1Q17 Results
São Paulo, May 11, 2017 – CPFL Energia S.A. (BM&FBOVESPA: CPFE3 and NYSE: CPL), announces its 1Q17 results. The financial and operational information herein, unless otherwise indicated, is presented on a consolidated basis and is in accordance with the applicable legislation. Comparisons are relative to 1Q16, unless otherwise stated.
CPFL ENERGIA ANNOUNCES ITS 1Q17 RESULTS
Indicators (R$ Million) 1Q17 1Q16 Var. Sales within the Concession Area - GWh 16,715 14,147 18.1% Captive Market 12,103 10,568 14.5% Free Client 4,611 3,579 28.8% Gross Operating Revenue 8,730 7,586 15.1% Net Operating Revenue 5,539 4,337 27.7% EBITDA(1) 1,196 1,035 15.6% Net Income 232 232 -0.1% Investments (2) 681 449 51.6%
Notes: (1) EBITDA is calculated from the sum of net income, taxes, financial result, depreciation/amortization, as CVM Instruction no. 527/12. See the calculation in item 4.6 of this report; (2) Includes investment related to the construction of transmission lines of CPFL Transmissão Piracicaba and Morro Agudo and, according to the requirements of IFRIC 12, it was recorded as “Financial Asset of Concession” (in non-current assets). Does not include special obligations.
1Q17 HIGHLIGHTS
• Stable load in the concession area (-0.4%); • Contracted demand is being preserved: -0.6% Off Peak and -0.2% Peak (Mar-17 x Mar-16); • Increases of 27.7% in Net Operating Revenue and of 15.6% in EBITDA; • Investments of R$ 681 million; • Pro forma net debt of R$ 13.8 billion and leverage of 3.30x pro forma Net Debt/EBITDA; • CPFL Paulista tariff adjustment, in Apr-17, with an average effect of -10.50% to be perceived by the consumers; • RGE Sul tariff adjustment, in Apr-17, with an average effect of -6.43% to be perceived by the consumers; • Current status of State Grid transaction: appraisal report of the Unified Tender Offer in preparation, as approved in the EGM of March 27, 2017; • Launch of Envo, a company that will offer solutions in distributed solar power generation, manly to residential clients; • 2016 Annual Report released on April 5, 2017.
Conference Call with Simultaneous Translation into English Investor Relations (Bilingual Q&A) Department Friday, May 12, 2017 – 11:00 a.m. (Brasília), 10:00 a.m. (ET) 55-19-3756-6083 Portuguese: 55-11-3193-100 1 or 55-11-2820-4001 (Brazil) [email protected] English: 1-888-700-0802 (USA) and 1-786-924-6977 (Other Countries) www.cpfl.com.br/ir
Webcast: www.cpfl.com.br/ir
WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c 1Q17 Results | May 11, 2017
INDEX 1) MESSAGE FROM THE CEO ...... 4
2) ENERGY SALES ...... 5 2.1) Sales within the Distributors’ Concession Area ...... 5 2.1.1) Sales by Segment – Concession Area ...... 6 2.1.2) Sales to the Captive Market ...... 7 2.1.3) Free Clients ...... 7 2.2) Contracted Demand (% - high voltage) ...... 8 2.3) Generation Installed Capacity ...... 8
3) INFORMATION ON INTEREST IN COMPANIES AND CRITERIA OF FINANCIAL STATEMENTS CONSOLIDATION ...... 10 3.1) Consolidation of CPFL Renováveis Financial Statements ...... 12 3.2) Consolidation of RGE Sul Financial Statements ...... 12 3.3) Economic-Financial Performance Presentation ...... 12
4) ECONOMIC-FINANCIAL PERFORMANCE...... 13 4.1) Opening of economic-financial performance by business segment ...... 13 4.2) Reclassification of the Concession Financial Asset ...... 14 4.3) Sectoral Financial Assets and Liabilities ...... 14 4.4) Operating Revenue ...... 14 4.5) Cost of Electric Energy ...... 14 4.6) Operating Costs and Expenses ...... 15 4.7) EBITDA ...... 18 4.8) Financial Result ...... 18 4.9) Net Income ...... 20
5) DEBT ...... 21 5.1) Debt (IFRS) ...... 21 5.2) Debt in Financial Covenants Criteria ...... 22 5.2.1) Debt Amortization Schedule in Financial Covenants Criteria ...... 22 5.2.2) Indexation and Debt Cost in Financial Covenants Criteria...... 23 5.3) Net Debt in Financial Covenants Criteria and Leverage ...... 24
6) INVESTMENTS ...... 24 6.1) Capital Expenditures ...... 24 6.2) Projected Capital Expenditures ...... 25
7) STOCK MARKETS ...... 26 7.1) Stock Performance ...... 26 7.2) Daily Average Volume ...... 26
8) CORPORATE GOVERNANCE ...... 27
9) SHAREHOLDERS STRUCTURE ...... 28 9.1) Launch of Envo ...... 28
10) PERFORMANCE OF THE BUSINESS SEGMENTS ...... 30 10.1) Distribution Segment ...... 30 10.1.1) Economic-Financial Performance ...... 30 10.1.1.1) Reclassification of the Adjustments to the Concession´s Financial Asset ...... 30 10.1.1.2) Sectoral Financial Assets and Liabilities ...... 30 11.1.1.3) Operating Revenue ...... 31 10.1.1.4) Cost of Electric Power ...... 32 10.1.1.5) Operating Costs and Expenses ...... 33 10.1.1.6) EBITDA ...... 35 10.1.1.7) Financial Result ...... 35
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10.1.1.8) Net Income ...... 37 10.1.2) Tariff events ...... 38 10.1.3) Operating Performance of Distribution ...... 39 10.2) Commercialization and Services Segments ...... 41 10.2.1) Commercialization Segment ...... 41 10.2.2) Services Segment ...... 41 10.3) Conventional Generation Segment ...... 42 10.3.1) Economic-Financial Performance ...... 42 10.3.1.1) Operating Revenue ...... 42 10.3.1.2) Cost of Electric Power ...... 42 10.3.1.3) Operating Costs and Expenses ...... 43 10.3.1.4) Equity Income ...... 44 10.3.1.5) EBITDA ...... 45 10.3.1.6) Financial Result ...... 45 10.3.1.7) Net Income ...... 46 10.4) CPFL Renováveis...... 46 10.4.1) Economic-Financial Performance ...... 46 10.4.1.1) Variations in the Income Statement of CPFL Renováveis ...... 46 10.4.1.2) Operating Revenue ...... 47 10.4.1.3) Cost of Electric Power ...... 47 10.4.1.4) Operating Costs and Expenses ...... 48 10.4.1.5) EBITDA ...... 48 10.4.1.6) Financial Result ...... 49 10.4.1.7) Net Income ...... 49 10.4.2) Status of Generation Projects – 100% Participation ...... 50
11) ATTACHMENTS ...... 51 11.1) Statement of Assets – CPFL Energia...... 51 11.2) Statement of Liabilities – CPFL Energia ...... 52 11.3) Income Statement – CPFL Energia ...... 53 11.4) Cash Flow – CPFL Energia ...... 54 11.5) Income Statement – Conventional Generation Segment ...... 55 11.6) Income Statement – CPFL Renováveis ...... 56 11.7) Income Statement – Distribution Segment ...... 57 11.8) Income Statement – Distribution Segment (without RGE Sul) ...... 58 11.9) Income Statement – Distribution Segment ...... 59 11.10) Sales within the Concession Area by Distributor (In GWh) ...... 62 11.11) Sales to the Captive Market by Distributor (in GWh) ...... 63 11.12) Reconciliation of Net Debt/Ebitda Pro Forma ratio of CPFL Energia for purposes of financial covenants calculation ...... 64
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1) MESSAGE FROM THE CEO
The beginning of 2017 was marked by new prospects and possibilities for the CPFL Group, after the conclusion of the acquisition of the controlling interest in the Company by the Chinese State Grid, the largest global player in the electricity sector. Its long-term strategic vision and technological development will make a great contribution to CPFL’s next steps. After eight consecutive quarters of decrease, the distribution segment registered stable energy sales in the first quarter of 2017 (+0.1%), disregarding the positive effect of the acquisition of RGE Sul. The residential class registered an increased 1.5%, while industrial and commercial classes fell by 2.2% and 0.7%, respectively, reflecting the effects of the slowdown in economic activity in the country. The acquisition of RGE Sul, consolidated since November 2016, added 2,549 GWh to volumes sold in the first quarter of 2017. It is also worth mentioning the considerable migration of consumers from the captive market (a 5.3% market reduction) to the free market (+16.1%) during the year 2016. In March 2017, the demand contracted by the high-voltage clients remained practically stable – a reduction of 0.6% during off-peak hours and 0.2% during peak hours, in comparison with the same month of the previous year, which preserves the majority of the remuneration of the business coming from high- voltage clients of this segment. The group posted EBITDA of R$ 1,196 million in the quarter (+16% vs. 1Q16), reflecting the contribution of the full consolidation of RGE Sul and the improvement in the results from our subsidiary CPFL Renováveis, among other effects. Consolidated leverage of CPFL Energia reached 3.30x net debt/EBITDA at the end of the quarter, in accordance with the criteria used to measure our financial covenants. The decline in interest rates throughout the year will be beneficial for the Company, which has around three-fourths of its debt pegged to the CDI interbank rate. CPFL maintained its growth strategy at the beginning of 2017. In the renewable energy segment, the company is advancing on construction of the Pedra Cheirosa wind complex, with total installed capacity of 48 MW. In transmission, the Morro Agudo project showed progress in the quarter, reaching 95% progress in the works. In addition, CPFL founded a new company in early May, Envo, focused on the solar distributed generation market for households, and small commercial clients, thus expanding the portfolio of energy products and services offered by the Group. Regarding the sale of controlling interest of CPFL Energia, its migration from category A to category B of the Brazilian Securities and Exchange Commission (CVM) and the delisting of its shares from the Novo Mercado segment of the São Paulo Stock Exchange were approved at the Shareholders Meeting held on March 27, 2017. This Unified Tender Offer process requires the preparation of a valuation report, which will be done by the bank Credit Suisse, as approved by minority shareholders at said meeting. Finally, CPFL’s management remains optimistic about the advances of the Brazilian electricity sector and remains confident in its business platform. For the year 2017, approximately R$ 2.8 billion in investments are projected, and more than R$10 billion in investments are estimated for the next five years, which reinforces the Group’s commitment to its long-term development strategy.
Andre Dorf CEO of CPFL Energia
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2) ENERGY SALES 2.1) Sales within the Distributors’ Concession Area
Sales within the Concession Area - GWh 1Q17 1Q16 Var. Captive Market 12,103 10,568 14.5% Free Client 4,611 3,579 28.8% Total 16,715 14,147 18.1%
Sales within the Concession Area (without RGE Sul) - GWh 1Q17 1Q16 Var. Captive Market 10,009 10,568 -5.3% Free Client 4,157 3,579 16.1% Total 14,166 14,147 0.1% Note: RGE Sul was consolidated in November 2016. For more information, see item 3.2 of this report.
In 1Q17, sales within the concession area, achieved by the distribution segment, totaled 16,715 GWh, an increase of 18.1%, mainly due to the acquisition of RGE Sul. Disregarding the effect of this acquisition, sales within the concession area would have totaled 14,166 GWh, an increase of 0.1%. Sales to the captive market totaled 12,103 GWh in 1Q17, an increase of 14.5%, mainly due to the acquisition of RGE Sul; disregarding the effect of this acquisition, sales to the captive market would have totaled 10,009 GWh, a reduction of 5.3%, reflecting mainly the strong client migration to the free market. The quantity of energy, in GWh, which corresponds to the consumption of free clients in the concession area of group’s distributors, billed through the Tariff for the Usage of the Distribution System (TUSD), reached 4,611 GWh in 1Q17, an increase of 28.8%, mainly due to the acquisition of RGE Sul; disregarding the effect of this acquisition, the quantity of energy billed through TUSD would have reached 4,157 GWh, an increase of 16.1%.
Sales within the Concession Area - GWh 1Q17 1Q16 Var. Part. Residential 5,129 4,265 20.2% 30.7% Industrial 5,663 5,146 10.0% 33.9% Commercial 2,944 2,585 13.9% 17.6% Others 2,979 2,150 38.5% 17.8% Total 16,715 14,147 18.1% 100.0%
Sales within the Concession Area (without RGE Sul) - GWh 1Q17 1Q16 Var. Part. Residential 4,328 4,265 1.5% 30.6% Industrial 5,035 5,146 -2.2% 35.5% Commercial 2,566 2,585 -0.7% 18.1% Others 2,237 2,150 4.0% 15.8% Total 14,166 14,147 0.1% 100.0% Note: The tables with sales within the concession area by distributor are attached to this report in item 11.10.
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Noteworthy in 1Q17, in the concession area: Residential class (30.7% of total sales): increase of 20.2%, influenced by the acquisition of RGE Sul. Disregarding the effect of this acquisition, we would have an increase of 1.5%, reflecting the high temperature in 1Q17 in comparison with the 1Q16; Commercial class (17.6% of total sales): increase of 13.9%, influenced by the acquisition of RGE Sul. Disregarding the effect of this acquisition, we would have a reduction of 0.7%, still reflecting the low economic activity in comparison with the 1Q16; Industrial class (33.9% of total sales): increase of 10.0%, influenced by the acquisition of RGE Sul. Disregarding the effect of this acquisition, we would have a reduction of 2.2%, still reflecting the low economic activity in comparison with the 1Q16. It is noteworthy that a large client of the steel business in the area of CPFL Piratininga has reduced consumption by 50.1% in comparison with the 1Q16; this represents 1.9% of the 2.2% reduction. Therefore, CPFL Piratininga recorded a reduction of 7.3% (117 GWh) in this class (or a reduction of 1.3% disregarding this client). CPFL Paulista recorded a reduction of 0.6% (14 GWh) and RGE had an increase of 3.7% (28 GWh).
2.1.1) Sales by Segment – Concession Area
1Q17 1Q16
Others 17.4% Others (+2.5 p.p.) Residential 14.9% 30.7% Residential (+0.5 p.p.) 30.1% Commercial Commercial 14.6% 16.6% (-2.0 p.p.) Industrial Free client Industrial 9.8% 13.1% 27.6% (-3.3 p.p.) Free Client (+2.3 p.p.) 25.3%
Note: in parentheses, the variation in percentage points from 1Q16 to 1Q17.
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2.1.2) Sales to the Captive Market
Sales to the Captive Market - GWh 1Q17 1Q16 Var. Residential 5,129 4,265 20.2% Industrial 1,631 1,849 -11.8% Commercial 2,442 2,347 4.1% Others 2,902 2,107 37.7% Total 12,103 10,568 14.5%
Sales to the Captive Market (without RGE Sul) - GWh 1Q17 1Q16 Var. Residential 4,328 4,265 1.5% Industrial 1,417 1,849 -23.4% Commercial 2,103 2,347 -10.4% Others 2,160 2,107 2.5% Total 10,009 10,568 -5.3% Note: The tables with captive market sales by distributor are attached to this report in item 11.11.
The increase of 14.5% (1,535 GWh) in sales to the captive market, from 10,568 GWh in 1Q16 to 12,103 GWh in 1Q17, was influenced by the acquisition of RGE Sul. Disregarding the effect of this acquisition, the sales to the captive market would have totaled 10,009 GWh in 1Q17, representing a reduction of 5.3% (559 GWh), mainly due to the performance of the industrial and commercial classes, still reflecting the low economic activity and the migration to the free market, as explained before.
2.1.3) Free Clients
Free Client - GWh 1Q17 1Q16 Var. Industrial 4,032 3,297 22.3% Commercial 502 238 110.6% Others 77 44 77.5% Total 4,611 3,579 28.8%
Free Client (without RGE Sul) - GWh 1Q17 1Q16 Var. Industrial 3,618 3,297 9.7% Commercial 463 238 94.5% Others 77 44 75.4% Total 4,157 3,579 16.1%
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Free Client by Distributor - GWh 1Q17 1Q16 Var. CPFL Paulista 2,177 1,845 18.0% CPFL Piratininga 1,335 1,219 9.5% RGE 534 432 23.5% CPFL Santa Cruz 28 12 130.8% CPFL Jaguari 42 27 57.2% CPFL Mococa 7 7 -7.2% CPFL Leste Paulista 14 14 4.7% CPFL Sul Paulista 20 23 -10.9% RGE Sul (*) 454 - - Total 4,611 3,579 28.8% Note: (*) Considers the quantity of energy billed through the TUSD from 1Q17.
2.2) Contracted Demand (% - high voltage)
Contracted Demand Evolution | % compared to the same month of the previous year
Off Peak Peak 1.1% 1.3% 0.5% 0.5% 0.6% 0.1%
-0.2% -0.8% -0.6% -0.6%
Mar-16 Jun-16 Sep-16 Dec-16 Mar-17
2.3) Generation Installed Capacity
In 1Q17, the installed capacity of generation of CPFL Energia, considering the proportional stake in each project, reached 3,258 MW, representing an expansion of 4.2% compared to 1Q16. This increase is due to the commercial start-up of Mata Velha SHPP and Campo do Ventos and São Benedito Wind Complexes.
Generation Installed Capacity | MW
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Renewables Conventional 4.2%
3,128 3,258 929 14.2% 1,060
2,199 -0.1% 2,198
1Q16 1Q17
Note: Take into account CPFL Energia’s 51.61% stake in CPFL Renováveis.
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3) INFORMATION ON INTEREST IN COMPANIES AND CRITERIA OF FINANCIAL STATEMENTS CONSOLIDATION The interests directly or indirectly held by CPFL Energia in its subsidiaries and jointly-owned entities are described below. Except for: (i) the jointly-owned entities ENERCAN, BAESA, Foz do Chapecó and EPASA, that, as from January 1, 2013 are no longer proportionally consolidated in the Company’s financial statements, being their assets, liabilities and results accounted for using the equity method of accounting, and (ii) the investment in Investco S.A. recorded at cost by the subsidiary Paulista Lajeado, the other units are fully consolidated. As of March 31, 2017 and 2016, the participation of non-controlling interests stated in the consolidated statements refers to the third-party interests in the subsidiaries CERAN, Paulista Lajeado and CPFL Renováveis. Since November 1st, 2016 CPFL Energia is considering the full consolidation of RGE Sul.
Approximate number Equity Number of End of the Energy distribution Company Type Location (State) of consumers Concession term Interest municipalities concession (in thousands)
Direct Interior of São November Companhia Paulista de Força e Luz ("CPFL Paulista") Publicly-quoted corporation 234 4,324 30 years 100% Paulo 2027
Direct Interior and coast October Companhia Piratininga de Força e Luz ("CPFL Piratininga") Publicly-quoted corporation 27 1,702 30 years 100% of São Paulo 2028
Direct Interior of Rio November Rio Grande Energia S.A. ("RGE") Publicly-quoted corporation 255 1,466 30 years 100% Grande do Sul 2027
Indirect Interior of Rio November RGE Sul Distribuidora de Energia S.A. ("RGE Sul") Publicly-quoted corporation 118 1,324 30 years 100% Grande do Sul 2027
Direct Interior of São Companhia Luz e Força Santa Cruz ("CPFL Santa Cruz") Private corporation 27 210 30 years July 2045 100% Paulo and Paraná
Direct Interior of São Companhia Leste Paulista de Energia ("CPFL Leste Paulista") Private corporation 7 58 30 years July 2045 100% Paulo
Direct Interior of São Companhia Jaguari de Energia ("CPFL Jaguari") Private corporation 2 41 30 years July 2045 100% Paulo
Direct Interior of São Companhia Sul Paulista de Energia ("CPFL Sul Paulista") Private corporation 5 85 30 years July 2045 100% Paulo
Interior of São Direct Companhia Luz e Força de Mococa ("CPFL Mococa") Private corporation Paulo and Minas 4 47 30 years July 2045 100% Gerais
Number of plants / Installed capacity Energy generation (conventional and renewable sources) Company Type Equity Interest Location (State) type of energy Total CPFL participation
Direct 1 Hydroelectric, 3 CPFL Geração de Energia S.A. ("CPFL Geração") Publicly-quoted corporation São Paulo and Goiás 1,295 678 100% SHPPs (a)
Indirect CERAN - Companhia Energética Rio das Antas ("CERAN") Private corporation Rio Grande do Sul 3 Hydroelectric 360 234 65%
Indirect Santa Catarina and Foz do Chapecó Energia S.A. ("Foz do Chapecó") (b) Private corporation 1 Hydroelectric 855 436 51% Rio Grande do Sul
Indirect Campos Novos Energia S.A. ("ENERCAN") Private corporation Santa Catarina 1 Hydroelectric 880 429 48.72%
Indirect Santa Catarina and BAESA - Energética Barra Grande S.A. ("BAESA") Publicly-quoted corporation 1 Hydroelectric 690 173 25.01% Rio Grande do Sul
Indirect Centrais Elétricas da Paraíba S.A. ("EPASA") Private corporation Paraíba 2 Thermals 342 182 53.34%
Indirect Paulista Lajeado Energia S.A. ("Paulista Lajeado") Private corporation Tocantins 1 Hydroelectric 903 63 59.93% (c)
Indirect CPFL Energias Renováveis S.A. ("CPFL Renováveis") Publicly-quoted corporation See chapter 10.4.2 See chapter 10.4.2 See chapter 10.4.2 See chapter 10.4.2 51.61%
Direct CPFL Centrais Geradoras Ltda. ("CPFL Centrais Geradoras") Limited company São Paulo 6 MHPPs (d) 4 4 100% Notes: (a) SHPP – Small Hydroelectric Power Plant; (b) The joint venture Chapecoense fully consolidates the interim financial statements of its direct subsidiary, Foz de Chapecó; (c) Paulista Lajeado has a 7% participation in the installed power of Investco S.A. (5.94% share of its capital); (d) MHPP – Micro Hydroelectric Power Plant;
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Energy commercialization Company Type Core activity Equity Interest
Direct CPFL Comercialização Brasil S.A. ("CPFL Brasil") Private corporation Energy commercialization 100%
Commercialization and provision of Indirect Clion Assessoria e Comercialização de Energia Elétrica Ltda. ("CPFL Meridional") Limited company energy services 100%
Indirect CPFL Comercialização Cone Sul S.A. ("CPFL Cone Sul") Private corporation Energy commercialization 100%
Direct CPFL Planalto Ltda. ("CPFL Planalto") Limited company Energy commercialization 100%
Indirect CPFL Brasil Varejista S.A. ("CPFL Brasil Varejista") Private corporation Energy commercialization 100%
Services Company Type Core activity Equity Interest
Manufacturing, commercialization, rental and maintenance of electro- Direct CPFL Serviços, Equipamentos, Industria e Comércio S.A. ("CPFL Serviços") Private corporation mechanical equipment and service 100% provision
Direct NECT Serviços Administrativos Ltda. ("Nect") Limited company Provision of administrative services 100%
Provision of telephone answering Direct CPFL Atende Centro de Contatos e Atendimento Ltda. ("CPFL Atende") Limited company services 100%
Direct CPFL Total Serviços Administrativos Ltda. ("CPFL Total") Limited company Billing and collection services 100%
Direct CPFL Eficiência Energética S.A. ("CPFL ESCO") Private corporation Management in Energy Efficiency 100%
Direct TI Nect Serviços de Informática Ltda. ("Authi") (e) Limited company IT services 100%
Indirect CPFL GD S.A. ("CPFL GD") (f) Private corporation Electric energy generation services 100%
(e) In September, 2014 the direct subsidiary TI Nect Serviços de Informática Ltda. (“Authi”), was set up with the objective of providing informatics, information technology maintenance, system update, program development and customization and computer and peripheral equipment maintenance services; (f) The main objective of CPFL GD S.A., incorporated in August 2015 and fully controlled by CPFL Eficiência Energética S.A., is the provision of general consultancy services in the electric energy market and commercialization of assets related to the electric energy generation plants;
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Others Company Type Core activity Equity Interest
Direct CPFL Jaguariúna Participações Ltda. ("CPFL Jaguariúna") Limited company Venture capital company 100%
Direct CPFL Jaguari de Geração de Energia Ltda. ("Jaguari Geração") Limited company Venture capital company 100%
Indirect Chapecoense Geração S.A. ("Chapecoense") Private corporation Venture capital company 51%
Indirect Sul Geradora Participações S.A. ("Sul Geradora") Private corporation Venture capital company 99.95%
Direct CPFL Telecom S.A. ("CPFL Telecom") Private corporation Telecommunication services 100%
Indirect CPFL Transmissão Piracicaba S.A. ("CPFL Transmissão Piracicaba") Private corporation Electric energy transmission services 100%
Indirect CPFL Transmissão Morro Agudo S.A. ("CPFL Transmissão Morro Agudo") (g) Private corporation Electric energy transmission services 100%
(g) The incorporation of CPFL Transmissora Morro Agudo S.A., subsidiary of CPFL Geração, was approved in January 2015, with the objective of building and operating electric energy transmission concessions, including construction, implementation, operation and maintenance of transmission facilities of the basic network of the Interlinked National System (“SIN”).
3.1) Consolidation of CPFL Renováveis Financial Statements On March 31, 2017, CPFL Energia indirectly held 51.61% of CPFL Renováveis, through its subsidiary CPFL Geração. CPFL Renováveis has been fully consolidated (100%, line by line), in CPFL Energia’s financial statements since August 1, 2011, and the interest held by the non-controlling shareholders has been mentioned bellow the net income line (in the Financial Statements), as “Non-Controlling Shareholders’ Interest”, and in the Shareholders Equity (in the Balance Sheet) in the line with the same name.
3.2) Consolidation of RGE Sul Financial Statements On March 31, 2017, CPFL Energia indirectly held 100% of RGE Sul, through its subsidiary CPFL Jaguariúna. RGE Sul has been fully consolidated (100%, line by line), in CPFL Energia’s financial statements since November 1st, 2016. In the analysis presented in this report, we consider the impact of the inclusion of RGE Sul as an isolated item.
3.3) Economic-Financial Performance Presentation In accordance with U.S. SEC (Securities and Exchange Commission) guidelines and pursuant to items 100(a) and (b) of Regulation G, with the disclosure of 4Q16/2016 results, in order to avoid the disclosure of non-GAAP measures, we no longer disclose the economic-financial performance considering the proportional consolidation of the generation projects and the adjustment of the numbers for non-recurring items, focusing the disclosure in the IFRS criterion. Only in chapter 5, of Indebtedness, we continue presenting the information in the financial covenants criterion, considering that the proper reconciliation with the numbers in the IFRS criterion are presented in item 11.12 of this report.
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4) ECONOMIC-FINANCIAL PERFORMANCE
Consolidated Income Statement - CPFL ENERGIA (R$ Million) 1Q17 1Q16 Var. Gross Operating Revenue 8,730 7,586 15.1% Net Operating Revenue 5,539 4,337 27.7% Cost of Electric Power (3,221) (2,528) 27.4% Operating Costs & Expenses (1,579) (1,146) 37.8% EBIT 739 663 11.5% EBITDA1 1,196 1,035 15.6% Financial Income (Expense) (436) (319) 36.7% Income Before Taxes 383 408 -6.0% Net Income 232 232 -0.1% Note: (1) EBITDA is calculated from the sum of net income, taxes, financial result and depreciation/amortization, according to CVM Instruction no. 527/12. See the calculation in item 4.6 of this report.
4.1) Opening of economic-financial performance by business segment
Income Statement by business segment - CPFL Energia (R$ million) Conventional Renewable Commerciali- Distribution Services Others Eliminations Total Generation Generation zation 1Q17 Net operating revenue 4,462 257 387 621 103 43 (335) 5,539 Operating costs and expenses (3,837) (47) (151) (580) (86) (58) 335 (4,423) Depreciation e amortization (189) (31) (151) (1) (4) (1) - (376) Income from electric energy service 437 179 86 40 13 (15) - 739 Equity accounting - 80 - - - - - 80 EBITDA 626 290 236 41 18 (15) - 1,196 Financial result (182) (100) (124) (13) 1 (19) - (436) Income (loss) before taxes 256 159 (38) 27 15 (35) - 383 Income tax and social contribution (105) (27) (12) (10) (4) 7 - (151) Net income (loss) 150 132 (50) 17 11 (27) - 232
1Q16 (Resubmitted) Net operating revenue 3,527 237 291 432 85 9 (243) 4,337 Operating costs and expenses (2,936) (51) (123) (415) (68) (16) 243 (3,366) Depreciation e amortization (139) (31) (133) (1) (3) (1) - (308) Income from electric energy service 452 155 34 16 14 (8) - 663 Equity accounting - 63 - - - - - 63 EBITDA 591 249 168 17 18 (7) - 1,035 Financial result (91) (84) (134) 4 1 (15) - (319) Income (loss) before taxes 361 134 (100) 19 15 (23) - 408 Income tax and social contribution (139) (25) (7) (6) (5) 6 - (175) Net income (loss) 222 110 (107) 14 10 (16) - 232
Variation Net operating revenue 26.5% 8.6% 33.2% 43.8% 21.0% 404.4% 37.7% 27.7% Operating costs and expenses 30.7% -8.2% 22.6% 39.8% 26.2% 268.7% 37.7% 31.4% Depreciation e amortization 35.7% -0.4% 13.2% -6.4% 45.5% 13.3% - 22.2% Income from electric energy service -3.2% 16.0% 148.8% 150.9% -8.5% 95.2% - 11.5% Equity accounting - 25.6% - - - - - 25.6% EBITDA 5.9% 16.4% 41.0% 141.8% 0.8% 104.9% - 15.6% Financial result 99.6% 19.5% -7.8% - 75.6% 30.9% - 36.7% Income (loss) before taxes -29.2% 18.3% -61.9% 36.9% -4.3% 53.5% - -6.0% Income tax and social contribution -24.1% 10.4% 68.2% 68.9% -18.9% 22.2% - -13.8% Net income (loss) -32.3% 20.1% -53.1% 23.5% 2.5% 65.1% - -0.1% Note: an analysis of the economic-financial performance by business segment is presented in chapter 10.
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4.2) Reclassification of the Concession Financial Asset
The Company and its electric energy distribution subsidiaries, aiming at the better presentation of their operational and financial performance, concluded that the adjustment of expectation of the cash flow of the indemnable financial asset of the concession of each distributor, originally presented under financial revenue item, in financial result, should be more adequately classified in the operating revenues group, together with other revenues related to its activity. This allocation reflects more accurately the business model of electric energy distribution and provides a better presentation regarding its performance. Pursuant to CPC 23 / IAS 8 - Accounting Policies, Changes in Estimates and Error Rectification, the CPFL Energia and its Subsidiaries changed their accounting policy previously adopted by an accounting policy that better reflects the performance of the Company's and its subsidiaries' businesses and, therefore, reclassified retrospectively into their income statements for 1Q16.
4.3) Sectoral Financial Assets and Liabilities
In 1Q17, it was accounted the total sectoral financial liabilities in the amount of R$ 565 million, compared to the total sectoral financial liabilities in the amount of R$ 732 million in 1Q16, a reduction of 22.8% (R$ 167 million). On March 31, 2017, the balance of these sectoral financial assets and liabilities was negative in R$ 1,525 million, compared to a negative balance of R$ 915 million on December 31, 2016 and a positive balance of R$ 707 million on March 31, 2016. As established by the applicable regulation, any sectoral financial assets or liabilities shall be included in the tariffs of the distributors in their respective annual tariff events.
4.4) Operating Revenue
In 4Q16, gross operating revenue reached R$ 8,730 million, representing an increase of 15.1% (R$ 1,145 million). Deductions from the gross operating revenue was of R$ 3,192 million in 1Q17, representing a reduction of 1.8% (R$ 57 million). Net operating revenue reached R$ 5,539 million in 1Q17, registering an increase of 27.7% (R$ 1,202 million). The main factors that affected the net operating revenue were: Increase of revenues in the Distribution segment, in the amount of R$ 935 million, mainly due to the acquisition of RGE Sul (for more details, see item 10.1.1.2); Increase of revenues in the Commercialization segment, in the amount of R$ 189 million; Increase of revenues in CPFL Renováveis, in the amount of R$ 97 million; Increase of revenues in Others, in the amount of R$ 35 million; Increase of revenues in the Conventional Generation segment, in the amount of R$ 20 million; Increase of revenues in the Services segment, in the amount of R$ 18 million; Partially offset by: Reduction of R$ 92 million, due to the eliminations.
4.5) Cost of Electric Energy
In the analysis presented in this report, we consider the impact of the inclusion of RGE Sul as an
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isolated item. In 1Q17, the cost of electric energy, comprising the purchase of electricity for resale and charges for the use of the distribution and transmission system, amounted to R$ 3,221 million, registering an increase of 27.4% (R$ 693 million). The factors that explain these variations follow below: The cost of electric power purchased for resale reached R$ 3,018 million in 1Q17, an increase of 39.4% (R$ 852 million), due to the following factors: (i) Impact of the inclusion of RGE Sul in our consolidation in 1Q17. The total cost of electric power purchased for resale in relation to RGE Sul (which was not included in our consolidation in 1Q16) totaled R$ 419 million for 1Q17; (ii) Increase of 27.1% (R$ 496 million) in the cost of energy purchased through auction in the regulated environment and bilateral contracts, due to the increases of 10.8% in the average purchase price (R$ 170.98/MWh in 1Q17 vs. R$ 154.37/MWh in 1Q16) and of 14.8% (1,750 GWh) in the volume of purchased energy; (iii) Increase in the amount of energy purchased in the spot market/PROINFA cost (R$ 63 million); Partially offset by: (iv) Reduction of 15.2% (R$ 83 million) in the cost of energy from Itaipu, due to the reductions of 11.9% in the average purchase price (R$ 191.38/MWh in 1Q17 vs. R$ 217.28/MWh in 1Q16) and of 3.8% (94 GWh) in the volume of purchased energy; (v) Increase of 19.3% (R$ 42 million) in PIS and COFINS tax credits (cost reducer), generated from the energy purchase.
Charges for the use of the transmission and distribution system reached R$ 202 million in 1Q17, a reduction of 44.1% (R$ 160 million), due to the following factors: (i) Variation of R$ 198 million in the System Service Usage Charges – ESS, from an expense of R$ 127 million in 1Q16 to a revenue of R$ 71 million in 1Q17; (ii) Variation of R$ 31 million in Reserve Energy Charges – EER, since there was no registration of this charge in 1Q17 and there was a revenue of financial resources derived from the Reserve Energy Account (CONER) in the amount of R$ 31 million in 1Q16; Partially offset by: (iii) Impact of the inclusion of RGE Sul in our consolidation in 1Q17. The total charges for the use of the transmission and distribution system in relation to RGE Sul (which was not included in our consolidation in 1Q16) totaled R$ 38 million for 1Q17; (iv) Increase of R$ 10 million in the basic network, connection and usage of the distribution system charges; (v) Reduction of 59.4% (R$ 21 million) in PIS and COFINS tax credits (cost reducer), generated from the charges.
4.6) Operating Costs and Expenses
For this report, we regarded the impact of RGE Sul as an isolated item. Operating costs and expenses were R$ 1,579 million in 1Q17, an increase of 37.8% (R$ 433 million) if compared to 1Q16 that reached R$ 1,146 million, due to the following factors:
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PMSO PMSO item, that reached R$ 759 million in 1Q17, compared to R$ 607 million in 1Q16, an increase of 25.1% (R$ 152 million).
Reported PMSO (R$ million)
Variation 1Q17 1Q16 R$ MM %
Reported PMSO (IFRS)
Personnel (332.5) (245.0) (87.5) 35.7%
Material (55.1) (39.8) (15.3) 38.5%
Outsourced Services (185.3) (149.2) (36.0) 24.1%
Other Operating Costs/Expenses (185.9) (172.7) (13.2) 7.7% Allowance for doubtful accounts (46.7) (46.1) (0.6) 1.4%
Legal, judicial and indemnities expenses (55.1) (59.6) 4.4 -7.5%
Others (84.1) (67.1) (17.0) 25.4%
Total Reported PMSO (IFRS) - A (758.8) (606.7) (152.1) 25.1%
PMSO RGE Sul
Personnel (41.5)
Material (8.7)
Outsourced Services (31.1)
Other Operating Costs/Expenses (23.2)
Allowance for doubtful accounts (8.0)
Legal, judicial and indemnities expenses (1.7) Others (13.5)
Total PMSO RGE Sul - B (104.6)
PMSO without RGE Sul
Personnel (291.0) (245.0) (46.0) 18.8%
Material (46.4) (39.8) (6.6) 16.6%
Outsourced Services (154.1) (149.2) (4.9) 3.3% Other Operating Costs/Expenses (162.7) (172.7) 10.0 -5.8%
Allowance for doubtful accounts (38.7) (46.1) 7.4 -16.0%
Legal, judicial and indemnities expenses (53.4) (59.6) 6.1 -10.3%
Others (70.6) (67.1) (3.6) 5.3%
Total PMSO - (A) - (B) (654.2) (606.7) (47.5) 7.8%
(i) Personnel - increase of 35.7% (R$ 88 million), mainly due to: RGE Sul acquisition (R$ 41 million); Collective bargaining agreement – wages and benefits (R$ 18 million);
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Increase in the Services segment business, due to business expansion of CPFL Serviços, CPFL Atende, Nect and CPFL Eficiência (R$ 15 million); Other effects (R$ 4 million);
(ii) Material – increase of 38.5% (R$ 15 million), mainly explained by: RGE Sul acquisition (R$ 9 million); Services business segment increase (R$ 3 million); Distribution segment business increase (R$ 3 million);
(iii) Out-sourced services - increase of 24.1% (R$ 36 million), mainly due to RGE Sul acquisition (R$ 31 million) and other effects (R$ 5 million);
(iv) Other operational costs/expenses - increase of 7.7% (R$ 13 million), mainly due to increase in the expenses in: RGE Sul acquisition (R$ 23 million); Collection fee expenses increase (R$ 4 million); Write-off assets (R$ 3 million); GSF risk premium payment – Conventional Generation segment business and CPFL Renováveis (R$ 2 million); Increase of the expenses with collecting actions (R$ 2 million); Partially offset by: Reduction in allowance for doubtful account (R$ 7 million); Reduction of 10.3% in legal and judicial expenses (R$ 6 million); Reduction of 18.3% in leases and rental (R$ 2 million); Reduction of regulatory penalties – DIC, FIC, DMIC and DICRI (R$ 1 million); Other effects (R$ 5 million).
Other operating costs and expenses Other operating costs and expenses reached R$ 820 million in 1Q17, compared to R$ 539 million in 1Q16, registering an increase of 52.1% (R$ 281 million), with the variations below: Acquisition of RGE Sul (R$ 133 million); Increase of 91.0% (R$ 113 million) in cost of building the concession´s infrastructure; Increase of 87.0% (R$ 12 million) in Private Pension Fund expenses, due to actuarial report update; Increase of 9.1% (R$ 22 million) in Depreciation and Amortization; Increase of 1.3% (R$ 1 million) in Amortization of Intangible of Concession Asset.
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4.7) EBITDA
In 1Q17, EBITDA reached R$ 1,196 million, registering an increase of 15.6% (R$ 161 million). EBITDA is calculated according to CVM Instruction no. 527/12 and showed in the table below:
EBITDA and Net Income conciliation (R$ million)
1Q17 1Q16 Var.
Net Income 232 232 -0.1%
De preciation and Amortization 377 308
Financial Result 436 319
Income Tax / Social Contribution 151 175
EBITDA 1,196 1,035 15.6%
4.8) Financial Result
Financial Result (R$ Million) 1Q17 1Q16 Var. Revenues Income from Financial Investments 160 132 20.9% Additions and Late Payment Fines 73 57 28.1% Fiscal Credits Update 3 3 0.7% Judicial Deposits Update 13 9 52.8% Monetary and Foreign Exchange Updates 30 55 -44.4% Discount on Purchase of ICMS Credit 3 7 -55.9% Sectoral Financial Assets Update - 49 - PIS and COFINS - over Other Financial Revenues (15) (21) -30.7% Others 13 22 -42.7% Total 281 312 -10.1%
Expenses Debt Charges (485) (431) 12.7% Monetary and Foreign Exchange Updates (184) (153) 20.2% (-) Capitalized Interest 24 13 88.8% Sectoral Financial Liabilities Update (27) (2) 1431.0% Use of Public Asset (3) (4) -13.0% Others (42) (55) -24.4% Total (717) (631) 13.5%
Financial Result (436) (319) 36.7%
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Financial Result (without RGE Sul) (R$ Million) 1Q17 1Q16 Var. Revenues Income from Financial Investments 155 132 17.0% Additions and Late Payment Fines 56 57 -1.7% Fiscal Credits Update 3 3 0.7% Judicial Deposits Update 12 9 43.4% Monetary and Foreign Exchange Updates 31 55 -43.3% Discount on Purchase of ICMS Credit 3 7 -55.9% Sectoral Financial Assets Update - 49 - PIS and COFINS - over Other Financial Revenues (13) (21) -38.1% Others 12 22 -46.7% Total 259 312 -17.1%
Expenses Debt Charges (443) (431) 2.9% Monetary and Foreign Exchange Updates (180) (153) 18.1% (-) Capitalized Interest 23 13 82.5% Sectoral Financial Liabilities Update (26) (2) 1368.3% Use of Public Asset (3) (4) -13.0% Others (37) (55) -31.8% Total (667) (631) 5.7%
Financial Result (408) (319) 28.0%
In the analysis presented in this report, we consider the impact of the inclusion of RGE Sul as an isolated item. In 1Q17, net financial expense was of R$ 436 million, an increase of 36.7% (R$ 117 million) compared to the net financial expense of R$ 319 million reported in 1Q16. The items explaining these variations in Financial Result are as follows: Financial Revenues: a reduction of 10.1% (R$ 32 million), from R$ 312 million in 1Q16 to R$ 281 million in 1Q17, mainly due to the following factors: (i) Variation of R$ 49 million in sectoral financial assets update, since there was no balance to be updated in 1Q17 and there was a revenue in the amount of R$ 49 million in 1Q16; (ii) Reduction of 43.3% (R$ 24 million) in the monetary and foreign exchange updates, due to: (a) the reduction of R$ 13 million in the gain with the zero-cost collar derivative1; (b) the reduction of R$ 8 million in revenues from fines, interest and monetary adjustment relating to installment payments made by consumers; and (c) the reduction of R$ 3 million in the update of the balance of tariff subsidies, as determined by ANEEL; (iii) Reduction of 46.7% (R$ 10 million) in other financial revenues;
1 In 2015, subsidiary CPFL Geração contracted US$ denominated put and call options, involving the same financial institution as counterpart, and which on a combined basis are characterized as an operation usually known as zero-cost collar. The contracting of this operation does not involve any kind of speculation, inasmuch as it is aimed at minimizing any negative impacts on future revenues of the joint venture ENERCAN, which has electric energy sale agreements with annual restatement of part of the tariff based on the variation in the US$. In addition, according to Management’s view, the scenario was favorable for contracting this type of financial instrument, considering the high volatility implicit in dollar options and the fact that there was no initial cost for same.
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(iv) Reduction of 55.9% (R$ 4 million) in discount on the acquisition of ICMS credit; (v) Reduction of 1.7% (R$ 1 million) in additions and late payment fines; Partially offset by: (vi) Increase of 17.0% (R$ 23 million) in the income from financial investments, due mainly to the increase in the average balance of investments; (vii) Impact of the inclusion of RGE Sul in our consolidation in 1Q17. The total financial revenue in relation to RGE Sul (which was not included in our consolidation in 1Q16) totaled R$ 22 million for 1Q17; (viii) Reduction of 38.1% (R$ 8 million) in PIS and COFINS over Other Financial Revenue (revenue reducer); (ix) Increase of 43.4% (R$ 4 million) in judicial deposits update.
Financial Expenses: an increase of 13.5% (R$ 85 million), from R$ 631 million in 1Q16 to R$ 717 million in 1Q17, mainly due to the following factors: (i) Impact of the inclusion of RGE Sul in our consolidation in 1Q17. The total financial expense in relation to RGE Sul (which was not included in our consolidation in 1Q16) totaled R$ 50 million for 1Q17; (ii) Increase of 18.1% (R$ 28 million) in the monetary and foreign exchange updates, due to: (a) the mark-to-market negative effect for financial operations under Law 4,131 – non-cash effect (R$ 19 million); (b) the increase of debt charges in foreign currency, with swap to CDI interbank rate (R$ 14 million), reflecting the increase in the stock of debt; partially offset by (c) the effect of Itaipu’s exchange variation (R$ 5 million); (iii) Increase of R$ 24 million in sectoral financial liabilities update, from an expense of R$ 2 million in 1Q16 to an expense of R$ 26 million in 1Q17; (iv) Increase of 2.9% (R$ 12 million) of debt charges in local currency, reflecting the increase in the stock of debt; Partially offset by: (v) Reduction of 31.8% (R$ 17 million) in other financial expenses; (vi) Increase of 82.5% (R$ 11 million) in capitalized interest (expense reducer); (vii) Reduction of 13.0% (R$ 1 million) in the financial expenses with the Use of Public Asset (UBP).
4.9) Net Income
In 1Q17, net income was R$ 232 million, registering a reduction of 0.1%.
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5) DEBT 5.1) Debt (IFRS)
Financial Debt1 - IFRS R$ billion
+12.3%
21.9 1.1 18.9 0.5 20.9 18.4
1Q16 1Q17 Financial Debt PPF (Fundação Cesp) 1) Do not consider mark-to-market effects and borrowing costs.
Indexation after Hedge1 – 1Q16 vs. 1Q17
1Q16
6%
22%
72%
Interbank Rate - CDI TJLP Pre-fixed
1Q17
5%
21%
74%
Interbank Rate - CDI TJLP Pre-fixed
1) For debt linked to foreign currency (24% of total in 1Q17), swaps are contracted, which convert indexing for CDI;
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Net Debt and Leverage in IFRS IFRS - R$ Million 1Q17 1Q16 Var. % Financial Debt (including hedge) (20,866) (18,442) 13.1% (+) Available Funds 4,878 4,406 10.7% (=) Net Debt (15,988) (14,036) 13.9%
5.2) Debt in Financial Covenants Criteria 5.2.1) Debt Amortization Schedule in Financial Covenants Criteria
CPFL Energia has always adopted a solid and conservative financial policy. Thus, the Company has used since 2011, a prefunding strategy, in other words, forecasts the cash needs for the next 24 months and anticipates market access on more favorable terms of liquidity and cost. Thus, at the beginning of 2016, CPFL Energia had worked in 2017 and 2018 prefunding.
Debt Amortization Schedule in Financial Covenants Criteria (Mar-17)1
Cash Coverage: 1.39x Short term amortization (12M)
4,510
Short-term2 Long-term
1) Considers only the principal debt of R$ 18,162 million, excluding accrued interests of R$ 546 million and including other adjustments in the amount of R$ 103 million) to reach in the debt value of R$ 18,606 million in the Covenant criteria; 2) Short-term (Apr-17 – Mar-18) = R$ 3,441 million.
The cash position at the end of 1Q17 had a coverage ratio of 1.39x the amortizations of the next 12 months, enough to honor all amortization commitments until the end of 1H18. The average amortization term, calculated by this schedule, is 2.80 years.
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5.2.2) Indexation and Debt Cost in Financial Covenants Criteria
Indexation1 After Hedge2 in Financial Covenants Criteria – 1Q16 vs. 1Q17
1Q16
6%
20%
74%
Interbank Rate - CDI TJLP Pre-fixed
1Q17
5%
19%
76%
Interbank Rate - CDI TJLP Pre-fixed
1) Considering proportional consolidation of CPFL Renováveis, CERAN, BAESA, ENERCAN, Foz do Chapecó and EPASA; 2) For debt linked to foreign currency (24% of total), swaps are contracted, which convert the indexation to CDI. The debt amount indexed in Interbank Rate (CDI) increased from 74% to 76.0%, mainly due to the R$ 620 million borrowed by CPFL Energia (holding) and R$ 400 million by CPFL Brasil through debentures emission in 4Q16. Additionally, In 1Q17 there were debentures emission in amount of R$ 786 million from RGE, CPFL Piratinga and CPFL Renováveis (holding).
Gross Debt Cost1 in Financial Covenants Criteria – LTM
13.7% 13.8% 13.9% 12.7% 13.7% 13.6% 10.3% 9.0% 8.4% 8.6% 7.0% 5.0% 4.0% 4.5% 3.0% 3.7%
2.4% 1.9%
2012 2013 2014 2015
1Q16 2Q16 3Q16 4Q16 1Q17
1) Adjusted by the proportional consolidation since 2012; Financial debt (+) private pension fund (-) hedge.
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5.3) Net Debt in Financial Covenants Criteria and Leverage
In 1Q17, Pro forma Net Debt totaled R$ 13,837 million, an increase of 13.0% compared to net debt position at the end of 1Q16 in the amount of R$ 12,241 million. The increase in Net Debt in 1Q17 was mainly due to the acquisition of RGE Sul, which was consolidated in November 2016.
Covenant Criteria (*) - R$ Million 1Q17 1Q16 Var. Financial Debt (including hedge)1 (18,606) (16,478) 12.9% (+) Available Funds 4,768 4,237 12.5% (=) Net Debt (13,837) (12,241) 13.0% EBITDA Proforma2 4,192 3,577 17.2% Net Debt / EBITDA 3.30x 3.42x -0.20x
1) Considering proportional consolidation of CPFL Renováveis, CERAN, BAESA, ENERCAN, Foz do Chapecó and EPASA; 2) Adjusted EBITDA in the covenants criteria: adjusted according to equivalent participation of CPFL Energia in each of its subsidiaries, with the inclusion of regulatory assets and liabilities and the historical EBITDA of newly acquired projects.
In line with the criteria for calculation of financial covenants of loan agreements with financial institutions, net debt is adjusted according to the equivalent stake of CPFL Energia in each of its subsidiaries. Also, include in the calculation of adjusted EBITDA the effects of historic EBITDA of newly acquired projects. Considering that, adjusted net debt totaled R$ 13,837 million and EBITDA Proforma in the last 12 months reached R$ 4,192 million, the ratio adjusted Net Debt / EBITDA Proforma at the end of 1Q17 reached 3.30x.
6) INVESTMENTS 6.1) Capital Expenditures
Investments (R$ Million) Segment 1Q17 1Q16 Var. Distribution 347 208 67.0% Generation - Conventional 0 3 -89.7% Generation - Renew able 283 227 24.4% Commercialization 0 1 -86.7% Services and Others1 13 7 80.6% Subtotal 643 446 44.2% Transmission 38 3 1102.0% Total 681 449 51.6% Special Obligations 64 44 46.8%
Note: 1) Others – basically refer to assets and transactions that are not related to the listed segments.
In 1Q17, R$ 643 million were invested, an increase of 44.2% if compared to 1Q16. In addition, there was an investment of R$ 38 million in the quarter related to the transmission lines construction of CPFL Transmissão Morro Agudo, which, according to the requirements of IFRIC 12, was recorded as “Financial Asset of Concession” (non-current assets). CPFL Energia also accounted for R$ 64 million in Special Obligations in the quarter, among other items financed by the consumer.
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We highlight investments made by CPFL Energia in each segment: (i) Distribution: a. Expansion and strengthening of the electric system; b. Electricity system maintenance and improvements; c. Operational infrastructure; d. Upgrade of management and operational support systems; e. Customer help services; f. Research and development programs. (ii) Generation: a. Mainly on Campo dos Ventos and São Benedito Wind Complexes; b. Pedra Cheirosa Wind Complex.
6.2) Projected Capital Expenditures
On April 28, 2017, CPFL Energia’s Board of Directors approved Board of Executive Officers’ proposal for 2017 Annual Budget and 2018/2021 Multiannual Plan for the Company, which was previously discussed by the Budget and Corporate Finance Commission. Projections already include expected investments for RGE Sul.
Projected Capital Expenditures (R$ million)1
Total: Distribution2: Generation3: Trading & Services: Transmission: R$ 10,438 million R$ 9,222 million R$ 1,011 million R$ 157 million R$ 48 million
2,770 48 2,288 87 2,033 1,982 51 740 1,914 22 1,739 51 14 18 134 62 39 17 986 36
1,895 1,877 1,906 1,857 1,687 1,201
2016 Actual 2017 2018 2019 2020 2021
Notes: 1) Constant currency; 2) Disregard investments in Special Obligations on Distribution segment (among other items financed by consumers); 3) Conventional + Renewable.
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7) STOCK MARKETS 7.1) Stock Performance
CPFL Energia is listed on both the B3 (Novo Mercado) and the New York Stock Exchange (NYSE) (ADR Level III), segments with the highest levels of corporate governance.
B3 NYSE Date CPFE3 (R$) IEE IBOV Date CPL (US$) DJBr20 Dow Jones 03/31/2016 R$ 18.76 27,859 50,055 03/31/2016 $ 10.69 14,334 17,685 12/31/2016 R$ 24.99 36,108 60,227 12/31/2016 $ 15.27 18,751 19,763 03/31/2017 R$ 25.77 39,971 64,984 03/31/2017 $ 16.39 21,073 20,663 QoQ 3.1% 10.7% 7.9% QoQ 7.3% 12.4% 4.6% YoY 37.4% 43.5% 29.8% YoY 53.3% 47.0% 16.8%
On March 31, 2017 the price shares closed at R$ 25.77 per share on the B3 and US$ 16.39 per ADR on the NYSE, which represented a variation in the quarter of 3.1% and 7.3% respectively. In the last 12 months, the shares appreciated 37.4% on B3 and the ADR appreciated 53.3% on the NYSE.
7.2) Daily Average Volume
The daily trading volume in 1Q17 averaged R$ 49.3 million, of which R$ 34.9 million on the B3 and R$ 14.4 million on the NYSE, representing an increase of 21.1% compared to 1Q16. The number of trades on the B3 decreased by 60.4%, from a daily average of 8,492, in 1Q16, to 3,363, in 1Q17.
Daily Average Volume R$ Million
59.2 63.0 58.1 55.4 14.1 49.3 40.7 21.4 17.7 16.4 14.4 12.4 48.9 36.8 41.5 38.9 28.3 34.9
1Q16 2Q16 3Q16 4Q16 2016 1Q17
B3 NYSE
Note: Considers the sum of the average daily volume on the B3 and NYSE.
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8) CORPORATE GOVERNANCE
The corporate governance model adopted by CPFL Energia and its subsidiaries is based on the principles of transparency, equity, accountability and corporate responsibility. In 2016, CPFL marked 12 years since being listed on the BM&FBovespa and the New York Stock Exchange (“NYSE”). With more than 100 years of history in Brazil, the Company’s shares are listed on the Novo Mercado Special Listing Segment of the BM&FBovespa with Level III ADRs, a special segment for companies that comply with corporate governance best practices. All CPFL shares are common shares, entitling all shareholders the right to vote with 100% Tag Along rights guaranteed in case of sale of shareholding control. CPFL’s Management is composed of the Board of Directors (“Board”), its decision-making authority, and the Board of Executive Officers, its executive body. The Board is responsible for defining the strategic business direction of the holding company and subsidiaries, and is composed of 7 members, whose term of office is 1 year and who are eligible for reelection. At the Ordinary and Extraordinary General Meetings held on April 28, 2017, 7 members were elected (of which 2 independent members). The Bylaws of the Board establishes the procedures for evaluating the directors, under the leadership of the Chairman, their main duties and rights. The Board set up three advisory committees (Management Processes, Risks and Sustainability, People Management and Related Parties), all coordinated by a director, which support the Board in its decisions and monitor relevant and strategic themes, such as people and risk management, sustainability, the surveillance of internal audits and analysis of transactions with Parties Related to controlling shareholders and handling of incidents recorded through complaint hotlines and ethical conduct channels. At a meeting of the Board of Directors, held on February 17, 2017, the new members of the advisory committees were elected. The Board of Executive Officers is made up of 1 Chief Executive Officer and 6 Vice Presidents, with terms of two years, eligible for reelection, responsible for executing the strategy of CPFL Energia and its subsidiaries as defined by the Board of Directors in line with corporate governance guidelines. To ensure alignment of governance practices, Executive Officers sit on the Boards of Directors of companies that make up the CPFL group and nominate their respective executive officers. At the Ordinary and Extraordinary General Meetings held on April 28, 2017, among the amendments to the Bylaws, which were approved, is the amendment to article 18, which changes the number of members of the Board of Executive Officers, creates the position of Deputy Chief Executive Officer and modifies the nomenclature of some of the positions of the Board of Executive Officers. CPFL has a permanent Fiscal Council that also exercises the duties of the Audit Committee, in line with Sarbanes-Oxley law (SOX) rulings applicable to foreign companies listed on U.S. stock exchanges. At the Ordinary and Extraordinary General Meetings held on April 28, 2017, 3 acting members and 3 deputy members were elected. The guidelines and documents on corporate governance are available at the Investor Relations website http://www.cpfl.com.br/ir.
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9) SHAREHOLDERS STRUCTURE
CPFL Energia is a holding company that owns stake in other companies. State Grid Corporation of China (SGCC) controls CPFL Energia through its subsidiaries State Grid International Development Co., Ltd, State Grid International Development Limited (SGID), International Grid Holdings Limited, State Grid Brazil Power Participações Ltda. (SGBP) and ESC Energia S.A.:
Free Float
54.6% 45.4%
100% 100% 100% 59.93% Paulista Lajeado 100% 100% 5.94% 99.95% Investco 100% 100% CPFL Centrais Geradoras
100% GENERATION 2 DISTRIBUTION 100% 100% Serra da Mesa HPP 1 100% 65% 51.54% 100% COMMERCIALIZATION 25.01% 48.72% 100% 100% 53.34% 100% 100% 51% 100% 100% SERVICES 100% Nect Serviços / Authi 100% 100% 51.61%
100% CPFL GD RENEWABLE
Reference date: 03/31/2017 Notes: (1) 51.54% stake of the availability of power and energy of Serra da Mesa HPP, regarding the Power Purchase Agreement between CPFL Geração and Furnas; (2) CPFL Energia holds a stake in RGE Sul through the CPFL Jaguariúna.
9.1) Launch of Envo
On May 3, 2017, CPFL Energia released through an Announcement to the Market that, on that date, it was setting up a new company, Envo, to provide distributed solar power generation services to residential as well as small commercial and industrial clients. Envo broadens the portfolio of energy products and services offered by the CPFL Group to its consumers and consolidates the strategy of growth with the focus on sustainable businesses and renewable energy. Envo will initially focus its sales efforts and operations on cities in the region of Campinas, Sorocaba, Jundiaí and surrounding areas. As such, the service will be available to cities in the interior region of São Paulo, such as Jundiaí, Sorocaba, Vinhedo, Hortolândia, Indaiatuba, Valinhos, Paulínia, Americana, Itatiba, Jaguariúna, Piracicaba, Sumaré and Pedreira, in addition to Campinas and other regions. The Company has plans to expand to other regions in the state. CPFL Energia believes that distributed solar power generation is one of the most promising markets in Brazil’s electricity sector and its investment in this segment is in line with the CPFL Group’s efforts to generate new businesses focused on the low carbon economy, such as investments in renewable energy, energy efficiency and digitization of the electricity network, in addition to research in the field of electric mobility and storage. According to the business model,
Página 28 de 64 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c 1Q17 Results | May 11, 2017 the Company will be responsible for all stages of the project for the client. Envo’s operations will span from technical design (evaluating items such as energy consumption, structural conditions of the building, levels of solar radiation and shadows at the place), as well as the sale and installation of the complete solution, to approval of the consumer at the distributor and intermediating the installation of digital meters. More information is available at the Envo website (www.envo.com.br).
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10) PERFORMANCE OF THE BUSINESS SEGMENTS 10.1) Distribution Segment 10.1.1) Economic-Financial Performance
Consolidated Income Statement - Distribution (Pro-forma - R$ Million) 1Q17 1Q16 Var. Gross Operating Revenue 7,536 6,686 12.7% Net Operating Revenue 4,462 3,527 26.5%
Cost of Electric Power (2,810) (2,225) 26.3% Operating Costs & Expenses (1,215) (850) 43.0% EBIT 437 452 -3.2% EBITDA (1) 626 591 5.9% Financial Income (Expense) (182) (91) 99.6% Income Before Taxes 256 361 -29.2%
Net Income 150 222 -32.3% Notes: (1) EBITDA (IFRS) is calculated from the sum of net income, taxes, financial result and depreciation/amortization, as CVM Instruction no. 527/12; (2) The distributors’ financial performance tables are attached to this report in item 11.12.
10.1.1.1) Reclassification of the Adjustments to the Concession´s Financial Asset The distribution subsidiaries, aiming at the better presentation of their operational and financial performance, concluded that the adjustment of expectation of the cash flow of the indemnable financial asset of the concession of each distributor, originally presented under financial revenue item, in financial result, should be more adequately classified in the operating revenues group, together with other revenues related to its activity. This allocation reflects more accurately the business model of electric energy distribution and provides a better presentation regarding its performance. Pursuant to CPC 23 / IAS 8 - Accounting Policies, Changes in Estimates and Error Rectification, by the end of 2016, the CPFL Energia and its Subsidiaries changed their accounting policy previously adopted by an accounting policy that better reflects the performance of the Company's and its subsidiaries' businesses and, therefore, accounting the adjustments to the concession financial asset in Operating Revenues.
10.1.1.2) Sectoral Financial Assets and Liabilities In 1Q17, total sectoral financial liabilities accounted for R$ 565 million, a decrease of 22.8% (R$ 167 million) if compared to 1Q16, when sectoral financial liabilities amounted to R$ 732 million. On March 31, 2017, the balance of sectoral financial assets and liabilities was negative in R$ 1,525 million, compared to a negative balance of R$ 915 million on December 31, 2016 and a positive balance of R$ 707 on March 31, 2016. As established by the applicable regulation, any sectoral financial assets or liabilities shall be included in the tariffs of the distributors in their respective annual tariff events.
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11.1.1.3) Operating Revenue In the analysis presented in this report, we consider the impact of the inclusion of RGE Sul as an isolated item. In 1Q17, gross operating revenue amounted to R$ 7,536 million, an increase of 12.7% (R$ 850 million), due to the following factors: Acquisition of RGE Sul (R$ 1,344 million); Decrease of 38.8% (R$ 284 million) in the Sectoral Financial Liabilities; Increase of 24.4% (R$ 62 million) in tariff subsidies (CDE resources), mainly discounts in TUSD (for special consumers) and low-income subsidies, in addition to discounts granted to consumers that obtained an injunction to disoblige the payment of specific components of CDE; Increase of 37.8% (R$ 53 million) in Short-term Electric Energy; Increase of 3.3% (R$ 2 million) in Other Revenues and Income; Increase of 37.0% (R$ 79 million) in revenue from building the infrastructure of the concession; Partially offset by: Decrease of 13.9% (R$ 927 million) in the revenue with energy sales (captive + free clients), due to: (i) the adoption of green tariff flag in January and February 2017, compared to red tariff flag applied in the same period of 2016 (yellow tariff flag was adopted in March 2016 and 2017); (ii) the negative average tariff adjustment in the distribution companies for the period between 1Q16 and 1Q17 (highlight for the average reduction of 7.51% in RGE in June 2016 and of 24.21% in CPFL Piratininga in October 2016); (iii) the stability in the sales volume within the concession area (variation of +0.1%); and Decrease of 53.3% (R$ 47 million) in the adjustments to the Concession´s Financial Asset, due to: (i) lower inflation (IPCA of 1.01% in 1Q17 and of 2.64% in 1Q16); and (ii) the reduction in concession’s financial asset observed in the distributors which have gone through the concession renewal process at the end of 2015 (CPFL Santa Cruz, CPFL Leste Paulista, CPFL Sul Paulista, CPFL Jaguari, and CPFL Mococa)2. Deductions from the gross operating revenue were R$ 3,073 million in 1Q17, representing a reduction of 2.7% (R$ 85 million), due to the following decreases: of 91.1% in tariff flags approved by the CCEE (R$ 320 million); of 13.7% in ICMS tax (R$ 180 million); of 15.4% in the CDE sector charge (R$ 130 million), due to the adoption of CDE System Usage quotas in lower amount than 2016, partially offset by the increase in CDE Energy quotas and in the CDE charges in order to cover ACR Account loans; of 8.9% in PIS and COFINS taxes (R$ 53 million); Partially offset by the following factors: acquisition of RGE Sul (R$ 577 million); increase of 92.4% in the PROINFA (R$ 19 million); and
2 In order to calculate the split between the intangible asset and concession’s financial asset, it must be considered the useful life of assets. The portion of the useful life that will occur by the end of the concession is classified as an intangible asset and the residual value is classified as concession’s financial asset, referring to the compensation that the distributor will receive when the assets are reversed to the Grantor.
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increase of 4.2% in the R&D and Energy Efficiency Program (R$ 1 million). Net operating revenue reached R$ 4,462 million in 1Q17, representing an increase of 26.5% (R$ 935 million).
10.1.1.4) Cost of Electric Power In the analysis presented in this report, we consider the impact of the inclusion of RGE Sul as an isolated item. The cost of electric energy, comprising the purchase of electricity for resale and charges for the use of the distribution and transmission system, amounted to R$ 2,810 million in 1Q17, representing an increase of 26.3% (R$ 585 million): The cost of electric power purchased for resale was R$ 2,633 million in 1Q17, representing an increase of 39.9% (R$ 751 million), due to the following factors: (i) Acquisition of RGE Sul (R$ 419 million); (ii) Increase of 26.0% (R$ 396 million) in the cost of energy purchased in the regulated environment and bilateral contracts, mainly due to the increase of 5.4% (537 GWh) in the volume of purchased energy and the 19.5% increase in the average purchase price (from R$ 153.97/MWh in 1Q16 to R$ 184.02/MWh in 1Q17); (iii) Increase of R$ 53 million in the cost of energy purchased in the short term and Proinfa, mainly due to the higher average PLD (from R$ 34.60/MWh in 1Q16 to R$ 155.37/MWh in 1Q17, in the Southeast/Midwest and South submarkets), despite the decrease in the average purchase price of Proinfa (from R$ 411.16/MWh in 1Q16 to R$ 264.07/MWh in 1Q17) and the decrease of 2.2% (5 GWh) in the volume of purchased energy; Partially offset by: (iv) Decrease of 15.2% (R$ 83 million) in the cost of energy from Itaipu, due to the 11.9% decrease in the average purchase price (from R$ 217.28/MWh in 1Q16 to R$ 191.38/MWh in 1Q17) and by the reduction of 3.8% (94 GWh) in the volume of purchased energy; and (v) Decrease of 17.6% (R$ 34 million) in PIS and Cofins tax credits (cost reducer), generated from the energy purchase.
Charges for the use of the transmission and distribution system reached R$ 177 million in 1Q17, representing a decrease of 48.3% (R$ 166 million), due to the following factors: (i) Variation of R$ 198 million in the system service usage charges – ESS, from an expense of R$ 127 million in 1Q16 to a revenue of R$ 71 million in 1Q17; (ii) Variation of R$ 31 million in the energy reserve charges – EER, since there was no registration in 1Q17 and there was a registration in the amount of R$ 31 million in 1Q16; Partially offset by: (iii) Acquisition of RGE Sul (R$ 38 million); (iv) Decrease of 59.3% (R$ 21 million) in PIS and COFINS tax credits (cost reducer), generated from the charges; and (v) Increase of 1.9% (R$ 4 million) in the basic network, connection, use of the distribution system and Itaipu transmission charges.
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10.1.1.5) Operating Costs and Expenses In the analysis presented in this report, we consider the impact of the inclusion of RGE Sul as an isolated item. Operating costs and expenses reached R$ 1,215 million in 1Q17, compared to R$ 850 million in 1Q16, an increase of 43.0% (R$ 365 million), due to the following factors:
PMSO PMSO reached R$ 619 million in 1Q17, an increase of 28.4% (R$ 137 million), compared to R$ 482 million in 1Q16. Disregarding the acquisition of RGE Sul, PMSO would increase 6.7% (R$ 32 million).
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Reported PMSO (R$ million)
Variation 1Q17 1Q16 R$ MM %
Reported PMSO
Personnel (223.8) (165.7) (58.1) 35.0%
Material (38.8) (28.3) (10.5) 37.1%
Outsourced Services (194.4) (144.1) (50.3) 34.9%
Other Operating Costs/Expenses (162.3) (144.3) (18.0) 12.5% Allowance for doubtful accounts (47.0) (45.4) (1.6) 3.5%
Legal, judicial and indemnities expenses (45.8) (50.5) 4.7 -9.3%
Others (69.5) (48.4) (21.1) 43.5%
Total Reported PMSO (619.4) (482.5) (136.8) 28.4%
PMSO RGE Sul
Personnel (41.5)
Material (8.7)
Outsourced Services (31.1)
Other Operating Costs/Expenses (23.2)
Allowance for doubtful accounts (8.0)
Legal, judicial and indemnities expenses (1.7) Others (13.5)
Total PMSO RGE Sul (104.6)
PMSO (-) RGE Sul
Personnel (182.3) (165.7) (16.5) 10.0%
Material (30.1) (28.3) (1.8) 6.3%
Outsourced Services (163.3) (144.1) (19.2) 13.3% Other Operating Costs/Expenses (139.1) (144.3) 5.2 -3.6%
Allowance for doubtful accounts (39.0) (45.4) 6.4 -14.2%
Legal, judicial and indemnities expenses (44.1) (50.5) 6.4 -12.7%
Others (56.0) (48.4) (7.6) 15.7%
Total PMSO (-) RGE Sul (514.8) (482.5) (32.3) 6.7%
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Personnel – increase of 35.0% (R$ 58 million), mainly due to the acquisition of RGE Sul (R$ 42 million), of the collective bargaining agreement effects (R$ 14 million) and others (R$ 2 million); Material – increase of 37.1% (R$ 10 million), mainly due to the acquisition of RGE Sul (R$ 9 million) and the replacement of material to the maintenance of lines and grid (R$ 1 million); Outsourced services – increase of 34.9% (R$ 50 million), mainly due to the following items: acquisition of RGE Sul (R$ 31 million), outsourced services (R$ 10 million), meter reading and use (R$ 2 million), tree pruning (R$ 1 million), and collection actions (R$ 1 million); Other operating costs/expenses – increase of 12.5% (R$ 18 million), mainly due to the following factors: acquisition of RGE Sul (R$ 23 million), assets write-off (R$ 2 million) and other expenses (R$ 4 million). These effects were partially offset by the decrease in the allowance for doubtful accounts (R$ 6 million) and in legal and judicial expenses (R$ 6 million).
Other operating costs and expenses Other operating costs and expenses reached R$ 595 million in 1Q17, compared to R$ 367 million in 1Q16, registering an increase of 62.2% (R$ 228 million), with the variations below: (i) Acquisition of RGE Sul (R$ 133 million); (ii) Increase of 37.0% (R$ 79 million) in cost of building the concession´s infrastructure. This item, which reached R$ 294 million in 1Q17, does not affect results, since it has its counterpart in “operating revenue”; (iii) Increase of 87.6% (R$ 12 million) in Private Pension Fund expenses, due to actuarial report update; and (iv) Increase of 3.6% (R$ 4 million) in Depreciation and Amortization;
10.1.1.6) EBITDA EBITDA totaled R$ 626 million in 1Q17, registering an increase of 5.9% (R$ 35 million).
Conciliation of Net Income and EBITDA (R$ million)
1Q17 1Q16 Var.
Net income 150 222 -32.3%
Depreciation and Amortization 189 139
Financial Results 182 91
Income Tax /Social Contribution 105 139
EBITDA 626 591 5.9%
10.1.1.7) Financial Result In the analysis presented in this report, we consider the impact of the inclusion of RGE Sul as an isolated item. In 1Q17, the net financial result recorded a net financial expense of R$ 182 million, an increase of 99.6% (R$ 91 million).
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Financial Result (R$ Million) 1Q17 1Q16 Var. Financial Revenue Income from Financial Investments 79 80 -1.2% Late payment interest and fines 72 56 28.3% Adjustment for inflation of tax credits 1 1 39.8% Adjustment for inflation of escrow deposits 13 8 55.0% Adjustment for inflation and exchange rate changes 13 25 -47.7% Discount on purchase of ICMS credit 3 7 -55.9% Adjustments to the sectoral financial asset - 49 - PIS and Cofins on financial revenue (11) (18) -41.6% Other 7 11 -33.8% Total 177 219 -18.9% - - Financial Expense Interest on debts (179) (167) 7.5% Adjustment for inflation and exchange rate changes (129) (110) 16.7% (-) Capitalized interest 5 2 105.4% Adjustments to the sectoral financial liability (27) (2) 1431.0% Other (29) (33) -13.7% Total (359) (310) 16.0% - - Financial Result (182) (91) 99.6%
Financial Result (without RGE Sul) (R$ Million) 1Q17 1Q16 Var. Revenues Income from Financial Investments 74 80 -7.7% Additions and Late Payment Fines 55 56 -2.1% Fiscal Credits Update 1 1 39.8% Judicial Deposits Update 12 8 45.3% Monetary and Foreign Exchange Updates 14 25 -45.4% Discount on Purchase of ICMS Credit 3 7 -55.9% Sectoral Financial Assets Update - 49 - PIS and COFINS - over Other Financial Revenues (9) (18) -50.2% Others 6 11 -41.9% Total 156 219 -28.8% Expenses Debt Charges (137) (167) -17.7% Monetary and Foreign Exchange Updates (125) (110) 13.9% (-) Capitalized Interest 4 2 69.6% Sectoral Financial Liabilities Update (26) (2) 1368.3% Others (25) (33) -26.0% Total (309) (310) -0.1%
Financial Result (154) (91) 69.0%
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The items explaining these changes are as follows: Financial Revenue: decrease of 18.9% (R$ 41 million), from R$ 219 million in 1Q16 to R$ 177 million in 1Q17, mainly due to the following factors: (i) Variation of R$ 49 million in sectoral financial assets update, since there was no balance to be updated in 1Q17 and there was a revenue in the amount of R$ 49 million in 1Q16; (ii) Decrease of 45.4% (R$ 12 million) in adjustments for inflation and exchange rate changes, due to the decrease of R$ 8 million in revenues from fines, interest and monetary adjustment relating to installment payments made by consumers and the decrease of R$ 3 million in the adjustment of the balance of tariff subsidies, as determined by Aneel; (iii) Decrease of 7.7% (R$ 6 million) in the income from financial investments, due to the lower average balance of investments; (iv) Decrease of 55.9% in the discount on purchase of ICMS credit (R$ 4 million); (v) Decrease of 2.1% in late payment interest and fines (R$ 1 million); Partially offset by: (vi) Acquisition of RGE Sul (R$ 22 million); (vii) Decrease of 50.2% in PIS and Cofins on financial revenues (R$ 9 million); and (viii) Increase of 45.3% in adjustments for inflation of escrow deposits (R$ 4 million).
Financial Expense: increase of 16.0% (R$ 49 million), from R$ 310 million in 1Q16 to R$ 359 million in 1Q17, mainly due to the following factors: (i) Acquisition of RGE Sul (R$ 50 million); (ii) Increase of R$ 24 million in the adjustments of the sectoral financial liability; and (iii) Increase of 13.9% (R$ 15 million) in adjustments for inflation and exchange rate changes, due to: (a) the mark-to-market positive effect for financial operations under Law 4,131 – non-cash effect (R$ 12 million); (b) the increase of debt charges in foreign currency, with swap to CDI interbank rate (R$ 8 million); partially offset by (c) the effect of exchange variation in Itaipu invoices (R$ 5 million); Partially offset by: (iv) Decrease of 17.7% (R$ 29 million) in interest on debt in local currency; (v) Decrease of 26.0% (R$ 9 million) in other financial expenses; and (vi) Increase of 69.6% (R$ 2 million) in capitalized interest.
10.1.1.8) Net Income In 1Q17, a Net Income of R$ 150 million was registered, a decrease of 32.3% (R$ 72 million) if compared to the Net Income of R$ 222 million observed in 1Q16.
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10.1.2) Tariff events
Reference dates
Tariff Process Dates Disco Date CPFL Santa Cruz March 22nd* CPFL Leste Paulista March 22nd* CPFL Jaguari March 22nd* CPFL Sul Paulista March 22nd* CPFL Mococa March 22nd* CPFL Paulista April 8th RGE Sul April 19th RGE June 19th rd CPFL Piratininga October 23
Tariff Revision Distributor Periodicity Next Revision Cycle CPFL Paulista Every 5 years April 2018 4th PTRC RGE Sul Every 5 years April 2018 4th PTRC RGE Every 5 years June 2018 4th PTRC CPFL Piratininga Every 4 years October 2019 5th PTRC CPFL Santa Cruz Every 5 years March 2021* 5th PTRC CPF Leste Paulista Every 5 years March 2021* 5th PTRC CPFL Jaguari Every 5 years March 2021* 5th PTRC CPFL Sul Paulista Every 5 years March 2021* 5th PTRC th CPFL Mococa Every 5 years March 2021* 5 PTRC * In the Public Hearing 038/2015, held by Aneel, the revision dates have been changed to March 22. The date previously used for the adjustments of these distributors was February 3.
Annual tariff adjustments occurred in the last 12 months
CPFL CPFL CPFL Santa CPFL Leste CPFL CPFL Sul CPFL RGE Sul RGE Paulista Piratininga Cruz Paulista Jaguari Paulista Mococa Ratifying Resolution 2,056 2,059 2,082 2,157 2,211 2,210 2,213 2,209 2,212 Adjustment 9.89% 3.94% -1.48% -12.54% -1.28% 0.77% 2.05% 1.63% 1.65% Parcel A -2.06% -3.75% -2.98% -7.02% 0.88% 1.26% 3.26% 0.44% 2.78% Parcel B 1.78% 1.86% 2.31% 1.67% 0.48% 1.92% 0.62% 0.53% 0.67% Financial Components 10.18% 5.83% -0.81% -7.19% -2.65% -2.41% -1.83% 0.66% -1.80% Effect on consumer billings 7.55% -0.34% -7.51% -24.21% -10.37% -3.28% -8.41% -4.15% -2.56% Date of entry into force 4/8/2016 4/19/2016 6/19/2016 10/23/2016 3/22/2017 3/22/2017 3/22/2017 3/22/2017 3/22/2017
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Annual tariff adjustments occurred in April-2017
CPFL Paulista RGE Sul
Ratifying Resolution 2,217 2,218 Adjustment -0.80% -0.20% Parcel A 1.37% 2.32% Parcel B 0.76% 0.63% Financial Components -2.93% -3.15% Effect on consumer billings -10.50% -6.43% Date of entry into force 4/8/2017 4/19/2017
10.1.3) Operating Performance of Distribution
SAIDI and SAIFI Below we are presenting the results achieved by the distribution companies with regard to the main indicators that measure the quality and reliability of their supply of electric energy. The SAIDI (System Average Interruption Duration Index) measures the average duration, in hours, of interruption per consumer per year. The SAIFI (System Average Interruption Frequency Index) measures the average number of interruptions per consumer per year.
SAIDI and SAIFI Indexes 1 SAIDI (hours) SAIFI (interruptions) Distributor 2013 2014 2015 2016 1Q17 ANEEL1 2013 2014 2015 2016 1Q17 ANEEL1 CPFL Paulista 7.14 6.93 7.76 7.62 7.33 7.50 4.73 4.88 4.89 5.00 4.89 6.53 CPFL Piratininga 7.44 6.98 7.24 6.97 8.82 6.86 4.58 4.19 4.31 3.80 4.28 6.03 RGE 17.35 18.77 15.98 14.44 14.43 12.15 9.04 9.14 8.33 7.56 7.82 9.10 RGE Sul 14.07 17.75 19.11 19.45 17.34 11.42 7.39 8.87 8.42 9.41 8.84 9.11 CPFL Santa Cruz 6.97 6.74 8.46 5.65 5.38 9.26 6.82 5.29 6.34 4.09 3.79 8.85 CPFL Jaguari 5.92 5.41 6.93 7.10 7.81 8.26 5.43 4.32 4.61 6.13 7.34 7.43 CPFL Mococa 4.86 6.88 7.04 10.56 10.30 9.95 4.93 7.31 5.92 6.63 6.33 8.99 CPFL Leste Paulista 7.58 8.48 7.92 8.01 8.19 9.73 6.33 6.30 5.67 5.73 5.69 8.18 CPFL Sul Paulista 9.08 9.69 11.51 15.20 12.62 9.95 6.71 7.03 9.47 11.76 9.98 8.29 1) Regulatory Agency (ANEEL) Limits – 2017.
In 1Q17, CPFL Piratininga’s SAIDI increased significantly in relation to 2016, due to the occasional disconnections of great impact mainly in the transmission system. On the other hand, CPFL Sul Paulista’s and RGE Sul's SAIDI registered a reduction in 1Q17 in relation to 2016, demonstrating the effectiveness of maintenance and improvement works, and also because, in 1Q17, we have more favorable weather conditions than in 2016, when we were still suffering the effects of what was considered the strongest El Niño of the last 15 years. The SAIFI indicator was kept below regulatory limits in all companies (except CPFL Sul Paulista), reflecting the effectiveness of the maintenance performed and the constant investments in improvements and modernization carried out by CPFL. The abnormal atmospheric conditions at the end of 2015 and early 2016 have more severely affected CPFL Sul Paulista, negatively impacting both SAIFI and SAIDI results.
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Losses Find below the performance of CPFL distribution companies throughout the last quarters:
12M Accumulated Technical Losses Non-Technical Losses Total Losses 1 Losses 2Q16 3Q16 4Q16 1Q17 ANEEL2 2Q16 3Q16 4Q16 1Q17 ANEEL2 2Q16 3Q16 4Q16 1Q17 ANEEL2 CPFL Energia 6.44% 6.39% 6.35% 6.33% 6.39% 2.71% 2.63% 3.00% 2.95% 1.83% 9.14% 9.02% 9.34% 9.28% 8.22% CPFL Paulista 6.77% 6.72% 6.55% 6.33% 6.32% 2.59% 2.65% 3.03% 3.32% 1.98% 9.36% 9.36% 9.58% 9.65% 8.30% CPFL Piratininga 4.29% 4.34% 4.45% 4.72% 5.52% 2.73% 2.71% 2.85% 2.79% 1.45% 7.02% 7.05% 7.30% 7.52% 6.97% RGE 7.45% 7.39% 7.35% 7.39% 7.28% 2.66% 2.31% 2.64% 2.46% 1.91% 10.11% 9.70% 9.99% 9.85% 9.19% RGE Sul 7.28% 7.05% 7.08% 7.26% 6.75% 3.53% 3.17% 4.00% 2.91% 2.20% 10.82% 10.22% 11.07% 10.17% 8.95% CPFL Santa Cruz 8.79% 8.65% 8.75% 8.74% 7.76% 0.81% 1.15% 1.08% 1.24% 0.51% 9.60% 9.80% 9.82% 9.98% 8.27% CPFL Jaguari 3.54% 3.45% 3.37% 3.33% 4.28% 1.65% 1.17% 1.26% 1.07% 0.41% 5.19% 4.62% 4.63% 4.40% 4.69% CPFL Mococa 7.84% 7.74% 7.46% 7.29% 8.17% 2.52% 2.43% 2.83% 3.23% 0.57% 10.36% 10.17% 10.29% 10.52% 8.74% CPFL Leste Paulista 8.51% 8.57% 8.49% 8.37% 7.99% 2.94% 3.24% 2.39% 2.20% 0.82% 11.44% 11.81% 10.88% 10.57% 8.81% CPFL Sul Paulista 7.83% 8.13% 8.26% 8.42% 5.94% 1.24% 1.46% 1.83% 1.80% 0.22% 9.07% 9.59% 10.08% 10.22% 6.16% 1) The figures above were adequate to a better comparison with the regulatory losses trajectory defined by the Regulatory Agency (ANEEL). In CPFL Piratininga, RGE and RGE Sul, high-voltage customers were disregarded. 2) Regulatory targets for losses are defined in the periodic tariff revision (RTP) process. CPFL Paulista, RGE and RGE Sul are on the 3rd PTRC and other distributors are in 4th PTRC.
The consolidated losses index of CPFL Energia, already considering RGE Sul in the historical series, was from 8.89% in 1Q16 to 9.28% in 1Q17, an increase of 0.39 b.p. This increase is mainly due to changes in the market breakdown, with increasing low voltage customers share, increase of energy injected in distribution lines (energy generated in SHPPs and transmitted to basic network) and worse macroeconomic scenario. Find below how was performance of losses in low voltage market:
12-month Non-technical Losses / LV Accumulated 2 Losses - LV1 2Q16 3Q16 4Q16 1Q17 ANEEL CPFL Paulista 6.04% 6.19% 7.13% 7.82% 4.61% CPFL Piratininga 7.81% 7.69% 8.05% 7.89% 3.90% RGE 6.58% 5.66% 6.51% 6.07% 4.41% RGE Sul 8.12% 7.23% 9.24% 6.64% 4.91% CPFL Santa Cruz 1.57% 2.27% 2.17% 2.50% 0.98% CPFL Jaguari 6.76% 4.77% 5.04% 4.32% 1.60% CPFL Mococa 4.44% 4.29% 5.01% 5.73% 0.98% CPFL Leste Paulista 5.19% 5.82% 4.32% 3.99% 1.46% CPFL Sul Paulista 2.91% 3.25% 3.95% 3.90% 0.46% 1) Regulatory targets for losses are defined in the periodic tariff revision (RTP) process. CPFL Paulista, RGE and RGE Sul are on the 3rd PTRC and other distributors are in 4th PTRC.
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10.2) Commercialization and Services Segments 10.2.1) Commercialization Segment
Consolidated Income Statement - Commercialization (R$ Million) 1Q17 1Q16 Var. Net Operating Revenue 621 432 43.8% EBITDA(1) 41 17 141.8% Net Income 17 14 23.5% Note: (1) EBITDA is calculated from the sum of net income, taxes, financial result and depreciation/amortization.
Operating Revenue In 1Q17, net operating revenue reached R$ 621 million, representing an increase of 43.8% (R$ 189 million).
EBITDA In 1Q17, EBITDA totaled R$ 41 million, compared to R$ 17 million in 1Q16, an increase of 141.8% (R$ 24 million).
Net Income In 1Q17, net income amounted to R$ 17 million, compared to R$ 14 million in 1Q16, an increase of 23.5% (R$ 3 million).
10.2.2) Services Segment
Consolidated Income Statement - Services (R$ Million) 1Q17 1Q16 Var. Net Operating Revenue 103 85 21.0% EBITDA(1) 18 18 0.8% Net Income 11 10 2.5% Note: (1) EBITDA is calculated from the sum of net income, taxes, financial result and depreciation/amortization.
Operating Revenue In 1Q17, net operating revenue reached R$ 103 million, representing an increase of 21.0% (R$ 18 million).
EBITDA In 1Q17, EBITDA totaled R$ 18 million, compared to R$ 18 million in 1Q16, an increase of 0.8%.
Net Income In 1Q17, net income amounted to R$ 11 million, compared to R$ 10 million in 1Q16, an increase of
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2.5%.
10.3) Conventional Generation Segment 10.3.1) Economic-Financial Performance
Consolidated Income Statement - Conventional Generation (R$ million) 1Q17 1Q16 Var. Gross Operating Revenue 282 261 8.2% Net Operating Revenue 257 237 8.6% Cost of Electric Power (22) (26) -14.4% Operating Costs & Expenses (56) (57) -1.1% EBIT 179 155 16.0% EBITDA 290 249 16.4% Financial Income (Expense) (100) (84) 19.5% Income Before Taxes 159 134 18.3% Net Income 132 110 20.1% Nota: (1) EBITDA is calculated from the sum of net income, taxes, financial result and depreciation/amortization.
10.3.1.1) Operating Revenue
In 1Q17, Gross Operating Revenue reached R$ 282 million, an increase of 8.2% (R$ 21 million) in relation to 1Q16. The variation in the gross operating revenue is mainly due to the following factors: Increase of 10.3% of the power supply revenue from Serra da Mesa HPP (R$ 13 million) due to the increase of 10.3% in the average sales price, as a result of the price readjustment of this sales agreement; Increase in the power supply to CPFL Paulista and CPFL Piratininga of energy from Barra Grande HPP (Baesa) (R$ 4 million); Increase of revenue from the plants CPFL Centrais Geradoras (R$ 4 million); Increase of revenue from Paulista Lajeado HPP (R$ 1 million); Other revenues (R$ 1 million); Partially offset by: Decrease of revenue from the plants of Rio das Antas Complex (Ceran) (R$ 2 million).
Net Operating Revenue reached R$ 257 million, registering an increase of 8.6% (R$ 20 million).
10.3.1.2) Cost of Electric Power
In 1Q17, the cost of electric power reached R$ 22 million, a reduction of 14.4% (R$ 4 million), due mainly to the following factors: Reduction of 22.3% in the cost with Electric Energy Purchased for Resale (R$ 4 million), due mainly to the following factors:
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In CPFL Geração (controlling company), decrease of R$ 8 million: (i) Reduction in the cost of energy from Barra Grande HPP (Baesa) (R$ 8 million) due to the reduction of 41.7% in the average sales price; In Rio das Antas Complex (Ceran), Paulista Lajeado HPP and Centrais Geradoras, increase of R$ 4 million: (i) Increase of R$ 3 million in the energy cost from the plants of CPFL Centrais Geradoras; (ii) Increase of R$ 1 million in the energy cost from the plants of Rio das Antas Complex (Ceran).
Increase of 12.4% in the cost with Charges for the Use of the Transmission and Distribution System (R$ 1 million).
10.3.1.3) Operating Costs and Expenses
In 1Q17, operating costs and expenses reached R$ 56 million, compared to R$ 57 million in 1Q16, a reduction of 1.1% (R$ 1 million), due to the variations in: (i) PMSO item, that reached R$ 25 million in 1Q17, compared to R$ 25 million in 1Q16, registering a reduction of 2.8% (R$ 1 million). The table below lists the main variation in PMSO: PMSO (R$ million) Variation 1Q17 1Q16 % PMSO Personnel (10.1) (9.0) 11.8% Material (0.6) (0.8) -35.0% Outsourced Services (5.5) (4.6) 18.4% Other Operating Costs/Expenses (8.6) (10.9) -21.3% GSF Risk Premium (1.8) (1.3) - Others (6.8) (9.6) -29.5% Total PMSO (24.7) (25.4) -2.8%
This variation is explained mainly by the following factors: i. Personnel expenses, which registered an increase of 11.8% (R$ 1 million); ii. Increase in Material, which registered a decrease of 35.0% (R$ 0.2 million); iii. Increase of 18.4% in Outsourced Services (R$ 1 million); iv. Reduction of 21.3% in Other Operating Costs/Expenses (R$ 2 million).
(ii) Reduction of 0.5% in Depreciation and Amortization;
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10.3.1.4) Equity Income
Equity Income (R$ Million) 1Q17 1Q16 Var. R$ Var. % Projects Barra Grande HPP 1 7 (6) -82.2% Campos Novos HPP 34 23 11 50.6% Foz do Chapecó HPP 25 18 7 37.7% Epasa TPP 19 15 4 24.2% Total 80 63 16 25.6%
In 1Q17, Equity Income reached R$ 80 million, compared to R$ 63 million in 1Q16, an increase of 25.6% (R$ 16 million).
Barra Grande HPP (-R$ 6 million): Reduction of 27.6% in Net Revenue (R$ 5 million); Increase in Operating Costs and Expenses (R$ 7 million); Reduction of 5.9% (R$ 0.1 million) in Depreciation and Amortization; Increase of 99.0% in Net Financial Expense (R$ 0.2 million); Reduction of the expense with Income Tax and Social Contribution (R$ 3 million); Reduction of 82.2% in Net Income (R$ 6 million).
Foz do Chapecó HPP (R$ 7 million): Increase of 6.5% in Net Revenue (R$ 6 million); Increase of 20.5% in Operating Costs and Expenses (R$ 4 million); Reduction of 0.9% in Depreciation and Amortization (R$ 0.2 million); Reduction of 6.2% in Net Financial Expense (R$ 1 million); Increase of the expense with Income Tax and Social Contribution (R$ 6 million); Increase of 37.7% in Net Income (R$ 7 million).
Campos Novos HPP (R$ 11 million): Increase of 4.4% in Net Revenue (R$ 3 million); Reduction of 32.1% in Operating Costs and Expenses (R$ 7 million); Reduction of 0.6% (R$ 0.1 million) in Depreciation and Amortization; Reversion of negative Net Financial Result in 1Q16 of R$ 1 million to positive Net Financial Result of R$ 2 million (variation of R$ 3 million); Increase of the expense with Income Tax and Social Contribution (R$ 6 million); Increase of 50.6% in Net Income (R$ 11 million).
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EPASA TPP (R$ 4 million): Increase of 20.7% in Net Revenue (R$ 15 million); Increase of 32.9% in operating costs and expenses (R$ 15 million); Reduction of 0.4% in Depreciation and Amortization; Increase of 19.5% in Net Financial Expense; Increase of the expense with Income Tax and Social Contribution (R$ 6 million); Increase of 50.6% in Net Income (R$ 11 million).
10.3.1.5) EBITDA
In 1Q17, EBITDA was of R$ 290 million, compared to R$ 249 million in 1Q16, an increase of 16.4% (R$ 41 million).
Conciliation of Net Income and EBITDA (R$ million)
1Q17 1Q16 Var.
Net Income 132 110 20.1%
Depreciation and Amortization 31 31
Financial Result 100 84
Income Tax /Social Contribution 27 25
EBITDA 290 249 16.4%
10.3.1.6) Financial Result
Financial Result (Adjusted - R$ Million) 1Q17 1Q16 Var. Revenues Income from Financial Investments 35 16 124.0% Late payment interest and fines 0 - 0.0% Fiscal Credits Update 0 0 0.0% Monetary and Foreign Exchange Updates 17 29 -40.5% PIS and COFINS - over Other Financial Revenues (2) (1) 93.9% Others 0 1 -89.9% Total 50 45 12.5% Expenses Debt Charges (115) (113) 1.4% Monetary and Foreign Exchange Updates (31) (7) 331.8% Use of Public Asset (3) (4) -13.0% Others (1) (4) - Total (151) (129) 17.1%
Financial Result (100) (84) 19.5%
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In 1Q17, the financial result was a net expense of R$ 100 million, representing an increase of 19.5% (R$ 16 million). Financial Revenues moved from R$ 45 million in 1Q16 to R$ 50 million in 1Q17, an increase of 12.6% (R$ 6 million), due to: Increase of 124.0% in income from financial investments (R$ 19 million); Partially offset by: Reduction of 40.5% in monetary and foreign exchange updates (R$ 12 million); Increase of 93.9% of PIS and COFINS on other finance income (R$ 1 million). Financial Expenses moved from R$ 129 million in 1Q16 to R$ 151 million in 1T17, an increase of 17,1% (R$ 22 million), due to: Increase of 331.8% in monetary and foreign exchange updates (R$ 24 million); Increase of 1.4% in debt charges (R$ 2 million); Partially offset by: Reduction of 13.0% in expenses of the Use of Public Asset (UBP) (R$ 1 million); Reduction of R$ 3 million in other effects.
10.3.1.7) Net Income
In 1Q17, net income was of R$ 132 million, compared to a net income of R$ 110 million in 1Q16, an increase of 20.1%.
10.4) CPFL Renováveis 10.4.1) Economic-Financial Performance
Consolidated Income Statement - CPFL Renováveis (100% Participation - R$ Million) 1Q17 1Q16 Var. % Gross Operating Revenue 409 308 32.9% Net Operating Revenue 387 291 33.2% Cost of Electric Pow er (51) (31) 63.2% Operating Costs & Expenses (251) (225) 11.3% EBIT 86 34 148.8% EBITDA (1) 236 168 41.0% Financial Income (Expense) (124) (134) -7.8% Income Before Taxes (38) (100) -61.9% Net Income (50) (107) -53.1% Note: (1) EBITDA is calculated from the sum of net income, taxes, financial result and depreciation/amortization.
10.4.1.1) Variations in the Income Statement of CPFL Renováveis
In 1Q17, the variations in the Income Statement of CPFL Renováveis are mainly due to the factors below: Commercial start-up of Mata Velha SHPP in May 2016 (24.0 MW); Commercial start-up of Campo dos Ventos Complex and São Benedito Complex wind farms, gradually, over 2016 (231.0 MW).
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10.4.1.2) Operating Revenue
Gross Operating Revenue reached R$ 408 million in 1Q17, representing an increase of 32.9% (R$ 101 million). Gross Operating Revenue reached R$ 387 million in 1Q17, representing an increase of 33.2% (R$ 97 million). This increase is mainly due to the following factors: Wind (R$ 50 million): (i) Commercial startup of the Campo dos Ventos and São Benedito wind complexes in May 2016 (R$ 36 million); (ii) Higher energy volume generated due to higher wind speed in 1Q17 and contractual price adjustment (R$ 14 million); SHPP (R$ 33 million): (iii) Commercial startup of SHPP Mata Velha in May 2016 (R$ 5 million); (iv) Different seasonal adjustment strategy for physical guarantee and contractual price adjustment (R$ 22 million); (v) Higher revenue from the holding company mainly due to the settlement of energy purchase to rebuild guarantees and the assets’ moving average, which were offset by the cost of energy purchase (R$ 6 million); Biomass (R$ 10 million): (vi) As from 1Q17, biomass revenue (excluding plants with an energy sale agreement in the regulated market – Bio Pedra, Bio Ester and Bio Formosa) started being recognized based on the seasonal adjustment of the physical guarantee of agreements, while a portion of biomass generation in 1Q16 was recognized based on generation. The variation is also impacted by intercompany transactions of CPFL Renováveis with CPFL Brasil and Group’s distributors, which are eliminated in the consolidation of CPFL Energia (R$ 4 million).
10.4.1.3) Cost of Electric Power
In 1Q17, Cost of Electric Power was of R$ 51 million, representing na increase of 63.2% (R$ 20 million). This increase is due to the following factors: Increase of 107.8% in the cost with Electric Energy Purchased for Resale (R$ 14 million), mainly due to the the purchase of energy to the meet exposure in the spot market and hedge; Increase of 31.0% in cost with Charges for the Use of the Transmission and Distribution System (R$ 6 million): (i) Start of contractual commitments for use and connection with distribution and transmission companies and the ONS due to the operational startup in the last 12 months; (ii) Higher energy generation between the periods being compared (+11.2% in 1Q17); (iii) Impact of the annual adjustment of connection charges and use and connection fees for the distribution and transmission system.
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10.4.1.4) Operating Costs and Expenses
In 1Q17, Operating Costs and Expenses reached R$ 251 million, representing an increase of 11.3% (R$ 26 million). The main factors were: PMSO item, which reached R$ 100 million, an increase of 8.7% (R$ 8 million). The table below shows a summary of the main variations in PMSO: PMSO (R$ million) Variation 1Q17 1Q16 R$ MM % Reported PMSO Personnel (22.9) (20.3) (2.6) 12.7% Material (4.9) (3.5) (1.4) 38.9% Outsourced Services (46.3) (42.1) (4.2) 9.9% Other Operating Costs/Expenses (25.7) (25.9) 0.1 -0.6% GSF Risk Premium (0.6) - (0.6) - Others (25.1) (25.9) 0.7 -2.9% Total PMSO (99.8) (91.8) (8.0) 8.7% This variation is explained mainly by the following factors: (i) Personnel: Increase of 12.7% (R$ 3 million), as a result of the higher number of employees and the collective bargaining agreement; (ii) Material and Outsourced Services: Increase of 12.2% (6 million) mainly due to increase in expenses with consulting services and lawyers fees related to corporate projects; Partially offset: (iii) Others: reduction of R$ 1 million. Depreciation and Amortization item, which reached R$ 112 million, an increase of 17.5% (R$ 17 million), due basically to the start-up of assets over the last 12 months.
10.4.1.5) EBITDA
In 1Q17, EBITDA was of R$ 236 million, compared to R$ 168 million in 1Q16, an increase of 41.0% (R$ 69 million).
Conciliation of Net Income and EBITDA (R$ million)
1Q17 1Q16 Var.
Net income (50) (107) -53.1%
Amortization 151 133
Financial Results 124 134
Income Tax /Social Contribution 12 7
EBITDA 236 168 41.0%
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10.4.1.6) Financial Result
Financial Result (Adjusted - R$ Million) 1Q17 1Q16 Var. Revenues Income from Financial Investments 36 26 37.5% Late payment interest and fines 1 0 56.8% Monetary and Foreign Exchange Updates 0 1 -88.0% PIS and COFINS - over Other Financial Revenues (2) (1) 36.9% Others 3 3 -3.0% Total 39 30 30.5% Expenses Debt Charges (151) (139) 8.6% Monetary and Foreign Exchange Updates (21) (22) -3.1% (-) Capitalized Interest 20 11 85.2% Others (10) (14) - Total (163) (164) -0.9%
Financial Result (124) (134) -7.8%
In 1Q17, net Financial Result was an expense of R$ 124 million, representing a reduction of 7.8% (R$ 10 million) compared to 1Q16. The main factors that affected the financial revenue (increase of R$ 9 million) were:
(i) Increase of the income from the financial investments (R$ 10 million); Partially offset by: (ii) Decrease of monetary and foreign exchange updates (R$ 1 million);
The main factors that affected the financial expense (decrease of R$ 1 million) were: (iii) Increase of debt charges, mainly due to the increase in the reference rates (R$ 12 million); (iv) Reduction in capitalized interest (R$ 9 million), due to the commercial start-up of the generation projects that were under construction; Partially offset by: (v) Reduction in other financial expenses (R$ 4 million); (vi) Decrease of monetary and foreign exchange updates (R$ 1 million).
10.4.1.7) Net Income
In 1Q17, Net Loss was of R$ 50 million, compared to a net income of R$ 107 million in 1Q16 (R$ 99 million).
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10.4.2) Status of Generation Projects – 100% Participation
On the date of this report, the portfolio of projects of CPFL Renováveis (100% Participation) totaled 2,054 MW of operating installed capacity and 75 MW of capacity under construction. The operational power plants comprises 39 Small Hydroelectric Power Plants – SHPPs (423 MW), 43 wind farms (1,260 MW), 8 biomass thermoelectric power plants (370 MW) and 1 solar power plant (1 MW). Still under construction there are 2 wind farms (48 MW) and 1 SHPP (27 MW). Additionally, CPFL Renováveis owns wind and SHPP projects under development totaling 2,987 MW, representing a total portfolio of 5,115 MW. The table below illustrates the overall portfolio of assets (100% participation) in operation, construction and development, and its installed capacity on this date:
CPFL Renováveis - Portfolio (100% participation) In MW SHPP Biomass Wind Solar Total Operating 423 370 1,260 1 2,054 Under construction 27 - 48 - 75 Under development 216 - 2,226 544 2,987 Total 666 370 3,535 545 5,115
Pedra Cheirosa Wind Farms The wind farms of Pedra Cheirosa Complex (Pedra Cheirosa I and II), located in the State of Ceará, are under construction. Start-up is scheduled for 1H18. The installed capacity is of 48.3 MW and the assured energy is of 26.1 average-MW. Energy was sold through long-term contract in the 2013 A-5 auction (Pedra Cheirosa I – price: R$ 156.20/MWh | Pedra Cheirosa II – price: R$ 156.82, both in March 2017).
Boa Vista II SHPP The Boa Vista II SHPP, project located in the State of Minas Gerais, has operations in input prediction from 1Q20. The installed capacity is of 26.5 MW and the assured energy is of 14.8 average-MW. Energy was sold through long-term contracts in the 2015 A-5 new energy auction (price: R$ 225.53/MWh – March 2017).
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11) ATTACHMENTS 11.1) Statement of Assets – CPFL Energia (R$ thousands)
Consolidated ASSETS 03/31/2017 12/31/2016 03/31/2016
CURRENT Cash and Cash Equivalents 4,877,813 6,164,997 4,405,794 Consumers, Concessionaries and Licensees 4,065,465 3,765,893 3,726,057 Dividend and Interest on Equity 75,395 73,328 86,901 Financial Investments 450 449 12,664 Recoverable Taxes 423,054 403,848 479,172 Derivatives 197,741 163,241 604,591 Sectoral Financial Assets - - 903,262 Concession Financial Assets 10,836 10,700 9,861 Other Credits 911,796 796,731 1,085,302 TOTAL CURRENT 10,562,550 11,379,187 11,313,605
NON-CURRENT Consumers, Concessionaries and Licensees 204,416 203,185 136,400 Affiliates, Subsidiaries and Parent Company 9,236 47,631 87,077 Judicial Deposits 769,646 550,072 489,460 Recoverable Taxes 205,938 198,286 168,455 Sectoral Financial Assets - - - Derivatives 440,011 641,357 1,240,428 Deferred Taxes 935,471 922,858 413,858 Concession Financial Assets 5,601,969 5,363,144 3,834,678 Investments at Cost 116,654 116,654 116,654 Other Credits 795,499 766,253 618,997 Investments 1,487,245 1,493,753 1,315,601 Property, Plant and Equipment 9,880,291 9,712,998 9,284,969 Intangible 10,723,398 10,775,613 9,085,331 TOTAL NON-CURRENT 31,169,774 30,791,805 26,791,909
TOTAL ASSETS 41,732,324 42,170,992 38,105,514
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11.2) Statement of Liabilities – CPFL Energia (R$ thousands)
Consolidated LIABILITIES AND SHAREHOLDERS' EQUITY 03/31/2017 12/31/2016 03/31/2016
CURRENT Suppliers 2,232,237 2,728,130 1,873,994 Accrued Interest on Debts 113,733 129,364 62,658 Accrued Interest on Debentures 325,169 305,180 216,035 Loans and Financing 2,826,371 1,746,284 2,303,027 Debentures 1,119,269 1,242,095 220,576 Employee Pension Plans 44,016 33,209 200 Regulatory Charges 339,777 366,078 733,451 Taxes, Fees and Contributions 785,682 681,544 709,205 Dividend and Interest on Equity 19,970 232,851 220,534 Accrued Liabilities 127,680 131,707 90,917 Derivatives 7,581 6,055 35,125 Sectoral Financial Liabilities 1,316,071 597,515 - Public Utilities 10,857 10,857 9,921 Other Accounts Payable 892,000 807,623 878,932 TOTAL CURRENT 10,160,412 9,018,492 7,354,576
NON-CURRENT Suppliers 130,767 129,781 633 Accrued Interest on Debts 139,342 144,709 137,405 Accrued Interest on Debentures 33,203 29,153 19,408 Loans and Financing 9,226,883 11,023,685 11,006,688 Debentures 7,546,014 7,423,519 6,271,237 Employee Pension Plans 1,011,715 1,019,233 469,064 Taxes, Fees and Contributions 25,096 26,814 - Deferred Taxes 1,286,397 1,324,134 1,415,799 Reserve for Tax, Civil and Labor Risks 837,809 833,276 598,349 Derivatives 165,825 112,207 14,534 Sectoral Financial Liabilities 209,384 317,406 196,536 Public Utilities 87,404 86,624 84,226 Other Accounts Payable 278,850 309,292 179,179 TOTAL NON-CURRENT 20,978,689 22,779,832 20,393,058
SHAREHOLDERS' EQUITY Capital 5,741,284 5,741,284 5,348,312 Capital Reserve 468,014 468,014 468,082 Legal Reserve 739,102 739,102 694,058 Statutory Reserve - Concession Financial Assets 729,608 702,928 640,545 Statutory Reserve - Strengthening of Working Capital 545,505 545,505 392,972 Adittional Dividend Proposed - 7,820 - Other Comprehensive Income (241,043) (234,633) 177,537 Retained Earnings 225,616 - 222,712 8,208,086 7,970,021 7,944,217 Non-Controlling Shareholders' Interest 2,385,137 2,402,648 2,413,663 TOTAL SHAREHOLDERS' EQUITY 10,593,224 10,372,668 10,357,881
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 41,732,324 42,170,992 38,105,514
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11.3) Income Statement – CPFL Energia (R$ thousands)
Consolidated 1Q17 1Q16 Variation OPERATING REVENUES Electricity Sales to Final Customers 6,821,851 6,463,078 5.6% Electricity Sales to Distributors 950,802 748,256 27.1% Revenue from building the infrastructure 416,039 217,134 91.6% Update of concession's financial asset 48,923 87,380 -44.0% Sectorial financial assets and liabilities (565,003) (732,253) -22.8% Other Operating Revenues 1,057,772 802,052 31.9% 8,730,385 7,585,647 15.1%
DEDUCTIONS FROM OPERATING REVENUES (3,191,606) (3,248,878) -1.8% NET OPERATING REVENUES 5,538,779 4,336,770 27.7%
COST OF ELECTRIC ENERGY SERVICES Electricity Purchased for Resale (3,018,384) (2,165,933) 39.4% Electricity Network Usage Charges (202,270) (362,089) -44.1% (3,220,654) (2,528,021) 27.4% OPERATING COSTS AND EXPENSES Personnel (332,483) (244,968) 35.7% Material (55,095) (39,785) 38.5% Outsourced Services (185,253) (149,219) 24.1% Other Operating Costs/Expenses (185,924) (172,685) 7.7% Allowance for Doubtful Accounts (46,696) (46,051) 1.4% Legal and judicial expenses - (59,384) -100.0% Others (139,228) (67,249) 107.0% Cost of building the infrastructure (414,627) (217,035) 91.0% Employee Pension Plans (28,831) (13,913) 107.2% Depreciation and Amortization (304,323) (246,081) 23.7% Amortization of Concession's Intangible (72,116) (61,887) 16.5% (1,578,653) (1,145,572) 37.8%
EBITDA1 1,195,765 1,034,769 15.6%
INCOME FROM ELECTRIC ENERGY SERVICE 739,472 663,176 11.5%
FINANCIAL REVENUES (EXPENSES) Financial Revenues 280,711 312,332 -10.1% Financial Expenses (716,850) (631,359) 13.5% (436,138) (319,027) 36.7% EQUITY ACCOUNTING Equity Accounting 79,854 63,625 25.5% Assets Surplus Value Amortization (145) (145) 0.0% 79,709 63,480 25.6%
INCOME BEFORE TAXES ON INCOME 383,043 407,629 -6.0%
Social Contribution (40,575) (47,166) -14.0% Income Tax (110,347) (128,016) -13.8% NET INCOME 232,121 232,446 -0.1% Controlling Shareholders' Interest 245,886 271,349 -9.4% Non-Controlling Shareholders' Interest (13,765) (38,902) -64.6% Note: (1) EBITDA is calculated from the sum of net income, taxes, financial result and depreciation/amortization, according to CVM Instruction no. 527/12.
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11.4) Cash Flow – CPFL Energia (R$ thousands)
Consolidated
1Q17 Last 12M Beginning Balance 6,164,997 4,405,795
Net Income Before Taxes 383,043 1,355,961
Depreciation and Amortization 376,718 1,359,915 Interest on Debts and Monetary and Foreign Exchange Restatements 592,962 2,258,620 Consumers, Concessionaries and Licensees (347,285) 50,777 Sectoral Financial Assets 20,486 1,341,471 Accounts Receivable - Resources Provided by the CDE/CCEE (70,265) 299,563 Suppliers (479,421) 24,832 Sectoral Financial Liabilities 562,875 729,667 Accounts Payable - CDE (7,545) (53,288) Interest on Debts and Debentures Paid (457,262) (1,581,730) Income Tax and Social Contribution Paid (152,233) (935,442) Others (149,785) (292,335) (110,755) 3,202,050
Total Operating Activities 272,288 4,558,011
Investment Activities Value Paid in Business Combination, Net of the Acquired Cash - (1,496,675) Acquisition of Property, Plant and Equipment, and Intangibles (642,319) (2,434,381) Others (35,436) (93,323) Total Investment Activities (677,755) (4,024,379)
Financing Activities Capital Increase by Non Controlling Shareholders - 467 Loans and Debentures 801,737 4,158,904 Principal Amortization of Loans and Debentures, Net of Derivatives (1,479,465) (3,784,902) Dividend and Interest on Equity Paid (224,437) (451,488) Others 20,448 15,405 Total Financing Activities (881,717) (61,614)
Cash Flow Generation (1,287,184) 472,018
Ending Balance - 03/31/2017 4,877,813 4,877,813
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11.5) Income Statement – Conventional Generation Segment (R$ thousands)
Conventional Generation 1Q17 1Q16 Var. OPERATING REVENUE Eletricity Sales to Final Consumers - - - Eletricity Sales to Distributors 279,499 259,272 7.8% Other Operating Revenues 2,818 1,682 67.5% 282,317 260,954 8.2%
DEDUCTIONS FROM OPERATING REVENUE (25,166) (24,157) 4.2% NET OPERATING REVENUE 257,151 236,797 8.6%
COST OF ELETRIC ENERGY SERVICES Eletricity Purchased for Resale (15,394) (19,814) -22.3% Eletricity Network Usage Charges (6,579) (5,852) 12.4% (21,973) (25,666) -14.4% OPERATING COSTS AND EXPENSES Personnel (10,085) (9,022) 11.8% Material (550) (847) -35.0% Outsourced Services (5,487) (4,636) 18.4% Other Operating Costs/Expenses (8,595) (10,915) -21.3% Employee Pension Plans (517) (322) 60.7% Depreciation and Amortization (28,173) (28,305) -0.5% Amortization of Concession's Intangible (2,492) (2,492) 0.0% (55,899) (56,538) -1.1%
EBITDA 289,654 248,869 16.4%
EBIT 179,279 154,592 16.0%
FINANCIAL INCOME (EXPENSE) Financial Income 50,508 44,851 12.6% Financial Expenses (150,573) (128,587) 17.1% Interest on Equity - - - (100,065) (83,736) 19.5%
EQUITY ACCOUNTING Equity Accounting 79,709 63,480 25.6% Assets Surplus Value Amortization - - 0.0% 79,709 63,480 25.6%
INCOME BEFORE TAXES ON INCOME 158,924 134,336 18.3%
Social Contribution (7,168) (6,605) 8.5% Income Tax (20,156) (18,135) 11.1%
NET INCOME (LOSS) 131,599 109,596 20.1%
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11.6) Income Statement – CPFL Renováveis (R$ thousands)
Consolidated (100% Participation) 1Q17 1Q16 Var. % OPERATING REVENUES Eletricity Sales to Final Consumers 23,790 23,200 2.5% Eletricity Sales to Distributors 384,169 284,175 35.2% Other Operating Revenues 885 309 186.2% 408,844 307,685 32.9%
DEDUCTIONS FROM OPERATING REVENUES (21,382) (16,771) 27.5% NET OPERATING REVENUES 387,462 290,914 33.2%
COST OF ELETRIC ENERGY SERVICES Eletricity Purchased for Resale (27,298) (13,134) 107.8% Eletricity Netw ork Usage Charges (23,892) (18,236) 31.0% (51,191) (31,370) 63.2% OPERATING COSTS AND EXPENSES Personnel (22,910) (20,335) 12.7% Material (4,878) (3,511) 38.9% Outsourced Services (46,278) (42,096) 9.9% Other Operating Costs/Expenses (25,735) (25,885) -0.6% Depreciation and Amortization (112,208) (95,497) 17.5% Amortization of Concession's Intangible (38,625) (37,800) 2.2% (250,634) (225,124) 11.3%
EBITDA (1) 236,470 167,717 41.0%
EBIT 85,637 34,419 148.8%
FINANCIAL INCOME (EXPENSE) Financial Income 38,890 29,880 30.2% Financial Expenses (162,541) (163,959) -0.9% (123,651) (134,079) -7.8%
INCOME BEFORE TAXES ON INCOME (38,014) (99,660) -61.9%
Social Contribution (4,573) (2,925) 56.3% Income Tax (7,573) (4,296) 76.3%
NET INCOME (50,160) (106,881) -53.1%
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11.7) Income Statement – Distribution Segment (R$ thousands)
Consolidated 1Q17 1Q16 Variation OPERATING REVENUE Electricity Sales to Final Customers 6,361,528 6,124,109 3.9% Electricity Sales to Distributors 285,534 215,538 32.5% Revenue from building the infrastructure 378,442 214,423 76.5% Adjustments to the concession´s financial asset 48,923 87,380 -44.0% Sectoral financial assets and liabilities (565,003) (732,253) -22.8% Other Operating Revenues 1,026,210 776,395 32.2% 7,535,635 6,685,592 12.7% DEDUCTIONS FROM OPERATING REVENUE (3,073,282) (3,158,707) -2.7% NET OPERATING REVENUE 4,462,353 3,526,884 26.5% COST OF ELECTRIC ENERGY SERVICES Electricity Purchased for Resale (2,632,925) (1,882,032) 39.9% Electricity Network Usage Charges (177,459) (343,437) -48.3% (2,810,384) (2,225,468) 26.3% OPERATING COSTS AND EXPENSES Personnel (223,800) (165,749) 35.0% Material (38,810) (28,315) 37.1% Outsourced Services (194,435) (144,128) 34.9% Other Operating Costs/Expenses (162,323) (144,345) 12.5% Allowance for Doubtful Accounts (46,977) (45,374) 3.5% Legal and Judicial Expenses (45,827) (50,533) -9.3% Others (69,519) (48,438) 43.5% Cost of building the infrastructure (378,442) (214,423) 76.5% Employee Pension Plans (28,315) (13,591) 108.3% Depreciation and Amortization (151,151) (118,085) 28.0% Amortization of Concession's Intangible (15,322) (5,918) 158.9% Amortization of goodwill derived from acquisition (22,202) (15,035) 47.7% (1,214,798) (849,587) 43.0%
EBITDA (IFRS)(1) 625,845 590,866 5.9% EBIT 437,171 451,829 -3.2% FINANCIAL INCOME (EXPENSE) Financial Income 177,342 218,543 -18.9% Financial Expenses (358,958) (309,554) 16.0% Interest on Equity (181,616) (91,011) 99.6% INCOME BEFORE TAXES ON INCOME 255,554 360,818 -29.2% Social Contribution (28,077) (36,746) -23.6% Income Tax (77,273) (102,051) -24.3% Net Income (IFRS) 150,205 222,021 -32.3%
Note: (1) EBITDA (IFRS) is calculated from the sum of net income, taxes, financial result and depreciation/amortization, as CVM Instruction no. 527/12.
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11.8) Income Statement – Distribution Segment (without RGE Sul) (R$ thousands)
Consolidated (without RGE Sul) 1Q17 1Q16 Variation OPERATING REVENUE Electricity Sales to Final Customers 5,197,280 6,124,109 -15.1% Electricity Sales to Distributors 267,893 215,538 24.3% Revenue from building the infrastructure 293,779 214,423 37.0% Adjustments to the concession´s financial asset 40,784 87,380 -53.3% Sectoral financial assets and liabilities (448,354) (732,253) -38.8% Other Operating Revenues 840,509 776,395 8.3% 6,191,890 6,685,592 -7.4%
DEDUCTIONS FROM OPERATING REVENUE (2,496,035) (3,158,707) -21.0% NET OPERATING REVENUE 3,695,855 3,526,884 4.8%
COST OF ELECTRIC ENERGY SERVICES Electricity Purchased for Resale (2,213,757) (1,882,032) 17.6% Electricity Network Usage Charges (139,658) (343,437) -59.3% (2,353,415) (2,225,468) 5.7% OPERATING COSTS AND EXPENSES Personnel (182,292) (165,749) 10.0% Material (30,086) (28,315) 6.3% Outsourced Services (163,302) (144,128) 13.3% Other Operating Costs/Expenses (139,113) (144,345) -3.6% Allowance for Doubtful Accounts (38,951) (45,374) -14.2% Legal and Judicial Expenses (44,127) (50,533) -12.7% Others (56,035) (48,438) 15.7% Cost of building the infrastructure (293,779) (214,423) 37.0% Employee Pension Plans (25,499) (13,591) 87.6% Depreciation and Amortization (122,361) (118,085) 3.6% Amortization of Concession's Intangible (5,918) (5,918) 0.0% Amortization of goodwill derived from acquisition (15,035) (15,035) 0.0% (977,385) (849,587) 15.0%
EBITDA(1) 508,369 590,866 -14.0%
EBIT 365,056 451,829 -19.2%
FINANCIAL INCOME (EXPENSE) Financial Income 155,569 218,543 -28.8% Financial Expenses (309,388) (309,554) -0.1% Interest on Equity (153,819) (91,011) 69.0%
INCOME BEFORE TAXES ON INCOME 211,237 360,818 -41.5%
Social Contribution (23,316) (36,746) -36.5% Income Tax (64,228) (102,051) -37.1% Net Income 123,693 222,021 -44.3%
Note: (1) EBITDA is calculated from the sum of net income, taxes, financial result and depreciation/amortization, as CVM Instruction no. 527/12.
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11.9) Income Statement – Distribution Segment (R$ thousands) Summary of Income Statement by Distribution Company (R$ Thousands)
CPFL PAULISTA 1Q17 1Q16 Var. Gross Operating Revenue 3,206,368 3,426,287 -6.4% Net Operating Revenue 1,892,227 1,807,781 4.7% Cost of Electric Power (1,240,578) (1,177,354) 5.4% Operating Costs & Expenses (490,483) (423,936) 15.7% EBIT 161,165 206,492 -22.0% EBITDA (1) 217,374 258,863 -16.0% Financial Income (Expense) (72,602) (40,489) 79.3% Income Before Taxes 88,563 166,003 -46.6% Net Income 52,268 104,295 -49.9%
CPFL PIRATININGA 1Q17 1Q16 Var. Gross Operating Revenue 1,415,587 1,587,552 -10.8% Net Operating Revenue 849,889 803,292 5.8% Cost of Electric Power (576,675) (521,982) 10.5% Operating Costs & Expenses (190,166) (150,960) 26.0% EBIT 83,049 130,350 -36.3% EBITDA (1) 106,906 153,222 -30.2% Financial Income (Expense) (32,505) (20,176) 61.1% Income Before Taxes 50,544 110,175 -54.1% Net Income 31,363 68,383 -54.1%
RGE 1Q17 1Q16 Var. Gross Operating Revenue 1,215,435 1,309,502 -7.2% Net Operating Revenue 728,517 709,202 2.7% Cost of Electric Power (417,453) (413,326) 1.0% Operating Costs & Expenses (211,525) (200,073) 5.7% EBIT 99,539 95,804 3.9% EBITDA (1) 139,124 133,565 4.2% Financial Income (Expense) (37,486) (19,741) 89.9% Income Before Taxes 62,053 76,063 -18.4% Net Income 39,555 49,149 -19.5%
CPFL SANTA CRUZ 1Q17 1Q16 Var. Gross Operating Revenue 159,595 155,251 2.8% Net Operating Revenue 102,760 88,093 16.6% Cost of Electric Power (54,577) (47,580) 14.7% Operating Costs & Expenses (30,064) (25,941) 15.9% EBIT 18,119 14,573 24.3% EBITDA (1) 22,418 19,147 17.1% Financial Income (Expense) (3,356) (4,297) -21.9% Income Before Taxes 14,762 10,276 43.7% Net Income 9,321 6,514 43.1%
Note:
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(1) EBITDA (IFRS) is calculated from the sum of net income, taxes, financial result and depreciation/amortization.
Summary of Income Statement by Distribution Company (R$ Thousands)
CPFL LESTE PAULISTA 1Q17 1Q16 Var. Gross Operating Revenue 46,196 43,664 5.8% Net Operating Revenue 30,552 25,698 18.9% Cost of Electric Power (14,258) (13,584) 5.0% Operating Costs & Expenses (10,439) (8,848) 18.0% EBIT 5,854 3,266 79.3% EBITDA (1) 7,474 4,976 50.2% Financial Income (Expense) (1,779) (2,125) -16.3% Income Before Taxes 4,075 1,140 257.4% Net Income 2,561 686 273.1%
CPFL SUL PAULISTA 1Q17 1Q16 Var. Gross Operating Revenue 60,734 63,239 -4.0% Net Operating Revenue 39,578 36,776 7.6% Cost of Electric Power (19,574) (19,789) -1.1% Operating Costs & Expenses (13,983) (11,863) 17.9% EBIT 6,021 5,123 17.5% EBITDA (1) 6,549 7,415 -11.7% Financial Income (Expense) (2,437) (2,085) 16.9% Income Before Taxes 3,585 3,039 18.0% Net Income 2,207 1,926 14.6%
CPFL JAGUARI 1Q17 1Q16 Var. Gross Operating Revenue 54,898 65,577 -16.3% Net Operating Revenue 31,334 35,391 -11.5% Cost of Electric Power (20,326) (22,317) -8.9% Operating Costs & Expenses (8,826) (6,005) 47.0% EBIT 2,182 7,069 -69.1% EBITDA (1) 3,209 8,185 -60.8% Financial Income (Expense) (2,499) (1,171) 113.4% Income Before Taxes (317) 5,898 -105.4% Net Income (392) 3,746 -110.5%
CPFL MOCOCA 1Q17 1Q16 Var. Gross Operating Revenue 33,077 34,519 -4.2% Net Operating Revenue 20,998 20,651 1.7% Cost of Electric Power (9,973) (9,537) 4.6% Operating Costs & Expenses (6,864) (6,927) -0.9% EBIT 4,161 4,187 -0.6% EBITDA (1) 5,315 5,494 -3.3% Financial Income (Expense) (1,036) (1,671) -38.0% Income Before Taxes 3,126 2,515 24.3% Net Income 1,965 1,613 21.8%
Note:
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(1) EBITDA (IFRS) is calculated from the sum of net income, taxes, financial result and depreciation/amortization.
Summary of Income Statement by Distribution Company (R$ Thousands)
RGE SUL 1Q17 1Q16 Var. Gross Operating Revenue 1,343,745 - 0.0% Net Operating Revenue 766,497 - 0.0% Cost of Electric Power (456,969) - 0.0% Operating Costs & Expenses (237,414) - 0.0% EBIT 72,115 - 0.0% EBITDA (1) 117,477 - 0.0% Financial Income (Expense) (27,798) - 0.0% Income Before Taxes 44,317 - 0.0% Net Income 26,512 - 0.0%
Note: (1) EBITDA (IFRS) is calculated from the sum of net income, taxes, financial result and depreciation/amortization.
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11.10) Sales within the Concession Area by Distributor (In GWh)
CPFL Paulista 1Q17 1Q16 Var. Residential 2,392 2,360 1.3% Industrial 2,532 2,546 -0.6% Commercial 1,455 1,476 -1.4% Others 1,033 994 3.9% Total 7,411 7,376 0.5%
CPFL Piratininga 1Q17 1Q16 Var. Residential 1,051 1,042 0.8% Industrial 1,483 1,600 -7.3% Commercial 647 640 1.1% Others 282 279 1.2% Total 3,463 3,562 -2.8%
RGE 1Q17 1Q16 Var. Residential 686 665 3.2% Industrial 792 764 3.7% Commercial 371 377 -1.7% Others 758 724 4.7% Total 2,607 2,530 3.0%
CPFL Santa Cruz 1Q17 1Q16 Var. Residential 94 93 1.0% Industrial 51 55 -6.1% Commercial 44 43 0.5% Others 90 85 5.7% Total 279 276 0.9%
CPFL Jaguari 1Q17 1Q16 Var. Residential 23 23 0.8% Industrial 94 99 -4.4% Commercial 14 13 8.3% Others 9 10 -2.5% Total 141 145 -2.3%
CPFL Mococa 1Q17 1Q16 Var. Residential 20 19 1.1% Industrial 15 16 -3.9% Commercial 8 8 -2.9% Others 15 14 5.7% Total 57 57 0.3%
CPFL Leste Paulista 1Q17 1Q16 Var. Residential 26 26 0.6% Industrial 22 21 4.8% Commercial 12 12 -1.6% Others 25 22 15.5% Total 85 80 5.4%
CPFL Sul Paulista 1Q17 1Q16 Var. Residential 37 37 0.8% Industrial 45 47 -2.6% Commercial 16 15 3.3% Others 24 23 4.4% Total 122 122 0.5%
RGE Sul (*) 1Q17 1Q16 Var. Residential 800 - 0.0% Industrial 628 - 0.0% Commercial 378 - 0.0% Others 742 - 0.0% Total 2,549 - 0.0% Note: (*) Considers sales within the concession area from 1Q17.
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11.11) Sales to the Captive Market by Distributor (in GWh)
CPFL Paulista 1Q17 1Q16 Var. Residential 2,392 2,360 1.3% Industrial 688 884 -22.2% Commercial 1,161 1,326 -12.4% Others 994 961 3.4% Total 5,235 5,531 -5.4%
CPFL Piratininga 1Q17 1Q16 Var. Residential 1,051 1,042 0.8% Industrial 322 463 -30.4% Commercial 507 569 -10.9% Others 249 268 -7.2% Total 2,129 2,342 -9.1%
RGE 1Q17 1Q16 Var. Residential 686 665 3.2% Industrial 288 349 -17.4% Commercial 345 360 -4.2% Others 754 724 4.2% Total 2,073 2,097 -1.2%
CPFL Santa Cruz 1Q17 1Q16 Var. Residential 94 93 1.0% Industrial 26 43 -37.8% Commercial 41 43 -6.4% Others 90 85 5.7% Total 251 264 -5.0%
CPFL Jaguari 1Q17 1Q16 Var. Residential 23 23 0.8% Industrial 52 72 -27.7% Commercial 14 13 8.3% Others 9 10 -2.5% Total 99 118 -16.0%
CPFL Mococa 1Q17 1Q16 Var. Residential 20 19 1.1% Industrial 8 8 0.5% Commercial 8 8 -4.3% Others 15 14 5.7% Total 51 50 1.4%
CPFL Leste Paulista 1Q17 1Q16 Var. Residential 26 26 0.6% Industrial 7 7 5.0% Commercial 12 12 -1.6% Others 25 22 15.5% Total 70 66 5.6%
CPFL Sul Paulista 1Q17 1Q16 Var. Residential 37 37 0.8% Industrial 25 24 5.2% Commercial 16 15 3.3% Others 24 23 4.4% Total 102 99 3.1%
RGE Sul (*) 1Q17 1Q16 Var. Residential 800 - 0.0% Industrial 214 - 0.0% Commercial 339 - 0.0% Others 741 - 0.0% Total 2,095 - 0.0% Note: (*) Considers sales to the captive market from 1Q17.
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11.12) Reconciliation of Net Debt/Ebitda Pro Forma ratio of CPFL Energia for purposes of financial covenants calculation
(in R$ million)
Net Debt Pro forma reconciliation (1Q17)
Net debt - Generation projects Majority-controlled subsidiaries Investees accounted for under the equity method (fully consolidated) March-17 Total CPFL Chapeco- CERAN Lajeado Subtotal Enercan Baesa Epasa Subtotal Renováveis ense Borrowings and debentures 299 6,459 36 6,794 219 127 1,402 246 1,994 8,788 (-) Cash and cash equivalents (276) (732) (25) (1,032) (375) (21) (220) (95) (712) (1,744) Net Debt 23 5,727 11 5,761 (156) 106 1,181 152 1,282 7,044 CPFL stake (%) 65% 51.61% 59.93% - 48.72% 25.01% 51% 53.34% - - Net Debt in generation projects 15 2,956 7 2,977 (76) 26 602 81 634 3,611
Reconciliation CPFL Energia Gross Debt 20,866 (-) Cash and cash equivalents (4,878) Net Debt (IFRS) 15,988 (-) Fully consolidated projects (5,761) (+) Proportional consolidation 3,611 Net Debt (Pro Forma) 13,837
EBITDA Pro Forma reconciliation (1Q17 LTM)
EBITDA - Generation projects Majority-controlled subsidiaries Investees accounted for under the equity method (fully consolidated) 1Q17 Total CPFL Chapeco- CERAN Lajeado Subtotal Enercan Baesa Epasa Subtotal Renováveis ense Net operating revenue 299 1,739 33 2,071 571 219 802 577 2,169 4,240 Operating cost and expense (68) (677) (26) (771) (123) (104) (148) (355) (731) (1,502) EBITDA 232 1,062 7 1,300 448 115 654 221 1,438 2,738 CPFL stake (%) 65% 51.61% 59.93% - 48.72% 25.01% 51% 53.34% - - Proportional EBITDA 151 548 4 703 218 29 334 118 699 1,401
Reconciliation CPFL Energia - 1Q17 LTM Net income 879 Amortization 1,360 Financial Results 1,571 Income Tax /Social Contribution 477 EBITDA 4,287 (-) Equity income (328) (-) EBITDA - Fully consolidated projects (1,300) (+) Proportional EBITDA 1,401 (+) RGE Sul - Apr-16 to Mar-17¹ 132 EBITDA Pro Forma 4,192
Net Debt / EBITDA Pro Forma 3.3x Notes: 1) In accordance with financial covenants calculation in cases of assets acquired by the Company.
Página 64 de 64 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13A-16 OR 15D-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of May, 2017 Commission File Number 32297
CPFL Energy Incorporated (Translation of Registrant's name into English)
Rua Gomes de Carvalho, 1510, 14º andar, cj 1402 CEP 04547-005 - Vila Olímpia, São Paulo – SP Federative Republic of Brazil (Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. Form 20-F ___X___ Form 40-F ______
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): [ ]
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): [ ]
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes ______No ___X____
If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-______
. WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c Registration Form – 2017 – CPFL Energia S.A. Version: 2
Summary
Registration data
1 . General information 2 2 . Address 3 3 . Securities 4 4 . Auditor information 5 5 . Share register 6 6 . Investor relations officer 7 7 . Shareholders’ department 8
1 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c Registration Form – 2017 – CPFL Energia S.A. Version: 2
1. General information
Company name: CPFL ENERGIA S.A. Date of adoption of company name: 08/06/2002 Type: publicly-held Corporation Previous company name: Draft II Participações S.A Date of incorporation: 03/20/1998 CNPJ (Corporate Taxpayer ID): 02.429.144/0001-93 CVM code: 1866-0 CVM registration date: 05/18/2000 CVM registration status: Active Status starting date: 05/18/2000 Country: Brazil Country in which the securities Are held in custody: Brazil Other countries in which the securities can be traded
Country Date of admission United States 09/29/2004
Sector of activity: Holding company (Electric Energy) Description of activity: Holding company Issuer’s category: Category A Date of registration in the current category: 01/01/2010 Issuer’s status: Operating Status starting date: 05/18/2000 Type of ownership control: Private Holding Date of last change in ownership control: 11/30/2009 Date of last change of fiscal year: Month/day of the end of fiscal year: 12/31 Issuer´s web address: www.cpfl.com.br Newspaper or media where issuer discloses its information:
Newspaper or media FU Diário Oficial do Estado de São Paulo SP Valor Econômico SP www.cpfl.com.br/ri SP www.portalneo1.net SP www.valor.com.br/valor-ri SP
2 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c Registration Form – 2017 – CPFL Energia S.A. Version: 2
2. Address
Mail Address : Rodovia Engenheiro Miguel Noel Nascentes Burnier, 1755, Km 2,5, Parque São Quirino, Campinas, SP, Brazil, zip code 13088-140 Telephone (019) 3756-6083, Fax (019) 3756-6089, E-mail: [email protected]
Registered Office Address : Rua Gomes de Carvalho, 1510, 14º– Cj 2 Vila Olímpia, São Paulo, SP, Brazil, zip code: 04547-005 Telephone: (019) 3756-6083, Fax: (019) 3756-6089, E-mail: [email protected]
3 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c Registration Form – 2017 – CPFL Energia S.A. Version: 2
3. Securities
Share trading Trading mkt Stock exchange Managing entity BM&FBOVESPA Start date 09/29/2004 End date Trading segment New Market Start date 9/29/2004 End date
Debenture trading Trading mkt Organized market Managing entity CETIP Start date 05/18/2000 End date Trading segment Traditional Start date 05/19/2000 End date
4 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c Registration Form – 2017 – CPFL Energia S.A. Version: 2
4. Auditor information
Does the issuer have an auditor? Yes CVM code: 385-9 Type of auditor: Brazilian firm Independent auditor: Deloitte Touche Tomatsu Auditores Independentes CNPJ (Corporate Taxpayer ID): 49.928.567/0001-11 Period of service: 03/12/2012 to 03/28/2017 Partner in charge Marcelo Magalhães Fernandes Period of service 03/12/2012 to 03/28/2017 CPF (Individual Taxpayer ID) 110.931.498-17
Does the issuer have an auditor? Yes CVM code: 418-9 Type of auditor: Brazilian firm Independent auditor: KPMG Auditores Independentes CNPJ (Corporate Taxpayer ID): 57.755.217/0011-09 Period of service: 03/29/2017 Partner in charge Marcio José dos Santos Period of service 03/29/2017 CPF (Individual Taxpayer ID) 253.206.858-23
5 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c Registration Form – 2017 – CPFL Energia S.A. Version: 2
5. Share register
Does the company have a service provider: Yes Corporate name: Banco do Brasil CNPJ: 00.000.000/0001-91 Period of service: 01/01/2011
Address:
Rua Lélio Gama, 105 – 38º floor, Gecin, Centro, Rio de Janeiro, RJ, Brazil, zip code: 20031-080, Telephone (021) 38083551, Fax: (021) 38086088, e-mail: [email protected]
6 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c Registration Form – 2017 – CPFL Energia S.A. Version: 2
6. Investor relations officer
Name: Gustavo Estrella Investor Relations Officer CPF/CNPJ: 037.234.097-09
Address: Rodovia Engenheiro Miguel Noel Nascentes Burnier, 1755, Km 2,5, Parque São Quirino, Campinas, SP, Brazil, zip code 13088-140 Telephone (019) 3756-6083, Fax (019) 3756-6089, email: [email protected].
Date when the officer assumed the position: 02/27/2013 Date when the officer left the position:
7 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c Registration Form – 2017 – CPFL Energia S.A. Version: 2
7. Shareholders’ department
Contact Leandro José Cappa de Oliveira Date when the officer assumed the position: 10/06/2014 Date when the officer left the position:
Address: Rodovia Engenheiro Miguel Noel Nascentes Burnier, 1755, Km 2,5, Parque São Quirino, Campinas, SP, Brazil, zip code 13088-140 Telephone (019) 3756-6083, email: [email protected]
8 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c (Free Translation of the original in Portuguese) Standard Financial Statements – ITR – Date: March 31, 2016 - CPFL Energia S. A
Table of Contents Company Data Capital Composition 1 Cash dividend 2 Individual financial statements Statement of Financial Position - Assets 3 Statement of Financial Position - Liabilities and Equity 4 Statement of Income 5 Statement of Comprehensive Income 6 Statement of Cash Flows – Indirect Method 7 Statement of Changes in Equity 01/01/2017 to 03/31/2017 8 01/01/2016 to 03/31/2016 9 Statements of Value Added 10 Consolidated Interim Financial Statements Statement of Financial Position - Assets 11 Statement of Financial Position - Liabilities and Equity 12 Statement of Income 13 Statement of Comprehensive Income 14 Statement of Cash Flows - Indirect Method 15 Statement of Changes in Equity 01/01/2017 to 03/31/2017 16 01/01/2016 to 03/31/2016 17 Statements of Value Added 18 Comments on performance 19 Notes to Interim financial statements 28 Other relevant information 83 Reports Independent Auditor’s Report - Unqualified 85 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c Capital Composition Number of Shares Closing Date (In units) 03/31/2017 Paid-in capital Common 1,017,914,746 Preferred 0 Total 1,017,914,746 Treasury Stock 0 Common 0 Preferred 0 Total 0
1 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c Company Data
Cash dividends Beginning of Class of Amount per share Event Approval Description payment Type of share share (Reais/share)
2 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c Individual Financial Statements
Statement of Financial Position – Assets
(in thousands of Brazilian reais - R$)
Code Description Current quarter 03/31/2017 Prior year 12/31/2016 1 Total assets 8,930,867 8,908,964 1.01 Current assets 554,519 791,016 1.01.01 Cash and cash equivalents 15,661 64,973 1.01.06 Taxes recoverable 84,938 82,836 1.01.06.01 Current taxes recoverable 84,938 82,836 1.01.08 Other current assets 453,920 643,207 1.01.08.03 Others 453,920 643,207 1.01.08.03.01 Other receivables 457 229 1.01.08.03.04 Dividends and interest on capital 453,463 642,978 1.02 Noncurrent assets 8,376,348 8,117,948 1.02.01 Long-term assets 211,132 250,625 1.02.01.06 Deferred taxes 179,619 171,073 1.02.01.06.02 Deferred tax assets 179,619 171,073 1.02.01.08 Receivables from related parties 23,220 52,582 1.02.01.08.02 Receivables from subsidiaries 23,220 52,582 1.02.01.09 Other noncurrent assets 8,293 26,970 1.02.01.09.04 Escrow deposits 357 710 1.02.01.09.10 Other receivables 7,936 26,260 1.02.02 Investments 8,164,039 7,866,100 1.02.02.01 Permanet equity interests 8,164,039 7,866,100 1.02.02.01.02 Investments in subsidiaries 8,164,039 7,866,100 1.02.03 Property, plant and equipment 1,146 1,199 1.02.03.01 Property, plant and equipment in service 1,146 1,199 1.02.04 Intangible assets 31 24 1.02.04.01 Intangible assets 31 24
3 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c Individual Financial Statements Statement of Financial Position – Liabilities and Equity
(In thousands of Brazilian reais - R$)
Code Description Current quarter 03/31/2017 Prior year 12/31/2016 2 Total liabilities 8,930,867 8,908,964 2.01 Current liabilities 62,620 255,755 2.01.02 Trade payables 1,874 3,760 2.01.02.01 Domestic trade payables 1,874 3,760 2.01.03 Taxes payable 1,589 454 2.01.03.01 Federal taxes payable 1,589 453 2.01.03.01.02 PIS (Tax on revenue) 20 15 2.01.03.01.03 COFINS (Tax on revenue) 128 90 2.01.03.01.04 Other federal taxes 1,441 348 2.01.03.03 Municipal taxes payable - 1 2.01.03.03.01 Other municipal taxes payable - 1 2.01.04 Borrowings 37,549 15,334 2.01.04.02 Debentures 37,549 15,334 2.01.04.02.02 Interest on debentures 37,549 15,334 2.01.05 Other payables 21,608 236,207 2.01.05.02 Others 21,608 236,207 2.01.05.02.01 Dividend and interest on capital payable 5,546 218,630 2.01.05.02.07 Other payables 16,062 17,577 2.02 Noncurrent liabilities 660,161 683,188 2.02.01 Borrowings 612,934 612,251 2.02.01.02 Debentures 612,934 612,251 2.02.01.02.01 Debentures 612,934 612,251 2.02.02 Other payables 46,374 69,929 2.02.02.02 Others 46,374 69,929 2.02.02.02.05 Allowance for investment losses 13,893 19,301 2.02.02.02.08 Other payables 32,481 50,628 2.02.04 Provisions 853 1,008 2.02.04.01 Provision for tax, social security, labor and civil risks 853 1,008 2.02.04.01.02 Provision for social security and labor risks 389 467 2.02.04.01.04 Provision for civil risks 464 541 2.03 Equity 8,208,086 7,970,021 2.03.01 Share capital 5,741,284 5,741,284 2.03.02 Capital reserves 468,014 468,014 2.03.04 Earnings reserves 2,014,216 1,995,356 2.03.04.01 Legal reserve 739,102 739,103 2.03.04.02 Statutory reserve 1,275,114 1,248,433 2.03.04.08 Additional dividend proposed - 7,820 2.03.05 Retained earnings/accumulated losses 225,615 - 2.03.08 Other comprehensinve income (241,043) (234,633) 2.03.08.01 Accumulated comprehensive income (241,043) (234,633)
4 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c Individual Financial Statements
Statement of income
(In thousands of Brazilian reais - R$)
YTD current year 01/01/2017 to 03/31/2017 YTD prior year 01/01/2016 to 03/31/2016 3.01 Net operating revenue - 1,713 3.03 Gross profit - 1,713 3.04 Operating expenses/income 254,680 273,791 3.04.02 General and administrative expenses (17,167) (8,044) 3.04.06 Share of profit (loss) of investees 271,847 281,835 3.05 Profit before finance income (costs) and taxes 254,680 275,504 3.06 Finance income (costs) (17,340) (10,440) 3.06.01 Finance income 5,765 9,160 3.06.02 Finance costs (23,105) (19,600) 3.07 Profit before taxes 237,340 265,064 3.08 Income tax and social contribution 8,546 6,285 3.08.01 Current - (21,943) 3.08.02 Deferred 8,546 28,228 3.09 Profit for the period from continuing operations 245,886 271,349 3.11 Profit for the period 245,886 271,349
5 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c Individual Financial Statements
Statement of Comprehensive Income
(In thousands of Brazilian reais - R$)
Code Description YTD current year 01/01/2017 to 03/31/2017 YTD prior 01/01/2016 to 03/31/2016 4.01 Profit for the period 245,886 271,349 4.02 Other comprehensive income - (1,327) 4.02.01 Comprehensive income for the period of subsidiaries - (1,327) 4.03 Total comprehensive income for the period 245,886 270,022
6 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c Individual Financial Statements
Statement of Cash Flows – Indirect Method
(In thousands of Brazilian reais - R$)
Code Description YTD current year 01/01/2017 to YTD prior year 01/01/2016 to 03/31/2017 03/31/2016 6.01 Net cash from operating activities 173,279 242,860 6.01.01 Cash generated from operations (12,121) (1,402) 6.01.01.01 Profit for the period before income tax and social contribution 237,339 265,063 6.01.01.02 Depreciation and amortization 54 46 6.01.01.03 Interest on debts, inflation adjustment and exchange rate changes 22,329 15,595 6.01.01.04 Share of profit (loss) of investees (271,847) (281,835) 6.01.01.05 Provision for tax, civil and labor risks 4 (271) 6.01.02 Changes in assets and liabilities 185,400 244,262 6.01.02.01 Dividend and interest on capital received 189,515 300,000 6.01.02.02 Taxes recoverable (1,979) (219) 6.01.02.03 Escrow deposits 364 (91) 6.01.02.04 Other operating assets 18,096 (128) 6.01.02.05 Trade payables (1,886) (112) 6.01.02.06 Other taxes and social contributions 1,135 1,110 6.01.02.07 Interest paid on debts and debentures - (38,857) 6.01.02.08 Income tax and social contribution paid - (14,225) 6.01.02.09 Other operating liabilities (19,661) (3,044) 6.01.02.10 Tax, civil and labor risks paid (184) (172) 6.02 Net cash from investing activities (1,688) (117,461) 6.02.02 Securities - (199) 6.02.04 Intragroup loans 29,820 (106,742) 6.02.07 Purchases of intangible assets (8) - 6.02.08 Advance for future capital increases (31,500) (10,520) 6.03 Net cash from financing activities (220,904) (521,700) Repayment of principal of borrowings and debentures, net of 6.03.01 derivatives - (586,637) 6.03.02 Dividend and interest on capital paid (220,904) (49) 6.03.04 Settlement of derivatives - 64,986 6.05 Increase (decrease) in cash and cash equivalents (49,313) (396,301) 6.05.01 Cash and cash equivalents at the beginning of the period 64,974 424,192 6.05.02 Cash and cash equivalents at the end of the period 15,661 27,891
7 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c Individual Financial Statements
Statement of Changes in Equity – from January 1, 2017 to March 31, 2017
(In thousands of Brazilian reais - R$)
Capital reserves, Retained earnings Other Share Earnings Code Description options granted and or accumulated comprehensive Equity capital reserves treasury shares losses income 5.01 Opening balances 5,741,284 468,014 1,995,355 - (234,632) 7,970,021 5.03 Adjusted opening balances 5,741,284 468,014 1,995,355 - (234,632) 7,970,021 5.04 Capital transactions with owners - - (7,820) - - (7,820) 5.04.06 Dividends - - (7,820) - - (7,820) 5.05 Total comprehensive income - - - 245,886 - 245,886 5.05.01 Profit for the period - - - 245,886 - 245,886 5.06 Internal changes in equity - - 26,680 (20,269) (6,411) - Share of profit (loss) on comprehensive income of 5.06.04 subsidiaries and associates - - - 6,411 (6,411) - 5.06.05 Changes in statutory reserve in the period - - 26,680 (26,680) - - 5.07 Closing balances 5,741,284 468,014 2,014,215 225,617 (241,043) 8,208,087
8 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c Individual Financial Statements
Statement of Changes in Equity – from January 1, 2016 to March 31, 2016
(In thousands of Brazilian reais - R$)
Capital reserves, Retained earnings Other Share Earnings Code Description options granted and or accumulated comprehensive Equity capital reserves treasury shares losses income 5.01 Opening balances 5,348,312 468,082 1,672,481 - 185,320 7,674,195 5.03 Adjusted opening balances 5,348,312 468,082 1,672,481 - 185,320 7,674,195 5.05 Total comprehensive income - - - 271,349 (1,327) 270,022 5.05.01 Profit for the period - - - 271,349 - 271,349 5.05.02 Other comprehensive infome - - - - (1,327) (1,327) 5.06 Internal changes in equity - - 55,094 (48,637) (6,457) - Share of profit (loss) on comprehensive income of 5.06.04 subsidiaries and associates - - - 6,457 (6,457) - 5.06.05 Changes in statutory reserve in the period - - 55,094 (55,094) - - 5.07 Closing balances 5,348,312 468,082 1,727,575 222,712 177,536 7,944,217
9 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c Individual Financial Statements
Statement of Value Added
(In thousands of Brazilian reais - R$)
Code Description YTD current year 01/01/2017 to 03/31/2017 YTD prior year 01/01/2016 to 03/31/2016 7.01 Revenues 8 1,887 7.01.01 Sales of goods and services - 1,887 7.01.03 Revenues related to construction of own assets 8 - 7.02 Inputs purchased from third parties (2,804) (2,101) 7.02.02 Materials, energy, third-party services and others (2,201) (1,882) 7.02.04 Others (603) (219) 7.03 Gross value added (2,796) (214) 7.04 Retentions (54) (46) 7.04.01 Depreciation and amortization (54) (46) 7.05 Wealth created by the company (2,850) (260) 7.06 Wealth received in transfer 277,916 291,472 7.06.01 Share of profit (loss) of investees 271,847 281,835 7.06.02 Finance income 6,069 9,637 7.07 Total wealth for distribution 275,066 291,212 7.08 Wealth distributed 275,066 291,212 7.08.01 Personnel and charges 12,076 5,008 7.08.01.01 Salaries and wages 8,824 2,654 7.08.01.02 Benefits 2,485 2,055 7.08.01.03 FGTS (Severance Pay Fund) 767 299 7.08.02 Taxes, fees and contributions (6,069) (4,320) 7.08.02.01 Federal (6,074) (4,326) 7.08.02.02 State 5 6 7.08.03 Lenders and lessors 23,173 19,175 7.08.03.01 Interest 22,975 19,163 7.08.03.02 Rentals 198 12 7.08.04 Shareholders 245,886 271,349 7.08.04.03 Retained earnings / Loss for the period 245,886 271,349
10 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c Consolidated Financial Statements
Statement of Financial Position – Assets
(In thousands of Brazilian reais - R$)
Code Description Current quarter 03/31/2017 Prior year 12/31/2016 1 Total assets 41,732,324 42,170,992 1.01 Current assets 10,562,550 11,379,187 1.01.01 Cash and cash equivalents 4,877,813 6,164,997 1.01.02 Financial investments 450 449 1.01.02.02 Financial investments at amortized cost 450 449 1.01.02.02.01 Held-to-maturity securities 450 449 1.01.03 Trade receivables 4,065,465 3,765,893 1.01.03.01 Consumers 4,065,465 3,765,893 1.01.06 Taxes recoverable 423,054 403,848 1.01.06.01 Current taxes recoverable 423,054 403,848 1.01.08 Other current assets 1,195,768 1,044,000 1.01.08.03 Others 1,195,768 1,044,000 1.01.08.03.01 Other receivables 911,796 777,450 1.01.08.03.02 Derivatives 197,741 163,241 1.01.08.03.04 Dividends and interest on capital 75,395 92,609 1.01.08.03.05 Concession financial asset 10,836 10,700 1.02 Noncurrent assets 31,169,774 30,791,805 1.02.01 Long-term assets 9,078,840 8,809,442 1.02.01.03 Trade receivables 204,417 203,185 1.02.01.03.01 Consumers 204,417 203,185 1.02.01.06 Deferred taxes 935,471 922,858 1.02.01.06.02 Deferred tax assets 935,471 922,858 1.02.01.08 Receivables from related parties 9,236 47,632 1.02.01.08.03 Receivables from controlling shareholders 9,236 47,632 1.02.01.09 Other noncurrent assets 7,929,716 7,635,767 1.02.01.09.03 Derivatives 440,011 641,357 1.02.01.09.04 Escrow deposits 769,646 550,072 1.02.01.09.05 Taxes recoverable 205,938 198,286 1.02.01.09.07 Concession financial asset 5,601,969 5,363,144 1.02.01.09.09 Investments at cost 116,654 116,654 1.02.01.09.10 Other receivables 795,498 766,254 1.02.02 Investments 1,487,245 1,493,752 1.02.02.01 Permanent equity interests 1,487,245 1,493,752 1.02.02.01.04 Investments in subsidiaries 1,487,245 1,493,752 1.02.03 Property, plant and equipment 9,880,291 9,712,998 1.02.03.01 Property, plant and equipment in service 9,608,068 9,462,696 1.02.03.03 Property, plant and equipment in progress 272,223 250,302 1.02.04 Intangible assets 10,723,398 10,775,613 1.02.04.01 Intangible assets 10,723,398 10,775,613
11 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c Consolidated Financial Statements
Statement of Financial Position – Liabilities and Equity
(In thousands of Brazilian reais - R$)
Code Description Current quarter 03/31/2017 Prior year 12/31/2016 2 Total liabilities 41,732,324 42,170,992 2.01 Current liabilities 10,160,412 9,018,493 2.01.01 Social and labor obligations 127,680 131,707 2.01.01.02 Labor obligations 127,680 131,707 2.01.01.02.01 Estimated payroll 127,680 131,707 2.01.02 Trade payables 2,232,236 2,728,131 2.01.02.01 Domestic trade payables 2,232,236 2,728,131 2.01.03 Taxes payable 785,682 681,544 2.01.03.01 Federal taxes payable 318,845 260,607 2.01.03.01.01 Income tax and social contribution payable 99,340 57,227 2.01.03.01.02 PIS (Tax on revenue) 31,327 28,759 2.01.03.01.03 COFINS (Tax on revenue) 138,892 126,939 2.01.03.01.04 Other federal taxes 49,286 47,682 2.01.03.02 State taxes payable 462,688 416,102 2.01.03.02.01 ICMS (Tax on revenue) 462,688 416,096 2.01.03.02.02 Other state taxes - 6 2.01.03.03 Municipal taxes payable 4,149 4,835 2.01.03.03.01 Other municipal taxes 4,149 4,835 2.01.04 Borrowings 4,384,541 3,422,923 2.01.04.01 Borrowings 2,940,104 1,875,648 2.01.04.01.01 Local currency 1,174,228 1,260,527 2.01.04.01.02 Foreign currency 1,765,876 615,121 2.01.04.02 Debentures 1,444,437 1,547,275 2.01.04.02.01 Debentures 1,119,268 1,242,095 2.01.04.02.02 Interest on debentures 325,169 305,180 2.01.05 Other payables 2,630,273 2,054,188 2.01.05.02 Others 2,630,273 2,054,188 2.01.05.02.01 Dividend and interest on capital payable 19,970 232,851 2.01.05.02.04 Derivatives 7,581 6,055 2.01.05.02.05 Sector financial liability 1,316,071 597,515 2.01.05.02.06 Use of public asset 10,857 10,857 2.01.05.02.07 Other payables 892,000 807,623 2.01.05.02.08 Regulatory charges 339,778 366,078 2.01.05.02.09 Private pension plan 44,016 33,209 2.02 Noncurrent liabilities 20,978,688 22,779,831 2.02.01 Borrowings 16,945,442 18,621,065 2.02.01.01 Borrowings 9,366,225 11,168,393 2.02.01.01.01 Local currency 6,123,955 6,293,533 2.02.01.01.02 Foreign currency 3,242,270 4,874,860 2.02.01.02 Debentures 7,579,217 7,452,672 2.02.01.02.01 Debentures 7,546,014 7,423,519 2.02.01.02.02 Interest on debentures 33,203 29,153 2.02.02 Other payables 1,909,041 2,001,356 2.02.02.02 Others 1,909,041 2,001,356 2.02.02.02.03 Trade payables 130,767 129,781 2.02.02.02.04 Private pension plan 1,011,715 1,019,233 2.02.02.02.05 Derivatives 165,825 112,207 2.02.02.02.06 Sector financial liability 209,384 317,406 2.02.02.02.07 Use of public asset 87,404 86,624 2.02.02.02.08 Other payables 278,850 309,292 2.02.02.02.09 Federal taxes payable 25,096 26,813 2.02.03 Deferred taxes 1,286,396 1,324,134 2.02.03.01 Deferred income tax and social contribution 1,286,396 1,324,134 2.02.04 Provisions 837,809 833,276 2.02.04.01 Provision for tax, social security, labor and civil risks 837,809 833,276 2.02.04.01.01 Provision for tax risks 302,749 288,389 2.02.04.01.02 Provision for social and labor risks 221,458 222,001 2.02.04.01.04 Provision for civil risks 228,972 236,915 2.02.04.01.05 Others 84,630 85,971 2.03 Consolidated equity 10,593,224 10,372,668 2.03.01 Share capital 5,741,284 5,741,284 2.03.02 Capital reserves 468,014 468,015 2.03.04 Earnings reserves 2,014,216 1,995,355 2.03.04.01 Legal reserve 739,102 739,102 2.03.04.02 Statutory reserve 1,275,114 1,248,433 2.03.04.08 Additional dividend proposed - 7,820 2.03.05 Retained earnings/accumulated losses 225,616 - 2.03.08 Other comprehensinve income (241,043) (234,634) 2.03.09 Noncontrolling interests 2,385,137 2,402,648
12 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c Consolidated Financial Statements
Statement of income
(In thousands of Brazilian reais - R$)
Code Description YTD current year 01/01/2017 to 03/31/2017 YTD prior 01/01/2016 to 03/31/2016 3.01 Net operating revenue 5,538,779 4,336,769 3.02 Cost of electric energy services (4,305,648) (3,269,610) 3.02.01 Cost of electric energy (3,220,654) (2,528,021) 3.02.02 Cost of operation (669,727) (524,053) 3.02.03 Cost of services rendered to third parties (415,267) (217,536) 3.03 Gross profit 1,233,131 979,779 3.04 Operating expenses/income (413,950) (340,503) 3.04.01 Selling expenses (149,218) (127,356) 3.04.02 General and administrative expenses (261,565) (205,091) 3.04.05 Other operating expenses (82,876) (71,537) 3.04.06 Share of profit (loss) of investees 79,709 63,481 3.05 Profit before finance income (costs) and taxes 819,181 639,276 3.06 Finance income (costs) (436,138) (319,027) 3.06.01 Finance income 280,711 312,332 3.06.02 Finance costs (716,849) (631,359) 3.07 Profit before taxes 383,043 407,629 3.08 Income tax and social contribution (150,922) (175,182) 3.08.01 Current (202,520) (285,077) 3.08.02 Deferred 51,598 109,895 3.09 Profit from continuing operations 232,121 232,447 3.11 Consolidated profit for the period 232,121 232,447 3.11.01 Attributable to owners of the Company 245,886 271,349 3.11.02 Attributable to noncontrolling interests (13,765) (38,902)
13 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c Consolidated Financial Statements
Statement of Comprehensive Income
(In thousands of Brazilian reais - R$)
Code Description YTD current year 01/01/2017 to 03/31/2017 YTD prior year 01/01/2016 to 03/31/2016 4.01 Consolidated profit for the period 232,121 232,446 4.02 Other comprehensive income - (1,326) 4.02.01 Actuarial gains (losses) - (1,326) 4.03 Consolidated comprehensive income for the period 232,121 231,120 4.03.01 Attributable to owners of the Company 245,886 270,022 4.03.02 Attributable to noncontrolling interests (13,765) (38,902)
14 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c Consolidated Financial Statements
Statement of Cash Flows – Indirect Method
(In thousands of Brazilian reais - R$)
YTD current year 01/01/2017 to YTD prior year 01/01/2016 to Code Description 03/31/2017 03/31/2016 6.01 Net cash from operating activities 272,288 348,302 6.01.01 Cash generated from operations 1,418,071 1,200,504 6.01.01.01 Profit for the period before income tax and social contribution 383,043 407,629 6.01.01.02 Depreciation and amortization 376,718 307,968 6.01.01.03 Provision for tax, civil and labor risks 46,675 84,639 6.01.01.04 Interest on debts, inflation adjustment and exchange rate changes 592,962 387,300 6.01.01.05 Pension plan expense (income) 28,831 13,913 6.01.01.06 Loss (gain) on disposal of noncurrent assets 23,020 8,304 6.01.01.07 Deferred taxes (PIS and COFINS) 1,247 8,180 6.01.01.08 Others (1,412) - 6.01.01.09 Allowance for doubtful debts 46,696 46,051 6.01.01.10 Share of profit (loss) of investees (79,709) (63,480) 6.01.02 Changes in assets and liabilities (1,145,783) (852,202) 6.01.02.01 Consumers, concessionaries and licensees (347,285) (603,890) 6.01.02.02 Taxes recoverable (16,784) (9,948) 6.01.02.04 Escrow deposits (206,335) 746,730 6.01.02.05 Sectorial financial asset 20,486 1,173,238 6.01.02.06 Receivables - CDE/CCEE (70,265) (183,776) 6.01.02.07 Concession financial assets (transmission companies) (39,636) (4,321) 6.01.02.08 Other operating assets (85,564) 4,947 6.01.02.09 Dividend and interest on capital received 84,150 - 6.01.02.11 Trade payables (479,421) (1,287,216) 6.01.02.12 Other taxes and social contributions 44,109 (123,495) 6.01.02.13 Other liabilities with private pension plan (25,499) (21,779) 6.01.02.14 Regulatory charges (41,786) (118,564) 6.01.02.15 Tax, civil and labor risks paid (60,668) (67,775) 6.01.02.16 Sector financial liability 562,875 121,352 6.01.02.17 Payables - amounts provided by the CDE (7,545) (25,164) 6.01.02.18 Other operating liabilities 132,880 86,650 6.01.02.19 Interest paid on debts and debentures (457,262) (446,517) 6.01.02.20 Income tax and social contribution paid (152,233) (92,674) 6.02 Net cash from investing activities (677,755) (468,595) 6.02.02 Purchases of property, plant and equipment (294,813) (236,880) 6.02.03 Securities, pledges and restricted deposits (51,359) (23,471) 6.02.04 Purchases of intangible assets (347,506) (209,007) 6.02.05 Sale of noncurrent assets - 753 6.02.06 Intragroup loans 15,923 10 6.03 Net cash from financing activities (881,717) (1,156,715) 6.03.01 Borrowings and debentures raised 801,737 417,188 Repayment of principal of borrowings and debentures, net of 6.03.02 derivatives (1,410,704) (1,524,704) 6.03.03 Settlement of derivatives (68,761) (28,310) 6.03.04 Payment of business combination (2,514) (16,191) 6.03.05 Dividend and interest on capital paid (224,437) (4,698) 6.03.07 Loan agreements with the parent company 22,962 - 6.05 Increase (decrease) in cash and cash equivalents (1,287,184) (1,277,008) 6.05.01 Cash and cash equivalents at the beginning of the period 6,164,997 5,682,802 6.05.02 Cash and cash equivalents at the end of the period 4,877,813 4,405,794
15 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c Consolidated Financial Statements
Statement of Changes in Equity – from January 1, 2017 to March 31, 2017
(In thousands of Brazilian reais - R$)
Capital reserves, Retained options Other Share Earnings earnings or Noncontrolling Consolidated Code Description granted comprehensive Equity capital reserves accumulated interests equity and income losses treasury shares 5.01 Opening balances 5,741,284 468,014 1,995,355 - (234,632) 7,970,021 2,402,647 10,372,668 5.03 Adjusted opening balances 5,741,284 468,014 1,995,355 - (234,632) 7,970,021 2,402,647 10,372,668 5.04 Capital transactions with owners - - (7,820) - - (7,820) (3,737) (11,557) 5.04.06 Dvidends - - (7,820) - - (7,820) - (7,820) 5.04.09 Dividends distributed to noncontrolling interests ------(3,737) 5.05 Total comprehensive income - - - 245,886 - 245,886 (13,765) 232,121 5.05.01 Profit for the period - - - 245,886 - 245,886 (13,765) 232,121 5.06 Internal changes in equity - - 26,680 (20,269) (6,411) - (8) (8) Share of profit (loss) on comprehensive income 5.06.04 of subsidiaries and associates - - - 6,411 (6,411) - - 5.06.05 Changes in statutory reserve in the period - - 26,680 (26,680) - - - 5.06.09 Other changes in noncontrolling interests ------(8) (8) 5.07 Closing balances 5,741,284 468,014 2,014,215 225,617 (241,043) 8,208,087 2,385,137 10,593,224
16 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c Consolidated Financial Statements
Statement of Changes in Equity – from January 1, 2016 to March 31, 2016
(In thousands of Brazilian reais - R$)
Capital reserves, options Other Share Earnings Retained Noncontrolling Consolidated Code Description granted comprehensive Equity capital reserves earnings interests equity and income treasury shares 5.01 Opening balances 5,348,312 468,082 1,672,481 - 185,320 7,674,195 2,455,943 10,130,138 5.03 Adjusted opening balances 5,348,312 468,082 1,672,481 - 185,320 7,674,195 2,455,943 10,130,138 Capital transactions with 5.04 owners ------(3,377) (3,377) 5.04.08 Additional dividend approved ------(3,377) (3,377) 5.05 Total comprehensive income - - - 271,349 (1,327) 270,022 (38,902) 231,120 5.05.01 Profit for the period - - - 271,349 - 271,349 (38,902) 232,447 5.05.02 Other comprehensive income - - - - (1,327) (1,327) - (1,327) 5.06 Internal changes in equity - - 55,094 (48,637) (6,457) - - - Changes in statutory reserve 5.06.05 in the period - - 55,094 (55,094) - - - - Realization of deemed cost of property, plant and 5.06.06 equipment - - - 9,784 (9,784) - - - Tax effects on realization of 5.06.07 deemed cost - - - (3,327) 3,327 - - - 5.07 Closing balances 5,348,312 468,082 1,727,575 222,712 177,536 7,944,217 2,413,664 10,357,881
17 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c Consolidated Interim Financial Statements
Statement of Value Added
(In thousands of Brazilian reais - R$)
Code Description YTD current year 01/01/2017 to 03/31/2017 YTD prior 01/01/2016 to 03/31/2016 7.01 Revenues 8,896,526 7,773,904 7.01.01 Sales of goods and services 8,179,148 7,352,192 7.01.02 Other revenues 416,039 217,134 7.01.02.01 Revenue from construction of concession infrastructure 416,039 217,134 7.01.03 Revenues related to construction of own assets 348,035 250,629 7.01.04 Allowance for doubtful debts (46,696) (46,051) 7.02 Inputs purchased from third parties (4,679,612) (3,554,865) 7.02.01 Cost of sales (3,586,020) (2,805,031) 7.02.02 Materials, energy, third-party services and others (903,503) (622,458) 7.02.04 Others (190,089) (127,376) 7.03 Gross value added 4,216,914 4,219,039 7.04 Retentions (377,397) (308,625) 7.04.01 Depreciation and amortization (305,281) (246,737) 7.04.02 Others (72,116) (61,888) 7.04.02.01 Amortization of concession intangible assets (72,116) (61,888) 7.05 Wealth created by the company 3,839,517 3,910,414 7.06 Wealth received in transfer 377,753 398,026 7.06.02 Finance income 298,044 334,546 7.06.03 Others 79,709 63,480 7.07 Total wealth for disbribution 4,217,270 4,308,440 7.08 Wealth distributed 4,217,270 4,308,440 7.08.01 Personnel and charges 349,210 235,212 7.08.01.01 Salaries and wages 217,816 144,395 7.08.01.02 Benefits 113,770 77,724 7.08.01.03 FGTS (Severance Pay Fund) 17,624 13,093 7.08.02 Taxes, fees and contributions 2,877,814 3,178,742 7.08.02.01 Federal 1,404,262 1,848,703 7.08.02.02 State 1,468,374 1,326,061 7.08.02.03 Municipal 5,178 3,978 7.08.03 Lenders and lessors 758,125 662,040 7.08.03.01 Interest 738,422 647,916 7.08.03.02 Rentals 19,703 14,124 7.08.04 Shareholders 232,121 232,446 7.08.04.03 Retained earnings / Loss for the period 232,121 232,446
18 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c COMMENTS ON THE INDIVIDUAL PERFORMANCE
The comments on performance are expressed in thousands of Reais, unless otherwise stated.
Profit or loss analysis
CPFL Energia (Parent)
This quarter, the decrease in profit was R$ 25,463 when compared with the same period of the prior year (R$ 245,886 in 2017 and R$ 271,349 in 2016) mainly due to the decrease in profit of investees and increase in general administrative expenses.
19 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c COMMENTS ON THE CONSOLIDATED PERFORMANCE
Consolidated 1st Quarter 2017 2016 Variation Gross operating revenue 8,730,385 7,585,647 15.1% Electricity sales to final consumers (*) 6,821,851 6,463,078 5.6% Electricity sales to wholesalers (*) 950,802 748,256 27.1% Revenue from concession infrastructure construction 416,039 217,134 91.6% Other operating revenues (*) 1,106,695 889,432 24.4% Sector financial assets and liabilities (565,003) (732,253) -22.8% Deductions from operating revenue (3,191,606) (3,248,878) -1.8% Net operating revenue 5,538,779 4,336,769 27.7% Cost of electric energy (3,220,654) (2,528,021) 27.4% Electricity purchased for resale (3,018,384) (2,165,933) 39.4% Network usage charge (202,270) (362,089) -44.1% Operating costs and expenses (1,578,654) (1,145,572) 37.8% Personnel (332,483) (244,967) 35.7% Private pension entity (28,831) (13,913) 107.2% Materials (55,095) (39,785) 38.5% Third-party services (185,253) (149,220) 24.1% Depreciation and amortization (304,323) (246,081) 23.7% Amortization of concession intangible asset (72,116) (61,887) 16.5% Cost of concession infrastructure construction (414,627) (217,035) 91.0% Others (185,924) (172,685) 7.7% Income from electric energy services 739,472 663,175 11.5% Finance income (costs) (436,138) (319,027) 36.7% Finance income 280,711 312,332 -10.1% Finance costs (716,850) (631,359) 13.5% Share of profit (loss) of investees 79,709 63,480 25.6% Profit before taxes 383,043 407,629 -6.0% Social contribution (40,575) (47,166) -14.0% Income tax (110,347) (128,016) -13.8% Profit for the period 232,121 232,446 -0.1%
Profit for the period attributable to owners of the Company 245,886 271,349 -9.4% Profit for the perioid attributable to noncontrolling interests (13,765) (38,902) -64.6%
EBITDA 1,195,765 1,034,769 15.6%
Reconciliation of Profit for the Period and EBITDA Profit for the Period 232,121 232,446 Depreciation and amortization 376,440 307,968 Amortization of fair value adjustment of assets 145 145 Finance income (costs) 436,138 319,027 Social contribution 40,575 47,166 Income tax 110,347 128,016 EBITDA 1,195,765 1,034,769
(*) For purposes of presentation of the comments on performance, the reclassification of revenue from network usage charge - TUSD to captive consumer was not made. 20 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c Gross operating revenue
st Gross operating revenue for the 1 quarter of 2017 was R$ 8,730,385, an increase of 15.1% (R$ 1,144,738) compared with the same period of the prior year. The main factors of this variation were:
Increase of 5.6% (R$ 358,773) in the supply of electric energy, justified by the beginning of consolidation of RGE Sul (R$ 1,164,248), increase of 1.5% (R$ 96,828) in the amount of energy sold, offset by the decrease in average tariffs of 13.8% (R$ 902,303), mainly from the decrease in revenue from tariff flags, which, in the first quarter of 2016, was predominantly “red” and negative effect of the Annual Tariff Adjustment (RTA) and Periodic Tariff Adjustment (RTP); Increase of 27.1% (R$ 202,546) in the energy supply, mainly due to:
o Increase of 21.4% (R$ 100,706) in other concessionaires and licensees, basically due to the increase in the amount sold of 26.1% (R$ 122,926), partially offset by the decrease in the average price of 3.7% (R$ 22,220); o Increase of 57.5% (R$ 89,360) in sale of spot market energy in CCEE (Electric Energy Trading Chamber), basically due to the volume sold of 141.4% (R$ 219,609) and beginning of consolidation of RGE Sul (R$ 12,006), offset by the decrease in average price of 37.9% (R$ 142,255); o Increase of 10.2% (R$ 12,480) in Furnas due to price adjustment. Increase of 22.8% (R$ 167,251) in sector financial asset and liability, due to a lower liability set up in the period, basically for (i) set up of cost of energy and ESS and CDE charges, Neutrality and Overcontracting, associated to (ii) amortization of approved assets and liabilities, partially offset by the effects of the beginning of consolidation of RGE Sul (R$ 116,648). Increase of 24.4% (R$ 217,264) in other operating revenues, basically due to (i) beginning of consolidation of RGE Sul (R$ 193,840), (ii) low income subsidies and tariff discounts using amounts from the Energy Development Account (“CDE”) (R$ 61,637), offset by the decreases in the adjustment of the concession financial asset (R$ 46,596).
Z Amount of energy sold
st In the 1 quarter of 2017, the amount of energy billed to captive consumers in the period, including other licensees and excluding the acquisition of RGE Sul, presented a decrease of 5.3% when compared with the same quarter of the prior year. The comments below regarding the performance by consumption class do not consider the acquisition of RGE Sul: The consumption of the residential class represents 43.2% of the total market supplied by distributors. Despite the negative performance of income mass, which, in the accumulated of 12 months (until February 2017) recorded a fall of 2.8%, consumption recorded an increase st of 1.5% in the 1 quarter of 2017, in relation to the same period of the prior year, due to the temperature effect and, mainly, due to the vegetation growth. st The commercial class, which represents 21.0% of the total market supplied by distributors, presented a drop of 10.4% in the 1 quarter of 2017 in relation to the same period of the prior year. The result partly reflects the behavior of income mass indexes and trade sales in the country (both in the accumulated of 12 months until February 2017), with a drop of 2.8% and 5.4%, respectively, but mainly due to the effect of change of clients to the free market. st The industrial class, which represents 14.2% of the total market supplied by distributors, reported a fall of 23.4% in the 1 quarter of 2017 in relation to the same period of the prior year. Such performance is a direct consequence of the poor performance of the country’s industrial activity, which in the 12-month accumulated (until February 2017), recorded a fall of 4.7% and mainly due to the effect of changes of clients to the free market. The other consumption classes (rural, public administration, public utilities and licensees) participate with 21.6% of the total market st supplied by distributors. Such classes presented a growth of 2.5% in the 1 quarter of 2017 in relation to the same period of the prior year. This performance reflects the growth in consumption of classes: (i) rural, due to lower rainfall in the first quarter in relation to the same period of the prior year, entailing greater irrigation for the rural activity and (ii) Licensees, which mainly supply to residential consumers. 21 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c Regarding the amount of energy sold and transported in the concession area, which impacts both the billed supply (captive market) and the TUSD collection (free market), there was a stagnation of 0.1% when compared with the same period of the prior year. The variation by class presented an increase of 1.5% in the residential class, a fall of 0.7% in the commercial class and a fall of 2.2% in the industrial class. Regarding other classes, there was a growth of 4.0%.
Considering the acquisition of RGE Sul in November 2016, the amount of energy billed to captive consumers in the period, including other st licensees in the 1 quarter of 2017, posted a growth of 14.5% when compared with the same quarter of the prior year. Regarding the amount of energy sold and transported in the concession area, which impacts both the billed supply (captive market) and the TUSD collection (free market), there was a growth of 18.1% when compared with the same period of the prior year. The variation by class presented an increase of 20.2% in the residential class, 13.9% in the commercial class, 10.0% in the industrial class and 38.5% in other classes.
Z Tariffs
st In the 1 quarter of 2017, energy supply tariffs decreased on average 13.8%. This occurred mainly due to the effects of the annual tariff adjustments and periodic tariff review, as follows:
Periodic Tariff Review (“RTP”) and Annual Tariff Review (“RTA”) 2017 2016 Distributor Month RTA Consumer perception (a) RTA / RTP Consumer perception (a) CPFL Paulista April (b) 0.80% 10.50% 9.89% 7.55% CPFL Piratininga October (c) (c) 12.54% 24.21% RGE June (c) (c) 1.48% 7.51% RGE Sul April (b) 0.20% 6.43% 3.94% 0.34% CPFL Santa Cruz March 2.44% 8.42% 22.51% 7.15% CPFL Leste Paulista March 1.20% 4.15% 21.04% 13.32% CPFL Jaguari March 0.74% 2.56% 29.46% 13.25% CPFL Sul Paulista March 3.12% 10.73% 24.35% 12.82% CPFL Mococa March 0.95% 3.28% 16.57% 9.02%
(a) represents the average effect perceived by the consumer, as a result of the elimination from the tariff base of financial components that had been added in the prior tariff adjustment (information not reviewed by the independent auditors).
(b) As described in Note 35.4, in April 2107, the subsidiaries CPFL Paulista and RGE Sul had their tariffs adjusted.
(c) The respective adjustments for 2017 have not occurred yet.
Deductions from operating revenue 22 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c st Deductions from operating revenue in the 1 quarter of 2017 were R$ 3,191,606, a decrease of 1.8% (R$ 57,272) in relation to the same quarter of 2016, which mainly occurred due to:
Decrease of 23.4% (R$ 294,093) in sector charges, basically due to a decrease (i) in the recognition of effects of tariff flags and others (R$ 319,589), (ii) decrease in Energy Development Account – CDE (R$ 130,090) from the new quota for the year 2017, offset by the increase (i) beginning of consolidation of RGE Sul (R$ 135,195) and (ii) Proinfa (R$ 18,806); Increase of 10.7% (R$ 142,181) on ICMS, mainly due to the beginning of consolidation of RGE Sul (R$ 314,438), offset by a decrease in billed supply; Increase of 14.1% (R$ 93,997) on PIS and COFINS, mainly due to the beginning of consolidation of RGE Sul (R$ 127,612), offset by a decrease in the basis for calculation of these taxes (energy supply).
Cost of electric energy The cost of electric energy this quarter amounted to R$ 3,220,654 an increase of 27.4% (R$ 692,633) in relation to the same period of the prior year, mainly justified by: Increase of 39.4% (R$ 852,451) in electric energy purchased for resale, due to: o increase due to the beginning of consolidation of RGE Sul (R$ 419,167) o increase of 16.4% (R$ 265,269) in the amount of energy purchased; o increase of 13.3% (R$ 251,252) in average price due to the increase in the difference settlement price (PLD), mainly offset by: o decrease of 15.2% (R$ 83,236) in energy purchased from Itaipu mainly due to a tariff decrease; Decrease of 44.1% (R$ 159,819) in transmission and distribution system usage charges, basically due to a decrease in the system service charge – ESS (R$ 197,942), offset by the increase due to the beginning of consolidation of RGE Sul (R$ 37,801). Operating costs and expenses Disregarding the cost of construction of the concession infrastructure, Operating Costs and Expenses this quarter amounted to R$ 1,164,027, an increase of 25.4% (R$ 235,490) compared with the same period of the prior years. This variation is mainly due to: Personnel: increase of 35.7% (R$ 87,516), mainly due to (i) beginning of consolidation of RGE Sul (R$ 41,508) and (ii) effects of the collective labor agreement and increase in the number of employees; Private pension entity: increase of 107.2% (R$ 14,919) due to the recognition of the impact of the actuarial report of 2017; Materials : increase of 38,5% (R$ 15,310), basically due to (i) beginning of consolidation of RGE Sul (R$ 8,723), (ii) maintenance of fleet (R$ 4,450) and (iii) replacement of material for the maintenance of lines and networks (R$ 2,614); Third-party services: increase of 24.1% (R$ 36,033), basically due to the beginning of consolidation of RGE Sul (R$ 31,132); Depreciation and amortization: increase of 23.7% (R$ 58,243), basically due to (i) beginning of consolidation of RGE Sul (R$ 35,958) and (ii) increase of R$ 16,710 in the subsidiary CPFL Renováveis mainly due to the effects of companies entering operation in the period; Amortization of the concession intangible asset: increase of 16.5% (R$ 10,229) mainly due to the beginning of consolidation of RGE Sul (R$ 9,404); Other expenses: increase of 7.7% (R$ 13,240), mainly due to (i) beginning of consolidation of RGE Sul (R$ 23,210), (ii) write-off the concession financial asset update (R$ 2,944), (iii) recovery of expenses (R$ 2,612), (iv) loss on disposal and retirement of assets (R$ 2,519), (v) amortization of GSF premium GSF (R$ 1,115), offset by decreases in (i) legal expenses (R$ 13,467), (ii) expenses with allowance for doubtful debts (R$ 7,382). Finance income (costs) Net finance result this quarter presented costs of R$ 436,138, compared with R$ 319,027 in the same period of 2016, an increase in net finance costs of 36.7% (R$ 117,111). Such variation is basically due to: Decrease in finance income of 10.1% (R$ 31,620), basically from decreases in (i) sector financial asset updates (R$ 51,287) and (ii) adjustment for inflation and exchange rate changes (R$ 23,679), partially offset by increase in (i) financial investment earnings (R$ 22,546) and (ii) beginning of consolidation of RGE Sul (R$ 21,772); 23 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c Increase in finance costs of 13.5% (R$ 85,491), mainly from (i) beginning of consolidation of RGE Sul (R$ 49,570), (ii) debt charges and adjustment for inflation and exchange rate changes (R$ 40,171).
Share of profit (loss) of investees The variation in share of profit (loss) of investees refers to the effect of the share of profit (loss) of joint ventures, as follows:
1st Quarter 2017 1st Quarter 2016 Epasa 19,032 15,324 Baesa 1,282 7,185 Enercan 34,151 22,672 Chapecoense 25,389 18,443 Amortization of fair value adjustment of asset (145) (145) Total 79,709 63,480
Enercan: increase of R$ 11,479 mainly due to (i) increase in revenue from energy sale of R$ 3,445 basically due to sale contract adjustments, (ii) decrease in cost of energy purchased of R$ 5.571, basically reflecting the decrease in average settlement price and (iii) decrease in other expenses of R$ 1,856, basically due to decrease in the financial compensation fee for the use of water resources;
Chapecoense: increase of R$ 6,946 mainly due to the decrease in finance costs of R$ 7,034, due to the decrease in Use of Public Assets.
Social Contribution and Income Tax
Expenses on taxes on profit in the 1° quarter of 2017 were R$ 150,922, a decrease of 13.8% (R$ 24,260) in relation to the one recorded in the same quarter of 2016, which reflects mainly the effects of variation in Profit Before Taxes.
Profit for the Period and EBITDA
Due to the factors described above, the profit for this quarter was R$ 232,121, 0.1% (R$ 326) lower than the one of the same period of 2016. st EBITDA (Earnings before depreciation, amortization, finance income and costs, and income tax and social contribution) for the 1 quarter of 2017 was R$ 1,195,765, 15.6% (R$ 160,997) higher than the one determined in the same period of 2016.
24 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c COMMENT ON THE PERFORMANCE OF SUBSIDIARIES/ASSOCIATES
Subsidiary/Associate: Companhia Paulista de Força e Luz - CPFL The subsidiary Companhia Paulista de Força e Luz - CPFL is a publicly-held corporation, and the comment on its performance is included in its Quarterly Financial Information - ITR as of March 31, 2017 filed with the Brazilian Securities and Exchange Commission (CVM).
Subsidiary/Associate: CPFL Geração de Energia S.A. The subsidiary CPFL Geração de Energia S/A is a publicly-held corporation, and the comments on its individual and consolidated performance is included in its Quarterly Financial Information – ITR as of March 31, 2017 filed with the Brazilian Securities and Exchange Commission (CVM).
Subsidiary/Associate: Companhia Piratininga de Força e Luz The subsidiary Companhia Piratininga de Força e Luz is a publicly-held corporation, and the comments on its performance is included in its Quarterly Financial Information – ITR as of March 31, 2017 filed with the Brazilian Securities and Exchange Commission (CVM).
Subsidiary/Associate: Rio Grande Energia S.A. The subsidiary Rio Grande Energia S.A. is a publicly-held corporation, and the comment on its performance is included in its Quarterly Financial Information – ITR as of March 31, 2017 filed with the Brazilian Securities and Exchange Commission (CVM).
Subsidiary/Associate: RGE Sul Distribuidora de Energia S.A. The subsidiary RGE Sul Distribuidora de Energia S.A is a publicly-held corporation, and the comment on its performance is included in its Quarterly Financial Information – ITR as of March 31, 2017 filed with the Brazilian Securities and Exchange Commission (CVM).
25 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c Subsidiary: CPFL Comercialização Brasil S.A.
Consolidated 1st Quarter 2017 2016 Variation Gross operating revenue 703,672 488,388 44.1% Electricity sales to final consumers 436,533 315,769 38.2% Electricity sales to wholesalers 267,136 172,589 54.8% Other operating revenues 2 30 -92.7% Deductions from operating revenue (84,129) (57,287) 46.9% Net operating revenue 619,543 431,101 43.7% Cost of electric energy (569,201) (406,116) 40.2% Electricity purchased for resale (569,175) (406,118) 40.2% Network usage charge (25) 1 -2252.2% Operating expenses (11,633) (9,677) 20.2% Personnel (7,742) (5,491) 41.0% Materials (34) (60) -42.8% Third-party services (2,076) (1,525) 36.2% Depreciation/amortization (907) (969) -6.4% Others (873) (1,632) -46.5% Income from electric energy services 38,709 15,308 152.9% Finance income (costs) (11,199) 1,355 -926.2% Finance income 7,051 9,656 -27.0% Finance costs (18,250) (8,300) 119.9% Profit before taxes 27,510 16,663 65.1% Social contribution (2,522) (1,500) 68.1% Income tax (7,018) (4,137) 69.6% Profit for the period 17,970 11,026 63.0%
Profit for the period attributable to owners of the Company 17,970 11,026 63.0%
EBITDA 39,616 16,277 143.4%
Reconciliation of Profit for the Period and EBITDA (*) Profit for the Period 17,970 11,026 Depreciation and amortization 907 969 Finance income (costs) 11,199 (1,355) Social contribution 2,522 1,500 Income tax 7,018 4,137 EBITDA 39,616 16,277
(*) information not reviewed by the independent auditors.
Gross Operating Revenue
st The gross operating revenue of the 1 quarter of 2017 was R$ 703,672, an increase of R$ 215,284 (44.1%) in relation to the same quarter of 2016, mainly explained by the (i) increase in the amount of energy sold to free consumers and concessionaires (1.433 GWh – R$ 249,461); (ii) gain in operations of CCEE due to an increase in the amount of energy traded (41 GWh – R$ 8,633); partially offset by (iii) a decrease in the average price used in sales in the period (R$ 45,009).
26 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c Cost of Electric Energy
st Cost of electric energy of the 1 quarter of 2017 was R$ 569,201, an increase of R$ 163,085 (40.2%) in relation to the same quarter of 2016, basically explained by bilateral contracts: increase in volume purchased (1.477 GWh - R$ 207,183) with decrease in average price of 11.6% (R$ 47,106).
Finance Income (Costs)
st The finance result determined in the 1 quarter of 2017 was a finance cost of R$ 11,199, a decrease of R$ 12,554 in relation to the same quarter of 2016, rd th mainly explained by the 3 issue of debentures in the 4 quarter of 2016, which generated an additional finance cost of R$ 13,124.
Profit for the Period and EBITDA
st The result determined in the 1 quarter of 2017 was a profit of R$ 17,970, an increase of R$ 6,944 (63.0%) when compared with the same quarter of 2016.
st EBITDA (Earnings before finance result, income tax and social contribution and depreciation and amortization) for the 1 quarter of 2017 was R$ 39.616, an increase of 143.4% when compared with the same quarter of 2016, which was R$ 16,277 (information not reviewed by the Independent Auditors).
27 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c NOTES TO INTERIM FINANCIAL STATEMENTS
The accompanying notes are an integral part of these interim financial statements.
28 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c The accompanying notes are an integral part of these interim financial statements.
29 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c (*) Comprises the effects of note 2.8
The accompanying notes are an integral part of these financial statements
30 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c The accompanying notes are an integral part of these financial statements
31 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c The accompanying notes are an integral part of these interim financial statements.
32 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c The accompanying notes are an integral part of these interim financial statements.
33 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c (*) Includes the effects of note 2.8 The accompanying notes are an integral part of these interim financial statements. 34 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c CPFL ENERGIA S.A. NOTES TO THE INTERIM FINANCIAL STATEMENTS AT MARCH 31, 2017 (Amounts in thousands of Brazilian reais – R$, unless otherwise stated)
( 1 ) OPERATIONS
CPFL Energia S.A. (“CPFL Energia” or “Company”) is a publicly-held corporation incorporated for the principal purpose of operating as a holding company, with equity interests in other companies primarily engaged in electric energy distribution, generation and commercialization activities in Brazil. The Company’s registered office is located at Rua Gomes de Carvalho, 1510 – 14th floor - Office 142 - Vila Olímpia - São Paulo - SP - Brazil. The Company has direct and indirect interests in the following subsidiaries and joint ventures (information on the concession area, number of consumers, energy production capacity and related data are not audited by the independent auditors):
Approximate number of Company Equity Location Number of consumers (in Concession End of the Energy distribution type interest (state) municipalities thousands) period concession
Companhia Paulista de Publicly-held Direct Interior of November Força e Luz ("CPFL 234 4,324 30 years corporation 100% São Paulo 2027 Paulista") Companhia Piratininga de Interior and Publicly-held Direct Força e Luz ("CPFL coast of São 27 1,702 30 years October 2028 corporation 100% Piratininga") Paulo Interior of Rio Grande Energia S.A. Publicly-held Direct November Rio Grande 255 1,466 30 years ("RGE") corporation 100% 2027 do Sul Interior of RGE Sul Distribuidora de Publicly-held Indirect November Rio Grande 118 1,324 30 years Energia S.A. ("RGE Sul") corporation 100% 2027 do Sul Companhia Luz e Força Privately- Interior of Direct Santa Cruz ("CPFL Santa held São Paulo 27 210 30 years July 2045 100% Cruz") corporation and Paraná Companhia Leste Privately- Direct Interior of Paulista de Energia held 7 58 30 years July 2045 100% São Paulo ("CPFL Leste Paulista") corporation Privately- Companhia Jaguari de Direct Interior of held 2 41 30 years July 2045 Energia ("CPFL Jaguari") 100% São Paulo corporation Companhia Sul Paulista Privately- Direct Interior of de Energia ("CPFL Sul held 5 85 30 years July 2045 100% São Paulo Paulista") corporation Interior of Companhia Luz e Força Privately- Direct São Paulo de Mococa ("CPFL held 4 47 30 years July 2045 100% and Minas Mococa") corporation Gerais
Installed power (MW) Energy generation (conventional and renewable Equity Number of plants / CPFL sources) Company type interest Location (state) type of energy Total share
CPFL Geração de Energia S.A. Publicly-held Direct 3 Hydropower plants São Paulo and Goiás 1,295 688 ("CPFL Geração") corporation 100% (a) CERAN - Companhia Energética Rio Privately-held Indirect das Antas Rio Grande do Sul 3 Hydropower plants 360 234 corporation 65% ("CERAN") Foz do Chapecó Energia S.A. Privately-held Indirect Santa Catarina and 1 Hydropower plant 855 436 ("Foz do Chapecó") corporation 51% Rio Grande do Sul Campos Novos Energia S.A. Privately-held Indirect Santa Catarina 1 Hydropower plant 880 429 ("ENERCAN") corporation 48.72% BAESA - Energética Barra Grande Publicly-held Indirect Santa Catarina and S.A. 1 Hydropower plant 690 173 corporation 25.01% Rio Grande do Sul ("BAESA") Centrais Elétricas da Paraíba S.A. Privately-held Indirect Paraíba 2 Thermal plants 342 182 ("EPASA") corporation 53.34% Paulista Lajeado Energia S.A. Privately-held Indirect Tocantins 1 Hydropower plant 903 63 ("Paulista Lajeado") corporation 59.93% (b) CPFL Energias Renováveis S.A. Publicly-held Indirect (c) (c) (c) (c) ("CPFL Renováveis") corporation 51.60% CPFL Centrais Geradoras Ltda Limited liability Direct São Paulo and Minas 6 small hydropower 4 4 ("CPFL Centrais Geradoras") company 100% Gerais plants
Equity Energy commercialization Company type Core activity interest Privately-held Direct CPFL Comercialização Brasil S.A. ("CPFL Brasil") Energy commercialization corporation 100% WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c Clion Assessoria e Comercialização de Energia Elétrica Limited liability Commercialization and provision of energy Indirect Ltda. company services 100% ("CPFL Meridional") CPFL Comercialização Cone Sul S.A. ("CPFL Cone Privately-held Indirect Energy commercialization Sul") corporation 100% Limited liability Direct CPFL Planalto Ltda. ("CPFL Planalto") Energy commercialization company 100% Privately-held Indirect CPFL Brasil Varejista S.A. ("CPFL Brasil Varejista") Energy commercialization corporation 100%
35 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c Equity Provision of services Company type Core activity interest CPFL Serviços, Equipamentos, Industria e Privately-held Manufacturing, commercialization, rental and maintenance of Direct Comércio S.A. corporation electro-mechanical equipment and service provision 100% ("CPFL Serviços") Limited liability Direct NECT Serviços Administrativos Ltda ("Nect") Provision of administrative services company 100% CPFL Atende Centro de Contatos e Limited liability Direct Provision of call center services Atendimento Ltda. ("CPFL Atende") company 100% CPFL Total Serviços Administrativos Ltda. Limited liability Direct Collection services ("CPFL Total") company 100% CPFL Eficiência Energética S.A ("CPFL Privately-held Direct Energy efficiency management ESCO") corporation 100% Limited liability Direct TI Nect Serviços de Informática Ltda. ("Authi") Provision of IT services company 100% Privately-held Provision of maintenance services for energy generation Indirect CPFL GD S.A ("CPFL GD") corporation companies 100%
Equity Others Company type Core activity interest Direct CPFL Jaguariúna Participações Ltda ("CPFL Jaguariuna") Limited liability company Holding company 100% Direct CPFL Jaguari de Geração de Energia Ltda ("Jaguari Geração") Limited liability company Holding company 100% Privately-held Indirect Chapecoense Geração S.A. ("Chapecoense") (d) Holding company corporation 51% Privately-held Indirect Sul Geradora Participações S.A. ("Sul Geradora") Holding company corporation 99.95% Privately-held Direct CPFL Telecom S.A ("CPFL Telecom") Telecommunication services corporation 100% Privately-held Energy transmission Indirect CPFL Transmissão Piracicaba S.A ("CPFL Transmissão Piracicaba") corporation services 100% CPFL Transmissora Morro Agudo S.A ("CPFL Transmissão Morro Privately-held Energy transmission Indirect Agudo") corporation services 100% a) CPFL Geração has 51.54% of the assured energy and power of the Serra da Mesa hydropower plant, which concession is owned by Furnas. The plants Carioba and Cariobinha are inactive while they await the position of the Ministry of Mines and Energy on the early termination of their concession and are not included in the table. b) Paulista Lajeado holds a 7% interest in the installed power of Investco S.A. (5.94% interest in total capital). c) CPFL Renováveis has operations in the states of São Paulo, Minas Gerais, Mato Grosso, Santa Catarina, Ceará, Rio Grande do Norte, Paraná and Rio Grande do Sul and its main activities are: (i) holding investments in companies of the renewable energy segment; (ii) identification, development, and exploration of generation potentials; and (iii) sale of electric energy. At March 31, 2017, CPFL Renováveis had a portfolio of 126 projects of 2,904.1 MW of installed capacity (2,054.3 MW in operation).
Hydropower generation: 47 SHP’s (555.3 MW) with 39 SHPs in operation (423 MW) and 8 SHPs under development (132.3 MW); Wind power generation: 70 projects (1,977.7 MW) with 43 projects in operation (1,260.2 MW) and 27 projects under construction/development (717.5 MW);
Biomass power generation: 8 plants in operation (370.0 MW);
Solar power generation: 1 solar plant in operation (1.1 MW).
d) The joint venture Chapecoense has as its direct subsidiary Foz do Chapecó and fully consolidates its financial statements.
( 2 ) PRESENTATION OF THE INTERIM FINANCIAL INFORMATION
2.1 Basis of presentation
This interim individual (Parent Company) and consolidated financial information has been prepared and is being presented in accordance with the International Accounting Standard IAS 34 - Interim Financial Reporting, issued by the International Accounting Standard Board – IASB, and also based on standards issued by the Brazilian Securities and Exchange Commission (CVM), applicable to the preparation of Quarterly Financial Information (ITR), in accordance with Technical Pronouncement CPC 21 (R1) - Interim Financial Reporting.
The Company and its subsidiaries also follows the guidelines of the Accounting Manual of the Brazilian Electricity Sector and the standards laid down by the Brazilian Electricity Regulatory Agency (Agência Nacional de Energia Elétrica – ANEEL), when these do not conflict with the accounting practices adopted in Brazil and/or with international Financial Reporting. 36 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c The accounting practices and criteria adopted in preparing this individual and consolidated interim financial information are consistent with those adopted in preparing the financial statements at December 31, 2016, and therefore should be read together. Management states that all significant information specific to interim financial information is disclosed and corresponds to the information used in managing the Company and its subsidiaries.
The interim financial information was approved by Management and authorized for issue on May 4, 2017.
2.2 Basis of measurement
The interim financial information has been prepared on the historical cost basis except for the following items recorded in the statements of financial position: i) derivative financial instruments measured at fair value, ii) financial instruments measured at fair value through profit or loss, and iii) available- for-sale financial assets measured at fair value. The classification of the fair value measurement in the level 1, 2 or 3 categories (depending on the degree of observance of the variables used) is presented in note 32 – Financial Instruments.
2.3 Use of estimates and judgments
The preparation of the interim financial information requires the Company’s management and its subsidiaries to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses.
By definition, the accounting estimates are rarely the same as the actual results. Accordingly, the Company’s management and its subsidiaries reviews the estimates and assumptions on an ongoing basis, based on previous experience and other relevant factors. Adjustments resulting from revisions to accounting estimates are recognized in the period in which the estimates are revised and applied on a prospective basis.
The main accounts that require the adoption of estimates and assumptions, which are subject to a greater degree of uncertainty and may result in a material adjustment if these estimates and assumptions suffer significant changes in subsequent periods, are:
• Note 6 – Consumers, concessionaires and licensees; • Note 9 – Deferred tax assets and liabilities; • Note 10 – Concession financial asset; • Note 13 – Property, plant and equipment and impairment; • Note 14 – Intangible assets and impairment; • Note 18 – Private pension plan; • Note 21 – Provision for tax, civil and labor risks and escrow deposits; • Note 25 – Net operating revenue; and • Note 32 – Financial instruments.
2.4 Functional currency and presentation currency
The Company’s and its subsidiaries functional currency is the Brazilian Real, and the individual and consolidated interim financial information is being presented in thousands of reais. Figures are rounded only after sum-up of the amounts. Consequently, when summed up, the amounts stated in thousands of reais may not tally with the rounded totals.
2.5 Segment information
An operating segment is a component of the Company (i) that engages in operating activities from which it earns revenues and incurs expenses, (ii) whose operating results are regularly reviewed by Management to make decisions about resources to be allocated and assess the segment's performance, and (iii) for which individual financial information is available. The Company’s and its subsidiaries officers use reports to make strategic decisions, segmenting the business into: (i) electric energy distribution activities (“Distribution”); (ii) electric energy generation from conventional sources activities (“Generation”); (iii) electric energy generation activities from renewable sources (“Renewables”); (iv) energy commercialization activities (“Commercialization”); (v) service activities (“Services”); and (vi) other activities not listed in the previous items. 37 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c The presentation of the operating segments includes items directly attributable to them, as well as any allocations required, including intangible assets, see note 29 for further details.
2.6 Information on equity interests
The Company's equity interests in direct and indirect subsidiaries and joint ventures are described in note 1. Except for (i) the companies ENERCAN, BAESA, Chapecoense and EPASA, which use the equity method of accounting, and (ii) the investment measured at cost by the subsidiary Paulista Lajeado in Investco S.A., all other entities are fully consolidated.
At March 31, 2017 and December 31, 2016, and for the quarters ended March 31, 2017 and 2016, the noncontrolling interests in the consolidated balances refer to interests held by third parties in subsidiaries CERAN, Paulista Lajeado and CPFL Renováveis.
2.7 Statement of value added
The Company has prepared the individual and consolidated statements of value added (“DVA”) in conformity with technical pronouncement CPC 09 - Statement of Value Added, which are presented as an integral part of the interim financial information in accordance with accounting practices adopted in Brazil and as supplementary information to the interim financial information in accordance with IFRS, as this statement is neither provided for nor required by IFRS.
st 2.8 Restatements in the 1 quarter of 2016 interim financial information
As mentioned in note 2.8 to the financial statements at December 31, 2016, the Company and its electricity distribution subsidiaries, for a better presentation of their operating and financial performance, concluded that the adjustment of the expected cash flow of the indemnifiable financial asset of the concession of each distribution company, previously presented in the line item of finance income, within finance income (costs), should be more properly classified in the group of operating income, together with the other income related to their core activity. This allocation reflects more accurately the electricity distribution business model and allows a better presentation regarding its performance. According to the guidance in CPC 23 / IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors, the Company and its subsidiaries changed their accounting policy previously adopted to an accounting policy that better reflects the business performance of the Company and its subsidiaries (for the reasons mentioned above) and, therefore, made the retrospective reclassifications in their corresponding information submitted for comparative purposes corresponding to the statements of profit or loss and value added, in relation to those originally issued on April 29, 2016. The reclassifications made do not change the total assets, equity and profit for the period, or the statement of cash flows. The statements of profit or loss and value added, for comparability purposes, are presented below:
38 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c Statement of profit or loss for the period
Consolidated 1st quarter 2016 1st quarter 2016 Reclassifications Reconciliation of statement of profit or loss (Restated)
Net operating revenue 4,249,389 87,380 4,336,769 Cost of electric energy services Cost of electric energy (2,528,021) - (2,528,021) Cost of operation (524,053) (524,053) Cost of services rendered to third parties (217,536) - (217,536) Gross profit 979,779 87,380 1,067,159
Operating expenses Selling expenses (127,356) - (127,356) General and administrative expenses (205,091) - (205,091) Other operating expenses (71,537) - (71,537) Income from electric energy services 575,796 87,380 663,176 Equity interests in subsidiaries, associates and joint ventures 63,480 63,480 Finance income (costs) Finance income 404,849 (92,517) 312,332 Finance costs (636,496) 5,137 (631,359) (231,647) (87,380) (319,027) Profit before taxes 407,629 - 407,629 Social contribution (47,166) - (47,166) Income tax (128,016) - (128,016) (175,182) - (175,182) Profit for the period 232,446 - 232,446
Statement of value added for the period
Consolidated 1st quarter 2016 Reclassifications 1st quarter 2016 (Restated)
1 - Revenues 7,702,844 87,380 7,790,224 1.1 Operating revenues 7,281,132 87,380 7,368,512 1.2 Revenue related to construction of own assets 250,629 250,629 1.3 Revenue from construction of concession infrastructure 217,134 217,134 1.4 Allowance for doubtful debts (46,051) (46,051)
2 - (-) Inputs purchased from third parties (3,571,185) - (3,571,185)
3 - Gross value added (1+2) 4,131,659 87,380 4,219,039
4 - Retentions (308,625) - (308,625)
5 - Wealth created by the company (3+4) 3,823,034 87,380 3,910,414
6 - Wealth received in transfer 490,543 (92,517) 398,026 6.1 Finance income 427,063 (92,517) 334,546 6.2 Share of profit (loss) of investees 63,480 63,480
7 - Total wealth for distribution (5+6) 4,313,577 (5,137) 4,308,440
8 - Wealth distributed 8.1 Personnel and charges 235,211 - 235,211 8.2 Taxes, fees and contributions 3,178,742 - 3,178,742 8.3 Lenders and lessors 667,177 (5,137) 662,040 8.3.1 Interest 653,053 (5,137) 647,916 8.3.2 Rentals 14,124 14,124 8.4 Shareholders 232,446 - 232,446 4,313,577 (5,137) 4,308,440
39 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c ( 3 ) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The interim financial information of the Company and its subsidiaries has been prepared based on the same accounting policies described in notes 3.1 to 3.18, disclosed in the financial statements for the year ended December 31, 2016.
( 4 ) FAIR VALUE MEASUREMENT
A number of the Company’s and its subsidiaries accounting policies and disclosures require the fair value measurement, for both financial and non- financial assets and liabilities. Fair values have been determined for measurement and / or disclosure purposes based on the following methods. When applicable, additional information on the assumptions made in the fair value measurement is disclosed in the notes specific to that asset or liability. Accordingly, the Company and its subsidiaries measures fair value in accordance with IFRS 13 / CPC 46, which defines the fair value as the price estimate for which an unforced transaction for the sale of the asset or transfer of the liability would occur between market participants under current market conditions at the measurement date. - Property, plant and equipment and intangible assets The fair value of property, plant and equipment and intangible assets recognized as a result of a business combination is based on market values. The fair value of these assets is the estimated value for which an asset could be exchanged on the valuation date between knowledgeable interested parties in an unforced transaction between market participants at the measurement date. The fair value of items of property, plant and equipment is based on the market approach and cost approaches using quoted market prices for similar items when available and replacement cost when appropriate. - Financial instruments Financial instruments measured at fair value are valued based on quoted prices in an active market, or, if such prices are not available, they are assessed using pricing models, applied individually to each transaction, taking into consideration future payment flows, based on the contractual conditions, discounted to present value at rates obtained from market interest curves, having as a basis, whenever available, information obtained from the websites of BM&FBOVESPA S.A – Bolsa de Valores, Mercadorias e Futuros (“BM&FBOVESPA”) and “Associação Brasileira das Entidades dos Mercados Financeiro e de Capitais – ANBIMA” (note 32) and also includes the debtor's credit risk rate. Financial assets classified as available-for-sale refer to the right to compensation, to be paid by the Federal Government when the distribution concessionaires’ assets are handed over at the end of the concession period. The methodology adopted for fair value measurement of these assets is based on the tariff review process for distributors. This process, conducted every four or five years according to each concessionaire, involves assessing the replacement price of the distribution infrastructure, in accordance with criteria established by the granting authority (“ANEEL”). This valuation basis is used for pricing the tariff, which is adjusted annually up to the next tariff review, based on the parameter of the main inflation indices. Accordingly, at the time of the tariff review, each distribution concessionaire adjusts the position of the financial asset base for compensation at the amounts ratified by the granting authority and uses the Extended Consumer Price Index (“IPCA”) as the best estimate to adjust the original base to the adjusted value at subsequent dates, in accordance with the tariff review process.
( 5 ) CASH AND CASH EQUIVALENTS
Parent company Consolidated 31/03/2017 31/12/2016 31/03/2017 31/12/2016 Bank balances 2,068 426 78,319 170,884 Short-term financial investments 13,593 64,548 4,799,494 5,994,112 Overnight investment (a) 13,255 64,541 22,545 95,034 Bank certificates of deposit (b) - - 2,104,755 2,357,187 Repurchase agreements secured on debentures (b) - - 2,741 58,616 Investment funds (c) 338 6 2,669,453 3,483,273 Total 15,661 64,973 4,877,813 6,164,997 a) Bank account balances, which earn daily interest by investment in repurchase agreements secured on debentures and interest of 15% of the variation in the Interbank Certificate of Deposit (CDI). b) Short-term investments in Bank Certificates of Deposit (CDB) and secured debentures with major financial institutions that operate in the Brazilian financial market, with daily liquidity, short term maturity, low credit risk and interest equivalent, on average, to 101.6% of the CDI. 40 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c c) Exclusive Fund investments, with daily liquidity and interest equivalent, on average, to 99.7% of the CDI, subject to floating rates tied to the CDI linked to federal government bonds, CDBs, financial bills and secured debentures of major financial institutions, with low credit risk and short term maturity.
( 6 ) CONSUMERS, CONCESSIONAIRES AND LICENSEES
The consolidated balance includes mainly activities from the supply of electric energy, broken down as follows at March 31, 2017 and December 31, 2016:
Consolidated Amounts Past due Total coming due until 90 days > 90 days 31/03/2017 31/12/2016 Current Consumer classes Residential 688,413 462,977 79,855 1,231,245 932,380 Industrial 247,922 84,825 84,306 417,052 386,826 Commercial 263,386 98,628 50,967 412,981 317,111 Rural 70,584 22,384 6,109 99,077 97,444 Public administration 70,488 14,998 15,474 100,960 94,348 Public lighting 55,220 5,604 3,655 64,479 73,142 Public utilities 79,443 5,820 8,101 93,364 97,503 Billed 1,475,456 695,236 248,467 2,419,158 1,998,754 Unbilled 1,082,597 - - 1,082,597 1,095,188 Financing of consumers' debts 209,826 15,716 33,527 190,453 170,982 CCEE transactions 187,998 1,505 3,149 192,652 289,761 Concessionaires and licensees 349,985 4,558 7,679 362,222 390,333 Others 48,061 - - 48,053 39,974 3,353,923 717,015 292,822 4,295,135 3,984,991 Allowance for doubtful debts (229,670) (219,098) Total 4,065,465 3,765,893
Noncurrent Financing of consumers' debts 195,634 - - 195,634 198,875 Free energy 5,601 - - 5,601 5,436 CCEE transactions 41,301 - - 41,301 41,301 242,536 - - 242,536 245,612 Allowance for doubtful debts (38,120) (42,427) Total 204,416 203,185
Allowance for doubtful debts
Movements in the allowance for doubtful debts are shown below:
Other receivables Consumers, concessionaires and licensees (note 11) Total At December 31, 2016 (261,525) (27,992) (289,517) Allowance - (recognition) reversal (70,625) (344) (70,969) Recovery of revenue 24,275 - 24,275 Write-off of accrued receivables 40,085 471 40,556 At March 31, 2017 (267,790) (27,865) (295,655)
Current (229,670) (27,865) (257,535) Noncurrent (38,120) - (38,120)
41 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c ( 7 ) TAXES RECOVERABLE
Parent company Consolidated 3/31/2017 12/31/2016 3/31/2017 12/31/2016 Current Prepayments of social contribution - CSLL - 5,508 3,799 14,141 Prepayments of income tax - IRPJ - 2,282 7,780 35,534 Withholding income tax - IRRF on interest on capital 3,126 3,126 3,126 3,642 Income tax and social contribution to be offset 54,176 45,457 135,383 94,268 Withholding income tax - IRRF 27,315 26,150 122,197 115,189 State VAT - ICMS to be offset - - 92,118 82,090 Social Integration Program - PIS 53 52 8,799 9,062 Contribution for Social Security financing - COFINS 269 262 39,928 39,984 National Social Security Institute - INSS - - 6,697 6,374 Others - - 3,228 3,564 Total 84,938 82,836 423,054 403,848
Noncurrent Social contribution to be offset - CSLL - - 56,333 55,498 Income tax to be offset - IRPJ - - 10,038 10,037 State VAT - ICMS to be offset - - 129,420 122,415 Social Integration Program - PIS - - 812 800 Contribution for Social Security Funding - COFINS - - 3,740 3,687 Others - - 5,595 5,849 Total - - 205,938 198,286
42 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c ( 8 ) SECTOR FINANCIAL ASSET AND LIABILITY
The breakdown of the balances of sector financial asset and liability and the movement for the period are as follows:
Consolidated Finance income or As at December 31, 2016 Operating revenue cost Receipt As at March 31, 2017 Tariff flag Inflation (note Granted Approved Total Constitution Realization adjustment 25.4) Granted Approved Parcel "A" (762,573) 190,369 (572,203) (346,402) (281,255) (20,566) (18,359) (1,097,303) (141,481) CVA (*) CDE (**) (342,161) (70,301) (412,462) (165,290) (41,251) (12,968) - (496,009) (135,962) Electric energy cost (506,490) (239,777) (746,267) 117,038 150,046 (27,020) (18,063) (388,011) (136,255) ESS and EER (***) (406,568) (124,411) (530,979) (318,212) 73,268 (16,518) (152) (689,972) (102,620) Proinfa 3,492 31,414 34,906 (17,614) (14,581) 1,462 - (12,893) Basic network charges 27,527 9,660 37,187 17,626 (7,600) 992 - 38,636 Pass-through from Itaipu 147,012 442,911 589,923 26,475 (387,084) 25,499 - 135,798 119,016 Transmission from Itaipu 7,646 7,281 14,927 1,629 (4,473) 439 - 8,886 Neutrality of industry charges 142,091 164,375 306,466 (431) (93,552) 2,330 - 140,407 Overcontracting 164,878 (30,782) 134,096 (7,625) 43,973 5,218 (144) 165,855 Other financial components (182,958) (159,759) (342,717) (582) 63,237 (6,610) - (185,241) (101,431) Refunds due to court injunctions (note 25.3) (76,615) (132,410) (209,025) (2,731) 34,642 (2,060) - (84,163) (95,011) Others (106,343) (27,349) (133,692) 2,149 28,595 (4,550) - (101,078)
Total (945,530) 30,612 (914,918) (346,984) (218,018) (27,176) (18,359) (1,282,544) (242,912)
Current liabilities (597,515) Noncurrent liabilities (317,406)
(*) Deferred tariff costs and gains variations from Parcel “A” items (**) Energy Development Account – CDE (***) System Service Charge (ESS) and Reserve Energy Charge (EER)
The details of the nature of each sector financial asset and liability are provided in Note 8 to the financial statements at December 31, 2016.
( 9 ) DEFERRED TAX ASSETS AND LIABILITIES
9.1 Breakdown of tax assets and liabilities
Parent company Consolidated 3/31/2017 12/31/2016 3/31/2017 12/31/2016 Social contribution credit (debit) Income tax and social contribution losses 45,951 42,841 112,205 123,389 Tax benefit of merged goodwill - - 84,433 86,377 Nondeductible temporary differences 1,136 1,125 (304,699) (332,750) Subtotal 47,087 43,966 (108,061) (122,984)
Income tax credit (debit) Income tax and social contribution losses 129,378 123,980 324,161 358,683 Tax benefit of merged goodwill - - 289,177 295,987 Nondeductible temporary differences 3,155 3,126 (845,375) (923,383) Subtotal 132,533 127,106 (232,037) (268,713)
PIS and COFINS credit (debit) Nondeductible temporary differences - - (10,827) (9,580)
Total 179,619 171,073 (350,926) (401,276)
Total tax asset 179,619 171,073 935,471 922,858 Total tax liability - - (1,286,397) (1,324,134)
The expected recovery of the deferred tax assets recorded in noncurrent assets, arising from nondeductible temporary differences, tax benefit of merged goodwill and income tax and social contribution losses, the breakdown of which is described in the financial statements at December 31, 2016, is based on the projections of future profits, approved by the Board of Directors and reviewed by the Supervisory Board. To reflect adequately the effective rate of WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c the taxes on profit, deferred tax assets are recognized monthly on any losses for companies that have positive projections, in accordance with such studies. 43 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c 9.2 Tax benefit of merged intangible asset
Refers to the tax credit calculated on the intangible assets derived from the acquisition of subsidiaries, as shown in the following table, which were merged and are recognized in accordance with the concepts of CVM Instructions No. 319/1999 and No. 349/2001 and ICPC 09 (R2) - Individual Financial Statements, Separate Financial Statements, Consolidated Financial Statements and Application of the Equity Method. The benefit is being realized in proportion to the tax amortization of the merged intangible assets that originated them as per CPC 27 and CPC 04 (R1) - Clarification of acceptable methods of depreciation and amortization, over the remaining concession period, as shown in note 14. Consolidated 3/31/2017 12/31/2016 Social contribution Income tax Social contribution Income tax CPFL Paulista 49,341 137,058 50,497 140,270 CPFL Piratininga 11,992 41,155 12,251 42,044 RGE 23,100 95,399 23,629 97,584 CPFL Geração - 15,565 - 16,090 Total 84,433 289,177 86,377 295,987
9.3 Accumulated balances on nondeductible temporary differences
Consolidated 3/31/2017 12/31/2016 Social Income Social Income PIS/COFINS contribution tax contribution tax Nondeductible temporary differences Provision for tax, civil and labor risks 45,451 126,252 - 45,065 125,182 Private pension fund 1,863 5,175 - 1,711 4,753 Allowance for doubtful debts 26,983 74,951 - 26,543 73,729 Free energy supply 7,921 22,003 - 7,718 21,440 Research and development and energy efficiency programs 18,859 52,386 - 17,474 48,538 Personnel-related provisions 4,265 11,846 - 3,422 9,506 Depreciation rate difference 6,054 16,817 - 6,200 17,223 Derivatives (31,145) (86,513) - (54,368) (151,023) Recognition of concession - adjustment of intangible asset (IFRS/CPC) (8,303) (23,063) - (8,355) (23,208) Recognition of concession - adjustment of financial asset (IFRS/CPC) (108,504) (300,259) (7,582) (104,080) (287,990) Actuarial losses (IFRS/CPC) 25,487 70,797 - 25,390 70,527 Other adjustments (IFRS/CPC) (8,821) (24,502) - (10,022) (27,838) Accelerated depreciation (87) (242) - (73) (204) Others 4,908 13,443 (3,245) 4,491 12,281 Nondeductible temporary differences - accumulated comprehensive income: Property, plant and equipment - adjustment of deemed cost (IFRS/CPC) (54,413) (151,146) - (55,223) (153,398) Actuarial losses (IFRS/CPC) 49,698 138,051 - 49,698 138,051 Nondeductible temporary differences - Business combination - CPFL Renováveis Deferred taxes - asset: Fair value of property, plant and equipment (negative value added of assets) 22,402 62,227 - 22,771 63,252 Deferred taxes - liability: Fair value of property, plant and equipment (value added of assets) (27,057) (75,157) - (27,472) (76,310) Value added derived from determination of deemed cost (66,964) (186,010) - (78,443) (217,897) Intangible asset - exploration right/authorization in indirect subsidiaries acquired (191,470) (531,862) - (183,443) (509,563) Other temporary differences (21,827) (60,569) - (21,754) (60,435) Total (304,699) (845,375) (10,827) (332,750) (923,383)
44 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c 9.4 Reconciliation of the income tax and social contribution amounts recognized in the statements of profit or loss for the quarters ended March 31, 2017 and 2016:
Parent company 1st quarter 2017 1st quarter 2016 Social contribution Income tax Social contribution Income tax Profit before taxes 237,339 237,339 265,063 265,063 Reconciliation to reflect effective rate: Share of profit (loss) of investees (271,847) (271,847) (281,835) (281,835) Amortization of intangible asset acquired (3,382) - (3,382) - Other permanent additions (exclusions), net 3,222 12,802 (1,703) (501) Tax base (34,668) (21,706) (21,856) (17,272) Statutory rate 9% 25% 9% 25% Total 3,120 5,426 1,967 4,318
Current - - (5,542) (16,401) Deferred 3,120 5,426 7,509 20,719
Consolidated 1st quarter 2017 1st quarter 2016 Social contribution Income tax Social contribution Income tax Profit before taxes 383,043 383,043 407,629 407,629 Reconciliation to reflect effective rate: Share of profit (loss) of investees (79,709) (79,709) (63,480) (63,480) Amortization of intangible asset acquired 12,162 15,689 12,162 15,689 Effect of presumed profit regime (48,719) (63,623) 12,194 2,062 Adjustment of revenue from excess demand and excess reactive power 30,250 30,250 31,231 31,231 Tax incentive - operating profit - (6,501) - (5,044) Other permanent additions (exclusions), net 4,023 13,395 (9,453) (9,526) Tax base 301,050 292,544 390,283 378,560 Statutory rate 9% 25% 9% 25% Tax credit (debit) (27,095) (73,136) (35,125) (94,640) Recognized (unrecognized) tax credit, net (13,481) (37,212) (12,041) (33,376) Total (40,576) (110,347) (47,166) (128,016)
Current (55,497) (147,023) (78,522) (206,555) Deferred 14,922 36,676 31,356 78,538
( 10 ) CONCESSION FINANCIAL ASSET
Distribution Transmission Consolidated As at December 31, 2016 5,193,511 180,333 5,373,844 Current - 10,700 10,700 Noncurrent 5,193,511 169,633 5,363,144
Additions 155,263 37,605 192,868 Adjustment of expected cash flow 48,923 - 48,923 Adjustment - financial asset measured at amortized cost - 6,060 6,060 Cash receipt - RAP - (2,618) (2,618) Disposals (6,272) - (6,272)
As at March 31, 2017 5,391,425 221,380 5,612,805 Current - 10,836 10,836 Noncurrent 5,391,425 210,544 5,601,969
45 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c The balance refers to the financial asset corresponding to the right established in the concession agreements of the energy distribution (measured at fair value) and transmission (measured at amortized cost) companies to receive cash (i) through compensation at the time assets are handed over to the granting authority at the end of the concession, and (ii) the transmission companies’ right to receive cash over the concession period through allowed annual revenue ("RAP"). For energy distribution companies, according to the current tariff model, the remuneration for this asset is recognized in profit or loss upon billing to consumers and the realization occurs upon receipt of the electric energy bills. Moreover, the difference to adjust the balance to the expected cash flow receipts at fair value (new replacement value - “VNR” - note 4) is recognized as a balancing item to the operating income account (note 25) in the statement of profit or loss for the period (R$ 48,923 in the 1st quarter of 2017and R$ 87,380 in the 1st quarter of 2016).
For energy transmission companies, the remuneration for this asset is recognized according to the internal rate of return, which takes into account the investment made, the allowed annual revenue (“RAP”) to be received over the concession period, and the compensation to be received at the time assets are handed over to the granting authority. The adjustment of R$ 6,060 is recognized against other operating revenues and income (R$ 3,428 in the 1st quarter of 2016).
( 11 ) OTHER RECEIVABLES
Consolidated Current Noncurrent 3/31/2017 12/31/2016 3/31/2017 12/31/2016 Advances - Fundação CESP 7,862 7,533 - - Advances to suppliers 19,900 15,787 - - Pledges, funds and restricted deposits 123,083 106,925 578,001 533,719 Orders in progress 214,564 203,344 - - Services rendered to third parties 9,457 9,385 - - Energy pre-purchase agreements 13,521 - 28,043 27,302 Collection agreements 780 1,273 - - Prepaid expenses 73,648 65,668 23,830 20,942 GSF Renegotiation 12,639 12,722 26,041 28,935 Receivables - Eletrobras 283,817 213,552 - - Advances to employees 32,076 15,940 - - Leases 18,798 19,281 49,194 50,541 Others 129,965 153,764 90,390 104,815 (-) Allowance for doubtful debts (note 6) (27,865) (27,992) - - Total 912,245 797,181 795,499 766,253
Receivables – Eletrobras: refer to: (i) low-income subsidies amounting to R$ 20,597 (R$ 17,239 at December 31, 2016), (ii) other tariff discounts granted to consumers amounting to R$ 245,915 (R$ 164,396 at December 31, 2016), and (iii) tariff discounts – court injunctions amounting to R$ 17,305 (R$ 31,917 at December 31, 2016) - note 25.3.1.
In the 1st quarter of 2017, the subsidiaries offset the receivables relating to the Eletrobrás account with the payables relating to the Energy Development Account (CDE) (note 19) amounting to R$ 102,641, of which (i) R$ 32,912 based on an injunction obtained in May 2015, and (ii) R$ 69,729 authorized by Order No. 1,576/2016.
( 12 ) INVESTMENTS
Parent company Consolidated 3/31/2017 12/31/2016 3/31/2017 12/31/2016 Permanent equity interests - equity method By equity method of the subsidiary 6,105,511 5,811,894 1,476,171 1,482,533 Fair value of assets, net 676,954 692,632 11,075 11,219 Advance for future capital increases 1,375,520 1,355,520 - - Goodwill 6,054 6,054 - - Total 8,164,039 7,866,100 1,487,245 1,493,753
46 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c 12.1Permanent equity interests – equity method
The main information on investments in direct permanent equity interests is as follows:
1st quarter 3/31/2017 3/31/2017 12/31/2016 2017 Profit Number of or Total Issued Share of equity of Share of profit shares Equity loss assets capital investees (loss) of investees (thousand) for the Investment period CPFL Paulista 880,653 8,868,556 905,948 1,115,668 52,268 1,115,668 1,063,400 52,268 CPFL Piratininga 53,096,770 3,771,497 235,556 387,117 31,363 387,117 355,755 31,363 CPFL Santa Cruz 371,772 442,375 74,862 149,840 9,321 149,840 140,520 9,321 CPFL Leste Paulista 892,772 171,062 29,212 55,414 2,561 55,414 52,853 2,561 CPFL Sul Paulista 454,958 198,994 28,492 61,102 2,207 61,102 58,895 2,207 CPFL Jaguari 209,294 139,728 20,632 29,863 (392) 29,863 30,255 (392) CPFL Mococa 117,199 115,764 16,004 35,789 1,965 35,789 33,824 1,965 RGE 1,019,790 4,215,081 1,213,180 1,653,875 39,555 1,653,875 1,614,320 39,555 CPFL Geração 205,492,020 6,678,296 1,043,922 2,253,056 94,672 2,253,056 2,158,384 94,672 CPFL Jaguari Geração (*) 40,108 48,060 40,108 46,275 1,176 46,275 45,099 1,176 CPFL Brasil 2,999 889,327 2,999 127,024 17,970 127,024 109,054 17,970 CPFL Planalto (*) 630 3,137 630 2,957 856 2,957 2,101 856 CPFL Serviços 1,509,882 193,992 50,143 112,919 (5,049) 112,919 97,968 (5,049) CPFL Atende (*) 13,991 25,462 13,991 18,989 1,839 18,989 17,150 1,839 Nect (*) 2,059 21,926 2,059 13,328 3,034 13,328 10,295 3,034 CPFL Total (*) 19,005 34,977 19,005 32,399 4,829 32,399 27,570 4,829 CPFL Jaguariuna (*) 3,156 1,686,452 3,156 1,685,231 29,071 1,285,231 1,256,161 29,071 CPFL Telecom 55,420 51,522 55,420 (13,893) (6,092) (13,893) (19,302) (6,092) CPFL Centrais Geradoras (*) 16,128 16,827 16,128 15,755 295 15,755 15,459 295 CPFL ESCO 48,164 101,796 48,164 62,968 1,426 62,968 61,543 1,426 AUTHI (*) 2,610 28,220 2,610 21,461 4,651 21,461 16,810 4,651 Subtotal - by subsidiary's equity 7,467,137 7,148,112 287,526 Amortization of fair value adjustment of assets - - (15,678) Total 7,467,137 7,148,112 271,847
Investment 6,105,511 5,811,894 Advance for future capital increases 1,375,520 1,355,520 Allowance for investment losses (13,893) (19,302) (*) number of quotas
Fair value adjustments (value added) of net assets acquired in business combinations are classified in the parent’s statement of profit or loss in the group of Investments. In the parent company’s statement of profit or loss, the amortization of the fair value adjustments (value added) of net assets of R$ 15,678 (R$ 15,678 in the 1st quarter of 2016) is classified in line item “share of profit (loss) of investees”, in conformity with ICPC 09 (R2). At March 31, 2017, the balances of advance for future capital increase comprised advances to the following subsidiaries: (i) R$ 1,299,520 to CPFL Jaguariúna, (ii) R$ 76,000 to CPFL Serviços; and (iii) R$ 40,500 to CPFL Telecom (allowance for investment loss).
The movements, in the parent company, of the balances of investments in subsidiaries are as follows:
Investment at Share of profit (loss) of Advance for future capital Investment at Investment 12/31/2016 investees increases 3/31/2017 CPFL Paulista 1,063,400 52,268 - 1,115,668 CPFL Piratininga 355,755 31,363 - 387,117 CPFL Santa Cruz 140,520 9,321 - 149,840 CPFL Leste Paulista 52,853 2,561 - 55,414 CPFL Sul Paulista 58,895 2,207 - 61,102 CPFL Jaguari 30,255 (392) - 29,863 CPFL Mococa 33,824 1,965 - 35,789 RGE 1,614,320 39,555 - 1,653,875 CPFL Geração 2,158,384 94,672 - 2,253,056 CPFL Jaguari Geração 45,099 1,176 - 46,275 CPFL Brasil 109,054 17,970 - 127,024 CPFL Planalto 2,101 856 - 2,957 CPFL Serviços 97,968 (5,049) 20,000 112,919 CPFL Atende 17,150 1,839 - 18,989 Nect 10,295 3,034 - 13,328 CPFL Total 27,570 4,829 - 32,399 CPFL Jaguariuna 1,256,161 29,071 - 1,285,231 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c CPFL Telecom (19,302) (6,092) 11,500 (13,893) CPFL Centrais Geradoras 15,459 295 - 15,755 CPFL ESCO 61,543 1,426 - 62,968 AUTHI 16,810 4,651 21,461 7,148,112 287,526 31,500 7,467,137
In the consolidated, the investment balances refer to interests in joint ventures accounted for using the equity method:
47 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c 3/31/2017 12/31/2016 1st quarter 2017 1st quarter 2016 Investments in joint ventures Share of equity Share of profit (loss)
Baesa 177,196 175,914 1,282 7,185 Enercan 596,852 562,701 34,151 22,672 Chapecoense 476,342 537,170 25,388 18,443 EPASA 225,781 206,749 19,032 15,324 Fair value adjustments of assets, net 11,075 11,219 (145) (145) 1,487,245 1,493,753 79,709 63,480
12.2Fair value adjustments and goodwill
Fair value adjustments (value added) refer basically to the right to the concession acquired through business combinations. The goodwill refers basically to acquisitions of investments and is based on projections of future profits. In the consolidated interim financial information, these amounts are classified as Intangible Assets (note 14).
12.3Dividends and interest on capital receivable
At March 31, 2017 and December 31, 2016, the Company has the following amounts receivable from the subsidiaries below, relating to dividends and interest on capital:
Parent company Dividend Interest on capital Total Subsidiary 3/31/2017 12/31/2016 3/31/2017 12/31/2016 3/31/2017 12/31/2016 CPFL Piratininga 72,080 72,080 - - 72,080 72,080 CPFL Sul Paulista 8,641 8,641 1,986 1,986 10,627 10,627 CPFL Jaguari 6,115 6,115 - - 6,115 6,115 RGE - 24,672 - - - 24,672 CPFL Geração 277,086 396,086 - - 277,086 396,086 CPFL Jaguari Geração 1,664 1,664 - - 1,664 1,664 CPFL Brasil 58,350 86,020 1,650 1,650 60,000 87,671 CPFL Atende - 1,953 - 554 - 2,507 Nect Serviços - 5,600 - - - 5,600 CPFL ESCO 9,565 9,565 16,325 16,325 25,890 25,891 AUTHI - 10,064 - - - 10,064 433,501 622,463 19,961 20,515 453,463 642,978
The consolidated balance includes dividends and interest on capital receivable amounting to R$ 75,395 at March 31, 2017 (R$ 73,328 at December 31, 2016) related basically to joint ventures.
12.4Noncontrolling interests and joint ventures
The disclosure of interests in subsidiaries, in accordance with IFRS 12 and CPC 45, is as follows:
12.4.1 Movements in noncontrolling interests
CERAN CPFL Renováveis Paulista Lajeado Total At December 31, 2016 263,719 2,060,963 77,966 2,402,648 Equity interest and voting capital 35.00% 48.40% 40.07%
Equity attributable to noncontrolling interests 10,985 (25,598) 847 (13,765) Dividends - (2,524) (1,213) (3,737) Other movements - - (8) (8) At March 31, 2017 274,705 2,032,841 77,592 2,385,137 Equity interest and voting capital 35.00% 48.40% 40.07%
48 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c 12.4.2 Summarized financial information on subsidiaries that have noncontrolling interests
The summarized financial information on subsidiaries that have noncontrolling interests at March 31, 2017 and December 31, 2016 and the quarters ended March 31, 2017 and 2016 is as follows:
3/31/2017 12/31/2016 CPFL Paulista CPFL Paulista CERAN Renováveis Lajeado CERAN Renováveis Lajeado Current assets 327,226 1,207,712 38,657 288,538 1,398,797 39,429 Cash and cash equivalents 275,871 731,682 24,830 238,241 908,982 24,688 Noncurrent assets 915,489 11,287,985 122,413 927,948 11,066,086 122,991
Current liabilities 132,588 1,397,062 43,709 121,646 1,313,466 10,799 Borrowings and debentures 60,900 926,414 35,729 60,162 889,981 324 Other financial liabilities 17,365 92,038 1,005 20,800 85,523 1,056 Noncurrent liabilities 325,256 6,718,015 241 341,356 6,713,610 36,404 Borrowings and debentures 237,852 5,532,693 - 254,732 5,517,890 36,167 Other financial liabilities 87,404 633 - 86,624 633 - Equity 784,871 4,380,620 117,121 753,484 4,437,807 115,217 Equity attributable to owners of the Company 784,871 4,268,264 117,121 753,484 4,324,589 115,217 Equity attributable to noncontrolling interests - 112,356 - - 113,218 -
1st quarter 2017 1st quarter 2016 CPFL Paulista CPFL Paulista CERAN Renováveis Lajeado CERAN Renováveis Lajeado Net operating revenue 74,883 (370,933) 9,522 76,730 278,746 7,593 Operating costs and expenses (14,833) (134,463) (5,841) (14,520) (111,030) (7,008) Depreciation and amortization (11,153) (150,833) (1) (11,310) (133,297) (1) Interest income 8,881 36,385 736 6,324 26,459 885 Interest expense (7,977) (150,878) (353) (7,469) (138,924) (409) Income tax expense (16,160) (12,146) (614) (16,833) (7,221) 262 Profit (loss) for the period 31,386 (54,664) 2,115 32,305 (105,897) 134 Attributable to owners of the Company 31,386 (56,325) 2,115 32,305 (107,796) 134 Attributable to noncontrolling interests - 1,662 - - 1,899 -
12.4.3 Joint ventures
The summarized financial information on joint ventures at March 31, 2017 and December 31, 2016 and the quarters ended March 31, 2017 and 2016 is as follows:
3/31/2017 12/31/2016 Enercan Baesa Chapecoense Epasa Enercan Baesa Chapecoense Epasa Current assets 494,645 51,742 428,705 266,878 405,874 54,703 577,296 257,082 Cash and cash equivalents 375,459 21,370 220,437 94,575 288,956 18,946 280,083 85,709 Noncurrent assets 1,160,824 1,102,799 2,850,001 547,204 1,174,869 1,117,120 2,892,371 562,462
Current liabilities 218,974 115,368 345,327 137,359 196,760 116,192 391,402 172,401 Borrowings and debentures 85,161 87,077 138,096 35,596 87,560 87,032 137,753 35,555 Other financial liabilities 6,518 22,323 82,270 65,503 7,848 24,119 78,372 62,762 Noncurrent liabilities 211,507 330,556 1,999,374 253,461 229,085 352,142 2,024,989 259,559 Borrowings and debentures 134,216 39,865 1,263,568 210,563 153,020 63,196 1,292,239 218,891 Other financial liabilities 26,344 278,031 733,529 25,394 26,254 276,600 730,494 28,686 Equity 1,224,989 708,617 934,004 423,262 1,154,897 703,489 1,053,275 387,584
1st quarter 2017 1st quarter 2016 Enercan Baesa Chapecoense Epasa Enercan Baesa Chapecoense Epasa Net operating revenue 143,373 53,089 203,703 166,659 137,284 73,344 191,257 138,129 Operating costs and expenses (28,865) (24,077) (45,205) (110,083) (42,523) 3,307 (37,510) (82,846) Depreciation and amortization (13,355) (12,661) (31,710) (8,148) (13,435) (13,450) (32,006) (8,183) Interest income 11,857 1,560 7,769 2,599 7,276 4,027 9,009 3,350 Interest expense (6,971) (3,883) (29,340) (5,029) (9,964) (5,195) (31,995) (6,370) Income tax expense (36,101) (2,635) (31,195) (7,968) (23,966) (14,810) (18,941) (12,123) Profit (loss) for the period 70,092 5,128 49,781 35,678 46,533 28,735 36,163 28,730 Equity interest and voting 48.72% 25.01% 51.00% 53.34% 48.72% 25.01% 51.00% 53.34% capital
Even holding more than 50% in Epasa and Chapecoense, the subsidiary CPFL Geração controls these investments jointly with other shareholders. The analysis of the classification of the type of investment is based on the Shareholders' Agreement of each joint venture. WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c The borrowings from the BNDES obtained by the joint ventures ENERCAN, BAESA and Chapecoense establish restrictions on the payment of dividend to subsidiary CPFL Geração above the minimum mandatory dividend of 25% without the prior consent of the BNDES.
12.4.4 Joint operation
Through its wholly-owned subsidiary CPFL Geração, the Company holds part of the assets of the Serra da Mesa hydropower plant, located on the Tocantins River, in Goias State. The concession and the right to operate the hydropower plant are held by Furnas Centrais Elétricas S.A. In order to maintain these assets operating jointly with Furnas (jointly operation), CPFL Geração was assured 51.54% of the installed power of 1,275 MW (657 MW) and the assured energy of mean 671 MW (mean 345.4 MW) until 2028 (information on energy capacity measurements not reviewed by the independent auditors). 49 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c 12.5Business combination - Acquisition of AES Sul Distribuidora Gaúcha de Energia S.A. (“AES Sul”)
As presented in the note 13.4.1 of financial statements for the year ended at December 31, 2016, the Company acquired, on October 31, 2016, 100% of the shares of AES Sul Distribuidora Gaúcha de Energia S.A. (“AES Sul”), currently RGE Sul, through its wholly-owned subsidiary CPFL Jaguariúna Ltda., shares until then held by AES Guaíba II Empreendimentos Ltda. (“seller”), indirect wholly-owned subsidiary of The AES Corporation.
The acquisition was made under the conditions disclosed in the Note and the fair values were determined provisionally for the financial statements, based on Management analyses. Confirmation of the fair values was pending completion of the economic-financial assessment report prepared by an independent assessor . Accordingly, no adjustment to the fair values of assets and liabilities was recognized in the reporting period for the interim financial statements at March 31, 2017.
There were no other business combinations in the first quarter of 2017.
50 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c ( 13 ) PROPERTY, PLANT AND EQUIPMENT
Consolidated Reservoirs, Buildings, dams and construction Machinery Furniture water and and and Land mains improvements equipment Vehicles fittings In progress As at December 31, 2016 176,145 1,394,162 1,153,220 6,655,391 76,217 7,562 250,302 9,712,998 Historical cost 206,330 2,060,191 1,652,934 9,066,408 106,920 21,507 250,302 13,364,592 Accumulated depreciation (30,185) (666,028) (499,714) (2,411,017) (30,704) (13,945) - (3,651,594)
Additions - - - 85 - - 314,217 Disposals - - - (14) (85) (38) (7) Transfers 24 85 8,760 275,235 8,108 185 (292,397) Transfers from/to other assets - cost - - (416) (794) (145) 127 108 Depreciation (2,010) (19,706) (16,000) (103,404) (4,312) (402) - (145,835) Write-off of depreciation - - 23 45 5 - - Transfers from/to other assets - depreciation 7 - 10 - 9 (9) -
As at March 31, 2017 174,166 1,374,541 1,145,597 6,826,544 79,796 7,425 272,223 9,880,291 Historical cost 206,354 2,060,275 1,661,278 9,340,943 114,798 21,780 272,223 13,677,651 Accumulated depreciation (32,189) (685,734) (515,682) (2,514,399) (35,002) (14,355) - (3,797,360)
Average depreciation rate 3.86% 3.69% 3.30% 4.19% 14.31% 10.01%
The balance of construction in progress, in consolidated, refers mainly to works in progress of the operating and/or under development subsidiaries, especially for the projects of CPFL Renováveis, which has construction in progress of R$ 241,140 at March 31, 2017 (R$ 182,181 at December 31, 2016). In conformity with CPC 20 (R1) and IAS 23, the interest on borrowings taken by subsidiaries to finance the works is capitalized during the construction phase. In the consolidated, in the 1st quarter of 2017, R$ 19,503 were capitalized at a rate of 11.18% (R$ 10,528, at a rate of 11.49%, in the 1st quarter of 2016) (note 28). In the consolidated, the depreciation amounts are recognized in the statement of profit or loss in line item “Depreciation and amortization” (note 26). 51 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c ( 14 ) INTANGIBLE ASSETS
Consolidated Concession right Acquired in Distribution Distribution Use of Other Total business infrastructure - infrastructure - public intangible Goodwill combinations operational in progress asset assets As at December 31, 2016 6,115 4,466,516 5,550,502 666,008 27,324 59,147 10,775,613 Historical cost 6,152 7,602,941 11,987,109 666,008 35,840 183,138 20,481,188 Accumulated amortization (37) (3,136,425) (6,436,607) - (8,516) (123,990) (9,705,575)
Additions - - - 351,320 - 840 352,160 Amortization - (72,116) (156,492) - (355) (2,320) (231,283) Transfer - intangible assets - - 154,243 (154,243) - - - Transfer - financial asset - - (1,034) (154,228) - - (155,262) Disposal and transfer - other assets - - (10,402) (8,577) - 1,150 (17,829)
As at March 31, 2017 6,115 4,394,400 5,536,818 700,279 26,969 58,817 10,723,398 Historical cost 6,152 7,602,941 14,185,035 700,279 35,840 185,167 22,715,414 Accumulated amortization (37) (3,208,541) (8,648,217) - (8,871) (126,350) (11,992,016)
In conformity with CPC 20 (R1) and IAS 23, the interest on borrowings taken by subsidiaries is capitalized for qualifying intangible assets. In the consolidated, for the 1st quarter of 2017, R$ 4,654 were capitalized at a rate of 8.33% p.a. (R$ 2,266 at a rate of 7.57% in the 1st quarter of 2016,) (note 29). In the consolidated, the amortization of intangible assets is recognized in the statement of profit or loss in the following line items: (i) “depreciation and amortization” for amortization of distribution infrastructure intangible assets, use of public asset and other intangible assets; and (ii) “amortization of concession intangible asset” for amortization of the intangible asset acquired in business combination (note 26).
14.1 Intangible asset acquired in business combinations
The breakdown of the intangible asset related to the right to operate the concessions acquired in business combinations is as follows:
52 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c Consolidated Annual amortization 3/31/2017 12/31/2016 rate Historical Accumulated Net value Net value 2017 2016 cost amortization Intangible asset - acquired in business combinations Intangible asset acquired, not merged Parent company CPFL Paulista 304,861 (199,514) 105,347 107,843 3.28% 3.28% CPFL Piratininga 39,065 (24,069) 14,995 15,319 3.31% 3.31% RGE 3,150 (1,727) 1,423 1,457 4.24% 4.24% CPFL Geração 54,555 (34,104) 20,450 20,912 3.38% 3.38% CPFL Jaguari Geração 7,896 (3,649) 4,247 4,314 3.41% 3.41% 409,527 (263,064) 146,463 149,845
Subsidiaries CPFL Renováveis 3,717,093 (760,690) 2,956,403 2,995,028 4.16% 5.39% RGE Sul 101,055 (3,828) 97,227 99,524 9.09% 9.09% RGE 618 (156) 462 473 7.06% 7.06% 3,818,766 (764,674) 3,054,092 3,095,025
Subtotal 4,228,294 (1,027,738) 3,200,554 3,244,869
Intangible asset acquired and merged – Deductible Subsidiaries RGE 1,120,266 (868,249) 252,018 257,924 2.11% 2.11% RGE Sul 312,741 (11,866) 300,875 307,982 9.09% 9.09% CPFL Geração 426,450 (315,989) 110,461 112,953 2.34% 2.34% Subtotal 1,859,457 (1,196,103) 663,354 678,859
Intangible asset acquired and merged – Reassessed Parent company CPFL Paulista 1,074,026 (730,512) 343,514 351,565 3.00% 3.00% CPFL Piratininga 115,762 (71,325) 44,436 45,395 3.31% 3.31% RGE 310,128 (174,830) 135,298 138,469 4.09% 4.09% CPFL Jaguari Geração 15,275 (8,032) 7,243 7,358 3.01% 3.01% Subtotal 1,515,190 (984,699) 530,491 542,787
Total 7,602,941 (3,208,541) 4,394,400 4,466,516
( 15 ) TRADE PAYABLES
Consolidated 3/31/2017 12/31/2016 Current System service charges 27,035 59,935 Energy purchased 1,631,278 1,868,950 Electricity network usage charges 120,968 121,884 Materials and services 317,062 545,468 Free energy 135,893 131,893 Total 2,232,237 2,728,130
Noncurrent Energy purchased 130,135 129,148 Materials and services 633 633 Total 130,767 129,781
53 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c ( 16 ) INTEREST ON DEBTS AND BORROWINGS
Consolidated 3/31/2017 12/31/2016 Interest - Interest - Principal Principal Current and Total Current and Total noncurrent Current Noncurrent noncurrent Current Noncurrent Measured at cost Local currency Investment 17,655 766,645 4,539,374 5,323,674 17,827 842,015 4,606,227 5,466,069 Rental assets 27 1,102 3,670 4,799 38 1,034 3,955 5,028 Financial Institutions 218,522 293,886 1,419,971 1,932,379 234,096 255,355 1,517,251 2,006,702 Others - 18,985 38,624 57,608 50 59,756 42,370 102,176 Total at cost 236,204 1,080,619 6,001,639 7,318,461 252,011 1,158,159 6,169,803 7,579,974
Measured at fair value Foreign currency Financial Institutions 16,870 1,745,467 3,238,752 5,001,089 22,062 595,101 4,922,463 5,539,626 Mark to market - 3,816 14,656 18,472 - (1,764) (35,651) (37,415) Total at fair value 16,870 1,749,283 3,253,408 5,019,561 22,062 593,337 4,886,812 5,502,211
Borrowing costs * - (3,530) (28,163) (31,693) - (5,213) (32,930) (38,143)
Total 253,074 2,826,371 9,226,883 12,306,329 274,073 1,746,284 11,023,685 13,044,041 (*) In accordance with CPC 38/IAS 39, this refers to the borrowing costs directly attributable to the issuance of the respective debts.
54 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c Consolidated Measured at amortized 3/31/2017 12/31/2016 cost Annual interest Amortization Collateral Local currency Investment CPFL Paulista TJLP + 2.12% to 72 monthly installments from CPFL Energia guarantee and FINEM V 28,622 37,078 3.3% (c) February 2012 receivables Fixed rate 8% (c) 90 monthly installments from CPFL Energia guarantee and FINEM V 3,201 3,638 August 2011 receivables Fixed rate 5.5% (b) 96 monthly installments from CPFL Energia guarantee and FINEM V 28,947 30,835 February 2013 receivables TJLP + 2.06% to 72 monthly installments from CPFL Energia guarantee and FINEM VI 137,970 149,984 3.08% (e) (f) January 2014 receivables Fixed rate 2.5% (a) 114 monthly installments from June CPFL Energia guarantee and FINEM VI 8,530 8,907 2013 receivables Fixed rate 2.5% (a) 96 monthly installments from CPFL Energia guarantee and FINEM VI 156,500 163,404 December 2014 receivables Fixed rate 6% (b) 96 monthly installments from April CPFL Energia guarantee and FINEM VII 55,805 57,798 2016 receivables SELIC + 2.62% to 72 monthly installments from April CPFL Energia guarantee and FINEM VII 72,075 73,435 2.66% (h) 2016 receivables TJLP + 2.12% to 72 monthly installments from April CPFL Energia guarantee and FINEM VII 126,752 132,622 2.66% (c) (d) 2016 receivables Fixed rate 4.5% 96 monthly installments from CPFL Energia guarantee FINAME 23,243 25,356 January 2012 CPFL Piratininga TJLP + 2.12% to 72 monthly installments from CPFL Energia guarantee and FINEM IV 15,416 19,970 3.3% (c) February 2012 receivables Fixed rate 8% (c) 90 monthly installments from CPFL Energia guarantee and FINEM IV 1,032 1,173 August 2011 receivables Fixed rate 5.5% (b) 96 monthly installments from CPFL Energia guarantee and FINEM IV 15,053 16,035 February 2013 receivables TJLP + 2.06% to 72 monthly installments from CPFL Energia guarantee and FINEM V 40,325 43,836 3.08% (e) (f) January 2014 receivables Fixed rate 2.5% (a) 114 monthly installments from June CPFL Energia guarantee and FINEM V 2,240 2,339 2013 receivables Fixed rate 2.5% (a) 96 monthly installments from CPFL Energia guarantee and FINEM V 38,945 40,664 December 2014 receivables SELIC + 2.62% to 72 monthly installments from April CPFL Energia guarantee and FINEM VI 40,849 41,620 2.66% (h) 2016 receivables TJLP + 2.12% to 72 monthly installments from April CPFL Energia guarantee and FINEM VI 62,867 65,778 2.66% (c) (d) 2016 receivables Fixed rate 6% (b) 96 monthly installments from April CPFL Energia guarantee and FINEM VI 27,225 28,198 2016 receivables Fixed rate 4.5% 96 monthly installments from CPFL Energia guarantee FINAME 11,021 12,023 January 2012 RGE TJLP + 2.12% to 72 monthly installments from CPFL Energia guarantee and FINEM V 17,325 22,444 3.3% (c) February 2012 receivables Fixed rate 5.5% (b) 96 monthly installments from CPFL Energia guarantee and FINEM V 11,104 11,828 February 2013 receivables TJLP + 2.06% to 72 monthly installments from CPFL Energia guarantee and FINEM VI 73,708 80,126 3.08% (e) (f) January 2014 receivables Fixed rate 2.5% (a) 114 monthly installments from June CPFL Energia guarantee and FINEM VI 903 942 2013 receivables Fixed rate 2.5% (a) 96 monthly installments from CPFL Energia guarantee and FINEM VI 57,546 60,085 December 2014 receivables Fixed rate 6% (b) 96 monthly installments from April CPFL Energia guarantee and FINEM VII 38,081 39,442 2016 receivables SELIC + 2.62% to 72 monthly installments from April CPFL Energia guarantee and FINEM VII 64,052 65,261 2.66% (h) 2016 receivables TJLP + 2.12% to 72 monthly installments from April CPFL Energia guarantee and FINEM VII 77,791 81,394 2.66% (d) 2016 receivables Fixed rate 4.5% 96 monthly installments from CPFL Energia guarantee FINAME 5,531 6,033 January 2012 Fixed rate 10.0% 90 monthly installments from May Liens on assets FINAME 153 168 2012 Fixed rate 10.0% 66 monthly installments from Liens on assets FINAME 545 579 October 2015 CPFLSanta Cruz Fixed rate 6% 111 monthly installments from April CPFL Energia guarantee FINEM 8,791 9,094 2015 SELIC + 2.19% 72 monthly installments from April CPFL Energia guarantee FINEM 3,280 3,381 2015 TJLP + 2.19% 72 monthly installments from April CPFL Energia guarantee FINEM 5,725 6,062 2015 CPFL Leste Paulista Fixed rate 6% 111 monthly installments from April CPFL Energia guarantee FINEM 3,284 3,397 2015 SELIC + 2.19% 72 monthly installments from April CPFL Energia guarantee FINEM 1,202 1,239 2015 TJLP + 2.19% 72 monthly installments from April CPFL Energia guarantee FINEM 2,101 2,224 2015 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c CPFL Sul Paulista Fixed rate 6% 111 monthly installments from April CPFL Energia guarantee FINEM 2,332 2,412 2015 SELIC + 2.19% 72 monthly installments from April CPFL Energia guarantee FINEM 1,679 1,731 2015 TJLP + 2.19% 72 monthly installments from April CPFL Energia guarantee FINEM 2,949 3,122 2015 CPFL Jaguari TJLP + 3.1% 96 monthly installments from June CPFL Energia guarantee CCB - Santander 1,401 1,464 2014 UMBNDES + 2.1% 96 monthly installments from June CPFL Energia guarantee CCB - Santander 521 572 2014 Fixed rate 6% 111 monthly installments from April CPFL Energia guarantee FINEM 2,342 2,422 2015 SELIC + 2.19% 72 monthly installments from April CPFL Energia guarantee FINEM 1,248 1,287 2015 TJLP + 2.19% 72 monthly installments from April CPFL Energia guarantee FINEM 2,192 2,321 2015 CPFL Mococa TJLP + 3.1% 96 monthly installments from June CPFL Energia guarantee CCB - Santander 1,803 1,883 2014 UMBNDES + 2.1% 96 monthly installments from June CPFL Energia guarantee CCB - Santander 670 736 2014 UMBNDES +1.99% 96 monthly installments from CPFL Energia guarantee CCB - Santander 1,298 1,413 October 2015 TJLP + 2.99% (f) 96 monthly installments from CPFL Energia guarantee CCB - Santander 3,944 4,081 October 2015 RGE SUL Fixed rate 5% 81 monthly installments from Bank guarantee FINEP I 10,364 7,757 September 2013 TJLP 73 monthly installments from May Bank guarantee FINEP II 6,201 7,562 2016 CPFL Serviços Fixed rate 2.5% to 96 monthly installments from CPFL Energia guarantee and FINAME 1,245 1,297 5.5% August 2014 liens on equipment Fixed rate 6% 72 monthly installments from April CPFL Energia guarantee and FINAME 298 313 2016 liens on equipment Fixed rate 7.7% to 90 monthly installments from CPFL Energia guarantee and FINAME 619 668 10% November 2012 liens on equipment Fixed rate 2.5% to 114 monthly installments from CPFL Energia guarantee and FINAME 10,852 11,292 5.5% February 2013 liens on equipment TJLP + 4.2% 90 monthly installments from CPFL Energia guarantee and FINAME 43 47 November 2012 liens on equipment Fixed rate 6% 90 monthly installments from CPFL Energia guarantee and FINAME 2,146 2,249 October 2014 liens on equipment Fixed rate 6% 96 monthly installments from July CPFL Energia guarantee and FINAME 98 101 2016 liens on equipment Fixed rate 6% 114 monthly installments from June CPFL Energia guarantee and FINAME 5,586 5,768 2015 liens on equipment TJLP + 2.2% to 56 monthly installments from July CPFL Energia guarantee and FINAME 701 762 3.2% (c) 2015 liens on equipment Fixed rate 9.5% to 66 monthly installments from CPFL Energia guarantee and FINAME 3,667 3,870 10% (c) October 2015 liens on equipment Fixed rate 6% to 66 monthly installments from April CPFL Energia guarantee and FINAME 1,511 1,589 10% (e) 2016 liens on equipment TJLP + 3.50% (e) 48 monthly installments from July CPFL Energia guarantee and FINAME 5,854 5,832 2017 liens on equipment SELIC + 3.86% to 48 monthly installments from July CPFL Energia guarantee and FINAME 1,290 2,511 3.90% (k) 2017 liens on equipment SELIC + 3.74% (d) 36 monthly installments from CPFL Energia guarantee and FINAME 1,252 1,147 November 2018 liens on equipment TJLP + 3.40% (h) 36 monthly installments from CPFL Energia guarantee and FINAME 551 495 November 2018 liens on equipment CERAN TJLP + 3.69% to 5% 168 monthly installments from Pledge of shares, credit and BNDES 254,527 266,484 December 2005 concession rights, revenues and CPFL Energia guarantee UMBNDES + 5% (1) 168 monthly installments from Pledge of shares, credit and BNDES 44,226 48,409 February 2006 concession rights, revenues and CPFL Energia guarantee CPFL Transmissão Fixed rate 3.0% 96 monthly installments from July CPFL Energia guarantee FINAME 16,222 16,871 2015 CPFL Telecom Fixed rate 6.0% (b) 60 monthly installments from CPFL Energia guarantee FINAME 7,070 7,448 December 2016 SELIC + 3.12% (h) 60 monthly installments from CPFL Energia guarantee FINEM 7,677 7,849 December 2016 TJLP + 2.12% to 60 monthly installments from CPFL Energia guarantee FINEM 20,328 21,342 3.12% (c) December 2016 TJLP (l) 60 monthly installments from CPFL Energia guarantee FINEM 448 470 December 2016
55 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c CPFL Renováveis TJLP + 168 monthly PCH Holding a joint and several debtor, letters of FINEM I 255,022 262,224 1.95% installments from guarantee October 2009 TJLP + 144 monthly CPFL Energia guarantee, liens on assets and FINEM II 21,420 22,210 1.90%. installments from assignment of credit rights June 2011 TJLP + 192 monthly CPFL Energia guarantee, pledge of shares, liens FINEM III 487,575 495,912 1.72% installments from May on assets, assignment of credit rights 2013 TJLP + 2.8% 143 monthly PCH Holding 2 and CPFL Renováveis as joint FINEM V 77,731 80,362 to 3.4% installments from and several debtors. December 2011 TJLP + 192 monthly Pledge of CPFL Renováveis shares, assignment FINEM VI 73,530 74,737 2.05% installments from of receivables October 2013 TJLP + 1.92 156 monthly Pledge of shares, assignment of rights, liens on FINEM VII 133,817 138,474 % installments from machinery and equipment October 2010 TJLP + 120 monthly Pledge of shares of subsidiary and liens on FINEM IX 23,387 25,195 2.15% installments from May machinery and equipment 2010 TJLP 84 monthly Pledge of shares, assignment of rights, liens on FINEM X 154 230 installments from machinery and equipment October 2010 TJLP + 168 monthly CPFL Energia guarantee, pledge of shares, liens FINEM XI 103,115 105,670 1.87% to installments from on assets, assignment of credit rights 1.9% January 2012 TJLP + 192 monthly CPFL Energia guarantee, liens on assets, joint FINEM XII 312,446 317,289 2.18% installments from July assignment of credit rights, pledge of shares 2014 TJLP + 192 monthly Pledge of shares and machinery and equipment FINEM XIII 313,609 318,257 2.02% to installments from of SPE , assignment of rights 2.18% November 2014 TJLP + 139 monthly Assignment of receivables, pledge of grantor FINEM XV 26,306 27,305 3.44% installments from rights - ANEEL, pledge of shares September 2011 Fixed rate 101 monthly Assignment of receivables, pledge of grantor FINEM XVI 5,897 6,418 5.50% installments from rights - ANEEL, pledge of shares September 2011 TJLP + 192 monthly Liens on machinery and equipment, assignment FINEM XVII 452,666 460,426 2.18% installments from of receivables, pledge of grantor rights - ANEEL, January 2013 pledge of shares and reserve account Fixed rate 102 monthly CPFL Energia guarantee, liens on assets , FINEM XVIII 12,583 13,763 4.5% installments from assignment of credit rights June 2011 TJLP + 192 monthly CPFL Energia guarantee, liens on assets, joint FINEM XIX 29,092 29,559 2.02% installments from assignment of credit rights, pledge of shares January 2014 Fixed rate 108 monthly Pledge of CPFL Renováveis shares, FINEM XX 42,789 44,650 2.5% installments from pledge of shares and reserve account of SPE, January 2014 assignment of receivables TJLP + 192 monthly CPFL Energia guarantee, liens on assets, joint FINEM XXI 39,645 40,281 2.02% installments from assignment of credit rights, pledge of shares January 2014 Fixed rate 108 monthly Pledge of CPFL Renováveis shares, FINEM XXII 37,644 39,281 2.5% installments from pledge of shares and reserve account of SPE, January 2014 assignment of receivables Fixed rate 102 monthly CPFL Energia guarantee, liens on assets , FINEM XXIII 1,585 1,729 4.5% installments from assignment of credit rights June 2011 Fixed rate 108 monthly CPFL Energia guarantee, liens on assets, joint FINEM XXIV 102,843 109,580 5.5% installments from assignment of credit rights January 2012 TJLP + 192 monthly Pledge of shares and grantor rights, liens on FINEM XXV 86,400 87,492 2.18% installments from July assets and assignment of credit rights 2016 TJLP + 192 monthly Pledge of shares and grantor rights, liens on FINEM XXVI 553,289 525,011 2.75% installments from July assets and assignment of credit rights 2017 TJLP + 162 monthly Pledge of shares of the intervening parties, 2,02% installments from assignment of credit rights, pledge of incidental FINEM XXVII 69,454 70,532 November 2016 rights authorized by ANEEL and SPE Reserve Account Fixed rate 96 monthly Pledge of CPFL Renováveis shares, FINAME IV 2,740 2,857 2.5% installments from pledge of shares and reserve account of SPE, February 2015 assignment of receivables Fixed rate 61 monthly Bank guarantee FINEP I 1,274 1,397 3.5% installments from October 2014 TJLP - 1.0% 85 monthly Guarantee FINEP II 10,445 10,445 installments from June 2017 TJLP + 2.0% 73 monthly Guarantee FINEP III 4,947 5,232 installments from July 2015 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c BNB I 97,983 100,323 Fixed rate 168 monthly Liens 9.5% to 10% installments from January 2009 Fixed rate 222 monthly CPFL Energia guarantee BNB II 156,627 158,364 10% (J) installments from May 2010 Fixed rate 228 monthly Guarantee, liens on assets, assignment of credit BNB III 28,557 29,020 9.5% installments from July rights 2009 IGPM + 50 quarterly No guarantee NIB 66,206 67,872 8.63% installments from June 2011
Purchase of assets CPFL ESCO Fixed rate 96 monthly CPFL Energia guarantee FINAME 2,762 2,923 4.5% to installments from 8.7% March 2012 Fixed rate 72 monthly CPFL Energia guarantee FINAME 95 99 6% installments from October 2016 TJLP + 48 monthly CPFL Energia guarantee FINAME 219 234 2.70% installments from August 2016 SELIC + 48 monthly CPFL Energia guarantee FINAME 210 219 2.70% installments from August 2016 Fixed rate 48 monthly CPFL Energia guarantee FINAME 118 121 9.5% installments from October 2016 Fixed rate 48 monthly CPFL Energia guarantee and liens on equipment FINAME 640 678 9.5% (e) installments from February 2017 TJLP + 48 monthly CPFL Energia guarantee and liens on equipment FINAME 756 753 3.50% (e) installments from August 2017 Financial institutions CPFL Paulista Banco do Brasil - Working 104.90% of 2 annual installments CPFL Energia guarantee 392,520 380,403 capital CDI (f) from July 2017 CPFL Piratininga Banco do Brasil - Working 104.90% of 2 annual installments CPFL Energia guarantee - 66,951 capital CDI (f) from July 2017 CPFL Santa Cruz Banco do Brasil - Working 104.90% of 2 annual installments CPFL Energia guarantee 51,813 50,213 capital CDI (f) from July 2017 Banco IBM - Working capital CDI + 0.27% 12 semiannual CPFL Energia guarantee 7,146 6,925 (f) installments from June 2015 CPFL Leste Paulista Banco IBM - Working capital 100.0% of 14 semiannual CPFL Energia guarantee 5,290 5,405 CDI installments from December 2012 Banco IBM - Working capital CDI + 0.1% 12 semiannual CPFL Energia guarantee 21,615 20,955 installments from October 2014 Banco IBM - Working capital CDI + 0.27% 12 semiannual CPFL Energia guarantee 15,273 15,658 installments from March 2015 Banco IBM - Working capital CDI + 1.33% 12 semiannual CPFL Energia guarantee 6,009 6,993 (f) installments from January 2016 CPFL Sul Paulista Banco do Brasil - Working 104.90% of 2 annual installments CPFL Energia guarantee 32,972 31,954 capital CDI (f) from July 2017 Banco IBM - Working capital CDI + 0.27% 12 semiannual CPFL Energia guarantee 7,375 7,888 to 1.33 (f) installments from June 2015 Banco IBM - Working capital CDI + 1.27% Semiannual CPFL Energia guarantee 6,121 6,784 (g) installments from February 2017 CPFL Jaguari Banco do Brasil - Working 104.90% of 2 annual installments CPFL Energia guarantee 4,553 4,413 capital CDI (f) from July 2017 Banco IBM - Working capital 100.0% of 14 semiannual CPFL Energia guarantee 11,061 10,726 CDI installments from December 2012 Banco IBM - Working capital CDI + 0.1% 12 semiannual CPFL Energia guarantee 11,652 11,297 installments from October 2014 CPFL Mococa Banco do Brasil - Working 104.90% of 2 annual installments CPFL Energia guarantee 29,832 28,911 capital CDI (f) from July 2017 Banco IBM - Working capital 100.0% of 14 semiannual CPFL Energia guarantee 3,589 3,481 CDI installments from December 2012 Banco IBM - Working capital 11,998 13,296 CDI + 0.27% CPFL Energia guarantee WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c 12 semiannual installments from March 2015 CPFL Serviços Banco IBM - Working capital CDI + 0.10% 11 semiannual CPFL Energia guarantee 3,582 3,473 installments from June 2013 CPFL Geração Banco do Brasil - Working 109.5% of 1 installment in March CPFL Energia guarantee 619,366 641,316 capital CDI 2019 CPFL Renováveis HSBC CDI + 0.5% 8 annual installment Pledge of shares 258,268 250,363 (i) from June 2013 Safra 105% of CDI 14 installments from Redeemable preferred shares structure 200,289 208,547 August 2016 Banco BBM - Bank credit note CDI + 3.40% 1 installment in March No guarantee 45,889 44,171 2018 Banco ABC - Bank credit note CDI + 3.80% 1 installment in No guarantee 46,061 44,217 December 2017 Banco ABC - Promissory notes CDI + 3.80% Semiannual No guarantee 101,239 105,883 installments from February 2017 CPFL Telecom Banco IBM - Working capital CDI + 0.18% 12 semiannual CPFL Energia guarantee 27,798 31,449 installments from August 2014
56 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c CPFL Transmissão Morro Agudo Santander CDI + 1.60% (k) 1 installment in CPFL 11,068 5,031 March 2017 Energia guarantee
Others Eletrobrás RGR + 6% to 6.5% monthly Receivables installments and CPFL Paulista 2,763 2,960 from August promissory 2006 notes RGR + 6% monthly Receivables installments and RGE 5,204 5,851 from August promissory 2006 notes RGR + 6% monthly Receivables installments and CPFL Santa Cruz 372 508 from January promissory 2007 notes RGR + 6% monthly Receivables installments and CPFL Leste Paulista 264 338 from February promissory 2008 notes RGR + 6% monthly Receivables installments and CPFL Sul Paulista 213 303 from August promissory 2007 notes RGR + 6% monthly Receivables installments and CPFL Jaguari 3 9 from June 2007 promissory notes RGR + 6% monthly Receivables installments and CPFL Mococa 104 122 from January promissory 2008 notes Fixed rate 5% 120 monthly Bank RGE SUL 26,947 25,946 installments guarantee from June 2012 Others 21,738 66,141 Subtotal local currency 7,318,461 7,579,974
Foreign currency Measured at fair value Financial institutions CPFL Paulista US$+Libor 3 months+1.35% 1 installment in CPFL (3) (f) october 2018 Energia guarantee Bank of America Merrill Lynch (***) 314,055 327,503 and promissory notes US$+Libor 3 months+1.70% 1 installment in CPFL (4) September 2018 Energia guarantee Bank of America Merrill Lynch 140,656 146,703 and promissory notes US$ + Libor 3 months + 1 installment in CPFL 0.88% (3) (g) February 2020 Energia guarantee Bank of Tokyo-Mitsubishi 156,554 163,279 and promissory notes US$+Libor 3 months+0.80% 4 semiannual CPFL (3) (f) installments Energia from September guarantee Bank of Tokyo-Mitsubishi 156,385 163,106 2017 and promissory notes Euro + 1.6350% (3) 1 installment in CPFL January 2018 Energia guarantee BNP Paribas 67,334 68,663 and promissory notes US$ + Libor 3 months + 1 installment in CPFL 1.30% (3) January 2018 Energia guarantee HSBC 271,206 282,808 and promissory notes J.P. Morgan 125,858 130,522 US$ + 2.28% to 2.32% (3) 1 installment in CPFL December 2017 Energia guarantee WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c and promissory notes US$ + 2.36% to 2.39% (3) 1 installment in CPFL January 2018 Energia guarantee J.P. Morgan 109,950 115,382 and promissory notes US$ + 2.74% (3) 1 installment in CPFL January 2019 Energia guarantee J.P. Morgan 78,581 82,544 and promissory notes US$ + 2.2% (3) 1 installment in CPFL February 2018 Energia guarantee J.P. Morgan 47,002 49,311 and promissory notes US$ + Libor 3 months + 1 installment in CPFL 1.40% (3) February 2018 Energia guarantee Bank of America Merrill Lynch 470,163 490,334 and promissory notes US$+Libor 3 months+1.55% 3 semiannual CPFL (3) (f) installments Energia from March guarantee Mizuho Bank 234,423 244,484 2018 and promissory notes Syndicated transaction (**) - Bank of America US$ + Libor 3 months + 2.7% 5 semiannual CPFL Merrill Lynch, Citibank, HSBC and EDC-Export (4) installments Energia Development Canada from May 2019 guarantee 209,095 218,104 and promissory notes
CPFL Piratininga Euro + 1.6350% (3) 1 installment in CPFL January 2018 Energia guarantee BNP Paribas 185,170 188,822 and promissory notes US$ + Libor 3 months + 2 annual CPFL 1.41% (3) installments Energia from January guarantee Citibank 196,091 204,486 2019 and promissory notes US$ + Libor 3 months + 1 installment in CPFL 1.35% (4) March 2019 Energia guarantee Citibank 156,501 163,225 and promissory notes US$ + 2.08% (3) 1 installment in CPFL August 2017 Energia guarantee Scotiabank 51,715 54,235 and promissory notes US$ + Libor 3 months + 1 installment in CPFL 1.35% (3) (f) April 2018 Energia guarantee Sumitomo 156,986 163,712 and promissory notes Syndicated transaction (**) - Bank of America US$ + Libor 3 months + 2.7% 5 semiannual CPFL Merrill Lynch, Citibank, HSBC and EDC-Export (4) installments Energia Development Canada from May 2019 guarantee 209,095 218,104 and promissory notes RGE US$ + Libor 3 months + 1 installment in CPFL 0.82%(3) April 2018 Energia guarantee Bank of Tokyo-Mitsubishi 56,439 58,852 and promissory notes US$ + Libor 3 months + 1 installment in CPFL 0.83%(3) May 2018 Energia guarantee Bank of Tokyo-Mitsubishi 256,708 267,740 and promissory notes WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c HSBC 42,671 44,496 US$ + Libor 3 months + 1 installment in CPFL 1.30% (3) October 2017 Energia guarantee and promissory notes US$ + 2.78% (3) 1 installment in CPFL February 2018 Energia guarantee J.P. Morgan 190,238 199,826 and promissory notes Syndicated transaction (**) - Bank of America US$ + Libor 3 months + 2.7% 5 semiannual CPFL Merrill Lynch, Citibank, HSBC and EDC-Export (4) installments Energia Development Canada from May 2019 guarantee 209,095 218,104 and promissory notes CPFL Santa Cruz US$ + 3.37% (4) (g) 1 installment in CPFL July 2019 Energia guarantee Scotiabank 15,736 16,556 and promissory notes CPFL Sul Paulista US$ + 3.37% (4) (g) 1 installment in CPFL July 2019 Energia guarantee Scotiabank 15,736 16,556 and promissory notes CPFL Leste Paulista US$ + 3.37% (4) (g) 1 installment in CPFL July 2019 Energia guarantee Scotiabank 15,736 16,556 and promissory notes CPFL Jaguari US$ + 3.37% (4) (g) 1 installment in CPFL July 2019 Energia guarantee Scotiabank 15,736 16,556 and promissory notes CPFL Geração US$+Libor 3 months + 1.30% 1 installment in CPFL (3) March 2017 Energia guarantee HSBC - 326,159 and promissory notes US$+Libor 3 months + 1.60% 1 installment in CPFL + 1.4% fee (4) June 2019 Energia guarantee CCB-China Construction Bank 93,914 97,946 and promissory notes US$ + 3.37% (4) (g) 1 installment in CPFL July 2019 Energia guarantee Scotiabank 111,726 117,550 and promissory notes US$+Libor 3 months + 1.41% 3 annual CPFL (3) (f) installments Energia from September guarantee Citibank 375,258 391,380 2018 and promissory notes US$ + 3.37% (4) (g) 1 installment in CPFL September 2019 Energia guarantee CCB-China Construction Bank 31,280 32,624 and promissory notes US$ + 3.13% (f) 1 installment in CPFL Scotiabank 157,619 163,125 December 2019 Energia guarantee Paulista Lajeado US$ + 3.196% (4) 1 installment in CPFL March 2018 Energia guarantee Banco Itaú 34,018 35,771 and promissory notes CPFL Brasil Scotiabank 42,356 44,501 US$ + 2.779% (3) WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c 1 installment in CPFL August 2018 Energia guarantee and promissory notes
Mark to market 18,472 (37,415)
Total in foreign currency - fair value 5,019,561 5,502,211
Borrowing costs (*) (31,693) (38,143)
Total - Consolidated 12,306,329 13,044,041
The subsidiaries hold swaps converting the operating cost of currency variation to interest rate variation in reais, corresponding to: (1) 143.85% of CDI (3) 99% to 109% of CDI (2) 95.20% of CDI (4) 109.1% to 119% of CDI
Effective rate: (a) 30% to 40% of CDI (e) 80.1% to 90% of CDI (i) CDI + 0.73% (b) 40.1% to 50% of CDI (f) 100.1% to 110% of CDI (J) Fixed rate 10.57% (c) 60.1% to 70% of CDI (g) 110.1% to 120% of CDI (k) 130.01% to 140% of CDI (d) 70.1% to 80% of CDI (h) 120.1% to 130% of CDI (l) 50.1% to 60% of CDI
(*) In accordance with CPC 38/IAS 39, this refers to borrowing costs directly attributable to the issuance of the respective debts. (**) Syndicated transaction – borrowings in foreign currency, having as counterpart a group of financial institutions.
As segregated in the tables above, in conformity with CPCs 38 and 39 and IASs 32 and 39, the Company and its subsidiaries classified their debts as (i) other financial liabilities (or measured at amortized cost), and (ii) financial liabilities measured at fair value through profit or loss.
57 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c The objective of the classification as financial liabilities of borrowings measured at fair value is to compare the effects of the recognition of income and expenses derived from marking to market of derivatives, tied to the borrowings, in order to obtain more relevant and consistent accounting information. At March 31, 2017, the balance of the borrowings measured at fair value was R$ 5,019,561 (R$ 5,502,211 at December 31, 2016). Changes in the fair values of these borrowings are recognized in finance income/cost of the Company and its subsidiaries. At March 31, 2017, the accumulated losses obtained on the marking to market of the borrowings were R$ 18,472 (accumulated gains of R$ 37,415 at December 31, 2016), which reduced by the gains obtained on the marking to market of derivative financial instruments of R$ 51,567 (R$ 24,504 at December 31, 2016) contracted to hedge against changes in foreign exchange rates (note 32), resulted in a total net gain of R$ 33,095 (R$ 61,919 at December 31, 2016).
The maturities of the principal of borrowings recorded in noncurrent liabilities are scheduled as follows:
Maturity Consolidated From 1/4/2018 2,168,022 2019 2,742,213 2020 1,345,297 2021 699,621 2022 492,204 2023 to 2027 1,279,041 2028 to 2032 468,721 2033 to 2037 17,108 Subtotal 9,212,227 Mark to market 14,656 Total 9,226,883
Main additions in the period:
R$ mil Bank / Total Released in Released net of Company Type approved 2017 borrowing costs Interest Utilization Local currency Investment: CPFL Santa Cruz, CPFL Leste FINAME Quarterly Subsidiary's investment 253 253 253 Paulista and CPFL Mococa (a) plan FINAME Quarterly Purchase of machinery CPFL Serviços 2,722 2,722 2,722 (a) and equipment FINEM Subsidiary's investment CPFL Renováveis 764,109 15,257 15,257 Monthly XXVI plan 767,084 18,232 18,232
(a) There is no restrictive financial covenant.
Restrictive covenants The borrowing agreements are subject to certain restrictive covenants, including covenants that require the Company and/or its subsidiaries to maintain certain financial ratios within pre-established parameters. Moreover, these agreements contain restrictive non-financial covenants, which are complied with as per the last measurement period. For the borrowings obtained, or with disbursement of amounts, in 2017, some of them have restrictive covenants related to financial indicators, as follows: CPFL Renováveis - FINEM XXVI • Annual maintenance of the debt service coverage ratio of the indirect subsidiaries belonging to the São Benedito and Campos dos Ventos Complexes and in the consolidated financial statements of the indirect subsidiary Turbina 16, at 1.3 or more; 58 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c The details of the restrictive covenants for the other debts are presented in the financial statements at December 31, 2016. The Management of the Company and its subsidiaries monitors these ratios systematically and constantly to ensure that the covenants are complied with. In the opinion of the Company’s and its subsidiaries’ Management, all restrictive covenants and covenants whose indicators are measured semiannually and annually have been properly complied with, as per the last measurement period, that is, June 30, 2016 and December 31, 2016, respectively.
( 17 ) DEBENTURES AND INTEREST ON DEBENTURES
Consolidated 3/31/2017 12/31/2016 Current Current and and Issue Current Noncurrent Total Current Noncurrent Total noncurrent noncurrent interest interest Parent company Single 5th Issue 40,284 - 620,000 660,284 18,069 - 620,000 638,069 series
CPFL Paulista Single 6th Issue 4,332 - 264,000 268,332 47,079 198,000 462,000 707,079 series Single 7th Issue 9,361 126,250 378,750 514,361 28,913 - 505,000 533,913 series 13,693 126,250 642,750 782,693 75,992 198,000 967,000 1,240,992
CPFL Piratininga Single 6th Issue 722 - 44,000 44,722 7,846 33,000 77,000 117,846 series Single 7th Issue 4,356 58,750 176,250 239,356 13,455 - 235,000 248,455 series 2nd 8th issue 1,350 - 246,000 247,350 - - - - series 8th issue 1st series 135 - 60,072 60,207 - - - - 6,563 58,750 526,322 591,635 21,301 33,000 312,000 366,301
RGE Single 6th Issue 1,561 - 200,000 201,561 35,666 150,000 350,000 535,666 series Single 7th Issue 3,151 42,500 127,500 173,151 9,733 - 170,000 179,733 series 2nd 8th issue 2,128 - 250,000 252,128 - - - - series 8th issue 1st series 459 - 130,327 130,786 - - - - 7,299 42,500 707,827 757,626 45,399 150,000 520,000 715,399
RGE SUL Single 4th Issue 71,471 - 1,100,000 1,171,471 32,058 - 1,100,000 1,132,058 series
CPFL Santa Cruz Single 1st Issue 2,775 32,500 32,500 67,775 550 32,500 32,500 65,550 series
CPFL Brasil Single 3rd Issue 25,989 - 400,000 425,989 11,657 - 400,000 411,657 series
CPFL Geração Single 5th Issue 50,460 546,000 546,000 1,142,460 12,969 546,000 546,000 1,104,969 series Single 6th Issue 5,850 - 460,000 465,850 23,228 - 460,000 483,228 series Single 7th Issue 37,915 - 635,000 672,915 16,379 - 635,000 651,379 series Single 8th Issue 4,691 - 86,393 91,084 3,369 - 85,520 88,889 series Single 9th Issue 1,218 - 50,776 51,993 524 - 50,278 50,802 series 100,133 546,000 1,778,169 2,427,968 56,470 546,000 1,776,798 2,379,268
CPFL Renováveis 1st to 1st Issue - SIIF 12th 2,054 42,703 469,730 514,487 762 41,938 461,314 504,014 series 1st Issue - PCH Single 657 8,701 132,092 141,450 644 8,700 132,091 141,435 Holding 2 series 1st Issue - Single 19,054 43,000 322,500 384,554 6,160 43,000 322,500 371,660 Renováveis series WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c 2nd Issue - Single 421 60,000 210,000 270,421 11,486 30,000 270,000 311,486 Renováveis series 3rd Issue - Single 15,160 - 296,000 311,160 4,444 - 296,000 300,444 Renováveis series 4th Issue - 1st series 344 - 200,000 200,344 7,925 - 200,000 207,925 Renováveis 5th Issue - Single 886 - 100,000 100,886 - - - - Renováveis series Single 1st Issue - DESA 1,066 17,500 - 18,566 425 17,500 - 17,925 series Single 2nd Issue - DESA 32,317 - 65,000 97,317 29,153 - 65,000 94,153 series 1st Issue - Pedra Single 8,925 52,200 - 61,125 6,675 52,200 - 58,875 Cheirosa I series 1st Issue - Pedra Single 8,174 47,800 - 55,974 6,114 47,800 - 53,914 Cheirosa II series 1st Issue - Boa Vista Single 8,550 50,000 - 58,550 6,395 50,000 - 56,395 II series 97,608 321,904 1,795,322 2,214,834 80,183 291,138 1,746,905 2,118,226
Borrowing costs (**) (7,442) (8,637) (56,876) (72,955) (7,346) (8,545) (51,684) (67,575)
358,372 1,119,269 7,546,014 9,023,653 334,333 1,242,095 7,423,519 8,999,946
(*) These debentures can be converted into shares and, therefore, are considered in the calculation of the dilutive effect for the earnings per share (note 24)
(**) In accordance with CPC 38/IAS 39, this refers to borrowing costs directly attributable to the issuance of the respective debts.
59 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c Quantity Annual Annual Issue Amortization conditions Collateral issued remuneration effective rate Parent company 120.65% of 2 annual installments from October No 5th Issue Single series 62,000 114.5% of CDI CDI 2019 guarantee
CPFL Paulista CPFL 6th Issue Single series 660 CDI + 0.8% (2) CDI + 0.87% 3 annual installments from July 2017 Energia guarantee CPFL 4 annual installments from February 7th Issue Single series 50,500 CDI + 0.83% (3) CDI + 0.89% Energia 2018 guarantee
CPFL Piratininga CPFL 6th Issue Single series 110 CDI + 0.8% (2) CDI + 0.91% 3 annual installments from July 2017 Energia guarantee CPFL 4 annual installments from February 7th Issue Single series 23,500 CDI + 0.83% (2) CDI + 0.89% Energia 2018 guarantee CPFL 2 installments in February 2021 and 8th issue 2nd series 246,000 109.5% CDI 109.5% CDI Energia February 2022 guarantee CPFL IPCA + 2 installments in February 2021 and 8th issue 1st series 60,000 IPCA + 5.2901% Energia 5.2901% February 2022 guarantee
RGE CPFL 6th Issue Single series 500 CDI + 0.8% (2) CDI + 0.88% 3 annual installments from July 2017 Energia guarantee CPFL 4 annual installments from February 7th Issue Single series 17,000 CDI + 0.83% (3) CDI + 0.88% Energia 2018 guarantee CPFL 2 installments in February 2021 and 8th issue 2nd series 250,000 111.25% CDI 111.25% CDI Energia February 2022 guarantee CPFL IPCA+ 2 installments in February 2021 and 8th issue 1st series 130,000 IPCA+ 5.3473% Energia 5.3473% February 2022 guarantee
RGE SUL CPFL 120.65% of 2 annual installments from October 4th Issue Single series 110,000 114.50% of CDI Energia CDI 2019 guarantee
CPFL Santa Cruz CPFL 2 annual instalments from June 1st Issue Single series 650 CDI + 1.4% CDI + 1.52% Energia 2017 guarantee
CPFL Brasil CPFL 124.04%% of 2 annual installments from October 3rd Issue Single series 40,000 114.5% of CDI Energia CDI 2019 guarantee
CPFL Geração CPFL 2 annual instalments from June 5th Issue Single series 10,920 CDI + 1.4% CDI + 1.48% Energia 2017 guarantee CPFL 3 annual instalments from August 6th Issue Single series 46,000 CDI + 0.75% (1) CDI + 0.75% Energia 2018 guarantee CPFL 7th Issue Single series 63,500 CDI + 1.06% CDI + 1.11% 1 installment in April 2019 Energia guarantee CPFL 103.33% of 8th Issue Single series 1 IPCA + 5.86% (1) 1 installment in April 2019 Energia CDI guarantee CPFL 101.74% of 9th Issue Single series 50,000 IPCA+ 5.48% 1 installment in October 2021 Energia CDI guarantee
CPFL Renováveis 1st to 12th TJLP + 1% + 39 semi-annual installments from 1st Issue - SIIF 432,299,666 TJLP + 1% Liens series 0.6% 2009 1st Issue - PCH Holding 2 Single series 1,581 CDI + 1.6% CDI + 1.8% WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c 9 annual installments from June CPFL 2015 Renováveis guarantee Assignment of dividends 1st Issue - Renováveis Single series 43,000 CDI + 1.7% CDI + 1.82% Annual installments from May 2015 of BVP and PCH Holding 115.43% of 5 annual instalments from June 2nd Issue - Renováveis Single series 300,000 114.0% of CDI Unsecured CDI 2017 120.64% of 3rd Issue - Renováveis Single series 29,600 117.25% of CDI 1 installment in May 2020 Unsecured CDI CPFL 3 annual installments from 4th Issue - Renováveis 1st series 20,000 126% CDI 134.22% CDI Renováveis September 2019 guarantee Dobrevê secured 138.06% of Principal and interest semi-annual guarantee 5th Issue - Renováveis Single series 100,000 129.5% CDI CDI instalments from June 2018 and letter of guarantee 3 semi-annual installments from May 1st Issue - DESA Single series 20 CDI + 1.75% CDI + 1.75% Unsecured de 2016 3 semi-annual installments from 2nd Issue - DESA Single series 65 CDI + 1.34% CDI + 1.34% Unsecured April de 2018 CPFL 1st Issue - Pedra Cheirosa I Single series 5,220 CDI + 2.85% CDI + 2.85% 1 installment in September 2017 Renováveis guarantee CPFL 1st Issue - Pedra Cheirosa II Single series 4,780 CDI + 2.85% CDI + 2.85% 1 installment in September 2017 Renováveis guarantee CPFL 1st Issue - Boa Vista II Single series 5,000 CDI + 2.85% CDI + 2.85% 1 installment in September 2017 Renováveis guarantee
Borrowing costs (**)
The subsidiaries hold swaps that convert the prefixed component of interest on the operation to interest rate variation in reais, corresponding to: (1) 100.15% to 106.9% of CDI (2) 107% to 107.9% of CDI (3) 108% to 108.1% of CDI
The maturities of the principal of debentures recognized in noncurrent liabilities are as follows:
Maturity Consolidated From 4/1/2018 998,523 2019 3,013,665 2020 1,791,533 2021 861,263 2022 399,898 2023 to 2027 439,253 2028 to 2032 41,879 Total 7,546,014
60 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c Main additions in the period:
R$ thousand Released net of Quantity Released borrowing Company Issue issued in 2017 costs Interest Utilization Semiannual Subsidiary's investment plan, debt CPFL 8th 306,000 306,000 303,059 refinancing Piratininga issue and working capital improvement Semiannual Subsidiary's investment plan, debt 8th RGE 380,000 380,000 376,605 refinancing issue and working capital improvement CPFL Semiannual Subsidiary's Renováveis 5th investment 100,000,000 100,000 97,556 - parent issue plan company 786,000 777,220
RESTRICTIVE COVENANTS The debenture agreements are subject to certain restrictive covenants, including covenants that require the Company and its subsidiaries to maintain certain financial ratios within pre-established parameters. Moreover, these agreements contain restrictive non-financial covenants, which are complied with as per the last measurement period. Debentures issued in 2017 are subject to restrictive covenants, which require from Company or its subsidiaries to maintain financial ratios, as follows:
CPFL Piratininga and RGE Maintenance, by the Company, of the following ratios: • Net indebtedness divided by EBITDA – maximum of 3.75; • EBITDA divided by finance income (costs) - minimum of 2.25; CPFL Renováveis • Real guarantee and surety of Dobrevê Energia S.A.
The Management of the Company and its subsidiaries monitors these ratios systematically and constantly to ensure that the conditions are complied with. In the opinion of the Company’s and its subsidiaries’ Management, all restrictive covenants and covenants whose indicators are measured semiannually and annually have been properly complied with, as per the last measurement period, that is, June 30, 2016 and December 31, 2016, respectively.
( 18 ) PRIVATE PENSION PLAN
The subsidiaries have supplementary retirement and pension plans for their employees, the characteristics of which are described in note 19 to the financial statements for the year ended December 31, 2016.
18.1Movements in the defined benefit plans
The movements in net liability occurred in the period are as follows:
CPFL CPFL CPFL RGE RGE Total Paulista Piratininga Geração Sul Net actuarial liability at December 31, 2016 800,445 139,958 18,954 4,972 74,830 1,039,158 Expenses (income) recognized in the statement of profit or loss 21,125 4,311 517 63 2,815 28,831 Sponsors' contributions transferred during the period (15,822) (4,881) (168) (1,620) (1,736) (24,227) Net actuarial liability at March 31, 2017 805,748 139,388 19,303 3,415 75,909 1,043,762 Other contributions 11,762 160 (10) 57 - 11,969 Total liability 817,510 139,548 19,293 3,472 75,909 1,055,731
Current 44,016 Noncurrent 1,011,715
61 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c The income and expenses recognized as cost of the operation are shown below:
1st quarter 2017 CPFL Paulista CPFL Piratininga CPFL Geração RGE RGE Sul Consolidated Service cost 177 788 18 68 722 1,773 Interest on actuarial obligations 119,153 31,890 2,858 9,349 12,732 175,982 Expected return on plan assets (98,205) (28,367) (2,359) (9,354) (10,639) (148,924) Total expense (income) 21,125 4,311 517 63 2,815 28,831
1st quarter 2016 CPFL Paulista CPFL Piratininga CPFL Geração RGE RGE Sul Consolidated Service cost 190 627 17 5 - 839 Interest on actuarial obligations 114,662 29,260 2,741 8,472 - 155,135 Expected return on plan assets (101,790) (29,223) (2,436) (8,872) - (142,321) Effect of asset ceiling - - - 260 - 260 Total expense (income) 13,062 664 322 (135) - 13,913
The main assumptions considered in the actuarial calculation, based on the actuarial reports prepared as of December 31, 2016 and 2015, were as follows:
CPFL Paulista, CPFL Geração and CPFL Piratininga RGE RGE Sul 12/31/2016 12/31/2015 12/31/2016 12/31/2015 12/31/2016
Nominal discount rate for actuarial liabilities: 10,99% p.a. 12,67% p.a. 10,99% p.a. 12,67% p.a. 10,99% p.a. Nominal return rate on plan assets: 10,99% p.a. 12,67% p.a. 10,99% p.a. 12,67% p.a. 10,99% p.a. Estimated rate of nominal salary increase: 7,00% p.a. 6,79% p.a. 8,15% p.a. 6,79% p.a. 7,29% p.a. Estimated rate of nominal benefits increase: 5,00% p.a. 5,00% p.a. 5,00% p.a. 5,00% p.a. 5,00% p.a. Estimated long-term inflation rate (basis for 5,00% p.a. 5,00% p.a. 5,00% p.a. 5,00% p.a. 5,00% p.a. determining the nominal rates above) General biometric mortality table: AT-2000 (-10) AT-2000 (-10) BR-EMS sb v.2015 AT-2000 (-10) AT-2000 Biometric table for the onset of disability: Low Light Low Light Medium Light Low Light Medium Light Expected turnover rate: ExpR_2012* ExpR_2012* Null ExpR_2012* Null Likelihood of reaching retirement age: 100% when a 100% when a 100% one year after 100% when a 100% one year beneficiary of beneficiary of when a beneficiary beneficiary of after when a the plan first the plan first of the plan first the plan first beneficiary of becomes becomes becomes eligible becomes the plan first eligible eligible eligible becomes eligible (*) FUNCESP experience, with aggravation of 40%
( 19 ) REGULATORY CHARGES
Consolidated 3/31/2017 12/31/2016 Financial components and water resources 995 1,385 Global reversal reserve - RGR 17,469 17,469 ANEEL inspection fee 2,058 2,044 Energy development account - CDE 282,676 309,117 Tariff flags and others 36,575 36,064 Total 339,777 366,078
Energy development account – CDE : refers to the (i) annual CDE quota for the year 2017 in the amount of R$ 138,135 (R$ 164,681 at December 31, 2016); (ii) quota intended for the refund of the amount contributed to the CDE account for the period from January 2013 to January 2014 totaling R$ 44,729 (R$ 44,622 at December 31, 2016); and (iii) quota intended for the refund of the amount contributed to the Regulated Contracting Environment (ACR) account for the period from February to December 2014, in the amount of R$ 99,814 (R$ 99,814 at December 31, 2016). The subsidiaries matched the payables relating to the CDE account with the receivables relating to the Eletrobras account (note 11) in the 1st quarter of 2017, in the amount of R$ 102,641 (R$ 34,481 in the 1st quarter of 2016). 62 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c ( 20 ) TAXES, FEES AND CONTRIBUTIONS
Consolidated 3/31/2017 12/31/2016 Current ICMS (State VAT) 462,689 416,096 PIS (tax on revenue) 31,327 28,759 COFINS (tax on revenue) 138,892 126,939 IRPJ (corporate income tax) 73,447 42,793 CSLL (social contribution on net income) 25,893 14,434 Others 53,433 52,522 Total 785,682 681,544
Noncurrent PIS (tax on revenue) 25,096 26,814
( 21 ) PROVISION FOR TAX, CIVIL AND LABOR RISKS AND ESCROW DEPOSITS
Consolidated 3/31/2017 12/31/2016 Provision for tax, civil and labor risks Escrow deposits Provision for tax, civil and labor risks Escrow deposits
Labor 221,458 113,088 222,001 110,147
Civil 228,972 104,585 236,915 114,214
Tax FINSOCIAL 32,932 92,515 32,372 90,951 Income Tax 145,069 363,987 142,790 150,439 Others 124,748 85,292 113,227 84,091 302,749 541,795 288,389 325,481
Others 84,629 10,178 85,971 229
Total 837,809 769,646 833,276 550,072
The movements in the provision for tax, civil, labor and other risks are shown below: 63 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c Consolidated 12/31/2016 Additions Reversals Payments Inflation adjustment 3/31/2017 Labor 222,001 24,490 (4,972) (28,152) 8,091 221,458 Civil 236,915 21,697 (5,073) (29,759) 5,192 228,972 Tax 288,389 9,121 (1,216) (7) 6,463 302,749 Others 85,971 - (59) (2,750) 1,466 84,629 Total 833,276 55,307 (11,322) (60,668) 21,213 837,809
The provision for tax, civil and labor risks was based on the assessment of the risks of losses on lawsuits to which the Company and its subsidiaries are parties, where the likelihood of loss is probable in the opinion of the outside legal counselors and the Company’s and its subsidiaries’ management. The details of the nature of the provision for tax, civil, labor and other risks and escrow deposits are presented in the Note 22 of the financial statements at December 31, 2016.
Possible losses: The Company and its subsidiaries are involved in other lawsuits and risks for which Management, supported by the opinion of its outside legal counselors, believes that the likelihood of a favorable outcome is possible as there is a solid defense position for these cases and, therefore, no provision was recognized. It is not yet possible to predict the outcome of the courts’ decisions or any other decisions in similar proceedings considered as probable or remote. The claims relating to possible losses at March 31, 2017 and December 31, 2016 were as follows:
Consolidated 3/31/2017 12/31/2016 Main claims
Labor 679,901 668,005 Work-related accidents, hazardous duty premium and overtime Civil 1,104,795 1,004,279 Personal injury, environmental impacts and increase in tariffs Tax 4,694,882 4,611,077 ICMS, FINSOCIAL, PIS and COFINS, and Income tax Regulatory 101,269 93,827 Technical, commercial and economic-financial supervisions Total 6,580,847 6,377,188
Tax – there is a discussion about the deductibility for income tax of the expense recognized in 1997 relating to the commitment assumed in regard to the pension plan of employees of the subsidiary CPFL Paulista with Fundação CESP in the estimated amount of R$ 1,156,907. In January 2016, the Company obtained court decisions that authorized the replacement of the escrow deposits related to these lawsuits with financial guarantees (letter of guarantee and performance bond), for which the withdrawals on behalf of the subsidiary occurred in 2016. There is an appeal by the Office of Attorney- General of the National Treasury in both cases, without suspensive effect, which is pending a decision of the Federal Regional Court. Concurrently, in February 2017, there was a decision for the refund of the amount related to interest incurred on part of the deposits withdrawn. Therefore, the subsidiary made an escrow deposit of R$ 206,874. Regarding the labor risks, as described in note 22 to the financial statements for the year ended December 31, 2016, there is a discussion about the possibility of changing the inflation adjustment index used by the Labor Court, the status of such discussion has been unchanged since then and the risk remains as possible. Based on the opinion of their outside legal counselors, the Company’s and its subsidiaries’ management believes that the amounts provided for reflect the current best estimate.
64 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c ( 22 ) OTHER PAYABLES
Consolidated Current Noncurrent 3/31/2017 12/31/2016 3/31/2017 12/31/2016 Consumers and concessionaires 67,077 73,864 45,038 44,711 Energy efficiency program - PEE 272,493 257,622 64,370 58,798 Research & Development - P&D 97,439 75,655 39,689 55,272 EPE / FNDCT / PROCEL 16,766 12,928 - - Reversion fund - - 17,750 17,750 Advances 204,847 163,054 7,654 8,029 Tariff discounts - CDE 1,346 8,891 - - Provision for environmental costs 13,146 13,703 63,151 61,828 Payroll 18,398 16,951 - - Profit sharing 66,371 56,215 11,400 11,400 Collection agreements 75,687 69,793 - - Guarantees - - 25,993 44,140 Business combination 7,076 9,492 - - Others 51,354 49,455 3,805 7,364 Total 892,000 807,623 278,850 309,292
( 23 ) EQUITY
The shareholders’ interest in the Company’s equity at March 31, 2017 and December 31, 2016 is shown below:
Number of shares 03/31/2017 Shareholders Common shares Interest % State Grid Brazil Power Participações Ltda. 322,078,613 31.64% ESC Energia S.A. 234,086,204 23.00% Members of the Executive Board and Board of Directors 23,750 0.00% Other shareholders 461,726,179 45.36% Total 1,017,914,746 100.00%
Number of shares 12/31/2016 Common shares Interest %
Caixa de Previdência dos Funcionários do Banco do Brasil - Previ 299,787,559 29.45% Camargo Correa S.A. 5,897,311 0.58% ESC Energia S.A. 234,086,204 23.00% Bonaire Participações S.A. 1,249,386 0.12% Energia São Paulo FIA 35,145,643 3.45% Fundação Petrobras de Seguridade Social - Petros 28,056,260 2.76% Fundação Sistel de Seguridade Social 37,070,292 3.64% Fundação Sabesp de Seguridade Social - Sabesprev 696,561 0.07% Fundação CESP 51,048,952 5.02% Members of the Executive Board 34,250 0.00% BNDES Participações S.A. 68,592,097 6.74% Antares Holdings Ltda. 16,967,165 1.67% Brumado Holdings Ltda. 36,497,075 3.59% Other shareholders 202,785,991 19.92% Total 1,017,914,746 100.00%
65 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c On January 23, 2017, the Company received a correspondence from State Grid Brazil Power Participações Ltda. (“State Grid Brazil”) informing that on that date the Share Purchase Agreement dated September 2, 2016 between State Grid Brazil, Camargo Corrêa S.A., Caixa de Previdência dos Funcionários do Banco do Brasil – PREVI, Fundação CESP, Fundação Sistel de Seguridade Social, Fundação Petrobras de Seguridade Social – PETROS, Fundação SABESP de Seguridade Social — SABESPREV, and certain other parties, had been signed. After finalizing the transaction, State Grid Brazil became the parent company of CPFL Energia with 54.64% (556,164,817 shares, direct or indirect) of the Company’s voting and total capital. With the transaction, State Grid Brazil Power Participações Ltda. became the only controlling shareholder of the Company, and the Shareholders’ Agreement dated March 22, 2002 signed among the former shareholders was terminated.
The details of the items included in equity are described in the financial statements for the year ended December 31, 2016.
( 24 ) EARNINGS PER SHARE
Earnings per share – basic and diluted
The calculation of the basic and diluted earnings per share for the quarters ended March 31, 2017 and 2016 was based on the profit attributable to the controlling shareholders and the weighted average number of common shares outstanding during the reporting periods.
1st quarter 2017 1st quarter 2016 Numerator Profit attributable to controlling shareholders 245,886 271,349 Denominator Weighted average number of shares held by shareholders 1,017,914,746 1,017,914,746
Earnings per share - basic 0.24 0.27
For the periods ended March 31, 2017 and 2016, the calculation of the earnings per share was not impacted by the dilutive effects of the debentures convertible into shares and by the share-based payment of the indirect subsidiary CPFL Renováveis and its subsidiaries. 66 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c ( 25 ) NET OPERATING REVENUE
Consolidated Number of Consumers (*) In GWh (*) R$ thousand 1st 1st quarter 1st quarter 1st quarter 1st quarter 1st quarter quarter 2016 2017 2016 2017 2017 Revenue from eletric energy operations 2016 (Restated) Consumer class Residential 8,210,466 6,940,139 5,129 4,265 3,177,388 2,829,092 Industrial 60,822 55,095 3,459 3,067 1,243,388 1,364,141 Commercial 547,263 469,606 2,829 2,455 1,526,521 1,499,215 Rural 355,693 246,192 1,099 512 329,769 187,433 Public administration 61,104 51,450 367 298 200,059 166,726 Public lighting 11,105 10,501 480 422 154,790 150,796 Public services 9,693 8,466 497 455 239,845 235,349 (-) Adjustment of revenues from excess demand and excess reactive power - - - - (24,279) (17,739) Billed 9,256,146 7,781,449 13,860 11,475 6,847,482 6,415,014 Own comsuption 955 - 9 8 - - Unbilled (net) - - - - (25,630) 48,064 Other consumer charges / Emergency charges - - - - - (1) - ECE/EAEE (-) Reclassification to Network Usage Charge - - - - - (2,591,482) (2,383,305) TUSD - Captive Consumers Electricity sales to final consumers 9,257,101 7,781,449 13,869 11,483 4,230,369 4,079,773
Furnas Centrais Elétricas S.A. 746 755 134,600 122,120 Other concessionaires and licensees 3,217 2,551 571,552 470,846 (-) Reclassification to Network Usage Charge - - - (12,476) (13,440) TUSD - Captive Consumers Spot market energy 1,421 549 244,650 155,290 Electricity sales to wholesalers 5,385 3,854 938,326 734,815
Revenue due to Network Usage Charge - TUSD - 2,603,958 2,396,745 Captive Consumers Revenue due to Network Usage Charge - TUSD - 526,309 458,552 Free Consumers (-) Adjustment of revenues from excess demand (6,797) (4,242) and excess reactive power Revenue from construction of concession 416,039 217,134 infrastructure Sector financial asset and liability (Note 8) (565,003) (732,253) Concession financial asset - Adjustment of 48,923 87,380 expected cash flow Energy Development Account (CDE) – Low income, tariff discounts - court 423,974 253,124 injunctions, and other tariff discounts Other revenues and income 114,287 94,618 Other operating revenues 3,561,690 2,771,058 Total gross operating revenue 8,730,385 7,585,647 Deductions from operating revenue ICMS (1,467,326) (1,325,145) PIS (135,803) (119,027) COFINS (625,490) (548,269) ISS (2,922) (2,276) Global reversal reserve - RGR (716) (681) Energy development account - CDE (830,156) (842,417) Research and development and energy efficiency (41,102) (33,179) programs PROINFA (43,905) (20,363) Tariff flags and others (36,603) (350,966) IPI (43) (19) FUST and FUNTEL (11) (8) Others (7,531) (6,527) (3,191,606) (3,248,878)
Net operating revenue 5,538,779 4,336,769 (*) Information not reviewed by the independent auditors
26.1 Adjustment of revenues from excess demand and excess reactive power
The information related to the recognition and historical data are described in note 27.1 to the financial statements for the year ended December 31, 2016.
67 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c 26.2 Periodic tariff review (“RTP”) and Annual tariff adjustment (“RTA”)
2017 2016 Subsidiary Month RTA Effect perceived by consumers (a) RTA / RTP Effect perceived by consumers (a) CPFL Paulista April (b) -0.80% -10.50% 9.89% 7.55% CPFL Piratininga October (c) (c) -12.54% -24.21% RGE June (c) (c) -1.48% -7.51% RGE Sul April (b) -0.20% -6.43% 3.94% -0.34% CPFL Santa Cruz March -2.44% -8.42% 22.51% 7.15% CPFL Leste Paulista March -1.20% -4.15% 21.04% 13.32% CPFL Jaguari March -0.74% -2.56% 29.46% 13.25% CPFL Sul Paulista March -3.12% -10.73% 24.35% 12.82% CPFL Mococa March -0.95% -3.28% 16.57% 9.02%
(a) Represents the average effect perceived by the consumer, as a result of the elimination from the tariff base of financial components that had been added in the prior tariff adjustment (information not reviewed by the independent auditors). (b) As described in note 34.1, in April 2017, the subsidiaries CPFL Paulista and RGE Sul had their tariff adjusted. (c) The respective adjustments for 2017 have not occurred yet.
26.3 Energy Development Account (CDE) – Low income, other tariff subsidies and tariff discounts - injunctions
Law 12,783 from January 11, 2013 determined that the amounts related to low-income subsidies, as well as other tariff discounts, be fully subsidized by amounts from the CDE account. In the 1st quarter of 2017, revenue of R$ 423,974 was recognized (R$ 253,124 in the 1st quarter of 2016), of which (i) R$ 28,034 related to low-income subsidy (R$ 23,710 in the 1st quarter of 2016), (ii) R$ 388,425 related to other tariff discounts (R$ 217,703 in the 1st quarter of 2016) and (iii) R$ 57,514 related to tariff discounts - injunctions. These items were recognized against other receivables, in line item Trade receivables - Eletrobrás (note 11) and other payables in line item Tariff discounts - CDE (note 22).
26.4Tariff flags The system for applying the Tariff Flags is described in note 27.5 to the financial statements for the year ended December 31, 2016. In the 1st quarter of 2017, ANEEL approved the tariff flags billed from December 2016 to January 2017 of the distribution subsidiaries. The amount billed in this period was R$ 23,187, of this amount R$ 17,900 were used to offset part of the sector financial asset and liability (note 8) and R$ 5,287 were passed on to the Centralizing Account for Tariff Flag Resources (CCRBT). R$ 36,490, related to tariff flag billed in February and March 2017 and not yet approved, are recorded in regulatory charges (nota 19).
26.5 Energy development account (“CDE”) ANEEL, by means of Ratifying Resolutions (“RHE”) No. 2,202 of February 7, 2017, amended by RHE No. 2,204 of March 7, 2017, established the definitive annual quotas of CDE for the year 2017. These quotas comprise: (i) annual quota of the CDE – USAGE account; and (ii) quota of the CDE – Energy account, related to part of the CDE contributions received by the electric energy distribution concessionaires in the period from January 2013 to January 2014, which should be charged from consumers and passed on to the CDE Account in up to five from the RTE of 2015. Furthermore, by means of REH No. 2.004 of December 15, 2015, ANEEL established another quota intended for the amortization of the ACR Account, with payment and transfer to the CDE Account for the tariff period from October 2016 to September 2017.
68 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c ( 26 ) COST OF ELECTRIC ENERGY
Consolidated GWh (*) R$ thousand 1st quarter 1st quarter 1st quarter 1st quarter Electricity purchased for resale 2017 2016 2017 2016 Itaipu Binacional 2,908 2,516 557,997 546,652 Spot market energy / PROINFA 962 548 91,725 7,366 Energy purchased through auction in the regulated market and bilateral contracts 15,498 11,864 2,671,971 1,831,475 PIS and COFINS credit - - (303,309) (219,561) Subtotal 19,368 14,927 3,018,384 2,165,933
Electricity network usage charge Basic network charges 247,875 201,489 Transmission from Itaipu 14,893 12,493 Connection charges 30,037 16,407 Charges for use of the distribution system 11,286 9,335 System service charges - ESS (82,663) 126,817 Reserve energy charges - EER - 30,558 PIS and COFINS credit (19,158) (35,010) Subtotal 202,270 362,089
Total 3,220,654 2,528,021
(*) information not reviewed by the independent auditors. 69 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c ( 27 ) OPERATING COSTS AND EXPENSES
Parent company Operating Expenses General and administrative 1st quarter 2017 1st quarter 2016 Personnel 14,112 5,878 Materials 36 26 Third party services 2,158 1,855 Depreciation and amortization 54 46 Others 806 238 Leases and rentals 198 12 Publicity and advertising 209 21 Donations, contributions and subsidies 15 - Others 385 204 Total 17,166 8,044
Consolidated Cost of services Operating Expenses rendered to third General and Cost of operationparties Selling administrative Others Total 1st 1st 1st 1st 1st 1st 1st 1st 1st 1st 1st quarter quarter quarter quarter quarter quarter quarter quarter quarter quarter quarter quarter 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016
Personnel 203,595 156,687 - - 42,524 30,112 86,364 58,169 - - 332,483 244,967 Private pension plans 28,831 13,913 ------28,831 Materials 48,611 36,077 139 127 2,594 1,270 3,751 2,311 - - 55,095 Third party services 67,335 64,656 504 377 43,638 33,444 73,776 50,744 - - 185,253 149,220 Depreciation and amortization 277,980 221,861 - - 1,326 833 25,017 23,387 - - 304,323 246,081 Cost of infrastructure construction - - 414,627 217,035 ------414,627 217,035 Others 43,374 30,859 (3) (2) 59,136 61,699 72,656 70,480 82,877 71,537 258,040 234,572 Collection fees 2,303 - - - 16,518 14,916 - - - - 18,821 Allowance for doubtful debts - - - - 46,696 46,051 - - - - 46,696 Leases and rentals 12,354 8,973 - - 28 - 4,635 4,332 - - 17,017 Publicity and advertising 1 21 - - - 12 2,884 2,340 - - 2,885 Legal, judicial and indemnities ------55,119 59,566 - - 55,119 Donations, contributions and subsidies 25 1 - - 2 - 1,128 8 - - 1,155 (Gain) loss on disposal, retirement and other noncurrent assets 2,944 ------10,823 8,304 13,767 Amortization of concession intangible asset ------72,116 61,887 72,116 Financial compensation for use of water resources 2,265 3,590 ------2,265 Others 23,483 18,275 (3) (2) (4,108) 720 8,890 4,234 (62) 1,345 28,200 Total 669,727 524,053 415,267 217,536 149,218 127,356 261,564 205,091 82,877 71,537 1,578,653 1,145,572
70 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c (Free Translation of the original in Portuguese) Standard Interim Financial Statements – ITR – Date: March 31, 2016 - CPFL Energia S. A
( 28 ) FINANCE INCOME (COSTS)
Parent company Consolidated 1st quarter 2017 1st quarter 2016 1st quarter 2017 1st quarter 2016 (Restated) Finance income Income from financial investments 1,073 5,209 160,204 132,491 Late payment interest and fines 1 1 73,435 57,340 Adjustment for inflation of tax credits 1,198 1,162 2,526 2,509 Adjustment for inflation of escrow deposits 10 10 13,237 8,663 Adjustment for inflation and exchange rate changes 8 - 30,406 54,669 Discount on purchase of ICMS credit - - 2,922 6,625 Adjustments to the sector financial asset (note 8) - - - 49,127 PIS and COFINS on other finance income (305) (478) (14,659) (21,161) Others 3,780 3,257 12,641 22,069 Total 5,764 9,160 280,711 312,332
Finance costs Interest on debts (22,951) (7,174) (485,294) (430,790) Adjustment for inflation and exchange rate changes (23) (11,971) (183,606) (152,761) (-) Capitalized interest - - 24,157 12,794 Adjustments to the sector financial liability (note 8) - - (27,175) (1,775) Use of public asset - - (3,386) (3,892) Others (132) (456) (41,544) (54,935) Total (23,106) (19,601) (716,850) (631,359)
Finance income (cost), net (17,341) (10,440) (436,138) (319,027)
Interest was capitalized at an average rate of 10.63% p.a. during the 1st quarter of 2017 (10.79% p.a. in the 1st quarter of 2016) on qualifying assets, in accordance with CPC 20 (R1) and IAS 23. The line item Adjustment for inflation and exchange rate changes includes the effects of losses on financial instruments amounting to R$ 290,752 in the 1st quarter of 2017 (R$ 477,516 in the 1st quarter of 2016) (note 32).
( 29 ) SEGMENT INFORMATION
The segregation of the Company’s and its subsidiaries operating segments is based on the internal financial information and management structure and is made by type of business: electric energy distribution, electric energy generation (conventional and renewable sources), electric energy commercialization and services rendered activities. Profit or loss, assets and liabilities per segment include items directly attributable to the segment, as well as those that can be allocated on a reasonable basis, if applicable. Prices charged between segments are determined based on similar market transactions. Note 1 presents the subsidiaries according to their areas of operation and provides further information on each subsidiary and its business line and segment.
71 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c (Free Translation of the original in Portuguese) Standard Interim Financial Statements – ITR – Date: March 31, 2016 - CPFL Energia S. A
The information segregated by segment is presented below, according to the criteria established by the Company’s and its subsidiaries officers:
Generation Generation (conventional (renewable Distribution source) source) Commercialization Services Others (*) Elimination Total 1st quarter 2017 Net operating revenue 4,456,742 152,485 253,536 616,809 18,323 40,882 5,538,779 (-) Intersegment revenues 5,610 104,666 133,925 3,733 85,048 2,336 (335,319) - Cost of electric energy (2,713,296) (18,575) (51,191) (437,592) - - (3,220,654) Operating costs and expenses (952,487) (23,597) (78,971) (8,995) (83,169) (54,995) (1,202,214) (-) Intersegment costs and expenses (170,724) (5,036) (20,829) (133,405) (2,552) (2,772) 335,319 - Depreciation and amortization (188,675) (30,665) (150,833) (907) (4,412) (947) (376,439) Income from electric energy service 437,171 179,279 85,637 39,643 13,237 (15,496) 739,472 Share of profit (loss) - 79,709 - - - - 79,709 Finance income 177,342 50,508 38,890 5,046 2,506 6,420 280,711 Finance costs (358,958) (150,573) (162,541) (18,029) (1,153) (25,596) (716,850) Profit (loss) before taxes 255,554 158,924 (38,014) 26,660 14,590 (34,672) 383,043 Income tax and social contribution (105,350) (27,325) (12,146) (9,670) (3,901) 7,469 (150,922) Profit (loss) for the period 150,205 131,599 (50,160) 16,990 10,689 (27,202) 232,121 Total assets (**) 22,731,913 5,053,559 12,449,229 428,915 388,344 680,364 41,732,324 Purchases of PP&E and intangible assets 347,451 286 282,681 119 12,036 556 643,129
1st quarter 2016 Restated (***) Net operating revenue 3,521,319 137,127 224,834 429,632 17,233 6,624 4,336,769 (-) Intersegment revenues 5,565 99,670 66,079 2,038 68,193 1,945 (243,490) - Cost of electric energy (2,135,973) (24,105) (31,370) (336,572) - - (2,528,021) Operating costs and expenses (653,679) (24,347) (73,533) (7,243) (64,902) (13,900) (837,605) (-) Intersegment costs and expenses (146,365) (2,955) (18,294) (71,084) (3,022) (1,770) 243,490 - Depreciation and amortization (139,037) (30,797) (133,297) (969) (3,032) (836) (307,968) Income from electric energy service 451,829 154,592 34,420 15,801 14,471 (7,937) 663,175 Share of profit (loss) - 63,480 - - - - 63,480 Finance income 218,543 44,851 29,880 9,735 2,192 7,131 312,332 Finance costs (309,554) (128,587) (163,959) (6,056) (1,421) (21,781) (631,359) Profit (loss) before taxes 360,818 134,336 (99,660) 19,480 15,241 (22,587) 407,629 Income tax and social contribution (138,797) (24,741) (7,221) (5,724) (4,811) 6,112 (175,182) Profit (loss) for the year 222,021 109,596 (106,881) 13,756 10,430 (16,475) 232,446 Total assets (**) 22,887,781 5,310,924 12,459,791 466,021 345,372 701,103 42,170,992 Purchases of PP&E and other intangible assets 208,070 2,781 227,168 892 6,028 945 445,884
(*) Others – refer basically to assets and transactions that are not related to any of the segments identified. (**) The intangible assets, net of amortization, were allocated to the respective segments. (***) For total assets, the balances refer to December 31, 2016. WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c ( 30 ) RELATED PARTY TRANSACTIONS
The Company’s controlling shareholders are as follows: State Grid Brazil Power Participações Ltda Indirect subsidiary of State Grid Corporation of China, a Chinese state-owned company primarily engaged in developing and operating businesses in the electric energy sector. ESC Energia S.A. Subsidiary of State Grid Brazil Power Participações Ltda. The direct and indirect interests in operating subsidiaries are described in note 1. Controlling shareholders, subsidiaries, associates, joint ventures and entities under common control and that in some way exercise significant influence over the Company and its subsidiaries and associates were considered as related parties. The main natures and transactions are described in note 32 to the financial statements for the year ended December 31, 2016. To ensure that the trading transactions with related parties are conducted under usual market conditions, the Company and its subsidiaries set up a “Related Parties Committee”, comprising representatives of the controlling shareholders, of the Company and an independent member, which analyzes the main transactions with related parties. The total compensation of key management personnel in the 1st quarter of 2017, as required by CVM Resolution 560/2008, was R$ 26,050 (R$ 12,632 in the 1st quarter of 2016). This amount is comprised by R$ 25,750 related to short-term benefits (R$ 11,976 in the 1st quarter of 2016) and R$ 300 to post- employment benefits (R$ 271 in the 1st quarter of 2016), and refers to the amount recognized on the accrual basis.
72 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c (Free Translation of the original in Portuguese) Standard Interim Financial Statements – ITR – Date: March 31, 2016 - CPFL Energia S. A
Transactions between related parties involving controlling shareholders, entities under common control or significant influence and joint ventures are as follows:
Consolidated 3/31/2017 1st quarter 2017 ASSETS LIABILITIES INCOME EXPENSES Advances BAESA – Energética Barra Grande S.A. - 717 - - Foz do Chapecó Energia S.A. - 1,016 - - ENERCAN - Campos Novos Energia S.A. - 1,254 - - EPASA - Centrais Elétricas da Paraiba - 457 - -
Energy purchases and sales, and charges Araraquara Transmissora de Energia S.A. - 26 - 380 Atlantico - Concessionária de Transmissão de Energia Do Brasil S.A - - - 58 Catxere Transmissora de Energia S.A. - 60 - 881 Expansion Transmissão de Energia Eletrica S.A - 4 - 2,742 Expansion Transmissão Itumbiara Marimbondo S.A - 279 - 1,276 Guaraciaba Transmissora de Energia (TP Sul ) S.A - 194 - 1,397 Investico S.A - - - 148 Iracema Transmissora de Energia S.A - 25 - 365 Itumbiara Transmissora de Energia S.A - 232 - 3,214 Linha de Transmissão do Itatim S.A - 53 - 775 Linhas de Transmissão de Montes Claros S.A - 59 - 406 Luziania Niquelandia Transmissora S.A - - - 52 Marechal Rondon Transmissora de Energia S.A - 72 - 805 Matrincha Transmissora de Energia (TP Norte) S.A - 427 - 2,685 Poços de Caldas Transmissora de Energia S.A - 42 - 613 Porto Primavera Transmissora de Energia S.A - 94 - 1,255 Ribeirão Preto Transmissora de Energia S.A - 33 - 478 Serra da Mesa Transmissora de Energia S.A - 135 - 1,942 Serra Paracatu Transmissora de Energia S.A - 39 - 558 BAESA – Energética Barra Grande S.A. - 4,299 - 10,200 Foz do Chapecó Energia S.A. - 36,514 - 92,528 ENERCAN - Campos Novos Energia S.A. 834 50,381 2,174 69,793 EPASA - Centrais Elétricas da Paraiba - 17,479 - 35,447
Intangible assets, property, plant and equipment, materials and services rendered Investico S.A - - - 3,280 BAESA – Energética Barra Grande S.A. 219 - 387 - Foz do Chapecó Energia S.A. 29 - 292 - ENERCAN - Campos Novos Energia S.A. 152 - 410 - EPASA - Centrais Elétricas da Paraíba S.A. 1,653 - 53 -
Intragroup loans EPASA - Centrais Elétricas da Paraíba S.A. - - 327 - Noncontrolling shareholders of CPFL Renováveis 9,236 - 212 -
Dividends and interest on capital BAESA – Energética Barra Grande S.A. 89 - - - Chapecoense Geração S.A. 31,396 - - - ENERCAN - Campos Novos Energia S.A. 40,983 - - -
73 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c (Free Translation of the original in Portuguese) Standard Interim Financial Statements – ITR – Date: March 31, 2016 - CPFL Energia S. A
Consolidated 12/31/2016 1st quarter 2016 ASSETS LIABILITIES INCOME EXPENSES Bank balances and short-term investments Banco do Brasil S.A. 48,985 - 1,877 1
Borrowings (*), Debentures (*) and Derivatives (*) Banco do Brasil S.A. - 4,257,562 960 106,754 Banco BNP Paribas Brasil S.A 5,126 - - 15,633
Other financial transactions Banco do Brasil S.A. - 962 308 1,206
Advances BAESA – Energética Barra Grande S.A. - 726 - - Foz do Chapecó Energia S.A. - 1,025 - - ENERCAN - Campos Novos Energia S.A. - 1,269 - - EPASA - Centrais Elétricas da Paraiba - 462 - -
Energy purchases and sales, and charges Afluente Transmissão de Energia Elétrica S.A. - 53 - 278 Aliança Geração de Energia S.A - 1,183 - 12,756 Arizona 1 Energia Renovável S.A - - - 239 Baguari I Geração de Energia Elétrica S.A. - 6 - 76 BRF Brasil Foods - - 3,258 - Caetite 2 Energia Renovável S.A. - - - 221 Caetité 3 Energia Renovável S.A. - - - 223 Calango 1 Energia Renovável S.A. - - - 267 Calango 2 Energia Renovável S.A. - - - 226 Calango 3 Energia Renovável S.A. - - - 266 Calango 4 Energia Renovável S.A. - - - 247 Calango 5 Energia Renovável S.A. - - - 263 Companhia de Eletricidade do Estado da Bahia – COELBA 743 121 3,177 - Companhia Energética de Pernambuco - CELPE 692 20 1,495 - Companhia Energética do Rio Grande do Norte - COSERN 267 - 428 - Companhia Hidrelétrica Teles Pires S.A. - 1,416 - 13,506 ELEB Equipamentos Ltda - - 797 - Embraer - - 3,165 - Energética Águas da Pedra S.A. - 112 1 1,199 Estaleiro Atlântico Sul S.A. - - 2,034 - Goiás Sul Geração de Enegia S.A. - - - 45 Itapebi Geração de Energia S.A - - 1 - Mel 2 Energia Renovável S.A. - - - 169 NC ENERGIA S.A. 451 2 3,417 - Norte Energia S.A. 1 4,585 - - Rio PCH I S.A. - 209 - 2,279 Samarco Mineração S.A. - - 1 - Santista Jeanswear S/A - - 2,714 - Santista Work Solution S/A - - 342 - SE Narandiba S.A. - 2 - 166 Serra do Facão Energia S.A. - SEFAC - 557 - 5,868 Termopernambuco S.A. - - 3 - ThyssenKrupp Companhia Siderúrgica do Atlântico - - 7,468 1,627 Vale Energia S.A. 8,680 - 25,492 - BAESA – Energética Barra Grande S.A. - 5,642 - 19,098 Foz do Chapecó Energia S.A. - 35,018 - 80,646 ENERCAN - Campos Novos Energia S.A. 387 50,526 1,937 65,321 EPASA - Centrais Elétricas da Paraiba - 12,418 - 22,964
Intangible assets, property, plant and equipment, materials and services rendered Alpargatas S.A. 168 - - - Afluente Transmissão de Energia Elétrica S.A. - - - 1 Brasil veículos Companhia de Seguros - - 1 - Companhia de Saneamento Básico do Estado de São Paulo - SABESP 4 42 153 - Concessionária do Sistema Anhanguera - Bandeirante S.A. 86 - - - Estaleiro Atlântico Sul S.A. - - 1 - Indústrias Romi S.A. 4 - 13 - Logum Logística S.A. 26 - 521 - Tim Celular S.A. 6 89 - - WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c TOTVS S.A. 2 - 8 BAESA – Energética Barra Grande S.A. 56 - 355 - Foz do Chapecó Energia S.A. 104 - 388 - ENERCAN - Campos Novos Energia S.A. 74 - 356 - EPASA - Centrais Elétricas da Paraíba S.A. 1,599 208 -
Intragroup loans EPASA - Centrais Elétricas da Paraíba S.A. 38,078 - 2,827 - Acionistas não controladores da CPFL Renováveis 9,067 - 418 -
Dividends and interest on capital BAESA – Energética Barra Grande S.A. 89 - - - Chapecoense Geração S.A. 29,329 - - - ENERCAN - Campos Novos Energia S.A. 40,983 - - -
(*) The balances include the mark to market adjustments
74 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c (Free Translation of the original in Portuguese) Standard Interim Financial Statements – ITR – Date: March 31, 2016 - CPFL Energia S. A
( 31 ) RISK MANAGEMENT
The risk management structure and the main risk factors that affect the Company’s business are disclosed in note 34 to the financial statements for the year ended December 31, 2016.
( 32 ) FINANCIAL INSTRUMENTS
The main financial instruments, classified in accordance with the Company’s and its subsidiaries accounting practices, are:
Consolidated 3/31/2017 Carrying Note Category Measurement Level (*) amount Fair value Assets Cash and cash equivalents 5 (a) (2) Level 1 3,737,328 3,737,328 Cash and cash equivalents 5 (a) (2) Level 2 1,140,485 1,140,485 Securities (a) (2) Level 1 549 549 Derivatives 32 (a) (2) Level 2 564,864 564,864 Derivatives - Zero-cost collar 32 (a) (2) Level 3 72,888 72,888 Concession financial asset - Distribution 10 (b) (2) Level 3 5,391,425 5,391,425 10,907,539 10,907,539
Liabilities Borrowings - Principal and interest 16 (c) (1) Level 2 (***) 7,298,183 6,619,219 Borrowings - Principal and interest 16 (a) (2) Level 2 (**) 5,008,146 5,008,146 Debentures - Principal and interest 17 (c) (1) Level 2 (***) 9,023,653 8,954,578 Derivatives 32 (a) (2) Level 2 173,406 173,406 21,503,388 20,755,349 (*) Refers to the hierarchy for fair value measurement (**) As a result of the initial designation of this financial liability, the consolidated balances reported a loss of R$ 55,887 in the first quarter of 2017 (a loss of R$ 108,897 in the first quarter 2016). (***) Only for disclosure purposes, in accordance with CPC 40 (R1) / IFRS 7
Key Category: Measurement: (a) - Measured at fair value through profit or loss (1) - Measured at amortized cost (b) - Available for sale (2) - Mensured at fair value (c) - Other financial liabilities
The financial instruments for which the carrying amounts approximate the fair values, due to their nature, at the end of the reporting period are: Financial assets: (i) consumers, concessionaires and licensees, (ii) leases, (iii) associates, subsidiaries and parent company, (iv) receivables – Eletrobras, (v) concession financial asset – transmission companies, (vi) pledges, funds and restricted deposits, (vii) services rendered to third parties, (viii) collection agreements and (ix) sector financial asset; Financial liabilities: (i) trade payables, (ii) regulatory charges, (iii) use of public asset, (iv) consumers and concessionaires, (v) FNDCT/EPE/PROCEL, (vi) collection agreement, (vii) reversal fund, (viii) payables for business combination, (ix) tariff discounts – CDE and (x) sector financial liability. In addition, in the 1st quarter of 2017 there were no transfers between the fair value hierarchy levels. a) Measurement of financial instruments As mentioned in note 4, the fair value of a security corresponds to its maturity value (redemption value) adjusted to present value by the discount factor (relating to the maturity date of the security) obtained from the market interest curve, in Brazilian reais. CPC 40 (R1) and IFRS 7 require the classification into a three-level hierarchy for fair value measurement of financial instruments, based on observable and unobservable inputs related to the measurement of a financial instrument at the measurement date. CPC 40 (R1) and IFRS 7 also define observable inputs as market data obtained from independent sources and unobservable inputs as those that reflect market assumptions. 75 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c (Free Translation of the original in Portuguese) Standard Interim Financial Statements – ITR – Date: March 31, 2016 - CPFL Energia S. A
The three levels of the fair value hierarchy are: Level 1: Quoted prices in an active market for identical instruments; Level 2: Observable inputs other than quoted prices in an active market that are observable for the asset or liability, directly (i.e. as prices) or indirectly (i.e. derived from prices); Level 3: Instruments whose relevant factors are not observable market inputs.
As the distribution concessionaries classified the respective concession financial assets as available-for-sale, the relevant factors for fair value measurement are not publicly observable. Therefore, the fair value hierarchy classification is level 3. The movements and respective gains (losses) in profit for or loss for the 1st quarter of 2017 are R$ 48,923 (R$ 87,380 in the 1st quarter of 2016) and the main assumptions are described in note 10. Additionally, the main assumptions used in the fair value measurement of the zero-cost collar derivative, the fair value hierarchy of which is Level 3, are disclosed in note 32 b.1. The Company recognizes in the consolidated, in “Investments at cost”, the 5.94% interest held by the indirect subsidiary Paulista Lajeado Energia S.A. in the total capital of Investco S.A., comprising 28,154,140 common shares and 18,593,070 preferred shares. As this company does not have shares listed on the stock exchange and considering that the main objective of its operations is to generate electric energy that will be traded by the shareholders holding the concession, the Company elected to recognize the investment at cost. b) Derivatives The Company and its subsidiaries have the policy of using derivatives to hedge against the risks of fluctuations in exchange and interest rates, without any speculative purposes. The Company and its subsidiaries have currency hedges in a volume compatible with the net exchange exposure, including all assets and liabilities tied to exchange rate changes. The hedging instruments entered into by the Company and its subsidiaries are currency or interest rate swaps with no leverage component, margin call requirements or daily or periodic adjustments. Furthermore, in 2015 the subsidiary CPFL Geração contracted a zero-cost collar derivative (see item b.1 below). As a large part of the derivatives entered into by the subsidiaries have their terms fully aligned with the hedged debts, and in order to obtain more relevant and consistent accounting information through the recognition of income and expenses, these debts were designated for the accounting recognition at fair value (note 16). Other debts that have terms different from the derivatives contracted as a hedge continue to be recognized at amortized cost. Furthermore, the Company and its subsidiaries do not adopt hedge accounting for transactions with derivative instruments.
At March 31, 2017, the Company and its subsidiaries had the following swap transactions, all traded on the over-the-counter market:
76 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c (Free Translation of the original in Portuguese) Standard Interim Financial Statements – ITR – Date: March 31, 2016 - CPFL Energia S. A
Fair values (carrying amounts) Gain (loss) Fair Values on Currecy / Maturity Assets Liabilities value, at cost, marking index range net net to Company / strategy / counterparts market Derivatives to hedge debts designated at fair value Exchange rate hedge CPFL Paulista Bank of Tokyo-Mitsubishi 38,449 - 38,449 38,216 233 dollar 03/2019 Bank of America Merrill Lynch 36,610 - 36,610 34,433 2,177 dollar 09/2018 Bank of America Merrill Lynch 41,475 - 41,475 39,462 2,013 dollar 03/2019 J.P.Morgan 20,737 - 20,737 19,731 1,006 dollar 03/2019 J.P.Morgan 9,431 - 9,431 9,368 62 dollar 12/2017 J.P.Morgan 7,978 - 7,978 7,909 69 dollar 12/2017 J.P.Morgan 3,628 - 3,628 3,553 76 dollar 01/2018 Bradesco 7,598 - 7,598 7,150 448 dollar 01/2018 Bradesco 32,872 - 32,872 31,069 1,804 dollar 01/2018 J.P.Morgan 9,112 - 9,112 8,792 320 dollar 01/2018 J.P.Morgan 9,578 - 9,578 9,200 378 dollar 01/2019 BNP Paribas 2,485 - 2,485 1,814 672 euro 01/2018 Bank of Tokyo-Mitsubishi 10,227 - 10,227 12,027 (1,800) dollar 02/2020 J.P.Morgan 5,342 - 5,342 5,290 52 dollar 02/2018 Bank of America Merrill Lynch 63,054 - 63,054 58,712 4,342 dollar 02/2018 Bank of America Merrill Lynch - (21,401) (21,401) (24,126) 2,725 dollar 10/2018 Bradesco - (5,999) (5,999) (7,475) 1,476 dollar 05/2021 Bank of America Merrill Lynch - (5,487) (5,487) (7,453) 1,965 dollar 05/2021 Citibank - (11,284) (11,284) (14,921) 3,637 dollar 05/2021 298,575 (44,171) 254,404 232,749 21,655
CPFL Piratininga Citibank 39,325 - 39,325 38,184 1,141 dollar 03/2019 Bradesco 22,825 - 22,825 21,997 829 dollar 04/2018 J.P.Morgan 22,838 - 22,838 22,000 839 dollar 04/2018 Citibank 24,361 - 24,361 22,748 1,613 dollar 01/2020 BNP Paribas 6,835 - 6,835 4,988 1,847 euro 01/2018 Scotiabank - (4,623) (4,623) (4,690) 66 dollar 08/2017 Bradesco - (5,999) (5,999) (7,475) 1,476 dollar 05/2021 Bank of America Merrill Lynch - (8,075) (8,075) (11,174) 3,099 dollar 05/2021 Citibank - (8,504) (8,504) (11,192) 2,688 dollar 05/2021 116,185 (27,201) 88,983 75,387 13,596
CPFL Geração Bradesco - - - - - dollar 03/2017 Votorantim - (8,162) (8,162) (11,228) 3,066 dollar 06/2019 Scotiabank - (8,322) (8,322) (8,537) 215 dollar 07/2019 Bradesco - (424) (424) (1,503) 1,079 dollar 09/2019 Citibank - (21,641) (21,641) (23,781) 2,141 dollar 09/2020 Scotiabank - (23,858) (23,858) (23,397) (461) dollar 12/2019 - (62,407) (62,407) (68,446) 6,040
RGE Bank of Tokyo-Mitsubishi 19,525 - 19,525 19,329 196 dollar 04/2018 Bank of Tokyo-Mitsubishi 87,486 - 87,486 86,466 1,020 dollar 05/2018 Bradesco 9,452 - 9,452 9,218 234 dollar 10/2017 J.P.Morgan 17,043 - 17,043 16,104 939 dollar 02/2018 Bradesco - (5,999) (5,999) (7,475) 1,476 dollar 05/2021 Bank of America Merrill Lynch - (10,662) (10,662) (14,894) 4,232 dollar 05/2021 Citibank - (5,725) (5,725) (7,463) 1,738 dollar 05/2021 133,506 (22,386) 111,120 101,285 9,835 CPFL Jaguari Scotiabank - (1,171) (1,171) (1,202) 31 dollar 07/2019
CPFL Sul Paulista Scotiabank - (1,171) (1,171) (1,202) 31 dollar 07/2019
CPFL Leste Paulista Scotiabank - (1,171) (1,171) (1,202) 31 dollar 07/2019 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c CPFL Santa Cruz Scotiabank - (1,171) (1,171) (1,202) 31 dollar 07/2019
CPFL Paulista Lajeado Itaú - (1,537) (1,015) (1,138) 123 dollar 03/2018
CPFL Brasil Itaú - (3,628) (3,628) (3,821) 193 dollar 08/2018
Subtotal (a) 548,265 (166,014) 382,774 331,207 51,567
Derivatives to hedge debts not designated at fair value Exchange rate hedge CPFL Geração J.P.Morgan - (4,662) (4,662) (4,834) 172 dollar 12/2018
Price index hedge CPFL Geração Santander 5,808 - 5,808 5,849 (42) IPCA 04/2019 J.P.Morgan 6,582 - 6,582 5,849 732 IPCA 04/2019 12,389 - 12,389 11,699 691
Interest rate hedge (1) CPFL Paulista Bank of America Merrill Lynch - - - - - CDI 07/2019 J.P.Morgan 455 - 455 (51) 506 CDI 02/2021 Votorantim 165 - 165 (16) 181 CDI 02/2021 Santander 175 - 175 (17) 192 CDI 02/2021 795 - 795 (84) 878 CPFL Piratininga J.P.Morgan - - - - - CDI 07/2019 Votorantim 255 - 255 (19) 274 CDI 02/2021 Santander 195 - 195 (14) 209 CDI 02/2021 450 - 450 (32) 483
RGE Bradesco - - - - - CDI 07/2019 Votorantim 243 - 243 (30) 273 CDI 02/2021 243 - 243 (30) 273 CPFL Geração Votorantim 2,721 (2,730) (9) (12) 2 CDI 08/2020
Subtotal (b) 16,598 (7,392) 9,206 6,707 2,499
Other derivatives (2) CPFL Geração Itaú 25,457 - 25,457 - 25,457 dollar 09/2020 Votorantim 21,219 - 21,219 - 21,219 dollar 09/2020 Santander 26,212 - 26,212 - 26,212 dollar 09/2020 Subtotal (c) 72,888 - 72,888 - 72,888
Total (a+b+c) 637,752 (173,406) 464,868 337,914 126,955
Current 197,741 (7,581) Noncurrent 440,011 (165,825)
For further details on terms and information on debts and debentures, see notes 16 and 17 (1) The interest rate hedge swaps have half-yearly validity, so the notional value reduces according to the amortization of the debt. (2) Due to the characteristics of this derivative (zero-cost collar), the notional amount is presented in U.S. dollar
77 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c (Free Translation of the original in Portuguese) Standard Interim Financial Statements – ITR – Date: March 31, 2016 - CPFL Energia S. A
As mentioned above, certain subsidiaries elected to mark to market debts for which they have fully tied derivative instruments (note 16). The Company and its subsidiaries have recognized gains and losses on their derivatives. However, as these derivatives are used as a hedging instrument, these gains and losses minimized the impacts of fluctuations in exchange and interest rates on the hedged debts. For the quarters ended March 31, 2017 and 2016, the derivatives generated the following impacts on the consolidated profit or loss, recognized in the line item of Finance costs on adjustment for inflation and exchange rate changes:
Gain (Loss) Company Hedged risk / transaction 1st quarter 2017 1st quarter 2016 CPFL Energia Exchange rate changes - (41,090) CPFL Energia Mark to market - 1,778 CPFL Paulista Interest rate changes (157) 770 CPFL Paulista Exchange rate changes (152,589) (298,086) CPFL Paulista Mark to market 12,818 49,051 CPFL Piratininga Interest rate changes (65) (57) CPFL Piratininga Exchange rate changes (57,615) (119,524) CPFL Piratininga Mark to market 5,315 16,678 RGE Interest rate changes (33) 447 RGE Exchange rate changes (48,474) (88,105) RGE Mark to market 4,702 22,202 CPFL Geração Interest rate changes (217) 1,083 CPFL Geração Exchange rate changes (63,822) (37,693) CPFL Geração Mark to market 18,947 33,654 CPFL Santa Cruz Exchange rate changes (1,102) (3,089) CPFL Santa Cruz Mark to market 111 131 CPFL Leste Paulista Exchange rate changes (1,102) - CPFL Leste Paulista Mark to market 111 - CPFL Sul Paulista Exchange rate changes (1,102) (3,397) CPFL Sul Paulista Mark to market 111 144 CPFL Jaguari Exchange rate changes (1,102) (4,787) CPFL Jaguari Mark to market 111 203 Paulista Lajeado Energia Exchange rate changes (2,405) (4,177) Paulista Lajeado Energia Mark to market (374) 1,101 CPFL Brasil Exchange rate changes (3,007) (5,149) CPFL Brasil Mark to market 188 1,585 CPFL Serviços Exchange rate changes - (1,348) CPFL Serviços Mark to market - 157 (290,752) (477,516)
b.1) Zero-cost collar derivative transactions entered into by CPFL Geração
In 2015, the subsidiary CPFL Geração entered into a transaction involving put options and call options in US$, both having the same institution as counterpart, and that combined are featured as a transaction usually known as zero-cost collar. Entering into this transaction does not have any speculative purpose, inasmuch as it is aimed at minimizing any negative impacts on future revenue of the joint venture ENERCAN, which has electric energy sale agreements with annual adjustment of part of the tariff based on the dollar variation. In addition, according to Management’s view, the scenario in 2015 was favorable to enter into this type of financial instrument, considering the high volatility implicit in dollar options and the fact that there is no initial cost for this type of transaction. The total amount contracted was US$ 111,817, with due dates between October 1, 2015 and September 30, 2020. At March 31, 2017, the total amount contracted was US$ 91,308, considering the options already settled until this date. The strike prices of the dollar options vary from R$ 4.20 to R$ 4.40 for put options and from R$ 5.40 to R$7.50 for call options. 78 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c (Free Translation of the original in Portuguese) Standard Interim Financial Statements – ITR – Date: March 31, 2016 - CPFL Energia S. A
These options were measured at fair value in a recurring manner, as required by IAS 39/CPC 38. The fair value of the options that are part of this transaction was calculated based on the following assumptions:
Valuation technique(s) and key information We used the Black Scholes Option Pricing Model, which aims to obtain the fair price of the options involving the following variables: value of the asset, strike price of the option, interest rate, term and volatility. Significant unobservable inputs Volatility determined based on the average market pricing calculations, future dollar and other variables applicable to this specific transaction, with average variation of 20.9%.
Relationship between unobservable inputs and fair A slight rise in long-term volatility, analyzed separately, would result in an insignificant increase value (sensitivity) in fair value. If the volatility were 10% higher and all the other variables remained constant, the net carrying amount (asset) would increase by R$ 836, resulting in a net asset of R$ 73,724.
The following table reconciles the opening and closing balances of the call and put options for the 1st quarter of 2017, as required by IFRS 13/CPC 46:
Consolidated Assets Liabilities Net At December 31, 2016 57,715 - 57,715 Fair value measurement 15,173 - 15,173 At March 31, 2017 72,888 - 72,888
The fair value measurement of these financial instruments was recognized as finance income in the statement of profit or loss for the period, and no effects were recognized in other comprehensive income. c) Sensitivity analysis
In compliance with CVM Instruction No. 475/2008, the Company and its subsidiaries performed sensitivity analyses of the main risks to which their financial instruments (including derivatives) are exposed, mainly comprising changes in exchange and interest rates. When the risk exposure is considered asset, the risk to be taken into account is a reduction in the pegged indexes, due to a consequent negative impact on the Company’s and its subsidiaries’ profit or loss. Similarly, if the risk exposure is considered liability, the risk is of an increase in the pegged indexes and the consequent negative effect on the profit or loss. The Company and its subsidiaries therefore quantify the risks in terms of the net exposure of the variables (dollar, euro, CDI, IGP-M, IPCA, TJLP and SELIC), as shown below:
79 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c (Free Translation of the original in Portuguese) Standard Interim Financial Statements – ITR – Date: March 31, 2016 - CPFL Energia S. A
c.1) Changes in exchange rates
Considering that the net exchange rate exposure at March 31, 2017 is maintained, the simulation of the effects by type of financial instrument for three different scenarios would be:
Consolidated Decrease (increase) Exposure R$ Currency Currency Currency thousand depreciation appreciation appreciation Instruments (a) Risk (b) of 25% (c) of 50% (c) Financial liability instruments (4,813,771) (346,163) 943,821 2,233,804 Derivatives - Plain Vanilla Swap 4,904,865 352,713 (961,681) (2,276,076) 91,094 dollar deprec. 6,550 (17,860) (42,272)
Financial liability instruments (252,504) (21,904) 46,698 115,300 Derivatives - Plain Vanilla Swap 255,806 22,191 (47,308) (116,808) 3,302 dollar deprec. 287 (610) (1,508)
Total 94,396 6,837 (18,470) (43,780)
Decrease (increase) Exposure R$ Currency Currency Currency thousand depreciation appreciation appreciation Instrumentos (a) Risk (b) of 25% (c) of 50% (c) Derivativos zero-cost collar 86,313 (d) dollar apprec. (80,760) (109,745) (138,730)
(a) The exchange rate considered at 3/31/2017 was R$ 3.12 per US$ 1.00 and R$ 3.35 per € 1.00. (b) As per the exchange rate curves obtained from information made available by the BM&FBOVESPA, with the exchange rate being considered at R$ 3.35 and R$ 3.64, and the currency depreciation at 7.19% and 8.67%, for US$ and €, respectively. (c) As required by CVM Instruction No. 475/2008, the percentage increases in the ratios applied refer to the information made available by the BM&FBOVESPA. (d) Owing to the characteristics of this derivative (zero-cost collar), the notional amount is presented in US$.
As the net exchange exposure of the dollar and euro is an asset, the risk is a drop in the dollar and euro, therefore, the exchange rate is appreciated by 25% and 50% in relation to the probable exchange rate.
c.2) Changes in interest rates
Assuming that: (i) the scenario of net exposure of the financial instruments indexed to floating interest rates at March 31, 2017 is maintained, and (ii) the respective annual indexes accumulated in the last 12 months, for this base date, remain stable (CDI 12.13% p.a.; IGP-M 4.89% p.a.; TJLP 7.50% p.a.; IPCA 4.57% p.a. and SELIC 13.86% p.a.), the effects that would be recognized in the consolidated interim financial information for the next 12 months would be a net finance cost of R$ 1,494,253 (costs of CDI R$ 1,145,441, IGP-M R$ 3,237, TJLP R$ 335,929, and SELIC R$ 238,429, and finance income of IPCA R$ 228,783). In the event of fluctuations in the indexes according to the three scenarios defined, the amount of the net finance cost would be impacted by: 80 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c (Free Translation of the original in Portuguese) Standard Interim Financial Statements – ITR – Date: March 31, 2016 - CPFL Energia S. A
Consolidated Decrease (increase) Scenario I Raising/Drop index by 25% Raising/Drop index by 50% Instruments Exposure Risk (a) (b) (b) Financial asset instruments 5,602,842 (149,036) (16,388) 116,259 Financial liability instruments (10,180,431) 270,799 29,778 (211,244) Derivatives - Plain Vanilla Swap (4,861,785) 129,323 14,221 (100,882) (9,439,374) CDI apprec. 251,086 27,611 (195,867)
Financial liability instruments (66,206) 1,364 895 427 (66,206) IGP-M apprec. 1,364 895 427
Financial liability instruments (4,479,057) 22,395 (55,988) (134,372) (4,479,057) TJLP apprec. 22,395 (55,988) (134,372)
Financial liability instruments (334,071) 1,269 4,769 8,268 Derivatives - Plain Vanilla Swap 92,573 (352) (1,321) (2,291) Concession financial asset 5,247,689 (19,941) (74,911) (129,880) 5,006,191 IPCA deprec. (19,024) (71,463) (123,903)
Financial liability instruments (194,814) 8,143 3,429 (1,286) Sector financial asset and liability (1,525,455) 63,764 26,848 (10,068) (1,720,269) SELIC apprec. 71,907 30,277 (11,354)
Total (10,698,715) 327,728 (68,668) (465,069)
(a) The CDI, IGP-M, TJLP, IPCA and SELIC indexes considered of: 9.47%, 2.83%, 7.00%, 4.19% and 9.68%, respectively, were obtained from information available in the market. (b) As required by CVM Instruction 475/08, the p (c) ercentages of increase or decrease were applied to the indexes in scenario I.
( 33 ) NON-CASH TRANSACTIONS
Consolidated 3/31/2017 3/31/2016 Other transactions Interest capitalized in property, plant and equipment 19,503 10,528 Interest capitalized in concession intangible asset - distribution infraestruture 4,654 2,266 Transfers between property, plant and equipment and other assets 1,102 -
( 34 ) SIGNIFICANT FACT AND EVENTS AFTER THE REPORTING PERIOD
34.1Annual Tariff Adjustment - CPFL Paulista and RGE Sul On April 4, 2017, ANEEL published Ratifying Resolution No. 2,217, which set the average tariff adjustment of the subsidiary CPFL Paulista, effective as of April 8, 2017, by -0.80%, of which +2.13% relating to the economic tariff adjustment and -2.93% to the related financial components. The total average effect to be perceived by consumers is -10.50%.
On April 13, 2017, ANEEL published Ratifying Resolution No. 2,218, which set the average tariff adjustment of the subsidiary RGE Sul, effective as of April 18, 2017, by -0.20%, of which +2.95% relating to the economic tariff adjustment and -3.15% to the related financial components. The total average effect to be perceived by consumers is -6.43%.
34.2Public Offering of Shares As presented in the note 38.5 of financial statements at December 31, 2016, State Grid Brazil Power Participações will conduct a public offer for acquisition of all the common shares held by the remaining shareholders of CPFL (“Offer for Sale of Control”) an has also the intention of:
81 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c (Free Translation of the original in Portuguese) Standard Interim Financial Statements – ITR – Date: March 31, 2016 - CPFL Energia S. A
conduct a unified public offer for acquisition of Company common shares aimed to cancel its listing as publicly-traded company with the CVM under the category “A” and its conversion to category “B” (“Offer for Conversion of Listing”) and withdraw the Company from the Special Listing Segment of BM&FBOVESPA named Novo Mercado (“Offer for Withdrawal from Novo Mercado) ; (i) the deposit agreement relating to the American depositary of the Company’s shares to be terminated, (ii) the Company to withdraw from the NYSE, and (iii) the Company’s listing as publicly-traded company in the United States to be canceled. At March 27, 2017, the Company’s extraordinary general meeting decided on the (i) selection of Credit Suisse (Brasil) S.A. for determining the Company’s economic value; (ii) cancelation of the Company’s listing with CVM as issuer of securities registered under the category “A”, and their conversion into category “B”; and (iii) Company’s withdrawal from the Novo Mercado .
State Grid Brazil filled with CVM in February 22, 2017 requiring authorization for a Public Tender Offer for acquisition of CPFL Energia’s shares. Such request is currently under analysis by CVM.
34.3Adjustment for refunding the Reserve Energy Charge ("EER") of Angra III ANEEL approved through REH No. 2,214 of March 28, 2017 the republication of the tariffs for the distribution subsidiaries, with the purpose of refunding the amount forecast for the Reserve Energy Charge (EER) of the energy generation company UTN Almirante Alvaro Alberto - Unit III (Angra III). The tariffs resulting from this decision will be effective only in April 2017, however, as the reading period of each consuming unit does not coincide with the calendar month, this reduction will occur in the revenue amounts for April and May 2017, with its impact diluted between the two periods. The average effect perceived by consumers will be: -15.28% for CPFL Paulista, -6.8% for CPFL Piratininga, -10.89% for RGE, -13.76% for RGE Sul, -13.41% for CPFL Santa Cruz, -16.49% for CPFL Jaguari, -14.81% for CPFL Leste Paulista, -14.71% for CPFL Mococa, and -14.29% for CPFL Sul Paulista. The estimated impact of this adjustment is an average reduction of -12.85% in revenues of distribution subsidiaries in April 2017.
82 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c (Free Translation of the original in Portuguese) Standard Interim Financial Statements – ITR – Date: March 31, 2016 - CPFL Energia S. A
OTHER RELEVANT INFORMATION
Shareholders of CPFL Energia S/A holding more than 5% of the shares of the same type and class, as of March 31, 2017:
Shareholders Common shares Interest - % ESC Energia S.A. 322,078,613 31.64 State Grid Brazil Power Participações Ltda. 234,086,204 23.00 Caixa de Previdência dos Funcionários do Banco do Brasil - Previ 98,589,229 9.69 BNDES Participações S.A. 68,592,097 6.74 Brumado Holdings Ltda. (*) 36,497,075 3.59 Antares Holdings Ltda. (*) 16,967,165 1.67 Other shareholders 241,104,363 23.69 Total 1,017,914,746 100.00
(*) Entities fully controlled by Bradespar S.A., which indirectly holds 5.25% of total shares common shares of CPFL Energia.
Quantity and characteristic of securities held by directly or indirectly Controlling Shareholders, Executive Officers, Board of Directors, Fiscal Council and Free Float, as of March 31, 2017 and December 31, 2016:
March 31, 2017 December 31, 2016 Shareholders Common shares Interest - % Common shares Interest - % Controlling shareholders 556,164,817 54.64 693,038,168 68.08 Administrator - - - - Members of the Executive Officers 23,750 0.00 34,250 0.00 Members of the Board of Directors - - - - Fiscal Council Members - - - - Other shareholders 461,726,179 45.36 324,842,328 31.91 Total 1,017,914,746 100.00 1,017,914,746 100.00 Outstanding shares - free float 461,726,179 45.36 324,842,328 31.91
83 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c (Free Translation of the original in Portuguese) Standard Interim Financial Statements – ITR – Date: March 31, 2016 - CPFL Energia S. A
SHAREHOLDING STRUCTURE 1st quarter of 2017 Date of last CPFL ENERGIA S/A Per units shares change 1 - SHAREHOLDERS OF THE Quotes/common Preferred # CNPJ or CPF % % Total % % Total TOTAL % Total COMPANY shares shares Controlling shareholders 556,164,817 54.64% 100.00% - 0.00% 0.00% 556,164,817 54.64% January 23, 1.1 Esc Energia S.A. 15.146.011/0001-51 234,086,204 23.00% 100.00% - 0.00% 0.00% 234,086,204 23.00% 2017 State Grid Brazil Power January 23, 1.2 26.002.119/0001-97 322,078,613 31.64% 100.00% - 0.00% 0.00% 322,078,613 31.64% Participações Ltda. 2017 Noncontrolling shareholders 461,749,929 45.36% 100.00% - 0.00% 0.00% 461,749,929 45.36% Caixa de Previdência dos January 23, 1.3 Funcionários do Banco do Brasil - 33.754.482/0001-24 98,589,229 9.69% 100.00% - 0.00% 0.00% 98,589,229 9.69% 2017 Previ 1.4 BNDES Participações S.A. 00.383.281/0001-09 68,592,097 6.74% 100.00% - 0.00% 0.00% 68,592,097 6.74% April 29, 2016 1.5 Brumado Holdings Ltda. 08.397.763/0001-20 36,497,075 3.59% 100.00% - 0.00% 0.00% 36,497,075 3.59% April 29, 2016 1.6 Antares Holdings Ltda. 07.341.926/001-90 16,967,165 1.67% 100.00% - 0.00% 0.00% 16,967,165 1.67% April 29, 2016 1.7 Board of Directors - 0.00% 0.00% - 0.00% 0.00% - 0.00% April 29, 2016 1.8 Executive Officers 23,750 0.00% 100.00% - 0.00% 0.00% 23,750 0.00% July 31, 2016 1.9 Other shareholders 241,080,613 23.68% 100.00% - 0.00% 0.00% 241,080,613 23.68% Total 1,017,914,746 100.00% 100.00% - 0.00% 0.00% 1,017,914,746 100.00% Quotes/common Preferred 2 - Entity: 1.1 Esc Energia S.A. CNPJ or CPF % % Total % % Total TOTAL % Total shares shares Controlling shareholders 1,042,392,615 100.00% 100.00% - 0.00% 0.00% 1,042,392,615 100.00% State Grid Brazil Power January 23, 1.1.1 26.002.119/0001-97 1,042,392,615 100.00% 100.00% - 0.00% 0.00% 1,042,392,615 100.00% Participações Ltda. 2017 Noncontrolling shareholders - 0.00% 0.00% - 0.00% 0.00% - 0.00% 1.1.2 Other shareholders - 0.00% 0.00% - 0.00% 0.00% - 0.00% Total 1,042,392,615 100.00% 100.00% - 0.00% 0.00% 1,042,392,615 100.00% 3 - Entity: 1.5 Brumado Holdings Quotes/common Preferred CNPJ or CPF % % Total % % Total TOTAL % Total Ltda. shares shares Controlling shareholders 983,227,791 100.00% 100.00% - 0.00% 0.00% 983,227,791 100.00% September 1.5.1 Antares Holdings Ltda. 07.341.926/0001-90 983,227,791 100.00% 100.00% - 0.00% 0.00% 983,227,791 100.00% 30, 2015 Noncontrolling shareholders 1 0.00% 100.00% - 0.00% 0.00% 1 0.00% 1.5.2 Other shareholders 1 0.00% 100.00% - 0.00% 0.00% 1 0.00% Total 983,227,792 100.00% 100.00% - 0.00% 0.00% 983,227,792 100.00% 4 - Entity: 1.6 Antares Holdings Quotes/common Preferred CNPJ or CPF % % Total % % Total TOTAL % Total Ltda. shares shares Controlling shareholders 326,999,999 100.00% 100.00% - 0.00% 0.00% 326,999,999 100.00% September 1.6.1 Bradespar S.A. 03.847.461/0001-92 326,999,999 100.00% 100.00% - 0.00% 0.00% 326,999,999 100.00% 30, 2015 Noncontrolling shareholders 1 0.00% 100.00% - 0.00% 0.00% 1 0.00% 1.6.2 Other shareholders 1 0.00% 100.00% - 0.00% 0.00% 1 0.00% Total 327,000,000 100.00% 100.00% - 0.00% 0.00% 327,000,000 100.00%
The Company is committed to arbitration in the Market Arbitration Chamber, in accordance with the Arbitration Clause in Article 44 of the Company’s By- Laws.
84 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c (Free Translation of the original in Portuguese) Standard Interim Financial Statements – ITR – Date: March 31, 2016 - CPFL Energia S. A
INDEPENDENT AUDITORS' REPORT
KPMG Auditores Independentes Av. Barão de Itapura, 950 - 6º andar 13020-431 - Campinas/SP - Brasil Caixa Postal 737 - CEP 13012-970 - Campinas/SP - Brasil Phone +55 (19) 2129-8700, Fax +55 (19) 2129-8728 www.kpmg.com.br
Independent Auditors’ Report on Review of Interim Financial Information
To the Shareholders and Directors of CPFL Energia S.A. Campinas - SP
Introduction We have reviewed the interim financial information, individual and consolidated, of CPFL Energia S.A. (“the Company”), included on Quarterly Information Form (Formulário de Informações Trimestrais – ITR), for the quarter ended March 31, 2017, which comprises the statement of financial position as of March 31, 2017 and the statements of profit or loss, other comprehensive income, changes in equity and cash flows for the three month period then ended, comprising the explanatory notes. Management is responsible for the preparation of the interim financial information in accordance with CPC 21(R1) Technical Pronouncement – Interim Financial Information and international standard IAS 34 - Interim Financial Reporting, issued by International Accounting Standards Board - IASB, and for presentation of this interim financial information in accordance with the rules issued by Brazilian Securities and Exchange Commission (CVM) applicable to the preparation of the interim financial information. Our responsibility is to express a conclusion on this interim financial information based on our review.
Scope of review We conducted our review in accordance with the Brazilian and international standard on interim review (NBC TR 2410 - Revisão de Informações Intermediárias Executada pelo Auditor da Entidade and ISRE 2410 - Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively). A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with auditing standards and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion Based on our review, nothing has come to our attention that causes us to believe that the accompanying individual and consolidated interim financial information referred above is not prepared, in all material respects, in accordance with CPC 21(R1) and the IAS 34, issued by IASB, applicable to the preparation of the Quarterly Information and presented in accordance with the rules issued by Brazilian Securities and Exchange Commission (CVM).
85 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c (Free Translation of the original in Portuguese) Standard Interim Financial Statements – ITR – Date: March 31, 2016 - CPFL Energia S. A
Other matters – Statements of Value Added The individual and consolidated interim financial information, related to statements of value added (Demonstração do Valor Adicionado – DVA) for the three month period ended March 31, 2017, prepared under the responsibility of the Company's management, and presented as supplementary information for the purposes of IAS 34, were submitted to the same review procedures followed together with the review of the Company's interim financial information. In order to form our opinion, we evaluated whether these statements are reconciled to the interim financial information and to the accounting records, as applicable, and whether their form and content are in accordance with the criteria set on Technical Pronouncement CPC 09 - Statement of Value Added. Based on our review, nothing has come to our attention that causes us to believe that the accompanying statements of value added are not prepared, in all material respects, in accordance with the individual and consolidated interim financial information taken as a whole.
Other matter relating to corresponding information The corresponding figures related to individual and consolidated financial position for the year ended December 31, 2016, were previously audited by another auditor that issued an unmodified report on March 13, 2017. The individual and consolidated information of profit or loss, other comprehensive income, changes in equity and cash flows for the three month period ended March 31, 2016, disclosed for comparative purpose and restated due to the matters described on Note 2.8, were also reviewed by another auditor who expressed an unmodified report on May 4, 2017. The corresponding amounts related to the individual and consolidated statements of value added (DVA) for the three month period ended March 31, 2016 were submitted to the same review procedures by those auditors, and based on their review, nothing has come to their attention that causes them to believe that the DVA has not been prepared, in all material respects, in accordance with the individual and consolidated interim financial information taken as a whole.
Campinas, May 4, 2017
KPMG Auditores Independentes CRC (Regional Accounting Council) 2SP014428/O-6
Original report in Portuguese signed by Marcio José dos Santos Accountant CRC 1SP252906/O-0
86 WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: May 4, 2017
CPFL ENERGIA S.A.
By: / S/ GUSTAVO ESTRELLA Name: Gustavo Estrella Title: Chief Financial Officer and Head of Investor Relations
FORWARD-LOOKING STATEMENTS
This press release may contain forward-looking statements. These statements are statements that are not historical facts, and are based on management's current view and estimates of future economic circumstances, industry conditions, company performance and financial results. The words "anticipates", "believes", "estimates", "expects", "plans" and similar expressions, as they relate to the company, are intended to identify forward-looking statements. Statements regarding the declaration or payment of dividends, the implementation of principal operating and financing strategies and capital expenditure plans, the direction of future operations and the factors or trends affecting financial condition, liquidity or results of operations are examples of forward-looking statements. Such statements reflect the current views of management and are subject to a number of risks and uncertainties. There is no guarantee that the expected events, trends or results will actually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations. WorldReginfo - 0cf5f186-c9f3-4a9e-b392-06006ed5607c