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.  

.

São Paulo, March 12, 2012 – CPFL Energia S.A. (BM&FBOVESPA: CPFE3 and NYSE: CPL), announces its 4Q11/2011 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 4Q10/2010, unless otherwise stated.

CPFL ENERGIA ANNOUNCES 4Q11 NET INCOME OF R$ 443 MILLION

Notes:
(1)     EBITDA (IFRS) is calculated from the sum of net income, taxes, financial result, depreciation/amortization and result of pension fund contributions;
(2)     EBITDA (IFRS + Regulatory Assets & Liabilitites – Non-recurring) considers, besides the items mentioned above, the regulatory assets and liabilities, and excludes the non-recurring effects;
(3)     Net Income (IFRS + Regulatory Assets & Liabilitites – Non-recurring) considers the regulatory assets and liabilities and excludes the non-recurring effects.

4Q11 HIGHLIGHTS

·      Increase of 4.6% in sales within the concession area;

·      Acquisition of Atlântica Wind Complex (120 MW of installed capacity, under construction) by CPFL Renováveis, in January 2012;

·      Acquisition of Bons Ventos Wind Complex (157.5 MW of installed capacity, operating) by R$ 1,062 million by CPFL Renováveis, in February 2012;

·      Acquisition of the biomass co-generation assets of Ester Plant (40 MW of installed capacity, operating) by R$ 111.5 million by CPFL Renováveis, in March 2012;

·      Distribution of R$ 1,506 million in dividends, related to 2011, with dividend yield of 7.1% (LTM);

·      Investments of R$ 703 million in 4Q11 and of R$ 1,905 million in 2011. Estimated capex of R$ 8,310 million between 2012-2016;

·      Increase in the stake in CPFL Renováveis to 63.0%, considering the conclusion of the acquisition of Jantus, and in EPASA to 52.75%, in December 2011;

·      Conclusion of the transaction of acquisition of Santa Luzia SHPP, in December 2011;

·      Financing of R$ 85 million approved by BNDES to the construction Salto Góes Small Hydroelectric Power Plant;

·      Appreciation of 34.0% of CPFL Energia’s shares price on the BM&FBOVESPA in 2011, outperforming the Ibovespa (-18.1%) and the IEE (19.7%); appreciation of 25.9% of the ADRs on the NYSE, outperforming the DJ Br20 (-20.6%) and the Dow Jones (5.5%);

·      CPFL Energia’s shares were maintained in the ISE (the BM&FBOVESPA’s Corporate Sustainability Index), for the 7^th consecutive year.

4Q11/2011 Results | March 12, 2012

                                                                                        

 

INDEX

1) ENERGY SALES

1.1) Sales within the Distributors’ Concession Area

In 4Q11, sales within the concession area, achieved by the distribution segment, totaled 13,947 GWh, an increase of 4.6%.

In 4Q11, sales to the captive market totaled 10,183 GWh, an increase of 3.2%.

The energy volume in GWh consumed by free customers in the distributors’ operational areas, billed through the Distribution System Usage Tariff (TUSD), rose by 8.5% to 3,764 GWh in 4Q11, reflecting the migration of customers to the free market.

1.1.1) Sales to the Captive Market

Note: The captive market sales by distributor tables are attached to this report in item 12.7.

In the captive market, emphasis is given to the growths of the residential and commercial classes, which jointly accounted for 54.4% of total consumption by the distributors’ captive consumers:

·      Residential and commercial classes: up by 5.3% and 6.7%, respectively, favored by the accumulated effects of economic growth (increase of income levels, purchasing power of consumers and the expansion of credit to consumption) over recent years, partially offset by the lower temperatures.

·      Industrial class: down by 4.3%, due to the migration of customers to the free market and the slowdown in industrial production.

1.1.2) Sales by Class – Concession Area

1.1.3) TUSD by Distributor

1.2) Commercialization and Generation Sales – Excluding Related Parties

Note: Excludes sales to related parties and in the CCEE. Considers Furnas (Semesa) and other generation sales outside the group, except Epasa’s sales (availability contract). Includes sales of CPFL Renováveis consolidated in November and November, considering 54.5%, and in December, considering 63.0% (excluding related parties).

In 4Q11, commercialization and generation sales moved down by 0.5% to 3,186 GWh, mainly due to the decrease in sales through commercialization’s short-term bilateral contracts, still effective in 2010 and that matured throughout 2011. However, the sales to free customers rose, due to the increase in the number of customers in the portfolio in 2011 compared to 2010 (from 129 to 140).

2) 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 bellow. Except for: (i) the jointly-owned entities Enercan, Baesa, Foz do Chapecó and Epasa, which are consolidated proportionately, and (ii) the investment in Investco recorded at cost by the subsidiary Paulista Lajeado, the other units are fully consolidated.

As of December 31, 2011, the participation of non-controlling interests stated in the consolidated statements refers to the third-party interests in the subsidiaries Ceran, Paulista Lajeado and in CPFL Renováveis.

2.1) Consolidation of CPFL Renováveis Financial Statements

On August 24, 2011, the joint venture between CPFL Energia and ERSA was actually implemented, through the incorporation of CPFL Renováveis, when CPFL Energia started holding, indirectly, 54.50% of CPFL Renováveis, through its subsidiaries CPFL Geração (43.65%) and CPFL Brasil (10.85%).

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.

On December 19, 2011, the acquisition of Jantus was concluded. CPFL Energia now indirectly holds 63.0% of CPFL Renováveis, through its subsidiaries CPFL Geração (35.5%) and CPFL Brasil (27.5%).

Jantus has been consolidated in CPFL Renováveis’ financial statements since December 1, 2011.

3) ECONOMIC-FINANCIAL PERFORMANCE

Notes:

(1)    EBITDA (IFRS) is calculated from the sum of net income, taxes, financial result, depreciation/amortization and result of pension fund contributions;

(2)    EBITDA (IFRS + Regulatory Assets & Liabilitites – Non-recurring) considers, besides the items mentioned above, the regulatory assets and liabilities, and excludes the non-recurring effects;

(3)    Net Income (IFRS + Regulatory Assets & Liabilitites – Non-recurring) considers the regulatory assets and liabilities and excludes the non-recurring effects.

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3.1) Operating Revenue

Gross operating revenue in 4Q11 reached R$ 4,983 million, representing an increase of 8.5% (R$ 391 million). Excluding the revenue from building the infrastructure of the concession (which does not affect the results because of the related cost, in the same amount), gross operating revenue would have amounted to 4,631 million, an increase of 9.1% (R$ 384 million).

The upturn in gross operating revenue was mainly caused by the following factors:

·         Tariff adjustments of the distribution companies;

·         Increase of 3.2% in the sales volume to the captive market;

·         Increase of 4.1% (R$ 13 million) in the gross revenue of TUSD from free customers, mainly due to the migration of captive customers to the free market;

·         Increase of 75.1% (R$ 28 million) in the other revenues;

·         Additional gross revenue:

·         At the Conventional Generation Segment, in the amount of R$ 22 million (R$ 21 million net of taxes), due to: (i) the beginning of operations of Foz do Chapecó Hydroelectric Facility,  in October 2010, and of Epasa’s 2 thermoelectric facilities, in January 2011;

·         At CPFL Renováveis, in the amount of R$ 83 million (R$ 79 million net of taxes), due to: (i) the new operating assets, resulting from the joint venture with ERSA and the acquisition of Jantus, whose results have been accounted for CPFL Renováveis since August and December 2011, respectively; and (ii) the beginning of operations of Bio Formosa and Bio Buriti thermoelectric facilities, in September and October 2011, respectively;

It is important to mention that part of the sales of these projects is made to Group companies, being eliminated in the consolidation.

Deductions from the operating revenue were R$ 1,578 million, representing an increase of 11.7% (R$ 166 million), mainly due to the following factors: (i) increase of 10.0% in taxes on revenue (R$ 106 million); (ii) increase of 12.9% in CCC and CDE sector charges (R$ 37 million); (iii) increase in global reversal reserve - RGR (R$ 24 million); and (iv) increase of 37.8% in the amounts related to Proinfa (R$ 5 million). These increases were partially offset by the reduction of 14.4% in the amounts related to the R&D and energetic efficiency program (R$ 6 million).

Net operating revenue reached R$ 3,404 million in 4Q11, representing an increase of 7.1% (R$ 226 million). Excluding the revenue from building the infrastructure of the concession, net operating revenue would have amounted to 3,052 million, an increase of 7.7% (R$ 219 million).

3.2) Cost of Electric Energy

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$ 1,642 million in 4Q11, representing a, increase of 0.1% (R$ 2 million):

·      The cost of electric power purchased for resale in 4Q11 was R$ 1,298 million, representing a decrease of 2.2% (R$ 29 million), due to the following effects:

         (i)        Decrease in the cost of energy purchased in the short term (R$ 109.0 million), due to the reduction of 86.3% in the average purchase price, partially offset by the increase of 48.5% (489 GWh) in the volume of purchased energy;

        (ii)       Decrease in the PROINFA cost (R$ 1.5 million), due to the 8.1% reduction in the volume of purchased energy (39 GWh), partially offset by the increase of 5.0% in the average purchase price;

       (iii)         Decrease in PIS and Cofins tax credits, generated from the energy purchase (R$ 6.8 million).

Partially offset by:

      (i)             Increase in the cost of energy purchased through auction in the regulated environment and through bilateral contracts (R$ 71.2 million), caused by the 17.5% increase in the average purchase price, partially offset by the reduction of 9.0% (860 GWh) in the volume of purchased energy. This increase was partially offset by the flowing factors: (i) Epasa: expenses increment of R$ 31 million, in 4Q10, with the energy acquisition to honour the commitments taken, while it hasn’t started the operations of Termonordeste and Termoparaíba Thermoelectric Plants; and (ii) Foz do Chapecó Hydroelectric Facility: expenses increment of R$ 10 million, in 4Q10, with the energy acquisition to honour the commitments taken;

     (ii)             Increase in the cost of energy from Itaipu (R$ 17.3 million), mainly due to the 7.8% increase in the average purchase price, partially offset by the 0.7% reduction (19 GWh) in the volume of purchased energy.

The net reduction of 428 GWh in the volume of purchased energy is due to the increase of purchases within CPFL Group.

·      Charges for the use of the transmission and distribution system reached R$ 344 million in 4Q11, a 10.0% increase (R$ 32 million), mainly due to the following factors:

            (i)        Increase of 19.4% in the basic network charges (R$ 42.5 million), mainly due to the following factors:

·         Increase of 17.2% in CPFL Paulista (R$ 18.3 million) and of 19.3% in CPFL Piratininga (R$ 10.3 million), partially offset by the 14.9% reduction in RGE (R$ 7.4 million);

·         Increases in Foz do Chapecó Hydroelectric Facility (R$ 6.5 million) and Epasa (R$ 1.5 million), due to the beginning of operation of the facilities.

           (ii)        Increase in the energy reserve charges (R$ 12.8 million);

          (iii)        Increase of 27.1% in the charges for the use of the distribution system (R$ 2.7 million).

Partially offsetting:

            (i)        Reduction of 25.0% in the system service usage charges - ESS (R$ 15.2 million);

           (ii)        Reducion of 23.8% in the conection charges (R$ 5.9 million);

          (iii)        Reduction of 10.1% in Itaipu charges (R$ 2.6 million); 

         (iv)        Increase  in the PIS and Cofins tax credits (R$ 3.0 million), generated from the charges for the use of the transmission and distribution.

3.3) Operating Costs and Expenses

Operating costs and expenses were R$ 985 million in 4Q11, registering an increase of 8.6% (R$ 78 million), due to the following factors:

·      Increase of 2.0% (R$ 7 million) in the cost of building the infrastructure of the concession (which does not affect the results because of the related revenue, in the same amount). This item, which reached R$ 352 million in 4Q11, has its counterpart in the “operating revenue”;

·      The PMSO item reached R$ 432 million in 4Q11, registering an increase of 12.5% (R$ 48 million), mainly due to the following factors (that need to be excluded for comparison purposes with the 4Q10):

         (i)       Additional PMSO of CPFL Renováveis, in the amount of R$ 41 million, due to:

·        The new operating assets, resulting from the joint venture with ERSA and the acquisition of Jantus (R$ 40 million), of which R$ 9 million are related to non-recurring  expenses with outside services for the operations with ERSA and Jantus to the consolidation of CPFL Renováveis on CPFL Energia;

·         Start-up of Bio Formosa and Bio Buriti thermoelectric facilities, in September and October 2011, respectively (R$ 1 million).

        (ii)            Additional PMSO of Conventional Generation Segment, in the amount of R$ 5 million, due to the start-up of Foz do Chapecó Hydroelectric Facility and Epasa - Termonordeste and Termoparaíba Thermoelectric Facilities;

       (iii)           Increase in the legal and judicial expenses and indemnities of CPFL Piratininga, due to the negative effect in the line of “loss/gain with assets disposal” (R$ 11 million), due to the non-operating revenue from the sale of a real state located in the Brazilian city of Santos, in the amount of R$ 11 million (non-recurring item).

Excluding these effects, PMSO for 4Q11 would have totaled R$ 383 million and PMSO for 4Q10 would have been R$ 392 million, a decrease of 2.4% (R$ 9 million), compared to the IGP-M index of 5.1% (for the last 12 months).

The principal factors explaining the variation in PMSO, following the exclusion of the effects already mentioned were:

         (i)          Outsourced services expenses, which registered a decrease of 6.1% (R$ 9 million) mainly due to the higher volume of services hired from the companies of the CPFL Group;

        (ii)          Other operating costs/expenses, which registered a decrease of 15.4% (R$ 11 million), mainly due to the following factors:

·         The reduction of expenses in RGE (R$ 4 million), caused by a higher recovery of uncollectible accounts receivable (R$ 2 million) and by the lower expenses with advertising and publicity (R$ 1 million); 

·         The reduction in CPFL Geração (R$ 4 million), mainly due to: (i) the amount registered, in 4Q10, in the line of “other indemnities, losses and damages”, related to the social auditing for the agreement approved in the court, between the Moovement of People Affected by Dams (MAB) and the Mines and Energy Ministry (MME) (R$ 2 million); and (ii) the lower expenses with advertising and publicity (R$ 1 million). 

Partially offsetting:

         (i)            Personnel expenses, which reported an increase of 6.7% (R$ 10 million), mainly due to the Collective Bargaining Agreement for 2011 (R$ 7.5 million).

·      Depreciation and Amortization, which represented a net increase of 12.1% (R$ 24 million), mainly due to the following factors:

              (i)       Additional expense in the Conventional Generation Segment, in the amount of R$ 6.9 million, due to the start-up of Foz do Chapecó Hydroelectric Facility (R$ 3.3 million) and Epasa - Termonordeste and Termoparaíba Thermoelectric Facilities (R$ 3.6 million);

             (ii)       Additional of CPFL Renováveis, in the amount of R$ 25.5 million, related to: (i) the new operating assets, resulting from the joint venture with ERSA and the acquisition of Jantus (R$ 23.0 million); and (ii) the start-up of Bio Formosa and Bio Buriti thermoelectric facilities, in September and October 2011, respectively (R$ 2.5 million).

Partially offset by:

            (i)   The decrease related to the change in the law that sets the criteria for use of PIS and Cofins tax credits (R$ 14.8 million).

The increase in the operating costs/expenses was partially offset by the Private Pension Fund, an item which represented a revenue of R$ 15 million in 4Q10 and of R$ 16 million in 4Q11, resulting in a positive variation of R$ 1 million. This variation is due to the expected estimated impact on actuarial assets and liabilities, according to CVM Deliberation No. 371/00, as shown in the Actuarial Report.

3.4) Regulatory Assets and Liabilities

The regulatory assets and liabilities, which are no longer registered, in accordance with the pronouncements issued by the Accounting Pronouncements Committee (CPC) and the international practices (IFRS), represented a cost reversal of R$ 35 million in 4Q10 and R$ 1 million in 4Q11 (impact in EBITDA). The amounts related to the deferral of the regulatory assets and liabilities will be passed through the tariffs in the next tariff readjustment, through the financial components. The amounts related to the amortization are reflected in the tariffs of each period.

It is important to note that, as directed by Aneel, the 4Q11 values include preliminary amounts of the liability related to the provisory tariff procedures for the 3^rd cycle of tariff review of CPFL Piratininga (corresponding to a reduction of R$ 29 million in the EBITDA). The application of this methodology should have occurred on October 23, 2011.

3.5) EBITDA

Based on the above factors, 4Q11 EBITDA (IFRS) reached R$ 978 million, registering a 20.8% increase (R$ 168 million).

Considering the regulatory assets and liabilities and excluding the non-recurring effects, the EBITDA (IFRS + Regulatory Assets and Liabilitites – Non-recurring effects) would have totaled R$ 833 million in 4Q10 and R$ 989 million in 4Q11, an increase of 18.6% (R$ 155 million).

3.6) Financial Result

The 4Q11 net financial expense was R$ 170 million, a 48.4% increase (R$ 55.5 million) compared with the net financial expense of R$ 115 million reported in 4Q10.

The items explaining these changes are as follows:

·         Financial Expenses: increase of 49.4% (R$ 131 million), from R$ 266 million in 4Q10 to R$ 397 million in 4Q11, mainly due to the following factors:

ü      Increase in the debt balance, as a result of: (i) the consolidation of 100% of debt from CPFL Renováveis, according to the new accounting procedures of IFRS; (ii) the strategy of the Group’s business expansion, such as the acquisition of Jantus and the financing of several greenfield projects (still under construction) at CPFL Renováveis; and (iii) the pre-funding strategy, anticipating the funding of debt with maturity by 2012;

ü      Increase in the CDI Interbank rate, from 2.6% in 4Q10 to 2.7% in 4Q11 (R$ 9.3 million);

ü     The currency effect in the purchase of energy from Itaipu (difference between the invoice and the payment day + adjustment until the end of the month for the open invoices) (R$ 12.8 million);

ü     Financial expense in the Conventional Generation Segment (R$ 24.1 million) related to the start-up of Foz do Chapecó Hydroelectric Facility (R$ 10.5 million) and Epasa - Termonordeste and Termoparaíba Thermoelectric Facilities (R$ 13.6 million). During the building of these plants, this financial expense was booked as investment, in the the fixed asset, according to the accounting procedures (CPC 20);

ü     Additional financial expense from CPFL Renováveis (R$ 19.4 million), related to: (i) the new operating assets, resulting from the joint venture with ERSA and the acquisition of Jantus. 

·         Financial Revenues: increase of 50.1% (R$ 76 million), from R$ 151 million in 4Q10 to R$ 227 million in 4Q11, mainly due to the income from financial investments (R$ 78 million), as a result of the increase in the investment balance and the increase in the CDI Interbank rate.

3.7) Taxation on the Result

In 4Q11, the income tax and social contribution totaled R$ 163 million, an increase of R$ 8 million compared to the amount registered in 4Q10. This increase is due to a higher income before taxes, partially offset by a higher use of tax credits (R$ 36 million in 4Q11 compared to R$ 18 million in 4Q10).

3.8) Net Income

Net income (IFRS) in 4Q11 was R$ 443 million, an increase of 22.6% (R$ 82 million).

Excluding the amount related to the non-controlling shareholders, the net income (IFRS) in 4Q11 was R$ 414 million, an increase of 16.3% (R$ 58 million), compared to the net income of R$ 356 million in 4Q10.

Considering the regulatory assets and liabilities, including the effects on the financial result, (net of taxes) and excluding the non-recurring effects, the net income (IFRS + Regulatory Assets and Liabilities – Non-recurring effects) would have totaled R$ 374 million in 4Q10 and R$ 448 in 4Q11, an increase of 19.8% (R$ 74 million).

4) DEBT

4.1) Financial Debt (Including Hedge)

CPFL Energia’s financial debt (including hedge) increased by 42.2% to R$ 13,388 million in 4Q11. This increase in net debt is a reflection of the consolidation of 100% of the debt of CPFL Renováveis, pursuant to the new IFRS accounting practices, as well as supporting the Group’s business expansion strategy, such as for example the acquisition of Jantus’ assets and the financing of a number of greenfield projects still under construction by CPFL Renováveis. During the course of 2011, CPFL Energia put into practice its pre-funding strategy for 2012, anticipating funding for maturing debt during 2012. Therefore, the company was capable of reducing the real cost of its debt by approximately 0.1 percentage point, to 4.3% per year, as well as extending its debt profile by 24.5%, from 3.47 to 4.32 years. Thus, the percentage of the debt classified as short-term declined from 23.9% to 12.3%.

The main contributing factors to the variation in the balance of financial debt were:

·         CPFL Brasil, CPFL Geração, CPFL Renováveis and Conventional Generation Projects: funding (BNDES and other financial institutions), net of amortizations, totaling R$ 1,651 million, for debt rollover, investments funding and increase of CPFL Renováveis’ capital stock done by CPFL Brasil (for the acquisition of Jantus’ equity), with the following highlights:

+      Debentures issuances by CPFL Brasil (2^nd Issue of R$ 1,320 million), CPFL Geração (4^th Issue of R$ 680 million) and EPASA (3^rd Issue of R$ 69 million);

+      Funding of BNDES financing for CPFL Renováveis (R$ 471 million) and EPASA (R$ 103 million);

+      Funding of financing, through Law No. 4131/62, for CPFL Geração (R$ 100 million);

+      Funding of BNB financing for Epasa (R$ 10 milhões);

-      Amortizations of the principal of Epasa (2^nd Issue of R$ 211 million), CPFL Geração (2^nd Issue of R$ 425 million), CPFL Brasil (1^st Issue of R$ 165 million), BAESA (R$ R$ 6 million) and ENERCAN’s debentures (R$ 3 million);

-      Amortizations of working capital by CPFL Geração (R$ 100 million), CERAN (R$ 22 million) and Foz do Chapecó (R$ 22 million);

-      Amortizations of BNDES financing for CERAN (R$ 54 million), CPFL Geração (R$ 40 million), ENERCAN (R$ 35 million), BAESA (R$ 19 million), Foz do Chapecó (R$ 17 million) and CPFL Renováveis (R$ 11 million).

·         CPFL Energia and Group’s Distributors: funding (BNDES and other financial institutions), net of amortizations, totaling R$ 718 million, for debt rollover and investments funding, with the following highlights:

+      Funding of financing, through Law No. 4131/62, for CPFL Paulista (R$ 952 million), CPFL Piratininga (R$ 336 million), CPFL Leste Paulista (R$ 8 million), CPFL Sul Paulista (R$ 8 million), CPFL Jaguari (R$ 7 million) and CPFL Mococa (R$ 7 million);

+      Debentures issuances by CPFL Paulista (5^th Issue of R$ 484 million), CPFL Piratininga (5^th Issue of R$ 160 million), RGE (5^th Issue of R$ 70 million) and CPFL Santa Cruz (1^st Issue of R$ 65 million);

+      Funding of financing by CPFL Paulista (R$ 150 million), RGE (R$ 56 million), CPFL Piratininga (R$ 19 million), CPFL Leste Paulista (R$ 18 million), CPFL Sul Paulista (R$ 9 million), CPFL Santa Cruz (R$ 7 million), CPFL Jaguari (R$ 6 million) and CPFL Mococa (R$ 3 million);

+      Funding, net of amortizations, of BNDES financing for Group’s Distributors, totaling R$ 88 million;

-      Amortizations of the principal of CPFL Piratininga (1^st Issue of R$ 200 million and 4^th Issue of R$ 280 million), RGE (2^nd Issue of R$ 29 million, 3^rd Issue of R$ 127 million and 4^th Issue of R$ 185 million), CPFL Paulista (3^rd Issue of R$ 213 million and 4^th Issue of R$ 110 million), CPFL Leste Paulista (1^st Issue of R$ 24 million), CPFL Sul Paulista (1^st Issue of R$ 16 million) and CPFL Jaguari’s debentures (1^st Issue of R$ 10 million);

-      Amortization carried out in compliance with Brazilian Central Bank Resolution 2770 by CPFL Paulista (R$ 489 million).

·         Indebtedness from the incorporation of CPFL Renováveis (source ERSA), in the amount of R$ 492 million;

·         Indebtedness from the acquisition of Jantus by CPFL Renováveis, in the amount of R$ 669 million, of which R$ 517 million are related to the 1^st Issue of Debentures and R$ 152 million are related to BNB financing;

·         Indebtedness from the acquisition of Santa Luzia Small Hydroelectric Power Plant by CPFL Renováveis, in the amount of R$ 136 million, related to BNDES financing.

In 4Q11, R$ 11,739 million (87.7% of the total) are considered long term, and R$ 1,649 million (12.3% of the total) are considered short term. In 4Q10, R$ 7,167 million (76.1% of the total) are considered long term, and R$ 2,251 million (23.9% of the total) are considered short term.

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4.2) Total Debt (Financial Debt + Hedge + Debt with the Private Pension Fund)

Total debt, comprising financial debt, hedge (asset/liability) and debt with the private pension fund, amounted to R$ 13,840 million in 4Q11, growth of 38.1%. The nominal average cost of debt rose from 10.5% p.a. in 4Q10 to 11.1% p.a. in 4Q11, due to the upturn in the CDI interbank rate (from 9.7% to 11.6%). The real average cost of debt fell from 4.4% p.a. in 4Q10 to 4.3% p.a. in 4Q11, due to the upturn in the IPCA (from 5.9% to 6.5%). (accrued rates in the last 12 months)

Debt Profile – 4Q11

Note: PSI – Investment Support Program

As a result of the funding operations and amortizations, there was an increase in the TJLP-indexed portion (from 30.7%, in 4Q10, to 33.4%, in 4Q11) and prefixed-PSI (from 3.2%, in 4Q10, to 4.4%, in 4Q11), and a decrease in the portion tied to the CDI-pegged portion (from 59.0%, in 4Q10, to 58.5%, in 4Q11) and the IGP-M/IGP-DI (from 6.7%, in 4Q10, to 3.4%, in 4Q11).

The foreign-currency and TJLP debt would have come to 13.1% and 34.2% of the total, respectively, if banking hedge operations had been excluded. However, as we consider contracted swap operations, which convert the indexation of debt in foreign-currency and TJLP to the CDI, the effective foreign-currency and TJLP debt is 0.3% (all of this possesses a natural hedge) and 33.4%, respectively.

The portion of the debt tied to the IGP-M/IGP-DI is related mostly to the debt with the private pension fund.

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4.3) Net Debt – criteria in line with the calculation of financial covenants

Note: to match the information to the calculation of Company's financial covenants, we consider only the financial debt (including hedge) and available funds, removing from the calculation the debt with the private pension fund and judicial deposit related to the process of income tax of CPFL Paulista. EBITDA does not consider Regulatory Assets and Liabilitites.

In 4Q11, net debt totaled R$ 10,689 million, an upturn of 36.1% (R$ 2,833 million), due to the factors already explained above (investments, consolidation, and strategy of pre-funding).

The Company closed 4Q11 with a Net Debt / EBITDA ratio of 2.84x. Adjusting the EBITDA, considering an recurring pro-forma estimation of CPFL Renováveis to the last 12 months, and excluding the balance of the debt of projects that are under construction (and have not started generating EBITDA to the group), the Net Debt / EBITDA would have been 2.55x. For the purpose of checking the financial covenants where the adjustment is made only for the pro forma of EBITDA of 12 months, the net leverage reached 2.63x, substantially lower than the limit of 3.75x of the Company.

4.4) New Funding

In January 2012, the contracting of BNDES financing to SPE Salto Góes Energia S.A. (CPFL Renováveis’ controlled company) was approved, to the construction of Salto Góes Small Hydroelectric Power Plant. The total amount of the financing is up to R$ 85 million, with term of 192 months and interest rate of TJLP + 2.05% p.a.. The SHPP is under construction, with the beggining of operation estimated to 1Q13.

5) INVESTMENTS

In 4Q11, R$ 702 million were invested in business maintenance and expansion, of which R$ 324 million in distribution, R$ 374 million in generation and R$ 4 million in commercialization and services. As result, CPFL Energia’s investments totaled R$ 1,905 million in 2011, of which R$ 1,065 million in distribution, R$ 823 million in generation (R$ 488 million of CPFL Renováveis) and R$ 17 million in commercialization and services.

Listed below are some of the main investments made by CPFL Energia in each segment:

         (i)       Distribution: strengthening and expanding the electricity system to keep pace with market growth, both in terms of energy sales and numbers of customers. Other allocations included electricity system maintenance and improvements, operational infrastructure, the upgrading of management and operational support systems, customer help services and research and development programs, among others. CPFL Energia through its eight distributors, serves 569 municipalities, in the States of São Paulo, Rio Grande do Sul, Paraná and Minas Gerais. On December 31, 2011, our distribution companies had 7.0 million customers and our distribution network consisted of 210,491 km of distribution lines, including 276,561 distribution transformers. Our eight distribution subsidiaries had 9,437 km of high tension distribution lines between 34.5 kV and 138 kV. On that date, we had 434 high tension to medium tension transformer substations for subsequent distribution, with total transforming capacity of 13,650 MVA; 

        (ii)   Generation: chiefly focused on Bio Formosa and Bio Buriti Thermoelectric Facilities, enterprises that have already entered into commercial operation, and Bio Ipê, Bio Pedra, Alvorada and Coopcana Thermoelectric Facilities, Salto Góes Small Hydro Power Plant and Santa Clara, Macacos I and Campo dos Ventos II Wind Farms, ongoing construction projects.

Investments Projected by the Group for the Next 5 Years

100% CPFL Renováveis and CERAN

(R$ million)

Note: (*) Considers 100% of CPFL Renováveis and CERAN and the proportional stake in the other generation projects. Includes investments to all new projects announced by the Group, including Atlântica Wind Farms.

 

 

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6) CASH FLOW

The cash flow balance closed the 4Q11 at R$ 2,700 million, representing a reduction of 36.8% (R$ 1,575 million) compared to the cash flow balance at the end of 3Q11. We highlight the following factors that contributed to this variation in the cash balance:

·      Cash increase:

         (i)       Cash from operating activities in the amount of R$ 482 million.

·      Cash decrease:

         (i)       Acquisition of equity interest net of cash acquired, in the amount of R$ 863 million, of which R$ 817 million related to the acquisition of Jantus and the remaining related to the acquisition of Santa Luzia Small Hydroelectric Power Plant and others;

        (ii)       Investments (sum of “Acquisition of Property, Plant and Equipment” and “Intangibles” accounts), in the amount of R$ 702 million (detailed in item 5, “Investments”);

       (iii)       Principal amortizations of loans and debentures, which exceeded funding by R$ 471 million.

4Q11/2011 Results | March 12, 2012

8) STOCK MARKET

8.1) Share Performance

CPFL Energia, which has a current free float of 30.7%, is listed on both the BM&FBOVESPA (Novo Mercado) and the NYSE (ADR Level III), segments with the highest levels of corporate governace.

The shares closed the period priced at R$ 26.02 per share and US$ 28.21 per ADR, respectively (closing price in 12/31/2011).

Shares Performance – 4Q11 (with dividends)

In 4Q11, the shares appreciated 26.1% on the BM&FBOVESPA and 27.4% on the NYSE, outperforming major market indexes.

Shares Performance – 2011 (with dividends)

In 2011, the shares appreciated 34.0% on the BM&FBOVESPA and 25.9% on the NYSE, also outperforming major market indexes.

 

 

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8.2) Average Daily Volume

The daily trading volume in 2011 averaged R$ 32.8 million, of which R$ 13.5 million on the BM&FBOVESPA and R$ 19.3 million on the NYSE, 1.5% down on 2010. The number of trades on the BM&FBOVESPA increased by 45.4%, rising from a daily average of 1,406, in 2010, to 2,045, in 2011.

Note: Considers the sum of the average daily volume on the BM&FBOVESPA and the NYSE.

8.3) Ratings

CPFL Energia’s rating was maintained the same, by Standard and Poor’s and Fitch Ratings, after the acquisition of Jantus and the joint venture with ERSA.

The following table shows the evolution of CPFL Energia’s corporate ratings:

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9) CORPORATE GOVERNANCE

CPFL Energia’s corporate governance model is based on four basic principles: transparency, equity, accountability and corporate responsibility, applied by all the companies in the Group.

CPFL Energia is listed on the segments of the highest governance level - the Novo Mercado of the BM&FBovespa and Level III ADRs on the New York Stock Exchange (NYSE). CPFL Energia’s capital stock is composed exclusively of common shares, and ensures 100% tag-along rights in the case of disposal of control.

The Board of Directors’ duties include defining the overall business guidelines and electing the Board of Executive Officers, among other responsibilities determined by the law and the Company’s Bylaws. Its rules were defined in the Board of Directors’ internal rules document. The Board is composed of one independent member and six members nominated by the controlling shareholders and all of them carry a one-year term of office, reelection being admitted. It normally meets once a month but may be convened whenever necessary. The Chairman and the Vice-Chairman are elected among the Board of Directors’ members and no member may serve on the Board of Executive Officers.

The Board of Directors constituted three committees and defined their competences in a sole Internal Rules. They are: the Human Resources Committee, Related Parties Committee and Management Processes Committee. Whenever necessary, ad hoc commissions are installed to advise the Board on such specific issues as: corporate governance, strategy, budgets, energy purchase, new operations and financial policies.

CPFL Energia maintains a permanent Fiscal Council comprising five members who also carry out the attributes of the Audit Committee foreseen in the Sarbanes Oxley Act and pursuant to the rules of the Securities and Exchange Commission (SEC). The Fiscal Council rules were defined in its internal rules document and in the Fiscal Council Guide.

During 2011, CPFL Energia’s Bylaws were adjusted to reflect the new Novo Mercado listing regulations. With the introduction of the Transformation Program, the composition and competences of the Board of Executive Officers also were changed, extinguishing the positions of three Executive Officers (Distribution, Generation and Power Sales) and creating the position of Chief Operations Officer and Chief Institutional Relations Officer. Thus, the number of departments reporting directly to the office of the Chief Executive Officer, including the Executive Officers, was reduced from 15 to nine, seeking a speedier, more modern and appropriate structure for the Group’s growth, as well as emphasizing a focus on more strategic operations, enhancing institutional relationship actions and making it possible to change the Company’s culture and decision-making processes.

The Board of Executive Officers is comprised of six Executive Officers, all with a two-year term of office, with reelection admitted. The Executive Officers represent the Company and manage its business in accordance with the lines of direction defined by the Board of Directors. The Chief Executive Officer is responsible for nominating the other statutory Executive Officers.

The guidelines and set of documents related to corporate governance are available at the Investor Relations website www.cpfl.com.br/ri.

 

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4Q11/2011 Results | March 12, 2012

10) CURRENT SHAREHOLDERS STRUCTURE – 12/31/2011

CPFL Energia is a holding company, whose results depend directly on those of its subsidiaries.

It is worth noting the increase in CPFL Energia’s stake in CPFL Renováveis to 63%, with the conclusion of the acquisition of Jantus, and in EPASA to 52.75%, as of December 2011.

Notes:

(1)    Controlling shareholders;
(2)    Includes the 0.1% stake of the company Camargo Corrêa S.A.;
(3)    Termoparaíba and Termonordeste Thermoelectric Facilities;
(4)    Pro-forma - CPFL Energia owns a 63.0% indirect interest in CPFL Renováveis through CPFL Geração, with 35.5% and CPFL Brasil with 27.5%.

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4Q11/2011 Results | March 12, 2012

11) PERFORMANCE OF THE BUSINESS SEGMENTS

11.1) Distribution Segment

11.1.1) Economic-Financial Performance