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CPFL Investor In this edition

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Optimistic scenario for 2013

INVESTOR RELATIONS | 46 | YEAR 9 | JANUARY-MARCH 2013

CPFLRenováveisinaugurates SaltoGóesSHPP

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Gustavo Estrella takes over as Chief Financial and Investor Relations Officer

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Energy Efficiency Program received R$59.7 million in 2012

CPFL Renováveis brought together authorities, shareholders, customers, suppliers and employees for the inauguration of the facilities at its Salto Góes Small Hydroelectric Power Plant (SHPP) in Tangará in the state of Santa Catarina, on March 6. The ceremony was conducted by Wilson Ferreira Jr., CEO of the CPFL Energia Group, and Miguel Saad, CEO of CPFL Renováveis. The project, which received investments of R$136 million, started commercial operations on December 28, 2012. Construction of the hydroelectric plant took two years and was completed four months ahead of schedule. With installed capacity of 20 MW, the SHPP has a 20-hectare reservoir and uses two horizontal turbines. The output from Salto Góes was sold at an

auction of alternative energy sources in 2010 through a 30-year supply contract of an average 11.1 MW of contracted energy. The project is the 35th Hydroelectric Plant (including SHPPs and MHPPs – Mini Hydroelectric Power Plants) of CPFL Renováveis to go operational. The total power generation capacity of CPFL Renováveis’ current portfolio is 5.5 GW, of which 1,153 MW comes from projects already in operation: 35 SHPPs (327 MW), 15 wind farms (556 MW), six biomass power plants (270 MW) and one solar power plant (1 MWp), and another 582 MW pertains to projects under construction: 18 wind farms (482 MW) and two biomass power plants (100 MW). The company also has 3.8 GW of wind power, SHPP and biomass plant projects in the development phase.

Message from the CEO The electricity sector is facing a challenging scenario. Apart from setting new efficiency standards for the distribution segment with the 3rd cycle of tariff reviews, Provisional Measure (MP) 579/12 marks the beginning of stricter rules for generation and transmission assets during the concession renewal process. I wish to highlight here that CPFL Energia was not directly affected by the measures imposed by PM 579 and even recognizes the benefits they will bring, whether through tariff reductions to final consumers, which had been expected for many years, or

through economic stimulus and consequent increase in the competitiveness of Brazilian industry, or through the opportunities this new scenario may bring us. Another issue that recently made the headlines was the worsening of the hydrologic scenario and the need to activate thermal plants throughout the country. This scenario demanded immediate action from all agents – with the CPFL group playing an important role - which resulted in the publication of decree 7,945/13, ensuring the compensation for the higher generation costs that pressured the cash flow of distributors.

Even in this environment of major changes, the consistency in the Group’s business strategies, backed by its commitment to discipline and the proactive management of economic and financial performance indicators, brought the conditions needed for registering exceptional results in 2012. The challenges will continue in the coming years and CPFL Energia is well prepared to operate competitively and efficiently in order to seize the best opportunities. Wilson Ferreira Jr. CEO of CPFL Energia


Optimistic scenario for 2013 CPFL Energia ended the fourth quarter of 2012 with a 5.6% increase in electricity sales in its concession area, compared to the same period in 2011, totaling 14,730 GWh. Between 2011 and 2012, sales grew 3.8% to reach 56,682 GWh. “We grew significantly in the Southeast region, virtually twice as much as the region. Our growth was higher than Brazil’s; in fact, far higher” said the CEO of CPFL Energia, Wilson Ferreira Jr., at the 4Q12 and 2012 earnings conference call on March 14. “Fourth-quarter sales already indicate what to expect from 2013.” The CEO also highlighted the operational startup of theTanquinho Solar Power Plant and

the Salto Góes SHPP, which were added to the Group’s assets in the period. Another highlight in 4Q12 was the daily trading volume of CPFL Energia’s shares on BM&FBOVESPA and NYSE. Trading volume increased 31.1% to reach R$42.7 million in 2012. Last year, the CPFL Energia invested a total of R$2,468 million. In the fourth quarter alone, investments came to R$537 million. The Company also plans to invest R$2,325 million in 2013, for a total of R$8,709 million among 2013 and 2017. Another important development was the acquisition, in partnership with Equatorial, of the assets of Grupo Rede, which are

Other highlights in 4Q12:

currently undergoing judicial reorganization. This acquisition is an excellent opportunity for consolidation in the electricity sector by enabling the company to obtain synergy gains and improving the quality of services rendered to the consumers of these concessions. CPFL Energia ended 2012 with net revenue of R$13.7 billion (according to IFRS), up 17.8% from 2011. EBITDA reached R$3.9 billion, increasing by 1.2%, while net income decreased by 22.6% compared to 2011, to R$1.2 billion. Note that the Company’s recurring result represented growth of 16.9% in net revenue, 22.7% in EBITDA and 7.4% in net income.

Results 2012

Results 4Q12

Net Revenue

Distribution of R$1,096 million in dividends related to 2012, for dividend yield of 4.6% (LTM); Credit rating of brAA+ assigned by Standard & Poor’s to the debentures of subsidiaries and maintenance of the AA+(bra) rating by Fitch Ratings assigned to CPFL Energia and its subsidiaries; Exame Magazine’s Sustainability Guide 2012 Award and ÉPOCA magazine/A.T. Kearney award for the“Most Innovative Companies in Brazil in 2012”;

+ 17.8% 2012

2011

2012

millions

millions

millions

millions

IFRS + Regulatory Assets & Liabilities Non-Recurring – Private Pension Fund

IFRS

+ 16.9%

2011

+ 27.3%

R$ 11,634 R$ 13,704 R$ 11,476 R$ 13,419

4Q12

4Q11

4Q12

millions

millions

millions

millions

R$ 3,052 R$ 3,886 R$ 3,018 R$ 3,884

R$ 3,852

2011

millions

millions

-16.2%

2012

R$ 4,625 millions

4Q11

R$ 994

R$ 1,624 millions

2011

millions

millions

R$ 1,257 R$ 1,560

R$ 981

millions

millions

4Q12

R$ 1,326 millions

Net Income IFRS + Regulatory Assets & Liabilities Non-Recurring – Private Pension Fund

IFRS

+ 7.4%

2012

4Q11

R$ 833

millions

IFRS + Regulatory Assets & Liabilities Non-Recurring – Private Pension Fund

-22.6% 2011

+ 35.1%

4Q12

Net Income IFRS

IFRS + Regulatory Assets & Liabilities Non-Recurring – Private Pension Fund

IFRS

+22.7%

2012

R$ 3,898 R$ 3,770

millions

EBITDA

IFRS + Regulatory Assets & Liabilities Non-Recurring – Private Pension Fund

+1.2% 2011

+ 28.7%

4Q11

EBITDA IFRS

CPFL Energia’s shares were included in the underlying portfolio of BM&FBOVESPA’s Business Sustainability Index (ISE) for the 8th consecutive year; Included in the Dow Jones Sustainability Index Emerging Markets.

Net Revenue

IFRS + Regulatory Assets & Liabilities Non-Recurring – Private Pension Fund

IFRS

-42.6%

2012

R$ 1,676 millions

4Q11

R$ 485 millions

4Q12

+14.9%

R$ 278 millions

4Q11

R$ 443 millions

4Q12

R$ 510 millions

CapitalMarkets The graph below shows the performance of CPFL Energia’s shares in the 12-month period ended in March 2013 at the São Paulo stock exchange BM&FBOVESPA (CPFE3) and the New York Stock Exchange – NYSE (CPL), compared to the main benchmark indexes of both exchanges:

Share Performance Bovespa – 12 months

-19.8% -21.0% -13.4%

-28.0% -12.8% 11.1%

CPFE3 IEE IBOV 3/28/12 26.30 35,143 65,079 3/28/13 21.10 27,750 56,352 Var. -19.8% -21.0% -13.4%

3/28/12 29.09 33,303 13,126 3/28/13 20.94 29,048 14,579 Var. -28.0% -12.8% 11.1%

Source: Economática Variations adjusted by dividends

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Share Performance NYSE – 12 months

CPL

DJBr20

DJIA

Analyst opinion

At the end of March 2013, CPFL Energia’s shares were covered by nine financial institutions, of which 89% gave it a buy or hold recommendation.


Gustavo Estrella takes over as Chief Financial and Investor Relations Officer On February 27, Gustavo Estrella, 38, took over as the Chief Financial and Investor Relations Officer of CPFL Energia, replacing Lorival Nogueira Luz Jr., who resigned from the position to pursue new professional challenges. Gustavo holds a degree in business administration with 15 years of experience in the energy sector, with

Conferences In 2013, CPFL Energia participated in a series of meetings targeted at the financial markets: Jan 15 IV Latin America Regulated Industries Conference, organized by Barclays in Rio de Janeiro; Jan 23 VI Brazil Equity Ideas Conference – New year, new perspectives, organized by Credit Suisse in São Paulo; Feb 7 XIV CEO Conference Brazil 2013, organized by BTG Pactual in São Paulo, in which CPFL Energia made a presentation;

Mar 21 VI Bank of America Merrill Lynch Brazil Conference in São Paulo; Apr 5 IV Brazilian Electricity Sector Conference, organized by Santander in São Paulo; Apr 8 III Latin Opportunities Conference, organized by BTG Pactual in London.

exposure to finance, financial and business planning, mergers and acquisitions, and investor relations. He has been in the CPFL Energia Group for 12 years, having worked as Manager of Economic and Financial Planning, Investor Relations Officer and, more recently, as Chief Planning Officer and Controller.

CPFL Energia selected for BM&FBOVESPA’s ISE sustainability index for the 8th consecutive year and debuts on the Dow Jones Sustainability Index Emerging Markets For the eighth straight year, CPFL Energia has been included in BM&FBOVESPA’s Business Sustainability Index (ISE), which covers companies with outstanding business sustainability practices, considering general, environmental, corporate governance, economic and financial, social responsibility and climate change aspects. The new ISE portfolio, valid from January 2, 2013 through December 31, 2013, consists of 51 shares of 37 companies. These represent 16 industries, with total market capitalization of over R$1 trillion, equivalent to 44.81% of the total market

capitalization of all the companies traded on the BM&FBOVESPA on November 29, 2012. CPFL Energia is one of the 12 companies included in ISE since its creation in 2005. For the first time, the Group is also a part of the Dow Jones Sustainability Index Emerging Markets (DJSI Emerging Markets), which evaluates the performance of leaders in sustainability in emerging markets. The index, which includes 14 other Brazilian companies, selects institutions based on a comprehensive, long-term analysis of their economic, environmental and social initiatives.

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Energy Efficiency Program received R$59.7 million in 2012 The Energy Efficiency Program of the eight distributors of the CPFL Energia Group, approved by the Brazilian Electricity Regulatory Agency (Aneel) received R$59.7 million during 2012, towards initiatives at conscious energy consumption in 569 cities in its concession areas. Aware that electricity is essential for the well-being of people and the development of society, CPFL Energia believes that producing and using electricity in a sustainable manner is essential for the future of mankind. Of the total amount, over R$36 million were invested in projects targeted at the low-income segment of the population, through actions such as replacement of refrigerators and showers with newer, more efficient models, and regularization of illegal connections. A

sum of R$13 million was used to improve energy efficiency at public buildings and utilities through the donation of bulbs and replacement of lighting equipment. Educational initiatives, which help raise consumer awareness on the importance of saving energy, received investments of R$8.6 million, while industries received R$1.3 million for projects and equipment to increase their efficiency. Energy saved through CPFL Energia’s energy efficiency programs totaled 33.3 GWh in 2012. This volume would supply energy to nearly 166,000 residential customers, with average monthly consumption of 200 kWh, for one month.

Exhibition on“100 years of History and Energy”

The exhibition “100 years of History and Energy”, which opened in 2012 in Campinas as part of CPFL Energia’s centenary celebrations, will visit the regional headquarters in the Group’s concession areas in São Paulo state, starting April. On April 12, the exhibition will open in Santos, at the Centro de Atividades Integradas, located at Avenida

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Rangel Pestana, 147 – Vila Matias (free admission), before moving to Sorocaba, Ribeirão Preto and Bauru during the course of the year. Using technological and interactive resources, the exhibition, under the curatorship of Renato de Oliveira Diniz, showcases the milestones in the electricity sector, starting from the discoveries that led to

the birth of devices such as radio, telephone and the Internet which brought people from all over the world even closer. At the exhibition, electrification is defined as a social process. Behind the electricity path - from generation to transmission and distribution before reaching our homes with a simple turning on of the light - there is a reality that was shaped by this technology.

CPFL INVESTOR is a publication of the Investor Relations Department of CPFL Energia, published by the Corporate Communication and Institutional Affairs Department, Rodovia Campinas Mogi Mirim, Km 2.5 - Jd. Santana - Campinas/SP, Zipcode 13.088-900. Phone: (19) 3756-8197 Fax: (19) 3756-8040 – Chief Financial and Investor Relations Officer: Gustavo Estrella, IR Officer: Eduardo Atsushi Takeiti, Corporate Communications and Institutional Relations Officer: Augusto Rodrigues, Communications Manager: Carlos Henrique Matos Ramos (MTb 19.163). Content, Editing and Design: Produção Coletiva - website: Investor Relations: www.cpfl.com.br/ir e-mail:ri@cpfl.com.br.


CPFL Investor Newsletter 46