sign the investiture.

§ 2^oIn the event that such investiture is not signed within thirty days following the indication, the appointment will be canceled, except for the presentation of a justification accepted by the office to which the member has been appointed.

§ 3^oThe investiture must contain, subject to becoming null, the indication of at least one residence in which the administrator will receive intimations in administration and legal process regarding their management, which shall be deemed accomplished by means of delivery to the indicated address, which could only be altered by written notification to Eletrobras.

§ 4^o Taking of office of the Board of Directors and the Executive Board is subject to the previous subscription of the “Termo de Anuência dos Administradores”, pursuant to the Regulation of Level 1 as well as the applicable legal requirements.

Art. 21. The Board of Directors of Eletrobras and the Board of Executive Officers may hold meetings when the majority of their members are present and their decisions shall be taken, respectively, by voting of the majority of the Members of the Board of Directors or Executive Officers present at the meetings.

§ 1^oMinutes should be drawn up after each meeting, and said minutes shall be signed by all the members present.

§ 2^oThe Board of Directors of Eletrobras shall meet ordinarily, once a month, and the Board of Executive Officers, once a week.

§ 3^oIt is the responsibility of their respective Presidents and/or to the majority of the members of each committee of the Company`s administration, to call, extraordinarily, the meetings of Board of Directors of Eletrobras and of the Board of Executive Officers.

§ 4^oThe Presidents are entitled, besides their personal votes, to the casting vote in connection with decisions of Board of Directors of Eletrobras and resolutions of the Board of Executive Officers.

Chapter V

The Board of Directors

Art. 22. It shall be incumbent upon the Board of Directors of Eletrobras to establish fundamental guidelines for the administration of Eletrobras, on its members¨ motions or motions which the Board of Executive Officers submits for its consideration and decision, as well as to exercise an overall control of Eletrobras, by supervising the enforcement of the guidelines thus established, following up the execution of approved programs and verifying the results obtained.

§ 1^oThe Board of Directors will meet at least once a year without the presence of the CEO.

§2^oThe Board of Directors will meet at least twice a year with the presence of external auditors.

Art. 23. It is not allowed to be elected for the office of Board Member, except by decision of the General Meeting, a person who:

I—takes offices in companies which might be considered competitors in their segment, mainly, in consulting, administration or fiscal councils;

II—holds conflicting interest with those of Eletrobras; and

III—hold office in more than five councils, including Eletrobras.

Sole Paragraph – The remuneration of the member will obey with current legislation.

Art. 24. The Board Member who fails to attend two consecutive meetings, without a justifiable motive, will be dismissed from his office.

Art. 25. With the exercise of its capacity, it shall be incumbent upon Board of Directors of Eletrobras to decide about the following matters:

I—to decide on the organization of subsidiary companies or the cessation of the participation of Eletrobras in Said companies;

II—discuss the association, directly or through subsidiary or controlled companies, with or without the allocation of resources for setting up consortia or participation in companies, with or without control, in Brazil or abroad, which are intended directly or indirectly to explore the production or transmission of electricity under a concession or authorization;

III—define the policy of granting loans and financing, not allowing to grant to directors, supervisory directors, employees and majority shareholder;

IV—besides the assumptions of deliberation of power by the Board of Directors, by legal force, to display evidence about acts and to approve contracts regarding funds whose amount is over 0.02% of the Company`s Stockholders Equity, including, without limitation, the granting of financing to utility electric energy companies, under its control, and the attainment of loans in Brazil and abroad;

V—to approve the granting of guarantee to loans taken in Brazil or abroad, on behalf of electric energy public utilities under its control;

VI—to decide on the organization of technical—scientific research entities which interest the energy power sector, as well as the granting of loans and guarantees to those under its control;

VII – to call the General Shareholders Meeting, in the events stipulated by Law 6404/76, or whenever it deems convenient;

VIII- to fix the distribution of functions among the members of the Board of Executive Officers;

IX—to propose to the General Shareholders Meeting a capital increase, issuance of shares, subscription bonds and debentures of Eletrobras, except the one described on item X;

X—authorize the acquisition of shares of Eletrobras, to be canceled or held in treasury for subsequent sale, and to decide on the issuance of non convertible debentures.

XI—to decide on the negotiation of shares or debentures;

XII—to authorize the sale of permanent assets and the creation of real property liens;

XIII—to approve the estimates of revenues, general appropriation of expenditure and provision for investments of Eletrobras in each business year, exercising their respective control;

XIV—to elect and dismiss the Company`s Officers, to control the management of its members, and to examine, at any time, the books and reports of Eletrobras;

XV—approve the management reports and internal controls, as well as those of the Executive Board;

XVI—to select and to dismiss the independent auditors and also to select and to dismiss the financial institution which will be responsible for book keeping Eletrobras¨ shares, under the name of their respective owner, in book entry form, according to the 1st paragraph of Article 7th of the present By-laws;

XVII—to establish the fundamental guidelines of the administrative organization of Eletrobras;

XVIII – selection of Eletrobras¨ representatives in the administration of either subsidiary companies or not, in which it participates, being appointed for those functions, preferably, Company`s employees or from subsidiaries;

XIX—to decide on sale expropriations;

XX—to decide on relevant matters regarding the activities of Eletrobras;

XXI—to develop and to alter its internal regulations;

XXII—to decide on the declaration of intermediate dividends and on the payment of interest on own capital, proposed by the Board of Executive Officers, according to Article 33, item XI of the present By-laws;

XXIII—grant vacation or license to the CEO;

XXIV—to establish the number of functions in confidence of the superior administration of Eletrobras, according to the terms of item II, Article 52 of the present By-laws;

XXV – approve the signing of the corporate performance goals—CMDE, through which the Eletrobras Group undertake to comply with the strategic guidelines defined there to meet the goals and outcomes established by the parent;

XXVI – preform formal evaluation of the Executive Board and the Board of Directors, according to criteria provided in the bylaws, in order to assist in the decision making of the shareholders regarding the reappointment of members;

XXVII – decide on the creation, termination and operation of committees to support the Board for further discussion of strategic studies, observing the law;

XXVIII—to decide on cases not provided for in the present By-laws.

Sole Paragraph. The minutes of meetings from the Board of Directors of Eletrobras will be filed at Trade Registration (Registro do Comércio) and the minutes containing decisions bearing effects to third parties will be published.

Art. 26. In each business year, the Board of Directors of Eletrobras shall examine and submit for the approval of the General Stockholders Meeting the Administration Report, balance sheet, statement of income, accumulated profit and loss statement, sources and uses of funds, as well as a proposal for the allotment of dividends and the investment of surplus, with its annexed opinion and the opinion from the Auditing Committee, according to item XI, of article 33, and an independent auditors¨ certificate.

Art. 27. In the event of a vacancy in the office of President of the Board of Directors, the substitute shall be elected, in the first meeting of the Board of Directors, remaining on the office until the next General Meeting.

Art. 28. In the event of a vacancy in the office of a Board Member, the substitute shall be appointed by the remaining Board Members and shall act until the first General Meeting, according to article 150 of Law 6.404, of 1976.

Sole Paragraph. The chosen Board Member shall finish the mandate of replaced Board Member.

Art. 29. Members of the Board of Directors and of the Board of Executive Officers shall be responsible, under the terms of Article 158, of Law 6.404, of 1976, individually and in sympathy, for the acts performed by them and for the damages caused by them on the Company.

§ 1^oEletrobras will ensure defense for the members and former members of the Board of Executive Officers and Board of Directors in judicial and administrative suits set against them relating to behavour performed while in office, provided there was not incompatibility with the Company`s interests.

§ 2^o The benefit provided in the first paragraph of this Article shall apply, as appropriate, and at the discretion of the Board, occupants and former occupants of positions of trust and other employees regularly invested with the powers delegated to administrators.

§ 3^o—Benefits as mentioned shall comply with terms established by the Board of Directors, once the legal department of Eletrobras has been consulted with.

§ 4^o—Eletrobras can keep, in the way and length as defined by the Board of Directors, in accordance with the 1st and 2nd paragraphs, contract of permanent legal liability in favor of the people mentioned to protect them from the responsibility of acts or facts by which they could be held accountable or administratively.

§ 5^o—If any of the mentioned members is convicted, and not allowed further appeal in respect to Company´s by-laws or deriving from an act with deceitfulness or guilt, such member shall reimburse Eletrobras the total costs and expenses deriving from defense procedures as mentioned within the 1st paragraph, besides fortuitous damages to the image of the Company.

Art. 30. The Board of Directors shall elaborate internal rules, in order to enhance its working, in light of the rules for its composition and competence fixed on the present By-laws and on-going legislation.

Chapter VI

The Board of Executive Officers

Art. 31. The general management of Eletrobras shall be incumbent upon the Board of Executive Officers, in accordance with the guidelines established by Board of Directors.

Sole Paragraph. The President and Directors may not exercise management functions, management consulting firms on private sector companies, which are electric energy public concessionaires under private law in any way connected to the electricity sector, except in subsidiaries, controlled companies specific purpose and concessionaires under control of the states in which Eletrobras has participation, where they can hold positions on boards, and taxation, subject to the provisions of Law No. 9.292 of July 12, 1996, from receiving compensation.

Art. 32. Board of Executive Officers members cannot be absent from their offices for more than thirty consecutive days, except in the case of holidays or leave of absence, under penalty of removal from their offices.

§ 1^oThe granting of vacation or leaves of absence to the directors will be subject of the Executive Board, except as provided in subparagraph XXIII of Article 25 of the present By-laws.

§ 2^oIn the case of temporary incapacity, leave, or holidays of any member of the Board of Executive Officers, his substitute shall take over in accordance with the procedure established by the other members, provided, however that such substitute is a member of the staff of Eletrobras.

§ 3^oIf a vacancy definitively occurs in the Board of Executive Officers, the same criteria from the previous paragraph shall be applied in order to replace the Officer which will resign from the Company, until the next Board of Directors of Eletrobras meeting appoints a substitute to occupy the vacant office during the remaining term of office of the substituted member.

Art. 33. The Board of Executive Officers, in the exercise of its rights and duties shall, especially:

I—submit for the Board of Directors of Eletrobras the fundamental guidelines of the administrative organization of Eletrobras, as well as the examining, decision and approval of subject from items I to XXV of Article 25 of the present By-laws, except for item “XXI”;

II – carry out the management of Eletrobras, take all adequate measures necessary for the faithful execution of guidelines and directives of the Board of Directors and, except for the cases of mandatory submission to the Board of Directors, declare on acts and approve contracts involving funds whose amount is equal or over 0.02% of the stockholders equity of the Company, including, among them, but not limited, the granting of financing to concessionaire companies of electric energy public services, under its control, and the taking of loans in Brazil or abroad;

III—establish administrative, technical, financial and accounting rules for Eletrobras;

IV – prepare budgets for Eletrobras;

V- approve changes in the organizational structure of Eletrobras, under its subordination, including the creation, termination and operation of committees which are linked to it;

VI—approve plans which provide for admission, career, access benefits and discipline of the employees of Eletrobras;

VII—approve the names indicated by the Directors to occupy places directly under their control;

VIII—issue an opinion in the cases of admission, praise, sanction, transfer and dismissal of employees directly subordinated to the Directors;

IX—delegate authority to Directors for individual decisions on matters included within the scope of the functions of the Board of Directors;

X—delegate powers to Members of the Board of Executive Officers and employees for the approval of expenditures, establishing limits and conditions;

XI – authorize, in the form of the current legislation, the Eletrobras employees leave the country for performing technical activities or professional development essential to its institutional mission;

XII—prepare, for each business year, the Balance Sheet, Statement of Income, Accumulated Profit and Loss Statement, Statement of Source and Uses of Funds, a proposal for allotment of dividend and the investment of surplus, to be submitted for the appreciation of the Board of Directors of Eletrobras and the Auditing Committee, and for the examination and decision of the General Stockholders Meeting;

XIII—prepare plans for the issue of debentures, for the appreciation of Board of Directors of Eletrobras, which shall decide about them or submit to the General Stockholders Meeting, according to the case;

XIV—establish administrative, technical, financial and accounting norms for the subsidiary companies or for entities in which Eletrobras has a majority participation;

XV—control the activities of subsidiaries and controlled companies, and of entities in which Eletrobras has a majority participation;

XVI—appoint representatives of Eletrobras to attend general meetings of companies in which it participates as shareholder, issuing instructions for their performance;

XVII—decide about the appointment of independent auditors for the subsidiaries; and

XVIII—give its opinion on power generation concessions required to ANEEL, including aspects regarding the technical, economic and financial adequacy of nuclear power units to the concessionaire system of the public electric energy system.

Chapter VII

Duties of the President and Directors

Art. 34. It shall be incumbent upon the President to guide the administrative policy of Eletrobras, calling and presiding the meetings of Board of Executive Officers, as well as:

I—to supervise the business of Eletrobras;

II—to represent Eletrobras in and out of court, before other companies, shareholders or the public in general, being entitled to assign such powers to any Officer or Board Member, as well as appoint representatives, attorneys, agents or proxies;

III—to preside over General Shareholders Meetings;

IV—to hire and dismiss employees;

V—to formalize the appointments approved by Board of Directors;

VI—to publish the annual report of activities of Eletrobras;

VII—together with another director, the move funds of Eletrobras and sign deeds and contracts, which may be delegated to other directors and employees of attorneys or Eletrobras, with the approval of the Executive Board;

VIII – ratify, such as the current legislation, the act of a member of Eletrobras entity that decides to leave the country by their respective employees, except as provided in Article 33, XI of this By-law

IX – appoint the electoral commission in order to organize the election of the employees representative on the Board and it shall also proclaim the winning candidate and communicate the result to the controlling partner to adopt the necessary action to designate the employees’ representative on the Board.

Art. 35. The President and the Directors shall, besides the duties and responsibilities inherent to their respective offices, act as managers of the areas of activities attributed to them by the Board of Directors of Eletrobras.

Chapter VIII

Of the Audit Committee

Art. 36. The Audit Committee of Eletrobras is held permanently and is composed of five effective members, and their respective substitutes, elected by the General Stockholders Meeting, according to the requests fixed by Law 6404/76, all of them Brazilian citizens and residents, either shareholders or not, of which one will be elected by holders of minority common shares, and the other by preferred shares, voting separately.

§ 1^oAmong members of the Auditing Committee, one Board Member shall be indicated by the Minister of Treasury, as representative of the National Treasury.

§ 2^oIn the event of vacancy, resignation, impeachment or unjustifiable absence to two consecutive meetings, the member of the Auditing Committee shall be replaced, until the term is over, by the respective substitute.

§ 3^oThe term of the Auditing Committee members is of one year, subject to reelection.

§ 4^o The members of the Auditing Committee and substitutes shall perform their duties until the first General Shareholders Meeting, to be held after its election, subject to re-election.

§ 5^oThe members of the Auditing Committee shall perform their duties, which are non-transferable, at the exclusive interest of the Company, and it is considered abusive to perform such duty with the objective of causing damage to the Company, or to its shareholders or administration staff, or to obtain, for themselves or others, advantage to which they are not entitled, or which might result in loss to the Company, to its shareholders or administrators.

Art. 37. It shall be incumbent upon the Auditing Committee:

I—to supervise, by any of its members, the acts taken by any of the managers and to check the accomplishment of its legal and statutory duties;

II—to issue an opinion on the annual report from the Administration, providing evidence in the report of all information deemed necessary or useful for deliberation by the Shareholders Meeting;

III—to issue an opinion on the proposals from the administrative bodies, to be presented to the Shareholders Meeting, regarding alteration in the social capital, issue of debentures or subscription bonds, investment plans or capital budget, distribution of dividends, transfer, incorporation, merger or split;

IV—to expose, by any of its members, to the administrative bodies, and in the event that they do not take the necessary measures on behalf of Eletrobras¨ interests, to the Shareholders Meeting, the mistakes, frauds or crimes they might found out, and to suggest useful measures;

V—to call an Ordinary Shareholders Meeting, in the event that the administrative bodies delay for more than a month such convocation, and Extraordinary, whenever ground or urgent reasons occur, including in the meeting`s agenda the subject they consider more necessary;

VI—to analyze, at least quarterly, the balance sheet and other financial statements, produced on a regular basis by Eletrobras;

VII—to examine the financial statements for the fiscal year and to issue an opinion on them; and

VIII—to perform the duties established on items I to VII in the event of liquidation of Eletrobras.

§ 1^oThe administration bodies have the obligation of informing, by written form, to make available to the members of the Auditing Committee, in the exercise of their duties, within days, copies of the minutes of the meetings and, within fifteen days of their receipt, copies of balance sheet and financial statements published regularly and the report on the execution of the budgets.

§ 2^oThe members of the Auditing Committee will attend meetings from the Board of Directors and the Board of Executive Officers of Eletrobras, in which is being deliberated subjects in which they might opine (items “II”, “III” and “VII”, from this article).

Art. 38. The Auditing Committee will meet ordinarily once a month, and extraordinarily, whenever called by the President of the Board of Directors of Eletrobras, or by any of its members.

Sole Paragraph. The Council will hold a meeting with a minimum of three Members of the Board of Directors, and the approval of matters subject to their decision demand vote of at least three of its members.

Art. 39. The Auditing Committee of Eletrobras may elaborate internal rules, with the objective of enhancing its working, in observance to the rules over composition and competence fixed in the present Bylaws and on on-going legislation.

Chapter IX

General Shareholders Meeting

Art. 40. Ordinary Shareholders Meetings shall be held within the four months immediately subsequent to the close of the business year, at an hour and on a date previously established, for the appreciation of the accounts prepared by the managers; examination, discussion and voting of financial statements; resolutions about the destination to be given to the net profit of the business year and the distribution of dividends; election of the members of the Board of Directors of Eletrobras and the Auditing Committee; and fixing of the remuneration of the administrators and members of the Auditing Committee, whenever necessary, in observation of ongoing legislation.

Art. 41. Besides the instances provided for in applicable laws, the General Shareholders Meeting shall meet whenever Board of Directors of Eletrobras deems it advisable and, especially, to decide about the following matters:

I—the assignment of all or any part of its shares in the social capital of Eletrobras or its subsidiaries;

II—capital increases through subscription for new shares;

III waiver of the right to subscribe for debentures or shares convertible into shares of its subsidiaries;

IV—the issue of debentures convertible into shares or the sale thereof, if they are treasury stock;

V—the sale of debentures convertible into shares owned by Eletrobras, issued by its subsidiaries;

VI—the issue of any other securities or papers, in Brazil or abroad

VII—any splitting, merger or incorporation

VIII—any exchange of shares or other securities; and

IX—ransom of shares of one or more classes, independently of approval by the Special Meeting of Shareholders of types and classes in regard.

§ 1^oThe minimum time span between the first Announcement of Meeting and the data of realization of Assembly shall be of 15 days and 8 for the second notice.

§ 2^oAssembly deliberation shall be carried by majority votes, being the vote of each individual representative proportional to shareholding participation in company capital.

§ 3^oThe declaration of vote can be registered if so desires the shareholder representative.

§ 4^oAbstaining from voting if occurring shall necessarily be registered on the minute and on the document of the Assembly disclosure.

Art. 42. The Table, conducting the proceedings of the General Shareholders Meetings shall consist of the President of Eletrobras or his substitute and a secretary, chosen from among those present.

Art. 43. The announcement of meeting will condition the shareholders¨ attendance to the compliance with the requirements stipulated in applicable laws in that regard.

Sole Paragraph.—The filing in Eletrobras of documents in evidence of the ownership of shares may have to be carried out seventy- two hours before the time scheduled for the General Meeting.

Art. 44. Shareholders may be represented by a procurator at the General Shareholders Meetings, in accordance with the stipulations of article 126, of Law 6,404, of 1976.

§ 1^oIt is not needed the recognition of signatures of the instrument of mandate provided by non-resident shareholders and holders of depositary receipts, and the representation instrument just be deposited at Eletrobras head-office within seventy-two hours advance from the day scheduled for the General Meeting.

§ 2^oThe representation of the Federal Government at the Shareholders Meetings will be made according to specific existing federal law.

Chapter X

Fiscal Year and Financial Statements

Art. 45. The fiscal year shall coincide with the calendar year, beginning on January 1 and ending the December 31st of each year and will comply with, the financial statements, to the precepts of the Law 3890-A, 1961, to the federal legislation on electricity, the law on joint stock companies and to this By-law.

§ 1^oIn each business year, shareholders shall have the right to receive a mandatory dividend corresponding to at least twenty- five per cent of the net profit, adjusted in accordance with applicable laws.

§ 2^oFinancial charges shall be accrued to the amount of dividend and interest payable to shareholders by way of remuneration of own capital, from the end of the business year to the date of actual payment thereof, without prejudice to the incidence of default interest, whenever such amount has not been paid by the date scheduled therefore by the General Shareholders Meetings.

§ 3^oThe amount of interest paid or credited, by way of interest on own capital, pursuant to Section 9, 7th Paragraph of Law 9,249 of December 26, 1995 and applicable laws and regulations, may be charged to the holders of shares of common stock and to the minimum annual dividend of the shares of preferred stock, integrating such amount to the aggregate amount of the dividend distributed by Eletrobras for all legal effects.

Art. 46. Each year, besides the Legal Reserve, the General Shareholders Meetings of shareholders shall make the following allocations, calculated on that business year’s net profit:

I—one per cent for a “Study and Project Reserve”, intended for the carrying out of technical and economic viability studies for the electric energy sector, the accumulated balance of which may never exceed two per cent of the paid-up share capital; and,

II—fifty per cent for an “Investment Reserve Fund”, intended for investments in electric energy utilities, the accumulated balance of which may never exceed seventy-five per cent of the paid-up share capital.

Art. 47. Every year, the General Meeting shall allocate a sum equivalent to not more than one per cent of the net profit of the respective business year, subject to the limit of one per cent of the paid-up share capital, for the supply of means to social welfare assistance to its employees, according to plans approved by the Board of Directors.

Art. 48 Every year Eletrobras shall allocate and enter in its budget, resources amounting to at least point five per cent of the share capital paid-up at the time of the close of the immediately preceding business year, for the development of technological programs.

Art. 49. When the dividend has reached six per cent of the paid-up share capital, the General Meeting may stipulate percentages or gratuities against the profits, for the Managers of Eletrobras.

Art. 50. The title to dividend shall be forfeited after the lapse of three years and any dividend not claimed in due time shall revert to Eletrobras.

Chapter XI

Personnel

Art. 51. To the employees of Eletrobras and its subsidiaries, associates and controlled companies, where applicable, will be applied the provisions of labor laws in force, of Law 3890-A, 1961 and of the present By-laws.

Art. 52. The labor force of Eletrobras will be composed of:

I—personnel admitted to permanent career functions, after selection process, formed by tests, or titles tests;

II—occupiers of confidence functions of Superior Management, whose number will be established by the Board of Directors of Eletrobras, in observance to item “XXIV” of article 25 of the present by-laws;

III—personnel admitted by temporary contract, in light of the applicable laws.

§ 1^oThe confidence functions of superior management and power and responsibilities of their respective holders will be defined on the Offices and Wages Plan of Eletrobras.

§ 2^oThe functions referred to in the 1st paragraph might, exceptionally, and at the discretion of the Board of Directors, be assigned to technicians or specialists outside the permanent staff of the Company.

Art. 53. After the close of each business year of Eletrobras and after the deduction of accumulated losses and the provision for Income Tax and profits of any nature, the employees shall be entitled to a share in the profits, in observance to the terms of the Working Agreements and Conventions, signed by Eletrobras, and specific directions fixed by the Executive Power.

Art. 54. Eletrobras shall provide social welfare assistance to its employees, with the intervention of FUNDAÇÃO ELETROBRÁS DE SEGURIDADE SOCIAL – ELETROS (ELETROBRÁS Social Security Foundation) in compliance with stipulations of the Board of Executive Officers.

Chapter XII

General Provisions

Art. 55. Eletrobras, through its management, is obliged to provide information to the Minister of Mines and Energy, to the scrutiny from the Federal Government, and the Court of Audit and the House of Representatives and the Senate, in this case through the Minister of Mines and Energy.

Sole Paragraph. The President, when called, must appear in person before any of the committees of any of these two Houses, to give information about a subject he has been notified of beforehand, and he may be dismissed from his function, in case he does not justify his failure to attend.

Art. 56. Eletrobras may contract with the Federal Government, directly or through companies in which it participates, the execution of works and services, with regard to which special financial allocations have been provided.

§ 1^oFacilities built in compliance with this Article may be incorporated into Eletrobras or its subsidiaries, in case the Federal Government considers it advisable, provided however that, in the respective operation, the legal system of service per cost is observed.

§ 2^oAs long as the provision in the previous paragraph has not been complied with, the facilities mentioned in this Article may be operated by Eletrobras or its subsidiaries, under an agreement entered into with the Federal Government.

Art. 57. The Board of Executive Officers shall have the Official Gazette publish the following, upon the approval thereof by the Minister of State Eletrobras is subject to:

I—the regulation governing competitive bidding;

II—personnel regulations, including the rights and duties vested in employees, discipline system and the proceedings for verification of responsibility;

III—the names of members of the staff with indication, in three columns, of the total number of employees, the number of positions occupied and vacant positions, according to career or category as of June 30 and December 31 each year; and

IV—a plan for wages, benefits, fringe benefits and any other portions making up the remuneration of its employees.

EX-8.1

EXHIBIT 8.1

SUBSIDIARIES OF ELETROBRAS

Name	Percentage of Shareholding
Eletrobras Furnas		99.54	%
Eletrobras Chesf		99.55	%
Eletrobras Eletrosul		99.71	%
Eletrobras Eletronorte		99.41	%
Eletrobras Eletronuclear		99.81	%
Itaipu Binacional (*)		50.00	%
CGTEE		99.94	%
Eletrobras Eletropar		83.21	%
Eletrobras Distribuição Rondônia		99.96	%
Distribuição Alagoas		75.16	%
Eletrobras Distribuição Piauí,		98.56	%
Eletrobras Distribuição Acre		93.29	%
Amazonas Energia (**)		100.00	%

(*) Jointly controlled with ANDE (Paraguay).

(**) Former Manaus Energia

EX-12.1

EXHIBIT 12.1

CERTIFICATION

I, José da Costa Carvalho Neto, certify that:

1. I have reviewed this annual report on Form 20-F of CENTRAIS ELÉTRICAS BRASILEIRAS S.A. – ELETROBRAS (the “company”)

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements and other financial information included in this report fairly present in all material respects the financial condition, results of operations and cash flows of the company as of and for the periods presented in this report;

4. The company’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

a) Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5. The company’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and to the audit committee of the company’s board of directors (or persons performing the equivalent function):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: May 21, 2012

By: /s/ José da Costa Carvalho Neto José da Costa Carvalho Neto Chief Executive Officer

EX-12.2

EXHIBIT 12.2

CERTIFICATION

I, Armando Casado de Araújo, certify that:

1. I have reviewed this annual report on Form 20-F of CENTRAIS ELÉTRICAS BRASILEIRAS S.A. – ELETROBRAS (the “company”)

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements and other financial information included in this report fairly present in all material respects the financial condition, results of operations and cash flows of the company as of and for the periods presented in this report;

4. The company’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

a) Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5. The company’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and to the audit committee of the company’s board of directors (or persons performing the equivalent function):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: May 21, 2012

By: /s/ Armando Casado de Araújo Armando Casado de Araújo Chief Financial Officer

EX-13.1

EXHIBIT 13.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE U.S. SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of CENTRAIS ELÉTRICAS BRASILEIRAS S.A. – ELETROBRAS (the “Company”) on Form 20-F for the fiscal year ended December 31, 2011, as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Report”), I, José Antonio Muniz Lopes, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the U.S. Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(i) the Report fully complies with the requirements of section 13(a) or 15(d) of the U.S. Securities Exchange Act of 1934, as amended; and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 21, 2012

By: /s/ José da Costa Carvalho Neto José da Costa Carvalho Neto Chief Executive Officer

EX-13.2

EXHIBIT 13.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE U.S. SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of CENTRAIS ELÉTRICAS BRASILEIRAS S.A. – ELETROBRAS (the “Company”) on Form 20-F for the fiscal year ended December 31, 2011, as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Report”), I, Armando Casado de Araújo, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the U.S. Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(i) the Report fully complies with the requirements of section 13(a) or 15(d) of the U.S. Securities Exchange Act of 1934, as amended; and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 21, 2012

By: /s/ Armando Casado de Araújo Armando Casado de Araújo Chief Financial Officer