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Corporate Presentation - CPFL Energia - May 2015
This document provides an overview of CPFL Energia's history and operations from 1997 to 2015. It discusses CPFL Energia's expansion through acquisitions and greenfield projects in distribution, renewable generation, and competitive power supply. Key milestones include the company's IPO in 2004, diversification into renewable energy in 2011 through the acquisition of CPFL Renováveis, and continued growth in distributed generation and telecommunications services. Financial highlights show increasing revenues across business segments despite challenges in distribution profits. The presentation establishes CPFL Energia's ambition to strengthen its leadership position through efficiency gains and managing regulatory risks across power generation, distribution, and commercialization.
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Corporate Presentation - CPFL Energia - May 2015
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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% COMMERCIALIZATION 100% Free Float 15.1% 30.9% 24.4% 29.6% Competitive Supply and Services3 221 Conventional Generation 1,210 CPFL Energia – Consolidated2| 3,976 Distribution 2,09052% 30% 6% LTM 1Q15 Adj. EBITDA Breakdown2 | R$ million 12%Renewable Generation 483 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. TSR2: 1.7% For 2014,a capital increase through stock dividend was approved in General Shareholders Meeting | Stock dividend approved is of 3.194510783%, in the ratio of 0.03194510783 new share, of the same type, for each share 2010 2011 2012 2013 2014 LTM 1Q15 10,921 11,413 13,235 13,681 15,687 16,889 CPFL Energia | Key financial figures1 44 Net revenues | R$ million CAGR 2010- LTM1Q15 9.1% 7.7% 2010 2011 2012 2013 2014 LTM 1Q15 3,260 3,649 4,343 3,908 3,916 3,976 EBITDA | R$ million 29.8% 32.0% 32.8% 28.6% 25.0% 23.5% 1.5% EBITDA EBITDA Margin CAGR 2010- LTM1Q15 4.1% Net Income | R$ million Net Income Net Margin 2010 2011 2012 2013 2014 LTM 1Q15 1,526 1,503 1,617 1,304 1,159 1,063 14.0% 13.2% 12.2% 9.5% 7.4% 6.3% -8.2% 1) Take into account proportionate consolidation of minorities’ stakes at gencos (+) regulatory assets & liabilities (-) construction revenues (-) non-recurring items. 2) TSR from Dec-09 to Dec-14 = Dividends 6.7% (+) Stock performance -5.1% = 1.7%. Dividends: CPFL has presented payout ratio close to 100% since its IPO, reaching the mark of R$ 11.6 billion distributed. Declaration of dividend for 1H14: R$ 422 million, equivalent to 44.5% of net income of the fiscal year | R$ 0.44/share
- 5. Distribution segment • 7.5million customers • 569 municipalities • Footprint: most developed regions • High potential in per capita consumption • Market size: 60TWh/year 1º Market share: 13% Industrial Commercial Residential Others 1) Source: EPE.5 29% 42% 17% 12% 5 small discos 49% 23% 8% 20% RGE CPFL Piratininga LTM 1Q15 Adj. EBITDA Breakdown R$ million CPFL Paulista Tariff review Sales CAGR by Region1 | LTM 1Q10 - LTM 1Q15 4th Tariff Review Cycle CPFL Piratininga Oct-15 CPFL Santa Cruz Feb-16 CPFL Leste Paulista CPFL Jaguari CPFL Sul Paulista CPFL Mococa CPFL Paulista Apr-18 RGE Jun-18 LTM 1Q15 Sales Breakdown GWh
- 6. 2010 2011 20122013 2014 LTM 1Q15Captive 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 1Q15 9,432 9,794 10,830 10,716 12,566 13,294 2010 2011 2012 2013 2014 LTM 1Q15 2,267 2,351 2,655 2,211 1,984 2,091 2010 2011 2012 2013 2014 LTM 1Q15 1,309 1,235 1,356 1,047 823 845 1) Excludes construction revenue; 2) Adjusted by non-recurring items and regulatory assets & liabilities. CAGR 2010- LTM1Q15 +7.1% +5.8% CAGR 2010- LTM1Q15 -1.6% +5.4% CAGR 2010- LTM1Q15 -8.4% +2.7% Sales in the Captive Market | TWh CAGR 2010-LTM1Q15 +2.6% 6 -0.7%
- 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 3,244 5,379 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 contracted energy (26 GW); 4) Considers the export of 2/3 of energy produced by the Company. CPFL Renováveis Others2 Market 9.49%51.61%1 26.63%12.27% 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 Renova Energimp QGER Brookfield Cosan Eletrosul Gestamp ElecnorOther 1.3% 6.9% 7.5% 3.6% 2.9% 2.5% 2.4% 2.0% 1.8% 1.6% 67.6% 4 8.2%
- 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 (May-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 174 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 120.9 average-MW3 13.1 average-MW 26.1 average-MW3 14.0 average-MW PPA4 ACL 20 years 16th LEN 20135 R$ 143.30/MWh until 2047 18th LEN 20145 R$ 133.00/MWh until 2037 21st LEN 2015 R$ 207.64/MWh until 2049 Financing BNDES (being structured) BNDES (under analysis) BNDES (under analysis) 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 (mar/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. Winner A-5 Auction 2015
- 11. 2010 2011 20122013 2014 LTM 1Q15 ,1047 ,1.351 1,964 2,356 3,164 3,086 Conventional and Alternative Energy | Key financial figures1 1111 Net revenues | R$ million CAGR 2010-LTM1Q15 24.1% -2.5% 2010 2011 2012 2013 2014 LTM 1Q15 EBITDA | R$ million -0.1% CAGR 2010-LTM1Q15 17.7% Net Income | R$ million 2010 2011 2012 2013 2014 LTM 1Q15 -12.0% 1) Adjusted by proportional consolidation and non-recurring items. 1,060 1,427 1,643 1,695 1,693 721 373 419 306 269 750 244 CAGR 2010-LTM1Q15 2.0%
- 12. Competitive power supply 12 ,of which 196 special customers current = 1.9 GWavg | current = 9.4 GWavg | • New activities: and 2008 2009 2010 2011 2012 2013 2014 1T15 80 74 129 141 231 284 266 250 2008 2009 2010 2011 2012 2013 2014 1T15 7 12 47 47 169 213 221 196 CAGR 2010-15 14.1% CAGR 2010-15 33.1% 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 1Q15LTM 1,909 1,699 2,031 2,031 2,497 2,443 2010 2011 2012 2013 2014 1Q15LTM 201 164 127 52 168 146 2010 2011 2012 2013 2014 1Q15LTM 303 278 287 74 263 221 CAGR 2010- LTM1Q15 5.1% -2.2% -16.1% -13.4%
- 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 – March, 2015; 2) Source: EPE and CCEE; 3) Source: ONS and Ministry of Mines and Energy (MME) – March, 2015; 4) March, 2015 Free Market Captive Market 76.6 million consumers 1,791 Consumers4 120 TWh of billed energy2 75.2 million Consumers 354 TWh of billed energy2 Transmission • 68 Companies³ • 125,149 km of transmission lines³ • Eletrobrás: ~55% of total assets Distribution • 63 Companies • 473 TWh of billed energy2 • Top 5: ~46% of the market Competitive Power Supply Generation • 135 GW of installed capacity1 • 78.1% Renewable energy1 • Eletrobrás: ~30% of total assets 18
- 19. Brazilian electricity matrix 1)Source: EPE - National Energy Balance 2013 and 10-year Energy Plan 2023; 2) Others: considers coal, oil, diesel and process gas; 3) Abeeólica . 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 11% of total installed capacity in 2023. Brazilian Electricity Matrix 125 GW 196 GW 2013 2023 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) 2013-20231
- 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 currency. Take into account 100% interest on CPFL Renováveis and Ceran (IFRS); 2) Current currency. Considers the proportional stake in the generation projects; 3) Disregarding investments in Special Obligations (among other items financed by the consumer); 4) Conventional + Renewable. Total: R$ 8,754 million1 (IFRS) R$ 7,769 million2 (Pro-forma) Distribution3: R$ 6,238 million Generation4: R$ 2,121 million (IFRS) R$ 1,135 million (Pro-forma) Commercialization and Services: R$ 395 million 702 882 1.390 1.385 1.299 1.282 265 592 1.181 282 37 2994 83 88 64 77 84 2014 actual (cash flow) 2015 2016 2017 2018 2019 702 882 1.390 1.385 1.299 1.282172 324 615 153 22 21 94 83 88 64 77 84 1,062 1,557 2,659 1,731 1,413 1,395 IFRSPro-forma 968 1,289 2,093 1,602 1,398 1,387
- 22. 22 CPFL Energia |Indebtedness and leverage CDI Prefixed (PSI) IGP TJLP Gross debt breakdown by indexer | 1Q15 1,4 1) Financial covenants criteria. 2) LTM recurring EBITDA; 3) IFRS criteria; 4) Financial debt (+) private pension fund (-) hedge. Average tenor: 3.67 years Short-term (12M): 12.4% of total Cash coverage: 1.65x short-term amortization (12M) Gross debt cost3,4: Nominal: 10.5% / Real: 2.2% 73% 1% 6% 20% 2013 1Q14 2Q14 3Q14 4Q14 1Q15 12.2 12.8 13.2 13.0 13.0 13.6 Leverage1 | R$ billion Adjusted net debt1/ Adjusted EBITDA2 3,399 3,570 3,830 3,886 3,736 3,835 Adjusted EBITDA1,2 R$ million 3.59 3.58 3.44 3.33 3.49 3.54
- 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 (LTM1Q15 x 2011)1: ≈R$ 249 million 1) Constant value of Mar-15.
- 24. 24 • Automated dispatch+ tablets deployed in all emergency orders (8 discos) and commercial orders (CPFL Piratininga) • 24,554 smart meters already installed as of December-14 • 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 survey ABRADEE (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 Emissions Scope 1 and 2 / Net Energy Generated (tCO2e/MWh) - EN15|EN16|EN17 0.08 0.08 Meters and transformers recuperated (%) - 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 Satisfaction Index Perceived Quality - 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 93 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 Degree of Severity (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 17.0 25.6