CPFL Investor In this edition
INVESTOR RELATIONS | 50 | YEAR 10 | JANUARY-MARCH 2014
Solid fourthquarter results
Capital markets and stock performance
CPFL Renováveis concludes the acquisition of Rosa dos Ventos and starts operations at the Atlântica Complex
Awards and recognition
Net revenues IFRS
Increase of 3.3% (1.8% accounting) in sales in the concession area - residential (+6.7%), commercial (+5.0%) and industrial (+1.1%) Tauron Program (smart grid) generated EBITDA of R$ 52 million in 2013 CPFL Renováveis expansion: (i) A-5 Auction (Dec/13), (ii) joint venture with DESA (Feb/14), (iii) start-up of Atlântica wind complex (Mar/14) Fitch Ratings reaffirmed the AA+(bra) rating to CPFL Energia and subsidiaries CPFL Energia’s shares were maintained in the ISE (the Corporate Sustainability Index of BM&FBOVESPA), for the 9th consecutive year CPFL Piratininga and RGE were granted the 2013 IASC Award in the Southeast and South categories, respectively (best evaluated distributors by the consumers)
CPFL Energia ends 2013 with strong results. Consumption in the company’s concession area increased 3.3% in the fourth quarter, driven by the good performance of residential clients, who consumed 67% more electricity than last year, and of commercial clients, whose consumption increased 5%. EBITDA in the fourth quarter reached R$912 million, increasing 25% from the previous year, while net income came to R$323 million, or 67% higher than in 4Q12. In 2013, the Company continued to pursue operating improvements and higher efficiency: since 2011, in nominal terms, CPFL has been able to reduce its expenses with personnel, materials, outsourced services and other items by R$236 million, or 14.9%. With a focus on further boosting its competitiveness and strengthening its distribution, trading and generation businesses, the company invested R$374 million in the last quarter of 2013, bringing its investments in the whole of the year to R$1.7 billion. Sharing its good results with all of its shareholders is a basic premise of CPFL’s business model. The company announced proposed dividends of R$913 million for fiscal year 2013, R$568 million of which in complementary dividends for the second half of 2013. The approval of the amounts and the payment date will be decided at the Annual Shareholders’ Meeting to be held in April 29th, 2014.
R$ 3,800 R$ 3,467 R$ 3,912 R$ 3,534
R$ 727 millions
R$ 912 millions
R$ 1,317 millions
R$ 1,135 millions
R$ 192 millions
R$ 323 millions
R$ 497 millions
Message from the CEO The year 2013 was marked by further advances in the value-creation strategy of CPFL Energia, which has become even more efficient. We made significant progress on our cost-cutting initiatives, which generated savings of R$107 million in nominal terms. In our Smart Grid project, we already have over 15,000 intelligent meters installed and nearly 35% of our operational fleet is already equipped with GPS systems and tablets, which enables more accurate monitoring of our distribution network while reducing costs with transporting teams.
We continue to expand our presence in the generation segment through CPFL Renováveis: in 2013, we added 130 MW in installed capacity through three new projects. And earlier this year, we announced an association with Dobrevê Energia, concluded the acquisition of Rosa dos Ventos and launched yet another new project, the AtlânticaWind Farm Complex. The year 2014 began with Brazil’s power industry facing many challenges, especially with regard to reservoir water levels and higher energy acquisition costs. Of course, the challenges posed
by an adverse scenario impose major obstacles on the entire industry. However, the results achieved by CPFL Energia results in recent years underscore the Group’s growth strategy, which is anchored primarily in solid and conservative financial discipline, excellence in the services provided to all consumers, a strong focus on financial and operating results and the creation of value for shareholders and investors. Wilson Ferreira Jr. CEO of CPFL Energia
R$ 425 millions
Market praises CPFL’s fourth-quarter results The fourth-quarter results of CPFL Energia were well received by the market. The various banks that cover the Company’s performance made very positive comments soon after the results were released. BTG Pactual mentioned that the company’s result was solid and highlighted the cost cutting achieved in the distribution business and the solid numbers in the power trading arm.
According to Citibank, the highlight of the balance sheet was the “solid control of costs,” which supports the investment thesis and buy recommendation. Credit Suisse pointed out that the company posted strong results that surpassed the bank’s expectations due to strong discipline in manageable expenses and the better-thanforecast financial results.
Deustche Bank said that with the startup of the projects of CPFL Renováveis, the subsidiary’s contribution to the Group’s EBITDA should double over the next five years. Merrill Lynch highlighted the Company’s efficient management and its exposure to the segment of alternative generation sources.
Government announces measures to bolster distributors’cash position The drought in the first quarter of this year posed a series of challenges to power distributors. Faced with the lack of rain, the federal government had to activate thermal power plants fired by natural gas and fuel oil to slow the decline in the reservoir levels of hydropower plants. Thermal power is more expensive than hydropower. Further exacerbating this scenario, the distribution of shares in the renewal of concessions proved insufficient to meet the demand of distributors, exposing them to the short-term market. The partial failure of the A-1 auction held in late 2013 increased distributors’exposure in 2014. In light of this scenario, on March 20, the federal government
announced three measures to avoid impacts on the cash positions of power distributors. First, it announced the injection of funds from the Treasury Department to help cover expenses. Second, the Electric Power Trading Chamber (CCEE) will raise an estimated R$11 billion in the market to cover the expenses incurred from the use of thermal power plants and the involuntary exposure. These two measures will prevent the high energy costs from being passed on in a single lump to final consumers. Lastly, on April 30, an energy auction will be held to reduce the involuntary exposure of distributors and consequently lower some of these costs.
Capital markets and stock performance In 1Q14, the price of CPFL stock fell 2.6%, which lagged the 5.4% drop in the Electric Power Index (IEE), which is formed by the power companies listed on the BM&FBovespa. Meanwhile, the price of CPFL’s ADRs gained 1.1%.
Share Performance Bovespa - 1Q14
CPFE3 IEE IBOV 12/30/13 19.09 26,250 51,507 03/31/14 18.60 24,838 50,414 Var. -2.6% -5.4% -2.1% Source: Economática Variations adjusted by dividends
Share Performance NYSE - 1Q14
+1.1% -0.4% CPL
12/30/13 16.16 24,919 16,504 03/31/14 16.33 24,831 16,458 Var. 1.1% -0.4% -0.3%
Conferences, road shows and events January 2014 Santander: Breakfast with analysts in São Paulo on Jan. 21 Morgan Stanley Brazil Utilities Corporate Access Day in Rio de Janeiro on Jan. 31 February 2014 Credit Suisse: 2014 Latin America Investment Conference in São Paulo on Feb. 4 and 5 JP Morgan: Latin America Utilities Day in Boston (USA) on Feb. 20 JP Morgan: Non-deal roadshow in New York (USA) on Feb. 21 BTG Pactual: XV CEO Conference in São Paulo on Feb. 26 and 27, presented by CEOWilson Ferreira Jr. March 2014 Santander: 5th Brazilian Power Industry Conference in São Paulo on Mar. 13, presented by CFO Gustavo Estrella
CPFLRenováveisconcludesthe acquisitionofRosadosVentosandstarts operationsattheAtlânticaComplex On February 27, CPFL Renováveis concluded the process to acquire 100% of the stock in Rosa dos Ventos, which holds authorizations to commercially explore the wind farms Canoa Quebrada (10.5 MW) and Lagoa do Mato (3.2 MW). The wind farms are located in Aracati, Ceará and are commercially operational. The power is contracted from Eletrobrás through the Program to Support Alternative Power Sources (PROINFA). On March 24, CPFL Renováveis received authorization from the National Electric
Power Agency (ANEEL) for the commercial startup of the generation unit of the Atlântica Wind Farm Complex, which is a set of four wind farms in Palmares do Sul, Rio Grande do Sul with total installed capacity of 120 megawatts (MW). Since November 2013, the operation of the complex’s wind turbines has been gradually ramped up. The Atlântica Complex is the first wind farm complex of CPFL Renováveis in Rio Grande do Sul (one Brazil’s states with the highest potential for this type of generation source) and combines two
The Atlântica Complex is the first wind farm complex of CPFL Renováveis in Rio Grande do Sul
important innovations: the highest towers and the highest power per generating unit ever installed in the country. Each tower is 120 meters high and each turbine can generate up to 3 MW. The power to be generated by this Complex was sold at the Alternative Sources Auction held in August 2010, with supply for 20 years and 52.7 MW average in contracted energy.
Association with Desa will expand the installed capacity of CPFL Renováveis by 19% to 2.1 GW In February, CPFL Renováveis signed an association agreement with Dobrevê Energia (Desa), which operates in the renewable energy segment and holds 331 megawatts (MW) of contracted capacity, of which 278 MW are operational and 53 MW are under construction. The projects are located in five Brazilian states, with 96 MW derived from SHPP and 234 MW from wind farms. Once the association agreement is finalized, the contracted installed capacity of CPFL Renováveis will increase by 19% from 1,800 MW to 2,131 MW (1,694 MW operational and 437 MW under construction). In view of the association, Arrow, the private-equity fund that is
the controlling shareholders of Desa, will hold 12.63% of the capital stock of CPFL Renováveis and become a party to the shareholders’ agreement of the company, which is controlled by CPFL Geração, and be able to appoint a representative to the Board of Directors. The transaction was unanimously approved by the boards of directors of both companies. “This association represents an important step forward in the expansion plan of CPFL Renováveis. In addition to the value created for its shareholders and other stakeholders, the transaction consolidates the Company’s leadership in Brazil’s market for power generation from renewable sources,” said André Dorf, CEO of CPFL Renováveis.
Fitch reaffirms CPFL’s national credit rating The national long-term credit ratings for CPFL Energia and its subsidiaries CPFL Paulista, CPFL Piratininga and RGE were reaffirmed at AA+(bra) by Fitch Ratings. The outlook for the ratings remained stable. In its analysis, the rating agency concluded that
CPFL Energia has a solid market position as the largest private group in Brazil’s power industry and highlighted the positive diversification of its power distribution and generation assets. “The confirmation of the ratings for CPFL Energia and its subsidiaries
reflects Fitch’s opinion that the current difficult scenario in the power industry, particularly in the distribution segment, is temporary and does not affect the credit fundamentals of the CPFL group,” the analysts pointed out. 3
Awards and recognition
The companies that form CPFL Energia have received various awards in the last few months that attest to their commitment to provide the best possible services to clients.
CPFLPiratiningaandRGEwintheIASCAward2013 CPFL Piratininga and RGE were the winners of the 2013 edition of the IASC Award (Aneel’s Customer Satisfaction Index), receiving, respectively, the awards for “Best Distributor in the Southeast” and “Best Distributor in the South” in the category for companies with over 400,000 consumers. Note that CPFL Mococa was also in the running as one of the finalists in the
category for companies in the South and Southeast with over 30,000 clients and up to 400,000 consumer units. The award is the result of a survey that measures consumers’ perceptions of the quality of services provided by Brazil’s 63 distribution concessionaires. A total of 19,470 residential consumers in 475 Brazilian cities were interviewed for this edition.
RGE is recognized as LatAm’s best distributor RGE, a distribution concessionaire of the CPFL Energia Group that serves 262 municipalities in Rio Grande do Sul that account for 51% of all municipalities in the state was recognized as the best power distributor in Latin America in the CIER Quality Awards 2013.
The award is sponsored annually by the Regional Energy Integration Commission. In 2013, 53 companies from 15 countries participated. The company won the gold category among concessionaires with over 500,000 consumers.
CPFL is included inThe Sustainability Yearbook 2014 CPFL Energia was included in “The Sustainability Yearbook 2014” published by RobecoSAM, a company specializing in sustainable investments and comparative analysis that maintains head offices in Zurich and Rotterdam and since 2004 has compiled a list of the world’s most
sustainable companies. The company is also responsible for conducting the assessmentoftheDowJonesSustainability Index. According to the yearbook’s rating system, companies must achieve at least 30% of the score of the industry’s leading company in order to be included.
CPFL Group donates nearly 220,000 seedlings In line with its strategy to relentlessly pursue operating efficiency and improve well-being in the regions where it operates, in 2013, CPFL Energia donated nearly 220,000 tree seedlings to municipalities and environmental institutions located in the interior region of the state of São Paulo. The initiative was part of the Group’s Tree Planting Program, which enjoys support from various cities and seeks to reduce the need for tree trimming and maintenance, assure high-quality power supply and raise society’s awareness on the issue’s importance. The quality of tree planting on urban roads directly influences the power distribution network. On rainy days, for example, 60% of power supply 4
interruptions are caused by branches and trees falling on the power network. Streets with a variety of well-trimmed trees not only provide a safer distribution network, but also help increase property values, reduce direct solar radiation and ensure better thermal comfort. The seedlings are donated free to any city or institution. The request must be submitted by the Public Administration through the CPFL Business Manager responsible for the region. CPFL also provides basic technical information in its guide “Planting Trees on Urban Roads,” which is made available to municipal governments at http://www.cpfl.com.br/ Portals/0/pdf/Guia_Meio_Ambiente.pdf.
CPFL INVESTOR is a publication of the Investor Relations Department of CPFL Energia, published by the Corporate Communication and Institutional Affairs Department, Rodovia Engenheiro Miguel Noel Nascentes Burnier, 1.755, Km 2,5 - Campinas/SP, Zipcode 13.088-900. Phone: (19) 37568197 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: Karam Valdo. Design: Produção Coletiva - website: Investor Relations: www.cpfl.com.br/ir - e-mail:ri@ cpfl.com.br. Phone: (+55 19) 3756-6083 / Fax: (+55 019) 3756-6089.
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