Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes _______ No ___X____(Free Translation of the original in Portuguese) | ||
FEDERAL GOVERNMENT | ||
BRAZILIAN SECURITIES COMMISSION (CVM) | ||
STANDARD FINANCIAL STATEMENTS DFP | Brazilian Corporation Law | |
COMMERCIAL, INDUSTRIAL AND OTHER COMPANIES | Date: December 31, 2007 |
REGISTRATION WITH CVM SHOULD NOT BE CONSTRUED AS AN EVALUATION OF THE COMPANY. COMPANY MANAGEMENT IS RESPONSIBLE FOR THE INFORMATION PROVIDED. |
01.01 - IDENTIFICATION
1 - CVM CODE 01866-0 |
2 - COMPANY NAME CPFL ENERGIA S.A |
3 - CNPJ (Federal Tax ID) 02.429.144/0001-93 |
4 - NIRE (State Registration Number) 353.001.861.33 |
01.02 - HEAD OFFICE
1 - ADDRESS Rua Gomes de Carvalho, 1510 14º andar Conjunto 2 |
2 - DISTRICT Vila Olímpia |
||||
3 - ZIP CODE 04547-005 |
4 - CITY São Paulo |
5 - STATE SP |
|||
6 - AREA CODE 019 |
7 - TELEPHONE 3756-8018 |
8 - TELEPHONE - |
9 - TELEPHONE - |
10 - TELEX |
|
11 - AREA CODE 019 |
12 - FAX 3756-8392 |
13 - FAX - |
14 - FAX - |
||
15 - E-MAIL ri@cpfl.com.br |
01.03 - INVESTOR RELATIONS OFFICER (Company Mailing Address)
1- NAME José Antonio de Almeida Filippo |
||||
2 ADDRESS Rodovia Campinas Mogi-Mirim, 1755, Km 2,5 |
3 - DISTRICT Jardim Santana |
|||
4 - ZIP CODE 13088-900 |
5 - CITY Campinas |
6 - STATE SP |
||
7 - AREA CODE 019 |
8 - TELEPHONE 3756-8704 |
9 - TELEPHONE - |
10 - TELEPHONE - |
11 - TELEX |
12 - AREA CODE 019 |
13 - FAX 3756-8777 |
14 - FAX - |
15 - FAX - |
|
16 - E-MAIL jfilippo@cpfl.com.br |
01.04 REFERENCE AND AUDITOR INFORMATION
Year | 1 Beginning date of the year | 2 Closing date of the year |
1 Current | 01/01/2007 | 12/31/2007 |
2 Previous | 01/01/2006 | 12/31/2006 |
3 The last but two | 01/01/2005 | 12/31/2005 |
09 - INDEPENDENT ACCOUNTANT KPMG Auditores Independentes |
10 - CVM CODE 00418-9 |
|
11. PARTNER IN CHARGE Jarib Brisola Duarte Fogaça |
12 - CPF (INDIVIDUAL TAX ID) 012.163.378-02 |
1
01.05 - CAPITAL STOCK
Number of Shares (in thousand) |
1 Current Quarter 12.31.2007 |
2 Previous Quarter 12.31.2006 |
3 Same Quarter of Last Year 12.31.2005 |
Paid-in Capital | |||
1 Common | 479,911 | 479,757 | 479,757 |
2 Preferred | 0 | 0 | 0 |
3 Total | 479,911 | 479,757 | 479,757 |
Treasury Stock | |||
4 - Common | 0 | 0 | 0 |
5 - Preferred | 0 | 0 | 0 |
6 Total | 0 | 0 | 0 |
01.06 - COMPANY PROFILE
1 - TYPE OF COMPANY Commercial, Industrial and Other |
2 - STATUS Operational |
3 - NATURE OF OWNERSHIP Private National |
4 - ACTIVITY CODE 3120 Administration and Participation Company - Electric Energy |
5 - MAIN ACTIVITY Holding |
6 - CONSOLIDATION TYPE Full |
7 TYPE OF REPORT OF INDEPENDENT AUDITORS Unqualified |
01.07 - COMPANIES NOT INCLUDED IN THE CONSOLIDATED FINANCIAL STATEMENTS
1 - ITEM | 2 - CNPJ (Federal Tax ID) | 3 - COMPANY NAME |
01.08 - CASH DIVIDENDS
1 ITEM | 2 EVENT | 3 APPROVAL | 4 TYPE |
5 - DATE OF PAYMENT |
6 - TYPE OF SHARE | 7 - AMOUNT PER SHARE |
01 | RCA | 08/01/2007 | Dividend | 09/28/2007 | ON | 1.7558375580 |
02 | RCA | 02/27/2008 | Dividend | ON | 1,4979645300 |
01.09 - INVESTOR RELATIONS OFFICER
1- DATE 02.28.2008 |
2 SIGNATURE |
2
02.01 - BALANCE SHEET - ASSETS (in thousands of Brazilian reais R$)
1 Code | 2 Description | 3 - 12/31/2007 | 4 - 12/31/2006 | 5 - 12/31/2005 |
1 | Total assets | 6,442,445 | 5,672,472 | 5,330,760 |
1.01 | Current assets | 1,107,786 | 918,207 | 849,762 |
1.01.01 | Cash and banks | 17,803 | 26,393 | 249,452 |
1.01.02 | Credits | 1,085,251 | 891,463 | 598,786 |
1.01.02.01 | Accounts receivable | 0 | 0 | 0 |
1.01.02.02 | Other receivables | 1,085,251 | 891,463 | 598,786 |
1.01.02.02.01 | Dividends and interest on shareholders equity | 1,008,363 | 824,242 | 515,494 |
1.01.02.02.02 | Financial investments | 34,555 | 28,615 | 22,923 |
1.01.02.02.03 | Recoverable taxes | 31,899 | 28,655 | 60,369 |
1.01.02.02.04 | Deferred taxes | 10,107 | 9,951 | 0 |
1.01.02.02.05 | Prepaid expenses | 327 | 0 | 0 |
1.01.03 | Material and supplies | 0 | 0 | 0 |
1.01.04 | Other | 4,732 | 351 | 1,524 |
1.01.04.01 | Derivatives contracts | 0 | 0 | 1,124 |
1.01.04.02 | Other credits | 4,732 | 351 | 400 |
1.02 | Noncurrent assets | 5,334,659 | 4,754,265 | 4,480,998 |
1.02.01 | Long-term assets | 595,548 | 177,992 | 182,468 |
1.02.01.01 | Other receivables | 181,199 | 177,685 | 182,468 |
1.02.01.01.01 | Financial investments | 97,521 | 103,901 | 107,681 |
1.02.01.01.02 | Recoverable taxes | 2,787 | 2,787 | 2,787 |
1.02.01.01.03 | Deferred taxes | 79,038 | 70,997 | 72,000 |
1.02.01.01.04 | Prepaid expenses | 1,853 | 0 | 0 |
1.02.01.02 | Related parties | 414,342 | 0 | 0 |
1.02.01.02.01 | Associated companies | 5,032 | 0 | 0 |
1.02.01.02.02 | Subsidiaries | 409,310 | 0 | 0 |
1.02.01.02.03 | Other related parties | 0 | 0 | 0 |
1.02.01.03 | Other | 7 | 307 | 0 |
1.02.01.03.01 | Escrow deposits | 7 | 7 | 0 |
1.02.01.03.02 | Other credits | 0 | 300 | 0 |
1.02.02 | Permanent assets | 4,739,111 | 4,576,273 | 4,298,530 |
1.02.02.01 | Investments | 4,732,232 | 4,575,504 | 4,298,189 |
1.02.02.01.01 | Associated companies | 0 | 0 | 0 |
1.02.02.01.02 | Associated companies - goodwill | 0 | 0 | 0 |
1.02.02.01.03 | Permanent equity interests | 3,077,514 | 3,126,322 | 2,976,208 |
1.02.02.01.04 | Permanent equity interests - goodwill | 1,654,718 | 1,448,410 | 1,321,981 |
1.02.02.01.05 | Other investments | 0 | 772 | 0 |
1.02.02.02 | Property, plant and equipment | 467 | 493 | 137 |
1.02.02.03 | Intangible | 0 | 0 | 0 |
1.02.02.04 | Deferred charges | 6,412 | 276 | 204 |
3
02.02 - BALANCE SHEET - LIABILITIES AND SHAREHOLDERS' EQUITY (in thousands of Brazilian reais R$)
1 Code | 2 - Description | 3 - 12/31/2007 | 4 - 12/31/2006 | 5 - 12/31/2005 |
2 | Total liabilities and shareholders' equity | 6,442,445 | 5,672,472 | 5,330,760 |
2.01 | Current liabilities | 762,251 | 782,977 | 500,815 |
2.01.01 | Loans and financing | 0 | 8,406 | 0 |
2.01.01.01 | Interest on debts | 0 | 120 | 0 |
2.01.01.02 | Loans and financing | 0 | 8,286 | 0 |
2.01.02 | Debentures | 15,983 | 0 | 0 |
2.01.02.01 | Interest on debentures | 15,983 | 0 | 0 |
2.01.03 | Suppliers | 14,029 | 6,387 | 1,908 |
2.01.04 | Taxes and social contributions payable | 273 | 291 | 16,625 |
2.01.05 | Dividends and interest on equity | 730,634 | 726,798 | 482,211 |
2.01.06 | Reserves | 0 | 0 | 0 |
2.01.07 | Related parties | 0 | 0 | 0 |
2.01.08 | Other | 1,332 | 41,095 | 71 |
2.01.08.01 | Accrued liabilities | 96 | 45 | 8 |
2.01.08.02 | Derivative contracts | 22 | 40,141 | 0 |
2.01.08.03 | Other | 1,214 | 909 | 63 |
2.02 | Noncurrent liabilities | 725,360 | 23,218 | 33,897 |
2.02.01 | Long-term liabilities | 725,360 | 23,218 | 33,897 |
2.02.01.01 | Loans and financing | 183,756 | 0 | 0 |
2.02.01.01.01 | Loans and financing | 171,251 | 0 | 0 |
2.02.01.01.02 | Interest on loans and financing | 12,505 | 0 | 0 |
2.02.01.02 | Debentures | 450,000 | 0 | 0 |
2.02.01.03 | Reserves | 43,691 | 23,218 | 8,533 |
2.02.01.03.01 | Reserve for contingencies | 43,691 | 23,218 | 8,533 |
2.02.01.04 | Related parties | 0 | 0 | 0 |
2.02.01.05 | Advances for future capital increase | 0 | 0 | 0 |
2.02.01.06 | Other | 47,913 | 0 | 25,364 |
2.02.01.06.01 | Derivative contracts | 47,913 | 0 | 25,364 |
2.02.02 | Deferred income | 0 | 0 | 0 |
2.04 | Shareholders equity | 4,954,834 | 4,866,277 | 4,796,048 |
2.04.01 | Capital | 4,741,175 | 4,734,790 | 4,734,782 |
2.04.01.01 | Capital | 4,741,175 | 4,734,790 | 4,734,790 |
2.04.01.02 | Treasury shares | 0 | 0 | (8) |
2.04.02 | Capital reserves | 16 | 16 | 0 |
2.04.03 | Revaluation reserves | 0 | 0 | 0 |
2.04.03.01 | Own assets | 0 | 0 | 0 |
2.04.03.02 | Subsidiary/associated companies | 0 | 0 | 0 |
2.04.04 | Profit reserves | 213,643 | 131,471 | 61,266 |
2.04.04.01 | Legal reserves | 213,643 | 131,471 | 61,266 |
2.04.04.02 | Statutory reserves | 0 | 0 | 0 |
4
1 Code | 2 - Description | 3 - 12/31/2007 | 4 - 12/31/2006 | 5 - 12/31/2005 |
2.04.04.03 | For contingencies | 0 | 0 | 0 |
2.04.04.04 | Unrealized profits | 0 | 0 | 0 |
2.04.04.05 | Profit retention | 0 | 0 | 0 |
2.04.04.06 | Special reserve for undistributed dividends | 0 | 0 | 0 |
2.04.04.07 | Other revenue reserve | 0 | 0 | 0 |
2.04.05 | Retained earnings | 0 | 0 | 0 |
2.04.06 | Advance for future capital increase | 0 | 0 | 0 |
5
03.01 - INCOME STATEMENT (in thousands of Brazilian reais R$)
1 - Code | 2 Description | 3 - 01/01/2007 to 12/31/2007 |
4 - 01/01/2006 to 12/31/2006 |
5 - 01/01/2005 to 12/31/2005 |
3.01 | Operating revenues | 0 | 0 | 0 |
3.02 | Deductions | 0 | 0 | 0 |
3.03 | Net operating revenues | 0 | 0 | 0 |
3.04 | Cost of sales and/or services | 0 | 0 | 0 |
3.05 | Gross operating income | 0 | 0 | 0 |
3.06 | Operating income | 1,858,788 | 1,533,537 | 861,523 |
3.06.01 | Selling | 0 | 0 | 0 |
3.06.02 | General and administrative | (24,475) | (18,934) | (9,327) |
3.06.03 | Financial | 26,294 | 103,528 | (45,968) |
3.06.03.01 | Financial income | 212,939 | 228,136 | 219,838 |
3.06.03.01.01 | Financial income | 21,070 | 86,136 | 47,316 |
3.06.03.01.02 | Interest on shareholders equity income | 191,869 | 142,000 | 172,522 |
3.06.03.02 | Financial expense | (186,645) | (124,608) | (265,806) |
3.06.03.02.01 | Financial expense | (74,847) | (38,170) | (23,457) |
3.06.03.02.02 | Interest on shareholders equity | 0 | 0 | (186,215) |
expense | ||||
3.06.03.02.03 | Goodwill amortization | (111,798) | (86,438) | (56,134) |
3.06.04 | Other operating income | 0 | 0 | 0 |
3.06.05 | Other operating expense | 0 | 0 | 0 |
3.06.06 | Equity in subsidiaries | 1,856,969 | 1,448,943 | 916,818 |
3.07 | Operating income | 1,858,788 | 1,533,537 | 861,523 |
3.08 | Nonoperating income (expense) | (876) | 60,349 | (649) |
3.08.01 | Nonoperating income | 3,309 | 62,747 | 9 |
3.08.02 | Nonoperating expense | (4,185) | (2,398) | (658) |
3.09 | Income before taxes on income and extraordinary item | 1,857,912 | 1,593,886 | 860,874 |
3.10 | Income tax and social contribution | (30,803) | (56,739) | (160) |
3.10.01 | Social contribution | (5,998) | (12,837) | 0 |
3.10.02 | Income tax | (24,805) | (43,902) | (160) |
3.11 | Deferred income tax | 8,196 | 8,949 | 72,000 |
3.11.01 | Deferred social contribution | (1,367) | 4,297 | 13,000 |
3.11.02 | Deferred income tax | 9,563 | 4,652 | 59,000 |
3.12 | Statutory profit sharing/contributions | 0 | 0 | 0 |
3.12.01 | Profit sharing | 0 | 0 | 0 |
3.12.02 | Contributions | 0 | 0 | 0 |
3.13 | Reversal of interest on shareholders equity | (191,869) | (142,000) | 13,693 |
3.15 | Net income | 1,643,436 | 1,404,096 | 946,407 |
SHARES OUTSTANDING EX- TREASURY STOCK | 479,911 | 479,757 | 479,757 |
6
1 - Code | 2 Description | 3 - 01/01/2007 to 12/31/2007 |
4 - 01/01/2006 to 12/31/2006 |
5 - 01/01/2005 to 12/31/2005 |
NET INCOME PER SHARES | 3.42446 | 2.92668 | 1.97268 | |
LOSS PER SHARES |
7
04.01 STATEMENTS OF CHANGES IN FINANCIAL POSITION (in thousands of Brazilian reais R$)
1 - Code | 2 - Description | 3 01/01/2007 to 12/31/2007 |
4 01/01/2006 to 12/31/2006 |
5 01/01/2005 to 12/31/2005 |
4.01 | Sources of funds | 2,260,517 | 1,569,215 | 910,205 |
4.01.01 | From operations | (100,395) | (3,697) | 18,804 |
4.01.01.01 | Net income | 1,643,436 | 1,404,096 | 946,407 |
4.01.01.02 | Items not affecting working capital | (1,743,831) | (1,407,793) | (927,603) |
4.01.01.02.01 | Depreciation and amortization | 111,898 | 86,446 | 56,134 |
4.01.01.02.02 | Reserve for contingencies | 20,473 | 14,685 | 8,533 |
4.01.01.02.03 | Long term interest and monetary and exchange variation | (30,984) | 11,715 | (11,685) |
4.01.01.02.04 | Unrealized losses (gains) on derivative contracts | 23,257 | 0 | 8,186 |
4.01.01.02.05 | Equity in subsidiaries | (1,856,969) | (1,448,943) | (916,818) |
4.01.01.02.06 | Losses (gains) on disposal of property, plant and equipment and investments | (3,309) | (62,747) | 47 |
4.01.01.02.07 | Deferred taxes - assets and liabilities | (8,197) | (8,949) | (72,000) |
4.01.02 | From shareholders | 0 | 0 | 17,258 |
4.01.03 | From third parties | 2,360,912 | 1,572,912 | 874,143 |
4.01.03.01 | Long-term financing and debentures | 450,000 | 0 | 0 |
4.01.03.02 | Transfer from noncurrent to current assets | 484 | 9,951 | 0 |
4.01.03.03 | Dividend and interest on equity from subsidiaries | 1,889,414 | 1,452,410 | 874,143 |
4.01.03.04 | Capital reduction in subsidiary | 12,400 | 20,628 | 0 |
4.01.03.05 | Sales of permanent assets | 2,635 | 89,899 | 0 |
4.01.03.06 | Sales of treasury shares | 0 | 24 | 0 |
4.01.03.07 | Other | 5,979 | 0 | 0 |
4.02 | Uses of funds | 2,050,212 | 1,782,932 | 1,015,341 |
4.02.01 | Purchase of interest in subsidiaries | 2,582 | 415,000 | 2,837 |
4.02.02 | Increase in property, plant and equipment | 74 | 101 | 137 |
4.02.03 | Capital increase in subsidiaries | 0 | 0 | 453 |
4.02.04 | Financial investments | (37,068) | 7,935 | 95,996 |
4.02.05 | Transfer from long-term to current liabilities | 0 | 25,363 | 13,840 |
4.02.06 | Dividends and interest on shareholders equity | 1,561,264 | 1,333,891 | 899,087 |
4.02.07 | Reversal of subsidiaries dividends | 100,642 | 0 | 0 |
4.02.08 | Transfer from current to noncurrent assets | 0 | 0 | 2,787 |
4.02.09 | Additions to deferred charges | 6,136 | 335 | 204 |
4.02.10 | Intercompany loans | 5,031 | 0 | 0 |
4.02.11 | Escrow deposits | 0 | 7 | 0 |
4.02.12 | Advance for future capital increase | 409,368 | 0 | 0 |
4.02.13 | Other | 2,183 | 300 | 0 |
4.03 | (Decrease) Increase in working capital | 210,305 | (213,717) | (105,136) |
4.04 | Increase in current assets | 189,579 | 68,445 | 227,037 |
4.04.01 | Beginning of the year | 918,207 | 849,762 | 622,725 |
4.04.02 | End of the year | 1,107,786 | 918,207 | 849,762 |
8
1 - Code | 2 - Description | 3 01/01/2007 to 12/31/2007 |
4 01/01/2006 to 12/31/2006 |
5 01/01/2005 to 12/31/2005 |
4.05 | Increase (decrease) in current liabilities | (20,726) | 282,162 | 332,173 |
4.05.01 | Beginning of the year | 782,977 | 500,815 | 168,642 |
4.05.02 | End of the year | 762,251 | 782,977 | 500,815 |
9
05.01 STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY FROM JANUARY 01, 2007 TO DECEMBER 31, 2007 (in thousands of Brazilian reais R$)
1 - Code | 2 Description | 3 - Capital | 4 Capital Reserves | 5 Revaluation Reserves |
6 Revenue Reserves |
7 Accumulated Income (Loss) |
8 Shareholders Equity Total |
5.01 | Opening balance | 4,734,790 | 16 | 0 | 131,471 | 0 | 4,866,277 |
5.02 | Prior year adjustment | 0 | 0 | 0 | 0 | 0 | 0 |
5.03 | Capital increase / decrease | 6,385 | 0 | 0 | 0 | 0 | 6,385 |
5.04 | Reserve realization | 0 | 0 | 0 | 0 | 0 | 0 |
5.05 | Treasury shares | 0 | 0 | 0 | 0 | 0 | 0 |
5.06 | Net income for the year | 0 | 0 | 0 | 0 | 1,643,436 | 1,643,436 |
5.07 | Allocation of income | 0 | 0 | 0 | 82,172 | (1,643,436) | (1,561,264) |
5.07.01 | Statutory reserve | 0 | 0 | 0 | 82,172 | (82,172) | 0 |
5.07.02 | Interim dividend | 0 | 0 | 0 | 0 | (842,375) | (842,375) |
5.07.03 | Proposed dividend | 0 | 0 | 0 | 0 | (718,889) | (718,889) |
5.08 | Other | 0 | 0 | 0 | 0 | 0 | 0 |
5.09 | Ending balance | 4,741,175 | 16 | 0 | 213,643 | 0 | 4,954,834 |
10
05.02 STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY FROM JANUARY 01, 2006 TO DECEMBER 31, 2006 (in thousands of Brazilian reais R$)
1 - Code | 2 Description | 3 - Capital | 4 Capital Reserves | 5 Revaluation Reserves |
6 Revenue Reserves |
7 Accumulated Income (Loss) |
8 Shareholders Equity Total |
5.01 | Opening balance | 4,734,782 | 0 | 0 | 61,266 | 0 | 4,796,048 |
5.02 | Prior year adjustment | 0 | 0 | 0 | 0 | 0 | 0 |
5.03 | Capital increase / decrease | 0 | 0 | 0 | 0 | 0 | 0 |
5.04 | Reserve realization | 0 | 16 | 0 | 0 | 0 | 16 |
5.05 | Treasury shares | 8 | 0 | 0 | 0 | 0 | 8 |
5.06 | Net income for the year | 0 | 0 | 0 | 0 | 1,404,096 | 1,404,096 |
5.07 | Allocation of income | 0 | 0 | 0 | 70,205 | (1,404,096) | (1,333,891) |
5.07.01 | Statutory reserve | 0 | 0 | 0 | 70,205 | (70,205) | 0 |
5.07.02 | Interim dividend | 0 | 0 | 0 | 0 | (611,981) | (611,981) |
5.07.03 | Proposed dividend | 0 | 0 | 0 | 0 | (721,910) | (721,910) |
5.08 | Other | 0 | 0 | 0 | 0 | 0 | 0 |
5.09 | Ending balance | 4,734,790 | 16 | 0 | 131,471 | 0 | 4,866,277 |
11
05.03 STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY FROM JANUARY 01, 2005 TO DECEMBER 31, 2005 (in thousands of Brazilian reais R$)
1 - Code | 2 Description | 3 - Capital | 4 Capital Reserves | 5 Revaluation Reserves |
6 Revenue Reserves |
7 Accumulated Income (Loss) |
8 Shareholders Equity Total |
5.01 | Opening balance | 4,082,036 | 0 | 0 | 13,946 | 0 | 4,095,982 |
5.02 | Prior year adjustment | 0 | 0 | 0 | 0 | 0 | 0 |
5.03 | Capital increase / decrease | 652,754 | 0 | 0 | 0 | 0 | 652,754 |
5.04 | Reserve realization | 0 | 0 | 0 | 0 | 0 | 0 |
5.05 | Treasury shares | (8) | 0 | 0 | 0 | 0 | (8) |
5.06 | Net income for the year | 0 | 0 | 0 | 0 | 946,407 | 946,407 |
5.07 | Allocation of income | 0 | 0 | 0 | 47,320 | (946,407) | (899,087) |
5.07.01 | Statutory reserve | 0 | 0 | 0 | 47,320 | (47,320) | 0 |
5.07.02 | Interim dividend | 0 | 0 | 0 | 0 | (323,677) | (323,677) |
5.07.03 | Interim interest on equity | 0 | 0 | 0 | 0 | (76,920) | (76,920) |
5.07.04 | Proposed dividend | 0 | 0 | 0 | 0 | (389,195) | (389,195) |
5.07.05 | Proposed interest on equity | 0 | 0 | 0 | 0 | (109,295) | (109,295) |
5.08 | Other | 0 | 0 | 0 | 0 | 0 | 0 |
5.09 | Ending balance | 4,734,782 | 0 | 0 | 61,266 | 0 | 4,796,048 |
12
06.01 CONSOLIDATED BALANCE SHEET ASSETS (in thousands of Brazilian reais R$)
1 - Code | 2 Description | 3 - 12/31/2007 | 4 - 12/31/2006 | 5 - 12/31/2005 |
1 | Total assets | 15,595,769 | 14,048,781 | 13,689,901 |
1.01 | Current assets | 4,076,064 | 3,695,728 | 3,770,291 |
1.01.01 | Cash and banks | 1,106,308 | 630,250 | 1,029,241 |
1.01.02 | Credits | 2,107,427 | 2,430,624 | 1,957,890 |
1.01.02.01 | Accounts receivable | 2,107,427 | 2,430,624 | 1,957,890 |
1.01.02.01.01 | Consumers, concessionaires and licensees | 1,817,788 | 2,124,968 | 1,800,556 |
1.01.02.01.02 | Dividend and interest on shareholders equity | 0 | 16,755 | 0 |
1.01.02.01.03 | Financial investments | 35,039 | 28,615 | 22,923 |
1.01.02.01.04 | Recoverable taxes | 181,754 | 170,953 | 188,772 |
1.01.02.01.05 | (-) Allowance for doubtful accounts | (95,639) | (99,609) | (54,361) |
1.01.02.01.06 | Deferred taxes | 168,485 | 188,942 | 0 |
1.01.02.02 | Other credits | 0 | 0 | 0 |
1.01.03 | Material and supplies | 14,812 | 16,008 | 9,203 |
1.01.04 | Other | 847,517 | 618,846 | 773,957 |
1.01.04.01 | Deferred tariff cost variations | 532,449 | 334,353 | 486,384 |
1.01.04.02 | Prepaid expenses | 202,721 | 191,239 | 149,352 |
1.01.04.03 | Derivatives contracts | 995 | 0 | 3,644 |
1.01.04.04 | Other credits | 111,352 | 93,254 | 134,577 |
1.02 | Noncurrent assets | 11,519,705 | 10,353,053 | 9,919,610 |
1.02.01 | Long-term assets | 2,555,327 | 2,046,088 | 2,583,634 |
1.02.01.01 | Other credits | 1,576,458 | 1,280,738 | 1,834,719 |
1.02.01.01.01 | Consumers, concessionaires and licensees | 215,014 | 165,183 | 530,423 |
1.02.01.01.02 | Financial investments | 97,521 | 103,901 | 108,531 |
1.02.01.01.03 | Recoverable taxes | 99,947 | 103,049 | 77,324 |
1.02.01.01.04 | Deferred taxes | 1,163,976 | 908,605 | 1,118,441 |
1.02.01.02 | Related parties | 0 | 0 | 0 |
1.02.01.02.01 | Associated companies | 0 | 0 | 0 |
1.02.01.02.02 | Subsidiaries | 0 | 0 | 0 |
1.02.01.02.03 | Other related parties | 0 | 0 | 0 |
1.02.01.03 | Other | 978,869 | 765,350 | 748,915 |
1.02.01.03.01 | Escrow deposits | 498,044 | 81,846 | 62,559 |
1.02.01.03.02 | Deferred tariff cost variations | 205,894 | 512,678 | 510,277 |
1.02.01.03.03 | Prepaid expenses | 43,111 | 28,769 | 38,187 |
1.02.01.03.04 | Other | 231,820 | 142,057 | 137,892 |
1.02.02 | Permanent assets | 8,964,378 | 8,306,965 | 7,335,976 |
1.02.02.01 | Investments | 2,705,692 | 3,092,648 | 3,095,162 |
1.02.02.01.01 | Associated companies | 0 | 0 | 0 |
13
1 - Code | 2 Description | 3 - 12/31/2007 | 4 - 12/31/2006 | 5 - 12/31/2005 |
1.02.01.01.02 | Associated companies - goodwill | 0 | 0 | 0 |
1.02.01.01.03 | Investments in subsidiaries | 0 | 0 | 0 |
1.02.01.01.04 | Investments in subsidiaries goodwill | 1,868,116 | 2,345,474 | 2,299,646 |
1.02.01.01.05 | Other investments | 837,576 | 747,174 | 795,516 |
1.02.02.02 | Property, plant and equipment | 6,196,046 | 5,162,543 | 4,200,769 |
1.02.02.02.01 | Property, plant and equipment | 7,115,143 | 5,953,930 | 4,841,766 |
1.02.02.02.02 | (-) Special obligation linked to the concession | (919,097) | (791,387) | (640,997) |
1.02.02.03 | Intangible | 0 | 0 | 0 |
1.02.02.04 | Deferred charges | 62,640 | 51,774 | 40,045 |
14
06.02 CONSOLIDATED BALANCE SHEET LIABILITIES (in thousands of Brazilian reais R$)
1 - Code | 2 Description | 3 - 12/31/2007 | 4 - 12/31/2006 | 5 - 12/31/2005 |
2 | Total liabilities and shareholders' equity | 15,595,769 | 14,048,781 | 13,689,901 |
2.01 | Current liabilities | 4,217,536 | 3,785,275 | 4,139,282 |
2.01.01 | Loans and financing | 921,840 | 687,975 | 1,245,946 |
2.01.01.01 | Accrued interest on debts | 59,135 | 29,859 | 47,931 |
2.01.01.02 | Loans and financing | 862,705 | 658,116 | 1,198,015 |
2.01.02 | Debentures | 226,141 | 225,430 | 368,440 |
2.01.02.01 | Accrued interest on debentures | 71,524 | 66,178 | 94,948 |
2.01.02.02 | Debentures | 154,617 | 159,252 | 273,492 |
2.01.03 | Suppliers | 867,954 | 854,161 | 782,233 |
2.01.04 | Taxes and social contributions payable | 604,093 | 522,758 | 474,960 |
2.01.05 | Dividends and interest on equity | 743,628 | 732,518 | 489,263 |
2.01.06 | Reserves | 765 | 0 | 0 |
2.01.06.01 | Reserve for contingencies | 765 | 0 | 0 |
2.01.07 | Due to related parties | 0 | 0 | 0 |
2.01.08 | Other | 853,115 | 762,433 | 778,440 |
2.01.08.01 | Employee pension plans | 64,484 | 86,715 | 121,048 |
2.01.08.02 | Regulatory charges | 68,696 | 105,013 | 30,945 |
2.01.08.03 | Accrued liabilities | 43,987 | 53,998 | 29,490 |
2.01.08.04 | Deferred tariff gains variations | 230,038 | 162,350 | 262,764 |
2.01.08.05 | Derivative contracts | 18,187 | 50,664 | 39,928 |
2.01.08.06 | Other | 427,723 | 303,693 | 294,265 |
2.02 | Noncurrent liabilities | 6,335,270 | 5,395,195 | 4,754,571 |
2.02.01 | Long-Term liabilities | 6,335,270 | 5,395,195 | 4,754,571 |
2.02.01.01 | Loans and financing | 2,891,161 | 2,475,548 | 1,807,465 |
2.02.01.01.01 | Accrued Interest on debts | 26,057 | 2,550 | 0 |
2.02.01.01.02 | Loans and financing | 2,865,104 | 2,472,998 | 1,807,465 |
2.02.01.02 | Debentures | 2,208,472 | 1,779,445 | 1,556,599 |
2.02.01.03 | Reserves | 116,412 | 103,711 | 214,969 |
2.02.01.03.01 | Reserve for contingencies | 116,412 | 103,711 | 214,969 |
2.02.01.04 | Related parties | 0 | 0 | 0 |
2.02.01.05 | Advance for future capital increase | 0 | 0 | 0 |
2.02.01.06 | Other | 1,119,225 | 1,036,491 | 1,175,538 |
2.02.01.06.01 | Suppliers | 223 | 0 | 201,982 |
2.02.01.06.02 | Employee pension plans | 656,040 | 773,646 | 793,343 |
2.02.01.06.03 | Taxes and social contributions payable | 16,529 | 39,741 | 31,110 |
2.02.01.06.04 | Deferred tariff gains variations | 68,389 | 71,069 | 11,976 |
2.02.01.06.05 | Derivative contracts | 158,552 | 24,094 | 29,635 |
2.02.01.06.06 | Other | 219,492 | 127,941 | 107,492 |
2.02.02 | Deferred income | 0 | 0 | 0 |
2.03 | Non-controlling shareholders interest | 88,129 | 2,034 | 0 |
2.04 | Shareholders equity | 4,954,834 | 4,866,277 | 4,796,048 |
2.04.01 | Capital | 4,741,175 | 4,734,790 | 4,734,782 |
15
1 - Code | 2 Description | 3 - 12/31/2007 | 4 - 12/31/2006 | 5 - 12/31/2005 |
2.04.01.01 | Capital | 4,741,175 | 4,734,790 | 4,734,790 |
2.04.01.02 | Treasury shares | 0 | 0 | (8) |
2.04.02 | Capital reserves | 16 | 16 | 0 |
2.04.03 | Revaluation reserves | 0 | 0 | 0 |
2.04.03.01 | Own assets | 0 | 0 | 0 |
2.04.03.02 | Subsidiary/associated companies | 0 | 0 | 0 |
2.04.04 | Profit reserves | 213,643 | 131,471 | 61,266 |
2.04.04.01 | Legal reserves | 213,643 | 131,471 | 61,266 |
2.04.04.02 | Statutory reserves | 0 | 0 | 0 |
2.04.04.03 | For contingencies | 0 | 0 | 0 |
2.04.04.04 | Unrealized profits | 0 | 0 | 0 |
2.04.04.05 | Profit retention | 0 | 0 | 0 |
2.04.04.06 | Special reserve for undistributed dividends | 0 | 0 | 0 |
2.04.04.07 | Other revenue reserves | 0 | 0 | 0 |
2.04.05 | Accumulated deficit | 0 | 0 | 0 |
2.04.06 | Advance for future capital increase | 0 | 0 | 0 |
16
07.01 CONSOLIDATED INCOME STATEMENT (in thousands of Brazilian reais R$)
1 Code | 2 - Description | 3 - 01/01/2007 to 12/31/2007 |
4 - 01/01/2006 to 12/31/2006 |
5 - 01/01/2005 to 12/31/2005 |
3.01 | Operating revenues | 14,207,384 | 12,227,052 | 10,907,058 |
3.02 | Deductions from operating revenues | (4,797,849) | (4,315,102) | (3,914,784) |
3.02.01 | ICMS (State VAT) | (2,477,084) | (2,165,696) | (1,911,382) |
3.02.02 | PIS (Tax on Revenue) | (242,315) | (195,694) | (176,895) |
3.02.03 | COFINS (Tax on Revenue) | (1,105,550) | (904,484) | (808,786) |
3.02.04 | ISS (Tax on Service Revenue) | (1,749) | (1,209) | (901) |
3.02.05 | Global reversal reserve | (52,250) | (42,904) | (41,029) |
3.02.06 | Fuel consumption account - CCC | (425,860) | (554,275) | (392,454) |
3.02.07 | Energy development account - CDE | (398,427) | (370,182) | (272,842) |
3.02.08 | Research and Development and Energy Efficiency Programs | (94,565) | (77,605) | (81,342) |
3.02.09 | Emergency Capacity Charge (ECE) and Emergency Energy Purchase Charge (EAEE) | (49) | (3,053) | (229,153) |
3.03 | Net operating revenues | 9,409,535 | 7,911,950 | 6,992,274 |
3.04 | Cost of electric energy services | (5,538,946) | (4,910,362) | (4,651,084) |
3.04.01 | Electric energy purchased for resale | (4,052,280) | (3,419,197) | (3,174,765) |
3.04.02 | Electric energy network usage charges | (702,781) | (774,077) | (757,186) |
3.04.03 | Personnel | (263,169) | (242,678) | (199,669) |
3.04.04 | Employee pension plans | 46,887 | 7,470 | (90,362) |
3.04.05 | Material | (49,664) | (39,189) | (33,990) |
3.04.06 | Outsourced services | (134,045) | (111,177) | (98,030) |
3.04.07 | Depreciation and amortization | (341,492) | (297,482) | (273,154) |
3.04.08 | Other | (35,961) | (12,638) | (12,029) |
3.04.09 | Cost of services rendered to third parties | (6,441) | (21,394) | (11,899) |
3.05 | Gross operating income | 3,870,589 | 3,001,588 | 2,341,190 |
3.06 | Operating expenses/income | (1,363,428) | (880,334) | (1,100,840) |
3.06.01 | Sales and marketing | (428,053) | (244,231) | (197,510) |
3.06.02 | General and administrative | (353,904) | (314,409) | (266,927) |
3.06.03 | Financial income (expense) | (514,388) | (289,345) | (519,811) |
3.06.03.01 | Financial income | 380,013 | 637,635 | 576,808 |
3.06.03.02 | Financial expenses | (894,401) | (926,980) | (1,096,619) |
3.06.03.02.01 | Interest on shareholders equity (expense) | (141) | 0 | (190,551) |
3.06.03.02.02 | Goodwill amortization | (143,646) | (138,882) | (117,561) |
3.06.03.02.03 | Financial expenses | (750,614) | (788,098) | (788,507) |
3.06.04 | Other operating income | 0 | 0 | 0 |
3.06.05 | Other operating expenses | (67,083) | (32,349) | (116,592) |
3.06.05.01 | Merged goodwill amortization | (34,423) | (12,962) | (8,148) |
3.06.05.02 | Other operating expense | (32,660) | (19,387) | (108,444) |
3.06.06 | Equity in subsidiaries | 0 | 0 | 0 |
3.07 | Operating income | 2,507,161 | 2,121,254 | 1,240,350 |
3.08 | Nonoperating income (expense) | (30,647) | 49,837 | (360) |
3.08.01 | Nonoperating income | 6,387 | 73,877 | 10,508 |
17
1 Code | 2 - Description | 3 - 01/01/2007 to 12/31/2007 |
4 - 01/01/2006 to 12/31/2006 |
5 - 01/01/2005 to 12/31/2005 |
3.08.02 | Nonoperating expense | (37,034) | (24,040) | (10,868) |
3.09 | Income before taxes on income and extraordinary item | 2,476,514 | 2,171,091 | 1,239,990 |
3.10 | Income tax and social contribution | (762,446) | (650,034) | (388,795) |
3.10.01 | Social contribution | (202,083) | (172,998) | (101,787) |
3.10.02 | Income tax | (560,363) | (477,036) | (287,008) |
3.11 | Deferred income tax and social contribution | (65,579) | (84,229) | 52,462 |
3.11.01 | Social contribution | (30,390) | (14,820) | 9,415 |
3.11.02 | Income tax | (35,189) | (69,409) | 43,047 |
3.12 | Statutory profit sharing/contributions | 0 | (32,559) | (32,559) |
3.12.01 | Profit sharing | 0 | 0 | 0 |
3.12.02 | Contributions | 0 | (32,559) | (32,559) |
3.12.02.01 | Extraordinary items net of tax effects | 0 | (32,559) | (32,559) |
3.13 | Reversal of interest on shareholders equity | 141 | 0 | 190,551 |
3.14 | Non-controlling interest | (5,194) | (173) | (40,371) |
3.15 | Net income | 1,643,436 | 1,404,096 | 1,021,278 |
SHARES OUTSTANDING EX-TREASURY STOCK | 479,911 | 479,757 | 479,757 | |
NET INCOME PER SHARES | 3.42446 | 2.92668 | 1.97268 | |
LOSS PER SHARES |
18
08.01 CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION (in thousands of Brazilian reais R$)
1 - Code | 2 Description | 3 01/01/2007 to 12/31/2007 |
4 01/01/2006 to 12/31/2006 |
5 01/01/2005 to 12/31/2005 |
4.01 | Sources of funds | 4,597,315 | 4,899,127 | 2,440,839 |
4.01.01 | From operations | 2,222,811 | 1,763,891 | 1,311,633 |
4.01.01.01 | Net income | 1,643,436 | 1,404,096 | 1,021,278 |
4.01.01.02 | Items not affecting working capital | 579,375 | 359,795 | 290,355 |
4.01.01.02.01 | Non-controlling shareholders interest | 5,194 | 232 | 40,371 |
4.01.01.02.02 | Monetary restatement of regulatory rationing assets | (19,740) | (124,952) | (243,800) |
4.01.01.02.03 | Provision for losses on realization of regulatory rationing assets | 0 | 0 | 91,805 |
4.01.01.02.04 | 2003 Tariff review | 0 | (10,402) | (28,441) |
4.01.01.02.05 | Other regulatory asset | (21,962) | 415 | (38,729) |
4.01.01.02.06 | Depreciation and amortization | 548,161 | 474,714 | 427,958 |
4.01.01.02.07 | Reserve for contingencies | 11,704 | (86,117) | 74,494 |
4.01.01.02.08 | Long-term interest and monetary and exchange variations | (25,294) | (10,157) | (89,148) |
4.01.01.02.09 | Unrealized losses (gains) on derivative contracts | 98,890 | 22,845 | (15,061) |
4.01.01.02.10 | Pension plan costs | (46,887) | 39,597 | 124,853 |
4.01.01.02.11 | Losses (gains) on disposal of property, plant and equipment and investments | 24,288 | (45,411) | 156 |
4.01.01.02.12 | Deferred taxes - assets and liabilities | 18,343 | 90,064 | (84,685) |
4.01.01.02.13 | Research and Development and Energy Efficiency Programs | 1,647 | 10,863 | 24,578 |
4.01.01.02.14 | Other | (14,969) | (1,896) | 6,004 |
4.01.02 | From shareholders | 2,238 | 0 | 17,258 |
4.01.02.01 | Capital contribution | 1,757 | 0 | 17,258 |
4.01.02.02 | Capital contribution conversion of treasury shares | 481 | 0 | 0 |
4.01.03 | From third parties | 2,372,266 | 3,135,236 | 1,111,948 |
4.01.03.01 | Long-term financing and debentures | 1,691,582 | 2,080,081 | 544,028 |
4.01.03.02 | Transfer from noncurrent to current assets | 102,911 | 692,424 | 356,150 |
4.01.03.03 | Increase net noncurrent asset by subsidiary acquisition | 25,074 | 63,653 | 0 |
4.01.03.04 | Special obligations | 65,917 | 56,209 | 23,371 |
4.01.03.05 | Sale of permanent equity interest | 0 | 0 | 1,225 |
4.01.03.06 | Sale of permanent assets | 24,091 | 94,517 | 18,261 |
4.01.03.07 | Transfers from noncurrent to current CVA, net | 354,823 | 144,470 | 162,625 |
4.01.03.08 | Advance for future capital increase | 82,597 | 0 | 0 |
4.01.03.09 | Sale of treasury shares | 0 | 24 | 0 |
4.01.03.10 | Other | 25,271 | 3,858 | 6,288 |
4.02 | Uses of funds | 4,649,241 | 4,619,683 | 2,984,340 |
4.02.01 | Purchase of interest in subsidiaries | 418,334 | 627,327 | 6,829 |
4.02.02 | Increase in property, plant and equipment | 1,132,757 | 797,235 | 626,537 |
4.02.03 | Financial investments | 25,717 | 26,996 | 105,254 |
4.02.04 | Advance energy purchase agreements | 27,474 | 0 | 0 |
4.02.05 | Transfer from long-term to current liabilities | 929,274 | 1,705,597 | 1,135,464 |
19
1 - Code | 2 Description | 3 01/01/2007 to 12/31/2007 |
4 01/01/2006 to 12/31/2006 |
5 01/01/2005 to 12/31/2005 |
4.02.06 | Dividends and interest on equity | 1,561,595 | 1,333,995 | 917,985 |
4.02.07 | Transfer from current to noncurrent assets | 18,921 | 65,058 | 83,889 |
4.02.08 | Additions to deferred charges | 33,794 | 12,622 | 7,102 |
4.02.09 | Escrow deposits | 376,505 | 38,171 | 78,704 |
4.02.10 | Net noncurrent asset merging | 0 | 2,219 | 0 |
4.02.11 | Other | 124,870 | 10,463 | 22,576 |
4.03 | Decrease (increase) in working capital | (51,926) | 279,444 | (543,501) |
4.04 | Increase (decrease) in current assets | 380,335 | (74,563) | 547,626 |
4.04.01 | Current assets beginning of the year | 3,695,728 | 3,770,291 | 3,222,665 |
4.04.02 | Current assets end of the year | 4,076,063 | 3,695,728 | 3,770,291 |
4.05 | Increase (decrease) in current liabilities | 432,261 | (354,007) | 1,091,127 |
4.05.01 | Current liability end of prior year | 3,785,275 | 4,139,282 | 3,048,155 |
4.05.02 | Current liability end of end of year | 4,217,536 | 3,785,275 | 4,139,282 |
20
09.01 INDEPENDENT AUDITORS REPORT UNQUALIFIED OPINION |
(Convenience Translation into English from the Original Previously Issued in Portuguese)
INDEPENDENT AUDITORS REPORT
To the Shareholders and Management of
CPFL Energia S.A.
Campinas - SP
1. We have examined the accompanying balance sheets of CPFL Energia S.A. and the consolidated balance sheets of the Company and its subsidiaries as of December 31, 2007 and the related statements of income, changes in shareholders´ equity and changes in financial position for the year then ended, prepared under the responsibility of your management. Our responsibility is to express an opinion on these financial statements.
2. The financial statements of the jointly-owned indirect subsidiary BAESA Energética Barra Grande S.A. for the year ended December 31, 2007 were examined by other independent auditors who issued an unqualified opinion, provided to us, on January 18, 2008. Other independent auditors examined the financial statements of BAESA Energética Barra Grande S.A. for the year ended December 2006 and also issued an unqualified opinion on January 12, 2007. CPFL Energia S.A. has valued its indirect shareholding interest in BAESA Energética Barra Grande S.A. using the equity method of accounting and consolidated this investment by the proportional consolidation method. As of December 31, 2007, the balance of this investment was R$ 131,331 thousand and the equity pick-up from this investments on the year end earnings was R$ 3,978 thousand in profits. The financial statements of this indirect subsidiary as included in the consolidated financial statements presents a proportional assets totaling R$ 384,202 thousand as of December 31, 2007. Our report, regarding the balances and amounts generated by this subsidiary is exclusively based on the report issued by the independent auditors of BAESA Energética Barra Grande S.A.
21
3. The financial statements of the indirect subsidiary CPFL Jaguariúna S.A. (formerly CMS Energy Brasil S.A.) and its subsidiaries for the year ended December 31, 2007 were examined by other independent auditors, who issued an unqualified opinion, provided to us, on January 18, 2008. These same auditors examined the financial statements of CPFL Jaguariúna S.A. (formerly CMS Energy Brasil S.A.) and its subsidiaries for the year ended December 31, 2006 and issued their unqualified report on January 31, 2007. CPFL Energia S.A. has valued its indirect shareholding interest in CPFL Jaguariúna S.A. according to the equity method of accounting and has fully consolidated this investment. As of December 31, 2007, the balance of this investment is R$ 397,055 thousand and the equity pick up of this investment on the income for the year is R$ 24,178 thousand in profits. The financial statements of this indirect subsidiary included in the consolidated financial statements presents assets of R$ 488,009 thousand as of December 31, 2007. Our report, regarding the balances and amounts generated by this subsidiary is exclusively based on the report issued by the independent auditors of CPFL Jaguariúna S.A. and its subsidiaries.
4. Our examination was conducted in accordance with auditing standards generally accepted in Brazil and included: (a) planning of the audit work, considering the materiality of the balances, the volume of transactions and the accounting systems and internal accounting controls of the Company and its subsidiaries; (b) verification, on a test basis, of the evidence and records which support the amounts and accounting information disclosed; and (c) evaluation of the most significant accounting policies and estimates adopted by Company management and its subsidiaries, as well as the presentation of the financial statements taken as a whole.
5. In our opinion, and based on the reports issued by the other independent auditors of the subsidiaries mentioned in the second and third paragraphs immediately above, the financial statements aforementioned in the first paragraph present fairly in all material respects the financial position of the company, CPFL Energia S.A. and the consolidated financial position of this company and its subsidiaries as of December 31, 2007, as well as the results of its operations, changes in shareholders´ equity and changes in its financial position for the year then ended, in conformity with accounting practices adopted in Brazil.
6. Our examination was conducted with the objective of expressing an opinion in relation to the financial statements taken as a whole. The statements related to added value and cash flow of CPFL Energia S.A. and its subsidiaries for the year ended December 31, 2007, represent supplementary information to those financial statements which are not required according to the accounting practices adopted in Brazil and have been presented to allow additional analysis. This supplementary information was subject to the same audit procedures applied to the aforementioned financial statements and, in our opinion, is presented fairly in all material respects in relation to the financial statements taken as a whole for the year ended December 31, 2007.
22
7. As mentioned in Note 3, item (b.3) to the financial statements, as a consequence of the second periodic tariff review, provided for in the concession agreement, ANEEL approved on a provisional basis the rate change for the subsidiary, Companhia Piratininga de Força e Luz at -10.94% to come into effect for the period beginning October 23, 2007. The possible effects resulting from a definitive revision, if any, will be reflected in the company financial position in subsequent years.
8. The financial statements for the year ended December 31, 2006 shown for the purposes of comparison were examined by other independent auditors, which issued unqualified reports related to them on January 26, 2007 containing a paragraph emphasizing the provisional change in the percentage related to the periodic rate review in 2003 of the subsidiary Companhia Piratininga de Força e Luz, from 9.67% to 10.14% . On October 22, 2007 based on instruction 3,209 issued by the Brazilian Electric Power Agency (ANEEL) the values approved in resolution 385 dated October 19, 2006 became definitive thereby determining a readjustment percentage of 10.14% .
Campinas, February 06, 2008.
KPMG Auditores Independentes
CRC 2SP014428/O-6
Jarib Brisola Duarte Fogaça
Accountant CRC 1SP125991/O-0
23
Management Report
Dear Shareholders,
In accordance with statutory and legislative requirements, the CPFL Energia S.A. (CPFL Energia) Board submits for your appreciation the Management Report and the Financial Statements duly certified by the Independent Auditors and the Fiscal Auditing Committee, referring to the financial year-ending December 31st, 2007. All comparisons in this Report refer to consolidated data during the same period of 2006, except when specifically stated otherwise.
1. Initial Considerations
The year 2007 was special in the history of the CPFL Energia group. During the year, CPFL Paulista, the company that originated the group, completed 95 years of existence and 10 years since privatization, in 1997. The holding company CPFL Energia, which completed 5 years of activity and three years since its initial public offering on the Novo Mercado of São Paulos Stock Exchange (Bovespa) and on the New York Stock Exchange (NYSE) (ADSs Level III), made important advances during the year, which reconfirms the companys competence in implementing the defined business plan, which has as its main objective the creation of value for the shareholders in a consistent and sustainable manner. The results were impressive: Gross Revenue reached R$ 14,207 million from growth of 16.2%, mainly a reflection of the 12.4% growth in electric energy sales within the distributors concession area and the increase of 48.1% in the groups generating capacity over the period. EBITDA, of R$ 3,345 million, was 19.9% higher than 2006. Net Income was a record, reaching R$ 1,643 million, 17.0% above the amount registered in 2006.
These results are mainly due to the discipline demonstrated in the introduction of each stage of the growth strategy, the careful choice of investments made, the permanent pursuit of standards of excellence in the management of corporate and operational processes in the controlled companies, the commitment to quality in services rendered, the satisfaction of customers expectations and the differentiations demonstrated in the business areas exposed to the free competition.
24
With these differentiations, in 2007, the group consistently advanced in its strategy of business expansion. The assets of CMS Energy Brasil were acquired (with the resultant name-change to CPFL Jaguariúna S.A.), which comprise four distributors, two companies active in the energy commercialization segment and services, plus generation assets, totaling 87.0 MW, corresponding to 9 small hydroelectric power plants (PCHs) and a participation in the the Luiz Eduardo Magalhães hydroelectric facility (UHE Lajeado). The controlled company CPFL Paulista increased its client portfolio through the acquisition of the assets of Cerfra, the rural electrification cooperative of the Franca region, within its concession area.
The acquisitions strengthen the strategic positioning of CPFL Energia in the market. In the distribution segment, with sales of 35,245 GWh and growth of 10.9% compared to 2006, the group has become market leader, with 6.3 million clients and 13.8% share of the Brazilian distribution market. In this segment the areas of operation have risen to 568 municipalities, in four of the most important Brazilian States: São Paulo, Rio Grande do Sul, Paraná and Minas Gerais.
In the competitive segment of commercialization, energy sales to free clients and through bilateral contracts reached 8,951 GWh, resulting in a domestic market share of 23%, plus a growing participation in sales of value added services to large clients.
In the generation segment, besides the previously mentioned acquisitions, CPFL Geração concluded the construction of the Campos Novos hydroelectric facility, the third large plant to go into operation of the six plants forecast until 2010. With this, CPFL Geração attained 1,501 MW of installed capacity which when added to the 87 MW of CPFL Jaguariúna, totalized 1,588 MW of the groups generation capacity, which represents an increase of 48% over the year 2006. The forecast for 2008 is for the start-up of commercial operation of the Castro Alves (130 MW) and the 14 de Julho (100 MW) hydroelectric facilities. In 2010, the Foz do Chapecó hydroelectric facility (855 MW), which is under construction in the south of the country, will come on-line, totalizing 2,174 MW of installed capacity. It is worth noting that the Foz do Chapecó hydroelectric facility received the approval of financing in the amount of R$ 1.7 billion, from the National Bank of Economic and Social Development (BNDES), which falls in with the new criteria of financing established by the Bank.
During the year, the economic-financial guidelines adopted by the CPFL group, have shown to be effective, permitting an improvement in the debt profile through a reduction in the cost of debt from 13.4% p.a. (in 2006) to 12.1% p.a. (in 2007), even when considering the increase in financial debt, incurred by investments in acquisitions and funding for the construction of the Foz do Chapecó hydroelectric facility.
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The differentiated business strategies and the company performance in 2007 can be gauged by the appreciation of shares on the São Paulo and New York Stock Exchanges, reflecting the trust and credibility earned from the market. The increase in the daily trading volume of CPFL Energia shares on Bovespa in 2006 and 2007 resulted in their inclusion in the Brasil 50 Index (IBrX50) and the Bovespa Index (Ibovespa), respectively in January and May, 2007.
With actions founded on solid Corporate Governance guidelines, management guided by criteria of excellence and responsibility in business dealings, CPFL Energia also gained other important acknowledgements. For the third consecutive year, its shares have been included in the Corporate Sustainability Index ISE, of Bovespa, which highlights companies that incorporate the permanent and integrated management of economic, social and environmental aspects into their business processes.
This recognition was confirmed by the inclusion of CPFL Energia, for the fifth year, as Model Company in the Guide Exame of Sustainability 2007 and, for the sixth year, in the Guide Exame/Você S.A. Best Companies to Work for in Brazil. The group was also featured in a survey carried out by the magazine Carta Capital, as one of the most admired companies in Brazil.
The initiatives developed and the results obtained in 2007, reconfirm the CPFL Energia groups commitment to the creation of value for the shareholders through sustainable business growth.
SHAREHOLDING STRUCTURE (Simplified)
CPFL Energia acts as a holding company with stock participation in other companies:
Further information on investments in controlled companies can be found in the Explanatory Note No. 1 in the Financial Statements.
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2. Comments on the Conjuncture
MACROECONOMIC ENVIRONMENT
The Brazilian economy displayed greater dynamism in 2007. The investment rate in the manufacturing sector was positive and the Gross Domestic Product (GDP) surpassed the average growth registered over the last few years. Domestic demand gained new impetus, favored by the fall in the unemployment rates, by the increase in real earnings and by the expansion of credit, although interest rates continue at elevated levels. Brazil has demonstrated greater resilience to the threat posed by the international economic crisis which occurred during the last quarter of the year, indicating an optimistic perspective for the macroeconomic scenario in 2008, with expansion of economic activity and new investments of the public sector.
REGULATORY ENVIRONMENT
The year was marked by the consolidation of the regulatory environment, represented by the series of normative acts by ANEEL. Noteworthy within this context is the methodology which will come in force in the 2nd cycle of distributors tariff revision defined through the publication of ANEEL Normative Resolution No. 234/06. This resolution will be fine-tuned from the contributions received via AP No. 052/07, which should be concluded in 2008. In addition, the regularization of the general conditions for the incorporation of private networks (ANEEL Resolution No. 229) will permit the regularization of clients assets involved, besides providing services with better standards of quality and efficiency.
With the repeal of the Ordinance DNAEE No. 05/1990, which established the financial participation of the consumer for new connections, which was replaced by ANEEL Resolution No. 223/03, resulting from the Law No. 10438/2002, a new systematic was defined, which will imply the reimbursement of the customers participation for connections made after November 2003. The rule for this reimbursement was established in Resolution No. 250/2007, with a time-frame of one year for its implementation.
Finally, with the ANEEL Normative Resolution No. 286/07, the rules for commercializing electric energy derived from sources where consumption incentives were given, for loads above 500 KW, as foreseen in ANEEL Normative Resolution No. 247/06, were approved. From this, new opportunities have emerged for operations in the commercialization segment, the results of which will be observed on the free energy market over the coming years.
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STOCKHOLDING CHANGES
Stockholding Reorganization of Rio Grande Energia-RGE
Unbundling of Stockholding in RGE: in compliance with ANEEL Authoritative Resolution No. 305/05, the stockholding reorganization process was concluded, with approval in the Extraordinary General Shareholders Meeting - GSM held on March 14th, 2007, considering the stockholding segregation of CPFL Paulista in RGE, indirectly transferring 99.76% control to CPFL Energia, through CPFL Serra Ltda. (CPFL Serra);
Merging of CPFL Serra with RGE: the Extraordinary General Shareholders Meeting - GSM held on September 18th, 2007, approved the merger of CPFL Serra and RGE, which inherits all rights and obligations of the merged company;
Migration of Minority RGE Shareholders to CPFL Energia: the Extraordinary General Shareholders Meeting - GSM held on December 18th, 2007, approved the incorporation of the RGE minority shareholders stocks by CPFL Energia, which now controls 100% of RGE.
Other Stockholding Reorganizations carried out in 2007
The merging of Semesa S.A. and CPFL Centrais Elétricas S.A. with CPFL Geração;
The merging of Nova 4 Participações Ltda. with CPFL Santa Cruz resulting in the direct participation of CPFL Energia in CPFL Santa Cruz stock.
Sale of Holdings in the company Energias do Brasil
In January of 2007, CPFL Energia sold its holdings in the company Energias do Brasil (ENBR3). The net value of the sale was R$ 2.6 million.
Further details on stockholding reorganizations can be found in the Explanatory Note No. 12 in the Financial Statements.
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TARIFFS AND PRICES OF ELECTRIC ENERGY
Distribution Segment
Annual Tariff Readjustment-IRT 2007
The following Annual Tariff Readjustments (IRT) rates were approved for the CPFL group companies:
In February 2007 CPFL Santa Cruz (5.71%), CPFL Jaguari (1.66%), CPFL Sul Paulista (5.52%), CPFL Leste Paulista (3.31%) and CPFL Mococa (9.61%);
In April 2007 CPFL Paulista (7.06%) and RGE (6.05%).
In 2007 CPFL Piratininga was subjected to the second cycle of tariff revision, as detailed in the following item.
Second Cycle of Tariff Revision
On October 22nd, 2007 by means of Homologated Resolution No. 553, ANEEL established the provisional result of the second tariff revision of CPFL Piratininga to take effect on October 23rd, 2007. The CPFL Piratininga energy tariffs were readjusted by -10.11%, of which -10.94% relative to tariff repositioning and 0.83% relative to financial components outside the periodic tariff revision.
On January 29th, 2008, ANEEL, within the context of the second tariff revision, provisionally established the tariffs of the controlled companies CPFL Santa Cruz, CPFL Jaguari, CPFL Sul Paulista, CPFL Leste Paulista and CPFL Mococa, relative to tariff repositioning and financial components outside the periodic tariff revision:
- CPFL Santa Cruz: readjustment of -7.13%, of which -9.73% was relative to tariff repositioning and 2.60% was relative to financial components;
- CPFL Jaguari: readjustment of -1.58%, of which -0.35% was relative to tariff repositioning and -1.23% was relative to financial components;
- CPFL Sul Paulista: readjustment of -3.57%, of which -2.98% was relative to tariff repositioning and -0.58% was relative to financial components;
- CPFL Leste Paulista: readjustment of -1.65%, of which -2.69% was relative to tariff repositioning and 1.04% was relative to financial components;
- CPFL Mococa: readjustment of -5.65%, of which -8.40% was relative to tariff repositioning and 2.75% was relative to financial components.
CPFL Paulista and RGE will go through the second cycle of tariff revision in April 2008.
Further details on the 2nd cycle of tariff revision can be found in Explanatory Note No. 34 in the Financial Statements.
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Generation Segment
The generators energy sales contracts contain specific readjustment clauses, using as the main index the annual variation measured by the IGP-M.
3. Operating Performance
ENERGY SALES
Sales within the Distributors Concession Area
Sales within the Concession Area - GWh | ||||||
2007 | 2006 | Var. | ||||
Captive Market | 35,245 | 31,778 | 10.9% | |||
TUSD | 11,230 | 9,585 | 17.2% | |||
Total | 46,475 | 41,363 | 12.4% | |||
In 2007, sales in the concession area, achieved by the distribution segment, totaled 46,475 GWh, an increase of 12.4% compared to 2006, mainly due to the 32.7% acquisition of RGE, CPFL Santa Cruz and the distributors controlled by CPFL Jaguariúna. Discounting the effect of these acquisitions, the increase would be 6.0%.
Sales to the captive market totaled 35,245 GWh, with an increase of 10.9%, due to organic growth in the distributors concession area, as well as the acquisitions over the period. Disregarding this effect, growth would be 3.3%.
The quantity of energy, in GWh, corresponding to the consumption by free clients in the distributors areas of activity, billed through the Tariff of Use of the Distribution System (TUSD), reached 11,230 GWh, with an increase of 17.2%.
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Sales to the Captive Market
Sales to the Captive Market - GWh | ||||||
2007 | 2006 | Var. | ||||
Residential | 10,766 | 9,489 | 13.5% | |||
Industrial | 11,401 | 10,882 | 4.8% | |||
Commercial | 6,437 | 5,724 | 12.5% | |||
Rural | 2,511 | 1,966 | 27.7% | |||
Others | 4,130 | 3,717 | 11.1% | |||
Total | 35,245 | 31,778 | 10.9% | |||
The captive market were highlighted by the increase in residential class (13.5%), industrial (4.8%) and commercial (12.5%), which together represent 81.2% of the total consumption by captive clients from group distributors. Discounting the effect of the acquisitions over the period, the sales performance would be:
Residential and Commercial Classes: an increase of 6.9% in both classes. The performance of the commercial class was favored by the increase is spending power, and the ease of credit coupled with the reduction in interest rates and extended payment terms. These effects, combined with the reduction of domestic appliance prices, stimulated the expansion of residential class consumption. Higher temperatures registered in the concession areas of group distributors also contributed to the performance of these classes.
Industrial Class: a reduction of 2.0%, mainly due to migration of captive clients to the free market. Although the flux of clients to the free market had been slowing down over 2007, the migration occurred with greater intensity among the so called special clients, which have contracted demand over 500 kW and are qualified to purchase electric energy from alternative generation sources, such as biomass and small hydroelectric plants (PCHs). Generally speaking, these alternative sources receive incentives through discounts on TUSD payments, which become an attraction for this range of client. Therefore, the migration of special customers to the market with incentives does not represent an increase in consumption on the free market, as these clients are not really considered free, and they financially impact the distributors through the TUSD discount, which is compensated in the distributors tariff revisions and readjustments.
Sales to the Free Market
Sales to the Free Market - GWh | ||||||
2007 | 2006 | Var. | ||||
Free Market | 8,951 | 9,336 | -4.1% | |||
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Sales to the free market, carried out by the commercialization segment, reached 8,951 GWh, with a decrease of 4.1% . This fall is due to the fact that the sale of CPFL Brasil to RGE, which was in turn fully merged with the CPFL Energia group in June 2006, was not considered, together with the reduction of short-term contract sales.
For further details regarding electric energy sales (sales in R$, in GWh, by consumption class and number of consumers), see Explanatory Note No. 23 in the Financial Statements.
OPERATING PERFORMANCE IN THE DISTRIBUTION SEGMENT
In order to satisfy the customers expectations the CPFL Energia Group distributors work with the objective of increasing the efficiency of their operations and to render quality and differentiated services. To achieve this, the company continually invests in the electric system and its support structure, in a way that provides them with the necessary conditions to preserve the high standards of quality and the continuity of power supply, even through adverse operating situations.
Quality of Energy Supply
To continuously improve the quality of supply, the CPFL Energia group distributors have developed initiatives and responses with a view to expand and automate the electric system and increase logistical efficiency of the network services to guarantee operational agility, reliability and flexibility. The distributors provide the customers with various channels of assistance and carry out intense inspections and preventive maintenance programs on their electric energy assets. The company also runs qualification and professional training programs and invests in the modernization of the systems and operational support infrastructure.
The results of these actions are reflected in the quality of supply indexes (FEC, which measures the frequency of interruptions per client over the year, and DEC, which measures the duration of interruptions per client over the year) registered by the CPFL Energia Group distributors. The following table shows the 2007 results:
INDEX | CPFL | CPFL | RGE | CPFL Santa | CPFL | CPFL Sul | CPFL Leste | CPFL | ||||||||
Paulista | Piratininga | Cruz | Jaguari | Paulista | Paulista | Mococa | ||||||||||
FEC (interruptions) | 5.88 | 5.79 | 10.90 | 8.20 | 5.86 | 9.09 | 7.93 | 5.88 | ||||||||
DEC (hours) | 6.98 | 6.90 | 17.04 | 5.85 | 6.32 | 11.58 | 6.80 | 4.25 | ||||||||
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Commercial losses
The eight group distributors have developed an ongoing operation to combat commercial losses in their respective areas of activity, which covers, principally, the inspection of consumer units and the verification and substitution of obsolete or damaged meters. In 2007 the distributors carried out 550,000 inspections which resulted in the recovery of 416 GWh, equivalent to revenue of R$ 140 million.
Universality of Service
The markets of the distributors CPFL Paulista, CPFL Piratininga, CPFL Santa Cruz, CPFL Jaguari, CPFL Sul Paulista, CPFL Leste Paulista and CPFL Mococa are entirely universalized. RGE connected 6,943 new clients in 2007. For 2008 the investment forecast will permit the connection of approximately five thousand new clients, or the complete universality of the distributor market.
Integration of the Distributors
CPFL Energia has also made important advances in the implementation of Integration Plans for the companies acquired between 2006 and 2007, which are aimed at guaranteeing the creation of shareholder value and business sustainability by implementing corporate governance guidelines and the management model, guided by criteria of excellence and corporate responsibility, adopted by the group companies.
OPERATING PERFORMANCE IN THE GENERATION SEGMENT
The energy available to CPFL Geração for commercialization is equivalent to the Secured Energy of each Hydroelectric Facility, in proportion to the shareholding participation held by the company. In 2007, the Secured Energy produced by the CPFL Energia group hydroelectric facilities reached 800 median MW, with an increase of 40.1% on the 571 median MW of the previous year. This growth is due to the coming on-line of the Campos Novos hydroelectric facility, the acquisition of the generation assets of CPFL Jaguariúna and the conclusion of the re-powering projects of the small hydroelectric plant of Gavião Peixoto.
During the year, the consolidated index of the group turbine availability was 90%, higher than the 86% recorded in 2006.
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In 2008, with the start of operations of the Castro Alves and 14 de Julho hydroelectric facilities and the small hydroelectric plants Capão Preto e Chibarro, Secured Energy provided by the group should reach 862 median MW. In 2010, when the conclusion of the Foz do Chapecó hydroelectric facility is forecast, the Secured Energy of the group will reach 1,082 median MW.
4. Economic-Financial Performance
Management commentaries on the economic-financial performance and operating results should be read together with the Audited Financial Statements and Explanatory Notes.
Operating Revenue
Gross operating revenue reached R$ 14,207 million, signifying growth of 16.2% (R$ 1,980 million).
The main contributing factors to this evolution in gross revenue were:
i) Increase of 12,4% in sales of electric energy within the concession area; and
ii) Distributor tariff readjustments, as referred to previously in the item Tariffs and Prices of Electric Energy.
Gross revenue was also impacted positively to the tune of R$ 189 million by the write-down of the Free Energy Liabilities. In 2007, due to the expiration of the term stipulated for the recovery of the RTE and the pass-on to the generators of free energy, the liability write down was concluded in compliance to ANEEL guidelines. It should be noted that the same sum was registered in the item Operating Costs/Expenses, due to the same asset write-down.
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Operating Cash Generation EBITDA
The following analysis excludes the adjustment mentioned in the previous item, with regard to free energy, which do not affect the companys net income and EBITDA.
The Operating Cash Generation measured by EBITDA reached R$ 3,345 million in 2007, with growth of 19.9% (R$ 556 million). This result mostly reflects the increase of 16.5% in Net Revenue (R$ 1,309 million), compensating for the increases of 13.4% in the Cost of Electric Energy (R$ 562 million) and the 10.8% in Operating Cost/Expense (R$ 106 million), excluding spending on the Private Pension Fund, Depreciation and Amortization.
EBITDA is calculated from the sum of net income, taxes, financial result, depreciation/amortization and private pension fund plus adjustments for extraordinary items.
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Net Income over the Year
In 2007, CPFL Energia earned Net Income of R$ 1,643 million, with growth of 17.0% (R$ 239 million). This result is specifically due to the following factors:
i) Increase of 19.9% (R$ 556 million) in EBITDA;
ii) Increase of 77.8% (R$ 225 million) in net financial expenses. Of this total, R$ 122 million resulted from the non-recurring gains in 2006 from the process judged in favor of the controlled companies referring to Pis and Cofins taxes paid on the expansion of the calculation base; and
iii) Increase of 12.8% (R$ 94 million) in Income Tax and Social Insurance Contribution.
For the year, net income per share was R$3.42.
Dividends
The Board proposes the distribution of R$ 1,561 million in dividends, the equivalent of 95% of Net Income for Year, of R$ 3.25 per share. With this, the company exceeds the minimum dividend distribution of 50% of net income, as stipulated in its dividend policy.
Indebtedness
The company indebtedness (considering financial debt and derivatives) at the end of 2007 stood at R$ 6,423 million, with an increase of 22.5% . Despite the increase in financial debt in nominal values, its average cost has fallen from 13.4% p.a., in 2006, to 12.1% p.a., in 2007, owing to the reduction in interest rates (Selic), from 15.0% p.a. to 11.8% p.a., and TJLP (from 7.87% p.a. to 6.38% p.a.), over the year.
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The increase in debt is due mainly to the financing of acquisitions and the expansion of the generation and distribution businesses. The main events of the year were:
Funding (BNDES and other financial institutions) obtained by CPFL Paulista, CPFL Piratininga, RGE, CPFL Brasil, CPFL Geração and Generation Projects, totalizing R$ 1,447 million;
Issuance of debentures by CPFL Energia, in the amount of R$ 450 million, for the acquisition of CMS Energy Brasil S.A. (CPFL Jaguariúna);
Issuance of debentures by RGE (R$ 380 million), with the financial settlement of R$ 100 million in 2007;
Amortizations (BNDES and other financial institutions) carried out by CPFL Energia, CPFL Paulista, CPFL Piratininga, RGE, CPFL Geração and Generation Projects, totalizing R$ 943 million.
For further details regarding debt, see Explanatory Notes Nos. 15 and 16 in the Financial Statements.
Payment Delinquency
In the electric energy distribution segment, the group distributors have maintained their efforts to collect unpaid bills from defaulting clients and obtained a reduction in the delinquency indexes. The weighted average delinquency index of the eight group distributors is 1.49%, over their Gross Revenue.
For the power generation and commercialization segments it is interesting to note that, over the year, payment delinquency was practically nonexistent.
5. Investments
Aligned with the strategy of expansion and consolidation of the groups participation in the Brazilian electric energy market, in 2007, the CPFL Energia Group invested R$ 1,545 million. Of this, R$ 859 million was invested in business expansion, covering the construction of hydroelectric facilities, the re-powering of small hydroelectric plants and the expansion and strengthening of the electric system to keep pace with the expressive growth in the distribution market. CPFL Energia, through its controlled companies, also invested R$ 416 million in the acquisition of companies and electric energy assets. A further R$ 258 million was allocated to improvements in the electric system, operational logistics and operational support infrastructure systems throughout the diverse business segments. The group commercializing companies received investments of R$ 9 million, while another R$ 3 million went on other investments.
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INVESTIMENTS IN THE ENERGY DISTRIBUTION AND GENERATION SEGMENTS
Energy Distribution
Investments in these segments totaled R$ 672 million. Of this amount, R$ 414 million was designated for the expansion and strengthening of the electric system, to keep pace with strong market growth both in power sales and customer volume (167 thousand) registered over the year by the eight distributors. Another R$ 258 million was designated for improvements in electric system maintenance, operational infrastructure, upgrading of operational administration support systems, customer help services and research and development, among others.
The new systems in implementation in the group distributors are highlighted:
New systems being implemented by the group distributors are highlighted below: Commercial Management System - CCS: now being set up at CPFL Paulista and CPFL Piratininga, will upgrade the client database and customer call processes, billing, collection, charging, accountability, loss administration and management information and will yield positive reflexes in the quality of services rendered to the customer and in operational efficiency. Its conclusion is forecast for 2008.
Integrated Management of the Distribution System - GISD: Already up and running at CPFL Paulista and being set up at CPFL Piratininga and RGE. The system, based on a geo-referential data platform permits the rationalization of field work on electric power assets and efficiency gains in grid operation engineering processes, which will reflect on the quality of expansion planning and the response to customers demands. At CPFL Piratininga, the first of the three stages of the project has been implemented, which consists of the construction of the geo-referential base and the training of the systems users the remaining stages will be completed by 2009. At RGE, in 2007, modeling work and preparation for implementation was started, which should be concluded in 2009.
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Power Generation
A total investment of in the amount of R$ 445 million was concentrated on projects under construction: Ceran Complex (Castro Alves and 14 de Julho Hydroelectric Facilities), the Foz do Chapecó and Campos Novos (concluded in May, 2007) Hydroelectric Facilities and the re-powering of the small hydroelectric plants Gavião Peixoto, Chibarro and Capão Preto.
The following are the construction stages of the Hydroelectric Facilities on December 31st 2007:
Castro Alves (130 MW) and 14 de Julho (100 MW) Hydroelectric Facilities: Civil Works, 95.4%; Supply of Equipment, 89.6%; Electromechanical Assembly, 75.1%; Environmental Actions, 91.8% . The start up of commercial operations of the Castro Alves hydroelectric facility is forecast for the first quarter of 2008 and the 14 de Julho hydroelectric facility for the fourth quarter, 2008. The allocation of energy from the plants, corresponding to 65% held by CPFL Geração, already has buy and sell contracts with the companies, CPFL Paulista, CPFL Piratininga and CPFL Brasil, approved by ANEEL.
Foz do Chapecó Hydroelectric Facility (855 MW): 23.6% of the undertaking is concluded, as follows: Civil Works, 27.4%; Equipment Supply, 18.9%; Electromechanical Assembly, 4.4%; Environmental Actions, 29.0% . Construction on the Foz do Chapecó plant commenced in December 2006 and the start-up of commercial operation is forecast for the third quarter of 2010.
Chibarro Small Hydroelectric Plant: re-powering work has been completed and the plant now has Installed Capacity and Secured Energy of 2.6 MW and 1.69 median MW, respectively. Work on the project was started in October 2006 and concluded in December 2007, with start of operation forecast for early 2008.
Capão Preto Small Hidroelectric Plant: re-powering work, which will raise the Installed Capacity and Secured Energy to 4.3 MW and 2.28 median MW, was started in October 2006 and should be concluded in early 2008.
Acquisitions over the Year
CPFL Energia has been developing a strategy consistent with the expansion of its share in the countrys electric energy market by acting as a consolidator of the sector, capitalizing on business opportunities which yield gains in efficiency and rates of return commensurate with the premises that guide the groups investments.
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Acquisition of CMS Energy Brasil S.A. (company name changed to CPFL Jaguariúna S.A.) - CPFL Energia, through the controlled company Perácio Participações S.A., acquired in June 2007 for R$ 412 million, 100% stock of CMS Energy Brasil S.A., a holding company which operates through its controlled companies in the distribution, generation, commercialization of electric energy and the rendering of specialized electric power services.
Acquisition of the electric assets of the Electrification and Development Company of the Region of Franca (Cerfra) In August 2007, the controlled company CPFL Paulista acquired for R$ 4.2 million, the electric assets of Cerfra, which added 443 km of grid to the electric system and 1,094 new clients in eight municipalities in the region of Franca.
6. Corporate Governance
CPFL Energia is recognized as one of the companies with the best corporate governance in Latin America. Since its inception, the company has been refining its policies, management processes and the system of controls in use. In 2007, the new model of Corporate Governance implanted in 2006 was consolidated with the aim of aligning the governance processes with the current structure of the Company and controlled companies. The highlights of the year were the advances made in dialogue mechanisms and interaction between Shareholders and the Board, aimed at guaranteeing effectiveness in the Companys decision making process.
The Board is a central forum for decision making which defines the companys general orientation on business and focuses on the creation of value for the shareholders. It comprised seven members, one of which is independent, and can call upon the advice of three permanent committees. The Committees of People Management and Management Processes are composed of title-holding directors who analyze target definitions, the evaluation of the Executive Committee, the monitoring of management information and corporate risks, and the overseeing of the annual Internal Audit plan. The Committee of Related Parties pre-analyzes all transactions involving related parties, to ensure compliance with the usual market conditions.
The Board can also count on the support of Temporary Commissions to oversee the flux of relevant topics or specific themes outside the competence of the committees. The Committees and Commissions also act within the ambit of the associated and controlled companies.
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The Fiscal Board, delegated by the Board of Directors, discharge the duties of the Audit Committee, in accordance with the Securities and Exchange Commission-SEC rules applicable to foreign companies listed on United States Stock Exchanges.
The CPFL Energia Board is composed of a Chief Executive Officer, who is the main executive and president of the Board of Directors of the controlled companies, which ensures that all the governance guidelines are aligned with the holding company, resulting in an integrated and optimized structure. The five vice presidents (directors of distribution, of generation, of energy management, financial and investor relations, and of strategy and regulation) are responsible within their respective areas to conduct the business of the controlled companies.
CPFL Energia operates a management system of internal controls and electronic certification arising from the main business processes carried out by management, which permits the mapping, monitoring and evaluation of the efficiency of the controls, while impacting the preparation and release of financial information together with the rationalization of the processes according to the stipulations of section 404 of the Sarbanes-Oxley act (compliance). During the year 2006, the effectiveness of the internal controls of the Company were certified by the CEO and the CFO and ratified by the Independent Auditors Deloitte Touche Tohmatsu.
CPFL Energia is a member of a select group of fourteen Latin-American companies recognized for their adoption of differentiated corporate governance practices the Companies Circle, which was constituted through the initiative of the Organization for Economic Cooperation and Development-OECD and the International Finance Corporation-IFC, with the aim of promoting and encouraging the advancement of good corporate governance practices in Latin America. In October 2007, CPFL Energia participated in the Latin American Corporate Governance Roundtable, promoted by the OECD, in cooperation with the IFC and the World Bank.
In 2007, the new CPFLs System for the Management and Development of Ethics was implemented. The system is a series of management devices aimed at fine-tuning individual and institutional actions, in order to promote the development of the quality of ethics in all the companys business dealings.
The second cycle of seminars on Reflections on Ethics, based on the Code of Ethics and Corporate Conduct was realized; the Committee of Ethical Development was restructured, focusing more on the assertion, dissemination and the control of compliance of the corporate action indicators, the organizational principals and corporate conduct guidelines; and the Ethical Network was established, made up from employees from diverse sectors to act as multipliers of ethical values in their respective organizational units.
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Commitment to Arbitration
CPFL Energia is bound to arbitration in the Bovespa Stock Exchange Chamber of Arbitration, in accordance with commitment clause of article 44 of the Companys Statute.
7. The Stock Market
CPFL Energia, currently with 27.6% of its shares circulating on the market (free float), trades securities in Brazil (Bovespa) and on the New York Stock Exchange (NYSE).
In 2007, CPFL Energia shares have appreciated 23.9% on Bovespa and 52.6% on the NYSE, closing the year priced at R$ 33.67 per share and US$ 56.66 per ADR, respectively.
The average daily trading volume reached R$ 32.6 million, of which R$ 19.8 million was on Bovespa and R$ 12.8 million was on the NYSE, representing an increase of 88.5% . The number of trades made on Bovespa grew 114.3%, increasing from the 2006 daily average of 345 to 738 trades in 2007.
The performance of CPFL Energia shares on Bovespa qualified them for inclusion, as from May 2007, in Ibovespa, an index which measures the total return from a theoretical portfolio consisting of shares, which together represent 80% of the at-sight trading volume over the 12 months prior to the formation of the portfolio.
8. Sustainability and Corporate Responsibility
CPFL Energia has developed a permanent program to manage the impact of business on the community in which it operates, through ongoing management of economic, environmental and social risks inherent in business development. The aim is to create value in an equilibrated and sustainable manner for all the community within which the company interacts, through initiatives and programs based on solid ethical principals, which assure integrity, transparency, trust and credibility in company relationships with clients, shareholders, employees, suppliers, civil associations and the communities within its area of activity.
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Management of Corporate Excellence
Aligned with its vision focused on the creation of value, CPFL Energia stimulates the controlled companies to incorporate criteria of excellence into their management models. To achieve this, the Integrated Management SystemSGI was developed, which contemplates the standardization and certification of the main working processes in four dimensions: Quality Management (ISO 9001:00), Environmental Management (ISO 14001:04), Occupational Health and Safety Management (OHSAS 18001:99) and Social Responsibility Management (SA 8000:01). Adherence to the system is permanently monitored including periodic audits from external organizations.
SGI is fully implemented at CPFL Paulista, CPFL Piratininga and CPFL Geração. In 2007 it was also implemented at RGE, where, in December, following an audit carried out by an external organization, the Integrated Management System was certified according to the international standards cited for the process of Distribution and Commercialization of Electric Energy, valid for all the company sites. In 2007, RGE also participated for the first time in the National Quality Award, promoted by the National Foundation of Quality-FNQ, thus qualifying for the second stage of the evaluation.
Another highlight of the year was the expansion of the Six Sigma Strategy at CPFL Paulista and CPFL Piratininga, and its introduction at CPFL Brasil and CPFL Geração, a methodology which facilitates the identification of opportunities for improvement and the reduction of waste during the work process.
Customer Relations Management
The CPFL Energia group distributors maintain specific programs with a view to establish a relationship of confidence and credibility with their clients. To achieve this, besides the agility and efficiency in responding to requests, the companies develop direct communication channels aimed at positioning the customers regarding their rights, the rational and safe use of electric energy, service communication channels with access to the companies, as well as the chance to participate in public interest campaigns by means of messages printed on the electricity bill. The CPFL Energia distributors maintain Consumer Councils to assess the quality of services and carry out periodic customer surveys to identify opportunities for improvement in services rendered.
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In 2006, two group distributors excelled in a survey carried out among residential consumers throughout the country, by winning the IASC Award ANEEL Index of Consumer Satisfaction, a result of the quality of service rendered to the clients. CPFL Jaguari was the best distributor in Brazil among all the companies evaluated, even winning the award referring to the regions South/Southeast/Central-West, in the category of up to 30 thousand consumers and CPFL Leste Paulista was the best in the regions South and Southeast, between 30,000 and 400,000 consumers. Furthermore, the indexes of CPFL Paulista (66.55%), CPFL Piratininga (63.61%), RGE (66.74%), CPFL Sul Paulista (61.96%) and CPFL Mococa (65.76%), revealed in this survey were all higher than the national average 60.49% .
Human Resources Management
The CPFL Energia group closed the year with a roster of 7,176 employees (5,836 employees, in 2006). The growth in the head-count results from the merging of new companies with the group. The turnover index was 8.12% . The average duration of employment with the company was 11.2 years and the average age was 37.8 years.
In 2007, training and development programs reached on average 97.97 hours per employee reflecting the integration efforts resulting from the process of new companies merging with the group.
During 2007, the group companies developed innovative support programs for the management of their human resources, the chief of which are:
CPFL Management - Program for management development, delineated in three axes of actuation: Development of Competitiveness, Individual Development, and Career Development, with specific career plan initiatives.
Dissemination of Competencies - In 2007, the process for the revision of organizational competencies was realized, for alignment with CPFL Energia Corporate Planning. The defined competencies were: Focus on Results, Excellence in Processes, Systemic Vision, Love What You Do, Customer Focus, Entrepreneurship, Capacity to Create, Transform and Innovate, Sustainability, Strategic Vision and Management and Development of Personnel.
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Training in Accordance with Regulatory Standard-NR 10 - Every group company electrician participated in a two-module training course on electricity risks, in order to work in safety on electric installations and in electricity services.
Quality of Life Gateway: inaugurated in October, the gateway offers information, tips and guidelines on the main pillars that constitute the CPFL quality of life program: safety, health, physical, environmental, social, emotional, and financial.
Respect for Diversity Program: is aimed at respecting and promoting diversity among the company employees, encouraging social inclusion, through affirmative action, with a view to increase the representation of Afro-Brazilians, women, and disabled people in the companys employee roster.
Talk to Me Program - aimed at giving support and guidance to employees and family members on social aspects.
The New Time Program: devised to prepare employees close to retirement age.
CPFL Volunteer Program: has the objective to create opportunities for joint initiatives between the company and the employees to make a difference in the community.
Community Relations
Among the initiatives developed by the group companies to contribute to community development in 2007, the following are highlighted:
Espaço Cultural CPFL (CPFL Cultural Space) Programs - A program designed to spread knowledge and culture as a way to contribute to the development of the communities where the company is active, through lectures, debates, and cultural and artistic manifestations. Access to the program is free for the public, and its contents are displayed for the whole country through the Internet and programs carried on TV Cultura of São Paulo. In 2008, the start of activity of the Espaço Cultural RGE (RGE Cultural Space) in Caxias do Sul is forecast.
The CPFL Program for the Revitalization of the Santa Casas and Philanthropic Hospitals - now covers 19 hospitals in the regions of Franca and Piracicaba (SP).
Projeto Aprender (Learning Project) - the program, created by CPFL Energia, draws adolescents from low income families and guides them on their first steps through the corporate environment. 119 young people benefited from the scheme in 2007.
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The CPFL Program of Energy Efficiency - promotes initiatives for the rational use of electric energy in public lighting, in services, squares and public buildings, besides developing programs such as, CPFL in the Schools, Education with Low Income Consumers, Municipal Energy Management and Donation of Florescent Light Bulbs.
CMDCA (Municipal Council for Child and Adolescent Rights) - CPFL Energia donated over R$ 2 million to entities, benefiting 31 towns in its area of activity. In all the company supported 73 projects from a total of 274 subscribed.
Environment Week - promoted by CPFL Energia in Campinas, the event presents diverse technical and cultural activities for the public in general.
Influence and Leadership in the Business Chain
CPFL Energia has adhered to the Corporate Pact for Integrity and Anti-Corruption together with the Corporate Pact against Sexual Exploitation of Children and Adolescents. CPFL also maintains its adhesion to the Global Pact and the Millennium Development Objectives ODM, both established by the United Nations (UN). CPFL Energia created the Forum for the Millennium Objectives for the dissemination of the ODMs.
In the CPFL Conhecer e Crescer (Knowing and Growing) Program - Management Excellence, a CPFL Energia initiative to disseminate concepts of management quality and social responsibility to micro, small and mid-size companies, 14 meetings were held, with 854 participants.
In the program Rede de Valor (Network of Value) created by CPFL Energia for the dissemination of social responsibility management, the V Meeting of Suppliers was held with 90 participants.
CPFL Energia participates in the Tear Program - Weaving Sustainable Networks of Social Responsibility at Micro, Small and Mid-sized Companies, developed by BID, the Ethos Institute and the Multilateral Investment Fund (Fumin), and took on the responsibility to disseminate good practices among 15, micro, small and mid-sized companies within its business chain.
Together with these initiatives, since 2001, CPFL Energia has also been associated with the Abrinq Foundation, and several organizations active in the dissemination of criteria of excellence and sustainability in Brazil.
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Management of Environmental Impacts - Sustainable Electric Power Projects
The CPFL Energia group companies have developed projects that seek to maximize the use of energy and to cause the least socio-environmental impact possible, thus contributing to the sustainable development and to the reduction of the emission of greenhouse gases. In this area the following initiatives are highlighted:
Power Generation:
Small Hydroelectric Plants
Mechanism of Clean Development - MDL / Program for the Re-Powering of Small Hydroelectric Plants - PCHs: by virtue of this program, which permits the increase of installed capacity, without increasing the flooded area, the Company was able to develop an MDL Project to trade the CO2 e Emissions Reduction Certificates-CERs with reference to the period 2003 to 2012, in a quantity forecast at 120 thousand tons, valued at 1.4 million Euros.
Control of Aquatic Plants: an initiative developed for the reservoir of the Americana Hydroelectric Plant, with the collection and removal of 31,976 m³ of material (corresponding to 50.70 ha). Studies are being made regarding the use of the collected material as a source of animal feed, with encouraging results.
Environmental Education: The project by the School Boat of Nature Association, sponsored by CPFL, received more than 22 thousand visitors over the year.
Fisheries Conservation Program: 390 thousand Curimbatá and Lambari fish spawn were released into the rivers and reservoirs of the hydrographic basins in the regions where the Company operates.
Cia Energética Rio das Antas-Ceran (Monte Claro, Castro Alves and 14 de Julho Hydroelectric Facilities)
Mechanism of Clean Development - MDL / Cia Energética Rio das Antas-Ceran: in December 2007, the sales process by auction was finalized for the sale of CERs referring to the hydroelectric generation from the Monte Claro facility. In total 701,563 CERs were traded, totaling 9.8 million Euros. This was the first trade in the world involving the sale of CER for a large run-of-the-river hydroelectric plant. Also in 2007, the Inter-Ministry Commission on Climate Change issued a Letter of Approval of the Project Castro Alves Hydroelectric Facility MDL Project Activity with approved CERs of 2 million tons of CO2e, up to 2014 (a period of 7 years of generation).
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BAESA - Energética Barra Grande (Barra Grande Hydroelectric Facility)
Socio-environmental Programs: after the IBAMA inspection to verify compliance with the stipulated environmental programs, the renewal of the Operating License (Licença de Operação-LO) was approved, for a further 6 years. The renewal demonstrates the companys commitment to socio-environmental matters, such as the forestry restoration project in the area influenced by the undertaking, with the planting of 81,281 native species saplings, totaling 434,870 trees planted between 2004 and 2007.
Social Programs: continues with the improvement and adjustment of infrastructure projects in the municipalities situated in the regions influenced by the hydroelectric plant. In 2007, the construction and paving of the road that interconnects the municipalities of Pinhal da Serra-RS to Anita Garibaldi-SC, have contributed to the development of the region.
Enercan - Campos Novos Energia (Campos Novos Hydroelectric Facility)
Socio-environmental Programs: had its Operating License renewed on 04/20/2007 for another 2 years, further evidence of the adoption of best socio-environmental practices.
Social Programs: in 2007, continued with the Rural Development Fund, providing resources in the amount of R$ 3.2 million to finance collective agribusiness in four municipalities situated in the region influenced by the hydroelectric plant.
Foz do Chapecó Energia (Foz do Chapecó Hydroelectric Facility)
Socio-environmental Programs: with the construction of the Foz do Chapecó Hydroelectric facility, the implementation of the socio-environmental programs, as determined in the Basic Environmental Project (PBA) was initiated, in 2007.
Serra da Mesa Hydroelectric Facility
Social Programs: the facility formalized its participation in the North-Northeastern Region of Goiás Development Fund, a joint initiative involving the Banco Interamericano de Desenvolvimento (BID), the Ministry of Mines and Energy (MME), Furnas Centrais Elétricas, Tractebel Energia and the Brazilian Support Service for Micro and Small Companies in Goiás-SEBRAE/GO. This fund is aimed at implementing projects to generate earnings for impoverished families situated in the municipalities affected by the undertakings of Serra da Mesa and Cana Brava. With a 42-month working plan and funds of approximately R$ 5 million to the development of the planned initiatives, the fund commenced its activities with the constitution of the Decision-Making Council and the divulgation of the project objectives and the work development phases to the municipalities.
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Power Distribution:
CPFL Paulista and CPFL Piratininga
R&D Projects that generate environmental benefits by eliminating, reducing, or treating residues, economizing energy and increasing energy efficiency.
- CPFL Paulista and CPFL Piratininga are continuing their projects related to: New Wood Technologies for application in the manufacture of cross-arms; Gasifiers for the generation of electric energy from residues of diverse types of biomass; Energy Networks and Vegetation (in partnership with CPFL Piratininga); and Implementation of Distributed Generation Systems.
- CPFL Piratininga acquired a further 250 units of the Green Transformer® for installation on its distribution grid. This is a transformer designed to be less aggressive environmentally, yet with a longer working life. The equipment was presented at the IV Congress of Electric Energy Technical Innovation receiving an Honorary Mention - Informe Técnico First Place. The company is also continuing with the project Distributed Residential Generation System, based on a natural gas reformer and a 2 KW combustion cell.
- The group companies also acquired 4 electric motorcycles with an operating cost of R$ 0.01 per kilometer and a running distance of 50 km per charge.
Program of Urban Tree planting: donations of up to 82 thousand saplings to the municipalities in their concession areas.
Program for the Final Disposal of Hazardous Residues.
Program for Selective Collection: separation of white paper, cardboard and plastics.
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Maintenance of the Environmental Certificate ISO 14.001:04: the certificate is valid for the scope Co-existence of the Urban Electric Energy Distribution Grid and the Environment, at the two distributors.
Reverse Chain: a process that permits the re-utilization of materials and obsolete equipment, withdrawn from the energy distribution and transmission networks.
Rio Grande Energia
Certification ISO 14.001: in December 2007, RGE received from BVC (Bureau Veritas Certification of Brazil) the recommendation for the certification ISO 14.001:2004 in the following scopes: Co-existence of the Urban Electric Energy Distribution Grid and the Environment and Electric Energy Transmission Services at the Substation Antônio Prado and the 69 kV Transmission Line Nova Prata 2 - Antônio Prado.
Reverse Logistics Process: aimed at the recycling and recovery of about 120 tons/month of damaged equipment and materials from the electric system.
Fifth Stage of the Impressive Tree Campaign: in 2007, through this campaign, RGE, distributed 15 thousand saplings of trees considered impressive and rare, from the species, guabijú, angico, cerejeira, uvaia and ipê amarelo. Leaflets containing information on the trees were also distributed. The campaign was started in 2003 and has already distributed approximately 149 thousand saplings.
Sixth Stage of the Araucária Reforestation Campaign: aimed at encouraging the replanting of the Araucária, a tree considered to be in extinction and essential for the native fauna of the region. In 2007, 5 thousand saplings and 2 thousand boxes of seedlings were distributed. It is estimated that this year the campaign will have been responsible for an increase of 20 thousand araucárias within the RGE concession area.
The Matas Ciliares Project: carried out in partnership with other organizations through which RGE donates material for the construction of isolating fences for the environmental recovery of 1,080,000 m² of areas situated by the banks of the rivers.
Urban Tree Planting Project: in which RGE planted 1.3 thousand trees in the streets and parks of 20 municipalities. The project was carried out with the highest standards of quality, delivering excellent results regarding environmental and aesthetic aspects, earning considerable recognition from the benefited communities.
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Corporative Programs:
Program for the Neutralization of Greenhouse Gas Emissions: the group companies have been carrying out extensive diagnoses on gases that can cause the greenhouse effect from secondary activities at the Campinas Headquarter Building. The target is to dimension the emissions resulting from the companys activities with the aim of seeking alternative solutions to minimize and compensate their impacts.
Recognition
The CPFL Energia group companies received several prizes in recognition of their performance in the areas of management, operations and quality of services, here are a few:
CPFL ENERGIA
Carta Capital Magazine - Most Admired Companies in Brazil The Most Admired in the Energy Sector.
Annual Statement Award 2007 - Jornal Gazeta Mercantil: Best Energy Company.
DCI Companies Award 2007 - Best Company in the Electric Energy Sector.
Guide Exame of Sustainability 2007 - Model Company, for the fifth year.
Guide Exame/Você S.A. - Best Companies to Work For, for the sixth year.
Apimec Quality Award 2007 - Best Presentation of the Year.
Expo Money Awards 2007 - Special Mention - Respect for the Individual Investor.
Aberje Brasil Award 2007:
- Business Communication Company of the Year - Highlight Brazil - CPFL Energia.
- Personality of the Year in Business Communication.
- Audio-Visual Media Management - São Paulo Region - South.
IR Magazine Awards Brazil 2007 - Honorary Mentions: Best Corporate Governance, Best Conference Call, Best Large Cap Company Investor Relations Program.
USP Award for Corporate Communications 2007 - Espaço Cultural CPFL Communication.
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DISTRIBUTORS
Electricity Award 2007 - Eletricidade Moderna (Modern Electricity) Magazine:
- CPFL Paulista - Best Company in Brazil, Best Company in the Southeastern Region, Best Operational Performance.
- RGE - Best Company in Brazil in Commercial Performance, Best Company in the Southern Region.
- CPFL Jaguari - Best National Evolution.
- CPFL Leste Paulista - Best Engineering Performance.
Abradee Award 2007:
- CPFL Paulista - Best Operational Management.
- CPFL Piratininga - Best Economic-Financial Management.
IASC Award - ANEEL Index of Consumer Satisfaction:
- CPFL Jaguari - Best Concessionaire in Brazil and Best Electric Energy Distributor -Southern, Southeastern, Central-Western Regions - (Up to 30 thousand consumer units).
- CPFL Leste Paulista Best Electric Energy Distributor - South/Southeastern Regions, for concessionaires between 30 thousand and 400 thousand consumer units.
Medalha Eloy Chaves Award for Health and Safety at Work:
- CPFL Santa Cruz Accident Prevention Achievement.
- RGE - Accident Prevention Achievement.
GENERATORS
Mário Henrique Simonsen Award 2007
- BAESA - Energética Barra Grande - Statement Excellence.
Fritz Müller Award 2007 - Environmental Foundation-SC
- Baesa (Energética Barra Grande) - Execution of relevant environmental actions.
Fritz Müller Award 2007 - Environmental Foundation-SC Company Award
- Enercan (Campos Novos Energia) - Creation of the Canoas River Park.
Citizen Company ADVB 2007
- Baesa (Energética Barra Grande) - Environmental Preservation Category.
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COMMERCIALIZATION COMPANIES
Corporate Excellency Award - FGV/Conjuntura Econômica (Economic Conjuncture) Magazine:
- CPFL Brasil - Highest profitability based on assets and net worth among any publicly held company in any sector monitored by FGV.
- Highlighted in the evaluation carried out by Valor 1000 Award, with the highest profitability - Return to Shareholders in relation to Own Capital in the institution.
9. Independent Auditors
The Independent Auditing Firm KPMG was contracted by CPFL Energia for external auditing services related to the examination of the companys financial statements as from the second quarter of 2007, in compliance with the required turnover of auditing firms as prescribed in Article 31 of Instruction CVM 308/1999. In compliance with Instruction CVM No. 381/03, we inform that this auditing firm, in 2007, did not render any services non-related to external auditing with fees higher than 5% of the total fee received for this service.
10. Closing Acknowledgements
The CPFL Energia Board of Directors wishes to thank the shareholders, clients, suppliers and the communities in the controlled companies activity area, for the confidence placed in the Company in 2007. We especially thank our employees for the competence, effort and dedication in the fulfillment of the objectives and targets established.
The Board of Directors
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For further information on the performance of this company or any other
company pertaining to the CPFL group, access the website
www.cpfl.com.br/ir.
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Annual Social Report / 2007(*) Company: CPFL - ENERGIA S.A |
1 - Basis of Calculation | 2007 Value (R$ 000) | 2006 Value (R$ 000) | ||||
Net Revenues (NR) | 9,409,535 | 7,911,950 | ||||
Operating Result (OR) | 2,507,161 | 2,121,254 | ||||
Gross Payroll (GP) | 392,246 | 351,814 | ||||
2 - Internal Social Indicators | Value (000) | % of GP | % of NR | Valor (000) | % of GP | % of NR |
Food | 30,228 | 7.70% | 0.31% | 26,556 | 7.55% | 0.34% |
Mandatory payroll taxes | 104,345 | 26.60% | 1.11% | 95,344 | 27.10% | 1.21% |
Private pension plan | 21,640 | 5.52% | 0.23% | 19,234 | 5.47% | 0.24% |
Health | 25,284 | 6.45% | 0.27% | 20,901 | 5.94% | 0.26% |
Occupational safety and health | 3,025 | 0.77% | 0.03% | 466 | 0.13% | 0.01% |
Education | 2,523 | 0.64% | 0.03% | 1,515 | 0.43% | 0.02% |
Culture | 0 | 0.00% | 0.00% | 0 | 0.00% | 0.00% |
Training and professional development | 7,712 | 1.97% | 0.08% | 7,244 | 2.06% | 0.09% |
Day-care/allowance | 778 | 0.20% | 0.01% | 493 | 0.14% | 0.01% |
Profit/income sharing | 28,073 | 7.16% | 0.30% | 32,622 | 9.27% | 0.41% |
Other | 6,288 | 1.60% | 0.07% | 2,483 | 0.71% | 0.03% |
Total - internal social indicators | 229,896 | 58.61% | 2.44% | 206,858 | 58.80% | 2.61% |
3 - External Social Indicators | Valor (000) | % of OR | % of NR | Valor (000) | % of OR | % of NR |
Education | 12 | 0.00% | 0.00% | 166 | 0.01% | 0.01% |
Culture | 14,133 | 0.56% | 0.15% | 11,298 | 0.53% | 0.14% |
Health and sanitation | 686 | 0.03% | 0.01% | 1,081 | 0.05% | 0.01% |
Sport | 10 | 0.00% | 0.00% | 11 | 0.00% | 0.00% |
War on hunger and malnutrition | 0 | 0.00% | 0.00% | 0 | 0.00% | 0.00% |
Other | 2,293 | 0.09% | 0.02% | 19,882 | 0.94% | 0.25% |
Total contribution to society | 17,134 | 0.68% | 0.18% | 32,438 | 1.53% | 0.41% |
Taxes (excluding payroll taxes) | 4,607,134 | 183.76% | 48.96% | 4,554,544 | 214.71% | 57.57% |
Total - external social indicators | 4,624,268 | 184.44% | 49.14% | 4,586,982 | 216.24% | 57.98% |
4 - Environmental indicators | Valor (000) | % of GP | % of NR | Valor (000) | % of OR | % of NR |
Investments related to company production / operations | 50,524 | 2.02% | 0.54% | 34,121 | 1.61% | 0.43% |
Investments in external programs and/or projects | 12,150 | 0.48% | 0.13% | 13,810 | 0.65% | 0.17% |
Total environmental investments | 62,674 | 2.5% | 0.67% | 47,931 | 2.26% | 0.61% |
Regarding the establishment of "annual targets" to minimize residues, the consumption in production / operation and increase efficiency in the use of natural resources, the company | ( ) do not have | ( ) fulfill from | ( ) do not have | ( ) fulfill from | ||
targets | 51 to 75% | targets | 51 to 75% | |||
( ) fulfill from | (X) fulfill from | ( ) fulfill from | (X) fulfill from | |||
0 to 50% | 76 to 100% | 0 to 50% | 76 to 100% | |||
5 - Staff indicators | 2007 | 2006 |
Nº of employees at the end of period | 7,176 | 5,836 |
Nº of employees hired during period | 820 | 425 |
Nº of outsourced employees | 5,414 | 3,286 |
Nº of interns | 158 | 137 |
Nº of employees above 45 years of age | 1,838 | 1,324 |
Nº of women working at the company | 1,172 | 1,012 |
% of management position occupied by women | 8.67% | 11.20% |
Nº of Afro-Brazilian employees working at the company | 554 | 431 |
% of management position occupied by Afro-Brazilian employees | 1.02% | 0.40% |
Nº of employees with disabilities | 196 | 179 |
6 - Relevant information regarding the exercise of corporate citizenship | 2007 | 2008 Targets | ||||
Ratio of the highest to the lowest compensation at company | 80.67 | 80.67 | ||||
Total number of work-related accidents | 90 | 30 | ||||
Social and environmental projects developed by the company were decided upon by: | ( ) directors | (X) directors and managers |
( ) all employees | ( ) directors | (X) directors and managers |
( ) all employees |
Health and safety standards at the workplace were decided upon by: | ( ) directors and managers |
( ) all employees | (X) all + Cipa | ( ) directors and managers |
( ) all employees |
(X) all + Cipa |
Regarding the liberty to join a union, the right to a collective negotiation and the internal representation of the employees, the company: | ( ) does not get involved |
( ) follows the OIT rules |
(X) motivates and follows OIT |
( ) will not get involved |
( ) will follow the OIT standards |
(X) will motivate and follow OIT |
The private pension plan contemplates: | ( ) directors | ( ) directors and managers |
(X) all employees |
( ) directors | ( ) directors and managers |
(X) all employees |
The profit / income sharing contemplates: | ( ) directors | ( ) directors and managers |
(X) all employees |
( ) directors | ( ) directors and managers |
(X) all employees |
In the selection of suppliers,the same ethical standards and social/environmental responsibilities adopted by the company: | ( ) are not considered |
( ) are suggested |
(X) are required |
( ) will not be considered |
( ) will be suggested |
( X ) will be required |
Regarding the participation of employees in voluntary work programs, the company: | ( ) does not get involved |
( ) supports | (X ) organizes and motivates |
( ) will not get involved |
( ) will support | (X ) will organize and motivate |
Total number of customer complaints and criticisms: | in the company 785,607 |
in Procon 1,858 |
in the Courts 1,683 |
in the company 748,078 |
in Procon 1,780 |
in the Courts 1,559 |
% of complaints and criticisms attended: to/resolved | in the company 100% |
in Procon 100% |
in the Courts 67% |
in the company 100% |
in Procon 100% |
in the Courts 45% |
Total Value-Added for distribution (R$ 000): | In 2007: 7,887,597 | In 2006: 7,065,607 | ||||
Value-added Distribution (VAD): | 66.56% government 4.00% employees | 65.39% government 4.99% employees | ||||
19.79% shareholders 8.61% third parties | 18.88% shareholders 9.74% third parties | |||||
1 04% retained | 1.00% retained | |||||
7 - Other information |
1 - Calculation Base
Net Revenues (NR)
The Company did reclassifications in the line of net revenues in the 2006 income statement, see details in explanatory note No. 2 of the Financial Statements.
Consolidated informations
In the financial items were utilized the percentage of stock paticipation. For the other information, as number of employees and legal lawsuits, the informations were available in full numbers.
Responsible: Antônio Carlos Bassalo, phone: 55-19-3756-8018, bassalo@cpfl.com.br
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NOTES TO THE FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2007 AND 2006
(Amounts stated in thousands of Brazilian reais, except where otherwise indicated)
( 1 ) OPERATIONS | |
CPFL Energia S.A. (CPFL Energia or Company) is a publicly quoted corporation incorporated for the principal purpose of acting as a holding company, participating in the capital of other companies primarily dedicated to electric energy distribution, generation and sales activities.
The Company has direct and indirect interests in the following operational subsidiaries (information on the concession area, number of consumers, energy production capacity and associated data not examined by the independent auditors):
1.1 Distribution activities
Direct interests:
Companhia Paulista de Força e Luz
Companhia Paulista de Força e Luz (CPFL Paulista) is a publicly quoted corporation, public electric energy service concessionaire, operating principally in the distribution of power to 234 municipalities in the interior of São Paulo State, serving approximately 3,414.6 thousand consumers. Among the main municipalities are Campinas, Ribeirão Preto, Bauru and São José do Rio Preto. Its concession term ends in 2027, and may be extended for a further 30-year period. The Company holds 100% of the total capital of CPFL Paulista.
Companhia Piratininga de Força e Luz
Companhia Piratininga de Força e Luz (CPFL Piratininga) is a publicly quoted corporation, public electric energy service concessionaire, operating principally in the distribution of power to 27 municipalities in the interior and coastal areas of São Paulo State, serving approximately 1,329.7 thousand consumers. The main municipalities include Santos, Sorocaba and Jundiaí. Its concession term ends in 2028, and may be extended for a further 30-year period. The Companyholds 100% of the total capital of CPFL Piratininga.
Rio Grande Energia S.A.
Rio Grande Energia S.A. (RGE) is a publicly quoted corporation and public electric energy service concessionaire, operating in the northern and northeastern regions of the State of Rio Grande do Sul, serving 262 municipalities and approximately 1,160.4 thousand consumers. The main municipalities include Passo Fundo and Caxias do Sul. Its has a concession term of 30 years, up to 2027, which may be extended for a further 30 years. Since the corporate restructuring of RGE, the Company directly holds 100% of the capital of RGE (for further details see Note 12).
Companhia Luz e Força Santa Cruz
CPFL Santa Cruz is a private corporation and public electric energy service concessionaire, which operates mainly in energy distribution to 24 municipalities located in the State of São Paulo, in the Central-Sorocabana region, and in 3 municipalities in the north of the State of Paraná, serving
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approximately 169.3 thousand consumers. The main municipalities include Ourinhos, Avaré and Santa Cruz do Rio Pardo. Its concession term ends in 2015, and may be extended for a further 20 years.
Indirect interests:
Companhia Paulista de Energia Elétrica
Companhia Paulista de Energia Elétrica (CPFL Leste Paulista) is a private corporation and public electric energy service concessionaire, which distributes energy to 7 municipalities: São José do Rio Pardo, Casa Branca, Caconde, Divinolândia, Itobi, São Sebastião da Grama and Tapiratiba, located in the State of São Paulo, serving approximately 47.8 thousand consumers. Its concession term ends in 2015, and may be extended for a further 20 years. The subsidiary CPFL Jaguariúna holds 96.56% of the capital of CPFL Leste Paulista.
Companhia Sul Paulista de Energia
Companhia Sul Paulista de Energia (CPFL Sul Paulista) is a private corporation and public electric energy service concessionaire, which distributes energy to 5 municipalities: Itapetininga, São Miguel Arcanjo, Sarapuí, Guareí and Alambari, located in the State of São Paulo, serving approximately 66.4 thousand consumers. Its concession term ends in 2015, and may be extended for a further 20 years. The subsidiary CPFL Jaguariúna holds 87.80% of the capital of CPFL Sul Paulista.
Companhia Jaguari de Energia
Companhia Jaguari de Energia (CPFL Jaguari) is a private corporation and public electric energy service concessionaire, which distributes energy to 2 municipalities: Jaguariúna and Pedreira, located in the State of São Paulo, serving approximately 29.6 thousand consumers. Its concession term ends in 2015, and may be extended for a further 20 years. The subsidiary CPFL Jaguariúna holds 90.15% of the capital of CPFL Jaguari.
Companhia Luz e Força Mococa
Companhia Luz e Força Mococa (CPFL Mococa) is a private corporation and public electric energy service concessionaire, operating mainly in distribution of energy to the municipality of Mococa, in the State of São Paulo and 3 municipalities in the State of Minas Gerais: Arceburgo, Itamogi and Monte Santo de Minas, serving approximately 37.8 thousand consumers. Its concession term ends in 2015, and may be extended for a further 20 years. The subsidiary CPFL Jaguariúna holds 89.75% of the capital of CPFL Mococa.
1.2 Generation activities
Direct interests:
CPFL Geração de Energia S.A.
CPFL Geração de Energia S.A. (CPFL Geração) is a publicly quoted corporation, which operated until 2006 as a holding company for the Company's energy generation business. As from 2007, with the mergers of CPFL Centrais Elétricas S.A. (CPFL Centrais Elétricas) and SEMESA S.A. (SEMESA), see Note 12, in addition to participating in the capital of other companies, the subsidiary CPFL Geração started operating as a public electric energy generation service concessionaire. It owns 19 small hydropower plants and 1 thermal power plant, with total installed capacity of 120 MW and 36 MW, respectively, all located in the State of São Paulo. Its concession term ends in 2027 and may be extended for a further 30 years. It also has an interest in the Serra da Mesa Hydropower Plant, located on the Tocantins river in the State of Goiás. The concession and operation of the Hydropower plant belong to Furnas Centrais Elétricas S.A. (FURNAS). These assets were leased to FURNAS under an agreement with a term of 30 years, starting in 1998, which assured SEMESA of a share of 51.54% of the installed capacity of 1,275 MW (657 MW) and average assured power of 671 MW (average of 345.8 MW). CPFL Geração, through the merged subsidiary SEMESA, also holds the concession and the related assets of
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the Ponte do Silva small hydropower plant (PCH), with total power of 125 kW, located on the São Luiz River, in the State of Minas Gerais, granted in October 1989 for a 30 year term. The Company holds 100% of the capital of CPFL Geração.
Indirect interests:
CPFL Sul Centrais Elétricas Ltda.
CPFL Sul Centrais Elétricas Ltda. (CPFL Sul Centrais Elétricas) is a limited liability company and owns four small hydropower plants PCHs, in the State of Rio Grande do Sul. The total power of the PCHs is 2.65 MW, with average assured energy of 2.45 MW. The subsidiary CPFL Geração holds 100% of CPFL Sul Centrais Elétricas capital.
BAESA - Energética Barra Grande S.A.
BAESA Energética Barra Grande S.A. (BAESA), is a publicly quoted corporation, whose objective is to construct, operate and exploit the Barra Grande Hydropower Plant (located on the Pelotas River, on the borders of the States of Santa Catarina and Rio Grande do Sul), with a planned installed capacity, established in the concession contract, of 690 MW. The three generator units, each with a capacity of 230 MW, started commercial operations in November 2005, February and May 2006. Its concession term ends in 2036, and may be extended in accordance with the conditions established by the Granting Authority. The subsidiary CPFL Geração holds 25.01% of BAESA's capital.
Campos Novos Energia S.A.
Campos Novos Energia S.A. ("ENERCAN") is a private corporation whose objective is to construct, operate and exploit the Campos Novos Hydropower Plant, (located on the River Canoas in the State of Santa Catarina), with planned installed capacity, established in the concession contract, of 880 MW. Commercial operations started in 2007, 2 turbines started operating in February and the last turbine started operating in May. Its concession term ends in 2035, and may be extended in accordance with the conditions established by the Granting Authority. The subsidiary CPFL Geração holds 48.72% of ENERCANs total capital.
Paulista Lajeado Energia S.A.
The objective of Paulista Lajeado Energia S.A. (Paulista Lajeado), a private corporation, is the generation and sale of electric energy. Paulista Lajeado holds 6.93% of the shared concession for the Luis Eduardo Magalhães Hydropower Plant Lajeado, which has an installed capacity of 902.5 MW. Paulista Lajeado also has a 5.84% share in the total capital of Investco S.A. (Investco), which holds the assets of the Hydropower Plant. These assets were leased to the controlling shareholders under a lease agreement and the portion relating to Paulista Lajeado's share of the plant's assured energy (6.93%) is negotiated with the subsidiaries CPFL Leste Paulista, CPFL Sul Paulista, CPFL Jaguari and CPFL Mococa. Paulista Lajeados concession term ends in 2032, and may be extended in accordance with the conditions established by the Granting Authority. The subsidiary Jaguari Geração holds 59.93% of the capital of Paulista Lajeado.
Subsidiaries in development
The subsidiary CPFL Geração holds interests in new generating ventures, the total assured energy of which will be available by 2010, increasing its installed capacity, in proportion to its participation, to 2,087
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MW. This capacity, together with the installed capacity of the subsidiaries of CPFL Jaguariúna will provide a total consolidated installed capacity of 2,174 MW. These jointly-controlled projects are:
CERAN - Companhia Energética Rio das Antas S.A.
The objective of CERAN - Companhia Energética Rio das Antas S.A. (CERAN), a private corporation, is to implement and operate the Monte Claro, Castro Alves and 14 de Julho Hydropower Plants (located of the State of Rio Grande do Sul) with planned installed capacity of 360 MW. The Monte Claro Hydropower Plant (130 MW) started operating in December of 2004, and the operational start-up of the other plants is scheduled for 2008 (Castro Alves and 14 de Julho Hydropower Plants). Its concession term ends in 2036, and may be extended to additional 35 years. The subsidiary CPFL Geração holds 65.00% of the capital of CERAN.
Foz do Chapecó Energia S.A.
The objective of Foz do Chapecó Energia S.A. (Foz do Chapecó), a private corporation, is to construct, operate and exploit the Foz do Chapecó Hydropower Plant (located on the Uruguai River on the border of the States of Santa Catarina and Rio Grande do Sul), with planned installed capacity, established in the concession contract, of 855 MW. Construction work started in 2006 and commercial operations are scheduled to start in 2010. Its concession term ends in 2036, and may be extended in accordance with the conditions established by the Granting Authority. The subsidiary CPFL Geração holds 51.00% of the capital of Foz do Chapecó.
1.3 Commercialization activities
Direct interest:
CPFL Comercialização Brasil S.A.
CPFL Comercialização Brasil S.A. (CPFL Brasil) is a private corporation, and its main objective is to sell energy, provide associated services, linked with or necessary for the sale of energy, and strategic, institutional and financial advisory services for buyers and sellers of electric energy and organizations operating in the national and international energy sector. CPFL Brasil is authorized by ANEEL to act as an electric energy retail agent in the ambit of the Electric Energy Trading Chamber (CCEE). The Company holds 100% of CPFL Brasil's capital.
Indirect interests:
Clion Assessoria e Comercialização de Energia Elétrica Ltda
Clion Assessoria e Comercialização de Energia Elétrica Ltda (CPFL Meridional) is a limited liability company, in order to sell electric energy and provide consultancy services in the energy field. It is authorized by ANEEL to act as an electric energy retail agent in the ambit of the CCEE. The subsidiary CPFL Brasil holds 100% of the capital of CPFL Meridional.
Sul Geradora Participações S.A.
Sul Geradora Participações S.A. (Sul Geradora) is a private corporation with the main purpose of participating in the capital of other companies as a shareholder, quota-holder or in any other capacity. The subsidiary CPFL Brasil holds 99.95% of the capital of Sul Geradora.
CPFL Comercialização Cone Sul S.A.
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CPFL Comercialização Cone Sul S.A. (CPFL Cone Sul) is a private corporation, and its objective is to sell energy. It is authorized to act as electric energy retail agent in the ambit of the CCEE. The subsidiary CPFL Brasil holds 100% of the capital of CPFL Cone Sul.
CPFL Planalto Ltda
The objective of CPFL Planato Ltda (CPFL Planalto), a limited liability company, is to sell energy. It is authorized to act as an electric energy retail agent in the ambit of the CCEE. The subsidiary CPFL Jaguariúna holds 100% of CPFL Planalto's capital .
CPFL Serviços, Equipamentos, Indústria e Comércio S.A.
The objective of CPFL Serviços, Equipamentos, Indústria e Comércio S.A (CPFL Serviços), a private corporation, is service provision in two business sectors: generation, transmission and distribution of electric energy and the transmission, distribution and storage of natural gas. The subsidiary CPFL Jaguariúna holds 89.81% of the capital of CPFL Serviços.
1.4 Other Participation Companies
Perácio Participações S.A.
The objective of Perácio Participações S.A. (Perácio) a private corporation is participation in other companies. It currently owns 100% of the capital of CPFL Jaguariúna. The Company holds 100% of Perácio's capital .
CPFL Jaguariúna S.A.
CPFL Jaguariúna S.A. (CPFL Jaguariúna) was set up with the main objective of acting as a holding company, and holds direct and indirect shares in public utilities companies that provide generation, distribution and sale of electric energy services. Perácio holds 100% do CPFL Jaguariúna's capital.
Makelele Participações S.A.
The objective of Makelele Participações S.A. (Makelele), a private corporation, is to participate in other companies, However, it currently holds no such participations. The subsidiary CPFL Geração holds 100% of Makelele's capital.
Companhia Jaguari de Geração de Energia
Companhia Jaguari de Geração de Energia (Jaguari Geração) is a private corporation and was set up to operate in the generation, distribution and sale of electric energy. Jaguari Geração currently holds 59.93% of the capital of Paulista Lajeado. The subsidiary CPFL Jaguariúna holds 90.15% of the capital of Jaguari Geração.
Chumpitaz Participações S.A.
The objective of Chumpitaz Participações S.A. (Chumpitaz), a private corporation, is participation in other companies, besides it doesnt have any participation at this moment. The Company holds 100% of Chumpitaz's capital.
( 2 ) PRESENTATION OF THE FINANCIAL STATEMENTS | |
The individual (Company) and consolidated financial statements were prepared in accordance with generally accepted accounting principles in Brazil, in accordance with the Accounting Manual of the Public Electric Energy Service, rules defined by National Electric Energy Agency ANEEL and the standards published by the Brazilian Securities Commission (CVM).
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In order to improve the information presented to the market, the 2007 and 2006 Cash Flow and Added Value Statements, parent company and consolidated, are presented as additional information, in APPENDICES I and II.
The Cash Flow Statements were prepared in accordance with the criteria established by FAS 95 Statement of Cash Flows, with respect to the presentation format, within the context of registering the Company's financial statements with the Securities and Exchange Commission (SEC).
2.1 Summary of the Principal Accounting Practices
a) Cash and Banks: Include cash balances, bank deposits, bank deposits certificates and short-term financial investments, which are stated at cost, plus income accrued up to the balance sheet dates.
b) Consumers, Concessionaires and Licensees: Include the supply of billed and unbilled electric energy to final consumers, and to other concessionaires for electric energy supply, in accordance with amounts through the Electric Energy Trading Chamber (CCEE) and balances related to regulatory assets of different kinds.
c) Allowance for Doubtful Accounts: recorded based on an analysis of the amounts receivable from clients in the residential class past due by more than 90 days, in the commercial class past due by more than 180 days and from other classes past due by more than 360 days, including public sector clients. It also takes into account an individual analysis of the balances of the larger customers, including refinancing of receivables classified as doubtful, in accordance with management's experience in relation to effective losses.
d) Investments: Include interests in subsidiaries valued by the equity method. Other interests are recorded at acquisition cost, net of provisions to reduce them to market value, where applicable. Investments also include the goodwill recorded on the acquisition of subsidiaries, resulting from the difference between the acquisition price paid and the book value of the companies acquired, amortized in proportion to the projected net income for the remaining period of the concession contract of each investee, in accordance with the ANEEL instructions.
Also includes assets related to the Serra da Mesa Hydropower Plant project, which, as they are leased to FURNAS, are shown under Investments Leased Assets, net of depreciation calculated by the straight-line method, at annual rates of 2% to 20%
e) Property, plant and equipment: Recorded at purchase, construction or formation cost, including, where applicable, interest, other financial charges and administrative costs, restated to December 31, 1995, net of depreciation calculated by the straight-line method, at annual rates of 2% to 20%.
f) Restatement of Assets and Liabilities: Assets and liabilities indexed to inflation or exchange rates variations, in accordance with contractual or legal provisions, are updated to the balance sheet dates.
g) Income Tax and Social Contribution: are calculated and recorded in accordance with the legislation in effect on the balance sheet dates. The Company and certain subsidiaries recorded in their financial statements the effects of tax credits relating to income tax and social contribution on tax loss carryforwards and temporary differences, supported by expectations of the future generation of income tax and social contribution payable within a period not exceeding 10 years. The subsidiaries also recorded tax credits in respect of the benefit of the goodwill merged by the subsidiaries, which are amortized in proportion to the projected net income for the remainder of the concession contract of each investee.
h) Retirement and Pension Plans: The subsidiaries record the post-employment benefits and the pension plans on the accrual basis and in accordance with CVM Decision 371/00.
i) Reserves for contingencies: The reserves for contingencies known at the balance sheet dates are recorded by assessing and quantifying the risks relating to tax, labor or civil matters, where management and the legal advisors consider loss is probable in processes involving litigation. The provisions shown in this item are net of the related legal deposits or blocks.
j) Loans and financing - Restated in accordance with the monetary and exchange variations, including charges.
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k) Derivatives - The company uses derivatives to manage the risks of variations in the exchange rates and interest on certain liabilities. These contracts are recorded on the accrual basis, and accrued losses and gains are recognised in financial income or expense.
l) Income: Revenue and expense are recorded on the accrual basis. Revenue from electric energy distribution is recognized when the energy is billed. Unbilled revenue relating to the monthly billing cycle is provisioned based on the actual amount of energy supplied during the month and the annualized loss rate. Historically, the difference between the estimated unbilled revenue and the actual consumption, which is recognized in the subsequent month, has not been material. Revenue from energy generation sales is recorded based on the assured energy and at tariffs specified in the terms of the contract or the market price in force. No consumers represent 10% or more of the total billing. The credits on operating costs and expense offset in determination of PIS and COFINS are stated net in the respective costs and expenses accounts.
m) Estimates: Preparation of financial statements in accordance with Brazilian Accounting Principles requires management of the Company and its subsidiaries to use estimates as a basis for recording certain transactions that affect the reported amounts of assets, liabilities, revenues and expenses, and also the disclosure of information on data in the financial statements. The final results of these transactions and information, with respect to their effective realization in subsequent periods, may differ from these estimates.
n) Net Income per Share: Is determined considering the number of shares outstanding on the balance sheet dates.
The Company and its subsidiaries made certain reclassifications in the Financial Statements published in December 31, 2006, to provide a basis for comparison, basically as a result of the new classifications required by ANEEL, in accordance with Order nº 3.073, which made changes to the Public Electric Energy Service Accounting Manual:
Item | From | To | ||
Deductions from Operating | ||||
Fuel Consumption Account - CCC | Operating Expenses | Revenue | ||
Energy Development Account - | Deductions from Operating | |||
CDE | Operating Expenses | Revenue | ||
Research and Development and | Deductions from Operating | |||
Energy Efficiency Programs | Operating Expenses | Revenue |
2.2 Consolidation Principles
The consolidated financial statements include the balances and transactions of the Company and its subsidiaries CPFL Paulista, CPFL Piratininga, CPFL Serra (to June 30, 2007), RGE (as from July 1, 2007), Nova 4 (to October 30, 2007), CPFL Santa Cruz (as from November 1, 2007), CPFL Geração, CPFL Brasil, Chumpitaz and Perácio (see corporate restructuring in Note 12). The asset, liability, income and expense balances were fully consolidated. Prior to consolidation into the Company's financial statements, the financial statements of CPFL Geração, CPFL Brasil and Perácio are consolidated with those of their subsidiaries, fully (majority) controlled subsidiaries or proportionally (jointly) controlled subsidiaries, according to the rules defined in CVM Instruction No. 247/96.
In compliance with the conditions described above, the portion relating to the non-controlling shareholders is stated separately in liabilities and income statements for the fiscal year.
All significant intercompany balances and transactions have been eliminated.
The accounting policies of CPFL Energias subsidiaries are consistent with those of CPFL Energia. The main difference in accounting policies relates to the revaluation of property, plant and equipment recorded by the indirect subsidiary RGE, which is eliminated in the shareholders equity base for calculation of equity interest and, consequently, in consolidation.
The Company's subsidiaries, by line of business, are as follows:
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2007 | 2006 | |||||||||
Subsidiary | Consolidation | Equity Interest - % | Equity Interest - % | |||||||
Method | Direct | Indirect (*) | Direct | Indirect (*) | ||||||
Energy Distribution | ||||||||||
Companhia Paulista de Força e Luz | Full | 100.00 | - | 100.00 | - | |||||
Companhia Piratininga de Força e Luz | Full | 100.00 | - | 100.00 | - | |||||
Companhia Luz e Força Santa Cruz | Full | 99.99 | - | - | 99.99 | |||||
Rio Grande Energia S.A. | Full | 100.00 | - | - | 99.76 | |||||
Companhia Paulista de Energia Eletrica | Full | - | 96.56 | - | - | |||||
Companhia Jaguari de Energia | Full | - | 90.15 | - | - | |||||
Companhia Sul Paulista de Energia | Full | - | 87.80 | - | - | |||||
Companhia Luz e Força de Mococa | Full | - | 89.75 | - | - | |||||
Energy Generation | ||||||||||
CPFL Geração de Energia S.A. | Full | 100.00 | - | 100.00 | - | |||||
CPFL Centrais Elétricas S.A. | Full | - | - | - | 100.00 | |||||
SEMESA S.A. | Full | - | - | - | 100.00 | |||||
CPFL Sul Centrais Elétricas Ltda | Full | - | 100.00 | - | 100.00 | |||||
Paulista Lajeado Energia S.A. | Full | - | 59.93 | - | - | |||||
CERAN - Companhia Energética Rio das Antas | Proportionate | - | 65.00 | - | 65.00 | |||||
BAESA - Energética Barra Grande S.A. | Proportionate | - | 25.01 | - | 25.01 | |||||
Foz do Chapecó Energia S.A. | Proportionate | - | 51.00 | - | 85.00 | |||||
Campos Novos Energia S.A. | Proportionate | - | 48.72 | - | 48.72 | |||||
Energy Commercialization | ||||||||||
CPFL Comercialização Brasil S.A. | Full | 100.00 | - | 100.00 | - | |||||
CPFL Comercialização Cone Sul S.A. | Full | - | 100.00 | 100.00 | - | |||||
Clion Assessoria e Comercialização de Energia Elétrica | ||||||||||
Ltda | Full | - | 100.00 | - | 100.00 | |||||
Sul Geradora Participações S.A. | Full | - | 99.95 | - | 99.95 | |||||
CPFL Planalto Ltda. (former CMS Comercializadora de | Full | - | 100.00 | - | - | |||||
Energia Ltda.) | ||||||||||
Services | ||||||||||
CPFL Serviços, Equipamentos, Indústria e Comércio | Full | - | 89.81 | - | - | |||||
S.A. (former CMS Energy, Equipamentos, Serviços, | ||||||||||
Indústria e Comércio S.A.) | ||||||||||
Holding Company | ||||||||||
Nova 4 Participações Ltda | Full | - | - | 100.00 | - | |||||
CPFL Serra Ltda | Full | - | - | 100.00 | - | |||||
Perácio Participações S.A. | Full | 100.00 | - | - | - | |||||
Chumpitaz Participações S.A. | Full | 100.00 | - | - | - | |||||
Makelele Participações S.A. | Full | - | 100.00 | - | 100.00 | |||||
CPFL Jaguariúna S.A. (former CMS Energy Brasil S.A.) | Full | - | 100.00 | - | - | |||||
Companhia Jaguari Geração de Energia | Full | - | 90.15 | - | - |
(*) Refer to the interests held by direct subsidiaries.
Corporate changes are described in Note 12.
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( 3 ) REGULATORY ASSETS AND LIABILITIES | ||
Consolidated | ||||||||
Current | Noncurrent | |||||||
2007 | 2006 | 2007 | 2006 | |||||
Assets | ||||||||
Consumers, Concessionaires and Licensees (note 5) | ||||||||
Extraordinary Tariff Adjustment (a) | 3,448 | 210,517 | 456 | - | ||||
Free Energy (a) | 1,924 | 74,500 | 480 | 790 | ||||
Tariff Review - Remuneration Base (b.1) | 1,443 | 28,484 | - | - | ||||
Tariff Review - Depreciation (b.1) | 13,147 | 34,341 | - | 12,604 | ||||
Tariff Adjustment - Others (b.3) | 1,769 | - | 95 | - | ||||
Discounts on the TUSD and Irrigation (b.3) | 64,235 | 31,078 | 19,637 | 7,970 | ||||
85,966 | 378,920 | 20,668 | 21,364 | |||||
Deferred cost variations | ||||||||
Parcel "A" (a) | 343,233 | 102,460 | 167,716 | 460,721 | ||||
CVA (c) | 189,216 | 231,893 | 38,178 | 51,957 | ||||
532,449 | 334,353 | 205,894 | 512,678 | |||||
Prepaid Expenses (note 9) | ||||||||
Tariff Adjustment Others (b.3) | 20,001 | 31,034 | 42 | 6,904 | ||||
PIS and COFINS - Generators pass-through (b.3) | 1,210 | 22,447 | - | 3,473 | ||||
Increase in PIS and COFINS (b.3) | 25,097 | 47,106 | - | 3,554 | ||||
Energy Surpluses and Shortfalls (b.3) | 81,704 | 30,102 | 28,605 | 5,467 | ||||
Low Income Consumers' Subsidy - Losses (d) | 55,967 | 47,393 | - | - | ||||
183,979 | 178,082 | 28,647 | 19,398 | |||||
Liabilities | ||||||||
Suppliers (note 14) | ||||||||
Free Energy (a) | (35,609) | (103,581) | (223) | - | ||||
- | ||||||||
Deferred Gains Variations | ||||||||
Parcel "A" (a) | (9,668) | - | (4,890) | (12,335) | ||||
CVA (c) | (220,370) | (162,350) | (63,499) | (58,734) | ||||
(230,038) | (162,350) | (68,389) | (71,069) | |||||
Other Accounts Payable (note 21) | ||||||||
PIS and COFINS - Generators pass-through (b.3) | (8) | (15,010) | - | - | ||||
Reimbursement to the consumer IRT Recalculation | ||||||||
(b.3) | (26,213) | - | - | - | ||||
Tariff Adjustment Others (b.3) | (1,492) | - | (54) | - | ||||
Increase in PIS and COFINS (b.3) | (113,964) | (30,842) | - | - | ||||
Energy Surpluses and Shortfalls (b.3) | (130) | - | (12) | - | ||||
Low Income Consumers' Subsidy - Gains (d) | (8,553) | (3,964) | (71) | (732) | ||||
(150,360) | (49,816) | (137) | (732) | |||||
Total | 386,387 | 575,608 | 186,460 | 481,639 | ||||
a) Rationing
At the end of 2001, as a result of the Emergency Program for the Reduction of Electric Energy Consumption, in effect between June 2001 and February 2002, the generators, the power distributors and the Federal Government signed the "Overall Agreement for the Electric Energy Sector". The agreement introduced an Extraordinary Tariff Increase of 2.9% on energy supplied to residential
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consumers (except those regarded as "low income consumers") and for rural and public lighting, and 7.9% for all other consumers, as a mechanism to reimburse the energy sector for the losses incurred as a result of this program.
This adjustment is being used to offset the following regulatory assets recorded by the subsidiaries:
Consolidated | ||||||||
Free Energy (2) | ||||||||
Asset | Liability | Parcel "A" | ||||||
RTE (1) | Net (3) | |||||||
Ratified Amount | 925,347 | 374,639 | (355,579) | 231,029 | ||||
Remuneration | 727,904 | 290,784 | (289,283) | 386,344 | ||||
Provision for Losses | (154,111) | (203,682) | 190,493 | - | ||||
Amount Amortized | (1,495,236) | (459,337) | 418,537 | (120,982) | ||||
Balances to be Amortized as of December 31, 2007 | 3,904 | 2,404 | (35,832) | 496,391 | ||||
(1) |
ANEEL Resolutions nº 480/02, 481/02 and 01/04. |
(2) |
ANEEL Resolutions nº 483/02 and 01/04. |
(3) |
ANEEL Resolutions nº 482/02 and 01/04. |
Changes in RTE, Free Energy and Parcel A balances:
Consolidated | ||||||||
Free Energy | ||||||||
Parcel "A" | ||||||||
RTE (1) | Asset (2) | Liability | Net | |||||
Balances as of December 31, 2005 | 417,012 | 284,801 | (292,200) | 475,906 | ||||
Assets added to the consolidated due to | ||||||||
acquisition of equity interests | - | 1,395 | (1,503) | 3,187 | ||||
Monetary Restatement | 51,488 | 43,669 | (58,519) | 71,753 | ||||
Provision for Losses | - | (146,606) | 145,568 | - | ||||
Realization/Payment | (257,983) | (107,969) | 103,073 | - | ||||
Balances as of December 31, 2006 | 210,517 | 75,290 | (103,581) | 550,846 | ||||
Assets added to the consolidated due to | ||||||||
acquisition of equity interests | 5,249 | 2,977 | (3,814) | 1,723 | ||||
Monetary Restatement | 20,542 | 27,654 | (24,344) | 61,480 | ||||
Provision for Losses | (8,744) | (45,916) | 44,925 | - | ||||
Realization/Payment | (223,660) | (79,964) | 71,115 | (117,658) | ||||
Tax Adjustments Technical Note | ||||||||
392/2007 SFF/ANEEL | - | 22,363 | (20,133) | - | ||||
Balances as of December 31, 2007 | 3,904 | 2,404 | (35,832) | 496,391 |
(1) | R$ 150 was recorded in Operating Revenue, under "Realization of Extraordinary Tariff Adjustment ", in relation to amortization of the Parcel "A" liability. |
(2) | The effects of amortization in 2007 were recorded in Operating Revenue R$ 76,487 (R$ 103,406 in 2006) and Accounts Receivable R$ 3,477 (R$ 4,563 in 2006). |
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comparison of the sales revenues from energy effectively recorded in the rationing period, and projected revenue for this period, not taking into account the effects of the Energy Rationing Program.
|
|
The RTE recorded refers to the indirect subsidiary CPFL Sul Paulista, which established a provision for losses of R$ 2,021, based on estimated projections of revenue, taking into consideration the market growth and expectations of inflation,
interest and regulatory aspects. The deadline established by ANEEL for recovery of the RTE by CPFL Sul Paulista is January 2009.
|
|
The term for recovery of the RTE ended in 2007 for the concessionaires CPFL Paulista and CPFL Piratininga, and losses of R$ 115,863 and R$ 36,227, respectively, were recorded due to failure to realize this asset. The subsidiaries CPFL Leste
Paulista, CPFL Jaguari and CPFL Mococa realized the full amount of the RTE in June 2005, December 2004 and December 2006, respectively. |
The amortization of Parcel A in 2007 for CPFL Piratininga and CPFL Santa Cruz is as follows:
Consolidated | ||
2007 | ||
Energy Purchased | 84,838 | |
System Service Charge | 5,477 | |
Fuel Consumption Account - CCC | 24,742 | |
RGR | 1,881 | |
Inspection Fee | 720 | |
Total | 117,658 | |
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b) Review and Adjustment Tariff
b.1) 1st Tariff review cycle (2003/2004)
a) CPFL Paulista Depreciation Difference
In 2007, by Ratification Resolution nº 443, ANEEL amended the final result of the first periodic Tariff Review of the subsidiary CPFL Paulista, approved in April 2005, adjusting the energy supply tariffs by 20.66%, due to a review of the calculation of the average depreciation percentage used in the 2003 tariff review. The difference in income resulting from the change in the tariff adjustment from 20.29% to 20.66%, and of the Xe component of the X Factor from 1.1352% to 1.2530%, corresponds to a financial adjustment of R$ 44,868, which is being offset in the 2007 tariff adjustment. This regulatory asset was recorded in the Consumers, Concessionaires and Licensees Tariff Review - Depreciation account, including the effects of PIS and COFINS, and has been amortized since the adjustment.
b) CPFL Piratininga Remuneration Base
In 2006, by Ratification Resolution nº 385, and in answer to the application filed by Bandeirante Energia S.A. (Bandeirante) for reconsideration of the tariff review, ANEEL amended the amounts of the subsidiary CPFL Piratininga remuneration base.
In accordance with this amendment, ANEEL established that the electric energy supply tariffs should be reset at 10.14% . Accordingly, in line with the new provisional percentage established by ANEEL, the subsidiary CPFL Piratininga recorded a regulatory asset of R$ 26,970 thousand in 2006, including PIS and COFINS, set against income from the Sale of Electric energy.
ANEEL Resolution nº 336, of 2001, concerning approval of the request for spin-off of Bandeirante and the partial transfer of its concession area to the subsidiary CPFL Piratininga, established that, in the first periodic Tariff Review, the lower of the rates of the two concessionaires would apply. As the rate for Bandeirante was 10.14%, against 11.52% for CPFL Piratininga, the rate of 10.14% applies.
ANEEL Order nº 3209, of October 22, 2007, ratified the result of the Companys first tariff Review, making it final.
c) CPFL Santa Cruz, CPFL Mococa and CPFL Leste Paulista Remuneration Base
In 2005, ANEEL finally approved the results of the first periodic Tariff Review of February 2004 for the subsidiaries CPFL Santa Cruz, CPFL Leste Paulista, CPFL Sul Paulista, CPFL Jaguari and CPFL Mococa. The differences between the provisional and the final percentages for subsidiaries CPFL Santa Cruz, CPFL Leste Paulista e CPFL Mococa were deferred to the next tariff adjustments and recovery is expected to continue until January 2008.
b.2) 2nd tariff review cycle (2007/2008)
By Ratification Resolution nº 553, ANEEL provisionally readjusted the tariffs of the subsidiary CPFL Piratininga by -10.11%, of which -10.94% refers to the tariff adjustment and 0.83% to the financial components not included in the periodic
tariff review.
As a result of the elimination from the tariff base of financial components added in the 2006 annual adjustment, the average effect for consumers will be -15.29% .
67
The adjustment authorized by ANEEL comprises the following items:
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Verified Revenue | 2,136,914 | |
Parcel A | 1,423,875 | |
Gross Interest on Capital | 154,530 | |
Depreciation Rate | 81,098 | |
Reference Company | 244,232 | |
Default | 12,619 | |
Parcel B | 492,479 | |
Income Required (Parc. A + B) | 1,916,354 | |
(-) Other Income | (13,152) | |
Income Required | 1,903,202 | |
Financial Components | 15,767 | |
Financial Repositioning | -10.94% | |
Financial Components | 0.83% | |
Total Repositioning | -10.11% |
Calculation of Parcel A comprises:
The financial components external to the tariff review comprise:
Additionally, a provisional Xe Factor of 0.73% was established, to be applied as a reduction factor for Parcel B in the subsequent 2008, 2009 and 2010 tariff adjustments.
b.3) 2007 Tariff Adjustments
The Annual Tariff Review - IRT of the electric energy distributors is the sum of the economic tariff review and the additional financial components. The Ratification Resolutions and the breakdown of the annual tariff review for the Companys directly and indirectly controlled electric energy distributors are shown in the following table:
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% Annual | % Financial | % Total | ||||||
Distributor | Ratification Resolution | Adjustment | Components | Adjustment | ||||
CPFL Santa Cruz | Resolution 424, of January 30, 2007 | 4.56% | 1.15% | 5.71% | ||||
CPFL Leste Paulista | Resolution 419, of January 30, 2007 | 3.52% | -0.21% | 3.31% | ||||
CPFL Sul Paulista | Resolution 423, of January 30, 2007 | 1.64% | 3.88% | 5.52% | ||||
CPFL Jaguari | Resolution 421, of January 30, 2007 | -0.38% | 2.04% | 1.66% | ||||
CPFL Mococa | Resolution 420, of January 30, 2007 | 6.70% | 2.91% | 9.61% | ||||
CPFL Paulista | Resolution 445, of April 3, 2007 | 2.60% | 4.46% | 7.06% | ||||
RGE | Resolution 452, of April 18, 2007 | 3.77% | 2.28% | 6.05% | ||||
CPFL Piratininga | See 2nd Tariff Review Cycle |
In addition to the CVA (see item c), the main additional financial components are as follows:
Total Amount | Recording of PIS and Cofins | |||||
Approved | increase - Asset | |||||
Distributor | 2007 | 2006 | ||||
CPFL Paulista | 97,377 | 72,983 | - | |||
CPFL Piratininga | 34,263 | - | 30,842 | |||
RGE | 13,462 | 569 | - | |||
73,552 | 30,842 | |||||
These amounts were recorded in the Prepaid Expenses account (note 9).
In view of the discussions in respect of the nature of this credit, the Company conservatively opted to record a liability of the same amount, posted in the account Other Accounts Payable (note 21), which is monetarily restated based on the variation of the IGP-M.
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Other effects of the tariff adjustment for the subsidiary CPFL Paulista, in addition to those mentioned above, were:
The following table shows the changes in the above items in relation to Tariff Review and Adjustments in the years ended December 31 2007 and 2006:
Consolidated | ||||||||||||||||||||||||
Tariff Review - Remuneration Base (b.1) |
Tariff Review - Depreciation (b.1) |
Tariff Adjustment- Other Asset and Liability (b.3) (1) |
Tariff Adjustment- Itaipu Purchase (b.3) |
PIS and COFINS - Generators Pass-through (b.3) |
Tariff Review - Return of consumer - IRT 2005 and 2006 Recalculated (b.3) |
Increase in PIS and COFINS (b.3) | Energy Surpluses or Shortfalls (b.3) |
Discounts on the TUSD and irrigation (b.3) | Total | |||||||||||||||
Asset (2) | Liability (3) | Asset | Liability | |||||||||||||||||||||
Balance as of December 31, 2005 | (103,182) | 33,100 | 10,917 | 33,238 | 11,534 | (11,456) | - | 41,474 | - | 44,212 | 2,412 | 62,249 | ||||||||||||
Assets added to the consolidated due to | ||||||||||||||||||||||||
acquisition of equity interests | 6,686 | - | - | - | 70 | - | - | 12,389 | - | - | 107 | 19,252 | ||||||||||||
Constitution | 26,970 | 10,402 | 25,642 | 15,152 | 40,522 | (40,633) | - | 30,842 | (30,842) | 13,986 | 46,792 | 138,833 | ||||||||||||
Restatement | - | 3,443 | 607 | 277 | - | - | - | 1,079 | - | - | 425 | 5,831 | ||||||||||||
Amortization | 98,010 | - | (12,280) | (35,615) | (26,206) | 37,079 | - | (35,124) | - | (22,629) | (10,688) | (7,453) | ||||||||||||
Balance as of December 31, 2006 | 28,484 | 46,945 | 24,886 | 13,052 | 25,920 | (15,010) | - | 50,660 | (30,842) | 35,569 | 39,048 | 218,712 | ||||||||||||
Assets added to the consolidated due to | ||||||||||||||||||||||||
acquisition of equity interests | 2,099 | - | 1,373 | - | - | (50) | - | 2,503 | (2,558) | 557 | 2,511 | 6,435 | ||||||||||||
Constitution | 8,301 | 6,310 | 31,785 | - | (7,579) | - | (98,635) | 73,552 | (72,983) | 99,270 | 77,489 | 117,510 | ||||||||||||
Restatement | 4,393 | (3,784) | 2,835 | - | - | - | - | 766 | (7,581) | - | 3,514 | 143 | ||||||||||||
Amortization | (41,834) | (36,324) | (40,518) | (13,052) | (17,131) | 15,052 | 72,422 | (102,384) | - | (25,229) | (38,690) | (227,688) | ||||||||||||
Balance as of December 31, 2007 | 1,443 | 13,147 | 20,361 | - | 1,210 | (8) | (26,213) | 25,097 | (113,964) | 110,167 | 83,872 | 115,112 | ||||||||||||
(1) |
The effects of provisions for constitution were recorded in Operating Revenue (R$ 26,768), Cost of Energy (R$ 2,985), Operating Expense (R$ 2,006) and Financial Revenue (R$ 26). The effects of amortization were recorded in Operating Revenue R$
39,212 (R$ 3,122 in 2006), Deductions from Operating Revenue (R$ 7,062 in 2006), Cost of Energy (R$ 677) and Operating Expense R$ 629 (R$ 2,096 in 2006). |
(2) |
The effects of provisions for constitution of 2006 were recorded in Operating Revenue (R$ 9,030) and in Cost of Energy (R$ 31,492). The effects of amortization were recorded in Operating Revenue R$ 2,015 (R$ 11,534 in 2006) and Accounts Receivable
R$ 15,116 (R$ 14,672 in 2006). |
(3) |
The effects of provisions for constitution of 2006 were recorded in Operating Revenue (R$ 32,869) and in Cost of Energy (R$ 7,764). The effects of amortization were recorded in Operating Revenue R$ 15,385 (R$ 25,623 in 2006) and Accounts Payable R$
-333 (R$ 11,456 in 2006). |
c) Deferred Tariff Costs and Gains Variations (CVA)
The mechanism for offsetting the variations in unmanageable costs incurred by the electric energy distribution concessionaires. These variations are calculated in accordance with the difference between the expenses effectively incurred and the expenses estimated at the time of establishing the tariffs in the annual tariff adjustments.
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The following expenses are currently considered unmanageable costs:
The CVA amounts are restated based on the SELIC rate.
Detailing: | Consolidated | |||||||||||
Balance as of December 31, 2006 |
Assets added to the consolidated due to acquisition of equity interests |
Changes | Balance as of December 31, 2007 |
|||||||||
Deferral | Amortization | Restatement | ||||||||||
ASSET | ||||||||||||
Energy Purchased | 185,103 | (3,651) | 295,912 | (296,766) | 22,521 | 203,119 | ||||||
System Service Charge | 37,526 | 5,310 | (593) | (36,201) | 1,718 | 7,760 | ||||||
Fuel Consumption Account CCC | 29,904 | (2,605) | (11,572) | (12,234) | 363 | 3,856 | ||||||
Energy Development Account - CDE | 31,317 | 139 | 10,769 | (31,563) | 1,997 | 12,659 | ||||||
Total | 283,850 | (807) | 294,516 | (376,764) | 26,599 | 227,394 | ||||||
LIABILITY | ||||||||||||
Energy Purchased | (166,335) | (3,268) | (137,028) | 120,909 | (10,241) | (195,963) | ||||||
System Service Charge | (54,431) | (251) | (3,480) | 31,963 | (2,891) | (29,090) | ||||||
Fuel Consumption Account CCC | (318) | (3,856) | (85,646) | 37,646 | (6,642) | (58,816) | ||||||
Energy Development Account - CDE | - | (3) | - | 8 | (5) | - | ||||||
Total | (221,084) | (7,378) | (226,154) | 190,526 | (19,779) | (283,869) | ||||||
d) Low Income Consumers Subsidy
Law nº 10.438, of April 26, 2002 and Decree nº 4.336, of August 15, 2002, established new guidelines and criteria for classification of consumer units in the low-income residential sub-category. According to the legislation, this new criteria encompasses consumer units served by monophase circuits, with average monthly consumption in the last 12 months of less than 80kWh, and consumer units with average monthly consumption in the last 12 months of 80 to 220kWh, provided certain specific requirements are complied with, such as enrollment in Federal Government Social Programs.
As the subsidies granted to the consumers will be offset in the ambit of the concessionaire itself, through the tariff charged to the other consumers in the market served, in view of the impact of this new criteria on the tariff levels, and the principal of reasonable tariffs for the rest of the market, ANEEL introduced a new methodology for calculating the subsidy, which has been applied monthly since May 2002.
After ratification by ANEEL, the amounts calculated using this new methodology should be settled as follows:
The changes in the 2006 and 2007 balances are as follows:
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Consolidated | ||||
Asset | Liability | |||
Balances as of December 31, 2005 | 47,183 | (5,400) | ||
Assets added to the consolidated due to acquisition | ||||
of equity interests | 1,389 | (1,840) | ||
Gain (Loss) of Revenue | 21,058 | (1,357) | ||
Amortization of Tariff Adjustment | - | 4,134 | ||
Receivables Approved by ANEEL | (22,237) | - | ||
Monetary Restatement | - | (233) | ||
Balances as of December 31, 2006 | 47,393 | (4,696) | ||
Assets added to the consolidated due to acquisition | ||||
of equity interests | 409 | 19 | ||
Gain (Loss) of Revenue | 17,413 | (6,579) | ||
Amortization of Tariff Adjustment | - | 3,100 | ||
Receivables Approved by ANEEL | (9,198) | - | ||
Monetary Restatement | (50) | (468) | ||
Balances as of December 31, 2007 | 55,967 | (8,624) | ||
( 4 ) CASH AND BANKS | ||
The short-term financial investments refer to operations with national financial institutions under normal market conditions and rates, mainly remunerated based on the variation of the CDI, and are available for use in the operations of the Company and its subsidiaries.
Parent Company | Consolidated | |||||||
2007 | 2006 | 2007 | 2006 | |||||
Bank deposits | 216 | 23,667 | 679,937 | 259,359 | ||||
Short-term financial investments | 17,587 | 2,726 | 426,371 | 370,891 | ||||
Total | 17,803 | 26,393 | 1,106,308 | 630,250 | ||||
( 5 ) CONSUMERS, CONCESSIONAIRES AND LICENSEES | ||
A breakdown of the consolidated balance as of December 31, 2007 and 2006, mainly derived from energy sales is presented, below:
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Consolidated | ||||||||||
Balances Coming due |
Past due | Total | ||||||||
Up to 90 | More than | |||||||||
days | 90 days | 2007 | 2006 | |||||||
Current | ||||||||||
Consumer Classes | ||||||||||
Residential | 237,773 | 161,046 | 26,400 | 425,219 | 371,145 | |||||
Industrial | 192,590 | 55,542 | 36,529 | 284,661 | 297,342 | |||||
Commercial | 107,093 | 46,332 | 28,562 | 181,987 | 173,588 | |||||
Rural | 31,816 | 7,523 | 1,615 | 40,954 | 35,262 | |||||
Public Administration | 30,206 | 5,530 | 2,436 | 38,172 | 39,749 | |||||
Public Lighting | 33,666 | 6,028 | 26,790 | 66,484 | 80,556 | |||||
Public Service | 29,684 | 7,436 | 4,287 | 41,407 | 47,626 | |||||
Billed | 662,828 | 289,437 | 126,619 | 1,078,884 | 1,045,268 | |||||
Unbilled | 421,552 | - | - | 421,552 | 444,389 | |||||
Financing of Consumers' Debts (a) | 30,146 | 2,443 | 8,271 | 40,860 | 78,213 | |||||
Regulatory asset (note 3) | 85,966 | - | - | 85,966 | 378,920 | |||||
CCEE Transactions (b) | 38,876 | - | - | 38,876 | 19,793 | |||||
Concessionaires and Licensees (c) | 74,529 | 11,149 | 4 | 85,682 | 76,939 | |||||
Other | 65,552 | 416 | - | 65,968 | 81,446 | |||||
Total | 1,379,449 | 303,445 | 134,894 | 1,817,788 | 2,124,968 | |||||
Non current | ||||||||||
Financing of Consumers' Debts | 152,549 | - | - | 152,549 | 101,930 | |||||
CCEE Transactions (b) | 41,797 | - | - | 41,797 | 41,616 | |||||
Regulatory Asset (note 3) | 20,668 | - | - | 20,668 | 21,364 | |||||
Other | - | - | - | - | 273 | |||||
Total | 215,014 | - | - | 215,014 | 165,183 | |||||
a) Financing of Consumers' Debts - Refers to the negotiation of overdue accounts receivable from consumers, principally public organizations. Payment of some of these credits is guaranteed by the debtors, in the case of public entities, by pledging the bank accounts through which their ICMS revenue is received. Allowances for doubtful accounts are based on best estimates of the subsidiaries' managements for unsecured amounts and losses regarded as probable. (Note 8).
b) Electric Energy Trading Chamber (CCEE) transactions - The amounts refer to the sale of electric energy on the short-term market in the period from September 2000 to December 2007. The noncurrent amount receivable mainly comprises: (i) legal adjustments, established as a result of suits brought by agents in the sector; (ii) lawsuits challenging the CCEE accounting for the period from September 2000 to December 2002; (iii) provisional accounting entries established by the CCEE; (iv) amounts negotiated bilaterally pending settlement. The subsidiaries consider that there is no significant risk on the realization of these assets and consequently no provision was posted in the accounts.
c) Concessionaires and Licensees - Refers basically to accounts receivable in respect of the supply of electric energy to other Concessionaires and Licensees, mainly by the subsidiaries CPFL Geração and CPFL Brasil, and to transactions relating to the partial spin-off of Bandeirante by the controlling shareholder CPFL Piratininga. The amounts are set off against accounts payable, through a settlement of accounts.
( 6 ) FINANCIAL INVESTMENTS | ||
In April 2005, through a Private Credit Agreement, the Company acquired the credit arising from the Purchase and Sale of Electric Energy Agreement between Companhia Energética de São Paulo
74
(CESP) (seller) and CPFL Brasil (purchaser), referring to the supply of energy for a period of 8 years. The amounts handed over by the Company to CESP will be settled using the funds derived from the acquisition of energy produced by that company for CPFL Brasil.
The short-term balance is R$ 34,555 (R$ 28,615 in 2006), and the long-term balance is R$ 97,521 (R$ 103,901 in 2006). The operation is subject to interest of 17.5% p.a., plus the annual variation of the IGP-M, and is amortized in monthly installments of amounts corresponding to the purchase of energy.
( 7 ) RECOVERABLE TAXES | ||
Parent Company | Consolidated | |||||||
2007 | 2006 | 2007 | 2006 | |||||
Current | ||||||||
Social Contribution Prepayments - CSLL | 501 | 900 | 8,653 | 4,020 | ||||
Income Tax Prepayments - IRPJ | 1,351 | 1,094 | 10,051 | 7,219 | ||||
Social Contribution and Income Tax | - | - | 10,766 | 11,159 | ||||
Withholding Income Tax - IRRF | 29,974 | 26,066 | 71,825 | 67,303 | ||||
ICMS (State VAT) | - | - | 64,221 | 43,820 | ||||
PIS (Tax on Revenue) | - | - | 2,457 | 5,994 | ||||
COFINS (Tax on Revenue) | 9 | 8 | 8,594 | 28,343 | ||||
INSS (Social Security) | - | - | 1,831 | 330 | ||||
Other | 64 | 587 | 3,356 | 2,765 | ||||
Total | 31,899 | 28,655 | 181,754 | 170,953 | ||||
Noncurrent | ||||||||
Social Contribution Tax - CSLL | - | - | 24,966 | 22,846 | ||||
Income Tax - IRPJ | - | - | 840 | 9,477 | ||||
PIS (Tax on Revenue) | 2,787 | 2,787 | 3,044 | 3,898 | ||||
COFINS (Tax on Revenue) | - | - | 859 | 6,588 | ||||
ICMS (State VAT) | - | - | 69,508 | 60,240 | ||||
Other | - | - | 730 | - | ||||
Total | 2,787 | 2,787 | # 99,947 | 103,049 | ||||
In noncurrent, the Social Contribution to be Offset balance refers to the successful final outcome of a lawsuit brought by the subsidiary CPFL Paulista. The subsidiary CPFL Paulista is awaiting the evolution of the legal procedures with the Federal Income Office to offset the credit.
( 8 ) ALLOWANCE FOR DOUBTFUL ACCOUNTS | ||
Consolidated | ||
Balance as of December 31, 2005 | (54,361) | |
Additions due to acquisition of equity interests | (12,767) | |
Additional Allowance Recorded | (111,494) | |
Recovery of Revenue | 28,170 | |
Write-off of Accounts Receivable | 50,843 | |
Balance as of December 31, 2006 | (99,609) | |
Additions due to acquisition of equity interests | (7,943) | |
Additional Allowance Recorded | (80,483) | |
Recovery of Revenue | 32,949 | |
Write-off of Accounts Receivable | 59,447 | |
Balance as of December 31, 2007 | (95,639) | |
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( 9 ) PREPAID EXPENSES | ||
Consolidated | ||||||||
Current | Non current | |||||||
2007 | 2006 | 2007 | 2006 | |||||
Regulatory assets - (note 3) | 183,979 | 178,082 | 28,647 | 19,398 | ||||
Other | 18,742 | 13,157 | 14,464 | 9,371 | ||||
Total | 202,721 | 191,239 | 43,111 | 28,769 | ||||
( 10 ) DEFERRED TAXES |
10.1 - Composition of the income tax and social contribution credits:
Parent Company | Consolidated | |||||||
2007 | 2006 | 2007 | 2006 | |||||
Social Contribution Credit on: | ||||||||
Tax Loss Carryforwards | 15,123 | 17,198 | 34,637 | 45,557 | ||||
Tax Benefit on Merged Goodwill | - | - | 234,114 | 169,809 | ||||
Temporarily Nondeductible Differences | 807 | 98 | 68,001 | 74,983 | ||||
Subtotal | 15,930 | 17,296 | 336,752 | 290,349 | ||||
Income Tax Credit on: | ||||||||
Tax Loss Carryforwards | 60,051 | 57,576 | 83,092 | 101,300 | ||||
Tax Benefit of Merged Goodwill | - | - | 714,041 | 490,722 | ||||
Temporarily Nondeductible Differences | 13,164 | 6,076 | 198,576 | 212,986 | ||||
Subtotal | 73,215 | 63,652 | 995,709 | 805,008 | ||||
Other | - | - | - | 2,190 | ||||
Total | 89,145 | 80,948 | 1,332,461 | 1,097,547 | ||||
Short Term | 10,107 | 9,951 | 168,485 | 188,942 | ||||
LongTerm | 79,038 | 70,997 | 1,163,976 | 908,605 | ||||
89,145 | 80,948 | 1,332,461 | 1,097,547 | |||||
Expected Recovery
The estimates for recovery of the long-term deferred tax credits derived from tax loss carryforwards, temporary nondeductible differences and tax benefit on merged goodwill are based on projections of future income examined by the Audit Committees and approved by the Boards of Directors, as follows:
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Parent | ||||
Company | Consolidated | |||
2009 | 8,867 | 124,084 | ||
2010 | 9,265 | 103,808 | ||
2011 | 9,923 | 90,335 | ||
2012 | 9,683 | 85,994 | ||
2013 a 2015 | 26,527 | 235,111 | ||
2016 a 2018 | 14,773 | 169,071 | ||
2019 a 2021 | - | 127,126 | ||
2022 a 2024 | - | 117,009 | ||
2025 to 2027 | - | 96,735 | ||
2028 | - | 14,703 | ||
Total | 79,038 | 1,163,976 | ||
The amount to be realized between 2017 and 2028 refers exclusively to the tax benefit on merged goodwill recorded by the subsidiaries, realized over the term of the concessions.
10.2 - Tax Credit on Tax Benefit on Merged Goodwill:
The tax benefit on merged goodwill refers to the tax credit calculated on the merged goodwill on purchase and is recorded in accordance with CVM Instructions nº 319/1999 and nº 349/2001. The benefit is realized in proportion to amortization of the merged goodwill, in accordance with the net projected profit of the subsidiaries during the remaining term of the concession, as shown in Note 12.2.
Consolidated | ||||||||
2007 | 2006 | |||||||
Social | Social | |||||||
Contribution | Income Tax | Contribution | Income Tax | |||||
Tax (CSLL) | (IRPJ) | Tax (CSLL) | (IRPJ) | |||||
CPFL Paulista | 123,187 | 342,186 | 132,537 | 368,160 | ||||
CPFL Piratininga | 27,377 | 93,863 | 29,339 | 100,525 | ||||
CPFL Serra | - | - | 7,933 | 22,037 | ||||
RGE | 68,584 | 195,202 | - | - | ||||
CPFL Santa Cruz | 8,465 | 26,616 | - | - | ||||
CPFL Leste Paulista | 1,964 | 5,455 | - | - | ||||
CPFL Sul Paulista | 1,924 | 5,344 | - | - | ||||
CPFL Jaguari | 1,837 | 5,102 | - | - | ||||
CPFL Mococa | 776 | 2,157 | - | - | ||||
CPFL Geração | - | 38,116 | - | - | ||||
Total | 234,114 | 714,041 | 169,809 | 490,722 | ||||
10.3 - Temporary nondeductible differences:
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Consolidated | ||||||||
2007 | 2006 | |||||||
Social | Social | |||||||
Contribution | Income Tax | Contribution | Income Tax | |||||
Tax (CSLL) | (IRPJ) | Tax (CSLL) | (IRPJ) | |||||
Reserve for Contingencies | 12,262 | 44,745 | 13,028 | 39,350 | ||||
Pension Plan Expenses | 5,914 | 17,425 | 7,566 | 22,011 | ||||
Allowance for Doubtful Accounts | 8,883 | 24,672 | 9,349 | 27,587 | ||||
Provision for losses on the realization of RTE | 404 | 1,121 | 10,195 | 28,317 | ||||
Research and Development and Energy Efficiency Programs | 14,000 | 38,888 | 8,457 | 23,491 | ||||
Profit Sharing | 1,604 | 5,138 | 3,290 | 9,821 | ||||
Differences in Depreciation Rates | 11,109 | 30,859 | 10,053 | 27,925 | ||||
Regulatory liability - Increase in PIS and COFINS | 8,105 | 22,512 | 2,776 | 7,710 | ||||
Other | 5,720 | 13,216 | 10,269 | 26,774 | ||||
Total | 68,001 | 198,576 | 74,983 | 212,986 | ||||
10.4 - Reconciliation of the amounts of income tax and social contribution reported in the income statements for 2007 and 2006:
Parent Company | ||||||||
2007 | 2006 | |||||||
CSLL | IRPJ | CSLL | IRPJ | |||||
Income before CSLL and IRPJ | 1,857,912 | 1,857,912 | 1,593,886 | 1,593,886 | ||||
Adjustments to Reflect Effective Rate: | ||||||||
- Equity on subsidiaries | (1,856,969) | (1,856,969) | (1,448,943) | (1,448,943) | ||||
- Goodwill Amortization (a) | 85,651 | 111,798 | 62,524 | 86,438 | ||||
- Received Dividends | (87) | (87) | (4,590) | (4,590) | ||||
- Other Permanent Additions (Exclusions), net | 713 | 682 | (211) | (192) | ||||
Calculation base | 87,220 | 113,336 | 202,666 | 226,599 | ||||
Statutory Tax Rate | 9% | 25% | 9% | 25% | ||||
Tax Debit Result | (7,850) | (28,334) | (18,240) | (56,650) | ||||
- Tax Credit Allocated | 485 | 13,092 | 9,700 | 17,400 | ||||
Total | (7,365) | (15,242) | (8,540) | (39,250) | ||||
Consolidated | ||||||||
2007 | 2006 | |||||||
CSLL | IRPJ | CSLL | IRPJ | |||||
Income before CSLL and IRPJ | 2,476,514 | 2,476,514 | 2,171,091 | 2,171,091 | ||||
Adjustments to Reflect Effective Rate: | ||||||||
- Goodwill Amortization (a) | 86,850 | 143,646 | 62,653 | 138,882 | ||||
- CMC Realization (b) | 17,802 | - | 19,118 | - | ||||
- Received Dividends | (87) | (87) | (4,667) | (4,667) | ||||
- Effect of Presumed Profit System | (31,999) | (41,320) | - | - | ||||
- Other Permanent Additions (Exclusions), net | 39,346 | 16,757 | (53,546) | (49,922) | ||||
Calculation base | 2,588,426 | 2,595,510 | 2,194,649 | 2,255,384 | ||||
Statutory Tax Rate | 9% | 25% | 9% | 25% | ||||
Tax Debit Result | (232,958) | (648,878) | (197,518) | (563,845) | ||||
- Tax Credit Allocated (c) | 485 | 53,326 | 9,700 | 17,400 | ||||
Total | (232,473) | (595,552) | (187,818) | (546,445) | ||||
a) Goodwill Amortization - Refers to the amortization of goodwill derived from the acquisition of investee companies, which is nondeductible for the income taxes purposes.
b) Realization of Complementary Restatement - CMC - Refers to depreciation of the portion of incremental cost of the complementary restatement introduced by Law 8.200/90, which is not deductible for purposes of determination of social contribution.
78
c) Tax Credit Refers to the tax benefit on the goodwill on the merger of SEMESA by CPFL Geração (see Note 12) and tax credit on tax loss carryforwards and negative base recorded in the parent company. The credits are limited to a projection of 10 years and the additional amount in 2006 refers to the additional year and review of the projection.
( 11 ) OTHER CREDITS | |
Consolidated | ||||||||
Current | Noncurrent | |||||||
2007 | 2006 | 2007 | 2006 | |||||
Receivables from CESP (a) | 18,277 | 22,121 | 27,204 | 54,727 | ||||
Receivables from BAESA's shareholders (b) | - | - | 31,794 | - | ||||
Advances - Fundação CESP (c) | 5,732 | 5,046 | - | - | ||||
Pledges, Funds and Tied Deposits (d) | 3,137 | 6,208 | 139,181 | 76,400 | ||||
Orders in Progress (e) | 19,018 | 8,706 | - | - | ||||
Services Rendered to Third Parties (f) | 19,979 | 22,122 | - | 10 | ||||
Reimbursement RGR (g) | 3,340 | 3,267 | 707 | 545 | ||||
Advance Energy Purchase Agreements (h) | 8,129 | 2,918 | 29,845 | 1,600 | ||||
Other | 33,739 | 22,866 | 3,089 | 8,775 | ||||
Total | 111,351 | 93,254 | 231,820 | 142,057 | ||||
a) Receivables from CESP - Refers to amounts receivable from Companhia Energética de São Paulo (CESP) by the subsidiary CPFL Paulista, deriving from balances of the Income to be Offset account transferred to CESP in 1993. The balance is restated in accordance with the variation of the U.S. dollar, plus interest calculated on 50% of the Quarterly Libor rate, and a spread of 0.40625% p.a., with a final maturity date of December 2009.
b) Receivables from BAESAs shareholders - The nature of the credit is explained in Note 12.5 to Differentiated rights BAESA.
c) Advances Fundação CESP: Refer to advances to employee welfare programs and operational maintenance of the unit.
d) Pledges, Funds and Tied Deposits - These are guarantees offered when negotiating or renegotiating loans and to guarantee CCEE operations.
e) Orders in progress: Comprise costs and income relating to the deactivation or disposal in progress of fixed assets and costs of the services in progress relating to the distribution of electric energy.
f) Services Rendered to Third Parties Refers to accounts receivable for services provided to consumers in relation to electric energy distribution.
g) Refund of RGR - Refers to amounts to be offset in relation to the difference between the RGR - Global Reversal Reserve approved by ANEEL and the amount actually incurred, based on property, plant and equipment in use.
h) Advance Energy Purchase Agreements: Refers to prepayments of energy purchases by the subsidiaries CPFL Paulista, CPFL Piratininga and CPFL Brasil, which will be liquidated on delivery of the energy to be supplied.
( 12 ) INVESTMENTS |
79
Parent Company | Consolidated | |||||||
2007 | 2006 | 2007 | 2006 | |||||
Permanent Equity Interests | 3,077,514 | 3,126,322 | - | - | ||||
Goodwill / Negative Goodwill | 1,654,718 | 1,448,410 | 1,868,117 | 2,345,474 | ||||
Leased Assets | - | - | 722,094 | 744,320 | ||||
Other | - | 772 | 115,482 | 2,854 | ||||
Total | 4,732,232 | 4,575,504 | 2,705,693 | 3,092,648 | ||||
12.1 - Permanent Equity Interests:
The principal information on the investments in Permanent Equity Interest direct is as follows:
Investment | Number of (thousand) Shares held |
Share of Capital - % |
2007 | 2007 | 2006 | 2007 | 2006 | |||||||||||
Capital | Shareholders Equity |
Net Income | Shareholders Equity Interest |
Equity in Subsidiaries | ||||||||||||||
CPFL Paulista | 1,000 | 100% | 1,000 | 497,388 | 818,889 | 497,388 | 1,456,044 | 818,889 | 767,347 | |||||||||
CPFL Piratininga | 53,031,259 | 100% | 47,418 | 230,538 | 323,088 | 230,538 | 230,538 | 323,088 | 306,161 | |||||||||
CPFL Serra | - | 100% | - | - | 77,288 | - | 320,607 | 77,288 | 23,312 | |||||||||
RGE | 807,168 | 100% | 830,924 | 1,097,275 | 84,805 | 1,097,275 | - | 84,600 | - | |||||||||
Nova 4 | - | 100% | - | - | 2,939 | - | (1,523) | 2,939 | (1,524) | |||||||||
CPFL Santa Cruz | 371,772 | 99.99% | 78,166 | 120,135 | 12,788 | 120,124 | - | 12,787 | - | |||||||||
CPFL Geração | 205,487,716 | 100% | 1,039,618 | 1,128,591 | 280,020 | 1,128,591 | 1,114,590 | 280,020 | 165,252 | |||||||||
CPFL Brasil | 2,999 | 100% | 2,999 | 3,598 | 237,836 | 3,598 | 547 | 237,836 | 187,437 | |||||||||
CPFL Cone Sul | 373 | 100% | - | - | 2,024 | - | 5,519 | 2,024 | 961 | |||||||||
Perácio | - | 100% | - | - | 17,498 | - | - | 17,498 | - | |||||||||
CPFL Missões (a) | - | 100% | - | - | - | - | - | - | (3) | |||||||||
Total | 3,077,514 | 3,126,322 | 1,856,969 | 1,448,943 | ||||||||||||||
(a) Company merged on December 2006
The changes in the balance of equity interests are as follows:
CPFL Paulista | CPFL Piratininga | CPFL Serra | RGE | Nova 4 | CPFL Santa Cruz | CPFL Geração | CPFL Brasil | Cone Sul | Perácio | Total | ||||||||||||
Permanent Equity Interests - As of December 31, 2006 | 1,456,044 | 230,538 | 320,607 | - | (1,523) | - | 1,114,590 | 547 | 5,519 | - | 3,126,322 | |||||||||||
Capital increase | 100,642 | - | 1,050,411 | - | 205,642 | - | - | - | - | - | 1,356,695 | |||||||||||
Capital decrease | (1,050,411) | - | (7,400) | - | - | - | - | - | (5,000) | - | (1,062,811) | |||||||||||
Merger | - | - | (1,363,618) | 1,363,618 | (207,058) | 207,058 | - | - | - | - | - | |||||||||||
Tax Credit CVM Instructions 319/99 and 349/01 | - | - | - | (251,800) | - | (61,685) | - | - | - | - | (313,485) | |||||||||||
Merger of shares | - | - | - | 2,755 | - | - | - | - | - | - | 2,755 | |||||||||||
Transfer of investment | - | - | - | - | - | - | - | 2,543 | (2,543) | - | - | |||||||||||
Equity in subsidiaries | 818,889 | 323,088 | 77,288 | 84,600 | 2,939 | 12,787 | 280,020 | 237,836 | 2,024 | 17,498 | 1,856,969 | |||||||||||
Dividends | (785,211) | (308,391) | (77,288) | (43,840) | - | (32,542) | (194,965) | (128,650) | - | (17,498) | (1,588,385) | |||||||||||
Interest on Net Equity | (42,565) | (14,697) | - | (58,058) | - | (5,494) | (71,054) | (108,678) | - | - | (300,546) | |||||||||||
Permanent Equity Interests - As of December 31, 2007 | 497,388 | 230,538 | - | 1,097,275 | - | 120,124 | 1,128,591 | 3,598 | - | - | 3,077,514 | |||||||||||
a) CPFL Paulista
Corporate Reorganization
An Extraordinary General Meeting (EGM) held on March 14, 2007 approved the transfer of the share control of RGE, in the form of a reduction in the capital of the subsidiary CPFL Paulista, through the return to the Company of 67.0686% of RGE's capital amounting to total assets of R$ 1,050,411. The Company transferred these assets to the subsidiary CPFL Serra on the same date. The transfer was in compliance with ANEEL Authorization Resolution nº 305, of September 5, 2005 and ANEEL Order nº 669 of March 14, 2007, in relation to the need for corporate segregation laid down in Law 10.848, of March 15, 2004. These assets were appraised at book values, in accordance with an appraisal report, as of December 31, 2006 and comprise investment records and goodwill of R$ 562,885 and R$ 487,526, respectively. All RGE's balances and transactions, from January 1, 2007 to June 30, 2007, are shown in the financial statements of CPFL Serra (see item b below).
Reversal of Dividends
The Company capitalized R$ 100,642 in the subsidiary CPFL Paulista, by a reversal of dividends, without issuing new shares, in order to separate the corporate participation of the subsidiary RGE.
b) CPFL Serra and RGE
80
Merger of the indirect subsidiary CPFL Serra by RGE
As authorized by ANEEL in Order nº 669 of March 14, 2007, an EGM held on September 18, 2007 approved the merger of CPFL Serra by the subsidiary RGE. The merged company was therefore terminated, and the subsidiary RGE succeeded to its assets, rights and obligations. The main objective of the merger was to simplify the group's corporate and administrative structures. As the accounting report for the merger was prepared as of June 30, 2007, as from July 1, 2007, all RGE's balances and transactions are directly reflected in the financial statements of the Company.
Merger of shares of the subsidiary RGE
In an Extraordinary General Meeting held on December 18, 2007, the Company approved the merger of RGE shares held by the minority shareholders, converting it into a fully-owned subsidiary. The exchange ratio, based on the evaluation reports, was 1 (one) common share in the Company to every 15.5126288900 common or preferred shares in RGE. This merger resulted in a capital increase of R$ 6,385 in the Company, through the issuing of 154,208 common shares, set against assets of R$ 2,755 in relation to the purchase of the investment in RGE and R$ 3,150 in relation to the goodwill generated by the transaction.
c) Nova 4 and CPFL Santa Cruz
Capital increase
In October 2007, the company capitalised the advance for future capital increase in Nova 4, resulting in a capital increase of R$ 205,642.
Merger of the indirect subsidiary Nova 4 by CPFL Santa Cruz
The merger of the subsidiary Nova 4 by the subsidary CPFL Santa Cruz was authorized by ANEEL in Authorization Resolution nº 1.066 of October 1, 2007 and approved in an EGM held on November 14, 2007. The merged company was therefore terminated, and the subsidiary CPFL Santa Cruz succeeded to its assets, rights and obligations. As the accounting report for the merger was prepared as of October 31, 2007, analysis of the financial statements as of December 31, 2007 should take the effects of the merger into account as from that data.
d) CPFL Geração
Merger of the indirect subsidiaries CPFL Centrais Elétricas and SEMESA by the subsidiary CPFL Geração
The merger of the indirect subsidiaries CPFL Centrais Elétricas and SEMESA (Merged Companies) by the parent company CPFL Geração was authorized by ANEEL and by the Banco Nacional de Desenvolvimento Econômico Social BNDES, and approved in an EGM of the shareholders held on March 30, 2007. The merged companies were therefore terminated, and the subsidiary CPFL Geração succeeded to their assets, rights and obligations.
As the shareholders equity of the merged companies was appraised at the book values as of December 31, 2006, analysis of the financial statements as of December 31, 2007 should take into account the effects of the merger of these investments as from January 1, 2007.
e) Foz do Chapecó Corporate Reorganization
81
The corporate reorganization of Foz do Chapecó, as authorized by ANEEL, was approved in the EGM held on July 16, 2007, and resulted in termination of the Foz do Chapecó Consortium (CEFC) and in Chapecoense Geração S.A. (Chapecoense) becoming a Foz do Chapecó shareholder. However, the restructuring maintained the partners participation in the project (51% of the subsidiary CPFL Geração) now directly in Foz do Chapecó.
The approved corporate reorganization was implemented by: (i) a capital increase of R$ 184,362, of which R$ 74,679 was contributed by Chapecoense by transfer of the assets held in the CEFC and cash funds and R$ 109,683 by capitalization of an advance for future capital increase made by the subsidiary CPFL Geração and Companhia Estadual de Geração e Transmissão de Energia Elétrica CCEE-GT (R$ 93,231 and R$ 16,452 respectively) and (ii) termination of the Foz do Chapecó Consortium, Foz do Chapecó now holds the concession for the Foz do Chapecó Hydropower Plant.
f) Cone Sul and CPFL Brasil
In order to simplify the corporate structure and increase transparency of the results of the energy sales segment, the Company made a capital contribution to the subsidiary CPFL Brasil by transferring all the shares of the subsidiary CPFL Cone Sul, amounting to R$ 2,543. As from May 2007, CPFL Cone Sul became a fully-owned subsidiary of CPFL Brasil.
g) Perácio
The Company purchased 100% of Perácios capital in 2007. In turn, on June 18, 2007, Perácio acquired 100% of the capital of CPFL Jaguariúna, comprising 94,810,080 common shares and 94,810,080 preferred shares. This transaction was approved by ANEEL in June 2007. The purchase price of R$ 407,710 generated goodwill of R$ 138,560. The total amounts, including consulting and audit costs, were R$ 411,943 and R$ 142,793, respectively. See in Note 1 Operations the investments held by CPFL Jaguariúna.
In December 31, 2007, the Company has balance related to an advance for future capital increase with its subsidiary Perácio in the amount of R$ 409,310.
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12.2 Goodwill and Negative Goodwill:
Consolidated | ||||||||||
2007 | 2006 | |||||||||
Amortization | ||||||||||
Historical | Accumulated | Net Value | Net Value | Rate - 2007 | ||||||
Investor | Cost | Amortization | ||||||||
Goodwill on acquisition | ||||||||||
Investor | ||||||||||
CPFL Paulista | 292,033 | (38,708) | 253,325 | 273,669 | 6.63% | |||||
CPFL Piratininga | 39,065 | (4,830) | 34,235 | 36,690 | 6.25% | |||||
CPFL Geração | 54,555 | (8,036) | 46,519 | 49,867 | 6.17% | |||||
RGE | 3,150 | - | 3,150 | - | 0.00% | |||||
Other | 26 | - | 26 | - | ||||||
388,829 | (51,574) | 337,255 | 360,226 | |||||||
Subsidiaries | ||||||||||
CPFL Jaguariúna | 142,793 | (5,116) | 137,677 | - | 4.18% | |||||
ENERCAN | 10,233 | (419) | 9,814 | 10,233 | 4,10% | |||||
Barra Grande | 3,081 | (445) | 2,636 | 2,858 | 7.18% | |||||
Foz do Chapecó | 7,319 | - | 7,319 | 7,319 | 0.00% | |||||
RGE | - | - | - | 495,712 | ||||||
CPFL Santa Cruz | - | - | - | 111,794 | ||||||
Semesa (note 13) | - | - | - | 269,058 | ||||||
Other | 17,518 | (9,239) | 8,279 | 90 | 4.99% to 12.12% | |||||
180,944 | (15,219) | 165,725 | 897,064 | |||||||
Subtotal | 569,773 | (66,793) | 502,980 | 1,257,290 | ||||||
Goodwill reassessment | ||||||||||
Investor | ||||||||||
CPFL Paulista | 1,074,026 | (216,391) | 857,635 | 922,734 | 6.63% | |||||
CPFL Piratininga | 115,762 | (14,314) | 101,448 | 108,720 | 6.25% | |||||
RGE | 310,127 | (10,717) | 299,410 | 56,730 | 3.06% | |||||
CPFL Santa Cruz | 61,685 | (2,715) | 58,970 | - | 4.40% | |||||
1,561,600 | (244,137) | 1,317,463 | 1,088,184 | |||||||
Subsidiaries | ||||||||||
CPFL Leste Paulista | 21,131 | (6,729) | 14,402 | - | 8.38% | |||||
CPFL Sul Paulista | 20,941 | (6,834) | 14,107 | - | 8.44% | |||||
CPFL Jaguari | 20,026 | (6,558) | 13,468 | - | 8.43% | |||||
CPFL Mococa | 8,444 | (2,748) | 5,696 | - | 8.48% | |||||
70,542 | (22,869) | 47,673 | - | |||||||
Subtotal | 1,632,142 | (267,006) | 1,365,136 | 1,088,184 | ||||||
Total | 2,201,915 | (333,799) | 1,868,116 | 2,345,474 | ||||||
The goodwill arising from the acquisitions of the equity interests is amortized in proportion to the net income curves projected for the remaining term of the concession contract. The rates are reviewed periodically.
Goodwill on Purchase:
83
Parent Company: Refers mainly to acquisition of all the shares held by CPFL Geraçãos minority shareholders in June 2005, CPFL Paulista and CPFL Piratininga in November 2005, and RGE in December 2007.
CPFL Jaguariúna: In June 2007, the subsidiary Perácio purchased 94,810,080 common shares and 94,810,080 preferred shares, comprising 100% of the total capital of CPFL Jaguariúna. The purchase price was R$ 407,710, and the total, including consulting and audit costs, amounted to R$ 411,943, generating goodwill of R$ 142,793, based on estimated future profits.
Amortization of Goodwill
In order to comply with ANEEL instructions and avoid the goodwill amortization resulting from the merger of a subsidiary by the parent company causing a negative impact on dividends paid to the shareholders, the subsidiaries apply the concepts of CVM Instructions nº 319/1999 and nº 349/2001 in relation to this goodwill . Accordingly, a reserve was recorded to maintain the integrity of the subsidiaries equity, so that the effect on the equity reflects the tax benefit of the merged goodwill. These changes affected the Company's investment in the subsidiaries, and goodwill was recorded in the parent company in order to restore it . The goodwill is amortized by the Company in proportion to the projected net income curves for the remaining term of the subsidiaries concession. The corporate restructuring carried out in 2007 is described in Note 12.1.
12.3 Leased Assets:
In the consolidated financial statements, the leased assets refer principally to the assets of the Serra da Mesa Plant, leased to the concession holder (FURNAS), for a 30-year period, ending in 2028 (see details in Note 1 Operations).
These assets are depreciated over their estimated useful life at annual rates defined by ANEEL, and in accordance with general conditions of the concession agreement held by FURNAS.
On termination of the concession, these assets and facilities revert to the Granting Authority, in return for compensation at book values
The composition of these assets is as follows:
Consolidated | ||||||||||
2007 | 2006 | |||||||||
Average Annual | Purchase Cost | Accumulated | Net Value | Net Value | ||||||
Depreciation Rate | Depreciation | |||||||||
Lands | - | 4,676 | - | 4,676 | 4,675 | |||||
Reservoirs, Dams and | 2.00% | 105,853 | (20,532) | 85,321 | 86,812 | |||||
Pipelines | ||||||||||
Buildings, Constructions | 3.83% | 523,062 | (110,328) | 412,734 | 424,209 | |||||
and Improvements | ||||||||||
Machinery and | 5.93% | 306,795 | (87,485) | 219,310 | 228,562 | |||||
Equipment | ||||||||||
Vehicles | 20.00% | 92 | (92) | - | - | |||||
Other | 20.00% | 91 | (38) | 53 | 62 | |||||
Total | 940,569 | (218,475) | 722,094 | 744,320 | ||||||
12.4 Other
Refers mainly to the indirect subsidiary Paulista Lajeado Energia S.A.s 5.84% participation in the total capital of Investco S/A, comprising 25,829 common shares and 16,412 preferred shares (see Note 1 Operations for further details of the investment). This investment is recorded on a cost basis. Due to the participation of minority shareholders in the form of (i) preferred shares representing 40.07% of the total capital of Paulista Lajeado, and (ii) beneficiaries (founder-shares) who assign the right to 10% of net income before profit sharing, these effects, totaling R$ 72,906, were registered in consolidated financial statements in the Non-Controlling Shareholders Interest liabilities.
84
12.5 - Interest on Shareholders Equity and Dividend:
Parent Company | ||||||||||||
Dividend | Interest on Shareholders Equity | Total | ||||||||||
Subsidiaries | 2007 | 2006 | 2007 | 2006 | 2007 | 2006 | ||||||
CPFL Paulista | 405,108 | 394,817 | 13,447 | 44,396 | 418,555 | 439,213 | ||||||
CPFL Piratininga | 151,397 | 191,571 | 6,124 | 7,029 | 157,521 | 198,600 | ||||||
RGE | 44,322 | - | 49,350 | - | 93,672 | - | ||||||
CPFL Santa Cruz | 32,541 | - | 4,670 | - | 37,211 | - | ||||||
CPFL Geração | 145,623 | 73,689 | 29,605 | - | 175,228 | 73,689 | ||||||
CPFL Brasil | 108,678 | 78,264 | - | - | 108,678 | 78,264 | ||||||
CPFL Cone Sul | - | 1,297 | - | - | - | 1,297 | ||||||
CPFL Serra | - | 33,179 | - | - | - | 33,179 | ||||||
Perácio | 17,498 | - | - | - | 17,498 | - | ||||||
Total | 905,167 | 772,817 | 103,196 | 51,425 | 1,008,363 | 824,242 | ||||||
In 2007, the Company received R$ 1,588,054 in respect of the total balance of 2006 dividends receivable, and an interim dividend and interest on shareholders equity declared and provisioned in 2007
As mentioned in Note 12.1, the Company capitalized R$ 100,642 in CPFL Paulista by Reversal of dividends.
Differentiated rights to BAESA's income were recognized as of December 31, 2006, in accordance with a shareholders' agreement, as equity in subsidiaries, at a different percentage from that of CPFL Geração's participation in the venture. Accordingly, the amount of R$ 16,755 was recorded in the consolidated financial statements in 2006 as dividends receivable. However, in 2007, as a result of negotiation between the shareholders, it was agreed that CPFL Geração's right to the differentiated income will be realized by financial offseting between the shareholders. The amounts recorded in 2006 were therefore reversed and the amount of R$ 31,793 was recorded in CPFL Geração's income for the period November 2005 to December 2007 as Other Operating Income, set against Other Credits in long-term accounts.
85
( 13 ) PROPERTY, PLANT AND EQUIPMENT |
Consolidated | ||||||||
2007 | 2006 | |||||||
Historical Cost | Accumulated | Net Value | Net Value | |||||
Depreciation | ||||||||
In Service | ||||||||
- Distribution | 7,555,228 | (3,835,444) | 3,719,784 | 3,288,325 | ||||
Intangibles | 154,913 | (58,268) | 96,645 | 99,494 | ||||
Land | 52,464 | - | 52,464 | 50,184 | ||||
Buildings, Constructions and Improvements | 184,821 | (107,543) | 77,278 | 77,625 | ||||
Machinery and Equipment | 7,058,769 | (3,597,707) | 3,461,062 | 3,036,062 | ||||
Vehicles | 72,865 | (53,536) | 19,329 | 13,779 | ||||
Furniture and Fixtures | 31,396 | (18,390) | 13,006 | 11,181 | ||||
- Generation | 1,499,460 | (154,042) | 1,345,418 | 668,944 | ||||
Intangibles | 2,315 | (350) | 1,965 | 1,656 | ||||
Land | 15,394 | - | 15,394 | 12,035 | ||||
Reservoirs, Dams and Pipeline | 722,829 | (44,822) | 678,007 | 248,523 | ||||
Buildings, Constructions and Improvements | 232,663 | (36,144) | 196,519 | 123,718 | ||||
Machinery and Equipment | 522,515 | (70,964) | 451,551 | 281,434 | ||||
Vehicles | 1,352 | (661) | 691 | 828 | ||||
Furniture and Fixtures | 2,392 | (1,101) | 1,291 | 750 | ||||
- Commercialization | 207,926 | (79,261) | 128,665 | 103,987 | ||||
Intangibles | 13,881 | (5,830) | 8,051 | 5,826 | ||||
Land | 152 | - | 152 | 120 | ||||
Buildings, Constructions and Improvements | 12,674 | (9,445) | 3,229 | 2,487 | ||||
Machinery and Equipment | 170,162 | (58,821) | 111,341 | 91,445 | ||||
Vehicles | 4,236 | (2,432) | 1,804 | 1,285 | ||||
Furniture and Fixtures | 6,821 | (2,733) | 4,088 | 2,824 | ||||
- Administration | 231,479 | (149,464) | 82,015 | 69,854 | ||||
Intangibles | 90,531 | (60,795) | 29,736 | 24,379 | ||||
Land | 2,545 | - | 2,545 | 2,197 | ||||
Buildings, Constructions and Improvements | 47,765 | (26,089) | 21,676 | 18,406 | ||||
Machinery and Equipment | 43,879 | (29,884) | 13,995 | 12,057 | ||||
Vehicles | 6,629 | (4,706) | 1,923 | 1,395 | ||||
Furniture and Fixtures | 40,130 | (27,990) | 12,140 | 11,420 | ||||
9,494,093 | (4,218,211) | 5,275,882 | 4,131,110 | |||||
In Progress | ||||||||
- Distribution | 284,420 | - | 284,420 | 250,828 | ||||
- Generation | 802,857 | - | 802,857 | 1,072,026 | ||||
- Commercialization | 13,966 | - | 13,966 | 17,328 | ||||
- Administration | 36,078 | - | 36,078 | 21,469 | ||||
1,137,321 | - | 1,137,321 | 1,361,651 | |||||
Subtotal | 10,631,414 | (4,218,211) | 6,413,203 | 5,492,761 | ||||
Other Assets not linked to the Concession | 1,553,621 | (680,131) | 447,040 | 461,169 | ||||
Total of Property, Plant and Equipment | 12,185,035 | (4,898,342) | 6,860,243 | 5,953,930 | ||||
Special Obligations linked to the Concession | (919,097) | (791,387) | ||||||
Net Property, Plant and Equipment | 5,941,146 | 5,162,543 | ||||||
The assets and installations used for generation, distribution and sales are tied to these services, and may not be removed, disposed of, assigned or given in mortgage guarantee without prior authorization from the Regulatory Agency. ANEEL regulates the release of assets and concessions of the Public Electric Energy Service, granting prior authorization for the release of assets that are of no use to the
86
concession, when intended for sale, establishing that the proceeds of the sale should be deposited in a tied bank account for investment in the concession.
The average depreciation rate of the assets is approximately 5.00% p.a. for the distributors and 2.6% p.a. for the generators.
Construction in progress The consolidated balance mainly refers to work in progress on the projects of the operating subsidiaries, described in Note 1, as shown below:
CERAN | ENERCAN | BAESA | FOZ DO | TOTAL | ||||||
CHAPECÓ | ||||||||||
Plant under construction as of | ||||||||||
December 31, 2007 | 731,512 | 80,575 | 2,065 | 517,440 | 1,331,592 | |||||
Company's proportionate | 475,484 | 39,260 | 516 | 263,894 | 779,154 | |||||
share in each plant |
The interest on the loans taken by these projects to finance the construction is being or has been capitalized, and a total of R$ 28,976 (R$ 53,630 in 2006) was recorded in the consolidated financial statements
Other Assets not linked to the Concession Refers to the goodwill from the merger of the subsidiaries RGE and CPFL Geração. In the case of RGE, relates to the purchase of its own subsidiary, with amortization over the remaining term of the concession, in proportion to the projected net income curve for the period (annual rate of 3.67% in 2007). In the case of CPFL Geração, relates to the acquisition of SEMESA (see Note 12), and amortization in proportion to the projected net income curve of the subsidiary, over the remaining term of the lease agreement with the holder of the concession (FURNAS). An annual rate of 5.26% was used in 2007 applied on the balance of the goodwill as of December 31, 2006, amounting to R$ 269,058. These rates are reviewed periodically.
Special Obligations linked to the Concession - Represent the amounts received from consumers and donations not linked to any return, and subsidies for funding investments to respond to applications for electric energy supply in the distribution business. As from the second Tariff Review cycle, the effects of the quotas for reintegration of the values of assets formed with funds from the Special Obligations, irrespective of the date of formation, are eliminated in the accounts by amortization of these obligations. The subsidiary CPFL Piratininga recorded an amount of R$ 1,353 in 2007.
On signing their respective Concession Agreements, the jointly-controlled subsidiaries CERAN, ENERCAN, BAESA and Foz do Chapecó and the indirect subsidiary Paulista Lajeado assumed obligations to the Federal Government in relation to the granting of the concession, as Public Utilities. The liabilities are restated annually by the variation in the General Market Price Index IGP-M, . The rates as of December 31, 2007 are as follows:
Public Utilities liabilities - December 31, 2007 | ||||||||||||||
Annual amount | Total amount | Payment | ||||||||||||
CPFL | CPFL | Number of parcel |
||||||||||||
Total | Energia | Total | Energia | Begin | Final | |||||||||
Empresas | interest | interest | ||||||||||||
CERAN | 5,780 | 3,757 | 167,620 | 108,953 | 348 | Mar/2007 | Feb/2036 | |||||||
ENERCAN | 1,511 | 736 | 42,938 | 20,920 | 341 | Jun/2006 | Oct/2034 | |||||||
BAESA | 16,511 | 4,129 | 478,819 | 119,733 | 348 | Jun/2007 | May/2036 | |||||||
Foz do Chapecó | 33,344 | 17,005 | 933,632 | 476,152 | 336 | Dec/2008 | Nov/2036 | |||||||
Paulista Lajeado | 3,234 | 226 | 65,152 | 4,561 | 348 | Jan/2004 | Jan/2033 | |||||||
TOTAL | 60,380 | 25,853 | 1,688,161 | 730,319 | ||||||||||
87
The subsidiaries CERAN, ENERCAN, BAESA and Paulista Lajeado record as expenses the amounts in accordance with realization.
( 14 ) SUPPLIERS |
Consolidated | ||||
2007 | 2006 | |||
Current | ||||
System Service Charges | 6,126 | 14,283 | ||
Energy Purchased | 572,498 | 515,103 | ||
Electricity Network Usage Charges | 94,931 | 75,131 | ||
Materials and Services | 148,174 | 132,604 | ||
Co-Generators | 5,559 | 4,224 | ||
Regulatory Liability (note 3) | 35,609 | 103,581 | ||
Other | 5,057 | 9,235 | ||
Total | 867,954 | 854,161 | ||
Non-current | ||||
Free Energy (note 3) | 223 | - | ||
( 15 ) INTEREST, LOANS AND FINANCING |
Consolidated | ||||||||||||||||
December 31, 2007 | December 31, 2006 | |||||||||||||||
Interest | Principal | Total | Interest | Principal | Total | |||||||||||
Current and Non | Current and | |||||||||||||||
current | Non current | |||||||||||||||
Current | Non current | Current | Non current | |||||||||||||
LOCAL CURRENCY | ||||||||||||||||
BNDES - Power Increases (PCH's) | 124 | 7,057 | 26,521 | 33,702 | 161 | 4,104 | 23,813 | 28,078 | ||||||||
BNDES - Investment | 6,164 | 237,672 | 1,637,143 | 1,880,979 | 10,995 | 203,374 | 1,251,703 | 1,466,072 | ||||||||
BNDES - Parcel "A", RTE and Free Energy | 663 | 142,216 | - | 142,879 | 787 | 338,163 | 124,369 | 463,319 | ||||||||
BNDES - Purchase of assets | 16 | - | 869 | 885 | - | - | - | - | ||||||||
FIDC | - | - | - | - | 7,086 | 4,953 | - | 12,039 | ||||||||
Furnas Centrais Elétricas S.A. | - | 47,519 | 111,665 | 159,184 | - | - | 124,404 | 124,404 | ||||||||
Financial Institutions | 45,418 | 233,752 | 143,032 | 422,202 | 4,788 | 13,915 | 304,829 | 323,532 | ||||||||
Other | 607 | 28,913 | 26,416 | 55,936 | 548 | 34,349 | 21,127 | 56,024 | ||||||||
Subtotal | 52,992 | 697,129 | 1,945,646 | 2,695,767 | 24,365 | 598,858 | 1,850,245 | 2,473,468 | ||||||||
FOREIGN CURRENCY | ||||||||||||||||
IDB | 669 | 3,133 | 59,394 | 63,196 | 886 | 2,656 | 75,472 | 79,014 | ||||||||
Financial Institutions | 31,531 | 162,443 | 860,064 | 1,054,038 | 7,158 | 56,602 | 547,281 | 611,041 | ||||||||
Subtotal | 32,200 | 165,576 | 919,458 | 1,117,234 | 8,044 | 59,258 | 622,753 | 690,055 | ||||||||
Total | 85,192 | 862,705 | 2,865,104 | 3,813,001 | 32,409 | 658,116 | 2,472,998 | 3,163,523 | ||||||||
88
Consolidated | ||||||||||
LOCAL CURRENCY | 2007 | 2006 | Remuneration | Amortization | Collateral | |||||
BNDES - Power Increases (PCH's) | ||||||||||
CPFL Geração | 5,022 | 7,410 | TJLP + 3.5% p.a. | 84 monthly installments from February 2003 | Guarantee of CPFL Paulista | |||||
CPFL Geração | 28,080 | 19,644 | TJLP + 3.1% to 4.3% p.a. | monthly installments from September 2004 | Guarantee of CPFL Energia | |||||
CPFL Geração | 248 | 442 | UMBND + 3.5% p.a. | 84 monthly installments from February 2003 | Guarantee of CPFL Paulista | |||||
CPFL Geração | 352 | 582 | UMBND + 4.0% p.a. | 72 monthly installments from September 2004 | Guarantee of CPFL Energia | |||||
BNDES - Investment | ||||||||||
CPFL Paulista - FINEM I | 1,700 | 13,259 | TJLP + 3.25% p.a. | 78 monthly installments from October 2000 and October 2001 | Revenue | |||||
CPFL Paulista - FINEM II | 190,161 | 257,040 | TJLP + 5.4% p.a. | 48 monthly installments from January 2007 | Guarantee of CPFL Energia and receivables | |||||
CPFL Paulista - FINEM III | 125,574 | - | TJLP + 3.3% p.a. | 72 monthly installments from January 2008 | Guarantee of CPFL Energia and receivables | |||||
RGE - FINEM I | 136,740 | 136,542 | TJLP + 3.5% to 5.0% p.a. | Installments from October 2000 to December 2012 | Revenue collection/Promissory | |||||
RGE - FINEM II | 4,062 | 9,390 | UMBNDES + 4.5% p.a (1) | 36 monthly installments from February 2006 | Revenue collection/reserve account | |||||
CPFL Piratininga - FINEM I | 70,808 | 95,718 | TJLP + 5.4%p.a. | 48 monthly installments from January 2007 | Guarantee of CPFL Energia and receivables | |||||
CPFL Piratininga - FINEM II | 87,937 | - | TJLP + 3.3% p.a. | 72 monthly installments from January 2008 | Guarantee of CPFL Energia and receivables | |||||
BAESA | 166,751 | 181,797 | TJLP + 3.125% p.a. | 144 monthly installments from September and November 2006 | Letters of Credit | |||||
BAESA | 34,725 | 45,659 | UMBND + 3.125% p.a. | 144 monthly installments from November 2006 | Letters of Credit | |||||
ENERCAN | 372,079 | 389,214 | TJLP + 4%p.a. | 144 monthly installments from April 2007 | Letters of Credit | |||||
ENERCAN | 22,688 | 28,845 | UMBND + 4% p.a. | 144 monthly installments from April 2007 | Letters of Credit | |||||
CERAN | 277,903 | 261,797 | TJLP + 5%p.a. | 168 monthly installments from December 2005 | Guarantee of CPFL Energia | |||||
CERAN | 40,703 | 46,811 | UMBND + 5% p.a. (2) | 168 monthly installments from February 2006 | Guarantee of CPFL Energia | |||||
CERAN | 104,116 | - | TJLP + 3.3% to 4.3% p.a. | 168 monthly installments from November 2008 | Guarantee of CPFL Energia | |||||
Foz do Chapecó | 245,032 | - | TJLP + 2.49% a 2.95% p.a. | 192 monthly installments from October 2011 | Pledge of shares, credit rights and income | |||||
BNDES - Parcel "A", RTE and Free Energy | ||||||||||
CPFL Paulista - RTE | - | 52,593 | Selic + 1% p.a. | 62 monthly installments from March 2002 | Receivables | |||||
CPFL Paulista - Parcel "A" | 139,760 | 332,938 | Selic + 1% p.a. | 13 monthly installments from May 2007 | Receivables | |||||
CPFL Piratininga - Parcel "A" | - | 67,031 | Selic + 1% p.a. | 9 monthly installments from September 2007 | Receivables | |||||
RGE - Free Energy | 494 | 3,251 | Selic + 1% p.a. | 60 monthly installments from March 2003 | Receivables | |||||
CPFL Santa Cruz - RTE | - | 5,166 | Selic + 1% p.a. | 65 monthly installments from March 2002 | Revenue | |||||
CPFL Sul Paulista - RTE | 2,267 | - | Selic + 1% p.a. | 79 monthly installments from March 2002 | Receivables | |||||
CPFL Geração - Free Energy | 358 | 2,340 | Selic + 1% p.a. | 60 monthly installments from March 2003 | Guarantee of CPFL Paulista | |||||
BNDES - Purchase of assets | ||||||||||
CPFL Brasil | 885 | - | TJLP + 2.84% p.a. | 36 monthly installments from May 2009 | Linked to the asset acquired | |||||
FIDC - CPFL Piratininga | - | 12,039 | 112% CDI | 36 monthly installments from March 2004 | Receivables | |||||
Furnas Centrais Elétricas S.A. | ||||||||||
CPFL Geração | 159,184 | 124,404 | IGP-M + 10% p.a. | 24 monthly installments from August 2008 | Energy produced by plant | |||||
Financial Institutions | ||||||||||
CPFL Paulista | ||||||||||
Banco do Brasil - Law 8727 | 49,675 | 52,341 | IGPM variation + 7.42% p.a. | 240 monthly installments from May 1994 | Receivables | |||||
RGE | ||||||||||
Banco Itaú BBA | 103,425 | 104,243 | 106.0% of CDI | 1 installment in March 2011 | No guarantee | |||||
Banco Santander I | - | 7,946 | 105.0% of CDI | 7 quarterly installments from January 2006 | Promissory notes | |||||
Banco Santander II | 57,690 | 51,332 | 104.5% of CDI | 1 installment in January 2008 | No guarantee | |||||
Banco ABN AMRO Real | 84,419 | 73,450 | 107.5% of CDI (3) | 02 installment in January and 01 installment in February 2008 | No guarantee | |||||
Banco do Brasil | 38,481 | 34,220 | 105% of CDI | 1 installment in January 2008 | No guarantee | |||||
Foz do Chapecó | ||||||||||
Banco Bradesco | 88,512 | - | 104.6% of CDI, 106.8% CDI and 107.6% CDI | 1 installment in January 2008 | No guarantee | |||||
89
Consolidated | ||||||||||
December 31, | December 31, | |||||||||
2007 | 2006 | Remuneration | Amortization | Collateral | ||||||
Other | ||||||||||
Eletrobrás | ||||||||||
CPFL Paulista | 11,369 | 10,082 | RGR + rate variable of 6% to 9% p.a. | 120 monthly installments from August 2006 | Receivables/Promissory notes | |||||
CPFL Piratininga | 2,444 | 5,971 | 5% p.a. | 120 monthly installment from August 2006 | Promissory notes/Receivables | |||||
RGE | 5,183 | 5,493 | RGR + rate variable of 6% to 6.5% p.a. | 120 monthly installment from August 2004 | Revenues/Promissory notes | |||||
Santa Cruz | 6,764 | 6,578 | 5% p.a. | 100 to 120 monthly installments from december 2002 | Revenues | |||||
CPFL Leste Paulista | 1,250 | - | 5% to 9% p.a. | 120 monthly installment from February 2008 | Revenues | |||||
CPFL Sul Paulista | 1,892 | - | 5% to 9% p.a. | 120 monthly installment from August 2007 | Revenues | |||||
CPFL Jaguari | 39 | - | 5% to 9% p.a. | 120 monthly installment from June 2007 | Revenues | |||||
CPFL Mococa | 356 | - | 5% to 9% p.a. | 120 monthly installment from | Revenues | |||||
January 2008 | ||||||||||
Other | 26,639 | 27,900 | ||||||||
Total Local Currency | 2,695,767 | 2,473,468 | ||||||||
FOREIGN CURRENCY | ||||||||||
IDB - Enercan | 63,196 | 79,014 | US$ + Libor + 3.5% p.a. | 49 quarterly installments from June 2007 | Guarantee of CPFL Energia | |||||
Financial Institutions | ||||||||||
Parent Company | ||||||||||
Banco do Brasil | 183,756 | 8,406 | Yen + 5.7778% p.a. (4) | 1 installment in September 2009 | No guarantee | |||||
CPFL Paulista | ||||||||||
Debt Conversion Bond | 9,610 | 14,174 | US$ + 6-month Libor + 0.875% p.a. | 17 semiannual installments from April 2004 | Revenue/Government SP guaranteed | |||||
New Money Bond | 845 | 1,700 | US$ + 6-month Libor + 0.875% p.a. | 17 semiannual installments from April 2001 | Revenue/Government SP guaranteed | |||||
FLIRB | 857 | 1,724 | US$ + 6-month Libor + 0.8125% p.a. | 13 semiannual installments from April 2003 | Revenue/Government SP guaranteed | |||||
C-Bond | 12,434 | 17,316 | US$ + 8% p.a. | 21 semiannual installments from April 2004 | Revenue/Government SP guaranteed | |||||
Discount Bond | 15,650 | 18,884 | US$ + 6-month Libor + 0.8125% p.a. | 1 installment in April 2024 | Escrow deposits and revenue/ Gov.SP guarantee | |||||
PAR-Bond | 22,412 | 27,052 | US$ + 6% p.a. | 1 installment in April 2024 | Escrow deposits and revenue/ Gov.SP guarantee | |||||
Banco do Brasil | 83,139 | 156,707 | Yen + 5.7778% p.a. (4) | 1 installment in September 2009 | No guarantee | |||||
ABN AMRO Real | 327,002 | - | Yen + 1.482% p.a. (5) | 1 installment in August 2009 | No guarantee | |||||
RGE | ||||||||||
Banco do Brasil | 27,140 | - | Yen + 5.7778%p.a. (4) | 1 installment in September 2009 | No guarantee | |||||
Nova 4 | ||||||||||
Banco do Brasil | - | 196,922 | Yen + 5.7778% p.a. (4) | 1 installment in September 2009 | No guarantee | |||||
CPFL Geração | ||||||||||
Banco do Brasil | 308,742 | 153,444 | Yen + 2.5% up to 5.8% p.a. (6) | 1 installment between February 2008 and April 2010 | Guarantee of CPFL Energia | |||||
ENERCAN | ||||||||||
Banco Itaú BBA | - | 14,712 | US$ + Libor + 14.5 % p.a (7) | 1 installment in July 2007 | No guarantee | |||||
Foz de Chapecó | ||||||||||
Banco Bradesco | 62,451 | - | US$ + 6.5% and 3.99% p.a. (8) | 1 installment in January 2008 | No guarantee | |||||
Total Foreign Currency - Parent Company | 183,756 | 8,406 | ||||||||
Total Foreign Currency - Consolidated | 1,117,234 | 690,055 | ||||||||
Total | 3,813,001 | 3,163,523 | ||||||||
The Company and its subsdiaries hold swap converting the local cost of currency variation to interest tax variation in reais, corresponding to | ||
(1) 119.0%, 134.45 and 135.0% of CDI | (4) 103.5% of CDI | (7) 109.5% of CDI |
(2) Balance of R$ 16,673 of 2006, Swap of 138.43% of CDI | (5) 102.9% of CDI | (8) 104.6% of CDI |
(3) 107.5% of CDI | (6) 103.25% up to 104.2% of CDI |
Main funding:
Local currency
BNDES - Investiment (CPFL Paulista - FINEM III) - The subsidiary obtained approval for financing of R$ 156,543 from the Banco Nacional de Desenvolvimento Econômico e Social (BNDES) in 2007, as part of a FINEM credit line, to be invested in the expansion and modernization of the Electric Energy System. The subsidiary received R$ 125,011 during the year and the balance of R$ 31,532 is scheduled for release in 2008. The interest is paid quarterly and as from January 15, 2008 the payments will be made monthly.
90
BNDES - Investiment (CPFL Piratininga - FINEM II) The subsidiary CPFL Piratininga obtained approval for financing of R$ 121,574 from the BNDES in 2007, as part of a FINEM credit line, to be invested in the expansion and modernization of the Electric Energy System. By December 31, 2007 the subsidiary had received R$ 87,516 and the balance of R$ 34,058 is scheduled for release in 2008. The interest is paid quarterly and as from January 15, 2008 the payments will be made monthly.
BNDES - Investiment (CERAN) Further installments of the loan from the BNDES contracted in February 2004 for financing of the Castro Alves and 14 de Julho projects, amounting to R$ 161,502 (R$ 104,976 in proportion to the participation of the subsidiary CPFL Geração), were released in 2007.
BNDES - Investiment (Foz do Chapecó) In 2007, the Board of Directors of the BNDES authorized the granting of credits of R$ 1,655,838 to the subsidiary Foz do Chapecó, for allocation to the construction work on the Foz do Chapecó Hydropower Plant. R$ 480,000 was released in 2007 (R$ 244,800 in proportion to the participation of CPFL Geração). To honor commitments assumed prior to release of the BNDES funds, short-term loans of R$ 296,230 (R$ 151,077 in proportion to the participation of CPFL Geração) were taken out with financial institutions.
Foreign Currency
Financial institution (CPFL Paulista) - The subsidiary contracted a foreign currency loan from ABN AMRO REAL in August 2007, amounting to R$ 360,000, in order to make the escrow deposit mentioned in Note 20.
Financial institution (RGE) In 2007 the subsidiary contracted a loan of R$ 27,053 from Banco do Brasil, in order to finance working capital requirements.
Financial institution (CPFL Geração): the subsidiary contracted credit lines from Banco do Brasil, to honor short-term commitments of R$ 177,700, maturing between February 2008 and April 2010. The interest will be paid together with the principal between February 2008 and April 2010.
Financial institutions (Parent Company): refers to the loan of R$ 200,000 contracted in 2006 from the Banco do Brasil, for acquisition of a share in the indirect subsidiary CPFL Santa Cruz. The principal and interest mature in September 2009. In 2007, the Company assumed the loan in the course of assumption of the subsidiary's debt.
In the consolidated financial statements, the maturities of the long-term balance of the principal of loans and financing are scheduled as follows:
Maturity | Consolidated | |
2009 | 1,061,465 | |
2010 | 367,245 | |
2011 | 270,273 | |
2012 | 132,784 | |
After 2012 | 1,033,337 | |
Total | 2,865,104 | |
The main financial rates used for restatement of Loans and Financing and the breakdown of the indebtedness in local currency are shown below:
91
Index | Accumulated Variation in % | % of Debt | ||||||
2007 | 2006 | 2007 | 2006 | |||||
IGP-M | 7.75 | 3.83 | 7.75 | 7.15 | ||||
UMBND | (16.78) | (8.52) | 3.81 | 4.95 | ||||
TJLP | 6.38 | 7.87 | 67.25 | 55.15 | ||||
CDI | 11.82 | 15.03 | 13.82 | 11.45 | ||||
SELIC | 11.85 | 15.07 | 5.30 | 18.73 | ||||
Other | - | - | 2.07 | 2.57 | ||||
100.00 | 100.00 | |||||||
SWAP OPERATIONS
The net gains and losses on the swap operations made by the Company and its subsidiaries, including contracting on short-term operations, are recorded, net, under Derivatives, and corresponding amounts are recognized under financial income or expense. These operations resulted, in December 31, 2007, in an asset of R$ 995 and a liability of R$ 176,739 (liability of R$ 74,758 as of December 31, 2006).
RESTRICTIVE CONDITIONS
Loans and financing contracts with BNDES establishes restrictions to the subsidiaries CPFL Paulista, CPFL Piratininga and RGE to: (i) not realize payments of dividends and interest on equity totaling more than the minimum mandatory dividend laid down by law without prior agreement of the BNDES, and the lead bank in the operation; (ii) totally accomplish with the restrictive conditions established by the contract; and (iii) maintenance of certain financial ratios within preestablished parameters, as follows:
CPFL Paulista
BNDES - FINEM I (Lead bank: BRADESCO)
BNDES - FINEM II (Lead bank: UNIBANCO)
BNDES - FINEM III (Lead bank: BANK OF BRASIL)
CPFL Piratininga
BNDES - FINEM I (Lead bank: UNIBANCO)
92
BNDES - FINEM II (Lead bank: BANCO DO BRASIL)
RGE
BNDES - FINEM I (Lead bank: Caixa Econômica Federal)
BNDES - FINEM II - (Lead bank: UNIBANCO)
Itaú BBA Bank - Contains restrictive clauses in relation to amendment or changes to the Capital, and any direct or indirect change, transfer or assignment of the share control, or merger, amalgamation or spin-off, without the prior and express agreement of the creditor. The following financial ratios must also be maintained:
ABN AMRO Real Bank - Requires compliance with the following financial ratios:
CPFL Geração
The loans raised from the BNDES by the indirect jointly-controlled subsidiaries ENERCAN, BAESA, CERAN and Foz do Chapecó, establish restrictions on the payment of dividends to the subsidiary CPFL Geração higher than the minimum mandatory dividend of 25% without the prior agreement of the BNDES
ENERCAN's loan from the BNDES and IDB establishes restrictive clauses that require the subsidiary to maintain certain financial ratios within preestablished parameters.
As a result of the damage that occurred in November 2005 in the bypass tunnels of the Campos Novos hydropower plant, which caused the postponement of the start of the commercial operations of the three generator sets, generation of the cash required to meet certain contractual obligations by the deadline originally foreseen was delayed. ENERCAN's management has already asked the respective financial institutions to review the contractual
93
parameters, and has obtained confirmation that this review will not involve declaration of early maturity of the loan contract.
Certain loans and financing of the direct and indirect subsidiaries are subject to early settlement in the event of changes in the Companys structure or in the corporate structure of the subsidiaries that result in the loss of the share control or of control over management of the Company by the Companys current shareholders, or in a reduction in the direct or indirect interest of VBC Energia S.A. in the capital of CPFL Paulista to less than 25%.
Furthermore, failure to comply with the obligations or restrictions mentioned could result in default in relation to other contractual obligations (cross default).
The management believes that, except for the coment related to the indirect subsidiary ENERCAN, the Company and its subsidiaries are in compliance with the restrictive covenants relating to the loans and financing contracts with financial institutions.
( 16 ) DEBENTURES |
Consolidated | ||||||||||||||||||||||||
Balances as of | ||||||||||||||||||||||||
2007 | 2006 | |||||||||||||||||||||||
Issued | Remuneration | Amortization Conditions | Collateral | Interest | Current | Non current | Total | Interest | Current | Non current | Total | |||||||||||||
Parent Company | ||||||||||||||||||||||||
3rd Issue | ||||||||||||||||||||||||
Unique series | 45,000 | CDI + 0.45% p.a. | 3 annual installments from September 2012 | Unsecured | 15,983 | - | 450,000 | 465,983 | - | - | - | - | ||||||||||||
CPFL Paulista | ||||||||||||||||||||||||
2nd Issue | ||||||||||||||||||||||||
1st series | 11,968 | 109% of the CDI | July 1, 2009. | Unsecured | 7,109 | - | 119,680 | 126,789 | 8,756 | - | 119,680 | 128,436 | ||||||||||||
2nd series | 13,032 | IGP-M + 9.8% p.a. | July 1, 2009. | Unsecured | 7,368 | - | 155,217 | 162,585 | 6,786 | - | 144,150 | 150,936 | ||||||||||||
3rd Issue | - | - | - | - | - | - | - | - | ||||||||||||||||
1st series | 64,000 | 104.4% of CDI | 3 annual installments from December 2011 | CPFL Energia guarantee | 5,328 | - | 640,000 | 645,328 | 6,247 | - | 640,000 | 646,247 | ||||||||||||
19,805 | - | 914,897 | 934,702 | 21,789 | - | 903,830 | 925,619 | |||||||||||||||||
CPFL Piratininga | ||||||||||||||||||||||||
1st Issue | ||||||||||||||||||||||||
Unique series | 40,000 | 104.4% of the CDI | 2 annual installments from January 2010 | CPFL Energia guarantee | 22,641 | - | 400,000 | 422,641 | 27,878 | - | 400,000 | 427,878 | ||||||||||||
RGE | ||||||||||||||||||||||||
2nd Issue | ||||||||||||||||||||||||
1st series | 2,620 | IGP-M + 9.6% p.a. | 1 installment in April 2011 | Unsecured | 3,660 | - | 26,200 | 29,860 | 2,692 | - | 26,200 | 28,892 | ||||||||||||
2nd series | 20,380 | 106.0% of CDI | 1 installment in April 2009 | Unsecured | 5,584 | - | 203,800 | 209,384 | 6,644 | 23,000 | 180,800 | 210,444 | ||||||||||||
3rd Issue | ||||||||||||||||||||||||
1st series | 1 | CDI + 0.60% p.a. | 3 annual installments from December 2011 | CPFL Energia guarantee | 888 | - | 100,000 | 100,888 | - | - | - | - | ||||||||||||
10,132 | - | 330,000 | 340,132 | 9,336 | 23,000 | 207,000 | 239,336 | |||||||||||||||||
CPFL Geração | ||||||||||||||||||||||||
CPFL Energia | ||||||||||||||||||||||||
guarantee, | ||||||||||||||||||||||||
2nd Issue | 69,189 | TJLP + 4 to 5% p.a. | Semiannual with settlement in June 2009 | Receivables and CPFL | 1,720 | 150,416 | 80,758 | 232,894 | 2,923 | 136,252 | 230,347 | 369,522 | ||||||||||||
Geração common | ||||||||||||||||||||||||
nominal shares | ||||||||||||||||||||||||
Baesa | ||||||||||||||||||||||||
1st Serie | 9,000 | 105% of the CDI | Quarterly with settlement in August 2016. | Letters of Guarantee | 1,008 | 3,164 | 25,560 | 29,732 | 3,150 | - | 28,353 | 31,503 | ||||||||||||
2nd Serie | 9,000 | IGP-M + 9.55% p.a. | Annually with settlement in August 2016. | Letters of Guarantee | 235 | 1,037 | 7,257 | 8,529 | 1,102 | - | 9,915 | 11,017 | ||||||||||||
1,243 | 4,201 | 32,817 | 38,261 | 4,252 | - | 38,268 | 42,520 | |||||||||||||||||
71,524 | 154,617 | 2,208,472 | 2,434,613 | 66,178 | 159,252 | 1,779,445 | 2,004,875 | |||||||||||||||||
The maturities of the long-term balance of debentures are scheduled as follows:
Maturity | Consolidated | |
2009 | 563,657 | |
2010 | 204,201 | |
2011 | 477,067 | |
2012 | 396,666 | |
After 2012 | 566,881 | |
TOTAL | 2,208,472 | |
CPFL Energia
On October 25, 2007, 45,000 registered, book-entry and single series subordinated debentures, non-
94
convertible into shares were subscribed and paid up. The par value on the issued date was R$ 10. Interest will be paid every six months, and the first payment is due in March 2008. This issue is part of the Company's fund-raising strategy to finance the acquisition of CPFL Jaguariúna. The total capital of CPFL Jaguariúna was acquired on June 18, 2007 through the subsidiary Perácio, and approved by ANEEL in June 2007. The funds raised through the Debenture Issue will accordingly be used for prepayment of the 4th Issue Promissory Notes of the Issuer, CPFL Energia, in turn used in payment for the acquisition of CPFL Jaguariúna.
RGE
On December 1, 2007, the subsidiary RGE issued a third series of simple unsecured registered book-entry debentures, without share certificates, not convertible into shares with no scheduled renegotiation option. The debentures will be issued in five
series, each comprising a single and indivisible debenture. The objective of the issue was to adjust the financial position of RGE, provide sufficient liquidity to cover the investments in fixed assets and permit the liquidation of debts with
maturities to 2009. The total value of the issue willl be R$ 380,000. The first series was subscribed and fully paid in December 2007, in the amount of R$ 100,000, will have a term of 6 years, and a final maturity of December 1, 2013.
Interest on the debentures is paid half-yearly, on June 1st and December 1st of each year.
RESTRICTIVE CONDITIONS
The debentures are subject to certain restrictive covenants and include clauses that require the Company and its subsidiaries to maintain certain financial ratios within pre-established parameters. The main ratios are as follows:
CPFL Energia
Third issue:
a) Ratio of net debt to EBITDA - less or equal to 3.75; and
b) Ratio of EBITDA to financial income - higher or equal to 2.25.
CPFL Paulista
Second issue:
a) Ratio of EBITDA to financial expenses higher or equal to 1.5 for all years;
b) In relation to total capitalization, a minimum equity of 40%, and maximum third-party capital shall be, a maximum of 60%.
Third issue:
a) ratio of net indebtedness to EBITDA - less or equal to 3.0; and
b) ratio of EBITDA to financial expenses higher or equal to 2.25.
CPFL Piratininga
First issue:
a) ratio of net indebtedness to EBITDA - less or equal to 3; and
b) ratio of EBITDA to financial expenses - higher or equal to 2.25.
RGE
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Second issue:
a) Total debt divided by EBITDA less or equal to 3.0;
b) EBITDA divided by the financial expenses higher or equal to 2.0;
c) Total debt divided by the total capitalization less or equal 0.55.
BAESA
The debentures issued by the indirect subsidiary BAESA provide for early maturity if the total indebtedness exceeds 75% of its total assets.
Various debentures of the direct and indirect subsidiaries are subject to early maturity in the event of changes to the corporate structure of the Company or its subsidiaries that involve the loss, on the part of the Companys current shareholders, of the share control or control of the Companys management, or a reduction in the direct or indirect participation of VBC Energia S.A. in the capital of the subsidiary CPFL Paulista to less than 25%.
In the opinion of the managements of the subsidiaries, these restrictive conditions and clauses are being adequately complied with.
Failure to comply with the restrictions mentioned could result in default in relation to other contractual obligations.
( 17 ) EMPLOYEE PENSION PLANS |
The subsidiaries CPFL Paulista, CPFL Piratininga and CPFL Geração, through Fundação CESP, the subsidiary RGE, through Fundação CEEE de Seguridade Social (ELETROCEEE), the indirect subsidiary CPFL Santa Cruz through BB Previdência Fundo de Pensão Banco do Brasil and the subsidiary CPFL Jaguariúna through IHPREV Fundo de Pensão, sponsor supplementary retirement and pension plans for their employees. The main characteristics of these plans are as follows:
I CPFL Paulista
The plan currently in force for the employees of the subsidiary CPFL Paulista is a Mixed Benefit Plan, with the following characteristics:
a) Defined Benefit Plan (BD) in force until October 31, 1997 a defined benefit plan, which grants a Proportional Supplementary Defined Benefit (BSPS), in the form of a lifetime income convertible into a pension, to participants enrolled prior to October 31, 1997, the amount being defined in proportion to the accumulated past service time up to that date, based on compliance with the regulatory requirements for granting. The total responsibility for coverage of actuarial deficits of this plan falls to CPFL Paulista.
b) Mixed model, as from November 1, 1997, which covers:
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With the modification of the Retirement Plan in October of 1997, a liability was recognized as payable by the subsidiaries in relation to the plan's deficit calculated at the time by the external actuaries of Fundação CESP, to be liquidated in 260 installments, amortized monthly, plus interest of 6% p.a. and restatement at the IGP-DI (FGV). Under the Contractual Amendment, signed with Fundação CESP on July 25, 2006, the payment terms changed to 175 monthly payments and 14 annual installments, in relation to the base date of December 31, 2005, with final maturity on July 31, 2020. The balance of this obligation as of December 31,2007 was R$ 560,190 (R$ 573,715 as of December 31, 2006).
II CPFL Piratininga
On April 2, 1998, the Supplementary Pensions Department SPC approved the restructuring of the retirement plan previously maintained by Bandeirante, creating a "Proportional Supplementary Defined Benefit Plan BSPS, and a "Mixed Benefit Plan", with the following characteristics:
a) Defined Benefit Plan in force until March 31, 1998 a defined-benefit plan, which concedes a Proportional Supplementary Defined Benefit (BSPS), in the form of a lifetime income convertible into a pension to participants registered up to March 31, 1998, to an amount calculated in proportion to the accumulated past service time up to that date, based on compliance with the regulatory requirements for granting. CPFL Piratininga is fully responsible for covering the actuarial deficits of this Plan.
b) Defined Benefit Plan in force after March 31, 1998 defined-benefit type plan, which concedes a lifetime income convertible into a pension in relation to the past service time accumulated after March 31, 1998, based on 70% of the average actual monthly salary for the last 36 months of active service. In the event of death while working or the onset of a disability, the benefits incorporate the entire past service time (including the accumulated time up to March 31, 1998). The responsibility for covering the actuarial deficits of this Plan is equally divided between CPFL Piratininga and the participants.
c) Defined Contribution Plan implemented together with the Defined Benefit plan effective after March 31, 1998, this is a pension plan up to the granting of lifetime income, convertible (or not) into a pension, and generates no actuarial liability for CPFL Piratininga. The pension plan only becomes Defined Benefit type plan after the concession of the lifetime income, convertible (or not) into a pension, and accordingly starts to generate actuarial liabilities for the subsidiary.
In September 1997, through a contractual instrument of adjustment of reserves to be amortized, Eletropaulo Metropolitana El. São Paulo S.A. (the predecessor of Bandeirante) recognized an obligation to pay referring to the plan deficit determined at the time by the external actuaries of the Fundação CESP, to be liquidated in 260 installments, amortized monthly, plus interest of 6% p.a. and restatement based on the IGP-DI (FGV). Under the Contractual Amendment, signed with Fundação CESP on July 25, 2006, the payment terms were amended to 183 monthly payments and 15 annual installments, in relation to the base date of December 31, 2005, with final maturity on March 1, 2021. The balance of the obligation as of December 31, 2007, is R$ 145,813 (R$ 160,258 as of December 31, 2006).
III RGE
A defined benefit type plan, with a benefit level equal to 100% of the adjusted average of the most recent salaries, including the presumed Social Security benefit, with a Segregated Net
97
Asset administered by ELETROCEEE. Only those employed prior to the spin-off from CEEE to RGE are entitled to this benefit.
IV CPFL Santa Cruz
Since November 1, 2007, management of the benefits plan of the subsidiary CPFL Santa Cruz, originally performed by FUNSEJEM, has passed to BB Previdência Fundo de Pensão do Banco do Brasil. The subsidiary CPFL Santa Cruz plan is a defined benefit plan.
V CPFL Geração
The plans currently in force for the employees of subsidiary CPFL Geração are a Proportional Supplementary Defined Benefit (BSPS) and a Mixed Benefit Plan, along the same lines as the CPFL Paulista plan.
With the modification of the Retirement Plan, at that point maintained by CPFL Paulista, in October 1997, a liability was recognized as payable by the subsidiary CPFL Geração, relating to the plan deficit calculated by the external actuaries of Fundação CESP, which is being amortized on a monthly basis, in 260 installments, plus interest of 6% p.a. and restatement according to the IGP-DI (FGV). Under the Contractual Amendment, signed with Fundação CESP on July 25, 2006, the payment terms were amended to 178 monthly installments and 14 annual installments, in relation to the base date of December 31, 2005, with final maturity on October 31, 2020. As of December 31, 2007, the balance of the liability, which is restated annually in line with the evolution of the actuarial deficit calculated in accordance with the criteria of the Supplementary Pensions Department, was R$ 11,318 (R$ 11,575 as of December 31, 2006)
VI CPFL Jaguariúna
In December 2005, the companies joined the CMSPREV private pension plan, administered by IHPREV Pension Fund. The plan is structured through the defined contribution type.
The amounts recognized in the balance sheet as of December 31, 2007 and 2006, for the subsidiaries, in accordance with an appraisal prepared by an external actuary, and assumptions confirmed by Management, and in line with the criteria of CVM Resolution nº 371/00, are presented as follows:
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2007 | ||||||||||
CPFL | CPFL | CPFL | ||||||||
Paulista | Piratininga | RGE | Geração | Consolidated | ||||||
Present value of actuarial liabilities with cover | 2,713,230 | 668,386 | 158,354 | 57,653 | 3,597,623 | |||||
Fair value of plan's assets | (2,330,144) | (590,696) | (192,306) | (51,602) | (3,164,748) | |||||
Present value of liabilities exceeding fair value of assets | 383,086 | 77,690 | (33,952) | 6,051 | 432,875 | |||||
Adjustments due to deferments allowed | ||||||||||
Unrecognized actuarial losses (gains) | 150,862 | 66,525 | 26,913 | 3,604 | 247,904 | |||||
Unrecognized cost of past service | - | (79) | - | - | (79) | |||||
Net actuarial liability to be recognized | 533,948 | 144,136 | (7,039) | 9,655 | 680,700 | |||||
Decrease of 50% on Actuarial Assets (*) | - | - | 3,519 | - | 3,519 | |||||
Net actuarial Assets/Liabilities recognized on balance sheet | 533,948 | 144,136 | (3,520) | 9,655 | 684,219 | |||||
2006 | ||||||||||
CPFL | CPFL | CPFL | ||||||||
Paulista | Piratininga | RGE | Geração | Consolidated | ||||||
Present value of actuarial liabilities with cover | 2,384,612 | 593,381 | 122,230 | 50,117 | 3,150,340 | |||||
Fair value of plan's assets | (1,909,458) | (472,333) | (165,387) | (41,562) | (2,588,740) | |||||
Present value of liabilities exceeding fair value of assets | 475,154 | 121,048 | (43,157) | 8,555 | 561,600 | |||||
Adjustments due to deferments allowed | ||||||||||
Unrecognized actuarial losses (gains) | 160,282 | 48,014 | 43,169 | 3,387 | 254,852 | |||||
Unrecognized cost of past service | - | (90) | - | - | (90) | |||||
Net actuarial liability to be recognized | 635,436 | 168,972 | 12 | 11,942 | 816,362 | |||||
Actuarial gains in excess of 10% of the Plan's liabilities or assets not recognized as of December 31, 2007 will have to be recognized by means of amortization during the remaining useful lives of the plan's participants.
The changes in net actuarial liabilities are as follows:
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2007 | ||||||||||
CPFL | CPFL | CPFL | ||||||||
Paulista | Piratininga | RGE | Geração | Consolidated | ||||||
Net actuarial liability at the beginning of the year | 635,436 | 168,972 | 12 | 11,942 | 816,362 | |||||
Income recognized in income statement | (36,023) | (6,418) | (3,532) | (914) | (46,887) | |||||
Sponsor's Contributions during the period | (65,465) | (18,418) | - | (1,373) | (85,256) | |||||
Net actuarial liability at the end of the period | 533,948 | 144,136 | (3,520) | 9,655 | 684,219 | |||||
Other contributions | 8,056 | 258 | 27,810 | 181 | 36,305 | |||||
TOTAL | 542,004 | 144,394 | 24,290 | 9,836 | 720,524 | |||||
Current | 45,034 | 14,234 | 4,016 | 1,200 | 64,484 | |||||
Non current | 496,970 | 130,160 | 20,274 | 8,636 | 656,040 | |||||
542,004 | 144,394 | 24,290 | 9,836 | 720,524 | ||||||
2006 | ||||||||||
CPFL | CPFL | CPFL | ||||||||
Paulista | Piratininga | RGE | Geração | Consolidated | ||||||
Net actuarial liability at the beginning of the year | 701,581 | 158,016 | 1,313 | 13,350 | 874,260 | |||||
Assets added to the consolidated due to acquisition of equity interests (note 1) | - | - | 378 | - | 378 | |||||
(Income) Expense recognized in income statement | 10,434 | 32,592 | (1,586) | 139 | 41,579 | |||||
Sponsor's Contributions during the period | (76,579) | (21,636) | (93) | (1,547) | (99,855) | |||||
Net actuarial liability at the end of the period | 635,436 | 168,972 | 12 | 11,942 | 816,362 | |||||
Other contributions | 8,988 | 451 | 34,387 | 132 | 43,958 | |||||
TOTAL | 644,424 | 169,423 | 34,399 | 12,074 | 860,320 | |||||
Current | 59,070 | 17,964 | 8,262 | 1,380 | 86,676 | |||||
Non current | 585,354 | 151,459 | 26,137 | 10,694 | 773,644 | |||||
644,424 | 169,423 | 34,399 | 12,074 | 860,320 | ||||||
The external actuary's estimate of the revenues to be recognized in 2008 and the revenues recognized in 2007, is as follows :
2008 Estimated | ||||||||||
CPFL | CPFL | CPFL | ||||||||
Paulista | Piratininga | RGE | Geração | Consolidated | ||||||
Cost of service | 1,083 | 4,574 | 1,236 | 106 | 6,999 | |||||
Interest on actuarial liabilities | 268,186 | 66,472 | 16,010 | 5,702 | 356,370 | |||||
Expected return on assets | (335,556) | (82,021) | (23,373) | (7,455) | (448,405) | |||||
Unrecognized cost of past service | - | 11 | - | - | 11 | |||||
Amortization of unrecognized actuarial gains | - | - | (1,239) | - | (1,239) | |||||
Subtotal | (66,287) | (10,964) | (7,366) | (1,647) | (86,264) | |||||
Expected contributions from participants | (31) | (1,400) | - | (139) | (1,570) | |||||
Subtotal expense (income) | (66,318) | (12,364) | (7,366) | (1,786) | (87,834) | |||||
Decrease of 50% on Prepaid Pension Expense (*) | - | - | 3,683 | - | 3,683 | |||||
Total | (66,318) | (12,364) | (3,683) | (1,786) | (84,151) | |||||
2007 Realized | ||||||||||
CPFL | CPFL | CPFL | ||||||||
Paulista | Piratininga | RGE | Geração | Consolidated | ||||||
Cost of service | 1,046 | 4,091 | 900 | 88 | 6,125 | |||||
Interest on actuarial liabilities | 259,511 | 65,088 | 11,323 | 5,454 | 341,376 | |||||
Expected return on assets | (296,545) | (73,701) | (15,336) | (6,456) | (392,038) | |||||
Unrecognized cost of past service | - | 11 | - | - | 11 | |||||
Amortization of unrecognized actuarial gains | - | - | (3,859) | - | (3,859) | |||||
Subtotal | (35,988) | (4,511) | (6,972) | (914) | (48,385) | |||||
Expected contributions from participants | (35) | (1,907) | - | - | (1,942) | |||||
Subtotal expense (income) | (36,023) | (6,418) | (6,972) | (914) | (50,327) | |||||
Decrease of 50% on Prepaid Pension Expense (*) | - | - | 3,440 | - | 3,440 | |||||
Total | (36,023) | (6,418) | (3,532) | (914) | (46,887) | |||||
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(*) As the sponsor, RGE matches the participants contributions to this plan, only 50% was recorded.
The expenses (revenues) were recorded in the following accounts in the statement of operations :
2007 | ||||||||||
CPFL | CPFL | CPFL | ||||||||
Paulista | Piratininga | RGE | Geração | Consolidated | ||||||
Operating Cost | (36,023) | (6,418) | (3,532) | (914) | (46,887) | |||||
Total | (36,023) | (6,418) | (3,532) | (914) | (46,887) | |||||
2006 | ||||||||||
CPFL | CPFL | CPFL | ||||||||
Paulista | Piratininga | RGE | Geração | Consolidated | ||||||
Operating Cost | (5,744) | (192) | (1,586) | 52 | (7,470) | |||||
Operating Expenses | - | - | - | (240) | (240) | |||||
Extraordinary Item net of Tax Effects | 10,677 | 21,637 | - | 245 | 32,559 | |||||
Taxation of Extraordinary Item | 5,501 | 11,147 | - | 82 | 16,730 | |||||
Total | 10,434 | 32,592 | (1,586) | 139 | 41,579 | |||||
The extraordinary item recorded in 2006 refers to the plan deficit as of December 31, 2001, on adoption of CVM nº 371, which was deferred and amortized in subsequent years, to December 31, 2006.
The principal premises considered in the actuarial calculations on the balance sheet date were:
CPFL Paulista, CPFL Piratininga and | RGE | |||||||
CPFL Geração | ||||||||
2008 | 2007 | 2008 | 2007 | |||||
Nominal discount rate for actuarial liabilities: | 10.24% p .a. | 11.30% p .a. | 10.24% p.a. | 9.392% p.a. | ||||
Nominal Return Rate on Assets: | (*) | (**) | 12.32% p.a. | 9.392% p.a. | ||||
Estimated Rate of nominal salary increase: | 6.08% p .a. | 7.10% p .a. | 6.08% p.a. | 5.264% p.a. | ||||
Estimated long-term inflation rate (basis for establishing nominal rates above) | 4.0% p .a. | 5.0% p .a. | 4.0% p.a. | 3.2% p.a. | ||||
AT-83 | GAM83 | AT-83 | GAM83 | |||||
General biometric mortality table: | ||||||||
Biometric table for the onset of disability: | MERCER TABLE | MERCER TABLE | Light-Average (ix) | Light-Average (ix) | ||||
Expected turnover rate: | 0.30 / (Service time + 1) | 0.30 / (Service time + 1) | null | 0.30 / (Service time + 1) |
(*) CPFL Paulista and CPFL Geração 14.82% p.a. and CPFL Piratininga 14.14% p.a.
(**) CPFL Paulista and CPFL Geração 15.95% p.a. and CPFL Piratininga 15.80% p.a.
( 18 ) REGULATORY CHARGES |
Consolidated | ||||
2007 | 2006 | |||
Fee for the Use of Water Resources | 2,327 | - | ||
Global Reverse Fund - RGR | 5,741 | 3,793 | ||
ANEEL Inspection Fee | 1,873 | 1,759 | ||
Fuel Consumption Account - CCC | 27,195 | 70,802 | ||
Energy Development Account - CDE | 31,560 | 28,659 | ||
68,696 | 105,013 | |||
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( 19 ) TAXES AND SOCIAL CONTRIBUTIONS PAYABLE |
Consolidated | ||||||||
Current | Non current | |||||||
2007 | 2006 | 2007 | 2006 | |||||
ICMS (State VAT) | 294,760 | 282,510 | - | - | ||||
PIS (Tax on Revenue) | 11,668 | 11,368 | - | 838 | ||||
COFINS (Tax on Revenue) | 52,910 | 49,286 | 249 | 3,862 | ||||
IRPJ (Corporate Income Tax) | 186,480 | 122,313 | 12,140 | 25,765 | ||||
CSLL (Social Contribution Tax) | 39,846 | 39,854 | 4,140 | 9,276 | ||||
Other | 18,429 | 17,427 | - | - | ||||
Total | 604,093 | 522,758 | 16,529 | 39,741 | ||||
( 20 ) RESERVE FOR CONTINGENCIES |
Consolidated | ||||||||||||||||
2007 | 2006 | |||||||||||||||
Reserve for contingencies - Gross |
Escrow Deposits related to Contingencies (1) |
Reserve for Contingencies, net |
Other escrow deposits (2) |
Reserve for contingencies - Gross |
Escrow Deposits related to Contingencies (1) |
Reserve for Contingencies, net |
Other deposits, Judicial (2) |
|||||||||
Labor | ||||||||||||||||
Various (a) | 66,610 | 51,443 | 15,167 | 35,184 | 70,736 | 47,597 | 23,139 | 13,799 | ||||||||
Civil | ||||||||||||||||
General Damages (b) | 14,716 | 12,670 | 2,046 | 20,509 | 13,535 | 9,922 | 3,613 | 9,023 | ||||||||
Tariff Increase (c) | 15,872 | 4,068 | 11,804 | 5,998 | 24,207 | 11,686 | 12,521 | 4,769 | ||||||||
Energy Purchased (d) | 40,809 | 28,168 | 12,641 | - | 40,809 | 28,167 | 12,642 | - | ||||||||
Other | 9,792 | 8,610 | 1,182 | 14,308 | 7,563 | 6,310 | 1,253 | 9,743 | ||||||||
81,189 | 53,516 | 27,673 | 40,815 | 86,114 | 56,085 | 30,029 | 23,535 | |||||||||
Tax | ||||||||||||||||
FINSOCIAL (e) | 18,171 | 18,171 | - | 33,603 | 17,926 | 17,926 | - | 33,149 | ||||||||
Increase on basis - PIS and COFINS | 2,592 | - | 2,592 | 301 | 1,053 | - | 1,053 | 301 | ||||||||
Interest on Shareholders Equity - | ||||||||||||||||
PIS and COFINS (f) | 46,811 | - | 46,811 | - | 26,045 | - | 26,045 | - | ||||||||
Income Tax (g) | 52,400 | 32,323 | 20,077 | 375,267 | 43,993 | 23,753 | 20,240 | 1,532 | ||||||||
Other (h) | 8,280 | 3,423 | 4,857 | 12,874 | 3,205 | - | 3,205 | 9,530 | ||||||||
128,254 | 53,917 | 74,337 | 422,045 | 92,222 | 41,679 | 50,543 | 44,512 | |||||||||
Total | 276,053 | 158,876 | 117,177 | 498,044 | 249,072 | 145,361 | 103,711 | 81,846 | ||||||||
Consolidated | ||||||||||||||
2006 | Assets added to the consolidated due to acquisition of equity interests |
Addition | Reversal | Payment | Monetary Restatement |
2007 | ||||||||
Labor | 70,736 | 1,788 | 7,461 | (5,227) | (8,148) | - | 66,610 | |||||||
Civil | 86,114 | 797 | 26,149 | (16,918) | (15,020) | 67 | 81,189 | |||||||
Tax | 92,222 | 6,150 | 28,528 | (3,015) | (42) | 4,411 | 128,254 | |||||||
Reserve for Contingencies - Gross | 249,072 | 8,735 | 62,138 | (25,160) | (23,210) | 4,478 | 276,053 | |||||||
Escrow Deposits (1) + (2) | 227,207 | 6,131 | 478,520 | (47,418) | (26,029) | 18,509 | 656,920 | |||||||
The reserves for contingencies were based on appraisal of the risks of losing litigation to which the Company and its subsidiaries are parties, where a loss is probable in the opinion of the legal advisers and the management of the Company and its subsidiaries.
The principal pending issues relating to litigation, legal cases and tax assessments are summarized below:
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a) Labor: The principal labor suits relate to claims filed by former employees or unions for additional salary payments (overtime, salary parity, severance payments and other claims). Under the terms of the Bandeirante spin-off protocol, the subsidiary CPFL Piratininga is responsible for the liabilities corresponding to the contingent risks of the employees located in the corresponding regions assumed by CPFL Piratininga, while corporate litigation prior to the date of the spin-off, October 1, 2001, is assumed in the proportion to the percentage of the controlling shareholders prior to the spin-off (56% for Bandeirante and 44% for CPFL Piratininga).
b) Personal damages: Mainly refer to claims for indemnities. These cases include claims relating to accidents in the subsidiaries' electrical networks, damage to consumers, vehicle accidents, etc.
c) Tariff increase: Corresponds to various claims by industrial consumers against the subsidiaries CPFL Paulista and CPFL Piratininga as a result of increases imposed by DNAEE Ordinances 38 and 45, dated February 27 and March 4, 1986, when the Plano Cruzado economic plan price freeze was in effect.
d) Energy purchased: As result of the loss of free consumers, the subsidiaries CPFL Paulista and CPFL Piratininga requested a reduction in the power demand of the initial supply contracts, which was partially granted by ANEEL. The subsidiaries filed a lawsuit on the grounds of disagreement with the physical amounts established by the Agency, alleging a discrepancy in the calculations and making monthly escrow deposits of the amounts in question.
e) FINSOCIAL: Refers to the questioning in the courts of the increase in rate and collection of FINSOCIAL during the period June 1989 to October 1991.
f) PIS and COFINS Interest on Shareholders Equity: at the end of 2005, the Company obtained an injunction with a view to non-payment of PIS and COFINS levied on interest on shareholders equity.
g) Income tax: For the subsidiary CPFL Piratininga, the entry refers to the injunction obtained in respect of the tax deductibility of CSLL in calculating IRPJ. In the case of the subsidiary RGE, it refers to a request for suspension of a decision of the Federal Revenue Office, in order to considering the deductibility of amounts paid to supplement the retirement provisions of beneficiaries of Fundação ELETROCEEE.
h) Other - Tax: Refers to other suits in progress at the judicial and administrative levels and of a regulatory nature resulting from the subsidiaries' operations, relating to INSS, FGTS and SAT tax issues.
i) Possible losses: The Company and its subsidiaries are parties to other suits in which management, supported by its legal advisers, believes that the chances of a successful outcome are possible, due to a solid defensive position in these cases. It is not yet possible to predict the outcome of the courts decisions or any other decisions on similar cases considered to be probable or remote. Consequently, no alowances were provided. The claims relating to possible losses as of December 31, 2007 were as follows: (i) R$ 211,432 for labor cases (R$ 168,847 as of December 31, 2006); (ii) R$ 398,739 for civil cases relating to personal injuries, environmental damages and tariff increases (R$ 421,474 as of December 31, 2006); and (iii) R$ 466,769 referring to claims on tax issues, principally Income Tax, ICMS (VAT), PIS and COFINS (R$ 327,475 as of December 31, 2006).
j) Other - Escrow Deposits - Income Tax: refers to discussion of the deductibility for income tax purposes of expense recorded in 1997 in respect of the welfare deficit of the pension plan of employees of the subsidiary CPFL Paulista in relation to Fundação CESP, due to the renegotiation and renewal of debt in that year. After consulting the Brazilian Federal Income Office, the subsidiary CPFL Paulista obtained a favorable answer in Note MF/SRF/COSIT/GAB nº 157 of April 9, 1998, and used the tax deductibility of the expense, thereby generating tax loss carryforwards in that year. In March 2000, CPFL Paulista was assessed by the tax inspectors in relation to use of the tax loss carryforwards in 1997 and 1998. In 2007, as a result of the legal decision demanding the deposit to permit continuity of the discussions, the Company made an escrow deposit of R$ 360,255 (R$ 373,116 restated to December 31, 2007). Based on the updated position of the legal counsel in charge of this case, the risk of loss continues to be classified as remote.
103
Based on the opinion of their legal advisers, Management of the Company and of its subsidiaries consider that there are no significant contingent risks that are not covered by adequate provisions in the Financial Statements, or that might result in the significant impact on future earnings.
( 21 ) OTHER ACCOUNTS PAYABLE |
Consolidated | ||||||||
Current | Non-Current | |||||||
2007 | 2006 | 2007 | 2006 | |||||
Consumers and Concessionaires (a) | 55,724 | 50,927 | - | - | ||||
Liability Regulatory (note 3) | 150,360 | 49,816 | 137 | 732 | ||||
Energy Efficiency Program - PEE (b) | 45,241 | 40,102 | 59,853 | 44,387 | ||||
Research & Development - P&D (b) | 34,280 | 25,435 | 44,535 | 38,049 | ||||
National Scientific and Technological Development Fund - FNDCT (b) | 24,220 | 25,610 | 3,257 | 5,868 | ||||
Energy Research Company - EPE (b) | 12,264 | 34,626 | 1,113 | - | ||||
Fund for Reversal | - | - | 17,751 | 17,750 | ||||
Advances (c) | 11,475 | 7,780 | 82,597 | - | ||||
Interest on Compulsory Loan (d) | 3,954 | 3,998 | - | - | ||||
Emergency Charges (ECE/EAEE) (e) | 4,466 | 10,386 | - | - | ||||
Provision for Environmental Expenses | 778 | - | 3,684 | 13,321 | ||||
Payroll | 9,617 | 3,951 | - | - | ||||
Profit sharing (note 28) | 23,893 | 20,832 | - | - | ||||
Other | 51,451 | 30,269 | 6,565 | 7,836 | ||||
Total | 427,723 | 303,732 | 219,492 | 127,943 | ||||
a) Consumers and Concessionaires: Refers to liabilities in connection with bills paid twice and/or adjustments to billing to be compensated or returned to consumers or joined in a program named Programa de Universalização. Liabilities to concessionaires refer to various transactions relating to the partial spin-off of Bandeirante by the controlling shareholder CPFL Piratininga.
b) Research and Development and Energy Efficiency Programs (PEE, P&D, FNDCT and EPE) The subsidiaries recognized liabilities relating to amounts already billed in tariffs (1% of the Net Operating Income), but not yet invested in the Research and Development and Energy Efficiency Programs. This amounts are subject to monthly restatement, at the SELIC rates, to realization.
c) Advances: Current balances refers to advances made by consumers to carry out work and services. Non-current refers to the contribution made exclusively by the shareholder Chapecoense to Foz do Chapecó. The subsidiary CPFL Geração will contribute funds relating to its participation in proportion to the requirements of the Foz do Chapecó Project.
d) Interest on Compulsory Loans: Refers to funds passed on by Eletrobrás to industrial consumers.
e) Emergency Capacity Charge (ECE) and Emergency Energy Purchase Charge (EAEE) Refers to the tariff charges relating to the contracting of emergency capacity and energy collected from consumers up to January 2006 and passed on to Comercializadora Brasileira de Energia Emergencial (CBEE).
104
( 22 ) SHAREHOLDERS EQUITY |
The participations of the shareholders in the Companys Equity as of December 31, 2007 and 2006 are shown below:
Amount of shares | ||||||||
2007 | 2006 | |||||||
Common | Common | |||||||
Shareholders | Shares | Interest % | Shares | Interest % | ||||
VBC Energia S.A. | 136,329,808 | 28.41 | 139,002,673 | 28.97 | ||||
521 Participações S.A. | 149,233,727 | 31.10 | 149,230,373 | 31.11 | ||||
Bonaire Participações S.A. | 60,713,511 | 12.65 | 60,713,511 | 12.66 | ||||
BNDES Participações S.A. | 27,465,653 | 5.72 | 24,789,436 | 5.17 | ||||
Brumado Holdings S.A. | 28,420,052 | 5.92 | 28,420,052 | 5.92 | ||||
Board Members | 3,112 | - | 11 | - | ||||
Executive Officers | 30,964 | 0.01 | 31,657 | 0.01 | ||||
Other Shareholders | 77,714,111 | 16.19 | 77,569,017 | 16.16 | ||||
Total | 479,910,938 | 100.00 | 479,756,730 | 100.00 | ||||
22.1 Capital Increase- The Extraordinary General Meeting of the Company and the subsidiary RGE, held on December 18, 2007, approved the merger of all the common shares of RGEs minority shareholders in the equity of CPFL Energia by an increase of R$ 6,385 in the Companys capital, through the issue of 154,208 common shares (Note 12).
22.2 Interest on Shareholders Equity and Dividend
Parent Company | ||||
2007 | 2006 | |||
Interest on Shareholders Equity Payable | 445 | 457 | ||
Dividend Payable | ||||
VBC Energia S.A. | 204,217 | 209,163 | ||
521 Participações S.A. | 223,547 | 224,553 | ||
Bonaire Participações S.A. | 90,947 | 91,358 | ||
BNDES Participações S.A. | 41,143 | 37,302 | ||
Other Shareholders | 170,335 | 163,965 | ||
Subtotal | 730,189 | 726,341 | ||
Total | 730,634 | 726,798 | ||
During 2007, the Company made a payment of R$ 1,557,428 in respect of the dividends declared on December 31, 2006 and June 30, 2007.
In July 2007, the Company's Board of Directors approved the declaration and payment of interim dividends of R$ 842,375, corresponding to R$ 1.755837558 per share, on the results of the first half-year of 2007.
105
22.3 Allocation of Net Income for the Year
The Companys By-laws assure shareholders of a minimum dividend of 25% of net income, adjusted in accordance with the law.
For this year, the Companys management is proposing distribution of the remaining balance of the net income, through the declaration of R$ 718,889 in the form of dividends, corresponding to R$ 1.497964530 per share, as shown below:
Net Income Parent Company | 1,643,436 | |
Legal Reserve constituted | (82,172) | |
Net Income Adjusted | 1,561,264 | |
Interim Dividend | (842,375) | |
Proposed dividend | (718,889) | |
Retained Earnings | - | |
22.4 Capital reserve
Refers to gain on selling of treasury shares. The treasury shares derived from the exercise by shareholders of the right to withdraw, at the time of the merger of the shares of the non-controlling shareholders. The shares were sold on February 8, 2006, resulting in a gain of R$ 16, recorded as a Capital Reserve.
106
( 23 ) OPERATING REVENUES |
Consolidated | ||||||||||||
No. of Consumers (*) | GWh (*) | R$ mil | ||||||||||
2007 | 2006 | 2007 | 2006 | 2007 | 2006 | |||||||
Revenue from Eletric Energy Operations | ||||||||||||
Consumer class | ||||||||||||
Residential | 5,368,159 | 4,937,060 | 10,766 | 9,489 | 4,555,313 | 3,922,483 | ||||||
Industrial | 87,091 | 81,178 | 16,692 | 16,882 | 4,123,411 | 3,662,592 | ||||||
Commercial | 483,934 | 448,440 | 6,509 | 5,779 | 2,494,199 | 2,145,111 | ||||||
Rural | 264,642 | 236,792 | 2,511 | 1,966 | 482,039 | 369,114 | ||||||
Public Administration | 40,767 | 36,786 | 972 | 862 | 352,223 | 303,339 | ||||||
Public Lighting | 4,882 | 2,560 | 1,284 | 1,152 | 276,622 | 241,337 | ||||||
Public Services | 6,292 | 5,640 | 1,590 | 1,472 | 448,637 | 390,015 | ||||||
Billed | 6,255,767 | 5,748,456 | 40,324 | 37,602 | 12,732,444 | 11,033,991 | ||||||
Own Consumption | 714 | 628 | 30 | 25 | - | - | ||||||
Unbilled (Net) | - | - | - | - | (32,826) | 75,361 | ||||||
Emergency Charges - ECE/EAEE | - | - | - | - | 48 | 3,052 | ||||||
Realization of Extraordinary Tariff Adjustment (note 3 a) | - | - | - | - | (223,510) | (257,983) | ||||||
Realization of Free Energy (note 3 a) | - | - | - | - | (76,487) | (103,406) | ||||||
Tariff Review - Remuneration Base (note 3 b.1) | - | - | - | - | 8,301 | 26,970 | ||||||
Realization of Tariff Review - Remuneration Base (note 3 b.1) | - | - | - | - | (41,834) | 98,010 | ||||||
Tariff Review - Depreciation (note 3 b.1) | - | - | - | - | 6,310 | 10,402 | ||||||
Realization of Tariff Adjustment - Depreciation - (note 3 b.1) | - | - | - | - | (36,324) | - | ||||||
Tariff Adjustment - Purchase of electric energy from Itaipu (note 3.b.3) | - | - | - | - | - | 15,152 | ||||||
Realization of Tariff Adjustment -Purchase of electric energy from Itaipu (note 3.b.3) | - | - | - | - | (13,052) | (35,615) | ||||||
Tariff Adjustment -Other (note 3.b.3) | - | - | - | - | 26,768 | 25,642 | ||||||
Realization of Tariff Adjustment -Other (note 3.b.3) | - | - | - | - | (39,212) | (3,122) | ||||||
PIS and COFINS - Generators Pass-Through (note 3.b.3) | - | - | - | - | (7,579) | (39,367) | ||||||
Realization PIS and COFINS - Generators Pass-Through (note 3.b.3) | - | - | - | - | 13,370 | 14,089 | ||||||
Discount of Tariff Adjustment TUSD and Irrigation (note 3.b.3) | - | - | - | - | 77,489 | 46,792 | ||||||
Realization of discount of Tariff Adjustment TUSD and Irrigation (note 3.b.3) | - | - | - | - | (38,690) | (10,688) | ||||||
ELECTRICITY SALES TO FINAL CONSUMERS | 6,256,481 | 5,749,084 | 40,354 | 37,627 | 12,355,216 | 10,899,280 | ||||||
Furnas Centrais Elétricas S.A. | 3,026 | 3,026 | 298,818 | 273,480 | ||||||||
Other Concessionaires and Licensees | 3,842 | 3,484 | 284,983 | 200,376 | ||||||||
Current Electric Energy | 1,863 | 951 | 99,141 | 26,673 | ||||||||
ELECTRICITY SALES TO WHOLESALER | 8,731 | 7,461 | 682,942 | 500,529 | ||||||||
Revenue due to Network Usage Charge - TUSD | 799,634 | 691,896 | ||||||||||
Low Income Consumer´s Subsidy (note 3 d) | 13,934 | 23,835 | ||||||||||
Other Revenue and Income | 355,658 | 111,512 | ||||||||||
OTHER OPERATING REVENUES | 1,169,226 | 827,243 | ||||||||||
Total | 14,207,384 | 12,227,052 | ||||||||||
* Information not reviewed by the independent accountants
See Note 3 (a) (Free Energy) and Note 12.5 (Differentiated rights BAESA) in respect of accounting records involving other revenue and income.
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( 24 ) COST OF ELECTRIC ENERGY |
Consolidated | ||||||||
GWh (*) | R$ Mil | |||||||
Electricity Purchased for Resale | 2007 | 2006 | 2007 | 2006 | ||||
Energy Purchased in Restricted Framework - ACR | ||||||||
Itaipu Binacional | 10,990 | 10,761 | 982,990 | 886,087 | ||||
Furnas Centrais Elétricas S.A. | 1,207 | 892 | 88,598 | 63,161 | ||||
CESP - Cia Energética de São Paulo | 1,071 | 372 | 83,999 | 26,291 | ||||
Cia de Geração de Energia Elétrica do Tietê | 377 | 387 | 32,631 | 32,800 | ||||
Duke Energy Inter. Ger. Paranapanema S.A. | 1,195 | 939 | 116,076 | 88,614 | ||||
Tractebel Energia S.A. | 8,110 | 6,690 | 1,006,452 | 801,003 | ||||
Petróleo Brasileiro S.A. Petrobrás | 1,717 | 1,717 | 195,924 | 198,584 | ||||
EMAE - Empresa Metropolitana de Águas e Energia | 28 | 20 | 1,951 | 1,351 | ||||
Cia Estadual Energia Elétrica - CEEE | 96 | 69 | 7,260 | 4,304 | ||||
AES Uruguaiana Ltda. | 1,244 | 1,119 | 163,188 | 123,883 | ||||
Câmara de Comercialização de Energia Elétrica - CCEE | 783 | 589 | 108,429 | 18,660 | ||||
Other | 2,856 | 1,739 | 305,757 | 168,367 | ||||
29,674 | 25,294 | 3,093,255 | 2,413,105 | |||||
Energy Purchased in the Free Market - ACL | 18,488 | 20,773 | 1,313,965 | 1,375,919 | ||||
48,162 | 46,067 | 4,407,220 | 3,789,024 | |||||
Deferral/Amortization liquid effect - CVA | - | - | 96,014 | 4,105 | ||||
Surplus of Energy (note 3 b.3) | - | - | (74,041) | 8,643 | ||||
Return of consumer - Tariff adjustments (note 3 b.3) | - | - | 26,213 | - | ||||
PIS and COFINS - Generators Pass-Through (note 3 b.3) | - | - | - | (39,256) | ||||
Credit of PIS and COFINS | - | - | (403,666) | (343,319) | ||||
Others | - | - | 540 | - | ||||
Subtotal | 48,162 | 46,067 | 4,052,280 | 3,419,197 | ||||
Electricity Network Usage Charge | ||||||||
Basic Network Charges | - | - | 631,665 | 563,910 | ||||
Charges for Transmission from Itaipu | - | - | 66,602 | 62,013 | ||||
Connection Charges | - | - | 63,380 | 35,594 | ||||
System Service Charges - ESS | - | - | 5,016 | 21,039 | ||||
- | - | 766,663 | 682,556 | |||||
Net effect of deferral and amortization - CVA | - | - | 1,738 | 167,628 | ||||
Credit of PIS and COFINS | - | - | (65,620) | (76,107) | ||||
Subtotal | - | - | 702,781 | 774,077 | ||||
Total | 48,162 | 46,067 | 4,755,061 | 4,193,274 | ||||
* Information not reviewed by the independent accountants
108
( 25 ) OPERATING EXPENSES |
Parent company | Consolidated | |||||||
2007 | 2006 | 2007 | 2006 | |||||
Sales Expenses | ||||||||
Personnel | - | - | 55,388 | 47,897 | ||||
Materials | - | - | 2,444 | 9,931 | ||||
Outside Services | - | - | 59,669 | 31,721 | ||||
Allowance for Doubtful Accounts | - | - | 47,534 | 83,324 | ||||
Depreciation and Amortization | - | - | 9,977 | 7,078 | ||||
Collection Tariffs and Services | - | - | 47,570 | 50,090 | ||||
Other (note 3 a) | - | - | 205,471 | 14,190 | ||||
Total | - | - | 428,053 | 244,231 | ||||
General and Administrative Expenses | ||||||||
Personnel | 1,833 | 1,032 | 115,537 | 102,639 | ||||
Materials | 81 | 78 | 5,548 | 5,258 | ||||
Outside Services | 15,489 | 13,808 | 149,450 | 130,126 | ||||
Leases and Rentals | 99 | 74 | 4,397 | 3,852 | ||||
Depreciation and Amortization | 100 | 8 | 20,386 | 18,311 | ||||
Publicity and Advertising | 4,925 | 2,313 | 11,644 | 8,657 | ||||
Legal, Judicial and Indemnities | 363 | 392 | 24,574 | 29,229 | ||||
Donations, Contributions and | ||||||||
Subsidies | 19 | 120 | 7,324 | 4,005 | ||||
Other | 1,566 | 1,109 | 15,044 | 12,332 | ||||
Total | 24,475 | 18,934 | 353,904 | 314,409 | ||||
Other Operating Expenses | ||||||||
Inspection Fee | - | - | 21,258 | 17,942 | ||||
RTE and Free Energy Losses | - | - | 9,735 | 1,038 | ||||
Other Operating Expenses | - | - | 3,430 | 407 | ||||
Total | - | - | 34,423 | 19,387 | ||||
Goodwill Amortization | - | - | 32,660 | 12,962 | ||||
Total Operating | 24,475 | 18,934 | 849,040 | 590,989 | ||||
See Note 3a for the amounts recorded in other selling expenses in relation to the writing off of free energy accounts receivable.
109
( 26 ) FINANCIAL INCOME (EXPENSE) |
Parent Company | Consolidated | |||||||
Financial Income | 2007 | 2006 | 2007 | 2006 | ||||
Income from Financial Investments | 31,459 | 44,473 | 106,635 | 132,397 | ||||
Arrears of interest and fines | - | - | 111,057 | 92,003 | ||||
Interest on Prepaid Income and Social Contribution | ||||||||
Taxes | 2,829 | 3,726 | 18,823 | 17,116 | ||||
Monetary and Exchange Variations | 111 | 43,371 | (1,319) | 39,741 | ||||
Interest - CVA and Parcel "A" | - | - | 68,300 | 106,817 | ||||
Discount on purchase of ICMS credit | - | - | 14,557 | 13,503 | ||||
Interest - Extraordinary Tariff Adjustment (note 3 a) | - | - | 20,542 | 51,488 | ||||
Interest on Intercompany Loans | 112 | 252 | - | - | ||||
Dividends received from noncontrolling investments | 87 | 4,590 | 87 | 4,667 | ||||
PIS and COFINS - increase in the calculation base | - | - | (20) | 122,140 | ||||
PIS and COFINS of Interest on Equity | (17,761) | (13,135) | (17,761) | (14,760) | ||||
Other | 4,233 | 2,859 | 59,112 | 72,523 | ||||
Subtotal | 21,070 | 86,136 | 380,013 | 637,635 | ||||
Interest on shareholder´s equity | 191,869 | 142,000 | - | - | ||||
TOTAL | 212,939 | 228,136 | 380,013 | 637,635 | ||||
Financial Expense | ||||||||
Debt Charges | (33,108) | (683) | (526,423) | (535,072) | ||||
Banking Expenses | (5,371) | (4,300) | (81,175) | (65,507) | ||||
Monetary and Exchange Variations | (33,641) | (31,617) | (109,095) | (141,437) | ||||
Other | (2,727) | (1,570) | (33,921) | (46,082) | ||||
Subotal | (74,847) | (38,170) | (750,614) | (788,098) | ||||
Goodwill Amortization | (111,798) | (86,438) | (143,646) | (138,882) | ||||
Interest on shareholder´s equity | - | - | (141) | - | ||||
Total | (186,645) | (124,608) | (894,401) | (926,980) | ||||
Net financial expenses | 26,294 | 103,528 | (514,388) | (289,345) | ||||
Increase in PIS and COFINS - The income of R$ 122,140 recorded in 2006 refers to reversal of the contingent liability and recording of tax credits to be offset, due to the favorable ruling on the appeal filed by the subsidiaries, challenging the legality of the increase in the calculation base for PIS and COFINS contributions.
( 27 ) NON-OPERATING INCOME (EXPENSE) |
Parent Company | Consolidated | |||||||
2007 | 2006 | 2007 | 2006 | |||||
Non-operating income | ||||||||
Gain on disposal of property, plant and equipment | - | - | 2,310 | 2,283 | ||||
Gain on disposal of equity in subsidiaries | 3,309 | 62,747 | 3,309 | 69,112 | ||||
Inventory adjustment | - | - | 196 | - | ||||
Other | - | - | 572 | 2,482 | ||||
Subtotal | 3,309 | 62,747 | 6,387 | 73,877 | ||||
Non-operating expenses | ||||||||
Loss on demobilization of property, plant and equipment | - | - | (23,749) | (15,932) | ||||
Loss on disposal of property, plant and equipment | - | - | (5,650) | (2,974) | ||||
Losses due to non-utilization of studies and designs | (4,185) | - | (5,914) | (754) | ||||
Inventory adjustment | - | - | (278) | - | ||||
Other | - | (2,398) | (1,443) | (4,380) | ||||
Subtotal | (4,185) | (2,398) | (37,034) | (24,040) | ||||
Total | (876) | 60,349 | (30,647) | 49,837 | ||||
110
On September 4, 2006, the Company disposed of all its shares in COMGÁS. The investment was recorded at the acquisition cost of R$ 27,152, and sold for R$ 89,899, resulting in capital gain recorded as non-operating income, of R$ 62,747.
( 28 ) EMPLOYEE PROFIT SHARING |
In accordance with the Collective Bargaining Agreement, the Company and its subsidiaries introduced an employee profit-sharing program, based on agreed operational and financial targets previously established with the employees. An amount of R$ 28,699 was recorded in 2007 in the consolidated financial statements (R$ 33,392 in 2006). After the prepayment in 2007, a balance of R$ 23,893 is provisioned in the consolidated financial statements (Note 21).
( 29 ) SEGMENT INFORMATION |
Distribution | Generation | Commercialization | Other (*) | Total | ||||||
2007 | ||||||||||
Revenues | 12,997,175 | 701,217 | 1,877,936 | - | 15,576,328 | |||||
(-) Intersegment revenues | (11,557) | (371,990) | (985,397) | - | (1,368,944) | |||||
Income from Electric Energy Service | 2,223,109 | 469,815 | 353,119 | (24,494) | 3,021,549 | |||||
Depreciation and Amortization | 333,716 | 73,437 | 1,388 | 139,620 | 548,161 | |||||
Net Income | - | - | - | - | 1,643,436 | |||||
Equity in Subsidiaries | 1,376,349 | 280,020 | 239,860 | (39,260) | 1,856,969 | |||||
Total Assets (**) | 9,459,588 | 3,804,689 | 255,772 | 2,075,720 | 15,595,769 | |||||
Parent Company Goodwill, allocated by segment | 1,608,173 | 46,519 | - | 26 | 1,654,718 | |||||
Capital Expenditures | 680,267 | 445,334 | 7,082 | 74 | 1,132,757 | |||||
Reserve for Contingencies (Liability) | 69,295 | 4,191 | - | 43,691 | 117,177 | |||||
2006 | ||||||||||
Revenues | 11,257,014 | 506,223 | 1,834,123 | - | 13,597,360 | |||||
(-) Intersegment revenues | (7,980) | (224,132) | (1,138,196) | - | (1,370,308) | |||||
Income from Electric Energy Service | 1,757,488 | 396,253 | 275,771 | (18,913) | 2,410,599 | |||||
Depreciation and Amortization | 323,310 | 64,587 | 242 | 86,575 | 474,714 | |||||
Net Income | - | - | - | - | 1,404,096 | |||||
Equity in Subsidiaries | 1,073,508 | 165,252 | 188,398 | 21,785 | 1,448,943 | |||||
Total Assets (**) | 10,048,436 | 3,173,930 | 180,891 | 645,524 | 14,048,781 | |||||
Parent Company Goodwill, allocated by segment | 1,399,989 | 49,867 | (1,337) | (109) | 1,448,410 | |||||
Capital Expenditures | 526,954 | 265,881 | 4,295 | 105 | 797,235 | |||||
Reserve for Contingencies (Liability) | 75,209 | 2,852 | - | 25,650 | 103,711 |
(*) Other - Refers basically to CPFL Energia after eliminations of balances with related parties
(**) The goodwill created in an acquisition, net the amortization, recorded in CPFL Energia was allocated to the respective segments.
111
( 30 ) RELATED PARTY TRANSACTIONS |
Transactions with related parties are carried out under normal market conditions and showed the following accumulated balances and changes in 2007 and 2006:
Consolidated | ||||||||||||||||||||
ASSET | LIABILITY | REVENUE | EXPENSE | PURCHASES | ||||||||||||||||
Companies | 2007 | 2006 | 2007 | 2006 | 2007 | 2006 | 2007 | 2006 | 2007 | 2006 | ||||||||||
Banco Votorantim S.A. | ||||||||||||||||||||
Short-term Financial Investments | 46.412 | 32.212 | - | - | 6.942 | 902 | - | - | - | - | ||||||||||
"Swap" | - | - | - | - | 6 | - | 1.823 | 547 | - | - | ||||||||||
Construções e Comércio Camargo Correa S.A. | ||||||||||||||||||||
Property, plant and equipment Purchases | - | - | 3.901 | 14.883 | - | - | - | - | 63.183 | 115.379 | ||||||||||
Advances to suppliers | 1.300 | - | - | - | - | - | - | - | - | - | ||||||||||
Camargo Correa Equipamentos e Sistemas | ||||||||||||||||||||
Property, plant and equipment Purchases | - | - | - | 155 | - | - | - | - | 5.511 | 1.772 | ||||||||||
Cimento Rio Branco S.A. | ||||||||||||||||||||
Property, plant and equipment Purchases | - | - | 655 | 993 | - | - | - | - | 14.467 | 9.209 | ||||||||||
TUSD | - | - | - | - | 13.392 | 12.504 | - | - | - | - | ||||||||||
Sale of Energy | 5 | - | - | - | 100 | 58.756 | - | - | - | - | ||||||||||
Camargo Correa Cimentos S.A. | ||||||||||||||||||||
Sale of Energy | 963 | 1.233 | - | - | 7.770 | 7.733 | - | - | - | - | ||||||||||
Companhia Brasileira de Aluminio | ||||||||||||||||||||
Property, plant and equipment Purchases | - | - | 533 | 237 | - | - | - | - | 3.955 | 1.649 | ||||||||||
Material Purchases | - | - | - | 3 | - | - | 7.161 | 4.289 | - | - | ||||||||||
Advances to suppliers | - | - | 8.790 | 7.666 | - | - | - | - | - | - | ||||||||||
Sale of Energy | 45 | 2.139 | - | - | 43.112 | 11.930 | - | - | - | - | ||||||||||
Indústrias Votorantim S.A. | ||||||||||||||||||||
TUSD | - | - | - | - | 19.481 | 17.277 | - | - | - | - | ||||||||||
Sale of Energy | - | - | - | - | - | 48.073 | - | - | - | - | ||||||||||
Votorantim Metais | ||||||||||||||||||||
Property, plant and equipment Purchases | - | - | 706 | 281 | - | - | - | - | 5.691 | 6.323 | ||||||||||
Advances from customers | - | - | 7.762 | 6.770 | - | - | - | - | - | - | ||||||||||
Sale of Energy | 71 | - | - | - | 19.264 | - | - | - | - | - | ||||||||||
Votorantim Celulose e Papel | ||||||||||||||||||||
TUSD | - | - | - | - | 16.758 | 16.913 | - | - | - | - | ||||||||||
Sale of Energy | - | - | - | - | - | 54.263 | - | - | - | - | ||||||||||
Votocel Filmes Flexíveis Ltda | ||||||||||||||||||||
TUSD | - | - | - | - | 6.782 | 7.162 | - | - | - | - | ||||||||||
Votorantim Comercial de Energia Ltda | ||||||||||||||||||||
Sale of Energy | 6.100 | - | - | - | 24.865 | - | - | - | - | - |
a) Short-term financial investments - Exclusive investment fund, remunerated based on the variation of the CDI and with daily liquidity.
b) Loans and Financing - Loans contracted under normal market conditions.
c) Acquisition of Property, plant and equipment - Acquisition of equipment for use in distribution and transmission.
d) Energy Sales - Income from electric energy sales.
e) Purchase of Materials - Materials for use and consumption.
f) TUSD - Revenue due to Network Usage Charge
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( 31 ) INSURANCE |
The insurance coverage maintained by the subsidiaries is based on specialized advice and takes into account the nature and degree of risk. The amounts are considered sufficient to cover any significant losses on assets and/or liabilities. The principal insurance polices cover the following:
Consolidated | ||||||
DESCRIPTION | TYPE OF COVER | 2007 | 2006 | |||
Property, Plant and | Fire, Lightning, Explosion, | |||||
Equipment | Machinery breakdown and | 1,936,162 | 1,361,841 | |||
Electrical Damage | ||||||
Transport | National Transport | 43,700 | 43,000 | |||
Stored Materials | Fire, Lightning, Explosion | 36,700 | 12,000 | |||
and Robbery | ||||||
Automobiles | 81,488 | |||||
Comprehensive Cover | 3,001 | |||||
Civil Liability | Electric Energy Distributors | 32,998 | 30,000 | |||
Personnel | Group Life and Personal | 106,747 | ||||
Accidents | 114,078 | |||||
Other | Other | 35,268 | 42,530 | |||
TOTAL (*) | 2,273,063 | 1,606,450 | ||||
(*) Information not reviewed by the independent accountants
( 32 ) FINANCIAL INSTRUMENTS AND OPERATING RISKS |
32.1 RISK CONSIDERATIONS
The business of the Company and its subsidiaries comprises principally generation, sale and distribution of electric energy. As public service concessionaires, the operations and tariffs of its principal subsidiaries are regulated by ANEEL.
The principal market risk factors that affect their business are the following:
Exchange Rate Risk: This risk derives from the possibility of the subsidiaries incurring losses and cash constraints on account of fluctuations in exchange rates, increasing the balances of foreign currency denominated liabilities. The Company and its subsidiaries generally protect themselves against the risks of raising funds in foreign currency by contracting swap operations, so that the liabilities are indexed to the variation in the CDI (Note 15). The Companys subsidiaries are also exposed in their operations to exchange variations in the purchase of electric energy from Itaipu. The compensation mechanism - CVA protects the companies against possible losses, as mentioned in Note 3. These operations are recorded on the accrual basis and in accordance with the conditions of the contractual instrument.
Interest Rate Risk: This risk is derived from the possibility of the Company and its subsidiaries incurring losses due to fluctuations in interest rates that increase financial expenses on loans, financing and debentures. For the loans taken out in local currency, the Company and its subsidiaries set against regulatory assets restated in accordance with the variation in the SELIC rate. The subsidiaries have also tried to increase the portion of loans tied to the variation in the TJLP, an index less susceptible to the oscillations of the financial market.
Credit Risk: This risk arises from the possibility of the subsidiaries incurring losses resulting from difficulties in receiving amounts billed to customers. This risk is evaluated by the Company and its
113
subsidies as low due to the fragmentation of the number of costumers and the policy of collections and supplies cuts to defaulting costumers.
Risk of Energy Shortages: The energy sold by the subsidiaries is basically generated by hydropower plants. A prolonged period of low rainfall could reduce the volume of water in the reservoirs of the power plants and result in losses based on the increase in costs of purchasing energy or a reduction in revenues with the adoption of a new rationing program, like the one in 2001. Due to the current level of the reservoirs, the National Electric Energy System Operator (ONS"), does not envisage another rationing program in 2008.
Risk of Acceleration of Debts: The subsidiaries have loan agreements, financing and debentures with restrictive clauses (covenants) normally applicable to these kinds of operation, related to compliance with economic and financial ratios, cash generation and others. These covenants have been complied with and do not limit the capacity to operate normally.
32.2 VALUATION OF FINANCIAL INSTRUMENTS
The Company and its subsidiaries maintain operating and financial policies and strategies aimed at ensuring the liquidity, security and profitability of their assets. As a result, control and follow-up procedures are in place on the transactions and balances of financial instruments, to monitor the risks and current rates in relation to those used in the market.
The principal financial asset and liability instruments of the Company and its subsidiaries, as of December 31, 2007, are described below, together with the criteria for their valuation and appraisal in the financial statements:
Cash and Banks: Comprise cash, bank accounts and short-term cash investments. The market value of these assets approximates to the amounts stated in the balance sheets (note 4).
Regulatory Assets and Liabilities: Basically comprise the Extraordinary Tariff Adjustment, Free Energy, Parcel A, Assets and Liabilities relating to Review and Adjustment Tariff, low income subsidy and others. These credits and debits are derived from the effects of the 2001 rationing plan and other amounts relating to the deferral of tariff costs and gains and changes in the tax legislation. These amounts are valued at book value, in accordance with criteria defined by ANEEL, with the characteristics described in note 3.
Loans and Financing: Are valued in accordance with the criteria stipulated in the contracts, with the characteristics defined in note 15.
Debentures: The debentures issued by the subsidiaries are traded on the market and are valued in accordance with the criteria stipulated at the time of issue, according to the characteristics defined in note 16.
Investments in subsidiaries: The Company has investments valued in accordance with the equity method in companies whose stock is traded on the capital markets. Company management considers that the trading value of these shares does not represent the market value of the respective companies, given the reduced volume of transactions in this stock.
114
The carrying values of the principal financial instruments of the Company and the subsidiaries as of December 31, 2007 and 2006, compared with market fundraising costs, as defined above, are as follows:
Parent Company | ||||||||
2007 | 2006 | |||||||
Book | Fair Value | Book | Fair Value | |||||
Value | Value | |||||||
Loans and Financing (note 15) | 183,756 | 181,642 | 8,406 | 8,555 | ||||
Debentures (note 16) | 465,983 | 474,493 | - | - | ||||
Derivatives (note 15) | 47,935 | 51,724 | 40,141 | 39,981 | ||||
Total | 697,674 | 707,859 | 48,547 | 48,536 | ||||
Consolidated | ||||||||
2007 | 2006 | |||||||
Book | Fair Value | Book | Fair Value | |||||
Value | Value | |||||||
Loans and Financing (note 15) | 3,813,001 | 3,695,602 | 3,163,523 | 3,198,518 | ||||
Debentures (note 16) | 2,434,613 | 2,466,855 | 2,004,875 | 2,086,807 | ||||
Derivatives (note 15) | 175,744 | 188,560 | 74,758 | 77,137 | ||||
Total | 6,423,358 | 6,351,017 | 5,243,156 | 5,362,462 | ||||
The estimated market value of these financial instruments of the Company and its subsidiaries were based on models that discount future cash flows to present value, comparison with similar transactions contracted towards the end of 2007 and 2006 and comparisons with average market parameters. In cases where there are no similar transactions in the market, principally related to the loan linked to the regulatory assets and credits receivable from CESP, the subsidiaries assumed that the market value corresponds to the respective book value.
( 33) LEGISLATION CHANGES - AMENDMENTS TO LAW 6.404/76 - LAW 11.638/07 |
Law 11.638/07 was enacted on December 28, 2007, amending, revoking and introducing additional provisions in Brazilian Company Law (Law 6.404/76) relating to disclosure and preparation of Financial Statements. These changes came into effect as from January 1, 2008 and are summarized below:
a) Pre-fixed financial assets and liabilities should be adjusted to present value, if the effects are relevant;
b) Certain financial instruments and derivatives should be recorded at a fair value;
c) Recording of assets and liabilities should be
recorded at market value in the case of mergers, amalgamations or spin-offs between unrelated parties.
d) Substitution of Statement of Changes in Financial Position - DOAR by the Statement of Cash Flows and mandatory disclosure of the Statement of
Value-added;
e) Inclusion of new subgroups of accounts as Intangible in assets and the Adjustment of Equity Valuation Account in Shareholders Equity;
The Law also requires the rules issued by the CVM to be in line with international accounting standards, based on the IASB rules.
The Company has already adopted some of the policies established by the new Law, such as disclosure of the Statements of Cash Flow (Appendix I) and the Statement of Value-Added (Appendix II) and is analyzing the impact of the other changes required by the law, which are to be applied in full during 2008, pursuant to the rules published by the regulatory authorities.
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( 34 ) SUBSEQUENT EVENTS |
On January 29, 2008, ANEEL provisionally adjusted the tariffs of the subsidiaries CPFL Santa Cruz, CPFL Jaguari, CPFL Mococa, CPFL Leste Paulista and CPFL Sul Paulista in accordance with the table below, in relation to the tariff adjustment and to the financial components not included in the periodic tariff review.
CPFL Santa | CPFL | CPFL | CPFL Leste | CPFL Sul | ||||||
Cruz | Jaguari | Mococa | Paulista | Paulista | ||||||
Verified revenue | 213,312 | 87,989 | 54,148 | 77,145 | 92,390 | |||||
Parcel "A" | 124,331 | 68,585 | 30,989 | 42,854 | 58,690 | |||||
Gross interest on capital | 14,894 | 4,880 | 3,658 | 11,696 | 7,745 | |||||
Depreciation rate | 10,594 | 2,492 | 1,816 | 4,322 | 4,230 | |||||
Reference company | 42,555 | 11,794 | 13,419 | 16,581 | 19,602 | |||||
Default | 1,463 | 220 | 126 | 187 | 225 | |||||
Parcel B | 69,506 | 19,386 | 19,019 | 32,786 | 31,802 | |||||
Income required (Parc. A + B) | 193,837 | 87,971 | 50,008 | 75,640 | 90,492 | |||||
(-) Other income | (1,291) | (291) | (411) | (569) | (860) | |||||
Income required | 192,546 | 87,680 | 49,597 | 75,071 | 89,632 | |||||
Financial components | 5,013 | (1,079) | 1,366 | 777 | (524) | |||||
Financial repositioning | -9.73% | -0.35% | -8.40% | -2.69% | -2.98% | |||||
Financial components | 2.60% | -1.23% | 2.75% | 1.04% | -0.58% | |||||
Total repositioning | -7.13% | -1.58% | -5.65% | -1.65% | -3.57% | |||||
Factor "Xe" | 0.22% | 2.10% | 0.24% | 1.07% | 1.31% |
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CPFL Energia S.A.
APPENDIX I
Statement of Cash Flows
For the fiscal years ended December 31, 2007 and 2006
( Stated in thousands of Reais )
Parent Company | Consolidated | |||||||
2007 | 2006 | 2007 | 2006 | |||||
OPERATING CASH FLOW | ||||||||
Income for the period | 1,643,436 | 1,404,096 | 1,643,436 | 1,404,096 | ||||
Adjustments to reconcile net income to cash derived from | ||||||||
operations | ||||||||
Non-controlling shareholders' interest | - | - | 5,194 | 173 | ||||
Monetary restatement of rationing regulatory assets | - | - | (85,333) | (108,391) | ||||
Provision for losses on rationing regulatory assets | - | - | 9,735 | 1,038 | ||||
2003 Tariff review | - | - | 62,938 | (138,825) | ||||
2005 and 2006 Tariff adjustment | - | - | 18,950 | 6,217 | ||||
Other regulatory assets | - | - | 28,148 | (5,231) | ||||
Low income consumers subsidy | - | - | (13,934) | (23,835) | ||||
Depreciation and amortization | 111,898 | 86,446 | 548,161 | 474,714 | ||||
Reserve for contingencies | 20,473 | 14,685 | 12,062 | (86,117) | ||||
Interest and monetary and exchange changes | (44,700) | (32,461) | (96,424) | (23,775) | ||||
Unrealized losses (gains) on derivative contracts | (16,861) | 15,901 | 101,981 | (919) | ||||
Pension plan costs | - | - | (46,887) | 38,026 | ||||
Equity in subsidiaries | (1,856,969) | (1,448,943) | - | - | ||||
Loss (gain) on the write-off of permanent assets and investment | (3,309) | (62,747) | 24,288 | (35,969) | ||||
Deferred taxes - assets and liabilities | (8,197) | (8,949) | 48,444 | 82,610 | ||||
Research and development and energy efficiency programs | - | - | (6,570) | 27,411 | ||||
Other | - | - | 2,274 | (1,023) | ||||
REDUCTION (INCREASE) IN OPERATING ASSETS | ||||||||
Consumers, concessionaires and licensees | - | - | 273,006 | 265,306 | ||||
Dividend and interest on equity received | 1,588,054 | 1,122,363 | - | - | ||||
Recoverable taxes | 25,536 | 53,015 | 30,308 | 34,193 | ||||
Financial Investments | (11,095) | 110,416 | (88,525) | 260,575 | ||||
Deferred tariff costs variations | - | - | 171,264 | 204,357 | ||||
Escrow deposits | - | (7) | (400,547) | (38,171) | ||||
Other operating assets | (4,233) | 49 | (37,268) | 29,089 | ||||
INCREASE (DECREASE) IN OPERATING LIABILITIES | ||||||||
Suppliers | 7,642 | 4,479 | 1,149 | (90,378) | ||||
Taxes and social contributions payable | (18) | (16,334) | 62,561 | 4,451 | ||||
Deferred tariff gains variations | - | - | 57,451 | 2,666 | ||||
Other liabilities with employee pension plans | - | - | (93,226) | (104,715) | ||||
Interest on debts - accrued and paid | 22,173 | 119 | 1,588 | (36,380) | ||||
Interest on debts - incorporated interest | - | - | 27,146 | 70,105 | ||||
Regulatory charges | - | - | (39,162) | 68,082 | ||||
Other operating liabilities | (1,976) | 1,231 | 25,359 | 18,736 | ||||
CASH FLOWS PROVIDED BY OPERATIONS | 1,471,854 | 1,243,359 | 2,247,567 | 2,298,116 | ||||
INVESTMENT ACTIVITIES | ||||||||
Acquisition of investments (net of cash & cash equivalents) | (2,582) | (415,000) | (383,816) | (593,000) | ||||
Decrease in investments on subsidiaries | 12,400 | 20,628 | - | - | ||||
Increase in property, plant and equipment | (74) | (101) | (1,132,757) | (797,235) | ||||
Financial investments | - | - | (51,520) | (18,916) | ||||
Redemption of financial investments | 31,045 | 24,754 | 33,549 | 27,847 | ||||
Advance energy purchase agreements | - | - | (28,378) | (81) | ||||
Increase in special obligations | - | - | 65,917 | 49,426 | ||||
Additions (reduction) to deferred charges | (6,136) | (335) | (8,536) | (12,733) | ||||
Sale of permanent assets | 2,635 | 89,899 | 24,091 | 94,308 | ||||
Advances for future capital increase | (409,368) | (300) | - | - | ||||
UTILIZATION OF CASH IN INVESTMENTS | (372,080) | (280,455) | (1,481,450) | (1,250,384) |
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FINANCING ACTIVITIES | ||||||||
Loans, financing and debentures obtained | 916,250 | 14,082 | 2,551,090 | 2,124,163 | ||||
Integralization of capital | - | - | 271 | - | ||||
Payments of loan and debentures | (473,250) | - | (1,451,590) | (2,220,076) | ||||
Advances for future capital increase | - | - | 82,597 | - | ||||
Dividend and interest on equity paid | (1,557,428) | (1,089,653) | (1,560,952) | (1,090,259) | ||||
Sales of treasury shares | - | 24 | - | 24 | ||||
Intercompany loans to subsidiaries and associated companies | (5,031) | - | - | - | ||||
UTILIZATION OF CASH IN FINANCING | (1,119,459) | (1,075,547) | (378,584) | (1,186,148) | ||||
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (19,685) | (112,643) | 387,533 | (138,416) | ||||
OPENING BALANCE OF CASH AND CASH EQUIVALENTS | 25,429 | 138,072 | 540,364 | 678,780 | ||||
CLOSING BALANCE OF CASH AND CASH EQUIVALENTS | 5,744 | 25,429 | 927,897 | 540,364 | ||||
SUPPLEMENTARY INFORMATION | ||||||||
Social contribution and income tax paid | 1,297 | 516 | 477,972 | 452,896 | ||||
Interest paid | 18,712 | 476 | 331,252 | 490,965 | ||||
Transactions with no cash effects: | ||||||||
Advances for future capital increase through assumption of debts of | ||||||||
subsidiary | 202,728 | - | - | - | ||||
Dividendos de controlada reinvestido | 100,641 | - | - | - |
December 31, | December 31, | December 31, | ||||
2007 | 2006 | 2005 | ||||
CASH AND CASH EQUIVALENTS | ||||||
PARENT COMPANY | ||||||
Balance according to Corporation Law | 17,803 | 26,393 | 249,452 | |||
Reclassification - FAS 95 (1) | (12,059) | (964) | (111,380) | |||
Adjusted balance | 5,744 | 25,429 | 138,072 | |||
Consolidated | ||||||
Balance according to Corporation Law | 1,106,308 | 630,250 | 1,029,241 | |||
Reclassification - FAS 95 (1) | (178,411) | (89,886) | (350,461) | |||
Adjusted balance | 927,897 | 540,364 | 678,780 | |||
(1) Adjustment made to cash and cash equivalents to adjust the Cash Flow Statement to the criteria established by FAS 95 – Statements of Cash Flow. In accordance with this criterion, short term cash investments which, while having immediate liquidity, have maturity dates of more than 90 days, with early redemption subject to their market value, are subject to reclassification to Financial Investments.
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APPENDIX II
Added Value Statements
For the fiscal years ended December 31, 2007 and 2006
( in thousands of Brazilian Reais )
Parent Company | Consolidated | ||||||||
2007 | 2006 (*) | 2007 | 2006 (*) | ||||||
1 - | Revenues | (876) | 60,349 | 14,119,468 | 12,192,527 | ||||
1.1 Operating Revenues | - | - | 14,207,384 | 12,227,052 | |||||
1.2 Provision for losses on the Realization of Regulatory Assets | - | - | (9,735) | (1,038) | |||||
1.3 Allowance for Doubtful Accounts | - | - | (47,534) | (83,324) | |||||
1.4 Nonoperating Income (Expense) | (876) | 60,349 | (30,647) | 49,837 | |||||
2- | ( - ) Inputs | (22,443) | (17,820) | (6,061,072) | (5,173,242) | ||||
2.1 - Electricity Purchased for Resale | - | - | (5,224,347) | (4,612,700) | |||||
2.2 - Outsourced Services | (15,489) | (13,808) | (352,101) | (281,551) | |||||
2.3 - Material | (81) | (78) | (59,592) | (56,223) | |||||
2.4 - Other | (6,873) | (3,934) | (419,365) | (201,374) | |||||
2.5 - Cost of Service Rendered | - | - | (5,667) | (21,394) | |||||
3- | Gross Added Value (1 + 2) | (23,319) | 42,529 | 8,058,396 | 7,019,285 | ||||
4- | Retentions | (111,898) | (86,446) | (563,399) | (482,479) | ||||
4.1 - Depreciation and Amortization | (100) | (8) | (387,093) | (330,635) | |||||
4.2 - Goodwill Amortization | (111,798) | (86,438) | (176,306) | (151,844) | |||||
5- | Net Added Value Generated (3 + 4) | (135,217) | (43,917) | 7,494,997 | 6,536,806 | ||||
6- | Added Value Received in Transfer | 1,895,800 | 1,548,214 | 392,600 | 528,801 | ||||
6.1 - Financial Income | 38,831 | 99,271 | 397,794 | 528,974 | |||||
6.2 - Equity in Subsidiaries | 1,856,969 | 1,448,943 | - | - | |||||
6.3 - Non-Controlling Shareholder's Equity | - | - | (5,194) | (173) | |||||
7- | Added Value to be Distributed (5 + 6) | 1,760,583 | 1,504,297 | 7,887,597 | 7,065,607 | ||||
8- | Distribution of Added Value | ||||||||
8.1 - Personnel and Charges | 1,612 | 908 | 315,394 | 352,733 | |||||
8.2 - Taxes, Fees and Contributions | 45,960 | 65,349 | 5,249,604 | 4,624,713 | |||||
8.3 - Interest and Rentals | 69,575 | 33,944 | 679,163 | 684,065 | |||||
8.4 - Dividend | 1,561,264 | 1,333,891 | 1,561,264 | 1,333,891 | |||||
8.5 - Retained Income for the Year | 82,172 | 70,205 | 82,172 | 70,205 | |||||
1,760,583 | 1,504,297 | 7,887,597 | 7,065,607 | ||||||
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REPORT OF THE AUDIT COMMITTEE
The Audit Committee of CPFL Energia S/A, in the exercise of its legal prerogatives, having examined the Annual Management Report and the Financial Statements for Fiscal Year 2007, in the light of the clarifications given by the Directors of the Company, the representative of the External Auditors, and also based on the opinion of KPMG Auditores Independentes, dated February 6, 2008, is of the opinion that these documents are fit to be reviewed and voted on by the General Shareholders Meeting.
São Paulo, February 27, 2008.
Paulo Midena | Fernando Dias Gomes | |||
Susana Hanna Stiphan Jabra | Francisco Djalma de Oliveira | |||
Enéias de Assis Rosa Ferreira |
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Wilson P. Ferreira Junior | ||
Chief Executive Officer | ||
Reni Antonio da Silva | José Antonio de Almeida Filippo | |
Vice President of Strategy and Regulation | Chief Financial Officer and | |
Head of Investor Relations | ||
Paulo Cezar CoelhoTavares | Hélio Viana Pereira | |
Vice President of Energy Management | Vice President of Distribution | |
Miguel Normando Abdalla Saad | ||
Vice President of Generation | ||
BOARD OF DIRECTORS | ||
Luiz Aníbal de Lima Fernandes | ||
Chairman | ||
Cecília Mendes Garcez Siqueira | ||
Vice Chairman | ||
Board Members | ||
Francisco Caprino Neto | Otávio Carneiro de Rezende | |
Milton Luciano dos Santos | Martin Roberto Glogowsky | |
ACCOUNTING DIVISION | ||
Antônio Carlos Bassalo | Sérgio Luiz Felice | |
Accounting Director | Accounting Manager | |
CRC 1SP085131/O-8 | CRC 1SP192767/O-6 |
121
SUMMARY
GROUP | TABLE | DESCRIPTION | PAGE |
01 | 01 | IDENTIFICATION | 1 |
01 | 02 | HEAD OFFICE | 1 |
01 | 03 | INVESTOR RELATIONS OFFICER (Company Mailing Address) | 1 |
01 | 04 | REFERENCE AND AUDITOR INFORMATION | 1 |
01 | 05 | CAPITAL STOCK | 2 |
01 | 06 | COMPANY PROFILE | 2 |
01 | 07 | COMPANIES NOT INCLUDED IN THE CONSOLIDATED FINANCIAL STATEMENTS | 2 |
01 | 08 | CASH DIVIDENDS | 2 |
01 | 09 | HEAD OF INVESTOR RELATIONS | 2 |
02 | 01 | BALANCE SHEET - ASSETS | 3 |
02 | 02 | BALANCE SHEET LIABILITIES AND SHAREHOLDERS EQUITY | 4 |
03 | 01 | INCOME STATEMENT | 6 |
04 | 01 | STATEMENTS OF CHANGES IN FINANCIAL POSITION | 8 |
05 | 01 | STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY FROM Jan 01, 2007 TO Dec 31, 2007 | 10 |
05 | 02 | STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY FROM Jan 01, 2006 TO Dec 31, 2006 | 11 |
05 | 03 | STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY FROM Jan 01, 2005 TO Dec 31, 2005 | 12 |
06 | 01 | CONSOLIDATED BALANCE SHEET - ASSETS3 | 13 |
06 | 02 | CONSOLIDATED BALANCE SHEET LIABILITIES AND SHAREHOLDERS EQUITY | 15 |
07 | 01 | CONSOLIDATED INCOME STATEMENT | 17 |
08 | 01 | CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION | 19 |
09 | 01 | INDEPENDENT AUDITORS REPORT | 21 |
10 | 01 | MANAGEMENT REPORT | 24 |
11 | 01 | NOTES TO THE FINANCIAL STATEMENT | 56 |
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CPFL ENERGIA S.A.
| ||
|
By: | /S/
JOSÉ ANTONIO DE ALMEIDA FILIPPO
|
Name: Title: |
José Antonio de Almeida Filippo
Chief Financial Officer and Head of Investor Relations
|
This press release may contain forward-looking statements. These statements are statements that are not historical facts, and are based on management's current view and estimates of future economic circumstances, industry conditions, company performance and financial results. The words "anticipates", "believes", "estimates", "expects", "plans" and similar expressions, as they relate to the company, are intended to identify forward-looking statements. Statements regarding the declaration or payment of dividends, the implementation of principal operating and financing strategies and capital expenditure plans, the direction of future operations and the factors or trends affecting financial condition, liquidity or results of operations are examples of forward-looking statements. Such statements reflect the current views of management and are subject to a number of risks and uncertainties. There is no guarantee that the expected events, trends or results will actually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations.