INVESTOR RELATIONS Newsletter | Year II | NO 7

International speaker talks about smart gridsat investor meeting

ny’s projections until 2017, featuring data about the Market, OPEX, Provision for

Doubtful Accounts (PDD), EBITDA, Investments and Net Debt.

The network

of the future

Smart grid consultant

Michael Wiebe, who has

more than 15 years of

experience developing

projects in the United

States, Canada, Australia

and the Middle East, ac-

Michael Wiebe,a smart gridsconsultant, givesa lecture on thissubject.

- Henrique Peretti (JP Morgan)

With the presentation of the smart grid,Light tried to show what investors mostoften consider and evaluate in relationto Light, which is the issue of losses.The Company’s professionals are extremelycompetent. It was very good, positive,with some news regarding Light.

DEC/FEC indicators positivefor the second quarter of 2014

As a result of the initiatives implemented by the action plan that began in July 2013,

Light has shown improvements in the performance of two important indicators: the

System Average Interruption Duration Index (DEC) and the System Average Interruption

Frequency Index (FEC).

The moving average of the DEC for the last 12 months, expressed in hours, amounted

to 13.80 in the second quarter of 2014, representing a reduction of 32.65% in relation to

the same period last year. The moving average of the FEC, expressed in number of occur-

rences, was 7.03, down 22.32% from the second quarter of 2013.

Light Distribution Superintendent Dalmer Souza attributes the strong performance of

these indicators to the following four pillars. The first is the change in the organizational

structure of Distribution Management, which took place in May 2013. “We created the

Regional Manager position and outlined regions with specific goals. Each manager is

responsible for monitoring a particular area,” Souza explained.

The second pillar is the creation of the Special Project, denominated P1, anchored in

Light’s PMO, to understand the performance of the indicators throughout the year. “Added

to this is the third pillar, which is the management and daily monitoring of the Company’s

indicators, identifying the causes of possible network failures and informing the regional

offices so that they can directly respond with agility to address them,” he added.

Finally, Superintendent Souza cited the fourth and final pillar supporting these positive

developments, which is focused on customer satisfaction: sharing responsibility down to

the operational level at Light. “The workforce is more committed and motivated. Every-

one, including Field Technicians, is responsible for the performance of the indicators. But

it’s also worth mentioning the investments, the technical training of the professionals,

the greater interaction between the areas of operation, the planning of services and the

creation of the Crisis Plan,” Souza pointed out.

Other actions can also be associated with the positive results, including the increase in

tree pruning and preventive maintenance services on the grid.

ACTIONS TO IMPROVE THE DEC/FEC INDICATORS

  July 2013 to June 2014

I. Aerial distribution network:- 970 inspections / acts of maintenance

on medium voltage circuits;- 3,353 transformers replaced;- 132,667 trees pruned.

II. Underground distribution network:- 22,754 transformer vault inspections;- 58,145 manhole inspections;- Maintenance on 177 transformers, 177 keys  and 1,226 protectors.

* Resubmitted values referring to 2Q14.

DEC FEC

July ‘13

June ‘14

9.05

20.49

 13.80

7.03

June ‘14

*

*

July ‘13

The 7th Annual Light and Investors Meeting took place on June 9, organized by

the Investor Relations area, in partnership with the Association of Capital Market

Investment Analysts and Professionals (APIMEC). The event was attended by share-

holders, investors, market analysts and representatives from the Company, and

featured a special lecture by Michael Wiebe, a smart grid consultant.

Chief Financial and Investor Relations Officer João Bastista Zolini Carneiro began

the panel discussion with

a presentation of the first

quarter of 2014 operating

and financial results.

Afterwards, Light’s Com-

mercial Superintendent,

Marco Vilela, talked about

the structure of the Project

to Combat Losses and its

results, mainly citing the

creation of the Zero Loss

Areas (APZs), in 2012. Since

the introduction of the

APZs, non-technical loss-

es, fell by 30 percentage

points, going from 50% to

20% in June 2014. The Superintendent also cited Electronic Metering. The Company

currently has more than 500,000 Electronic Measurers installed.

The results from the Generation, Marketing and Services, and New Business De-

velopment area were presented by the Energy Officer, Evandro Vasconcelos, who

talked about the expansion of generation and highlighted the importance of the

energy marketing strategy for the Company.

Light’s Communications Manager, Jordana Garcia, presented Light’s communi-

cations plan. And the Regulation Superintendent, Ângela Magalhães, highlighted

the main issues to be discussed during the 4th Periodic Rate Adjustment Cycle.

The panel also included Personnel Officer Andreia Junqueira and Business Man-

agement Officer Paulo Carvalho.

At the end of the meeting, the IR area presented its guidance, with the Compa-

The CFO/IRO, João Zolini,receives from the hand ofthe president of the Riode Janeiro Capital MarketInvestment Professionals andAnalysts Assossiation, theAPIMEC stamp due to anotheryear of partnership.

and the Middle East, ac-

cepted Light’s invitation

and presented the lecture “Smart Grids: the network of the future.”

According to Wiebe, customers around the world have new expectations in

relation to the supply of

electricity. Smart grids al-

low for a complete mod-

ernization of the distri-

bution network in order

to serve them better.

He cited Light’s pio-

neering use of the smart

grid system to improve

customer satisfaction, re-

duce non-technical losses

and improve manage-

ment, billing systems and

operational processes.

Wiebe presented tech-

nical information about

the smart grids, discussing the benefits for energy concessionaires and citing the

billions involved in projects of this size. According to Wiebe, Light is among the

ten largest smart grid investors in the world at the moment.- Pedro Batista (3G Radar)

It’s always good to maintain this traditionof presenting guidance every year,with a longer-term view, to providethe Company’s long-term outlook.It was also interesting to see the resultof the most recent rate adjustmentand the investments classified as special obligations, compared with theCompany’s cash flow, as well as thedetails about the implementation of the smart grid and the details about theCompany’s CAPEX. This helps us to bemore confident in our analysis of Light.

- Henrique Peretti (JP Morgan)

- Michael Wiebe, smart grid consultant

I could see that Light has beenable to deal with the problem of non-technical losses, which is going to turnit into a financially healthier company. And that’s good for everyone, includingits employees. By combatting losses,the Company can grow and employmore people. I was very impressedwith the event, particularly the participation of the audience, whichwas interested not only in what I hadto say about smart grids, but also aboutLight’s progress.

And speaking of smart gridsSmart grids are being discussed now more than

ever. This is because smart grids are revolutionizing

the distribution and consumption of electricity. Since

2003, Light has been dedicated to this issue, as this

new technology is going to improve the provision of

service and customer satisfaction.

Light will be the first company in Latin America to

have three smart grid components: intelligent devic-

es, including electronic meters; a mesh network, to

automatically reconfigure the network in the event of

partial failures through a process known as self-healing;

and a software system to support the decision-making

process, known as business intelligence.

Electronic metering was initially introduced to Light’s

large customers segment (Industrial and Commer-

cial). In 2009, the Company expanded the process

to residential customers. As of July 2014, there were

a total of 484,000 telemetered clients, 449,000 of

whom were being billed. The difference is due to the

time period between installation, and verification of

wether everything is functioning properly, in order to

begin billing.

Since 2011, the Company has also had a mesh

network for intelligent automated devices. Beginning unnecessary work and increasing the operational effi-

Distance monitoring

will be available on the meter itself. If they want, these

The Concentratorconcentrates the readingof all electronicmeasuring boxes withina certain region andsends it to the MeasuringControl Center throughLight’s smart grid.

This informationis retransmitted throughLight’s smart grid to theMeasuring Control Center.

The monitoring and detectionof any kind of irregularitiesis performed by the Measuring ControlCenter, located at Light’s headquarters.

This consumption is registeredby the electronic meter.

The digital display staysin the client’s house and showsthe energy consumptionfor monitoring purposes.

Light releases results for 2Q14Total energy consumption in the second quarter of

2014 increased 3.0% when compared with the same

quarter last year, reaching 6,495 GWh. This result was

mainly influenced by the growth in consumption in

the residential and commercial segments, which grew

8.0% and 2.8%, respectively.

Consolidated net revenue for the quarter, exclu-

ding revenue from construction, totaled R$1,601.5

million, an increase of 1.4% when compared with

the second quarter of 2013.

Consolidated EBITDA for the quarter, which amoun-

ted to R$239.3 million, dropped 13.9% from the 2nd

quarter of 2013, mainly due to the higher energy pur-

chases by the distributor – in the portion not covered

by the transfer of the CDE – whose future pass-through

to tariffs is guaranteed by the regulations. Adjusted for

the regulatory asset (CVA), EBITDA totaled R$359.7

million for the period, a decrease of 9.4% in relation

to the same quarter in 2013.

Net income for the quarter totaled R$15.3 million, a

decrease of 73.8%, due to the increase in the non-ma-

nageable costs with energy purchases incurred by the

distributor. Adjusted for the CVA, net income totaled

R$94.7 million, a decrease of 30.8% in comparison

with the 2nd quarter of 2013.

Non-technical losses over the last 12 months, calcu-

lated based on billed energy in the low-voltage market

(ANEEL criteria), dropped 0.5 p.p. in relation to the

previous quarter, reaching 41.9% in June 2014.

Collections for the quarter totaled 103.5% of billed

consumption, a 0.7 p.p. drop year-on-year. Provisions

for Past Due Accounts (PCLD) represented 1.7% of gross

billed energy, totaling R$36.1 million, an improvement

of 0.8 p.p. in relation to the 2nd quarter of 2013.

CapexLight invested 357.8 million in the first half of

2014, a growth of 9.5% in comparison with the

same period in 2013.

The distribution segment concentrated the highest

volume, R$332.2 million, a growth of 21.8% in re-

lation to the first half of 2013. This total included: (i)

R$154.8 million for the development and expansion

of distribution networks in order to keep pace with

market growth, strengthen the network and improve

quality, including the underground network; (ii) R$119.7

million for the energy loss project (network protection,

electronic meters, and fraud regularization); and (iii)

R$36.4 million for specific investments related to the

World Cup and Olympic Games.

Commercialization and energy efficiency Investments

fell from R$33.1 million in 1H13 to R$5.0 million in

1H14, due to the conclusion of a major co-generation

project in April of this year.

Light’s energy distribution, the data are trafficked be-

tween devices installed in the field and at the conces-

sionaire through a communication network composed,

for example, of electronic meters and the hub (see

infographic). Afterwards, these data are evaluated by

the Metering Control Center (CCM).

The goal of automation is to minimize the need for

human intervention in the operating processes, allow for

the remote operation of equipment and take action more

rapidly. This scenario has a direct impact on improving

the quality of the energy supply (DEC and FEC), avoiding

and new consumer behaviors. Telecommunications,

sensory equipment, information and computing sys-

tems, combined with existing infrastructure, have

come to constitute an increasingly powerful arsenal

that can make a difference,” explains Light smart grid

consultant Ricardo Loss.

Smart grid technology also brings other benefits to

customers, such as the future possibility of obtaining

information related to their energy consumption via

website, smartphone and/or social networks. For large

customers, who use special meters, this information

of the metering and automation systems, bringing

greater operational efficiency and the possibility of

implementing the full concept of a smart grid. The

installation of this network will allow a significant

increase in the number of electronic meters, which are

equipped with alarms and energy scales, providing a

better targeting in the detection of irregularities. The

Company expects to reach 40% telemetered custom-

ers by 2018, mainly in the East, West and Baixada

regions, as well as the pacified communities, where

the rate of non-technical loss is high.

This electronic newsletter is destined to Light’s investors. Creation and text: Quadratta Comunicação e Design.This publication is a joint realization between the Finance and Investor Relations Superintendence, the Investor

Relations Management and Light’s Communications Department. Suggestions and inquiries can be sent to ri@light.com.br.In case you do not want to receive this newsletter anymore, please contact ri@light.com.br