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, November 05, 2012 – CPFL Energia S.A. (BM&FBOVESPA: CPFE3 and NYSE: CPL), announces its 3Q12 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 3Q11, unless otherwise stated.

CPFL ENERGIA ANNOUNCES 3Q12 NET INCOME

OF R$ 321 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.

3Q12 HIGHLIGHTS

·      Increase of 1.0% (2.8% adjusted) in energy sales within the concession area;

·      Commercial start-up of Santa Clara wind farms (188 MW) in July 2012;

·      Conclusion of the acquisition of Ester Biomass Thermoelectric Power Plant, in October 2012;

·      Payment of R$ 640 million of intermediary dividends, related to 1H12, on September 28, 2012;

·      Investments of R$ 660 million in 3Q12 and of R$ 1,930 million in 9M12;

·      Maintenance of the brAA+ (national scale) credit rating by Standard & Poor’s to CPFL Energia and subsidiaries;

·      Increase of 43.6% in the average daily trading volume of CPFL Energia’s shares on BM&FBOVESPA and on NYSE, to R$ 50.1 million in 3Q12 from R$ 34.9 million in 3Q11;

·      In the last 12 months, CPFL Energia’s shares on BM&FBOVESPA were up 15.0%, outperforming the Ibovespa (13.1%) and the IEE (8.2%) indexes;

·      “Você S.A. – Melhores Empresas Para Você Trabalhar” Research, ÉPOCA Award of Climate Changes 2012 and Época Negócio 360º Award (1^st place in the ranking of companies of electric sector).

3Q12 Results | November 05, 2012

INDEX

3Q12 Results | November 05, 2012

1) MACROECONOMIC CONTEXT

The international scenario is still of great uncertainty for the coming months. The role of U.S. and European central banks reduced the nervousness of the markets, but the global economic activity continues losing strength. The IMF revised its forecasts for 2012 GDP in the Eurozone, from 0.7%, in June 2012, to 0.2%, in October 2012. Spain and Italy must present downturn in 2012 and even more robust economies such as Germany and France, will have very modest growth.

Evolution of the 2012 GDP forecasts (annual %)

(Source: World Economic Outlook - IMF)

Consequently, the performance of the Brazilian economy, despite government stimulus, follows at a slower pace than in previous years, particularly in relation to industry.

Evolution of GDP Brasil (annual %)

(Source: IBGE. Forecast: LCA Consultores)

But despite the unfavorable conjuncture, it is important to highlight that the Brazilian economy has been undergoing structural changes that ensure good prospects for the coming years. The most important is that the government, after many years, spent to stimulate investment as a driver of economic growth and development.

In this context, some measures were taken on an emergency basis, as a way of offsetting the effects of the international crisis; others, however, have structural basis and target the long term.

Among the measures to stimulate the current economic conjuncture, we highlight: the reduction of taxes (IPI) for vehicles ¹ , home appliances ² and capital goods ³, and the postponement of the deadline for payment of PIS/COFINS ⁴.

Among the structural measures, we can mention firstly the stimulus to the investment, highlighting:

·      Investments in infrastructure (roads, energy, oil/gas) – is estimated that 21 Brazilian states will increase its debt by R$ 58.3 billion to invest in infrastructure in the period 2013-2014. Moreover, the government encourages investment in roads and railways, electric energy (Belo Monte hydroelectric) and in the oil and gas sector (Petrobras platforms);

·      My Home My Life Program – in the 1^st phase of the program (2007-2010), were built just over 1 million new housing units. For the 2^nd phase (2011-2014), the goal is to build more 2.4 million units, of which more than 900 thousand units have already been built. Still, the Brazilian housing deficit, estimated in 6 million households, is not solved, allowing the development of a new phase of the program starting from 2015;

·      New Automotive Regime – a program which will run between 2013 and 2017 and has among its main objectives: (i) increase the regional content in automobile production, (ii) ensure investments in R&D; and (iii) improve energy efficiency. Automakers will be benefited by a gradual exemption of IPI as they reach the requirements of the program;

·      Pre-Salt and Sporting events – the investments necessary to become reality will require an additional effort of government and private enterprises, generating a multiplier effect throughout the economy.

With these and other measures, infrastructure investment ⁵ (in % of GDP) should continue to grow, following the trend already observed in recent years.

Infrastructure Investment - % GDP

Source: ABDIB and IBGE

Then, have been put in place paramount measures that aim to stimulate the increase of national competitiveness, which, worth remember, has already left the 72^nd position in the ranking in 2007 to the 48^th in 2012 (53^rd in 2011). Some measures are highlighted accordingly:

·      Provisional Measure 579/2012 (reduction of the cost of electric energy) – it is estimated that the tariff reduction results in a decrease of 1 percentage point in 2013 IPCA ⁶ , favoring therefore the expansion of the real mass of income. In industrial activity, sectors less subject to competition will tend to restore their margins, while sectors more subject to competition will be stimulated to reduce prices and produce more;

·      Discharge of the payroll of 40 sectors – benefits to industry and the sectors of transport, food and services, with tax waiver estimated at R$ 12.8 million for 2013;

·      Fall of interest rates and spreads – recent reduction of the main interest rates in the economy (Selic and TJLP) and reduction of spreads as a result of increased competition between banks, fosters economic expansion;

·      More competitive foreign exchange – recent devaluation is the result of increased risk aversion, the reduction of the differential of interest, the fall in commodity prices and increased government intervention, working under a managed float to ensure the competitiveness of Brazilian exports;

·      Greater fiscal gap – effective fall in real interest rates reduces the need to pay interest and makes room for reducing the tax burden, without prejudice to the formation of the fiscal surplus.

All these stimuli to investment and competitiveness should combine to the positive effects generated by the expansion of consumption, which has already been observed in recent years.

Between 2003 and 2011, 17 million jobs were created. ⁷ Poverty, which reached 28% of Brazilian individuals in 2003, fell to 15% in 2009. ⁸ Social inequality, measured by the Gini coefficient fell from 0.59 in 2002 to 0.54 in 2009. ⁹ The mid class, which represents a class with high propensity to consumption, reached 55% of the total population in 2011, considering that it represented only 38% in 2003. ¹⁰ The expansion of income - the minimum wage, for example, increased by 63% ¹¹ in real terms between 2003 and 2011 –, the reduction of unemployment and greater access to credit are factors that changed the consumption pattern of Brazilians, especially durable goods.

Following this trend, Brazil will arrive in 2020 to 5^th position in the world ranking of household consumption, with consumption estimated at about R$ 3.5 trillion, ahead of countries like France, England and Italy. ¹²

Finally, it is interesting to note the evolution of housing loan approvals, which increased significantly in recent years.

Housing credit – R$ billion

(Source: Caixa Econômica Federal)

This has been reflected in the expansion, above of the historical average, of the number of new connections of customers of CPFL Energia. Between September 2011 and September 2012, 215,000 customers were connected, an increase of 3.3%, higher than verified in previous periods.

CPFL Energia – Customers new connections (thousand)

In short, despite the uncertainties in relation to the external environment and industry performance, are good the prospects for the Brazilian economy in the coming years, which will be favored not only by the expansion of the internal market, but also by strong incentives to public and private investment.

Thus, it is estimated that the consumption of the residential and commercial classes will continue to grow in the coming months, despite the less optimistic forecasts for Brazil's GDP growth in 2012 and a modest recovery forecasted for 2013. The industry, in turn, should start showing positive rates in 2013, due to the low base of comparison in 2012 and recent government stimulus, which will potentially prevent further contamination of the negative effects from the international scenario and ensure that the expansion of the industry consolidate in more competitive basis.

2) ENERGY SALES

2.1) Sales within the Distributors’ Concession Area

In 3Q12, sales within the concession area, achieved by the distribution segment, totaled 13,890 GWh, an increase of 1.0%.

In 3Q12, sales to the captive market totaled 9,795 GWh, a reduction of 2.7%.

The energy volume in GWh consumed by free customers in the distributors’ operational areas, billed through the Distribution System Usage Tariff (TUSD), rose by 11.1% to 4,096 GWh in 3Q12, reflecting the migration of customers from the captive market to the free market.

Note: The tables of sales within the concession area by distributor are attached to this report in item 12.8.

Emphasis is given to the growth of the residential and commercial classes, which jointly accounted for 40.3% of the sales within the concession area:

·      Residential and commercial classes: up by 2.4% and 2.8%, respectively, negatively impacted by less billing days (on average 2.6 less days). Excluding this factor, the growth of these classes would have been 5.0% and 5.9%, 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.

·      Industrial class: consumption stable, reflecting the industrial production, still at a slower pace, due to the international crisis. Nevertheless, requests for reduction in power demand from industrial customers were not observed in the period, favoring the maintenance of the revenue level coming from this class.

The following table shows sales in the concession area adjusted for calendar and temperature:

 

3Q12 Results | November 05, 2012

 

2.1.1) Sales by Class – Concession Area

2.1.2) Sales to the Captive Market

Note: The captive market sales by distributor tables are attached to this report in item 12.9.

2.1.3) TUSD

 

3Q12 Results | November 05, 2012

 

2.2) 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). Considers 100% of the sales of CPFL Renováveis and CERAN (accounting criteria | IFRS). Considers the provisioned supply of 41 GWh in 3Q12.

In 3Q12, commercialization and generation sales moved up by 33.3% to 4,443 GWh, due to (i) the increase in sales to free customers, as a result of the increase in the number of customers in the portfolio in 3Q12 compared to 3Q11 (from 132 to 217), and (ii) the increase in sales through commercialization and generation’s bilateral contracts.

 

3Q12 Results | November 05, 2012

 

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 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 September 30, 2012 and 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. On June 30, 2011, the participation of non-controlling interests refered to the third-party interests in the subsidiaries Ceran and Paulista Lajeado.

Notes:

(1)     Does not include the 24 MW of installed capacity equivalent to the 9 Small Hydroelectric Power Plants of the distribution companies: Companhia Leste Paulista de Energia (CPFL Leste Paulista), Companhia Sul Paulista de Energia (CPFL Sul Paulista), Companhia Jaguari de Energia (CPFL Jaguari) and Companhia Luz e Força Mococa (CPFL Mococa);

(2)     Paulista Lajeado has a 7% stake in the installed capacity of Investco S.A..

 

3Q12 Results | November 05, 2012

 

3.1) 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, CPFL Renováveis concluded the acquisition of Jantus throught the capital increase of CPFL Brasil on CPFL Renováveis. 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.

3Q12 Results | November 05, 2012

 

Impact of acquisitions in 2012 on the Financial Statements

The acquisition of Atlântica Complex was completed on March 26, 2012, with the opening balance sheet as at February 29, 2012. The interim financial statements on September 30, 2012 therefore include seven months of this indirect subsidiary’s operations.

The acquisition of Bons Ventos was completed on June 19, 2012, with the opening balance sheet as at May 31, 2012. As such, the consolidated interim financial statements for the nine month period ended in September 30, 2012 included four month’s operation of this indirect subsidiary.

The acquisition of SPE Lacenas (controlled company of Usina Ester) was not concluded as at September 30, 2012. As such, the operations of SPE Lacenas had no impact to be recorded in the consolidated interim financial statements for the nine month period ended in September 30, 2012.

4) 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.

 

3Q12 Results | November 05, 2012

4.1) Operating Revenue

Gross operating revenue in 3Q12 reached R$ 5,382 million, representing an increase of 10.8% (R$ 524 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 4,992 million, an increase of 9.9% (R$ 448 million).

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

·         Average tariff adjustment of 4.3% in the distribution companies, for the period between 3Q11 and 3Q12 (R$ 53 million);

·         Increase in the gross revenue of energy supply in the short term:

 

3Q12 Results | November 05, 2012

 

            (i)                 In CPFL Paulista (R$ 32.9 million) and RGE (R$ 25.9 million), chiefly due to the increases: (i) in the volume of energy sold in the short term; and (ii) in the price of differences settlement (“PLD”);

           (ii)                In CPFL Piratininga (R$ 11.3 million), chiefly due to the increase in the price of differences settlement (“PLD”), partially offset by the decrease in the volume of energy sold in the short term.

·         Increase of 10.1% (R$ 32.8 million) in the gross revenue of TUSD from free customers, mainly due to the migration of captive customers to the free market;

·         Increase of 58.3% (R$ 31.9 million) in other revenues, mainly due to the following factors:

            (i)                Non-recurring  effect, at CPFL Piratininga and CPFL Paulista, in the amount of R$ 16.0 million (R$ 14.5 million net of PIS and Cofins taxes), due to the register of the low income subsidy revenue reimbursed to the distribution companies, by ANEEL, through the resources of CDE sector charge. These amounts (which refer to 2002 to 2004) were registered as “regulatory assets/liabilities” and, in 3Q12, when they became cash to the company, they were registered in the statutory financial statements as “other revenues”;

           (ii)                Increase in the revenue from leases and rentals (R$ 8.3 million), mainly at CPFL Paulista (R$ 4.1 million) and CPFL Piratininga (R$ 2.6 million).

·         Additional gross revenue from CPFL Renováveis, in the amount of R$ 198.3 million (R$ 184.9 million net of PIS and Cofins taxes), mainly 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;

           (ii)                The acquisitions of Santa Luzia Small Power Plant, in August 2011, and of Bons Ventos wind farms, which was concluded in June 2012;

          (iii)               The beginning of operations of Bio Formosa thermoelectric facility, in September 2011, Bio Buriti thermoelectric facility, in October 2011 and Santa Clara wind complex, in July 2012.

It is important to mention that part of the sales of these projects is made to companies within CPFL Group, being eliminated in the CPFL Energia consolidation. The additional revenue of CPFL Renováveis, net of PIS and Cofins and eliminations, was R$ 169.7 million.

·        Increase in the revenue from the Segments of Conventional Generation, Commercialization and Services, in the amount of R$ 86.1 million (R$ 78.4 million net of PIS and Cofins). The increase net of eliminations was R$ 65.5 million.

These increases were partially offset by the following factors:

·         Reduction of 2.7% in the sales volume to the captive market;

·         The non-recurring  effect of the re-accounting for the energy cost of Epasa regarding 2010 in 3Q11, in the amount of R$ 32.4 million (R$ 29.4 million net of PIS and Cofins taxes);

·         Reduction of R$ 6.5 million in 6 distribution companies of CPFL Group (CPFL Piratininga, CPFL Santa Cruz, CPFL Mococa, CPFL Sul Paulista, CPFL Leste Paulista and CPFL Jaguari) related to the reclassification of the revenue for the exceeding demand and surplus of reactive to “special obligations”. Of this amount, R$ 5.2 milllion are related to CPFL Piratininga and the remaining amount (R$ 1.3 million) is related to the other 5 distribution companies mentioned.

In compliance with Aneel’s Order No. 4,991, of December 29, 2011, related to the basic procedures for the preparation of Financial Statements, these 6 distribution companies adjusted the revenue for the exceeding demand and surplus of reactive in the “Electricity Sales to Final Customers” and “TUSD from free customers” itens to the “Special Obligation” item.

 

3Q12 Results | November 05, 2012

 

These distribution companies made the reclassification (such amounts have been accrued as “Special Obligations”, in compliance with the Accounting Pronouncement CPC 25) but are awaiting a court decision regarding how to treat these revenues. On February 7, 2012, the Brazilian Association of the Electricity Distributors (Abradee) obtained the suspension of the effects of No.463 Normative Resolution, with early relief accepted and suspension of the ruling for booking revenues for exceeding demand and surplus of reactive as special obligations. In June 2012, the effect requested by Aneel in its "Bill of Review," which had suspended the early relief originally granted in favor of Abradee, was accepted. The six distributors are waiting the final sentence for the definitive treatment of these revenues.

Deductions from the operating revenue were R$ 1,538 million, representing a reduction of 1.8% (R$ 28 million), mainly due to the following decreases: (i) 30.9% in the CCC sector charge (R$ 58.0 million); (ii) 1.8% in the global reversal reserve - RGR (R$ 0.4 million); and (iii) 29.1% in the ISS tax (R$ 0.4 million). These reductions were partially offset by the following factors: (i) increase of 11.3% in CDE sector charge (R$ 14.8 million); (ii) increase of 1.0% in ICMS tax (R$ 7.8 million); (iii) increase of 24.8% in Proinfa (R$ 4.0 million); and (iv) increase of 1.0% in the Pis and Cofins taxes (R$ 4.1 million).

The increase in the Pis and Cofins was partially offset by effect of the recording, in the amount of R$ 33.0 million, of Pis and Cofins taxes credits on the depreciation and amortization of the distribution companies. In 3Q11, theses credits were registered in the “depreciation and amortization expenses” line and, in 3Q12, they were registered in the “deductions from the operating revenue” line, for better accounting purposes.

Net operating revenue reached R$ 3,845 million in 3Q12, representing an increase of 16.8% (R$ 552 million). Excluding the revenue from building the infrastructure of the concession, net operating revenue would have amounted to 3,454 million, an increase of 16.0% (R$ 476 million).

4.2) 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$ 1,920 million in 3Q12, representing an increase of 17.4% (R$ 284 million):

·      The cost of electric power purchased for resale in 3Q12 was R$ 1,524 million, representing an increase of 19.2% (R$ 246 million), due to the following effects:

         (i)       Increase in the cost of energy purchased in the short term (R$ 106.8 million), mainly due to the increase of 11.0% (118 GWh) in the volume of purchased energy and of 316.0% in the average purchase price. This increase is net of the non-recurring  effect of the re-accounting for the energy cost of Epasa regarding 2010, which generated a cost increase in 3Q11  (R$ 12.4 million);

        (ii)       Increase in the cost of energy purchased through auction in the regulated environment and through bilateral contracts (R$ 102.8 million), caused by the increases of 6.6% in the average purchase price and of 2.6% (228 GWh) in the volume of purchased energy;

       (iii)       Increase in the cost of energy from Itaipu (R$ 54.7 million), mainly due to the 22.4% increase in the average purchase price;

      (iv)       Increase in the PROINFA cost (R$ 10.6 million), due to the 43,7% increase in the average purchase price, partially offset by the decrease of 12.9% (31 GWh) in the volume of purchased energy.

Partially offset by:

       (v)       Increase in PIS and Cofins tax credits, generated from the energy purchase (R$ 29.3 million).

 

3Q12 Results | November 05, 2012

 

·      Charges for the use of the transmission and distribution system reached R$ 395 million in 3Q12, a 10.7% increase (R$ 38 million), mainly due to the following factors:

            (i)                 Increase in the energy reserve charges (R$ 29.6 million);

           (ii)                Increase of 8.6% in the basic network charges (R$ 23.6 million), mainly due to the increases of 7.6% in CPFL Paulista (R$ 9.8 million), of 6.7% in CPFL Piratininga (R$ 4.3 million), of 4.3% in RGE (R$ 2.1 million) and of the CPFL Renováveis additional (R$ 4.7 million);

           (ii)                 Increase of 56.8% in the charges for the use of the distribution system (R$ 6.1 million);

          (iii)                Increase of 7.8% in Itaipu charges (R$ 1.8 million).

         (iv)                Increase  of 5.3% in the conection charges (R$ 1.0 million).

Partially offsetting:

          (v)               Reduction of 36.6% (R$ 19.4 million) in the system service usage charges - ESS, mainly due to the reductions of 40.2% (R$ 13.3 million) in CPFL Paulista and of 46.7% (R$ 7.4 million) in CPFL Piratininga;

         (vi)               Increase in PIS and Cofins tax credits, generated from the energy charges for the use of the transmission and distribution system (R$ 4.5 million).

4.3) Operating Costs and Expenses

Operating costs and expenses were R$ 1,183 million in 3Q12, registering an increase of 35.4% (R$ 309 million), due to the following factors:

·       Increase of 24.3% (R$ 76 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$ 390 million in 3Q12, has its counterpart in the “operating revenue”;

 ·       The Private Pension Fund, which represented a revenue of R$ 22.4 million in 3Q11 and of R$ 2.5 million in 3Q12, resulting in a negative variation of R$ 19.9 million. This variation is due to the expected estimated impact on actuarial assets and liabilities, according to CVM Deliberations Nos. 371/00 and 600/09, as shown in the Actuarial Report.

·      Depreciation and Amortization, which represented a net increase of 55.0% (R$ 109 million), mainly due to the following factors:

            (i)          Additional of CPFL Renováveis, in the amount of R$ 84.3 million, related to:

·          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; 

·           The acquisitions of Santa Luzia Small Power Plant, in August 2011, and Bons Ventos wind farms, which was concluded in June 2012 ;

·           The beginning of operations of Bio Formosa thermoelectric facility, in September 2011, Bio Buriti thermoelectric facility, in October 2011 and Santa Clara wind complex, in July 2012.

           (ii)         Increase in the Conventional Generation Segment, in the amount of R$ 3.5 million, mainly due to: (i) the increase in CPFL Geração, due to the change in the depreciation rate defined by the Brazilian Electric Energy Agency (ANEEL), that reduced the useful life of the energy generation assets (R$ 1.0 million); and (ii) to the increase in Chapecoense (R$ 2.4 million).

 

3Q12 Results | November 05, 2012

 

On February 4, 2012, through Normative Ruling No. 474, Aneel established new annual rates of depreciation for assets in services granted the power sector. The new rates have changed those contained in the Power Sector Assets Control Manual (MCPSE), approved by Normative Ruling No. 367 of June 2, 2009, and became effective on January 1, 2012. This change resulted in a reduction in the useful life of generation assets and, in line with the accounting pronouncement CPC 23, the Company prospectively changed the depreciation of fixed assets as of that date.

          (iii)         Increase in the Distribution Segment, in the amount of R$ 22.4 million, mainly due to the following factors:

ü The recording, in the amount of R$ 20.7 million, of Pis and Cofins tax credits on the depreciation and amortization. In 3Q11, these credits were registered in the “depreciation and amortization expenses” line and, in 3Q12, they were registered in the “deductions from the operating revenue” line, for better accounting purposes;

ü Increase in the new assets depreciation.

Partially offset by:

ü The reduction, in the amount of R$ 15.8 million, related to the change in the depreciation rates stablished by the Brazilian Electric Energy Agency (ANEEL). In the average, this change (as explained in the item “(ii)” above), caused an increase in the useful life of the energy distribution assets and, pursuant to the accounting pronouncement CPC 23, the distribution companies changed the fixed asset depreciation prospectively, from that date.

·      The PMSO item, that reached R$ 490.4 million in 3Q12, compared to R$ 386.3 million in 3Q11, registering an incrase of 26.9% (R$ 104.1 million), mainly due to the following factors (that need to be excluded for comparison purposes with the 3Q11):

         (i)       Additional PMSO of CPFL Renováveis, in the amount of R$ 24.7 million, due to:

·        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;

·        The acquisitions of Santa Luzia Small Power Plant, in August 2011, and Bons Ventos wind farms, which was concluded in June 2012;

·        The beginning of operations of Bio Formosa thermoelectric facility, in September 2011, Bio Buriti thermoelectric facility, in October 2011 and Santa Clara wind complex, in July 2012.

        (ii)            Non-recurring  adjustment in the provision for doubtful debts, in the 8 distribution companies, due to the change in the estimate (R$ 53.7 million);

       (iii)          Non-recurring  expenses with technical reports in the distribution companies, related to the physical inventory of assets and the implementation of the Manual for the Equity Control in the Power Sector, in accordance with Aneel’s Resolution No.367/09 (R$ 1.9 million of expense in 3Q12 compared to R$ 17.6 million of expense reversal in 3Q11, representing a difference of R$ 19.5 million);

      (iv)          Non-recurring  increase in the other operating expenses regarding the assets write-off, due to the implementation of the Manual for the Equity Control in the Power Sector (MCPSE) in 6 distribution companies (CPFL Piratininga, CPFL Mococa, CPFL Leste Paulista, CPFL Sul Paulista, CPFL Jaguari and CPFL Santa Cruz) (R$ 16.5 million);

 

3Q12 Results | November 05, 2012

 

Partially offset by:

      (v)             Non-recurring  decrease in the legal and judicial expenses and indemnities of CPFL Piratininga in 3Q12, due to the decision in favor of the distribution company in a tariff increase process (R$ 3.1 million);

     (vi)             Non-recurring  increase in 3Q11  Personnel Expenses due to the complement of the Incentivated Retirement Program – PAI, related to the additional adherences (R$ 3.0 million).

Excluding these effects, PMSO for 3Q12 would have totaled R$ 372.2 million and PMSO for 3Q11 would have been R$ 376.4 million, a reduction of 1.1% (R$ 4.2 million), compared to the IGP-M index of 8.1% (price variation between September 30, 2011 and September 30, 2012).

This reduction is the result of the implementation of the Incentivated Retirement Program (PAI) and the “zero base budget” (ZBB) methodology in CPFL Group. The ZBB methodology avoids that eventual inefficiencies from past budgets are maintained, that is, are carried over to the future budget processes.

 

3Q12 Results | November 05, 2012

 

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

         (i)          Material expenses, which registered a reduction of 14.2% (R$ 3.9 million), mainly due to the decrease in:

·         CPFL Paulista (R$ 3.2 million), mainly in the expenses with maintenance of lines and network (R$ 1.0 million), with work clothes and tools (R$ 0.7 million) and with other materials (R$ 1.5 million);

·         CPFL Piratininga (R$ 0.5 million), mainly in the expenses with maintenance of lines and network (R$ 0.3 million), and with other materials (R$ 0.2 million).

        (ii)          Out-sourced services expenses, which registered a decrease of 9.1% (R$ 10.5 million) mainly due to the decrease in expenses with: (i) consulting (R$ 4.3 million); (ii) maintenance of lines and network (R$ 2.7 million); and (iii) tree pruning (R$ 1.0 million).

Partially offset by:

       (iii)             Personnel expenses, which reported a net increase of 1.1% (R$ 1.7 million), mainly due to: (i) the 2012 Collective Bargaining Agreement, that readjusted the wages by 6.64%, in the average (R$ 8.6 million); and (ii) the business expansion of CPFL Serviços and CPFL Atende (R$ 2.5 million). These increases were partially offset by the reduction caused by the Incentivated Retirement Program – PAI.

      (iv)             Other operating costs/expenses, which registered an increase of 11.2% (R$ 8.5 million), mainly due to the following increases:

·     CPFL Paulista (R$ 3.1 million), due to the following factors: (i) increase in legal and judicial expenses and indemnities (R$ 1.4 million); (ii) assets disposal (R$ 1.1 million); and (iii) increase in the advertising and market expenses (R$ 1.2 million);

·     CPFL Piratininga (R$ 3.9 million), mainly due to the uncollectible recovery, in 3Q11, in the amount of R$ 2.4 million;

·     RGE (R$ 1.5 million), mainly due to the increase in the provision for contingencies (R$ 1.7 million);

·     CPFL Jaguari, CPFL Mococa, CPFL Leste Paulista, CPFL Sul Paulista, and CPFL Santa Cruz (R$ 0.9 million).

4.4) 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$ 84.8 million in 3Q12 and of R$ 71.0 million in 3Q11 (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.

Provisory tariff procedures:

It is important to note that, as directed by Aneel, the 3Q12 values include preliminary amounts of the liability related to the provisory tariff procedures for the 3^rd cycle of tariff review of 6 distribution companies (CPFL Piratininga, CPFL Santa Cruz, CPFL Leste Paulista, CPFL Sul Paulista, CPFL Mococa and CPFL Jaguari), corresponding to a reduction of R$ 55.8 million in the EBITDA. The application of this methodology should have occurred on October 23, 2011, for CPFL Piratininga, and on February 3, 2012, for the other distribution companies (CPFL Santa Cruz, CPFL Leste Paulista, CPFL Sul Paulista, CPFL Mococa and CPFL Jaguari). Therefore, the amount related to the impact of the provisory tariff procedures of the distribution companies tariff review in 2012 needs to be accumulated from January 1 to October 22, 2012, for CPFL Piratininga, and from February 3 to December 31, 2012 for the other 5 smaller distribution companies.

 

3Q12 Results | November 05, 2012

 

4.5) EBITDA

3Q12 EBITDA (IFRS) reached R$ 1,044.3 million, registering a 9.2% increase (R$ 88.1 million).

Considering the regulatory assets and liabilities and excluding the non-recurring effects, the EBITDA (IFRS + Regulatory Assets and Liabilities – Non-recurring effects) would have totaled R$ 1,184 million in 3Q12 and R$ 996 million in 3Q11, an increase of 18.9% (R$ 188 million).

4.6) Financial Result

The 3Q12 net financial expense was R$ 237 million, a 15.3% increase (R$ 31.4 million) compared with the net financial expense of R$ 205 million reported in 3Q11.

The items explaining these changes are as follows:

·         Financial Revenues: decrease of 28.3% (R$ 62.4 million), from R$ 220.1 million in 3Q11 to R$ 157.7 million in 3Q12, mainly due to the reduction in the income from financial investments (R$ 85.2 million), due to the reduction in the CDI Interbank rate and in the available cash, partially offset by the non-recurring  financial revenue from the decision in favor of CPFL Piratininga in a tariff increase process (R$ 7.0 million);

·         Financial Expenses: decrease of 7.3% (R$ 31.0 million), from R$ 425.3 million in 3Q11 to R$ 394.3 million in 3Q12, mainly due to the following factors:

        (i)        Decrease in the debt charges and in the monetary and foreign exchange update (R$ 105.5 million), mainly due to the reduction in the indexes used to update the debt;

       (ii)       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) in the distribution companies (R$ 24.9 million);

Partially offset by:

      (iii)       Financial expenses from CPFL Renováveis, in the amount of R$ 69.2 million, due to:

·        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;

·        The acquisitions of Santa Luzia Small Power Plant, in August 2011, and Bons Ventos wind farms, which was concluded in June 2012.

         (i)        Non-recurring  financial expense at CPFL Paulista regarding the interests and penalties on payments related to the incorporation of networks (R$ 20.1 million);

 

3Q12 Results | November 05, 2012

 

        (ii)       Non-recurring  financial expense regarding the assets write-off related to the implementation of the Manual for the Equity Control in the Power Sector (MCPSE) in 6 distribution companies (CPFL Piratininga, CPFL Mococa, CPFL Leste Paulista, CPFL Sul Paulista, CPFL Jaguari and CPFL Santa Cruz) (R$ 1,0 million);

       (iii)       Increase in the financial expense with the Use of Public Asset (“UBP”) (R$ 9.1 million), mainly due to financial update, that is, due to the effect of the indexes (IGP-M and IPCA) used to update the UBP balance.

4.7) Net Income

Net income (IFRS) in 3Q12 was R$ 321 million, a decrease of 15.2% (R$ 58 million). This result reflects the higher financial expense related to the higher Company’s debt to support the strategy of expanding its business, mainly for CPFL Renováveis generation segment, as explained before.

Excluding the amount related to the non-controlling shareholders, the net income (IFRS) in 3Q12 was R$ 314 million, a decrease of 14.9% (R$ 55 million), compared to the net income of R$ 369 million in 3Q11.

Considering the regulatory assets and liabilities, including the effects on the financial result, (net of taxes) and excluding the non-recurring effects, the total net income (IFRS + Regulatory Assets and Liabilities – Non-recurring effects) would have totaled R$ 425 million in 3Q12, comparared to R$ 401 million in 3Q11, an increase of 6.1% (R$ 25 million).

5) DEBT

5.1) Financial Debt (Including Hedge)

Financial Debt (R$ Billion)

CPFL Energia’s financial debt (including hedge) reached R$ 16,631 million in 3Q12, increase of R$ 3,502 million, or 26.7%, compared to 3T11. This increase in net debt is mainly a reflection of:

·         the consolidation of 100% of the debt of CPFL Renováveis (principal + charges), which according to the new IFRS accounting practices, has added around R$ 3,237 million to the consolidated indebtedness of CPFL Energia. Part of these funds, around R$ 1,282 million, was assumed through the acquisitions of the assets of Jantus, Santa Luzia Small Hydro Power Plant and Bons Ventos wind farms in the period. In addition, there were borrowings for the payment of these acquisitions, as well as for the construction of several greenfield projects, which totaled around R$ 1,955 million;

 

3Q12 Results | November 05, 2012

 

·        the increase in indebtedness due to the funding, net of amortizations, in the amount of R$ 244 million, in CPFL Energia (Holding) and the other Group companies (conventional generation, distribution and commercialization segments);

·         the increase in the other charges and monetary and exchange rate updates (net of hedge) in the period, in the amount of R$ 21 million.

The main contributing funding and amortizations to the variation in the balance of financial debt described above were:

·         CPFL Renováveis: funding, net of amortizations, in the amount of R$ 1,955 million, and debt assumptions in the amount of R$ 1,282 million:

+      Debentures issuance by CPFL Renováveis (1^st Issue of R$ 430 million);

+      Funding of BNDES financing for CPFL Renováveis (source CPFL), in the amount of R$ 618 million;

+      Funding related to the acquisition of Santa Luzia Small Hydro Power Plant through the 2^nd Issue of Debentures, in the amount of R$ 169 million;

+      Funding related to the acquisition of Bons Ventos (operation with redeemable preferred shares), in the amount of R$ 400 million;

+      Promissory notes issuances by Coopcana and Alvorada Thermoelectric Power Plants and Atlântica Wind Complex, in the amount of R$ 320 million;

+      Funding of BNDES financing for Salto Góes Small Hydroelectric Power Plant, in the amount of R$ 51 million;

-      Amortizations of BNDES financing for CPFL Renováveis (source CPFL), in the amount of R$ 33 million.

+      Indebtedness from the acquisition of Jantus by CPFL Renováveis, in the amount of R$ 673 million, of which R$ 526 million are related to the 1^st Issue of Debentures and R$ 147 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$ 127 million, related to BNDES financing;

+      Indebtedness from the acquisition of Bons Ventos by CPFL Renováveis, in the amount of R$ 482 million, of which R$ 224 million are related to BNDES financing, R$ 184 million are related to BNB financing and R$ 74 million are related to NIB (Nordic Investment Bank) financing.

·         Group’s Distributors: funding (BNDES and other financial institutions), net of amortizations, totaling R$ 707 million:

+      Debentures issuance by CPFL Paulista (6^th Issue of R$ 660 million), CPFL Piratininga (6^th Issue of R$ 110 million) and RGE (6^th Issue of R$ 500 million);

+      Funding of financing, through Law No. 4131/62, for CPFL Paulista (R$ 49 million), CPFL Piratininga (R$ 64 million), RGE (R$ 223 million), CPFL Santa Cruz (R$ 20 million), CPFL Leste Paulista (R$ 25 million), CPFL Sul Paulista (R$ 21 million), CPFL Jaguari (R$ 13 million) and CPFL Mococa (R$ 11 million);

+      Funding of working capital by CPFL Jaguari (R$ 19 million), CPFL Leste Paulista (R$ 9 million) and CPFL Mococa (R$ 6 million);

-      Amortizations of the principal of RGE (3^rd Issue of R$ 127 million) and CPFL Paulista’s debentures (3^rd Issue of R$ 213 million);

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

 

3Q12 Results | November 05, 2012

 

-      Amortizations of financing for CPFL Paulista (R$ 49 million), CPFL Piratininga (R$ 5 million), RGE (R$ 95 million), CPFL Santa Cruz (R$ 8 million), CPFL Leste Paulista (R$ 8 million), CPFL Sul Paulista (R$ 5 million) and CPFL Mococa (R$ 4 million);

-      Other amortizations, net of funding, in the amount of R$ 20 million.

·         CPFL Geração, EPASA and Conventional Generation Projects: amortizations (BNDES and other financial institutions), net of funding, totaling R$ 318 million:

+      Funding of BNDES financing for EPASA (R$ 105 million) and Foz do Chapecó (R$ 5 million);

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

-      Amortizations of the principal of Epasa (2^nd Issue of R$ 142 million and 3^rd Issue of R$ 2 million), BAESA (R$ R$ 6 million) and ENERCAN’s debentures (R$ 4 million);

-      Amortizations of working capital by Foz do Chapecó (R$ 25 million) and CERAN (R$ 22 million);

-      Amortizations of BNDES financing for CPFL Geração (R$ 56 million), CERAN (R$ 55 million), Foz do Chapecó (R$ 66 million), ENERCAN (R$ 35 million), BAESA (R$ 19 million) and EPASA (R$ 6 million).

·         CPFL Brasil and CPFL Serviços: funding, net of amortizations, totaling R$ 5 million:

+      Funding of BNDES financing for CPFL Brasil (R$ 6 million) and CPFL Serviços (R$ 2 million);

-      Amortizations of BNDES financing for CPFL Brasil (R$ 2 million).

·         CPFL Energia (Holding): 

-      Amortization of the principal of CPFL Energia’s debentures (3^rd Issue of R$ 150 million).

During the second half of 2011, CPFL Energia put into practice its pre-funding strategy, anticipating funding for maturing debt during 2012. This strategy continued to be employed during the year 2012 in respect of debt maturing in 2013. The latest funding for this purpose were conducted in July 2012 through the issuance of debentures, in the total amount of R$ 1,270 million, and a credit line of R$ 297 million through Law No. 4131/62. Over the 12 months ended on September 30, 2012, CPFL Energia made amortizations that exceeded the mark of R$ 2,600 million. Therefore, the company was capable of reducing the nominal cost of its debt by approximately 1.7 percentage point, to 9.8% p.a., as well as extending its debt profile by 4.7%, from 4.3 to 4.5 years.

 

3Q12 Results | November 05, 2012

 

Of the total indebtedness of R$ 16,631 million in 3Q12, R$ 14,347 million (86.3%) are considered long term and R$ 2,284 million (13.7%) are considered short term. In 3Q11, of the total of R$ 13,129 million, R$ 11,061 million (84.2%) are considered long term and R$ 2,068 million (15.8%) are considered short term.

The cash position at the end of 3Q12 has coverage ratio of 1.3x the amortizations of the next 12 months, enough to honor all amortization commitments until early 2014.

5.2) 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$ 17,030 million in 3Q12, growth of 25.1%. The nominal average cost of debt fell from 11.5% p.a. in 3Q11 to 9.8% p.a. in 3Q12, due to the decrease in the CDI interbank rate (from 11.5% to 9.5%). (accrued rates in the last 12 months)

 

3Q12 Results | November 05, 2012

 

Debt Profile – 3Q11

Debt Profile – 3Q12

Note: PSI – Investment Support Program

As a result of the funding operations and amortizations, considering the indexation after hedge, there was an increase in the BNDES-TJLP-indexed portion (from 24.9%, in 3Q11, to 27.4%, in 3Q12) and prefixed-PSI (from 3.3%, in 3Q11, to 5.5%, in 3Q12), and a decrease in the portion tied to the CDI-pegged portion (from 67.7%, in 3Q11, to 64.1%, in 3Q12).

The foreign-currency and TJLP debt would have come to 14.1% and 27.6% of the total, respectively, if banking hedge operations had been excluded. Considering the 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 0.2% (all of this possesses a natural hedge) and 27.4%, respectively.

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

3Q12 Results | November 05, 2012

 

5.3) Net Debt and Leverage

In 3Q12, net debt totaled R$ 13,967 million, an upturn of 57.7% or R$ 5,113 million, compared to net debt position at the end of 3Q11 in the amount of R$ 8,855 million. This increase is explained on the following factors:

·         Increase of R$ 3,502 million in the gross indebtedness, as described in the item 5.1;

·         Reduction of R$ 1,611 million in the balance of the cash, from R$ 4,275 million in 3Q11 to R$ 2,664 million in 3Q12, mainly explained by:

          (i)        Cash generation of operating activities in the period: +R$ 2,176 million;

         (ii)        Payment of the acquisitions (Jantus, Santa Luzia, Atlântica and Bons Ventos): -R$ 1,686 million;

        (iii)        Investments in the period: -R$ 2,633 million;

        (iv)        Net funding in the period: +R$ 1,971 million;

         (v)        Payment of dividends: -R$ 1,414 million;

        (vi)        Other movements: -R$ 25 million.

In line with the criteria for calculation of financial covenants of loan agreements with financial institutions, net debt is adjusted according to the equivalent participation of CPFL Energia in each of the projects. Also, include in the calculation of adjusted EBITDA the effects of the CVA – "Account for the Compensation of the Variations of Parcel A" and the historic EBITDA of newly acquired projects, as Jantus and Bons Ventos. As a result, adjusted net debt totaled R$ 12,685 million and adjusted EBITDA reached R$ 4,315 million, and the adjusted Net Debt / adjusted EBITDA at the end of 3Q12 reached 2.94x (value to be reviewed by the independent auditors). Considering the net debt without adjustment and the IFRS reported EBITDA accumulated in 12 months up to the end of 3Q12 in the amount of R$ 4,052 million, the Company would have closed the quarter with a net leverage of 3.45x.

5.4) New Funding in October 2012 – BNDES Financing Disbursements

In October 2012, disbursements for financing the investments of distributors occurred, in the total amount of R$ 606 million. The amounts by company were as follows:

·           2.4 years: 

-     Amount: R$ 45 million

-     Average cost: TJLP + 2.27%

·           7 years: 

-     Amount: R$ 290 million

-     Average cost: TJLP + 2.57%

3Q12 Results | November 05, 2012

 

·           10 years: 

-     Amounts: R$ 271 million

-     Cost: 2.50% Prefixed (PSI)

6) INVESTMENTS

In 3Q12, R$ 660 million were invested in business maintenance and expansion, of which R$ 436 million in distribution, R$ 213 million in generation (R$ 209 million of CPFL Renováveis) and R$ 11 million in commercialization and services. As result, CPFL Energia’s investments totaled R$ 1,930 million in 9M12, of which R$ 1,041 million in distribution, R$ 872 million in generation (R$ 862 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;

        (ii)      Generation: chiefly focused on Alvorada and Coopcana Thermoelectric Power Plants, Salto Góes Small Hydro Power Plant, Campo dos Ventos II Wind Farm and Santa Clara, Macacos I, Campo dos Ventos and São Benedito Wind Complexes, 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.

3Q12 Results | November 05, 2012

 

7) DIVIDENDS

On September 28, 2012, intermediary dividends related to 1H12 were paid to holders of common shares traded on the São Paulo Stock Exchange (BM&FBovespa S.A. Bolsa de Valores, Mercadorias e Futuros - BM&FBOVESPA). The total declared amount was R$ 640 million, equivalent to R$ 0.665339515 per share and corresponding to 100% of controlling shareholders' net income for the period.

On October 5, 2012, intermediary dividends related to 1H12 were paid to holders of ADRs, traded on the New York Stock Exchange (NYSE). The paid amount was equivalent to US$ 0.6436 per ADR.

Note: (1) Based on the average of the closing quotations in each half year period.

The 1H12 dividend yield, calculated on the average of the closing quotations in the period (R$ 26.30 per share) is 2.5% (6.1% in the last 12 months).

Dividend Distribution – R$ Million

(*) Note: considering share price adjusted for reverse stock split and simultaneous stock split on June 29, 2011. Without dividends.

The declared amounts are in line with the Company’s dividend policy, which states that shareholders will receive at least 50% of adjusted half-yearly net income as dividends and/or interest on equity (IOE). CPFL Energia has presented a payout ratio close to 100% since its IPO, respecting the constitution of the legal reserve of 5%.

3Q12 Results | November 05, 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$ 22.39 per share and US$ 21.91 per ADR, respectively (closing price in 09/30/2012).

Shares Performance – 9M12 (with dividends)

In 9M12, the shares depreciated 8.8% on the BM&FBOVESPA and 17.7% on the NYSE.

Shares Performance – Last 12M (with dividends)

In the last 12 months, the shares appreciated 15.0% on the BM&FBOVESPA and 4.9% on the NYSE.

3Q12 Results | November 05, 2012

 

8.2) Average Daily Volume

The daily trading volume in 9M12 averaged R$ 45.2 million, of which R$ 18.7 million on the BM&FBOVESPA and R$ 26.5 million on the NYSE, 37.6% up on 2011. The number of trades on the BM&FBOVESPA increased by 51.6%, rising from a daily average of 2,045, in 2011, to 3,101, in 9M12.

R$ thousands

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

8.3) Ratings

In October 2012, Standard & Poor's issued a report reaffirming its credit rating for CPFL Energia. Therefore, the Company maintains the AA+ rating on the national scale, with stable perpective, by Fitch and Standard & Poor's agencies.

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

Note: Close-of-period positions.

3Q12 Results | November 05, 2012

 

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.