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Glossary

A-3 (A minus three) - Refers to Auction for the Purchase of Energy from new projects with supply beginning three years ahead.

A-5 (A minus five) – Refers to Auction for the Purchase of Energy from new projects with supply beginning five years ahead.

ABEEólica – Brazilian Wind Power Association.

ANEEL (National Electricity Regulatory Agency) - An autonomous government agency that regulates and inspects the generation, transmission, distribution and trading of electricity in Brazil, striving for quality of the services provided, for equal treatment of users, and for controlling the reasonability of fees charged from consumers, preserving the economic and financial feasibility of the agents and the sector.

Installed capacity – The maximum electricity generation capacity of a plant.

Electric Energy Trading Chamber (CCEE) - A private non-profit organization. It functions under the authorization of the government and under the regulation and supervision of ANEEL with the purpose of enabling the purchase and sale of electricity among CCEE agents, restricted to the National Interconnected System (SIN).

EBITDA (Earnings Before Interest, Taxes, Depreciation & Amortization) - The Company's financial results before deducting interest, taxes, depreciation and amortization expenses.

Affluent Natural Energy (ENA) - Measured in MW average, it is a way of presenting the status of a river's flow at any given time. It is usually calculated as a percentage to show whether it is above or below the historical long-term average (monthly historical average from 1931 to 2011).

Energy Research Company (EPE) - Federal public company linked to the Ministry of Mines and Energy. Responsible for the country's energy planning, covering generation, transmission, distribution, oil and gas.

Physical Guarantee – A portion of the SIN's physical guarantee allocated to each plant, which will be the contracting limit for generators in the system. Determination of physical guarantee and its revisions are proposed by the National Electricity System Operator (ONS) together with the Energy Research Company (EPE), with approval by the Ministry of Mines and Environment (MME).

GSF (Generation Scaling Factor) – The percentage of energy that all MRE participants are generating in relation to their total Physical Guarantee.

Electric Energy Index (IEE) – An industry index of BMF&BOVESPA that measures the performance of the electricity sector.

Energy Auctions – Bidding processes established by the MME and ANEEL for the purchase and sale of energy. They can be characterized as: LEN – New Energy Auction; LER – Energy Reserve Auction; LFA – Alternative Source Auctions.

Spot market – A market that accepts transactions in which delivery of the product occurs in the short term and payment is at sight. It is common to resort to this market to purchase electricity urgently, usually due to scarcity of the resource, which causes prices to go up.

Free Market - An energy contracting environment where the prices are freely negotiated between consumers and generation or trading agents.

Regulated Market - This market has specific regulations for aspects such as energy price, submarket for agreement registration and duration of supply, which are not subject to bilateral amendments by the agents. Although it is not contracted at auctions, the energy generated by the binational plant of Itaipu and the energy associated with the Incentive Program for Alternative Sources of Energy (PROINFA) qualify under the ACR, because their contracting is regulated under specific conditions established by ANEEL.

Energy Reallocation Mechanism (MRE) - It is aimed at fully utilizing the production capacity, resulting in a process of transfer of energy between generators.

National Electricity System Operator (ONS) - A private legal entity authorized to coordinate and control energy generation and transmission operations in the interconnected systems.

Power Purchase Agreement (PPA) - energy purchase agreement.

P50 - estimate that indicates there is a 50% chance that actual energy production in the long term will exceed this value. Estimated average energy production.

P90 - estimate that indicates there is a 90% chance that actual energy production in the long term will exceed this value. Conservative estimate of energy production.

Spot Price (PLD) – Short-term price at which the differences between contracted and generated energy are settled. Price volatility is directly related to the dynamic of affluents.

Small Hydropower Plants (SHPP) - Hydroelectric projects with capacity of 1,000 KW or more, or lower than 30,000 KW, with a total reservoir area of 3.0 km or less.

PROINFA - Incentive Program for Alternative Energy Sources.

SIN (National Interconnected System) - A large hydrothermal system with strong presence in hydroelectric plants, comprising generation units in the Southern, Southeastern, Midwestern, Northeastern and Northern regions of Brazil. Operation in the system is based on interdependence, integrating hydroelectric resources for energy generation and transmission to serve the market. Interconnection enables the exchange of energy between regions with different climate and hydrological variations, which tend to cause production surplus or shortfall. The system also envisages the reduction of operating costs and minimizing thermal production.

Energy Optimization Tariff (TEO) – Used for pricing MRE transactions, established by ANEEL.

 

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