Although Eletropaulo’s 4Q12 results came in roughly in line with our forecast, we are seriously concerned about a new accounting rule issued by CVM (the Brazilian SEC), which could
severely impact Eletropaulo’s pension-fund liability in 1Q13 and, as a consequence, our valuation for the stock. According to an explanatory note on Eletropaulo’s 4Q12 financial tatement, the CVM ruling #695, issued on December 13, 2012, will require the company to increase its pension-fund liability, which is currently booked at BRL 1.13 billion, by as much as ~BRL 2.8 billion.
