ISA Capital do Brasil S.A.

The acquisition of the CTEEP shares was funded through a combination of debt and the Company's own funds, in a number of stages.

On January 29, 2007 the Company successfully concluded a transaction in the international capital markets, through a bond issue totaling R$ 554 million. This issue, under the agents J.P. Morgan and ABN Amro, was divided into two series of notes (senior notes) one of which totaling US$ 200.0 million and with a 5-year term, at 7.875% per annum and with a Call option as of 2010 and maturity in 2012, and the other totaling US$ 354.0 million and with a 10-year term, at 8.800% per annum, maturing on 2017 (the “Notes”). 60% of the total bond issue was distributed in the United States, 36% in Europe, 2% in Latin America, and 2% in Asia. These notes are listed in the Luxemburg Stock Exchange and may be traded in NASDAQ's Portal Market.

This issue's success was based on investor confidence on the transaction's financial structure, support by the ISA Group to its investments in Brazil, CTEEP's positive projections in the Brazilian energy sector, and also had the support of international level credit risk ratings by Standard & Poor's (BB – positive outlook), and by Fitch Ratings (BB – stable outlook). These ratings are similar to those for the Federative Republic of Brazil and reflect the low risk for the electricity transmission business and the expansion outlook for the sector. On March 7, 2007 Standard & Poor's changed its risk rating for the transaction to BB.

The proceeds from the Note offering are being used to pay off loans entered into by the Company with J.P. Morgan and ABN Amro.

Commitments with Creditors

According to market practice, the Company took on a number of commitments and obligations with the loaning banks and the Note purchasers, which restrict the availability and likelihood of pledging Company assets in other transactions. In general, among the obligations entered into by the Company, the latter has agreed: (i) not to enter into new debt; (ii) not to create or allow the creation of any sort of lien on its assets; (iii) not to dispose of its assets in any direct or indirect manner; (iv) not create or acquire new subsidiaries; (v) not to invest in its activities, further to those investments covered by the Notice, in the acquisition proposal for the CTEEP controlling shares, and in the Purchase and Sale Agreement; (vi) not to merge into another company; (vii) not to sell its assets, in whole or in part; (viii) not to enter into business or activities that are not expressly permitted; (ix) not to propose or pay out dividends, or pay out any funds in certain situations; and (x) not to acquire shares or securities which would entitle to subscribe shares issued by itself or by its subsidiaries, in certain circumstances.

In addition to the above-mentioned obligations, the loan agreements and documentation in connection with the Note issue contain a number of clauses in connection with CTEEP, providing that if for any reason CTEEP should cease to comply with any of the conditions specified in the mentioned documentation, the Company's creditors may declare the Company to be in default and demand acceleration of the its indebtedness. Among the obligations assumed by the Company with regard to CTEEP are limits and restrictions on indebtedness; the creation of encumbrances and sale of assets; transactions with related parties; sale and lease back transactions; payments and transactions involving subsidiaries; corporate restructuring; and changes in CTEEP's By-laws.

All the obligations provided for in Notice SF/ 001/2006 have already been, or are being fully complied with, among which we mention:

(i) submission of the acquisition of CTEEP's equity control to Conselho Administrativo de Defesa Econômica – CADE, which took place on July 19, 2006 and was approved without reservations;

(ii) acquisition of any remaining CTEEP shares in the offering to its own employees, which took place on September 12, 2006;

(iii) the holding of the OPA, concluded on January 9, 2007.

( iv) other steps in formalizing the takeover of CTEEP's equity control by the Company, such as signing the CTEEP Share Purchase and Sale Agreement on July 26 , 2006, the changes in CTEEP's By-laws on August 14, 2006, and lastly, entering into the amendments to the electricity transmission service agreements, concluded on January 29, 2007. The CTEEP Share Purchase and Sale Agreement entered into on July 26 , 2006 also imposed on the Company and on ISA, the parent company, a number of obligations in the course of CTEEP's management with regard to compliance with previous contracts, corporate governance rules, the preservation of CTEEP employee rights, and maintenance and continuity in the quality of electricity transmission services, among others.

The Company's management believes that it is strictly complying with all the obligations taken on in the course of the CTEEP control acquisition procedures, directly or jointly with CTEEP's management.