6-K 1 cplpr1q19_6k.htm CPLPR1Q19_6K cplpr1q19_6k.htm - Generated by SEC Publisher for SEC Filing  
 
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, 2019
Commission File Number 32297


 
CPFL Energy Incorporated
(Translation of Registrant's name into English)

 
Rodovia Engenheiro Miguel Noel Nascentes Burnier, km 2,5, parte
CEP 13088-140 - Parque São Quirino, Campinas - 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-_________________

.


 

 

Campinas, May 7, 2019 – CPFL Energia S.A. (B3: CPFE3 and NYSE: CPL), announces its 1Q19 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 1Q18, unless otherwise stated.

 

 

CPFL ENERGIA ANNOUNCES ITS 1Q19 RESULTS

 

Indicators (R$ Million)

1Q19

1Q18

Var.

Sales within the Concession Area - GWh

          17,731

          17,185

3.2%

Captive Market

          12,407

          11,983

3.5%

Free Client

            5,323

            5,201

2.3%

Gross Operating Revenue

          10,788

            9,637

11.9%

Net Operating Revenue

            7,127

            6,375

11.8%

EBITDA(1)

            1,531

            1,366

12.1%

Net Income

               570

               419

36.0%

Investments(2)

               445

               426

4.6%

 

 

 

 

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 investments related to the transmission segment; according to the requirements of IFRIC 15, it was recorded as “Contractual Asset of Transmission Companies” (in other credits). Does not include special obligations.

 

1Q19 HIGHLIGHTS

 

      Increase of 3.2% in sales within the concession area, highlighting the growths of the residential (+8.4%) and commercial (+5.1%) classes;

      EBITDA of R$ 1,531 million, growth of 12.1%;

      Net Income of R$ 570 million, growth of 36.0%;

      Net debt of R$ 14.9 billion and leverage of 2.70x Net Debt/EBITDA;

      Investments of R$ 445 million;

      CPFL Paulista’s tariff adjustment, in Apr-19: (i) increase of 9.63% of the parcel B, from R$ 2,310 million to R$ 2,532 million, and (ii) average effect of +8.66% to be perceived by the consumers.

 

 


 
 

 

1Q19 Results | May 7, 2019

 

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  6 
2.1.3) Free Clients  7 
2.2) Generation Installed Capacity  7 
 
3) INFORMATION ON INTEREST IN COMPANIES AND CRITERIA OF FINANCIAL STATEMENTS   
CONSOLIDATION  8 
3.1) Consolidation of CPFL Renováveis Financial Statements  10 
3.2) Consolidation of RGE Sul Financial Statements  10 
3.3) Economic-Financial Performance Presentation  10 
3.4) Consolidation of Transmission Companies  10 
 
4) ECONOMIC-FINANCIAL PERFORMANCE  11 
4.1) Opening of economic-financial performance by business segment  11 
4.2) Sectoral Financial Assets and Liabilities  12 
4.3) Operating Revenue  12 
4.4) Cost of Electric Energy  13 
4.5) Operating Costs and Expenses  14 
4.6) EBITDA  15 
4.7) Financial Result  16 
4.8) Net Income  17 
 
5) INDEBTEDNESS  18 
5.1) Debt (IFRS)  18 
5.1.1) Debt Amortization Schedule in IFRS (Mar-19)  19 
5.2) Debt in Financial Covenants Criteria  20 
5.2.1) Indexation and Debt Cost in Financial Covenants Criteria  20 
5.2.2) Net Debt in Financial Covenants Criteria and Leverage  21 
 
6) INVESTMENTS  21 
6.1) Actual Investments  21 
6.2) Investments Forecasts  22 
 
7) ALLOCATION OF RESULTS  23 
 
8) STOCK MARKETS  23 
8.1) Stock Performance  23 
8.2) Daily Average Volume  24 
 
9) CORPORATE GOVERNANCE  25 
 
10) SHAREHOLDERS STRUCTURE  26 
 
11) PERFORMANCE OF THE BUSINESS SEGMENTS  27 
11.1) Distribution Segment  27 
11.1.1) Economic-Financial Performance  27 
11.1.1.1) Sectoral Financial Assets and Liabilities  27 
11.1.1.2) Operating Revenue  28 
11.1.1.3) Cost of Electric Energy  29 
11.1.1.4) Operating Costs and Expenses  30 
11.1.1.5) EBITDA  32 

 

Page 2 de 57


 
 

 

1Q19 Results | May 7, 2019

 

11.1.1.6) Financial Result  32 
11.1.1.7) Net Income  33 
11.1.2) Tariff Events  33 
11.1.3) Operating Performance of Distribution  35 
11.2) Commercialization and Services Segments  36 
11.2.1) Commercialization Segment  36 
11.2.2) Services Segment  37 
11.3) Conventional Generation Segment  38 
11.3.1) Economic-Financial Performance  38 
11.3.1.1) Operating Revenue  38 
11.3.1.2) Cost of Electric Power  38 
11.3.1.3) Operating Costs and Expenses  39 
11.3.1.4) Equity Income  40 
11.3.1.5) EBITDA  41 
11.3.1.6) Financial Result  41 
11.3.1.7) Net Income  42 
11.4) CPFL Renováveis  42 
11.4.1) Economic-Financial Performance  42 
11.4.1.1) Operating Revenue  43 
11.4.1.2) Cost of Electric Power  43 
11.4.1.3) Operating Costs and Expenses  43 
11.4.1.4) EBITDA  44 
11.4.1.5) Financial Result  45 
11.4.1.6) Net Income  45 
11.4.2) Status of Generation Projects 100% Participation  45 
 
12) ATTACHMENTS  47 
12.1) Statement of Assets CPFL Energia  47 
12.2) Statement of Liabilities CPFL Energia  48 
12.3) Income Statement CPFL Energia  49 
12.4) Cash Flow CPFL Energia  50 
12.5) Income Statement Conventional Generation Segment  51 
12.6) Income Statement CPFL Renováveis  52 
12.7) Income Statement Distribution Segment  53 
12.8) Economic-Financial Performance by Distributor  54 
12.9) Sales within the Concession Area by Distributor (In GWh)  55 
12.10) Sales to the Captive Market by Distributor (in GWh)  56 
12.11) Reconciliation of Net Debt/EBITDA Pro Forma ratio of CPFL Energia for purposes of financial   
covenants calculation  57 

 

 

Page 3 de 57


 
 

 

1Q19 Results | May 7, 2019

 

1) MESSAGE FROM THE CEO

The results from CPFL Group in the first quarter of 2019 reflected the growth of energy sales, as well as our discipline in cost and expense management.

The distribution segment had an increase in energy sales (+3.2%) in 1Q19. Residential and commercial classes registered market variations of +8.4% and +5.1%, respectively, reflecting the increase in temperature, mainly in the first two months of 2019. The industrial class registered market variation of -0.9%, still reflecting the slow recovery of economy activity.

CPFL group’s operating cash generation, measured by EBITDA, reached R$ 1,531 million in 1Q19 (+12.1%). We highlight the distribution segment, whose EBITDA reached R$ 980 million in 1Q19 (+23.6%), mainly reflecting the results coming from the conclusion of the tariff revision process (4th cycle) of CPFL Paulista, RGE Sul (both in April 2018) and RGE (in June 2018).

We continue working on value initiatives and in our investment plan (around R$ 11.9 billion for the next five years, being R$ 2.2 billion for 2019), with financial discipline, efforts and commitment of our teams. We invested R$ 445 million in 1Q19.

CPFL Energia’s capital structure and consolidated leverage remained at adequate levels. The Company’s net debt reached 2.70 times EBITDA at the end of the quarter, under the criteria to measure our financial covenants, lower than in the previous quarter.

Finally, CPFL’s management remains optimistic about the advances of the Brazilian electricity sector and remains confident in its business platform, which is increasingly prepared and well positioned to face the challenges and opportunities in the country.

 

Gustavo Estrella

CEO of CPFL Energia

 

Page 4 de 57


 
 

 

1Q19 Results | May 7, 2019

 

2) ENERGY SALES

2.1) Sales within the Distributors’ Concession Area

Sales within the Concession Area - GWh

 

1Q19

1Q18

Var.

Captive Market

    12,407

    11,983

3.5%

Free Client

      5,323

      5,201

2.3%

Total

    17,731

    17,185

3.2%

 

In 1Q19, sales within the concession area, achieved by the distribution segment, totaled 17,731 GWh, an increase of 3.2%. Sales to the captive market totaled 12,407 GWh in 1Q19, an increase of 3.5%. 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 5,323 GWh in 1Q19, an increase of 2.3%.

Sales within the Concession Area - GWh

 

1Q19

1Q18

Var.

Part.

Residential

      5,604

      5,172

8.4%

31.6%

Industrial

      5,943

      5,994

-0.9%

33.5%

Commercial

      3,094

      2,945

5.1%

17.5%

Others

      3,090

      3,074

0.5%

17.4%

Total

    17,731

    17,185

3.2%

100.0%

 

Note: The tables with sales within the concession area by distributor are attached to this report in item 12.9.

 

Noteworthy in 1Q19, in the concession area:

·        Residential and Commercial classes (31.6% and 17.5% of total sales, respectively): increases of 8.4% and 5.1%, respectively. Highlights for residential class of CPFL Piratininga (+8.9%), RGE (+8.6%) and CPFL Santa Cruz (+9.4%). Highlights for commercial class of CPFL Paulista (+5.7%), CPFL Piratininga (+7.0%) and CPFL Santa Cruz (+9.0%). This result was due to the increase in temperature, mainly in the first two months of 2019.

·        Industrial class (33.5% of total sales): reduction of 0.9%, reflecting the low economic activity.

 

Page 5 de 57


 
 

 

1Q19 Results | May 7, 2019

 

2.1.1) Sales by Segment – Concession Area

Note: in parentheses, the variation in percentage points from 1Q18 to 1Q19.

 

2.1.2) Sales to the Captive Market

Sales to the Captive Market - GWh

 

1Q19

1Q18

Var.

Residential

      5,604

      5,172

8.4%

Industrial

      1,402

      1,504

-6.8%

Commercial

      2,398

      2,323

3.2%

Others

      3,004

      2,984

0.7%

Total

    12,407

    11,983

3.5%

 

Note: The tables with captive market sales by distributor are attached to this report in item 12.10.

Sales to the captive market totaled 12,407 GWh in 1Q19, an increase of 3.5% (424 GWh), mainly due to the performance of the residential class (+8.4%); the performance of industrial (-6.8%) and commercial (+3.2%) classes, reflects the migration of customers to the free market.

 

 

Page 6 de 57


 
 

 

1Q19 Results | May 7, 2019

 

2.1.3) Free Clients

Free Client - GWh

 

1Q19

1Q18

Var.

Industrial

      4,541

      4,490

1.1%

Commercial

         697

         622

12.0%

Others

           86

           90

-4.2%

Total

      5,323

      5,201

2.3%

 

Free Client by Distributor - GWh

 

1Q19

1Q18

Var.

CPFL Paulista

      2,515

      2,434

3.3%

CPFL Piratininga

      1,479

      1,529

-3.3%

RGE

      1,152

      1,093

5.4%

CPFL Santa Cruz

         177

         145

21.9%

Total

      5,323

      5,201

2.3%

 

 

2.2) Generation Installed Capacity

In 1Q19, the Generation installed capacity of CPFL Energia group, considering the proportional stake in each project, is of 3,272 MW.

 

Generation Installed Capacity

Total: 3,272 MW

Note: Take into account CPFL Energia’s 51.56% stake in CPFL Renováveis.

 

Page 7 de 57


 
 

 

1Q19 Results | May 7, 2019

 

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, 2019 and 2019, 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.

Energy distribution

Company Type

Equity Interest

Location (State)

Number of municipalities

Approximate number of consumers
 (in thousands)

Concession term

End of the concession

 Companhia Paulista de Força e Luz ("CPFL Paulista")

Publicly-quoted corporation

Direct
100%

Countryside of São Paulo

234

4,516

 30 years

  November 2027

 Companhia Piratininga de Força e Luz ("CPFL Piratininga")

Publicly-quoted corporation

Direct
100%

Countryside and seaside of São Paulo

27

1,760

 30 years

  October 2028

RGE Sul Distribuidora de Energia S.A. ("RGE") (a)

Publicly-quoted corporation

Direct and Indirect
100%

Countryside of Rio Grande do Sul

381

2,888

 30 years

  November 2027

Companhia Jaguari de Energia ("CPFL Santa Cruz")

Private corporation

Direct
100%

Countryside of São Paulo, Paraná and Minas Gerais

45

458

30 years

 July 2045

 

Note:

(a)    On December 31, 2018, was approved the grouping of the concessions of the distribution companies RGE Sul Distribuidora de Energia S.A. (“RGE Sul”)  and Rio Grande Energia S.A. (“RGE”), considering RGE Sul as the Merging Company and RGE as the Merged Company;

Energy generation  (conventional and renewable sources)

Company Type

Equity Interest

Location (State)

Number of plants / type of energy

Installed capacity

Total

CPFL participation

CPFL Geração de Energia S.A. ("CPFL Geração")

Publicly-quoted corporation

Direct
100%

 São Paulo and Goiás

 3 Hydroelectric (b)

1,295

678

CERAN - Companhia Energética Rio das Antas ("CERAN")

Private corporation

Indirect
65%

Rio Grande do Sul

 3 Hydroelectric

360

234

Foz do Chapecó Energia S.A. ("Foz do Chapecó")

Private corporation

Indirect
51% (c)

Santa Catarina and
Rio Grande do Sul

 1 Hydroelectric

855

436

Campos Novos Energia S.A. ("ENERCAN")

Private corporation

Indirect
48.72%

Santa Catarina

 1 Hydroelectric

880

429

BAESA - Energética Barra Grande S.A. ("BAESA")

Publicly-quoted corporation

Indirect
25.01%

Santa Catarina and
Rio Grande do Sul

 1 Hydroelectric

690

173

Centrais Elétricas da Paraíba S.A. ("EPASA")

Private corporation

Indirect
53.34%

Paraíba

 2 Thermoelectric

342

182

Paulista Lajeado Energia S.A. ("Paulista Lajeado")

Private corporation

Indirect
59.93% (d)

Tocantins

 1 Hydroelectric

903

38

CPFL Energias Renováveis S.A. ("CPFL Renováveis")

Publicly-quoted corporation

Indirect
51.56%

See chapter 11.4.2

See chapter 11.4.2

See chapter 11.4.2

See chapter 11.4.2

CPFL Centrais Geradoras Ltda. ("CPFL Centrais Geradoras")

Limited company

Direct
100%

São Paulo and Minas Gerais

6 MHPPs

4

4

Transmission

Company Type

Core activity

Equity Interest

CPFL Transmissão Piracicaba S.A. ("CPFL Piracicaba")

Privately-held corporation

Electric energy transmission services

Indirect 100%

CPFL Transmissão Morro Agudo S.A. ("CPFL Morro Agudo")

Privately-held corporation

Electric energy transmission services

Indirect 100%

CPFL Transmissão Maracanaú S.A. ("CPFL Maracanaú")

Privately-held corporation

Electric energy transmission services

Indirect 100%

CPFL Transmissão Sul I S.A. ("CPFL Sul I")

Privately-held corporation

Electric energy transmission services

Indirect 100%

CPFL Transmissão Sul II S.A. ("CPFL Sul II")

Privately-held corporation

Electric energy transmission services

Indirect 100%

Notes:

(b)    CPFL Geração holds 51.54% of the assured power and power of the Serra da Mesa HPP, whose concession belongs to Furnas. The Cariobinha HPP and the Carioba TPP projects are deactivated pending the position of the Ministry of Mines and Energy on the anticipated closure of its concession and are not included in the table;

(c)     The joint venture Chapecoense fully consolidates the interim financial statements of its direct subsidiary, Foz de Chapecó;

(d)    Paulista Lajeado has a 7% participation in the installed power of Investco S.A. (5.94% share of its capital).

Page 8 de 57


 
 

 

1Q19 Results | May 7, 2019

 

Energy commercialization

Company Type

Core activity

Equity Interest

CPFL Comercialização Brasil S.A. ("CPFL Brasil")

Private corporation

 Energy commercialization

Direct
100%

Clion Assessoria e Comercialização de Energia Elétrica Ltda. ("CPFL Meridional")

Limited company

 Commercialization and provision of energy services

Indirect
100%

CPFL Comercialização Cone Sul S.A. ("CPFL Cone Sul")

Private corporation

 Energy commercialization

Indirect
100%

CPFL Planalto Ltda. ("CPFL Planalto")

Limited company

 Energy commercialization

Direct
100%

CPFL Brasil Varejista S.A. ("CPFL Brasil Varejista")

Private corporation

 Energy commercialization

Indirect
100%

 

Services

Company Type

Core activity

Equity Interest

CPFL Serviços, Equipamentos, Industria e Comércio S.A. ("CPFL Serviços")

Private corporation

 Manufacturing, commercialization, rental and maintenance of electro-mechanical equipment and service provision

Direct
100%

NECT Serviços Administrativos Ltda. ("Nect")

Limited company

Provision of administrative services

Direct
100%

CPFL Atende Centro de Contatos e Atendimento Ltda.  ("CPFL Atende")

Limited company

 Provision of telephone answering services

Direct
100%

CPFL Total Serviços Administrativos Ltda. ("CPFL Total")

Limited company

 Billing and collection services

Direct
100%

CPFL Eficiência Energética S.A. ("CPFL Eficiência")

Private corporation

 Management in Energy Efficiency

Direct
100%

TI Nect Serviços de Informática Ltda. ("Authi")

Limited company

IT services

Direct
100%

CPFL GD S.A. ("CPFL GD")

Private corporation

 Electric energy generation services

Indirect
100%

 

Others

Company Type

Core activity

Equity Interest

CPFL Jaguari de Geração de Energia Ltda. ("Jaguari Geração")

Limited company

 Venture capital company

Direct
100%

Chapecoense Geração S.A. ("Chapecoense")

Private corporation

 Venture capital company

Indirect
 51%

Sul Geradora Participações S.A. ("Sul Geradora")

Private corporation

 Venture capital company

Indirect
99.95%

CPFL Telecom S.A. ("CPFL Telecom")

Private corporation

 Telecommunication services

Direct
100%

 

Page 9 de 57


 
 

 

1Q19 Results | May 7, 2019

 

3.1) Consolidation of CPFL Renováveis Financial Statements

On March 31, 2019, CPFL Energia indirectly held 51.56% 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, 2019, CPFL Energia held the following stake in the capital stock of RGE Sul: 89.0107%, directly, and 10.9893%, indirectly, through CPFL Brasil. RGE Sul has been fully consolidated (100%, line by line), in CPFL Energia’s financial statements since November 1st, 2016.

 

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 12.11 of this report.

 

3.4) Consolidation of Transmission Companies

As of 4Q17, the subsidiaries CPFL Transmissão Piracicaba and CPFL Transmissão Morro Agudo are consolidated in the financial statements of the segment "Conventional Generation".

Page 10 de 57


 
 

 

1Q19 Results | May 7, 2019

 

4) ECONOMIC-FINANCIAL PERFORMANCE

Consolidated Income Statement - CPFL ENERGIA (R$ Million)

 

1Q19

1Q18

Var.

Gross Operating Revenue

10,788

   9,637

11.9%

Net Operating Revenue

   7,127

   6,375

11.8%

Cost of Electric Power

(4,484)

(4,014)

11.7%

Operating Costs & Expenses

(1,603)

(1,470)

9.0%

EBIT

   1,041

  891

16.9%

EBITDA1

   1,531

   1,366

12.1%

Financial Income (Expense)

(220)

(308)

-28.4%

Income Before Taxes

  906

  668

35.6%

Net Income

  570

  419

36.0%

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)

 

 

Distribution

 

Conventional Generation

 

Renewable Generation

 

Commerciali-zation

 

Services

 

Others

 

Eliminations

 

Total

1Q19

Net operating revenue

 

  5,936

 

  269

 

  334

 

  760

 

  146

 

-  

 

(318)

 

  7,127

Operating costs and expenses

 

(4,957)

 

   (51)

 

(142)

 

(730)

 

(110)

 

   (11)

 

  318

 

(5,682)

Depreciation e amortization

 

(192)

 

   (30)

 

(161)

 

(1)

 

(6)

 

   (16)

 

-  

 

(404)

  Income from electric energy service

 

  788

 

  188

 

31

 

30

 

30

 

   (27)

 

-  

 

  1,041

Equity accounting

 

-  

 

86

 

-  

 

-  

 

-  

 

-  

 

-  

 

86

  EBITDA

 

  980

 

  304

 

  192

 

31

 

36

 

   (11)

 

-  

 

  1,531

Financial result

 

   (60)

 

   (44)

 

(112)

 

(8)

 

   0

 

   3

 

-  

 

(220)

Income (loss) before taxes

 

  728

 

  230

 

   (80)

 

22

 

30

 

   (24)

 

-  

 

  906

Income tax and social contribution

 

(263)

 

   (46)

 

   (13)

 

(8)

 

(7)

 

   0

 

-  

 

(336)

  Net income (loss)

 

  465

 

  184

 

   (93)

 

15

 

23

 

   (24)

 

-  

 

  570

                                 
                                 

1Q18

Net operating revenue

 

  5,201

 

  281

 

  384

 

  710

 

  112

 

-  

 

(313)

 

  6,375

Operating costs and expenses

 

(4,408)

 

   (42)

 

(156)

 

(702)

 

   (89)

 

(9)

 

  313

 

(5,094)

Depreciation e amortization

 

(181)

 

   (30)

 

(158)

 

(1)

 

(6)

 

   (16)

 

-  

 

(390)

  Income from electric energy service

 

  612

 

  210

 

70

 

   7

 

17

 

   (25)

 

-  

 

  891

Equity accounting

 

-  

 

85

 

-  

 

-  

 

-  

 

-  

 

-  

 

85

  EBITDA

 

  792

 

  325

 

  228

 

   8

 

23

 

(9)

 

-  

 

  1,366

Financial result

 

(105)

 

   (68)

 

(129)

 

(7)

 

(0)

 

   2

 

-  

 

(308)

Income (loss) before taxes

 

  507

 

  227

 

   (59)

 

(0)

 

17

 

   (23)

 

-  

 

  668

Income tax and social contribution

 

(187)

 

   (45)

 

   (13)

 

(0)

 

(4)

 

   0

 

-  

 

(249)

  Net income (loss)

 

  321

 

  182

 

   (73)

 

(0)

 

13

 

   (23)

 

-  

 

  419

                                 

Variation

Net operating revenue

 

14.1%

 

-4.3%

 

-12.9%

 

7.1%

 

30.4%

 

-

 

1.8%

 

11.8%

Operating costs and expenses

 

12.4%

 

23.2%

 

-8.7%

 

3.9%

 

23.3%

 

15.8%

 

1.8%

 

11.6%

Depreciation e amortization

 

6.4%

 

-1.5%

 

1.8%

 

-15.1%

 

7.2%

 

0.0%

 

-

 

3.7%

  Income from electric energy service

 

28.7%

 

-10.1%

 

-55.1%

 

321.5%

 

75.1%

 

5.9%

 

-

 

16.9%

Equity accounting

 

-

 

0.5%

 

-

 

-

 

-

 

-

 

-

 

0.5%

  EBITDA

 

23.6%

 

-6.5%

 

-15.7%

 

295.0%

 

58.5%

 

15.8%

 

-

 

12.1%

Financial result

 

-43.1%

 

-35.1%

 

-13.5%

 

5.9%

 

-

 

42.2%

 

-

 

-28.4%

Income (loss) before taxes

 

43.6%

 

1.3%

 

35.7%

 

-

 

80.0%

 

3.1%

 

-

 

35.6%

Income tax and social contribution

 

40.9%

 

1.1%

 

-4.7%

 

2480.8%

 

86.2%

 

-79.3%

 

-

 

35.0%

  Net income (loss)

 

45.1%

 

1.4%

 

28.3%

 

-

 

78.1%

 

4.1%

 

-

 

36.0%

Page 11 de 57


 
 

 

1Q19 Results | May 7, 2019

 

 

Note: an analysis of the economic-financial performance by business segment is presented in chapter 11.

4.2) Sectoral Financial Assets and Liabilities

In 1Q19, it was accounted the total sectoral financial liabilities in the amount of R$ 324 million, compared to the total sectoral financial assets in the amount of R$ 374 million in 1Q18, a variation of R$ 697 million.

On March 31, 2019, the balance of these sectoral financial assets and liabilities was positive in R$ 1,212 million, compared to a positive balance of R$ 1,508 million on December 31, 2018 and a positive balance of R$ 596 million on March 31, 2018.

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.

 

4.3) Operating Revenue

In 1Q19, gross operating revenue reached R$ 10,788 million, representing an increase of 11.9% (R$ 1,150 million). Deductions from the gross operating revenue was of R$ 3,660 million in 1Q19, representing an increase of 12.2% (R$ 397 million). Net operating revenue reached R$ 7,127 million in 1Q19, registering an increase of 11.8% (R$ 753 million).

The main factors that affected the net operating revenue were:

·      Increase of revenues in the Distribution segment, in the amount of R$ 735 million (for more details, see item 11.1.1.2);

·      Increase of revenues in the Commercialization segment, in the amount of R$ 50 million;

·      Increase of revenues in the Services segment, in the amount of R$ 34 million;

Partially offset by:

·      Reduction of revenues in the Renewable Generation segment, in the amount of R$ 49 million;

·      Reduction of revenues in the Conventional Generation segment, in the amount of R$ 12 million;

·      Reduction of R$ 6 million, due to eliminations.

Page 12 de 57


 
 

 

1Q19 Results | May 7, 2019

 

 

4.4) Cost of Electric Energy

Cost of Electric Energy (R$ Million)

 

1Q19

1Q18

Var.

Cost of Electric Power Purchased for Resale

     

Energy from Itaipu Binacional

   657

   558

17.7%

PROINFA

   105

  86

22.1%

Energy Purchased through Auction in the Regulated Environment, Bilateral Contracts and Energy Purchased in the Spot Market

   3,572

   2,975

20.1%

PIS and COFINS Tax Credit

  (382)

  (318)

20.0%

Total

   3,953

   3,301

19.7%

 

 

 

 

Charges for the Use of the Transmission and Distribution System

 

 

 

Basic Network Charges

   498

   567

-12.2%

Itaipu Transmission Charges

  67

  62

7.0%

Connection Charges

  47

  32

47.3%

Charges for the Use of the Distribution System

  13

  10

35.5%

System Service Usage Charges - ESS

   (41)

  47

-

Reserve Energy Charges - EER

  -  

  66

-100.0%

PIS and COFINS Tax Credit

   (53)

   (72)

-26.2%

Total

   531

   712

-25.4%

 

 

 

 

Cost of Electric Energy

   4,484

   4,014

11.7%

 

In 1Q19, 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$ 4,484 million, registering an increase of 11.7% (R$ 470 million).

The factors that explain these variations follow below:

·      The cost of electric power purchased for resale reached R$ 3,953 million in 1Q19, an increase of 19.7% (R$ 651 million), due to the following factors:

                   (i)        Increase of 20.1% (R$ 597 million) in the cost of energy purchased through auction in the regulated environment, bilateral contracts and energy purchased in the spot market, due to the increases of 9.8% in the average purchase price (R$ 211.19/MWh in 1Q19 vs. R$ 192.33/MWh in 1Q18) and of 9.3% (1,446 GWh) in the volume of purchased energy;

               (i)          Increase of 17.7% (R$ 99 million) in the cost of energy from Itaipu, due to the increase of 18.5% in the average purchase price (R$ 241.63/MWh in 1Q19 vs. R$ 203.86/MWh in 1Q18), partially offset by the reduction of 0.7% (19 GWh) in the volume of purchased energy;

                 (ii)        Increase of 22.1% (R$ 19 million) in the amount of PROINFA cost, due to the increases of 21.7% in the average purchase price (R$ 407.84/MWh in 1Q19 vs. R$ 335.19/MWh in 1Q18) and of 0.3% (1 GWh) in the volume of purchased energy;

Partially offset by:

                (iii)        Reduction of 20.0% (R$ 64 million) in PIS and COFINS tax credits (cost reducer), generated from the energy purchase;

 

 

 

Page 13 de 57


 
 

 

1Q19 Results | May 7, 2019

 

·        Charges for the use of the transmission and distribution system reached R$ 531 million in 1Q19, a reduction of 25.4% (R$ 181 million), due to the following factors:

                   (i)        Variation of R$ 88 million in the System Service Usage Charges – ESS, from an expense of R$ 47 million in 1Q18 to a revenue of R$ 41 million in 1Q19;

                 (ii)        Reduction of 12.2% (R$ 69 million) in the basic network charges;

                (iii)        Reserve Energy Charges – EER of R$ 66 million in 1Q18;

Partially offset by:

                (iv)        Reduction of 26.2% (R$ 19 million) in PIS and COFINS tax credits (cost reducer), generated from the charges;

                 (v)        Increase of 47.3% (R$ 15 million) in charges for connection;

                (vi)        Increase of 7.0% (R$ 4 million) in Itaipu transmission charges;

              (vii)        Increase of 35.5% (R$ 3 million) in charges for usage of the distribution system.

4.5) Operating Costs and Expenses

Operating costs and expenses reached R$ 1,603 million in 1Q19, compared to R$ 1,470 million in 1Q18, an increase of 9.0% (R$ 133 million).

The factors that explain these variations follow below:

 

PMSO

Reported PMSO (R$ million)

 

 1Q19

 1Q18

 Variation

 

 R$ MM

 %

Reported PMSO

 

 

 

 

  Personnel

        (348)

        (338)

          (10)

3.0%

  Material

          (67)

          (63)

            (4)

6.8%

  Outsourced Services

        (165)

        (181)

            16

-8.8%

  Other Operating Costs/Expenses

        (175)

        (106)

          (69)

65.6%

Allowance for doubtful accounts

          (69)

          (26)

          (42)

159.7%

Legal and judicial expenses

          (32)

          (12)

          (20)

160.8%

Others

          (75)

          (67)

           (7)

11.2%

Total Reported PMSO

        (755)

        (687)

          (68)

9.9%

 

The PMSO item reached R$ 755 million in 1Q19, compared to R$ 687 million in 1Q18, an increase of 9.9% (R$ 68 million), due to the following factors:

(i)

Personnel - increase of 3.0% (R$ 10 million), mainly due to the collective bargaining agreement – wages and benefits;

(ii)

Material - increase of 6.8% (R$ 4 million), due to the increase in maintenance of the fleet, lines and networks (R$ 8 million), partially offset by the reduction in maintenance of machinery, equipment and others (R$ 5 million);

(iii)

Outsourced services - reduction of 8.8% (R$ 16 million), mainly due to the primarization of services (R$ 27 million), partially offset by the maintenance of substations (R$ 8 million) and services related to electric energy billing (R$ 3 million);

(iv)

Other operational costs/expenses - increase of 65.6% (R$ 69 million), mainly due to:

ü  Increase of 159.7% (R$ 42 million) in allowance for doubtful account;

 

Page 14 de 57


 
 

 

1Q19 Results | May 7, 2019

 

ü  Increase of 160.8% (R$ 20 million) in legal and judicial expenses;

ü  Other effects (R$ 7 million).

 

Other operating costs and expenses

Other operating costs and expenses reached R$ 848 million in 1Q19, compared to R$ 783 million in 1Q18, registering an increase of 8.2% (R$ 65 million), due to the following factors:

·      Increase of 12.1% (R$ 45 million) in Costs of Building the Infrastructure item;

·      Increase of 4.3% (R$ 14 million) in Depreciation and Amortization item;

·      Increase of 25.2% (R$ 6 million) in Private Pension Fund item, due to the registration of the impacts of the 2019 actuarial report;

·      Increase of 0.8% (R$ 1 million) in Amortization of Intangible of Concession Asset item.

 

4.6) EBITDA

In 1Q19, EBITDA reached R$ 1,531 million, compared to R$ 1,366 million in 1Q18, registering an increase of 12.1% (R$ 165 million).

EBITDA is calculated according to CVM Instruction no. 527/12 and showed in the table below:

EBITDA and Net Income conciliation (R$ million)

 

1Q19

1Q18

Var.

Net Income

               570

               419

36.0%

De preciation and Amortization

               405

               390

 

Financial Result

               220

               308

 

Income Tax / Social Contribution

               336

               249

 

EBITDA

            1,531

            1,366

12.1%

 

Page 15 de 57


 
 

 

1Q19 Results | May 7, 2019

 

4.7) Financial Result

Financial Result (R$ Million)

 

1Q19

1Q18

Var.

Revenues

     

Income from Financial Investments

                 49

                 66

-26.8%

Additions and Late Payment Fines

                 75

                 70

8.3%

Fiscal Credits Update

                   1

                   3

-51.7%

Judicial Deposits Update

                   9

                   9

1.1%

Monetary and Foreign Exchange Updates

                   8

                 23

-63.7%

Discount on Purchase of ICMS Credit

                   7

                   7

2.1%

Sectoral Financial Assets Update

                 28

                   7

287.5%

PIS and COFINS - over Other Financial Revenues

               (10)

               (12)

-11.0%

Others

                 40

                 25

61.3%

Total

               207

               197

4.8%

 

 

 

 

Expenses

 

 

 

Debt Charges

              (295)

              (343)

-14.0%

Monetary and Foreign Exchange Updates

               (85)

              (119)

-28.3%

(-) Capitalized Interest

                   6

                   6

-10.0%

Sectoral Financial Liabilities Update

                 -  

                 (5)

-100.0%

Use of Public Asset

(2)

                 (4)

-49.3%

Others

(50)

               (40)

23.9%

Total

(427)

              (505)

-15.5%

 

 

 

 

Financial Result

(220)

              (308)

-28.4%

 

In 1Q19, net financial expense was of R$ 220 million, a reduction of 28.4% (R$ 87 million) compared to the net financial expense of R$ 308 million reported in 1Q18.

The items explaining these variations in Financial Result are as follows:

·        Financial Revenues: increase of 4.8% (R$ 9 million), from R$ 197 million in 1Q18 to R$ 207 million in 1Q19, mainly due to the following factors:

(i)               Increase of 287.5% (R$ 20 million) in sectoral financial assets update;

(ii)              Increase of 61.3% (R$ 15 million) in other financial revenues;

(iii)            Increase of 8.3% (R$ 6 million) in additions and late payment fines;

(iv)            Reduction of 11.0% (R$ 1 million) in PIS and COFINS over Interest on Own Capital (revenue reducer);

Partially offset by:

(v)             Reduction of 26.8% (R$ 18 million) in the income from financial investments, due to the reduction in the average balance of investments;

(vi)            Reduction of 63.7% (R$ 14 million) in the monetary and foreign exchange updates, due to the reductions: (a) of R$ 11 million in revenues from fines, interest and monetary adjustment relating to installment payments made by consumers, and (b) of R$ 7 million in gains with the zero-cost collar derivative1; partially offset by the increases (c) of R$ 3 million in other monetary and foreign exchange updates, and (d) of R$ 1 million  in the update of the balance of tariff subsidies, as determined by ANEEL;


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.

Page 16 de 57


 
 

 

1Q19 Results | May 7, 2019

 

(vii)           Reduction of 51.7% (R$ 1 million) in fiscal credits update.

 

·        Financial Expenses: reduction of 15.5% (R$ 78 million), from R$ 505 million in 1Q18 to R$ 427 million in 1Q19, mainly due to the following factors:

(i)               Reduction of 14.0% (R$ 48 million) of debt charges in local currency, due to the reduction in the average balance of debt;

(ii)              Reduction of 28.3% (R$ 34 million) in the monetary and foreign exchange updates, due to: (a) the mark-to-market positive effect for financial operations under Law 4,131 – non-cash effect (R$ 33 million), and (b) the reduction of debt charges in foreign currency, with swap to CDI interbank rate (R$ 1 million);

(iii)            Sectoral financial liabilities update in 1Q18, in the amount of R$ 5 million;

(iv)            Reduction of 49.3% (R$ 2 million) in the financial expenses with the Use of Public Asset (UBP).

Partially offset by:

(v)             Increase of 23.9% (R$ 10 million) in other financial expenses;

(vi)            Reduction of 10.0% (R$ 1 million) in capitalized interest (expense reducer).

4.8) Net Income

Net income was of R$ 570 million in 1Q19, registering an increase of 36.0% (R$ 151 million) if compared to the net income of R$ 419 million observed in 1Q18.

 

Page 17 de 57


 
 

 

1Q19 Results | May 7, 2019

 

5) INDEBTEDNESS

5.1) Debt (IFRS)

 

 

 

 

Note: for debt linked to foreign currency (24.0% of total in 1Q19), swap operations are contracted, aiming the protection of the foreign exchange and the rate linked to the contract.

 

Page 18 de 57


 
 

 

1Q19 Results | May 7, 2019

 

Net Debt in IFRS

IFRS | R$ Million

1Q19

1Q18

Var. %

Financial Debt (including hedge)

         (19,891)

   (20,427)

-2.6%

(+) Available Funds

            3,441

      3,029

13.6%

(=) Net Debt

         (16,450)

   (17,398)

-5.4%

 

5.1.1) Debt Amortization Schedule in IFRS (Mar-19)

CPFL Energia has a large market access to liquidity sources through diversified funding alternatives, either through local market financing lines such as debenture issues, BNDES and other development banks, or through financing lines in the foreign market. This access to credit for the CPFL group is currently strengthened by the support of its shareholding structure, as State Grid gives greater robustness to CPFL group in financial market.

 

 

Notes:

1)    Considers only the principal of the debt of R$ 19,859 million. In order to reach the value of debt in IFRS, of R$ 19,891 million, should be included charges and the mark-to-market (MTM) effect and cost with funding;

2)    Short-term (April 2019 – March 2020) = R$ 3,471 million.

 

The cash position at the end of 1Q19 had a coverage ratio of 0.99x the amortizations of the next 12 months, enough to honor all amortization commitments until the beginning of 2020. The average amortization term, calculated from this schedule, is of 3.10 years.

 

 

 

 

 

 

Page 19 de 57


 
 

 

1Q19 Results | May 7, 2019

 

 

Gross Debt Cost1 in IFRS criteria

 

Note: (1) as of 2Q17, CPFL Energia started to calculate its debt average cost considering the end of the period, to better reflect the variations on interest rates.

5.2) Debt in Financial Covenants Criteria

5.2.1) Indexation and Debt Cost in Financial Covenants Criteria

 

Indexation1 After Hedge2 in Financial Covenants Criteria – 1Q18 vs. 1Q19

 

 

1) Considering proportional consolidation of CPFL Renováveis, CERAN, ENERCAN, Foz do Chapecó and EPASA;

2) For debt linked to foreign currency (26.5% of total), swap operations are contracted, aiming the protection of the foreign exchange and the rate linked to the contract.

Page 20 de 57


 
 

 

1Q19 Results | May 7, 2019

 

5.2.2) Net Debt in Financial Covenants Criteria and Leverage

In 1Q19 Proforma Net Debt totaled R$ 14,902 million, a reduction of 4.4% compared to net debt position at the end of 1Q18, in the amount of R$ 15,585 million.

Covenant Criteria (*) - R$ Million

1Q19

1Q18

Var.

Financial Debt (including hedge)1

   (18,048)

   (18,241)

-1.1%

(+) Available Funds

      3,145

      2,656

18.4%

(=) Net Debt

   (14,902)

   (15,585)

-4.4%

EBITDA Proforma2

      5,515

      4,708

17.2%

Net Debt / EBITDA

        2.70

        3.31

-18.4%

 

 

1) Considering proportional consolidation of CPFL Renováveis, CERAN, ENERCAN, Foz do Chapecó and EPASA;

2) Proforma EBITDA in the financial 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 Proforma EBITDA the effects of historic EBITDA of newly acquired projects. Considering that the Proforma Net Debt totaled R$ 14,902 million and Proforma EBITDA in the last 12 months reached R$ 5,515 million, the ratio Proforma Net Debt / EBITDA at the end of 1Q19 reached 2.70x.

 

6) INVESTMENTS

6.1) Actual Investments

Investments (R$ Million)

Segment

1Q19

1Q18

Var.

Distribution

                404

                366

10.1%

Generation - Conventional

                    1

                    1

16.0%

Transmission1

                    0

                    0

-68.2%

Generation - Renewable

                  33

                  44

-26.2%

Commercialization

                    1

                    1

-24.3%

Services and Others2

                    7

                  13

-44.5%

Total

                445

                426

4.6%

Note:

1) Investments related to the transmission segment, according to IFRIC 15, are recorded as “Contractual Asset of Transmission Companies” (in other credits). Investments of R$ 55 thousands in 1Q19 and R$ 172 thousands in 1Q18.

2) Others – basically refer to assets and transactions that are not related to the listed segments.

 

In 1Q19, investments were R$ 445 million, an increase of 4.6%, compared to R$ 426 million registered in 1Q18. We highlight investments made by CPFL Energia in the Distribution segment:

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;

Page 21 de 57


 
 

 

1Q19 Results | May 7, 2019

 

 

6.2) Investments Forecasts

On November 30, 2018, CPFL Energia’s Board of Directors approved Board of Executive Officers’ proposal for 2019 Annual Budget and 2020/2023 Multiannual Plan for the Company, which was previously discussed by the Budget and Corporate Finance Commission.

 

Investments Forecasts (R$ million)1

Notes:

1) Constant currency;

2) Investment Plan released in 4Q18/2018 Earnings Release, from March 2019;

3) Disregard investments in Special Obligations (among other items financed by consumers);

4) Conventional + Renewable.

Page 22 de 57


 
 

 

1Q19 Results | May 7, 2019

 

7) ALLOCATION OF RESULTS

The Company’s Bylaws require the distribution of at least 25% of net income adjusted according to law, as dividends to its shareholders. The proposal for allocation of net income from the fiscal year is shown below:

 

 

Thousands of R$

Net income of the fiscal year - Individual

2,058,040

Realization of comprehensive income

25,117

Adjustments from previous years - IFRS 9/CPC 48 adoption

(82,607)

Reversion of statutory reserve - concession financial asset

826,600

Net income base for allocation

2,827,151

Legal reserve

(102,902)

Statutory reserve - working capital reinforcement

(2,235,465)

Minimum mandatory dividend

(488,785)

 

Minimum Mandatory Dividend (25%)

At the Annual General Shareholders’ Meeting (AGM), held on April 30, 2019, at 10:00 a.m., among other matters, it was declared the distribution and it was approved the payment of dividends by the Company, in the amount of R$ 488,784,574.40 (four hundred and eighty-eight million, seven hundred and eighty-four thousand, five hundred and seventy-four reais and forty centavos), equivalent to R$ 0.480182232 per common share issued by the Company.

Pursuant to paragraph 3 of article 205 of Law No. 6,404/76, the payment of dividends will be made in one single installment, until December 31, 2019, in a specific date to be informed in due course to the shareholders and to the market, without monetary update or incurring interest between the declaration date and the effective payment date.

Shareholders owning shares on April 30, 2019 will be entitled to receive the dividends. Shares will be traded “ex-dividend” at the Brazilian Stock Exchange (B3 S.A. – Brasil, Bolsa, Balcão, or “B3”) and at the New York Stock Exchange (NYSE) as of May 2, 2019.

 

Statutory Reserve – Working Capital Reinforcement

For this fiscal year, considering the current macro scenario with an incipient economic recovery, and also considering the uncertainties regarding hydrology, the Company’s Management proposed the allocation of R$ 2.235 million to the statutory reserve - working capital reinforcement.

 

 

8) STOCK MARKETS

8.1) 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.

 

 

Page 23 de 57


 
 

 

1Q19 Results | May 7, 2019

 

B3

NYSE

Date

CPFE3 (R$)

IEE

IBOV

Date

CPL (US$)

DJBr20

Dow Jones

03/31/2019

 R$      30.48

         57,449

         95,415

03/31/2019

 $        15.52

         23,618

         25,929

12/31/2018

 R$      28.85

         49,266

         87,887

12/31/2018

 $        14.80

         22,007

         23,327

03/31/2018

 R$      24.91

         41,445

         85,366

03/31/2018

 $        15.00

         25,170

         24,103

QoQ

5.6%

16.6%

8.6%

QoQ

4.9%

7.3%

11.2%

YoY

22.4%

38.6%

11.8%

YoY

3.5%

-6.2%

7.6%

 

On March 31, 2019, CPFL Energia’s shares closed at R$ 30.48 per share on the B3 and US$ 15.52 per ADR on the NYSE, an appreciation in the quarter of 5.6% and 4.7%, respectively. Considering the variation in the last 12 months, the shares and ADRs presented an appreciation of 22.4% on the B3 and of 3.5% on the NYSE.

 

8.2) Daily Average Volume

The daily trading volume in 1Q19 averaged R$ 24.0 million, of which R$ 22.5 million on the B3 and R$ 1.4 million on the NYSE, representing a reduction of 25.5% in relation to 1Q18. The number of trades on the B3 decreased by 13.0%.

 

 

Note: Considers the sum of the average daily volume on the B3 and NYSE.

 

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1Q19 Results | May 7, 2019

 

9) 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 2018, CPFL marked 14 years since being listed on the B3 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 B3 with Level III ADRs, special segments for companies that comply with corporate governance best practices. All CPFL shares are common shares, entitling all shareholders the right to vote, as well as the tag along right with same conditions granted to the seller, in case of an offer which results in control transference.

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 9 members (of which 2 independent members), with terms of one year, eligible for reelection.

The Internal Regulation of the Board establishes the procedures for evaluating the directors, under the leadership of the Chairman, as well as their main duties and rights.

The Board set up three advisory committees (Management Processes, Risks and Sustainability, People Management and Related Parties), 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, analysis of transactions with parties that are related to controlling shareholders and handling of incidents recorded through complaint hotlines and ethical conduct channels. Furthermore, 2 advisory commissions were set ad hoc, as foreseen in the Internal Regulation: Strategy and Finance and Budget, which support the Board in subjects related to the strategic plan, as well as the budget follow-up.

The Board of Executive Officers is composed of 1 Chief Executive Officer and 9 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 form the CPFL group and nominate their respective executive officers.

CPFL has a permanent Fiscal Council, composed of 3 members, that also exercises the duties of Audit Committee, in line with Sarbanes-Oxley Law (SOX), applicable to foreign companies listed on U.S. stock exchanges.

The guidelines and documents on corporate governance are available at the Investor Relations website http://www.cpfl.com.br/ir.

 

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1Q19 Results | May 7, 2019

 

10) 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 S.A. (SGBP) and ESC Energia S.A.:

 

 

Reference date: 03/31/2019

Notes:

(1) RGE is held by CPFL Energia (89.0107%) and CPFL Brasil (10.9893%).

(2) CPFL Soluções = CPFL Brasil + CPFL Serviços + CPFL Eficiência;

(3) 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;

 

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1Q19 Results | May 7, 2019

 

11) PERFORMANCE OF THE BUSINESS SEGMENTS

11.1) Distribution Segment

11.1.1) Economic-Financial Performance

Consolidated Income Statement - Distribution (R$ Million)

 

1Q19

1Q18

Var.

Gross Operating Revenue

            9,446

            8,329

13.4%

Net Operating Revenue

            5,936

            5,201

14.1%

Cost of Electric Power

           (3,877)

           (3,451)

12.4%

Operating Costs & Expenses

           (1,271)

           (1,138)

11.7%

EBIT

               788

               612

28.7%

EBITDA(1)

               980

               792

23.6%

Financial Income (Expense)

               (60)

              (105)

-43.1%

Income Before Taxes

               728

               507

43.6%

Net Income

               465

               321

45.1%

 

Note:

(1)     EBITDA (IFRS) is calculated from the sum of net income, taxes, financial result and depreciation/amortization, as CVM Instruction no. 527/12.

 

11.1.1.1) Sectoral Financial Assets and Liabilities

In 1Q19, total sectoral financial liabilities accounted for R$ 324 million, a variation of R$ 697 million if compared to 1Q18, when sectoral financial assets amounted to R$ 374 million.

On March 31, 2019, the balance of sectoral financial assets and liabilities was positive in R$ 1,212 million, compared to a positive balance of R$ 1,508 million on December 31, 2018 and a positive balance of R$ 596 million on March 31, 2018.

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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1Q19 Results | May 7, 2019

 

 

11.1.1.2) Operating Revenue

Operating Revenue (R$ Million)

 

1Q19

1Q18

Var.

Gross Operating Revenue

     

Revenue with Energy Sales (Captive + TUSD)

            8,567

            6,950

23.3%

Short-term Electric Energy

               243

               115

111.6%

Revenue from Building the Infrastructure of the Concession

               415

               370

12.1%

Sectoral Financial Assets and Liabilities

              (324)

               374

-

CDE Resources - Low-income and Other Tariff Subsidies

               429

               377

13.8%

Adjustments to the Concession's Financial Asset

                 64

                 65

-0.6%

Other Revenues and Income

                 52

                 79

-34.3%

Total

            9,446

            8,329

13.4%

 

 

 

 

Deductions from the Gross Operating Revenue

 

 

 

ICMS Tax

           (1,740)

           (1,400)

24.2%

PIS and COFINS Taxes

              (794)

              (736)

7.9%

CDE Sector Charge

              (998)

              (898)

11.1%

R&D and Energy Efficiency Program

               (55)

               (48)

16.3%

PROINFA

               (39)

               (35)

10.1%

Tariff Flags and Others

               122

                 (7)

-

Others

                 (7)

                 (5)

26.4%

Total

           (3,510)

           (3,129)

12.2%

 

 

 

 

Net Operating Revenue

            5,936

            5,201

14.1%

 

In 1Q19, gross operating revenue amounted to R$ 9,446 million, an increase of 13.4% (R$ 1,117 million), due to the following factors:

·

Increase of 23.3% (R$ 1,617 million) in the revenue with energy sales (captive + free clients), due to: (i) the positive average tariff adjustment in the distribution companies for the period between 1Q18 and 1Q19 (highlight for the average increases of 16.90% in CPFL Paulista and 22.47% in RGE Sul, in April 2018, of 20.58% in RGE, in June 2018, and of 19.25% in CPFL Piratininga, in October 2018); and (ii) the increase of 3.2% in the sales volume within the concession area;

·

Increase of 111.6% (R$ 128 million) in Short-term Electric Energy;

·

Increase of 13.8% (R$ 52 million) in tariff subsidies (CDE resources);

·

Increase of 12.1% (R$ 45 million) in revenue from building the infrastructure of the concession;

   

Partially offset by:

·

Variation of R$ 697 million in the Sectoral Financial Assets/Liabilities, from a sectoral financial asset of R$ 374 million in 1Q18 to a sectoral financial liability of R$ 324 million in 1Q19;

·

Reduction of 34.3% (R$ 27 million) in Other Revenues and Income.

 

Deductions from the gross operating revenue were R$ 3,510 million in 1Q19, representing an increase of 12.2% (R$ 381 million), due to the following factors:

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1Q19 Results | May 7, 2019

 

·        Increase of 24.2% (R$ 340 million) in ICMS tax;

·        Increase of 11.1% (R$ 100 million) in the CDE sector charge;

·        Increase of 7.9% (R$ 58 million) in PIS and COFINS taxes;

·        Increase of 16.3% (R$ 8 million) in the R&D and Energy Efficiency Program.

·        Increase of 10.1% (R$ 4 million) in the PROINFA;

·        Increase of 26.4% (R$ 1 million) in other deductions from the gross operating revenue;

Partially offset by the following factor:

·        Variation of R$ 129 million in tariff flags approved by the CCEE, from an expense of R$ 7 million in 1Q18 to a revenue of R$ 122 million in 1Q19.

 

Net operating revenue reached R$ 5,936 million in 1Q19, representing an increase of 14.1% (R$ 735 million).

 

11.1.1.3) Cost of Electric Energy

Cost of Electric Energy (R$ Million)

 

1Q19

1Q18

Var.

Cost of Electric Power Purchased for Resale

     

Energy from Itaipu Binacional

               657

               558

17.7%

PROINFA

               105

                 86

22.1%

Energy Purchased through Auction in the Regulated Environment, Bilateral Contracts and Energy Purchased in the Spot Market

            2,932

            2,384

23.0%

PIS and COFINS Tax Credit

              (324)

              (265)

22.1%

Total

            3,370

            2,764

22.0%

 

 

 

 

Charges for the Use of the Transmission and Distribution System

 

 

 

Basic Network Charges

               479

               549

-12.7%

Itaipu Transmission Charges

                 67

                 62

7.0%

Connection Charges

                 45

                 30

53.0%

Charges for the Use of the Distribution System

                   9

                   5

60.4%

System Service Usage Charges - ESS

               (41)

                 47

-

Reserve Energy Charges - EER

                 -  

                 66

-

PIS and COFINS Tax Credit

               (52)

               (71)

-27.7%

Total

               507

               687

-26.2%

 

 

 

 

Cost of Electric Energy

            3,877

            3,451

12.4%

 

In 1Q19, 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$ 3,877 million, representing an increase of 12.4% (R$ 426 million):

·         The cost of electric power purchased for resale was R$ 3,370 million in 1Q19, representing an increase of 22.0% (R$ 607 million), due to the following factors:

(i)           Increase of 23.0% (R$ 548 million) in the cost of energy purchased through auction in the regulated environment, bilateral contracts and energy purchased in the spot market, due to the increases of 10.4% in the average purchase price (from R$ 213.51/MWh in 1Q18 to R$ 235.78/MWh in 1Q19) and of 11.3% (1,267 GWh) in the volume of purchased energy;

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1Q19 Results | May 7, 2019

 

(ii)         Increase of 17.7% (R$ 99 million) in the cost of energy from Itaipu, due to the increase of 18.5% in the average purchase price (from R$ 203.86/MWh in 1Q18 to R$ 241.63/MWh in 1Q19), partially offset by the reduction of 0.7% (19 GWh) in the volume of purchased energy;

(iii)        Increase of 22.1% (R$ 19 million) in the cost of the Proinfa, due to the increases of 21.9% in the average purchase price (from R$ 335.19/MWh in 1Q18 to R$ 408.60/MWh in 1Q19) and of 0.1% (1 GWh) in the volume of purchased energy;

Partially offset by:

(iv)        Increase of 22.1% (R$ 59 million) in PIS and Cofins tax credit (cost reducer), generated from the energy purchase.

 

·         Charges for the use of the transmission and distribution system reached R$ 507 million in 1Q19, representing a reduction of 26.2% (R$ 180 million), due to the following factors:

(i)           Variation of R$ 88 million in the System Service Usage Charges – ESS, from an expense of R$ 47 million in 1Q18 to a revenue of R$ 41 million in 1Q19;

(ii)         Reduction of 12.7% (R$ 70 million) in charges for basic network;

(iii)        Reserve Energy Charges – EER in 1Q18, in the amount of R$ 66 million;

Partially offset by:

(iv)        Reduction of 27.7% (R$ 20 million) in PIS and Cofins tax credit (cost reducer), generated from the charges;

(v)         Increase of 53.0% (R$ 16 million) in connection  charges;

(vi)        Increase of 7.0% (R$ 4 million) in the Itaipu transmission charges;

(vii)      Increase of 60.4% (R$ 3 million) in the usage of the distribution system charges.

 

11.1.1.4) Operating Costs and Expenses

Operating costs and expenses reached R$ 1,271 million in 1Q19, compared to R$ 1,138 million in 1Q18, an increase of 11.7% (R$ 133 million).

 

 

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1Q19 Results | May 7, 2019

 

The factors that explain these variations follow below:

 

PMSO

Reported PMSO (R$ million)

 

 1Q19

 1Q18

 Variation

 

 R$ MM

 %

Reported PMSO

 

 

 

 

  Personnel

         (226)

         (224)

             (2)

1.0%

  Material

           (46)

           (40)

             (6)

14.7%

  Outsourced Services

         (207)

         (206)

             (0)

0.1%

  Other Operating Costs/Expenses

         (158)

           (95)

           (63)

67.0%

Allowance for doubtful accounts

          (68)

          (26)

          (42)

159.9%

Legal and judicial expenses

          (31)

          (11)

          (19)

166.6%

Others

          (59)

          (57)

            (2)

4.2%

Total Reported PMSO

         (637)

         (565)

           (72)

12.7%

 

In 1Q19, PMSO reached R$ 637 million, an increase of 12.7% (R$ 72 million), compared to R$ 565 million in 1Q18.

Personnel – increase of 1.0% (R$ 2 million), mainly due to the collective bargaining agreement – wages and benefits;

Material – increase of 14.7% (R$ 6 million), mainly due to the increases in the replacement of material to the maintenance of lines and grid (R$ 3 million) and in the fleet maintenance (R$ 2 million);

Third party services – increase of 0.1% (R$ 0.2 million);

Other operating costs/expenses – increase of 67.0% (R$ 63 million), due to the increases in the following items: (a) allowance for doubtful accounts (R$ 42 million), (b) legal and judicial expenses (R$ 19 million), and (c) other costs/expenses (R$ 2 million).

 

Other operating costs and expenses

In 1Q19, other operating costs and expenses reached R$ 635 million, compared to R$ 573 million in 1Q18, registering an increase of 10.8% (R$ 62 million), with the variations below:

(i)

Increase of 12.1% (R$ 45 million) in cost of building the concession´s infrastructure. This item, which reached R$ 415 million in 1Q19, does not affect results, since it has its counterpart in “operating revenue”;

(ii)

Increase of 6.9% (R$ 12 million) in Depreciation and Amortization item;

 (iii)

Increase of 25.3% (R$ 6 million) in Private Pension Fund item, due to the registration of the impacts of the 2019 actuarial report.

 

 

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1Q19 Results | May 7, 2019

 

11.1.1.5) EBITDA

EBITDA totaled R$ 980 million in 1Q19, compared to R$ 792 million in 1Q18, an increase of 23.6% (R$ 187 million).

Conciliation of Net Income and EBITDA (R$ million)

 

 1Q19

 1Q18

 Var.

Net income

               465

               321

45.1%

Depreciation and Amortization

               192

               181

 

Financial Results

                 60

               105

 

Income Tax /Social Contribution

               263

               187

 

EBITDA

               980

               792

23.6%

 

11.1.1.6) Financial Result

Financial Result (R$ Million)

 

1Q19

1Q18

Var.

Revenues

     

Income from Financial Investments

                 17

                 24

-28.6%

Additions and Late Payment Fines

                 74

                 68

9.1%

Fiscal Credits Update

                   1

                   2

-43.8%

Judicial Deposits Update

                   9

                   9

1.2%

Monetary and Foreign Exchange Updates

                   8

                 18

-55.5%

Discount on Purchase of ICMS Credit

                   7

                   7

2.1%

Sectoral Financial Assets Update

                 28

                   7

287.5%

PIS and COFINS - over Other Financial Revenues

                 (9)

                 (9)

-6.0%

Others

                 10

                 11

-9.4%

Total

               145

               136

6.4%

 

 

 

 

Expenses

 

 

 

Debt Charges

              (140)

              (145)

-3.3%

Monetary and Foreign Exchange Updates

               (59)

               (75)

-22.0%

(-) Capitalized Interest

                   6

                   4

48.4%

Sectoral Financial Liabilities Update

                 -  

                 (5)

-100.0%

Others

               (12)

               (20)

-42.8%

Total

              (205)

              (241)

-15.1%

 

 

 

 

Financial Result

               (60)

              (105)

-43.1%

 

In 1Q19, the net financial result recorded a net financial expense of R$ 60 million, a reduction of 43.1% (R$ 45 million). The items explaining these changes are as follows:

 

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1Q19 Results | May 7, 2019

 

 

·       Financial Revenue: increase of 6.4% (R$ 9 million), from R$ 136 million in 1Q18 to R$ 145 million in 1Q19, mainly due to the following factors:

(i)

Increase of 287.5% (R$ 20 million) in sectoral financial assets update;

(ii)

Increase of 9.1% (R$ 6 million) in late payment interest and fines;

(iii)

Reduction of 6.0% (R$ 1 million) in PIS and Cofins on financial revenues (revenue reducer);

                    Partially offset by:

(iv)

Reduction of 55.5% (R$ 10 million) in adjustments for inflation and exchange rate changes, due to (a) the reduction of R$ 11 million in revenues from fines, interest and monetary adjustment relating to installment payments made by consumers; partially offset by the increase (b) of R$ 1 million in the adjustment of the balance of tariff subsidies, as determined by Aneel;

(v)

Reduction of 28.6% (R$ 7 million) in the income from financial investments, due to the lower average balance of investments;

(vi)

Reduction of 43.8% (R$ 1 million) in fiscal credits update;

(vii)

Reduction of 9.4% (R$ 1 million) in other financial revenues.

 

·       Financial Expense: reduction of 15.1% (R$ 36 million), from R$ 241 million in 1Q18 to R$ 205 million in 1Q19, mainly due to the following factors:

(i)

Reduction of 22.0% (R$ 17 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$ 21 million); partially offset by (b) the increase of debt charges in foreign currency, with swap to CDI interbank rate (R$ 5 million);

(ii)

Reduction of 42.8% (R$ 9 million) in other financial expenses;

(iii) 

Reduction of 3.3% (R$ 5 million) in interest on debt in local currency;

(iv) 

Sectoral financial liabilities update in 1Q18, in the amount of R$ 5 million;

(v) 

Increase of 48.4% (R$ 2 million) in capitalized interest (expense reducer).

 

11.1.1.7) Net Income

Net Income totaled R$ 465 million in 1Q19, compared to R$ 321 million in 1Q18, an increase of 45.1% (R$ 145 million).

 

11.1.2) Tariff Events

Reference dates

Tariff Process Dates

Distributor

Date

CPFL Santa Cruz

March 22nd

CPFL Paulista

 April 8th

New RGE

 June 19th

CPFL Piratininga

October 23rd

 

 

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1Q19 Results | May 7, 2019

 

 

Tariff Revision

Distributor

Periodicity

Next Revision

Cycle

CPFL Piratininga

Every 4 years

October 2019

5th PTRC

CPFL Santa Cruz

Every 5 years

March 2021

5th PTRC

CPFL Paulista

Every 5 years

April 2023

5th PTRC

New RGE

Every 5 years

June 2023

5th PTRC

 

 

 

Annual tariff adjustments of October 2018, March 2019 and April 2019

 

CPFL Piratininga

CPFL Santa Cruz

CPFL Paulista

Ratifying Resolution

2,472

2,522

2,526

Adjustment

20.01%

13.70%

12.02%

Parcel A

7.07%

1.12%

0.78%

Parcel B

1.76%

0.90%

2.17%

Financial Components

11.18%

11.68%

9.07%

Effect on consumer billings

19.25%

13.31%

8.66%

Date of entry into force

10/23/2018

03/22/2019

04/08/2019

 

Periodic tariff reviews occurred in 2018

 

RGE Sul

RGE

Ratifying Resolution

2,385

2,401

Adjustment

18.44%

21.27%

Parcel A

6.79%

6.11%

Parcel B

4.77%

9.45%

Financial Components

6.88%

5.71%

Effect on consumer billings

22.47%

20.58%

Date of entry into force

04/19/2018

06/19/2018

 

 

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1Q19 Results | May 7, 2019

 

 

4th Periodic Tariff Review Cycle

RGE Sul

RGE

Date

Apr-18

Jun-18

Gross Regulatory Asset Base (A)

           3,605

           4,374

Depreciation Rate (B)

3.87%

3.74%

Depreciation Quota (C = A x B)

              140

              164

Net Regulatory Asset Base (D)

           2,389

           3,032

Pre-tax WACC (E)

12.26%

12.26%

Cost of Capital (F = D x E)

              290

              372

Special Obligations (G)

                 5

                 8

Regulatory EBITDA (H = C + F + G)

              435

              543

OPEX = CAOM + CAIMI (I)

              438

              523

Parcel B (J = H + I)

              872

           1,066

Productivity Index Parcel B ( K )

0.98%

1.07%

Quality Incentive Mechanism ( L)

-0.71%

0.05%

Parcel B with adjusts (M = J * (K - L)

              870

           1,054

Other Revenues (N)

               19

               28

Adjusted Parcel B (O = M - N)

              851

           1,026

Parcel A (P)

           2,653

           2,816

Required Revenue (Q = O + P)

           3,504

           3,842

 

RGE Sul

On April 17, 2018, ANEEL approved the result of the fourth Periodic Tariff Review of distributor RGE Sul. The average effect to be perceived by the consumers was 22.47% and details can be found in the table above.

 

RGE

On June 19, 2018, ANEEL approved the result of the fourth Periodic Tariff Review of distributor RGE Sul. The average effect to be perceived by the consumers was 20.58% and details can be found in the table above.

 

11.1.3) 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 Indicators

Distributor

SAIDI (hours)

SAIFI (interruptions)

2014

2015

2016

2017

1Q18

2Q18

3Q18

2018

1Q19

ANEEL1

2014

2015

2016

2017

1Q18

2Q18

3Q18

2018

1Q19

ANEEL1

CPFL Paulista

6.92

7.76

7.62

7.14

6.90

6.50

6.25

6.17

6.46

7.38

4.87

4.89

5.00

4.94

4.76

4.46

4.13

4.03

4.16

6.33

CPFL Piratininga

6.98

7.24

8.44²

6.97

6.37

5.93

6.01

5.92

6.40

6.74

4.19

4.31

3.97²

4.45

4.13

3.61

3.71

3.87

4.31

5.82

RGE

18.28

17.47

16.82

14.83

13.74

13.46

13.15

14.44

14.95

11.48

9.01

8.37

8.44

7.68

7.09

6.71

6.28

6.10

6.27

8.50

CPFL Santa Cruz

 

 

 

6.20

5.80

5.61

5.61

6.01

6.21

8.75

 

 

 

5.12

5.26

4.98

4.89

5.09

4.84

7.88

 

Notes:

1)      Limit of the Regulatory Agency (ANEEL);

2)      In the previous disclosures, we reported a SAIDI of 6.97 and a SAIFI of 3.80 for CPFL Piratininga in 2016. This number excluded the effect of a CTEEP transmission failure during a storm. However, a decision by ANEEL determined that this effect was included in the SAIDI and SAIFI statistics, so that we corrected the values, as shown in the table.

 

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1Q19 Results | May 7, 2019

 

The annualized values of SAIDI and SAIFI for the first quarter of 2019 presented lower results than the annualized values for the same period of 2018 (-0.6% in the SAIDI and -9.3% in the SAIFI) in the consolidated of the distributors. In the annualized view by distributor, there was a reduction of 6.5% in the SAIDI and 12.6% in the SAIFI of CPFL Paulista. CPFL Santa Cruz and RGE reduced the SAIFI by 8.0% and 11.3%, respectively.

As regards RGE Sul specifically, the recovery plan for technical indicators remains Rural, Troncal and Urban pruning, treatment of major primary, secondary and damage recidivism, programming of services for testing and maintenance in substations and transmission lines, carry out termovision and ultrasound inspections in distribution networks, substations and transmission lines. In addition, part of the maintenance plan, improvements and extensions of the existing structure, with the forecast of exchanges of posts, capacity adjustment, modernization of substations, and installation of remote control and control equipment. This plan is part of a continuous improvement that is already under development. In addition to the significant investments being made, the significant reduction of these investments has already been observed.

Since 2019, the RGE and RGE Sul concessions have been unified, becoming a single distributor for the purpose of calculating technical indicators.

 

Losses

Find below the performance of CPFL distribution companies throughout the last quarters:

12M Accumulated Losses1

Total Losses

1Q18

2Q18

3Q18

4Q18

1Q19

ANEEL

CPFL Energia

8.82%

9.02%

8.86%

9.03%

8.84%

8.30%

CPFL Paulista

8.93%

9.10%

8.87%

9.13%

8.86%

8.37%

CPFL Piratininga

7.72%

7.87%

7.79%

7.94%

7.69%

6.92%

RGE

9.45%

9.73%

9.71%

9.70%

9.78%

9.11%

CPFL Santa Cruz

8.65%

8.84%

8.09%

8.56%

7.82%

7.58%

Notes:

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.

 

The consolidated losses index of CPFL Energia was of 8.84% in 1Q19, compared to 9.03% in 4Q18, a reduction of 0.19 p.p. Compared to 1Q18 (8.82%), there was an increase of 0.02 p.p.

 

11.2) Commercialization and Services Segments

11.2.1) Commercialization Segment

Consolidated Income Statement - Commercialization (R$ Million)

 

1Q19

1Q18

Var.

Net Operating Revenue

              760

              710

7.1%

EBITDA(1)

                31

                  8

295.0%

Net Loss

                15

                (0)

-

 

Note:

(1)       EBITDA is calculated from the sum of net income, taxes, financial result and depreciation/amortization.

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1Q19 Results | May 7, 2019

 

 

Operating Revenue

In 1Q19, net operating revenue reached R$ 760 million, representing an increase of 7.1% (R$ 50 million).

 

EBITDA

In 1Q19, EBITDA totaled R$ 31 million, compared to R$ 8 million in 1Q18, an increase of 295.0% (R$ 23 million).

 

Net Income

In 1Q19, net income was of R$ 15 million, compared to a net loss of R$ 0.4 million in 1Q18, a variation of R$ 15 million.

 

11.2.2) Services Segment

Consolidated Income Statement - Services (R$ Million)

 

1Q19

1Q18

Var.

Net Operating Revenue

              146

              112

30.4%

EBITDA(1)

                36

                23

58.5%

Net Income

                23

                13

78.1%

 

Note:

(1)       EBITDA is calculated from the sum of net income, taxes, financial result and depreciation/amortization.

 

Operating Revenue

In 1Q19, net operating revenue reached R$ 146 million, representing an increase of 30.4% (R$ 34 million).

 

EBITDA

In 1Q19, EBITDA totaled R$ 36 million, compared to R$ 23 million in 1Q18, an increase of 58.5% (R$ 13 million).

 

Net Income

In 1Q19, net income was of R$ 23 million, compared to a net income of R$ 13 million in 1Q18, an increase of 78.1% (R$ 10 million).

 

 

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1Q19 Results | May 7, 2019

 

11.3) Conventional Generation Segment

11.3.1) Economic-Financial Performance

 

Consolidated Income Statement - Conventional Generation  (R$ million)

 

1Q19

1Q18

Var.

Gross Operating Revenue 

301

308

-2.3%

Net Operating Revenue 

269

281

-4.3%

Cost of Electric Power

(29)

(19)

57.4%

Operating Costs & Expenses

(52)

(53)

-2.6%

EBIT

188

210

-10.1%

EBITDA

304

325

-6.5%

Financial Income (Expense)

(44)

(68)

-35.1%

Income Before Taxes

230

227

1.3%

Net Income 

184

182

1.4%

Nota:

(1)       EBITDA is calculated from the sum of net income, taxes, financial result and depreciation/amortization.

 

11.3.1.1) Operating Revenue

In the analysis presented in this report we consider the migration of the transmission companies CPFL Piracicaba and CPFL Morro Agudo from “Others” to “Conventional Generation” segment.

In 1Q19, Gross Operating Revenue reached R$ 301 million, a reduction of 2.3% (R$ 7 million). Net Operating Revenue was of R$ 269 million, registering a reduction of 4.3% (R$ 12 million).

The main factors that affected the net operating revenue are:

  • Reduction of R$ 10 million in other operating revenues;
  • Reduction of R$ 1 million in the revenue with the power supply from Jaguari Geração;
  • Reduction of R$ 1 million in the revenue with the power supply from CPFL Centrais Geradoras;

Partially offset by:

  • Increase of 1.7% (R$ 3 million) in the revenue with the power supply to CPFL Paulista and CPFL Piratininga;
  • Increase of 2.0% (R$ 2 million) in the revenue from the plants of Rio das Antas Complex (CERAN).

 

11.3.1.2) Cost of Electric Power

In the analysis presented in this report we consider the migration of the transmission companies CPFL Piracicaba and CPFL Morro Agudo from “Others” to “Conventional Generation” segment.

In 1Q19, the cost of electric power reached R$ 29 million, an increase of 57.4% (R$ 11 million), mainly due to the following factor:

  • Increase of R$ 11 million in the cost with Electric Energy Purchased for Resale, mainly due to the gain in 1Q18 related to the reimbursement of the GSF agreement.

 

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1Q19 Results | May 7, 2019

 

11.3.1.3) Operating Costs and Expenses

In the analysis presented in this report we consider the migration of the transmission companies CPFL Piracicaba and CPFL Morro Agudo from “Others” to “Conventional Generation” segment.

Operating costs and expenses reached R$ 52 million in 1Q19, compared to R$ 53 million in 1Q18, a reduction of 2.6% (R$ 1 million). The factors that explain these variations follow below:

 

PMSO

 

PMSO (R$ million)

 

1Q19

1Q18

Variation

 

%

PMSO

 

 

 

  Personnel

8

9

-10.2%

  Material

1

1

30.1%

  Outsourced Services

6

5

16.2%

  Other Operating Costs/Expenses

7

8

-13.0%

        GSF Risk Premium

2

2

31.9%

       Others

5

7

-25.3%

Total PMSO

22

23

-4.4%

 

 

PMSO item reached R$ 22 million in 1Q19, registering a reduction of 4.4%, due to the following factors:

           (i)        Reduction of 10.2% (R$ 1 million) in expenses with Personnel;

         (ii)        Reduction of 13.0% (R$ 1 million) in Other Operating Costs/Expenses;

Partially offset by:

        (iii)        Increase of 16.2% (R$ 1 million) in expenses with Outsourced Services;

        (iv)        Increase of 30.1% (R$ 0.2 million) in expenses with Material.

 

Other operating costs and expenses

Other operating costs and expenses reached R$ 30 million in 1Q19, compared to R$ 31 million in 1Q18, registering a reduction of 1.3% (R$ 0.4 million), explained by the variations below:

           (i)        Reduction of 0.5% (R$ 0.4 million) in Depreciation and Amortization item;

Partially offset by:

         (ii)        Increase of 0.3% (R$ 0.1 million) in Private Pension Fund.

 

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1Q19 Results | May 7, 2019

 

11.3.1.4) Equity Income

 

Equity Income (R$ Million)

 

 

 

 

 

1Q19

1Q18

Var. R$

Var. %

Projects

       

Barra Grande HPP

3

3

0

13.7%

Campos Novos HPP

30

27

3

11.3%

Foz do Chapecó HPP

30

31

(1)

-2.6%

Epasa TPP

22

24

(2)

-9.5%

Total

86

85

0

0.5%

 

 

In 1Q19, Equity Income result reached R$ 86 million, compared to R$ 85 million in 1Q18, an increase of 0.5% (R$ 1 million).

 

Equity Income (R$ Million)

EPASA

1Q19

1Q18

Var. R$

Var. %

         

Net Revenue

105

93

12

12.3%

Operating Costs / Expenses

(71)

(58)

(14)

23.3%

Deprec. / Amortization

(5)

(5)

0

-0.5%

Net Financial Result

(2)

(2)

0

-1.8%

Income Tax

(5)

(5)

(0)

7.0%

Net Income 

22

24

(2)

-9.5%

 

 

 

   

Equity Income (R$ Million)

FOZ DO CHAPECO

1Q19

1Q18

Var. R$

Var. %

         

Net Revenue

108

106

 2

2.0%

Operating Costs / Expenses

(29)

(24)

(4)

18.3%

Deprec. / Amortization

(16)

(15)

(0)

1.9%

Net Financial Result

(18)

(12)

(6)

47.8%

Income Tax

(15)

(16)

1

-5.1%

Net Income 

30

31

(1)

-2.6%

 

 

 

   

Equity Income (R$ Million)

BAESA

1Q19

1Q18

Var. R$

Var. %

         

Net Revenue

14

16

(1)

-7.0%

Operating Costs / Expenses

(6)

(5)

(1)

25.2%

Deprec. / Amortization

(3)

(3)

(0)

0.3%

Net Financial Result

(0)

(0)

0

-95.4%

Income Tax

(2)

(2)

(0)

11.0%

Net Income 

3

3

0

13.7%

 

Page 40 de 57


 
 

 

1Q19 Results | May 7, 2019

 

 

Equity Income (R$ Million)

ENERCAN

1Q19

1Q18

Var. R$

Var. %

         

Net Revenue

 68

69

(1)

-1.4%

Operating Costs / Expenses

(12)

(15)

3

-23.1%

Deprec. / Amortization

(6)

(6)

0

-4.6%

Net Financial Result

(4)

(5)

1

-27.7%

Income Tax

(16)

(14)

(2)

11.3%

Net Income 

30

27

3

11.3%

 

11.3.1.5) EBITDA

In 1Q19, EBITDA was of R$ 304 million, compared to R$ 325 million in 1Q18, a reduction of 6.5% (R$ 21 million).

 

Conciliation of Net Income and EBITDA (R$ million)

 

 1Q19

 1Q18

 Var.

Net Income

184

182

1.4%

Depreciation and Amortization

30

30

 

Financial Result

44

68

 

Income Tax /Social Contribution

46

45

 

EBITDA

304

325

-6.5%

 

11.3.1.6) Financial Result

 

Financial Result (Adjusted - R$ Million)

 

1Q19

1Q18

Var.

Revenues

     

Income from Financial Investments

3

15

-76.7%

Adjustment for inflation and exchange rate changes

0

4

-97.4%

Interest on loan agreements

7

0

2485.1%

PIS and COFINS on other finance income

(0)

(1)

-32.9%

Others

0

1

-75.2%

Total

10

20

-50.7%

   

 

 

Expenses

 

 

 

Interest on debts

(47)

(64)

-26.5%

Adjustment for inflation and exchange rate changes

(4)

(20)

-78.7%

Use of Public Asset

(2)

(4)

-49.3%

Others

(1)

(1)

11.4%

Total

(54)

(88)

-38.7%

 

 

 

 

Financial Result

(44)

(68)

-35.1%

 

 

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1Q19 Results | May 7, 2019

 

In 1Q19, the financial result was a net financial expense of R$ 44 million, representing a reduction of 35.1% (R$ 24 million), compared to net financial expenses of R$ 68 million registered in 1Q18.

·        Financial Revenues moved from R$ 20 million in 1Q18 to R$ 10 million in 1Q19, a reduction of 50.7% (R$ 10 million), due to:

ü  Reduction of 76.7% (R$ 11 million) related to income from financial investments;

ü  Variation of R$ 4 million in monetary and foreign exchange updates (zero-cost collar derivative2 effect of R$ 5 million in the period);

ü  Reduction of 75.2% (R$ 1 million) in other financial income;

Partially offset by:

ü  Revenue of R$ 6 million in 1Q19, related to interest on loan agreements;

·        Financial Expenses moved from R$ 88 million in 1Q18 to R$ 54 million in 1Q19, a reduction of 38.7% (R$ 34 million), due to:

ü  Reduction of 26.5% (R$ 17 million) in debt charges, due to the reduction in the volume of debt, and also to the reduction in the CDI interbank rate;

ü  Reduction of 78.7% (R$ 15 million) in monetary and foreign exchange updates;

ü  Reduction of 49.3% (R$ 2 million) in the financial expenses with the Use of Public Asset (UBP).

11.3.1.7) Net Income

In 1Q19, net income was of R$ 184 million, compared to a net income of R$ 182 million in 1Q18, an increase of 1.4% (R$ 2 million).

 

11.4) CPFL Renováveis

11.4.1) Economic-Financial Performance

Income Statement - CPFL Renováveis ( R$ Million)

 

1Q19

1Q18

Var. %

Gross Operating Revenue

             354

             406

-12.8%

Net Operating Revenue

             334

             384

-12.9%

Cost of Electric Power

              (53)

              (70)

-24.4%

Operating Costs & Expenses

            (249)

            (243)

2.7%

EBIT

               31

               70

-55.1%

EBITDA (1)

             192

             228

-15.7%

Financial Income (Expense)

            (112)

            (129)

-13.5%

Income Before Taxes

              (80)

              (59)

35.7%

Net Income

              (93)

              (73)

28.3%

Note:

(1) EBITDA is calculated from the sum of net income, taxes, financial result and depreciation/amortization.

 


2 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.

Page 42 de 57


 
 

 

1Q19 Results | May 7, 2019

 

 

11.4.1.1) Operating Revenue

In 1Q19, Gross Operating Revenue reached R$ 354 million, representing a reduction of 12.8% (R$ 52 million). Net Operating Revenue reached R$ 334 million, representing a reduction of 12.9% (R$ 49 million). These variations are mainly explained by the following factors:

 

Wind Source:

·        Reduction of R$ 44 million in revenue from wind farms, mainly due to: (i) the difference in the price of energy sold in the new energy auction through the Surplus and Deficit Offset Mechanism (MCSD), since the energy no longer contracted in 1Q18 was sold in the free market at a price higher than the contract price in the regulated market in 1Q19; and (ii) the lower generation of wind complexes.

 

SHPPs Source and Holding Company:

·        Reduction of R$ 11 million in revenue from SHPPs, chiefly due to the different strategy of seasonal adjustment of physical guarantee in the agreements between the periods (-R$ 42 million), partially offset by the secondary energy in the MRE, in the amount of R$ 26 million, and other effects of financial settlement in the amount of R$ 5 million at CCEE.

·        Increase of R$ 10 million in revenue from the Holding company due to intercompany operations with Boa Vista II SHPP, which started commercial operations in November 2018, and with wind farms. Other revenues also include the sale of a project with a positive impact of R$ 2 million in 1Q19.

 

Biomass Source:

·        Reduction of R$ 4 million in revenue from biomass due to the strategy of seasonal adjustments to agreements and the lower generation at some plants.

 

11.4.1.2) Cost of Electric Power

In 1Q19, cost of electric power totaled R$ 53 million, representing a reduction of 24.4% (R$ 17 million). Energy purchase cost totaled R$ 29 million in 1Q19, a reduction of 36.1% (R$ 17 million), mainly due to the lower energy purchase volume to meet the short-term market exposure and hedge operations. Cost of system use fees totaled R$ 24 million in 1Q19, a reduction of 2.7% (R$ 1 million), chiefly due to the positive effect of the recovery of PIS and Cofins credits, which was partially offset by price adjustments in connection charges, as well as the distribution and transmission system use and connection tariffs.

 

11.4.1.3) Operating Costs and Expenses

Operating Costs and Expenses reached R$ 249 million in 1Q19, compared to R$ 243 million in 1Q18, representing an increase of 2.7% (R$ 6 million).

 

 

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1Q19 Results | May 7, 2019

 

 

The factors that explain these variations follow:

 

PMSO

PMSO (R$ million)

 

 1Q19

 1Q18

 Variation

 

 R$ MM

 %

Reported PMSO

 

 

 

 

  Personnel

        (26)

        (25)

          (1)

5.7%

  Material

          (4)

        (10)

           6

-56.8%

  Outsourced Services

        (45)

        (43)

          (3)

6.5%

  Other Operating Costs/Expenses

        (13)

          (8)

          (5)

61.7%

        GSF Risk Premium

          (1)

          (1)

           1

-50.0%

        Others

        (12)

          (7)

          (6)

81.5%

Total PMSO

        (89)

        (85)

          (4)

4.2%

 

The PMSO item reached R$ 89 million in 1Q19, compared to R$ 85 million in 1Q18, an increase of 4.2% (R$ 4 million), mainly due to the reversal of provision for impairment in 1Q18, in the amount of R$ 6 million, which did not repeat in 1Q19, partially offset by the lower costs (R$ 3 million) with: (i) leases, given the lower generation, since a part of this payment is linked to the Company’s revenue, which was affected by weaker winds, and (ii) recovery of PIS and Cofins credits.

 

Other operating costs and expenses

Other operating costs and expenses, represented by Depreciation and Amortization accounts, reached R$ 161 million in 1Q19, increase of 1.8% (R$ 3 million), due to the startup of Boa Vista II SHPP in November 2018.

 

11.4.1.4) EBITDA

In 1Q19, EBITDA was of R$ 192 million, compared to R$ 228 million in 1Q18, a reduction of 15.7% (R$ 36 million). This reduction is mainly due to: (i) lower net revenue; (ii) reversal of provision for impairment in 1Q18.  These items were partially offset by the lower energy purchase costs.

Conciliation of Net Income and EBITDA (R$ million)

 

 1Q19

 1Q18

 Var.

Net income

                (93)

                (73)

28.3%

Amortization

              (161)

              (158)

 

Financial Results

              (112)

              (129)

 

Income Tax /Social Contribution

                (13)

                (13)

 

EBITDA

               192

               228

-15.7%

 

 

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1Q19 Results | May 7, 2019