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Corporate Presentation CPFL Energia

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Corporate Presentation CPFL Energia

  1. 1. Corporate Presentation November 2013 São Paulo, 07 de março de 2012
  2. 2. Agenda 1 2 Distribution 3 Generation 4 Competitive Power Supply and Services 5 Consolidated financial figures 6 2 Corporate Overview The Electric Sector
  3. 3. Agenda 1 2 Distribution 3 Generation 4 Competitive Power Supply and Services 5 Consolidated financial figures 6 3 Corporate Overview The Electric Sector
  4. 4. Corporate overview – Highlights in the Brazilian electricity sector • Market cap of , listed and on • LTM3Q13 Adj. EBITDA2 of and Adj. Net Income2 of • Differentiated : >50% of net income, semisince IPO in 2004 annually. • Presence concentrated in the of Brazil through 8 subsidiaries and a of in in Brazil private Generator with an equivalent stake of , more than 4 1) On Nov, 14, 2013; 2) IFRS (+) proportionate consolidation of minorities’ stakes at gencos (+) regulatory assets & liabilities (-) non-recurring items.
  5. 5. Corporate structure Free Float 100% 100% 100% 100% 100% 99.95% 100% GENERATION 100% 30.5% 15.1% COMMERCIALIZATION 100% 30.0% SERVICES DISTRIBUTION 24.4% 100% 5 25.01% 48.72% 1 51% 100% 100% 59.93% 5.94% Investco 100% 100% 100% Nect Serviços RENEWABLES 100% 65% 52.75% 100% 100% 100% 58.8%2 1) Termoparaíba and Termonordeste thermal power facilities; 2) CPFL Energia has a 58.8% indirect interest in CPFL Renováveis through CPFL Geração.
  6. 6. Corporate governance World-Class Corporate Governance Practices • Shares listed in differentiated segments: • BM&FBovespa Novo Mercado • NYSE (ADR Level III) • Compliant with the Sarbanes-Oxley Act • Board of Directors composed by 7 members: • 1 Independent Member • Advised by 3 Committees • Self-Assessment for Board of Directors and Fiscal Council • Enforcement of policies for disclosure of information and for prevention of insider trading by employees • Dividend Policy: • Minimum of 50% of net income, semi-annually 6
  7. 7. CPFL Energia enjoys long term concessions 2015 2027 2028 2032 2035 2036 CPFL Santa Cruz CPFL Paulista CPFL Piratininga HPP Luis Eduardo Magalhães HPP Campos Novos HPP Foz do Chapecó CPFL Jaguari RGE HPP Serra da Mesa1 CPFL Sul Paulista CPFL Leste Paulista … ~3% CPFL Energia's EBITDA 19 SHPPs (CPFL Renováveis) HPP Castro Alves HPP Monte Claro 1 TPP (Carioba) CPFL Mococa HPP Barra Grande HPP 14 de Julho SHPP Rio do Peixe (I/II) SHPP Macaco Branco 7 <1% CPFL Energia's installed capacity CPFL Energia requested Aneel to renew the expiring concessions Distribution Generation 1) Furnas has the concession for HPP Serra da Mesa. CPFL has the contractual right of 51.54% of the plant’s assured energy, according to the 30year leasing contract, maturing in 2028.
  8. 8. CPFL Energia | EBITDA breakdown CPFL Energia – LTM3Q13 Adj. EBITDA Breakdown¹ | R$ million CPFL Energia - Consolidated1 | 4,427 Competitive Supply3 113 2% Generation 1,808 57% Distribution 2,506 41% Distribution Segment CPFL Santa Cruz CPFL Leste Paulista CPFL Jaguari CPFL Sul Paulista CPFL Mococa 5% 55% CPFL Paulista 26% RGE 14% CPFL Piratininga Generation Segment Conventional 1,208 67% 33% Alternative Energy 599 3rd Tariff Review Cycle CPFL Piratininga Oct-122 CPFL Santa Cruz CPFL Leste Paulista CPFL Jaguari Feb-132 CPFL Sul Paulista CPFL Mococa Apr-13 RGE 8 8 CPFL Paulista Jun-13 1) Adjusted by regulatory assets & liabilities and non-recurring items; does not consider the holding company; 2) 12 months retroactive effect; 3) Commercialization in the free market and Services
  9. 9. CPFL Energia’s ambitions Leadership among private companies in the electric sector, with a diversified portfolio in different businesses related to Energy GENERATION • Operational Excellence, presenting the highest margins of the sector • Expansion of installed capacity in hydro and thermal with attractive returns DISTRIBUTION • Market leader, doubling the market share in Brazil • Operational excellence through innovation and new technologies (smart grid) • Leadership in renewable sources (> 4 GW by 2020) COMPETITIVE SUPPLY • Leadership in commercialization in the free market • Maximization of profitability, through a best-inclass set of solutions 9 9 SERVICES • Largest services company in the power sector • Strong growth of sales
  10. 10. Agenda 1 2 Distribution 3 Generation 4 Competitive Power Supply and Services 5 Consolidated financial figures 6 10 Corporate Overview The Electric Sector
  11. 11. Distribution Segment 1º Market share: 13% CAGR 2008-12 3.7% TUSD +4.1% Captive • 7.3 million customers • 569 municipalities • Footprint: most developed regions • High potential in per capita consumption 2008 2009 2010 2011 2012 2010 2011 LTM 3Q12 LTM 3Q13 Industrial Residential 26% 44% 14% Others 16% Commercial 2008 11 1) Excluding sales at CCEE; 2) Source: EPE. 2009 2012 2013
  12. 12. Brazilian economy and market performance 2006 2007 2008 Real wage bill 2006 12 -2.7 0.7 0.4 3.9 2007 2008 2009 2010 2011 2012 Industrial production Industrial consumption • • • • • • • 8.5 6.8 6.7 6.6 6.0 10.9 5.9 5.2 9.1 2007 2008 Retail sales 2009 2010 2011 2012 Commercial consumption Other variables influencing energy consumption 10.5 9.3 -7.4 -6.7 3.1 2.9 6.0 6.1 2.8 3.3 Industrial production2 and CPFL’s industrial consumption3 | %YoY growth 2006 5.6 6.2 5.5 4.5 4.9 2009 2010 2011 2012 Residential consumption 9.7 7.7 Retail sales2 and CPFL’s commercial consumption3 | %YoY growth 6.6 6.9 7.3 5.2 3.9 6.0 6.1 6.8 5.9 6.9 5.9 4.5 Real wage bill1 and CPFL’s residential consumption | %YoY growth Population growth Migration Credit Household appliances Temperature Rainfalls Public investments 1) Source: IBGE/LCA. 2) Source: IBGE. 3) Take into account changes in billing calendar for free consumers.
  13. 13. Distribution business Footprint in the most developed regions of Brazil Southeast: CPFL Paulista, CPFL Piratininga, CPFL Santa Cruz, CPFL Leste Paulista, CPFL Jaguari, CPFL Sul Paulista, CPFL Mococa South: RGE Leadership in the distribution segment • • • • • Start Up 8 distribution companies; 13% of market share; 7.3 million customers; 569 municipalities; LTM3Q13 sales of 58,197 GWh | 04-12 CAGR of 3.7% Discos’ Acquisitions | Key dates 1 1 1912 13 13 1997-2001 2006 2007 1) Acquired by VBC (one of CPFL Paulista’s controlling shareholder at the time) and PSEG in 1997, during the privatization process, and incorporated by CPFL Energia in 2001 (67,03%). In 2006, CPFL Energia acquired the additional stake (32.67%).
  14. 14. Distribution: best-in-class operational efficiency Avg. Length of Power Outages per Consumer per Year - DEC 2012 (hours) 10.8 8.1 8.3 8.4 9.4 9.8 9.9 5.8 7.5 4.5 5.3 5.7 21.6 19.3 19.4 20.0 16.5 16.9 18.2 14.5 14.6 14.7 Avg. Frequency of Power Outages per Consumer per Year – FEC 2012 (# occurrences) 8.4 8.9 8.9 9.0 9.1 7.0 7.9 8.1 6.6 5.4 5.7 5.8 6.0 6.4 4.2 4.6 4.7 4.7 5.3 14 10.9 11.8 13.0
  15. 15. Cost-cutting Initiatives Zero-Base Budget Tauron Program Inefficiencies from past budgets are not carried over to the next periods Introduction of the smart grid technology in the distribution network Corporate Services Center Implementation of a backoffice services provider to increase operating productivity and efficiency Cost-cutting Initiatives Total (2015 x 2011): Value Initiatives Corporate Level • Reduction of consulting services and “insourcing” of activities: reduction of ≈47% • Standardization of outsourced labor: reduction of ≈52% • Improved management of travel expenses: reduction of ≈18% • Consumption of paper and office supplies: reduction of ≈66% 15 Operational Level • Optimization of inspections (loss prevention), process review, and improvement in assertiveness: reduction of ≈17% • Metering and delivery of bills - online billing (email), changes in layout/type of paper, alignment of bank fees for all Discos: reduction of ≈11%
  16. 16. Projeto Tauron – smart grid Optimized logistics for field teams (georeferenced maps) • Real-time consumption readings • Faster power restoration • Analysis of consumer load curve • Savings with optimized routes Tablets for real-time communication • Dynamic dispatch of teams • Real-time fraud detection • Real-time power outage detection • Automated routing of teams • On-line update of field services’ progress Achievements • Automated dispatch + tablets deployed in ~35% of all teams (RGE and CPFL Piratininga) • 10,500 smart meters already installed as of Nov-13 (42%) – (Target: 25,000 large consumers) • Implementation of RF Mesh Telecom Network already concluded 16 EBITDA acumulado até setembro: R$ 24 milhões EBITDA 9M13: R$ 24 million
  17. 17. Distribution | Key financial figures Sales in the Captive Market (TWh) Net revenues1 – Adjusted2 +1.8% CAGR = +1.8% +8.2% CAGR = +6.8% 41.1 40.7 9,432 40.4 9,794 2010 10,763 2011 10,279 11,123 39.9 39.3 2010 2011 2012 EBITDA – Adjusted2 CAGR = +8.7% 2,267 17 2011 +2.6% 2,678 2,351 2010 LTM 3Q12 LTM 3Q13 2012 Net income – Adjusted2 CAGR = +3.4% 2,444 2,506 LTM 3Q12 LTM 3Q13 2012 1,309 2010 1,399 1,235 2011 1) Excludes construction revenue; 2) Adjusted by non-recurring items and regulatory assets & liabilities. 2012 LTM 3Q12 LTM 3Q13 -4.8% 1,298 1,236 LTM 3Q12 LTM 3Q13
  18. 18. Agenda 1 2 Distribution 3 Generation 4 Competitive Power Supply and Services 5 Consolidated financial figures 6 18 Corporate Overview The Electric Sector
  19. 19. Generation Segment 2º Market share: 2.3% • Long Term Concessions • Brazil’s largest Portfolio in Alternative Energy 25% Renewable Sources: higher than 93% • Installed Capacity1 (MW) | Estimated growth CAGR 2000-16e = 21.5% a.a. Enercan Semesa Ceran Foz Chapecó Epasa Baldin Creation of CPFL Renováveis Baesa 657 660 747 751 931 - Greenfield 19 Brownfield 1) Considering 58.8% stake at CPFL Renováveis, since its creation. Privatization assets 1,047 1,047
  20. 20. Conventional generation | 2,234 MW1 of installed capacity CPFL Energia’s power plants – state-of-the-art environmental efficiency 1998 2005 2007 2007¹ 2008 2008 2010 2010-11 1,275.0 130.0 690.0 880.0 902.5 130.0 100.0 855.0 341.6 671.0 59.0 380.6 377.9 526.6 64.0 50.0 432.0 247.6 51.54% 65.00% 25.01% 48.72% 6.93% 65.00% 65.00% 51.00% 52.75% 657.1 84.5 172.5 428.7 62.5 84.5 65.0 436.1 180.2 345.8 38.4 95.2 184.1 36.5 41.6 32.5 220.3 130.6 1.784 1.4 95.0 32.9 630 5.0 5.0 80.0 - 0.7 92.9 7.3 26.7 1.4 26.0 20.0 10.7 - 2028 20 2004 2036 2036 2035 2032 2036 2036 2036 2042 1) Equivalent stake, including 38MW of small plants at CPFL Geração and 24MW of SHPP embedded in the distribution companies.
  21. 21. CPFL Renováveis | Corporate structure 100% Free float 63.0% 58.8% 37.0% 24.6% 0.0% 16.6% Pre-IPO Post-IPO Small Hydro 21 Biomass Wind Solar
  22. 22. CPFL Renováveis | High quality and diversified portfolio Diversified and high quality portfolio, delivering superior performance, mitigating risks, ensuring reliable load factors and providing capacity to grow with different sources High Quality Development, Construction and Operation • • • • • Biomass Solar 21% Selective high quality project development Wind projects certified by industry leaders Backed by high quality equipment suppliers Long term O&M contracts Energy generation monitoring and optimization Wind Portfolio Attractive location due to high wind speeds Installed Capacity1 0% 19% SHPP 60% Wind Total: 1,735 MW CPFL Renováveis benefits from the complementarity of sources • Biomass Portfolio Proximity to sugarcane production centers Reservoir storage at high levels in the first semester while wind energy generation is concentrated in the second semester of the year Region NE Reservoir Storage (%) 22 22 Feb Mar Apr May Jun Jul Wind (Generation - MWavg) 1) To be fully operational by 2016 Aug Sep Oct Nov Dec Reservoir Storage 506 SO Wind Generation MW Jan 958 CW/SE Complementarity of Sources Mitigating Risks MW 271 Operating: Hydro Wind Biomass Solar SHPP Portfolio Exposure to abundant hydro resources Under Construction: Hydro Wind SHPP Potential (Southeast and Midwest Regions) Biomass Wind Potential (Northeast and South Regions)
  23. 23. CPFL Renováveis | Unparalleled wind conditions combined with top technology Wind Features in Brazil are the Most Adequate for Power Generation | The average wind in Brazil (Northeast) has a similar intensity with less variability Brazil (NE) Area 89% Frequency United States Frequency Frequency Europe Area 95% Ideal Wind Speed Wind Speed (m/s) Ideal Wind Speed Area 99% Wind Speed (m/s) Ideal Wind Speed Wind Speed (m/s) Technology Has Shown Great Improvements in Recent Years | Recently developed technology for wind power plants allows greater load factors Europe and EUA 180 Brazil 100m 3.000kW 160 140 Altura (m) 120 Rotor Diameter (m) Rating (kW) 80m 1.800kW Greater efficiency 70m 1.500kW 100 50m 750kW 80 30m 300kW 60 40 17m 75kW 20 0 1980 1990 23 1990 1995 1995 2000 2000 2005 2000 2005 2010 Improved availability Reduced generation losses
  24. 24. CPFL Renováveis | Installed capacity (MW) Wind SHPP – Small Hydro Biomass 3,818 5,553 Under development Total Portfolio Possible Probable Highly Confident 100% with PPA 1,735 1,283 Operating (Nov-13) Small Hydro Under construction End of 2016 Biomass Wind Total • 35 operating: 327MW • 8 operating: 370MW • 16 operating: 586MW • 60 operating: 1,283MW1 • Under construction: - • Under construction: - • 17 under construction: 452MW • 17 under construction: 452MW • Under development: 626MW • Under development: - • Under development: 3,192MW • Under development: 3,818MW Total: 4,230MW Total: 5,553MW1 Total: 953MW 24 Total: 370MW 1) Including Tanquinho solar power plant – 1MWp of installed capacity
  25. 25. CPFL Renováveis | Track record (MW) CPFL Renováveis (Aug-11) (MWavg) 652 314 2Q12 25 8.2 Free market - 2Q12 70 24.4 Reserve auction (R$158.81/MWh) Revenue(e): R$ 20 million/year 2Q12 158 63 Proinfa PPA (R$ 310.51/MWh) Acquisition price: R$ 1,062 million 3Q12 188 76 Reserve auction (R$ 175.51/MWh) Revenue(e): R$ 115 million/year Acquisition price: R$ 111.5 million 4Q12 40 11 Alternative sources auction (64%) and free market (36%) 4Q12 1 1 Free market - 4Q12 20 11 Alternative sources auction (R$166.41/MWh) Revenue(e): R$ 112 million/year 3Q13 50 18 Free market Revenue(e): R$ 22.6 million/year 4Q13 30 15 Reserve auction R$ 142,51/MWh Revenue(e): R$ 18.5 million/year 4Q13 50 18 Free market Revenue(e): R$ 22.6 million/year 1,283 559 Current portfolio (Nov-13) 25 1) Constant currency (Dec-12)
  26. 26. CPFL Renováveis | Portfolio under construction Commercial start-up in 2013-2016(e) | 452 MW / 219 MWavg (e) (MW) (MWavg) 10 wind turbines installed and in test phase; 5 wind turbines in final installation phase 4Q135 120 52.7 R$ 154.87 20 years 4Q135 78.2 37.5 R$ 152.67 20 years Starting final installation phase 40.2 Free market 19 years Contract to supply wind turbines signed; executive projects underway 89.0 Free market 19 years Contract to supply wind turbines signed; executive projects underway 1Q16 2Q16 82.0 172.0 Atlântica wind farms 26 1) Atlântica I, II, IV and V; 2) Macacos, Pedra Preta, Costa Branca and Juremas; 3) Campo dos Ventos I, III, V; 4) Ventos de São Benedito, Ventos de Santo Dimas, Santa Mônica, Santa Úrsula São Domingos and Ventos de São Martinho; 5) Considering the start-up of the first farm in the complex; 6) Projects with energy sold to the free market in the long term, with
  27. 27. Conventional and Alternative Energy | Key financial figures Net Revenues (R$ million) - Adjusted1 EBITDA (R$ million) - Adjusted1 +18.6% +32.4% CAGR = +44.8% 2,729 2,350 CAGR = +43.7% 1,672 2,062 1,571 1,181 1,520 1,121 2010 1,863 810 2011 2012 LTM3Q12 LTM3Q13 Net Income (R$ million) - Adjusted1 2010 2011 2012 LTM3Q12 LTM3Q13 EBITDA Margin - Adjusted1 -51.6% 833 778 384 404 262 2010 27 2011 2012 LTM3Q12 LTM3Q13 1) Adjusted by proportional consolidation and non-recurring items. 2010 2011 2012 LTM3Q12 LTM3Q13
  28. 28. Agenda 1 2 Distribution 3 Generation 4 Competitive Power Supply and Services 5 Consolidated financial figures 6 28 Corporate Overview The Electric Sector
  29. 29. Competitive power supply| Regulated vs. free market Main differences No choice - distribution company Free choice Distribution company Distribution company Regulated by ANEEL Free negotiation Advantages Regulated Market  Lower prices 73%  Free choice from energy supplier 27%  Better predictability of energy expenses  Customization according to consumer seasonality Free Market1 Who can join after July, 1995 Free Special 29 > 3,000 kW 500-3,000 kW units totaling 500 kW 1) Source: EPE. 12 months ended in Sep-13. before July, 1995 - any any > 69 kV any < 69 kV incentivized Group A Group A incentivized incentivized
  30. 30. Competitive power supply 1º Market share: 10% • CPFL Brasil was awarded the winner of Exame Magazine’s 2013 Best and Largest Companies (category Energy) Sector Leader • 288 free consumers • The Company was selected among gencos, discos, transcos and other players in the electric sector throughout Brazil 2010 | 2011 | 2013 • Nationwide outreach • Value-added product portfolio • Synergy with CPFL Renováveis Portfolio (Free Consumers) 213 179 Outside the concession area Number of Consumers (#) | CPFL Brasil Inside the concession area CAGR = 30% 288 75 52 231 129 80 Free Market in Brazil 30 Current: 11.7 GW avg Potential: +7.1 GW avg 2009 2010 2011 74 2008 141 2012 3Q13
  31. 31. Competitive power supply | Opportunities Number of free clients in Brazil # of competitive customers – larger than 3 MW # of special customers – from 0.5 to 3 MW 1,141 CAGR=53.8% CAGR=8.7% 897 441 477 503 578 616 221 539 204 Sep/09 Sep/10 Sep/11 Sep/12 Sep/13 Sep/09 Sep/10 Sep/11 Sep/12 Sep/13 Current: 9.8 GWavg Potential: +2.1 GWavg Current: 1.9 GWavg Potential: +5.0 GWavg Competitive advantages of CPFL: market leadership, expertise and synergies with CPFL Renováveis 31 Source: ANEEL and CCEE
  32. 32. Services Segment | CPFL Serviços • Foundation: 2006 • Core Business: offers a wide range of value-added services, ranging from engineering projects to maintenance and recovery of equipment. These services are designed to help consumers improve the efficiency, cost and reliability of their electric equipment • Type of services: construction of transmission and distribution networks; maintenance and recovery of equipment; selfgeneration networks (cogeneration, energy-efficiency projects and distributed generation arrays – solar energy) Transmission networks 32 Self-generation networks Distribution networks Recovery of equipment
  33. 33. Services Segment | CPFL Total and CPFL Atende • CPFL Total offers collection services with an established authorized network; capacity to collect utility bills, such as water, energy, telephone, and cable TV. • Capability of cross-sale with other service providers, enabling the collection via energy bills. 33 • Foundation: 2008 • Core Business: provider of contact center and customer relationship services to other utility companies • Services: face-to-face attendance, backoffice, credit recovery, toll-free customer support, ombudsman, service desk and sales
  34. 34. Competitive power supply and Services | Financials1 Net revenues 2,040 EBITDA Net income 2,161 1,909 303 278 1,699 293 201 164 124 113 56 2010 34 2011 1) Pro forma 2012 LTM3Q13 2010 2011 2012 LTM3Q13 2010 2011 2012 LTM3Q13
  35. 35. Agenda 1 2 Distribution 3 Generation 4 Competitive Power Supply and Services 5 Consolidated financial figures 6 35 Corporate Overview The Electric Sector
  36. 36. CPFL Energia | Key financial figures – Sales Total energy sales1 (GWh) 51,090 52,382 52,851 57,128 4.5% 59,706 CAGR 2009-12 3.8% 2009 CPFL Renováveis2 2010 2011 2012 Commercialization + Conventional generation3 Net revenues (R$ million) – adjusted5 10,962 Captive market4 7.3% 13,399 10,566 LTM3Q13 14,206 11,476 CAGR 2009-12 7.0% 2009 36 36 2010 2011 2012 LTM3Q13 1) Disregarding CCEE and intercompany sales. 2) 100% - IFRS criteria. 3) Incl. provision adjustments of 88 GWh in 9M12 and equivalent stakes at Foz do Chapecó, Baesa, Enercan and Epasa. 4) Take into account changes in billing calendar for permissionaires in RGE in 2Q12. 5) Adjusted by generation proportionate consolidation (IFRS 11), regulatory assets & liabilities, non-recurring items and ex-construction revenues.
  37. 37. CPFL Energia | Key financial figures EBITDA and net income -4.5% EBITDA (R$ million) | Adjusted1 4,625 3,320 4,415 3,770 EBITDA EBITDA Margin 2,762 30.3% 32.9% 34.5% 30.7% 26.1% 2009 2010 2011 2012 Net Income (R$ million) | Adjusted1 1,544 1,560 14.6% 13.6% 2009 37 2010 2011 11.7% LTM3Q13 -13.2% 1,676 1,286 11.7% CAGR 2009-12 12.5% 2012 1,455 Net Income Net Margin CAGR 2009-12 10.1% LTM3Q13 1) Adjusted by generation proportionate consolidation (IFRS 11), regulatory assets & liabilities and non-recurring items 9.2%
  38. 38. CPFL Energia | Key financial figures – Dividends Dividend Yield 1 (LTM) 9.1% 8.7% Declared dividends (R$ Mi) 9.6% 10.9% 9.7% 6.5% 3.7% 401 498 612 722 842 719 CPFL average price (R$/ORD)2 8.6% 7.6% 7.3% 7.6% 7.9% 6.9% 602 606 572 655 774 6.0% 7.1% 748 758 6.1% 4.6% 3.9% 640 486 456 363 140 2H04 1H05 2H05 1H06 2H06 1H07 2H07 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 1H13 22.05 21.95 17.99 18.05 16.69 15.77 16.51 18.44 20.18 15.02 14.13 15.87 11.67 8.29 9.43 26.30 22.78 21.11 Since its IPO, CPFL Energia has distributed R$ 10.6 billion in dividends. Payout ratio has been close to 100%. 1H13 Dividends: R$ 363 million | 0.38/share 38 1) On a LTM basis; 2) Adjusted by reversal stock split and simultaneous split of shares on June 29, 2011 (not dividend adjusted).
  39. 39. Capex 2013 - 2017 R$ 2,325 Generation: R$ 2,062 million2 R$ 1,923 Commercialization and Services: R$ 667 million R$ 1,367 1,231 1,321 R$ 1,706 R$ 1,389 39 2013 2014 2015 11 113 120 15 2012 actual (cash flow) 151 234 22 136 147 729 1,047 1,072 1,043 1,117 1,403 R$ 2,468 Distribution: R$ 5,981 million 1,265 Total: R$ 8,709 million1 2016 2017 1) Constant currency Dec-12. Take into account 100% interest in CPFL Renováveis and Ceran (IFRS); 2) Conventional + Alternative Energy
  40. 40. CPFL Energia | Indebtedness and leverage Leverage1 | R$ billion 12.6 12.2 3.03 3.42 3.53 2012 1Q13 2Q13 3Q13 4,377 Adjusted EBITDA2 R$ million 12.6 2.89 Adjusted net debt1/ Adjusted EBITDA2 12.5 4,111 3,676 Gross debt cost3 | LTM Gross debt breakdown3 17.7% Nominal 40 3.0% 1.7% 1.2% 2Q13 2011 2010 4.9% 4.4% 4.3% 8.0% CDI TJLP 2.0% 3Q13 11.1% 9.4% 10.5% 9.0% 8.4% 8.0% 2009 2006 2005 2004 9.9% 7.3% 7.1% 2008 7.9% 2007 9.4% Real 13.4% 1Q13 13.4% 12.1% 2012 13.9% 3,466 Fixed (PSI) IGP 1) Financial covenants criteria. 2) LTM recurring EBITDA (covenants criteria). 3) Financial debt (+) private pension fund (-) hedge (considering proportional consolidation).
  41. 41. CPFL Energia | Strong and robust liquidity Debt amortization schedule1 (Sep/13) | R$ million Cash coverage: 5,406 2.4x short-term amortization (12M) Average tenor: 4.08 years Short-term (12M): 14.4% of total 4,200 3,315 2,886 2,686 2,283 2,231 198 Cash 41 Short-term 2014² 2015 2016 2017 2018 2019+ 1) Disregard financial charges (ST = R$ 350 million; LT = R$ 61 million), hedge (net positive effect of R$ 350 million) and MTM (R$ 60 million). 2) Considers amortization as of October 01, 2014.
  42. 42. Achievements Perspectives 2H13 Achievements CPFL Renováveis new projects • 2H13: 328 MW to be added  • Start-up: Coopcana (50 MW), Campo dos Ventos II (30 MW) and Alvorada (50 MW) • 4Q13: 198 MW to be added Recovery signals in industrial segment, favoring energy consumption: +2.7% in 2Q13  Industrial segment growing again: +2.5% in 3Q13 Productivity gains Productivity gains • Focus on reduction and cost optimization (Zero Based-Budget and Corporate Services Center) • Maturation of Tauron Project (smart grid): higher productivity, lower costs • Optimization in the occupation of Company’s buildings – sale of idle assets 42 • PMSO – real decrease of R$ 137 million (9M13 x 9M11)  • Tauron Project – EBITDA of R$ 24 million in 9M13 • Sale of properties and vehicles – R$ 47 million in 3Q13
  43. 43. Agenda 1 2 Distribution 3 Generation 4 Competitive Power Supply and Services 5 Consolidated financial figures 6 43 Corporate Overview The Electric Sector
  44. 44. Energy sector in Brazil: business segments Consumers 74.2 million consumers Generation • 126 GW of installed capacity1 • 78.2% Renewable energy1 • Eletrobrás: ~31% of total assets Transmission Distribution • 68 Companies • 63 Companies • 107,400 km of transmission lines • 459 TWh of billed energy2 • Eletrobrás: ~56% of total assets • Top 5: ~50% of the market Competitive Power Supply Captive Market 74.2 million Consumers 334 TWh of billed energy2 Free Market 1,757 Consumers 125 TWh of billed energy2 44 1) Source: ANEEL - November 21, 2013; 2) Source: EPE - 12 months ended in Set -13.
  45. 45. Brazilian electricity matrix Brazilian Energy Matrix Brazil’s electricity matrix is predominantly renewable, with hydro installed capacity totaling 69% of the total supply, while biomass, wind and SHPPs account for 14%. In the next years, it is expected that other sources will grow, mainly wind, reaching 10% of total installed capacity in 2022. Evolution of Installed Capacity (GW) 2013-20221 2013 2022 129 GW 45 2017 153 GW 183 GW 1) Source: EPE - National Energy Balance 2013 and 10-year Energy Plan 2013-2022; 2) Others: considers coal, oil, diesel and process gas.
  46. 46. Mechanics of regulated auctions Gencos • New Energy: Initial supply 5 years after the auction • Term of contract: 15-30 years • Objective: Cover discos market growth and finance new generation • Energy contract limit: no limit A-5 Auction • • • • A-3 Auction A-1 Auction 2013 • • • • “New” Energy: Initial supply 3 years after the auction Term of contract: 15-30 years Objective: Adjust discos’ contracted energy levels Energy contract limit: 2% of the load “Old” or Existing Energy: Initial supply in the following year Term of contract: 1-15 years Objective: Replace old contracts, maintaining the discos’ contracting level Energy contract limit: 96% to 100% of the Replacement Amount (MR) 2014 2015 2016 2017 2018 Reserve Energy Auction - LER: Discos are not required to declare contracting needs and generation costs are covered through sector charges Discos Discos must purchase electric energy to supply their captive market, five years in advance, in public auctions (Regulated Market – ACR) 46
  47. 47. World’s most attractive alternative energy market Renewables in Brazil are expected to grow at a CAGR of 9.5%, from 16 GW in 2012 to 36 GW in 2021 and still a highly fragmented market Unrealized Potential to be Explored in Brazil Potential Realized Wind  Potential: 143GW  Installed capacity: 2.0GW 1% SHPP  Potential: 17.5GW  Installed capacity: 5.0GW 29% Biomass  Potential: 17.2GW  Installed capacity: 8.9GW Highly Fragmented Market | Renewables Market Share in Brazil based on contracted energy (22GW) 8% Renova 5% 52% Energimp 4% QGER 4% Evolution of Brazilian Installed Capacity by Source | GWh 4.6% p.a. 182 Brookfield 3% Cosan2 3% CAGR 36 122 16 10 10 Renewables 9.5% 16 Other 5.1% 13 Natural Gas Eletrosul 3% Elecnor 2% Bioenergy 2% 2.7% Hydro Others 66% 3.6% 117 85 2012A 47 2021E Source: ANEEL, PDE 2021 and Company; 1) Projected to 2020; 2) Considers the export of 2/3 of energy produced by the Company;
  48. 48. Stable and solid regulatory framework Description Environmental & Streamlined Implementation Process    Access to Multiple Sales Channels    Dedicated Sovereign Funding Conditions Discounts on Transmission Charges   Discount of at least 50% (TUST and TUSD)             48 Regulated energy auctions and the free market Long term inflation protected/linked PPA (average 20-30 years) Special niche in the free market for “special client” (demand between 0.5-3.0MW) Current special free market of 2.7% (1.6GW) to potential of 9.6% (5.8GW) BNDES Financing Low Cost – average interest rate of 7.0% Long-term funding of 16 years Attractive capital structure   Favorable Tax Regime and Fiscal Incentives Faster and simpler environmental process Faster construction cycle Sustainability “Lucro Presumido” with reduction in the effective tax rate to 5% - 15% from 34% REIDI (special program of incentives for infrastructure development) - exemption of PIS/COFINS, Exemption of ICMS (movement tax) and IPI (production tax) Source: Company ; 1) Tax on revenues    Natural consequence of projects with lower environmental impact Annual auctions to match growth in energy consumption Price of energy at the captive market structurally higher than at the free market given regulatory charges Not a sector specific benefit BNDES has been providing support for the sector for many years Policies in place since 1996 Not a direct government expenditure/tax break Not applicable for regulated auctions Tax regime for small enterprises (annual revenues below R$78 mm), which is not sector specific REIDI is applicable for all infrastructure projects ICMS/IPI1: discussions on expanding tax incentives to SHPPs
  49. 49. Pressure on tariffs Average tariff1 (CPFL Piratininga) - [R$/MWh]2 -24% Taxes Sector charges Distribution Transmission Generation R$/MWh (6%) (18%) (9%) (45%) 1st CRTP3 2003-2006 (14%) (22%) (7%) (13%) (8%) (15%) (4%) (44%) (53%) 3rd CRTP3 2011-2014 R$/MWh % -16% -22.1 -27% 20.0 88% -4.2 -18% -25.6 -38% -26.0 -39% -7.4 -24% -21.6 -69% -25.8 (22%) % -13.3 82 (22%) -16% -18.5 -11% 2012 Tariff after RTE4 The Distribution segment, intensive in O&M expenses, has gone through periodic tariff reviews to reduce costs and improve efficiency, while Generation and Transmission segments, capitalintensives, did not suffer the same regulation 49 1) Average of all classes and voltages; does not take into account financial components. 2) Constant figures in December/12. Amounts adjusted by IPCA | Source: CPFL Energia. 3) Periodic Tariff Review. 4) Extraordinary Tariff Review.

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