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CPFL Investor In this edition



Sales in the concession area grow 4.3% in the third quarter



CPFL included in the Corporate Sustainability Index (ISE) for the 9th consecutive year

CPFL Renováveis increases generation by 328 MW




CPFL donates R$879 thousand to projects targeted at children and youth

For the ninth consecutive year, CPFL Energia has been included in the select group of companies that make up the Corporate Sustainability Index (ISE), which brings together publicly held companies with the best performance in economic, social and environmental aspects. Since the launch of the index in 2005, CPFL has been included in all the portfolios, which attests to its commitment to growth while creating value for all its stakeholders. The new ISE portfolio, valid from January 1, 2014 to January 2, 2015, consists of 40 companies from 18 sectors of the economy, with combined market cap of R$1.14 trillion, which is equivalent to 47.16% of the total market cap of all the companies whose shares are currently traded on the BM&FBovespa. A total of 183 companies trading the 200 most liquid shares on the stock exchange in December 2012 were

invited to join the new portfolio. Of these, 45 enlisted in the selection process for inclusion in the portfolio. The index is calculated by the BM&FBovespa in real time during the course of the trading session, weighting the shares included in the portfolio by the market value of the assets available for trading. TheISEwascreatedinDecember2005anditsmethodology is the responsibility of the Center for Sustainability Studies (GVces) of the School of Business Administration of the Getulio Vargas Foundation (FGV-EAESP). The ISE reflects the return on a theoretical portfolio of shares of companies with the best performance in sustainability. Apart from the aspects typically covered by the theme – Environmental, Social and Economic-Financial – four other aspects are considered: corporate governance, general, nature of the product and climate change.

Message from the CEO The third quarter of 2013 was quite positive for CPFL Energia. We recorded strong growth in our concession areas, improved our efficiency and made progress in the implementation of smart energy grids, which will take us to a new level of operating excellence. These initiatives consolidate our strategy of creating value for all our shareholders over the coming years. Energy sales in our operating area registered a surprise growth of 4.3% in the quarter compared to the same period last year, outperforming the national average of 3.9%. The healthy operating results came in tandem with our constant focus on operating excellence. Since 2011, when we adopted Zero-Base Budgeting and launched the Early Retirement Plan, we have managed to

reduce costs by R$ 137 million in real terms in the nine months of 2013 compared to the same period in 2011. We are now focused on optimizing our operations, improving efficiency and increasing productivity. Our Tauron Project, which will install the smart grid network in our concession area, is progressing. We have already reached the mark of 13,000 smart meters installed and integrated with our RF Mesh data network, resulting in a more efficient management of our network and in cost savings on meter readings and delivery of bills. This new technology contributed nearly R$ 24 million to our EBITDA in the first nine months of 2013. We still have a long way to go, considering that we plan to reach the mark of 25,000 meters for Group A by mid-2014. Lastly, in the Generation segment, our

subsidiary CPFL Renováveis is on full-scale expansion. Recently we rolled out three new projects: the biomass-fired thermal plants Coopcana (50 MW) and Alvorada (50 MW), and the wind farm Campo dos Ventos II (30 MW). Two more wind farms, with total capacity of 198 MW, are in the final stages of assembly, with the delivery of the first farms already having begun late last year. Another 254 MW should be added in 2016. We also contracted another 51 MW in the A-5 auction held in December 2013, with the projects Pedra Cheirosa I and II, which will be delivered in 2018. As a result, the portfolio of CPFL Renováveis totals 1,787 MW, of which 1,283 MW are already in operation. Wilson Ferreira Jr. CEO of CPFL Energia

Sales in the concession area grow 4.3% in the third quarter CPFL Energia maintained its trajectory of sustained growth. In the third quarter, total energy sales outside the group increased by 4.7%. In the concessions area, which covers the cities in Rio Grande do Sul and São Paulo, total electricity sales increased 4.3%, led by residential and commercial clients, who consumed 7.6% and 4.9% more electricity, respectively. The market growth and higher operating efficiency reflected in higher cash generation and attractive dividend payments for shareholders. EBITDA according to IFRS increased 13.6% in the third quarter to reach R$1.065 billion. Net income remained practically stable at R$355 million. At the end of the third quarter,

CPFL’s financial leverage reached 3.53x, reflecting the heavy investments in expanding our operations, especially the construction of new plants by CPFL Renováveis and the installation of smart grid in the Group’s distributors. It must however be noted that leverage will decrease gradually over the coming years. The operational startup of projects for generating energy from renewable sources will increase our cash flow, while further installations of smart grid in our client base will enhance our efficiency. Interim dividends totaling R$363 million were distributed in the first half of the year, related to the same period. The company is all set to create even more value for its shareholders.

Net Revenue 3Q13







R$ 3,435 R$ 3,367 R$ 3,374 R$ 3,568

Growth of 4.3% in energy sales in the concession area; Operational startup of TPP BioCoopcana (50 MW) in August 2013, the wind farm Campos dos Ventos II (30 MW) in October 2013, and TPP Bio Alvorada (50 MW) in November 2013. Economic tariff adjustment of 7.42% at CPFL Piratininga in October 2013; Capital injection of R$ 167 million from CDE to CPFL Piratininga in 3Q13, pursuant to decree 7,945/13; Capex of R$331 million in 3Q13; Payment of interim dividends of R$ 363 million for 1H13; CPFL Energia was elected Company of the Year by the Época Negócios 360º yearbook and one of the 20 most innovative companies in Brazil by the 2013 Best Innovator Award.

+ 13.6% 3Q12

R$ 937 million

Net Income

IFRS+ProportionalConsolidationofGeneration+ RegulatoryAssets/Liabilities–Non-RecurringItems


+ 5.7%

-2.0% 3Q12

Increase of 4.7% in total energy sales outside the Group;


IFRS+ProportionalConsolidationofGeneration+ RegulatoryAssets/Liabilities–Non-RecurringItems


3Q13 Highlights






R$ 1,065 R$ 1,175


R$ 1,012 million

IFRS+ProportionalConsolidationofGeneration+ RegulatoryAssets/Liabilities–Non-RecurringItems



-0.4% 3Q12

R$ 356 million


R$ 355 million


R$ 460 million


R$ 282 million

CapitalMarkets–Performanceinthestockexchange The graph shows the performance of CPFL Energia’s shares in the period between January and December 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 - 9 months

Share Performance NYSE – 9 months

Opinion of Analysts


-8.8% -15.5%

-22.9% -13.4% 25.9%

CPFE3 IEE IBOV 12/28/12 20.54 28,792 60,952 12/30/13 19.09 26,250 51,507 Var. -7.0% -8.8% -15.5%

12/31/12 20.96 28,775 13,104 12/30/13 16.16 24,919 16,504 Var. -22.9% -13.4% 25.9%

Source: Economática Variations adjusted by dividends





At the end of December 2013, CPFL Energia stock was covered by 12 financial institutions and all of them gave it a buy or hold recommendation.

CPFL Renováveis increases generation by 328 MW

CPFL continues to focus on creating value for shareholders by expanding its generation capacity, notably through investments in CPFL Renováveis. The third quarter of 2013 saw the operational startup of the biomassfired plant Coopcana, located in São Carlos do Ivaí, Paraná, with installed capacity of 50 MW, and the wind farm Campo dos Ventos II, located in João Câmara, Rio Grande do Norte, with installed capacity of 30 MW. These plants will bring combined annual revenues of over R$ 40 million. The thermal power plant Bio Alvorada, with

installed capacity of 50 MW, was inaugurated in November. The project, located in Araporã, Minas Gerais, also utilizes sugarcane bagasse as fuel and will generate annual revenue of R$23 million. Early in 2014, wind power plants generating another 198 MW are already going operational. The Atlântica complex, with installed capacity of 120 MW, is located in Palmares do Sul, Rio Grande do Sul, while the Macacos I complex, with installed capacity of 78 MW, is located in João Câmara, Rio Grande do Norte.

Events In line with the strategy of transparency in its relationship with shareholders, CPFL Energia participated in a series of events in Brazil and abroad last quarter to disseminate its sustainable growth strategy. October 1 Non-deal roadshow – Credit Suisse, Rio de Janeiro; October 9 and 10 Latin American IV BTG Pactual NewYork CEO Conference, NewYork; October 10 UBS Brazil UtilitiesTrip in São Paulo, with a presentation by Gustavo Estrella, Chief Financial and Investor Relations Officer of CPFL Energia; November 22 Morgan Stanley: Brazil Utilities Corporate Access Day in São Paulo, with a presentation byWilson Ferreira Jr, CEO of CPFL Energia; December 5 J. P. Morgan Conference - Brazil Opportunities 2013, in São Paulo, with a presentation by Gustavo Estrella, Chief Financial and Investor Relations Officer of CPFL Energia; December 10 Non-deal roadshow - J. Safra, São Paulo.

An additional 254 MW are expected in the first half of 2016, when the Campos dos Ventos (82 MW) and São Benedito (172 MW) complexes go operational. Note that CPFL Renováveis launched its Initial Public Offering (IPO) in the Novo Mercado listing segment of the BM&FBovespa in July 2013. By going public, the company, which implements power generation projects in the areas of wind power, small hydroelectric plants (SHP) and biomass-fired thermoelectric plants, has a robust capital structure to expand its project portfolio.

Sale of 51.3 MW of wind power at the A-5 auction At the A-5 auction held on December 13, for the delivery of energy five years from now, CPFL Renováveis came out winner with two projects: Pedra Cheirosa I and Pedra Cheirosa II, both located in Itarema, Ceará. Together, these projects have a total installed capacity of 51.3 MW and will generate 26.1 MW average. These projects will generate annual revenue of R$ 29 million, at an average price of R$125.04/MWh, annually adjusted by the IPCA inflation index. The contracts, which will be entered into with the distributors that declared themselves energy buyers at this auction, are valid for 20 years, with supply starting in January 2018. “The Company’s successful

participation in the A-5 auction is in line with its growth plans and underscores its strategy of creating value through power generation from renewable sources,” says André Dorf, CEO of CPFL Renováveis. With the sale of these projects, the company now has a portfolio of 1,787 MW in total contracted capacity, of which plants with capacity for 1,283 MW are already in operation. The contracted portfolio is distributed as follows: 1,089 MW of wind power, 327 MW from Small Hydroelectric Plants, 370 MW from biomass-fired thermal plants and 1.1 MWp generated from photovoltaic solar plants. CPFL Renováveis also has projects totaling 3.8 GW in the development stage. 3

CPFL donates R$879 thousand to projects targeted at children and youth In 2013, the CPFL Energia group companies donated R$879,290.00 to the Municipal Councils for the Rights of Children and Adolescents (CMDCA), benefitting 12 cities in the states of São Paulo, Santa Catarina, Rio Grande do Sul and Goiás. A total of 453 projects applied for assistance, of which 23 initiatives targeted at children and teenagers received support. The donations, made in December 2013 through the Municipal Funds for the Rights of Children and Adolescents (FMDCA), were credited to the bank accounts directly linked to and under the responsibility of the CMDCAs. The activities receiving our assistance must be related to one of the following social causes: culture, diversity, fight against sexual exploitation of children, environment, mass mobilization, professional development or health. Each entity

receives funds for only one project, which is evaluated according to the criteria of CPFL’s social investment policy, and must be in line with the principles of the Brazilian Statute of the Child and Adolescent (ECA): promoting and enforcing the rights of children and adolescents, particularly the creation of opportunities for their best and healthy development. The CPFL Group will monitor the performance of the projects and the results proposed for 2014. The donation is a tax incentive envisaged in Law 8069/1990 (Statute of the Child and Adolescent), which allows income tax deduction of up to 1% for legal entities and 6% for individuals.

Transparency in carbon management

Rodolfo Nardez Sirol, Chief Environment Officer of CPFL Energia; Juliana Lopes, Latin America CDP Director; and Sue Howells, CDP General Director

CPFL Energia’s commitment to developing solutions to mitigate climate changes has once again been attested to. In October, it was recognized as the third most transparent company in carbon management among 100 Brazilian companies, by the Carbon Disclosure Project (CDP), a London-based global organization that provides a unique global system for companies and cities to measure, disclose, manage and share information on carbon emissions. CDP’s institutional supporters include Previ, Sistel and Petros, three funds that 4

Support Program for the CMDCAs 2013-2014

are also part of the controlling group of the CPFL Energia Group. The certification was handed over during the launch of the “2013 Brazil Report - New business opportunities from the reduction of emissions in Brazil”, in São Paulo. “This recognition shows our ability to organize information on CO2 emissions originating from our operations and to constantly report them to all our stakeholders,” said the Chief Environment Officer of CPFL Energia, Rodolfo Nardez Sirol, at the awards ceremony. CPFL’s CO2 emissions are measured annually through an external audit conducted by PWC (PricewaterhouseCoopers), which attests to its public commitment to reducing its emissions. The first edition of CDP’s Brazil report was published in 2007. The report is based on data collected from the 100 largest Brazilian companies according to the Brazil Index (IBrX) of the BM&FBovespa, which are invited to participate. Several rating agencies and asset managers base their investment decisions on the CDP report.

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. Content: Rockmann Press. Editing: Cárita Abdal. Design: Produção Coletiva - website: Investor Relations: Phone: (+55 19) 3756-6083 / Fax: (+55 019) 3756-6089.

CPFL Investor Newsletter 49