IV BTG Pactual Utilities Day CPFL Energia

São Paulo, 07 de março de 2012 September 2015

IV BTG Pactual Utilities Day

Wilson Ferreira Jr

CEO

2

Topics for discussion

GSF and load performance 1

Market performance and Delinquency

3

4

Leverage

4th Cycle of Tariff Review

2

5 Controlling Shareholders

2




3

4

Leverage


3


GSF | ANEEL has proven willing to solve the problem

Expected GSF for 2015 | in %

1H15 2H15

-19.9%

-13.5%

Average: -16.9%¹

1) Average weighted by number of hours month, considering the seasonalyzed physical guarantee; 2) Average PLD (Submarket Southeast)

Contributions for PH 32/2015

Expected PLD for 2015² | R$/MWh

Expected value hydrological risk Aneel Proposal: R$ 6.90/MWh (2015-20) APINE Proposal: R$ 1.60 to R$ 3.63/MWh (considers the average term of Regulated Market (ACR) agreements - 27 years)

Discount rate in Regulated (ACR) and Free (ACL) Markets Aneel Proposal: WACC = 7.16% p.a.

APINE Proposal: ke = 9.63% p.a.

Risk Premium in the Regulated Market (ACR) Aneel Proposal: R$ 6.90/MWh + spread (formulas) APINE Proposal: simulation based on the use of the concept of firm energy: value of R$ 7.25/MWh

Risk Premium in the Free Market (ACL) Aneel Proposal: Adhesion for at least 3 years and contracting of around 10% of Reserve Energy APINE Proposal: Adhesion for at least 2 years and establishment of a minimum level of Reserve Energy contracting (5%). Cost: Value of Reserve Energy + premium of R$ 10.4/MWh

242

221 244

156

388 388 388 388 387 369

244

145

Jan/1

5

Feb/1

5

Mar/

15

Apr/

15

May/1

5

Jun/1

5

Jul/15

Aug/1

5

Sep/1

5

Oct

/15

Nov/1

5

Dec/

15

CCEE Current

4

PLD (Sep-Dec): R$ 216 /MWh

CPFL Impact R$ 300 million

-8,1%

NIPS Load Evolution

2014 65.1 GWavg Growth

ONS (PEN 2015) 67.3 GWavg +3.3%

Rev. ONS Aug/15¹ 64.0 GWavg -1.7%

CPFL 63.3 GWavg -2.8%

+2,7% -2,6%

-7,4%

-7,9% -7,6%

-5,5%

-4,6%

69.6

68.1

66.6

63.9

60.9

59.9 60.1

63.5

65.2 65.0 64.5

67.8

69.9 69.9

67.6

65.8 65.0 65.1

66.5 67.1

67.9 67.7 67.2

61.1 61.4

63.0 62.6 62.6

Jan/15 Feb/15 Mar/15 Apr/15 May/15 Jun/15 Jul/15 Aug/15 Sep/15 Oct/15 Nov/15 Dec/15

Current 2015

ONS (2nd Rev. PEN Aug/15)

ONS (PEN Jan/15)

CPFL

NIPS Load Evolution in 2015 - GWavg

Deviance

1) Including current figures in the period of Jan-Aug/15 5

2




3

4

Leverage


6


27%

41%

17%

15%

2Q15 Energy Sales

1) Source: PME/IBGE - New Methodology; 2) Quarter compared to the same quarter of last year; 3) Source: FGV 7

Off Peak Peak

9,000

3,534

9,188

3,483

Jun/14 Jun/15

1Q14 1Q15 2Q14 2Q15

11,355 11,152 10,329 10,079

4,153 3,962 4,292 4,112

14,621

14,191

(59) 14 (335)

(51)

Resid.

+0.6%

-5.4% -2.4% -2.9%

Commerc. Indust. Others 2Q14 2Q15

-1.5%

Sales in the concession area | GWh

Sales by consumption class | GWh

14,621 14,191

-4.2%

TUSD Captive market (Distribution)

-2.9%

-2.4%

+2.1%

-1.4%

Contracted Demand l MW

15,507 15,114

-4.6%

-2.5%

-1.8%

Market Breakdown in the

concession area | 2Q15

Industrial Class by activity l GWh

Residential Commercial

Industrial

Others

INDUSTRIAL SEGMENT 2Q14 2Q15 Δ

Food & Beverage 879 882 0.4%

Chemicals 719 684 -4.8%

Metallurgy 689 634 -8.0%

Rubber & Plastics 566 548 -3.2%

Automobile 499 441 -11.7%

Textiles 447 422 -5.7%

SUBTOTAL 3,799 3,611 -4.9%

OTHERS 2,404 2,258 -6.1%

TOTAL SEGMENT 6,203 5,869 -5.4%

8 1) Source: PME/IBGE - New Methodology; 2) Quarter compared to the same quarter of last year; 3) Source: FGV

Consumer Confidence Index³ Index Base Sep-2005 = 100

Unfavorable economic environment and strong higher tariffs inhibit residential consumption

Jan/1

0

Jul/10

Jan/1

1

Jul/11

Jan/1

2

Jul/12

Jan/1

3

Jul/13

Jan/1

4

Jul/14

Jan/1

5

Jul/15

1Q

10

2Q

10

3Q

10

4Q

10

1Q

11

2Q

11

3Q

11

4Q

11

1Q

12

2Q

12

3Q

12

4Q

12

1Q

13

2Q

13

3Q

13

4Q

13

1Q

14

2Q

14

3Q

14

4Q

14

1Q

15

2Q

15

Payroll²

Average price variation (%) in R$/MWh Residential of CPFL Energia

Unemployment Rate¹ | In % of EAP

-20%

0%

20%

40%

60%

80%

2Q10 2Q11 2Q12 2Q13 2Q14 2Q15

67% Tariff Flags

48%

19%

Extraordinary Tariff Review /

Tariff Adjustments

82.983.9

80

100

120

140

Jan-1

0

May-1

0

Sep-1

0

Jan-1

1

May-1

1

Sep-1

1

Jan-1

2

May-1

2

Sep-1

2

Jan-1

3

May-1

3

Sep-1

3

Jan-1

4

May-1

4

Sep-1

4

Jan-1

5

May-1

5

Confiança do Consumidor

Taxa média 2008-2014

Consumer Confidence

Average Rate 2008-2014

Delinquency | Strengthening of collection actions inhibit the advance of delinquency

Energy Bills Total of CPFL Energia

Contas de Energia Grupo B

Delinquency Evolution R$ million in D90 / revenues (LTM)

Evolution of Allowance for doubtful accounts (PDD) | R$ million

9

23 24

15

23 21

41

1Q14 2Q14 3Q14 4Q14 1Q15 2Q15

75%

2




3

4

Leverage


10


1) Financial covenants criteria; 2) EBITDA of the last 12 months; 3) Adjusted by the proportional consolidation as of 2012; 4) Financial debt (+) private pension fund (-) hedge

Indebtedness Evolution

11

2Q151Q14 2Q14 3Q14 4Q14 1Q15 2Q15

12.8 13.2 13.0 13.0 13.6 13.8

Leverage1 | R$ billion

Adjusted net debt1/ Adjusted EBITDA2

3,570 3,830 3,886 3,736 3,835 3,755 Adjusted EBITDA1,2 R$ million

3.58 3.44 3.33 3.49 3.54 3.67

3.47 3.33 3.20 3.25 3.24 3.23

Evolution of Cash balance and CVA | R$ billion

1Q

14

2Q

14

3Q

14

4Q

14

1Q

15

2Q

15

4.045 4.549

3,822 , 4.088 3,783 3,292

413 474

548 911 1,147 1,638

Cash balance CVA

4,930 4,929 4,999 4,370

5,023 4,459

+0%

+43%

-13%

Adjusted with CVA in the cash balance

Gross debt cost3,4:

Nominal: 11.4% / Real: 2.3%

Average Tenor: 3.74 years

Short-term (12M): 10.0% of total

Gross debt by indexer 2Q15:

CDI: 71% l TJLP: 21% l PSI: 7% l IGP: 1%

Adjusting the cash balance by the receivable CVA, accumulated until 2Q15, net debt/EBITDA ratio would be of 3.23x. If we separate CPFL Renováveis, growth vehicle of the group, the leverage adjusted by the balance of CVA would be of 2.89x

CPFL Energia ex CPFL Renováveis

2.89

3.33

11.2

3,363

2




3

4

Leverage


12


4th Cycle of Tariff Review | CPFL Piratininga (preliminary proposal)

13

Methodology changes 4th cycle

(R$ million)

Variation over 3th cycle

(R$ million)

WACC from 7.50% to 8.09%

Capital Remuneration 210 +15

Creation of Special Obligations remuneration

Special Obligations remuneration 11 +11

Methodology changes in Technical Losses

Technical Losses 143 +9

Other Revenues – Methodology simplification

Other Revenues Sharing -36 +6

Extension of the aging from 49 to 60 months

Irrecoverable Revenues 24 -7

Xpd from 1.11% to 1.53%

Xpd Factor -6 -4

Total effects +29

New methodology of the 4th Cycle of Tariff Review for CPFL Piratininga Generated an annual benefit of R$ 29 million (preliminary figures)

4th Cycle of Tariff Review | CPFL Piratininga

14

June July August September October

Expected schedule of the Process of Periodic Tariff Review of CPFL Piratininga

Day 19: Aneel submits preliminary proposal to CPFL

Day 3: Aneel’s meeting Day 21: Public Hearing Opening (technical notes release)

Day 13: In-house Public Hearing (opportunity for unions, consumers, etc. give their opinions) Day 27: End of In-house Public Hearing (deadline for contributions)

Day 18: Aneel submits final proposal to CPFL Day 25: Meeting with Aneel

Day13: Aneel’s Board of Executive Officers Meeting and Periodic Tariff Review (RTP) deliberation Day 23: Publication of tariffs

2




3

4

Leverage


15


Evolution of the Stake of Controlling Shareholders

Previ: During the 1Q15 and 2Q15, Previ has reduced its stake from 30.0% to 29.5%, selling part of its free shares

Stock dividend: A 3.19% stock dividend occurred on May 06, 2015, as approved in the Extraordinary General Shareholders’ Meeting. These shares were unbounded from the control block

Camargo Correa: After the Stock Dividend, Camargo Correa sold its Unbound shares

In 3Q15, there were no shares sales by the Controlling Shareholders

Source: Standardized Financial Statements (DFP) form, Quarterly Information (ITR) forms and CVM 358 form of CPFL Energia 16

9.6%

3.4%

20,4%

24.3%

11.7%

30.5%

December/14

Previ

Free Float

Camargo

Bonaire

9.7% 3.8%

19.8%

23.6%

11.3%

31.9%

August/15

Previ

Free Float

Camargo

Bonaire

0.1%

P C B

P B

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IV BTG Pactual Utilities Day CPFL Energia

Investor Relations