Other Operating Revenue (Expenses)

CTEEP recorded a R$ 531.7 million expense under other operating revenues (expenses) in 2013, mainly due to the recognition of a R$ 516.3 million provision for losses in connected with the amounts to be received from SEFAZ-SP, booked in 2Q13.

This provision is related to part of the amount to be received from SEFAZ-SP in connection with the supplementary pension plan governed by State Law 4819/58, which provided for the creation of a State Social Assistance Fund for employees hired up to May 1974.

The São Paulo State Government is responsible for paying the beneficiaries and did so until 2003 by transferring funds through CESP and/or CTEEP. In January 2004, SEFAZ-SP started making the payments directly and suppressed part of the payroll amounts.

The beneficiaries then filed a lawsuit at the 2nd Finance Court, which dismissed the request for a supplementary pension in June 2005 and made SEFAZ-SP responsible for paying the supplementary amount.

In another lawsuit filed in July 2005, the 49th Labor Court of São Paulo granted the beneficiaries' request for supplementary pension payments. In addition, it held SEFAZ-SP, CESP, CESP Foundation and CTEEP liable for these payments, and made CTEEP responsible for paying the amounts previously suppressed in connection with certain components of the total amount to be transferred.

Despite conflicting court decisions, CTEEP is following the court order and requests every month from SEFAZ-SP the funds needed to transfer the whole amount to CESP Foundation, which is supposed to process the respective payments to the beneficiaries.

In February 2013, the Federal Supreme Court judged an appeal connected with the litigations of other parties not related to this legal action and decided that regular (non-labor) courts of law have the jurisdiction to judge actions against private pension funds. This decision will serve as precedent for judging the jurisdiction conflict involving CTEEP's case in relation to Law 4819/58.

As previously mentioned, SEFAZ-SP has been transferring to CTEEP an amount lower than that needed to carry out the 49th Labor Court's decision since September 2005. As a result, CTEEP filed in December 2010 a collection suit for the amounts not received since September 2005 and an appeal for the adjudication on the merits of the case. This appeal is pending so that the deadline to receive the amounts not transferred by SEFAZ-SP but paid to the beneficiaries, booked under accounts receivable, has been postponed.

EBITDA and EBITDA Margin (both w/o SEFAZ-SP Provision)

EBITDA (without the SEFAZ-SP provision) amounted to R$ 346.5 million in 2013, reflecting the new amounts related to the renewal of the concession contract. EBITDA margin (without the SEFAZ-SP provision) stood at 35.3%, down 32.7 percentage points year-over-year.

EBITDA and EBITDA Margin (both w/o SEFAZ-SP Provision)