Corporate Presentation - CPFL Energia - Outubro/2014
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Transcript of Corporate Presentation - CPFL Energia - Outubro/2014
São Paulo, 07 de março de 2012October 2014
Corporate Presentation
2 Distribution
3 Generation
Competitive Power Supply and Services4
Corporate Overview
Agenda
Consolidated financial figures5
2
6 Sustainability
7 The Electric Sector
1
2 Distribution
3 Generation
Competitive Power Supply and Services4
Corporate Overview
Agenda
Consolidated financial figures5
3
6 Sustainability
7 The Electric Sector
1
4
• Largest private player in the Brazilian electricity sector
• Market cap of ≈ R$18.2 billion1, listed on BM&FBovespa Novo Mercado and on NYSE (ADR Level III)
• LTM 2Q14 Adj. EBITDA2 of R$ 3.9 billion and Adj. Net Income2 of R$ 1.3 billion
• Differentiated Dividend Policy: >50% of net income, semi-annually. Payout ratio of ≈95% since IPO in 2004
• Presence concentrated in the most developed regions of Brazil
• Leadership in Distribution through 8 subsidiaries
• 2nd largest private Generator with an equivalent stake of 3,127 MW of installed capacity, more than 93% from renewable sources
• Leadership in Renewable Energy in Brazil
• 3rd largest player in Competitive Power Supply and a world-class provider of Value-Added Services
1) On October 03, 2014; 2) Take into account proportional consolidation of minorities’ stakes at gencos (+) regulatory assets & liabilities (-) non-recurring items.
Corporate overview – Highlights
551) Controlling shareholders; 2) Includes the 0.1% stake of Camargo Corrêa S.A.; 3) Includes the 0,2% stake of Petros e Sistel pension funds; 4) 51.54% stake of the availability of power and energy of Serra da Mesa HPP, regarding the Power Purchase Agreement between CPFL Geração and Furnas.
Corporate structure
Free Float
DIS
TR
IBU
TIO
N 100%
100%
100%
100%
100%
100%
100%
100%
65%
25.01%
48.72%
57.13%
51%
GEN
ER
ATIO
N
100%
100%
99,95%
100%
CO
MM
ER
CIA
LIZ
ATIO
N100%
100%
REN
EW
AB
LES
59.93%
Investco5.94%
SER
VIC
ES 100%
100%
100%
51.61%
100%
15.1%3 30.5%
Nect Serviços100%
24.4%2 30.0%
Paulista Lajeado
1
100% CPFL Centrais Geradoras
Serra da Mesa HPP
51.54%4
• 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
World-Class Corporate Governance Practices
66
Corporate governance
HPP Foz do Chapecó
HPP Barra Grande
HPP Castro Alves
HPP Monte Claro
HPP 14 de Julho
HPP Campos Novos
HPP Luis Eduardo
Magalhães
CPFL Piratining
a
HPPSerra da Mesa1
CPFLPaulista
RGE
19 SHPPs (CPFL
Renováveis)
1 TPP (Carioba)
CPFL Santa Cruz
CPFL Jaguari
CPFL Sul Paulista
CPFL Leste Paulista
CPFL Mococa
203620352032202820272015 …
~3%CPFL
Energia's EBITDA
7
CPFL Energia enjoys long term concessions
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 30-year leasing contract, maturing in 2028.
DistributionGeneration
CPFL Energia requested Aneel to renew the
expiring concessions
3rd Tariff Review Cycle
CPFL Piratininga Oct-122
CPFL Santa Cruz
Feb-132
CPFL Leste Paulista
CPFL Jaguari
CPFL Sul Paulista
CPFL Mococa
CPFL Paulista Apr-13
RGE Jun-13
8
CPFL Energia – LTM 2Q14 Adj. EBITDA Breakdown¹ | R$ million
CPFL Santa CruzCPFL Leste
PaulistaCPFL Jaguari
CPFL Sul PaulistaCPFL Mococa
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
50%
22%
8%
20%
8
AlternativeEnergy
450
Conventional
1,260
CPFL Paulista
RGE
CPFL Piratininga
Competitive Supply and Services3
204
Generation1,710
CPFL Energia - Consolidated1 | 3,942
Distribution2,027
74%26%
51%
43%
5%
Generation Segment
Distribution Segment
CPFL Energia | EBITDA breakdown
9
Leadership among private companies in the electric sector,with a diversified portfolio in different businesses related to
Energy
99
COMPETITIVE SUPPLY
• Leadership in commercialization of renewable energy in the free market
• Maximization of profitability, considering new market conditions
GENERATION
• Operational Excellence, presenting the highest margins of the sector
• Expansion of installed capacity in hydro and thermal
• Leadership in renewable sources (> 4 GW by 2020)
DISTRIBUTION
• Market leader, doubling the market share in Brazil
• Operational excellence through innovation and new technologies (smart grid)
SERVICES
• Largest services company in the power sector
• Strong growth of sales
• Synergies with other segments in the Group
CPFL Energia’s ambitions
2 Distribution
3 Generation
Competitive Power Supply and Services4
Corporate Overview
Agenda
Consolidated financial figures5
10
6 Sustainability
7 The Electric Sector
1
2009 2010 2011 2012 2013 2Q14
6,568.0006,750.000
6,954.0007,176.000
7,386.705 7,497.211
Distribution Segment
• 7.5 million customers
• 569 municipalities
• Footprint: most developed regions
• High potential in per capita consumption
1º1º
Distribution LeaderMarket share: 13% Sales in the Concession Area (TWh)1
Industrial
Commercial
Residential
Others
Sales Breakdown | LTM 2Q14
5.3 5.3
4.3 5.0
6.4 6.4
1) Excluding sales at CCEE; 2) Source: EPE.
Number of Consumers | # Thousands
11
Sales CAGR - % by Region2 |LTM 2Q09 – LTM 2Q14
2009 2010 2011 2012 2013 LTM 2Q13
LTM 2Q14
37.3 37.8 39.3 39.9 40.7 41.1 40.9
11.711.0 13.1 14.7 16.0 17.3 16.4
Captive TUSD
52.448.8
56.7 58.5
CAGR 2009-134.6%
54.6
27% 42%
16%15%
+3.5%
59.6
57.6
Brazilian economy and market performance
Real wage bill1 and CPFL’s residential consumption | %YoY growth
2006 2007 2008 2009 2010 2011 2012 2013
5.9 5.9 6.1
3.9
7.3
4.5
6.6
2.9
4.5
6.9 6.86.0
5.2 4.9
6.9
5.9
Real wage bill
Retail sales2 and CPFL’s commercial consumption3 | %YoY growth
2006 2007 2008 2009 2010 2011 2012 2013
6.2
9.7 9.1
5.9
10.9
6.78.5
5.45.5
7.75.6 5.2 6.0 6.6 6.8
3.6
Industrial production2 and CPFL’s industrial consumption3 | %YoY growth
2006 2007 2008 2009 2010 2011 2012 2013
2.86.0
3.1
-7.4
10.5
0.4
-2.7
-3.0
3.36.1
2.9
-6.7
9.3
3.90.7 2
.0
Industrial production
1) Source: IBGE/LCA. 2) Source: IBGE. 3) Take into account changes in billing calendar for free consumers.
Other variables influencing energy consumption
• Population growth• Migration• Credit• Household appliances • Temperature• Rainfalls• Public investments
12
Southeast:CPFL Paulista, CPFL Piratininga, CPFL Santa Cruz,
CPFL Leste Paulista, CPFL Jaguari, CPFL Sul Paulista,
CPFL Mococa
South: RGE
Footprint in the most developed regions of Brazil
131313
Distribution business
• 8 distribution companies;• 13% of market share;• 7.5 million customers;• 569 municipalities;• LTM 2Q14 sales of 59,615 GWh | 04-13 CAGR of
5.4%
Leadership in the distribution segment
2006 20071912
Discos’ Acquisitions | Key dates
1997-2001
Start Up
1
1
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%).
Avg. Frequency of Power Outages per Consumer per Year – FEC2013 (# occurrences)
Ele
trop
au
lo
CPFL
Pir
ati
nin
ga
CPFL
Pau
lista
CPFL
Moco
ca
Ele
ktr
o
Coelc
e
CPFL
Lest
e P
au
l...
Ban
deir
an
te
Esc
els
a
Cem
ig
CPFL
Jag
uari
CPFL
Su
l Pau
lista
CPFL
San
ta C
ruz
Celp
e
Lig
ht
Cose
rn
Coelb
a
RG
E
Am
pla
Cele
sc
Cem
ar
CEEE
4.4 4.6 4.7 4.9 5.0 5.1 5.4 5.5 5.8 6.3 6.3 6.7 6.88.3 8.3 8.7 8.9 9.0 9.8 10.610.9
15.8
14
Avg. Length of Power Outages per Consumer per Year - DEC2013 (hours)
Distribution: best-in-class operational efficiency
CPFL
Moco
ca
CPFL
Lest
e P
au
l...
CPFL
San
ta C
ruz
CPFL
Pau
lista
CPFL
Pir
ati
nin
ga
CPFL
Jag
uari
Ele
trop
au
lo
Ban
deir
an
te
Ele
ktr
o
CPFL
Su
l Pau
lista
Coelc
e
Esc
els
a
Cem
ig
Cose
rn
Cele
sc
RG
E
Lig
ht
Cem
ar
Am
pla
Celp
e
Coelb
a
CEEE
4.9 5.9 7.0 7.1 7.4 7.6 8.0 8.1 8.5 9.1 9.1 9.712.513.7
15.517.418.418.920.1
22.022.523.2
Zero-Base Budget
Inefficiencies from past 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%
15
Cost-cutting Initiatives
Cost-cutting Initiatives Total (2015 x 2011): ≈R$ 320 million
Cost-cutting already performed (2013 x 2011)1: ≈R$ 236 million
1) Constant value of Dec/13.
EBITDA acumulado até setembro: R$ 24 milhões16
• Automated dispatch + tablets deployed in ~35% of all teams (RGE and CPFL Piratininga)
• 22,000 smart meters already installed as of September-14 (84%) – (Target: 24,000 large consumers)
• Implementation of RF Mesh Telecom Network already concludedEBITDA 2013: R$ 52.4 million
Achievements
Smart metering – Commercial and Industrial Consumers
• Real-time consumption readings
• Analysis of consumer load curve
• Real-time fraud detection
• Real-time power outage detection
Mobile Workforce Management
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
Projeto Tauron – smart grid
Distribution | Key financial figures
Net revenues1 | R$ Million – Adjusted2
EBITDA | R$ Million – Adjusted2 Net income | R$ Million – Adjusted2
2010 2011 2012 2013 LTM 2Q14
9,432 9,794 10,830 10,716
11,203
2010 2011 2012 2013 LTM 2Q14
2,267 2,351 2,655
2,211 2,003
2010 2011 2012 2013 LTM 2Q14
1,309 1,235
1,356
1,047 910
1) Excludes construction revenue; 2) Adjusted by non-recurring items and regulatory assets & liabilities.
CAGR 2010-13
+4.3%
+4.5%
CAGR 2010-13
-0.8% -9.4%
CAGR 2010-13
-7.2% -13.1%
Sales in the Captive Market (TWh)
2010 2011 2012 2013 LTM 2Q14
39.3
39.9
40.741.1
42.3+2.9%
CAGR 2010-13
+1.6%
17
2 Distribution
3 Generation
Competitive Power Supply and Services4
Corporate Overview
Agenda
Consolidated financial figures5
18
6 Sustainability
7 The Electric Sector
1
• Long Term Concessions
• Brazil’s largest Portfolio in Alternative Energy
• Renewable Sources: 93%
2º2º
2nd Largest Private Generation Company
Market share: 2.4%
Hydro power 60%
Thermal7%
SHPP7%
Wind19%
Biomass7%
Solar0%
Portfolio by source – 2018(e)
33%
Generation Segment
Installed Capacity1 (MW) | Estimated growth
CAGR 2000-18e = 21% a.a.
Semesa Baesa
Enercan Ceran
Foz Chapecó
EpasaBaldin
Creation ofCPFL
Renováveis
19
Partnership with DESA
1) Equivalent stake for projects.
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014(e)
2015(e)
2016(e)
2017(e)
2018(e)
2019(e)
- 657 660 747 751 894 996
1,146 1,146
-
143
765 776 776 818 879 1,0361,5521,6681,701
2,1672,534
2,7932,8603,1273,1273,2733,2733,300
0
Privatization assets Brownfield
Serra da Mesa
Monte Claro
Barra Grande
CamposNovos Lajeado Castro
Alves 14 de Julho
Foz do Chapecó Epasa
Commercial Startup
1998 2004 2005 2007 2007 2008 2008 2010 2010-11
Installed Capacity(MW)
1,275.0 130.0 690.0 880.0 902.5 130.0 100.0 855.0 341.6
Assured Energy (MWavg)
671.0 59.0 380.6 377.9 526.6 64.0 50.0 432.0 247.6
CPFL Stake 51.54% 65.00% 25.01% 48.72% 6.93% 65.00% 65.00% 51.00% 57.13%
Installed Capacity CPFL (MW)
657.1 84.5 172.5 428.7 62.5 84.5 65.0 436.1 195.2
Assured Energy CPFL (MWavg)
345.8 38.4 95.2 184.1 36.5 41.6 32.5 220.3 141.5
Flooded area (km2)
1.784 1.4 95.0 32.9 630 5.0 5.0 80.0 -
(MW/km2) 0.7 92.9 7.3 26.7 1.4 26.0 20.0 10.7 -
Concession terms 2028 2036 2036 2035 2032 2036 2036 2036 2042
Conventional generation | 2,248 MW1 of installed capacity
CPFL Energia’s power plants – state-of-the-art environmental efficiency
20 1) Equivalent stake, including 37.3 MW of small plants at CPFL Geração and 24.3 MW of SHPPs at CPFL Centrais Geradoras.
CPFL Renováveis | Corporate structure after the joint venture
5.61% 5.49% 7.12% 2.97% 1.93% 1.47%58.84% 9.32%
Market
7.24% 0.00%
4.93% 4.82% 6.25% 2.60% 1.64% 0.05%51.61% 9.49%
Market
6.35%
(ARROW)
(ARROW)
(1)
(1)
1) Through CPFL Geração.
Pre-operation
Post-operation
21
Daniel Gallo
12.27%
22
Operating (Oct-14)
Under
construction
End of2018
Under development
Total Portfolio
100% with PPA
2,108
5,875
PossibleProbableHighly Confident
3,767
Small Hydro
• 38 operating: 399MW
• 1 under construction: 24 MW
• Under development: 626MWTotal: 953MW
Biomass
• 8 operating: 370MW
• Under construction: -
• Under development: -
Total: 370MW
• 28 operating: 1,004MW
• 12 under construction: 311MW
• Under development: 3,141MWTotal: 4,220MW
Wind
• 71 operating: 1,773MW2
• 13 under construction: 335MW
• Under development: 3,767MWTotal: 5,875MW2
Total
1) After the joint venture with Dobrevê Energia; 2) Including Tanquinho solar power plant – 1MWp of installed capacity.
1,773
WindSHPP – Small HydroBiomass
335
2,214
1,077
476
4,316
1,188
370
1,004
370399
1,315
370423
CPFL Renováveis | Installed capacity (MW)1
DESA is one of the main independent renewable energy companies in Brazil,with total contracted capacity of 331 MW
CPFL Renováveis | Partnership with Dobrevê Energia
23
3
2
5
1
4
1) DESA holds 60% of SHPP Ludesa. 2) The PPAs are based on January 2014 (average values when there is more than one PPA). 3) On December 31, 2013, DESA presented a consolidated net debt of R$ 656 million (preliminary value, subject to audit and, therefore, eventual changes) to be added after December 31, 2013 in approximately R$ 200 million.
Commercial Start Up
Installed capacity
Assured Energy
(MWavg)
PPA2
R$/MWh
1 SHPP Ludesa(1)
São Domingos (SC) Jul-07 30.0 MW 21,2 202
2 SHPP FigueirópolisIndiavaí (MT) Nov-10 19.4 MW 12,6 201
3 SHPP Novo HorizonteCampina Grande (PR)
Jun-11 23.0 MW 10,4 136
4 Morro dos VentosJoão Câmara (RN) Jul-12 145.2 MW 66,1 186
4 EurusJoão Câmara (RN) Sep-13 60.0 MW 29,5 150
4 Morro dos Ventos IIJoão Câmara (RN)
1Q16 29.2 MW 15,1 124
5 SHPP Mata VelhaUnaí (MG) 2Q16 24.0 MW 12,5 131Portfolio of Projects in the Partnership
(MW)Operation Construction Total
CPFL Renováveis 1,495.1 282.3 1,777.4
DESA 277.6 53.2 330.8
CPFL Renováveis After-Partnership 1,772.7 335.5 2,108.2
SHPPWind
Hydro
Wind
Biomass
Solar
Commercial start-up / Acquisition
Installed Capacity (MW)
Assured Energy (MWavg)
PPA Comments
CPFL Renováveis (Aug-11)
652 314
Bio Ipê TPP 2Q12 25 8 Free market -
Bio Pedra TPP 2Q12 70 24Reserve auction (R$170.91/MWh)
Revenue(e): R$ 20 million/year
Bons Ventos Wind Farms 2Q12 158 63 PROINFA (R$ 331.11/MWh)Acquisition price: R$ 1,062 million
Santa Clara Wind Farms 3Q12 188 76Reserve auction (R$ 184.71/MWh)
Revenue(e): R$ 115 million/year
Ester TPP 4Q12 40 11Alt. sources auction (64%) and free market (36%)
Acquisition price: R$ 111.5 million
Tanquinho Solar PP 4Q12 1 1 Free market -
Salto Góes SHPP 4Q12 20 11Alternative sources auction (R$176.71/MWh)
Revenue(e): R$ 112 million/year
TPP Coopcana 3Q13 50 18 Free marketRevenue(e): R$ 22.6 million/year
Campo dos Ventos II Wind Farm
4Q13 30 15Reserve auction (R$ 151,21/MWh)
Revenue(e): R$ 18.5 million/year
TPP Alvorada 4Q13 50 18 Free marketRevenue(e): R$ 22.6 million/year
Rosa dos Ventos Wind Farms 1Q14 14 5 PROINFA (R$ 338.41/MWh)Acquisition price: R$ 103.4 million
Atlântica Wind Farms 1Q14 120 53Alternative sources auction (R$154.81/MWh)
Revenue(e): R$ 76.7 million/year
Macacos I Wind Farms 2Q14 78 38Alternative sources auction (R$161.51/MWh)
Revenue(e): R$ 52.6 million/year
DESA 3Q14 278 167 - Partnership with Dobrevê
Current portfolio (Oct-14)
1,773 822
1) Constant currency (Dec-13).24
CPFL Renováveis | Track record
CPFL Renováveis | Power plants under construction
Commercial Start-up 2016-2018(e)
282MW
147MWaverage
1) Campo dos Ventos I, III, V; 2) Ventos de São Benedito, Ventos de Santo Dimas, Santa Mônica, Santa Úrsula São Domingos and Ventos de São Martinho; 3) Pedra Cheirosa I and II; 4) Gradual commercial start-up from 2Q16; 5) Gradual commercial start-up from 1H18; 6) Constant Currency (Dec-14); 7) Assured Energy calculated in the P90.
Campo dos Ventos Wind Farms1,4 and São Benedito Wind Farms2,4 Pedra Cheirosa Wind Farms3
Commercial Start-up 20164 20185
Installed Capacity 231.0 MW 51.3 MW
Assured Energy7 120.9 MWaverage 26.1 MWaverage
PPA Free market 20 yearsA-5 Auction
R$ 125.04 MWh6 until 2037
Status Contract to supply wind turbines signed; executive projects in progress
Negotiation of wind turbines supply in progress
25
Conventional and Alternative Energy | Key financial figures
Net Revenues | R$ million - Adjusted1 EBITDA | R$ million - Adjusted1
Net Income | R$ million - Adjusted1
1) Adjusted by proportional consolidation and non-recurring items.
2010 2011 2012 2013 LTM2Q14
1,0471,351
1,9642,303
2,668
CAGR 2010-13 = +33.5%+15.8%
2010 2011 2012 2013 LTM2Q14
750
1,060
1,4271,583
1,693CAGR 2010-13 = +30.7%+6.9%
2010 2011 2012 2013 LTM2Q14
244
721
373 390 407+4.4%
26
CAGR 2010-13 = +21.1%
2013 EBITDA/installed MW
0.57 0.56 0.47 0.44 0.41 0.41 0.41
0.13
2 Distribution
3 Generation
Competitive Power Supply and Services4
Corporate Overview
Agenda
Consolidated financial figures5
27
6 Sustainability
7 The Electric Sector
1
Competitive power supply| Regulated vs. free market
Regulated market Free market
Energy supplier No choice - distribution company Free choice
Tariff of the use of distribution system (TUSD) Distribution company Distribution company
Energy prices Regulated by ANEEL Free negotiation
Consumer Capacity Connection date Voltage Energy source
Free > 3,000 kW
after July, 1995 any any
before July, 1995> 69 kV any
< 69 kV incentivized
Special500-3,000 kW - Group A incentivized
units totaling 500 kW - Group A incentivized
28 1) Source: EPE (full year 2013)
Main differences
Advantages
Who can join
Lower prices
Free choice from energy supplier
Better predictability of energy expenses
Customization according to consumer
seasonality
27%
73%
Free Market1
Regulated Market
• 284 free consumers
• Nationwide outreach
• Value-added product portfolio
• Synergy with CPFL Renováveis
Number of Consumers (#) | CPFL Brasil
3º3º Market share: 8%
Portfolio (Free Consumers)
179
52
Inside the concession area
Outside the concession
area
Current: 10.9 GW avgPotential: +7.9 GW avg
Free Market in Brazil¹
211
73
Competitive power supply
29
• CPFL Brasil was the winner of Exame Magazine’s 2013 Best and Largest Companies (category Energy)
• The Company was selected among gencos, discos, transcos and other players in the electric sector throughout Brazil2010 | 2011 | 2013
3rd Largest Player
2008 2009 2010 2011 2012 2013 1Q14
80 74
129 141
231
284 284
CAGR = 30%
1) Jun-14
2Q142008 2009 2010 2011 2012 2013
30
Jun/09 Jun/10 Jun/11 Jun/12 Jun/13 Jun/14
441 465 491 558
613 617
Current: 9.1 GWavgPotential: +1.3 GWavg
Current: 1.8 GWavgPotential: +6.6 GWavg
Competitive advantages of CPFL: market leadership, expertise and synergies with CPFL Renováveis
Source: ANEEL and CCEE
# of competitive customers – larger than 3 MW
# of special customers – from 0.5 to 3 MW
Number of free clients in Brazil
CAGR=6.9% CAGR=43.6%
Competitive power supply | Opportunities
Jun/09 Jun/10 Jun/11 Jun/12 Jun/13 Jun/14
192 221
495
796
1,048 1,164
Transmission networks
Self-generation networks
Distributionnetworks
Recovery of equipment
Services Segment | CPFL Serviços
31
• 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; self-generation networks (cogeneration, energy-efficiency projects and distributed generation arrays – solar energy)
Services Segment | CPFL Total and CPFL Atende
32
• 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.
• Foundation: 2008
• Core Business: provider of contact center and customer relationship services to other utility companies
• Services: face-to-face attendance, back-office, credit recovery, toll-free customer support, ombudsman, service desk and sales
Net revenues | R$ million
EBITDA | R$ million Net income | R$ million
Competitive power supply and Services | Financials1
1) Pro forma33
2010 2011 2012 2013 LTM2Q14
1,909
1,699
2,031 2,031 2,009
2010 2011 2012 2013 LTM2Q14
201
164
127
52
136
2010 2011 2012 2013 LTM2Q14
303278 287
74
204
2 Distribution
3 Generation
Competitive Power Supply and Services4
Corporate Overview
Agenda
Consolidated financial figures5
34
6 Sustainability
7 The Electric Sector
1
35
20092010201120122013 LTM 2Q1
4
10,53710,92111,41313,235
13,67114,245
CPFL Energia | Key financial figures1
35
Net revenues | R$ million
CAGR 2009-13
6.7%
4.2%
2009 2010 2011 2012 2013 LTM 2Q14
2,702
3,2603,649
4,343
3,848 3,743
EBITDA | R$ million
25.6%
29.8%32.0%32.8%
28.1%26.3%
-2.7%
EBITDA
EBITDA Margin
CAGR 2009-13
9.2%
Net Income | R$ million
Net Income
Net Margin
CAGR 2009-13
0.4%
2009 2010 2011 2012 2013 LTM 2Q14
1,266
1,5261,5031,617
1,2841,167
12.0%14.0%13.2%12.2%
9.4%8.2%
-9.1%
1) Take into account proportionate consolidation of minorities’ stakes at gencos (+) regulatory assets & liabilities (-) construction revenues (-) non-recurring items.
36
CPFL Energia | Key financial figures – Dividends
Dividend Yield 1 (LTM) Declared dividends2 (R$ Million) CPFL average price (R$/ORD)3
1) Considering last two half years’ dividend yield. 2) Refers to declared dividend. Payment in the next half year. 3) Considers share price adjusted for reversal stock split and simultaneous split of shares on June 29, 2011 (not adjusted per dividends).
2H04
1H05
2H05
1H06
2H06
1H07
2H07
1H08
2H08
1H09
2H09
1H10
2H10
1H11
2H11
1H12
2H12
1H13
2H13
1H14
140
401498
612722
842719
602 606 572655
774
486
748 758640
456363
568
422
8.29 9.4311.67
15.0214.1315.8717.9918.0516.6915.7716.51
18.4420.1822.0521.95
26.3022.95
21.1119.8018.35
CPFL has presented payout ration close to 100% since its IPO, reaching the markof R$ 11.6 billion distributed. Declaration of dividend for 1S14: R$ 422 million |R$ 0.44/share
3.7%
6.5%
9.1% 8.7%9.6%
10.9%9.7%
7.6% 7.3% 7.6% 7.9%8.6%
6.9%6.0%
7.1%6.1%
4.6%3.9%
4.8% 5.4%
37
Capex(e) 2014-2018 | R$ Million
1,5531,239 1,235
1) Constant currency Dec/13. Take into account 100% interest on CPFL Renováveis and Ceran (IFRS)2) Constant currency Dec/13. Considers the proportional stake in the generation projects 3) Conventional + Renewable
1,8421,505
1,230 1,226
Total:R$ 7,739 million1 (IFRS)R$ 7,213 million2 (Pro-forma)
Distribution: R$ 5,826 million
Generation3:R$ 1,425 million (IFRS)R$ 899 million (Pro-forma)
Commercialization and Services:R$ 488 million
2013 actual (cash flow)
2014 2015 2016 2017 2018
845 8751,316 1,342 1,153 1,140
513 392
390 8019 18
53 144
13683
58 68
845 8751,316 1,342 1,153 1,140
837 603
637129
28 27
53 144
136
8358 68
1,735 1,622
2,089
IFR
SPro
-form
a 1,410 1,410
38
CPFL Energia | Indebtedness and leverage
2011 2012 2013 1Q14 2Q14
10.0
12.6 12.2 12.8 13.2
2.73 2.893.59 3.58 3.45
3,665 4,377 3,399 3,570 3,828
70%
3%
6%
21%
CDI
Prefixed (PSI)
IGP
TJLP
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
1Q
14
2Q
14
9.4%7.9%
9.9%7.3% 7.1%
4.9% 4.4% 4.3%3.0% 2.4% 3.0% 2.9%
17.7%
13.9%13.4%12.1%
13.4%
9.4%10.5%11.1%9.0% 8.4% 9.1% 9.7%
NominalReal
Leverage1,2 | R$ billion
Gross debt cost4,5 | LTM
Adjusted EBITDA3
R$ million
Adjusted net debt/Adjusted EBITDA3
Gross debt breakdown1,5
1) Financial covenants criteria; 2) Pending validation of external auditors; 3) LTM recurring EBITDA; 4) IFRS criteria; 5) Financial debt (+) private pension fund (-) hedge.
39
CPFL Energia | Strong and robust liquidity
Cash Short-term
2015³ 2016 2017 2018 2019 2020+
4,549
3,014
489
1,860
2,724
3,3253,139
2,796
Cash coverage:
1.51x short-term amortization (12M)
1) Considers Debt Principal; 2) Covenants Criteria; 3) Amortization from July/2015.
Average tenor: 3.87 yearsShort-term (12M): 17.4% of total
Debt amortization schedule1,2 | Jun-14 | R$ million
2 Distribution
3 Generation
Competitive Power Supply and Services4
Corporate Overview
Agenda
Consolidated financial figures5
40
6 Sustainability
7 The Electric Sector
1
Sustainability at CPFL: Incorporation of strategic guidelines
41
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.
http://www.cpfl.com.br/energias-sustentaveis/sustentabilidade/plataforma-sustentabilidade/Paginas/default.aspx
Sustainability Platform
Indicators 2013 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 (%) - EN219 & 37
14 & 23
Critical 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 | EU9 | EU23 36.7 33.3
Satisfaction Index Perceived Quality - ABRADEE (%)¹ 89.4 88.2
Reverse chain - lighting, wooden cross arms, poles, transformers, other materiais (un) - EN1
284,494
350,317
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
Indicator - GRI G4 2013 2012Material themes
Customer Relationships
Supply Chain Management
Eco-efficiency
Managementof socio-
environmentalimpacts
Community Development
Health and Safety
2 Distribution
3 Generation
Competitive Power Supply and Services4
Corporate Overview
Agenda
Consolidated financial figures5
43
6 Sustainability
7 The Electric Sector
1
Energy sector in Brazil: business segments
Consumers
1) Source: ANEEL – August 18, 2014; 2) Source: EPE and CCEE; 3) Source: ONS and Ministry of Mines and Energy (MME) – January 31, 2014; 4) June, 2014
Free Market
Captive Market
76.1 million consumers
1,781 Consumers4
125 TWh of billed energy2
76.1 million Consumers347 TWh of billed
energy2
Transmission
• 104 Companies³
• 118,105 km of transmission lines³
• Eletrobrás: ~55% of total assets
Distribution
• 63 Companies
• 472 TWh of billed energy2
• Top 5: ~46% of the market
Competitive Power Supply
Generation
• 130 GW of installed capacity1
• 79.9% Renewable energy1
• Eletrobrás: ~31% of total assets
44
Brazilian electricity matrix
1) Source: EPE - National Energy Balance 2013 and 10-year Energy Plan 2013-2022; 2) Others: considers coal, oil, diesel and process gas.
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
Hydro 69%
Nuclear2%
SHPP4%
Wind2%
Biomass8%
Natural gas9%
Others9%
125 GW 168 GW 196 GW
2013 2018 2023
Evolution of Installed Capacity (GW) 2013-20231
2
45
Hydro 64%
Nuclear2%
SHPP4%
Wind10%
Biomass7%
Natural gas8%
Others7%
2
Hydro 60%
Nuclear2%
SHPP4%
Wind11%
Biomass7%
Natural gas10%
Others6%
2
2013 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 must purchase electric energy to supply their captive market, five years in advance,in public auctions (Regulated Market – ACR)
Discos
Gencos
Mechanics of regulated auctions
A-5 Auction
A-3 Auction
A-1 Auction
• 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
• “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)
• “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
46
86
117
11
12
11
2017
47
Renewables
Other
Natural Gas
Hydro
2023E2013A
471) 10-year Energy Plan 2013-2023 (preliminary); Installed Capacity: BIG - ANEEL April, 2014 + A-5 Auction; 2) Includes estimates of energy imported from Itaipu HPP, which is not consumed by Paraguay Electric System ; 3) Considers the export of 2/3 of energy produced by the Company.
Unrealized Potential to be Explored in Brazil
Evolution of Brazilian Installed Capacity by Source | GW
Highly Fragmented Market | Renewables Market Share in Brazil based on contracted energy (26GW)
Wind Potential: 143GW Installed capacity: 2.9GW
2%
SHPP Potential: 17.5GW Installed capacity: 5.0GW
29%
Biomass Potential: 17.2GW¹ Installed capacity: 9.3GW
54%
Potential Realized
4.6% p.a.196
125
Renewables in Brazil are expected to grow at a CAGR of 10.5%, from 17 GW in 2013 to 47 GW in 2023 and still a highly fragmented market
World’s most attractive alternative energy market
RenovaEn-
ergimpQGERBrook-fieldCosanEletrosul
GestampElecnor
Other
8.2%
1.3% 6.9%7.5%
3.6%2.9%2.5%2.4%2.0%1,8%
1,6%67,6%
3CAGR
0.9%
10.5%
6.5%
3.1%²
484848
• 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
High Quality Development, Construction and Operation
Complementarity of Sources Mitigating Risks
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov DecWind (Generation - MWavg)Reservoir Storage
• Reservoir storage at high levels in the first semester while wind energy generation is concentrated in the second semester of the year
CPFL Renováveis benefits from the complementarity of sources
Wind PortfolioAttractive location
due to high wind speeds
SHPP PortfolioExposure to
abundant hydro resources
Installed Capacity1
Total: 1,800 MW
Solar
18%
61%
21%0%
SHPP
Wind
Biomass Solar
Operating:
HydroWind
Biomass
Under Construction:HydroWind SHPP Potential (Southeast and Midwest Regions)
Wind Potential (Northeast and South Regions)
Biomass Portfolio
Proximity to sugarcane production centers
Biomass
Region MW
NE 1,023
CW/SE 506
SO 271
Rese
rvoir
Sto
rag
e
(%)
Win
d G
en
era
tion
MW
Diversified and high quality portfolio, delivering superior performance, mitigating risks, ensuring reliable load factors and providing capacity to grow
with different sources
CPFL Renováveis | High quality and diversified portfolio
1) To be fully operational by 2018
49
Technology Has Shown Great Improvements in Recent Years | Recently developed technology for wind power plants allows greater load factors
Europe United States Brazil (NE)
Area89%
Area95%
Fre
qu
en
cy
Wind Speed (m/s)
Fre
qu
en
cy
Wind Speed (m/s)
Fre
qu
en
cy
Wind Speed (m/s)Ideal Wind Speed
Ideal Wind Speed
Area99%
Ideal Wind Speed
1.500kW
1.800kW80m
3.000kW
100m
70m
750kW50m
30m
300kW
75kW
17m
1980 -1990
1990 -1995
1995 -2000
2000 -2005
2000 -2005
20100
20
40
60
80
100
120
140
160
180
Rotor Diameter (m) Rating (kW)
Alt
ura
(m)
1.500kW
1.800kW80m
3.000kW
100m
70m
750kW50m
30m
300kW
75kW
17m
1980 -1990
1990 -1995
1995 -2000
2000 -2005
2000 -2005
20100
20
40
60
80
100
120
140
160
180
Rotor Diameter (m) Rating (kW)
Alt
ura
(m)
BrazilEurope and EUA
Improved availabilit
y
Greater efficiency
Reduced generation losses
Wind Features in Brazil are the Most Adequate for Power Generation | The average wind in Brazil (Northeast) has a similar intensity with less variability
CPFL Renováveis | Unparalleled wind conditions combined with top technology
Description Sustainability
50
Natural consequence of projects with lower environmental impact
Environmental & Streamlined Implementation
Process
Faster and simpler environmental process
Faster construction cycle
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
Access to Multiple Sales Channels
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)
Not a sector specific benefit BNDES has been providing support for the
sector for many years
Dedicated Sovereign
Funding Conditions
BNDES Financing Low Cost – average interest rate of 7.0% Long-term funding of 16 years Attractive capital structure
Policies in place since 1996 Not a direct government expenditure/tax break Not applicable for regulated auctions
Discounts on Transmission
Charges Discount of at least 50% (TUST and
TUSD)
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
Favorable Tax Regime and
Fiscal Incentives
“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
Stable and solid regulatory framework