© CPFL Energia 2015. Todos os direitos reservados.

Welcome

© CPFL Energia 2015. Todos os direitos reservados.

Challenges and

perspectives for

CPFL Energia

Challengesin theelectricpowerindustry

• PM 579 – tariff cut by

20.2%

• A-1 Auction canceled

• Hydrologic scenario starting to deteriorate

Key recent facts in the electric power industry

4

201420132012

• Involuntary exposure of discos

• A Auction (May/2013) had no offers

• Presidential Decree 7,945: CDE guarantees cash flow of Distributors

• A-1 Auction (Dec/2013): only 41% of demand was met

• Below-average rainfall

• Growing involuntary exposure of discos

• Presidential Decree 8,221: ACR account covering expenses with thermal dispatch and involuntary exposure

• A Auction: meets 57% of demand for May/14 onwards

• GSF affecting generators

• Eletrobras delayed the transfer of CDE of tariff subsidies

• 11th worst hydrologic scenario

2015 Agenda

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1

2

3

4

5

6

6

1. How to face the rationing threat in 2015?

27th

worst in history

Reservoir levels in SIN | % ENA of 2015 | % LTA

Evolution of NIPS Power Load in 2015 | GW

Thermal plant dispatch | GW

(1) Through November

Wet Dry Year1

SE/MW 67% 106% 82%

South 137% 162% 157%

NIPS 71% 114% 89%

CPFL estimate for 2015:-1.9%

Tariff Reality

7

2. How to mitigate the cash unbalance of distributors without funds from Treasury or ACR account?

Tariff flags | Jan/15

% change in average price in R$/MWh Residential at CPFL Energia

Extraordinary Tariff Review | Mar/15

(1) Source: Aneel; (2) Balance of regulatory assets and liabilities (-) tariff flags not homologated by Aneel.

Accumulated CVA at distributors2

CPFL | R$ billion

Repositioning of items further apart from the tariff coverage:

CDE Quota: from R$ 1.7 billion in 2014 to R$ 22.6 billion in 2015

Costs with energy acquisition:

• Itaipu: +46% for distributors S/SE/MW

• 18th Adjustment Auction: high contracting cost (R$ 387.07/MWh)

• Contracts by availability during green flag pricing

Mechanism created to reduce cost volatility at distributors and minimize the cash issue - DEFINITIVE

Considers costs of thermal generation and exposure to PLD (hydrologic risk, ESS and involuntary exposure)

Earnings from Tariff Flags 1 (R$ billion)

2012 2013 2014 1Q15 2Q15 3Q15

0.40.2

0.91.0

1.5

1.9+109%

67%Tariff flags

48%

19%

RTE/RTA

GenerationDistribution

Electric power industry: recent measures indicating higher rates of return for projects

8

Regulatory WACC [%] Auction Prices [R$/MWh]

Source: ANEEL; CCEE

HPP Itaocara

Thermal plants by availability

+8%

+36%

+34%

Transmission

+43%

Solar Wind SHPP

+45%+55%

+28%

3. How to regain the sector attractiveness for new investments?

Regulatory WACC [%]

Application of the new methodology for CPFL Piratininga generated a gain of R$ 43.5

million/year

9

In general terms, discussions around the methodology of 4CPTR yielded positive results compared to the current 3CPTR rules

4th Tariff Review Cycle | Main changes in methodology

CPFL Piratininga 3CPTR

(R$ million)

WACC of 8.09% (vs. 7.50% in 3CRTP) +17.1

Remuneration of special obligations +10.4

Technical Losses +22.3

Sharing of Other Revenue +6.7

Unrecoverable Losses -8.0

Xpd Factor of 1.53% + market adjustments/UCs (1.11% in 3CRTP)

-5.1

3. How to regain the sector attractiveness for new investments?

RAB methodology (3rd phase PH023)

Main Equipment: weighted average of prices throughout

the tariff cycle> mitigates risk of significant

price fluctuation

BAR:maintained pricing methodology

as a function of power assets, with restated formula

> increases BAR revenue

COM & CA:Pool of Reference Prices - rewards

companies that buy more efficiently >Application in PTRs from 2017

Aspects yet to be discussed:

Remuneration on fully-depreciated assets

Non-technical losses - incentive for efficient companies

Irrecoverable Revenues - increased aging in 4CPTR

Excess demand and excess reactive - rules for sharing

Aneel established the parameters to ensure a minimum level of investments and service quality

4. How to enable the process of renovating concessions for the Distribution segment?

10

CPFL Energia distributors renewing their concessions in 2015

The parameters do not pose a risk for CPFL Energia group distributors

• 19 distributors do not currently meet financial requirements valid from 2020

• 16 of 19 do not meet quality requirements either

Possibilities for Consolidation

1) DEC/FEC 3Q15 LTM; 2) EBITDA 3Q15LTM; 3) QRR (RTA 2014); 4) Net Debt (Sep/15); 5) Regulatory reference simulated with Selic at 12.87% p.a. Indicator must be ≤ 1/0.8*Selic in 2019 and ≤ 1/1.11*Selic in 2020.

Net Debt4/(EBITDA – QRR) vs Limits 2019 and 2020

EBITDA2 and EBITDA (-) QRR3 vs Limits 2017 and 2018

FinancialOperating | Consolidated 5 Ds

1

1

SAIDI

SAIFI

11

5. How to solve the impact of GSF for generators?

• Hydroelectric generators may mitigate the hydrologic risks by paying a risk premium

• Unique rules for Regulated (ACR) and Free (ACL) Contracting Environments

• ACR: generator pays premium (of up to R$9.50/MWh) to mitigate the effects of GSF

• ACL: the generator acquires at least 5% of the physical guarantee allocated in ACL in existing reserve energy through 2018 (risk premium of R$10.50/MWh)

General Rules

• Number of plants: 41 (7 HPPs and 34 SHPPs)

• Exposure Level: 760 MW average

• Exposure ACR: 77% (586 MW average)

• Exposure ACL: 23% (174 MW average)

• Refund of 2015 GSF: up to R$ 158 million (impact on EBITDA)

CPFL Perspective Next steps

Approval by Senate: Nov. 24, 2015

ANEELRegulation

Necessary corporate approvals

Adhesion of generators: by Dec. 18, 2015

• Did not allow electricity sales in the free market

6. How to re-submit HPPs not renewed in 2012?

12

Change in rules of auctions of un-renewed generation concessions:

PM 579/12

• Allows electricity sales in the free market (up to 30%)

PM 688/15 (Official Letter 384/15)

• No payment of granting bonus

• Winning bid offering the highest discount from the ceiling tariff

• Did not remunerate investments in expansion

• With payment of granting bonus

• Winning bid offering the highest granting bonus and lowest tariff

• Remunerates investments in expansion

Auction became more attractive and indicated more adequate prices

Agenda for 2016

13

1

2

3

4

Dry periodWet period

(91% of thermal plants)

With an ENA of 90% of LTA and thermal dispatch of 70%, the expectation is to reach Nov/16 with reservoir levels close to the average of the 1997-2014 period.

Reservoir Level Scenarios for 2016

1. Hydrologic scenario

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15

2. Macroeconomic scenario for 2016

GDP | YoY change (%)

Inflation | IPCA inflation - YoY change (%) Payroll | YoY change (%)

Source: IBGE and LCA

Industrial Production | YoY change (%)

Evolution of PDAin R$ million

Collection ruler | 14 actions aimed to find the most effective recovery

16

3. Delinquency and PDA

Distribution Segment

4. Outlook for CPFL Energia

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4CPTR is already a reality for CPFL Piratininga and will be implemented at the 5 small distributors in 1Q16

New parameters valid for distributors with renewed concession

Balance of CVA tends to decrease as cumulative values are transferred to tariffs

• CPFL Piratininga: Oct/15

• CPFL Santa Cruz / CPFL Leste Paulista / CPFL Sul Paulista / CPFL Jaguari / CPFL Mococa: Mar/16

• CPFL Paulista: Apr/16

• RGE: Jun/16

Expected behavior for CVA

balance

Generation Segment

4. Outlook for CPFL Energia

18

Expansion of CPFL Renováveis

Expenses with GSF for the portion adjusted by the ACR rule will be avoided from 2016 and the risk premium will be paid only from 2020 (new cash outflow), after the end of refunding

Note: Physical Guarantee (annual) and prices restated through Sep. 30, 2015

Beginning of agreement term of Morro dos

Ventos II wind farmAnnual revenue:

R$ 18 million

Startup of Campo dos Ventos and São Benedito

wind farms Annual revenue:

Free Market

Startup of SHPP Mata Velha

Annual revenue:

R$ 16 million

Startup of Pedra Cheirosa wind farmAnnual revenue:

R$ 60 million

Startup of SHPP Boa Vista II

Annual revenue:

R$ 48 million

2016 2017 2018 2019 2020

Status &StrategicPlanning

CAGR 2010-LTM 3Q15

11.6% 20.6%

3.0%

EBITDA EBITDA Margin

CAGR 2010-LTM 3Q15

4.3%-0.1%

Trading2

173

Conventional Generation

1,388

CPFL Energia Consolidated2

4,033

Distribution1,99349%

34%

4%

13%Renewable Generation

509

Net Revenue | R$ million EBITDA | R$ million Net Income | R$ million

LTM 3Q15 Breakdown of Adjusted EBITDA1

R$ million

20

CPFL Energia - Overview

• Largest private player in the Brazilian electric power industry

• Leading distributor through 8 subsidiaries

• Second largest private generator holding interest equal to 3,129 MW3 of installed capacity, of which 94% from renewable sources

• Leader in Renewable Energy in Brazil

• One of the most profitable operations of energy Trading and high-value Services.

Net Income Net Margin

1) Adjusted by regulatory assets and liabilities and non-recurring items; excludes holding company; 2) Commercialization in the free market and Services; 3) Considering CPFL's share of each generation project

21

Debt

Leverage1 | R$ billion

3,570 3,830 3,886 3,736 3,835 3,755 3,971Adjusted EBITDA1.2

R$ million

Adjusted Net Debt1

/Adjusted EBITDA2

Inc. CVA adjustment to cash balance

Exc. CPFL Renováveis

If we exclude CPFL Renováveis,

the group's growth driver, leverage ratio would stand at

2.66x

Evolution in cash balance and CVA3 | R$ billion

5,622

4,8084,8014,9994,134

2,616

+17%

YTD CVA receivables through 3Q15 affecting our cash balance.

Adjusting by this cash balance, the net debt/EBITDA ratio would be 2.98 times in 3Q15

1) Criteria adopted in financial covenants; 2) LTM EBITDA; 3) Balance of regulatory assets and liabilities (-) dynamic pricing not homologated by Aneel.

Distribution

J

H

M

A

B

DC

LK

E

G

I

F

Creating value

Destroying

value

Regulatory EBITDA

Actu

al

EB

ITD

A

CPFL has been creating value through Operating Efficiency

23 1) Source: CPFL; Bank of America – Merrill Lynch Report (Jun. 17, 2015)

100%

Creates value

Destroysvalue

Operating EfficiencyRegulatory PMSO / Actual PMSO (%)

Regulatory EBITDA vs. Actual EBITDA1

Expectation to resume real EBITDA growth after the application of 4CPTR

CPFL Piratininga: +12.0% in Regulatory EBITDA

CPFL continues to create value with actual EBITDA exceeding regulatory EBITDA

3CPTR

Regulatory EBITDA vs. Actual EBITDACPFL Historical (R$ billion - constant currency)

Actual EBITDA

Regulatory EBITDA+28% +40%

Transfer of operating costsin 4CRTP

CPFL Group leading the efficiency ranking

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1) CPFL Santa Cruz, CPFL Mococa, CPFL Leste Paulista, CPFL Sul Paulista and CPFL Jaguari have efficiency rates in 4CRTP ranging from 77% to 100%, with the rates under 4CRTP exceeding the ones in 3CRTP for all companies.

Efficiency is measured by the gap between the company and the benchmark

Disco

Relative efficiency –reference for cost

target (4CPTR)

122%

126%

126%

Transfer of operational costs abovereal costs

% of Relative Efficiency of Larger Distributors1

Y =

km

of

gri

d,

ma

rke

t a

nd

cu

sto

me

rs

X = costs

Efficiency Threshold

93%95%

98%100%

3 CRTP

4 CRTP

76% 69%

IndustryAverage

99%100%

Smart distribution was a key theme addressed by the Project

"Energy in the City of the Future"

Vision of the Future of Distribution is directly associated with Smart Grids:

• The smart grid technology will provide increased network monitoring capabilities and greater quality and commercial opportunities

• Smart Grids will boost the amount of information available, which will be used in innovative ways to optimize operations and services

CPFL is preparing itself for the future challenges of Distribution

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Emergency Dispatch

26

The past:

The future:

System interventionor self-healing

Automatic failure detection Real-time informationfor customers

Intelligent meter

• Reduced unnecessary travel;

• Shorter average service;

• Reduced SAIDI (optimization of possibilities of network maneuvering);

• Greater customer satisfaction (real-time information);

• Optimization of service to nearly 600,000 tickets every year.

Gains

Reading and Delivery

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The past:

Reading Energy bill Delivering the bill Payment

Making the payment

The future:

Smart Metering Center and/or automatized

software

Data networkIntelligent meters

Bill via e-mailand/or app

(consumption management)

• Greater employee safety (reduced travel and exposure to risk)

• Data gathering from load curve and customer consumption profile;

• More sustainable process (reduced use of paper).

Gains

Payment overdue Dispatch Disconnection Dispatch ReconnectionMaking the payment

Disconnection and Reconnection

28

The past:

Making the payment

The future:

Smart Metering Center and/or automatized

software

Data networkIntelligent meters

Energy disconnection

• Increased safety of employees (reduced need to travel and confront customers);

• Reduced delinquency (improved disconnection management, more subsidies to propose bill due date, etc.);

• Improved understanding of customer profile (more gathered data available).

Gains

ConventionalGeneration

CPFL Geração focuses on operating efficiency

PMSO /

Physical

guarantee

(R$/MWh)

PMSO /

Installed

capacity

(R$/MW)

+30%

-22%

Genco 1 Genco 2 Genco 3 Genco 4 Genco 5

Genco 1 Genco 2 Genco 3 Genco 4 Genco 5

PMSO1 / Physical guarantee (R$/MWavg) | 2014

Note: (1) PMSO excludes Epasa's fuel costs

PMSO1 / Installed capacity (R$/MW) | 2014

30

Sector average

Sector average

• Operating Efficiency with Innovation & Technology

• Strategic Growth

Note: Reference ID CPFL plants between 85% and 93%, ID from 2016 between 92% and 94%(1) Abrage Annual Report 2014; (2) Companies' filings

CPFL Geração: operating efficiency and strategic growth

Average availability by Agent | HEP (%)

Domestic Agents1 International Agents2

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CPFL Geração Strategy

• Leader in operating efficiency, becoming an international benchmark

• Enable growth with value creation

Renewable Generation

Evolution of Installed Capacity (MW) - CPFL Renováveis

Visible growth through development of high quality pipeline

1,039MW of projects with a highly confident execution profile, ready to sell energy in the next 12 months

Pipeline of projects in three of the four renewable sources

3,453MW

Ready to sell energy in the

next 12 months

33

CPFL Renováveis: Evolution of the Company's

portfolio

SolarBiomassWindHydro

399519

14834

70 75 42

251

19

1,032

150

285365 385 375 161

280294

46

200

370

940

175

532 13113

1

1 3

CPFL Renováveis: Portfolio Diversification

Source: Company - ANEEL and company websites; Updated through Nov/2015; Note: (1) Installed capacity in operation (MW) and considering players with at least 1% of market share.

Largest player in the renewable energy industry1

Small hydro (SHPP)

Biomass

Solar

Wind

333

2,135

Under construction

1,802

940

844

532

400375385 366

336355

232297

434

Biomass

Solar

Wind

Small hydro (SHPP)

34

35

CPFL Renováveis: Recent evolution and Strategic

Guidelines

Adjustments to EBITDA

Energy Generation (GWh) EBITDA (R$ million)

CAGR

32.0%

Note: (1) EBITDA excludes non-recurring effects. Between 2013 and 2015, the two main non-recurring impacts were the cost of GSF and extraordinary energy purchases to meet contracts.

• Efficiency of Operations

• Growth with value creation

CPFL Renováveis Strategy

• High operating performance and efficacy in management, supported by controls, processes, systems, organizational structure and institutional presence

• Creating value by implementing generation, M&A and innovation projects

CAGR

EBITDA 30.3%

ADJUSTED EBITDA1 34.6%

Trading & Services

Ranking of Trading Companies

CPFL Brasil: the best operating result despite the lower energy volume compared to the competition

37 Source: CCEE (Public Reports); Companies' Financial Statements. There are no financial data available for all key commercialization companies

General Market Share – 10 largest | 2014

EBITDA (R$ million)

EBITDA – Key Players | 2014

38

CPFL Brasil: Portfolio Evolution and Strategic Guidelines

CAGR 2010-15

13.2%

CAGR 2010-15

31.5%

• Profitability

• Volume

• New Products

CPFL Brasil Strategy

• Continue to figure among the top commercialization players, maintaining EBITDA margin and maximizing value

• Grow sales of conventional and incentivized energy, expanding presence in retail

• Explore synergies through energy management services offered to customers

Free Customers | Conventional + Special

Free Customers | Special

Strategic Plan& Sustainability

40

CPFL Energia Strategy

Distribution Generation Renewable Commercialization Services

41

Sustainability

Actions

Raising awarenessabout the

strategic relevance of the

Sustainability Platform

Establishing formal sustainability

targets for internal leaderships

Results - 2015

Integrated platform based on the

strategic plan, with 6 themes, 17 leverages, 63 indicators and short

and medium-term goals

Sustainability goals published on CPFL's

website (of all indicators, 82.5% have

been achieved1)

Officers and managers have

sustainability goals

Recognition

• Component of ISE since its first edition, in 2005

• 40 companies of 19 industries - Market cap of R$ 1.2 trillion

• Component of DJSI Emerging Markets for the fourth consecutive year

• 86 companies achieved the Dow Jones requirements (17 Brazilian, of which 3 are in the power industry)

• Component of MSCI for the second consecutive year

• Formed by companies with the highest ESG standards in their industries

• Transparent reporting of greenhouse gas emissions since 2006

• Best company in Management of Water Resources in Latin America - 2015

WelfareUntil 1999

Social Responsibility2000 to 2006

Corporate SustainabilityAdded to business from 2007

Level of incorporation of

the theme Sustainability

Increasingly more comprehensive concept of responsibility

Note: (1) Data for 2014. 2015 data will be available in Feb/2016.