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MarketScreener Homepage  >  Equities  >  Bolsa de Valores de Sao Paulo  >  CPFL Energia S.A.    CPFE3   BRCPFEACNOR0

CPFL ENERGIA S.A.

(CPFE3)
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CPFL Energia S A : 3Q20 Earnings Release

11/12/2020 | 07:09pm EST

3Q20 CPFL Results

  • Increase of 1.6% in load in the concession area
  • EBITDA of R$ 1,954 million, increase of 20.8%
  • Net Income of R$ 1,352 million, increase of 80.8%
  • Net Debt of R$ 13.3 billion and leverage of 1.93x Net Debt/EBITDA
  • Debts prepayment (CPFL Renováveis): BNDES debts prepayment (R$ 2 billion - trapped cash of R$ 915 million), concluded in Aug-20
  • Investments of R$ 770 million, increase of 25.0%
  • CPFL Piratininga tariff adjustment, in Oct-20: +9.82% for the consumers and +17.02% in Parcel B
  • Release of funds of COVID Account in 3Q20, in the amount of R$ 1,280 million
  • CPFL Renováveis' integration plan through the Corporate Restructuring of the CPFL Group companies: concluded on Sep 30th
  • Release of our 2020-2024 Strategic Plan of Sustainability in Oct-20
  • CPFL in Hospitals Program: (i) energy efficiency: R$ 50.5 million invested up to Sep-20; and (ii) 48 hospitals with concluded actions

Video Conference with Simultaneous Translation into English (Bilingual Q&A)

Friday, November 13, 2020 - 11:00 a.m. (BRT), 09:00 a.m. (ET)

Zoom platform - link to access: https://us02web.zoom.us/webinar/register/WN_LVyVK8GbT4iWO4rF4yl6vg

Investor Relations

(+55) 19 3756.8458/8887

ri@cpfl.com.br

www.cpfl.com.br/ir

3Q20 CPFL Results

MESSAGE FROM THE CEO

We have reached the end of one more quarter. Since the onset of the pandemic, the CPFL Group has been focusing on preventive measures to preserve the health and safety of all its employees, while ensuring its financial health and maintaining the excellence of its services. In the 3rd quarter, we continued to take timely measures in this regard and reap the fruits of the efforts, commitment and resilience of each of our more than 13,000 employees.

As for the 3rd quarter results, I can assure you that the expectations we had when the pandemic broke out have been exceeded and we already see clear signs of recovery in economic activity. Electricity sales in the concession area of our Distributors totaled 16,023 GWh in 3Q20, an increase of 0.4% from 3Q19, mainly driven by the residential category, which grew 8.8%, thanks to the new home office arrangement on account of social distancing and higher temperatures this year. A recovery trend is also observed in industry and commerce, though consumption in 2020 declined in relation to 2019. In the Generation segment, wind power generation merits special mention, growing 11% in 3Q20 compared to 3Q19, as was the availability of our wind farms, which stood at 97%, up 2.2% from 3Q19.

Despite this challenging period, we continued to work on value-creation initiatives and on our investment plan, which in 3Q20 came to R$770 million, 25.0% higher than in 2019.

I would like to mention the importance of the Environmental, Social and Corporate Governance (ESG) agenda for the CPFL Group. In early October, we announced our Strategic Sustainability Plan, sharing with local and international investors our 15 commitments guided by the UN Sustainable Development Goals (SDGs), based on three major pillars: Sustainable Energy, Smart Solutions and Society Shared Value.

On the social front, we continued with the CPFL in Hospitals program, investing R$ 50.5 million in 2020 and benefiting 48 hospitals in our concession area. The goal is to cover 200 hospitals by the end of the program at an estimated total investment of R$ 150 million.

Finally, I wish to state that CPFL Energia acted and continues to act in a timely manner to safeguard its employees and its operations during this pandemic period. But the time has come to think of the future and, although we remain focused on pandemic-related issues, we are seeking growth opportunities and remain highly confident about the recovery of the Brazilian economy in the post-pandemic period. To this end, I reaffirm our commitment to all our stakeholders and take this opportunity to reiterate that our business platform is sustained by our five pillars, which are now even stronger: operational efficiency, corporate governance, sustainability, financial discipline and synergistic growth. We are prepared to face the challenges and seize the opportunities that the future holds for us.

Gustavo Estrella

CEO, CPFL Energia

1

3Q20 CPFL Results

Indicators (R$ Million)

3Q20

3Q19

Var.

9M20

9M19

Var.

Load in the Concession Area - GWh

16,703

16,434

1.6%

49,435

51,035

-3.1%

Sales within the Concession Area - GWh

16,023

15,963

0.4%

48,419

50,320

-3.8%

Captive Market

10,503

10,522

-0.2%

32,422

33,951

-4.5%

Free Client

5,520

5,441

1.5%

15,997

16,369

-2.3%

Gross Operating Revenue

11,317

11,665

-3.0%

32,042

33,257

-3.7%

Net Operating Revenue

7,781

7,746

0.4%

21,625

21,910

-1.3%

EBITDA(1)

1,954

1,618

20.8%

4,858

4,654

4.4%

Distribution

1,072

846

26.7%

2,831

2,699

4.9%

Conventional generation

349

338

3.2%

999

976

2.4%

Renewable generation

485

384

26.3%

910

827

10.1%

Commercialization, Services & Others

49

50

-3.0%

118

152

-22.4%

Net Income

1,352

748

80.8%

2,718

1,892

43.7%

Net Debt(2)

13,303

16,849

-21.0%

13,303

16,849

-21.0%

Net Debt / EBITDA(2)

1.93x

2.68x

18.7%

1.93x

2.68x

18.7%

Investments(3)

770

616

25.0%

1,928

1,582

21.9%

Notes:

  1. EBITDA is calculated from the sum of net income, taxes, financial result, depreciation/amortization, as CVM Instruction no. 527/12. See the calculation in item 3.1 of this report;
  2. In covenants criteria, which considers CPFL Energia stake in each project;
  3. Does not include special obligations.

2

3Q20 CPFL Results

CONTENTS

1) COMPANY PROFILE AND CORPORATE STRUCTURE .........................................................................

4

2) OPERATIONAL PERFORMANCE ......................................................................................................

6

2.1)

Distribution ...............................................................................................................................

6

2.1.1) Load net of losses in the concession area ..................................................................................

6

2.1.2) Sales within the Distributors' Concession Area............................................................................

6

2.1.3) Losses....................................................................................................................................

8

2.1.4) SAIDI and SAIFI .....................................................................................................................

9

2.1.5) Delinquency...........................................................................................................................

10

2.2)

Conventional and Renewable Generation ....................................................................................

11

2.2.1) Installed Capacity...................................................................................................................

11

2.2.2) Operational and under construction Projects .............................................................................

11

2.3)

Commercialization.....................................................................................................................

12

2.4)

Transmission ............................................................................................................................

13

3) CPFL ENERGIA ECONOMIC-FINANCIAL PERFORMANCE...................................................................

13

3.1)

Economic-Financial Performance ................................................................................................

13

3.2)

Indebtedness ...........................................................................................................................

21

3.2.1) Debt (IFRS) ...........................................................................................................................

21

3.2.2) Debt in Financial Covenants Criteria .........................................................................................

24

3.3)

Investments .............................................................................................................................

25

3.3.1) Actual Investments.................................................................................................................

25

3.3.2) Investment Forecast...............................................................................................................

26

4) STOCK MARKETS.........................................................................................................................

26

4.1)

Stock Performance ....................................................................................................................

26

4.2)

Daily Average Volume ...............................................................................................................

27

5) PERFORMANCE OF BUSINESS SEGMENTS......................................................................................

27

5.1)

Distribution Segment.................................................................................................................

27

5.1.1) Economic-Financial Performance..............................................................................................

27

5.1.2) Tariff Events ..........................................................................................................................

36

5.2)

Commercialization and Services Segments ..................................................................................

37

5.3)

Conventional Generation Segment ..............................................................................................

37

5.4)

CPFL Renováveis.......................................................................................................................

43

6) ATTACHMENTS............................................................................................................................

47

6.1)

Balance Sheet - Assets - CPFL Energia .......................................................................................

47

6.2)

Balance Sheet - Liabilities - CPFL Energia....................................................................................

48

6.3)

Income Statement - CPFL Energia..............................................................................................

49

6.4)

Income Statement by business segment .....................................................................................

50

6.5)

Cash Flow - CPFL Energia..........................................................................................................

51

6.6)

Income Statement - Conventional Generation Segment ...............................................................

52

6.7)

Income Statement - CPFL Renováveis ........................................................................................

53

6.8)

Income Statement - Distribution Segment ..................................................................................

54

6.9)

Economic-Financial performance by Distributor ............................................................................

55

6.10) Sales within the Concession Area by Distributor .........................................................................

56

6.11) Sales to the Captive Market by Distributor .................................................................................

57

6.12) Information on Interest in Companies .......................................................................................

58

6.13) Reconciliation of Net Debt/EBITDA Pro Forma ratio of CPFL Energia for purposes of financial covenants

calculation ..................................................................................................................................

60

3

3Q20 CPFL Results

1) COMPANY PROFILE AND CORPORATE STRUCTURE

Company Operation

CPFL Energia operates in the Generation, Transmission, Distribution, Commercialization and Services segments, with presence in 11 states in all regions of the country.

CPFL is the second largest distributor in volume of energy sales, with 14% of the national market, serving approximately 9.9 million customers in 687 municipalities. With 4,305 MW of installed capacity, it is the third largest private generator in the country, being the leader in renewable generation, operating in hydroelectric, solar, wind and biomass sources. It also has investments in Transmission and a national operation through CPFL Soluções, providing integrated solutions in energy management and commercialization, energy efficiency, distributed generation, energy infrastructure and consulting services.

Shareholders Structure

CPFL Energia is a holding company that owns stake in other companies. State Grid Corporation of China (SGCC) controls CPFL Energia through its subsidiaries State Grid International Development Co., Ltd, State Grid International Development Limited (SGID), International Grid Holdings Limited, State Grid Brazil Power Participações S.A. (SGBP) and ESC Energia S.A.

4

3Q20 CPFL Results

Reference date: 09/30/2020

Notes:

  1. RGE is held by CPFL Energia (89.0107%) and CPFL Brasil (10.9893%).
  2. CPFL Soluções = CPFL Brasil + CPFL Serviços + CPFL Eficiência;
  3. 51.54% stake of the availability of power and energy of Serra da Mesa HPP
  4. CPFL Renováveis is controlled by CPFL Energia (49.1502%) and CPFL Geração (50.8498%);
  5. Includes the assets of the former CPFL Centrais Geradoras and other subsidiaries and affiliates.

Corporate Governance

The corporate governance model adopted by CPFL Energia and its subsidiaries is based on the principles of transparency, equity, accountability and corporate responsibility.

CPFL's Management is composed by the Board of Directors, its decision-making authority, and the Board of Executive Officers, its executive body. CPFL also has five advisory committees to the Board of Directors, which support the Board in its decisions and monitor relevant and strategic themes, and a permanent Fiscal Council, composed of three members, that also exercises the duties of Audit Committee, in line with Sarbanes-Oxley Law (SOX), applicable to foreign companies with registration in Securities and Exchange Commision (SEC) from the United States.

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

5

3Q20 CPFL Results

Dividend Policy

On May 21, 2019, CPFL Energia announced to its shareholders and to the market that its Board of Directors approved, at the meeting held on that date, the adoption of a dividend distribution policy, which determines that the Company should distribute annually, as dividends, at least 50% of the adjusted net income, in accordance with the Brazilian Corporate Law. Furthermore, the Dividend Policy sets out the factors that will influence the amount of the distributions, as well as other issues considered relevant by the Board of Directors and the shareholders. The Dividend Policy also highlights that certain obligations contained in the Company's financial contracts may limit the amount of dividends and/or interest on own capital that may be distributed.

The approved Dividend Policy is merely indicative, with the purpose of signaling to the market the treatment that the Company intends to give to the distribution of dividends to its shareholders, having, therefore, a programmatic character, not binding upon the Company or its governing bodies.

The Dividend Policy is available at the Investor Relations website http://www.cpfl.com.br/ir.

2) OPERATIONAL PERFORMANCE

2.1) Distribution

2.1.1) Load net of losses in the concession area

Load in the Concession Area - GWh

3Q20

3Q19

Var.

9M20

9M19

Var.

Captive Market

10,660

10,708

-0.4%

32,585

33,956

-4.0%

Free Client

6,042

5,726

5.5%

16,849

17,079

-1.3%

Total

16,703

16,434

1.6%

49,435

51,035

-3.1%

Note: If disregarding the migration of large consumers, the load within the concession area would have a variation of +2.3% in the quarter and -2.6% in YTD.

In 3Q20, the load net of losses in the concession area totaled 16,703 GWh, an increase of 1.6%. In 9M20, the load totaled 49,435 GWh, a reduction of 3.1% compared to 9M19.

2.1.2) Sales within the Distributors' Concession Area

Sales within the Concession Area - GWh

3Q20

3Q19

Var.

9M20

9M19

Var.

Captive Market

10,503

10,522

-0.2%

32,422

33,951

-4.5%

Free Client

5,520

5,441

1.5%

15,997

16,369

-2.3%

Total

16,023

15,963

0.4%

48,419

50,320

-3.8%

In 3Q20, sales in the concession area totaled 16,023 GWh, an increase of 0.4%. If we disregard the migration of large consumers to the Basic Network and the significant reduction in the amount of energy contracted by two permissionaires1, sales in the concession area in 3Q20 would have a variation of +1.2%.

6

3Q20 CPFL Results

Sales to the captive market totaled 10,503 GWh in 3Q20, a decrease of 0.2%. The amount of energy, in GWh, corresponding to the consumption of free customers in the concession area of the group's distributors, billed through the Tariff for the Use of the Distribution System (TUSD), reached 5,520 GWh in 3Q20, an increase of 1.5%.

In 9M20, sales in the concession area reached 48,419 GWh, a reduction of 3.8%. Sales to the captive market totaled 32,422 GWh, a reduction of 4.5%, and free customers consumption totaled 15,997 GWh, a reduction of 2.3%. If we disregard the migration of large consumers to the Basic Network and the significant reduction in the amount of energy contracted by two permissionaires, sales in the concession area in 9M20 would have a variation of -2.9%.

Sales within the Concession Area - GWh

3Q20

3Q19

Var.

Part.

9M20

9M19

Var.

Part.

Residential

5,041

4,632

8.8%

31.5%

15,334

15,037

2.0%

31.7%

Industrial

5,930

6,114

-3.0%

37.0%

16,921

18,292

-7.5%

34.9%

Commercial

2,304

2,505

-8.0%

14.4%

7,594

8,391

-9.5%

15.7%

Others

2,748

2,712

1.3%

17.2%

8,569

8,600

-0.4%

17.7%

Total

16,023

15,963

0.4%

100.0%

48,419

50,320

-3.8%

100.0%

Note: The tables with sales within the concession area by distributor are attached to this report in item 6.10.

Concession area in 3Q20:

  • Residential Segment (31.5% of total sales): increase of 8.8%, favored by changes in habit due to the social isolation imposed by the COVID-19pandemic, by the temperature, that positively impacted this segment (higher temperatures in 3Q20, compared to 3Q19), in addition to the billing calendar effect;
  • Industrial Segment (37.0% of total sales): decrease of 3.0%, reflecting the economic slowdown, but already showing signs of recovery. Disregarding the migration of large customers to the Basic Network, the industrial segment would have reduced 1.3%;
  • Commercial Segment (14.4% of total sales): decrease of 8.0%, mainly reflecting the social isolation and the economic slowdown, due to the COVID-19pandemic, partially offset by the effects of temperature and billing calendar.

Concession area in 9M20:

  • Residential Segment (31.7% of total sales): increase of 2.0%, reflecting the positive impact of changes in habit due to the social isolation imposed by the COVID-19pandemic, partially offset by lower temperatures in the 1S20;
  • Industrial Segment (34.9% of total sales): decrease of 7.5%, reflecting the weak performance of the economy and the migration of large customers to the Basic Network;
  • Commercial Segment (15.7% of total sales): isolation and the consequent economic slowdown lower temperature.

decrease of 9.5%, reflecting the social in 2Q20 and 3Q20, in addition to the

7

3Q20 CPFL Results

Sales to the Captive Market - GWh

3Q20

3Q19

Var.

9M20

9M19

Var.

Residential

5,041

4,632

8.8%

15,334

15,037

2.0%

Industrial

1,164

1,388

-16.1%

3,347

4,214

-20.6%

Commercial

1,693

1,901

-11.0%

5,586

6,406

-12.8%

Others

2,604

2,601

0.1%

8,155

8,294

-1.7%

Total

10,503

10,522

-0.2%

32,422

33,951

-4.5%

Note: The tables with sales within the captive market by distributor are attached to this report in item 6.11.

Free Client - GWh

3Q20

3Q19

Var.

9M20

9M19

Var.

Industrial

4,766

4,726

0.8%

13,575

14,078

-3.6%

Commercial

611

604

1.2%

2,008

1,985

1.2%

Others

144

111

29.5%

414

307

34.9%

Total

5,520

5,441

1.5%

15,997

16,369

-2.3%

Free Client by Distributor - GWh

3Q20

3Q19

Var.

9M20

9M19

Var.

CPFL Paulista

2,487

2,512

-1.0%

7,282

7,626

-4.5%

CPFL Piratininga

1,557

1,479

5.3%

4,575

4,507

1.5%

RGE

1,256

1,272

-1.3%

3,550

3,704

-4.2%

CPFL Santa Cruz

221

178

24.2%

590

532

10.9%

Total

5,520

5,441

1.5%

15,997

16,369

-2.3%

2.1.3) Losses

The consolidated losses index of CPFL Energia was of 9.06% in the 12 months ended in Sep- 20, compared to 9.31% in Sep-19, a decrease of 0.25 p.p. However, disregarding the effect of the billing calendar in both years, there was an increase of 0.15 p.p. (from 9.05% in 3Q19 to 9.20% in 3Q20), indicating a possible reaction to the resumption and intensification of power cuts as of August 20.

12M Accumulated

Losses1

Sep-19Dec-19Mar-20Jun-20

Sep-20

ANEEL

CPFL Energia

9.31%

8.89%

9.14%

9.09%

9.06%

8.20%

CPFL Paulista

9.63%

9.12%

9.30%

9.39%

9.24%

8.38%

CPFL Piratininga

7.99%

7.59%

7.58%

7.60%

7.65%

6.53%

RGE

9.86%

9.62%

10.08%

9.79%

9.87%

9.18%

CPFL Santa Cruz

8.34%

7.69%

8.45%

8.01%

8.34%

7.57%

Note: According to the criteria defined by the Regulatory Agency (ANEEL). In CPFL

Piratininga and RGE, high-voltage customers (A1) were disregarded.

The CPFL group has intensified the actions against non-technical losses and the main achievements in the 9M20 were:

  1. Energy recovery of 479.2 GWh, of which 344.3 GWh related to the increase in revenue and 134.9 GWh of retroactive energy;
  2. 494.6 thousand fraud inspections;
  3. 154.5 thousand cuts of inactivated consumer units;

8

3Q20 CPFL Results

  1. Telemetry installation with inspection and meter replacement for 5.3 thousand group A customers;
  2. Implementation of armored measuring boxes for 7.8 thousand customers;
  3. Regularization of 1.6 clandestine consumers;
  4. Replacement of obsolete/defective meters by new electronic meters;
  5. More than 1,100 police reports relating to energy fraud identified by CPFL's operational teams;
  6. More than 200 investigative actions with the police, culminating in leading people to the police station for prison or indictments for energy theft;
  7. Disclosure of the balance of energy fraud and theft in the media, intensifying communication that energy theft is a crime and subject to penalties. In the 9M20, we recorded 263 articles about the subject coming from CPFL group.

2.1.4) SAIDI and SAIFI

The SAIDI (System Average Interruption Duration Index) measures the average duration, in hours, of interruption per consumer per year and the SAIFI (System Average Interruption Frequency Index) measures the average number of interruptions per consumer per year. Such indicators measure the quality and reliability of the electricity supply.

SAIDI Indicators

Distributor

SAIDI (hours)

2016

2017

2018

2019

3Q19

1Q20

2Q20

3Q20

Var. % ANEEL1

CPFL Energia

10.18

9.06

9.01

8.14

9.03

8.14

7.90

7.72

-14.5%

n.d

CPFL Paulista

7.62

7.14

6.17

6.72

6.84

6.39

6.37

6.22

-9.1%

7.38

CPFL Piratininga

8.44

6.97

5.92

6.48

6.55

5.92

5.85

5.67

-13.4%

6.41

RGE2

16.82

14.83

14.44

14.01

14.33

12.68

11.99

11.76

-17.9%

11.08

CPFL Santa Cruz

8.47

6.22

6.01

5.56

6.36

4.97

4.77

4.53

-28.8%

8.46

SAIFI Indicators

Distributor

SAIFI (interruptions)

2016

2017

2018

2019

3Q19

1Q20

2Q20

3Q20

Var. % ANEEL1

CPFL Energia

5.85

5.37

4.87

4.64

5.05

4.64

4.59

4.44

-12.1%

n.d

CPFL Paulista

5.00

4.94

4.03

4.38

4.42

4.15

4.14

3.97

-10.2%

6.32

CPFL Piratininga

3.97

4.45

3.87

4.34

4.35

3.93

4.02

4.04

-7.1%

5.68

RGE2

8.44

7.68

6.10

6.25

6.48

5.93

5.77

5.54

-14.5%

8.35

CPFL Santa Cruz

6.25

5.13

5.09

4.25

4.79

3.85

3.67

3.51

-26.7%

7.64

Notes:

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

The annualized figures of SAIDI and SAIFI in 3Q20 were lower than in the same period in 2019 (-14.5% in SAIDI and -12.1% in SAIFI) for the consolidated of the distributors. These results reflect maintenance actions and investments for improvements in the CPFL Energia group's distributors. Furthermore, the concession areas had a lower number of occurrences and bad weather situations, if compared to 2019.

9

3Q20 CPFL Results

2.1.5) Delinquency

ADA (R$ MM)

-42.9%

79.3

61.1

57.9

1.28%

-56.0%

0.87%

39.5

34.9

0.77%

0.49%

0.51%

3Q19

4Q19

1Q20

2Q20

3Q20

The ADA registered a decrease of 42.9% (R$ 26.2 million) in 3Q20, if compared to 3Q19. In comparison to 2Q20, there was a decrease of 56.0% (R$ 44.4 million).

In order to combat the advance in the level of delinquency intensified by the economic situation during the COVID pandemic, in a context where the main combat tool (power cut) was suspended, CPFL intensified other collection actions, highlighting:

  1. Implementation of new payment options on the web with credit card, with 134,000 payments, totaling R$ 47.1 million;
  2. Implementation of installment with credit card, offering greater convenience to the customer and mitigation the risk of delinquency for the company. In line with CPFL's digitalization strategy, this modality of payment represented, until Sep-20, 45,000 installments made through digital channels, totaling R$26.7 million;
  3. Reallocation of power cut teams to collection actions;
  4. Differentiated negotiation plan for Group A customers of essential services and with greater impact of the crisis in the short term, totaling R$ 14.5 million in 3Q20, mainly in RGE and CPFL Piratininga;
  5. Implementation of a "delivery" payment, actions using on-site collection, where the field teams assumed the role of collecting agents, taking the debit card machine to the customer's residence.

These actions, which were implemented from Apr-20 to Sep-20, contributed to the reduction of delinquency in 3Q20.

In addition, after the end of the period of prohibition of power cuts by Resolution 878 that was in force until the end of July 2020, CPFL carried out 389,000 suspensions in energy supply due to non-payment, representing an increase of 172.0% over 2Q20 (143,000), prioritizing the overdue bills with higher values. It is worth highlighting that in September, 287,000 cuts were made, a historical record for the Company.

10

3Q20 CPFL Results

2.2) Conventional and Renewable Generation

2.2.1) Installed Capacity

In 3Q20, the Generation installed capacity of CPFL Energia group, considering the proportional stake in each project, is of 4,305 MW.

Since the IPO in 2004, CPFL Energia has been expanding its portfolio and today has a capacity 4 times higher.

Installed Capacity (MW)

Note: Source breakdown graphic does not consider 1 MW of Solar Generation of Tanquinho Plant.

2.2.2) Operational and under construction Projects

The project portfolio of conventional generation segment (considering CPFL Energia's participation in each project) totals 2,173 MW of installed capacity in operation. The plants in operation comprise 8 HPPs (1,966 MW), 2 TPPs (182 MW) and 9 SHPPs (24 MW).

Conventional Generation - Portfolio

In MW

HPP

TPP

SHPP

Total

In Operation

1,966

182

24

2,173

CPFL Renováveis' project portfolio totals 2,133 MW of installed capacity in operation and 110 MW of capacity under construction. The plants in operation comprise 40 SHPPs (453 MW), 45 wind farms (1,309 MW), 8 biomass thermoelectric plants (370 MW) e 1 solar plant (1 MW). Still under construction 1 SHPP (28 MW) and 4 wind farms (82 MW).

Additionally, we have wind, solar and SHPP projects under development totaling 3,350 MW.

11

3Q20 CPFL Results

The table below illustrates the overall portfolio of assets in operation, construction and development, and their installed capacity:

Renewable Generation - Portfolio

In MW

SHPP

Bio

Wind

Solar

Total

In Operation

453

370

1,309

1

2,133

In Construction

28

-

82

-

110

In Development

116

-

2,094

1,140

3,350

Total

597

370

3,484

1,141

5,593

SHPP Lucia Cherobim

SHPP Lucia Cherobim, a project located in the state of Paraná, is scheduled to start operating in 2024. In September 2020, the physical progress of the project was 10.8%. Installed capacity is 28.0 MW and physical guarantee is 16.6 average MW. The energy was sold under a long- term contract at the 2018 new energy auction (A-6). (Price: R$ 202.54/MWh - September 2020).

Gameleira Complex Wind Farms

The Gameleira Complex Wind Farms (Costa das Dunas, Figueira Branca, Farol de Touros and Gameleira), located in the state of Rio Grande do Norte, is scheduled to start operating in 2024. In September 2020, the physical progress of the project was 28.1%. The installed capacity is 81.7 MW and the physical guarantee is 41.0 average MW. Part of the energy (12.0 average MW) was sold under a long-term contract at the 2018 new energy auction (A-6). (Price: R$ 95.84/MWh - September 2020) and the rest was sold on the free market.

Corporate restructuring

On September 30, the second stage of the CPFL Renováveis integration plan was completed through the Corporate Restructuring of the CPFL Group's generation companies. The new structure strengthens the administrative structures and brings synergies to the Group, which now has a single Generation segment with all its projects.

2.3) Commercialization

Number of Commercialization Consumer Units

In 3Q20, CPFL Brasil consumer units reached a total of 2,252, an increase of 17.7%.

12

3Q20 CPFL Results

2.4) Transmission

Operational Portfolio

Project

Location

RAP

Capex

Operation Start

Substation #

Lines

(R$ MM)

(R$ MM)

(Km)

Piracicaba

SP

8.9

100

Apr/16

1

6.5

Morro Agudo

SP

10.8

100

Jun/17

1

1

In Construction Portolio

RAP

Estimated Capex

Lines

Project

Location

by Aneel

Operation Start Substation #

(R$ MM)

(Km)

(R$ MM)

Maracanaú

CE

7.9

102

Mar/22

1

2

16.9%

Sul I

SC

26.4

366

Mar/24

1

320

16.1%

Sul II

RS

33.9

349

Mar/24

3

85

39.3%

Notes: Base Date - Piracicaba (12/19/12) - Morro Agudo (06/01/14) - Maracanaú (06/28/18) - Sul I and II (12/20/18).

  1. CPFL ENERGIA ECONOMIC-FINANCIAL PERFORMANCE 3.1) Economic-Financial Performance

Consolidated Income Statement - CPFL ENERGIA (R$ Million)

3Q20

3Q19

Var.

9M20

9M19

Var.

Gross Operating Revenue

11,317

11,665

-3.0%

32,042

33,257

-3.7%

Net Operating Revenue

7,781

7,746

0.4%

21,625

21,910

-1.3%

Revenue from building the infrastructure

690

562

22.9%

1,790

1,488

20.2%

Net Operating Revenue (ex-rev. from infrastructure)

7,091

7,185

-1.3%

19,835

20,422

-2.9%

Cost of Electric Power

(4,468)

(4,779)

-6.5%

(12,832)

(13,532)

-5.2%

Contribution Margin

2,623

2,405

9.0%

7,003

6,890

1.6%

PMSO

(727)

(841)

-13.6%

(2,288)

(2,410)

-5.0%

Other Operating Costs & Expenses

(1,109)

(1,008)

10.1%

(3,153)

(2,803)

12.5%

Equity Income

96

82

16.7%

266

258

3.3%

EBITDA1

1,954

1,618

20.8%

4,858

4,654

4.4%

Financial Income (Expense)

(192)

(132)

45.1%

(143)

(564)

-74.6%

Income Before Taxes

1,380

1,068

29.3%

3,474

2,859

21.5%

Net Income

1,352

748

80.8%

2,718

1,892

43.7%

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

13

3Q20 CPFL Results

CPFL Energia - Key financial indicators by business segment (R$ million)

Distribution

Conventional

Renewable

Others

Eliminations

Consolidated

Generation

Generation

3Q20

Contribution margin

1,735

273

576

208

(170)

2,623

EBITDA1

1,072

349

485

49

-

1,954

Financial results

(75)

(13)

(105)

1

-

(192)

Net Income

571

273

538

(30)

-

1,352

3Q19

Contribution margin

1,574

281

493

186

(127)

2,405

EBITDA1

846

338

384

50

-

1,618

Financial results

(43)

(43)

(93)

47

-

(132)

Net Income

375

232

124

17

-

748

Variation (%)

Contribution margin

10.3%

-2.5%

16.9%

12.2%

33.2%

9.0%

EBITDA1

26.7%

3.2%

26.3%

-3.0%

-

20.8%

Financial results

74.3%

-69.6%

13.7%

-97.4%

-

45.1%

Net Income

52.4%

17.4%

333.9%

-

-

80.8%

CPFL Energia - Key financial indicators by business segment (R$ million)

Distribution

Conventional

Renewable

Others

Eliminations

Consolidated

Generation

Generation

9M20

Contribution Margin

4,886

802

1,180

576

(440)

7,003

EBITDA1

2,831

999

910

118

-

4,858

Financial results

150

(58)

(257)

22

-

(143)

Net Income

1,568

697

465

(13)

-

2,718

9M19

Contribution Margin

4,807

789

1,119

561

(386)

6,890

EBITDA1

2,699

976

827

152

-

4,654

Financial results

(174)

(126)

(316)

52

-

(564)

Net Income

1,227

624

(8)

48

-

1,892

Variation (%)

Contribution Margin

1.6%

1.6%

5.5%

2.5%

14.0%

1.6%

EBITDA1

4.9%

2.4%

10.1%

-22.4%

-

4.4%

Financial results

-

-54.2%

-18.4%

-57.8%

-

-74.6%

Net Income

27.8%

11.6%

-

-

-

43.7%

Notes: (1) The analysis by business segment is presented in chapter 5; (2) The breakdown of economic-financial performance by business segment is presented in annex 6.4.

14

3Q20 CPFL Results

Non-cash effects, extraordinary items and others

We highlight below the non-cash effects, extraordinary items and others of greater relevance observed in the periods analyzed, as a way to facilitate the understanding of the variations in Company's results.

EBITDA effects - R$ million

3Q20

3Q19

Var.

9M20

9M19

Var.

Adjustments in the concession financial assets (VNR)

80

22

268.7%

157

194

-19.2%

CPFL Piratininga - Tariff review effects (RAB appraisal report)

-

42

-

-

42

-

Legal and judicial expenses

(44)

(55)

-20.9%

(107)

(126)

-14.9%

Assets write-off

(27)

(48)

-43.8%

(78)

(102)

-23.9%

Other extraordinary items:

CPFL Santa Cruz - PIS/Cofins over ICMS

-

-

-

-

34

-

Financial results effects - R$ million

3Q20

3Q19

Var.

9M20

9M19

Var.

Mark-to-market (MTM)

(61)

6

-

209

11

1796.0%

Financial revenues due to Re-IPO resources

-

56

-

-

62

-

Operating Revenue

In 3Q20, gross operating revenue reached R$ 11,317 million, representing a reduction of 3.0% (R$ 348 million). Net operating revenue reached R$ 7,781 million in 3Q20, registering an increase of 0.4% (R$ 35 million).

In 9M20, gross operating revenue reached R$ 32,042 million, representing a reduction of 3.7% (R$ 1,215 million). Net operating revenue reached R$ 21,625 million in 9M20, registering a reduction of 1.3% (R$ 285 million).

The breakdown of net operating revenue by business segment is presented in the table below:

Net Operating Revenue (R$ Milhões)

3Q20

3Q19

Var.

9M20

9M19

Var.

Distribution

6,286

6,134

2.5%

17,783

17,837

-0.3%

Conventional Generation

346

324

6.8%

968

891

8.7%

Renewable Generation

670

599

11.9%

1,384

1,345

2.9%

Commercialization

758

969

-21.8%

2,186

2,542

-14.0%

Services

190

147

29.6%

517

451

14.7%

Elimination and Others

(470)

(426)

10.1%

(1,212)

(1,155)

5.0%

Total

7,781

7,746

0.4%

21,625

21,910

-1.3%

For further details about the revenue variation by segment, see chapter 5 - Performance of Business Segments.

15

3Q20 CPFL Results

Cost of Electric Energy

Cost of Electric Energy (R$ Million)

3Q20

3Q19

Var.

9M20

9M19

Var.

Cost of Electric Power Purchased for Resale

Energy from Itaipu Binacional

PROINFA

Energy Purchased through Auction in the Regulated Environment, Bilateral Contracts and Energy Purchased in the Spot Market PIS and COFINS Tax Credit

1,010

752

34.3%

2,939

2,102

39.8%

76

99

-23.2%

220

303

-27.3%

2,843

3,711

-23.4%

8,729

10,387

-16.0%

(346)

(412)

-16.0%

(1,056)

(1,083)

-2.4%

Total

3,583

4,150

-13.7%

10,832

11,709

-7.5%

Charges for the Use of the Transmission and Distribution System

Basic Network Charges

722

544

32.7%

1,788

1,530

16.8%

Itaipu Transmission Charges

91

74

22.8%

234

211

11.2%

Connection Charges

48

40

18.1%

130

134

-2.9%

Charges for the Use of the Distribution System

12

11

1.3%

33

36

-8.2%

ESS / EER

102

22

354.5%

15

94

-83.6%

PIS and COFINS Tax Credit

(89)

(63)

41.2%

(200)

(182)

9.7%

Total

885

629

40.7%

2,001

1,822

9.8%

Cost of Electric Energy

4,468

4,779

-6.5%

12,832

13,532

-5.2%

Cost of Electric Power Purchased for Resale

In 3Q20, the cost of electric power purchased for resale reached R$ 3,583 million, a reduction of 13.7% (R$ 567 million), mainly due to:

  1. Reduction of 23.4% in energy purchased in auctions, bilateral contracts and spot market (R$ 868 million), due to the lower volume of purchased energy (-8.7%)and the decrease in the average purchase price (-16.1%);
  2. Reduction of 23.2% in PROINFA (R$ 23 million);

Partially offset by the:

  1. Increase of 34.3% in energy from Itaipu (R$ 258 million), due to exchange variation, which raised the average purchase price in 34.8%;
  2. Reduction of 16.0% in PIS and COFINS tax credit (R$ 66 million).

In 9M20, the cost of electric power purchased for resale reached R$ 10,832 million, a reduction of 7.5% (R$ 878 million), mainly due to:

  1. Reduction of 16.0% in energy purchased in auctions, bilateral contracts and spot market (R$ 1,658 million), due to the lower volume of purchased energy (-4.9%)and the decrease in the average purchase price (-11.7%);
  2. Reduction of 27.3% in PROINFA (R$ 83 million);

Partially offset by the:

  1. Increase of 39.8% in energy from Itaipu (R$ 837 million), due to exchange variation, which raised the average purchase price in 40.5%;
  2. Reduction of 2.4% in PIS and COFINS tax credit (R$ 26 million).

16

3Q20 CPFL Results

Volume of purchased energy (GWh)

3Q20

3Q19

Var.

9M20

9M19

Var.

Energy from Itaipu Binacional

2,765

2,776

-0.4%

8,201

8,241

-0.5%

PROINFA

285

284

0.2%

797

807

-1.3%

Energy Purchased through Auction in the Regulated Environment,

15,296

16,746

-8.7%

46,920

49,328

-4.9%

Bilateral Contracts and Energy Purchased in the Spot Market

Total

18,346

19,806

-7.4%

55,918

58,376

-4.2%

Average price (R$/MWh)

3Q20

3Q19

Var.

9M20

9M19

Var.

Energy from Itaipu Binacional

365.09

270.76

34.8%

358.34

255.03

40.5%

PROINFA

267.20

348.39

-23.3%

276.50

375.31

-26.3%

Energy Purchased through Auction in the Regulated Environment,

185.86

221.62

-16.1%

186.03

210.57

-11.7%

Bilateral Contracts and Energy Purchased in the Spot Market

Total

195.30

209.55

-6.8%

193.71

200.58

-3.4%

Charges for the Use of the Transmission and Distribution System

In 3Q20, charges for the use of the transmission and distribution system reached R$ 885 million, an increase of 40.7% (R$ 256 million), due to the connection and transmission charges (national grid, Itaipu transmission, connection and usage of the distribution system) (R$ 202 million) and the sector charges (ESS/EER) (R$ 79 million). Such effects were partially offset by the PIS/Cofins tax credit (R$ 26 million).

In 9M20, charges for the use of the transmission and distribution system reached R$ 2,001 million, an increase of 9.8% (R$ 178 million), due to the connection and transmission charges (national grid, Itaipu transmission, connection and usage of the distribution system) (R$ 275 million), partially offset by the sector charges (ESS/EER) (R$ 78 million) and the PIS/Cofins tax credit (R$ 18 million).

Contribution margin

In 3Q20, contribution margin reached R$ 2,623 million, an increase of 9.0% (R$ 218 million). In 9M20, contribution margin reached R$ 7,003 million, an increase of 1.6% (R$ 113 million). These results mainly reflect the improvement in the performance of the Distribution and Renewable Generation segments in the periods. For more details, see items 5.1.1 and 5.4.

PMSO

PMSO (R$ million)

3Q20

3Q19

Variation

9M20

9M19

Variação

R$ MM

%

R$ MM

%

Personnel

(355)

(364)

9

-2.4%

(1,066)

(1,077)

11

-1.0%

Material

(74)

(71)

(3)

4.4%

(207)

(204)

(3)

1.5%

Outsourced Services

(128)

(172)

44

-25.8%

(449)

(515)

66

-12.8%

Other Operating Costs/Expenses

(170)

(235)

64

-27.5%

(566)

(613)

47

-7.7%

Allowance for doubtful accounts

(36)

(61)

25

-40.4%

(174)

(195)

21

-10.5%

Legal and judicial expenses

(44)

(55)

12

-20.9%

(107)

(126)

19

-14.9%

Assets Write-Off

(27)

(48)

21

-43.8%

(78)

(102)

24

-23.9%

Others

(63)

(70)

7

-10.0%

(206)

(190)

(16)

8.5%

Total Reported PMSO

(727)

(841)

114

-13.6%

(2,288)

(2,410)

121

-5.0%

PMSO reached R$ 727 million in 3Q20, a reduction of 13.6% (R$ 114 million), due to the following factors:

  1. Reduction of 40.4% (R$ 25 million) in allowance for doubtful accounts;

17

3Q20 CPFL Results

  1. Reduction of 43.8% (R$ 21 million) in assets write-off;
  2. Reduction of 20.9% (R$ 12 million) in legal and judicial expenses;
  3. Other items with a reduction of 8.8% (R$ 57 million), highlighting personnel (R$ 9 million), hardware/software maintenance (R$ 8 million), telecommunication materials (R$ 6 million), invoices reading and delivery (R$ 3 million), tree pruning (R$ 3 million), travel (R$ 3 million), publicity and advertising (R$ 3 million) and banks' collection fee (R$ 2 million), among others;

In 9M20, PMSO reached R$ 2,288 million, a reduction of 5.0% (R$ 121 million), due to the following factors:

  1. Reduction of 23.9% (R$ 24 million) in assets write-off;
  2. Reduction of 10.5% (R$ 21 million) in allowance for doubtful accounts;
  3. Reduction of 14.9% (R$ 19 million) in legal and judicial expenses;
  4. Other items with a reduction of 3.7% (R$ 70 million), highlighting telecommunication materials (R$ 12 million), personnel (R$ 11 million), invoices reading and delivery (R$ 6 million), travel (R$ 5 million) and hardware/software maintenance (R$ 5 million), among others;

Partially offset by:

  1. Increase of 15.0% (R$ 12 million) in expenses with grid and substation maintenance, related to Capex efforts.

Other operating costs and expenses

Other operating costs and expenses

3Q20

3Q19

Var.

9M20

9M19

Var.

Costs of Building the Infrastructure

685

561

22.2%

1,781

1,487

19.7%

Private Pension Fund

43

29

47.5%

131

85

53.6%

Depreciation and Amortization

382

418

-8.7%

1,241

1,231

0.8%

Total

1,110

1,008

10.1%

3,153

2,803

12.5%

EBITDA

In 3Q20, EBITDA reached R$ 1,954 million, registering an increase of 20.8% (R$ 336 million). In 9M20, EBITDA reached R$ 4,858 million, registering an increase of 4.4% (R$ 205 million). These results mainly reflect the improvement in the performance of the Distribution and Renewable Generation segments in the periods. For more details, see items 5.1.1 and 5.4.

18

3Q20 CPFL Results

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

EBITDA and Net Income conciliation (R$ million)

3Q20

3Q19

Var.

9M20

9M19

Var.

Net Income

1,352

748

80.8%

2,718

1,892

43.7%

Depreciation and Amortization

382

418

-8.7%

1,241

1,231

0.8%

Financial Result

192

132

45.1%

143

564

-74.6%

Income Tax / Social Contribution

29

320

-91.0%

756

967

-21.8%

EBITDA

1,954

1,618

20.8%

4,858

4,654

4.4%

Financial Result

Financial Result (R$ Million)

3Q20

3Q19

Var.

9M20

9M19

Var.

Revenues

140

280

-50.2%

760

718

5.9%

Expenses

(332)

(412)

-19.6%

(904)

(1,282)

-29.5%

Financial Result

(192)

(132)

45.1%

(143)

(564)

-74.6%

In 3Q20, net financial expense was of R$ 192 million, an increase of 45.1% (R$ 60 million) if compared to the net financial expense observed in 3Q19. The items explaining this variation are as follows:

  1. Variation of R$ 67 million in the mark-to-market (non-cash effect);
  2. Financial revenue from Re-IPO funds in 3Q19 (R$ 56 million), which enabled the maintenance of a higher cash balance throughout the process of completing the transfer of CPFL Renováveis' shares, from State Grid to CPFL Energia;
  3. Updates of the sectoral financial asset/liability (R$ 20 million);
  4. Negative variation of R$ 16 million in other financial revenues/expenses;

Partially offset by:

  1. Reduction of 35.5% (R$ 99 million) in the expenses with the net debt (debt charges net of income from financial investments), mainly reflecting the reduction in interest rate (CDI) and the lower debt cost.

In 9M20, net financial revenue was of R$ 143 million, a reduction of 74.6% (R$ 420 million) if compared to the net financial expense observed in 9M19. The items explaining this variation are as follows:

  1. Reduction of 35.5% (R$ 321 million) in the expenses with the net debt (debt charges net of income from financial investments), mainly reflecting the reduction in interest rate (CDI) and the lower debt cost;
  2. Variation of R$ 198 million in the mark-to-market (non-cash effect);
  3. Positive variation of R$ 19 million in other financial revenues/expenses;

Partially offset by:

  1. Financial revenue from Re-IPO funds in 9M19 (R$ 62 million), which enabled the maintenance of a higher cash balance throughout the process of completing the

19

3Q20 CPFL Results

transfer of CPFL Renováveis' shares, from State Grid to CPFL Energia;

  1. Updates of the sectoral financial asset/liability (R$ 55 million).

Income Tax and Social Contribution

In 3Q20, Income Tax and Social Contribution recorded a reduction of 91.0% (R$ 291 million), mainly explained by the recognition of tax credits in CPFL Renováveis (R$ 271 million). The effective tax rate, that was 30.0% in 3Q19, went to 2.1% in 3Q20.

In 9M20, Income Tax and Social Contribution recorded a reduction of 21.8% (R$ 211 million), mainly explained by the recognition of tax credits in CPFL Renováveis (R$ 271 million) in 3Q20, partially offset by the increase in earnings before taxation.

Net Income

Net income was of R$ 1,352 million in 3Q20, registering an increase of 80.8% (R$ 604 million). This result reflects the increase in EBITDA, mainly due to the improvement in the performance of the Distribution and Renewable Generation segments, and the reduction in Income Tax and Social Contribution, partially offset by the worsening in the financial result, due to the negative variation in mark-to-market and the non-recurring financial revenue from Re-IPO funds in 3Q19.

In 9M20, net income was of R$ 2,718 million, registering an increase of 43.7% (R$ 826 million). This result reflects the increase in EBITDA, mainly due to the improvement in the performance of the Distribution and Renewable Generation segments, the reduction in Income Tax and Social Contribution and the gain recorded in the financial result, due to the mark-to- market of debts and the reduction in debt cost.

20

3Q20 CPFL Results

3.2) Indebtedness

3.2.1) Debt (IFRS)

On September 30, 2020, CPFL Energia's total debt was R$ 21.7 billion, with a variation of +4.9% compared to the last year. The financial debt of the group, which considers loans, debentures and intercompany loans, was of R$ 19.7 billion in the same date.

Note: (1) Including the mark-to-market (MTM) effect and borrowing costs; (2) Including the intercompany loan, in the amount of R$ 2.4 billion, of CPFL Renováveis and CPFL Brasil with SGBP.

Debt Profile - IFRS

Average Cost (End

of the period -

IFRS)

3Q20 - 3.62%

3Q19 - 6.75%

Note: (1) Others: credit lines and intercompany loan of CPFL Renováveis and CPFL Brasil with SGBP.

The CPFL Group constantly seeks to mitigate any possibility of market fluctuations risk and, for this reason, a share of its debts portfolio, around R$ 6.8 billion, is protected by hedge operations. Considering, for instance, foreign loans, which represent almost 32% of the total debts (IFRS criteria), it was contracted swap operations, aiming protection for the foreign exchange and the rate linked to the contract.

21

3Q20 CPFL Results

Indexation After Hedge

3Q19 vs. 3Q20

3Q19

3Q20

Note: (1) For debts contracted in foreign currency (32.26% of the total in 3Q20), swap operations were contracted, aiming protection for the foreign exchange and the rate linked to the contract.

Net Debt in IFRS criteria

IFRS | R$ Million

3Q20

3Q19

Var. %

Financial Debt (including hedge)

(19,733)

(19,502)

1.2%

(+) Available Funds

6,758

3,232

109.1%

(=) Net Debt

(12,974)

(16,270)

-20.3%

Debt by Segment (R$ Million - IFRS)

Notes:

  1. The Conventional Generation segment considers CPFL Geração, Ceran and CPFL Transmissão Piracicaba; Service segment considers CPFL Serviços and CPFL Eficiência.
  2. Considering the debt's notional, interests and derivatives.
  3. In the Renewable Generation and Commercialization + Services segments, the balance of the intercompany loans was considered.

22

3Q20 CPFL Results

Debt Amortization Schedule in IFRS (September-20)

The Group CPFL constantly evaluates market opportunities to close deals that enables financial results that meet the company's strategies and policies. Thus, due to CPFL's broad access to several kinds of fundraising in the market, both national and international, different modalities and instruments compose the group's debt portfolio.

The cash position at the end of 3Q20 had a coverage ratio of 1.92x the amortizations of the next 12 months, which allows the CPFL Group to honor the amortization commitments until September-21. The average amortization term based on this schedule is of 2.68 years.

The debt amortization schedule of the financial debt below considers only the notional of the debts and derivatives.

Debt Amortization Schedule (IFRS)

Note: (1) Considering only the notional and hedge of the debt. In order to reach the financial result of R$ 19,733 million, should be included charges and the mark-to-market (MTM) effect and cost with funding; (2) Including the intercompany loan of CPFL Renováveis and CPFL Brasil with SGBP.

Gross Debt Cost¹ in IFRS criteria

Note: (1) The calculation considers the average cost in the end of the period, since it better reflects the interest rate variations.

23

3Q20 CPFL Results

Ratings

The following table shows the corporate ratings of CPFL Energia.

3.2.2) Debt in Financial Covenants Criteria

Indexation and Debt Cost in Financial Covenants Criteria

Indexation¹ after Hedge² - 3Q19 vs. 3Q20

3Q19

3Q20

Note:

  1. The total amount considers the proportional consolidation of CERAN, ENERCAN, Foz do Chapecó and EPASA;
  2. For debts contracted in foreign currency (31.38% of the total), swap operations were contracted, aiming protection for the foreign exchange and the rate linked to the contract.

Net Debt in Financial Covenants Criteria and Leverage

In the end of the 3Q20, the Proforma Net Debt totaled R$ 13,303 million, an increase of 21.0% compared to net debt position at the end of 3Q19, of R$ 16,849 million.

24

3Q20 CPFL Results

Covenant Criteria (*) - R$ Million

3Q20

3Q19

Var.%

Financial Debt (including hedge)1

(20,297)

(20,174)

0.6%

(+) Available Funds

6,995

3,325

110.4%

(=) Net Debt

(13,303)

(16,849)

-21.0%

EBITDA Proforma2

6,895

6,296

9.5%

Net Debt / EBITDA

1.93

2.68

-27.9%

Notes:

  1. The total amount considers the proportional consolidation of CERAN, ENERCAN, Foz do Chapecó and EPASA;
  2. Proforma EBITDA in the financial covenants criteria: adjusted according CPFL Energia's stake in each of its subsidiaries.

In line with the criteria for calculation of financial covenants of loan agreements with financial institutions, net debt and the EBITDA are adjusted according to the equivalent stake of CPFL Energia in each of its subsidiaries.

Considering that the Proforma Net Debt totaled R$ 13,303 million and Proforma EBITDA in the last 12 months reached R$ 6,895 million, the ratio Proforma Net Debt / EBITDA at the end of 3Q20 reached 1.93x.

Leverage in financial covenants criteria - R$ billion

Notes: (1) LTM EBITDA; (2) Adjusted by the proportional consolidation.

3.3) Investments

3.3.1) Actual Investments

Notes:

  1. Transmission - Transmission assets do not have fixed assets, the figures in this table is the addition of concession financial assets;
  2. Others - basically refers to assets and transactions that are not related to the listed segments.

25

3Q20 CPFL Results

In 3Q20, the investments were R$ 770 million, an increase of 25.0%, compared to R$ 616 million registered in 3Q19. We highlight investments made by CPFL Energia in the Distribution segment, in the amount of R$ 601 million, mainly intended for expansion, modernization and maintenance of electrical system.

3.3.2) Investment Forecast

On November 29, 2019, the Board of Directors of CPFL Energia approved Board of Executive Officers' proposal for 2020 Annual Budget and 2021/2024 Multiannual Plan for the Company, which was previously discussed by the Budget and Corporate Finance Committee.

Investments Forecast (R$ million)1,4

Notes:

    1. Constant currency;
    2. Disregard investments in Special Obligations (among other items financed by consumers);
    3. Conventional + Renewable.
    4. It is worth mentioning that the resources for carrying out projects and actions related to the theme of sustainability contained in the 2020-24 Sustainability Plan, which total approximately R$ 1.8 billion, are already included in the amounts presented in the graph above, in a total amount of R$ 1 billion. The rest of the amount will come from projects made possible with regulated resources from ANEEL programs and encouraged resources through the CPFL Institute.
  1. STOCK MARKETS

4.1) Stock Performance

CPFL Energia is listed in B3 (Novo Mercado), segment with the highest levels of corporate governance.

B3

Date

CPFE3 (R$)

IEE

IBOV

09/30/2020

R$

27.56

68,569

94,603

06/30/2020

R$

30.66

70,160

95,056

09/30/2019

R$

32.89

68,122

104,745

QoQ

-10.1%

-2.3%

-0.5%

YoY

-16.2%

0.7%

-9.7%

26

3Q20 CPFL Results

On September 30, 2020, CPFL Energia's shares closed at R$ 27.56 per share in the B3, a depreciation of 10.1% in the quarter. Considering the variation in the last 12 months, the shares depreciated by 16.2%.

4.2) Daily Average Volume

The daily average volume trading of CPFL Energia in 3Q20 was R$ 78.9 million, representing a decrease of 21.6% if compared to 3Q19. The daily average number of trades of CPFL Energia's share went from 8,490 in 3Q19 to 11,202 in 3Q20, a variation of 31.9%.

Note: For the NYSE daily average trading volume, it was considered the volume until 01/27/2020, the date on which the ADR negotiation was suspended in NYSE, as a result of the process of delisting in this stock exchange.

  1. PERFORMANCE OF BUSINESS SEGMENTS
    5.1) Distribution Segment
    5.1.1) Economic-Financial Performance

Consolidated Income Statement - Distribution (R$ Million)

3Q20

3Q19

Var.

9M20

9M19

Var.

Gross Operating Revenue

9,656

9,870

-2.2%

27,732

28,693

-3.3%

Net Operating Revenue

6,286

6,134

2.5%

17,783

17,837

-0.3%

Cost of Electric Power

(3,915)

(4,009)

-2.3%

(11,201)

(11,552)

-3.0%

Operating Costs & Expenses

(1,519)

(1,483)

2.4%

(4,398)

(4,176)

5.3%

EBIT

852

642

32.7%

2,183

2,108

3.5%

EBITDA(1)

1,072

846

26.7%

2,831

2,699

4.9%

Financial Income (Expense)

(75)

(43)

74.3%

150

(174)

-

Income Before Taxes

777

599

29.8%

2,333

1,934

20.6%

Net Income

571

375

52.4%

1,568

1,227

27.8%

Note:

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

27

3Q20 CPFL Results

Sectoral Financial Assets and Liabilities

On September 30, 2020, the balance of sectoral financial assets and liabilities was negative in R$ 184 million. If compared to December 31, 2019, there was a reduction of R$ 1,178 million, as demonstrated in the chart below:

The variation in this balance was due to the constitution of an asset of R$ 757 million, due to higher energy costs of Itaipu and an increase in energy overcontracting. However, there was an amortization of R$ 674 million, mainly favored by the tariff readjustments in the period, which allowed the pass-through of costs to consumers. The monetary adjustment of assets and liabilities totaled R$ 18 million. In addition to these effects, some portions of the COVID Account were received, in the total amount of R$ 1,280 million, as a way of anticipating the resources that would be passed in the next tariff events. Consumers will pay this loan through the CDE charge, in a 5-year installment, as of the 2021 tariff event.

Operating Revenue

Operating Revenue

3Q20

3Q19

Var.

9M20

9M19

Var.

Gross Operating Revenue

Revenue with Energy Sales (Captive + TUSD)

8,059

8,138

-1.0%

23,842

24,919

-4.3%

Short-term Electric Energy

182

441

-58.7%

602

799

-24.7%

Revenue from Building the Infrastructure of the Concession

636

551

15.3%

1,695

1,477

14.8%

Sectoral Financial Assets and Liabilities

256

238

7.3%

83

(65)

-

CDE Resources - Low-income and Other Tariff Subsidies

355

352

0.9%

1,115

1,119

-0.4%

Adjustments to the Concession's Financial Asset

80

63

26.2%

157

236

-33.4%

Other Revenues and Income

100

104

-4.2%

299

274

9.4%

Compensatory Fines (DIC/FIC)

(11)

(17)

-35.2%

(61)

(66)

-7.7%

Total

9,656

9,870

-2.2%

27,732

28,693

-3.3%

Deductions from the Gross Operating Revenue

ICMS Tax

(1,606)

(1,606)

0.0%

(4,836)

(4,960)

-2.5%

PIS and COFINS Taxes

(814)

(847)

-3.9%

(2,368)

(2,453)

-3.5%

CDE Sector Charge

(845)

(947)

-10.7%

(2,631)

(2,991)

-12.0%

R&D and Energy Efficiency Program

(56)

(55)

0.8%

(160)

(162)

-1.6%

PROINFA

(41)

(44)

-7.6%

(129)

(127)

1.9%

Tariff Flags

(0)

(229)

-99.9%

198

(142)

-

Others

(8)

(7)

5.8%

(23)

(21)

7.4%

Total

(3,370)

(3,736)

-9.8%

(9,949)

(10,856)

-8.4%

Net Operating Revenue

6,286

6,134

2.5%

17,783

17,837

-0.3%

28

3Q20 CPFL Results

In 3Q20, gross operating revenue amounted to R$ 9,656 million, a decrease of 2.2% (R$ 214 million), due to the following factors:

  • Decrease of 58.7% (R$ 259 million) in Short-termElectric Energy due to the lower PLD;
  • Decrease of 1.0% (R$ 79 million) in the revenue with energy sales (captive + free clients), due to: (i) the tariff review with negative average readjustment in the consumer perception of 7.80% in CPFL Piratininga; partially offset by (ii) the positive average tariff adjustments in the distribution companies in the period between 3Q19 and 3Q20 (average increases of 0.20% in CPFL Santa Cruz, in March 2020, of 6.05% in CPFL Paulista, in April 2020, and of 6.09% in RGE in June 2020); partially offset by the increase of 1.6% in the load in the concession area1;

Partially offset by:

  • Increase of 15.3% (R$ 85 million) in Revenue from Building the Infrastructure of the Concession; this revenue has its counterpart in operating costs;
  • Increase of 26.9% (R$ 17 million) in the adjustments to the concession's financial asset. In 3Q19, there was an extraordinary effect in the amount of R$ 42 million, due to the RAB appraisal report for the tariff revision of CPFL Piratininga; disregarding this effect, in 3Q20 we would have an increase of R$ 58 million, due to the higher IPCA (from +0.31 in 2019 to +0.86% in 2020);
  • Increase of 7.3% (R$ 17 million) in the accounting of Sectoral Financial Assets/Liabilities;
  • Increase of 1.1% (R$ 5 million) in the other items.

Deductions from the gross operating revenue were R$ 3,370 million in 3Q20, representing a decrease of 9.8% (R$ 366 million), due to the following factors:

  • Decrease of 99.9% (R$ 229 million) in the accounting of tariff flags approved by CCEE;
  • Decrease of 10.7% (R$ 102 million) in CDE due to the reduction of the CDE quota, mainly due to the termination of ACR account loans;
  • Decrease of 1.4% (R$ 36 million) in the other items.

Net operating revenue reached R$ 6,286 million in 3Q20, representing an increase of 2.5% (R$ 152 million).

In 9M20, gross operating revenue amounted to R$ 27,732 million, a decrease of 3.3% (R$

961 million), due to the following factors:

  • Decrease of 4.3% (R$ 1,078 million) in the revenue with energy sales (captive + free clients), due to the reduction of 3.1% in the load in the concession area2, partially offset by the positive average tariff adjustments in the distribution companies in the period between 9M19 and 9M20;
  1. If considering the migration of large consumers the load in 3Q20 would be +2.3%.
  2. If considering the migration of large consumers the load in 9M20 would be -2.6%.

29

3Q20 CPFL Results

  • Decrease of 24.7% (R$ 197 million) in Short-termElectric Energy due to a lower PLD and a variation of 2.2 GWh in volume;
  • Decrease of 33.4% (R$ 79 million) in the adjustments to the concession' financial asset;

Partially offset by:

  • Increase of 14.8% (R$ 218 million) in Revenue from Building the Infrastructure of the Concession;
  • Variation of R$ 148 million in the accounting of Sectoral Financial Assets/Liabilities;
  • Increase of 2.0% (R$ 27 million) in other items.

Deductions from the gross operating revenue were R$ 9,949 million in 9M20, representing a decrease of 8.4% (R$ 907 million), due to the following factors:

  • Variation of R$ 339 million in the accounting of tariff flags approved by CCEE;
  • Decrease of 12.0% (R$ 360 million) in CDE due to the reduction of the CDE quota, mainly due to the termination of ACR account loans;
  • Decrease of 2.8% (R$ 209 million) in taxes (ICMS and PIS/COFINS);

Partially offset by:

  • Increase of 0.5% (R$ 1 million) in others items.

Net operating revenue reached R$ 17,783 million in 9M20, representing a decrease of 0.3% (R$ 54 million).

Cost of Electric Energy

Cost of Electric Energy (R$ Million)

3Q20

3Q19

Var.

9M20

9M19

Var.

Cost of Electric Power Purchased for Resale

Energy from Itaipu Binacional

PROINFA

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

1,010

752

34.3%

2,939

2,102

39.8%

76

99

-23.2%

220

303

-27.3%

2,269

2,897

-21.7%

7,028

8,297

-15.3%

PIS and COFINS Tax Credit

(297)

(342)

-13.2%

(907)

(898)

1.1%

Total

3,058

3,406

-10.2%

9,279

9,804

-5.4%

Charges for the Use of the Transmission and Distribution System

Basic Network Charges

700

523

33.8%

1,725

1,471

17.2%

Itaipu Transmission Charges

91

74

22.8%

234

211

11.2%

Connection Charges

46

39

18.9%

125

128

-3.0%

Charges for the Use of the Distribution System

7

7

-1.8%

19

22

-13.9%

ESS / EER

102

22

356.2%

16

93

-83.4%

PIS and COFINS Tax Credit

(87)

(61)

42.1%

(196)

(178)

10.0%

Total

857

603

42.1%

1,922

1,748

10.0%

Cost of Electric Energy

3,915

4,009

-2.3%

11,201

11,552

-3.0%

Cost of Electric Power Purchased for Resale

In 3Q20, the cost of electric power purchased for resale amounted to R$ 3,058 million, representing a decrease of 10.2% (R$ 348 million), due to:

30

3Q20 CPFL Results

  • Decrease of 21.7% (R$ 628 million) in the cost with energy purchased in the regulated environment, bilateral contracts and short term, due to a decrease in volume (-3.7%) and in the average purchase price (-18.7%);
  • Decrease of 23.2% (R$ 23 million) in Proinfa, mainly due to a decrease in the average purchase price;

Partially offset by:

  • Increase of 34.3% (R$ 258 million) in the cost with Energy from Itaipu, due to the increase in the average purchase price (34.8%), as a result of the exchange rate variation;
  • Decrease of 13.2% (R$ 45 million) in PIS and COFINS tax credit.

In 9M20, the cost of electric power purchased for resale amounted to R$ 9,279 million, representing a decrease of 5.4% (R$ 525 million), due to:

  • Decrease of 15.3% (R$ 1,270 million) in the cost with energy purchased in the regulated environment, bilateral contracts and short term, due to a decrease in volume (-3.3%) and in the average purchase price (-12.4%);
  • Decrease of 27.3% (R$ 83 million) in Proinfa, due to a decrease in the average purchase price;
  • Increase of 1.1% (R$ 10 million) in PIS and COFINS tax credit;

Partially offset by:

  • Increase of 39.8% (R$ 837 million) in the cost with Energy from Itaipu, due to the increase in the average purchase price (40.5%), as a result of the exchange rate variation.

Volume of purchased energy (GWh)

3Q20

3Q19

Var.

9M20

9M19

Var.

Energy from Itaipu Binacional

2,765

2,776

-0.4%

8,201

8,241

-0.5%

PROINFA

285

284

0.2%

797

807

-1.3%

Energy Purchased through Auction in the Regulated Environment,

11,166

11,599

-3.7%

34,233

35,398

-3.3%

Bilateral Contracts and Energy Purchased in the Spot Market

Total

14,217

14,659

-3.0%

43,230

44,446

-2.7%

Average price (R$/MWh)

3Q20

3Q19

Var.

9M20

9M19

Var.

Energy from Itaipu Binacional

365.09

270.76

34.8%

358.34

255.03

40.5%

PROINFA

267.20

348.39

-23.3%

276.50

375.31

-26.3%

Energy Purchased through Auction in the Regulated Environment,

203.19

249.78

-18.7%

205.29

234.40

-12.4%

Bilateral Contracts and Energy Purchased in the Spot Market

Total

215.10

232.36

-7.4%

214.64

220.59

-2.7%

Charges for the Use of the Transmission and Distribution System

In 3Q20, the charges for the use of the transmission and distribution system reached R$ 857 million, representing an increase of 42.1% (R$ 254 million), due to:

  • Increase of 31.3% (R$ 201 million) in connection and transmission charges (basic network, Itaipu transmission, connection and use of the distribution system);
  • Increase of 356.2% (R$ 79 million) in sector charges (ESS/EER), mainly due to the Reserve Energy Charge. Due to an increase in the generation surplus of the reserve power plants being liquidated at a PLD lower than that of 2019, there was the need for a higher payment of EER. The ESS was also impacted by a CCEE resettlement for 2019,

31

3Q20 CPFL Results

a result of Public Consultancy 39/2019. Partially offset by:

  • Increase of 42.1% (R$ 26 million) in PIS and COFINS tax credit.

In 9M20, the charges for the use of the transmission and distribution system reached R$ 1,922 million, representing an increase of 10.0% (R$ 174 million), due to:

  • Increase of 14.7% (R$ 270 million) in connection and transmission charges (basic network, Itaipu transmission, connection and use of the distribution system);

Partially offset by:

  • Reduction of 83.4% (R$ 78 million) in sector charges (ESS/EER), mainly due to the resources from the Reserve Fund for Future Relief of Charges, in the amount of R$ 229 million, authorized by the ANEEL Dispatch #986/2020 as a way to mitigate the impacts of the COVID-19 pandemic. This effect was partially offset by the higher volume of reserve energy and the lower PLD, which elevated the ESS;
  • Increase of 10.0% in PIS and COFINS tax credit (R$ 18 million).

PMSO

Reported PMSO (R$ million)

3Q20

3Q19

Variation

9M20

9M19

Variação

R$ MM

%

R$ MM

%

Personnel

(228)

(235)

7

-2.9%

(689)

(704)

15

-2.2%

Material

(44)

(46)

3

-5.9%

(132)

(137)

4

-3.1%

Outsourced Services

(200)

(212)

12

-5.7%

(607)

(638)

31

-4.8%

Other Operating Costs/Expenses

(150)

(206)

56

-27.4%

(498)

(546)

48

-8.8%

Allowance for doubtful accounts

(35)

(61)

26

-42.9%

(172)

(194)

21

-11.1%

Legal and judicial expenses

(43)

(53)

10

-19.4%

(104)

(122)

18

-14.8%

Assets write-off

(25)

(39)

14

-35.1%

(74)

(91)

17

-18.7%

Others

(46)

(53)

6

-11.9%

(148)

(140)

(9)

6.2%

Total Reported PMSO

(621)

(699)

78

-11.2%

(1,926)

(2,025)

98

-4.9%

In 3Q20, PMSO reached R$ 621 million, a decrease of 11.2% (R$ 78 million), due to the following factors:

  1. Decrease of 42.9% (R$ 26 million) in the allowance for doubtful accounts, reflecting the negotiations during the pandemic period and the resumption of power cuts due to delinquency;
  2. Decrease of 35.1% (R$ 14 million) in the assets write-off, due to an adequacy in the registers, which impacted on the volume of write-offs;
  3. Decrease of 19.4% (R$ 10 million) in legal and judicial expenses due to the lower number of lawsuits, mainly in RGE;
  4. Decrease of 2.9% ( R$ 7 million) reduction in expenses with personnel, due to lower use of medical assistance in the period, lower overtime and variation in headcount;
  5. Other items with a decrease of 6.7% (R$ 21 million), mainly due to the reduction telecommunication materials (R$ 6 million), tree pruning (R$ 4 million), properties

32

3Q20 CPFL Results

maintenance (R$ 3 million), invoices reading and delivery (R$ 3 million), banks' collection fee (R$ 2 million), travel expenses (R$ 2 million), among others.

In 9M20, PMSO reached R$ 1,926 million, a decrease of 4.9% (R$ 98 million), due to the following factors:

  1. Decrease of 11.1 (R$ 21 million) in allowance for doubtful accounts, reflecting the negotiations during the pandemic period and the resumption of power cuts due to delinquency, since August 2020;
  2. Decrease of 14.8% (R$ 18 million) in legal and judicial expenses;
  3. Decrease of 18.7% (R$ 17 million) in assets write-off;
  4. Other items with a decrease of 3.5% (R$ 54 million) due to manly the reduction in expenses with personnel (R$ 15 millions), telecommunication materials (R$ 12 million), invoices reading and delivery (R$ 6 million), properties maintenance (R$ 5 million), fleet maintenance (R$ 4 million), tree pruning (R$ 4 million), banks' collection fee (R$ 4 million) and travel expenses (R$ 3 million), among others;

Partially offset by:

  1. Increase of 15.0% (R$ 12 million) in expenses with lines, grid and substation maintenance, related to Capex efforts.

Other operating costs and expenses

3Q20

3Q19

Var.

9M20

9M19

Var.

Costs of Building the Infrastructure

636

551

15.3%

1,695

1,477

14.8%

Private Pension Fund

42

29

47.5%

129

84

53.5%

Depreciation and Amortization

206

190

8.4%

605

548

10.5%

Total

884

770

14.8%

2,430

2,109

15.2%

EBITDA

EBITDA totaled R$ 1,072 million in 3Q20, an increase of 26.7% (R$ 226 million), due to the improvement in market performance and the recovery of the ADA, in addition to the reduction in the PMSO.

In 9M20, EBITDA totaled R$ 2,831 million, an increase of 4.9% (R$ 132 million), favored by the market performance and tariff and the impact of the reduction in the PMSO.

Conciliation of Net Income and EBITDA (R$ million)

3Q20

3Q19

Var.

9M20

9M19

Var.

Net income

571

375

52.4%

1,568

1,227

27.8%

Depreciation and Amortization

220

204

7.8%

648

590

9.7%

Financial Results

75

43

74.3%

(150)

174

-

Income Tax /Social Contributio

206

224

-8.1%

764

707

8.1%

EBITDA

1,072

846

26.7%

2,831

2,699

4.9%

33

3Q20 CPFL Results

EBITDA by Distributor

EBITDA by Distributor

Distribuidoras

3Q20

3Q19

Var.

9M20

9M19

Var.

CPFL Paulista

476

352

35.2%

1,214

1,106

9.8%

CPFL Piratininga

164

157

4.6%

454

421

7.9%

RGE

385

297

29.7%

1,017

1,003

1.4%

CPFL Santa Cruz

47

40

17.4%

146

169

-13.7%

EBITDA

1,072

846

26.7%

2,831

2,699

4.9%

CPFL Paulista:

EBITDA totaled R$ 476 million in 3Q20, an increase of 35.2% (R$ 123 million), explained by the better market performance and tariff, leveraged by the positive variation of the residential segment (9.5%) and other segments (5.4%) in relation to 3Q19, which represent 48.9% of the consumption of the concession area. Another effect was the update of the financial assets of the concession which contributed with R$ 24 million. In addition, CPFL Paulista presented an 8.2% reduction in the PMSO, with a highlight to assets write-off.

In 9M20, the EBITDA totaled R$ 1,214 million, an increase of 9.8% (R$ 108 million), resulting from the tariff adjustment. CPFL Paulista presented a 5.2% reduction in the PMSO, with highlight to assets write-off, legal and judicial expenses, among others.

CPFL Piratininga:

EBITDA totaled R$ 164 million in 3Q20, an increase of 4.6% (R$ 7 million). The less expressive result in this quarter is due to the RAB appraisal report of the tariff revision, which led to a gain of R$ 42 million in 3Q19 (extraordinary effect). Disregarding this effect, EBITDA would have varied 42.2%.

In 9M20, the EBITDA totaled R$ 454 million, an increase of 7.9% (R$ 33 million), mainly due to a reduction in PMSO, highlighting assets write-off, partially offset by the RAB appraisal report, already mentioned above. Disregarding this effect, EBITDA would have varied 19.7% in 9M20.

RGE:

EBITDA totaled R$ 384 million in 3Q20, an increase of 29.7% (R$ 88 million), explained by the better market and tariff performance, leveraged by the positive variation of the residential segment (7.1%), which represents 31.6% of the consumption in the concession area. Another effect was the update of the concession financial assets, which contributed with R$ 25 million. In addition, RGE presented a reduction in PMSO of R$ 28 million, mainly in legal and judicial expenses.

In 9M20, EBITDA totaled R$ 1,017 million, an increase of 1.4% (R$ 14 million), resulting from the tariff adjustment and PMSO reduction. The less expressive result in the accumulated is due to the adjustment in the regulatory asset in the RTA, which generated a gain in 2019 (extraordinary effect).

CPFL Santa Cruz:

EBITDA totaled R$ 46 million in 3Q20, an increase of 17.4% (R$ 7 million), explained by the better market and tariff performance, leveraged by the positive variation of the residential

34

3Q20 CPFL Results

(7.2%) and industrial (5.1%) segments in relation to 3Q19, which represent 63.4% of consumption in the concession area.

In 9M20, EBITDA totaled R$ 146 million, a 13.7% reduction (R$ 23 million). The less expressive result in 9M20 is due to the accounting of the favorable decision in relation to the PIS/Cofins over ICMS (extraordinary effect), which has generated a gain of $ 34.2 million. Disregarding this effect, EBITDA would have increased 8.3%.

Financial Result

Financial Result (R$ Million)

3Q20

3Q19

Var.

9M20

9M19

Var.

Revenues

106

168

-37.2%

635

462

37.7%

Expenses

(180)

(211)

-14.6%

(485)

(636)

-23.6%

Financial Result

(75)

(43)

74.3%

150

(174)

-

In 3Q20, the financial result recorded a net financial expense of R$ 75 million, compared to a net financial expense of R$ 43 million in 3Q19, an increase of 73.9%. The items that explain this variation are:

  1. Decrease of 33.0% (R$ 50 million) in the expenses with net debt, resulting mainly from the drop in the CDI rate, partially offset by the increase in the IPCA;
  2. Increase of 35.0% (R$ 30 million) in late payment interest and fines;

Partially offset by:

  1. Variation of R$ 61 million in the mark-to-market (non-cash effect).
  2. Decrease of 77.5% (R$ 20 million) in the update of sectoral financial assets/liabilities;
  3. Decrease of 196.8% (R$ 18 million) in other monetary updates;
  4. Decrease of 70.2% (R$ 6 million) in judicial deposits updates;
  5. Variation of R$ 6 million in other financial income and expenses.

In 9M20, the financial result recorded a net financial revenue of R$ 150 million, compared to a net financial expense of R$ 174 million in 9M19. The items that explain this variation are:

  1. Variation of R$ 177 million in the mark-to-market (non-cash effect);
  2. Decrease of 36.3% (R$ 177 million) in the expenses with net debt due to the fall in the interest rate (CDI);
  3. Increase of 15.0% (R$ 41 million) in late payment interest and fines;

Partially offset by:

  1. Decrease of 75.5% (R$ 55 million) in the update of sectoral financial assets/liabilities;
  2. Decrease of 54.3% (R$ 14 million) in judicial deposits updates;
  3. Variation of R$ 17 million in other financial revenues and expenses.

35

3Q20 CPFL Results

Net Income

Net Income totaled R$ 571 million in 3Q20, an increase of 52.4% (R$ 196 million), mainly reflecting an increase of the EBITDA and the gain registered in the financial result, due to lower expenses with net debt.

In 9M20, Net Income totaled R$ 1,568 million, an increase of 27.8% (R$ 342 million). The positive result was mainly a reflection of the increase in the EBITDA and the gain registered in the financial result, due to the mark-to-market of debts and lower expenses with net debt.

5.1.2) Tariff Events

Reference dates

Tariff Revision

Distributor

Periodicity

Next Revision

Cycle

Tariff Process Dates

CPFL Piratininga

Every 4 years

October 2023

6th PTRC

October 23rd

CPFL Santa Cruz

Every 5 years

March 2021

5th PTRC

March 22nd

CPFL Paulista

Every 5 years

April 2023

5th PTRC

April 8th

RGE

Every 5 years

June 2023

5th PTRC

June 19th

Annual tariff adjustments and periodic tariff reviews in 2019 and 2020

Annual Tariff Adjustments (ATAs)

CPFL Santa

CPFL

RGE(1)

CPFL

Cruz

Paulista(1)

Piratininga

Ratifying Resolution

2,522

2,526

2,697

2,627

Adjustment

10.71%

14.90%

15.74%

18.31%

Parcel A

4.79%

5.83%

8.25%

11.80%

Parcel B

-1.59%

0.26%

1.82%

3.96%

Financial Components

7.51%

8.80%

5.67%

2.55%

Effect on consumer billings

0.20%

6.05%

6.09%

9.82%

Date of entry into force

03/22/2020

04/08/2020

06/19/2020

10/23/2020

  1. ANEEL suspended the application of 2020 new tariffs for CPFL Paulista and RGE until July 1, 2020, due to the COVID-19 pandemic. The difference in revenue from the anniversary date of the Distributors until July 1 was transferred to the Distributor through the sectoral loan "COVID Account". Additionally, to avoid a cash flow mismatch, ANEEL gave a discount on the CDE payment to CCEE, in the same period, in the estimated amount of this difference of revenue, to be refunded in installments from July to December 2020.

36

3Q20 CPFL Results

5.2) Commercialization and Services Segments

Economic-Financial Performance

Consolidated Income Statement - Commercialization (R$ Million)

3Q20

3Q19

Var.

9M20

9M19

Var.

Net Operating Revenue

758

969

-21.8%

2,186

2,542

-14.0%

EBITDA(1)

8

25

-68.5%

28

77

-63.0%

Net Income

9

12

-20.3%

29

40

-26.2%

Consolidated Income Statement - Services (R$ Million)

3Q20

3Q19

Var.

9M20

9M19

Var.

Net Operating Revenue

190

147

29.6%

517

451

14.7%

EBITDA(1)

49

32

51.6%

122

107

14.0%

Net Income

37

17

115.2%

81

63

28.5%

Note: EBITDA is calculated from the sum of net income, taxes, financial result and depreciation/amortization.

5.3) Conventional Generation Segment

Consolidated Income Statement - Conventional Generation (R$ Million)

3Q20

3Q19

Var.

9M20

9M19

Var.

Gross Operating Revenue

385

358

7.6%

1,074

991

8.4%

Net Operating Revenue

346

324

6.8%

968

891

8.7%

Cost of Electric Power

(18)

(33)

-45.0%

(72)

(91)

-20.7%

Operating Costs & Expenses

(105)

(65)

61.7%

(253)

(171)

47.3%

EBITDA(1)

349

338

3.2%

999

976

2.4%

Equity Income

96

82

16.8%

266

258

3.1%

Net Income

273

232

17.4%

697

624

11.6%

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

Operating Revenue

In 3Q20, the Gross Operating Revenue 27 million). The Net Operating Revenue 6.8% (R$ 22 million).

reached R$ 385 million, an increase of 7.6% (R$ was of R$ 346 million, registering an increase of

The main factors that affected the net operating revenue were:

  • Increase of R$ 44 million in the Revenue from Building the Infrastructure of the Concession, related to the services rendered to the construction of transmission lines and substation; this revenue has its counterpart in operating costs;

These effects were partially offset by:

  • Decrease of 3.0% (R$ 10 million) with Electric Energy Supply;
  • Decrease of 26.2% (R$ 7 million) in Other Revenues;

37

3Q20 CPFL Results

  • Increase of 11.0% (R$ 4 million) of PIS/COFINS;
  • Higher expense with CFURH (R$ 2 million).

In 9M20, the Gross Operating Revenue 83 million). The Net Operating Revenue million).

reached R$ 1,074 million, an increase of 8.4% (R$ was of R$ 968 million, an increase of 8.7% (R$ 77

The main factors that affected the net operating revenue were:

  • Increase of R$ 83 million in the Revenue from Building the Infrastructure of the Concession;
  • Increase of 0.6% (R$ 5 million) with Electric Energy Supply;
  • Lower expense with CFURH (R$ 2 million);
  • Lower expense with Aneel's inspection fee (R$ 1 million);

These effects were partially offset by:

  • Increase of 10.2% (R$ 10 million) of PIS/COFINS;
  • Reduction of 8.9% (R$ 5 million) in Other Revenues.

Cost of Electric Power

Cost of Electric Energy (R$ Million)

3Q20

3Q19

Var.

9M20

9M19

Var.

Cost of Electric Power Purchased for Resale

Energy Purchased in the Spot Market

(0)

(5)

-95.1%

(14)

(13)

6.6%

Energy Purchased Bilateral Contracts and ACL

(11)

(23)

-50.8%

(40)

(63)

-36.7%

PIS and COFINS Tax Credit

1

2

-52.5%

4

6

-36.2%

Total

(10)

(25)

-59.0%

(50)

(70)

-28.6%

Charges

Basic Network Charges

(8)

(7)

4.5%

(23)

(21)

5.9%

Charges for the Use of the Distribution System

(0)

(0)

0.3%

(1)

(1)

2.5%

Connection Charges

1

1

2.0%

2

2

6.1%

Total

(7)

(7)

4.5%

(22)

(21)

5.8%

Cost of Electric Energy

(18)

(33)

-45.0%

(72)

(90)

-20.7%

In 3Q20, the Cost of Electric Energy was of R$ 18 million, representing a decrease of 45.0% (R$ 15 million), compared to 3Q19. There was a reduction of 59.0% (R$ 15 million) in the Cost of Electric Power Purchased for Resale, due to:

  • Decrease of 50.8% (R$ 12 million) in the cost with energy purchased in the free market and bilateral contracts, due to the reductions in the volume (-22.2%)and in the average purchase price (-36.8%);
  • Decrease of 95.1% (R$ 5 million) in the cost with energy in the spot market, due to the reductions in the volume (-77.4%) and in the average purchase price (-78.3%);

Partially offset by:

  • Decrease of 52.5% (R$ 1 million) in PIS and COFINS tax credit.

In 9M20, the Cost of Electric Energy amounted to R$ 72 million, representing a decrease of 20.7% (R$ 19 million), compared to 9M19. There was a reduction of 28.6% (R$ 20 million) in

38

3Q20 CPFL Results

the Cost of Electric Power Purchased for Resale, due to:

  • Decrease of 36.7% (R$ 23 million) in the cost with energy purchased in the free market and bilateral contracts, due to the reductions in the volume (-12.5%)and in the average purchase price (-27.7%);

Partially offset by:

  • Decrease of 36.2% (R$ 2 million) in PIS and COFINS tax credit;
  • Increase of 6.6% (R$ 1 million) in the cost with energy in the spot market, due to the increase in the volume (176.1%), partially offset by the reduction in the average purchase price (-61.4%).

Volume of purchased energy (GWh)

3Q20

3Q19

Var.

9M20

9M19

Var.

Energy Purchased in the Spot Market

23

102

-77.4%

528

191

176.1%

Energy Purchased Bilateral Contracts and ACL

206

265

-22.2%

631

721

-12.5%

Total

229

366

-37.5%

1,159

912

27.1%

Average price (R$/MWh)

3Q20

3Q19

Var.

9M20

9M19

Var.

Energy Purchased in the Spot Market

(10.13)

(46.77)

-78.3%

(26.47)

(68.56)

-61.4%

Energy Purchased Bilateral Contracts and ACL

(54.17)

(85.69)

-36.8%

(63.08)

(87.20)

-27.7%

Total

(49.75)

(74.89)

-33.6%

(46.40)

(83.29)

-44.3%

PMSO

PMSO (R$ million)

3Q20

3Q19

Variation

9M20

9M19

Variation

R$ MM

%

R$ MM

%

PMSO

Personnel

11

10

1

5.9%

33

27

6

22.2%

Material

1

1

(0)

-3.7%

3

3

0

4.3%

Outsourced Services

5

6

(1)

-23.0%

17

19

(1)

-7.2%

Other Operating Costs/Expenses

8

8

1

8.8%

22

23

(0)

-0.6%

GSF Risk Premium

4

2

1

68.4%

9

7

2

23.7%

Others

4

5

(1)

-17.4%

14

15

(2)

-11.8%

Total PMSO

25

25

(0)

-0.8%

75

71

5

6.5%

The PMSO reached R$ 25 million in 3Q20, maintaining the same place as 3Q19.

In 9M20, the PMSO registered an increase of 6.5% (R$ 5 million), explained by the increase in the expenses with personnel of 22.2% (R$ 6 million), due mainly to the increase in headcount and the effects of the collective bargaining agreement. This result was partially offset by a decrease of 7.2% (R$ 1 million) in the expenses with outsourced services.

Other operating costs and expenses

Other operating costs and expenses

3Q20

3Q19

Var.

9M20

9M19

Var.

Costs with Infraestructure Construction

(49)

(10)

413.6%

(86)

(10)

738.6%

Private Pension Fund

(1)

(0)

49.0%

(2)

(1)

60.5%

Depreciation and Amortization

(30)

(30)

0.8%

(89)

(89)

0.3%

Total

(80)

(40)

101.2%

(177)

(101)

75.9%

39

3Q20 CPFL Results

Equity Income

Equity Income (R$ Million)

3Q20

3Q19

Var. %

9M20

9M19

Var. %

Projects

Barra Grande HPP

(1)

(4)

-71.4%

(9)

(3)

158.0%

Campos Novos HPP

42

26

61.1%

111

93

19.4%

Foz do Chapecó HPP

36

39

-7.8%

111

101

9.4%

Epasa TPP

19

20

-8.3%

54

67

-20.2%

Total

96

82

16.7%

266

258

3.3%

Note: Disclosure of interest in subsidiaries is made in accordance with IFRS 12 and CPC 45.

In 3Q20, the result of the Equity Income was R$ 96 million, an increase of 16.7% (R$ 14 million). In 9M20, the result of the Equity Income was R$ 266 million, an increase of 3.3% (R$ 9 million).

Equity Income (R$ Million)

BARRA GRANDE

3Q20

3Q19

Var. %

9M20

9M19

Var.%

Net Revenue

9

21

-54.9%

33

49

-32.3%

Operating Costs / Expenses

(7)

(19)

-62.1%

(26)

(37)

-29.7%

Deprec. / Amortization

(3)

(3)

0.4%

(10)

(10)

0.0%

Net Financial Result

(5)

(3)

79.9%

(11)

(6)

74.5%

Income Tax

5

(0)

-

4

(0)

-

Net Income

(1)

(4)

-71.4%

(9)

(3)

158.0%

Equity Income (R$ Million)

CAMPOS NOVOS

3Q20

3Q19

Var. %

9M20

9M19

Var.%

Net Revenue

94

80

17.4%

257

236

9.0%

Operating Costs / Expenses

(23)

(31)

-27.0%

(65)

(66)

-1.0%

Deprec. / Amortization

(6)

(6)

0.6%

(18)

(18)

2.1%

Net Financial Result

(1)

(4)

-58.6%

(7)

(14)

-51.0%

Income Tax

(22)

(13)

65.2%

(57)

(48)

20.2%

Net Income

42

26

61.1%

111

93

19.4%

Equity Income (R$ Million)

FOZ DO CHAPECO

3Q20

3Q19

Var. %

9M20

9M19

Var.%

Net Revenue

119

114

5.0%

353

333

6.1%

Operating Costs / Expenses

(24)

(23)

8.3%

(77)

(75)

2.4%

Deprec. / Amortization

(16)

(16)

-0.9%

(48)

(48)

0.3%

Net Financial Result

(26)

(18)

48.3%

(67)

(65)

3.7%

Income Tax

(19)

(20)

-5.1%

(57)

(51)

11.9%

Net Income

36

39

-7.8%

111

101

9.4%

40

3Q20 CPFL Results

Equity Income (R$ Million)

EPASA

3Q20

3Q19

Var. %

9M20

9M19

Var.%

Net Revenue

35

39

-9.2%

108

254

-57.7%

Operating Costs / Expenses

(8)

(8)

-0.5%

(26)

(153)

-83.0%

Deprec. / Amortization

(5)

(5)

0.6%

(14)

(14)

0.2%

Net Financial Result

(1)

(1)

-18.7%

(4)

(6)

-26.3%

Income Tax

(5)

(5)

-1.1%

(13)

(16)

-20.5%

Net Income

19

20

-8.3%

54

67

-20.2%

Below are the main variations:

Barra Grande:

In 3Q20, the net revenue decreased 54.9% (R$ 11 million), while the operating costs and expenses had a decrease of 62.1% (R$ 12 million). The financial result (net financial expense) increased 79.9% (R$ 2 million), due to the increase in expenses with UBP, which were impacted by IGP-M.

In 9M20, the net revenue decreased 32.3% (R$ 16 million), while the operating costs and expenses decreased 29.7% (R$ 11 million). The financial result (net financial expense) presented an increase of 74.5% (R$ 5 million), due to the increase in expenses with UBP (impacted by IGP-M).

Campos Novos:

In 3Q20, the net revenue increased 17.4% (R$ 14 million), especially due to the contracts readjustments. The operating costs and expenses decreased 27.0% (R$ 8 million), mainly due to lower energy purchased. The financial result (net financial expense) presented a reduction of 58.6% (R$ 3 million), due to the lower debt expenses, especially regarding lower CDI interest rate over debentures.

In 9M20, the net revenue increased 9.0% (R$ 21 million), especially due to the contracts readjustments. The operating costs and expenses of 9M20 remained stable compared to 9M19. The financial result (net financial expense) presented a reduction of 51.0% (R$ 7 million), due to the lower debt expenses, favored by lower CDI interest rate over debentures.

Foz do Chapecó:

In 3Q20, an increase of 5.0% in the net revenue, especially due to the contracts readjustments. The operating costs and expenses presented an increase of 8.3% (R$ 1 million). In the financial result (net financial expense), there was an increase of 48.3% (R$ 9 million), due mainly to the increase in expenses with UBP (impacted by IGP-M and IPCA).

In 9M20, net revenue increased 6.1% (R$ 20 million), especially due to the contracts readjustment. The operating costs and expenses increased 2.4% (R$ 2 million). The financial result (net financial expense) presented an increase of 3.7% (R$ 2 million), due mainly to the increase in expenses with UBP (impacted by IGP-M and IPCA), partially offset by the reduction in debt expenses.

41

3Q20 CPFL Results

Epasa:

In 3Q20, net revenue decreased 9.2% (R$ 3 million), due to lower sell of energy in the spot market. The operating costs and expenses and the financial result of 3Q20 remained stable compared to 3Q19.

In 9M20, the net revenue decreased 57.7% (R$ 147 million), due to the lower volume of generation and lower energy sales in the spot market. The operating costs and expenses decreased 83.0% (R$ 127 million), due to lower fuel purchase. The financial result (net financial expense) presented a decrease of 26.3% (R$ 2 million) due to lower debt expenses.

EBITDA

In 3Q20, EBITDA was of R$ 349 million, an increase of 3.2% (R$ 11 million), mainly due to the lower expenses with GSF and the contracts readjustments.

In 9M20, EBITDA was of R$ 999 million, an increase of 2.4% (R$ 23 million), mainly due to the contracts readjustments.

Conciliation of Net Income and EBITDA (R$ million)

3Q20

3Q19

Var.

9M20

9M19

Var.

Net Income

273

232

17.4%

697

624

11.6%

Depreciation and Amortization

30

30

0.8%

90

89

0.3%

Financial Result

13

43

-69.6%

58

126

-54.2%

Income Tax /Social Contribution

33

33

0.8%

154

135

14.0%

EBITDA

349

338

3.2%

999

976

2.3%

Financial Result

Resultado Financeiro (R$ Milhões)

3T20

3T19

Var.

9M20

9M19

Var.

Receitas

9

13

-28.1%

28

36

-23.1%

Despesas

(22)

(56)

-60.2%

(86)

(162)

-47.3%

Resultado Financeiro

(13)

(43)

-69.6%

(58)

(126)

-54.2%

In 3Q20, the financial result was a net financial expense of R$ 13 million, a reduction of 69.6% (R$ 30 million), mainly due to lower expenses with net debt (R$ 25 million) and other items (R$ 5 million).

In 9M20, the financial result was a net financial expense of R$ 58 million, a reduction of 54.2% (R$ 68 million), mainly due to lower expenses with net debt (R$ 56 million) and other items (R$ 12 million).

Net Income

In 3Q20, net income was R$ 273 million, an increase of 17.4% (R$ 40 million), compared to 3Q19. In 9M20, net income was R$ 697 million, an increase of 11.6% (R$ 73 million), compared to 9M19. These results mainly reflects the higher EBITDA and the gain with the financial result, due to lower expenses with net debt.

42

3Q20 CPFL Results

5.4) CPFL Renováveis

Economic-Financial Performance

Consolidated Income Statement - CPFL RENOVÁVEIS (R$ Million)

3Q20

3Q19

Var.

9M20

9M19

Var.

Gross Operating Revenue

703

634

10.8%

1,465

1,422

3.0%

Net Operating Revenue

670

599

11.9%

1,384

1,345

2.9%

Cost of Electric Power

(95)

(106)

-11.1%

(204)

(226)

-9.6%

Operating Costs & Expenses

(198)

(270)

-26.6%

(702)

(775)

-9.4%

EBIT

377

222

69.7%

477

343

39.1%

EBITDA1

485

384

26.3%

910

827

10.1%

Financial Income (Expense)

(105)

(93)

13.7%

(257)

(316)

-18.4%

Income Before Taxes

272

130

109.6%

220

28

695.2%

Net Income

538

124

333.9%

465

(8)

-

Note:

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

Operating Revenue

Renewable Generation Revenue by Source (R$ Million)

3Q20

3Q19

Var.

9M20

9M19

Var.

SHPP

144

138

4.5%

417

402

3.6%

Biomass

89

100

-10.4%

217

207

4.8%

Wind/Holding

437

362

20.9%

750

735

2.0%

Total Net Operating Revenue

670

599

11.9%

1,384

1,345

2.9%

In 3Q20, Gross Operating Revenue reached R$ 703 million, representing an increase of 10.8% (R$ 69 million). Net Operating Revenue reached R$ 670 million, representing an increase of 11.9% (R$ 71 million). These variations are mainly explained by the following factors:

SHPPs Source:

  • Increase of R$ 6 million in revenue from SHPPs, mainly due to the different strategy of seasonal adjustment of physical guarantee in the agreements between the periods and price readjustments.

Biomass Source:

  • Decrease of R$ 11 million in biomass revenue, mainly due to the strategy of contract seasonalization and the lower generation.

Wind Source and Holding Company:

  • Increase of R$ 75 million in revenue from wind farms and the Holding Company, mainly due to the higher generation and availability of wind complexes.

43

3Q20 CPFL Results

In 9M20, Gross Operating Revenue reached R$ 1,465 million, representing an increase of 3.0% (R$ 43 million). Net Operating Revenue reached R$ 1,384 million, representing an increase of 2.9% (R$ 40 million). These variations are mainly explained by the following factors:

SHPPs Source:

  • Increase of R$ 15 million in revenue from SHPPs, mainly due to the readjustment of contracts and different strategy of seasonal adjustment of physical guarantee in the agreements between the periods, partially offset by the GSF exposure.

Biomass Source:

  • Increase of R$ 10 million in biomass revenue, mainly due to the strategy of contract seasonalization.

Wind Source and Holding Company:

  • Increase of R$ 15 million in revenue from wind farms and the Holding Company, mainly due to the higher generation in the 3Q20 and the higher availability of wind complexes.

Cost of Electric Power

Cost of Electric Energy (R$ Million)

3Q20

3Q19

Var.

9M20

9M19

Var.

Cost of Electric Power Purchased for Resale

(68)

(81)

-15.6%

(126)

(152)

-16.9%

Charges for the Use of the Transmission and Distribution System

(26)

(26)

3.4%

(78)

(74)

5.4%

Cost of Electric Energy

(95)

(106)

-11.1%

(204)

(226)

-9.6%

In 3Q20, Cost of Electric Energy totaled R$ 95 million, representing a decrease of 11.1% (R$ 12 million). Energy purchase cost totaled R$ 68 million in 3Q20, a decrease of 15.6% (R$ 13 million), mainly due to the lower energy volume purchased for SHPPs and wind farms. Cost of charges for the use of the system totaled R$ 26 million in 3Q20, an increase of 3.4% (R$ 1 million).

In 9M20, Cost of Electric Energy totaled R$ 204 million, a decrease of 9.6% (R$ 22 million). Energy purchase cost totaled R$ 126 million in 9M20, a decrease of 16.9% (R$ 26 million), mainly due to the lower energy volume purchased for SHPPs and wind farms. Cost of charges for the use of the system totaled R$ 78 million in 9M20, an increase of 5.4% (R$ 4 million).

44

3Q20 CPFL Results

PMSO

Reported PMSO (R$ million)

3Q20

3Q19

Variation

9M20

9M19

Variação

R$ MM

%

R$ MM

%

Reported PMSO

Personnel

(24)

(31)

7

-22.5%

(74)

(85)

11

-12.4%

Material

(12)

(5)

(6)

114.5%

(14)

(13)

(1)

4.2%

Outsourced Services

(40)

(52)

11

-21.9%

(134)

(148)

14

-9.4%

Other Operating Costs/Expenses

(15)

(20)

6

-28.2%

(47)

(45)

(2)

4.1%

Asset Write-off

(2)

(9)

8

-82.9%

(3)

(9)

6

-64.2%

Others

(13)

(11)

(2)

15.6%

(44)

(36)

(8)

21.3%

Total Reported PMSO

(91)

(109)

18

-16.4%

(269)

(292)

22

-7.6%

PMSO reached R$ 91 million in 3Q20, compared to R$ 109 million in 3Q19, a decrease of 16.4% (R$ 18 million). This variation is explained by the reduction in assets write-off, in comparison with 3Q19, when we had the write-off of fixed assets of wind farms which were operated by Suzlon, in the amount of R$ 9 million. In addition, there was a decrease of R$ 7 million in personnel costs, mainly due to the reduction in the number of employees and the average cost per employee, due to the restructuring proposed by the Group.

In 9M20, PMSO reached R$ 269 million, compared to R$ 292 million in 9M19, a decrease of 7.6% (R$ 22 million). This variation is mainly explained by the same factors that influenced the quarter, in addition to a decrease in outsourced services.

Other operating costs and expenses

Other operating costs and expenses

3Q20

3Q19

Var.

9M20

9M19

Var.

Depreciation and amortization

(68)

(122)

-44.6%

(313)

(365)

-14.0%

Amortization of Concession Intangible

(40)

(40)

0.5%

(120)

(119)

0.2%

Total

(108)

(162)

-33.5%

(433)

(484)

-10.5%

EBITDA

In 3Q20, EBITDA was of R$ 485 million, compared to R$ 384 million in 3Q19, an increase of 26.3% (R$ 101 million). This result is mainly due to higher generation and availability in wind farms, lower cost with GSF and contracts adjustments in the SHPPs.

In 9M20, EBITDA was of R$ 910 million, compared to R$ 827 million in 9M19, an increase of 10.1% (R$ 83 million). This result is mainly due to SHPPs contract adjustments and higher availability of wind farms, partially offset by the lower wind performance.

45

3Q20 CPFL Results

EBITDA and Net Income conciliation (R$ million)

3Q20

3Q19

Var.

9M20

9M19

Var.

Net Income

538

124

333.9%

465

(8)

-

Depreciation and Amortization

108

162

-33.5%

433

484

-10.5%

Financial Result

105

93

13.7%

257

316

-18.4%

Income Tax / Social Contribution

(265)

6

-

(245)

35

-

EBITDA

485

384

26.3%

910

827

10.1%

Financial Result

Financial Result (R$ Million)

3Q20

3Q19

Var.

9M20

9M19

Var.

Revenues

16

43

-61.8%

68

141

-52.2%

Expenses

(122)

(135)

-10.0%

(325)

(457)

-28.9%

Financial Result

(105)

(93)

13.7%

(257)

(316)

-18.4%

In 3Q20, financial result registered a net financial expense of R$ 105 million, an increase of 13.7% (R$ 13 million). This variation is basically explained by the decrease of 21.7% (R$ 19 million) in expenses with the net debt (debt charges, net of income from financial investments), mainly due to the decrease in interest rates (CDI) and the lower debt cost. This effect was offset by an additional expense to debt pre-payments other items of the financial result.

In 9M20, financial result registered a net financial expense of R$ 257 million, a decrease of 18.4% (R$ 58 million). This variation is basically explained by the decrease of 28.2% (R$ 82 million) in expenses with the net debt (debt charges, net of income from financial investments), mainly due to the decrease in interest rates (CDI) and lower debt cost, partially offset by the variation of R$ 24 million in other items.

Income Tax and Social Contribution

In 3Q20, the income tax and social contribution item registered a positive result of R$ 265 million, compared to a negative result of R$ 6 million in 3Q19, a variation de R$ 271 million. In 9M20, the income tax and social contribution item registered a positive result of R$ 245 million, compared to a negative result of R$ 35 million in 9M19, a variation of R$ 281 million. These variations are explained by the recognition of tax credits (R$ 271 million) occurred in 3Q20.

Net Income

In 3Q20, net income was of R$ 538 million, compared to the net income of R$ 124 million in 3Q19, an increase of 333.9% (R$ 414 million). This performance reflects the improvement in EBITDA and in the income tax and social contribution item, partially offset by the worsening in the financial result.

In 9M20, net income was of R$ 465 million, compared to the net loss of R$ 8 million in 9M19. This performance reflects the improvement in EBITDA, in the financial result and in the income tax and social contribution item.

46

3Q20 CPFL Results

6) ATTACHMENTS

6.1) Balance Sheet - Assets - CPFL Energia

(R$ thousands)

Consolidated

ASSETS

09/30/2020

12/31/2019

09/30/2019

CURRENT

Cash and Cash Equivalents

6,758,471

1,937,163

3,231,733

Bonds and securities

1,357,372

851,004

725

Consumers, Concessionaries and Licensees

4,739,787

4,985,578

5,046,010

Dividend and Interest on Equity

99,942

100,297

98,318

Recoverable Taxes

589,026

419,126

419,722

Derivatives

1,139,475

281,326

318,385

Sectoral Financial Assets

332,721

1,093,588

1,328,954

Contractual Assets

24,565

24,387

34,262

Other assets

891,686

648,161

590,041

TOTAL CURRENT

15,933,045

10,340,630

11,068,152

NON-CURRENT

Consumers, Concessionaries and Licensees

758,494

713,068

662,605

Judicial Deposits

766,124

757,370

876,539

Recoverable Taxes

418,750

472,123

430,881

Sectoral Financial Assets

-

2,748

325,012

Derivatives

1,715,469

369,767

536,754

Deferred Taxes

348,049

1,064,716

760,934

Concession Financial Assets

9,772,378

8,779,717

8,398,420

Investments at Cost

116,654

116,654

116,654

Other assets

193,624

736,019

706,587

Investments

1,098,857

997,997

973,882

Property, Plant and Equipment

8,894,142

9,083,710

9,106,888

Contractual Assets

1,581,055

1,322,822

1,396,228

Intangible Assets

9,077,416

9,320,953

9,264,793

TOTAL NON-CURRENT

34,741,011

33,737,664

33,556,177

TOTAL ASSETS

50,674,056

44,078,293

44,624,329

47

3Q20 CPFL Results

6.2) Balance Sheet - Liabilities - CPFL Energia

(R$ thousands)

Consolidated

LIABILITIES AND SHAREHOLDERS' EQUITY

09/30/2020

12/31/2019

09/30/2019

CURRENT

Trade payables

2,881,472

3,260,180

3,211,553

Borrowings

3,466,905

2,776,193

3,394,489

Debentures

1,301,309

682,582

584,682

Private pension plan

154,851

224,851

123,486

Regulatory liabilities

114,067

232,251

247,053

Taxes, Fees and Contributions

1,236,547

960,497

731,835

Dividends

2,120,493

668,859

512,257

Estimated payroll

184,210

125,057

174,024

Derivatives

-

29,400

1,377

Use of public asset

12,573

11,771

6,189

Other payables

1,517,817

1,094,269

1,123,247

TOTAL CURRENT

12,990,245

10,065,908

10,110,192

NON-CURRENT

Trade payables

399,297

359,944

334,949

Borrowings

8,915,535

7,587,102

8,256,512

Debentures

6,508,223

7,863,696

8,115,705

Private pension plan

1,849,054

2,153,327

1,101,463

Taxes, Fees and Contributions

158,713

157,003

1,588

Deferred tax liabilities

891,192

1,048,069

1,087,252

Provision for tax, civil and labor risks

530,281

600,775

821,032

Loans with Controled and Controlling Companies

2,395,881

-

-

Derivatives

-

6,157

4,092

Sectoral financial liabilities

518,300

102,561

137,539

Use of public asset

100,290

91,181

96,442

Other payables

596,340

759,331

620,933

TOTAL NON-CURRENT

22,863,105

20,729,147

20,577,509

SHAREHOLDERS' EQUITY

Issued capital

9,388,080

9,388,081

9,388,978

Capital Reserves

(1,643,776)

(1,640,962)

(1,640,962)

Legal Reserve

1,036,125

1,036,125

900,992

Statutory reserve - working capital improvement

4,046,305

4,046,305

3,527,510

Dividend

-

1,433,295

-

Accumulated comprehensive income

(990,716)

(1,268,465)

(406,889)

Retained earnings

2,698,679

-

1,879,755

14,534,698

12,994,381

13,649,386

Equity attributable to noncontrolling interests

286,008

288,857

287,242

TOTAL SHAREHOLDERS' EQUITY

14,820,706

13,283,238

13,936,627

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

50,674,056

44,078,293

44,624,329

48

3Q20 CPFL Results

6.3) Income Statement - CPFL Energia

(R$ thousands)

Consolidated

3Q20

3Q19

Variation

9M20

9M19

Variation

OPERATING REVENUES

Electricity Sales to Final Customers

7,505,802

7,675,780

-2.2%

22,253,622

23,213,292

-4.1%

Electricity Sales to Distributors

1,297,020

1,787,762

-27.5%

3,494,689

4,456,730

-21.6%

Revenue from building the infrastructure

690,319

561,861

22.9%

1,789,593

1,488,441

20.2%

Update of concession's financial asset

79,774

63,213

26.2%

157,124

236,000

-33.4%

Sectorial financial assets and liabilities

255,624

238,278

7.3%

83,080

(64,548)

-

Other Operating Revenues

1,488,204

1,337,955

11.2%

4,263,900

3,926,718

8.6%

11,316,742

11,664,848

-3.0%

32,042,010

33,256,634

-3.7%

DEDUCTIONS FROM OPERATING REVENUES

(3,535,722)

(3,918,367)

-9.8%

(10,417,079)

(11,346,400)

-8.2%

NET OPERATING REVENUES

7,781,020

7,746,482

0.4%

21,624,931

21,910,234

-1.3%

COST OF ELECTRIC ENERGY SERVICES

Electricity Purchased for Resale

(3,582,924)

(4,150,261)

-13.7%

(10,831,541)

(11,709,289)

-7.5%

Electricity Network Usage Charges

(884,948)

(629,141)

40.7%

(2,000,939)

(1,822,487)

9.8%

(4,467,872)

(4,779,402)

-6.5%

(12,832,480)

(13,531,776)

-5.2%

OPERATING COSTS AND EXPENSES

Personnel

(354,870)

(363,683)

-2.4%

(1,066,447)

(1,077,469)

-1.0%

Material

(74,125)

(71,008)

4.4%

(207,019)

(204,005)

1.5%

Outsourced Services

(127,637)

(171,957)

-25.8%

(449,342)

(515,415)

-12.8%

Other Operating Costs/Expenses

(170,166)

(234,559)

-27.5%

(565,564)

(612,981)

-7.7%

Allowance for Doubtful Accounts

(36,372)

(61,016)

-40.4%

(174,344)

(194,866)

-10.5%

Legal and judicial expenses

(43,655)

(55,180)

-20.9%

(107,417)

(126,155)

-14.9%

Others

(90,139)

(118,364)

-23.8%

(283,803)

(291,960)

-2.8%

Cost of building the infrastructure

(685,234)

(560,882)

22.2%

(1,780,831)

(1,487,416)

19.7%

Employee Pension Plans

(42,813)

(29,020)

47.5%

(131,065)

(85,322)

53.6%

Depreciation and Amortization

(309,124)

(345,801)

-10.6%

(715,121)

(1,014,203)

-29.5%

Amortization of Concession's Intangible

(72,311)

(72,109)

0.3%

(144,219)

(216,328)

-33.3%

(1,836,280)

(1,849,021)

-0.7%

(5,059,608)

(5,213,140)

-2.9%

EBITDA1

1,954,094

1,618,024

20.8%

4,858,457

4,653,623

4.4%

INCOME FROM ELECTRIC ENERGY SERVICE

1,476,868

1,118,058

32.1%

3,732,843

3,165,318

17.9%

FINANCIAL REVENUES (EXPENSES)

Financial Revenues

139,622

280,129

-50.2%

760,397

718,061

5.9%

Financial Expenses

(331,666)

(412,487)

-19.6%

(903,693)

(1,281,783)

-29.5%

(192,044)

(132,358)

45.1%

(143,297)

(563,722)

-74.6%

EQUITY ACCOUNTING

Equity Accounting

95,790

82,055

16.7%

266,274

257,774

3.3%

Assets Surplus Value Amortization

(145)

(145)

0.0%

(435)

(435)

0.0%

95,645

81,910

16.8%

265,839

257,339

3.3%

INCOME BEFORE TAXES

1,380,469

1,067,610

29.3%

3,855,386

2,858,936

34.9%

Social Contribution

(10,207)

(86,711)

-88.2%

(205,238)

(260,789)

-21.3%

Income Tax

(18,673)

(233,160)

-92.0%

(550,790)

(706,377)

-22.0%

NET INCOME

1,351,589

747,739

80.8%

3,099,358

1,891,770

63.8%

Controlling Shareholders' Interest

1,337,434

676,957

97.6%

2,678,569

1,861,036

43.9%

Non-Controlling Shareholders' Interest

14,155

70,782

-80.0%

39,354

30,734

28.0%

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

49

3Q20 CPFL Results

6.4) Income Statement by business segment

(R$ thousands)

Income Statement by business segment - CPFL Energia (R$ million)

Distribution

Conventional

Renewable

Commerciali-

Services

Others

Eliminations

Total

Generation

Generation

zation

3Q20

Net operating revenue

6,286

346

670

758

190

0

(470)

7,781

Operating costs and expenses

(5,215)

(93)

(185)

(750)

(142)

(8)

470

(5,923)

Depreciation e amortization

(220)

(30)

(108)

(1)

(7)

(16)

-

(382)

Income from electric energy service

852

223

377

7

42

(24)

(0)

1,477

Equity accounting

-

96

-

-

-

-

-

96

EBITDA

1,072

349

485

8

49

(8)

-

1,954

Financial result

(75)

(13)

(105)

7

0

(6)

-

(192)

Income (loss) before taxes

777

305

272

13

42

(29)

-

1,380

Income tax and social contribution

(206)

(33)

265

(4)

(5)

(46)

-

(29)

Net income (loss)

571

273

538

9

37

(76)

-

1,352

3Q19

Net operating revenue

6,134

324

599

969

147

2

(429)

7,746

Operating costs and expenses

(5,289)

(68)

(215)

(945)

(115)

(9)

429

(6,211)

Depreciation e amortization

(204)

(30)

(162)

(0)

(6)

(16)

-

(418)

Income from electric energy service

642

226

222

24

26

(22)

0

1,118

Equity accounting

-

82

-

-

-

-

-

82

EBITDA

846

338

384

25

32

(7)

-

1,618

Financial result

(43)

(43)

(93)

(8)

0

54

-

(132)

Income (loss) before taxes

599

265

130

17

26

32

-

1,068

Income tax and social contribution

(224)

(33)

(6)

(5)

(9)

(44)

-

(320)

Net income (loss)

375

232

124

12

17

(12)

-

748

Variation

Net operating revenue

2.5%

6.8%

11.9%

-21.8%

29.6%

-99.1%

9.5%

0.4%

Operating costs and expenses

-1.4%

37.2%

-13.8%

-20.6%

23.4%

-12.8%

9.5%

-4.6%

Depreciation e amortization

7.8%

0.8%

-33.5%

142.1%

12.3%

0.4%

-

-8.7%

Income from electric energy service

32.7%

-1.5%

69.7%

-72.5%

61.0%

5.4%

-

32.1%

Equity accounting

-

16.7%

-

-

-

-

-

16.7%

EBITDA

26.7%

3.2%

26.3%

-68.5%

51.6%

17.4%

-

20.8%

Financial result

74.3%

-69.6%

13.7%

-

148.2%

-

-

45.1%

Income (loss) before taxes

29.8%

15.4%

109.6%

-19.0%

61.5%

-

-

29.3%

Income tax and social contribution

-8.1%

0.8%

-

-15.9%

-40.5%

6.1%

-

-91.0%

Net income (loss)

52.4%

17.4%

333.9%

-20.3%

115.2%

539.5%

-

80.8%

Income Statement by business segment - CPFL Energia (R$ million)

Distribution

Conventional

Renewable

Commerciali-

Services

Others

Eliminations

Total

Generation

Generation

zation

9M20

Net operating revenue

17,783

968

1,384

2,186

517

(4)

(1,208)

21,625

Operating costs and expenses

(14,952)

(235)

(474)

(2,157)

(395)

(28)

1,208

(17,033)

Depreciation e amortization

(648)

(90)

(433)

(2)

(21)

(47)

-

(1,241)

Income from electric energy service

2,183

643

477

26

101

(79)

0

3,351

Equity accounting

-

266

-

-

-

-

-

266

EBITDA

2,831

999

910

28

122

(32)

-

4,858

Financial result

150

(58)

(257)

18

1

3

-

(143)

Income (loss) before taxes

2,333

851

220

44

102

(77)

-

3,474

Income tax and social contribution

(764)

(154)

245

(14)

(21)

(47)

-

(756)

Net income (loss)

1,568

697

465

29

81

(123)

-

2,718

9M19

Net operating revenue

17,837

891

1,345

2,542

451

2

(1,157)

21,910

Operating costs and expenses

(15,138)

(173)

(517)

(2,465)

(344)

(34)

1,157

(17,514)

Depreciation e amortization

(590)

(90)

(484)

(1)

(18)

(47)

-

(1,231)

Income from electric energy service

2,108

629

343

76

88

(79)

(0)

3,165

Equity accounting

-

258

-

-

-

-

-

258

EBITDA

2,699

976

827

77

107

(32)

-

4,654

Financial result

(174)

(126)

(316)

(17)

1

68

-

(564)

Income (loss) before taxes

1,934

760

28

59

89

(11)

-

2,859

Income tax and social contribution

(707)

(135)

(35)

(19)

(26)

(44)

-

(967)

Net income (loss)

1,227

624

(8)

40

63

(55)

-

1,892

Variation

Net operating revenue

-0.3%

8.7%

2.9%

-14.0%

14.7%

-

4.4%

-1.3%

Operating costs and expenses

-1.2%

35.9%

-8.4%

-12.5%

14.9%

-17.0%

4.4%

-2.7%

Depreciation e amortization

9.7%

0.3%

-10.5%

68.4%

13.1%

0.3%

-

0.8%

Income from electric energy service

3.5%

2.3%

39.1%

-65.6%

14.2%

0.8%

-

5.9%

Equity accounting

-

3.3%

-

-

-

-

-

3.3%

EBITDA

4.9%

2.4%

10.1%

-63.0%

14.0%

1.6%

-

4.4%

Financial result

-

-54.2%

-18.4%

-

52.4%

-95.7%

-

-74.6%

Income (loss) before taxes

20.6%

12.1%

695.2%

-26.0%

14.6%

603.3%

-

21.5%

Income tax and social contribution

8.1%

14.0%

-

-25.5%

-18.8%

6.8%

-

-21.8%

Net income (loss)

27.8%

11.6%

-

-26.2%

28.5%

125.3%

-

43.7%

50

3Q20 CPFL Results

6.5) Cash Flow - CPFL Energia

(R$ thousands)

Consolidated

3Q20

Last 12 months

Beginning Balance

6,987,631

3,231,733

Net Income Before Taxes

1,380,469

4,601,307

Depreciation and Amortization

381,435

1,691,297

Interest on Debts and Monetary and Foreign Exchange Restatements

205,031

534,469

Consumers, Concessionaries and Licensees

(543,405)

(3,269)

Sectoral Financial Assets

591,460

1,415,488

Accounts Receivable - Resources Provided by the CDE/CCEE

17,040

4,005

Suppliers

171,901

(265,734)

Sectoral Financial Liabilities

433,178

319,606

Accounts Payable - CDE

142

(41,255)

Interest on Debts and Debentures Paid

(185,184)

(943,132)

Income Tax and Social Contribution Paid

(39,223)

(577,134)

Others

(423,762)

205,920

608,613

2,340,261

Total Operating Activities

1,989,082

6,941,568

Investment Activities

Purchases of Contract Asset, Property, Plant and Equipment and Intangible Assets

(674,406)

(2,529,627)

Securities, Pledges and Restricted Deposits

522,298

(817,633)

Others

(1,951)

(5,298)

Total Investment Activities

(154,059)

(3,352,558)

Financing Activities

Loans and Debentures

-

4,665,140

Principal Amortization of Loans and Debentures, Net of Derivatives

(3,586,457)

(6,587,538)

Dividend and Interest on Equity Paid

(4,098)

(518,723)

Intragroup Loans with Subsidiaries

1,530,000

2,380,000

Amortization of Intragroup Loans with Subsidiaries

(3,628)

555

Others

1

(1,706)

Total Financing Activities

(2,064,183)

(62,272)

Cash Flow Generation

(229,159)

3,526,738

Ending Balance - 09/30/2020

6,758,471

6,758,471

51

3Q20 CPFL Results

6.6) Income Statement - Conventional Generation Segment

(R$ thousands)

Conventional Generation

3Q20

3Q19

Var.

9M20

9M19

Var.

OPERATING REVENUE

Eletricity Sales to Distributors

310,846

320,484

-3.0%

925,395

920,152

0.6%

Revenue from construction of concession infrastructure

54,469

10,593

414.2%

94,340

11,230

740.1%

Other Operating Revenues

19,884

26,939

-26.2%

54,116

59,385

-8.9%

385,199

358,017

7.6%

1,073,852

990,767

8.4%

DEDUCTIONS FROM OPERATING REVENUE

(39,424)

(34,369)

14.7%

(105,990)

(100,004)

6.0%

NET OPERATING REVENUE

345,775

323,647

6.8%

967,862

890,763

8.7%

COST OF ELETRIC ENERGY SERVICES

Eletricity Purchased for Resale

(10,400)

(25,358)

-59.0%

(49,771)

(69,690)

-28.6%

Eletricity Network Usage Charges

(7,485)

(7,165)

4.5%

(22,007)

(20,827)

5.7%

(17,885)

(32,523)

-45.0%

(71,778)

(90,517)

-20.7%

OPERATING COSTS AND EXPENSES

Personnel

(10,643)

(10,046)

5.9%

(32,712)

(26,761)

22.2%

Material

(994)

(1,032)

-3.7%

(2,838)

(2,720)

4.3%

Outsourced Services

(4,812)

(6,252)

-23.0%

(17,241)

(18,587)

-7.2%

Other Operating Costs/Expenses

(8,484)

(7,796)

8.8%

(22,496)

(22,625)

-0.6%

Costs of infrastructure construction

(49,384)

(9,615)

413.6%

(85,578)

(10,205)

738.6%

Employee Pension Plans

(705)

(473)

49.0%

(2,278)

(1,419)

60.5%

Depreciation and Amortization

(27,432)

(27,192)

0.9%

(81,972)

(81,681)

0.4%

Amortization of Concession's Intangible

(2,492)

(2,492)

0.0%

(7,475)

(7,475)

0.0%

Amortization of Concession Goodwill

-

-

0.0%

-

-

0.0%

(104,944)

(64,897)

61.7%

(252,589)

(171,474)

47.3%

EBITDA1

348,659

337,966

3.2%

999,215

975,701

2.4%

EBIT

222,945

226,228

-1.5%

643,495

628,772

2.3%

FINANCIAL INCOME (EXPENSE)

Financial Income

9,125

12,697

-28.1%

27,612

35,926

-23.1%

Financial Expenses

(22,332)

(56,163)

-60.2%

(85,533)

(162,314)

-47.3%

(13,207)

(43,467)

-69.6%

(57,921)

(126,388)

-54.2%

EQUITY ACCOUNTING

Equity Accounting

95,790

82,055

16.7%

266,274

257,774

3.3%

Assets Surplus Value Amortization

(145)

(145)

0.0%

(435)

(435)

0.0%

95,645

81,910

16.8%

265,839

257,339

3.3%

INCOME BEFORE TAXES ON INCOME

305,384

264,671

15.4%

851,413

759,723

12.1%

Social Contribution

(8,711)

(8,803)

-1.0%

(40,955)

(36,099)

13.5%

Income Tax

(24,051)

(23,705)

1.5%

(113,246)

(99,132)

14.2%

NET INCOME

272,621

232,163

17.4%

697,212

624,492

11.6%

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

52

3Q20 CPFL Results

6.7) Income Statement - CPFL Renováveis

(R$ thousands)

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

53

3Q20 CPFL Results

6.8) Income Statement - Distribution Segment

(R$ thousand)

Consolidated

3Q20

3Q19

Variation

9M20

9M19

Variation

OPERATING REVENUE

Electricity Sales to Final Customers

6,919,652

7,118,937

-2.8%

20,593,562

21,615,399

-4.7%

Electricity Sales to Distributors

333,480

618,941

-46.1%

1,098,486

1,658,946

-33.8%

Revenue from building the infrastructure

635,850

551,267

15.3%

1,695,253

1,477,211

14.8%

Adjustments to the concession´s financial asset

79,774

63,213

26.2%

157,124

236,000

-33.4%

Sectoral financial assets and liabilities

255,624

238,278

7.3%

83,080

(64,548)

-

Other Operating Revenues

1,431,484

1,279,689

11.9%

4,104,378

3,769,872

8.9%

9,655,864

9,870,324

-2.2%

27,731,885

28,692,880

-3.3%

DEDUCTIONS FROM OPERATING REVENUE

(3,369,608)

(3,736,085)

-9.8%

(9,949,210)

(10,856,016)

-8.4%

NET OPERATING REVENUE

6,286,256

6,134,239

2.5%

17,782,675

17,836,864

-0.3%

COST OF ELECTRIC ENERGY SERVICES

Electricity Purchased for Resale

(3,057,958)

(3,406,107)

-10.2%

(9,279,132)

(9,804,238)

-5.4%

Electricity Network Usage Charges

(857,496)

(603,272)

42.1%

(1,922,329)

(1,748,187)

10.0%

(3,915,453)

(4,009,379)

-2.3%

(11,201,461)

(11,552,425)

-3.0%

OPERATING COSTS AND EXPENSES

Personnel

(228,369)

(235,284)

-2.9%

(688,523)

(703,957)

-2.2%

Material

(43,741)

(46,471)

-5.9%

(132,477)

(136,672)

-3.1%

Outsourced Services

(199,526)

(211,696)

-5.7%

(607,417)

(638,209)

-4.8%

Other Operating Costs/Expenses

(149,532)

(205,908)

-27.4%

(497,984)

(545,844)

-8.8%

Allowance for Doubtful Accounts

(34,919)

(61,105)

-42.9%

(172,102)

(193,538)

-11.1%

Legal and Judicial Expenses

(43,103)

(53,444)

-19.4%

(103,802)

(121,873)

-14.8%

Others

(71,510)

(91,359)

-21.7%

(222,080)

(229,858)

-3.4%

Cost of building the infrastructure

(635,850)

(551,267)

15.3%

(1,695,253)

(1,477,211)

14.8%

Employee Pension Plans

(42,108)

(28,547)

47.5%

(128,787)

(83,903)

53.5%

Depreciation and Amortization

(205,909)

(189,965)

8.4%

(605,468)

(548,100)

10.5%

Amortization of Concession's Intangible

(14,133)

(14,133)

0.0%

(42,399)

(42,399)

0.0%

(1,519,168)

(1,483,270)

2.4%

(4,398,308)

(4,176,295)

5.3%

EBITDA1

1,071,677

845,687

26.7%

2,830,773

2,698,642

4.9%

EBIT

851,635

641,590

32.7%

2,182,906

2,108,144

3.5%

FINANCIAL INCOME (EXPENSE)

Financial Income

105,768

168,428

-37.2%

635,451

461,587

37.7%

Financial Expenses

(180,459)

(211,289)

-14.6%

(485,406)

(635,609)

-23.6%

Interest on Equity

(74,691)

(42,861)

0.0%

150,045

(174,022)

-

INCOME BEFORE TAXES ON INCOME

776,943

598,729

29.8%

2,332,951

1,934,122

20.6%

Social Contribution

(55,072)

(60,036)

-8.3%

(203,063)

(189,737)

7.0%

Income Tax

(150,648)

(163,822)

-8.0%

(561,395)

(517,394)

8.5%

NET INCOME

571,223

374,871

52.4%

1,568,493

1,226,991

27.8%

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

54

3Q20 CPFL Results

6.9) Economic-Financial performance by Distributor

(R$ thousand)

CPFL PAULISTA

3Q20

3Q19

Var.

9M20

9M19

Var.

Gross Operating Revenue

4,334,779

4,349,461

-0.3%

12,195,565

12,443,979

-2.0%

Net Operating Revenue

2,882,339

2,749,311

4.8%

7,965,948

7,836,471

1.7%

Cost of Electric Power

(1,851,732)

(1,864,038)

-0.7%

(5,197,077)

(5,242,398)

-0.9%

Operating Costs & Expenses

(629,382)

(602,689)

4.4%

(1,772,921)

(1,685,718)

5.2%

EBIT

401,225

282,584

42.0%

995,950

908,354

9.6%

EBITDA( 1 )

475,537

351,712

35.2%

1,214,017

1,106,080

9.8%

Financial Income (Expense)

(19,598)

(7,742)

153.1%

107,352

(47,350) -

Income Before Taxes

381,628

274,842

38.9%

1,103,302

861,004

28.1%

Net Income

246,650

176,837

39.5%

712,243

553,156

28.8%

CPFL PIRATININGA

3Q20

3Q19

Var.

9M20

9M19

Var.

Gross Operating Revenue

1,690,083

1,801,238

-6.2%

4,930,210

5,295,775

-6.9%

Net Operating Revenue

1,093,627

1,108,673

-1.4%

3,153,785

3,223,653

-2.2%

Cost of Electric Power

(759,853)

(777,433)

-2.3%

(2,193,551)

(2,234,650)

-1.8%

Operating Costs & Expenses

(198,488)

(202,396)

-1.9%

(593,382)

(650,621)

-8.8%

EBIT

135,285

128,843

5.0%

366,853

338,381

8.4%

EBITDA( 1 )

164,419

157,257

4.6%

454,063

420,786

7.9%

Financial Income (Expense)

(2,362)

(5,077)

-53.5%

44,258

(27,674)

-

Income Before Taxes

132,923

123,766

7.4%

411,111

310,708

32.3%

Net Income

85,311

76,781

11.1%

263,856

195,620

34.9%

RGE

3Q20

3Q19

Var.

9M20

9M19

Var.

Gross Operating Revenue

3,147,363

3,262,130

-3.5%

9,263,298

9,640,653

-3.9%

Net Operating Revenue

1,961,512

1,970,728

-0.5%

5,710,938

5,872,192

-2.7%

Cost of Electric Power

(1,113,287)

(1,184,068)

-6.0%

(3,290,173)

(3,559,954)

-7.6%

Operating Costs & Expenses

(564,398)

(583,895)

-3.3%

(1,703,209)

(1,582,770)

7.6%

EBIT

283,827

202,765

40.0%

717,556

729,468

-1.6%

EBITDA( 1 )

384,966

296,895

29.7%

1,017,155

1,003,153

1.4%

Financial Income (Expense)

(49,779)

(28,040)

77.5%

(3,837)

(89,979)

-95.7%

Income Before Taxes

234,047

174,726

34.0%

713,719

639,490

11.6%

Net Income

221,318

105,913

109.0%

525,662

400,153

31.4%

CPFL SANTA CRUZ

3Q20

3Q19

Var.

9M20

9M19

Var.

Gross Operating Revenue

483,639

457,495

5.7%

1,342,813

1,312,472

2.3%

Net Operating Revenue

348,779

305,527

14.2%

952,003

904,548

5.2%

Cost of Electric Power

(190,581)

(183,840)

3.7%

(520,660)

(515,422)

1.0%

Operating Costs & Expenses

(126,900)

(94,289)

34.6%

(328,796)

(257,186)

27.8%

EBIT

31,298

27,398

14.2%

102,547

131,940

-22.3%

EBITDA( 1 )

46,755

39,823

17.4%

145,538

168,623

-13.7%

Financial Income (Expense)

(2,953)

(2,002)

47.5%

2,272

(9,020)

0.0%

Income Before Taxes

28,345

25,395

11.6%

104,819

122,920

-14.7%

Net Income

17,943

15,339

17.0%

66,732

78,062

-14.5%

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

55

3Q20 CPFL Results

6.10) Sales within the Concession Area by Distributor

(In GWh)

56

3Q20 CPFL Results

6.11) Sales to the Captive Market by Distributor

(in GWh)

57

3Q20 CPFL Results

6.12) Information on Interest in Companies

Number of

Approximate number of

Concession

End of the

Energy distribution

Company type

Equity interest

Location (state)

consumers (in

municipalities

period

concession

thousands)

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

Publicly-held corporation

Direct

Interior of São Paulo

234

4,644

30 years

November 2027

100%

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

Publicly-held corporation

Direct

Interior and coast of São Paulo

27

1,814

30 years

October 2028

100%

Direct and

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

Publicly-held corporation

Indirect

Interior of Rio Grande do Sul

381

2,954

30 years

November 2027

100%

Companhia Jaguari de Energia ("CPFL Santa Cruz")

Privately-held corporation

Direct

Interior of São Paulo, Paraná and

45

472

30 years

July 2045

100%

Minas Gerais

Note:

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

Energy generation (conventional and renewable sources)

Company type

Equity interest

Location (state)

Number of plants / type of

Installed power (MW)

energy

Total

CPFL share

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

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

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

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

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

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

Paulista Lajeado Energia S.A.

("Paulista Lajeado")

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

Publicly-held corporation

Direct

São Paulo e Goiás

3 Hydropower (a)

1295

678

100%

Privately-held corporation

Indirect

Rio Grande do Sul

3

Hydropower

360

234

65%

Indirect

Santa Catarina e

Privately-held corporation

51% (d)

1

Hydropower

855

436

Rio Grande do Sul

Indirect

Privately-held corporation

48.72%

Santa Catarina

1

Hydropower

880

429

Publicly-held corporation

Indirect

Santa Catarina e

1

Hydropower

690

173

25.01%

Rio Grande do Sul

Privately-held corporation

Indirect

Paraíba

2 Thermal

342

182

53.34%

Indirect

Privately-held corporation

59.93% (b)

Tocantins

1

Hydropower

903

38

Publicly-held corporation

Direct and Indirect

See chapter 2.2.2

See chapter 2.2.2

See chapter 2.2.2

See chapter 2.2.2

99.94%

Transmission

Company Type

Location

Core Activity

Equity Interest

CPFL Transmissão de Energia Piracicaba Ltda ("CPFL Piracicaba")

Sociedade limitada

São Paulo

Prestação de serviço na área de transmissõa de energia

Indireta

elétrica

100%

CPFL Transmissão de Energia Morro Agudo Ltda ("CPFL Morro Agudo

Sociedade limitada

São Paulo

Prestação de serviço na área de transmissõa de energia

Indireta

elétrica

100%

CPFL Transmissão de Energia Maracanaú Ltda ("CPFL Maracanaú")

Sociedade limitada

Ceará

Prestação de serviço na área de transmissõa de energia

Indireta

elétrica

100%

CPFL Transmissão de Energia Sul I Ltda ("CPFL Sul I")

Sociedade limitada

Santa Catarina

Prestação de serviço na área de transmissõa de energia

Indireta

elétrica

100%

CPFL Transmissão de Energia Sul II Ltda ("CPFL Sul II")

Sociedade limitada

Rio Grande do Sul

Prestação de serviço na área de transmissõa de energia

Indireta

elétrica

100%

Notes:

  1. CPFL Geração holds 51.54% of the assured power and power of the Serra da Mesa HPP, whose concession belongs to Furnas. The Cariobinha HPP and the Carioba TPP projects are deactivated pending the position of the Ministry of Mines and Energy on the anticipated closure of its concession and are not included in the table;
  2. The joint venture Chapecoense fully consolidates the interim financial statements of its direct subsidiary, Foz de Chapecó;
  3. Paulista Lajeado has a 7% participation in the installed power of Investco S.A. (5.94% share of its capital).

58

3Q20 CPFL Results

Energy commercialization

Company type

Core activity

Equity interest

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

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

CPFL Comercialização de Energia Cone Sul Ltda ("CPFL Cone Sul")

CPFL Planalto Ltda ("CPFL Planalto")

CPFL Brasil Varejista de Energia Ltda ("CPFL Brasil Varejista")

Privately-held corporation

Energy commercialization

Direct

100%

Limited liability company

Commercialization and provision of

Indirect

energy services

100%

Limited liability company

Energy commercialization

Indirect

100%

Limited liability company

Energy commercialization

Direct

100%

Limited liability company

Energy commercialization

Indirect

100%

Provision of services

Company type

Core activity

Equity interest

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

Nect Serviços Administrativos de Infraestrutura Ltda ("CPFL Infra")

Nect Servicos Administrativos de Recursos Humanos Ltda ("CPFL Pessoas")

Nect Servicos Administrativos Financeiros Ltda ("CPFL Finanças")

Nect Servicos Adm de Suprimentos E Logistica Ltda ("CPFL Supre")

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

CPFL Total Serviços Administrativos Ltda ("CPFL Total")

CPFL Eficiência Energética Ltda ("CPFL Eficiência")

TI Nect Serviços de Informática Ltda ("Authi")

CPFL Geração Distribuída de Energia Ltda ("CPFL GD")

Privately-held corporation

Limited liability company

Limited liability company

Limited liability company

Limited liability company

Limited liability company

Limited liability company

Limited liability company

Limited liability company

Limited liability company

Manufacturing, commercialization, rental and maintenance of electromechanical equipment and service

Infrastructure and Fleet Servies

Human Resources Services

Financial Services

Supply &¨Logistics Services

Provision of call center services

Collection services

Energy efficiency management

Provision of IT services

Provision of maintenance services for energy generation companies

Direct 100%

Direct 100%

Direct 100%

Direct 100%

Direct 100%

Direct 100%

Direct 100%

Direct 100%

Direct 100%

Indirect 100%

Others

Company type

Core activity

Equity interest

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

Limited liability company

Holding company

Direct

100%

Chapecoense Geração S.A. ("Chapecoense")

Privately-held corporation

Holding company

Indirect

51%

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

Privately-held corporation

Holding company

Indirect

99.95%

CPFL Telecomunicações Ltda ("CPFL Telecom")

Limited liability company

Telecommunication services

Direct

100%

59

3Q20 CPFL Results

6.13) Reconciliation of Net Debt/EBITDA Pro Forma ratio of CPFL Energia for purposes of financial covenants calculation

(R$ million)

Net Debt Pro Forma Reconciliation (3Q20)

Net debt - Generation projects

Majority-controlled subsidiaries (fully

Investees accounted for under the equity method

consolidated)

Sep-20

Total

CPFL

Paulista

CERAN

Subtotal

ENERCAN

BAESA

Chapecoense

EPASA

Subtotal

Renováveis

Lajeado

Borrowings and Debentures

319

2,274

-

2,593

256

-

950

125

1,331

3,924

(-) Cash and Cash Equivalents

(134)

(892)

(21)

(1,047)

(72)

(21)

(306)

(179)

(577)

(1,624)

Net Debt

185

1,381

(21)

1,545

184

(21)

644

(54)

754

2,299

CPFL Stake (%)

65.00%

100.00%

59.93%

-

48.72%

25.01%

51.00%

53.34%

-

-

Net Debt in Generation Projects

120

1,381

(13)

1,489

90

(5)

329

(29)

384

1,874

Reconciliation

CPFL Energia

Gross Debt

19,733

(-) Cash and Cash Equivalents

(6,758)

Net Debt (IFRS)

12,974

(-) Fully Consolidated Projects

(1,545)

(+) Proportional Consolidation

1,874

Net Debt (Pro Forma)

13,303

EBITDA Pro Forma Reconciliation (3Q20 - LTM)

EBITDA - Generation Projects

Majority-controlled subsidiaries (fully

Investees accounted for under the equity method

consolidated)

3Q20LTM

Total

CPFL

Paulista

CERAN

Subtotal

ENERCAN

BAESA

Chapecoense

EPASA

Subtotal

Renováveis

Lajeado

Net operating revenue

309

1,968

40

2,316

694

223

922

285

2,124

4,440

Operating cost and expense

(88)

(681)

(23)

(791)

(191)

(158)

(200)

(81)

(630)

(1,422)

EBITDA

221

1,287

16.911

1,525

503

65

722

204

1,494

3,019

CPFL stake (%)

65.00%

100.00%

59.93% -

48.72%

25.01%

51.00%

53.34% -

-

Proportional EBITDA

144

1,287

10

1,441

245

16

368

109

738

2,179

Reconciliation

CPFL Energia - 3Q20 LTM

Net income

3,574

Amortization

1,691

Financial Results

(78)

Income Tax /Social Contribution

1,027

EBITDA

6,599

(-) Equity income

(358)

(-) EBITDA - Fully consolidated projects

(1,525)

(+) Proportional EBITDA

2,179

EBITDA Pro Forma

6,895

Net Debt / EBITDA Pro Forma

1.93x

Note: in accordance with financial covenants calculation in cases of assets acquired by the Company.

60

Disclaimer

CPFL Energia SA published this content on 12 November 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 13 November 2020 00:08:04 UTC


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Sales 2020 28 147 M 5 314 M 5 314 M
Net income 2020 3 176 M 600 M 600 M
Net Debt 2020 14 168 M 2 675 M 2 675 M
P/E ratio 2020 11,7x
Yield 2020 5,78%
Capitalization 36 596 M 6 971 M 6 909 M
EV / Sales 2020 1,80x
EV / Sales 2021 1,72x
Nbr of Employees 9 716
Free-Float 16,3%
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Technical analysis trends CPFL ENERGIA S.A.
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TrendsNeutralNeutralNeutral
Income Statement Evolution
Consensus
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Mean consensus OUTPERFORM
Number of Analysts 9
Average target price 37,18 BRL
Last Close Price 31,76 BRL
Spread / Highest target 29,7%
Spread / Average Target 17,1%
Spread / Lowest Target -2,39%
EPS Revisions
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Gustavo Estrella Chief Executive Officer & Director
Bo Wen Chairman
Luís Henrique Ferreira Pinto Vice President-Regulated Operations
Yue Hui Pan Chief Financial Officer & IR Officer
Antonio Kandir Independent Director
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