6-K 1 f6k_082302.txt REPORT OF FOREIGN PRIVATE ISSUER FORM 6-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Report of Foreign Issuer Pursuant to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934 For the month of August 2002 ESPIRITO SANTO CENTRAIS ELETRICAS S.A. - ESCELSA Rua Sete de Setembro, 362 Vitoria, Espirito Santo, Brazil 29015-000 (Address of principal executive offices) Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. Form 20-F X Form 40-F ----- ----- Indicate by check mark whether the registrant by furnishing information contained in this Form is also thereby furnishing information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934. Yes No X ----- ----- If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-___________________. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this current report to be signed on its behalf by the undersigned, thereunto duly authorized. ESPIRITO SANTO CENTRAIS ELETRICAS S.A. - ESCELSA (Registrant) Date: August 22, 2002 By: /s/ Sergio Pereira Pires -------------------------------- Name: Sergio Pereira Pires Title: Chief Financial Officer EXHIBIT INDEX ------------- 1. Condensed Consolidated Financial Information of the Company at June 30, 2002 and 2001 and Report of Independent Accountants, dated August 14, 2002. EXHIBIT 1 [ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002 -------------------------------------------------------------------------------- (Convenience Translation into English from the Original Previously Issued in Portuguese) ACCOUNTANTS' REVIEW REPORT To the board of Directors and Shareholders of Espirito Santo Centrais Eletricas S.A. - ESCELSA Vitoria - ES 1. We have performed a special review of the Quarterly Information (ITR) of Espirito Santo Centrais Eletricas S.A. - ESCELSA and subsidiaries (parent company and consolidated) for the quarter and the semester ended June 30, 2002, prepared under the responsibility of the Company's management, in accordance with accounting practices established by the Brazilian Corporate Law, comprising the balance sheets, the related statements of income and the reports on performance. 2. Our review was performed in accordance with standards established by the Brazilian Institute of Independent Auditors - IBRACON, in conjunction with the Federal Accounting Council, and consisted principally of: (a) inquiries and discussions with the Company's management responsible for the accounting, financial and operational areas of the Company and its subsidiaries, as to the criteria adopted in preparing Quarterly Information; and (b) a review of the information and subsequent events that had or could have material effects on the financial position and results of operations of the Company and its subsidiaries. 3. Based on our review, we are not aware of any material modifications that should be made to the Quarterly Information referred to in paragraph 1 in order for it to be in accordance with the accounting practices established by the Brazilian Corporate Law and the standards issued by the Brazilian Securities and Exchange Commission specifically applicable to the preparation of Quarterly Information. 4. Previously, we reviewed the balance sheets (parent company and consolidated) related to March 31, 2002, and issued our accountants' review report dated May 14, 2002, containing an emphasis paragraph related to the matter mentioned in paragraph 5. The statements of income (parent company and consolidated) for the quarter and the semester ended June 30, 2001, presented for comparative purposes, were reviewed by other independent auditors, who issued their accountants' review report thereon dated July 27, 2001 containing an emphasis paragraph related to the assets and liabilities relating to the sales and purchases of electric power in the Electric Power Wholesale Market (MAE), which amounts were recorded based on preliminary information released by the Electric Power Wholesale Market Services Administrator - ASMAE. 5. On December 21, 2000 Provisional Measure (Executive Order) no. 14 was issued, and converted into Federal Law no. 10.438 on April 26, 2002, providing, amongst other matters, for the reestablishment of the financial-economic equilibrium of the electric power distribution companies, as guaranteed in the concession agreements. The detailed information and the effects of this Law on the financial position and the results of the operations are disclosed in Notes 5 and 7 to the quarterly information. The amounts of this recovery will be realized through extraordinary tariff increases. These amounts are in process of approval by the National Electric Energy Agency - ANEEL. 6. As mentioned in Notes 5 and 12 to the quarterly information, the Company has recorded, as of June 30, 2002, in current assets, accounts receivable in the amount of R$37,288 thousand (R$65,016 thousand consolidated) and, in current liabilities, accounts payable in the amount of R$22,794 thousand (R$35,073 thousand consolidated), relating to electric power sales and purchases operations conducted in the Electric Power Wholesale Market - MAE, based on preliminary information released by MAE and/or based on management estimates. These amounts, related to the period from September 1, 2000 to June 30, 2002, are pending of approval from MAE and subsequent settlement. August 14, 2002 /s/ Deloitte Touche Tohmatsu DELOITTE TOUCHE TOHMATSU Celso de Almeida Moraes Auditores Independentes Contador CRC-SP 11.609-S/RJ CRC-SP 124.669-S/ES -------------------------------------------------------------------------------- 1 [ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002 -------------------------------------------------------------------------------- (Convenience Translation into English from the Original Previously Issued in Portuguese) SECOND QUARTER 2002 HIGHLIGHTS Electric energy sales in the first half of 2002 totalized 3,058,198 MWh, 11.5% lower than the 3,460,819 MWh sold in the same period in 2001. This decrease demonstrates that even with the end energy rationing in Brazil, consumption levels are recovering slowly, mainly among residential customers that adopted new usage habits that effectively reduced consumption As per the General Agreement for the Electric Energy Sector as well as criteria established in ANEEL Resolutions 031 and 078 of 01/24/2002 and 02/07/2002, respectively, ESCELSA recognized revenue of R$ 209,640 thousand related to 2001 and R$ 25,921 thousand related to 2002 - a total of R$ 235,561 thousand - as extraordinary tariff adjustments (Regulatory Asset). These amounts are subject to approval by ANEEL, which is expected by August 31, 2002. Based on newly available information, ESCELSA recalculated losses incurred during rationing, resulting in a cross-entry to revert operating revenue of R$33,218 thousand. The regulatory asset position on June 30, 2002 was follows: -------------------------------------------------------------------------------- Operating Financial PIS AND Current and Revenue Revenue COFINS Non-current TAXES asset recognition -------------------------------------------------------------------------------- Losses recognized on 12/31/2001 209,640 2,980 212,620 Losses in January and February 2002 25,921 25,921 Indexation by SELIC 10,858 10,858 Adjustment to losses (33,218) (33,218) Recovered by rate adjustments (22,470) Pis and Cofins taxes 357 357 -------------------------------------------------------------------------------- TOTAL 202,343 10,858 3,337 194,068 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 2 [ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002 --------------------------------------------------------------------------------

(*) Non revised by Independent Accountants -------------------------------------------------------------------------------- 3 [ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002 -------------------------------------------------------------------------------- MARKET PERFORMANCE ENERGY REQUIREMENTS Energy required for the first half of 2002 totalized 3,537,726 MWh, representing a decrease of 7.0% when compared to 3,805,237 MWh in the same period last year. In order to satisfy market demand, the Company generated 588,481 MWh and purchased 1,954,134 MWh from Furnas and Rosal, 864,033 MWh from Itaipu and 51,640 from other companies. In addition, 79,438 MWh, generated by self-producers was transported on ESCELSA's system. The maximum demand during the first half of 2002 was 1,077.5 MWh/h, compared to 1,138.1 MWh/h in the same period last year Sources (*) Uses(*) ------------------------------ ------------- ----------------------------- Self Generation Wholesale 16.6% 4.3% 588,481 MWh 151,091 MWh ------------------------------ ----------------------------- ------------------------------ ----------------------------- Purchased from FURNAS Retail and Rosal 55.2% 82.2% 1,954,134 MWh 2,907,107 MWh ------------------------------ ----------------------------- ------------------------------ ----------------------------- Purchase from ITAIPU ENERGY Losses and differences 24.4% REQUIREMENTS 11.2% 864,033 MWh 3,537,726 MWh 400,090 MWh ------------------------------ ----------------------------- ------------------------------ ----------------------------- Purchase from OTHER Transport of Energy 1.5% 2.3% 51,640 MWh 79,438 MWh ------------------------------ ----------------------------- ------------------------------ Transport of Energy 2.3% 79,438 MWh ------------------------------ ------------- (*) Not reviewed by independent auditors ENERGY SOLD Energy sold totalized 3,058,198 MWh during the first half of 2002, representing a decrease of 11.5% when compared 3,460,819 MWh in the same period last year. The reduction in sales was a result of the Energy Rationing Plan, implemented on June 4, 2001, which caused a reduction in sales in all consumer segments, particularly in the residential segment. Energy sales per consumer segment was as follows (not reviewed by independent auditors):

-------------------------------------------------------------------------------- 4 [ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002 --------------------------------------------------------------------------------

CUSTOMER PROFILES The customer breakdown in terms of sales volume and revenue changed significantly among the residential and industrial segments, due mainly to the effects of rationing. In calculating the breakdown of energy sold, the impacts from the regulatory asset and short-term sales were not considered. -------------------------------------------------------------------------------- PARENT COMPANY --------------------------------------------------- First Half of 2002 First Half of 2001 --------------------------------------------------- As a % of As a % of As a % of As a % of Sales Volume Revenues Sales Volume Revenues -------------------------------------------------------------------------------- Retail: Residential 18.77 32.37 21.19 36.32 Industrial 50.15 36.01 47.73 33.45 Commercial 13.80 18.41 13.35 17.17 Rural 4.91 3.96 5.77 4.51 Other 7.44 7.05 7.34 6.67 -------------------------------------------------------------------------------- 95.06 97.81 95.39 98.12 Wholesale 4.94 2.19 4.61 1.88 -------------------------------------------------------------------------------- Total 100.00 100.00 100.00 100.00 -------------------------------------------------------------------------------- (*) Not reviewed by independent auditors NUMBER OF CUSTOMERS The number of customers on June 30, 2002 totaled 939,961, an increase of 7.0% compared to the same period last year.(*) During the first six months of 2002, 17,382 customers were connected.

(*) Not reviewed by independent auditors AVERAGE TARIFF The average tariff charged to retail customers in June 2002 was R$ 128.92/MWh, while the wholesale rate to other distributors was R$ 69.24/MWh, resulting in an overall average tariff of R$ 126.09/MWh, an increase of 14.9%, compared to the same period last year. The average tariffs per segment are as follows: (*)

-------------------------------------------------------------------------------- 5 [ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002 --------------------------------------------------------------------------------

(*) Not reviewed by independent auditors. QUALITY OF SERVICE RENDERED The main indicators used by the energy sector to measure the quality of service rendered showed the following performance: Average Service Response Time - TMA is an indicator that measures the average time between a complaint of interruption in energy and the re-establishment. For the 12-month period ended June 30, 2002, TMA was 109 (*) minutes compared to 108(*) minutes for the same period in the previous year, an increase of 1.0%(*). Equivalent Outage Duration per Customer - DEC measures the average number of hours that each customer remains without the supply of energy. For the 12-month period ended June 30, 2002, DEC was 14.99(*) hours, compared to 14.57(*) hours in the previous year, an improvement of 2.9%(*). Equivalent Outage Frequency per Customer - FEC indicates the average number of interruptions in energy service per customer. For the period ended June 30, 2002, FEC was 11.23(*) compared to 12.17(*) for the same period the previous year, an improvement of 7.7%(*). (*) Not reviewed by independent auditors. ENERGY LOSSES Energy losses increased from 9,59% in the twelve-month period ended June 30,2002 to 11,71% in the same period this year. This increasing is due to the energy rationing, as the reduction in sales was not necessarily followed by a reduction in energy losses, especially commercial losses. Since the end of the rationing (March, 2002) losses have been decreasing. FINANCIAL PERFORMANCE INCOME FROM OPERATIONS Income from operations in the first half of 2002 totalized R$ 24,900 thousand, compared of R$ 10,764 thousand in the same period last year and resulted in an EBITDA of R$ 53,243 thousand, equal to an EBITDA margin of 14.34%. The items that make up service income showed the following performance: OPERATING REVENUES Gross operating revenues in the first half of 2002 totaled R$ 521,267 thousand, an increase of 6.5% when compared to the same period last year. The revenue from the retail sector was R$ 480,787 thousand, an increase of 1.7% compared to the same period in 2001. The increase in the wholesale revenue in the first half of 2002, compared to the same period last year was due to the short-term supply sales of excess energy. The increase in other revenues is due to the new breakdown in revenues as per the new sector model, as well as to the growth in the utilization of the distribution system by customers. -------------------------------------------------------------------------------- 6 [ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002 -------------------------------------------------------------------------------- Net operating revenues in the first quarter of 2002 totaled R$371,345 thousand, 5.6% higher than the same period in 2001. -------------------------------------------------------------------------------- thousands of reais ---------------------------------------------- PARENT COMPANY CONSOLIDATED ---------------------------------------------- First Half ---------------------------------------------- 2002 2001 2002 2001 ---------------------------------------------- Retail: Residential 161,580 176,067 264,078 283,308 Industrial 179,755 162,128 221,748 197,163 Commercial 91,902 83,232 148,580 138,012 Rural 19,774 21,844 37,353 37,958 Other 35,201 32,319 62,631 59,418 Unbilled revenues (128) (3,089) 1,932 (3,810) Regulatory assets (7,297) - 8,991 - ---------------------------------------------- 480,787 472,501 745,313 712,049 ============================================== Wholesale: Other distributors 10,951 9,128 12,835 12,065 Short-term 19,016 3,931 (1,236) 14,048 ---------------------------------------------- 29,967 13,059 11,599 26,113 ---------------------------------------------- Other revenues 10,513 4,057 19,351 12,492 ---------------------------------------------- Gross operating revenues 521,267 489,617 776,263 750,654 Operating revenues deductions (149,922) (138,035) (209,437) (196,837) ---------------------------------------------- Net operating revenues 371,345 351,582 566,826 553,817 -------------------------------------------------------------------------------- OPERATING COSTS Operating costs including operating expenses plus RGR quotas increased from R$ 349,109 thousand to R$ 354.581 thousand, an increase of 1.6%. Operating costs outside Company control such energy purchased, electric power transport, CCC, and RGR quotas decreased 0.5%, compared to the same period in 2001, due to the transfer to prepaid expenses items in the amount of R$7,552 thousand. Costs controlled by the Company such as personnel, material, third party services and other expenses increased from R$ 59,169 thousand in the first half of 2001 to R$ 65,060 thousand in the first half of 2002, or 10%. Depreciation increased 3.1%. The increase in controlled costs was also impacted by the change in criteria used to provision for doubtful accounts, energy conservation programs and customer services. -------------------------------------------------------------------------------- thousands of reais ----------------------------------- PARENT COMPANY ----------------------------------- First Half ----------------------------------- 2002 2001 Change % -------------------------------------------------------------------------------- Company Controlled Costs Personnel 29,699 31,595 (6.0) Material 3,210 3,768 (14.8) Third party services 15,103 14,050 7.5 Other 17,048 9,756 74.7 ----------------------------------- 65,060 59,169 10.0 ----------------------------------- -------------------------------------------------------------------------------- 7 [ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002 -------------------------------------------------------------------------------- Depreciation 28,343 27,488 3.1 -------------------------------------------------------------------------------- TOTAL COMPANY CONTROLLED COSTS 93,403 86,657 7.8 -------------------------------------------------------------------------------- Outside Company Control Energy purchased 224,563 225,943 (0.6) CCC 26,464 26,587 (0.5) Financial compensation 1,388 799 73.7 ANEEL fiscal fee 627 832 (24.6) RGR 8,136 8,291 (1.9) ----------------------------------- TOTAL COSTS OUTSIDE COMPANY CONTROL 261,178 262,452 (0.5) -------------------------------------------------------------------------------- GRAND TOTAL 354,581 349,109 1.6 -------------------------------------------------------------------------------- ENERGY PURCHASED EXPENSES Energy purchased expenses totalized R$ 224,563 thousand in the first half of 2002, 0,6% lower than the same period last year. The following table details energy purchased expenses.

(*) Not reviewed by independent auditors. NET FINANCIAL INCOME (EXPENSE) The net financial result in the first half of 2002 was negative R$ 259,087 thousand, while in the same period last year was negative R$ 139,109 thousand. The difference in the second half is due mainly to the 22.6% devaluation of the Brazilian real against the U.S. dollar, which caused a significant increase in financial expenses on U.S. dollar denominated debt. -------------------------------------------------------------------------------- 8 [ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002 -------------------------------------------------------------------------------- LOSS FOR THE PERIOD This factors mentioned above contributed to the loss of R$ 174,368 thousand in the first half of 2002. CASH AND EQUIVALENTS ESCELSA has funds deposited in banks or invested in financial instruments in the amount of R$ 221,869 thousand for the Company and R$ 222,955 thousand on a consolidated basis as shown below:

-------------------------------------------------------------------------------- 9 [ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002 -------------------------------------------------------------------------------- BALANCE SHEETS (In thousands of Brazilian reais) (Convenience Translation into English from the Original Previously Issued in Portuguese)

-------------------------------------------------------------------------------- 10 [ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002 --------------------------------------------------------------------------------

See notes to financial statements. BALANCE SHEETS (In thousands of Brazilian reais) (Convenience Translation into English from the Original Previously Issued in Portuguese)

-------------------------------------------------------------------------------- 11 [ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002 --------------------------------------------------------------------------------

See notes to financial statements STATEMENTS OF INCOME (In thousands of Brazilians reais, except income (loss) per share) (Convenience Translation into English from the Original Previously Issued in Portuguese)

-------------------------------------------------------------------------------- 12 [ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002 --------------------------------------------------------------------------------

See notes to financial statements STATEMENTS OF CASH FLOWS (In thousands of Brazilian reais) (Convenience Translation into English from the Original Previously Issued in Portuguese)

-------------------------------------------------------------------------------- 13 [ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002 --------------------------------------------------------------------------------

NOTES TO THE FINANCIAL STATEMENTS FOR THE QUARTER ENDED JUNE 30, 2002 AND 2001 (In thousands of Brazilian reais, unless otherwise indicated) (Convenience Translation into English from the Original Previously Issued in Portuguese) 1. OPERATIONAL CONTEXT Espirito Santo Centrais Eletricas S.A. - ESCELSA - is a publicly-held Brazilian corporation engaged, principally, in the generation, transmission and distribution of electric energy in the State of Espirito Santo, covering 70 of the 77 municipalities within 41,372 Km(2), which represent approximately 90% of the total area of the State of Espirito Santo. ESCELSA is the majority shareholder of MAGISTRA PARTICIPACOES S.A. which is the controlling shareholder of EMPRESA Energetica de Mato Grosso do Sul S.A. - ENERSUL - an electric energy distribution company in the State of Mato Grosso do Sul, acquired in a public auction on November 19, 1997, and TV a Cabo Vitoria S.A. - TVIX, incorporated on July 4, 1997, which is a Pay TV company serving residential condominiums in the municipalities of Vitoria and Vila Velha in the state of Espirito Santo. In addition, ESCELSA is the majority shareholder of ESCELSA Participacoes S.A. - ESCELSAPAR, which operates as an Internet Service Provider (ISP), also providing several services in the area of information technology. The subsidiary ENERSUL has taken steps to raise funding through long-term obligations with domestic and international banks in order to restore its working capital position and to improve its overall debt profile, specifically in terms of costs and maturity. -------------------------------------------------------------------------------- 14 [ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002 -------------------------------------------------------------------------------- 2. presentation of FINANCIAL STATEMENTS The financial statements were prepared in accordance with accounting practices set forth by the Brazilian Corporate Law, specific legislation applicable to electric utility concessionaires established by National Electric Energy Agency - ANEEL and regulations of the Brazilian Securities and Exchange Commission -CVM. The financial statements for the period ended June 30, 2001 were reclassified, when applicable, for comparison purposes and in order to be in accordance with the new Electric Utility Accounting Plan, applicable as from January 1, 2002. 3. PRINCIPAL ACCOUNTING PRACTICES 3.1. Parent company financial statements a) Marketable securities - are recorded at cost plus interest accrued up to the balance sheet date, with necessary provisions for devaluation to reflect market values, when applicable. Marketable securities are represented, basically, by public treasury notes bearing interest and exchange variation; b) Accounts receivable - include the supply of electric power both billed and unbilled to customers as of the balance sheet date, accounted for on an accrual basis, also including charges for late payments by customers as well as accounts receivable related to the extraordinary tariff recovery. c) Allowance for doubtful accounts - recognized in accordance with General Instruction n(Degree) 6.3.2 of the Accounting Standards for Public Electric Utilities, reflecting a conservative position in comparison with ESCELSA's historical average of losses. d) Materials and supplies - materials and supplies to be applied in operations and maintenance are recorded as current assets and those earmarked for construction are included in property, plant and equipment, both based on the average acquisition cost. e) Investments - the investments in wholly-owned subsidiaries are stated based on the equity adjustment method. The other investments are stated at cost plus monetary restatement, until December 31, 1995, net of provision for loss, when applicable. f) Property, plant and equipment - stated at the acquisition or construction cost, monetarily restated until December 31, 1995, less the accumulated straight-line depreciation based on account balances recorded in the respective Unit Registries - UC, in accordance with DNAEE Rule 815 of 11/30/1994, at constant rates as per the schedule stipulated in ANEEL Rule 44 of 03/17/1999. In accordance with the General Instructions nos. 35 and 36 of the Accounting Standards for Public Electric Utilities, interest and other financing charges and inflationary effects related to third party financing, which have been applied in the property, plant and equipment under construction, are recorded within this subgroup as costs. In accordance with specific Public Electric Utilities Service regulations, interest on the shareholder's own capital applied in financing projects under construction is calculated according to Long-term Interest Rates (TJLP) and is credited directly to capital reserves in Shareholders' Equity. g) Assets and liabilities denominated in foreign currencies subject to indexation - such items are subject to restatement because of exchange and monetary variations for contractual or legal reasons and are updated through the balance sheet date. Foreign currency liabilities are converted into Reais according to the exchange rates informed by the Brazilian Central Bank (US$ 1 = R$2.8444 on June 30, 2002 and US$ 1 = R$ 2.3204 on December 31, 2001). h) Income tax and social contribution - income tax recorded in the results of the period is calculated based on taxable income (adjusted net income) at a rate of 15% plus 10% on taxable income exceeding R$240, according to the current tax law. Social contribution recorded in the results of the period is calculated based on taxable income prior to income tax, at a rate of 8%, plus an additional of 1%, which is applicable through 12/31/03. The deferred income tax and social contribution were recorded as tax credits, based on the tax losses, negative basis of the social contribution and temporary differences, considering the rates of such taxes that will be prevailing on the date of the realization. -------------------------------------------------------------------------------- 15 [ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002 -------------------------------------------------------------------------------- i) Obligations related to the concession - are obligations that are part of the concession agreement for electric utilities representing, basically, contributions from the Federal Government, donations without conditions set forth as to returns to the contributors, subventions and contributions received from consumers exclusively for the purpose of investment in electric energy distribution. The expiration of these obligations is determined by the Regulatory Agency, and will be withdrawn at the end of the concession period. As from January 1, 2002, this account is being classified as property, plant and equipment. j) Pension plans - the Company is the sponsor of Fundacao Escelsa de Seguridade Social - ESCELSOS, which manages the pension fund for its employees. The costs, contributions and the actuarial obligation associated with pension plans are calculated at the balance sheet date by independent actuaries. As from December 31, 2001, such amounts are calculated and recorded in accordance with Deliberation CVM n(Degree)371. Employee profit sharing is recorded in the statement of income of the corresponding fiscal period. k) Earnings (loss) per share - these amounts are calculated based on the number of shares outstanding at the balance sheet date for the fiscal period. l) Revenue recognition - revenues and expenses for all services are recognized on an accrual basis of accounting, recognized when incurred. Billing for all customers is made on a monthly basis according to the meter reading calendar. Unbilled revenues, corresponding to the period between the date of the last reading and the end of the month, are estimated and recognized as revenue in the month in which the energy was consumed. m) Estimates - financial statement preparation according to corporate law accounting practices requires that the Company's Management make estimates for the recognition of certain transactions that impact assets and liabilities and revenues and expenses of ESCELSA and its subsidiaries, which are reflected in data disclosed in its financial statements. The final figures that are recorded upon the realization of such transactions in subsequent reporting periods may differ from these estimates. Most of these estimates refer to the recognition of impacts from the Emergency Program for Reducing Electric Energy Consumption, the Compensation Account for Cost Variations for Portion A - CVA, Provision for Doubtful Accounts, Provision for Contingencies and Pension and Retirement Plans. 3.2. Consolidated Financial Statements The consolidated financial statements include the balance sheets and the statements of income for the semester and quarter ended June 30, 2002 and March 31, 2002 for ESCELSA, and its subsidiaries MAGISTRA, TVIX and ESCELSAPAR. The main consolidation procedures adopted were as follows: a) elimination of ESCELSA's investments in controlled subsidiaries; b) elimination of account balances between ESCELSA and its subsidiaries included in the consolidation, as well as the accounts between such subsidiaries; c) recognition of the minority shareholders' participation in the balance sheet and statement of income; d) disclosure of the goodwill recorded for the acquisition of ENERSUL by MAGISTRA. The profit and the shareholders' equity at ESCELSA are equal to those of the consolidated group, as there was no unrealized income in the intercompany operations. 4. MARKETABLE SECURITIES

5. ACCOUNTS RECEIVABLE

Regulatory Asset According to clauses included in Provisional Measure n(Degree)14, in Resolution n(Degree)91 from the Energy Crisis Management Chamber - CGE of December 21, 2001, Resolution n(Degree). 31 from the National Electric Energy Agency - ANEEL of January 24, 2002 and ANEEL Resolution n(Degree) 72 of February 7, 2002, the Company calculated the amount of the extraordinary tariff recovery to be applied to all of the concession areas for electric energy distribution, to be recognized as the basis for re-establishing the financial-economic balance of the concession contracts, with the recovery of the consumption losses which were incurred as a result of the Emergency Program for Reducing Electric Energy Consumption - PRE from June 2001 through February 2002. The increase in tariffs for final customers approved by ANEEL for ESCELSA and ENERSUL for extraordinary tariff recovery were as follows: -------------------------------------------------------------------------------- 18 [ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002 -------------------------------------------------------------------------------- o 2.9% for residential and rural clients (except low-income customers); o 7.9% for all other clients. The regulatory asset, related to the extraordinary tariff recovery, had the following movements during the quarter:

The extraordinary tariff increase will be effective for the period deemed necessary to recover the total amount calculated. On March 8, 2002 and May 7, 2002, the Company sent to ANEEL its calculations related to the tariff recovery amounts corresponding to the period up to 12/31/2001 and from January to February 2002, respectively, being both subject to the Regulatory Agency approval. In order to obtain the right to such compensation, the Company renounced the right to any judicial or extra judicial claims related to the facts and rules concerning the Emergency Program for Reduction of Electrical Energy Consumption and the extraordinary tariff recovery, as well as entered into agreements signed between the electrical sector agents, in accordance with the Provisional Measure n(Degree)14 and Resolutions n(Degree) 91 edited by GCE and n(Degree) 31 edited by ANEEL. Energy negotiated in the Spot Market The balance of accounts receivable from consumers and distributors includes the preliminary figures related to the energy negotiated in the Spot Market, in the amount of R$37,288, of which R$18,075 relates to the period from September 2000 through December 2001, recorded based on the information published by MAE, and R$19,213 related to the period from January to June 2002, which was recorded based on management estimates. Such amounts will be settled when the final amounts are known and approved by MAE. -------------------------------------------------------------------------------- 19 [ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002 -------------------------------------------------------------------------------- 6. SPECIAL TARIFF SITUATION According to Provisional Measure 2,147 of May 15, 2001 and subsequent amendments, as well as regulations from the Energy Crisis Management Chamber - CGE, ESCELSA has charged a surtax to customers who have exceeded their consumption quotas up to February, and granted bonuses in cases in which customers have reduced consumption to levels below their quotas. The financial accounting criteria for these events, defined as per ANEEL Rule 299 of July 27, 2001, do not have an impact on the Company's results, and on March 31, 2002, the corresponding amounts are classified in the current assets as customers and wholesale, as shown below:

From the total balance receivable from Ministry of Mines and Energy above, except for the costs incurred by the Company, ANEEL has already approved the following transfers: PARENT LEGAL ACT COMPANY CONSOLIDATED --------------------------------------------- ---------- ------------ Order ANEEL n(Degree)128, of 03/13/02(*) 4,965 7,416 Order ANEEL n(Degree)167, of 03/25/02 4,087 6,492 Order ANEEL n(Degree)239, of 04/25/02 4,628 6,937 ---------- ------------ Total 13,680 20,845 ========== ============ (*) Received on 07/17/2002 Based on the Resolution GCE n.(0) 117, of 02/19/2002, the Emergency Program for Reduction of Electrical Energy Consumption was extinguished, being determined that, as from March 1, 2002, the surtax charged to customers who have exceeded their consumption quotas no longer applicable, however the bonus regulated by Article 4(Degree) of the Resolution GCE n.(Degree) 4, of 05/22/2001, was maintained until March 31, 2002 -------------------------------------------------------------------------------- 20 [ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002 -------------------------------------------------------------------------------- 7. Prepaid EXPENSES The distribution concession agreements establish, for a part of the tariffs charged by the Electric Utilities, amounts related to exogenous costs which are attributable to operating expenses, together with a variable referred to as Portion "A" of the Tariff Adjustment Formula (IRT), demonstrated below: o Pass-through of tariff related to energy purchased from Itaipu Binacional; o Pass through of transport costs for electric energy from Itaipu Binacional; o Quota for the Fuel Consumption Account - CCC; o Costs for transmission infrastructure usage on the basic grid; o Compensation for usage of water resources; o System Service Charges - ESS; o Energy Purchased as established in the initial contracts; o Quota for the Global Reversion Reserve - RGR; o Electric energy service enforcement fee; and, o Connection charges. With the introduction of Provisional Measure n(Degree) 2,227 and n(Degree) 14 of 09/04/2001 and 12/21/01, respectively, and ANEEL Resolution n(Degree). 90 of 02/18/02, an account was established to record the compensation of differences, positive or negative, between the amount of each item since the date of the last tariff adjustment and its effective date of payment. The balance will be monetarily adjusted based on the SELIC rate variation. The positive variations are presented in current and long-term assets in the account of prepaid expenses. On the other hand, the negative variation that corresponds to pass through of transport costs for electric energy from Itaipu Binacional and quota for the fuel consumption - CCC are presented in the current and long-term liabilities in the account of other creditors, in accordance with the directive release n(Degree)s.60 and 91/2002, of January 24, 2002 and February 14, 2002, respectively. The balances are as shown below: PARENT COMPANY CONSOLIDATED ---------------------------------------------------- Jun-02 Mar-02 Jun-02 Mar-02 ------ ------ ------- ------- ASSETS Current 26,843 5,226 31.730 10.643 Long term assets 50,200 58,606 91.412 94.592 ------ ------ ------- ------- 77,043 63,832 123.142 105.235 ------ ------ ------- ------- LIABILITIES Current 29,051 1,702 29.438 1.702 Long term 1,833 1,216 3.769 1.216 ------ ------ ------- ------- 30,884 2,918 33.207 2.918 ------ ------ ------- ------- The amount of R$41,392, which is included in the balance of the long-term asset as shown above, refers to the period from January 1 through October 25, 2001, and will be recovered in connection with the regulatory asset, through the extraordinary tariff recovery. 8. TAX CREDITS Tax credits classified as current assets correspond to income tax withheld for cash investments, which is being compensated with tax debits authorized by the Internal Revenue Service. -------------------------------------------------------------------------------- 21 [ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002 -------------------------------------------------------------------------------- Tax credits classified as long-term assets, as listed below, generated by fiscal losses, negative basis of social contribution and other amounts that constitute temporary adjustments for reduction of future taxation were recorded based on Companies' estimated future profitability, considering that the realization period will not exceed 10 years. According to the estimated future profitability, as mentioned above, the Companies determined the following fiscal assets:

9. AFFILIATES AND SUBSIDIARIES

The Company does not engage in transactions or agreements with related companies under terms or conditions less favorable than would be exercised with third parties. The transactions refer essentially to services rendered/received to/from related companies. The consolidated financial statements show primarily the balance of inter-company loans between the parent company MAGISTRA and the subsidiary ESC90, as detailed below, which were made at similar terms to those practiced in the Brazilian financial market. 1) Interest rate: TJLP + 4% per annum; Maturity: November 2004; Balance: R$ 4,989. 2) Interest Rate: 100% of CDI; Maturity: several dates through December 31, 2002; -------------------------------------------------------------------------------- 22 [ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002 -------------------------------------------------------------------------------- Balance: R$ 51,961. MAGISTRA's financial income from subsidiary ESC90 totaling R$4,449 (R$2,764 on 06/30/2001) in the consolidated statement is recorded as other financial income. The guarantees are promissory notes corresponding to 125% of principal. 10. INVESTMENTS

The goodwill recorded by the subsidiary MAGISTRA, generated by the difference between the amount paid and the book value of ENERSUL stocks, acquired in 11/25/1997, is based on the Company's future profitability and is being amortized proportionally to the Company's projected results, during the term of ENERSUL's concession, of thirty years beginning 01/01/1998. Additional information about investments stated by the equity adjustment method:

11. PROPERTY, PLANT AND EQUIPMENT

Obligations related to the concession is composed by the following balances: PARENT COMPANY CONSOLIDATED ------------------- ------------------- Jun-02 Mar-02 Jun-02 Mar-02 ------- ------- ------- ------- Consumer contributions 63,229 61,943 87,016 85,294 Donations and subsidies 25,794 25,794 90,237 90,639 Federal participation 5,245 5,247 7,394 7,396 ------- ------- ------- ------- TOTAL 94,268 94,984 184,647 183,329 ======= ======= ======= ======= In accordance with General Instruction n(Degree) 36 of the Accounting Standards for Public Electric Utilities and CVM Instruction n(Degree) 193 of July 11, 1996, the following amounts were incorporated into Property, Plant and Equipment:

12. SUPPLIERS -------------------------------------------------------------------------------- 24 [ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002 -------------------------------------------------------------------------------- PARENT COMPANY CONSOLIDATED ------------------ ------------------ CURRENT LIABILITIES: Jun-02 Mar-02 Jun-02 Mar-02 ------- ------- ------- ------- Electricity suppliers: FURNAS 29,734 37,677 29,734 37,677 ITAIPU 46,853 27,159 60,584 38,236 TRACTEBEL - - 9,600 9,906 ELETROSUL - - 1,486 1,169 MAE 22,794 41,909 35,073 56,120 Other 6,241 6,247 8,744 9,266 ------- ------- ------- ------- 105,622 112,992 145,221 152,374 Materials and service providers 5,542 6,832 11,905 12,894 ------- ------- ------- ------- TOTAL 111,164 119,824 157,126 165,268 ======= ======= ======= ======= LONG TERM LIABILITIES: Electric Energy Supply: Free energy 68,596 61,239 95,329 84,600 ------- ------- ------- ------- TOTAL 68,596 61,239 95,329 84,600 ======= ======= ======= ======= -------------------------------------------------------------------------------- 25 [ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002 -------------------------------------------------------------------------------- 13. LOANS AND FINANCING

(*) Financing are hedged against currency fluctuations by swap contracts (**) Loans composed of several notes with the same maturity date -------------------------------------------------------------------------------- 26 [ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002 -------------------------------------------------------------------------------- a) The breakdown of loans and financing per currency is as follows: PARENT COMPANY CONSOLIDATED ----------------------- ----------------------- Jun-02 Mar-02 Jun-02 Mar-02 --------- --------- --------- --------- Local currency 253,436 240,629 656,077 654,405 Foreign currency 1,225,817 1,001,374 1,402,993 1,150,953 --------- --------- --------- --------- TOTAL 1,479,253 1,242,003 2,059,070 1,805,358 ========= ========= ========= ========= b) The percentage variation of the main indicators used for updating the loans and financing are as follows: Currency and Indexes Jun-02 Jun-01 --------------------------------------------- ---------- ---------- US$ x R$ 22.58% 17.87% IGP-M 3.48% 4.32% INPC 3.43% 3.81% TJLP 9.50% 9.25% c) Maturity of short and long-term installments is as follows:

14. PROVISION FOR CONTINGENCIES

-------------------------------------------------------------------------------- 27 [ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002 --------------------------------------------------------------------------------

Management understands that the provisions recorded are sufficient to cover eventual losses from the ongoing litigation. Based on the opinion of the Company's legal counsel, all litigation for which the probability of a favorable outcome was estimated as remote for the Company was provided for. Furthermore, there are labor, civil and fiscal cases pending in the total amount of R$28,827 , for which the probability of a favorable outcome was estimated as likely and no provisions were recorded on the financial statements. COFINS: Provided for based on the amounts deposited from May 1996 to July 1999, based on a preliminary injunction obtained in May 1996 by way of a tax immunity claim. With the decision by the Supreme Court - STF in July 1999, upholding the constitutionality of COFINS tax on electric energy transactions, the Company converted the deposited amounts, normalizing the taxes payments and reclassified the provision to the current asset. The Company awaits the final judicial decision ruling for a reversion of the deposits and subsequent payment of the amounts provided for. Labor contingencies: Refer to several labor claims against the Company, which claim payment of overtime, hazards, reintegration, among other items. Civil contingencies The civil contingencies include suits in which the Company is a defendant, being in most of cases related to moral and material damages claims, among other challenging amounts paid by customers for tariff increases based on DNAEE regulations 38 and 45 of January 27, 1986 and March 4, 1986, respectively, during the Cruzado Plan. Fiscal contingencies The Company is also a party of a administrative process with the Federal Reserve, pending final decision, for compensation of amounts overpaid related to FINSOCIAL, due to the unconstitutionality of the Decrees - Law n(Degree)s. 2,445 and 2,499. There is also a preliminary decision in lower court which guarantees restitution and/or compensation of amounts overpaid related to fines on tax and contributions made spontaneously and untimely. The fines exemption are being requested based on article 138 of the National Tax Code - CTN. Based on its legal counsel, the Company compensated the amounts related to past-due contributions (PIS, COFINS, IRPJ and CSLL), as per Article 66 of Law no. 8,383/91. Conservatively, the Company maintained provisions for amounts corresponding to the above mentioned taxes and contributions. 15. CAPITAL STOCK AND RESERVES In accordance with its by-laws, the Company is authorized to operate with up to R$1,000,000 in capital of which R$153,947 are subscribed and fully paid in. Capital stock as of June 30, 2002, is represented by 4,550,833 common shares, with no par value, with the following equity structure: -------------------------------------------------------------------------------- 28 [ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002 -------------------------------------------------------------------------------- Quantity Shareholders' % of Shareholder of shares quantity participation -------------------------------- ------------ -------------- --------------- IVEN S.A 2,378,673 1 52.27 GTD PARTICIPACOES S.A 1,137,709 1 25.00 Fundacao Banco Central - CENTRUS 275,678 1 6.06 CINVES 66,363 1 1.46 Other 692,410 145 15.21 --------- --------- --------- TOTAL 4,550,833 149 100.00 ========= ========= ========= 16. CHANGES IN SHAREHOLDERS' EQUITY - PARENT COMPANY

17. INCOME TAX AND SOCIAL CONTRIBUTION

18. PENSION PLANS a) The Company is the sponsor of FUNDACAO ESCELSA DE SEGURIDADE SOCIAL - ESCELSOS, a nonprofit organization, whose main purpose is to complement the benefits granted by the official social security to the Company's employees through two benefit packages: A Defined Benefit Plan (Plan I) and a Defined Contribution Plan (PLAN II). These benefit plans are based on mathematical reserves calculated actuarially according to the capitalization policy, which is revised annually. PARENT COMPANY -------------------------- Jun-02 Mar-02 ------- ------- TECHNICAL RESERVES Mathematical reserves: Benefits paid 75,012 73,862 Benefits 80,641 80,574 ------- ------- 155,653 154,436 ------- ------- TECHNICAL SURPLUS Contingency 21,378 23,061 ------- ------- Total 177,031 177,497 ======= ======= -------------------------------------------------------------------------------- 29 [ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002 -------------------------------------------------------------------------------- b) The table below shows the number of participants in each plan: PLAN I PLAN II TOTAL ------ ------- ----- Contributing participants 36 1,446 1,482 ----- ----- ----- Receiving participants Retirees 642 106 748 Pension beneficiaries 103 4 107 ----- ----- ----- 745 110 855 ----- ----- ----- Total 781 1,556 2,337 ===== ===== ===== c) As a sponsor, the Company's monthly contributions are made at the same proportion of the participants of ESCELSOS Foundation, corresponding to the amount established in each plan, limited to 7% of the total payroll. For the first half of 2002, ESCELSA contributed R$1,222 (R$1,209 in the first half of 2001). d) Based on the Article 84 of CVM Deliberation n.(Degree)371/2000, at December/2001 the Company calculated the present value of the actuarial obligations related with the unvested benefit,. As a result, the balances as of June 30, 2002 can be shown as follows: Obligations related to post-retirement benefits. Current liabilities 2,420 Long term liabilities 28,032 e) The actuarial calculations showed that the fair value of the net assets of the pension plan exceeds the present value of the vested and unvested actuarial obligations. However, company's management adopted a conservative position and decided do not record this surplus as a deduction of the unvested actuarial obligations. 19. FINANCIAL INSTRUMENTS As per CVM Instruction n(Degree) 235 of March 23, 1995, established a mechanism for the disclosure of the market value of financial instruments by way of "notes to the financial statements," regardless their recognition or not in the financial statements. The Company's business entails the distribution and sale of electric energy for customers within its concession area - the State of Espirito Santo - and therefore significant financial instruments are related to the following transactions: o Balances of long-term accounts receivable and accounts payable are related to the extraordinary tariff recovery and therefore are not subject to adjustments to market value; o Investments in short term mutual funds and/or fixed income investments are recorded at approximate market value as they are recorded with accrued interest on a pro-rata basis; o Equity stakes in other companies are in most cases through shares that are not publicly traded; o Loans due by the Company are mainly long-term and, in the most of cases, are, from specific funding sources. 19.1 Exchange rate and interest rate risks The book value of the main financial instruments held by ESCELSA are:

A portion of the loans and financing in local currency is comprised of financing from government entities ELETROBRAS and BNDES -------------------------------------------------------------------------------- 30 [ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002 -------------------------------------------------------------------------------- As the market interest rate (or opportunity cost of capital) is established by these governmental entities, taking into consideration the risk premium related with the electrical sector's activities and that in the absence of other financing sources or other market options and/or methodology to estimate the market value of such options, in light of the Company's business and specific circumstances of the sector, the market value for this portion comprised of domestic loans shall correspond to their book value, as shall other financial assets and liabilities. As mentioned in Note 14, foreign currency financing was obtained (in U.S. dollars), being the indebtedness and earnings significantly impacted by the risk of exchange rate variation of foreign currency. Such risk may cause the Company to incur losses due to unexpected foreign exchange fluctuations, which may increase liabilities denominated in foreign currency. Net exposure to the exchange variation of foreign currency risk as of June 30, 2002 is as follows: BOOK VALUE FAIR VALUE --------------------------------------------------------- Jun-02 Mar-02 Jun-02 Mar-02 ---------- ---------- ---------- ---------- Senior Notes 1,225,817 1,001,374 833,556 911,250 U.S. dollar assets (214,370) (207,551) (214,370) (207,551) ---------- ---------- ---------- ---------- Net Exposure 1,011,447 793,823 619,186 703,699 ========== ========== ========== ========== The method used to determine the fair value of the Senior Notes obligation was their average market price as per the security's trading activity at the end of each fiscal period (source: Report edited in the USA by Morgan Stanley Team Witter, showing the market price of transactions negotiated in New York.) and, for U.S. dollar assets, the market price of the contracts at the end of the fiscal period was utilized, which is equal to the book value. Additionally, the Company hedged part of its currency fluctuations exposure by using swap contracts. The operations' parameters and amounts are described above:

On a consolidated basis, loans and obligations held by companies within the ESCELSA Group were made at rates and terms generally practiced in the domestic and international markets to fund investments in the electric energy sector in its concession areas as a public utility. The subsidiaries MAGISTRA and ENERSUL maintain liabilities in foreign currency (US$). To reduce foreign exchange related risk, swap instruments are being used to hedge a portion of these obligations, as mentioned in Note 13. Indexes used in these instruments are the IGP-M plus interest rates of 11.70% to 12.01% per annum and CDI plus 0.95%- 2.33% per annum. Considering the Real devaluation during the period, the hedging instruments generated a gain of R$9,025, recorded monetary variation in the financial statements, as follows: AMOUNT -------------------------- LIABILITY BOOK VALUE SWAP VALUE GAIN ----------------------- ---------- ---------- ---- Loans and Financing 93,645 84,520 9,025 For the remaining contracts, given the specific nature of these transactions and the inability to determine the market value for this type of financial instrument, Companies' management, taking into consideration the risk to the company, the strategy and debt management practices adopted, estimates that the market values of the instruments are equal or approximates to their book value. 19.2 Credit Risk -------------------------------------------------------------------------------- 31 [ESCELSA LOGO] QUARTERLY FINANCIAL STATEMENTS AS OF JUNE 30, 2002 -------------------------------------------------------------------------------- As to the credit risk, there is a possibility that the Company will incur losses resulting from its customers default. To mitigate against this risk, the Company has the right to interrupt the supply of electric energy in the event that a customer fails in paying bills within the time-periods defined by legislation and specific regulations. A provision for doubtful accounts is established in an amount deemed sufficient by management to cover potential accounts receivable risks. 20. EXPLANATION ADDED FOR TRANSLATION INTO ENGLISH These financial statements are presented on the basis of accounting principles set forth by the Brazilian corporate law. Certain accounting practices followed by the Company and its subsidiaries that conform to generally accepted accounting principles in Brazil may not conform with generally accepted accounting principles in other countries. -------------------------------------------------------------------------------- 32

ENERGY CO OF ESPIRITO SANTO 6-K