Fiscal Year Highlights. Conference Call 2013 with Simultaneous Translation

Transcription

1 2013 São Paulo, March 21, 2014: CESP - Companhia Energética de São Paulo (BM&FBOVESPA: CESP3, CESP5 and CESP6), the largest hydroelectric power generator in the State of São Paulo and one of the largest in the country, discloses the release for the results regarding fourth quarter and full year of 2013 (4Q13 and 2013). The quarterly information has been developed according to the International Financial Reporting Standards (IFRS) and accounting practices adopted in Brazil and have been compared to the same periods in 2012, except where otherwise indicated. Conference Call 2013 with Simultaneous Translation Date: 03/25/2014 Portuguese 11h00 (Brasília Time) 10h00 (New York Time) Tel.: Code: CESP Replay: Password: CESP Translation to English 11h00 (Brasília Time) 10h00 (New York Time) EUA: (1 646) Other countries: (1 866) Code: CESP Replay: Password: CESP IR Conctat: Tel.: Fax: ricesp@cesp.com.br Highlights Fiscal Year 2013 Net Operating Revenue of R$ 3.9 billion, 16.4% higher than 2012 Operating Expenses of R$ 1.7 billion, 9.2% lower than 2012 EBIT of R$ 2.2 billion, 48.6% higher than 2012 EBITDA (Instruction CVM 527/12) of R$ 852 million in 2013 Adjusted EBITDA of R$ 2.7 billion in 2013, adjusted by the provision of Três Irmãos power plant, with a margin of 68.2% Losses of R$ million in 2013 Dividend distribution proposal of R$ 1.0 billion (R$ 196 million have already been paid as Interest on Own Capital) Financial and Operating Highlights (R$ thousand) 4Q13 4Q12 Chg % Chg % Net Operating Revenue 951, , % 3,904,102 3,354, % Operating Expenses (433,850) (528,742) -17.9% (1,694,460) (1,867,031) -9.2% EBIT 517, , % 2,209,642 1,486, % EBITDA (1,183,121) 402, ,187 2,086, % Adjusted EBITDA 628, , % 2,663,905 2,086, % EBITDA Margin 66.1% 50.0% 16.1 p.p. 68.2% 62.2% 6.0 p.p. Financial Result (104,458) (120,021) -13.0% (422,082) (576,633) -26.8% Net Income (Loss) (990,558) 59,705 - (195,346) 504,298 - Dividends 1,044, , % 1

2 GENERATION FACILITIES CESP Companhia Energética de São Paulo has five hydroelectric power plants operating in price system and a power plant, Três Irmãos, which from April 18, 2013 is being operated temporally in the quota system. Both operations totaled 57 generating units, add up 7,457.3 MW of installed capacity and MW average of physically guaranteed energy, representing 6% and 5%, respectively, of Brazil s installed capacity and physically guaranteed energy supply. The hydroelectric plants are distributed between two hydrographic basins, that of the Rio Paraná in the West of the state of São Paulo and the basin of the Rio Paraíba do Sul, in the Eastern region of the state. Below the main data for the Generation Facilities plants are presented: Power Plants Date of Conclusion Generating Units Installed Capacity (MW) Physical Guarantee (Average MW) End of Concessions llha Solteira , , /7/2015 Jupiá , /7/2015 Porto Primavera , , /21/2028 Paraibuna /9/2021 Jaguari /20/2020 Total 52 6, ,698.5 Trës Irmãos* /18/2011 Total 57 7, ,916.0 * The Company believes that since CESP has not accepted the conditons proposed by Provisional Measure no. 579 (subsequently passed into Law no , of 1/14/2013), the Licensing Power took measures to revert the concession back to the Union. Thus, since April 18, 2013, CESP no longer detains the plant under the price exploration regime, now operating it on a temporary and provisional basis in a quota regime. As per the terms of the CESP Concession Contract, upon extinction of the concession, the Company has the right to compensation for those assets still not amortized. According to its records, the Company claims compensation for R$ 3,529.1 million, which refers to the Três Irmãos Hydroelectric Plant. For the Licensing Power, this compensation is worth R$ 1,717.4 million (base date March/2013) and CESP should seek its rights in court, if necessary. PRODUCTION OF ELECTRIC ENERGY In 2013, electricity production from CESP Generating Park (disconsidering Três Irmãos Power Plant) reached 34,054 GWh, 12.3% below the same period in In the quarter, the reduction was 5.5% and reached 8,900 GWh. The reduction of production is due to dispatch of Thermoelectric on the orders of the ONS National Electric System Operator for recovery of the reservoirs of hydroelectric plants. 2

3 Power Plants Production MWh 4Q13 4Q Ilha Solteira 4,061,981 4,301,165 15,289,750 17,725,139 Jupiá 2,243,311 2,365,512 8,544,398 9,743,720 Porto Primavera 2,487,323 2,588,852 9,775,980 10,761,397 Paraibuna 83, , , ,456 Jaguari 23,312 35,785 97, ,214 Subtotal 8,899,762 9,421,833 34,054,295 38,841,926 Três Irmãos* 490, ,550 1,891,385 3,511,144 Total 9,390,184 9,890,383 35,945,680 42,353,070 * The energy from the Três Irmãos Power Plant was allocated to the quota system starting April 18, 2013 Physical Guarantee = 3,698.5 average MW X 24 hours X 92 days = 8,166,288 MWh/4Q13 (without Três Irmãos) = 3,698.5 average MW X 24 hours X 365 days = 32,398,860 MWh/2013 SALES? CESP s clients are: (i) the electrical energy distributors in the country which purchase their energy through long term agreements, in auctions in the regulated market; (ii) the traders and free consumers who acquire their energy through public offers in short, medium and long term bilateral agreements. CESP sells its net physically guaranteed energy supply in the following environments: Free Contracting Market ACL: by way of Agreements for Purchase and Sale of Energy (CCVEs) for short, medium and long terms, with volumes, prices and conditions negotiated with selling companies and with free consumers. Regulated Contracting Market ACR: through power purchase auctions organized by ANEEL Electric Energy National Agency, conducted through the CCEE to serve the distributors. Electric Energy Trading Board CCEE: in which the differences between energy produced, physically guaranteed and contracted are booked and liquidated, in which the differences between energy produced, physically guaranteed and contracted are booked and liquidated, partly to meet the ERM Energy Reallocation Mechanism to regulated tariffs that only cover the variable costs of power generation, and partly as waste products and secondary energy, the prices for Settlement of Differences PLD, cleared in CCEE. Furthermore, CESP is operating, on a temporary basis, the Três Irmãos plant, which has provided its energy in a Quota Regime since 4/18/

4 REVENUE In 2013, Energy Sales recorded R$ 4.4 billion, 14.1% higher than 2012, underscoring the Short Term Market PLD and the ACL Free Contracting Environment, with variations of 185.6% and 37.8% respectively. In 4Q13, Energy Sales grew 15,4% compared to the same quarter of 2012, due to contracts in the Free Market ACL and also the liquidations in the CCEE, and totaled R$ 1.1 billion. Energy Sales Breakdown MWh R$ thousand 4Q13 4Q12 Chg. 4Q13 4Q12 Chg. Free Market - ACL 3,617,920 3,161, % 456, , % Regulated Market - ACR 3,572,776 5,342, % 424, , % Spot Market - PLD 148, , Spot Market - MRE 157,074 1,487, % 8,449 13, % Total 7,496,177 9,991, % 1,080, , % Energy Sales Breakdown MWh R$ thousand Var Var. Free Market - ACL 14,694,010 12,446, % 1,858,201 1,348, % Regulated Market - ACR 14,037,343 20,639, % 1,628,992 2,123, % Spot Market - PLD 2,333,421 3,241, % 849, , % Spot Market - MRE 1,227,569 5,025, % 19,301 46, % Total 32,292,343 41,353, % 4,356,316 3,816, % Note 2013 data do not consider the Três Irmãos HEP after April 18, when the plants energy was allocated to the quota regime. REVENUE BREAKDOWN In 2013, the revenues resulting from electric energy sales in the Regulated Contracting Environment (ACR) corresponded to 37.4%, in the Free Contracting Environment (ACL) to 42.7% and in the Electric Energy Commercialization Chamber (CCEE) was 19.9% % 42.7% 37.4% 35.3% 9.0% 55.6% Regulated Market - ACR Free Market - ACL Spot Energy - CCEE The change in the income distribution profile from 2012 to 2013 is a sign of the maturity of contracts in the regulated market from , finished in December 2012, part of which was recontracted at higher prices in the Free Market - ACL, and part uncontracted, settled in the CCEE at Differences in Settlement Prices PLD. 4

5 Free Contracting Market ACL The share of Free Contracting Market ACL in the quarter was 42.2% and totaled R$ million. In the year of 2013 revenues in ACL recorded R$ 1.9 billion, a share of 42.7%. In the quarter the energy volume for short, mid and long term contracts, in the Free Contracting Market, totaled 3,618 GWh, representing a 48.3% share in energy quantities sold. In the quarter the share was 45.5% and totaled 14,694 GWh. Regulated Contracting Market ACR The share of revenues in this environment was 39.3% in this quarter and 37.4% for full year, reaching R$ million and R$ 1.6 billion, respectively. The volume of energy sent to the ACR totaled 3,573 GWh the fourth quarter of 2013, which represents a share of 47.7 % of the total sold in contracts for the quarter. In the year correspond to 14,037 GWh. A share of 43.5% Spot Market In this quarter, the revenues obtained by the company in CCEE, including the Energy Reallocation Mechanism (MRE) and the Spot Market (PLD) was R$ million, a share of 18.5% in total revenues. In the year, revenues totaled R$ million, a share of 19.9% in the total energy sold. The volume traded in this environment in the year of 2013 was 3,561 GWh or 11.0% of the total volume sold. In 2002, the PLD price average in the CCEE was R$ , compared to R$ in 2012 Revenue The Company billing in 2013 was R$ 4,420,6 million, with R$ 3,487,1 million in bilateral contract in regulated and free contract environments, R$ 869,1 million in Electric Energy Trading Chamber CCEE, R$ 60,5 million for the operation and maintenance of Três Irmãos hydroelectric power station under quotas regimen and, additionally, R$ 2,4 million in revenues from service rendering contracts and R$ 1,4 million from other revenues. DEDUCTIONS TO REVENUE In 4Q13 Deductions from Revenues represented 14.0% of Gross Operating Revenues and totaled R$154.9 million. In 2013, Deductions from Revenues amounted to R$516.5 million, 11.7% of Gross Operating Revenue. Deductions from Operating Revenues - R$ '000 4Q13 4Q12 Chg Chg. Global Reserve for Reversion Quota - RGR (54,677) (38,880) 40.6% (117,862) (100,289) 17.5% Research and Development (9,312) (8,084) 15.2% (39,095) (33,504) 16.7% Services tax - ISS (25) (30) -16.7% (118) (100) 18.0% COFINS tax on Operating Revenues (74,683) (69,825) 7.0% (295,322) (272,776) 8.3% PIS tax on Operating Revenues (16,212) (15,159) 6.9% (64,105) (59,217) 8.3% Total (154,909) (131,978) 17.4% (516,502) (465,886) 10.9% % Gross Revenues 14.0% 14.1% -0.1 p.p. 11.7% 12.2% -0.5 p.p. 5

6 OPERATING EXPENSES Operating Expenses in 2013 totaled R$ 1.7 million, 9.2% lower than 2012, representing 43.4% of Net Revenues, a decrease of 12.3 p.p. In the quarter the reduction was 20.0 p.p, representing 45.6 of Net Revenues. Personnel expenses fell 14.5% in the quarter and 5.5% in the year, but they incurred an expense of R$.27.9 million in 3T13 from the implementation of the Retirement Incentive Program, which should be recovered in the next six months. Other factors that contributed to this reduction were: (i) Non-existence of expenses with the purchase of energy in the CCEE, which in 2012 was R$ million; (ii) Reduction in depreciation expenses due to the termination of economic exploration at the Três Irmãos HEP in the price regime; (iii) Reduction in Financial Compensation from the Use of Water Resources, from the reduction in energy production commanded by the National Electric System Operator ONS; (iv) decrease in Transmission System Charges from the reduction in tariffs in 2013; and (v) Reduction in third party Materials and Services items, due to internal management. Operating Expenses - R$ thousand 4Q13 4Q12 Chg Chg. Personnel (51,555) (60,292) -14.5% (199,964) (211,574) -5.5% Retirement incentive program (27,948) - - Social Security Entity - Contribution to plan (2,472) (2,514) -1.7% (9,768) (8,877) 10.0% Social Security Entity - CPC 33 / IAS 19 (14,756) 38,873 - (25,109) 14,114 - Materials (2,661) (2,848) -6.6% (10,584) (10,908) -3.0% Outsourced Services (30,973) (32,613) -5.0% (102,672) (111,792) -8.2% Compensations for Use of Water Resources (47,823) (48,648) -1.7% (183,067) (208,323) -12.1% Energy Purchased - (142,464) - - (142,464) - System Service Charges - transmission (91,547) (93,403) -2.0% (356,242) (371,503) -4.1% System Services Fee (4,770) (4,502) 6.0% (18,303) (17,637) 3.8% COFINS/PIS credits on services charges 6,962 8, % 27,865 31, % Depreciation (159,377) (191,745) -16.9% (680,626) (773,830) -12.0% Provision for Estimated Credit Losses (1,706) (3,448) -50.5% (12,021) (28,411) -57.7% Operating Provision (24,216) 11,121 - (73,914) (11,713) 531.0% Other Expenses (8,956) (4,903) 82.7% (22,107) (15,828) 39.7% Total (433,850) (528,742) -17.9% (1,694,460) (1,867,031) -9.2% % Net Revenue 45.6% 65.7% p.p. 43.4% 55.7% p.p. It is also worth underscoring that on 1/1/2013, the CPC 33 Technical Pronouncement Benefits and Employees took effect in its new version, called (R1). The main impacts from adopting this standard in the Company were: (i) elimination of the method for recognizing actuarial gains and losses immediately in the fiscal year; and (ii) calculation of the estimated return on assets using the same discount rate used to calculate actuarial liabilities. With the alterations introduced by CPC 33 (R1), the Company had to make adjustments in the financial statements for the previous fiscal year (2012) to permit comparing the new practices, adopted for fiscal year 2013, as well adjustments in opening balances, on 1/1/2012 for those items whose values were altered compared to the originally informed values on 12/31/2011. Tus, the Income Statement of 2012 (redone) now shows income of R$ 14.1 million in the Employee Pension Entity item CPC 33, compared to an expense of R$ million in the financial statements originally released in

7 EBITDA The Adjusted EBITDA, calculated according to provision of Assets (Três Irmãos), amounted to R$ milion in the quarter and R$ 2.7 billion in Adjusted EBITDA Margin was 66.1% in 4T13 and 68.2% in the full year of ADJUSTED EBITDA R$ million 2, % 2, % 66.1% % 62.2% 50.0% Q13 4Q Breakdown: EBIT / EBITDA - R$ thousand 4Q13 4Q12 Chg Chg. Net Income (Loss) (990,558) 59,705 - (195,346) 504,298 - Tax and Social Contribution (Net) (456,725) 30,453 - (56,488) 230,171 - Financial Result 104, , % 422, , % EBIT (1,342,825) 210, % 170,248 1,311, % Depreciation 159, , % 681, , % EBITDA (1,183,121) 402, ,187 2,086, % Contingent Asset Provision - HPP Três Irmãos 1,811,718 1,811,718 ADJUSTED EBITDA 628, , % 2,663,905 2,086, % Adjusted EBITDA Margin 66.1% 50.0% 16.1 p.p. 68.2% 62.2% 6.0 p.p. FINANCIAL RESULTS Financial Revenues totaled R$ 22.9 million in the fourth quarter of 2013, against R$ 10.1 million in the 4Q12. In the year, Financial Revenues totaled R$ million, 182.8% higher than 2012, mainly due to update on buying foreign currency. The Total of Financial Expenses, including Debt Charges and Other Financial Expenses was R$ 54.8 million in the 4Q13 and R$ million in the year of 2013, below 38.8% and 28,2% respectively to the same periods in In the quarter, Net Monetary Variations resulted in R$ R$ 37.7 million negative reflect indicators tied to inflation in the year totaled R$ million negative. Net Exchange Variations reached R$

8 million negative in the fourth quarter of 2013 and R$ million negative in the year of 2013, reflecting the devaluation of the Real against the U.S. Dollar. Consequently, the Financial Result in 4Q13 was R$ million negative, 13.0% lower than R$ million of the fourth quarter of In 2013, the Financial Result was R$ million negative, 26.8% lower than R$ million negative in Breakdown of Financial Results - R$ thousand 4Q13 4Q12 Chg Chg. REVENUES 22,917 10, % 131,084 46, % Revenues from Investments 20,967 7, % 67,626 34, % FIDC - update 1,799 1, % 6,725 5, % Update of Credit and Receivables - DAEE ,689 3, % Update of Accounts Receivable - Free energy Update on purchase of foreign currency , Update escrow and tax for offset , Other % 508 2, % EXPENSES DEBT CHARGES (38,706) (55,141) -29.8% (198,901) (223,578) -11.0% Foreign Currency (11,235) (24,386) -53.9% (79,089) (97,975) -19.3% Local Currency (27,471) (30,755) -10.7% (119,812) (125,603) -4.6% OTHER (16,087) (34,441) -53.3% (60,028) (136,872) -56.1% Charges and update on taxes and social contributions (175) (404) -56.7% (1,014) (2,837) -64.3% Interest and update of the ELETROBRÁS Agreement - (3,727) - (4,969) (22,857) -78.3% Restatement of assignement of energy bill credits - (11,502) - (4,219) (43,140) -90.2% Income tax on financial operations (719) (79) 810.1% (999) (533) 87.4% Income tax on remittances abroad (*) (2,043) (6,689) -69.5% (20,515) (23,524) -12.8% Financial Adjustment - TAC (200) (902) -77.8% (1,197) (2,560) -53.2% Financial Operation Expenses - FIDC (229) (271) -15.5% (1,862) (1,198) 55.4% Updating R&D - projects (1,728) (1,117) 54.7% (5,687) (4,962) 14.6% Discount on customer contracts (707) (5,507) -87.2% (4,181) (23,149) -81.9% Other charges (10,286) (4,243) 142.4% (15,385) (12,112) 27.0% TOTAL FINANCIAL EXPENSES (54,793) (89,582) -38.8% (258,929) (360,450) -28.2% GROSS INCOME (31,876) (79,439) -59.9% (127,845) (314,101) -59.3% MONETARY AND EXCHANGE VARIATIONS, NET (72,582) (40,582) 78.9% (294,237) (262,532) 12.1% Local Currency (37,732) (32,507) 16.1% (132,430) (156,921) -15.6% Foreign Currency (34,850) (8,075) 331.6% (161,807) (105,611) 53.2% FINANCIAL RESULT (104,458) (120,021) -13.0% (422,082) (576,633) -26.8% NET INCOME In 2013, Profit before Taxes reached R$ 251,8 million negative and and expenses from Income Tax and Social Contributions totaled R$ 56.4 million positive, due to the reversal of R$ deferred income tax that refers to the Três Irmãos Plant. Thus, in 2013, the Company presented Losses of R$ million. 8

9 The provision regarding the Três Irmãos Plant was done considering the compensation announced by the Ministry of Mines and Energy, which was R$ 1,717.4 million, and the accounting value according to the IFRS criteria, which is R$ 3,520.1 million. Thus, the provision was R$ 1,811.7 million, entered in the Other Net (Expenses) Income item, with the impact shown below: Accounting Impact HPP Três Irmãos Result Três Irmãos Provision Annual Result Income (Loss) before taxes 1,559.9 (1,811.7) (251.8) Current Income tax and social contribution (373.3) Net Income (Loss) 1,186.6 (1,381.9) (195.3) By virtue of constituting the provision, there was a realization of Adjustment to net assets of Três Irmãos HPP of R$ million benefiting the distribution of dividends. PROVISION FOR LEGAL RISKS The liability accounting item Provision for Legal Risks behaved as follows during Balance 1,941 Position Adjustment 254 Provision and Reversals 165 Payments (44) 2013 Balance 2,317 Starting from the 2012 position, R$ 254 million was entered as monetary correction and interest. There was a net constitution of provision worth R$ 165 million and payments of R$ 44 million were made on lawsuits. On 12/31/2013, the balance was R$ 2.3 billion, a variation of 19.4% compared to the end of INDICATORS In the table below are listed the main indicators that affect the result of CESP. Financial and Economic Indexes 4Q13 4Q12 Chg Chg. Average Price Contract - R$ per MWh* % % Operating Margin 54.4% 34.3% 20.1 p.p. 56.6% 44.3% 12.3 p.p. Foreign Exchange Variation (USD/BRL) 5.05% 0.64% 4.4 p.p % 8.94% 5.7 p.p. IGP-M (General Market Price Index) 1.75% 0.67% 1.1 p.p. 5.51% 7.82% -2.3 p.p. IPC-A (Extended Consumer Price Index) 2.03% 1.98% 0.1 p.p. 5.91% 5.84% 0.08 p.p. Current Ratio * Does not consider revenue and energy from Três Irmãos 9

10 FINANCIAL DEBT Financial Debt on 12/31/2013 was R$ 3,000.5 million, 19.9% less than 12/31/2012. Considering the cash available of R$ million, Net Debt at the end of December 2013 was R$.2,160.8 million (R$ 3,166.0 million on 12/31/2012), 31.7% lower than 12/31/2012. Financial Debt R$ million -19.9% 3,745.3 (US$ mm) 3, % 33.9% (US$ mm) 74.6% 66.1% 12/31/ /31/2012 Local Currency Foreign Currency The foreign currency debt was US$ million on 12/31/2013, including charges incurred up to the date (US$ million on 12/31/2012). Financial Debt Position in 12/31/ /31/2012 (In R$ thousand) Charges Current Long Term Total Total Chg. Foreign Currency 2, , , ,923 1,269, % Financial Institutions ,409-32,963 86, % BNDES 1, , , , , % Medium Term Notes , % Other ,352 1,527 1, % Local Currency 38,260 18, , ,870 1,198, % Financial Institutions ,946 38,728 52,493 95, % Medium Term Notes 37, , ,819 1,066, % ELETROBRÁS 10 5,186 25,362 30,558 35, % Other Debts 3, , ,260 1,237,690 1,277, % Account Payables , % FIDC 3, , , ,444 1,002, % Social Security Entity (a) - 115, , , , % Total of Financial Debt (1) 44, ,867 2,403,272 3,000,483 3,745, % Resources (2) - 839, , , % Cash and Cash Equivalents - 839, , , % Restricted Deposits , % NET DEBT (1) - (2) 44,344 (286,782) 2,403,272 2,160,834 3,166, % (a) Debt agreements with CESP Foundation that, less R$ million for the 33 CPC adjustment present balance of R$62.9 million in Non-Current Liabilities on

11 PROPOSAL FOR THE DESTINATION OF RESULTS AND DISTRIBUTION OF DIVIDENDS To be submitted to deliberation by shareholders in the Meeting scheduled for next April 25: Fiscal Year (R$ million) 2013 Net Income (195,346) Allocation - (+) Realizable Profits Reserve 170,126 (+) Realization of Equity Value adjustment (depreciation) 182,800 (+) Realization of Equity Value adjustment (Três Irmãos HPP provision) 834,371 (+) New accounting CPC 33 (R1) from previous years 163,759 Balance for allocation of dividends 1,155,710 Statutory Reserve Constitution (111,633) Balance for distribution 1,044,077 Interest on Equity already paid (196,000) Balance for distribution as dividends 848,077 The Board of Directors proposal to the Shareholders' Meeting projects the payment of R$ million by 6/30/2014 and the balance of R$ million by 11/30/2014. CAPITAL MARKETS CESP s most negotiated stock, Class B Preferred (CESP6), which represents 64% of the Company s total capital had an appreciation of 15.6% in Class A Preferred (CESP5), which represents 3% of the capital, appreciated 19.4% and the Common shares (CESP3), which represents 33% of the capital, appreciated 20.7%. During the 2013, IBOVESPA and the IEE Electric Energy Index saw a negative variation of 15.5% and 8.8% respectively. The table below shows the closing prices and the market value for CESP on the last day of June and December 2013, as well as the total points for the IBOVESPA and IEE indexes on those same dates. Share / Index Closing December 2013 Closing December 2012 Chg. % Number of Shares (thousand) Market Value (R$ thousand) December 2013 CESP % 109,168 2,172,443 CESP % 7, ,853 CESP % 210,632 4,722,369 TOTAL CESP 327,503 7,065,665 IBOV 51,507 60, % IEE 26,250 28, % 11

12 Base 100 Volume - R$ thousand Base 100 Volume - R$ thousand STOCK PERFOMANCE CESP3 - ON (Share price on 12/31/2013 R$ 19.90) Volume CESP3 CESP3 IBOV IEE CESP5 PNA (Share price on 12/31/2013 R$ 22.18) Volume CESP5 CESP5 IBOV IEE 12

13 Base 100 Volume - R$ thousand CESP6 PNB (Share price on 12/31/2013 R$ 22.42) ,000, ,000, ,000, ,000, ,000, ,000, ,000, ,000, ,000, ,000,000 90,000,000 80,000,000 70,000,000 60,000,000 50,000,000 40,000,000 30,000,000 20,000,000 10,000,000 0 Volume CESP6 CESP6 IBOV IEE LEGAL DISCLAIMER The statements contained in this document relating to the business outlook, estimates of operating and financial results and growth prospects of CESP are merely projections, and as such based exclusively on Management s expectations regarding the future of the business. These forward looking statements depend substantially on changes in market conditions, the performance of the Brazilian economy, the industry and international markets, and therefore are subject to change without prior notice. 13

14 Income Statement - R$ thousand 4Q13 4Q12 Chg Chg. OPERATING REVENUES 1,106, , % 4,420,604 3,819, % Electricity sales to final customers 242, , % 971, , % Electricity sales to distributors - Contracts 213, , % 886, , % Auction Energy 427, , % 1,628,992 2,123, % Quota system - Três Irmãos 22, , Spot Market Energy 199,754 13, % 869, , % Other Revenues % 3,791 3, % DEDUCTIONS FROM OPERATING REVENUES (154,909) (131,978) 17.4% (516,502) (465,886) 10.9% Global Reserve for Reversion Quota - RGR (54,677) (38,880) 40.6% (117,862) (100,289) 17.5% Development and research (9,312) (8,084) 15.2% (39,095) (33,504) 16.7% Services tax - ISS (25) (30) -16.7% (118) (100) 18.0% COFINS Tax on Operating Revenues (74,683) (69,825) 7.0% (295,322) (272,776) 8.3% PIS Tax on Operating Taxes (16,212) (15,159) 6.9% (64,105) (59,217) 8.3% NET OPERATING REVENUES 951, , % 3,904,102 3,354, % OPERATING EXPENSES (433,850) (528,742) -17.9% (1,694,460) (1,867,031) -9.2% Personnel (51,555) (60,292) -14.5% (199,964) (211,574) -5.5% Retirement incentive program (27,948) - - Social Security Entity - Contribution plan (2,472) (2,514) -1.7% (9,768) (8,877) 10.0% Social Security Entity - CPC 33 / IAS 19 (14,756) 38,873 - (25,109) 14,114 - Materials (2,661) (2,848) -6.6% (10,584) (10,908) -3.0% Outsourced Services (30,973) (32,613) -5.0% (102,672) (111,792) -8.2% Compensation for Use of Water Sources (47,823) (48,648) -1.7% (183,067) (208,323) -12.1% Energy purchased - (142,464) - - (142,464) - System Services Charges - transmission (91,547) (93,403) -2.0% (356,242) (371,503) -4.1% System Services Fee (4,770) (4,502) 6.0% (18,303) (17,637) 3.8% COFINS/PIS credits on services charges 6,962 8, % 27,865 31, % Depreciation (159,377) (191,745) -16.9% (680,626) (773,830) -12.0% Provision for Estimated Credit Losses (1,706) (3,448) -50.5% (12,021) (28,411) -57.7% Operating Provision (24,216) 11,121 - (73,914) (11,713) 531.0% Other Expenses (8,956) (4,903) 82.7% (22,107) (15,828) 39.7% INCOME FROM OPERATIONS 517, , % 2,209,642 1,486, % Other Net Revenues (expenses) (1,860,167) (66,260) % (2,039,394) (175,872) % OPERATING INCOME FINANCIAL RESULTS (1,342,825) 210, ,248 1,311, % FINANCIAL RESULT (104,458) (120,021) -13.0% (422,082) (576,633) -26.8% INCOME (LOSS) BEFORE TAXES (1,447,283) 90,158 - (251,834) 734,469 - Current Income Tax (36,957) (41,483) -10.9% (303,234) (214,212) 41.6% Current Social Contribution (16,781) (16,127) 4.1% (115,778) (81,512) 42.0% Deferred Income Tax and Social Contribution 510,463 27, % 475,500 65, % Income Tax and Social Contribution TOTAL 456,725 (30,453) - 56,488 (230,171) - NET INCOME (LOSS) (990,558) 59,705 - (195,346) 504,298 - NET INCOME (LOSS) per share - R$ (3.02) (0.60)

15 INCOME STATEMENT (ANEEL STRUCTURE) - R$ thousand Chg. GROSS OPERATING REVENUES Energy Revenues Energy Supply 971, , % Energy Supply - Contracts 886, , % Energy Supply - Auction 1,628,992 2,123, % Short-term energy 869, , % 4,356,316 3,816, % 60, Other Revenues 3,791 3, % 4,420,604 3,819, % DEDUCTIONS FROM OPERATING REVENUES Global Reserve for Reversion Quota (RGR) (117,862) (100,289) 17.5% Development and research (39,095) (33,504) 16.7% Services Tax - ISS (118) (100) 18.0% COFINS Tax on Operating Revenues (295,322) (272,776) 8.3% PIS Tax on Operating Revenues (64,105) (59,217) 8.3% (516,502) (465,886) 10.9% NET OPERATING REVENUES 3,904,102 3,354, % COST OF ELECTRIC ENERGY SERVICES Costs with electric energy (511,444) (690,575) -25.9% Financial Compensation for Use of Water Resources (183,067) (208,323) -12.1% System Service Charges - transmission (356,242) (371,503) -4.1% Energy purchases - (142,464) - COFINS/PIS credits on services charges 27,865 31, % Operating costs (837,930) (873,780) -4.1% Personnel (54,915) (57,250) -4.1% (27,948) - - Materials (6,808) (5,498) 23.8% Outsourced Services (37,334) (45,220) -17.4% Social Security Entity (34,877) 5,237 - Generation depreciation (675,412) (768,720) -12.1% Other Expenses (636) (2,329) -72.7% GROSS OPERATING INCOME 2,554,728 1,789, % Operating Expenses General and Administrative Expenses (256,127) (259,956) -1.5% Other Operational Expenses (88,959) (42,720) 108.2% Other Net Revenues (expenses) (2,039,394) (175,872) % (2,384,480) (478,548) 398.3% OPERATING INCOME BEFORE FINANCIAL RESULT 170,248 1,311, % FINANCIAL RESULT (422,082) (576,633) -26.8% INCOME (LOSS) BEFORE TAXES (251,834) 734,469 - Current Income Tax (303,234) (214,212) 41.6% Current Social Contribution (115,778) (81,512) 42.0% Deferred Income Tax (Assets) (91,434) (91,696) -0.3% Deferred Social Contribution (Assets) (32,280) (25,906) 24.6% Deferred Income Tax (Liabilities) 440, , % Deferred Social Contribution (Liabilities) 158,615 48, % Income Tax and Social Contribution Total 56,488 (230,171) - NET INCOME (LOSS) (195,346) 504,298 - Net Income (Loss) per share (0.60)

16 ASSETS 12/31/ /31/2012 CURRENT ASSETS 1,471,399 1,075,237 Cash and Cash Equivalents 839, ,525 Accounts Receivable 530, ,189 Allowances for Doubtful Losses (58,916) (46,895) Recoverable Taxes 39,491 6,656 Guarantees and Judicial Deposits - 65,750 Stockroom 34,964 33,804 Other Receivables 79, ,536 Prepaid Expenses 6,989 1, NON CURRENT ASSETS 13,703,454 15,814,635 Pledges and Restricted Deposits 601, ,201 Deferred Taxes and Social Contribution 297,573 - Other Receivables 6,426 4,868 Prepaid expenses 4,213 - Assets available for reversal 1,717,362 - Property 11,076,739 15,181,566 TOTAL ASSETS 15,174,853 16,889,872 16

17 LIABILITIES AND SHAREHOLDERS' EQUITY 12/31/ /31/2012 CURRENT LIABILITIES 1,251,127 1,790,097 Suppliers 21,907 20,619 Loans and Financing 193, ,789 FIDC 287, ,581 Accounts Payable - Energy - 46,391 Taxes and Social Contributions 51,649 61,672 Employee Pension Entity - 30,954 Purchase Energy - CCEE - 100,084 Regulatory Tariffs 133,807 87,411 Interest on equity and Dividends 402, ,684 Estimated obligations and payroll 32,294 34,931 Environmental obligations 12,418 24,163 Other obligations 115, ,818 NON CURRENT RECEIVABLES 4,606,340 5,219,838 Loans and Financing 1,569,012 1,763,999 FIDC 496, ,948 Accounts Payable - Energy - 76,384 Taxes Payable - stallment - 7,170 Deferred Income Tax and Social Contribution - 177,927 Employee Pension Entity 62, ,916 System Service Charges - transmission 33,600 18,399 Provision for Contigencies 2,316,985 1,941,473 Environmental obligations 109, ,141 Other obligations 17,292 15,481 SHAREHOLDERS' EQUITY 9,317,386 9,879,937 Capital Stock 5,975,433 5,975,433 Capital Reserve 1,929,098 1,929,098 Adjustment to net assets 531,519 1,548,690 Other comprehensive income 66,579 (163,759) Income Reserve 368, ,716 Additional Proposed Dividends 446,534 - Accumulated Income - 163,759 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 15,174,853 16,889,872 17

18 ANNEX I Electricity Sector Glossary ACL Free Contracting Market The segment of the market in which energy is purchased and sold through freely negotiated bilateral contracts, among generators, sellers and free consumers in accordance with specific selling rules and procedures. Distribution agents (distributors) are not allowed to purchase energy in this environment. ACR Regulated Contracting Market The segment of the market in which energy is purchased and sold among generators and distributors, preceded by auctions except in cases envisaged by the Law, in accordance with specific selling rules and procedures. Agent Agent of the Electric Energy Trading Board (CCEE) Concessionaires, authorized companies or permit holders of energy services and facilities, sellers and free consumers, members of the CCEE and subject to the obligations and rights in the Trading Agreement, Rules and Procedures. ANEEL Brazilian Electricity Regulatory Agency Regulatory body of the Brazilian energy industry. A special regime governmental agency, linked to the Ministry of Mines and Energy MME, created by Law 9,427, of December 26, The Agency has the following responsibilities: regulating and monitoring the generation, transmission, distribution and commercialization of energy, responding to complaints of agents and consumers with fairness to the benefit of society; mediating conflicts of interest between energy sector agents and between energy sector agents and consumers; granting, permitting and authorizing energy facilities and services; ensuring fair tariffs; doing everything to ensure the best possible service quality; requiring investments; encouraging competition among operators; and ensuring service universalization. Assured Energy See Physical Guarantee. Basic Network Transmission facilities of the National Interconnected System SIN, owned by public service transmission concessionaires with voltage equal to or higher than 230 kv, established pursuant to criteria set forth by Regulatory Resolution 67, of June 8, Bilateral Contract A legal document that formalizes the purchase and sale of electric energy among CCEE agents in the Free Contracting Market in order to establish prices, deadlines and supply volumes in specific time intervals. Captive Consumers Consumers that are only allowed to purchase energy from the distributor to whose network it is connected. CAR Risk Aversion Curve Mechanism that establishes the minimum water storage level in reservoirs of hydroelectric power plants needed to produce energy with a safe interconnected system. CAR was introduced in January 2002 by Resolution 109, which established criteria and rules for the energy operation policy and thermal generation dispatch executed by the ONS, as well as pricing in the energy market. CCE Energy Purchase Agreement Contract with regulated tariff that establishes the general terms and conditions regulating the sale of energy among current generators and distributors with a market lower than 500 GWh/year, to serve its market. CCEAR Energy Trading Agreement in the Regulated Market A contracted between each generator and all distributors that participate in the auction for the sale of energy from existing or future projects. 18

19 CCEE Electric Energy Trading Chamber Private non profit legal entity that operates under the authorization of the Granting Authority, regulated and monitored by the ANEEL, to facilitate energy purchase and sale transactions between CCEE agents, restricted to the National Interconnected System (SIN). It is in the CCEE that all agents account for their energy rights and book energy transactions on a monthly basis. CCVEE Energy Purchase and Sale Agreement Also called Bilateral Contract. It is an agreement that formalizes the sale of energy (volume, prices, conditions, etc) resulting from the free negotiation among generators, sellers, free consumers and importers in the Free Contracting Market. CNPE - National Energy Policy Council CNPE is a committee created in August 1997 that advises the President of Brazil on the development of national energy policy. The CNPE was created to optimize the use of Brazil s energy resources and to guarantee national energy supply. Concession Contract Legal document signed between the Granting Power and the concessionaire formalizing the concession, which must have the essential clauses relating to the objective, area and period, as well as the main conditions for the provision of the public service. CVM - Brazilian Securities Commission Distributors Agent holding the federal concession to provide energy distribution public services under the terms of applicable legislation, serving captive consumers in its concession area. EBIT and EBITDA Defined by the rules established by the CVM Instruction No. 527/2012. Adjusted EBITDA EBITDA is defined by CESP as Net Income (or Loss) plus Financial Results, Depreciation, Impairment, Operational Provisions, Other Net (Expenses) Revenue, Employees Pension Plan CPC 33/IAS 19, Income Tax and Social Contribution. Electric Sector General Agreement Agreement signed between generators and distributors defining the rules for compensation for the financial losses due to energy rationing in 2001/2002. The agreement, signed in December 2001, envisaged a loan provided by the Brazilian Development Bank (BNDES) to companies and the extraordinary tariff adjustment for consumers, except low income consumers, to recoup losses. Energy Auctions Bidding process for the purchase of electric energy, governed by their invitations to bid and related documents, where distributors may buy energy to serve their market. Energy from Existing Projects Energy produced by projects that were already operating by December 31, 1999, also called Old Energy. Energy from New Projects Electric energy from new plants, new projects in the bidding process and projects granted or authorized until March 16, 2004, which began commercial operations as of January 1, 2000 and whose energy was not contracted until March 16, It is also called New Energy. Energy Provision Sale of energy to large consumers. Energy Supply Sale of energy to distributors and sellers who resell it to their clients. FIDC Credit Rights Investment fund, as established by the rules of the Brazilian Securities and Exchange Commission (CVM). Receivables securitization. 19

20 Free Consumers Consumers with contracted demand equal to or higher than 3.0 MW, who have opted to freely negotiate their contract conditions with the energy provider of their choice, (regulated by Articles 15 and 16 of Law 9,074, of July 7, 1995). Free Market See ACL. Generator A company that produces energy. Installed Capacity (Installed Power Capacity) Maximum amount of electricity that may be delivered by a generating unit, a hydroelectric power plant or a generating park. Installed Power Capacity See Installed Capacity. MCSD Mechanism for Compensating Surpluses and Deficits Reallocation process between Distribution Agents who participate in the Electric Energy Trading Board CCEE, of surpluses and deficits in sums of energy contracted in the Regulated Contracting Market ACR. Through this process, distributors can transfer up to 3% of those sums they maintain under purchase agreement with generators to other distributors per year. 16 MME Ministry of Mines and Energy The MME is the Brazilian government s primary authority the power industry. Its main duties are drafting guidelines for the granting of concessions and issuing directives governing the bidding process for concessions that relate to public services and public assets. MRE Energy Reallocation Mechanism A mechanism for sharing the water source risks associated to the electric energy optimization of the National Interconnected System (SIN) relating to the centralized dispatch of the electric energy generation units. This means that eventual generation shortages by a plant under the ONS may be covered by another plant in the system, with a view to optimize the system. These compensations are remunerated by the Optimization Energy Tariff TEO. MW- Megawatt Measurement unit of mechanical or electrical energy, thermal flow and energetic radiation flow, equivalent to one million watts. MW average - Megawatt average Measurement unit related to energy in MegaWatt-hour (MWh) divided by number of hours of the period. MWh - Megawatt-hour Measurement unit equivalent to one megawatt of power supplied or demanded for one hour or a million Watts-hour. ONS National Electrical System Operator An agent instituted by Law 9,648, of 1998, based on the text contained in Law 10,848, of 2004, which is responsible for coordinating and controlling the generation and transmission of electric energy in the National Interconnected System (SIN). Physical Guarantee the amount of energy that an agent is authorized to trade under contracts, as energy supply, measured in average megawatts (average MW). It is established by ANEEL as the average amount of energy that a plant can generate and trade, on a sustainable basis, 365 days per year, with a 5% risk factor. (this replaces the concept of assured energy). PLD Spot price The price disclosed by CCEE, calculated a maximum of one week in advance based on the Marginal Cost of Operations, limited by minimum and maximum prices, in effect for each calculation period and each submarket, based on which the energy sold in the spot market is priced. 20

21 Quotas See quota system. Quota system The mechanism used for proration of physically guaranteed energy and power from the Hydroelectric Plants, renewed in accordance with Law (MP 579) and allocated to the National Interconnected System electric energy distribution concessionaires, as per specific ANEEL regulation, aiming to tariff moderateness Regulated Market See ACR. RGR Global Reversal Reserve a charge paid on a monthly basis (quota) by energy companies with the purpose of providing funds for the reversal and/or nationalization of energy public services. There is also the legal reserve to finance the expansion and improvement of these services, as well as alternative energy sources for inventory and feasibility studies to use new hydraulic potentials, and to develop and implement programs and projects focused on preventing waste and promoting the efficient use of energy. The annual charge to be collected is equivalent to 2.5% of the fixed assets related to the provision of energy services, limited to 3.0% of its annual revenue. RTE Extraordinary Tariff Recomposition Temporary tariff increase authorized for distributors of regions where energy was rationed in 2001 and 2002, in compliance with Law 10,438, of Part of the proceeds from this compensation was transferred to generators as a refund for the energy purchased. Seller A company that operates in the intermediation of energy purchase and sale transactions. SIN National Interconnected System Electrically interconnected installations, comprising plants and transmission facilities, responsible for providing electric energy to all regions of the country, covering 97% of the Brazilian consumption. Spot Market Segment of the Electric Energy Trading Board (CCEE) where the differences among the electric energy amounts contracted and recorded by CCEE agents and the amounts actually generated or consumed and attributed to the respective agents are traded. Spot Market Power The energy accounted for by the CCEE resulting from differences between production or consumption and the contracted amount. Positive or negative differences are settled in the spot market and calculated at the PLD (spot price). TAC Conduct Adjustment Agreement A legal instrument entered into between those responsible for certain actions or measures (CESP, in this case) and the federal, state or municipal Prosecution Office to defend the public or collective interest. It generally refers to environment preservation, mitigation or recovery initiatives through the establishment of technical obligations and conditions. 21