INFRASTRUCTURE AND PROJECT FINANCE

CREDIT OPINION CPFL Geracao de Energia S.A. 14 June 2018 Update following rating assignment

New Issue Summary CPFL Geracao de Energia S.A (CPFL Geracao, Ba1 / Aaa.br stable)'s credit view reflects the consolidated credit profile of its parent company, CPFL Energia S.A. (CPFL Energia, Ba1 / Aaa.br stable) due to the centralized cash management policy implemented by the group, the corporate guarantee provided by CPFL Energia to the rated debenture issuance, and the RATINGS cross default clauses embedded in the various debts issued across the corporate family. Given CPFL Geracao de Energia S.A. these operational, financial, and structural links, CPFL Geracao's credit profile is best provided Domicile Brazil through CPFL Energia's consolidated profile, as the holding company for the corporate family. Long Term Rating Ba1 Type Senior Unsecured - CPFL Energia Dom Curr CPFL Energia’s 'Ba1' global scale rating incorporates a one-notch uplift from its standalone Outlook Stable credit profile, reflective of a moderate likelihood of support from State Grid International Please see the ratings section at the end of this report Development Limited (SGID, A2 stable) as controlling shareholder. Its standalone for more information. The ratings and outlook shown consolidated credit profile reflects its leading position and relatively diversified business reflect information as of the publication date. portfolio, with large scale operations in the distribution (9.4 million clients) and generation segments (3.3 GW of pro-forma installed capacity).

Contacts Supporting the credit is the track record of adequate and timely tariff reviews within its Bernardo Costa +55.11.3043.7353 distribution business, and moderate regulatory risk. Within its generation business, the VP-Senior Analyst combination of a relatively diversified resource mix and regulatory insurance limit exposure [email protected] to low hydrology. The ratings also reflect resilient credit metrics over the past three years and Camila Yochikawa +55.11.3043.6079 its large capital investment program (BRL7 billion throughout 2018-2020). Associate Analyst [email protected] Exhibit 1 Alejandro Olivo +1.212.553.3837 Capex-driven negative free cash flow in Moody’s base case to be funded from available cash Associate Managing Director Moody's Base Case [email protected] Free Cash Flow (left axis) Cash (left axis) Total Debt (left axis) CFO pre WC / Debt (right axis) 25,000 20.0% 23,000 18.0% 21,000 19,000 16.0% CLIENT SERVICES 17,000 14.0% 15,000 12.0% 13,000 BRL MMBRL Americas 1-212-553-1653 11,000 10.0% 9,000 8.0% 7,000 Asia Pacific 852-3551-3077 5,000 6.0% 3,000 4.0% 1,000 2.0% Japan 81-3-5408-4100 (1,000) (3,000) 0.0% 2014 2015 2016 2017 2018 2019 EMEA 44-20-7772-5454 Source: Moody's Financial Metrics™, Moody's estimates MOODY'S INVESTORS SERVICE INFRASTRUCTURE AND PROJECT FINANCE

Credit strengths » Strategic importance to stronger rated parent company and structural incentives for parent-company support in case of financial distress

» Established market position as a leading energy company in Brazil, operating its energy distribution business on a more economically resilient service area

» Commitment to deleveraging while continuing to invest; minimal dividend distributions expected in the short to medium run

Credit challenges » Highly regulated nature of the distribution and generation businesses; decreasing but still existent exposure to political influence

» Tariff adjustment minimum periodicity of one year exposes the issuer to intra-annual mismatch in costs and expenses

» Large capital investment program (close to BRL10.4 billion over next five years)

Rating outlook The stable outlook for CPFL Geracao's ratings reflects the stable outlook to the Corporate Family rating assigned to CPFL Energia. The stable outlook on CPFL Energia is reflective of the outlook on Brazil's sovereign bond rating (Ba2 stable). Factors that could lead to an upgrade Positive pressures on the ratings could arise should the perception of support from SGID become more evident and/or formalized in debt guarantees. Given the intrinsic linkages of CPFL Energia's standalone credit quality to that of the Brazilian sovereign, positive rating actions in the sovereign rating can cause upward pressure to the global scale ratings. Factors that could lead to a downgrade The ratings can be downgraded if the stability and transparency of the regulatory regime for the distribution and generation segments is weakened, ultimately resulting in a perception of more volatility or decrease of the cash flow base, causing sustainable declines in CFO pre WC to Debt and/or Interest Coverage Ratio to levels below 12.0% and 2.0x, respectively. The global scale ratings can also be downgraded upon a similar rating action on the sovereign rating. Key indicators

Exhibit 2 KEY INDICATORS [1] CPFL Geracao de Energia S.A's Key Indicators and Projections

12/31/2015 12/31/2016 12/31/2017 3/31/2018(L) 2018-Proj 2019-Proj (CFO Pre-W/C + Interest) / Interest 1.9x 1.9x 2.4x 2.5x 2.8x 3.1x (CFO Pre-W/C) / Debt 9.1% 9.2% 12.2% 12.4% 18.0% 20.3% RCF / Debt 9.1% 7.9% 3.9% 5.2% 17.1% 20.1%

[1] All ratios are based on 'Adjusted' financial data and incorporate Moody's Global Standard Adjustments for Non-Financial Corporations. Source: Moody's Financial Metrics™

Overview of Transaction Moody's assigned long term backed senior unsecured global scale and national scale ratings of Ba1 and Aaa.br, respectively, to the BRL1,400 million 11th issuance of debentures to be issued by CPFL Geracao. The structure is defined as follows:

» The issuance is held under CVM 476, and the use of proceeds is to pay its 7th debenture issuance and working capital needs

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

2 14 June 2018 CPFL Geracao de Energia S.A.: Update following rating assignment MOODY'S INVESTORS SERVICE INFRASTRUCTURE AND PROJECT FINANCE

» The transaction is structured in two tranches of BRL700 million each. The pricing for the Tranche 2 will be defined at the bookbuilding.

Exhibit 3 Amortization Profile: CPFL Geracao's BRL1,400 million 11th Debenture Due 2023

11th Debenture Max Pricing Maturity Am. Schedule Issuance

Tranche 1 105.75% of CDI May-2021 Bullet

Tranche 2 107.50% of CDI May-2023 50% May. 2022

50% May. 2023

Source: Indenture for CPFL Geracao's 11th Issuance of Debentures

The transaction is guaranteed by CPFL Energia. Covenants include automatic acceleration clauses related to bankruptcy filing of CPFL Geracao, CPFL Energia as guarantor, and cross-default with debts above BRL75 million of the issuer, the guarantor and/or any of its subsidiaries. Non-automatic covenants include change of control clauses and Net Debt / Ebitda > 3.75x and Ebitda/Financial result < 2.25x, which are measured at CPFL Energia on a consolidated basis. Profile CPFL Geracao Headquartered in Campinas, CPFL Geracao is a power generation company under CPFL Energia, which owns 100% of its shares. CPFL Geracao has a total installed capacity of 3,216 MW and 1,502 MW of assured energy, which is mainly comprised of conventional renewable sources, as hydropower assets (68% of installed capacity), followed by non-conventional renewable sources (wind power plants, 21%), and thermoelectric biomass power plants (6%). In the last twelve months ended in March 2018, CPFL Geracao posted net operating revenues and EBITDA (Moody's-adjusted) of BRL3.1 billion and BRL2.4 million, respectively. CPFL Geracao carried BRL10.7 billion in debt (48% of CPFL Energia's total debt) and BRL1.8 billion in cash (60% of CPFL Energia's total cash), leading to a Net Debt / Ebitda ratio of 3.8x, as per Moody's standard adjustments.

CPFL Energia CPFL Energia is a non-operational holding company which holds activities in distribution, generation, and commercialization of electricity in Brazil. The company holds a leading position in the Brazilian market, distributing around 66 TWh/year of electric energy to around 9.4 million clients in 679 cities through its five distribution concessions in the State of Sao Paulo (Ba2 stable) and State of Rio Grande do Sul, and with more than 3.3 GW of pro-forma generation installed capacity, including renewable sources.

In November 2017, SGID through its local subsidiary, State Grid Brazil Power Participaçoes S.A, placed a mandatory tender offer for the remaining outstanding shares of CPFL Energia and CPFL Renovaveis S.A. As a result, in December 2017 the ownership of SGID in CPFL Energia increased to 94.75% from 54.6%. The other portion remains listed on the Brazilian domestic stock exchange, B3 S.A, and on the New York Stock Exchange (ADR, Level III). The tender offer for the indirect control of CPFL Renovaveis S.A's shares is still ongoing due to differences among the methodological pricing criteria adopted by SGID from the one considered by the Securities and Exchange Comission of Brazil (CVM). A new price per share is expected to be announced in mid-June 2018.

In the last twelve months ended on March 31, 2018, CPFL Energia reported net operational revenues (excluding construction revenue) of BRL25.6 billion and EBITDA of BRL5 billion.

3 14 June 2018 CPFL Geracao de Energia S.A.: Update following rating assignment MOODY'S INVESTORS SERVICE INFRASTRUCTURE AND PROJECT FINANCE

Exhibit 4 CPFL Energia S.A Organizational Chart

Source: Company

Detailed credit considerations Credit reflects centralized cash management policy, holdco guarantee, and cross-default clauses The senior unsecured rating assigned to CPFL Geracao's BRL1,400 million debentures due 2021 and 2023 reflect the corporate guarantee provided by CPFL Energia (holding company). It also factors in the centralized cash management structure implemented by the group, with no additional limitations on dividend distributions from the operating companies to the holding company, aside from consolidated pro-forma covenants measured at the holding company level.

As of March 2018, 100% of the group's consolidated debt is held at the operating subsidiaries level, with over 80% of the debt guaranteed by CPFL Energia. Effectively, the debt structures provide for cross-default clauses across the operating companies and the holding company.

Moderate likelihood of support from stronger parent company at CPFL Energia The one-notch uplift on the global scale from CPFL Energia’s standalone credit quality reflects the strategic importance of CPFL Energia to SGID, given it represents 33% of its asset base (Brazil, 47%), and further reflected by the appointment of several senior members from SGID and State Grid Corporation of China (SGCC, A1 stable) to oversee its operations, including Chairman of the Board. The uplift also reflects:

» A commitment to deleverage the company through minimal dividend payout over the next five years, aiming to bring the ratio of Debt to Capitalization down from current levels of 65% to 50% in the medium term.

» A wider network of global banking relationships, including Chinese banks, which can further mitigate refinancing risks and provide for lower costs of debt

» Structural incentives to provide support given the existence of an all-encompassing cross-default clause on SGID’s 2015 bond issuance indenture for any subsidiary where it holds +50% interest

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» Demonstrated track record of support: following the acquisition of REN - Redes Energeticas Nacionais, SGPS S.A. (REN, Baa3 Stable) in 2012, SGID was able to secure a EUR1.0 billion loan with the China Development Bank (A1 stable), which allowed the company to refinance immediate maturities.

Diversified business profile and established market position In the last twelve months ended in March 2018, on a consolidated basis, the distribution segment was responsible for 49% of Ebitda and generation 48%. However, considering the distribution OpCos are 100% owned and several generation projects are partially owned, on a pro-forma basis, distribution Ebitda is 52% and generation 42%.

Exhibit 5 Balanced Ebitda share between distribution and generation segments

OpCo 2017 GWh Net Revenues (BRL 000) Ebitda (BRL 000) Avg. % Distri. Ebitda

Clients (000) Cities 2017 2016 2017 2016 2017 2016 2017

CPFL Piratininga 1,720 27 13,730 13,547 3,997,322 3,132,760 421,784 317,096 8% CPFL Santa Cruz¹ 1,094 384,243 60,472 CPFL Leste Paulista¹ 344 120,413 28,934 CPFL Jaguari¹ 447 45 2,769 561 1,028,945 136,613 158,235 20,239 3% CPFL Sul Paulista¹ 478 155,045 27,908 CPFL Mococa¹ 232 85,724 23,463 CPFL Paulista 4,389 234 29,960 29,267 9,326,596 7,555,155 860,328 873,130 19% RGE Sul² 1,336 118 8,849 1,452 3,394,572 2,853,167 335,054 153,976 5% RGE 1,485 255 10,268 10,013 3,351,571 2,947,061 459,038 457,807 10% CPFL Geração - - - - 3,149,347 2,680,931 2,421,127 2,103,000 49% Other 1,396,000 208,290 304,000 6% CPFL Energia 9,377 679 65,576 56,988 24,248,353 20,051,112 4,863,856 4,370,025 100%

[1] companies merged into CPFL Santa Cruz in year-end 2017 [2] acquired in November 2016, reflects full year 2016 financials Source: CPFL Energia

Distribution Business In year-end 2017, CPFL Energia's distribution business faced a merger transaction aiming to optimize their administrative and operational costs and produce large-scale savings and synergies in the future. In December 2017, five of its distribution companies (CPFL Santa Cruz, Companhia Leste Paulista de Energia, Companhia Sul Paulista de Energia, Companhia Luz e Força de Mococa and CPFL Jaguari) were grouped into CPFL Santa Cruz. As a result, CPFL Energia currently owns five distribution companies from nine owned in 2016. The tariff adjustments and reviews will occur on a consolidated basis in which a unique tariff adjustment will be applied for these merged companies. In March 2018, the regulator granted a 5.71% annual tariff adjustments to them.

All five concessions are regulated by Aneel, a federal agency under the Ministry of Energy and Mining. The regulatory framework is designed to compensate investments at a regulatory WACC which follows a transparent methodology, compensation for energy costs, O&M expenses, and regulatory charges. Annual tariff adjustments are conducted to reflect the operating cost base, while the tariff review cycle is conducted every four or five years, depending on the concession. Most of CPFL Energia’s distribution companies underwent their 4th tariff review cycle in 2016, with due compensation, two others were held in April 2018 and the last one (RGE) will be granted in June 2018.

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Exhibit 6 Larger scale than peers, leading position in the distribution segment Peer company, number of clients in service area (millions) - 2017

EDP - Energias do Brasil (Ba2 / Aa2.br stable), 3.4

Centrais Elétricas Brasileiras S.A. - Eletrobras (Ba3 stable), 4.4

CPFL Energia S.A. (Ba1 / Aaa.br stable), 9.4

Eletropaulo Met. Elet. De São Paulo (Ba3 / A3.br stable), 5.8

Cemig Distribuição S.A. (B3 / B2.br stable), 8.3 Energisa S.A. (Ba2 / Aa2.br stable), 6.7

Source: CPFL Energia S.A, EDP - Energias do Brasil S.A, Centrais Eletricas Brasileiras S.A - Eletrobras, Eletropaulo Met. Elet. de Sao Paulo, Energisa S.A and Cemig Distribuição S.A

CPFL Energia maintains a strong market share position of 14.2%. Adding to that is the relatively higher GDP/Capita basis of these states relative to the overall country as of 2014 data: State of Sao Paulo (Ba2 stable) ranks 2nd (BRL42.2k) and Rio Grande do Sul ranks 6th (BRL31.9k), with ratios of 1.5x and 1.1x that of the national average. The service area has shown to be relatively resilient in terms of volumes in contrast to other distribution companies. CPFL Energia’s volumes ended 2016 at levels 5% lower than 2013 and 7.5% lower than 2014. As December 2017, volumes grew by 2.1% in contrast to 2016 (removing the effects of the RGE Sul acquisition in late 2016) and by 2.9% quarter over quarter in Q1 2018.

Exhibit 7 More resilient service area than peers GWh Sold Index

Cemig Dist. EDP Brasil Eletropaulo CPFL Energia 1.10

1.05

1.00

0.95

0.90 Index: 2013 GWh = 1.0 GWh 2013 Index:

0.85 2013 2014 2015 2016 2017 Source: CPFL Energia S.A, EDP - Energias do Brasil S.A, Eletropaulo Met. Elet. de Sao Paulo and Cemig Distribuição S.A

Generation Business CPFL Energia is the country’s 3rd largest private generator, with a leading position in renewables (95% of total installed capacity). The company’s portfolio has an assured energy level of 1,539 MW, leading to a capacity factor of 49%. Revenues are driven by long-term PPAs, currently with an average life of 12.4 years, at fixed prices adjusted by inflation (current average price of BRL197/MWh).

6 14 June 2018 CPFL Geracao de Energia S.A.: Update following rating assignment MOODY'S INVESTORS SERVICE INFRASTRUCTURE AND PROJECT FINANCE

Installed capacity mix is largely composed of hydro (68%), followed by wind (21%), and thermal (5%). The expectation is that growth will primarily come from wind projects, balancing out diversification, given there are another 2.0 GW in wind projects under development at CPFL Renováveis, followed by 352 MW in solar and only 242MW in hydro. Despite contracting almost 100% of its assured energy until 2020, exposure to hydrology risk is managed through hiring the SP100 hydro insurance product for projects operating under regulated PPAs. Given some exposure to unregulated PPAs, overall hydro exposure is restricted to 12% of hydro assured energy, which is quite low relative to peers.

Exhibit 8 Geographically and resource based diversified portfolio of generation projects

Consolidated Installed % Total (pro-forma Subsidiary Ownership State Location Projects Pro-Forma Share (MW) Capacity (MW) MW)

CPFL Geração e Energia 100% SP & GO 4 Hydro 678 678 21% CERAN 65% RS 3 Hydro 360 234 7% Foz do Chapeco 51% SC & RS 1 Hydro 855 436 13% ENERCAN 49% SC 1 Hydro 880 429 13% BAESA 25% SC & RS 1 Hydro 690 173 5% EPASA 53% PB 2 Thermal 342 182 6% Paulista Lajeado/Investco 60% TO 1 Hydro 903 63 2% CPFL Renovaveis 52% Several 39 SHP, 45 Wind, 8 Biomass, 1 Solar 2103 1085 33% CPFL Centrais Geradoras 100% SP 6 Hydros 4 4 0%

CPFL Energia 6,815 3,284 100%

Source: CPFL Energia

Corporate strategy The company has developed clear acquisition and expansion investment strategies which are based on gains of scale and synergies within the distribution segment and a project-specific IRR-driven strategy for the generation segment. This minimizes the risks related to speculative turnaround acquisitions. The company operates within Sao Paulo state through three concessions, and Rio Grande do Sul, where it held the concession for Rio Grande Energia S.A. (RGE). In late 2016 the company purchased RGE Sul Distribuidora de Energia S.A. (RGE Sul) from the AES Group for BRL1.7 billion (8.5x average 2015/2016 Ebitda). RGE Sul’s territory is exactly adjacent to RGE, and complements its existing platform in the region. The acquisition was largely funded through the retention of cash (2015 + 2016 dividends = BRL237 million, vs. BRL1.0 billion in 2014) during a buyer’s market. Within the context of these strategies, and the limited potential for gains of scale in terms of distribution companies currently available for sale, growth is likely to be organic within the distribution segment.

Within the generation business, the company has a pipeline of close to 2.0 GW of installed capacity in the wind sector. This is largely due to the more competitive costs and opportunities available in the sector rather than a portfolio mix strategy. Their hydro operations are located within the South and Southeast regions, while new large hydro opportunities have been located in areas of difficult terrain (Amazon rainforest) with more complex environmental issues and difficulty of finding human capital.

Robust margins driven by timely tariff adjustments and adequate management of hydro resource risk CPFL Energia has posted resilient margins amid the 2015-2016 recession, as evidenced by EBITDA margins of 28% in 2016 and 24% in 2015. Margins stability is supported by fair tariff adjustments granted to the distribution OpCos, in line with the regulatory framework, where the volatility of non-manageable costs has been transferred to tariffs and investments incorporated to the asset base, remunerated at adequate rates.

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Exhibit 9 Historical annual, periodic ordinary, and one-off extraordinary tariff reviews Distribution OpCos

2013 2014 2015 2016 2017 2018 ² Distribution OpCo Annual Periodic Extra Annual Periodic Extra Annual Periodic Extra Annual Periodic Extra Annual Periodic Extra Annual Periodic Extra

CPFL Santa Cruz ¹ 9.3% - -3.1% 14.9% - - 34.7% - 5.2% - 10.7% 10.7% -1.3% - - -- CPFL Leste 6.5% - -14.9% -7.7% - - 20.8% - 14.5% - 8.0% 8.0% 0.8% - - -- Paulista¹ CPFL Jaguari¹ 2.7% - -25.4% -3.7% - - 38.5% - 16.8% - 14.1% 14.1% 2.1% - - 5.7% -- CPFL Sul Paulista¹ 2.3% - -18.4% -5.5% - - 24.9% - 17.0% - 9.8% 9.8% 1.6% - - -- CPFL Mococa¹ 7.0% - -5.8% -2.1% - - 23.3% - 11.8% - 6.1% 6.1% 1.7% - - -- CPFL Paulista - 5.5% -15.8% 17.2% - - 41.5% - 31.8% 9.9% - - -0.8% - - - 8.7% - RGE Sul - -5.4% -23.6% 16.4% - - 52.5% - 39.5% 3.9% - - -0.2% - - - 11.6% - RGE - -10.3% -11.4% 21.8% - - 33.5% - 35.5% -1.5% - - 3.6% - - - - - CPFL Piratininga 7.4% - -10.2% 19.7% - - 0.0% 56.3% 29.3% -12.5% - - 7.7% - - - - -

[1] These companies were merged into CPFL Santa Cruz in December 2017 [2] as of June 2017 Source: Aneel

In spite of a 12% EBITDA growth in 2017 vs. 2016, the margin reduced to 22% from 28% mainly because of additional costs related to RGE Sul acquisition which had full impact in 2017. Our forward looking view expects margin improvements following the complete integration of the new assets, the gains of synergies derived from the distributors merger and the continuity of reasonable tariff adjustments.

On the generation side, CPFL Energia currently has lower exposure to hydrology risks, which affected all Brazilian generation companies during the abnormal drought period in 2014 and 2015. In year-end 2015, ANEEL established a new law in which generators were able to share the costs of higher-cost thermal energy dispatch amid the low hydro environment, and introduced insurance protection mechanisms in exchange for a premium payment, providing improved predictability on generation companies’ margins. CPFL Energia adhered to this law, protecting 100% of this exposure to all of its contracts on the regulated market, with the 12% exposure (measured in assured energy terms) restricted to unregulated PPAs. In 2017, besides the increased costs derived from this mechanism, its generation subsidiary, CPFL Geracao (Ba1/Aaa.br, stable) posted improved EBITDA mostly driven by the beginning of commercial operations of Pedra Cheirosa wind farm complex, adding 25MW of installed capacity. Additionally, eight wind farms entered in the regulated auction to uncontract energy through the mechanism sponsored by the regulator (Mecanismo de Compensacao de Sobras e Deficits - MCSD) for 2018. It replaced 131 MW signed at an average PPA price of BRL174/MWh for contracts signed at a weighted average price of BRL187/MWh, contributing to the better results.

The fair application of tariff reviews, implementation of the MCSD auctions, and the establishment of insurance products that mitigate hydro risk for regulated PPAs are all credit-friendly measures implemented by the regulator. Nonetheless, the exposures which both distribution and generation companies have faced over recent years are evidence of a regulatory framework that is still in evolution and that support a view of moderate regulatory risk.

Prudent financial policies have supported credit metrics CPFL Energia has prudently managed its leverage levels while executing high capital investments. Considering Moody’s standard adjustments, CFO Pre-WC to Debt ranged 14%-17% from 2013 to 2017 while the company invested an average of BRL1.9 billion per year. In 2017, the respective ratio improved mainly due to higher volume of energy sales (+15.1%) derived from RGE Sul integration and growth resumption in the existing concessions, combined to a 8% decrease of total outstanding debt.

The company has been able to access debt markets, as shown by BRL3.8 billion of debt proceeds (new issuances and debt rollover) in 2016, BRL3.4 billion in 2017 and BRL2.8 billion in Q1 2018. The expectation is of minimal dividends supporting its intensive capital investment program. In 2016 and 2017, the payout ratio hovered the legal minimum of 25% while in the last 4 years this ratio ranged around 80-100%.

Our forward-looking view considers a BRL7 billion capital investment program between 2018 and 2020 supporting the distribution company network investments in improvements and expansion, and that the company will continue to successfully refinance most of its maturing debts. We also expect that CPFL Energia will maintain a minimal dividend distribution policy to gradually deleverage

8 14 June 2018 CPFL Geracao de Energia S.A.: Update following rating assignment MOODY'S INVESTORS SERVICE INFRASTRUCTURE AND PROJECT FINANCE

the company in the next five years. Our projections indicate that CFO Pre-WC to Debt will improve gradually to above 16% in 2019, reaching 20% by 2020, with debt to capitalization declining to below 60% by 2019.

Exhibit 10 Gradual deleveraging process expected amid high capital investment program

Capex¹ (left axis) Debt/Book Capitalization (right axis) 3,000 80%

70% 2,500 60% 2,000 50%

BRL MM BRL 1,500 40%

30% 1,000 20% 500 10%

- 0% 2013 2014 2015 2016 2017 2018 2019 2020

[1] It does not include Business Acquisitions Source: Moody's Financial Metrics™

Liquidity analysis CPFL Geracao As of March 2018, CPFL Geracao's carried BRL1,086 million in cash and cash equivalents with a balance of adjusted financial debt due over the next twelve months of BRL 2,923 million. The BRL1,400 million debenture issuance in May 2018 addresses some short run needs. Nonetheless, given centralized cash management policy and corporate guarantees, liquidity is analyzed in the context of CPFL Energia's consolidated profile.

CPFL Energia We consider CPFL Energia’s liquidity profile as relatively tight but evolving. As of March 31, 2018, the company had BRL3 billion in cash and cash equivalents which compares to BRL3.3 billion in debt maturities by year end-2018. In May 2018, through CPFL Geracao S.A, the company announced the issuance of BRL1.4 billion of debentures due in 3 to 5 years to refinance outstanding debts, alleviating liquidity pressure in the short-term. Our base case scenario incorporates a moderate improvement in the operating margins over the next two years, and as a result of an investment program averaging BRL2.5 billion per year, the free cash flow generation will likely remain negative in 2018. Our base case incorporates minimal dividend distributions.

Despite possessing refinancing needs of BRL5.5 billion in the short-term, CPFL Energia has enjoyed good access to capital and debt markets. The company holds long-standing banking relationships with local and international banks and will further benefit from the banking relationships of its parent company. The company’s necessity to continuously access debt capital markets for refinancing needs, given its relatively high volume of capital markets debt outstanding (BRL11 billion in debenture out of BRL22.3 billion total adjusted debt) and the short debt average life (2.9 yrs), contributes to our view that the company’s standalone credit quality is constrained to the sovereign. The company can face a scenario of very tight credit markets or complete market closure under an event of sovereign default.

CPFL Energia’s debts contain financial covenants of Adjusted Net Debt / Ebitda ≤ 3.75x and Adjusted Ebitda / Financial Result ≥ 2.25x, on a pro-forma consolidated basis. As of March 31 2018, the company reported 3.31x Adjusted Net Debt / Ebitda and 3.5x Ebitda/ Financial Result. Our base case projections indicate adequate adherence to these metrics.

9 14 June 2018 CPFL Geracao de Energia S.A.: Update following rating assignment MOODY'S INVESTORS SERVICE INFRASTRUCTURE AND PROJECT FINANCE

Rating methodology and scorecard factors Moody’s evaluates CPFL Geracao’s standalone credit quality through the Unregulated Utilities and Unregulated Power Companies methodology, published May 2017. While the grid indicated rating of the company is Ba1, reflective of its own conslidated profile, the Ba1 rating reflects the credit quality of its parent company, CPFL Energia, due to the corporate guarantee and associated cross default clauses that exist across the corporate family.

Exhibit 11 Rating Factors CPFL Geracao de Energia S.A.

Moody's 12-18 Month Forward Current Unregulated Utilities and Unregulated Power Companies Industry Grid [1][2] View LTM 3/31/2018 As of 6/7/2018 [3]

Factor 1 : Scale (10%) Measure Score Measure Score a) Scale (USD Billion) Ba Ba Ba Ba Factor 2 : Business Profile (40%) a) Market Diversification Ba Ba Ba Ba b) Hedging and Integration Impact on Cash Flow Predictability A A A A c) Market Framework & Positioning Ba Ba Ba Ba d) Capital Requirements and Operational Performance Baa Baa Baa Baa Factor 3 : Financial Policy (10%) a) Financial Policy Baa Baa Baa Baa Factor 4 : Leverage and Coverage (40%) a) (CFO Pre-W/C + Interest) / Interest (3 Year Avg) 2.5x B 2.9x Ba b) (CFO Pre-W/C) / Debt (3 Year Avg) 12.4% Ba 19% Ba c) RCF / Debt (3 Year Avg) 5.2% B 19% Baa Rating: a) Indicated Rating from Grid Ba1 Ba1 b) Actual Rating Assigned Ba1

[1] All ratios are based on 'Adjusted' financial data and incorporate Moody's Global Standard Adjustments for Non-Financial Corporations. [2] As of 3/31/2018(L); [3] This represents Moody's forward view; not the view of the issuer; and unless noted in the text, does not incorporate significant acquisitions and divestitures Source: Moody's Financial Metrics™

Ratings

Exhibit 12 Category Moody's Rating CPFL GERACAO DE ENERGIA S.A. Outlook Stable Bkd Senior Unsecured -Dom Curr Ba1 ULT PARENT: STATE GRID CORPORATION OF CHINA Outlook Stable Issuer Rating A1 PARENT: CPFL ENERGIA S.A. Outlook Stable Corporate Family Rating Ba1 NSR Corporate Family Rating Aaa.br Source: Moody's Investors Service

10 14 June 2018 CPFL Geracao de Energia S.A.: Update following rating assignment MOODY'S INVESTORS SERVICE INFRASTRUCTURE AND PROJECT FINANCE

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11 14 June 2018 CPFL Geracao de Energia S.A.: Update following rating assignment MOODY'S INVESTORS SERVICE INFRASTRUCTURE AND PROJECT FINANCE

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12 14 June 2018 CPFL Geracao de Energia S.A.: Update following rating assignment