light s.a. and subsidiaries consolited financial statement december 31, 2008...

FEDERAL PUBLIC SERVICE

BRAZILIAN SECURITIES AND EXCHANGE COMMISSION (CVM)

STANDARDIZED FINANCIAL STATEMENTS (DFP)

COMMERCIAL, INDUSTRY AND OTHER TYPES OF COMPANIES

December 31, 2008 Brazilian Corporation Law

01987-9 LIGHT S.A. 03.378.521/0001-75

11.01 – NOTES TO THE FINANCIAL STATEMENTS

1

LIGHT S.A. and subsidiaries

Consolited financial statement

December 31, 2008 and 2007






01987-9 LIGHT S.A. 03.378.521/0001-75


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Message from the Management

In this beginning of 2009, I would like to address the customers, employees,

shareholders, authorities, the financial market and other public of interest, to

reaffirm my belief in the domestic economic development and in our Company’s

development.

In the future, 2009 will be marked as an important economic transition year, with

the capitalism reinventing itself in a more natural, sustainable basis, closer to the

real economy’s operation.

Recent years were marked by a large and global economic development;

innovation in technology and communication brought people, countries and market

closer into a real globalization. For the first time, the impacts of men’s actions on

climate changes were discussed together with the scientific community and the

world’s leaders. Wars gained a regional conflict tone, but not less hideous. Above

all, it was possible to observe a greater convergence of humanity’s common

interests that tend to prevail on any other country or region, even after some

disturbances, such as the Kyoto Protocol.

Post-war economic system showed its incapacity to deal with the challenges of an

economy where future anticipation became the most precious contribution to

forming value. Theories on natural resources shortage, scientific discoveries and

their consequences on trivial activities were incorporated into assets valuation and

people’s development. Expectation generalization (some of them in long-term) and

their financial flows reached a rough term in September 2008, when the large

entities of the international financial system collapsed and provoked a systemic

drop in the value of the assets.

Scale measures never seen before and agreements among the Central Banks of

countries representing the world’s largest economies were not enough to make

people trust in basic institutions that regulate our economic life: currency, credit,

respect to contracts and legal-financial order.

It might sound strange, within this context, to reaffirm our optimism towards the

future. Essentially, this comes from understanding what the opportunities raised by

strongly integrated economies in this scenario can provide.






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Brazil, in particular, has favorable conditions to an immediate economic recovery:

energetic resources, agriculture, fossil and renewable resources, in addition to an

inventive people who, despite requiring better qualification, live a democratic

regime. To summarize, Brazil is surely one of the countries that can maintain the

recent years’ path and continue growing.

Therefore, we should be aware that 2009 will have a slower growth compared to

the past years. We are members of a global system and we cannot be opposed to

the economy as a whole. However, we believe in the appropriate policies that have

been put into practice, such as investments in infrastructure, better access to

credit and actions to achieve more competitiveness.

The Brazilian electricity sector was under a lot of pressure: the challenge to

making electricity available at competitive prices for the 2011-2012 period that

precedes the beginning of the great Amazon hydroelectric utilization operation.

This apprehension regarding future energy supply comes from a historic situation:

the huge delay preparing projects and invitations for bids for new hydroelectric

utilization combined with environmental licensing difficulties. However, the effect

of the crisis upon the electricity market adjusts this expectation; supply is

guaranteed since the work continues progressing normally and the effects of the

crisis upon industrial development in electricity-intensive sectors – iron industry,

mining etc. – are incorporated to demand projections. It is important to highlight

the supplementary feature among the different forms of energy generation. Fossil-

origin energy resources, such as gas and combustible oil, that recently played an

important role in the hydroelectric system offer decrease, will be reduced and,

consequently, will reduce energy costs in the wholesale.

A successful transmission lines bidding program, with the privatization of this

system’s extension, allowed the segment’s agents to be calmer regarding the

performance of the system’s components that assure better use of hydrologic

diversity throughout the Brazilian regions.

With regard to distribution – Light’s main business, responsible for 85% of our

EBITDA – some factors that pointed at a growth dynamics smaller than in the

other regions of Brazil in the concession area, were reverted by the crisis

perspective. Since it is a predominantly urban and concentrated area, without

large industries, it is less affected by the crisis and it does not lose services

dynamics, the main feature of its social economical profile aimed at finances,






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insurance, tourism and culture. In addition, urbanization programs developed by

the federal government - such as the road arch, ports and urbanization of needy

areas, positively affect the growth at the concession area. The advanced

implementation of Companhia Siderúrgica do Atlântico – CSA, the largest ongoing

private investment in Brazil, and of COMPERJ petrochemical center will provide, in

a near future, more efficiency to the domestic industrial scenario.

Rio de Janeiro’s tendency to become a large services, leisure and tourism center

with the 2014 World Cup and the possibility to host the 2016 Olympics has direct,

relevant and positive impacts upon distribution systems and can speed up the

implementation of electrified urban transportation systems.

Within a broad vision, Light is now prepared to use all its capacity to succeed in

this economic segment in order to supply demands and intensify energy sale

activities.

The last two years’ accomplishments reinforce our belief in our capacity to face

challenges.

The first challenge is to stand out, once again, in energy generation, which will

happen due to Light’s large investments to expand its capacity. Regarding PCH

Paracambi, great part of its area has already been expropriated; the acquisition of

other lands in the vicinity is being concluded. The selection phase of suppliers for

construction and equipment acquisition is already in course. UHE Lajes’

construction work, a small hydroelectric exploitation at Lajes Complex, is expected

to begin in the second semester of 2009; we are waiting for the approval of the

basic project that is being analyzed by ANEEL. For their part, UHE Itaocara

environmental licensing is on time; the Provisory License should be granted by the

end of 2009.

Altogether, the contribution of these three investments will represent a 15% in

generation increase – in addition to being significant, it emphasizes Light’s return

to investing in generation and which will surpass R$ 500 million in five years.

The second challenge is the Energy Recovery and Commercial Losses Reduction

Program that is in full progress. It is important to remember that this challenge is

not simply technical, since we are talking about a concession area that

encompasses 20% of the country’s slums. We have made an endless effort to

reduce urban informality together with the state and the city halls of the most






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affected municipalities. Programs developed for this purpose include the

regularization of property ownership, physical infrastructure provisioning (sewage,

water and electricity supply), social infrastructure (schools, health unit centers,

communitarian offices) and economic support (institutions aimed at qualifying

employees and supporting micro-, small- and medium-sized businesses).

Rio de Janeiro is the largest domestic scenario for activities in this area. We

highlight the pilot project that is being carried out and implemented at Morro Santa

Marta, in Botafogo, with Light performing important activities with the community,

and PAC’s projects at Rocinha, Complexo do Alemão, Pavão/Pavãozinho and Maré.

The third challenge is our obsessive search for more efficiency when rendering

services and improving commercial services to our customers.

We acknowledged that our network was demanding urgent structural changes, in

order to be less affected by weather conditions and protected against improper,

intentional and non-intentional human actions. We have an ongoing program that

expects significant changes of part of primary and secondary grids, which will

reduce operational expenses and the duration and frequency of energy

unavailability situations. The program includes the stations’ automation and the

replacement of older installations (transmission lines and substations) by newer,

more compact ones. As a result, part of the land occupied will be made available to

other ends; due to that, we expect important urban interventions, such as

Madureira Park, a Copacabana substation, among others, which will increase the

concession’s income.

With regard to the employees, works focused on dissemination of culture of

results, merit and the construction of a work environment that contributes to a

more meaningful life to employees are being carried out. For Light, this is the

biggest challenge – which necessarily has been going through an alignment

process of values of all employees. In this sense, several actions have been carried

out by Academia Light, such as courses, seminars and trainings.

Two and a half years after being under RME’s control (Rio-Minas Energia), its

major shareholder, Light is now consolidated - a result of a strategy focused on

valuing people and converging into the model that can be found in its Mission.

The employees, who are organized in several activities within the Company – from

long-term activities up to daily and more specific ones, are associated by means of






01987-9 LIGHT S.A. 03.378.521/0001-75


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management commitments to the accomplishment of goals that are reflected in

the profit sharing.

With this set of relationships and commitments, Light had one of the most

meaningful turnarounds in its history, which is currently in a consolidation phase.

Such effort generated an income increase of 8% in the year. Our EBITDA grew by

32.2% compared to the previous year; EBITDA margin had a 28% growth, placing

Light among the companies with the best segment performance.

Net income grew by 148.9%, not considering non-recurring effects. In total, the

earnings reached R$ 974 million, an extremely meaningful result in our history.

Light’s carried out its quinquennial tariff revision process with extreme devotion,

being acknowledged by several of its pleadings regarding the specificity of its

concession area, especially the ones related to the flagrant economic informality,

currently being attacked by the State and the City Hall of Rio de Janeiro.

In 2008 we paid the equivalent to two dividends referring to 2007, one in March

and the other in November, totaling R$ 554 million. We are also proposing

dividend distribution in the amount of R$ 500 million referring to 2008. The

Company has been recognized by the capital markets by its proposal to accomplish

a dividend policy - established in 50% of the net income, as an action that brings

sustainable results, based upon its operational management efficacy. Manageable

costs were reduced by 13% within the year.

Light’s shares were valued by 78%, from August 2006 to December 2008, while

IEE reached 36% and Bovespa only 1%. This scenario shows the result of our

management strategy efforts, in a favorable context in terms of Brazil, but still

very difficult in terms of Rio de Janeiro, a state that, for many decades, was kept

aside from the country’s growth flows.

The close connection between Light’s and the city’s fates, once again formalized by

our institutional signature - Rio is Light in our communication, is the reason why

Light is solidary to public administrations in municipal, state and federal levels, to

promote as much as possible, the quality of life, the safety and the development of

the population. Due to the success of several initiatives that express such

commitment, Light has received several awards and was publicly recognized,

becoming one of the most dynamic players in Rio de Janeiro’s social development

scenario and also in the State’s countryside.






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By accepting the invitation from the Governor Sérgio Cabral, I took over the

presidency of Rio’s Development Agency Council – AD-Rio, an entity that supports

nearly 15 strategic projects for the development of our state and that will result in

economic growth, job generation and higher consumption of energetics.

These actions are based on the commitment to sustainability, which is expressed

in our Mission and based on environmental, economic and social dimensions.

Among internal activities that make this commitment possible, we can highlight the

approval of a new communication policy and the diversity policy, in addition to the

implementation of the Safe Work Management System, from the Mais Valor

Program and the certifications in the Environmental Management System – SGA.

Externally, we went after the vision of renowned experts who discussed our

management model and the Company’s commitments to sustainability, in a

session organized by the Brazilian Foundation for Sustainable Development –

FBDS.

We incorporated the fair statements and suggestions presented – in cases where

they were not yet part of our practices, since we understand that the Company

should provide for the society’s demands – expressed by this group of people and

by other, more dispersed groups, captured by the several forms of interaction, in

different social and political forums.

On behalf of Light, I would like to thank the Rio de Janeiro Legislative Assembly,

the City Councils, the Judiciary and mainly, the unconditional support of all

jurisdictions of the Executive, the mayors and especially to the Governor of the

State of Rio de Janeiro, the vice-governor and his secretaries. I reaffirm our

willingness to work for the common progress, social justice and quality of life

objectives we share with them.

On behalf of the Board of Executive Officers, I would like to thank the Board of

Directors for the clear guidance, encouragement, responsibilities and the

recognition that helped us to achieve most of our goals set in the beginning of last

year.

I would like to thank the employees, service providers, suppliers and the

community that is totally connected to our destiny, for the devotion that made this

partnership extremely successful.






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José Luiz Alquéres CEO

Corporate Profile

Light S.A. (Light) is a holding whose businesses are in the electric power

distribution, generation and trading segments. It is a centennial company present

in the southeastern Brazil with energy distribution activities in the state of Rio de

Janeiro and energy generation activities in the states of Rio de Janeiro and São

Paulo.

Light Serviços de Eletricidade S.A. is the 4th largest energy distributor in the

country, with a concession area encompassing 31 municipalities in the state of Rio

de Janeiro, with a total area of 10,970 Km², serving around 10 million people. In

2008, the Company distributed 23,698 GWh in energy to both captive and free

customers. Energy distribution concession is valid until June, 2026.

Light Energia S.A., the 6th largest private hydraulic-generation company in the

country (in terms of generation capacity) that produces electric power from the

utilization of the hydraulic power coming from Paraíba do Sul and Ribeirão das

Lajes rivers and has power plants in the states of Rio de Janeiro and São Paulo.

The installed capacity of the generating park, comprising five generating plants

and two pumping plants, is 855 MW.

Light Esco – Prestação de Serviços Ltda, is a company that integrates energetic

solutions, together with the customers, to find the best alternatives to acquire and

optimize the use of energy. Its activities include the direct acquisition and sale of

energy (trader), energy acquisition and sale trading intermediation (broker) and

representation and consulting services for free customers. Throughout 2008, the

Company traded 1,759 GWh (trader and broker activities), inclusive to companies

that are not in its concession area.

Light S.A.

(Holding)

Light

Energia S.A. OutrasLight S.E.S.A. Light

Esco Ltda






01987-9 LIGHT S.A. 03.378.521/0001-75


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Operational Context

Business Environment

Light is involved with sustainable and pro-active activities, is socially responsible

and aimed at the development, through partnerships with public entities in many

cases. The region serviced by the Company comprises 5.6% of the Brazilian

population and 7.9% of the GPD. Despite the concession area represents an

important intangible asset, there is strong, external pressure due to social risks

and great population concentration. To soften these factors, Light works with

agencies and companies – the federal government, class entities, commercial

associations, and other public state service concessionaires – to develop projects

to improve public security and urban and social order in the State of Rio de

Janeiro.

Within the economic scenario, the international credit crisis that emerged as of

September 2008 devaluated the real in relation to the dollar by 17.15% within the

year.

Operating Performance

Energy Distribution

Light SESA is the company that renders energy distribution services, comprising

energy supply to the captive market and energy distribution to free customers and

concessionaires, with network use (TUSD) revenue.

Tariff Revision

The main results of the tariff revision process are: tariff repositioning, that

establishes tariffs compatible with the efficient operating costs coverage and the

compensation on prudent investments and; Factor X, which establishes

productivity goals for the subsequent tariff period.

For the tariff repositioning, ANEEL (Brazilian Electricity Regulatory Agency)

calculates: (i) the efficient operational costs, using the Reference Company (ER)

methodology, (ii) prudent investments, using the Regulatory Compensation Base,

(iii) the level of regulatory losses to be transferred to customers and (iv) non-

manageable costs, which compose Installment A.






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In a public meeting held on November 4, 2008, ANEEL approved, temporarily,

Light SESA’s structural tariff repositioning of 1.96% for the period as of November

7, 2008, comprising all consumption classes (residential, industrial, commercial,

rural and others).

ANEEL established new regulatory levels for losses and delinquencies. In the losses

item, the index was 19.15% over the wire load, while the previous index was

15.97%. In the delinquency item, the level to be considered in this revision is

0.90% of the distribution gross income, while the previous index was 0.50% of the

distribution net income (without ICMS). It was also established the Factor Xe of

0.0%, to be used as of the 2009 tariff adjustment, pursuant to the new

methodology proposed by the Public Hearing 052.

Considering the financial tariff components that are not part of the tariff base, but

with amounts referring to the 12-month period after the revision, the tariff

repositioning index was 4.26%.

It is important to emphasize that Light’s final consumers observed, in average, a

4.70% increase in their electric power bills as of November 7. This was due to the

financial additional included in the tariff, referring to the period between November

7, 2007 and November 6, 2008, associated to the recovery of tariff differences

from previous periods that had a 0.41% negative effect in the tariff of that period.

Remunerable Investment

The Remunerable Investment, also called Compensation Base, is formed by the

Assets under Service (AIS) and Operations Supply, deducting the balance of

Obligations Bounded to the Public Electric Power Service (Special Obligation), on

which the compensation was calculated, as well as the AIS (Assets under Service)

that generated the depreciation quota, that is part of Installment “B” of the

Concessionaire’s Required Income – RR, confirmed by ANEEL’s Homologatory

Resolution 734, of November 04, 2008, if updated by the IGPM in the Annual Tariff

Adjustments, would be:

R$ thousand

Remunerable Investment Components

Nov/08

revision

a) Gross Assets under Service 9,893,473

b) (-) Accumulated Depreciation 4,832,831

c) (-) Obligation Bonded to SPEE 400,433






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d) Net Assets under Service 4,660,209

e) (+) Supplies 12,755

f) Remunerable Investment (Compensation Base) 4,672,964

g) Assets 100% depreciated 1,230,148

h) IGPM variation (Aneel HR/Tariff Adjustment number) -

i) Depreciation Quota – Annual Average Rate 4.25%

Market Growth

Total electric power consumed in Light’s concession area (captive + free

customers) in 2008 was 23,698 GWh, in line with 2007, which resulted from the

stability of both captive and free markets.

Captive Market

In 2008, captive market billed consumption totaled 18,292 GWh, in line with

2007’s billed consumption. The temperature effect (La Niña) reduced consumption,

incurring in atypical temperatures, reducing the year average temperature to

23.8º, compared to the historic average (20 years) of 24.5º. Another important

factor was the end of Energia Plus1 billing, bringing billed volume for this product

down by 177 GWh compared to 2007. Excluding Energia Plus1 billing in 2007 and

2008, we observe a 0.9% growth in the captive market consumption in 2008.

1 Energia Plus is an energy package offered to larger clients and has its own

generation capacity for peak hours.

Electric Power Consumption (GWh) Year

7,344

2,011

5,756

3,197

18,307 7,388

1,875

5,852

3,177

18,292

Residential Industrial Commercial Others Total

2007 2008

0.6%

-6.8%

1.7%

-0.6%

-0.1%

Electric Power Consumption (GWh) Total Market (Captive + Free measured)

18,307 18,292

5,380 5,406

23,687 23,698

2007 2008 Captive Free¹

-0.1%

0.5%

0.0%

¹ Energy measured






01987-9 LIGHT S.A. 03.378.521/0001-75


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Network Use

In 2008, the measured network use totaled 8,025 GWh, in line with the total

energy transported in 2007. Industrial class that responds for approximately 90%

of free customers’ consumption reduced 0.7% in the year, resulting from the 7.2%

reduction in the consumption of this segment in 4Q08. The consumption of free

customers in the commercial segment had 18.5% increase compared to 2007,

highlighting the retail commerce.

Energy Losses

In 2008, Light’s total losses over the wire load totaled 20.23%, representing a

decline of 0.45 p.p. compared to 2007. Non-technical losses, where the Company’s

efforts are focused, presented a reduction even lower, falling 0.53 p.p. over the

wire load, continuing the decrease presented in the previous quarters.

In order to achieve the regulatory loss level of 19.15% over the wire load (as set

by the November 2008 tariff revision), the Company has been investing in its loss-

reduction measures, both by means of conventional strategies and the use of new

technologies.

Light’s Losses Growth 12 months

6.666 6.795 6.791 6.819 6.856

14.74% 14.68% 14.57% 14.44% 14.21%

20.23% 20.68% 20.64% 20.56% 20.47%

Dec/07 Mar/08 Jun/08 Sep/08 Dec/08

Losses (GWh) Losses % Wire L. Non-technical losses % Wire Load






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In 2008, the number of normalized clients

(withdrawal of frauds by means of

regularization of meters) and replacement of

meters increased 64% year-on-year. In

addition, our intelligence was enhanced, mainly

resulting from the utilization of the identification

software and inspections control. As a result,

negotiation of amounts owed by corroborated

fraudulent clients caused energy recovered

(difference between billed energy and

consumption estimate for the fraud period) to

rise 80%.

To complement the conventional process to

reduce losses, the Company has been investing

in new metering and distribution network

protection technologies to combat losses. An

example of this is the installation of centralized

individual electronic meters in direct

communication with the Metering Control Center

(CCM), which amounted to over 62,000 in 2008,

with the installation of more than 120 km of

network with multiplex cables. CCM began its

operation in June 2008 and is responsible for

the automated management of reading

processes, cut, re-connection and identification

of irregularities or frauds in metering.

At the end of 2008, Light began to implement initiatives aimed at reducing energy

theft in regions of high loss ratios and where, historically, conventional initiatives

have not been effective. The installation of individual electronic meters in high-

income condominiums in the regions of Barra and São Conrado was completed, a

step that prioritizes loss reduction in areas with high consumption clients and that

enables fast return on the investment. In terms of concentrated efforts, several

inspection and normalization teams have been sent to the region, where they work

together to fight fraud and constantly monitor repeated offenses. The evaluation of

the initiative’s results helps define the areas for the implementation of new

technologies and network protection programs.

Light intends to invest even more in loss-prevention initiatives in 2009, based on

the excellent results of the initiatives implemented in 2008. Installation of new

electronic meters is expected to surpass 100,000 units in 2009, raising that total

to 160,000, and increasing the protected network to 1,000 km.

Normalized Clients

88,084

144,611

2007 2008

+ 64%

Energy Recovery GWh

72.2

130.0

2007 2008

+ 80%






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Delinquency

In 2008 the collection rate was 98.2% of commercial billing, 1.2 p.p. lower the

2007 level. Retail market collection was the main cause of this reduction in the

overall collection rate, due to intensified loss reduction efforts and to the effect of

the reduction in available credit to retail clients at the of the year. Major clients

and public authorities’ classes continued to provide high collection rates of 100.0%

and 110.2%, respectively, due to the collection of outstanding balances from

previous years. Despite the year-on-year decrease, the rate remained higher than

in 2006, reflecting the success of the Company’s efforts to reduce delinquency, as

well as its initiatives with major clients, public authorities and the retail market.

Service Quality

In 2008, Light intensified its investment program to improve the quality and to

increase its distribution network capacity, totaling R$ 85 million, compared to

the R$ 54 million invested in 2007.

As a result of high investments in the network and the subsequent increase in

the number of scheduled shutdowns, Light’s supply quality indicators showed a

decrease in 2008 when compared to 2007. Moreover, meteorological

conditions in 2008 also had an impact in the indicators decrease.

Collection Rate Variable average 12 months

94.1%

99.4%

98.2%

Dec/06 Dec/07 Dec/08

DEC / FEC - 12 Months

6.30

7.99

11.06

6.74 6.39

9.08

FEC

DEC

2008 2007 2006






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Client Satisfaction

Client satisfaction is one of Light’s most important objectives. The Company

invests on services modernization, on the sales team qualification and on service

channels, always aligned with the clients’ needs and market changes.

In 2008, Light centralized its services structure to meet clients’ needs in a single

contact, whenever possible, by implementing enhancements and standardizing its

sales processes.

A key factor for the success of this strategy is to provide efficient communication

channels that facilitate the access to information, products and services, claim

records and solution for the requests.

Generation

Electric Power sold in 2008 totaled 4,900.3 GWh, slightly below the volume of

2007, a reflex of hydrological conditions in the year, which impacted electric power

sale in the spot market, with a reduction of 28.2% in this market.

Generation Projects

Throughout 2008, Light put into action its generation segment growth strategy,

resulting in the following noteworthy achievements:

• Was granted Installation License for construction of the PCH Paracambi,

issued by FEEMA (Rio de Janeiro Foundation for Environmental Engineering) at the

end of December 2008. The license authorizes the start of PCH construction. Works

will begin in the next few months, and the project is expected to last 24 months.

The Company has already sold part of its energy take through Light Esco. The PCH

Paracambi, located on Ribeirão das Lajes, downstream from the Lajes Complex,

will have 25 MW of installed capacity and 20.4 average-MW of assured energy;

• The Board of Executive Officers approved the start of the contracting

process for the Executive Project of PCH Lajes, which will begin with the

contracting of civil construction for its adductor system (Tunnel 2) and the supply

of the necessary hydro mechanical equipment. The required environmental

licenses have been granted, and the plant’s Basic engineering Project is subject to

ANEEL’s approval. The PCH will have 17 MW of installed capacity and is located in

the Lajes Complex and the operational start-up is scheduled for 2011;






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• The company filed for UHE Itaocara hydropower plant environmental license

with IBAMA and has already received the Terms of Reference to prepare the

Environmental Impact Studies (EIA/RIMA). The Basic engineering Project, which

seeks to comply with the environmental demands of the affected region, is being

prepared. UHE Itaocara will have 195 MW of installed capacity and 110 MW of

assured energy, located on the Paraíba do Sul river, in Itaocara, in the state of Rio

de Janeiro. Operational start-up is estimated for 2013 following a construction

period of 36 months;

• Creation of a consortium with Cemig for the construction and exploitation of

PCH Paracambi and UHE Itaocara hydroelectric projects; and

• Execution of an agreement of intent with Cemig for a joint participation in

bids related to hydroelectric power plants to generate energy or third party

ventures already in progress, until attaining at least 300 MW in addition to the

installed capacity.

Trading

In 2008, Light Esco recorded direct sales of 434.3 GWh to a portfolio of 55

customers, 148.1% above 2007. From this energy sold, 178.7 GWh result from the

energy sale from Light Energia’s hydrological hedge, adding value at the energy

surplus allocation.

In addition to direct sales, Light Esco also operated as a consultant and as a broker

for free customers with the CCEE. These operations involved about 1,325.0 GWh, a

volume 8.4% higher compared to 2007.

In addition to the revenue obtained in 2008, Light Esco executed important

contracts aimed at increasing the value created through the sale of its energy. The

Company closed on successful negotiations resulting in long-term contracts to free

customers that will provide average future delivery of 220 MW. It is important to

highlight that 100 average MW of this amount were sold to the Votorantim Group.

To maximize shareholder return on equity, the Company will continue its efforts to

sell energy from Light whose auction contracts expire in 2012 and 2013.






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Investments

In 2008, the Company invested R$ 546.7 million in investment projects, with

highlight to the development of distribution networks, primarily involving new

connections, capacity increases and corrective maintenance, totaling R$ 165.4

million; quality improvements (structural optimization and preventive

maintenance), which absorbed R$ 64.8 million; and loss-prevention initiatives

totaling R$ 156.0 million. In the generation segment, about R$ 24.8 million went

to maintenance and R$ 23.0 million to three new generation projects.

CAPEX (R$ MM)

286.7

455.4

55.8

361.8

546.7

42.6

19.3

47.8

0.0

0.8

2007 2008

Distribution Administration Generation Trade






01987-9 LIGHT S.A. 03.378.521/0001-75


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Financial and Capital Markets Comment

Financial Performance

Revenues

In 2008, the 7.9% growth in consolidated net revenues of R$5,386.6 million

compared to 2007, was mainly associated with the recognition of additional

financial charges from the tariff review, as well as with changes in the consumption

mix, with larger growth in the residential and commercial classes, which increased

net distribution revenue by 7.3%. Additionally, it emphasizes the revenue growth

in the generation and selling segments, which grew by 12.2% and 154.7%

respectively.

Costs and expenses

In 2008, operating costs and expenses, in the amount of R$ 4,195.0 million were

in line with 2007. This result is mainly due to a 0.4% reduction on the distribution

segment costs and expenses, totaling R$ 4,074.5 million, highlighting the 13.1%

decrease on manageable costs and expenses. Costs and expenses in the

generation segment were also reduced by 2.3%.

EBITDA

Net Revenue

4,951 4,992

5,387

2006 2007 2008

Costs and Expenses (R$ million)

4,534 4,183 4,195

2006 2007 2008






01987-9 LIGHT S.A. 03.378.521/0001-75


20

EBITDA rose 32.2% to R$ 1,504.1 million in the year, with an EBITDA margin of

27.9%. Excluding the non-recurring effects of R$ 107.5 million, generated by the

recognition of additional financial charges from previous years and of R$133.8

million referring to the reversal of Braslight provision, growth was 11.0%, in which

the 3.2% drop in PMSO consolidated costs stands out. The generation and trading

segments represented 13.5% and 0.7%, respectively, of EBITDA, versus 14.9%

and 0.4% in 2007.

Net Income

Net income in 2008 came to R$ 974.5 million, 9.3% lower, than the R$ 1,074.3

million income in 2007. Net income would have been up 148.9% from R$ 223.1

million in 2007 to R$ 555.3 million in 2008 if the following non-recurring effects

were excluded from both years: (i) recognition of tax credits totaling R$ 851.3

million in 2007 and (ii) reversals of the PIS/COFINS provisions and the Braslight’s

actuarial loss in 2008, which had impacts of 285.4 million and R$ 133.8 million,

respectively.

Income Allocation Proposal

EBITDA (R$ million)

738

1,138

1,504

2006 2007 2008

Net Income (R$ million)

(151)

974 1,074

2006 2007 2008






01987-9 LIGHT S.A. 03.378.521/0001-75


21

At the Board of Directors’ meeting held on February 13, 2009, a dividend

distribution proposal, in the amount of R$ 499,637,756.10 or R$ 2.45 per share

over the 2008 income was approved, subject to approval at the Annual General

Meeting.

Financial Situation

The Company ended 2008 with a net debt of R$ 1,580.3 million, 8.1% higher

compared to 2007, without affecting the net debt/EBITDA ratio, which remained at

1.1x, evidence of the Company’s strong cash generation during the year.

The average maturity of the debt is 4.9 years and the average cost is 14.0% p.a.

for debt denominated in local currency and U$ + 5.3% p.a. for debt denominated

in foreign currency. Both costs kept steady if compared to September 2008.

Foreign-currency exposure represented 7.9% of total indebtedness on December

31, 2008. The company carries out hedge operations for cash flows with maturity

in the next 24 months through non cash swap instruments with first class financial

institutions. Including the effective swap operations, foreign currency debt

accounted for 5.4% of the total.

Corporate Governance and Capital Markets

The capital stock of Light S.A. comprises 203,933,778 common shares, with no par

value. The controlling group, Rio Minas Energia (RME), holds 52.1% of the capital

stock.

The Company's shares have been listed on Bovespa's Novo Mercado since July

2005, granting special rights to minority shareholders based on the best corporate

Net Debt (R$ million)

2,540

1,462 1,580

2006 2007 2008






01987-9 LIGHT S.A. 03.378.521/0001-75


22

governance practices and on the principles of transparency and equity, essential

for ensuring mutually beneficial relations with the capital market. According to the

segment’s rules and pursuant to its Bylaws, the Company is bounded to arbitrage

in the Market’s Arbitrage Chamber. Light is listed on the Ibovespa, IBrX Itag, IGC,

IEE, MLCX and ISE indexes.

Light’s Board of Directors is formed by 11 members, 2 of which are elected

independently. The following 5 committees support the Board of Directors:

Finance, Management, Audit, Human Resources, and Governance and

Sustainability.

The Company has an indicative dividend policy, where it establishes an objective to

pay a minimum dividend of 50% of the adjusted net income, semi-annually or

annually, as long as the precedent conditions, such as the Company’s financial

condition, macroeconomic conditions and investment plans, among other relevant

factors, are fulfilled.

As of November 17, 2008 Light began its Sponsored Level 1 Depositary Receipts

Program, for the trading in the American over-the-counter securities market.

Citibank is the depositary institution of ADRs in the United States of America. As of

October 27, 2008, the Company contracted Credit Suisse to act as a market maker

of its shares in Bovespa, with the objective to provide more liquidity to the

financial instruments, avoiding liquidity gaps and providing reference price to the

shares.

In 2008, the value of Light’s shares fell by 13.6%, compared to decreases of

41.2% and 11.6% on the Ibovespa and IEE, respectively.

Light x Ibovespa x IEE10/08/06 = 100 até 30/12/08

80

100

120

140

160

180

200

220

240

ago/

06

set/0

6

out/0

6

nov/06

dez/06

jan/

07

fev/07

mar

/07

abr/0

7

mai/0

7

jun/

07

jul/0

7

ago/

07

set/0

7

out/0

7

nov/07

dez/07

jan/

08

fev/08

mar

/08

abr/0

8

mai/0

8

jun/

08

jul/0

8

ago/

08

set/0

8

out/0

8

nov/08

dez/08

70% Light

1% Ibovespa

28% IEE

R$/ação

08/10/06 12,88

12/30/08 21,86

Light x Ibovespa x IEE

Base jan/07 = 100 até 30/12/08

60

80

100

120

140

160

180

dez/06

jan/

07

fev/07

mar

/07

abr/0

7

mai/0

7

jun/

07

jul/0

7

ago/

07

set/0

7

out/0

7

nov/07

dez/07

jan/

08

fev/08

mar

/08

abr/0

8

mai/0

8

jun/

08

jul/0

8

ago/

08

set/0

8

out/0

8

nov/08

dez/08

2008

LIGT3 -14%

IEE -12%

IBOV -41%






01987-9 LIGHT S.A. 03.378.521/0001-75


23

For the second consecutive time, the Company was included in Bovespa’s ISE

(Corporate Sustainability Index), this time for the period from December 2008 to

November 2009.

Committed to the Future

People Management

Light believes that constructing value to the Company only happens if its

employees grow and develop personal and professionally throughout the process.

That is why Light’s recipe is based on "people with values – since they are the

foundation of our management model” -, intensely living the Company’s mission –

that reflects upon its statement by the way we want to be identified and seen by

our stakeholders -, working according to a planned action based on business

knowledge -, and committed to common objectives agreed with instruments

named management commitments – that establish goals and which are the base

for people’s participation in the Company’s result.

Based on policies that define and support the best corporate practices, in order to

provide an equal treatment to all employees and to encourage happiness at work

(one of its main values), Light develops a set of initiatives to have its employees

improve in the professional environment.

By the end of 2008, Light had 3,732 employees with an average time of 14.9 years

in the company and an average age of 40.4 years. Since the Company believes the

education of its employees is essential to its success, 86.6% of the employees

have high school education.

Light is a founder sponsor of the Social Security Foundation – Braslight, a closed

supplementary private pension company that guarantees retirement income to the

Company’s employees that are linked to the Foundation and alimony to their

dependents.

Work Safety

The best practices to assure the efficient management of Occupational Health and

Safety are explained in the totality of tools that compose the Safe Work

Management System and reflect Light’s permanent concern with the physical

integrity of its employees.






01987-9 LIGHT S.A. 03.378.521/0001-75


24

Specially developed for the electrical segment concessionaires, meeting the

requirements of the main norms in effect, the Safe Work Management System was

implemented in September 2008. Based on five important themes - Leadership,

Risk Management, Education, Control and Monitoring – the objective of the system

is to control and reduce risk levels associated to the Company’s activities.

Research and Development (R&D)

The annual Research and Development (R&D) programs encourage creative and

innovative thinking within the Company. In accordance with the regulation, since

1999 with the investment of 0.5% of the Net Operating Income in R&D projects,

the programs are mandatory.

Light invested R$78 million in its R&D programs between 2000 and 2008, of which

R$ 28 million were in the years 2006-2008. In the last year, Light SESA alone

invested over R$ 9 million in 61 projects, while Light Energia invested R$ 440

thousand in five projects. The alignment of technical themes to technological roots

outlined by the Company’s top management results in a larger commitment with

the results reached, generating products with higher applicability and gains to the

Company.

Environment

Having a history marked by important social and environmental actions and a

responsible performance with the society and the regions it is present, with its

Environmental Policy, Light consolidates a clear and concrete global performance

strategy before the increasing challenges imposed to energy companies regarding

environmental preservation.

This policy, which arouse from the implementation of the Environmental

Management System (SGA), has been guiding the Company’s environmental

practices guaranteeing the continuous improvement of its environmental

performance. Light’s SGA was granted its first conformity certification with NBR

ISO 14001 in 2002; nowadays, 182 units of the Company are already certified –

substations, transmission lines, power plants and commercial agencies and self-

service stations. The certification of the generating plants complex includes, in

addition to SGA, OHSAS 18001 norms (safety and health) and the ISO-9001 series

(continuous improvement of processes quality).

Social Action






01987-9 LIGHT S.A. 03.378.521/0001-75


25

Light has been working in the society since 2002 through the Efficient Community

Project, which is standing on the sustainability basis: income generation, energy

economy and social inclusion. The Company counts on six years of coordinated

actions in three basic fronts – education, efficient equipment donation and

technical and commercial regularization. 266 thousand homes in 229 localities

have been served within this time.

The Company also acts through Instituto Light, whose mission is to contribute to

the improvement of economic and social conditions of Light’s concession area. The

Institute is also the Company’s interface with the consumers and society, to seek

for the solutions for the urban problems that interfere in the services rendering.

Other Information

External Audit

Pursuant to CVM Instruction 381/03, we inform that KPMG Auditores

Independentes only renders services related to external audit at Light S.A.






01987-9 LIGHT S.A. 03.378.521/0001-75


26

CONSOLIDATED SOCIAL BALANCE SHEET (not audited)






01987-9 LIGHT S.A. 03.378.521/0001-75


27

Independent auditors’ report

To the Board of Directors and Shareholders

of Light S.A.

Rio de Janeiro - RJ

1. We have examined the accompanying balance sheet of Light S.A. (“Company”) and

the consolidated balance sheet of the Company and its subsidiaries as of December 31,

2008, and the related statements of income, changes in shareholders’ equity, cash flows

and added value for the year then ended, which are the responsibility of its

Management. Our responsibility is to express an opinion on these financial statements.

2. Our examination was conducted in accordance with auditing standards generally

accepted in Brazil and included: (a) planning of the audit work, considering the

materiality of the balances, the volume of transactions and the accounting systems and

internal accounting control of the Company and its subsidiaries; (b) verification, on a

test basis, of the evidence and records which support the amounts and accounting

information disclosed; and (c) evaluation of the most significant accounting policies

and estimates adopted by Company management and its subsidiaries, as well as the

presentation of the financial statements taken as a whole.

3. In our opinion, the aforementioned financial statements present fairly, in all material

aspects, the financial position of Light S.A. and the consolidated financial position of

the Company and its subsidiaries as of December 31, 2008, the result of its operations,

the changes in its shareholders’ equity, its cash flows and the added value on

operations for the year then ended, in conformity with accounting practices adopted in

Brazil.

4. The financial statements of Fundação de Seguridade Social Braslight for the year ended

December 31, 2008 were examined by other independent auditors whose opinion,

dated January 29, 2009, includes an emphasis paragraph regarding the balance of

R$130,941 related to tax credits arising from the Entity’s tax court case which was

successful in obtaining a final and non-appeasable decision, which, according to the

Management’s forecast, will allow them to utilize these credits to offset taxes payable

in future years. The future realization of the credits is subject to the completion of the

offset process with the Federal Tax Authority (Secretaria da Receita Federal), which

the Entity suspended in September 2005. If the Entity does not complete the offset

process, they may eventually record a provision for this asset. This asset, which

guarantees the Entity’s actuarial reserves, was deducted from calculation of the

subsidiaries’ actuarial deficit, as required by Resolution n° 371/00 of the Brazilian

Securities and Exchange Commission - CVM . Consequently, in the event that a

provision is recorded for this amount, Company’s liability may be proportionally

adjusted.

5. As mentioned in Note 37, due to the second periodical review of the tariffs of the

subsidiary Light Serviços de Eletricidade S.A. as set forth in the concession agreement,






01987-9 LIGHT S.A. 03.378.521/0001-75


28

the National Regulatory Electricity Agency- ANEEL temporarily ratified the

subsidiary’s tariff repositioning on 1.96%, to be applied during the period beginning

November 7, 2008. Considering the 2.30% interest on sales, the tariff’s impact reaches

4.27%. Additional changes that may result from the final review, if any, will be

reflected in the equity and financial position of the Company and its subsidiaries in the

following periods.

6. The Company’s financial statements and the consolidated financial statements of the

Company and its subsidiaries for the year ended December 31, 2007, including the

balance sheet and the statements of income, changes in shareholders’ equity and

changes in financial position for that year, and the supplementary information

including the statement of cash flows, were examined by other independent auditors,

on which a unqualified opinion was issued dated February 13, 2008. As mentioned in

Note 3, the accounting practices adopted in Brazil underwent changes as from January

1, 2008. The financial statements for the year ended December 31, 2007, presented

together with those for 2008, were prepared in accordance with the accounting

practices adopted in Brazil in effect until December 31, 2007, and, as permitted by the

Technical Pronouncement CPC 13 – Preliminary Adoption of Law 11,638/07 and

Provisional Measure 449/08, are not presented with the necessary adjustments to make

them comparable with the financial statements of 2008..

7. Accounting practices adopted in Brazil vary in certain significant respects from

International Reporting Standards – IFRS as issued by IASB. Except for the non-

adoption of IFRIC 12 (Service Concession Arrangements) considering the exemption

provided by BM&F BOVESPA for whose effects were not determined by the

Company’s management, and for the non recognition of the fair value of fixed assets at

initial adoption as required by IFRS or the revision of the historical cost in compliance

with IFRS, the information relating to the nature and effect of such differences were

presented in Note 39 to the consolidated financial statements.

February 13, 2009

KPMG Auditores Independentes

CRC-SP-14.428/O-6-F-RJ

Vânia Andrade de Souza

Accountant CRC-RJ-057.497/O-2






01987-9 LIGHT S.A. 03.378.521/0001-75


29

Notes 12/31/2008 12/31/2007 12/31/2008 12/31/2007

CURRENT

Cash and Cash Equivalents 6 40,256 2,536 590,126 490,211

Consumers, concessionaires and permissionaires 7 - - 1,350,832 1,345,109

Recoverable Taxes 8 284 209 836,504 697,848

Inventories - - 18,603 13,256

Receivables from swap transactions 33 - - 6,671

Dividends Receivable 24 499,638 203,463 - -

Services - - 57,500 60,217

Prepaid Expenses 9 135 171 383,291 275,618

Other receivables 10 167 166 107,879 36,081

540,480 206,545 3,351,406 2,918,340

NON-CURRENT ASSETS 2,764,479 2,666,497 6,110,559 6,111,740

LONG-TERM ASSETS

Consumers, concessionaires and permissionaires 7 - - 292,594 326,066

Recoverable Taxes 8 - - 1,109,566 1,253,753

Receivables from swap transactions 33 4,413 -

Escrow deposits 121 103 194,200 166,132

Prepaid expenses 9 - - 129,435 159,030

Other receivables 10 - - 26,420 97,188

121 103 1,756,628 2,002,169

Investments 11 2,764,358 2,666,394 13,615 13,157

Property, Plant and Equipment 12 - - 4,059,358 3,772,054

Intangible assets 13 - - 280,958 271,090

Deferred charges - - - 53,270

3,304,959 2,873,042 9,461,965 9,030,080

ASSETS

Parent Company Consolidated

LIGHT S.A.

BALANCE SHEETS ON DECEMBER 31

(In thousands of reais)






01987-9 LIGHT S.A. 03.378.521/0001-75


30

Notes 12/31/2008 12/31/2007 12/31/2008 12/31/2007

CURRENT

Suppliers 14 283 380 486,204 488,441

Payroll 7 8 2,791 2,058

Taxes 8 10 7 230,461 305,568

Loans, Financing and Financial Charges 15 - - 116,799 50,501

Debentures and Financial Charges 16 - - 61,523 89,921

Dividends Payable 24 499,638 203,463 499,638 203,463

Estimated Liabilities 31 26 55,052 51,768

Sector charges – Consumer Contributions 17 - - 126,733 115,510

Provision for contingencies 18 - - 2,237 2,237

Pension plan and other employee benefits 20 - - 87,744 73,585

Other Liabilities 19 1,286 810 519,757 354,064

501,255 204,694 2,188,939 1,737,116

NON-CURRENT LIABILITIES - - 4,469,322 4,601,165

LONG-TERM LIABILITIES

Suppliers 14 - - - -

Loans, Financing and Financial Charges 15 - - 1,046,550 832,946

Debentures and Financial Charges 16 - - 945,549 978,567

Taxes 8 - - 324,743 276,872

Provision for contingencies 18 - - 998,460 1,361,740

Pension plan and other employee benefits 20 - - 944,417 818,330

Other Liabilities 19 - - 209,603 329,532

- - 4,469,322 4,597,987

DEFERRED INCOME - - - 3,178

SHAREHOLDERS' EQUITY

Capital stock 23 2,225,819 2,220,355 2,225,819 2,220,355

Profits Reserve 23 555,426 447,993 555,426 471,444

Recognized granted options 38 22,459 - 22,459 -

Retained earnings (accrued losses) - - - -

2,803,704 2,668,348 2,803,704 2,691,799

3,304,959 2,873,042 9,461,965 9,030,080


BALANCE SHEETS ON DECEMBER 31

LIGHT S.A.


LIABILITIES






01987-9 LIGHT S.A. 03.378.521/0001-75


31

Parent Company Parent Company Consolidated Consolidated

Notes 01/01/2008 to 12/31/2008 01/01/2007 to 12/31/2007 01/01/2008 to 12/31/2008 01/01/2007 to 12/31/2007

OPERATING REVENUE

Electric Power Supply 26 - - 7,214,341 7,093,519

Electric Power Supply 26 - - 360,009 405,536

Other Revenues 27 - 8 664,298 639,310

- 8 8,238,648 8,138,365

Deductions from operating revenue

ICMS - - (1,949,018) (1,927,228)

Consumer Charges 28 - - (416,411) (644,584)

PIS/COFINS - - (484,004) (571,883)

Other - (1) (2,571) (2,292)

- (1) (2,852,004) (3,145,987)

NET OPERATING REVENUE - 7 5,386,644 4,992,378

ELECTRIC POWER COST

Electric Power Purchased for Resale 31 - - (3,063,177) (2,927,353)

- - (3,063,177) (2,927,353)

OPERATING COST

Personnel 30 - - (141,964) (160,039)

Material 30 - - (13,987) (12,791)

Outsourced services 30 - - (120,526) (118,984)

Allowances 30 - - - -

Depreciation and amortization 30 - - (275,887) (289,645)

Other 30 - - (16,364) (16,059)

- - (568,728) (597,518)

GROSS OPERATING PROFIT - 7 1,754,739 1,467,507

OPERATING EXPENSES

Selling 30 - - (315,476) (280,270)

General and Administrative 30 (26,446) (5,389) (247,581) (377,385)

(26,446) (5,389) (563,057) (657,655)

EQUITY IN THE EARNINGS OF SUBSIDIARIES 1,023,996 1,084,533 - -

FINANCIAL REVENUES (EXPENSES)

Revenues 32 763 368 270,149 247,633

Expenses 32 (384) (2,284) (175,757) (563,601)

379 (1,916) 94,392 (315,968)

OTHER OPERATING REVENUES (EXPENSES)

Revenues - - 30,188 -

Expenses - - (8,751) -

- - 21,437 -

OPERATING RESULT 997,929 1,077,235 1,307,511 493,884

Non-operating income - 6 - 17,890

Non-operating expenses - - - (6,576)

NON-OPERATING RESULT - 6 - 11,314

INCOME BEFORE TAXES

AND INTEREST 997,929 1,077,241 1,307,511 505,198

Income tax and social contribution 8 - - (301,531) 601,975

NET INCOME/(LOSS) BEFORE INTEREST 997,929 1,077,241 1,005,980 1,107,173

Interest (25) (31,527) (32,843)

NET INCOME/(LOSS) FOR THE YEAR 997,904 1,077,241 974,453 1,074,330

Net Income/(Loss) per share – R$ 4.89327 5.29454 4.77828 5.28023

No. of shares 203,933,778 203,462,739 203,933,778 203,462,739


LIGHT S.A.

STATEMENT OF INCOME FOR THE YEARS ENDED DECEMBER 31






01987-9 LIGHT S.A. 03.378.521/0001-75


32

RETAINED EARNINGS

CAPITAL CAPITAL LEGAL PROFIT / (ACCRUED TOTAL

STOCK RESERVE RESERVE RETENTION LOSSES)

BALANCE ON DECEMBER 31, 2006 1,704,618 - - - (196,108) 1,508,510

Capital Increase 804,060 - - - - 804,060

Capital decrease for loss absorption (288,323) - - - 288,323 -

Retained earnings reserve - - - 55,093 (55,093) -

Dividends related to 2006 - - - - (37,122) (37,122)

Net income for the year - - - - 1,077,241 1,077,241

Allocation of net income for the year:

Legal reserve - - 53,862 - (53,862) -

Proposed dividends – 1st half of 2007 - - - - (480,878) (480,878)

Proposed dividends - - - - (203,463) (203,463)

Profits reserve - - - 339,038 (339,038) -

BALANCE ON DECEMBER 31, 2007 2,220,355 - 53,862 394,131 - 2,668,348

Capital Increase 5,464 - - - - 5,464

Dividends paid – profits reserve - - - (350,766) - (350,766)

Adjustment to preliminary adoption of Law 11,638/07 - - - - (40,067) (40,067)

Granted options - 22,459 - - - 22,459

Net income for the year - - - - 997,904 997,904


Legal reserve - - 49,895 - (49,895) -


Profits reserve - - - 408,304 (408,304) -

BALANCE ON DECEMBER 31, 2008 2,225,819 22,459 103,757 451,669 - 2,803,704

PROFITS RESERVE

LIGHT - S.A.

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY – PARENT COMPANY







01987-9 LIGHT S.A. 03.378.521/0001-75


33

RETAINED EARNINGS

TOTAL CAPITAL LEGAL PROFIT / (ACCRUED TOTAL

CAPITAL RESERVE RESERVE RETENTION LOSSES)

BALANCE ON DECEMBER 31, 2006 1,704,618 - - - (196,108) 1,508,510

Previous years adjustments - - - - 26,362 26,362

Capital increase 804,060 - - - - 804,060

Capital decrease for loss absorption (288,323) - - - 288,323 -

Profits reserve - - - 81,455 (81,455) -

Dividends related to 2006 - - - - (37,122) (37,122)

Net income for the year - - - - 1,074,330 1,074,330


Legal reserve - - 53,862 - (53,862) -

Proposed dividends - 1st half of 2007 - - - - (480,878) (480,878)


Profits reserve - - - 336,127 (336,127) -

BALANCE ON DECEMBER 31, 2007 2,220,355 - 53,862 417,582 - 2,691,799

Capital increase 5,464 - - - - 5,464

Dividends paid - profits reserve - - - (350,766) - (350,766)

Adjustment to preliminary adoption of Law 11,638/07 - - - - (40,067) (40,067)

Granted options - 22,459 - - - 22,459

Net income for the year - - - - 974,453 974,453

Allocation of net income for the year: -

Legal reserve - - 49,895 - (49,895) -


Profits reserve - - - 384,853 (384,853) -

BALANCE ON DECEMBER 31, 2008 2,225,819 22,459 103,757 451,669 - 2,803,704

LIGHT - S.A.

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY – CONSOLIDATED


PROFITS RESERVE






01987-9 LIGHT S.A. 03.378.521/0001-75


34

01/01/2008 to

12/31/2008

01/01/2007 to

12/31/2007

01/01/2008 to

12/31/2008

01/01/2007 to

12/31/2007

Cash flows from operations

Net income (loss) for the period 997,904 1,077,241 974,453 1,074,330

Expenses (revenues) not affecting cash:

Allowance for doubtful accounts - - 233,398 171,479

Provision for (reversal of) losses in the recovery of amounts in the Long-term RTE - - 2,980 (4,389)

Allowance for doubtful accounts - Free Energy - - (595) 32,434

Restatement of regulatory assets and liabilities - - 43,845 (28,270)

Adjustment of receivables to present value - - (10,830) (11,168)

Depreciation and amortization - - 312,443 327,960

Interest and monetary variations, net - - 273,699 254,222

Equity in the earnings of subsidiaries (1,023,996) (1,084,533) - -

Write-off of property, plant and equipment - - (12,974) (10,495)

Deferred income and social contribution taxes - - 140,121 (852,221)

Charges and monetary variation on post-employment liability - - 115,428 106,824

PIS/COFINS reversal - Increase in calculation basis - - (432,359) -

Provision for contingencies - liabilities - - 72,053 110,367

Granted Options 22,459 - 22,459 -

Other - - - (819)

(3,633) (7,292) 1,734,121 1,170,254

(Increase) decrease in assets

Consumers and distributors - - (205,021) 176,210

Recoverable taxes - - (150,222) (85,745)

Services provided - - 2,717 (29,923)

Inventories - - (5,347) (1,847)

Prepaid expenses (CVA and other) - - 16,990 -

Regulatory assets (CVA and Financial Bubbles) - - (64,401) 176,932

Dividends 595,616 528,000 - -

Escrow deposits - - (28,068) (32,344)

Other (61) (200) (7,015) 28,067

595,555 527,800 (440,367) 231,350

Increase (Decrease) in liabilities

Suppliers (97) 151 (11,520) 64,386

Energy suppliers - - 4,528 (42,688)

Payroll and social contributions 4 (7) 4,017 16,417

Taxes and social contributions 3 (27) (45,341) 30,672

Memorandum accounts - CVA - - 8,899 125,421

Regulatory charges - - (8,460) 6,725

Contingencies - - (62,867) (42,948)

Post-employment liabilities - - (85,125) (75,855)

Other 117 (295) 210,132 46,744

27 (178) 14,263 128,874

Cash provided by (used in) operations 591,949 520,330 1,308,017 1,530,478

Cash flows from investing activities:

Sale of income property - - 21,649 28,000

Property, plant and equipment - - (615,127) (488,087)

Consumer contributions - - 2,570 14,026

Deferred charges - - - (17,597)

Cash used in investing activities - - (590,908) (463,658)

Cash flows from financing activities:

Capital increase - - 5,464 -

Dividends paid (554,229) (518,000) (554,229) (518,000)

Loans and financing - 3,490 264,507 1,693,627

Amortization of loans and financing - (3,490) (332,936) (2,447,344)

Cash provided by (used in) financing activities (554,229) (518,000) (617,194) (1,271,717)

Cash net variation 37,720 2,330 99,915 (204,897)

Statement of cash net variation

At the beginning of the period 2,536 206 490,211 695,108

At the end of the period 40,256 2,536 590,126 490,211

Cash variation 37,720 2,330 99,915 (204,897)


LIGHT - S.A.

STATEMENT OF CASH FLOWS







01987-9 LIGHT S.A. 03.378.521/0001-75


35

Consolidated Parent Company

Description 1/1/2008 to 12/31/2008 1/1/2008 to 12/31/2008

Revenues 8,024,304 -

Goods, products and services sold 8,238,648 0

Other Revenues 21,437 0

Revenues related to Constr. Own Assets - 0

Provision/Rev. of allowance for doubtful accounts (235,781) 0

Raw material acquired from third-parties (3,360,469) (1,683)

Cost of goods, products and services sold (3,063,176) 0

Material-electric power-third-party services-other (297,293) (1,683)

Loss/Recovery of Assets - 0

Other - 0

Gross Value-Added 4,663,835 (1,683)

Retentions (312,443) -

Depreciation, Amortization and Depletion (312,443) -

Net value-added 4,351,392 (1,683)

Value-added received in transfer 270,149 1,024,759

Equity in the earnigns of subsidiaries - 1,023,996

Financial revenues 270,149 763

Total Value-Added to Distribute 4,621,541 1,023,076

Value-Added Distribution 4,621,541 1,023,076

Personnel 226,552 24,747

Direct remuneration 160,955 24,635

Benefits 39,881 102

FGTS (Government Severance Indemnity Fund for Employees) 22,653 10

Other 3,063 0

Taxes, Fees and Contributions 3,220,169 123

Federal 1,249,177 123

State 1,949,018 -

Municipal 21,974 -

Third-party capital remuneration 200,367 302

Interest rates 152,582 295

Rental 29,923 7

Other 17,862 -

Remuneration of own capital 974,453 997,904

Dividends 499,638 499,638

Retained earnings / accrued losses in the year 474,815 498,266

STATEMENT OF VALUE-ADDED

LIGHT S.A.







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36

NOTES TO THE FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2008 and 2007

(Amounts in thousands of Brazilian reais)

1. OPERATIONS

Light S.A. was established as a subsidiary of LIGHT – Serviços de Eletricidade S.A. (“Light

SESA”), on July 27, 1999, and remained as a subsidiary until September 12, 2005, when its

shares were sold to LIDIL Comercial Ltda.

Light S.A.’s corporate purpose is to hold equity interests in other companies, as partner or

shareholder, and the direct or indirect exploitation, as applicable, of electric power services,

including electric power generation, transmission, sale and distribution systems, as well as

other related services.

On September 5, 2005, in accordance with Law 10,848/2004, Brazilian Eletricity Regulatory

Agency - ANEEL, through Authorizing Resolution nr. 307/2005, approved the corporate

restructuring project was approved at the Extraordinary General Meeting held on January 13,

2006. As of January 14, 2006, Light S.A. became the parent company of all the Grupo Light’s

operational and non-operational companies shown below:

Light Serviços de Eletricidade S.A. (Light SESA) - Publicly-held Company engaged in the

distribution of electric power;

Light Energia S.A. - (Light Energia) – Closely-held Company whose main activity is study,

plan, construct, operate and exploit electric power generation, transmission and sales systems,

and related services;

Light Esco Prestação de Serviços Ltda. - (Light Esco) – Company whose main activity is to

provide services related to co-generation, projects, management and solutions, such as

improving efficiency and defining energy matrixes and sale of energy on the free market;

Itaocara Energia Ltda. - (Itaocara Energia) – Pre-operating Company, primarily engaged in the

exploitation and production of electric power;

Lightger Ltda. (Light Ger) and Lighthidro Ltda. (Light Hidro) – Pre-operating companies both

to participate in auctions for concession, authorization and permission for new plants. On

December 24, 2008, Light Ger obtained the installation license that authorizes the start of

implementation works of Paracambi small hydroelectric power plant (PCH); and

Instituto Light para o Desenvolvimento Urbano e Social (Light Institute) – It is engaged in

participating in social and cultural projects, interest in the cities’ economic and social

development, affirming the Company’s ability to be socially responsible.

Grupo Light’s concessions and authorizations:






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Concessions / authorizations

Date of concession /

authorization Maturity Date

Generation, Transmission and Distribution (direct) July 1996 June 2026

Paracambi small hydroelectric power plant (PCH)

(indirect)

February 2001 February 2031

Itaocara hydroelectric power plant (indirect) March 2001 March 2036

2. PRESENTATION OF THE FINANCIAL STATEMENTS

The individual and consolidated financial statements including the notes thereto, are presented

in thousands of reais and other currencies, except when otherwise indicated and were prepared

in accordance with the accounting practices adopted in Brazil, which comprises the Brazilian

Corporation Law, Pronouncements, Guidances and Interpretations issued by the Brazilian

Committee on Accounting Pronouncements – CPC, rules issued by the Brazilian Securities and

Exchange Commission (“CVM”), and standards applicable to electric power public utility

concessionaires established by Brazilian Eletricity Regulatory Agency - ANEEL.

The Company and its subsidiaries adopt the chart of accounts and accounting instructions

contained in the Accounting Manual for the Electric Power Public Utility, enacted by ANEEL

Resolution nr. 444 of October 26, 2001 and further Amendments, Resolutions and Orders

issued by ANEEL.

When preparing the individual and consolidated financial statements of December 31, 2008,

the Company adopted for the first time the amendments to the Brazilian Corporation Law

introduced by Law nr. 11,638 approved on December 28, 2007 and respective modifications

introduced by Provisional Measure 449 of December 3, 2008. The adjustments related to these

modifications are detailed in the Note 3.

Given that the Company is comprised primarily of interests in other corporations, the notes to

the financial statements primarily reflect the accounting practices and breakdown of its

subsidiaries’ accounts.

The Board of Directors authorized the conclusion of these financial statements on February 13,

2009.

The financial statements as of December 31, 2007 were reclassified, where applicable, for

comparison purposes, as described below:






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Reclassification of reversal reserve (a)

Published Reclassification Adjusted

Fixed Assets

Property, Plant and Equipment

Special Obligations Linked to Concession (240,040) 69,933 (170,107)

Non-current Liabilities

Other Debts

Reversal Reserve - (69,933) (69,933)

Reclassification of employees profit sharing (b)

Cost of Goods and/or Services Sold

Personnel Expenses (180,740) 20,701 (160,039)

Selling Expenses (282,451) 2,181 (280,270)

General and Administrative Expenses (387,346) 9,961 (377,385)

Interest/Statutory Contributions

Interest - (32,843) (32,843)

(a) Special Obligations Linked to Concession included the amount of R$69,933 on December 31, 2007, referring to reversal reserve. This reserve derives from RGR (Global Reversal Reserve) funds, incurring financial charges that are yearly paid to Eletrobras. Thus, this liability is not classified as special obligations linked to concession and therefore, not reduced from property, plant and equipment account.

(b) For most appropriate presentation, management and employees profit sharing should be classified as profit sharing result under income tax. Thus, the Company reclassified the amounts related to employees profit sharing, under income tax, in the Statement of Income for 2007.

The Company made previous years adjustments which are reported retrospectively, as per chart

below:

P r e vi o us Y e a r

P ub l ish e d A d j u s tm e nt A d j us t e d

12 / 3 1/ 2 00 7 1 2/ 3 1 /2 0 0 7

R e c o v er a b le ta x e s ( no n -c u rr e nt ) 1 , 23 0 ,3 0 2 2 3 , 45 1 1 , 25 3 ,7 5 3

D e fe r re d I nc o m e T a x (i n c om e ) 85 5 ,1 3 2 ( 2 , 91 1 ) 85 2 ,2 2 1

N e t I nc o m e 1, 07 7 ,2 4 1 ( 2 , 91 1 ) 1 , 07 4 ,3 3 0

S ha r e ho l d e rs ' E q ui t y 2 , 66 8 ,3 4 8 2 3 , 45 1 2 , 69 1 ,7 9 9

C o nso l id a t e d

As detailed in Note 23(c), two prior years adjustments, were recognized both affecting

Deferred Income Tax Asset:

a) R$26,362 debiting Deferred Income Tax Asset and crediting Shareholders’ Equity,

with adjustments at the opening balances of 2007.






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b) R$2,911crediting Deferred Income Tax Asset and debiting 2007 expense-year

Deferred Income Tax.

Pursuant to CVM Resolution 506/06, the 2007 financial statements have been restated to

include these adjustments.

3. SUMMARY OF ACCOUNTING PRACTICES

3.1) Initial adoption of Law 11,638/07

The Company and its subsidiaries opted for preparing the transitional balance sheet on January

1, 2008, which is the basis for the accounting pursuant to the Brazilian Corporation Law

modified by Law 11,638/07 and Provisional Measure 449/08. Modifications introduced by this

law are characterized as changes in accounting practices. Nevertheless, as authorized by

Technical Pronouncement CPC 13 – Initial Adoption of Law 11,638/07, approved by CVM

Resolution 565 of December 17, 2008 and Provisional Measure 449/08, all the adjustments

affecting results both of parent company and subsidiaries, have been made against retained

earnings/(losses) on the transition date, pursuant to Article 186 of Law 6,404/76, without

retrospective effects on the financial statements.

a) Summary of main accounting practices modified by preliminary adoption of Law

11,638/07 and Provisional Measure 449/08:

Derivative financial instruments:

The Company and its subsidiaries contracted derivative financial instruments to minimize their

exposure to market risks related to currency fluctuations. These financial instruments are

classified at fair value through income.

Gains or losses resulting from fair value variation of derivative financial instruments are

recognized in the net income for the year.

Derivative financial instruments operations in 2007 were recorded in the balance sheet

including the accrued interest until the balance sheet date.

Transaction costs in the issue of securities:

Transaction costs related to funding when contracting debt instruments (debentures) were

recorded under liabilities as write-down account of Debentures and amortized based on same

debt amortization curve.

Until December 31, 2007, these costs were recorded as prepaid expenses and amortized on a

straight-line basis for the loan term.

Financial lease:

Financial lease agreements are recognized as fixed assets by its fair value, or if lower amount,

by present value of balance of minimum payments provided for in financial lease agreements

and depreciated by depreciation rates practiced by Company and its subsidiaries, according to






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the nature of each asset.

Respective balances payable of financial lease agreements are recognized in current and non-

current liabilities based on the present value of installments payable on the transition date. The

difference between the present value and the total amount of installments falling due is

appropriated to the statement of income as financial expense for the remaining duration of the

agreement by means of amortized cost method and based on effective interest rate.

This accounting practice had already been adopted in 2007 by the Company and its

subsidiaries.

Deferred assets:

The balance of deferred assets on the transition date was partially written-off against retained

earnings and partially reclassified to the group of fixed assets - construction in progress.

Present value adjustments:

The balance of accounts receivable deriving from renegotiation of consumers´ debts was

adjusted at present value, by using interest rates that reflect the nature of these assets in terms

of validity, risk, currency, receipt or payment conditions pre or post fixed.

The effects of present value adjustment deriving from the preliminary adoption of Law

11,638/07 and Provisional Measure 449/08 were recorded against retained earnings/(losses) on

the transition date.

Share-based remuneration plan:

The Company granted stock options to part of its employees, which may only be exercised

after specific grace periods. These options are valued based on the fair value and recognized as

expenses in conterpart to a specific account of Shareholders’ Equity to the extent that the

service period has been complied with.

No previous year adjustment has been recognized related to the adoption of Law 11,638/07,

since the plan has been granted in March 2008.

b) Effects of initial adoption of Law 11,638/07 and Provisional Measure 449/08:

The reconciliation of 2008 results and shareholders’ equity on December 31, 2008 considering

the effects of initial adoption of Law 11,638/07, including results that would be obtained if

changes in accounting practices related to said legislation have not been adopted, is presented

below.

Statement of effects on consolidated results and Shareholders’ Equity as of December 31, 2008

deriving from the InitialAdoption of Law 11,638/07 and Provisional Measure 449/08:






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Net Income

Shareholders'

Equity

Book balances according to the Law 11,638/07: 974,453 2,803,704

Adjustments resulting from initial adoption of Law 11,638/07 and Provisional Measure 449/08:

Financial instruments measured at fair value through income 60 60

Present value adjustment- Accounts receivable 6,181 23,802

Deferred assets (8,231) 34,863

Share-based payment expenses - 22,459

Temporary differences of Income and Social Contribution Taxes 677 (19,967)

Book balances excluding the effects of Law 11,638/07: 973,140 2,864,921

12/31/2008

Consolidated

Tax effects of adjustments deriving from the initial adoption of Law 11,638/07 and Provisional

Measure 449/08, where applicable, were recorded in the shareholders’ equity accounts on

which the refered adjustments were recorded in counterpart to the deferred tax assets or

liabilities equity accounts.

The equity adjustment deriving from the adoption of new law, recognized in subsidiaries under

shareholders’ equity, were also directly recorded in the parent company shareholders’ equity.

3.2) Summary of main accounting practices:

Determination of income

Income is determined pursuant to the accrual basis of accounting.

Revenues from all services rendered are recognized when earned. Electricity bills to all

consumers are issued monthly according to the reading calendar of meters. Unbilled

revenue, corresponding to the period between the date of last consumption reading and the

end of the month, is estimated and recognized as revenue in the month that energy was

consumed. Revenue is not recognized if its realization is uncertain.

Accounting Estimates

The preparation of the financial statements requires Management to be based on estimates

and its judgment when recording certain transactions that affect assets and liabilities,

revenues and expenses, as well as the disclosure of information in the financial statements.

Final results of these transactions and information upon their effective realization in

subsequent periods may differ from Management’s estimates and judgment. The Company

and its subsidiaries review estimates and assumptions, at least, yearly.

Main estimates related to the financial statements refer to the recording of effects deriving

from:

- provision for extraordinary tariff recovery credit within term established by ANEEL

(fully written-off until June 2008);

- allowance for doubtful accounts;

- provision for contingencies and supplementary private pension plans;

- recovery of deferred income and social contribution taxes; and

- market value of financial instruments.






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Financial revenues and expenses

Include interest, monetary and exchange rates variations incurring on rights and obligations

subject to monetary restatement until the balance sheet date and the hedge operations results,

which are appropriated to income according to the duration of agreements. Foreign currency

assets and liabilities are translated into Reais at the exchange rate reported by Brazilian

Central Bank on the balance sheet date. The net effect of these variations is reflected in the

net income for the year.

Net income (loss) per share

Determined taking into account the number of outstanding shares on the balance sheet date.

Non-derivative financial instruments

Include temporary cash investments, cash and cash equivalents, loans, financing and

debentures.

Non-derivative financial instruments are preliminarily recognized by fair value accrued of

transaction costs directly attributable.

Derivative Financial Instruments

The Company and its subsidiaries maintain derivative financial instruments to hedge against

foreign currency and interest rates risks.

Derivatives are preliminarily recognized by their fair value; attributable transaction costs are

recognized in income when they are incurred. Subsequently to the initial recognition,

derivatives are measured by fair value and changes are recorded in income.

Current and non-current assets

Consumers, concessionaires and permissionaires (Clients) – Include the supply of

electricity billed and to be billed (estimate), default surcharges, interest deriving from

payment in arrears and renegotiation of consumers debts, adjusted to present value when

applicable and energy sold to other concessionaires due to electric power supply according

to amounts made available within the scope of Electric Power Commercialization Chamber

(“CCEE”) and credits related to varied nature of regulatory assets.

Present value is calculated for each renegotiation transaction of consumers debt (payment by

installments), based on interest rates that reflect the term and the risk of each transaction, on

average, 1% per month. The conterpart of accounts receivable present value adjustment is

the financial result.

The allowance for doubtful accounts was established in amount considered sufficient by

Management to cover eventual losses in the realization of credits.

Inventories (including property, plant and equipment) – Inventories classified in Current

Assets (maintenance and administrative storehouse) and those allocated to investments,

classified in Non-Current Assets – Property, Plant and Equipment (works warehouse), are






01987-9 LIGHT S.A. 03.378.521/0001-75


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recorded at the average acquisition cost and do not exceed their replacement costs or

realization values, deducted from provision for losses, when applicable.

Investments – permanent equity interest in subsidiaries and associated companies are

valued by the equity accounting method. Other investments are valued at the acquisition cost

monetarily restated until December 31, 1995, deducted from provision for devaluation, when

applicable.

Property, plant and equipment – Recorded at the acquisition, formation or construction

cost, monetarily restated until December 31, 1995, deducted from accumulated depreciation.

Other expenditures are capitalized only when there is an increase in economic benefits of

this item. Any other type of expenditure is recognized in income as expense when incurred.

o Property, plant and equipment under Service – (“AIS”) – Include assets and facilities in

view of service granted, registered and controlled by means of the Registration Unit –

(“UC”) and Unit of Addition and Withdrawal – (“UAR”), by Assets Order – (“ODI”),

book account and date of transfer (capitalization) for Property, plant and equipment

under Service, as required by ANEEL.

o Depreciation – The depreciation is calculated by the straight-line method, based on

book balances recorded at the respective Registration Units – (“UC”). Annual rates

are determined in the chart attached to ANEEL Resolution nr. 240 of December 5,

2006, as disclosed in the Note 12.

o Construction in progress – (“AIC”) – Refers to fixed assets and facilities under

construction.

o General Management Apportionment (“RAG”) – Part of administrative and general

expenses, deriving from staff expenses, services rendered, leasing, rentals and other

are monthly appropriated to construction and other orders in progress, according to

the Accounting Manual published by ANEEL.

o Financial Charges – In view of provision in Accounting Instruction 6.3.10 of the

Accounting Manual for the Electric Power Public Utility, enacted by ANEEL

Resolution 444 of October 26, 2001 and CVM Resolution 193 of July 11, 1996,

interest rates, monetary variations and financial charges related to financing obtained

from third parties, effectively applied to construction in progress were appropriated to

the orders in progress as cost. Starting in 2008, Grupo Light capitalized financial

charges, in the amount of R$34,738.

Financial lease – Certain leasing agreements substantially transfer risks and benefits

inherent of an asset ownership to the Company and its subsidiaries. These agreements are

characterized as financial lease agreements and assets are recognized by fair value or present

value of minimum payments provided for in the agreement. Items recognized as assets are

depreciated considering depreciation rates applicable to each group of assets as described in

Note 12. Financial charges related to the financial lease agreements are appropriated to

income over the term of the agreement, based on the amortized cost method and effective

interest rate.

Intangible asset – Intangible assets of the Company and its subsidiaries comprise assets

acquired from third parties and are measured by total acquisition cost, deducted from






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accumulated amortization. Intangible assets with defined useful life are amortized on a

straight-line basis by the annual rate of 20%.

Impairment – Property, plant and equipment and intangible assets have their recoverable

value tested, at least, yearly, should exist signs of impairment.

Deferred Assets - Until 2007, these referred to pre-operating expenses, project

development expenses and environmental management systems. After Law 11,638/07,

R$10,176 were reclassified from balance existing on January 1,2008 to fixed assets and

R$43,094 were written-off against retained earnings.

Current and non-current liabilities – Recorded by their known or calculable values,

accrued, when applicable, of corresponding charges, monetary and exchange variations

incurred up to the balance sheet date. A provision is recognized in the balance sheet when

the Company and its subsidiaries have a real or legal obligation established as a result of

past event and it is likely that an economic resource will be required to settle the obligation.

Provisions are recorded based on the best estimates of risk involved.

Pension plan and post-employment benefits to employees – Costs subsidizing pension

plans and eventual plan deficits are recognized by the accrual basis and pursuant to CVM

Resolution nr. 371/00 and NPC 26 of IBRACON based on actuarial calculation prepared by

independent actuary.

When plan benefits are improved, the increase portion of benefit related to employees

services rendered in the past is recognized in income on a straight-line basis during the

average period until benefits are acquired. If criteria to obtain these benefits are immediately

met, expenses are immediately recognized in income.

The Company and its subsidiaries recognize all gains and losses deriving from defined

benefit plans directly defined in income.

Share-based remuneration plan – the effects of share-based remuneration plan are

calculated based on the fair value of equity instruments granted and recognized in the

balance sheet and in the statement of income as the contractual conditions are met.

Current and deferred income and social contribution taxes – Deferred and current income

and social contribution taxes are calculated based on the 15% rate, accrued of 10% surcharge

over excess taxable income of R$240 for income tax and 9% over taxable income for social

contribution on net income and take into account social contribution negative basis and tax

loss carryforward limited to 30% of book taxable income.

Deferred tax assets deriving from tax losses carryforward, negative social contribution basis

and temporary differences were established pursuant to CVM Instruction nr. 371 of June 27,

2002, and consider the profitability track record and the expectation of generating future

taxable income, based on feasibility technical study approved by Management bodies.

As provided for in Provisional Measure 449/08, the Company and its subsidiaries opted for

adopting the Transitory Tax Regime (RTT) when determining the book taxable income, so

that changes in the criterion to recognize revenues, costs and expenses considered in the

determination of net income for the year will not have effects for the purposes of






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determining book taxable income of company subject to RTT, and should consider for tax

effects the accounting methods and criteria effective on December 31, 2007.

Provision for contingencies – Recorded taking into account the evaluation and

quantification of lawsuits which the probability of loss is deemed as probable according to

Management’s and legal counsels’ opinion.

Correction of error – Pursuant to CVM Resolution nr. 506/06, the correction of error

amount should be stated retrospectively:

a. Adjusting the comparative amounts of previous year(s) on which the error has been

made; or

b. If the error occurred prior to the oldest reported period, considering the adjustment

to opening balance of assets, liabilities, retained earnings/(losses) of the oldest

reported period, so that other financial statements are reported as if the error had

not been made;

c. Detailing in the retained earnings/(losses) in the changes in shareholders’ equity,

the effects of correcting the error and the income originally determined.

As disclosed in Note 2, the Company is presenting the Financial Statements for 2007 which

were restated as consequence of adjustments and reclassifications of previous years.

Recording of electric power purchase and sale transactions through Electric Power

Commercialization Chamber (“CCEE”)– The cost of energy purchased and supply

revenues are recognized by accrual basis based on information published by Electric

Power Commercialization Chamber (“CCEE”), which is in charge of determining the

amount and quantities of purchases and sales made within a regulated environment, or by

Management’s estimate, when this information is not available.






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4. CONSOLIDATION PROCEDURES

Consolidated financial statements include Light S.A. and its direct and indirect subsidiaries,

listed below:

Interest

%

2008 (%) 2007 (%)

Light SESA 100 100

Light Energia 100 100

Light Esco 100 100

Light Ger 100 100

Light Hidro 100 100

Light Institute 100 100

Itaocara Energia 100 100

Accounting practices were consistently applied in all consolidated companies and compatible

with those employed in the previous year, except for the effects of Law 11,638/07.

These financial statements were prepared pursuant to consolidation rules of Law nr. 6,404/76,

amended by Law nr. 11,638/07 and Provisional Measure 449/08 and CVM Instruction nr.

247/96. Thus, interest between consolidated companies, balances of accounts receivable and

payable, intercompany revenues and expenses were eliminated.

Below, the income reconciliation of parent company and consolidated on December 31, 2008:

Consolidated net income on December 31, 2008 974,453

Previous year adjustment (1) 23,451

Parent company’s net income on December 31, 2008 997,904

(1) It refers to previous year adjustments with retrospective effects on its subsidiaries, due to

correction of errors, as disclosed in the Note 2.






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5. REGULATORY ASSETS AND LIABILITIES

12/31/2008 12/31/2007 12/31/2008 12/31/2007

Assets

Consumers, Concessionaries and Permissionaires (note 7) 67,977 95,114 - -

Extraordinary Tariff Recovery, net - 37,866 - -

Free energy, net - 16,354 - -

Tariff Readjustment - TUSD 67,977 40,894 - -

Prepaid Expenses (Note 9) 381,624 273,640 125,071 137,988

CVA - (b) 222,245 45,909 125,071 1,898

PIS and COFINS - (c)1 - 6,079 - -

Other Regulatories - (c)2 27,469 18,373 - -

Portion "A" - (a) 131,910 203,279 - 136,090

TOTAL ASSETS 449,601 368,754 125,071 137,988

Liabilities

Suppliers (note 14) - (16,053) - -

Free energy, net - (16,053) - -

Other Debts (note 19) (160,661) (131,567) (1,719) (21,502)

CVA - (b) (143,947) (76,686) (1,719) (21,502)

Other Regulatories (c)2 (16,714) (54,881) - -

TOTAL LIABILITIES (160,661) (147,620) (1,719) (21,502)

288,940 221,134 123,352 116,486

Consolidated

Current Non-current

a) Rationing:

The Emergency Power Rationing Program (“PERCEE”) was created on August 24, 2001 by

Provisional Measure 2,198 to align electricity demand and supply and avoid unplanned

interruption in power supply, and was effective from June 2001 through February 2002, at

which time the government considered reservoir levels to be back to normal.

In December 2001, the Brazilian government and the electric utilities executed the Electricity

Overall Agreement with electric power distribution and generation concessionaires to restore

the economic and financial breakeven of existing agreements and recover lost revenues relating

to the period in which the PERCEE was in effect.

This agreement addressed the following items related to the period the aforementioned

Emergency Program was in force: (i) margin losses incurred by distribution companies; (ii)

additional costs of “Portion A” for the period from January 1 to October 25, 2001; (iii) costs of

energy purchased through the Electric Power Commercialization Chamber (“CCEE”) owed to

generation companies not committed to energy “Initial Agreements” (called “free energy”),

carried out until December 2001; and (iv) replacement of the contractual right set forth in

Exhibit V of the Initial Agreements (energy purchase and sale) related to the rationing period.

For the post-rationing period, March to December 2002, the Electricity Overall Agreement set

the rate for trading excess energy from the Initial Agreements at R$73.39 per MWh.

The electric power distribution and generation companies revenues (“free energy”) for the

rationing period is being recovered through the “Extraordinary Tariff Recovery - RTE”, which

agreement only allowed for the billing related to revenue lost of the subsidiary Light SESA

through February 2008. In June 2008, Light SESA wrote off the items related to the






01987-9 LIGHT S.A. 03.378.521/0001-75


48

extraordinary tariff recovery, free energy and its respective provisions, without affecting the

income.

Due to the maturity of term for the RTE billing (Loss of Revenue), the Variation in “Portion

A” items (from 01/01/2001 to 10/25/2001) started to be recovered from March 2008 until the

time necessary for the amount approved by ANEEL has been fully recovered pursuant to

Directive Release nr. 267/04:

R e c o g n i ti o n : T o t a l A m o rt iz e d

R e so l u ti o n s N o . A c c u m u la t e d A c c u m u la t e d V a lu e B a la n c e t o

A S S E T S 4 8 2 /0 2 a n d 0 0 1 /0 4 R e m u n e ra t io n 2 0 0 8 2 0 0 8 A m o rti z e

(1 ) (2 ) ( 3 ) = (1 + 2 ) (4 ) (5 ) = (3 -4 )

P o rt io n A (fr o m 0 1 / 0 1 to 1 0 / 2 5 /2 0 0 1 ) 1 2 5 ,6 9 5 2 4 4 ,1 7 6 3 6 9 ,8 7 1 2 3 7 ,9 6 1 1 3 1 ,9 1 0

b) Memorandum account for Portion “A” Variations (“CVA”)

Records the variations during the period and the annual tariff adjustment based on the Central

Bank overnight rate (“SELIC”) for: purchase of energy; the tariff for transportation of electric

power from Itaipu; the Fuel Usage Quota (“CCC”); the Economic Development Account

(“CDE”); System service charges (“ESS”); the tariff for the use of transmission facilities of the

basic electric network; and compensation for the use of water resources (“CFURH”).

Breakdown of CVA

1 2 /3 1 / 2 0 0 8 1 2 / 3 1 /2 0 0 7 1 2 / 3 1 /2 0 0 8 1 2 /3 1 / 2 0 0 7

B re a k d o w n - C V A

F u e l U sa g e Q u o t a - C C C 1 4 1 ,6 5 0 - 3 1 ,8 7 1 -

T ra n sp o rt a ti o n o f e l e c tr ic p o w e r t o b a s ic e l e c t ric n e t w o r k 4 ,8 3 0 - 2 ,7 5 6 -

E n e rg y D e v e lo p m e n t A c c o u n t - C D E - 1 7 ,4 9 0 - 1 ,8 9 8

A c q u i s i ti o n c o s t o f e le c t ri c it y - 2 8 ,1 0 9 7 5 ,4 1 9 -

S ys te m S e rv ic e C h a r ge s - E S S 7 3 ,1 4 5 3 1 0 1 4 ,2 0 0 -

T ra n sp o rt a ti o n o f e l e c tr ic p o w e r fr o m It a ip u 2 ,6 2 0 - 8 2 5 -

T O T A L - C V A 2 2 2 ,2 4 5 4 5 ,9 0 9 1 2 5 ,0 7 1 1 ,8 9 8

1 2 /3 1 / 2 0 0 8 1 2 / 3 1 /2 0 0 7 1 2 / 3 1 /2 0 0 8 1 2 /3 1 / 2 0 0 7

B re a k d o w n - C V A

F u e l U sa g e Q u o t a - C C C - ( 7 0 ,8 3 6 ) - (5 ,8 7 1 )

E n e rg y D e v e lo p m e n t A c c o u n t - C D E (3 0 ,8 6 3 ) - (1 ,6 6 4 ) -

S ys te m S e rv ic e C h a r ge s - E S S - - - (4 ,0 0 5 )

P R O IN FA (3 ,1 5 0 ) ( 1 6 ) (5 5 ) (1 5 8 )

A c q u i s i ti o n c o s t o f e le c t ri c it y (1 0 9 ,9 3 4 ) - - (5 ,2 3 1 )

T ra n sp o rt a ti o n o f e l e c tr ic p o w e r fr o m It a ip u - ( 1 ,1 4 0 ) - (1 4 5 )

T ra n sp o rt a ti o n o f e l e c tr ic p o w e r t h ro u g h b a s i c e le c t ric n e tw o rk - ( 4 ,6 9 4 ) - (6 ,0 9 2 )

T O T A L - C V A (1 4 3 ,9 4 7 ) ( 7 6 ,6 8 6 ) (1 ,7 1 9 ) (2 1 ,5 0 2 )

C u rr e n t N o n -c u r re n t

C o n so li d a te d

A sse t s

N o n -c u r re n t


C u rr e n t

L i a b il it ie s

c) Periodic Tariff Review

In 2008, Light SESA undergone its second periodic tariff review, as per Technical Note

339/2008-SRE / ANEEL (see Note 37).

The periodic tariff review is required by law and electric power distribution public utility

concession agreements. Therefore, this is a legal and contractual liability, and ANEEL is liable






01987-9 LIGHT S.A. 03.378.521/0001-75


49

for its implementation, as provided for in paragraph 2 of Article 9 of Law 8,987 of February

13, 1995.

The second periodic tariff review was approved through Normative Resolution nr. 734 of

November 4, 2008, which established temporarily that electricity bills of Light SESA are

adjusted by 4.27%, being 1.96% related to tariff repositioning and 2.30% related to financial

components external to periodic tariff review.

(c1) -PIS and COFINS

Refers to the increase in the respective rates and the effect of changing the calculation of

PIS and COFINS to a noncumulative basis, as prescribed by Laws nr. 10,637/02 and nr.

10,833/03, as amended by Law nr. 10,865/04, that is reflected in the 2007 annual tariff

adjustment of the subsidiary Light SESA in accordance with Normative Resolution 563 of

November 6, 2007, amortized through October 2008.

(c2) - Other regulatory assets/liabilities

Finance costs transferred in the second tariff review of subsidiary Light SESA in

accordance with Normative Resolution nr. 734 of November 4, 2008, as per chart below:

Consolidated Approved Values

12/31/2008 10/31/2008

Other Regulatory Assets

Financial Adjustment TUSD Generating Companies 27,033 32,680

Guarantees at Auction (CCEAR) 113 136

Furnas Connection 174 210

"Luz para Todos" Program 149 181

TOTAL 27,469 33,207

Consolidated Approved Values

12/31/2008 10/31/2008

Other Regulatory Liabilities

Onlending of energy overcontracting, art.38 of Decree 5,163/04) (15,737) (18,956)

Boundary Adjustment (977) (1,182)

TOTAL (16,714) (20,138)

6. CASH AND CASH EQUIVALENTS

1 2 /3 1 / 2 0 0 8 1 2 / 3 1 /2 0 0 7 1 2 /3 1 / 2 0 0 8 1 2 /3 1 / 2 0 0 7

C a sh a v a i la b l e 5 0 1 2 9 4 1 ,0 2 9 8 8 ,8 6 5

T e m p o r a ry c a sh in v e s tm e n ts 4 0 ,2 0 6 2 ,4 0 7 5 4 9 ,0 9 7 4 0 1 ,3 4 6

T o t a l 4 0 ,2 5 6 2 ,5 3 6 5 9 0 ,1 2 6 4 9 0 ,2 1 1

1 2 /3 1 / 2 0 0 8 1 2 / 3 1 /2 0 0 7 1 2 /3 1 / 2 0 0 8 1 2 /3 1 / 2 0 0 7

F i n a n c ia l In v e s t m e n t s : Fe e M a t u ri ty D a t e

O v e r n ig h t (su b s id i a rie s L IR a n d L O I) - D a il y - - 9 9 2 2 9 9

C D B C D I D a il y 4 0 ,2 0 6 2 ,4 0 7 5 4 7 ,9 1 9 3 9 3 ,7 6 9

O t h e r C D I D a il y - - 1 8 6 7 ,2 7 8

T o t a l 4 0 ,2 0 6 2 ,4 0 7 5 4 9 ,0 9 7 4 0 1 ,3 4 6

P a r e n t C o m p a n y C o n so li d a t e d

P a r e n t C o m p a n y C o n so li d a t e d






01987-9 LIGHT S.A. 03.378.521/0001-75


50

7. RECEIVABLES FROM CONSUMERS, CONCESSIONAIRES AND

PERMISSIONAIRIES (CLIENTS)

1 2 / 3 1 /2 0 0 8 1 2 / 3 1 /2 0 0 7

C U R R E N T

B i ll e d S a l e s 1 ,7 2 9 ,8 8 5 1 ,4 4 2 ,6 3 9

U n b i ll e d S a l e s 2 6 0 ,3 6 1 2 7 3 ,1 1 1

D e b t s p a y m e n t b y in s t a ll m e n ts ( a ) 1 4 0 ,8 7 4 1 4 9 ,5 6 0

2 ,1 3 1 ,1 2 0 1 ,8 6 5 ,3 1 0

S a le s w i th i n th e s c o p e o f C C E E ( N o t e 2 9 ) 6 1 3 1 6 ,6 9 1

S u p p ly a n d c h a r ge s re l a te d t o th e u s e o f e l e c tr ic n e t w o r k 5 2 ,4 1 2 4 7 ,1 6 0

T a rif f re c o v e ra b l e c re d i ts ( N o t e 5 ) 6 7 ,9 7 7 4 0 ,8 9 4

F re e E n e rg y - i n d e m n i ty to g e n e r a ti o n c o m p a n i e s ( N o t e 5 ) - 1 6 ,3 5 4

E x tr a o rd i n a ry T a r iff R e c o v e ry -R T E (N o t e 5 ) - 3 7 ,8 6 6

1 2 1 ,0 0 2 1 5 8 ,9 6 5

2 ,2 5 2 ,1 2 2 2 ,0 2 4 ,2 7 5

(-) A l lo w a n c e fo r d o u b tf u l a c c o u n t s (b ) ( 9 0 1 ,2 9 0 ) ( 6 6 7 ,8 9 5 )

(-) A l lo w a n c e fo r d o u b tf u l a c c o u n t s - R T E - (1 1 ,2 7 1 )

1 ,3 5 0 ,8 3 2 1 ,3 4 5 ,1 0 9

N O N -C U R R E N T

D e b t p a y m e n t b y i n s t a ll m e n t s (a ) 2 9 2 ,5 9 4 3 2 6 ,0 6 6

F re e E n e rg y c h a rg e s - P IS /C O F IN S - 2 8 ,3 1 0

(-) P ro v i s io n f o r fr e e e n e rg y - P IS /C O F IN S - (2 8 ,3 1 0 )

F re e E n e rg y - i n d e m n i ty to g e n e r a ti o n c o m p a n i e s - 1 4 6 ,2 0 6

(-) P ro v i s io n f o r fr e e e n e rg y - (1 4 6 ,2 0 6 )

E x tr a o rd i n a ry T a r iff R e c o v e ry - R T E - 2 8 1 ,6 3 4

(-) P ro v i s io n f o r l o sse s i n e x t ra o rd i n a ry ta r iff re c o v e r y -R T E - (2 8 1 ,6 3 4 )

2 9 2 ,5 9 4 3 2 6 ,0 6 6


a) Debt installments are adjusted to present value, when applicable, pursuant to Law

nr.11,638/07.

b) The allowance for doubtful accounts was set up in amounts deemed sufficient to cover

eventual losses in the realization of credits and it is in accordance with ANEEL’s instructions

summarized below:

Clients with significant debts (large clients):

- Individual analysis of balance receivable from consumers, by consumption class, deemed

unlikely to be received.

In other cases:

- Residential consumers – past due for more than 90 days;

- Commercial consumers – past due for more than 180 days;

- Industrial and rural consumers, public sector, public lighting, public utilities and other – past

due for more than 360 days

Overdue and falling due balances related to electric power billed and renegotiated debts are

distributed as follows:






01987-9 LIGHT S.A. 03.378.521/0001-75


51

Maturing Overdue Overdue over

date up to 90 days 90 days Total

Residencial 187,010 135,907 758,851 1,081,768

Industrial 27,127 17,671 196,919 241,717

Commercial 130,691 38,719 177,802 347,212

Rural 584 272 531 1,387

Public Sector 27,355 19,330 95,172 141,857

Public Lighting 12,239 2,822 35,967 51,028

Public Utility 274,160 2,544 21,680 298,384

Billed Sales and renegotiated debts (Current and non-current) 659,166 217,265 1,286,922 2,163,353

Maturing Overdue Overdue over

date up to 90 days 90 days Total

Residencial 191,186 130,186 522,208 843,580

Industrial 25,071 18,647 176,576 220,294

Commercial 129,225 38,820 143,758 311,803

Rural 579 315 338 1,232

Public Sector 53,047 33,742 92,861 179,650

Public Lighting 12,517 4,340 31,361 48,218

Public Utility 302,770 10,718 - 313,488

Billed Sales and renegotiated debts (Current and non-current) 714,395 236,768 967,102 1,918,265

12/31/2007

12/31/2008

8. TAXES






01987-9 LIGHT S.A. 03.378.521/0001-75


52

Reconciliation of effective and nominal income and social contribution taxes rates:

1 2 / 3 1 /2 0 0 8 1 2 /3 1 / 2 0 0 7

E a rn in g s b e fo re i n c o m e a n d s o c ia l c o n tr ib u ti o n s t a x e s ( L A IR ) 1 ,3 0 7 ,5 1 1 5 0 5 ,1 9 8

P ro fi t s h a rin g (3 1 ,5 2 7 ) (3 2 ,8 4 3 )

A d j u s t e d in c o m e b a s i s fo r t a x a t io n 1 ,2 7 5 ,9 8 4 4 7 2 ,3 5 5

C o m b i n e d in c o m e a n d so c i a l c o n t rib u t io n t a x ra t e 3 4 % 3 4 %

In c o m e a n d so c i a l c o n t ri b u ti o n ta x e s a t s t a tu t o ry ra t e s (4 3 3 ,8 3 5 ) (1 6 0 ,6 0 1 )

In c o m e a n d s o c ia l c o n tr ib u t io n t a x e ffe c t o n p e rm a n e n t a d d iti o n s a n d e x c lu s i o n s 2 9 ,0 3 7 (7 ,3 6 0 )

In c o m e a n d s o c ia l c o n tr ib u t io n t a x e ffe c t o n e q u i ty in t h e e a rn in g s o f su b s i d ia r ie s 1 8 2 ,9 6 1 (3 9 ,9 8 6 )

D i ffe r e n c e b e tw e e n b a s i s o f c a l c u l a ti o n - in c o m e a n d so c i a l c o n t ri b u ti o n ta x e s 5 9 (2 ,4 1 2 )

In c o m e f ro m o f fsh o r e c o m p a n i e s - 2 0 0 8 (8 1 ,1 5 8 ) (6 1 ,4 5 7 )

T a x lo s s c a rry fo r w a rd – 3 0 % - n o t re c o g n iz e d in i n c o m e (4 9 0 ) 3 5 3

B a d d e b t lo s se s - 2 3 ,8 0 0

R e c o gn iti o n o f d e f e rre d a s se ts - 8 5 1 ,2 5 0

P ro v i s io n f o r in c o m e ta x lo ss - a d d i tio n a l p a y m e n t o f s t a te i n c o m e t a x - (4 ,1 6 2 )

T a x In c e n ti v e s 1 ,8 9 5 2 ,5 5 0

In c o m e a n d so c i a l c o n t ri b u ti o n ta x e s in i n c o m e (3 0 1 ,5 3 1 ) 6 0 1 ,9 7 5

C u rre n t IR P J a n d C S L L i n in c o m e (1 6 1 ,4 1 0 ) (2 5 0 ,2 4 6 )

D e f e rre d IR P J a n d C S L L i n in c o m e (1 4 0 ,1 2 1 ) 8 5 2 ,2 2 1

(3 0 1 ,5 3 1 ) 6 0 1 ,9 7 5

C o n so l id a t e d

a) Refers to tax credits arising from refunds from temporary cash investments and government

agencies. The variation of the amounts results of the monthly adjustment based on the

SELIC rate in the amount of R$14,064, new credits in the amount of R$69,100 and

compensations in the amount of R$33,686.

b) From 2007, having met all conditions set forth by the CVM Instruction 371/02, Light SESA

began to recognize deferred tax assets over temporary differences, and also reversed portion

of the provision for recovery of tax credits.

Identifying these deferred tax credits, Light SESA restated, already taking into account

realizations up to December 2008, technical feasibility studies approved by the Board of

Directors and evaluated by the Fiscal Council, based on the projections prepared in

December 2008, which indicated recovery within 11 years. The deferred tax assets include

amounts expected to be recoverable within 10 years, as set forth in refered CVM Instruction

and in the assumption of not being barred by law according to Income Tax Regulation. This

study was based on future taxable income expectations. The table below presents the

deferred tax assets installments by year of realization:

2 0 0 9 2 7 0 ,4 9 3

2 0 1 0 2 7 2 ,3 1 0

2 0 1 1 2 5 4 ,0 7 1

2 0 1 2 1 7 4 ,2 1 4

2 0 1 3 1 7 8 ,6 8 8

2 0 1 4 t o 2 0 1 6 1 0 1 ,6 8 0

2 0 1 7 t o 2 0 1 9 1 7 4 ,2 5 8

1 ,4 2 5 ,7 1 4

(-) P ro v is io n fo r n o n -re c o v e ry (1 1 8 ,4 6 2 )

T o t a l – L ig h t S A 1 ,3 0 7 ,2 5 2






01987-9 LIGHT S.A. 03.378.521/0001-75


53

Deferred taxes have been established based on the assumption of future realization, taking

into account:

i. Income tax loss carryforward and negative social contribution basis– these shall be

carried forward indefinitely, but realization is limited to 30% of net income for each future

fiscal year.

ii. Temporary differences – these will be realized upon the payment or reversal of the

provisions and/or the actual loss of doubtful accounts (PCLD).

Income tax and social contribution deferred tax assets result from income tax loss carryforward

and negative social Contribution basis and revenues/expenses (temporarily non-deductible

provisions) recognized in income, which will be added to/deducted from taxable income and

the social contribution tax basis in subsequent periods. Deferred tax assets are as follows:

12/31/2008 12/31/2007

ASSETS AND LIABILITIES - CURRENT AND NON-CURRENT

Tax loss carryforward and social contribution negative basis 770,681 808,588

Allowance for doubtful accounts 300,922 301,359

Provision for profit sharing 11,288 9,897

Provision for labor contingencies 56,007 55,148

Provision for tax contingencies 136,060 261,419

Provision for civil contingencies 94,932 89,732

Impacts resulting from the adoption of Law No 11, 638/07 19,967 -

Other provisions 31,592 35,385

1,421,449 1,561,528

(-) Provision for non-recovery (118,462) (118,462)

Total - Light SESA 1,302,987 1,443,066

Tax loss carryforward and social contribution negative basis - Light Energia and Light Esco 4,265 839

Total - Consolidated 1,307,252 1,443,905

Consolidated

c) Tax Debt Refinancing Program – PAES (REFIS II) – Law nr. 10,684 of May 31, 2003

introduced the Tax Debt Refinancing Program (PAES), designed to settle debts owed by

legal entities to the Federal Government related to taxes administered by the Internal

Revenue Service, National Treasury Attorney General, and National Institute of Social

Security (“INSS”). The deadline for opting for the installment plan was July 31, 2003 but

was subsequently extended to August 29, 2003.

The balance related to PIS and COFINS as of December 31, 2008 is R$12,156 (R$18,745

on December 31, 2007).

Light SESA filed its application for PAES (60.213.452-8) with the INSS on July 31, 2003.

The debt included in PAES was R$59,975 (net of a 50% fine reduction), which was under

judicial dispute while the subsidiary was seeking recovery of the amounts paid for

occupational accident insurance. The consolidated debt amount has already been ratified by

the INSS and payment is to be made in 120 monthly installments. As of December 31,

2008, the subsidiary has paid 66 installments. The installments were calculated based on the

total debt divided by the number of installments, subject to the “TJLP” (long-term interest

rate). The balance as of December 31, 2008 is R$37,223 (R$43,531 on December 31, 2007).






01987-9 LIGHT S.A. 03.378.521/0001-75


54

d) On February 20, 2003, Light SESA filed Writ of Mandamus 2003.51.01.005514-8

requesting an injunction that would release it from the payment of levied income and social

contribution taxes on:

(i) Profits earned by the companies LIR Energy Limited (LIR) and Light Overseas

Investment Limited (LOI) before they are effectively available, in which case sole

paragraph, Article 74 of Provisional Measure 2,158-35, of August 24, 2001 (MP 2,158-

35), for the periods from 1996 to 2001, shall not apply;

(ii) Profits earned by the companies LIR and LOI before they are effectively available, in

which case Article 74, caput, of Provisional Measure 2,158-35/01, for calendar year

2002 and following years shall not apply;

The injunction was granted to Light SESA but was subsequently dismissed in the decision.

The appeal resulted in the suspension of the tax levies and allowed the case to be remanded.

The Federal Government filed an interlocutory appeal against this decision, which was

accepted. Light filed an internal interlocutory appeal, which had a favorable decision in

March 2007, re-establishing the suspension of the tax levies. The Federal Government filed

a special appeal against such decision, which is pending judgment.

Subject to the decision on writ of mandamus 2003.51.01.005514-8, which suspended the

collection of income and social contribution taxes, the Company is currently awaiting

decision by the Regional Federal Court - 2nd

Region on the appeal filed by the Ministry of

Finance.

Based on this court decision, Light SESA suspended the payment of income and social

contribution taxes on taxable income related to the profits earned by companies located

abroad for the years 2004, 2005, 2006, 2007 and 2008.The provision as of December 31,

2008 is R$286,337 (R$256,742 on December 31, 2007).

As part of the dissolution process of LOI, concluded in 2008, as per ANEEL’s resolution,

the investee settled all its Assets and Liabilities and distributed dividends in the total

amount of U$105,976, corresponding to R$176,400, R$130,836 of which in March 2008

and R$45,564 in April 2008. The distribution of dividends is characterized as profits

available for the purposes of income tax and social contribution taxation in Light SESA,

whose amount calculated and paid accounted for R$31,139 in March 2008 and R$10,844 in

April 2008.

e) The amount of the state VAT (“ICMS”) recovery on December 31, 2008 includes R$72,011

(R$109,283 on December 31, 2007) of credits deriving from the renegotiations of the

CEDAE debt in July and December 2006.

f) Refers to the tax credits to offset derived from the adjustment of PIS and COFINS

calculation bases in the period from February 2004 through April 2008, due to the use of

some segment charges, such as calculation basis deduction from these taxes. In relation to

the period from November 2005 through April 2008, the amount related to credits assessed

is being transferred to consumers. Thus, the amount of R$46,893 is recorded in other debits

(see Note 19).






01987-9 LIGHT S.A. 03.378.521/0001-75


55

9. PREPAID EXPENSES

1 2 /3 1 / 2 0 0 8 1 2 /3 1 / 2 0 0 7 1 2 / 3 1 /2 0 0 8 1 2 / 3 1 /2 0 0 7

C U R R E N T

C V A (N o t e 5 ) - - 2 2 2 ,2 4 5 4 5 ,9 0 9

P IS a n d C O F IN S ( ta x e s o n re v e n u e s) – IR T (N o te 5 ) - - - 6 ,0 7 9

F in a n c i a l C o m p o n e n ts – IR T (N o te 5 ) - - 2 7 ,4 6 9 1 8 ,3 7 3

O v e r a ll A g re e m e n t f o r E le c t ri c P o w e r S e c to r – P o r ti o n "A " (N o te 5 ) - - 1 3 1 ,9 1 0 2 0 3 ,2 7 9

S w a p p r e m i u m - - - 5 4 4

O t h e r 1 3 5 1 7 1 1 ,6 6 7 1 ,4 3 4

T o t a l 1 3 5 1 7 1 3 8 3 ,2 9 1 2 7 5 ,6 1 8


C V A - (N o te 5 ) - - 1 2 5 ,0 7 1 1 ,8 9 8

O v e r a ll A g re e m e n t f o r E le c t ri c P o w e r S e c to r – P o r ti o n "A " (N o te 5 ) - - - 1 3 6 ,0 9 0

E x p e n se s r e la t e d to t h e is su e o f d e b e n t u re s ( a ) - - - 1 3 ,2 9 2

O t h e r - - 4 ,3 6 4 7 ,7 5 0

T o t a l - - 1 2 9 ,4 3 5 1 5 9 ,0 3 0

P a re n t C o m p a n y C o n s o li d a te d

(a) Pursuant to CPC 08 – Transactions costs and premium on the issue of securities, approved

on November 12, 2008 by CVM Resolution nr. 556/08, costs of these transactions should be

reclassified to a specific account, according to the nature of operation. Thus, the Company

reclassified this balance to the write-down account of debentures.

10. OTHER RECEIVABLES

1 2 / 3 1 /2 0 0 8 1 2 / 3 1 /2 0 0 7 1 2 /3 1 / 2 0 0 8 1 2 /3 1 / 2 0 0 7

C U R R E N T

L o w -i n c o m e c o n su m e rs - - 1 ,0 4 5 1 ,1 2 8

A d v a n c e s to s u p p lie rs a n d e m p lo y e e s 3 0 1 5 1 1 ,8 3 5 7 ,6 7 7

E m p l o ye e s t e m p o r a ri ly tra n s fe rr e d to o t h e r c o m p a n ie s - - - 1 ,3 2 4

P u b li c li g h ti n g f e e - - 2 5 ,7 4 0 2 0 ,1 7 7

P ro p e rt y r e n ta l - - 1 1 3 2 ,1 3 9

S u b s i d y t o lo w -in c o m e se g m e n t (c ) - - 4 9 ,9 2 6 -

E x p e n d it u re s t o re fu n d - - 1 3 ,3 6 0 -

O t h e r 1 3 7 1 5 1 5 ,8 6 0 3 ,6 3 6

T o ta l 1 6 7 1 6 6 1 0 7 ,8 7 9 3 6 ,0 8 1


P IS a n d C O F IN S r e c o v e ra b l e (a ) - - - 8 4 ,2 7 1

P ro v i s io n f o r C V A (b ) - - 1 3 ,3 2 9 6 2 5

A s se ts a n d rig h t s fo r d isp o s a l - - 1 1 ,5 9 7 1 1 ,5 9 7

O t h e r - - 1 ,4 9 4 6 9 5

T o ta l - - 2 6 ,4 2 0 9 7 ,1 8 8

P a r e n t C o m p a n y C o n so l id a te d

a) Refers to tax credits reviewing the determination of PIS/COFINS over sector charges,

which were transferred in the second quarter of 2008 to “recoverable taxes” (see Note 8-f).

b) Refers to amounts determined in current month which will be transferred to the Regulatory

Asset upon effective cash outlay.

c) Refers to credits from low-income subsidies which have not yet been authorized by

ANEEL.






01987-9 LIGHT S.A. 03.378.521/0001-75


56

11. INVESTMENTS

1 2 /3 1 / 2 0 0 8 1 2 / 3 1 /2 0 0 7 1 2 / 3 1 /2 0 0 8 1 2 /3 1 / 2 0 0 7

A c c o u n t e d fo r u n d e r th e e q u it y m e th o d :

L i g h t S E S A 2 ,5 9 8 ,5 4 1 2 ,5 2 2 ,6 1 2 - -

L i g h t E n e rg i a S .A . 1 4 3 ,0 5 4 1 2 7 ,0 8 0 - -

L i g h t E sc o P re s ta ç ã o d e S e r v iç o s L td a 1 7 ,0 4 2 1 1 ,3 4 7 - -

L i g h tg e r L td a ( a ) 3 ,2 8 9 3 ,2 8 9 - -

L i g h th i d ro L t d a (a ) 5 0 5 0 - -

Ita o c a r a E n e rg ia ( a ) 8 4 9 8 4 9 - -

S u b t o ta l 2 ,7 6 2 ,8 2 5 2 ,6 6 5 ,2 2 7 - -

A c c o u n t e d fo r a t c o s t (a d j u s te d u p to D e c e m b e r 3 1 , 1 9 9 5 , w h e n a p p l ic a b l e ) - - 3 ,7 9 6 3 ,7 9 6

L e a s e d A ss e ts - - 7 ,0 9 7 8 ,0 9 9

O t h e r 1 ,5 3 3 1 ,1 6 7 2 ,7 2 2 1 ,2 6 2

S u b - T o t a l 1 ,5 3 3 1 ,1 6 7 1 3 ,6 1 5 1 3 ,1 5 7

T o t a l 2 ,7 6 4 ,3 5 8 2 ,6 6 6 ,3 9 4 1 3 ,6 1 5 1 3 ,1 5 7

Pa re n t C o m p a n y C o n so l id a t e d

(a) Pre-operating companies

INFORMATION ON SUBSIDIARIES

CHANGES IN INVESTMENTS IN SUBSIDIARIES AND ASSOCIATED COMPANIES






01987-9 LIGHT S.A. 03.378.521/0001-75


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12. PROPERTY, PLANT AND EQUIPMENT

1 2 /3 1 / 2 0 0 7

P r o p e rty , P la n t a n d E q u ip m e n t

A c ti v ity H is t o ri c a l C o s t

A c c u m u la t e d

D e p re c i a ti o n N e t V a l u e

N e t V a l u e

(R e c la ss ifi e d )

G e n e ra t io n 9 4 9 ,1 0 7 ( 4 2 8 ,4 0 6 ) 5 2 0 ,7 0 1 5 3 6 ,3 6 5

T ra n s m i ss i o n 1 7 ,2 9 9 ( 7 ,9 3 6 ) 9 ,3 6 3 9 ,6 9 9

D is tri b u ti o n 6 ,0 2 4 ,5 2 0 ( 2 ,8 9 5 ,6 2 9 ) 3 ,1 2 8 ,8 9 1 2 ,8 7 6 ,4 4 2

A d m i n is tra t io n 2 5 6 ,4 1 6 ( 1 5 3 ,0 5 8 ) 1 0 3 ,3 5 8 1 4 0 ,3 4 5

S a l e s 3 6 ,1 3 5 ( 2 1 ,2 1 5 ) 1 4 ,9 2 0 6 3 ,3 0 4

In S e r v ic e 7 ,2 8 3 ,4 7 7 ( 3 ,5 0 6 ,2 4 4 ) 3 ,7 7 7 ,2 3 3 3 ,6 2 6 ,1 5 5

G e n e ra t io n 6 4 ,5 6 1 - 6 4 ,5 6 1 3 1 ,1 2 0

D is tri b u ti o n 3 2 8 ,7 8 4 - 3 2 8 ,7 8 4 2 4 9 ,6 8 9

A d m i n is tra t io n 4 4 ,4 5 1 - 4 4 ,4 5 1 3 0 ,0 2 7

S a l e s 1 ,6 3 1 - 1 ,6 3 1 5 ,1 7 0

In P r o gr e ss 4 3 9 ,4 2 7 - 4 3 9 ,4 2 7 3 1 6 ,0 0 6

T o t a l P ro p e r ty , P la n t a n d E q u ip m e n t 7 ,7 2 2 ,9 0 4 ( 3 ,5 0 6 ,2 4 4 ) 4 ,2 1 6 ,6 6 0 3 ,9 4 2 ,1 6 1

S p e c i a l o b l ig a t io n s li n k e d to c o n c e s s io n ( a ) (1 5 8 ,3 3 6 ) 1 ,0 3 4 (1 5 7 ,3 0 2 ) (1 7 0 ,1 0 7 )

T o t a l P ro p e r ty , P la n t a n d E q u ip m e n t, n e t 7 ,5 6 4 ,5 6 8 ( 3 ,5 0 5 ,2 1 0 ) 4 ,0 5 9 ,3 5 8 3 ,7 7 2 ,0 5 4


1 2 / 3 1 /2 0 0 8

a) The balance of special obligations derives from the consumer’s financial income,

appropriation of the Federal Government and federal, state and municipal funds to finance

the work necessary to meet the electric power demand.


1 2 / 3 1 /2 0 0 8 1 2 /3 1 / 2 0 0 7

C o n su m e r c o n tri b u ti o n 1 0 9 ,0 3 5 1 2 3 ,4 8 4

C o n su m e r c o n tri b u ti o n d e p re c i a ti o n (7 0 2 ) -

D o n a t io n s /su b s id i e s fo r i n v e s t m e n t s 3 7 ,6 3 9 3 7 ,4 7 8

D e p r e c ia t io n o f d o n a ti o n s /s u b s id i e s fo r in v e s tm e n ts (2 5 3 ) -

R e se a rc h a n d D e v e lo p m e n t 1 1 ,6 6 2 9 ,1 4 5

D e p r e c ia t io n o f re se a r c h a n d d e v e lo p m e n t (7 9 ) -

T o t a l 1 5 7 ,3 0 2 1 7 0 ,1 0 7

The maturity of these special obligations is established by the Regulatory Agency, ANEEL,

and will occur at the end of the concession period, through a reduction in the residual value of

property, plant and equipment for the purposes of determining the indemnity to be paid by the

Granting Power to the concessionaire.

In accordance with Articles 63 and 64 of Decree 41,019 of February 26, 1957, assets and

facilities used in the generation, transmission, distribution and sale of electric power are linked

to these services and cannot be removed, sold, assigned or pledged as mortgage guarantees

without the prior and express authorization of the regulatory agency. ANEEL Resolution

nr.20/99 regulates the removal of restrictions of electric power public utility concession assets,

requiring previous approval to selling an asset tied to the concession, and requires that the

proceeds from the sale be deposited in a restricted bank account, and invested in the

concession.

ANEEL Regulatory Resolution nr.234 of October 31, 2006, established the general concepts,

methodologies and initial procedures to carry out the second cycle of periodic tariff review, the

subsidiary Light SESA has undergone in November 2008 and determines that special






01987-9 LIGHT S.A. 03.378.521/0001-75


58

obligations shall be amortized at same depreciation rates, using an average rate from tariff

review. Thus, amortization average rate of special obligations is 3.5% and was determined

taking into account distribution registration units.

Change in property, plant and equipment:

B a la n c e s o n B a l a n c e s o n

1 2 / 3 1 /2 0 0 7 A d d it io n s W r it e -o ff s S e rv i c e O t h e r 1 2 /3 1 / 2 0 0 8

A S S E T S U N D E R S E R V IC E

C o st

G e n e ra t io n 9 4 2 ,0 4 4 8 ,6 6 3 (1 ,6 0 0 ) - - 9 4 9 ,1 0 7

T ra n s m i ss i o n 1 7 ,2 9 9 - - - - 1 7 ,2 9 9

D is tri b u ti o n 5 ,4 2 6 ,4 5 8 4 3 6 ,0 5 4 (7 4 ,7 7 4 ) - 2 3 6 ,7 8 2 6 ,0 2 4 ,5 2 0

S a l e s 2 3 0 ,0 3 1 7 6 1 (2 ,1 8 1 ) - (1 9 2 ,4 7 6 ) 3 6 ,1 3 5

A d m i n is tra t io n 2 9 9 ,5 3 4 6 ,0 1 4 (3 ,8 9 2 ) - (4 5 ,2 4 0 ) 2 5 6 ,4 1 6

T o t a l a ss e ts u n d e r se rv i c e 6 ,9 1 5 ,3 6 6 4 5 1 ,4 9 2 (8 2 ,4 4 7 ) - (9 3 4 ) 7 ,2 8 3 ,4 7 7

( -) D e p re c i a ti o n

G e n e ra t io n (4 0 5 ,6 7 9 ) ( 1 7 ,8 6 4 ) 1 ,1 2 5 - (5 ,9 8 8 ) (4 2 8 ,4 0 6 )

T ra n s m i ss i o n (7 ,6 0 0 ) ( 3 3 5 ) - - - (7 ,9 3 5 )

D is tri b u ti o n (2 ,5 5 0 ,0 1 6 ) ( 2 3 2 ,4 1 2 ) 4 8 ,3 2 1 - (1 6 1 ,5 2 2 ) (2 ,8 9 5 ,6 2 9 )

S a l e s (1 6 6 ,7 2 7 ) ( 7 ,7 0 1 ) 2 ,1 5 1 - 1 5 1 ,0 6 3 (2 1 ,2 1 4 )

A d m i n is tra t io n (1 5 9 ,1 8 9 ) ( 1 2 ,9 5 7 ) 2 ,2 4 6 - 1 6 ,8 4 0 (1 5 3 ,0 6 0 )

T o t a l a ss e ts u n d e r se rv i c e - d e p r e c ia t io n (3 ,2 8 9 ,2 1 1 ) ( 2 7 1 ,2 6 9 ) 5 3 ,8 4 3 - 3 9 3 (3 ,5 0 6 ,2 4 4 )

C O N S T R U C T IO N IN P R O G R E S S

G e n e ra t io n 3 1 ,1 2 0 4 2 ,2 6 2 - (7 ,8 3 7 ) (9 8 4 ) 6 4 ,5 6 1

T ra n s m i ss i o n - - - - - -

D is tri b u ti o n 2 4 9 ,6 8 9 6 5 8 ,1 9 6 (1 ,9 2 4 ) (4 2 6 ,1 4 8 ) (1 5 1 ,0 2 9 ) 3 2 8 ,7 8 4

S a l e s 5 ,1 7 0 1 ,1 4 6 - (4 ,6 8 5 ) - 1 ,6 3 1

A d m i n is tra t io n 3 0 ,0 2 7 2 7 ,5 9 6 - (1 3 ,1 7 2 ) - 4 4 ,4 5 1

T o t a l c o n s t ru c t io n i n p ro g re s s 3 1 6 ,0 0 6 7 2 9 ,2 0 0 (1 ,9 2 4 ) (4 5 1 ,8 4 2 ) (1 5 2 ,0 1 3 ) 4 3 9 ,4 2 7

T O T A L P R O P E R T Y , P L A N T A N D E Q U IP M E N T 3 ,9 4 2 ,1 6 1 9 0 9 ,4 2 3 (3 0 ,5 2 8 ) (4 5 1 ,8 4 2 ) (1 5 2 ,5 5 4 ) 4 ,2 1 6 ,6 6 0


T ra n sfe r b e t w e e n a c c o u n ts

i) There are no assets or rights belonging to the Federal Government in use at the subsidiary

Light SESA.

ii) Construction in progress includes inventories of materials for projects totaling R$53,463 as

of December 31, 2008 (R$35,200 on December 31, 2007) and a provision for inventory loss of

R$1,488 (R$2,710 on December 31, 2007).

iii) Annual depreciation rates

Main depreciation rates, according to ANEEL Resolution nr.240 of December 5, 2006 are

the following:

G e n e ra t i on ( % ) D i s t ri b u t i on (% ) S a le s ( % ) A d m i n i s t ra t io n ( % ) T ra n sm i s s io n ( % )

B u s 2 . 5 C a p a c i to rs b a nk 6 .7 B u il d in gs 4 . 0 B u i l d i n gs 4 .0 S y s t e m c o nd u ct o r 2 .5

D isc o n ne c t o r 3 . 0 D i s t ri b u t i on k e ys 6 .7 G e ne r al eq u ip m e n t 1 0 . 0 G e n e ra l e q u i p m e nt 1 0 .0 G e ne r al eq u ip m e n t 1 0 .0

B u il d in gs 4 . 0 S ys te m co n d uc t or 5 .0 V e h i c le s 2 0 . 0 V e h ic l e s 2 0 .0 S y s t e m s t ru c tu r e 2 .5

I n t a ke eq u ip m e n t 3 . 7 D i sc o nn e c to r 3 .0 C o nn e c to rs 4 .3

I n t a ke s tr uc t u re 4 . 0 B u i l d i ng s 4 .0

G e ne r at o r 3 . 3 S ys te m s tr uc t u re 5 .0

E n gi n e g r o up – g e ne r a to r 5 . 9 M e t e r 4 .0

R e se rv o ir s , da m s a nd w a te r m a i ns 2 . 0 V o l ta g e r e gu la t o r 4 .8

L o c a l c om m un ic a t i on sy s t em 6. 7 C o n ne c t o r 4 .3

H yd ra u li c t u rb i ne 2 . 5 T ra n s fo r m e r 5 .0

A v e ra g e d e p re c i a ti o n ra t e A v e ra g e d ep r e c ia t i on r a te A v e ra g e d e p re c i a ti o n ra t e A v e ra g e d e pr e c ia t i on r a te A ve ra g e d e p re c i a ti o n ra t e

G e ne r at i o n 3 . 8 D i s t ri b u t i on 4 .9 S a l e s 1 1 . 3 A d m i n i s t ra t io n 1 1 .3 T r a nsm is s io n 4 .8






01987-9 LIGHT S.A. 03.378.521/0001-75


59

iv) Universalization of electric power public utility.

Pursuant to Decree nr.4,873 of November 11, 2003, the National Program for Universalization

of Electric Power Access and Use of Electric Power was created with a view to providing

electricity in rural areas – the Program called “Luz para Todos” (Light for All), free of charge

to clients. This decree defined the allocation of sector funds (CDE and RGR) and States to

finance the universalization in rural areas and until 2008 provide electricity to the Brazilian

rural population which still does not have access to this type of public utility.

New 1,001(*)

consumers were connected with total cost estimated at R$10.380. In September

2007, Light SESA concluded all the installations expected for this program. Even after the

achievement of universalization targets submitted to ANEEL, Light SESA continued

connecting households, whose characteristics fit into the Universalization Program.

To execute this program, Eletrobras authorized R$1,200 and Light SESA participated with the

amount of R$8,836.

(*) Unaudited information

13. INTANGIBLE ASSETS

1 2 /3 1 / 2 0 0 7

IN T A N G IB L E A S S E T S

A C T IV IT Y H i sto r i c a l C o st

A c c u m u la t e d

A m o r tiz a t io n N e t V a lu e N e t V a l u e

I n ta n g ib l e A s se ts

D i s t rib u t io n 1 8 2 ,5 6 5 (1 5 6 ,6 1 2 ) 2 5 ,9 5 3 3 1 ,4 4 0

G e n e r a ti o n 5 ,7 9 9 (5 ,6 3 6 ) 1 6 3 5 7 3

A d m in i s t ra ti o n 6 3 ,7 5 0 (5 1 ,1 7 1 ) 1 2 ,5 7 9 1 4 ,3 6 8

S a le s 1 6 3 ,4 9 6 (8 7 ,5 5 6 ) 7 5 ,9 4 0 8 8 ,2 8 6

I n S e r v ic e 4 1 5 ,6 1 0 (3 0 0 ,9 7 5 ) 1 1 4 ,6 3 5 1 3 4 ,6 6 7

D i s t rib u t io n 1 3 ,0 9 1 - 1 3 ,0 9 1 8 ,9 3 2

G e n e r a ti o n 1 1 7 ,6 5 8 - 1 1 7 ,6 5 8 1 0 2 ,8 1 3

A d m in i s t ra ti o n 3 5 ,1 4 6 - 3 5 ,1 4 6 2 4 ,6 7 8

S a le s 4 2 8 - 4 2 8 -

I n P r o g r e s s 1 6 6 ,3 2 3 - 1 6 6 ,3 2 3 1 3 6 ,4 2 3

T o ta l In ta n g i b le A sse t s , n e t 5 8 1 ,9 3 3 (3 0 0 ,9 7 5 ) 2 8 0 ,9 5 8 2 7 1 ,0 9 0

1 2 /3 1 / 2 0 0 8

C o n s o li d a te d

Grupo Light classifies Softwares as intangible assets, which are amortized at a rate of 20% p.a.,

and Right-of-Ways, which are not amortized, as represent the right to use certain areas of land,

usually associated with a Transmission and Distribution Line.






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14. SUPPLIERS

15. LOANS, FINANCING AND FINANCIAL CHARGES

Date of

Financing Entity Signature Current Non-current Current Non-current PRPayment

Beginning End

TN - Par Bond 4/29/1996 - 90,955 1,175 - US$ 6.0000% 1 Sole 2024 2024

TN - Collateral - Par Bond 4/29/1996 - (43,507) - - US$ U$ Treasury 1 Sole 2024 2024

TN - Discount Bond 4/29/1996 - 63,465 511 - US$ Libor + 13/16 1 Sole 2024 2024

TN - Collateral - Discount Bond 4/29/1996 - (30,519) - - US$ U$ Treasury 1 Sole 2024 2024

TN - Flirb 4/29/1996 1,159 - 9 - US$ Libor + 13/16 5 Semiannually 2003 2009

TN - C. Bond 4/29/1996 7,731 34,790 726 - US$ 8.0000% 15 Semiannually 2004 2014

TN - Debit. Conv. 4/29/1996 8,660 21,650 248 - US$ Libor + 7/8 11 Semiannually 2004 2012

TN - New Money 4/29/1996 1,142 - 9 - US$ Libor + 7/8 5 Semiannually 2001 2009

TN - Bib 4/26/1996 281 1,124 26 - US$ 6.0000% 13 Semiannually 1999 2013

BNDES - Imports 3/27/1998 1,791 597 9 - Umbndes BNDES Basket + 4% 37 Monthly 2000 2010

Societe Generale II 7/20/2000 4,399 - 10 - US$ Libor + 0.65% 6 Semiannually 2003 2009

KFW III , IV and V - Tranche A/B/C 11/3/2000 2,048 1,932 1 - US$ Libor + 0.65% 8 Semiannually 2003 2010

Foreign Currency 27,211 140,487 2,724 -

Eletrobrás Several 7,698 3,105 249 - Ufir 5.0000% from 2 to 120Monthly and

Quarterly

2013 to

2017

CCB Bradesco 10/18/2007 - 450,000 14,014 - Cdi CDI + 0.85% 10 Annual 2012 2017

BNDES - FINEM 11/5/2007 58,797 372,382 1,883 - Tjlp TJLP + 4.3% 66 Monthly 2009 2014

Working Capital - ABN Amro 8/27/2008 - 80,000 3,919 - Cdi CDI + 0.95% 4 Semiannually 2009 2010

BNDES - PROESCO 12/12/2008 20 576 - - Tjlp TJLP + 2.5% 60 Monthly 2009 2014

Sundry banking warranties - - 284 -

Domestic Currency 66,515 906,063 20,349 -

Overall Total 93,726 1,046,550 23,073 -

Consolidated

Interest Rate p.a.

Reference Date 12/31/2008

Principal Charges

12/31/2008

Currency/ Index

Date of

Financing Entity Signature Current Non-current Current Non-current PR Payment Beginning End

TN - Par Bond 4/29/1996 - 68,938 890 - US$ 6.0000% 1 Sole 2024 2024

TN - Collateral - Par Bond 4/29/1996 - (28,854) - - US$ U$ Treasury 1 Sole 2024 2024

TN - Discount Bond 4/29/1996 - 48,103 657 - US$ Libor + 13/16 1 Sole 2024 2024

TN - Collateral - Discount Bond 4/29/1996 - (20,269) - - US$ U$ Treasury 1 Sole 2024 2024

TN - Flirb 4/29/1996 1,757 878 36 - US$ Libor + 13/16 5 Semiannually 2003 2009

TN - C. Bond 4/29/1996 5,609 29,845 606 - US$ 8.0000% 15 Semiannually 2004 2014

TN - Debit. Conv. 4/29/1996 6,563 22,972 407 - US$ Libor + 7/8 11 Semiannually 2004 2012

TN - New Money 4/29/1996 1,731 865 36 - US$ Libor + 7/8 5 Semiannually 2001 2009

TN - Bib 4/26/1996 213 1,065 24 - US$ 6.0000% 13 Semiannually 1999 2013

BNDES - Imports 3/27/1998 1,338 1,784 13 - Umbndes Cesta BNDES + 4% 37 Monthly 2000 2010

KFW 1 - Tranche A 8/12/1999 295 - 7 - US$ Libor + 0.6% 2 Semiannually 2000 2008

Societe Generale II 7/20/2000 3,334 3,335 23 - US$ Libor + 0.65% 6 Semiannually 2003 2009

KFW III , IV and V - Tranche A/B/C 11/3/2000 1,552 3,018 2 - US$ Libor + 0.65% 8 Semiannually 2003 2010

Foreign Currency 22,392 131,680 2,701 -

Eletrobrás Several 4,972 7,135 295 - Ufir 5.0000%from 2 to 120

Monthly and

Quarterly

2013 to

2017

CCB Bradesco 10/18/2007 - 450,000 10,649 - Cdi CDI + 0.85% 10 Annual 2012 2017

BNDES - FINEM 11/5/2007 - 242,567 926 - Tjlp TJLP + 4.3% 66 Monthly 2009 2014

Domestic Currency 4,972 699,702 11,870 -

SWAP - - 8,566 1,564

Overall Total 27,364 831,382 23,137 1,564

Consolidated

12/31/2007

Currency/ Index Interest Rate p.a.

Reference Date 12/31/2007

Principal Charges

Loans are guaranteed by collateral in the amount of R$30,940, guarantee of Light S.A. and

receivables in the approximate amount of R$57,988.






01987-9 LIGHT S.A. 03.378.521/0001-75


61

The principal of long-term loans and financing matures as follows (excluding financial

charges):

Local Currency Foreign Currency Total Local Currency Foreign Currency Total

2008 - - - 4,972 22,392 27,364

2009 66,515 27,211 93,726 - - -

Total (current) 66,515 27,211 93,726 4,972 22,392 27,364

2009 - - - 37,174 20,354 57,528

2010 159,635 19,201 178,836 45,208 14,170 59,378

2011 78,987 16,672 95,659 44,559 12,134 56,693

2012 153,987 12,342 166,329 119,559 8,853 128,412

2013 153,973 8,012 161,985 119,546 5,571 125,117

2014 134,139 3,866 138,005 108,314 2,679 110,993

2014 onwards 225,342 80,394 305,736 225,342 67,919 293,261

Total (non-current) 906,063 140,487 1,046,550 699,702 131,680 831,382

Total (current and non-current) 972,578 167,698 1,140,276 704,674 154,072 858,746

Consolidated

12/31/2008 12/31/2007

In percentage terms, the variation of major foreign currencies and economic ratios in the

period, which are used to adjust loans, financing and debentures, was as follows in the years:

U S D 2 0 0 8 - % 2 0 0 7 - %

E U R 3 1 .9 4 ( 1 7 .2 0 )

U M B N D E S 2 4 .1 3 ( 7 .5 0 )

IG P - M 3 3 .8 6 ( 1 6 .5 7 )

C D I 9 .8 1 7 .7 5

S E L IC 1 2 .3 7 1 1 .8 2

1 2 .4 8 1 1 .8 8

Covenants

The 5th issue of Debentures, the funding of CCB Bradesco, the loan with ABN Amro and

BNDES FINEM, classified as current and non-current, requires that the Company maintain

certain debt ratios and interest coverage. In the year ended December 31, 2008, the Company

and its subsidiaries are in compliance with all required debt covenants.

16. DEBENTURES AND FINANCIAL CHARGES

Date of PR

Financing EntitySignature

Current Non-current Current Non-currentPayment

Beginning End

BNDES - Debentures 1st Issue 2/16/1998 15,257 7,666 1,143 - Tjlp TJLP + 4% p.a. 6 Semiannually 2000 2010

Debentures 4th Issue 6/30/2005 8 110 - - Tjlp TJLP + 4% p.a. 72 Monthly 2009 2015

Debentures 5th Issue 1/22/2007 18,311 937,773 26,804 - Cdi CDI + 1.50% 25 Quarterly 2008 2014

Local Currency 33,576 945,549 27,947 -

Consolidated

12/31/2008

Currency/

IndexInterest Rate

12/31/2008

Principal (1) Charges

(1) Pursuant to CVM Resolution nr.556/08, the principal amount is reduced by funding costs

incurred, as outlined in the Note 9 and financial charges are calculated by the amortized cost

method.






01987-9 LIGHT S.A. 03.378.521/0001-75


62

Financing Entity Signature Current Non-current Current Non-current Payment Beginning End

BNDES - Debentures 1st Issue 2/16/1998 15,311 22,967 1,889 - Tjlp TJLP + 4% p.a. 6 Semiannually 2000 2010

Debentures 4th Issue 6/30/2005 - 5,600 41 - Tjlp TJLP + 4% p.a. 72 Monthly 2009 2015

Debentures 5th Issue 1/22/2007 50,000 950,000 22,680 - Cdi CDI + 1.50% 25 Quarterly 2008 2014

Local Currency 65,311 978,567 24,610 -

Consolidated

12/31/2007 Currency/

IndexInterest Rate

12/31/2007

The portions related to the principal of debentures have the following maturities (excluding

financial charges):

12/31/2008 12/31/2007

2008 - 65,311

2009 33,576 -

Total (Current) 33,576 65,311

2009 - 65,778

2010 75,915 108,589

2011 68,234 100,933

2012 198,241 200,933

2013 268,241 250,933

2014 334,916 250,933

2014 onwards 2 468

Total (Non-current) 945,549 978,567

Total 979,125 1,043,878

Consolidated

Local Currency

Addendum to the 5th

Issue of Debentures

In 2008, the following deed amendments were negotiated with the banks coordinating the 5th

issue of debentures, ratified at the General Debenture Holders Meeting held on May 14, 2008:

I. Change in the amortization flow of debenture principal amount is presented below:

D a te O r ig in a l F lo w N e w F lo w

Ja n 22 ,2 0 0 8 1 .2 5 % 1 .2 5 %

A p r 2 2 , 20 0 8 1 .2 5 % 1 .2 5 %

Ju ly 2 2 , 2 0 08 1 .2 5 % 0 .5 0 %

O c to b e r 22 , 2 00 8 1 .2 5 % 0 .5 0 %

Ja n u ar y 22 , 2 00 9 1 .2 5 % 0 .5 0 %

A p ri l 2 2 , 2 0 0 9 1 .2 5 % 0 .5 0 %

Ju ly 2 2 , 2 0 09 1 .2 5 % 0 .5 0 %

O c to b e r 22 , 2 00 9 1 .2 5 % 0 .5 0 %

Ja n u ar y 22 , 2 01 0 2 .5 0 % 1 .7 5 %

ap r il 2 2 , 20 1 0 2 .5 0 % 1 .7 5 %

Ju ly 2 2 , 2 0 10 2 .5 0 % 1 .7 5 %

O c to b e r 22 , 2 01 0 2 .5 0 % 1 .7 5 %

Ja n u ar y 22 , 2 01 1 2 .5 0 % 1 .7 5 %

A p ri l 2 2 , 2 0 1 1 2 .5 0 % 1 .7 5 %

Ju ly 2 2 , 2 0 11 2 .5 0 % 1 .7 5 %

O c to b e r 22 , 2 01 1 2 .5 0 % 1 .7 5 %

Ja n u ar y 22 , 2 01 2 5 .0 0 % 5 .0 0 %

A p ri l 2 2 , 2 0 1 2 5 .0 0 % 5 .0 0 %

Ju ly 2 2 , 2 0 12 5 .0 0 % 5 .0 0 %

O c to b e r 22 , 2 01 2 5 .0 0 % 5 .0 0 %

Ja n u ar y 22 , 2 01 3 6 .2 5 % 6 .7 5 %

A p ri l 2 2 , 2 0 1 3 6 .2 5 % 6 .7 5 %

Ju l y 2 2 , 20 1 3 6 .2 5 % 6 .7 5 %

O c to b e r 22 , 2 01 3 6 .2 5 % 6 .7 5 %

Ja n u ar y 22 , 2 01 4 2 5 .0 0 % 3 3 .5 0 %

1 0 0 % 1 0 0 %






01987-9 LIGHT S.A. 03.378.521/0001-75


63

II – Maintenance of Amortization Premium at 0.25% until January 2009 and establishment of

an Amortization Premium of 0.20% valid from February 2009 to July 2009, in the event of debt

prepayment.

Covenants

As mentioned in the Note 15, the 5th Issue of Debentures requires the maintenance of

indebtedness indicators and coverage of interest rates, which were fully achieved on December

31,2008.

17. REGULATORY CHARGES – CONSUMER CONTRIBUTIONS

1 2 / 3 1 /2 0 0 8 1 2 /3 1 / 2 0 0 7

C U R R E N T

F u e l U sa g e Q u o t a – C C C 2 4 ,8 9 5 1 4 ,6 2 0

E n e rg y D e v e lo p m e n t A c c o u n t Q u o t a – C D E 1 6 ,6 3 8 1 7 ,0 4 4

R e v e rsa l G l o b a l R e se r v e Q u o t a – R G R 6 ,4 2 8 6 ,2 5 3

C h a rg e s fo r c a p a c it y a n d e m e rg e n c y a c q u is it io n 7 8 ,7 7 2 7 7 ,5 9 3

1 2 6 ,7 3 3 1 1 5 ,5 1 0


Global Reversal Reserve (“RGR”) – This is a charge of Brazilian electricity sector paid

monthly by electric power concessionaires, aiming at providing funds for reversal, expansion

and improvement of electric power public utility. Its annual amount corresponds to 2.5% of

concessionaire investments in electricity-related assets, limited to 3.0% of its annual revenue.

Fuel Usage Quota (“CCC”) – This is a portion of tariff revenue paid by distribution companies

in interconnected systems with two applications: pay expenses with fuel used at thermal plants

that are activated to guarantee water uncertainties and; subsidize part of expenses with fuel at

isolated systems in order to allow that electricity tariffs at these locations have levels similar to

those practiced in interconnected systems.

Economic Development Account (“CDE”) – It aims at promoting the energy development of

States and competitiveness of energy produced, from alternative sources, in the areas served by

interconnected systems, allowing the universalization of electric power service. The amounts to

be paid are also defined by ANEEL.

Emergency Energy Charges (“ECE” and “EAE”) – These are operating, tax and administrative

costs, incurred by the Emergency Power Brazilian Trader – “CBEE” when contracting the

generation or power capacity, which have been transferred to final electric power consumers

served by the National Interconnected Electric System proportionally to individual

consumption verified.

18. PROVISION FOR CONTINGENCIES

Light S.A. and its subsidiaries are party in tax, labor and civil lawsuits and regulatory

proceedings in several courts. Management periodically assesses the risks of contingencies

related to these proceedings, and based on the legal counsel’s opinion it records a provision






01987-9 LIGHT S.A. 03.378.521/0001-75


64

when unfavorable decisions are probable. In addition, the Company does not record assets

related to lawsuits with a less-than-probable chance of success, as they are considered

uncertain.

18.1 Contingencies

Provisions for contingencies are as follows:

1 2 / 3 1 /2 0 0 8 1 2 /3 1 / 2 0 0 7 1 2 /3 1 / 2 0 0 8 1 2 / 3 1 /2 0 0 7

L a b o r 5 9 7 5 9 7 1 6 4 ,1 2 8 1 6 1 ,6 0 4

C iv i l - - 2 5 7 ,5 0 7 2 4 3 ,2 6 6

T a x - - 4 9 3 ,8 2 3 8 9 5 ,9 7 9

O t h e r 1 ,6 4 0 1 ,6 4 0 8 3 ,0 0 2 6 0 ,8 9 1

T o t a l 2 ,2 3 7 2 ,2 3 7 9 9 8 ,4 6 0 1 ,3 6 1 ,7 4 0

A s se ts

B a l a n c e o n

1 2 /3 1 / 2 0 0 7 A d d it io n s

B a la n c e o n

1 2 / 3 1 /2 0 0 8 J u d ic i a l D e p o s i ts

R e s t a te m e n t P a y m e n t s R e v e r sa ls

L a b o r 1 6 1 ,6 0 4 2 6 ,4 0 7 (1 5 ,7 3 6 ) ( 8 ,1 4 7 ) 1 6 4 ,1 2 8 3 7 ,1 0 2

C iv i l 2 4 3 ,2 6 6 7 2 ,7 7 1 (4 7 ,8 6 0 ) ( 1 0 ,6 7 0 ) 2 5 7 ,5 0 7 2 3 ,1 9 9

T a x 8 9 5 ,9 7 9 4 0 ,9 7 5 - ( 4 4 3 ,1 3 1 ) 4 9 3 ,8 2 3 9 ,7 1 6

O t h e r 6 0 ,8 9 1 2 4 ,9 9 1 (2 ,5 7 8 ) (3 0 2 ) 8 3 ,0 0 2 -

T o t a l 1 ,3 6 1 ,7 4 0 1 6 5 ,1 4 4 (6 6 ,1 7 4 ) ( 4 6 2 ,2 5 0 ) 9 9 8 ,4 6 0 7 0 ,0 1 7

W ri te - o ffs


C u rre n t N o n -c u r re n t

L ia b i li ti e s

18.1.1 Labor Contingencies

There are 4,088 labor-related legal proceedings in progress (4,228 on December 31, 2007) in

which the Company and subsidiaries are the defendants. These labor proceedings mainly

involve the following matters: overtime; hazardous work wage premium; equal pay; pain and

suffering; subsidiary/joint liability of employees from outsourced companies; difference of

40% fine of FGTS (Government Severance Indemnity Fund for Employees) derived from the

adjustment due to understated inflation.

We point out that in December’2007, the subsidiary Light SESA was notified to reply to a

public civil action filed by the Public Prosecution Office of Labor of the 1st

Region, contesting

on court the fact that the Company engages other companies to provide services related to its

main and ancillary activities. Rafered lawsuit was granted relief on April 4, 2008. A suspensive

effect was granted to the Ordinary Appeal lodged by Light SESA. Light SESA’s legal counsels

believe in a favorable decision in these actions.

18.1.2 Civil Contingencies

The Company and its subsidiaries are defendants in approximately 38,593 civil legal

proceedings (33,132 on December 31, 2007), of which 11,763 are in the state and federal

courts (Civil Proceedings), among which those claims that can be accurately assessed

amounting to R$629,734 (R$482,629 on December 31, 2007) and 26,830 are in Special Civil

Courts, with total claims amounting to R$370,563 (R$241,420 on December 31, 2007).






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65

C i v il C o n t in g e n c i e s A c c ru e d V a lu e ( p ro b a b le l o ss )

1 2 /3 1 / 2 0 0 8 1 2 /3 1 /2 0 0 7

a ) C i v il p ro c e e d i n g s 1 1 7 ,8 8 0 1 1 6 ,6 6 3

b ) S p e c ia l c iv i l c o u r t 3 3 ,7 8 3 3 3 ,3 8 3

c ) "C ru z a d o " P la n 1 0 5 ,8 4 4 9 3 ,2 2 0

T o t a l 2 5 7 ,5 0 7 2 4 3 ,2 6 6

a) The Provision for civil proceedings comprises lawsuits in which Light SESA is the

defendant and it is probable the claim will result in a loss in the opinion of the respective

attorneys. The claims mainly involve alleged moral and property damage as well as

consumers challenging the amounts paid.

The Company is also party to civil proceedings that Management believes that risk of loss

are less than probable, based on the opinion of its legal counsels. Therefore, no provision

was established. The amount, currently assessed, represented by these claims is R$358,383

(R$274,999 on December 31, 2007).

Light SESA is also involved in Public and Class Civil Actions, contesting in court fees,

rates and charges, contracts, equipment, “cruzado” plan, interest, among others. Up to

December 31, 2008, the Management could not assess the amount involved in each one of

these actions due to their nature, comprehensiveness and need of settlement of these claims.

On November 18, 2008, the Company, managers and shareholders took cognizance of a

class civil action filed by an individual at the Court of Belo Horizonte State, in the state of

Minas Gerais, alleging among others, irregularities in the acquisition of share control of

Light S.A.. The attorneys defending this action deem as remote the chances of an

unfavorable decision.

b) Lawsuits in the Special Civil Court are mostly related to matters regarding consumer

relations, such as improper collection, undue power cut, power cut due to delinquency,

network problems, various irregularities, bill complaints, meter complaints and problems

with ownership transfer. There is a limit of 40 minimum monthly wages for claims under

procedural progress at the Special Civil Court. Accruals are based on the moving average of

the last 12 months of condemnation amount.

c) There are civil actions in which some industrial consumers have challenged, in court, the

increases in electric power tariff rates approved in 1986 by the National Department of

Water and Electric Power (“Cruzado Plan”).






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18.1.3 Tax Contingencies

The provisions established for tax contingencies are as follows:

1 2 / 31 / 20 0 8 1 2 /3 1 /2 0 0 7

a ) P IS /C O F I N S 2 14 ,2 3 7 6 2 3 , 77 3

b ) P IS / C O F IN S – R G R a n d C C C 17 ,7 0 9 1 7 , 29 4

c ) I N S S - A C T A ll o w a nc e - 9 , 92 9

d ) I N S S – t a x d e fi ci e n c y n o ti c e 37 ,7 5 6 3 5 , 66 9

e ) I N S S – qu a rt e rl y 92 ,6 7 7 8 5 , 96 1

f ) L a w 8 ,2 0 0 20 ,0 6 3 1 9 , 01 2

g ) IC M S 76 ,6 1 0 7 1 , 00 7

h ) S o c i a l C o n tr i bu t io n 27 ,0 7 6 2 6 , 08 4

i ) C ID E 4 ,5 9 3 4 , 34 5

j ) O th e r 3 ,1 0 2 2 , 90 5

T o t a l 4 93 ,8 2 3 8 9 5 , 97 9

T a x C o nt i ng e nc i e s A m o u nt A c cr u ed (P ro ba b l e L o ss )

a) PIS/COFINS: Light SESA was party of two lawsuits contesting on court the charge of these

contributions, pursuant to Law 9,718/98, as follows:

In the first one, Light SESA challenged in court the changes introduced by said Law

concerning (i) the increase in their calculation basis and (ii) increase in COFINS rate from 2%

to 3%. In the appeal filed by Light SESA in Supreme Federal Court it was rendered a final and

unappealable decision regarding the increase of calculation basis, considering an

unconstitutionality action of Article 3, paragraph 1, of Law 9,718/98.

In the second one, Light SESA has been challenging the lapse of enforceability of part of the

amounts claimed in the January 31, 2007 Collection Letter issued by the Internal Revenue

Service, as the federal tax authorities did not request payment within the legal term. A

temporary injunction was granted and maintained by the Regional Federal Court to suspend the

charge, and currently the appeals to Higher Courts are pending judgment. In relation to the

merits, the judgment in low court is awaited, and, according to the Company’s legal counsels,

the decision is estimated as a possible loss.

Regarding the increase in PIS and COFINS calculation basis, in view of the Supreme Federal

Court’s decision, the Company reversed the amounts provisioned in the amount of R$432,358,

in conterpart to the item “financial expenses” in the second quarter 2008 result.

On December 31, 2008, the amount of R$214,237 (R$203,097 on December 31, 2007) related

to the increase in the COFINS rate from 2% to 3% remains provisioned.

b) PIS/COFINS – RGR and CCC: The contingency amount corresponds to the portion not

included in PAES payment in installments regarding the application of the ex-officio fine, in

which the Light SESA was not successful in the regulatory cases but had a favorable court

decision, in which the Company awaits the appeal decision of the Federal Government. This

amount also includes the portion corresponding to the increase in the COFINS rate related to

the period of April 1999 to December 2000, which is being argued in court.

c) INSS – ACT Allowance: In August 2006, Light SESA based on its attorney’s assessment,






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established a provision in the amount of R$14,715, related to the allowance eventually paid by

the Company to its employees as a result of provisions set forth in Collective Bargaining

Agreements for the period between 2001 and 2005. In December 2007, based on a new

assessment, a reversal was recorded in the amount of R$6,355, due to the expiration of the

statute of limitation of the tax authority’s right to collect the related taxes. In September 2008,

the full reversal of remaining balance of R$10,773 was recognized, taking in consideration

such issue based on former court decisions of Higher Courts and the lack of credit constitution.

d) INSS – Tax Infringement Notices: In December 1999, the INSS issued tax infringement

notices to the Company on the grounds of joint liability, withholdings on services rendered by

contractors, and levy of the social security contribution on employee profit sharing. Light S.A.

and its subsidiaries’ Management believes, based on legal counsels’ opinion, understands that

only a part of these amounts represent a probable risk for recording a provision. The variation

in the amount between December 31, 2008 and December 31, 2007 is due to the adjustment

based on the SELIC rate.

e) INSS – Quarterly: Light SESA challenges the constitutionality of Law 7,787/89, which

increased the rate of social security contribution taxes assessed on payroll, noting that there

was a consequent increase in the calculation basis in the period from July to September 1989.

Light SESA was able to offset the social security contribution amounts payable according to

advance protections that was previously granted. Management recorded provision, for the total

amount of the tax infringement notices issued by the INSS based on the legal counsel’s

opinion. The variation in the amount between December 31, 2008 and December 31, 2007 is

due to the adjustment based on the SELIC rate.

f) Law 8,200: The provision recorded is due to the fully use of the 1991 and 1992 depreciation

expenses, and no longer apply the provisions of Law 8,200/91, Article 3, item I. The lawsuit

was accepted by the lower and higher courts, and the appeal filed by the Federal Government

in Supreme Federal Court is pending judgment. Light SESA’s Management, based on the

opinion of its legal counsels and the amounts of the tax infringement notices, believes that only

part of these amounts represents a probable risk that requires recognition of a provision. The

variation in the amount between December 31, 2008 and December 31, 2007 is due to the

adjustment based on the SELIC rate.

g) ICMS: The provision recorded is mainly related to litigation on the application of State Law

3,188/99, which limited the manner of receiving credits from ICMS levied in the acquisitions

of assets allocated to property, plant and equipment, requiring the receipt in installments, while

this limitation was not provided for in the Complementary Law 87/96. There are other tax

infringement notices which have been challenged at the regulatory and judicial levels. Based on

the opinion of its legal counsels and the amounts of the tax infringement notices, Light SESA’s

Management believes that only part of these amounts represents a probable risk, for which a

reserve has been recorded. The variation of amount between December 31, 2008 and December

31, 2007 refers to the adjustment by UFIR (Fiscal Reference Unit).

h) Social Contribution: The provision recorded is related to (i) deductibility of interest on

capital paid to shareholders in calendar year 1996 from the CSLL (Social Contribution on

Profit) tax basis, in which the preliminary injunction was granted and a guarantee was partially

granted, and the appeal filed by the Federal Government is pending judgment; and (ii) lack of

addition of the amounts related to the PIS/COFINS provision to the social contribution

calculation basis, the payment of which was suspended. With the completion of administrative

level, a tax foreclosure has been filed and the Company made a full deposit of litigated amount,






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as well as it filed a motion to stay execution. The variation of amount between December 31,

2008 and December 31, 2007 refers to the adjustment by SELIC.

i) Economic Intervention Contribution Credit (“CIDE”): It is the provision related to CIDE

levied on service payments remitted abroad. The low court decision was unfavorable, so Light

SESA awaits the appeal judgment. Since December 2003, the subsidiary has been paying the

amounts due.

The Company and its subsidiaries are also parties to tax, regulatory and legal proceedings in

which Management, based on the opinion of its legal counsels, believes the risks of loss are

possible, and based on that no provision was recorded. The amount of these proceedings is

R$752,700 (R$518,286 on December 31, 2007).

The Company describes below the main tax proceedings deemed as possible loss or that had

effects in 2008:

Possible Losses

(i) IN 86. Light SESA was subjected to a fine by the Internal Revenue Service due to the fact

that the Company did not comply with service of process for the delivery of electronic files

between 2003 through 2005. The challenge was deemed groundless. Currently, the voluntary

appeal lodged by Light is pending judgment. The restated amount of the fine up to December

31, 2008 is R$222,200 (R$199,810 on December 31, 2007).

(ii) ICMS (Aluvale). These are tax foreclosures related to the ICMS deferral in the supply of

electric power for the consumer ALUVALE, an electro-intensive industrial consumer. A

motion to stay was filed and is currently pending judgment at the lower court. The amount of

these tax foreclosures at December 31, 2008 is R$155,700 (R$206,200 on December 31, 2007).

(iii) IRRF – Disallowance of tax offset. Light was given a decision informing about the non-

ratification to offset IRRF credits over financial investments and IRRF of electricity bills paid

by public authorities, which were offset due to negative balance of IRPJ in 2002. As a result,

Light filed a Motion to Disagree, which is pending judgment. The amount involved on

December 31, 2008 is R$171,500.

(iv) Others. In addition to the cases mentioned above, there are other judicial and

administrative litigations, deemed as probable losses by the legal counsels, mainly (a) ICMS on

low-income subsidy; (b) transfer of ICMS credit (RHEEM company); (c) PIS, COFINS, IRPJ

and CSLL Voluntary Disclosure; (d) ISS on regulated services. The amount involved in these

litigations was R$140,900 on December 31, 2008 (R$133,300 on December 31, 2007).

(v) On December 16, 2008, Light SESA received a lawsuit filed by a business client

challenging PIS and COFINS transferred to electricity bill, pleading to refund all amounts

unduly paid. According to the opinion of its attorneys, the chances of loss is deemed as

possible, and no provision was recorded.






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Remote Losses

Proceedings deemed as remote losses by the Company’s and subsidiaries’ legal counsels were

not provisioned.

18.1.4 Administrative Regulatory Contingencies

The subsidiary Light SESA has regulatory contingencies derived from administrative

challenges against ANEEL:

a) Low Income – The Monitoring Report RF-LIGHT-04/2007-SFE of August 2007 was

prepared by ANEEL, between July 2, 2007 and July 13, 2007, challenged the granting of the

social tariff to some consumers in the period and deemed as undue part of the subsidies ratified

and received by Light SESA from Eletrobras in the amount of R$266,379. Light SESA

recorded a provision in the amount of R$53,381 (R$36,175 on December 31, 2007), to cover

the probable risk of having to refund part of the subsidy already received.

b) ANEEL’s Infringement Notice 009/2005 – the notice was issued on March 15, 2005 under

the argument that Light SESA had: (i) incorporated the subsidiaries LIR Energy Limited and

Light Overseas Investments without prior consent of ANEEL (R$1,144); (ii) performed

operations with these companies without prior consent of ANEEL – (total amount of R$2,287);

and (iii) not complied with ANEEL’s order of cancelling operations and closing companies’

activities (total amount of R$3,431). After appeals had been filed, the fine related to item (iii)

was excluded, and fines associated with items (i) and (ii) were maintained. The penalty

associated to item (ii) was paid, while a writ of mandamus was filed regarding the fine related

to item (i), with court deposit in the amount of R$1,655 (original amount restated by the

SELIC, rate up to the deposit date). After decision rendered on November 23, 2007 of refusing

MS security, the Requests of Clarification were filed, and consequently rejected by decision

rendered on December 17, 2007. Against the judgment, Light SESA filed an appeal on January

25, 2008, requiring a supersedeas to that appeal. On September 10, 2008, a decision was

rendered to which an appeal was filed for remanding purposes only. Finally, on September 17,

2008, Bill of Review 2008.0.00.046455-8 was filed, in order to obtain the supersedeas to the

appeal, avoiding the fact that the amounts expended in the lawsuit were verified. The Bill of

Review was distributed to the Federal Superior Court Judge, who still did not issue an opinion

on the request of advance protection. The amount as of December 31, 2008 is R$1,944

(R$1,712 on December 31, 2007).

c) ANEEL´s Infringement Notice 055/2008 – SFE. The notice was issued on October 28, 2008,

with fine in the amount of R$2,782 under the allegation that Light SESA has infringed DEC

and FEC indicators of 14 groups of consumers who filed 18 supposed infringements in

2007. Light SESA, in disagreement with ANEEL’s allegation, lodged an appeal via Letter D-

058/2008, filed on November 12,2008. Light SESA recorded provision in the total contingency

amount. On December 31, 2008, the amount accrued is R$2,847.






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19. OTHER PAYABLES

1 2 /3 1 / 2 0 0 8 1 2 /3 1 / 2 0 0 7 1 2 /3 1 / 2 0 0 8 1 2 /3 1 / 2 0 0 7

C U R R E N T

P u b li c li g h ti n g f e e - - 4 0 ,9 1 7 4 3 ,7 0 1

E n e rg y E ff ic i e n c y P r o gr a m - PE E - - 1 1 8 ,7 4 5 8 1 ,4 1 3

R e se a rc h a n d D e v e lo p m e n t Pr o g ra m – P & D - - 6 0 ,3 2 0 5 0 ,2 6 8

E n e rg y R e se a r c h C o m p a n y – E P E - - 7 ,4 0 4 7 ,8 4 0

N a t io n a l S c ie n t if ic a n d T e c h n o l o g ic a l D e v e l o p m e n t F u n d – FN D C T - - 1 4 ,8 0 8 1 6 ,0 5 3

C o m p e n sa t io n f o r u se o f w a t e r re s o u rc e s - - 3 ,2 7 4 2 ,3 0 5

C V A (N o t e 5 ) - - 1 4 3 ,9 4 7 7 6 ,6 8 6

O t h e r t a rif f c h a rg e s (N o t e 5 ) - - 1 6 ,7 1 4 5 4 ,8 8 1

O t h e r d e b t s - r e im b u rse m e n t t o c o n su m e rs - - 4 6 ,8 9 3 -

O t h e r 1 ,2 8 6 8 1 0 6 6 ,7 3 5 2 0 ,9 1 7

T o t a l 1 ,2 8 6 8 1 0 5 1 9 ,7 5 7 3 5 4 ,0 6 4


D e f ic i t B ra s l ig h t – C V M P ro v i s i o n 3 7 1 /2 0 0 0 C V M 3 7 1 /2 0 0 0 ( c ) - - - 1 0 9 ,1 3 3

U s e o f p u b li c a ss e t - U B P ( a ) - - 1 1 7 ,5 8 3 1 0 7 ,1 5 9

P ro v i s io n f o r C V A - C C C - - - 8 0 0

C V A (N o t e 5 ) - - 1 ,7 1 9 2 1 ,5 0 2

P ro v i s io n f o r re g u l a to ry li a b il it ie s - o v e rc o n t ra c t in g o f e n e r g y - - 7 ,6 8 4 1 6 ,9 8 6

R e v e rsa l re se r v e (b ) 6 9 ,9 3 3 6 9 ,9 3 3

O t h e r - - 1 2 ,6 8 4 4 ,0 1 9

T o t a l - - 2 0 9 ,6 0 3 3 2 9 ,5 3 2

P a re n t C o m p a n y C o n so l id a t e d

a) According to the concession agreement 12/2001, as of March 15, 2001, that regulates the

use of the hydroelectric power plant of the Paraíba do Sul river, in the municipalities of

Itaocara and Aperibé, the subsidiary Itaocara Energia Ltda. shall pay the Federal

Government, for using the public asset, as of the date of its startup (expected for 2013) up to

the end of the concession, or while it uses the hydroelectric resources. Payments shall be

made in monthly installments equivalent to 1/12 of the proposed annual payment of

R$2,017, subject to the IGP-M variation or to any other index that may substitute it, should

such index be abolished (see Note 12).

b) The amount corresponding to reserve for reversal, classified as special obligations linked to

concession, was reclassified from property, plant and equipment to other debits item (see

Note 02).

c) In 2008, Light SESA reversed a provision recorded for actuarial loss in view of actuary’s

opinion pursuant to CVM Resolution nr.371/00.

20. PENSION PLAN AND OTHER EMPLOYEE BENEFITS

Light SESA sponsors Fundação de Seguridade Social – BRASLIGHT, a nonprofit closed

pension entity, whose purpose is to provide retirement benefits to the Company’s employees

and pension benefits to their dependents.

BRASLIGHT was incorporated in April 1974 and has three plans - A, B and C – established in

1975, 1984 and 1998, respectively, with about 96% of the active participants of the other plans

having migrated to Plan C.






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Plans A and B are of the Defined Benefit type and Plan C provides mixed benefit. All are

currently in effect.

On October 2, 2001, the Secretariat for Pension Plans (“SPC”) approved an agreement for

resolving the technical deficit and refinancing unamortized reserves, which are being amortized

in 300 monthly installments beginning July 2001, adjusted based on the IGP-DI (general price

index – domestic supply) variation (with one-month lag) and actuarial interest of 6% per

annum.

Transactions occurred this year in net actuarial liabilities were the following:

T o ta l

C o n so l i d a te d

P e n s io n P l an o n 12 / 31 / 2 00 6 86 0 ,9 4 7 7 4 ,0 8 4 7 8 6 ,8 63

A m o rt i z at i o ns in t he ye a r (7 5 ,8 5 5) (7 5 ,8 5 5) -

R e s t a t e m e nt s i n t he y e a r 10 6 ,8 2 3 9 ,1 9 2 9 7 ,6 31

T ra n s fe r fr o m n on -c u rr e n t t o c ur re n t - 6 6 ,1 6 4 (6 6 ,1 64 )

T o ta l P e n s i o n P la n o n 1 2 /3 1 / 20 0 7 89 1 ,9 1 5 7 3 ,5 8 5 8 1 8 ,3 30

A m o rt i z at i o ns in t he ye a r (8 5 ,1 2 6) (8 5 ,1 2 6) -

R e s t a t e m e nt s i n t he y e a r 15 3 ,5 4 8 1 3 ,7 6 7 1 3 9 ,7 81

D e fi c i t e qu a l iz a t io n a d j us t m e n ts (a ) 7 1 ,8 2 4 - 7 1 ,8 24

T ra n s fe r s fr o m n on -c u rr e n t t o c u rr en t - 8 5 ,5 1 8 (8 5 ,5 18 )

T o ta l P e n s i o n P la n o n 1 2 /3 1 / 20 0 8 1 , 03 2 ,1 6 1 8 7 ,7 4 4 9 4 4 ,4 17

C u r r e n t N on -c u r r e n t

(a) According to actuarial appraisal report issued on January 19, 2009, in 4Q08, Braslight

changed its mortality general table and now adopts the table AT-83. This change was made to

comply with Resolution CGPC 18 of March 28, 2006. The actuarial result of the year and the

change of table resulted in an increase of R$71,824 in the deficit equalization agreement.

The breakdown of provision on December 31, 2008 for defined benefit retirement plans and also additional commitments of retirement and/or pension for decease deriving from court settlements or decisions related to injured employees, considered at present value of actuarial liability and other information required by CVM Resolution 371/00, is presented below:






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2 0 0 8 2 0 0 7

R e c o n c il ia t io n o f a c tu a r i a l a ss e ts a n d l ia b il it ie s

F a i r v a l u e o f p la n a s se t s 1 ,1 6 9 ,5 3 5 1 ,0 5 3 ,6 8 9

P r e se n t v a lu e o f a c t u a ri a l l ia b i li ti e s w it h o v e rd u e ri g h ts ( 1 ,5 8 0 ,7 3 4 ) ( 1 ,6 4 7 ,9 6 7 )

P r e se n t v a lu e o f a c t u a ri a l l ia b i li ti e s w it h rig h t s fa l li n g d u e ( 3 6 0 ,5 5 8 ) ( 4 0 6 ,7 7 0 )

N e t a s se ts (u n se c u r e d li a b il it ie s ) ( 7 7 1 ,7 5 7 ) ( 1 ,0 0 1 ,0 4 8 )

N e t l ia b i li ti e s , C V M 3 7 1 /2 0 0 0 ( 7 7 1 ,7 5 7 ) ( 1 ,0 0 1 ,0 4 8 )

B a la n c e o f th e a d ju s t e d a n d re c o r d e d a gr e e m e n t , a s p e r d e fic i t e q u a liz a ti o n a g re e m e n t ( 1 ,0 3 2 ,1 6 1 ) ( 8 9 1 ,9 1 5 )

P r o v is i o n C V M 3 7 1 - a c tu a r ia l ga in s a n d l o sse s - ( 1 0 9 ,1 3 3 )

2 0 0 8 2 0 0 7

B r e a k d o w n o f a c t u a r ia l li a b il iti e s

N e t l ia b i li ti e s , C V M 3 7 1 /2 0 0 0 - o p e n in g ( 1 ,0 0 1 ,0 4 8 ) ( 9 7 9 ,0 8 5 )

S p o n s o r's c o n tr ib u t io n s 9 1 ,0 5 4 7 8 ,4 6 7

G a in s a n d lo ss e s re l a te d t o a c t u a ria l d e fi c it 2 2 8 ,7 5 0 ( 1 5 ,1 8 7 )

E x p e c t e d c o s t ( 9 0 ,5 1 3 ) ( 8 5 ,2 4 3 )

N e t l ia b i li tie s , C V M 3 7 1 /2 0 0 0 - c lo s i n g ( 7 7 1 ,7 5 7 ) (1 ,0 0 1 ,0 4 8 )

2 0 0 9 2 0 0 8

E x p e c te d c o sts

C o st o f t h e c u rre n t se rv i c e 1 ,6 5 0 1 ,6 8 0

C o s t o f i n te re s t 2 1 0 ,6 8 0 1 9 4 ,1 0 0

R e t u rn o n in v e s tm e n ts ( 1 2 1 ,7 3 2 ) ( 1 1 0 ,4 4 2 )

E x p e c t e d c o n tr ib u t io n f ro m e m p lo y e e s (8 5 ) ( 9 5 )

E st im a t e d e x p e c te d c o st 9 0 ,5 1 3 8 5 ,2 4 3

2 0 0 8 2 0 0 7

A c tu a r i a l a ss u m p ti o n s

N o m i n a l i n te r e s t ra te ( d isc o u n t ) a t p re se n t v a lu e o f th e a c t u ri a l l ia b i li ti e s 1 2 .3 6 % 1 0 .5 9 %

E x p e c t e d yi e ld r a te o v e r n o m i n a l p l a n a sse t s 1 2 .4 4 % 1 2 .6 8 %

S a l a ry g ro w t h ra t e 4 .3 3 % 4 .3 3 %

A d ju s tm e n t i n d e x o f c o n t in u e d b e n e f it s 4 .9 6 % 4 .9 6 %

C a p a c i ty fa c t o r 4 .3 3 % 4 .3 3 %

R e v o l v in g ra t e 9 8 .0 0 % 9 8 .0 0 %

G e n e ra l m o r ta l it y t a b le (a ) A g e -b a se d A g e -b a se d

D is a b il it y t a b le ( p la n s A /B ) A T - 8 3 ( 1 ) A T - 8 3 (1 )

D is a b il it y t a b le ( p la n C se t tl e d ) L IG H T - S t ro n g L IG H T - S t ro n g

M o rta l it y t a b le o f d is a b le d p e o p l e L IG H T - S t ro n g L IG H T - S t ro n g

A c ti v e p a rt ic i p a n ts IA P B -5 7 IA P B - 5 7

R e t ire e s a n d p e n s i o n e rs p a r ti c ip a n t s 3 ,6 9 0 3 ,9 2 5

5 ,6 8 6 5 ,6 5 8

(1 ) T a b l e w i th o u t a gg r a v a ti o n







01987-9 LIGHT S.A. 03.378.521/0001-75


73

21. RELATED-PARTY TRANSACTIONS

The Company’s main shareholders are:

Controlling Group - Rio Minas Energia Participações S.A – RME, jointly-owned

subsidiary of Companhia Energética de Minas Gerais – CEMIG, Andrade Gutierrez

Concessões, Luce do Brasil Fundo de Investimento em Participações and Equatorial

Energia.

BNDESPAR

Direct and indirect interest in operating subsidiaries are outlined in the Note 1.

A summary of related-party transactions occurred in 2008 and 2007 is presented below:

C on tra c ts w it h th e sa m e gro u p

R e la t io n sh ip w it h L i gh t S /A C o n s ol id a te d

A s s e ts L i ab il it i e s R e v e n u e E x p e n s e s

(O b je c ti ve s a nd c h a ra c t e r is t ic s o f t he a g re e m e n t) (1) 12 / 31 /2 0 08 12 / 31 /2 0 07 12 / 31 / 20 0 8 12 /3 1 /2 0 07 1 2 /3 1 /2 00 8 12 / 31 / 20 07 12 / 31 /2 0 08 12 / 31 /2 0 07

1

S tr a te g ic C on tr a c t

P u rc ha s e a gre e m e nt o f e l e c t r ic i ty b e t w e e n L i gh t S E S A a nd C E M IG

C E M IG (p a r t y of th e c on tro ll in g

gr ou p)- - 2 ,5 96 6 , 7 19 - - 8 8 , 41 6 5 5 , 53 7

2


S a l e a g re e m e n t o f e le c tr i c it y be tw e e n L ig ht S E S A a n d C E M IG


gr ou p) 2 , 45 4 2 , 35 6 - - 2 1 , 4 58 2 0 , 52 8 - -

3


C o ll e c t iio n o f d is tr i bu ti on s y st e m u sa ge c ha rge s b e t w e e n L i gh t

S E S A a n d C E M IG


gr ou p) 14 8 15 5 - - 2 , 0 12 1 , 79 4 - -

4


C o m m it m e nt t o e le c tr i c b a s ic ne tw or k us a ge c h a rge s be tw e e n L igh t



gr ou p) - - 3 79 1 , 3 87 - - 1 2 , 98 5 1 2 , 23 8

5


E le c t r ic it y s a l e c o m m it m e nt b e t w e e n L i gh t E n e rgi a a nd C E M A R

E qu a t or i a l (pa r ty o f t he

c o nt rol li ng g rou p)

1 , 10 5 1 , 00 2 - - 8 , 7 58 8 , 37 7 - -

6

L o an s

F IN E M

B N D E S (pa r ty o f t he c on tr ol lin g

gr ou p)

- - 4 3 3 ,0 62 2 4 3 , 4 93 - - 3 4 , 72 9 5 , 38 5

7

L o an s

L i ne o f c re d it


gr ou p)

- - 2 ,3 97 3 , 1 35 - - 89 8 ( 33 6 )

8

L o an s

D e b e nt ure s 1s t is s ue - N o n-c o nv e r t ib le


gr ou p)

- - 2 4 ,0 66 4 0 , 1 67 - - 2 , 76 7 4 , 37 9

9

L o an s

P ró E s c o a nd E n e rgy E f f ic i e nt P ro j e c t o f C o nd o m íni o E di fí c io

S a n to s D um o nt


gr ou p)

- - 5 96 - - - - -

1 0

P e n s io n P la n

F un d a ç ã o d e S e gu r id a d e S o c i a l (S oc ia l S e c u r it y F o und a t io n) -

B R A S L I G H T

B R A S L IG H T (p a r t y of th e

c o nt rol li ng g rou p)

- - 1 ,0 3 2 ,1 61 8 9 1 , 9 15 - - 2 2 5 , 37 1 1 0 6 , 82 3

I te m

A summary of agreements executed with related parties is presented below:






01987-9 LIGHT S.A. 03.378.521/0001-75


74

C o nt ra c t s w i th t he s a m e g rou p

R e l a ti on s hip w i th L ig ht S / A O ri gin a l V a lu e D a te o f m a tu r it y

o r t e rm

T e rm in a ti o n

c on di ti on s R e ma in ing B a la n c e

1 2/ 31 / 20 0 8

(O b j e c t ive s a nd c ha ra c te r i s ti c s of th e a gre e m e nt ) (1 ) T ho us a n d D a te T ho us a n d

1

S t r ate gi c A g r e e m e n t

P u rc h a s e a g re e m e n t of e le c tr i c it y be tw e e n L igh t S E S A a nd C E M IG

C E M IG (p a r ty o f t he c o nt rol li ng

g ro up ) 4 3 9 ,6 9 1

0 1 /0 1 /2 00 6 1 2 /3 1 /2 0 15 3 0 % o f re m a i ni ng

b a l a nc e 3 3 1 ,2 7 7

2


S a le a gre e m e nt o f e l e c t r ic i ty b e t w e e n L ig ht E n e rgi a a n d C E M IG


g ro up ) 1 5 6 ,2 3 9 Ja n/ 20 0 5 D e c /2 01 3

9 7 ,5 0 8

3


C ol le c t io n o f d is tr i bu ti on s y st e m u sa ge c ha rge s b e t w e e n L i gh t



g ro up ) - N ov /2 0 03 In de te rm i na t e

1 4 8

4


C om m it m e n t to t he b a si c e le c t r ic ne tw o rk us a ge c h a rge s be tw e e n

L ig ht S E S A a n d C E M IG


g ro up ) - D e c / 2 00 2 In de te rm i na t e

1 ,4 7 9

5


E le c tr i c it y sa le c om m i tm e n t be tw e e n L ig ht E ne rg ia a nd C E M A R

E q ua t o r ia l (p a r t y o f t he

c o n tro ll in g g ro up )

6 1 ,2 1 4

Ja n/ 20 0 5 D e c /2 01 3

3 8 ,7 4 3

6

L oa n s

F IN E M

B N D E S (p a r ty o f t he c o nt ro lli ng

g ro up )

5 4 9 ,3 3 1

N ov /2 0 07 S e p / 20 14

4 3 3 ,0 6 2

7

L oa n s

L in e o f C r e di tB N D E S (p a r ty o f t he c o nt ro lli ng

g ro up ) 1 4 ,1 4 7 M a r/1 99 9 A p r / 20 1 0

2 ,3 9 7

8

L oa n s

D e b e n tu re s 1 st i ss u e - N o n- c on ve r ti bl e


g ro up )

1 0 5 ,0 0 0

Ja n/ 19 9 8 Ja n/ 20 1 0

2 4 ,0 6 6

9

L oa n s

P r ó E s c o a n d E ne rgy E f fi c ie nc y P ro j e c t o f C o nd o mí ni o E d if í c io

S a nt os D u m on t


g ro up )

5 9 6

D e c / 2 00 8 O c t /2 0 14

5 9 6

10

P e n s i on P l an

F u nd a ç ã o de S e g ur i da d e S oc ia l (S o c ia l S e c ur i ty F o un d a ti on ) -

B R A S L IG H T

B R A S L IG H T (pa r ty o f t he

c o n tro ll in g g ro up )

5 3 5 ,0 5 2

J u n/ 20 0 1 Ju n/ 2 02 6 U nt il e n d o f

a g re e m e n t 1 ,0 3 2 ,1 6 1

I t e m

Related-party transactions have been executed under usual market conditions.

Additional information – agreements in progress

Light, in order to potentialize its capacity of developing and implementing new generation

projects and taking into account the recognized capacity in this area of its shareholder

Companhia Energética de Minas Gerais – CEMIG (“Cemig”), Light entered into Heads of

Agreement (“Agreement”) which, among other provisions, establishes that the parties will

jointly prepare business plans for the development and implementation of energy generation

projects (“Generation Projects”). The Agreement also determines that the parties will execute

specific instruments for each of the Generation Projects to be implemented and the Company’s

interest directly or by means of its subsidiaries in each one of these consortia will be fifty-one

percent (51%) and CEMIG’s interest, directly or by means of its subsidiaries will be forty-nine

percent (49%).

Light, which already has in its portfolio projects under development, formalized by means of

its subsidiaries, Lightger Ltda., Itaocara Energia Ltda. and Light Energia S.A., three

Consortium Agreements with Cemig Geração e Transmissão S.A. (“Cemig GT”), wholly-

owned subsidiary of Cemig, aiming the exploration of hydroelectric projects in the regions of

Paracambi, Itaocara and Lajes, respectively.

All private instruments mentioned above were executed by the parties under suspensive

conditions, therefore, their effectiveness relies on obtaining authorizations or endorsements

required by regulatory authorities, including but not limited to ANEEL.






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75

22. MANAGEMENT COMPENSATION

Annual global compensation of Company’s Board of Directors and Board of Executive

Officers was determined at R$1,479 (not including charges and other benefits) at the Annual

General Meeting held on March 17, 2008. Payroll charges and other benefits paid amounted to

R$177.

23. SHAREHOLDERS’ EQUITY

a) Capital Stock

The capital of Light S.A. is represented by are 203,933,778 common shares, without par value

outstanding as of December 31, 2008 recorded as Capital Stock in the total amount of

R$2,225,819 as follows:

N u m b e r o f S h a r e s % In t e r e st N u m b e r o f S h a r e s % In te r e st

C o n tr o l li n g G r o u p

R M E R i o M i n a s E n e rg i a P a rt ic i p a ç õ e s S .A . (* ) 1 0 0 ,7 1 9 ,9 1 2 4 9 .3 9 % 1 0 0 ,7 1 9 ,9 1 2 4 9 .5 0 %

L i d il C o m e rc ia l L t d a 5 ,5 8 4 ,6 8 5 2 .7 4 % 5 ,5 8 4 ,6 8 5 2 .7 4 %

O th e r

B N D E S P a r ti c ip a ç õ e s S .A . - B N D E S P A R 6 8 ,5 5 5 ,9 1 8 3 3 .6 2 % 6 8 ,5 5 5 ,9 1 8 3 3 .7 0 %

P u b li c a n d o t h e rs 2 9 ,0 7 3 ,2 6 3 1 4 .2 5 % 2 8 ,6 0 2 ,2 2 4 1 4 .0 6 %

2 0 3 ,9 3 3 ,7 7 8 1 0 0 .0 0 % 2 0 3 ,4 6 2 ,7 3 9 1 0 0 .0 0 %

S H A R E H O L D E R S

1 2 /3 1 / 2 0 0 8 1 2 / 3 1 /2 0 0 7

(*) On February 12, 2008, the Extraordinary General Meeting of Equatorial Energia S.A

approved the merger of PCP Energia, a company that held 13.06% of Light shares through

RME. Equatorial now integrates Light’s controlling group (RME). This merger did not

represent a change of control, given that both PCP and Equatorial have the same controlling

group.

Light S.A. is authorized to increase its capital up to the limit of R$203,965,072 through

resolution of the Board of Directors, regardless of amendments to the bylaws. However, this

increase is to occur exclusively upon the exercise of the warrants issued, strictly pursuant to the

conditions of the warrants (Bylaws, Article 5, paragraph 2).

b) Paid-in Capital

According to the minutes of the Board of Directors dated October 3, 2008 and November 7,

2008, Company’s capital stock increases were approved in the amount of R$4,919 and R$545,

respectively, amounting to R$5,464, as a result of exercising the warrants rights. The increase

occurred by means of issue of 471,039 shares, and capital stock was increased to R$2,225,819

represented by 203,933,778 book-entry common shares. These amendments were approved at

the Extraordinary General Meeting held on December 23, 2008.

c) Retained Earnings/ (Losses)

Pursuant to Regulatory Resolution nr.176 issued by ANEEL as of November 28, 2005, and

approvals of Manuals of Electricity Efficiency and Research and Development Programs,

which changed the criteria of accounting recognition of refered programs in 2005 and 2006,

Light SESA recorded in Shareholders’ Equity the amounts related to Research and






01987-9 LIGHT S.A. 03.378.521/0001-75


76

Development – R&D and Energy Efficiency Program - PEE related to 2003, 2004 and 2005.

For tax purposes, these amounts were not used as deductible expenses for income tax and

social contribution calculation basis. However, after analysis, we concluded that these amounts

can be deducted from corresponding calculation basis. Taking into consideration that the

original amounts were directly recorded in shareholders’ equity, the taxes currently calculated

in the amount of R$26,362 were also directly recorded in shareholders’ equity – under retained

earnings or accrued losses.

In addition, Light SESA recorded in 2007 a provision for PIS/COFINS over the deductibility of

CCC and RGR expenses. When this fine is recorded, the subsidiary considered the total amount

deductible for income tax and social contribution. After analysis, it was concluded that if it

refers to fine, there is no deductibility. Thus, the expense in the amount of R$2,911 was

adjusted in the statement of income for 2007, in conterpart to deferred taxes of that same year.

See chart of adjustments in the Note 2.

d) Profit Reserve

- Legal Reserve– Recorded at 5% of net income for the year, pursuant to prevailing laws.

- Profit Retention Reserve – Recorded with the remaining Net Income of the year after

allocations, based on capital budget approved by the Board of Directors.

24. DIVIDENDS

a) Dividends paid

The declaration of supplementary dividends of R$203,463 was approved at the Annual General

Meeting held on March 17, 2008, based on the balance sheet related to the year ended

December 31, 2007, representing R$1.00 per share and available to shareholders from March

31, 2008 on.

The payment of dividends in the amount of R$350,766 was approved on November 7, 2008,

based on the profit reserve existing at December 31, 2007, representing R$1.72 per share and

available to shareholders from November 21, 2008 on. Overall dividends in the amount of

R$554,229 were paid in 2008, related to 2007 results.

b) Proposed dividends

At a meeting held on February 13, 2009, the Board of Directors of Light S.A. proposed the

dividends of R$499,638 (R$2.45 per share) based on the balance sheet as of December 31,

2008 to be approved at the General Meeting:






01987-9 LIGHT S.A. 03.378.521/0001-75


77

Light S.A 2008

Income for the year 997,904

Legal Reserve (49,895)

Adjusted Income for the year 948,009

Minimum compulsory dividends 237,002

Proposed Dividends 499,638

25. PROFIT SHARING

The Profit Sharing Program, implemented in 1997 is mainly connected with net income and

consolidated EBITDA of the Company. Payment is composed of two parts: one fixed and other

variable. The Program has been improving over the years so that to enable greater employees’

commitment to improving operating results of the Company and its subsidiaries.

On December 31, 2008 the profit sharing accrued balance for Grupo Light amounted to

R$31,527, with payment estimated for April 2009.

26. ELECTRIC POWER SUPPLY

0 1 / 0 1 to 1 2 / 3 1 2 0 0 8 2 0 0 7 2 0 0 8 2 0 0 7 2 0 0 8 2 0 0 7

R e sid e n c i a l 3 ,6 2 4 ,4 2 5 3 ,5 7 5 ,5 5 3 7 ,3 8 8 7 ,3 4 4 2 ,3 9 9 ,5 2 1 2 ,3 9 7 ,8 3 2

In d u s t ria l 1 2 ,1 6 4 1 2 ,7 9 4 1 ,8 7 5 2 ,0 1 1 4 0 5 ,6 9 2 3 6 8 ,0 8 3

C o m m e rc e , se r v ic e s a n d o t h e r 2 6 9 ,0 8 8 2 6 9 ,9 0 5 5 ,8 5 2 5 ,7 5 6 1 ,8 0 3 ,7 9 3 1 ,7 9 4 ,4 5 5

R u ra l 1 0 ,9 0 4 1 0 ,9 0 0 4 9 4 9 9 ,4 4 0 9 ,9 7 2

P u b li c se c t o r 9 ,9 8 1 9 ,5 0 2 1 ,3 1 4 1 ,3 1 1 3 5 7 ,2 6 8 2 9 3 ,6 9 3

P u b li c li g h ti n g 4 1 7 1 9 5 6 7 8 6 9 8 1 0 1 ,1 5 7 8 4 ,8 6 4

P u b li c u ti li ty 1 ,3 8 2 1 ,2 5 1 1 ,0 6 8 1 ,0 6 2 2 1 4 ,9 5 6 2 0 3 ,1 6 5

O w n c o m s u p ti o n 3 2 8 4 2 7 6 8 7 6 - -

B i ll e d S a le s 3 ,9 2 8 ,6 8 9 3 ,8 8 0 ,5 2 7 1 8 ,2 9 2 1 8 ,3 0 7 5 ,2 9 1 ,8 2 7 5 ,1 5 2 ,0 6 4

IC M S (s t a te V A T ) - - - - 1 ,9 3 5 ,2 6 4 1 ,9 1 7 ,7 5 1

U n b i ll e d S a le s - - - - (1 2 ,7 5 0 ) 2 3 ,7 0 4

T O T A L S U P P L Y 3 ,9 2 8 ,6 8 9 3 ,8 8 0 ,5 2 7 1 8 ,2 9 2 1 8 ,3 0 7 7 ,2 1 4 ,3 4 1 7 ,0 9 3 ,5 1 9

E le c t ric P o w e r A u c ti o n - - 4 ,0 5 3 4 ,6 9 3 3 3 3 ,0 6 8 2 8 6 ,0 2 7

S h o rt -te r m e n e r gy - - 5 9 1 1 ,5 0 5 2 6 ,9 4 1 1 1 9 ,5 0 9

T O T A L S U P P L Y - - 4 ,6 4 4 6 ,1 9 8 3 6 0 ,0 0 9 4 0 5 ,5 3 6

O V E R A L L T O T A L 3 ,9 2 8 ,6 8 9 3 ,8 8 0 ,5 2 7 2 2 ,9 3 6 2 4 ,5 0 5 7 ,5 7 4 ,3 5 0 7 ,4 9 9 ,0 5 5

( 1 ) u n a u d it e d


N u m b e r o f B i ll e d S a le s ( 1)

G W h (1)

R $

27. OTHER OPERATING INCOME

0 1 / 0 1 to 1 2 / 3 1 2 0 0 8 2 0 0 7

T a x e d se rv i c e 1 8 ,5 1 5 8 ,4 3 4

In c o m e f ro m s e rv i c e s re n d e r e d 3 5 ,8 6 0 2 6 ,4 6 0

L e a s e s , re n t a ls a n d o th e r 2 9 ,3 7 1 4 4 ,1 0 8

In c o m e f ro m n e tw o rk u sa g e 5 8 0 ,5 5 2 5 6 0 ,3 0 8

6 6 4 ,2 9 8 6 3 9 ,3 1 0







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78

28. CONSUMER CHARGES (Operating Revenue Deductions)

0 1 / 0 1 to 1 2 / 3 1 2 0 0 8 2 0 0 7

T a x e s C h a rg e d fr o m C o n su m e rs - R G R (7 2 ,7 9 2 ) (6 3 ,5 0 1 )

C D E - C a sh (1 9 9 ,6 5 6 ) (2 0 4 ,5 2 8 )

C D E - C V A (4 0 ,8 4 5 ) 1 5 ,9 2 2

C D E - C V A A m o rt iz a t io n (1 1 ,0 2 0 ) (2 7 ,5 1 5 )

C C C - C a sh (2 3 5 ,9 7 3 ) (1 8 5 ,0 3 7 )

C C C - C V A 2 0 9 ,1 0 7 (1 0 0 ,5 5 4 )

C C C - C V A A m o rt iz a ti o n (1 1 ,9 6 9 ) (2 3 ,5 8 8 )

P E E - E n e r g y E ffi c ie n c y (2 5 ,3 6 7 ) (2 0 ,3 1 8 )

R & D - R e s e a rc h a n d D e v e lo p m e n t (1 1 ,2 2 8 ) (1 7 ,8 9 7 )

F N D C T - N a t io n a l D e v e l o p m e n t F u n d (1 0 ,9 8 5 ) (1 1 ,7 1 1 )

E P E - E n e r g y R e se a r c h C o m p a n y (5 ,6 8 3 ) (5 ,8 5 7 )

(4 1 6 ,4 1 1 ) (6 4 4 ,5 8 4 )


29. ELECTRIC POWER PURCHASE AND SALE TRANSACTIONS THROUGH CCEE

The balances of electricity spot market sale and purchase transactions carried out through the

CCEE (former MAE) are as follows:

2 0 0 8

S h o r t -te r m s a le o f e n e r g y :

B a l a n c e re c e i v a b l e o n 1 2 /3 1 / 2 0 0 7 (N o t e 7 ) 1 6 ,6 9 1

B a l a n c e re c e i v a b l e o n 1 2 /3 1 / 2 0 0 8 (N o t e 7 ) 6 1 3

2 0 0 8

S h o r t -te r m p u r c h a s e o f e n e r g y :

B a l a n c e p a y a b le o n 1 2 / 3 1 /2 0 0 7 ( N o t e 1 4 ) (1 5 2 )

B a l a n c e p a y a b le o n 1 2 / 3 1 /2 0 0 8 ( N o t e 1 4 ) (1 3 ,1 1 7 )

30. OPERATING COSTS AND EXPENSES

0 1 / 0 1 to 1 2 /3 1 E l e c tr ic P o w e r O p e ra t io n S e l li n g G e n e ra l a n d A d m 2 0 0 8 2 0 0 7

N a t u re o f th e E x p e n s e

E le c t ri c it y P u rc h a se d fo r R e s a le ( N o t e 3 1 ) (3 ,0 6 3 ,1 7 7 ) - - - ( 3 ,0 6 3 ,1 7 7 ) ( 2 ,9 2 7 ,3 5 3 )

P e rso n n e l a n d M a n a g e m e n t - ( 1 4 1 ,9 6 4 ) (1 4 ,9 5 6 ) (8 0 ,0 2 2 ) ( 2 3 6 ,9 4 2 ) ( 2 5 3 ,9 0 9 )

M a t e ri a ls - ( 1 3 ,9 8 7 ) (1 ,1 1 4 ) (1 ,9 6 2 ) ( 1 7 ,0 6 3 ) ( 1 5 ,6 0 6 )

O u t so u r c e d S e rv i c e s - ( 1 2 0 ,5 2 6 ) (6 1 ,6 3 3 ) (9 4 ,5 9 4 ) ( 2 7 6 ,7 5 3 ) ( 2 7 3 ,2 1 2 )

A l lo w a n c e fo r D o u b t fu l A c c o u n ts - - (2 3 5 ,7 8 1 ) - ( 2 3 5 ,7 8 1 ) ( 1 9 9 ,5 2 4 )

P ro v i s io n f o r C o n ti n g e n c ie s - - - 3 4 ,6 2 8 3 4 ,6 2 8 ( 9 9 ,2 6 7 )

O t h e r - ( 1 6 ,3 6 4 ) (9 6 1 ) (4 8 ,6 6 9 ) ( 6 5 ,9 9 4 ) ( 8 5 ,6 9 5 )

(3 ,0 6 3 ,1 7 7 ) ( 2 9 2 ,8 4 1 ) (3 1 4 ,4 4 5 ) (1 9 0 ,6 1 9 ) ( 3 ,8 6 1 ,0 8 2 ) ( 3 ,8 5 4 ,5 6 6 )

D e p r e c ia t io n a n d A m o rt iz a t io n - ( 2 7 5 ,8 8 7 ) (1 ,0 3 1 ) (3 5 ,5 2 5 ) ( 3 1 2 ,4 4 3 ) ( 3 2 7 ,9 6 0 )

T o t a l (3 ,0 6 3 ,1 7 7 ) ( 5 6 8 ,7 2 8 ) (3 1 5 ,4 7 6 ) (2 2 6 ,1 4 4 ) ( 4 ,1 7 3 ,5 2 5 ) ( 4 ,1 8 2 ,5 2 6 )


C o st o f S e rv i c e O p e r a ti n g E x p e n se s






01987-9 LIGHT S.A. 03.378.521/0001-75


79

31. ELECTRIC POWER PURCHASED FOR RESALE

0 1 / 0 1 to 1 2 / 3 1

2 0 0 8 2 0 0 7 2 0 0 8 2 0 0 7

Ita i p u 5 ,7 3 1 8 ,3 0 7 5 4 3 ,1 0 8 7 9 2 ,4 1 4

U T E N o r te F l u m i n e n se 6 ,3 6 8 6 ,3 5 1 7 9 3 ,1 0 5 8 0 1 ,5 8 4

O t h e r C o n tr a c ts a n d E l e c tr ic P o w e r A u c ti o n s 1 2 ,5 9 3 1 2 ,0 5 8 1 ,0 0 7 ,0 6 5 8 6 8 ,2 5 3

C V A (R e c o v e ra b l e C o s t V a ria tio n ) - - 1 1 8 ,2 0 0 9 8 ,4 6 2

S p o t M a rk e t E n e r gy 8 0 0 - 2 1 0 ,3 1 0 -

N e t w o r k U sa ge C h a r ge s - - 3 6 4 ,0 1 5 3 4 1 ,5 7 2

C o n n e c ti o n C h a r g e s - - 1 6 ,3 4 5 1 3 ,9 5 8

N a t io n a l E le c t ri c S ys t e m O p e ra t o r (O .N .S .) - - 1 1 ,0 2 9 1 1 ,1 1 0

2 5 ,4 9 2 2 6 ,7 1 6 3 ,0 6 3 ,1 7 7 2 ,9 2 7 ,3 5 3


G W h(1 )

R $

(1) Unaudited

32.FINANCIAL INCOME

01/01 to 12/31 2008 2007 2008 2007

REVENUES

Income from temporary cash investments 704 289 69,902 43,370

Swap operations - - 12,909 15,481

Interest and variation in debts paid by installments - - 24,744 7,128

Arrears interest on electricity bills and debt paid by installments - - 68,751 43,358

Charges on CVA accounts and Portion A - - 30,667 40,638

Charges on tariff margin recovery - - 6,254 56,168

Charges on free energy transactions - - 3,154 31,962

Restatement of tax credits - - 44,965 6,382

Other 59 79 8,803 3,146

763 368 270,149 247,633

EXPENSES

Interest on loans and financing – local currency - - (201,035) (210,800)

Interest on loans and financing – foreign currency - - (17,319) (58,055)

Monetary variation – local currency - - (65) (1,702)

Exchange variation – foreign currency - - (36,450) 96,739

Swap Operations - - 1,610 (95,887)

Charges and monetary variations on actuarial liability of Braslight - - (225,371) (106,823)

Banking expenses (90) (2,035) (5,314) (49,220)

Restatement of provision for contingencies - - (59,893) (60,510)

Charges on free energy transactions - - (4,756) (33,039)

Charges on regulatory liabilities - - (19,271) (18,302)

Reversal of PIS/COFINS provision on financial revenue - - 432,358 -

Adjustment to present value - Accounts Receivable - - 10,830 11,168

Restatement of tax liabilities - - (45,018) (29,969)

Other (294) (249) (6,063) (7,201)

(384) (2,284) (175,757) (563,601)

NET FINANCIAL INCOME 379 (1,916) 94,392 (315,968)







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33. FINANCIAL INSTRUMENTS

Below, we compared book and market values of Companies’ assets and liabilities:

B o o k V a l u e M a rk e t V a l u e B o o k V a l u e M a rk e t V a l u e

A S S E T S

T e m p o ra r y c a s h in v e s t m e n t s (N o t e 6 ) 5 4 9 ,0 9 7 5 4 9 ,0 9 7 4 0 1 ,3 4 6 4 0 1 ,3 4 6

S w a p s 1 1 ,0 8 3 1 1 ,0 8 3 - -

5 6 0 ,1 8 0 5 6 0 ,1 8 0 4 0 1 ,3 4 6 4 0 1 ,3 4 6

L IA B IL IT IE S

L o a n s a n d fin a n c in g (N o te 1 5 ) 1 ,1 4 0 ,2 7 6 1 ,1 5 2 ,7 6 1 8 5 8 ,7 4 6 8 7 7 ,1 1 9

D e b e n t u re s (N o t e 1 6 ) 9 7 9 ,1 2 5 9 7 9 ,1 2 5 1 ,0 4 3 ,8 7 8 1 ,0 4 3 ,8 7 8

S w a p s - - 1 0 ,1 3 0 1 0 ,1 7 7

2 ,1 1 9 ,4 0 1 2 ,1 3 1 ,8 8 6 1 ,9 1 2 ,7 5 4 1 ,9 3 1 ,1 7 4

C o n so li d a te dC o n so li d a te d

1 2 /3 1 / 2 0 0 8 1 2 /3 1 / 2 0 0 7

a) Policy for utilization of derivatives

The policy for utilization of derivative instruments approved by the Board of Directors

determines the debt service protection (principal plus interest and commissions) denominated

in foreign currency to mature within 24 months, forbidding any utilization for speculative

purposes, whether in derivatives or any other risk assets.

In line with provisions of this policy, the Company and its subsidiaries do not have futures

contracts, options, swaptions, swaps with regret option, flexible options, derivatives embedded

in other products, structure operations with derivatives and “exotic derivatives”. In addition, it

is evidenced through the chart above that the single derivative instrument used by the Company

and its subsidiaries is the non-cash currency swap (US$ versus CDI), whose Contractual

Notional Value corresponds to the amount of foreign currency-denominated debt service to

expire within 24 months, in line with the policy for the utilization of aforementioned

derivatives.

b) Risk management and objectives achieved

The management of derivative instruments is conducted by means of operating strategies,

aiming liquidity, profitability and safety. The control policy consists of permanently inspecting

the policy compliance in the utilization of derivatives, as well as to monitor the rates contracted

against those used in the market.

A strong currency devaluation verified in the last quarter did not impact on the Company’s

consolidated cash position and solvency, considering the exposure of the Company and its

subsidiaries to this currency compared to total indebtedness, associated with the fact that the

policy for utilization of derivatives has been fully complied with.

c) Classification and measurement of financial instruments:

Concerning the calculation of market value, below the following considerations:

Loans and receivables - consumers, concessionaires and permissionaires (clients) deriving

from subsidiaries operations, are classified as held to maturity and are recorded by their






01987-9 LIGHT S.A. 03.378.521/0001-75


81

original values, subject to provision for losses and present value adjustment, where

applicable.

Suppliers are measured by the amortized cost method and therefore, recognized by their

original value.

Loans and financing: market values were calculated at interest rates applicable to

instruments with similar nature, maturities and risks, or based on market quotations of

these securities. The market values for BNDES financing are identical to accounting

balances, since there are no similar instruments, with comparable maturities and interest

rates. In case of debentures, book and market values are identical, as there is no liquid

trading market for these debentures as an accurate benchmark in the market calculation.

Swap operations: the determination of market value used available information in the

market and usual pricing methodology: the face value (notional) evaluation for long

position (in U.S. dollars) until maturity date and discounted at present value of clean

coupon rates, published in bulletins of Future and Commodities Exchange – BM&F.

It is worth mentioning that estimated market values of financial assets and liabilities were

determined considering information available on the market and appropriate valuation

methodologies. Nevertheless, meaningful judgment was required when interpreting market

data to produce the most appropriate market value estimate. As a result, estimates do not

necessarily indicate the amounts that may be realized in current exchange market.

d) Risk Factors

During the normal course of its businesses, the Company and its subsidiaries are exposed to the

market risks related to currency variations and interest rates, as evidenced in the chart below:

Debt breakdown (excluding financial charges):

R$ % R$ %

USD 165,310 7.8% 150,950 7.9%

Currency Basket BNDES 2,388 0.1% 3,122 0.2%

Foreign Currency (current and non-current) 167,698 7.9% 154,072 8.1%

CDI (Interbank Deposit Certificate) 1,486,084 70.1% 1,450,000 76.2%

TJLP (Long-Term Interest Rate) 454,816 21.5% 286,445 15.1%

Other 10,803 0.5% 12,107 0.6%

Local Currency (current and non-current) 1,951,703 92.1% 1,748,552 91.9%

Overall Total (current and non-current) 2,119,401 100.0% 1,902,624 100.0%

Consolidated

12/31/2008 12/31/2007

On December 31, 2008, according to the chart above, the foreign currency-denominated debt is

R$167,698, or 7.9% of total debt. Nevertheless, if we include financial charges, this amount

increases to R$170,421 (US$72,923, according to U.S. dollar quote of December 31,2008).

Financial derivative instruments were contracted for the amount of foreign currency-

denominated debt service to expire within 24 months, in the swap modality, whose notional

value on December 31, 2008 stood at US$22,995, according to the policy for utilization of

derivative instruments approved by the Board of Directors. Thus, if we deduct this amount






01987-9 LIGHT S.A. 03.378.521/0001-75


82

from total foreign currency-denominated debt, the foreign exchange exposure represents 5.4%

of total debt.

Therefore, we provide a few considerations and analyses on risk factors impacting on business

of Grupo Light companies:

Currency risk

Considering that a portion of Light SESA’s loans and financing is denominated in foreign

currency, the Company uses derivative financial instruments (swap operations) to hedge

service associated with these debts (principal plus interest and commissions) to expire within

24 months. Derivative operations resulted in a R$12,228 gain in the fourth quarter of 2008

(R$9,253 loss in the fourth quarter of 2007) and in a gain of R$11,144 in 2008 (loss of

R$80,405 in 2007). The net amount of swap operations as of December 31, 2008 is positive in

R$11,084 (negative R$10,130 in 2007), as shown below:

In s titu t i o nL i g h t

R e c ei va b leL ig h t P a y ab l e S ta rt i n g Da te Ma tu r ity Da te

N o tio n a l V a lu e

C o n tra c te d

( U S $ th o us a n d )

Fa i r V a l u e

D e c/0 8

(R $ th o u sa n d )

A ss e ts

Fa i r V a lu e

D e c/0 8

(R $ th o u sa n d )

L ia b i li t ie s

Ita u US $ + 6 .2 % 1 0 0 % CD I 0 6/1 9 /0 7 0 1 /1 5 /0 9 4 2 1 3 -

I ta u US $ + 6 .1 % 1 0 0 % CD I 0 6/1 9 /0 7 0 2 /1 6 /0 9 4 1 1 3 -

U n ib a n co US $ + 6 .06 % 1 0 0 % CD I 0 6/1 9 /0 7 0 3 /1 1 /0 9 1 1 1 3 5 -

U n ib a n co US $ + 6 .07 % 1 0 0 % CD I 0 6/1 9 /0 7 0 4 /0 9 /0 9 6 ,9 3 5 2 ,2 1 7 -

B N P US $ + 6 .05 % 1 0 0 % CD I 0 6/1 9 /0 7 0 5 /1 5 /0 9 4 0 1 3 -

I ta u US $ + 6 .06 % 1 0 0 % CD I 0 6/1 9 /0 7 0 6 /0 5 /0 9 9 4 0 3 0 5 -

I ta u US $ + 6 .05 % 1 0 0 % CD I 0 6/1 9 /0 7 0 6 /2 6 /0 9 4 4 4 1 4 9 -

U n ib a n co US $ + 3 .3 % 1 0 0 % CD I 0 4/0 4 /0 8 0 7 /1 5 /0 9 3 6 1 9 -

U n ib a n co US $ + 3 .3 % 1 0 0 % CD I 0 4/0 4 /0 8 0 8 /1 7 /0 9 3 6 1 8 -

C it i b a nk US $ + 3 .32 % 1 0 0 % CD I 0 4/0 4 /0 8 0 9 /1 0 /0 9 7 3 3 7 -

U n ib a n co US $ + 3 .31 % 1 0 0 % CD I 0 4/0 4 /0 8 0 9 /1 5 /0 9 3 6 1 8 -

C it i b a nk US $ + 3 .4 % 1 0 0 % CD I 0 4/0 4 /0 8 1 0 /0 9 /0 9 6 ,2 7 5 3 ,1 6 4 -

U n ib a n co US $ + 3 .3 % 1 0 0 % CD I 0 4/0 4 /0 8 1 0 /1 5 /0 9 3 5 1 8 -

U n ib a n co US $ + 3 .35 % 1 0 0 % CD I 0 4/0 4 /0 8 1 1 /1 6 /0 9 3 5 1 7 -

C it i b a nk US $ + 3 .41 % 1 0 0 % CD I 0 4/0 4 /0 8 1 2 /0 8 /0 9 9 2 2 4 5 6 -

U n ib a n co US $ + 3 .4 % 1 0 0 % CD I 0 4/0 4 /0 8 1 2 /1 5 /0 9 3 4 1 7 -

C it i b a nk US $ + 3 .48 % 1 0 0 % CD I 0 4/0 4 /0 8 1 2 /2 8 /0 9 4 4 9 2 2 2 -

U n ib a n co US $ + 4 .42 % 1 0 0 % CD I 0 8/2 5 /0 8 0 1 /1 5 /1 0 3 2 2 1 -

U n ib a n co US $ + 4 .32 % 1 0 0 % CD I 0 8/2 5 /0 8 0 2 /1 7 /1 0 3 2 2 1 -

U n ib a n co US $ + 4 .32 % 1 0 0 % CD I 0 8/2 5 /0 8 0 3 /1 0 /1 0 7 0 4 7 -

U n ib a n co US $ + 4 .32 % 1 0 0 % CD I 0 8/2 5 /0 8 0 3 /1 5 /1 0 3 1 2 1 -

U n ib a n co US $ + 4 .53 % 1 0 0 % CD I 0 8/2 5 /0 8 0 4 /1 2 /1 0 5 ,8 8 9 3 ,9 4 0 -

U n ib a n co US $ + 4 .32 % 1 0 0 % CD I 0 8/2 5 /0 8 0 4 /1 5 /1 0 3 1 2 0 -

U n ib a n co US $ + 4 .45 % 1 0 0 % CD I 0 8/2 5 /0 8 0 6 /1 5 /1 0 4 2 6 2 8 3 -

To ta l 2 2 ,9 9 5 1 1 ,0 8 4 -

The amount recorded is already measured by its fair value on December 31, 2008. All

operations with derivative financial instruments are registered in clearing houses for the

custody and financial settlement of securities and there is no margin deposited in guarantee,

operations have no initial cost.

The sensitivity analysis for foreign exchange and interest rates fluctuations, showing eventual

impacts on financial result of the Company and its subsidiaries are presented below.






01987-9 LIGHT S.A. 03.378.521/0001-75


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The methodology used in the “Probable Scenario” was to consider the same behavior of foreign

exchange and interest rates verified in 2008, maintaining steady liabilities, derivatives and

financial investments on December 31, 2008. It is worth mentioning that the behavior of debt

and derivatives balances will observe their respective contracts, and the balance of temporary

cash investments will fluctuate according to the need or available funds of the Company and its

subsidiaries.

Exchange Rate Devaluation Risk (in local currency)

Operation Risk Probable

Scenario (I):

Scenario (II) Scenario (III)

FINANCIAL LIABILITIES

Par Bond USD (6,428) (19,598) (32,767)

Discount Bond USD (3,297) (12,199) (21,100)

Flirb USD (131) (724) (1,317)

C. Bond USD (4,432) (16,004) (27,577)

Debit. Conv. USD (1,866) (10,745) (19,624)

New Money USD (131) (716) (1,300)

Bib USD (101) (495) (890)

Bndes - Financ. Import Basket (220) (1,050) (1,880)

Societe Generale USD (391) (2,274) (4,156)

KfW USD (292) (1,674) (3,055)

DERIVATIVES

Swaps USD 14,521 28,542 42,629

Reference for financial assets and liabilities +25% +50%

2.3370 2.9213 3.5055

Exchange Rate Appreciation Risk (in local currency)


Scenario: (I)

Scenario (IV) Scenario (V)


Par Bond USD (6,428) 6,741 19,911

Discount Bond USD (3,297) 5,604 14,506

Flirb USD (131) 462 1,055

C. Bond USD (4,432) 7,141 18,714

Debit. Conv. USD (1,866) 7,013 15,893

New Money USD (131) 453 1,038

Bib USD (101) 294 688

Bndes - Financ. Import Basket (220) 609 1,439

Societe Generale USD (391) 1,491 3,373

KfW USD (292) 1,089 2,470

DERIVATIVES

Swaps USD 14,521 367 (13,719)

Reference for financial assets and liabilities -25% -50%

R$/US$ Exchange Rate (End of the year) 2.3370 1.7528 1.1685






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Considering the chart above, it is possible to identify that despite partial hedge against foreign

currency-denominated debt (only limited to debt service to expire within 24 months), as

R$/US$ exchange rate increases, liabilities financial expense also increases but financial

revenues of derivatives also partially offset this negative impact and vice-versa. Thus, cash is

hedged due to the derivatives policy of the Company and its subsidiaries.

Interest rate risk

This risk derives from impact of interest rates fluctuation not only over financial expense

associated with loans and financing of subsidiaries, but also over financial revenues deriving

from financial investments. The policy for utilization of derivatives approved by the Board of

Directors does not comprise the contracting of instruments against such risk. Nevertheless, the

Company and its subsidiaries continuously monitor interest rates so that to evaluate eventual

need of contracting derivatives to hedge against interest rates volatility risk.

See below the sensitivity analysis of interest rate risk, evidencing the effects on variation

results in the scenarios:

Risk of Interest Rates Rise


Scenario: (I)

Scenario (II) Scenario (III)

FINANCIAL ASSETS

Temporary cash investments CDI 69,902 87,378 104,853


Debentures 5th

Issue CDI (130,548) (157,967) (184,827)

CCB Bradesco CDI (60,864) (75,768) (90,962)

CCB Bco ABN Amro Banking S/A CDI (3,919) (4,751) (5,585)

Debentures 1st Issue TJLP (2,734) (3,171) (3,612)

Debentures 4th

Issue TJLP (377) (437) (498)

FINEM BNDES TJLP (33,984) (39,406) (44,893)

DERIVATIVES

Swaps CDI 14,521 13,591 12,653

Reference for FINANCIAL ASSETS +25% +50%

CDI (% accumulated in the year) 12.3% 15.4% 18.4%

Reference for FINANCIAL LIABILITIES +25% +50%


TJLP (% accumulated in the year) 6.25% 7.81% 9.38%






01987-9 LIGHT S.A. 03.378.521/0001-75


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Risk of Interest Rate Drop


Scenario: (I)

Scenario (IV) Scenario (V)

FINANCIAL ASSETS

Temporary cash investments CDI 69,902 52,427 34,951


Debentures 5th

Issue CDI (130,548) (101,992) (73,524)

CCB Bradesco CDI (60,864) (44,466) (30,672)

CCB Bco ABN Amro Banking S/A CDI (3,919) (3,036) (2,153)

Debentures 1st Issue TJLP (2,734) (2,357) (1,940)

Debentures 4th

Issue TJLP (377) (325) (267)

FINEM BNDES TJLP (33,984) (29,295) (24,108)

DERIVATIVES

Swaps CDI 14,521 15,479 16,429

Reference for FINANCIAL ASSETS -25% -50%


Reference for FINANCIAL LIABILITIES -25% -50%


TJLP (% accumulated in the year) 6.3% 4.7% 3.1%

Credit risk

It derives from the Company and its subsidiaries eventually suffering losses deriving from

default of counterparties or financial institutions depositary of funds or financial investments.

To mitigate these risks, the Company and its subsidiaries adopt the analysis of financial and

equity position of its counterparties as practice, as well as the definition of credit limits and

permanent monitoring of outstanding positions. Concerning financial institutions, the Company

and its subsidiaries only carry out operations with low-risk financial institutions classified by

rating agencies.

34. INSURANCE

On December 31, 2008, the Company and its subsidiaries had insurance covering its main

assets as follows:

Operational Risk Insurance – Covers property damages caused to buildings, machinery,

equipment, furniture and fixture as a result of fire, explosion, rubbish, flooding, earthquake,

loss of machinery and electric damages. All assets of Grupo Light are insured for operational

risks with all-risks coverage, except for transmission and distribution lines.

D&O Civil Liability Insurance – Protects executives from losses and damages resulting from

activities as Board members, Officers and managers of the Company.

Civil Liability and Blanket Insurance – Covers the payment of indemnity should the Company

be liable on a civil basis by means of an unappealable decision or an agreement authorized by

an insurance company related to indemnity for involuntary damages, physical damages to

individuals and/or property damages caused to third parties and related to pollution,

contamination or sudden leakage.






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International Transportation Insurance – Covers shipments of cargo/equipment, Financial

Guarantee Insurance – Sale of Energy (8 insurance policies) and Insurance against Fire on

Leased Properties.

The assumptions of risks adopted, given their nature, are not included in the scope of an audit,

accordingly, they were not audited by independent auditors.

Insurance coverage as of December 31, 2008 is considered sufficient by Management, as

summarized below:

A m o u n t

R IS K S F r o m T o In su r e d P r e m iu m

D i re c t o rs & O ff ic e r s (D & O ) 8 / 1 0 /2 0 0 8 8 / 1 0 /2 0 0 9 U S $ 3 0 .0 0 0 U S $ 8 4

C iv i l a n d G e n e ra l L ia b ili ti e s 9 / 2 5 /2 0 0 8 9 / 2 5 /2 0 0 9 R $ 1 8 ,2 7 7 R $ 5 0 4

O p e r a ti n g R i sk s 1 0 / 3 1 /2 0 0 8 1 0 / 3 1 /2 0 0 9 * R $ 2 .2 5 9 .1 7 6 R $ 1 ,1 0 8

* T h e m a x im u m l im it o f i n d e m n i fic a tio n (M L I) is R $ 3 4 8 ,8 9 2

E ff e c tiv e T e r m

The amounts mentioned (Insured Amount and Premium) of Civil Liability, Blanket and

Operating Risks Insurance were contracted as of this year in Reais in compliance with

provisions of CNPS Resolution nr.165/2007, which does not allow another foreign currency-

denominated contracting for these types of insurances.

35. ENVIRONMENTAL ISSUES

In view of commitment to sustainability declared in the Organization’s mission, Grupo Light

has been developed several initiatives and projects focused on environment. Among most

relevant actions, we point out:

- Reduction of Greenhouse Gas (GHG) Emissions (1): Light started a survey of greenhouse

gases related to its activities from 2006 to 2008. The results obtained will allow to study new

ways of reducing its emissions, in addition to those already practiced, such as reforestation of

degraded areas (1,180 ha until 2008) and generation of energy by renewable sources.

- Waste Management (1): Two waste centrals were implemented at units Rua Larga and Frei

Caneca to manage solid waste and set them aside for recycling, which has been improving the

efficiency of selective collection and decreasing generation of garbage.

- Environmental Management System (SGA) (1): SGA aims at managing environmental

aspects and impacts, as well as the compliance with the Environmental Policy, employees

awareness and training, among others. By the end of 2008, Light had already 182 certified

facilities, and has undergone three re-certification processes, from the implementation of SGA

in 2001.

- Reutilization of consumption materials (1): Concerned with reducing the purchase of

materials, in order to preserve the global resources basis, Light has been using materials

deriving from recycling, pointing out a great advance in the amount of recycled paper used that

reached 97% of total amount consumed. Equipment, such as transformers and meters are also

sent for repair, achieving a total of 77% and 65% of amount consumed, respectively.

- Energy Efficiency (1): Since 1999, when Energy Efficiency Programs have started, the

Company and its subsidiaries invested in the development of 139 projects that provided energy

savings of 478.4 GWh/year, approximately 3% of Light’s captive market consumption in 2008.






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This result derives from the implementation of projects that use most modern and efficient

technologies, such as the improvement or modernization in production processes and

replacement of obsolete equipment. Accumulated energy savings until 2008 corresponds to the

average consumption of approximately 250 thousand households during one-year period,

which corresponds to residential consumption of a city with 1 million inhabitants.

In addition to these initiatives, 550km of conventional networks were replaced with protected

networks in 2008 aiming at decreasing conflict between network and trees, as well as the

excessive consumption of timber.

These initiatives contributed to Light continuing being included in the ISE Bovespa portfolio

since 2007.

In 2008, amounts invested in the projects mentioned above amounted to R$16,770, being

R$6,010 earmarked for investment projects and R$10,760 for operating expenses.

(1) Unaudited information.






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36. STATEMENT OF INCOME BY COMPANY

01/01 to 12/31 Light SESA Light Energia Light SA Light ESCO Removals

Consolidated

2008

Consolidated

2007

OPERATING REVENUE 7,893,652 346,728 - 95,650 (97,382) 8,238,648 8,138,365

Billed sales 7,227,091 - - - - 7,227,091 7,093,519

Unbilled sales (12,750) - - - - (12,750) -

Supply – Electric Power 10,742 341,299 - 77,596 (69,628) 360,009 405,536

Other 668,569 5,429 - 18,054 (27,754) 664,298 639,310

REVENUES DEDUCTION (2,792,564) (42,225) - (17,215) - (2,852,004) (3,145,987)

Billed sales - ICMS (state VAT) (1,935,264) (307) - (13,447) - (1,949,018) (1,927,228)

Consumer charges (405,122) (11,289) - - - (416,411) (644,584)

PIS (tax on revenues) (78,020) (5,460) - (556) - (84,036) (89,219)

COFINS (tax on revenues) (377,432) (25,158) - (2,570) - (405,160) (410,955)

COFINS - CVA - Amortization 5,192 - - - - 5,192 (71,709)

Other (1,918) (11) - (642) - (2,571) (2,292)

NET OPERATING REVENUE 5,101,088 304,503 - 78,435 (97,382) 5,386,644 4,992,378

OPERATING EXPENSES (4,053,064) (122,879) (26,446) (68,518) 97,382 (4,173,525) (4,182,524)

Personnel (191,354) (18,987) (24,756) (1,845) - (236,942) (253,909)

Materials (14,216) (790) (71) (1,986) - (17,063) (15,606)

Outsourced services (256,993) (12,259) (1,208) (6,293) - (276,753) (273,211)

Energy purchased (3,060,020) (42,887) - (57,333) 97,063 (3,063,177) (2,927,353)

Depreciation (287,057) (24,772) - (614) - (312,443) (327,960)

Provisions (201,131) (22) - - - (201,153) (298,791)

Other (42,293) (23,162) (411) (447) 319 (65,994) (85,694)

Equity Method - - 1,023,996 - (1,023,996) - -

FINANCIAL INCOME 159,186 (65,989) 379 816 - 94,392 (315,968)

Financial Revenues 334,533 8,163 763 1,179 - 344,638 247,633

Financial Expenses (175,347) (74,152) (384) (363) - (250,246) (563,601)

OPERATING INCOME 1,207,210 115,635 997,929 10,733 (1,023,996) 1,307,511 493,886

NON-OPERATING INCOME - - - - - - 11,312

Non-operating Revenues - - - - - - 17,888

Non-operating Expenses - - - - - - (6,576)

INCOME BEFORE TAXES 1,207,210 115,635 997,929 10,733 (1,023,996) 1,307,511 505,198

Social Contribution (65,656) (10,285) - (1,801) - (77,742) 174,171

Income Tax (194,135) (27,516) - (2,138) - (223,789) 427,804

INCOME AFTER TAXES 947,419 77,834 997,929 6,794 (1,023,996) 1,005,980 1,107,173

Employees profit sharing (29,255) (1,733) (25) (514) - (31,527) (32,843)

NET RESULT 918,164 76,101 997,904 6,280 (1,023,996) 974,453 1,074,330






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37. TARIFF REVIEW

Result of second periodic tariff review of Light SESA:

At a public meeting held on November 4, 2008, ANEEL established, temporarily, the structural

tariff repositioning of Light Serviços de Eletricidade S/A at 1.96%, which took effect on

November 7, 2008. Considering the 2.30% financial additions, the tariff’s impact was 4.27%.

In view of the tariff basis withdraw of a -0.41% financial component that had been added to the

2007 annual readjustment, the average effect on the tariff to be acknowledged by the

consumers corresponded to 4.70%.

Regarding the financial additions, it is worth pointing out that ANEEL granted the

administrative appeal filed by Light concerning its 2007 readjustment. Through such appeal the

Company requested the recalculation of energy tariff costs for the periods of 2005 and 2006.

The impact of this decision was R$76.8 million (additional tariff of 1.48%, effective for 12

months), distributed according to ANEEL methodology that used the CVA participation in the

2007 adjustment as basis to prorate the amounts receivable and payable related to CVA. This

resulted in an increase of amounts recorded in CVA-CCC assets and amounts recorded in

CVA-Energy liabilities and CVA-CDE (see chart in the Note 5-b).

The tariff review process showed the following main results: the tariff repositioning that

established tariffs compatible with the coverage of efficient operating costs and the

remuneration over prudent investments and; the X Factor that established productivity goals

for the subsequent tariff period.

Concerning the calculation of tariff repositioning, ANEEL determines: (i) efficient operating

costs, using the Benchmark Company methodology – ER, (ii) prudent investments, using the

Regulatory Remuneration Basis, (iii) level of regulatory losses to be transferred to consumers

and (iv) non-manageable costs, which represent the Portion A.

The table below presents the results for Light’s tariff repositioning.

2008 Tariff Review Amount (R$ thousand)

1.Verified Revenue 5,102,841

2.Required Revenue (Portion A + Portion B) 5,222,228

Portion A 3,531,847

Purchase of Energy 2,455,572

Sector Charges 643,772

Transportation of Electric Power 432,503

Portion B 1,690,381

Benchmark Company 575,868

Delinquency 66,737

Capital Remuneration 704,485

Reinstatement Quota 343,291

3.Other Revenues 19,221

4.Required Net Revenue (2-3) 5,203,007

5.Tariff Repositioning [(4-1)/1] 1.96%

6.Financial Components 119,817

7.Tariff Repositioning with financial effects (5+6/4) 4.27%

It is worth mentioning that the level of regulatory losses and the calculation of efficient

operating costs (Benchmark Company and Default) are provisional.






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ANEEL temporarily established a component Xe of X Factor, to be applied as reducer, in real

terms, of Portion B in the subsequent tariff readjustments, from 2009 to 2012, at 0%.

With the conclusion of methodology improvements for the second cycle of tariff reviews on

November 25,2008, definite amounts will be established after resolution of the Public Enquiry

process, expected for April 2009.

38. LONG-TERM INCENTIVE PLAN

The Company’s Long-Term Incentive Plan was approved at the Extraordinary General Meeting

as of March 3, 2008, under the mode of Stock Option Plan and the mode “Phantom Options”,

in order to: (i) attract and retain executives; (ii) align the executives’ interests with objectives

and interests of shareholders; (iii) share the success and creating value with executives; and (iv)

develop sustainability and long-term vision.

a) Stock Incentive Plan

The eligible beneficiaries of the Stock Option Plan mode are the Company’s current executive

officers, since they had not been appointed by the Board of Directors to be part of the Long-

Term Incentive Plan in the mode “Phantom Options”. Options granted up to December 31,

2008 totaled 6,917,733, equivalent to 3.4% of total shares issued by the Company, and the

exercise price to be paid by the holders is R$21.49 per Option, deducted from eventual

amounts paid per share to shareholders as dividends, interest on capital or capital reduction.

These options can be fully exercised, in a sole opportunity, between August 10, 2010 and

August 10, 2011.

The Company’s Long-Term Incentive Plan, under the mode of Stock Option will be settled

with the delivery of equity instruments, which were measured by fair value on the granting

date, based on respective market price of these instruments (R$9.54 on March 3, 2008). The

pricing model used to measure the market price was Black & Scholes. For this calculation,

assumptions were used the Management deemed as appropriate, considering the volatility of a

previous year to the granting date, the exercise price provided for in the plan, as reported above

and the market price on the granting date.

Light S.A., pursuant to CVM Resolution nr.562 issued on December 17, 2008, recorded an

increase of R$22,459 in its shareholders’ equity, under capital reserves, corresponding to the

vesting period already incurred until December 31, 2008.

b) “Phantom Options” Incentive Plan

The “Phantom Options” mode will be offered to eligible officers appointed by the Board of

Directors and is directly related to the creation of Light value, calculated by means of Light

Unit Value (LUV) variation. The calculation of LUV results from the weighting of the

following factors:

1. Market value of Light S.A. shares;

2. Economic value (EBITDA multiple);

3. Amount of distributed dividends.






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The difference between LUV provided for in the Program for the granting year and the LUV

verified in the year of exercise multiplied by the amount of options exercised by participant

will amount total long-term bonus to be paid to each participant.

The Plan will be offered in three consecutive programs in 2008, 2009 and 2010 and the total

amount of Options shall not exceed the total gross amount of R$18,150.

The program approved for 2008 includes 1,540,146 “Phantom Options”, accounting for,

approximately, R$16,000. The participant cannot exercise any Option up to December 31,

2010, and as of this date the participant may exercise up to 50% of their Options in the first

following year (2011), plus 25% of their Options in the second following year (2012) and in

the following third year (2013) the participant can exercise all their remaining Options.

The Company accrued the amount of R$4,346 on December 31,2008 related to the 2008

program, in conterpart to the item of personnel expenses.

39. SUMMARY OF THE DIFFERENCES BETWEEN BRAZILIAN GAAP AND IFRS

39.1 Basis of preparation

Light’s consolidated annual accounts as of and for the year ended December 31, 2008 were

prepared in accordance with Generally Accepted Accounting Practices in Brazil (hereon,

“Brazilian GAAP”), which differ in certain significant aspects from International Financial

Reporting Standards.

Light prepared the accompanying consolidated annual accounts for 2008 in accordance with

IFRS and In accordance with a waiver received from the BM&FBovespa, dated December 19,

2008, Light is not obliged to disclose (a) comparative information for the year ended December

31, 2007 and (b) additional disclosures that might be required under IFRS, on top of Brazilian

GAAP disclosures included in these consolidated financial statements.

Reconciliations and descriptions of the effect of the transition from Brazilian GAAP to IFRS

on Light’s equity and net income are provided in Note 4.3.

The consolidated financial statements present a true and fair view of the consolidated equity

and consolidated financial position of Light at December 31, 2008, as well as the consolidated

results of its operations, the variations in the statements of consolidated net equity and

consolidated cash flows, which have occurred in Light in the year ended on said date.

The consolidated annual accounts for 2008 of Light have been prepared on the basis of the

accounting records of Light and its subsidiaries forming part of the Group Light. Each

company prepares its annual accounts following the general accounting practices and

accordingly, the adjustments and reclassifications necessary to homogenize said practices and

criteria in order to adapt them to IFRS have been introduced. The accounting practices of the

consolidated companies have been modified where necessary in order to assure that they are

consistent with the accounting policies adopted by Light.

.






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39.2 Accounting policies applied

The first IFRS reconciliation of LIGHT are prepared using accounting policies that comply

with the standards in force at December 31, 2008, the reporting date. Standards in force are

those that are published by IASB and are mandatory for accounting periods beginning on or

after January 1, 2008.

The described accounting policies have been consistently applied by Group companies and are

consistent with those used in the opening balance sheet prepared at the transition date.

39.3 New accounting standards and IFRIC interpretations effective for future accounting

periods as detailed below

Certain new accounting standards and IFRIC interpretations have been published that are

mandatory for accounting periods beginning on or after January 1, 2009. Light’s assessment of

the impact of these new standards and interpretations is set out below.

IAS 23 (Amendment), ‘Borrowing costs’ (effective from 1 January 2009)

The amendment requires an entity to capitalize borrowing costs directly attributable to the

acquisition, construction or production of a qualifying asset (one that takes a substantial period

of time to get ready for use or sale) as part of the cost of that asset. The option of immediately

expensing those borrowing costs will be removed. The Group will apply IAS 23 (Amendment)

prospectively from 1 January 2009.

IAS 23 (Amendment), ‘Borrowing costs’ (effective from 1 January 2009)

The amendment is part of the IASB’s annual improvements project published in May 2008.

The definition of borrowing costs has been amended so that interest expense is calculated using

the effective interest method defined in IAS 39 ‘Financial instruments: Recognition and

measurement’. This eliminates the inconsistency of terms between IAS 39 and IAS 23.

The Group will apply the IAS 23 (Amendment) prospectively to the capitalization of

borrowing costs on qualifying assets from 1 January 2009.

IAS 1 (Revised), ‘Presentation of financial statements’ (effective from 1 January 2009)

The revised standard will prohibit the presentation of items of income and expenses (that is,

‘non-owner changes in equity’) in the statement of changes in equity, requiring ‘non-owner

changes in equity’ to be presented separately from owner changes in equity. All non-owner

changes in equity will be required to be shown in a performance statement, but entities can

choose whether to present one performance statement (the statement of comprehensive income)

or two statements (the income statement and statement of comprehensive income). Where

entities restate or reclassify comparative information, they will be required to present a restated

balance sheet as at the beginning comparative period in addition to the current requirement to

present balance sheets at the end of the current period and comparative period.

The Group will apply IAS 1 (Revised) from 1 January 2009. It is not expected to have a

material impact on the group’s financial statements.

IAS 1 (Amendment), ‘Presentation of financial statements’ (effective from 1 January 2009)






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The amendment clarifies that some rather than all financial assets and liabilities classified as

held for trading in accordance with IAS 39, ‘Financial instruments: Recognition and

measurement’ are examples of current assets and liabilities respectively.

The Group will apply the IAS 1 (Amendment) from 1 January 2009. It is not expected to have

an impact on the group’s financial statements.

IFRS 2 (Amendment), ‘Share-based payment’ (effective from 1 January 2009)

The amended standard deals with vesting conditions and cancellations. It clarifies that vesting

conditions are service conditions and performance conditions only. Other features of a share-

based payment are not vesting conditions. These features would need to be included in the

grant date fair value for transactions with employees and others providing similar services; they

would not impact the number of awards expected to vest or valuation thereof subsequent to

grant date. All cancellations, whether by the entity or by other parties, should receive the same

accounting treatment.

The Group will apply IFRS 2 (Amendment) from 1 January 2009. It is not expected to have a

material impact on the group’s financial statements.

IAS 32 (Amendment), ‘Financial instruments: Presentation’, and IAS 1 (Amendment),

‘Presentation of financial statements’ – ‘Puttable financial instruments and obligations arising

on liquidation’ (effective from 1 January 2009)

The amended standards require entities to classify puttable financial instruments and

instruments, or components of instruments that impose on the entity an obligation to deliver to

another party a pro-rata share of the net assets of the entity only on liquidation as equity,

provided the financial instruments have particular features and meet specific conditions.

The Group will apply the IAS 32 and IAS 1(Amendment) from 1 January 2009. It is not

expected to have any impact on the group’s financial statements.

IFRS 1 (Amendment) ‘First time adoption of IFRS’, and IAS 27 ‘Consolidated and

separate financial statements’(effective from 1 January 2009)

The amended standard allows first-time adopters to use a deemed cost of either fair value or the

carrying amount under previous accounting practice to measure the initial cost of investments

in subsidiaries, jointly controlled entities and associates in the separate financial statements.

The amendment also removes the definition of the cost method from IAS 27 and replaces it

with a requirement to present dividends as income in the separate financial statements of the

investor.

The amendment will not have any impact on the Group’s financial statements.

IAS 27 (Revised), ‘Consolidated and separate financial statements’, (effective from 1 July

2009)






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The revised standard requires the effects of all transactions with noncontrolling interests to be

recorded in equity if there is no change in control and these transactions will no longer result in

goodwill or gains and losses. The standard also specifies the accounting when control is lost.

Any remaining interest in the entity is re-measured to fair value, and a gain or loss is

recognised in profit or loss.

The Group will apply IAS 27 (Revised) prospectively to transactions with non-controlling

interests from 1 January 2010.

IAS 27 (Amendment), ‘Consolidated and separate financial statements’ (effective from 1

January 2009)


Where an investment in a subsidiary that is accounted for under IAS 39, ‘Financial

instruments: recognition and measurement’, is classified as held for sale under IFRS 5, ‘Non-

current assets held-for-sale and discontinued operations’, IAS 39 would continue to be applied.

The amendment will not have an impact on the Group’s operations because it is the group’s

policy for an investment in subsidiary to accounted for using the equity method, in the

standalone accounts of each entity, as permitted in Brazilian GAAP.

IFRS 3 (Revised), ‘Business combinations’ (effective from 1 July 2009)

The revised standard continues to apply the acquisition method to business combinations, with

some significant changes. For example, all payments to purchase a business are to be recorded

at fair value at the acquisition date, with contingent payments classified as debt subsequently

re-measured through the income statement. There is a choice on an acquisition-by-acquisition

basis to measure the non-controlling interest in the acquiree either at fair vale or at the non-

controlling interest’s proportionate share of the acquiree’s net assets. All acquisition-related

costs should be expensed.

The Ggroup will apply IFRS 3 (Revised) prospectively to all business combinations from 1

January 2010.

IFRS 5 (Amendment), ‘Non-current assets held-for-sale and discontinued operations’ (and

consequential amendment to IFRS 1, ‘First-time adoption’) (effective from 1 July 2009)


The amendment clarifies that all of a subsidiary’s assets and liabilities are classified as held for

sale if a partial disposal sale plan results in loss of control. Relevant disclosure should be made

for this subsidiary if the definition of a discontinued operation is met. A consequential

amendment to IFRS 1 states that these amendments are applied prospectively from the date of

transition to IFRS.

The Group will apply the IFRS 5 (Amendment) prospectively to all partial disposals of

subsidiaries from 1 January 2010.

IAS 28 (Amendment), ‘Investments in associates’ (and consequential amendments to IAS 32,

‘Financial Instruments: Presentation’, and IFRS 7, ‘Financial instruments:

Disclosures’) (effective from 1 January 2009)






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The amendment is part of the IASB’s annual improvements project published in May 2008. An

investment in associate is treated as a single asset for the purposes of impairment testing. Any

impairment loss is not allocated to specific assets included within the investment, for example,

goodwill. Reversals of impairment are recorded as an adjustment to the investment balance to

the extent that the recoverable amount of the associate increases.

The Group will apply the IAS 28 (Amendment) to impairment tests related to investments in

subsidiaries and any related impairment losses when applicable from 1 January 2009.

IAS 36 (Amendment), ‘Impairment of assets’ (effective from 1 January 2009)


Where fair value less costs to sell is calculated on the basis of discounted cash flows,

disclosures equivalent to those for value-in-use calculation should be made.

The Group will apply the IAS 36 (Amendment) and provide the required disclosure where

applicable for impairment tests from 1 January 2009.

IAS 38 (Amendment), ‘Intangible assets’(effective from 1 January 2009)

The amendment is part of the IASB’s annual improvements project published in May 2008. A

prepayment may only be recognized in the event that payment has been made in advance of

obtaining right of access to goods or receipt of services.

The Group will apply the IAS 38 (Amendment) from 1 January 2009. The amendment will not

have any impact on the group’s financial statements.

IAS 19 (Amendment), ‘Employee benefits’ (effective from 1 January 2009)


The amendment clarifies that a plan amendment that results in a change in the extent to which

benefit promises are affected by future salary increases is a curtailment, while an amendment

that changes benefits attributable to past service gives rise to a negative past service cost if it

results in a reduction in the present value of the defined benefit obligation.

The definition of return on plan assets has been amended to state that plan administration costs

are deducted in the calculation of return on plan assets only to the extent that such costs have

been excluded from measurement of the defined benefit obligation.

The distinction between short term and long term employee benefits will be based on whether

benefits are due to be settled within or after 12 months of employee service being rendered.

IAS 37, ‘Provisions, contingent liabilities and contingent assets, requires contingent liabilities

to be disclosed, not recognized. IAS 19 has been amended to be consistent.

The Group will apply the IAS 19 (Amendment) from 1 January 2009.

IAS 39 (Amendment), ‘Financial instruments: Recognition and measurement’ (effective from 1

January 2009).






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This amendment clarifies that it is possible for there to be movements into and out of the fair

value through profit or loss category where a derivative commences or ceases to qualify as a

hedging instrument in cash flow or net investment hedge.

The definition of financial asset or financial liability at fair value through profit or loss as it

relates to items that are held for trading is also amended. This clarifies that a financial asset or

liability that is part of a portfolio of financial instruments managed together with evidence of

an actual recent pattern of short-term profit-taking is included in such a portfolio on initial

recognition.

The current guidance on designating and documenting hedges states that a hedging instrument

needs to involve a party external to the reporting entity and cites a segment as an example of a

reporting entity. This means that in order for hedge accounting to be applied at segment level,

the requirements for hedge accounting are currently required to be met by the applicable

segment. The amendment removes the example of a segment so that the guidance is consistent

with IFRS 8, ‘Operating segments’, which requires disclosure for segments to be based on

information reported to the chief operating decision-maker. Currently, for segment reporting

purposes, each subsidiary designates contracts with group treasury as fair value or cash flow

hedges so that the hedges are reported in the segment to which the hedged items relate. This is

consistent with the information viewed by the chief operating decision-maker. See note 3.1 for

further details. After the amendment is effective, the hedge will continue to be reflected in the

segment to which the hedged items relate (and information provided to the chief operating

decision-maker).

When re-measuring the carrying amount of a debt instrument on cessation of fair value hedge

accounting, the amendment clarifies that a revised effective interest rate (calculated at the date

fair value hedge accounting ceases) are used.

The group will apply the IAS 39 (Amendment) from 1 January 2009. It is not expected to have

an impact on the group’s income statement.

IAS 16 (Amendment), ‘Property, plant and equipment’ (and consequential amendment to IAS

7, ‘Statement of cash flows’) (effective from 1 January 2009)


Entities whose ordinary activities comprise renting and subsequently selling assets present

proceeds from the sale of those assets as revenue and should transfer the carrying amount of the

asset to inventories when the asset becomes held for sale. A consequential amendment to IAS 7

states that cash flows arising from purchase, rental and sale of those assets are classified as

cash flows from operating activities.

The amendment will not have an impact on the group’s operations because none of the group’s

companies ordinary activities comprise renting and subsequently selling assets.

IAS 28 (Amendment), ‘Investments in associates’ (and consequential amendments to IAS 32,

‘Financial Instruments: Presentation’ and IFRS 7, ‘Financial instruments: Disclosures’)

(effective from 1 January 2009)






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Where an investment in associate is accounted for in accordance with IAS 39 ‘Financial

instruments: recognition and measurement’, only certain rather than all disclosure requirements

in IAS 28 need to be made in addition to disclosures required by IAS 32, ‘Financial

Instruments: Presentation’ and IFRS 7 ‘Financial Instruments: Disclosures’.

The amendment will not have an impact on the group’s operations because it is the group’s

policy for an investment in an associate to be equity accounted in the group’s consolidated

accounts.

IAS 29 (Amendment), ‘Financial reporting in hyperinflationary economies’ (effective from 1

January 2009)


The guidance has been amended to reflect the fact that a number of assets and liabilities are

measured at fair value rather than historical cost.

The amendment will not have an impact on the Group’s operations, as none of the group’s

subsidiaries or associates operate in hyperinflationary economies.

IAS 31 (Amendment), ‘Interests in joint ventures’ (and consequential amendments to IAS 32

and IFRS 7) (effective from 1 January 2009)


Where an investment in joint venture is accounted for in accordance with IAS 39, only certain

rather than all disclosure requirements in IAS 31 need to be made in addition to disclosures

required by IAS 32, ‘Financial instruments: Presentation’, and IFRS 7 ‘Financial instruments:

Disclosures’.

The Group will apply the amendment where applicable for special purpose entities and

consortiums from 1 January 2009.

IAS 38 (Amendment), ‘Intangible assets’ (effective from 1 January 2009)


The amendment deletes the wording that states that there is ‘rarely, if ever’ support for use of a

method that results in a lower rate of amortization than the straight-line method.

The amendment will not have an impact on the group’s operations, as all intangible assets are

amortized using the straight-line method.

IAS 40 (Amendment), ‘Investment property’ (and consequential amendments to IAS 16)

(effective from 1 January 2009)


Property that is under construction or development for future use as investment property is

within the scope of IAS 40. Where the fair value model is applied, such property is, therefore,

measured at fair value. However, where fair value of investment property under construction is

not reliably measurable, the property is measured at cost until the earlier of the date

construction is completed and the date at which fair value becomes reliably measurable.






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The amendment will not have an impact on the group’s operations, as there are no investment

properties are held by the Group.

IAS 41 (Amendment), ‘Agriculture’ (effective from 1 January 2009)

The amendment is part of the IASB’s annual improvements project published in May 2008. It

requires the use of a market-based discount rate where fair value calculations are based on

discounted cash flows and the removal of the prohibition on taking into account biological

transformation when calculating fair value.

The amendment will not have an impact on the Group’s operations as no agricultural activities

are undertaken.

IAS 20 (Amendment), ‘Accounting for government grants and disclosure of

government assistance’ (effective from 1 January 2009)

The benefit of a belowmarket rate government loan is measured as the difference between the

carrying amount in accordance with IAS 39, ‘Financial instruments: Recognition and

measurement’, and the proceeds received with the benefit accounted for in accordance with

IAS 20.

The Group will apply the IAS 39 (Amendment) from 1 January 2009. It is not expected to have

an impact on the group’s financial statements.

IFRIC 15, ‘Agreements for construction of real estates’ (effective from 1 January 2009)

The interpretation clarifies whether IAS 18, ‘Revenue’, or IAS 11, ‘Construction contracts’,

should be applied to particular transactions. It is likely to result in IAS 18 being applied to a

wider range of transactions.

IFRIC 15 is not relevant to the group’s operations as all revenue transactions are accounted for

under IAS 18 and not IAS 11.

Other amendments

There are a number of minor amendments to IFRS 7, ‘Financial instruments: Disclosures’, IAS

8, ‘Accounting policies, changes in accounting estimates and errors’, IAS 10, ‘Events after the

reporting period’, IAS 18, ‘Revenue’ and IAS 34, ‘Interim financial reporting’, which are part

of the IASB’s annual improvements project published in May 2008 (not addressed above).

Further minor amendments to IAS 20 ‘Accounting for government grants and disclosure of

government assistance’, and IAS 29, ‘Financial reporting in hyperinflationary economies’, IAS

40, ‘Investment property’, and IAS 41, ‘Agriculture’, which are part of the IASB’s annual

improvements project published in May 2008 (not addressed above).

These amendments are unlikely to have an impact on the group’s accounts and have therefore

not been analyzed in detail.

39.4 Transition to IFRS






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The BM&FBOVESPA S.A. - Bolsa de Valores, Mercadorias e Futuros(hereon

“BM&FBOVESPA”) in its Regulamento de Listagem de Novo Mercado sets down that all the

listed companies shall, starting two reporting periods after listing on Novo Mercado, present

their consolidated financial statements (a) according to International Financial Reporting

Standards – IFRS, as issued by the International Accounting Standards Board – IASB, or

alternatively (b) according to United States Generally Accepted Accounting Principles (US

GAAP) as issued by Financial Accounting Standards Board (FASB) or alternatively (c)

according to Brazilian GAAP with a reconciliation note to IFRS or US GAAP.

On February 16, 2006 the common shares of Light became listed on Novo Mercado and

therefore for the reporting period ending December 31, 2008, Light opted for (c) presenting

Brazilian GAAP consolidated financial statements with a reconciliation of P&L and

shareholders’ equity to IFRS.

The consolidated financial statements for 2007 were prepared in accordance with the Brazilian

GAAP. The accounting principles included in these financial statements have been taken into

consideration as the “Former Generally Accepted Accounting Principles”, as defined in IFRS

1, for the preparation of the opening consolidated balance sheet as at January 1, 2007 (date of

transition).

These consolidated annual accounts have been prepared as described in note 4.3. Light has

applied IFRS 1 in order to prepare these consolidated annual accounts, applying all the

obligatory exceptions and some of the optional exemptions from retroactive application of

IFRS.

The Company prepared the opening balance sheet at transition date, January 1, 2007 and

adopted IFRS on January 1, 2008. The financial statements as at and for the year ended

December 31, 2008 are the first reconciliation between Brazilian GAAP with IFRS.

In the process of first time adoption of IFRS the Company prepared an opening balance sheet at

January 1, 2007, being the date of transition to IFRS, Selected accounting policies that comply

with IFRS; applied those policies retrospectively to all of the periods presented in the first

IFRS financial statements; Considered whether to apply any of the 15 optional exemptions

from retrospective application; Applied the five mandatory exceptions from retrospective

application; and prepared extensive disclosures to explain the transition to IFRS.






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39.4.1 IFRIC 12 Service Concession Arrangements (Issued 30 November 2006)

This interpretation addresses how service concession operators should apply existing IFRS to

account for the obligations they undertake and rights they receive in service concession

arrangements. It does not address accounting for the government side of service concession

arrangements. IFRIC 12 is effective for annual periods beginning on or after 1 January 2008.

The interpretation was endorsed by EFRAG on March 25, 2009. It is applicable to Light as is

involved in service concession arrangements.

In accordance with IFRIC 12, infrastructure within the scope of this Interpretation shall not be

recognized as property, plant and equipment of the operator because the contractual service

arrangement does not convey the right to control the use of the public service infrastructure to

the operator. The operator has access to operate the infrastructure to provide the public service

on behalf of the grantor in accordance with the terms specified in the contract. IFRIC 12 sets

out general principles on recognizing and measuring the obligations and related rights in

service concession arrangements. Application of IFRIC 12 should result into material

reclassifications and certain adjustments to the Company´s financial statements in accordance

with IFRS, mainly due to the reclassification of property, plant and equipment to intangible and

financial assets, revenue recognition, capitalization of additions to the intangible and

amortization. The Company is evaluating the impacts of the aforementioned standard and has

not yet determined the changes in its financial position and results of the operation that would

result from the application of IFRIC 12.

39.4.2 Exemptions from full retrospective application – elected by Light

The Company applied all mandatory exceptions and certain voluntary exemptions as detailed

below:

a) Business combinations

LIGHT has applied the business combinations exemption in IFRS 1 for business combinations.

Therefore, it has not restated business combinations that took place prior to the January 1, 2004

transition date.

b) Employee benefits

LIGHT has elected to recognize all cumulative actuarial gains and losses as of January 1, 2007.

c) Cumulative translation differences

This exemption is not applicable.

d) Compound financial instruments

LIGHT has applied the exemption and it only identifies separately the two elements of the

equity component (original equity component and the interest on the liability component that is

part of the retained earnings) where the liability component is outstanding at the date of

transition.

e) Assets and liabilities of subsidiaries, associates and joint ventures







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101

f) Exemption from restatement of comparatives for IAS 32 and IAS 39

LIGHT has not used the exemption and has applied IAS 32 and IAS 39 since the transition date

(January 1, 2007).

g) Designation of previously recognized financial instruments


h) Decommissioning liabilities included in the cost of property, plant and equipment exemption

LIGHT has not detected at January 1, 2007 any asset that could incur dismantling costs or the

like, and, accordingly, this exemption is not applicable.

i) Share-based payment transaction

LIGHT has not taken the exemption and has not applied IFRS 2 to liabilities that were settled

before January 1, 2005.

j) Insurance contracts

This exemption is not applicable in Light.

k) Exploration and evaluation assets


l) Fair value measurement of no-active market financial instruments

LIGHT has not applied the exemption offered by the revision of IAS 39 on the initial

recognition of the financial instruments measured at fair value through profit and loss where

there is no active market. This exemption is therefore not applicable.

m) Presenting comparative accounting and risk disclosures


39.4.3 Reconciliations between IFRS and Brazilian GAAP

The following reconciliations provide a quantification of the effect of the transition to IFRS in

LIGHT. The reconciliation provides details of the impact of the transition on the following

details:

– Summary of stockholder’s equity (Note 39.4.3.1)

– Reconciliation of net result for 12 months ended December 31, 2007 (Note 39.4.3.2)

39.4.3.1 Summary of stockholder’s equity

The following reconciliations provide a quantification of the effect of the transition to IFRS






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Dec 31, 2007 Dec 31, 2008

Total equity under Brazil GAAP 2,691,799 2,803,704

i) Maintenance expenses (137) (3)

ii) Deferred charges (43,094) -

iii) Compound fin. Inst. - conversion (*) (268,039) (269,556)

iii) Compound fin. Inst. - effective interest rate (46,236) (46,363)

iii) Compound fin. Inst. - segregation of equity component (*) 315,958 315,958

iv) Recognition of deferred tax asset 118,462 118,462

v) Net deferred tax effect on GAAP differences 92,037 93,956

vi) Reversal of dividends proposed 203,463 262,636

vii) Regulatory assets and liabilities (337,620) (412,292)

viii) Special obligations 127,776 135,954

ix) Debt payment in installments (17,621) -

Total equity under IFRS 2,836,748 3,002,456

Explanation of effects of transition to IFRS

We set out below explanations and quantifications of the adjustments in the reconciliation

included in the point above.

i. Maintenance expenses

Under Brazilian GAAP those administration expenses that are related to maintenances are held

as Services in course in balance sheet, whereas under IFRS these are expensed as incurred.

ii. Deferred charges

Under Brazilian GAAP(until December 31, 2007), the Group capitalized start-up costs.

However, under IFRS, following IAS 16 Property, Plant and Equipment definitions, start-up

costs are expensed in the period they are incurred, except if it is probable that the expected

future economic benefits will flow to the Companies and if those benefits can be reliably

measured. Therefore, Start-up costs were reversed for IFRS purposes.

iii. Compound financial instrument

Under Brazilian GAAP the compound financial instruments are recognized and measured

according to its legal form and no equity component separation is required. The debentures

issued in June 2005 are fully convertible to common shares at any moment as requested by the

bearer of the debenture. The maturity date of debentures issue is in June 2015. Under IFRS the

Company determined the fair value of debenture and separated the equity component. Items

marked (*) are posted against capital reserves.

The segregation of equity component represent the amount of equity component at the initial

recognition of financial instrument, that was reclassified to equity. The effective interest rate

adjustment represents the increased interest expense over the period of debt, using effective

interest rate rather than nominal rate that will increase the liability to its nominal value at the

end of period of instrument. The amount included as conversion represents amounts converted

to shares.






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iv. Recognition of deferred tax asset

Under Brazilian GAAP, Light is not allowed to recognize a deferred tax asset that is expected

to be recovered after more than 10 years from the balance sheet date. No such limit exists in

IFRS and Light recognized additional deferred tax assets.

v. Net deferred tax effect on GAAP adjustments

In accordance with the accounting policy of Light, the income tax charge is determined

considering the taxable income in accordance with the applicable legal framework and the tax

rate approved or substantially approved in Brazil. Deferred taxes are determined according to

the liability method based on the balance sheet, considering temporary differences between the

accounting and fiscal amounts of assets and liabilities, by the use of the tax rate approved or

substantially approved as at the balance sheet date in Brazil, and that are expected to be

applicable when the above mentioned differences are reversed. Therefore, the deferred tax

adjustments performed under IFRS are related to the impact of the adjustments mentioned

above, whenever in accordance with IAS 12 Income Taxes, there are temporary differences

between accounting practices and tax regulations that result in deferred taxes asset or liability.

vi. Reversal of dividends proposed

Under Brazilian GAAP, at each balance sheet date, the board of directors is required to propose

a dividend distribution from earnings and accrue for this in the financial statements of the

Company. Since this proposal needs to be approved and might be modified at the annual

shareholders’ meeting, for IFRS reconciliation purposes, the excess of the minimum dividends

required by Brazilian Corporate Law of 25% of adjusted net income was not considered as

declared at the balance sheet date as they were not approved as of that date and were reversed.

vii. Regulatory assets and liabilities

Under Brazilian GAAP, when the regulator establishes a criteria of allocating income or

expense to future years, a regulatory asset or liability is booked in the financial statements,

which otherwise would be recognized as profit or loss of the year. In accordance with IFRS,

regulatory assets and liabilities, which do not attend the criteria established in conceptual

framework, are not recognized.

viii. Special obligations

Under Brazilian GAAP, the Company presents special obligations, representing consumers’

contributions to the cost of expanding power electric supply systems, as a non-current liability.

These obligations were not subject to amortization over the applicable useful lives of the

underlying assets. The special obligations are now subject to amortization after the second

periodic tariff reset published by ANEEL.

Under new regulation the special obligations (Both existing and newly incurred) are amortized

over average remaining useful life of network assets. In some cases this is longer than the

remaining concession period. At the end of concession the net amount of special obligation will

be deducted from the compensation that Light shall receive for the network assets.






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Under IFRS, contributions received from consumers are considered reimbursement of

construction costs and are credited against the cost of the related fixed assets. For IFRS

reconciliation purposes, the depreciation is adjusted for the effects of the amortization of

special obligations using the average depreciation rates applicable to the fixed assets. The non-

amortizable portion represent a financial liability as it will either decrease the cash inflow or

cause cash outflow at the end of concession period and hence it is carried at amortized cost.

For asset contributions received after the second periodic tariff reset there will be no difference

between Brazilian GAAP and IFRS.

Before the determination that special obligations should be amortized for Brazilian GAAP

purposes, this reconciled item was considered a permanent difference, and therefore there was

no deferred tax impact. Since the determination of special obligations’ amortization for

Brazilian GAAP purposes, this reconciled item became a temporary difference and, therefore,

subjected to deferred taxes calculation. The ANEEL Regulatory Resolution, which established

the amortization of special obligations, confirmed the tax impacts related to the amortization of

special obligations.

ix. Debt payments in installments

Under Brazilian GAAP until December 31, 2007. the Company recognizes the interest for

payments divided in various installments in last payment, whereas in IFRS this financial asset

is carried at amortized cost using effective interest rate to recognize interest income at constant

rate. In 2008 Light modified its local accounting policies in line with new Brazilian GAAP






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39.4.3.2 - Reconciliation of net result for 12 months ended December 31, 2008

Item

Brazilian

GAAP

31/12/2008

Effect of

transition to

IFRS IFRS

Net Sales 1 5,386,644 (131,853) 5,254,791

Cost of Sales:

Personnel cost 2 (141,964) (31,527) (173,491)

Material cost (13,987) - (13,987)

Procurement (120,526) - (120,526)

Energy for resale 3 (3,063,177) 51,531 (3,011,646)

Depreciation 4 (275,887) 2,056 (273,831)

Other expenses 5 (16,364) 5,650 (10,714)

Sales expenses (315,476) - (315,476)

General and administrative expenses 6 (247,581) 134 (247,447)

Net finance cost 7 94,392 5,995 100,387

Other operating income 30,188 - 30,188

Other operating expenses (8,751) - (8,751)

Income before income taxes 1,307,511 (98,014) 1,209,497

Income tax expense - Current (161,410) - (161,410)

Income tax expense - Deferred 8 (140,121) 22,562 (117,559)

Staff statutory contributions 9 (31,527) 31,527 -

Net income for the year 974,453 (43,925) 930,528

Explanation of effects of transition to IFRS

We set out below explanations and quantifications of the reclassifications and adjustments

included in the reconciliation above.

1. Net Sales

a) Regulatory assets and liabilities (see item vii above) (131,853)

2. Staff costs

a) Reclassification of statutory contribution to staff as personnel expenses (31,527)

3. Energy for resale

a) Regulatory assets and liabilities (see item vii above) 51,531

4. Depreciation

a) Amortization of special obligations (see item viii above) 2,056






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5. Other expenses

a) Regulatory assets and liabilities (see item vii above) 5,650

6. General and administrative expenses

a) Maintenance expenses (see item i above) 134

7. Net finance revenue /(cost)

a) Special obligations (see item viii above) 6,122

b) Adjustment to effective tax rate on debentures (see item iii above) (127) 5,995

8. Deferred income tax credit

9. Statutory contribution to staff

a) Reclassification of statutory contribution to staff as

personnel expenses 31,527

39.5 Additional disclosures required under IFRS

Earnings per share

Under Brazilian GAAP, net income per share is calculated on the number of shares outstanding

at the balance sheet date. Under IFRS, the Company presents basic and diluted earnings per

share (EPS) data for its ordinary shares. Basic and diluted EPS are calculated by dividing the

profit or loss attributable to ordinary shareholders of the Company by the weighted average

number of ordinary shares outstanding during the period.

2008

Earnings per thousand of shares under Brazilian GAAP R$ 4.77828

(a) Basic

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the

company by the weighted average number of ordinary shares in issue during the year.

excluding ordinary shares purchased by the company and held as treasury shares.

2008

Profit attributed to equity holders of the company 930,528

Weighted average number of ordinary shares in issue (thousands) 203,573

Basic earning per share 4.57098

a) Net effect of deferred taxes on GAAP differences (see item

v above) 22,562






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(b) Diluted

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary

shares outstanding to assume conversion of all dilutive potential ordinary shares. The company

has one categories of dilutive potential ordinary shares, that is convertible debt.

The convertible debt is assumed to have been converted into ordinary shares, and the net profit

is adjusted to eliminate the interest expense less the tax effect.

2008

Earnings

Profit attributed to equity holders of the company 930,528

Add back of interest expense on convertible debt (net of tax) 680

Profit used determine diluted earnings per share 931,208

Weighted average number of ordinary shares in issue (thousands) 203,573

Adjustments for:

- Assumed conversion of convertible debt (thousands) 373

Weighted average number of ordinary shares for diluted earnings per sahre (thousands) 203,946

Diluted earnings per share (in R$) 4.56595






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BOARD OF DIRECTORS

MEMBERS ALTERNATES

Wilson Nélio Brumer Luiz Fernando Rolla

Djalma Bastos de Morais João Batista Zolini Carneiro

Eduardo Borges de Andrade João Pedro Amado Andrade

Ricardo Coutinho de Sena Paulo Roberto Reckziegel Guedes

Carlos Augusto Leone Piani Ana Marta Horta Veloso

Firmino Ferreira Sampaio Neto Paulo Jerônimo Bandeira de Mello Pedrosa

Ricardo Simonsen Carlos Roberto Teixeira Junger

Aldo Floris Lauro Alberto de Luca

Elvio Lima Gaspar Joaquim Dias de Castro

Jose Luiz Silva Carmen Lúcia Claussen Kanter

Ruy Flaks Schneider Almir José dos Santos

FISCAL COUNCIL

MEMBERS ALTERNATES

Ari Barcelos da Silva Eduardo Gomes Santos

Isabel da Silva Ramos Kemmelmeier Leonardo George de Magalhães

Eduardo Grande Bittencourt Ricardo Genton Peixoto

Maurício Wanderley Estanislau da Costa Márcio Cunha Cavour Pereira de Almeida

Aristóteles Luiz Menezes Vasconcellos

Drummond João Procópio Campos Loures Vale






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BOARD OF EXECUTIVE OFFICERS

José Luiz Alquéres

Chief Executive Officer

Ronnie Vaz Moreira

Vice Chief Executive Officer and Investor Relations Officer

Roberto Manoel Guedes Alcoforado

Vice Chief Operations Officer

Paulo Henrique Siqueira Born

Officer

Ana Silvia Corso Matte

Officer

Luiz Fernando de Almeida Guimarães

Officer

Paulo Roberto Ribeiro Pinto

Officer

CONTROLLERSHIP AND PLANNING SUPERINTENDENCE

Elvira Madruga B Cavalcanti Luciana Maximino Maia

Controllership and Planning Superintendence ACCOUNTANT – Accounting Manager

CPF 590.604.504-00 CPF 114.021.098-50

CRC-RJ 091476/O-0

light s.a. and subsidiaries consolited financial statement december 31, 2008...

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