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Corporate Presentation CPFL Energia
This document provides a summary of CPFL Energia's business for 3Q15. It discusses CPFL Energia's history of expansion since privatization in 1998 through acquisitions and greenfield projects. It outlines CPFL Energia's key business segments including distribution, generation, trading, and services. For each segment, it provides financial highlights for the period of 2010-3Q15 including net revenues, EBITDA, and net income. It also summarizes CPFL Energia's ambitions for future growth across its business segments.
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Corporate Presentation CPFL Energia
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- 2. 22 1) Considersthe date of startup of the plants, except Semesa. Since 1997, CPFL Energia has maintained an aggressive growth and diversification strategy Privatization 1998 2002 200420001997 2001 2003 IPO 2004 20062005 2007 IPO 2008 20102009 2011 2012 2013 2014 History of expansion After the IPO Construction of 6 Hydros Incorporation of the holding company Creation of CPFL Brasil Acquisition of 5 distributors Entry in renewable energy segment Association with Ersa -> Creation of CPFL Renováveis Association of CPFL Renováveis with Desa
- 3. 33 1) Furnas hasthe concession for HPP Serra da Mesa. CPFL has the contractual right of 51.54% of the plant’s assured energy, according to the 30-year leasing contract, maturing in 2028; 2) Adjusted by regulatory assets & liabilities and non-recurring items; does not consider the holding company; 3) Commercialization in the free market and Services. Company Profile Lajeado HPP 5.94% Nect Serviços CPFL Centrais Geradoras DISTRIBUTION 100% SERVICES 100% RENEWABLES 51.61% 65% 48.72% 51% 25.01% Serra da Mesa HPP 51.54%1 53.34% GENERATION 100% TRADING 100% Free Float 15.1% 31.9% 23.6% 29.4% Trading3 173 Conventional Generation 1,388 CPFL Energia – Consolidated2| 4,033 Distribution 1,99349% 34% 4% LTM 3Q15 Adj. EBITDA Breakdown2 | R$ million 13%Renewable Generation 509 Concession’s expiration 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 HPP Barra Grande CPFL Sul Paulista 19 SHPPs (CPFL Renováveis) HPP Castro Alves CPFL Leste Paulista HPP Monte Claro CPFL Mococa HPP 14 de Julho ~3% CPFL Energia's EBITDA
- 4. TSR3: -5.7% 2010 20112012 2013 2014 LTM 3Q15 10,921 11,413 13,235 13,681 15,687 18,911 CPFL Energia | Key financial figures1 44 Net revenues | R$ million CAGR 2010- LTM3Q15 11.6% 20.6% 2010 2011 2012 2013 2014 LTM 3Q15 3,260 3,649 4,343 3,908 3,916 4,033 EBITDA | R$ million 29.8% 32.0% 32.8% 28.6% 25.0% 21.3% 3.0% EBITDA EBITDA Margin CAGR 2010- LTM3Q15 4.3% Net Income | R$ million Net Income Net Margin 2010 2011 2012 2013 2014 LTM 3Q15 1,526 1,503 1,617 1,304 1,159 1,157 14.0% 13.2% 12.2% 9.5% 7.4% 6.1% -0.1% 1) Take into account proportionate consolidation of minorities’ stakes at gencos (+) regulatory assets & liabilities (-) construction revenues (-) non-recurring items. 2) For 2014, a capital increase through stock dividend was approved in AGM. 3) TSR from Sep-10 to Sep-15 = Dividends 7.2% (+) Stock performance -12.9% = -5.7%. Dividends: CPFL has presented payout ratio close to 100% since its IPO, reaching the mark of R$ 11.6 billion distributed.2
- 5. Distribution segment • 7.7million customers • 561 municipalities • Footprint: most developed regions • High potential in per capita consumption • Market size: 58.4 TWh/year 1º Market share: 12,4% Industrial Commercial Residential Others 1) The Public Hearing 038/2015, placed by ANEEL, proposes a change in the current month review from February to March. 2) Source: EPE.5 28% 40% 17% 15% 5 small discos 49% 22% 8% 21% RGE CPFL Piratininga LTM 3Q15 Adj. EBITDA Breakdown R$ million CPFL Paulista Tariff review Sales CAGR by Region2 | LTM 3Q10 - LTM 3Q15 4th Tariff Review Cycle CPFL Piratininga Oct-15 CPFL Santa Cruz1 Feb-16 CPFL Leste Paulista1 CPFL Jaguari1 CPFL Sul Paulista1 CPFL Mococa1 CPFL Paulista Apr-18 RGE Jun-18 LTM 3Q15 Sales Breakdown GWh
- 6. 2010 2011 20122013 2014 LTM 3Q15 39.3 39.9 40.7 41.1 43.2 42.2 13.1 14.7 16.0 17.3 16.8 16.2 Captive TUSD Distribution | Key financial figures Net revenues1 | R$ Million – Adjusted2 EBITDA | R$ Million – Adjusted2 Net income | R$ Million – Adjusted2 2010 2011 2012 2013 2014 LTM 3Q15 9,432 9,794 10,830 10,716 12,566 15,446 2010 2011 2012 2013 2014 LTM 3Q15 2,267 2,351 2,655 2,211 1,984 1,993 2010 2011 2012 2013 2014 LTM 3Q15 1,309 1,235 1,356 1,047 823 864 1) Excludes construction revenue; 2) Adjusted by non-recurring items and regulatory assets & liabilities. CAGR 2010- LTM3Q15 +10.4% +22.9% CAGR 2010- LTM3Q15 -2.5% +0.5% CAGR 2010- LTM3Q15 -8.0% +5.0% Energy sales | TWh CAGR 2010-LTM3Q15 +2.2% 6 -2.7% 54.6 56.7 52.4 60.058.5 58.4
- 7. 77 1) ConsidersCPFL’s equivalent stake in each project. 2) Amounts in currency Dec/14. PMSO excludes fuel cost at EPASA. Conventional Generation Segment | Installed Capacity of 2,199 MW and Assured Energy of 1,134 MWavg1 Sector Average 16.0 18.7 18.8 22.4 23.7 27.2 21.1 -24% Genco 1 Genco 2 Genco 3 Genco 4 Genco 5 117 136 101 89 89 79 102 Sector Average Genco 1 Genco 2 Genco 3 Genco 4 Genco 5 +15% PMSO2 / Physical Guarantee (R$/MWh) EBITDA2 / Physical Guarantee (R$ MM/MWh)
- 8. August 2011 July2013 September 2014 April 2015 2016-20 Total 2020 Under Development Total Portfolio 652 1,153 1,773 29 333 2,135 3,453 5,588 Renewable Generation Segment 8 1) Through CPFL Geração; 2) Patria; Eton Park; BTG Pactual; Bradesco BBI; GMR Energia and Previ; 3) Renewables Market Share in Brazil based on installed capacity in operation (24 GW); 4) Considers the export of 2/3 of energy produced by the Company. CPFL Renováveis Others2 IPO (R$ 1 billion) Joint venture with DESA + Campo dos Ventos São Benedito Mata Velha SHPP Pedra Cheirosa Boa Vista II SHPP Morro dos Ventos II CPFL Renováveis Portfolio (100% - MW) Portfolio Breakdown 2020(e) Possible Probable Highly Confident Highly Fragmented Market3 Brookfield Biosev Energimp Elecnor Tractebel Renova Brennan Queiroz GalvãoOther 3.8% 2.2% 1.6% 1.6% 1.5% 1.4% 1.2% 1.0% 74.3% 7.5% Market 51.61%1 12.27% 26.63% 9.49% Cosan 3.9%
- 9. (MW) (MWavg) CPFL Renováveis(Aug-11) 652 314 2Q12 25 8 Free market - 2Q12 70 24 Reserve auction Revenue(e): R$ 20 million/year 2Q12 158 63 PROINFA Acquisition price: R$ 1,062 million 3Q12 188 76 Reserve auction Revenue(e): R$ 115 million/year 4Q12 40 11 Auction and free market Acquisition price: R$ 111.5 million 4Q12 1 1 Free market - 4Q12 20 11 Alt. Sources auction Revenue(e): R$ 112 million/year 3Q13 50 18 Free market Revenue(e): R$ 22.6 million/year 4Q13 30 15 Reserve auction Revenue(e): R$ 18.5 million/year 4Q13 50 18 Free market Revenue(e): R$ 22.6 million/year 1Q14 14 5 PROINFA Acquisition price: R$ 103.4 million 1Q14 120 53 Alt. Sources auction Revenue(e): R$ 76.7 million/year 2Q14 78 38 Alt. Sources auction Revenue(e): R$ 52.6 million/year 3Q14 278 167 - Partnership with Dobrevê 2Q15 29 15 Reserve Auction Revenue(e): R$ 17.9 million/year Current portfolio (Nov-15) 1,802 837 9 CPFL Renováveis | Track record
- 10. 10 CPFL Renováveis |Greenfield projects Commercial Start-up 2016-2020(e) 333 MW of installed capacity 183 average-MW of assured energy Campo dos Ventos Wind Farms e São Benedito Wind Farms Mata Velha SHPP Pedra Cheirosa Wind Farms Boa Vista II SHPP Commercial Start-up 20161 20161 20182 2020 Installed Capacity 231.0 MW 24.0 MW 51.3 MW 26.5 MW Assured Energy 129.2 average-MW3 13.1 average-MW 26.1 average-MW3 14.8 average-MW PPA4 Free market - 20 years 16th LEN 20135 R$ 143.30/MWh until 2047 18th LEN 2014 R$ 133.00/MWh until 2037 21st LEN 2015 R$ 207.64/MWh until 2049 Financing BNDES (under analysis) BNDES (in negotiation) BNDES (to be structured) BNDES (to be structured) 1) Gradual commercial operation from 2Q16; 2) Gradual commercial operation from 1H18; 3) Assured Energy calculated in the P90; 4) Constant Currency (jun/15); 5) With the anticipation of work, a bilateral contract (Free Market) will run between 2016 and 2018, when the supply of LEN 2013 starts.
- 11. 2010 2011 20122013 2014 LTM 3Q15 1,047 1,351 1,964 2,356 3,164 2,859 Conventional and Alternative Energy | Key financial figures1 1111 Net revenues | R$ million CAGR 2010-LTM3Q15 22.3% -9.6% 2010 2011 2012 2013 2014 LTM 3Q15 EBITDA | R$ million +12.0% CAGR 2010-LTM3Q15 20.4% Net Income | R$ million 2010 2011 2012 2013 2014 LTM 3Q15 +18.0% 1) Adjusted by proportional consolidation and non-recurring items. 1,060 1,427 1,643 1,695 1,898 721 373 419 306 361 750 244 CAGR 2010-LTM3Q15 8.2%
- 12. Competitive power supply 12 ,of which 182 special customers current = 1.9 GWavg | current = 9.6 GWavg | • New activities: and 2008 2009 2010 2011 2012 2013 2014 3Q15 80 74 129 141 231 284 266 238 2008 2009 2010 2011 2012 2013 2014 3Q15 7 12 47 47 169 213 221 182 CAGR 2010-15 13.2% CAGR 2010-15 31.5% Free Customers (#) | Conventional + Special Free Customers (#) | Special
- 13. Incorporation: 2008 Provision of customer relationship services to utility companies: call center face-to-face service back office credit recovery ombudsman help desk and sales Foundation: 2006 Offers a wide range of value-added services: engineering projects for transmission and distribution grids equipment maintenance and recovery self-generation grids collection of utilities’ bills through an established authorized network Services Segment 13
- 14. CPFL Telecom Grid OperationsCenter (COR) in Jundiaí Value Creation Processes Objective: To be the provider of grid infrastructure and connectivity solutions to telecommunication operators and service providers. Focus: economically more attractive cities with a higher concentration of grid users CPFL concession area: 7.3% of Brazil’s GDP Telecom market estimated at R$13 billion/year Footprint: 17 cities (780 km + optic fiber) 14
- 15. Net revenues |R$ million EBITDA | R$ million Net income | R$ million Competitive power supply and Services | Financials1 1) Pro forma15 2010 2011 2012 2013 2014 3Q15LTM 1,909 1,699 2,031 2,031 2,497 2,408 2010 2011 2012 2013 2014 3Q15LTM 201 164 127 52 168 129 2010 2011 2012 2013 2014 3Q15LTM 303 278 287 74 263 173 CAGR 2010- LTM3Q15 4.8% -3.6% -34.2% -23.4%
- 16. 16 1616 CPFL Energia’s ambitions GENERATION •To act on both institutional and regulatory fronts to mitigate business risks • To be efficient in managing energy contracts • Maintain the leadership in operating efficiency across the sector COMMERCIALIZATION • To maximize value in the free market by operating within the risk thresholds • To operate with the focus on special clients • To explore synergies through strategic operations: ESCO and Retail Commercialization DISTRIBUTION • To be the leader in operating efficiency by investing in technology, automation and innovation • To act on both institutional and regulatory fronts to ensure sustainability of the sector SERVICES • To operate with the focus on Technical Services, with technology and productivity • To mitigate service risk by hiring qualified manpower and suppliers RENEWABLES • Growth while creating value through acquisitions and greenfield projects • To be the leader in operating efficiency in the Renewables segment TELECOM • Sales growth in the 17 cities where the project has been implemented • Geographic expansion on demand according to client requirements and profitability of projects
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- 18. Energy sector inBrazil: business segments Consumers 1) Source: ANEEL – November, 2015; 2) Source: EPE and CCEE; 3) Source: ONS 4) Source: Ministry of Mines and Energy (MME) – Sep-15; 4) Sep-15 Free Market Captive Market 78.6 million consumers 1,793 Consumers4 117 TWh of billed energy2 78.6 million Consumers 353 TWh of billed energy2 Transmission • 104 Companies³ • 126,773 km of transmission lines4 • Eletrobrás: ~55% of total assets Distribution • 63 Companies • 469 TWh of billed energy2 • Top 5: ~46% of the market Competitive Power Supply Generation • 139 GW of installed capacity1 • 79.5% Renewable energy1 • Eletrobrás: ~29% of total assets 18
- 19. Brazilian electricity matrix 1)Source: 10-year Energy Plan 2024; 2) Others: considers coal, oil, diesel and process gas; 3) Abeeólica. Brazil’s electricity matrix is predominantly renewable, with hydro installed capacity totaling 68% of the total supply, while biomass, wind, SHPPs and solar account for 16%. In the next years, it is expected that other sources will grow, mainly wind and solar, reaching 12% and 3% respectively of total installed capacity in 2024. Brazilian Electricity Matrix 133 GW 206 GW 2014 2024 19 Wind Potential: 350GW3 Installed capacity: 3.8GW 1% SHPP Potential: 17.5GW Installed capacity: 5.0GW 29% Biomass Potential: 17.2GW Installed capacity: 9.3GW 54% Potential Realized Potential to be Explored in Brazil Evolution of Installed Capacity (GW) 2014-20241
- 20. • Shares listedin 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 World-Class Corporate Governance Practices 2020 Corporate governance
- 21. 21 Capex(e) 2015-2019 |R$ Million 1) Current investment plan released in 4Q14 Earnings Release on March 26, 2015. 2) Current currency. Considers 100% interest on CPFL Renováveis and Ceran (IFRS); 3) Considers proportional stake in the generation projects; 4) Disregard investments in Special Obligations (among other items financed by consumers); 5) Conventional + Renewable. Total: R$ 8,962 million2 (IFRS) R$ 7,877 million3 (Pro-forma) Distribution4: R$ 6,238 million Generation5: R$ 2,328 million (IFRS) R$ 1,135 million (Pro-forma) Commercialization and Services: R$ 396 million 702 882 1.390 1.385 1.299 1.282 265 592 1.196 296 113 13194 83 88 64 77 84 2014 actual (cash flow) 2015 2016 2017 2018 2019 702 882 1.390 1.385 1.299 1.282172 324 623 161 62 74 94 83 88 64 77 84 1,062 1,557 2,674 1,745 1,489 1,497 IFRSPro-forma 968 1,289 2,101 1,610 1,438 1,440
- 22. 22 CPFL Energia |Indebtedness and leverage CDI Prefixed (PSI) IGP TJLP Gross debt breakdown by indexer | 3Q15 1,3 1) Financial covenants criteria. 2) LTM recurring EBITDA; 3) Financial debt (+) private pension fund (-) hedge. Average tenor: 3.51 years Short-term (12M): 12.4% of total Cash coverage: 1.70x short-term amortization (12M) Gross debt cost1,3: Nominal: 12.2% / Real: 2.5% 74% 3% 5% 18% 2012 2013 2014 1Q15 2Q15 3Q15 12,6 12,2 13,0 13,6 13,8 13,7 Leverage1 | R$ billion 4,377 3,399 3,736 3,835 3,755 3,971 Adjusted EBITDA1,2 R$ million 2,89 3,59 3,49 3,54 3,67 3,46 2,79 3,53 3,25 3,28 3,26 2,98 Adjusted net debt1/ Adjusted EBITDA2 Adjusted with CVA in cash balance
- 23. Zero-Base Budget Inefficiencies frompast budgets are not carried over to the next periods Tauron Program Introduction of the smart grid technology in the distribution network Corporate Services Center Implementation of a back- office services provider to increase operating productivity and efficiency Corporate 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% Operational Level Value Initiatives • 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% 23 Cost-cutting Initiatives Cost-cutting Initiatives Total (2015 x 2011): Cost-cutting already performed (LTM3Q15 x 2011)1: ≈R$ 279 million 1) Constant value of Sep-15.
- 24. 24 • Automated dispatch+ tablets deployed in all emergency orders (8 discos) and commercial orders (CPFL Piratininga) • 25,000 smart meters already installed • Implementation of RF Mesh Telecom Network already concluded Achievements • Real-time consumption readings • Analysis of consumer load curve • Inputs to fraud detection • Real-time power outage detection • Savings with truck rolls Optimized logistics for field teams (georeferenced maps) • Faster power restoration • Savings with optimized routes Tablets for real-time communication • Dynamic dispatch of teams • Automated routing of teams • On-line update of field services’ progress Tauron Program – smart grid
- 25. Sustainability at CPFL:Incorporation of strategic guidelines 25 Energy is essential for the welfare of people and the development of society. We believe that producing and using energy in a sustainable manner is vital for the future of humanity. Vision To provide sustainable energy solutions with competitiveness and excellence, acting in a manner that is integrated with the community. Mission • Value Creation Commitment • Safety and Quality of Life • Austerity • Sustainability • Trust and Respect • Overcoming • Entrepreneurship Principles CPFL Energia is the largest private group in the Brazilian electricity sector which, through innovative strategies and talented professionals, offers sustainable energy solutions. Positioning CPFL Energia built its Sustainability Platform in 2013 in order to define the issues material to its growth strategy and the development of goals and indicators related to each of these issues at each business unit. The Platform consolidation process covered the company as a whole, meaning that sustainability is not just an element of our principles and values but included in strategic planning. Sustainability Platform
- 26. Indicators 2014 x2013 x 2012 1) Index obtained through the ABRADEE survey (value = average value between the distributors CPFL Paulista, CPFL Piratininga, RGE, CPFL Santa Cruz and CPFL Leste Paulista). 2) FR - represents the number of accidents involving time off work in relation to one million man hours worked (106 x total number of accidents involving time off work divided by total Man Hours Worked). 3) DS - represents the seriousness of the injury, i.e. the “non-productive time” per one million man hours worked (106 x total number of days lost + total number) of days debited divided by the total man hours Scope 1 and 2 Emissions / Net Energy Generated (tCO2e/MWh) - EN15|EN16|EN17 0.08 0.08 Reformed meters and transformers (%) - EN2 19 & 37 14 & 23 Strategic suppliers assessed for sustainability (%) - G4-12 22.2 17.7 Number of strategic suppliers - G4-12 139 124 Energy saved by energy efficiency projects (GWh) - EU7 | EU23 36.7 33.3 Perceived Quality Satisfaction Index - ABRADEE (%)¹ 89.4 88.2 Reverse chain - lighting, wooden cross arms, poles, transformers (un) - EN1 367.3 463.8 Investments in the Environment (R$ million) - EN31 96.0 93.0 Contributions to society – without mandatory investments (R$ million) - EC1 22.0 23.4 Investments in energy efficiency projects for low-income consumers (R$ million) - EN31 35.5 36.3 Severity Degree (DS)³ - LA6 1,073 415 Frequency Rate (FR)² - LA6 1.77 1.80 26 87.08 125 21 & 29 0.09 89.5 354.8 34.2 3.02 414 39.0 17.0 25.6