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Economic Performance

REVENUE [GRI EC1]

The Gross operating revenue increased by 3.9%, reaching R$ 2,551,542 million in 2010 (R$ 2,455,811 million in 2009). Said increase, recorded as a result of a 22,7% construction revenue growth and 2% financial revenue growth, was partially offset by the decrease of 11.5% in the operation and maintenance revenues.

The construction revenues amounted to R$ 693,803 million in 2010, an increase of 22.7% compared with the preceding year (R$ 565,468 million). Contributed to this result the progress of the works within the IEMadeira subsidiary, offset by the reduction of CTEEP reinforcement and expansion works, and completion of the works and consequent startup of the controlled companies IEMG, IENNE, IESUL and Pinheiros.

The financial revenues summed up R$ 1,398,245 million in 2010 (R$ 1,371,068 million in 2009), as a result of an increase in the construction account receivables balance, which reflects the progress of the CTEEP ´s and its controlled companies stages of works.

The operation and maintenance revenue amounted to R$ 442,469 million in 2010 (R$ 500,001 million in 2009). Said decrease is due to the Company´s RAP decrease, by virtue of CTEEP second cycle of periodic tariff revision, which was partially offset by Pinheiros subsidiary startup.

The operating revenue deductions were decreased by 3.8%, reaching R$ 295,257 million in 2010, against R$ 306,799 million in 2009. Said result was due to a 14.6% decrease in the regulatory charges, resulting from a drop in consumption by free customers and an increase in the balance to invest in research and development projects taken place in 2009, which was partially offset by an increase of 8.3% in the taxes over income.

As a result of the aforementioned factors, the net operating income increased by 5%, amounting to R$ 2,256,286 million in 2010 (R$ 2,149,012 million in 2009).

COSTS [GRI EC1]

The construction as well as operation and maintenance costs increased by 32.6%, reaching R$ 948,270 million in 2010, against R$ 714,992 million in 2009. Such performance is a result of a 33.1% increase in the construction costs, combined with a 32.1% increase of the operation and maintenance costs.

The increase verified in the construction costs is due to the progress of the works within IEMadeira, offset by the reduction of CTEEP´s reinforcement and enlargement works and consequent startup of the controlled companies IEMG, IENNE and Pinheiros.

The increase verified in the operation and maintenance costs results from a larger number of maintenance services at CTEEP facilities and startup of the controlled companies IEMG, IENNE and Pinheiros.

EXPENSES

The overhead and administrative costs decreased by 12.8%, reaching R$ 137,933 million in 2010 (R$ 223,003 million in 2009). Said number results substantially from a fine gotten for records on tax regulation works in 2009.

EBITDA AND EBITDA MARGIN

The Ebitda margin was 52.1%, amounting to an Ebitda of R$ 1,176,130 million in 2010, compared with 56.6% and R$ 1,215,730 million in 2009, respectively.

FINANCIAL RESULT AND INCOME TAX AND SOCIAL CONTRIBUTION

The financial result reached expenses of R$ 356,289 million in 2010, an increase of 31.1% compared with 2009 (R$ 271,721 million), due to greater debts in the year, represented substantially by the issuing of debentures.

Income tax and social contribution expenses decreased by 18%, amounting to R$ 222,921 million in 2010, against R$ 277,360 million in 2009. The actual income tax and social contribution rate was 28.5% in 2010, compared with 31.2% in 2009.

NET EARNINGS

Due to the aforementioned factors, the net earnings amounted to R$ 812,171 million in 2010, a sum 5.8% lower compared with 2009 (R$ 867,975 million).

ADDED VALUE DISTRIBUTION [GRI EC1]

In 2010, the value added by CTEEP amounted to R$ 1,639 million, an 8.7% reduction in relation to 2009. Out of this total, R$ 772 million refers to payment of proceeds to stockholders as dividends and interests on stockholders´ equity; R$ 523 million was paid to the government as taxes and federal, state and municipal fees and contributions; and R$ 160 million for payment of wages and benefits to the employees.

CONCILIATION BETWEEN THE FINANCIAL STATEMENTS ACCORDING TO THE FORMER ACCOUNTING PRACTICES AND THE CURRENT ACCOUNTING PRACTICES IN FORCE IN 2010

When preparing the individual corporate financial statements (Holding Company), the Company adopted the pronouncements and respective technical interpretation and technical guidelines issued by the CPC and approved by the CVM (Brazilian Securities And Exchange Commission) that together with the accounting practices included in the Brazilian Corporate Legislation are named accounting principles adopted in Brazil. (BR GAAP).

OTHER FINANCIAL INFORMATION

CTEEP received no financial aid whatsoever from the government over the year. [GRI EC4]

In 2010, the company was served a notice of violation by ANEEL, as per the description below. In both cases, the Company filed a legal action. [GRI PR9]

• Notice of violation Nº 022/2010 – Disturbance Inspection on date 04/01/2009, at the substation Santista Lowlands substation. Fine at the amount of R$ 318,128.73.
• Notice of violation No 099/2010 – Disturbance Inspection on date 11/10/2009, at 22:13h, involving several disconnections in SIN. Fine at the amount of R$ 3,195,903.63.